welcome to "worldwide exchange." i'm julia chatterley. these are your headlines. deutsche bank shares under pressure as it fills u.s. regulators. the new york fed has raised major questions about the bank's financial apportioning. bad weather in north america affects syngenta sales. as others keep a close eye on russia. >> a leadership position and we're calling for stability there, if not political,

certainly in terms of agriculture. tech giants dominate the earnings season in the u.s. apple gets a boost in strong iphone demand in china. now europe's space agency recommends all nights to israel be canceled following news of canceled flights in the u.s., as a rocket lands close to tel aviv's airport. >> your watching "worldwide exchange," bringing you business news from around the globe. a warm welcome to this edition of "worldwide exchange." the federal reserve bank of new york has accused deutsche bank, the u.s. operations, of inaccurate and unreliable reporting. that's according to the "wall street journal." they reportedly said the bank, quote, requires wide ranging remedial action and has made no

progress fixing previously identified problems, including shoddy reporting and weak technology. shares this morning under pressure as you can see -- actually, that's gsk we're showing you, deutsche bank earlier in the session down about 3%, but gaining back some of the losses this morning, too. david enrich will be joining us later in the showed and we'll discuss that. lots of earnings news out from europe today. disappointing figures out from abb. the firm missed expectations with net profit falling by 17% in the period. the engineering giant blamed a continued weak performance in its loss making power unit which it says would weigh on earnings in the current quarter. dutch painter axa mobile was boosted by decorative paints business in europe and in asia.

resolute cost cutting helped boost the bottom line. akzo says it's on track to hit targets, higher today by 3.9%. a strong performance in rail units help alstom. general electric snapped up that power unit for mon than 12 billion euros. the firm seas it sees revenue growth but stopped short of providing full year guidance. and syngenta blamed bad weather for a drops in sales in north america. the agricultural productsmaker reaffirmed its full year sales target saying emerging markets in america in particular, in fact, will help accelerate growth. carolin roth has been speaking to syngenta about those numbers. we'll get out to her live in about ten minutes time. access africa, find out why ratings agencies are starting to

consider ethiopia a investment destination. we're joined by a guest who has a market share warning for the connegligent. and iphone shares helps apple's earnings for its to launch its much anticipated smartwatch. plus, the price was not right. find out how close google came to acquiring spotify. now, a train carrying many of the victims of malaysian flight mh-17 arrived in the city as they made their way back to the netherlands. five cars containing 200 body bags reached the ary agreed to deliver the bodies to the netherlands. u.s. intelligence officials

found no evidence of russia's direct involvement after eu foreign ministers failed to deliver more sanctions to moscow. several ministers called for an arms embargo. france took back its criticism with its plans to go ahead and provide warships to russia. >> translator: the english in particular were very, let's say, cute about this commerce saying we would never have done anything like that. what i replied to them was that the same principals existed for everyone. i said to our dear british friends, let's talk about the financial sector. i am led to believe there are few russian oligarchs in london. >> the uk has approached tens of millions of arms exports to

russia. joining us on the phone is pola poland's foreign minister. we agreed to discuss the possibly of sanctions going forward. one could probably see that we could implement them right now because it seems like we make lots of threats with very little follow-up. >> i think the probability is quite high. the reason we didn't take the formal decision yesterday is because this is something reserved for the european council and the heads of government. but the european commission has a ready paper of targeted sanctions in the fields of all the ones you mentioned, just to say access to capital markets, defense exports and sensitive technologies, including in the energy field. and if the diplomates in brussels get the right instructions from their capital

cities, it could be introduced as early as thursday. >> the problem is that right now, if you look at the financial markets, they don't believe we're going to see stringent requirements or sanctions from europe right now. i don't believe necessarily putin believes we're going to do that, too. could we say here that the events of the last few days in mh-17 could have been avoided if europe had acted sooner? >> well, they could have been avoided if russia failed -- heeded our warnings and stopped the supplies of increasingly sophisticated and heavy weapons to the separatists who are actually coordinated by russian citizens. so the underlying cause of what happens is russia's stealth annexation of eastern ukraine. >> and as you call it, the stealth annexation of eastern ukraine, why do fresh sanctions

stop this if they previously haven't made a difference? >> the costs in crimea are considerable. we think above $30 billion over five years. eastern ukraine is three times bigg bigger. if those areas are under sanctions and we declare the people's republic a terrorist entity and if russia's borrowing costs rise, then hopefully president putin will make new calculations. . >> ambassador to the uk told me yesterday that putin is still supplying weapons to the rebels. we've got france looking to provide warships to russia. reports this morning that the uk hasn't stopped providing arms to russia, too, given the focus david cameron has given on pushing for tougher sangs here, he comes out looking like a bit of a hypocrite, doesn't he?

>> the machine of government always needs some time for decisions taken in the past. but make no mistake, the impassioned plea by the dutch or foreign minister yesterday, the reaction of public opinion to the inhumane handling of the crash site, the bodies of the victims and the relation that what russia is doing in eastern ukraine can affect everyone, has produced a change in attitudes and i think we will see practical effects. >> a change in attitudes even from the french who said this morning if we had some kind of embargo from them, it would hurt french more than moscow. >> well, france does have a problem. the current french president

inherited this contract from its pred set sesser. and i understand its consolation would be very expensive. but there are things france can do to show that it's committed to stopping the russian metalling in eastern ukraine. dwr we recently spoke to the polish prime minister saying that he was very embarrassed after a recording. i wonder whether you're similarly embarrassed by what happened there or do you stand by your metric particularly what we've seen in the last few days, a worthless relationship? >> i'm not grateful to you for raising an illegal recording of a private conversation. i'm not sure you would like your private conversations to be broadcast to the world. but yes, we are certainty that our major allies have put forces in our region to back up the

treaty guarantees with the ability to actually deliver on them. we want more of america in our country. >> thank you for joining us today. the markets have been accused of being too flippant on geopolitical tensions. however, our next guest says it represents only a fraction of economic growth. he also says moscow will look to avoid sanctions. joining us now from jpmorgan. >> putin has made comments about how he's trying to work towards negotiations, for the further escalation of violence. and i think as you mentioned in

your piece earlier, the market don't believe those sanctions actually come, especially from europe, coming off your nose to spite your face. especially in a economy that's so fragile at the moment. these are the considerations i think markets are putting on it and saying what's the possibility? what's the probability? the possibility of sanctions being very, very strong is quite low. >> we're still not talking about iran sanctions as far as arms are concerned, as far as energy is concerned. . >> the technology of energy. >> yeah. there's always a very, very high end. until you see something that's

going to either drive a huge risk, energy inflows to europe, that's why it's been nipent. >> as we said right now, central bank policy is still the key features investors are focusing on right now. yesterday, inflapgz numbers in the u.s., as far as the fed in particular is concerned, a benign or at least more benign reading there. a sigh of relief. >> another reason why you're not seeing markets react. you had central banks pushing out money which is reducing volatility. for me, the biggest risk in the market is technology, pricing in exactly how the u.s. will react, the fact that they're forecast to what they think up employment rates and what they think growth is going to be, a little out of sink with where the economy is going. we've heard janet yellen say

she's concerned about the equity market and the clear market. and they're going to remain quite dovish for a long time. and that's my risk. i think the data will change and similarly in a situation where they're supposed to raise rates. it hasn't been device and anytime you see a normalization of that policy, debt can create policy in the markets. >> is it a pot shot that some of the smart shots in the biotech firms, we've got small caps seemingly under a bit of more pressure yesterday. an underlying message there about where we are concerned with the recovery or -- >> yeah. i think it's the mid point in the recovery. i think the pressure in the market is now functional and investors enjoyed so much since 2009 in equities.

overall, we're looking and saying, is this going to continue? should i be worried about valuations? is it going to be a large correction? in between the rise a bit more, excuse me, as you're seeing it remain in place at least for the next 12 months. >> i think earnings in europe will be key for the european market this year. i think after many, many quarters, they haven't materialized. and so far, it's looking like there were supplies in the upside and support markets, provide -- for the market and help it go higher. >> it's the key quarter. this is the moment. anyway, great to have you on. >> thank you.

it's a weaker start to the seption this morning. right now we're seeing 6/4, greens to the red. you can see the ftse 100 relatively unchanged right now. german and french markets gaining between 0.4% and 0.3%. we're seeing this bounceback in the micex indegs, up 0.5%. as you heard from the polish foreign minister, not sure we're seeing the kind of concerns we should be seeing in the markets. what this is doing is giving a bid to the dollar right now. that's taking the euro/dollar down to eight-month lows. mario draghi will be smiling on

this level right now. 1.3466. the cpi readings this morning, taking some of the optimism out, 0.5% quarter on quarter. i'll point out sterling, too, some of the loans taken out of this. 1.708 at the moment. it will be easy to see some of the language of the cdc as far as the slack in the economy. that's europe. let's check in on asia. sri. what can you tell us? >> hi there, julia. we saw another record for the s&p 500 overnight, despite all the geopolitical turmoil that we've been seeing. but you're right right, the market seems to be relatively complacent. we are looking at the resilience in the markets here, easily constructed, especially in the greater china market.

the jakarta markets are one of the highlights for you. we are, i must say something have most problems. they haven't been updated. the jakarta composite was up on the election. jokowi was the outright winner of the poll. what we know now is that his main component, the ex special forces general for boa, is going to the constitutional court to challenge that election result allegation i allegationing wide pred numbers. israeli prime minister benjamin netanyahu has asked john kerry to help restore

commercial flights to israel after the federal aviation administration issued a 24-hour ban to carriers. the faa was respond to go a market strike about a mile from airports. the safety agency, the esra, says it strongly recommends airlines should begin operating from and to tel aviv. if we look at the situation, we have the justice minister saying the cease-fire is not near. i just wonder what else israel can do at this stage to try and bring hamas to the table. >> unfortunately, the only way to increase that right now is by increasing their warfare. israel is party to the negotiations secretary of state here, the secretary general of the united nations, everyone is trying to narrow the differences

between hamas and israel. but if anything, the statements of hamas and israel show if anything they're growing apart. israel believes that it needs to stop, and i said this repeatedly. israel believes it needs to destroy the tunnel network which has shown itself to be slightly strategic to israel. those secret tunnels built by hamas that lead into israel in order to attack israel from the rear. what they're seeing with these airlines, the foreign airlines canceling their flights to israel for at least 24 hours is that the rocket threat is a threat that needs to be finished with altogether before a real cease-fire can take hold, too. if anything, israel's threat is now expanding, needing to destroy those rockets. the world's largest crop chemicalmaker takes a hit from

bad weather stateside, but could syngenta faes further woes from russia? having the cloud allows us to rapid prototype a lot of ideas. being able to pay as we go was crucial for a start up. having to fork out a lot of money up front was risky. you can launch a feature really quick, and if the feature doesn't work, we haven't lost anything and we can have something up and running in days. and this would not be possible without the cloud. we are now supporting over 25 million users each month. ideas can be tried and tried again on the ibm cloud. the ibm cloud is the cloud for business.

syngenta is on track to hit its full year sales target, despite a prot from the back of poor weather stateside.

carolin is in basul speaking to the ceo. i guess there's some currency headwinds into play here, too. i want to ask you about cis in particular because that's strategically important for them, also, isn't it? >> it is. the cif region, which includes ukraine and russia, this is the company's third largest territory after the u.s. and brazil. yes, they have seen some significant fx headwinds for the likes of ukraine. but they have been able to off set that with pricing and this is why, in part, shares are trading higher today, slightly outperforming the rest of the market. not just in ukraine, they were able to offset some of the weakness in pricing, but also in other parts of the world. this is one of the key take aways from goldman sachs this morning. but coming back to russia, the ceo of the company, mike mac, that's his name, he found a certain message about russia. >> russia, cis is after the

united states and after brazil is the third largest territory. >> but not small at all. >> not small at all. we're headed for $850 million and a lot of countries all around the world. it's important territory and it has some good leadership position and a number of those cropses and we're calling for stability, if not political certainly in terms of agricultural. >> talks were called off about acquiring your company according to rumor. what part of that can you confirm? >> there has been talk about industry consolidation every year several times a year since 2000 when the last deal was done. this deal, industry consolidation, here we are.

>> we're going to go and talk with the analysts. in there, we have a particular chart that shows the growth of the dividend over the past year. 17% comp on annual growth. the cash is coming back to shareholders just as we said it would. and it's coming in the form of a dividend. the track record speaks volumes about putting our money where our mouth is been. >> there you go. the ceo on the speculation pretty mum. that bid would have valued syngenta at about $40 billion. in terms of the outlook rt fo rest of the year, that is looking better. now the focus is shifting back to north america. they're expecting to win back the market share and continue with positive pricing. that is why syngenta was able to confirm the guidance for the full year and that's pleasing investors this morning. jul

julia, back over to you. bank of england minutes r e rereleased any minute. stay tuned as we bring you the wires.

deutsche bank is under pressure. "the wall street journal" reports the new york fed has raised major questions about the bank's financial reporting. bad weather in north america rains on syngenta sales as the ceo tells us he's keeping a close eye on developments in russia. >> we've got some good crops in laip position. we're taulg calling for stability there if not political, certainly in terms of agricultural. >> tech giants dominating the earnings season in the u.s. apple gets a boost from strong iphone demand in china. and europe's air spacey agency recommends all nights to israel be halted. this as a rocket lands close to tel aviv airport.

we've got the minutes of the latest bank of england meeting out there. they voted 9-0 in july to keep interest rates on halt. we knew that already, it's something that despite the mixed messages we've received from the policymakers, they say growth is generally looking more short. weakness rages after unemployment becoming more striking. that divergence growing here and pointing that out in the minutes here. one view that the risk of a small rate rise in the economy

has rerese sereceded. the risk from a small rate rise is receding. despite the labor market unlacking the pace may be more relevant. so a number of comments right now from the minutes. joining us, jeffrey ewe. what are you saying here? >> i think after injecting the initial volatility into rate markets, the boe thought they were smartly taking a stoep back saying on balance it's still quite balanced. there's no preset timing. and by resting the two interpretations, probably they're distressing, we don't want to precommit to anything, especially the housing activity is quite interesting.

and given a lot of the investment that we've seen in the uk over the past few sources, it would be related to the housing sector, as well. so if that comes off without any obsessing factors, rebalancing the economy, sterling is not going to hate this too much. it's not going to like it too much, either, especially towards a risk environment, not very solid right now. >> an economic risks are surprisingly low. we're coming back to the idea of slack, this is something that we continue to discuss about the uk economy goes right now. they're saying the weakness we see in wages, given the inflation profile is quite striking. this is another conundrum for them. >> this is snippets for the

inflation report. are they goes to revise lower and acknowledge that the pace at which it's being closed is uncertain enough for them. i don't think this changes the markets. >> tightening would leave the economy vulnerable. any kind of policies options they're data dependent here. >> they are risk dependant, as well. the leading indicators aren't looking back late. if they have appear announcement and the fed, a decision coming up at the end of the month.

>> what's your view right now based on sales and weaker gdp. >> looking at uk figures alone, at least tactically right now. so if we see a recovery in risking and a lot of that is predicated like the fed and not marking it in any way, then we could see a pick up in cable again and maybe looking at 1.73 and 1.75. i think there's an acknowledgement that we've reached that valuation. >> particularly given what is more broadly the risk market. you can see say it looks pretty solid.

>> we see the actual fall and the dollar is rising. we vice president seen that in a while. >> great point. jeffrey, great to have you on. let's take a look at the european markets this morning. we did start the session in the red. we continue to act minor against the ftse 100 up 0.1%. the german market higher by 0.4%. the foreign exchange markets, very little reaction to sterling to those minutes right now underlying the importance for the data right now. so very much suggesting that right now with data dependance still 9-0 as far as the calls for future rate roises are

concerned. >> the corruption scandal in china and the strong sterling weighing heavily on its third quarter. carth rin, sterling has hurt them in the first quarter and even more in the second quarter. >> of course, we've had other elements. you've had decline in emerging clients, ceos hit in china. >> later today it is going to be questioning what is happening with the china scandal. that's something that could potentially lead to a substantial sign and, of course,

we also know now it's much sooner than we had previously thought and potentially that's gsk the world didn't quite investigate them as fairley as she should have done when they first emerged. >> what has come to light in the last few months is the bribery issue going back more than a decade. it's nog something you can perhaps draw a line under. we have the idea of what the charges are going to be. the this is something that appeared to be systemic for them on over a long period of time. >> it seems like straight talking kind of guy and doesn't seem, you know, to be a new being who was going to counteract all that negative

publicity. >> it is something that all of them do. >> it may be something that investors start banking and it is definitely still the right -- for this company. it's been very well received so far, but this may be one of the key tasks for his tenure. >> we'll have to watch and see. catherine, great to have you on. now, we have some big u.s. sterns reporting overnight, too. apple's third quarter profits rose 12% to $1.38 a share beating forecasts. revenues fell less than expected as sales in china surged 28%. apple sold 35.2 million iphones, up 32% from a year ago, shy of analyst estimates. ipad sales for the second straight quarter fell. apple is giving a wide range for fourth quarter revenue, $37 billion to $40 billion which is below analysts forecasts. shares are largely unchanged in after hours. right now, the german market up

0.3%. microsoft's fourth quarter profits fell 7% missing forecasts as the company continues to integrate the struggling hand set unit. on the core, the company says it ames to have nokia breaking even in two years. right now in the german market, higher by 1.6%. electronic arts first quarter profits just 36% as the company benefited from consumers buying video games for the xbox 1 and play station 4 game consoles. the company says it needs to improve the gain based on a

feature version. electronics arts trading in the german session lower by 2%. japan and mongolia have reached broad agreement on a free trade pact. makiko, tell us more. >> they will remove the 5% task that mongolia currently has on japanese vehicles within ten years. tariffs will be stopped at one. on the other hand, japan will immediately lift the 11% tariffs it has on items imported from mongol mongolia. talks have been ongoing since june 2012 and following discussions between japan and mongolia yesterday, the two sides managed to reach consensus and may sign the agreement

within the year. japanese exports in the company amounted to around $219 million last year and mongolia's cep is around 11.5 billion and is relatively small when compared globally. but it is rich in copper and rare metals and the agreement gives japanese firms eager to develop such resources. for mongolia, it's seen as a move to free itself on neighboring china and russia. that's all from the nikkei. back to you, julia. >> thanks. we looked like we had somebody walking in air just a few moments ago wind you. thanks a lot. elsewhere, stock market businesses and schools are closed today. the storm slammed into the island up to 1 is 55 kilometers per hour and creating 30 foot waves. it left 46 dead. the china food scandal is

widening. all as the allegations of the chinese based supplier companies such as starbucks, mcdonald's and kfc used old and rotten meat. the five detained were questioned and includes the company's quality manager. in asia, we'll get information from the reserve bank of england. also south korea will post its q2 growth figures at 8:00 and a few minutes after that, we'll get japan's june trade figures and hsbc will release its china flash pmi. on the earnings front, keep an eye out for the quarterly results from lg electronics and canon. access africa takes us to ethiopia. we leave you now with a preview

and we'll be right back after the break. see new two. >> what our people does for us and how this government performs. so i think it is not something which gives power to a government.

ethiopia was once known for famine and poverty. in may this year, the country received its first stop in credit rating from the top three credit agencies. it's a deaf nation you should be taking seriously. in a brand new show, access africa, we sit down with the ethiopian prime minister to find out. >> ethiopia's finance minister recently declared the company open to investment and tourism, undercoring the ratings report. as much as you may tout your results, there are other indicators and bench markets. doing the survey from the world bank where some important

feedback came through, showing weakness when it comes to investor protection, when it comes to registration of property, access to finance. you drop in those ratings compared to the year before. why are these setbacks happening at a time when you are pushing full force and trying to get more investment to ethiopia? >> what this says and what's happening on the ground to the contrary. >> so i think you're saying the world bank is wrong? i'm telling you the practice. i am not talking about -- i'm talking to you about the practice. you can see around the town and the city that a number of -- are coming up. but the one bank is writing something different. we put that on papers and what's happening on the ground is what we believe. >> so you disagree, you're saying you do not need to open

up these markets? >> not now. but our local sector flexes its muscle, then it opens up because they can compete. >> the local companies are not competitive at all. >> they are competing now. >> these industries, a lot of them, are run by effective monopolies. >> you know what happened? from our sectors, we indicate every year more than 6 billion -- to the railway sectors. >> so you have a clear position from an idealal point of view? >> of course. there is a stage of development in every country, including the united states, at every stage of connectoff, government had the skin and in the uk, at the early

stage of development of the uk, government has a strong hands. now they have matured already. they're asking that they forget that they started the same way we are doing now. so now, simply because of reagan and -- announced the development, it doesn't mean that they're going to take it now. because at the every stage of development, there is huge market cap where the private sector -- >> so the tag line then is ethiopia is open for business selectively? >> no. those sectors which we designated, mentioned, these sectors which we are going to wait for some time until the market is, you know, is freed. >> the first ever trade of access africa with that entire interview with the ethiopia prime minister will run tonight at 1 cycle 30 c he t and over

the weekend. don't forget to catch that. earlier, a train carrying the remains of many of the victims of malaysian airlines flight 17 arrived in khakiev. meanwhile, pro russian separatists downed mh-17 by mistake, that's according to the u.s. intelligence officials who found no evidence of russia's direct involvement. this comes after eu foreign ministers failed to agree new sanctions on moscow delaying any further action until thursday. several ministers called for an arms embargo. benjamin netanyahu has asked secretary of state john kerry to help restore flights to israel after the federal aviation administration issued a 24-hour ban on flights for u.s. carriers. the faa was respond to go a rocket strike about a mile from the airport in tel aviv. the easa said it strongly

recommends air lines should avoid operating to and from tel aviv. here is a list of the airlines that have currently canceled operations into tel aviv from north america. delta air lines, united airlines, us airways, air can a canada. from u.s., klm, air france, lufthansa, easyjet, teshg injury eighteen lies and aeroflot. a spokesman said the situation could be monitored closely. and the israeli carrier is flying as usual. we just had some breaking news from usa airways, they plan to resume flights from philadelphia to tel aviv on thursday. the u.s. weekly inventory report due out later, we'll be watching out for that, but it's expected to show a decline of 278 million

barrels. now, our next ges guest has a warning for european oil refiners. he says crude oil are increasing their oil capacity and that could mean they're vulnerable to losing market share. joining us now is david hemming. david, thanks for joining us. we're going to come back to inefficient european oil refiners. but first i want to talk to you about the situation with russia right now and potential sanctions on the technology of the energy sector in russia as far as the europeans are concerned. just help us understand why europe isn't capable, it seems, of pushing for tougher iran sanctions as far as the energy sector is concerned. we can't offset it in the short-term. >> no, i don't think we can. i think the way you look at the world is yes, refining exports are pushing towards or focusing on europe, whether it be from the u.s. which has been increasing year on year or whether it be from russia where we're seeing increased exports from china and also the middle

east, increasing the amount of refining capacity that they have. that being said, as capacity has increased over the last couple of years beyond what is demand, we see a problem with the input, crude oil. that has left us with a balanced market. what this means is that europe cannot afford to offset one of the trade partners when it comes to refined petroleum products. and russia has been growing substantially. changes in tax regulations mean that they are improving the quality of the fine product that is going into europe. and really, they cannot afford to lose one of the trade partners right now. >> so what you are saying is actually not only is russia exporting the unrefined, but it's really focused now, including makesing tax measurer more accessible to some of these producers to supply europe with refined products, too. and what impact is that having on european refiners right now? it seems to me we're increasing our reliance on russia going

forward or at least trying to look elsewhere. >> yeah, i think that's very true. the margins for refining are pretty much in the u.s. and in russia. they're able to move up from poorly refined products, fuel oil, and now looking forward to gasoline and diesel. that's where europe has made their profit is taking fuel and refining it into diesel for the domestic market. that is going away and that's one of the issues that does face european refiners. >> it's not just about the short-term. it's about longer term literally going in the wrong direction. what about the u.s. trying to loosen ties as far as what they did. what's the hope for the u.s. pushing for tighter sanctiones and then saying, guys, look, we'll try and help you as far as supplies are concerned, because it looks like to me obama doesn't have the political pull to do that even if he wants to. >> no, i don't think he does. the u.s. also has other trey trade partners when it comes to

refined other products. you've changed the outlook for u.s. renining. it's now along the gulf coast where the margins are strongest. that crude used to find a home going to europe. we're seeing more refined product and that's coming from the u.s. gulf coast. however, they still have to find a way to move it into europe. i don't know if that is sustainable. >> so as far as you're concerned, you would probably be more shocked than vladimir putin if we saw broader sectoral sanctions on russia. >> agreed. >> frightening. so for oil right now, what's your take in the short-term at least. >> demand has been strong. that's why we're seeing prices come off for about 110 to 105.

we saw crude prices come down. they're down to 20 million barrels a day. the absolute capacity is beyond 65 to 70 million barrels. you would expect tightening of spreads and spreads have weakened, as well. >> absolutely. >> so you're seeing that move from the middle of the u.s. into the gulf coast where supplies are plentiful. >> david, great to get your perspective. david hemming, commodities portfolio manager. still to kot on the show, is geopolitical risk really a buying opportunity? we'll discuss right after the break. we're back in two.

welcome to "worldwide exchange." i'm julia chatterley and these are your headlines from around the world. deutsche bank under shares. the u.s. fed has raised major questions about the bank's financial reporting. apple reports another strong quarter of iphone sales although just shy of analyst forecasts. this chinese.appetite offsets future demand in the u.s. microsoft sets a lofty goal for nokia angling to get the hand set business back in the

black within the next two years. and all flights have been suggested to by halted in israel as a rocket lands close to tel aviv's airport. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. if you're just tuning in, thanks for joining us here on "worldwide exchange." as always, we look at how the u.s. futures are faring ahead of the equity markets. right now, we've got gains in yesterday's session, 0 of 4%. 0.6% for the s&p. we did see a fresh interday high, right now, just 17 points off that qk level. so we'll watch that in the session today. we did see the ongoing weakness in the small cap versus the large caps. we'll be talking about that a little later in the show. plenty after the bell, apple and microsoft yesterday, we'll talk

about those in this show, too. we did start earlier in the session in the red now, popping into the green. we've got the ftse 100 higher by 0.1%. the german and french markets higher by around 0.3%. micex higher by 0.3%. earlier in the session it was higher by 1%, so actually slipping, losing a little bit of ground. we see the euro trading around those lows. sterling, relatively unchanged. they did highlight that the bank will remain data dependent right now. but they did talk about this divergence we're seeing between inflation numbers. we saw that pop in the last reading to 1.9%. we're still seeing weak wage growth. that's creating headaches for the bank of england and the idea

that it's slack right now in the economy. the federal reserve bank of new york has accused deutsche bank u.s. operations of inaccurate and unreliable reporting. that's according to the "wall street journal." the german lender reportedly said the bank requires wide ranging remedial action and has made no progress fixing previously identified problems included inadequate auditing, shoddy financial reporting and weak technology. shares are trading lower in the session today. as you can see, down by around 1.6%. in a statement, deutsche bank says it's been working hard to strengthen its systems and control, adding we're committed to being best in class. deutsche says it's invested 1 billion euros and a thousand colleagues focused on its parts of a dedicated program. david, you've been busy? >> indeed. >> the banks keep you busy, it seems. talk us through what happens here. it's been discussed or described

by the supervisors, the regulators as a systemic breakdown in financial reporting there at the u.s. units. >> yeah. the new york fed is not happy with toich ya bank in the u.s., at least to how they're disclosing financial data and other information to the regulators. all banks report reams and reams of information to federal regulators used to assess the health of the operation. it's publicly available daddy that everyone from analysts and investors, academics and journalist committees use. deutsche bank's regulators are completely screwed up. it's written with data entry errors, there's systemic funds in terms of how they're coming up with the numbers, manual assessments they're making and hundreds and hundreds of problems totalling hundreds of billions of dollars of problems. >> let's go back to what happened with bank of america and it impacted the capital. we know deutsche raised 8.5 billion euros in june. how material are we talking about? >> that's a good question. it's a little unclear as to

whether and what emphasis any impact on them is designed to raise 8.5 billion euros of capital this year. they've contributed to the fed's distrust of what deutsche bank is reporting and frankly the fed's frustration with deutsche bank. this has been a problem dating back more than a decade. it has been repeatedly brought to deutsche bank's attention and deutsche bank has repeatedly failed to address it. >> they said they've hired more people. as i look back at citi's report, this stood out to me dramatically. 30,000 employees at citi by the end of the year dealing with compliance. how does deutsche bank shape up? >> deutsche bank has previously tried to deal with these problems and according to the fed has failed. it seems like the message is coming through loud and clear. the letter written to deutsche

bank l bank last december was incredibly harsh. deutsche bank was told they're the worst of their peers. i think it might have been an intended affect, which is to get deutsche bank's attention. so they do seem to be taking things seriously. >> taking things as far as the european banks are concerned, we look at deutsche bank, commerzbank in particular. i just wonder whether there is a little bit of exuberance here and a little bit of persecution here. you did just describe it as pretty screwed up as far as deutsche is concerned. >> yeah want the litany of errors, which by the way you can look at it. you can see what they're saying. it is brutal, it's very detailed, and deutsche bank isn't disputing any of the findings in the letter as far as we can tell. so -- and i think, you know, i'm not sure this is perfect. they're concerned about what

they're saying. >> but more broadly? is it spotlight a little bit hot it's very hot. it's keeping people like me very busy. >> too hot? >> i don't know. there's a lot of problems they're going after, that's for sure. >> thank you, david, european banking editor at the "wall street journal." let's take a look at some of the big earnings report out of the u.s. a mixed bag of earnings. apple did help. josh lipton has the breakdown. >> apple stock has been up 25% since last reported earnings in april. today, apple giving the q3 results, delivering eps of 128 on 37.4 billion. the street was looking for 123 on 38 billion. that eps growth rate, by the way, up 20% year over year. the strongest in about two years. i did have the chance to sit

down and speak to apple ceo tim cook about these results. cook telling me he couldn't be happier, this is the best execution in any quarter since he's been at apple. apple sold 35.2 million iphones in the quarter, but one slightly ahead of the estimate buy we're seeing. cook telling me it was strong in the bric country, iphone in china up about 48%. in the developed market, cook telling me he was chalking it up to consumers putting off an iphone purchase because they're expecting a new device to hit the market in the fall. ipad, 13.3 million units. that is slightly less than what the street was looking for. analysts are looking for about 14.2 million. cook telling you, again, the strength in the ipad with the emerging markets, china was up 50%. developed markets not as strong.

cook said he was comfortable with that and they're excited about what they had planned for this category. finally, maces, 4.4 million maces, that was better than expected. cook saying they were pretty pleased about that category growth when the pc industry is shrinking. cook called the gross margin number a blowout number. finally, looking ahead in terms of guidance, apple guidance between 37 billion and 40 billion. the street was looking for around 40.6 billion. as for capital returns, apple saying it returned 8 billion to shareholders in the june quarter. josh lipton, cnbc. we'll be speaking far more about apple and all the details of that earnings report in around 30 minutes time. microsoft fourth quarter profit fell missing forecasts as the company continues to move the

hand set unit. revenues beating estimates boosted by microsoft's commercial crowd efforts. on the core, the company says it ames to have nokia break even within two years ago it takes out $1 billion worth of costs. shares rose in after hours trade, and right now higher by 1 is.5% in the german market session. joining us is daniel morris, global investment strategist at tiaa crest asset management. daniel, thank you for joining us this morning. we're not re inveinventing the as far as earnings are concerned. we're seeing companies shifting guidance lower and continuing to outperform. >> it's not been a bad dynamic. it seems to be repeating this quarter in a positive way in that when companies talk about what the outlook is for the future, earlier in the year, it was getting by about uncertainty and economic growth. so not giving the most positive

guidance. but when you get to the earnings results, they've been decent so far this quarter and they were good the last couple of quarters. that could ultimately give a boost to what we want to see. >> we're 17 points off the 2000 level in the s&p 500 as we look at what's going on in small caps right now. they've struggled pretty much for the whole of 2014 after, what, 60 months of outperformance right now. what's the take away, if any, that you get from that right now? >> i think there's two aspects to it, even with the sell-off that you've had in small caps on -- you know, if you look at their valuations compared to history. it seems a little bit rich, so i think there's a struggle for small cap in terms of valuation, certainly compared to large caps. and then again, if you think about the maturity of the rally of this, it has been going on since 2009, you're looking for companies trying to get that

marginal increase in earnings. that's going to be easier to do for larger cap companies, higher quality names and a large cap. we think it's going to continue to be challenging for small cap. >> janet yellen didn't help with her comments as far as the small caps and what about central bank policy? we had the inflation data yesterday. i think if people were concerned, that point at least gives them a little bit of a calm here. >> well, i'm sure. that's always the debate. you think the central bank will be behind the curve and ultimately hopefully won't matter too much. it's how much the shock will be when we get that information that rates are going to go up. ultimately, if it's driven by highly inflationary pressures, we think ultimately that's because growth is better. so it's kind of a good environment. generally speaking, when you've had interest rates go up, it hasn't about a problem for the market. the only time it's been a challenge is if you had significantly high inflation that the fed needed to bring

down. we've had some environments in the past, equity ves struggled because rates have to go up a lot higher. we're still 92% inflation. we think we're going to have it on the way as we deal with adjustments in fed guidance. we think ultimately it should be just fine. >> it's funny, isn't it, when we talk about the current environment. we've never been in this environment before. so i'm cautious about using past experience to predict forward in this sense. but we'll come back to that point. first, a look at what's on today's agenda in the united states. no economic data today, there's plenty of earnings. we'll get earnings from boeing, pepsi co, biogen, delta air lines and general dynamics. after the bell, we'll hear from northrop, at&t, facebook and qualcomm. coming up after the break, netanyahu asking kerry to list an faa ban.

welcome back to "worldwide exchange." these are your headlines. apple reports another strong quarter of iphone sales boosted by china. the numbers just shy of forecastes. microsoft misses expectations, but promises to get nokia back to profit. and major questions about

deutsche bank's financial reporting are raised in the u.s. a look at u.s. futures as we head towards the open. the u.s. equity market session, get it right, relatively unchanged right now. the s&p 500 applied in the open right now, just half a point. the nasdaq indicating 3 points high were b dow jones 11 points higher. 17 points away from that 2000 level in the s&p 500. the future right now, you can see which way to take this. daniel morris from tiaa cress asset management is still with us. you're looking at fund flows and seeing fund managers taking cash out of the u.s. and europe despite the highs we think we're making in the u.s. and putting it into emerging markets. do you follow them? do you buy into this idea? >> it makes sense from an asset al cage review. again, valuations probably

around fair value. you look at emerging markets. honestly, underperform for the last several years. but at this point, relatively attractive valuatiovaluations. think about what your concerns are expected to be and it looks likes it's a pretty good idea to move towards the emerging markets. >> so this is about diversification? i look at the equity market value we're seeing in some of these emerging markets and i look at the bond market. the bond markets are gaining, too. that makes me concerned that we're looking at fair weather friends again that exit the first sign of trouble. >> that's absolutely concerned. we saw what happened with the taper tantrum last year. so far given that we're more or less at the end of tapering now, the markets seem to have adjusted, they're not getting any more unexpected news or changes in policy, it looks like we're going to be able to adjust, perhaps a period of dollar strength which is always a bit challenging. but as long as it's relatively

smooth, even clearly rates not only in emerging markets but in developed markets lower than we would tenially see, we think it looks like a relatively good option on the bond side, as well. >> daniel, what portion of your portfolio are you holding in emerging markets and what portion are you holding in cash? >> you know, it all depends on what your benchmark is. we're over in emerging markets versus developed markets right now and not an unusually high level of cash. people have talked about perhaps having extra cash on the side lines right now. we think you're going to have mormal volatility for equity markets. but we don't see a prospect. if you have the big cash and we see the sell-off in the markets, we probably see it as a buying opportunity. we think the underlying trend is positive for the market. >> and it's about any potential knock on effects as far as the geopolitical risk is concerns concerned.

>> well, you know, the thing to keep in mind is, they're really very rarely have any effect on the underlying trend in the market. yes, we may have a bit of upset in the market with what's going on, but ultimately as far as corporate profits are concerned, investors are going to focus on that. that's going to drive prices and that's wag goes to be sustainable. >> and i'm just waiting to find one investor who believes europe is capable of pushing through more sanctions right now. daniel, thank you for talking with us. we're looking at a view of the heat map to see how the european markets are trading right now. we'll be talking microsoft and apple in just a few minutes time. stay with us.

us airways plans to resume flights from philadelphia to tel aviv on thursday. this comes after the federal aviation administration issued a 24-hour ban on flights. israeli prime minister benjamin netanyahu has asked secretary of state john kerry to help restore flights to the nation. the safety security agency says

it strongly recommends airlines do not operate to and from tel aviv. delta air lines, united airlines, us airways and air canada canceled flights to israel. from europe, loouufthansalufthar france, easyjet, turkish airlines and aeroflot. british airways said it would continue to operate and monitor the situation carefully. nbc's martin fletcher joins us now from tel aviv. martin, how safe do you feel in light of some of the changes that the airlines have made here? i can't help but make a contrast between what you're wage or lack of what you're wearing in terms of body armor and the images we see in gaza right now. >> there's a huge difference, julia, between life in gaza .life here. in gaza, life must be hell for

the palestinians under almost permanent attack in the air, sea and ground. here, protected by the iron dome, these are the centers of security, frankly. so when the airlines cancel their flights of at least 24 lours, the israeli government responded very angrily. the transportation minister said you're rewarding terror. the prime minister called on the americans to restore flight. on the other hand, a rocket did fall within one mile of the april, so that is enough to put the wind up many, many of the people whose concern is for their aircraft and their passengers. but it does seems that after 24 hours, the ban may well be lifted. there are far fewer rockets flying from gaza to israel since israel's ground invasion, down to about half the number of rockets. i think about 20 rockets have been fired today so far. last week, that number would have been around about 70 or 80.

and they're using shorter range rocket. actually, the real threat to this area where i am, which is very close to the april and gets about 6 miles from the airport is very slim, but the airline is playing it safe. and israel is hoping they're lift that ban within a few hours and that 24-hour period runs out, julia. >> thanks, martin. the israelis came in here saying they didn't want to police the gaza strip any more, they didn't want to topple hamas. but given the line from hamas seems to be their backs are against the wall still and they've got no intention on of backing down here, is that going to be ultimately the end result for israel, do you think? >> well, i think israel will speak to that position that they don't want to destroy the hamas government. and the reason is what follows could be a lot worse. there are others banning militant groups in that area who could seize control. so unless there's a real

organized hanover power, israel would be against destroying hamas. and by the way, there's not much chance of an organized handover of power. but it's increasingly intense because it's realized that not only does it find it needs to destroy a tunnel network, now they're seeing that the success of hamas with the rockets which has been basically to isolate israel from the world, that emphasizes the continuing rocket threat from gaza. israel now appears to feel the need to destroy the rocket threat once and for all, as well, before it calls an end to the society in gaza and that could well increase the duration of the fighting, increase the intensity of it and, of course, focus attention all the more urgently on the need for a cease-fire. so in israel alone, when we have the u.n. secretary general in town also the american secretary

of state john kerry, it's a tough sell, that's for sure, julia. >> feels like that despite seeing how they bring hamas closer now. thanks for the update. former mayor michael bloomberg say he's making a trip to israel to show unity with the israeli people. we have had some comments from the ukrainian prime minister. he said they would impose sanctions on individuals holding russian passports. that's the ukrainian prime minister saying they were impose attentions on individuals holding russian passports. still to come on the show, apple takes a bite out of china. we'll take a look at the tech giant's core numbers. stay with us.

welcome to "worldwide exchange." i'm julia chatterley and these are your headlines. deutsche bank faces the wrath of u.s. regulators. there are major questions about the bank's financial reporting.

apple reports another strong quarter of iphone sales, just shy of analyst forecasts. this as chinese appetite offset futures demand in the u.s. microsoft ames to get annoy kia back in the black in the next two years. and europe says safety agencies recommend all flights to israel be halted. this as a rocket lands close to tel aviv's airport. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> if you're just tuning in, thanks for joining us here on "worldwide exchange." a look at how futures are shaping up ahead of the u.s. market. the dow adding 0.5% in yesterday's trading session, right now indicating higher by around 13 points. we've got the s&p 500 lying just 17 points off that 2,000 level. so far, relatively unchanged,

futures higher by around a point. and the nasdaq gaining around 0.9% in yesterday's session. right now, a couple of points higher. making up time as far as u.s. investors in the direction right now. we did see european markets ending lower. but they have managed to pull that back. right now, we have the ftse 100 higher by 0.25%. we have the minister saying they're still data dependent. gains for the french and the german markets here, too, and the russian market, the micex also up 0.3%. just how do you make money in these markets with the geopolitical risk, central banks very much in key? listen in to what some investors have been telling us this morning. >> syngenta is getting ready to make the largest product launch in its history. they're calling for -- and by

the way, when we call a vote, it's $500 million typically. we're speccing to hit $300 million in the first year of launch. >> now russia is as cheap as it ever was. i think it makes it one of the best times to be invested here. microsoft was really saying all the right things to investors. the stock is up 1.5% after hours. for 2015, getting into -- in 2015. you look at the stock, the stock is up 20% since it was taken over in february 2014. >> apple's third quarter profit

rose to $1.20 a share beating forecasts. revenues rose less than expected and sales in china surged 38%. apple sold 35 million iphones 35% a year ago shy of analyst estimates. iphone sales fell for the second straight quarter. sales were likely unchanged in after hours sales and right now gaining around 0.2% in the german market session. joining us on the phone from st. louis is aaron rakers, managing director at stifel. aaron, as far as what we saw with ipad sales, you had increased your expectations for the next couple of quarterses on increased demand for iphone and large display phones in ee original inning markets and china, too. are you comfortable with those upgrades? >> yeah, i am. thanks for having me on, julia. i think particularly for apple, the growth in the bric markets, so the emerging markets up 55%.

and then also as you mentioned, china up 28% revenue, but iphone up 48% year over year gives us confidence that the company is able to place those devices. competitively in those emerging markets which gives us further confidence looking into the product cycle later this year. >> if we look at the strength they saw in china, and i pull in samsung's recent comments, also a potential change in the subsidy environment, too, to the detriment particularly of end users. i wonder how much flexibility you have baked into the cake on those numbers. >> yeah. i think as we've looked at our numbers, particularly into the december quarter post of product cycle, we've told investors whether we can be looking at 50 or 60 million iphone shipment range. china mobile continues to away strong driver for the company and also you get the 4g build out from china telecom and

unicom later this year, as well, into 2015 as positive catalyst. >> let's talk about the ipad share declines, as well. right now they're facing lower priced competition from intel and they trail. we have the window space tablet, too. i wonder about the imb deal in this environment unless it's backed up by some hardware here. >> yeah. and i think that's, again, part of the second half product story and with regard to the ibm relationship, apple came out last night and emphasized that the penetration rate of the ipad continues to be relatively low. i think the number was 20% in the commercial enterprise market. that's the opportunity for them with that collaboration, with ibm going forward. also, obviously, the education vertical as we get into this calendar third quarter to away positive driver for that solution, as well. >> talking about positive

drivers there, a cash position looks spectacular, generating, what, 10 billion dollarers in the quarter. and this cash position has dropped 14 billion. >> you've got 7.9 billion of free cash flow up 30% year over year. you've got the 11th quarter on in a row where they've generated more than 40 billion trailing free cash flow and return background 90 plus on of that towards shareholders. so the cash flow story on the company continues on be impressive and consistently strong. >> is it impressive enough? 26% rally for the share price heading into these earnings, more upside potential, do you think? >> yeah. we've maintained the buy rating on the name. we've got a $110 target price on apple. we think there's upside to the story, obviously, from the

product cycle. i-phone 6 coming through this second half of the year. and obviously, new product category potential which is not factored into our spengations at this point. >> brilliant. aaron, great to chat with you. i've had some comments from fiat chrysler's ceo this morning. he's saying q2 is in line right now with expectations. he says the idea of a tie up with volkswagen is not on the agenda right now, so taking some of the heat out of recent speculation right now. he's saying the new ltc will be similar to the foremaner fiat scuto and he's expecting -- to happen within the first two weeks of on october. so he's still expecting that u.s. lift to happen within the first few weeks ooh october. electronic arts first quarter profit jumped 5 % as the company benefited to continued buying of video games for the x

box1 and play station 4 consoles. it is delaying the much anticipated battlefield hard line from october to next february. the company says it needs to improve the game. lkic arts trading right now in the german session lower by 2% down in the german session. now we'll be getting into microsoft earnings later in the show, too. for now, we have to take a break. also coming up next, reportses say google was buying deal a deal and find out y more about a popular music streaming service.

microsoft mixes expect ages, but promises to get nokia back to profit. and the u.s. raises major questions about deutsche bank's financial reporting. stubhub says cyber thieves got access to more than 1,000

customer accounts who then used them to buy tickets for events. they got the data from breaches from other websites. the manhattan district attorney's office will hold a news conference today with canadian and uk authorities and reports say arrests are expected. stubhub says it issued refounds. right now, stock trading in the german market higher by around 0.3%. google may have made a play for spotify, but details hit a sour note. seema is at cnbc hq with all the details. >> google reportedly tried to buy spotify late last year. but talks broke down for several reasons, including price. google executive susan wojowski who took the top job in february was pushing hard for a deal. however, larry page expressed a

lack of enthusiasm for subscription services. google disclosed it decided to drop the potential buyout of a foreign company with a valuation of between $4 million and $5 million. spotify raised $250 million in equity financing last november, giving it a valuation of $4 billion. but the journal says it was looking to be sold for at least $10 billion. in may, apple spot spotify's rival beats music. beats music was launched in january and has several hundred thousand paid subscribers. spotify has more than 10 million paid subscribers and another 30 million users of its service. it launched the ipod and itune necessas

in 2001, google play music all access last year, it because songza earlier this year for an undisclosed amount. checking shares in europe, moves slightly higher. music streaming has been a hot space. clearly being seen as an opportunity for big tech firms. >> thanks very much, seema. let's take a look at today's other top stories. the federal reserve bank of new york has accused deutsche bank's u.s. operations of inaccurate and unreliable reporting. a december letter to the german lender reportedly said the bank, quote, requires wide ranging remedial action and has made no progress fixed in previous identified problems, including inadequate auditing, shoddy financial reporting and weak technology. shares are trading lower in the session today. in a statement, deutsche bank says it's been working hard to strengthen its controls arguing, we are committed to being best

in class. deutsche says it's investing $1 billion euros as part of this effort. appointing more than a thousand employees to focus on it as part of a dedicated program. jpmorgan is reportedly close to a deal to sell one half of its equity business. "the wall street journal" says it's in advanced talks with lexington partners and carlisle investment partners. the journal says jpmorgan won't invest in the fund's shares in the future. jpmorgan lower by just high of 0.5%. coming up, we discuss strategy and the tech giant microsoft's q2 earnings. stay with us. xkç

welcome back. john kerry is arriving in israel this morning. they're saying right now that they're not providing any further details on that. we know he's meeting mahmoud abbas, ban ki-moon from the u.n. and benjamin netanyahu. we will keep you updated if any further comments are made. there's no economic data today, but plenty of earnings to watching for. we'll get results from boeing, pepsico within biogen idec, delta air lines, general dynamics and northrop.

after the close, we'll hear from at&t, facebook and qualcomm. looking at the futures, 13 points higher on the dow, the s&p relatively unchanged. right now 17 points away from 2 that 2000 level. right now, for the futures, wait and see mode ahead of the open of the u.s. markets. microsoft's fourth quarter earnings missed expectations due to their nokia acquisition. nokia should break even in two years' time. jon fortt has the details. >> microsoft reported revenue of $23.8 billion, ahead slightly of what analysts were expected. eps came in at 58 cents nongap. that's a little lighter than what wall street was looking for. there's a bit of an after on that. "wall street journal" hadn't been given real guidance on how to model the expenses associated with nokia. so a lot of them were just sort

of darks in the dark. on the call, microsoft ceo amy hood did give them better information about how to model nokia. microsoft would have been that eps would have been 8 cents higher without nokia than it was with. also, bing sure to be profitable, they said, in fiscal year 16, as well. going into guidance for the current quarter, that looks pretty good. a little better than wall street expected, from what i can see. across different divisions, microsoft guided for the division toes be about even and maybe even slightly higher. even a couple of cases saying expenses will remain under control and also saying that as far as integration costs of nokia, 150 million per quarter is what people should expect there. the enterprise business continues to be strong for

microsoft in the quarter, they just reported the xp refresh. benefits tailed off durnd the quarter, but they got plenty of commercial benefits. commercial bookings were up 23%, olympicsing up 14%. nardella planning to build on that as he settles into his seat as ceo. back to you. >> patrick moorehead joins you us now from austin, texas. patrick, good morning. thanks for joining us. nokia drained $700 million operating profits from the entire group. they still fell less than 5% of all new smartphones bought worldwide. do you believe the turn around date, june 2016? >> nokia has a ton of challeng s s ahead of it. not only do they have the manufacturers on the low end undercutting them on cost, but you have premium brands like apple and samsung at the top.

i'm skeptical as to a 2016 break even. but with the caveat that that might be at a very, very low revenue. so i'm sure they can make it break even, but the question is, how much will the revenue be? >> he also said that his strategy is mobile first, cloud first, as far as the strategy is concerned. it does seem to be working for him. do we need to see more of a cloud centric strategy here, do you think? >> we do so microsoft has some strengths and weaknesses in cloud. they are doing very well in what i would call legacy applications. for people who had their applications on microsoft servers on premise who wanted to move them to the cloud. their biggest challenge, though, is in relation to what's called an open stack cloud, the standard in public clouds and hyper clouds for new application sess based on open stack. it's industry standard. lennox plus open stack isn't

very congenial with what microsoft wants to do and i think microsoft is very challenged to figure out in an open stack world with players like hp and ibm how they operate and how they're successful there. >> overall, i'm getting the sense that you're skeptical right now. we have seen the stock with location of flows in some of the largest names right now. but if it look at where it's trading, six times forward earnings right now, it looks rich. >> well, microsoft just keeps chugging along. financially, me do very well. the challenge, though, is we're entering two areas where microsoft wants to win in mobility and cloud, but quite frankly, they're challenged in right now. so i think we're going to have to wait and see, what is the some of the key decisions that nadella makes to make them successful in a world of

mobility and cloud that quite frankly their assets aren't very strong. >> yeah. and right now, he's not making a choice. as you quite rightly said, it almost seems like they need to specialize. you can't be everything to everyone right now and he's still not making a choice, is he? >> well, that is one thing i think they have done really well and i'll give them credit for. they are focusing on productivi productivity. when balmer redid thinks strategy, it wasn't very clear. with nadella's new spin and the strategy, it's all about productivity. and i think that's really good for microsoft. i think as it relates to the definition of productivity, whether it's a business of home productivity, i actually think microsoft can pull that off. >> brilliant. patrick, great to chat with you.

that's it for today's show. i'm julia chatterley. thanks for watching "worldwide exchange." i'll see you back here tomorrow. have a great day.

good morning and welcome to "squawk box." apple's profits beat the street, but revenue res short despite better than expected growth in china. meanti meantime, sales of microsoft top estimates, but earnings fall short as the company began to fold in its acquisition of nokia's hand set business. and in global news, u.s. and european airlines are halting flights to israel due to instability and the other big story, any rockets anywhere, you don't want any planes around. but one well known america says

it's a mistake and he's not ready to stay home. ricky fowler, did you see that? he's on today. "squawk box" begins right now. good morning and welcome to "squawk box" right here on cnbc. i'm andrew ross sorkin along with joe kernen. kayla tousche is in today sitting in for becky quick who will be back tomorrow. joe mentioned earnings. today we have boeing, glaxosmithkline, pepsi, north grumon norfolk southern, dow chemical. now, the ceos of delta and dow will both join us first here on cnbc interviews. we'll talk to them in just a little bit. after the close, we're going to hear from at&t, qualcomm, facebook among others. we're going to talk about expectations for the social networking giants. a bit in just a little bit later this hour. al,