wehello, and welcome to "worldwide exchange," i'm ross westgate. >> and i'm kelly evans. >> china's exports grow weaker in july, missing estimates and shrinking the trade surface, turning global equities lower. the uk financial watchdog looks to tighten the screws on libor. the man in charge of the fsa review considers rates and extending regulations to other financial bemz. and football club prices sends the ipo below the expected range as it gets ready to list in new york. and prudential is due to release first-half results in 15 minutes.

we'll speak to the ceo of the insurance giant first on cnbc in half an hour. okay, welcome to the program and the week. we're in the last week of the olympics and we have oil data out at the top as well for you. the iea is saying sluggish economic growth could restrict annual oil demand growth to just around 900,000, a million barrels a day in 2012. they say globalized oil supply grew only by 300,000 to bring it down to 90.7 million barrels a day, while opec crude supply fell slightly, oil prices have gone since july and early august since extending earlier gains. >> and cutting the necessary opec output to just 400,000

barrels a day by the end of the year, ross. >> yeah, absolutely. so, prices are down today as we go through that. we will have more on oil prices with our guest a little later in the show, so keep our eyes on what's going on with that. of course, it's interesting, brent was down into the 90s, climbed up this week to $112. >> trying figure out what the global demand situation will be. this indicates still a little soft. >> absolutely. also coming up on today's show, how should libor be reformed? the fsa's martin wheatley opens up the debate as he opens his discussion paper in less than 30 minutes time. japan's prime minister speaking to parliament on plans to raise the sales tax, but will that change cost him his job? back-to-school shopping is under way. we'll recap the retail stocks to watch. and will investors be as passionate about manchester

united as its fans? the football cup starts trading day on the new york stock exchange after pricing below expectations. economists fear china may not be able to post an economic rebound as soon as the third quarter. those fears were triggered by poor july trade data which came in much worse than most expected. trade figures followed a batch of disappointing july economic indicators out just yesterday. the pboc also released troubling data on the liquidity front. last month, chinese banks offered a smaller than expected pool of new yuan loans, but china's broad measure of money slide did fall in line with general broadcasts. joining us is managing director and chief economist at heitong international. thank you for joining us this morning. just how weak is the demand picture in china? >> yes, so, all the dry data actually came out very weak. this morning, we came out and have to trade the data, so both

exports and imports dropped dramatically. exports dropped to 1% increase and also for the imports data dropped to 4.5%. so, the drops were widely expected, however, the magnitude is much greater than market expectation. two hours ago, we come out for the imb loan data, again, very weak data. both long-term and short-term loans dropped significantly, from 920 billion last month to 540 billion this month. so, the drop actually reflecting the very low incentive for investment. >> how quickly, then, should we expect a policy response here? could it be days away? >> we expected the policy -- this weak data could trade immediate, so probably this weekend or maybe next weekend. i think the monetary policy probably have to do something to deal with that.

and we also expect more supportive policy will come out very soon. and very likely in the field after infrastructure. as we know, this year, the weak construction is 150. so currently, for the last three months, we just issued about 65 billion, so we still have 85 billion to issue. so all that could probably boost investment a little bit for the second half. >> are those the right stimulus measures? yesterday a guest was on the show saying that rather than monetary policy being weakened or indeed infrastructure spending, we should have tax cuts and try and boost consumption. what do you think? >> i agree with that, but this cannot -- this is more like long-term. so i think it's very hard to imagine it can be announced just before the leadership

transition. so, to me, in the next three to five months, it's very likely the supportive policy is more like immediate push to the investment, especially in the railway construction side. >> okay. thank you for that. let's turn our attention back to the iea report. they have lowered the forecast for china's demand. lewis davis is a senior strategist at bnp-paribas. thank you for joining us. what do you make of the report? >> well, at face value, it's bearish for the oil price, given that they've lowered their demand growth estimates for 2012 and 2013. but given the overall size of the market and the ability of opec to swing production up or down 3 million barrels a day as they have done over the last three years, these slight revisions can be accommodated, shall we say, by saudi arabia in particular, just in its

production. so, in summary, although face value, the report is price-bearish, i think that may be overstated, given the ability of opec to react. >> do you think opec will react? because they've sort of been arguing against others in opec about lower prices and therefore they've been willing to keep production higher. >> yeah, certainly they want to guard against high oil prices that could knock the world economy into recession, and therefore into low oil demand. and yet, saudi arabia particularly wants to protect an oil price that can generate enough revenues for its own needs, which we think are around $100 or so. so, we think saudi definitely can protect the price on the down side. we are more sort of optimistic, supportive of prices at bnp-parib bnp-paribas, because we feel over the next six months, demands will be growing more than supply, so there will be greater reliance over the next six months or so. >> garreth, we're looking at a

chart here of the three-month performance of nymex and brent crude, nymex down 5%, crude slightly -- i'm sorry, brent slightly firmer. where do you expect that spread, that differential to go? and is your view changed at all in light of this report? >> well, we've been overuse since fourth quarter of last year, but the differential between brent and wti, which was wide at that stage, would take some time to narrow, and we still do agree with that on the basis that brent is getting support through maintenance which is restricting supply of crude in that area. on the other side, wti is faced with a marked increase in tight light oil shales from the tight shale play in the u.s., which is depressing in particular because it is essentially a land-locked crude. so, though over time the differential will narrow, we still see it as $10 at year end. so, we see this differential

exist. >> and if that happens, i guess the question is what type of supply conditions make a difference in the u.s.? there's been a lot of focus on kind of long-term shift to higher levels of output. is this happening at kind of precisely the wrong time, given the demand situation? >> well, i think what's happening in the u.s. is u.s.-specific in the sense that this oil is starting to get to the refiners on the gulf coast. so, if you're a refiner in the midwest, you're sitting pretty in the sense that you have lower cost of your feed stock. but if this overhang of crude persists, it will discount further and further in order to find a marketplace within the midwest. outside that, the oil in the international market, oil prices will be more affected by international factors such as the iranian embargo and so forth. >> and gareth, bottom line, because we've actually seen

prices at the pump higher than a year ago, which is the first time i think since april that's happened. bottom line, how long do you think that's going to persist? >> so, u.s. gasoline, we have a peak in demand coming up in the next few weeks or so. it trends with the price of crude oil. but if crude softens in the u.s. because of the particular circumstances around wti, this will be good for gasoline prices -- rather, gasoline consumer, rather, in the sense that prices will fall. >> gareth lewis-davies at pnb paribas, thank you for your time. >> okay, kelly, thanks for that. one hour into the trading day now, stocks just weighed on the dow side. the trading day in europe, i should say. 7-3 decliners out-pacing advancers. it's been a flat couple sessions the last few days. the cac is flat, flat again on the ftse. results are coming out shortly

xetra dax down .3%, ibex down about a percent. we'll get out to julia later to look at sort of the lack of construction as you might call it. as far as bond markets are concerned, treasury yields 1.65%. we hit a 2 1/2-month high yesterday, 1.73%. we've come off of that. italian ten-year debt pretty steady where we were yesterday. ten-year spanish debt back below that 7%. ten-year bunds currently yielding 1.40%. euro/dollar weak, chinese data impacting, 1.2272. dollar-yen 78.48 today. the dollar/yen is impacted the most. we hit around 1.0616 a couple days ago. besides the chinese trade data not helping out, we have the reserve bank of australia saying they're worried about the strong

currency, despite the fact as well they did upgrade the economic forecast for the aussie weakening on the comments about the strength of the currency. sterling/dollar at the moment 1.5589. and a quick reminder where we stand on oil prices. talking about the drought, corn 829, brent is 112, weaker on the session, and 92.65 nymex. that's the current european trading session. sichuan lee has more for us on what's happened particularly in relation to the chinese situation hi, sixuan. >> hi. asian markets pulled back following the weak trade data. the shanghai lost about 0.25%. china may expand property tax files to more cities. but banks out-performed after china industrial bank registered

about 40% increases in first-half net profit. but interest in nonperforming lows remain a concern. hong kong finished lower by 0.7%. others fell due to weak performance in its u.s. unit. more on that from emily chen later. the nikkei lost about 1% but still had its best week since february. and china is reportedly working on investing in a struggling tv-maker. the kospi will buck the downward trend, adding 0.3%. china consumer prices fell for the first time in three years. analysts say it may prompt the bok to take action. in china, they listed the gdp forecast, but it was overshadowed by concerns from china. the index was lower about 0.7%. lastly, india is now trading

lower by 0.1%. back to you, kelly. >> all right, sixuan, thanks. martin wheatley is leading a review that will formally launch a look into the intrabank rate. this is on the heels of the libor rate-setting scandal which claimed the top management at barclays. we'll bring you that press conference live at 9:30 local time. and barclays has found a new chairman, david walker, former chairman of morgan stanley international, taking up the position november 1st, replacing the current chairman. the new chief executive says he would be fully engaged in the process. meantime, u.s. treasureies secretary geithner has ensured his british counterpart george osborne that u.s. regulators investigating standard chartered will try to coordinate their

actions. he repeatedly voiced concern that the bank may not be treated fairly in the investigation as finch reported it may cut its rating following allegations over deealings with iran. the ratings agency said the bank could be downgraded when there is more clarity on the situation. all right, don't forget, we're going to be joined by jian tian first on c information in 15 minutes time. those earnings should be coming out about now. the interesting thing is why they're releasing them at 9:15. i think they're waiting for the asian markets to get to the end of their trading day. >> prudential has performed quite well, operating profit now crossing the wire 1.26 million pounds for a profit. that's 13%, that's the company's operating profit, again, up 13% to 1.262 million pounds, just slightly better than expected. >> looking for 1.1 on the operating number.

the asia operating margin -- i'm trying to see what kind of growth they've had in asia because that's become a driver this morning. >> the asian life insurance business operating profit looks like it's up 26% year on year. we'll look for the broader business figure, which is expected to come in about 16% higher than a year earlier, but so far, results look stronger, perhaps, than the market expected. >> healthy dividend as well. everybody likes a dividend. half-year dividend increased by 5.7% to 8.4 per share. they were looking for 8.5, so they look to be in line slightly better than perhaps what a range of analysts were looking at this morning on the dividend and operating margins as well. we'll see if there's any impact on the u.s. annuity costs, and of course, we'll talk to tidjane about what's happening in the low-yield environment as well. and whether the improved equity

performance. there's a whole range of things to talk about with tidjane and also the perennial questions about whether he's still happy to be a uk-based company. >> of course, and a company that as regulators look not just at banks, but at insurance companies that are too big to fail, how he feels about that. >> insurance is -- yeah. >> industry not happy. >> a bit of regulation that's complicated, to say the least. >> okay, we've got plenty to dig through in that. also, today's the big day for manchester united, going public on the new york exchange. do you think man u. will score with investors? where will the share price close today? joining the krves on "worldwide exchange" by e-mail us at worldwide@cnbc.com, tweet us or reach us at kelly_evans or @rosswest gate. >> still to come, that exclusive interview with the former economist with ecb and find out why he thinks the euro does not have to be saved. >> we'll be right back.

the final of the women's soccer tournaments are reigning champions. the usa take on japan. carli lloyd opening the scoring

early with a header and doubling the lead just after the break. despite japan getting on the scoreboard through yuki ogimi, the usa scored the gold with the 2-1 win. >> happy about it, huh? >> yeah, a crowd of 80,000 people, a record for women's soccer match. >> at wembley, yeah, football match is a big thing. we'll keep looking at that. the main event was usain bolt trying to finish the 200-meters race, a runoff between bolt and yohan blake. bolt got the gold. blake got the silver. warren weir completed a jamaica 1, 2, 3 by picking up the bronze. they are very keen as well to praise the people helping them out at the birmingham training base. >> really? good to hear. the usa has jumped to the top of the leaderboard, surpassing china in the gold medal tally, that's right, 39-37 about three days to go. the race is on to see if the u.s. can stay on top. 90-80 is the total medal count. great britain there with a total medal count slightly behind

russia, ross. this was a neck-and-neck battle expected between russia and great britain, see who could take that. >> instead, it's a neck-and-neck battle between russia and south korea. >> british ladies picking up three golds, tae kwon do, dressage and wrestling. first ever for women's boxing. >> kate middleton i believe was there to see it, lend her support. today's highlights, tonight is the final of the women's hockey competition over at olympic stadium, the focus will be on the women's 1,500 meters and the men's 4x400-meter relay. meanwhile, a growing number of european policymakers have started in at data greece could be forced to leave the eurozone. they raised eyebrows by suggesting such a scenario would be manageable. and in an exclusive interview at cnbc, former ecb chief economist

otmar issing left the idea open for a smaller, more efficient eurozone. >> the euro itself needs to be safe, it's a safe currency, will stay with us. what has to be safe is the stability of the euro and of the euro area. it's a question how many countries can participate. this is the challenge which your office confronted. >> actually, are all of our politicians driven too much by the, let's call it panic orchestra in the market? >> we are members of this orchestra. we get the impression that under the pressure of markets, they are always a step behind with markets' demand, but this is not without their own responsibility, because they always give the impression that they have the right medicine, which is more money, and markets

will always ask for more. so, this will be an endless game and politics will always be seen as prisoner of this process. this should be reversed, politics should say what will not happen. this is total mutualization of debt. this is something that must not happen. and those politicians in europe which are strongly in favor of eurobon eurobonds, germany chancellor has said never in my lifetime. so, they make the chancellor responsible for the turmoil in markets, the uncertainty, but they know what the answer would be, that they should shut up. >> where does the ecb fit in there? the ecb has been left with the short end of the stick many times because the ecb, many argue, is the only institution that really functions in the ouour eurozone, so they have to step out of their way, buy eurobonds.

they come into deep space. we had covered bond purchasing program. they had to lower collateral. has the ecb been pushed in a corner where it actually overstepped what it should do? >> this is indeed very dangerous. on the one hand, the ecb is seen as the most powerful institution, the only institution which really can act, can act any time, and has the power, the money, the big bazooka or whatever you would call it. and this is at the same time weakening the position of the ecb over time, and i think it is a mistake if the ecb accepts this position as being the final savior of the euro area. this is a wrong impression, and i think the ecb should do everything to avoid that. >> not often you hear an economist, ross, saying shut up,

but that's otmar issing for you. >> yeah, it's impossible, impossible. there's too many different constituent parts, right in europe for them to all stop talking. still to come on the program, it was once dubbed the manhattan of madrid. i'm not sure why, but now it's home to a host of empty buildings. we'll examine the extent of the spanish housing crisis with views from on the ground. >> plus, we'll have the ceo of prudential here first on cnbc to discuss the company's results, which are just out. that's coming up after the break.

and these are the headlines from around the globe. china's export growth weakens in july, missing estimates by a long way and shrinking the trade surplus. the dismal data has turned global equities lower. uk financial watchdog looks to tighten the screws on libor. the man in charge of the fsa review considers obliging banks to set rates and extending regulation to other financial benchmarks. and will manchester united score with investors? the football club prices its ipo below the expected range as it gets ready to list in new york. plus, japan's upper house gets set to vote on a

controversial sales tax hike within hours. the prime minister could also set a timetable for an election shortly after. prudential's earnings for the first half of the year have been helped by strong growth in asia. we'll get to those full results in one second. first, just bringing you the release of producer price data for the uk in july. that core ppi output posted its weakest year-on-year gain since september 2009, coming in at minus 1% for the year, minus 2.4% for the year for the inter-ppi, that is, up 3.4% for the month. so, flat on the month for the output ppi, a gain of 1.3% for the input figures. bottom line, softer, ross. >> yeah, and that helps with the bank of england's inflation, if

output ppi is the weakest since what, 2009, that helps with the inflation profile as well. tidjane thiam with prudential is here with us in the studio. we'll get to you shortly on your earnings, which we reported 15 minutes ago. before that, the fsa's martin wheatley is about to present a discussion paper on how to reform libor. >> martin will bring all that experience to bear on one of the most complex challenges yet, a review of the framework for setting of libor. and as you all know, the question of how best to index overnight bank lending rates is top of mind for almost everyone in the financial services community. this, of course, includes bloomberg. we are leveraging our position as a neutral provider of data to facilitate a swift and effective response to this market challenge. today's guest, martin wheatley, and his team, are leading this effort on behalf -- >> well, obviously, we're still

waiting for martin to start speaking. i think what we'll do is while we wait for that is let's just remind you what prudential have said this morning. earnings for the first half of the year are helped by strong growth in asia, operating its life insurance business in the region up 24% to 409 million pounds. joining us first on cnbc is tidjane thiam, ceo of prudential. thank you for joining us. >> good morning. >> the numbers this morning, dividend up to what, 8.4 per share as well is what we were looking for operating profit, in the range of what analysts were looking for as well. how much now is asia worth contributing? >> asia is central to our growth. we've seen the numbers, profits of 26%, which continued to make progress across the countries in the region -- indonesia, malaysia, hong kong, singapore, even our smaller thailand and philippines are up 50%, so growth continues to be strong and predictable. and the pressing thing is that

we've had 126 million pounds of cash out of asia this first half. if you look back a few years, asia used to be cash-consumptive. >> you talk about profitable, but are margins going down a bit on your asian business? >> it's not really margins. what's happening is we have two different things, agency and bank, and the banking trend is less profitable than agency, but still is very profitable by any measure. so as bank of china grows faster, mechanically, margins are increasing, but that doesn't worry us at all. it remains very significant. >> i'm curious what impact, generally speaking, the low interest rate environment is having on your business as it becomes more and more clear that this isn't just going to be a one or two-year phenomenon? >> that's a very important point and it is a most challenging environment for insurance companies. typically, we like to look at the yield curve and we like rates to be on a high level. there are two things that are important. one, you have to write new

business profitably, so we have repriced quite aggressively our products so that they are profitable in the new low-rate environment. then you have to protect the value of your enforce, so the existing book, so that the low interest rates don't damage you too much. >> but how much pricing power do you have, especially in developed markets like the u.s. and europe? >> we have pricing power. we can direct through the commissions, through control of our distribution what kind of products we sell and what products in a future selling environment like this one is quite different than five or six years ago. >> where is demand strongest? >> in asia, there is no doubt, because we sell health and protection products, and that's where we make our money, and as the middle class develops, their appetite to protect their assets, their family, their health grows, and they're very happy to buy the products we offer. so, there's three ways you make money in insurance -- it's

spread, fee and underwriting pricing. so, we have emphasized the last two because they are less sensitive to market. if you were going to make a profit over the last five years, it's been completely transformed and the underwriting profits and the fee profits dominate today versus the spreading problem, which is, actually as you say, very dependent on markets. >> you spoke this morning about capitalizing long-term growth opportunities. what does that mean in practice in terms of strategy and maybe buying additional units in asia? >> distribution. the main strength to our group is our ability to put the growth out there, because demand is infinite. so we grow as fast as we can grow our distribution machine. so, we grow it organically by hiring new agents, also inorganically by entering new distributional elements like with banks like we did in 2010 and they are up 110%, so that

gives you a sense of the kind of growth rates you can achieve. this is what i mean by demand. we're just scratching the surface. indonesia is 1%, vietnam 0.7%, so your growth is determined by your ability to distribute. >> at the same time, as you ramp up, especially in those markets, your company's only going to grow. there are already concerns, as we know, for a lot of financial institutions as to size and systemic importance. now there is a potential out there for insurance companies to be deemed too big to fail, to have to raise extra capital. what's your view on that? >> i see diversification, which is on this topic. we believe insurance companies are -- look at what happened during the crisis. we globally as an industry have a group crisis. there is a bit of confusion because of the aig story, but aig had activities that had nothing to do with insurance, based on unregulated investment bank in london. the insurance activities of aig have continued unperturbed.

so, insurance in itself, we are long-term investors, we are buy-and-hold investors, and actually, in terms of market turmoil, we contribute to reducing volatility, not increasing it. so, we don't believe that we are, if you wish, a systemic risk in the traditional sense of the term, and we don't believe that we should be classified as a systemic risk significant, but that discussion is ongoing. >> how much of a chance, then, is sovereignty, too at the moment? and are the proposals still being -- i mean, they're still being talked about. are they being changed? do you know what's going to happen? >> well, it's being changed. we, and i don't believe in the sovereignty regime. sovereignty is a bit like oxygen, it's only when you miss it that you realize it's important, so sovereignty only matters at times of stress. so the flow in the design of sovereignty is that it works only in benign conditions, and in extreme conditions, as it was originally designed, it was completely procedural, exactly what we don't need.

so, all the discussion has been centered around introducing countercyclical measures. the industry used to be quite, how can i say this, have very disparate views on that, but now we have converged. i think all industry believes that those countercyclical measures are indispensable and there is a lot of discussion on how they can be implemented, so that's a step in the right direction. the other big issues, the famous issue of u.s. equivalents, and i think we're making progress on that, too. we get a lot of support from the treasu treasury. i was two days ago talk being this with the fsa -- >> when will we get final clarity on when and what this regulation is going to be? >> i'm afraid that's a question you'll have to deal with -- >> do you have a sense of it yourself? there's been pushback. >> we are participants. >> right. >> we don't control it. >> what's your net exposure to europe at this point? >> you mean in terms of assets? 344 million pounds. >> how does that -- have you ramped back significantly there

to protect yourself against losses? >> we don't really have operations in europe. what drives this is having operations in most countries. we don't have a single operation in the eurozone. >> what about investments? >> investments, i said 340 million pounds. we have hundreds of billions of pounds of investments, so it's completely material. our exporter could receive zero, 140 million, i'm sorry, to italy, 40 million, which on our scale -- >> because if you want to see yield curve, you can find it in some of this. >> it's been actually good for our share price that we're not exclusive. >> how far do you think we are through this eurozone crisis? many characterized it as a crisis of deleveraging. what's your answer personally? >> i think it's going to go on for a long time. i think the decision-making processes are inadequate. just as i was talking about with the high-level senior french official over there describing the process of 27 countries.

every time you come up with an idea, it has to go through a government and has to go through parliament, sometimes has to go through a vote. by the time that has happened, 18 months have gone by and 18 months is quite long in the life of markets. so, the decision-making process is simply not adequate. and until that is changed, this will continue and the uncertainty will be -- >> three to another five years? >> i was surprised to see the strength of your annuities business. can you talk about what's accounting for that? >> in the u.s.? >> yes. >> yes. it's a combination of things. one, it's baby boomers. 17 million of them retiring, but there's about 77 million. that's 20,000 people retiring every day for 20 years. it's an amazing number. $7.6 trillion of assets. they've lost all their wealth between home equity and the stock market, and they are very willing to buy downside

protection, and that's what we sell, and they are very willing to pay a high price to buy that downside protection. >> so those fees up front are helping offset the costs, because a lot of companies have exited this business. >> yeah. >> demand may be strong, but from a company's point of view, not necessarily profitable. >> it's always good in business to do what you say. i think if you charge high fees to a customer, you should use those fees to hedge, and you will find that the companies that are effectively doing that, instead of looking at profit, have been fine, and the companies that didn't hedge have not been fine. >> so much more of your business coming from asia. it's a great opportunity. it's the same old question, for now, are you happy to stay as a uk-based company? >> we are. we are. >> all right. tidjane, thanks. always good to see you. thank you for joining us. tidjane thiam, ceo of prudential. just a reminder, the fsa's martin wheatley is currently discussing how to reform libor.

i don't think there is frankly a lot of what he was going to say was already prereleased in newspaper articles because he's actually launching the consultation today. >> right, and if there's any additional headlines from this conference, we will bring you those, of course. also happening right now, japan's parliament has passed that sales tax hike bill. this comes at a time of political upheaval and uncertainty in the country, but nevertheless, it looks like that plan is going forward. it looks certain to pass the final upper house vote with opposition help now. japanese prime minister n e yoshihiko noda is expected to make an announcement in an hour. so, let's get more with linda sieg from thomson reuters, joining us by phone. linda, it looks like the sales tax bill has passed. what does this mean for the announcement and for noda's career? >> well, the fact that the bill has passed, actually, they're still, they're counting the votes as we speak, but it's

calculated that, you know, based on them handing in their tips, that it has passed. basically, this plan to raise the sales tax 10% by 2015 has been looked at as a test of japan's ability and its resolve to tackle its ballooning public debt. and given that japan's political situation has been stalemated basically for several years now, this is, in fact, a significant achievement on the part of the prime minister. however, in order to achieve that, he needed the cooperation from the main opposition parties and in return has promised, although with no firm date, to bring forward a general election that his party, which has been in power for three years now, is quite likely to lose. >> linda, at this point, we've seen so much political upheaval in japan over the last couple of years.

where are we headed here? should we expect more of this rapid-fire turnover? >> it's quite possible. first of all, we don't know of the timing of the election. before that, both of the major parties, the prime minister noda's democratic party and the main opposition liberal democratic party, will both have leadership elections. i think it's generally expected that they would both, both noda and his rival, will be re-elected, but nothing is certain. if there were to be a change in the democratic party leadership, that would be the fourth prime minister since the democrats took power for the first time in 2009. that's not the main scenario. i think the main scenario is that he will be re-elected but that there will be a general election probably by the end of the year. and at that point, they will need to form a new government, a new coalition, and it's really not clear really what parties, who will be the number one party or who will be in the coalition, and therefore, who will be the

prime minister. >> it's remarkable, too, that investment into the country has held up so well. government bonds still yielding extraordinarily low rates. do you expect there to be more of an impact on how the country's perceived its investment opportunity to outsiders as the turmoil continues? >> well, the thing is, when you talk about turmoil, turmoil in japan, if you look around, it doesn't look very much like turmoil. what's turmoil, sounds like turmoil to people with a solid japanese nose is pretty stable if you compare to other places. i think that's one thing in terms of the government debt. still at present, it is almost entirely in the hands of domestic investors. and as for investment in companies, well, that really is not affected terribly much by the political situation, so companies have their own problems, but that's kind of a separate issue? >> you know, great point. linda sieg joining us on the line, chief correspondent at

thomson reuters calling in from tokyo. linda, thanks very much for that. well, it's never a good sign when the world's largest supply chain company sites challenging times ahead. emily chan has the report. >> the biggest drop ever since interim earnings. interim core operating profit fell to $221 million due to a slower-than-expected turn-around of its u.s. operations and weak demand in europe. li & fung manages retailers like walmart and target and says an election year like this one is typically a strong year for consumer spend, so it is now looking for a pickup after the u.s. vote in november. >> i think that, you know, for the world economy to recover, the u.s. economy has to first recover more strongly than it has. and of course, the u.s. consumer spending 75% of gdp now. so, we're really a bit around the curve about world sentiment. things are not looking that

great. >> fung's comments triggered brokerages to downgrade the global supply chain company. goldman sachs cut it to neutral and barclays to neutral weight. analysts say the only positive they see is a possible announcement of acquisitions amid the disappointing numbers, li & fung's net profit rose by a third due to accusations from 2010. back to you now. let's look at what's on the agenda in asia next week. on monday, japan posts second-quarter gdp data just before 2:00 a.m. central european time. meantime, two of asia's top commodity companies release quarterly figures. we're waiting on results from newcrest mining, australia's largest gold producer, and tata steel, india's biggest steel firm. ross, you have to wonder whether we should be on central bank action watch, pboc watch, given the weak chinese figures this morning. >> yeah, and they do things on the weekends, as well, so we'll see. still to come on the show, london has been on a high for the past two weeks, but will the

feel-good factor of the success of the olympics make a big difference to the capital here? what the mayor of london thinks, after the break. [ male announcer ] this is the at&t network. in here, every powerful collaboration is backed by an equally powerful and secure cloud. that cloud is in the network, so it can deliver all the power of the network itself. bringing people together to develop the best ideas -- and providing the apps and computing power to make new ideas real. it's the cloud from at&t. with new ways to work together, business works better. ♪

welcome back to the program.

well, today's the big day for manchester united. they're going public on the new york stock exchange, and that makes us question whether man u. will score with investors, especially in light of lowering its offering. tell us if you think the soccer team is a good investment. there's a poll on our website. you can head to cnbc.com to check it out or join the conversation here on "worldwide exchange." respond to that, respond to prudential or anything else you've heard on the program this morning by e-mail us at worldwide@cnbc.com. tweet us @cnbcwex or reach us directly @kelly_evans or @rosswestgate. an increase in the number of ghost towns is revealing the extent of the housing crisis still unfolding in the spanish market. julia is in the town once dubbed the manhattan of madrid. julie, just looking behind you, it looks pretty empty right now. the only thing we need there is a bit of tumbleweed. can you get the producer to sort that out? >> reporter: i think there's plenty of it. i don't need to ask any producers to do that.

it is a wasteland, it's apartment-locked in the middle of nowhere, and there's actually huge craters where obviously foundations for other apartment blocks and buildings were supposed to be built and they've been abandoned. it's a legacy to the housing boom that peaked in 2007. now fast-forward five years, and analysts say that house prices have adjusted downwards by 20% to 25% and that probably we need to see about the same again. they actually say 25% further they need to fall if you compare it to what's happened in the u.s. and the level of adjustment that's taken place there. now, it's interesting, because they apparently sold 500 to 600 apartments here in the building that you can see on my right in the last few months, and apparently, they sold them at below construction cost. now, i managed to find an owner this morning, and she said that, apparently, she paid a third of the price that apartments on the blocks on my left here were selling for around three years ago. so, at least in certain areas surrounding madrid, we're seeing prices drop to 60% to 70%. of course, this adjustment

depends on just how willing the banks are to take provisions or increase the write-downs they made. we know that the government's asking to increase provisions by about 80 billion euros, and it does seem to be feeding into this. she says she put down the 50% deposit, but the facts suggest that although the volumes are incredibly low compared to what we saw at the peak, in fact, 50% of the houses purchased that are going on right now are done by cash. now, i spoke to a mortgage broker earlier this morning and this is what he had to say about that fact. >> banks are really tough to get new mortgages and less on their own properties. and the other one is it seems like some investors are looking at the properties as a safe way, you know. they think prices are going down good enough. and the other one is that the uncertainty about getting out of the euro or not, some people are saying i'd better have my cash in properties rather than in the bank. >> now, he expects the banks to accelerate their losses this year and actually that we could

see house prices fall by around 12% this year, but then you have to remember, there's a backlog of up to 1.5 million homes that has to clear and he says it could take three to five years to reach that point. for now, though, guys, back to you. ♪ well, just two days to go before the cloefts london olympics, and i'm going to miss that little graphics package. anyway, countries and corporations have been pulling out all the stops to capitalize on the games and the party atmosphere. as tom mckenzie reports, national olympic houses have become the go-to place away from the sport stadiums and arenas of olympic park. >> reporter: ireland might not be storming the medals tables at london 2012, but that hasn't stopped the irish getting into the spirit of the games. the emerald isle, perhaps unsurprisingly, picked a bar as the venue for its olympic house, partly sponsored by irish

whiskey brand jamerson and decked out in green, white and orange, it's become a mecca for the thousands of irish living in london. the irish are famous for loving a party, and there's few better excuses than the olympic games. they're certainly making their presence felt here at the irish house. >> yeah! >> reporter: but for many non-irish sports fans and athletes, the place to be here is here at holland house. the dutch have gained a reputation for hosting the best olympic parties, since they set up a heineken-sponsored tent at the barcelona games in 1992. and they year, they appear to have out-done all their previous efforts. heineken has hired out the alexandra palace, a venue normally used for rock concerts. they wouldn't tell us how much they forked out for it, but it's estimated to be in the hundreds of thousands of pounds. some of that will be clawed back in ticket sales. they've sold all of their 6,500 daily tickets to date.

>> we have athletes when they come here, they celebrate with us the ceremonies, the medals they won, but after, when they had stopped the games, they will come here every night. fans can mix with them, can have pictures, can have discussions with them. that's what it's all about. >> reporter: inside, it's a homage of sports stars and love of all things orange, and of course, the country's most famous beer-maker. fans watch the games on giant screens and celebrate their athletes' success in true dutch style. and if you want to try and emulate this year's olympic rowers, you can always try your hand at this. trust me, it's not as easy as it looks. but for now, at least, it's all about celebrating the final days of the games. >> whoo! >> tom was assuming that he made the rowing look easy when he said that. >> all i will say is that he was in a rowboat, i was in a bobsled over at sochi house and on skis. it really is a riot to go around.

and it's not just the party atmosphere, it's actually quite telling what these various houses indicate about their host economies. for example, the african olympics pavilion had to close early with debts outstanding, greece was open for one week, not two, because of the cost of running it. on china, you're thrown out if you're not on the approved securities list, and in the u.s., security is a nightmare, too, you have to have a special invite. i did go into the u.s. house. you can go in, there is a store with gear. the only place you can get team u.s. gear in london, but again, you have to be on a list, friend, family, sponsor, to get in. you can see why the sponsors do it. still to come, manchester united has moved the goal post on its ipo. will the stock score with investors on the first day of trading?

welcome back to "worldwide exchange." i'm kelly evans. >> and i'm ross westgate. these are your headlines from around the world. china's export growth weakens in july, missing estimates by a long way and shrinking the trade surplus. the dismal data turned equities lower. the uk's financial watchdog says the existing libor structure is no longer fit for purpose as it opens a discussion on how to reform the benchmark rate. corn prices jumped to new highs. traders are bracing for today's usda crop report. the government is expected to slash production forecasts. and japan's parliament passes the government's controversial sales tax hike. now all eyes on the prime minister, who may have to pay

for it with his job. with a good morning to you, as viewers may be tuning in at this hour, let's take a look at how futures are positioned, and it is red arrows behind me as we get closer to the session open. the dow jones industrial average is pointed lower by about 16 points, taking fair value in account there. the nasdaq is lower by 4 points or so as well. the s&p 500 also in the negative this morning. this, of course, follows a couple of weeks of gains for the equity market. but as we turn our attention to europe, you get a sense of the hesitancy with which we hand over. the ftse is up about 0.1% this morning, the xetra dax down 0.3%, paris down about the same amount and ibex in spain down about 0.8%, ross. >> so, pretty lower than

yesterday, weak. as far as bond yields are concerned, we're below 7% on the ten-year, yields a little higher, 6.9%, 5.87% on italian debt as well, slightly higher than yesterday. ten-year treasuries, of course, yesterday hit 1.731%, the highest in 2 1/2 months, may 30th, lower today 1.645. the response to the chinese dollar, the aussie/dollar coming off after being above 1.0615 during the session yesterday. besides china trade data coming in weakest, remember, july exports just up 1%. people thought they'd be up 8.6% year on year. we also have the reserve bank of australia coming out and talking about worries about the australian strength. dollar/yen steady, euro/dollar 1.2280, moving away from the highs of 1.2444. keep an eye on what's happening with commodity prices.

brent today 1.1254. the iea downgraded its demand forecast for oil. gold slightly weaker, but ahead of the crop report, corn is firmer right now, 828.25 is where we stand. that's european trading. what happened in asia earlier today in relation to the chinese trade? sixuan has more at singapore. >> thanks, ross. asia snapped a four-day rally after china's july trade data came in below expectations. the shanghai dropped but poked the its best week in 2 1/2 months. developers were under pressure on reports china may expand property tax files to more cities, but banks out-performed after china industrial bank reported around 40% increases in their first-half net profit. similar picture over in hong kong. the hang seng was down about 0.7% but gained 2.4% for this

week. leanne thong in the spotlight after shares tumbled 19% on downbeat earnings. the nikkei lost 1% but still marked its biggest weekly gain since february. sharp shares recovered as they are reportedly still working on investing in the struggling tv-maker. the kospi bucking the trend to end in the green on easing hopes after july ppi fell for first time in three years. over in australia, the rba upgraded its gdp forecast, but that was overshadowed by demand concerns from china. the index lowered by 0.7%, the sensex now trading below the flatline. over to you in london. >> thanks for that. now, more sports today. >> it's a sport-heavy week. >> women won the u.s. gold, u.s. football gold. >> or soccer gold. >> yeah. >> football, soccer gold. >> when does manchester united play? >> manchester united plays

soccer. >> football. okay, but the question is, is what's going to happen with their flotation today, the british football club is going to test the appetite of investors. the price of the ipo came in cheaper than we would have thought, 13 bucks a share, but it's the first sports team to list in the u.s. since the cleveland indians in 1998. >> which was news to me, the indians and the boston celtics, who tried the strategy before. >> and cnbc's brian shactman has more on man u.'s ipo. >> thanks, guys, good to see everybody. we are getting ready for around historic ipo. british soccer/football icon manchester united will trade on the new york exchange in just a little while. last night it priced at $14 a share. that's $2 below the low end of the range, which was $16 to $20, but there's a lot of nuance to this. from some reporting i've done, i've learned the lead underwriter, jefferies, handled this with more care than any transaction they've ever

handled. part of that, it's man u., considered the most valuable sports franchise on the planet, but underlying that is the post-facebook deal. people involved wanted to trade well, so pricing at a more balanced level, even if it's below the range, is considered relatively healthy if it trades well. and we get another nuance here -- who's going to buy it? some institutional people i spoke to were pretty wary. is it a growth company? is it a mid cap or a luxury brand as the team marketed itself on the road show? it's pretty to nail down. we do know it's a company laden with debt and the controversial glazer company will still retain total control while also pocketing half of the ipo's proceeds. not a good case for institutional ownership, but the team is profitable. just inked $500 million deal with general motors and boasts 659 million fans worldwide, but it says it hasn't yet fully monetized. pretty intriguing dynamic, and the first big test has passed. it priced below the range, is coming to market and now we will see in a little while exactly how it trades.

back to you. >> we have a look ahead, getting more on this as well about the potential success or failure of the ipo at 10:30 pst, 5:30 eastern. in other words, in about 24 minutes from now. i think, okay, one of the most interesting things about this is really, are they listing in new york because of the jump-start of business start-ups now, which is -- >> that's a great question. >> -- a lot less onerous listing requirements. >> we'll put that to our guest in about a half-hour's time. u.s. regulators reportedly told five of the country's biggest banks to come up with plans to stave off collapse if they come in travel. goldman, b of a, citigroup, jpmorgan and morgan stanley are involved for 2010. they emphasized the banks couldn't count on government help. under the recovery plans, they would have to consider efforts like selling assets and finding other funding if traditional borrowing markets shut them out. the justice department

decided not to bring charges against goldman sachs or any of its employees, dropping a year-long probe into financial fraud related to the subprime mortgage crisis. a senate panel had asked for the investigation after publishing a scathing report on the financial crisis, naming goldman as a culprit. lawmakers claimed executives, including ceo lloyd blankfein, lied to congress in hearings about the firm's bets against the housing market. in a statement, goldman says it's pleased the matter has been resolved. goldman's shares there in frankfurt trading are down about 0.5%, roughly in line with the index this morning. britain's financial world stock says the existing libor structure is no longer fit for purpose. martin wheatley opened a month-long consultation designed to restore confidence in the benchmark interbank rate. it comes on the heels of the libor rate-setting scandal, which of course, claimed the management at barclays. and talking of which, barclays has found a new chairman. the bank says that david walker, former chairman of morgan stanley international, will take up the position from november 1st, replacing current chairman,

marcus agius, who announced his resignation before bob diamond left. walker said finding a new chief executive was his immediate priority and is ensured to be fully engaged in the process. staying with banks, u.s. treasury secretary geithner assured george osborne that u.s. regulators investigating standard chartered will coordinate their actions. it's been voiced concern that the bank may not be treated fairly in the investigation, this as finch warned it may cut its rating on standard chartered following allegations of dealings with iran. in a statement, the ratings agency said the bank could be downgraded when there is more clarity on the situation, and clarity would be good, kelly. well, u.s. corn futures, meantime, hitting a record high ahead of the usda crop report today. the first report released since the drought in the midwest began. it's sparking fears of global food price inflation after the food price spike in 2008 that caused unrest and riots around

the globe. we'll discuss that and the fuel versus food debate with our guest, anna puchi-donnelly in about 20 minutes time. today is a big day for man chest -- manchester united. will it score with investors? tell us what you think on the poll on our website and tell us where shares will end the day. e-mail us with your guess or tweet us @cnbc wex o or @kelly_evans o or @rosswestgate. and the winner may get a shout-out here on "worldwide exchange." >> yeah, absolutely. still to come, though, we'll be going out to a spanish ghost town. julia's been looking into the property market crash.

you are watching "worldwide exchange." these are your headlines. china's export growth weakens to 1% in july, missing estimates by a long shot. britain's financial watchdog says the existing libor structure is no longer fit for purpose. and manchester united prices its ipo below the expected range as it readies to list in new york. meanwhile in spain, an

increase in the number of ghost towns is revealing the extent of the housing crisis still unfolding in the spanish market. jules is in sesena, once dubbed the manhattan of madrid, but now it's a relative ghost town, as we can see from the pictures behind you, julia. how much is this symbolic of the problem of the country, where huge property crash weighing down the banks and ultimately weighing down the sovereign? >> reporter: it's at the heart of the sovereign debt crisis here in spain, ross. it's absolutely the issue. and actually, we've been traveling around spain this last week, and what i've seen here today is not unusual. you see buildings being built 45 minutes to an hour away from the city, and then just wasteland between here and there. if you don't have a car here, you're in serious trouble. if you mistime the buses, it takes three hours to get to the center of madrid. so, it's no wonder that the occupancy rate of this building on my right is around 5%, so brokers and mortgage brokers here tell me, of course the valuation is a problem, too, and

that's going to be a problem until we see the write-downs from the banks. they've been forced to make provisions against this to the sum of around 80 billion euros this year. and actually, what i've heard in the last few days is that they have managed to sell between 500 and 600 apartments in this block, though they reportedly sold them for less than the construction price. and actually, i spoke to one owner who told me she bought her property for less than a third the apartments were selling for just three years ago. so, while analysts are suggesting house prices have fallen 25% what we're seeing here at least, is house prices that have fallen more like 60%. among the people i've been discussing it with, house prices are actually not the big issue in terms of valuation for the banks. the more critical issue is not just the commercial real estate but also land prices. and if we look at the oliver wyman report, they were suggesting losses on land of around 72%. so, that's one critical issue. the other thing is, 90% of the mortgages here are variable rate. and actually, although the sums

are very small, 95% of those that are currently being originated are still variable rate. so, we move forward three or four years, perhaps we see some kind of recovery in the eurozone, rates start to rise, and we could have a second issue here in the spanish mortgage market. so, it's difficult to see the bright side right now. for now, though, guys, it's back to you. >> julia, quickly, are those variable rates pegged to what the ecb lending rates are, or are they the cost of money to spanish banks, which presuyare ? >> reporter: you're right, that's what i've been told by the mortgage brokers, but i can double check that, but it does look like that. the prices i've been looking at are significantly higher else where where in europe. >> julia, thanks very much for that. your ibor has been sinking, but again, the question is whether people could take advantage of those rates. >> yeah. the french constitutional

court has ruled that the eu fiscal pact does not require a change to the country's constitution. delivering a victory to president francois hollande. the decision allows the socialist government to push ahead with implementation by september using a super law that it can pass with its majority in parliament. this as european policymakers remain divided over future steps to tackle the sovereign debt crisis. in an exclusive interview with cnbc, former ecb chief economist otmar issing poured water on the calls for the bond and said proponents of the plan were hurting price's efforts. >> this is mutualization of debt. this is something that must not happen. and those politicians in europe which are strongly in favor, for example, of eurobonds, know exactly, in germany, the chancellor has said never in my lifetime. so, they make the chancellor responsible for the turmoil in

markets, the uncertainty, but they know what the answer would be, so they should shut up. >> you have to start think about going back to school, i'd get a very long face indeed. >> yes. >> but -- >> it's happening. >> nevertheless, u.s. retailers are deep in the heart of the second most important shopping season, back-to-school. are consumers willing to open their wallets? we'll hit the stores in search of backpack bargains in just a moment.

welcome back to the program. let's check now on markets. u.s. futures are pointed lower across the board on this friday morning. dow jones implied to open lower by 16 points, nasdaq almost 5, s&p 500 lower a couple points as well. >> there have been a couple flat sessions for european stocks, lower as we go ahead of the u.s. open, flat for the ftse, xetra dax down and ibex. london has to do with weaker data out of china. let's see what's on the agenda in the u.s. today. july import prices are out at 8:30 a.m. eastern, expected to show a gain of 0.1%. the usga, the one to watch, released the monthly crop report at 8:30 a.m. as well. and jcpenney will turn in openings before the opening bell. speaking of which, it's

back-to-school season in the u.s., and it's the second most important shopping period for retailers after the christmas holiday, generating $68 billion in sales last year. this year, teen vogue is teaming up with several retailers, including aeropostale, american eagle and the gap, to create a special back-to-school shopping day, and that will take place tomorrow. joining us on the phone now from chicago is paul swinand, analyst at morningstar. thank you for calling in. >> good morning. >> is there a difference in what "teen vogue" is doing? is the season needing a shot in the arm this year? >> i don't know that it needs a shot in the arm. obviously, retail has been tough with 8%-plus unemployment for almost three-plus years now. i think that the teen retailers are always vying for back-to-school, but you know, the real needle mover is the national retailers, the targets, the walmarts, the jcpenneys, the macys, and they give a real read

on the economy. what investors are interested in is does this predict holiday or say something about the broad economy? i think it does, actually. >> i wonder, too, as we gear up for jcpenney's results, what you're expecting to hear from that company, clearly some of its own operational challenges, but what are you honing in on there? >> you know, i'm actually bullish on the long term for jcpenney. everybody i talk to, you know, at the store or customer level, i think the second-quarter numbers are going to be bad, but you know, my joke is, when even the janitor knows sales could be down 20%, there is a possibility it's already in the stock, right? but i wouldn't extrapolate jcpenney's results to the broad economy. that's more just driven by the strategy and the communication problems that they've had more recently. >> we have seen some weakness showing up at macy's, too, and that's certainly the industry's stalwart. >> yeah, and that's a really good point. and what i would say is, you know, the american consumer

really took a stall speed or whatever you want to say, this balked in june, and then they started to come back in july and actually accelerate towards the end of july. all the retailers i've talked to have basically said they'll start to accelerate as august approached. so, the question is, you know, does that mean back-to-school's going to be stronger than last year? there is a lot of survey data, for example, the national retail federation is pointing to actually a 14% increase in sales compared to last year, and some other consultants, such as deloitte, have also had survey data saying that back-to-school's actually going to be better than last year. the retailers themselves are a little bit more cautious, but most are actually planning for increases. >> do you think we'll get any turn -- paul, it's ross here -- in the lower-end consumers? it's been constrained for a while. >> yeah, you know, it doesn't look like it's going to happen this quarter. it's usually when things are in the trend, you know, you say, well, it's going to happen, but not this quarter. so, one of the funny things i

even saw in macy's was their average unit retail is actually up 8% in the first half. that's a huge amount. that means that unit sales or transactions per sale went down -- or items per basket went down. now, what's going on with the low-end consumers, they're obviously disproportionately unemployed, but the outlook is terrible. and gas prices and food prices really weigh on the low-end consumer, because they're not so tuned in to what's going on with bond yields in italy and spain. but if they go to the store and they can't fill up their car or buy bread or milk, that really impacts their outlook. so, that means they're going to spend less. that should turn around in the fourth quarter, but again, we've been waiting for quite a while. >> and just finally, paul, is the back-to-school going to be like last year, people are going to hold off until sort of early september, going to make purchases last-minute? >> yeah, you know, the retailers themselves obviously plan

largely looking at the calendar and how things played out last year. i think that consumers are actually, the higher-end consumers are actually going to spread their purchases out more. people are planning ahead a little more. so, i think we'll actually see better sales in august. september, when the numbers come out, investors have to be cautious because the weather was very cooperative last year. i think if sales get pulled in to august-september, and the weather comparison could create a little bit of a weak comparison in september. that doesn't mean we're going to have a bad holiday season. i think this year the back-to-school is going to be decent and will predict a decent holiday season as well. >> okay, paul, thanks for that. paul swinand, analyst at morningstar, joining us from chicago. coming up, the u.s. drought reignited the fuel versus food debate. we'll look at the usda crop report and we'll be joined by a panel to preview manchester united's anticipating listing this morning.

welcome to "worldwide exchange." if you're just tuning in, i'm kelly evans. >> and i'm ross westgate. these are the headlines around the world. china's export growth weakens in july, missing estimates by a long-shot and shrinking the trade surplus. the dismal data turns global markets lower. traders are bracing for today's usda crop report. the government is expected to

slash production forecasts. will manchester united score with investors? the football club prices its ipo below the expected range as it readies to list in new york. and britain's financial watchdog says that the existing libor structure is no longer fit for purpose, as it opens the discussion on how to reform the benchmark rate. as we head closer to the start of the u.s. trading session, let's look at how stocks are pointed lower. it's red across the board. the dow jones industrial average is looking to open lower by almost 20 points, the nasdaq by 6 or so, and the s&p 500 lower by 3 or 4 points as well. take a look at the cnbc ftse global 300 to give you a sense of some of the action in global trading. we've down about 0.25%, given up gains pretty much throughout the session, a lot of it starting in

asia on weakness on the china export figures in particular. growth of 1% year on year sounds like something out of the u.s. or china at this point, not out of the world's purportedly fastest growing economy and in any case, the european markets keyed off that. we've seen red here. the ftse is just slightly lower, 58.50 the level. the xetra dax is under that 7,000 level. the cac is down 0.75%, ibex down 1%, so losses are picking up a bit. and meanwhile, plenty of guests already today on cnbc telling investors what should be doing with their investments. here's a recap. >> it is where you have unrest unladen over high capital costs is where you'll see pressure. we've been looking at areas like west africa and infrastructure developments for thermacor in australia. it has sold off higher than many expected this year so far.

>> one thing about the commodity markets at the moment, which is fascinating, is that in gold, the speculative overhang has collapsed. in most soft commodities, for all the obvious reasons, there is a very major long position, and that gives you a very clear warning sign. >> after their last delivery at this point in dutch, the shares have drifted up a little bit, and then that for me is good buying opportunity because then they came out and said they've got a development field for the japanese car manufacturer and it renews the interest in the shares again. so, it's certainly not for widows and orphans, but on a risk-reward trade-off, the rewards could be huge. >> okay, prudential was on today, but you get the sense where not much is going to happen in the eurozone this august. and we're now getting into

that -- >> the filling season, you could call it. there's very few events, very few auctions, but at the same time, little trading can mean more volatile action, rumored prone market. so we'll see especially now with the weak china figures, whether that starts to have a stronger hand. we'll also see, by the way, the impact that high food prices are going to have on disposable incomes. u.s. corn futures hit a record high on thursday ahead of the usga crop report, the first report released since the drought in the midwest began. it's due out at 8:30 a.m. eastern time. this is sparking fears of global food price inflation after the food price spike in 2008 that caused unrest and riots. joining us is anna puchi-donnelly, trader at marix suspect ron. 2008 seemed to be a one-off episode and here we are again. what do you expect the crop report today to tell us? >> to tell you the truth, this is worse than 2008. we are in the middle of a

perfect storm scenario. today's crop report will be very important. it is -- the usda is going to incorporate a survey of approximately 28,000 farmers and its own usda plots to come up with their estimation of yield, of what the drought and the dryness has done. and the range is huge. the range for the yield is approximately 117 to 135 bushels per acre, when the last estimate was 146. >> so, what does that -- with that enormous range, what does that mean in terms of market action going into this report? >> it means that it has the potential to be incredibly volatile, because if we get a 127 yield, which is in the middle of the range, it is still incredibly bullish. but considering people came into the report long as well, that might be actually taken as bearish? >> that's what i wonder at this point. we're looking at the price charts there. corn's up 33% over the past year. i mean, how much further can it run? >> it's really a question of demand rationing from this point. we really need to focus on the

supply side of the equation and see how bad the situation is. and this is just one crop report. we need to wait for the ones coming in september and october as well to see how bad it is, because we won't really know until the whole crop is harvested. this is just going to be an estimation. and once we know the final number, we will know how much demand needs to be rationed. it definitely needs to be rationed, but that will ultimately drive the highest price. >> how long before the whole crop? what's the timescale for that? >> the whole crop should be harvested by october. some of the crop has already started to be harvested because it was planted so early, but the final yield estimate will be january. >> and so, is it still prone to weather swings? because as i look at these images and think growing up in upstate new york, where you're surrounded by rows and rows of corn fields and you build into the fall and the traditional harvesting season, does that mean there are still vulnerabilities here if things don't go right with the weather? >> because the corn was planted so early, a lot of people are saying that corn is pretty much done. we just have to see how bad it is at this point.

there is some hope that genetics will help this crop, right? that is also why the huge range. but now people are starting to focus on soybeans because soybeans still has a few weeks left for the crop to be made, and the u.s. came into this crop year tight from a soybean perspective because of the -- and we got even tighter globally because of the failure in brazil and argentina. so, the soybean situation is also incredibly important, and that should play out towards the end of the year as well. >> it was such a big test for the gm food, because there was a big thing about gm, don't worry, we'll ensure yield. and you know, if it doesn't, if the gm crops don't deal with this drought, everybody's going to say, well, what was the point? >> although it has to be supportive for companies like monsan monsanto, does it not? >> one would imagine, but there's only a limited amount genetics can do, right? we're talking about the worst drought in the last 50 to 70 years, one of the hottest years on record. i mean, there is -- so, if we're

talking about devastation versus slightly less. so, if anything that comes in from this point would, hopefully, be down to genetics. and so, it would only be positive. >> meanwhile, at the same time, we've got pressure on the u.s. to reduce the amount of corn allocated to ethanol. the head of the u.n.'s food and agricultural organization has called to relax the ethanol quota to ease the effect of the drought. from what i have seen, there has been no movement, but do you think they will? >> that is very hard to tell. we're also in an election year, so we really need -- >> and the cost of gasoline is more important. >> and ethanol is oxygenic, so it needs to be blended in. so it's incredibly hard to tell. we really need to find out how bad the supply situation is before we start thinking about where we're going to cut demand. demand needs to come down in general, but it needs to come down from a number of different things, from feed, from ethanol, from exports.

so, there are so many moving parts at the moment, it's very difficult to tell. >> how long before the new, sort of the next ethanol crops? because they're developing the new ethanol crops, won't be replacing corn. it will be, you know, the new type isn't going to be corn you can put into food production. they're going to stop that argument. do you think that's going to -- i mean, they're saying 2014, 2015, they'll start growing crops for ethanol that won't be replacing corn. >> that won't -- so, they won't be using corn? i mean, that's a different story and time will tell on that front as well, and it will really become a matter of, you know, what ethanol does to the supply balance sheet, but really, all we can focus on at the moment is, you know, the corn balance sheet is so tight and the soybean balance sheet. >> how are you going to trade right now through this? >> it is incredibly risky because we've rallied already over 50% in a month and a half, right? so, how do you trade? you keep it tight and end users

should really hedge whatever needs they have, because this is -- we're in the middle of it right now, if not the beginning. it's not over by any means. >> right. >> we need south america to replant, we need to watch the wheat crops globally and we need to replant in the states before we can even think about being comfortable on a global perspective. >> i'm buying seeds. i'm planting. i'm getting in the backyard at this point. every little bit helps. corn stocks. ana puchi-donnelly, thank you for your time this morning. >> we haven't had a drought in the uk, not over the summer months. we had it during the winter months. >> and during the olympics. still to come, japan's parliament passes the government's controversial sales tax hike, and now all eyes on the prime minister. he may have to pay for it with his job. he's due to speak any minute and we'll bring that to you live.

welcome back to the program. japanese prime minister yoshihiko noda is holding a press conference live right now. we don't have an english translation. you can see that press conference offset there, however, and as we get the english translation or watch the market-spreading reaction, we'll bring that to you right away. he did just apparently score a political victory by getting the sales tax plan through

parliament, but the question is whether that will cost him his job. dollar/yen there, as you can see, slightly weaker, down 0.2%. not much action late leach, though, so we'll watch that. >> key will be to see whether we get any early elections in japan as a result of that. meanwhile, these are the other headlines today. china's export growth has weakened to 1% in july, missing estimates by a long way. >> traders are bracing for today's usda crop report as the government is expected to slash production forecasts. and manchester united prices its ipo below the expected range as it gets ready to list in new york. now, team usa has jumped to the top of the leaderboard, surpassing china on the gold medal tally. and with just three days to go, we'll see who will end up on top, but ross, the picture of the americans looks pretty good. 90 medals to china's 80, 39 golds to china's 37. >> and the latest usa gold was

the women's team football last night, beating japan. they reversed their loss in the world cup, not quite a capacity crowd at welcome bleywembley, b the biggest -- >> record crowd ever. >> and your striker is something else, i've got to say. >> i did see the team play up in newcastle last week. it was a lot of fun, so great for them. >> they said knowing they had your support was the thing that spurred them to the gold medal. on the highlights today, with the final of the women's hockey competition, unfortunately, the hookleg's gb didn't make the final. they're in the bronze match. i did train with them. at the olympic stadium, the focus look on the final women's 1,500 meters and the men's 4x400-meter relay. i can't believe on monday we won't any longer have the olympics. >> i know. we won't have these fun graphics and medal boards to follow, but you can sense a bit of exhaustion as the second week is approaching. all of the olympics workers who have been wonderful, and volunteers, who on day one and

two were sort of saying smile and keep laughing and blah, blah, even they're sort of like, please, keep laughing. they're running out of steam. >> and of course, when the game's over, it will be all about legacy it was about legacy even before the games started. the mayor of london had a press conference yesterday to talk about where we are with legacy planning and this is what he had to say. >> i think we can ensure the continued momentum of london 2012, and we can secure a transport housing infrastructure, sporting, cultural and social legacy from london, for london for these games and turn these games to gold for decades to come. >> and we will have a report on monday, because i'm going to compile it after the show, on what is so far been achieved in terms of legacy. most of the buildings' uses have already been sorted out. >> yes, and britain prior to the

olympics did okay in the global tourism standing, but you have to imagine this would help. still to come, are investors looking to score with man united's ipo? we'll take a look at the public offering due to take place on the nyse later today.

perhaps earnings out of the uk, prudential's numbers for the first half of the year have been strong, helped by growth in asia. operating profit in its life insurance in the region rose. earlier we spoke with prudential's tidjane thiam who outlined the business. >> the main strong is to put that out there. because if you wish, demand is infinite, so we grow as fast as we can grow our distribution machine. so, we grow it organically by

hiring new agents. we also grow it inorganically by entering new distribution elements with banks, like we did in 2010 and uob is up 129% this year. so, it gives you a sense of the kind of growth rates you can achieve. >> well, the uk's financial watchdog says the existing libor structure is no longer fit for purpose. martin wheatley from the financial services authority opened a month-long consultation designed to restore confidence in the benchmark interbank rate. comes on the heels of the libor rate-setting scandal, which of course claimed top management at barclays. joining us on set for more is a reporter at the "wall street journal" who's been following this story. dana, perhaps not a surprise that there may be a few things wrong with the way libor is set. where do you expect, though, regulators to make changes from here? >> it's unclear. what martin wheatley effectively did was threw open the floor for people to make suggestions. so this is really the beginning of a process.

you know, he didn't make any definitive suggestions, but one of the interesting things i thought that he said in this report that he's released this morning is that, clearly, more regulation is needed. and that's something that's only become clear recently. you know, as you said, as a result of -- >> what does that mean? >> it means in the past, the rate-setting process has been overseen by the british bankers association, which is a trade group, not by regulators. now, presumably, somebody like the fsa or the bank of england, a hard, real regulator, is going to oversee the process. >> we'll see if that impacts the way, of course, that rate is handled. regulators clearly looking to move away from it entirely, but it's too late for the derivatives, products already tied to it. >> $300-plus trillion worth of transactions. how easy would it be if they decided the right thing to do is shift the regime? how easy would that be and what would the friction costs be? that's an issue he brings up and nobody knows the answer to. >> they're going to look at all the other ways that are set, or

prices that are set by sort of mutual disclosure. >> exactly. >> so we'll see if that's dragged into it meanwhile, manchester united will start trading on the new york stock exchange today. the initial price offering saw shares priced at $14 apiece, below the original $16 to $20-a-share profit. the glazer company will keep around half of the cash raised from the sale. >> well, despite lowering the size of that offering, we asked earlier on the program our viewers if they thought man u. would score with investors. they seem pretty positive, actually. tito tweets to say he thinks the stock will close at $25 today. we're taking bets. john says manchester united's stock should do well. "lots of people love this type of investment." well, that may be the case. whether it does well is another matter, though. tell us if you think the team is a good investment. poll's our our website, or tweet us to let us know what you think. >> and scott rosner is a

professor of business at wharton school. thank you for joining us, scott. what's your view of this? they've reduced the price this morning, but is it a dual structure that glazers are retaining control here, you won't get a dividend. what are you buying with this stock? >> well, what you're buying is a piece of the most popular football team in the world, the most popular sports franchise in the world. you know, it's sexy. it makes for a nice stock certificate to frame and hang on your wall, but it doesn't necessarily make for the best investment. >> and historically, scott, these kinds of investments haven't turned out all that well. >> no, they've actually turned out pretty poorly. the track record is not good on these. if you look at the last american teams to be floated, the cleveland indians, the boston celtics and the florida panthers, which are the three in recent -- three recent vintage in the states, as well as a

number of european football sides, the returns just aren't very good. the dow jones stocks football index went public, or was created in 1991, and it's down over that 21-year period. so, the track record is pretty poor. >> i'll tell you what's interesting here is why are they listing in new york? they looked at singapore, looked at hong kong. are they going there because they're using the jobs act and it has far less sort of reporting requirements? are they using the jobs act as the reason tomorrow listing in new york? >> that sounds like the most logical explanation because it's a bit -- you do wonder. you know, for some reason, soccer as we call it, has never really taken off in the states, so why choose the part of the world that seems to have the least enthusiasm for it? but who knows? people have always been predicting that some day soccer is going to catch fire in the u.s. maybe it's a long-term bet on that. >> i'm interested in this, because you know, the jobs act

applies to companies with $1 billion or less in annual revenue, and some of the exemptions, you don't have to give shareholders a nonbinding executive pay. it's designed for companies who are growing jobs in america. man u. at the moment i don't think has a single employee or office in america at the moment. 710 people employed in the uk. it's a bit of an abuse, isn't it? >> could be, yeah. let's not forget, also, what is it, their third choice, you know? they tried two venues in asia. so, it can't be that there's an overwhelming logic to it. >> scott, what do you think? >> i think it has more to do with the voting structure than it does fitting under the jobs act loophole. you know, i think that the glazers are essentially monetizing the passion that their fans have, like i said, for the product without giving up really any ownership control. so, if you step back from it, what they're getting is, essentially, a $200 million-plus infusion of capital while giving up almost no voting control over the team.

it's not like investors are going to decide whether the team's going to pursue robin van persie, who's going to be in the first 11 or anything like that. >> you've described it, actually, as a brilliant move by the owners. scott. >> i do think it's a brilliant move by the owners. i think that for the glazers, it's essentially a no-brainer, right? i mean, you've got financial fair play roles that uefa is about to impose and this helps you pay down the debt to come within those rules. i think that, you know, you're sitting on a brand that is nonparalleled in the sports world and has very few parallels in the corporate world in general, and this is a way to monetize that branding power in a very direct way. >> they'll be raising around $230 million. they've got a 420 million pound debt stockpile, so how much debt can they pay down with this? >> well, my sense is that's about $650 million as of, you

know, as of the end of march. i think they'll pay down probably about 15% of that, which is a great start. it may be enough to get some of their critics off of their back. they have supporters who have taken them to task, as you well know, in london. >> dana? >> i mean, the other issue we didn't bring up is the valuation, you know? this is -- five times sales is pretty rich. so you've got to wonder, even at below the price range, what's the appetite going to be? >> some at morningstar are talking about 10 bucks it would be. great to see you. thank you so much, dana. and scott rosner joining us as well. they're also going to replace the manager at some point. alex ferguson can't keep going. >> i don't even know. i'll leave the football analysis up to you. >> that's it for today's "worldwide exchange." the olympics are nearly over, but "scorebox" is coming -- "sq

box" is coming up in a few moments. >> and we'll see you again on monday.

good morning. day's top stories. new signs that china's economy is struggling. plus, the iea cuts the oil demand forecast for next year, citing weak global conditions. and the justice department drops its probe of goldman sachs tied to the financial crisis. it's friday, august 10th, 2012. "squawk box" begins right now. ♪ finally friday, free again ♪ i've got my motor running for a wild weekend ♪ good morning and welcome to "squawk box" here on cnbc, andrew ross sorkin along with joe kernen. becky