welcome back to "worldwide exchange." i'm karen cho. these are your headlines from around the world. austerity is not the answer. brussels will today signal a clear change in policy, giving spain and france more leeway on deficit cuts and placing emphasis on growth-oriented reforms in its annual eu health check. the u.s. ten-year treasury yields hit a fresh 30-month high on speculation the fed may consider pulling back on qe amid signs the economy is improving. if you can't beat them, join them. the bank of thailand hops on the easing bandwagon, cutting rates by 25 basis points, citing weak

growth. soft bank and springs reportedly reach a deal with the u.s. government on security concerns, looking to buy china out of american networks. good morning. let's take a look at some numbers just crossing for you. the german jobless number is the latest to hit the wires. the may seasonally adjusted jobless rate is plus 21,000 positions is the latest. in terms of that, this is now an increase in the number of jobless to 2.96 million people out of the workforce. in terms of the seasonally adjusted jobless number in april, this was plus 6,000. so, the month earlier. in terms of overall what economists were expecting, according to dow jones

economists in germany seasonally adjusted numbers were plus 3,000, so the numbers coming in are a lot stronger than that. in terms of the may seasonally adjusted jobless rate, this is 6.9%, unchanged from april, according to the label office, so just a tad below the 7% mark. the jobless rate was of course 6.9% in april as well. so, the unadjusted jobless rate as well as 7.1%. the numbers suggesting that the core still also has some issues when it comes to stirring employment and creating jobs across the economy as well, and this has been one of the issues when you take a look at the periphery, the pace of job creation and just how many more jobs can an economy create when you're not seeing such strong growth rates and we're not seeing small and medium-size enterprises invest in enterprise. well, it is a key day for brussels. today's expected to mark a definitive shift away from austerity when it releases its annual verdict on the health of the eu's 27 member states at

1400 cet. according to the latest report, european commission will give spain, france and the netherlands more time to reach a mandatory 3% budget deficit target. italy may be free to fiscal monitory, but early reports have also suggested the commission will criticize france, spain and slovenia for their slow pace of structural reforms. ironically, belgium could become the first eurozone company to be fined for breaking the bloc's fiscal rules. well, the latest in france and spain have urged eu companies have tapped for youth unemployment projects. they outlined a number of measures, including a youth guarantee scheme. the promise to everyone under the age of 25 for a job, further education or training. mario area hoy, meanwhile, said subsidies for youth unemployment should be exempt from deficit measures. 23.5% of young people are jobless in the eu. in greece and spain, it is over 50%. well, the wto in conjunction

with the eocb will release their biannual economic outlook for all major world economies in under an hour's time and pascal lamy is director general at the world trade organization. nice to have you back on board with us. let me first of all ask you about the big story across european markets, whether we will see deficit leniency for the likes of france, spain, italy and also the netherlands. do you think there should be more time for these countries to bring their deficits back to the 3% mark? >> well, i think that's precisely what's happened. if you compare the sort of fiscal tightening stance of brussels, vis-a-vis national economies in europe, obviously, brussels is now giving these economies more time to adjust as a consequence of a new mix of

fiscal restraint, less tough than in the past and more structural reforms. i think this is the trade-off which is now in the making within europe. if you compare the amount of fiscal adjustment in europe this year, it's probably half of what it was last year, and, by the way, half of what it is in the u.s. in 2013. >> let's take france for an example, though. more time doesn't necessarily mean changes to what you need to bring about, competitiveness, and you've been critical about this very issue in the past. do you think france is given more time to reach this 3% target that we will actually see the country reform its labor market and other issues it needs to to compete in the world forum? >> i think you are correct. we have to look in france, as in other european countries, at the two sides of this equation. one issue is with public debt,

public expenditure, fiscal management. another one has to do with economic structural reform, addressing the problem of pension, addressing the problem of the labor market, which, by the way, france has started addressing recently, which is a sort of big turning point, in my view, in the history of the french industrial relations. the question there is how much of a quantum of a reform and with what sort of sequence? but i think the new pattern, as opposed to last year, is that there is a bit less accent on fiscal restraint and a bit more accent on structural reform. >> let me ask you about what we may see today in terms of a sacrificial lamb. there is a feeling that brussels may have to retain its commitment to bringing these countries to account, and it might, in fact, be belgium that

sees some discipline. do you think this is the message that europe needs to send? >> well, i mean, it's always the same with this sort of monitoring of preagreed disciplines, and we know that full well in the world trade organization. it's resisting sort of name and shame on the one hand, but on the underside, building credibility so that commitments of macroeconomic budgetary structural reform, which were taken in the past, are fulfilled. and this is the role in situations like the european commission, although believe me, it's not always a good role to hold, because public opinion makes you responsible f. so sort of being the cop of the system is a necessity, but you know, cops are not popular anywhere. >> indeed. well put.

let me ask you about some of the numbers coming out today. you've got a report with the eocd. what are the growth numbers looking like? dramatically different than we've been seeing? very slow growth across the globe? >> yeah. that's, unfortunately, the picture. slow, slower than we would wish exit of this huge economic crisis, still very high level of unemployment, notably in developed economy, and we see that on the trade field where our expectations for trade volumes this year, although positive, sort of, you know, plus 3%, are clearly below the sort of medium and long-term trend of international trade volumes growing by 5%, 6%. this has a lot to do with europe, not just because europe in itself is a large part of the

amount of world trade. >> we do have the opportunity to speak with you a little bit longer on the show, so i'm just going to dive out and look at breaking news and come back to you. pascal lamy, director general at wto, staying with us on the show today. in the meantime, news just crossing from the ecb about the deposit data. in terms of the private-sector loans across the course of april, the ecb has reported that there is a minus 0.9% fall. this is the minus 0.7% fall in march. so, a decline of less than 1% across the course of the month. in terms of the private sector deposits at cyprus banks, they've dropped by high single digits, falling 7.3% to 41.32 billion euros in april. so, money is still falling on deposit from some of these banks in cyprus because of fears around the country. in terms of the spanish banks, deposits are down 1.5% in april

and down 1.6% in greece. so, low single-digit falls for some of the peripheral banks. in terms of holding of government bonds, spanish banks' holding of government bonds have dropped by 10.3 billion euros in april. in terms of italian bank holdings of government bonds, they've risen by 7.4 billion euros in april, so a very mixed picture between those two countries on the holding of government debt. moving along, the eu trade chief says he will plow on with plans to impose stiff import duties on chinese solar panels. the eu recently announced it would conduct antisubsidy investigations into both solar energy and mobile telecommunications equipment imported from china. according to "financial times," 18 of 27 eu member states say they oppose the plan. let's get back to pascal lamy, director general at the world trade organization. perhaps you can weigh into this solar panel debate. is this the right move by

europeans to crack down and try to impose stiff tariffs on the chinese? >> it's the sort of issue on which the wto director general has to be very cautious and neutral. the reality is that we have rules in the world trade organization which both eu and china have subscribed which discipline subsidies and allow countries who believe that an exporter is unduly subsidizing its exports to put antidumping duties. so, we have a worldwide system of discipline on subsidies and the country is allowed to sort of retaliate. now, whether the eu is right in pretending that chinese telecom or solar equipment exports are

benefiting from a wto not complying subsidy, not for me to say, this will come to the wto if and when eu takes action and if and when, if eu takes action, china takes eu to the wto. but frankly speaking, we are not there yet. at this stage, what happens in europe, as it should, is a debate within the european system whether it's legally, politically, economically a good thing to hit chinese export to europe in solar equipment or in telecoms equipment with extra custom duties, and this debate is ongoing within the european union. as always in the european union, it's happening very much in the public, but at the end of the day, the commission was the one that will take the decision,

needs a single majority among the member states. >> indeed. >> so, at the end of the day, if more than half of the 27 members object to such a measure at the end of the procedure, then it will not happen. if the commission wishes to do this because of its own analytical finding, it needs a majority in the council of ministers. >> indeed. let me ask you about this fight because it pits an emerging market economy against developed markets, and this is one of the developments from the emerging market countries, is that they want a greater say on global platforms. we know that your success, the ambassador of brazil, roberto acevedo has been named, and this is one of the early hopes of optimism from emerging markets is that they will have a greater say through the wto. do you think this is going to change the agenda? >> frankly speaking, i think the

fact that brasilia national becomes wtog becomes in many ways a reflection of these changing geopolitics of this planet, and that's a good thing because it shows that the world trade organization as an institution lives with its time. but, but let's be very clear. the moment you are elected and you start working in this position, you have to forget your nationality. i don't think anybody in the wto during the eight years i've been in this position has believed one day that as a european origin -- >> indeed, yes. >> -- i was pulling the wto agenda into a european direction. had i done that, i would have been dead immediately. >> yes, indeed. >> so, that's the fate of these

international institutions. >> yes. >> once you are in position, you have to forget where you come from. >> let me jump in there, about to lose the line with you. we very much appreciate your time on the program. pascal lamy, director general at the wto with us. thank you very much for your time. let me show you what's playing out on global markets today. the benchmark 600 in europe tracking weaker, so a very different picture from yesterday, a reversal from some of the green that the markets have been trending on of late, down almost 1% on the morning session. drilling down to the individual markets, you can see where some of the selling is concentrated. notice where this is taking place, across on the core markets. the likes of the ftse, which has been changing some fresh peaks. it's been trying to get through to the 6,900 level to test out the all-time peaks. it hasn't gotten there. we've reclaimed 2007 levels. nonetheless, the trend today is to back away from those levels. we're down 1.1%. the xetra dax has been very close to its all-time records,

but it is also going backwards today, almost 0.9%. so, the selling is more heavily concentrated in these key marks. the cac down by similar amounts. the core which has been picking up of late with the risk-on rally, the ftse mib today is actually down less than you're seeing on the core, so it's gaining more on some of the stronger days but falling less on the weaker days, which is an indication of sentiment in a way. 0.5% lower is the indication. this is what's happening across the individual bond markets. first up, german bunds 1.5% mark. it's been in danger the last couple days of doing that but we're pushing higher on yields on the core. speaking of which, this is what we're seeing on the u.s. market. we've had a 30-month high on the ten-year yield, clearing the 2%, in fact, close to 2.2%, just one basis point shy of that. this is on expectations about the tapering of qe, that it could be forthcoming in a couple months' time. the ten-year italian note, 4.08%.

so, it's not having much success at pulling under the 4% threshold. 4.34% on the spanish paper. foreign exchange markets, this is the activity we're seeing out there today. there's a fair bit of movement on some of the usual trades where we're seeing the movement of late, dollar/yen rates and the australian dollar. running through the boards, euro and sterling trading similar to the dollar, both tracking a little firmer, but dollar/yen rates now pulling back under the 1.02 handle. we nudged through that with a fairly strong move yesterday, but the dollar is weakening just a bit to the japanese currency. the australian dollar also tracking around two-year lows. there's been a significant breakdown in this trade. the 0.9580 mark is what many are looking for and we're tracking below that. momentum seems to be to the down side still. the imf is playing catch-up with other institutions by cutting its growth outlook for china. it now expects the economy to grow by 7.75% this year. that's down from 8% previously, as demand slows for chinese

goods. now, in beijing, the first deputy chief, david lipton, also warned of rising debt levels in china. he said easy credit could lead to bad investments and rising defaults. the bank of japan's governor says the financial crisis still lingers and global policymakers have to be flexible with attempts to fight it, but just how flexible some emerging companies set capital controls, says hiroki kuroda. the policy chief said the world needs to work together on a new system of financial supervision. let's check on the trading day in the asian markets and chloe cho is joining us from asia. a lot of green on your charts today. >> a little green, but remember, it took a lot of choppiness to get here and also a lot of caution out there as well. a big worry for asia is that if we are moving into a higher rate, stronger dollar environment, this might not bode well. a couple of past experiences, 2004 and 1994.

asia actually underperformed. you were highlighting how the aud has fallen like a rock there, getting closer to two-year lows. what's interesting is that the high-yield players keep selling off despite the real yield of 5% or so over in australia. so, that is a bit of concern. the imf joining the bandwagon, lowering the growth estimates. due bear in mind that they're lowering projection to 7.75% from the earlier call of 8% is still higher than the government, what the chinese government's estimate is, 7.5%. also, the ims urging cap on social financing. this is a broad gauge of the amount of money flowing into the system, and saying that if growth levels fall behind in china, they are urging the government to take on stimulus. is stimulus such a good thing in china at a time when growth levels are falling off, downpulled credit? so, it's a tricky picture. the fact that we have these worries certainly added another down side for the hang seng as well, closing down 1.6%.

and even the shanghai market, what is interesting is that the three-day rally -- in fact, earlier in the session, this market was really jumping, especially as we saw huge levels of gains in autos and real estate players. quickly in japan, another roller coaster ride today. the market did manage to close a little higher to the plus column, but the fact that mr. kuroda is talking about potential capital controls in emerging market economies when we were making some big moment from that jgb meeting with market participants. so, therefore, the japanese government bond yields also crept higher. i believe it touched about 0.95%. and then we had a comment from the secretary-general of the ruling coalition's junior partner, new komeito party, saying that if the ten-year jgb yield breaks 1%, that is going to be a problem. so, ultimately, the boj seemed to have kicked the can down the road, but no real comment on what they intend to do to keep the longer rates down, so this might be a problem and we'll take it one day at a time.

we might see the rates creeping back up higher over in japan. back to you. >> thank you very much for that, chloe. let me tell you what's coming up on today's show. angela merkel is rallying her party in readiness for the upcoming german elections. after the break, we cross to frankfurt to hear why she can't count on support from the greens. spain vows to hit its deficit target of 3% by 2014, but at 10:30 cet, we discuss how much it matters as the eu prepares a softening stance on struggling economies. the central bank in brazil is vowing to fight inflation, but will it hike interest rates on the way to 8% tonight? we'll discuss the latin american giant at 10:45 cet. and how will china respond to the eu's tough stance on the trade dispute? at 11:20 cet, we hear why the spat has weakened the eu as a global player. we went out and asked people a simple question:

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german nan chancellor angela merkel has told her cdu party it must stand up for a strong euro, saying it will be a key point during the upcoming election. let's get to carolin roth for more in frankfurt. this is curious, because the anti-euro party atonement for germany is gaining ground in the polls, so how strategic is it

for merkel to go in the opposite direction? >> reporter: well, you know, the german public has been a big fan of how she handles the eurozone debt crisis. in fact, it's interesting, 70% of the germans think that she did a very, very good job. now, with the rise of the euro septic party, the danger is that it is going to be stealing votes from the christian democrats but also from the social democrats. so, you know, the preferred coalitions between the cdu and the fdp and between the social democrats and the green party, they are, in fact in danger. now, yesterday, i spoke to one of her big opponents, the green party, which is hoping to form a new coalition with the social democrats. i spoke to the financial policy spokesman, and he was very critical of how angela merkel dealt with the crisis. take a listen. >> generally speaking, yes, but the way the crisis in cyprus was managed was disastrous, and it causes additional economic and social costs for taxpayers and

citizens in cyprus and it caused turmoil in financial markets all over euro. so, that's why it's important to have an institution in europe is that correct like the fdic in the united states cope with the bangs instead of the month-long negotiations that we saw in europe which brought the turmoil in financial markets. >> reporter: your party's in favor of the financial transaction tax and we know that your desired coalition partner, the socialist democrats are also in favor, but in recent days, some of their members have said we know it's a silly idea. do you actually still believe it's coming? >> it has to, because it cannot argue why for most transactions in our economy we have a value-added tax. in the case of financial products, there's no such tax. we have to even that out and make sure that the financial sector also takes part in

financing public goods. but then it comes to the question how should the tax be designed specifically? and there, of course, we have to look at the facts, we have to look at the arguments and find out what is the best tax base, what are the correct tax rates, and so there are weaknesses in the proposal of the european commission that have to be overcome and that is what the legislative process is for, and we want everybody to take positively part in that process and propose what to improve instead of saying this is not a good idea. >> reporter: if a governing coalition with the social democrats doesn't work out come december, would you consider working with the christian democrats? >> well, the programs are so far apart that it seems very unrealistic to go in that direction. right now the green party is the clear alternative to the government of angela merkel, and we want to make sure that there is a real change in government.

>> reporter: that was gerhard schick, the spokesperson for the green party. interestingly enough, the green party is doing quite well in the polls. it's polling at 14%, despite the fact that it wants to push through higher taxes. karen, back over to you. >> thank you very much for that, carolin. it may be the power house of europe, but is germany to blame for the eurozone crisis? find out why one group thinks berlin's growth policies are holding back growth in other countries. read that on cnbc.com. on a different note, new york has become the latest city to embrace the bicycle. this week it launched a bike-sharing scheme that has placed 6,000 citigroup-funded cycles in 330 docking stations across manhattan and brooklyn, making it the biggest such program in the united states. more than 16,000 people signed up to become annual members by day one, despite some complaints about technical problems with the service. italy is also putting on the like area. according to a government report, sales of bikes have

overtaken those of cars for the second time in 50 years. the transport undersecretary is calling the shift to two wheels a silent revolution for one of the biggest car-owning countries in the world. also, for our viewer exchange today, want to know what are your wheels of choice? send us your views by e-mail at worldwide@cnbc.com, via twitter @cnbcwex or go to my twitter handle @cnbc karen. perhaps this is a sign of austerity. it's obviously cheaper to ride a bike than a car, but i've never tried out the bikes here, but perhaps it's all ahead of me. speaking of which, what's ahead of us today, still to come on this show, the european commission is expected to end the excessive deficit procedure against italy. stay tuned to find out what this move will mean for the country's bond markets.

austerity is not the answer. brussels will today signal a clear change in policy, giving spain and france more leeway on deficit cuts and placing emphasis on growth-oriented reforms in its annual eu health check. u.s. ten-year treasury yields hit a fresh 30-month high on speculation that the fed may consider pulling back on qe amid signs the economy's improving.

if you can't beat them, join them. the bank of thailand hops on the easing bandwagon, cutting rates by 25 basis points, citing weak growth. while soft bank and sprint reportedly reach a deal with the u.s. government on security concerns, agreeing to cut equipment made by china out of the american networks. we've been on the back foot this morning on european equity markets. let's take another check of how we're faring, now down 1.2% on the ftse, so backing away from those recent highs around the 2007 highs on the uk market. the xetra dax appealing off its record all-time peaks, 0.9% lower. the cac also sliding a similar amount. the force is slightly less in italy. this is interesting because this market has been rallying more than the core on some of the risk-on days. but nonetheless, we are tracking a little weaker across the session. let's move on to bond markets and this is how it plays across

the core. in particular, bunds fallen 1.5%. is this a question around the tapering off, starting to see the core nudge into fresh territory? the ten-year italian yield not clearing the 4% mark anymore, but budging above that when it spent much time below that level. 4.34% on the ten-year spanish paper. foreign exchange markets, this is the latest where a lot of the activity gain is on the ten-year dollar trade, now the dollar softens to the japanese currency. we're fairly steady across on some of the other trades in fact, almost building on euro/dollar rates. 1.5068 on the sterling. and the swiss, the dollar tracking there, so weaker across the charlottes fts for the u.s. today. softbank's takeover has jumped another hurdle.

they have gained national security approval from the u.s. government. we have the story now from tokyo. k kitadai, tell us the latest. >> one of the biggest movers today was the softbank and shares of the telecom company rose 4% in the morning session and managed to stay 2% higher at the close. investors welcomed the news that softbank along with its acquisition target, sprint nextel, reached an agreement in principle with the u.s. government on how to protect national security. the agreement is good news for softbank, as it would clear the biggest regulatory hurdle faced by the company's proposed $20 billion takeover of sprint. some members of the u.s. congress had been raising concerns about softbank's close relations with chinese telecom equipment-makers and its implications on national security. addressing this concern, softbank promised to use equipment only approved by the u.s. government, but investors were worried that fcc's

screening process could take a long time. with the new agreement likely to be finalized in the coming days, an analyst said shareholders are relieved that once uncertain factors surrounding the takeover deal has been crossed out. back to you. >> thank you very much for that. moving on to other news out of the corporate spear, bidders are lining up for australia's unit optus. that deal is reportedly worth $2 billion. they are reportedly attracted to the steady cash flow and low capex required in the business. not looking west, a report says china's ali baba is not planning to list in the united states as initially thought. instead, the much-anticipated ipo will likely take place in hong kong. ft sources say ali baba doesn't want to deal with the regulatory scrutiny stateside. one banker told the paper that the ecommerce giant wants to make a cultural point by listing solely in hong kong.

ali baba is expected to launch its ipo later this year and the offering could value the company at more than $60 billion. certainly a message to regulators, isn't it? after all the chinese companies listed in the united states. on a different note, 100 years is developing a new business space. the company believes it's the first to develop the idea of health management, wealth management principles but optimal health and longevity. in the third of the series looking at new disruptive companies, ross westgate caught up with the president and co-founder, robert levin, at the follow the entrepreneur conference, and started by asking him to explain this new business idea. >> it is taking a proactive approach to managing somebody's health. so, like you would do with your investments and your portfolio of money, we try to do with your health. so, establishing goals for your health, establishing a timeline for what you want to get done, and then bringing all of those resources to you in a way that

you can use them actionably to fulfill those goals or to meet those dreams. >> reporter: so, if i pay someone to help look after, manage my investments, is that the principle i'm applying? instead of paying to look after my wealth, it's health? >> sure. they want a coordinated approach. they want one person to know everything about what's important to them, but that person might not actually make all of the investments or build all of the products that you're going to use in your portfolio, but they would oversee that and they would manage it and they would do it in a coordinated way. most people don't do that with their health. most people do it in an ad hoc way. they have a gp. they might have a specialist here or there, but there's no real coordination, no real plan around it. and what we're trying to do is to bring some more disciplined planning around health care. >> it sounds like quite an expensive luxury product. >> it isn't inexpensive, but

neither is private wealth management inexpensive either. very commonly, people will pay fees of 1% or 2% of their wealth to have that properly managed. and if you've got a lot of money, then it is not an inexpensive proposition, but people pay for things that are very important. it works in practice by doing the same thing, by building a team of health specialists around you, by having a private health manager that understands everything about your needs and goals, and by finding the exact right resources for you when you need them. >> reporter: you're american founders, and yet, this is a business that is based in london. why is that? >> that was the motivation for the business. london is unique in the sense that there are a lot of people here with those means. it's english speaking. lots of people will come here for quality health care, and they will spend time here, extended periods of time.

but it's also a very good hub for global citizens. so again, as we talked about before, we have to be able to deal with somebody who is a global citizen, who might spend six months in st. petersburg, russia, and six months in singapore and six months in london. so, you do have a very big global population, global community here, and you have a very good health care system, you know, the private health care system here is excellent. so, it was a natural place for us to launch the business. the u.s., obviously, is a really, really important market for us. it's the largest health care market in the world, so it's not one we can ignore. the issue with the u.s. right now, as you may know, but people in britain may not be as familiar with is there is a big change taking place in the health care market in the u.s., especially around what people were calling obama care or the affordable care act that's really changing how people are going to interact with the health care system. we think that creates a

tremendous opportunity for us, but as an entrepreneurial business and as somebody who ultimately does have to make money and sell a product, it was not the right time to roll the product out into a market that was just, you know, so uncertain at such an early point in time. still to come on this show, brazil's central bank is expected to hike rates once again, but will the move curb inflation? we'll discuss the policies of emerging markets of central banks after the break. [ male announcer ] here's a word you should keep in mind. unbiased. some brokerage firms are. but way too many aren't. why? because selling their funds makes them more money. which makes you wonder -- isn't that a conflict? search "proprietary mutual funds." yikes! then go to e-trade. we've got over 8,000 mutual funds, and not one of them has our name on it. we're in the business of finding the right investments for you. e-trade. less for us. more for you. the fund's prospectus contains its investment objectives, risks, charges, expenses, and other important information and should be read and considered carefully

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brazil's central bank is set to release its monthly interest rate decision later today. a reuters poll indicates a split decision with some analysts calling for an aggressive hike of 50 basis points to 8%. this is as the brazilian real continues to take a hit, falling yesterday to its lowest point against the dollar this year, this on speculation that the central bank is ready to prop up the real on fears that further depreciation could fuel inflation. meanwhile in thailand, the central bank has cut interest rates by 25 basis points. as expected, they are citing growth risks at home and abroad. the bank of thailand move drops the benchmark rate to 2.5%. earlier this week, thailand's finance minister publicly called for a larger cut. that's in light of ongoing

efforts to stem hot money inflows into the country which have pushed up the thai baht. policymakers say more exchange rate volatility is expected and capital controls are reaalready required. the thai baht is bouncing 0.4% in session. joining us now is maya bhandari, director of global macro strategy at citi, and elisa garcia herrera, chief economist at mbaba. maya, the interest rate cut today, how much is that to do with capital controls? >> well, i think rather less with capital controls, in our view. i mean, i think you're quite right. you pointed out earlier that data in thailand has been quite weak. yesterday's manufacturing number sort of added to an overall pretty bleak picture in the first quarter. and of course, this is all set against inflation that's coming down quite quickly. cpi is down about 30% since the start of this year. and if you like the combination

of slowing growth and slowing inflation created room for the thai central bank to cut rates. it was expected. 25 bps is what we were looking for and what we got. i think what's interesting is markets are looking still for a bit of a reversal of this policy over the course of this year. the swap rates are pricing in a little tightening over the next 12 months, and i think that certainly looks pretty unlikely to me in thailand, and, indeed, elsewhere in asia. >> alicia, perhaps you can weigh in here because the growth numbers have been pretty weak for the first quarter, a contraction of just over 2%, but nonetheless, the imports have held up, recent numbers 10.5%. >> yeah, i think the economic outlook for thailand is not as bad as people may think. i think our forecast is basically 5.7%, so it's not much lower than last year. and even the huge basis that we

had last year compared to the flattening the year before i think is very good outcome. inflation is under control, clearly under control, so the cut is certainly welcome. now, there is, however, a concern that i would like to point out. credit is growing basically nearly double last year. it's growing over 15% so far. we're talking about 8% last year. and that should be a concern for the central banks. so, that might be picking up in the rates, as was mentioned before. and maybe people thinking that there won't be any cuts anymore because, you know, this could actually help the bubble build up, given that opposition pressures i think will be off, you still have the credit bubble problem eventually. >> i have the same question marks, because covering thailand and speaking to the prime minister in the last couple of years, the policy was to try and stimulate at home, lift the minimum wage, but also to give incentives to farmers. maya, perhaps you can weigh in here again, because you wonder

whether there is much control that the central bank has now or is it just responding to international markets? and down the track, there is a real risk of runaway inflation. >> well, i think certainly when we're talking about the currency, i think we're in a strong dollar world, if you like. so, i don't think we need to worry about the thai baht too much. i mean, i think there are worries about credit bubbles and debt bubbles in parts of asia. i think that is for now a more medium-term problem, if you like. i think in the next 12 to 14 months, i think the key worries, if you like, for the likes of thailand, which are, after all, a large exporting economies, is the slowdown we're seeing in china, the rebalancing we're seeing in china towards domestic demand and what that really means for the likes of thailand from a sort of structural perspective, if you like. and i mean, we certainly don't see any case for higher rates in thailand. we've got rates on hold at

today's level all the way out to june 2014. >> maya, are there ripple effects here, too, from the japanese policy? i mean, japan has been a country that has pushed out a lot of production to countries such as thailand, for instance. if you start to see it more competitive at home in japan, does that lessen the case for outsourcing much of its production, therefore, damaging the thai story? >> well, you make a very good point, because i really think asia in general is stuck between a stronger cny on the one hand, if you like, and a weaker yen and a generally stronger dollar on the other. now, you're quite right. i mean, i think to some extent, a more competitive yen does put pressure on some of the asians, but our economists have actually done some really interesting work on how much there are actual overlaps between the asian countries and japan. and actually, on their assessment, it's only really korea that stands out for having more than half its export basket comparable to japan's.

for i think thailand, the number was closer to 20%, if i'm not mistaken, between 20% and 25%, and similarly for some of the other export-driven countries. so, i think that is something that affects countries very differently. i think it affects certainly the likes of korea very much. i think for someone like thailand, it feels to us that the effect may be slightly less. just goes to overlap is so much less than it is. >> alicia, jump in here, because whether it's a global currency war or indications of liquidity rushing over into thailand or the manufacturing side, what do you think the thai reaction has been to the japanese policy stimulus? >> i actually very much agree with the fact that thailand could actually benefit from the weaker yen. at the end of the day, thailand is importing lots of parts and components for its industry from japan, obviously, so i don't think that should be a big problem. we haven't even seen it yet in the numbers for the first

quarter, demand holding up. i just think the problem might be a bubble. it might be early to say, but frankly, when it starts, it's very hard to stop. so, that would be my worry for thailand in the next months to come. >> alicia, let me get some thoughts, too, on brazil. like thailand, this is expensing a lot of inflows and outflows and central banks are trying to manage the process in both directions. now we're talking about whether there will be an aggressive interest rate hike to 8%. do you think that's going to transpire and will this help out the brazilian economy? >> i think brazil should actually hike rates, but i don't think it will. there is a lot of political pressure for that not to happen. they went too far lowering rates at the time, and now, you know, in a way, they are behind the curve. and probably they will stay behind the curve. so, inflation happens to be probably even a larger problem in brazil than its actual growth

is. so, yeah, it's a gloomy picture. it would be hard for them to hike rates, but they do have to hike rates. and such a weak currency, you know, with the huge capital inflows going to emerging market just doesn't make any sense. it does show the weakness of the economy, unfortunately. >> maya, how does the central bank lift interest rates when it's trying to rein in credit but also create a growth story? >> well, i think the first point i'd make is i sort of disagree with brazil certainly needs higher rates. it's got the highest real rates on the planet at the moment, so i'm not sure that the need point is correct. certainly when, you know -- i mean, you've got inflation is still high at 6.5%. it's coming down, though. and for what it's worth, you know, i think most houses on the street, including us, expect inflation to come down quite steadily through the course of this year to about 5.7%, 5.8%, which is, of course, well within the central bank's band.

then the question becomes what will the central bank do? i think they will hike today. markets, the consensus, and citi, are expecting a 25 basis points hike. the local is expecting more, pricing in about 40 bps today. now, i think brazil is in a difficult position, if you like, because i think on the one hand, inflation is higher than elsewhere. but on the other hand, you know, the growth numbers are rather weak, and weakening further. for what it's worth, again, where we've all been cutting our gdp -- >> it's a conundrum, isn't it? >> we're expecting a little bit below the consensus today. so, really, you've got a little bit of sort of em stagflation, i think, happening in brazil. >> okay. >> i think that does mean rate hikes, but i'm not sure they're good for the economy. >> thank you for clarifying for us. ladies, very much appreciate the perspective. and alicia garcia-her remembero, chief economist at bbba. today is mark carney's last

interest rate decision at the bank of canada before leaving to head up the bank of edge laepd. no change in rates is expected. under carney's watch, the bank of canada slashed rates to a historically low rate before raising them to 1% in september 2010. the rate hasn't moved since. carney officially leaves the bank of canada on saturday and starts his post at the bank of england on the 1st of july. as the eu prepares to release its check on the health of the bloc's economy, stefan p pedrata ski caught up with the bank chief christine moyer about its efforts to reform the labor market. >> certainly, in the domain of the market, they passed a law in parliament recently which with the translation of an agreement between businesses and unions, which is a very good one. it creates new flexibilities in the working market, a little bit

taking the inspiration, i should say, from what had been done in germany with more flexibility in particular to reduce working hours and reduce costs when the corporate is meeting with difficulties. other things remain to be -- other reforms remain to be done to increase more the flexibility of working contracts to improve the functioning of training, especially training of low skilled labor or unemployed persons, redistribution of the financi financing. so, a lot of things remain to be done, but this is certainly a very important direction. another one is the opening of a

number of goods and services marke markets, especially in services. >> reporter: how do you think the government can improve competitiveness without an excessive pressure on salary, which would damage consumer spending? >> well, the choice that has been done so far, there also, looking back to what germany had done during the previous decades, a little bit of the inspiration was to indirectly reduce the social levees imposed on wages and replace that through public financing by a small increase in indirect access. and this is certainly a way to lighten the cost of labor and improve the competitiveness. and more generally, we tell the government you should not push

the minimum wages, because that is really negative in terms of competitiveness. >> christian nowyer there. earlier, we asked a question and they tweeted the safety aspect surely out-weighs any health benefits or credentials from cycling. we have plenty of responses coming through. keep them coming on "worldwide exchange." e-mail worldwide@cnbc.com and twitter, @cnbcwex or direct to me, @cnbckaren. on tuesday, a record day for assets with the dow and treasury yields hitting fresh highs. are the falling bond prices evidence of the great rotation out of fixed coming and into equities? i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting

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welcome back to "worldwide exchange." i'm karen cho. these are your headlines from around the world. austerity is not the answer. brussels will today signal a clear change in policy, giving spain and france more leeway on deficit cuts and placing emphasis on growth-oriented reforms in its annual eu health check. the u.s. ten-year treasury yields hit a fresh 13-month high on speculation the fed may consider pulling back on qe amid signs the economy is improving. and if you can't beat them, join them. the bank of thailand hops on the easing bandwagon, cutting rates by 25 basis points, citing weak growth. well, softbank and sprint

reportedly reach a deal with the u.s. government on security concerns, agreeing to cut equipment made by china out of american networks. good morning. if you're just joining us, let's look at the latest numbers crossing from the oecd and wto on this report from the economy. in terms of what's just crossing, the oecd's japan's gdp is in positive territory, an upgrade of the 0.7% that it forecast in november. so, it seems as though the oecd also getting behind argue no, ma'am -- argonomics, believing an improvement in the forecast. the overall gdp is forecast for its members has been trimmed.

so, they have trimmed the forecast for members to 1.2%, versus 1.4%. and we were talking to pascal lamy from the wto earlier, and he suggested that the growth outlook would remain to be fairly sluggish in terms of the 2013 world gdp growth forecast. this is at 3.1%, down from 3.4% in november. so, that's also going backward if you take into account also, i guess, some of the emerging markets. the oecd, again, just returning to japan, because this has been the biggest stimulus story out there, hasn't it, in terms of what we're seeing, whether it's moving the needle now in the japanese story. the oecd says the japanese government needs a credible plan to achieve a primary budget surplus. so, that's some of the latest on the japanese story. the chinese estimates, this is curious, too, because the market is very much wondering whether china can continue to grow their economy at the same pace. are the numbers a little lighter behind the scenes? the oecd says its 2013 numbers are at 7.8%.

that's from 8.5% in november. so, a huge pullback there for the economy. that's fairly significant. let's get some analysis on these numbers. john rate is fixed income strategist at bank of america merrill lynch, joining us now for some analysis. john, what stands out to you about this, the japanese numbers, the chinese numbers? what do you think's important? >> the japanese number's certainly a sizable improvement from the previous estimate. it suggests the oecd agrees that the stimulus measures japan is undertaking are going to be successful, at least to the extent of raising gdp more significantly. i think what also stands out is that downgrade in the eurozone forecast from minus 0.1% to minus 0.4%, very much in line with our forecasts. it suggests that certain countries within the eurozone remain in deep trouble, and the prospects for them are not bright, which is why there's all this talk about potential cuts in the deposit rate into negative territory and so on. >> it seems to be a little bit of a thumbs up for argonomics,

but on the same hand, there is a warning about the credible required to achieve that surplus. it's basically saying you can sprinkle the market with money, but it's not necessarily going to get you structurally back to good health. you need to do more. >> yeah, and that's an accusation you could levy at a lot of central banks, or more particularly, economies in the way they're being managed. but of course, whether it's japan or the u.s., parts of the eurozone, the uk, there is severe constraints on how much fiscal policy can do at this point. so, while stimulus and monetary policy clearly has its risks, it does seem essential for getting growth going, and that clearly has to be the first priority. >> john, in terms of some of the interesting commentary on the european market, this is from the oecd. the german gdp forecast is at 0.4% from 0.6% in november, so also going backward. the french forecast, minus 0.3%. so, yes, negative territory, down from plus 0.3%.

also, the oecd is saying the ecb should cut the deposit rate and consider qe. this is curious, isn't it? because we've heard from mario draghi, flirting with the idea of negative deposit rates, but there's been so many central bank board members saying we've got to be very cautious about this. what's the next move for the ecb if growth numbers are going to be this weak? >> it comes back to what can they really do? a cut to the negative territory is possible. it's been aired by the ecb and is becoming if not mainstream speculation, it's becoming a real prospect. i think if you ask me more widely whether that would be a sort of game-changing event in terms of the outlook for the eurozone and in terms of alleviating the risks that are clearly building around the core countries in the eurozone as well, the answer's probably no. full-blown qe may well be a partial solution, but whether the ecb can ever actually get agreement to do that is a very different question. >> but even if it does get

agreement, there's this theory -- mural roubini, for instance, says not everyone can embark on qe. it's a zero sum game if everyone's going down the same path. >> but i think there's a point at which central banks and governments try to look at their own interests. clearly, they want to get to a point where the global economy is rebalanced and stable, but ultimately, you know, there is an extent to which the central banks and governments inevitably are going to look after their interests first. >> john, appreciate that. we've just got some numbers also crossing from the italian bond market. this is the latest auction on some short-term paper six-month t-bills. it sold 8 billion euros worth. the six-month auction yield is also the highest since march. this is a curious state of affairs, isn't it? we had one of our analysts who sent out a research note this morning saying that markets are feeling numb about central bank stimulus, but i wonder if that was the case around italy? because after the sell-off in markets last week, the ten-year note's been above 10% and hasn't

come below that. are we now starting to see just an element of fear around italy and debt markets? >> yeah, i don't know if fear necessarily, but certainly, you're seeing a slippage of the anchor and the fact that all these yields in peripheral markets were pushing lower and have been for several months, partly because of the reassurances from the ecb. >> but it's been holding by contrast, so what's wrong with italy by comparison? >> nothing i think's wrong with it necessarily, but i think that when you see the core market starting to see higher yields, partly as a result of expectations of tapering of qe in the u.s. being moved forward and so on, then it does start, clearly by definition, if those core yields are rising, to make peripheral yields look less attractive at the levels they were at. so, it is an anchor that when core yields are very low, everything else gets sucked in towards them, and when they start to rise, you do see some of these other markets start to drift higher in yield terms as well. and at some point, not yet, because it's a fairly marginal move, but at some point, it can certainly raise fresh concerns

about the outlook for the periphery. >> just very, very quickly, could the supplier have made a big of a difference here, the 8 billion euros worth as well? that's quite a market to tip in the market at one go. >> it ultimately helps, but six-month bills get you financing for six months. >> yes, that's true. >> and the problem doesn't go away as a result. >> we'll see you the back half of the year, don't we? john's staying with us, but let me get you up to speed on a story out of europe today. brussels is expected to go for a carrot and stick approach when it releases its annual verdict on the health of the eu's 27 member states at 1400 cet. the "financial times" reports that the european commission will give spain, france and the netherlands more time to reach a mandatory 3% budget deficit target, signaling a softening stance on austerity. italy may be free to fiscal monitoring, but early reports have also suggested that the commission will criticize france, spain and slovenia for their slow pace of structural reforms. ironically, belgium could become the first eurozone country to be fined for breaking the bloc's fiscal rules.

let's tap back into some of the market action. chloe cho joining us from singapore. >> asia mostly higher, but a lot of choppiness, despite wall street ending at record highs, much uncertainty stemming over worries of whether asia could underperform ain a strong dolla, higher rate environment as in 1994. the meeting with the jgb was a non event. yields creeping higher. equity slightly higher, although with a lot of volatility. australia pretty much flat, but the sell-off in high-yielding stocks continues, coinciding with a slide, as low as 20-month lows. a lot of worries over china's growth outlook, the imf cutting its growth outlook to a 7.75%, urging caps on social financing and advising fiscal stimulus if growth lags behind. that might have been the reason behind mainland investors taking profits. shanghai's three-day rally

stalling and hong kong selling off. this is the latest picture across futures for the u.s. market. we were at a record high yesterday, but it doesn't look as though the green ink will continue. the dow called weaker, 17 points below fair value so far or 51 to the down side on the boards, 9 on the nasdaq. and the s&p 500 down by six early on. we saw some strong data yesterday from the consumer and also on the housing market. and typically, this should have rattled investors because it's just another indication that qe tapering could come sooner rather than later, but perhaps it's a little bit of a delayed impact, but the early number suggests a retreat. european markets today also have been unwinding, pulling back from some recent highs. down 1.25% on the uk market, also tipping below 1%, too, on the xetra dax and the cac. so, some fairly strong selling action we're seeing, but the periphery, which has been scooping up some of the trading activity on the up side, is seeing a slight decline today. the lax down, so not exactly seeing too much pressure compared to the core.

when it comes to bond markets, we're holding on the spanish note, 4.43%, still above 4% on italy. we have seen a push higher in some of the core yields, though the ten-year treasury at its highest point in 13 months on the yield, 2.17%. and we've also pushed through 1.5% on german bunds. across on currency markets, we're still seeing some reductions as well, not so much on euro and sterling, both tracking a little higher to the dollar. the dollar's been unwinding to a lot of the trades this morning. dollar/yen rates below the 102 handle is significant after a strong rally through that level yesterday. the exception here, though, is the australian dollar. so, you've got the u.s. dollar retreating to most of these payers except the australian dollar, and we saw a breakdown through key support today. 0.9581 seemed to be what traders were looking for. we melted through that and the market is selling off as a result, almost 0.5% weaker. the banks have a shortfall,

according to the country's regulator. we'll hear from a regulator from the bundesbank on the health of the financial sector. that's coming your way. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t have the security you need to get you there. call us. we can show you how at&t solutions can help you do what you do... even better. ♪

well, these are your headlines today. the oecd cuts growth projections for the world's major economies. overexpansion for members is

trimmed to 1.2%. is it time to end austerity? apparently, brussels believes so, and is today expected to signal a clear change in policy. stateside, signs of the u.s. economy is healing, causing a sell-off in u.s. treasury. yields hitting their highest point in more than a year. let's delve a little further into that headline. tenuous treasury yields have hit their highest levels in more than a year. dealers say selling has come mainly in the wake of suggestions that the federal reserve will soon taper off its quantitative easing program. conversely, promises by central banks in japan and europe to keep monetary easing on track also aided the treasury sell-off. staying with us, john wraith, strategist at bank of america merrill lynch pch we've also just seen the eocd forecast for global growth in the u.s., 1.9% down from 2%, so a retraction, but this is lower than what a

lot of economists see from the u.s. do you think tapering is going to start in the next couple months? >> well, we can certainly see why the markets started to take that view and focus on it in terms of the move in treasury yields. bernanke floated the possibility at the joint economic committee ten days or so go, not in any direct sense, but he just sort of warned that if the data continued strong, then tapering would be considered, which really makes sense, but the market started to struggle at that point. we have then, as you mentioned earlier, had some decent data, certainly in some areas, housing particularly, consumer confidence yesterday. and that does start to make people talk about it more widely. we still think there are other impacts to come through from the sequester, the fiscal tightening, over the coming months, which are actually going to delay tapering a bit longer than perhaps the market thinks. so, this sell-off we think is not the start of a big capitulation, even though it could run further in the short run. >> yes, the sequester is something that ben bernanke has been warning about all long.

thank you so much for joining us, john wraith, fixed coming strategist at merrill lynch. italy's largest banks were short of the capital to meet brussels' requirements at the end of 2012, according to the company's regulator barfen. however, this was an improvement on the billions lacked by commerce bank and deutsche bank at the middle of 2012. carolin, many regulators are issuing concerns about basel iii and much this is going to squeeze the banking sector at a time when they're being told to lend up more to small and medium-sized enterprises. >> yes, absolutely, that is one of the big concerns out there. the other concern is whether the implementation is actually even around the world. i mean, we know that some people say the u.s. banks are actually dragging their feet. i wondered whether this puts german banks at a disadvantage.

i put that question to a board member at the bundesbank. he told me, no, it doesn't really put them at a disadvantage. he also said that german banks' capital levels are very good. remember that deutsche bank and commerce bank, between the two of them, have announced very big capital measures to the tune of 5 billion euros just over the last couple months. so, these concerns are now allaying a little bit here. we also talked about the concerns of what the low interest rate environment is having in terms of risk-taking. but mr. damlet said that there is no bubble out there just yet. >> we don't see real patrons for a sort of yield apart from very specific areas. first of all, you see more high-yielding bonds being issued, you see more high-yielding bonds being invested into. you see sort of the credit ratings of the issues is going down.

you also can see that insurance companies are increasingly entering the banking market. some of them are lending to the real estate sector. you see several signs -- the real estate sector in itself is a point of interest. there is no bubble yet, but that is also increasing. so, you do certain surge for yield, not an overall phenomena which is making us nervous, but we're looking at this very, very carefully, and we want to make sure that not too many risky assets are out there. >> reporter: let's talk about growth, because if you look at the recent efo data, for example, that points to a nice bounceback in the second quarter. what is it that you're seeing out there? and do you feel that the first quarter and the fourth quarter of last year were really just an aberration? >> we had a pretty tough winter in germany, which means that what we foresaw forthcoming in the first quarter is now coming in the second half of the year. by the way, this is not only a german phenomena, but in the rest of the eurozone and europe.

we will have a much stronger second half of the year and then a pretty strong next year, 2014, in the economy, both in germany and in the eurozone, likely to leave recession and enter into a growth again. overall, bundesbank is not changing its forecast and we are pretty confident that we will have a good year and an even better year next year. >> reporter: and the fact that we're not seeing this usual spring revival in the german economy is also very much visible in this morning's unemployment data for the month of may. the number of unemployed rose much more than expected, by 21,000, but the unadjusted jobless number did fall to 6.8%, and that's still pretty good compared to the rest of the eurozone, karen. >> thank you very much for joining us on that. we have plenty more still to come on this show, including is germany replacing the eu as the main point of contact for european trade with the chinese? stay tuned as we discuss how the european commission can rescue its prickly relationship with china.

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telecommunications equipment imported from china. joining us now to talk more about this is james gandolfiry. the germans have been pushing back against the position and you make the point that this is significant that china's been able to drive a wedge in what is normally a common position across europe. >> yeah. let's be clear, there's not always a common position across the member states on trade issues, but when you're one united trade bloc, the european commission does get to present somewhat of a united front. what's happened is china's lobbied very heavily on the most important governments in the eu, and they've managed to sort of divide and rule the european union. it's much easier to combat perhaps by the trade by the european commission, dg trade, if they can persuade one member state, especially an important one like germany, that it's not in their interests to have the european commission progress with this point of view. >> what do you think is the implication short-term on these tariffs that have been proposed? do you think they're likely to go ahead? >> yeah, it will be real interesting to see. it looks like the provisional tariffs which can run for six

months are likely to go ahead. the eu trade commission has made that quite clear. that's not to rule out entirely the possibility that they won't go ahead, but if they didn't, it would be really interesting, because the european commission at this stage, for provisional tariffs, is not obliged to listen to member states' views. it only has to consult them. so, we'll wait and see what happens, but it looks likely that provisional tariffs will go ahead. >> the german position has been interesting, because we've seen in the press throughout the course of the year that german leaders and chinese leaders have been spending quite a bit of time together and relations are fairly strong. but ultimately it feels as though the germans have gotten the best outcome here. they've sent a message through the european channels to the chinese that these duties are not well received at home. yet, it takes a position of being very, very friendly. >> yeah, i mean, i think it's clear that germany is certainly now the pre-eminent power in the european union, certainly in the eurozone. france has faded somewhat. it's also the most important exporter.

so when it comes to key eu issues, germany's in the driving seat. that said, if germany can present or confront trade issues as a bloc through the european union, that gives it much more clout on a global scale, even than it has being the fourth or fifth biggest economy in the world as it is now. >> the issue is interesting for the germans because we know the company stepped away from a nuclear policy, and so it's not getting energy from that source. it seems as if solar would be the next step to shore up its industry in this area, would be key for such an economic power house. does that mean it's going to sacrifice solar? >> well, i don't think so. i mean, you know, it's important to point out that it's not the german government that's been pushing these moves for tariffs on chinese solar panels, it's a german company, german trade group that pushed for these tariffs. but i think germany, the whole tech industry has been suffering since the recession, and that's likely to continue, whatever happens, whether these tariffs are imposed or not.

>> i appreciate the analysis there, james. eu analyst at ihs. still ahead on this show, private equity's the answer. that's according to a report out today. the answer to what, though? find out right after the break. and we'll leave you with a look at how futures are trading ahead of the open on wall street. don't expect any fresh records today. that's what the boards are telling us. expect a bit of a decline out of the gates as markets just look a little bit more rattled before the session. the new blackberry z10 lets you talk face-to-face and share whatever's on your screen. blackberry z10 with bbm video. built to keep you moving. see it in action at blackberry.com/z10

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welcome to "worldwide exchange." if you're just tuning in, i'm karen cho. these are your headlines from around the world. the oecd trims its call on global growth for this year, despite a rebound in the u.s. and japan. the secretary-general blames a deeply eurozone recession. austerity is not the answer. today brussels will signal a clear change in policy, giving spain a emphasis on cuts and placing more emphasis on growth-oriented reforms in its annual eu health check. well, u.s. ten-year treasury yields hit a fresh 13-month high on speculation the fed may consider pulling back on eu amid signs the economy is improving. and apple's ceo, tim cook, weighs in on a wide range of topics at a top tech conference,

including saying he thinks the iphone and ipad will be responsible for more game-changing innovations. well, if you are just switching on today, thanks for joining us here on the program. let me show you how markets are shaping up for the wall street session. we've got a little bit of red on the charts, suggesting we'll see a pullback from the record highs that we enjoyed again on wall street yesterday. so, the dow called open lower. we've got 49 to the down side is the early indication, 9 for the nasdaq and 6 for the s&p 500, but these are markets that were propelled north yesterday by some strong housing numbers and also consumer sentiment. it's curious, because on wall street, when we've had strong data points of late, the market has taken this as a negative because it seems to be an indication that the timing of qe being tapered could happen sooner rather than later. but nonetheless, it was an

unusual session because wall street took that in stride and managed to go higher. the ftse global 300 is down 0.33%. european markets today are showing selling right across the boards, but look in particular at the periphery versus some of the core markets. the extent of the selling from the likes of italy is slightly less than across the rest of the index, and the cac's down 1.13%, the ftse mib down in italy and xetra dax is close to the all-time peaks and appears to be peeling off that level at the moment, down 1% in the session. the ftse was also setting the all-time high in its sight, but it's going in the wrong direction to try to test those levels. we're down 1.3%. well, the big question for investors today, how do you make money in these markets? here's what some of the experts have been telling us this morning. >> emerging market softens, dollar-denominated debt, however.

so, we don't necessarily -- we're not looking at local currency denominated debt all that much, simply because of the currency risk. and i think where we would be looking at as well is not necessarily china but much more southeast asia, because we're looking at frontier markets as well. >> pit fuels equity. if at some point we have a recovery coming, i'm not saying there is a recovery there, but if we do, we will be very impressed by periphery fuels. >> focus on sensible high yields. now, we've called that the pan levels, not the real high yield that you may not get paid, but the 3% to 4% yields that look good, good, solid companies that

look good against bond yields at 2%. apple's ceo, tim cook, held court at the annual all things digital tech and media conference in southern california tuesday evening, giving the keynote address. now, cook's appearance comes a week after he was grilled by the u.s. senate about how apple avoided paying billions in taxes by keeping profits overseas. cook says he thought it was important to go before congress and tell the company's story. >> instead of just going and saying, you know, we think this is screwed up and that's screwed up and the other's screwed up, we came in with a proposal and said, you know, this is what we think should be done. we think -- we're not in here asking for tax breaks. we think we should do comprehensive reform. >> well, cook didn't drop any hints about new products but says he expects the iphone and ipad to be responsible for several more game-changers. he says he has a grand vision for television that goes beyond

the apple tv device, but he didn't reveal any details, unfortunately. cook also says wearable computers could be the next big thing. but unfortunately for google, their new glasses device will have limited appeal. cook says he is frustrated with the downturn in the stock price but isn't worried about market share. >> winning has never been about making the most. that's never been -- that's never been the cornerstone of apple. i mean, arguably, we make the best pc. we don't make the most. we make the best music player. we wound up making the most. we didn't initially. we make the best tablet. we're making the most there today. we make the best phone. we're not making the most phones. so, the way that i look at this is there are several things that to assess the health or how

you're doing that, just like you would with your body, you would take more than one measurement. >> well, since hitting a record close above $702 last september, apple has shed 44%, more than $280 billion in market cap, more than google's entire market value at $441.44 the current trading price on apple's stock. well, let's move on to one of the other stories we're tracking for you. private equity firm carlyle group is busy making deals in asia. now, the company's buying stakes in two chinese shopping malls. no dates were disclosed, but both malls have been operating for the past three years with stores such as walmart and starbucks as tenants. and also down under, carlyle is reportedly lining up for a bid for sinnottel's australian unit, optus, a deal worth nearly $2 billion. carlyle and private equity peers such as kkr are reportedly

attracted to steady cash flow and also low capex that the business provides. as european businesses struggle to secure lending from banks, private equity's the answer. that is according to research out today from frontier economics. the report shows that nearly 250 million euros of private equity was invested in over 19,000 companies between 2007 and 2012. joining us now is vincenzo morelli, who is the chairman of evca. nice to have you on board with us today. >> hello. >> i want to talk about one of the calls that's come out from this report, which is that private equity involvement in portfolio companies increases the efficiency of innovation efforts. what evidence is there to support that? >> well, i think, you know, the headlines is that private equity in europe accounts for about 6% of private sector employment on average in the countries that are studied by the roheport, bu it accounts for 8% of r&d and

10% of patent citations. that's a very good proxy to tell you there is a high level of productivity in private equity companies when it comes to managing r&d. >> take us through the process of what happens behind the scenes in private equity. what is so different from the way these businesses are managed under a private structure versus as a listed company that makes innovation possible? >> well, you know, i think that the key point about private equity, it's a very good governance model because, "a," it aligns the interests of managers and investors very carefully, and that has a positive effect, of course, on management. secondly, private equity general partners tend to be quite experienced in the sectors in which they invest. they are, you know, very active on company boards. they insist on very sophisticated key performance indicator monitoring. and i suppose they also won't ever allow, you know, management any slack in a manner that is, you know, probably more similar

to what happens at a family-owned firm than sometimes in a publicly owned company. >> it's curious that you bring up the common goal of trying to extract profits, because for a long time, private equity was accused of loading up many companies with debt and taking the quick returns, but it seemed as though the financial crisis changed the industry model, when people had to find it in a different form, which was actually running these businesses. do you think this is what has transformed in recent years for private equity and why we are starting to see the innovation, that is the only way to get growth? it's not going to come from natural economies anymore. >> i think it's always been focused on product improvement from the beginning. in particular, the private. >> caller: part that funds the earlier stage in smaller companies that typically account for a disproportionate amount of innovation and technology, have always really focused on operating performance. i think the headlines have focused, you know, focused more on the financial aspects of private equity during the 2004, '05, '06, '07 period, but the

underlying focus has been there and is there now that the economy's been so difficult. >> i want to ask you about competition in the pe space. dell is a great example of this. private equity firms are grappling over this company, but we have yet to see the outcome of that. also we're talking about the singtel-optus deal. there seems to be more than one player lining up, increasing the ticket price on purchase. can you still extract value and have innovation in the space when companies may start to overpay for assets? >> well, i think buying intelligently is a very important element of the private equity governance model, and i think self-discipline is always essential when you're an investor. so i'm not going to make any specific comments on any particular deal. >> but is it getting more competitive out there? >> i wouldn't say any more so than in the past. i think it's been competitive for many years. >> vincenzo morelli, thank you very much for joining us today, chairman of evca. we're going to break, but

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realtime data technology's opening a new frontier in the cost of treating patients by better diagnosing treatments, helping them avoid costly hospital stays. bertha coombs is live from cnbc headquarters with more on the story. >> reporter: hi, karen, good morning. part of this is driven by a new payment format where hospitals are now being performed more for outcomes of their patients, and they are looking to technology to make a difference. >> hannah, get up. i've got two kids. they're always scared every time i go to the hospital. >> reporter: rachel has been in and out of hospitals for years. >> i kept asking them, you know, can you find out what's wrong with me? >> reporter: suffering from osteoarthritis, high blood sugar and liver disease, no one seemed to be able to help her get a handle on it all. >> i thought, you know, there's no doctors that care about patients anymore. >> reporter: six months ago, that changed. >> hey, rachel!

>> reporter: at cincinnati's mercy health. >> i know i'm not just another number in their office. they actually do care about me. >> reporter: they do. mercy health is a designated accountable care organization, or aco. under the obama health reform act, medicare now pays acos higher rates for improving patients' health and avoiding costly hospital stays. >> to be able to reach out and care for patients in a timely manner, in realtime prompted us to realize we were going to be able to meet data more quickly. >> reporter: using a big data program from privately held explorers, mercy has been reaching out to its high-risk patients. >> i see that we're almost up to the 30-pound mark since november. >> yes. >> that we've lost weight. >> reporter: more actively working with them on preventive care. >> everyone thinks that they're doing a great job, but there is a great deal of variability when

we look in the data. >> reporter: that variability by some estimates costs the nation's health system hundreds of billions. rachel is one of 9 million disabled and older americans eligible for both medicaid and medicare. the sickest 20% of these patients account for two-thirds of health spending in those plans. big data can help sort out unnecessary care, but it requires a big shift. >> it's not just technology that's going to solve the problem, but it's going to be change management, meaning that who should we have involved? what kinds of care coordinators should we have involved? >> yeah, and in many respects, it means a lot more people working with those machines. the mckinzie study predicts that the shift in models here in the u.s. and the push for more evidence-based medical care will drive strong demand for big data over the next five years. the big challenge will be finding enough people with the skills to use it. karen, whenever we have these new technologies, it always seems as though the technology

gets out ahead and then finding the talent is always something that lags. >> indeed. thank you very much for bringing us the latest on that, bertha. here are your headlines today that we're following. the oecd cuts growth projections for the world's major economies. overall expansion for members is trimmed to 1.2%. is it time to end austerity? apparently, brussels believes so and is today expected to signal a change in policy. but stateside, signs that the u.s. economy is healing causes a sell-off in u.s. treasuries. yields hitting their highest point in more than a year. ♪ bonjour ♪ je t'adore ♪ c'est aujourd'hui ♪ ♪ et toujours ♪ me amour ♪ how about me? [ male announcer ] here's to a life less routine. ♪ and it's un, deux, trois, quatre ♪ ♪ give me some more of that [ male announcer ] the more connected, athletic, seductive lexus rx.

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blackberry z10 with time shift. built to keep you moving. see it in action at blackberry.com/z10 how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪ let's take a look at some of today's top stories. president obama is reportedly expected to name longtime adviser jason furman as the next

white house chief economist. he would replace allen krueger as head of the council of economic advisers. he's returning to academia at princeton university. he has advised president obama on economic matters since his first campaign in 2008 and played a key role in crafting the $787 billion economic stimulus package in 2009. citigroup settles a lawsuit filed by the federal housing finance agency, which accused the bank of misleading fannie mae and freddie mac into buying more than $3 billion of mortgage-backed securities. the amount of the settlement wasn't disclosed. this is the second such pact the government regulator has reached out of the 18 securities fraud cases it filed against banks in 2011 involving more than $200 billion in mortgage-backed securities. here's a look at citi's shares. you can see in germany down about 1%. in after-hours trade in new york, they're also trading just a fraction down, just 0.1%. a csx freight train crashed

into a garbage truck near baltimore tuesday afternoon, derailed and caught fire. the accident sparked an explosion that blew off the face of a nearby warehouse and sent a plume of black smoke into the sky that could be seen for miles. csx says one of the train cars was carrying hazardous chemicals, but fire officials say no toxic fumes were released in the air. let's give you a look at what's on today's agenda in the united states. there's no economic data, but the fdic releases its quarterly report on u.s. bank and thrift ownings at 10:00 a.m. eastern. boston fed president eric rosen again is in minnesota to talk about the economy at 1:00 p.m. the only earnings results of note is the retailer michael kors. ten-year u.s. treasury yields have hit their highest levels in more than a year. dealers say selling has come mainly in the wake of questions that the federal reserve will soon taper off its quantitative easing program.

conversely, promises by central banks in japan and europe to keep monetary easing on track also aided the treasuries sell-off. let's get to the publisher of "the bush update" and cnbc contributor. andy, we saw some improvements in consumer confidence, housing data, housing numbers improving as well. typically, this would have caused a sell-off in the equity market. we only saw the push-up, though, on the u.s. ten-year treasury yield. this is a market that has a mixed position of how to price in tapering? >> well, i think so, and i think that's the biggest risk, obviously, for the federal reserve, is how to message what they're going to do in the future. now, we've had since really the fomc minutes that came out for december and january, we saw ten-year bond yields jump 50 basis points then, then go back down, and then come to may, now we had the fed meet and they expressed some optimism about the u.s. economy. as a matter of fact, ben bernanke during his testimony in front of congress said, gosh,

yes, we may even start to taper back come the fall. and that really is what's led to this week where we had this massive supply coming on from the treasury and interest rates have jumped. i think we hit 2.23% yesterday on the ten-year. so, markets are very jumpy here as far as interest rates go. >> where do you see some of the short-term yields going? because yesterday we saw the $35 billion sale of two-year debt, attracting the fewest bids for the security since february 2011. is this indicating that yields have to rise fairly steeply in the short term? >> yeah, i think so. i mean, it's surprising we haven't been up to these levels already, and it's a testimony to people's belief that the fed would hold rates longer than the market was thinking, but i think what we're seeing is better-than-expected data, and it doesn't have to be great, because the expectations for the united states were a slowdown between the second and third quarter due to the fiscal drag here in the united states. that's going to take away about 2% to 2.5% of gdp, but we seem

to be, you know, rolling ahead here, and the markets kind of get it into its head that, you know, hey, this isn't necessarily a bad thing to see interest rates push up a little bit. the stocks have come with it. what's interesting about what happened yesterday is that, you know, we saw the jump in bond yields, and today we're seeing u.s. stocks sell off. so, let's see if that trend continues. >> andy, you make the point to us that the fed has a problem with messaging to the markets when they're going to turn off the monetary spigot, but if they give the market information, you could see a rush out of the safe haven assets. if they don't, you're going to see uncertainty. >> right, and they've given us some metrics by why they would pull back. that's why we're already seeing this action. in other words, for the zero interest rate policy component of the fed, they said 6.5% unemployment, 2.5% inflation. well, the quantitative easing component of the monetary easing that the fed's doing is the canary in the coal mine. that's the first thing that's

going to roll off. now, they can do all sorts of different things with it. they can just taper back. that's a language they've been using a little bit. but the markets aren't going to wait for the fed to taper back. they're going to see better-than-expected data and they're going to run well far ahead of the fed. that's the fed's problem. so, what i would say to the federal reserve is give us some, you know, tell us very specifically, say we're going to keep this interest rate policy for a period of time here. we're going to really try to manage this market as best we cannot to have a serious jump up in interest rates. they need to come out and say something along those lines, i think, to make sure that we don't have this massive rise in rates. >> andy, just quickly, just five seconds, strategy right now. do you keep on selling some of these safe havens? >> yeah, i think so. i mean, and i think specifically, actually, you can sell u.s. treasury and buy german bunds. i think that spread's starting to move really significantly higher here. it may taper back a little bit, but u.s. rates continue to go up. german unemployment rate was

weak today, and i think europe remains weak for some time. >> about 70 basis points on that spread on the ten-year. thank you very much, andy busch, author and publisher of "the busch update" and cnbc contributor. new york has become the latest city to embrace the bicycle. this week it launched a bike-sharing scheme that placed 6,000 citigroup-funded cycles in 300 docking stations across manhattan and brooklyn, making it the biggest such program in the states. italy has also been putting it on. according to government reports, sales of bikes have overtaken cars for the second time in nearly 50 years. earlier, we asked if bike is your preferred meth yol of transportation. fred from ohio has written in to say he opts to ride a bicycle wherever and whenever possible. however, fred says he has too much fear of cars and trucks to ride on major streets. i hear you on that one as well. well, that's it for today's program. i'm karen cho. thanks for watching "worldwide exchange." have a good day.

good morning. today's top story's another tuesday, another all-time high. the dow finishes higher for the 20th straight tuesday session. tim cook kicks off the d-11 conference. i don't know. apple's ceo says the company has more game-changers ahead but declines to talk about future products. and president obama's top economic adviser is going back to school. we hardly knew you, allen! it's wednesday, may 29th, 2013, and "squawk box" begins right now.

good morning, everybody! welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. let's start things off with the futures. joe mentioned that yesterday you did have gains once again, for the 20th time on a tuesday. well, this morning you are looking at a decline. dow futures down by about 55 points, s&p futures down by just over 8 points right now. in asia overnight, you'll see that japan barely budged higher. it was up by 0.1%. hang seng was the big loser. it was down by 1.6%. in the early trading in europe, it is a reflection of what you see here. there is weakness right now, the ftse down by 1%, more modest declines for the france and german markets. and as joe mentioned, it is d-11, and andrew, you know a lot about that. >> thank you, becky. do i know? i don't know if i know about it. >> d-11? it's all things digital. whatever that is. >> you're ahead of me. ahead of joe. >> i have no idea. >> only slightly. >> i love when they put it