welcome to "worldwide exchange." i'm carolyn ross. these are your headlines from around the world. japan's abenomics gears down at a slower than expected pace in the second quarter leading to more government second-guessing over hiking the sales tax. the bank reportedly expects a fresh rescue plan for greece to happen by early next year, fueling criticism from the opposition that the chancellor downplayed risks of another bailout. second quarter greek gdp data is out in one hour from

now. u.s. authorities may be stepping up their criminal investigation of jpmorgan. reports say they may arrest two former employees for allegedly hiding the size of losses. and prudential is expected to raise its dividends thanks to growth in its asian and u.s. businesses when it reports for top numbers in 50 minutes' time. we speak to the ceo first on cnbc. that's at 10:35 c.t. you're watching "worldwide exchange," bringing you business news from around the globe. >> hello and good morning, everyone. ross is out on holiday this week, so i'll be filling in for him all this week. are emerging markets already a missed opportunity? at 10:20 c.t., very investigate the results that south africa may still hold a few diamonds in the rough.

drug crime has boomed globally despite continuing efforts of authorities. in the first episode in a week-long series on crime, we'll bring you a special reports on the drugs trade. and greek gdp figures for the second quarter are released. and the usda crop report is due out later today with some analysts forecasting record high numbers for corn and soybean harvests. join us at 11:20 as we take stock of the stock commodity picture. send in your e-mails if you have any questions, any comments on what we're discussing today. and one of the top stories that we're following for you today is obviously the japanese economy. well, it grew at a slower than expected rate of 2.6% in the second quarter. heightening calls for the government to delay a controversial sales tax hike. top adviser insisted that prime

minister shinzo abe is in no hurry to raise the tax and could consider delaying the measure by one year. now, we did see the japanese economy growing by less than expected in the second quarter, but i just want to give you a look at what abenomics has done so far in terms of boosting the economy. remember, the first quarter of 2013, we did see a nice boost of 1%, and we were expecting the second quarter to continue at this pace, but no, it did come in less than expected at 0.6%. but keep in mind, abenomics has done a whole lot to stimulate the economy. just compare that to the third quarter of 2012 where we still saw gdp at a quarterly rate of 0.9%. i also want to show you what the cpi picture is looking like, just because one of the -- the key pillars under abenomics is obviously to double the inflation rate, the cpi, by

2014. he's aiming for a 2% number. we're still quite far away from that, but at least cpi has been rising in june and july. take a look, 0.4% in the month of july. but again, there are many critics out there saying we may not be reaching that 2% rate by 2014. and the nikkei has seen a stellar rally thanks to abenomics. it is up -- this is the dollar/yen, in fact. the dollar/yen currently around 96. we've seen it hovering at that 100 level over the last couple weeks, but we have seen the strength in the yen of late and the nikkei has rallied quite substantially since the start of abenomics. joining us from hong kong, andrew sullivan, director of asian sales trading. andrew, thank you so much for joining us today. so the gdp number came in lower than forecast. what will the effect be on the

government's decision to introduce the sales tax hike? >> i think looking at the numbers, the first thing to realize there is that there is consumption taking place, which is one of the key things, and that we are seeing deflation is less of a problem. so those, again, are positive points about abenomics, but i think the market does want to see them bring in the sales tax, and they'll also be looking for the government to be addressing some of the other issues that were talked about before the election. so reform of employment, reform of maybe the pharmaceutical sectors, and really just to see how they are going to implement. there are a lot of tough decisions that have to be taking place. but the key thing is that they're continuing to move in the right direction. so the stress really must be on that that momentum keeps going. >> if you break down the gdp numbers, we see that it actually was pretty strong. but if you look at business spending, that's down for six

quarters. we saw delays in housing, delays in cap ex. despite make you more confident knowing that some of these factors will actually take place over the next couple quarters? this is really just a delay to some of the stimulus that we're expecting to see. >> well, i think companies, just like investors, are really waiting to see the government put into practice what it's already been saying it will do. on the consumption side, i think that the concern is that so far a lot of that consumption spending has been due to higher fuel costs, which has been due to the weakening of the yen. so we're not yet seeing wages rise. and it's really wages that will be one of the key drivers for getting people out there and spending money. they have to be confident that their wages are going to go up. they have to be confident that there is inflation there and that it's worth buying the new television today rather than waiting for a month or two. so we've really got to try and

get this change of mentality into practice. and one of the key things that we have seen and notably from some of the larger companies and probably from some pressure from the government is looking and talking about increasing cap ex going forward. well, that's a real confidence boost. but they'll only do that if they can see real demand and use the demand for the products they're going to produce. so it's a bit of a chicken and egg. and really it's up to the government to pump prime and push it forward. >> andrew, it really is a loose situation for the japanese government, it seems. if they're not going to be implementing the higher sales tax, they may be seen as not following through in terms of reducing their excessive debt levels. 200% of gdp. if they do implement it, they could be seen as choking off the recovery. is there a good solution out of this? >> well, you know, it's a difficult question whichever way you look at it.

i think the key thing is, though, that the market, in general, will want to see them implementing the policies that they have talked about. now, consumption tax is a very thorny issue. we've already had kuroda saying he doesn't see that as a big negative to the economic growth. but obviously looking back at the japanese economy, we have seen occasions beforehand where we've started to see the signs of recovery coming through, only to be quashed by taxes being brought in too quickly. so no doubt that abe is very much aware of that. we have at least a template on the -- out for people to see as to how they might implement it. and of course, we're not talking about anything happening till really next spring, but we want to know they're going to go down that path. again, consumption tax will be another reason for the general investment parties to be confident that government will make tough decisions. and there are a lot of tough decisions that it has to make, and this is just the first up with. >> you know, i was just talking

about the pressures from market participants on abe's plans to lower the deficit, to lower the debt level. you know, it's interesting. the yield on the ten-year today was lowest in three months. so investors don't seem all that concerned by the fact that the sales tax may be delayed. so are we just overly concerned, or are we just too consumed, really, with the debt levels? is it not a big concern for the markets after all? >> well, the market's waited a long time for this to happen, so we're only a few months in, really, realistically we're six months into the abenomics anyway. there's a long way to go. he's won the upper house. he's got a mandate which is going to last for a few years. so there is scope and time frame to do that. it's like most things. people are worried about a lost opportunity and not really, you know, taking the opportunity here to drive these changes

through. and these are changes that japan really needs to see happen in order for a change of thinking to occur. because if you don't think things are going to go up, you're not going to go out and spend money, and we're not going to see all that money that's currently held by either domestic institutions or by the general public being spent. and until we see that, then we're not going to see the full recovery coming through. >> andrew, thank you so much for those thoughts. andrew sullivan, director of asian sales trading. and let's check in on markets in asia. lisa schwinn is standing by in singapore. we are seeing weakness on the nikkei yet again. all right. it seems as though we are having a little bit of a microphone problem with our correspondent there in asia. but what i can tell you is that the nikkei has been underperforming on the back of the worse-than-expected gdp numbers out of japan.

now, we did see the nikkei down by around 0.6% last time i checked. other than that, asian markets are doing a little bit better across the board. also want to show you what european markets are doing because they are lower except for the ftse 100, which is pretty much flat. it is very much flat. but the dax, the ftse mib and the ibex 35 down in spain, they're all lower to the tune of 0.25%. this follows a pretty positive week for european equities last week in which were up by 0.6%. generally corporate earnings reports were better than forecast, so this really boost the indices. we also had a very strong spate of economic data. that boosted those indices as well. let's take a check of the bond markets now. the ten-year yield is at 1-7.

an auction in italy, we'll see 12-month bills being auctioned off. that's in around one hour's time. ten-year treasuries below that 2.6% level in terms of the yield at 2.58. and the ten-year gilt at 2.48%, just below that 2.5% level. the dollar-yen is, of course, the most interesting one of the day. we did see the dollar-yen dip below that 96 level just after the gdp data came out, but it rebounded quite strongly after that. take a look, now up by 0.6%. this is after we got rather reassuring comments from the japanese economy minister saying growth in the country will continue to be strong. the dollar index off by around 1% last week against the u.s. dollar, the aussie dollar against the greenback currently trading at 91.50, back above that 90 handle but still trading close to those three-year lows. cable sterling/dollar off by

0.2%. this is on the back of those greek comments which we're going to talk about in just a second. germany's opposition parties have seized on a report that alleges greece will need a fresh round of aid early next year. as evidence, angela merkel is lying to voters ahead of the elections. a bundesbank report, greece will need fresh aid in 2014. germany's finance ministry declined to comment. and we'll find out more about the health of the greek economy when we get second quarter gdp at 11:00 c.t., and we'll, of course, have instant analysis for you. the data may not be due until wednesday, but france's finance minister insists his country is out of recession. he told reporters in paris that gdp data due to be released

august 14th will show a 2% rise in growth following two quarters of declines. >> translator: we are out of recession, and what does this mean for us? recession is having two quarters in a row of negative growth. that's what we had. last quarter of 2012 was the -- and the first quarter of 2013. now we've entered a period of positive growth. that will be the case for the second quarter of 2013. >> on wednesday, gdp data will also be released from germany, portugal, the netherlands as a whole. meanwhile, u.s. authorities are reportedly considering the arrest of two former jpmorgan employees for their alleged role in hiding the extent of the more than $6 billion london whale losses last year. sources tell cnbc u.s. the prosecutors are seeking the extradition of the man who worked in the bank's london office and was the trader's

direct supervisor. the other person is julian grout. reports say timing of the arrests and extradition are unclear, and lawyers for the men aren't commenting. he is reportedly cooperating with authorities and isn't expected to be charged. jpmorg jpmorgan, if we can bring up the board, is down by 0.2% in trading over the last three months, it's up by 8.7%. now, we are still waiting for numbers from prudential. earnings are set to hit the wires any second now. now, we are, of course, expecting a hike in the dividend. you know what? they have just come out. i will give you the details, frs operating profit of 1.415 billion, this is an increase of 22%. we were expecting an operating profit, though i'm not quite sure whether this is the irfs

one of 2.7 billion for the first half of the year. first half operating profit at 1.42 billion. the interim dividend increased by 15.8% to 9.73. this is a little higher than what they anticipated. the first half new business profit came in at 1.27 billion pounds. that looks to be higher than forecast. so again, prudential raising its dividends to 9.73 versus 8.4. this is in the same period last year. we are going to be talking to the ceo of the business, prudential ceo speaks first to cnbc. tune in at 10:35 c.e.t. according to our next guest's latest report, which emerging market still has investors feeling positive? stay tuned to find out next. [ male announcer ] i've seen incredible things.

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welcome back to the show. i just want to recap those prudential earnings for you. numbers from the insurance giant, at first glance look to be pleasing because the market

was looking for a dividend hike, and yes, they got that. the dividend was up to 9.73 pence versus 8.4 the year before. they usually hike it by one-third of the previous year's. so we would have expected a number of 9.69. this would be an increase of 15%. so we got a little bit more than that. so this should be pleasing investors. just want to bring you a couple of other numbers. the first half net profit came in at 365 million pounds. eps of 14.3 and the pretax profit of 506 million pounds. new business profit looks to be beating expectations at 1.27 billion pounds. all right. let's move on. coming up, prudential ceo speaks first to cnbc. that's at 10:30 cet. in other news, china's banks made $114 billion worth of new

yuan loans for the month and money supply grew unexpectedly to 14.5% from a year earlier. let's check in on markets on the back of these better-than-expected numbers. li is in singapore. >> thank you, carolyn. asian markets traded mostly to the upside. let me start with japan because despite a slightly weaker currency, the nikkei is the worst performer in the region as q2 gdp data surprised on the down side. the index lost 0.7% in today's trade to end at a six-week low. the rest of asian markets shrugged off the gdp data, getting a lift on healthier growth expectations out of china. as carolyn just mentioned that china's banks made $114 billion worth of new yuan loans for the month. and to money supply also came in higher than expected. on the back of this data, the shanghai composite jumped over 2% today. and the hang seng in hong kong

also gained over 2%. as for some individual movers in japan, real estate developers and financial stocks led the losses. and some exporters also came under pressure today. dainippon tumbled after q1 results and a ratings downgrade by goldman sachs. shares jumped over 16% after the company raised its profit forecast for the year. meanwhile, asian resources stocks also extended a strong winning streak. a list of gold miners rallied on expectations of higher prices and supportive policies. in australia, miners also surged, tracking higher commodity prices. evolution gold surged over 18%. back to you. >> thank you so much for that. india made some progress in cutting its trade deficit in july. exports surged nearly 12% on year to more than $25 billion

while imports slipped more than 6%. but the trade deficit still sits at more than $12 billion. now, that's likely to continue pressuring the current account deficit, and by extension, the rupee, the currency, meanwhile, south africa is outperforming other emerging markets when it comes to investor confidence. that's according to the latest survey from citi wire which shows fund managers looking to decrease allocations in china and india. joining us now is charlie parker, editor at citi wire. thank you so much for joining us today. how are you? >> very well, thanks. >> fantastic. so this survey to me and to a lot of people in the investment community probably doesn't come as a huge surprise. with the tapering debate, we're seeing sentiment in the emerging markets certainly taking a hit, but talk us through the main findings of this survey, and talk us through some of the surprises like south africa. >> yeah, so we conducted this with deutsche. and we spoke to 100 global fund

managers, they represent about a quarter of a trillion of assets. at the end of the first quarter this year, we had already seen that negative economic news start to come through from places like china and india. but fund manager sentiment remained relatively buoyant. now at the end of the second quarter we've taken another reading of those 100 fund managers, and there's been a substantial decrease in sentiment. really most profoundly felt in places like china and india. at the end of the first quarter, despite the beginning of negative news, they were still adding money. it was still net money coming in from these guys. it's now net down in these big economies. those that are doing a bit better in the eyes of global fund managers are really those where you started with lower expectations. south africa, it's never been a great star, but look, it wasn't quite as much hope as the others. so that's attracting marginally more money coming in. and also those economies where in the face of bad news, it's priced in more quickly because they're more cyclical like south korea where some people are

saying well, actually, the valuations now are looking okay again despite the economic headwinds. >> but you've got to wonder, with chinese data last week, turning a little bit more positive, some people are now calling the bottom, is now not the right time to go bargain hunting in some of these markets? do we expect sentiment to turn around quite quickly? >> well, these guys seem to believe valuation is fair in china but certainly not cheap. it took them quite a long time to come to terms with the idea that they should be reducing their holdings in china because the assumption had built that when things go wrong in china, the government steps in. it fundamentally won't let anything go wrong. so there has been quite a substantial shift to get to this place. and i think it may take some some file for that to begin to unwind, helped by pretty dramatic notes from some of the investment banks. barclays for the first time, talking about 2%, 3% growth as a conceivable option in china. now, a year ago that would have seemed absolutely absurd. >> on this barclays note, for

example, don't you feel like fears over china's slowdown are completely overdone, and that's why sentiment, as shown in one of these surveys, is taking a huge hit, too, which is not necessarily representative of what's really going on? >> well, time will tell. but what you've had in china for recent years is very buoyant economic growth numbers which if you've ignored the very profound and economic change taking place in this country, it seems inevitable to me that because the whole structure of their economy has to change so much in such a short period of time, we will get bursts of very negative sentiment and news. there is going to be a wall of worry to climb here. >> thank you so much for those insights. fascinating especially with regards to south africa. thank you so much, charlie parker. norway's prime minister has been moonlighting as a taxi driver in the run-up to the country's election. the prime minister revealed he recently spent the afternoon driving around oslo, picking up

passengers, wearing a taxi driver's uniform. the exchanges with passengers were recorded by a hidden camera, and the footage will now be used as part of his campaign. so we want to know, what job would you do for one day if you had the chance to take time out from your regular work? join our viewer exchange by e-mail at worldwide@cnbc.com or via twitter or direct to me. prudential's operating profit jumped 22% in the second quarter. and up next, to discuss the earnings, the ceo speaks first to cnbc. stay tuned.

japan's abenomics-fueled economy gears down with gdp clocking in at a slower than expected pace in the second quarter leading to more government second-guessing over hiking the sales tax. the bundesbank reportedly expects a fresh rescue plan for greece to happen by early next year, sparking criticism from angela merkel's opposition that the chancellor downplayed risks of another bailout. second quarter greek gdp data is out in one hour. the u.s. authorities may be

stepping up the criminal investigation of jpmorgan. reports say they may arrest two former employees for allegedly hiding the size of the london whale losses. and prudential raises its dividend nearly 16% after operating profit jumps. the group citing solid growth in asia. ceo tidjane thiam is with me on set for a first-on-cnbc interview. before we get to that very exciting interview, i do want to show you where european markets are early on in the trading session. we are seeing a little pressure across the board, not to a great extent but modestly softer picture. the ftse 100 is down by 0.25%. the xetra dax now off by 0.3%. we still are close to two-month highs for these european markets. don't get me wrong, we're not

seeing a big bout of weakness across the board, but obviously since its august volumes are pretty low, but we will be getting more earnings throughout the next couple days, so that may get the markets a little more direction. let's take a look at the bond yields. the ten-year bund yelled is at 1.71%. we get an auction later in the morning. ten-year gilt yields at 2.48%, just below that 2.5% level. and the ten-year jgbs, i just mentioned that yields are at a three-month low so investors not too concerned about the gdp numbers we got this morning. and the implications for the sales patax, a potential delay. the ten-year u.s., 2.59%. and finally, a look at the currency markets where we are seeing dollar rebounding against the yen after some initial weakness on the back of the

weaker-than-expected gdp report coming out of japan. it is now up by 0.5%. euro-dollar, a little weaker, down by 0.3%. this is after we got the report about greece potentially needing more financial aid and cable sitting at 154.73. if you have any comments or questions to anything that you're seeing on the program, do write in to worldwide@cnbc.com. now, prudential has hiked its dividend by nearly 16% to 9.73 pence after posting a 22% jump in first half operating profit. the uk insure is looking forward to the rest of the year with confidence and says it is on track to double asia's 2009 new business profit by the end of the year. let's take a look at how shares are responding to this report. they're up by a little bit more than 2% at 1208.

joining us now for a first-on cnbc is tidjane thiam, ceo at prudential. thank you for joining us. >> thank you for having me. >> how do you feel about these numbers? >> we feel good about these numbers. the results are good. we have hit four of our first six targets for 2013 early. we're quite pleased. asia is continuing to do well. you've seen profits are up 22%. 32% in the u.s., which has also come back very strongly. m&g in the uk, for the first time above 200 million pounds in the first half and uk business is continuing to do well. overall a very good performance. >> now, you seem surprisingly sanguine about what's happening in asia. many of your competitors were hit very hard by the slowdown. the worries around what's happening in asia, how is the

emerging market weakness affecting you? >> it's not really affecting us because we are in a very early stages of the development of the market. what we are doing fundamentally is going into those markets and providing health insurance, out-of-pocket expenditures for health are the highest in asia, so it's an obvious case for bringing in insurance. because when people are insured like in the uk, out-of-pocket expenses are about 9%. in that space, we call it a protection gap. we can go in, sell people a policy, and everybody wins. it's a huge benefit. you can take something that cost 10,000 pounds, 80% savings for them. the company can make a good return and society at large. so it's really the fact that the penetration is very low. in all those countries we have between 0.5% and 1% of the total population. in the uk, we peaked at 11% of

the total population. so you can see the headroom there. although we're the biggest in asia, we're still very small compared to the size of the opportunity. >> so would you say that worries over a hard landing in china are completely overdone? >> it's a personal view. i don't think they're completely overdone, but i think the chinese leadership has many levels. i think it's been explicit in its will to rebalance the economy, drive more consumption, less export and less investment, and they have the leverage to do that. so the growth, if it's 7 or 7.5, if they wanted to, i believe they could take it to 9. so i think the fear, i think, would get out of control in china. but in the end, they will do okay. and if i can add one point -- >> sure. >> -- we believe that in the next 20 years, the world gdp is going to grow $47 trillion.

whenever china grows plus or minus 1 percentage point is the difference between $15 trillion and $20 trillion. asia is going to dominate world growth over 20 years to come. i think there's an excessive focus on growth rates, forgetting about the amounts. >> let's talk about the dividend because you are giving your investors a little bit more than what they had expected. up 16%. what does that increase in the dividend tell investors? are there not any suitable m&a targets out there? are you confident enough to be returning that much to the shareholder? >> we have a really very advantageous position where we get a lot. just to give you a few numbers on each one, china is at 42%. the philippines are 38%. hong kong is 21%. singapore is 21%. korea is up 38%. and i could continue. so when you're enjoying that type of growth, frankly, you are

in an ideal position to do m&a because you don't have to. and it only creates value because it has bargaining power. because it's really very attractive, so we can be selective and do m&a only when it's extremely attractive because we can grow anyway, and that's a very comfortable position. investors understand that. we're quite cautious. a funny statement to make when you've just raised it by 16%, but it's giving us -- how can i say -- this overgrowth we can capture, and we are not trading growth from dividends. so first we fuel our appetite for growth, and then we set the dividend. >> let's leave asia to one side for a moment. i want to talk about what's happening in the uk and in the u.s. with the new bank of england governor, just give me your initial thoughts about forward guidance.

how much is it really going to do to stimulate the uk economy, and at the end of the day, your clients, your consumers? >> i'm not going to make specific comments about what the governor said, but i know mark, and i'm extremely supportive of him, and i think he's the right man for that job and will drive the uk economy forward. as far as the u.s., i think the recovery there is certain. and it's clear, i go to america regularly. you talk to people in every sector. what they've been able to do is restructure their banks and get real estate going. and those two things are powering the economy forward. so as the u.s. recovers, that's also very good news for asia and the rest of the world. so we are much less worried than we've been in the last four or five years. >> in the last quarter, we saw many analysts being concerned over the new business margins in the u.s. how do you see that evolving, and how did that play out in the last quarter?

>> it's a really interesting point. what hatppened in the u.s. is equity markets have gone up and long-term interest rates which matter very much for our industry, and those are two very good things because fundamentally, our revenues, we charge on the asset base. the more assets increase, the higher they are, frankly, the more revenue we get. and the fact that long-term interest rates have increased means that our long-term commitments. so if you look at our book of guarantees, it was 10% at the end of 2012. it's now 2%. so 98% of the options we sold to the market are out of the money. so our business is in a very healthy position, and it's also due to the timing we had in selling. we're always very careful of selling at the right time. other players, it looks very different. we have a lot of options in the money. >> can you say, then, for the entirety of your business what

the effect will be of rising interest rates? rates may be stuck at a record low for the next two or three years, but what about the rise in the long-term interest rates and the effect? >> it's a positive for our sector and for our company. if you remember during the crisis when interest rates fell, the insurance sector was hit very hard. fundamentally, we are a prms on the future. it's a very simple business. the higher long-term interest rates, the easier it is for us to meet our commitments for our customers. it's simple. we encourage people to invest in the long term. higher long-term returns, the better it is for our business, so it's a positive. when you've seen the sector rallying, it's one of the best performing sectors this year. >> tidjane, i know that you're a staunch opponent of what kiwi is doing, how it's depressing interest rate. now we see abenomics more qe. in the uk, it's more of a split picture.

the u.s. is winding back qe. do you feel that policymakers, do you feel that central bankers are doing the right thing as far as your industry is concerned? >> we're in a difficult place. i understand why. i'm not a big fan of qe. i thought that qe at the time of the crisis has been very effective. it's averted a 1930 crisis. my relentless questioning has been on what is the exit strategy? what long-term investors need to understand is what is going to be the shape of the exit. what speed is it going to happen and when because depending on how that is done, the impact on the economy can either be benign or actually quite significant, and which is why we keep our balance sheets in a defensive position. what we haven't had in this cycle is actually a credit event. a lot of companies which usually are killed by cash flow or lack of cash flow are kept afloat.

so we want to make sure that our balance sheet can withstand such an event if and when it happens. and i think what it's trying to do is actually time that so that we get a credit event when balance sheets can perform. >> another topic that you've been extremely vocal about is regulation. we have seen obviously this increase in regulation, whether it's solvency. now the fsb is coming out with higher capital requirements for insurers. even though you didn't really cause the crisis, what are your thoughts on that? are we going too far with this? >> well, i think solvency is not an example of how to do regulation. and i'm just quoting here. it's been quite critical. directly but also indirectly because uncertainty weighs on the decisions and valuation of the sector. look, we've been designated as a globally systemically important

institution. we as an industry do not believe that insurance causes systemic risk. they are making that case with u.s. authorities. we'll make the same case here in the uk, and hopefully we'll be able to convince. >> hopefully more compromise there. thank you so much. >> thank you so much. >> it was a pleasure having you around the desk. tidjane thiam, ceo of prudential. moving on, japan's second quarter gdp came in below expectations, fueling calls to delay the hike in the country's sales tax. our analyst from the nikkei has the story live from tokyo. hi there. >> hello there. prime minister shinzo abe had said gdp data will influence his decision on whether to go forward with a consumption tax hike. and under the current plan, the 5% consumer tax will be raised in two stages to up to 8% next april and then to 10% by october

2015. and the weaker-than-expected 2.6% gdp growth didn't seem to worry abe today who said the numbers underline steady economic growth. but it has made some cautious, and abe's close economic adviser said raising the consumption tax as scheduled will have a negative forecast on the still-fragile economic recovery. and he suggested delaying the rates for a year saying a 4% gdp growth is needed to carry out the tax hike without risking a slowdown in the economy. and another economic adviser also voiced his concerns saying that the hike could kill off the momentum for overcoming deflation. however, though, in general, government ministries are eager to stick to the tax hike as planned. the economy minister was upbeat, saying the economy is entering a positive growth cycle, and the gdp figures show that conditions are favorable for a tax hike. bank of japan governor kuroda also supports the hike, saying last week at a press conference that overcoming deflation while raising the tax is possible and

that any negative effects would be temporary. so amid all this, prime minister abe is expected to wait for the revised gdp data that comes out in early september and then make a final decision within the month. that's all from nikkei business report. back to you. >> thank you so much for that. some shareholders have shrugged off the international trade commissioner's ruling on friday that will ban some products in the u.s. now, that's largely because it will likely apply to older models like the galaxy "s." plus samsung has hinted it's already making changes to keep more gadgets on the shelves. and if the white house doesn't strike down this decision in the next 60 days, samsung says it will appeal. with more on this story, our reporter is in seoul. shares didn't really react too much to it. as the introduction there indicated, this is because it is applying to older models. is samsung really adjusting the newer models to make sure it's not going to be hit by this at

all? >> well, carolyn, we know that samsung is pretty savvy with its strategy. so that's going to be its plan. and those four models, as you said, that are banned from sale are older versions. they didn't cite specific models, but they're believed to be the galaxy "s," s2 which are pretty much off the shelves anyway. and samsung will make modifications to existing models or new versions in order to make sure that they don't infringe on apple's patents. if you're wondering about the more recent models, apple did file another complaint in u.s. court seeking to ban the sale of galaxy s4, but that case doesn't go to trial until next year. so future rulings won't have much impact on the actual numbers. but obviously the korean government will be quite upset with the obama administration if they don't veto samsung's ban in the next 60 days. many also blame the u.s. government for triggering a trade war, and that means u.s.

authority and the overall mood in the country are favoring apple. bear in mind, foreign ownership of samsung stocks have slipped to 47% which looks like a lot, but it's actually the lowest in more than three years. so samsung is perhaps also worried that this ruling could have a kind of ripple effect across the world. but for now investors don't seem to be too concerned at this point. back to you. >> thank you so much for that. still to come on the show, over the past five years, the global financial landscape has changed, but what has the crisis done for illicit industries? this week we'll take a look at the economics of organized crime starting with drugs up next. [ kitt ] you know what's impressive? a talking car. but i'll tell you what impresses me.

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the financial crisis has shifted the operations of europe's organized crime gangs which are exploiting new opportunities in everything from the synthetic drugs trade to counterfeiting and cyber crime. this week we'll be focusing on the evolving nature of organized crime and its economic impact. and we start by looking at the drugs trade. with more, tom mckenzie is in the studio. tom. >> thanks, carolyn.

yes, the global drugs trade is worth about 435 billion u.s. dollars every single year. let's put that in 134 content. that's equivalent to the gdp of belgium. the cocaine trade alone is worth 84 billion u.s. dollars. and that is a trade that actually has changed. whereas back in 2005, u.s. users of cocaine made up about 50% of global users. that's now down to 27%. european users of cocaine about flat about 25%. but there has been a pickup of emerging markets. africa, asia and latin america for cocaine. around 35 million people used amphetamines in 2011, up slightly as well. but the drug of choice very much for europeans is cannabis, around 23 million people using in 2011 alone. and then there's new psychoactive substances otherwise known as sometimes as legal highs. and these are being churned out on an almost monthly basis. they're around 166 of those back

in 2005 according to the u.n. that's back up now to around 251. it's probably increased since then. the internet really helping to push that trade forward. and it's a hydra-headed problem. every time they regulate against one of these legal highs, then another one is created. ross caught up and spoke to a senior fellow with the center for 21st century intelligence with the brookings institution and talked about how the trade has changed. >> the drug trade is becoming more global. new countries have emerged. for example, brazil and argentina arguably now have per capita drug consumption on par with the united states. russia has been going through a major heroin epidemic over many years, and china is robustly back again as drug-consuming countries. meanwhile to supply both europe and other parts of the world,

africa, east africa is becoming the new trafficking area. so the drug trade is truly becoming very global with flows going across the world, increasingly while the political realities are changing in latin america, and particularly countries are moving toward very different regimes. breaking the existing global narcotics regime. >> so with this changing world, can they really achieve anything like a coordinated drug policy on an international level? >> it's going to be very difficult to imagine how that could be the case. in 2016, the united nations will go once again through its reviews of drug policy. and there are large hopes that perhaps the u.n. regime could be reformed to allow for approaches

to allow for public health approaches to treatment of users. and to the extent that there are likely to be any changes, this is probably with respect to adopting public health approaches with respect to users. but beyond that how one deals with supply side, how one deals with trafficking, there is really not any concerns. in fact, increasingly there is a very strong dissent. very different opinions as to how to manage that within latin america itself. brazil, very important demand place right now. for example, it does not want legalization, yet at the same time countries such as uruguay and guatemala are talking about legalization. and then you have china and russia who today are far more doctrinated in supporting the existing regime and tightening law enforcement than the united states was in the '80s in the

heyday of its most stringent, most aggressive counternarcotics policies. >> from the brookings institute talking to ross about the evolving drugs trade. stay tuned tomorrow where we'll be talking about cyber crime and the economic impacts of that. carolyn, back to you. >> tom, thank you so much for that. some very fascinating steps. meanwhile, china has launched an investigation after claims of bribery. according to the news agency, the french drugsmaker is accused of paying more than 500 doctors in bribes which were disguised as research grants. it comes as chinese authorities widen in a clampdown. it says it takes the claims, quote, very seriously and is committed to cooperating with authorities. shares in the company are down by a little more than 1%. and researchers in japan have withdrawn studies that touted the benefits of novartis's heart medicine. it's after investigations showed

that data had been altered to produce inaccurate results. novartis denies any research distortions and said it stands by its most popular medicine. let's see whether it's had an impact. down by 0.3%. and let's give you a look at what's on the agenda in asia tomorrow. more clues on the state of japan's economy. june machinery orders will be released along with minutes from the bank of japan's july meeting. resources and automotive earnings also in the spotlight with mahindra & mahindra all reporting. germany's chancellor under attack. so what's at stake with elections drawing near? we discuss as we bring you breaking gdp data out of greece. [ male announcer ] it's time.

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welcome to "worldwide exchange." i'm carolyn ross. these are your headlines from around the world. u.s. authorities may be stepping up their criminal investigation of jpmorgan. reports say they may arrest two former employees for allegedly hiding the size of the london whale losses. japan's abenomics gears down at a slower than expected pace in the second quarter leading to more government second-guessing over hiking the sales tax.

prudential's ceo in a first-on-cnbc interview saying that the uk is focusing on organic growth. >> we can be selective because we can grow anywhere, and that's a very comfortable position. investors understand that. and the bundesbank reportedly expect a fresh rescue plan for greece to happen by early next year, sparking criticism from angela merkel's opposition that the chancellor downplayed risks of another bailout. second quarter greek gdp hitting the wires now. as i said, greek second quarter gdp just hitting the wires. the second quarter unadjusted seasonally unadjusted number is minus 4.6% year on year.

this is versus an analyst estimate for a 5% contraction. so this is the only number that we got so far. it seems as though it did come in a little bit better than expected. this follows a contraction to the tune of 5.6% in the first quarter. joining us now is antonio garcia pasquale of barclays. antonio, thank you so much for joining us today. your instant reaction to the numbers? >> sure. i mean, we have to take the quarterly figures for greece with a pinch of salt because they tend to be quite revised. but as you mentioned already, they did come in a little bit bett better than the market was expecting. when you look at survey indicators, they signal somewhat stabilization. so with respect to for the rest of the year, there's still contraction. and some sort of equilibrium into next year. >> can you actually say for the

greek economy that the worst is definitely over, or are there more dangers lurking in the background? as you say, we did see some pretty encouraging signs like the trade beginning to rebalance. we see inventory restocking, but are these just temporary factors? could there be a false dawn for the greek economy? >> i think they all point in a similar direction. it's not just one indicator signaling somewhat, you know, more positive trends. but i think it's still a lower pace of contraction rather than a recovery. the recovery is likely to come more next year. so it's less of negative growth rates. as you point out, that comes from stronger exports. and also something that is very relevant for greece is the fiscal accounts. which it is suspected for the second half of the year to print its first primary surplus.

that is very important for negotiation issues. >> coming back to exporters, are they actually more competitive now, or is the rebalancing of the trade account, is that just because imports are actually doing better? >> there's an important point you're making which is the gains has a lot to do with impact label shedding. and some sectors actually have seen some wage compression, but not as much as, you know, to fill in the competitive gap that it is experiencing. but i think overall the trends for exports and gains are pointed in the right direction. so i think therefore they are beginning to pay off. it's just that what is ahead is still very challenging on the fiscal as well as structural reforms. >> let's remind our viewers of another big story this morning. germany's opposition parties have seized on a report that alleges greece will need a fresh round of aid early next year as

evidence angela merkel is lying to voters ahead of the election. over the weekend "der spiegel" says reforms had been satisfactory and a new plan would be unveiled. germany's finance ministry declined to comment. antonio, is this a big surprise? it seems as though this is the worst-kept secret in all of europe. we know that something is going to be happening on september 23rd, the day after the german elections. whether it's a new aid package or an osi. would you agree? >> i mean, clearly 176% of gdp doesn't work for this country. and there's been commitments that once the country reaches a primary balance close to zero or a surplus, so this is not new news. so indeed, we can understand why germany does not want to discuss this issue because it's a very hot issue.

it doesn't really -- it's difficult for politicians to sell more aid to southern europe. but definitely this is something up for discussion. may certainly towards year end or by beginning of next year, we should see an important discussion on debt relief. and as you mentioned on public sector, relief on the european loans, either extensions, production of interest rates or the position taken by the esn. that is a possibility for sure. >> we just got the italian ten-year results. 1.053. this is versus 1.078 on the last auction, july 10th. so we see average yield in the primary auction coming down. the primary market coming down just a touch. the ratio was 149 versus 156 on july 10th. antonio, should we be concerned about slightly lower bid to

cover ratio given that we are in a summer lull? >> i think, as you mentioned, this is typical -- this is typical for this time of year. you also need to keep in mind that there are political difficulties in italy. there is a bit of calm during the summer. so i don't think this number should be a surprise, no. >> antonio, thank you so much for that. i think you are sticking around. antonio, chief southern european economist at barclays. all right. i do want to show you what's happening in the european markets. we did see a positive start to the trading day, but then we did turn negative, as you can see here. just shortly after 9:00. some of the auto stocks are underperforming. there was no major big event that didn't make european markets take that lower, but

overall we're seeing volumes pretty low. maybe a little bit of profit taking. given that we still are at two-month highs. and of course, we are still trying to digest more and more economic data. keep in mind the gdp data for the eurozone is out on wednesday. now, let's take a look at some of the individual indices and how they're faring one by one. they're all in the red, at least in terms of the markets. the ftse 100 down. the ftse mib and the ibex down. in italy, this is how futures are looking. keep in mind u.s. stocks under pressure last week. the worst weekly performance since june actually. the dow was off by 1.5%, ending six weeks of gains. again, low volumes is the name of the game in the u.s. trading session as well. so any gains that were seen could be exacerbated. and we are awaiting to see what

happens in september or october in terms of fed tapering. now, futures are looking like this. we're once again expecting a lower start to the trading day. and finally, let's take a look at some of the bonds. the bond yields. the ten-year italian at 4.2%. we see prices moving lower just a little bit. so yields are just a tad higher. the ten-year treasury yield sitting at 2.58%. we did see a lot of two major auctions in the u.s. space last week. they saw pretty good demand. that would indicate that investors are now getting used to the higher yield. the ten-year yield is currently trading at 2.47, just below that 2.5% level. here's a look at the forex rates where the interest is the dollar-yen, changing hands at 96 96.70. initially we saw the dollar below that 96 level after the

weaker-than-expected second quarter gdp numbers out of japan. then we did see a bit of a turnaround. actually quite a bit of a rally throughout the trading day. this is in part on the back of some reassuring comments from the japanese economy minister, saying that he expects economic growth to continue to strengthen in the japanese economy. and euro-dollar, very close to that 1.33 level, down by 0.3%. this is also in part because of the greek debt story that we were just discussing with antonio. let's check in on how markets are faring in asia. sichuan is in singapore. what are asian markets showing you? >> yeah, thank you, carolyn. in fact, plenty of push and pull factors driving asian stocks today. japan's nikkei 225, in fact, dropped to a seven-week low despite that weaker currency. this after the country's q2 gdp missed expectations, expanding just to 2.6% on year versus forecasts for 3.6% growth.

but a couple of upbeat data points from china helped fuel the rally for the rest of the region. china's banks made $114 billion worth of new loans in july. it grew unexpectedly from aier earli earlier. and on the back of these better than expected data, the shanghai composite and hang seng index both jumped more than 2%. chinese midsize lenders sharply higher on reports of the healthy growth of the money supply. m minsheng bank surged. china's coal gained almost 5%. and over in australia, gold miners outperformed other resource stocks as prices for the precious metal climbed for the fourth straight day. and news that china's gold consumption jumped more than 50% in the first half also helped

boost sentiment. evolution gold among the top gainers, surging almost 19% in today's trade. back to you, carolyn. >> thank you so much for that and have a fantastic evening. let's give you a look at what's on today's agenda in the united states. the july federal budget statement is out at 2:00 p.m. eastern. just a few notable earnings reports today. icahn enterprises. u.s. authorities are reportedly considering the arrest of two former jpmorgan employees for their alleged role in hiding the extent of the more than $6 billion london whale losses last year. sources tell cnbc u.s. prosecutors are seeking the extradition of an employee who worked in the bank's london office and was the trader's direct supervisor. the other person is julian grout who was a junior trader.

reports say the timing of the arrests and extradition are unclear, and lawyers for the men aren't commenting. he is reportedly cooperating with authorities and isn't expected to be charged. jpmorgan shares are down by 0.3%. banks need to offload 3.2 trillion euros to comply with regulations. a report by rbs says the largest burden falls on the region's smaller banks which need to shed 2.6 trillion from their balance sheets. deutsche bank and barclays were also singled out as the financial institutions in most need of fresh capital. of the three, credit agricole have been the standout performer, up by 34% on the year. and norway's prime minister has been moonlighting as a taxi driver in the run-up to the country's elections. the prime minister revealed the

recently spent the afternoon driving around oslo picking up passengers wearing a taxi driver's uniform. the exchanges with the passengers were recorded by a hidden camera and footage will now be used as part of his campaign. so we want to know from you, what job would you do for one day if you had the chance to take time out from your regular work? join our viewer exchange, get in touch with us by e-mail at worldwide@cnbc.com, via twitter or direct to me @carolincnbc. what would you do? as a job. >> that is a job, right, with a 3-year-old. i don't know what i'd do. i have another half hour to decide what i want to do for a day. but probably, i don't know. so many interesting jobs out there. could a controversial property tax strike the final blow for italy's fragile

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welcome back to the show. antonio garcia pasquale, chief southern european economist from

barclays is still with us. we've got new trouble on the horizon for italy. there's a spat around the housing tax. what are the chances of this bringing down the coalition government? >> it is indeed a very sensitive issue. probably a very socially sensitive issue. if you think about the previous election, that was one of the key issues that actually resulted in mr. monti. at the same time, it makes fiscal sense. it's likely to use it to his advantage and demand it to be scrapped. most likely, i think they will find an agreement in which they review the tax by 2 billion, and that should maintain the coalition holding. that is also a bargaining chip that they may use for the future if they actually want to bring it down. but we don't think they're about to do that. >> it's a pretty important one because it does bring in 4 billion euros in revenues. could italy, from a financial

markets perspective, from a fiscal perspective, could it actually do without the 4 billion in revenues? >> probably 4 billion, you know, it's big, but for the size of the revenue income. i don't think it will scrap fully the 4 plus billion that the tax brings in. so what is most likely to happen is perhaps a reduction in the tax rate, so they have a revenue of 2 or over 2 billion, and that is a compromise that is feasible. it's willing to go that way. >> you have to wonder whether this bickering between the pdl and the main government party will actually end at some point. i mean -- >> it's politically motivated. people are looking at the pulse with one eye, and then it will use it at the point in which the policy is to their favor. that's why we don't think it's about to use that. even if they firmly want to be scrapped. >> okay.

antonio, thank you so much for your thoughts over the last half hour. antonio garcia pascal, chief southern european analyst at barclays. u.s. authorities are reportedly set to arrest two former jpmorgan employees allegedly tied to the london whale losses. japan's economy grows less than expected in the second quarter, casting doubt over plans for a sales tax hike. and prudential ceo tells cnbc he's still confident on asia after posting a 22% surge in group operating profit. and still to come on the show, we take stock of global soft commodities ahead of the usda's latest report. could bumper crops keep prices in check? we'll discuss straight after the break.

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to browse... and share... faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. it's time. slightly higher this morning after hitting a three-year low in the previous session, this ahead of the august report which is expected to upgrade record high forecasts for corn and soybean harvests in 2013. that's according to reuters. but some analysts say the outlook could surprise to the down side. joining us now is associate director of research at etf. thanks so much for coming in.

as i said in my introduction, there is a lack of clarity at this point in time as to what the usda report will actually tell us. why are there so many conflicting analyst reports on this specific report? >> yeah. it's mainly due to the fact that july, the july usda report is revised on the down side. no one expected really the report to be so bearish, but it was extremely bearish. and that grew to a falling price as we've seen in the last month. so the only bullish crop we are positive about is actually soybeans. and this is due to the fact that they were planted much later than expected due to very wet weather in may. so these fears of a possible early frost of soybeans has brought them up a little bit. but for wheat and corn, there is not positive news because ultimately corn is at the highest level since 1936. so this is kind of -- production

is expected to be extremely high independently on slightly weather concern. >> but at the end of the day, doesn't it all just fend depend the weather? what's the risk to changes in your forecast given to what we'll be seeing in august, september, october? >> everything can change pretty fast. and this is what we experienced last year. so if you look at the number of areas which might suffer from a drought or from extremely dry conditions, those can change from week to week. and can spike up substantially. and the crop could be substantially affected. so the best way to do is to monitor every week what's the percentage of excellent crop condition or good crop conditions. and this is what the usda pretty much does. but at the moment, the crop looks quite good. so the weather has been quite favorable for both wheat and corn. as i said, yeah, it's all up to

the weather in the end. so things can change from a couple of weeks. >> i love that. it's all up to the weather. you know, this is one of the few asset classes where it's not always down to some of the other fundamentals, but the weather, hey, what can we do about it? >> yeah. >> let's talk about the demand side, not necessarily the supply side. we're seeing soybeans trading at a three-week high. to what extent is this down to this 23% surge in chinese imports? >> that's the fundamental part, obviously, of any commodity because we have to look at supply and demand. so this is extremely important. but unlike other commodities, what really is important for agriculture is really the supply side because the demand side is usually pretty constant. we still have to eat independent of a crisis or not. so obviously the demand side can be fundamental, but it's the supply side that determines whether the crop is going to be

in a supply surplus or in a deficit. >> okay. simona, thank you so much for that. we're waiting with bated breath for the report. it's got a lot of surprises in store. associate director of research at etf securities. let's change tack, egyptian authorities are expected to step up efforts against supporters of ousted president mohamed morsi, this after tens of thousands of demonstrators took part in sit-ins in cairo. yusef gamal al-din joins us with the latest. what are you seeing on the ground? >> reporter: well, carolin, it's a great segue because remember that egypt is one of the largest importers of wheat, the arab world's most populous state. that matters when it comes to the government because it adds to the subsidy bill and makes it more difficult for the government to cope. all this perhaps can be

mitigated if the political impasse could be resolved. that would make life a lot easier. as you mentioned, protesters supporting ousted president mohamed morsi are still in the square calling for his reinstatement. today is the first day after a religious holiday weekend, and that gives the opportunity perhaps to security forces to try to disperse those protests. there have been reports that it could be imminent as soon as the next few hours. nbc understands that no set date is available and that no decision has been made on that front. but it does raise the prospect of further violence. and here's the thing, carolin. this interim government does not have a very solid track record when it comes to dealing with these confrontations. 300 people have died since the beginning of the political turbulence in egypt. and whether they will change tactics remains to be seen. in any case, the market, though, is trading to the upside here in cairo, and investors for the

moment appear to be reacting quite in stride to what's happening on the ground. >> yousef, thank you so much. we are going to leave you with a look at how futures are trading ahead of the open on wall street. we are expecting a slightly lower start to the trading day in the u.s. this is after a pretty bad week for u.s. stocks last week. the worst weekly performance since june. we'll be back in two. [ male announcer ] this store knows how to handle a saturday crowd. ♪

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welcome to "worldwide exchange." i'm carolin ross, and these are your headlines. u.s. authorities may be stepping up their criminal investigation of jpmorgan. reports say they may arrest two former employees for allegedly hiding the size of the london whale losses. japan's abenomics-fueled economy gears down with gdp clocking in on the a slower than expected pace in the second quarter, leading to more government second-guessing over hiking the sales tax. prudential raises its dividend nearly 16% after operating profit jumps, citing solid growth in asia. ceo tidjane thiam tells us in a first-on-cnbc interview that the uk is preparing for the end of qe. a greek gdp shrinks less than feared in the second quarter, but they expect a fresh rescue plan for athens by early next year.

all right. good morning, everyone. if you're just tuning in, thank you for joining us on the show. here's how markets are faring ahead of the u.s. open. a quick check of u.s. futures which are pointing to a slightly lower start to the trading day for the dow, the nasdaq and the s&p 500. the s&p is set to open at 1,675 points. remember, it lost the 1,700 mark wednesday last week, i believe. it is off by around 1% over the last week. the dow losing 1.5% last week, ending six weeks of gains. let's put this all in perspective. volumes are pretty low. the earnings season is coming to an end. we've got big data points out of the way. so we're really looking for a new direction in the market. the ftse global 300 is off just

slightly by 0 to .2%, but you c see we've been moving throughout the early hours of the session. no real driver behind the moves in the market this morning. we did see the dax underperforming this morning. it is off by 1%. the ftse 100 is losing around 30 points. and the italian and the spanish markets are down by 0.7% and 0.3% respectively. hey, we are still trading at close to two-month highs. now, maybe a little bit of profit taking taking place here. jpmorgan may be feeling more heat soon as u.s. authorities are reportedly closing in on some former employees who allegedly played a role in the bank's massive trading losses. seema mody is live at cnbc headquarters with more. seema. >> this is a big story on wall street. u.s. authorities are reportedly considering the arrest of two former jpmorgan employees. as part of their investigation into the so-called london whale

losses which have topped $6 billion. now, sources tell cnbc u.s. prosecutors are seeking the extradition of javier martin who worked in the bank's london office and was the trader's direct supervisor. the other person is julian grout who was a junior trader. reports say grout was responsible for recording the prices of positions on the books for jpmorgan's chief investment office. the timing of the arrests and extradition are reportedly unclear, and lawyers for martin and grout aren't commenting. cnbc has learned both are being represented by london law firm kingsley & naipley. he is cooperating with authorities and isn't expected to be charged, but his cooperation is essential to any arrest. now, the london whale losses have sparked multiple civil and criminal investigations as well as several congressional hearings. about a dozen jpmorgan employees have changed jobs, and some

include i including ina drew have left. ceo jamie dimon saw his 2012 bonus kit by jpmorgan and a shareholder proposal to strip dimon of his dual role as chairman and ceo gained some support but ultimately failed. jpmorgan shares right now down just fractionally in early trade. back to you. >> thank you so much for that, seema. meanwhile, sic capital is bracing for investors to pull most of the hedge fund's outside capital, that's as it faces criminal insider trading charges. reports say that sic is discussing ways to streamline the firm. last week the company struck a deal with u.s. prosecutors to allow it to maintain operations while it goes through the legal process. reports say that sic has about $1 billion in outside capital that hasn't already been marked for withdrawal by clients who have pulled nearly $5 billion in funds this year. all right. let's talk about apple.

i'm just waiting for my apple story. samsung shareholders have shrugged off the international trade commission's ruling on friday that will ban some products in the u.s. that's largely because it will likely apply to older models like the galaxy "s" and tab 10.1. plus samsung has hinted it's already making changes to keep more gadgets on the shelves. and if the white house doesn't strike down this decision in the next 60 days, samsung says it will appeal. joining us now from singapore is a.j.sunder. a.j., thank you so much for joining us today. so how big of a setback is this really for samsung? we don't really know which specific models are affected, do we? >> you're right in that we don't know which products are impacted by the ruling. if you ask me, i don't think samsung will be greatly impacted. fundamentally what the ruling

states is that there are certain patents which samsung would have violated, and most of these would be referring to older models. even if samsung would need to stop selling these older models in the u.s. markets, i don't think it will be that big of a setback for samsung financially. >> wouldn't you expect that apple would be able to catch up on some of the lost market share against samsung? the most recent data, u.s. market shares, 35%, apple, 32%. do you think they could even up in terms of those levels? >> i think patent rules will keep on happening. they'll be using a defensive strategy. what apple would really like to do is bring some marketing publicity around this for the launch of the new iphone 5 which is expected in september. there are innovations which should happen in this new form of iphone. that's what apple should be trying to do. but these kind of patents i think will continue and samsung

will be launching other patents against apple. so this, in my view, the main reason would be -- the main focus should be to use this to get some marketing and to use this forum to build up some new innovations for the next level of smartphones. >> a.j., if you say that these sort of patent disputes between the two companies will keep on happening, just how detrimental is it to the relations between the u.s. and korea? you've got to wonder, it's bound to have a negative impact on their maybe diplomatic relations, even. >> it is. not just from a country level. if you talk about samsung and apple from a company-to-company perspective, currently samsung is one of the chief suppliers for apple. so this is a relationship between these two. even if you talk about u.s. and south korea, it can potentially trigger off kind of a trade disdense, but also i think it

would be cooperation between two corporate entities which happen to belong to south korea and the other the u.s. so the government would not like to get involved too much. that's my fundamental belief in this. >> a.j., stay there while we bring you the latest on the new iphone that's supposedly coming all things digital. first reported that apple will unveil the next version of the smartphone at a special event on september the 10th. the new iphone would hit stores in time for the holiday shopping season. earlier this summer reports said that apple was experimenting with larger screens for the iphone. the device is expected to run apple's new ios 7 software which it began testing in june. apple shares in frankfurt are pretty much flat, down by around 0.1%. a.j., let me bring you back on this one. you talked about this before. apple will now be trying to put the market's focus squarely on the launch of that new iphone. just how much better will it be than the previous models?

>> well, i'm sure apple is betting largely on this new model. some of the features, it's all speculation right now. apple has not raised any specific issues around what the new model will look like. we're expecting a bigger screen. that's based on the supply chain news has been happening. apple will be looking at some form of innovation. so from a larger screen as well as processor, what kind of innovations are up apple's sleeves. i'll be interested to see what other features will it have. >> a.j., penetration of the u.s. so incredibly high, is there still enough appetite to be buying a new model which, you know, may just incrementally have a slightly different look and feel to it? >> well, if you look at it from a fundamental buyer's perspective, what's happening is your traditional -- the life cycle of a smartphone has gradually reduced. ultimately we're talking about a

three-year time period for a typical mobile phone user to hold on to a phone. in mature markets like u.s., south korea, apple, you have to take into context that they're waiting for the next smartphone release from apple. and apple has been very patient in terms of not basing their releases too narrowly. so i'm sure there's a market for that, and there is a segment with enough die-hard apple users who are waiting for this release very eagerly. >> it's all about those die-hard apple users. thank you so much for your insights. senior director of ict practice for asia at frost & sullivan. and still to come for a city drowning in debt, you might be surprised to hear how detroit handled a $1 million check like chump change. we'll tell you more. that's coming up after the break. [ male announcer ] i've seen incredible things.

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and these are your headlines. u.s. authorities are reportedly set to arrest two former jpmorgan employees allegedly tied to the london whale losses. japan's economy grows less than expected in the second quarter, casting doubt over plans for a sales tax hike. prudential ceo tells cnbc

he's still confident on asia after posting a 22% surge in group operating profits. i just want to bring you some flashes from the german finance ministry. it is not aware of a new document on greece. now, this comes hot on the heels of the reports in a german magazine saying bundesbank is preparing for a new aid package for the country as early as 2014, and then the opposition parties in germany have taken this as an opportunity to bash angela merkel, saying that she is lying to the german public about what's really happening with greece. the german finance ministry saying we are not aware of a new document on greece. we are optimistic that greece can actually overcome its problems, and we expect the next troika evaluation on greece in october. well, a bit more detail on prudential. shares are up after the uk

insurer hiked its dividend by nearly 16% to 973 pence, posting a 22% jump in first-half operating profit. prudential is confident for the rest of 2013 and says it is on track to double asia's 2009 new business profit. speaking first on cnbc, ceo tidjane thiam is happy with the performance. >> we have hit four of our first six targets for 2013 early, because we still have till the end of the year, so we're quite pleased. asia is continuing to do well. you've seen that group profits are up 22%. 32% in the u.s. which has also come back very strongly. new product excess, m&g, net flows in the uk for the first time above 200 million pounds of profits in the first half. and the uk business continuing to do well. so overall, a very good performance. >> and let's take a look at today's other top stories. jp pen

"the wall street journal" says directors are upset that ackman who also sits on the retailer's board privately disclosed discussions. last week he reported a letter on cnbc calling for jc penney to speed up the process to replace ceo mike altman. it's unclear whether he violated his duties as a board member, leaving fellow directors with limited options. jc penney shares are up a buy roughly 1%. the commodity futures trading commission has reportedly subpoenaed a metals warehousing firm as part of a broader probe. reuters says the cftc is asking for all documents and communications related to the london metals exchange since january 2010. u.s. regulators have stepped up their investigation of the relationship between metals warehousing firms and wall street banks amid allegations by customers that they've inflated prices by restricting supplies.

new york's top banking regulator has reportedly issued subpoenas to companies associated with bit coin as part of a broader probe into the virtual currency. "the wall street journal" says the department is seeking information on anti-money laundering programs, consumer protections and investment strategies. the department also plans to issue a memo today expressing reservations that bitcoin companies aren't complying with new york's money transfer laws. and it's no secret that detroit is in a dire financial situation, having filed for bankruptcy last month. now reports say the city is having trouble keeping tabs on what money it actually has. "the detroit news" says earlier this year city officials misplaced a $1 million check from the school system that wasn't found until a month later. sitting in a desk drawer. can you believe that? a spokesman for detroit's

emergency manager says the incident is symbolic of the city's antiquated bureaucracy that helped it slide into bankruptcy. how can you misplace a $1 million check? coming up, the dow snaps a six-week winning streak, so investors look to get things back on the winning track this week. we head to the bond pits in chicago to preview the trading week ahead next. [ male announcer ] come to the golden opportunity sales event

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and experience the connectivity of the available lexus enform, including the es and rx. ♪ this is the pursuit of perfection. welcome back to the show. here is what european markets are doing. they are under pressure a little bit this morning. the ftse 100 is off. bigger losses for the xetra dax to the tune of 1%. the ftse mib and ibex, down 0.6%

and 0.3%. corporate earnings have generally been better, and we did get some very good economic data points out of the eurozone. joining us now from chicago is mark sebastian, chief operating operation at option pit ment mentoring. good morning to you. the dow had a pretty tough week last week, down by 1.5%, ending six weeks of gains. how concerned are you about this consolidation move? is it just low volumes? summer lull? or is this actually investors selling into strength? >> well, i think it's probably a combination of all those things. and i think most importantly, you've got this fed tapering discussion that's going on right now. when traders are bored, when there's not a lot of volume going on in the markets, when there's not a lot of real news, you know, earnings season was basically a wash.

for every good earnings, there was a bad earnings. so now what do we have to concentrate on in these low volumes? well, traders are starting to worry about qe. so we've got to wait here now like a week and a half before we get to the fed minutes. and i think that's kind of what markets are really waiting for, to decide whether we break out of this kind of ping-pong match we're seeing between 16.75 and 1700 in the s&p 500. >> looking at the vix, it is back above 13. we saw a spike. are the markets a little too complacent about what sort of volatility we could be heading into come september? come october? >> potentially. one thing to recognize, though, is the vix is actually severely overpriced right now relative to how the market is moving. option prices aren't cheap. that said, i'm expecting the vix to continue to creep up through the next, you know, nine days until that fed decision comes

out. then we will see kind of whether that rally in the vix is justified. my guess is no. unless we see some sort of really great economic data, i'm not thinking that we're going to see any real tapering out of the fed in september. but, again, those fed minutes will really matter. maybe we'll get a little bit of a glimpse from bullard later in the week. i think it's going to be one of these weeks where the trend is going to be down a little bit because of fear. this bank of japan news is not good. and so -- or the economy -- japanese economy is not good. so kind of no news is kind of ease the markets back, especially coming off of basically all-time highs. until probably middle of next week. >> okay. mark, thank you so much for that. have a fantastic week. mark sebastian, chief operating officer at option pit mentoring and consulting. and earlier, we told you how norway's prime minister moonlighted as a taxi driver

ahead of elections. and we asked what job would you do for one day if you had the chance to take time out from your regular work? peter dunn tweeted he'd like to cook and bake for his family for one day as a job. not sure if the pay is that great. john wright also tweeted to say he'd like to be a physical therapist to help others regain their health and deal with pain. now, that is a very noble job, isn't it? now, i, over the last two hours, i had to think, and i came up with my favorite job for one day if i, you know, didn't have to come into cnbc for one day. i've got to say, i do want to stay in the journalist space, but i want to change the industry a little bit, at least what i'm reporting on. i want to be a sports reporter. i want to do tennis. i want to do skiing. and i also want to do male swim meets. yes, that's right. that's what i want to do. that's it for today's show. i'm carolin ross. thanks for watching "worldwide exchange."

good monday morning. authorities now considering arresting two former jpmorgan employees for their alleged role in the so-called london whale losses. also, jc penney's board, they're reportedly meeting to discuss how to deal with bill ackman. the fight between michael dell and carl icahn is said to be scaring away customers. it's monday, august 12th, 2013, and "squawk box" begins right now. ♪ come on now people let's get on the phone and work together ♪ ♪ come on come on ♪ let's work together ♪ now now people

good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin. scott, thanks for being here this morning. >> thank you, becky. >> we're ready to go on a monday morning. >> are you ready to go? >> i am. >> did anybody stay up to watch "breaking bad" last night? >> no. i had to prep for the show. did you? you've seen it. >> we had actually seen it. >> i should have because i couldn't sleep anyway. you know. might as well have taken a show in. >> tick, tick, tick. how many hours till i have to wake up? it's a hard transition when you don't do this every week. anyway, we do have a busy week on the economic front. it's a slow start today with only an update on the federal budget this afternoon. but today we have the nfib survey of small business sentiment. we also get retail sales, import prices and business inventories. on wednesday, we have the july producer price index. on thursday, of course, we have the weekly jobless claims. plus we have july cpi. the empire state survey, tick ,