hello. welcome to today's edition of "worldwide exchange." >> neez are your headlines from around the world. >> he's talking the talk, but will he walk the walk? will the ecb buy bonds. >> hiring for the tourist season kicks in, but madrid's costs continue to rise. >> sony failed to deliver on its earnings as losses rise. >> the bnp rise after the french bank beats expectings and sthoes it has strengthened it's capital base. the ceo is happy with how the

group is positioned. >> in absolute terms we have a return on equity. we are really well-positioned. >> you're watching "worldwide exchange," bringing you business news from around the globe. >> okay. welcome to today's program. i was desperately trying to find some sideburns for bradley wiggins. >> you should give your predictions, because your gold medal prediction wasn't bad. >> two. i said we would get two other medals. we got five in total. i was happy. >> what do you think they're going to do today? what are policymakers going to do, or should we save it for later in the show? >> bold calls on policymakers. the risk is on the onside on bold calls on policy makers. that's what i think. do you think? >> i'm with you on this one.

if enough think risks are the downside, does it mean there are no risks to the upstid. >> maybe it will resolve again. >> how do you manage the examinations by the end of show. we're joins bid kevin garnett for the first hour, and we'll find out why he's bullish on financial bonds. >> we go to dubai where access middle east is speaking to the tourist group. >> we'll talk about kellogg's and kraft that report figures. we'll see which stock is undervalued at 5:30 eastern. >> we'll speak with baltimore-based trader david lutz and see what he thinks it means for the future. >> despite all the volatility, there weren't big share price falls. >> there were relatively speaking. >> they could have been a lot

worse, ir think. >> it was much more contained, but that's what those stop gap measures domestic for. anyway, there is mounting anxiety in the market that european central bank may keep its powder dry for now. analysts suggest a further rate cut is unlikely at this meeting, and any policy action to subdue spanish and italian bond deals could be weeks ago. we have sylvia vadva positioned outside the bank this morning. we have all the reports back and forth over whether to expect some big measure from the european central bank today. what are you hearing on the ground? >> reporter: when you saying speculation that the ecb might keep their powder dry, the powder they have left is not the rate cut powder. didn't do anything, wasn't a surprise it didn't do anything. the ten minutes of finding the markets is out and get. another ltro not happening yet. if we get one, the effect in the

markets are doubtful. so what are we left? we're left with the s&p program and the bond-buying program that has been dormant and can be reactivated if and when needed. is the time now? certainly yields would justify that, but it is dysfunctional enough for the ecb to step? of course, as the wider speculation, much more fun about the two-pronged approach b-the concerted efforted between ecb buying in the secondary markets and the esm or effs buying in the primary markets. one has to put a dampen on that. the effs can buy bonds of countries under bailout regime. certainly counts out italy and at the moment spain. that's a nonstarter right now. the esm could be a starter. can they buy bonds in the prime

market even in countries not under bailout regime. this won't be for another half-year or so if the german constitution court waves it through. every step of the way, amongst other things the german parliament has to give their okay, and that's more doubtment. >> has dragge boxed himself into a corner? >> i wonder if he was overinterpreted. the ecb will do all it can, all it takes to save the euro. maybe the ecb will do all it can, and the all it can is very limited at this stage. the real action really has to come from politicians, and the ecb has said that time and time again. we can buy time. we bought you time with one and two. we buy you time with a buying program and rate cuts, but the action, if that's the right word, for the sort of snail's pace at which we're sometimes

moving, the action has to come out of brussels, berlin and paris, whatever. that doesn't body well because fast action is not to be had. zo >> sylvia, i have a whole four hours with you today. i'm looking forward to that. we'll repeat that conversation in various guises over the next four hours. what do you think the ecb will do, cut rates or buy bonding or revive the program? we'll ask you to share expectations in a poll and head to our website on cnbc.com and vote. >> the federal reserve will keep ultra low interest rates until 2014. they were provide further accommodated policy when needed, but despite what policymakers called a deceleration in economic activity, the fed offered no signal on when to restart the bond buying program. we're joined by kevin gardner, head of global investment

strategy at barclays. welcome. a disappointment, i guess, from the fed yesterday for those looking for more action. do you think the same is likely today? >> a little. it's quite worrying. we say the ecb is likely to disappoint expectations, but we felt for all central bank meetings that people hoping for big blockbuster solution is likely to like likely disappointed. we expect each three central banks do something over the next few months, but we woebt get the definitive answer. >> what's priced in at the moment? what have investors baked into risk assets? what's most vulnerable or what will they not -- what is it they won't do that will leave them vulnerable? >> i suspect because equity markets rallied a little the last couple of weeks. you can expect a sell-off if you dpoent get a reviolationization in the program announced clearly

today. i think that sell-off might be relatively short-lived. our view on a longer term basis is throughout this. we don't expect a definitive solution, but taking three months and beyond type view, there's a tremendous amount of bad news priced into securities. so you have a short-term rally, but underlying valuations are pricing in a disappointing outcome, which won't occur. we're using the phrase, i'm afraid, muddle through. it's painful and taking a long time. we expect the euro zone and economy and capital markets to get through this without disaster. >> it's that question is not action today, promise of some action later, dependent on other things. therefore, i'm not sure where that leaves prices. >> difficult. in the short term the trade being books that take the short term may be disappointed. people should know you can't have a definitive solution. this will drag on for a long

time. doesn't mean we won't be on the edge of our seats. >> the heads of europe's biggest banks keeping a close eye on ecb. bnp pair par bass is saying what they might to do. europe has a strong plit cat report from urt row zone and germany. last week the president and chancellor in a common move explained that they're very much in favor of the euro. so very strong political support. second, over the past two years, the european level built relevant to it, for example dsm, to give it to spanish banks for countries that would be in

trouble. the ecb is ready to take action. they're ready to take action. they've been quite clear last week. spain is going to benefit from up to 100. italy's running a new plan for now one year, close to one year. they have a surplus in terms of primary budget. the global deficit is not that huge between 1% and 2%. the level of the in depthness for the private sector is quite low, for private individuals and companies. exports are quite high. this economy is going to benefit first from some slippage in the euro, so all in all you have a number of elements that are positive and that will help the euro zone to go back to something that is a more resumable and positive scenario. this is the way we're looking.

this is not only the ecb. this is the full picture you have to take into account. >> do you expect a strong signal from the ecb meeting today? >> he sent a very strong signal last week. as for today, we really don't know. >> along with everybody else. steffen, this was on the back of the earnings they put out this morning. how have those been received? >> very well. they are stronger than expected despite a 13% decline of the net profit in the second quarter. compared it was a good surprise. it has been impacted in the second quarter by the market volatility. they have a 24% decline of the second quarter. the ceo is confident for the rest of the year. believes that bnp pair bass will

maintain a high level of profitability. it was under the basil three new regulation rules. he indicated he wants to limit individual country sovereign debt exposure to a maximum of 12 billion euros. they have exposure to italy and soaring debt. the ceo believes that's the -- that's spain and talking about debt crisis. that spain might need additional european support at some point and also very favorable at the banking union in europe. this is what he said in this

interview to cnbc. back to you. >> steffen, thank you very much. let's go up to speed with the earnings releases we have gotten out, including generale, which will present a new strategic plan focused on improved profitability. this company is one of europe's biggest, of course, saying it's going to launch a review of the business performance, of its structure. it's shares are up 1% after the results. it was helped by premiums and better operating results. you can keep an eye on that performance there. we're looking at perhaps down 0.3% now, it's so it's moved off after the initial positive reaction to the earnings. they promised a return to profitability, but it's elusive. japan's electronics giant sony and sharp had disappointing operating results for the first quarter. the report cards were more than twice the losses than they expected. they put the blame on the usual suspects, the strong yen and

expensive restructuring costs. europe remains their big stumbling block. more namsz will dock with the nikkei business report and the head of consumer electronics a little later on in the program. also on the earnings front we speak to the cfo of continental as they raised the full year forecast in about 15 minutes' time. >> kelly, thanks for that. we're over an hour into trading session hitting the session low of the ecb. a little bit more than 6 to 4. ftse 100 had not a bad day. there's an impressive set of sta statistics bearing in mind what's going on with gdp and raising hopes maybe it's easing slightly as inflation went down

a little bit. the dax was down a quarter of a percent today. the kax off a tenth of a percent, and the ibex down around half of 1% at the moment. all eyes are on the spanish auction 2014, '16, and '22. two, fours and tens are auctioned this morning. this is where the yields stand at the moment, five-year 6.35. ten-year spanish yields nudged up today. we are in the week down around under 6.6. a week ago we were at that record high of over 6775, but still obviously elevated. we'll keep a close reaction today on those yields post the ecb. we'll hear from the bank of england later while they announce their expectations last month. don't expect much today. we have the construction pmis

out today. italian yields below 6%, 5.8775. ten-year bonds are 1.36, record low borrowing costs aat a five-year auction of course for german bonds. the dollar got a new boost after the fed yesterday. not raeally adding anything. eurodollar 122.65. yesterday dollar yen up 78.46. aussie dollar 104.81. we saw it come down, and then it got a bit of a boost. we had sales out of june in austral australia. it suggests they won't cut rates anytime soon. so we have maintained that below 80 on euro sterling. tracy has the latest for us and all the market reaction out of asia from singapore. >> thanks, ross. markets are mostly lower here in

asia. they gave up most of the gains from yesterday down 0.6 of 1%. it was a big drag on the investment. they fear beijing will have new property restrictions after july's housing prices rose by a biggest margin in a year. hong kong shares snapped a five-day winning streak. weakness in petro china doubt 2.5% outweigh strengths and aggressive plays. they stay in positive territory. they have the hopes for more policy actions from the ecb meeting. toyota is a winner tacked down 1.3% on the back of strong july u.s. sales. the kospi closed down, and battered oil refiners did outperform on bargain hunting. on earnings front they set second quarter net profit and did the 74% from a year earlier. lower phone fees and higher marketing costs.

australia shares finish higher reversing earlier losses after the nation's retail and trade numbers surpassed all market expectations. lastly, just a quick check is showing weakness down 0.4 of 1%. >> over here in the uk, cabinet ministers are reportedly considering the possibility of fully nationalizing rbs to ensure it lends to businesses. the financial times saying some senior uk government officials are in favor of buying the 18% of the bank not already owned by the state. the newspaper does say any plan would likely meet with opposition from chance lor george osborne not to mention a few others involved. a sign of what's to come? what do you think. you can e-mail us at worldwide@at cnbc.com or reach us on twitter. ross. >> yes. you may find on my tweets over

the next couple weeks rather more olympic references than olympic ones. i will keep up mixing for the next two weeks. i apologize. i'll keep mixing up business and sports. still to come, another exciting episode of access middle east takes place tonight. the focus this time is on the uae. we have a sneak presprview when come back. [ 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. ♪

plenty to focus on day five, olympic cyclists took the streets once again yesterday. tour de france winner taking home gold for team gb. the win makes wiggins the most decorated olympian in british history. >> the final of the 100 meter freestyle was a hard one to call with all trail ya's magnuson being the favorite. he held his lead into the last 50 meters. usa's nathan adrian pegged him back with 25 meters to go and claimed the gold by 0.01 of a second. >> the usa is certainly king of the pool in the medals table. china is sitting pretty on the overall leaderboard.

team usa is in second place with a strong performance in the pool helping them to gain ground on their olympic rivals. >> on the schedule today there's a final of double sculls at teton dorney. did i say that right? in the velodrome there's the final and we have the final 100 meter freestyle. >> double sculls is two rowers. we had a good medal chance in that. >> we'll see if britain can deliver on the water. >> thank you for acting it out for me. >> yeah. i used to do a little bit of that. as the greatest athletes in the world compete to see who is the fastest, strongest and best, there was a great display of athleticism from the mayor of london, boris johnson. he got stuck -- that is boris. he got stuck on a zip line in victoria park for five minutes.

isn't that fan fafk? >> that hair and the helmet. >> this is a man some are tipping as a future prime minister. >> i think if anyone has won the olympics, i would say it's boris johnson. look at that with the flags. you got to love it. >> you know, the thing about boris is someone with that kind of sense of humor, he's not an evil -- i can't be an evil man, can he? he just can't be. >> or he's true lie diabolical. it's one or the other. incredible. reports suggest the ecb today will present a plan to purchase spanish and italian debt together with the euro zone's bailout fund. according to the germany daily the esm would buy the bonds directly from the sovereign while the ecb would purchase them on the secondary market. this is a day after officials warn the ecb against large bond

buying. joining us more is hans redeker. hans, first to you, what do you make of these latest reports, and what do you expect from the european central bank today? >> well, i guess that after the announcement mr. rogge did do on thursday, we need to expect some type of road map at least, how to get the monetary transmission mechanism going again. as you know, they have to focus on their european bond spreads. to get those bond spreads down to a reasonable level, it seems to be a target, a policy target and as well the ecb's target. in one form or shape they will deliver, and everything could be executed effectively today. that needs to be put into doubt concerning a plan, a road map. i guess, we can be quite hopeful on that. how is the market going to

direct to it? i think that you should never trade against the central bank, at least not when the central bank is trying to do something new, something innovative. i think we're exactly in this type of environment. >> i think, hans, you could have done already trading again the central bank for the last year or so. well, i would say that the european central bank has done monetary easings, the european central bank has a lot of -- has done a lot of things to ensure that the euro zone is going to stay together. when you are saying trading against the european central bank, you obviously mean the development of the euro. we had been bearish on the euro for the past 14 months, and quite correctly so. i think what we are now going to get here in the market is we're potentially getting into a

corrective phase simply because what the european central bank and other authorities will promote is a reduction of bond spreads. that has severe implications on how bond portfolio managers are going to react to this. when you compare that, what happened after the ltos at that time, banks were buying bonds and they were adjusting their portfolios accordingly. tom some extent we head to something like that again. you find here an euro bear becoming a little bit short constructive on the outlook. >> kevin. >> on the medium, too, and beyond outlook maybe for the euro versus the dollar in particular, one of the thoughts we had is in the past the dollar hasn't always been perceived a safe haven currency. if risk appetite comes back and the u.s. economy begins to recover at some stage, we could see the u.s. dollar continue to trend higher against the euro, even if the euro zone crisis

actually is effectively kicked into touch for a while. what do you think of that possibility? >> that possibility is a very strong possibility. we said that last year and year ahead outlook recorded the year of the u.s. dollar. what we have to differentiate here is between what we think about in the long term and what is a technical trade. what i think is going along here, what is coming along is a technical trade. it is the breeze in the market, and that is, i think, promoted by potential action by european authorities in the next few weeks. so the euro temporarily higher. beyond that, you're absolutely right. the euro's going to be a long-term funding currency. the reason it's a long-term funding currency is because we have a severe problem in the euro zone, and we need a weaker euro on three reasons i would say. first of all, a weak euro is cheapening for foreign investors' point of view in the

zone. you get risk-absorbing capital coming in. it supports the export industry in the peripheral and generates income in core countries and then you can use that to support peripheral countries as well. >> just a step back for a minute and consider for a second angela merkel's role in this. it's remarkable her popularity is so high at a time so many european politicians bite the dust. do you expect that to continue, and what do you think explains it? >> i think that the opposition parties have taken a much more pro-european stance than her, so she's seen as a guardian of german interests. the question is, what is going to happen between now and the september 2013 election? is there a possibility that you can get a type of german tea party coming along, and there are some signs that we might go into that direction. then it becomes very interesting, because then you will see how chancellor merkel is going to react to the

potential appearance of a german tea party. so a type of conservative skeptical party. if that would happen, i guess mrs. merkel is going to become herself more ready to go. >> hans redeker, thank you to much for your time this morning. we want to now bring you up to speed on more earnings news we get in. hutchinson winpoe reports net private profit weak frer a year ago but better than expectations coming in at 10.1 billion hong kong dollars. that's above expectations for 9.39 billion in net profit for the first half of the year and excluding extraordinary items because they sold a port a year ago. the underlying profit for hutchinson came in at $9.83 billion, and that was an increase from an year earlier. it was high than the forecast. while that company's shares underperformed this year, perhaps we could see a bit of a turn-around given the tone of their figures.

>> slight bounce hoof back for uk construction pmi, which is interesting, because construction is such a big drag on the gdp in the uk. we have employment increasing unless the gdp numbers have gotten worse. some have blamed it on construction. it was 48.2. the poll was to decline to 48. so after contracting in two and a half years, it has returned to marginal growth. as i say, there's some slight relief there as well. meanwhile, a heads-up on tonight's access middle east program. we look at how you can make money by emulating one of the business leading the region. we're in dubai with more on the program. >> good to see you. again, we had a very candid conversation with a man who is very well known in this part of the world. he's the found eer and chairmanf the alhi tour group.

it's not listed and there's not a lot of information when it comes to the financial situation of the company, but it is a very influential player in the middle east. we fauktalked about all kinds o different issues and we spoke about whether european banks are currently worth investing in at all, given the libor scandal and all the challenges they have faced. this is a man who back in 2008, when the british lender barclays was scrambling for funds, bought a 2% stake and he sold it a year later and was disappointed by the decision by the company to cut the dividend. he says there's a fundmental problem. here's a bit of a preview of what he had to say. >> they don't have the capability and the knowledge of a businessman. their mentality is they're an employee. they pay a high salary and go home and don't care.

>> of course, the conversation went on. we talked about his interests in some of the other sectors that the company is involved in. he just picked up the meridian in budapest for an estimated $80 million. there's a lot more. we talked about syria and about an interest in asia, which he does not have at all. we find out why. tune in later on tonight, ross. it's a good show. >> thank you to much for the heads-up. >> still to come on the program, tire maker continental has raised the full-year forecast. what's behind the buoyant see? we'll talk to the ceo right after the break.

and these are the headlines from around the world. he's talked the talk, and will he walk the walk? all eyes on mario drogge. they can't wait to see if they will start to rebuy bonds. >> spanish unemployment falls in july as tyre hiring for the tourist season kicks in but the costs rise. >> sony fails to deliver on its promise to get back into the black as losses widen on weak european demand and the rising yen. >> and bnp paribas shares the top french market after the bank

beetss expectations and shows it strengthened its capital base. the ceo is happy with the results. >> in terms of absolute terms, return on equity, libor, in this new environment, we are really well-position well-positioned. >> germany tire maker continental has raise the full-year forecast after posting stronger than expected second quarter results. joining us first on cnbc is the ceo. thanks for being with us this morning. you know, we've seen such weakness in european car sales figures in particular. what's supporting your business? >> we see the weakness in the europe can cars as well and some weakness in south america. where we profit from is the strong growth in america in

nafta where the market was growing by 17% the first half of the year and we see further growth in china. being a company specializing on those products which are the megatrend products, we were possible to increase our guidance for this year. >> you did so, despite the fact you could face a rebound in cost pressures, you had some benefit from that in the first half the year. how much more might that hit profit margins going forward? >> we saw that the raw material costs in the second half of the year should be at a level we've seen the same period before. no further additional costs for us from that. that should help to get the profits back to the level which we have seen last year. >> are you planning -- you're talking about a fairly stable third quarter.

does that mean you're going to increase investments and purchases in other areas? >> no, we are not planning for that. we see a stable development over the year, but this is not influencing our purchasing or in any case or m and a strategy. >> i'm curious what kind of impact your business has seen from europe's debt crisis in terms of funding costs and access to lick wit and how much you rely on reserves to keep funding the business. >> we are a strong company, so we expect this year to generate free cash flow of 600 million. our banking contracts run over next year in 2014. this actually at the moment is not an issue for us. currency-wise, we have mostly for the important currencies for us natural hedges, so we are not

so much profiting or suffering from changes in exchange head for example in dollar euro. >> i'm curious, you mentioned your cash base and the strong results. you raised your outlook. people may wonder what more will it take to invest to put some of that money to work? >> you know, the gross of continental for the next year is in the bricks companies with tires, as well as with the u.s., expanding capacity there. this is a 1 billion program which we have started to invest and at the moment we are strongly investing in the future of the company. >> just finally, there's some bank analysts say they consider the new guidance conservative. what would it take for you to raise even your new guidance?

>> actually, this is our expectation now which we have. i wouldn't call it conservative. i think this is our best forecast which we have at the moment. this includes that there is still growth in the u.s. market, not the 17% we have seen in the first half of the year, but reduced but still growth. we included in that growth the chinese market and we foresee a further weak market in europe. if this environment stays as i describe it, i think this is a realistic guidance. >> thanks so much for joining us. wolfgang shafer, cfo of continental joining us from hanover. we got a raise guidance today from continental, but the italian carmaker is declining to provide it because of the economic downturn following the meeting of unions. the company that owned chrysler said they will present it with third quarter results in the autumn. also in the sector gm due to

report earnings later today. it may have halved in the second quarter. >> in japan two struggling electronics maker sony and sharp were stuck in the red for the may-to-june quarter. we have the story live from tokyo. >> hi. given these results, both companies cut their forecasts for the fiscal year. sony widened to $330 million. sales of flat panel tvs and other electronic devices waned and the strong yen exported profits. it managed to generate some products thanks to sony mobile communications. sharp posted a net lost of $1.7 billion on an operating loss that was twice as bad as estimates. the lcd operations remain sluggish, and the company width cut around 5,000 jobs or 9% of

the staff by march 2013. five of japan's eight electronic companies have reported first quarter losses reflecting how hard the global slowdown has hit them. that's all from nikkei business report. back to you. >> thanks for that. join us for more as we look at euro monitor international. louie, thanks so much for joining us. good to see you again. operating profits down 77%. no sign of them stopping the bleedin bleeding. what are they going to do? >> well, consumer electronics is a volume-driven business. cost is a very important issue. both companies really have to find ways to actually cut costs, and the whole tv business is actually declining. there's oversupply of panels, so we allow price cuts from other manufacturers. beyond that, the fastest growing

category, both companies do not have a strong presence. if we look at how important smartphones are to a company's bottom line, look at samsung. just one year ago, the revenue for mobile phones in its tv division is the same. then fast forward to this year. the revenue for its mobile division is doubled in terms of profits, almost three to four times. >> what's the future for these companies, given they have not caught that smartphone wave? if they don't turn the business around, will there be more layoffs ahead? >> yes, we expect that the situation will get worse. you look at tv, by samsung and lg, it is very big. even in both development markets and emerging markets, so there's not a lot of space for companies like sharp or sony to win over,

so to speak. >> yeah. is sony also more exposed to europe? does it have a bigger portion of sales there and also therefore eu euro/yen exchange rate? >> yes. 50% of sony's revenue is derived from developed markets. they're very largely exposed whenever the exchange fluctuates. in the case of sharp, 40% of the revenues is derived domestic in pater japan, so when there's a slowdown in japan, it will be hit harder. >> this is really -- the space is taken over by mobile devices. what is sony doing that may -- what prushgts do they have got that might excite you. until they come out with something that excites the consumer, it's going to be heart for them to turn things around.

>> there's older tvs. they're actually slightly behind. they do have the new technology that is comparable to the older tv, but there's the crystal tv in the prototype stage. you probably need about two to three more years at least for it to be ready for mass production. currently, there's not a lot of products that are looking forward that will come from stonsony unfortunately. >> thanks for that. we have spanish bond auctions as well. they raised the amount of money. they wanted over 3 billion in two, three issues. twos, fours, and 2022. the bid to cover on the two-year, it was three. that's the last auction, 2.7 on the four year, a little bit better than last time around. on the ten-year it's down, and i'm looking to see what the

yield was as well. have you seen the yield, kelly? >> looks like for the 2016, the yee yield of over 6% that compares with 5.6. >> the yield on the ten-year has gone up 6.7%. that's the yield on the ten-year. it was 6.5% on july 5th. so indeed yields are up on the similarly priced july auctions. one wonders if we hadn't had comments out from drogge last week how much worse these yields would have been. >> i was struck this morning on europe's "squawk" by one of the guests saying spain has five to seven weeks if the ecb doesn't rise to the rescue today before it's shut off. >> monty was there. he's meeting and saying you've got -- he wants them to take the bailout, but then the sff can buy spanish debt. it's like we don't want you to bail out, per se, but we want you to it take a balance so they

can step in and buy your debt. this is a bailout without conditions am it's tough politically. >> absolutely. absolutely. >> let's get some reaction on that. can we pull up the euro -- can we bring up the eurodollar charts and the spanish ten-year curve. there we go. >> that's what we're showing, yeah. >> i'm sorry. i was looking at the auction results as well. there you go. eurodollar is spiking on the back of 127. so we have the spanish ten-year? right. apparently we don't want to show reaction on that for some reason. >> we'll wait and see how the curve is reacting. in the meantime we want to do a quick check of the agenda in asia fotomorrow. we're wautching for a slew of earnings, and over in singapore cease asia's largest bank dbs will post the results. china and india release their

respective july services pmis. >> in a few moments the prime minister meeting them, and more reaction to the spanish bond auction. yields are higher again from july.

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exchange." >> welcome back to the program this morning. well, ross, a key meeting between mario monti of it legal and italy. we thought we'd look at their economies. it let has an unemployment rate now of 10.8%. compare that for example with germany, 6.8%, the u.s. 8.2%. the public debt is 123% of gdp. 2012 gdp forecast not growth. it's expected to shrink by 1.5% to 2% this year. june skwurm prices showing signs of stagflation up 3.6% from a year earlier. the domestic demand to look at the picture here in the first quarter, which is what we have the latest full figures for, was down 1.2% year on year. nlts a pretty picture, ross. >> no. what the concern monti has,

italy's figures might look like spain's. the xwunment is depression statistics. unemployment rate is just under 25%. public debt isn't that bad, and that's the thing about spain. this isn't the story of a country that is overspent. public debt still below 80%, 72.1% of gdp. the forecast here for growth, 1.5% to 2%. the june consumer prices a bit more inflation up 1.8% on the year. here we go. the domestic demand is down 4% year on year. just to recap this morning, spanish bond yields, ten-year borrowing costs up again, 6.7% in auction. they were 6.5% in july. two-year is a big jump, 4.8% from 3.6 and the yields on that and full-year money over 8%. in some ways it's the borrowing costs of the short end that's what happens on the ten year. if you borrow money near 5%,

that is really unsustainable, kelly. >> when we watch these yields on the market every day, ross, that matters for investors, but for the country what matters is the auction. when borrowing costs jump like this, it's a problem. >> that's why he's having a meeting and persuade him to take a bailout so they can step in. we're in madrid with our own views on this. the question is, julia, bhar the politics going to be to enable him to take bailout condition or bailout with light conditions. >> absolutely. you have to question what it's going to take. we show an inversion of the curve last week. they made record highs and still nothing from them. there is a suggest that given that monti and italy are meeting today, we could see a joint "to see if the ess can get involved, but that's difficult. his mandate has been there's financial assistance for the banking sector only.

if he broadens that out, he has significant pressure. also, it would meenl some kind of memorandum of understanding. we heard from citi earlier this week in their research report, that said even if spain gets a bailout, it might not mean more austerity. what it could mean for the country is greater oversight, and that's not going down well. we have to wait and see. we have the presser at 4:00 p.m. this afternoon. that comes after the ecb meeting, and i'm sure they're going to sit there hoping we get something from the ecb so they don't have to make the formal request. the likelihood of that doesn't look so high. guys, back to you. >> thanks for that. >> well, we look now back to kevin gardner, our guest here for the hour. kevin, we've been talking about, you know, what more the ecb can or will do today. if they don't deliver with what we spoke about happens with spanish and italian yields, with the auction, if they don't deliver with an outline or more

specific plans on reactivating the smp, for example, should we expect it over 7%? >> i don't know if it would go that far, but we expect a little bit of volatility near term. the key term we make for clients don't think it's a financial rubik and it's the end of the world. this is a relatively thin market. if the yield does push back doesn't mean it's going to stay there. i think it's going to be a little bit of a disappointing meeting, but i do expect the verbal comments to be pretty profuse and there will be a lot of them and we'll have a determination of what it takes out of meeting. we spoke with the continental. one of the things that struck me interesting in this whole context is he makes the point his company is very cash-rich and profitable. they're not investing. how can they make a company that doesn't feed funds go ahead and invest? the confidence is so important in the area and it's difficult

to see how you break na. >> i don't wonder if we're far from a point where governments write checks directly or doing massive tax cuts to give some, you know, consumer lift. >> or the balance sheet at the central bank eventually expanding even further than it has done to date, perhaps. that's further down the road. >> that seems unavoidable. thanks very much for being with us this morning. >> we'll take a short break. still to come, back out it to new york to speak to citi's head and find out why he says the significant downside risk for the euro. that's after this break.

welcome. if you're just joining us this morning, i'm kelly evans. >> and these are your headlines from around the world. >> he talked the talk but will he talk the talk. they're waiting to find out if the ecb will restart bond buying. >> spanish unemployment falls in july. madrid seeing borrowing costs still rise at the latest auction of sovereign debt. >> sony fails to deliver on the process to get back in the black and the rising yen. >> sfil no answer today as to watch caused the glitch. they were flooded further

undermining confidence in the inner workings of wall street. >> wur watching worldwide exchange bringing you business news from around the globe. >> well, good morning to our u.s. viewers who may just be tuning in. let's look at how futures are positioned. it's almost deja vu from where we stood yesterday. it opened higher by 25 pints and the nasdaq by one or two points and the s&p 500 same thing. maybe we hope we don't finish the day in the same sort of way. look at the global 300. it's only down fractionally, 0.08% negative. we haven't seen too much action this morning. as we look at european boards, this is how it shakes outs as the trading session moves from asia into europe. it's up a quarter of a 1% this morning. it's weaker. in paris they're trying to hold

onto the gains but the ibex is down a third of a percent. the broader picture emerging one is one of investors not sure what to make of the eca as we await the decision. >> we suspect they lay out a plan, so the talk is of action in the future and is a road map enough for what we've done in terms of price action. spain had one bond auction this month in august. they've just held it. the good news is they raised the amount of money they're talking about, a little more than that, 3.1 billion. they look for up to 3 billion. as a result yields have come down a little bit, but the yield to that auction have gone high despite the draggy comments from last year. two-year cash yields. they paid in auction 4.84%, which is above the 3.6 in july. the 2016, the four-year, they paid at auction an average yield of 6.0. we trade at 5.88.

yields come down post that auction. the ten-year yield back down to 10.66. they were around 6.8. they paid in auction 6.7, still higher than the 6.5% in july. the auction is done and they raised the money yesterday and paid certainly at the short end what are unsustainable yields. they don't center to come back to the markets, so there's relief about that. as far as italian yields are concerned, they're below 6% quite fimplly today and went lower post the spanish auction. they're up it'll bit at 1.51 and ten-year bond yields steady at 1.37%. as far as your odollar is concerned, it had a good day post the fed statement yesterday. right now dollar yen is fine on the sex, 78.31. it's a little firmer than where it was. we're up to 123 and above. that's the three-week high from last week. we keep our eyes on sterling amongst all the folks at ecb:

the bank of england has an interest rate today, but they added to the program. they launched the lending for loan scheme as well. we don't expect an awful lot today. construction pmi actually dipped just above into expansionary territory much better than expected. construction, of course, has been the weakest component of gdp, albeit employment is gaining. gdp has gone negative and skukz is a big play on that and better news for the uk. that's where we stand in europe. what about in asia? tracy joins us from singapore with the update. hey, tracy. >> good morning, ross. asian markets mostly lending in negative territory today. the composite gave up a large chunk of gains we made yesterday, down 0.6 of 1%. it was a big drag that beijing will come up with new property restrictions after july's housing prices rose by the biggest margin in the year mplt hong kong shares snapped a five-day winning streak.

weakness in petro china outweigh plays. petro china is down 2.5%. japan's nikkei managed to stay in positive territory. exporter stocks gain a hope for more policy actions from the ecb. toyota motor is a winner here at more than 1.3% on the back of strong u.s. july sales numbers. the cks ospi closed down. second quarter net profit is up from year earlier on lower phone fees and higher marketing costs. australia shares finish higher after all. it surpasses all market expectations. and lastly a quick economic on the index, although recovers a bit further down 0.2%.

>> there's mounting anxiety in the market this morning that the european central bank won't deliver big bang measures for now. they say it's unlikely this month and any policy action to sub due bond yields could be some weeks away. sylvia vadva joins us from the european central bank in frankfurt. we were asking if a road map will be enough. first of all, should we even expect a road map towards these purchases, and secondly, do you think that's enough given where expectations have been and given what mario has said in the last week or so? >> well, if mario drogge said they will do everything it takes to stabilize the euro, he should have said it would do everything it can do. that might be rather limited. they can buy bonds talking about the two-pronged approach and the

essf and the esm buying in the primary market directly off issue, so to speak. although there we have the first problems. the sff can't buy for spain and italy at the moment because there's not countries in the bailout jeem if spain should join so to speak. the esm doesn't exist yet, and it will exist the earliest if all sailing is smoothly at the beginning of next year. even then before the esm can buy bonds in the primary bonds in the market, there has to be a formal application of the formal country in question and a unanimous decision by the euro group which means all 17 have to agree. the dutch and fins have said maybe not. then we have also every step the way, we need parliamentary remov removal. it stent look like a quick solution or something that the

market cook take too much courage from. >> when drogge comes out says, you know, we will take action, we'll do whatever it takes and believe me it will be enough, what did he mean? >> well, we shall be the wiser or so i hope when the press conference comes. what has the ecb got in their monetary tool kit so to speak? it's a familiar combination of things. rates, rate cuts. we just had one that didn't do much. money market operations, ltro 1, 2. could we have a longer term ltro into deep space? maybe. the third one is, of course, bond buying programs. that he can revive and announce today, how much that does to the market remains to be seen. whether he sort of pulls another monetary rabbit out of the hat, be very interested to know. >> thanks for that. we'll be back in a little bit.

what do you think the ecb is going to do? will it cut rates by bonds and revive the program. this morning we ask you to share your expectations in a poll. head to our website at cnbc.com or vote and look at what people are thinking, ross. >> so much to talk about here. of course, just in case we forgot, the federal reserve is a place to keep ultra low interest rates in 2014. they're monitoring events and provide further comment on policy needed. despite what they called a deceleration in economic activity, the fed offered no signal on when it could restart its own bond buying program if that was the right course of action. joining us more is street talks, and a global effect of g-10 fx strategy. welcome to you both. we kick off with you. we saw the dollar get a boost post the fed. it can you tells it squarely and firmly on the ecb today.

how do we trade if no action from the fed and if as we heard from sylvia, the most we get out of the ec about is a road map. >> emotionally it's hard to say that the ecb is independent of the fed. they don't sit there saying i'll do it if you do it. they need something stronger than a road map to impress the market. if you read the entire drogge speech he was much morp explicit something would get done. in four hours we could be at 124 and 121 if they really disappoint. if they put out a road map, it's specific so it specifies there's a deal in place and these are the steps in the deal and this is what everybody does to give the market confidence that there is actually a plan that will be implemented. >> the germany newspaper says the road map would be -- sylvia highlighted this.

would be we get two-pronged approach. a european bailout fund would be at some point a future stop buying sovereign debt in the primary market and the ecb would step in and support the secondary market. there's lots of steps to gets to that point. p if he lays that out, how do you react? >> i think if he says, look, this is what we're going to do, i would buy euros on that. if he says, well, this is kind of sort of maybe what we're thinking about and the direction we're headed and i'll tell you next month, then you sell yours i think. that's a clear disappointment. i think they don't have to start today. but we have to walk out of the meeting being very confident that they will be starting and that the size will be appropriate. >> lance, what do you do? >> well, you know, the issue here becomes whether or not that they can get germany to come along with their program. so let's say mario lays out an

absolute crystal plan here about using an ltro financing plan or using the efsf and the esm. the problem is ultimately germany is the pay master here. they've been clear over the last few days there's no banking license for the esm at this point. there's no intention at this point to go forward with the esm until september when they have their initial vote, so the problem is that for drogge he can come out and make a road map. the question is whether or not he can follow-through with it. that leaves the markets in some angst over the next couple of months. >> we have a viewer writing in saying drogge is more successful at moving the popular vote towards leaving the common currency than anything else, which would cut angela merkel's own objective? is that the risk here? that popular sentiment as turned away from this project? >> it has. kelly, earlier you were talking about angela merkel's popularity

in germany. recent polls have shown that her popularity has slipped here recently, and she's up for re-election here soon. with germany slipping towards recession and, you know, german kind of facing their own troubles at this point economically, there's more of a push-back from germany to protect their own at this point rather than going forward to bail out broke countries that can't ford to pay them back if they doan them the money. >> thanks for that. we'll be back with more in a bit. >> meanwhile, the new york stock exchange has canceled -- this was extraordinary yesterday. canceled trades in six stocks. a rouge algorithm bought and sold millions of share flooding the market at the open with a surge in volume. knight was down 32% to a nine-year low yesterday amid concerns about lawsuits from disgruntled customers.

what does the issue mean for the futural goe rit mctrains. we'll talk to david lutz on the issues. the machines are in control. very scary. >> the machines are in chrome of the market, and government wants to be in charge of the banks. uk cabinet ministers consider the possibility of fully nationalizing rbs to ensure it lends to businesses. the financial times said some senior uk government officials are in favor of buying 18% of the bank that isn't already owned by the state. the newspaper, though, does say any plan would meet with opposition from chanwith chance george osborne. is it a sign of more to come? e-mail us or tweet us. you can also, of course, reach us directly on twitter. ross. >> on my tweets you'll find some sport in there as well. i sort of apologize for it, but

i make no apologies for adding olympics to business. still to come, find out what's making the boss at bnp paribas so confident about the rest of the year. we'll be in paris when we come back.

today on "squawkbox" the former kansas city fed chief who is really outspoken about the need to do go with

welcome back. if you're just joins us, these

are your headlines. the ecb is in focus after the fed holds fire. investors waiting too find out if mario will restart bond purchases. >> spanish yields continue to rise at an auction despite improvement in july. >> still no answers about the glitch at knight capital that flooded the u.s. mark with bad trades. meanwhile, bnp paribas beats expectations after the second quarter figures. the firm says it's confident about prospects for the rest of the year. stefan sat down with the ceo. how confident was he, particular, of course, with all this expectation and speculation about what the ecb might do? >> first of all, regarding the bank performance, bnp paribas never gives proper guidance. they told us that the bank should maintain a high level of

profitability for the second half of this year. he also believes that the cost of risk would be the flat compared to last year after a 37% decrease on the second quarter. i caught up with the head of it, and asked him if the second quarter was particularly challenging. >> well, the environment is challenging, but if you look at the overall results of the group, they're really stronger. we're very satisfied with this -- with those sets of results, especially in retail, but also with investment solutions and even if we were in capital markets, what to pass through those markets are quite challenging. we're in a position to run the situation in a very safe way. we kept -- i'm sorry. we fixed at relevant positions like being number one in all

euro bond issues. so challenging environment. very strong results, and as you can see a very nice position in terms of being able to achieve this new -- this new regulation. >> on bnp paribas, also improved its capital position in the second quarter of this year. core capital ratio at 8.9% under basil 3, which means that the bank nearly reached the 2013 target six months ahead of schedule. it's trading up higher. over it to you. >> thank you for that. >> still to come on the show, we head out to madrid. that and much more on the spanish auction results and the future for that country next. [ female announcer ] e-trade was founded on the simple belief that bringing you better technology helps make you a better investor.

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we have a key meeting later on today. going into that meeting we thought we'd look at how they're economic performance stacks up starting with italy. they have an unemployment rate of 10.8%, a public debt-to-gdp ratio of 123%. it's interested to shrink its economy this year by 1.5% to 2%.

consumer prices of 3.6% and just to add to the spade of weak data, q1 domestic demand down from a year earlier. >> can mr. monti to stop his economy sper suede mr. ma how take a bakeout. he doesn't not the economy to deteriorate like spain has. when you look at the unemployment rate below 25%, total public dpebt less than it let. 72.1% of gdp. if you add in continuing bailouts of the banks, that number is going to rise. we saw spanish auction costs rise today, two-year, 4.8% and four-year 6%. those yields are clearly unsustainable in auction. they don't have to borrow any more money this month. the question is these two men meet is what can mr. monti persuade him to do. julia is in madrid for us. to get the ecb to act and the

bailout funds to work, they have to take a bailout with light conditions. is he going to do that? >> politically, that would be very difficult for him. i think perhaps the suggestion today is if we could perhaps see light, say they would yucatan peninsula help from the esf 2 that might be a bitter pill to swallow but we heard from the chief of the treasury in spain, he said there's nowhere near asking for help. we married from the economics ministry, and they said that the average funding costs this year are 60 base points below what we saw in tweven. you have to bear that in mind despite the turbulence last week. it did bring spreads down significantly. what do we get? we expect a presser at 4:00 local ti local time. that's after we here from the them. they need to bail out draghi if

he can't come up with the goods today is the question. back to you. >> julia, thanks very much for that. still with us is lance roberts and steven england or global trend of fx strategy at citi group. lance, out to you. we talk about spain. it's vulnerability here. the potential for a bailout and its borrowing costs rising. what specifically does the ecb need to do to finally get ahead of the issue if it even can? >> i think the last part of your statement is the most important part, which is that these bailouts that we've seen do -- let's talk about the ltros for a moment and talk about the bond-buying programs. they provide a temporary measure of relief, but ultimately until you resolve the underlying debt issues and fwrogrowth issues, i difficult to get ahead of this trying to move debt from one side of the balance sheet to another and shuffle it around

the euro zone. at some point these economies have to start to turn around organically and get back onto a path of growth and start to bring in debt riblts that they've got, reduce their interest costs so that the economies can begin to grow. >> yeah. steven, let's bring you in on this aspect as though i just -- you know you look at sovereignty here, monti is getting a lot of backing from the u.s., and i'm wondering where the bad influences play any part here or not. >> i think on the margin there's a recognition that europe's problems have to be solved won europe. the problem for sfan and italy is that even though their headline deficits, their primary deficits are lower than those of the u.s., they pay up a lot more because they don't have a central bank behind them ft debt

markets like the u.s. does. they desperately need structure reforms and austerity but they desperately need the help of the central bank to get the borrowing costs down and make it all work. u.s. can use its gentle influence. i just don't think it's a big player in any of this. >> lance, while we've got you, i want to pivot right quick and talk about the trading action in the u.s. yesterday. how significant is this interrupti disruption and what's it mean for equity activity going forward? >> this is important. this is reminiscent, obviously of the flash crash in 2010. it's that the problems when you actually start to allow computers to trade, these are m man-made programs prone to error, and this will happen again. how much does this erode investor confidence in the markets itself?

the one thing that we've seen over the last three years is a continued flight out of equities and into fixed income for safety. we have a massive number of individuals, 75 million bookers moving into retirement dependent upon the money and any lose faith that the markets are a fair place to invest it. the landscape has shifted away from an environment of fairness and competitiveness to something that seems to be rigged in a lot of situations for the individual investor again. that's where we're speaking from. in order to have a strong capital market and what made the united states so great for so many years is we had a strong constitution. we had strong contract law, and we had the ability to compete on a fair and equitable basis. all three of those have been under attack over the last three years by both the administration as wells finance markets and wall street itself. until we begin to move back towards the situation where the average investor can feel like they're able to play on a fair

playing field, it's difficult to get that confidence back and into the markets. >> steve, finally if you're in the currency markets and you want to go somewhere to avoid policy risk, what trade can you take? >> i think what you see is the smaller currencies in the g-10 australias are very attractive. they're much better. what you see is that central banks in managing the reserves are increasingly buying these small currencies. they thiseem to buck the trend times. there's supports. some combination, i think, of the dollar on the -- over the median term on the potential for greek exit and a further crisis in europe and the smalls at your risk component is probably, you know, where i would be. >> steven tharn, thanks for tha.

and we'll -- we'll get more from him with it. we have to let you go, lance. sorry. >> thank you so much. >> good to see you both. thanks, guys. we have comments coming out from pboc. they'll make stabilizing growth a bigger priority and continue complementing policy and maintain reasonable growth of money and credit. it's worth pointing out a month ago today when we had the last meetings, china did cut rates. >> it's right around this time sort of mid-day in london they come out with statements and policy action. you have to wonder in tandem with the comments earlier in week what they're talking about f-they get specific enough for investors to buy into this. we'll see. >> we're going to use increasing swings, so increasing two-way currency swings as well. i think continuing down that path of making it more

tradeable. it's a slow and steady path. stick to come on the program, we'll talk about oreos, cadbury cream agencies and rice krispies. >> haven't you had an oreo? >> these are the ones you're supposed to pull apart, right? >> they report second quarter earnings today, and we will preview the results coming up here's how futures trade as we gear up for the open on wall street. we'll be right back.

today on "squawkbox" a

former kansas city fed chief who is really outspoken about the need to do something with

welcome back. well, he has talked the talk, but will he walk the walk? all eyes are on mario draghi with investors waiting to find out if they'll buy back bonds. >> spain sees borrowing costs rise despite draghi's words and unemployment falling in july as the hires for tourist season kicks in. >> sony fails to deliver on the promise to get back to the black as losses widen on the demand and rising yen. >> still no answer today as what caused the glitch at night. they flooded u.s. markets with band trades further undermining confidence in the interworkings of wall street. >> you're watching worldwide exchange bringing you business

news from around the globe. >> well, as we approach the start of the u.s. trading session, we saw stocks get a lift here. the dow jones industrial average is pointed higher by almost 40 points, the nasdaq by four or five at point and trying to add about the same imagine. we saw the indices move a little bit to the upside since we checked p in. here we check from being marginally lower to higher, just about flat, but trying to it add one point here. what i want to focus on is the increase we've seen in the last couple of minutes. pboc is saying it will keep on doing things to help spur money and credit growth in china, even including things like first-time home buyer credits. is this an indication there's going to be more policy action from china the same way that last month when europe and the bank of england were meeting to do decide what to do about policy. china had a rate cut stwl.

>> exactly. it's fascinating they want more fir first-time buyers reducing the risk in the property market and restricting credit. what are investors to do today as we wait for the ecb? this is what some guests told us this morning on c nbs. . >> we chat with them. i think it's disappointing. i don't think the ecb has the ability at this point in time to follow-through, so that's sort of peripherals leading up against the euro, also sfoining with the eurodollar as well. >> so you can actually see these opportunities. companies need financing. companies need money. equity prices are so low, they they look at alternative ways to raise funds. dle

clever investors can get direct exposure now, and you don't have to worry about the wikt market evaluations in the short term. . >> we like corporate credit. in a fundamental case it's another part of the had you not for yeed that disappeared in the bond markets and other markets. people look at equities that pay income and corporate bonds that pay a coupon. >> a pair of global food giants report earnings today. kellogg is out before the opening bell expected to earn 84 cents a share. earlier in year they cut the 2012 outlook blaming high ingredients costs. kraft will report after the close and xiptsed to earn 62 cent a share. this is after exposured to

cadbury unit. kraft has an update on plans to split into two separate companies. joining us on the phone from chicago is erin lash, senior stock analyst at morningstar. you have kraft and kellogg. which company is better positioned right now? >> at this point in time, we think that kraft is better positioned. th they've been firing on all cylinders. last quarter they realized a very balanced growth from all regions. >> kwha in tim lar is going to be the thing to watch when kraft reports, even when kellogg does as well? we do watch for earnings. i imagine food cost pressures have to be a big deponent as well. >> food cost pressures are obviously something we pay attention to. in terms of the weather-related issues we see right now, those don't have the potential to impact results for some time down the road. what we pay attention to is it how sales growth is impacted between price and volume. if the firms are still having

high prices and volumes are compressed, that's a negative sign. >> it's interesting because these companies have done okay, all things considered despite worries about the european exposures and certainly despite signs of weakened consumer demand. why is it that food packaging companies are generating decent performance? >> obviously, food is an essential product. people ton he'd in addition to what we see over the past year or so. food companies are investing more between product innovation and producting support to differentiate their products from lower prior offerings. >> kraft since taking out of it have management challenges. they split the company over snacks for north american groceries. will that help it out? >> that's a value enhancing strategic action that will

unlock volume and obviously that was something announced a year ago and we hope to get more details on the progress later today. >> with regard to kellogg, erin, do you expect this company to do anything with dif dends something forward to lure investors? >> most package food companies have strong commitment to their dividend, and that's one to increase the total return. both kellogg has raised their dividend and paid a dividend for several years. we expect it will continue. >> how would you compare this with the likes of un ilever or . we saw growth from emerging markets. >> obviously, unilever has been knocking the ball out of the park with very balanced growth and maintaining margins. they've excelled quite well.

procter & gamble has their own international challenges, specif specifically related to competitive pressures as well as initiatives to try to cut a large chunk of costs out of their cost structure. they face different challenges, so i guess it's somewhat different but we'll hear more from procter foam. >> erin lash, thanks for calling in this morning. still to come on the program, we'll tell what you caused london's mayor to get stuck on a zip line. >> that's the mayor of london waving flags, and then he came to a crushing halt. >> you're so proud? >> has this never happened to mayor bloomberg? >> no, but there's still time. >> okay. >> we'll be right back. [ male announcer ] it's a golden opportunity... to drive a car filled with as much advanced technology as the world around it. with the available lexus enform app suite, you can use opentable to make restaurant reservations...

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welcome back. the investors are waiting to it find out if mario draghi will restart bond purchases. spanish yields continue to rise at auction despite an improvement in july. no answers about the glitch at knight capital that flooded u.s. markets with bad trades.

>> you just heard it. yields continuing to rise at a spanish auction today. two-year money at 8.84%. the reaction in the spanish yield cash market is actually to improve slightly. 4.89 is where we stand in the cash market. 3.6 in july. on the four-year the yield auction is 6.05. it was 5.6 in july. still below the cash. yields have come down, and the ten-year yields, at the moment 6.64% pretty much down on the low for the session today. remember, they were 7.75% last we week. that's a hoochlt the auction yield today 6.7%. these are clearly still unsustainable in any medium term or even perhaps short-term period as well. it's the only auction spain has to undertake this month. it raised more than the maximum 3.1 versus 3 billion they were fl plans. they got the money in and don't center to come back to the market in an raukz like this

again until september by which time we hope we're clearer on what to get from european authorities. sylvia is outside there. she's at her standard post in front of the ecb. here's the question. mario draghi said last week i'll do whatever it takes, believe me it will be enough. you've laid out many reasons why he can't do anything concrete today. what road map -- we're anow looking at a road map potentially. what can you lay out? >> well, the road map must include more than what the ecb can do, because the speculation was about a two-pronged proe approach, three-pronged approach with other institutions. thegsd before the esm is not there yet, and even with the esm primary bond buying is not so easy. they can only buy bonds for countries in the bailout regime, which rules out the countries

we're interested in, spain and italy. that leaves, of course, the ecb. what can it do? it can cut rates and more on money market operations into deeper space or maybe indifferent maturities at the same time. a sort of machine gun approach. the ecb can revive its bond purchasing program. remember, we had a covered bond purchasing program before to take some -- to give some relief to the market, and that segment of the market. these are the things that essentially can do. if there's anything else that super mario can pull out of the hat on the monetary magic tricks front, we'd be very interested to hear that. at the moment there's no speculation about anything else. rate cuts at the same time we've had a rate cut. it didn't do an awful lot of good. it's questionable at the low rates where we are at the moment that that even does an awful lot. ltro combined with bond purchasing programs could give

us a bit of fun. on the other hand we know if the ecb doesn't give up the seniority debtor position, then the bond purchasing program always is half counter-productive. >> sylvia, thanks for that. the trading glitch at knight capital, two months after facebook's boshed ipo on the nasdaq and two years after the flash crash, ross. how much will the latest incident hurt investor confidence? we'll ask a trader next. [ female announcer ] want to spend less and retire with more? then don't get nickle and dimed by high cost investments and annoying account fees. at e-trade, our free easy-to-use online tools and experienced retirement specialists can help you build a personalized plan. and with our no annual fee iras and a wide range of low cost investments, you can execute the plan you want at a low cost. so meet with us, or go to etrade.com

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okay. i've been breaking out the sideburns today, and i'll do it later. the olympics, here's and the fastest, strongest and best. but a display of athleticism

didn't go so well for boris johnson. this is, in fact, the mayor of london on a zip wire, and then he got stuck. >> this it could be your next prime minister, ross. >> i'm liking that fact. >> you could be looking at britain's next leader stuck hanging on a zip line. >> i haven't seen mitt romney getting stuck doing this. >> i couldn't. >> he's sadly lacking for it. >> you would think it would help him out a little bit. in any case, crazy images there. the new york stock exchange canceled trades and six stocks most impacted by knight capital. a rougeal goe rilt repeated by millions of shares flooding the market at the open with a surge in volume. knight blames a, quote, technology issue but hasn't said anything further. its shares fell 32% to a nine-year low yesterday amid

concerns about lawsuits from s disgruntled customers. joining us is david lutz. what are the ramifications from what we saw yesterday? >> kelly, thanks for having me. you know what? i think we're trying to let the dust settle in this knight capital issue and how much was really a software issue where orders continue to get repeated or a fat finger? was it human error? there's a key difference to know that. if it was truly a human error, there's not a tremendous loss of confidence in u.s. markets. at the end of the day, we had human error in the markets when they had trade under the button tree in new york city. if it was an algorithm error, there will be more safeguards put in place and thankfully we had a lot of volatility safety guards in there that helped to mitigate some of the issues and slow down the damage. most of the damage is centered around knight capital losing

about $300 million in market cap, kelly. they make probably about $200 million in market making revenues between now and the end year. they've taken out one and a half times there. is it truly a lot of lawsuits and issues as far as financials are concerns or is it a shear loss of confidence in bhaets going on at knight. >> what's it mean for the nicee if anything, david? >> it means they might put more body backs on the floor. hopefully there's more between the algorithms and computers where things get executed. at the end of the day, i have to make a phone call down for the floor. there would be three steps in between me and the order actually getting executed in order to get something done. there's good about that as far as catching any human error and big problems we have as far as orders are concerned. it slows things down a little bit, but at the end of the day

losing a second or two with high frequency traders out of the market, i'm not sure that would be the worst thing at all for investors. >> we had the spanish auction yield tie but it's deemed a success because they raised the money they want and don't have to come back to the market until september. where does that lead us as head of the ecb and as a trader? >> ross, it's very key to see what the ecb does today. traders were not necessarily anticipating it to do anything yesterday. we look forward to the jackson hole conference at the end of august. maybe it's cutting the deposit rate, and i think cutting the deposit rate would be key because at the end day, that would probably drive the value of the euro down a little further. we'd see a big rotation out of the euro as it gets less and less expensive and against borrowed in what we call the carry trade. why is that important? at the end of the day a lot of

conspiracy theorists see it to press down the value of the euro and help europe's economy to continue to grow because they're in contraction according to their pmi. ultimately germany is responsible for things going on in the euro zone and bailing out the periphery to get yields back in line. >> tlhank you so much for joinig us this morning. >> that selts up up. plenty more to come on cnbc. here in europe viewers are sticking around with us. louise is going to join us as we launch the bank of england today. >> as we hand off to the u.s., we'll look at whether there's more action in china and not clear if we see any real action. it could be another interests day on wall street. >> keep it tuned at cnbc wherever, but from kelly and for now, good-bye. [ male announcer ] this is the at&t network.

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good morning. the top story the ecb meeting. the markets waiting to see if super mario lives up to his proposition of saving the euro. today's decision follows another one by the fed yesterday. ben bernanke stopping short of resorting to new measures, instead saying he's prepare to act unless the economy stages an unlikely comeback. rage against the machine at knight capital sending traders into a tizzy. "squawkbox" begins right now.