you're watching "worldwide exchange." i'm ross westgate. the headlines, today a sense of calm after yesterday's selloff. the vix spiking by more than 20%. money rates remain at elevated levels despite talk the central bank has quietly pumped some money into the system. greece on shaky ground. coalition talks over the closure of the state -- break down.

>> this story is premature. we have plenty of time. we're still having discussions with greece. provided we can reach agreement with them before the end of july, there's financing for the subsequent year. we can just go ahead. >> focus on emerging markets remains high. india's central bank as well saying it's ready to take all action needed to support the rupee. they'll be in st. petersburg to get the inside view on russia's outlook. okay. welcome to the start of "worldwide exchange," the last trading day of the week. quadruple witching to get through in the states today. normally causes a little bit of volatility. we don't really want more than we had in the last 24 hours. one hour into europe, 5-4,

outpacers to decliners. heavy selling yesterday. most european markets off 3% or more. the ftse 100 having its biggest one-day fall since 2011. september 2011. after that fall yesterday, 6184. the dax yesterday down 3.3%. just up a quarter at the moment. ibex was down 3.4. it's flat. ftse mib is down half a percent. take a look at commodities hit hard on the back of chinese data. copper trying to rebound slightly. gold, 1296. down 6% yesterday. brent a little firmer. 102.70. nymex slightly firmer. just a pause in some of the sellingoff. brent off nearly 4% during the session. the big thing has been this up tick in beyond yields.

treasury yield, 2.41%. gilt yields continue to rise 2.3%. highest levels since march last year. spanish yields, 4.79% is where we stand at the moment. 4.85% we got to yesterday. up 7% during the session. as far as currency markets, dollar index hit a two-week high during the session. dollar/yen, 97.94. sterling/dollar below 1.55. all the pressure, of course, is on emerging markets during the session yesterday. the rupee, well, still just below the 60. neared 60 yesterday. below it at the moment. the rand is 10.18. trying to hold their own. dollar is up against the rupiah

and brazilian real. >> following weakness on wall street, most asian markets wrapped up the week in the red. the nikkei 2225 staged a nice turn around ending higher by 1.7% today. the yen weakens against the greenback, boosting exporter stocks and a possible -- the rest of asia remained under water. still lots of volatility in china's cash market. the short term repo rates have done quite a roller coaster today. they are managing to come off their historic highs. the market chatter is that the ppoc has encouraged state lenders to release cash and to ease the liquidity squeeze. the shanghai recoupedrecoupe eed

early losses. soft jnt bank in japan gained 1.8%. the ceo said his takeover plans for sprint/nextel are on track. he is expecting to wrap up the deal next month. south korea, not a warm welcome for the new samsung galaxy. shares eased 0.3% after samsung tumbled more than 13% over the past two weeks. meanwhile, on the region's commodity plays, miners in china and australia also take the brunt of the selling as gold is still trading near the 1300 level. and the double hit of the weak chinese economy and also the fed's tapering continue to weigh on this sector. back to you. >> thanks for that. let's recap what happened in the u.s. as well. selling off for a second day. dow, s&p 500 suffering their worst day of the year. dow down 254 points. highest one day percentage drop since last november.

all 30 components down with 29 of the 30 dropping more than 1%. s&p had its worst one day percentage drop since november as well. november 2011, i should say. all ten s&p sectors were down more than 2%. 96% of the stocks listed on the benchmark index ended in the red. the vix, the markets fair gauged up more than 23% to its highest close since december. joining us for more, charles steeple, head of market strategy at lloyd's bank with us for the best part of the first hour today. good to see you. it's been described as sort of a big unwind of leverage. the thing that's striking about this, of course, actually what was the hedge yesterday that paid off? maybe if you were long in the vix. otherwise you were pretty much whammied. >> yeah. i mean, it's -- heads you lose, tails i win. you know, it's the situation where the market is effectively derisking. that's because of this potential threat from the fed that they're

going to start tapering later in the year. >> in a derisking environment normally core bond yields you would derisk into. actually it's the rising core bond yields that's causing everything else to sell off. >> absolutely. that's the conundrum faced by policymakers. how do you exit the rising tide that floats our boats. that's essentially what we're facing now. i think there has been something of an overreaction. i don't think we're going to follow through from here. at least in the short term. the longer term -- high yields in the states. probably not as much as the market is sort of talking itself into at this point. in the short term i think we're overdone. but that said, you are in an environment where you now have to be a lot more careful about the risk you take. because obviously there is a choice to make on everything.

this is particularly what you're seeing on emerging markets. if some of the underlying issues that face these economies, they were brushed under the carpet just like you did with the european crisis, brushed under the carpet in this credit expansion, the minute that goes away people go, oh, maybe it's not the place i want to have my money. >> yeah. if the cost of -- if your cost of money is going up, risk premium for everything else goes with it. >> absolutely. the volatility we've seen by itself adds to the risk premium in everything. the potential reversals that you could witness from any investment are that much greater. >> just one thing this has done, i mean, there is -- mortgage rates have gone up to the highest we've seen in a year. >> 4.24 this morning. >> right. that's something the fed actually doesn't wasn't. >> absolutely. i think, you know, we had this story from hills and rath, obviously the fed mouthpiece in the "wall street journal" saying, look, if we don't get the improvement in the data, if

it's not justified today, then it's not going to happen. i think the fed and bernanke perhaps did not want to see such a selloff. he wants to induce a dose of reality to the markets. but he doesn't want to spark a massive bond market selloff. that in itself will kill the recovery. >> we had a taste of this a month ago. >> yep. >> the market thought he'd come out with -- he chose not to is the interpretation. >> absolutely. >> therefore -- >> that's why the bond market sold off so badly. but you're always going to see a market try to discount its full cycle. you know, whenever you start an economic tightening or an economic easing cycle, the market will always very quickly try to move to what it thinks will be the end point. that's what the bond market's trying to do now. even though -- >> move to an end point for something in a couple years. >> exactly. >> in a couple of weeks.

>> and that's the problem we're facing is the markets tend to be binary. they can't price that subtlety very effectively. high yields in the longer term. if the data aren't supportive we could find ourself in a situation where all the sudden 10-year notes are 2.5%. we've got an unemployment rate that's actually going up rather than down. that's the problem. >> away from the u.s., of course, also we have the double whammy of china as well. china's short term money rates are still relatively tight despite talks the central bank has been trying to inject funds into the market. it is still way higher than the typical levels. also talk of serious cash crunches in china's money market all week. reports that chinese banks having asking the pvoc to put more money into the system without success. the central bank wants to send a message to chinese lenders to

rein in and manage liquidity more prudently. the shanghai interbank offered rate up 500 basis points. on concerns about the one hand the shadow banking system, they're trying to rein in all that credit that's been created in the shadow banking system. but it's just another -- it's something we could do without, right? >> absolutely. >> how dangerous is this pressure out of china? >> well, the people seek to make the problem go away in one fell swoop by providing liquidity. >> they've got the funds. >> this is a problem they've created, effectively. the pboc are trying to say to the banks, look, we don't want you to continue with the pace of credit expansion you have pursued so far. they are deliberately keeping funding tight for these guys. now, as i say, they could relax that in an instant if it comes to a real crisis. they're trying to teach them a lesson. i think what it does do also is as you rightly point out, highlights that, you know, chinese growth is not running at the pace that it was.

some of the question marks surrounding the outlook outside of the u.s. remain very much in place, particularly with respect to europe. so all of the sudden if you're withdrawing this liquidity and it's exposing all these flaws or, you know, faults in the system, and the pricing that we're seeing, you know, that's why we're seeing such a cathartic reaction from all the markets. because everyone's having this sort of just get me out, i want to go into cash. >> when we say cash we actually mean cash. as opposed to sovereign bonds, short term -- >> exactly. >> right. okay. so look, where are you putting your money? get in touch with us. e-mail worldwide@cnbc.com. tweet. plenty other things to get to on today's program. is the imf on the verge of pulling aid from greece? we'll hit direct from the deputy head of the fund, david lipton. a fall in the value of

samsung shares. $27 billion sliced off the company's market cap 1020 ct. in around ten minutes we'll ask if a new mini smart swrn phone can spur sales. emerging market currencies have continued to take a hammering on fears over the fed's taper talk. the rupiah -- ask if a recovery is possible. plus, oracle subscription numbers dwindling. the compa disappointment post their report yesterday. we'll be state side on that 11:45 ce terks. all that coming up. first, russia's second biggest bank vtb says it needs more protection against a worsening economy. let's get out to st. petersburg for more on the picture and how vladimir putin's government is doing. jeffrey. >> ross, you just catch me. i'm having a well earned break here in st. petersburg.

i've been rushed off my feet, i tell you. >> i saw those pictures earlier. my only question, i hope you beat -- >> we didn't have a chance to finish the game, unfortunately. i think we may have a rematch given the way west ham have been playing recently i'm hoping i might have the advantage in the competition. as i say, we've been very busy here. a lot of conversations here. a lot of conversations are focused on the same topic you're talking about. tightness in monetary markets. and what impact that's having on the way that the russian economy is performing. and whether change at the helm of the central bank, there should be some easing of monetary conditions here. let me start off by playing you a little bit of the conversation that i had with a former finance minister. he thinks the government is out of touch at the moment with the changes that are taking place in the economy. let's listen to what he said.

>> the government in my mind is not fully appreciating the changes in the economy and in the investment landscape. and, therefore, they're underestimating the changes at the weight of those factors and their impact on the economy. which generate the results which i've mentioned. >> and part of the problem is, just access to capital. when you talk to the banks, they say they are lending here. when you ask them are you lending to small or medium-sized enterprises, then the question starts to get a little tougher. because the reality is that they are reluctant to lend into small or medium sized companies that don't have extensive credit track records. one of the challenges, of course, then is this easy monetary or tight monetary story. right now the central bank here not very keen to pursue qe or any other monetary easing at this stage. they do have an inflation problem, which is making life difficult for them here.

but at least one ceo of a bank, the head of vtb, thinks easier money is coming for russia. >> i think the russian monetary policy will be softened. i think the reason for this is the government for the first time decided to keep the tariffs of the national monopolies under control in light of inflation. gas, petroleum, won't be allowed to increase tariffs. it will provide more flexibility for central bank to lower down interest rate and support more lows -- >> one of the problems, really, is that russia really has a history of fiscal and monetary hawkishness, i would say. i mean, there have been episodes where the government has been seen to misallocate capital or spend a little too liberally. right now there are those saying part of the reason economic growth is slowing here is

because money isn't being made more available. as i say, this is a relatively intrenched view. when i spoke with the finance minister, he made the point that he thinks that the kind of qe that's been pursued in the united states and elsewhere is just not appropriate for russia. this is what he said. >> translator: we have a slightly different situation in the countries with qe policies. why do they pursue qe? because they see m-2 aggregate going down, because banks don't lend as much, don't generate cash into the economy. and to stimulate circulation you need liquidity. banks inject liquidity into the economy. but what's going on in russia? we have very high lending magnitudes. loans have grown 15%. and in the consumer market, 14% and more. if we rely on qe and if the central bank starts buying bonds or injects liquidity, what will we get? we'll get more inflation.

with more inflation, loans will become more expensive. monetary markets will become more unstable. so monetary easing for russia, we believe, is quite unacceptable. >> there you go, ross. with those intrenched views, it seems that perhaps the stimulus is not going to come any time soon. so you've got an economy that slipped from somewhere near a 7% growth rate to somewhere near 2% for full year 2013. that's the forecast. that's just not enough here to rebuild some of the creeking infrastructure and help support sme growth. unemployment isn't really an issue here. the economy is quite tight in terms of capacity, so they need the extra investment. but it really is that stubborn headline inflation at over 7% that is creating problems, just easing monetary conditions. but if russia is not careful, it's going to be swept up in the

same kind of liquidity issues that now markets of royal buyers, they see the 10-year treasury bond yield rising and worry about tapering, ross. we already saw the russian market off a couple percent as they reacted to that tapering story. let me send it back to you. >> jeffrey, take another break now. i hope we haven't interrupted your morning. >> yeah. well, i have -- you see i've got a little trau of biscuits here i might indulge in. >> good. >> when you go back to london. >> lovely. all right. carry on. we'll have more. we'll come back and interrupt you a little bit later, jeff. samsung has unveiled a water resistant version of its flagship galaxy s-4. can it keep samsung's stock from drowning? we'll talk about that in a few moments. i want to make things more secure.

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samsung has unveiled its tricked down version of the flag ship smartphone. the cheaper galaxy s-4 mini is touted as the device to help samsung grab more sales in emerging countries.

samsung shares have fallen quite a bit over the last two weeks. shaved off around $27 billion around market cap. exwyties have sold off generally as well. the japanese court ruled samsung had infridnges on apple's patten in a bounceback feature. ironically a u.s. market has earlier judged apple's bounceback pattern was invalid. the two companies are still locked in pat teent fights in t countries. let's get more for what's next from samsung. joining us from singapore, international head of consumer electronics at euro monitor. thanks for joining us. there seems to be some sort of disappointment with samsung's -- the sales of samsung's galaxy. we've sort of decided they were

going to be stellar. now they're not quite stellar. is that accurate or not? >> it's actually a bit disappointing. if you look at the new production, its mini, nothing special. they are no longer a follower. we look to them to share the market rather than making it cheaper. >> yeah. so, look, what's your view of the s4, galaxy s4 phone? is momentum slowing down for that more than investors were expecting? >> yes. actually, s4, if you compare s4 to s3, there are not a lot of difference. mainly improvement. for some markets the s4 runs on a certain processor. in real life situation you

probably wouldn't notice any difference. it's a bit disappointing, yes. >> okay. so it's a little bit disappointing. what are they going to do at this exposition? they now dominate android pretty much. so what have they got to show? what's the next thing? >> well, actually, everyone is trying to -- the talk is always about the next one being consumers. that's why you have the galaxy mini. therefore that's a low end phone. trying to equip consumers, it could be the first time the share buy a smartphone or are even using a computer. in the long run, you have a lot of -- in the low end segment. sony. there's just so many local brands. things are very crowded at the bottom half of the pyramid. >> yeah. i presume you're not going to

pay the same for a -- phone as you are for a samsung. >> that's true. once it comes to the low end phone, price does make a difference. they could probably do with lower margin. just to gain some market share. samsung shouldn't be going down. >> finally, we were talking about sony yesterday. are they going to make any kind of impact with their experia phone? >> definitely. if you look at experia it's waterproof. actually technically water resistant. it's a direct competitor. sony is coming back very strong.

also on cameras. also putting a lot of their camera technology on to the mobile phones. we'll see more of that moving forward. >> makes sense. okay. thanks very much, indeed, for that. joining us from euromonitor. still to come on the program, reports claiming the international monetary fund is planning to stop payments to greece are premature. that's the opinion of the imf managing director david lipton. more of that interview when we come back. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air.

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the headlines from around the globe. a sense of calm following yesterday's big selloff. stocks in europe have been trading higher after the dow and s&p suffered their worst day of the year. the vix spiked by more than 20%. china's money rates at elevated levels despite talk of central banks trying to pump money into the system. greece is on shaky ground. coalition talks over the closure of the state broadcaster broken down. worries about its funding resurface. speaking to cnbc, the imf

minister is down playing they're facing financing problems. >> the story is premature. we have plenty of time. we're still having discussions with greece. providing we can reach agreement with them before the end of july there's financing for the subsequent year and we can just go ahead. we have borrowing numbers out of the uk. up 8.8 billion. it was expected to be around 12 billion. the public sector net borrowing reduced by -- the reason for that, reduced by 2.2 billion from the swiss tax deal. so that's had something of the impact on that. so the public sector net cash -- including financial interventions up around 3.1 billion versus a previous 6.8.

i think that's around about right. just a quick word about the state of the uk public finances. >> obviously that's a nice little windfall to improve the headline number. we're still on a very slow improving path with respect to public finances. you know, what we really need to see is the economy pick up. >> retail sales was getting strong. i know one month data doesn't mean anything. but the trend is there. >> we're looking for a better half of the uk overall. as long as that continues the f public finance should continue to claw back. >> european equities. hour half into the day after 3% falls yesterday. up about a third of a percent. hardly clawing back the cloloss. on the currency markets, dollar index made gains yesterday.

it's come off those two-week highs. fairly solid footing. euro/dollar just above 1.32. meanwhile, talk over the future of the greek public broadcast remain deadlocked with the leader of junior coalition partner saying his proposal for the network has been rejected by the prime minister. with the dispute threatening to unhinge an already fragile coalition the socialest party leader has stated he will remain in the government, adding that greeks don't want fresh elections. the democratic left is set to hold a parliamentary meeting today to decide its future in the government. at the same time, euro group -- said greece doesn't have a financing gap and the nation will receive further disbursements after review in early july. >> the message for our greek colleague was please do everything you can in order for

us with troika to finalize the review at the beginning of july so we can take decisions on the disbursements. >> but there has been impact on greek financing. the greek 10-year bond, 11.59%. up to the highest since april. that political turmoil putting that country back into the spotlight. at the same time the ft was reporting this morning the imf is ready to suspend payments to greece. but the number two at the imf, david lipton, has been telling us it's too soon to see whether greece faces further financing problems. and he's been speaking to the boys in st. petersburg. jeffrey, of course, is there. jeff? >> yeah, ross. fascinating topic, this. a very interesting conversation that we had with the number two at the imf. i've just put the question directly to him. is there any truth in the story that's in the financial times that imf funding for greece

could end as early as next month. of course, there is this review process that rolls forward in july. david lipton's response, it's too early. let's listen in to what he had to say. >> the story is premature. we have plenty of time. we're still having discussions with greece. provided that we can reach agreement with them before the end of july, there's financing for the subsequent year and we can just go ahead. for now we're just going ahead with our discussions with greece. >> but the funding is contingent on the outcome of that meeting in july. that's the message. >> well, no, there's funding that exists. if the discussions were to lapse and go longer, there would be other discussions to have about financing. but right now we proceed with our discussions. there's financing for the subsequent year that's already established. >> are you irritated that some of the central banks appear to be unwilling to roll over the greek bonds? >> the central banks will make their own decisions.

i think they've made pledges for the ways in which they're going to help greece. we're pretty sure they're going to carry out those pledges. >> does this story come about because one of the parties, wherever it be, someone at the imf or at the central banks or a commissioner somewhere wants this story to come out to put more pressure on the greeks in your opinion? >> i don't think so because this story isn't about the greeks. the story even the way it was written was about the european provision of finance. so i think, you know, we have our discussions with the greeks. our team has been there. we'll be back before the end of the month and carry on. >> your team has been there but you have a permanent presence on the ground, i believe? >> we have permanent presence and a visiting presence. >> the permanent presence is telling you what about the progress the greeks are making. >> good progress. there are some issues to be resolved. these have been good discussions. >> what are the biggest problems? pri privatization program? >> privatization is one issue. there are a number of steps they're working on taking. i don't have any reason to believe these discussions won't carry forward.

>> it's interesting. david lipton there, i think, putting to rest for the time being that greece story. but, ross, we also in that interview talked more widely about some of the liquidity questions that the markets are asking at the moment. and david lipton agreed, you know, it could be a tricky summer. because the markets are rather choppy at the moment. but he's still convinced, or at least that's the message that he wants to put out to the marketplace, that the crisis as was is over. what we have now is just the continual cross winds that you would get as the global financial system sorts itself out here. let's hope he's right on that story. because there are those, and plenty of those here in russia, including the finance minister, who think that we could be headed into another difficult phase in terms of liquidity and the crisis of global markets. ross, back to you from st. petersburg. >> we'll come back to you a little bit later.

we just had some comments out from the union finance minister who says there's no need to react and panic over the fall in the rupiah. it's been down record lows against the dollar. says the u.s. fed statement is being misunderstood. we'll come on to this. we'll talk about india in a little bit. john, i want to talk about europe. in a way, we saw these big jumps in italian and spanish yields up 7%. that last happened when they were in the eye of the storm. here they were sort of being silently assassinated. >> again, it highlights how much the -- the fed policy and, you know, things like the ont have been supporting, this compression yields and this acquisition of yield, if you like, across the world. in virtually every shape and form. really it's an excuse for some profit taking. you know, you've seen over the past 12 months this massive compression in countries like italy and spain. partly because the imt and partly because of the fed. if that paradigm is changing as

we were talking earlier, look, there is a cost to liquidity yield. risk assessment is bound to change. that's what's prompted this liquidation. >> mr. draghi on one comment i read this morning, draghi needs the tapering effect like a hole in the head. >> absolutely. they wanted to keep yields low. you know, if this continues, then that's obviously not having a positive effect. >> there's the point. there's the if. how do we -- is there any way of working out the if part of that statement? >> to a degree. it's a self-correcting mechanism, right? if interest rates go up sufficiently in the states, it will slow the recovery down. particularly the housing market, i think, is pretty vulnerable. we were talking about the mortgage rate. that is a key pivot point for the u.s. from here. i think that, you know, draghi doesn't need it but there's a not a lot he can do about it because it's beyond his control. >> can we get back to a situation where good data sends yields up and poor data brings

yields down? actually that would be a proper functioning market, right? >> yeah. i mean, in a world where risk is being properly assessed, then that's what should happen. but i think we are at risk here of getting too carried -- we're sort of, because we've had two days of destruction in the bond market, we're sitting here going, you know, the paradigm shifts to what has changed. it hasn't. the u.s. economy is doing very much now what it was a week ago. that's a gradual improvement. and while that's the case, there is still this risk that the bond market and the backup in yields causes a problem. i think that's why you're seeing them pull back a bit from the messaging that you saw. because they just cannot afford to slow the economy down too much. >> all right. we've been asking where you've been putting your money. weigh in on this. e-mail worldwide@cnbc.com. tweet direct to me@rosswestgate.

over in japan the softbank c ceo says his take over for sprint nextel -- the story from tokyo. >> softbank will eventually become the world's biggest company by making its way into the u.s. market. that's according to its ceo. speaking at today's shareholders meeting, he said the acquisition of sprint will be completed in early july. softbank's shares rose more than 70% since the start of this year, showing investors' optimism over the deal and the company's growth. softbank ceo warned that its u.s. rival, dish, could make a surprise move before a sprint shareholders meeting next tuesday. it's still in a separate battle with dish over control of clearwire. sprint announced yesterday it would raise the offer to $5 per share to take a full control of

its subsidiary. wholly owning clearwire is essential for softbank since it needs clearwire's wireless air waves to up sprint's network. in the meantime, japan tobacco also held its shareholder meeting today. shareholders voted down a set of proposals including a dividend hike by a uk based hedge fund. jt has said such shareholder returns will limit the country's future business investment over the long term. back to you, ross. >> all right. thanks for that. meanwhile, also in japan, the bank of japan chief kuroda continues to give his reassurances that the japanese financial markets will stabilize over time to mirror the revival in the economy. speaking at a conference in tokyo he said japan is likely to resume moderate growth thanks to support from easing monetary and fiscal policies. although he's also warned the risks remain and the central bank will continue to monitor the economic situation. elsewhere, the haze in

singapore is worsening. pollutant standards index climbed to a historic high of 400 earlier today as smog from fires in indonesia continue to shroud the city state. the hazardous levels have prompted singapore's airport to lengthen the time between landings and departures as a precautionary measure. singapore airlines and asia both told cnbc they have no plans to suspend flights but are monitoring things. singapore's prime minister said the haze could last for weeks depending on weather conditions. the fwogovernment is urging residents to remain indoors whenever possible. >> the haze is horrible. it's bad for everyone's health. quite honestly something needs to be done about it. >> you're still going to work? >> yeah, i am still going to work. everybody has to keep going to work. probably might not be a bad idea for the companies to have people stay home to make a point. >> it really gets bad today. my office we have almost like half the staff on mc because of

this haze. it's really -- i think the government really needs to do something about this. it's really going to be bad if it's going to prolong like this. >> singapore not the only country affected by the smoke. haze in the southern part of malaysia has also reached hazardous levels. the government ordered 200 schools to stay shut at least till the end of the week. meanwhile, ma lay's air asia has reportedly raised around $10 million in ipo but pricing itself at 1.25 per share. it's the lower end of the indicative range. the long hold budget carrier is set to finalize its ipo monday before its debut on the malaysian stock exchange due on july 10th. we'll take a short break. still to come, from india to korea investors have been flee emerging market currencies. is it going to continue? more when we come back.

china's short term money rates are still relatively tight despite talk the central bank has been quietly injecting funds. the overnight bond week purchase rate eased to under 10% today down sharply from yesterday's close of nearly 12%. but it's still way higher than the typical levels. there's also been talk of a serious cash crunch in china's money market all week. some reports suggest chinese

banks have been asking the pboc to pump more money into the system without much success. analysts say the central bank wants to send the message to chinese leaders to rein in their credit binge and manage their liquidity more prudently. joining us with his thoughts, managing director at cig neknci wealth. charlie diebel with us as well. it's the overlap of -- it's not a particularly great combination, chris. give us your perspective where you place this chinese story. >> i think the main issue is the tapering. and the reversal of capital flows into some of the emerging markets. we've seen the capital -- the capital account essentially compensate the current account deficits. and the capital flows we've seen over the last few years in terms of emerging market debt flows, the carry trade out of the u.s., out of the u.n. has been powerful. >> how much of the flow into

emerging markets has been leveraged? >> it's difficult to say. we think a lot of the flows have been quite speculative. they've obviously driven growth through the multiplier effect in the economy in the emerging market. it's not just the delta one type of situation. you could actually get a multiple effect from the contraction of the liquidity in those economies. that's really something that's very difficult to anticipate and to sort of take into account. i think the danger is that if those capital flows stop very aggressive, which is the sort of a sudden stop of any type situation, then that in itself feeds on further capital flight. that's the real risk. >> is there a way of gauging what's likely to happen or not? >> well, it's -- it's the sort of madness of crowds type of event, really. if confidence falls in those countries, then it could be

overdone. i think the danger is that these -- and financial markets do tend to overshoot. ultimately, the situation for emerging markets as we've been sort of told over the last few years is much more stable than it has been in previous eras of currency crises. nevertheless, there are some significant countries with significant current account deficits that have -- that are sort of blaming or putting the blame at the feet of the fed when actually what they need to address is their own structural issues. >> yeah. you say it's -- those countries current account deficits, brazil, indonesia, south africa, turkey being impacted more negatively. at the same time, turkey's got its -- its own issues as well. how is that playing into it? >> at signia we rank the countries on a number of issues and a number of criteria. turkey actually ranks lowest in terms of short term debt,

refinancing needs, current account deficit. so the internal strife doesn't help. but the country has sort of bigger issues in terms of having to maintain the capital flows and the attraction of capital to outside investors. so it really needs to address those structural issues. the traditional way would be higher rates. that's the old economic cycle. sort of the downward spiral of rates leads to lower growth, more capital flight. that old economics, which has sort of been put to bed, really, by the accumulation of reserves by these countries, that old economics is coming back. that could be a risk. >> this is one story, turkey's been warning the german chancellor, angela merkel, not to interfere in the bidding to get into eu. they haven't canceled planned negotiations with turkey. they may make a decision over the weekend. is there any risk surrounding turkish eu talks because of the demonstrations and the problems?

>> i'm not really in a position to comment on that. i think it's -- i don't -- it seems quite short term. i would imagine they're looking at the longer term issues when considering the membership. >> no. i mean, i just think that that point is well made about all of these markets. what the tapering is exposing is the differentiation between these various economies. and that means that your country selection, your stock selection, become that much more important. and i think, you know, you are going to see that reflected quite heavily in foreign exchange markets as well. we're seeing the -- continue to weaken. that is obviously one way this can take place. it's obviously destabilizing and can -- i think that's what we're at risk at right here. >> to show you where we stand with the turk irk ish 2-year as. up 49 basis points to 8.10. it's not just turkey, of course, we've seen protests. we've saw protests in brazil as

well which has led the president to call emergency cabinet meeting for today. 1 million the demonstrators take to the streets on thursday to demand better public service and voice their disapproval over the high cost of hosting the football world cup. the protests were largely peaceful. though you can see in some places the police were forced to use tear gas and rubber bullets. there was some looting reported in rio. that's putting just more focus, of course, on these emerging market currencies post the taper discussion. the rupee also not far away. got pretty close to 60 during the session yesterday. which was a new record low. the indian finance minister has been coming out this morning and saying there's no need to react and panic over the rupee's fall. the rbi will do what is needed and the fed statement has been misunderstood. what can india and south africa do to defend their currencies? should they be defending them?

>> well, i think india's in a slightly better situation. it hasn't been the significant beneficiary from capital flows. it can obviously raise rates. internal reforms in india are helping. i would put india at the lower end of the spectrum in terms of risk. just the degree of capital flows issue. i think south africa, different story in terms of -- >> i meant to say brazil as well. >> brazil and south africa different stories in terms of degree. south africa, you could say the adjustment is already taking place with close to 30% appreciation. at some point that creates an opportunity for investors. especially on the equity side. this excess capital has destroyed returns in these markets. also the terms of trade improvement will be a significant benefit. i think we just have to be a little bit patient before we sort of leap in to these situations. but they do create a potential

for export growth and a potential for a better it sha--e solid foundation. >> yeah. does that apply for brazil? >> it does. i mean, it's very -- obviously very commodity dependent. >> goes back to china. >> it goes back to china. i think it needs to broaden the economy. that's very, very difficult for brazil at the moment. >> i mean, it does -- all roads lead to china. this is where, you know, this liquidity story, the timing of the pboc decision to try and teach the bank and the financial system a lesson is -- is really unfortunate. because, as you were saying earlier, it's really bad timing coming at the same point as we're trying to come to terms with this -- or accurately price the prospect of fed tapering. and, you know, this does pose quite a growth risk going into the second half for china, i

think. >> what is the -- what is this -- 7% growth rates from 9%. they're trying to rein in the credit in the secondary banking system, chris. how is that going to spill out into asian -- asian emerging markets? >> it's going to be -- it's going to be quite powerfully negative, i think. and i think the other thing as proliferation countries are dealing with is the yen. essentially japan is exporting deflation. they may be trying to create inflation in their own economy, but they're exporting deflation everywhere else in the pacific realm. the two factors are pretty difficult, make difficult conditions. on the other hand, korea seems to be in pretty good shape to us. it's probably one of the better positioned markets. a selloff, significant sellback in that market could be a good entry point. >> okay. chris, good to see you today. thanks very much indeed for joining us. charlie, final thought from you.

what happens next? how long is this volatility going to be around? >> as i say, i think probably the next week or so we're going to see a bit of a paring of the excess sort of tapering that we priced in. so you're probably talking about a bit of a recovery in the u.s. equities, bit of a recovery in the u.s. bond market. but the game has changed. we know this -- there is this alteration in liquidity. and price of money coming. and the availability of money. and that is going to alter the investment landscape over the next 12 months. >> good to see you. thanks for that. the second hour of "worldwide exchange" continues. we'll get more analysis when we come back with citi's steven england. see you in a few moments. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪

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this is "worldwide exchange." i'm ross westgate. if you've just joined us a recap of the headlines. sense of calm on global markets post yesterday's selloff. stocks in europe trying to trend higher after the dow and s&p suffered the worst day of the year and the vix spiked by more than 20%. china's money rates still remain at elevated levels despite talk the central bank has quietly pumped money into the system. greek is on shaky ground. coalition talks over the closure of the state broadcast have broken down and worries over funding resurface. speaking to cnbc, the imf's

number two has down played reports they're facing financing problems. >> the story is premature. we have plenty of time. we're still having discussions with greece. provided we can reach agreement with them before the end of july, there's financing for the subsequent year. we can just go ahead. >> the focus stays on emerging markets. the brazilian government is due to hold an emergency meeting following the latest protests. while india's central bank says it's ready to take all action needed to support the rupee. we'll also have the latest from st. petersburg and have the inside view on russia's outlook. all right. if you've just joined us, warm welcome to the start of the global trading day here on cnbc. we'll kick off with a look at what's happened in asia overnight before we run through the futures and european assets. with us in singapore. >> thank you, ross.

in fact, most asian markets wrapped up the week on a low note. following the selloff on wall street overnight. the clear outperformer, though, was the nikkei 225, reversing early weakness to end higher by 1.7%. the weaker yen lifted exporter stocks while a possible corporate tax cut also helped sentiment. the rest of asia is still under pressure today. china's short term rates remained at lofty levels, although they managed to pull back from historic highs. this was amid market chatter that the pboc has encouraged state lenders to release cash to ease the liquidity crunch. the state owned central -- also continued to buy more shares in some of these big financial names to restore market confidence. and the shanghai composite today came off its session lows, ending down by about .5%. elsewhere, let me show you the region's tmt space. japanese mobile carrier softbank, let's have that. the softbank, in fact, gained

1.8% today because of the company's ceo -- here we go. because the company's ceo said he is expecting to wrap up the sprint nextel deal over the nex electronics unveiled the cheaper galaxy s4 mini among demand concerns for the s4. they tumbled more than 13% over the last two weeks. meanwhile let's take a look at the commodity space. miners in china and also in australia, they took the brunt of the selling today as gold still trading shy of the 1300 level. the recent downgrade to china data and also the fed's tapering continue to weigh on the sector. back to you, ross. >> thank you very much indeed for that. that's the wrap in asia. after the falls we've seen in the u.s., how are futures looking right now? remember, we saw the dow down with a 253 point loss, down

2.3%. right now futures suggest we're currently looking for a little bit of a rebound back this morning around 84 points above fair value. right now the nasdaq -- thank you very much. the nasdaq, up nine points above fair value. painful thing, let me tell you. the s&p 500 at the moment around ten points above fair value after its 40-point loss yesterday. now, european equities were down 3% and more during the session yesterday. a little bit higher today. it's really just a sense of we're not going to go higher, claw back the losses. ftse 100 up .5%. ibex fairly flat. ftse mib down .5%. big selloffs in commodities, of course. let's just show you where we stand with gold, down 6.4% to 1285. rebound a little bit. not very much. copper up a smidgeon as well.

bridge yesterday we saw down 4%. currently just at 1.03. nymex as well up a little bit at 95.73. bond rates the thing we've really been looking at. the backup in treasury yields that have been spooking everything else. 10-year treasuries 2.38% after 2.42% yesterday. highest since august 2011. spanish yields 4.81. they fell 7%. yield climbed 7% yesterday to 4.85. so we've just come back from that level. gilt yields continue to climb, yielding the highest since march last year as well. quick run through currencies. aussie/dollar bouncing off the low. dollar yesterday 98.29. currently 98.70. euro/dollar moved away the four month high of 1.34. all the pressure, of course, in

emerging market currencies. the rupee, the indian finance minister said we're overreacting. the rupee moving away a little bit from that 60 level we made yesterday which is the all-time low. but on this note, let's bring in steven england, global head of g-10 fx strategy at citi. steven, good to see you. let's kick off with emerging markets first of all. as we get people, you know, withdrawing liquidity, u.s. treasury yields going up, how much more pressure is there going to be on em currencies? >> well, we expect the pressure to continue. you know, what we see is there are a lot of investors who are still in emerging markets and bond markets who would still like to get out. liquidity isn't great. the easiest way out is through the currency. that's putting downward pressure on currencies across the board. >> now, at the same time, of course, those investors are from

europe, the uk, japan. when they're exiting those, is that in a way limiting the dollar's ascent against the yen and the euro? >> you know, maybe to some degree. but i think right now the dollar's pretty much the safe haven and the only story in town. it's not as if the news out of europe is particularly good or out of swjapan is particularly good. you know, the backing up of yields has been the setback for economics. it's been a setback for any growth aspirations the europeans have. i think the dollar ends up on top on this, not necessarily because of good reasons. >> no. look, is this the end of the bernanke -- those who are doing dollar carry trades, buying emerging market assets, is this the end of that? or is this a sort of a quick unwind? >> well, he -- he made it sound as if there's a conditional bernanke put. he said they would act to support markets if they saw it

derailing the economic expansion that they expect. i think we have a combination of market skepticism on the bernanke put. and a segue from, you know, the currency wars that we were discussing for the last couple of years into interest rate wars. basically u.s. has backed up the yields for the world. it may be suitable for the u.s. it's not suitable for the rest of the world. >> yeah. here's the interesting thing. the backup in yields in u.s. justified. is it a sense that the market can't deal with a gradual normalization? we haven't even started normalizing. we're only talking about it. the market wants the cm to go straight to what that means in the end game in a couple of years. it seems very binary. >> well, yields were very low and certainly there was, i think, a difference of perception between market participants who thought that in march and april that the fed was saying that they would be supportive of asset markets and let the bond market down gently,

you know, the most recent comments beginning with may 22nd but kind of being hammered further on wednesday suggest that the -- you know, the fed just isn't as friendly as market participants expected. and there's a lot of catching up to do. even going into the fomc there was a lot of optimism in the sense that the fed would backtrack or at least go no further than they had done on may 22nd. and if anything, they went a lot further. that the it sha-- you know, yes was a lot -- or wednesday was a lot more aggressive than the may 22nd testimony was. >> yeah. all right. stay there, steven. get a cup of coffee. we'll come back to you. good to see you. also given the recent market volatility earlier, we've been asking where were you supposed to put your funds? someone tweeted he'd like to reverse treasury efs since the leverage is better. stocks, stocks, stocks, more stocks. keep your responses coming.

e-mail us worldwide@cnbc.com. tweets a cnbcwex. still to come, besides more from steve, back to russia with an exclusive interview with a ceo of enel. jeff and steve are both there. "worldwide exchange" continues in just a few minutes. ♪ [ engine revs ] ♪ [ male announcer ] just when you thought you had experienced performance, a new ride comes along and changes everything. ♪ the 2013 lexus gs, with a dynamically tuned suspension and adjustable drive modes. because the ultimate expression of power is control. this is the pursuit of perfection. how old is the oldest person you've known? we gave people a sticker and had them show us.

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the big selloff of global assets yesterday was primarily driven with what was going on with bond yields. treasury yields at the moment 2.39 on the 10-year. hit 2.42 yesterday. gilt yields continuing to climb this morning. we're now at once again fresh highs in the yields we haven't seen since march 2012. spanish yields 4.8%. hit 4.85% yesterday. still with us, of course, is steven englander. joining me in the studio as well, senior credit strategist at national australia bank. simon, everything -- because everything is priced off the cuffs -- basically global assets are priced off u.s. yields. >> absolutely. >> right? why -- here's the first question is, how much higher in the short term do you think u.s. treasury yields can go? >> oh, i think, you know, in the absence of -- we're going to a fairly quiet period of data over

the next couple of weeks. i wouldn't be surprised to see 2.75%, perhaps 3% over the next two, three, four weeks. >> that quickly? >> that quickly. we moved very rapidly, 1.60 from 2.40. come back consolidating a little today. the buyer still seems very much towards the high yield. people are derisking into that as well. >> if that happens, what happens to the -- what happens to the rest of the credit space? >> well, the rest of the credit space continues to try and chase that increasingly crowded trade that we're getting now at the front end of the duration curve. everybody's looking for short dated quality assets like they were looking for longer dated higher yielding assets only a matter of months ago. the more yields go up, the more you're going to get is differentiation across that credit space. your earlier guests were saying in the em space. it's not just sort of the aggregate trade anymore. it's much more about sort of single name stock picking, maturity picking, rather than just the grabathon we've had previously. >> steven, could you see yields backing up that quickly?

what would you think the impact would be? >> well, i think that the yields certainly could back up. i think the market will be watching whatever data we get in coming weeks. particularly payrolls. if the payrolls are anywhere close to 200,000, i think the markets will continue to assume that the -- you know, fed withdrawal of liquidity will continue to go up. you know, the rest of the world is very vulnerable. the difference between this hiking cycle and previous hiking cycles is that normally em is kind of ahead of the u.s. in terms of the business cycle. now em is pretty flat. europe is on its back. japan is nowhere. the rest of the world really did not need this backing up. it's going to do a lot of damage to the growth prospects and to their asset markets. >> there is a point. because mortgage rates are the highest in a year, simon. where has the protection been? you've got bond yields sold off, stocks sold off, currencies sold off, commodities sold off. where are people going for

safety? corporate -- >> people are looking short dated torp rdate ed corporates. there's a lot of cash being accumulated as well. a lot of asset managers sort of ahead of potential redemptions. what we've had over the last month, six weeks have been negative towards returns on your fixed income portfolio. in isolation that's one thing. if we start to get two or three months of negative total returns looking at those portfolios that's fwoigoing to become a tr. that's going to be self-generating in terms of the further liquidations we're going to see. i think there's a keen interest in accumulating cash as well at the same time rather than sort of, you know, needing to get invested as we've felt previously, perhaps. >> all right. simon, for now, steven, as well for now. thank you both. coming up, back out to st. petersburg for an exclusive interview with the ceo of enel. it's important to get away from everything once in awhile.

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[ 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. ♪ it's day two of our coverage from the st. petersburg forum. jeff is there. >> thanks very much indeed, ross, for that. we've been focused on inward investment into russia. we've been talking to a lot of international ceos who've been putting money to work here. energy and the oil and gas sector is one that continues to

fascinate. and we know it's a significant part of the russian economy. helga lund was with us earlier from stat oil. let's hear what he had to say about investments they're making now. >> i think we now have a stable framework in russia for energy investments. i think the political leadership knows the importance of stability in long term fra framework. we continue to deploy capital in russia. >> helge lund and stat oil do a lot of business in this part of the world. they have deals with some of the larger russian energy businesses. i have with me on the set fulvio conti, ceo of enel, the italian energy company. you just signed a deal this morning. >> that's right sf. >> to sell one of the assets you own. >> that's right. >> this is a deal not necessarily to invest in russia, but sell something to the russians. >> that's correct.

>> tell us what they're buying. >> they are supposed to buy our plant in belgium. brand-new. efficient. belgium is an interesting market. to the extent we have reduced our size into the northern france as we accidentally nuclear plant -- doesn't make that much strategic sense anymore. and i think we matched the interest of fwrgazprom to expan their interest into the european market. combining this new interest we are seeing a jewel of technological capacity and we're happy with that. >> would you imagine that russians will be in the market for some of the other assets that you need to dispose of as part of this 6 billion euro program of selloffs? >> well, i think the russians' interest is to expand beyond just being an exporter of gas and oil and become int fwregrat

partners in many different markets. i cannot discard the idea russian investors might be willing to continue to deepen their positions in the european markets. and we'll be ready to offer them opportunities. >> i'd love for you to give us detailed views on negotiations. but i don't suppose you're going to do that. >> no, i'm not. i'm not. i'm so sorry about it. but i mean -- >> let me ask you a question about the disposal program. enel is a little flabby. this program is all about getting you lean and mean moving forward. so what else needs to go on the block at this point, do you think? what is noncore that you can do with disposing of? >> well, again, if i would be speaking into details, i would be, you know, kind of unveiling the secret. and those negotiations and disposals can only be done under -- >> i understand that. >> basically the concept that we are selling minority stakes, where we have a minority that

doesn't accrue over time into our consolidation even though it's performing. we are selling assets which are valuable to others and can be effectively able to get enough value that can be satisfactory to shareholders. and the money we got will be redeployed in the growth areas that we are identifying in other markets, including russia, south america, latin america and renewables. >> yeah. those are all exciting markets in the energy space, i know. let me just ask you for a moment, though, about some of the issues in southern europe, in italy and spain, where you operate on a large scale. we know that there are challenges here with demand and also questions about profitability going forward for producers of power. give us, if you can, the most up to date read you have on whether these markets are coming back for you or whether you expect

them to be flat or whether they're still falling away. >> well, demand is falling. has been falling over the last couple of years. we're back to the level of consumption in italy of ten years ago. yet we're selling all of this because of our technological mix, because of our presence in the markets and our stance to customers, our results continue to be -- even in italy and spain. the regulatory changes that have been initiated by governments and regulators, of course, are negatives to some extent. we are losing some of the original margins. but we can translate that into more efficiency within the house. and the net compensating factor would allow us to carry on delivering above the expected level of the markets in these days. >> is there any way that you can adjust any of the previous

contracts that you signed into? i know a lot of the energy companies now are struggling with some of the uncompetitive gas projects, specifically. is that just something that you have to take on the chin and live with? >> we do it regularly. and we have the renegotiation to make contracts in nigeria. we'll continue to do so as the contract allows to do so. close one renegotiation and you open a new one. we are always in the process. i think it's worth mentioning that we don't go -- it's a part of our being good partners for those exporters of gas. but be reassured, we did it last year. we did it the early part of this year. and we are reopening again the two years backward contracts

outlook. the slide of the gas price into the western european markets. >> i was reading fitch's view on some of the upcoming note issuance you're planning. i think they've rated bbb plus. but they have put a negative element in there where they express some concern about some of the head winds that we've been talking about here. how much is that going to constrain your ability to seek further funding in the capital markets? >> we have no urgency of issuing papers. i think our paper has been one paper that has been also outperforming on a secondary market once it's been issued. we want to maintain that credibility with all the investors. so we were redty to issue some paper a few weeks ago. the market turned into a volatile status as we see it today. we said, no, we're not going to do it. we're going to wait for a better

moment. so that the issuance will be positive and the secondary performance will be positive. >> fulvio, it's been a real pleasure catching up with you. we'd love to see more of you in london if you can make time for us. fulvio conti. ceo of enel. >> more from st. petersburg. we'll be joined by the russian deputy pm with his opinions ranging from the level of the ruble to where changes are needed in government. as we go to the break, futures are pointing to a session that might try and claw back some of yesterday's losses. the next part of "worldwide exchange" after this.

this is "worldwide exchange." recap of the headlines today. a sense of calm, however uneasy it might be, an easy truce for stocks. here in europe trading higher after the dow and s&p suffering the worst day of the year. the vix spiking by more than 20%. china's money rates, though, still at elevated levels despite talk the central bank has quietly pumped some money into the system. greece is also on shaky ground. coalition talks over the closure of the state broadcaster has broken down. there are worries over his funding resurfacing. speaking to cnbc, the imf's number two has played down other reports athens is facing

financing problems. >> the story is premature. we have plenty of time. we're still having discussions with greece provided that we can reach agreement with them before the end of july, there's financing for the subsequent year. we can just go ahead. in the selloff the focus on emerging markets remains high. the brazilian government is due to hold an emergency meeting following the latest protest. india's central bank says it's ready to take all action needed to support the rupee. we'll also have the latest from st. petersburg to get the inside view from russia. all right. if you've just joined us stateside, very good morning following the triple digit loss on the dow yesterday. big selloff on global markets. futures suggest we'll get a small bounce back or a bit of a bounceback on the open. dow down 353 points right now. about 100 points above fair

value for the dow. nasdaq at the moment about 21 points above fair value. s&p 500 following its 40-point drop yesterday at the moment is about 12 points above fair value. so a little bit of a bounce currently being predicted. which is what we've had on the ftse cnbc global 300. not by much. up about a third of a percent. all european markets yesterday down by 3% and more. ftse 100 having its biggest one day fall since september 2011. right now up about a percent. exetra dax up. ftse mib up about two-thirds. cac 40, yields have come down a little bit this morning. not by much on the bond markets. so with this big volatile session we saw yesterday, volatility spiking in a selloff across all asset classes. what are investors to do? a recap of the some of the

thoughts we've had. >> totally valid. i was just looking back at a twitter argument i had on the 23rd of may about saying yen bonds were in a bubble. are currency bonds already in a bubble. local currency was getting there. we ended up saying, okay, overpriced. either way that selloff is not surprising. it's a repricing. that's totally fine. >> i've always known at some point in time you're going to get rates rising in the u.s. we knew it would happen there first. the economic point has always suggested that. when you get rates rising in outstanding portfolios, example of apple, starts looking a bit underwater. people need to start thinking i knead to go back in. you're then chasing rising rates. that's difficult from a fixed income perspective. >> a month ago we were at highs. now we're trading back down again. this market is trading within

very clearly identifiable volatility ranges. because value isn't moving. value is going sideways. the market is trading around a sideways value. this is the environment we're in. there's nothing we can get hold of and say, let's go and buy a rising value trend. let's get on that rising tide. >> all right. that's the views of some of the guests. we'll get into more of that in a moment. also a lot of cash moving in and out of the u.s. stock and bond markets. all of the talk of prospects of high r rater rates down the roa. kayla has been looking at this. she joins us from the states. >> it's a very closely watched indicator, this lipper tracker. investors apparently poured more money into u.s. stock funds this past week even amid the fed's tapering talk. lipper tracks mutual funds and hedge fund activity. it says stock etfs brought in $4.7 billion, up from $2.22 billion the previous week. the muni bond market continues

to struggle with the possibility of higher rates. lipper says muni funds reported their fourth straight week of outflows with $2.2 billion coming out. that's the third consecutive week with outflows of $1 billion or more and the biggest weekly drop since mid-december. even before ben bernanke's comments this week, investors have been pulling money out of $3.7 trillion muni market. prices have plunged in secondary trade. the turmoil has also been felt in the primary market. with issuers postponing nearly 2 billion in new sales on thursday due to market conditions. all this happening despite the fact muni credit quality is still pretty good. the ishares, s&p national, amt free muni bond fund or mub for short closed down 1.7% on thursday. the fund is down about 6% in the past month. so a few indicators if you're looking to play the market, ross. at least as far as inflows, it looks like stocks are getting a little love in the last week. >> all right, kayla. good stuff. thanks for that. meanwhile, we'll take a short break.

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oracle's fourth quarter profits rose 10%. revenue was flat for the second straight quarter. that's raised concerns about demand. oracle says sales did increase as expected in some regions including china, australia and brazil. co-president says that was disappointing. may is usually a very big month. oracle down 9% in afterhours. in another big announcement oracle is moving from the nasdaq to the nyse next month in the biggest ever u.s. market transfer. oracle is currently the fourth biggest stock in the nasdaq 100. joining us, senior analyst at fbr capital markets, daniel, good to see you. look, in march you said the first quarter was a bit of a hiccup, right? now we've had two quarters that are a bit of a hiccup. that looks dangerously like a trend. >> yeah. i mean, definitely this was a

disappointing quarter. especially given the fiscal 4 k. the company is still in transition. they've hired roughly 4,000 salespeople in the last, you know, 18 months. and definitely going to transition as they go to the cloud. definitely they were the teflon guy. now it seems they've started to hit some bumps in the road. it sort of to some extent becomes a prove me stock here. >> how much is this lack of demand which we talked about here, is that going to be, you think, across the piece rather than just oracle products on their own? >> it's a good question. i mean, i think part of this is definitely a more challenging i.t. spending environment. oracle is not alone in seeing some of the softness out there. i think there are some company company specific issues in terms of challenges as they transition, more competition. especially on the cloud. that's a big focus for this company. i think over the next 6 to 12

months, proving themselves in the cloud, the hardware business starting to turn around, that's going to be the key to moving the stock higher as we look forward. >> sales force and others -- >> s.a.p. has definitely had a very good -- we'll call it 12 months, plus. they've made some good acquisitions. definitely become more competitive with oracle. you know, sales force work. they have also been breathing down the company's back. this is a company that has seen competition before. and i think they've been able to reinvent themselves and that's sort of our thesis. that over the next year, they're going to sort of see this bounceback as cloud, as a new product strategy, as why these sales rep starts to ramp over the next 6, 12 months. >> okay. that's the oracle specifics. what are you now going to take away, though, as your focus for -- i mean, it's interesting here.

i.t. spending sort of on emerging markets versus, you know, the developed world. >> sure. yeah. because here it is. the americas and amia were pretty respectable. apac was the real soft spot for oracle. when you take a step back it's not a great i.t. spending environment. you're talking about the low singling digit i.t. spending environment. getting large deals signed whether it's oracle, an s&p, ibm, it's tougher today than it's been in the last, you know, four or five years. i think part of that is customers want more for less. i think these are the challenges that, you know, you're not just seeing with oracle but across the tech food chain. i think as we look forward, i think you're going to see a modest second half improvement in i.t. spend. but, you know, there's definitely some nervous investors, especially more this morning given what oracle just printed last night. >> what about -- what do you make of this move from the nas back to the nyse. what do the tech guys think

about that? >> look, oracle, they've always been a pioneer, right? so this is definitely going to raise some eyebrows. especially out in silicon valley. i think it's -- it's one where they might not be the last. i think it's one where i think a lot of investors as well as other companies could be talking about it. >> does that mean they're now a mature lower growth company? >> yeah. i mean, it's -- look, i mean to some extent you talk about mature and lower growth. i mean, on the positive, if you look at what they're doing with their cash allocation strategy, you know, they doubled the dividend. you know, they awe nounnounced significant increase in the buyback. i think this speaks to what you see across the board. emc just increased dividend, buyback. you're seeing a lot more of large tech companies that have maybe some growth challenges, more mature growth, starting to look at, you know, returning some good amount of cash back to shareholders, which i think is what guys want. and i think that's a positive.

>> yeah. you raise a point there about that. because this demand for cash from investors, whether it's dividends or buybacks, and companies are getting rewarded for it with higher pe levels than others if they do that, i just get a little worried that what we're doing, you've got investors sucking cash out. none of it's being reinvested. >> i mean, look, they -- i mean, oracle as well as a number of their peers, i mean they reinvest a good amount into the business. but it becomes this conundrum because you look at acquisitions out there. you look at organic initiatives. but there's a lot of cash sitting on the sidelines that some of these companies, it's been overhang even on the valuation. as they do increase buybacks, as they do dividend, which is why you see the trend, that's what investors, you know, want to see. at least as they go through these growth transitions. but, again, it also speaks to i think you're going to see more and more m & a.

you see a lot of these larger tech companies looking at some of these newer technologies, whether it's big data, whether it's in the cloud, whether it's virtualization. that really could be the -- you know, the fuel in the tank for some of these larger tech companies. >> good to see you. thanks very much indeed for joining us this morning. a recap of the headlines. global markets stabilize after the fed selloff. european stocks are higher. fears of a cash squeeze in china linger as money rates remain elevated. greece is the word. but the imf's number two has played down funding fears. it's important to get away from everything once in awhile. well, everything but palm trees, sunshine and fruity drinks, that is.

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u.s. futures also pointing to an attempt to claw back yesterday's losses. the dow at the moment is 110 points above fair value. the s&p at the moment is around 13 1/2 points above fair value. senior market strategist at trading advance is on the phone from the cme. scott, okay. we've got quadruple witching as well today. it's not like we needed any more volatility. how is it going to play out today after yesterday's selloff? >> honestly, i think today is going to be a lot calmer than it was yesterday. people are going to look for, you know, a little bit of a rebound this morning. what we're going to see is with options expiration especially, you'll see individual equities that may have some interesting trade today just because of options expiration. but in general, i think that the rebound we're going to see or we're likely to see coming up this morning is going to be pretty muted into the afternoon. i wouldn't expect a real lot. i also think now that we've -- you know, we've hit this almost

6% pullback now. i think that the next week or so we're going to see some pretty calm markets. and i say that because this is an area that not only traders, but investors alike, were looking for that 5% to 7% area to start putting money in. but now that's questionable. now people are saying, well, maybe i want to wait for 8% to 10%. what i think is really going to be important now is now that, you know, this fed announcement's behind us, we've seen this massive selloff, especially in the commodity market in gold, we've seen treasuries rising, the next focus now is going to be u.s. earnings. those start in ernest in about three weeks. >> that's going to be really key. >> i'm sorry? >> that's going to be really key, scott. >> it is. >> just stay there for a second. we'll come back to you in a moment. i just need to get out to st. petersburg because we've been speaking to the deputy finance minister. steve is there. steve? >> yeah. thanks, ross.

look, jeff and i have had some amazing access. i do thank our russian hosts for that as well. jeff yesterday was speaking to the former finance minister of russia. there's been an enormous amount of speculation here in russia about whether he could come back into government. don't forget, he was a finance minister for the whole of the last decade. widely respected for getting russia out of the ruble crisis from 1998 as well. speculation he may come back in, potentially even as prime minist minister. i spoke to the man who many think could be the third most powerful man in russia, the deputy prime minister, about this very issue. i asked him point-blank, actually, is he coming back into government? let's see what he said. >> he's my friend. we have known each other for many years. i wouldn't like to speculate about his, you know, value within the government. so he's not in the government at the moment. and i think he's -- he has a

huge value, whether he decides to work with government or outside government. and he can make, you know, any project, you know, achieved. he is a very talented person. and he has a great experience. now he works outside of the government. he criticizes us. but he at the same time, you know, he's positive. he always provides how to improve things. we can argue. we can agree with him or disagree. but we still -- we continue the dialogue. so i hope him all the good. i hope that he will be, you know, very successful in any area he would choose for himself. >> do you think he's making some points about the longer term structural reforms that russia needs to make to have a better growth story back to some of the levels we saw between 2000 and 2008 in has he got some valid points there? >> i agree with him when he speaks about education, health care, housing, infrastructure.

you know, we are on the same side. but he says in order to achieve this, we need to reduce the expenditures for defense, for, you know, the different -- very needed now by the state. when we talk about the defense program, it's just, you know, newer equipment, machineries, equipment and so on. and i doubt that we can pursue the way he suggests. just to reducing once here and provide additional funds for this very important things like education and health care. so, you know, we -- we are talking. this position of mr. kudrin is known. in general terms i completely agree when he speaks as an economist. but relating to our, you know, history, modern history, and,

you know, what's going on with our army and how we can convert the army from, you know, one condition into something different which would be very competitive in terms of first class, you know, armies in the world, that army should become completely professional, it will need additional funds. and people are not ready to send their kids, you know, for the army services compulsory service. if you speak about professionals, then it means you need to pay, you know, market wages, salaries. so it's not that easy that you shrink there and you add somewhere else. but in general terms, i would rather say i am completely with him as with economic side of his view. >> my final point about politics and economics is do you feel, though, that this it sha-- what

to be at the moment constant speculation about political leadership in russia, do you think that is denting two things? one, confidence among russians themselves and two, investment into russia from outside? >> you know, it's not an easy question. yesterday i spoke with american investors. and when they ask different questions about, you know, barriers, administrative barriers or some limits, whatever. and i ask them, but do you have fewer administrative barriers in china or brazil? why do you invest there more? they say, no. we wouldn't say that there are fewer. maybe even more. but the public perception of russia in the western media that it is something, you know, bad or bad place and you shouldn't go there for any reason. and frankly, i think it is a case of russian image rather than climate itself.

so we need to improve investment climate. that's for sure. and we -- our domestic agenda. at the same time, our real status of investment climate and status of our image about investment climate, two different things. and if you go to the western world and watch tv and read the papers, you know, sometimes it's y just ridiculous picture. >> very important issue for investors there. i think he's trying to answer some of those questions as bluntly as he could. still speculation, ross, about the leadership of russia. live on the ground here in st. petersburg. i'll hand it back to you, mate. >> steve, good stuff. thanks for that. thanks to you and jeff for the coverage. a final thought from scott bauer as well. we were just speaking about the upcoming reporting season in three weeks. what's going to happen during that if companies come out and say for another time that although revenues are down, we

actually are now not going to make our targets for the year? >> well, that's -- that's going to really be the telltale of what happened with rising rates. i don't really foresee that happening. i think that quite the opposite, if we see companies either meeting expectations, meeting revenues, meeting bottom line, you're going to see the market really rebound and probably get not only to the highs that we've seen this year, but through them as well. so if the big s&p 500 corporations can withstand this last runup in the interest rates and everything that the sequester had given us, then i think we're going to see a real nice rally into the last quarter of the year. >> that's a big question on this last runup. we'll see what happens. scott, good to see you. thanks for joining us. scott bauer on the phone from the cme. futures are ticking higher. plenty more on the counterdown to the open right now with "squawk box."

you don't want to go anywhere. we hope you have a profitable day. bye for now.

good morning. u.s. investors are waking up to a bounce in global stocks the day after the dow and s&p turning in the worst session of the year. it's friday, june 21st, 2013. i think it's the longest -- the longest daylight of the year. the summer solstice. "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. our top story today is global

markets. u.s. equity futures are rebounding handily up 116 points. when you put it in perspective this is after a decline of more than 550 dow points. yesterday the dow dropped by more than 2%. it was its worst one day percentage drop since november of last year. in fact, all 30 dow components were in the red. >> 550 for two days. >> yeah. over two days we were down more than 560. >> yeah. >> but the dow was down more than 5% since its may closing high. that is something to start paying attention to. all those market participants who have said that they would buy when you saw the market down by 5% to 10%, well, here's their opportunity. again, if you put those declines together from the last two sessions, the dow and the s&p 500 wiped out all of their gains from may. and from june. by the way, the vix, that's the fear gauge. it spoked near 20. it hit its highest level of the year. this was something to watch. it wasn't just equities, guys. this was across the board. all of the market. bonds. oil. gold. silver. silver was even deeper