ameri america. >> let's get over to caroline in spain, back in spain, in valencia. i saw something extraordinary, caroline, yesterday. now they want the lottery to contribute 6 billion into the bailout fund for the regions and the lottery fund itself is asking for loans. it just shows you sort of how everybody is getting impacted.

>> yeah. that's absolutely right. we've traveled south a little bit to valencia. we're now in the city of valencia which is the capital of the broader region and this is the region which really set up the latest bout in market jitters when it was the first of the spanish regions to request aid from the government's recently set up liquidity fund. the fact that it did request that money, that shouldn't be a big surprise for the markets because this country, or this region, rather, hasn't had access to the capital markets since the beginning of this year. s&p rated the local bonds junk back in february and this is the second high evident indebted region after okcatlonia. those of you who have been to valencia, this is known as the capital of modern architecture. it was a boon town about five years ago, host to some very

prestigious america's cup, formula one races and a lot of vanity infrastructure projects being built here. a lot of that, of course, facilitated by easy credit and corruption. all of that they have to pay for it with massive budget use and the region is suffering because it's deeper into recession. back over to you guys. >> caroline, thanks very much for that. joining us now on set for the next hour is hugo dickson. hugo, a couple of troubling reports from our correspondents there in spain. meanwhile we're learning from the european central bank deposits in spain have fallen to their lowest level since 2008. is the country's bailout inevitable. >> some sort of bailout is inevitable. we have first bailout, bank only bailout, 100 billion agreed last week.

that's not enough. we need something extra. what that extra is, it could be the full bailout of spain, put them into a proper program like portugal, ireland and greece. or it could be something more limited like bond buying by the efss, europe's bailout fund, or it could be some further help from the european central bank. but clearly on their own they can't -- they can probably make it, they can probably make it until october which is what they got, i think it's 27 billion euros of debt that they need to repay, provided that we don't have massive capital flight between now and then and that's the concern that these deposit figures that you were talking about would be raising. >> exactly. i also wonder if the solution to the banking crisis is to create another bank, this one, though,

being the esm. what do you think about true mores going around giving that entity banking license would that leverage up and take down the duty of the central bank? >> that would be potentially a game changer. first of all the esm has to be created and we're wait forge the german constitutional court to give it thumbs up. we expect that to happen. secondly, the european central bank would have to agree to let the esm have a banking license and we did have that comment from the central bank governor yesterday saying he thought there were some good arguments in favor of that. most of the other ecb governors think it's a bad idea. even if the ecb agreed to give it then the countries would have to ask for to it happen. so you would think does germany want that happen. there's a lot of hurdles to jump. >> we'll have more thoughts from hugo so stick around but now let's get a check of how markets

are doing. ross? >> just over an hour. choppy start to trading this morning. we've had some disappointing earnings, mixed earnings out and of course we have some hopes potentially that we might get some move from the fed maybe next week although many don't think that will happen. nevertheless we're split on the stoxx 600. ftse 100 reflecting. dak up a quarter of a point. ftse is down eight points. xetra dax is down half a percent. we hit that high of around 7.7% as far as the spanish ten year was concerned. maybe we'll move on and show you where we are. thank you very much. 7.37. we're below that 7.75% that we hit.

7.29 for the seven, five is not as inverted. two year, we did breach the 7% level earlier. that has come down, 6.3%. as far as the rest of the markets, germany's yields are 1.24%, treasuries are where we've seen the action, 1.41. euro dollar, 1.42. euro/dollar at the moment is pretty flat at 1.2127. dollar/yen is flat as well. that's where we stand. what about the asian trading day? tracey joins us for the first time today out of singapore. hi, tracey. >> asian markets stabilize but concerns over corporate profitability limited the upside. klein slumped a% to lowest closing and after its biggest

span undersecond quarter results. over in mainland china shanghai come possibposite lost half a p. let's dive into nintendo rose 5% on smaller than expected loss and nomura holdings gained from a shakeup. we'll have more on that and after bell earnings along with automaker nissan shortly. index heavyweight canon lost 8% after lowering its full year operating profit guidance. the kospi, .7% higher. hyundai motor climbed 1.6%. we'll get more from seoul in a

few minutes. the aussie market has gained. finally just a quick check, india sensex is showing weakness down by 3%. >> the world's biggest chemical company said it will benefit from its earnings. profit in the second quarter, beating estimates rising to 2.5 billion euros. joining us is the cfa from basf. economic growth in china could be subdued until the end the year. how synchronized is the global slow down? >> right now it looks like it's pretty synchronized. europe is slow. we've known this for many months actually. the big surprise this year was china and asia. we had a weak fourth quarter. then q1 for our business was below last year's laechbl

continued into the second quarter. that's something we haven't seen before, obviously, and leads us to the expectation that for the next couple of months, if not for the entire year demand will be pretty flat. this could still mean there's some growth compared with last year's first quarter was quite weak but we don't see any indications right now in asia for our business picking up very fast. >> that's interesting because we of course have spoken with a lot of chinese ceos in the last few days. they are more bullish on their country's prospects. what you're saying is you're seeing materially different conditions than you've seen at any point in this cycle. is that right? >> it's at least a new experience. we have been used to high growth rates in asia. last couple of quarters we haven't seen those growth rates in china particularly. i'm not saying it won't come back and we only see part of the

economy, obviously if other companies can see more and have higher visibility even better for us so it will trickle down but for the time being our customers are very cautious. >> we've seen a lot of volatility as well in commodity prices. how is that feeding through and are you able to rise, raise prices when you get a spike in costs? >> actually raise prices over the last 80 months quite considerably. what we don't like is utility in price. oil price reached a new all year high and then it came down dramatically. that leaves speculation on our customer side because they make assumption about the future of oil price and might hold back certain orders.

volatility is not what we need. we think it will however at a couple hundred dollars. it could lead so some improvement but too early to say. all in all as you said at the beginning reaffirmed our order for 2012 which means we want to beat the record numbers of 2011 in terms of special items but obviously it is a little bit more difficult from today's point of view than a couple of months ago. >> lots of volatility as well in the grains business and agricultural commodities. what's happened to your agricultural solutions business? >> i think we did a great job. in the first six months of this year got a better result than in the entire year won the. we had very good volume and sales growth based on good and innovate products from basf but you're right the heat wave is

reason to be concerned. the heat wave in the united states. too early to say how the yield will fin squish. everything we've seen today leds us to think for agricultural products 2012 could become a new record year for basf. >> thanks very much indeed for joining us. ceo of basf. the stock is down of half of 1% but other stocks in notice, telecom equipment maker, alcatel came down. it's cutting its workforce. the ceo had this to say about the strategy. >> if europe is down for us 15% and we don't see the market coming back, if in asia there are certain markets that are like china that are really very good prospects but are

postponing some of the major decisions, then you have to face reality and take action. so what we're going to do is we're going to take a very systematic approach to our performance that has to improve. >> royal dutch shell is seeing share losses down 3.2%. almost 13% drop in its second quarter hit by falling energy prices and sluggish demand. >> look towards macro economic environment which most probably will drive the oil price over the next six to 12 months, strengthening afterwards when the demand comes back on a worldwide basis, led by the emerging markets. >> siemens stock is down. the ceo warned of further headwinds. >> we see a slow down in the

global economies and also recessionary environment particularly southern part of europe and therefore we anticipate slow growth, more volatile environment also going into 2013 and, therefore, clear focus of siemens is on costs and productivity. >> a number of ceos that have been on the channel today. by and large those earnings on a whole with a negative outlook. >> meanwhile we're asking the question, is america still the land of opportunity for foreign workers? the ft notes high unemployment and tough visa rules are making other parts of the world more attractive although in light of the report you've just seen from those earnings, i'm not quite sure whether the rest of the world looks just so attractive this morning. anyway do you agree? what could this do to america's competitiveness long term. if you want to joining the conversations here on "worldwide exchange" we would love to flare you. send us an e-mail at

worldwide@cnbc.com. tweet us at cnbcwex.com or reach us directly at kelly evans or ross westgate. >> japanese carmakers have been complaining about the strong yen for some time now. how big a toll did it take on this bottom line. we'll tell you when we come back.

welcome back this morning. nissan lost some speed in april to june quarter. japan's second largest automaker report ad 15% of net profit to $926 million. the company blamed on higher costs in north america and falling demand in china but says it still expects to hit a $5.1 billion net profit target for the full fiscal year. japan's largest brokerage logged the largest drop. it's slumping earnings due to week mutual fund sales. this in turn related to firm's involvement in an insider trading probe. the ceo and cfo will announce their resignations in just under

an hour. joining us for more is ed rogers, managing director at rogers investment ad voiceovisa. you've been quite bullish on the japanese economy. do you change your tune now? >> good morning. thanks for having me on the show. we don't. not that these are good numbers or good news, frankly, for nissan or for nomura, but this is just one data point. the larger thing to keep in mind while china is slowing down, certainly we've seen the u.s. pick up in southeast asia, indonesia, car sales are dramatically expanding. again, cars are a great commodity in that you can pick up production and move it elsewhere as nissan has proven an ability to do. the way you fight back against a strong yen you move production facilities offshore and ship the cars some place elsewhere people

are buying them. nissan still has great management and building great cars. despite this one negative point it doesn't make us bullish. >> what can we expect better corporate earnings this year? >> sure. we've had the china slow down but on the other hand year-on-year exports to asean countries, southeast asian countries are up double digits. exports to the united states, it's a slow gradual u.s. recovery but a recovery nonetheless. we expect to see exports increase there. i wouldn't be surprised to see some government intervention, frankly, if the yen continues to strengthen. somewhere around 76, 75 people get very, very nervous and almost to see government action and one thing that will make that government action easier is the fact is that we have an increase coming in the sales tax so you've seen the japanese government address its deficit

problems and that will allow a little bit more room for improvement as far as fighting the dollar/yen exchange rate. >> it's been such a tough couple decades for japanese banks just as they are starting to show some improvement we're seeing reports at nomura in particular of this troubling insider trading case. how significant is this for the company and what does it mean broadly for the financial sector? >> right. i think in the financial sector we need to draw a line. there's a difference between banks in japan which are very, very healthy and securities firms which nomura is a securities firm and securities firms in japan and every where around the world frankly is a tough business to be in right now. you're fighting regulators globally, fighting public opinion, fighting the biggest deleveraging we've seen probably since the great depression on a global basis, you have to go

back to the 1930s in america the great depression to see this sort of deleveraging on a global scale. that means that nomura is in for more tough times no matter who is at the helm. the insider trading scandal is a short term black eye for sure for a firm like nomura but the regulators are on the prowl. they are doing their job. they are make being for a safer, cleaner, fairer market which is what regulators have to do to bring the public back to promote security firms business. but in the banking sector the japanese banks are the healthiest banks in the world. they are in great shape. >> lost decade or two you heard it there, he said they are in great shape. ed rogers thank you for joining us. managing director at rogers investment in tokyo. meantime in south korea, hyundai motor has its hands firmly on the wheel. it has reported stellar second quarter earnings and we have more details live from seoul.

>> reporter: hyundai motor has managed to post a back-to-back quarter of rising profits. defied the odds in europe with an 18% jump in revenues. automaker cited robust sales overseas, lower production costs and higher prices for 10% surge in the profit. the firm's overall sales climbed loin 9% marking the slowest pace of growth in three years. the firm's cfo said he expect as slight pickup in global sales for the rest the year. hyundai shares closed up 1.5%. we also had otheree earnings in the tech base. lg display announced second quarter of losses. panel prices are recovering and apple related sales is growing. and sk hynix rebounded back to the black for the first time in four quarters.

back over to you, kelly. >> still plenty more to come on today's program. find out just how much chinese ceos think the new leadership will affect growth. they represent over 5% of china's gdp. >> world's third biggest economy. we'll have much more on that when we come back. >> the political transition do have some slowing down effect because people are waiting for the emergence of the new leadership.

and these are the headlines from around the world. super thursday. disappointing earnings from royal dutch shell. weak crude prices take their toll. siemens also hit as they battle tough operating environments. >> but there are positive results from volkswagen beating estimates. >> quarterly net profits 15% on strong yen and weak demand from its key customer china. >> we bring you unprecedented access to china's corporate

elite in exclusive interviews. the they tell us why their economy is holding up. >> think the economy is transforming. the gdp is lower but i think the quality of the growth is higher. >> meanwhile ahead of the u.s. open this morning choppy trade for europe because of mixed earnings that we've had. we're flat after a fairly flat close yesterday as well. bond markets slightly contained as well today. >> take a look what's happening across the ten year. spain, now sealing yields a bit lower, 7.37%. yield on ten year this morning. italy is down 6.43%. only in this day and age would that be down. nevertheless ten year. bund 1.45%. 10 year gilt is just under 1.5. >> i'm not sure it makes a lot

of difference. euro/dollar not going an awful lot. had a little squeeze, 1.32 earlier this week. durable goods out of the u.s., we'll get that print of gdp. >> citi group economists have raised the odds of a greek exit from the eurozone to 90%. citi chief economist has previously forecast a chance of between 50 and 75%. julia chatterley is in athens. do the greek agree? >> reporter: well, i prefer not to consider the probability is 90%. 0e% of this population want to remain in the euro. that's what the greek politicians are trying to show and never more important than today than the president of the european commission is set to meet the prime minister at 5:30 athens time this evening. the markets will closely watch that as an indication on just how the future negotiations

between the two parties, the eurozone leaders and the greek will continue given what we've heard about the future financing needs and of course the debt sustainability analysis. what we're expecting to hear between the troika and finance minister today too is talk about potentially further details on recapitalization, also 11.5 billion euros they have to cut over the next two years and the reforms and getting the current greek bailout program back on track. we've heard of a number of thing over the last few days. we heard about the 21 agencies, public sector agencies that the government is looking to close. we heard yesterday they are willing to sell off this portion of bank and focus on privatization. that's a struggle given this ongoing threat of return of greece to the drachma. for now we'll watch this meeting

to gauge this ongoing relationship between the two. guys, back to you. >> julia, thanks very much for that report. >> hugo, we had this report this week in the telegraph of the british government, greece runs out of money on august 20th. how lose to the end game are we? >> i think we got a few more months to run, frankly. i don't think that it's -- august will be the end game. i think that the key thing is going to be whether or not the troika gives them the next trench of bailout cash. that will be decided in september. >> we've had this comments out from angela merkel, reiterating comments, i won't stand in front of the german parliament and ask for more money for greece. >> you have to find a way to square the circle. greece needs more money. merkel won't ask for more money from the german parliament. we don't know how much morgan

they need but what range else seems to be 10 to 30 billion euros between now and the end of 2014 and more after that. but we can wait until later to see what happens in 2015 and beyond. say you got a 10 to 30 billion gap, can you find that from some other sources? and i must say, i was in berlin this week and i think that there are some creative thinking going on about other little piggy banks that you could tap. remember, there is those bond holders who did not agree to that bond swap earlier this year. >> how do they get more money out of them. >> they just don't pay them. >> this will be litigated in courts for years. >> sure. >> doesn't matter. for years. >> we're talking about the immediate problem. we're talking about what they need to do in order to get that 30 odd billion from troika. so don't pay the bonds. >> but won't that destroy the

rest of the yields across the rest of the eurozone because people will great i have no prospect of getting money out of this? >> it might do. i actually think there's a feeling that those bond holders should have taken part in the bond swap and since they didn't now is the time to really tighten the screws. there's more things. there's the ecb. the ecb bought about 55 billion euros worth of greek debt. but it didn't pay 55 billion for it, it paid about 40 billion. it theoretical has a 15 billion profit. maybe you can persuade the ecb -- >> while we may be able to shake people down it's not a long term solution. >> i'm not talking about a long term solution. you asked about when is the end game. >> fair point.

>> stay calm because actually buying the time is still the game and it may be important because we've got spain. and we don't yet have as we talked earlier we don't yet have this esm the next bailout fund isn't ready. >> we can't let greece go because we haven't dealt with spain or italy. >> if you can buy a couple more months, a few more months, i think that the eurozone will want to buy a few more months if it can. >> and as hugo outlined they still have a couple of ways of doing so. he sticks around. more on this. as mentioned mood moody's has d the stability of several banks. patricia, what are the ramifications here? >> reporter: first of all we have to look at the reasons why moody's did what they did because it's a logical consequence in changing the outlook for the german sovereign

debt in general as we heard at the beginning of the week that they changed it from stable to negative, hence these 17 german financial institutions partly also guaranteed by the german government or municipalities or regional state means that, of course, these banks need to also be downgraded in terms of their outlook. but we always know that a rating agency looks at any kind of asset or company comes through with a change in the outlook that perhaps ratings downgrade is just around the corner. this is very interesting indeed. also if you look at who they downgraded, which is german reconstruction bank that was downgrade in terms of the outlook also, german related issuers, gri fell and eaa converted banks as well. anything that's guaranteed in some sort of way by the german state or by the government in general would get this downgrade in the negative outlook. well i think this is something the market should have expected.

the short fallout isn't too bad. the short fallout what we heard from deutsche bank is worse than what we heard from moody's. ecb will not take guarantees from greece any more for any kind of funding they get. moody's is saying basically the ecb is trying from text itself from a possible corrective. >> patricia, great point. deutsche bank spooking people more, ross, than any downgrades. now the china entrepreneurs club consists of 50 ceos from the biggest private companies in mainland china and this week they are on a historic trip to the uk. together they are responsible for nearly 6% of chinese gdp and we caught up with them exclusively last night and asked them about the challenges facing

the world's second biggest economy. >> as a group of successful private entrepreneurs, we invest across the border. this year we had been invited by your prime minister david cameron to take part of opening of olympic. so we're excited to come. and meanwhile we would like to explore opportunities to see if there are collaborations between the two economies. >> and obviously europe at the moment is gripped by the eurozone crisis. do you see that as a big problem or is more of an opportunity? >> i think challenging opportunity co-exists. we do feel that great britain

compared to what's happening in south europe is much better shape. we do see, there are synergies for chinese company to invest in great britain and to bring some of the opportunity back to china to help china to grow. >> what things in particular do you think are of interest in terms of investments? >> the sovereign wealth side they have their investment strategy. on the private entrepreneurship side we are more interested in the private service sector, consumer retail, health care, innovative industry which are capital light but the service, design and management of the brand power of the uk company can grow in china in the form of

joint venture to take advantage of the mass consuming power in china. >> the imf said no hard landing in china. what's your view of the chinese economy today and the halls? >> i think the economy is transforming. the gdp is lower but i think the quality of growth is higher. many low value added manufacturing sector has filled the squeezing pressure but i think that's a good thing for the longer term because chinese companies cannot always rely on low cost manufacturing. it should move up the value chain. >> we're just about to go through a period of change as far as the political leadership is concerned. is that causing a pause in private chinese investment or

not? >> the political transition do have some slowing down effect because people are waiting for the emergence of the new leadership. many investment project has been lightning down. but next year, things will return to normal. >> okay. just one of the individual we spoke to last night. plenty more dome on the program. what did you make of it in >> it's tough because you know they are constrained that politically, you know, china, even its executives, private executives is seen as not necessarily being able to speak freely. people at my table who had been with them said they were surprised by the degree of the group were talking about southeast issues and problems of china's economy. >> hugo what's your view? >> it was interesting what you got that ceo to admit on camera

that the political transition in china was causing a pause or at least some sort of slow down in business investment. and what i would say is i think we've really got sort of -- i mean we got quite a lot of headwinds that the chinese are dealing with. we got that factor. we got, obviously, the euro crisis and the impact on the emerging markets that china is trading with. so you got that fact which i think will go on for quite a few years. then structural changes that china has to make. >> it's this move from investment led to consumer led. >> it's inevitable in changing the gears there will be some awkward moment but it's inevitable that future period will be a slow growth period than the last 30 years. so i think it's going to still be a good story but not as good.

>> the growth numbers doesn't matter that much so it's growth on a much larger output. >> right. >> total economic output is more important than the growth rate. >> maybe not more important but you people should remember how big these economies are. in any case speaking of growth or lack thereof despite the on set of bad news, mark mobius remains optimistic that europe is on the right pat. he tells us what he thinks spain should do to spur growth. >> spain should cut spending. i know a lot of people are saying oh, if you cut spending the economy will go down. no. if you cut government spending the economy will go up. because there will be enough room for the private-sector to

thrive. the problem that faces spain, italy and all of europe for that matter is the percent of the economy that is taken by the government is too big. so they are crowding out the private-sector and when i say crowding out i don't mean only in financing but in every other way because the heavy hand of government is putting so many restrictions in these countries that they can't function and particularly the small and medium size businesses who create jobs are being squeezed. so that is the big, big issue facing us. >> they've been doing think it way for such a long time. how long do you think it will take for the eurozone to resolve its debt issues? >> it's going to take three or four years, you know. it's going to take quite a while because they have to debate everything and have to go through all the political process. the good news and the reason why i'm optimistic is that they are on the way. they are at least debating these

issues. forcing certain reforms. of course some of these are bitter to some people. but they are moving in the right direction and i think two, three, four years from now you're going to see europe in much better shape. >> when do you expect a turn around in risk appetite? >> there's never going to be a turn around in risk appetite under the current conditions. why? because volatility is increasing. global markets have become more and more volatile and they will continue to be and maybe increase the volatility. why? because you have high frequency trading. you have hedge funds. you have lots of leverage. lots of money to be invested. you've got derivatives. all of these things creates the possibility of much more volatility. >> what's your view on china right now? things pick up in the second half do you think? >> you'll see 7.5% growth in china this year. if not better.

and you must remember that the base of the china's economy is huge. second largest economy in the world. you can expect double digit growth year after year. the economy is so big. so we can expect, you know, high single digit, maybe mid-single digit growth going forward. >> mark mobius talking. we'll take a short break. can direct interest rates from countries help the eurozone debt. are plans being discussed now? more when we come back. hugo d.

there's a view that the eurozone may have a break up. imf has to have a full political union or the thing breaks apart. we've talked about how that's not innocently true. there are alternative ideas out there. there's the redemption fund idea. there's the idea we've discussed with you before about interest rate subsidies which would top the crisis in its tracks now and give them enough time to develop over the future.

and i don't -- are those ideas getting any traction, any debate in the circles that matter in european politics? >> i think a little bit. i think the redemption fund -- i haven't heard that very much in recent weeks. >> that was a german -- >> that was a german wise man. essentially that is debt mutualization for a limited period of time for a particular transfer of existing debt. there's that idea. i think, my feeling is that you really need something that focuses in on spain and italy. they are the two big cheeses. they have to, we have to somehow get their borrowing costs down below say 5%. and that's how you then get possibly reverse this terrible confidence crisis which at the moment you got to sort a vicious cycle, feeding a vicious cycle and get that below 5% people

will start to believe. >> will they buy this? is anybody nibbling at this. >> nibbling is the right word. the idea of the direct interest rate subsidy, part of the beauty of is you take germany and france, they would subsidize the interest rate of spain and italy. people are clearly interested in it. it's a bit too early to say they will go for it. >> all right. i'm glad to hear people are interested. if there are ideas out that avoid it why wouldn't you he levy at it. hugo, great to see you today. >> just a reminder that the reserve bank of new zealand kept its interest rate unchanged at a record low of 2.5%. the move was expected as the central bank hinted it was in no

rush. it sent worries over europe's debt crisis at home. let's take a look at what's on the agenda in asia tomorrow. japan releases june cpi and retail figures. south korea out with its latest current account data and samsung post second quarter earnings results. >> we're nearing the opening ceremony of the torch this morning passed by cnbc, the olympic torch where it was handed over from one torch bearer to the next on the step of the cathedral. very exciting. still to come, what are you to do in a fixed income markets? pick up the phone and call hoveround, the premier power chair. hoveround makes it easier than any other power chair. hoveround is more maneuverable to get you through the tightest doors and hallways. more reliable. hoveround employees build your chair, deliver your

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welcome back to "worldwide exchange." >> these are your headlines from around the world. . >> super thursday offers up a raft of disappointing earnings. >> sleight better results from the likes of volkswagen. >> nomura's ceo is the world's biggest casualty as regulators clamp down on investment banks. he'll resign shortly. >> is it time to foreclosure on farmville? shares of zynga plunged to an

all time low as the game maker reports disappointing numbers and slashed its full year outlook. you are watching "worldwide exchange." thanks for tuning in this morning. let's take a look at how u.s. futures are pointing as we draw closer to the open. we have red arrows behind me although the losses are huge. dow jones industrial average is pointed lower by about 10 or 15 points. the nasdaq pointed lower by nine or ten and s&p 500 a couple of points to the down side as well. let's take a look at what's happening across the globe. the ftse 100 is .1%. the xetra dax down almost 1%. the ibex 35 in spain is adding .4% to its string of losses. >> spanish debt, were a little

bit lower than we were during the height earlier in the week. the two year which is 97%, 6.3%. not inverted at the moment across the curve although the five, sevens and tens same yields. the high we hit this week, were lower than that. basically we're still well over 7%. farce the rest bond markets are concerned we hit that record low in treasuries 1.38%. right now ten year note is yielding 1.39. pretty much back on down on that fresh record low as well. ten year bund 1.3%. the yields in italy 6.44. well asian markets stabilized over concerns of corporate profitability kept markets up. hong kong shares a choppy

trading day flat, klein slumped 5% to lowest closing since the end of last year after their parent company posted underwhelming second quarter results. shanghai come possible set lost half a percent and tokyo stocks inched 1% higher bouncing back from a seven week low. nomura holding gaining on a report of management shake up. we'll see earnings reaction to nomura and nissan earning tomorrow. canon lost nearly 8% after lowering its full year operating guidance. elsewhere, hyundai motor climbed 1.6%. and the aussie market gained about .6%. finally just a quick check on india, the sensex is showing some weakness dipping further,

now off by .6%. >> plenty of earnings focus here in europe. lucent stock down 9%. came out with a profit warning. announcing its cutting 6% of its workforce to restructure some operations. the group has post ad loss of 250 million euros in the second quarter. royal dutch shell stock down 4%. seen its profit drop almost 13% in the second quarter hit by a fall in energy prices and sluggish demand. the ceo spoke to cnbc about the group's prospects. >> we'll look towards macro economic environment which will drive the oil price over the next six to 1 months strengthening afterwards when the demand comes back on a worldwide basis led by the emerging markets. >> siemens stock down 4% as well. seeing new orders in the fiscal third quarter drop 23%. bigger than expected fall.

and the ceo warning of morehead winds. >> we see a slow down in the global economies and also recissi recissionary and slow growth in toe and focus of siemens is on costs and productivity. >> basf reporting that its forecast for an increase in full year profit but the world's biggest chemical company will benefit from its oil and gas divisions. profit in the second quarter beat estimates. stock is down 1% because the ceos warned of challenges in the coming months. >> we reaffirmed our out look for 2012 which means we want to beat the numbers for won the. but obviously it is little bit more difficult from today's point of view than just a couple of months ago. meantime shares of zynga have plunged 40% in after hours

trading wednesday to a fresh all time low. those shares are down 70% from the ipo price of $10 as the maker of social games like farmville and mafia warriors post ad second quarter net loss. it missed analysts forecast and the company also poor results from its newly acquired game draw something. users are spending less time and zynga is slashing its full year outlook. facebook fell in after hours trade on the news. it gets 12% of its annual revenue from zynga and facebook will report second quarter results today after the close bell. that will certainly be one to watch. let's take a look at what sells on the agenda. exxonmobil, 3m, united technologies, coroner me group, colgate, palmolive, dow chemical, will post results. after the close we'll hear from amazon, facebook and starbucks.

coming up at 5:45 a.m. eastern time we'll also get an early preview of exxonmobil's numbers with oppenheimer senior energy analyst. >> plenty excitement here at the studio. the olympic torch literally pretty much passed our front door. >> you can almost feel the glow, the heat from it. >> these are the current live shots at the moment. the relay heading towards the start of the games. worth pointing out the olympics is under way. the women's football competition has kicked off. the opening ceremonies will men's the proceedings tomorrow night. >> look at the weather forecast. beautiful and sunny and the rain is supposed to start at 5:00 p.m. on friday night. >> that's been pushed out. >> has it? >> the torch is passing headquarters. on its way where it's handed from one torch bearer to the next. today it's passing buckingham palace before the finale is

going to hyde park. cool. >> so i'm told. absolutely. anyhow -- >> all right, moving on from the olympics. spain will need to find an extra 50 billion euros by the end the year including 1 billion for a new line created to indebted regions and 10 billion to meet a new target. the spanish government is expected to increase bond auction targets. our next guest says spain won't need a bailout. it is 70% funded. joining us is steven major. steven, great to see you. thanks for joining us. are these -- how sustainable are these current yields? how much time does spain of a? >> lots of people are focusing on the key numbers, 7% and even 8% for the ten year. what really matters is the short

term funding rate and the bill market moving towards 5%, which is very high by bill standards in europe. even greece was issuing bills for a yield less than 5% at the height of the crisis. spain has time and it can fund itself in the shorter maturities. it can probably do so right the way through to the end of this year. they've done 70% of the target for this year. there's new debts they have to assume for the regions and there's the bank recaps still overhanging the kingdom of spain. but overall i think they can get through to later this year. and the big hope and it is a hope is that by then there will be a bit more of durable solution in place for europe. it's impossible for any one country to deal with its problems on its own. it needs to bet the help from brussels. >> steven, hold on for one second. we want to mention at the same time, david cameron is currently speaking at a trade investment

conference in the uk. we'll watch for his comments of course sees saying that he expects the government will finish the job of cutting the budget deficit and further comments. >> just on that point, we'll come back to that. on the point of gilt, we're down to appreciate record loss. will core yields keep getting support even in the uk and we have obviously more qe. steven? >> yes, hi. i think the uk is very for bring into this and to compare with spain and france and germany. first of all, the uk is a true sovereign which is why i tend to dismiss comments about straight. you would have seen in the press aaa rate funding after the big decline in growth of q2. but actually growth will

probably pick up in q3 anyway. frankly if you have sovereignty our fiscal and monetary policy together with your currency as the uk does then actually what the credit rating agency says is irrelevant, there's no credit risk on uk bonds but there's loads of credit risk on german bonds and french government bonds. these countries don't have sovereignty over its currency policies and that's why i think i would take it much more seriously that the rating agencies are looking at germany. german yields probably have reached the low point while its gilt yields can stay low. in terms of core assets safe aaas you're best off with uk, u.s., some of the nordic countries. >> would you buy bunds. >> you have the likelihood of more qe coming in.

in the uk is not a credit market, i can't say this enough times, people still don't believe me. it's not a credit market. the uk gilt yields justify, are justified by the weakness of the real economy and falling inflation even deflation threat. in germany the yields do not reflect the economic fundamentals of germany on a standalone basis and certainly don't reflect germany assuming debts. >> which nation will be first have its ten year debt below 1% following japan in that regard? >> it's a race between uk and u.s. the way things are. i don't think it will be germany. things will have to get a loss worse in the eurozone, which some people are saying they will do. august will be a real challenge. we have a cash flow event in greece. september we have the challenges

from the courts in germany. so i suppose if things get worse in the eurozone then bund yields go 1% or below and maybe they will be the first. i think in a more benign backdrop that i'm seeing it's more likely to be tuck or u.s. that see 1% first. >> steven, the debt market, people talk about the guns of august. do we have to fear this august? >> every august that i can remember for the last four or five years has bean busy one. back in 2008 it all started and we've had just about every august focused on some kind of crisis from the financial sector or sovereigns. we've had money markets, we've had refinancing problems in some sovereigns sponsorship it seems to happen every year so why not this august. it seems that there's a great deal. the big difference is we're prepared for it and know the 20th of august is a big thing in

greece. in reality it's not the 20th august because most of these cash flow events are preempted, so it's going to be sometime in the next couple of weeks the greek situation will be solved one way or another spept is probably more challenging than august this year i would say. >> steven, stick around. we'll come back to talk more about greece as well. great to have you on. bit of breaking news out of nomura. the company saying that its ceo will step down. we'll be replaced in the role by brokerage unit head koji nagai. it's ceo will be stepped down and be replaced by u.s. operation head. nomura says the possibility of is high that insider information on share underwriting was leaked in more cases than already reported. so we'll keep an eye on nomura share price throughout the morning.

>> italy sold the maximum amount of zero coupon bonds. the yield 4.86%. they are paying 4.71 on june the 26th. a bit to cover ratio 1.78. so they saw the maximum total amount. the yields just a little bit higher than they were in june. still to come, we'll be back in athens as citi group analysts raised the greek exit of the eurozone to 90%. [ male announcer ] it's a golden opportunity... to experience the ultimate expression of power -- control. ♪ during the golden opportunity sales event, get great values on some of our newest models. this is the pit of perfection.

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you are watching "worldwide exchange" this morning and these are your headlines. super thursday offers up a raft of disappointing earnings from the likes of royal dutch shell and siemens. >> the chief operating officer and ceo resigned in nomura. >> zynga has disappointing results. citigroup economists raised the odds of a greek exit from the eurozone to 90%. it was previously forecast chance of somewhere between 50% and 70%. julia chatterley is on the ground for us in athens.

steven major is with us. steven, the question this morning becomes we've heard from hugo dickson earlier as to options they may have to force other greek bond holders to have a loss. what expectations would that have across the eurozone? >> the other options include something like osi. that's the official sector taking a hair cut. what we've seen so far is mainly the private-sector. i don't think that would be very encouraging at all. and it would probably involve us having to then see a recapitalization of the institutions that got the hair cut like the ecb or ieb. that could very well be counter productive. we're not ready for osi just yet. first more i don't think that the private-sector would be very happy about a second round of hair cuts so soon after the first ones. so the solution is probably much

more to do with the interest rate and the term, probably terms the debt out even further and lowering the interest rate. because greece doesn't stand a chance based on the current terms. >> are we still in a sense just trying to buy time for greece? do you share the citigroup eventually they can't stay in unless we can't write off their debts completely? are we still buying time while we try to find a solution for spain and cauterize italy. >> i don't see that. is it based on between now and year end or between now and the end of next year? it depends, right? i would say the possibility of greece actually this year is much lower than 90%. i don't think it will happen.

not particularly helpful for anyone for it to happen in the next few months. the other thing to bear in mind is that there seems to be this view building up in europe among certain people that greece is now ready to go and the banks have unionized themselves of the risk. french and german banks made provisions, made the hair cuts, sold the bonds, whatever. that's a naive view to take. i don't know how it's going to be managed, if there's any plans, if there are plans they better to be done in secret because i have no access to this information. i think it's not going to happen any time soon. >> citi is saying, they are saying at about three quarters. >> in about three quarters time. so that means mid-2013.

that's a time horizon that may work for southeast european authorities. we need to get through the implementation of the esm, and all the talk in the last few days has been about esm, leveraging, banking license. for me it's very dangerous the market keeps focusing on one thing at a time. til it's the nature of market. if it was done on its own it would be like having a t.a.r.p. without fdic. you need resolution in place for banks and sovereigns. you need to see top slicing of european debt. >> steven we'll come back with you. still to come we'll also hear from china's top ceos about how good an investment they think europe is. stick around. we'll be right back. i look at her, and i just want to give her everything.

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sleep number. enjoy introductory savings of $500. and two free coolfit pillows! plus, free shipping through saturday. only at the sleep number store, where queen mattresses start at just $699. the china entrepreneurs club has made an unprecedented trip to tuck ahead of the olympics. you could call it the business olympics if you wanted. the group of 50 ceos make up 5% to 6% of chinese gdp and ross spoke with them exclusively asking them about the slow down in china and the challenges now

facing the nation? >> i think, in my mind, the slowing down is kind of healthy. government decided not to put as much money as four years ago into the economy. >> i think most of china now, our transition motto export. but so far abroad our concern is not to buy something made in china. >> i think the economy is transforming. the gdp is lower but i think the quality of growth is higher. many loo value added manufacturing sector has squeezing pressure. >> still with us is steven major global head of fixed strategy at hsbc. steven, concerns about china have underpinned a lot of action in trading across the globe in recent weeks.

is weakness there causing some of this panic move in markets? >> yeah. it's contributed to some of the concerns in the forex markets and bonds. some of the previous issue and allocation towards dollars and euros is stopping now and i think that's a key factor. but also people are thinking if china is slowing then where is the global growth going to come from and this is really undermining a lot of markets around the world. the extent of the slow down is still in the 7% to 8% range. the pmi numbers weren't that bad. it still looks to us much more like a soft landing than a hard landing. >> and, steve, quick word about treasury, ten year yesterday, what do you do with treasuries at the moment? >> the curve has more flattening potential and twist has been

quite effective. there's the threat of qe3 at some point in the future and obviously the fiscal cliff, et cetera to come up later this year. but i think the u.s. economy is weak. and the growth has been only a nominal growth, been sort of inflation based. the likelihood is we'll see yields going down. i think 1%, may be too far to go. but towards 1% is more likely than towards 2% in the coming months. >> anything next week from the fed yes or no? >> no. i don't think it's the right time for anything. i think they are constrained in what they can do anyway and they are relying on twist for now. >> okay. >> i think it's probably from the fed. >> steve good to say. thanks for joining us. still plenty more to come on today's "worldwide exchange." we'll continue the too big to fail debate and latest from

spain and preview earnings numbers due from exxonmobil. >> take a quick look at how futures are trading this ahead of the open. red arrows across the board. we'll keep an eye on that and we'll be right back. >

welcome back to "worldwide exchange." i'm kelly evans. . >> i'm ross westgate.

these are your headlines from around the world. super thursday offers up a raft of disappointing earnings from the likes of royal dutch shell as weaker crude prices take their toll. alcatel lucent and siemens hit as they battle tough operating conditions. >> volkswagen second quarter beat estimates by 3 million euros. >> nomura ceo and cfo will step down over an insider trading scandal. >> is it time to foreclose on farmville. shares of zynga plunged to an all time low after the game maker reports disappointing numbers. it slashed its full year outlook. as we check back in with futures we've seen them moving a couple more points to the down side. nothing major at the moment.

dow jones industrials average pointed lower by about 20 points. the nasdaq pointsed lower by 10. s&p 500 is lower as well for the open potentially by five or six points there. european markets show the same kind of tone generally a weaker one although there are a couple of green spots. footprint so 100 is spoun.3%. xetra dax down 1%. cac in paris is down .3%. i beaks 35 down half a percent. >> we've had quite a new of guests telling us what to do with our investments. here's a recap. >> i'm not a great fan of the dollar right here. it's difficult to find out what you should be buying. i think gold has been very sideways recently. looks like it's breaking out to the top side.

>> investing earnings growth by buying other things. have lots of other problems attached. all make investments that sort of chief executive is referring to and say to yourself i'm in this for the long haul. >> in southeast asia places like indonesia, car sales are dramatically expanding. so, again, cars are a great commodity in that you can pick up production and move it elsewhere as nissan has proven an ability to do. and the olympic torch is headed down its final stretch as we head towards the start of the olympic games here in london. the women's football or soccer competition has already kicked off but course the opening ceremony starts friday evening and that will officially commence proceedings. this morning the torch passed by cnbc's european headquarters here in london, couple hundred

yards from where we're sitting. these are image of that. it was on its way to st. paul that's where the torch images you're seeing right now. handed from one to the other on the step of the cathedral. today pass downing street and buckingham palace before the olympic torch finale concert in hyde park this evening. >> that's about 100 yards from where we're sitting right now. usually i'm sort of running there to get lunch or get in the shade this week. but we've seen -- >> would you have been very good. >> at the torch relay. i could have done a good job. maybe next time. >> rio. >> works for me. >> plenty of other things focus on. timothy geithner is back on capitol hill today. he presents the annual report of the financial stability oversight council which is the

group of regulators at 10:00 a.m. eastern. face more questions about the libor scandal. he was grilled wednesday on why he didn't pass information that bar chase admitted it was manipulating rates in 2008 when he was head of the new york fed. he admitted yesterday the firms needed to be punished for bad behavior. >> this as it's been reported that former barclays executive will receive nearly 9 million bond payoff after resigning over the libor scandal. they negotiated the sum with the outgoing chairman just days before he quit. joining us now around the desk is tim ryan president and ceo of sitma. how serious is this investigation? do you expect criminal charges? >> we don't know whether there will be criminal charges or not and as to the wholly bore mess

it is very distressing. you know, right now is not an appropriate time to speculate how many firms are involved. we don't know. from an industry standpoint we do know that it's, as i said, distressing. we know accountability is very important. we know that moving forward, whatever the problem is, we need to fix it. >> do you have any preference for what happens with the libor rate going forward? if there's a move way from this benchmark to something else, a, do you think that should happen and b, what should that something else be. >> for me it's a broader issue. the broader issue is because we have many survey based indices that exist globally, and it's really important that the inputs are accurate. it's important the governance really works and the reporting is accurate and timely. >> back in 2008 there were no accurate reports, many guys

couldn't borrow any levels. so, talking about 2008 is a pretty weird, that period particularly after the collapse very strange time to work out exactly what were you bore roger. >> you're absolutely right. you know, within this area of libor and the situation we find ourselves in, you can divide this into two different categories. one is the attempt or alleged attempt to suppress the rate, to push the rate down. that's what we were just talk about. which, which i think the governments are on top of. the other side is manipulation of the rate for potential profit. and that's the most distressing to me because this business works pretty much on each other's worth and if you are manipulating the rate for your own profit that's a big problem. those people need to be held accountable. >> we're looking at marvin king who is governor of the bank of

england. speaking at the same conference that david cameron was at restoring confidence in our financial system is the great challenge we all face and it has been damaged. ross, not a surprise to anyone. >> i'm going to the conference as soon as this show is over. how do we restore confidence in the financial system without damaging these institutions too much that we all need actually just for the smooth functioning of society and business transactions. >> this is the tension that exists. we went through '08, you know, financial meltdown, regulators and politicians said we've spent too much taxpayer money we need to fix this. so we've been on this path over the last three, four years to globally concentrate on the big, big interconnected banks and put in place rules that make sense. that's still not finished. it's not finished on a global

basis. for us the biggest issue, quite frankly, the biggest issue is putting too big to fail to bed totally. we will not be able to really fully move on at least for the big institutions until we can confidently say taxpayer funds will not be at risk again. we were working harder on that issue than any other issue. >> in the meantime the commodity futures trading commission is holding a day long meeting to discuss ways to better protect customer money. this emergency meeting which was called last week comes in the wake of collapse of futures broker mf global. the bankruptcy trustee has hired accountants to figure out how much money is left over after the ceo left this month. tim, i'm just curious about your impressions here with regard to these cases. is this a failing by the cftc or

should we now expect the reaction here to be one where regulators crack down more significantly? >> well regulators are human beings. i used to be a regulator. they will definitely crack down higher especially on mf global and some of the commodities futures trading companies. you know, there we're talking about a very different issue than the type of issues we were just talking about. some of these instances, we're talking about theft, certainly peregrin, he's admitted it. that's just a societal problem with an individual. i'm sure the regulators will be very, very focused on customer money within the commodities area and they should be. that is something that has to be now and done appropriately. >> a reminder that this question about banking models and whether to separate or keep together retail investment banks doesn't

necessarily fix all the things that plagued us in the financial system these days. nevertheless we'll have more with tum. >> would like to get tim's views. >> it's not just the u.s. well put that question to him when we come back. we'll head out the madrid where sovereign yields are stubbornly high. full discussion after the break. >

we're at a global trade center for the olympics. >> over the next weeks and days, thank you. [ applause ] >> there we go. let me remind you -- [ laughter ] >> some you win, some you lose. we lost that one. he says the global economy is far from vibrant. global finance needs to return to the original mission of mobilizing capital to finance private investment. this after saying restoring confidence in the financial system is the greatest challenge that everybody faces. >> if you're just tuning in this is "worldwide exchange" and these are your headlines this morning. super thursday offers up a raft of disappointing earnings from

the likes of royal dutch shell, alcatel lucent and siemens. ceo and coo of nomura have resign. zynga shares hitting an all time low this after disappointing results. meanwhile spain will need to find an extra 50 billion euros by the end the year. a to avoid a state bailout the spanish government is expected to increase bond auction targets. stephane, we heard from steven major earlier. there he is. we heard from steve major earlier and said spain actually are likely to meet any sovereign bailout this year because they can find the money. what's the view there? >> yes.

they can find the bone because we've seen recently the demand for the auction was stronger. bid to cover the ratio was significant but the country has to pay very high price for this auction and that's the main problem because there is demand still for spanish bonds so what could do, it could either increase the target for each of the aurktions remaining this year to which this target of 50 billion euros because it looks what spain will need by the end of this year or could decide to name the two auctions. so likely it will maintain this auction which is unusual it will need morgan and tap the markets more often so that's probably what's going to happen in the next couple of weeks for spain. along the extra expenses, of course, the autonomic regions, let's look at them.

valencia, with julia there. >> the city of valencia are prime examples for the overspending and property boom in spain about a decade ago and now they are paying a very high price for it. valencia was the first [ speaking spanishspanish region to tap the liquidity funds. without that liquidity fund because it's closed off to markets it won't be able to the that. valencia one of the worst offenders in terms of the deficit slippage to gdp last year. it's deficit to gdp came in at three times higher than initially forecast. it's target for this year set by the central government is 1.5%, many analysts say this is way too ambitious. back over to you. >> thanks for that. let's get a thought here from tim. how do you see the timelines.

we have a huge problem. from my perspective and i come as an american to this, it's one of moving forward in the european union so that you have more comprehensive ability to address issues. some of that is in the financial sector some with the banks, mostly on the tax side so that some of the debts can be syndicated through the entire european union and that's eventually where from my perspective where things go. that's very difficult. you're talking multiple countries. everybody speaks a different language. very hard. i'm sure it will take long

period of time. but i'm not sure there's another option. so there's only one option. just a matter of stick tight. it appears governments are in that focus. >> all right that's tim ryan president and ceo of -- still to come, shell post second quarter lower profits and exxonmobil gets set to report its q2 numbers. stay with us. [ male announcer ] while many automakers are just beginning to dabble with the idea of hybrid technology... it's already ingrained in our dna. during the golden opportunity sales event, get great values on some of our newest models. this is the pursui of perfection.

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welcome back to the program. a quick look at the corporate earnings we're expecting later this morning from the u.s. and the economic data as well. jobless claims, durable goods is the one to watch and pending home sales. exxon, 3 p, colgate palmolive,

dow chemical is due and after the close all eyes on amazon, facebook and starbucks especially zynga shares plunged nearly 40% after hours on wednesday to a new all time low as maker of social games post ad scanned quarter loss. it slashed its full year outlook. took facebook shares down 1% because it does get 12% of annual revenue from zynga and facebook will report its own earnings after the bell. >> shell saw its profit drop 13% in the second quarter hit by falling energy crieses. ceo spoke to cnbc about the prospects. >> work towards macro economic environment which mostly will drive oil price over the next six to 12 months strengthening afterwards again when the demand comes back on a worldwide basis, mostly led by emerging markets. >> mob second quarter profits are forecast to don't 10%.

that figure down 8% from a year earlier. senior energy analyst at open end -- open endoppenheimer. >> we have to realize that exxon earnings are highly leveraged to crude oil prices. crude oil prices moved from $10 from a year ago. so that $10 drop in oil prices in effect will take $5 billion way from exxon. >> what's your vow on oil prices. >> oil prices are inflated. they are not supported.

prices for wti should be closer to 70 and for brent 2k4r0er8s. obviously we'll have $100 brent and $80 plus wti. as long as we have this tension in the middle east and fears of potential supply disruption will likely see oil prices higher than what they would otherwise be. >> that's -- isn't that sort of a fair concern. there's always going to be a political tension price in oil, isn't there? >> correct. part of the oil price dna. you can't separate fact from fiction any more because traders trade on tension and tension is the price of supply. there's plenty of oil, exxonmobil chairman said recently for every country, any country that exxon does business

in, there is no shortage of oil, you can get oil any time you want it for whatever the price is listed at the time that you want it. >> fadel, just very briefly, everybody talks about shale gas in the united states and shale oil. how much of a challenge is that posing for refiners in the u.s. because it's a very different texture, product. >> correct. the big problem with shale with gas is that it's oversupply in the u.s. and don't have the means to export it. and it is not in the national interest of the u.s. to export natural gas in the form of l and g because natural gas will help keep prices lower and keep the economy at least on the right track. >> we'll leave it with that. thank you for calling in and thanks everybody for joining us. >> "squawk box" is up next. we hope you have a profitable

day.

good morning, everybody. today's top story, citigroup warning a greek exit from the euro next year is now a 90% probability. also facebook set to report quarterly results for the first time as a public keen disappointing numbers from its main game provider zynga casting an ominous clouds over "the social network." financial world reacts to the call you heard less than 24 hours ago. >> i think what we should probably do is go and split up investment banking from banking. >> the story plastered on the front page of every major newspaper this morning. it's thursday, july 26, 2012 and "squawk box" begins right now.