hello and welcome to today's edition of worldwide exchange." i'm ross westgate. these are the headlines from around the world. markets feeling the merkel impact, banks and auto stocks lead the way after the chancellor vows to save the euro. helsinki is planning for the break up of the euro. >> asia's beer battle --

heineken is preparing for. >> and short fallout from the violent clashes at its mine in the south africa. okay. very good morning to you. no kelly. you got me solo. global shares have been up after merkel said germany was committed to do anything necessary to save the euro. she's voiced support for the ecb mario draghi to contain the debt crisis. >> what the president of the

european central bank mario draghi said is something that was repeated time and again since the beginning of the greek difficulties more than two years ago. we feel committed to do everything we can to maintain the common currency. the european central bank, although independent, is completely in line what we said all along. >> here we are, one hour into the trade day. we have the green. pretty flat for the ftse 100 and xetra dax up over 3% for the month of august. slim gains this morning. not a huge reaction. the ftse xetra dax up marginally. this market has done very well since mid-july. as far as bond markets are concerned we're seeing gilt yields steady. ten year treasuries i way from

that 1.85. yield ten year spanish yields this move back down to 6.5%. still very elevated. we've moved away a lot more from that 7% mark on those comments out of angela merkel. ten year bund yields up. as far as currency markets, euro/dollar 1.2349. pretty steady. we did get a rally in the euro overnight. dollar/yen up to 79.37. aussie/dollar is down. so let's get over to singapore. >> thanks, ross. asian markets mostly finished higher. merkel backing ecb calmed market

jitters. many expect easing measures. the shanghai comp gained. gains in banking shares on the back of those were offset by losses in developers and consumer stocks. hong kong shares fared better. shar nikkei climbed to close out its three month high. exporters extended gains on the weaker yen. the economy is facing some headwinds. in south korea ship builders with europe's exposure talk about merkels remarks. we'll get a bit more. aussie market added 0.9% led by

energy and banking stocks. lastly india's sensex up by .1%. with an interview with cnbc this morning, a member played down newspaper reports that finland is preparing for a euro breakup. they said it had to be prepared for the worse. the company's minister told "squawk box" today that his country is 100% committed to the euro. >> there is a lack of trust among member states a lack of confidence and we need to rebuild that trust. in order to rebuild that trust we need tighter rules for the future and the collateral requirement, which is a footnote in this whole game is part and parcel of it.

what we need to start focusing on right now is to get tighter and tougher rules. >> so if you want to get involved, big subject of debate at "worldwide exchange". tweet me @rosswestgate or cnbcwex.com would be those additions as well. don't forget plenty more to come up on today's program. we're going to be talking about domestic consumption in india. let's get out to mumbai. would you pay more than $10 million for a car? some enthusiasts might at this weekend's classic car event in california. find out which motor is catching everyone's interest. we're going to be in nashville, tennessee at 5:30 eastern. speaking to tasti d-lite.

and seoul, south korea for the latest on the apple/samsung court battle. joining us now is chief economist. we had these comments out from angela merkel in canada and then we've had sort of slightly differing views potentially out of finland, but there's a coalition government there. how are the politics? we've had a break here over august. how are the politics going to start playing out in september? >> well, we have a calendar which is full of risks coming in. we have, of course, the jackson hole which is not eu related but we have then the ecb meeting where we get the outline from draghi. we have the dutch election on the 12th and on the same day we also have the german constitutional court and then

the ecb minister on october 8th. we're looking for increase in speed and velocity and as such it will increase in september. >> there's a sense here what we got from the ecb is, okay, we will perhaps step in with one sterilized bond purchases providing a number of things happen. will those other steps happen to enable them to do that? >> well, the key operating word, of course perhaps, and if so what will happen then. it's interesting to see the interpretation, especially by the anglo-saxon press.

she says we're all for saving the euro. that has been interpreted as euro being full blown support to support the ecb program to buy bonds outright. i don't think that's true because the constitutional court needs to rule and germany has had a hard time and finland has some issues at least on communication policy in terms of where they stand on this. >> what is an investor to do? >> i hate to say this, but this is really the time where you want to keep the powder dry, because we're not in business not to do business. just relaxing and policymakers has been a way which is always good news because as you know, the more macro we have the better it is. as we come in to september this activity will increase. we see these comments today,

hope of policy responses across the globe, and i don't see any value. we're chasing similar to what we did in 2007 and 2008 and chasing yield ultimately always ends up with somebody crying and those crying will be investors, unfortunately. >> steve, good to have you on. stick around. get a cup of tea or coffee. spells and hexes can't list their products on e-bay. the ban extends to healing, psychic reading, tarot card sessions. auction site spells and potions category will disappear along with 6,000 listings contained. we want to know what's the weirdest thing you've seen on e-bay. if you want to join the conversation get in touch with us at worldwide@cnbc.com or

twist us @rosswestgate. kelly is flying to another part of europe today. all right. still to come investors unfriend facebook shares of the social network falling. more when we come back. so, how do you feel about cash back? i would not say i'm into it, but let's see where this goes. [ buzzer ] do you like to travel? i'm all about "free travel," babe. that's what i do. [ buzzer ] balance transfers -- you up for that? well... too soon? [ female announcer ] fortunately, there's an easier way with creditcards.com. compare hundreds of cards from every major bank, and find the one that's right for you. creditcards.com. it's simple. search, compare, and apply. investors are unfriending

facebook. shares of the social networking giants fell to another low closing below 20. early investors could sell some of their stock on thursday. kayla tausche reported that investors unloaded 50 million shares. partners can make their own decision whether to hold or sell the stock. excel owned 140 million shares. tale of two retailers. gap had strong sales in north america. parent of the gap old navy and banana republic is raising their full year outlook. and aeropostale is cutting its

third quarter outlook citing a soft start to the back to school season. shares today in frankfurt, gap up and aeropostale down 1%. a bidding war in singapore ranges on. heineken is in to boost its offer for apb. new offer would be conditional. thai bench is the rival to heineken. they have no comments to add. japan's sharp jumps as much as 13%. taiwanese electronics interest wants to jump its share holding

to 20%. and shares of samsung have been punished today as the tech giant's trial is heating up. >> the entire main kospi here in seoul dragged lower by samsung electronics which fell 3.7% as foreign investors unloaded shares after they hit a three month high in the previous session and investors also reacted to rumors that the iphone 5 will be released on september 12th and could easily become a 10 million seller in that month alone. apple shares are closing at an all time high yesterday. as for the latest on the u.s. patent trial with apple, recent testimony is all coming down to money. an accountant appearing on samsung's behalf said apple's witnesses overstated samsung's profit margins. he put the margins closer to 12%

compared to apple's expert's figure of 35%. the judge pressed both companies to settle. she said it was time for both to do so. back to you. for more we join managing director for asia-pacific. thanks for joining us. big fall off in samsung. anything to do with the patent discussions going on with apple or not? >> i did not get that. could you please repeat? >> sorry. we had this fall in samsung stock, patent discussions going on with apple. how damaging is that patent debate? >> it is.

you know, it's extremely damaging for both companies. clearly apple is trying to push hard in this case to slow down samsung as much as they can. samsung in recent times has made significant progress, particularly in its phone business and also now more recently with the recent of its galaxy 10.1 inch tablet. it boils down to try to slow down as much as samsung's progress as apple races to launch its new products as quickly as it can. >> the new galaxy note 10.1 you talked about, how does it compare with the ipad? >> clearly it is not a product that will take away a significant, you know, significant market share away from the ipad. it has got several interesting features, the stylus as well as the ability to have more applications run at the same

time and makes it appealing to users. clearly will be the undisputed tablet as far as android tablets are concerned. in that sense it will make more progress than the traditional tablets that samsung had in the marketplace. will it be something that can take away 5 or 10 percentage points market share from apple or the ipad, i don't think so. >> we heard in that dispute samsung lawyers trying to suggest apple, you know, had miscalculated the margins that samsung was making, samsung was trying in this instance trying to talk down the margin they have on their products in the united states. but then i wonder whether should investors also think maybe they are making less margin than we thought? >> you know, clearly apple is making a lot more margins on its phone as compared to the ipad. it did seem like some of the

profit remarks made about samsung's profitability about the phones were a little overstated. what investors like about samsung is it's made significant gains in the mobile phone space, both with the phone and galaxy s3. samsung has made gains and that's what led apple to slow them down by getting into the legal dispute. >> yeah. clearly, these two companies are forging a lead at the moment in this space. where does it leave everybody else? >> clearly the intensity of competition between both of them is driving and accelerating the pace of innovation. having said that, you know, the

market is commodityizing very rapidly. it's becoming more increasingly difficult to maintain that position in the space. so we saw nokia dominate the market ten years ago. blackberry dominated five years ago. there's others waiting to make significant gains in the next couple of years. for now for the next 18, 24 months both of these companies have a very strong stranglehold on the markets and the profits available in this mobile phone market. >> those markets are concentrated at the high end. the rest of the sector is so commoditized. >> and the profit has gone predominantly between these two players. >> which leaves not a lot -- so where does that leave everybody else? can you see someone at the

moment starting to do the things and come up with the desire and innovation that is going enable them? is anybody else out there at the moment that you think is somebody to watch? >> you know, microsoft has not made the progress that was expected in this space in the last, you know, with its recent releases. having said that microsoft is not known to be the most innovative company. it's a fierce competitor. as the market continues to mature i would like to think that microsoft is somebody who may potentially have the ability to gain market share over the next two, three, four years time frame. you know, they will be one fierce competitor to watch out for. hard to think about any other company at this point in time. >> thanks. steve, good to see you.

we talked about what's going to happen with eurozone policy a little bit earlier and the first thing you said we have to look ahead to jackson hole september 1st as well. market now seems to be undecided whether we get any more policy stimulus from the fed. i can't work out whether that's good or bad from a market perspective. what's going to happen and how will we react? >> i wish i knew, ross. the fact is that the market is frustrated. i think on one hand the leads we've seen through the "wall street journal"s and other official leads indicated that the federal reserve is willing to do more and recently the data has gotten more concerning. on an inflation front where we have seen agriculture prices pick up. record high gasoline prices during the month of july. so basically the mandates to lower the range or extending the time frame beyond the 2014 in place right now is becoming

increasingly difficult. on top of this we accept the fact that the housing market seems to be stabilizing, it has stabilized before but at least it is stabilizing. there's microscience that after five years of nonperformance starting to pick up which leaves the federal reserve unable to do too much. which is the right thing to do. in economic history we learn that the less the macro policies we get the better economies can sustain and correct itself. what the u.s. economy needs and european economy needs is a rate for two or three years and make you and i and companies perform as they always have been and that's why you have to start looking to buy equities. we're very close to the bottom in terms of how bad it can get economically, politically right

now. >> just about u.s. qe, there was a big link twheen the fed started qe the first time in terms of liquidity and then going into gold, oil, other resources, if we get a third bout, how broken is that, that link between qe and liquidity into other asset markets? >> i think what behavior has told us is the impact of new instruments on conventional measures is decreasing one after one. so the first qe was the most powerful one. the second one was less powerful. i doubt there will be any impact. i think that's part of the reason why the fed has been very reluctant to move this time. they realize they are merely increasing the we velocity of chasing. credit is constrained, high

yield bonds are among the best performers in the marketplace. equity markets have been doing extremely well because there's no alternative. we're in a zero bound economy. we're now back to year 2007 scenario where we are just chasing yield at any cost and that will almost never to end be being a play. >> good to see you. have a good weekend. thanks as always. now next story contains some images of a disturbing nature. more than 30 people died after south african police opened fire on striking workers. it follows days of clashes beeen officers and protesting miners. in a statement, police ministry said the action was in self-defense. the impact today, shares hitting a nine year low. the company released a statement

saying it is cooperating fully with authorities to help stabilize a safe and secure work environment. britain and sweden criticize julian assange's asylum. he's holed up in an apartment in that embassy. we'll take a short break. india's economy slammed on the brakes on the back of the global slow down. is all hope lost for the emerging market? we'll talk about it when we come back.

> . these are the headlines. stocks are feeling the merkel effect, banks and autos a little bit higher. the chancellor vows to save the euro. finnish minister for european affairs say it is committed to the euro.

committed to the euro and especially finding solutions both short term and long term for the euro to stay intact. asia's beer battle, asia as pacific breweries and afn is halted. heineken is preparing a new offer. lonmin stock is down. they deal with the short fallout from violent clashes at its mine in south africa. no kelly today, she's enjoying a long weekend, a deserved break. european stocks marginally higher, flat yesterday and not a huge amount of gains today. of notable important is the ibex, up 1.46%. big out performer over the last four or five weeks. bull markets are concerned it's seen in the spanish bond yields

currently yielding 1.51%. italian yields 5.78%. currency markets euro/dollar 1.23 handle today, made its big move in the last 12 hours before we got into the european session. aussie/dollar 1.44. standard & poor is threatening to strip india of its investment grade status. short term problems are no match for the country's long term trump card, domestic consumption. as part of our week long focus on india, we have this final report. >> reporter: spend some time in india and you'll hear the same message again and again. >> indian economy has very strong fundamental. >> the indian economy is largely a domestic consumption economy.

>> there's some kind of internal momentum in the economy which doesn't let it go down the drain very dramatically. >> reporter: they say sure there are issues but long term they feel india is a safe bet because of domestic consumption. people buy things that are produced in india. that buffers against down turns in other parts of the world. but it's easy to say things are okay if you're staying in top or luring in a foreign investor or two. we decided to put that theory the test. we decided to ask this guy. mohamed owns a textile shop from one of the poorest areas in mumbai. he makes t-shirts and has one source of revenue and that's the local economy. he says business is booming. >> translator: in india there are so many communities that live together and each one has a

different festival at different times. >> reporr: even here in the slums which is widely perceived as one of the poorest places in the world you can feel the buzz of commerce. things are being made, sold, moved around and the local shop keepers say if there's a broader slow down in india they are not feeling it. >> business is in fact booming on the ground. >> reporter: this is a form international banker turned mumbai tour guide no stranger to assessing economic queue, she educate tourists about the area. >> these businesses are going strong. nobody is talking on any downturn. >> reporter: in fact, it is thriving. the children were cared for and happy and the so-called informal economy turns out an estimated $1 billion a year all from small businesses, all booming by serving the local market. so foreign investors considering

india, it all comes down to timg. short term is anyone's guess when government policy and gdp will turn around. long term india's biggest advantages, consumers and entrepreneurial spirit are woven into the fabric of the country. >> i don't know. i can't predict. i got to do my best. joining us for more is chief economist to indian at hsbc. thank you for joining us. so, that report what we know is the long term story. there will be a growing middle class and that's what investors tap into. there's been so many short term problems, some they can't avoid, the monsoon. power outages. and policy mistakes, particularly from the government. how do you work your way through those issues to get to that story lisa was talking about?

>> well, i think there is, i would say, a short term story that is not necessarily as favorable and it's a medium to long term story that's still quite strong. let's start with the shorter term story. growth has slowed down. there's a number of reasons. monetary policy has to be tightened because it was too loose to get to fiscal policy in quite a while. there was a need to put the brakes on the economy to contain inflation. externally, external conditions have spilled over to india. india is not just a domestic story. it's driven by exporters and in addition to that financial flows also impacting financing conditions domestically that has an impact and impacted by global conditions. the key reason, one of the key reasons for the slow down in the short term is that over the last couple of years there's been slowing implementation of key

structural reforms that i think effectively are needed to improve the supply side of the economy. in the absence of these reforms, the economy cannot really fully utilize its strong growth potential and that's one of the reasons growth has moved down to 5%. also one of the reasons why inflation has not decelerated because the demand side of the economy including consumption has remained quite strong but with the supply side constraining growth that there's these underlying pressure prices in the economy despite the slow down. that's why they want to re-accelerate growth. they need supply side reforms but that would help on the inflation problem. monetary policy is not the solution here. >> we got a new finance minister now in india and the market seemed to applaud that appointment initially. is there the political ability, political will to deliver on the kind of reform, supply side reforms you're talking about and

also necessary political reform along with quite a creaking bureaucracy? >> i think we will probably see some reforms tabled over the next six to 12 months. that will begin to alleviate some of these supply side constraints. you won't be able to expect over that time frame big bang reforms significant jumps and leaps in terms of full implement jays. there will be reforms rolled out in the next six to 12 months. that would bring about a moderate recovery in growth in india but not be back in our view to above 8% for another two years or so because there's the political constraint in terms of implementing the reforms but the reforms by themselves take time to implement and that's where we stand at the moment. >> what sort of growth rates are realistically achievable?

>> this fiscal year we're looking at about 6.2%, next year 7.4%. the following fiscal year we're looking at around 8%. it is conditioned on two things, one, of course, as i mentioned that there will be a little bit of traction on the reform side. we see stabilization in global economic conditions towards the end of this year more so into next year. so those are preconditions for this to take place. if it doesn't happen it will continue strain growth more but there's a chance for these reforms to get some traction. >> what happens to the rupee? >> in the short term, we still haven't seen a lot of traction on the supply side reforms. we still have issues related to

inflation. 0 it's not helping on that front. the global economic backdrop, the situation in europe is not particularly encouraging either. this analyenvironment, the down remains. we'll have to see clear traction on supply side reforms. have to see clearer signs, i would say, of stabilization and global economic conditions before we can start seeing some of these downward pressures. >> thanks for that. have a great weekend. just a reminder what's on the agenda for asia, earnings out of australia, yancoal and bluescope steel. on monday hk earnings. and thailand released their july trade figures. back here in europe, the chairman of ubs denied the bank helped wealthy germans dodge

taxes. caroline is in zurich with more details. it's a controversial story, caroline. what are the details? >> reporter: very controversial story. it's about how to declare assets. there's reports circulating that ubs bankers helped german clients evade taxes and told them to move that your undeclared asset from switzerland to singapore. ubs denied this over and over again in the last few days but then i guess it felt a need to get out the big guns and had their new chairman talk and in today's edition he said ubs has zero tolerance for bankers who help clients avoid their tax responsibilities. now separately, he also talked

about the libor investigation and he said that ubs was currently not in negotiations with prosecutors about a settlement in the libor case and he reiterated, again, that ubs had cooperated with authorities very early on even back in 2010 and that's why it was benefiting. >> i'm sad that you're no longer in bordeaux. you got back to switzerland. >> sadly. but i hear there's alsoome wine production here in switzerland. that's what i hear. >> yes. apparently. i'll have to try some. catch you later. the ceo of peregrine will be arraigned in iowa today. he asettled suicide last month has confessed to forging documents about how much money was in peregrine's customer

accounts. former head of morgan stanley investment in china has been sentenced to nine months in prison. garth peterson admitted to violating u.s. anti-corruption laws. prosecutors alleged he conspired with two other people including a chinese government official to misappropriate millions of dollars from a state shanghai parmt building. morgan stanley thought they were selling the stake but instead sold to it an entity run by peterson. chinese court is due to deliver its verdict on the country's high-profile murder case on monday. that's when the wife of the former chinese politician will also receive her sentence. admitted to killing neal hayward saying the british man threatened to kill her son. she's expected to get a light sentence. and still to come on the program, finland is standing by the euro but a government official tells cnbc more must to

be done to save the currency. find out what he's proposing coming up.

this morning a member of

finland's government played down reports that the eurozone was going to break up. it said it had to be prepared for the worst. and "squawk box" was told that his country is 100% committed to the euro. that debate will rage. leading economist who was in support of germany's austerity program changed course. there was a letter supporting austerity what he called a significant moment. one still hopes exactly the same sentiment according to polls conducted by the new statesman. joining us is the director of national institute of economic and social research. a prolific writer as well. thank you for joining us. i was looking at these reports. they hadn't all completely changed their minds said maybe

there's other things that the government could do as well. >> that's quite right. a degree of variation among them. some people have taken a rather more mixed or ambiguous step. what i think is significant it's very difficult, as you probably get as economists come out and say the government did the right thing and doing the right thing now. that's no longer a credible view. >> one thing i've looked at and i know is whether the government can use historically low rates of borrowing here for what i think the government should be involved, which is these large scale, long term investment projects. if you want to build a third airport, is there anyway the

government can utilize that? i think that's something investors wouldn't punish bond investors wouldn't punish the government for if it delivers some growth on the back of it. >> that's absolutely right. basic common sense let alone basic economics to say when borrowing rates are unprecedented low levels. markets are essentially lending money to british government for nothing. when we have lots of unemployed people, when we have, as you say a creeping transport infrastructure and have house building at a historically very low level at a time when we have a structural shortage of housing in this country it's basic common sense saying we should use the government's borrowing ability to put those resources to work. >> can you urge the bond vigilantes, if you buy long term you're changing the debt

dynamics of the country long term as well you're locking in low rates. >> who are these mythical bond vigilantes. >> people that stuff -- >> people have stuffed the eurozone countries because those countries can't borrow independently. they don't have any independent monetary policy. the interest monetary fund pointed out every single advanced country that has independence borrows domestically. not just u.s. or japan but sweden, chile. they all have seen a sharp fall in long term interest rates. why? because the bond market vigilante don't do this when it comes to countries that borrow in their own currency. bill gross from pimco said we should short treasuries and gilts. he lost a lot of money. >> how far are we? for all the talk of austerity in

this country, the truth is that actually borrowing is going up. there's not a lot of cutting and spending. >> it's absolutely true that the government hasn't cut current spending. all it's done cut mostly investment which as you say is completely the wrong thing to do. that illustrates my point. you had treasury ministers saying explicitly that if we didn't have this credible plan to get rid of the deficit in this parliament then the bond market vigilantes would punish us. the gilt market would blow up, we lose our aaa rating. what happened? in fact this government is now borrowing more than was forecast by the independent obr but forward for conciliation. bore roger has gone up but yet the bond market vigilantes hasn't emerged. talking about the gilt market going up -- basic economics. >> you seem to be angling fiscal

consolidation is responsible for the weak growth in this country which i'm not sure it is. i would argue that we've had a far bigger impact from high inflation, negative real wages, take on pace the squeeze for the last five years. that seems to be the biggest impact. bank crisis in deleveraging, change in regulation is stopping people to get mortgages very easily, eurozone crisis is hampering investment. i would think all these things are a much bigger hindrance to the economy. >> all of these things do matter and i agree it's quite difficult to unpick the differences. as we just discussed the government has cut public sector net investment by more than 40% over the last couple of years and at the same time we saw yesterday house building at historic loss. there's a direct connection between those two things and there's a direct connection between that and the construction industry -- >> can't get a mortgage.

who is going to go out and beltway house when you can't get a mortgage. >> we had a shortage of housing supply. a lot of people would like affordable housing. what we've seen the biggest drag in gdp is in construction. the eurozone crisis has had an impact. not the eurozone crisis that's dragging down the construction sector. that is a direct confluence of the foreign public investment. i agree with you, there's a multitude of causal factors behind the current weakness on the uk economy. it doesn't take away from the plan was a mistake two years ago and we see in retrospect it was a mistake. >> maybe we should have much more supply side reform an argument for lowering the tax burden as well and actually reducing the involvement of government in some areas and actually trying to relight, you know, relight consumption and investment on the

private-sector. >> supply side reform is always important. it's important whether you're in a recession or not because it's the supply side of the economy "worldwide exchange" all know yknow. supply side is a lot of things. i think planning reforms which is government is trying to do something on that matters a lot. transport infrastructure as you said, we can have possibly be open for business. i would point to immigration where the government has taken several steps backwards. the biggest damaging labor market regulation has been the new burdensome bureaucratic restrictions on skilled labor. >> let me read something else here because i want a quick word about the u.s.. obama administration is planning to make half a billion dollars

in unspent highway federal funds available to states who promise to use the money for job creation. ray lahood will say more than $470 million will be available to rebuild roads and bridges. he says it will promote and create jobs. we actually haven't had a budget now in the united states for what three years. >> yeah. >> so, who has got the right ideas here? >> well, i would say the obama administration plans are clearly flawed, confusing, continue do nearly enough either in the short term to get the economy moving or the long term to reduce the deficit and they don't make the right sort of investments for the u.s. economy. there's a lot wrong. on the other hand, the ryan and romney budget is just a joke. it essentially says we'll cut taxes and we'll balance the budget but we're not going to

tell you how we'll balance the budget either through spending cuts or tax increases. it's not a plan. >> you're depressing me. three years no budget and no clear idea -- no sensible budget on the table from anybody. >> i'm afraid that's true. as i say the obama plan is at least, does fulfill the basic prerequisites of a plans. there's some numbers and it's not completely mad. >> good to talk to you today. thank you for joining us today. now our next story contains some images of a disturbing nature. more than 30 people have died after south african police opened fire on a crowd of striking warriors at lonmin's plant. following days of clashes between officers and protesters. in a statement the police said the action was in self-defense. lonmin shares today hit a nine year low. the company released a statement

saying it is cooperating fully with authorities to help restore a safe and secure environment for its employees. production has seceased at the moment. >> the latest retail figures out of the u.s., find out which stores are defying the economic gloom. plenty more to come in the second hour of "worldwide exchange". it will be starting in just a few moments. ddd#1

hello and welcome to today's edition of worldwide exchange." i'm ross westgate. these are your headlines from around the world. stocks have that merkel impact. the german chancellor vows to back efforts to save the euro. this is the finnish minister saying finland is committed to the single currency fooling report that helsinki has been preparing plans for the breakup. euro. >> finland is 100% committed to the euro and especially finding solutions both short term and long term for the euro to stay intact. >> shares in lonmin are down a nine year low. they don't to deal with fall out

from clashes at its mine in south africa. how low can facebook go. the stock goes below $20. one of the early investors decided to unload some of its shares. okay. if you just joined us stateside good morning. welcome to the start of your trading day. no kelly today. she got a well earned break. some of the stories we're following global stocks have been up overnight after comments from angela merkel suggesting germany was committed to doing whatever it can to save the euro. speaking at a press conference with the canadian prime minister she voiced support for the ecb president mario draghi to stop the debt crisis. >> what the president of the european central bank mario

draghi said is something that was repeated time and again since the beginning of the greek difficulties more than two years ago. we feel committed to do everything we can to maintain the common currency. the european central bank, although independent, is completely in line what we said all along. so we had to see where the futures are right now. slightly positive opening. the dow currently trading two points above value. the s&p is actually just trading below fair value at the moment. as far as the ftse global 300 is concerned you can see we're pretty flat really. yes we have some support from merkel overnight but petered out as we work our way towards the u.s. open. flat yesterday the foot scene' xetra dax volumes low. ftse up eight going, xetra dax up a quarter. cac up six points.

strongest gains has been the ibex. feeling the most support up 1.55%. and also spanish bond markets also getting a push. ten year spanish yields below 6.5%. firmly below 27% mark. ten year treasury steady at 1.83%. currency markets, euro/dollar, we've seen the big gains overnight. 1.2372 is where we stand hasn't made any more significant move during european trade this morning. so what has happened in asia, let's get a wrap from there. let's go singapore. >> thanks, ross. asia is mostly in the green. merkel's firm stance in backing the ecb void risk appetite. many investors expect easing efforts. the shanghai gained in lackluster trading.

gains in banking shares, liquidity injection were offset by loss by developers and consumer stocks. hong kong shares fare better in i.t. companies. the nikkei climbed 0.8% to close out its three month high. exporters extended gains on the weaker yen but the economy still facing plenty much headwinds. economists called by reuters couldn't graded due to weak domestic consumption. in south korea ship builders with europe exposure chalked up gains on merkel's remarks. a heavy sell off weighed. oil and gas player posted strong gains. india sensex still on the move up by .3% at the moment.

back to you. >> now in an interview with cnbc this morning a member of finland's government played down newspaper reports that the country is preparing for a eurozone breakup. the finnish foreign minister told the daily telegraph hit to be prepared for the worst. but then told europe "squawk box" his country is 100% committed to europe and said tighter rules must be enforced. >> there's a lack of trust among member states lack of confidence and we need to rebuild that trust. in order to rebuild that trust we need tighter rules for the future and i think the requirement which is a footnote in this whole game is part and parcel of it. what we need to start focusing on right now is to get tighter and tougher rules. >> joining us is director of economic research. patrick, good to see you. there's sort of an expectation,

we put everything on hold here in august and expectation as we get into september, are we building up our hopes for policymakers response too much or no? >> i think the markets perhaps are in danger of building up their expectations. we keep looking to central bankers to flood the market with more money and more money. we got excess reserves slushing around the world and are not yet dealing with the underlying problem. listening to the discussion of the eurozone, we heard the commitments before that everybody is going to do everything they can. but the one thing that we're not doing is writing off those debts and those debtors who are insolvent. until we get to the core problem, we're just going to continue to muddle through. we're not learning the lesson that we should have from the japanese experience more than ten years ago, and the counter point that the germans an

canadians have given us over the past decade. >> can we keep -- here's the big question. can we just keep muddling through without any sort of big explosion? i mean i always thought it was a question whether we can sustain it without sort of something major happening. >> well, the risk of something major remains higher as long as all we got is the muddle through philosophy. it seems to me that chancellor merkel has been the one grown up in the room who has said we are not going to throw people overboard but we do have to rearrange the furniture and perhaps throw some of the furniture overboard. the legacies of the debt binges that we experienced. so, we are not at the brink of a catastrophe as far as we know, but we would have said the same thing back in the summer of 2006. we weren't then, we didn't think

at the brink of a catastrophe. >> yeah. then when things get out of hand they move fairly quickly. this is where spanish yields are a little bit lower. even at 6.5%, they are not in a long term sustainable moment, i guess. >> well, what happens is really you're rolling over the interest into the principle and so your debt burden continues to grow. add to that the fact that their economy, unfortunately, is not only not growing it's contracting so relative to their net worth, relative to their income, their debt burdens inevitably are growing and that's not sustain scrabble. >> what would be a break through? it's such a political story here. angela merkel in canada saying that the european commission should receive stronger powers to intervene when budgets of european states. the french don't want to give up budgetary control to a european

institution. so what your going to look for though actually for you would be a game changer? >> well, i think the possibility of a game changer is not immediately available. what we have to do is set out the strategy by which we get to that game changer and it's going to, i think, for the european sovereign, it's going to require more of a republic form of government where the central authority does have some degree of control over the amount of debt that they can incur. we probably should have more of that in the united states except we have a drunken federal government that can't contain itself. the other thing that all of the western economies including the united states need to recognize is we have built in a lot of are regulatory rigidity into our labor markets and therefore not as competitive as we need to be globally. >> all right. patrick, good to have you on. stick around.

plenty more to come. gap's second quarter profits rose better than expected 29% on strong sales in north america. parent of the gap, old navy and banana republic is raising its full year's earnings outlook. aeopostole profits dropped. they reported weaker results for more than a year and cutting its third quarter outlook. citing a soft start to back to school shopping season. gap super. aeropostale is down. on the agenda, consumer sentiment is out 9:55:00 a.m.. as for earnings look for results from ann taylor, foot locker, kirkland's as well. patrick, what is consumer sentiment going to tell us

today? >> i think as the consensus indicates we don't expect much movement in the sentiment indicator of either way right now. what really has happened here in the united states is we pretty much gotten on hold. if we look at the university of michigan consumer sentiment indicator, there has been a marked improvement since i want hit bottom last august. in the nine months between last august and may of this year, we saw 42% rise in consumer sentiment. the difficulty is that while there's been significant improvement it is still well below its historic average, and all of the question marks, sort of blizzard of question marks we see around the global economy here in the united states is causing the consumer to become more cause shourtioucautious, s up. we'll see little change. not little change from a position where the consumer sentiment was strong but little change where it's still history

jablg ic -- historically relatively weak. >> where does this leave us in terms of the fed policy going into september. jackson hole coming up, minutes next week. >> you know, i think the fed's quandry is as follows, it's more activist than its predecessor. while the data is tepid, the data indicates this grudging growth here in the united states. you may recall the american comedian rodney dangerfield who complained that he didn't get any respect and then would tell us why he didn't deserve it. that's the way this recovery is. it's weak, it's erratic, tenu s tenuous, still a recovery. so what do you do in the face of

slow growth given the fact that the tools available for the fed don't have channels nald directly stimulate growth, particular employment growth. >> patrick, stick around. we'll get into housing as well. sellers of spells and hexs, disappointing day. you can't list your products any more on e-bay from september. the ban extends to healing, psychic reading, and tarot card sessions as well. so maybe some investors used those. the auction sites spells and potion category is going to disappear along with the 6,000 listings currently contained within it. they've waived their wand and it's going to magically disappear although take a few weeks. we want to know what's the weirdest thing you've seen on e-bay. if you want to join the conversation, e-mail us at "worldwide exchange," tweet

cnbcwex.com. we'll get into housing when we come back. we'll talk about that with patrick.

okay. this is the headlines from around the globe. stocks trying to feel a little

bit of merkel magic. banks and autos are. you. shares in lonmin down following violent clashes that led to 30 deaths in south africa. facebook drops below $20. cnbc learns one. earlier investors decided to unload some of its shares. let's talk about u.s. housing. housing starts post ad surprise drop in july. construction of new homes slowed. drop in building activity mostly comes from the single family home building sector. patrick o'kefe is still with us. have we bottomed or are we on an upturn? >> i think finally housing has, we can say it's turned the corner. but right now it's a little bit like a child learning how to ride a bike. it's wobbly. it's not going very quickly. but it is making progress.

if we look at the housing data month to month, we tend to see a very erratic pattern but if we look at three month averages or year-over-year changes, that monthly movement sort of gives rise to following. overall, existing home sales in the united states were up almost 8% year-on-year. prices have risen nationally for four consecutive months which is very good news. the data we got yesterday indicates that permits compared to last year are up almost 30%. all of which indicates that the market is beginning to gain some momentum. but there's still headwinds or at least some things, some legacies of the past that have to be worked out, not the least of which is that the number of mortgages that are seriously delinquent, eat ear payment hasn't been made in 90 days or they are in the foreclosure process while down from the peak

still is elevated. that's a shadow inventory that will have to be taken care of over the next year or so. so the resilience of prices will be constrained by that phenomenon. >> depressed homeowner activity, strained mortgages will be with us. at the margin what difference does the housing market make or can make to the u.s. economy? >> for most of this recovery going back now two full years, the housing sector has remained e either a drag or noncontributor to gross domestic product. in the second quarter we saw a positive contribution and by residential construction it will become a positive contributor to the general growth of the economy assuming that interest rates stay low which they

certainly will, assuming we get job growth and income growth and housing over the course of the next year will make a growing contribution to the overall recovery. >> patrick, take a pause. good time four to get a coffee, so we'll have a little break. make sure they look after you. we'll be back with you shortly. our next story contains some images of a disturbing nature. 30 people have been shot and killed after south african police opened fire on a crowd of striking workers at lonmin's mine. it follows days of clashes between officers and protesting miners. the police ministry said the action was in self-defense. the president said he was shocked and dismayed. the impact on lonmin stock is hitting a nine year low. production has been halted at that mine as well. kathryn is in the studio with reaction. it's a complicated story. it seemed to have started with two unions, mining unions and

then got completely out of control. >> tragic story as well of course for the people here being killed including the policemen and their community and families, but in terms of the reaction, the analyst reaction to what's happen you got a tale of two extremes. on one hand you have a buy reading on the stock and the target price is going to be about 10% above current levels. on the other hand you have long term bearish on a stock but cutting price targets, keeping a sell rating and price targets a quarter of what current levels are. so really a lot of effects with credibility in this company. >> lonmin saying -- what are they saying at the moment as far as production levels out of this mine? are they giving you any hints?

>> they haven't said much about production long term. in the short term they've said that about 15 has been affected it could go 40. no one knows how long it will go on. analysts predictions hope it will be over in a couple of weeks. it will raise questions for people doing business in africa. >> miners and their operations and whether the government if they can't keep control here whether that's a place they want to continue to invest. >> of course. we've seen that with gold recently too. >> thanks. still to come, would you pay $10 million for a car? find out which classic vehicle is grabbing everyone's attention.

i just reminded u.s. futures right now pretty flat ahead of the open a little bit later. so we'll bring you that. meanwhile classic c fans including jay leno, california's pebble beach golf course is hosting the prestigious

concours di'elegance. >> reporter: this weekend they are expected to sell $200 million worth of cars. they will break records for an auction total as well as for several cars. the star of this auction is this mercedes-benz, 1936 roadster. it was owned by the von krieger family in germany. this car stayed in a garage for 40 years. it was brought back to life. this weekend it's expected to sell for more than $10 million. there are over 25 cars here this weekend that are expected to sell for more than a million dollars. you would think with the global

economy being weak this market would be hurting. in fact it's those troubles that are actually helping this market, the wealthy simply have nowhere else to put their money. in fact, the weakness in europe is a big strength we're told that many buyers here this weekend are from europe with the insecurity in europe and the euro, they believe these cars are actually a better future currency than the euro itself. back to you. >> okay. a couple of options i spied there. still to come, i scream, you scream, we all scream for ice cream. we'll speak to the owner of tasti d-lite. >

this isworldwide exchange". these are your headlines from around the world. . stocks feel a little bit of merkel impact, banks and tuesday are higher after the german chancellor mysterious save the euro. is finnish minister says finland is committed to the single currency. helsinki is preparing plans for a breakup. >> finland is 100% committed to the euro and especially finding solutions both short term and long term for the euro to stay

intact. >> shares in platinum miner is down. lonmin continues to deal with the short fallout from violent clashes from its mine in south africa. judge just how low can facebook go >> the stock dropped to below $20. one of the company's earliest investors decided to unload some of its stock. so you just woke up. very good morning. welcome to the start of your trading day here, your global trading day. kelly is having a well earned day of rest. and futures right now, fairly cautious. the dow trading nearly five points above fair value. nasdaq is point above fair value. sapp trading slightly below fair value. as far as the rest of the world is trading, we're flat. ftse global 300 up 1.4 points.

european stocks after pretty flat close yesterday today also marginally higher. the best performer today and where we have seen reaction since those merkel comments is in spain. iran b ibex up 2%. yields on spanish debt has come back towards that 6.5% mark as well. what are investors to do with their money? here's some thoughts already from today's cnbc's contributors. >> at the moment i would be short rather than long. relatively short cycle and i think "the cycle" actually gets shorter as the years go by and people get more information, more quickly, they retook it more quickly and the overall cycle then. >> where people are putting

money, if we look at the first half of this year and look at commercial real estate investment transactions europe as a whole, just over 50 billion euros, london took 24%. that shows you where the money is going. paris took 11%. 35%. we are chasing yields similar to what we did in 2007 and 2008. and chasing yields ultimately always ends up with someone crying and those crying will be the investors, unfortunately. if you're a fan of the tv show "30 rock" or "sex in the city," you might be familiar with tasti d-lite. the company operates franchises in the u.s., mexico, australia and the middle east, and our next guest says franchise owners

are the real heroes of the economy. joining us is the president and ceo of tasti d-lite. his new book tasti d-lite way, lessons for building loyalty comes out next month. jim, good morning to you. patrick o'keefe is still with us. why are franchises the heroes of the american economy? >> well, i think that franchises, small business purveyors like all small business owners are the real heroes of our economy and frankly offer the solution to our economic ills here and around the world in my opinion. every net job in america since 1984, as an example, has been generated through small business and in particular with business format franchises we employ both directly and indirectly about 20 million people and generate $2.3

trillion in our economy which is roughly about 8%, 9% of the private economy. very substantial. larger than any other two economic sectors combined. >> you have 60 stores today. you want to build out 500 stores globally. that's a pretty ambitious scheme here. if you want to roll out this franchise more in america right now which of the areas of the country where you're going to get more traction and is doing better and people more willing to take this on? >> well, we've been expanding, as you mentioned earlier around the world which is, has been reflecting, frankly, robust growth. domestically across the country, the reality is if you look at our economy since 2009 which was perhaps the year of maximum uncertainty, each year since then has had its own challenges beginning with some optimism. generally the middle the year for one reason or another car

cratering in some sense. and we'll offer 25 cent cones all day. i think in terms of geographical target, in the last four years, even though excess to loans for growth is difficult, 50% of all financeable transactions have not occurred, we've been able to put, just about the 500 units that you're talking about in the queue, not open but in the queue through working with area developers, multiple store developers, people who had infrastructure and operational expertise and experience in place. >> jim, this is pat o'keefe. since ice cream is at the top of the food pyramid you have a

compelling product. but we right now know that we have an extraordinary amount of uncertainty in the economy both the household sector and the business sector. how is that affecting the implementation of your business plan? >> well, look, i go back to the earlier question about small business owners, franchisees being the heroes of the economy. these are people that understand what it means to have to make a payroll. these are people that are impacted significantly by upward trends or downward trends in comps and same store sales. these people often have their life savings on the line. so when you talk about questions as it relates to health care or energy or taxes, or particularly regulatory environments that depress expansion, the employer mandate related to obama care that's significant on these businesses. for the last four years we saw

both in tasti d-lite and planet smoothy, which we acquired at the end of 2011 really downward trends and comps until the beginning of 2012 for the first six months in 2012, we actually saw double digit same store sales on the planet smoothy side and roughly 5%, 6% improvement on the tasti side. again at the beginning of the years beginning of june that began to be depressed again. of course we're bumping up against this election and that's becoming a significant mandate overall for this year. >> jim, i'm wondering, because of what's happened with employment, whether you've seen more people expressing an interest in franchising, maybe people that worked for companies find themselves out of a job maybe i can do something on my own. but come up with this problem of

getting the funding which you seem to point to earlier. what's happening in terms of interest and access to getting funds? >> again, a great question. everyone talks about the availability of funds. we paid in a couple of small business summits and lending summits with the associates related with the full spectrum of the banking community. what you hear being said by talking heads everybody is awash in cash, funds are available, and then you sit down and talk to franchisors and franchisees and tell you while the bank say there's no demand, the reality is the demand is there but the loans are not being proffered and still not today. there may be some encouragement in that direction but believe me not much. so, you know, the reality is

businesses like ours who have a requirement to expand and a moral and ethical commitment to the community you look every way possible to scale and help these folks until there's funds available for them. i have to tell you, i don't see that occurring in the near distant future. and it has been a continual suppression of development particularly in the franchising world. now, you know, i mean there's a lot of talk recently about comments that have been made, such as, you know, you didn't build that, which can be, if interpreted in a particular way offensive to business folks. here's the reality, they did build it as small business folks, but if some of these businesses are being impaired and in some case loss today they

are not doing that by themselves, they are doing that specifically because of government programs that are not allowing them to continue to grow that are suppressing the entrepreneurial spirit in the marketplace and specifically as you're pointing out not allowing real loans to be made to real people. >> jim, thanks for joining us. 25 year anniversary. just very briefly over that period what's been the best selling flavor? >> well, you know we looked at the data over 25 years. i think some combination of peanut butter is always high on the list. but certainly across spectrum in the world of frozen desserts, vanilla and chocolate. >> up can't beat the old favorites. >> encourage everybody to visit us on the 7th in new york. >> i would like to come to new york. thanks for joining us this morning. patrick sticks around for a little bit more. still to come, the latest "us weekly" job reports points to further signs of recovery.

is the good news story here to stay. more when we come back.

let's turn our attention to jobs in the states. weekly numbers for jobless claims did rise last week with four week moving average hit the lowest level since the end of

march. weekly jobless numbers out of all the numbers, kelly think it's the most important. what are they telling us? >> well the unemployment insurance data are a good proxy for layoffs. they don't tell us a lot about how much hiring is going on but they do tell us whether or not employers are shedding jobs. and what we've seen over the past year and particularly the last six months is that the initial claims, the weekly application for benefits have been relatively level. around a number that we would associate with a stable labor market, that is to say employers are not shedding workers because they have an excess. most of what we see anyone shall claims is the normal churn where jobs disappeared because the company had trouble, or there was a problem with a particular worker, things like that. so overall, the ui data is

telling us we have a solvent base here. but when we look at the rest indicators, we still have a very slow growing jobs recovery here in the united states. >> yeah. so how does that -- what happens to growth? do we stay around the sub 2% mark for a while? >> well, you know, if you try to build it from the bottom up and you look at the different sectors of the economy, you look at consumer demand, you look at business investment, it's hard to see where further acceleration in job creation comes from. that's not to say that we won't add jobs, but at this point in the cycle we should be adding well over 300,000 jobs a month. we've had sustained slow growth for quite some time. i step back and i look at the longer term trend and what you see over the last 12 years is that the american economy's job

machine that's been throttled back even when we're in a growth phase, we're not growing as rapidly as we did historically. that suggests we're in the process realignment, consolidating and redistricting our labor resources based on changes in response to trade, in response to technology, and in response to emerging industries and declining industries. >> yeah. okay. a couple of other stories. peregrine financial cfo will be arraigned in an iowa courtroom. he was charged on lying to regulators. he's confessed to forging documents about how much money was in peregrine's customer accounts. former head of morgan stanley real estate investment in china has been sentenced to nine months in prison. garth peterson admitted to violating u.s. anti-corruption laws.

prosecutors allege he conspired with two other people including a chinese government official to misappropriate millions of dollars from a stake in an apartment building being sold by the bank. morgan stanley thought they were selling the bank to a state-owned company but instead sold to it an entity run b peterson. stocks feel a little bit of merkel magic much banks and autos are higher in europe. shares in lonmin are down to a nine year low after violent clashes at its mine in south africa. facebook has dropped below $20. cnbc learned one of the company's earliest investors decided to unload some of its shares. ♪ i can do anything ♪ i can do anything today ♪ i can go anywhere ♪ i can go anywhere today ♪ la la la la la la la [ male announcer ] dow solutions help millions of people

by helping to make gluten free bread that doesn't taste gluten free. together, the elements of science and the human element can solve anything. solutionism. the new optimism.

ahead of u.s. open european stocks are firmer today. xetra dax up.

the real gainer is spanish market. up a session high 2.6%. all being helped by comments from angela merkel, the german chancellor saying germany was committed to doing everything necessary to save the euro. speaking at a press conference with the canadian prime minister she voiced support of mario draghi's efforts to contain the crisis. meanwhile in an interview with cnbc this morning a member of finland's government played down newspaper reports that the country is preparing for eurozone breakup. he told britain daily telegraph newspaper it was something the government was not advocating it had to be prepared for the worse. then the country's minister for european affairs told european "squawk box" today tha his country is 100% committed to the euro. >> there is a lack of trust among member states right now a lack of confidence and we need to rebuild that trust and in order to rebuild that trust we

need tighter rules for the future and i think the collateral requirement which is a footnote in this whole game is part and parcel of it. what we need to focus on right now is to get tighter and tougher rules. >> investors are unfriending facebook. shares of the social networking giants fell to another low, closing below $20. thursday was the first day that early investors could sell some of their shares. kayla tausche reported that partners unloaded 50 million facebook stock worth $1 million. those limited partners have to make up their decision on whether to hold or sell the stock. accel owned shares at the time of its floatation. >> gap sales are strong sales. gap and banana republic is raising its full year earnings outlook.

aeropostale dropped and missed forecasts. it reported weaker results for more than a year and cutting third quarter outlook citing a soft start to the back to school shopping season. stocks gap up 3% in frankfurt. aeropostale down 1%. in the united states, august consumer sentiment coming out at 9:55. at 10:00 a.m. we get july leading indicators. for earnings look out for results from ann taylor, jm smucker, foot locker and kirkland's. what about this session today? ben, what's going to happen today? volume is a lot lighter in this

last week or so but will we trend higher at the open? >> sure seems that way. we've yet to see any rejections from the levels. the s&p is holding well, up above 1400. we're testing this april 2012 high basically. we're looking at this 1411 area. we need to see conviction above this area otherwise rejection could build some energy. if you look at that pattern that's forming on the daily this is a critical level. if this market should roll over from this point would start to develop what a lot of traders look for which has a lot of energy associated with it, that m formation or upside down w. powerful formation and should we see some rejection at these levels again it could build energy. for the most part you have to give the benefit of the doubt to the bulls. low energy, low volume built high conviction.

>> one would have to wonder what would be a trigger for you to reject the levels that you talk about. >> again, i don't think there's anything out there in terms of fundamental but certainly the technical aspect could play. this is a major level, key resistance as i mentioned. but anything out of europe could play and we could just see some outright profit take which could start the ball rolling. this rally, again a lot of traders are talking about. fairly typical rally you see in the middle or end of summer time activity. summer doldrum activity. we're looking at, although we're seeing better than expected numbers for the most part you guys were men sthong good jobless claims we saw yesterday, building permits coming in higher than expected. for the most part tough to get in the way of this rally. >> ben, we got slow growth in

the united states, no growth in the eurozone, the emerging markets aredesdesolerrating. >> there's optistic thoughts that there's pent up demand. i think there's the potential again that there's traders out there that are expecting some sort of stimulus to come still considering we've seen less than desirable growth and less than desirable job activity. for the most part it's on this hope or optimism that we'll see some sort of, some sort of boost, if you will, and some continuation to the upside. but, again, there's the potential here right now considering some major markets, you look at corn at all time highs so again there's concern. >> ben, we got to go. patrick, great to see you. thank so you much for your

contribution. that's it. "squawk box" is coming up next.

good morning. stocks in europe and asia moving higher on comments from germany's angela merkel. while the s&p 500 already stands at a four month high. gap beat forecast and raises guidance but facebook is at a face plant. "the social network"ing stock hits another new low but still worth $42 billion. it's friday, august 17, 2012. "squawk box" begins right now. good morning and welcome to box here on cnbc. i'm andrew ross sorkin along with joe kernen. becky quick is off