welcome to today's edition of "worldwide exchange". isaac trike the gulf coast with heavy rains and flooding in lie lowing areas, including new orleans. more than 90% of oil production in the region remains okay but crude prices rise. china sees stable growth while the state run newspaper says more aggressive easing is newed. glencore shares is at the

bottom, and the firm is aopposed to a $30 billion takeover. warm welcome to you. solo, of course, all this week. kelly continues her tour of duty in the united states and plenty of focus in states as isaac has made a second landfall this morning. we will be going out to new orleans. we'll be looking at production facilities for the energy sector throughout the show. we'll number berlin where top level talks continue between america xl monti. we'll be in tampa, florida, where mitt romney is announced as republic nominee. we'll be in berlin, ibm's

biggest production ground. hurricane isaac is near new orleans. the category 1 storm made landfall before 8 p.m. eastern at the mouth of the mississippi river. hours before the seventh anniversary of when hurricane katrina roared ashore. the national hurricane center says isaac is now nearly stationary and is expected to drift over the coast before heading inland. the storm's been unleashing heavy wind and rain knocking out power to more than 200,000 customers. rigs and refinery is virtually shut down with 90% of production closed as a precaution. check in on what's happening with crude prices. nymex is off slightly. natural gas is off slightly. they predict those facilities will be undamaged.

two key pieces of economic data. second reading of gdp is due at 8:30 eastern. the fed reserves' beige book will provide economic conditions across 12 reserve banks across the united states. as jackson hole summit gets under way, one key player will not be attending, mario draghi says the heavy workload will not allow him to travel to the event. cnbc will have full coverage throughout today and tomorrow with federal reserve chairman ben bernanke's much anticipated speech to take place on friday. joining us for more, chief global economist for capital economists. thank you for joining us. we're waiting for policymakers.

will ben bernanke, as de a couple years ago, announce another policy of more qe with rather less shock and awe? >> what he did a couple years ago was hint at more quantitative easing but i think that hint has been made by hints of fmoc meeting. markets expect additional qe3. i don't think he'll reinforce expectations any further than are in place. >> a lot of dependent on the data, some of it. we had anticipationally strong data. we saw strong housing numbers. the numbers have ticked up. is any of that daylight that strong enough to cause a pause? >> i don't think it is. i think the statement from the fmoc minutes was clear they needed substantial strengthening in the economy. three ss there. they have to have significant improvement in the data, which we're unlikely to get. in particular there are no signs of growth picking up to a strong enough rate to get the unemployment rate down. we may well get an upward

revision today but gdp growth is less than 2%. simply isn't enough to create more jobs. >> while everybody expects it to come, an awful lot of people don't think it will do much. we're in a strange position. you must follow this policy. it won't have very much impact. adam posen on yesterday said they should target more mortgage-backed securities. what should they be doing? >> well, first of all, i think it's right to ease policy further. the economy is fragile and lots of risks, whether it's the fiscal cliff in the u.s. or growing financial crisis in the eurozone. i think more policy is appropriate. whether it will make a huge difference is debatable. this is the third round of asset purchases by the fed. i think they're right to ease more but whether it changes the big picture, i doubt it. >> the big picture is what? >> as far as the u.s. is

concerned it will be reasonably upbeat. we're looking for growth of 2% this year and next, which isn't bad. growth rate people in europe would kill for. the problem is very little the fed can do to direct problems in the rest of the world. you have the mounting crisis in europe. the unbalanced economy in china. frankly, the fed purchasing more mortgage-backed securities in u.s. treasuries -- >> do you expect much of a market reaction, either in terms of dollar or, you know, real asset prices? >> i suspect it will be a case of buy the rumor, sell the fact. u.s. equity prices in particular, multiyear highs off the back of expectations, further policy stimulus. i suspect it's priced into u.s. equities. modty prices have been lifted well above levels that are currently justified by fundamentals. given the weakness of the global economy, oil shouldn't be where it is now, copper shouldn't be where it is now.

>> we'll get into it as well because this is a fascinating point with the weakness of the global economy and brent up $115. julian sicks around for much more. in asia we have the details out of singapore. >> thanks, ross. asian markets traded mixed in light volume as investors hunkered down ahead of the jackson whole symposium. steel makers and oil were the big winners yesterday. airlines tumbled on down beat earnings. shares in hong kong followed suit. china's blue chip such as chalco, costco pacific.

nikkei climbed 0.4% helped by 35% surge in chip maker renaissance. sharp shares up 7% after announcing a volunteer plan. samsung electronics expanded rebound up 3%. lg electronics surged 4% after unveiling their new smartphone. gains in telecoms, and india sensex down 0.75% at the moment. >> thanks for that. eight minutes into the trading day in europe and advance is outpaced by decliners 7 to 3 at the moment. ftse 100 flat after day's holiday on monday. didn't do much yesterday. this morning the ftse down 0.5.

xetra dax down. ten-year is higher this morning, 5.8%. spanish yield back over the 6.5%. ten-year ahead of jackson hole down to 1.63. on the currency markets we saw the euro, we got up to 12570. right now euro/dollar slightly down. dollar/yen at 78. aussie/dollar around 1.0362. bei ining battered by thinking boom is over in europe. meanwhile, italy is facing another test in the debt market as it prepares to auction up to

9 billion euros in six-month bills. the treasury saw yields fall markedly in ten-year zero coupon bonds yesterday. the bigger test for italy comes tomorrow. treasury will attempt to sell up to 6.5 billion euros. prime minister monti is arriving in berlin for discussions with angela merkel as european leaders attempt to forge tighter unity. sylvia in berlin with much more of what's going on. i'm wonder how much of this discussion between monti and merkel will actually be mario monti suggesting to merkel they go easy on conditionality with any further assistance to spain. >> reporter: and good luck to them. one could cynically say the

biggest test for italy comes when monti meets merkel. the last eu summit monti came out posturing as victor which was criticized by many. angela merkel meekly went home until this came out he hadn't won anything and she lost nothing. go easy on conditionality? really? maybe i'm too german about this. the finn and dutch have said angela merkel should stand fast rather than loosen her stance. there's the great danger of pouring the baby out with the bath water. spain wants to avoid a bailout for two reasons. national pride and for not being tl throttled by the other countries like a troika regime.

the ecb could be a bit more flexible on recapitalizing banks directly will not be on track until some time next year, and that's only if, the other biggest landmark out there, if the german constitutional accord on september 12th decides -- allows the german president to even sign the esm legislation. after that, we still have the main esm court cases going on where the court will decide yea or nay at bottom line. esm will not be there for spain fast. if spain need money any time this year or early next year will have to go with the esf, which can only help countries with a bailout regime. i don't think angela merkel or anyone from the northern european league is going to budge from that one. >> thanks for that. we'll catch you a little later. julian, sylvia neatly pointed out the hurdles we've got to

jump through. markets have behaved as these are done deals. how much event risk is there? >> i still think there's a fair bit. the markets responded positively to hints that the ecb would do whatever is needed to saver europe. >> these conditions on other things happening first, right? >> exactly. the statement you'll do whatever is needed is evacuous -- >> but we've heard it a lot. >> yes. the markets need actual, hard commitments to do things. i think a lot of the ideas that have been talked about in the last few weeks will come to nothing. there was, for example, the idea the ecb might be willing to set in and set a formal ceiling, a cap on bond deals in the periphery which is a nonrunner. people are hoping for that sort of development. they're bound to be disappointed. >> hang on. what will get laid out next week by mario draghi? >> i think holding operation. date to focus on is october when

the troika on greece and we'll have a better idea of how the greek economy is doing over the summer. i think until then, the government and the central bank will make the right noises but apart from limited purchases of government bonds which -- >> with the current mechanism? >> exactly. that's just easing short-term financial tensions. isn't dealing with fundamental economic imbalances or -- >> we said that. but we saw a rally in peripheral bonds. they've started slipping again. on the fact we'll get something going again in september. you're saying it ain't going to happen. i'm wondering what the reaction will be. >> most certainly negative. also disappointment at what bernanke might or might not say. what we see in the last few weeks has been an artificial marketing. trading has been thin because of the summer holidays. i think key players will get back from the beaches. with a look at what's actually

happened and the incoming economic data. >> when you -- just a quick word about spain because obviously there's a lot going on on whether they want to perform the bailout or not. i mean, oubviously, we saw more -- the economy is worse than official figures. we continue to see deposit outflow at the moment. how significant are those deposit outflows because if there's anything that forces action, it's flight of money out. >> i think this is very worrying. after all, i think greece has been written off by most people some time ago. clearly, the greek government has not done what it should have done over the last few years. the economy is fundamentally competitive. spain is different and spanish government is a well-behaved government in the eyes of the germans. there have been plenty of economic and other reforms over the last few years. yet, its membership of the euro and certainly short-term public finances is still in doubt. if policymakers have been unable to draw the line at greece, i

think we need to be concerned about possibility of greece exit and the effects they might have on stronger economies like spain or italy. >> we'll take a pause. still to come, back out to berlin where tech experts are aawaiting the latest offering from samsung at the electronics fair. [ male announcer ] whether it's kevin's smartphone...

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just to let you know hurricane isaac made second landfall along the coast of southeast louisiana, according to national hurricane center. made landfall at port fourchon at 8 p.m. it's moving pretty slow. maximum sustained wind at 130 kilometer an hour. you'll see this graphic here. we'll keep that going. naets a live tracker of the storm. republicans kicked off their speech yesterday, and mitt romney was officially nominated by gop delegates. he'll accept nomination on urs

thursday. romney was in spotlight at a aim of showing the human side of her husband. >> i can't tell you what will happen over the next four years but i can just stand here as a mother, grandmother, an american, and make you this solemn commitment, this man will not fail. >> meanwhile chris christie, a rising star in the republican party, gave the keynote address. he aims some remarks at president obama and says needs to tell the americans the real truth. >> i know the simple truth and i am not afraid to say it. our ideas are right for america and their ideas have failed america. >> festivities continue in tampa when paul ryan will speak in prime time, formally accepting

his nomination as vice president. also news out surrounding -- socgen unit. patricia is in berlin. we're waiting to see what happens with injuctionz, does the samsung fight back at this fair? >> yes. i think this is crucial, this launch. all of that new note, the tablet, as it's called, because that would not be included in the u.s. ban of samsung products, which was linked with

the verdict which we heard a week ago, regarding the smartphone's release by samsung. the note is an interesting one. i have to say today is the release of the new version, makes me a bit miffed and i got mine ten days ago and it's the old version. this is what it is. this is basically a telephone. seems to be huge. the great thing is you have that pen. with that you can do whatever you want. and it is a very nail-friendly. for the ladies, i was unhappy with the iphone and i switched on samsung. that launch is going to be perhaps the savior for u.s. sales for samsung because they expect good sales numbers to roll in in the fourth quarter. the critical christmas quarter. if you think about the success, this iphone -- this samsung note came out about nine months ago. within the first nine months they sold more than 10 million unit. coming through with the numbers it's very interesting to see

apart from the new releases is the innovations or the -- yeah, the innovations of their product because what can you innovate considering this is an absolutely new product. you can make it faster. you can make it thinner. you can make it lighter. by the end of the year, you could actually make it also bendable which was interesting, because samsung is working on a flexi screen which they might introduce by the end of the year where this entire thing is bendable, flexible so you will not feel it in your pocket. it's quite big, bigger than the smartphones, but it has a different kind of advantage but it is, a, midway between a smartphone and a tablet as well. they're launching it today, which is an interesting point of view in terms of the timing. remember that apple is coming through with their new products, new iphone 5 on september 12th. they're also coming through with their ipad mini on the same day. so, steve, it is going to be

very interesting, indeed, who's going to run the race. there's a lot of in terms of the verdict out. credit rating on samsung this morning saying it shouldn't be too much of an impact with samsung going forward. in terms of what's going on today, samsung press is going to happen in an hour and we'll have an interview with samsung ceo kazue hira. samsung has been having problems with the economic malaise in japan and we know about the world economy also and the way it is only very slowly growing. so, we'll bring you that later on. >> thank you. you can also go and join angela and mario later. we have earnings out of bank, first off net profit 85 billion

yuan. marginally lower than consensus forecast. first off net energy margin, 2.85, lower than the 2.97 at the end of march. 1.39 at the end of union. it was 1.44% at the end of march. staying in china, chinese companies are seeing a rise in late payment and even debt default from companies. they say money owed to machinery and coal is at high lateness and they're worried it will spread to other companies. ndr says speculative on real estate is. the an op-ed is calling on the

ecob to further cuts to bank requirement ratios ahead of where chinese growth might be when we get the official numbers saturday, 3:00 in the morning cet. investors expect manufacturing to come to a nine-month low to 50 from july's 50.1. how weak is the chinese, in your view? >> i don't think we'll have a hard landing. i think the emphasis of policy has moved away from fighting inflation to supporting growth and they'll do whatever is necessary to keep the economy grohhing but at the risk of a harder landing down the line in 2013 or 2014. fun mentally the chinese economy is unbalanced, far too dependent on property and elsewhere. even if we avoid a hard landing this year, we have to get used to the idea that growth will be

substantially weaker than previous years. >> plenty more with julian to come on "worldwide exchange." the days of bumper profits for chinese banks are over but are rumors of looming debt crisis exaggerated? a passionate belief, and the foundation on which merrill lynch has been built. today, our financial advisors lead from a new position of strength. together with bank of america, they have access to more resources than ever before. a steadfast commitment to help you achieve your financial goals in life. that's the power of the right advisor. that's merrill lynch.

these are the headlines. hurricane isaac moves ashore, striking the gulf coast with the threat of hef rains, including new orleans. more than 90% of oil production remains down but crude prices remain high. mixed economic signals out of china. top planning agency sees signs of stable growth while state run newspaper says more aggressive easing is needed. glencore is at the bottom of the ftse 100. we're an hour and a half into the european trading day. equities are down, less than 0.5 for ftse 100. similar losses for the ibex as

well. bond markets, back over 6.5% for spanish ten-year yields and ten-year bund yields are lower. currency market, euro/dollar near the ten-week high, and slightly weaker today. u. euro/sterling, maintaining the break, aussie/dollar slightly weaker as well. first off earnings, agricultural bank of china is coming below estimates. agbank earned $12.7 billion in the first six months of year. percentage of nonperforming loans shrunk slightly but analysts say it may be lowering

and some questioning whether china is facing a looming debt crisis. joined from singapore. thank you for joining us. is there a looming debt crisis? is there an outstanding sort of mount of debt that we need to be worried about? >> there is a problem, definitely, but is it a crisis? i'm not so sure about. i think china's nonperforming loans in the banking sector, the reporting number is only 1%. if you look at it's far less than 2%, 2.5% in india, 3% in thailand, 1.6% in south korea. i guess the situation with china's nonperforming loans is not the reported number but uncertainty and lack of transparency on exactly what the real number is, because shadow banking system in china makes it

extremely difficult to actually get a feel of what the real nonperforming loans are. now, we know that a lot of chinese banks have lent a lot of money to the local government lending platforms. and with the problems in the property sector and in a downturn in the crisis in the slower economy, will obviously lead to some stress there. now, how much that stress is, there are analysts who are expecting nonperforming loans to reach double digits. my personal feel is if you look at what bank of china has reported yesterday, what agbank reported today, 1.2 kind of range. from where i sit in my fixed income inspector area, i don't see it as a problem for trading

spreads. >> who has exposure to the real estate sector? >> i guess it's not the direct exposure that matters. that obviously can be seen. but these banks have lent to local governments, which in turn have lent that money into the developers. it's very hard to get accurate number of who has lent how much to the property sector but it is one of the fundamental concerns. >> i have a theory as well. ultimately the problems in the banking sector will be transferred to the government in one way or the other, for which i moon the central government. public finances of china are probably healthy enough to deal with that. my concern is the weaken in the banking system is a symptom of an underlying problem which will last for many, many years. because of the way the chinese economy is stimulated by promoting cheap lenning, lenning

without sorts of constraints we might see in a more advanced western economy, there is an awful lot of inefficient investment that's taken place, easy opportunities to invest have already been exhausted. i think this is a symptom of underlying economic problem instead of something that will bring the economy down. something you would agree with? >> i do. china's nonperforming issue is a long-living dragon. if you think of the issues in '99 the government had to come and help bail out, the government had to do something again in 2005. so, this time around, the problems are definitely there. and with a lot of local debt coming due in 2012 and the economy slowing, i fear it's still ahead of us in 2013, 2014-ish but i'm confident about the ability to do something and manage it appropriately without

letting it become a crisis. >> anita, we have this report in the ft, chinese banks going to up lenning in united states. now at 6.1%, up from 5.1% last year. what's behind this? where are they lending to? now, if we look at what's happening in the european and american bank, they're preserving capital, capital ron strant so lending growth has slowed. on the other hand we have chinese banks where loan to deposit ratio is around 60%, 80%. there's a lot of liquidity. these banks have the ability to lend a lot. and then the growth in the home market is slowing, the economy is slowing in china. they are naturally inclined to look for this growth in international market.

for them to capitalize on the fact that european and banks is slowing is a great time. the way they are lending, i think commercial banks are lending to all the large corporates which have international exposure. chinese are active. policy banks are lending to the interest space. it's a well known fact the chinese government, chinese policies, everything is skewed toward investing in hard assets, infrastructure or mining roads and toll roads. the policy banks are lending money to that space. the commercial banks are open to lending money where there's a safe international credit to lend to. >> thanks for that. >> enjoy your evening in singapore. julian sticks around. in japan, a couple of m&a

stories have been reported. more from tokyo. >> thank you. japanese air conditioner maker has announced they would buy goodman for $3 .7 billion. daikin will buy all outstanding shares in goodman to develop the south and northern american market where presence is weak. kkr will spend close to $1.3 billion to pick up controlling stake in the troubled japanese chip maker, renesas. kkr presented proposal to top three shareholders as well as

the chip makers' main banks. it hopes to reach a formal agreement as early as next month. back to you. >> thanks for that. have a good evening in tokyo. south korea has surplus for last month. we have the details from seoul. >> korea's july trade with the rest the world hit a record $6.1 billion replacing june's all-time high of $5.9 billion. the bok expecting a surplus again for august and a full year surplus to go beyond the current forecast of $20 billion. the country saw imports slow down at a faster pace than exports in july and weak global demand, particularly from europe and china, remain a big a concern for world's fourth biggest economy. as we've been focusing on isaac, korea has been hit by a typhoon. what's been happening with that?

>> this was, in fact, the worst typhoon in a decade here and the government is now said to promise $1.7 billion in order to restructure the economy that was hit. now the typhoon pounded trees, streetlights and many properties. domestic flights were canceled as well and caused power outage for 1.7 million households. as far as casualties, 222 people evacuated to shelters. back to you. >> thanks for that. that's the latest out of seoul. brazil is expected to lower its benchmark interest rate to record low of 7.5%. the ninth consecutive rate cut for the central bank. economy see policy-loosening cycle come to an end as they show signs of recovery. is that your base rate, 7.5%, the low? >> i think it probably is, although if we're wrong it's because rates will go lower still. i think they already cut

interest rates aggressively. emphasis of policy is shifting and i think quite rightly, more towards sorting out supply side problems of the economy, boosting infrastructure spending in particular, making the economy more ee fishgt, able to grow at a faster rate without creating inflation. >> they have to do do a lot of infrastructure. they have the olympics in rio and the world cup as well. when i was there in june, it struck me, there's huge potential for infrastructure. >> that's the shift that has to take place. there have been enormous inflows of capital into brazil over the past few years, as a result of high interest rates on brazilian currency. a lot of that money has been hot money or fueled domestic credit boom. that ultimately isn't going to do any good. if they can refocus that investment more toward

infrastructure to boost the economy, i think that could be much more positive over the medium to longer term. >> hurricane isaac raking the louisiana coast toward new orleans. the category 1 made landfall before 8 p.m. eastern tuesday at the mouth of the mississippi and hours before the seventh anniversary of when hurricane katrina roll add shore. the national hurricane center says isaac is now nearly stationary and is unexpected to drift over the course before heading inland. joining us is mike bettis of the weather channel. how slow moving is isaac? >> this is creeping along. 80 miles an hour wind. you can see it's coming onshore now in louisiana. just hammering the city of new orleans with torrential rain. there's a look at the radar.

it is nothing brought prolific rain across mississippi and louisiana. right now probably the worst weather new orleans has seen in the entire event so far. you can see huge amounts of rain and wind coming into new orleans. they're fortified after katrina with increased flood protection system with levees and pumps. they are getting reports south of new orleans that the levees are overtopped because we've had so much surge and rain. good news is, forecasting this to gradually weaken as it comes in but torrential rain will be the calling card as it rolls inland here. all the way north to a place like kansas city or even chicago as we go later in the weekend. a long way to go, but as of now new orleans with the worst weather they've seen so far with hurricane isaac. >> thanks for that. that's the latest. we'll have plenty more on new orleans.

tropical storm south of b a baja, california, winds at 65 miles an hour. of course, we have seen oil prices come off slightly in the gulf because it doesn't -- because production facilities on the back of hurricane isaac. brent prices are relevant. thanks for joining us. we think not much damage to the gulf production facilities. >> on that basis it's highly likely prices won't show too much although prices closed slightly higher than last trading time. not much excitement. if that were to change, all bets are off. what has happened, as you said earlier, a substantial amount of

production has been shut in as a precautionary matter, oil and gas, and the length will have some impact if it turns out to be precautionary shut down for longer than we think. >> how long does it take to get things back up and running? >> you can't just flip a switch and there it goes. takes two or three days to shut things down and two or three days to get things back up again. they know what they're doing. >> the storms are things that the industry deals with, right? >> they happen every year, roughly the same time. severity varies from year to year. >> what's fascinating here to me, talking to julian about the weakness of the global economy, right? the slow down, relatively weak performance of the economy and crisis in europe. let's pull up a brent chart. where are we trading? brent chart? anyway, around the -- no, that isn't brent.

around 140, 115, right? >> yeah, sure. >> 111 at the moment. why are we at these prices when we have the economy doing what it's doing? >> i've been talking on several appearances on cnbc recently. i think that price is elevated and they've been at higher levels, 116, 115 for brent mainly because of geopolitical factors. people are more worried about the iranian situation, worried about a possible israeli strike ahead of the u.s. presidential election, worried about shut-ins of north sea production, worried about lower iranian experts. now it appears those situations -- north sea production is coming back, as was planned. iranian export situation is being dealt with by higher supplies from other countries. and it looks as if, although it's very hard to tell, that a literal explosion in iranian situation is less likely than we

might have thought a few weeks ago. on the other side of the balance, as you alluded to, the economic outlook if anything seems to be getting less and less positive as time goes by. so, demand is softening, although it's still growing for oil. prices should slide. >> what slightly worries me is if we have -- the weakness of the economy we have with brent, albeit for reason neil points out for these, what happens when the world economy recovers? >> the recent increase in oil prices is having a further dampening effect on economic. we saw weaker reading in u.s. economy, i think due to gasoline prices. i think further increases in headline inflation don't prevent central banks to raise interest rate thes may be -- >> is energy going to be a stabilizer -- is it going to be a choke on future stronger

growth? every time we get a growth the prices go to a point where they choke it off again? >> absolutely right. i think there's a danger here that more bullish forecasters of the oil price want to have their cake and eat it. on the one hand they expect high growth, and on the other they expect high oil prices. i don't think you can get them together. >> if the economic outlook improves, and as time goes by, i become more and more pessimistic about the speed of any recovery, i think we are in for a very long haul of poor economic performance, there will come a point where if there is economic lift-off, we'll run up against capacity constraints. even today, one of the reasons prices stay, perhaps, as high as they are now, is that actually there isn't that much spare production capacity even today. >> that's what i was going to come on to here. are we nudging up against, you know, maximum capacity? >> well, there isn't a great deal out there. it's mainly in saudi arabia and the uae. with iranian export capacity cut

because of sanctions, there is a problem. what lies at the bottom of the oil price, and we should never forget this, saudi arabia, which is the most important producer in the world told us earlier in the year it regards $100 a barrel for brent is a fair oil price, one enough to encourage oil investment but isn't such a high price, and maybe we disagree here, that it chokes off demand excessively. saudis will support $100 a barrel, slightly less, if it comes to that. we're not going to go below $100 for any time, i don't believe, but i also don't think we'll see prices rising significantly where we are now for brent unless there's a major geopolitical incident. >> good to see you always. thanks for coming in. we'll take a short break. the honeymoon period hasn't started.

u.s. judge set september 6th hearing on apple's request on permanent ban on certain samsung

smartphones. that could give samsung more time to deal with the judgment against it. galaxy note 2, one of the worldest biggest consumer electronic events in berlin. what are you expecting from samsung's newest device and what features would you love to see on your smartphone or tablet? join the conversation on "worldwide exchange." get in touch with us, e-mail us, worldwide @cnbc.com, twe tweet @cnbcwex or come direct to me at ross westgate. glencore shares are lower today following an ft report suggesting the norwegian sovereign wealth fund is the latest investor to reject terms of glencore's $30 billion takeover bid for xtrata.

now another investor saying they don't like the details. is this deal going to get completed or not? >> reporter: it's not looking likely at this point, to be honest. with that opposition to the deal, norway is joini ining qua opposition. qatar has a 12% stake and according to ft, norwegian wealth fund has 4%, and sovereign wealth funds together can now essentially block the deal all together. now, according to the ft, the norwegian sovereign wealth fund that been buying $5 million worth of xstrata funds to gain more in that deal and it reportedly told glencore and xstrata it's opposed to the deal. glencore is offering 2.8 shares

for each xstrata fund. qatar wants that raised to 3.25. if you look at where they're trading in the market right now, the ratio has fallen to 2.5. that tells you the market is pricing it that this deal will not be going through. the big showdown comes on september 7th. when shareholders of the two companies will be voting on the deal but looking increasingly unlikely now. >> thanks for that, karen. meanwhile spain has requested $5 billion bailout from madrid, catalonia is struggling with refinancing debt of 42 billion euros. final thoughts from julian as well. what are we going to get from the ecb next week? >> i think a limited commitment to buy more european government bonds. i suspect that's fully priced

in. what you won't get is unlimited commitment to bail out peripheral governments the market seems to be hoping for. >> does that mean spanish yields, your view is they head back higher from here? >> yes, they will. more generally, the back drop in spain of a weaker economy and the prospect -- i think the inevitably of a sovereign government bailout will mean that yields have to rise further. >> you think we will get larger qe by the next fed meeting. what happens to gold and other related assets? >> i think gold is probably the only clear winner from all of this. i think oil prices probably priced in qe3. what happens what they haven't priced is in the exit of one or more countries from the eurozone. qe3 helps but the real factor that drives gold significantly higher is actual break up of the euro gloen and all unserpt it creates. >> do you believe greece and others might leave? >> our working assumption is greece will leave by this year

to be followed by portugal and ir lan. the exact timing -- >> what will force them out? >> two possible things. the contagion onfrom greece, speculators will move on to the next target. i think the bigger problem is if greece does better outside of the eurozone, as we think it will, i think other countries will be forced to follow. >> thank you for that. we'll take a short break. still to come, all eyes will turn on congressman paul ryan as the republican national convention today. more on that when we come back.

second half of "worldwide exchange." here are the headlines today from around the world. hurricane isaac roared ashore. the slow-moving storm striking the u.s. gulf coast with the threat of heavy rain in low lying areas, including new orleans. more than 90% of oil production in the gulf region remains closed but crude prices trade better on expectations that energy facilities won't be hit autos hard as expected. earnings at china's third biggest lender jumped agbank, although analysts warn easy profit at big chinese banks may be over. glencore shares are at the bottom of the ftse as norway sovereign wealth fund, major

xstraa shareholder is opposed to the $30 billion takeover. very good morning to you. if you just joined us stateside, futures are indicating slightly negative start. dow trading below fair value, three points below fair value for nasdaq and s&p 500 is below fair value as well. ftse down six points. european stocks have been down around 30% during the first two hours of trading. the ftse yesterday, flat on day back from monday holiday.

xetra, cac and ibex down today. spanish yields are higher, over 6%. catalonia, spanish regional government asking for assistance from madrid government. they want it without conditionality as we continue to see deposit outflow. we're just a bit of robach on ecb plans about whether they want to cap bond yields, now seems to be moving away. yields in u.s. as we look ahead toward mr. bernanke in jacksonville are lower at 1.2% on the ten-year as are ten-year bund yields, trading at 1.3%. currency markets, euro dollar is at 12557. aussie/dollar back down toward the one-month low on tuesday. sterling/dollar, steady. what about the asian session? we have more out of singapore.

>> thanks, ross. more oinvestors awaiting the wyoming gathering and ecb meeting yesterday. steel makers and oil majors, sold off heavily on profit taking. airlines tumbled on sour earnings. agbank reported 21% in first half profit in line with reuters forecast and we'll watch stock reaction tomorrow. shares in hong kong followed suit. in the red, china blue chips such as china coal energy, chalco and costco pacific weighed on the hang seng. blue chip down as worries. nikkei climbed 1.4% helped by 35% surge in renasase on kkr's

investment offer. sharp shares after announcing a voluntarily retirement plan. kospi higher by 0.6%. samsung electronics extended it's rebound, up 3% today. lg electronics surged more than 4% after unveiling new smartphone. gains in telecom were countered by loss in weak commodity prices. sensex lower by 0.7% at the moment. back to you. >> we have comments from mario draghi. the ecb will do what's necessary and act within mandate. it says the ecb is not a political institution and he says fulfilling our mandate sometimes requires us to go beyond the standard monetary policy and this may at times

require exceptional measures. exceptional measures he says would still be within the mandate. those comments from mr. draghi, the first comments since it was announced he won't be going to jackson hole for symposium there. this comes as well as we've seen italy, results ofthy auction coming in. they have sold 9 billion february 2013 t-bills. average yield, 1.58 on the six-month and 2.45 previously. yields continue to come down for italian short-term borrowing costs as well. bid to cover, 1.69. healthied by to cover, 1.61 previously. at the same time we turn our attention back to the louisiana coast. hurricane isaac is raking in at the moment on slow march toward a fortified new orleans. category 1 storm made initial

landfall before 8 p.m. eastern at the mouth of the mississippi river. and a second landfall this morning just west of portfourchon. they say it's stationary and expected to head over the coast before heading inland. unleashing heavy winds and rain, knocked out power to more than 200,000 customers. rigs and refineries virtually totally closed down with 90% of production shut as a precaution. as far as gasoline and oil prices, crude off slightly, gas down around 1.3%, and natural gas is also trading slightly lower. there are thoughts energy installations are coming through relatively unscathed. we'll head to the port of new orleans where brian shactman has been hunkering down. republicans have kicked off their convention tuesday with

several speeches to make the case to voters as mitt romney for president. he was officially nominated in a roll call vote by state gop delegates. he'll accept the nomination on thursday. romney was in the spotlight last night, as ann romney says her husband has worked hard to achieve success but understands hardships facing american families. >> i cannot tell you what will happen over the next four years but i can only stand here as a wife, a mother, a grandmother, an american, and make you this solemn commitment. this man will not fail. >> new jersey governor, chris christie gave keynote address. he aimed some remarks at president obama and says romney would be able to tell american the hard truths needed to bring the country's deficit under control. >> i know the simple truth and i'm not afraid to say it. our ideas are right for america

and their ideas have failed america. >> joining us is boris, krinice see you this morning. we'll get mr. ryan up today. how big a challenge does he have in this conference to underline his vp credentials? >> it's less than challenge, more opportunity. it's paul ryan's opportunity to go out and prove exactly what he is. he's someone who's a heavyweight on the budget. someone who is a serious candidate for a vp. and he's someone who will underscore the fact we have a very much of a big boy this time around. mitt romney and paul ryan have been experienced at every level. it's a good opportunity to go out and make a case, not just to republicans but to the american people that he is well qualified to be vp and would be there to

stand in if necessary to be president. >> would we get necessity details on budget plan or not? >> i think we'll get a vision. a vision for paul ryan and that does include his budgets and includes the latest budget he had, which passed the house. you will hear some specifics he's wanted to put out there throughout the budget he's proposed. the last one that passed the house. overall, expect more of a vision, expect more of a general overview of what he believes. more importantly, what mitt romney believes, because this is mitt romney at the top of the ticket. it's not the paul ryan plan. it's the mitt romney plan republicans will be running on november 6th. >> what will romney do? how will he sell himself, then, when he delivers his speech? >> what i heard from ann romney was the emotional appeal from republicans. what mitt romney will do on thursday is he's going to say, i've been successful everywhere

i've been, private sector, public sector, olympics, everywhere you look, i've done well, i've succeeded. trust me and i'll succeed for the next four years for america the way obama bo has not done. this convention is is more uplifting rather than being overly negative. chris christie didn't mention barack obama by name, calling him president obama. why is that? republicans are saying barack obama is a good guy, a nice guy, you might have voted for him the last time around but he simply has not delivered. mitt romney has delivered everywhere he's been and he'll do so again once elected. >> it seems republicans -- it's an interesting point you raise. it seems to me, i don't know why they got vovd in personal stuff and brought the campaigning down to petty levels. surely the smart thing to do is campaign consistently on the economy and nothing else and take personality and everything out of it. >> i completely agree with you

on that. actually paul ryan underscores that choice by republicans to raise the level of this election, raise the level of the campaign, have someone on the ticket who's a whiz on the budget, who knows the budget inside and out, paul ryan, and some pundits would say paul ryan is too serious. i disagree with that. we have two people on this ticket who knows what will it take to get america out of this slumpb. we've had 8% unemployment for three years now. it's been a tough go for america. barack obama's policies haven't gotten done. we have two people who will turn that around when elected on november 6th. >> we'll see what happens. thanks for that for now. good to see you. we're getting some reports from emergency management officials suggesting we have got over topping of the levee in southeast new orleans. we're now getting reports of an

overtopping of the levees in southeast new orleans. we'll keep our eyes on that. eurozone merry-go-round goes round and round italy and germany come together for high-level meeting. at bank of america, we're continuing to lend and invest in communities across the country. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future for everyone. ♪

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these are your headlines. hurricane isaac with report overtopped levee in new orleans. 90% of the oil production shut down. china's agbank profits up but analysts warn easy profit at big banks in china may be over. t-bill auctions out from italy this morning. good news, the takeaway, yield is lower, demand is still solid. despite the fact ten-year yield is higher the auction is going well. we have some comments out from mario draghi, the first words we've heard from him since it was disclosed he's not going to jackson hole. he's saying the ecb will do what is necessary. they will do what's independent,

act within their mandate. essentially sometimes the situation demands they take extraordinary measures. it says strong decisions have to be made to manage the euro and still says germany needs to remain anchor of strong euro. so, single monetary policy may require exceptional measures as i say. that is the background as italian prime minister mario monti arrives in berlin for talks with angela merkel. part of the merry-go-round of meetings as european leaders work to forge tighter economic policy. sylvia, i'll see what you think of these comments from draghi in this interview. political union can and shall develop from parallel with fiscal and financial union. strong decisions have to be made to manage the euro.

also repeating their independence. those comment he's talking about in terms of unions, political unions, how does that marry with the sense of what's happening in berlin and how they see those steps being taken? >> first of all, i think angela merkel could sign up on each of those statements. that's what she's pshing for. stronger economic union. this is what the fiscal compact is all about at the end of the day. extraordinary measurements by the ecb, one could cynically say, isn't that what they've been doing since we headed into the subprime crisis? we've had a whole host of ltrs, already extraordinary measures. we had covered bond program, bond buying programs which will likely be revived. we've had the three-year lgo, of course, interest rates heading toward zero. we've been flooding the money

market with money on tap at a secured low interest rate. so, i think these are all extraordinary measures. what the market, of course, is waiting for is is that mario draghi steps up next week at the ecb meeting and says, we're going to buy everything above a certain interest rate in spanish yields, in -- spanish bonds, italian bonds, whatever. i whoever is if this is the extraordinary measures they talk about. i would personally almost consider is suicidal for a central bank to guarantee something like that. in the past they've always said, we will never give a number but we'll see. angela merkel and mario draghi, i think they -- we've had the script. we've had it from others last week. stick to the reform process. we must push for more europe and we're determined to defend euro and everybody who's in it. is that really new? no. >> thanks for that.

>> we're getting reports now that water has flowed over the top of a flood defense in southeast louisiana early today when hurricane isaac caused huge rains. brian shactman, our very own brian shactman is in the middle of the storm at port of new orleans. >> very wisely we've chosen a hat to protect the hair, brian. looks pretty rough there. >> reporter: i know, i know. it's much worse when we went to bed last night. my first hurricane. definitely feels like a hurricane now. reports of levee breach at plaquemine's parish. that's not in new orleans. in term of the oil and gas stuff i've been covering, 93% of the entire gulf is shut to oil production, including everything, even the texas coast -- wow.

in terms of gas it's a little less. a lot of the gas rigs can get up and move out of harm's way with oil, platforms and so on. we won't know the damage out in the ocean. in terms of the global oil market, it's a major supplier for the u.s., a quarter of the u.s. production comes out of the gulf. when the storm is done, they'll assess the damage. it's a wait and see situation. if there's no damage, they have coast guard approval, safety checks and get personnel back there. it will be at least a week when the storm ends to get these back up and running. definitely a hit to the oil and gas sector. russ, one thing i want to point out to people, you have to separate refining from oil production. there's actually plenty of oil out there. refinery are the issues down there. gas prices are close to all-time highs for this time of year.

if they can't refine enough gas, they can't necessarily keep that price tamped down. refineries seem to be the biggest concern here right now. other than the wind and the rain. >> brian, thanks for that. i hope you stay safe. brian will be reporting later in the day on cnbc from the port of new orleans. still to come, brazil central bank is set to cut rates for the ninth straight time but is the cycle coming to an end? we'll discuss that. [ male announcer ] drive a car filled with as much advanced technology as the world around it. with the available lexus enform app suite, you can use opentable to make restaurant reservations. during the golden opportunity sales event, get great values on some of our newest models. this is the pit of perfection.

brazil is in focus, expected to lower to 9.5%, the second rate cut. coming to an end after that. the economy is starting to show signs of recovery. carlos, head of latin american division at exclusive analysis. thanks for joining us. we had some pick up of data, retail sales of economic activity jumping in june. does that mean if we get 50 basis cut points today that would be the last in the cutting cycle? >> i was expecting that in light

of the economic pick up, but the problem was figure, july, june, is not as good as june figure. therefore today there's a big decision to be made here. if the economy is not picking up, what has happened in june will temporarily rebound, then the central bank will cut interest rates again. i think what we've seen in brazil since mid-2011 is a big dilemma for economies for the central bank. this is a country with hyperinflation. nonetheless in mid-2011 they took a decision to start cutting interest rate despite the fact that the level of inflation was well above -- it was 7%. now is 5%, far better than last year. so, if the central bank was brave enough to cut interest rates last year when inflation

was 7%, i don't see why they're doing it now if the economy is not picking up. it's a question now of monetary policy the next, fiscal policy? how much should we be looking at, in particular, toward maybe infrastructure spending. there seems to be a lot of fiscal stimulus instead -- >> now is the time for fiscal policy instead of monetar policy. possibly we're reaching that level in which interest rates will stay there. now is the chance for fiscal policy to re-implement, for example, over the last two days there's been rumors that actually brazil is going to relax primary fiscal surplus,

which has been part of credibility, which is normally 3.1% gdp year after year. it appears the president of the central banks are considering relaxing these. it suggests to me that now brazilians are going to try to fiscal policy to add to the significant reduction in monetary policy. >> brazil's grown average 4% a year. can brazil get back to those kind of growth rates without inflation rates? what is achievable? >> brazil we have a problem to grow beyond 4%. i think the 7.5% of 2010 was significantly sustainable. we see brazil going to over 3.5% not this year. i think brazil manage to grow 2% a year, it will be a big

achievement. i'm talking more about 2013, 2014. i think the goal is to do things in the right directions. one is relaxing fiscal policy, but at the same time, there is a set of structural difficulties for brazil, including excessive high taxation in flexible labor markets. very difficult financial situation. for that reason, i don't think brazil is going to grow below 4%. >> thanks for joining us. head of latin american division of exclusive analysis. still to come as hurricane isaac makes its slow crawl inwards, we'll have more from louisiana. plus a reminder of where futures are now. implied for slightly weaker u.s. open.

welcome back to "worldwide exchange." i'm ross westgate. these are the headlines. hurricane isaac roars ashore. more than 90% of oil production in the gulf region remains down. crude prices are trading lower on expectations that energy facilities won't be hit as hard as expected. ecb prosecute mario draghi says the central bank may need

to make strong decisions to save the eurozone. if you've just won't up and joined us stateside. futures indicating a slightly weaker start for u.s. stocks. still aways to go ahead of that. s&p 500 a below point fair value of the nasdaq and dow following a slightly weaker session in europe. the ftse flat on first day back from the bank holiday. down around 0.5%, ibex down, and yields in spain, ten-year yields up a little bit back over 6.5%. plenty of people have come out today on cnbc globally and talked about what investors should be doing. here's a recap of some of those thoughts.

>> shorter aussie/dollar because this benefits the world in which the fed remains doggish but not doing qe. prices remain relatively elevated. >> if you look at valuation of equities they're attractive, especially over medium terms. if you look at alternatives on fixed income space, you can't be very excited about bunds or gilds are relatively astraktive. >> gold is the clear winner. i think gold prices are fairly priced in qe3 but perhaps what they haven't priced in is exit of one or two countries from the eurozone. qe3 helps but the real factor

that drivers is higher is the breakup of the eurozone. >> those are some of the thoughts from this morning. let's remind you what's going on with hurricane isaac. water has flowed over the top of flood defense in southeast louisiana today where we've seen huge rains. just out with brian shactman in.new orleans and we saw the strength of the wind and rains. emergency management officials in plaquemine parish are reporting overtopping of a levee on the east bank. that will result in significant deep flooding in that area, according to the national weather service. the weather channel website as well. this is not the new orleans levee, worth pointing out as brian mentioned earlier. we'll be going out to louisiana and a live on the ground report from scott cohen on that shortly. beforehand, u.s. retailers are banking on a back to school boost. transition alleyly second biggest shopping season of the year after christmas holiday.

mattel is tailoring its product to take advantage of the expected spending spree. executive vice president at fisher-price and joins us now. very good morning to you. thanks for joining us this early. we appreciate it. how would you size up this back to school period? >> good morning, ross. mattel and fisher-price in tarl have been investing in our brands over the last couple of years and really preparing ourselves for, you know, what are generally some challenging economic times. we feel we're very well prepared with the breadth of the portfolio we offer to give the consumer a great value for money proposition at this time. >> so what -- you talk about value for money here. what happens on the margin side of this? how keenly priced to do you have to make products? >> we were always in a competitive environment.

because of the breadth of our portfolio and brands within it, we always have a product at every price point we're able to offer a consumer in that form, whether hot wheels basic car or, you know, through to $70 or $80 merchandise that sales around the key critical kris malperiod of the year. that breadth helps us in being able to offer a great consumer proposition. >> you have interactive books, telephones and clothes as well. what particularly sells best in this season? >> usually merchandise associated with back to school, ba backpacks and licensed products we would do from a barbie perspective. within fisher-price with children being born all the time and birthdays happening at every moment, we offer a great comparison price point around there. we make the acquisition of thomas the tank engine. that's a fantastic brand that

has licensed products associated with it that does sell at this time of the year. >> how are you sizing up the run into christmas and other holiday season here? what are you gearing up for in terms of the level of demand? we're expecting strong consumer demand leading into the end of the year. we know it will be very competitive. but as i said a little earlier, birthdays and christmas always happens. we feel we have a strong lineup to be able to represent to the consumers at that time. we've got great product in the thomas the tank engine range. we have little people disney castle that's already selling very well for us in that form. we are very optimistic we'll perform well within this season. albeit, there are challenging times at this moment. >> that's what i want to get at. is there any shift -- are you looking for any shift?

housing numbers have been better, data has been better. are you seeing a shift in environment in terms of the retailer? >> not at this moment in time. i think understandably retailers are looking for companies that are investing within their properties to create the demand for their products, the critical season times. again, at fisher-price we've done a lot of work in investing in new advertising campaigns, getting invested in the digital arena to entice consumers in terms of creating that demand. clearly, we have to make sure that we are doing that to make sure we are in economic environments and they vary around the world. >> thank you for joining us, executive vice president of fisher-price. back to new orleans for the

latest on hurricane isaac. it's slowly making its march toward crescent city, drenching everything in its path.

just a reminder of the stories we're following today. hurricane isaac roared ashore

with reporting ittopping levee. all eyes on paul ryan as he's set to take the stage at republican national convention. we'll take a break. when we come back, we'll take a look at ben bernanke's big speech from jackson hole, and ann romney introducing her husband to american voters. >

angela brayly resigned over wellpoint. the company has taken big losses on medicare plans in california and recently cut its full year

earnings forecast. wellpoint's board says it will look at internal and external candidates for replacement candidate. stock up today 1.4%. john paulson is reassuring clients investors aren't fleeing his firm even though his funds have flagged. last week citigroup's private bank decided to stop investing with paulson. he says he's disappointed by the move but notes fund withdrawals haven't been unusually high. down nearly 13% this year. nj services in new orleans have reported hurricane isaac topped a levee in the southeast part of the city. cnbc's senior correspondent scott cohen is in new orleans and joins us for more. it's going to be an interesting connection.

where is this levee, how far away from the city is it? >> reporter: the levee is in plaquemine's parish. plaquemine's parish is southeast of here. it is not part of the new orleans $14.6 billion flood renovation/repair after hurricane katrina. the issue they're dealing with is this kind of rain and wind -- >> it is a hurricane. that's all i'm going to say. at least we got to hear that. you can see the amount of water and rain coming through. with a slow-moving storm, that's the issue they'll deal with, is the volume of rain coming down because of the slowness of the storm. we'll try to re-establish contact. i think you can forgive us he's in the middle of a hurricane with heavy rain. european stocks at the

moment are down 0.5% ahead of the u.s. open. u.s. futures are pointing to a mildly down start. a little negative. s&p has been indicated down about a point or so. and dow jones down 11 points. nasdaq currently down 1.5%. what about agenda stateside today for business and economics? revised second quarter gdp is out at 8:30 eastern. growth is forecast to be revised upwards to 1.7% from the previous estimate of 1.5%. at 10 a.m. we'll get jooil july pending home sales. at 2 p.m. it's the fed's beige brook. brown-forman report today, and also heinz, pandora and tivo as well. other stories, fidelity investment promoted abe gaigail

johnson to head all core operations. johnson will still report to her father, edward johnson, who is chairman and ceo of the company. analysts say the move makes it obvious that she'll eventually replace her 82-year-old father as fidelity's chairman, who currently has no plans to step down. u.s. courts have set september 6th for a permanent ban on samsung's smartphones. south korean tech giant's shares closed up 3% on the news. is the annual jackson hole summit gets under way one key player who will not be attending is ecb president mario draghi. now, cnbc will have full coverage of the event throughout thursday and friday. that's when the federal reserve chairman ben bernanke will give

his much-anticipated speech. we have had comments out, even though mario draghi is not there, we have had comments from him this morning. we'll bring you up to speed. printed in a german newspaper, an he said ecb will do what's necessary to ensure price stability. they will remain independent. policy may require at times exceptional measures. those exceptionals, we believe, they're working on. he says, building a strong economic union requires a process with correct sequencing. it's going to be fairly important, bearing in mind we need spain to request a bailout to get any of these moves going. draghi says, political union parallel with fiscal, economic and financial union. one of the big questions surrounding the eurozone if you're going to get that move is if countries are willing to give up sovereignty, in particular,

whether france is prepared to do that. bonds in light of those comments and not a bad t-bill auction from italy will yields slightly higher in italy, 5.8 %. crept up in spain, up 6.5%. they are lower in germany, 1.3 2%, and gilts back 1.48%. italian yields have dipped back slightly where we saw t-bills come down. euro/dollar, not far from the se-- essentially 1.2559 bute got up to 1.2590, which was that seven-week high. dollar/yen at the moment, 78.52 as well. other stories, new jersey

governor chris christie giving a key note speech at gop convention last night. mitt romney speaks to the convention on thursday. let's listen to what governor christie had to say. >> i know the simple truth and i'm not afraid to say it. our ideas are right for america and their ideas are failed america. >> and ann romney was also in the spotlight, a speech aimed as showing the huge side of her father. she says he's worked hard to achieve success -- or her husband, rather, he's worked hard to achieve success but understands hardships faced by american families. we'll hope to get out to john harwood fairly shortly for more on the republican national convention center.

let's remind you where u.s. futures stand at the moment. s&p 500 currently down around two points. dow jones around ten points. nasdaq around 1.24. we've seen oil prices -- we heard from brian shactman a little earlier. we heard that production facilities had appeared at this moment not to have been damaged by hurricane isaak. by hurricane isaac. brent as a result also down today. this is light crude currently trading lower. brent down nearly a cent in trade to $111.59. the interesting point is how much political tension is in those prices with the global economy currently showing signs of weakness. interesting to see brent trading at 1 11.55. chinese companies are seeing a rise in late payment and debt

defaults. the state-run newspaper saying money owed to corporations like machinery is coal is at high levels. the paper said those surveyed are they may spread and spread to other sectors. china's top planning committee says steps to curb real estate inflation have been effective but not everyone is convinced. they are calling on the ppoc to be more aggressive to cuts to banks reserve requirement ratio. we've seen hbsc come in higher. we'll get another indication of chinese growth when pmi is released on saturday morning. they expect manufacturing to ease to a nine-month july to 50 from july's 50.1.

back to europe. european banking union needs to be put in place by december in a joint news conference, herman v backed him. this is spain's catalonia region has requested a 5 billion euro bailout from madrid. catalonia regional government is struggling with refinancing debts of 42 billion euros. this may be one of the reasons we've seen spanish yields spike a little heighter today as we continue to see euro/dollar trading to seven-week highs. those spanish yields, we were a little firm -- higher, 6.54% and higher across the board as well on that. a big test is going to come tomorrow for italy.

we'll get a new ten-year being issued and a five-year as well. we'll get a gauge of sentiment on the eurozone cries today or tomorrow with the italian primary auctions as well. big redemptions coming through, before. heavy amount of redemption andishance for italy to get through which is why the monti/merkel meeting is important and if monti can have merkel come up with a spanish bailout, which is the prerequisite for getting any funds and then the ecb action. the german constitutional court to come in. remind you of some of those steps we have to go through. merkel meets monti today, rajoy meets van rompuy.

john harwood joins us for a quick preview of the republican national convention. what's going to be the big deal? >> reporter: last night was the first important night of this convention. you had chris christie giving the speech. you played a bite a minute ago. ann romney was more important because she was trying to make a personal connection between the husband she knows and american voters, they haven't warmed up to him so far even though he's close to barack obama. that's what made last night so important. she said, i am speaking from the heart about our hearts. that was an important line. >> plenty more to come from you in "squawk box." thanks for that quick tease. we'll take a break. we're going to wrap the show up. "squawk box" is coming up next. stay here on cnbc. hope you have a profitable day.

good morning. hurricane isaac makes a second landfall. pounding the gulf coast, causing major flooding. 18 miles of levee overtopped in lose louse. gop making its pitch for mitt romney in a prime time speech last night, ann romney and chris christie cast the presidential candidate as relatable and decisive. >> let me say this to every american who is thinking employ who should be our next president. no one will work harder. no one will care more. and no one will move heaven and earth like mitt romney to make this country a better place to live.