hello and welcome to "worldwide exchange." the headlines, the clock is ticking to avoid a potential debt default. there are three days left to reach a dale. chinese consumer prices reach a seven month low. the main index nose dives. whole sale prices up.

and there's confidence in the banking business. announcing plans to exit this year. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. pretty tepid for equity markets. we went home thinking a deal would be done in the united states. u.s. senate talks on a government shutdown may be stalling. senate majority leader harry reid still sees a chance to break the impasse before thursday. he spoke with mitch mcconnell sunday saying talks were substantive. reports now say senate democrats say any debt deal not lock in further sequester budget talks

which the gop won't accept. congress will be in session today even though it's a federal holiday. world leaders are urging a deal. christi christine legarde is warning of the problems. >> if there is a lack of trust in the u.s. signature, it would mean massive destruction the world over and we would be at risk of tipping yet again into recession. >> yeah. session here though on the trade for european equities were fairly even stevens. we hit the session high a short while ago. the ftse 100 was up on friday. we thought the deal would be done. this morning take a look at the

indic indices, xetra dax is down. it will come on to that. so let's talk about persia. it's going to tap the chinese. the stock is down nearly 10%. dassault systemes, it's down 6.83%. michael page is down. it's named a new acting cfo. take a look at the bull markets. it's columbus day in the u.s. yield slightly low in spain.

on the currency market, the dollar is a little bit weaker. safe haven flows. japan is closed. euro dollar, 1.356. know big news this morning. we did actually get quite a bit jump in our exports in china reaching a record 4 million tons. the pound below 160 against the dollar. let's get more on the asian markets. we have all of the details out of singapore. sixuan.

investors are eyeing the all important gdp number, china gained traction. the shanghai gained traction. all is quiet in japan and hong kong, both out for public holidays. south korea's kospi ended lower by a modest .2%. nuclear stock falling on reports that the country's energy industry will cult the weight of nuclear power. the s&p/asx 200 ended down. now for some top movers. china's car makers shifted into high gear on a 21% jump in september sales up for a year ago. leading the way was rebounding

japanese car details. shanghai auto industry corp and first auto car jumped up 2.5%. back to you. >> that's the latest on the markets. at a conference hosted by international finance, the deutsche bank warned of the impact. they're spending huge amounts of money preparing for the small possibility of default. with us for the first half of the program, alan higgins. four days and counting. still no deal on the table. getting twitchy? >> a little bit. it's a head fake. there will be some kind of deal.

i saw well connected people like barry fink and bill gross saying there's zero% chance of default. i wouldn't say zero but some low amount. >> even if there's an extension of six weeks, takes us to the end of november, we're right back here again. this does not engender any confidence. confidence may have an economic impact. >> quite. it depends on why your' bullish on markets, in particular equity markets. we very much like the low interest rate story. the low corporate bond yield. ironically this is on the yield's low. it depends how you look at it. it's causing some economic impact. >> well, default, definitely

default would -- >> i didn't mean that. i just mean -- >> no, because i think the numbers i've seen is .15% of the gdp per week of the shutdown. some weakness but really what's been driving markets has not been big earnings gains. it's a rerating of equities, in particular rising corporate bonds. >> do you think that rerating can continue? >> yeah, definitely. what we're seeing right now, which i've never seen before in my career, is a direct payout on equities is higher than corporate bonds. there's hundreds of examples from bat rising 3/4 on the dividend. that's so unusual. so, yeah, for us this relative ally between bonds and the corporate equities and bonds are very important. >> does that mean you have an

investment with bonds? >> the govies are the least value. the order of preference would be equities, then the bonds sec for. within bonds still reach for high yield. we bought loans earlier this year so floating rate characteristic about yields and then corp rates. so just above govies. pretty low down. >> low down? >> yeah. >> low down in your wish list. pleasant yip more to come from newman. every week he's asking you to set the trend. this week two of wall street's banking giants are reporting. would you be long short or would you have the stock as a hold. head to trader poll.wnbc.com. you can have your say on twitter

by #traderpoll. food prices are rising with a 7 month cpi. september exports unexpectedly slipped instead of rising the expected 6%. importsz remain strong. some say that imports may be driven more by beijing's mini stimulus package. we're joined with trade data. what do you make of it? >> i think the export data is very concerning because we have in the last couple of months seen a recovery in chinese exports, which is a key growth engine for the chinese economy. now clearly the momentum has faltered, at least in the latest month's data. it could be because of the

timing of the mid autumn festival which came earlier this year than last year and because of the boosting of invoicing. so there may be special factors. nevertheless, it's an extremely weak number and very worrying since it's an important number for the economy. what's a bit more reassuring is that the import number was still reasonably robust and suggests that domestic demand is pretty strong. that's what we see in the other numbers. seems like domestic is still holding up but the exports are worrying. >> southeast asia, those exports as you say, is that also some impact? is there some tapering impact there? >> i think there is a supply

chain impact from around the world. we're seeing the weak ps has fed through the supply chains in many emerging markets. that's been hitting us and chinese exports and emerging markets have been rising quite rapidly last year. that's one factors. there were weakness to europe, taiwan and other markets as well. i think apart from these special factors, we'll need to see how the october data shapes up. if you look back over a decade or so, exports have been a very important growth engine. when you look at the pmi indices for the u.s., for the eurozone, also for japan they have been picking up so that would suggest that we should be starting to see some up turn in chinese exports through the course of the rest of this year. i would expect actually to see that in the fourth quarter and

early 2014 that we see some better exports coming out of china. >> as you stay there, talk about india as well. inflation isn't getting any easier. it's up 6.5% in september. most expected it to moderate. food prices are making gains. meanwhile, the most powerful storm to hit the country in 40 years is getting slightly weaker. cyclone phailin is hitting the country. ekt a is with us from mumbai. >> maybe the fact that we avoided so many lives with regard to the cyclone is one of the few positives coming out. the inflation data which you alluded to, it is coming at that

level in the month of september as well as in the previous month. it was at 6.1%. it's elevated above 18% on a month-to-month basis as well and not to mention we did have numbers declining. core inflation, which is also a signal of how exactly growth is doing, inched up a tad bit. that came in at 2.1% versus 1.9%. there was a tad bit of an uptick. that's simply because that could signal a little bit of impact to growth. the wbi inflation has been weak. 0.6% growth in the month of august. just concentrating on psy cone

phailin, that is the strongest one to hit the country. there are people that cat nobodying ask the accounted for. there are houses which have been blown away. the key factor is that there has not been as much casualty of life because they've been so precise in determining the cyclone and the speed that was going at and there are a lot of evacuation performances. we had hardly any back door for a cyclone which was expected to be a big size. >> ekta, thank you very much. radiff, let's bring you back in. on the inflation side as we look at the impacts of the cyclone, how much pressure is there to

hike rates with a weaken iing numbers? >> i think he's caught between the devil and the deep blue sea. he's dealing with rising inflation. i think there is a lot of pressure to put in another at least small rate hike. on the other hand, the economy is weak. if you look at the pmi indices for manufacturing and for services, they're both ind be kating that the indian economy is contracting, which is very unusual to see them both negative like that. so that's really because of the tight impact of indian policy. it's very rate sensitive. we are seeing the impact of tight monetary policies is the

key factor squeezing growth. india is growing at about 4.5% year on year. that's about half the pace of growth that we've seen in the last decade or so. so it's a very weak outlet. he needs to balance these two differing trends. >> let's bring alan back into this. what do you make of this as we're getting out of china and india? >> it looked negative on the surface. what i'm interested in is pretty good market performance, this kind of data you would have indian and china stocks down 2 or 3%. >> i saw the trade data, there are some seasonals in there. there's a day out from september. i would be interested in why the market is so resilient. >> yeah, rajiv, why do you think

the market is so positive? >> i think the new rbi governor and we saw the ruppe starting to strengthen again. there's been quite a big strengthening of the ruppe against the u.s. dollar. that's favorable for inflation. india is very big on imported oil. the stronger ruppe will dampen those imported price inflation pressures. nevertheless, what we're seek is high inflation but i think there's this expectation that things are gradually starting to turn. when you look at the situation the economy is in, it's still very weak. further rate rises will con strain it.

the outlook is very difficult. we are offering some moderate improvement by 4.5% to 5.5% growth next year. that's still a relatively sluggish performance for an economy growing at 8 to 9%. >> rajiv, thank you. still to come, the beginning of a crucial week for angela merkel. she has to pick a coalition partner. as sdb makes a national wage announcement. plus, your mail may have had stunning profits, but will the u.k. postal service going public cause a problem? candy crush creator king looks at zynga to launch a public listing itself.

will investors want to play? we'll speak to kabam at 11:20. they're more exposed to domestic bonds. the latest eco fin gathering. we'll be in luxembourg. that's coming up. we'll be back.

now euro group finance minister is going to discuss how to shore up the region's banking system when they meet in luxembourg. they're saying they're more exposed to domestic bonds than any time during the beginning of the crisis. jules is in luxembourg. one would suggest that government debt isn't quite the risk free asset that the politicians might think, jules. maybe that's okay as long as they don't default. >> well, as long as you don't go market to market, ross. this is one of the crucial issues, the doom loop between sovereign debt holdings of the country's debt. this is why we keep working on this banking union. the topic of conversation is how to wind up these banks. what kind of back stops are in place if we need to wind down a

bank and ultimately who to pay. we've had plenty of opposition along the way. there is a suggestion that a soft target will make some kinds of decisions on this at the end of the year. they do have their work get cut out. we'll find one mechanism of 130 banks. the bottom line is that germany doesn't have to pay. there's other issues here, too. the supervisory mechanism of the ecb, the likes of the u.k. and sweden concerned about what their voting role is going to be as the banking union evolves over the months and years. there's a number of things to thrash out. we'll be talking about the progress of ireland, portugal and greece. a few absentees, the irish, portuguese and italians could be

not here. >> what time does it all kick off there, jules? >> well, the arrivals begin this afternoon from about 1:00 p.m. cet. meetings begin at 3:00 p.m. >> you'll be less on your own later, i think, is what we're saying. >> yes. >> it's all ready to go. not a lot happening. >> early bird catches the worm. >> i hope it's a big, fat juicy one. let's bring you in here. there's still this link between banks and sovereign debt. are you interested in owning banks? >> banks we like. >> explain that. they have a lot of the stuff you don't like. >> value. but what we do like is italian government and spanish government bonds. they have big premiums.

as they mature, no defaults, that's very, very profitable. there is this link but what else could they do? buy corporate bonds? buy treasuries? buy gold? it's always been a link to buy the domestic bond market is the way it's always going. i suppose they could go elsewhere. the reality is the british bank will have a lot of italian bonds. >> as long as they don't default, right? does it matter or not? >> well, i'm not only an accountant, but as i understand it, there he is a hold to maturity bucket. so the path is not relevant. there's a trading bucket where the path is relevant. >> right. >> i think this is quite interesting in japan at the moment. at some point you would think there would be a japanese bond bear market. if they're elongated with bonds,

it will soar. >> okay. that's kind of interesting. are you of the view with the ecb ofly quit ditties. >> the banks are deleveraging. go back to 2011, the french banks in particular, that used to have a lot of spanish government bonds. there was a ruling from high. get out of the so-called peaks. so it's really left to the domestic banks. they deleveraged. they paid off some of the ltros. >> see what demand is. stay there. more to come including angela merkel's cvu party. we asked people, "if you could get paid to do something 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.

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these are the headlines from around the globe. the clock is ticking. talks to avoid a potential u.s. debt default may lie in the hands of these two senate leaders with just three days left to reach a deal. chinese consumer prices are at a seven month old high. exports are nose diving in

september. inflation is also an issue in india as wholesale prices hit a seven month high fueled by a rapid rise in food prices. peugeot confirms it's in cash infusion talks. its rival bmw will sell a record number of cars in china this year. just four days away from a possible default by the u.s. government. european equities a little mixed. the ftse up 1/3. cac ka rant down. the u.s. treasury market is closed and yields are flat really across the board. slightly lower in spain than italy. they're fine with each other. the currency market has not been

slielly slow. it's not the biggest move. just below 1 60 on cable. the third quarter output figures are being reported and the rba's october meeting and september fdi figures are out. markets in singapore, malaysia, indonesia will be closed for holiday. today they're closed in inbe doe nearby yeah, japan and hong kong. now it's a caribbean island where res dechbts pay extra low tax. richard branson insists his money issues have to do with his

health. he's highlighting his charitable work. looks nice from the air, doesn't it? has he done enough to merit living tax free? is he a tax exile? he hasn't paid much in the past few years anyway. are we just jealous that he has an island he can move to? meanwhile, george osbourne began a week long visit to china with the announcement of an $800 billion development contract. they will develop land around man chester airport and described it as one of the biggest projects since london's olympic park. >> it's impressive because it's an $800 million joint venture between the beijing group and

carillion and this is the first investment between the two groups. >> the sunday time reports t.d. may make a bid for the i.s. citizens. both countries are declining to contract. the dominion bank is down 1/3. up 2% for rbs. italian shareholders will vote on a $3 million capital increase to keep it afloat. they were thrown a life line on friday. there are conflicting reports of whether the klm will

participate. today they're off 1 point poip 7%. brittain is said to be extremely close to signing a bill with france's pdf agency. the government's been in talks with edf for some time and now in an interview, they say they expect tens of billions of dollars invested. stocks finished lower and now they are up 2%. but also in paris, shares of peugeot citreon is down. joining us with the details is stefan in paris. how might this work then?

>> ross, peugeot would announce significant capital increase, 3 billion euros. it would become the largest shareholder and the peugeot family would not subscribe to the capitol hike would see significant delusion of its stake from 25 to 35%, he it was working with different partners but claims none of these rich projects would be included. it would have financial implications. we are expecting more announcement on this plan on october 22nd when peugeot will hold a board meeting. for the time being the market reacts significantly. it will have an important

dilution. the second region is the largest stake that they would take in the country. it will make the company unmanageable. these are the two main concerns that explains why the stock is not up the 11.5%. the u.s. car maker has a 7% stake in peugeot citreon. it will be a significant change in the management of peugeot. that adds to the negative sentiment on the stock. >> we'll keep our eyes on that for now. thank you. yeah, german chancellor angela merkel is going to meet with the social democrats today and the greens on tuesday.

annette is joining us. are we comfortable with the rate of progress, are we? >> reporter: we are comfortable with the rate of progress. it's the second round of meetings. today's meeting with the social democrats is of extreme importance because they have to tackle the tough issues, i should say. they will talk about minimum wage which is still not a very much agreed contract. the social democrats want to have a minimum wage. the whole talk of tax hike seems to be off the table. they will take about the ear row crisis strategy. >> if we are looking at local media points because both

parties have worked in another direction. it looks like we're heading to the grand comb ligs. there's a meeting with the greens taking place this week as well. there is more disagreement possibilities. there are some high level politicians in both parties who really like that option of the christian democrats going together with the green. there are a lot of questions in terms of coalition building with germany. what's clear is that by the end of this week we'll know which kind of a coalition we will probably get here in germany and as well what that will entail in terms of tax hikes potentially and as well minimum wage. angela merkel said until october 22nd when the new parliament will have talks, they want to

know who they're having talks with. >> annette, thanks for that. we have alan hingens. one of the issues is tax. is the spd mofg away from wanting to hike rates. >> merkel has talked about other measures. the social demp kratz have moved away from the push from raising the top level of the democrats. so i think there's potential for a deal. >> what about financing that extra investment? >> that is going to be the crucial question. no indication there. what is clear is both paefrts remain committed to solid healthy public finances. >> how does this feed through into the ongoing banking union

debate at a wider eu level? >> i think the interesting indicator is that schober won't be present. i think everything remains on hold frankly pretty much. the situation we've seen over the summer until we have a german government in place. >> when will we get a german government in place? the spd meets on the 20th? >> that can take somewhere between four to six weeks. i'm confident we'll have a deal by the end of november. >> the end of november, at that point what do we expect in any substantive moves. in the end in terms of outcomes, that's what markets are interested in, ideas such as capitalization because of guarantees being up very

unpopular. is there an alternative? is a green coalition -- >> no. the task on the greens is to move from the left to the center ground. that will take time. you don't have time when you're a party in government. you can talk about that. >> looking, european politics have slipped way down the list of investor's concerns. justifiably? >> germany was never an issue. so that wasn't ab issue. i spees the big news is etly. it has been a concern. that seems to have stabilized. what we've always looked at closely is what do people want with respect to the euro. amazingly people in greece, portugal, etc., want to stay

inside of that. until the people want out. euro then stay before are i like, no break jun stance. a grand coalition has to be good news for the euro as well. >> it is certainly good news that we have a super majority and it should smooth down the bro ses of finding majorities there in parliament. at the same time, the budget experts of both parties, all parties don't disagree very much. there's a great resistance and skep tans when it comes to utilization process. >> it will be a very increddal step-by-step process. >> it helped for brittain agreeing on e.u. car emissions.

the germans were going to make is it easier for the u.k. banking union. >> the germans don't have an interest in a quick resolution there. that would be a typical package deal. >> cost and conceive. other corporate news today, ikea is supposed to up 3.71. southern europe is still showing effects of the economic crisis. still to come, it's in the post. mail's prices soaring. our next guest tells us why the british postal services suck sems is going to --

setting the trend by taking part in a poll. how are you trading goldman sachs in third quarter earnings on thursday. would you be long short or would you have the stock as a hold. jpmorgan's first quarter lost with jamie dimon.

mainly because of litigation. head to traderpoll.cnbc.com. you can have your say on twitter, use #traderpoll. get involved in that. shares are openly being traded on the stock exchange today. conditional trading on friday. the share price dropped 40%. the union is saying the government underpriced the deal. joining us is john west. alan is still with us as well. look, there's clearly huge institutional demand and they couldn't get their hands on it enough. what happens to world mail now? >> as early as june we ran analytics suggesting that it was

as much as 4 point poip 6 to 4.8 billion pounds listed at 3 point poip 8 billion. it's in that ballpark area. in terms of what happens next for world mail, it will have to pull 300 to not be listed in the ftse. >> does that mean more institutions will be buying it? >> if it stays at this level you'll have them coming in. >> which is kind of interesting. the interesting thing is have they changed much in the -- if you were having this at the beginning of the year, what would demand have been like? >> i think it's important to say what the valuation would have been in the at beginning of the year. we had decent block trades from ilead, there was some block

placement from g 4 s. they indicated that the listings could do well. since we've seen that breakdown. >> is it now -- are we going to see more? is this going to take down others? >> certainly already last week as it was closing on royal mail the portuguese government unveiled that it was choosing an ipo as the preferred track for ctt, its postal service. we've run comps analytics on that suggesting it could be up to 660 million our rows. here in the u.k. they're saying the government has a 33% stake in urenko, uranium enrichment company. that could list next year. >> i think the independent was talking about travel x in the 1 billion pounds. it is flushing people out.

what do you make as far as are these flows going to be attractive for investors or not? >> royal mail looks like it will come out with an absurdly high yield. we don't know, but they're talking 5.5 to 6. they could issue bonds rating quite easily. i would make a distinction between the private equity deals, which people are still a little bit cautious about. i think institutions have seen this too many times. it comes back a few years later. >> we've forgotten that. >> have we forgotten it? >> well, i think it's important to distinguish it's not so much the exits versus capital raises, i think it's more to do with company readiness.

earlier in the year we saw it from -- >> i got the valuation a little bit toppy. you're looking more at the valuation company ratings than the particular root of the ipo or its reason. >> yeah. the pricing is always an issue. just getting back to sort of urenco, this uranium enrichment you were talking about as well. why rwe holding some shares, why do they want to sell out? why would these guys want to sell out? what is the motivation for the shelf those places? >> it's interesting that you were talking about the german elections and results there. obviously whoever takes over the energy industry, that will have a massive impact on it. there's a degree of regulatory

industry there. for the first time you have the u.k. government and dutch government, the shareholder and two german players involved in urenco. all the ducks are in a row. they all want to sell. the valuation is difficult. it could be worth as much as 7.5 billion pounds. >> i would like to see a lot of p firms. are they dusting off their manuals and briefs? >> the ecm is definitely dusting off their prospectuses that they may have wanted to have put into the market. sure. listen, there are lots of p investments made during the crisis where they picked up assets relatively cheaply. this is a good opportunity. >> okay. good to see you. thanks for joining us. john west, head of ecm europe. and let's get some final

thoughts from you. tell us, one thing i did want to pick up on is japan which is closed today. you've been investing in japan. you're now lightening up. why is that? >> just a little bit. it's all about abenomics and his three famous arrows particularly in terms of the employment markets. he said it's very difficult to do culturally. so the markets have to come to terms with the fact that maybe he's not going to be as quiet a man mouth as he was on that front. having said that as someone well known said two out of three ain't bad when it comes to arrows. we have a small overweight. >> do you think the big forms was earlier this year? >> yes, based on really aggressive loosening and big profitability from the fall of the yen. for the next stage really you are looking for reforms and it's

cheap enough to justify a moderate overweight but to be aggressively overweight, japanese equities looking at something in the reform way. >> south asia, that takes you to, what, south korea. if you're taking someone out of japan, you're putting it into korea? >> this is my colleagues in asia. i don't want to dodge you here. they're talking about markets in hong kong and even focusing on china. i think they would be very encouraged to see the fact that china is up today on a day of apparently disappointing data. >> let's bring you back closer to home then. the economic growth in europe becoming more sustainable. growth stocks outway cyclic calls. >> no, we're buying more cyclicals. we bought financials.

i should step back. we buy funds. we do buy individual stocks so we have bought kind of china, the hps, the rios of this world. we are more cyclically exposed right now. >> the interesting thing is the staple china plays. the diagios, the consumer groups which were steady growths into emerging markets taking a bit of a bath. >> a little too expensive. we have the news and there is some kind of a slowdown in china. long term we wouldn't have an issue with these types of stocks at all, it's just right now the cyclicals and financials is what we like to emphasize. >> what do you think is going to happen from now until year end? we keep our eyes on washington.

>> i'm not positive about the default. that would be really serious. but seasonally it's a good time. november/december to gain markets. the values in equity markets, as i say, we put a great emphasis on this almost m and a corporate bond versus equity dividend yield. very rare when a finance director has a chance to save money rather than just boost earnings. save money by buying back shares and issuing a corporate bond. that's very powerful. >> good to see you today. thanks for joining us. alan higgins from koontz. we'll get into the debate in washington after this. i love having a free checked bag

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you're watching "worldwide exchange." a recap of the headlines. the clock is ticking. these two senators have three days left to reach a deal. chinese consumer prices hit a seven month high which could lead the pboc's hands tied. inflation an issue, too, in india. it's fueled by a rapid rise in food prices. peugeot confirms it is in

financing talks amid a cash injection from the french government. at the same time german rival bmw says it will sell a record number of cars in china this year. all right. very good morning to you. if you've just joined us state side, we're just four days away from a possible u.s. government default. futures right now are just pointing a little bit down. get into that. this is u.s. senate talks on a possible deal to end the senate shutdown may be stalling. senate majority leader harry reid still ceasees a chance to e a deal. the talks between the white house and republicans broke down. now there are suggestions that democrats are demanding any debt deal and not lock in.

congress will be in session even though it's a federal holiday. the imf's chief christine lagarde has warned of serious consequences if the debt ceiling isn't raised. >> if there is the degree of destruction, that lack of certainty, that lack of trust in the u.s. signature, it would mean massive destruction the world over and we would be at risk of tipping yet again into recession. >> which is why people don't think it's going to happen. nevertheless, after rallying last week, the dow up 164 points. the s&p up 12 points. futures are down. the dow is currently 84 points below fair value. that's 14 points below fair value. the s&p 500 is currently around 10 points below fair value. global equities today during the session have been down not by

much. the ftse global 300 is flat. no big setoff here. the ftse today up three points. it was up half a percent on friday. xetra dax down 16. the cac is down .2% but the ftse is up so you can see fairly mixed the a the moment. that's where we stand right now. as far as european equities are trading, let's bring you up to speed. we have it out of singapore from sixuan. asian markets under a little bit of pressure. it's partially due to strength in the u.n. off the back of sharp declines in other asian currencies. investors are eyeing friday's all important gdp data. china markets gained traction with the shanghai higher .4%. elsewhere, all is quiet in japan

and hong kong and indonesia. all out for public holidays. south korea kospi ended lower by a modest .2% while energy and chemical shares traded higher weighing the index down for nuclear stocks falling on reports of the country's energy ministry will cut the weight of nuclear power to below 30% by 2035. it was hurt by china's disappointing data and the looming u.s. ceiling debt line. as for top performers, china's railway stocks staged a strong rally. this is after reports that china's premier league could attend an exhibition on china's high speed rail line. it's set to push forward with cooperation between the two countries. shares of china's northern rail ways and china railway group all

surged up by 10%. back to you, ross. >> sixuan, thanks for that. beijing is keeping a close watch on that. china's official news agency is calling on them to end what it calls a pernicious impact. it's calling for a deamericanized world. china's the biggest foreign owner of u.s. treasuries with nearly $1.3 trillion as of july of. and as you might expect, the world's bankers are warning of dire consequences of the u.s. default. a conference says it would be catastrophic. j.p. dimon says it would have a dramatic impact. dimon says banks are already spending huge amounts of money preparing for the possibility of a default. and tempers also flared sunday as veterans and

conservative tea party groups protested the u.s. government shutdown in washington. they marched in front of the white house and took down barricades at the world war ii memorial. police, some in riot gear, pushed back at the crowd when they got too close to the white house. the rally included speeches from sarah palin and senator ted cruz, a tea party favorite. talks continue and shutdown continues. let's tell you what's on the market in the united states. fed chairman ben bernanke will be speaking to an international banking conference in mexico city about central bank independence. as for earnings, look for truck dag at that from j.b. hunt and brown and brown. every week as well, cnbc is asking you to set the trend by taking part in our online poll. this week two of europe's banking giants are reporting.

how are you trading goldman sachs. would you be long, short? would you have the stock as a hold? let us know. get in touch with us or head to traderpoll.cnbc.com to cast your vote. once you do, you'll begin to see the trend. you could also have your say on twitter using #traderpoll. well, we will talk about what may happen today in washington in talks fairly shortly on the program. meanwhile, ireland could become the first eurozone nation to lead an eu imf bailout. it may not use a precautionary credit line. julia is in london meeting there. no doubt this will be held up as an example that these plans do work. >> absolutely, ross. remember, this is a pretty new subject. as late as september interpret talking about asking for a

precautionary credit line of around 10 billion euros. to be able to go ahead with one is a steep demand. the message on friday is he's pretty confident that they might not need one. my question to him is why not? why wouldn't you give investors that extra layer of protection with a precautionary credit line. they still have immediate access to mario draghi's bond buying program if they need it. this ultimately will be one of the questions that gets decided in november and perhaps as late as the december meeting, too. remember, we don't have the likes of germany, of spain, of portugal. the finance minister is coming to this meeting. it's likely to be discussion more than anything else. the message from ireland has already been that they've postponed any further debt raising. they're fully funded this year and next year. that's the key distinction to make between the likes of

ireland and portugal. certainly i think ireland is the one to go with. it will be interesting to see if they do let them get away with fully exiting this bailout program. as prime minister kenny put it, weakening their economic serenity. that's the crucial issue here. ross, back to you. jules, thanks so much for that. will ireland deviate from its tough stance on austerity in tomorrow's budget. log on to cnbc.com for the full story. we'll take a short break. still to come, a tale of two automakers. peugeot hopes for help and bmw is hoping for bumper sales. more when we come back. [ 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.

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don't have your legs. call now for your free consultation. and right now, get this limited edition hoveround america travel mug free with your hoveround delivery. call or log onto hoveround.com right now! very much the focus in europe. city citreon stokes are plummeting. down nearly 10%. they could be getting capital injections from the french government. stefan has got more for us out of paris. stefan, however might the injection be and what kind of stakes would these partners take as a result? >> according to press reports, ross, we are talking about a 3

billion euro capital hike. that would be subscribed equally by the french states and by the chinese car maker don feng. the peugeot family would not subscribe to the capital increase and would face a substantial dilution. 25% today. it will end up around 15%. market reaction because the market is worried about the french stake, a significant stake in the company that would make it unmanageable. that's the story out of france. >> in germany it's really good news. what we're hearing from bmw when it comes to their sales in china, they are saying or they have said over the weekend that they're set to have record sales this year. looking at the sales the first nine months of this year this looks really plausible because

sales for bmw vehicles in china are up by more than 20% and that means that bmw is more successful than the average market because the chinese premium market grew by roughly 12.7% during the first nine months of this year. this was the good news looking at china for bmw. the bad news is that they have to recall roughly 10% of their vehicles they sold this year according to a chinese consumer authority and actually more than 25,000 cars are affected. that is equaling a little bit shy of 10% for the market. but overall the tone is really optimistic. auto analysts are expecting that the chinese premium market will be bigger than u.s. premium market by the end of the decade and of course luxurious car makers such as bmw and daimler

are benefitting. their shares are on the move. there's some sentiment change in terms of chinese demand. with that, back to you, ross. >> annette, thanks for that. that's the latest on automakers out of europe. if you're just joining us, the unthinkable news as the u.s. politicians are failing to come to an agreement on the debt ceiling. china and india inflation spike. and peugeot has a big selloff. it's seeking new financing. meanwhile, debt ceiling negotiations are now in the hands of senate leaders harry reid and mitch mcconnell. they don't have a good history. tina is joining us at citi. right, tina. what now? >> well -- >> good morning to you, by the

way. >> good morning to you. good morning to you. on friday the market rallied with the news that house republicans appeared to have changed their position and were willing to consider a six-week extension to the debt ceiling. however, that deal fell apart over the weekend. we're not quite back to the drawing board but we are trying to separate the signal from the noise right now. >> it fell apart basically because the democrats don't want to have the sequester cuts automatically locked in or have them locked in for the fourth period. >> the main reason is because it didn't include reopening the government. it didn't reverse the government shutdown which would have required continuing resolution. if we're looking at the calculus involved here, the political calculus, republicans i mentioned about the signal. the signal is republicans don't appear to be willing to use the debt ceiling where they want to place the most pressure. they want to do that through the

government shutdown and so, therefore, not agreeing to a mini grand bargain which would have had both rolled in was their way of keeping the pressure up. democrats are saying no and the president wants to end this continuous political cycle. he's standing pretty tough. >> so what about this report that senate democrats are saying any debt deal with the budget. this thing about the 980 billion versus the 1 trillion they were looking at. >> there are lots of -- i mean, the senate has the ball right now. that's probably because the house won't convene until tonight actually. today is a holiday in u.s. markets but congress will come back into session. everything is back on the table. that's where we are. sequestration, spending cuts, entitlements, you name it. it's all up for grabs. we still think though that there isn't time to negotiate anything significant here. it's going to be a short-term patch or a break. >> a short-term patch so the

six-week extension with nothing else? >> it might have to have a sweetener for democrats to get through the senate. >> what would the sweetener be? >> democrats don't want to see cuts in entitlements and they don't want the sques jer to continue. the shape of the deal is up in the air. they want to see this include the government reopen so continuing resolution. >> they want to see the government reopen. that's -- either the government reopens or doesn't. there's no negotiating on that, is there? what do you chuck into the deal to make the republicans say, okay, we'll allow the government to reopen? what do you chuck into the deal? how do you get around that? >> again, there's so little time that we're talking about a short-term extension possibly of both. >> right. >> we were talking about three months ago. as of friday it's six weeks. what's to say we couldn't have a

two week extension. that's not what the white house wants. they're keeping the pressure high. >> there's this -- i was looking at this this morning. the 14th amendment to the constitution which says the validity of the public debt of the united states shall not be questioned. there was this idea that even if you didn't raise the debt ceiling, treasury could keep on going issuing debt and borrowing and justify the 14th amendment. is that a get out of jail free card? it's not completely free. >> there are no get out of jail free cards in this dispute. the founding fathers included the 14th amendment. people like roger buttle and constitutional scholars say this is the condition we want to see exercised. the president doesn't want to hear that they will. it certainly doesn't provide him

with the political cover to do it. again, as we discussed, we're entering unchartered political territory when we're talking about these kinds of measures when we're talking about the partisan dispute. >> they talked about the 17th. bigger payments in june, sort of end of november and what have you. it does come down to what is available in the time available. what can you craft in and debate and pass in three days essentially. >> and that's why when we look back at the last couple of years, the last 13 times we've been here we've had a short-term extension. why would this time be different? the stakes are higher. we're getting closer to the 2014 mid terms. that's the other point. in principle it's useful for both parties not to have this political football being passed back and forth and to be able to concentrate on passing legislation but -- >> be a good time to be an

independent in the mid terms i would think. no? i don't know. say i'm not part of this ridiculous game that's going on. >> well, certainly the number of registered independents is growing but what's obvious in this to and fro is that partisan divides are hardening. >> tina, stick around. more to come from you. meanwhile, it's a caribbean island where residents pay extra low tax. his current move to necca has nothing to do with money. he plans to spend the remaining years there because of his health. the billionaire boss is taking there to defend himself. there he's dressed up in a union jack suit with a very large flag. anyway, what do you think? has richard branson done enough to merit living tax free? is he simply another tax exile? let us know.

join the conversation on "worldwide exchange." tweet@cnbc or direct to me at ross westgate. short break. still to come, the social media revolution has seen an explosion in free online gaming. our next guest tells us how the trend helped him software company grow to a $300 million industry leader. mine was earned orbiting the moon in 1971.

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the rise in mobile gaming and the social media revolution has seen traditional giants facing stiff competition. the sea change has allowed firms like zynga to become major players. kabam was still in its inif a si. kevin is co-founder of kabam. you're one of the leaders in free world -- free to play games as well. how has this market grown so much? >> the market is growing because there are so many people buying smart phones and tablets these days that can enable a really great gaming experience. today there's about 900 million android devices out on the market, there are 600 million ios devices. you have 1.5 billion devices or

so that can play a great game experience. that's enabling companies like kabam to develop great content for these devices that really bring that console quality experience into your pocket. >> how many people who download a game for free which you don't earn anything else then go on to pay for premium product, which is where you do earn money? what's sort of the take home? >> it ranges by game. >> is there an average? >> 10 to 20% of people will end up paying for something in a game. >> what does that do for your -- what sort of margins? i'm trying to work out how good the model is here? >> kabam, we're doing over 300 million in revenues this year. 70% growth from last year. we had 70% growth from the year before that. industry is growing at a massive rate. the margins look like software margins. every additional consumer that

pays for a virtual grid or premium content, there's no extra cost us to to deliver that to the consumer. >> what's the new game? what are you launching? we talked about this with the console hand held devices. the nintendos and the hand helds, if you can keep downloading free games. >> sure. we're excited to announce our new game with nbc universal, one of cnbc's companies. we're launching the sequel to fast and furious. the next fast and furious 7 game on android and ios. we're very excited about that. we have a number of new games that we brought to market with hollywood partners including the hobbit which we launched last year. we'll be doing a mamgor

expansion pack this year with the next release of the hobbit. we've worked with paramount to do a god father game. >> god father? >> god father. >> is that with marlon brando, al pacino, how would you take this dosh do you take the story on? >> we do. it's a prequell to the trilogy. we start with the five families. you can pick a faction. you join that family. then you fight with all the other families. it's a lot of fun. >> good to see you, kevin. thank you very much. kevin chu, co-founder and ceo of kabam. tempers flair. will they take the country to the brink again? it looks that way. we'll be in the nation's capitol when we come back. [ woman ] if you have the audacity to believe

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you're watching "worldwide exchange." a recap. the clock is ticking. the u.s. debt default has been in the hands of the senate. it may be back with the house with three days left to reach a deal. china's consumer prices hit a seven month high. it could leave the pboc's hands

tied just as they nose dive in september. inflation an issue. india's wholesale hit a seven month high fueled by a rise in food prices. plus, peugeot announces it is in talks for a cash injection. the german rival says it will sell a record number of cars in china this year. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. all right. if you've just joined us state side, a very good morning to you. welcome to the start of your global trading day. we start this monday week of trade with talks on a possible deal to end the government shutdown versus debt default possibly stalling in the senate. senate majority leader harry reid has been talking about he's still seeing a chance to break the impasse before thursday's deadline.

he spoke with minority leader mitch mcconnell on thursday. the talks are substantive. now reports say senate democrats are demanding any debt limit time -- sorry, any debt limit deal not lock in further sequester budget cuts. mitch mcconnell saying the gop won't accept. congress will be in session even though it's a federal holiday. the world leader is warning of serious consequences if the debt ceiling isn't raised. >> if there is that degree of disruption, that lack of certainty, that lack of trust in the u.s. signature, it would mean massive destruction the world over. we would be at risk of tipping yet again into reception. we had two days of rallies going into the recession. we thought something would be announced coming monday trade. the s&p is up 12. right now you can see we are

pointing lower again. the s&p 50010 points below fair value. the nasdaq is 10 points below fair value. and the dow is 10 points below fair value. european equities have been unperturbed. ftse 100 is absolutely flat. up .5% on friday. the cac carant is down. no major moves here. this comes as banks have been warning about what will happen were the dire consequences of a u.s. default on its debt. at a conference hosted by the institute of international finance, the deutsche bank says it will be catastrophic. they say it will have a dramatic impact on the value of u.s. debt and the dollar.

dimon says banks are spending huge amounts of money preparing for the possibility of a default. joining us for more is robert costa, washington editor of the national review and kudlow report. robert, let's kick off with you first of all. are those senate talks broken down? where is the next lead going to come from, the senate or house? >> i was at the senate late last night and this morning. the impasse continues. senate democrats feel that the republicans are on the ropes and they're demanding sequestration. probably monday night the house will come up with another offer. >> what would that offer shape around? are we just looking now at pure extension, just looking to extend the time to talk? >> that's right. when we see the bargain in the senate collapsing on sunday and we see the house uneasy about

how to move forward, the most likely path according to my sources in the house gop is a six week extension. that will probably come in the house first, then go over to the senate. >> the extension. what happens with sequestration, shutdown, medical device tax, all much those activities? >> shutdown will likely continue. both republicans and democrats can't come up to a compromise on ending the shutdown. when it comes to the medical device tax repeal, that was considered an opg. unless they budge it's unlikely to see that happen. >> yes, but we're talking about the political machineations. there is another elephant in the room. that's the markets. that's been muted. that fact has relieved u.s. politicians of the only forcing mechanism that would have pressed them to do more quicker.

>> is that a fair point, robert? you talked about that, the senate and the house meeting. the markets are not playing much of a part. >> until the markets really start to become volatile you're not seeing members of either party feeling pressured to come to a deal. we're at this point right now where we're at the 11th hour and the markets aren't over reacting. they think congress can come to a deal. there's political posturing happening as they're trying to get the best deal possible in the final minute. >> what's happening in the gop at the moment, particularly in the house? >> you're seeing speaker john boehner trying to grapple with his power in his own conference. a lot of conservative members in the house gop are very weary of any house compromise. in this final day or two he has to do a balancing act. can he keep conservatives united?

should a deal emerge? >> are they worried they can't get any lower in the polls? >> you saw senator john mccain say they can't get any lower in the polls. 9 on the only people who like the party are family members. they're dipping in the polls. they need to come up with some kind of consensus on how to fix it and come up with a debt limit. we're still not there in washington. >> you can read the polling data in a lot of different ways. the poll that was mentioned talked about republican party popularity at an all time low. having said that, some of the most hard line republican house members are seeing their approval ratings very high within their own constituencies. another point is that the whole u.s. political establishment is falling out of favor, seeing their public support decline as this shutdown wears on into its

13th day. the court may be getting the brunt in the court of public opinion. the polls show that the damage doesn't last very long. >> justifiably, i kne l-- just i know we're going to come back to you, robert. over the course of today, i mean, what's the latest -- i want to ask you, what's the latest we can get a deal done that we can then sort of pass something? >> the latest is going to be sometime on tuesday afternoon or evening. it's very unlikely the house moves on something before 8 or 9:00. it doesn't come back before 6:30. the senate is unlikely what it will do. >> robert, stick around. we'll come back to you. tina, good to see you today. thank you for joining us. so what are you supposed to

do as these political rumblings and machinations go on. here's what they're telling us this morning. >> in my opinion, the most efficient trade out there is actually just to look across the border and to look at selling the fresh ris versus buying. i think there's a nice moment because that spread has tightened back out to 80 bases points. i would look at the top 100 bases points. in the bigger markets, that depends where you're looking to invest, but the jsc is becoming more and more interesting as a potential investment decision. if you look at the biggest companies, ntn, celtel getting exposure.

we suggest the qe is quite an aggressive cross that you can play more in asia. new zealand looks like we'll raise rates a lot more ahead of new zealand. and every week cnbc is asking to you set the trend by taking part in an online poll. we're asking how do you trade goldman sachs ahead of their third quarter, would you long short or would you have the stock as a hold. simply head to traderpot dom cnbc.com. straightaway you'll see the data. xerox has fixed a glitch that kept food stamp recipients from being able to use electronic debit cards to buy groceries saturday. the problem, which was caused by a software outage, potentially affected millions of people in

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and a recap of the headlines. the unthinkable news as u.s. politicians fail a deal ahead of the u.s. debt ceiling deadline. china and india have an inflation spike. peugeot is seeking a new financing deal leading to a pretty big selloff in europe. well, the u.s. health care industry has been a pretty reliable area of job growth.

that once humming job engine has gun to sputter. bertha coombs is at cnbc. hi, bertha. >> good morning, ross. they're beginning to send outlayoffs. the cuts are a bit of a surprise as the affordable care act, otherwise known as obama care, is projected to provide health care for 30 million americans. j.a. christmas says they announced more job cuts than most notably the cleveland clinic. 8100 of them. most of the reductions are by hospitals. the se the sector has announced 41,000 job cuts this year. since april we've seen 8,000 jobs shed in the sector.

there are several reasons behind the rising job cuts which are impacting not only doctors and nurses but also administrative staff. first of all, medicare, medicaid, private insurers are putting a lot of pressure. the american hospital association says the u.s. budget sequester was an across the board reduction lowering reimbursement by 2%. under obama care there is a whole new standard in the sense that hospitals are now reimbursed for their outcomes. if you have people coming back before 30 days, you are going to get dinged on your reimbursement. the number of in patient visits has been lower since the recession. between 2007 and 2011 it's fallen 4% partly due to the economic downturn, partly because people are much more concerned taking time off for elective surgery. as more baby boomers turn 65,

their health care services will be reimbursed at lower medicare rates further hurting hospital revenue. some analysts say these job cuts are a bit knee jerk. they think the health care sector is going to be benefitting these providers might have to bring that staff back next year as we start seeing more people covered under obama care. health stocks in terms of hospitals have outperformed the market this year. universal health services is up better and some analysts, ross, think that some of the potential federal reimbursement rates, they won't have that medical loss for people who are not insured, that the market hasn't priced that in yet and even another catalyst to watch for, the s&p 500 hats just one hospital stock with. >> dell: coming o -- with dell t and others coming out, they're

looking to add another stock. that would be a boost for the sector and stocks. >> bertha, thank you. good to see you. robert costa is still with us. we started this whole process because the tea party was trying to repeal bits of obama care. is that element gone or not? >> it's not gone within the tea party but there's been a slow acknowledgment among republicans on capitol hill that any kind of health care related recessions are not a viable ask right now in divided governments. republicans probably overshot their expectations for what they could achieve from the negotiations. >> what about some modest entitlement reform? >> what you have seen is talk of entitlement reform, such as cpi and trading for changes to

sequestration. they want to change sequestration. republicans want minor entitlement reform. any kind of possibility for entitlement for sequestration trade is going to happen in broader fiscal talks not between now and the current deadline on tuesday. >> we cobbled together some deal that means the u.s. doesn't default. we continue the discussions. what is going to change? what will have changed in six weeks from now? >> i've been covering capitol hill for four years and i always expect very little to change. it seems like we're playing a repeat now of the 2011 fiscal negotiations. we're seeing divided government incrementally moving forward in a very partisan, heated fashion. >> good. the answer is not a lot is going to change, right? >> right. that's correct. >> all right. robert, good to see you this morning. thanks so much for joining us.

robert costa. still to come, your stocks did manage to finish in the black last week on hopes of a debt deal. you've seen this morning futures are looking low. we'll look ahead to the trading date when we come back. mine was earned orbiting the moon in 1971.

afghanistan in 2009. on the u.s.s. saratoga in 1982.

[ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. if you've just joined us, u.s. futures are dipping down right now. the dow is currently about three points below fair value. nasdaq is currently 16 points below fair value. the s&p 500 is some 11 points, 10.5 points below value. michael gerka is managing

director of spectrum asset management. how are you feeling about what's going on in washington? >> well, there's many different ways, ross, the market can look at what's going to unfold this week. you can take a look at the bond market in particular, the ten year yield, after we saw the fed play its hand last moment. it was absolutely sold down to that 260 level. now we're starting to spike a little bit higher with a lot more retracement ahead. as you had mentioned, the stocks took a lot of heat and the belief that there's no resolution in site with the government. that being said, that's where you're going to see more selling pressure. it seems as though the gold market in particular, precious metals, are continuously looking oversold here with a lot more room to the downside. it looks as though it's an extension of the status quo of the way the markets ended last week. >> we saw gold down to around 1266 the end of last week, we're

currently at 1267 on co mix. what is the strategy? >> there was a big news article friday about a massive sell order that came into the market on friday. we don't know if it was central bank or hedge fund related. the point was it looks as though anybody who had long term gains in gold is getting away from the table and taking those profits and more importantly it looks as though new longs are not coming into the market with the preface being right now at least that globally we're not going to start seeing this crisis turn to a level where panic starts to run wild and then all of a sudden the demand for precious metals start coming back into play. i think a lot of it could be the resurgence of how europe is buckled up and startings to look better from anything systemic. >> i like to ask you about something we don't usually talk about. lumber. there you go, michael, lumber.

>> lumber has been tied to the housing market forever. it was at the 280 level to the point where it spiked recently. we're starting to see a little bit of a pull back. attributing it to the housing market, there's still more up side. the most bullish scenario to start the week is nat gas. it's getting into the winter months now starting to increase in demand and for those same reasons i think as you're starting to see the other side of the market selling off, you'll be a good recipient as we start to conclude the month. >> mike, you need to come over here tottenham hotspur need your help. >> love my spurs. love them. >> goodman. >> i'm a chelsea man myself. "worldwide exchange." plenty more coming on "squawk

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good morning. day 14 of the government shutdown. no deal out of washington this weekend. nervous investors were taking note with equity futures trading sharply below fair value but not giving back that 400 points that we picked up. it is monday though, october 14th, 2013. "squawk box" begins right now. sfwood morning, everybody. welcome to "squawk box."

i'm becky quick. andrew ross sorkin. all those promises that maybe the government would be open by now. not so fast. the treasury department warns that the government will not be able to pay its bills after wednesday. senate leaders have taken over negotiations. they spoke by phone yesterday. they failed to reach a deal. the senators are at an impasse over sequestration cuts. bipartisan group of 12 senators had put together a proposal that would reopen the government and funneled it at current levels and fund it at sequestration levels for six months. it would raise the debt limit through january 31st. >> january 31st on the debt ceiling, march 31st on the cr gives us time to work. >> i do believe we're going to see a resolution this week. >> but there