you're watching "worldwide exchange." i'm ross westgate. weak conditions and higher costs for its lowest fourth quarter forecast. a shock analyst claims hsbc overstated assets claiming it was a $111 billion capital hold. other analysts took a more cautious view. game over for nintendo, at least this year, pushing a profit warning on weak console sales.

japanese gaming unit now forecasts an annual operating loss. and intel's fourth quarter figures missed forecast. the company giving fourth quarter guidance raising fresh concerns about global i.t. spending. hello. warm welcome to the presume. plenty to get through and lots of news. also coming up on today's show, as taper takes its toll, goldman sachs speaks income trading, we'll speak to the ceo of the international giant about the impact of markets. he'll join us at 11:20 cet. china mobile is now selling the iphone 5 after six years of negotiations. we'll have the latest from beijing with all the action. that's at 10:45 cet. is nintendo losing the game?

japanese gaming giant has delivered a profit warning on weak, weak console sales. we'll get the full story from tokyo in around 30 minutes. intel has posted a slight miss in its profits. investor sentiment will have a closer look in the second hour of the program. and just a little south in sunny l.a., we're going to roll out the red carpet for the oscar nominations. find out why one animated picture is reaping big rewards for disney pictures. that's coming up at 11:40. if you've got any thoughts, comments, please e-mail us. worldwide@cnbc.com. royal dutch shell is stunned of a warning of a significant profit miss. the stock is down 2.6%. higher capacity and global refining conditions and current oil and gas prices will sorely dent fourth quarter figures.

new chief executive ben van beurden says the 2014 performance is not what i expect from shell. mr. van beurden says he now expects profits to be $16.8 billion for all of 2014. coming up, hsbc could be facing a capital hold of more than $ 00 billion. this is according to analysts at forensic based research asia. the banking giant may have overstated assets by up to $92 billion. the report also says that h is sbc hasn't made the necessary adjustments during quantitative easing. it's allowed legacy problems to linger while new ones put emerging markets together. cnbc contacted hsbc. the bank declined to comment on the report. the hedge fund credited with spotting the u.s. subprime

bubble. and we'll be joined exclusively by thomas monaco in just under an hour's time. we'll get through why he thinks what he thinks. meanwhile, simon is on the phone. thanks for joining us. what do you make of this report by thomas monaco and hsbc? does it stack up for you or not? >> well, let's worry first about what the market thinks of this. you can see the share price reaction today. there is more negative sentiment around the uk. domestic banks and millibands, comments about potential fourth bronze closures than there is in hsbc. more importantly than that, if we look at the credit market, the implied volatility on hsbc shares, it's significantly less than the european bank average. whether it's equity, credit or option markets, they're not

concerned about this story. >> yeah. he said -- thomas monaco said, look, eye just gone out and used all the figures that are publicly available. what he's particularly talking about is no one is really looking at the impact of incoming basul 3 capital rules. they say they could be required at a minimum to educate the 60 million. that's not required by 2019. >> it would be a remarkable thing, given the huge amounts of publicity and vast amount that's been written, if it was true, that the world was not looking at hsbc through basul 3 and any other bank. i would think specifically about what tom is saying. of course, he can defend himself on your show a little later. first of all, he's saying that hsbc has surplus capital, but under his stress test environment that disappears. well, that's kind of what surplus capital is there for in

the first place. secondly, he's saying that they haven't used the period of qe to dispose of legacy assets. it is precisely because of hsbc's capital strength that they took the decision to hold on to those legacy assets and get a better price for them when they matured. thirdly, this is reminiscent of 2007, taking a stake in hsbc and acknowledge stating for disposals in the u.s. because they said hsbc is about to collapse under unmarked crisis from the subprime market. hsbc is still here. it outperformed the sector in 2008 and 2009. and that campaign really came to nothing. >> i know you don't want to speak first. it's certainly got a time of publicity for them. is there a little bit of mis-chief in here? >> you've just started a new research boutique in hong kong. there's a lot of people out

there wanting to make a lot of noise. they have had great success pulling out the occasional chinese county for bad accounting and hugely boosted their business. hats off to forensic asia for getting tremendous media coverage. but i don't think it is something that major shareholders, certainly none of the ones we speak, are concerned about today. >> what are they concerned about with hsbc? >> well, what has been happening, if i look at those credit markets and those option markets, there's been a gradual increase in bc's ratio of credit costs to the european bank average and an increase in its implied volatility relative. and that's because of the concerns about slowdown in china. and what impact the tapering may have on capital flows to

emerging markets. that is a beginin issue and it might cause some problems that cause people to say, we told you so. but it is really a macro concern, not a concern about hsbc's particular position or indeed their accounting that is hanging over the shares. >> simon, always good to talk to you. simon mention d mentioned mr. m. ed milliband is expected to say he will force the country's five significant banks give up a significant number of branches. it would likely lead to the break-up of lloyd's and rbs. not even super mario can help with this one. nintendo slashing profits for the year warning it will now post an operating loss. they expect to sell fewer wii

consoles in the face of new offerings from sony and microsoft. executives will face pay cuts. for more, we're joined from tokyo by our viewer chief there, kaori enjoji. kaori, did anybody see this coming? >> the writing has been on the wall in terms of the problems at nintendo for many, many years. for the last two years, they have posted operating loss. so this latest estimate means for the third year running, this is a company facing another operating loss. so for about two or three years, the company seems to have been going through an identity crisis, so to speak. but i think today's announcement moves one set beyond that. it's the crisis, period. when you're saying that your mainstay product, which is as you mentioned the wiiu, if they're now saying that sales are only going to be 2.8

million, that's 70% below their forecast. and the reason why i mentioned this in particular is because nintendo's business model is they don't make money on the game console. actually, they lose money on the game console. the whole beauty of nintendo was people really want to buy their games, for example, mario, and in order to buy those games, you have to have the hard ward. the software is where the margins are. this is potentially a huge problem for nintendo. but i think the writing has been on the wall for a long, long time. take a look at the casual gamer. their real enemy isn't really microsoft, xbox or sony play station. i think it's more something like the iphone. the casual gamer that's being offered free games. and many, many analysts have said over a long period of time, why don't they open their -- why don't they license their games

to -- or offer their services on a mobile phone and that would be the answer. but at today's press conference, they do not suggest that they're going to take that step. and i think this seems to be short-term and i doubt it is going to put a floor under a reaction in the share prices, which is undoubtedly going to be very negative. >> yeah. and you're talking there about potentially structural issues facing the industry. how do you compare, you know, what nintendo is saying with what sony is attempting to do? >> well, it's a completely different product. nintendo built their band on they are a gamemaker and they're going to stick to that. because of this huge success that they've had in the past, they've been very brash, so to speak, and they've stuck to that model. but sony shifted gears, and sony, more in line with

microso microsoft, is offering a computer. like device that can play games. it's a very, very different approach. at a certain point a couple years back, the whole paradigm in gaming shifted. not many people want a gaming console that only plays games. the ps3, which in gaming is an ancient machine, is selling as well as the wiiu. that's house weak sales are. there have been a number of wake-up calls over the last couple of years, and certainly this is probably the biggest one that they have in recent months. >> kaori, great to speak to you, as ever. thanks for that. shares in intel are down. the world's largest chipmaker says it expects no revenue these

year. he told cnbc he still sees a recovery story despite another tough year for the pc market. >> we saw a contraction of the pc segment during 2013. but this contraction slowed down in the fourth quarter, which was positive. and, again, if we look at all the devices that were shipped to the marketplace in the fourth quarter, they did grow year on year. and if we look at how the year unfolded, the first part of the year, we saw some significant contraction. and then this did improve going to the second half of the year and got a little more steady at the end of the year. >> speaking to "squawk box" a little bit, it's time to bring you up to speed with where we're trading on the final section of the week. we'll kick off with li sixuan in singapore. >> thank you, ross. asian markets wrapped up the week on the low note as the sluggish u.s. earnings chilled investors risk appetite. the japanese government raised its assessment on overall

economy. but on a separate note, a cabinet office survey showed japanese consumer confidence were sending december to 411.3. that's well below the key 50 level. not to forget, the new tax theme kicks it in april. as far as markets are concerned, the nikkei 225 shrank early losses and they're lower by just a tad but still lost nearly 1% for the week with liquidity concerns weighing on sentiment. the shanghai composite dipped to a 2 1/2 year low. but the bright spot comes from the ipo market. industrial golfmaker new wave valve jumped 43%.

in south korea, shares ended lowerdy 0.7%. the s&p/asx 200 ended basically flat. super retail group david over 14% today in today's trade. ross, that's a look at the asian markets. back to you. >> catch you later, sixuan. just over an hour into the trading session in europe, advancers outpacing decliners. right now, the stoxx europe 600 is up just a point. xetra dax is up 0.2%. the cac 40 is up 0.2%, as well. break the sectors down for you. oil and gas is the lowest sector dragged down by shell. financial services, travel and

leisure, banks weaker. we've had this report. it's dragged uk banks down. chemicals, utilities, basic resources up 1.3%. take a look at where we stand with bond rates. ten-year treasury yields, do2.8. mixed u.s. data. we did see jobless claims yesterday falling. and we suggest maybe that nonfarm payrolls data was something of an aberration. we'll keep our eyes on gilt yields, as well, coming up in just a few minutes time. retail sales suggesting it hasn't been the best christmas, of course, in the uk, particularly for the growth. pound is weaker at 1.6329. the dollar taking a bit of a pause after recovering from the nonfarm payroll. dollar/yen, back down to 104.34. the aussie dollar just above 3 1/2 year lows which we hit yesterday.

still to come, now, he resigned in the wake of a devastating roof market collapse, but led his country into the euro scope. the outcoming latvia prime minister joins us on the phone right after this. d save you fifteen percent or more on car insurance. yeah. everybody knows that. did you know there is an oldest trick in the book? what? trick number one. look-est over there. ha ha. made-est thou look. so end-eth the trick. hey.... yes.... geico. fifteen minutes could save you... well, you know. female announcer: during sleep train's

female announcer: huge year end clearance sale, get beautyrest, posturepedic, even tempur-pedic mattress sets, at low clearance prices. plus, get free same-day delivery, set up and removal of your old set. and through monday, get three years interest-free financing on selected models. but hurry, this special financing offer

ends martin luther king jr. day. don't miss the year end clearance sale at sleep train. superior service, best selection, lowest price, guaranteed! ♪ your ticket to a better night's sleep ♪

roich dutch shell has stunned investors saying ben van beurden says the performance was not what he expected from shell. mr. van beurden says he expects profits for the year as a whole to be $16.8 billion. chris is with us. chris, good to see you. the upstream hit by higher volume costs, downstream hit by weaker retyping. what's your reaction? >> well, i think the concern that we've had, we've had a sale recommendation out on royal dutch slightly controversial with some of on our clients since the start of the year, really. because the stock rallied very strongly in december, didn't seem like the fundamentals were underpinning that price move. we were warning that the stock was looking exposed and liable to correct. it's in and out because of a major problem that's suddenly been unearthed here, but i think the ongoing reality of the

difficulty the oilmakers have been having is revealed in this. >> and we've known about lower production volumes. that's a challenge for them to find oil they want to drill and refining margins. so is the read through from shell to bp to the sector? >> i think the read through to the sector is a broader message, which is at the end of last year, people got very carried away broadly with money going into internationally exposed equities within those flows continuing in the first few weeks of on this year, as well. and i think there was a momentum trade that is not the information is new. it's just that the stock price that's exposed here against that back drop which hasn't really changed. and i think you can put the fundamentals to one side as a bit of a momentum rally in december. and then i was just coming back down. a follow through of southern relations and difference. i think it's just a reality -- >> what maybe is a shock is the magnitude of the miss.

we understand the problems, maybe we didn't quite understand they were going to come out with this size of a profit warning. they're now talking about full year results around 16.8 billion earnings for 201. dm 2012, there was 27 billion. that's a massive difference. >> what we've noticed is that the valuation outlook has been deteriorating for some time. and the markets seem to be ignoring those fundamentals. i think the danger we have here is people say it's not important. we're just starting the results season here. we're getting a lot of up to date information as we reasonably can from all the major corporate around the world coming off the back of very strong momentum movement in the market in the second half of last year. anything that misses is going to get quite dealt with severely by markets. people are saying, i'm taking my

money off the table here, thanks. our recommendation is -- >> no profit? >> no. >> what you're seeing is it's been recycled in international equities. there's a lot of good companies and a lot of good businesses out there that are perhaps no longer giving you the returns that you anticipated for 2014. a lot of these companies are saying, analysts time after time this company is down 25%. we can't see the up side. people are looking to say who is going to jump next? flow is going into all international equities and bonds and all liquid asset are out there. savings is being deployed into capital markets. but we don't have to stick with a company that disapoints. there's a lot of options that people can find. latvia is the 18th state to join the eurozone at the beginning of the year. payments could be made in both euros and lat came to an end on tuesday. the ecb lead held latvia's

trrchlz as the single attractiveness. latvia's session is the highlighting of its career. the prime minister's replacement is expected to take up her post next week. joining us on the phone now is the acting prime minister of latvia valdis dombrovskis. thank you for joining us. >> good morning. >> i want to talk about the euro entry. why was it the right thing for latvia to do, bearing in mind all the problems that the eurozone has had during the post financial crisis? >> well, we believe that it will facilitate economic growth in latvia through a number of ways. we expect to have lower interest rates because whatever currency

exchange risk which was there between lots and euro has disappeared. and also crediting agencies have indicated they see latvia's skegz autos position about economic stability. we are very small, very open economy. we do around 70% 06 our foreign trade in euros. which means we were spending lots of money converting currencies from lats to euros. this cost is removed from economy. also, for foreign investors, we expect it's going to facilitate foreign investment in latvia. for investors, it's easier and safer to work with euros than with different, small national currencies. and besides latvia, lots was anyway picked to euro. so anyway, whatever was happening to euro was happening to lats. so from that point of view,

there were many reasons not to join. >> a lot of economies have studied latvia and tried to understand what's happened there. you've had heavy austerity policies. harsh budget cuts, tax increases, tough structural reform. tied to the euro, which you haven't had the ability to sort of offset that with a weaker currency, yet somehow it worked. why? >> well, first of all, we didn't see the relation being a realistic option. because with this being very small, very open economy, whatever competitiveness gains we would get, it would disappear very quickly through inflation. important that prices would increase immediately, important compliance prices would increase immediately, and very soon we would be back to the situation where we hoped to still face real problems in our economy and to do with the real structural

adjustment. so we then rather opted to deal with structural problem in our economy straightforward to address our competitive prices. this has worked and helped latvia return to the economic growth and already for three years to be among very fastest growing eu economies. >> and just finally, you thought it right to resign after the maxima super market collapse last thursday which killed 54 people. what happens now? because the elections aren't scheduled until next year, but it's essentially the collapse of your government. how does this now take things forward? >> well, in fact, the new leadership is under a prime

minister appointed by the president of the state. things seem to be on track. we're working to form a broad, center right coalition and we expect the government to interoffice next week. >> thank you so much for joining us. >> thank you. still to come, the uk high street was a sea of red over christmas. how bad was the period? we'll have uk retail sales right after this.

shock research claims hsbc overstated estimates. but other analysts told cnbc take a more cautious views. >> hats off to forensic asia for getting tremendous media coverage. but i don't think it is something that major shareholders, certainly none of the ones we speak to are concerned about today. is it game over for nintendo? could be for this year after weak console sales. the japanese gaming consolemaker now estimates an annual operating loss.

sterling is bounced, gilt futures have erased gains after uk retail sales came in quite a bit stronger than expected. up 276% on the month, 5.3% on the year. they were forecast up 0.2% on the month and 2.5% on the year. so today's retail sales match the record month on month write that we saw back in fed 2010. the sales value growth was fueled by small scores, according to the ons. december department storts ported the strongest on year sales since january 2000. and the december retail sales posted the strongest rise on the year since october 2004. we'll get some more comments out, but let's get some immediate reaction. still with us is chris tinka. that is a surprise. the onus has gone out of its way to talk about small stores. >> i think absolutely. and i think this was evident

over the christmas trading statements that we've had whereby most of the nonfood retailers have actually done very well. all the way from john lewis next argot to smaller retailers, as well. jigsaw, ted baker and the likes of that. the only people that have done badly are the grocers and that's the largest retail we have in this country. and there's specific issues going on there and a select few likes marks & is expenser had difficulties. >> the smaller stores, revenue grew more than three times faster than the bigger stores. what's going on high street? we no longer go to the big place where we want to drive any more. >> i think there's a big difference between what's happening with the big grocers particularly and the smallest of convenient stores. i think as we're getting older, people think the bigger stores are harder to navigate. they've let prices increase quite a bit over the past few years and it's pushed people into the likes of aldi and

needle. on the other hand, they get quality and go to retros. so you're getting stuck in between them. i can where a lot of the convenient stores and discount stores are doing better. >> are the supermarkets going to rethink their model? >> very much. i think what you already see, i think you've another got margin reset brooming. at a time when high street generally is doing well, that's pretty shocking. >> i think the warning flag, the problems with government, for example, before christmas when they identified they were going to their suppliers and going to try and apply this tesco model as saying you've got to reduce your prices to us so we can generate more capital to invest in new stores and benefit in the long run, i think the rest of the world had a bit of a head fake and said no, that's not what we want to do. we want to sell to people who can keep their margins who have

the context of the market. it does seem to me that the headlines and the growth over-shadowed the fact that we've come off the back of a sharp rise in economic performance in the uk, falling unemployment, the headlines are there. you know, everybody has been distracted by this concept of the cost of living crisis, but the politicians have been pushing. the reality is that these numbers have demonstrated the fact that people aren't getting back out and buying and it puts in stark contrast where the likes of morrison have been and where they haven't been. six months ago, we were talking about so where is your delivery strategy outside of your stores? where is your online sales and -- >> but, you know, and do you want to be an investors in a company that's only woken up and the reality is what's happening in the distribution chain in 2014? >> we all know the super market is under pressure. there are two questions. is there an investment opportunity in there if they

start changing things around? aside from that, which is the company that is getting it right? >> the two answers to that, we've looked for the opportunities. buys on -- after the price correction. the market will send a strong and sharp message about the performance at the back end of last year. they've got issues, but there's value there now. so those are the two companies that you will definitely look at. if you're looking at a company that's continuing to perform, you've got to look at the necks of this world. you've got to look at the performance and the next end of the retail market who really are responding much more quickly now to the fashion environment. and marks & expenser is a dinosaur. >> i would largely agree with that. if you look at this christmas, the exceptions were people that had goods and products that people wanted but also that they

were able to deliver conveniently in the way people wanted. tloifr can as possible. the likes of neck responded. the likes of john lewis did exceptionally well on that score. it's because the exclusive product there that you want to reach out to. the reason why some struggled was the product was boring and there was little exposure on the interpret, as well. european equities have been trying to edge higher today, but it's pretty hard going. we're flat for the ftse, really, but about 115 points away from the all-time high. the xetra dax up 0.3%. the cac up 0.25%. the ftse mib up 0.1%. 2.83% is the gilt. treasury, 2.84%. sterling nunl nudging up, as well.

10 1.6432. euro/dollar, just below 1.36. hsbc could be facing a capital hold of more than $100 billion. the research firm says the global banking giant may have overstated assets at the major subsidiary level up to $92 billion. it says hsbc has not made the necessary adjustments during quantitative easing reprieve. rather it has allowed legacy problems to linger. now, cnbc has contacted hbc. the bank has declined to comment. the report is led by two analysts. one, thomas monaco, a former senior bank examiner at the new york federal reserve who has previously worked the front point at partners, the hedge fund credited with spotting the justify what we

sort of discounted last year? >> well, the interesting thing about the banking sector in general is -- >> well, i'm going to broaden this out, you know, if you want. >> to start with the banks, the interesting thing about the banks is the real recovery in the banks has not been because we think earnings are growth. it's because we think the risk is growing. >> my question more broadly is about the markets overall. >> absolutely. so the reason i mentioned the banks initially is because that was where the stress of risk was being seen the most in markets.

across the market in general, risks in terms of capitalization, that has been sustainablely coming down because of qe. and so we're now in an environment in 2014 where it's top line that's going to be much more important. growing top line is much harder. if you look at what's happened in the states last year, the bottom line wasn't that im impressive across the board. half the people were still rationalizing, having write backs, benefits coming through from the hard work that companies were growing in. growing top line was the focus for 2014, 15. this is where the market is getting quite carried away. you have visibility of growth at top line. you think the country is now organized enough and is sfushtly deleveraged that that can throw through to the bottom line. the difficulty about growing earnings is you need to be able to grow top line sales. so that's your focus, whether it's in the retail sector or the

technology area of the market, investors need to be looking through the soap much more about sustainable and increasing performance of the top line now. that is where disappoint is going to be responding to the sharp price responses through downside through this earnings season. >> chris, always good to see you. thanks so much for joining us. staying with the banks, citi and goldman sachs posted disappointing earnings yesterday largely due to a drop in fixed income. citigroup nearly doubled net income in the fourth quarter, but missed analyst estimates. at the same time, goldman sachs reported a 21% drop in its net earnings for the quarter while the bank's bond trading revenue was down 1 1%. this was read by investors as a sign of things to come as they adjust to higher interest rates. and nintendo warned today it's expecting to post a net loss. hi, fushiko.

>> hi, ross. nintendo has seen weaker game consoles. it has been trying to cut prices to counter sony's play station4 and xbox 1. nintendo cut its global eu sales forecast today to 2.8 million units from 9 the million. ref knew is expected to fall 7% on the year to $5 billion for this fiscal year. the company flashed a dividend to 100 yen from 260 yen. at a press conference this evening, the nintendo president said he won't step down, but will see pay cuts for

executives. ross, back to you. >> have a good weekend there in tokyo. thanks for joining us. india's top ip explorer rose in the third quarter beating estimates. they expect sales growth to accelerate in fiscal 2014. investors have punished the stock sending it down 5%. it has risen 75% over the last year. and the ceo of tcs told cnbc investors are likely taking some of that off the top. >> the electoral commission has said the 2nd of february elections cannot be free and fair, but they step back, advise all sides, open up political space for some kind of compromise so we can move to elections that can be accepted by all sides. that's what we're proposing. the protesters are demanding different things. you have to recognize the differences. move on to thailand, the

anti- -- panel will be probing the prime minister's role in a scheme that has depleted government coughers. they're using subsidy toes issues royal votes and issuing new bonds to pay for them. that's one of the reasons many are boycotting the february 2nd election. earlier today, the leader of that party said western media is wrong to be critical. maria is joining us from maybank. that i think so much for joining us. this is not relevant to the stock market in a way, but why should it concern us? >> our issue here is that these are from -- or it could affect the gdp growth going forward. we have already seen some

institutions and agencies saying that on the baseline it could be -- the growth could be around 2.5%, 2.8%. and that's not a small amount. therefore, our earnings forecast for this year looks very optimistic. >> yeah. the -- i suppose we have to understand how the rice trade works. the rice exporters are not the same as the rice farmers. >> they are not the same entity, yes. >> who is making the profits and the money? >> one estimate is that this is done by who estimated the

benefit to the nonfarmer is 2.8 million. >> who is going to initiate this investigation? >> oh, the nacc said that we could complete the investigation in two weeks. so probably it will be another case that will be filed against them. there are a number of cases pending at the nacc, is the constitutional court, so just one of the main. >> maria, thank you so much for joining us from thighland. head of institution research at maybank. still to come, apple i sales are on sales at china mobile. finally. are they going like hot cakes? we'll have the latest from beijing.

china mobile, the country's biggest mobile network has started selling am iphones to its customers today. the ceo tim cook of apple says it's a long awaited move. >> this is fantastic for apple to be launching with china mobile today. we had long wanted and wasted for this day to come and i'm so

happy that it's come today. today we're bringing the best smartphone to the fastest network and the largest network in the world. >> right. eunice yoon joins us from beijing. i wasn't kidding when he said it's taken us a while. >> i know. six years. >> that's not on long. >> yeah, well, people have been ordering them. the company said that they had over a million preorders so far. so i mean, it's difficult to gauge from, say, the store itself. it was a little bit crowded. there's some lines. but it really was difficult. so i think it's probably going to be safetory really gauge everything and really make a judgment once the official sales come out. a lot of people have been talking about this story, waiting for it to happen. finally, it has. we've seen apple is probably now going to get a boost and a lot of people are excited about it because of the fact that the

company has been saving competition, especially from rivals. china mobile, they really have been trying to push this new 4g network, a fast speed network that they're hoping will help generate a lot of data profitability for them. but at this stage, ross, one of the big questions that people have here is still unanswered. the subsidies, there's been a lot of discussion about whether or not there could be a subsidy war which could hurt china mobile's profitability at the end of the day if it doesn't, indeed, look at those. some analysts have been talking about how maybe it's going to have a slash actually, you know, boost some of the subsidies in order to get more people to buy those phones. >> yeah. how important is it that they're taking the lead in 4g commercializations? how quickly are you going to roll that out? and how does that feedback into the iphone deal? >> well, it's already rolled out. and it is very important because

one of the key issues that the two companies had was the fact that the technology wasn't really seen at china mobile as up to snuff when it came to apple's iphones. one of the problems -- that was a key issue. so the fact that the 4g network is now out, it's seen as one that's really right now the fastest in the country, and, you know, in that way, iphone users will be able to suffer the interpret, browse, helping china mobile generate a lot of money, but at the same time, also helping apple sell more phones because people will enjoy the experience more on an iphone. at least that's according to apple. >> what is, eunice, the best selling phone, the high end smartphone at the moment? >> well, the iphone actually is -- i don't know if it's absolutely the best, but it is definitely a phone that a lot of

people see as an aspirational product. it's not -- you know, so a lot of the other phones out there don't quite have that same status. you know, the iphone is seen as one that you really work up to and one of the reasons why people who you wouldn't think would be able to afford an $870 phone will actually save up and go out and purchase them. >> eunice, good to see you. catch you a little bit later. let's get more with tucker grinnan. tucker, good to see you. we know this deal will certainly improve the revenue of china mobile. what's it going to do for the profits? >> it's going to hurt profit. we estimate profits are going to fall 7% or 8% this year. largely due to the subsidies issue and the depreciation on the 4g network. just to put it in context, china mobile spent about $28 billion for hand set subsidies. we think the number for fy14 is

more like 50 billion. so the first year of the iphone deal is going to take a big hit. they've deployed a big network on balance sheet. the key issues for investors is do they look at the revenue acceleration or earnings. what is the focus? >> so what is the focus for you? >> the fof for me is revenue growth. china mobile has been growing revenue at about half the industry rate. let's say 6%, 7% versus the competitors. they have not lost a lot of share in the high end. the main reason is the iphone experience so far, the 40 million or so iphone customers they have can't really use the main data network. they're using wi-fi. so china mobile has quite good data traffic, but they're selling wi-fi at a 90% discount to cellular traffic and wi-fi represents the highest of my major operator globally. our view is they should be able to monetize the existing customer base with these better hand sets. >> how much do you think they have to subsidize the iphone by?

>> ballpark, on let's say the numbers you showed on a 5800 or 6 of,000 renminbi device, probably around 2,000 renminbi. the subsidy is usually equivalent to 8 to 10 months of service revenue. it is a hit. china mobile still has the bulk of high end customers. this is a very strong brand. we think the top 100 million or so china mobile customers can afford to pay 5,000 renminbi for a hand set. >> thanks for that. still to come, we'll sxeek exclusively to one of the authors of the explosive hsbc report. second hour of "worldwide exchange," coming up.

other analyst ves told cnbc to take a more cautious view. >> hats off to forensic asia for

getting tremendous media coverage. but i don't think that it is -- it is something that major shareholders, certainly none of the ones that we speak to are concerned about today. >> game over for nintendo. at least for this year after issuing a profit warning on weak console sales. the japanese gaming firl now forecast an annual operating lot loss. plus, intel's fourth quarter profits missed analyst forecasts, the company giving disappointing guidance which has raised fresh concerns about global i.t. spending. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. hello. warm welcome to you on the second hour of "worldwide exchange." if you've just joined us in north america, welcome to the start of your global trading day. u.s. futures after we snapped a two-day gain yesterday for the dow and the s&p 500 suggesting fairly muted start. the s&p is called down at the

moment by 0.3 of a point. the dow jones flat and nasdaq down by 2 points. plenty can change between now and then. first off this morning, we're going to talk about hsbc. it could be facing a capital hold of up to $1 billion. this according to analysts at the hong kong basis forensic asia. the global banking giant may have overstated assets at the major subsidiary level by up to $92 billion. the report says hsbc has not made the necessary adjustments during quantitative easing reprieve. rather, it's allowed legacy problems to linger while new ones in emerging markets gather. joining us now is one of the authors of that report, thomas monaco. also with me on the set are helia. welcome to you both. thomas, you talk about lots of things in this report.

how -- but you seem to say that the biggest impact is coming from basul 3 capital walls. they could be required to set close to 60 billion in new capital by 2019. what is your major concern? >> well, there are a number of concerns. we can start with the asset, what we believe to be asset overstatement. there are issues of loan loss provisioning. and restructured assets that seem to go without any provisioning against them. issues of deferred tax, underfunded pension plans, etcete etcetera, intangibles associated with previous acquisitions that are questionable. so we'll start with that. and so that, to us, is somewhat problematic. then what we have done st we've looked at the company on a -- on a regulatory reform guideline

under basul 3, potential pra guidelines. what we have found as we stress the balance sheet as well as take a look at it to be compliant under 2019 guidelines, we find that the organization looks to need some capital. and that number is upwards of $100 billion, but that's going to depend on, i would say, the final rules with respect to basul 3 within the uk. >> i mean, you've done a forensic analysis. i'm just assuming i could take pretty much any bank and come up with a whole list of things that i should be very worried about. it doesn't mean they're going to come to pass, though, does it? >> sometimes they do, sometimes they don't. it really depends on what's going on with asset values.

it all depends on the regulatory authorities in each specific market. it's all going to be dependent upon that. but at the end of the day, what we are seeing is the legacy problems have lingered. new ones in emerging markets are forming. and the fact of the matter is, earnings are under a significant amount of pressure. and whether you believe the idea of asset overstatements, which in our view amount to six to seven years worth of earnings, they still have to be compliant with basul 3 by 2019. our feeling is that these capital requirements are pretty enormous. earnings are under significant pressure. and as a result, more lickly than not, the dividend likely will be cut or suspended. and, you happen, our feeling is the company is even

contemplating some of these rules. what we have seen over time is the organization peel off assets in china. we've seen it for basul 3 which is a negative impact earnings. we have also seen that the organization is contemplating potentially listing the hsbc uk retail subsidiary. >> i know there's -- there's a number of issues i want to bring helia in. i was just on the legacy stuff. one could argue that they actually want to keep the legacy, they have a balance sheet to do it until such time as they could get a better price for those assets. >> i think it's interesting. there are some concerns around, i guess, asia and if there's a hard landing in china, what does that mean for the hong kong balance sheet? does that mean bigger loss reserves? does that mean less revenues? what about the stakes that hsbc reduced in those banks? tom, you obviously have a great reputation and people like meredith whitney have made their

careers out of calling things like citigroup back in 2007. we've seen bernstein come out and talk about standard chartered. have you applied the same stress tests to standard chartered? >> we have not. we do not cover standard chartered at this point. we have taken a look at h -- we've applied the same standards to quite a number of the american banks under the regulatory reports and we find that the level of capital charges under the same assumptions, hsbc versus bank of america and the more traditional banks and hsbc, by far, has the worst balance sheet of the traditional banks within the united states, in our opinion. even worse than that of industry leaders. tom, can i just ask you, obviously, your forensic if your

look, but your note is quite short. can we see some of the work? when you talk about questionable balance sheet, you mention six different things from loan loss reserves to the defined pension plan. where can we say how you've applied this stress test? because i guess to get to these big numbers you're talking about the bank needing to raise. it would be interesting to see where you -- >> sure. we have done -- well, what we have done over the past year, we have written a series of about six or seven notes on the various entities of hsbc. outlining, highlighting where we think the problems are via asset class on balance sheet, off balance sheet. and applied that many that versus their stated equity as well as versus their regulatory capital and we've come up with a substantial level of questionable assets on their bat

balance sheet. >> thomas, good to talk to you. thanks for joining us. congratulations on one issue. you've got a lot of people talking about your firm. i don't know if that was part of the plan, but, you know, you've done well on that. >> it's a slow news day, slow news day. >> thank you. thomas monaco, managing director at forensic analysis. >> thank you. royal dutch shell has stunned the market with warningings of a significant market miss. high capacity and global refining conditions and current oil and gas prices will sorely dent fourth quarter figures. the new chief executive says the 2013 performance is not what i expect. mr. van beurden now says he expects profits for 2013 as a whole to be $16.8 billion. and not even super mario can help with this one. nintendo has warned it will now post an operating loss.

nintendo president says he won't resign, but executives will face pay cuts. and considering the theme intel's fourth quarter profit rose 6%, but missed analyst forecast by a penny. revenues slightly beat estimates. results were hurt by weak spending on service. intel has a fairly luke warm outlook. the first quarter revenue says it overestimated the extent of the recovery and spending among enterprise customers, citing the impact of the u.s. government shutdown. intel down 5% in after hours. it's currently off nearly 4% in frankfurt. let's start off with housing. we start off with this snapshot of u.s. futures. pretty flat is where we're indicated at the moment. we snapped a two-day winning streak yesterday. the dow down 64 points. the s&p down 2.5. pretty much on fair value for the dow as is the nasdaq as is

the s&p. so new england strong indicated at the moment. european equities, pretty much reflect that, as well. the ftse 100 just up 8 points. it was down yesterday. means it's about 105 points away from the all-time high. the xetra dax is up 0.5%. cac 40 up 0.4% and the ftse mib is currently up 0.2%. ten-year treasury yields, 2.84%. it's been an interesting week for yields. lower today. gilt yields are higher. we had a much stronger than expected retail sales number ow of the uk for december. uk sales up on the month, 5.3% on the year. that's the fastest annual growth since october 2004. smaller stores selling three times the pace of the bigger stores. and it was groceriers that were the super markets were the big losers in the uk. on the currency markets, sterling has resulted in stronger cable against 1.6445, up nearly 1 cent today against the dollar.

dollar/yen, 104.44. dollar taking a breather after recovering from its nonfarm payroll sell-off. and euro/dollar just below this 1.36 mark where we were this time yesterday. that's european assets in trading right now. sixuan will wrap up the week for us in asia out of singapore. sixuan. >> thank you, ross. it's largely negative session in asia as sluggish u.s. earnings tamed investors risk appetite. the nikkei 225 trimmed warning losses ending a tad weaker, but loss nearly 1% for the week. as ross just mentioned, after the market close, nintendo expected full year operating loss and slashed the outlook or its wii console sales. and ahead of announcement, shares dropped nearly 3% today. elsewhere, what's lingering liquidity concerns weighing on sentiment. the shanghai composite dipped to a 5 1/2 month low ending down by almost 1%. this yeah of key economic data including gdp numbers next week.

but the priet spot comes from the ipo market. new wave jumped 43% in its $240 million market debut, which is the first ipo in 14 months on the mainland markets. elsewhere in south korea, shares ended lower by 0.7% in australia's asx 200 managed to end just a tad weaker. all the miners extended a strong rebound today, but australian retailers tumbled after a profit warning from super retail group and that stock took a dive, ending down by over 14%. ross. >> sixuan, thank you. have a good weekend. now, a reminder of what's on the agenda in the united states today. we've got december housing starts. they're out at 8:30 eastern. forecasts to drop by more than 10%. building permits are expected to rise 11%. at 9:15, we get december industrial production. that's forecast to rise 0.3. just before 10:00 a.m., the first report on january consumer sentiment is out. the richmond fed president is

speaking about the economy at noon. joining us for the next part of the program today, jim o'sullivan, chief u.s. economist at high frequently economists. >> morning, ross. >> it's a week now since that employment report. weekly jobless claims fell yesterday. do you think that was an aberration or what is the data since told you? >> ternl the employment report likes like the aberration. even going into the number, we do think that there were weather issues in terms of risks. and there's no question that unfavorable weather in early december was a factor in that report. more generally, the numbers are very volatile. they have been trending 180, 190,000 on the month. you look at the evidence that's coming out since then, including the claims number which continues to signal improvement. more generally, you look at the numbers, retails sales earlier in the week were reasonably solid for december. the beige book was pretty

positive. and just generally, the numbers have been consistent with an economy that's improving, all of which suggests that, yeah, the employment report is an aberration. >> okay. and that -- does that explain why we've got a number of fed speakers this week saying we should go a little bit -- fisher .plosser was saying and charlie evans coming out and saying, well, maybe there would be. i wouldn't necessarily be against it. >> fisher and foster are viewed as on the hostile side. >> exactly. they kind of hint that there might be a case. >> they're certainly not doing more at this point. i think at this point, the fed is almost on auto pilot. i think it's 10 million a meeting for now. and -- >> what changes that? what magnitude of data change do we need to change them? >> well, i think you have to look at the inflation numbers, not just the growth numbers. inflation has stayed tame. we saw yesterday the core cpi was tame at 0.1%. the core pc number, the fed

favored inflation gauge is running 10.11% year over year. that's running below their long-term goals. so i think you probably need to see some of the inflation numbers tick up, not just continued strength in the growth numbers. frankly, at this point, i think it's easier after all the object session over the fed in takenering in 2013, put it on auto pilot and we don't have to talk about it every meeting. >> are they going to be able to keep the surf where they want it? >> well, i mean, of course, where they want it, i mean, it's not 100% clear what that means. but in terms of long rates, i mean, i think the expectation is if they're right and ultimately they have to tighten come 2015, 2016 and the economy is improving, long rates will continue to buy. >> the pressure goes -- >> yeah. i the fed right now, they have forward guidance. you look at the projections for the funds rate. the median fed official shows the funds rate are zero. 1.75 at the end of 2016. and right now, you look at fed fund futures contracts and

they're pretty much completely in sync with the fed. personally, i think the markets will start to second-guess that dovishness as the numbers continue to improve. we start to get some bubbling in the wage inflation numbers in particular in 2014. i think you'll see the markets start to price in a bit more tightening in 2015, 2016 as the status projecting. ultimately, obviously, that puts upward pressure on bond yields. >> jim, good to have you on the set. still to come, apple's iphones are finally on sale today at china mobile. has the wait been worth it? we'll tell you more after the break.

a recap of the headlines, shell shocks the market with its $11 billion profit warning. hsbc overstated assets and could face a capital hole of more than $1100 billion. and came over for anyone tendo. the japanese gaming firm warns on profits ar weak sales. still to come, amid taper fierce for the emerging market, we speak to the international chief executive of brazil. let's put some music on.eng. woman: welcome to learning spanish in the car. passenger: you've got to be kidding me. driver: this is good.

woman: vamanos. driver & passenger: vamanos. woman: gracias. driver & passenger: gracias. passenger: trece horas en el carro sin parar y no traes musica. driver: mira entra y comprame unas papitas. vo: get up to 795 miles per tank in the tdi clean diesel. the volkswagen passat. recipient of the j.d. power appeal award, two years in a row. i nethat's my geico digital insurance id card - gots all my pertinents on it and such. works for me. turn to the camera. ah, actually i think my eyes might ha... next! digital insurance id cards. just a tap away on the geico app. could save you fifteen percent or more on car insurance. everybody knows that. well, did you know that when a tree falls in the forest and no one's around, it does make a sound? ohhh...ugh. geico. little help here.

global banking risks will be among the hot topics in next week's davos forum. joining us for more is charles stewart, ceo of itau bba international. also still with us is jim o'sullivan from high frequency

economics. jim, good to see you. one of the biggest latin american banks? >> yes. one of the biggest banks in brazil and one of the biggest private investors banks in latin america, yes. >> all right. jim is here and on automatic mode. is that okay for latin america? we can cope with that? >> well, i think to a certain extent, what we're seeing is -- and our hope is that we're seeing the pain before the gain. i don't think tapering at this point is catching anyone particularly by surprise, except the exact timing of it, perhaps. and, of course, the underlying sentiment that the u.s. economy is improving is ultimately a positive for us in latin america, particularly in mexico. >> mexico because it's right next door. >> yes. >> there has been a -- mexico has been an outperformer already.

so is there a lot in the price? >> to me, yes. mexico has had a relatively good run, particularly by em standard over the last 12 months. but coupled with, perhaps, just some momentum in the u.s., you've also got some important structural reforms in the mexican economy, which is impressive. such as the energy reform currently making its way through the legislature and the new president. >> jim, what do you think of mexico's leverage? >> it's closely tied to the cycle. obviously, can do to the north and mexico to the south are part of that. it's hard for them to deviate too far, i think, from the u.s. >> it's a different case in brazil. they just put rates up by 50%. the consumer is under pressure there. they've had a weaker currency and inflation problem. they've got elections coming up. >> yes. >> it's tough. >> there are certainly a lot of what i would characterize as

head winds in the brazilian economy. you look at some of the major macro factors in the world today, whether it's slowing growth in china, whether it's tapering in the u.s., whether it's political noise and the election in brazil, and in the end of kind of easy money and consumer credit, those are all negatives or head whippeds for brazil in an em context. but from our perspective, the long-term fundamentals, the fundamentals of the brazilian economy are extremely compelling, whether you look at that from a demographic perspective, the resource story, rule of law and certainly i would argue that many emerging market economies, certainly brazil and south american economies are better equipped to with stand the pressures that we're seeing. >> briefly, you finally got the world cup this year and the olympics coming. is that a problem or is that helped? >> well, you know, i think for anyone who is passionate about football, the world cup will be

a very special event in brazil this year. and the legacy of the world cup in brazil, our hope and expectation at a minimum, is that it will stimulate infrastructure investment. it's already doing that. that's been one of the key bottlenecks in the brazilian economy. we see nearly half a trillion dollars of infrastructure investment in brazil over the next four or five years which should provide further support to the medium and long case in brazil. >> charles stewart, thank you for joining us. we're going to keep jim for a couple more comments. intoll missed expectations by a penny. we'll get into the details of the world's biggest chipmaker right after this. 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.

you're watching "worldwide exchange." a recap of the headlines today from around the globe, we have a shock from shell. a $1 billion profit warning sends its shares to the bottom of the stoxx 600. the oil giant citing weaker conditions and higher costs for lower fourth quarter forecasts. another research note that is also a bit of a shock, hsbc, it says, could face a official $111 billion capital hold. the managing director told us why he thinks the bank has overstated assets. >> issues of loan loss

provisioning and restructured assets that seem to go without any provisioning against them, issues of deferred tax assets, underfunded pension plans, etcete etcetera, intangibles associated with previous acquisitions that are questionable. game over for nintendo after weak console sales. japanese gaming firm forecasting an annual operating loss. plus, intel's fought quarter profits missed forecasts. the company gives disappointing guidance, raising fresh concerns about global i.t. spending. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. a warm welcome if you just joined us stateside. u.s. futures are pretty flat at the moment against fair value after snapping a two-day winning streak yesterday.

the dow down 64. we are some 19 points off fair value, the nasdaq has inched up to be around 3 points above fair value and the s&p is around 2 points above fair value. european equities, which have been fairly flat, have just inched up in the last half hour. the uk today experiencing much stronger than expected retail sales in the month of december. 5.3%, the annual rate. the strongest since october 2004. we thought they would come in at 2.6. the cac 40 up around 0.5% and the ftse mib up around 0.3%. shares anyone tell down in after hours trading after the company's fourth quarter earnings missed expectations by a penny. the world's biggest chipmaker said it expects no revenue growth in 2014 as worldwide personal computer sales continue to slide. intel said it overestimated the extend of a recovery in spending

among its enterprise customers. patrick wang joins us now from new york. patrick, a very good morning to you the fairly luke warm revenue forecast, is that what is concerning us most? >> absolutely. if you take a look at the way that intel has performed just over the past couple of months here, you can see that investors have been taking expectations higher and higher. they've outperformed the nasdaq, they have outperformed the market. it really started in late november, starting with some signs of rush orders for notebook. over in asia, you know, that started driving excitement in terms of pc builds and things like that. when you take a look at investor sentiment going into earnings last night, i think most folks are looking for a healthy raise. we didn't get that. we goet got a pretty good beat on the fourth quarter. we got an inline first quarter guide and, of course, 2014 was

kept basically the same. as you mentioned, no growth. but as you mentioned earlier, i think that the biggest concern has to come down when you peel into the full year guide this year, when they down tick on data center growth, which is one of the nice growth drivers of the company over time. >> yeah. now, personal computer sales, we know, for a long time have been losing ground to tablets and smartphones, which the market has been slower to enter. is there a sign over that slowdown pc sales is going to taper a little bit to give them some room? >> yeah. you know, it's interesting. 2013 was really a bad year for pcs, right? so notebook shipments dropped over 10% last year. so, you know, as we went into the fourth quarter into q11, we were just getting to the point where pcs were stabilizing. so consumer pcs probably aren't going to drop that much this year. and that was part of the reason why you saw investors get a little bit more excited. in fact, you take a look back,

just over the past month, there were five upgrades of intel. basically, on that thesis that pcs weren't going to be as bad as before. that said, the one -- the rock for the bullish thesis for a lot of these investors out there had been data center, dcg, the data center group, which shifts into the cloud. it's been a very, very good performer over the last couple of years. last night, management dropped the ball saying, hey, listen, we're seeing enterprise growth below what we had expected. they lowered the full year guidance. so i think that that was a concern. >> and that must be a read through of other firms, right? there must be a read through. >> absolutely. i mean, they pointed to a couple of things. they said enterprise spending is weaker in the fourth quarter. in particular, they pointed to the government. so i think that's something that many of us have been concerned about. the debt ceiling tapering of government spending as we go towards year-end.

and it actually hit intel in the fourth quarter, right? on top of that, you know, when they said that when they were in the third quarter, things seemed a little better in the fourth quarter than they had expected. as a result, they still had excess inventory. so they overbuilt in the third quarter for actual demand. i think when you take a look at the markets today, most of the enterprise related companies probably are going to trade down in sympathy, just not on intel's comments last night. i can't imagine why you come out of that feeling great about enterprise spending right now. >> patrick wang, joining us from evercore partners, thanks for joining us. jim o'neill is still with us. it's interesting they said they were hurt by the debt ceiling in the fourth quarter. do you think there will be many others that will share that? >> when you look at the macroeconomic data, it doesn't look like there were big effects. but i think government spending will be down in the fourth quarter. certainly there were some

shutdown effects in there. overall, it looks like gdp growth in the forty quarter was at least 3%. right now, my forecast is 3%. if anything, the numbers might be adding up stronger than that. that comes after 4% in the third quarter. but i'm sure there could be individual cases. from a big macro perspective, it's not obvious in the numbers at all. >> the key here is it was interesting, down 6.7%. how much of that is around the participation rate? and then how does that feed through into any point soon anybody being able to ask for higher pay? >> well, i mean, that's been an ongoing debate. to the extent that the drop in the unemployment rate may have been exaggerated by the drop in the participation rate. the aging population, brings down participation rate over time. and you look at the details of the whole employment report and household survey, the employment number that goes into the unemployment rate, different from the payroll survey, is also what i would call implausibly weak. so that weakness offsets some of the implausible weakness in the

labor force. and the bottom line is the 6.7% up employment rate does seem to represent consumers. people ask do you think jobs are hard to get? and that number has completely lined up with the unemployment rate coming down. you ask businesses in the nfib survey, do you have job openings? that number is up to 23%. it's the highest since january 2008. at that point, the unemployment rate is 5%. so if anything, that survey is suggesting even more tightness in the unemployment rate. so you can quibble with the details, but the big picture is, there's been improvement in the u.s. labor market. and i think to the point where that becomes a focus. the labor cost numbers have been pretty stable. around 2% year over year per hour. but i think that's the next story in 2014. tho do those numbers start to move up a bit. >> gel, great you have to on today. look at that, 2013 forecaster of the year, your name appears

quite a lot on there. >> six times. >> six times out of the last ten years. that's pretty impressive, jim. it's a pleasure to have you on, jim o'sullivan joining us from high frequency economics. disney hopes the movie "frozen" will pick up two oscars this year. more right after this. [ male announcer ] this is the story

of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. ...and the little room above the strip mall off roble avenue. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪

new details emerging now about the scope and sophistication of target last month. court joins us for more with the details. morning, court. >> good morning to you, ross. the u.s. government issued a report to retailers and other organizations on thursday. outlining what may have occurred at target, which was hit by hackers during the holiday shopping season. between black friday and mid-december. last friday, target said as many as 110 million customers may have had information stolen when they swiped their credit and debit card toes pay for items in stores. they also later said information such as e-mails, phone numbers, addresses and names could have also been stole.. on thursday, the company agreed to testify about the incident at a house southbound committee hearing next month. a report was prepared by online security firm isight.

isight tells cnbc the code comes from a code written in russian. a part of the malware was written in russian and a program was originally published by a russian crime master. isite said the code was available online since last summer, so anyone could have bought and used it. the software was sophisticated, require ago high degree of skill and it's unlikely that it was limited to just one attack. investigators won't say how target's network was breached, but the reports are that the virus couldn't be detected by any antivirus software. it included features to hide that they were collecting copies of data from strip owes customer cards. american express said it had minimal exposure. the company said it has five controls in place on accounts

affected by the theft. american express is safer due to its closed loop network. the "new york times" reports neiman marcus computers may have been hacked as far back as july. and the breach wasn't fully contained until this past sunday. neiman said it publicly learned of suspicious activity in mid-december. and a programming note, isight chairman john warters will be on "squawk box" today at 7:00 a.m. eastern time. >> thank you for that. that's the latest on an extraordinary bug, really. let's talk about the oscars. the nominees for the 86th annual academy awards were out yesterday in los angeles. in the race for best pictures, "12 years a slave," "captain philips," "american hustle,"

dallas buyers club, and "the wolf of wall street." the best picture nominees also get a boost at the box off. zero dark made an additional 90% of box office growth after it was nominated. disney will be looking for a box office boost as it received six oscar nominations for three feature films and one short movie. the studio's smash hit "frozen" is up for best animated film as well as best song. senior analyst at media sternekie, thank you for joining us. how will the studio help disney? >> i'm sorry, can you repeat that? >> yes. how is the studio going to help disney with its earnings? >> well, really, the studio is around 8% of disney earnings. so it's not a huge driver of

profit. but i would say that this "frozen" sess ask is a huge success for disney. disney animation hasn't had a hit like this for years. all their big animated films were from pixar. so this is definitely a positive event for disney animation. >> and yet you say that you think contented estimates will have to come down a little bit. why? >> that's not because of the disney animation studio. that's because of i think people overestimating the revenue growth trajectory at the cable networks, which is the biggest operating profitability driver at disney. >> what about the parks? are they going to have to spend more in the parks? does that mean they don't get the margins that investors are expecting? >> you know, parks is a great business, but it's a mature business. it's not going to be massive margin extension unless you're coming out of a recession or an

event like '08, or 9 kind of scale. so i think it's a state of growing business. it's probably 40, 50 basis points margin expansion and a benign economic environment. and it's pretty predictable at this point, but it's hard to drive massive upside from the parks given that you need 30 million in edit for disney to move eps by a penny. >> and you've got a neutral rating. good to see you this morning. thank you so much indeed for inning us. >> thank you very much. recap of the headlines, shell shocks the market with its $1 billion profit warnings. forensic asia tells hsbc overstated assets and could face a capital hole of $1 billion. game over for nintendo. the japanese gaming firm warned on profit after weak sales. [ male announcer ] the new new york is open. open to innovation. open to ambition. open to bold ideas.

that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. and shift through all eight speeds of a transmission connected to more standard horsepower than its german competitors. and that is the moment that driving the lexus gs will shift your perception. this is the pursuit of perfection.

hsbc could be facing a capital yhold of more than $1 billion. a research firm told me earlier, the banking giant may have overstated assets by up to $92 billion over the last five to seven years. now, we've contacted hsbc. the banks declined to comment. but actually, you can clearly see that report having no impact on the stock. it's actually up 0.7%. a view that's not widely shared by investors. royal dutch shell, meanwhile, has stunned with a warning of a significant profit miss. the shares down around 2% this morning. they've been down between 2% and 3% so far during the london session. the oil major says high capacity and global refining conditions and current oil and gas prices will sorely dent fourth quarter figures. joining us is peter hauck. peter, good to see a$[yyou.

we know that they've had problems with production, getting volumes out. we know there's been weaker refining. but even so, a billion dollar sort of profit warning. is it the size that shocked us rather than the fact? >> yeah. i don't think it's the fact. i think a lot of this is a reminder rather than particularly new information. what's slightly different is sort of the interpretation of what is underlying and what sort of seen as an exceptional item which oil companies such as shell will normally strip out to allow analysts to get to an underlying number. what shell said previously is expiration rights which have been heavy in the last couple of quarters, they've already said that they were going to be pretty much at the same level in the fourth quarter. so i think a lot of peep's numbers. i think there's a twist in this one. that probably underlying about 1.7 billion and they said in the segment this morning that they would only strip out 0.7 of those as nonexceptional. so when you have those back,

yes, it's a disappointment. but rather than being the difference between 4.5, which was last quarter and the 2.9, we think it's the different between 4.5 and 4. >> what's the difference between the other oil majors? >> some of these are general. some of these i think would be shell specific and where they are in the management process at the moment. clearly in terms of refining, shell speak particularly of asia and europe. so that does impact all the integrated. but i think we're seeing some rotation out of shell into total because total just needed slightly more secure haven for the moment. so i think that's a general consideration. but i think what is really driving this one is we've got -- you know, shell announced a strategic review on its shale business. it's attacking its level of

unreenumerated capital. this will be the third quarter where there are opportunities to take significant write-downs. it's taking that opportunity. we think there's probably sort of within each of the businesses, you know, a lot of the controllers will be being cautious in terms of what they're share offering in terms of profitability at the moment. and all this is preparing the position for the new ceo, who will be on the core on the fourth quarter who really is going to get stuck in from the first -- from the results beginning the 1st of january this year. >> yeah. >> and i think less tolerance for write-downs next quarter. >> yes. if you're coming in, get all the bad news out even before you take the seat. that's not a bad way of doing it, is it? peter, thanks for joining us. u.s. futures have been trying to particular higher from about an hour or so ago. we were currently 20 points above fair value for the dow after we snapped a two-day winning streak yesterday. the nasdaq is currently, what, two points or three points off fair value and the s&p 500 is

two points above fair value. allen knuckman joins us now. it's been a topsy turvey start to the year, allen. when are we going to start a trend? >> well, i think we have established a trend. we made new highs. not in the s&p futures just yet. we're going to have another positive week. yields are going down. crude oil remains low. looking at the stock market, we have a 35% sell-off in the s&p. you can add that on to the upside breakout. another 2% high he. and we've seen this happen repeatedly over the last four years. every time it makes new highs, it goes that length of that previous sell-off. >> yeah. look, what's -- and what's the key right now for this to grind up? >> the key is just to step out

of the way. step out of the way and let the market keep going. we're getting good, solid earnings keep developing. the financials have come in and you saw new relative highs here. you saw bank of america perform very well. that stock was below 11 within the last 52 weeks. so i think the financials are leading the way. nasdaq, obviously, showing some great strength. i'm keeping an eye on apple. i know everybody focuses on the high price of apple. but you could see 605 here as the next target. if we get up to that level, then we can approach those highs once again. you have to think about apple. yes, it is a big dollar stock. take that zero off it. could it go from 60 to 70? certainly. when you put it in that perspective, it's not that big of a move in percentage terms. >> that would kind of be interesting if that was happening. the dollar sort of recovered all its sort of employment report losses at the moment. and we're back to levels we were at. you got a sense that it -- i mean, there's always this view

at the beginning of the year dollar is going to go stronger, it's going to become a growth currency. is it? >> i'm still very negative on the dollar in the long-term. from the standpoint that we are in a weak dollar policy for the last 25 years. and i think the safety of the dollar has gone and people don't need that any more. so i think you're going to see a slow decline. we're at a very important point in the dollar versus the euro. we're at the 1.36 level. we're right at that mid point. on a weekly basis, look for that to hold. you can see us fluctuating. from a risk/we ward standpoint, i'm a buyer of the euro here. i'm a buyer of the australian dollar. we have bullish diversion, meaning that we made new lows, but the volatility to make new highs. that's usually a very good sign of a bottom. >> that's a good call. we'll see what happens. alan, thanks for that, alan knuckman from trading advantage. that's it for today's edition of

"worldwide exchange." "squawk box" is coming up next. whatever happens, we hope you have a profitable day. [ cellphones beeping ] ♪ [ cellphone rings ] hello? [ male announcer ] over 12,000 financial advisors. good, good. good. over $700 billion dollars in assets under care. let me just put this away. [ male announcer ] how did edward jones get so big? could you teach our kids that trick? [ male announcer ] by not acting that way. ok, last quarter... [ male announcer ] it's how edward jones makes sense of investing.

welcome to "squawk box." general electric and morgan stanley get ready to roll out results. intel misses and offers a weak forecast. that stock is lower this morning and a new report says that the target breach appears to be part of a broader scam that affected several other retailers. it's friday, january 17th, 2014. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on

cnbc. i'm becky quick along with joe kernen and andrew ross sorkin who is reporting from new york today. andrew, you have a big show coming up. what's on set? >> we are here, becky, at the lowes regency