hello. this is "worldwide exchange." i'm ross westgate. >> and i'm kelly evans. these are your headlines from around the world. >> not enough to keep the eu above the flat line. >> and inflation in india drops below expectations. not enough to budge the rbi from its haushish sales. >> u.s. retail sales set to ride for the first time in four months, thanks to a pickup in employment.

okay. so welcome to today's program. going to be a lot about growth today. >> or lack thereof. >> yes. and, you know, what is amazing, the market reaction to data not as bad as we saw. >> even when it's still bad and when we haven't seen the third-quarter data more of the pain across the eu will sink in. nevertheless, we'll see if that's already been priced in based on market reaction today. >> that will be part of, of course, our coverage and a disappointing set of third-quarter figures. why uk operations are hurting the bank. >> india's inflation drops unexpectedly in july. will it be enough to prompt a rate cut. head of the indian central bank in 30 minutes' time. >> and german and french gdp figures, how much will they boost the overall numbers? that will be breaking in an hours' time.

retail sales figures for the month of july. we'll look at the pros and cons for consumer at 5:20 a.m. eastern time. first, french and german second-quarter gdp came in better than expected. still zero and .3% respectively on the quarter. the reuter's forecast was for france to show a drop instead and a .2% increase for germany. for morning we're joined from silva in frankfurt and carolyn in bordeaux. carolyn, first to you, in france. it would seem a flat reading better than a contraction expected. what's your raeftd econoead of there? >> no growth means zero outlook for growth. and in the third quarter, we're expecting a decline according to the bank of france and number of economists. and barclays says she is not expecting a meaningful recovery in the economy, unemployment,

inflation, fiscal consolidation will weigh on household spending and that's one of the key drivers for the french economy. coming back to this morning's figures, of course, marginally better than expected. so in a way that's good news, because it could have been a lot worse, yes, france could have headed for a recession. we have dodged that bullet for now. but if you look at the breakdown of the numbers, you see exports were down, household consumption was down, and only investment was a tad better than expected. kiel, these numbers this morning, certainly a relief to mr. olange who finished his first 100 days in office today and the recent polls suggest, the french do blame him for the xheblg malaise, his approvalal ratings have fallen to 46%. when he comes back from vacation next week, it's definitely cut out for him, his words.

>> let's bring in silva from germany. the bundesbank is saying don't get your hopes up over these numbers. could this be a high water mark for the year? >> certainly, the same thing for france as for germany, the economy doesn't seem to be falling off a cliff. that's the good news. slightly better than expected. now stagnating economies that can't be good enough news for doing anything seriously about the eurozone debt crisis, about the eurozone economic crisis. the south, the whole southern, southern areas are falling off the cliff, and the rest of the north is kind of clinging on to the cliff. but that's about as much as we go. carolyn is right. no lasting surprises in there, and that's already taken as good news. in terms of what can germany bring to the table to boost the economy, not an awful lot. we still largely dependent on

experts, the economic model won't change in a hurry and why should it? it's been the success model for 60 odd years in post-war history and arguably to some extent, even before that. why change this model if you can't do that in a hurry. even if you wanted to. in terms of the domestic side. it's slackening. the consumer not doing as much as he or she has done in previous months, what actually happened in the second quarter, we only find out in the -- in the second reading when we get more details some of that is down to confidence rather than anything else. you can't simply change by throwing more money on the table. you have to change that by giving people more confidence in the policies actually working. and that is a problem for politicians and the ecb alike. >> for our guests for now, a look at spanish patient, bank net for the ecb borrowing. continues to creep high in july.

337 in june. joining us now is chairman of sachto capital markets. and welcome to you. let's kick off with philip. i heard a phrase. this isn't a growth probm. although it is obviously a growth problem. this is a confidence problem. there isn't enough confidence for firms to invest. how much do you agree with that? >> well, we have a lot of issues when you look at the growth, the growth figures in france. we have a real growth issue, we have very low internal demand and we have a confidence problem. we don't know exactly where we're going to, not specifically in france, but in the euro area. we don't know exactly what will be the exact framework for the

euro for there now to the next two years. we know that consumers and companies are waiting before investing, before consuming and that's what characterizes the french economy. this means we are very dependent on external side, and as it was said, exports were weak this quarter, and the only driver, except investment. but the main driver for the figures this morning was inventories and that's not strong enough. >> in germany, we had a fall in in cap e x. is there some concern that the import export data is starting to roll over a bit? >> well that would be the -- the main issue to -- to note. what is interesting is to compare what is happening in

germany, in france, in germany you have a strong net imports, negative in france. and in germany, negative in france. and strong investment in france, but negative in germany. we're in a very different module, and the risk for germany in months to come is that the -- we'll stay very weak. we saw that in asia, in the u.s. and will probably affect the growth momentum in germany and that's the real issue now, to -- to note what will be the -- the engine, what triggers stronger growth in germany and france. that's what government in germany and france will have to -- will have to manage in the coming months and the next four

with the -- with the markets in france and germany. >> what is priced in? nothing here we didn't know, and the data slightly better. >> i don't think it will move markets. it's history for start. and gdp, also watches for markets on a historic basis. and it could have shocked, which it didn't, so there is so blessed relief. have you too much macro, not enough micro. the government sectors are crowding out private sector entrepreneurialism. >> if anything, they are trying to fill a gap. i'm not suring they are crowding it out that would indicate they are pushing aside eager investors that don't exist right now. >> we wouldn't want to start from here, quite frankly. you wouldn't want to start from

here, you face a big problem. do you kick the can down the road as europe decided to do yet again. or do you take a real pain now and if you like, start again, with a different philosophy? >> and with what's happening across the eurozone, correct? >> we're talking about more and more positive, more and more jeet money, for under lying structural problems. >> philipyesphilipe, do you agr? >> the main issue, the market depends, too much probably, on macro environment and we don't know exactly where we're going to, specific until europe.

not only in europe, we see that in asia or in the main problem, we need to know where we are going from here. from china, u.s., europe what will be the institutional constriction in europe and that's a lot of information for investors. we need to know exactly what will be a driver for growth in the coming months and the main iss issue. and we understand that the macro is very important to understand the market. >> we'll leave it there. nick will stay with us.

flat gdp growth in france, europe's core looking like the periphery? that story on line, join the debate and check out plenty more at cnbc.com. okay, meanwhile azhar as the heat map. and the gdp number, currently 8-2 advances, and decline at the moment. and far as, vk very low. and david cameron predicting they were down 41%. and the dax up 3/4. ebe x up .9%. and bull markets, slig and bond markets, down, still below the key index market. and we expect to see inflation fall in cpi. we'll get numbers in 15 minutes. currency markets, euro/dollar,

above 1.23. getting back toward the 1.24 level. yesterday, 122.75. and aussie dollar, where we were just above $1.05 at the moment. sterling slightly firmer against the dollar. that's where we stand right now, as far as european trade is concerned. let's find out what is going on in asia as we have been waking up. x uan has more. >> and we saw it positive in the afternoon session, up .3%. helped by oil majors and banks. brokeragers and insurers extended losses and gloomy earnings outlook. hong hong shares begined 1%. elsewhere, nikkei higher by .5%. and easing hopes, members wanted all options left on the table.

and kospi, up 1.2%. and they delivery the heavily discounted ships ordered during the financial crisis. the australian market, eeked out modelest gains, .2%. but shares of national australia bank fell 1.4% as earnings missed forecast, and we'll have more on that in a bit. and india, higher on .6% on the backs of inflation data back to you. >> si x uan, thank you. miriam webster, unveiled 100 new words, making space for systemic risk, underwater, toxic assets and tipping point. not the only words added. although it is a telling tale of the times. man cave and bucket list made it in and we weep tears of sadness for that.

is the linguistic makeover sign of the times? what do you think of the new additions? e-mail us. worldwide@cnbc.com or tweet #cnbcwe x. >> still to come, find out the head of india's second biggest bank says needs to be done to kick start the economy. we have an interview with the ceo of icics, next.

one of the headlines. the eads, the paper says it's seen papers shoenior employees were questioned to questionable payments made to cayman banks. the author, a financial controller, also highlighted expensive gifts given to members of the saudi royal family. the payments are now under investigation by britain's ford office. and standard chartered is in

talks that it hid dealings with iran. standard chart terered accused making transactions up to $250 billion. it's fighting charges. national australia bank, missed forecasts of third quarter figures. it was hit by weak results, particularly at the uk unit. joining us is oriel morrison. knows a thing or two about australia. >> just a thing or two. >> tell us what's going on. it's here uk more of the problem for the bank. >> absolutely. it is that particular segment of the bank causing most of the problems. you have to keep in mind, these banks are the very exclusive i guess you could say global club aaa rated. still pretty impressive. these numbers below expectations. did come in around 1$1.4 billio cash profit. $1.5 billion was the estimated

number. puts now on call for a second straight year of record straight profits. still pretty impressive numbers, given the global situation. much of the down side, yes, from the uk division. bearing in mind back in april this year, we did have national australia downsizing its clydesdale and yorkshire banking units. took writedowns and boosted provisions in the uk against the commercial real estate portfolio. four major banks, of course, in australia. they are on cause to wrack up more than $25 billion in combined annual profits. still a substantial number. working on cost cuts. we know they are a part of this includes cutting jobs and also salaries at the bank. but we are still dealing with a number of issues that the global banks are also dealing with. and that is the higher cost of funding. >> you guys are dealing with that as well. >> i was going to bring you in on this. it shows you how tough the

british banking sector is at the moment. will we see that cross the board? the bearest entry for new entrants seems very high. the government wants cheap competitive banking, but making almost possible for people to set up a new business. >> you might hesitate to invest new capital in setting up a bank right now as you say. the environment, landscape, remains tough. we could see further government effort to stimulate lending along the lines of the lending -- funding for lending scheme we saw by the bank of england. there will be more help on that front. >> jim, australian banks used to go by their initials. nab was nab and then they decided it was quite to be australian. now they say we are national

australia bank. we are an australia bank, which is what we do. >> which is so different of what other companies do, which are going to the acronyms. >> aaa ratings, saying we're not a european bank. we're a strong australia bank. fascinating how the world changes. good to see you, oriel. for now. all this week, looking at indianaa reviving business growth in the country is key to getting the third biggest economy in asia back on track. more positive signs for new del delhi, india inc. is asking for more decisive action. the ceo of icics bank tells us what the key factors should be. >> what is more important to get the economy kick starting again, take many executive decisions which will bring back an

investment climate into the economy. so in my view, i think three important things is what we need to do really. one is improve decision making around projects, which are either completed or getting completed. so they are environmental clearances, location for the project, so on, so forth. for there is a stability in terms of how these projects start becoming productive. the second important thing. bring a lot more clarity around the tax reggie. the retro spespective of taxes. i think if you do these three things that would actually take care of a lot of issues currently surrounding the economy. >> how do these blackouts that made international headlines just around the world, how they

are affecting your business? because the concern is, it's more expensive for your clients to operate their businesses, it's going to drive up npls, nonperforming loans, and affect your bottom line. is that something you are worried about? >> the first thing we are seeing, the profitability of the corporate sector is becoming under stress. you look at the performance of corporates, revenues are continuing to go up, but profit levels are comingdo cost of praugss and many other costs segueing up. that's the first stress. may not necessarily need those companies to become npls for banks, but it compresses cash flows. that's one impact. the second, actually are you seeing an impact on production itself. these are not able to operate as many hours as they were

planning, because of power shortage. and the third, the power projects we have funded, you know, would see kind of a delay in actual cash flow generation, because the last approvals are go. >> the first country to lose your investment status. you are required to put a quarter of your profits in indian bonds. how does that effect you? >> icici, we're very comfortable on liquidity and asset liability management. while we have some of our bonds internationally, which are due for repayment this year, we also have enough cash and cash flows available to make good those payments, so i don't think any of that will impact us in the form of liquidity or cash flow management or so on. >> but on profitability?

>> i don't even think on profitability. the bigger impact, the sheer ability of india to raise funds which includes banks like us, which includes competition, just becomes that much more expensive. so the next round of funding that will come will come at much higher rates. i think on future business, the growth gets impacted, profitability impacted. but on existing business, at least you know for banks like us, strong liquidity, this is quite okay. >> the rbi's deputy chief weighing in on the fear of being downgraded. and is india's economy as soft as the numbers suggest. >> we're talking about inflation out of the uk. those numbers break in just a few moments.

these are the headlines from around the globe, moderate fwroet in germany, stagnation in france, and not enough to keep the eu above the flat line.

>> india well below expectations. >> u.s. retail sales set to rise for the first time in four months in july, thanks to a pickup in employment. we have inflation out. july cpi has come in up .1% on the month. up 2.3% on the year, pretty much as we were expecting. and that's the core cpi. the -- it was forecast up 2.6% on the year. it was -- it was the forecast, and up 4%, up 3.2%, stronger for the rpi, ukcpi on the month, june, july, up for the first time since 2005. >> you can see the reaction, both cpi, rpi stronger than expected and sterling rising a

little more against the dollar, as you might expect, nick. >> i think that will be a short-lived bang. and i think the figures are not the start of a train. if anything, the country will face a deflation problem with the rest of europe, probably toward the end of next year. >> i want to -- this was lifted by airline fares, clothing and foot wear. the interesting thing, we had a very wet april, may, june, which would have depressed sales. so you would have seen sales coming in. interesting, the good weather coming out. that's what we have got higher clothing prices. weather variations in this particular number. the interesting thing, whether that is slightly higher, whether that changes anything higher. and a good article from posen yesterday. saying the banks should do a lot more than buying gilds. they should be looking at other

assets. are. >> i think we'll get to that. other unconventional ways of getting quantitative easing through to the economy, other than just buying gilds. i think these numbers will not cause any change in attitude by the bank. we saw the forecast over relevant horizon. what cancels those guys. these are just short-term blips caused by the weather. >> back by 2% on cpi by the end of the year? >> not an unreasonable expectation. close to 1% by the end of next year. >> this is recap. 2.6%. annual rate of inflation, forecast to be 2.4%. and up 1% on the forecast. flat on the month. core cpi, up 2.3%. lifted by airline fares, clothing and foot wear. and also house prices down, lowest level since june 2011.

and the group's monthly index, down to negative 24 from negative 22. the report again, reuter's forecast, calling for negative 23. a new stimulus package to jump start home building. the plan could ease rules that would require private builders to supplement big developments with social housing projects. would that make much of a difference, nick? >> anything can cause a rebound in house building. it's crazy the way first time buyers are exclusionist, a very difficult environment. house building, it's something like a low since the '20s or '30s in this country. just extraordinary. >> yeah, and it has been a big component of the weaker gdp. we have weak gdp and the bank according torc korccording to i

says construction not tallying with other things in the economy. >> that will be a focus, and the biggest sector is the services sector. until we see a boost in the construction sector as well, difficult for the economy to recovery significantly. as is the case in the states. the housing sector is critical. somehow in anglo saxon minds, the housing sector maybe has greater value. but it's key. well, inna india made headlines when it suffered the worst power outages. the deputy governor of rhett serve bank of india told lisa oak how the central bank is

viewing that failure. >> i would say the equivalent of a natural disaster of some kind. fortunately, there aren't the same human consequences that a storm or hurricane or cyclone would have. but in a sense, it is a sharp shock disruption and people lose lively hoods for a day or two, so on, you can make this up. it doesn't have a microcosm. it is highlighting several deeper problems with the sector, infrastructure. that is significant for supply bottlenecks and the way we're balancing growth. >> what is the worst performing currency in asia so far this year, the rupee. do you support it? >> the fact that we saw the rupee deappreciate shows that

capital is slowing across the board, across all countries. the global markets are taking a risk off position. when that happened, the deficit drove the currency dynamic, so we saw a sharp decrease. the combination of global factors, and we have put pressure on the rupee. our responsibility is to try to stabilize it. from november onward. all of which have been evaluated at centrally making it doesn't become a runaway depreciation. >> are you surprised how persistent the pressure has been, despite the measures you keep rolling out to support it? >> the range of movement we've seen in the last many months or month and a half, has certainly been much narrower than we saw before that, and that would suggest that the combination of measures that we're taking have helped, contributed to stabilization, but also in the

last few days, we've seen some revival of capital flows as global conditions have pushed markets a little more toward risky positions. and obviously, domestically, a certain sense of as you call it, renewed urgency that seems to be showing up in -- in what policymakers are saying and doing, so the combination has helped to us push it. in fact, the last two days, we've seen very substantial increase. that's -- that's too early to judge a train. what's important from our point, we've done things that have helped to stabilize, and we still have a substantial reserve left to tie to us what might be a prolonged state of global uncertainty. >> india's inflation figures, unexpectedly weakened in july. wpi inflation, climbing about

6.9%, well shy of the 7.9% forecast. they have factored in weak prices from monsoon season. the rbi unlikely to cut in september. the central bank sticking to its hawkish stance lately. and the related risk of price pressures. and the ten-year bond rallied, while we recovered from earlier losses folng t data. joining us to make sense of all of this is the market economist at mizhou bank. thank you for being with us. do you agree with those saying despite the weaker figures, the rpi is expected to stay pat? >> i would agree with those partly at least. i agree these figures in isolation should not change the rbi stance for what the biggest myth, core inflation, underlying inflation was nudged up from 4.8% to 5.4%. and surely, this highlights the

fact that one of the facts that inflation is the key in some sense. and just to get back to the figures, think it was the down tick in the rate of inflation of fuel, which offset the manufacturing. nonetheless, come september, october, the rbi could revisit and perhaps rightly judge, and they can cut rates. the main point here, there are inflationary pressures that do come on. food is definitely one of the key risk factors that the rbi is particularly concerned about. fuel could be one of them. the down story, the downside risks have been exacerbated quite a bit and given this cue of risks, the markets are mixing the cues. nonetheless, i think that a lot

of the growth tradeoff, growth sectors if you must, are priced in for currency type policy. so not point of tightening it further. and growth position will loosen. >> can you talk about the inflation basket in india and how important food is, how much you expect to keep upward pressure through the end of the yeefr, into early next? >> absolutely. i mean, surely for low-income country like india, food is perhaps more important than it is reflected in the wholesale price index. in the wholesale price index, the rating of food doesn't go as high as 40%, 50%. closer to 25%, to 30%. if you want to take a consumer basket, surely the rates would go up to 40%, to 50%. food inflation is a key risk for india. and going forward, food prices are accelerating much faster, we

could see inflation get much faster, and the situation could get quite precarious. we saw record rises in food prices going into the third quarter, so that would offer little -- some consolation at least, that rate of inflation should not pick up too dramatically. we are not expecting it to be 10%, 9%. it should stabilize before coming off later in the year. >> is it really the case, though, that the rbi has a tide and we've seen that massive fall in the value of the rupee over the last year or two and they need to keep rates high to stabilize the rupee? is that the case? >> to some extent it is the case. they want to stabilize the rupee that is for sure spot on and to some extent, also assessing how overall, conditions which assess

a weaker rupee aallow for them to keep rates higher than they ne necessarily need to be. 8% is exceptionally high. no matter how we look at it. businesses are feeling the brunt of it, especially in the economic downside. the rbi is not so much tight as they choose for it, almost as a gambit, partly because they want to force the government's hand to do more from the government's side of thing. >> thank you for your time. remind you where we stand with european stocks. slightly higher early. and it's up .8%. and 3% higher for the ede x volume. >> light once again. >> and we can take a look at what's happening across europe. spain, a little bit lower now, 6.88%. after being closer to the 7% market.

meanwhile, gilds and bunds, yielding, 1.55, and 1.44% respectively. >> an auction needed to cover current cash needs. the greek government facing a bond redujs due on monday. and five years on from the start of the financial crisis, investors playing closer attention to the macup of banks' balance sheets, especially the debt, such as central bank funding. the level of asset encumbrance mixed across europe, and banks could be trending toward overdependence on such assets. joining success bridgette gandi. nice to see you. just explain, when we talk about sort of encumbered assets what exactly do we mean? >> it's a technical term. we get crazed using it.

it's effectively assets on your balance sheets, have you assets and liabilities, and those assets are pledged. it's like pledging anything really. >> and the place you need to get loans, in other words. >> you pledge to the ecb, pledge to anybody who is lending to you for a specific purpose, and one of the difficulties or nervousness we're seeing for those who are lending money to banks that don't have these pledged assets is increasingly these assets, being pledged to others, and that effectively means if you are sort of at the bottom of the pecking order when it comes to paying out. >> this is a symptom of some degree of the post credit crisis world, where there is less and less faith in unsecured lending and more and more banks are requiring collateral and these assets. a sign of lack of confidence. >> that's right. that's one point, and i think the important point in this, though, there is a change in perspective from bondholders as

to government protecting in the end. so what happened now, because of the taxpayer money that kneed to be put in, they are trying to find another way to do that. and traditionally we thought equity holders would lose their money. but senior bondholders in europe, always been bailed out, almost always been bailed out and that won't be the case. >> the reason why this matters too. in the case of default that would leave fewer assets left for bondholders to recover. as you point out in the report this means it's only relevant in the case, extremely rare over the last couple of years. a 1% actual default rate. >> exactly. our data shows and i think we have very specific data the rate which is in most of the major european banks, in the sectors, they have defaulted globally less than 1% of the

if you don't default, it doesn't matter if you are secure or not. you will get paid. we have date which shows you haven't been reported, would you default? it's ten times as much. it means you are more at risk. >> without government support, there is a lot of lame ducks walking around. is that what you are saying? >> only if the bank isn't holding up on its own. then the focus turns to who are the stronger banks, who are the weaker banks? and because you are starting to really put some emphasis onto how much you will charge on the funding side for the stronger banks versus weaker banks because a self-fulfilling prophecy, it is too expensive for them to borrow. >> it doesn't change the picture of who is strong is or weak as underscore it. a lot of banks whose assets are

encumbered double the stronger banks. it doesn't say to investors, a different picture emerges when you take this into account, this is an additional reason why banks are so vulnerable. >> that's right. it underscores it, it spirals, so it -- exactly it does. what's happened now for certainly the medium-sized central european banks, they are paying more to borrow. no one is lending to them, and it makes the whole situation much worse. >> 28% is the median figure. more with bridgette in a couple of minutes. >> despite attempts to rescue european banks, some are calling for another lifeline from the ecb. [ male announcer ] the perfect photo... [ man ] nice!

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porscha global sales up 60% on the year, to 12,091 cars. germany up 31% and china, up 18%. doing expatrolmtremely well. >> that's incredible, isn't it?

>> i don't know the total numbers, but the percentage in germany. >> more saturated market to have almost twice as fast growth as china pretty interesting. >> you don't see that in many markets. difference -- normally the other way around. isn't it? porsche chart. have we got that? not bothered. am i bothered by porsche sales says the stock price. we were a little more bothered about gdp. 0%, no change from the previous quarter. carolyn is in bordeaux. i changed my consumption in june from bordeaux to brovance. i helped that part of the region basically from like september to june and then i -- and then i'm on to the rose. >> yeah, thank you so much for

that. but i don't think it really makes a difference to this economy. you are right, you would think that bordeaux's economy is somewhat shielded in the overall economic malaise in france because of wine making. but we ventured out and spoke to people on the streets of bordeaux. and they are forced to tighten their belts. >> it's different. it's different for two or three years now. it's not so easy because the price increases. >> we can see that customers are -- they care about money. that's the main impact really. they just choose bottle of wine which are less expensive. people that used to drink really expensive wine. >> i want to go into the public sector, and the employment

decrease in this part of the employment. >> so, ross and kelly, you can see consumers trading down on bordeaux wine. in terms of gdp numbers this morning. marnl naturally better than expected. but no reason to pop those bordeaux bottles. before it gets better it will get worse in the second half of the year. third quarter, bank of france expects a contraction of 0.1%. back to you. >> okay. carolyn, thank you. moving on now. spanish -- according to a fresh survey from fitch -- according to a fresh survey from fitch, 82% of investors say european banks need another round of rtlo financing from the central banks in the next couple of years. spanish banks continue to rely heavily on ecb funding, and according to government figures out this morning, spanish

lenders' gross edp borrowing ticked up from july, from 365 billion euros in june. >> what is your thoughts here on the -- the reliance now of spanish banks going up on ecb funding? >> not surprising ally. the two largest spanish banks, generally, the only access these banks have to wholesale funding is the ecb borrowing. and until they actually reduce the balance sheets. they have the assets down that need funding, they will continue to have to borrow this much. >> how much more shrinkage do we need for banks to get them back to equilibrium? >> a lot depends on what happens with the bad assets. bad asset transfer going on as

well, as well as that actually helping them out in terms of capital it will reduce funding needs. and then after that, i think you are looking for two or three years of natural shrinkage. but at the same time, they are trying to get the economy stimulated. so how that will work is -- >> how do you think -- if a bank holds spanish paper, how do you rate that? good asset or bad asset? >> good question. at the moment if they are holding spanish paper and can pledge it with the ecb, get funding that way, that helps provide liquidity and relying on ecb funding is not good news for any rating. >> one does reconsider, this is actually a huge ponzi scheme. the rtlo accepts spanish, in this case, peripheral government bonding as clollateral, and the banks buy more peripheral debt.

it is very circular. >> there is some of that going on, and the interesting thing is that they are borrowing at less -- borrowing at 1% of the rtlo and getting 6% or 7% on the spanish government issue. that gives them a profit to unwin bad assets they've gotten. some of that going on. the ecb and policymakers are aware of that. trying to eliminate how much of that goes on. until they sort out the general problems with the spanish banks, difficult for them to do anything else. >> bridgette, great having you on today. nick, good to see you as well. and row say se or red? >> red. always. better for you. both german and french growth numbers better than expected for the second quarter. is in enough to help overall gdp? we'll bring that you, as it crosses the wire, next.

welcome back to "word wide exchange." i'm kelly evans. > i'm ross westgate. >> gdp in europe's biggest economy are a touch better than expected, but not enough to keep the economy above the flatline. a big jump in the airline ticket price sends the sterling higher. >> and we see a rise in retail

sales in the u.s. due to a rise in employment. >> and groupon stock, after the daily deal site reports disappointing second quarter figures. gdp numbers and -- let's deal with gdp pfigures. >> loo as though second-quarter gdp for the eurozone that rank for .2%. bang on as expected. down 0.4% from a year earlier. the annualized pace of decline for the area as a hole, 0.8%. on the quarter, a drop of 0.2%. >> it's interesting that the german and french numbers are a little better than expected, shows they are way down by

figures elsewhere. and this snapshot, the economic sentiment, down from july, worse than expected. current conditions index, 18.2%. and that's as expected, and 18. the indicator declined signals and analysts expected german committ economy to cool. the investor sentiment index is minus 25. and slight improvement in the german gdp number this morning. people think that actually it is going to invest. and it will worsen into the course of the year. alec young, global equity strategist at capital iq, joins us for more. the question here, alex, what we have priced -- if you are an investor, what we have priced in in terms of growth. >> well, i think in terms of the european situation, i think today's numbers are pretty much

an upside surprise across the board. germany and france came in a bit better than expected. and those are the two biggest economies in the region, and the aggregate numbers in line, but think i people were really bracing for misses today. inline numbers, tantamount to beats. as far as the miss, i think that's completely priced in with the prices in the asian economies for the zew. investors are bracing more from the fallout of what's going on in europe and weaker trade opportunities with eamericaning markets. at this point, a lot of this bad news has been priced in by the swoon we saw in equities in the spring. and now markets are really looking ahead to better times in the future perhaps on the bank of policy stimulus and very much focused on does the market have it right in terms of the benefits of stimuluses, or is

the market overreading that? in terms of economic weakness currently, that's factored in and really more about what can the central banks do about it? the focus is now is very much more on liquidity bets than it is on the actual numbers we're getting. >> that's a good point. we now expect greater steps from the ecb, greater steps from the fed and from the pboc in china, as they deal with their slowdown as they alluded to and talked about the trade data. that question is the important one. are we getting overly optimistic over what those central banks can achieve? >> i think it varies, depending on which central bank are you talking about. ironically, we think mario draghi has laid out a very credible roadmap for defusing the crisis in europe and getting banks in better shape. laid out a roadmap, whereby if the spanish government requests

officially help from the new esm bailout fund, that that would be conditional. wouldn't be any handouts, no loans from the asm to spain would be conditional. they would be buying in the government auction market. if the ecb sees that, we'll step into the secondary market and have further support to spanish bonds. th's a credible plan. not going to see any subordination of private-sector bondholders, which we have in the past. it scared away the private sector, that was an important step. a credible framework. political hurdles, spanish have to officially request help from the esm. we think the political hurdles are manageable. they do exist. the german constitutional court has to approve the constitutionality of the esn. that will happen on september 12th. there are -- >> we think it's a great -- >> we have a slight problem. there may be a delay in the

constitutional court ruling in germany? looks to be another challenge. can we weather that? will that be a disappointment? >> i think we can weather it. a lot of people expecting there will be very strict conditionality to germany. the fact it's being delayed. part of the natural give and take, getting germany on board, never been an easy think, so i don't think markets will be that surprised a little bit of push back, ultimately, the ecm is ratified in germany, we think it will happen. really a golden opportunity for politicians that they have been given by draghi, not to solve the crisis with a silver bullet. certainly to buy time, to defuse the stress in the markets, bring yields down. seeing that happening already, and we would urge the politicians to really seize this opportunity, because they may not get another one. >> yeah, that's -- that's the point of which it all potentially falls down, is when

you leigh it in the hands of the politicians. good to have you on. plenty more to come from you. we'll be back with you shortly. kelly. >> let's get a quick check of markets. not a huge reaction to the gdp figures. dow jones will open higher by more than 30 points this would potentially give better tone to the markets. ten of 12 last mondays, dow has closed lower and we're trying to add five points to the nasdaq. and s & p pointed higher, 1405 is the level people have been watching. anything over that 1400 mark. and european markets, mostly green behind me, and that's due to the better figures from france and germany, even if the overall tally isn't that great.

about .4% from the capcaron and even the ibe x is adding. >> and ten-year bonds, adding 10.2%. and still below 7% at 6.83. and ten-year slightly higher. ten-year yields still below 6% at 5.91. g gilds higher, after inflation unexpectedly stronger, and the headline, annual cpi up to 2.6%. we thought it might trend 2.3%. clothing playing its part. very wet in april, may, june. that meant sales came early and with better weather in july, a bit of a snap back in that, as far as currency markets, and as a result. went higher earlier on against the dollar. below the 1.57 market. and dollar/yen, steady.

euro dollar firmer, back over 123.63. that's where we trade in europe to bring you up to speed of what's happened in asia, we have si x uan from asia. >> thanks, ross. asian numbers tracked higher out of key economic data out of europe and and the u.s. helped by oil majors and banks. other financials like brokerages and insurers extended losses and gloomy earnings outlook. hong kong shares followed suit, gaining for the first time in three days, up 1.1%, led by china mobile and other blue chips. nikkei up .5%. blj minutes easing hopes as some members wanted to keep all options on the stable to boost economy. and the kospi, strong 1.3% had of ahead of its holiday tomorrow. and shipbuilders discount

heavily discounted ships ordered two to three years ago during the financial crisis, and they are down heavily. and up 0.2% for australia. and national all centrala bank fell. and india up half a percent. back to you. and what's on the agenda in asia tomorrow? china posting investment data. and twe'll get tsingtaao and sia corporate numbers. >> and miriam webster has unveiled ten new words. to toxic assets and tipping points

were added. as well as man cave and bucket lists. and webster's linguistic makeover a sign of the times? it seems so. what do you think? should any additional words be added? do any of those deserve to be added? get in touch with us by e-mail. worldwide@cnbc.com. tweet us @cnbcwe x. ross. >> is there a female man cave? or the home is the -- maybe the entire home is -- belongs to the ladies. still to come, groupon's latest earnings spook investors as revenue falls. we'll break down the numbers when we come back.

and if you are just joining us, a recap ahead of the u.s. opening. >> u.s. futures showing green arrows this morning. not a huge move. dow jones industrials trying to open higher at 30 points, and s & p and nasdaq adding five or six points. >> group i don't know down to an all-time low. this is on disappointing second-quarter figures.

julia bjorsten has more. >> there are concerned about slowing growth. revenue grew 45% from a year earlier to $568 million. down from the first quarter's 89% year over year growth. earnings per share, a nickel better than expected at 8 cents. the company's outlook for the third quarter, right in line for wall street's targets. perhaps the largest factor behind the stock's decline, gross billing declined 5% from the first quarter to the second quarter, falling below expectations. the problem? groupon's ceo andrew mason blames europe, saying european customers aren't as willing to spend for high-priced coupons like laser hair removal. the company is moving to offer lower price point deals. growth in north america is coming largely from groupon

goods, the product sales division which has a new category of direct revenue. the ceo stressed on the call, the company is counting on technology to drive efficiencies and has improved customer acquisition costs and grown the number of transactions on mobile devices by more than a third, in the past year. but wall street investors still don't seem to think groupon's stock is a deal. from cnbc los angeles, i'll julia boorstin. >> alec, how much of an excuse is europe becoming for corporate? >> pretty b we have looked at contentious data. back to the third quarter of '09. strong double digit profit growth. it slowed to 7.5% in the quarter. in the second quarter, 90% of the companies reporting, looking at earnings up less than 1% on a

year over year basis. a big slowdown in earnings growth. revenues up 2%, europe the single biggest negative that companies are speaking about. >> what do you make the group i don't know sto-- the groupon st specifically? i am looking at the way ipos have gone this year? >> i think with regard to a lot of these newly mint ed technoloy ipos, they can grow very quickly or can be cannibalized very quickly. and they are not analogous to the fate of the large blue chip companies that tend to trade in major indices, so i wouldn't associate either extremely positive things that are happening if a company is executing on it's growth or extremely negative things of companies being cannibalized. wouldn't extrapolate that to

your typical blue chip stock. it's a very different kettle of fish. >> interesting, we haven't seen companies just studying european weakness, we've seen currency headwinds. how do you typically read those? unusually large swing factor? any unusual characteristic about that? >> generally with currency, look at the dollar-euro, also a dollar index, a trade weighted basket. the dollar-euro probably the most important. most american companies, multinationals, deriving more sales from the eurozone than any other single area. what you need is a big move in the currency. we're seeing that for the first time in a while. second quarter of 2012, we saw the dollar up 8%, even bigger gains against the euro.

comparing the second quarter of '11 to the second quarter of '12, you will see an impact. smaller moves not as big of a deal. when you see a number that big, it will have an impact. in fairness, a lot of companies do hedge. a lot of companies that are selling in europe will be sourcing in europe. not seeing as much of the negative currency translation. generally speaking, you get a move that approaches double digits in the dollar, it will be a major headwind for american companies. >> alex, stay with us. we'll be back with more. here are the headlines. euro gdp better than expected. >> and u.s. inflation rises in july. >> and u.s. retail sales set to rise for the first time in four months.

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a look at retail sales in a second before that, we have this auction out of greece, sold three-month t-bills, just over 4 billion, and the yield on that 4.43%. not bad. >> not terrible. >> 4.4% for just over three months. >> switzerland had a similar

auction, paying negative 0.5%. a bit of diversity. >> i'll get my money back from greece. t-bill doesn't give a structure, right? >> 4%. where else can you get that? >> why wouldn't you? u.s. retail sales for the month of july are out later. economists are expecting a modest rise following a half percent fall in june. how is the overall retail picture shaping up state side? positive aspects, and confidence edging higher. obviously talking about increased back-to-school spending and looking for chain store data and they are seeing strength in clothing, apparel. as you might say, kelly. >> down side here. >> at the same time, the pros. there are these cons. retail sales began prior to this report were down for three straight months, much more weakness than people would have expected back this spring in terms of the consumer. meantime, employee average hourly earnings up 1% year on

year, employment picture has operati brightened, earnin brightened, we are seeing some softness. mcdonald's, a recent to be somewhat cautious as we head into this report later this morning. retail shares have done okay. up 16%. that compares with just about 11% with the broader index, so, ross, 5% is about performance, not necessarily in the gloomiest environment. let me join you. >> this plays into sentiment. >> well, i think given the concern, not only internationally, but in the u.s., about softening growth,

it's very low in terms of investment expectations in terms of anything to do with the consumer. investors aren't expecting a great deal. we have had three negative months. i think overall, the problem the job market still very structured. a prolonged period with unemployment above 8%. historically, a very high reading, and we look at all of the political uncertainty. we think it's keeping employers on the sidelines. consumers, hard for them to go out and splurge in this environment. a lot of insecurity about job prospects and that tends to lead people to save more, subpoena less. the good news, we think a lot of that is factored into the economist's expectations for retail sales, so we do have a low bar, and hopefully, you know, companies will be able to exceed low expectations. >> alec, possible that price

willing be a factor here? retail sales are a phenomenal figure, an increase on the price of gasoline that could boost the headline. >> absolutely. people will look at that gasoline number. harder to see an increase in those numbers. but you're right. nominal figures. >> keep that in mind for discounting activity for the back-to-school season. a key read into whether retail having to mark things down to move merchandise. >> absolutely. that's one of the challenges will you deal with the consumer, more nervous, more gun shy. really only spending on things they need versus the thing they want. harder for the retailers to get that pricing power, unless you are talking about the really high end, where there is less sensitivity. >> the agenda in the u.s., aside from retail sales figures,

several retailers report. home depot, estee lauder, michael kors and t.j.x. which owns marshal's, home goods, and t.j. maxx. >> we'll ask a form every top economic adviser to vice president joe biden about u.s. politics, next.

welcome to "wordwide exchange." just tuning in, i'm kelly evans. >> and i'm ross westgate. >> german's economy grows, but not enough no boost overall gdp, which shrinks 0.2%. >> and now drops of four straight months in august, and economic conditions will weaken. >> and investors can get a groupon on groupon stock. disappointing second-quarter results. you u.s. retail sales set to rise thanks to a pickup in employment. well, this morning, u.s. futures continue to sort of creep higher. we see the dow jones industricl

higher by almost 40 points. nasdaq climbing eight points. and we're looking for an open in the green. that would follow the mood across europe. the borse here, all to the upside. ftse, adding .6 percent. and the dax, up almost a percent. and cac, up .7% and ibe x up by almost 1%. >> the new republican presidential ticket will continue outlining their message to voters. mitt romney in ohio, paul ryan in nevada and wyoming. president obama will be in iowa for the second straight day. and chrisstie will give the keynote speech at the republican national convention. >> americans maybe aren't too excited about romney's choice of paul ryan as his running mate.

"usa today"/fwgallup poll belie he's a fair or poor choice. it may be because ryan isn't widely known nationwide. the poll, conducted sunday, also finds 17% of people say they are more likely to vote for romney in november now that romney is his vp pick. joining us for more is jared bernstein, senior fellow at the center for budget and economic policies. former policy adviser to vice president joe biden. thank you for getting up to join us this morning. >> my pleasure. my pleasure. >> how much should we read into this gallup poll? >> not too much. those numbers will be jumping around. they are already jumping around as is typically the case. a representative of congress from a small district in wisconsin, even if he's someone with the kind of profile of paul ryan, in d.y., not known very

much nationwide. and that's what polls are showing. they'll be moving in the next few weeks, which direction no, one can tell. >> he seems to be the right pick to energize the base. there are reports of romney/ryan attracting crowds at fund-raisers, that kind of thing. is it a risk for democrats here? >> i don't think so, in the sense that the base really didn't have anywhere to go anyway many people looked at this choice and scratched their heads. boy, the people who will make the difference in the ultimate outcome of this election are neither side's base, it's the independence in the middle, and kin of the rule of thumb of american politics that if you are appealing that intensely to your base, you risk turning off the kind of independence in the middle. so i think many view this as a somewhat risky choice, but others say that governor romney needed a risky choice because he

wasn't moving in the polls. >> paul ryan's budget plans and mitt romney kind of completely signed on with them or retwined his own policy. how much of a hurdle, how much will that define the rhetoric over the next couple of weeks? what do you think is going to take on the most focus? medicare issue, taxes, fiscal cliff? >> it's all of the above under the rubric of the role and size of government. we have a plebiscite, a national referendum on the role of government in our lives and our society. in issues like retirement security. medicare, guaranteed health benefits for seniors, the way it stands on the books now, under representative ryan's plan, this becomes a voucher, much more kind of private sector oriented solution to the challenges of medicare, whereas with the president under at fordable care act continues that medicare

guarantee. that's something that democrats are hitting very hard on in particular in places like florida, a lot of seniors depend on that guaranteed benefit. >> it may be a tough issue. but it is a message that resonates with people. the idea that fundamentally, the current structure of programs isn't sustainable, i guess the question is to what degree that does attract some independents who may be comfortable casting a vote for that in this election? >> i think you've hit the nail on the head there. we have seen this morphing over the cast pouchl days. if you are going to attack ryan/romney on medicare issue, in the sense you're defending status quo, which is unsustainable. what the president can legitimately say, no sh, in faci saw through landmark legislation, the affordable care

act, very much intended to create a much more sustainable medicare program, but retain that guaranteed benefit. i do believe that's where the debate will be held. >> let's bring you in, alec. is there a wall street -- you heard what jared had to say. is there a wall street consensus over this? >> difficult to get a consensus when are you dealing with something as contentious as politics. everyone has a view. in general, the street likes the pick. we know the fiscal cliff is a huge challenge that we're facing late this year, early next year. and ryan's clearly got experience on the hill. can complement romney, like that. and i think wall street recognizes that obama's spending is in no way sustainable over time, and romney and ryan have the guts to tell that to the public.

democrats come in with fearmongering. the romney/ryan solution doesn't bankrupt our grandkids and wall street likes that. people who are buying government bonds. and hopefully, they will succeed in spreading that message to the average voter. >> i would argue what wall street or what markets really like is growth. in fact, the risk here despite sort of the headliner that appealed to people who don't want these large debts and deficits nevertheless, if they do things significantly rein them in and hurt growth that will create more headwind for risk assets. >> right. it's a short term versus long term discussion. in the short term, wall street wants to avoid the fiscal cliff which would push us into recession early next year and most people expect a short-term, one-year extension of many of the bush tax cuts. having said that, from a longer term perspective, unless we want the bond market vigilantes to

drive interest rates through the roof, most financial professionals understand that we're not on a sustainable path. so in the short term, we don't want to kill the recovery. on the other hand, we need to get about resetting the long-term entitlement baseline or we're going to have serious problems in a few years. >> jared, how do we do that? >>ith interesting. alex, i'm bev enjoying his analysis this morning. you hear the st. thomas aquinas version of fiscal policy. grant me fiscal rectitude, but not yet. kicking the can down the road on the fiscal cliff. basically pushing everything back a year or so, and that probably is what you would e. under ryan and romney. the danger there, you say we'll revisit this in another year, and knowing this congress, even with the kind of fiscal

rectitude they report to have on the republican side, they'll keep kicking the can, that's my fear and the fear of many other budget analysts. >> the obama administration would be doing the same thing in different clothing. >> no, not at all. obama administration has been very explicit in allowing the high-end bush tax cuts to sunset. it's the top 2%, but $860 billion in deficit savings. if there were no difference, they would have resolved this thing already. that's what they are fighting about. >> what i'm arguing, they are fighting about the way to go about it, but both are ultimately going to do something to stave this off a year or so, without dramatic reform. we have to leave it there. jared, thank you for joining us this morning. alec will stay with us. >> no problem. >> ross. >> it's one of those conversations that will take us all the way through to november and we'll keep going, even after the presidential election.

>> oh, joy. >> on cnbc.com, that discussion, can paul ryan help romney win continues. will he be more of an asset than a liability? also still to come, france narrowly missed slipping back into a technical recession. karen in bordeaux. >> which you know a thing or two about. >> but i'm consuming provance at the moment. >> we'll be right back.

welcome back no the program. miriam webster, unveiled 100 new words to its collegiate dictionary. making space for financial crisis jargon terms like systemic risk, underwater as it relates to mortgages, toxic r k risk. others made it in as well such as man cave and bucket list. is the linguistic sign of the times? what new words do you think should be added? >> morris says that seinth should be added. other says that these are

trivializations for the uneducated masses. i suppose aha moment is a perfect example since no one knows greek anymore. eureka will disappear from the scene. george, are you a man after my own heart. e-mail us or tweet us. let us know when you think about these or anything else we've been discussing on the program this morning. ross. >> that means you would be in favor of gre x ic. it's greek, what's wrong with that? >> absolutely not. george might like the greek term no termnology. if that makes it in, i'm really done. >> we'll see if they eventually add that to the lexicon of words. thanks, kelly. european gdp data out today. a little better than expected. .3% gdp second quarter. we were looking for .2.

france came in flat. most forecasting thought it would be minus .1%. avoiding recession there. eurozone came in minus point 2% quarter on quarter. so let's get more on the breakdowns of these numbers, whereas slightly better tone come from? we have silva in frankfurt, but first, carolyn in bordeaux. carolyn, most people think of bordeaux as fields of grapes and wine production, are you standing in front of the port. why is that? >> that's because the south is not specifically known for its industrial side. but in bordeaux, one of the biggest industrial sites in the south. helping gdp numbers in the. if it helped the numbers in the second quarter, we don't know. those numbers better margealy than expected. boosted by investment and public consumption. household consumption weak on the quarter, down 2%, these numbers nothing to be too

jubilant about specifically. the bank of france said last week we're expecting a 0.1% decline in gdp in the third quarter. but from the political side, maybe a tiny success for president olange, who, by the way, celebrates his first 100 days in office today. on vacation, but slightly better than expected numbers should definitely help him. by the way, his approval numbers have gone down significantly. now at 46% after those 100 days. silva. >> frah merkel back from holidays and right back to crisis management mode. data on the table. slightly better than expected. up .2% quarter on quarter. let's not kid ourselves. these are economies that are basically stagnating, whether .1 up or down is a moot argument right now. not an economy that has any

dynam dynamics, same with the german economy right now. on the plus side of the fence. we don't know details yet. we don't quite know what carrot of the stick -- how well exports fared and what the breakdown is. the figures out over the past couple of weeks. exports through the eurozone are floundering. no big surprise. we know that exports to the emerging markets are booming. they come down from highs. big question, the german consumer can keep it up. but they are slightly tightening the purse string. >> silva, karen, thank you, indeed for that. a little wrapup. >> if you are just joining us, watching "world wide exchange." these are your headlines. eurozone gdp shrinking, despite germany posting better than expected growth for the period. >> economic sentiment in germany dropped for the fourth straight month in august. >> u.s. retail sales due 8:30

a.m. eastern, set to rise for the first time in four months.

now, good reason. if you are not already watching cnbc tomorrow. >> what are you doing? >> exactly. cnbc all day tomorrow, you especially want to tune in. along with networks of nbc universal. an unprecedented look at the drought of 2012. a special half hour dedicated to the situation and the impact on companies, the nation's farmers and all of you who live in north america. don't miss that. meanwhile, european stocks ahead of the u.s. open, trending slightly firmer as they have been for the last couple of hours. up half percent and a little more across the board. >> same story for u.s. futures

adding to earlier positions and paring back a bit. not too much, down a point by 28 points, despite weak gdp pfigurs out of europe. out of the agenda in the u.s., see if anything can turn the trade around or add momentum to it july retail sales, 8:30 a.m. eastern, expected to show .2% headline gain, .3% excluding autos. and july ppi expected to rise .3% on the headline, and 2 .% on the core minus food and energy. and at 10:00, we have business invento inventories, and we have home depot, estee lauder, michael kors and tj x reporting. and shares of groupon down nearly 20% after hours trading, on disappointing earnings results.

the missed estimated and revenues driven mostly by groupon goods, the low-margin business that sells discounted items like jewelry and appliances. up 2% sequentially and demand for daily deals slowed due no part to weak european economy as consumers shied away from discretionary spending. take a look at groupon shares this morning in frankfurt. lower by 19%. >> a new travel adventure that google will buy. it could give the search giant access to the travel expertise and extensive hotel database, seen a competitive bid to a on industrial leaders such as expediaand trip adviser. >> boston fed said 78 prime money market funds took support, and at least 20 of them would have broken the buck with the net asset value falling below a dollar a share.

a taxpayer backed guarantee program was set up after a major fund set up a run on its assets. mary shapiro is trying to introduce reforms for the $2 $2.billion money market industry. >> and all aboar the whale watching cruise. how investors are navigating choppy waters when large fund managers meet dead lines to report with the f.e.c. later today. we just had to find a way to get a whale picture in. the producers find it more amusing than we do. markets will look for the likes of warren buffett and berkshire hathaway. warren's war chest is expected to show a loss. >> still us with, alec young, global equity strategist. as we turn to the u.s. trading

session, and start to head into retail earnings season, where do you like -- how does that sector stack up compared to the performance across the rest of the index? >> certainly consumer discretionary houses retail stocks, and consumer discretionary sector one of the strongest year-to-date. overweight that sector throughout the entire year. downgraded it to neutral about a month ago. replaced it with energy, and since then, energy done much better. given a lot of concerns about the consumer, we think there are better places to make cyclical bets. drop in oil prices led analysts to slash earnings forecast for the energy space. we think it's a cyclical area, where the expectations are realistic and we can get over that lower bar. there may be expectations a little too high for some of the retailers and consumer discretionary more broadly. we prefer energy or technology if investors are looking for

cyclical exposure. >> a lot more multinational companies. a lot more s & p companies, where they are reached the tipping point. 50% more earnings outside there outside the u.s. how worried should we be by the trade data out at the end of last week? they will stem up to the base of the stimulus. even so, growth won't meet what companies are expecting. >> right. think i clearly in the short term, markets are focused on the stimulus, looking at the weak data. troubling, exports up only 1%, new loan growth in china, disappointed pretty badly. a pretty big miss. no sign that the easing to date is doing much good. stimulating lending. one thing about the chinese he'sing campaign and how successful it may turn out to be. tremendous overcapacity in china, especially in the

manufacturing and real estate sectors it can inhibit the ability to stimulate growth through easier monetary policy. china is something to watch. europe is stabilizing, and i'm more concerned about china going forward. >> do you think that's priced in, alec? we look ahead toward the end of the year, will estimates have to keep coming down, or are they pricing in weakness? they have to keep coming down. we're looking for a big rebound at 10% earnings growth in the fourth quarter, up from flattish readings in the section quarter. earnings are somehow miraculously supposed to shoot up 10%. think they are too high. analysts will continue to trim numbers down and companies beat the lowered bar, that's the trendory the last few quarters. i don't think much more slowing is priced in on china. i think 7 to 8% growth is priced in.

probably okay for this year. i think going forward risk could get worse and it's not priced in yet. when people talk about longer term concerns, i think china is definitely something you have to focus on. >> all right. good to see up thank you for joining us bright and early. alec young. talking about webster's earlier. aha moment. it reminds me, a norwegian group called a-ha in the '80s. >> do you think they should get credit for that? >> i don't know. people, if you remember aha, they had a couple of big hits. >> if that was an aha moment of yours, let us know. that will do it for us. "squawk box" up next. countdown to the action in the u.s. and retail sales as well. thank you for watching today's program. we'll do it all again tomorrow. [ male announcer ] the perfect photo... [ man ] nice!

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good morning. today's top stories, groupon reports a profit, but shares tumble on a revenue miss. the government releasing data on retail sales and producer prices at 8:30 a.m. eastern. and new jersey governor chris christie plans a major role at the gop convention. it's tuesday, august 14, 2012. "squawk box" begins right now. good morning, and welcome to "squawk box" on cnbc. i'm andrew ross sorkin. becky quick off this week. let's get you up to speed on the headlines er