hello. you're watching "worldwide exchange." i'm ross westgate. the headlines from around the globe. it's all over, omnicom call after their 35 billion mega merger. apple feels the beat. the tech giant reportedly nearing a deal to snap up the head phonemaker beats electronics for a cool $2.3 billion. and no more waiting by the phone after lucent shares rise.

and a victory parade fills up moscow's red square as russia shows off its military prowess ahead of a weekend referendum in ukraine. we'll be joined by the former uk ambassador to russia. you're watching "worldwide exchange," bringing you business news from around the globe. hello. warm welcome to the final "worldwide exchange" of the week here on cnbc. equities weighted to the downside in europe. around about 7-3 decliners currently outpacing advancers on the dow jones 600. by the close of play yesterday the ftse was up around 43 points, the dax up nearly a percent. this morning, the ftse is down a quarter percent, cac current dune nearly 0.5% and the ftse

mib currently off 0.6%. the nikkei up 0.25%, fairly flat in the hang seng, the kospi up a third. china cpi up at an annual rate of 1.8%. the smallest rise in 18 months. producer prices down around 2%. the 26th straight falling producer prices. there is certainly scope and room for the people's bank of china to add more stimulus if it needs to. we'll be talking about that fairly shortly. now, some of the leading stocks i mentioned, petrifact, down after they warned its 2014 profit may fall by as much as 11%. this is because of a poor performance in its integrated energy services division. petrifact had pinned many of its medium-term growth projects on that.

alcatel-lucent, reporting a first quarter loss after restructuring costs weighed. but investors welcomed the fact there is turnaround with this program. the turnaround is scheduled to end in 2015. also today mattel down 2.5%. this is the steelmaker reporting a loss of $205 million in the first quarter. the world's biggest steelmaker by volume has said that shipments helped narrow that loss. they also cut the 2014 growth forecast for global steel consumption to between 3% and 3.5%. which hasn't necessarily helped them out. ten-year treasury-year-olds today, 2.6%, still not far away from the 2.57% three-month yield we hit. the currency market, the focus has been on the euro/dollar.

before mario draghi spoke yesterday, we were progressing toward two-year highs. mario draghi came out and said there is serious concern about the strength of the euro and they'd be comfortable taking more action. guiding toward action in june when we get the stock forecast out. euro dollar today, currently trade at 1.3830. dollar/yen, 101.40. and sterling with a 1.69 hasn't been able to breach through 1.70 either. aussie just a little bit weaker. that's where we stand at the moment on the currency markets. the biggest corporate story today is in advertising. it's all over, advertising companies omnicom and publicist have called off their $35 billion merger. this deal, if it had happened, would have created the world's

biggest advertising firm. it was dissolved because of the challenges around regulatory and tax issues. the boards of both companies have agreed to end the deal without a breakup fee. speaking earlier on cnbc, we have this verdict on the deal's dissolution. >> i think this deal was driven by ego issues and emotional issues. both ceos wanted to try and dislodge wpp from its number one perch. it was emotional, egotistical. it was eyes bigger than tummy. to be fair, gallic charm, maurice is a charming persuader, seducer. i think he seduced john renn into thinking this would be a good deal and he would ride off into the sunset. clearly when it came to nailing down the detail he wasn't prepared to do that. >> the thoughts of sir martin

sorrell. we are joined by ian whittaker. was it ego? >> i don't think it was just ego. if you take media buying, digital, and also both parties gain fondness. if you were omnicom, publicis. i think that's a little bit unfair. b but, again, it did allow both omnicom publcis to claim they were the number one global

agency. >> they lost notable clients. vodafone pulled their books away. others walked away as well. how much has it cost them? >> you do tend to get an ebb and flow with clients anyway. you do tend to get rotation between various organizations and groups. having said that, it looks like omnicom in particular was impacted by the slow progression of this merger. i think the risk for all agency groups, wbc within be careful what you wish for, is that now that you've had the two groups break apart, omnicom in particular, do they look to regain some of the clients and also regain staff that its lost. doing so, adopt a very aggressive policy on pricing and on wages with staff. don't forget, staff costs make up 60% of an agency's revenue space. with fees, there's also quite a large amount of competition on fees in the market anyway. the last thing any agency group

needs is an acceleration of that process. >> people looked at this as a potential defensive merger, technology driven trading platforms are increasingly becoming common. advertising is becoming much more commoditized. how much is the agency model in general under threat? >> well, i wouldn't say the agency model is under threat. if you look at the agencies over the past couple of years, they've been seen as one of the more structurally protected media space. you go back around six, seven years ago, there was a concern that google was trying to barge into the media space. most of those concerns have gone away. and although there is a concern about exchanges -- the impact of exchanges on media buying. i think the issue, though, over the past six months has been we've had uncertainty creep into this. you had to be tapering down

their annualized increase in margin guidance wasn't really a proper explanation as to what had changed from before. with agencies, structurally on balance, they think they're fine but there are perhaps one, two more questions than there were six to nine months ago. >> ian, i mean, right now from an investment point of view, it's still broken down. when you look at the agencies, look at what is left for publcis, whatever their favorite play? >> where holders are on both this, with the space, it is a space where one trend will affect all agency groups. we think the agency groups, quite frankly, are roughly similar. i think wpp, if you would look on balance, wpp would have the better strategic position. it has more exposure to faster growing markets.

there's a structural growth element because they are developed. the view would be that they have had the right approach in technology in recognizing it needs to have ownership of that technology. having said that, there's been doubt induced into the model over the past six to nine months. that will impact all players and at the same time, you still have pressure being placed by clients on fees. that is something that no agency group at the moment has been able to successfully push back against. the hope from this merger, one of the hopes from this merger would have been with one fewer agency group in the market, the agencies might have been a bit more discipline, both in terms of client fees and on staff costs. obviously those hopes have been dashed. >> fair point. good speaking to you this morning. ian whittaker from liberum

capital. apple, according to the financial times, says apple will pay $2.3 billion for the beats firm. beats was founded in 2008 by the rapper dr. dre. and music producer jimmy ivan who were inspired to make beats by dre head phones. after what they saw was poor quality head phones that come with the ipads and iphones. it's draft day for the nfl. but who is the top pick? we'll take a look at the first round analysis and what it means for the league. plus, berlusconi's get out of jail card. we're in milan. the ex-italian prime minister has begun his community service.

that is all to come. but first, china's cpi in april has come in below forecast, rising 1.8% on the year, the weakest reading since october 2012 and well below the 3.5% annual target set by beijing. factorygate deflation remains a problem. ppi in april falling to a negative 2% on the year. joining us now is chief economy igs at gre-- economist. this inflation number, how much of a problem is it? >> this shows that china's growth has slowed more sharply than people expected. if you look at the ppi deflation, it has been in the 26 years time, this suggests china's deflation risk has risen.

we think that it will prompt the pboc to cut reserve requiration now. >> by how much, do you think? >> we think at this moment they may want to try at least 50 basis points to inject some of the permanent liquidity into the economy to see how the economy responds. we think probably by year end another 50 basis points. we are forecasting 100 basis point reserve requirement ratio cut. as we know, china's lending rate is pretty much liberalized. and recently pboc has announced the prime lending rate. so we think that in order to anchor the market expectation, the pboc should also lower the prime lending rate issued by

commercial banks in china. >> interesting point. you talk about cutting the reserve requirement ratio. is that because you seem to be eluding there, lower money market, other money market rates haven't had much of an impact. >> indeed. if you look at the pboc's monetary operations since the beginning of the year, they have been using short-term liquidity injections into the money market. they also intervene in the foreign exchange market. we now have a depreciated exchange rate and lowered the money market rate. we've seen no evidence that lower money market rate has been translated into lower lending rate. for example, chinese firms still face weighted average one year lending rate at 7.18% for the first quarter.

chinese smes are still facing 10% to 15% lending rate. given that market has slowed to less than 5%, it suggests that perhaps the current monetary policy condition has been too tight. >> now, look, investors talk about, when they look at this number, they talk about the risk of deflation. i wonder whether that's overdone. clearly in this number, consumer price inflation, theful in that, producer prices, yes, that is negative but isn't that down to the weakness in global commodity markets as an overcapacity issue? >> that's true and indeed, if you exclude vegetable prices, the china's cpi inflation is lower at 1.6%. the downward commodity prices also has been pulling down china's ppi prices.

but what we have been observing that in q1 this year, if you look at monthly economic indicators, they were much lower, perhaps, than the 7.4 gdp growth tend to suggest on china's real economic activity. and even the central government is using some mini stimulus to prop up the growth but if firms cannot see profit margin rising, they will not be able to invest. and given investment is still a big chunk of china's growth engine, so that is a serious risk, we see, in the chinese economy. >> thanks very much for joining us. have a good weekend. chief economist for china.

we'll be in pretoria with the latest, after this. ♪ [ female announcer ] there's a gap out there. ♪ that's keeping you apart from the healthcare you deserve. ♪ but if healthcare changes... ♪ ...if it becomes simpler... the gap begins to close. ♪ when frustration and paperwork decrease... when doctors are better connected... when grandparents get to live at home instead of in a home... ♪ ...the gap closes even more.

♪ and you begin to live a healthier, happier life. ♪ so let's simplify things. ♪ let's close the gap between people and care. ♪

you're watching "worldwide

exchange." >> south africa's ruling anc party has taken a clear lead in vote counting and getting a re-election for presumably chris zuma. chris, how long before we get the full results? >> i think it will be a few more hours yet. just over 5% of the vote left to be declared. the interesting thing is the anc, may be winning the election by a street, is flirting with its worst ever performance in the polls. now, the worst ever performance up to now was in 1994 when anc got 62.4%. right now they're standing on 62.42%. bearing in mind there's a lot of opposition votes coming in from the areas yet to be declared, there is a chance that it may

drop a bit further and even though as i say, the anc will win quite handsomely, it will still go down as their worst performance of the polls. >> what would be behind the rise in the opposition vote? clearly it's the first election we've had without president nelson mandela still being alive. that's a fact. we also wonder whether we're seeing an increase in left wing side of politics getting support? >> well, i think there's a lot of dissatisfaction with the way the economy is being run. there have been service protests, hundreds upon hundreds of service protests, particularly around johannesburg where you have abject poverty. i think a lot of people are asking questions about the way the ruling party is ruling the economy, there's been questions about scaring off foreign investors. these are the things that are coming up. but also a lot of people born

free now, they didn't grow up in the struggling apartheid days. they look at it now, people are making their own choices. you have to look aside from the eff who have taken quite a slice of the vote with a million votes straight off the bat. they have the d.a. which was seen as a white middle class party. and now, it's getting more and more black support, black middle class people are voting now. so it's a changing time. i think that over the next two elections, the anc will face quite some stiff competition. >> i suppose the question is whether this result means they actually start to change some policies. >> well, i haven't talked to a lot of politicos here over the last few days. the feeling is, actually, that it's going to be business as usual. they think the victory and the fact that priz jack -- presiden

jacob zuma will continue will be viewed quite well by international business. they say policy hardly changed since mbeki's day. the one thing i'm picking up here, speaking to people inside the anc, they've been told by the many men in the world in the global economy, if south africa heads sharply to the left, nationalization, socialism, all bets are off. all investment is off. i think that the anc is quite clearly heeding that call. i think it's going to go more towards the center if anything else. >> chris, thanks very much indeed for that. good speech. chris bishop joining us from pretoria, the site of the main election counting area. some other corporate news. iag has beaten forecasts for the first quarter with a narrow net loss. the firm says the turnaround at its spanish iberia unit is beginning to take effect.

aig said cost cutting would give a boost to its 2014 operating profit putting it on track to meet analyst expectations for the year. losses are narrowing over at alcatel-lucent. they report a first quarter net loss of 73 million euros, from 350 million a year ago. they have welcomed the progress on group's turnaround plan which includes cost cuts as well as the removal of unprofitable contracts. a bit of a different story over at telefonica. it missed expectations. they posted a 23% drop in net profit for the first three months of the year. numbers hit by weaker currencies in latin america. telefonica was hit by costs related to the sale of its check business last year. and shares in hedge fund manager also under pressure, the

firm said it took in $2 billion worth of net new money in the first group, though man group warned the environment in this period particularly challenging, adding march was a very difficult month. the firm said it remains cautious on the outlook for asset flows for the rest of the year. that's some of the corporate news. whether it's boardroom battles or mega m&a, spats over the euro, the demise over investment banking, we've covered it all this week. let's take a look back at some of the highlights. >> if necessary, we can adjust our monetary policy without hesitation. >> i don't think political influence on monetary policy is very wise. so i'll leave it at that. >> i think it was a very solid quarter. we were profitable in all businesses, in all regions. >> generally you don't get invited on boards if you think you have a person that actually

loves a fight. >> if there are new elements in this proposals, should it be an alternative offer, decisions or improvements of existing ones? >> you say that in 20 years people would still use a phone, maybe not. in 20 years from now, i'm quite convinced that people would still drunk dom perignon. >> good thing about being a diversified group, we talked about the benefits of diverse fiction. it shows its value in situations like this. >> my favorite quote is whatever happens, people will still drink dom perignon.

how long can president putin ride this latest wave of patriotism? we'll be joined by tony brenton, a former british ambassador to russia, in just a few moments.

you're watching "worldwide exchange," bringing you business news from around the globe. the headlines from around

the globe, it's all over, publicis and omnicom call off their $35 billion merger, citing differences in management and regulatory hurdles. apple feels the beat. the tech giant reportedly nearing a deal to snap up head phonemaker beats electronics for a cool $3.2 billion. no more waiting by the phone for alcatel li kcatealcatel-luc. the loss narrows in the first quarter. and a victory parade fills up russia's red square as russia shows off its military prowess ahead of a weekend referendum in ukraine. we get the latest from a former british ambassador to russia in just a moment. it's an hour and a half into the trading session in europe. equities here are down slightly after gains yesterday. the ftse 100 during the session

yesterday up 43 points, 0.6%. we're down a quarter percent as is the xetra dax. the cac current is off half a percent, a little bit more for the italian markets. ten-year treasury yields, 2.57% was the-year-old we hit last week around this time, a three-month low. haven't moved an awful long way off that. and on the currency markets, the big focus on euro/dollar, ahead of draghi speaking yesterday, we inched towards a 2.5-year half just below 1.40 on the euro/dollar. we are comfortable about taking more action. right now, the euro currently trading at 1.3822. sunday's independence vote by pro-moscow separatists in eastern ukraine is going to go ahead despite russian president

vladimir putin calling for it to be postponed. this is the russian president oversaw military exercises involving the country's nuclear forces. according to the kremlin, the maneuvers were planned back in november. vladimir putin said the exercises were necessary to counter the threat of fascism. >> translator: there's still many challenges and threats in the world. in europe, as you know, here and there, nationalism has raised its head again, the same one that brought the rise of a fascist ideology. the example of our neighbor, brotherly nation of ukraine shows the irresponsible politics brings many losses and problems. yesterday, as you know, i had productive talks with the president of the swiss con federation, the acting chairman of the osce. and exact steps were outlined for activating the efforts of the osce with the goal of de-escalating tensions in the ukraine. first of all it is important to have an equal dialogue between the current kiev government and

the representatives of the protesters in southeastern regions of ukraine. >> president vladimir putin. what is the latest in donetsk? joining us is kyra simmons. has the situation over the last couple of days improved or deteriorated further? >> reporter: i think the answer to that, ross, honestly, is that the situation has stabilized a little bit. today is a really tense day. as you rightly point out, this is victory day in yaushg and russia, the most important day for both those countries that were both parts of the soviet union in the calendar because it is a celebration of the victory, world war ii victory over the nazis. you mentioned there the parade in red square. here there are demonstrations taking place across eastern ukraine, tense moments while the civilians come out to celebrate. you're also seeing the militia out parading and making their point. so it's going to resonate

highly. we'll see if there are clashes through the day. there was gunfire overnight here in donetsk. but there are continuing tensions but not the way we've seen, perhaps even just a week ago. meanwhile, in the crimea, there is some suggestion that president putin may turn up there for this important day. so that would be symbolic. the problem, ross, of course, is that this tension in ukraine tends to pulsate. we get moments of real concern, clashes, then it eases off and people relax a little bit, then it comes back again. the reality is that ukraine is heavily divided, much of this eastern area of ukraine is now being run by those militia, the tv station here in donetsk was occupied by them overnight, yesterday. and there are other buildings, symbols of authority of the ukrainian government that have been taken over by this militia in various places.

how you overcome that, how kiev re-introduces its authority, that's a difficult question, without the country descending into some kind of a civil war or dividing. >> kyra, thank you for now. that's the latest from donetsk. joining us with his thoughts, tony brenton, on the line from cambridge. mr. brenton, thanks so much indeed for joining us. >> pleasure. >> how delicate a situation do we have at the moment? how far away are we from the potential of a civil war? >> obviously in ukraine itself, the situation is still pretty tense as your correspondent has just said. there's regular outbursts of fighting. quite a lot of people have been killed. my instinct is that the russians are trying to get the temperature down. putin on wednesday said that he did not support this independence referendum in donetsk on sunday. the rugs have not really retaliated against western sanctions. they haven't turned off the gas. putin didn't mention ukraine in

his speech on victory day in moscow today. my feeling is, they are trying to get into some sort of discussion process with the west to find a way out of this. >> and yet, the referendum is going ahead. there is an expectation, i guess, in the east of ukraine, certainly within russia, that if tensions flare, putin would step in to help the russians in that part of the country. is he losing control? how does he roll back from what has been an aggressive stance? >> two separate points there. the west has accused putin of fermenting the problems in east ukraine and running it. what is going on in east ukraine is largely spontaneous, driven by the overpopulation and has overtaken what the russians want, the disagreement between saying he doesn't want the referendum and the referendum

going ahead is a clear illustration of how these people are out of his control. the second important point, russia has no interest in inv e invading eastern ukraine or taking over eastern ukraine. there's a pro-ukrainian problem there, he would be acquiring a bankrolled place. he does have concerns about the way ukraine functions but he doesn't want to get involved militarily in eastern ukraine. >> how do we get to a point where we can get geneva back on track? what does russia have to do, indeed, what does kiev and the west have to do? >> well, the answer to that is that we have to stop shouting at each other. a big problem at the back of all this, normally when you have a diplomatic issue of this sort, obviously governments have to take hard positions in public. you establish a private back channel line of communication, which enables you to find common

ground. the real core problem, mechanical problem, is the united states and russia don't have such a channel. putin and obama barely speak to each other. kerry has been distracted. lavroven is in the putin's inner circle. so the back channel contact which ought to be taking place haven't been. with putin's signals now that he want tos calm things down, the americans have slightly responded to those signals, there ought to be an opportunity to begin to establish that sort of back channel contact which then would enable us to find ways of de-escalating. >> you focus as a u.s./russia problem. is the eu have no role to play here? >> europe does have a role to play. germany is the other key nation. germany is obviously in close contact with the russians on a number of aspects of this problem, including the sanctions point. but russia really doesn't take europe seriously on security matters.

and the core issue with regard to ukraine is a security point. it's whether ukraine slips into nato and adds to what the russians see as their encirclement. if the u.s. could get into this conversation about that with the russians, could re-assure the russians and give them the guarantees of what they're looking for at that point. then the temperature could go down significantly and quite quickly. >> tony, good to speak to you. thank you very much. tony brenton, former british ambassador to russia. still to come on the program, berlusconi's get out of jail card. we head to milan as the former italian prime minister begins his community service.

♪ ♪fame, makes a man take things over♪

♪fame, lets him loose, hard to swallow♪ ♪fame, puts you there where things are hollow♪ the evolution of luxury continues. the next generation 2015 escalade.

you're watching "worldwide exchange." the abduction of hundreds of nigerian school children continues to overshadow the world economic forum in africa with the nigerian president goodluck jonathan vowing to conquer the boko haram terrorists. we go to abuja. the nigerian government has come under some criticism for its handling of this.

how is the leader of nigeria and the president responded? >> reporter: the president goodluck jonathan of nigeria is standing strongly in garnering support for the missing girls. it certainly has become a priority here at the world economic forum and economic discussions are being shadowed by the missing girls, ross. just giving you the latest update, it appears or allegedly the girls have been broken up into smaller groups and have been sent into chad, niger and cameroon. fbi agents are already on the ground here in abuja, offering their support to the nigerian government and i believe french intelligence is also on its way. at the forum, the finance minister, nigerian finance minister, is championing the cause for the missing girls and many delegates here are using

the hash tag bring back our girls. the nigerian government still has an award of 310,000 u.s. dollars for any information leading to the safe return of the girls and the nigerian government officials here believe that there is a breakthrough imminent. with me now is colin common, the partner managing director of the goldman sachs sub-saharan africa. if you invest money in africa, given the latest situation, are you going to get it out? >> yes. the unfolding human drama you've just described is of great concern and will be a test for niger nigeria's security establishment to get on top of it. directionally, over time, africa's overall macro political stability has improved dramatically with the formation of democracies, multiparty democracies, much greater stability and underlying economic growth that is fundamentally positive. >> give me an update on the depth and breath of the capital

ma markets as you see them. >> the activity that's going on, trying to finance companies that are growing. bear in mind, africa is 15% of the world's population but 3 press of the gdp. it's growing at 6.5% over the next 20 years. and with that it's going to require huge amounts of equity and debt financing. unfortunately, the equity capital markets only really exist in south africa of size and liquidity. the other markets have a huge amount to develop, not unlike china did 30 years ago. it's really important that the debt and equity markets develop. goldman sachs issued a bond, for example, for one of its nigerian banks, $500 million. there's a lot of sovereign activity, corporate activity going on in financing this growth. >> what is the pipeline for m&a look like? >> m&a is always going to be lumpy. you know, there's a lot of m&a going on around south africa. really companies are developing.

you don't have many 24 billion market cap companies outside of south africa in these markets. there are a handful of multibillion market cap companies. this is really medium and small companies that are developing fast that require the financing. having said that, you know, brazil, india, china, the sovereign wealth funds, private equity groups are extremely active. we see a mix of the m&a, financing, underwriting activity that i've spoken of. >> the south africa election results, the uncontested results are due out shortly. currently, anc sitting at just over 62% and the d.a. at 22%. are you satisfied or other businessmen satisfied with the outcome of what we're about to see in south africa? >> i think it was predictable. and i think where we're going now is really a question of what south africa and the anc administration does with its fifth term. it's really important that it's the formation of the cabinet is

the best in class of people. the generals and the foot soldiers who are going to administer the next five years implementing the national development plan, dealing with the twin problem of economic growth on the one hand and inequality and poverty on the other. >> for more of the discussion here, one of the biggest opportunities i'm seeing is the power environment, the energy poverty we have here with the stat that most countries are losing between 2% and 5% potential annual gdp growth. >> this is the rub. if you look at nigeria, the vested interests that want to see the diesel continue, high cost, versus the low cost generation is the tussle that's happening in society. we have to see power generation multiply many times over in nigeria but they have to get the societal dynamics right to deliver that for people. >> good to catch up.

he's the partnering managing director of goldman sachs sub-saharan africa. >> thank you. that's the latest from abuja. we're had european banks reporting numbers in the past few days. many of them have been hit by weakness in one specific area, fixed income currencies and commodities or ficc is proving to be a weak spot for many lenders. take a listen to what some of the executives have been telling the channel. >> the combination of much greater capital allocation towards ficc activities and the state of the economy with the end of quantitative easing, tapering and so on, means that the outlook for ficc is quite challenged going forward. and we believe that that's going to persist for a number of years, which is why now is the right time to reposition the investment bank. >> unfortunately, our outlook in the last few quarters has proven

to be correct. i'm saying unfortunately. i would have preferred to have a better environment. it's still challenging out there, actually every quarter we see each other something new is popping up. i think there's a level of complacency in financial markets. clients are still risk adverse. >> the demise of ficc, people have been slightly overplaying that one. this is a huge part of the market, transformation of liquid credit into things that people can buy will be around for a long, long time. >> some of the thoughts we've had on banking. turning to italian politics, the former prime minister, silvio berlusconi begins community service today after last year's conviction for tax fraud at his media vision group. we have this report from milan. >> reporter: on friday morning, former prime minister silvio berlusconi arrived here in a home for the elderly on the outskirts of milan to start his community service following a

sentence for tax fraud last year. now, this is a home for the elderly that specializes -- in three, two. on friday morning, former prime minister silvio berlusconi arrived here at a home for the elderly in the outskirts of milan to start his community service following a tax fraud conviction last year. now, he will be spending at least four consecutive hours per week for the next 12 months here, taking care of the elderly affected by alzheimer's. he will take part in a morning program that deals with motor activities, reading, writing and playing games and he will be accompanied by specialized staff from the institution. he will still be allowed to travel back to rome from tuesday to thursday to continue his political activities, despite the sentence that was given to him last year, that carried an expulsion from the senate and a ban for two years from running

for any elections, he's still the leader of the biggest and most popular party from the center right. and, of course, he will allow him to participate in the campaign for the upcoming european elections. despite the centers and the community service, in fact, he's still quite popular. at least 20% of italians are prepared to vote for him for the european elections. but silvio berlusconi has also taken advantage of this liberty to -- saying that the sentence was monstrous and the community service decision was ridiculous. but the magistrate warned him if he continues to defimate, they will force him to continue his sentence either in the house of rest or in prison. for cnbc, milan. >> our apologies for the problems at the beginning of that report. joining us now with his thoughts is francesco gallietti.

nice to see you. berlusconi still the leader for italia. is he completely out of italian politics or is he still going to try and engineer something? >> well, berlusconi is a come-back kid. and even in the current circumstances, he will certainly try to make the most out of the current situation. he would in all likelihood try to turn his state of disgrace into political opportunity by showing how close he is to elderly people, always bear in mind that elderly people, retired people are always part of the electorate. my belief is that silvio berlusconi's tactics are overshadowed by a number of elements, like in general terms, berlusconi has never got to grips with his own succession.

so as long as there is no political legacy for the center right, many voters who previously voted for italia over berlusconi himself, are now turning, either to nonvote or to the five stars movement. and second, yesterday marked a day where we had a huge number of surprise arrests related to the international exhibit 2015 in milan and i believe that this will increase the sentiment of many voters vis-a-vis mainstream politics, clearly berlusconi will not benefit from yesterday's arrests. >> yes. >> and his community service beginning will be overshadowed by yesterday's arrests. >> yes. a former minister of his arrested on suspicion of helping a former party colleague flee

after conviction for association. how does that play into the euro elections? berlusconi flirted with being sort of an anti-eu candidate but he hasn't come out forcefully on that. >> no, not really. he made some outrageous remarks against germany, but i don't think that he is that much of an eu politician. there are other political forces that embrace anti-eu claims more vocally. i'm thinking of the five stars movement. but getting back to your question, where is the relation between the arrest and the european elections? well, there is one political force in particular that is saying that it is supporting, explicitly supporting public prosecutors, that is the five stars movement. what i see is an increasingly

bipolar system. we're back to a bipolar world of the only difference with what we previously knew is that it's no longer center right against center/center left. it's reformists, so those who are in the institutions inside and those who are radicals. who are opposed to reforms and want to bring down the current infrastructure architecture. >> francesco, good to speak to you as always. francesco galietti. just to update you on a couple of stories out of asia, in thailand, anti-government protesters are crowding the streets of bangkok asking the prime minister, yingluck shinawatra to leave quietly. the prime minister of the

illegal transfer of her security chief. the government of yingluck's partner is still in place, saying it is working towards an election on july 20th. they say the current government is controlled by yingluck's brother. redshirts are also planning a mass rally on sunday. and an employee of the national bank of australia and an official from the australian statistics bureau have been arrested on allegations of insider trading. according to the police, they made 7 million aussie dollars by trading on market sensitive information to deal with the currency. the police alleged that his friend took information to trade on the foreign exchange derivatives market. ahead of the u.s. open today, european equities are

down about a third percent for the ftse 100, xetra dax. cac current is off 0.5% as is the ftse mib. the ftse up 0.6%. the dax up 0.9%. the dow up 32 points, the s&p flat, the nasdaq off 0.4%, the first three-day losing streak in a month. this morning, as far as u.s. futures are concerned -- there we are. thank you very much. we are trading below fair value. not much for the dow, just around another 11, 12 points. the s&p is about a point below fair value. we'll get into apple a little bit later, reportedly in line to buy beats. plenty more to come in the next hour of "worldwide exchange." ♪ ♪ drivers want to go further with their electrical vehicles. but you can't take a trip from lisbon to stockholm if you can't plan and re-charge along the way.

the european commission is using cloud to make this possible. creating a single charging and billing network across 28 countries. so drivers can travel as far as they want to go and when they want to go. [ female announcer ] there's a gap out there. ♪ that's keeping you apart from the healthcare you deserve. ♪ but if healthcare changes... ♪ ...if it becomes simpler... the gap begins to close. ♪ when frustration and paperwork decrease... when doctors are better connected... when grandparents get to live at home instead of in a home... ♪ ...the gap closes even more. ♪ and you begin to live a healthier, happier life.

♪ so let's simplify things. ♪ let's close the gap between people and care. ♪ between people and care. ♪ here's a good one seattle... what did geico say the mariner? we could save you a boatload! ♪ foghorn sounds loudly ♪ what's seattle's favorite noise? the puget sound! ♪ foghorn sounds loudly ♪ all right, never mind doesn't matter. this is a classic. what does an alien seamstress sew with? a space needle! ♪ foghorn sounds loudly continuously ♪ oh come off it captain! geico. fifteen minutes could save you fifteen percent or more on car insurance.

this is "worldwide exchange," i'm ross westgate, the headlines from around the globe. it's all over. publicis and omnicom call off their $35 billion mega merger, citing management differences and regulatory hurdles. apple feels the beat. the tech giant reportedly nearing a deal to snap up head phonemaker beats electronics for a cool $3.2 billion. no more waiting by the phone.

alcatel-lucent, shares rise on the turnaround program, with losses narrowing in the first quarter. and pfizer may be facing a major tax payment if the firm's acquisition of astrazeneca goes through. you're watching "worldwide exchange," bringing you business news from around the globe. an a very good morning to you. if you've just joined us in north america, welcome to the start of your global trading day. we'll take a look at the futures later. indicated for a fairly flat start this morning. we spent the week talking about merger deals and the prospect of them happening. this morning we have news about one that is no longer going to happen. it's all over, advertising companies omnicom and publicis have called off their $35 billion planned merger. the deal, if it had happened, would have created the world's

biggest advertising firm. it's being dissolved because of regulatory issues. they've agreed to end the deal without a breakup if he. shares of publicis have been trading lower in paris. they're actually up 1. %. omnicom off slightly, barely marginally, off 0.4%. speaking of the conference call following at announcement, the ceo, said he's disappointed the talks had broken down. he said the tie-up was not a necessity for publicis. he said he's still considering acquisitions but that is not his sole focus. we'll have plenty more analysis on this over the course of the next hour. meanwhile, staying with the m&a theme, apple is reportedly close to a deal to buy beats electronic for $3.2 billion. if it happened, it would be the company's biggest acquisition ever. beats is the head phonemaker and streaming music operator founded

by jimmy ivan and rap star dr. dre. reports that apple has been looking for a subscription-based music service to complement it's i-radio ad based offering. analysts question whether beats is worth the price. joining us for the first part of this hour is daniel morris, global investment strategist at tia cref. a huge amount of m&a news out this week. what extra support is this providing for investors? i always -- once we get to huge amount of m&a deals, i always get the view we must be near a market top. >> well, hopefully that's not our view necessarily. you are asking yourself what will companies be doing with the cash they have, if one outlet for that is m&a, that's not necessarily a bad thing.

you don't really seeing it happening. you don't see the market overall valued too excessively. hopefully it will allow corporations to evaluate their earnings more efficiently. >> a lot of m&a deals are done at the wrong price. but it would be much better off if they bought these companies two years ago. >> in retrospect it's always a lot easier. >> what do you think right now about earnings expectations and where we stand in terms of the value? because clearly in the u.s., a lot of companies beating with profits but not doing as well against historic averages on top line revenue. >> right. so i mean it was a decent quarter if you look at the results. you did have earnings which you get inevitably to the degree that companies manage what analysts are expecting and always having to find a few pennies better than that.

it was all fine. that said, if you look at the forecasts for the full year, they are too optimistic. it's all the case given analysts forecasts. if those have to come down, that's on one hand a bit of a drag on the market. if analysts increase in their expectation, that will probably not be the case. you have modestly negative factors in terms of analysts lowering expectations, also if you look at corporate guidance that came out of the last earnings season, it wasn't all that optimistic. good numbers coming out of europe and, again, fundamentally strong earnings trends. it's fairly robust in the end. >> what is your view for the investment case with europe versus the u.s.? the rate of growth, the change is going to still be better in

europe. do you agree with that? >> well, a couple things to keep in mine. one if you look at the valuations between the two regions, neither one seems more expensive or less expensive than the other. they're both trading at a slight premium to their long-run forward multiples. not a big valuation gap between the two. if you look at earnings expectations and how those are changing, it really still looks better for the u.s. nonetheless, expect higher earnings growth in the u.s. than in europe. the trend over the last year in europe has been relatively flat. we done the have the top line revenue growth you'd like to see. you have low nominal gdp growth, low inflation. at the same time, it's fundamentally more difficult for european corporates to cut costs in the way that u.s. corporations can, because it's a more rigid if you will labor market. more difficult for european corporates to increase earnings so you don't see the same potential in europe, i think, as

you've seen in the u.s. right now. given that valuations are about the same, it argues for a preference for u.s. equities. >> daniel, stay there. we'll come back to you fairly shortly. let's remooned you where we stand ahead of the u.s. open with european equity markets. the ftse up 0.6%. 43 points higher, currently down 26 points, around 0.4% lower. the xetra dax, off 0.3%, the cac current off 0.5 as is the ftse mib at the moment. data out this morning, china's cpi in april, coming in below forecast, rising 1.8% on the year. the weakest reading since october 2012, well below the 3.5% annual target set by beijing. there's extras in there, food and stuff. when you take those out. when you strip those out it was even lower. factory-gate deflation still a problem, down to a negative 2% on the year. the nikkei 225 is up 0.25.

the kospi up a third. the s&p/asx, down 0.3%. we'll get response. the bond markets, keep your eyes on treasury yields. we hit a three-month low of 2.57% last friday. ahead of the nonfarm payroll report, 2.7%. the euro/dollar, we were marching toward a 2.5-year high. nearly up to 140. mario draghi came out and said the strength of the euro is a serious concern. we're very comfortable with taking meaningful action, point pg us really towards the june meeting. there is an expectation there will be some kind of action. what it will be is a fairly moot point. the euro did weaken a little

bit. still fairly higher. dollar/yen, fairly muted below 102 at the moment. still benefitting from safe haven flows and issues and stresses surrounding the ukraine as well. where are the u.s. futures with all of this going on? after yesterday's moves, we are currently below fair value, the dow ten points below fair value and the nasdaq is around about six points below fair value as well. this week, of course has been characterized by a bit of a divergence between the dow and the nasdaq. this week, the dow is up a quarter percent and the nasdaq down 1.7%. social, internet and small caps pulling down the nasdaq. it's struggling to maintain its 200-day averages. some technicians have been telling cnbc that now may be a good time to play this fairly cautiously. let's get back to daniel morris. daniel, what do you make of this divergence? obviously we've had some stocks

with big losses, twitter, tesla is off 11% yesterday as well. is there a play here? because of this divergence or not? >> i think people want to be cautious, you know, certainly anything in the social media space has a lot of fashion involved in trying to pick exactly what stocks will be the winners versus the losers. ittette goods pretty challenging. they'd want to look more with the underlying sector trends are across the economy and broadly speaking, technology, especially more in the business and hardware and business software space does look attractive. one thing to keep in mind if we go back to the question about what corporations will do with all the cash they have to the degree they start investing on the capex and trying to increase profitability and productivity, that should benefit that part of the tech space. there's possibility there. otherwise, i think just generally speaking, cyclical sectors look good, industrials, so on and so on. it's focusing more on the underlying outlook for the

economy. always thinking of allocations. >> i just mentioned the euro yesterday, you know, heading up towards 2.5-year high before mario draghi came in and spoke. what do you think will happen with the ecb? >> they're setting up a challenge for themselves, all this talk about all they're going to do but at the same time you wonder what really they can do given the constraints they operate under and how effective it's ultimately going to be. on the one hand it's good the ecb is trying to talk down the euro. but in terms of the market, it's going to be the fundamental drivers. we do want a weaker euro. it's taking longer than we thought. even if the u.s. is taperi tape. that supply/demand balance favors the euro in the short

term but you think ultimately that will turn around. you have stronger growth in the u.s. that should argue also for a stronger dollar versus the euro. we think that trend should re-assert itself. it just may take longer perhaps than the european exporters would like. >> have a good weekend. thank you very much indeed. daniel morris joining us from tia cref asset management. >> as far as the agenda in the united states is concerned today, here's a recap for you. we've got at 10:00 wholesale trade data due out for march. at 12:00, the dallas fed president, richard fisher will be speaking at an event, the usda also releases its monthly crop report, known as wasde, w-a-s-d-e. also on the agenda today, ralph

lauren and bloomin' brands, owner of outbak steakhouse. pfizer could cut its tax bill by millions if it could buy astrazeneca. shareholders would face a major hit if the deal goes through. shareholders with stock in taxable accounts would own capital gains when shares are converted into stock of the combined company. pfizer says it's aware of that which is why it mentions it expected shareholders would face a taxable event in a press release last week. that will give shareholders something to think about. gap's april same-store sales rose 9%, well above analyst forecasts, thanks to an 18% surge at old navy. the gap's been one of the few bright spots in retail as many other chains have lowered their forecast, citing heavy

promotions and weak traffic. gap managed to post higher same-store sales for eight straight quarters. pretty good performance compared to the rest. the stock up another 4% in frankfurt trade. and still to come, south africa looks to be ruled once again by the anc. early suggestions saying that two out of three voters will re-elect jacob zuma. the latest from pretoria, after this. gap out there. that's keeping you from the healthcare you deserve. but if healthcare changes, if it becomes simpler... if frustration and paperwork decrease... if grandparents get to live at home instead of in a home... the gap begins to close. so let's simplify things. let's close the gap between people and care.

you're watching "worldwide exchange." the headlines, plans for the biggest advertising firm is off. apple could be looking to pump up the volume on its streaming music business, they're reportedly looking to buy dr. dre's beats. and pfizer could cut its tax bill by picking up astrazeneca. but shareholders could foot the bill if the deal goes through. south africa's ruling anc party has taken a clear lead in the vote count, indicating a likely win for the party and re-election of president zuma.

we are joined from the nation's capital in pretoria. chris, looks like mr. zuma is in. what's the latest and what's happened to the share of vote compared to previous elections? >> well, there's around 4% left to be declared, around 800 stations. that should take one, maybe two hours to come in. then there will be more checking and verifying of the results. so hopefully there it will be sometime this afternoon. you can never quite say. sometimes these things push over to the next day. the anc keeps dipping below that 62.4 level. as i mentioned in the earlier bulletins, the worst performance ever was 62.6, which was in 1994. one good thing that's come out of the election is the

continuation of the government. anc will rule for another five years. the rand which has been suffering as you know, we're getting reports that it's strengthened by more than 1%, which, again, will be welcome news on the markets here if nothing else. it looks like no change and the inauguration set for the end of may. >> the first election of course since the death of nelson mandela. which undoubtedly, presumably, has had some impact, chris. >> yes. there were about 20 people that came in here to represent 20 years since democracy. the idea that the a in. c was born essentially of struggle and in many ways that struggle has been won now. there's a democracy here, there's freedom here. a lot of young people are i growing up and wanting different things. i think that that tra degsal support, i think it's going to dwindle as the years go on.

i think 2019 will be a contest. i think certainly election after that will be a very good contest. as you know, these things take time. the opposition is strengthening year by year. i think it will be more of a contest in the future. >> chris, thanks very much indeed for that. the latest from pretoria and the election. we'll take a short break. still to come, the nfl draft kicked off state side, two weeks later than normal. is that good business or are football fans going to suffer from draft fatigue? as we go into the break, a quick reminder of where european stocks are. decliners outpacing advance erss by around 7-2.

free hot breakfast options. hampton, enjoy our you did a great job. it looks good! ...then fuel up with double points or double miles on your next getaway. make every stay more rewarding and feel the hamptonality honestly, the off-season isn't i've got a lot to do. that's why i got my surface. it's great for watching game film and drawing up plays. it's got onenote, so i can stay on top of my to-do list, which has been absolutely absurd since the big game. with skype, it's just really easy to stay in touch with the kids i work with. alright, russell you are good to go! alright, fellas. alright, russ. back to work!

afghanistan, in 2009. orbiting the moon in 1971. [ 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. it's one of the annual spectacles of sport, it involves 32 teams and hundreds of players. the action doesn't take place on the field. the annual nfl draft kicked off last night at new york's radio city music hall. houston texans had the first pick and they chose defensive lineman jadeveon clowney from the university of south carolina. in all, some 256 selections were made across the seven rounds of the draft. of all the players in the nfl, nearly 70% were picked through the draft. only eight teams have made the

playoffs after picking the overall number one player although more than 100 of those drafted in the first round have gone on into being inducted in the football hall of fame. sports attorney and former sports agent robert bolland, academic chair and professor of sports management at nyu joins us from new york. robert, good to see you. do you miss the draft when you were an agent? >> agents typically hate the draft. everything that happens that day unless you're the first overall pick is bad. >> downhill, is it, after that? what do you think about the deal then that mr. jadeveon got? >> the deal that he's going to get, it's still to be negotiated by his agent, bus cook and of course the houston texans, will be around $25 million, maybe just under, and about 16 of that million will be guaranteed. he has achieved generational wealth off one night. >> yes. he's done all right. and will he be worth the money?

>> if he plays up to his potential, certainly. he's one of the most talented players ever to enter professional football as a defensive end. he takes over the game and can take over any play. he's very exciting. if he plays to his potential, he certainly would be. >> aside from him, we lacked a definitive marquee player. quarterback -- his nickname is johnny football, johnny manziel. >> he was figured to go in the top four or five. he's a little bit small. there are questions about how his game fits pro football. he's a boom or bust player. but he waited around until the 22nd pick, about three hours in the ready room before the cleveland browns traded up to get him in a trade to add him in. stunning player and a lot of people in the league like him very much. >> yes but is it not so much about quarterbacks in the draft as owe posed to linesmen, you

said a lot of linesmen around. >> you can't play the game of american football without having strong defensive linemen, typically three or four players and strong offensive linemen, who are typically five players. that's a lot of numbers in the trenches in professional football. the draft is usually about quarterbacks. it's about the marquee player who changes the game and manziel was that player for a lot of people this year. he had knocks on him in terms of his size. he had to wait a long time. with each successive pick lost about $500,000 in signing bonus he'll never get back. >> that's painful to see him drift down there. >> very painful. >> we're two weeks later here with the draft. are they a good idea? are they going to make more money out of that? will there be more fatigue for the viewers? how does it work? >> the nfl doesn't seem to have any fatigue anymore. i was at a party at giants stadium that drew about 30,000

people last night to watch it. while the nba were playing playoff games. the nfl really can assert its dominance. this will be the most watched television cable show of the spring. and by moving into may, which wasn't totally intentional for the nfl, it was because radio city wasn't able to them, but by moving into may, they're in the ratings period month. this could be good business. as the nfl draft is the only major sports show that i can think of in recent memory in the u.s. that's televised simultaneously on two networks. the nfl's own in-house network and espn which pays mightily for it. >> they've done well out of it. robert, good to speak to you. enjoy your weekend. moving to the beat, apple to splash out $3 billion on beats electronics. white chocolate lovers don't like dark chocolate. milk chocolate lovers don't necessarily like dark or white. before we couldn't really allow

the consumer to customize their preferred chocolate. we needed the scalable cloud solution allowing them to see all 800 products and select what they are looking for. now there is endless opportunity to indulge. on car insurance. everybody knows that. well, did you know that game show hosts should only host game shows? samantha, do you take kevin as your lawfully wedded husband... or would you rather have a new caaaaaar!!!! say hello to the season's hottest convertible... ohhh....and say goodbye to samantha. [ male announcer ] geico. 15 minutes could save you 15% or more.

i'm ross westgate. the headlines from around the globe today. no deal. public publicis' ceo says he's disappointed that a planned merger with omnicom has fallen through. apple feels the beat. the tech giant reportedly nearing a deal to snap up head phonemaker beats electronics to are a cool $3.2 billion. no more waiting by the phone for alcatel-lucent. shares rise.

investors cheer progress in the firm's turnaround plan with its loss in the first quarter narrowing. and bracing for a hit. pfizer shareholders could be facing a major tax payment if the firm's acquisition of astrazeneca goes through. you're watching "worldwide exchange," bringing you business news from around the globe. very good morning to you. just joining us state side, european equities softer today. u.s. futures are also indicating we might head a little bit lower. again, we had a divergence between the dow and the nasdaq, yesterday, the dow up 0.2%, the nasdaq down 0.4%. it's first three-day losing streak in around a month. this morning, the nasdaq is 9 points below fair value and 3

points below fair value for the s&p and 18 points lower for the dow. similar losses for the xetra dax, the cac, off 0.6%. about the same for ftse mib. apple is reportedly close to a deal to buy beats electronics for 3.2 billion in what would be the company's biggest ever acquisition. although analysts have been questioning whether beats valued at $1 billion during its last round of funding is actually worth the price. the question is, what exactly is beats and why does apple potentially want it? this is a firm which was founded by the record producer jimmy ivan and the rapper dr. dre, d-r-e, is probably best known as

a headphonemaker. beats controlling 27% of the headphone market. beats also owns beats music, using algorithms to personalize your music collection and make recommendations. reports say apple has been looking for this type of model to complement its i-radio ad-base offering which launched last year. joining us with his thoughts, richard kramer, managing editor at arete research. does this stack up for you? >> it's hard to know right now. because it's all a rumor at the moment. in terms of why apple might look at a property like beats, clearly the world has moved from track downloads into subscriptions, bundled into monthly services. the way spotify has with

vodafone or bundling with at&t family plans. the other reason is, it gets for gotten in all the discussion, accessories are incredibly profitable. ask yourself what kind of margin apple makes on an ipad, smart cover or how much the material might be in the beats head set. so this could be a very profitable business for whomever. and if apple is able to broaden the footprint of where beats sells, these can be very profitable products. >> is this a sign here that apple's throwing in the towel on an attempt to create its own services? >> well, one of the things that you've seen is that itunes growth has slowed substantially. it's still a fantastic distribution platform for content as you saw with the beyonce album but it had 9%

year-on-year growth for apple, its lowest ever at 14% of its first quarter of the fiscal year and 24% the year before. this online streaming radio or music services business is incredibly crowded. you've got pandora with 76 million monthly average users, you've got spotify with 20 million to 30 million and up to 7 million paying customers. you have sony, and many, many more variants. it is an incredibly crowded space. it's clear that the old apple model of selling tracks for 99 p or the content over the internet is not the model of the future. >> is this the start of a broader acquisition strategy to build their slice of the digital life pie? >> well, i mean, apple has a nice slice of the digital life

pie in terms of the app store. in terms of content you have to ask basic questions. one of them that apple faces, this will seem like a paradox, is cash. they've had three terms of flat cash in the u.s. they need to use that cash to pay dividends and repurchase the stock which accounted for about half of the eps growth. netflix, they would have to pay substantial amounts of tax on the 117 billion of offshore cash that they have to get the money to make these sort of acquisitions. you might ask why they're not looking at spotify and maybe that wasn't for sale. i think the other real question is whether apple is still a disruptive company in this space. they're very aligned with the interest of content owners which want their content to be sold on a per track or per item basis. and you know, the guys who have

been disruptive are folks like the streaming music services are netflix that have offered a different set of economics and obviously with netflix, they are expanding into their own content as well. >> richard, good to speak to you this morning. thanks for joining us. managing partner at arete research. >> thank you. apple's newest iphone may hit store shelves sooner than expected. apple will unveil the iphone 6 in august. the new version will have a 4.7 inch screen with a bigger screen set to arrive in september. plenty of other m&a news, advertising companies omnicom and publicis have called off their planned $35 billion deal. the merger would have created the world's biggest advertising film but was dissolved because of regulatory challenges and tax issues. the boards of both companies have agreed to end the deal without a breakup fee.

the publicis ceo said he was disappointed to see the talks break down but said there were some differences between the firms. however, he said the tie-up was not a necessity for publicis or omnicom. he said he's considering acquisitions but this is not his sole focus and he'll outline a stand-alone plan for the firm with the second quarter results. speaking earlier, sir martin sorelle gave his verdict. >> i think this deal was driven by ego issues and emotional issues. i think both ceos wanted to try and dislodge wpp from its number one perch. it was emotional, egotistical. it was also, as i say, eyes bigger than tummy. to be fair, gallic charm, maurice is an extremely charming persuader, seducer. i think he seduced john renn into thinking that this would be

a good deal and that he would ride off into the sunset and clearly, when it came to nailing down the detail, he wasn't prepared to do that. >> as far as both companies stock are concerned, not a huge fallout. publicis group outperformed the market, omnicom just off 0.4% in frankfurt trade. sunday's independence vote by pro-moscow separatists in eastern ukraine will go ahead, despite vladimir putin calling for it to be postponed it as the russian president oversaw military exercises involved in the country's nuclear forces. according to the kremlin, the maneuvers were planned back in november. kyra simmons is nbc news foreign correspondent, joining us from the city of donetsk.

the referendum is going ahead, despite the fact that president putin said he preferred if they weren't. >> it's not -- it's pretty tense to be honest. we've just been watching protests march by, hundreds of civilians marching with russian flags, shouting "russia, russia." behind them, a flank of militia armed in military uniforms fatig fatigues, walked by, marched by, actually. we can hear from here the protests gathering strength just down the street outside the city hall where that building has been barricaded and being run by the militia for the last week before. and then that same scenario is playing out in various places across the eastern ukraine. we've heard about gunshots fired where the ukrainian military is

said to be trying to take back control of a building there. that interfax report. mostly, as you say, it is these demonstrations are taking place across eastern ukraine, marking this very important day in ukrainian and russian history, marking this victory day, victory over the nazis. so it is at the same time we're seeing the traditional parade in red square, in moscow. it is a very tense day. we'll see what happens by the time we get to the end of this. that referendum on sunday will still take place. i suspect that will be a vote in favor of independence. we've seen the ballot. it does talk about independence for this part of the country. which leaves you wondering with all of this, how difficult it's going to be for ukraine to reunite to get past this and not to split. >> indeed. kyra for now, thank you very much. nbc's kyra simmons. still to come on "worldwide

exchange," pfizer shareholders could be facing a major tax payment if the firm's acquisition of astrazeneca goes through. we'll find out why, coming up. with every stay at hampton, enjoy our free hot breakfast options. you did a great job. it looks good! ...then fuel up with double points or double miles on your next getaway. make every stay more rewarding and feel the hamptonality that's keeping you from the healthcare you deserve. but if healthcare changes, if it becomes simpler... if frustration and paperwork decrease... if grandparents get to live at home instead of in a home... the gap begins to close. so let's simplify things. let's close the gap between people and care.

the annual company retreat. planned, as usual, by this guy. nature lover... people person. ♪ and you put up with it all... because he also booked you a room... at this place. planet earth's number one accomodation site: booking.com booking.yeah! you're watching "worldwide exchange."

and a recap of the headlines. the plans to create the world's biggest advertising firm is off as the publicis and omnicom deal falls through. apple could be looking to pump up the volume in its streaming music business, reportedly looking to buy dr. dre's beats. and pfizer could cut its u.s. tax bill by picking up astrazeneca, although shareholders would ultimately foot the bill if the deal went through. pfizer's pursuit of astrazeneca may carry a major tax incentive for the drugmaker but the company's shareholders may not be quite as lucky. cnbc's hampton pierson has more for us out of washington. there's a little line in the sand here, potentially for stockholders. >> as in business and in life, ross, it's always about the taxes. here's what we've got. pfizer could cut its tax bill by hundreds of millions of dollars if it can land astrazeneca.

but shareholders could face a major hit if the deal goes through. "the wall street journal" is reporting this would stem from a little known provision in the u.s. tax code that's triggered when u.s. companies buy an overseas firm and relocate there. it's what's known as a tax inversion. shareholders with stock in taxable accounts would owe capital gains when those shares are converted into the stock of the combined company. shareholders who hold stock de owe taxes as a result of the deal. pfizer said it is aware of this, which is why it said that shareholders may be exposed to a taxable event. pfizer has 6.4 billion outstanding shares and 27% of those appear to be in the hands of individuals versus large

institutions. the uk's biggest medical research has major concerns about pfizer's bid for astrazeneca. they are raising doubts about pfizer's commitment to investing in britain and says astrazeneca is critical to the country's science base. now, two u.s. democratic senators, ron wyden and carl levin are considering legislation to prevent companies from doing tax inversions, widen who shares the senate finance committee wants to make it harder for u.s. firms to move their headquarters abroad to lower taxes. he wants to increase from 20% to 50% the amount of stock a foreign company must own in a u.s. rival for an inversion deal to legally take place. "the wall street journal" is reporting astrazeneca's management is hitting the road in europe to try to convince investors to resist pfizer's advancers. executives were in sweden thursday as part of a week of

meetings. swedish shareholders have about 10% of astra stock. u.s. investors hold between a fifth and a half of the company. we'll end where we began. it's all about the taxes. ross? >> oh, it certainly is. yes. it's worth remembering, astrazeneca was originally a uk and swedish merger as well. a big chunk of swedes have a say in that. hampton, good to see you. thanks to are that report. >> thank you. have a great weekend. >> you, too. gap's april same-store sales was up 9% which easily beat analyst forecasts, mainly thanks to an 18% surge at old navy. the company is also raising its first quarter earnings outlook. gap has been one of the few bright spots in retail. as many other chains have lowered their forecast, citing heavy promotions and weak traffic. gap, though, managed to post higher same-store sales now for eight straight quarters.

gap stock up by about 4%. meanwhile, missouri lawmakers are debating whether to ban automakers to sell direct to consumers. if approved, missouri would be the fourth u.s. state after texas, arizona and new jersey to impose such restrictions. the tesla ceo, elan musk has long argued car dealers are a bad fit for the company because they make more money from selling traditional cars than the tesla model s. tesla stock is off about a third of a percent in frankfurt. still to come, should you mess with a classic? we're not talking about cars here. mcdonald's is looking to spice things up with its iconic french fries. we'll reveal all, next.

when folks think about what they get from alaska, they think salmon and energy. but the energy bp produces up here creates something else as well: jobs all over america. engineering and innovation jobs. advanced safety systems & technology. shipping and manufacturing. across the united states, bp supports more than a quarter million jobs. when we set up operation in one part of the country, people in other parts go to work. that's not a coincidence. it's one more part of our commitment to america.

now, some of the other stories we're looking at today, timothy geithner will publish his memoirs next week. the ap got an advanced copy of the book called "stress test." in it he said he was looking to leave his post in 2010 but he stayed on until stepping down last year. now, mcdonald's is apparently looking to spice things up with its iconic french fries. "usa today" says the golden arches will start testing seasoned fry in california and st. louis. they come with packets of seasoning that you have to pour into a bag and shake up

yourself. i remember crisps like that about 30 years ago. mcdonald's debuted this concept in some of its hong kong restaurants nearly a decade ago. see whether that takes off. u.s. futures this morning are indicating a flat to softer start for u.s. equities. nasdaq is down by around 6 points, the s&p 2 points below fair value and the dow at the moment is some 12 points below fair value. the weakness is being characterized as divergence between the big caps and nasdaq. some technicians have been telling cnbc it may be a good time to play the markets fairly cautiously. let's get the view of michael girka. what do you make of this slight divergence? nasdaq off by 0.7% and the dow

up 0.25. >> it seemed there was a divergence between technology or the nasdaq itself versus the broader market looking a lot weaker. as we started to progress during the week, we're starting to notice, again, there is actually more pressure in the russell and now we're starting to see it even in the small caps. at the end of the day, the equity markets have an antithesis now that we could be in a top and more selling pressure coming in from the weekly basis. i think today is key if we see a broad sell-off that gathers momentum during the day. personally, i don't think we're going to see that and, again, my barometer always remains that ten-year yield. as we remain pegged on the needle at 260, it seems this is buying opportunities. >> we haven't done an awful lot. this time last yeweek we had a w after the nonfarm payroll

reports. we keep thinking in the future these valuations aren't sustainable. it's a long time to wait. >> well, i have been cautiously wrong trying to fight this, every time it seems as though the bearish trigger is about to hit. that's one of the reasons you're so good at cueing the commodities markets because right now it seems gold forms somewhat of a base here. it looks like it might shoot back up and hold 1300. for the same reason that nature of 99 on crude oil, at least here in the wti, same premise, it's finding a base. those both look solid from the buy side. could that be something on the broader markets to start making the equities look as though anticipation of the ukraine problems and the commodities themselves catch flight to quality? and for those reasons, equities turn around. today's close will hold something for me if we have something bigger on the horizon.

>> yes. on the horizon, what sort of events are you looking ahead to, mike? >> well, i think the housing numbers have been trickling in surprisingly solid coming in here. and for those reasons, i think right now at least i'd like to see if expectations cannot be met. i've been befuddled by the consumer confidence numbers and also kind of the inflation gauge. i know gdp was for me just a big bummer. so right now i want to see if housing -- i don't want to reference a bubble by any measure. i want to see if housing looks fundamentally which most traders believe is the start of a quirky market. that might lead into some of the profit taking in the equity side if we start seeing the misses. >> good to see you, mike. final game of the season by the way tomorrow forrist a -- asten villa.

coming up next, "squawk box" and the countdown to the opening markets state side. have a profitable end to the week.

good morning and welcome to "squawk box." apple is reportedly ready to spend more than $3 billion on beats. and that would be the company's biggest acquisition ever. advertising giants omnicom and publicis call off a $35 billion merger. and the nfl draft kicked off, so to speak, last night. >> with the first pick in the 2014 nfl draft, the houston texans select jadeveon clowney. defensive end, south carolina. >> it is friday, may 9th, 2014.

quarterback quarterback 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 will be here shortly. we'll have an nfl draft breakdown a little later this hour. first let's get to today's headlines. apple is said to be in talks to buy headphonemaker beats electronics. apple could pay as much as $3.2 billion for the company founded by dr. dre and music producer jimmy ivine. back in january, rubenstein was on set with us. he put on a pair and explained how he was learning