who have suggested they're trying to dismantle the company. so this is the latest as rothchild tries to come up with a rival bid and keep the stock listed here in the uk. the offer expected to be about $1.4 billion, but it's not just a uk venture either. this could involve powerful forces in indonesia, as well. there are suggestions rothchild is in talks with a current presidential candidate. and let's move on to rbs. we mentioned it's been reporting its numbers. getting reaction of 2.71%. the company posted a third quarter net loss as the company takes more impairment charges, but also more provisions, as well, as china shared some noncore assets trying to restructure the business in terms of the latest provision. this amounted on 400 million

pounds. the question is whether rbs has seen into the charges in relation to the scandal. we asked in a first on on cnbc interview. >> we have to see how things play out. at this point 400 is our best sges matt of how much we'll need. >> what was the main point investors were trading on? >> rbs is a recovery stock and i think the market recognize it is. ultimately it won't be the deni defensively it won't be the utility stocks. rbs falls in to the category. it's doing a lot on get back on the path of growth. welling less on the wholesale

banking market. did manage on ipo successfully, as well. so it is getting back on the road. when it starts paying dividends, it will attract a whole different investor. and rbi could be trading a lot higher than it is at the moment. >> we noticed impairment charges were a little higher than the market had expected. do you think that's a little concern for investors? >> i think it is a concern for investors. we could find that those type of impairments with sandy with regard to the scandal, those do creep to the up side, as well. but ultimately i think rbs is on the right path and drawing the line on these issues. and as we've seen with the market reaction to lloyds yesterday and rbs this morning, investors are fairly encouraged. >> we also waited to see who is going to buy those 15 branches

of santander, unexpectedly pulled out of the deal. sort of an overhang of the stock, it wonders what price it can attract for those branches now. >> absolutely. leaves other parties that could be potentially interested and normal pressure on on rbs to off load these banks. but it can only do it if the market is there and there is a buyer out there for those markets. so we'll have to wait and see what happens with those markets. >> so far decent performance so far for the stock out of the gate. thanks for joining us. and just a quick check of the stoxx 600 as it moves throughout the morning trading session. creeping negative, but not too negative. >> thanks very much for that. our guests are already chatting amongst themselves. so i have to join in.

i was questioning whether we've had the rally that would include decent payroll figures. ie anything bad figure could mean we're going down today. i don't know if you have any view on this. >> i mean clearly a good one would be a positive. but -- >> in the market already? >> i think there's been a lot of between news in the market, that's true. we could have a little bit of a pull back. at the same time, valuations are still attractive. we have two areas of growth, china and the u.s. doing slightly better. not saying they're growing very fast, but they're not detak deterioratin deteriorating. that's very important. and in europe, you have a situation where i think the degradation is possibly troughing.

>> given everything we've heard, i think if we didn't have this going forward, i think there may well be. but a lot of bad stuff coming in the corporate earnings from the made being a crow in europe. >> this is not a market being supported by earnings. the market is being supported by liquidity, asset allocation shifts out of bonds and people prepared to take a view the long term pe. if we look at the 1442, if we can get up above that level, then the rally is back on. but we were at a very important technical point yesterday. the second thing we're looking

at today is the euro-dollar. the rate has been very stable, but it's been highly correlated with the s&p. about 80% correlated. the historic relationship is between plus or minus 20% correlation. it's a bullish figure that people will start to look at asset classes differently from each other. but it's an important day today. and if we tonight breach that higher level, then we will probably come down next week. >> is this another reason why managers haven't been making money? this i heard this last year. assuming they're all running in tandem with each other. >> you you should look within equities about. you have spread in performance between stocks is dramatic. so i would disagree with that.

there is correlation between risk on, risk off, that's for sure. but when you have to give money to the german government to it take your money, i think there's something absolutely wrong with this. and i think if you think of equity risk premium for example, in five years time, are we going to look back at now and say, well, things are sort of troughed a little bit, that was the time, even though markets have had a very good run in the past 12 months actually. >> so we're coming out of to a certain degree, but we have these enormous disparity in 9 perfo the performance of stocks. >> it has been those macro funds that are dealing in all those asset classes who are saying hang on a minute, what are we supposed to be betting on here. there are no clear trends.

very high profile ftse listed companies that have trend following software that perform extremely poorly. but, yes, you do have the situation where bonds on any kind of reasonable history are ridiculously overpriced. at some point that will lead a wave of money to come into equities. the earnings season isn't hugely supported about to do it right now, but i think it's definitely coming. and i agree good you're looking back from five years time, you will think that's supported. >> there's over your left shoulder, i don't know if you can see it -- >> they do that on purpose. >> let's take a close look at

this stock. cac down about a tenth of percent in france, but al came tell is o alcatel after a second straight quarter of losses, reviewing its options to strengthen it balance sheet. earlier we spoke to their ceo who insisted his turnaround plans will work. >> i know what we have to do. i think we're absolutely determined to go and do it. at the end of last year, we had 4% operating at the company. not totally happy, but in hindsight, it was pretty good. the first nine months in this industry has been awful. my situation is it's been awful for everybody. and if we're going to do it, that's my only focus today is we're going to execute cost reductions, market improvements

and balance sheet improvements. >> the market giving the stock a big thumbs down. let's get out to stefane for more. market still concerned about the cash taking places at alcatel-lucent. >> yes, can definitely the numbers were really negative and it's increasing the pressure to speed up the restructuring plan of the company. this morning it says it was reviewing all options to strengthen it balance sheet. the recent job cuts are part of the plan. they stated they would cut 500,000 jobs worldwide and 150,000 jobs in france. that's about 16% of the workforce in the country. but they're also continuing assets at it disposal. how much time the markets will give the management of the company to improve the situat n

situation. declined by 2.8% on the quarter and impacted by the crisis in europe with telecom companies nolts spending as much as they should. saying that the first nine months of the year have been awful for the economic major and slowing down a significant part of its business. that being said, the company remains confidence but keeps the target for the months to come. they are targeting a better second half of the year and also is targeting positive cash position at the end of the year. this announcement obviously have not really convinced the market if you look at the share price.

alcatel down 5.5%. a few minutes ago we were down 8% on shares in paris. very quickly, i'd like to mention another story we just had at 9:00, the down nearly 8% in october, sharp decline for the second largest car maker in france, renault, dropped by 26% in october. over to you. >> thanks very much. our producers brought up that boa board. >> before we leave this correlation story, i want to gist go on a different basis and that's volatility compression across all assess classes have been drawing down volumes. what do you mean by that? >> basically because interest rates are low and they're

staying low probably through 2015. the consensus view is three more years of very low interest rates. it means there is very little risk out there and people as a consequence are pushing down volatility. realized volatility is very low. the discrepancy is what's happening in the u.s. and what's happening in europe where people are still focused on the possibility of a sharp down turn disappointment in the eurozone. probably more likely to be euro related. so there is still opportunity if they follow the trend we've seen in the u.s. for implied volatility to come down which is generally supportive of equity risk premiums. >> i look at the risk and the at

the money volatility, and several viewers saying high on the tail, but actually they are lower across the skew, aren't they? >> in the banking sector for example, the difference between implied and realized is 220%. 220% of the level in the states in europe, which shows it's still a lot of risk being factored in, even though overall volatility has come down in both the states and europe. still a lot more risk factors in to european banks. >> does that mean there is really a good opportunity even though at historic lows, even

though we're at historic low, still an opportunity to short that and make money? >> as long as you're comfortable draghi will continue to save the system. >> i think what's interesting is look being at the statistical data. but when i look at global stocks, volatility to me has not come down. i would say from a supply factor, you have very good companies who supplies on the down side, you have very bad companies who come up and supply on the up side. so the environment is shifting in a way because of low interest rates, but also because of the other regulatory that we haven't had for many years. i think this creates an environment where another kind of volatility where the fragmentation is still there p about. >> which brings me to the

question a lot of seasoned will roll their eyes and it didn't work. shorting is volatility and buying in-sdeks of volatility, as well. how dangerous is that? it sounds very dangerous, but obviously the risk reward might be at beneficial levels. >> cbo numbers are reporting stronger trading in vix. cop census numbers not having changed much for the full year, there is a big rebound im34r50ied in im34r50i applied implied. >> i think what's interesting is

there's a lot of expectations that have already adjusted that are not in the numbers. even though the numbers are coming and are not good, but people have talked about them ahead of type and stocks adjust. my personal view is that the numbers that are coming here are important. but i think it's more the ability for people to look at the next 12 months, around the transition of power and to say continued in terms of policy, low interest rate, flooding the market with liquidity or not, and that sentiment factor is very hard to price. >> let's get back to karen.

>> the stock right behind your shoulder, the lower end interest -- not there now. >> nothing there. >> i tried. but still on the back of earnings. the stop of the ledger 43.5 was the number, but also the it decline when pmis came in at 44.6, so we're now at the lowest level since july. but there is just a glimmer of hope out there and this seems to be the thing the spanish numbers of late. the new export numbers at 50.1. so in expansionary territory. this is the highest level since june last year and this is the

hope that external demand could prove for the spanish commitment. we mentioned the stock higher by just over 6%. it seems stocks is something the market likes. this is the maker of media products and the company raised it revenue forecasts for the rest of the year. it expects between 3% to 4% sales for the group, up from 3% previously. profit also sur prying to the up side, 107 million euros versus 19 10 104 million the market expected. s risk markets this morning just a modest move forward. tenth of a percent or about six points is what we're looking at.

carol lyn has been taking a loo at the numbers. >> a big reaction a couple weeks ago when a logistics firm came out with a profit warning. that's because it air freight unit saw volumes decline quite substantially. in fact third quarter volumes were done by 8% and main cull pretty was really europe. so that's why the reaction today may not be as extreme because it's largely baked into the cake. and that's why also the results that the company came out with this morning were hardly surprising. but let me remind you of the key revenues. 1.7 billion. gross profits rose by around 7% and that was actually a little bit better than expected. the company says it's taking reaction as a result of the declining air freight market, it's a point that the new head

of air freight, also accelerated it cost savings program. though some analysts pointed out it may not be a quick acceleration. but it did it say it will shrink by 3% in 2012. >> you can see this board, we've been oscillating between positive and negative territory this morning. i think this might be have something to do with nonfarm payrolls coming out later today. >> we've had a general rally over the next pew months. there is and underweight in the market which you're saying is a potential positive, but it's

just the timing. you think the way to underweight equities. >> absolutely. i think we're interrupting the path of normalization. we have some very serious issues to be thinking about in the next ten years. but i think, you know, timing the entry in the market over the next two weeks, three week, one quarter is very difficult. again, it's about visibility of policy and the fact that stocks are very attractive at this point. >> why are they attractive given what we've seen on the earnings picture? the most underperforming s&p companies, the 38 worst performing companies are the ones with the most exposure to europe. so i don't necessarily believe the pe of the internationally exposed companies. >> that's true. you have some company that goes are challenged, but the equity market looks to the future. so accepting if you thought the company would go bankrupt and if you think that you might be

seeing the trough and it's attractive on that basis, you're going to have i would say the stop of deterioration. >> i didn't see any sign of troughing there. talking about another stock, as well you make observe vagus on the tech plays. i think it was apple you talked about and the move there. just expand that for us. >> since the middle of septem r september, we estimate that the fall in apple has accounted for about a fifth of the fall in the index. and that's where people to get a bit cleary of some of their year to date gainers which they've tried to lock in, which i think is behind some of the performance statistics that you're talking about.

it may simply be a portfolio management decision rather than a commentary on whether earnings are peaking or on troughing. now, what wi sea coming b we see will put money in equities, but not necessarily this quarter. so we look at very technical levels, but -- >> hold that thought and we'll talk about what you're looking for after the break.

traders are turning pretty cautious ahead of the u.s. jobs report. rbs results better than expected, but admits it will take another 400 pound hit. >> i guess in general banks didn't live up to the standards of integrity and have the right cultures. so we're paying some of the sins for that. alcatel-lucent posted its second consecutive loss and the ceo saying he will turn things around. >> costs are down 12%. we take he's extremely serious. we are absolutely determined to

execute. >> and a report founder of rothchild isn't giving up and is looking for backers to fund and offer on to rival an existing $1.4 billion bid. >> markets open for half an hour. it's the end of the weak and we're waiting for the all important jobs report. markets are holding their breath because we're almost entirely flat. this is what's going on in a sector by sector account. gains of about 0.#%. industrials and financial services, while real estate and banks are also managing on to move modestly higher. on the down side, we do have sectors that are losing ground.

chief amongst them, health care down by 0.4% along with utilities, media and technology both up 0.2%. on the earnings front, several reports driving the big movers. alcatel-lucent, earlier we were discussing the results that have come out of the company and we made reports that it's reacted strongly in both directions. and that's certainly the case once again today. admiral also down after its earnings report, too, a 3.9% lower roughly for the shares of this company. third quarter revenue for the car insurer down by 2%. so another earnings story driving the stock lower. and also a pharmaceutical company down by 3 about.2%.

again, after an earnings report this highlighted problems with the generics plant in the u.s. so negative reaction there. on the plus side, though, up 6.6% just shy of results from this company, particularly flagging china in 2013. conversely negative reaction when we get negative sentiment around the particular china growth story. but working out well for this german company today. and i just want to mention, too, shares of air france again today in the biggest gainers list, 12.2% higher. we have figures out from this company this week also talking about cost cutting. and now we have the day two effect as analysts have upgraded their price targets. adding up to another positive day for that stock. >> let's move on. heineken may have fallen a

little flat, but the company still has reason to cheer. and ongoing battle of control for the growing asian market. chief financial officer from heineken is with us. the most recent figures just under line what we were talking abo about. the the u.s. is picking up. but europe remains awful. and is european negativity dominating the positive stories? or is it actually being negated? >> we are determined to win this both the developed and developing world. the nature of the challenge is different. the way we'll win in europe is

going to be different. we have very relevant brand offerings. the premium sector is doing very well and the premium is growing in europe. we also have other brands which are very relevant agreeing in euroyou'r growing in europe. we have to work with other developers to have a positive story with beer. we also need to regrow the capital. the capital is not growing. and for the long term, you want a healthy and die magic category for everyone to compete. there is everything which is healthy about beer. beer is much less calories than many thinks you can think about. >> many a morning i thought to myself why. >> beer has less calories than a glass of milk. the other thing --

>> i'll give me 3-year-old a beer. >> i wouldn't go that far. but beer is one of the few drinks that's absolutely purely natural. water, hops, yeast. >> beer is good for you. all these preg thantd mothers are cheering up. >> working harder to convince the female drinker. but you did make a strong pitch recently with the product placement in the new james bond film. >> the most important thing is that this partnership is valuable for both friends. heineken and james bond are all franchises, but remains very much dynamic.

so we believe the association of heineken with skrams bond will benefit heineken because my heineken positioning is to be a man of the world and james bond is the quintessential man of the world and it's universal value because every man lies a little james bond. >> that's very dangerous. >> we believe james bond bringing a lot to the heineken brand, but heineken brand keeps the franchise happening -- >> so a slightly less happy note, i'd like to talk about russia. announced some drastic measures for russia against alcoholism as we nknow life expectancy is ver short in russia versus other

countries. what does that mean for a company like you? >> goes without saying that russia is quite a difficult market to operate in in today's environment, so that's a reality before the good news, though, is that we are not as exposed to russia and the second thing is that the strategy which is to follow is a premium strategy and we've been very successful in that strategy. so we have today actually we're growing share and the other thing is that brand heineken is actually growing in excess of 20%. so our brand is growing with consumers. >> you seem to be one of the first movers in to emerging markets and i wonder if there is a brand fatigue sense you got there early.

>> it's an excellent question. on which times when i give trainings classes, people say how do you keep a brank account. you want to be consistent, but you want to be surprising. every once in a while, we try to come with surprising message that gets people. but what are they doing? james bond is one of them. nobody expected james bond to drink heineken and he's drinking heineken quite naturally actually. and other thing is our advertising. we're one of the first to move away from the big fat beer jokes and creating advertiser which is unisex, which is complex, and a lot is digital. we're leading in the digital world.

>> are you still getting the money or the funds from the board to spend? >> heineken is a brand building company. and brands are the life line of our growth and of our strategy. and this is one thing we will always preserve. does that mean in order to keep our brands interesting and growing we have to escalate that is this no. actually we maintain that as revenue, but we've chosen to invest in a more resonating way. >> heineken is an example of the themes you're talking about and indeed the new middle class.

campaigning for the u.s. election is back in full swing yesterday. i didn't see whether they were holding any beer bottles, but just five days to go now until the vote. the obama and romney hitting with full force. an michael bloomberg endorsed obama. he insisted obama could still fulfill the hope he implied four years ago despite what he calls a disappointing first term. meanwhile the president and his republican rival are focusing on change. >> we haven't can the same four more years. our xlant is five more days. >> you know what i believe, you know where i stand, you know i'm willing to make tough decisions everyone when they're not politically convenient. >> you have to ask yourself is america on the road to greece.

are we on the road to check crisis as you're seeing in europe and italy and spain and other parts of the world. >> we know what change looks like. and what the governor's offering sure ain't change. >> while the election campaign is back ork many american still struggling to get back to normal following super storm sandy. at least 98 people now confirmed dead, millions still without power on the northeast coast. rescue teams continue to search houses for victims. drivers face gasoline short annuals. the president's response may have gained him some votes. today's crucial nonfarm payroll report expected to show 125,000 jobs added in october, but the unemployment rate is seen ticking up to 7.9%. yesterday u.s. equity markets

rallied. still to come on the show, rbs ups its ppi provisions and admits it may face fines for the libor manipulation scandal. we have an update.

we have a decline from september. the output index falling to 4 #.7 and this is the 15th month in a row that we've seen the italian manufacturing declining7 and this is the 15th month in a row that we've seen the italian manufacturing declining..7 and this is the 15th month in a row that we've seen the italian manufacturing declining.3.7 and this is the 15th month in a row that we've seen the italian manufacturing declining. >> rbs says it is going to pay fines relating to it part in how libor and other interest rates were set. the bank is under investigation by both the uk and u.s. authorities. likely to settle after barclays fined in june. separately, rbs has confirmed it will take another 400 a million

pound hit they admitted they had been overly cautious. >> i guess we're guilt i along with the other banks of understemting wh inestimating w overall complaint response rate will be. so we still have to see how things play out.

i'm interested in whether the growth markets have premises or they're largely home markets. because it makes a big difference. traditionally looking at beer company, you think, oh, great, i'll go to the pub. but you drink the one that is in the pub, not the one you saw on the tv. so therefore the benefit of being the first mover in the market as you mentioned heineken was is big for in license premises. so i was curious where the growth is predominantly. is it in supermarkets or bars

and vauntss some. >> in developed markets, it's more in supermarkets than in bars because people tend to go out a little bit less. in the developing world, it's actually in both sectors. both are growing. and we need to remember that the role of each one is different. when you go in a bar and drink a beer, it's an experience and in our estimation, it needs to be all encompassing. in the supermarkets as you say, the challenge for us is of a different nature which is bringing to life our marketing programs down to the i'll. for example we are trying to bring james bond down to the aisle to be more competitive with our other offerings. we try to bring them to life at the point of purchase. >> final manufacturing pmi rising 43 ppts 7, up from the low in september.

we were hearing about the developed market strategy, but also of course heineken after the rest of the brewers and the asian market, as well. is it paying off in your mind? it's a vicious scramble, as well. all after the same emerging market. >> yeah, as one of my long term theme has been the super cycle of the emerging markets, the cycle between the new consumers coming on the plan thaet can spend between $10 to $100 a day, clearly that's about $30 trillion of capacity on to spenspend some of that will be spent on beers and cars, et cetera. when i look at company, it's what is the specific strategy, what is the local brand name. the beer market in china is a

very difficult market. you have partner, et cetera. you ever a lot of local players love to hear your views, but also you have it's a market that they've tried to enter quite early on on. >> premium brands and pop cities. so urban approach. and urban is one of the largest mega trends in today's world that on whiften passes below th radar screen. so our strategy is playing off. >> if you buy from local chinese stock market, you'd have a bloody nose over the last couple years. if you're a u.s. corporate trying to take van of those

longer erm domestics, the same risks are there. >> my favorite topic, the correlation. there is very limited correlation between gdp growth and actually sock market performance. a lot of what has been funded at the sales line is being taken out of working capital and if you get a more sophisticated investor base looking at this to say hang on a minute, this isn't all as it seems. >> and that get there is to see ski matt tig. we'll never get the consumption that people will get out of the emerging world.

as we get the number of cars per household, we don't have the resources for it. so i'm just wondering if too much growth expectation has been played on the emerge market story. given climate change and emerging markets, impact of deleveraging from the crisis, et cetera, we are currently consuming 1.5 times the resourc resources. add the 9 billion population by 2015, and assume that population wants to lead on the american way of life, you'll be consuming 4.5 times the planet resources. so it's absolutely not possible.

there's an element of saturation. the way we manufacture beer, the way we construct chips. if you look at a new product that can be a very exciting area, the carbon based man made substance, that is very conducive and people leak samsung are looking at it in terms of replacing chips. so it's not today, but the impact of the resources in general, if you think construction, if you think water, it's enormous. so it's now the absolute growth. it's how we accommodate 9 billibil

billion people. >> final pmi numbers for germany, 46. so in contractionary territory still. a little lower than the flash numbers. 45.7. and also retreat away from the september final numbers of 47.4. so we are seeing the manufacturing sector shrink for the eighth month in a row. the issue is can you ever move away from the single digit growth from market values. and get back to a high single digit number at least. >> when you look at the long term process spekspects of the category, it is forecast to grow.

beyond that we address different parts of the world. some parts we'll deliberately follow very disciplined premium strategy so it can extract more volume out of the volumes that we generate. some parts of the world, we have to develop the market like in africa. >> thank you so much indeed for joining us. all of you. >> thank you. >> our guest host is money is director of investment at old broad street research.

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