this is "worldwide exchange." i'm ross westgate. >> i'm kelly evans. these are your headlines from around the world. . >> toyota pulls a sharp u turn back to profitability but the carmaker sticks to its profit outlook. >> bank stocks leaf markets higher in europe. rbs post expectations. >> we have done a very thorough job. we've been working with all the investigative bodies all over the world. we've gone through millions of emails and so we've identified, i think, what we know. >> and a few more red flags over

china's domestic economy following pmi readings in july. >> the nonfarm payroll with anything short of the predicted 95,000 figure likely to boost hopes from the fed. china's pmi, we got the latest revised or final eu services pmi. 47.9. 47.6 flash. four month high. business expectations 50. it was 50.1 in the flash. that has lowered since march 2009. so the final composite pmi 46.5, flash 46.4. what they are concerned about is a sharp drop in new orders

compounding this suggesting a lower start. james shuk is a senior economist and joins us. mr. draghi yesterday talked about the risk to the economic growth to the down side. if we keep getting these sort of pmi numbers might we get a rate cut next month? >> i'm not sure a rate cut is high on the agenda of the policy option the ecb is considering. look, i think he alluded back in june when they didn't revise the growth forecast for this year there would be a revision later in the year downward. we think that these sort of survey outcomes are consistent in the second quarter with minus .6, minus .7 gdp growth.

that will fade into september projections which will need be revised down substantially. we think the full year growth story for year end will be minus 1%. they won't go that far in the september numbers but that's the kind of outcome we'll end up with. >> i know we have all the other stuff to talk about with ecb. i read this ubs note this number this morning, they thought they would get a cut. >> he said they discussed the cut, but decided that it wasn't appropriate for the time being. i don't know that one month makes that much difference particularly if they put in place a coordinated policy response, speaking of taking the best elements of what he talked about yesterday and putting them into like a coherent package. that will be the focus of policy at the september meeting. we hope so. yesterday's disappointment was the fact that markets wanted

instant gratification. they didn't get it. he kept talking about in a few weeks maybe we'll have that gratification in september. >> okay. we'll talk about the other things he said. first of all, i want to apologize for my voice. >> i think mario draghi has gotten to you so you can't talk about how bad the situation in europe is. >> i would like to say that. that's your excuse. >> is that the olympics? >> might be something. >> if ross sounds froggy it may have something to do with great britain gold medal race. >> the noise is unbelievable. fantastic. >> it's friday. >> yeah. >> teamwork for this one. in any case, ecb president mario draghi did disappoint markets yesterday after failing come up with immediate action to solve europe's debt crisis. he indicated some bone buying could take place to help ease peripheral yield but no action would occur before september.

>> the governing council within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy may undertake outright open market operations of a size adequate to reach its objective. this effort is going to be focused on the shorter part of the yield curve. so it's early to say whether they will be sterilized or not sterilized. we remain assured that we will be acting within our mandate, that is to preserve price stability in the medium term for the euro area. well nevertheless spanish yields remain stub bonely high after the ecb refused to announce lower costs. 7.3% is the ten year spanish

yelled. the spanish prime minister refused to say whether he would seek assistance from eu bailout funds. dow jones citing a government official saying a group of spanish lenders will request the first batch of eu bailout fund in the coming days. joining us now is ed rogers, managing director at rogers management ad riceors. the market reaction clearly one of disappointment. you're seeing 7.3% on the spanish ten year. why is it when we read commentary analysis this morning they say it is a step in the right direction? >> well, i think as noted earlier we continue to hear positive noises but we don't see the productive actions that would lead to interest rates coming down. so it's a little bit more of kick the can down the road in september we'll solve the problems. some people focus on the fact they will still solve the problems.

it's an open question whether the political will frankly exists to take the actions necessary to solve the problems. >> ed, it's remarkable to sort of listen to that press conference yesterday, the openings on the table, the measures to discuss without any specificity. does it change your view what to expect from the ecb what we might see come down the pike in september? >> well, our view is it remains very hard for the europeans to reach a consensus on how to approach solving their problems or how to agree on what the exact problem is. europe to us remains a geographic definition rather than a political or a cultural or an economic single entity that acts as such. until europe acts with a unified political will there. >> solut-- there is no solution

this problem. >> the french are resisting giving up some of their sovereignty. the germans actually seem to be prepared to do that, to an over reaching brussels administration. there needs to be much more fiscal cooperation and sharing of obligations. fiscal transfer has to be part of it. these are hugely politically difficult to achieve but they have to happen if the euro is to survive longer term. i mean, if draghi last week hadn't said what he said but then had delivered what he delivered yesterday i think markets would have given a near term possibility of much more strong ecb participation which is a necessary part of the solution. but no means sufficient. you need to have the ecb holding down the periphery. so these other reforms can take place. yeah, it's very difficult for europe unless we see so much more integration.

>> thanks, james. ed will stay with us for a little bit longer in the program. >> expectations management wrong? >> this is a classic -- they want to bring in a pr team or something to avoid this problem in the future. the thing is even if that's true, ross, the fundamental picture hasn't changed. they may have mismanaged last week or ten days but the fundamental problems are still there. >> plenty more to come. we'll be in spain's most indebted region. and an exclusive interview with a woman who is making a name for herself for a relentless drive for austerity. >> italy's banking sector as the financial heavyweights get set to report numbers. >> we get a first view on berkshire hathaway figures. we'll speak to a man who knows all there is to know about

warren buffett. >> first, toyota made a u-turn back to profitability. japan's biggest automaker announced a stronger than expected $4.5 billion profit. it also ramped up its global production in sales targets. yen pressures remain the biggest threat. toyota says it will stick with its initial earnings forecast for the year. ed, what's your view of toyota now? >> we've been very positive on the auto sector, the japanese auto sector in its entirety for a long time. they really took their medicine quite some years ago as far as learning the lesson that you need to outsource production. they got production facilities in united states, europe, china. the overall view on where the auto industry goes is incredibly bright. we look at indonesia as a

benchmark. indonesia is approaching 1 million units per year in car sales. what a fantastic number. the chinese within two to three years will have an economic rebound they could get 25 to 30 units of purchase a year. i love the auto industry in the medium to long term. companies like toyota are well run, strong companies. you got to like them going forward. >> japan's the world's second largest ipo. japan airlines will list on september 19th with a total share of $8 million. it would move it back to the public sector and give jal a higher capital than nippon

airways. sharp has the backing from two of its main banks but market players were unconvinced the company can stage a turn around. on thursday sharp said they expect earnings loss of $1.3 billion compared to $260 million profit predicted. it announced its first layoff in 60 years. how significant is that? >> it's very significant. what we think is that the electronics industry will have to do what the auto industry has already done. they need to figure out how to rationalize their japanese workforces and outsource their production facilities. once they do that they will be fine but this is the first step in a very painful step obviously to cut the workforce in japan. but that's really one of the few options that there is combat the yen at 78 yen to the dollar.

>> more to come from you, ed. time to update everybody where we are with equities. ross, we're .9% on the upsaid to on the stoxx 600. now this follows a really rough and tumble day in markets yesterday. that initial disappointment from european central bank leading to losses. we're seeing relief. you can see it mostly in the indexes that suffered worse yesterday. ibex 35 is spoup 1.9%. cac up 1.6. the xetra dax up 1.4%. the ftse up .75%. here's the caution. let's look at the ten year bund. price of that yields sinking to 1.278%. investors are leaving spain and they are leaving the u.s. let's focus on spain. this is the one to watch.

7.3%. that's the yield this morning. that does not look like much of a relief rally to me. just a quick check on gilts and treasury. moving slightly higher. maybe edging a little bit higher. that could indicate we're more supportive risk atmosphere later in the trading action. still sitting below 1.5%. forex, the aussie/dollar, supportive of risk. euro/dollar adding about .3%, 1.2214. that is the level. let's check in how markets are doing across asia. hi. great to see you. you were talking about spanish bond yields were creeping higher and higher. take a look at the drops. japan down 1%. korea, the hang seng has reached most of its losses. kite a bit of losses coming through here in the asian market not only about disappointment

about inaction from temp cb but jitters of u.s. jobs and dismal earnings. take a look at china, shanghai composite bucked the down draft up a percent. cut in trading fees. official denials that fresh property curves are on the horizon. that remains the big question given we got 760 companies queued up to ipo. that will take three years to clear the backlog. earnings. japan a huge story today. take a look at some of the big companies. sharp, sony and dollar/yen. sharp and sony are hovering at loss we haven't seen since 1980. it's about the earnings picture. not only that outlook looking bad. a dollar/yen, boj meeting next week whether they will do some powerful easing like they did on valentine's day. that's the big question.

really seems to be about some of the forex moves not to mention that they don't have a technological stride over their biggest competitors of south korean rivals. >> thanks very much for that. anticipation is building at least for me for the u.s. jobs report that's going to be out later this morning. all eyes are on this figure across the globe. probably one of the most market moving indicators or piece of data we get. forecast to grow by 95,000 jobs. stronger adp report earlier this week lifted expectations, there have been other troubling signs and little pieces here and there. still looking for a pickup from june's level of 80,000. not necessarily looking for improvement in the unemployment rate. 8.2% is the figure. need more improvement and more quickly if we'll keep risk out of the market. >> all-important -- >> i'm excited.

>> jobs report. >> ross is in. pin up spot. >> swing my legs around and everything. what do you think about today's jobs numbers? what do you think they will be. send us your guesses at worldwide@cnbc.com. tweet cnbcwex.com. or direct to us at kelly evans, the under score is very important. myself @rosswestgate. we'll be right back. 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.

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recap of the action from day six. olympic legend michael phelps faced off ryan lochte. he pushed lochte and won his first individual gold medal of the games, his 20th olympic medal in total. >> incredible. well the final of the women's all around gymnastics saw 16-year-old american gabby douglas nicknamed the flying squirrel take home gold ahead of tough competition by the russian. i'm just happy about a fellow virginian. >> oh, yeah. attention very much, today.

phillips hines got the team off to flying start. up to chris hoy to bring home the gold medal which he did in a new world record time. i know i'm going to talk now because it's going to couple. they built this as the fastest track in the world. and temperature they keep it at 28 degrees because apparently that's the temperature which the track, the wood is scandinavian, siberian. 28 is hot in there. they have double doors so they don't let any of the air in. they let people in and shut the back door. >> sometimes i think when it gets so sophisticated isn't it defeating the purpose. >> we saw six world records. >> of course you'll get world records with perfect conditions. anyway a good night for the usa did meet despite trailing china overall in the standings they

are equal to their olympic rivals. we'll see if the american's women's soccer team can keep it up. >> there's a good chance that usa might meet gp in the women's soccer finals. >> i would love that. >> they are not sold out. we could go to that. you want to do that. >> the loser will have to do something. >> it's traditional. >> also got full day of competition with team gp facing canada in the quarterfinals. >> i'm presuming we'll get through that one particularly. right. that's the olympics. china's service sector is growing at a better pace than the mainland's sector. there was some weakness in new orders. hsbc did have a pickup in the services sector from july to june 10 month low. india's service sector expanded activity for the ninth straight month in july although the july

data was a bit lower from june. the survey highlighted inda's new orders and stable employment. ed, we have more comments out from the pboc yesterday. how do you assess the china slow down and what more we're going to get in terms of policy response? >> well, first of all, ill love to get a ticket to the women's soccer final and have you guys fly me over so i can tell you personally what i think. barring that the pboc is very committed to reviving growth in china. we've seen every indication that in this year which is a political transition year, a very important political transition year in china, that the chinese governing authorities would like to ease the pain as much as possible of the economic slow down. >> right now how does that impact your investments, your china plays?

>> we continue to see japan as a very interesting levered play on china. retail sector, the auto sector, a lot of consumer goods sector in japan are very critically tied to china. china has been the largest trading partner for japan since 2004. so, any pickup, any uptick in chinese economic activity will be very positive for japan. >> all right. ed, good to see you. have a good weekend. i don't think we can pay for you but if you can get over here -- you have to get over here on your own. but if you do that, we might be able to work something out. good to see you ed. can't be clear we can't -- >> we can't fly ourselves around. can't fly other people around. >> still to come, debt out of the uk, pmi due in a few moments time. >> stay with us. ddd#1

these are the headlines from around the globe. toyota pulls a u-turn back to profitability but the carmaker

cites a volatile yen. >> rbs post results in line with expectations and says it's facing multinational probes into its role in the libor scandal. >> we've done a very thorough job, we've been working with all the investigative bodies all over the world. we've gone through millions of emails and so we've identified, i think, what we know. and more red flags are raised over china's domestic economy. july's pmi has a mixed message. july services pmi out of the uk 51. it was 51.3 in june and it's weaker in the poll of 51.5. the low since september 2010. business expectations component 65.6. it was 64.3. that's a tick higher. it does mean the composite pmi taking the very weak

manufacturing number of 49.5 from 51.1 the lowest reading since april 2009. this is a dominant service sector slowing something over accrual. adam chester joins us now. when you add that on, this is still an expansionary mode, add on to the manufacturing right now, how much doubt does it cause and whether we get a rebound in the third quarter? >> i think we'll get a rebound in the third quarter not the least because some of the distortions that impact the q2, for example the extremely poor weather and bank holiday in june would unwind. is underlying growth improving? with pmi for service, dominant part of the economy, pretty much flat lining around the 50, around 50, it doesn't body particularly well. nevertheless i think the bank of england has put in substantial stimulus. we're hopeful things will improve. >> market economists paul smith

says companies continue to indicate that underlying demand remains fragile. what's going to change it around? >> well, i think -- manufacturing is getting hit very hard at the moment by the crisis in the eurozone and some weakening in domestic bond conditions and until the eurozone crisis is resolved the manufacturing sector will remain weak. the real prospects on uk rests on services. business and financial services. i think the key catalyst is confidence. we need to see this uncertainty that's hanging over the markets start to lift and hopefully that will praecipecipitate output. >> does it remind you of the confidence shocks we saw at the end of last year or more of a business cycle phenomenon? >> the best we think is look at our internal surveys.

the economy is broadly flat lining. very difficult to reach any firm judgments on the data at the moment given all the extreme distortions that are impacting. we have the olympics at the moment which willaway heavily. i'm not sure we should draw comparisons with previous episodes. we have to see how the economy unfolds over the next two to three months. >> it was interesting to see confidence ticked up on some of the gauges here, business expectations has ticked up. this dichotomy is it a one month aberration or sort of a difference of views how we look going forward? >> the bank of england has injected a substantial amount of stimulus. i want raised its program last month. introduced the funding for lending scheme and other measures, liquidity conditions in the financial markets. so i guess there are hopes that over time that liquidity, that will start to foster improvements in conditions. but i'm certainly not dismissing these numbers. the anybody environment remains

exceptionally challenging. the other thing there's a bit of dichotomy. the output numbers and the survey is telling us and what the labor market is telling us the labor market in the uk is holding up a lot better than the recent headline figures would suggest. >> good point the. royal bank of scotland has reported a first half net attributable loss of 9.99 billion pounds after taking charges on credit of 3 billion pounds. the bank is unable to quantify liabilities arising from libor and said talking national san diego is unhelpful. >> nationalization is more idea or what is driven more by the, you know, search for getting more lending to the uk economy. i can assure you on that front we're doing all that we can. >> for more we're joined by james ferguson. james, your reaction to the figures and some of their comments this morning?

>> the thing about the bank figures that, you know, it's working its way through the background loss, the hidden losses on its book. i think that point by the cfo is right at the moment the discussions about nationalizing rbs is a way of getting around the politician' frustration and none of the banks really are aggressively lending. the problem is if they did nationalize rbs they would discuss why rbs is not lending aggressively. >> which is? >> they still have a whole stask legacy loans predating the crisis which it can't work through either because they are not performing their collateral has fallen in value or the borrower can no longer satisfy interest payments above a certain level therefore squeezing interest margins and leaving loans technically under water. >> so many different exceptionals. in rbs case it's the interest rate swap litigation, i.t. failure, ppi claims plus whatever comes -- the bank has

continuous extra exceptional provisioning. all the legacy stuff. at what point do we get into some clear air and clearwater. >> in the good times the credit bubble, that good times hide a multitude of sins. it was warren buffett who said only when the tide goes out you get caught swimming without swimming trunks. this is what's happening. all sorts of attitude, activities and accepted business actions turned out not to be acceptable but what we're discovering now we're in a benevolent environment. >> would that be an investment looking at if that does take place? >> absolutely. the point about banks in these situations is that they are unable to dispose of their rub

beneficia >> stake round. plenty nor talk about with you. investors are bracing for a drop in profit. italy's two biggest banks will report results later today. good to see you. there are the numbers as the operating figures. i tell you, i really just interested how much and if they are under water on their italian debt purchases. >> reporter: that's exactly the main point of the market. nachlts will be looking for that today. this is a big toeft understand how badly the recession and slow down in the italian economy is hitting the balance cheat of the two major banks. they are expected to rays provisions on losses on loans to nearly 30%. if you look at the system at the end of may italian banks had bad loans on overall loans at 111

billion which is 5.6% close to record highs and this might be skyrocketing according to some sources that we heard because the recession is deepening in the second quarter. the second quarter was very different from q1 in the number you may expect from the banks later today. this is due to the fact that what we mean is nice performance in domestic bond that boosted the trading income in q1. today you may see lower volume in terms of lending, less fees and less commissions and lower margins with the euro trading at historic lows. so they are expecting to react to this. they have launched a restructuring change, a reorganization in the barngs. revising its industrial plan, looking at cost counting and probably more layoffs and also

reducing the risk. they made a big buy back of perpetual bond in terms of strengthening their capital position. even though today the market is accelerating, the stocks are trading up 5% and 6% respectively they are down more than 24 and 37 year-to-date. you can't separate what is sovereign uncertainty here in italy with the story of italian banks and their stock market prices. >> we just see yields this morning -- they will trade, i guess, with what happens with italian yields. reversing the ten year some of the earlier rises this morning. just on that, we saw -- we had some comments out yesterday, andrea, i'm not sure they came from monti but he said if yields go up we risk in italy giving support to anti-euro parties. how much of a risk is that

because obviously we know berlusconi will come back on the anti-euro platform. >> in few months in october 2013 there will be a general election here in italy and mario monti is concerned if all the measures and sacrifice that the italian people are doing in toward restore credibility in the public finance have no results because the spread are so high at the end of the day people will start and anger will start to mount versus the european system and the euro itself. this is what berlusconi is looking at but not just berlusconi. there are other new players in the political arena that will have the temptation to ride this wave of discontent of the italian people versus the euro. it will depend basically on what the european central bank and the european union can do in terms of putting, you know, kind of a cap or giving italy the chance to get to results of all the policies that mario monti put in place. >> okay.

always good to speak to you. thanks, my friend. james, the ltro short term success but it sort of seems to have tied the banks even more into the fortunes of the sovereign state. so do you see progress or not? >> the ltro was really very classic part of the early part of bank crisis resolution. we sort of think this bank crisis is five years old and we've seen reports in america looking back on the 2009-2009 banking crisis. for europe it's just beginning. so the first thing that happens is that the private sector stops funding the banks, the banks are running a wholesale funding gap that determines the size of their problem. in european that's 3.5 trillion euro problem and ltro, the ecb's attempt to fund that. they don't know how much of a withdrawal of public sector fun was taking place. guys have as much as you want. that turned out to be a trillion. one-third of the private-sector

funding gap disappeared at the end of last year. >> the fed has been flattening the yield curve. the ecb has been steepening it. who is right? >> in europe you have to steepen the yield curve to help out the banks. the problem is it doesn't help. steepening the yield curve helps the banks with new assets. doesn't help with old assets. the banks shaf legacy assets. it's a balance sheet issue. in the u.s. things are so much more positive. we're not at the end of the tunnel but we can see the end of the tunnel in the u.s. and now have the authorities talking about big legal actions because the sector now can with stand that criticism. >> how far into the tunnel are we in europe? >> not far enough. >> quarter of the way? >> at the moment big european banks, cumulative loan loss provisions since the crisis began in summer of '07 are sub

4% of peak loan assets. money in u.s. 12%. one-third of the way to the same spot that the u.s. banks earlier. >> good. a 36% drop in profit for axa. speaking earlier to cnbc the chief executive was happy with the results. >> we think it's a solid set of results in an environment which is not easy for financials and the balance sheet is a strong balance sheet because the sovereign ratios are at high levels. >> and later on the show we'll speak to the ceo of axa of biggest competitor, allianz. they are closely monitor the interbank offered rates probe. dexia shares are lower. the result does represent an improvement for dexia which reported a loss of 4 billion

same period a year ago. shares trading at penny stock levels, got its value wiped out since the start of the crisis. >> 21 cents now. that's what the shares are. >> since then she has embarked on an ambitious program of cuts that divided opinion and seen her touted as a future leader. for more we're joined by july gentleman chatterly who is in toledo. what can you tell us? >> reporter: well as you said this is one of the smaller regions here in spain but it did manage to have the largest deficit last year coming in at 7.3%. a region that's relying on agriculture and tourism and 95% of the businesses here, in fact small and medium size businesses and when the new president came into power she started taking all sort of austerity and reform

measures saying this is the only way to get the economy back on track and improve the funding conditions of the region. at the same time as all those measures what they've seen is unemployment speck. it's just above 27% and growth too has taken a hit down 1.8% in the first quarter. so it is a really interesting microcosm on one hand seeing austerity measures on the other what to do about growth. not just this region but other regions in spain and perhaps the broader eurozone. when i spoke to her i said austerity aside just what are you doing to support growth in this region and this is what she had to say. >> translator: it's true that the unemployment rate in spain has increased and i think that this is circumstantial. because the reforms and savings plans caused unemployment immediately. nevertheless in the medium term they will achieve recovery. that's something i want to make clear and i also believe that these debates between austerity and growth are not real.

and i'll explain myself. an economy that is strongly indebt, a an economy with huge deficit as in the case of the spanish economy can't grow. growth needs certain debt that never a debt that spain had seven months ago when the government took over. these debts amounted to gdp and that's impossible. when we say we have to grow the first thing we have to do is to achieve a better funding and financing which is something you can't do if the deficit is too high. because no one will give you loans or the loans will have high interest rates. so going to the debate on where there's no funding, there can't be growth. what this means is the debate where we oppose austerity and growth is a fake debate. >> just how essential is it that the other regions in spain follow the same kind of measures and rear forms that you're doing

here? >> translator: it's absolutely essential spain has an institutional structure which is formed by the region and the regions have to have several confidences. therefore the fact that the regions are able to control their debt an not get into too much debt is essential because we're part of the state. we're not aside from it. we're part of the national public sector. and, therefore, it's essential that the regions commit to control deficit. that's why the establishment of deficit objectives and spansive ceiling for troijs which we are willing to meet, that's why the establishment of deficit objectives and ceiling for the regions which we're willing to meet and that's why we also need to transmit this message which is real and it is that the government is now doing something that hasn't been done for many years which is something we're not used to in ars and is that to control the

way the regions invest, spend and get funding. >> so how likely is it actually that spain even meets this adjusted target given the trouble that we've had restraining the spending in the region areas already? >> translator: i'm sure that this year that the regions will meet the deficit objectives for one reason which is that the situation has not only changed from an economic point of view but also from a political one. today everyone knows that it is impossible that a region is saved if spain is not saved. it seems obvious that before there were people who didn't know that, we're all in the same boat and am autonomous regions are making important efforts some faster than others. >> now she estimates funding requirements of the regions could be up to 25 billion euros in the second half of this year. we can't make any estimates or

suggestions what the difficulties of the region will be going forward but it does dwarf the 18 billion euro fund the government set aside for them. worth noting at least. kelly, back to you. >> julia, thanks very much. she's one to watch. >> absolutely. she's in toledo. that looks nothing like ohio. >> toledo. how now? you've never gone to ohio. >> i know it doesn't look like that. i've flown over it. it didn't look anything like that. >> it is beautiful, i have been there. >> to ohio? >> no just toledo. >> ohio is beautiful. >> that too. >> you can tell us what you think. want to bring you some news. china has okayed the expansion of its otc trading trial meant to boost small business access to capital markets and exexpapa

listing firms. >> the only thing i know about ohio is jack nicklaus. european stocks are firm today after losses. going to crawl back those loss. up .75%. as far as bond markets are concerned yields did tick a little bit higher on the calls on the peripherals this morning. >> it's interesting to watch. we saw the spanish ten year now pulling back. italy showing more relief because spain super. italy has come in the shorter end of those curves has come in markedly this morning. bunds, gilts benefiting a little bit as a result. >> down two cents. got down 1.2133. just back over 1.22 april aussie/dollar over the 1.05 mark. >> tropical storm warning has been discontinued for barbados.

tropical storm ernesto is supposed to go over the islands friday. >> still to come on the show not doing a hurricane -- lost 70% of its market value in two days. after this week's software glitch all the details next.

welcome back to the program. we're just hours away from the release of the july jobs report. yes it is payroll friday and i'm excited. the forecast is for a gain of 95,000 jobs for the month. that would be an uptick from june's disappointing read of just 80,000. jobless rate though staying steady, gain job growth much stronger than that if we bring that rate down. 8.2%. that was level in june. kpengted to hold there in june. ross we had three months now of disappointing job growth, double digit job growth. the question is whether that will continue that. >> james ferguson is with us. i just read a report. they are looking for shocking numbers so we can cement qe3. we want a bad number so we get more -- >> this is a difficult timing

for qe3 because we're getting too close to the election. it's going start looking political if you have qe3 now. i would imagine everyone will be served by a number that isn't too bad. maybe a number that's good. three disappointing numbers. how about a statistically -- >> how are you supposed to trade through the event, or the non-event we had this week. this might be another non-event. >> interesting and possibly a little starting pointing is the fact that draghi and the ecb has been shown that words are still working. because the markets fell off, he tried to stop them falling but saying we'll do whatever is necessary then had a week to go and get some consensus and some numbers together, came up with something pretty weak and starting pointing in terms of consensus and numbers. markets should have punished him. we got half a session of severe punishment and markets are bouncing again today. we're higher than before he opened his mouth. a bad lesson as we learned. >> what do you think job numbers

will be? he expects 115,000. isaac expects 136,000. >> maybe that's a local economic indicator. >> we do the office sweep. >> i wonder if you have such low conviction that self is a butt of the problem. we can't rely on stronger growth. whatever you think the jobs number might be. e-mail us at worldwide@cnbc.com or tweet us at cnbcwex.com. >> or @kelly_evans or @rosswest gate. >> $450 million bill is what the stock has been left with. the company is fighting for survival and customer defections and 70% share price drop in two days. >> reporter: things are not looking good for knight capital.

the stock has lost two-thirds of its value in just two days plummeting 30% on wednesday and another 63% overnight. that algorithm software glitch that sent the market on a wild ride turned out to be costly. knight said riding all those trades will cost it $440 million much more than the firm's market cap. then came a laundry list of companies that are either limiting or suspending their connections with knight overnight. big retailers like e*trade, td aameritrade, fidelity and vanguard and shares of 75% in two days there's concern about whether knight capital can survive this tragic mistake and it's raising money to fund its way through these massive competences or if anyone wants to buy a broken market maker. >> james ferguson is still with us. james, yeah, we're thrilled.

i know you're counting the hours. auth fry. this issue with knight capital this week is incredibly concerning to a lot of investors. what's the impact going to be from here? >> well, these are confidence issues, can develop a momentum of their own and people can read an awful lot into them. a hit like this as long as it's containable and has no inference going forward but has an inference who was running i.t. and why didn't they control the issue do, their pre-runs properly. aside these are things that should be controllable. there's a big issue in near term. >> we had the flash crash. if that was a one off then this happened we moved down. but it seems like these things keep coming up and how much faith can people have that they won't wake up one day and be down 10% or 15% on some investment because a machine went haywire. >> from an investment point of

view these are temporary glitches. from that point of view i don't think the markets are serious. this is an issue about i.t. if we're going have ever more sophisticated i. t. we need more specialist i.t. engineers. >> you take the plug out and put it back in to cure i.t. problems. >> james, thanks for that. james ferguson. still to come. >> drought worsening in the u.s. the house approved a bill to provide some relief. we'll bring you all the details in just a bit.

hello and welcome to today's edition of worldwide exchange." . if you're just tuning in. i'm kelly evans. >> i'm ross westgate. these are your headlines from around the world. . >> investors are waiting for the key nonfarm payroll number. likely to boost hopes for more support from the fed. >> uk post results in line with expectations and unveils it's face judging multinational probes into the libor scandal. >> we've done a very thorough job. we've been working with the investigative bodies throughout the world. we've identified i think what we know. >> the knightmare on wall street

continues as knight continues to tumble. and more red flags are raised over china's domestic economy following soft services pmi readings in july. let's take a look now how u.s. futures are trading as we approach the start of that session. green behind me. the reaction here isn't as negative as initially seen. dow jones industrial average implied to open higher by 75 points, nasdaq by 18, the s&p 500 trying to add about nine or ten points there as well. take a look at what's happened across the zone here in europe the stronger gains coming from the indexes that were initially hit the hardest.

ibex up 2%. cac in paris up 1.5. xetra dax same thing. ftse 100 adding a percent of its own. bond markets more cautionary tone. ten year in spain, prices falling, yield is up to 7.22%. we were up towards 7.3%. well above levels we saw last week when it seemed there would be more stimulus coming, more relief coming from the ecb. nevertheless the shorter end in spain and italy showing relief and italy's ten year is coming in as well. euro/dollar, let's look what that is doing. currencies are showing more risk. down here the aussie/dollar is up nearly half a percent. let's check in on markets in asia. >> thanks so much for that. no action from the fed.

we see sizable drops through many of our key equity markets. shanghai, up 1%. trading fees for the third time this year and also a lot of talk about how companies listed should list buy back shares. pmi starting pointed and a huge backlog of ipos coming in the works about 765 companies to be exact. the next big headline to look out for china really is whether they get read of the 0.1% stamp duty. if that happens that could perhaps jolt the market further higher from where they are now. earnings not looking great in china or elsewhere around the world. earlier we talked about sony and sharp how that reflect ad lot of investment jitters. toyota was a big surprise. quite a bit of a disaster bounce back that we saw. toyota outperforming the market but only higher by .66%.

toyota's world, they are seeing a slightly better view of how things will shape. vehicle production somewhere around 10 million and sales about 9.76. that's higher projection. europe looking soft. china soft and steady. u.s. they need to bank on that given that camry, prius, where they got the bulk of the earnings, government subsidies set to expire in japan. where the dollar/yen goes is important. back to you. thanks very much for that. and so the start of this part of the show -- by the way if you just tuned in and think i sound weird i do. i apologize. a little over excited in the olympic village yesterday. >> somebody was cheering. you have at least merited the excitement with that medal count

jumping up. >> we got five gold medals. i expect plenty more today. that's why i was shouting. the noise was unbelievable. >> i'm worried about what's going to happen next week. we still have a whole week to go. >> thank goodness it's the weekend. >> away from the olympics the excitement or lack of excitement yesterday from ecb president mario draghi, disappointing after failing to come up with immediate action to quell europe's debt crisis. he indicated some bond buying could take place to ease peripheral yields but no action would occur before september. he made those comments last thursday, what he nuclear programsed yesterday would have a big impact. here we are, you know, sort of where we were before the ecb press conference. so what sense are we left with? >> i think the markets were a bit more pessimistic about what he said.

granted he didn't come out with a firm action that they thought he would given his comments last week about doing whatever necessary to support the euro. he did say support would be there. the critical thing the government has to ask for it which is where the politics kicks in. he has to play the politics himself vis-a-vis the banks opposition toni firm support. ultimately there will be support in the form of secondary market buying which is what the market is looking for. if we can get over the political aspects, the sovereign governments asking for support. >> how likely is that? in spain it's politically the last thing they want to do. >> absolutely. when their bone yields, let's take an example if their bond yields starts hitting 8% or becomes unsustainable or can't roll over debt so, it looks like they are going in danger of default they will be asking for help. it makes sense while we wait for fiscal integration which will take some time it makes sense

for the ecb to provide short term temporary support in the form buying italian, spanish, et cetera, sovereign debt. >> we just saw the two year in spain yielding 4.5%. that was over 7% not long ago. talk a little bit about the strategy of targeting the short end. why and will it be effective? >> the short end -- used that term twice. they have to roll over the debt. for example if they are doing a bill issue or short term bone issue and rolling over ma during debt it's important they can plates. if the markets are not convinced that support is there from the ecb or eurozone political body they won't be willing to buy spanish debt. it does look to me there will be some request maybe indirect that results in the ecb buying bond in the secondary market. it was more pessimistic than it needed be. >> initial reaction. >> how important that it may be unsterilized. if they do it it would be much

more like proper kwrn emp qe. >> it looks like there's unified action coming together. we'll support the southern eurozone. the domestic politics are very important here especially in germany and that's what's causing the delay. i heard in your previous program before i came on, the markets are back to weak, ecb president -- he's not going to sort out unity over come the opposition of the bank in a week. >> isn't the fundamental issue, though, because a lot of comments or a lot of reaction focused the bank license for these rescue found the real issue being there needs to be a sense of unlimited ecb fire power behind these purchase. even a well capitalized program, you're talking about two trillion, $2 trillion bond market, $800 trillion bond market in spain. you don't have enough fire power doinl. the market will continue to push

until it feels like there's an unlimited supply of funds there. >> if we're talk about a sovereign default there's not capacity to bail out spain and italy together. what the market will be satisfied with, i think, is support that hints as political union, fiscal union later on. the banking license issue -- >> it just means the markets will be left vulnerable to anything not headed in that direction. >> absolutely right. the answer has been clear for the last two years, three years since the crisis has been taking place. the answer is fiscal integration. everything else is just buying time. kicking the can down the road. they are just buying time. this time can't to be done forever. they will have to move towards fiscal integration and that's the politics kicking in. >> absolutely. good to have you on.

the all-important jobs report, u.s. jobs report are a few hours away. for july expecting an addition of 95,000 versus 80,000 in june. traders keeping this month's number pretty close eye on that because they may send a signal to the fed to move ahead with another round of quantitative easing in the coming months. what american workers want to know is where are the jobs? so stay tuned. we'll speak to the chief employment analyst for an early preview at 5:30 eastern. and it's got everybody talking this jobs number. >> it does. in fact our viewers seem to be more optimistic than economists. joe tweets in from ohio to say he expects 100,000 figure for july. he thinks it's time to break a disappointing streak and hit higher than expectations. others have written in with guesses in the range of 113 to

130. tweet us at week weecnbcwex.coml us why. ross? >> wex beige book. >> we'll find out what the gave the business a boost of allianz in the second quarter. >

. welcome back to the program this morning. these are your headlines. waiting for the jobs report. anything short of the expected figure may boost hopes of fresh support from the fed. >> red flags raised over china's outlook following soft services pmi in july. >> rbs reveals its facing multinational probes into its probe in the libor scandal. okay. we're just seen the italian senate approved growth measures for the country, and we've also got italian banks higher today. investors bracing for a drop in profit. italy's two biggest banks will report results later today. italian banks are climbing this

morning as you see ahead of that and unicredit up. but as we heard, those banks are down around 20%, 30% respectively this year. that will give you a little bit of perspective. meantime royal bank of scotland has reported a first half net attributable loss of 2 billion pounds after taking charges on credit of almost 3 billion pounds. it's unable to quantify liabilities. >> the nationalization is more idea or chat is driven more by the, you know, search for getting more lending to the uk economy. i can assure you on that front we're doing all that we can. not surprising that they don't want to hear about nationalization. a lot of people discussing that even that possibility saying it's remote. still to come we'll be live in one of spain's most indebted

regions as the country's yield remains high. >> are we going talk telecom? >> are we? >> i thought you were talking telecoms in the break. >> i was. i was trying to take a call during the break. >> you will get your things sorted out. we'll leave you a view of the stocks. up for the session highs and the employment report out of u.s. >> we'll be right back.

welcome back to the program. well maria inherited the deepest debt of spain's 17 region when she became president of castilla la mancha last year. for more we're joined by julia chatterly from toledo. being spain's most indebted region is a pretty tall crown at this point. >> absolutely. they are trying to get the deficit down 1.5% this year. they haven't been given any more lee way than any other regions. actually this kind of austerity politically very difficult and it's the same kind of problem on a grander scale that she faces, a competition between the

markets and pressure that's put on them by widening spread there and also the fact that he has to understand that if he asks for help it will come with more conditionality and does that mean more austerity and actually that was a question i posed to the president of this region and suggested to her that is there a risk that she and her people's party aren't around long enough to see the reforms to go ahead that they tried to impose over the last few months. here's what she had to say. >> translator: while austerity measures are always unpopular measures, this is not about the pp, allowing itself to do one thing or another. this is what the pp has to do. today the government of spain cannot think about winning elections. they have to rule the country. even if that has an important political cost. >> interesting to know if the prime minister agrees with her on that fact as he watches the

market today. we do have a press conference after the cabinet meeting which we think will be very closely watched likely to be around 2:30 today. back to you. >> ross we might have a stealth spanish stimulus program here on "worldwide exchange." seeing the reports wants them to go back and visit those parts of spain. >> i thought that was toledo, ohio. >> it's a long a. >> looks nothing like toledo. that was spain not ohio. >> we're spurring tourism or at least the hoech tourism. let's get baron gettelfingeget . spain is that being overlooked as we focus on the headlines in the last couple of days about federal government's need for funds? >> it's being overlooked at the headline level when they talk about market reaction to say the ecb. nobody is forgetting any analyst

or investor looking at the eurozone. contracting economic activity. it's not something i imagine people would forget. >> teen way mario draghi said in order to move forward they need to see these countries do as part of their prom and stick with these initiatives. how is that going to make it easier for the eu to come together? >> it isn't. it's the same issue when greece, the fiscal straight jacket is required for other governments to write off debt or give hair cuts to debt repayments but doesn't help the economy. really, it's all because one is in the euro. if one wasn't in the euro one would devalue the current circumstance hit the labor market and do all these things to get the market back on track again. fiscal austerity doesn't help the economy. because i got a jam with this indebtedness i have to carry on

bore roger. >> we're in a depression in spain. i see so little -- >> urgency. >> i mean if you look at those numbers they are comparable with some of the '30s depression numbers? >> the one employment statistic is all that one needs look at to see that economy is in big trouble. >> why there's no policy to address it? >> i wouldn't say there's no policy. but it's not getting the attention it should. >> same in the uk. labor market on the supply side isn't getting the attention it should. we're wrapped up in skl austerity and the need to pay down debt. youth unemployment is a million people. long term unsploimt very high. certainly it's equally bigger problem in the southern eurozone. because we have the euro and can't break up the euro, we have all these issues of debt repayment. >> we therefore at the moment moving on to german insurer which confirmed its full year targets after beating expectations. we're joining first on cnbc by

the cfo of allianz. thank you for your time this morning. what's your biggest concern. we've been speaking of europe's debt crisis. what impact has that on your business. how have you been able to deal with it? >> it makes investment very difficult in this environment but i think with a very solid quarter leading up to strong six month numbers you can prove even in this very difficult environment one can deliver strong performance. >> what kind of performance do you expect heading through the end the year into 2013 as the economic outlook is deteriorating across the globe? >> we think we can beat the markets because we have underlying very strong trends in all of our three business division, asset management particularly with pimco at the top is doing outstandingly well, our property casualty business is delivering because we're switching from investment product more to risk base product, also delivering really well. so we just confirmed our out

look to make at least 8.2 billion euros in operating profit for the total year. we're very happy with the performance given this extremely difficult environment. >> i'm struck here, is it premiums are going up? they are going up in regions that have been hit hard by big market volatility. can that trend continue? >> we hope so. we see absolute flight to quality, should be no surprise. we're one of the few aa credits around. we have better rating than some countries and that for clients that's a reassuring sign that their money is safe with allianz. >> what happens in terms of consultation. if there's a flight to quality as you put it, other players must be feeling the heat a little bit. is that going to provide you with acquisitional opportunities? >> absolutely. particularly we're looking at the property casualty arena, as you may have noticed we've done two acquisitions in the second

quarter, one was in france, one was in belgium and we'll be seeing a lot more opportunities coming to the market at more reasonable prices. so we'll be taking advantage of the opportunities. but we'll be very disciplined so our shareholders should noted be afraid of allianz doing stupid things. >> also what's your view of the, sort of what's going on with libor, the interbank offered rates? how is that going to develop? how will that impact you >> we're very concerned about development because it will further impact the already low confidence in the bank being sector and for the first time central banks implicated. we're trying to understand what's been going on. the good news is allianz assets and our third-party money we haven't had any damage really because we don't have libor based products that have been affected. certainly not good for the

reputation of the financial sector and i hope regulators are waking up having central banks being too close to banks in terms of regulation is not the best idea. >> interesting. >> cfo of allianz, putting distance between banks and central banks. we shift our attention to the jobs. all about jobs today ahead of the key july unemployment report. after the break we'll talk to recruitment company to find out what trends they are expecting in the labor market.

. welcome back to "worldwide exchange." >> investors are waiting on the latest nonfarm payroll report. anything short of the 85,000 expected is likely to boost support from the fed. >> equities are up. the uk rbs post results in line with expectations. and reveals its facing multinational probes into the libor scandal. >> we have done a very thorough job. we've been work with all the investigative bodies all over the world. we've gone through millions of emails and so we've identified, i think, what we know.

>> the knightmare on wall street as brokerageage firm knight capital tumbles. with a good morning to u.s. viewers who are just tuning in. we've been adding to our gains. the dow jones industrials average implied to open higher by triple digits, 95, 96 points. nasdaq pointed higher by 25. s&p 500 looking to add double digits as well, 12 or 13 points. this comes after a trading session in europe that really saw rebounds after some sharp initial losses yesterday after the ecb rate decision. mario draghi's comments. footprint so 100 up 1.2%.

xetra dax 1.75%. cac up by the same amount. ibex 35 is up more than 1%. we have to keep in mind the context, sharp selloffs. people are wake up and wonder if we're not in better position than yesterday's reaction might have suggested. >> absolutely, kelly. meanwhile what are you doing as an investor right now as we get to those best levels of the day. this is what the experts have been telling us this morning. >> between the core and the periphery it's probably it's volatility the rule. tons of volatility. i don't know it's enough to necessarily drive a wedge but we'll continue to work through the wedges that we already have between those until we get a plan and once we see it if it is viable you could see some narrow peripheral spread. >> we still like short selling yen. we've had this week, we still

like it. >> it's a project engineer excellence, manage those costs and deliver cash. companies which have really managed to understand the inflation, keep resource but equally be efficient and deliver the bar of excellence for their clients. okay. just people have been waiting for the announcement of this deal. heineken is taking control of asia-pacific. waiting for approval. that looks like it's going through. >> speaking of things happening today, it is jobs friday, the all-important payrolls figure is due out in just a couple of hours. economists are looking for a gain of about 90,000 jobs. that versus 80,000 gain in june. now, of course, they are going

to be eyeing this month's figures which could send a signal to the fed to have more quantitative easing in the coming months. joining us for more is the chief employment analyst. what's your own expectation for today's figure? >> well, certainly it's going an interesting jobs report, probably expecting more of the same what we saw through second quarter. i wouldn't expect the numbers would be much higher than 100,000, but certainly hopeful to see that. there will be some other interesting things certainly to look at in this jobs report. you know last month we did see that 25,000 jobs were created in the temporary sector. i want shows that companies are still a little cautious about making those permanent hires but they are using traers. we'll see if there's revisions of past months. hopefully some of those numbers

have improved as well. >> what your seeing in your own firm? >> so we place many people in different sectors, different type of positions. what seems to really be doing the best or the best sectors in industries are certainly in the professional area. so there's a strong demand for engineers, i.t. professionals, health care continues to be very strong. but we also saw an uptick in manufacturing, a lot of the automakers didn't take that normal summer break that they normally do in july and kept workers at the plants because the demand is so high. so certainly there are some sectors that are performing very well. >> good morning. by what number increase over the expected payroll number should the market feel positive the recovery is back. 20,000, 30,000.

the expectation, it's not that big of a number, is it? >> you know, i certainly think that, you know, people are looking for a strong number. and, you know, strong numbers really used to be 200,000, 300,000 jobs created. we're nowhere near that level. so, you know, certainly if the number is significantly less than 100,000 jobs created i think there's still a lot of concern. you know we're seeing employers are still cautious to make those hires. i think they are concerned about, you know, the economic stability of conditions in the u.s. as well as over in europe. we're also, you know, all eyes are on the election campaign right now to see what's going to happen. so there's a lot of different factors that play into this. but, you know, certainly unemployment is not going to move that much, you know, we've seen it be hovering now at 8.1% to 8.2%.

i wouldn't expect that to move too much. we don't have enough jobs created to get that number moving. >> it's interesting when we phrase it as what will the fed do but i wonder if there aren't other measures that would help more, reducing the cost of education, helping people sort of train in these industries you mentioned still do have brighter prospects what do you think is the biggest sort of hurdle for the u.s. labor market at the moment? >> there's a few challenges. certainly if you take a look at where the jobs are at today they are in these skilled positions, you know, a degree is required, education, training. unemployment for ted indicated worker is only at about 4%. so, we really have a challenge in the u.s. right now with kind of a skills gap. and we need to get the population that doesn't have the education or training, we need to get them that type of training, to get them into jobs. they need to learn new skills,

that's certainly a challenge. even students that are entering college, you know, we spend a lot of time talking to them about what are the good fields, where are the jobs going to be in the future. you hear a lot of talk about the stem jobs, scientific, technical, you know, engineering and math. that's where most of the jobs are going. there's going a lot of job creation in there. so i think from, you know, a funding standpoint or trying to create, you know, some stimulus there to get people educated and trained in those types of positions could really help the u.s. >> thanks very much for your time this morning. still to come on the show the knightmare on wall street continues. knight kidnap down hard. can it survive the snafu. all the details next.

okay. we've had the central bankers today. it's about the employment numbers the july employment number later today. what do you think the numbers will be. our viewers so far on "worldwide exchange" have been optimistic. howard says it will be higher than 100,000 and this is an

election year and the forbes always help the incumbent out. do you agree? e-mail us at worldwide@cnbc.com. tweet us at cnbcwex.com or @kelly_evans or @rosswestgate. people are getting more bullish. >> something about you sitting there has put them in a good mood. >> i can swing my legs around. >> your voice isn't too great. speak being about things to cheer about investors like what's going on with bank stocks across europe. a couple of italian banks will be reporting later. 5%, 6% respectively those are the gains. what we're seeing across the block whether it's deutsche bank or the other banks range in 2% to 6%. more to do with the comments out of the ecb yesterday.

there was initially negative reacti reaction. investors are finding more to like this morning in whatever it was that draghi laid out. >> let me read these headlines. waiting for the jobs report. anything short of the expected figure may boost hopes from the fed. red flags raised over china's pmi readings and rbs is facing multinational probes into the libor scandal. and as drought conditions worsen in the u.s. livestock and other agricultural producers may see some relief. the house approved a bill on thursday that would provide $383 million of aid. vote was 223-197 with mostly farm state democrats joining republicans in support. the bill goes the senate next but with august recess it could be months before the legislation moves ahead. linkedin beats the street on

revenues. the biggest professional networking social media site reported earnings. this compared with estimates of about 216 million and shares as a result were up in late trading. stock, though, closing lower on the day, 3% trading higher after hours and up more than 45% on the year. and the knightmare on wall street continues. earlier this week knight kidnap computer glitch spurred trading in 140 stocks. since then the brokerage firm tumbled from being a $1 billion market gap to $253 million as of thursday's close. knight capital said the software problem has been fixed and despite a $440 million pre-tax loss it remains in compliance with capital regulations. shares over the last week are down 63%. your reaction to this particular

event? are you worried just more broadly speaking about what's happening in equities trading? >> it's just that age old specter of operational risk, a so-called i.t. or computer glitch impacted the firm so significantly that it seen its capital wiped down and market equity price dropped down significantly. brokerage firms don't have the same requirements as bank but they form a central part of the liquidity and daily transparency of the market. >> we've seen so many issues at brokerage firms. >> exactly right. all companies don't on top of their i.t. issues but there's a capital issue here as well that needs to be addressed. one more thing for regulators to get concerned about. it goes way beyond the fortunes of one firm.

>> yeah. my voice sounds croaky. i apologize important my slightly depleted voice. i was shouting too loudly at gb winning gold. >> thought you were shouting at mario draghi. i might have done a little bit. >> might have done that earlier. other things to show in the olympics. michael phelps facing off against ryan lochte in the men's immediately. phelps started strongly in well record pace. faltered in late push from lochte. took his first individual gold medal. his 20th overall medal in the last three olympics. >> remarkable. also remarkable the final of the women's all around gymnastics in which 16-year-old american gabby douglas known as the flying squirrel took home gold ahead of

tough competition by the russian. >> i want to know where that nickname came from. >> if you watched her performance she does -- you can tell maybe where that came from. >> attention turns last night, gb squaring up to france men's team sprint. and with one lap remaining, chris hoyt brought home the gold medal for great britain and that's when i lost my voice. >> good night for the u.s. meant that despite trailing china overall americans are equal to their olympic rivals in the gold medal tally about 18 each. two shy of phelps in the medal count. great sporting action to keep an eye including the semi-finals of the tenney tournament and men's 100 meter. women's football competition continues, team gb will face canada in the quarterfinals and

i'll catch the u.s. ross up in newcastle later today. still to come on the show. >> okay. >> you might just get that. >> is that an accent? >> wool have an analysis when we come back.

welcome back to the program. well on the earnings front kraft foods edged up in after hours trading after the company reported higher quarterly profits pap boost due in part to price hikes and stood by its full year goals. revenue of 13.3 billion.

it was down from a year early. kraft expects revenue growth at 9%. aig has reported gang buster profits. more than twice what wall street was expecting. in an exclusive interview with cnbc, aig said all four main businesses contributed to the profit. it ended the quarter with roughly 11.5 billion in parent company liquidity. >> later today, none other than warren buffett's berkshire hathaway will report earnings. the company expected to show a marginal increase with second quarter results but before those figures we have with us a man who knows all there is to know about buffet. jeff matthews, general partner at ram partners and author of

the warren buffett. >> i don't think it will be gang busters like aig but continued steady growth on the industrial side of the business and housing side of the business and then insurance is always full of surprises. >> in terms of share performance, berkshire we know over the years those a shares hotly followed. where do you see this, that shaping up by the end the year? >> you know, i have no idea. i think as long as the economy remains in flux and as long as people remain concerned about the health of their assets i think they will turn to secure stocks like berkshire hathaway. i think that will support the stock, whatever happens in europe or china. >> and buffet talked on cnbc perhaps housing related business doing better. you mentioned that as well, jeff. what about nonhousing? >> well that's going to be very

interesting, ross. they got a lot of buses that are exposed to the industrial side of the economy, particularly lubrasol which he bought last year. big investment. escar which sells metal working components. very interesting to see what happens there. i wouldn't expect too much in the way of gain or loss out of those businesses, because what buffet talked about on cnbc a month or so ago as far as the industrial side slowing down just seemed to have occurred in the last month or two. so this is the first snapshot of actually how does it really look? how bad is the slow down and was it offset by the housing pickup. >> how good a gauge would this be if what buffet says about the u.s. economy? >> oh, i think it's a very good gauge because as you know most of berkshire's businesses are directly tied to the health of

the economy. burlington northern railroad which is actually the largest business unit now is sort of the -- it's the life blood of the economy and we're going learn a lot about the health from the results of burlington northern which is the single biggest entity. >> jeff, can you talk a little bit about the insurance business as well, ep as it becomes clearer and clearer we'll be in a low rate environment for some time. >> right. you know, berkshire -- anything can happen on the insurance side and it will. we can have some losses from earthquakes, from catastrophes that have occurred. they have been doing a lot of interesting underwriting overseas in thailand following the flooding there. it will be interesting to see how much money they put to work over there. geico is a very steady grower and earner and i wouldn't expect too much fireworks out of geico.

insurance business is where a lot of capital can be put to work very quickly and so we'll see what happens there. the other interesting thing, of course, is how much in the waive equities did berkshire buy last quarter. didn't beltway whole lot in the first quarter the year. i suspect they put a lot more fwhoerng in the last couple of months with the market fluctuations. >> jeff thanks so much for walking us through that. we'll keep an eye out for those results. jeff matthews is not making this up. you can read his books all you can about buffet. it gives you a sense he's fed up with the world. let's take a quick look on what's on the agenda in the u.s. in addition to the -- >> something else besides jobs? >> there is. the services pmi. >> that is important. >> it is. that 8:00 figure is the one for people to watch. the gain is 95,000. also bunch of earnings, proctor and gamble, viacom, berkshire

hathaway to name a few. >> this is -- you can work out with this. principles of banking. this is very timely. i mean you should send this everybody who is a chief executive, anybody on the board of a bank. such a complex business. can banks be properly run particularly when we've lost a lot of ceos. do you think we can effectively run the banks? >> first of all it's very kind of you to publicize that. large banks are difficult to manage and we're still working out the very large one, multinational one kansas be run properly in a way we would like in going forward post-crash. ultimate literacy possible but there's a lot of things to work through. >> thank you so much for joining us. >> still to come "squawk box"

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good morning. the government's monthly report topping today's jends. knightmare on wall street. a computer glitch, trading disaster and multimillion dollar losses leaves knight capital fighting for survival. facebook short fallout "the social network" lost almost half of its value since its may ipo. it's friday, august 3, 2012. "squawk box" begins right now. ♪ >> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe ke