well tom to today's edition of worldwide exchange. sghoo neez are the head lines around the world. >> the swiss banking giant misses expectations as there's a 349 million swiss franc hit. >> deutsche banc sees price decline as they drop 63%. they also see the bottom line hurt further. provisions for real estate losses. >> also pp takes a whooping $5 billion in the second quarter because of refinement shares and suspensions at alaskan operations. >> economic conditions worsen in india. the central bank cuts the

economic outlook but keeps rates unchanged on rising inflation and poor monsoons. p. >> you're watching worldwide exchange bringing you business news from around the globe. okay. welcome to today's program with kelly and i. we got our first bronze medal yesterday, the gymnastics since 1912 rope climbing. >> are you referring to we as great britain? >> uh-huh. >> i think the americans got a few in there as well. >> unemployment, do you have that? >> german unemployment head steady at 6.8% for the month of june. the jobless total was at an unadjusted 2 th.8 million. there was an up tick there i believe. the jobless total rose by 7,000, and that was a bit better by the gain of 10,000 that was

expected. let's look at what's happening in italy as well. a lot of employment figures out this morning, jess. the italian jobless rate, if only the italian jobless rate were 6%. >> up to 10.8%, the unemployment rate in italy as well. >> krg that consider that diver. >> how long before you're a uk citizen? >> a gold medal. if britain takes the medal tally for the games. >> that's no commitment at all. that's no commitment whatsoever. on today's show we move on to frankfurt for an expert opinion as mary comes under investigation for an alleged conflict of interest. >> we'll see why japanese auto earnings are getting back on track. >> the cf buy join us first on cnbc after lifting guidance for the year. >> we're joined by guests at

11:30 european time. he says it could spike above 30 and hit 40. >> a set of disappointing results for two of europe's biggest banks this morning. the second kquarter profit was halved and ups numbers hit by a big drop in trading revenue and a significant loss on facebook's controversial ipo. carolyn, let's catch up with you, first of all. it's amazing how one flirtation can have so much of an impact. >> yeah, but, russ, that's only part of the story. let me run you through the numbers. you can't really sugar coat is because these numbers were much worse than expected, specifically in the investment banking unit which had a surprised pretax loss of 130 million swiss fra francs.

it was the slump in trading revenues, and the fallout from the disastrous facebook ipo for which it is incurring a $350 million loss. ubs told us this morning it will take appropriate legal action against the action in dak for the, quote, gross mishandling of the facebook ipo. the numbers weren't all bad. the net new money flows into the private bank were better than expected. 13.2 billion for the group but the impressive capitalization have been what they point out. still the outlook was very, very cautious. look at the share price. ubs shares down by 5.2%. let's go to julia who is looking at the market reaction to bbva's numbers. julia. >> thanks so much, carolyn.

the reaction is nothing. i think that's due to the fact that the spanish bank rallied 15% over the last seven days so maybe some of the price movement in there. it was a solid set of results from the bank. earnings or net profits slightly lower than expected down 35%, so it looks like that was on the basis of provisioning and it's boosted by aa growth in latin america. we saw revenues up 15%. t-win capital was 2.8% and slightly higher and it's robust too as the loan book deteriorates. they set aside 1.4 billion euros as provisions. that's around a third of the amount that the government wants them to do for this year. that compares to around two-thirds. the asset quality stayed the same as the first quarter around 4%.

interesting to continue to watch rbs thinks that actually that npl will fit along with what the investment economy is doing. that could double over the next three years. the amount of sovereign debt on the portfolio, 11% now of total assets. that means it's something we have to watch for both the sovereign and possible downgrades going guard. for now, though, ross, it's up to you. >> thanks for that, julia. deutsche banc had a 63% before the pretax profit. they warned that the euro zone crisis will continue to add confidence and earnings. the bank is still committed to the universal business model. ralph silva is with us for the first half of today's program. hi, good to see you. it's hard to wage your way for this with so many provisions for this and that or libor or misselling or hspcsa.

but the key story is all the investment banks are finding it very tough. >> they are, and it's the most complex earnings set i've seen to be honest with you. everybody took advantage of the fact that the brands are so deteriorated and so bad, let's get everything out of the laundry right now. all of the interest is in the olympics right now sxpt not everyone is watching this thing. >> bank handlers not doing their job because they're interested in the great britain men's gymnastics team. >> they can only afford tickets. >> no investment bankers are allowed to go to the olympic games. >> that's true. their wives are going. >> is this a kitchen sink quarter knowing the results will disappoint, bankers are throwing everything in there? either to distract from underlying performance or because they want to get ahead of some of these things? >> naets what we're seeing and seeing every bank take the opportunity now. if you look at the underlying business levels, it's not as bad as the markets are indicating.

ubs didn't do so well, but there's trying to close down the investment banking operations anyway. what's positive is the number of customers, high net worth individuals which is the core business is growing month after month. >> is this an investment opportunity then? >> absolutely. the tier one bank, the ubss and hsbcs are buying opportunities. we see the biggest delta on those organizations once the economy recovers, and that's a key thing. >> that's bold, ralph. >> it is. >> once the economy recovers and there's a fix for the euro zone. >> that's my big caveat. the banks are directly connected to the economy right now. we've never seen this before the. as the economy goes, the banks will go, too. >> that's not true. when is that not true? >> the banks always led the economy. now it has a 1% change, and we see the banks take a similar 1% change.

because the products are razor thin. they can't make money. they're dependent entiriely on people walking in the door saying give me more business. >> there are a lot of people right now. not helping matters, bankers found guilty of libor manipulation may look at years of jail time under uk law according to "the telegraph." it can prosecute banks in the affair. royal bank of scotland is negotiating a settlement with authorities. according to the "wall street journal" an agreement that includes fines could be reached in the next few months. ralph, thoughts on the libor scandal and where we go from here, and does it change your view now is the time to invest in banks? >> it's time to invest in large banks, and i think the

regulators took the responsible view of not putting the fine on every bank immediately. what we saw with barclays, we can't lose 10, 15 bank ceos. what's happening now is the regulators are saying let's do one every six months to get the entire process out in a more orderly way. >> people are saying barclays might have been first out of the bank. in order to asteroid that domino effect of this being in the news and affecting big performance, in fact, the rest of the groups come together with a coordinated statement? >> we hope that happens. we hope that happens. what i hear from the regulatory community is it didn't expect this kind of fervor over what happened at barclays. they didn't expect to lose a ceo over this. if we lose half of the other ceos, it's too much. >> should regulators worry about what's responsible with regards to bank executives coming and going. we have to leave it there. >> we should. >> first, we must check in and see how markets are doing. ross.

>> it's very hard to stop kelly when we're into libor, but well-done for na self-restraint. i appreciate it. we want the trade for european stocks today. 73 right now, decliners outpacing advancers, so the first decline in four sessions for european stocks follows good gains yesterday. ftse is just down 11 points. the ibex is under half of 1% at the moment. we have bond yields in spain and italy. last tuesday spanish yields hit the high of 7.75%. the yield this morning is 6.63%. still 100 basis points below that euro high. we closed yesterday just below 6%, 5.99. there was some relief, and of course yields were back down to

levels in april as well. keep your eyes on the u.s., of course, with the fed decision coming out tomorrow. rates are down to 1.50%. that low we hit last week, all-time low 1.83% just above it. as far as the currency markets, the aussies in focus today. 105.38. right now 105.03. just below that. we're in all time highs with the euro. that 1239.40 and 120 ht 40 was twot-year low we hit last week. we hit them in the same way. shows you the level of volatility on euro trade. tracy joins us for the latest out of asia. hi, tracy. >> good morning to you, ross. well, another risk-on day for the regional markets. hong kong shares rose for a fourth day up more than 1% led

the major financial heavyweight hsbc advanced more than half a percent. mainland china underperforms the rest of asia. it lost about 0.3%. steel companies are the biggest losers. a profit warning from chinese companies dragged it lower. the independent nikkei rose for a fourth day to one-week closing high by fund managers. the kospi extended the winning streak rising more than 2% to the highest closing since june with banks, construction places and large cap tech leads the charges. australian charges fare as well. there's a smaller nan expected decline to lift sentiment. let's check oind ya. it's flirting with the point at he the moment. kelly, over to you now. >> we get reports that india is struggling with power outages for the second day in a row.

manchester united set out the terms of the upcoming ipo on the new york stock exchange. they will offer more than 16 million shares for 16 to $20 each. it would value the club at $3.3 million. man u will begin the road show wednesday with presentations across the u.s., europe and asia. general motors is swapping one kind of football for another. after announcing it wouldn't be advertising at the super bowl, gm has shelled out a reported $600 million to sponsor manchester united. will it pay off with global buyers? e-mail us and let uss know what you think or tweet us. >> how much of that money goes in to pay off the debt in the

club. a lot of fans want to see that. bp sees its profit almost wiped out as it takes massive hits on the assets as the gulf spill charges continue to weigh. details after this. [ male announcer ] this is the at&t network. in here, every powerful collaboration is backed by an equally powerful and secure cloud. that cloud is in the network, so it can deliver all the power of the network itself. bringing people together to develop the best ideas -- and providing the apps and computing power to make new ideas real. it's the cloud from at&t. with new ways to work together, business works better. ♪

welcome back to the program. i really like that music. it gets me in the spirit of the games. london 2012 is in full swing. here's how the nations are standing so far in their medal races. u.s. and china tied at the top with 17 medals each. the chinese are streaming ahead on the gold medal front. as you can you see they got 9-5 in the u.s. >> the french in the swimming pool have been amazing. everybody thought it would be lochte's, right? the french sprinter, he's not out of nowhere. >> i guess out of nowhere for the uninitiated. to me it was who knew french swimming so strong. >> it's like the chinese out of nowhere. >> that's true. they can stave off those concerns that they would really stumble in this games after doing well the last time around. there's plenty of olympic action today including the final of women's team gymnastics and a

whole host of matches from the women's preliminary football or soccer tournament. meanwhile away from the olympics there are other performances to focus in on, particularly on the corporate earnings front. trading lower after booking, and it took a charge of $5 billion in three months to june thanks to a fall in the assets. the stock was down 3.4%. the high transport costs in the u.s. and brazil hitting numbers also that had a large marketing budget as well on new brands of beer. hugo boss down 4% today as you can see as well in frankfurt. trade suffering from a slowdown, although the company said it will maintain its targets thanks to strength in europe. you don't hear many companies talking about weakness in asia and strength in europe. metro, the one stock out of the four is up.

the german retailer is up 2.74% today said sales in europe picked up in the second quarter. they told investors cost cutting investors are coming in ahead of schedule. >> greece coalition leaders failed to agree to awe nye package of savings after talks yesterday. they command two extra years to complement a $1.5 billion in cuts. prime minister samaras is said to be unwilling to renegotiate the terms of kunlt's bailout which demands all austerity measures be implemented by 2014. >> all right. some news out of -- you have to be quick. spain may current account 750 million you're yos versus 1.7 billion in april. capital outflow is 43.3 billion euros, it was 26.6 billion in april. the capital outflows are nearly

doubling at 40%. >> nearly doubling, which is more than 40% of my apologies. in the nemeantime it's a curren account balance and shrinking, so the international position is weakening. >> if there was a crisis, it would be bank grounds or capital outflows, right? we'll get the thoughts in a second. at the same time the bank order results, wefr the latest results. let us go over to julia in madrid. the outflows, bank deposit outflows, julia. that's where the real -- if there's ever a crisis triggered, that would be where we look, i guess. >> certainly the suggestion in these peripheral economies and that's why they're so intent to address the problems in the spanish banking sector and they're expecting a second order at this time from the big four accounting firms to have a

better idea what the cap fall neez are of the individual bajs rather than the mother broad assessment from oliver wyman and roland berger a month or so ago. they said the adverse scenario would take 62 billion euros. market is disappointed by, and analysts like barclays suggest 116 billion euros in the adverse scenario and there's up to 118 billion auto euros. the question is whether we see something slightly large for her the euros, but remember on the top side we have 100 billion euros promised to the spanish banking sector. perhaps somewhere in the middle is what we look at today. back to you guys. >> thank you for that. charlie is joining us in the studio along with ralph. charlie, as we look at money continuing to flow out of spain,

one wonders what germany is on the hook for in terms of numbers? >> that's the key question you face right now. while germany is sitting there debating issues like ratification with the constitutional court not voting until september, the reality is germany is very much on the hook. in the disaster scenario where there isn't a resolution to the euro zone crisis, then the potential losses to the european economy directly and indirectly are huge. >> once we debase the esm, what actually happen this is week on the ecb? have we built or expectations far too high, even if it's restarting the smp. i'm not sure people are expecting more than that. >> i mean, there seems to be a consensus that something big is coming without a doubt. now, the question is is what is big enough? if it were the esm with a banking license and official sector involvement so government bond holdings would pass over

the official sector, that would be the nuclear option and the game changer. i really don't think that's going to be delivered. in fact dragge himself can't deliver that and has to be the eeu. they have to restart the smp and esmf to buy time for that process to happen. if they make it clear that's what they're heading towards, but if they say we're doing another ltro and reactivating the s&p, you're right. you get a big disappointment trade. >> do you want to step in, ralph? >> actually, one of the concerns i have with all the central banks everywhere in the world is there's this natural assumption the economy is going to recover in three months. i find that all the tools are under the assumption of recovery. shouldn't we assume it will recover in ten years and be pleasantly surprised?

>> and, you know, the alarming factors is this latest slowdown does seem to be very synchronized and very global. so you have asia slowing down, china, the u.s., we have the fomc, which probably won't act this week but very close to pulling the trigger on further action and you have the euro zone crisis. i think that they need to put these measures in place. the real risk on to me is with so much de-leveraging still to do, you are entering this sort of risk we're getting the global japan scenario where there is this slow growth, there is this de-leveraging and monetary policy becomes ineffective. >> so i want to ask you on that. have we seen the low? we hit the yield of 113? >> i think they probably have, because bit by bit it's dawning on people that the nutization of

liabilities is coming. as much as the germans protest it's not going to occur, one way or the other it's the only solution for it to occur. if not the euro won't survive. >> very briefly, what do you expect from the fed? how do you trade the fed? >> i don't think the fed are really going to do anything. i think they're going to effectively imply that they could do more, but they want more forecasts, which will be at the next meeting. i think they won't do anything. i'd probably fade the fed so to speak and actually be probably a little bit short treasuries going in. >> good stuff. thanks. your daughter would be proud. john is head of market strategy of lloyds bank, wholesale banking markets. >> we want breaking news out of italy. italian police took documents from barclays offices in milan as part of the italian probe into possible euro libor manipulation. italian police have taken

documents from barclays offices in milan as part of their ongoing probe into possible libor manipulation. in the meantime ecb president mario drogge is investigating into the g-30. a complaint has been raised suggesting a conflict of interest due to his involvement in public and private sector financial leerzs. sylvia is it in frankfurt following this story. sylvia, is this unusual? europe is a bit more stringent when it comes to it these markets, but what's the context or background for this one? >> by the way, like the discussion you had before. let's assume we have ten years of recession and then we're pleasantly surprised. that would make a change from the present scenario, but nobody seems to go there. this investigation he's facing is a complete hype and overblown. he doesn't need it, credibility is more sensitive issue but

let's put this into context. this body that called them ceo, corporate europe observatory, maintains or thinks this is a conflict of interest that mario drogge is on this body. the group of 30 is present central bankers, ex-central bankers and academics and representatives of the private banking industry although leveraged out. they discuss matters of euro zone crisis and the global economy and et cetera. he's not alone in there as a present, acting central banker. measure vin king of england is there in, canada is in there. the ex-ecb president is chairman of an aforementioned group and paul volcker and still a chairman of the group. it's not as if there's anything sort of shady about it. the only difference may be being that the ecb is a slightly different animal from other central banks, and that this

stage in time a credibility question is the last thing that the ecb needs to discuss. beyond that, i think it's probably unjustified and a little overblown. >> yeah. sylvia, thanks for that, thanks for all your thoughts of course. find out more about the story. head to our website, cnbc.com with full details. >> they need to speak more. they're not acting together enough. so, you know, i'd go to the other side of that trade. >> there's one potential solution to that. >> still to come as well, india's weak monsoon rain have an impeding drought. that's not good for food prices. how the rbi is supposed to act. more on that when we come back.

>> these are the headlines around the world. there's a hit from the facebook ipo. >> deutsche banc sees earnings decline in the period as the profit drops 63% and spain's bba sees the bottom line hurt by further provisions for real estate losses. >> bp takes a whoops $5 billion

h hit. >> economic conditions worsen in it india. rates are unchanged on the rising inflation outlook and monsoons. we're following, of course, the action in barclays shares this morning. they're now down about 2% in this session. they were a bit weaker, but, of course, we wait to see what kind of reaction investors have to the news reuters is reporting. italian police is taken documents from barclays offices in italy as part of the probe into euro-libor manipulation according to a judicial source that reuters is citing. barclays shares, while being down closer to 3% are now down a little better than 2%. >> the rest of the european markets after a few days of solid gains just flatter today.

the ftse 100 is just down slightly 0.2 of 1% under that. it's up around a quarter. it's flat and the ibex is up around 1% at the moment. you're seeing yields slightly higher than lows yesterday particularly on the peripheral spanish ten-year. we hit 6.53 yesterday and italian yields over the 6% mark. on the eurodollar, we hit 123.90 and we're below that at 122.69. so in between that particular range. meanwhile, india's central bank is on guard against rising inflation. the rbi kept the key lending rate unchanged saying any cut right now would be counter-productive. we have more from mumbai. this was the expected decision. >> it was indeed expected that this time around the rbi will

not cut any rates, so they have the kept the rate unchanged at 7%. the repo range is 8% and they have cut it out by 100 basis points. it's at 23% versus an earlier 24% to ease the credit conditions in india. more importantly they do point out to a deteriorating economic outlook. they have gdp production is lowered to 6.5% versus 7.3%. b, they have also upped the inflation to 7% versus an earlier 6.5% reading. they're more or less the result economists expected from india, but it's a confirmation from the governor that the economic situation is looking bleak. back to you now. >> all right. thanks very much for that. rima is joining us as the director of head and research for strategy of asia japan

markets. thank you for joining us. i presume india's economy is less sensitive to drought than it used to be because it relies less on the agricultural sector. nevertheless we're not through the monsoon season. is there still a chance it will have an impact sdm. >> yes. i think we're sort of midway through the monsoon season, so depending on what the final outcome is, it will be safe to assume that we're going to lose somewhere between 9.3 to 9.6% of grow growth. in that context i think that even the 6.5 forecast may be a tad optimistic. >> is there the lack of rainfall, is that going to add to concerns about inflation and add to worries about the slowdown, which has been under way since late last year? >> certainly. i think that the situation we have right now, as you said,

that the economy is getting less reliant on the agricultural sector. at this point in time with investment undoubtedly food prices are probably going to go up. that said, it's important to sort of put the slowing growth and high inflation in perspective. what we should expect is that headline inflation may sort of run at a high level and remain persistently at a higher level, but the pass-through from higher food prices through the core inflation should sort of weaken in the coming months. >> sanjay, i want to bring you some news and to those who are watching that, once again, we have serious power outages reported across india. a delhi metro spokesperson says

th the airport is use diesel generators. how significant is this about the condition of the indian economy right now? >> clearly this is one example of lack of reforms on this front political in the power sector and also it sort of highlights the weak government around it. that if it cannot sort of make sure that user charges are complied with, people actually pay for the power they're consuming, it's difficult to bring inflation down. it's going to really weigh on the existing weak infrastructure we have. >> sanjay, let's talk more about the monsoon. i understand that the whole economy will suffer because of it, but if you want safe havens, what india industries are safe havens and don't have a direct effect because of monsoons?

>> i think that at this stage, you know, it really is going to be things like property, et cetera, which were -- you know, they're not dependent on rural incomes. you could expect an improvement in the capital goods sector if the investment aenvironment improves. probably we are close to the bottom of, you know, the deterioration and asset qualities in banks. at some stage of that we are sort of cut rates. you might want to look at the financial sector again, but away from that, you know, things like consumer durables, fast-moving consumer sector, i think it's still a question mark. we have to see the full monsoon panel. >> stanjay, how able is the government to deal with things like wheat and rice that have big stockpiles? >> they have stockpiles of wheat and rice, and i think they'll get away with that. they did learn something from the '09 drought, so the bumpers

are pretty good. the real issue is with fresh produce and things like protein for which the government is really not responsible. it's really the determined part of food prices that's subject to increas increases. >> sun janjay, director of rese and strategy asia-pacific as rbs, thank you for with us. ralph stays, of course, and in the meantime chinese steel makers are underwater today. tracy chang is standing by to explain what's going on. tracy. >> that's right, kelly. well the china iron and steel association said profits at the country's steel mills fell by 96% in the first half of 2012. csa officials said large steel mills are struggling because expensive upgrades approved dug the time of booming steel demand are now due while steel prices took a deep dive.

industry regulators are not sitting idle. they say they have apeopled to beijing to revive a value-added tax rebate to help out producers. the plan lets some domestic producers sell high-end products to exporters without paying the 17% value-added tax. if beijing gives the green light to the plan, it should help boost profit margins in china and reduce the country's massive inventory stockpile. it can hurt regional peers' competitiveness. so far market reaction is mixed. south korea and nupon steel gain 2% or month while tata steel lost more than 1%. back to you. >> now let's look at what's on the agenda in asia tomorrow. china posts its official pmi data for july while hsbc releases the private gauge for the mainland and india. on the earnings front some of the big names include mong

congress's hutchinson and indonesia airlines. >> we have a bit of news out of greece. the bank offerfiled an offer. it didn't give the offer value. the offer is full of the share capital. we'll see whether they get any progress in those discussions. still to come, more japanese carmakers hit the road to recovery, honda's recovery surges thanks to u.s. sales. >> will the surging yen bring on the brakes? stay with us. we'll be right back. [ male announcer ] this is the at&t network. a living, breathing intelligence helping business, do more business. in here, opportunities are created and protected. gonna need more wool! demand is instantly recognized and securely acted on

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general motors is swapping one kind of football for another. they agreed to a sponsorship deal with manchester united after announcing they wouldn't advertise at the super bowl. it's valued at $600 million, and will their bet on the british football club pay off? what do you think? send us an e-mail here or you can tweet us your thought

thoughts @cnbcwex. we saw a mixed bag of economic data out of japan. manufacturing activity slipped in july at the fastest pace since last march due to weakness in europe and china. the jobless rate fell in june and the availability of jobs improved thanks to reconstruction spending. eco-friendly car subsidies triggered a rise in household spending in june. >> kelly, japan's third and fifth biggest carmakers reported improved number for the june quarter. honda said the operating profit climbed to $2.3 billion thanks to strong sales. master had a narrowle $82 million net loss due to a recovery in domestic sales. both companies were hurt by the strong yen. mazda and honda keep it out. joining us for more, vice president for asia-pacific at

automotive transportation unit at first and sullivan. we had a big bounce-back from the tsunami-caused troubles last year. have we now -- have investors seen the benefit of that bounce-back? >> yeah. and the benefit by honda is true. if you compare quarter on quarter last year, this quarter was probably the worst possible quarter. it was the quarter just after the tsunami had hit both these carmakers and probably their fi financials were the worst. you see the quarter on quarter jump, which is basically they get some benefit from the worst quarter, which was one year ago. >> does that now -- does that now -- i'm sorry. sorry to interrupt. does that now follow therefore things get tougher for them on the comparisons because of things like the strong yen and the slower synchronized slower

growth outlook? >> yeah, but i think only positive aspect of what we see in this world is currently the u.s. market seems to be doing pretty well, and that's where the japanese companies get their profits from. therefore, that is i would say the silver lining to the cloud. but the challenges in europe and china are definitely weighing on them, and that is definitely going to interrudisrupt the dat financial reserves they have in quarters to come. >> okay. so you say the u.s. is holding up here. how are they coping with the yen? i mean, is that -- look, they had a strong yen for a while now, so it is impacting the margins or not? is it an excuse when things don't go their way? >> no. that's not really an excuse. i think yen has a huge, huge impact on the japanese

automakers, and whenever there's a global uncertainty, the yen tends to rise because it's a safe haven. therefore, you know, the yen pricing is definitely going to be a problem. it helps them in two ways. their exports become more expensive, and when they take the earnings back in the yen, they become lesser. so the yen is a huge problem for all japanese companies, and they have to basically cut their yen $2, which currently i believe are fairly high. there are somewhere between $82 to a yen to a dollar, and that's quite high. just two weeks in this particular year they have hit that particular yen pricing. so, you know, we are going to see that they would be under pressure because of high yen pricing in quarters to come. >> we've seen a lot of the japanese car companies announce

plants, a lot of plants outside of japan, specifically a lot in europe and maybe central and eastern europe. are we go to see that as a trend? fewer cars actually made in japan, but more cars made by japanese companies outside of japan? >> fuellactually, that's intent. the manufacturing in japan is struggling, and it's not something the japanese government will give up easily. shifting it out of japan is not politically correct as far as car companies are concerned. but any new production facilities and any new expansion is outside japan. the strategy seems to be produce closer to where it was getting consumers. that's why we would see more plants getting built in europe, more plants getting built in latin america as well as china perhaps. >> can you talk a little bit about the context this now leaves japanese automakers in

globally. competitively speaking how are they stacking up, and where are you seeing pockets of strength in terms of other auto makers? >> japanese automakers are doing he extremely well as far as green cars are concerned. cars that are hybrid and fuel efficient cars and that is something that's a segment to watch for and grow. that's clearly where japanese have a great lead. nissan is strongly present there. they have a launch there of their lead car, which is the largest-selling electric vehicle. so green cars are something where they're strong. where there are pockets of weakness or strengths for others is probably more aesthetically pleasing car, more performance-oriented cars where they will struggle a little bit and that's where the european cars are perhaps at the lower end of the market and the korean

cars will do better. >> european cars are s have an aesthetic edge. it's pleasing to my eye. >> people on twitter say it's bold. is bold bad or good? >> i think bold is good, if you can pull it off. i think you can pull it off. in other earnings news out of japan, japanese conglomerate toshiba has reported a larger than expected operating profit up 178% the first quarter. the firm's whose operations rain from computer electronics to nuclear power plants, they lost due to the strong yen plaguing automakers. panasonic swung back to profit in the fiscal first quarter. its earnings rose half a billion dollars thanks to the cost-cutting measures. we'll bring you up to speed out of barclays. reuters reporting that italian police took documents from the

offices in milan as part of a probe into possibly libor manipulation according to judicial sources. barclays shares were down closer to 3% on the news but still hanging in there lower on the morning. reuters is adding details to the story. it was ordered due to prosecutors that opened a criminal probe into possible libor manipulation. these two consumer groups in a joint statement said documents, computer material and e-mails were seized at the barclays milan offices, quote, with the aim of looking at evidence that barclays manipulated libor with a negative impact on mortgage rates paid by italians. no immediate comment from the firm. >> we see the unemployment numbers out of there today. jumping up, and as germany it stayed steady at 6.8%.

continuing deverdedie vernance. >> it's unfortunate. >> they've never been in tune. >> you could argue for a belief moment where they converged. >> they didn't converge, because everybody tsd we have to converge them. the economies never converged. that's the problem. >> there was a general sense that their business cycle at that point was somewhat in tune, but we learned in retrospect that was for false reasons. >> i would argue that the corporations around europe linked themselves together, and i don't think the economies went full bore off of that. that's some of the problems we've had. basically businesses say i'm bringing in money from europe but the economies are so diverse. >> we're launched with a deep recession in germany and a boom in spain, ireland, everywhere else. >> in retrospect it's clear what was happening. there was a sense the business cycle was up synchronized and

it's clear that you can't ever get back to pay point where the business cycles are synchronized making it harder to run fiscal and monetary policy. >> it will never be the united states of europe. there's too much diversity of culture. we don't speak the same languages. it's impossible. >> the federal reserve begins twot-day policy meeting today with the announcement expected tomorrow at 2:15 p.m. eastern time that is. economists expect the central bank to hold off such as more asset purchases to get a better gauge where they hit aa soft patch or bigger trouble. most expect the fed to take a small step perhaps by extending the pledge to keep rates low until at least the middle of 2015. so, ralph, as we pivot to focus on the u.s. a little bit, what's your view. what does the fed do here? >> i don't think neve much they can do to be honest with you. i don't think this is an economic question anymore. i think it's a political one. we need to get americans to

believe they can keep their jobs. >> it's not belief. there's clearly -- if there's a lack of sort of economic performance there, does that not sort of suggest the fed should act? >> yeah, but how much can they act? if people don't buy new ovens or cars, nothing will happen. i think that the business environment in the u.s. is ready to spend. i think they're ready to build new plants and they have innovation waiting in the pipelines. they're ready to go. as soon as they say the customers are willing to buy the products, they will rush through it. investment banks do well when the recovery -- >> what's the catalyst? >> naets a great question. >> ultimately there's not necessarily the nand there to support that. >> i think this is a political -- i think there's a political solution to this, not necessarily an economic. if people feel they will lose their jobs, they're not going to find -- >> how many people in the west are ready to load up the credit cards to sustain things?

>> they may have to in order to sustain spending, maybe not a best sign. >> we should be pretty proud of the americans because they're not doing that. >> that's my point. >> i think they're going to continue to not do that, and we should be proud of that. it's going to turn around where they feel comfortable about the jobs and they will start. >> we have the personality savings rate in the economic date at that today. if it's happening, it's slow and steady. >> ralph, thank you. director of civsilva research network. we'll speak for the ceo first here on cnbc.

welcome tobacco to "worldwide exchange" this morning. >> these are the headlines. >> shares in ubs tumble as the swiss banking giant misses expectations with a 349 million franc hit from the facebook ipo. >> the investment banking drops 6% and they see it further hit by further real estate losses. >> bp takes a whooping $5 billion charge in the seblgd quarter due to refinery sales and u.s. spill charges and suspensions at the alaskan operations. >> the fed begins a two-day meeting with most believe the

central bank will dip its toes into the qe pool rather than diving in headfirst. >> you're watching "worldwide exchange" bringing you business news from around the globe. >> we have unemployment data. good morning to you stateside. we have unemployment data out the euro zone, 11.2%. it's pretty much as expected as well. this follows an earlier flat unemployment statistic in germany but a tick up in italy to 10.8%. the german reading is 6.8%. nevertheless that unemployment rate remains at the highest level since the creation of the euro zone as well. greek may retail sales down 10.3% year on year after the revised 13.3% drop in april. so the annual fall isn't as bad as it was in april, but it's still up pretty awful. kelly.

>> thanks very much. let's look at how the u.s. futures are trading as we approach the start of trading session. the dow joennes is pointed high and the nasdaq by 6 points and the s&p 500 trying to gain a couple of points as well. the global 300 gives a sense of the action we've seen in the session so far. not a lot of major news moving things around. we're following worsening unemployment figures out of the countries in the euro zone. we look at weakness in spain's fiscal position. closer look to see how they digest the news. the ftse is down 0.2%. the cac is holding john to a gain for 0.1 of a% in the morngs. the ibex is up 0.7%. it's interesting to watch to see whether there's any momentum. >> you get the sense as we get

towards the fed starting, we're getting cautious trade as we get into the big events for this week. ten-year spanish yield is higherer frhigher from yesterday. it was 6.63. last tuesday we hit the all-time high 7.75%. italian ten-year debt below the 6% mark right now. good news and getting benefit from the auction. treasuries here yielding 1.5053% as we look ahead towards the trading dollar. eurodollar very much in focus this morning as well. right now 122.61. pretty steady. we hit the three-week high, so pretty much in between the range. the aussie against the u.s. 105.08. we went up to 105.38 which was an aussie four-month high against the u.s. dollar. the aussie is up against the euro as well. that's where we stand p in european markets.

kelly. >> thanks very much. let's look at the agenda today in the u.s. it's a busy day actually aside from the first day in the fed meeting, there's a ton of economic data, june personal income and spending which including my much beloved personal savings rate and the secretary quarter cost index, those are both out at 8:30 a.m. eastern time. at 9:00 we get the may home price index, and an hour later it's chicago pmi, a key barometer from the ism figures we get next week and consumer confidence for july. the earnings front, pfizer, aetna, archer daniels and coach report earnings before the opening bell. well, the fed begins it's two-day policy meeting today as mentioned with their announcement due wednesday at 2:15 p.m. economists expect the central bank to hold off on launching a major stimulus program such as more aspeset purchases to see whether the u.s. hit a soft patch or bigger trouble. they expect the fed to take a

small step to extend the pledge to keep rates low until at least the middle of 2015. lots of data to dig through on that front, ross. in the mean whim want to mention a couple of these flashes out of china. of course, a key gauge for global risk assessment. china's president hu says there will an increase he says to increase fiscal and monetary support to the economy in the second half year. china's communist party is going to continue prudent monetary policy but maintaining stable economic growth is a top priority. again, that first flash there, ross, i think with regards to what he says about the increase of fiscal monetary supports p in the second half. >> proactive fiscal policy. >> a couple of keywords. >> more stimulus and the interesting thing is on monetary policy which means more interest

rate cuts. you might get another cut in the reserve requirements this week. >> it's certainly something when you sort of read the other catalyst events that could happen, it's something that's constantly in the mix there. >> big earnings as well in europe. german drug maker bayer has raised the outlook for the year citing weakness in the euro. joining us first on cnbc is the ceo of bayer. thanks for joining us. you're raising your full-year earnings now. not many companies doing that. is the -- is what we're seeing with droughts and shifting food prices, is that having a positive impact for you? >> yeah. we have very good strength in our crop sciences business, but also in our health care business and the material business, material science business always had improvement year-over-year. in all three of our businesses,

we've seen year-over-year improvement, and you know well enough we're optimistic it to increase our guidance for the full year. on crop sciences for the farmers, it's very important that they have high yields and particularly when agricultural commodity prices are high the farmers are motivated to have the highest possible yields. our products, seeds and herbicides and insecticides, contribute it to allowing the farmers to really have high yields and they're willing to pay for that. >> i'm curious if you can talk a little bit about the business, certainly as one of germany's biggest companies you're right in the thick of the crisis. what impact is it having? >> it also is having a relatively minor effect, because we're not a real typical cyclical business, particularly our two life sciences businesses, health care and core

sciences beat to a different drum than the overall economy. of course, you know, particularly when governments want to save money, there is pressure on the prices for medicines, and we are experiencing price pressure in our pharmaceutical business in particular. then crop sciences, it's all about food supply in the world, and as the food supply is under pressure, that is positive for our business. >> and the euro is obviously also weakened in this year as well. does that have a -- is this a translational impact it has, or does it have any impact on the operating line? >> no it does have an overall effect on the profits, because yes, we translate, but, you know, it helps us to get dollars or other currencies now coming in at higher euro levels.

so it has had a very good, positive effect, in addition to the good operating performance. it's another reason for us to be confident and optimistic for the second half of the year, and that's why we raised our guidance. >> just a quick question. u.s. headlight regulators in april added warnings to the labels on birth control pills as well. you're combining -- i think you talk about paying salgtsment just over $400 million. is that the final settlement? is that the final payment? will that cheapter be closed? >> well, this is a reserve that we have taken, so it's not a payment, but the reserve we have taken for the cases that we see worthy of settlement. this applies to our entry contraceptive product in the u.s. without any admission of

liability. so we believe that a large part of our liability here is covered with this reserve. >> okay. thank you very much for joining us. we appreciate your time. ceo of bayer first here on cnbc. >> general motors meanwhile is swapping one kind of football for another. as we mentioned earlier in the program, they said they won't be advertising at the super bowl but are shelling out a reported $600 million to sponsor manchester united. we want to know if their bet on the british football club will pay off, especially with its american customers, that is. what do you think? let us know here at "worldwide exchange" and you can e-mail us and tweet us @cnbcwex. ross. >> still to come as well, take a look at today's earnings in the banking space.

two of europe's biggest investment banks. more details when we come back. [ male announcer ] this... is the at&t network. a living, breathing intelligence teaching data how to do more for business. [ beeping ] in here, data knows what to do. because the network finds it and tailors it across all the right points, automating all the right actions, to bring all the right results. [ whirring and beeping ] it's the at&t network -- doing more with data to help business do more for customers. ♪ 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.

welcome back to the program this morning. unemployment in the euro zone hits the highest levels since records began as austerity

weighs on labor markets. >> results all disappoint in the second quarter. >> the fed starts its two-day policy meeting with most up expecting the central bank to dip its toes ft qe pool. well, it's a set of disappointing results for two of europe's largest banks. bbea has seen its profit more than halved. ubs numbers meanwhile hit by a drop in trading revenue and a significant loss on facebook's disastrous ipo. carolyn is in zurich following the stories. with ubs, tell us what's happening there. >> reporter: yeah, just the share price really says it all. ubs shares are down by 5% off the session lows a few seconds ago. they were down by as much as 5.3%, but the results were clearly disappointing, specifically in the investment

banking unit which posted a surprise pretax loss in the second quarter of 130 million swiss franc. there are a couple of reasons for that. the trading slump in the quarter where revenues r down 40% quarter on quarter and ubs not offering a better outlook for the third quarter saying that the kerns about the fiscal cliff in the u.s., the euro zone debt crisis and concerns about global growth could hit client activity quite massively in the third quarter. second of all, as you said that $350 million loss resulting from the facebook ipo in which ubs was a major market makers and ubs saying in the press release this morning that it will take, quote, appropriate legal action against nasdaq for the gross mishandling of the facebook ipo. of course, numbers were bad, but it wasn't all bad. there were a couple of bright spots specifically with regards

to the bank's very good capitalization and secondly net new money flows were positive for the entire unit and the group level. on that note, back over to you. >> carolyn, thank very much for that. joining us the next hour is yulia norcado. julia, thanks for your time this morning. we've been discussing all of the bank earnings kind as a set of weak headlines. how important is this weakness to you when it comes to gauging the global growth outlook? >> well, it's one element holding the global growth outlook back. it's a tough environment for banks. not only are they facing a more difficult environment to make money, but they face tougher regulations. this is a road we have to go down, but it does take its toll. it reduces bank lending and reduces bank's appetite for risk taking and it's a slower recovery.

>> you mentioned earlier, drew attention to the fact that risk assets performed well given the weak backdrop including earnings season. does that strength continue to surprise you, or is it possible that we given the sell offwe had earlier this summer priced in a lot of the bad news? >> i think that one of the reasons risky assets are so resilient right now is because central bankers promise to act. that raises the stakes. we need to see the ecb and fed come through on these promises in order to see this resiliency continue. as you noted all along, these earnings are -- it's a tougher profit environment not just for financials but for non-financials. that big boom we had over the last few years has largely played out, and now i think it is mainly hopes that central bankers will find the solution for the global economy or at least help ease the road and print some more money and keep markets recommend actively well

liquidated as we go through structural adjustments. i think it's that promise that kept risky assets well-supported, and now it's time to pay the piper. >> does the fed wait to see what the ecb comes up with, what europe comes up with before they do anything next? >> well, i don't expect them to do anything this week, other than potentially maybe extend the language, the rate guidance into 2015. that's one step they might take. i think they're waiting not just because they're waiting to see what the ecb is going to do. they're also evaluating their options. there's a lot of soul-searching going on at the fed. what are the best options? are their policies effective? what is the right way to calibrate how much they should do, what they should do? so i think that it's also internally they're really going through a lot of scenarios and debating all the pros and cons, and that's going to take some time. this is a big committee, and there's a lot to be discussed.

>> all right. we'll get more into that in a little bit as well. julia sticks around for the rest of the program. we had the comments out from the chinese premier a short while ago. they're talking about ramping up more fiscal action and monetary policy action to support the economy. it has taken the aussie dollar back up as you can see. you can see the spike up as the comments came out. we get back towards the four-month highs that we hit early on in the session. basically chinese premier nguyen will boost dmantd and the monetary stimulus. >> we'll see bha kind of lift that gives to risk assets. we have to tind out if that reality will stick with with people throughout the moerng. we have action between decliners and advancers and the stocks are up by 0.05%.

at the moment we're not seeing a huge reaction in stocks. we'll follow it for you and be back right after this break.

the federal reserve begins its two-day policy meeting today with the announcement due wednesday at 2:15 p.m. eastern.

economists expect the central bank to hold on off on launching a major stimulus program like more asset purchases in order to get a better gauge of whether the u.s. has hit a soft patch or perhaps is in bigger trouble. instead, many expect the fed to take a small step this time by extending the pledge to keep rates operhaps until at least the middle of 2015. julia is still with us. julia, the fed seems to have several options here, but are any of them great options at this point to support the economy? >> well, none of the options really have great impact on the economy. they don't create jobs. they just sort of prevent potentially a self-fulfilling negative downward spiral by keeping markets well supported, but they won't fix the mousing sector. they're not going to make better fiscal policy, and really fiscal policy is one of the issues right now that's holding the u.s. economy back. the uncertainty around the election outcome.

the uncertainty around regulatory policy, tax policy, spending policy. all of this is just yet another cloud of unknowns that businesses have to work with in addition to the european crisis and in addition to the global slowdown. it's really all of these uncertainties are combining, i think, to lead to a real deer in the headlights problem for the u.s. economy where businesses don't want to hire or invest because they want to way and see what's going to happen over the next six months. that's a self-fulfilling thing. even if the fed's actions keep the confidence in the sxhe and keep the markets going, that helps to prevent a much worse outcome. it doesn't necessarily generate a lot of above trend growth. >> julia, um curious, too. what you say is an important point. it's not we're always worried about uncertainty, but there's a question of whether monetary policy is pushing on a string in this kind of situation, is it actually fiscal policy that would be more effective and

while that's something that people kind of hate to talk about, the idea of the government, for example, writing out economics and handing them to people, are we far off from that point? >> well, right now we are at a fiscal impasse because of the election. we've all been staring at the fiscal cliff. all of the policies set it to expire at the end of the year, and they're significant. they add up to nearly 4% of gdp. it's nontrivial what happens to the policies. even understanding the importance of this because of the politics, nothing is going to get done before november. as we get closer and closer, the awareness of all of these issues is heightened amongst households and businesses. so it's really a very different situation from a fiscal policy standpoint, and all the fed is doing is sort of carrying the baton for fiscal policymakers. hopefully once we get the election behind us, perhaps we

can get more abc nection on the policy frontal. >> it doesn't help that u.s. drought conditions have gotten worse in the next week. the usga rates 24% of the corn crop in good to excellent shape, just 29% of soybeans. that's down 2% from the prior week and the worst rating for both since 1988. dry and hot weather the next two weeks could actually further crops and corn and soybean futures closed higher on monday. watching that corn contract, 818 is the level we're at right now. this is almost a tax on households, especially on lower income households and an additional challenge for policy at the moment. >> absolutely. that's the stagflationary outlook if we get a real spike in food prices as a result of the drought. it's not to much the impact to the farmers through the lost revenue but the impact on consumers through higher food

prices. right now conditions as you know it are really very, very bad and deteriorating for the corn crop in particular. >> we leave it there for the time being, and we'll be back with more in just a minute. >> thanks for that. still to come on the program, the dow ran the stretch to negative mondays now to nine. that's amazing, isn't it? >> that's a streak almost unprecedented. we'll go inside those numbers and other market technicals next.

welcome back to "worldwide e-chan exchange." the swiss banking giant misses expectations on q2 with investment banking with a hit from the facebook ipo. >> the $5 billion charge in the second, refinery sales and u.s. spill charges and suspensions at the alaskan operations taking a toll. >> china's government pledges increased fiscal and monetary support as leaders warn the economy may face continued challenges and risks in the next few months. >> the fed begins a two-day meeting dipping its toes into the qe pool rather than diving in headfirst.

>> you're watching "worldwide exchange" bringing you business news from around the globe. >> well, those headlines from china hit in the last half hour, but we don't see a knee-jerk reaction from the upside here. dow jones implied higher by about 23 points. the nasdaq now pointed up by 7 points and the s&p 500 trying to add 3 or 4. the europe yoon forces, we'll look at how they react. the ftse 100 is down almost 0.2 in the red. and the ibex 35 in spain, that has added to its gains a little bit. it's now up better than 1.2%. still, though, ross, we have to see if the comments out of china gain more momentum going forward or if people stay on the sidelines ahead of the key policy meetings. >> on to show you where we stand

at the moment in terms of making money, this is what some of the investors today on cnbc have already told us. >> i think at the moment you basically carry on looking at infrastructure investments very much like the chinese are doing, and the infrastructure investments in the emerging world. i'm talking about across the world. africa, latin america and indeed asia. >> the eurodollar, we definitely like the idea of selling into rallies north of 123. you may see a good deal of offers, you know, where we are now at a trading spot slightly below 123 as well. >> i think that the big -- the tier one banks especially in the european theater, the bigger wins are buys opportunities because we see the biggest delta on those organizations once the

economy recovers. that's the key thing. >> that is the key thing. when. when the economy recovers. >> is that a pun on the name? >> no, no, no. ralph said i'm getting into the big banks, but -- >> when it recovers, yeah. that's a big "when." the bangles said it best. it's another manic monday. u.s. investors may wish the trading week was down to just four days. with yesterday's two-point loss, the dow extended the monday losing streak to nine straight weeks. it's the first time it's happened in 39 years. >> at the same time volatility will be subdued with hitting lows. i think there's a high probability that it could hit highs of 30 or even 40, the mid-40s by autumn. >> joining us now is jim strugger. jim, volatility has come in a

bit here. why do you expect it to flare up towards the end of the year, and what would that imply for stocks? >> well, just to be clear over the near term, we think that based on the equity market volatility surface, we're set to absorb the upcoming macroevents pretty well. what we had was in may/june, a run-up in the vix to just shy of 28 on an intraday basis, and it faded. we could have seen that escalate into a much higher magnitude event. it didn't happen. historically when we see this type of magnitude event, we're given around two to four months before the next volatility event. we measure that from mid-june. that gets us into late summer or the fall when you begin to run into the typical seasonality of volatility typically peaking in mid-october. >> jim, what you say for the

next couple of months is somewhat consistent with other market signals at the moment, that perhaps we see an end to the latest sell-off or soft patch on stocks, perhaps the market could find its footing here before we get into the period later this fall that you're worried about? >> that's exactly right. there's an embedded floor under vix around the sa level if you look at a graph going back to the inception in 1990. it's there. this high volatility regime we're in and have been in since july of 2007 has seen repeated troughs right around that level. so with a 17 handle now, we think, again, in the very near term we can absorb some macroevents and watch spot vix trend back down toward that 15 level. skew is very flat and will flatten some more. term structure, if you look at volatility over time, will steepen, but that's because longer dated expirations will

see stability while the short end will come and implied correlation will come in as well. from a volatility market perspective, we expect it to look benign and even increasingly benign over the next month or so. >> i have to say bearing in mind the slightly better ton in equities was down to what drogge may do this turhursday. if we don't get what we thought he would deliver, isn't volatility going to spike up again? >> in the short term you can certainly play that. we are talking to clients about using weekly options, for example, in spdrs to have short market exposure, but that's really a trade i.e. hedge also. even if they do disappoint, again, given the broader scope of the market's volatility

surface, over the coming weeks it will absorb that and move on and that the real volatility event we should be concerned about will happen further out in the fall. >> i also just wonder sort of forgetting vix as a market signal for the moment but an investment itself. the joke a month or two back was investors could do welby buying volatility. has that strategy paid off throughout this weak recovery with these bouts of activity? >> generally, no, but that's because these products are complicated and people need to understand them. they're based on the vix futures curve. you can't, for example, buy vxx or tvix and just forget about it for months on end. there's role yield involved, so you can dive a million cuts. you really need to be a little more sophisticated in understanding these products and really have a discrete time frame and a short time frame to

ok to be long volatility. i would agree with you. these are not products that you want to go out and buy, and then go to sleep on for a few months. >> julia is still with us. julia, step in. >> jim, i have a question. in the technical analysis how do you factor in the central banker's determination to keep volatility low with money printing? it seems like a brand-new factor in the market that wasn't relevant in prior cycles. >> you know, it's a great question. what i would tell you is that there's lf-similar patterns in volatility, and as much as obviously central bankers are focused on easy money in simulating economic growth, from the perspective of stravalue to there's nothing out of sync we see now relative to earlier in this cycle or prior cycles over the past 25 years that suggest that models need to change to

bring in exactly what monetary policy is focused on here. >> jim, thanks for that. julia sticks around. great questions from julia. >> i'll offer her my seat. maybe we can trade places. coming up after the break, we have more from us. we look at ubs posting a big drop if profit and what facebook had to do with the disappointing numbers. >> all the details coming up next. i'm serious, we compare our direct rates side by side to find you a great deal, even if it's not with us. [ ding ] oh, that's helpful! well, our company does that, too. actually, we invented that. it's like a sauna in here. helping you save, even if it's not with us --

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♪ nobody knows... [ male announcer ] e-trade. investing unleashed. we know soccer is gaining some popularity in the u.s., but does that mean traction of general motors' strategy of swapping one kind of football for another? first after announcing it wouldn't advertise at the super bowl, gm is saying it shelled out a reported $600 million to sponsor manchester united. we want to know if their bet on the british football or soccer club will pay off. the tweets are skeptical, but we want to know what you think. maybe the olympics will help with that or the euro tournament this summer. let us know what you think, and, of course, we'll keep your

comments going on air. we'll keep the discussion going on air. >> ross. >> the first sponsor you had was ait. that didn't pan out so well. >> didn't work out so well. >> these guys are taking over. we'll see which one of those go through. thanks for that, kelly. a recap of the news out of china in the last half hour. the leadership there talking about stepping up policy and fine-tuning the second half. that is boast month monetary anl stimulus as well. expect nor movement as well as fiscal stimulus. there's more money credit, and they want to boost the domestic side but won't release the controls on property at the moment. we did just see a spike up in the aussie dollar. as the other commodity prices are concerned, the corner is slightly firm. spot gold is unchanged at 1623 and brent is steady and nimax

slightly higher. let's get a recap of the headlines. kelly. >> this is "worldwide exchange," and these are the top stories this morning. unemployment hits the highest level as levels began. results from ubs, bbba and deutsche banc disappoint in the second quarter. the fed starts its two-day meeting today with most expecting the central bank to dip its toe in the qe pool as china pledging increased fiscal and monetary support in the next few months. >> more earnings out of europe today. ubs has reported a slump in profits in the second quarter as the investment bank division slid to a loss part of that thanks to dropping in trading. it suffered from facebook's ipo on the issue. carolyn is in zurich with more on the story.

p pick up it on the facebook side, carolyn. what action are they taking against nasdaq? >> reporter: well, this morning they said in the press release they're taking all necessary and appropriate legal action against nasdaq for, quote, gross mishandling of the facebook ipo. so $350 million, that's the loss relating to the facebook ipo. remember that ubs was one of the major market makers. the ceo just said on the conference call, this was a stupid action. he calls it stupidity. coming back to the numbers, which were far worse than expected, the net profit was 56% below expectations according to barclays. a couple of reasons for that. first of all, the sharply lower trading revenues in the second quarter. because, of course, the weak trading environment and secondly we had that facebook ipo loss. in terms of the outlook that ubs gave us for the third quarter of this year, well, that was weak. very, very weak. it talks about concerns of global growth and the udz fiscal

cliff and the euro zone debt crisis. on that note, back over to you. >> let's get a final thought from julie coronado joining us from new york. later today we get data shows personal income, spending figures for the u.s. consumer, the savings rate. is there a healthy rebalancing here? are there signs of repair or signs the consumer is overlen overleveraged? >> we've seen that consumers loosen the purse strings a little bit and bought some cars in particular. there was a burst of spending on cars, and now they're taking a step back and trying to restore that saving rate back to where it was a few months ago. that's bad news. we've seen retail sales get really very weak over the last three months, and car sales level off. the momentum in consumer spending has slowed down considerably. it's good news and bad news. the good news is consumers are more prudent and more cautious

than they were in the boom times, and that's a good thing from a structural standpoint. the bad news is it adds to the slowing momentum globally that you referred to. >> that three-month string of weak retail sales reports got a lot of attention because it's correlated with recession. do you expect the u.s. economy to be quite that weak, or is there something about the nature of this recovery where we see more recessionary signs without outright recession? >> i think it's the latter, exactly. i think once an economy like the u.s. has gone through the kinds of adjustments we've gone through, it's hard to actually tip into recession. we don't centerhave a lot of ex in the economy that need to be corrected, so we have a bit more stability and resiliency. so these things like recessionary indicators and the notion of a stall speed in growth are not as amicabpplicab the current environment. it's difficult to achieve above

trend growth. we keep grinding along at the very low pace of growth, which from the fed's point of view is very difficult because it doesn't seem to be enough to bring the unemployment rate down. that leaves them with a conundrum. >> what's your year-end unemployment forecast, and do you expect anything the fed does to change that between now and then? >> well, we do think that the unemployment rate is going to creep higher before it goes lower. we're expecting, for example, on friday to see the unemployment rate tick up to 8.3%. for not much progress or backtracking beyond that towards year-end. so that would be a worry isome development for the fed. they're gathering more information on the economy, an uptic on the employment rate would say do what you can. >> julia coronado, thanks to nu much for your time this morning. >> visa not so good as far as they're concerned. they're charging the european

operation over its cross-board of credit card fees saying they harm competition among banks and lead to higher consumer prices. visa makes up 40% of the credit card transactions in europe, so they have a big impact. >> 100% of the credit card transactions in the olympic village. >> yes. >> it's cash or visa in the olympic village. >> you should see all the people the at checkout having trouble with that. we're at the mid-point of u.s. earnings season. what grade can we give to the second quarter so far? we look for red flags in the company's comments next. >

so ahead of the u.s. index, quick recap of bigger earnings out of europe today. bp is down 4% this morning,

booked a massive write-down in the second quarter. it took a charge of $5 billion thanks to the value of its assets. ab inev was down today. they marketed new brands of beer as well impacting the bottom line. you have boss down and suffering from a sloandown in as january sales to maintain targets because of strength in europe, you don't talk about strength in europe and slowdown in asia as a region for the numbers. metro today is up nearly 3%. the german retailer is talking about sales in europe picking up in the second quarter and cost-cutting measures are coming in ahead of schedule.

kelly. >> in the u.s. a busy day in the earnings front. then it's a raft of economic data, consumer data, housing data and allstate will report after the close. christine short is a senior manager at s&p capital iq. welcome back to the program. what are the headlines for second quarter earnings seasons so far? >> we're still really expected a weak corporate earnings season, right now we're down -- at s&p capital iq is down about 2.2% for year-over-year growth. a couple of weeks ago we looked at negative growth of 2%. we have improved since then and had a flurry of positive corporate earnings reports. of the 300 companies that have reported, about 67% have beat earnings. i think that's better than anyone has expected for this quarter. it's higher than the historical average of 62% of companies beating earnings. where corporations really fail this quarter is on top line

growth we have 40 companies beating growth numbers in comparison to an average of 2%. we are seeing weakness in that area. >> when are other periods with weakness? when do they happen and what are the implications? >> we haven't seen this weakness in earnings growth since the first quarter of 2009. that was the last quarter of negative earnings we've seen. as far as top line growth, this is actually the weakest quarter for revenue growth that we've steen in the ten years of history that we have it for that data. we expect a growth rate of 2% for revenues, however, if you just look at the 300 companies that have reported thus far, that revenue -- the revenue growth for those 300 companies is negative by 2%. the expectation is still that revenue growth is up in the low single digits. if you look at the companies reporting, they are down year over year as far as revenues go.

>> we heard from cisco, morgan stanley announcing large work force reductions. is that going to become a trend? >> you know, i think so. we're really seeing cost-cutting picking up like you said. morgan stanley continuing with their work force reduction they started towards the beginning of the year. they're trying to reduce work force by about 7% in comparison to december 2011. cisco is reducing the work force by 2%. we see companies cutting in a variety of other ways. goldman sachs doesn't say they're necessarily reducing work force but cutting compensation in benefits. this says that although this has helped many companies be on the bottom line, the cost-cutting is not enough because we have a negative growth rate. what i think is more disconcerting if we look beyond the second quarter reporting the season, the third quarter is now expected to post negative growth of .8%. at the beginning of the year they expected 7.5%. we're seeing analysts cut for

the second half the year as well. >> real quick on sectors, what are strongest and weakest out of this period so far? >> we see industrials up double-digits about 12%, and information technology is still up 6%. the only other two sectors expecting positive growth rates are health care up 1.5% and consumer staps les up 2%. >> christine short, senior management at s&p capital iq with a review and preview of what the rest of the earnings we can expect. health care is a lone break spot. >> you go down to olympic park this afternoon? >> i am. it's interesting. today we look at how the wealthy get to the olympic games. this may or may not involve the yacht from james bond. stay tuned. >> "squawkbox" is up next. whatever happens, we hope you have a profitable day. [ male announcer ] this is the at&t network.

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good morning. ben bernanke is set to gavel open up a meeting. the corporate trial of the decade. century here? apple and samsung prepare to give opening statements in a california courtroom. investors closing the books on the month. it's tuesday, july 31st, 2012. "squawkbox" begins right now. ♪ welcome back ♪ your dreams >> good morning, everybody. welcome to quack b"squawkbox" o. joe kernan is back from vaekz. a lotap