hello. you're watching "worldwide exchange." your headlines today, tough medicine. a surprise rate hike to record down inflation sends indian stocks tumbling. the rupee lower as measures evolve back. germany's angela merkel makes a final appeal to voters ahead of weekend elections as polls suggest the rate is far from over. and the radical left party suggests germans are not bailing out ahead of actions in the greek capital.

plus, as the federally fizzles out, stocks are more or less fairly priced right now, getting harder to find bargains. hello. very good morning to you. we're into -- or good afternoon if you're into asia. we're into the final hour of "worldwide exchange" right now. and 5-4 advancers currently outpacing decliners on the dow jones stoxx 600. fairly flat for the indices. 60 odd points higher. s&p snapping a four-day winning streak. the rally in the u.s. only lasted a day. we had been rallied ahead of it, as well. this is where we stand for the european indices. the ftse 100 fairly flat.

the dax and the ftse mib down 0.2%. bond rates, let's look at treasury yields. wednesday night, we hit 2.67% on the yields. currently, six basis points above it. gilt yields currently higher at 2.9% today. german bund yields below 2% at 1.91%. on the on currency markets, we saw the dollar hit a low in yesterday's session. 1.3532 is where we stand on euro/dollar. dollar/yen, just moving away from 99.50 after being at 99.76 on wednesday. the aussie/dollar still below the .95 mark. sterling/dollar, 1.606 of 4, which is an eight-month high. let's find out what's happening

in asia. there's a huge market there and some have the day off, as well. sixuan is joining us. >> the nikkei 225, in fact, reversed early modest gains to trade marginally lower as investors booked profits. while tin decks still hofrs around the two-month highs. the tom topics still managed in the green higher by 0.3%. index heavyweight tenco lost ground in today's trade. the magnitude 5.3 earthquake has not damaged the cripple fukushima daiichi power plant. the earthquake, in fact, happened just 12 hours an prime minister shinzo abe visited the plant. a cleanup of the site is expected to take more than 30 years and tenco shares lost more

than 2%. some equity porters showed pockets of strings. ny conis trading higher by 6.4%. currencies gained ground against the dollar yesterday after the fed surprise. but we are seeing consolidation in today's trade. we are seeing india's rupee, indonesia's rupiah are all losing ground against the greenback. back to you. >> thanks very much indeed for that, sixuan. let's check in with emerging markets. christian, good to see you this morning. look, we're now sort of an extra day post. clearly, there was a knee jerk reaction. every decided they were going to buy emerging market. what happened now? >> i think, you know, we -- this move has more legs up.

i mean, it was unrealistic to think this is a linear form where we see one day after the other. but, you know, we had a significant change. it was unexpected. i think a lot of people got caught off guard. they were either underweight. they were very negative on currencies. they were, you know, shortening them against the dollar. and all these people have trough position. we think this is going to last at least for a few weeks. so it was unlikely to go linear. i think today some consolidation is to be expected. but i think it has more legs than a rally. >> this is more than just short covering, is it? what is that base and what fundamentals would that be based on? >> i think it's in two stages. i think we have a stage where we talk about short covering and i think that lasts longer than a few days. it's short covering and repositioning. and then i think on a second

stage will be differentiation. i don't think we go back into a premay environment. i think clearly if you also lift the market commentary and how investors thipg think, that is not going to be the case. but i think people are going to look at some of the emerging markets. they look at the global rebound in manufacturing that we seem to see and they're like open economies and emerging markets with strong manufacturing. we see that in northern asia. we see century europe. we steer quite positive from mexico. and these emerging market stories will have, then, i think, a longer way to go. by some of the others, maybe we're just going to see the kind of short covering that we've witnessed, you know, in the last 24 hours or so. >> christian, stay there. we'll come back. we're going to dig into india, as well, and get some more views. they will have more of a sale on the surprise rate hike from mumbai, too.

>> last night, all the political parties were out in force in germany. the sdp trying to set itself apart from the ruling coalition. annette has been on the trail. jeff is in berlin, as well. jeff, you sort of landed in german election fever. what are your feelings on it? >> it's interesting, being a foreigner now transplanted into this campaign. and being an anglo-saxon. what struck me the most is how little real dissent and difference there is between the main competing parties when it comes to key domestic issues here, like taxation, like the way that the economy is broadly run and about the commitment to the euro and the broader eurozone. i mean, there is quite a good measure of consensus.

>> yeah, yeah, of course. the majority of germans, i think roughly 80% or so are very happy with the euro and want to keep the euro and want, as well, to keep germany in the eurozone. only that outline is collecting the anti-euro party. >> having said that, that doesn't mean pierce steinbrueck and angela merkel aren't campaigning hard. let's have a listen as we're in the final days of campaigning here pushing hard to say this is a government that should stop here and there should be a new one that is more forward looking coming next. this is what he had to say. >>.

>> translator: in three days' time, you'll have an opportunity to vote out a government that is the most ineffective, backwards looking, most fractious unit since unification. >> to be fair, the last government or the current government, you should say, one of the biggest challenges was to tackle the euro crisis and angela merkel devoted a lot of her efforts to attend meetings in brussels and elsewhere to prevent the taxpayers' money. there is a lot of criticism surrounding her austerity measures and people are taking to the streets to protest against it. but take a listen to what she had to say about that phenomenon. >> translator: when i go to greece or to portugal, people there are allowed to demonstrate against me. they will not be arrested when i

leave. they have freedom of opinion, freedom of press, and freedom to travel and freedom of religion in the whole of europe. >> now, it tells you something, ross, about the lack of real differentiation on key elements in the parties. but a real focus is about personalities, about characteristics. angela merkel is held in very high esteem here. she has certain behaviors that have been elevated in this campaign. there is one very large poster not far from here which is basically just showing hands. it doesn't tell you that it's angela merkel. it doesn't show anything else, really, except show a very large pair of hands ta come together like this. >> but here in germany, that is one of the feature that a lot of germans are, they kind of link to her and it is a means for stability and it's -- as well,

her whole attitude of how she talks and as you were explaining to me early on, she always brings the word back to her, so the center of her body. as well, that is subconsciously, i think, implying stability and -- yes, security. >> and that this whole -- i mean, it's been great for us because we look for the signs and these things that we can create metaphors out of and that whole idea that germany is safe in this pair of hands is the message that's being put across. but very interesting, we did get just announced a new statue by madden, two swords of chancellor merkel which replaces the old one. and it's quite interesting that just a few days before there is a vote that could lead to her leaving the chancellory. she decided to unveil her latest statue. clearly, they feel confident enough that she is going to stay

around to make the investment into this new piece of wax. >> to complete the picture, what you get from herr steinbrueck is just the middle finger, right? >> breakfast programming. it's a family show. anyway, let's send it back to you, ross. >> you do raise a point, though, geoff. there's absolutely no chance, is there? i mean, how slim is the chance angela merkel won't be chancellor again? >> that's a better one for you, annette. it seems to me that angela merkel does look a shoo-in here. one hates to prejudge any election, but hard to imagine pierce steinbrueck taking that up. >> the only thing that could happen is if the social democrats are going together with the left, which they promised not to do. but you never know after the election. >> yep. back to you, ross, from berlin. >> annette, geoff, thanks very much. we'll catch you a little bit later. still to come, we hear public support from the euro or

lack of it is playing a major in the german elections. more when we come back.

foxtons has gone public today. british agency fitch has a firm, this a-grade rating and stable outlook for rbs, lloyds bank and santander uk. british financial institutions are now benefiting from the gradual improvement in the country's operating environment. and performance is improving, albeit also gradually. shares in lloyds are up 60% this year. the government fell down a 60% stake. it's up a more meager 14% by comparison. adidas has followed in the tracks of rival nike. and revised down its sales forecast for the year. the german sports wearmaker expects net income to come in between 820 and 850 million euros. this is compared to a previous target of up to 920 million.

the firm is blaming weakening currencies in emerging markets and poor performance of its golf business for the move. adidas stocks under 22% this year. nike has climbed 34%. back to adidas, and that chart, up 17%. and the wait is finally over. the new iphones are released today. apple fans are the first in line. even typhoon weather conditions couldn't stop them from getting in line. and the crowds have been lining up all over the world. they were cueing for five days. so what we want to ask is is the wait really worth it? and if not, what would you actually cue for? would you queue and camp for wimbledon tickets? let us know. e-mail us, worldwide@cnbc.com,

tweet@krns we can see or direct to me @rosswestgate. is there anything worth getting in line for days that's worth it? let us know. and moving on, warren buffett continues at the gradual pace it's been on since the fall of 2009. buffett says it hasn't been harmful. >> i don't know whether you say it isn't working. it's hard to say what would have happened if they go the other direction. the economy is improving, but i think probably bernanke was hoping to see an acceleration of the rate of improvement and what i think he's see is a continuation of more or less the same rate. maybe if they hadn't been doing it, it would seem less than 2%. >> and asked who thought the next fed chairman would be, buffett said he would have ben bernanke to stay on because he's

done a great job. but he thinks it's likely. we heard adidas talking about emerging markets. india's new central bank governor took markets by surprise by hiking the key lending rate by 25 basis points. rising inflation needs to be brought down to more tolerable levels. most economicists expected the rbi to hold steady. the central bank unwound some of its recent moves to support the currency and that sent the currency lower. joining us for more, economist at dbs bank, rahika, clearly a surprise. do you think they would have done this if the fed hadn't -- if the fed had tapered? >> yes, i think they have delivered what they promised. essentially the market was expecting the liquidity measure toes be partially brought down

and that was delivered. but, of course, the hike was a surprise. i think partially doing what the fed did, essentially the tapering has been delayed. but i think rbi wanted to be on the proactive end of the inflation. it's inevitable that the global stimulus will be withdrawn. if not this year, if not in december 2013. even domestically, there are reasons why the rates should be a bit higher than where they are. we saw that the inflation has bottomed out. especially the retail inflation and it's back above 9.5%. inflation at 9.5%, core inflation around 8.825. your rates cannot be at 10.25%. there's a big negative carry there. to that extent, an increase was warranted. given this was the first meeting for the new governor, i think the broad consensus was he would

come in on a cautious, yet do have dovish note. but i didn't think that materialized. >> it's a real upshot here that he -- that what we've learn is that mr. rajhan is more dovish than his predecessor. >> that is very true. in his opening remarks, he did mention low inflation is important. given that it comes after the u.s. tlad the tapering, hence the pressure on the rupee, i think that combination was the surprising factor. but if you were to see on the em as a whole, indonesia and any of the other markets have raise raised rates.

also they mentioned narrowing the key mark between the two currencies. >> let's bring back in christian keller, who is still with us, as well. christian, what do you make of the rbi move? on the one hand, we had the rate hike, but marginal standing facility was reduced. so sort of a rate hike and a rate cut at the same time. but if the desire was to allow the rupee to strengthen to deal with inflation, it didn't work today. >> i think it's a man on the move. i think he wants to calibrate the move between acknowledging what the fed did, and that means that he could go back on some of the liquidity tightening

measures they did in july. but he reduced the margin facility standing rate. but at the same time, i think i wanted to signal to the market about inflation volatility. i think the knee jerk reaction was, obviously, to sell off. he went to stock markets, banks sold off, stock markets sold off. i think that may not be a lasting move because, you know, if now they follow up with other steps. and i think the governor has all kinds of other reforms he proposed in the financial sector and even beyond. and if there's a follow-up, i think this could turn out to be actually a positive step for, including for the current stocks. >> christian, thanks very much. good to see you.@@ thank you for that. ann rahiko, thank you very much, as well. let's turn our attention back to the german elections. our next guest says it will remain a frustrating act in

europe for years to come. matt, good to see you. why debilitating actor? >> look, there are limitations to what germany can do in europe, going beyond the electoral cycles. it has deep roots, constitutional restrictions with a strong constitutional court which accesses a break of anything it's trying to do too quickly. it has a very federal system with constant elections, which means public opinion will continue to matter. public opinion is very skeptical for putting more bailout cash on the eurozone. there are several ways in which germany has held up. >> why has germ into the not be an issue in this election? >> because i think it's simple. the german elections are doing very well. no one wants to upset the apple cart. no one is happy with the bailout, but pensioners, ordinary people have yet to feel the pinch of the eurozone crisis. therefore, the eurozone and

europe haven't been an issue. >> are they going to feel the pinch? >> potentially at some point. that's the worry here. there is a big gap in germany between what the public thinks and what the politicians think. that is fine as long as, again, the economy is doing well. years down the road, we may have a different situation. weir talking for greece 10 billion euros. shaes a small amount compared to what we had previously. we may be looking at extended maturities on greece's loans. these are small things, not major steps towards integration, towards a fiscal union. these are minuscule things in

the grand scheme of things. so weir not going to see any big greek debt, for example. >> there seems to be a big breakdown in inflation. post election, what happens with that? that's always been key, of course. >> there is there is a grand coalition, perhaps it will be easier to deal with, the easier relationship between paris and berlin. these two countries in some respects have fundamental different views on the eurozone. one wants solidarity first wsh more cash on the table. the other, german, of course, wants a position. stroker consent and control it takes in the spending. and that complicated sequencing

really puts europe in that situation. that will continue to be the case. >> it was the european commission and everybody else, you know, besides the only answer here is a truly federal europe, which i don't think germany wants, right? >> no. >> and give more power to the european parliament, right? >> not quite. one interesting development in recent years is that germany, both germans, the german public, but also german politicians are becoming increasingly skeptical of the constitutional. the other is skeptical of brussels. >> absolutely more in line with the british feeling. slightly closer. still a long way away, but a little closer. matt, thank you very much, indeed. we'll take a short break. still to come, will greece prove to be a headache for angela merkel amid the ongoing debates? julia is on the ground in athens.

more to come.

these are the headlines from around the world. germany's angela merkel makes a final plea to voters. and tough medicine, a surprise rate hike from the rbi to wrestle downen flag sends indian stocks tumbling and the rupee lower. plus, the federally fizzles out. warren buffett weighs in. telling cnbc stocks are fairly more or less priced right now, but it's getting harder to find targets. a warm welcome to you. european markets are fairly flat today post the rally yesterday and the close lower for -- for u.s. markets. we've also just got uk public sector numbers, as well. public sector borrowing in august down versus a year earlier.

public finances showing some improvement this morning. george osborne says he has the company's fiscal rate deficit. down from the 4.4 billion august in 2012. the government is aiming for a deficit of no more than $120 billion or 7.5% of gdp this year. this will help a little bit. revenues in the august period, up around 2.8%. total spending by central government down by 2.2% led by stocks indeed departmental spending. so those numbers are a little

better. priced more comfort for george osborne, as well. sterling not reacting strongly. the european activities we've looked at. as far as bond markets are concerned, gilt yields have been higher today, 279% away from that 3% we hit after the minute. treasury yields spiking up further today. we hit 2.67 on the yield on wednesday evening after the fed. and currency markets, dollar/yen, 99.29. euro/dollar still near the 7 1/2 month high we hit yesterday around 1.3560. now, germany is not being punished for bailing out greece. the that is the view ahead of this weekend's troika

inspection. he said people should not view greece as a drag on their economy. >> translator: i travel add few thousand kilometers to look you in the eye and to tell you one fact. i hear what mrs. merkel and mr. steinbrueck are saying, that you are paying taxes to save greece. yes, you are taxed, but not to save greece, but to save the greek banks, which in turn means that the german banks are being saved. >> annette and geoff are in bur lynn and jules is in athens, as well. he made that point about you're not saving greece, you're saving greek banks. did that message get through, or not? >> it's interesting. the eurozone has not figured as a large message here because the two main blocks both believe germany should remain a strong member of the euro community and effectively they have a similar line, really, on the

relationship with the periphery economies. it has cropped up every now and again and, clearly, the competing challenges, mr. steinbrueck and angela merkel have felt inclined to address europe. but it hasn't been one of the core domestic drivers here. but let's listen in to what pierre steinbrueck of the spd had to say about germany's role in europe. >> translator: our germany will only do well if our neighbors do well. it will result in a great coresponsibility in europe to keep this conference together. you'll be deciding about that when you vote on september 22nd. >> angela merkel, when it comes to euro politics, always likes to refer to they have to do their homework .they need to cut government debt because she really doesn't like these high debt levels, as well, in other eurozone countries. as well in germany we have

something called debt break. so we are obeying to the rules and so she wants the others, as well, to obey to the rules. that is probably the biggest montra she has. we are helping, but they have to do something, as well. it's not unconditional love. take a listen. >> translator: solidarity and individual responsibility of the effective countries. ask for service in return, tw sides of the same coin. no euro bonds, no collective thinking funds. instead, everyone mutt do their own homework so all of us in europe end up strong in the end. >> so it's pretty difficult, really, if the key blocks make the gains that are predicted in the polls. it's difficult to see it having a great deal of impact on the euro at some point or on how quickly or otherwise germany might be willing to allow a bond buying program or other ways of assisting these indebted peripheral nations.

>> and don't forget at least the german government is really having a party about these numbers we're getting from the periphery that growth is coming back. so they see it, actually, as proof that their policy was right, that austerity was right, and that more of it could, as well, be hid for other nations if they run into these kind of problems, i.e. france or italy. i mean, we are not off the hook there. >> no. this is a key issue, this idea of these are the rules and replay by the rules. this is very much the line at the moment that we see here. which is fascinating. and let's send this out to julia in athens on this. there has been this story floating around that the foreign minister or deputy prime minister was encouraging key ecb member asmussen to be a little more lenient or understanding,

shall we say, on some of the deficit numbers that were obviously going to be reflected in official reporting. i mean, i think this one has been denied, but, julia, it's interesting that this is floating around here in germany, running up to this election, even as greece is struggling with its current round of problems. >> absolutely, geoff. as much as it's being talked about in germany, it's being spoken about here. they said it's absolutely untrue. the discussion happened back in august and he's asking if the numbers could be slightly adjusted to make that funding gap disappear. that's going to be part of the discussion for the troika. the other thing, of course, that's being discussed here is golden on the rise of the extreme right party here. quite frankly, yes, there are far bigger economic and political issues in this country to happen and we can question what happens after the german election.

but certainly, at least as far as the people are talking about today, this is the german election very much far from our minds. so germany, of course, and the implications in this country at the forefront. now, i want to talk about both of those things with my next guest. petroff telulu is joining me now. talk here of mr. venilof going to germany. what does this say about the country here? >> first of all, i haven't heard such a thing. i cannot make any comments on something i have no knowledge of on. >> in terms of addressing the perception of greece and their handling of the situation, it's not what the country needs right now, but it is making adjust manies. >> let's establish something. greece is the most fiscally, the most x-rayed country in the universe at the moment because we have been in a program for the past three years.

we are -- fiscally, we are in the intensive care and it's hardly anything that is not known, is not -- has not come to the open and we have a statistical agency that -- which is in fully aligned with euro stat. so i don't think we have any problems and any issues any more with the accuracy of our numbers. >> so this idea that actually the greek fiscal agency is working with euro stat, there is still a belief that we're going to have to wait until april to agree that it has a prime rebalance now, which ultimately is one of the conditions for seeing a debt write-down. you were at the forefront of the first write-down for greece. >> first of all, i don't think -- i don't think there is any talk about any write-down. the minister has explicitly come out and explicitly said that

there is no talk about any write-down. and i think that we are all looking forward to having a primary surplus at the end of the year, beginning of next year. and let's look at the direction. let's look at the fact where we're come from. let's look at the fact that greece has gone through three years of on very tough program. anybody who has known any of the imf adjustment programs, if you like, knows that the peak of the fatigue in the country, social fatigue is usually comes about 18 months into a program. we're already beyond the three-year mark and beyond a 25% contraction to the economy. >> petras, the former finance minister this morning told me that the government is at a 40% principal write-down. is he wrong? >> people have expectations or people can think that, you know, the solution could come from a debt write-down or something. this is his personal opinion.

i think there has been an official denial by greek officials and foreign alike. there's definitely not something preagreed or something in the cards, if you like. >> you talked about the sociology issues here, the adjustment that greece has made. how concerned are you about what this means for the sentiment in the country? >> look, the rise of extremism is something very worrying for all of us greeks here. i can see where it's coming from. like i said, three years into a program, seeing the economy contract by 25%, the unemployment rising 27%. among young people under the age of 30 is up to 55%. it is expected to put a lot of strain on the economy. now, is the rise of the extremism kind of expected? yes. is what's happening worrisome? yes, indeed, very much so. >> very quickly, yes or no, should the party be outlawed? >> that's a political decision.

i'm a greek citizen. but i think this is outside the measure of our democracy. >> well handled, avoided. the deputy head of the national bank of greece. guys, back to you. >> julia, thanks very much, indeed, for that. that's the latest out of athens. while berlin continues to reject claims of a greek problems, a new report suggests a growth in ddp for the next quarter. but it warns stark divergence between the north and the south. joining us in the studio is marie. thanks very much indeed for joining us. >> good morning. >> there's always been a north/south divide. are you suggesting it's getting worse? >> we're suggesting it's fought getting better. this is something we've looked at since the beginning of this crisis. the convergence happened since

early 2000. but what we're seeing is that over the next five years, based on our forecast, this device remains very stark and that causes issues about coordination, about corroboration within the eurozone. >> yes. wa sort of collaboration? what do you mean? >> the previous report is very illustrative about the tensions that can happen at a social level, at a political level. if the eurozone is to function, we need to have really a call in the action on policies, in the fiscal area, in the monetary area. and more generally, really. >> does that mean burden sharing? >> it does involve burden sharing, yes, in the medium term. >> when i say burden sharing, what would you tell the german people burden sharing is? >> well, i think at the moment, really, some debt write-down is politically imaginable. so i don't think we can suggest something that is just not acceptable. >> but you would advise that, though?

>> it's just that the numbers don't add up at the moment. so some financing is to come. >> it is politically easier. i think some clarity is needed in this. we have had numerous bailouts that have had to be prolonged and replaced by new bailouts and i think at some point we need to come clear about what is really needed. >> wa about financing conditions are clearly still very different. that's what the ecb was talking about. how much of an issue is that going to continue to be? and particularly, still, over

indebted and overleveraged banks? >> it is an issue, unfortunately, again, for these countries, countries in the south that typically rely on banks more than on markets for that financing. so the fact that banks in these countries are themselves cleaning up the balance sheets and not willing or able to lend is going to be an issue. we had some progress the ecb is taking over as a single supervisor. there are some proposals about resolution. but it's still very early days. we hope that after the german elections maybe some of its decisions are unlocked and we see a bit more. >> actually, i don't see anything -- i don't see how the youth unemployment level is going to change. in a way, the neutral observer has to accept that the neutral observer is going to remain scler ottic and weak at best. >> our forecast is a forecast for subdued growth.

i'm not sure you can accept that youth unemployment. >> i don't see anything in political circles that's going to do anything that fuldly changes it. >> i think there are opportunities there. we have a market with 3 hunl million people favoring moments in the market in this area. >> that means someone is going to have to come out and say we are truly going to allow single market and services, right? >> yes. i don't see that happening. i've been waiting 20 years for that to happen. >> recognizing qualifications more broadly, more easily. the movement in general. it will take some time, but i think something needs to be done to the advantage that would take these people and unemployment is very low at the moment. it's difficult for companies to find qualified labor there. so there is a mutual benefit there to be found. but i agree with you, politically, it's difficult. it will take some time.

>> marie, thank you so much for joining us for ey's eurozone forecast. staying in europe, the italian cabinet is meeting to approve the economic forecasts which is expected to hike the country's debt and deficit projections. italy is widely expected to predict a 1% contraction in 2013, worse than the previous outlook for 1.3% negative growth rate. and in slovenia, the eurozone minister says the banking system is relatively weak and trust is limited, as well. still to come, the new iphone 5s and 5c have been released today. it follows week long queues in tokyo, london and elsewhere. would you get in line to pick up a new model? find out what apple fans have been through in japan, coming up next.

now, as the japanese prvm plans to raise the saelts tax,

the japanese government plans to offer corporate tax cuts. >> hi, ross. the japanese government plan toes offer more than $14 billion in corporate tax reductions. a big chunk of the corporate tax cut will come from lending the special reconstruction tax charge extra firms next march. the government hopes boosting income will increase spending. prime minister abe is said to make a formal announcement on october 1st. meanwhile, his cabinet ministers offer different views on the issue. the prime minister said corporate tax cuts would encourage investment in the medium term, but finance

minister taro aso said it's not that easy boosting the economy. ross, back to you. >> thanks for that. have a good evening in tokyo. the eu and singapore have reached a final trade pact. under its term, singapore will open up its public procurement and many eu product standards nearly all singaporean goods will be dropped. if approved by eu members in parliament, the deal could be in place by late next year. >> markets in china and taiwan are closed today for the mid autumn festival. this is a 2 1/2 ton moon cake. it's expected to be the world's largest and that's an awful lot

of lotus seed paste and egg yokes, which is apparently what they make a moon cake with. typhoon may disrupt markets on monday if it stays on course. greater china south korean markets affect that, as well. but then it will be japan's turn to have a day off. and for you gadget freaks, the wait is finally over. the new iphone is being released today. in tokyo, apple fans will be the first to receive it. even typhoon conditions didn't stop them from getting in line. eunice is in beijing today as the new models hit the shelf there. >> i'm in beijing.

we are outside the largest apple stores in asia. people have prebooked their phones, they're lining up and getting ready to get their hands on the in you iphone 5s and 5c. this is the first time the chinese will be able to get their iphones at the same time as in the united states. >> i came here at 4:58 this morning. 5s has a new color, gold, so it bought it. >> originally, all the talk was about the 5c. people thought that it was going to help apple grow its market share in china and be competitive. but the 5c is only $100 cheaper, so the buzz today is about the 5s. especially the gold color. people in china love this color. >> with the color of gold, you can tell right away it's an iphone 5. >> people have been telling us that they feel proud that china was one of the first places to get the iphone. .now the chatter online is all about china mobile. people are asking when is apple

going to cinch a deal with the country's largest carrier and get access to its 700 million subscriber. eunice yoon, beijing. >> die hard fans have been cueing outside many stores around the world. why are the new models set for review? find out what the experts are saying online. head to cnbc.com for that. as you said, with crowds lining up all around the world, we've been asking is the wait worth it? if not, is there anything that you would queue for? jay parwood has tweeted to see he would have stood in a line for months for a preview of bernanke's speech the other day. that's not a bad thought, actually. and merith said the cure to human stupidity is worth queueing for, as well. good answers.

tweet @cnbcwex or direct to me @rosswestgate. our producer apparently would queue for a month for a season football complicate to a football club. anyway, the vegetarian day has apparently hurt the polls ahead of the german election. can the government tell what you to eat and when? annette has been finding out what the fuss is about. >> here in berlin, that means, of course, easing. some say this is somehow like a social slew in that city because everybody gathers here from tourists to politicians and, of course, i'll have that now, as well. [ tires screech ] ♪ [ male announcer ] 1.21 gigawatts. today, that's easy. ge is revolutionizing power. supercharging turbines with advanced hardware and innovative software.

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this is "worldwide exchange." i'm ross westgate. a recap of the headlines today. germany's angela merkel makes a final appeal ahead of weekend elections as polls suggest the rate is far from over. the leader of greece's radical left parties say germans are not being punished for bailing out athens. and tough medicine, a price rate hike from the rbi to wrestle down inflation sends indian stocks tumbling. currently support measures are also rolled back. and the federally fizzled out.

warren buffett says stocks are more or less fairly priced right now. it's getting harder to find bargains. all right. a very good morning to you. we saw the dow and the s&p snapping a four-day winning streak yesterday. dow, 40 points, the s&p down 3. right now as far as futures are concerned, we're above fair value. the nasdaq at the moment, about 5 points plus fair value and the s&p, what, about 2 points above fair value. european stocks have been fairly flat, really, during the session today. yes, it's red, but three points lower for the ftse. the xetra dax down 6 points. no real moves or decision making, al, about where to go after the moves higher yesterday. the ftse up around about 1%.

treasury yields are slightly higher today. 2.73% is where we are. 2.76% is the yield late wednesday after the fed. gilt yields are higher today. better tan spec'd on the month of august, as well. currency market, we saw the dollar index at that two-month high. we were at 97.66, three-week low wednesday evening. euro/dollar, kind of where we were at this time yesterday, 1.35726. that's the trading right now. as far as europe is concerned, sip sixuan will update you on the trading day in asia. there's a number of markets that have not been up and running today. >> you're right, ross. asian markets pulled back a bit in light trading with china and south korean markets out of action for the mid autumn

festival. the nikkei 225 saw some profit taking today while the index still hovers around its two-month high and has gained 2.3% for the week and over 10 this month so far. take a look at some of the big movers in japan. tenco lost ground despite the magnitude 5.3 earthquake has not damaged the puck should he sheem na power plant. the earthquake happened just 12 hours after prime minister shinzo abe made a rare visit to the plant. but some exporters showed pockets of strings as they were trading above the 99 handle. nikon, helped by its new product launch yesterday. the stock has soared 10% already for the week. but some emerging markets saw profit taking today after yesterday's surge.

.these currencies gained ground against the dollar yesterday after the fed's no taper surprise. but we are seeing some consolidation in today's trade. and india's rupee, indonesia's rupiah. they are all losing ground against the greenback. back to you. >> thanks for that. try and have a good weekend. meanwhile, warren buffett has been speaking with becky quick on closing bell. he says it's been harder to find things to buy using his tried and true value investing strategy. >> they were very cheap five years ago and ridiculously cheap. that's been corrected. they probably more is fairly priced now. we don't find bargains around, but we don't think everything is way overvalued, either.

>> with that view, let's get more from andrew berkeley. do you share that view? it's hard to find any value now? and i wonder where that leaves us taking in light of the fed's nontapering move. >> yeah, good morning. i guess i would largely agree with that. if you look at the overall s&p 500, we're trading somewhere between 15 and 16 times on a pe basis. you know, if you look on a trailing or a forward multiple, which is right around the long-term average, maybe slightly above the long-term average. if you look at an asset allocation basis, the decision between stocks and bonds certainly with interest rates climbing higher, it started to put more pressure on the earnings yield. so we've seen this postponement for the fed.

that does allow rates to kind of back off a bit, it will allow those valuations to look more attractive on an equity basis. but we're not taitd at a point where stocks are particularly cheap, they're not particularly expensive, either. i think it's more about looking underneath the index and finding sectors in industries that look, you know, expensive or cheap. that is kind of what we've seen over the past couple of months, more a rotational market than a big move in one direction or the other. >> if you do that, the other way to view the fed's lack of action is that the economy isn't strong enough at the moment. in a way, that should be worrying investors. there's not a fundamental pick up at the moment. we can't survive without continuing injections from the fed because things just aren't good enough. >> well, i mean, i think there was probably two or three reasons, you know, why we didn't get the taper, as some are calling it. i can the first one is that

markets move a lot quicker than the fed can. when the fed first started talking about this back in may is when the bond market first started to reaction to it. the bond market moved a long way in a short period of time. that hindered some of the recovery in terms of the housing related indicators, in terms of mortgage originations and permits and so on on the housing side. so i think the fed saw that. without them doing anything, that started to clamp down on the recovery we've been in. i think the other one is that the fed had to come to a reality in terms of their own economic forecast. every year, they come into the year and tuk about more of a break away trajectory of the economic recovery of 2 1/2, may 3, 3.5% growth. so yet again, they had to downgrade their economic forecast on wednesday. which would have been a little bit inconsistent to take back

the stimulus. at the same time you're downgrading your economic forecast. so, you know, if the market does the work for the fed again and they can manage to talk expectations down, then if rates start to come back a bit and the housing stabilizes, that could be more of a boost going forward. >> how do you turn it into a strategy? we've had relief in bond proxy sectors, utility staples. do you stick with those? what do you do? you said you have to look under the hood. >> yeah. i mean, our suggestion if you look at this year sent to the box proxies, the more defensive yield areas where the leadership into about the first quarter until this whole tapering discussion started. in chassic action, they were the first to get hit and relatively underperform until more of the cyclical global commodity areas started to come on during the summer. now you're starting to see a bit of a bond proxy.

we would recommend rotating out of those to get more cyclical, to get more commodity oriented on the idea that, again, the fed is going to stay on the sideline longer which should provide growth going forward. we think directionally, interest rates will continue to climb from here, even if they've paused temporarily. again, i think the box proxies, which are still very expensive on a historic basis, so getting back to the original buffett discussion about how is the market valued? a lot of those box proxy areas like staples and utilities, they're still very expensive on a historic basis. where cyclical areas are still very cheap on a relative basis. >> we'll come back to you very shortly. >> with just days to go until the german election, which is on

sunday, how do parties differ on those key points? jeff is in for the weekend to tell us all. geoff, just how close is this race going to be? >> well, the polls at the moment are telling thaw it's very close, indeed. the latest set of numbers we've seen puts the cdsu slightly ahead. but if you look across the range of polls that have come through, ross, then there is still the opportunity for an upset, i.e. the current coalition doesn't go forward and we end up with something that likes like a grand coalition with the cde/csu mix and then the sdp joining us. when it comes to issues, it's been fascinating. there isn't a huge difference in the direction of travel between the significant power blocks. there is on some issues like taxation, i guess, energy

policy, ottobon tolls and pricing, whether that should be introduced, minimum wages, the traditional kind of left/right positioning on some of those issues, the spd looking more concerned about growth and wanting to tax and invest the liberal right, perhaps less interested in raising taxes so much. not triesing, perhaps, for international viewers is that the europe isn't such a big issue. there's really only one party that's talking about leaving the euro block. that's the afd. let's listen in to what the head of the polling agency has to say about their prospects. >> as long as the afd was the pure anti-euro party, it had no chance to get close to the threshold. but now it carries a right

populist or far right example which is present in germany as well as other societies. that is a group that is difficult to hold. so we have them under 5%. they float between 2% and 4%. >> better late than never on the bite. so let's pick up and talk about olaf guenter. he is ahead of the berlin office here for the european council on foreign relations. nice to see you. >> nice to see you. >> so why isn't germany's relationship with the rest of europe a much bigger issue here in these elections? >> i think because like you said, most of the issues, these are domestic driven ones. two years back, if we had elections then, it would have been a big issue. but there is no euro crisis and all what's coming up next are

more technical details, economic governmen government. >> is this going to change after the elections? there's been a view that once we're through the elections, angela merkel can take a more engaged approach to resolving the eurozone debt crisis. is this just a pipe dream or could it happen? >> no. i think the expectations are that germany are much bigger than what's reflected, what we know so far from statements by the politicians. so i think she will pretty much continue on her path of crisis management in a very step by step approach. so there is no big european vision. there's nothing actually no plan b or a master plan in her desk actually hidden until the day after the elections. of course, the germans have an interest to fix issues like the

banking union. but it's not so much a political issue, unfortunately, in germany. it's also a constitutional issue. so we have as one of the hidden forces the constitutional accord. and it's pretty much on their saying in the autumn if we're going for a banking union with treaty change or without. >> one other issue, it seems to me, is this spying row that's cropped up and does have the potential to damage relations longer term with the united states. so far, angela merkel has been very careful to avoid anything like that. again, if it is a grand coalition involving the spd, is it possible that it becomes a slightly more fractious relationship with washington? >> to be honest, i don't think so. the relationship to washington with one of the key comparable toes france and britain and poland maybe in germany. but it is reflected in public opinion, definitely.

so if you see president obama's recent attempt to bit a coalition for any kind of action towards syria. so the german public opinion was quite hesitant. you could see is nsa scandal was reflected in that. so this partnership with the united states is no longer an undoubtable issue for public opinion in germany. >> well, this is isn't, isn't it? here we have the world's fourth largest economy and yet germany appears not to play a significant role quite often in these broader international issues. germany very rarely is seen to be driving the issue at the top table. are we going to see a change in that? is germany going to be able to get away with not taking a strong view on some of these international issues going forward? >> i don't think so. there's also a consensus to make

both parties. they make it clear in statements there will be no german troops in any kind of action definitely without any u.n. mandate. so the germans see themselves pretty much like a big switzerland and this goes for the european affairs as well as international. so we are fine with our decent living standards here, but we don't care so much about what's going on in the rest of the world. at least for 40 years. so we got that constant message from our partners. so stay out of hard power games and now since the demand is increasing, why their troops are needed and why we are needed for this. >> olaf, thank you so much for being with us. let's send it back to you, ross, at the moment. >> geoff, thanks very much for that, indeed. plenty more on the german elections online, as well. they're on sunday. the federal elections, we'll have full coverage here on cnbc on monday. meanwhile, a recap of the

headlines, yes, it is the final countdown for germany's angela merkel seeking to secure a first term in those weekend elections. india's central bank elections surprise wes a rate hike. and this as the global federally fizzles out. europe is pretty flat today. still to come, as german politicians debate the eurozone periphery, greek meets the trade in athens. julia will join us on the ground in just a few moments. [ driver ] today, my ambulance knew all about a bike accident, just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before.

we've had a bit of a bounce in commodities yesterday post the fed. today, sort of much more muted, really. in fact, crude is lower. brent just below 110. crude just below -- it's at 106.23. spot silver is off, as well, after rallying around 6% yesterday. andrew berkeley is still with us. andrew, what do you do? commodities have been relatively unloved. resource stocks have been relatively unloved this year. what do you do with the sector? >> we like the sector. we would recommend people gain more exposure to it in the portfolio. getting back to the valuation discussion we had before, it's

one of the areas of the market that's well below its long-term historic valuation levels. one of the indicators we like to track is earnings revisions, earnings estimate revisions and analysts have just completely decimated their expectations for these companies. a month or two ago over the summer. and we saw that bottom out and start to get a little less bad. we think that pattern will continue here and we've seen the standard operating procedure stocks have a bit of a bounce. one of the macro variables that's correlated with the overall sector is the u.s. dollar index on an inverse basis. so, you know, i think what the fed did on wednesday, keeping short rate expectations lower for longer should keep the dollar -- the lower end of its range, which should be, you know, commodity and material positive. yeah. you would think base

commodities? and what do you think of gold? >> well, i think, you know, there's two different reasons generally to look at commodities. one is more the industrial type commodities, you know, for building, copper that goes into housing and so on. and then, you know, gold is really more of the kind of safe haven currency anti-inflation hedge. and, again, going back to what the fed did on wednesday, you know, the fact that they are keeping their balance sheet very elevated and they're going to continue to grow their balance sheet keeps these longer term inflation worries on the table. and i think that supports the price of gold. so i do think, you know, gold is, you know, likely to move higher from here based on that. we're not seeing inflation flowing through in the data currently, but, again, the longer the fed keeps their balance sheet very large, the greater the risk down the road of the inflation pressures. >> they'll be completely saying that for five years and it still hasn't happened.

it seems like we have to wait a while. we'll come back to that. more from andrew as we go into the break. futures implying we'll get a bit of a tick higher right now. s&p up around 2 points. i love having a free checked bag

with my united mileageplus explorer card. i've saved $75 in checked bag fees. [ delavane ] priority boarding is really important to us. you can just get on the plane and relax. [ julian ] having a card that doesn't charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u.s. when i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. ♪ the greek government has called on judges to ban -- following the killing of a 34-year-old rapper by a sympathizer of the far right party. julia is in athens as we prepare

for troika inspections for more. hi, jules. >> good morning, ross. you're absolutely right. this is the focus of people here. what are they going to do about the extreme frye right group. they're now garnering one in six votes here. the message that i've been getting from officials is that it won't be democratic to call on a criminal organization here. we have to get around this some other way. ultimately, they're sending a suggestion to society that you have to wonder whether it is a message that will be brought home to the troika in the facial fabric here. we're not talking about the german election, but another thing that's a hot topic here is -- allegedly the deputy prime minister here says to mr. asmussen back in august that there needs to be some massaging of the numbers to reduce the gaps that has been created here and denial that we've had this morning from the deputy prime minister. i have to question whether it's

more about actually germany than greece. well placed arsenal here, getting some push back to the periphery from europe from the germans to say this is what will continue after the election. that's my take, perhaps it's more about germany than it is about greece. as always, politics and economic sliding here, ross. back to you. >> jules, thanks for that. united states may be the land of the free and the home of the brave, but it's falling short in a new report that measures global economic freedom. find out which countries make the grade and why the u.s. is falling behind. more to come on "worldwide exchange" right after this. get paid to do somethingwe d you really love, what would you do?" ♪ [ woman ] i'd be a writer. [ man ] i'd be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] i'd be an architect. what if i told you someone could pay you

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you're watching "worldwide exchange." i'm ross westgate. germany appears angela merkel makes a final appeal ahead of the weekend elections as polls suggest the rice is far from over. >> the leader of the radical elect party says germans are not being punished for bailing out athens. and tough medicine, a surprise rate hike from the rbi to wrestle down inflation sends indian stocks tumbling. the rupee lowers. and as the federally fizzles

out, warren buffett weighs in. he's telling cnbc it's harder to find bargains. okay. a very good morning. you've just tuned in stateside, welcome to the start of your global trading day. stocks are fairly flat this morning. we saw the rally fizzle out. the s&p down three snap ago full day of gains. we should still have three weeks of gains. right now, we might get a tick higher at the open. the s&p 500 is around did 2 points above fair value. the nasdaq is 5 points above fair value. so wool see what happens as european equities have been fairly flat. and the ftse yesterday was up about 1%. we're flat for the xetra dax

ahead of the elections. the cac 40 is off 4 points. the ftse might be is off 0.1%. still with us is andrew berkeley, ahead of constitutional portfolio strategy in the states. andrew, it's a flat session. what is the biggest risk now? clearly we've gone over the fed and nothing might happen mow for a few months. is the big risk right now congress and a potential shutdown? >> yeah, i think the four iss of september, syria, summer, sep-taper. we're past those three. now the next one is the stalemate which is the show ondown in washington. largely likely to heat up probably even today and tomorrow we'll start to see hlgs comes through on that. the initial debate will be over the continuing resolution to keep the government funded past september 31st. and then the big one is really the debt ceiling. which will come to play -- you know, there's no specific dais

date, but sometime in mid october, maybe even late october. so i think that's the big headline risk. and earnings season is the big next fundamental driver which would start, you know, had in a couple of weeks. that will be the next big fundamental driver. >> how do you see that playing out the earnings soap? >> the trajectory in the s&p consistent over the past couple of quarters. analysts have been marking their numbers down during the quarter by somewhere between 3% and 5%. we've seen that. that was the first quarter and the second quarter pattern. >> yeah, and look, for the fed,

on the qe, to get ott of this qe forever, what is the fed going to -- i was wondering if the economy will ever be good enough for them to get out of this. if they're worried that by announcing it, market rates go up too much, which they don't want. does it come down to a debate about the -- how positive it is versus the negative impacts? >> yeah. i think at this point, certainly with them taking a path at this latest meeting, it's going to have to get back to the larger term cost benefits of keeping to expand their balance sheet. you know, we know they've been at it for a number of years now. you know, the recovery has still been subpar by standards. we can't seem to get much above 2%, 2.5% gdp growth. the fed keeps projecting that we're going to get to 3 plus but that doesn't happen.

and they just keep swelling the asset purchases. so the longer term implications is that is potentially inflationary fuel hasn't happened and certainly that fuel hasn't been released on the economy yet. but i think the cause benefit gets less and less positive the longer they're at it. so in terms of the economic data, it's okay right now. it's not great. but i don't think there's anything between now and year-end that would really suggest is data is going to get much stronger to allow them to start reducing the bond purchases. i think we come back to that original argument that bernanke made back in the beginning of the year which is this long-term cost benefit of keeping at the current pace. >> andrew, thanks for that. sting around, we'll get one more comment from you a lot later, andrew. the u.s. house of representatives is set to vote on a stopgap government funding

bill today. the measure is sure to spark a fight in washington. seema joins us for more on that. >> hello, ross. good morning. the stopgap funding bill would keep the u.s. government operating past the start of the new fiscal year on october 1st. the measure would only run through december 15th, meaning lawmakers would have to pass another bill before the holidayses. house republicans have included a provision in the bill to defund president obama's health care law. the senate is expected to strip the provision out, sending the so-called clean bill back to the house. that will set the stage for a possible government shutdown next month, the first since 1995, during the clinton administration. if that happens, most but not all functions of the u.s. government will be shut down. definitely on september 1st, many agencies will be closed. federal contractors could see their projects delays delayed because agencies they work for can't issue the paperwork needed to move forward. critical services such as air

traffic control, national security and border protection would still operate, but possibly at a reduced level. or workers could go without pay. taxes would still be collected and social security checks still mailed out, although the people who process those items may not be at work. hundreds of thousands of federal workers would be furloughed without pay, except members of congress who are exempt. republicans could relent and pass the clean bill, shifting their focus to the fight over the u.s. debt ceiling. that's expected to come to a head in mid october. the house may unveil a proposal next week with a list of things the gop wants, including the controversial keystone pipeline. lots to focus on. >> there serm is. let's remind you of how futures are trading ahead of the open. right now, we ever called slightly higher. the dow is currently called 27 points higher after snapping a

winning streak yesterday. more to come after this short break. [ tires screech ] ♪ [ male announcer ] 1.21 gigawatts. today, that's easy. ge is revolutionizing power. supercharging turbines with advanced hardware and innovative software. using data predictively to help power entire cities. so the turbines of today... will power us all... into the future. ♪

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. like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's great. [ male announcer ] the best thing to share? a data plan. at&t mobile share for business. one bucket of data for everyone on the plan, unlimited talk and text on smart phones. now, everyone's in the spirit of sharing. hey, can i borrow your boat this weekend? no. [ male announcer ] share more. save more. at&t mobile share for business. ♪

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they say fed tapering impacts on china's economy will be fairly small. as you were talking about commodity earlier, andrew, clearly china has an impact on that. i want to get back to this gold thing because you talked about ip flagdz being a concern, driving gold higher. we haven't created any real inflation. i know we've created some commodity price inflation from qe, but we haven't created any wage inflation. they haven't materialized, have they, from qe around the globe? >> no. and, you know, you hit the more important of the two. certainly if you look at commodity prices or input costs versus labor costs and wage cost, labor cost is a big driver of inflation over time. certainly wage cost. and that's really been the lacking factor and really has been the sticking point behind why the fed, you know, hasn't tapered and why they continue with the policies because the labor side and the wage side just can't get going on a sustained basis. so that would be the longer

term, more significant driver, which just hasn't shown up yet. so, you know, inflation in the u.s. has been modest, kind of 1 1/2 pc or cpi basis, kind of below the 2% target the fed talks about. but, you know, away from the deflationary levels that they were more concerned about. so, you know, when i look at materials and metals, i'd be more interested in more industrial metals. so the metals that go into building and construction as opposed to just gold, which is more of the safe haven. >> yeah, which will be dependent, of course, on what happens on growth rates in china. andrew, thanks for joining us. andrew berkeley, head of constitutional portfolio strategy at oppenheimer and co. . still to come, will u.s. markets still post the third straight week of gains? we'll get into that and we'll find out, as well, why the economic freedom in the united states is slipping.

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recap of the headlines today, it's the final countdown for germany's angela merkel, taking a look at the first term in weekend electrics. india's new central bank governor surprise wes a rate hike, sending stocks sharply lower. and this as the global federally fizzles out with europe mostly in the red. now, let's remind you what's on the agenda stateside today. there's no economic data. four fed official will be speaking this afternoon. it will be fascinating to hear what they have to say. kansas city esther george has been the low dissent on the fed this year. front door governor tannel tarullo, st. louis fed pet james bullard. one notable earnings report today, darden restaurants. this is the parent of red

lobster and olive garden. futures right now, yesterday suggesting an upward tick at the moment. we're about 2 points above fair value for the s&p 500. two points above fair value for the nasdaq and currently about 30 points above fair value for the dow. got slightly stronger over the last hour. allen joings us for more. allen, okay, so look, the federally fizzled out yesterday. what do we do now? >> all right. fizzled out is a strong phrase after the trend we've seen. we're 6% off the august low, so you have to expect some profit taking. we finish essentially on change in the future. i'm still very positive, still very optimistic. i think there's a lot more upside. from a technical standpoint, if you can look at things technically and you can ignore the nonsense out of washington, and ignore the tapering discussion which we'll get into, we saw an 80-point sell off from

the s&p in august. if you tack on the 80 points in the high, 79 points is the target which is still another 5% above where we are right now. >> theoretically, there should be a fairly clear wind for people who want to go long on stocks if we don't get too much disruption from washington. i suppose the question is how big an if is that? >> right. it's always -- they're always create ago crisis dejour in our business here. it's always something to focus on. now we continue to talk about this tapering. but to get to this issue and then we can set it aside, nothing has change td. the thresholds were set. everybody got excited about somehow the thresholds were going to change. the fed has the market action that they wanted by their policy. why would they change it? they said 6.5% and they said 2% inflation and we're not there yet. so, anyway, to move forward looking at it, i think my focus remains on the trends and rem n remains on earnings.

earnings are driving the market. earnings have continued to expand. but the p/e ratio of the s&p is still significantly below the average in the last 25 years. so i still think there's a lot more up side here. the dollar continue to go decline could be the catalyst just like we saw the bond unwinding, giving the market a little push. all that safety money that went into the dollar in the past couple of years could come out and be put to use in the stock market. >> it's the fed, not the driver? >> the fed is not the driver. the fed is a focus for the retail investor for the media and for us to talk about, but the driver is earnings. corporations are having record profits. their earnings have come back. price is a function of the earnings, no more, month less. and if you look at the p/e ratio, right now we're at about 16 or 17. the median for the last 25 years is about 18. the average is about 19. we still have a lot more up side to look at. and if you look at things technically, we still have some much higher targets.

it's about reward to risk at these levels. there's a lot of companies that you can lean on some good support at here and focus off. i think if you look at some of the banks, obviously, we're coming into earnings season once again. that will be a catalyst. the banks have led the way. and if you look at xlf, which is the financial sector, the xlf is not even at the halfway point of the 3538 to 6 lows that we saw in the extremes from 2007 do 2009. we haven't even seen a halfway recovery. i think xlf is a good way to play and have a diversified basket of banks. remember, they made $40 billion last quarter. they're not going to forget how to make money quarter after quarter. >> thanks for that. alan knuckman from trading advantage. >> thank you. we finally get to the federal german lkzs on sunday. blast night, all the political

parties out in force on the campaign trail. the opposition sdp trying to set itself apart from the ruling coalition. geoff is in berlin with the sort of a final count here. geoff, what do we think is going to happen? >> well, it's interesting. you were talking about the federal reserve just as we came into this conversation, ross, because that was the event risk number one, wasn't it? the german event has been talked about for much of the year in terms of being event risk number two. but here, as you're listening to the heart of things as we're in the final days and hours of this election campaign, not so much europe that's being talked about, but issues on the ground to do with, say, low wages or taxation or whether there should be tariffs on the ottobonn. so very much a different feel inside germany from perhaps the international perspective. as you might anticipate in these final hours, the two leading

candidates, angela merkel and pierce steinbrueck making that final appeal to core voters. so let's just listen to what pierce steinbrueck had to say about why he thinks people should reject the current government and bring in his let me tellward leaning spd. >> translator: in three days' time, you'll have the opportunity to vote out a government that is the most ineffective, backwards looking, most fractious government since reuni reunification. >> he has a difficult battle because angela merkel is the incumbent. she also somehow has been taken to the hearts of the german people, unlike many other political leaders we see around the world who have been damaged by the global financial crisis or damaged by flip-flopping over intervention in syria. angela merkel was very clear. she said it very quickly and straight up, we will not

intervene in syria. that is exactly the kiebtd of approach that the german people want. a low key place on the global stage. so angela merkel very much looks like she's going to come through this still as the chancellor. but when you look at the way that the left/right block sits currently, it is possible that we get rid of this current conservative liberal coalition and a grand coalition comes in in its place. but, ross, it is still all to play for here. so we will be watching and waiting and with a great deal of interest wanting to see whether the germans themselves are willing to replace angela merkel, who, as i said, is very popular here. back to you. >> yeah. a survey says 56% of the french people would like angela merkel to stay on, as well. so all angles will be covered. we will have full coverage of the german elections on monday. it all kicks off from 6:00 cet

here in europe. meanwhile, back to america, the u.s. may be the world's biggest economy, but it trails more than a dozen other countries in a report out this week that measures economic freedom. the report from the frazier institute, an independent policy and research group says the u.s. is being hurd by burdensome and costly regulations. joining us to more, brian brenberg. breen, thanks for joining us. first of all, define what you mean by economic freedom. >> what we're really talking about is the ability for individuals and families to make choices about economic choices, right, how to spend their money, where to invest their money. and we're talking really about things like openness to trade, sound money, size of government, things like that. these are the components of economic freedom that frazier uses in their index. >> so, look, in 2000, the united states was second in the world in economic freedom. it's now down 17 according to

this report behind others like canada, australia and britain. why? >> well, there's a number of reasons for this. one of them happens to be the growth and the size of government. if you look over the past decade, government spending in the u.s. has increased by about 40%. but i think the real issue here is probably regulation. if you look at the data, the united states has dropped precipitously in terms of the burdensome of their regulation over the past 10, 12 years. right now in the united states, on an annual basis, the cost of regulation of businesses, according to the small business administration, is $1.75 trillion. it's a huge burden on businesses. this is becoming an increasingly difficult place to start and grow a business. compare that to hong kong, which is the world leader in economic freedom. it takes about twice as long to register a business in the u.s. as it does in hong kong. and you have to jump through about two times as many procedural hoops to do it. so we're making it difficult to start and grow businesses and as a result, we're sliding in the economic freedom rankings.

>> what's the direct correlation between economic freedom and growth? germany is below there. japan is below the united states. china is in 101st. >> right. you saw -- look, you're going to get -- there's a number of different reasons can cause growth. what the data shows, though, in general, is that the freer the economy, the more growth. over the past two decade wes b the most economically free countries had groan at three times the rate of the tleeft three economic countries. germany is generally a free economy in the rankings. their growth has been strong. so this stuff is going to happen, but in general, economic freedom has been the biggest driver of economic growth. >> what would be the easiest thing to -- if you wanted to change it in the united states, what would be the key policy change that you would make? >> i don't know if there's an easy fix to this. look, the united states ranking has fallen for a number of years now on a number of dimensions. so i think the important point is there's not an easy fix, but

i think the one thing that's going to be difficult in the years ahead is the regulation piece. there's no sense here that regulation is going to become less burdensome in the near future. next year, projections of new regulations are going to add another $133 billion of the compliance costs for bess. the affordable care act hasn't rolled out yet. so i think that's really the issue that the federal government has to tackle right now. >> all right. we'll see what happens. brian, thanks very much indeed for that. assistant professor of business and economic at the kings college in new york city. thanks for joining us early. have a good day. that just about concludes today's decisiedition of "world exchange." futures have been ticking higher as we go towards the break. european equities have been fairly flat. emerging markets called off a little bit today, as well. we had a surprise rate hike in india. all the action continues now from cnbc. "squawk box" will be picking up the range. whatever happens, we hope you

have a profitable day, a great weekend whenever it starts for me and the rest of you. from "worldwide exchange," good-bye for now. explorer card. i've saved $75 in checked bag fees. [ delavane ] priority boarding is really important to us. you can just get on the plane and relax. [ julian ] having a card that doesn't charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u.s. when i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. ♪

good morning. the day's top stories, a budget showdown in washington. the house plans to vote on a bill to temporarily fund programs while cutting obama care. and just days after the shocking the market, india's central bank chief pulls off a surprise of his own. and two well-known investors say stocks are now more or less fairly priced. it's february, september 20th, 2013 and "squawk box" begins right now.

good morning, everyone. i'm becky quick along with joe kernen and andrew ross sorkin. we start this morning with the markets. the dow and the s&p 500 snapping a four-day rally yesterday as some of the fed euphoria fades. we've been asking our guests to make what they make of the markets. yesterday, i sat down with arguably the world's best known investor, warren buffett. he says over the last five years, stocks have gone from ridiculously cheap to more or less fairly priced now. >> the lower interest rates are, the more assets are worth, basically. and to the extent that qe3 is keeping interest rates lower than they would otherwise, it probably keeps asset prices somewhat higher than they might be otherwise. but there's other variables. if that doesn't exist, it's maybe because business is a lot better. there's more than one variable. but interest rates are a terribly important variable in the evaluation of assets. >> when you look around, are there still deals that you can