you're watching "worldwide exchange". these are the headlines. stocks in europe trading higher boosted by a trio of positive u.s. economic data. focus now shifting to ecb president mario draghi saying there's limits to what monetary policy can achieve. the broad sell off in treasuries hitting the most experienced investors out there. these been sizable losses just this month. and uk finance minister george

osborn stick to his austerity plan as he details a 7 1/2 billion pounds cut. and the political drama heating up in australia as they vote to former prime minister mounting a challenge saying he'll leave the parliament if he loses the ballot. >> announcer: "worldwide exchange," bringing you business news from around the globe. hi, everybody. welcome yes you're watching "worldwide exchange". mario draghi the head of the ecb speaking as we're on air. he's in paris and giving a speech there and we're just looking at what he's saying. essentially he's saying we stand ready to act again when need be. he says there's limits to what monetary policy can achieve and monetary policy cannot create real economic growth. these are things he said in the

past so far. european bank union is essential as well. this, of course, as finance ministers are meeting again today, eco fin taking on later on. we'll hear more from them later on. mario draghi speaking and we'll keep you up to date what he says out of paris. bob parker joins us here in the studio. hi, bob. so, mario draghi indicating we stand ready to act again when need be. there are limits to what monetary policy can achieve. what's the strategy >> it's very clear which is they remain very concerned that the court which ends this weekend will be the second quarter and the eurozone will be in recession and even though we have some improvement in the german economy, we have retail sales numbers this week which will confirm the modest up trend in german consumption, the pmi

is coming out of spain and italy, they are not good but less bad so the recession in spain and italy is easing but we're not out of recession. inflation is not a problem and if we look at eurozone inflation in the next few months we'll see headline inflation below 2%. they were concerned, the way the pressure is off at the moment but they were concerned ten days ago about the strength of the euro and if the euro continues to strengthen if it got up to 135 i think we would have seen verbal intervention. the message is monetary policy stays easy for the foreseeable future. >> we saw the euro ease a bit. we'll talk more with bob throughout the remainder of the hour. get your emails in so we can use them and pose them to bob. he's very good at answering them. >> hopefully. not too simple. >> exactly.

but that's the real gist of getting to everything. today's show, could global banks be the casualty of a sudden run up in bond yields. we speak to the chairman of for america partners group. we speak to him at the imf conference in an hour's time. some u.s. banks are still too big to fail according to regulators heading to capitol hill today. the former controller of the currency under president bill clinton also joins us from the imf meeting that's live at 10:30 cet. australia's prime minister is calling for a leadership vote. we'll bring you live updates from sidney including the ballot results in the next hour. now as george osborn scrambles to find 11 1/2 pound

of savings on the uk balance sheet we'll hear from the former chancellor. live from be abington green. monsanto took a hit on the back of gm wheat fears in the united states but we'll hear from one analyst who holds a buy rating on this company. find out why as we preview the group's earnings. that's around 11:50 cet. now, it hasn't been good to be the bond king this month. the biggest bond fund has been the hardest hit. total return fund is down 3.6% in june through monday. that makes it the 12th worst performing fund among the 177 intermediate investment grade bonds tracked. the pimco investment grade corporate bond fund has fared worst losing 4.5%.

the fund is off by 7% since the end of april when treasury yields began to rise after the ten year, hit a low of 1.16%. gross's fund is down 1.7% over that span. speaking of yields the ten year treasury yield, still holding on to a level of somewhere in the region of 2.5%, 2.7%, bob >> we've had a big sell off in global bond market. not just the g 4 government bond markets that sold off we have seen high correlations and the highest for many years between all government bond markets worldwide. the selloff in u.s. treasury market initiate on the 22nd of may by bernanke's statements about the move towards tapering qe, that has been reflected in emerging debt, been reflected in european bond markets as well. and obviously it has triggered a

widening in spread. if one looks, for example, for the u.s. dollar high yield market we reached back in late april early may a low spread under 350 basis point, we're now back to 470 basis points. one point to make is that since the 22nd of may, if you are running a long only fund, whether it be fixed income where it be credit, whether it be global equities, particularly emerging equities and local currency, emerging equities, basically you generated negative returns. there's been nowhere to hide since the 22nd of may except cash. now the question is what happens now >> what happens now >> we've seen a major selloff. my argument is that actually investors have probably over discounted the threat to the market of qe being tapered. you got a very clear statement

from the federal reserve which is that for the next few months and few is probably until september, qe stays at 85 billion a month. in the fourth quarter qe inevitably will be reduced and that, obviously, very confident in making that statement particularly given the recent strong data we've had from the u.s. economy and yesterday we had a raft of good numbers whether housing sector, consumer confidence or durable goods. those numbers will continue. bond market for at least the next one important,ly three months stabilize around current levels. we're oversold. investors moved into cash. there's been a panic selloff. we now have a short term three months period of stability. >> bob, we'll talk more about strategy here as i said throughout the program. i just want to get you some breaking news. we're just learning mark rich the founder of the commodities group glencore has passed away

according to swiss radio one. he was 78 and passed away in switzerland. we'll get you more on that as the news emerges but just to bring you that update again according to swiss radio one. the founder of glencore has passed away at the age of 78. let's move on and get back to the markets. the shanghai composite over the last seven days having lost something in the region of 10%, bob. we've seen a lot of volatility here. we saw some stable san diego here in the overnight session. the pbo said they punched some cash into some institutions. seems they are trying to address the liquidity fears. >> the liquidity squeeze we saw and very severe liquidity squeeze we saw was partly seasonal. behind that seasonal factor, they are concerned about increased default risk in the

shadow banking system and very worried about the say of the shadow banking system and what they are trying to do is not actually hit the money markets or hit the chinese banks, what they are trying to do is reign in the shadow banking system. you had a clear statement from them yesterday staying they will stabilize the money markets and supportive of healthy banks. that word healthy sends a very clear message behind their concern about they want to attack the shadow banking system. now, in fact i think the money markets in china now will calm down for the next few weeks. one critical set of data that's coming out over the next week is the chinese pmis. if the national bureau of statistics number comes out, the consensus stat pmi is 50.1. if it comes out below 50 expectations will be revised down for second quarter growth to less than 7% and that means

that the rally in the shanghai composite probably runs out of steam. >> okay. you're hearing it here from bob. you can get in touch with us via twitter. i'm happy to take your questions or comments for bob so go on and find me @julie boorstin. all kinds of twitter addresses. for a selection of stories on the situation in china, head to our website on cnbc.com. you can read why moody's believe china is right to tame the high credit growth. if you want more on the middle kingdom china has fell to its lowest level. will it continue the slide and head on to twitter and find us on there if you want to make yourselves heard. your questions and comments. it's always nice to hear from you.

we go to singapore. >> thank you. a mixed reaction to the reassurance to calm the cash crunch. the shanghai composite eased a bit. smaller tech place and environmental stocks and environmental shares led support ending higher by a strong 2.5%. in japan nikkei had a volatile session ending down by 1%. but south korea kospi managed to finish in the green by modest .2%. australia reacted positively to the comments up 1.6% with minors in bank gaining traction. back to financial stocks in china. some big lenders ended in the green but mid-size banks, they were still under pressure today but came off their session loss.

the seven day repo rate eased from last week's historic highs from 11% to however at 7% in today's session but this is still high. in japan soft bank is in focus. this would be the largest foreign acquisition in japan's corporate history. while investors wait for u.s. authorities final approval soft bank shares dipped into negative territory along with a selloff. to put it into context the stock rallied 77% year-to-date. out performing the broader index. in south korea, samsung electronics tumbled 3% to nine month loss. as the number of local brokerages cut their demand. back to you. >> good to see you. thank you very much for that. i'm standing here in front of a wall with quite a bit of

green on it. we're in consolidation mode. we had this rally taking place yesterday on our european markets. i'm matching the wall. amazing. stocks europe 600 higher by .8%. around an intersession high. we're only getting started. only getting stuck into trade. our main nurn markets trading in positive territory higher by a percentage point, less for the ftse 100. we're hanging on to these gains. the ftse being one of the main losing stocks within this index. bond markets as we were just talk about with bob seeing buying. yields are just being pushed down by a tad. the yield on the spanish ten year note below 5%. u.s. treasury yield 2.5%.

coming off just a tad. the currency markets, here again we're seeing stable as she goes flows this morning. the euro/dollar a little bit light, saw it coming off a tad, draghi's comments he's giving right now in paris they are slightly dovish but saying there's a limit to what monetary policy should achieve at the moment compared to what arguments need to do. that's what draghi is saying. so, the uk finance minister george osborn will stand before parliament today to deliver his spending review in which he'll allocate resources to government departments. nuclear program he's under pressure to save 11 1/2 pounds in a bid to save the budget. we go to westminster for the details. so, what exactly is taking

place. international viewers who are watching and don't know what this is b-outline the structure of today for us. >> reporter: well, today the chancellor is going to deliver to parliament is plan for shedding about 11.5 billion of cuts across government departments. now, that means the axe might fall hardest on different areas like local government house. some department, like health and international aid will be ring fixed. the key debate is not who gets hardest in spending, it will go the major argument about how does the government balance growth versus austerity. and this is the conversation people will be having right up until the election. while treasury officials will tell you austerity is the prerequisite for growth a lot of critics have come out and said

the chancellor hasn't done enough to spark economic recovery in the uk. a few green shoots and while the u.s. has pulled away from austerity, we've been criticized by christine lagarde for being too entrenched in that regard. we need to look at spending and business leaders say it's not just about cuts but how we're spending. get rid of these ring fences around health. instead look at defense procurement that's vital to tuck economy. look at infrastructure spending. those things are the way to bring the uk out of economic turmoil, especially in a world where we're going to be letting go of quantitative easing. back to you. >> we'll see you later on outside of westminster. for midday london time our uk audience can watch special conference of the spending

review. be sure to stay tuned for that here in the uk. the chancellor tweeted a picture of himself last night putting the final touches on the speech and eating a burger as you do. nice nutritious dinner while you're putting final touches to the uk spending review. we figured it's only fair to show you how we get ready for a big day on set here in studio, and, yeah. this is kind of some of it. right? a little bit of makeup. a little bit of curling the hair. how do you get ready for a big day? get in touch with us. let us know. how do you get ready for a big day? >> get out of bed, roll into the shower. nothing complicated about it. >> no curlers? >> no. very straightforward. >> do you have anything you do, anything that brings you good luck before any big event? >> no. the strategy is to get on with

it. >> i always put perfume on. always. >> i obviously don't. my strategy is -- >> the this is smelly vision. >> my strategy is very straightforward. turn up and get on with it. >> you have two different ways of getting ready for a big day. how do you get ready for a big day? find us on twitter or directly to me @julie boorstin. you smell nice bob. >> let's change the subject. >> let's talk about standard charter. they are saying they remain comfortable with full year consensus for their operating profit. the second quarter is showing an acceleration over the second quarter. growth resilient, footprint markets of asia, africa and the middle east. income for the first six months

of 2013 is expected to grow at a mid-single digit rate trading higher in the session today up by 2.5% as the markets are out performing the broader market and expected to show income growth by around double digit percentage points. they remain comfortable with their operating profit. standard charter trading update just hitting our hires. the australia prime minister has called for a vote. cnbc matt taylor is live in sidney up in a couple of moments.

spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ 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. ♪

welcome back. i'm julie boorstin. it feels like a case of deja vu for australian political watchers. supporters of former prime minister kevin rudd are working to oust the current prime minister julia gillard from her role as labor party leader. matt taylor is live in sidney. matt, this is amazing. it's unbelievable how quickly things can change and how important tonight will be. >> reporter: yeah. that's absolutely right. of course there had been some

agitation for a change in the labor party leadership. for the last couple of months, given the dire polling that's been coming out with julia gillard as leader, ahead of the election on the 14th of september but it has come to a head this evening with the prime minister calling for a leadership ballot. that will take place in about 35 minutes time from now. 7:00 p.m. australian eastern time. with both sides of the political spectrum saying that they believe they have enough votes to win, that being julia gillard and also kevin rudd. take a listen to what some of the prime minister julia gillard had to say a short while ago when she announced this ballot would be called for 7:00 p.m. tonight. i wouldn't be putting myself forward unless i had a degree of confidence about the support of my parliamentary colleagues. i certainly have very much received good support from my

closest cabinet colleagues, people who are doing very good and important work for the country. this is a pressurized time. people will make a decision. the important thing is that people keep in their minds as they walk into that room what's in the best interest of the nation, what's in the best interest of the labor party. >> reporter: so, of course the former prime minister kevin rudd who julia gillard ousted a little over three years ago confirming he'll be challenging for that leadership. there are about 104 votes in caucus. they need to gate majority. mr. rudd saying he's decided to challenge despite emphatically ruling that out over the last couple of years or so because many of ordinary australians have asked him to challenge once again for the leadership and he says he believes that he's the most or the best candidate to be able to defeat tony abbott the opposition leader in september.

the prime minister julia gillard saying if she's not successful when it comes to this ballot that she will bow out of politics, she will resign and not contest the next election. she urged essentially urged mr. rudd to do the same and he said he will also do that if he's not successful. so about 35 minutes or so now until we get this vote. i'll be back bringing you all of those developments throughout the night here in australia. >> sounds good. we look forward to it. thanks very much for that. in the meantime before we get that, citigroup are updating operations in asia by opening up smart banking branches with video walls and touch screen sales points. it generated net income of $2 billion in the past two years for the bank. joining us exclusively from the fund form international in monaco is jonathan larson.

thanks fork with us. you were the consumer banking head in hong kong, you were then made the global head of retail banking and they kept you in asia. talk to us a little bit about what you're seeing in consumer banking out of asia and what the strategy is now. >> reporter: well, thank you, it's a plea sure to be on. i do look at global banking for citi but i'm based in hong kong and i operate the franchise which tells you something about the role and importance of asia for us as a company. asia generates about a third of our net income for our consumer group globally. we're the largest credit card issuer and largest wealth manner but we've had a lot of success in rolling out our smart banking approach, new distribution model using a blend of physical distribution and technology to reach out to a broader client segment the emerging affluent to combine the reach of our card

business to combine with our wealth business. it's a great region for us to be in. we have a unique position across 14 countries and a brand that's unmatched. the challenges of operating in asia for the last couple of years have been around re-regulation post-crisis, adjusting to a new set of regulatory norms to protect consumers and consumer credit area. dealing with spread compression, of course, and low interest rate environment. and, of course, dealing with a pretty skiddish market environment for the last couple of years although for the first half of this year we saw a strong resurgence. >> just going back to retail operations and what digital means. you have something like 700 branches in asia as far as i understand and those branches are now under the smart banking concept. so, are retail consumers, are they attracted to digital? is it easy to sign up new clients or easier?

>> digitization is a fundamental trend transforming financial services globally. as you know, asia economies have this knack of developing economies and taking on new technologies faster. we've seen that in abundance across to asian markets. digital on one hand is the primary ways clients will interact with us and will do so. today 90% of our transactions happen other than in our branches. the branches, however, play a very important role. still in the psychology of consumer banking a need to see financial providers particularly banks as being physically present and committed to a market. what's changed is the role of the network and instead of having standard format branchs that are transaction oriented on high streets we're much more interested in an eco system that could bring large flagships down to places where we can acquire

customers in large volumes. >> briefly as well how is it operating in the indian financial system? there's a lot of regulatory, many say the indian system holds you back if you're a financial group work in india, especially if you're a foreign group. how do you get around the reporting red tape? >> india is a very difficult market from a regulatory standpoint. we're up against very large embedded banks and new generation of banks who have been successful, we have against them just 42 branches in this country over a billion people. having said that we're the largest credit card issuer, largest nonresident indian financial provider for wealth management. with a leader in wealth management we're the largest mutual fund seller in the whole country against any bank not just foreign banks and we have a

very good emerging affluent proposition where we work principally with technology companies to provide a digital banking solution for their workforce so that's been very successful over the last ten years or so. >> thank you very much for your time. thanks for wk being with us. remember your sunscreen. let's get you our headlines as we head into break. stocks in europe are trading higher boosted by a trio of positive u.s. economic data. focus now shifting to ecb president mario draghi saying there are limits to what monetary policy can achieve. broad selloff in treasuries is hitting the most experienced investors. there's been sizable losses just this month. political drama heating up in australia has members of the ruling labor party get set to vote, kevin rudd mounting a challenge to julia gillard

saying he'll leave the parliament if he loses the ballot. 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.

♪

hello, everybody, welcome back. you're still watching "worldwide exchange" here this morning. i'm julie boorstin. our european markets are

bouncing. we're in the region of 1% to 1.5%. we're seeing consolidation off a back of a rally we had yesterday. italy could stand to lose billions of euros on derivatives contract. according to the finance times. it doesn't name the banks involved but the contracts date back to the '90s. it sheds more light on the tactics to help italy enter the single currency despite it debts. we've been asking you for your e-mail questions, comments or tweets here this morning. you can still find us @julie boorstin on twitter or go to google or e-mail as well, worldwide@cnbc.com. people have been writing in. bruce writes in and does bob see a near bottom in gold. >> no.

identify been negative on gold markets. if you look at reasons why you should want to buy gold, is there going a pick up in inflation, do we worry about bank failure, do we worry about another sovereign bond crisis, do we worry about geopolitical risk, all those risks are reduced. so my argument is gold probably starts to rally towards the end of 2014, going into 2015 when inflation picks up. in the near term, i think you could see a technical base close to 1,200 on gold. but should you be buying gold over the next six months, nine months. my answer is still no. i think it goes lower. >> you think it goes lower. >> another tweet says hello. question for your host, why is the austerity plan for portugal not working. >> i would disagree. i think it's largely working. portugal has made very good progress in actually

restructuring the economy. portugal is still in recession but recession is getting less bad. i think as we go into late probably first quarter of next year portugal will come out of recession. if you look at the bail out countries ireland clearly a successful bailout. portugal still got some more work to do but we're largely there. greece obviously a different story although made quite a lot of structural haengs. >> we talked about how you get ready for a big day because the chancellor in george osborn tweet ad picture of himself eating a burger and laying the final touches on the uk spending review. we show you how we get ready for a big day. there's the burger and george osborn. then we showed you how we get ready here in the studio as well. people writing in and telling us how you get ready out there. john says, when i prepare for a big day i try to do most of my preparation the night before. very smart. i used to do that when i did the

early show. >> die that when i was younger. >> very smart. after the shower you jump into the clothes. bob, thank you very much. >> thank you. >> see you very soon. top fdic officials are warning congress that efforts to rein in too big to fall banks have fallen show. the former fdic chair will testify about the issue before the house financial services committee at 10:00 a.m. eastern time. she says the u.s. should step in to help failing banks. future of global financial regulation is one topic under discussion at this spring meeting of the institute of international finance in paris where karen joins us live once

again from this event today. karen, the too big fail discussion is still up and running. >> reporter: indeed. this is a discussion that's been happening on both side of the popped in the united states and europe. there's been a discussion about stress testing and this mechanism that was originally used to determine the capital on bank portfolios and how much money should be redistributed to investors and banks. there's a suggestion stress test could be used to determine whether a bank is too big to fail. let me bring in a gentleman who spent most of his career at looking at the risk. he's this is james ludwig joining us on the program. let's talk about this hearing that's coming up before congress because a number of u.s. officials, fdic officials is sketching out this argument as to why banks are still too big to fail. are institutions still too large? >> the federal government in the u.s. has done a fabulous job of

post-dodd-frank. it has a resolution recovery froch deal with the largest institutions and the regulators have been working. we're close to having a complete system that can resolve the largest institutions in the world. >> if you look at how big these organizations still are, one of the arguments put forward by fed officials, james bullard was telling us the other week if these banks were smaller they would be more profitable. do you think that's the case that there are more profit physician these banks are small center >> the marketplace ought to tell us that. we're lucky in western society to develop fabulously effective marketplace mechanism. let's let the marketplace tell us that. resolution recovery mechanism that the federal government has put in place is great. i want keels with the too big to fail problem. in terms of what size they should be, it's going be fwrong it comes from one source. >> one argument i put forward is

that when you have bigger institutions, they are more able to fund capital markets because they are larger. they are saying this is not true because these companies can go the market directly they don't need large banks to fund them. do you think that's true? >> not entirely. certainly the capital markets give larger institution aster fix opportunity to fund themselves including very large ones. that's only one part of the funding mechanism. a large banking organization is another part of the funding mechanism and that's one. great things about modern finance. it's dynamic. different sources for funding and we basically don't want to restrain it right now. we want to see it evolve with a dynamic economy. >> the balance sheet of banks is selling very much in focus this week as we talk about fed tapering, there's suggestions losses on bond portfolios can be negative for bank balance sheets justify as they start to show improvement. how concerned are you about that risk? >> i think bernanke has acted

responsibly and sensibly. there's a danger that people get lax, they think accommodation would last forever. bernanke sent a signal it won't last forever. there are some adjustments. some people will take some losses. it will be much more contained now that people understand the signal. >> do you think there will be losses coming up in the near reporting season or the way that many of these banks seem to account for losses on u.s. treasury can sometimes translate to a profit on the books. what are we facing? >> it depends how you mark them. on a mark to market bay sits wouldn't remember surprising interest rates rise some people will take a hit. may not be a permanent hit. but this action by fed, signalling there's going to be a change, allows these institutions to cull rates so over time they can continue to show good profitability and do their job in terms of providing funds for the marketplace. >> nice to see a smile on your

face. it because of the fed? >> it's been a gloomy conference. the world both economic and political scene is in turmoil. been years and years of new regulation and that doesn't necessarily make the private-sector cheery but having said that, i remember living through august of '98 which was a pretty scary time with asia having had its asian meltdown and one very wise regulator said to me, gloomy, everybody is gloomy and that means it's time to buy. i think we're getting to a point where the pendulum will swing back not soon but headed. >> good take away. thank you very much for joining us here on the program. that's tone from the conference as you heard direct from gene. thank you. we'll see you later on. after numerous twists and turns japan's soft bank is finally in

the last leg of its bid to buy sprint-nextel. ever sprint shareholders gave their stamp of approval. soft bank is expected to watch up the acquisition if it gets the green light from the u.s. fcc. if all goes well this is the biggest foreign acquisition by a japanese economy. soft bank shares jumped by 4% earlier in tokyo but gave up all of its gains finishing slightly in the red. sharp will manufacture and advance l.e.d. panels for smartphones and computer tablets. with more, we go to tokyo. >> reporter: hi. sharp provided panel technologies to lcd giant china electronics panda group. production of the panels will start as early as 2015. at a new plant the chinese

company is building and managing for $3 billion. aquos slashed power consumption so perfect for smartphones and l.e.d. computers. through the new arrangement it will receive hundreds of millions of dollars in licensing fees. some of the fund will go towards acquiring a 10% stake in the plant operator. the japanese firm will obtain right to sell up to half the output. sharp is receiving output to rebuild. with the chinese joint venture deal sharp reckons it can profit from its advanced technology. back to you. thank you very much. still to come here on the show as we countdown tuck spending review we'll speak to the former chancellor on what to expect from osborn's big speech. stay tuned.

hi, everybody welcome back to "worldwide exchange". the legendary oil trader mike rich has died.

rich passed away in a swiss town this morning. >> reporter: identify been able to confirm the news just a few minutes ago. i spoke to the spokesman of the mark rich group. he said mark rich has passed away in a hospital close to his house in central switzerland this morning. he's to be buried in tel aviv tomorrow. that's not yet confirmed. let's take a look back at his life. remember back in 1980 he fled the u.s., in 1983 he was indicted by the u.s. government for tax evasion charges and for illegally dealing with iran during the iranian hostage crisis. he was in switzerland when he was indicted and never came back to the u.s.. now in 2001 on the last day of

bill clinton's presidency, bill clinton pardoned mark rich but, again, he has not been back. in 1994, if we talk about his business dealings he formed glenn core which is now one of the biggest commodity trading giants in the world. just recently merged with extrata. back to you. caroline, thank you very much. the uk finance minister george osborn will stand before parliament today to deliver his spending review in which he'll allocate resources to government departments. our uk business editor is in westminster. an important day for tuck, important to see where the cuts will be coming from as well? >> reporter: the chancellor will get up at 12:30 uk time and describe how he's going to deliver these 11.5 billion pounds worth of cuts across uk

government departments. and that's for the year 2015 and 2016. but the key debate here is not going to be really about whether the military is lost or the police in terms of the political tussle. it's about the debate between has the government managed their balancing act between growth on one hand and austerity on the other. correctly. and have we got economic recovery. joining us now is former chancellor lord lamont. lord lamont, you've said that growth doesn't come out of thin air, it's not a silver bullet but surely at a time when we're spending 701 billion pounds on government spending that's more than the outgoing labor government in 2010. cutting things like capital been a mistake. >> well, i think it takes a long time to turn the tanker around. and, in order to get the debt down you have to first reduce

the amount we're spending year by year the annual deficit. the annual deficit has come down by over a third, but that process has a long way to go. obviously the fact that the economy has not grown as expected, the situation in the eurozone and in the world has been worse has meant that growth success slower. but you still have to go on, containing expenditure. put it this way. if we spent a lot more would he be in a better situation? i feel we would be in a far worse situation. >> reporter: surely it's not just about spending more it's how we spend. crypts have said things like ring fencing the nhs is an absolute mistake, we should be looking at protecting defense procurements and capital expenditure, infrastructure investment. this is how we get to the economic recovery. don't you think? >> i don't think anything should be protect. i think you need cuts right across the board. the government have chosen to ring fence certain areas but, of

course, the consequence of that is you have larger cuts in the areas that are not ring fenced. that's the choice they've made. >> reporter: where do you see, if we're on the road to recovery you said growth hasn't been as flourishing as hoped. where do you see that growth coming from in the uk? >> we're in a difficult situation. we're not in as bad as a situation as the eurozone where if you take france there's been no growth, zero growth for a year. we got a little growth. the eurozone as a whole is still in recession, and has no sign of coming out. over 50% of our exports historically have gone there so british exporters and this is where the problem has been largely in trade have to diversify to new markets and that's taking time. i still think we'll grow a bit. not as much perhaps as america, but we'll grow faster than europe. >> reporter: you talked about trade. the bcc came out recently and said why are we investing just

300 million pounds a year in trade and investment where we've got 7.5 billion pounds being invested in foreign aid. surely that's a mistake. >> well, i don't think exports depend on government money being spent. exports depend on individual firms, finding someone who wants to buy their product. >> reporter: if we go to what happened in markets in recent weeks we've seen there's been turmoil on the back of the fed signalling that quantitative easing was coming to an end. doesn't that underline the case for stimulus here in the uk and will thereabout any other tools in the box? >> q search a stimulus, but the stimulus can't go on forever. you just can't print money. you can't end up in a situation where the whole of your debt is just being printed. that's a very dangerous and no one in this country can believe that would be right to go on indefinitely with that. >> reporter: the outgoing bank

of england governor seems to be signalling the economy does need qe here in the uk for some time to come. he's been out voted in recent months. will mark carney be different? >> what as i understand mervin king said was that whether qe ends in america at a particular date will depend on the data. it will be withdrawn gradually in response to the data and the fed are actually targeting the unemployment rate and it's only when unemployment reaches 6.5% in the united states that the qe will end. >> reporter: here in the uk will we have things like guidance come in from autumn and how useful is guidance from the bank of england, governor? >> well, it looks as we'll have guidance, appears why they altered the para meter eparamet.

>> reporter: thank you very much. back to you. thank you very much for that. we got a little bit of time to go before we get the details of those spending cuts. for midday london time our uk audience can watch our special coverage of the uk spending review so stay tuned right here especially if you're in the uk to watch the uk spending review itself. now, in the uptake to this, the chancellor tweet ad picture of himself last night putting the final touches on his speech. and eating a burger having a bit of coca-cola as well, burger and fries. hope he didn't get the papers greasy. that's what he was up to last night putting the final touches to the speech. it was only fair for to you see how we get ready for a big day. every day is a big day for us. this is what we do. we want to know how do you get ready for a big day on the job

or elsewhere. i was saying earlier i always put perfume on. you feel ready. bob was saying that he just jumps out of the shower and were ready. what were you saying. we have our things in here. what do you do before a big day? find us on e-mail worldwide@cnbc.com or via twitter @julie boorstin. is the great rotation getting into the swing of things? our next guest ceo thinks that the interest rate rise will be the case. that's the ceo of liquidnet, coming up. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel.

delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ 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. ♪ [ 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. ♪

. hello, everyone, welcome back. you're still watching "worldwide exchange". i'm julie boorstin. these are your headlines. stocks in europe trading higher boosted by a trio of positive u.s. data. focus shifting back to the ecb president mario draghi telling french lawmakers that there are limits to what monetary policy can achieve. the broad selloff in treasuries is hitting some of the most experienced investors out there. the world's biggest bond fund run by pimco's bill gross saw sizable losses this month.

political drama heating up in australia has members of the ruling labor party get set to vote. kevin rudd mounting a challenge to julia gillard saying he'll leave the parliament if he loses the ballots. founder of glenn core mark rich has died. he's credited with creating modern day oil trading. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. hello, everybody. welcome back. you're still watching "worldwide exchange". if you're just tuning in. welcome. welcome to you. have a cup of tea in bed. wake up with us. take a look at the futures. we're a couple of hours ahead of the u.s. market open. a bit higher once again. this morning it seems we're seeing a little bit of second

lie additi-- of a consolidation. we're higher somewhere half of a percent on the 300 global index. ftse higher up by a shy of 1%. gaining a bit of traction in the last hour or so of trade. bond markets we've seen buying in bonds as well. past couple of sessions except for yesterday we saw what goes down, goes down whether it's bonds or equities or commodities and today is the opposite. it's emerging with ten year bund now yield be 1.7. yield on spanish ten year below 5% and u.s. ten year which we're watching very closely 2.5% and

bit spiking. currency markets, on the back of draghi's comments we saw the euro coming down a little bit against the dollar. he reiterated what he said in the past that there's only so much monetary policy can do. the ecb stands ready to fact need be. he said the program has achieved everything they wanted without spending a single euro, just the promise to step in if the markets need more support. but let's check in on what took place in the asian markets. if you're just joining us, we that have asian market update. >> thank you. asian stocks were mostly higher today following the positive lead from wall street. markets in the region's two largest economies still feeling the blues. china's shanghai composite continued to lose ground. weighted down by financial plays. japan's nikkei fell 1% to end

below the key 13,000 level hurt by a stronger yen and lingering china levels. big lenders in china ended in the green helped by the pboc's reassurance to curb the cash drunch. mid-size banks were still under pressure but came off their session lows. and the repo rate eased to however around 7% in today's session. in south korea the kospi snapped a five day losing streak to end just a tad higher. woori finance jumped. samsung electronics tumbled almost 3% to a nine month low. a number of brokerages have cut the target price on fears samsung's earnings will be

weaker than initial estimates. >> thank you very much for that. just to mention we're seeing some results from the italian six mobile auction. they are selling 8 billion euros worth of six month t bills worth noting the yield is the highest since february. we're just getting those details through here at the moment. we'll just flash those details four on screen as we get them but the yield the highest since february on this six month t-bill auction. let's move on. because draghi this morning having been talking in paris, saying what he said in the past we're nowhere near exiting the strategy, the policy stance that the ebc has. the program has achieved everything that they set out to achieve, the stability of the markets, the stability in the bond markets in particular without spending a single euro. he said ecb is ready to act but governments have to reform.

draghi still speaking in paris. we'll keep you up to date. dow and the markets here over the past couple of days, we have seen a bit of a turn around from southeast pressure that we were in at the end of last week heading in to this week. the u.s. treasury yield 2.5% plus as we've been saying. and, pimco has lost quite a bit of money as you assume them acbond fund. but, liquidnet said the run by pimco has been among the hardest hit in the broad bond market fund. it's down 6.3% in june through monday, 12th worst performing bond among 177 investment grade bond funds. the pimco investment grade corporate bond run has fared worse losing 4.5%. that fund is off by 7% since the

end of april when treasury yields began to rise after the 10 year hit a low of 1.6%. we went from 1.6 to more than 2.5%. gross's fund is down by 5.7% over that span alone. with us in the studio is seth merrin, ceo of liquidnet. from your perspective, what are we seeing in the markets and what type of flows are we seeing? where is the action? how are liquidity levels looking? >> you have a dichotomy in the market that's coming. you got the great rotation that people have been talking about for a while that we haven't seen just yet. the markets over the last few years the equity matters have been performing extremely well and normally that brings equity investors back into the market. we haven't seen that. some have said this is the most unloved bull market in history.

the rotation doesn't start until interest rates start rising. yields on the bond funds are so low and you just reported you only need to see a light increase in interest rates and you see massive loss in the bond funds. that you've seen in the last couple of weeks. record outflow from bond funds. this is exacerbated because there's only a quarter of the capital that the banks have to facilitate the trading out of those bonds. when people are heading for the exit you have a massive dislocation that's coming. so, my advice is and here's a quote, you can put your money into equities and you might lose money or keep your money in bond funds and definitely lose money. >> you really think it's that clear cut right now? >> absolutely. the problem is that because interest rates have been so low, so much money has gone, corporations have issued so much debt there's massive amount of debt. at the same time the banks because of the financial crisis have a fraction of the capital that they need, and bonds

historically have been facilitated through capital that the banks have had. you have a massive amount of debt, you've got a massive amount of investors in debt, once they want to exit, there's no exit for them. so those -- you're going to see the yields widening, losses mounting and i think that's going to be a self-fulfilling prophecy. >> the fed now, many might argue, that they hinted that they are going to start unwinding quantitative easing and by doing that they are hinting in the long run rates are going to head higher. then i guess we need to ask when is the tapering going start and what's the impact on markets and what's long term. when will we start to see these out flows happening or great rotation taking place? >> the fed is doing what they should do and that's signalling that they are going to ease quantitative easing at some point and even with that signalling, you can see the dislocation in interest rates just in a very short period of

time and you see the losses that occur. 1% move in the interest rates yields 5.5% loss in pimco's bond fund. it's really very scary at this point opinion certainly quantitative easing has to stop at some point you can't keep on writing these blank checks but they are not going to do it in a sudden matter where they take it away and then the whole market collapses. they are signalling. they are telling you they are going to stop it. they will ease it gradually. not going to tell you when. but you should plan for it and you should know that fixed income funds are in for a hard time. >> i have a feeling that seth would be good at answering all of your questions. i think we should test him on that. write in. what questions do you have for seth about the market, liquidity, about bond, about equity, the great rotation. find us on twitter @julie boorstin. if you want to get in touch with us find us on e-mail.

get your questions through. now we need to give you a look on what is on today's agenda in the u.s.. the final estimate on first quarter gdp is out at 8:00 a.m. eastern time. growth is forecast at 2.4% unchanged from the previous estimate. on the earnings front look for results today from general mills, from monsanto, bed, bath and beyond, paychecks and her man miller. steve liesman sitting down with narayana kocherlakota on "squawk box". usa's labor party voting on its next leader the prime minister julia gillard calling for the leadership ballot after supporters of rival of kevin rudd forced a vote. with more matt taylor joins us live out of sidney. matt. >> reporter: thanks very much. this vote which was called for 7:00 p.m. australian eastern

time about 11 minutes ago so the vote ongoing as we speak right now. reports, early reports coming out in some australian media that i'm just track being for you over twitter suggesting that julia gillard has lost the vote and that kevin rudd has won the leadership ballot and will, again, become the prime minister of australia. we're bringing you a live shot from just outside of that party room right now. you can see it right there with that security guard sanding in that corridor. earlier on about 15 minutes or so before this vote took place one of the prime minister's strongest supporters, the workplace minister revealed he decided to back kevin rudd in this ballot. this came as a bit of a shock to many observers because he has been a long standing supporter of the prime minister julia

gillard and once we got that news out it really seemed as though it was a foregone conclusion that because he had shifted his support kevin rudd that kevin rudd would now that have numbers when it comes to this ballot. in terms of what this will mean, of course we have an election coming up on the 14th of september that julia gillard announced earlier this year. will that election still take place at that time under a new prime minister, under kevin rudd if these reports that we're seeing are, in fact, correct and that julia gillard has lost the vote. we're also going to be watching for a number of other significant changes to the front bench ministry in australia as well. the deputy prime minister and treasurer, a strong supporter of gillard will be forced out as a result of the change in this party leadership. also a number of significant

changes that will be changing because those supporters that backed the prime minister in this ballot will seemingly not want to sit on a cabinet with kevin rudd. that's the latest four as we know it right now. we'll bring the final details of this vote as soon as a parliamenti parliamentarian emerge from the room. the uk chancellor george osborn under pressure ahead of spending review speech. which department is getting the cut? we'll be discussing with our uk business reporter in just a couple of moments. we went out and asked people a simple question: 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. ♪ [ 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. ♪

. welcome back, everybody. these are your headlines this morning. data drives markets up but mario draghi warns only mitts of monetary policy. a change at the top in australia looks set on reports that prime minister julia gillard has lost the leadership vote. even the experts are being called out by the sell off in treasuries. pimco suffering significant losses this month.

now, italy could stand to lose billions of eurozone on derivatives contracts. it doesn't name the banks involved but thought the contracts date back to the late '90s. experts say it sheds more light on the tactics that helped italy into the single currency despite its debts. staying in italy hundreds gathered in rome to protest against the conviction of prime minister silvio berlusconi for paying for sex with an under age prostitutes. the message is we're all prostitutes and demonstrators calls the seven year prison sentence scandalous. silvio berlusconi took to facebook to express amazement saying he was convinced he would be acquitted. for more on the precarious

nature of italy's situation, read why jpmorgan's could a cloigs be the most fragile in the eurozone. the uk finance minister george osborn will stand before parliament to deliver his spending review in which he's allocating resources to government departments. he's under pressure to save 11.5 billion pounds. we go to westminster. we'll be covering the events live as they take place. just in the uptick to the actual events, what should we be looking out for. >> reporter: well, the devil is in the detail here and 12:30, the chancellor will stand up and detail how he'll exactly get this 11.5 billion pounds worth of cuts across uk government departments, and as you remember we've already been told that here in the uk austerity will last all the way until 2018.

so this review which is just about the year 2015 is the opening salvo of how the government wants to save george osborn's favorite mantra which is britain needs to live within its means, it will be tested. that we got bore roger under control. even in the face of having 701 billion pounds worth of spending a year, that's more than labor had in 2010 as outgoing government. also comes on the back of the deficit edging up recently to just under 119 billion pounds. when you speak to people in london, uk business leaders they say the chancellor has got it wrong. more needs to be done stimulate growth. that's capital expenditure. things like infrastructure spending which had decades of under investment and get rid of things like ring fencing and look at more things like defense procurement. stimulate growth in the uk

economy rather than holding on to protecting areas that don't need it. back to you. good stuff. thank you very much. so from midday london time our uk audience can watch special coverage of the uk spending reviews. stay tuned for that. we'll take a quick break. we'll leave you with a review of our heat map to see how markets are trade right now. ♪

[ 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.

hi, everyone. welcome back. glad you're still with us here on "worldwide exchange". u.s. futures pointing to a slightly higher open at least for the s&p 500, more positive open for the dow jones and nasdaq calling higher. we got a couple of hours to go before the u.s. markets come on tap. joining us or still with us in the studio, seth merrin. i was asking information write in because you were giving a fantastic explanation about rotation. people have been writing in, jonathan writes in from connecticut, seth an awesome

explanation about the rotation. if bond funds will or are starting to liquidate and presumption is money moves into equities why are we considering selling equities or should we as rates are rising. where do you go to now? >> is this a supply and demand issue. we had a about a trillion dollars leave the equity markets to go into fixed income markets over the last ten years. we expect that trillion dollars would come back into the equity markets and because of the dislocation of the bonds and what we expect to be consistent rising interest rates you're going to see potentially a trillion dollars come back into text markets, that's a massive amount of money but enough money from pell a bond market for the next couple of years. so, i think that even though the markets have been rising they have a long way to go just because there's so much demand and it's really because there is no alternative. somebody coined the acronym tina, there is no alternative.

you won't put money into bonds or foreign exchange or keep your money in bonds. >> also just looking at the broader market moves then, another viewer wrote in and was asking is there a correlation between what we see in stateside and europe. i'm not sure there was a direct correlation. there was a time when we saw spread widen significantly and there was a trade. do you see any indication of trades being broken or new trades emerging? >> we have artificial stimulus keeping rates artificially low. if the fed eases before the european union starts easing then you can have a spread situation. my guess is that they are going to coordinate that, even though we're growing at a different pace between two countries. but at some point you know that the easing is going to have to stop and hopefully they will do

it gradually. at that point the interest rates start rising. and, you know, at that point it's going to be very, very tough to start getting out of your bond position. >> basically what you're seeing even if we see a scaling back of qe equity markets can handle it and we'll continue to head north. >> i'll speak to regulators tomorrow in berlin. what i want to tell them, one impediment you have to watch out for is the regulatory issue. if you get the regulation wrong, then perhaps if you make it more expensive for institutions to bring money into the european nations, then, you know, investments going to find their path of the least resistance. they will go to wherever the investments are best, where they can access them the most efficiently and cheaply. my sees sag to regulator, don't do anything to put any constraint on that institutional investment. a lot of money can come in to your countries to help your

countries, help job growth and do everything to ease that path into the countries. >> excellent. seth, very enjoyable speak towing. thank you very much. seth merrin, ceo of liquidnet. we'll take another break and leave with you a look at the futures and how they are trading ahead of the open on wall street. keep your questions and comments coming in. see you in a second. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ]

in that time there've been some good days. and some difficult ones. but, through it all we've persevered, supporting some of the biggest ideas in modern history. so why should our history matter to you? because for more than two centuries, we've been helping ideas move from ambition to achievement. ♪ and the next great idea could be yours. ♪

hi, everyone, welcome back. watching "worldwide exchange". these are your headlines from around the world. stocks in europe strayeding higher boosted by a trio of u.s. positive economic data, focus shifting to ecb president mario draghi telling french lawmakers that there are limits to what monetary policy can achieve fch broad selloff in treasuries is hitting some of the most experienced investors out there. pimco has seen sizable losses this month. the political drama heating up in australia has reports filtering through kevin rudd defeated the current prime minister julia gillard in a leadership vote. the finder of glencore mark rich has died. he's credited with creating

modern day oil trading. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. hi, everybody. welcome back and again if you're just joining us maybe stateside waking up, glad you're with us. just looking at how the u.s. markets are set to open at this point. we're a couple of hours away from the happening. but we're still being called slightly higher across the boards for the u.s. markets. in europe, seeing pose activity on european markets as well. consolidation seems to be the name of the game. higher by half of a percentage point. very good data yesterday from the states, housing data, confidence data, durable goods data albert than expected and that helped to give us a further boost in european late session trade yesterday and then opening on a positive footing today too. just showing the european markets, the pboc stating they now have punched cash into some

financial institutions, so it does seem they are attempting to address liquidity fears and that's helping to let people into the buying mode once again, eu finance ministers later today meet in brussels to discuss banking rules again. they couldn't agree on these rules over the weekend so that's why we have this extra meeting for them, the final estimate of the first quarter u.s. gdp is also out later on today, forecast to print of 2.4%. so quite a few things on the agenda still in today's session. we wanted to show you some of the other top stories. bp has taken out a full page ad today in the "new york times," "wall street journal" and "the washington post". the company is mounting an aggressive campaign to challenge what could be billions of dollars in settlement pay outs as a result of the 2010 gulf i'll spell. it accuses lawyers and businesses to inflate claims. in april a u.s. court upheld a

claims administrator's reading on the company's multibillion dollar settlement agreement. bp had appealed the decision which will be heard by u.s. appeals court next month. the stock trading marginally higher in today's trade. and moving on to the next story. it seems venezuela's president says that he would consider an asylum request from fugitive u.s. contractor edward snowden if its made. he says venezuela would evaluate it just as ecuador is doing. russian president vladimir putin confirmed snowden is in the airport transit lounge and not on russian soil because he hasn't gone through passport control. he ruled out handing snowden over to the u.s. because there's no extradition treaty between two countries. microsoft will unveil a tune up to its flagship windows 8

software at its developer conference in san francisco. windows 8.1 code name blue and said apartment addressing some of the gripes that people have with the latest version of the operating system including the lack of a start button. you need a start button. the update will be free for microsoft's partners and developers to download starting to today and available to the general public later this year. microsoft in german trade this morning higher by .8%. the u.s. senate has now confirmed that chicago business woman penny pritzger will be the next commerce secretary. she currently serves as chair of two real estate investment firms and she's on the board of the hyatt hotel chain which was co-found by her father. she's a long time friend of president obama who raised hundreds of thousands of dollars for his campaigns as well. we've been asking you what do you do to get ready for a big

day? we'll read out some of those answers in a bit but coming up the bond market blues and why not even the biggest and most experienced investors aren't immune from losses. what do you do to get ready for a big day. find us on twitter and/or e-mail. [ driver ] today, my ambulance knew all about a bike accident, just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. [ 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. ♪

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. ♪

hi, everybody. welcome back. yes, you're watching "worldwide exchange". i'm louisa bojesen. i'm glad you're with us. quite a bit going on in mash. seeing quite a bit of consolidation. quite a bit of loving in unloved equities but not a lot of buying in gold. 1225 over the last seven days, gold down by 10%. so a big loss. the lowest level since august of 2010. seems the fund selling is continuing. speaking of funds, losses in the value of bond portfolios are threatening the recovery of bank balance sheets. according to the "financial times" a spike in interest rates have wiped $16 billion off the value of available for sale portfolios in the u.s. it's expected some banks could revalley losses in the second quarter of the reporting season which starts in about two week's time. with more on financial sector, karen is on the ground at the

conference in paris. karen? >> reporter: thanks. i'm with a gentleman who is well versed in bond losses. after all he was the chief negotiator in the hair cut that those holder of bonds were take. this is the boss of the iaf for 20 plus years. you're now in the private sector running partners group. tell us about the exposure that exist in the u.s. system. is there a real risk balance sheets will be affected? >> goobd with you today. i think that, yes, balance sheets will come under some strain. do i think that corporate balance sheets in the u.s. now remain quite strong. i think household balance sheets are a little more of a concern because, obviously, the deallerd deleveraging process has run its course. many homeowners were looking to lower interest rates. 0 >> when i want relates to bond

exposure for banks you think many are holding a significant amount because there was much talk about this great interrogatories away from bonds into stocks. many are not getting out as quickly. >> there's some exposure. but my sense in talking to leading bankers position have been managed carefully and hedged well. i think the impact on bank balance sheets is quite manageable at this stage. >> tell us about the recovery in the housing market and the impact here. you're looking at buying in to real estate assets. do you think we start seeing bore roger costs rise particularly market rates right now? will this impact the housing recovery? >> the partners group very active in real estate. i do think that this could bring back some clouds over the housing market. recovery of the housing market has been so important. not only for housing and construction contribution to the real economy but for overall consumer and investor sentiment

because it's lifted wealth in a substantial way. i do think if we see too much further move in long term rates impacting mortgage rates this is going take some steam out of the housing market. it's important to recall that not with standing the strong recovery in the last 18 months, many homeowners who purchased their homes in the period 2004 to 2007 are still under water. this could be a difficult dimension in terms of sustaining a recovery. >> those who have that wealth creation effect are not seeing it because many are still sitting on losses on a major asset. >> do i think they are. but this recovery of wealth has underpinned the growth of consumption. it has been the growth of consumption that's driven our recovery so far. it's important this market reaction not move so far to take all the wind out of the sails of consumer sentiment. if i want does it will be very hard to see the continued slow but steady building.

momentum that we've seen. >> i want to ask you about bank regulation. there's a hearing today where fdic officials, board members will give their views which is an argument to shrink the banks. if we start to see banks forced to fit into a smaller mold this will also have a big impact across the industry? >> i'm not at all convince this approach is really going to stabilize financial systems or strengthen the banking system. to be honest with you, when you start trying to force banks into smaller molds you actually may inhibit their ability to diversify their earnings, diversify their revenue and hedge their businesses in a way that if difficulties arise in one part that they can be offset in another part. i also think that we're moving much too far in the world of national approaches and not global approaches to resolving banks. the too big to fail problem is a

global, proit's it's a global p. it didn't just freeze u.s. markets it froze global markets, it froze the global economy. yet we seem to be losing sight of this in the united states, in europe. we for cussing increasingly on national solutions. there will, karen, no genuine national solutions to too big to fail. regulators need to recognize that. >> i'll let you get back to the conference. let me toss it back to you. before we let you go we've been asking viewers today how they get ready for a big day off the back of chancellor osborn tweeting a picture of himself eating a burger last night. there we go a picture of him from yesterday. how do you get ready for a big

day? what do you do? are there certain routine? >> reporter: the joys of being a tv anchor. there's preparation the day before. exercising, eating healthy food. you need a good night's sleep. fantastic lives we lead. >> amazing, isn't it. our guest host earlier says he takes a shower and then he's ready. matt tweets in and says he starts the day off with two alarm clocks and cnbc world and coffee. jeff says he gets ready for a big day with hot tea, pastry or a pop tart and plays with his cat. karen, thank you very much. we'll see you a little bit later on. top fed and fdic officials are warning congress efforts to rein in too big to fail banks have fallen short. there will be testimony about

the issue before the house financial services committee at 10:00 a.m. eastern time. he says the u.s. should eliminate the belief among creditors the government will step in to help failing banks. investment banking shouldn't fall within the federal safety net. now it hasn't exactly been the best to be the bond king this month amid the broad selloff and volatility seen in the market. bertha coombs joins us live from cnbc's headquarters with the latest. bertha. >> reporter: it's been tough sledding for the bond king and for his clients. the world's biggest bond fund pimco's bill gross hardest hit in the market sell off. pimco total return fund is down 3.6% in june through monday. makes it the 12th worst performing funds. gross's fund is down 5.7% since the end of april when treasury yields started rising after the

ten year hit a 2013 low of 1.61%. yields, of course, trade in the opposite direction of the value of the bond so the selloff in bonds is what's producing this climb. yields continue to rise hitting 2.59% on tuesday following a soft auction of two year notes. but pimco is not alone. the pimco or bill gross, rather the pimco investment grade bond fund has fared worse losing 4.4% and nearly 7% since the april make it the worst performer among the investment bond funds. pimco funds are on two month losing streaks. investors have reacted to that. they pulled $1.3 billion out of the funds in may, the first monthly outflow since 2011 according to morningstar. all bond funds hatch lost money since the end of april down on average about 4.3%.

despite the dufrg there's been solid long term track records. one high-profile fund manager is telling his investors to just be patient. in a webcast on tuesday, it was characterize as the bond market selloff as a liquidation cycle that will end within weeks once a ten year hits a high of 2.75% which sounds painful if you're in bond funds now. he says now is the time to consider buying riskier debt. such a swift move in reaction to the fed's tapering. >> ice in your stomach to go against the grain of everyone else. bertha, thank you very much. just getting you up to date with our headlines, data driving markets up, mario draghi warns

only mitts of monetary policy. a change at the top in australia looks set on reports that prime minister julia gillard lost the leadership vote. and as we were talking about even the experts are being called out on the selloff. pimco suffering significant losses this month. coming up, monsanto set to report quarterly results before the opening bill. will the agriculture giant's profit plant a seed in investor's mind to buy the stock? we'll preview the numbers in a bit.

hi everybody. welcome back. i want to mention to you what we're seeing on the wires at the moment. we're getting a little bit of news. we got mr. letta having been speaking, indicating that the

italian prime minister is saying youth unemployment measures includes tax breaks for companies hiring young workers. the italian prime minister also talk about how the planned hike has been postponed until october 1st. bank of england financial stability extensive review is being published right now and warning a sharp rise to global interest rates. lot of flashes hitting on wires. we'll keep you up to date what the bank of england's findings are. they will scale back liquidity buffers. we'll keep you up to date. europe's markets trading in positive territory here in this morning's trade. we're seeing buying back into some of the unloved, some of the unloved spector, today's session. we need to cross out to taylor who is live in sidney on the

back of what looks to be some changes at the helm of the political arena, matt. >> reporter: yeah. that's right. we just got this statement coming out now. let's listen into the verdict from this latest ballot and see exactly who has won this poll. >> at 45 votes. >> i've just come from counting the latest -- i tuned deputy is making a statement at the moment, but i thought i would come straight out -- >> will the lab new deputy? >> identify come out -- >> did kevin rudd let julia gillard speak before the vote and did julia gillard speak after? >> both actually spoke before the vote.

julia gillard moved the motion and spoke to it. kevin rudd sought leave of the caucus and spoke prior to the vote as well. >> was there any discussion of the election date? >> no. solely to conduct the ballot. >> what was julia gillard's reaction? >> when i left -- >> what was julia gillard's reaction to the end result? >> i'm not in position to advise. i came straight out. >> the mood is quite somber. most people are happy that tissue of leadership is now put behind so the party can concentrate on preparing for the september election. just come straight ought from conducting the vote so i'm not sure what else might be

occurring. >> it was a long meeting. what was -- >> we counted the votes one by one. these charges are emotional. they are human beings. please take that into account. >> did the party make the wrong decision? >> i think the parliament certainly were advised of her vision. >> reporter: you're watching the outcome of this leadership vote here in australia where australian prime minister julia gillard has lost the leadership of the party and the prime ministership to kevin rudd, the man she ousted for that job a little over three years ago, three years and three days ago. the outcome of the vote according to the party officials is mr. rudd scored 57 votes to miss gillard's 45 votes. they are still conducting a ballot. it would appear from that discussion for the deputy leadership role which had, of course, been previously occupied by the treasurer who is a loyal

supporter of julia gillard. he'll go. some reports as well coming in from the daily telegraph that an earlier election will be called for august 24th, previously julia gillard had announced a september 14th poll. so, there you go. new prime minister for australia, the old prime minister for australia. back to the future essentially with kevin rudd now officially the leader of the labor party. >> matt thank you very much. we'll discuss what these changes mean for markets here throughout the rest of the day. stay tuned. matt thank you very much for that. we were going to speak to an analyst about monsanday from mo.

i'm louisa bojesen. thanks for watching. ncer ] 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. suddenly, faraway places don't seem so...far away. ♪

is. good morning. today's top story a good one, global stocks are stabilizing amid a host of global concerns. it's wednesday, june 26, 2013. "squawk box" right now. ♪ good morning, welcome to "squawk box" here on cnbc. i'm sore. joe and becky are off. we miss them. but we're joined by michelle caruso-cabrera and brian sullivan. let's get to the news of the morning. markets in asia are closed and closed mixed in a volatile

session. china's central bank said it would provide cash to institutions that needed it. hong kong shares had their best day in nearly six months as investors hunted for bargains following the recent selloff but japan's nikkei dropped below the 13,000 mark. china's yuan slipping against the dollar. the central bank set a weaker official mid-point. traders say that this is signalling the central bank doesn't intend for the chinese currency to appreciate further. the major indexes are mostly higher in early trading. among the catalyst follow through from yesterday's session on wall street and news that german consumer sentiment rose to its highest level in six years. we'll have more from our colleagues overseas in just a couple of minutes. let's first get to michele. >> on the economic agenda today, 7:00 eastern time, getting weekly mortgage applications.