you're watching "worldwide exchange." i'm ross westgate. headlines from around the globe. russian president vladimir putin says he would support military action in syria, but only backed by evidence that assad regime used chemical weapons and was sanctioned by the u.n. stocks in europe trade lower as a strike looks more likely as well after u.s. senate committees agreed on a draft resolution giving president obama 60 days for the use of military force. india central bank steps in with aggressive moves. the former finance minister -- financed aadvisor takes the

reins as rbi governor. and samsung is preparing to take the wraps off its new galaxy gear smart watch as it tries to take first move advantage over apple in the gadget wars. all right. warm welcome. we're into another "worldwide exchange." good afternoon. good morning depending where you are in the globe. eurozone composite pmi hit the high since august 2000. the final number, slightly weaker, a nudge down from the flash. but nevertheless, 51.5 for the month of august. it was 50.5 in july. the highest headline since june 2011. as i said, albeit revised down from the official flash reading of 51.7. we have just as a result --

slightly down, euro dollar down on the session low at 131.62 at the moment. the new orders index up to 51. the first time it has been the 50 mark dividing growth contract igs since july 2011. something of welcome news to the ecb, which, of course, meets this week as well. we have also been hearing from the imf this morning and saying germany could do more for domestic investment and to reduce the imbalances. we have been talking about loan balances as part of the cause of the global financial crisis and the imf making that point again. so we'll keep our eyes on that. meanwhile, as far as equities are concerned, they're weaker this morning. more on global market watch, but just take a quick look at where we stand over an hour into the trading session today. you'll see we are lower on the

basis. we have got these composites out with syria. xetra dax down .1%. ftse mib down 1%. sonny kapour is with us this morning. reaction, first of all, we are in an economic recovery mode, a little bit, for europe. it was better than where we have been. is anything here to really get your teeth into though, do you think? >> i think first it was kind of hard to sink even lower than we were. so -- >> exactly, yeah. >> put in perspective that we are starting from a really, really horrible base. the second, i think there is good reason to question how robust this recovery actually is. partly because the banks remain amazingly fragile. this has been quarter after quarter after quarter of deep recession.

and losses on corporate lending, et cetera, have really, really racked up. many of them remain unrecognized. the second reason the global economy is not exactly in a very robust shape. particularly with the uncertainty around emerging markets and the dependence of countries such as germany and others on exports. and, third, i think nothing has fundamentally changed in terms of structure changes in terms of the banking unit, et cetera, the school of thought, waiting for bated breath for the german elections to be over for there to be game changer in terms of how things work -- >> we waited so long for this, and everything -- we can't expect anything until german elections are out of the way. >> i'm afraid we have disappointment in the air. >> nothing changes. >> not really. >> except, of course it has been publicly acknowledged -- what does that mean? as clearly they need more money or more debt write-off or whichever way you want to look at it. >> it has been quite remarkable

how people and the electorate can be taken for a ride until steinberg mentioned it and until the finance minister acknowledged it. there was a significant number of people in germany who actually were convinced that greece would not need any more money. to any rational observer even with a passive interest in what was going on, they would that would definitely not be the case. >> it is actually quite remarkable, i think, i don't know if you agree, how big an issue it isn't in germany, bearing in mind everybody knows germany will have to pay one way or the er. >> that's true. it has been mostly an election focused on domestic issues. part of it has been that neither party, neither the major parties have interest in putting pressure on europe. so the focus has primarily been

on domestic issues given both parties don't differ much and the european policy we can't expect a sea change. >> good to have you on. plenty more to come from you. on today's show, have you had an invite to the latest apple product launch? we'll be in singapore to get reaction to the latest tech stories including the unveiling of the galaxy gear smart watch. greece, in a first on cnbc interview, we're joined by one of the first greek companies to go private, the gaming firm opat. as new york fashionistas suit up for fashion week, we'll get into the business of the catwalk with the editor in chief of "allure" magazine. also joined by a guest who says yesterday's spike of nokia stock may have been due in part to short sellers looking to cover positions rather than a change in fundamental fortunes. we'll get into that. any thoughts or comments, e-mail

us worldwide@cnbc.com. russian president vladimir putin says he will consider supporting a military strike on syria if it is proven that the assad regime is responsible for carrying out alleged chemical weapons attacks. in an interview be he urged western leaders to submit convincing evident to the u.n. security council and warned against a unilateral strike. >> translator: i do not exclude this. but i would like to draw your attention to one absolutely key aspect. in line with international law, only the u.n. security council can sanction the use of force against a sovereign state. any other pretext or method, which might be used to justify the use of force against an independent sovereign state is inadmissible and can only be interped ereted as aggression. >> -- will continue to supply damascus with other military supplies and services. hadley gamble is with us, our

middle east correspondent. people looked at the comments from putin and say theoretically we could get support. you read down the rest of the transcript, it goes on to say, it is ludicrous to think the syrian government would have used chemical weapon on its own people. that's probably the more important statement, isn't it? >> the man says he's going to continue to supply defense systems to syria, even if not these s-300s and he's not sending the s-300s for the simple fact they haven't received payment. i think certainly this is the opening volley from president putin. and i think he's showing president obama, these are the parameters under which we could give any kind of international support to action in syria. >> the same time, though, things are moving perhaps different to what we thought in the states, or going quicker. >> exactly. president obama has left, gone to the g-20, left this in the

hands of secretary kerry. secretary hagel. he's hoping that, you know, as winston churchill once said, the americans will eventually do the right thing if you just let them expend all other options first. he's left congress to it. i think they are expecting a vote by next week. >> yeah. what do you think? >> well, i think this is one of the kind of trickiest challenges in foreign policy recently. and how it has been managed so far has probably been everybody getting their nickers in a twist. the first question, of course, is after 100,000 civilians were so have died, why now? why this red line? >> they crossed the red line. >> absolutely. jon stewart was brilliant in "the daily show" i think yesterday if you haven't seen that one yet, it is brilliant. but this is extremely difficult. and in a way they're dammed if they do and dammed if they don't. i can't -- >> more dammed -- are they more dammed if they don't? >> if you were to ask me, to take a punt, i would say perhaps

in the longer term. this is too little, too late. perhaps they should have either gone in earlier and done something more or to let the situation resolve. but that may just continue to get -- the humanitarian situation is absolutely horrible. >> absolutely correct. you have millions of syrians who have been completely displaced by this conflict. but clearly the situation in congress, for example, they have couched this in terms of this is an action against hezbollah, action against iran, going way beyond the use of chemical weapons. for the president, this very much is a big political issue for him. at least going into the next couple of years and dealing with what has mainly been an obstructionist congress. >> and there is the economic impact, which countries like india are already taking into account in terms of their position in the g-20 on the syrian intervention. india faces massive current account deficits. the oil price spike, if there is any, is going to further push india into the troubled land. >> we'll talk about india coming

up. hadley, for now, thank you. stay there for a second. the comments that we heard from putin come ahead of the g-20 meeting which is supposed to focus on syria. the two may speak on the sidelines. obama will hold by lilateral ta. john kerry and chuck hagel will be back on capitol hill today for more congressional hearings on syria. they'll be joined by the director of national intelligence james clapper and the joint chiefs chairman general martin dempsey. joining us now from turkey on the board with syria is jim mace maceda. what reaction in the middle east to what is the developments that have taken place both in terms of comments from putin and, of course, in the u.s. congress? >> reporter: hi there, ross. well, as you say, we're monitoring the situation here from turkey.

it is a good example, you've got a nato ally and a friend of the u.s. which will soon have half a million syrian refugees to contend with here. and that has been a target of cross border attacks from syrian forces. so turks are watching the political battles unfolding in washington very carefully as are other u.s. allies. unlike most of them in this region, turkey is worried that anything less than a major offensive that would actually bring bashar al assad down will simply embolden the dictator and trigger retaliation against turkey. so there is real trepidation here and that said, turkey, like saudi arabia and like the gulf emirates and like israel, are backing still and hoping in president obama's plan, hoping that air strikes, if and when they happen, will at least re-establish american credibility in the region. if there isn't, then these countries that are friends to america don't feel credible

either. so, for now, ross, it is kind of hold your breath, hope that putin comments are, in fact, viable. and wait and see if anything good can come out of what will be unchartered territory for the united states if it actually does launch air strikes against syria. ross, back to you. >> thanks for that. jim maceda in turkey. this is as the u.s. president, you see the pictures there, arriving in stockholm, the air force one. obama will hold a bilateral meeting and a joint meeting. this is before he heads to russia for the g-20. hadley, those comments from jim are enlightening in terms of turkish position. >> absolutely. you have to also remember syria is at a major crossroads for energy politics, pipelines. you have the energy pipeline going through syria, going to europe. that brings gas into the picture. you talk about who is going to get the next pipeline that goes

through syria, that's a big question, a big if. those plans have been on hold while we have seen the uprising. it is within everyone's interest to find a resolution to this. but certainly russia has a skin in the game. >> yeah. resolution. how does one get a resolution? >> it is hard to see one forth coming in the near future. and i think things will certainly get significantly worse before and if they do get better and part of the problem is exactly as your correspondent was saying, that this is a regional problem. and this is historically the most volatile region in the world with several powers competing for balance, saudi arabia on one side and qatar has a strong position, israel, of course, what happened. if there is a retaliation against israel or turkey or what not, et cetera and iran. all these regional actors jockeying for power and launching a few missiles may actually without consistent fallout, without as your correspondent said, making sure

that their sovereign regime falls may actually turn out to be counterproductive. having made the noises, doing nothing may be even worse. >> yeah. okay. if you want to find out more about why syria is expected to headline the g-20 summit, go to cnbc.com and follow us on twitter @cnbcworld. hadley, thank you. the secretary-general told cnbc that syria will not scud irtier the g-20 agenda. you can catch the interview on european closing bell 1700 cet. not sure who is presenting that but he's terribly good. now, it is me. can't put down your smartphone? you're not alone. john mccain was caught by a reporter playing poker on his

iphone during a pivotal congressional hearing yesterday. mccain took to twitter to respond to the news saying scandal, caught playing iphone game at three-hour plus senate hearing. worst of all, i lost. so does mccain pass his time on his phone not a big deal or do you think it is a waste of the taxpayer dollar? join the conversation at "worldwide exchange," let us know, e-mail us, worldwide@cnbc.com, tweet @cnbcwex. or direct to me @rosswestgate. sonny, is it a big deal or not, the fact that -- the fact -- it is mccain in a syria hearing. >> if it is a big deal, then it would probably indict every single policymaker out there as well as many of the leading business people. i mean, the addiction to iphones and games and twitter and i'm guilty of it as much as perhaps you are, and i was just playing with my phone while you were talking to your correspondent. >> i wasn't saying anything of interest. but he was supposed to be an --

being briefed on what is going on in syria. >> i think it is possible to play brainless poker as well as tune into syria hearings. >> you're saying, okay, look, i understand how it happens. >> and he had a sense of humor. he said he lost. >> he did. president obama might need a sense of humor as he gets through what is likely to be a tough week for him, just coming down the steps on air force one, meeting with the swedish prime minister. we'll continue our coverage of the politics in syria. right now, let's bring you up to speed with what is happening on today's global markets action. and we'll take a shot of the dow jones stoxx 600, weighted to the downside around about 6 to 3 decliners outpacing advancers at the moment. this is where we stand now for european equities, saw the ftse a little weaker earlier on. down 14 points, fairly flat for

the xetra dax. cac quarante off a third and ftse mib down about a percent at the moment. number of individual stocks focused in on, ryanair, off 13.8%. low cost airline issuing a profit warning saying it sees full year net profit at the bottom end of the 576 million euro range. and cutting winter season capacity as well. easy jet down 7.5% with it. the company admits a number of airlines performing poorly this morning. airlines are down as we see oil prices rise again on the syrian news. and keeping our eyes on prosieben stat. at 30.48. as far as the bond markets are concerned today, we'll keep our eyes on gilts.

2.87%. services pmi coming up around 10, 12 minutes time, 10 minutes time. strong construction and manufacturing pmis already this week against better than expected. ten-year spanish yield higher, getting up to 4.5%. italians up 4.4. on the currency markets, euro dollar lower today. keep our eyes on sterling as well ahead of the services number. 1.5573. dollar yen, 99.62. we saw the slight nudge down, of course, in the eurozone composite pmi from the flash number. that's where we trade right now in europe. sixuan has the update for us from singapore and asia. >> thank you, ross. helped by more upbeat data from china, asian markets came off the session lows in the afternoon session. the shanghai composite gained a modest .2% with some cyclical

sectors and miners lending support. earthquake in japan had little impact on the markets. the nikkei 225 managed to finish marginally in the dprgreen afte the 4.4 surge after the post two days. as for the top gainers, canon jumped to a three-week high after saying the company will buy back up to 1.6% or a maximum of $500 million worth of shares between today and the first of november. the stock finished higher by 3.8%. also want to show you shares of honda, a dividend hike for the automaker on the hopes of strong full year earnings. analysts say positive news but doesn't exceed market expectations by too much with other automakers also likely to hike dividends. honda shares gained .6% in today's session. in china's dealmakers enjoyed a very nice rally helped by

optimism over beijing's policy measures to support growth. latest industry data also pointing to a modest pickup in steel prices and demand. we can see from here that steel gained almost 6% today. back to you, ross. >> thank you for that, sixuan. catch you later. now, we'll put up an image of what a samsung might look like. there we go. this is what we're talking about. is this what samsung might reveal later today? set your alarm after the break. we'll count down to the unveiling of the firm's new smart watch. [ kitt ] you know what's impressive?

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samsung set to release its latest device. the galaxy gear smart watch. a leaked image is believed to be a prototype of the watch. the device is expected to act as a companion to the galaxy smartphone. also expected to announce it is installing anti-virus software on all its new android phones. apple has begun its marketing blitz for its latest product

launch september 10th at the california campus stating this should brighten everyone's day. speculation is mounting that an updated model could come in a variety of colors or even a -- cut cost. brian mooar joins us from singapore. brian, good it see you. look, how -- first of all, this samsung launch, how important is it? >> in terms of the watch, you mean? >> yes. >> yeah, so it is interesting because there is a lot of hype being driven up around it, right? everyone is looking for what is the next growth area. i think samsung is, you know, the concerns that are being raised about samsung are whether or not it has enough products in the pipeline to really keep it going, especially if competitors like apple may be potentially

doing something as well. so, you know, it is interesting from a growth per spective and for that matter for the sake of technology is this something that could change the way we interact with smartphones rather than having to rumble around in your pocket or purse and fumble around for your phone, is this something that could really take us to that next level. but, of course, we'll have to see what kind of product they roll out for that. >> interesting, you say smartphone now. the contrast to the smartphone market and the sort of -- i suppose the nonfeature phones, i mean, how different are the two? >> yeah. well, the lines are blurring, right? you have high end feature phones and, you know, can do apps and you have certain low end smartphones that are arguably don't really do as apps very well and could be just like feature phones. but nonetheless, the point is that you got feature phones and smartphones going along, but what is that next level that people are going to? and what is it then that apple and samsung and other guys are going to bring out to basically

keep that innovation moving along. >> yeah. and meanwhile, got this, you know, how is the battle between samsung and -- apple has this invitation out at the moment. will samsung keep its lead? >> for now, yes. if you look at the sheer numbers in terms of the units shipping, look at the presence that they have globally and their ability to command a wide range of price points, the momentum going behind samsung is still good. the question is, however, who is going to be the one that takes mind share. apple has been the one that people look to for next cool thing and we'll see if they're able to keep that up. it is look a boxing match. we'll see this week what samsung has up its sleeve. and whether or not that's

something that looks better than what apple has got next week. >> yeah, sonny, any news about the -- >> as someone who is not invested in either companies, i'm a consumer and i love the boxing match as long as they keep doing better things for us. i think one of the important thing today to watch out for is whether the samsung watch gadget is going to be stand alone or is it going to be purely functional only integration with the samsung galaxy. >> i think that -- the integration is the important point, isn't it, bryan? whatever devices you have, they have to be able to talk to each other, right? that's where we are. >> yeah. whole heartedly. if anything, the key thing to know about the whole smart watch spaces, nobody has it figured out yet. there have been a lost iterations of this in the past. some have been putting that entire phone in your wrist, which i don't think is the right solution. what will be interesting to see if it is a companion to the phone. the most likely usage model now is that it is a remote control for your phone if you will.

that doesn't sound attractive when i describe it that way, but count the number of times you missed a call or text message because your phone was in your pocket or something, when it is vibrating on your wrist, you might be able to capture it more quickly. if you think about other applications, there is a lot of potential in terms of what application developers can do to change the way we interact. great example, wee chat in chi, people use it like a ya walkie-talkie but you have to pull the phone out of your pocket. we have to be careful when we talk about smart watches, these things at the end of the day have to be fashionable. you don't want to look like a do when you' rk when using these things. >> bryan, thanks for that. we got to go. i have some uk data. go to cnbc.com to find out the other contenders in smart watch wars as well. british services sector growth,

new order, huge, actually. 60.2 in july. sorry. 60.5 in july. 60.5 in august. 60.2 in july. highest since december 2006. sterling up at the best levels of the day, 155.75. composite pmi above 60 for the first time. and so russian new business last month driving the fastest growth in britain services sector for more than six years. we're looking for it to slow slightly down to 59. banks to restaurants, the fastest pace since may 1997. that's when tony blair became prime minister. the sector recovery, evidence, has some legs essentially. this is the highest level since the composite series began as well in 1998. so three more activity surveys this week, which outstripped expectations.

the oecd raised its forecast for the british economy. what do you think? this looks real. this feels and looks real. >> each additional data point that comes out makes it look more and more robust. the question is twofold. one, is it going to translate into employment and how quickly. and the second exactly how long lasting this will be. one has to remember, we are still more or less at the same level of gdp we were just before the crisis. we have a lot of lost ground to make up for. and it is only this specific expansion continues quarter after quarter. and, of course, there are loads of risks out there, potential minefields in the eurozone, what might happen with tapering, et cetera, which means this may not last very long. enjoy it while it lasts. >> the job growth apparently fell, the point you just made. and the jobs now is even more important. now that carney has anchored, you know, forward guidance to an

employment rate, and the jobs end now becomes much more important than it has ever been. >> and also the question of the housing market. we just haven't got it right in this country. >> yeah. you think we're following another boom. >> absolutely. >> unsustainable boom is what you're saying. okay. we'll take a pause. we'll come back to that. another great number now, right now for the british economy. more on that when we come back in a few moments time. sonny sticks around. still to come, the new rbi governor is stepping into the eye of the rupee, first day on the job. how big is his challenge? we'll talk about that when we come back. we have always believed in this pursuit, striving to bring insight to every investment, and integrity to every plan. we are morgan stanley. and we're ready to work for you.

these are the headlines in around the globe. russian president vladimir putin would support action in syria but only if backed by evidence that assad regime used chemical weapons and was backed by the u.n. tindia's central bank steps in with aggressive moves to shore up the faltering rupee as the rbi governor takes the reins. watch out, samsung's taking the wraps off its new galaxy gear smart watch as it tries to take first move advantage over apple in the gadget wars.

india's growth slowdown is continuing to be felt in the services sector. the pmi gauge continued its slide in august to levels not seen since the financial crisis. new business flows weakened as optimism took its biggest monthly hit in a year. services make up close to 60% of the indian economy. the cause of much of the economic anxiety, the sliding rupee, continues volatile ride today. the currency in striking distance of a record low before the central bank stepped in to sell dollars. this move to shore up the rupee comes as the new governor takes the reins. key government and financial adviser is taking up the job. and stabilizing the droopy rupee is now a top priority for the former imf chief economist. >> reporter: currency stability is moderate.

the new rbi governor is expected totecting the value of the currency as a key task. the outgoing governor has been the favorite whipping boy of the government for the slowdown in growth. his successor on the other hand played a key role in all decisions taken by the government over the last one year. but this proxy meeting may not necessarily mean that rajjen would agree with the strategy so far. rajjen is a man known for his bright ideas. 100 ideas in his report on financial inclusion are a testimony to this. he's also known as a man for taking swift action, but givend constraints posed by government policy, will rajjen have fertile ground to seed these? the food bill will pressure fiscal consolidation over the next few years limiting the

scope of monetary policy. but he could move on other ideas like the one for sovereign bond issue which he as the chief economic adviser has discussed with investment bankers. as he steps in on wednesday, a key head wind he will face is some tapering of the quantitative easing program in the u.s. expected later this month. while rajjen is confident the market is already factored in a taper, this could well be his first major test at main street. >> we have already seen today the rupee recovering sharply as the central bank sold dollars. is that a better policy intervening in the currency markets than ratcheting up rates and hike the marginal standard facility this week? >> well, in the last couple of weeks we have seen a lot more aggressive intervention by the central bank and it has helped protect the downside on the

einar to a certain extent. from here on, the key concern is the volatility in the market and the fact that some of the recent moves by the central bank have helped in protecting the downside. but volatility still quite high. so i think the focus for the central bank right now will be on how is volatility in the fx space. >> you say successful in protecting the downside. until this morning, no. we flirted with a record low this morning. that's not stopping the fall, is it? >> well, i think that sort of forms a cue for them to come and intervene heavily and we did see them pushing the rupee down by 2% in the intraday session itself. so, given that there is very little liquidity that is there in the market, i mean, even smaller amount of trades can have a huge impact on the price action. i wouldn't emphasize so much on specific levels but i think it is the intention of the central bank to try and protect the downside as much as they can.

and that's probably going to help in shoring up sentiment to a certain extent. >> how much do you think it will cost them to do that? >> well, so far, we have seen the move lower by $12 billion. good chunk of it is actually reserve losses through valuation, but clearly on board prices. in terms of the net intervention we think that there has been about 7 to $10 billion that has been done year to date. a lot of it is happening on the forward space, which is not evident in the numbers yet, but we will get a better idea once data comes out for it in the next couple of weeks. >> sonny, briefly, what should india be doing? >> i think that trying to stabilize the rupee and kind of define a market level of how much further it would be allowed to go is important. the reserves have been building up as a rainy day funds and rainy days have arrived. i'm not that concerned about the

slow depletion of reserves. how does india use this time that reserves can buy it to actually work on domestic policy. that is where the problem is. particularly because the election cycle. and your correspondent mentioned the food subsidy bill that has come out at a time when the fiscal problems and current account deficits are high and syria is causing oil prices to spike again. so the challenges are very, very real. but i can't think of anybody better than rajjen to be in this space and trying to work them through. but his hands are tied, given the run-up to the election. >> he's not got great -- he's got the best man to play it. sonny, thank you for that. still to come, we continue our special coverage of uk banks, diving into rbs. is the worst over for the bailed out lender?

european equities a little over again today, ftse 100 off half a percent with the xetra dax. we had very strong services pmi out a short while ago from the uk, blowing through expectations again. the data this week activitiwise much stronger than expected.

cac quarante down three-quarters. bond yields, gilt yields higher after that data. and we have seen more of the reaction in the short end, but nevertheless, ten-year gilt yields steady at the moment. treasury yields at 2.87. currency market, the pound is the mover today. up against the dollar. getting up towards 1 preponderate 1.5560. a two-year investigation and we have the story from the nikkei and tokyo. >> the japanese camera said britain's fraud office charged it with accusations of olympus providing misleading, false or deceptive material in its

financial accounts in fiscal 2009 and 2010. a spokesman said it is too early to estimate what the impact on earnings would be in case it is found guilty. nevertheless, the firm's shares finished 2.9% lower on the news. olympus's acquisition was one of the deals called into question by $1.7 billion accounting fraud scandal uncovered in 2011 by its former british ceo michael woodforde. in july, three former olympus executives were found guilty and handed suspended sentences by japanese courts. back to you, ross. >> thank you very much for that. on the agenda in asia tomorrow, big day for central banks. policymakers in japan and malaysia announce their decisions. rajan begins his first day as rbi governor, talking about that. and resource exports will be watched when july trade figures come out. we continue our week-long

coverage of the british banking sector with a look at rbs. he helia has been conducting this and she joins us once again. >> the question you asked before the break was exactly right, is rbs over the worst of it? you've got to hope so because as you see here, shares in rbs have fallen over 90% since the beginning of the financial crisis. and the bank has been working very hard to make sure that it is restructuring and trimming its balance sheet. and actually when we talked yesterday about lloyds being the golden child of the government, possibly delivering them the next election, you've got to think of rbs as more like a delinquent teenager with very, very bad parents. it cost the job of outgoing chief executive steven hester, but there is a new man in charge, and what does he have to deal with? well, rbs is a bank that has brought its balance sheet down massively. this was the biggest balance sheet in the world. down from $2.2 trillion, down to

$1 trillion. and the restructuring goes on and on and on. and that's the big question. will this restructuring come to an end and will it keep hurting earnings? if you have a look at the return on equity for rbs, it is still massively down in comparison to its peers. now, we had mp mark garnier on earlier this morning saying, look, from our perspective as politicians, low return on equity means high capital, we're very happy. from a investor perspective, that's not good news, even with some analysts saying return on equity might be up to 5% by 2015, quite low still. so, the question is how does the bank split? remember, rbs isn't lloyds, it was a big investment bank, big corporate bank, that's its main business. but what steven hester did was bring that investment bank business down from 60% to as you can see, 20%. how does the business split?

if we bring up a pie chart, you'll be able to see that massive amount is uk corporate, direct line with partial ipo last year. uk retail is a small proportion in comparison to the proportion it is for lloyds. the question is how -- rbs continue going forward. is it all bad tirely bad news. they do the biggest amount to sme lending, that's 35% of the market in total. and they say they have about 20 billion pounds in the process that they're keen to learn. ross, to discuss more of this, i'll come back to the table. >> okay. see helia in a second. tomorrow, she'll look at barclays as it prepares to launch its right issue. on friday, we'll be looking at hsbc and standard charter. helia, you answered some of the questions there. what is the few that is still the most important thing that

needs to be proven about rbs. >> we're still waiting to see whether the government is going to decide whether it is split into a good/bad bank situation. and i think for investors that's key. and for taxpayers, remember, 45 billion pounds as taxpayers into this. i think what investors are keen on is how much of -- we have already spent 8 billion pounds since 2008 on restructuring costs. how much of that is going to continue and how do you service uk corporate clients without having the products that they need if you take out everything from the investment bank? >> yeah, so the argument is if you were going to break this up, should have done it at the beginning and spent an awful lot of money doing something else and then we change -- we got it wrong. >> quite possibly yes. the three most important factors to watch for rbs is one is whether the uk economic recovery holds. it is hard to be an underperforming bank in a moving economy. but it is hard to be a good bank in an economy that is

underperforming. the second thing to watch out for, particularly for shareholders is what the terms the split. if it does happen, whether they are made to absorb losses now or whether it is the taxpayers -- what are the terms? and the third important thing to look out for is what happens in the u.s. and global markets. where rbs still maintains a fairly significant footprint. i think that to a large extent rbs' fate is less and less in its hands and more and more in terms of factors and -- >> shareholders beware. >> that's the problem is that when we're talking about risks within banks, we have put up politics at the beginning and no bank exemplifies that more than rbs. how is it going to move forward? i think there is an understanding post hester leaving that the bank really needs now to focus and move forward. but as the -- as mark said from the banking commission, there is a line in there that says, you know, uk corporates don't trust banks and don't trust rbs in

particular. and there is a feeling that while rbs is shouting from the rooftop we have got 20 billion, we want to lend to smes that actually there isn't the trust needed in rbs for smes to come forward, even though the bank wants to be supportive. >> also the question of as long as the uncertainty around the fate exists, would you open a new client relationship, depend on rbs today, i probably wouldn't. >> just don't forget, the bright spots as well as the uk economy, you could have a sharper recovery in ireland, which would help also. they could be a bright -- you could have interest rate margins go up if the central bank kind of movement in interest rates. and also in terms of the investment bank, let's not forget that natwest was the number one player in sterling products. this was a bank that historically though it became overinflated --

>> the world's biggest bank. >> it used to be, yeah. >> glory days behind us. >> not sure would call them glory. >> depends on your view of history, i suppose. what about the -- as far as the rest of the sector is concerned? clearly we heard mark carney saying, you go out and put -- the banks seem hesitant to do that. seems difficult actually for any authority to get them to do something they just don't want to do. >> sure. as it should be. they're the ones that are going to bear the risk. but funding for lending, to some extent, has worked. it is going on with home to buy schemes, et cetera, even though i don't agree with the policy, is this having an impact. these policy initiatives may not work exactly at the pace one wants or at the scale or maybe exactly at those consequences, but they do still have a real

impact. >> they are -- they're interesting initiatives. but you're right. okay, so you can take 90 billion out of gilts. but are you actually going to give it to smes because the question is still capital. if you lend out to smes, you still have a higher risk loan out there and need more capital to put against it. so it is possible that it frees them up. it is possible if you are very highly dependent that you do something else, but not necessarily true. >> and you spoke about this earlier, at least a little further ahead in the uk than the rest of the eurozone, right. still have huge concerns about undercapitalized banks in europe. >> absolutely. couldn't agree more. >> how much of a drag will that continue to be? >> it is going to be a drag to the extent that our relationships with the eurozone continue, which will be fairly substantial, both financial and trade relationships and the confidence affects also will wear the uk down. part of the problem is if before the crisis you ask the question whether germany or france are

friendly for the financial sector, most people would have laughed in your face. post crisis, switzerland, united states, united kingdom, which all seem to be much more friendly for the financial sector, have done much more to reform the banking system, partly because the existential threat that the uk and switzerland faced than germany or france and germany in particular, going around undermining the modest requirements. i think that the european banking system, particularly the eurozone banking system has a much, much longer way to go and we are somewhere between where the u.s. is already arrived and the eurozone is. >> one final point on regulation for banks, the most important piece of regulation, which is all about resolution in these living wills still hasn't been hammered out. that's in the hands of regulators and how do you divide that between europe and the fed and how do you get to agreement when the banks fail? it is a lot more important than splitting retail and investment bank and somehow it has been

lost on how much of an impact it actually has. >> what is a dead will? >> it is when lehmans doors close and the administrators come in. >> the debate -- has to be a death for wail to a will to be . proposals are stacking up in the norwegian parliament ahead of next week's election. are they underperforming? >> i don't think they're underperforming. i think maybe the -- has changed and some of the big funds. norway is basically an owner of almost every stock, but a very passive owner. i think corporate governance attitudes have changed. >> sonny, you looked at this. >> it is underperforming both its absolute benchmark, suppose to be a 4% real rate of return that the parliament has set as well as every other contemporary

fund that could be considered to be part of its -- which includes a big u.s. university endowment which includes abu dhabi, singapore's two sovereign wealth funds, apg and calipers large pension fund. the largest sovereign wealth fund in the world has only delivered a rate of return of 3.1% over the past 15 years. many of the others have delivered a rate of return in excess of 5%. that's -- the change needs to be in strategy. it is part of the problem. it is essentially a passive index investor. 99.1% of its investments. >> great to have you today. thanks very much, sonny kapour. still to come, taper talk continues. what are strategists to do?

this is "worldwide exchange." i'm ross westgate. a recap of your headlines today from around the globe. russian president vladimir putin could support military action in seer why only backed by evidence that the assad regime used chemical weapons and backed by action by the u.n. india central bank steps in with aggressive moves to shore up the rupee as rajan takes the reins as rbi governor. and watch out, samsung

prepares to take the wraps off its new galaxy gear smart watch as it tries to take first move advantage over apple in the gadget wars. all right. warm welcome to you. we have got the latest eurozone gdp second estimate unrevised at .3% quarter on quarter, unrevised at .3% quarter on quarter. this is after we saw the pmi a little earlier come in slightly weaker than the flash number. though still in expansion territory and follows a strong uk services pmi number, 60.5. the orders the best since may 1997. the annual number was revised a

little bit higher, minus .5% contraction versus .7% previously. and that's just helped the euro dollar up the best levels of the day after dipping previously on that second estimate of pmi an hour or so ago. right. the economic data, let's show you where we stand with fewer futures now. dow currently is around 12 points below fair value. the nasdaq indicated also about 4 points below fair value and the s&p 500 is also a couple of points below fair value. cautious start is what we're in play for as far as these are concerned. the ftse cnbc global 300 has been flat. european equities have been -- jumping around a little bit. there we go. european equities are down.

the xetra dax down a similar amount. cac quarante off around two-thirds. bond markets, gilt yields on the ten-year did react a huge amount to services pmi but are up a little bit. 2.88%. on the currency markets, the pound has been moving today as well. sterling dollar now over 156. get the sense the sterling trade will try to pressure mr. carney, the bank of england on their views about this forward guidance and whether they can, in fact, make it stick. dollar yen steady at 19.59. that's where we stand now in european trade. sixuan has the latest for us out of asia from singapore and the wrap there. sixuan? >> thank you, ross. we see consolidation in asia today after their recent gains. more pass data from china helped the shanghai composite end higher with cyclical sector and miners lending support.

earthquake in japan had little impact on the markets. the nikkei 225 managed to reverse early losses to finish higher by half a percent. this after the index surged over 4% over the past two days. as for the top gainers, canon jumped to a three-week high after saying the company will buy back up to 1.6% or a maximum of $500 million worth of shares between today and the first of november. the stock finished higher by almost 4%. also want to show you shares of honda as the nikkei reported a likely dividend hike for the automaker on hopes of strong full year earnings. analysts say it doesn't really wow investors with other automakers also likely to hike dividends. honda shares gained about .6% today. take a look at shares of ccb, china construction bank. it is flat on the main land but slipped 1.4% in hong kong today. this after reports that bank of

america has sold its remaining stake in the bank for up to $1.5 billion, wrapping up a multiyear exit from this chinese banking asset. chinese steelmakers enjoyed a nice rally today, this helped by optimism over beijing's policy measures. latest industry data also pointing to modest pickup in steel prices in demand. back to you. >> sixuan, thanks for that. now, joining us for the second part of the program today, piers curran. good to see you. summer is over. >> yeah, unfortunately. >> and here we are. we have got a number of big events going on. the geopolitics is one with syria, which has had an impact as we can see. and the fed is coming up in the taper talk. >> absolutely. >> what do we do? >> it has been a rough august. >> yeah. down 4.5%. s&p down 3.

>> particularly with obviously the syria escalation and also the emerging market space continued to get a little hammering ahead of the fed. i still think that there is a misconception a little bit in the emerging market, the fed aren't providing enough clarity and still uncertainty on how this stepdown on the region policy will work. but i don't really get it. bernanke has been telling us for months now tapering will start in september. and it is going to be a slow process and will finish in june next year. i think that the fed has a delicate balance. >> you're clear he's been that clear? >> i am. i know there has been things going on, i've been saying this for a number of months, but fed tapering in september is mailed on. there is always risks, always developments and expectations shift. but ultimately there nothing that happened that has been significant enough to alter that fed strategy.

>> we should be used to it by now. >> yes. >> i think that's the way the fed conducted the policy, we get slightly part of it. >> all about communication these days, and communication has been reasonable. i think the fed has a delicate balance. not only worrying about what impact is going to have on their own economy, because we have seen mortgage rates rise steadily over the last couple of months, ever since the may announcement from bernanke that, you know, they'll start it look at unwinding. has to think about the impact it is going to have on the housing market. but also, you know, the emerging market space is a delicate one. >> yeah. so has enough damage been done? if you're trading the equities, has enough damage been done or not right now? >> the way markets work is that they assume the worst case scenario when there is not perfect clarity. they tend to err on the side of caution. so there has been a big unwind

in the emerging market space particularly. we have seen rates globally push higher and this has caused a little concern. people are saying we finally got a little bit of traction and momentum on growth. and this is just going to kill it in its tracks. i think it is always an overreaction. i think that the worst has passed. don't get me wrong. still have a couple of weeks until bernanke -- still have the syrian issue. there is going to be choppiness, volatility is probably going to stay around where it is now. i don't think the vicx is going to get above 20. i think once we're past all of these big risks that are haunting the market at the moment, i think the outcome at the other side will be one of relief, i don't think you're going to see dramatic negative reactions to these risks as they fall into line. >> could be a buying on the fact? >> i think that, yes. i think the quarter four is going to be pretty positive. i think we'll go through these phases. i think the fed -- the fed need to get it right, though.

i think that slow and steady has to be the way. i don't think they should come in and say, right, we're going to taper by 25 billion straightaway. i think it needs to be they need to feed it through 10 billion a month, no more than that. if you see on the 18th of september, bernanke says 25 billion are going to cut. i think you're going to -- >> that's a shock. >> particularly to the emerging market currencies and bond markets. >> all right. piers, you're with us for the rest of the program. you mensed se edmentioned syria. vladimir putin will consider supporting a military strike on syria if it is proven that the assad regime is responsible for carrying out alleged chemical weapons attacks. in an interview with ap, he urged the western leader to submit convincing evidence to the u.n. security council and warned against a unilateral strike. >> translator: i do not exclude this. but i would like to draw your attention to one absolutely key aspect. in line with international law, only the u.n. security council

can sanction the use of force against a sovereign state. any other pretext or method which might be used to justify the use of force against an independent sovereign state is inadmissible and can only be interpreted as an aggression. >> putin said russia suspended deliveries of missile systems into syria but would continue to supply damascus with other military supplies and services. most comments come ahead of the g-20 meeting which is expected to focus on syria. the u.s. president barack obama made no plan for formal meeting with putin, but the two may speak on the sideline. obama will have talks with francois hollande and xi jinping. for more from the region, and the middle east, jim maceda

joins us from turkey near the syrian border. jim, plenty of comments out from u.s. politicians, from the russian president. how is this all being perceived in turkey, which, of course, fears an escalation of fears what may happen in syria? >> reporter: that's absolutely right. it is interesting to be in turkey now because it does encapsulate all of it. it is a nato ally. a friend of the united states. it will soon have half a million syrian refugees to contend with inside turkey. and it is also a target of cross border attacks from syrian forces. so, getting turkish reaction is interesting. and the turks are watching these political battles unfolding in washington very carefully. like most u.s. allies, turkey is worried. worried that too little too late, that only a major offensive would actually topple bashar al assad, hoonly that cod

prevent assad from triggering a retaliation against turkey. if he's only -- if it is only a pinprick, which only angers the dictator. there is trepidation here in turkey as well as in saudi arabia, in the emirates, and in israel. they're all officially publicly backing president obama's plan. they're hoping that air strikes work. if and when they happen. and that they will at least establish some credibility for americans in this region, which has been sorely missing. putin comments are potentially a breakthrough because putin has never said this before, we know he's three times vetoed anything of this nature. and he requested for authority to strike syria. at this time, he seems to be making 18 degree turn an we know that as russia moves, china moves as well in the security council permanent five. this could be interesting.

and i understand that putin -- that obama going to st. petersburg will certainly be bri bringing credible intelligence with him. the russians have been complaining very much that when they ask to see intelligence, they're getting the declassified version which doesn't offer concrete details. i would be surprised if they're offered the same thing again in st. petersburg tomorrow on friday. back to you, ross. >> jim, thanks very much for that. jim maceda in turkey. now, can't put down your smartphone? you're not alone. u.s. senator john mccain an advocate of interscension in syria was caught by a reporter playing poker on his iphone during a pivotal congressional hearing yesterday. mccain took to twitter to respond to the news saying -- we have been asking, is this really not a big deal or do you think it is a waste of the taxpayer dollar? mike tweeted, he disrespects the country and world in poker terms gambling away tax dollars and is

a big tell. i don't think he's playing with real money. keep the responses coming. if you want to join the conversation, e-mail worldwide@cnbc.com, tweet @cnbcwex or direct to me @rosswestgate. on our website, of course, cnbc.com you can find out plenty more why syria is expected to headline the g-20 summit and follow us as well on twitter @cnbcworld. the secretary-general toll cnbc that syria would not scudder. that full interview will be on european closing bell tonight and in the united states, watch that on cnbc world. still to come now, greece's privatization goals boosted after off loading a stake in the

gambling firm. we'll hear from the group's ceo after life after government ownership right after this.

recap of the headlines. russian president vladimir putin shifts stance on syria ahead of

the g-20 summit saying he might back a military strike. global equities lower as prospects fall about strikes seem more likely. and samsung wraps up the battle as it takes the wraps off a new galaxy gear smart watch. greek prime minister recently announced the country's privatization fund will remain under greek control following the reports that the responsibilities might be transferred to europe. the road towards privatization of greek assets one of the key terms of the bailout has been beset with delays and difficulties, but one hurdle cleared last month when greece did complete the sale of the state's 33% stake in lottery operator opat. joining us for more is the ceo of opat. welcome. >> thank you. >> thank you for joining us. mixture of equity -- mixture of

people brought this 33% stake for 650 million pounds. what does the company have to do? >> a million euros. >> million euros, yes. did i say -- a million euros, exactly. the attraction has been it has been a monopoly of the state lottery, but that is being challenged by plenty of other gaming operators in the european courts. >> i'm glad you started with this question. the issue in my opinion is more of a noise than of a substance because it is a -- an issue that we have fought successfully in the past and we have won all the battles. so the monopoly is pretty much properly secure. >> did the european court of justice not rule in january that your monopoly was illegal? >> well, again, i'm quite firm in my opinion that there is a series of activities and the

series of regulatory controls that the government has implemented. so it is fully legal. >> did they rule that or not rule that? >> it is subject now to a fine and a verdict from the greek supreme court. and the european court of justice passed over this issue to the greek supreme court. we are expecting the ruling of the supreme court i think next month. >> i'm sure the issue won't go away, though, your competitors will want to -- at the same time, your first quarter profit is down 70% because of the new gaming tax sales were down. so that's one issue. clearly there are other operations going on at the moment. what do you do with the business? now that you're not in government control, how do you now maximize that? >> in order to make the monopoly operate properly, the government has implemented the last two years a new commission which is called the gaming control commission. and this commission has got the responsibility of monitoring the

proper gaming rules, responsible gaming and the compliance with rules that are appropriate to monopolies. i think you also have to know that the acquisition of the monopoly has cost a lot of money. we have paid nearly more than a billion for this monopoly to the year 2030, and we're not the only monopoly in europe. now, the taxation issue is also part of the measures that the government has implemented in order to adjust the terms and conditions of how the monopoly is going to operate. i think you also have to take into consideration that the tax regime that we pay 30% to send taxes on our gross gaming revenue which is probably the highest percent rate in europe.

this is also part of the protection of the monopoly measures. >> the good news is the privatization happened. give us your sense of whether you think this will make more the privatization program to actually really kick in with other companies or not in greece. >> i think the example of opap was a very, very important one. it was not easy, not self-evident that we will succeed, it was difficult. there were many conflicts, there were many issues to be resolved. i can tell you that sometimes we have to create -- we have to create new laws. and finally we succeeded. and it was not easy, it was difficult in this success is really indicating we can do it, we did it first and we did it with transparency and this is recognized by the rest of the world as not something i'm seeing by myself. >> can i ask -- >> actually, unfortunately, we

have to go. i would like to continue the discussion. i hope you'll come back next time in london. we'll talk more, see how the greek economy is come on as well. ceo of opap. linda wells, editor in chief of "allure" magazine will join us as new york fashion week kicks off state side. building animatronics is all about getting things to work together. the timing, the actions, the reactions. everything has to synch up. my expenses are no different. receipt match from american express synchronizes your business expenses. just shoot your business card receipts and they're automatically matched up with the charges on your online statement. i'm john kaplan and i'm a member of a synchronized world. this is what membership is. this is what membership does. yeah.

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now, all eyes on the beauty and designer worlds for tomorrow's fashion week as l'oreal proved emerging markets continue to demand in the sector. giving them some resilience to the rest of the global economy. does the fashion industry look better than ever? joining us from new york is linda wells, editor in chief of "allure" magazine. thank you very much for joining us. the l'oreal results were kind of interesting. how indicative of what they're saying is actually what is going to go on and what focus does that give this week? >> i think that what is really interesting what is going on, l'oreal is a beauty company. and many new designers that are showing this week are going to be introducing new makeup lines. there is a great potential for their business. enormous branding, big margins,

and a real opportunity here. that used to be limited to fragrance, now designers are moving into the makeup world. >> who will be making the makeup for them? is this a white label? >> no, this is -- michael kors is doing a makeup line with estee lauder. mark jacobs is doing a line that is in partnership with sephora and then giorgio armani, he's with l'oreal. and dolce and gabbana has a line done by prestige. so they're backed by big cosmetic companies. >> does the -- if you launch a line of makeup and you say you -- i presume they line it with some individual star or somebody, does that then become a driver -- how big a driver does that become for the fashion itself rather than the makeup? using makeup as a driver for the

fashion? >> well, it becomes a big driver for the fashion. fewer of them are using celebrities to endorse these things because the celebrity in this case is the designer. and these designers now have such big images because of reality tv, and social media puts it in a whole different league. but i think that this can drive the designer business and it fuels -- both of them fuel each other. you have big runway shows, they get a lot of attention and social media now raises that attention to a different level. and then the makeup now becomes a part of the whole imagery and the whole branding and hen it draws the consumer back into the line. in many ways it gives access to consumers who couldn't afford the big expensive things that come down the runway. a lipstick might be $25, $30, where as a dress is in the $2,000 range. this is something that gets these designers in a lot of different markets and a lot of different consumers hands. >> how are the designer businesses holding up? how are they faring right now?

are they making good money? is it difficult? what is the deal? >> i wouldn't be sad if my name were michael kors right now. a lot of the designers are doing really well right now. i think there is a real -- there is a sense of consumer confidence that you even see it in the way they're designing and the kinds of things they're designing. we're seeing a lot of color and color is something that is -- it is a risky proposition to a lot of people. and people feel as if it has a limited life span in their closets. in the past, people in times of economic difficulty wanted to buy very basic items. now, the more flamboyant, the better. and the price points ofer cloth high. when you bring in the makeup, that brings it to a much more greater level of accessibility for consumers. >> linda, good to join you. or thank you for joining us this morning as well. have a great week in new york. linda wells, editor in chief of

"allure" magazine. on the eve of samsung's product launch, apple is sending out its own rsvp. we look at tech's new battleground, smart watches. [ female announcer ] what if the next big thing, isn't a thing at all? it's lots of things. all waking up. connecting to the global phenomenon we call the internet of everything. ♪ it's going to be amazing. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco. tomorrow starts here. [ agent smith ] i've found software that intrigues me. it appears it's an agent of good.

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i'm ross westgate. a recap of the headlines today.

vladimir putin says he would support military action in syria, but only if it is backed by evidence that the assad regime used chemical weapons and was sanctioned by the united nations. stocks in europe trade lower's the strike looks increasingly likely as well after u.s. senate committee agrees on a draft resolution giving president obama 60 days for the use of military force. watch out. samsung's preparing to take the wraps off its new galaxy gear smart watch as it tries to take some first mover advantage over apple in the latest round of the gadget wars. okay. just joining us state side, very good morning to you. welcome to the start of global trading day. u.s. futures mixed this morning. three points below fair value on the dow. little bit flat on the nasdaq.

little below fair value by three points. s&p 500 at the moment half a point below fair value. european equities down .5%. the ibex is down half a percent. the cac quarante down .6% and eurozone pmis came in a tad weaker than the flash. they were an expansionary territory. now, linked in is tapping investors for more cash with a $1 billion sale of common stock. the company says it will put the funds it raises toward potential acquisitions as part of the new content strategy. shares in the business social media site fell after hours, but over the last 12 months, the stock is almost doubled. the company's market cap standing at $32 billion. it was 4.3 billion at the time of its 2011 ipo. i bet piers wishes he got that -- samsung is set to release its latest device in the

tech innovation battle. the galaxy gear smart watch. technology new site venture beat released a leaked image believed to be a prototype. the derivice is expected to as a companion. samsung is also expected to announce it is installing anti-virus software on all of its new android phones. at the same time, unsurprisingly, apple has gun its own marketing blitz for the latest product launch, inviting people to an event on september 10th, next tuesday, at its california campus. it is only stating that they should brighten everyone's day on the invitation. it sent tongues wagging over the release of a new iphone. are you excited by the product launches, by the potential of buying a samsung wristwatch. >> i'm excited to see what it

looks like. i'm not sure if i'm excited to buy one. the backdrop is that these guys are fierce competitors in the hand set world. anything one of them can do to get a little edge is really crucial here. in last few year, samsung tripled its share, around a third of hand sets. that's why apple stock is soft in the last several months. >> the big thing is we know for last few years that tech fairs has been wearable technology. the interesting thing is, what is going into a samsung watch, how much of a threat actually is this to traditional watchmakers and some of the luxury guys have been doing really well. >> that's right. if you look at what the luxury brands have been doing and your previous guest was talk ing about this with cosmetics, michael kors, mark jacobs, these guys have been licensing the brands to watchmakers and making a killing off this. it is high margin because they give them the right to produce this stuff and go out and do it and book revenue and collect almost all of the profit. but there is a little bit of a risk here that the smart

watches, along with all the traditional or other traditional watchmakers getting involved and the space becoming crowded. michael kors in particular has had phenomenal sales through fossil which manufactures them. but last quarter for the first time in something like 20 quarters the same store sales, their retail locates were flat. it looks like it is possible that the market is getting saturated. if you throw in all the exciting smart watches which these companies no doubt will market very heavily, i think the holiday season in particular could be very interesting. >> interesting to see whether the watchmaker -- rolex ties up with samsung. who knows where it will go. >> is this -- is this going to be a big deal in the long-term? i think the smart watch idea, i don't think it is going to be anywhere near as significant a revenue as smartphones. i mean, i think isn't it just kind of a play to gain media attention at the moment and samsung is coming in early to

get there first and perhaps they rushed their product production and perhaps the product will not cut it. and i don't know. i see it as a side show. >> i think there is something to that. these are not meant to replace smartphones anyway. the way from the little we know at this point, samsung is going to pitch this as sort of something to accompany, you know, its galaxy phone. so the idea may be -- there is a bluetooth connection or something to your watch. if you're on the train and don't want to take your phone out, you can take your phone out and say -- >> for the likes of senator mccains of this world, this might be a lot more -- this could be -- this could be the killer app for people in meetings. instead of picking the thing out and just doing that, just doing -- i'm just -- >> has the consumer been turned off by smaller and smaller screens? samsung has come out in competition with apple and come out with bigger screens. will the consumer want to go to something that is tiny? i wouldn't want to read an e-mail on my watch. maybe. >> that's a great point.

sony is one of the guys that has come out early. they had two models, neither of which has done that well. they made the screen bigger in the second up wione. it is really small. >> stay there. we want to talk about nokia as well. we talk about phones. nokia shares have seen the stock becoming one of the most shorted in europe following microsoft's approach yesterday. many short sellers rush to cover their market positions. our next guest says this action would have helped drive yesterday's share spike. joining us on set in a second, is simon colvert from market. i'm just interested actually while we put simon, joins us on set here, piers, look, nokia, microsoft, what do you think of what this means for microsoft? or whether you've been -- >> i don't -- well, i think it is possibly worth the risk. they have picked something up relatively cheap. they have got no market share on

the smartphone business and so perhaps it is worth the risk. i don't know whether nokia -- whether they can come back from the dead, whether they can compete on the level with apple and samsung. maybe the competition is too fierce, but -- >> we'll see what happens. simon is now with us. the spike we had in nokia yesterday and up today, you think it may be nothing more than a short covering? >> well, yeah, exactly. we track what is the stock on loan here and we see them 400 million shares being borrowed by investors. so that represents about 12% of the current shares outstanding. and so, you know, looking into this announcement, still very heavily shorted. it used to be about 21% of the company shares were being borrowed now. nokia has done some things to turn itself around in strategiwise and made it quite clear with the announcement of the buying of the seiemens join

venture. we have a base to cover it, how long it would take back to buy back short positions. >> how long? >> and ahead of the deal is about 40 days trading volume. you have to keep in mind it has been light trading volume due to the summer low. but right now, yesterday, we got 400 million shares trading hands. you could say, if all this was short covering, people are covering most of their position, but, you know, still very significant development for short sellers. >> yeah. >> once the short selling finishes, which maybe it has done given the volumes you suggested, is that it for the nokia spike? >> we're seeing that level sustain itself today. still trading flat, but no massive kind of spike on the downward side. the big speculation coming into this, you know, the second wave of development would be what are they going to do with the extra $5 billion in cash they're receiving. there is talks of special dividend, going forward, you know, because nokia hasn't paid

a dividend since 2012. that made it exposed to short sellers, they're not liable for the dividend yield going forward. could you see potentially this company really start to use its cash as generating or pay dividends going forward? >> i think the big question in my mind is how they convince app developers to make apps you want to use on the phone. it is a tough sell. it is a tough sell. if you go to an app developer and say make something for us, there just aren't enough devices to make it worth their while. maybe microsoft will come up with a way to encourage them, advance the money on it or something. without that, why would you want one of these phones? >> they have the revenues, the reserves, that's -- john, good to see you today. still to come, case dismissed. the u.s. judge tossed out a lawsuit against former bear

stearns fund managers and one of the first cases spawned by the financial crisis. more details in a few moments. building animatronics is all about getting things to work together. the timing, the actions, the reactions. everything has to synch up. my expenses are no different. receipt match from american express synchronizes your business expenses. just shoot your business card receipts and they're automatically matched up with the charges on your online statement. i'm john kaplan and i'm a member of a synchronized world. this is what membership is. this is what membership does.

russian president vladimir putin shifts his stance on syria ahead of the g-20 saying he might back a strike.

global equities move lower as prospects fall of that strike become more likely. and samsung wraps up the battle among tech titans as it takes the wraps off a new galaxy gear smart watch today. u.s. federal judge dismissed a lawsuit filed by bank of america against three former bear stearns fund managers. bertha's at cnbc hq in the states with all the details. good morning, bertha. >> good morning, ross. the lawsuit was brought by bank of america in 2008 against ralph chofy, imagine ymatthew tannin l garagal. it comes months before bear stearns went under in march of 2008. the demise of the funds was among the earliest high profile

signs of stress in the credit market that led to the global financial crisis. the bear funds and enhanced leverage funds had been crammed with subprime mortgage-backed securities prior to their collapse. they said they structured a cdo in may of 2007 of mortgage-backed assets that were primarily owned by the two bear funds and took huge losses when they imploded one month later. they say it would not have entered that transaction if it had known the funds were suffering substantial redemption requests and were desperate to secure liquidity to prop them up. the judge rejected the claims saying bank of america couldn't prove damages that could be traced to bear or the fund managers concealing any market moving information. a jury acquitted chofy and tannin of securities fraud in 2 09 saying there was no evidence of criminal intent or that they conspired to mislead investors. it was the first major criminal trial stemming from the

financial crisis. ross? >> all right, bertha, thanks for that. growing prospects of a syrian strike have spooked equities. so how will wall street react? we'll preview trading day ahead in the states right after this.

vladimir putin will consider supporting a military strike on syria if it is proven the assad regime is responsible for carrying out alleged chemical weapons attacks. an interview with ap urged western leaders to submit convincing evidence to the u.n. security council and warpd against a unilateral strike. >> i do not exclude this. but i would like to draw your attention to one absolutely key

aspect. in line with international law, only the u.n. security council could sanction the use of force against a sovereign state. any other pretext or method which might be used to justify the use of force against an independent sovereign state is inadmissible and can only be interpreted as an aggression. >> putin said russia suspended deliveries of missile systems into syria but would supply damascus with other military supplies and services. those comments come ahead of the g-20 meeting in st. petersburg. president obama made no plans for a formal meeting with the prussian president, but they may speak on the sidelines. the u.s. secretary of state john kerry and chuck hagel will be on capitol hill today for more congressional hearings on syria. hadley gamble is with us for more. hadley, the russian president talked about suspending those missile exports, but you think there is a pretty simple reason why it is not anything to do

with the fact that they don't want to escalate things. >> exactly. he'll continue the defense deals already in place. the missile deal, this was reported a cull ouple of days g. they suspend delivery because the syrians haven't paid up yet. even though while there say huge international political consensus in terms of who is playing what side, the russians are not going to continue supplying syria with any kind of weapons that they're not paying for. >> we would consider supporting military action if there is u.n. approved, they go on later and says, it is ludicrous to think that the syrian government is gassing their own people. absurd. when you use that language, it is clear that that is actually far more telling than the comments at the front. >> he's throwing the first volley at president obama. there is a very set ground rule

in terms of how russia would be dragged into any kind of conflict, it would have to be through u.n. security resolution. >> we're getting the 60-day action plan to vote on for the u.s. administration it take action as well. piers, how is that going to impact investors is now we saw last week, the markets are a little better. >> yeah. if you look at these kind of events and obviously this isn't the first time we have had middle east unrest and the threat of the likes of the u.s. going into try and disrupt it, but what normally happens from a market perspective is that you tend to get a two, to three month sell-off, the strike happens and then actually history tells us that a month after the strike, stocks rebounded to where they were before. i don't think this is any different. it is inevitable we'll get an air strike and it will be short and contained and probably be a

slap on the wrist for assad. i don't know whether he's used weapons or not. i don't think that's not the point. i think they want to stamp their authority and say this is not on. and i don't think it will have a wider implication for the middle east and therefore i don't think it will have an upside effect on energy prices. >> that's true that president obama is fine with a much more narrow scope than what the white house sent over to congress as well. much more of a spank to president assad than anything else and, of course, even in the gulf, you've seen the gulf market in a panic so often the last couple of days. they don't want this regional contagion to spread. we'll continue to see that i would expect, panic sell-off. >> the wider issue is russia and the u.s. i don't think you'll get a u.n. agreement to an air strike and so if that's what putin wants, he's probably not going to get t the u.s. will go in anyway and so i don't think that's going to affect the markets. >> piers, just before we let you go, just a final thought here, a lot of data to get through this week for the employment report ahead of the fed as well.

is it the key takeaway here with syria and with the fed that you hold fine for now? >> yes. going to be -- payrolls needs to be pretty terrible to put off this tapering schedule. it is going to need to be down around 100,000, i would say, and for it to have any chance of delaying tapering. so that's nailed on, i think. all we need to know is on the 18th how quickly will they taper. the syria thing will drag on for a week or so. i think as we get to the latter part of september, i think it will be clear syria issue will not disrupt energy costs. i think the tapering will be announced as slow and steady. i think merkel will remain in power and the european policies will not alter. i think the three big risks people are worried about now will go. therefore i think this will launch a decent risk rally for quarter four. >> thanks, piers. good to see you.

hadley, thank you. we told you how u.s. senator john mccain was caught by a reporter playing poker on his iphone during the hearing yesterday. we asked is that a big deal or a waste of taxpayer dollar? paul tweeted, john mccain said americans are misinformed about syria, we tapay attention. two sides of the argument. the agenda today state side, july trade deficit at 8:30 eastern. gap forecast wie widened by $5 billion. 2:00, the beige book of economic conditions. and automakers report u.s. august sales today with another strong month expected. as far as u.s. futures, they point to a fairly flat start for u.s. equities. "squawk box" will take over with the countdown to the opening state side.

whatever happens, have a profitable day.

today's top stories, washington trying to come to an agreement on whether or not to authorize a strike against syria. investors try to handicap the odds of action or inaction and figure out what decisions in d.c. mean for the global markets and on the economic agenda a key report from the fed, it is wednesday, september 4th, 2013. and "squawk box" begins right now. ♪ good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick with joe kernen

and andrew ross sorkin. let's set up today's agenda. in washington, the senate armed services and foreign relations committees will hold closed hearings to receive classified intelligence on syria. they could vote as soon as today on the syria authorization bill. in the meantime, the house foreign affairs committee will convene a hearing at noon to hear from secretary of state john kerry, defense secretary chuck hagel and martin dempsey. we'll have more from ayman jabbers in d.c. also, president obama arrived in sweden this morning. he'll be holding a news conference at 8:30 eastern time with that country's prime minister. it is safe to assume he will face questions on syria. we'll be monitoring all of that and bringing you the highlights as they happen. plus, on the economic front today, a few releases of note for the markets. 8:30 eastern, international trade. then this afternoon, we get the fed's beige book. and throughout the day, the nation's automakers. they'll be reporting on august sales. in addition to covering all of these ie