hello and welcome to "worldwide exchange." i'm ross westgate. >> and i'm kelly evans. these are your headlines from around the world. >> washington and wall street brace as the deadline to pass the sequester passes. president obama holds budget talks at the white house today, but the odds are pretty low on a deal. chinese factories fall to an all-time low. and european equities begin the month trying to inch their way into the green after all three major u.s. indices end at a february high. the dow coming in within 16 points. >> you're watching "worldwide exchange," bringing you business news from around the globe. >> all right. welcome to the last show of the

week. plenty to do today, as well. >> the first show of march and we know what happens on the first day of the month. it's our favorite day or at least mine. open, that's why. it's the pmi figures around the world, frankly. europe, by the way, came in after the flash at 47 i think point 9 versus 47.8 flash. that's just in line with what we saw in january. some interesting things happening with the components. greece is a little better, as well, although still contracting. but yes, we're looking at not too much of a reaction in the euro/dollar to those figures. >> slight pick up. we've also got italian january adjusted jobless rate jumping to 11.7%, higher than the forecast 11.3%. and the highest since the series began back in 1992. the youth unemployment rate in italy, 38.7% versus december's

7.1%. so the unemployment rate jumping up 11.7% on wider numbers. joining us for more is brendan brown, head of research at mitsubishi usj securities international. brendan, thanks for joining us. for all the port of the omt, clearly, the economics haven't turned around and we saw this the last time last week the yields coming out and talking about france and spain weren't going to hit their targets in the way we thought. when you look at that italian number, how does that play into the politics? >> clearly, the italian political situation is very concerning. i think the consensus for you is if we are in a deep recession, political uncertainty is going to deepen that recession. is in in general, i would say this morning's data continues and there is a slightdown turn it had at the end of the last

year. that's the main good news in europe. the super economy in europe is somewhat positive and i think that's actually underpinning some think global markets. if global markets had the combination of seeing raised italian political uncertainty and germany going into recession, that would have been much more serious. fortunately we're not seeing that. i think what we're seeing in global markets is one school of thought says for weakness and commodities is telling you that the global economy is slowing down. my own view is that what we're actually seeing is some rotation of asset price inflation away from commodities, commodity extraction companies, high yield debt to u.s. equity markets and japanese equity markets. so i'm more positive in general. >> and central bank action is boosting equities more than it is other assets. >> when you think about this

fantastically bad monetary movement in the united states, the process of inflation goes through different markets at different times. there has to be a speculative story and we have that speculative story back a year ago or two, three years ago with china in emerging markets. that story is fading a bit. and the new story is the u.s. is the super energy economy of the world manufacturing coming back from china on sourcing everything out. and that's the new story. so that is a feature of this asset price inflation. you get rotation from the asset market inflation attacks one market after another. and you don't have previous market which was attacked seeing a speculative temperature fall. at a time, the speculative temperature is falling. >> every day that we talk about what's happening across eastern europe, but today we'll be talking to barto's paul

alolowski. polish gdp this morning slowing to 1.1% growth on the year in the fourth quarter. that was better than expected. and the same going on with the pmi figures point to go a less severe contraction in manufacturing. so a lot of concern about the vulnerability of eastern europe to deliver -- >> and poland is the mexico of europe. >> right. >> does that make sense? nd iis that's exactly what we're going to discuss. president obama is due to meet for the final sets of budget talks with lawmakers. is it too little too late? we'll be stateside with analysis. >> and we'll head to istanbul where u.s. leaders are weighing in on the sequester deadline. also, the iran nuclear talks have reportedly reached a milestone feeling halts for a break throughout of tehran.

an adviser to the u.s. state department will join us about 11:20 cet. china's factory growth hit a two-year high in january, but february is a different story. activity is cooling. li sixuan has more. i understand if you seasonally adjust and make a few other fixes to the figures, they don't look quite so bad. >> it is seasonally adjusted. the final reading of hsbc's pmi came in with earlier estimates. note both pmi numbers are now very close to the boom and bust level of 50. if you drill down the data, both new orders and new export orders fell in february from the previous month and that signals more head winds for chinese factories which are already suffering from sluggish poor sales. some economists say the pullback in the pmi could be due to

distortions in the seasonal holiday despite the adjustments. we're get a clearer picture for the pmi data in march. the data does signal a path to the economic picture. >> thanks very much for that. brendan brown is still with us. jing joins us, as well. what do you make of the data this morning?ning? >> well, the data clearly are slightly below expectations indicating the economy is perhaps losing a bit of the momentum. in the last several months on the back of the government's stimulus program, we're seeing a very strong economic rebound. clearly in february, manufacturing activity is slowing a little bit. however, we should also look forward to march and april

because i think there's indeed some distortion in the data. >> is it your view that a cyclical recovery is taking hold in china? >> it has indeed taken hold. going forward, we're beginning to talk to investors and multi national companies about the chinese risk in the economy. given the strong rebound we've seen in november, december and is january of this year, people are beginning to worry about potential overheating concerns. as you can see, housing prices are very high. the central government put on new measures to restrict the speculative activity in the housing market. we're seeing potentially higher inflation down the road, maybe three or four months from now. on the one hand, we do have an ongoing economic recovery. on the other hand, we have to be potentially concerned about o r overheating risks. >> across the brick some

tightening here taking place. how does that fit in with what we were just talking about and the asset performance that we're seeing? >> very much so on because the whole story about two years ago was china-centric. what you're now seeing is a growing concern that maybe the china bubble didn't burst and that there is possibly big slowdown and puncturing the bubble still to come. >> are you saying the hard landing question is still with us? >> it's still in investors' minds. a lot of investors are waking up saying there wasn't a bubble bursting and man it's still to come in the future. >> gene, what's your view? >> i don't hear a lot of people talking about hard landing risks today. however, a lot of people are really looking forward to next week's major national people's congress taking place in beijing. some 3,000 people will gather and the new chinese leadership will be formally inaugurated.

we'll have the new president, the new premier and a pretty big lineup coming up. a lot of investors are focusing on what new policies will be announced. i think one thing we are focusing on is social rel fair provisions. health care, education, retirement services which will help support consumption going forward. the other area we're focusing on is basically the property market, which is 10% of china's cdp. will there be further measures announced by the central government? lastly, the more focused portion of the chinese government is putting people first. they're trying to promote social well fare. they're building a lot more low-cost housing. so i think at the present time if you look at hard landing risks, i would say those risks are pretty remote. however, going furd, we need to focus more on investing more towards private consumption. >> okay.

thanks very much. we'll keep an eye out for cnbc next week in beijing. it will be one of the main events for investors to watch next week. >> it will certainly be on our radar. worldwide@cnbc.com. president obama will meet with congressional leaders at the white house at 10:00 a.m. eastern for last-minute budget talks as the sequester looms. hopes are low for the deal to avoid the budget cuts. the deadline has passed but $85 billion in spending cuts won't go into effect right away. the president must order a sequestration for fiscal 2013 but he can issue that order at any point today and the white house says it will probably be as close to midnight as possible. thursday, competing bills replace the sequester failed in the senate while house members left early for the weekend. apparently, yes, finding no reason to stick around. >> well, i think what we're seeing here is political

theater. the economic impact of the $40 billion of cutbacks in spending is going to be fairly insignifica insignificant. in fact, much more significant is going to be the implementation of obama care in terms of what it may do to the labor market. >> explain that for a second. >> we're seeing more .more reports of employers cutting back labor forces to be under the 50 which obama care tax cuts start coming in or reducing hours, under 30 hours for part-timers so they don't pay obama care. this may have a significant impact on employment and i think that's much more important than the $40 billion coming from the sequester. >> it would be rare for something like that to seep through on the left level. >> it's bound the influence the labor market. what we don't know is how it will all balance out in terms of unemployment numbers. we don't know.

but i think the general point i would come back to with this sequester is that there's going to be a huge amount of political theater over this and where the cuts come. it's in the obama administration's time so make sure the republicans get the right message. but the economic impact is not so great. these tax adjustments are going to be positive from the effect coming from the stock market. >> ross, do you want to walk us through that? >> yeah. it's the first trading day of the month. looking back at what happened in february, as well, march the 1st. weighted to the upside. less than six to four advancers outpace decliners at the moment, kelly. ftse 100 up nine months in a row, the longest winning streak since 1997. up around 1.3% on the month.

upper 16 points today. the xetra dax is up nine points. ibex up 0.25% at the moment. it was down over 8% during the last month. the ftse mib down today, also. been a big loser during the month of february. some individual stocks we're looking at, areeva says it's sticking with its target to sell and build ten nuclear reactors by 2016. after the bell last night, the group revealed a doubling risk for just over 2 billion euros. the stock downmildly. thales is doing okay, up 13% this morning. the french defense electronics group posting a 24% margin in its full year effort. it beat estimates, 2012 sales up by 9%. the company also saying the headwinds in europe should be easily offset by growth in emerging markets. and over in italy, luxottica up 2.5%. it had a 19% jump in adjusted

full year net profit. this is the world's big ft eye wear company. it says it's going to focus on southeast asia this year and expect double digit growth in those premium and luxury segments. as far as bond markets are concerned, we're up to 4.9% before that auction a couple of days ago. fairly contains 4.7%, ten-year yields back down to 5.07% in spain. so we've seen a sharp narrowing of the space between italy and spain. on the currency markets, declined quite a lot on the month. aussie/dollar, 1.02. dollar/yen at 92.65. euro/dollar, 1.3066. 1.3017 was the 17-week low which

we hit a couple of days ago. that's where we stand. by the way, we have uk pmis coming out in around about -- if i can work it out, 14 memberships. no, 12 minutes. we'll get to that in a second. li sixuan is with us. >> thank you. china pmi data in worries over the auto u.s. budget cuts put a lid on asian markets ending the week on a mixed note. they bared down early losses. insurers tumbled after china life issued a profit warning and that stock lost nearly 3% today. but environmental stocks yet again surged on hopes of more supportive policies. in beijing, the hang seng finished lower by 0.6% with citic leigh leading the losses.

in japan, january cpi figures marked a third straight decline and we had a mixed showing for exporters. the but the property counter and other inflation betts left their support. the nikkei gained 0.4% and it's up for the third straight week. elsewhere, it's a solid day for south korea's kospi up over 1% helped by bank and automakers, this despite the sharp fall. and down under australia's asx 200 eased 0.4%. india's sensex, less than an hour ahead of its market close currently trading higher by 0.4% after yesterday's sell-off. back to you. the london mayor has

fashioned brussels policymakeres and described this deal's eu deal as the, quote, most adil e adiluted measure since bowman times. and investors have done pretty well buying stocks this year, but this could have done even better with nigerian equities. find out which other countries are leading global equity markets also on the website at cnbc.com. plus, what will buffett do next? this is always the question, the oracle of omaha is set to release its annual letter to shareholders today. read more of them, history and previews of the buffett letter over at the website, as well. .you know the address, cnbc.com. also still to come, fed policymaker warnings investors could become too dependent on monetary easing members.

and before that, we want to leave you with the latest rendition of what is known as the harlem shake. yes, u.s. aviation regulators are set to look at whether rules were broken when they got up on the airline. the seat belt sign was off and safety measures were followed.

welcome back to the program. growth concerns remain front and center in india. we're seeing some positive signs out of factories there. remo tendokhar has more information. >> thanks so much for that. the february manufacturing pmi as released by hsbc has come in at 54.2. it's on a month to month basis, there has been an improvement that we've seen.

the february manufacturing pmi came in at a bit more of a low of 4.5%. the manufacturing activity has picked up on the back of growth and domestic order. there were a few brokerages who indicated that the rise has lifted the output and exports have moderated. going forward, if you look at the indications, it does seem to provide that there could be growth going forward. but the data has come in higher than expectations and it should alleviate, at least to some extent, the numbers that rose. >> reema tendulkar, thanks, reema. speaking on cnbc, he

compared it to monetary ritalin, warning that there's a risk that the market economy has become too addicted. >> it's time to really perhaps taper this off. this doesn't mean to stop it. we're not going to go from wild turkey to cold turkey, but i do think we probably have run up to the limits of the efficacy of what we're doing. it's time for people to begin the discount basis on a normal basis. and i think it's a good time to do it. >> brendan, your book is called global curse of the federal reserve so, therefore, mr. fisher is one of the good guys at the federal reserve, isn't he? >> yeah, of course, but he's not in the ruling party. we saw ben bernanke this week denying there were any bubbles anywhere. >> what is your beef with their policy? what is the curse as you see it that they've inflicted on all of us? >> the curse of the federal reserve is their policy of

manipulating interest rates and rolling the economy causes two forms of economic destruction. one, it causes a lot of malinvestment over time and that's what we're suffering now in a lot of economies. secondly, in the long run, it causes anorexia of risk appetite. people looking at this monetary uncertainty and the huge rise withdrawal from benefits. >> isn't monetary policy more certain than ever? here is exactly wa we're going to do, but interest rates have going nowhere. >> every man, woman and their dog know at had some point this policy is going to be reversed or it's going to roll into higher inflation. so there's an existential

uncertainty block there and investors realize it. so if we moved into an age of monetary alternativety where there was no roller coast of of qe and qe being taken away, you could argue that in that more stable monetary environment, equity markets would actually be a lot stronger and there would be much more risk appetite around. >> the trouble is, we can look at market performance every time the fed hints they might be tightening and so on. so you can sort of say if you were to take the bunch bowl away, we know what would happen and that is financial assets would immediately weaken and the question becomes at what point do investors come in and ultimately is the cycle more sustainable? you could make that argument. you can not like a lot about what the fed is doing right now, but you can look at the counter factual and say how would things be if they were different? and it's not clear that they would be -- >> it's sort of -- we have got two points here. one, if it had been a much more stable monetary environment all along, we wouldn't be in this

situation today of the fear that if the money policy gets taken away, then the market crashed. but where we are today, we're sort of in a cursed situation -- >> you did say a minute ago, brendan, that text rally is because of fed policy. and now you're saying fed policy damages equity investments. >> let me be specific. that if we were living in a period of monetary regime certainty and stability, pes may be 18, 20. because for so much monetary uncertainty around may be a normal level to account for huge possibilities of withdrawal of recession in the future. pe maybe should only be at 80.10. but pe and fabtory are at 12 and 15. it's a difficult thing to measure. it looks as if the market is so

inexpensive. >> we're just about to get manufacturing pmi data out of the uk. we are looking for this to be fairly steady. 47.9, it was 50.5 in january. that was revised, but that is weaker than the 51 that was forecast. the new orders pmi, 46.6 in february. that's disappointing. it was 49.7 in january. manufacturers shedding jobs in february at the fastest rate since october 2009. uk factories need a strong rebound in march to avoid weighing on the gdp. according to markets, british manufacturing shrinking unexpectedly in february, brendan, and those new orders not particularly healthy. sterling under pressure as you might expect post that number. >> yeah. it very much reinforces the expectati expectations. i think sterling is very much trading on the basis of that shift. >> does that mean not

necessarily more qe, but what might they do, buy other -- >> i don't think it's so much qe, but there's a growing idea that when we get the change of leadership at the bank of england and maybe related to that we're going to get some reformulation of the monetary framework away from strict inflation targeting to maybe bringing in some nominal gdp targing or allowing some overshoot to compensate for previous periods when there was undershoot. so these sort of concerns that the whole discipline is going to be loosening even further. that's a concern. >> are they going to come out with sort of a fed statement, you know, don't worry, rates will stay low for two years? is it going to go down that? >> maybe not so -- pretty well on that route, anyway. i think the other background factor here is that the bank of canada president is coming in to run the bank of england, we know now that canada has been very much a bubble economy which is already beginning to burst. and that's one of the features in today's market, that the dollar is weak and we're getting

weak economic data. so we're coming in with a record of being the bubble president. >> brendan, good to see you. thanks so much indeed for joining us, brendan brown. >> i was just taking a look at that sterling move there and it's interesting. the moment we first saw sterling breach that, what was it, 1.54 threshold people were talking about a couple of weeks ago, we've seen it pretty swiftly fall down to 1.51. i wonder if we won't be at or under 1.50. look at that, just a straight line down. it's not much of a better story over in italy, meanwhile, which saw its manufacturing data decline for the month. also want to bring you the news out of the montepaschi bank. now the bank saying it has started legal action against former top executives. it says it's starting legal action not just against them,ly also again nomura and deutsche bank. this probably goes back to those

contracts which caused some of its losses. >> you are plugged into cable, aren't you? >> yeah. still to come on the program, find out why there is still hope for a coalition in rome.

these are the headlines from around the world. washington and wall street brace as the deadline to avoid the so-called sequester passes. president obama holds budget talkses with the white house today. but the odds are pretty low on a deal. uk manufacturing activity unexpectedly slumped into negative territory in february. new orders fall to their lowest level since july and the pound is sharply lower. chinese factory activity causes a five-month low, pulling into question the strength of the recovery in the world's number two economy. and european stocks start the month trying to inch their way into the green after all three major u.s. averages ended february higher. the dow was in 16 points yesterday of its all-time high. all right. the ftse managed to make it nine months in a row of gains in february. the first trading day today,

we're flat now. we were a little firmer. the manufacturing pmi is not helping britain out. the xetra dax down 0.2%. the cac 40 down 0.4%. the ftse mib down about 11%. >> take a look at the bond space. even as we've seen the mib sell off, peripheral bonds stell held up okay. spain and italy are seeing the yields fall a bit. 4.711% for italy. 5.05% for spain. >> gilt yields have dropped about 20 basis points since that data point. 1.95 was the yield. the interesting thing is, here we are since the downgrades. yields are gone only one way, lower. >> that happens when you downgrade equities. that's not surprising given the fact we've seen the u.s. react to its own down graiz grades. italy is pushing ahead with its needs faster than planned.

the yield offered on the ten-year was the same as wednesday's scheduled auction which was 4.81%. that's up from a sale seen at the end of january. meanwhile -- i'm sorry. >> that's all right. italy's future remains clouded in uncertainty. bersani has ruled out a grand coalition with silvio berlusconi's party. in an interview, it was stressed that the idea of a grand coalition does not exist and never will. >> the comments come as former italian prime minister silvio berlusconi faces yet another scandal. this time, he's under investigation on suspicion of bribing a senator to change sides in 2006. investigations have been opened into berlusconi's promise to return monies from the election.

istanbul, geoff cutmore is on the ground there. tell us about this conference. >> yeah, good morning, kelly. good morning, ross. the young president's organization is an international network of presidents and ceos of companies and generally they are people under 50, although they can move into the world president's organization a little later on as they age. so say part of the fraternity, if you like. it's just a fantastic place to come and get a very granular look of what is happening on a lot of these stories. and that's what i want to do with this italian story. i have tim cossilidge with me. that's an italian shipping business with a turnover of about $1.5 billion in revenue. thanks very much for coming down, tim. give us your assessment of the

political discourse taking place in italy at this point. can we avoid a second round election? >> i think we can. at the moment, there is surprise coming out of this. the number one surprise is the movement. and this i think only someone who lives in italy can understand this was mainly due to the frustration of people with regard to the current political class in italy and the fact that the level is not efficient. their work is also no sufficient. so, of course, the movement, they leveraged this which is quite generally to gain quite -- >> but the question, it's a bit like the tea party in the u.s. it's sort of an anti-party vote if you like, an anti-politics vote. do you think at this point grillo and bersani can start to look together? >> i think they would not officially create a coalition. because grillo at the moment is being quite strict on there.

but i think there is common ground in which they can work together. at the regional level when in october of last year, basically, the results of the regional election from the one we had today and actually, yes, the regional government now is working with the support both from the movement and the pd. and they are working quite well together. so i think there could be some common ground that they can cover. >> so you're relatively optimistic, actually, that the tide is turning on the italian story. >> i think so. because i think that it's a movement, a transparent movement can actually improve the level of the people in the parliament. at the same time, i think it gives a push to the current political understanding and to renovate that. >> what are you doing as a business to ameliorate some of the effects of the weakness in the italian economy and also international investor concern

about putting money into the country? >> well, this is where i think there is a big difference between people who lit in italy and people who live outside italy. if you live in italy, you already see the benefit that the monti government has. people who live in italy, they're probably more concerned about their taxes that they're having and all the reforms. whereas if you live outside italy, you really see the credibility that was restored as far as monti. we have strong presidents in italy. being quite diversified, we try to push the issue of being a global country. i also want to make the point that the economy, especially in the northern part of italy, is very productive. and i think there is quite a

number of businesses that are working very hard and thanks, of course, to those bonds. >> we wish you the best of luck with your business and hopefully things will settle down politically in italy. tim cosulich joining us. and it's sort of a measure of the kind of news here on the ground that even as we see negative political headlines and we see weakness in many global economic aggregates, there are plenty of business people here that feel that they still need to invest, that actually, you can find pockets of growth at the moment around the world and not just in emerging markets. there are places to go to in europe, as well. so we're having some interesting conversations, kelly. let me send it back to you studio. >> geoff, thank you very much for that.

there will be more coming up from the ypo conference in the next hour. brendan is still with us and i guess it's good for italy to see them talking optimistically. but the pmi is now contracting the faster rate. are they whistling past the graveyard? >> you have the american thinker coming out with a line earlier this week saying the question is whether senior grillo is a fascist or a median in fascist clothing. there's a huge amount of political uncertainty there. so turkey, istanbul may be the center of the bubble at the moment in the emerging market and there may be a lot of good feeling there. but i think that's part of the -- >> and look at the ten-year, 4.72%. there's such strong demand at these levels that they had to follow an auction. and your view is ultimately we're encouraging investor toes

misallocate capital. very much so. so long as we have this modest expansion in germany, i wouldn't be pressing the panic button. japan's consumer prices have dipped for a third straight month. what does that mean for the battle against deflation? we have the story from the nikkei in tokyo. >> hi, ross. the fight to end the case of deflation is well and truly on in japan. the bank of japan's new chief faces a big challenge to come up with ways to meet the 2% inflation target. the government released cpi numbers and it fell for a third straight month in january. core consumer prices excludeing fresh food but includes energy fell 0.2%. the fall is mainly due to a drop in house hold electronics such as air-conditioners. but energy prices including electricity and petroleum products rose 479%. this is boosted by the side effects of the weakening yen

which helped off set the extent of the decline. japan's labor market showed small improvement. tun employment rate fell to 4.2% in january from a revised 4.3% in december. this marks the first improvement in three months. but some government officials say that the jobless rate has been at the same level since last fall and employment conditions remain tough. in the meantime, the finance minister urged business loaders to boost compensation to employees as part of the attempt to lift the economy out of deflation. he stressed that private consumption won't grow unless labor's share increases. back to you, ross. >> thanks so much, indeed, for that. the fight against deflation. we've got kuroda coming in. asset prices moved a long way on the nikkei and the yep, as well. what is the chance that they can achieve something more meaningful or more than what has been priced in?

>> well, in the short run, and that can extend over the next year or two, so long as the equity markets are the same gets a powerful wealth effect on spending in japan. a lot of the older population who account for most of the spending in japan have portfolios full of foreign currency bonds and equities. and i expect to see that reflected in economic data. i don't think japan is going to go into any sort of inflation anytime soon, but that's not the important point here. the important point is to some extent solve the japanese economy from the currency war with the united states and a very overvalued yen. >> and are they going to achieve that more than they already have? >> i think the surprises are going to be in the up side in terms of the next year or two, but i would be deeply pessimistic about where it's all heading in the long run. it's enough to have the yen go too expensive, but then end up

suffering the same monetary fate as the united states. >> good to see you. thanks very much indeed for joining us. brendan brown. we're going to take a quick break, but don't go anywhere. when we come back, it was one tale this eastern europe's superstar. now the polish economy is facing serious challenges. [singing] hoveround takes me where i wanna go...

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a little bit of news out of china. the state counselor is going to continue to implement property controls. we're all been very worried about the build up in prices the last few years and then the existential slowdown, as well. meanwhile, how could events in north korea get any more bizarre? how about former nba bad boy dennis rodman showing having a blast with kim jong un afterwards. rodman tells kim he has a friend for life. now, he may have friends in high places, but so some yao ming. the former superstar has been

elected to the chinese people political conference that kicks off this sunday. it's a policy advisory group to the national people's congress. yao says he's accepted the role with great responsibility and he's working on submitting a proposal. he'll need a friend in high places because he's very tall. >> exactly. >> that's what i assumed it was a play on. u.s. president barack obama is set to meet congressional leaders at the white house in a last minute establishment to reach a deal on the so-called sequester. what exactly does the sequester mean and why is it happening? steve liesman explains. >> today, a series of across the board federal spending cuts are set to take effect that almost no one in washington wants. but they appear powerless to avoid. known as the sequester, the cuts would reduce government spending by $58 billion this year and by 1.2 trillion over a decade. what nearly everyone hates is that the cuts are across the board, targeting programs

favored by both republicans and democrats. defendants gets walked by 7.3%. domestic program is by more than 5%. a few things are exempt, social security, medicaid, military pay, war fund something some anti-poverty programs. but other programs like emergency assistance for disasters, education, emergency assistance and prisons all day a hit. it exists because washington couldn't great on spending cuts in 2011, so they created an ax that would loom over lawmakers. it was a crazy last-ditch idea at the time and it looks even crazier now that it's going to take effect. some now say the automatic cuts may be the best option that's out there. >> well, business leaders won't be hanging around waiting for politicians to bicker over the sequester. at least that's according to wpp's ceo martin sorrell. the chief of the world's largest

advertising groups shrugged off fears about political uncertainty. >> they've made the decisions not to wait for the politicians in washington or congress to make up their minds. we saw that with the fiscal cliff negotiation up until midnight or virtually midnight on december 31st, 2012. so i think people who have budget -- companies to run, budgets to make like we do really get on with it. so i think that has been factored in. i think confidence actually ironically is at a pretty high level. high levels of cash unleveraged balance sheets, improving profits as a percentage of gdp at the highest levels we've seen certainly in the u.s. and elsewhere. but having said that, there's enough uncertainties around like the eurozone, bright in, highlighted by the italian election webs some of the issues faced in spain, the middle east situation probably worse than a year ago. the fiscal cliff, though, or debt, $16 trillion of debt in the u.s. there's enough china hard/soft

landing, that's gone away. china clearly is strong. we saw strong numbers from china in our final quarter last year. january has started off strongly in china. and we have a good indian budget from the finance minister this morning in india. so i think india, china, russia, brazil, brazil will come back again. those are good and set fair. but the u.s., i think the clients are confident in terms of their balance sheets and their p&l, but they're not willing to make the decisions, the big decisions that we would like to see them make because of these uncertainties, these gray swans as we irritatingly call them, these uncertainties, these known unknowns that we all talk about and you talk incessantly about them on "squawk box." >> yeah. there will be more incessant talk about that government sequester coming up later in the program. first, though, a look at poland, the country whose once booming economy is now growing at its

weakest pace in four years. according to data this morning, poland's fourth quarter gdf fell earlier that was beating estimates in 20 111. what is an investor to do? martin joins us now. good morning. >> welcome. >> poland in 2009 was the green island. it was the one economy in the world, or at least in the west that was still growing. has it structurally weakened given the deleveraging we've seep across the financial developed world? >> what we're seeing at the moment is those countries that had the relatively good crash in 2008/2009, they haven't been forced to adjust too much. therefore, those countries tend to suffer on the domestic front. poland is a classic example. it's a totally different slowdown then back in 2008 and 2009. it's domestically driven. which means even if the german

economy continues to expand or europe somehow finds growth, it's not necessarily entirely obvious that poland will follow through. >> what's the trouble for poland and what's its outlook for growth at this point? >> if you recall last year, poland had the 2012 championship. before that, that was a massive investment program. this is now over. and there is no extra demand for investments from the government. the demand for credit from the corporate sector is very low because there is no demand anywhere in the world. and, yeah, people's purchasing power is slowing down because of the unwillingness of the -- of consumers to spend. so sort of -- all sorts of -- >> coming together, yeah. >> and yields, post bonds have pretty good performance. they came down in 2012. what investor -- if you fall into that, what are you to do now? >> if you're big investors who

completely miss the rally last year, but still, they managed to outperform their benchmark because they bought something that rallied even more. when buying poland, when you're an em investor, you're forfeiting quite a bit of yield in other places. 4% for ten years with the central bank rate not that much lower than that is really not appealing. therefore, i really don't see much juice in the polish bond fund. you have this trade idea of shorting the slotty and buying the ruble. >> the ruble bit is maybe not very controversial, i'm sure that this is one of the consensus trade. but it's not so much poland is going to below blow up. but it's just the opportunity. 4% is not great.

the second half of last year, we had an epic infloud flow to the polish bond market. yet the polish currency has been unable to strengthen. it's been range bound. so it's difficult to imagine that this inflow to the bound market repeats itself. >> good to see you. strong pnp paribas. still more to come on today's "worldwide exchange." >> we'll head back out to the ypo leadership summit. what do ceos of customer's bank have to say about the sequester? stay tuned.

welcome back to "worldwide exchange." i'm kelly evans. >> and i'm ross westgate. >> washington and wall street bracing as the deadline to ae void the sequester passes. president obama holds budget talks at the white house today, but odds are low for a deal. uk manufacturing activity unexpectedly falls into negative territory for february. the pound going sharply lower. chinese factory activities calls to a five-po low, calling into question the strength of the rebound and the world's number two yes xhe. and european stocks trying to inch their way into the green. all three major averages end at a february high. the dow coming within 16 points of its all-time high. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe.

>> right. we have jobless numbers out of the eurozone first of all. the eurozone jobless rate, 11.9% ticking higher again from 11.8el% in december. it's the highest eurozone jobless rate on record. we've also got cpi, february cpi at 1.8%. it was 2% in january. and there has been chatter about a possible rate cut from the ecb. well, if the cpi keeps falling, they would have a mandate to indeed do that. that jobless number comes after we saw a sharp uptick in the italian jobless rate, 11.7%. the highest since the series began in 1992. and we're keeping our eyes on the euro/dollar, which is weakening, down to 1.3026. we could go below 1.50 on cable. this is after manufacturing in

the uk pmi 47.9%. it was forecast at 51. new orders, the allowest since july 49.7 and they're shedding jobs in february at the fastest rate since october 2009, kelly. and there is one person in this studio, by the way, who is quite excited and pleased about that. >> i may be structurally long the dollar relatively the pound, but an extraordinary move there on the chart. the lowest reading that i've seen so far this morning was 1.5011. so within about ten or 11 basis points of breaching that level. in fact, that's having an impact on global markets. the month of february was the second positive month and generally speaking a strong trading session, although we did give back some of the gains in the end. the dow came within 16 points of its nominal high. today, though, after giving up gains into the close yesterday,

we are looking lower. we are looking to give up about 22 points on the dow there. similar declines seen across the nasdaq and s&p 500, ross, it's not often that we've seen global markets react to what's happening in britain, but that is taking some wind out of the trade in sales today. the cnbc ftse global 300, first of all, look at this drop. this just as we got through the pmi data and, of course, that includes the uk figures down 0.3%. a clear downward move in just the last couple of minutes. meanwhile, european trade, the bourses are now all generally in the red across the major bourses after trying to open higher. the ftse 100 starting off on a weak note. it's interesting because often what we see on the first of the month sets the trading tone and pattern for the rest of the month. that's been a phenomenon in the u.s. and some other markets, too. 0.3% on the ftse. 0.5% on the xetra dax. almost 1% on the cac 40. similar weakness seen across the ibex and the ftse mib is the

strong performance today. >> all of that has been fairly supportive for bond yields. the ten-year low at 1.43%. spanish yields actually doing pretty well, 5.07%. we've narrowed the spread between spain and italian yields, 4.74%, higher slightly on the session, but lower than they were post the italian election results. and here we go, gilt yields, we've fallen quite a long way in the yield in this session. 1.90%. we were around 1.96% about an hour or so ago. let's show you where we stand with sterling right now. sterling/dollar, 1.5031. pretty much down on 2 1/2 year low owes cable. now, 1.50, a lot of people think is sort of the bottom of this range. we sort of are back in that range of 1.75 and 11.50. aussie/dollar is lower at 1.0203. dollar/yen, 92.70. we've been volatile over the

last few days and there's the euro/dollar, as well, 1.3029. we're back down to these seven-week lows. 1.3017 we hit at the beginning of the week. that's why we stand right now in europe ahead of the u.s. opening. let's get a recap of the asian trading session, as well. sixuan rejoins us. >> thank you, ross. a candy striped day for asian markets as we wrap up trade for the week. china finished in the red after the official pmi data pointing to a certain recovery picture. the banking stocks were the big losers as china's key money rate surged, reviving worries about tighter policies. insurers tumbled after china life issued a profit warning and that stock down nearly 3% today. environmental stocks surged on hopes of more government support. in hong kong, the hang seng lost 0.6% with growth sensitive counters leading the losses. shares of citic pacific had the

co 2/profit conglomerate today down by 5.5% after manufacturing pmi data. in japan, investors expect the new boj chief will implement a policy change next month and marked a third straight month of decline, stoking more easing hopes. property counters and other reflation betts led support to the nikkei. managing to bust the down beat trend, the nikkei gained 0.4% and is up for the third straight week. elsewhere, south korea's kospi outperformed up over 11% helped by banks and automakers, this despite a chart fall in the country's february exports. in australia, resources stocks weighed on the asx 200 down 0.4%. also on worries that the u.s. sequester could hurt global growth. india's sen session just closed today's trading session up 0.25%. back to you. >> sixuan, thanks for that. now, the deadline has passed

for the white house and congress to reach a deal to avoid the so-called sequester. is that an oh, yeah? >> yep. >> automatic budget cuts won't go into effect right away. president obama must issue a sequestration order. he could do that at any point today. the white house says that will be as close to midnight as possible. john harwood sends us the latest from washington. >> what we saw on thursday was the flickering of the last hopes that congress might avert the sequester at the very last minute. the house of representatives departed washington for the weekend having failed to pass an alternative to the sequester in this congress. they did pass one in the last congress. the senate, controlled by democrats, took up two alternatives. one republican, one democrat. both failed to get the 60 votes necessary to become enacted. therefore, there was no solution from congress. business leaders went to both capitol hill and to the white house to appeal for compromise. here is scott davis of ups. >> certainly we have, you know, millions of customers. and in the u.s., i think they're

impacted more by the lack of a compromise, lack of a decision. you know, i think that we have millions of customers in this country who need certainty and policy. so we need to resolve the problem. everybody has to make sacrifices in the situation. >> in a few hours, president obama is going to have the bipartisan congressional leadership, both chambers down to the white house for a meeting. but the truth is, it's not really about meetings at this point. some event in the economy or in public opinion has to shift in order to put sufficient pressure on one side or the other to give into the other's demands. republicans want no tax increases and significant entitlement cuts. democrats wasn't smaller entitlement cuts and small increases. something has to give. not clear when. perhaps later this spring. back to you. >> investors count down to the deadline and we're taking a closer look at the real impact on businesses across the united states. customers bank started off more in the philadelphia area with just five brancheses and now

have assets of over $2 billion. they're seeking to trade publicly on the global market after a year. jay, thanks so much indeed for joining us. what's your own view of the impact of the sequester and what still appears to be sort of political brinksmanship and, you know, role playing in washington? >> i would give washington a c or a d if it was a grade for authentic leadership. we have a problem. and washington is doing nothing about the problem but they are trying to find other side issues to make this into a political problem. here is our country that has a fiscal crisis. we have 16 trillion in debt. we wanted to try to solve the problem. authentic leaders understand what's the real problem and they

look for real solutions. so we tried to push the can down the road and said let's make it so painful we have to come to an agreement. but they have failed in terms of leadership. in my opinion, if something knot done in the last three months -- you're not going to see much of a crisis in the next two or three months. but if something is not done in the next three months or so, you'll have a lack of business confidence, consumer confidence, and that will result in slower economy and that will result in taking away some of the good that monetary policy is doing and we are going to see a downgrade by moody's and that is going to put america into a downward spiral and that is bad news. >> we heard in john's report that it would take some event or something to happen to sort of get the politicians to work

together. what will that event be, in your mind? >> you know, i think what we need is to set a common goal and that goal should be why don't we try to find a 3% between 2.5% to 3% gdp growth over the next three years? the republicans and the democrats can agree on something which is a common vision or a common goal. stop fighting over whether entitlements are bad or tax rerevenues are bad. so let's focus on 2.5% to 3% gdp in the next few years. in my opinion, what it would take is let us agree upon a medium term solution. that means we will have a plan on how to cut $4 trillion in spending. we'll have a plan on how to increase revenues by $1 trillion or two to tax gs code changes which is not going to negatively impact the economy.

a third thing is we will raise the confidence level of the business community as well as the consumer. there is the monetary stimulus that the federal reserve is so much involved in. we need to make sure that that benefits us because if it doesn't benefit us, you're going to see hyper inflation in the country because there is no other solution. >> jay, the federal reserve, though, is keeping -- so your bank here, you're taking advantage of these ultra low borrowing rates of the fed. i wonder if you're able to see any kind of liveliness coming back into the private sector. we've seen better readings in terms of jobs lately in the u.s. growth, though, hasn't been all that great. what can you tell us about the demand you're seeing across the northeast? >> across the northeast, actually, i can talk about housing. housing market is better. consumer confidence is definitely better. our loan growth was 85% over the last 12 months. things are looking up. but people are still cautious.

so in spite of being cautious when things are looking up, you're going to see a tremendous opportunity and in my opinion, america is very capable of 3% economic growth over the next two years. but america will end up with no growth over the next two years if we have no authentic leadership between the administration and in congress. this is not a republican problem. this is not a democratic problem. this is a problem for united states of america and hence the globe. we can do this. but we need some policy for a short-term solution. >> jay, if you're seeing better signs among your customers, seeing maybe more demand for funds, it sounds like, still benefiting again from ultra low borrowing costs, if the federal reserve does what you're talking about here, steps back away, what impact would that have on your business? >> in my opinion, the federal reserve is keeping the long-term

rates down. when long-term rates down are really as a result of the demand, there's no question about it that their rates are going to move up. when the rates are going to move up, we are talking about an $85 billion sequester problem. 1 is% increase in rates means about 1150 billion more in interest costs for america. what we should be doing right now as a company is extending our borrowing for the united states of america while we are promoting economic growth and we need to solve this problem. otherwise we'll have a major problem. >> well, he is nothing if not vehement. that's jay sinu chairman and ceo. thanks so much for your time the. meanwhile, europe's auto sector hit another road bump as the french car administration posted another steep decline. >> not a great sign for the french economy. tell you more about it when we come back. [ male announcer ] i've seen incredible things.

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welcome back to "worldwide exchange." will president obama and congress reach a truce? february unexpectedly slows new orders in britain, it sent

the pound sharply weaker. and chinese manufacturing growth falls to a five-month low as the road to recovery in the world's second biggest economy is called into question. >> meanwhile, automakers report february sales today. total sales are expected to come in at a total rate of 15.5 million vehicles. january and february are typically the slowest months of the year. but a bit of a contrast between the space of europe. >> speaking here, the industry is continuing to take a hit amid the ongoing debt crisis. new car registrations in france up 12% in february from a year earlier according to figures out today. registration res down about 13% over the same period. hugeo citron took the biggest hit. renault suffered with an 11% decline. and we'll be taking a look

at the sector from the international motor show in geneva. that's on tuesday. steve sedgwick will be bringing us cover aemg with intous with ceos that include peugeot and renault. here on "worldwide exchange," we'll speak to gm's new president tuesday at 10:00 cet. >> not a bad gig, that one. looking forward to it. straight ahead on the program, iran says it's reached a major milestone with leaders. is the west ready to declare victory, though? ♪

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beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. . welcome back to "worldwide exchange." the british pound is affecting markets on this first trading day of the month. shows surprising weakness in mblths including italy and britain. and the pound took it on the chin and the risk appetite in global markets broadly reflective of that. european markets broadly in the red this morning. the ftse down in the range of about 0.3% at last check. the dax down now by 0.75%.

the cac and the mib down better than 1%. >> the sellers are starting to get the bit between their teeth. we were up when we came in first thing this morning. let's just show you where we are on the currency markets, as well. we've got to go. we've got to get -- right. we'll get back to that in just a second. >> first, though, nuclear talks between tehran and world leaders have reportedly made problem with tehran's leader saying a major milestone had been reached. can you tell us about what you

read into these comments about iran? is it real? >> well, of course, these talks have been going on for quite some time. one of the things the west and the u.s. is very worried about is the fact that the iranians would like to protract these talk toes give them an opportunity to continue to enrich. but in this case what the iranians have is the situation where the sanctions have taken a bite out of the economy. you've had the u.s. presidential election. and what you're looking at is there is a way that the iranians can save face and enrich uranium and not cross the red line where the united states is moving that up into weapons productivity. >> and there's elections coming up in iran in june. it's an event that not many investors have been focused on. just how much is that complicating these talks? >> well, you know, as you know, iran is a theocracy. and the ayatollah bear and the

theocracy regime retains a lot of the power. you also r i think it's interesting, though, that the delegation has been given what seems to be leeway to make decisions. typically in the past we've seen the iranian government walk those back quickly. >> and how do you expect israel to respond? >> israel is going to be very skeptic yalg. israel's line is that it's the capability, not just the conversion of this into a weapon. but the capability. and i think they're going to be very, very cautious. they'll be pressuring the united states not to overly concede or look into this as some sort of break through. but, again, israel is dealing with many challenges. for them, iran is the number one challenge and they'll be looking at this closely. >> exactly. and we were talking about this right around the time of the

israeli elections last fall. an event this people in and outside the financial community are extremely worried about. what would you say the prospects are now for some tim lar strike given what's reported out of these discussions? >> i would say in the short-term, probably less. you have this coalition. netanyahu did not do as well as expected at the polls. so you have an opening there for slight recall bragz. but you've had this dissengz between the military and the intelligence community who says, that's fine if you want to go into iran, but are you really going to be able to 2k50e8 a fatal blow to iran's nuclear program or are you going to accelerate it? and i think that debate is conditioning. >> stewart holliday, thank you for joining us. plenty more to come on

today's "worldwide exchange," as well. major u.s. equities closing out february on a high note, but could sequester fears rain on the parade? >> about 16, i think. but the sequester might be britain raining on the parade today. >> we know about rain. >> yeah. we'll be right back.

welcome back to "worldwide exchange." i'm kelly evans. >> and i'm ross westgate. here with your headlines. washington and wall street heading towards the deadline of the sequester. president obama holding budget talks at the white house today, but odds are low for a deal. chinese manufacturing activity calls into question the world's number two economy. and more bad news on the european data front. uk manufacturing activity unexpectedly contracts in february. >> this as european stocks begin the month trying to inch their way into the green. they've since fallen into the red. three major u.s. averages ending february high. the dow within 16 points of its all-time high.

the first trading day of the month will often set the tone for the rest of the note. on that note, take a look at what's shaping up behind me. reading of global manufacturing activity, so far, the message has been choppy and fairly weak. europe coming in relatively steady to january but still in contraction. the uk is a surprise decline. we're seeing it knock the sales out of u.s. futures. here is the ftse 100 down 0.3%. the cac 40 in paris and ibex giving up gains significantly. forex, though, again is where we're seeing some of the major moves and this of course has been a theme for the year. the euro/dollar is barely holding on to that.130 level. the sterling/dollar, 11.5040 we're giving up about 0.8%. we hit a session low.

the real question is whether we do fall through this level. this is already a 2 1/2 year low and it comes a couple of weeks after we first started to fall below the 1.54, 1.53 levels. there has not been much support here, ross. >> kelly, thanks for that. that's where we stand ahead of the u.s. open. what doin' vetters have to make of all of this? here is a recap of what some of the experts at cnbc have said today. >> volatility is the best as you move around there. you look around and if you say where is the dollar going to go, you say there's still strength to get to the u.s. dollar. the euro looks like it's going to trade lower. the yen looks like it can strengthen a bit more. we're seeing a correction in the euro/yen. that's the stage we set up for over the next month. >> the fed clearly is the very concerning message that was sent by the italian vote with regard to reform. and this, i believe, yes, will

require a structurally higher risk premium for italian and peripheral debt in general. >> that is sort of the stand out officially among europe. but i think things like the ibex have struggled a bit more and recently have taken to the mib, obviously. i think, though, it's going to be pretty difficult places to invest over the next three months. >> all right. of course, it is the first trading day of the month, as well. let's remind you where we've been through the month of february as we start march. the ftse is having its ninth month in a row of gains. it's the longest winning streak monthlywise since 1997. down today, but up about 1% on last month. just over 1% on the month. now, let's take a look, as well, at what happened to u.s.

indices. the dow up 1.4% on the month and the nasdaq, there you go, just up 0.5% and the s&p got a look at the numbers in the top right corner, folks, and the s&p also up 1.1%. joining us from chicago, tom horwitz. we keep managing to eek out the gains, 16 points shy yesterday during the session for the all-time high on the dow. what happens now? >> good morning, ross. you know, i'm giving out a buyer beware. we're still running up on a bunch of news, a bunch of artificial news. but you look at the markets themselves, there seems to be a lot of the risk trade coming out of the market. you're starting to see a tremendous amount of strength back in the bond market. you're seeing a lot of strength in the u.s. dollar.

so after monday's big drop based on whatever you want to say, the italian election, profit taking, whatever, i think wa you're seeing now is people are trying to buy that up. but what you're seeing is the real money is going into the safety stocks like the telecoms and the utilities and it's coming out of the risk assets. take a look at gold. take a look at oil. they're not performing here. although we're getting close to that high, i think that, really, buyer beware here because i think we're coming very close to some choppy action as the markets seem to be very mixed and we're getting the risk off trade versus the risk on trade. >> todd, we're seeing some of this trading activity this morning being framed as sequester jitters. but i wonder if it's not europe and in particular the uk data that's been the damp squid here. >> you know, i think that that data is not good, but we've been able to overcome all of this bad

data. you know, we continued to hide in the corner underneath the carpet saying everything will be okay, everything will be okay because we've got the fed continuing with the punch bowl. but, you know, eventually we're going to have to answer these problems. and what's happening with even the jobs numbers, people -- the jobs numbers have been good, but you're not telling the people that aren't working any more. you're not getting people dropping out of the system. and these are the real issues with the political fight in washington where these guys are more concerned about the political abuse versus the country. this is what the real problem is. >> are investors on tender hooks about washington? how much of that is the focus of the trading session today? >> you know, i don't think that -- at this point, the way the market has been acting, washington has really been a back window view because the markets are still managing to hold on to gains and if there's any real bad news or any real dramatic news, i think you'll see some selling pressure here. but i think the market is

looking for a reason. i think the market is kind of hoping that there will be some bad news out of washington so they can go in and take profits and see some selling pressure. because the market is showing very choppy action right here. >> gold down five months in a row. the dollar is clearly up against the euro and the pound today, as well. we had a guest on earlier who said as you watch what happened with the latest stimulus is it's gone more into -- and not into commodities. do you think that trend is here to stay? >> well, you know, you have to watch. gold has been in a very solid down trend. you know, we made the chop a couple of years ago, we came back and made a double top and we've been in a solid down turn. i think this 1550 level in gold is extremely important. if we break that, i think we're going down into the 1400s. we bounced last week on the 1550, but the trend remains lower. we're making lower highs on a technical basis. the fed is now -- although the money is still free, the people

that are taking the money are going into safer asset classes and they are taking the risks off the table. that's really the focus you want to loot here is the risk is coming off and going into these much safer asset classes as bond as the u.s. dollar. as that happens, that's telling you that there's some issues down the road and to look for some -- probably some pretty good sell-off here come any day soon here, i would like to see a correction starting in the market. >> and the first trading day of the market often sets the tone. we've been talking a lot about the see kweter. what exactly does that term mean? and why is it happening? our very own steve liesman explains. >> today, a series of across the board federal spending cuts are set to take effect that almost no one in washington wants, but they appear powerless to avoid. known as the sequester, the cuts would reduce government spending by $85 billion this year and by

$1.2 trillion over a decade. what nearly everyone hates is that the cuts are across the board. targeting programs favored by both republicans and democrats. defense gets walked by 7.3%. domestic programs by more than 5%. now, a few things are exempt. social security, medicaid, military pay, war funding and some anti-poverty programs. but other programs like emergency assistance for disasters, prisons, energy, education and parks all take a hit. the sequester exists because washington couldn't great on spending cuts in 2011. so they created an ax that would loom over lawmakeres and force saner, more targeted spending efforts. it was a crazy action at the time and it looks crazier now that it's going to take into effect. some say the automatic spending cuts may be the best option that's out there. >> yeah.

it's funny how these things get looked at. the whole idea was that it would force people to do something and it's not. >> yeah. >> struggling deals website groupon have found -- how does he make light of the situation? >> stay tuned. find out.

welcome back to "worldwide exchange." a couple of stories hot on our website. buffett always a top topic. what will he do next? this is the question. the oracle of omaha set to release letters to berkshire hathaway today. as investores and wanna bes line up for clues. head to our website for in-depth analysis on cnbc.com. and it's the first trading day of the month to look and see where we went in the previous month in february. a couple of big losers on the currency market, euro/dollar, it had strengthened in january. the euro weakening throughout the month of february down. and you can take a look on the top right. you need to zoom in as we see that price down on 4% on the month. sterling/dollar down heavily again today. let's show you where we are on sterling/dollar. down 5% on the month. terribly good news for you,

kelly. >> well, yeah. at this point, 5% when it's still $1.50? it is surprising because it feels like the sterling/dollar has been so much weaker than the euro/dollar and is that's probably because the weakness has been focused in the last couple of weeks. if you're just joining us, it's d-day for the sequester. will president obama and congressional leaders reach a truce? eurozone unemployment hits a record high. inflation dips, as well. could boost more talks of a rate cut. and chinese manufacturing growth hits a five-month low as the road to recovery for the world anticipates second biggest economy looks a rocky one. >> some of the other stories we're following, as well. groupon's board has ousted co-founder and ceo andrew mason. this is a day after the daily website revealed disappointing figures. the board made the decision on thursday morning. mason will be replaced on an

intrimt basis by co-founder eric lakosky and board member ted sinisus. in a memo, mason admitted he was getting in the way of the company and failed in his role, but he said i've decided i'd like to spend more time with my family. just kidding. i was 5 today. >> you have to worried how his family feels about that. >> nice to see theo with us. we applaud you for that. boeing has reportedly planned to cut several workers at the south carolina factory where it makes the 787 dreamline per. the move is part of a previously planned reduction of contract workers and not related to the jet's grounding. reports suggest the cuts could reduce the plant's workforce by

up to 20%. now, best buy has ended talks with founder richard schultze. it's still possible schultzy would come back to the table. best buy moved its earnings report up to today to give him more time for his bid. keep an eye on that one. shares in frankfurt are just fractionally lower. hedge fund paulson and co. plans to vote against the merger between t-mobile and deutsche telekom. metro pcs would declare a very verse stocks bid and pay 1.5 billion to shareholders. paulson says the company would have too much emerging did want debt to be competitive. deutsche telekom off 2.3%.

>> they tried to do the t-mobile at&t deal didn't happen. coming up, the rhetoric gets louder in washington. frb and republican leaders blaming each other for failing to prevent a fiscal crisis. how much damage and sequester could do to the u.s. economy? more to come on "worldwide exchange." [ kitt ] you know what's impressive? a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪

ahead of the u.s. open, european stocks are down. the xetra dax off 0.75%. ibex down 0.6%. xetra dax down 0.6% and the ftse 100 down 0.25%. italian unemployment down the highest since they started record onning this measure since 1992. >> chinese pmi didn't offer much

comfort to markets. brent and crude down. u.s. futures taking a hit, as well with, after weakening at the close yesterday. the dow looking to shed another 20 points at the open. quite a bit on the agenda stateside. january person income and spending out at 8:30 eastern. we'll get the final report on february consumer sentiment. it's the february ism manufacturing index in january construction spending. fed chairman bernanke will be talking about monetary policy tonight at 10:00 p.m. eastern. best buy, foster wheeler, magna, pepco report before the bell. berkshire hathaway is out after the closing bell. mr. buffett will be on "squawk box" on monday answering all of your questions. send them in on askwarren@cnbc.com or tweet with the #askwarren. >> and we don't mean elizabeth.

the deadline has passed for the u.s. government to reach a deal to prevent sequester. president obama will issue a sequestration order. it will be as close to midnight as possible. john harwood gives us the latest on the budget battle from washington. >> what we saw on thursday was the flickering of the last hopes that congress might avert the sequester at the very last minute. the house of representatives departed washington for the weekend having failed to pass an alternative to the sequester in this congress. they did pass one in the last congress. the senate, controlled by democrats, took up two alternatives. one republican, one democrat. both failed to get the 60 votes necessary to become enacted. therefore, there was no solution from congress. business leaders went to both capitol hill and to the white house to appeal for compromise. here is scott davis of ups. >> certainly we have, you know, millions of customers. and in the u.s., i think they're impacted more by the lack of a compromise, lack of a decision. you know, i think that we have millions of customers in this country who need certainty and

policy. so we need to resolve the problem. everybody has to make sacrifices in the situation. >> in a few hours, president obama is going to have the bipartisan congressional leadership, both chambers down to the white house for a meeting. but the truth is, it's not really about meetings at this point. some event in the economy or in public opinion has to shift in order to put sufficient pressure on one side or the other to give into the other's demands. republicans want no tax increases and significant entitlement cuts. democrats wasn't smaller entitlement cuts and small increases. something has to give. not clear when. perhaps later this spring. back to you. >> let's get a view from naramin. good to see you. a little warmer than the last time we spoke in davos. >> indeed. >> how long before we start doing some real damage? >> well, probably a couple of months. i mean, just to give you a sense, if we go up into the

sequester and stay there the whole year, basically, those 85 billion in cuts, it would cut gdp growth from about 2% this year to about 1.5%. and would raise the unemployment rate by about 0.3% relative to where it otherwise would have been. so this damage, it's not horrible, but there is damage that could be inflicted here. >> nariman, what would gdp and unemployment look like in the u.s. this year? >> well, after the sequester, you know, we could come back up. but i mean, the unemployment rate with the sequester is probably going to hang in there around 7.8%, 7.9%. if they resolve the sequester, it could probably go down to about 7.5%, somewhere in that ballpark. it will have an impact, no question about it. >> and it's interesting, nariman, earlier in the we're we were speaking to people and they

were saying, if it hurts growth, we will see weaker numbers in things such as crude. it hasn't happened yet. a lot of people at this point are taking a wait and see attitude. consumer confidence is up this week in terms of the measure that was released. i think a lot of consumers and to some extend businesses are getting a little sort of jaded by this whole thing. like here we go again. and so they're not taking it that seriously yet. but as the cuts come through, they might take it more seriously and you'll start to see some of those impacts that you're talking about. >> do you think that's what happened with other elements of the fiscal cliff, that once people started to see the impact on their paychecks, it was a wake-up call? >> absolutely. and that's exactly right. with the fiscal cliff, the reaction initially wasn't that strong. but you're right, especially as the payroll tax increase went into effect, people felt it in their pocketbooks and so the spending got hit and so on.

so yeah, i think we could see some kind of a delayed impact here. >> there will be hair cuts showing up across the economy and not just for people who are, saying, federal workers. >> injury absolutely right. it will be sort of -- not isolated wab but others depend so which programs will get cut. i suspect what's going to happen in the end is the mt. and the congress will agree on the kind of cuts that come. >> can. well. spell that out. what would that deal look like? >> it would not include cuts to air traffic control, just to give you an example. but potentially other kinds of discretionary spending, like

infrastructure. delaying those or eliminating those. so i think they're looking for things. they will look for things that will have a limited impact and won't have the ripple effect than some of the cuts they've been talking about. >> however long it takes them. nariman, always good to see you. thanks for that. we've got the latest car registrations in spain, down 9.8%, the annual rate of 9.6% in january. we have the geneva motor show next week, as well. but right now, time to say good buy for the week on "worldwide exchange." coming up next, "squawk box." >> we're going to unplug. we hope you all unplug overnight, but not just yet. stay tuned. we'll see you back here on monday. tens of thousands of dollars in hidden fees on their 401(k)s?! go to e-trade and roll over your old 401(k)s to a new e-trade retirement account. none of them charge annual fees and all of them offer low cost investments.

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