welcome to "worldwide exchange." i'm carolin roth. these are your headlines from around the world. the death toll in egypt mounts as fights between security forces and pro morsi protesters continue. the country's interim vice president resigns and protests the use of violence by the police. stocks in europe follow asia lower after the dow suffers a triple digit decline as traders get increasingly nervous about the prospect of a fed tapering in september. shares of cisco systems are tanking after the bellwether gives a dour outlook on the global economy and cuts 5% of

its workforce. zurich insurance net profit falls nearly 30%, hit by weather-related claims in the u.s. and europe. this as lower interest rates weigh on investments. welcome to the show, everyone. let's get back to one of our top stories this morning. hundreds have been left dead and thousands injured after security forces broke up camps supporting the former president mohamed morsi. interim vice president and leading liberal voice in the country mohamed elbaradei resigned over the use of force. yousuf is in cairo. what is the latest on the ground? >> there is a relative return to calm in this part of cairo, but, of course, the country as a whole is in a state of emergency

after clashes yesterday between supporters of the ousted president and security forces. the government taking a decision to disperse these two protest sites, which have been holding out there for some six weeks. the diplomatic efforts didn't work and now they made a decision, they said they had no other choice. the prime minister in a speech to citizens yesterday said that basically he could not let the situation go on further, and no state that respected itself would do what is being done now. also, the latest death toll, carolin, we have, 326 people have been killed and over 2,900 injured. that's according to the ministry of health. the muslim brotherhood on the other hand claims the figure is much, much higher. now, the clashes were very, very violent, some very distressing images and another step up in perhaps a ladder of violence, raising the prospect of prolonged conflict in this country. the clashes were not just happening in cairo. they were happening across the country, in suez, islamiyah, in

alexandria as well. the response from supporters of the ousted president in skirmishes across egypt, they fired on churches. they stormed police stations and buildings. ministry of interior says 43 people have been killed in the fighting, but he praised the officers for the work they did. they were able to secure and confiscate weaponry at protest sites. but the muslim brotherhood is not giving up. they're saying they will fight this military coup, this massacre as they describe it. and they have called on egyptians to rise up, which tells you a little bit about where this could lead in the coming hours and in the coming days. the international condemnation is clear. we have turkey, the turkish prime minister calling for an emergency meeting of the security council. and u.s. secretary of state john kerry as well calling it deplorable what happened here in cairo. but the resignation of the interim prime minister as you pointed out is a step back for this government, and could

signal a rift in the cabinet. and that has serious implications down the road. >> yousuf, obviously it is extremely difficult to forecast what is going to be happening in the country and on the ground. but do you feel based on what you're hearing from people on the ground that this is something that could be blowing over pretty quickly or are we heading into a syria-like civil war situation, which could be dragging on for years and years? >> well, carolin, the reality of the matter is that the two parties have moved much further apart now. the violence that has killed so many people and i told you the numbers, that doesn't bring people closer together and let alone anywhere near a negotiating table. it will push the muslim brotherhood to look at more serious methods to get their message across. that is the worry. you also have to keep in mind that in the past two years, the muslim brotherhood has been able to build itself up as a serious force. the weapons that the ministry of interior claims to have found in

the two camps is evidence to that. the libyan border is porous, a lot of weapons are in this country. the ministry of interior made that clear himself during a press conference. he said we may have gotten all these weapons now, but there are many more still out there and that, of course, means there is a lot more work to do to not only get security back to this country, but also to get the political reconciliation process in any direction. >> yousuf, thank you for that. i want to take a quick check of where oil prices are heading. brent crude is higher to the tune of .6%, just above the 110 handle. light crude at 107.30, up by .4%. egypt, of course, is not a major oil producer, but it is home to the suez canal, which is very important gateway for oil and bigger commodities, exports and trading. st. louis fed president james bullard says the fed needs more evidence the economy is improving.

and inflation is heading higher before they decide to taper their massive bond buying program. bullard is a voter on the fomc this year. he says the fed chairman should hold a press conference after every policy meeting instead of quarterly to prevent decisions from being held up or brought forward to coincide with that precedent. dan scott is head of research at credit suisse. dan, always great to see you. you're looking very tan this morning. you must have been on holidays. >> yeah, you bet. it is summer holidays here. we're seeing it a little on volumes, perhaps on volatility and the effect on -- thank you. good to see you. >> we know that tapering is coming, whether it is september or december. do we really care? have the markets adequately priced in the fact that tapering is coming or once we do get hit by it, are we going to be seeing another huge vat of volatility? >> yeah, that's really the question. because i think any rational investor would have to take a

step back and think that tapering is a good sign. tapering only comes when we have concrete signs that there is an improvement in the economy that the economy can stand on its own legs and so if the fed comes forward and decides it is ready for tapering, that must be a good sign, must mean they have enough evidence to be able to release the economy and let it run on its own. the thing, however, is when we first heard the initial balloon being floated by the fed, that they were considering easing, markets sold off, because the markets were of the opinion that the economy is not ready. that's a few months back. i think the data that we have seen recently, globally, not just in the u.s., has been constructive. a lot of the concerns have started to ease european economy has come out of recession, and so markets are a little bit more at ease. so the reaction to these statements may be not quite as strong. reaction to the markets overnight, though, still there, around 4:00 a.m., saw a little bit of activity there after we saw bullard's statements. not that i was up in the middle

of the night, but i checked this morning, and that goes to show that markets still are a little bit sensitive about timing of tapering, and what that means for commodities, what it means for the dollar what it means for financial markets in general. >> dan, what do you do with u.s. stocks now? the s&p 500 has rallied by some 18% year to date. it seems as though with are definitely ripe for a correction. i can't see what could be taking these markets even higher from here. >> as a house we agree with you. our house view on equities is mutual at the moment. we're constructive longer term on equities and the equities space. we really think that everything is there. but markets have rallied quite a lot and so overall we are neutral on equities. having said that, however, within that neutral waiting from our country perspective, we do like the u.s., we also like japan and we also remain over at germany. we think japanese equities have

further room to rise higher, but say in terms of portfolio contexts and portfolio waiting, we remain neutral. >> let's stick with japan. japan's finance minister is downplaying reports the government plans to cut corporate taxes. he also said a corporate tax cut wouldn't help the economy since most businesses in japan don't pay corporate taxes. aso said cutting corporate taxes and research should be a priority. the yen traded slightly higher against the dollar today after his comments. so, dan, you come out with a fairly comprehensive note on japanese companies. you've got -- walk us through some of the top picks and tell us why you're putting the focus on exporting stocks. >> well, i mean, basically we feel that abe will have success longer term, able to push the yen lower. after we initiated the trade, it was higher than it is now.

we feel that a number of companies are going to benefit from that. so what we did is we ran a sensitivity analysis on companies, share prices, reacting to a declining yen. and then also adding an overlay on -- trying to see which companies have hedges in place and what their positioning is to currency movement. we have come up in the end with a blended quantitative/qualitative analysis on japanese companies that benefit most from a weakening yen. we think there is further downside on the yen and upside on equities. given that point of departure, we have put together this list of companies we think are going to benefit most from those drivers, weakening yen and equities in japan continuing higher. sony is one of the companies we like a lot. and there are also some other perhaps the companies you wouldn't necessarily traditionally see as exporters, but companies that face good prospects to a weakening yen. some also in the financial

space, for example. so the holding company that ran the 7-eleven franchise. a number of companies that we think will be big beneficiaries of what is to come. >> toyota and sony increased their guidance for the year. dan, thank you for that. stay with us. dan scott at credit suisse. and let's check in on how markets are trading. li sixuan, lots of red arrows today. >> following wall street's weakness overnight, asian markets also under pressure today. japan saw profit taking after the finance minister's comments. the nikkei 225 finished lower but over 2%. the shanghai composite pulled back nearly 1% despite the pboc's fund injection. beijing's antitrust probes took a toll on pharmaceutical and auto counters. hong kong came back from yesterday's typhoon break ending on the flat line. in australia, finishing marginally in the red. a stronger yen weighed on

japanese exporter stocks. panasonic shares lower by over 3% today. meanwhile, top gainers from yesterday such as financials and real estate stocks become underperformers on today's session on some profit taking. nomura holdings down 2.6% and sumitomo realty and development shed 3%. look at earnings news in hong kong. china mobile turned in its report card earlier today. first half profit climbed slightly better than expected 1.5% as fierce market competition persists. and shares added a modest .2%. in a much stronger showing for another blue chip stock, le fung, they reported a 70% drop in net profit yesterday, it said the worst is already over and is on track for recovery this year. shares soared almost 12%. brilliance auto hitting an all

time high. shares jumped almost 7%. back to you, carolin. >> thank you so much for that. time to look at what the currency markets are doing. the euro dollar is back below 133. closer to that level yet again, up bit a third of 1%, getting a boost from the second quarter gdp numbers out of the eurozone yesterday. we talked about the dollar weakness against the yen just before on the back of comments from the finance minister who really poured cold water on talks we could be seeing a cut in the corporate tax rate. dollar/yen down by a third of 1%. the dollar weakness is a trend we have been seeing since yesterday because there is still more uncertainty around fed tapering and, of course, a little bit of caution ahead of a slew of economic data out from the u.s. markets later on today. sterling/dollar sitting at 1.5544. and continuing its gains against the dollar. remember, we get uk retail sales for the month of july a little bit later on this morning. now, this is the picture for the

government bonds markets where we did see the ten-year treasury yields 2.7%. this still is a two-year high. again, a little bit of caution ahead of the data later on today. and the gilts phase, this is a fascinating one currently, especially after the boe minutes yesterday, which were a little more hawkish than expected, but we did see that big decline in the claimant count. the ten-year gilt yield is at 2.63%, still close to those two-year highs. but i also want to show you what is happening in the short term space in terms of the two-year gilt yield. it is now the highest since the month of june. that basically tells you that the market isn't believing what mark carney says about forward guidance. look at this gilt yield at 0.447%. the market is not believing what he says. it does believe that markets that raids in the short term will rise earlier than what mark carney is guiding for, maybe as early as 2015.

here's a quick check of the european markets, we are seeing a lot of red arrows across the board. the smi, bit of an underperformer on the back of weaker than expected numbers coming from zurich. the xetra dax losing a third of 1%. similar story for the ftse 100, which has been relative underperformer yesterday on the back of the boe minutes. now, cisco's fourth quarter profits and revenues grew, beating forecasts as demand for its networking products increased. however, the company's first quarter revenue guidance is weaker than analysts expected. ceo john chambers says the global economy is, quote, challenging and inconsistent, noting continued caution in southern europe. cisco is also cutting 4,000 jobs. that's around 5% of its workforce. and cisco shares down in frankfurt, off by almost 9%. and it did fall some 10% in after hours trade. and as i said, lots of earnings out of switzerland this morning. wholesome reported flat profit for the second quarter falling

shy of forecasts for 429 million swiss franks. the cement giant said weakness in the india, canada and mexico markets weighed on the bottom line. we see wholesome shares despite that up by around .1%. zurich insurance big underperformer off by 3.3%. zurich insurance posted a steeper than expected 27% drop in second quarter net profit. the group did take a hit from tornado claims in the u.s. and flooding in europe. this is obviously something that also impacted some of the other insurers. and at first on cnbc interview earlier on, the group's ceo said that low interest rates also weighed on the group's investment. >> continued low interest rates are also impacting our result. investment income was down 8% compared to the prior quarter, which is a significant drop on the investment income, of course. >> dan scott head of venture research at credit suisse is still with us.

dan, how concerned are you about numbers coming from we know the natural catastrophes had a big impact on the bottom line, but, you know, by and large, the market still loves the stock because of its strong capital levels and the fact it is paying a nice dividend. would you agree with that? >> well, our insurance analyst still has the company on hold. numbers were overall disappointing. i think they would like to focus on weather-related losses. but really, in fact, that's the whole sectors. and what the market is unpleased about here on zurich is that the pnc unit didn't really live up to expectations. shareholders equity also a little shy of expectations. i think that's what the market reaction is here to these numbers. yeah. it looks like those key divisions, pnc disappointing is what the market isn't liking here. >> what about wholesome? we have seen this huge dichotomy between the emerging markets and the developed markets. it still is very cautious about what we're seeing in europe in

terms of the margin trends. but we're also seeing weakness in india now. is this just a one-off, do you believe? >> yeah, weakness in india is something i also picked up here on the numbers from wholesome. i think overall the results from wholesome were strong, though. they show really strict management of their cost base. given that, overall profitability went up despite the fact that volumes went down, that's a good sign. having said that, indian weakness is not a positive. and they try to balance that with comments about demand out of asia pacific being strong. so that's why you have this balanced statement today from wholesome and a pretty mixed reaction to the shares too. >> okay. dan, thank you so much for those comments. but you are still staying with us. do go get a cup of coffee and we'll be back with you after the break. on today's show, find out why recent deals could trigger a domino effect in the european telecom space. we get the m&a stock pick 15

when we head to zurich after the break. time to pass on the smoke. weakness in europe as sales volumes drop for the third consecutive quarter. we'll take a closer look at the tobacco industry at 10:30 cet. we continue our organized crime series with a special report on china as the country vows to clamp down on counterfeit products. is this the end of fake china? we'll discuss at 10:40 cet. plus, we'll head out to johannesburg after an 11% jump in first half earnings. we'll speak to the ceo at a first on cnbc interview at 11:35. and the pulse of the u.s. retail market as walmart reports second quarter earnings before the bell at 11:50 cet. foreign salmon producers are announce a new worldwide industry body. after the break, we reel in the details live from norway. some beautiful pictures there. [ kitt ] you know what's impressive?

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the world's richest man carlos slim and his company

american mobile are bean asked to set out their intentions for kbn after the foundation which represents kpn owners, worker and customers said it was concerned about a lack of clarity on mobile's 7.2 billion euro bid. kpn foundation has the power to block the buyout. dan, let me get your thoughts on this. you've put out a note just recently and in this note you point out why this deal, not between kpn and american mobilitmobile, but why the deal is extremely important for the m&a activity in the telecom sector. walk us through your thoughts here. >> i think the telecom sector overall is just very interesting at the moment. on the one hand we have carlos slim here trying to shake things up at kpn and all sorts of possibilities there. but you also have and this is more important, i think, the

regulatory backdrop of a -- that facilitates consolidation within the european telco space. we have had comments out from the eu that he wants to set up a single commission for telco and we move away from this nation by nation view of the telco market. having said that, the german regulators moved to block the cable deutschland deal has been an interesting one there too. the regulatory space is very interesting and across the markets, be it in spain, be it in germany, we are likely going to see a lot of consolidation going forward here as the way we view monopolies, players, starts to change. >> which are going to be the most likely targets? are we looking for southern europe to be among the big targets or do you think we could even be looking at, you know, other targets, let's say in germany or the uk?

>> well, you know, for our m&a 15 we look at not only acquisition targets, but look at pretty much companies that are going to go through some corporate actions and whether it is a divestiture of a unit or going through some sort of a restructuring. it could be a full takeover, doesn't have to be. and so for that reason, we put telecom italia on the list. we think there is a lot of pressure on telecom italia to address their financial situation. and they're in a situation really where they can't afford to stand still and not do anything. what form that's going to take, whether they sell a chunk of their business to a competitor, whether they do some other sort of restructuring and what the regulators in italy allow are all question marks. but we feel at the moment that sentiment and share price on telecom italia does not really reflect fundamentals anymore, that the sentiment is just so negative on telecom italia because of their exposure, of course, to italy and also because of their financial

situation that we feel that this is a company that has some upside potential and we're likely going to see some corporate actions around. >> dan, just very quickly, do you not believe markets are get a little too frothy for further m&a activity, you know, with companies realizing we don't want to pay big premiums anymore? >> you know, we don't think the valuations are the top priority for ceos, or cfos when looking at potential acquisition candidates of the they certainly are a consideration, but we don't think they're the top one. because really what drives m&a is seeking growth and so when an incumbent like a pharma has a large cash pile, but a pretty lackluster growth outlook, they're going to be looking to either in license or acquire some sort of growth in the form of a biotech company, or if a telco that has -- or utility that has a very low growth outlook is also looking to gain exposure, say, to a market, like asia pacific where there are more growth dynamics,

acquisitions are the way to go. the combination of very high cash piles, they have drawn down a little bit from their highs, but they still are very high, and the fact that there is a lackluster growth outlook for many well capitalized companies we feel is going to drive m & a activity further. volumes are still at lows, really at lows. what you have seen recently, though, is that the premiums are going up. companies are paying increasingly large amounts for their acquisitions. >> dan, appreciate your thoughts this morning. always fantastic to speak to you. have a fantastic day. thank you very much for that. dan scott at credit suisse. companies representing two thirds of the world's foreign salmon industry are banning together under a new body launched today. they aim to tackle buy, security, feed and sourcing. alfonzo joins me from norway. thank you for taking the time to speak to us today. we are a financial news channel

and not necessarily familiar with the challenges facing the global salmon industry. could you just enlighten us why you've taken the decision to launch this global salmon initiative? >> absolutely. and thanks for inviting us. the salmon industry globally faces constant challenges. this is a young industry. there is currently partner together 70% of the producers in order to basically improve the stability of the industry. we want to fully understand the environmental impact in order to be able to grow consistently in the future. so we have decided to basically focus on three areas, which is feed, basically alternative sources of marine proteins. second is biosecurity. and thirdly we want to and adhere to a standard that will be common for all our members

and that will ensure that we're transparent and that we can report continuous improvement. >> alfonzo, we will get more with you on the global salmon industry right after the break. do stay with us. we'll be back in two. [ male announcer ] it's time. time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. it's time.

and we're getting more encouraging data for the uk economy. we get uk july retail sales beating expectations quite handily. retail sales for the month of july including fuel came in at positive 1.1% month on month. and year on year figure was 3%. now this is much better than the expected 0.6% increase for the monthly level and 2.5% for the annual increase. this, in fact, is the biggest annual rise since january 2011. so obviously the heat wave helping uk retail sales in the month of july. and this is a nice bounce back after that initial weakness we saw in the june retail figures. just because weather hasn't been that great. alfonzo joins me now. thank you so much for sticking

with us to talk about the global salmon industry. now, we just talked about the challenges facing the global salmon industry. to what extent is this -- does this mean a squeeze on profitability on some of the smaller producers? do you see consolidation in the industry as a result of that? >> well, first of all, let me tell you that our group, the gsi is basically an open group. currently we are 15 companies, but all companies in the world that produces atlantic salmon are invited to join us and obviously throughout the year to principles and objectives that we have set. and basically since we are now -- we have decided we will follow the ase standards, we believe that it will not decrease profitability. i believe that being sustainable is a wise business decision. >> alfonzo, i saw an interesting set of statistics. the world farm fish production

has now overtaken beef production and same applies to consumption. so it is not just population growth that is driving the increase in the salmon consumption, it is also a shift in the consumption pattern that is. i hear that we just lost alfonzo's line, a bill of t of instability on the line. i was dying to hear more about the salmon global industry, interesting trends we're seeing there. that was alfonzo. let's show you what european markets are doing this morning. we see a softer trend across the board. ftse 100 off by .4%. the psi in portugal is outperforming a little bit, up by .5%. many of the

italian marks are closed because of assumption holiday. quick check on bond yields. the ten-year bund at 1.82%. we have seen this big surge in yields towards the beginning of the week and that big sell-off in bond prices. the ten-year gilts at 2.65%. this is a two-year high and ten-year spanish yield sitting at 4.44%. and last but not least, this is what the forex markets are doing. dollar/yen, a decline after some nice gains earlier on in the weak. the dollar/yen now at 97.89, down by .25%. euro/dollar, still below the 1.33 level, but inching closer, up by .25%. and sterling dollar getting a nice lift, yet again, after the stronger than expected retail numbers for the month of july. that follows the jump yesterday after the hawkish minutes and that big decline in the jobless or in the claims count.

europe continues to be a drag on imperial tobacco as volumes fall by 7% in first nine months. the british company was hit by the continent's rising unemployment and increase in illicit trade. joining us is eric bloomquist, senior analyst at baronburg bank. thank you for joining us this morning. we talked off camera about the numbers of imperial tobacco and you weren't too impressed. >> we weren't. they missed our expectations in consensus on revenue and volume. that said, the price mix actually looks to be a bit better than what is implicit in the numbers for q-3. and that bodes well for q-4, and importantly the company is saying with cost saves that they can actually make the expectations for the full year. >> eric, you're actually booked to appear on set today because we want to talk about e-cigarettes, not the conventional cigarettes. i wonder, given this is a relatively new concept, will this be the big kodak moment for some of these big tobacco producers or are they doing a

good job to adapt to the changes in the industry? >> that's the multibillion dollar question. we think they will adapt. and we think they have some competitive advantages that really are sustainable. critically among those are the knowledge they have of the consumer, and also the distribution systems they have. also now in some cases belatedly really putting a lot of effort into developing the product. that's one of the things that came out of the imperial release today, they're planning some new products to come out in 2014. that will be about when bat launches some new products that have been launched by the mhra which we think will be critical because then they'll be able to tell people, this is a product that is lower risken this eer r traditional cigarette. >> how does it work? we see this nice board up on screen, but how exactly in ten seconds, how does it work? >> effectively you get some vapor, you atomize it and that creates the liquid -- you atomize it, that creates the vapor and you pull it into your mouth or lungs and get the

nicotine and flavor. you get it without the benefits of smoking, which is the nicotine, but without all the bad stuff that is in the smoke when you burn tobacco. >> on the back of this new development, and the industry, which stocks are going to be the best performers because they have adapted the best among the pack? >> yeah, our view is that bat and philip morris international are probably ahead on the international names. within the u.s. domestics, lorillard is well ahead. for example, their blue product i think has a 40% share and we think it is really dominating the innovation side of things within the united states. >> okay. eric, thank you so much for that. eric bloomquist, senior analyst at baronburg. cisco systems is raising red flags for the rest of the tech sector after the bellwether reported disappointing results after the u.s. close and announced a series of layoffs. john ford has more. >> cisco had a rough night after its q-4 report yesterday.

just look, first of all, at the numbers. revenue came in at $12.41 billion, in line with expectations. earnings per share actually a penny better than expected at 52 cents, but the guidance, cisco guided to a soft q-1 revenuewise, below what analysts were looking for, and went ahead and said the global economic environment was so shaky, so inconsistent as far as their ability to see gdp and sense demand, cisco is going to go ahead and cut 5% of the workforce, 4,000 workers over the next couple of quarters, and take charges to that effect. nongap eps will be off of gap eps by 16 to 20 cents. gap eps down 16 to 20 cents because of the charges they're going to take based on the cuts. so what is the cause of the inconsistency? cisco saying, for instance, the switching business is doing pretty well.

the routing business not so well. except at the edge. geographically there is also a lot of inconsistencinconsistenc. in the americas, things are going pretty well as they are in northern europe. in southern europe, not as well. in japan, where cisco was doing very well last year, now they have some tough comparisons. also in the rest of asia, it is just a mixed bag. china is an area where cisco continues to have trouble. ceo john chambers said on the conference call cisco is committed to delivering on the financial targets they set, like gross margins being above 60%, like earnings growing faster than revenue in most quarters, well managed businesses do that, he said. and therefore that necessitates the making of the cuts so they are able to roll with the punches and the changes in this environment. he also said that cisco is taking too long to make decisions. he's going to cut out some layers that are slowing cisco down. but the stock tumbled at one

point more than 10% after hours. if that is indeed where the stock opens later today, it will be back to the levels where it was back in may. guys, back to you. >> here is a quick look at cisco shares in germany, off by some 8.1%. pretty big declines on the back of those news coming out of cisco. dell will release quarterly results after the bell today, publishing the earnings almost a week earlier than anticipated. the company's numbers come a day before a dell court hears carl icahn's opposition to ceo michael dell's $25 billion offer. lenovo continues to gain market share as it posted its second best quarterly earnings report. net profit rose 23% on year to $174 million. but it is not lap drops driving the revenue. mobile products surpassed pc sales thanks to gains in smartphones where lenovo is now

the world's number four seller. that's according to ibc. lenovo shares traded higher by about 2% today. joining us from hong kong is john louis lafayette. thank you for joining us today. absolutely fascinating what lenovo is able to pull off here. it is the world's biggest company in terms of shipments of pc sales. and now it is making significant headway into the mobile space. what is it doing better than its competitors, which simply missed out on that big move? >> i think there are two major things here to take away from the results. first thing being that in its core business, pcs, lenovo is outperforming the rest of the market. as you mentioned, it became the first or top pc player globally. but in doing so, its pc shipments were more or less flat year over year. that's pretty impressive when you look at past two quarters,

pc sales down about 12% to 20% if you look at the scale there. so it is doing its core business very well, which is pcs. as you mentioned, the other side of this business, the smart device part of the business, that smartphones and tablets principally, also managed growth around about 125% year over year in that particular segment and that kind of outperformance is in sharp contrast to its other -- to the other pc areas, for example, dell and ace and i think that's powering the shares today. >> but, john louis, what is it doing better? spending more on innovation? is it more r&d spending? i just can't seem to see what it is that sets it apart from its competitors. >> i would say one of the major things here, one thing with lenovo, is that its core market is china. so china still as of full year

last year contacted for approximately 70% of operating profit, which gives you an idea that if you're able to ramp up shipments of smartphones and tablets as lenovo has done in a huge and very fast growing market like china, then actually that's really where your growth is going to come from. when you look at lenovo smartphones and tablets, outside of china, it hasn't really been very impressive. most of that growth has come from china, which is a hugely growing market, and very fast growing. and lenovo gains traction because of the distribution networks, supply chain networks that it has in china where, of course, it has a huge domination in market share, 35% pcs, utilizing that to leverage sales of smart phones and tablets at decent prices, it must be said, in china, and therefore with a known brand like lenovo, people out there are buying. >> john louis, just very, very briefly, do you think that lenovo, to drive further that growth in the smartphone

business, will be acquiring blackberry or partner with htc as the market has been speculating about? >> well, i cover htc, i don't cover blackberry, but i would rule htc out is first thing. secondly, i would say perhaps a deal with blackberry is not completely off the table. we saw the blackberry market share thshrank in the last quarter. it is in a tough position. it has excellent ip which lenovo lacks in terms of smartphones. therefore, my guess is that it would be more willing to strike up a joint venture, perhaps not a full acquisition, because blackberry would be expensive, but a joint venture with blackberry rather than an acquisition of htc. >> john louis lafayette, thank you for that. still to come on the show, made in china used to be a buy word for cheap and often fed goods. but could the tide be turning

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china has long been known as one of the most prolific counterfeiting nations in the

world, but now attitudes toward piracy may be changing with chinese consumers themselves beginning to stand up for their rights against intellectual property theft. as part of our ongoing look at organized crime this week, eunice yoon filed this report in beijing. >> wang high is a crusader for the chinese consumer. he shrouds his identity. one way this investigator can track counterfeiters. >> fake crocs. >> after sniffing out fakes for nearly two decades, he finally feels consumers here are backing him up in the fight. people have a stronger sense to protect their rights against counterfeits, he says. china has long been the land of the fakes. famous for everything from bogus luxury handbags and watches to gadgets. but recent health scares involving food and iphone knockoffs are making consumers here think twice. >> translator: i don't think buying counterfeits should be the norm of our lives.

we should boycott them. >> translator: i don't trust the quality and they are harmful to the genuine products. >> counterfeits harmed international businesses for decades, with hundreds of billions of dollars in estimated losses every year. beijing says it is clamping down on violators, but to many companies, progress has been slow. this swiss wine importer opened shops here more than two years ago. he's already dealt with one copycat and is pursuing another. >> so they copied our store twice already. from the price concept, from the wine descriptions, from the wine, sometimes even the uniform of our stuff, everything is copied. >> investigator wang says the situation will only improve if consumers are allowed to move from complaining to advocating the government enforce the law. otherwise china will only be known for cheap, low quality and unreliable products, he says, a reputation china wants to change.

eunice yoon, cnbc, beijing. >> now most of us have been offered a near perfect fake watch or a handbag and may even have been tempted to buy pirate dvds. such counterfeits may seem harmless enough, they have far reaching consequences, potentially affecting consumers' health and rights, denting investor confident and fueling transnational criminal networks. ross westgate spoke to francis gury of the world intellectual property organization and began by asking him how big an impact counterfeiting can have on a national level. >> there is a certain amount of controversy over the various measures but let me explain it this way. if you look at the s&p 500, you see that over the last 30 years the distribution of assets has changed from roughly 20% intangibles and 80% tangibles to now 80% intangibles and 20% tangibles. there is enormous value in this. a study by the department of

commerce and the united states of america, for example, attributed to directly to the ip intensive industries, some 35% of gdp, and about 27% of total employment. so this is massive value, residing in the intangibles in the knowledge-based economy, and intellectual property controls that. now, as to the measures of the harm that is done through counterfeiting and piracy, we know the opportunities are enormous. opportunities are rising out of globalization, where we see fragmented value chains that increase the possibility of counterfeiting physical goods, and where we see with digital piracy the possibility of, you know, taking a value that has cost several hundred million dollars, a film to produce over two years, and reproducing it at zero cost. so the measure may not be able

to be measured exactly, but it is enormous, it has been called for example by the recently published commission report, report of the commission on the theft of intellectual -- american intellectual property as equivalent to the total exports the united states economy to asia. >> what happens if a country is known for a place where there is piracy and intellectual property theft. how much does that then impact further investment? is there a loss of investment in that country and a pickup in general criminal activity? >> all the evidence suggests that one of the things that a investor looks to, especially in the technology intensive area is the degree of intellectual property protection and degree rule of law that prevails in the host country. and that will be a very important consideration in deciding on where to make an investment. >> how do you tell someone who

might be down on the market store and buying a pirated dvd for a couple of quid, i mean, they won't think really they're doing anything wrong apart from getting a cheap copy of a film, which people might download illegally on the internet anyway. how do you get these people to buy in to say, stop it? >> it is a hard sale in intellectual property. because what you're selling is a short-term disadvantage, namely you have to pay for the film or the music or whatever it might be, the other cultural content, in return for a long term advantage which is that we are able to finance cultural product in our economy. we're able to finance all the performers and musician, the composers and writers, all of which enrich our lives and copy right performs this essential function of financing all of that cultural production, so you got to persuade people to have a social conscience, actually, and that's always rather difficult, because there is a tendency for the immediate gain of being able to have something free.

that's a big educational exercise. i think we have to undertake as we see values shifting to intangibles in the economy. >> japan's finance minister is downplaying reports that the government plans to cut corporate taxes in order to soften the blow of a sales tax hike. with more on that story, yukako from tokyo. >> the passive comments by japan's finance minister tarot aso reporting corporate tax rate let down sentiment today and sent the nikkei 225 nose-dive nearly 300 points. aso said lowering corporate tax rates which only 30% of the country's firms pay, will only bring a small impact at this point. the yen traded higher to the dollar today after his comments. meanwhile, the economy minister is showing concerns that japan's corporate tax rates are high compared to other countries.

he said that tax breaks are an essential issue to enhance japan's competitiveness as a business location. the nikkei had reported earlier this week that the prime minister shinzo abe had ordered the government to start considering corporate tax cuts to reduce impact of the consumption tax hike planned in spring. his cabinet members, however, appear split on the issue and cuts on other taxes such as capital investment and income taxes could be coming up on the table too. that's all from nikkei business report. back to you. >> thank you so much for that. indonesia central bank took a pause in its tightening cycle as expected, keeping its key lending rate unchange at 6.5%. bank indonesia hiked grades by 50 basis points last month as the country struggled to contain high inflation and boost its sagging currency. despite slowing growth, some economists expect more hikes down the road as the rupee is pressured by capital outflows. a rebound in the ipo

pipeline and higher trading volume helped boost second quarter earnings at hong kong exchanges. $150 million, a 9% gain from a year ago. its purchase of the london metal exchange remains a concern for some analysts, though, as it battles a class action suit in the u.s. hong kong exchange shares were essentially flat, in line with the broader market. a look at what's on the agenda in asia tomorrow, the earnings break continues out of hong kong. china merchants will report earnings. we also get an update from sands china.

welcome to "worldwide exchange." i'm carolin roth. these are your headlines from around the world. the death toll in egypt mounts as fights between security forces and pro morsi protesters continue. the interim vice president resigns. stocks in europe follow asia lower after the dow suffers a triple digit decline as traders get increasingly nervous about the prospect of fed tapering in september. shares of cisco systems are tanking, that's after the tech bellwether gives a dour outlook on the global economy, and cuts 5% of its workforce.

zurich insurance net profit falls nearly 30%, hit by weather related claims in the u.s. and europe, this as lower interest rates weigh on investments. good morning, everyone. if you're just tuning in, if you're just waking up, thank you for joining us on the show. here is how our markets in the u.s. are faring ahead of the open. futures are pointing to yet another soft session in terms of the nasdaq, the s&p 500 and the dow. remember, the dow seeing triple digit losses in yesterday's trading session. overall, down by 0.5%. this was the biggest point decline since june and, of course, there is uncertainty around when we'll see fed tapering and the consumer stocks being dragged down by macy's. we'll talk much more about that later on in the show. this is how european markets are doing early on. now, we are seeing some red

arrows across the board. the smis, one of the biggest underperformers this morning, off by .7%, after we got a disappointing earnings from the like of zurich insurance, hit by weather-related claims. the xetra dax off by .4%. and ftse 100 is still down by .4%. even though we got better than expected retail sales for the month of july. but overall, we're seeing volumes being pretty low today given there is a holiday in many of the markets today and maybe a little bit of profit taking after the rates and gains. the bond markets are looking like this. we did see that big sell-off earlier on in the week, didn't we? and yields shot up for the ten-year treasuries, up at 2.7%. this is a two-year high. the ten-year gilt phase, fascinating one as well, 2.642% is the yield currently. this is a two-year high. what we're seeing in the two-year space, this is the highest level in about five months or so. this is on the back of a market

questioning mark carney's guidance. it expects interest rates to come or rise in interest rates to come earlier than what mark carney is guiding for. the forex markets are seeing a little bit of dollar weakness ahead of the data slew later on today. dollar yen changing hands at 97.88. it is off by a quarter of 1%. this is also tied to the story coming out of japan, the finance minister pouring cold water on hopes that we are going to be seeing a cut in the corporate tax rate. the aussie/dollar has seen a bit of a bounceback over the last couple of trading days after we seen it at a three-year low. it is now at .9183. sterling dollar getting a boost from the better than expected retail sales in the month of july. that is largely down to the heat wave we have been seeing. let's check in on markets in asia. li sixuan is in singapore. sixuan, good afternoon to you. >> good morning to you, carolin, thanks. asian markets mostly in the red as investors continue to fret

over the timing of the fed's tapering moves. japan's nikkei 225 fell more than 2% as carolin just mentioned briefly, that's after finance minister tarot aso denied reports that shinzo abe is considering a corporate tax cut. one of the most traded stocks in japan, social gaming company gree, the stock soared nearly 13% after its profit didn't fall as much as expected. but index heavyweight fast retailing tumbled more than 3% today. sentiment on this operator of the unit clones stores hit by a strong yen. in hong kong, li and fung shares is up, mostly due to short covering after the company said the worst is over after reporting its results. brilliance china, its shares climbed almost 7% following dividend announcement and that's its first time in eight years. back to you. >> sixuan, thank you so much for

that. have a fantastic evening. james bullard says an early introduction of tapering could result in damaging deflation for the u.s. economy. despite the worries, bullard says he is yet to decide whether it is a time for the fed to start scaling back bond buying. john canaly is investment strategist and economist at lpl financial and joins me now. john, good morning to you. do you think james bullard has a point here? are we being too complacent about the deflationary threat? >> i look at -- it says bad as we would -- we had two or three years ago. i think there is some factors in place that will push inflation higher. we get the cpi data later this morning. it is likely to show mild disinflation, maybe get 1.5 to 1.7% year over year gain in inflation. i think we're getting some inflation. but that still is at the low end of the fed's comfort zone. so there is some debate within

the fed about whether or not we're too close to the lower end. >> let me put to you a very, very gentle question. with all this market volatility, the market is fearing that the u.s. economy simply isn't strong enough to stomach the end of the bond buying by the fed. how strong is the u.s. economy and how strong is the u.s. consumer? >> yeah, no, this is the same reaction we got after qe-1 and qe-2, the equity market sold off and bond yields fell because the market felt that the fed needed to do more. and now we're experiencing the same thing again. i think the economy is tracking at around 2%. we average just around that in first half of the year, the current quarter is about 2%. it is hard to see accelerating, in fact, it has to accelerate a lot to get to the fed's forecast. the fed's forecasting in essence 3.5% growth this quarter and next quarter to get to their year end target for basically 2.5% growth for the economy. so i think the economy is strong

enough 2%, but probably not as strong as the fed thinks it is. >> let's talk about any potential revisions to second quarter growth. we saw the lowest trade deficit in almost four years. some economists saying yeah, of course, we're going to be seeing an upgrade to growth. at the same time we get june business inventories, they're flat. the auto sector is cutting on restocking. these are very conflicting signs. what do you think will we see in terms of the revisions? >> well, if you do the bean counting right now, you get somewhere in the range of 1.9, maybe 2% from the initially reported 1.7. so a slight upward revision. that trade report did get us almost 2.5, but since then inventories, retail sales et cetera knocked that back down. we'll get some more on that next week as we get the durable goods reports. so i think it is safe to say it will be around 2%, and that kind of gives it a little bit of a

different base. but i think mash et markets are focused on this quarter and next quarter and next year. and i think the prospects again for this quarter and next quarter are still maybe a touch higher than 2%, maybe 2.5%, but certainly not as high as the fed right now is forecasting. >> all right, john, thank you so much for that, for those initial comments. you are going to be sticking around. so we will talk much more about the u.s. economy and where it is headed with john canaly, investment strategist and economist at lpl financial. former bank of england governor mervyn king didn't need a golden handshake when he left as bank of england governor. instead, he got a 597 pound silver napkin ring. according to the telegraph, the central bank also paid for 10,000 pound portrait of the former governor, 13,000 pounds was spent on his retirement parties. wow. the total amount spent was 26,000 pounds. a member of the labor party criticized farewell parties and

presents for being too lavish, calling them, quote, completely inappropriate. so what do you think? is it appropriate or too extravagant? how much is too much when it comes to bidding farewell, especially to central bankers? if you want to join the conversation here on "worldwide exchange," do get in touch with us by e-mail at worldwide@cnbc.com. via twitter @cnbcwex. or direct to me @carolincnbc. i wonder what kind of a farewell party ben bernanke will be getting come january. so if you have any thoughts on that, please do e-mail in your comments and your suggestions for any lavish gifts to ben bernanke. let's look at today's top earnings stories. cisco's fourth quarter profit and revenues grew beating forecasts as demand for its networking products increased. however, the company's first quarter revenue guidance is weaker than what analysts had anticipated. ceo john chambers says the global economy is challenging and inconsistent, noting continued caution in southern europe. cisco is also cutting 4,000 jobs

or 5% of its workforce. cisco shares fell nearly 10% in after hours trade. currently in frankfurt, shares are down by .1%. shares initially tumbled 5% before recovering, the company is promising to keep investing more in mobile apps, big future for those kind of companies. and shares are off by around a half of 1% after that initial decline. wholesome reported flat profit for the second quarter, falling shy of forecasts for 429 million swiss franks. the cement giant said weakness in its india, canadian and mexico markets weighed on the bottom line. zurich insurance, a drop in second quarter net profit. the group took a hit from tornado claims in the u.s. and flooding in europe. and a first on cnbc interview

earlier on today, the group's ceo said that low interest rates also wayed on t eweighed on the investments. >> continued low interest rates also are impacting our result. investment income was down 8% compared to the prior quarter, which is significant drop on the investment income, of course. >> a state of emergency in egypt as hundreds of people are killed during protests. we bring you the latest from cairo after the break. [ 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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as you've just heard, hundreds have been left dead and thousands injured after security forces broke up camps, supporting the former president mohamed morsi. interim vice president and leading liberal voice in the country mohamed elbaradei resigned over the use of force. yousuf gamal eld-din is live. how has this calmed down as you can see from your vantage point? >> close to they are area, carolin, there is a relative term to normalcy is how i would describe it. there is still a heightened state of alert, though. the country is in a state of

emergency and there have been sporadic clashes, more violence is expected in hours and days to come. now, the latest death toll we have from the ministry of health and that figure continues to rise almost by the hour, is 421 people have died as a result of the violence. and over 3,500 injured. now, the muslim brotherhood claims the figure is much higher. just to give you a sense of some of the local papers and how they're covering the story, this is a government-owned paper, writing here the removal of the brotherhood nightmare. and then the private paper as well talking about the state of emergency, and the breaking up of protests with heavily armed soldier beside one of the women in the protest camps. interestingly, though, even though they did clear the two protest camps, the skirmishes spread throughout the city and to the rest of the country, to other cities such as suez and alexandria. the clashes were quite heavy as

well. the ministry of interior made it clear they would try everything they could to bring the situation back under control. the resignation of mohamed elbaradei is seen as a setback to the foreign relations of the government, with other countries around the world. he cited that he could no longer stand by and watch the violence that was happening. given that what he thought was not fully exhausted peaceful options to finding a reconciliation agreement. >> you sufficiesuf, it is intere are checking oil prices and seeing brent move higher to 110, but i just do wonder, to what extent is it actually down to the unrest that we're seeing in egypt, or is it just because of other factors, let's say oil enve inventories in the u.s., for example. is the suez canal affected by the unrest we're seeing? >> well, carolin, of course, how much of the unrest is priced

into the oil price is something that is going to be debated on and on and it is our job. experts will tell you the premium is not so much down to the suez canal, the dangers posed to it, as much as to the supply or some of the disruption we're seeing in iraq or libya. but nonetheless, egypt is still a very critical factor in this oil price equation. you have two key pieces of infrastructure. on the one hand, the suez canal, one of the busiest shipping routes in the world and the sumed pipeline, an important hub. those are heavily fortified, secure, and no track record of these institutions being breached. so for the moment, they may not be any need for concern, but the situation needs to be watched very, very carefully. >> thank you so much for that. while you were speaking, we saw brent prices have crept higher, now above the 111 level, but, again, it remains to be seen what extent this is down to egypt or the drop in u.s. inventories. these are your headlines this morning. the egyptian government's death

toll rises as violent exchanges continue on cairo. cisco systems shares dive as the company cuts 4,000 jobs and warns on the global outlook. bad weather events in the u.s. hits zurich insurance hard as net profit drops by almost a third in the second quarter. and still to come on the show, the world's biggest investors are making waves in gold markets as they scramble to exit the precious metal trade. we'll discuss the latest whale watching report. that's after the break.

we're going whale watching again, several big name investors are disclosing what they have been buying and selling over the past few months. george soros added to his stake in jcpenney and revealed a large stake in herbalife. several including dan lobe and david einhorn reduced gold holdings during the quarter. john paulson cut his stake in atf in half. checking on some of the stocks, the gold trust is up by around 1%. air products in frankfurt up by 1.4%. and mondelez also lower by 1.3%. it is, in fact, a day high. still with us, john canaly investment strategist and economist at lpl financial.

john, we see a lot of those big hedge fund guys cutting their exposure to gold. this has got to be the right move given that fed tapering is coming, whether september or december, and the dollar is moving higher. >> yeah, that's a good point. we exited our positions in gold earlier this year. it just hasn't been acting normal, quote/unquote, a difficult time getting above its 50-day moving average. and, you're right, one way or the other, september or december, qe is going to end or at least slow down and i think those don't add up to a good environment for gold. the one positive for gold would be that there is still plenty of demand in the emerging markets and the middle class for gold, but i think the big run-up that we saw ahead of last -- of the qe at about a year ago, i think that was sort of the big run and since then gold is kind of not

acted in the way we have seen in the past. >> want to come back to the strengthening in the u.s. dollar. to what extent will the stronger dollar hit u.s. exports, which have been doing extremely well. as you point out in your notes, this has been one of the few bright spots in the recovery. >> exports are somewhat sensitive to our currency. we didn't hear a whole lot from s&p 500 companies here in the second quarter earnings reporting season that the stronger dollar hurt their businesses. i think in some respect it really is more to do with whether or not china is going to ramp back up to 10% growth that we saw between 2000 and 2010 or if europe can finally get its act together and possibly get their recovery going again. i think the dollar plays a small part, but far more important would be the health of our trading partners, which both -- in both cases, both have stopped

getting worse. in china, the signs suggest we're starting to maybe climb out of a bid in china and got the gdp data yesterday in europe that suggests that they did grow a bit in the second quarter. i think our export growth could be a plus here, not only in the second half of the year, but also in the next few years as well. >> john, stay there while we do give our viewers a check on what's coming up on today's agenda in the united states. weekly jobless claims out at 8:30 a.m. eastern, forecast to remain unchanged at 333,000. also at 8:30, the july cpi with prices forecast to rise 0.2%. and at 9:15 a.m., july industrial production is out, followed by the august survey from the national association of home builders at 10:00 a.m. and st. louis fed president james bullard is speaking yet again, yes, at 8:15 a.m. as for earnings, walmart and kohl's report before the open. and after the open, we thatter from dell which moved its report up from next week.

also expect results from applied materials. john, let's talk about the housing market. we have seen strong gains in home builder stocks. we have seen a lot of activity in terms of new home sales and in terms of existing home sales. but yet you say the recovery in the housing market isn't as strong as it has been in previous recoveries. why is that? >> i think it is the nature of the downturn. we had a very severe downturn in the economy. at the epicenter to that was the housing market. housing really didn't begin to gain traction until about two years ago or so. we went through a period of early 2009 and middle to late 2011. the housing market stagnated, didn't get any worse, didn't get any better. then it started to get better. it got a late start. so although we do think we're still in the early innings of a longer housing recovery, certainly the recent rise in rates is going to slow that

recovery, i think the good news is right now that a lot of the purchases that we're seeing in the housing market are for cash, somewhere near 30, 40, even 50% of sales for cash, so the rising rates will not impact the market now, might slow it. a year from now, two years from now, if mortgage rates are over 6%, you get concern that the housing recovery could end. but for now, i think we're just sort of in slow growth mode in the housing market. and i think it is still a ways to go, 3, 4, 5, 6 more years. >> the growth in the housing market is good. it is not credit fuel, right? >> we don't want to get in the situation where we're in the bubble like we got in 2004, 2005 where people were taking out, you know, mortgages that were worth more than the house, cash out refinance on their homes. lenders are being a little -- a little easier in terms of their lending standard now.

that's helping as well. but you don't really see signs of a bubble in the housing market just yet again with all the purchases happening in the cash, mostly in cash. i think it is difficult to see a bubble. will another bubble develop? it could, but that's probably not this year, next year, even in the next five years. i think we're okay for the time being. those cash purchases are really helping. >> looks like a lot more sustainable development there on housing market. john, thank you so much for that today. john canaly, investment strategist and economist at lpl financial. still to come on the show, standard bank group has skald ba scaled back international operations to concentrate on expansions with africa. how is the strategy working out? after the break, we cross live to johannesburg for a first on cnbc interview with ceo john kruger. a look at how the futures are trading ahead of the open on wall street. we'll be back in two.

just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before.

stocks in europe follow asia lower after the dow suffers a triple digit decline as traders get increasingly nervous about the prospect of fed tapering in september. shares of cisco systems are tanking, that's after the tank bellwether gives a dour outlook on the global economy and cuts 5% of its workforce. the death toll in egypt

mounts as fights between security forces and pro morsi protesters continue. the country's interim vice president resigns and protests after use of violence by the police. hello and good morning, everyone. you're watching a brand-new edition of "worldwide exchange." that is if you're just waking up in the u.s. get up, sleepy head. it is time to start your global trading day. here is a look at futures for the u.s. markets. taking fair value into account, the implied open signaling a softer start to the trading day yet again. this is after we saw the triple digit declines for the dow in yesterday's trading session. that was the biggest point decline since june. the s&p also losing .3%. there is uncertainty about fed tapering, yes, but also macy's weighing on consumer stocks.

we are seeing a lot of red across the board. ftse 100 continuing its underperformance after yesterday's losses, off by .4%. remember, boe minutes were more hawkish than expected. we did get very positive uk july retail sales this morning. but not really lifting the markets too much. the xetra dax also off by .4%. keep in mind, volumes are pretty low this morning, because we are -- we have a holiday across many parts of europe. and, again, maybe we still are seeing a little bit of profit taking. let's come back to the u.s. cisco systems is raising red flags for the rest of the tech sector after the bellwether reported disappointing results after the close and announced a series of layoffs. cnbc's jon fortt has more on the story. >> cisco had a rough night after its q-4, fiscal q-4 report yesterday. take a look, first of all, at the numbers. revenue came in at $12.41 billion, right in line with

expectations. earnings per share actually a penny better than expected at 52 cents, but the guidance, cisco guided to a soft q-1 revenue wise, below what analysts were looking for, and went ahead and said the global economic environment was so shaky, so inconsistent as far as their ability to see gdp and sense demand, cisco is going to go ahead and cut 5% of the workforce, 4,000 workers over the next couple of quarters and take charges to that effect. nongap eps will be off of gap eps by 16 to 20 cents. gap eps will be down 16 to 20 cents because of the charges they're going to take based on the cuts. so what is the cause of the inconsistency? well, cisco saying, for instance, the switching business is doing pretty well. the routing business not so well. except at the edge. geographically there is also a

lot of inconsistency. in the americas, things are going pretty well as they are in northern europe. in southern europe, not as well. in japan, where cisco was doing very well last year, now they have some tough comparisons. also in the rest of asia, a mixed bag. china is an area where cisco continues to have trouble. ceo john chambers said on the conference call cisco is committed to delivering on a financial target that they set, like growth margins being above 60%, like earnings growing faster than revenue in most quarters. that necessitates them making the cuts so they are able to roll with the punches and the changes in this environment. he also said that cisco is taking too long to make decisions. he's going to cut out some layers that are slowing cisco down. but the stock tumbled at one point more than 10% after hours. if that is indeed where the stock opens later today, it will

be back to the levels where it was back in may. guys, back to you. >> the executives who supervise the traders at the heart of the l london whale losses are unlikely to face any charges. a federal complaint was filed against two former traders on wednesday. their former bosses aren't mentioned by name in the report. prosecutors say the trading scandal wasn't a, quote, tempest in a teapot, but rather a combination of individual misconduct and inadequate internal controls at jpmorgan. >> we happen to live in a time where not just one bank, but one trader, within one bank, can do catastrophic economic harm in practically the blink of an eye. regulators need to be even more vigilant and as i have been saying for some years now, companies themselves need to pay

closer attention to the cultures that they create. >> bruno iksil will not face criminal charges. he's been cooperating with the government. it is unclear when the other two will appear in court to face charges. with more on that story, helia ebrahimi joins me in the studio. it seems a little random as to who will be charged, who will be facing criminal charges. the two traders, now charged, are they being used as scapegoats here? >> i don't think they are. i think the london whale has suddenly come out as being the good guy in this, which is quite strange. if you listen to some of the quotes that you had from the report, you can see that his boss was actually pushing him a lot to undermark the losses in that account. some of the e-mails that are in the report are incredible, but if you listen to the u.s.

attorney last night, you can see the quote that he was kind of reviving, the tempest in the teapot, really a swipe at jamie dimon. he says this was not a tempest in the tea spot, but rather a perfect storm of individual misconduct, and internal inadequate internal controls. and that's all about jpmorgan. that's saying that actually for this office there was one control function, one individual who just signed off on everything and that's not good enough. we had the s.e.c. yesterday file charge against jpmorgan, which it is pushing the bank to admit wrongdoing and that's going to end in a big fine. >> how big is that fine going to be? >> i mean, look at the fines that were levied against uk banks, people like standard charter and hsbc. running close to a billion dollars. so these are not small amounts of money.

remember, white collar crime in the u.s. is criminal and it is heavily gone off and very political from the attorney's office. these people are political bodies and they're looking for support. if you look, i want to pull out one quote, mr. martin said in one of these quotes, i'm a trader, he tells the controller, on this, on several recorded calls and he says i don't mark the books to u.s. accounting rules. what are you expecting? these are some of the behaviors you think have actually come out of banks and are against the culture. and that's what the u.s. attorney general was pointing to. how much of this is under the watch of jamie dimon and the culture of the bank? >> he's come under a lot of fire for that. but his head is not going to be rolling, we know that. again, i find that huge story extremely fascinating as to, you know, who gets charged and who doesn't. he's apologized many times. we know that.

helia, thank you for that. helia ebrahimi, our uk business editor. standard bank reported robust earnings for the first half of the year. south africa's largest lender said the numbers have been boosted by strong loan growth. ben kruger is the ceo of standard bank. ben, thank you for joining us today. so your numbers were boosted by strong loan growth as we said in the introduction there. was that able to offset the credit impairments which you have been seeing over the quarter as well? >> good morning. yeah, absolutely. most of the loan growth occurred in higher margin assets in south africa and unsecured lending, part of our businesses in africa. primarily on small and medium enterprises. and given that these are higher margin type activities, we monitor the credit costs. >> given that you're situated in south africa, you have large operations across the rest of africa as well, but i'm just curious to what extent you're

exposed to the weakness in the south african currency, the rand of late, and this whole movement of capital out of emerging markets. >> clearly south africa is a very interesting market, very connected to the international capital market. and we have -- in south africa or markets outside of south africa. so we do get a benefit in t. we now generate a lot of revenue as well as costs outside of south africa. and so the weakness of the rand has both a positive impact on the revenue and negative impact on our costs outside of africa. most of the african currencies have been stronger than the rand. so about a 2% to 3% gain to our revenue. >> ben, you've been narrowing your focus back on africa, away from the international side. but still, you're heavily exposed to china through the 20%

stake of icbc. are you more sanguine about chinese growth? are you not fearing a hard landing in that specific economy? >> yeah. the investment from china into us, 20% of us. so our business operations in china actually are really quite limited. we have investment banking teams and global markets and commodities teams that transact with customers. africa is to facilitate trade and investment flows to and from china into africa as well as markets like brazil for example. >> even if you're not directly invested in china, i know icbc has the 20% stake in you, you point to the investment flows between africa and china. do you fear there will be a substantial slowing down in investment flows? >> absolutely. there is no doubt about that. in fact, if anything, we are not only focusing on the trade and

investment flows between china and africa, we clearly do focus on the rest of the world. and particularly if you look at north america, and even europe and japan in particular, there is a huge amount of interest back on to africa now. i would say too much attention and interest. we're quite well positioned to try to capitalize and leverage all of those. >> there have been a number of reports saying you're in advanced talks with icbc, which has the 20% stake to sell the commodities and fx trading business. can you confirm that we are close to a deal here? and what are the issues that you still need to be discussing? is it about pricing? >> no, no, not at all. in fact, i think people often interpret a lot of interaction we have. we have officers in beijing, shanghai, hong kong and so forth. and have operations here. and we have a very close working relationship. not just with them, leading chinese internationals and so

forth. so we really do focus on a large number of initiatives. earlier this year we announced a massive participation in renewable energy investment. we have nothing really to report on absolute new agreements we're entering into. but if there is an opportunity, and the fact we have scaled back, we would be very interested to look at that. but currently there is nothing to report at this point in time. >> okay, nothing to report on that front. just finally, jpmorgan out with a note recently highlighting that the biggest risk in terms of higher interest rate is the pressure on mortgage asset quality. are you well provisioned for that, i wonder, because this is something that the market may be underestimating. >> you're quite right. something we very, very much are in tuned to. you look at our results, you will find that we have had very muted growth in mortgages. we see mortgages as an important

product for customers that transact with us. but we don't particularly try to grow. we had a much lower credit impairment experience, other mortgages, over the last three years and we're far greater participation in the mortgage market. i think we see more participants coming in, trying to gain back market share. i do believe we're all three in liquidity coming, it is a difficult market and always one has to be very, very sanguine of the creditors associated with mortgages. >> ben, thank you so much for joining us this morning. ben kruger, ceo of standard bank. we head to one of the top places for whale watching, it is wall street, after all. see what stocks the big name investors and hedge fund managers are buying and selling. that's coming up next. [ kitt ] you know what's impressive?

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to experience the precision handling of the lexus performance vehicles, including the gs and all-new is. ♪ this is the pursuit of perfection. welcome back to the show. these are your headlines. the egyptian government's death toll rises as violent exchanges continue in cairo. cisco systems shares dive as the company cuts 4,000 jobs and warns on the global outlook. bad weather events of the u.s. hit zurich insurance hard as net profit falls almost a third in the second quarter.

and we're going to be going whale watching again, as several big name investors are disclosing what they have been buying and selling over the past few months. seema mody is live with the latest. good morning. >> good morning, carolin. like clock work, the s.e.c. is releasing the quarterly 13 f filings. bill ackman wasn't just involved in the recent board room battle at jcpenney. the head of pershing square took a new stake in air products and sold his entire holding in mondelez. george soros added to his stake in jcpenney buying more shares. his stake in the store chaps with worth about $331 million as of june 30th. soros revealing a large stake in herbalife, 5 million shares, which would be just under 5% of the company. dan lobe of third point sold his entire stake in apple, oil company hess, but disclosed new holdings in disney and elan.

gold fell out of favor with several investors including lobe, who sold his stake in the spider gold trust or gld, the world's largest etf. john paulson who has been a big buyer of the gld in recent years cut his stake in the etf in half. gold prices fell 21% during the second quarter. and as for carl icahn, his s.e.c. filing did mention his big purchase of apple stock, which he tweeted about earlier this week. that likely means he bought shares of the iphonemaker in july or august. and what about warren buffett, who is clearly one of the most watched whales each quarter? the s.e.c. says a filing from berkshire hathaway will be out later today as a glitch in its edgar system created a backlog on wednesday. carolin? >> seema, thank you for that. have a fantastic day. coming up, walmart is set to report second quarter results in just about an hour from now. will the world's largest retailer set the bar for the rest of the sector? we get a preview next.

walmart reports second quarter results at 7:00 a.m. eastern. cnbc's courtney reagan looks at the top issues facing the world's largest retailer. >> there is heightened concerns for retail earnings after macy's reported a disappointing quarter, citing consumers continuing uncertainty about spending on discretionary items. if the typically higher income macy's shopper is cautiously spending, walmart shoppers could be further strained. the world's largest retailer reports earnings before the opening bell. last quarter, walmart's u.s. same store sales dropped for the first time since summer of 2011. that's a key metric for wall street. investors will want to know if that was just a blip on the radar or the beginning of a downward trend. and if sales are weak again, is it a walmart specific issue or a broader consumer one.

traffic has been a concerning trend as well at walmart. patrick mckiefer is watching that number, to see if walmart has gained or lost market share, particularly around dollar store competitors. any commentary about back to school momentum will be of particular interest, especially as it seems many shoppers are waiting to buy. many students in midwest and south are back in classrooms so the need is here now. analysts are expecting profit of $1.25 per share on revenue of $118.25 billion for walmart. and 0.7% growth for walmart's u.s. same store sales. phil joins us now from new york. phil, good morning to you. how good of an indicator is macy's report card for what walmart is set to give us? >> well, it is a different shopper. macy's shopper is a bit higher end. the fact that macy's told investors that shoppers have been directing more of their money to their homes, their cars, home improvement, they're

not going to the malls, and they also trended towards less expensive items means shoppers are very price conscious. and that actually is a bit worrisome for walmart, all the way down to walmart. >> still, it should cater to walmart because it has been slashing prices quite aggressively and because of its size, it can actually get away with it. do we not expect walmart to come out as the winner in the back to school shopping season? >> i mean, it could, but the pressure is on shoppers haven't changed. it is almost stagnant in the united states, what lower income people, you know, the gas prices are still high. the payroll taxes are higher than they were a year ago, the job market is not really improving so there is this tendency to wait to need to shop closer to when you actually need something. and, you know, the wall street is expecting a 1% increase in same store sales in the u.s.,

which is really mild. and when you strip out the effective payroll tax, you know, they're not really better off than they were a year ago, even at the low end as well. >> so essentially you are saying that even if walmart continues to discount, it is not going to be offsetting the generally weaker trend we are seeing in traffic. >> yeah. the traffic trends have been low everywhere at malls, off mall. a lot of companies have been -- we saw with the july sales report last week, and with macy's yesterday, the -- everybody seems to be missing and the shopper seems to be very cautious right now. so we'll see in just over an hour if that applied to walmart u.s. but, you know, 1% gain is not very robust. >> phil, do you expect any significant improvement on the international front, especially in terms of india and china? >> well, the wall street is a little bit concerned about the

international because traffic trends have been down there too. and it's international has been what fueled walmart's growth. they're pretty saturated here in the united states. and so, you know, the question remains will traffic trends improve there? international is really where sales are growing more quickly, but not as profitable and there is also the question is walmart expanding too quickly in relation to the sales trends. so, you know, there is going to be a lot to look at this morning. >> okay. phil, thank you so much for that. phil wahba, retail correspondent at reuters who joined us from new york. that's it for today's show unfortunately. i'm carolin roth. thank you for watching "worldwide exchange." be safe if you're trading out there in the markets, even though volumes are pretty low. we'll be back with a new show tomorrow. [ male announcer ] it's time.

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good morning. today's top stories, global markets are under pressure following yesterday's rough session on wall street. and follow the money, the world's most successful investors reeling their latest bets. and tech checks. cisco announcing quarterly results, says it plans to lay off 4,000 employees. it is thursday, august 15th, 2013. "squawk box" begins right now. ♪ good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick with an drudrews

sorkin and steve liesman in for joe kernen. >> i'm going to look forward to finding out where he is. does this have to do with his tweet? >> don't give things away. let's go right to the markets. the dow and s&p falling yesterday. this was the worst day since june 28th. this morning, as we're coming in, resetting, you can look at the u.s. equity futures, you'll see again there are some red arrows, so no quick rebound. these are very modest declines, a drop of 3.5 points for the s&p and the dow down. in asia, the nikkei dropped by more than 2% overnight. check that out and see that in shanghai, the market there was down by .8%. the early trading in europe at least at this point, take a look and see that, yeah, some very