had hello and welcome to "worldwide exchange." i'm kelly evans and these are your headlines from around the world. bank of japan steps up its easing agenda under heavy pressure doubling its inflation a target and fed style open-ended qe starting next year. president obama lays out a liberal position for his second term during his inaugural address. and brewing giant sab miller

reports a growth in third revenue quarter after china's growi coldest winter in 28 years sees an increase in lagger. ross westgate is in davos. in the meantime, big news out overnight, this one for global markets. the bank of japan delivered what markets had been banking on with a joint commitment to double its inflation target to 2%. it says it will buy $145 billion of assets each month starting in 2014 with no set deadline to finish the purchases. all that said, the yen is strengthening this morninfor mot be disappointed, let's get

straight out tore kaori enjoji. we're seeing again in markets a little disappointment. did the boj not fully deliver here? >> i don't think so. i don't think that's the right interpretation at all. i think this was an exercise in showing that the government and the bank of japan, the central bank are on the same page. they certainly delivered that. i think the fact that it's an open-ended asset purchase program, it was more than what the markets had been factoring in. i think the dollar/yen moves are sort of moving independently right now. and i think a lot of that has to do with the comments that we had from government saying, oh, we're not trying to manipulate the currency, which throws into question this competitive devaluation story they were banking on. instead of being explicit about that over the last couple of weeks, now they're going to have to be a little bit more implicit about that. but the man of the hour, mr.

shiraka shirakawa, the bank of japan, here is what he had to say. >> translator: japan believes growth is important. we teamed up with the dwoft to strengthen our policies and work on this goal together as one. >> let's take a look at the technicals about this 2% inflation target. because at the same time today, the bank of japan is saying the price of fiscal '13 are going to rise 0.4%. and in fiscal '14, they say it's going to rise near 0.5%. how can they realistically achieve this goal? >> and the focus is shift flg what they want to do so what they'll be able to do. there's the sense in markets that why are they waiting until 2014? central bank independence has

died. if the bank of japan is serious about want to go deliver on this front, does it not need to have more aggression on cutting interest rates reserves, trying different kinds of asset purchase programs? that seems to be the concern here. >> well, i think this whole idea of dependance was it was interesting while it lasted. i think the government has come out today and said that no, we don't need to think about revising the bank of japan law. it was a threat they had out there before this statement came out. i think that independent story is something we can forget about for the time being. i think the interesting point is that monetary policy, anyone will tell you, has its limitations. especially in a country like japan. i think the onus is going to start shifting to the government itself and the government is looking ahead to an election, as we talked about many, many times. and here becomes the tricky part because they're trying to embark on structural reforms, they're talking about tax reforms, as

well. this will be a multi layered process and hopefully they'll be in power long enough to deliver some of those changes. i think the market was expecting for the bank of japan to come in .deliver everything that was going to solve all of japan's problems after decades of recession, then they were probably misguided. but for the moment, the reaction we're getting from people who were watching japan is they probably took as many steps as they could today to try and address this decision. >> kaori, stay with us. ed, welcome. you just heard a little bit of the back and forth. what's your own opinion here on what the boj has or hasn't delivered? >> good morning. thanks very much for having me on the show. my opinion is i completely agree with everything kaori said. even more than that, i would say to the viewing audience, look, this is the cramer moment for japan where you bring out the bells and the whistles and you toot the horn and you tweet and

you pound the table and you run around the room saying buy, buy, buy. the framework is now in place for elected politicians and the unelected bureaucrats who run japan to be on the same page in a multi year process to bring inflation back to japan. which is desperately needed. so the market reaction today is really not so important as far as the big picture understanding that. as long as the ldp is staying in power and they are certainly taking the right steps to do so, i believe, politically speaking, you're going to have a multi year partnership where the ruling elite bodies of japan, elected and unelected, are pursuing this goal of reflation. and it will be the effect on equity prices, on housing prices. it's going to be very, very dramatic. >> ed, where prices really matter in the short-term is dollar/yen. 88 or 89 or even 90 gives corporations breathing room and they need that breathing room

because there's still a lot of risks that they're facing out there. and if the earnings start to improve, if all the money is out there, if they're willing to take on more risks, then the boj's moves start to get more effective, right? how do you factor in the fact that we hit your ceiling on dollar/yen and that equation in the equity market over the medium term? >> sure. dollar/yen has been leading the charge on this. i had this conversation today with someone where generally thinking you think interest rates lead and foreign exchange rates will follow that. we've seen the dollar/yen movement be a leading indicator of what is going on in this country politically and economically. we believe that we'll see a further move. the range over the next one to two years is going to be something like 95 to 1075 we suspect. we suspect sometime this year we will break above 95 and could

close in on 100. the groundwork has been laid the build much greater investor confidence frankly than you've seen in this country in the past two decade peps that's why today marks a true inflexion point, i believe, and you'll see this play out not just in today's returns in equities, but in the next three, six, nine, 12, 18 months. you're going to see -- sometimes it will be two steps forward, one step back. but the yen is going to weaken. inflation is going to become a reality in japan. asset prices are going to accuracy. unless there's a dramatic change in government this fall, and we really don't see that happening, we see a further strengthening of the political will to enact these changes, the ground is set. we know what the next one to three years look like. >> that's interesting, ed. kaori, i want to talk about the action across asia.

if you look at korea, they're having to get with some measures to help korean exporters. this really, as we've heard comments about currency wars from elsewhere across asia, what does this mean for some of japan's major trading partners? >> i think the yen/won story is phenomenal. but yen/won is still not at the levels we saw in pre-lehman crisis 2008. there's a new guy coming in to help south korea, as well. and he ran on a platform to help small and medium enterprises, sort of moving away from the export model. you know, you know that the bank of korea has been very interventionist. they're prone to that. we might see a politician up there. this is an interesting point. from an industry perspective, when you compare the automobile companies to south korea and

japan, when you compare the steelmakers, when you compare the likes of posco to their peers in japan, there's more direct competition there than you might see effectively in the u.s. dollar/yen relationship. >> kaori, great point. ed, i just want to see, we are out of time, but you're talking about a true inflexion point in japan, a cramer moment where they run around screami ining b buy, buy, cramer is listening and he says that you're correct. he reads it the same way, too. we'll see if you're right. we'll see if this truly is an inflexion point. kaori enjoy ji, thank you, as well. now let's do more to check on the markets across asia. li sixuan is standing by. >> asian markets finished on a mixed note. indeed, a lot of focus on japan. the nikkei saw some profit

taking after the boj's announcement. kaori mentioned earlier, doubled its inflation tafrth and open ended qe starting next year. the yen has firmed up against the u.s. dollar, dragging exp t exporter stocks lower. property developers, automakers and miners were among the worst performers. but chinese banks reversed earlier losses extending a three-day winning streak. this despite the decision to lower bank transaction fees. the hang seng finished marginal in the green, but shares of vanke property slipped 5.7% today after the hong kong unit issued a property warning. shares of f&n pulled back after they competed with a rival bid finally bringing the curtains down on that five-month takeover

battle. the stock had rallied over 16% since last september. meanwhile, south korea's kospi gained .5%. australia's asx 200 finished flat. miners finished higher. back to you, kelly. >> okay. sixuan, following the developments for us across asia, thank you so much for that. as we turn to the session, you can see for the most part red behind me. about nine to one outpacing advancers. the stoxx europe 600, down 0.6%. the dax in particular is down by 11.25%. it's a big move for germany and it's led in part by what's happening in deutsche bank with those shares down more than 3%. we're seeing pressure on the ibex and the cac down .8%.

the ftse is down by .4%. i want to mention one name in particular here. and that's megette. it makes the charger for the batteries on boeing dreamliner 787. it is working with u.s. officials as that investigation continues, but it is one of their arizona-based subsidiaries. those shares are down about 0.3% today, but they are up since news of those incidents in japan grounded aircraft on january 7th. over here, sab miller, we'll get into this also in just a second, but those shares up 0.7.% after reporting that sales volume necessary china and across asia were weaker than a lot of analysts had expected. shares nevertheless moving higher. we wanted to show you swatch and richemont. talking about weakness in asia. now let's take a quick look at bond rates and focus on what's

happening with the core and the periphery. the periphery is selling off again. italy, 4.32%. gilt, falling towards 2% today. forex is the focus. it's probably going to be the theme of the entire year. the dollar/yen, look at this, down almost 1%. in other words, after the bank of japan decision, the yen is now stronger against the dollar by almost 1%. there has been some disappointment today. australia/dollar strong, sterling/dollar, down about 0.2%. plenty more to come on today's show. we will be looking at dynamic resilience. that is the phrase of the day in davos, apparently. we'll hear from the world's economic forum about this year's

theme. and we'll head back to tokyo for more on the bank of japan's inflation targets coming up at 1040 central european time. president obama calls for a more inclusive united states in his second term inauguration speech. we'll have in-depth analysis from former reagan and bush presidential aides at 5:30 eastern. so there's no reason to ever turn the channel. france and germany are today celebrating the 50th anniversary of the treaty signed by charles degall and conregard eisenhower. the french and german parliaments will meet in berlin. but with relations between angela merkel and francois hollande being what they are, laland has labeled today's festival a festival of

hypocrisy. what do you make of it? >> well, i mean, maybe that's overly cynical. certainly the relationship between the more conservative christian democrat angela merkel and the socialist francois hollande is less than cordial, less than warm hearted. they come from different sides of the political spectrum. but the bottom line is, we've had this over 50 years many times before. usually relationships between new french premieres and old german chancellors or the other way around are -- i wouldn't say frosty, but a little bit distant and then they grow with each other and at the end of the day, it's about business and not about warm-hearted relationships between politicians. and at the end of the day, push comes to shove, whether it's in paris or berlin, politicians and indeed the people involved have long decided if we want to survive in the global markets and not only in the markets, but in this global environment as

europeans, then that is what we have to do. we have to do this together. and at the heart of the european process is the german and french alliance. ever since the signing of the treaty, fist the was a peace effort, then it was an economic effort. now it's maybe a combination of all of economic or financial or social. it certainly is the urinan blueprint is something that the rest of the world looks at, it is largely being pushed forward by whatever berlin and paris work out together. and i think that necessity of doing things together has been relationed by both, whether there's a cordial relationship or not. >> silvia wadhwa, thank you. we'll have more from sylvia coming up later in the program. also, we'll talk brewing as sab miller sees heavy knews hit by a

cold snap in china. stay tuned for that. what are you doing? nothing. are you stealing our daughter's school supplies and taking them to work? no, i was just looking for my stapler and my... this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go... we got clients in today. [ male announcer ] save on ground shipping at fedex office.

welcome back to the program. sab miller saw a decline in third quarter revenue from china. sam heart is equity research analyst at charles stanley. he joins us now. welcome. your reaction to the results? >> well, i think the results themselves are pretty much as expected, really. volumes up 2%. revenues up 8%, as you say. i don't think the slowdown in china is very much related to a bad winter in china. you know, cold weather, wet, as well, obviously not a perfect environment for drinking beer. other markets have been pretty resilient, you know, other parts of asia have been good. india was up strongly. australia, volumes are down slightly, but the story there is more about integrating the fosters business. latin america was strong, as well. the u.s. was okay.

and, you know, some signs of softness in eastern europe, but i think that is very much to be expected in the current economic environment. >> we're seeing shares up about 0.6% today. what is your price target? >> we don't set official price targets, but we have an accumulated return between 5% and 15% on a one-year time horizon. we think the valuation is pretty much up near term. but we would expect the share price to moch up in line with earnings growth over the last career. we're currently forecasting low to mid teens earnings per share growth. >> and how important is asia and china in particular to that earnings growth? >> yeah, i mean, you know, china is still relatively small in the group context. i don't think they spit out profits to come from china, but i would put it at less than 5%.

asia probably accounts for something like 15% of profits overall. the real drivers for sab miller are latin america. that's the key driver. second to that probably would be asia, maybe europe, as well. do you think you're going to be more inquisitive? here we know we're seeing so much consolidation in this industry. we're still working through the fosters bit of it. more to come? >> i think probably in the longer term, there will be more acquisitions. for the time being, i think they're concentrating on the integration of the fosters business. they made a recent acquisition in turkey. again, i think they have plenty of work to do to integrate that. they're in the process of deleveraging the balance sheet. so i think that's very much necessary before going out and making further acquisitions. >> i know you like the shares. i know they're up today. but cold and wet conditions make me want to drink more beer, not less. >> i think the vast majority of on people prefer to drink, you

know, cold beer this a warm environment. i think they generally go for different drinks when the weather is cold. >> i don't know. sam hart is research equity analyst at charles stanley. sab miller is citing china's unusually cold and wet winter as the reason for a drop in sales from a year earlier. we wonder, don't those conditions make you want to drink more? send in your thoughts they're. worldwide@cnbc.com. tweet us, @cnbcwex or reach us directly. now, staying in the sector, the five-month long takeover for fraser and mead is finally over. oue conceded to its rival bringing the curtain down on one of the most watched takeover

values. here is the reaction. down almost 2%. thai beverage and oue up 3% and 4% respectively. let's see how they performed in september when they battle began. thai beverage seems to be the winner, up 38%. oue up about 15%. now, the world's biggest companies will regain the confidence to undertake more significant m&a by 2013 that shows appetite for transaction rising 15% over the past six months. david senior joins us now. >> good morning. >> wishful thinking? are we really going to see the start of more activity here? >> kelly, we haven't seen it yet, but we hope that we're going to. people like me have, every six months, said we think confidence is going to come back. there is a little bit of a sign. we've got announced deals worldwide are up for the three

months for the first time in calm of years. >> after a boring, dull 2012 an uplift in activity. was that u.s. fiscal cliff related, in your view? meaning was it one off, did it pull demand forward? >> i think we're seeing a market move which is based on easy money and the lack of nasty news. we're all sick of hearing nasty news and we're hoping that's going to start to feed into the m&a market from the main stock market. >> and so where in particular do you expect activity this year? who is going to be busy on weekends? >> well, i think every sector, almost every sector is suffering from the joint issues of a lack of growth in its own sectors and quite a lot of money building up in corporate owner sheets. so almost every management team is saying what do we do to grow? what do we look at buying? on the other side identity, investors are saying, hang on a minute, remember what happens the last time. be cautious. we'll see a push and a pull between them.

and we expect over the next six to 12 months, we'll see a slow increase in m&a activity, but it will be cautious, carefully targeted and it will be thought about. >> when you have easy financing and a lot of optimism, is this driven by a lack of optimism? is it macro positions used to whittle down companies to buy growth because it doesn't exist otherwise? >> that's exactly right. the other one is still people haven't been able to sell businesses successfully for the last two or three years. high quality businesses are out there and some of them will be for sale, as well. >> do you read dell's possible private equity move? what do you read into that? >> i read into that specific circumstances with dell. there have been problems getting those sorts of size deals done in the private equity markets in europe. perhaps we're seeing a special case of that in europe. >> do you expect the euro to remain weak for the rest of the

year? >> i expect the eurozone crisis to remain weak. people will look carefully at special situations across europe. >> and best performer of 2013? >> it's impossible to tell. let's say the whole of the market. >> very diplomatic answer there. david simple sop, thank you very much for coming by. some hopeful signs there. straight ahead on the program, talking of hopeful signs, our next guest is at u.s. oil production not seen since the 50s. what does it mean? we'll explore that when we come back.

. welcome back to "worldwide exchange." these are your headlines. the bank of japan steps up its easing agenda under heavy government pressure, doubling its inflation target and promising open ended qe starting next year. president obama lays out a vision for his second term in his innagul address. and this is the face of the

new mr. euro. earlier, we had a nine to one ratio of decliner toes advancers.inaugural. earlier, we had a nine to one ratio of decliner toes advancers. the ftse down by about .3%. public borrowing has inched up year on year in december. not too much of a reaction there to those figures, however. now let's take a look at the bond space. look for further fallout as we take a look at those figures and other news. we're going to get the german zew index out shortly. the ten-year bund yield is rising to 1.6%. trade has been mixed across the bond space this morning. we're seeing italy roughly unchanged at 4.23%. spain was about 5.2% earlier and has backed up quite a bit since being under 5% a week or two

back. 10-year gilt is coming in and you can tell investors aren't too bothered by net credit fell inching up slightly year on year. recapping one of our top stories today, the bank of japan delivered pretty much what markets were looking for. bold moves doubling its inflation target to 2%. but the boj switched to open-ended easing saying it will buy $145 billion of assets each month starting in 2014. the moves do follow heavy pressure from shinzo abe despite reflation and a flagging economy. but the yen actually settled higher with some economists. look at that. that is suggesting they ended up almost 1.2% above the dollar. there's questions whether the 2% dollar stated can be achieved. now there's plenty more on the boj's inflation packed with the government live. hi. >> hi, kelly. the bank of japan and the government issued a joint

statement that set a 2% inflation target today replacing its current 1% price. from japan's monetary policy has shifted into unexplored territory. the boj agreed to try and hit the 2% target as quickly as possible rather than over the medium to long-term. but the target will probably be difficult to meet. forecasts released by the bank showed that the consumer price index will rise to just 0.9% in the fiscal year starting in 2014. boj officials said that the 2% target will be possible if the country's growth potential is improved by further government reform. the joint statement is binding for both the government and the boj calling on both sides to help achieve the 2% target. the government promised to introduce measures for investments from companies. the central bank decided to pursue open on-ended monetary easing to achieve this target, suggesting it will implement more aggressive monetary easing

in the future. back to you, kelly. >> thank you. 1.2% been that's the strengthening we're seeing in the yen on the back of this decision. let's get a look at what's on the agenda for today and tomorrow. bh billiton is set to announce fourth quarter earnings as well as keppel land. france has put forward a candidate for the head of europe's new banking supervisory body. the french prime minister pierre moskovichi has refused to identify the person's identity. he supported the candidacy of bloom for the leadership of the ur roe group. it comes as france and germany today celebrate the 50th anniversary of the so-called treaty of friendship that was signs in 1963 by charles degaul and adenhour.

but with relations between angela merkel and francois hollande seemingly less cozy than those between the german chancellor and sarkozy, le something monde has labeled this festival a festival of hypocrisy. sylvia, can you gives a sense over there, you mentioned it's not as frosty as le monde has suggested. what more can you tell us? >> well, of course, angela merkel and francois hollande wasn't from the get-go a match made in heaven. we know that the conservatives not only here in germany supported nicolas sarkozy in the preelection campaign. but at the end of the day as far as personality res concerned, both francois hollande and angela merkel are very unpretentious business like

politicians. what we hear is that they are sort of working things out between them and the divide is not nearly as big as some of the newspapers suggest. you know we do love headlines and we do love friction and we love conflict. at the end of the day, they know they have to work this out together and that's indeed what we hear here, not only during the celebrations, but what we've heard over the past months and weeks. let's me bring in our guest. eunice, thanks for braving it with us here in the cold. you to, this franco german relationship needless to say during celebrations, everybody says how important it is. but is it still valid or i'm almost inclined to say it is as valid and important as it was 50 years ago? >> yes, i would agree. it is still as important as it was 50 years ago. france and germany still carry a lot of political and economic weight in the european union. in this regard, they are the most important countries.

but there's a second factor which links in which is that germany and france do often take on opposing points of view with regard to the solution for the euro crisis that other countries can rally around either the french or the german position. so once they have found a compromise together, they can lead in the european union. so yes, they are still pivotal and very important in bringing forward european integration. >> and as i said in the lead in, even though us journalists love the headlines, especially when you look at the anglo-saxon environment, the relationship between the country sess broken and the germans don't need the french any more and now in a united germany. one gets the feeling that at the end of the day with all the political oppositional opinions, at the end of the day, the germans and the french have realized they have to work this out together or they won't? >> well, you know, that's true. first of all, let me say in any political relationship as we

have seen with germany and france over the last 50 years, there are ups and is down pes.that's very normal. and one challenge that they have faced actually in the last 23 years or so is that there's been a shift in balance with the end of the cold war. during the cold war, waits really that germany carried more of the economic weight, france carried more of the political weight so there was more of a balance. this seem going from a french perspective has shifted. then germany is now with enlargement, with the fall of the wall, more or less in the geopolitical center. there has been a shift in balance. there's more potential for conflict. so it is becoming more difficult. but as you have said, you know, in your intro ductory statement, at the end of the day, germany and france are interested in finding solutions and they always do come together in the end. >> yes, we are not quite european yet. when we look at the appointment of the head of euro group, we

couldn't agree on the german who might have been the most qualified man. we couldn't agree on the frenchman because if the german he can't good the job, neither can a frenchman. and we had to agree on -- no offense to him, we had to agree on the compromised candidate, the dutchman. still a long way to go before we think european. >> well, you know, that is a good point, but i think this shows, again, that they have found a viable compromise that everyone can live with. >> often there is the criticism because the german/french alliance is the driving force, of course, in european integration, there has been the criticism especially between merkel and sarkozy when we had these walks that they then find a solution presented to brussels and basically present the rest of the eurozone or the eu with a -- do you think this criticism is justified? >> certainly this is a point of criticism that's made outside of germany and france but that's made inside germany and france.

some politicians frmt call for widening of the partnerships such as poll left-hand looking towards the east or spain or italy. even more so in the french population. there's a call of widening this partnership. as i've said, france and germany often do have contradictory policy positions. so other countries can really find themselves within these positions, i think. so at the end of the day, it's not so much i think a question of content, but rather a question of style. so what germany and france need to make sure is that they do show leadership, as i've said, to their political and economic weight, but they do find the balance between leadership and dominance because surely dominance is not what either of the two countries or any country in europe would want. >> lead but don't -- >> back to you. >> thank you so much for your time there. we'll will you go and warm up. now stick around. we just want to first get you a couple of news stories hitting the wires.

first there's been a story on bank demote paschi who shares losses. the losses were designed by a contract that was apparently designed by nomura. adding some nervousness, this bank has been focused centered around the health of italian banks generally speaking. nomura is out saying its derivative trade with a approved at the highest level within the bank. it says it was reviewed by external auditors kpmg, that it acted fairly and responsibly and it was one of several banks to approach derisk positions held by monte paschi. lots of different elements of this story to follow. we're getting the results from spain's latest debt auction. we want to bring you those, as well. three-month and six-month t-bills, it has raised $1.2 billion euros earn 0.5%.

that compares with a yield of 1.3% in mid-december. for the sixth month, it has raised a yield of 0.9 the% versus 1.7% in mid-december. high bid to cover ratios on those two, over four and three respectively. so let's get some reactions from tim skeet, managing director at rbs. welcome. >> good morning. >> thoughts here? spain getting plenty of demand for short-term paper. >> yeah. for the long-term, they're out with a syndicated transaction this morning which i think is immensely positive signal, good timing. looks as if they're going to return, as well. but it looks as if that is going to be well supported. this stock is a good time for spain right thou. >> what's with a syndicated bond as opposed to a typical auction? >> you're going to get a bunch of banks out there to work the markets, work the accounts.

there's been a lot of transactions. you get a wheel bunch of sales forces across the street working very hard. >> a new ten-year. what they'll do, they'll get it well bedded down, get it trading. it's a good way to launch the new tenure. >> and when was the last time they launched this in here? >> i can't believe. but this is a good news sign. they're offering a pick up of 30, 35 beats this morning. i don't know where the pricing is right now. >> you can actually take a look at this ten-year benchmark, at least. that's just under 5.2%. it has backed up. is that significant in your view? we've had many guests on here raising concerns. >> well, it could be. again, as people sense, there's one body that would like that to happen.

i'd like it not to happen. i'd like to think that we can get over on the hump. at the end of the day, spain has taken a lot of pain. versus worked with the spanish for about 20 years now, i know they have the ability to reinvent themselves. i'm hoping they are going to get on with it, knuckle down. unemployment is looking grim. the reality on the street knot great. at the end of the day, they're trying to get on and fix their problems. i hope the market has given them support. let's wish them well, not only on the short end, but i think on the ten year. >> they did interesting oppose the appointment of this now dutch minister to head the euro group. are there any significant changes there as to how the euro is going to handle spain going forward? >> spain has a slightly difficult relationship. they don't want to get bailed out. i think we can understand why. i think people are trying to push them too far towards the

bailout option are going to meet some resistance. i'm very sympathetic to that. i'd like the market to be able to deal with this and move on. as you say, we don't really know. what we found last year was a whole year of us in and out of the cross hairs with spain, with italy, with other jurisdictions. maybe this year is going to be a little bit more stable, a little bit more positive. this is great stuff. >> do you speak spanish? >> no. german, french. we can celebrate the treaty of friendship from '63. [ speaking foreign language ]. >> sylvia, she can tell me what he just said there because i have no idea. tim will stick around, though. he promises to talk in english for the next segment. >> absolutely. in the meantime, we want to shift gears and take a look at oil prices. commodities have recede from the headlines until last week when we saw that violence in algeria. brent up a little bit. savina shells is here, senior

director at bofa merrill lynch. welcome. >> good morning. >> is this the start of a pattern for the year, nymex down in the u.s. brent a little bit up? >> we think this is just a short-term trend where wti has been strength.ing over the last few days. the spread is now trading into $15 a barrel whereas a couple of weeks ago we were trading at $22, $23 a barrel. wti has been regaining some strength relative to brent. ultimately, u.s. crude or production growth is running at 900,000 barrels a day. to per that into perspective, the u.s. in 2005 produced about 5 million warls a day approximated today they're at 7 million barrels a day. it's a phenomenal growth trade that is unprecedented in history. and we think there is -- you know, room for this to continue when we speak to many of these producers in north dakota and texas and louisiana, they'll

tell us. on 20 years of reserve, very often, the profitability is as high at 20%, 25%. >> you've continued to drill, even if wti falls a little bit. >> now there's talk that president obama in his second term may go forward with the keystone pipeline, that there may be liquified natural gas terminals coming joen line. why is it given all of this that the price has been rising? >> ultimately, the u.s. has become a bit of an island with regard to crude oil. similar to what we've been experiencing with liquid natural gas and brine natural gas. a lot of this is land locked. the thing in north dakota or the thing in texas and louisiana, either the infrastructure, i.e. pipeline capacity isn't there to bring this to the refinery. but really, even looking beyond that, if you were to fix the pipeline problem, you ultimately

left the underlying demand from refineries because refining capacity utilization rates are already running at pretty high rates. so unless you are, you know, fundamentally allowing for the u.s. to opt towards crude oil abroad, we really think wti will have to decouple a little more. now, that might not necessarily happen over the next few months. we're getting more pipeline capacity, keystone is coming online, but really, we think on a 24-month horizon, you could see wti drop down to $50 a barrel. >> and on that point about brent supply, concerns playing in here, how significant is the situation in algeria across north africa going to be for 2013? >> algeria itself is going to be a significant gas producer, not oil producer. but the production is very close to libya, close to where a lot of the libyan production is.

certainly the heightened security concerns are going to question, maybe, you know, some of the investment flows into north africa. it could potentially have some knock on effects in libya production and production in egypt and -- >> has is changed your brent price target for the year? >> no. our target is at $110 for the two-year. so right around the current price level. but we think present before can hit $120 by year-end. >> wow. we'll look for that gap to widen. thank you so much for stopping by. coming up after the break is another wave of cheap funding on the way for european central banks. we'll talk about that when we come back. what are you doing? nothing. are you stealing our daughter's school supplies

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welcome back to the show. financial executives are bracing for another round of cheap funding in order to stimulate the economy. tim is still with us and he says lenders have been using priority lto operations to dump ill liquid assets and buy liquid ones. wa do you mean by that? >> what we're seeing over the

last year, everyone expected massive deleveraging. concern has been at the regulatory level, does this mean that the banks are all going to be folded in the -- upon themselves and stop lending to the real economy? so, of course, l.t.r.o. has served several different purposes and different central banks had different policies to address it including here in the united kingdom whereby governments were saying we need to ramp up equity levels, capital levels, liquidity levels of banks, we need to make sure they can still lend. now, what the ltro money has had the effect of doing is off of very, very cheap funding of banks. >> and just to remind people who may be struggling with the acronyms, it was initially part of the central bank's response to the debt crisis. back in the early part of last year said we will give you short money. >> this was the great idea. it's money that is medium term

as opposed to very short-term. pull it on the balance sheet and it's there for a while. people don't have to panic about how to refinance themselves. >> and much like in the u.s., we're coming to the bax and now banks are eager because they can start now to repay some of this money and eager to do so. >> yeah. liquidity has many much better. we've seen a lot more banks coming to the sterm markets. in the covered bond market, we've seat another irish bank coming out today. >> but they are covered bonds. >> yeah, that is secured funding as opposed to unsecured funding. but, you know, we've had, for instance, just out of spain alone about 10 billion euros worth of bank issues, many of them secured, since the beginning of this year. >> wow. >> that's quite a big number from spain which as a whole has been struggling to get access to the markets. what we're seeing is there was a problem with getting liquidity into banks.

banks, therefore, were having to downside size very, very fast. my original comment was pointing to the fact that once they got adequate liquidity, they're under pressure to restructure the balance sheet, so less likely to fall over if there's a short-term shock. >> right. is there any concern that perhaps the banks are more encumbered? >> well, that's exactly right. obviously, that would attract a haircut. we know the ecb is up a lender always demanding super senior status. and there are other forms of incumbents. one is derivative exposures. so there are a lot of ways in which banks have moved from an unsecured funding model to a funding model and, therefore, the nominal levels of incumbents

have been pushed up. now, there's been a debate. as you rightly say, a lot of investors hang about in the bail in world. governments say next time the bank falls over, we want the unsecured critters to take a hit. >> and there's more risk for those investors going forward. >> there's going be more risk. now where do i line up in the pecking order of pret predators when a bank gets into trouble? >> we need to continue this discussion. come back maybe. tim hughes, manage director from rbs. thank you for coming by. we're waiting for german investor confidence data. the zew is up next.

welcome back to "worldwide exchange." i'm kelly evans. president obama lays out a liberal vision for his second term during his inaugural address. the bank of japan steps up easing agenda under heavy pressure doubling its inflation target and promising fed style open ended qe starting next year. and this is the new face of the euro he group. finance ministers name dutchman yaselbloom as their mr. euro.

>> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. yet more signs that the contraction in the german economy is perhaps bottoming out, slowing. the zew is out showing its highest levels since may 2010. the headlines, 31.5, if i'm reading this right, compared with an expectation of 12 and a reading under 7 in december. this gives them criticism for reflecting prevailing market attitudes because of the survey of investors. nevertheless, economics for germany have brightened according to the zew institute. current conditions less of an increase, up from 5.7%. let's get out to julian now who is chief international economists at barclay's. that headline, 31.5, what do you make identity? >> that's obviously a

strong-looking number. this is a survey which does rely on participants in the financial sector. they are seeing for themselves that equity markets have improved, that financial conditions overall have been improving here and is they feel more positive about the outlook. this is a question which asks, how do you feel about the next six months? do you feel more optimistic or less optimistic? obviously, under these conditions, people are going to start to feel a bit more optimistic than they had been doing. >> julian, it's interesting because we've been looking at the growth figures showing this much bigger than expected contraction for germany in the fourth quarter. >> yes. the dax, germany's market, has underperformed in january so far. it's down again today. it wouldn't suggest we're necessarily coming off a period of optimism from the investment community. >> well, i think obviously the dax performed very well last year. i think what we have to remember is in the second half of last year, the economic numbers, particularly for the industrial

sector, were not that great. the industrial sector at a global level was stag nating and that was the message from the bufident state. now business confidence is starting to pick up and link from improvement in the global industrial sector. but there's still some capacity there for some disappointment i would say on the revenue side, particularly coming out of europe. europe is at the moment still not seeing such a stim latory environment when you aggregate together monetary and fiscal conditions compared with, for example, asia or the united states right now. and so i think maybe the stock market is realizing particularly for the global capital goods cycle that things are still soft and there could be some disappointment along the way, even though as we go through the next two years, we should be embarking upon a renewed growth cycle for the capital goods sector globally. >> which is interesting. julian, should we be looking at what's happened out of the bank today? and i can quote one analyst

earlier who said this aggressive move towards further easing leaves the european central bank stranded with the relatively tightest monetary policies of all central banks in the world. is that more relevant to the market reaction we're seeing today snm yeah. it fits in together with what we're saying about the financial conditions. and the big problem with financial conditions in the eurozone is there is this big blip. you've got easy financial conditions in northern europe. you have record low borrowing costs for german households and german companies. but at the same time, they're not showing a great readiness to go out ask borrow at the moment. there's still caution about the environment in europe. and you've got these record rates of contraction in bank lending in, for example, spain and italy and in portugal. you've got very tight conditions overall. particularly the smaller companies. and that is really keeping a lid on any recovery prospect there

along with the ongoing fiscal consolidation that we expect for this year. so it is actually a weak outlook. and to be honest, the euro has appreciated in trade weighted stance by about 6% since the q3 level of last year. but the yen is down 15% since then. >> exactly. julian callow, stay with us. we'll come back for a few more thoughts in just a bit. first, though, we want to get a look at the market reaction here. u.s. futures did trade yesterday despite the markets being closed to celebrate martin luther king jr. day. they were roughly unchanged, not surprising given there wasn't much volume today. same story, there's a bit of hesitation here. the bank of japan, the big news out moving markets. but actually showing some disappointment relative to what has been priced in and what the bank of japan actually delivered. the cnbc ftse global 3 the 00 is fractionally higher. europe is kind of taking this move on the chin. we're down across the board, anywhere from .5% in paris to .9% for the xetra dax.

this index was down 1.25% earlier. as to the discussion we were just having, there's some concern here now the bank of japan is being more aggressive. can it really support those levels? we'll continue to follow that. some top stocks to keep an eye on this morning, we wanted to focus some attention here. it's fractionally lower. this company owns a subsidiary in the u.s. called secureplane which makes chargers for the batteries that are at the center of the boeing 787 dreamliner probe. the uk parent has been down fractionally. it has been higher since the grounding of those planes. sab miller up 0.7%. this as results came in largely in line for expectations in the third. it did, however, cite weakness in particular in asia and china and said the sales dropped relative to a year earlier, which it blamed on cold, wet

weather. swatch group, i wanted to show you their reaction today. a mixed picture across the board. quick look at the bond space, we did just talk about what was happening in spain. they had a ten-year syndicated bond, about 5.2% this morning. so spain, italy, a different pattern. italy rallying after selling off earlier in the day. now it's roughly flat, 4.22%. uk yields pretty much unchanged after an increase in government spending or borrowing, i should say, in december from a year earlier. now, forex, this is the big story. as mentioned over here, the yen, look at this. you might expect when a central bank comes out with the aggressive measures like we've seen for the bank of japan today its currency would weaken. but that's not happening. the yen is 1% stronger against the dollar. so what's going on? let's get more on the asian market reaction to the bank of japan's decision from li sixuan.

she joins us now from singapore. >> hi. thank you, kelly. some mixed back for asian markets. the nikkei saw profit taking after the boj's announcement doubling inflation targets to 2% and promising open ended asset purchases. as we just mentioned, the yen strengthened after boj governor shirakawa said there is no plan to throw out the floor on china rates. property developers, automakeres and miners were among the worst performers. but banks reversed earlier losses, extending a three-day winning streak on attractive values. shares of vanke properties overseas slipped 1.7%. hong kong unit issued a profit warning. a flat session for singapore. fraper and neace pulled back 2%.

the stock had rallied over 16% since last september. meanwhile, south korea's kospi gained .35% as automakers and some technology shares rebounded strongly. australia's asx 200 finished flat. miners gained ground, but shares eased after bank santander denied interest in the bank's troubled uk unit. back to you, kelly. >> thanks very much for that. we want to turn now to the u.s. lots of data, lots of earnings. december existing home sales are out at 10:00 a.m. eastern. expected to show a 2% increase over 5 million at an annualized pace. it's a big day for earnings. four dow components are out just before the opening bell, dupont, johnson & johnson, travelers, verizon. after the bell, we'll hear from google, ibm, amd, cks and texas instruments. house leaders are expected to vote tomorrow to extend the debt

ceiling deadline until may 19th. the gop measure doesn't specify an amount, but would lead let the government borrow what it needs to meet its obligation for that period. the strategy shift was agreed to last week and would let republicans focus on other fiscal fights in march such as ook automatic spending cuts delayed by the deal and the potential resolution. julian callow is still with us. julian, do you take this news as a positive development for markets or are you concerned about still the prospect of a government shutdown as others are calling for once we hit some of those further deadlines? >> yeah. i think that is quite positive, really. it shows that there is some desire not to up the vote too much on the side of the house. republicans at this stage. i think it's actually very important if we think about what it means for both financial markets and for the u.s. economy. obviously, financial market conditions have improved

noticeably. there's less uncertainty around. that should come through in terms of stronger business confidence and that will mean hiring, it will mean greater spending power and investment coming through, as well as in the u.s. economy. but we still need to nurture this. what's more, there's a fierce fiscal headwind coming through this year with a 2 percentage point payroll tax increase in the first of january. certainly if you like tr an economic management perspective, it's a good idea not to introduce a load more dosage of uncertainty coming through just in a few weeks' time to let this settle down a little bit and then take a more structured considered balanced look at the fiscal situation, particularly on the spending side during the course of q2. and i think that's really the way i would read what the republicans have agreed to here. and this is the more sensitive approach and should help in the recovery. >> and what does it suggest for

global recovery hopes? because global growth has been relatively disappointing over the last 12 to 18 months. if we look to 2013, is a growing u.s. going to help that situation or are we still looking to asia to be in the drivers' seat here? >> we're still looking to asia gentleman and the emerging economies. so be honest, if you look at the barclay's weekly global gdp this year expanding by 337%, that would be up to 3.1% last year, iepts not really until next year that we see the global economy picking up to around a 4% pace of growth. within that, the advanced economies we think will still be growing by less than 2% for this year, which is similar, really, to last year. so the pick up in global economic activity will be driven by the emerging economies. and we take a great deal of comfort from the recent news out of china. retail sales, industrial production and indeed gdp itself that was released last week that points to some significant improvement. i think they're going to remain

focused on the emerging economies which by and large don't have the kind of balance sheet difficulties and also has more capacity to promote stimulus on the fiscal side and also on the monetary side to support economic recovery. concerning the united states specifically, we're looking for gdp growth this year, still to be around a 2% pace. it would be a lot stronger, but you do have that fiscal headwind which as i mentioned is quite serious. the actual fiscal tightening for the current year, the current calendar year equates to at least 1.5% of gdp. it could be a touch more like 1.7% gdp. that's quite a fiscal headwind. >> and it gives you a sense of where growth might be if it weren't for that tight.ing. well over 3%, it sounds like. stay there. we want to dig into the bank of japan's decision with you in just a little bit. interesting comments there, though been we're going to take a quick break. dynamic resilience is the phrase of the day in davos, apparently. we'll hear from the founder of the world economic forum about

this year's theme when we come back. stay with us. ♪ [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information... ♪ into a fifth anniversary of remission? ♪ whatever your business challenge, dell has the technology and services to help you solve it. nothing. are you stealing our daughter's school supplies and taking them to work? no, i was just looking for my stapler and my... this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go...

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you are watching "worldwide exchange." these are your headlines. obama lace out a liberal vision for his second term during his inaugural address. the bank of japan pledges

open-ended stimulus and doubles its inflation target. and germany's zew index shows expectations at their highest level since may 2010. world leaders, members of the global business elite including ross westgate are gathering in davos for the annual world economic forum. the powwow starts tomorrow and runs through sunday. this year's theme is dynamic resilience. cnbc's hadley campbell spoke to the chairman and asked him to explain the recent naming. >> it's a habit for the world economic forum to choose a theme where you first have to reflect on what it really means. now to explain this move, we have to look at the last year. the world was caught in -- we all spoke about management. now i think it's time to look again much more at the future.

to move out to a more constructive vision of a policy. and here, on the other hand, were in a world which is very much interrelated, interconnected, very complex. we have systemic risks. and the risks will not go away. so how can we combine the preparation to deal with future risks, with more? that's the idea. so we could say there's dynaism, but we could speak about dynamic resilience. but we want to be people coming out more optimistic, but at the same time, more resilient against future risks. >> interesting discussion there. plenty more to come on the show. first we just want to mention what's happening with deutsche bank shares. they are a weak performs on the xetra dax index. that index down .75%. deutsche down more than 2% this morning.

we'll find out more and get back to you. warning against the bank of japan for poe lit sizing the yen. we'll discuss when we return.

here is an update again on where deutsche bank shares are trading in germany, weighing on the xetra dax. down better than 3% at session lows earlier. recovering some of those gains as we get more information on what's behind the move, we'll bring it to you. in the meantime, xetra dax is down about .75%. was down more than 1% on that benchmark german index earlier today. the euro/dollar is moving higher by about .3% there. we saw it walken by .2% earlier. the dollar/yen, this is the one to focus on given what's happening today. that shows the dollar down about 1% against the yen. in other words, the yen is strength.ing. this after the bank of japan delivered what the market had been looking for to some extent. bowl, easy moves with the government to double its inflation target to 2%. the central bank went a step further promising open ended asset purchases starting next career. the bank of japan says it will

buy 145 million of assets each month with no deadline to finish the purchases. joining us now for more on what this means, adrian schmit and still with us is julian callow. welcome. are you surprised by the size of the yen move today? >> no. i'm surprised the yen hasn't gone up a little bit more. i think the market is quite disappointed that there's no real ex trankz traction until next year. and even next year, 145 billion a month, there's a lot of maturing stuff, a lot of it is in bills and the net impact isn't that large. so in practice, they've done nothing extra. no unlimited buying this time starting now. in fact, they haven't got anything until next year. 2015's bank of japan forecast is for .9%. >> is the issue in your view more that they didn't try more

creative measureser, or is it more the deliverability, whether they can deliver this 2% target? >> well, i think it's both. i think the market is naturally skeptical of them being able to left the 2% market. >> they have done more qe in the last few months. i wouldn't say they've been completely inactive. you about probably the yen has gone up 10% in the last month. theback of japan isn't doing anything extra. >> julian, i wonder if it since that recession and they're not acting in a vacuum. >> that's absolutely right. i think at the same time, japan is likely to be under a lot of pressure here at the q7 level, you've got the g-20 summit coming through next month in moscow. i think there's going to be a lot of pressure on japan not to undertake too radical a form of monetary easing.

we shouldn't dismiss the kind of easing the bank of japan is doing. this year, we think that the size of the boj asset holdings will expand by about 7% of japanese gdp. now in the case of the fed, we think the expansion will be about 5% to u.s. gdp. so this is a very formidable expansion. admittedly, if you look allow for all the redemptions and the fact that the purchases are more at the short end, there would be net expansion in the asset holdings at the bank of japan in 2014. at the moment, it looked to be about 3% of gdp. so it is going to be less. at the same time, i would say, well, look, the most fundamental thing is that the bank of japan has redefined its inflation target. i remember when the european central bank dipped in around 2003 and that redefined the target to be close to 2%. here, the bank of japan is

saying 2%. the crucial thing, though,ite not setting a deadline for get ago 2% inflation. that will be important, i think. >> and i think that's the trouble. give us a sense as to what you can hit this or are trying to hit this 2% target. >> yeah. it's all very well. but talk is cheap. they have established a target of 1% just over a year ago and haven't done a great deal to get towards that. they've taken some measures, but the measures haven't been particularly effective. it's like raising the bar from six feet to seven feet when you haven't cleared six feet. >> the yen is weaker from where we stood when abe moved behind us? >> i think the yen is weaker mainly on rhetoric. i think the market may look at

it and say, hang on, what have you done exactly? have you done anything different in the u.s. or the uk? not really. yes, you can talk about margining more than it was before or less than others. but in perhaps, the yen is -- at this stage, we regard it as one of the cheapest currencies in g-7. it was broadly said before, and now only the dollar and the yen are both pretty cheap. >> and the yen is back to being the carry trade. julian, adrian, thank you very much. we'll keep an eye on the yen. we'll keep an eye on deutsche bank. coming up on the show, president obama is setting out the vision for his second term. can they find middle ground? we'll try to figure it out when we come back.

welcome to "worldwide exchange" been if you're just tuning in, i'm kelly evans. these are your headlines from around the world. president obama lays out a liberal vision for his second term during his inaugural address, setting the stage for more divisive fights with congress. the bank of japan has stepped up easing under heavy preb your doubling its inflation target. the euro is trading higher after the latest figures out of

germany. confidence is rising higher by the economic outlook. and shares slump amid media reports and speculation the regulator may be asked by regulator toes simulate a break-up of its investment bank. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> today, we're pointed to a lower open, about 12, 13 points lower on the dow jones. similar declines for the nasdaq, roughly unchanged. the nasdaq looking to open up by a couple of points. we have big earnings out for these markets today. i can we hear from four dow components just before the opening bell. after the close, we'll hear from the likes of google, another tech bellwether. european markets have been under pressure this morning. the ftse 100 is roughly flat for the time being. others are coming off their lows. the xetra dax down less than .5%

after being down 1% therl this morning. deutsche bank being today. other bourses here reflecting some of that concern, too. the cac 40 down 0.3%. same for the ibex 35. president obama has kicked off his second term with an inaugural address. it was short, just 18 minutes. he touched on several comments he plans to pursue in the next four years. the president promised hard choice toes cut the u.s. deficit, but without shredding programs like social security and medicare. you called for after overall of government. >> fort week, we understand the people we believe america's

prosperity must rest upon the broad shoulders of a riegz middle class. >> mary jo jacoby was former special assistant to reagan. she joins us now. mary jo, good morning. i'm getting you had a few problems with what we heard from the president yesterday. >> well, kelly, it wasn't exactly the inaugural address that i would have written, but, you know, the president delivered it well. the crowd reacted enthusiastically, and now it's time for the nation to get to work. >> what about, mary jo, this sense of coming together, which is the great hope that obama would unite the country? i think people have gotten cynical about those prospects. is that right? >> i think the tone has certainly changed over the last four years and also if inaugural

address yesterday, it was not exactly a hands across america speech. >> a lot of people were criticizing the speech for being general. inaugural addresses don't necessarily go down in history as being some of the most memorable in the world. if anything, it's perhaps interesting to look at what was happening in the last week so so with the republican side of the aisle. what is its future going to be, now if they're going throw for an increase in the debt ceiling, what issues put a stake in the ground going forward? what do you expect on that front? >> i expect the republicans to fulfill the constitutional duty of the house of representatives, which is where the money stuff originates. so tax bills, spending bills, they will pass a budget. they will expect the senate to pass a budget. i will look to the republicans to hold the line on spending. even if the other body doesn't

and the president doesn't want to. it certainly seems to be what the an lives and the markets want. >> house republican leaders have set a vote for tomorrow to extend the debt ceiling deadline until may 19th. the u.s. treasury has been taking steps in the meantime to keep the country from defaulting until late february or early ma. this gop figure would let the government borrow what's needed to meet its obligations for that purpo purpose. mary joe, which one do you expect europe to focus its energy on. >> i think the likelihood of a shutdown is less standard than it would have been ten days ago. but i would look at a three-stage process here.

the first is tomorrow to deal with the debt ceiling and extend without a number extend the ability of the government to continue to expend until mid-may. then i would look at march 1st sequestration. that is the agreed-to reduction s amounts that the president already agreed to. >> and we've heard what sequestration would to to the government and people? >> not really, but with the nomination of peter,

historically he's talked about cuts in defense. if you're going to cut, anyway, then let's get started and what about, too, is happening in the middle east, we'll find out tonight who takes israel, obviously netanyahu is leading the poles now. at the same time, north africa in the news with all of the latest violence at the gas field in algeria. so does this complicate the narrative of wanting to push ahead with sequestration? >> well, the speech yesterday was very short on international affairs. which i found surprising. because we are in ra very dangerous place right now. there is a great deal of uncertainty and new turmoil. sequestration was to what america's positive tour should be and how best to that in the

in the two weeks. we'll have more focus on spending in general, spending in particular and, if you will, trying to right side the dvenlgs budget. >> mary jo, as you said, we didn't necessarily hear a strategic vision from the president, but do you think we can take what's happening in algeria that this is basically how the u.s. is going to conduct foreign policy when it comes to that issue in the world, this idea of leading from behind? >> i think that that is -- has certainly been the tenor recently and it looks like it will continue to be. let's lead from behind. let's provide support where we can. but let's not just get actively involved and in it up to our wastes. >> okay. we'll leave it there. we appreciate your time from houston this morning. now, over to japan. a speed change in mon tar policy under way and a share role on

tokyo and equation. >> foifrt fist time, the bank of japan a suggesting'ing a 2% pure chasing. from the jot set, today's decision was an exercise, so to speak, in showing that the central bank and the government are on the same page when it comes to trying reflat the japanese economy. here is what the governor had to say. >> the government has again pledged to take concrete steps towards the sustainable fiscal struck structure. we have high expectations for the government's measures. >> but here comes the tricky part. the bank of japan is also saying today that they think prices of fiscal 2013 are going to rise 0.4%. they also say prices of fiscal '14 are going to rise 0.7.%.

so at the same time that they've adopted this 2% target, they're saying that realistically, it's probably still a long way off. what you're saying is that to reflat the japanese economy, it's going to take more than the bank of japan's monetary policy. they're trying to get the structure form, the government incentive to try and get that going. so i think the onus now shifts to the government in shinzo abe which is looking ahead to an election come summer to implement some of those structural changes. that's the latest on the bank of japan and the latest on the government policies. back to you for now. >> fascinating story. also of interest, apple reports its first quarter results in 2013 tomorrow. and we'll take a look at whether they will show a decline in earnings, what investors might make of that and rumors about the next generation of iphone. stay with us. ♪

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nothing. are you stealing our daughter's school supplies and taking them to work? no, i was just looking for my stapler and my... this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go... we got clients in today. [ male announcer ] save on ground shipping at fedex office. welcome back. let's take a quick look at deutsche shares. down almost 3% at their low. better, i believe, now less than 2%. this on reports from local german media that the bank is potentially being asked by regulator toes stimulate a split of its investment banking and retail activities. of course, comes at a time of increased regulation across europe of some of these major

banks. on that note, these are your headlines. the bank of japan pledging open ended stimulus and doubling its inflation target. january's zew index to show german economic index at their highest level since may 2010. and deutsche shares falling after the government is asking it to split investment .retail banking activities. if you've just gotten used to your iphone 5, it may may already be obsolete. china times reports apple could release three new iphone models this career. one, the rumored iphone 5 s could come in june. and the third model, doubled iphone map may be ready by the holiday season. this would have a bigger 4.8 inch screen. manufacturers could begin production as soon as april. apple reports earnings tomorrow afternoon. you can take a look at shares

there. down about .3%. that's the bear market over the last three months. erin joins you now. erin, good morning and thanks for your time. is this a turning point for apple? they've got new products coming out, shares have been down, are earnings going to mark the bottom >> first of all, good morning. we are positive on am. we feel as though we're find ago bottom in the stock with the adjustment that you had talked about, down 20%. and we feel like we're digesting a derisking of forward expect ages in front of tomorrow night's print. we still believe that iphone 5 will be an up side for tomorrow night's earnings conference call and we still feel as though the ipad will be strong numbers, as well, and possibly some up side on the gross margin line. so we expect an up side in the print tomorrow night. we expect a typical apple will be conservative on the forward guide. we feel the street has factored

that in largely. >> and this is such a different trading level. a reversal, at least we're seeing the sell-off happen heading into earnings. but what's the key metric here? is it going to be sales? is it profit margins? >> yeah, i think it's both. we've made a call that we feel like saleswise this company could put up a 57 to 60 billion upside number and a $14.50 plus eps number for tomorrow night's print. but i think underneath that, the gross margin line is going to be a key factor. that sets the stage for the forward guide which the company has typically guided the march quarter down about 210 basis points. we think that, again, apple is typically conservative. we expect that to be the case tomorrow night, but believe us, now down trading at eight times that cash, a lot of that has been adjusted in the share price already. >> and what's the investment case over the next 12 to 18 months? where do you see shares headed? what do you make about the news overnight about these three new

iphone models? >> i think that we're at $720 target price. we lowered that last week given tempered forward expectations. but we think what we're dealing with is a time of incomplete data points on the supply chain. hopefully tomorrow night we get more visibility without apple coming up and specifically saying what's up their sleeve on a product road map front. we believe that later this year and an expansion of the iphone family, a larger skrooe screen size is possible. but i think clarity on what's been choppy and incomplete supply chain data points is a key focal point for investors. and does it matter, aaron, that the cool factor for apple is lost? i can't tell you how many times i've been standing around and groups of people are comparing their latest samsung phone or talking about the next generations of devices out. the mobile world conference is next month in barcelona. how much pressure is on the company for new devices? i think it's been said many

times. this is an extremely important earnings called for the company tomorrow night. we feel the echo system that apple brings to the table is very strong and powerful. we see about 20% 3g coverage for mobile phones at this point. there's a lot of smartphone buyers still to come into the market and we ultimately feel as though it's a samsung and apple ecosystem play here as we go forward. but, you know, i don't feel as though apple has lost the cool factor completely. we feel as though this year will be important from a product perspective of what they, again, have up their sleeve over the coming quarter peps. >> aaron, do you have an iphone? >> i do, iphone 5. >> are you using it now? >> i am. >> okay. just curious. so it still has the cool factor there with aaron rakers. he's coming in from stifel nicolaus. am will report after clothe close. research in motion is surging. the eco told the german paper

the company may license its blackberry 10 on software for other devices. he also said other possibilities for the company include selling rim's hardware production business and says the company will wait to see how will blackberry can perform before doing anything drastic. now the major u.s. indexes are sitting near five-year highs coming off their third straight week of gains. can they keep some positive momentum? we'll preview the trading week, next.

welcome back. we're on the final strep of "worldwide exchange." the u.s. today, earnings are

expected to rise 2% to an annual raise of 5.2 million homes. before the opening bell, we will hear about earnings from due point, j&j, travelers and verizon. futures are pointed lower. the dow jones looking to open lower by about 13, about 15 points now. markets were closed yesterday of course for the holiday. the nasdaq is trying to stay above water, roughly unchanged for the s&p. 1480 is the level. anthony crudelli joins us now. when is it going to be 1500 here for the s&p? >> well, if you look at the charts, i mean, the charts look bullish. if you just look at the s&p 500 charts right now. you have the financials, transports and industrials all supporting higher prices in the s&p. and i do think the s&p will see 1500 sometime soon.

but the one thing that concerns me about the s&p right now, which is why i think this week is so very important for the s&p 500 is because the nasdaq 100. the nasdaq 1 00 is about 140 points off of their 2012 highs and they're lagging the major indices right now. and believe me, buyers right now don't want to see the technology sector, the nasdaq in item particular lagging the major indices. we like to see confirmation across the board. all sectors making highs at the same time. because that gives a real strong primary trend of the market, which is why i think today and tomorrow is very important for the s&p. you have google just sitting above their 50-day moving average at 697. and they're reporting after the close. then you have tomorrow's am, which we know apple has been weighing on the nasdaq and -- >> yeah. >> today and tomorrow will be really important for the s&p. >> and i'm not trying to get distracted by the lovely shot of naples, florida, in the sunrise behind you. but when we talk about tech and

underperformance, i guess the question now is whether we start to see rotation. having been weak,e knhis is a relatively bad seasonings earning for tech. does that come in and people start to get more bullish going forward? well, the tape never lies, as they say. the s&p has proven that it can go higher without technology participating, but to -- right now we're in the 2007 area of the fiscal 76 high in the s&p and in order to really get things going, you're going to need to see technology start supporting this rally. it's great that the financials and industrials and transports are doing well. but i really think that traders, you know, right now we're sitting at prices where buyer res itching to maybe take some profits and if technology doesn't get going, i think that the s&p really stalled. and potentially pulled back. >> stalls and pulled back, is that your near term call? and what are your main concerns about the market? earnings, is it going to be debt ceiling talks?

basically, is it macro? >> well, i think today and tomorrow is going to tell us a lot. i want to see how google's earnings affect the nasdaq and in turn how the s&p reacts to that. and then tomorrow we have apple. i want to see how apple comes out. is apple going to take out the recent low of 43 and change? and how does the nasdaq react to that? and then what does the s&p react to the nasdaq? right now, i feel the s&p rally is going to be held hostage by the nasdaq. if google and apple can sustain their ground, then i think we keep going up. if they start to pull back, buyer hes in the s&p is going to say why buy them today if they're going on sale tomorrow? >> 483, we know the levels to watch for apple. anthony, thanks. >> thank you. before we go, pro golfer fill michaelson has said he will make drastic changes because of several recent u.s. california and state tax hikes. the four-time major winner says he may move out of california or

even retire. mickelson says if you add up everything, his tax rate is about 62%. he flirted with becoming part-owner of the san diego padres baseball team but backed out and now says taxes had something to do with it. so it seems we have our own version of girard dipardou. one of the big points about yesterday's presidential inauguration was what michelle obama would wear. earlier monday, as you can see there, michelle obama wore a navy coat and dress by tom brown and belt and gloves by j. crew. that's another long time favorite. the first lady has established herself as an international style trend setter and the clothes she has worn have sold out at retailers. j. crew is private now, but who knows, maybe there will be

investor demand soon. u.s. "squawk box" is up next.