welcome to "worldwide exchange." ross is away. i'm kelly echs. these are your headlines from around the world. a sharp sell-off in europe follows with asia falling lower. pmi data out of france and germany shows private sector activity slowing more than expected. the chinese market is hit the hardest as fears of the crackon and pboc's trading funds show concerns over trading privacy. the insurance industry improving and insurance agency reed sees a 60% rise in earnings. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> welcome to the program this morning. before i bring you these numbers right away, eurozone flash, pmi services estimated coming in well below expectations at 47

versus 49 expected, this all for the month of february. these pmi surveys are one of the earliest reads we get for activity across the eurozone. many hopes for activity bottoming out in the quarter potentially thrown a bit of a blow given these numbers are quite weaker. the euro/dollar falling another 0.6%. the fomc yesterday was adding to weakness. as you can see there, it was ticking below $1.32. $1.3199 is the level for the euro this morning. the flash composite pmi, 47.3 versus the reuters forecast for 49. my understanding is that was services. interestingly enough, if this reuters figure is right, that they are both the same for the services and pmi, about a appointment below expectations. so the point is, at these levels, activity is not only

contracting, it's contracting at a faster pace. we'll dig through the numbers and find out where the weakest spots are, but it looks like france is one of them in particular. on today's show, we're days away from italy's pivotal elections. we'll be on the ground in milan with the latest. we'll get a view about how the country's economy could be transformed as an exclusive interview. we're hours away from retail giant walmart's earnings. we'll hear what investors expect head of the company's reporting results in light of a weak start to february. and shareholders vote on rothschild about replacing the board. we'll also get a preview of this likely ending of this battle of the titans. and japanese prime minister shinzo abe is heading to walk to talk to president obama. just what kind of reaction can

abe expect from washington? we'll give you a preview. before all that, let's recap what's happening in markets. we've seen more activity, in fact, higher volume over the last couple of sessions, really, than we've seen for much of the year. the volume is coming on a sell-off. u.s. markets fell yesterday following the release of the fed minutes. it was the worst day of the year for the s&p and nasdaq. as you can see, shedding 108 points there, a rare triple digit decline this year. energy and material stocks were the worst hit. all ten s&p sectors did hit the day lower. volatility on the rise. the vix rose nearly 20% on this session. the sell-off has continued overnight. the shanghai composite, the australian markets taking it on the chin. will i sixuan joins us from singapore. >> thank you, kelly. fears of an early access by the fed rocks sentiment here in asia

today. the nikkei pulls back 1.4% from its 52-month high. investors remain cautious ahead of the decision on the next boj chief. construction equipmentmakers were down after caterpillar reported slowing sales for the quarter ending january. but batterymaker gsyuasa reported a fix over long-term battery problems. the shanghai composite tumbled to 3% today. commodity place were under a lot of pressure today after the u.s. fomc minutes raised the possibility of a qe asset. development and cementmakers rose. financials said their losing streak on fears of monetary easing. shares in the hang seng fell

1.7%. belle international fell 15% after learning the profits would be at the lower end of its forecast. the kospi ended lower by 0.5%. steelmakers took the worst hit. the asx 200 lose 2.3%. the fed minutes took a toll on aussie miners ending well in the red. index action on the sensex now shedding 1.5%. back to you, kelly. >> there wasn't a lot of green behind her on the board there and there isn't much green on the board behind me here. maybe about a dozen stocks across europe this morning in the green. what's interesting is this follows a weak session yesterday, too. you can see some people as dennis gartman put it on "squawk box" this morning deciding something has changed here. now, the cac 40 down 1.75%

today. this follows weaker than expected data on french pmi data. ibex 35 taking a hit, down 1.8%. the xetra dax not much better and this has been the outperformer for the last couple of sessions. same goes for the ftse. we're seeing a magnitude of sell-offs. here is a couple of top stocks, though. they're trying to buck the trend here, bae systems adding 1.4% after results came in better than expected. swiss re also moving higher 1.7% after a special dividend and fourth quarter income beat expectations. similar gains here for capgemini. ul almost 1.74%.

akzonod giving up about 5%, certainly not helping performance across the markets this morning. let's go back out and stay a look at bond rates. auctions this morning, we're waiting on spain, france and the uk in particular. the uk yield for the ten-year is 2.15%. we are seeing it come in just a little bit. a different story for italy and shape, though, which are seeing yields move a little higher. italy moving towards that 4.5%. spain, 5.234%. we'll bring you the results in about half an hour's time. a worst than expected german auction yesterday where yields were off 1.6%. finally, a quick look at forex, as we know, there is so much in the markets as of late. dollar/yen, 93.38 ahead of president obama and abe's meeting tomorrow. sterling, this is interesting.

now decidedly below the 1.52 mark given up another 0.25% today and finally the euro/dollar, giving up about 0.6%. 1.32. in fact, we did dip below that 1.32 level just after the pmi data. earlier on cnbc, ian hart of strategy research played down the market sell-off. he says we're seeing a normal correction and there's still reason for optimism going forward. >> almost 10% over the last three months. it's very difficult to sustain that. so i suspect we'll have a little bit of pushback. but, you know, if we look further out, if we look to the next year, we're still very positive that equities as a whole will do well and europe within that will be one of the best performing areas. >> here on set with me now is peter oppenheimer from goldman sachs. welcome. >> thank you. >> do you agree with ian there? >> i do. i think that's right.

i think the prospect strategically are still very good. they look attractively valued relative to other asset classes. but it's not that surprising that we're seeing a bit of a setback. we move to a neutral position. as we thought, the very sharp rise we've seen in equities really moved a little bit ahead of the fundamentals. >> so your recommendation is to buy into the weakness, then? >> we would for people take a view for 12 months or beyond. >> what are the key factors in your view why european stocks are headed higher? >> well, i think europe and all stocks are headed higher in terms of their trend and that's supported by, as i said, attractive valuations. we think that the global economy is recovering, albeit slowly, and that pace of acceleration is likely to increase through the year and into next year. profits around the world are rising and companies have very, very strong balance sheets. all of that is in the context of

accommodative policy. and the combination in terms of the trend should be very positive for equities. >> but two things i push back and wonder first of all, these pmi surveys don't point to a worsening than a pick up for europe. secondly, if you're talking about monetary expansion levels, if anything, european central bank stance is looking tighter and tighter given what everyone else is seeing. >> well, i think that first of all central bank policy in aggregate is likely to be very supportive. inflation is going to be low and credit support is still very positive, even in the eurozone area. the weakness that we're seeing in the european economy itself, again, shouldn't really be a surprise. we're expecting the eurozone economy to contract another 10.2% this year. that's not that far away from the consensus. we expect that you get continued divergence within the eurozone and germany, which had a very

soft patch at the end of the last year is picking up and that's supported by the pmi data whereas other economies in europe are stag nating or weakening. >> wouldn't it be easier if they were all stag nating or weak? even if germany is weak, the central bank can come in and say we have to be more accommodating. but if they're holding in okay, that puts more of the onus on the periphery or even france, that means the economies would like more saurt and might not get it. >> but this divergence in europe is part of the recovery process. germany needs to see stronger than after growth at other countries effectively deflate in order to get these big imbalances to reverse over time. and that's really part of the recovery process. we don't think that the european economy itself needs to be strong for european equities to perform well. let's face it, last year, economies in europe were in recession, profits declined last year. we have lots of concerns about

politics and equities ended up doing very well. and that's largely because they were supported by attractive valuations and investors got too negative. >> kind of a scary point. peter, stay there. we have more thoughts coming up in peter in just a moment. but first there's another reason why stocks may be more -- in europe and that's the italian election owes sunday. mario monti says german chancellor angela merkel doesn't want italy's center left party to win the elections this weekend. the outgoing prime minister said merkel feared a consolidation of parties from the left, especially in an election year for her. the german leader has so far refrained from commenting on the election. what does all of this mean? julia joins us now from milan. julia, i have to confess, i don't really understand what monti's point is here. >> well, you know, we have to

give it a bit of context, kelly. this was in response to something berlusconi said about the possibility that mario monti had already signed an agreement with the democratic left party, the democracy party mr. bersani with the agreement with angela merkel. i don't think mario monti has hidden the fact that he's concerned about the influence, particularly the power of the union on the democratic party. if we look on the german side, the foreign minister said what they want ultimately is a party that's going to continue with the reforms, that's going to continue with the fiscal consolidation. i'm not sure there's anything new here. perhaps an argument, too, where angela merkel is concerned, the power she would least like to see in power is the -- in a few months time. we've talked a lot about politics. i want to get a sense of, too, the voice of the business in terms of what they need to see after this election. and i spoke to the ceo of the largest retail bank here in san

paolo and we talked about this idea of reforms and a mandate for change. germany arguably had schroeder. i asked whether perhaps the most influential and important italian doesn't actually sit in this cup, but he sits at the head of the ecb. listen to what was said. >> mario draghi has proved fantastic leadership at the ecb. and i think we have to be very grateful for his commitment and enlightened leadership because he has perhaps gone beyond what is normally expected from the head of the ecb. and his speech in london was definitely a discontinuity point. i think he is what -- he impersonates the kind of leadership that we need in europe, someone that is, i would

say, multicultural and that has a very clear perception of the global reality. while most of politicians in europe are purely domestic and, therefore, do not fully appreciate that we are competing in a global world. however, mario draghi sits in frankfurt and we need to implement reforms here and italians have to take charge of that, for that. and it's very interesting because you're referring to margaret thatcher in the uk and schroeder in germany. in continental europe, perhaps it is easier for center left coalitions to push forward with structural reforms because they can get the buyin of a larger segment of the population. >> do you think by doing what

mario draghi has done he's actually given italy the stability no matter what happens at the election in order to pass through these reforms? he controls the market, in a sense? >> well, that is a very important form of insurance. the results are another one that is purely domestic. a balanced budget is not wishful thinking or is not just the commitment of the current government. it is now part of a load that has been prom muulgated that is very strict constraint to any future government, as well. so i think that we have a multi publicity of insurance forms that will prevent italy from derailing from a path, a trajectory of sound policies. >> so would you say that the btv

bund spread right now is an accurate reflection of the domestic risk here? >> i think that the spread can fluctuate around a certain value, but i don't think it was going to get out of control any longer. i am pretty confident in this respect. >> so you don't think italy poses a risk to the eurozone going forward? >> well, italy in itself, because of its size and integration with the european economy, is in itself a potential risk. but, frankly, i think that the risk is currently under control and my assessment is that it will continue to be under control under the new government. >> we also discussed some possible scenarios after this week's election which is really interesting. and i'll bring you that later on in the show. stick around for that. back to you, kelly. >> julia, thanks very much. i also understand there's going to be a little bit of football that we hearut our next

pit, so we'll stay tuned for the market implications of that, as well. telecom italia is reportedly delaying a launch for hybrid bonds over investor concerns uncertainty. investors especially from germany and france are worried about the outcome of sunday's elections. and coming up on the program, prime minister shinzo abe has set off on his trip to the u.s. will they have a bumpy landing in washington? we'll discuss when we come back. to grow, we have to boost our social media visibility. more "likes." more tweets. so, beginning today, my son brock and his whole team will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that?

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even when she's not going anywhere. citibank for ipad. easier banking. standard at citibank. europe's largest employer allainz has reported better than expected q4 forecasts. axa shares, meanwhile, taking a hit this morning after the french insurer reported a unexpected drop in earnings. stephane pedrazzi following this story for us out of paris.

stephane, what can you tell us? >> first of all, the numbers for the last year, they were below expectations and significantly because if you look at the revenue for the last year, 90.1 billion euros. it's about 4 billion euros below expectations despite the full increase in the year. the unit had a 3% decline last year, which was offset by the 3% rise in savings as well as a rise in property and casualty. if you look at the net profit for the last year, it was almost flat from 2011. however, 2011 was boosted by some exceptional items by a one off capital gain. and if you remove this one of capital gains, actually, the numbers were sharply increased last year at axa. especially the profit from operations. but still, a gain, it was below expectations. so what do you do when you report numbers which are below the consensus?

first of all, axa is going to increase its cost savings program to reach 1.7 billion euros for the period 2011/2015. and it has decided to increase its dividend from a year ago. stephane, as you say, nevertheless, shares are down 2%. not even enough to boost investor sentiment. thanks very much for that. peter oppenheimer still around the table here. earnings, does anything matter other than what we were saying earlier about monetary stimulus? >> i think earnings do matter and this year we expect earnings to be rising even in europe. they fell moderately last year and the year before. and that recovery in europe we think is largely driven by a pick up in floebl growth. we were discussing before about how european economic activity itself matters less. >> what are your favorite sectors here? >> we like insurance. we think it's a relatively safe

way to play exposure to financials. less regulatory risks, more positive drivers to earnings. they're a positive beneficiary, rising bond yields and -- >> but if we take, for example, german bunds to keep rising? we're starting to see even as they inch back towards that 1.7% level, they retreat, whether it's a sell-off here. >> well, there's huge demand still for bonds and that will limit the extent to which bond yields rise. on the other hand, we expect growth, particularly in germany, to pick up and ultimately german activity to grow above trend over the course of the next 12 or 18 months. and that will push yields up a little bit, i think. but not very significantly and the rise, i think, will probably be fairly moderate. and will coexist with moderately rising equity prices. >> this is a good rise in bond yields because germany, like the u.s., like the uk, tends to see bond yields increase when

there's the inflationary view that everything is working. today, maybe not one of those days, though. >> right. i think that's exactly right. we have to look at this in the context of history. typically, rising bond yields are not very good for equities and falling bond yields are. but that's changed, really, in the last decade after the collapse of the technology bubble when growth expect ages started to come down. and particularly since the start of the credit crunch falling bond yields have been accompanied by falling equity prices as growth expectations collapsed. what we're seeing now is a gradual moderation of sale risks, a gradual rise of expectations and that's pushing bond yields up and benefiting equities. >> can the german bund punch above 2% this year or -- we think it will reach around 1.9% and that's pretty much we think in line with fundamentals, inflation expectations, debt positiones and so on. most of the sort of risk free bond markets have reached levels

well below fundamentals driven by qe and excessive risk concerns. and as those factors moderate, we expect yields to rise more in line with fundamentals. >> and so the biggest risk to this view is basically we have to go back to central banks. so the federal reserve markets yesterday, we saw the markets fall out. is that because people are reading from that? >> yes. although, again, i think here we are to be careful with the interpretation. at the end of the day, if the fed are going to be less accommodative, it's only likely to be in an environment where growth is picking up more quickly. inflation expectations are still very stable and with big output gaps, a lot of excess capacity, it's very unlikely that we've seen a big rise in expectations. the yield will remain much more dovish for longer than people have begun to worry about and neither gain will be supportive for risky assets. >> even on this difficult

market, you have to look longer term and rely on those central banks. thank you for joining us around the set this morning. >> thank you. >>. still ahead on the program, the board room battle over bumi is set for its final act. how does nat rothschild rate his chances? stay tuned.

welcome back 20 "worldwide exchange." a sharp sell-off in europe with stocks taking another leg down as eurozone pmi data shows the private sector contracting more than expected. the chinese market hit the hardest and the pboc's record of trading funds and the concern over tighter policy. plus, france's access over fourth quarter income below expectations while allianz says the insurance industry is improving. and just some news out of britain, public sector finances showed negative 11.4 billion euros, almost twice as large as expected -- i'm sorry, twice as large as the previous year and almost about twice as large as expected, as well.

this is the largest, in fact, since january -- let me just make sure i get this straight. so 11.4 billion pound surplus appears to be what this is saying. what's curious, though, is the way this looks for some negative sign necessary there. let's sort it out, keep an eye on the sterling reaction and give you more of a response as to what's happening generally with trade this morning. the ftse 100 is down 1 .5%. same with the xetra dax and the cac 40. the ibex weak, as well. we're seeing a sell europe across the board. we're also seeing, of course, continued strength in japanese markets. japan's prime minister shinzo abe has set off for washington looking to forge deeper ties and putting a strong alliance on display. he's hoping president obama likes his abe-nomices, so to

speak. a summit with the two leaders will be held on friday where prime minister abe is expected to deliver a policy speech entitled, "japan is back." tomo is joining me now. thanks so much for your time. is japan back? >> that's a good question. i think japan is certainly back and with the depreciation of the yen and higher stock prices, the market reacts at least that way and we think that this will impact on our financial market is going to filter through to the real economy anytime soon. >> this is the interesting point. it's one thing for investors to bid up the nikkei, to push down the yen in anticipation of the bank of japan will be extremely aggressive. we'll deliver on its inflation target. it's another to actually deliver. have we moved on that phase now where they have to deliver and how likely is it that they can? >> well, we are going to see a new governor and the two deputy governors in april. so, well, i think regardless of

who is going to be the next governor, the bank of japan should have a more -- a much easier monetary policy, given the fact that they have already announced in january the 2% inflation target. so based on that, we think that monetary policy easing should continue. >> well, and is it going to be kuroda who is chief there? we're taking a look at his bio, head of the asian development bank, special adviser to koizumi. who would be most market friendly here? >> well, i think that mr. yuata is the most market friendly, but mr. kuroda is one of the leading candidates. and mr. kuroda has previously said further monetary policy easing is necessary. so i think the market is going to react in a positive way if either mr. kuroda or mr. yuata will be elected. >> it's a tricky message,

obviously, to sort of say yes, it's okay. what do you expect out of washington, out of these meetings tomorrow? >> well, i think this is the very important trip to mr. abe because this is his first trip to u.s. while we understand that the u.s.-japan relationship is the most important bilateral relationship for gentleman pap. so to make this trip very successful is really important task for mr. abe and i think that the both sides want to reaffirm the close tie given the fact that we have seen the rising tensions, geographical tensions over north korea and over the senkaku islands. >> east asia is becoming more and more precarious. that was a quote from one professor to another. how does the political back drop complicate, if it complicates at all, the macroeconomics for japan?

>> well, not really. well, i think that the very fortunately the bilateral relationship between japan and china has been improving after the september last year despite lots of noise we have heard recently. so the -- i think over time japan is going to have fda with china or korea and also with the other asian countries and then mutually try to benefit from the liberalization of trade. so i'm really optimistic on the future prospect of japan's trade. >> that would be a step in the right direction. thank you very much for your time today. egypt's economic landscape has been clouded with political instability, but the chairman of citadel capital says the muslim brotherhood is clearly pro market. he told cnbc in an exclusive interview on access middle east that the country's leadership needs time to find its way, that he's confident on political stability going forward.

usef has more from dubai. some interesting comments here. >> absolutely, kelly. aman who i spoke to who heads citadel capital, they manage monies in places like southern sudan, kenya, and he's bullish about not just egypt in the long term, but also about africa. he's like, listen, if you are trying to sun risk, just go by with t-bonds. he's very positive about the continent. it's not the demographic. it's not the natural resources. what he's really excited about is improved governance. you look at egypt which continues to be in political disarray despite an elected government and you ask yourself, is this really the case? how much of a long-term horizon do we need to have at this point? here are his thoughts on the income of governments and the muslim brotherhood in egypt. >> clearly, poor markets.

clearly looking at finding their ways not yet fully. they're also learning and part of the issue is that egypt is pressed for time and you can do so much learning before you have a problem. probably their heart is in the right place, but the politics in egypt is becoming more and more difficult. and i think they need to form new middle ground and new concepts with different forces that are on the ground because in order to movie gipt into a situation where the country from economic point of view and from a political point of view is stable, you need a lot of actions which have a lot of political costs and political

capital that is required. >> a lot of investors have been scared away from egypt because of the events that have taken place in the country over the last two years and a lot of investors have lost a lot of money, as well. are you confident enough in the administration's plan to be able to tell cnbc viewers that this is a good time to invest in egypt? >> on a selective basis, yes. you have to be -- you have to be selectively investing in egypt at this point in time. this is not the time for buying an index of 32 or 30 egyptian companies on the exchange. you need to select to see what is the environment that we're living in. how will egypt move forward? and which are the sectors that are going to benefit from those local macro trends? my view is egypt is in the middle of a balance agreement crisis coming from the energy sector. >> of course, that political disarray has brought the economy

to its knees. to give you a bit of context, we're talking about $36 billion in foreign currency reservers before the revolution. that's down to less than 14 billion which barely covers three months of imports. that has hit the egyptian local currentdy down 8% so far this year. the conversation is far tr over and continues tonight on access. make sure you do tune in and we will discuss how to manage risks in the broader confident n of africa and much more. >> you can look at the times there to catch that program. yusef, thanks very much for that and egypt reiterating the annual growth no less than 3% in the six months through june. best of luck on that front. it's decision day for bumi shareholders. the public showdown should draw a line under a bitter board room battle. both sides have admitted they need to part ways. the question is how.

>> if you take into account the 11th hour admission of these funds, it may be difficult for us to win if those funds hadn't been on the regular extra, we would have won convincingly. pretty good column that heard on the street. what should we expect out of today's vote? >> it was looking earlier as though it was going to be a very close vote. but as nat himself is admitting, the decision earlier this week of one of the big indonesian shareholders to sell their 13% stake tends to favor now the bumi board winning through and ask winning through this battle. i think it's still going to be pretty tooid tight, but at the end of the day, i think the status quo is going to remain at the end of the vote. >> where does that leave bumi? >> it leaves them in a

position -- it's been a pretty awful episode for the city of london, a lot of big advisers, jpmorgan, credit suisse, some of the lawyers, price waterhouse coopers, a lot of people who are on the board of bumi, all of them have tarnished reputations as a result of this scandal. >> whose fault is that? >> that's a good question. and there's still a bitter takeover by the panel going on as to exactly who knew what when the fundamental issues about funds that have gone missing from the company before it was brought to the london market. >> and nat rothschild has a lot of complaints about that money. the question is whether he knew about it before he brought this

company to the london market, anyway. >> he calls the current management team a disaster. the company is uninvestble. we have to get out the cancer, he says. >> bumi has made a lot of commitments as to what they will do if this vote is won. they certainly sent a message that the current chairman will step down, the backrie family have offered to buy out half the company in return for their own shares in bumi. so in theory, at least, they will become disconnected trt company. so essentially, both sides appear to have the same objective. of course, if the bumi board do win the day-to-day, investors are going to have to watch closely to make sure that they actually do carry out those commitments that they've made. >> that meeting starts at 11:00 here in london local time. could carry on for several hours. you may not know the outcome for tomorrow. we may have to have you back for that one. andrew people, thank you very much for coming by. full year earnings at 4.2

billion in earnings for 2012 for swiss re. >> good morning to you, kelly. take a look at solaris in swiss re, the only gainer of the smi. though it has given back some of its gains. look, you've got a strong performance in the pnc business. that's the nonlive business in the fourth quarter. the most favorable capital markets in 2012 and above all, you've got a relatively benign year in terms of natural catastrophes. yes, we had the sandy hit to the tune of 9 million euros, but apart from that, it was fairly quiet. a lot of focus going into these numbers was on the dividend paying capability. swiss re has surprised investors. it pays a total dividend of 7.5 francs a share. that was higher than expected because it added a special dividend and beyond that, it had some excess capital left. investors liked the news and

they like the shares up 1.6%. back to you. speaking of a difficult market, well, not so difficult with spain getting results from their latest bond auction. they were selling debt with a bid to cover ratio. they're selling the 2015 bond. that's a three year at a maximum 2.57% yield versus 2.9% on february 7th. they sold bonds with a 6.3% yield on july 19th and they sold about 2.5 billion of the 2023 bonds with a maximum yield of 5.22%. justin knight from ubs joins us now. justin, we have, of course, seen a broader risk off day. it's still pretty healthy for spanish debt. >> yeah. i think that's right. we are still seeing foreign investors wanting to buy on debts.

and we think the rally, if you like, the risk on environment in spain is still on for the moment. however, we see the demand having limited scope. the investors we think are buying are those that are staying in their benchmarks and always did. there are many investors that have left the market in a formal sense. they've customized benchmarks and we don't think they're coming back. and without the domestic banks being able to take up the slack this year, we think a man for spanish bonds, the supply demand balance will tip yields once more. >> they're just days away, but they don't appear to be causing investors to back away just yet. >> i think that's right. what we're looking at is it's probably a bersani government with maybe some kind of deal done with monti for control of

the senate. if that is the case, then the markets should be okay going forward. of course, worries are that the senate may be a little more fragmented than that or even that perhaps one of the anti-reform parties could get a greater hope within the senate or win tess lower house. but i think that's pretty unlikely. so for the moment, the market is waiting until we get the results monday night. >> it was german auctions that was surprisingly week. on a day when we found out that the pmi figures much weaker than expected. a bit of a shrug here in terms of peripheral belief. and it's germany and the uk that are entering cross hairs. >> on the flip side of what i was saying a moment ago, there is a stronger bank round bid for the core. but what they're looking for is higher yields. so despite the fact that the

periphery has moved so much, we haven't seen a sell-off in the core of yields. i think what that demonstrates is the market is fragmented. so the german yields below 160 again, then it's going to be very difficult for investors to get that interesting. as we go back up towards the yield highs of 1.73, we think investors come back in. if we break 173, we don't expect to see an increasing or even an exponential amount of german bonds as we approach 2%. >> it's still fascinate to go compare that with last year and the euro crisis, any prices at any yields. this is a paradigm shift. >> no, i don't agree with that. i think we're go back to that kind of paradigm at some point. it's just for now with the

markets, with risk relatively benign that this sort of wall of money, if you like, that is chatsing core yield, they get less interested. >> it's a fascinating point. we'll bring you back, justin, when it happens, suggesting, again, it could be a return to some of the weaker conditions from last year. straight ahead on the program, the 4g super fast broadband was supposed to be the next big thing in global mobile, but now the industry is facing a bit of a setback. can 4g change the way we use our phones? to grow, we have to boost our social media visibility. more "likes." more tweets. so, beginning today, my son brock and his whole team will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex

help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that? he won a contest online to be ceo for the day. how am i supposed to run a business here without an office?! [ male announcer ] fast, reliable deliveries worldwide. fedex.

welcome back to the program. boeing is set to redesign the 787dreamliner battery. what does that mean for japan? >> the nikkei 225 retreated from a 52-month high. bucking this downward trend was japan airlines and yuasa.

stocks soared on the news that boeing is set to install repair plans for the boeing's dreamliner as early as tomorrow. the battery supplier stocks jumped 8%. japan airlines climbed 1.26%. market players reacted to the cost cutting plans worth $42 million reported by the nikkei this morning. their strategy includes reducing costs of cabin crew uniforms and expenses in airport services. it's hoped that these measures will absorb the hit from the 787 flight cancellations. stocks of al nippon airways ended flat. that's all from the nikkei business report. back to you. >> gamers had to think out of the box after sony took the wraps off its new playstation 4

console. that's because sony didn't show the console or reveal the price tag. our new features include instant streaming and more social networking. after also announce ago share sale in medical unit m3 inc. is it game changer or is it game over for the console? tell us what you think. e-mail us, world would it@cnbc.com, tweet us, @cnbcwex. see what it's like up there in scotland with ross westgate while he's on holiday. meanwhile, has the industry just been dealt a serious setback? the uk's network auction raised much less than expected. still, our next guest says 4g is set to drive a commerce boom.

welcome. >> thank you. >> first of all, how much of a setback is the fact that britain only raised, what, about 2.5 billion pounds at the latest auction? that's 60% of what it was hoping. >> it's really good news for the industry. >> it's really good news and in the recent internet consumer research, we have seen that 40% of the consumers are more likely to invest on mobile and to pay on mobile. we see the increasing odds of the speed as a possibility for mobile to divvy up very quickly now. it's interesting because it's not only operator for four carrier. it's also forestry.

>> why is mobile commerce for important to the future of 4g? >> it's not only a question of speed because customers are connecting with internet, with wi-fi primarily. now the consumer will be able to be connected everywhere. this is a real change. it's possibly to be connected in the street everywhere. >> do you think, is this a case that consumers just aren't aware of what 4g can deliver for them that they haven't more aggressively sought it? >> maybe its usage is coming and it will discover that it can do anything now with mobile. it's really helping on the

desktop. >> and so it's basically going to still be the next big thing. >> yes. especially for the mobile new commerce and for brands, it's something massive and it will be posting really big. >> mobile world conference next week, this is sure to be a focus. >> we will be there, as well. we will see if companies make more of an option of explaining to customers with that platform. thank you very much for joining us. >> thank you. >> and stay with us because straight ahead on the show, u.s. markets took a nose dive yesterday. the vix was up nearly 20% and this follows the fed stoking

fears about an early end to its bond buying program. we'll take a closer look at the sell-off and what it means tore your money when we come back.

welcome back to "worldwide exchange." i'm kelly evans and these are your headlines from around the world. a sharp sell-off in europe follows asia lower with stocks taking another leg down on eurozone pmi data showing the private sector is contracted more than feared. fears of a property crackdown and the pboc's trading funds over concerns of tighter policy. and walmart reports fourth quarter results in just about two hours' time offering a view on the financial health of the u.s. consumer. >> not a pretty day in u.s. markets. yesterday, we saw the major indexes having one of their best days in 2012. the s&p 500 edging nearly that 1500 level and could drop below it this morning. it is looking to give up about five points at the open, the

nasdaq weaker, as well. the dow jones industrial looking about 40 points lower at the open. the ftse cnbc global 300 is about 0.9% lower. it's risk off. take a look at european markets. it's just sell europe. the cac 40 is 1.5% down. the ibex 35 in spain not faring much better. down 1.4%. the xetra dax down 1.5% back towards that 7600 level. the ftse 100 giving up 1.3%. 6,309 is its level today. the bond space gives us a sense of where money is going to and coming out of. it's leaving spain and italy, 5.24%. spain did have an auction that went off reasonably well. uk over here, though, seeing its prices rally. yields coming down to 2.16%.

kind of the same story for germany, which has the bund yield up, falling a little bit to 1.61% after its auction yesterday failed to spur a lot of investor demand. quick check off forex before we hand it over to sixuan. sterling/dollar is recovering some of its losses. now it's back up above 1.52 today. the dollar jumped yesterday after the fed minutes revealed a more hawkish tone than people had been expecting. over here, the euro/dollar is down by 0.6%. in fact, below 1.32. and finally, the dollar/yen retreating, as well, down about 0.25% in this as shinzo abe is heading to washington for talks with president barack obama. that meeting will take place tomorrow. for more on how markets are trading ahead of that, let's get out to li sixuan. >> take a look at the damage report behind me. you can see how the fed minutes

spooked investors here in asia. the nikkei slipped 1.4% from its 52-month high while investors remained cautious ahead of the decision on the next boj governor. construction equipment makers were down after caterpillar reported slowing sales for the quarter ending in january. but battery maker gs yuasa is up 8% over hopes of a long-term fix for battery problems. and yesterday's rebound in china was all but forgotten. the shanghai composite down 3% today after being slapped by tightening fears. commodity players raised the possibility of a qe exit. developers and cementmakers lost ground on news that beijing will press ahead with measures to cool housing prices. shares in hong kong lost 1.7% today weighed down by resources, developers and financials.

china's top retailer bel international fell 17% after a set profit for 2012 would be at the lower end of its forecast. elsewhere, south korea's kospi snapped a six-day winning streak, ending down 0.5%. steel measures took the worst hit. meanwhile, the asx 200 had its worst day since may last year losing 2.3%. the fed minutes and market talks on commodity fund liquidation took a toll on all the miners and oil majors ending well in the red. india's sensex slipped 1.7% today. back to you, kelly. >> sixuan, thank you very much for for that. not much green on that board behind her. u.s. markets yesterday were broadly in the red following the release of the fed minutes. it was, in fact, the worst day of the year for the s&p and nasdaq. the dow posted its biggest loss since february 4th, giving up about 108 points decline in the dow. energy and oil stocks are the worst hit. higher volatility, it jumped

nearly 20% during the session. we wonder if that spread a lot of calls to patrick spencer, director of international sales. welcome. >> welcome. >> were investor egg loor phenomenon an sclus to sell and did the fed minutes offer that excuse? >> the market is up 20% since june. so you've had a very firm market, in fact, since that time. and looking at the earnings recently, if you look, they've got a line at 70% of earnings, in fact, actually beat and on the top line by 67% and they were only 40% the last time. so the environment is extremely good. >> although a lot of companies have come out and warned about the next quarter. we've seen a high ratio. >> yes. there is -- i'd give you that, yes. we're looking at -- and assessments we're looking for 1%, 2% growth in the next quarter. and the market is up, as i say, 20% since june. all the fed basically said there's potential worries i think out there which are unfounded that there's going to be tightening. if not tightening, maybe there's a bit of slowing from the asset purchases as the bank grows its

balance sheet from trillion, 4 trillion. generally, bernanke has said that he's going to support unemployment down to below 6.5% with qe. >> is it enough that they're already expanding the balance sheet to 4 trillion? is it enough that we can sort of get past the fed minutes and investors work through that or do they now have to come out with more? >> i think they're going to watch. if you look, we talked about earnings. if you look at earnings, 10% above record peaks and so the recent earnings as we've just discussed being reasonable. i think they're going to watch. but the environment is reasonable. it's not explosive. so i think the environment is healthy, so yes. >> generally speaking, how does

your view on international equities fall? what do you recommend and what do you stay away from sthp. >> sure. the u.s. we believe is going to be one of the engines of growth this year. we're looking for 10% earnings growth this year. so the u.s. would certainly be top of that. and there's a lot of interesting fundamentals in the u.s. >> they want to lend money. the housing environment continues to get stronger. equities are still under owned through the world. unemployment will continue to get better and the demographics of the oil being, you know, certainly the shale, gas, etcetera being much lower, there's a democratic huge advantage to the states. so for the u.s., i think it's going to be our top priority for this year. >> i want to get into a couple of specific names. first, let's give people an idea of what's on the agenda in the u.s. weekly jobless claims are out at

8:30 a.m. eastern expected to jump 14,000 to 335,000. we'll get the january cpi index up 0.1%. and january home sales report is expected to show a drop of 1.2% to an annualized rate of 4.9 million homes. leading indicatorers for january and a pair of fed officials speak for the day, st. louis's james bullard and san francisco's john williams. and walmart, yes, will report earnings before the open, so, too, about l chesapeake energy and hormel foods. walmart, fascinating story, is it not? what did you think when they happen talking about how to start february results here. >> we had highlighted the fact that there may be some rebate issues with regard to tax. and there is are payroll increases. but walmart is a cash flow

machine. it uses its capital allocation. you've got to simply look at walmart per year for the last ten odd years. >> do you still like them here? >> i do, yes. they basically buy back stock. they increase dividends and they can -- they basically can might want earnings to 10% per year and they've done that historically over the last ten years. so i'm not worried about up two, down one. as long as it's not majorly declining, we continue to like this stock. >> because it's a different story for hewlett packard, for example, that is a company that you are much more worried about from a fundamental point of

view. >> sure. hewlett packard, the big problem is debt. they have nearly 40 billion net debt, 5 billion free cash flow. it's really a private equity company moving in a free cash trade flow. printers and pcs are in structural decline. their networking business, their storage business are under attack and cisco, there's a question mark around. >> are they going the way of dell, hp? >> i don't think they can because their debt level is so high. they're like a private -- dell is going private. hp is very much like a private company, but in the public marketplace. but dell has 15 billion cash pile.

>> chesapeake, a lot of trouble. what now for the company? >> well, you know, the ceo has just resigned. they've got a huge debt mounting once again, 16 billion. they made asset sales last year of 11 billion. we were looking for 14 billion. so for us, what we'll be looking at today is how much of those asset sales are going to continue to be sold. that's the key for the company and their shales business, how will that is doing. so those are things that we'll be looking for today. >> may help to move into equities? >> possibly. >> thank you for coming by. >> coming up after the break, we're going to take a check on the insurance industry. for more on what that means for the company and for the sector, stay tuned. we'll be right back. all stationo mission a for a final go.

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would i be to "worldwide exchange." these are your headlines. property fears did rattle chinese markets, sending the shanghai index sharply lower on the day. walmart gears up to report earnings ahead of the u.s. open,

offering a window into the health, or lack thereof, into the american consumer. first, in earnings news, it's meant to wear a green spot on european trade this morning, swiss re has comped estimates of full-year earnings of 4.2 billion in 2012. carolin joins us from zurich. a low-rate environment didn't necessarily hit this company as much as people thought. >> no, not really. the key factor in this set of results is really the low number of natural catastrophes in 2012. yes, we had sandy and that hit the fourth quarter with around $900 million. but that was the only big natural catastrophe in the year. and apart from that, it was a good year because the business performed we will in the fourth quarter with capital markets being favorable for that firm. swiss re shares are higher by

more than 2%. swiss re was hit ago five-year high, but below that level now. the capital value is very good and because it has so much excess capital, swiss re is able to pay out a special dividend and that boosting the share prices this morning. back over to you. >> carolin, thanks very much for that. it was allianz in focus this morning as the earnings season continues. it sees improved prospects for the company this year. uncertainty over government debt could strike a blow to prots. alliance shares are down by about 0.5% which is outperforming the market. for axa shares, taking a hit after the french firm expected a drop nernings. the group said it would raise its cost cutting target. stephane pedrazzi is following

this story for us from paris. it has come off its lows. >> yes, but it's still losing ground on despite some positive announcement this morning that we are supposed to boost the share price. first of all, as you mentioned, the company has decided to increase the first savings target to 1.7 billion euros for the period 2011-2015 which is about 200 billion euros more than the original plan. it will increase its dividend to 72 cents per share from 2012 up 69 cents in 2011 and the ceo says it continues about the possible spin-off of the private equity unit. that was supposed to have a positive impact on the share price. but, obviously, the market is more focused on the earnings which were better than expected for the last year. net profit was at 4.1 billion euros which was below the average forecast of 4.4 billion, mainly because of some restructuring costs. also, the revenue despite a 5% increase last year remain much

lower than expected at 90 billion euros. it's 4 billion less than the average forecast that is question mark about the outlook. it seems to be moderator falling to bank of america merrill lynch and as a result the share price is losing a bit of ground in paris this morning. >> that's right. foreign exchange and impact, too. lots of variables to watch out for. stephane pedrazzi, thank you, sir. gamers had to think out of the box after sony took the wraps off its playstation 4 console. that's because it didn't show the console or the touch pad. a new touch pad controller was on display. sony's plan is to hit store shelves by the latest holiday season to compete with the newest xbox set to debut this

summer. is it game over for the console? join the conversation here on "worldwide exchange." you know how. i want to bring you a couple of the responses we've gotten already. jeff says, i don't use playstations any more. i now play free games on my android tablet. i don't use any platforms for any games. still to come on the program, keep thoughts and is e-mails coming. we're also just three days away from italy's general election. find out what the country's business leaders are expecting from the race. we'll be live in milan when we come back. great, everybody made it. we all work remotely so this is a big deal, our first full team gathering! i wanted to call on a few people. ashley, ashley marshall... here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys.

ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location.

italy votes on sunday. we're just days away 23r from when eye at that timans will go to the polls to vote for a new leader. julia is in milan with all the latest on the elections. hi, julia. >> hi, kelly. thank you very much. all morning on this show we've been listening to my interview with the sam paolo coe. >> the current situation we're in serious elements of optimism. in fact, if i look at the

possible political outcome, i think that the central left coalition is ahead of any other coalition and with a new law, even though they're likely to get between 32, 36%, of the vote, they should get firm control, 55% of seats in the lower chamber while they will not have control in the senate. but if they were to form a coalition, they could secure also affirm majority also in the senate. now the unsettling factor could be low. if it gets more than 20%, that could change the landscape and might lead, also, to another scenario whereby we might see a

frank coalition going from the central left to monti to berlusconi's party coalition. >> and yet the italian election might be taking a back seat to football this morning. ac milan defeated major rival barcelona last night. milan went to victory after two goals in the second half bringing an end to its seven-game losing streak against barcelona. julia, should we read anything into this? >> well, kelly, it's difficult given how many teams lr here in italy. like any good journalist, i've done some extensive research and it is fashion week and, of course, when it involves shopping, it's not a chore. so i've been buying some shirts to explain what we have. ac milan, prince scoring last night. good luck prince. and following on to mr. messi,

the best player in the world, what was he doing last night? i have no idea, but, of course, a disappointment. this here is the most popular club in italy. that leads on to inter-milan and this, a lot of rivalry between ac milan and ininter-milan. it makes it difficult to guess what it means for the election. >> which one is your favorite, by the way? >> good question. no, i think you have to stick with blue because it matches my eyes. but, you happen, i'm not going to keep hold on these, actually. these are going to be ringing their way to little tom who should be expecting these in the next few days. >> and i think it's time to get warm, as well. it looks frigid there. and i can't help but see foreloren on the back of that jersey. not going to read too much into that one. we're going to take a break, but wti oil prices taking a big

low with prices plunging below $90 a barrel in yesterday's session. can they return to last year's highs? find out when we come back. and here is a look at how futures were trading ahead of the open today. looks like another session spurred lower by global development. ♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon if the miles aren't interesting? the lexus ct hybrid. this is the pursuit of ection.

welcome back to "worldwide exchange." i'm kelly evans. a sharp falloff today in asia as stocks fall lower. the private sector is contracting more than expected. the chinese market hit the hardest overnight and the pboc's record of draining funds has raised concerns about tighter policy. and wall street opwalmart releases results in two hours time. auto sharp sell-off across major indexes yesterday, mott much of a rebound taking shape. if anything, there's more added selling pressure coming from europe overnight. the dow jones looking to shed another 50 points or so at the

open. the nasdaq s&p 500 same story. of course, this follows the session in which these major index had one of their worst days in 2012. volume was higher on that sell-off. overnight, the cnbc ftse global 300 had a big move down, down 0.9% which is much more than we usually see for this index which tends to be a slower mover. european markets, pretty consistent with their decline. it's not a case of core versus periphery today. it's really about selling europe, generally speaking. the contraction at a faster than expected pace in germany. the ftse 100 down 1.5%. same story for the cac 40, and the xetra dax. the ibex 35 down 1.37%. >> we've had a big move in dollar/yen. we've rallied over 15% from november. i do think in the medium term, there is some room for the

upside. i think the bank of japan are adamant in their policy the 2% deflation target should drive the dollar higher. i think the u.s. story, as well, which we saw last night is adding to dollar strength. and my personal target is 98 to 100 in dollar/yen over the next six to nine months. >> zault stocks that have been under investing, dividend based stocks, they have been the ones to outperform. in fact, they've outperformed in europe more than tech did in the u.s. tech bubble. we think that that bubble is going to bust. we think the investor is going to look back to companies that are investing, that are growing rather than, you know, just running themselves for cash. >> right now, it's a mean aversion. if anything has gone one way up until this point this year, it's very likely to come back quite

considerably. it's bearish on gasoline in particular right now. bullish on the yen. >> take a look at light sweet crude selling off by 1.25% after a sharp decline yesterday. it's the same story for brent, which is giving up about 0.9%. and it was this climb in yesterday's session that sparked a lot of talk, a lot of rumors, a lot of concern about what was happening in the commodity space. harry, welcome. any sense as to what was driving the sharp declines yesterday? >> no. i think a lot of the declines we've seen recently, especially on industrial commodities have been motivated by mixed u.s. data and weak eurozone data while the market waited for confirmation of basically better chinese pmi data. and we hope that we'll get that data on february 25th. in the meantime, i guess, the fact that the minutes of the fomc yesterday were -- had some hawkish elements to it, again,

reiterating concerns they had in january over quantitative easing part three duration and quantity, that certainly didn't help. from that perspective, the dollar strengthened and that allowed for further correction across the board on commodities. not just an oil thing. base metals, gold, agriculture. so typically, the financial conditions, economic conditions, nothing particularly supportive, but none 2 less, we see this correction as a very good buying opportunity. >> because you actually see we're looking at light crude, about $9 the 4 a barrel. you say it's headed to 100. >> well, basically on a ti basis, yes, we expect to return to 100. we expect to get back to the 120 and above yeah on brent. the important thing to remember here is that the fed is committed to quantitative easing part three or at least ben bernanke is committed to quantitative easing. so we will have a weaker dollar environment in 2013, which means

the demand for real assets denominated in dollars will rise and that, of course, includes commodities. >> still getting to focus is the $3.75 level for gasoline in the use. started pointing out when we hit this bubble before, there was almost a knee jerk reaction in the s&p. is there not a natural selling, a point at which these tend to support themselves? >> i think in terms of u.s. gasoline prices, really, the threshold of pain is closer to $4 a gallon at the retail level. we had a bump up in gasoline prices in the u.s. mainly as a result of the closure on the atlantic coast and new jersey and that is the pricing points of our gasoline future contracts. so from that perspective, i think the market overreacted. we saw gasoline prices move higher and the curve for gasoline prices move higher. for us, that's an excellent opportunity to be selling tracks on gasoline.

>> is there any specation for retail gasoline prices to stop? we know the move downward has been sharp over the last couple of trading sessions. do you think they'll seep through to prices at the pump? >> yes. as i said, we think there's an overreaction to the refiner in new jersey that has allowed the gasoline prices to knee jerk higher, if you will, and representing an excellent opportunity. inventories in the u.s. are quite comfortable. the east coast can be sxlied from gasoline to the gulf coast. domestic demand is on the lows. we don't have too much pressure on gasoline supply. all in all, the fundamentals are not particularly bullish for gasoline. i think what we just had is a reaction to a closure at an important location for the pricing of gasoline, which is new york harbor. from that viewpoint, we see this as temporary and representing an excellent selling opportunity. >> potentially some good news

there. gasoline headed lower. harry from bnp parry bass, thank you very much. we'll see if that can be sustained. still to come on the program, speaking of what's happening with retail gasoline prices, walmart is feeling the winter blues. e-mail from top executives pointed to a disaster for the executive giant. earnings are due out shortly. we'll be right back.

welcome back to "worldwide exchange." citigroup 5e7s's chairman o'neal is not looking for the bank to break up. now he's determined a break-up wouldn't make sense given the current regulatory climate not to mention he's the ceo. take a look at citigroup shares, down about 1 is% in frankfurt trade this morning. it's a touch better than the dax. the justice department and inbev are looking for a delay in buying mo did he lo's deal. the justice department said that

wasn't enough and sued to block the deal. last week, inbev sought to block $3 million in additional concessions. inbev selling off about 1% in what i mentioned has been a generally weak session across european markets. president obama took to the air waves wednesday talking to several location tv station toes press republicans to avert the $85 billion in budget cuts set to begin in just eight days. on the same day, the pentagon outlined plan toes furlough some 800,000 civilian workers to save money. these interviews are part of the white house strategy to blame potential job losses on the gop. >> instead of us cutting education, instead of us cutting the mental health programs, instead of us affecting military readiness and a whole range of other things that are important to our security and prosperity,

we should be focused on programs that we know don't work, waste in government, and some of these tax loopholes that we could close that frankly benefit the well off and well connected. >> now, congress isn't in session this week. it isn't expected to reach a deal by the march 1st deadline to prevent the sequester. so, ideal, the physical mini cliff continues. david einhorn is taking his case against apple directly to the company's shareholders. he's seeking an injunction to get rid of a system to issue pressed stock. einhorn will hold a conference call with investors today, an interesting move and one that's seeing apple shares outperform this morning. they are one of the rare green spots across the european stoxx 600. hasn't been the case for the last three months, of course. if you're just joining us on the program today, these are your headlines.

european stocks are following global markets lower. property fears rattle chinese markets sending the shanghai index sharply lower. and walmart is gearing up to report earnings ahead of the u.s. open offer a view into the health of the u.s. consumer. straight ahead, we will preview those results of the analysts. and what might it tell us about strength for the rest of the year? we'll be right back. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers.

welcome back to "worldwide exchange." eurozone recovery hopes are dealt a blow after the regional pmi's flash estimates came in well below forecast. that compares with reuters forecast to 48.9. france, among the weakest link

in the currency block with services activity slump to go a four-year low. we can take a look at the impact that that is having across markets. now down better than 2%. same goes for the xetra dax. the ftse 100 down 1.8%. the xetra dax is down 2% as well as the cac 40. the ibex 35 down 1.9%. now, u.s. futures are taking a hit on this. you can see the euro/dollar, for example, selling off as it is now decidedly below that 1.32 level. it's a pretty big move. dollar strengthened after the fomc meetings yesterday are a contributing factor. today, not much of a rebound shaping up. in fact, the dow now looking to shed something like 64 points, taking fair value into account. the nasdaq, the s&p 500 also weaker. look at that. the s&p is barely clinging on to that 1500 level this morning. markets in the last couple of days have erased much of the

gains they had previously built up, although the strategists on the program have told us, perhaps it's a pause in the rally. indeed, if we look ahead to the u.s. opening bell, we've been asking guests what's behind the latest sell-off? is it really the minutes? >> i think the prospects strategically for equities is still very good. they look attractively valued relative to other asset classes. but it's not that surprising that we're seeing a bit of a setback. we move to a neutral position from overweight. as we thought that the sharp rise we've seen in equities, it's moved a little bit ahead of the fundamentals. >> speaking of fundamentals, here is what we look for in the u.s. jobless claims are out at 8:30 a.m. eastern. love this one. they're expected to rise 14,000 following a seasonal perhaps led drive last week. also at 8:30, it's the cpi and the inflation index there expected to show a gain of 0.1% on the month for the headline and 0.2% excludeing food and

energy. at 10:00 a.m., it's the january fed report. also, fed speak, yes, st. louis fed james ballard and john williams of the san francisco fed will be speaking later today. and walmart reports earnings before the open. so does chesapeake energy, hormel foods. aig, hp and newmont mining will follow after the close. we asked earlier if computer giant hp could be headed down the same road as dell. >> i don't think so. their debt is too high. hp is very much like a private company, but in the public marketplace. but dell has got 15 billion cash pile. so silver lake, obviously, they will put debt on that to take it private. >> hp can't afford that. >> they can't do that. >> interesting point there. walmart, meanwhile, reports fourth quarter earnings at 7:00

a.m. eastern. that's coming.. the world's largest retailer, forecast to earn $1.57 a share and nearly $128 billion in revenue. the results may offer further signs u.s. consumers are under financial stress, however. last week, a report showed leaked e-mails from a top executive who said the first two weeks of february were a total disaster for the company. patrick is senior equity analyst at mkm partners and joins us now. patrick, some pretty frank talk there, the likes of which we don't usually get to see from these executives. how significant for the stock? >> well, that, i think, it's lower start for the year is priced into the stock here. i'm not recommending it. i have a neutral rating. i think it's fairly close to being fairly valued. but there's been some speculation about a weak start to the year. we all know that the payroll tax went up on january 1st. we know tax refunds are about two weeks later. the early tax refunds are about

two weeks later this year than they were a year ago. and that has pinched lower income consumers that rely on those tax funds for some of their discretionary spending this time of year. january was a low month for retail overall, but target had a 3% increase in the same-store sales in january. but i think it's pretty widely, you know -- it's baked into the stock, a slower start to the year, i think, as it relates to walmart shares. >> i wonder, too, we're talking about a country that's been under pressure to increase sales growth. they were finally showing momentum on that front. have they lost it here or has this left a walmart story and more a consumer one broadly? >> yeah. i mean, i think they probably have lost a little bit of momentum since the fall. they talked -- management talked about a very good black friday. we haven't heard a lot from them since, other than this -- apparently this leaked memo from last week.

but the company hasn't substantiated that. they may talk to it this morning. but, yeah, it does seem like momentum has slowed a little bit from walmart since the early part of the holiday period. >> what gets you interested in the stock again? >> well, i'd like to see some improvement in store traffic. store traffic at walmart u.s. which is the primary engine for the company. traffic was up only 3% in the third quarter, so let's call it flat. if we see some pick up in store traffic, that might get me a little more positive. the other thing that's concerning me is that international performance across the company's international portfolio has been mixed. they've had some problem areas. china, brazil, and i'd like to see a little bit more evenness across the international portfolio. >> should walmart be more aggressive when it comes to that overseas expansion or given the missteps that they've had, would

you prefer they focus closer to home? >> i think i'd prefer that they focus a little bit more at home. they have done a number of acquisitions over the past few years. so they've been integrating those acquisitions, including an acquisition in south africa. there's been some talk more recently about turkey. and, you know, the international story has been, in part, anyway, a good part, has been in good part about acquisition. but it hasn't been easy for the company to digest and integrate its overseas acquisition. so, yeah, i think i'd like to see them focus more on driving walmart and the core super center business here in the u.s. >> what if they were -- and we've seen this across the european space. we've seen special dividend companies looking to save investors, look, we know it wasn't a good quarter. here is a handout. any prospect of that as seeing an increase in the 2.3% dividend yield for walmart? >> sure, we could see an increase in the dividends.

they did accelerate their dividends into calendar 2012 because of the changes in the tax laws and all. i'm not looking for any major changes there. i mean, the company is very well positioned. well capitalized, lots of cash on the balance sheet. and is, yeah, i think you could see more of that go to dividends, sure. >> i wonder, too, to broaden out and talk about the rest of your sector, if walmart is middle of the pack for you, who is at the top? who do you like here? >> well, i cover the discount store space and the off price apparel space. so the names that have been at the top for me are the off price retailers, tjx and ross stores that have been rooet real momentum plays for two plus years now. they're both coming off very strong holidays. they both had 6% growth in same-store sales in december. january was a little bit slower, but a lot of that is that they just didn't have a lot of clearance merchandise in the stores after a very strong holiday. so that's been where the strength has been most recently.

target, as i said, they did pretty well in january. they had a 3% increase. so i think we'll see -- you know, i'm not saying it's -- the economy is tough, no question about it, and the consumer is going through a little bit of a transition right now with income taxes and whatnot. but i think target is pretty well positioned here, better positioned than walmart and i do like that stock. >> lastly, dollar stores, they've been accused of taking a bite out of walmart's typical consumer and costco might steal more of the affluent shoppers, the dollar stores might be taking the lower end shoppers. is that still a trade or is that theme ending? >> well, the dollar store stocks have been more -- some have decided that theme has played its out. i disagree. i like the dollar stores, general, family dollar ask dollar tree. the business, the sales have been a little bit less consistent more recently, but if you look back over the past two

years or so there, they've had mid single digit same-store sales growth pretty much quarter in and quarter out on top of those diendz of gains the year before. so there has been a clear market share story there and i can some of that market share has come from walmart, some of it is related to their convenience and ability the price at parity with walmart and i don't think the trade has fully played itself out. i think it's taken a bit of a pause and i think as cons across the board tighten up a little bit in 2013, perhaps trade down again as was the case in the recession, i think the dollar stores stand to benefit. so i like those stocks, actually. >> you trade down trade perhaps it's back for 2013. patrick joining us there from mkm partners. thanks very much for that. wart march will report in just about an hour's time, giving more detail on just how bad, perhaps, recent traffic has been. tesla motors has posted wider fourth quarter loss. higher costs to ramp up

production of its luxury electric cars. the ce owe says he expects the company to be moderately profitable in the first quarter. customers placed orders for fourth quarter. tesla shares down 6.9% in frankfurt, one of the worst performers today on the stoxx 600. and google is reportedly developing several touch screen devices that uses chrome operating system. the first run of products will include laptops and could go on sale later this year. google is trying to compete with microsoft and windows but the chrome devices would compete with android, which powers a slew of smartphones and tablets. google shares up about 0.3% today. well above the market, we should add. pintrest, valuation of $2.5 billion. hedge fund valiant led the

investment group. pinterest has grown quickly since launching in 2010 and now has more than 49 million users worldwide. that's a growth story for you on what's otherwise been a pretty grim morning. the s&p 500 trying to cling on to that 1500 level. european trade has seen markets whacked across the board. down in the range of 1.5%, almost 2% now slightly off those lows. but the pmi figures not doing much for sentiment. i'll have more on the market update for you on "squawk box" in just a couple minutes time. for now, that does it for us here on "worldwide exchange." thank you for tuning in. hope to see you back here tomorrow morning. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and you'll find advanced safety technology

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