welcome to "worldwide exchange." i'm karen cho. stocks in europe move lower one hour into the trade. gold is down after a 4% drop in yesterday's session. the e.u. is moving away from making taxpayers pay. german chancellor angela merkel welcomes investors and de'si tors to take a bigger role.

a hit for people after a particular compound. and the u.s. man who is set freebie workers after being held cap ttive for nearly a week. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. here's a snapshot of the morning picture across european markets. you can see there are some green boxes across the screen so there is an element of buying taking place across the market which is supporting us, but there is more red which is carrying us just under the flat line. we're flatly negative across the base mark index. let's take a look at some of the core markets because this will give you indication of where the pressure is coming from. we've had a slight turn in the market.

it's 5100 here in the u.k. it's been in positive territory. .4%. this has helped the ftse. the ibex has been down just under .7%. let's move out across the border. the likes after basf, also lanxess. one of the compounds is facing antidumping. this is right across the chemical space particularly in these german names. you can see a couple of key stocks in the u.k. media in italy bouncing 4%. let's move on to bond markets

because we do have an auction coming up today in italy. this is one of the big soakers for the market. we are tracking across the market. we have prices pushing high. slielly lower across the board. 2.5 billion euros with a five year btb. they're diving into a ten year german bond. this is relevant to what we're seeing on treasury markets 16789.75%. slightly elevated in the u.s. treasury. some of the other safe havens are close. a spread of about, what are we saying, 7 plus 2, 9 bases points. the spanish yield, 4.75%. a little bit of pressure coming off the markets. let's take a look across these markets and foreign exchange markets. you're seeing a little bit of a bounce back on the euro market.

mario drag gee. the dollar rates have been across the board. .4% firmer. australia is bouncing back today. this has been positive for the australian dollar story. let's take a look at some of the commodities. this is how we're shaping up. we're seeing a very mixed picture. we're seeing prices for crude. silver is going higher. the odd one out of the bunch is spot gold prices. almost 3% of a trade 1, 238 is what we have on the trade. copper prices is a little bit

better, .7%. in the foreign market, we see a record gdp from the u.s. this credits some optimism we'll see down the curve. >> you're right, karen. in fact, a largely positive day here in asia add to the fears of the increase. it jumped by almost a 3% day. it welcomed the new prime minister ending higher by 1.7% but since then it remained fragile. the composite ended flat. and the shanghai composite ended 1% down. as for the banking, a better

showing than yesterday. bigger lenders like icb and bank of china chalked up nicer gains. smaller banks remain underwatersheding 1.6% at ping an bank. they went from 4 to 5% today. for the rest of asia, japanese property developers picked up steam after the recent decline. mitts sue by shi rallied. in south korea, samsung electronics staged a powerful rebound. up a whopping 6% today. the stock in fact snapped a six-day losing streak of rebounding from a 9.5 month low from yesterday. there have been worries over smartphone demand. samsung is set to release its q 2 earnings guidance late next

week. we'll be watching. back to you. >> thank you very much. we did see some decent gains across the u.s. market yesterday. the dow was up about 1 plus percent. the s&p 500 reclaiming that 1600 mark. the bad news is good news for the markets. we saw the gdp suggested that the gdp is now expanding at a rate of 1.8% in the first quarter. this is from the commerce department, 2.3% growth which is the last estimate. the numbers are broken down by categories. home construction and government were some of the exceptions in terms of being supported. the rest was great consumer spending in particular. grew on a pace of 2.6%. then again, this has been a supportive element for the economy. there have been much discussions about where they're starting to recover and the spending is going to be supported for the u.s. economy.

i want to delve into this a little bit more. joining us on the set is a senior fellow at goldman foundation. nice to have you on board with us. >> good morning. >> the market out there is trying to interpret the data points. this is what ben bernanke has forced the market to do is take a look at the numbers. the numbers are strong. does that mean tapering is not going to happen. >> tapering is not going to happen, karen, i think it's as simple as that. as soon as you put up interest rates, the cost of the deficit increases which governments don't like. more importantly, as soon as interest rates go up then it destabilizes the banks. the banks begin to potentially implode from the weakest point. the banks have enormous amounts of government debt, fixed interest, higher yield, lower price which starts wiping out

their very, very slim capital base but also there is a huge amount of interest rate swap derivatives. the bank for international settlements came up at the end of last year. that figure was 441 trillion. the way that works is that you and i might take out a mortgage on a house and we might think, let's lock in these low interest rates. that's basically what the public did. they lock in the low interest rates but who supplies it? the banks. to the banks are vulnerable to a rise in interest rates. if it happens slowly in a controlled fashion, then hopefully that can be dealt with. but if you have yield volatility in the market, just the mention of tapering got going, then we can begin to see how dangerous the situation is for the banks. those two reasons, government finances and the very fragile banking system, tapering is not going to happen.

>> i got back from the iif. i was talking to the former u.s. controller of the currency, he was telling me this is a warning shot by ben bernanke to the banks to get their houses in order. this means we'll see less banks collapse because they'll be able to prepare for the increase. >> that's supposition. whether it's true, i don't know. for many of us looking at it if you like in a slightly detached way, we can see as soon as you get involved in printing money to finance the banking system, government, whatever system you're trying to finance, it is virtually impossible to get off that treadmill. north to get off that treadmill people have to be persuaded that the dangers of printing money are greater than the immediate benefits. there's no way we're near that. >> alicester, your background is in gold. we are seeing fluctuations in the markets.

gold prices sunk to its lowest level yesterday continuing a downward trend that kicked off after the federal reserve said it would wind down monetary prices. 1,238 level that we've got at markets. allister, you have a vested interest in gold because you still have the bouillon, is gold broke? >> it's been a very uncomfortable ride for investors but i think, karen, it's helpful to understand, you have two categories in the market. you have the investors. they typically will buy in. then there's the other category, that is people who are worried about increasing systemic rest. those are typically our customers. they're the people that we tend to store money for outside of the banking system in a range of jurisdictions so that it is effectively safe and secure and away from failing currencies,

failing banks. i think that in the current situation the people who are hurting are investors. the people who bought it because there's a bull market, we'll cash in. the people who are actually benefitting from this are the people who want that insurance against systemic risk. >> the geographical spread here. the u.s. is getting out of gold perhaps because conditions are changing. they have bank standing over here. we have a scheme that now bans depositors, 100,000 euros. does that mean we are seeing a different view on gold in the united states versus europe? >> it's an interesting question. i think what we're seeing in the united states does mask to a degree the buying of gold for, if you like, personal possession, personal ownership away from the banks.

that is continuing the pace. you see this reflected in coin sales. every month, new record, new record, new record. we're finding the same thing in our business. we're finding that those customers are very, very solid. but if you take it one further and we look at what's happened over a really considerable period of time. gold is tending to move from west, which really tends to under price gold because we look at it as an investment, to the east, you've got three nations who see gold as the safe store value for the long term. their experience of government currencies is abysmal. we've seen it's taken another toss, 60 rupees for a dollar. in china, that's an interesting one because there the government thinks we're encouraging people to buy gold. we have to remember the chinese have a savings rate of something

like 40%. they don't rely on a state to provide it. they're taking the same long term positions. >> very much enjoy the kmemts. thank you for stopping by the studio. gold prices are going low. precious metal is in the midst of a lower market. on today's show australia's new prime minister, kevin rudd is taking office. and fresh off the back of the u.k.'s spending review, we'll take the pulse of britain's economy. the first quarter gdp reports. samsung unveils its first television with a hefty price tag of $13,000 so will customers line up? we'll cross that and the market

reaction. and switzerland has a top spot for private wealth, but find out which emerging markets are there. we'll have an exclusive report from new york city. a recent spike in home sales. we'll hear from one guest who says the runup is going to slow down. we'll be right 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. suddenly, faraway places don't seem so...far away. ♪

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you're watching worldwide exchange. european finance ministers worked late into the early morning hours to agree on a deal of who should foot the bill when big banks fail. let's get out to brussels. julie, the ministers worked into the early hours, i gather you did, too. >> i'm having difficulty pronouncing my words as i often have that issue when i'm in brussels. yes, they agreed. who will get bailed in and in what order. big depositors, exemptions for deposit terse, 100,000. also the minimum level of bail in is 8% of the total liabilities of the bank.

once they've reached that minimum, then they can move on to a resolution fund, up to a 5% equivalent. they will start now building. also a deposit guarantee scheme by levying the banks. we have a lot of details to come. right now we have a broad outline, a hen plate, we don't use that word in europe, it's a dirty word. i did speak to the president and they are going to give us a broader outline of what they achieved overnight. >> well, the broader overline is that we have a clear hierarchy of bail in. in other words, if a bank gets into trouble, we will now throughout europe have one set of rules, who pays the bill to start with. those investors that have put money in the banks and if necessary also using funds, resolution funds which will be financed by the financial sector as a whole. so that's a major shift from the

public means, from the taxpayer back to the financial sector which will now become from a very large extent responsible for dealing with its own problems. >> do we have a pro forma rule on who gets bailed in and in what order? >> exactly. clear for everyone throughout europe, not just the eurozone, but in all 27 or i should say 28 on the 1st of july countries, clear set of rules how we will deal with it. >> the british bank manager said to me that we risk putting countries in a straight jacket if we are too concrete on the bail in rules. is there some flexibility for some of the weaker countries around this bail in structure? >> well, actually, it's not very good for weaker countries to have too much unclarity on bail in rules so i think as the euro area as a whole, as european union as a whole, would he will benefit from having clear rules.

there is some room for flexibility. national funds can be used if they are available but it's only a limited amount of flexibility. for the rest of it, it's going to be bail in mechanism which is the main instrument to save banks. >> do you agree that some banks could mean a higher funding cost and we consider whether to keep deposits in some banks? >> as you know, all deposits under 100,000 are completely exempt from this so they are absolutely safe and the other depositors are right at the end of the hierarchy. we have to make sure that there is enough capital before that and that there is enough capital in the funds, the resolution funds. having said that, i think that some of the other things that we're doing regarding the banking union also helps. for example, the capital requirements directive which makes a bank have better reserves, stronger balance sheet. we're improving our supervisory work by the ecb which will start

next week. so the banks will become stronger, healthier, under striblgt supervision and if things still go wrong we have a clear set of rules how to deal with that. >> you don't expect any kind of spread widening in some of the bonds in some of these banks in the periphery in particular? >> i think a lot of investors having uncertainty, what the risks might be would be a reason perhaps not to invest. now we're taking away that uncertainty so i think it's a very, very important step. >> we don't say the word in europe but effectively what we have here is a template. >> you know, i always try to leave out that word. what we have here is a clear set of rules which takes away the responsibility from the public, from the taxpayers and takes it back to where it belongs, where the responsibilities lie, which is in the financial sector and the investor side. >> the president not concerned about the impact of these bail in rules on the funding costs. i spoke to the swedish finance

minister, he said we have to wait and see how the market digests it. yes, we have a pro forma for bail in. what we don't yet know is who's responsible for if the banks are shut down or if they're restructured. one step forward and plenty more to go. >> lovely. thank you very much. what's playing out across european markets today, we are seeing selloffs in the chemical industry. tensions between china and their ministry says it's planning to slap a stiff dumping tax. the duties on a chemical compound to produce dye and medicine could run as high as 37%. the german chemical giant lanx oe ss has a 35% tariff. the tariffs will kick in tomorrow. they'll be in force for the next five years. elsewhere, kevin rudd has been sworn in as australian prime minister for the second

time. let's get out with more on the story. many international viewers are wondering where kevin rudd has been as the prime minister. he was a former prime minister. >> that's right. kevin rudd was ousted by julia gillard in 2010. the tables have clearly turned now and what we're essentially seeing, this is the third time that we've seen a challenge like this in less than a year but this time ultimately kevin rudd has been successful and has been sworn in as the prime minister. what it comes down to now is the actual calling of an election date. at this point in time we still don't know when that election date is actually going to be. it could go one of two ways. it could come, well, pretty soon i guess if kevin rudd wants to open it up to the australian people to let the political leaders know exactly what they think of the shenanigans that have surrounded australian

politics over the last few years or he may stick very close to the election date for the 14th of september. kevin rudd was speaking in parliamented today, here's a bit of what he has to say. >> as we all know in this place, political life is a very hard life, a very hard life, indeed. occasionally it can be kind. more often, it is not. it has been that way since time and memorial. i doubt very much in the future it will change. >> now, karen, we do, of course, know that kevin rudd is going to try to take on this election with probably a different set of policies to his predecessor, julia gillard. he has spoken out saying he's going through the budget, holding treasury briefings throughout the course of the weekend which could indicate a change in policy there. now we did hear a little while

ago that the leadership still essentially had to give today. we heard market rumors this was planned, over a week ago out here in australia. so we're hoping to get some clarification on that of course as the days go by. karen. >> a mining tax could be scrapped. trying to dump it. wondering if that will move on. thank you very much. we're going to be speaking more about the australian story. joining us in a short time is someone from the university of western city. he'll give us his thoughts on the strained australian economy. also still to come on the show, we get a fresh check on the u.k. economy. the first quarter gdp. we'll bring you that straight after the break. we went out and asked people a simple question:

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>> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. the stocks in europe dip lower one hour into the opening of the market. 4% drop in yesterday's session. the e.u. is moving away from making taxpayers pay. german chancellor angela merkel welcomes a late night deal welcoming investors and

depositors to help with the bank failure. a toxic problem as china is dropping heavy taxes. being set free after being held captive for nearly a week. we have the final print for q 1 gdp just crossing the wires now. i'm advised that plus .3 in the quarter, plus .3 year to year. plus .3%. the q 1 services member -- let me clarify that, q 1 gdp is unchanged. q 1 services plus .5% quarter on

quarter. industrial production growing at plus .3. construction still a drag on the economy falling by minus 1.8% quarter on quarter. let's get some thoughts on this. joining us is a strategist from merrill lynch global research. john, the numbers coming in in line with expectations as such. what's your view of what we've just seen? >> well, to a degree this is a number that's somewhat backward looking now. we're obviously at the end of the second quarter. somewhat reassuring. the u.k. price this year had seen four negative quarters out of five and was still struggling to gain any sort of momentum towards a recovery. so confirmation of the first quarter was okay, was welcome, and we think the second quarter will probably be a little stronger than that. >> the construction industry is going to drag on the economy, but we did have some very big conditions. do you think this is going to

start to improve? >> it's been tough, the construction industry. the pmi has said that construction is in reasonable health but in terms of its impact on gdp numbers, it's been very weak for some time. there are signs the housing market is picking up given recent indicators on mortgages and house prices and the bank of england standing a bit more relaxed for the outlook of construction which is one reason why we hope the gdp is getting on to slightly firmer footing. >> the actual markets with dollar tracking, it was in positive territory. the ftse coming back from the highest today. up .3 of a percent. we are seeing a little bit of stocks going up. these numbers are telling us that the household disposable income, what main street has in its purse to spend is a little bit less, 1.7% quarter on quarter. is this because inflation has been sticky and wages are not

going anywhere? >> all of these major economies going through big adjustments, necessary adjustments over the last four or five years now. one of the areas where the u.k. has felt that adjustment the most is through real wages. they've been negative pretty much constantly now since early 2009. they remain deeply negative with real wages rising very slowly and inflation still elevated and this is one result of that, the disposable income is still under stress. >> just quickly, the chancellor as he's outlining his case for the economy. >> you know, another round of cuts, it was only one year because of the timing of the electoral cycle. an acknowledgment that there was more to come because it's been hampered by the economy not returni returning. cutting has been difficult because of the welfare that you

get through a weak economy and more elevated welfare spending. >> we're going to check on the rest of the action. i showed you the ftse which is still positive. it has been one of the stronger markets. the rest of europe feeling a little pressure. the dax trying to get up. just a little bit underwater. chemical companies in germany are facing pressure because of a new tax by the chinese, the cac is still down .25%. the ftse is sliding down just .1%. kevin rudd has been sworn in as australian prime minister a day after ousting julian gillard. david, we now have a lame duck government as we wait for the next election to be called. is there an argument now for

bringing it to sooner rather than later, perhaps even august? >> well, we're in the end of june and the election was planned for september so there's not that much room to move but, yes, possibly it will be sooner rather than later and august is about as early as it can be. it's also logic on the side of that as well, i think. kevin rudd was a difficult prime minister to deal with for his colleagues and senior public servants last time around. he's a man whose public image for the electorate is not really the same as his private image and the longer between his reinstatement and the election i think the more the chance that the gloss, the mystique will fade. he'll be well advised to go sooner rather than later. >> behind the scenes he can be this very academic, scholarly man. in public he is a very appealing character who can mix with the population in australia.

do you think that he can win the state and also carry some of the other key states perhaps changing the fortunes of the labor party that was destined to fail at this election? >> to be frank, i think the labor party is still destined to fail in this election. i think labor will home hold some seats in queensland and then they hold a few seats elsewhere that they might have lost but labor is still on track for hiding, i believe, and i don't think mr. rudd will alter that, i think it will change the scale of hiding. i think the reason he's been elected prime minister is not because they love him as an individual, it's because he's strongly disliked by many people who work with him. he's not an easy man to work with. he's a man with an explosive temper and poor management skills frankly and he was not good at making decisions. and not good at delegating, either. but his public image is much more positive and his colleagues are aware of that.

they've elected him, i believe, in order to minimize the scale of the loss and also to position labor better for next time around and the time after that. i think their fear was not just losing this election but losing it so badly that they would take two elections or more to come back to office again. >> the key part here, too, is that kevin rudd doesn't have any factions within the labor party, a party that is dominated by factions. doesn't this give him a lot of room to change policy that he needs coming off of the elections. he's already tried to pin the blame on the treasurer, wayne swan. that issue that is unpopular with big business but there was also the carbon tax. do you think he can reform some of these key policies? >> it will be difficult for him to make a complete policy turn around in a couple of months, i would say. there's also the question of whether he's actually able to do that. i think one of rudd's assets, while he hasn't been prime minister, is he able to be all things to all people.

he's very popular among conservative voters even though he's now the leader of the labor party. he appeals to individuals as somewhat of a kind of radical intellectual. the trouble is if he starts to turn around policy on questions like the mining tax, the carbon tax and asylum seeking refugees, he'll lose some of that support. there are only two points of view, sorry to say, on asylum seeker refugees in australia and there's not much middle ground between them. if he backed off from the mining tax he'll face a backlash for that, too. he, after all, introduced the idea of the mining tax in the first place. it's unpopular because it's not raising any money. if he abolishes it he will create political problems for himself on the other side. the problem the government has had for the last three years. it's the minority government.

it's been playing compromise politics and finding it hard to get its message out. mr. rudd will have the same problem. it won't go away. that's another reason why he needs to go soon. >> indeed, david. the message there from business has been that once there's a change whether it comes from the labor party or conservatives, let's hope they get it. david burchell. as the world is supporting the confederations cup, protesters took to the streets on wednesday. 30,000 demonstrators gathered to demand better public services just three kilometers from where the game is being played. this comes despite the brazilians punishing them for corruption. elsewhere, samsung shares snapped a six day losing streak. you can see the share price up 6 plus percent just as the south

korean electronics giant slapped a $13,000 price tag on a super thin television. let's go to seoul. the price tag on this television, who's going to buy it for that price? >> exactly. the hefty price tag does come with the high cost of the technology, but let's talk about the nice session that we saw with samsung on the kospi today. the concession seems to be the improved liquidity, at least in today's session on the korean market as well as the regional market, actually, is behind the surge. foreign investors who, by the way, just ended their net selling for the first time after 14 straight sessions of selling out of the kospi were also behind this nice surge in samsung's shares. now the question is has the stock bottomed out on all of these external concerns as well as the smartphone margin related

concerns, the market doesn't seem so confident on that front. in fact, a number of brokerages do seem to show that market fears do exist. one thing samsung can bet on to differentiate itself from other smartphone makers. apple is its other electronics goods offerings. speaking of which, its first curbed super fund tv for sale out today following its competitors, lg electronics model. i believe we have pictures, but this oled technology is supposed to be the display of the future with high contrast images and very clear resolution and faster response time. yes, it does come with a hefty price tag of $13,000, karen, but this oled tv is still init at this point and is a step to not put all eggs in one basket for samsung portfolio. >> back to you. would you look at those images.

paypal is entering unchartered territory fully launching its galactic initiative in silicon valley. the program will bring together scientists and astronauts to bring together the future of payments in space. paypal is taking a bit of adventure on space. is investing in space a real business opportunity or is it just an out of this world fantasy? join the conversation here on "worldwide exchange." get in touch with us. we're on e-mail at worldwide@cnbc.com. join us on twitter, @cnbcwex. we're shuttling to people at space at this stage. shareholders are revealing compensation talks with boeing over the grounded dreamliner

747. we have the nikkei and we have the story lines from tokyo. >> yes. hi there. now that the dreamliner 787 are back in the sky the focus is shifting on how much compensation boeing will be paying, especially to al nippon airways and japan airlines. both carriers have started compensation talks over the huge damages that they suffered. operating losses of ana which holds the largest fleet of dream liners is reaching and $767 million through the end of june. they hold eight aircraft, around $390 million through the end of may. now that's more than 1,000 million dollars in total. the two carriers resumed operations of the dreamliner on june 1st and will have expanding flights in domestic and international routes to catch up on its losses. industry officials say that compensations could extend to

them and they could get discounts on other planes and updated delivery. it's a big day for data especially in japan. that's where we see a slew of information including cpi, jobs, industrial output and retail sales. meantime, south korea put out industrial members where ppi is the least in malaysia. still to come on the show, italy is tapping bond markets after the ecb reported earlier this week. we'll preview the auction after the break.

>> announcer: you're watching "worldwide exchange." >> italy is looking to sell five to six billion euros. it's a reverse from the sharp rises it saw earlier this week. they're insisting that it would maintain its easing monetary policy for the foreseeable future. bonds are tracking this morning. we're up about 2.25%.

4.59%, just shy of 5%. let's go to bank of america global. how do you think demand will be for bonds today? >> it should be okay. i think the markets become pretty adept at taking down these government bond auctions in the eurozone the last few days. these bonds that are being auctioned have been cheapend up a little bit in a relative sense and we should see a reasonable outcome of the auctions. >> thanks. we'll come back to this in a moment. the treasury's use of derivatives dating back to the '90s. the report from the financial times which claims that there are billions of euros of losses in contracts over destruction at the height of the financial crisis. the treasury has dismissed claims and the criteria for joining the euro. the people's liberty party says there's a rule of secrecy as the country's finances are like the

formula of coca-cola. julia is in brussels. julia, it seems like it's very difficult to pull back the curtain on what lies ahead for the italian financial system. >> right. it's very true. the deputy prosecutors said they're talking to the bank of italy, talking to try to understand just what's going on for the derivative contracts. it all began when we have that leaked treasury report suggesting that it has restructured eight derivative contracts in 2012. it had an independent order to look at this based on current market pricing. 8 billion euros. we're not talking a huge chunk of money, yet again questions being raised about the health of the italian banking sector. it came at the same time as we were having conversations with people in milan yesterday. rumors abounding that the italian finance ministry were talking to the ecb about potentially accessing the ont. not really seeing that kind of

news reflected in the markets, but i did speak to the italian finance minister and i asked him whether he had or is having conversations with the ecb. listen in. >> no, not at all. not at all. i think it's a system that has been successful in stabilizing market considerations but there is nothing concerning italy. we just obtained the clearance from the european union who are no longer under excessive deficit procedure. there is turbulence in the market but for italian purposes it's coming from the united states. i think there was some misunderstanding about what was the true intention of the fed in announcing the policy measures today, but now we'll have to weather the storm. >> the italian finance minister there saying he's not speaking to the ecb and he's not worried about the movement in italian rates right now.

the message we've gotten from other finance ministers and it is fed driven rather than any other real concerns about the reform prices right now. >> julia, let's look at the finance minister that led talks on the banking administration. the scandal in dublin you've been talking about on the ground in brussels. >> absolutely. he would have most definitely been talking about that. as he arrived all the journalists pounced on him. one of the first questions was given the rumors and the caped content, the speculation about the german involvement in a future bailout deal, just what the perception was of the italian financial sector here in brussels and across the other european countries. this is what he had to say. >> i have no doubt at all it would influence public opinion and the countries that provide us with funds that are needed for a bailout program and we had put a lot of energy into

restoring ireland's reputation and i hope that's a passing phase that doesn't do permanent damage. we could have done without it. >> to push for criminal convictions if the probe on this goes forward? >> there has been an investigation and an investigation by the director of corporate control and it has gone to the director of public prosecutions in ireland and one of the principles who didn't figure in the tapes was return for trial and that trial will take place next year. it's up to the courts to decide whether they'll convict or not but certainly it's within the criminal justice system now and process is proceeding can all due haste. it's extremely complex. teachers, hundreds of teachers of documents and there are tapes as well. it's very difficult to put a

book of evidence together. >> you mentioned one of the executives that wasn't mentioned in those tapes. other executives that are involved but are still working in the irish banking sector? >> you see, we liquidated the anglo irish bank. there aren't -- >> no executives from anglo are working on the banks? >> there's no bank anymore. it's liquidated. >> could they be working elsewhere in the banking system? >> i don't know. it's private. i didn't do the taping. >> the irish finance minister was considering the banking sector beyond the irish anglo banking system. he was being coy there. they have launched a probe into this issue, too. probe going on in the banking sectors across europe, karen. >> thank you very much. from brussels. let's move onto the u.s. treasury which is looking to sell $29 billion in selling its notes later today, this after

treasury broke a seven day losing streak. let's delve into the story a little bit more. it's been said that the overall options, that people have lost money on their bond investments of late. do you think there's going to be appetite that will be tested at this particular auction? >> yeah. this is certainly a gauge of whether the backup in yields is seen by investors widely as having run its course or whether, you know, we're on the start of the move towards significantly higher yields. the signs over the last couple of days, i think, are that we're probably seeing the large extent of the selloff for now, anyway. clearly economic data and the way the fed responds to it will dictate where we go next. >> who's buying the u.s. treasury? investors? >> it's a bit of both. the point here is that the yields have gone up quite significantly. that's one reason why you're seeing all of these ripples spreading into the market far and wide.

the yields are historically low but they're higher than before. investors, it's starting to draw money in. it's seen as a safe haven. yields got so compressed that people were willing to put their money into a wide range of other markets. some of it is coming back home and that's one reason why markets from the periphery of the eurozone to emerging markets around the world are seeing some violent price action in the wake of what's going on over the last few weeks. >> investors are trying to work out what this means for bank balance sheets and we were talking offline a moment ago about the different systems of account and the markets. this will show up on the books of u.s. companies sooner than it will in europe. >> the situation is bleak when you see a fast rise in yields. a lot depends whether it has further to run or whether we'll see some sort of moderation and head back towards where we came from. individual institutions will obviously have weathered the storm in very different ways and time will tell whether any of them have suffered significantly

as a result of what have been, you know, the most volatile price movements in a very long time. >> banking chief yesterday who said they invested in this and they were somewhat protective. you don't think this makes a difference if you're investing in stocks and bonds and they're moving, there have been losses if you invested in bonds. >> it makes a difference to the extent of which yields have risen and certainly shorter duration in bonds have suffered less because they do have shorter duration. as you said, they've risen and ris sen sharply. they will clearly have lost money, yes. >> i want to get into the gdp numbers that were weaker than expected. do you think this will change the assessment about the timing or are we still on the hook? >> we are and we've become very data dependent in the u.s. the fed said only what was logical which is that if the

data continues to strengthen, then they will at some point reduce the extent of stimulus which, as i say, is a fairly logical conclusion, but it does mean that the market is very focused now on u.s. data points. as we've been discussing, it affects markets far and wide. and weaker gdp has helped span some of the losses. if you get a lower pay on friday, it will head back the other way. >> we appreciate your staying with us. let's move on and remind you that we are taking some of your feedback today. is investing in space a business opportunity or an out of the world fantasy? join the conversation on "worldwide exchange." join us by e-mail or twitter. plenty more still to come. [ kitt ] you know what's impressive?

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welcome to "worldwide exchange." i'm karen cho. these are your headlines around the world. stocks are lower around the world despite a rebound in asia and the united states. the e.u. is making a way for making taxpayers to pay. german chancellor angela merkel welcomes a late night deal for investors to help with bank failures ahead in brussels.

lanxess is being hit with heavy dumping duties from china. and the u.s. businessman is set freebie workers at a chinese factory after being held captive for nearly a week. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. if you're just tuning in, thanks for joining us here on the show. here's how u.s. markets are setting up for the trading session. we are seeing a little bit of green on the charts. this comes after a fairly solid session yesterday. the dow up 1 plus percent. this was the interpretation of the markets. it took on board some more rate data. rate data is good news for markets because investors are starting to hope they can push that down the track. the gdp is coming in at 1.8% on the annual rate for the first

quarter. this is down from the 2.4% previously reported. the numbers came from the consumer spending side. the powerhouse for the u.s. economy is suggesting that there is still some weakness as many people go out there and spend mona cross the u.s. economy. some investors looking at this news and putting a back end into stocks again so you can see today we're chasing a little bit more strength as well. across the board this is how worldwide stocks are tracking. a little bit higher on the ftse. the european stock markets, we're with the core markets. the ftse remains in the green. the strengths we're seeing in the commodity space has been supported by the index today. they're ahead .3%. the dax has struggled to get a foothold into positive territory. the ibex seeing a stronger

selloff now. it was down more but most of the early session are accelerating the losses. 1.3%. the ftse mib is down .3%. bond markets across europe has been positive after what has been a push higher because of the fed tapering story. the market here also digesting the latest gdp prints from the states. german bonds, 1.3% they're tracking. 4.61%. they'll look towards the sell of frech steps in the market. it will continue btp coming toot market. in total, 5 billion euros worth. we'll see whether this is soaked up in the market and at what price. you can see across the border how this has been priced.

the 30 year at the 5% mark. just a recap on the 10 year, 4.61%. foreign exchange markets, this is the latest. let's take a look at euro dollar rates. we're getting some success at pushing past the 130. we have a trade week yesterday on the european currency. this is inspired by mario draghi. that policy will remain accommodative. this, of course, push the trade down against the u.s. dollar. there has been support into the u.s. dollar trade because coming up to the end of the month, the end of the quarter. a little bit of window dressing. we are getting closer to that 100 mark out there. right down around the 93 handle. the australian dollar, a little bit of a relief. is this the play, the fact that kevin rudd is the prime minister again. also, as we come up to a strong

conservative contender or is it just that the commodities are playing out. it's a little bit hard to get a read on that. just shy of the 93 on the u.s. dollar. the sterling trade, a little bit weaker after the latest gdp which came in pretty much in line with expectations there. just a tad under on the annual date for the quarter. 1.52 is where we are trading. the commodity has been very mixed today. not great for the gold bond. oil prices are trading firmer. silver's going north, but gold is down more than 3% now. sort of acceleration in the bouillon price is taking place today. it was down sharply yesterday. copper prices though a little bit firmer as well. let's check on the rest of the action across the world and see how asia has been trading. you can see on the charts in china it's a little bit weeker. we're being joined out of singapore with more. >> yeah, indeed. thank you, karen. in fact, except for china,

pretty good day for asian markets. japan's nikkei saw its best day in two weeks, up nearly 3%. south korea's kospi wasn't far behind, up 2.9%. that's mostly due to the big jump in samsung electronics. the stock surged more than 6% today. lg electronics and lg display also went along for the rally. those stocks ended in the green. in australia, gold mine jerp newcrest was one of the top gainers up more than 6%. given that the stock has lost more than half of its value year to date. since then it's remained pretty fragile in china despite we got much stronger than expected production data. they retrained from pumping funds into the market.

it still remains around 7% in today's session. as for the banking scene, big lenders, icbc and bank of china chopped up big gains. ping an bank down 1.6%. smaller securities companies extended losses in the afternoon session tumbling between 5 and 6%. back to you. thank you very much. we do have some news crossing and this relates to a new budget for the e.u. the latest is that a deal has been struck to finalize the long-term budget. this is breaking across the wires. this means governments have reached an agreement that are ahead of the european parliament on thursday to finalize the block's long-term budget. it's been going on for months. 1 trillion euros in future funding. this suggests that there's been somewhat of a win for david cameron who wanted to see some reduction in the amount of

spending. the spending plan goes out 2014 to 2020 and we're seeing the first ever fall in real spending now for the e.u. but this is the latest, indeed, that's been crossing and just what the spending pattern looked like. i don't think that we are seeing a lot of pressure on budgets across europe. the fact that there's more conservative spending from the european governments is probably going to be taken at the polls by markets. you can see some live pictures breaking. he's speaking about the european commission president, this is shots from an e.u. parliament i'm speaking about now. they are also taking some comments across the wire. he spoke earlier. he said he was delighted that they had the budget. there's a bit of backpacking going on there as you can see in brussels today. let's return to u.s. markets. we'll check on how the session is likely to open up. we had some pretty strong gains across the main indices

yesterday. the dow 1.6%. this is the technical level some traders are taking a look at. we are trading 3 points above that level. what's key is the 1600 point mark. the data points we had out yesterday were suggesting that this would push that down the track. perhaps we won't see tapering take place in september. it might be the latest stop point for turning back some of those asset purchases that has been there. let's go to brian reynolds, chief market strategist joining us now. give us your take. do you think there is a reason for investors in the stock market to be a little bit more positive? >> yes, i do. i think the fed changed the way they viewed the world last week and that frightened investors. they had gone from a situation where the fed was saying they would interpret the data as it came in and could ease more or

ease less to shifting their view to say, we're going to make a forecast that the economy is going to be strong even though they've gotten that forecast wrong in the past and that really unnerved investors, but then on monday at the height of panic the fed which is normally hot came out and said you shouldn't overreact to what we said and now we have six fed speeches today and tomorrow and if we can get through those and hold that 1600 area, then i think we see the peak of panic and we can start to resume the bull market. >> brian, you look at some of the technicals and you're saying 1600 is key. you want to see this level held for a week. do you think that is going to happen and why is that important? >> well, the thing is is that people are panicking. we saw a retail panic start in may with fed chairman bernanke's testimony and it escalated last week with the fed's sudden change in how they view the world. and what we need to see the fed

say the next couple of days from all these speeches is that, hey, maybe we got ahead of ourselves. we were trying to forecast a stronger economy when in fact the data doesn't quite support it yet. if the fed gets back in line with investor expectations and we can hold that psychologically important 1600 level, then a lot of the panic that we saw over the last month or so can gradually start to reverse. >> brian, some of this confusion at a banking conference in paris the last couple of days with the heads of the u.s. and european banks were discussing bernanke. some people thought he was too confident in a press conference when he suggested that the fed was going to taper no matter what. do you think that was the message that got lost out there, that investors took his confidence around tapering as a suggestion that it's just going to happen in september? >> i think that was it. 100% you're on the money on

that. it was as if he's saying, hey, i'm retiring in january. the president told you i was retiring in january so i want to start the tapering before i leave and so i'm going to forecast a stronger economy and i expect the markets and the economy to go along with me. that was a big change in sentiment from the past view of the fed saying, hey, we will interpret the data as it comes in. and what we've seen since then is that the fed governors that have spoken have reinforced the fact that they want to interpret the data as it comes in. and if we see that in the upcoming six speeches between today and tomorrow, then i think investors will gain more confidence and shed some of that panic they've had over the last week. >> so watch for some more buying. brian, we'll come back to you. chief market strategist from rosen black securities. >> let's give you a look at what's on the agenda in the united states. weekly jobless claims due out at 8:30 a.m. eastern.

it dropped from 9,000. today we will see the may personal income and spending numbers. those are expected to rise 0.3%. little bit later on in the morning, at 10:00 a.m., may home sales and the fed's governor, jerome powell and dennis lockhart are speaking today. they'll look at the earnings from conagra, kb home and nike. we're going to break. coming up in the show, a climb, an interest in mortgage rates rising. we'll check on the pulse of the u.s. housing market. we're joint by mr. olson. and staying with tech, paypal is entering unchartered territory launching its galactic policy into the silicon valley. paypal is joining a slew of

other big names taking a bite out of space. we want to hear from you about investing in space as a business opportunity or an out of the world fantasy. it was tweeted as long as the infrastructure is in place, it could be ea reality. keep your feedback coming. we're enjoying the exchange. we have some more news crossing out of europe. tracking the italian auction for you this morning. 2.5 billion euros in 2018 btb bonds have been auctioned off. the yield at 3.47%. so this is the five-year paper that's come to the market. the big shares, 130 in terms of the yield changing from previous auctions. it is up almost 50 bases points

coming in at plus .46 of a percent. it is slightly higher. let's move on to this paper. the yield has come in at 4.55%. it is slightly below what you're seeing. in terms of the change from previous auctions though, .41 over the same is how much higher investors have paid up. it's at 1.46%. so in terms of what's been sold of the five year btp this is what was expected, in the range of 2 to 2.5 billion. at the top end of what it was expected. conditions are still somewhat supportive. still a little bit of appetite out there. perhaps that is the story today. there's interest from investors. how much of a difference does it

make to pay up almost 50 bases points more. let's go back out to brian reynolds for some analysis. >> it's up about 50 bases points from the last auction but that's less of a rise than we saw in the u.s. and it's actually a tter than we saw yesterday because as your screen indicates, the yields are down today. so to me that's a decent auction. what that's telling me, it's supportive of what i've been saying is that we saw the peak of panic on monday and as long as the federal reserve and other central bankers don't shoot themselves in the foot with their speeches in the next couple of days, we will see credit investors start to get back into the market and as they do, that will help support other markets like the equity markets. >> brian, in some ways this is a bet on bond prices rising and yields falling in the next few months, isn't it? >> not necessarily.

the question here -- the question since this correction began under a month ago is will higher yields be a buying opportunity or a selling opportunity? we know that as yields rose over the last month in the u.s. many yields rose over 100 bases points. that generated losses. the question is whether those losses will mean more selling or whether it will mean more buying as those higher yields attract more investors once the panic ends. we saw the panic start to end on monday and now we're starting to see more people re-enter the fixed income markets. higher yield environment as a buying opportunity. as long as that's the case, then this is nothing more than a temporary correction in the four year long bull market. >> perhaps this is the opportunity everyone's been talking about. appreciate the analysis. brian reynolds staying with us. promise to get to a break but here are your headlines. the european markets trade mixed

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u.s. citizen is on a plane head being back to the united states after being held at a chinese factory after nearly a week. speaking exclusively to cnbc the ceo of a head of medical supplies was speaking to a vendor. in the end a deal was reached. with the latest we're joined on the phone from beijing. tell us in the end how he was freed? >> in the end he was freed by -- because he actually struck a deal. once he struck the deal, local officials put him into a car. he said that he then switched into another car with some of his lawyers and then he eventually made it to the city of beijing. once he was there, he said that he ended up -- actually, what was unclear is that he eventually got on to a plane to go to the united states. there were a lot of rumors that were flying around as to how

long he was going to be in beijing. he said that he still needed to work out a lot of different issues with some of his managers and with some of his workers, but for the most part i think he decided to leave that part of his business with his general manager here and instead he fled the country because, as you said, he was being intimidated by a vendor. he said that vendor was very specific about his threats and that he feared for his personal safety and really wanted to get out. >> eunice, u.s. media has run pretty heavy with this story. what are the ramifications here? does it send the message that it's not safe to do business in china? >> well, i think that this is an isolated case. the american chamber of commerce president has said in the past that these are isolated incidents. it's not as though they happen a lot within the international business community. at the same time what i thought was really interesting was the fact that workers were -- the

workers were becoming more demanding and that you could see that wages are rising here and base wages are rising there are a lot of workers who aren't really used to the idea that business is leaving this country for other lower cost countries such as india. so, you know, in places like the united states or in your case in the u.k. there are a lot of workers who have lost their jobs and have complained in the past that they've lost their jobs to places like china and now here in china you're starting to see a similar trend but at the same time a lot of these workers don't necessarily have the same level of education that a lot of people here who are still very poor just because of the numbers in china so what's interesting, i think, is that you're starting to see already a movement of workers that you've seen in other countries but possibly a

system that really isn't able to handle it quite yet. >> part of the transition is that the government tries to get consumption economy to have that consumption. it's high ranges. eunice yoon joining us from beijing. still to come, not only is the banking system undergoing a massive cultural change, so is wealth management. after the break we bring you an exclusive of the challenges for the ministry. a look at how the futures are trading on wall street. we have early indications of what was a solid day on wall street yesterday. this is the early view. ♪ norfolk southern what's your function? ♪

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welcome to "worldwide exchange ". if you're just tuning in, i'm karen cho. stocks in europe are lower moving into the trading session despite a rebound in asia and wall street. gold down again after drops in yesterday's session. the e.u. is leading the way for making taxpayers pay. angela merkel welcomes a late night deal asking investors and depositors to fund bank failures. that's ahead in a summit in brussels. a toxic hit for european producers as lanxess is dumping

a key compound used in dyes and pesticides. chip is set free by his captors after being held captive for nearly a week. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. if you are just switching on this morning, you're going to want to take a look at how it's setting up for a trading session in the states. a little green on the charts after what was a decent day of gains yesterday. enough to carry the s&p 500 through the 1600 mark by the finish again. the early indication is that we are looking for a little bit more movement higher. this comes on the back of what was a weaker first quarter gdp. the market is now taking negative data points as good news because maybe it's pushing up down the track. fed officials hoping that the message that tapering is very much going to be the payment on the data.

investors didn't seem to believe that ben bernanke was talking about tapering. you can see on the ftse, cnbc global 300 index is positi positive .3%. the european markets not exactly playing ball today. we do have a choppy session out here. we have the periphery up a little bit. the cac in france has been underwater all morning, do down .1%. we have seen the german markets pushing into positive territory. we're almost at the 7,950 mark in the german market. the ftse has been positive this morning because of the money posting some gains. the question for investors, how do you make money in these markets. here's what some of the experts have been telling us today.

>> one of the currencies we like right now is in mexico. the market is up 3.5, 3.6 which is inflating the numbers 10.5%. >> the next couple of years you can see a scenario, especially higher bond yields. higher bond yields usually correlate to doing well, stronger economy. we like the yield in the u.k., that can be moving up which we think the market will come to terms with what's happening in china. >> interest rates coming back on the table as we see an end of

the q 1 rate. the commodities are more tightly coupled to consumption rather than investment. oil is more connected to the car industry. the industry faces margin pressure due to challenges such as inflation. we sat down and heard that the industry is experiencing significant world changes. we're joined now for the conversation. steve, i want to get to some of the take away points from this survey. the cost to income ratios are significantly lower in the americas. is this because we're seeing bonuses taken by the banks and also the fact that new i.t. systems have come into place? >> that's a good question, karen.

it's actually a function of some of the changes that we've seen coming out of the global financial crisis plus some of the aftermath of some of the regulation. the cost of regulatory compliance continues to weigh on u.s. business in wealth management. more importantly, it's changing the fundamental dna of sefrg wealth managers do. it's very much a new day in wealth management and the clients have changed. they're more digitally enabled. they're running a different type of advice and that all translates into challenges around profitability and that's what you see in the cost income ratios. >> let's get to some of the regional fallout here because there's been so much regulation across the board. you have to wonder wherein vestors are putting their money. i feel that new york, london, miami, some of the more successful managers are topping the list.

singapore making inroads. steve, is this because investors are chasing safe harbors on the tax side? >> as we look at it, singapore continues to gain momentum, it's gaining momentum over the last two surveys. it continues to grow. a lot of that has to do with asian wealth and the growth of wealth in the emerging markets. one of the things that we've identified spwc this time is that it's actually a three-speed world. you have the established and mature markets, you have the emerging markets and you have the newly emerging markets. those newly emerging markets are growing at a completely different rate. their numbers are profoundly different and the challenge that wealth managers and our clients in general are going to have to face is how do they configure

their organization for those different types of markets, different types of change and different opportunities? the risk profiles are different. the opportunity is different and quite truthfully you need a different infrastructure and different team in many cases to be able to serve the aflfluent n those markets. >> brian, what do you hear? i would like your thoughts on this as well. >> well, to pick up on that thread, in the last cycle banks concentrated on their own portfolios. they tended to trade for their own account. with all the changing in the financial market regulation, banks can't do that anymore. what they're trying to do now, everybody wants to be a wealth manager. that's also one of the things that's contributing to the profitability pressures is that this is one of the few areas

that banks can still operate in. everyone wants to do it. and it's making for a more competitive landscape. >> the landscape is the back drop here, isn't it, steve, because you also know that compliance has overtaken reputation at the top risk management concerns. spell this out for us. what compliance are we seeing that managers have to deal with? >> they're worried about suitability and fitness for the end client. they continue to be concerned not just about u.s. but about have i put the people in the right investment? am i managing it appropriately? as brian pointed out, as we move from proprietary trading to serving other people and other people's money, you need to be able to have a broad gauge approach to managing that and managing risk. as part of that, the other thing that we see is that the client

has evolved and is much more digitally enabled than we've ever seen before. they are using advanced technology and it breaks on generational lines. we have older investors who have never turned on a pc using tablets throughout the day. we have younger generations, millennia millennials, using smart phones as they do throughout the day. the industry is going to need and wealth managers are going to need to be able to communicate with these different constituencies throughout the day in the way they like to be communicated with. >> everyone wonders what people are doing on their tablets and smart phones. some of them are getting investment information. let's take a look at some of the top stories today. there are conflicting reports on whether ecuador has granted a travel pass to edward snowden. the fugitive government contractor who's wanted in the

u.s. on he is spi owe naj charges. spanish news agency efe says that's not so. ecuador's prime minister says it could take two months to decide on snowden's request. the chair of the senate foreign relations committee robert menendez warns if ecuador grants him asylum it would affect the trade regulations they have which is set to expire. in bangladesh, there's would be ri and bangladesh can sell 5 million products to the u.s. duty free which is the top market. china and its biggest trading parkts are running high. china's commerce department says they're going to slap a stiff tax on the chemical company.

the tax could run as high as 37%. the german chemical giant lanxess has been suited up. shares are going down sharply just over 5%. the tariffs will kick in tomorrow and are set to be in force for the next five years. we told you earlier how paypal is launching a galactic initiative to discuss the future of payments in space. so we've been asking you, is investing in space a bit of an opportunity or is it an out of this world fantasy. john has tweeted, space ventures are fantasy. the costs would be too steep. certainly we understand that view. keep in touch with us on e-mail, a couple of twitter handles as well. coming up, investors are

encountering some very choppy waters in the ipo market. key details about the pricing well below the initial expectations. that's coming up. 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. ♪

you're watching "worldwide exchange." welcome back. these are your headlines today. european markets trade expecting

to follow a rebound in asian history. china is slapping antidumping duties on some industrial chemical supplies. a ceo captive is set free after being held captive nearly a week. here's a couple of other stories we're following. the men's warehouse founder is denying he pushed for a sale of the store before he retired from the board. he seeked the possible sale of the shares. zimmer accuses the board of marginalizing him. zimmer earned 3.5% of men's warehouse. this is how the shares have been tracking. a little bit rocky.

up nine points. the trend has been thinner. a federal court says former aig ceo hank greenberg can continue with his suit. his firm came to the rescue and the selloff was unconstitutional. aig has opted to stay out of the lawsuit amid criticism that participating would make it appear that they were ungrateful for the bailout. in an effort to keep student loans from doubling may be on the verge of collapse. they face a july 1st deadline. stafford loans go from 3.4 to

6.8%. it would link rates to the financial markets which could mean high rates in coming years. senate majority leader harry reed says a bipartisan measure won't pass and he's also talking about protections for students and parents. how much would you pay for lunch with a top tech ceo? we're still trying to answer that question as bidding ends today with yahoo!'s chief marissa mayer. up to $95,000 with the proceeds going to a local charter school. there are a few conditions, however. the winner is subject to a security screening and they have to find and pay for your own way there. in the markets, u.s.ipos are

having a slow start. let's get to bertha king. you're having your fingers crossed in the market right now. >> yeah, you've got to be pretty brave. interestingly, second quarter we've seen a bit more activity. we've had about three dozen deals at nearly $8.5 billion raised. that's up from 29 deals in the first quarter where they raised about $7.3 billion. investors are taking a cautious approach amid the appeal we've seen in the equity markets. hd supply took a turn last week. underwriters have told investors earlier on wednesday that the deal would likely price between 18 and $20. so even then they're pricing at the low end of the range given market conditions. the industrial and construction supply company was bought from home depot in 2007 by a group of

private equity firms including bain capital for $18 billion. they'll start trading on nasdaq. they used to have four letter tickers on the nasdaq, now it doesn't matter which board you're listing on. it is looking to capitalize on the rebound in u.s. housing stocks which has been strong in the past several weeks. several companies have come to markets including home builders tripointe homes and taylor and boise cascade. the tech products retailer had cut the size and price offering by more than 15% on wednesday when its private equity owners, madison dear born and providence equity partners failed to sell 4.5 million shares.

c cdw was taken private. gogo is not grounded but it hasn't taken flight. the company writes in flight wi fi service fell on friday. it's now down about 15% from its debut price. not a very nice debut. >> thank you very much for watching the market. we're going to go to a break on "worldwide exchange." coming up, will higher mortgage rates put the brakes on home sales. we preview today's pending home sales data and do a cross-check on the data. ♪ 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.

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it's affecting the market. new home sales are hitting a five-year high and home prices posting their largest gains in seven years. the total number of mortgage applications fell 3% in the past week and interest rates jumped. joining us now is sherry olofson who is the author of "foreclosure nation." and staying with us is brian reynolds. kick it off because we are seeing a mixed view across the mortgage sector. how significant is that on the local economy? >> what we're seeing is that those areas that are hardest hit are actually in many cases rebounding hugely in terms of the prices. that's where the investors are focusing. groups like blackstone specifically are focusing on regions like florida, california, arizona for their investment. yet, the prices are still 20% below peak in a lot of those

areas. >> i was talking with someone who said he bought in 2004, 2007, in that period you'd still be underwater in your investments. there isn't a bubble in housing forming just yet, is there? >> i don't think so. not yet. in fact, part of that is driven by real low inventory. that's what's driving up prices. we're also seeing prices depressed a little bit. some of those sales, 18% of those sales, are still distress sales. the wages, the problem we have are wages are not keeping up with these rising prices but a majority of these purchases are still investors who are counting on rental income. we are seeing increases in rentals. we're not seeing prices that are exceeding the affordability indexes yet. there are targets for that. when you have increases like 15% a year, you know that's just not sustainable. >> brian, here we're seeing leads on wall street lose their appeal. do you think the housing sector is going to be under pressure here in terms of institutional

investors? >> again, the question with this rise in rates, is it a buying opportunity or a selling opportunity? the space is hit in the equity space. my sense is that institutional investors are going to view this as a buying opportunity, put more money into commercial and residential real estate, especially in the elites, so i think this is just a little blip in what is the beginning of an up trend for housing. appreciate the time. brian reynolds, chief market strategist. also, cheryl olefson, author of "foreclosure nation." that's it for today's show. i'm charn cho. thank you for watching "worldwide exchange." coming up lloyd blankfein and hank paulson. you can watch that on "closing

bell" from 3:00 to 5:00 p.m. what role can i.t. innovation play towards a clean energy future? energy opportunities. meet the chal college, join the brainstorm in association with shell.

good morning, everybody. welcome to "squawk box." joe is on vacation. he'll be back next week. let's start with today's market

agenda because it is a fairly packed one. we do have weekly jobless claims coming up. they're set to hit the tape at 8:30 eastern time. we have pending home sales at 10:00. plus we have a whole lot of fed speak as well. fed speakers could shape today's session. we have new york fed chief dudley speaking at 10:00 a.m. they say that no one other than bernanke or janet young has more credibility about conveying what direction the fed might take. on top of that, you also have some other fed speakers including governor jerome powell and dennis lockhart. on squawk yesterday they were talking about policy and central bank's communication. >> as the economy improves, people should expect interest rates to go up because the fed should go with the economy as the economy improves. that's a good thing. i think a lot of the movement and this is where i