welcome to "worldwide exchange." i'm karen cho. profit warnings, adidas scales back plans in russia. shell rise to the top of the ftse to help beat earnings

forecast. and here at home, according to the ceo of generale, who tells cnbc in an exclusive interview, that he expects a rebound to boost the confidence to boost earnings. >> the actual stake is what the actions in other regions of the world to achieve their targets over time. so we see the determinants. >> announcer: you're watching "worldwide exchange," bringing you business news from around the world. >> welcome to "worldwide exchange". the german sports wear company adidas says it will scale back plans to expand in russia as

it's been forced to cut its outlook for 2014. meanwhile, lufthansa says second quarter net profit fell due to strikes, adversity affects and overcapacity on its north american and european routes. the german flag carrier net profits are the 170 mini euros from 155 million a year ago. and you can see continental down 2.4% despite the tiremaker raising its outlook for the second time in five months. the german firm is warning adverse effects may harm its sales. lths the fourth worst performer on the german stock market today. but stay tuned because we are going to be joined by wolfgang

schafer to speak about these results. and more earnings based in the uk. let's switch over, we'll take a look at royal dutch shell. a little bit of green on the boards atop the ftse today. royal dutch shell says it will continue to cut costs having sold $8 billion worth of assets this year. they posted a 33% rise in adjusted earnings for the second quarter. astrazeneca has raised its guidance for the full year after beating expectations for the second quarter earnings. as you can see, the stock price drifting south today. the firm was driven by stronger sales in emerging markets. eruptions in that stocks are on the back of that sales and you can see weir group is marking lower. it has post theed a 6% decline in profits for the first half. this as the engineering firm was hit by currency headwinds.

revenue in the oil and gas division were hit by 40% in the period. taking a look at dia sg eo, a 9% decline in sales. the group has experienced a slowdown in china and emerging markets. the ceo spoke to cnbc earlier. take a listen. >> it has been a year, as i said, with a lot of continuity. to put it into context, mainland china is about 1% of diageo. within that, the budai sector has taken a structural shift. some of that has been the big

competitor. but if you look at our international brands, our super deluxe johnny walker is doing very well. we've opened johnny walker houses in beijing and china. johnny walker blue label is up 40%. and 3406g on to some of the french stokts, safran has raised its outlook for the year after posting a 4.4% increase in first half revenues.. the earlier space supply side is the strong performance in single aviation operations. plenty to talk to this company about the ceo of safran will speak to cnbc exclusively at 11:20 cet. and edf has posted a 3.1

pefrs rise in ebitda citing strong distribution in france and the uk. the share priegs up 1.5%. take a look at alcatel-lucent, down 5 plus percent. it says cost cutting measures have enabled the company to post a net loss of 298 million euros. we spoke to the ceo of alcatel-lucent earlier and asked him about the next big project in the pipeline. >> i have announced this morning as you have probably referred to a potential of ipo as we work with submarine networks, which was a leader in undersea telecommunications. so i have mentioned that i intended to launch an ipo in order to -- for the time of the company.

>> bnp para bass had a net loss in the second quarter. profits actually beat expectations. the shares up about 0.3%. stephane spoke to the bnp para bass ceo. take a listen to his explanation. >> the second quarter has been impacted by one of a 6 billion euro charge released to the settlement reached with the u.s. authorities. if we look through the underlying profits this quarter, up 23% over this last year. basically, on the back of revenue at 4% versus the period last year. 4% spanning from relatively stable retail, good performance at investment solutions and

strong performance at corporate investment banging. so all this basically leads to core equity, one fully loaded of 10%, which is in line with what we set forth in our plan. >> we had a lot of irpings today. let's kick it around to spain and italy and take a look at some of the numbers out there. san tan der saw bad debt decline and posted particularly strong revenue growth in latin american and british markets. the bank down 1.3%. meanwhile, telefonica posted a 15% drop in operating income for the second quarter. and latin america, also the focus from nl. it saw a weaker performance in that market for the first half. however, the utility group did beat expect ages with ebitda

coming in below expectations. a lot of headwinds in that capacity and there are wholesale prices in europe, particularly in spain. we're going to be speaking to the ceo at 11:10 cet about the impact of some of its russian operations, as well. stay tuned to that conversation. in the meantime, generale had a 1.2 million loss on the upcoming sale of its swiss banking unit. let's get out to julia for more on this. julia, what was the take away messages from generale today? >> generale says this is their strongest half year in seven years. in particular, as you quite rightly said, if you strip out the exceptionals here, both for life and nonlife, they beat expectations. it's in the process of reshaping this business and stripping out

the core. they're now lying at 162%. if you look at the combined ratio, too, a measure of the underlying profitability, further gains there, a gain ahead of expectations right now. you look at the stock performance, compare it to the underperformance we've seen, i think it comes down to analysts looking at this stock and looking at generale itself and saying, look, we bought into the idea that you've been reshaping this business, now what? wait until you take this as far as growth and profitability is concerned. when i spoke to mario grechi i asked him about the past year and how he characterized performance. >> it shows profits can shift production towards profitable product. it is working. and the increase of profits in italy is reaffirming that we're doing the right things. life is doing quite well in italy. it's also doing well in germany.

germany has a one off sector last year because production was extremely doing well in q1 because of its practical products we launched last year. all in all, i'm very proud and pleased with this return. >> do you expect a resumption in german activity once that rt yeaher affect -- >> yes, absolutely. absolutely. in germany also is having a very healthy production because they're developing product much more than the market is doing. so the balance of our production in germany is much more practical than the average market. >> you heard him speaking there about the performance in italy. a growth performance pick up of 27% weakness in germany that he believes will come out about base effects. also weakness. underlying this message is zero interest rate policy across much of the world. also still the stagnant growth

in europe. you still see a very tough period, managing to eek out gains beside that. we'll talk about the risks as far as russia and ukraine are concerned, more broadly. >> thank you, julia. some reminders about the euro zoe and how that's impacting the eurozone. speaking of the ceo and cfos of continental. a key issue now for markets, now not as tolerant. how are some of those companies dealing with those exposures? we are tracking around the lows of the morning session.

the stoxx 600 south tracking lower by 0. 6/%. some of the weaker markets out there, germany has been a real laggard today down by 0.8% currently. you've got selling across the other markets, as well. it was in positive territory, but it has now dropped 0.5%, as well. the ftse just hanging up negative, giving up some of the early green. you can see the russian stock market by comparison, which the em battling the concerns around actionses so far is putting in a little bit of territory today, moving higher by 0.3%. in fact, picking up off the lows that we've seen in the past seven days. let's move on to foreign exchange markets and take a look at some of the activity. there was a u.s. dollar story in the past 24 hours after we saw strong u.s. gdp. that 3% was the line in the sand, really, for market. 1 is.3392 is the level on

euro/dollar. so it is tracking a little bit softer today to the u.s. dollar. japanese yen trying to claw back a little bit of territory. you've gone up to the 103 handle in the past couple of days. the australian/dollar weaker, 0.93. let's move on to asian markets and see how the day has been shaping up. looking patchy over that way, sri. what are you seeing? >> it does. quite choppy, as you said, karen. i think because of the event risk with the data front in the u.s. with payrolls at the end of the week, of course, also tomorrow we will get the china data. this is the official read on the pmi from the month of july out tomorrow. so perhaps the shanghai composite, you're trying to front run that number. the market there up by almost 1%. looking back on the month, it's been a pretty good month overall for the greater china markets. hong kong and china on track with their best month since 2012. some choppiness, really, on the

nikkei 225. modest retreat in the six-month highs that we saw earlier on the session. yes, the weaker yen was helping. yes, the earnings have been pretty good with a few exceptions and today was case in point with nintendo, the stocks are off by more than 6% after a worse than expected operating loss in the april to june quarter. so mario luigi leading the power up on electronics stocks. the benchmark up by 0.8%. singapore airlines, their shares hitting a two-month low. the biggest loser on the share after a 52% drop in quarterly operating profits. they're feeling the erosion in yields, the operating erosion. very similar circumstances as to what lufthansa is going through now. >> sri, thank you very much for

the update. after the break, the government blames vulture hedge funds and the ratings agencies blame the government. we'll get the analyst's take next. ♪

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argentina has failed to strike a deal. last-ditch talks with critters in new york ended pushing the country into default. standard & poors selected a default shortly before the discussions ended. the economy's prime minister blamed them for the failed talks after they refused to take a write-down on their bonds. >> the president said it. this state, this government is not going to sign anything more consent to anything despite the pressure being exerted, but is going to respect the parameters of the law and respect the parameters of the argentine people so we offer within what was available to us which is join the exchange or grant a stay. >> the ceo of kenny house, did you think it would get to this point of a technical default? >> there was a lot of sentiment that we wouldn't get to this

point, but it's not a huge surprise that we have actually come to this stage, given the way the negotiations or lack of negotiations took place during the last month or so. >> you make the point this isn't a repeat of history. it's not 2001 all over again. why is that? >> i think the main reason is that the situation is different in argentina. in 2001, they were simply unable to pay and therefore it was an invoe voluntary default. the government r government would argue on the contrary, it was the more complex situation it was then in terms of the parties involved. >> what's the ripple effect of the economy? you point out there are a number of sectors that could be impacted by this technical default. >> indeed. the banking sector could be severely affected. on corporate bonds and loans affected by this. there will be an increased

inflation rate in the local xhe economy which will not help the position in terms of trying to get the economy to grow again and get out of recession. and they will have difficulty finding investments in some key sectors such as energy and developing shale gas resources. >> the loan we're talking about today involves the maturity of about 20 odd years down the track. but typically in these cases, and as our viewers have been pointing out, you can't necessarily -- some of the loans because the cross can mean other loans that held up the bank can also be subject to this because it is risk essentially, not just one loan default. so what are the ripple effects here for the sovereign? >> sure. well, the construction of the master here is there are indeed

rufos, rights upon future clauses, which allow them to have the best possible offer if an offer is made that is better than their conditions to the holdouts. this was the construction of the government's arguments, had they paid the holdouts, they would have had to treat the other bondholders with similar returns. there may be less business there and more jugz in other jurisdictions such as the european union. >> it is an interesting take. we take a look at yields across the board, very, very low levels. and have the restructured bonds. what does this mean for longer term implications around latin american countries? do you think there will be more high yields across the border?

>> i think argentina is a particularly difficult case. so the ripple effects throughout latin america will be perhaps less than might be expected. there might be some sentiment within the countries because they have expressed unconditional solidarity with the argentinians. so that may color future perceptions of loans to those markets. >> tightening 411 basis points, also the one-year credit default swaps have risen. so there has been an impact across the funding markets for argentina. thank you very much for joining us today. from canning house. plenty more earnings, but this time from asia. a surprise first quarter profit report by sony. the tokyo based company posted a

757% surge in the first quarter net profit on the year thanks to its strong ps4 sales. sony is attributing its 97% jump in operating profit to a gain from the sale of its technology facility in japan. the company has also announced plans for a joint venture with industry peers and a sony in japan display. perhaps you can flesh out for us some of the detail around the sony nebs, seen staggering from the headline results. >> the headline sounds good. operating margins are 3%. so if you applied that to samsung or apple, you wouldn't be impressed. but it is the earliest days of what seems to be a genuine recovery. only one of their divisions lost money and that was a small amount. they get marks for effort. >> you mentioned a small amount

from the smartphone business, but this is where they've put a lot of their energy behind. there's been press conferences the last couple of years where they talked about the experience and this experience of entertaining the customer. why are they not gaining any traction? is the device simply wrong? >> i think when it came out, it was probably the best hand set of its type on the market. the problem is they don't have very good distribution. there are almost no distribution in america, they're hawaiily reliance on the japanese and the uk market, because everybody sells into these markets. that's their number one problem. so sales of hand sets in unit terms despite having a great hand set, we're down year on year and that's scary for them. >> and it's been patchy in the consumer markets, anyway. so if we move on to the ps4, there's no shortage of competition in gaming devices. how would you describe the success in this area so far? >> well, they made the machine

that gamers wanted to make. there was a no frills dead on fantastic machine for playing high definition games. cooperate be beaten. >> there are gains to be made when many of the corporates take down their produces. has that had any impact in sony at all? >> i think it has. they say it's about 50 billion in sales and 7 billion i think in profit. last year, everybody was rising up their profits thinking wow, massive benefits from the yen. they import a lot of materials. they produce a lot of goods overseas. and this time around, 12 months later, a time of those currency gains coming through, not because of the move in the currency, but because management has had 24 months or so to

realize that they're actually in a better position than they were and they're being able to plan accordingly. >> the big word on toshiba's flash memories, decent numbers out? >> yeah, decent. they're on course to have their best year ever. when you look at the share price, it seems remarkable at the make all their money in the second and fourth quarters. this is their best numbers ever for a first quarter. >> thank you very much for that. a lot of investors wading back into the japanese markets in the last couple of weeks. still ahead, continental raised its full year operating outlook. why are investors not impressed? stay tuned. i'll speak to the cfo of the german tiremaker.

argentina's -- for the second time in 13 years after last-minute talks in new york with bondholders end in failure. adidas falls to the bottom of the german markets after falling sales lead to a profit warning. the company must scale back expansion plans in russia.

and the eurozone already sees inflation according to the ceo of generale. but he tells cnbc in an exclusive interview that he expects a rebound across the quarter. >> we are confident that the actual stake as well as the -- will achieve their target over team. so we see that. it has been a weak day across european markets. we're seeing selling across the board. some softness out of the ftse, just under water. the dax still down 0. 7%. a fraction of improvement from the last check but still negative. a slight pick up to the cac which was down 0.5% in the last check. the ftse mib down a hefty 1%. but there you see on the earnings front today, a lot of earnings reaction on bond

markets. this is how it's shaping up in the ten-year yields, particular of note in the last 24 hours after you got that strong gdp. you nudged higher to the 2.5% level. 2.55% on the charts. the yields in germany, down 1.17%. gilts, 2.6%. look at the higher inflation, you can see tracking below that 3% mark. on foreign exchange markets, it was the u.s. dollar strength story that played out after the gdp numbers. a lot of people counting down to the payroll effects on friday. it is causing concern about whether interest rates might be brought forward despite dovish comments yesterday. dollar/yen rates, 102.88. euro/dollar on the back. sterling declining 0.2%. the dollar is a little south today as well as the swissy puts in a little strength on the australian dollar. a bit below 93 u.s. cents on the

australian dollar. investors are expecting concerns about continental sales despite its better than expected outlook. they posted a jump coming in at 1.3 billion euros. adverse currency effects maintained group sales. here is a look at how the share price has been doing in the trading session, drifting off 1.6%. joining us now is wolfgang shaifer, cfo of continental. let me ask you about some of the sales numbers. your company said they're capable of combining growth with valuation. a fraction below last year, well below market consensus. why the disappointment? >> well, i don't think it's a

disappointment. if you compare our growth, if you take the first half of the year, 6%, and compare it to the growth of the production or compare it to the growth of the entire market replacement markets, we are still outgrowing the markets, worldwide growth 3% to 4%. so we are in the end confirming the markets. the markets were not adjusted for exchange rate effects. as we are setting outside of the eurozone, we are affected by the stronger euro since the second half of last year. we had translation effects which are 600 million in the first half of the year. aus take that out, our growth is still there and we are still outgoing our markets. >> wolfgang, analysts not willing to take our effects any more. i noticed that you said your fx effects curve 2014 sales by about $1 billion euros. where is the big clip to get

currency impact so far? the emerging market currencies? >> well, it's the strength of the euro, which we have seen starting the last half of 2013. and this is basically concerning many, many currencies, not all about many currencies. it's the dollar as well as the japanese yen and it's some other currencies from emerging markets. we just had this translation effects. aus mentioned, as well, our profitability is rising. so we have the natural hedge in our p&l. if our sales have a translation effect, our cost base has basically the same translation effect so the profitability, the profit margin is not affected. >> i'm curious about your take on the auto markets. the recent numbers that came through from many of the automakers suggest a little bit of a change of pace and where some of the earnings growth has been. the u.s. recovery story, for instance, and emerging markets seem to have a little bit of a

wobble, but europe, which has been very, very weak for a couple of years, started just to pick up off the baseline. are you seeing that in the latest trends, as well, in your numbers? >> well, we do expect the european market basically to be on the level of 2013. in europe, a little stronger. but when i talk about europe, i include russia and their markets specifically weaker. so overall, europe now on the level of the previous year in the second half of 2014. in the contrary, in the u.s., we see a private strong third quarter and we expect growth in the fourth quarter, as well. specifically, china seems to be growing with the 8% to 10% throughout the year. >> i can ask you about russia, then, and the impact. you mentioned it's been hurt by the crisis. no quick recovery in sight. how do you manage the exposure

in russia? do you keep your foot on the pedal if the sanctions are lifted at some point? >> yeah, that's exactly what we are doing. luckily, russia from the point of the crisis at the moment, russia is less than 1% of our total sales. so the impact on the group is now strong, but, of course, we are indirectly affected by these sanctions because the car market is down and the entire market is down. >> appreciate the comments today. thank you very much for joining us today. wolfgang schafer, continental ag. europe's third larger insurer generale posted a profit of 28% on the quarter. the net profits dipped on the year as insurers booked a 138 million euro loss on its upcoming sale of the swiss unit

bfi. julia, the outlook looks a little bit lagger. >> it is. and we are starting to see a pick up. quite interesting to look at in the live segment in particular, 27% in the premiums written in italy, too. so some of the restructuring that's happening here is starting to take effect. as you pointed out, it's a really tough environment as far as europe is concerned. they're very much leveraged to the italian economy. we can't escape that from the assets that they hold, the bond equities and the performance of the consumer. we know italy has been one of the companies that was seeing further sanctions on russia. and i asked him what his concerns were as far as the energy impact, the trade impact. we're hearing anecdotal evidence of less russians visiting. listen in. >> well, i mean, this -- like

what's going in ukraine and what's going on in the south don't help at all. we're living in a subdued economic situation and the economies make it even worse. so the only thing i can say on that is we all wish this situation stabilizes and this population can get much better situation for the future. turning for a second to the federal economy, it's impressive to see what's been going on there and how much is there for its people. >> further sessions on russia, because of the trade links, because of the dependentance. it concerns you given the

leverage and the performance. >> well, it's also physical. when you have a trade partner and the country with which you do a lot of defense. its financial services and then you see these were exploding. it is difficult to find a balanced solution for that. also, they want to destroy the friendship that was developed. and i think this is about one european country. and on one side, the principal, you know, there are people there, people who are quite friendly. we got to know them quite well

over the past year from many respects. how you treat this and how you balance this out. >> peace have to come before economics. do you stand with him on that? >> peace is the most important thing that we need to have. the european countries have to live in peace. i do buy the concept that this is the most important. but then we should be careful and try practical solutions. >> many people say that the eurozone is one knock away from deflation at this stage. do you see this as potentially that knock? >> absolutely. and the european situation is quite concerning. the neighbor situation is not moving good at all.

france, italy, partially spain which is recovering from very low levels, even germany are not in a situation which we can consider service factory. europe needs to reform and needs a vision for the future and needs to become competitive against the rest of the world. >> aside from the low grit environment in europe, the geopolitical risk, we know the environments in any way given the low interest rates. despite that, they have seen a numbers. they say it's the best half of year they've had in seven years. analysts still slip on this stocks, to euro price target. they've got you in significant upside. they're still a neutral acceleratings lie on generale right now. we've seen a turn around over two years. the questions now, can they complete the work on more profitability and more growth that we start to see beating

into some of these numbers. karen, i'll hand back to you now, but i'll be back in a few minutes' time. argentina, a very small part of their business, but we'll be talking more. >> julia, when you look at some of the earnings there, and usually they don't shed a good light on the competitive story. the back up behind you, it's very hard to be negative about italy when you're standing there in the sunshine and you see what appears to be a busy economy behind you. >> i think everybody here agreed there's an enormous amount of potential. there's a number of roadblocks that have been in the way. i think any ceo says despite the political back drop, be spite the limitations, we carry on business as usual. but you have to say there are definite steps that can be made to improve the situation here. generale is an example of a company that is stripping out some of those noble efforts, getting rid of some of the aleaguans. we'll have to wait and see what

happens. >> julia, thank you very much. in the meantime, malaysia in regard to the ebola outbreak in west africa, countries, liberia, it has raised questions about a spread to other nations. there's been an instant reaction to the airlines association. the world airline is not recommending any traffic restrictions. the risks to other passengers are low. there's been ee formus concerns that if someone should hop on to a plane, these are interesting comments coming through. we are going to be having a conversation about some of the risks and impacts from the global economy, too, from the ebola crisis that's been playing out on the continent of africa.

in the meantime, let's switch directions and talk about messaging apps. there's been enormous valuation owes some of these countries stateside. also in japan, second quarter sales continue to soar up 56% from the previous year. we have the story live from tokyo. >> yes, hello. the parent company south korea's online portal operator announced its april to june earnings today. the sales generated had reached around $180 million, up 56% from the year before. users in indonesia and other asian countries continue to grow while it managed to win new users in mexico and columbia expand to go over 490 million users. in line, the public having submitted applications pages to stock exchanges in both tokyo and the u.s. meanwhile, a south korean newspaper reported today that

alibaba, china's e-commerce giant and softbank have their eyes on the company. the firms are seek to go invest an all-out performance partnership seeking a 30% stake in the company. they said there were no plans to seek investments from anyone. that's all from the nikkei. back to you. >> thank you very much. in its latest outlook on the mainland, they expect the economy to slow to 17% on the fist year. and it could fall further to 3.5% in 2020. and even lower after that. is that just a sign of the economy becoming more developed to achieve more growth rates. the question didn't touch on

twitter today. the meat scandal in china has left a bitter taste in yum brands balance sheet. restaurants in china have been -- over the last ten days after a recent television expose shows meat being improperly handled at its supplier. shares tumbled in after hours trading. let's give you a look at what's on the agenda in asia tomorrow. we'll get a health check of the manufacturing sector. does it get to the snapshot of the small companies, medium sized, but big state and enterprise. release in rt yeaherly numbers. earnings are due out from the second quarter from singapore's largest bank, dbs.

mohammed ali's gloves are up for auction. they were used by him when he took to the ring against frazier in march 1971. and it was billed as the fight of the century. at the time, ali was looking to win back the title and he was banned for boxing in the vietnam draft. on the back of the draft, sporting memorabilia that you would pay up for? a tennis racket from john mcenroe, michael jordan jumping shoes? join in the conversation on "worldwide exchange," get in touch via e-mail or twitter. worldwide@cnbc.com. @cnbcwex. the cadillac summer collection is here.

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aid groups are evacuating from west africa as the obama outbreak continues to worsen in the region. the peace corps.have removed

nonessential staff after some of its members helping to treat expected patients contracted the virus. the latest outbreak has so far killed around 660 people, including about 50 health workers. joining me now is gregory from the health world organization. gregory, what does this tell us about this virus and how easily it can spread? >> it's a good question. each in the field, all the tie namics is infecting so many health workers. it shouldn't be in this stage of an outbreak. there are various reasons this could be possible. we know there are shortages of treatments. health care workers do treat patients in their homes on the

side to earn extra money. this underbreak is under reversed in terms of health care workers, in terms of material resources and in terms of money both to buy materials and to pay health care workers. and for that reason, can w.h.o. is launching a huge appeal to donors worldwide in order to raise money, materials, and send people to the effected countries to buy this outbreak. >> today, they were saying that there shouldn't be any extra travel restrictions according to the world health organization. your organization, also, that the risk is very low of contracting it, even if you are on a flight with somebody next to you. how is that the case when some of these health workers not contract a virus? >> first of all, remember that

the health care worker is caring for a sick patient and a patient patient often is vomiting, has diarrhea and may be bleeding. and it is normally through the context, direct contact with bodily fluids. this is why health care workers were so exposed because if there is even the slightest break and control of production measures in a hospital, you lose blood or something gets through a crack in the protective equipment, you can be exposed to the bodily fluid. on a plane or anywhere outside the health care setting, you are not much less in danger of becoming exposed to the virus or contracting the disease because you're not touching individuals. individuals walking down a street do not touch other people who are sick. >> gregory, let me ask you about

some of the open boarders across europe. british officials are concerned about the warnings coming down the track. do you think there is a risk to the uk and other developed countries? >> well, a very, very small risk. you can never say there is no risk, but there is an extremely small risk of cases going outside of western africa. again, because of what i said, people would have to touch a visibly sick person, be exposed to their bodily fluids, and somehow those bodily fluids would have to get in through your eyes or mouth, for example. that turn of evens is extremely unlikely. >> thank you very much for explaining the situation to us, gregory, from the world health organization. elsewhere, israel's security capital has approved tns tpd assaults on russia. the country is days away of

destroying the hamas tunnels into israel. nbc's richard engle sent this report. >> all day, israel bombarded gaza, often without warning. nowhere here is safe. another u.n. school was hit. at least 15 of the 3300 people sheltering inside were -- many were sleeping when the shells started falling. this classroom like all the classrooms were packed with women and children. the men were sleeping outside. when the shells hit, shrapnel went flying and the field collapsed. >> even after the blast, gazans are still living here. there was nowhere else to go. we were told to come because we were told it was safe. we're trying to avoid fighting to protect our children.

>> israel has denied responsibility in the past, saying hamas uses the school to hide weapons. kwl you believe it was israeli fire? >> yes. >> the security staff this morning, we were able to gather fragments from the explosive devices, we were able to take photos and look at the trajectory. >> israel said minimum tants were not operating at the school and it does not target civilians, but civilians are still dying every day. this video is hard to watch. ambulances are rushing to a blast site in gaza city. the cameraman is rolling, and then a second incoming round knocks him down. the cameraman prays. more artillery comes in. nearby, a mosque was destroyed, an image likely to enrage many in the muslim world. israel's air and ground

offensive is punishing and relentless. today, pushing deeper into gaza's narrow streets. israeli troops searched house to house for militants, trying to find and destroi hamas tunnels. this isn't the quick and easy fight israeli officials talk about just a few foo weeks ago.

welcome to "worldwide

exchange." i'm karen cho. these are your headlines from around the world. continue to fall from debt the second time in 13 years after last-minute talks in new york with bondholders end in failure. the federal reserve keeps labor market concerns at the top of its agenda. policymakers upgrade their economic views at the considerable time before a rates rise. shares in royal dutch shell rise to the top of the ftse after helping earnings beat forecast. and the eurozone has beat inflation. buddy tells cnbc in an exclusive interview he expects a rebound across the industry. >> we're confident that the actually -- that we think in other reasons of the world will achieve their targets over time. so if we see the light out of the tunnel at this time.

>> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. an update on inflation after the headline news, generale saying we're already in deflation. the latest read is that july has come in at the lowest since october 2009. the read is 0.4% year on year. the market had expected a july reading of about 0.5%. core inflation is flat at 0.8%. so a little bit under on this headline figure. darting into some of the details around this, we are looking for a bit of softness. energy prices fell by 1% in the year to july after 0.1 in june. a couple of competing headwinds on the level that we've seen on the inflation reading.

let's get some thoughts on this. daniel is with us from new york. daniel, weigh in on this number today. it's come in under on the headlines. what does this say about the level of inflation across the eurozone so far? >> yes. good morning. the number came out below expectations. it is very clear there is a divergence between the data coming out of europe and the data coming out of the u.s., which is clearly reflecting on the euro/dollar price action over the past couple of weeks. >> too slow to reaction on the inflation numbers here in europe? we're not going to see any policy measures as we wait for the existing policy to take hold. >> correct. we agree it will take quite some time before policymakers in europe take another step, which probably will mean the market action going forward will

reflect the anticipation of policy action over the next few months. again, the data in europe is still being reflecting a fairley slow pace of growth that we have seen for the past 12 months. again, that doesn't clear divergence in the u.s. >> u.s. futures have come off a little bit at this number@has hit euro/dollar this morning, and this continues the trend that we've seen in euro/dollar rates. so market positioning wise, is this event enough to take some of the risk off the table? >> yeah, that's actually an excellent point, because clearly growing into the data, we have seen already quite a bit of price action. so it would have been expected that as the number came at least in line of expectations, the euro/dollar would have gone a little bit up on the back of positioning. but, again, the number consolidates the view, so actually we might see new fresh

positions coming in, supported by the data. and we could see actually another leg of this going forward. >> daniel, waiting in investors minds here because yesterday's stateside, we kind of ignore this, we have some very, very strong growth numbers, 4% for the second quarter. nobody expected a number like that. actually you did, but very few people expected a 4 handle. as we put this in context, does a low inflation rate persistent concerns about deflation in the eurozone start to detract from the growth stateside? >> well, again, at this point, policymakers are trying to dismiss extreme data. the gdp data for the second quarter united states, it's still going to be shelved as a rebound from a very, very weak first quarter. still the sense that the job market in the united states is fairley soft. so from that perspective, we

still see the united states trying to play itself down with the europeans on this wait and see mode. and we will probably see an end to this towards the fall of this year. >> daniel, we'll talk more about the jobs situation stateside and the payrolls number coming out friday in just a bit. you're staying with us. we'll come back to you in just a moment. in the meantime, let's move on to some market reaction. we can see dow s&p 500, nasdaq futures all turning negative. so a sell-off at the start of the trading session. to what was a bit of a choppy session yesterday, markets not gaining many on the back of that growth numbers. it triggered fresh concerns about whether interest rates will be pulled forward, but in the back of your mind, you have to think we see revisions in the second quarter numbers. a lot of confusing elements to try to piece into the equation. here in europe, the gator desire has been to push south. we have the ftse down 0.3%.

further weakness since our last check. these inflation numbers on the dak have not been positive for the markets, either. all of that is weighing into the equation. dollar still reclaiming territory to the japanese yen. the aussie under pressure, down 0.4%. and the sterling, one of the stronger trades of late has been suffering the past 24 hours to the u.s. dollar. let's get out to asia now for the reaction to some of those markets. sri is joining us. >> hi, karen. the price action over here has been quite scattered. i think that's largely because we've got data tomorrow coming out from china, you mentioned this earlier, the official pmi number manufacturing for the month of july. out tomorrow, as will be the hsbc number, too. so perhaps the shanghai

composite trying to front run from some better than expected numbers. the data recently has been quite encouraging. we are seeing stabilization in the broader chinese economy, but the property has been the weak link. nikkei, though, retreating from a six-month high earlier on the session, the weaker yen was benefiting the exporters. and we've seen some pretty good earnings. but the expectation today was innintendo. the stock off by more than 6% earlier on in the session after a worse than expected operating lot loss in the april to june quarter. samsung electronics turned in their report card. and it wasn't a pretty one. the worst quarterly profit in two years, guidanceport second half was very weak. samsung's index heavyweight was a big drag on the broader index for south korea and the kospi. karen, that's where we stand. back to you. >> sri, thank you very much for the roundup there. the cnbc rally told argentina it can make a comeback from its default.

it's made some strong comments that the eurozone is already in deflation. julia, i want to pick up on that first. that isn't the news breaking at this hour. the very low inflation rate has crossed on the headline today, 0.4% year on year. perhaps you can give us a sense of how worried generale was about the inflation. >> yeah. it's interesting. we've talked about this in context. the situation right now in russia, ukraine and the knock on impact of whether or not this could be the knock that she pushes into deflation in the eurozone. and he said absolutely. he said look, are we already there? we're already seeing a weakness as far as the growth profile is concerned. certainly an impact on his business right now. actually, the inflation figure that you just mentioned feeding into that right now. so it's certainly not taking the risk as far as the eurozone is concerned, but a key concern for generale himself. we talked about the risk of argentina as you started by saying that. this is a tiny portion of his -- in particular. i did ask for the situation

there, too. >> in 13, 15 years? which is already amazing by itself. i think argentina is a country that has shown in the past that they can come back quite fast and positively. so i hope that this is just the bottom of the crisis and that after it argentina will be able to recover. for us, exposure to argentina is very, very -- it's 1% of our total assets. so it's not really concerning in terms of our portfolio assets, but it's a great country. argentina, there is a great country there. lots of skills. and i wish them that they can recover quickly. >> investors look to the technical default, a product of service here as opposed to being issued quite rightly. in fact, the third default in two decades. do you think investors will

forget that quickly and reinvest? it's incredibly bad, again, for argentina. >> it is. and also sidelined on the world economy. they close borders in many respects. so i hope that, you know, one way to get out of this situation would be to reopen the country and to join again the world economy and participate for the exchanges of trades, goods and currencies. >> so argentina less than 1% of generali's business. as i mentioned this before, that all feeding right now into the risk environment and the potential knock on to confidence here. he did, when talking about the situation in europe, want to go back to that, talked about mario draghi. he said we still need to see further support from mario draghi in addition to reforms and gains in competitiveness in the individual economies in the

eurozone. i guess that crisis support from the ecb, that gets even louder on the back of that inflation reading today. karen. >> yeah. the time to look at these markets after some of the earnings today telling us just how weakness still remains out there. julia, thank you very much. let me get to the earnings headlines today. we are seeing some very strong moves in markets, particularly from adidas, the german sports company says it will scale back plan toes expand in russia. but also overhaul its business as it takes a swing at both problems. it's been forced to cut its apple to the write-downs in the bottom of the german stock market today, down 13 plus percent. not much brighter for lufthansa. it says second quarter net profits fell earlier due to strikes, adverse currency effects and overcapacity on its north american and european rigs. a whole bunch of factors impacting the airlines. meanwhile, alcatel-lucent had

share reaction out. the cost cutting measures have enabled the country to improve its operating margins. the telecom equipmentmaker posted a net loss of 298 ur he ros. perhaps investors had become optimistic around the country of late. we spoke to the cfo earlier and asked about the next big project in the pine lines. >> i have announced this morning as you referred to potential ipo of our submarine network, which is the worldwide leader in undersea telecommunications. so i have mentioned that i intended to final an ipo in order to final the development of the country. this is a real industrial project in order to strengthen and to increase the leadership of alcatel. >> let's take a look at some of the top earnings he stateside. some of the earnings have been fairley positive. many are expected to grow their

earnings in the order of 6.7% from last year. so is it a different story in the european earnings picture? kraft foods secretary quarter fell sharply, but beat forecasts. however, revenue barely rose and came up shy of estimates. the company has price increases during the quarter to offset rise in commodity costs. but that in turn hurt consumer demand. on the country's conference call, the cfo says it's likely consumers will be the new normal. kraft fell 2% in after hours trade. down 2%%, as well. and exxon mobil reports second quarter results at 8:00 a.m. eastern. the world's largest oil company is forecast to earn $1.85 a share. boosted by rising natural gas prices and higher production. exxon did just take a big risk, embarking on a multibillion dollar to drill its largest well

in waters. the frontier isn't as lucrative as they had hoped with all these sanctions in place. conco philips reports second quarter profits at 8:00 a.m. eastern. the company's profits were likely lifted by higher oil prices. here is a look at how the shares have been doing in both companies in germany today. a little bit under water for exxon. conco trading down 0.3%. not a huge amount of traction ahead of the earnings release. don't forget to check out some of the stories trending on cnbc.com today. find out why the market bulls are sticking by samsung, all this despite weak numbers coming through from the company. how toys could save nintendo. and ground control to major tom, is the uk ready for 5g? follow up on twitter @cnbcworld.

the boxing gloves worn by mohammed ali worn in his first professional defeat go on sale. we have the blow by blow coming up next.

u.s. markets are set to open

lower as argentina defaults for the second time in 13 years. shell easily beats second quarter estimates ahead of oil results later today. and they give the market a mixed picture saying growth is improving the labor market concerns remain. volkswagen has announced the second quarter operating profit with 3.3 billion euros. we had a decent reaction on the back of these numbers. the first half passenger car brands operating profit was $1 billion euros versus 1.5 billion previously. worth delving into the brands. very high exposure. the high end part of the market for pore ya and audi. audi operating profit was

roughly on the level of the previous year. this brand in particular has been making strong inroads into the chinese markets. overall q2, 59.8 billion euros. the ebitda oilmaker's position, 5.71 billion euros. i think in context, this is an interesting story. peugeot, which has been struggling over the last couple of years, has revealed that its had stronger profitability in the auto division. there seems to be a turn around taking place in western europe and across the periphery, italy and spain, for instance, there's been stronger markets for the auto companies of late. it has been the core impact from emerging markets.

the boxing gloves worn by mow hhammed ali have emerged fo sale for $300,000 pound. signed by the trainer, the gloves were used by the boxing hero when he took to the ring against phrase ner march 1971. was it the fight of the century, as well? at the time, ali was looking at a title has been bd stripped after he refused to enlist in the u.s. draft. we asked you what piece of memorabilia you would like, whether it's a racket from john mcenroe or a michael jordan shoe. get in touch, worldwide@cnbc.com, @cnbcwex or @cnbcworld.

still to come on the show, a pick up in air traffic is set to get the motors running as boeing supplies its background. we have an exclusive interview with the cfo next 37.

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i want to show you how the share price is traying in the session. santan did he r was initially suspended, the share price tanked and now they're on the order of 50 odd percent. this on the back of the company reporting a massive 3.6 billion euro first half loss. it has pledged to raise fresh cash, also provide more details around those irregular layerties around the parent company and the bankers. citi, though, has put out a bit of a concerning notes to clients about this cleanup loss. shares have exceeded citi estimates. citi was one up on warning about some of the exposures. they said there are still risks for the stakes and that support could be required to boost sovereigncy ratios. so talking about somewhat of an

intervention there, that's why the share price is down. keep in mind, though, this is a very cheap stock these days, so any small move will cause rather large swings in the stock price. elsewhere, raised its outlook for the year after posting a 4.4% increase in first half revenues. airbus and boeing supplier cited a particularly strong performance in its civil aviation operations. plus, mcginnis, the cfo from safran joins us from paris. let me ask you about the russian exposures. you've reported that the defense electronics business could be impacted by eu and u.s. sanctions, not significantly for the parent company. but still, can you explain some of the practicalities, how the sanctions would hurt? >> in fact, most of us our dealings with russia are in

civil aerospace. the defense exposure is very, very modest to the point of in material in this case in the general slope of things. >> way up by both exposures, civil and defense, was the immediate impact short and long-term because we don't know how long the sanctions are going to last. >> well, as the sanctions don't concern similar aerospace activity, it's unlikely to have any significant impact. >> let's move on to a joint venture that you have with ge, the business cfm as it's known is developing at least 18 inches for boeing 737 max citing development. but i noticed that the accelerator has been pressed on speeding up the developer of this and there's a larger r&d spend. these particular aircraft that are agents are going into, very fuel efficient aircraft. so would i bet right in assuming that this is about righting

those efficiencies as much as possible? >> i think it's the fine of success. the loop will be on boeing, as you pointed out. the thoughts will be available on the a-320 neoand the source on the chinese c-919. so we have succeeded in quite the feat in putting our engine on all though of the new short haul aircraft. and the pick up in r&d development is really to enable us to face the acceleration in which we will be producing as those engines to meet the requirements of our two major customers, boeing and airbus. the civil aviation market has been a sweet spot for a lot of companies that have positioned around. at the start of the year, it was certainly very optimistic. you had some very, very high hopes. what are your expectations now? do you think the market is holding up, as well, when we have a lot of concerns around

aviation? for instance, we had a missing flight to deal with, we had a downed aircraft with geopolitical events and now health risks. are you concerned that we might stop to see a bit of a wobble across in the demand joint space? >> the outlook for the rest of the year remains extremely strong. ir row space is a worldwide business. to the extent that you might have a slowdown in any particular area, the growth in other areas more than makes up for it. so our outlook for the year is indeed improved as we raise the outlook for carrying operating income to be close to the mid teens as opposed to approximately 10%. >> appreciate the time today. thank you so much for joining us, ross mcginnin, cfo of safran. we're going to take a quick break. argentina defaults on its debt for the second time in 13 years

this after last-minute talks in new york with bondholders end in failure. the federal reserve keeps labor market concerns at the top of its policy agenda. as policymakers upgrade their economic view that is a considerable time before an interest rate rise. spot earnings front, shares in royal dutch shell rise after higher oil prices help earnings beat forecasts. meantime, the eurozone is already in deflation according to the ceo of generali. but he tells cnbc that he expects rebound across the continent to boost earnings. >> we are comfortable that the actions taken in ukraine is that the actions that we took in other regions of the world will achieve their targets over time. so if we see the likes in time. ♪

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welcome back. let's see how u.s. markets are shaping up today. we have seen a bit of a negative numbers on inflation numbers in europe. slide to 0.4% in july. under expectations. it seems to have had a bit of an impact on u.s. market, fears about a slide into lower deflation here in europe. this on the back of what was a choppy day yesterday, despite strong gdp numbers.

didn't have much of an impact for confidence with concerned about the timing an interest rate hike. europe has been patchy today, sea sawing across. we've been weaker now on the ftse for calm of hours. the dax down 1 is%. still you can see a weakness across the cac pt the micex in russia is to the upside. let's move on and take a look at the u.s. economy which bounced back in the second quarter after a harsh winter, posting 4% gdp on an annualized basis. fourth quarter gdp was revised up, as well. the economy contracted by 2.1% as opposed to an earlier estimate of 279%. the fed is offering a mixed message in the u.s. economy. the federal reserve said growth is improving and unemployment is falling steadily, but the job market remains subpar. the fed is hinting they want to see more improvement before they start raising interest rates. they gave no real indication of

when that could happen. staying with us out of new york is daniel tennengaza, the head of global fx strategy. daniel, thanks for holding on the line for us today. i want to ask you about the gdp picture versus payrolls. some people are saying as long as the payroll number is stronger, this is the game changer. it's not necessarily this 4% figure on gdp, which is subject to revisions. >> correct. the key focus on the job market in the united states these days is not really about payroll or even the gdp data, but wage pressures. wages in the u.s. are still fairley flat lined. there are no wage pressures and this is one of the key indicators coming out of the fed that is signaling that this recovery is still not strong enough to justify a change in monetary policy. >> nonetheless, you're still getting a print on the payroll number that is about 200,000. and it's starting to become consistent is that level, perhaps enough to take us to 6%. and who knows, some of the

strange daetd that we've had lately, we may see a print below 6% this week on the unemployment level. is this starting to become a catalyst for the feds hinting around the interest rate trigger? >> correct. and, again, i agree with 100% of that. we have seen a very, very, very, very sign of hawkishness in the statement yesterday. again, the key thing to watch will be tomorrow's data and then going into the next fo mc meeting in september, clearly the market will be looking for a more kooep clear path in terms of monetary policy behavior going into 2015. >> what are you doing around the u.s. yield? it has been a bit of a tricky one for investors. there was a lot of griping it was too low to justify the break-up you're seeing across the stock markets. we did see a bit of a budge, close to 2.6%. what are you targeting on the ten-year u.s. treasury?

>> we are looking for yields to drift 3% going into next year. but, again, the key things to watch here really is the 0 to three-year part of the yield curve. that part of the yield curve needs to reprice monetary policy and we are going to see the debt pricing only when we hear from the fed a more clear expectation going into next year in monetary policy. >> we haven't got much time left for you, daniel. we've been noting a lot of the misses because of current market exposure. give us a take away message on how you can make money from emerging market currencies. >> the trade among the markets right now is a high -- there has been a chase after the groupons and the yielding in emerging markets. but going forward, it's clearly going to be a risky business given the fomc and monetary policy in the u.s. >> you've got a couple of undervalued names. the argentinian pesos, the

argentinian dollar. do you like these as a buy right now? >> correct. for now, we would stay away from argentina given what happens overnight. but with the yen and taiwan, we agree these are attractive at these levels. >> thank you very much for that. joining us out of new york today, daniel, help of global fx strategy at rbc. let's pick up on the story around argentina, which has failed to strike a deal to avert its second default in 13 years. last-ditch talks critters in new york ended without a settlement earlier pushing the country into default. standard & poors cut argentina's credit rating to select default shortly before discussion ended. the country's finance minister blamed them for the failed talks after they refused to take a write-down on their bonds.

>> the president said it. this state, this government is not going to sign anything nor consent to anything despite the pressure being exerted, but he's going to respect the parameter of the law and respect the interest of the argentine people. so what offered what was within the possibilities available to us, which was either join the exchange or grant a stay. >> speaking earlier on this channel, steven king, a chief global economist at hsbc, said investors should have always been concerned about the prospects of argentina based on its debt history. >> argentina's own history over the last hundred years, it is effectively a serial defaulter over that period of time. and, you know, argentina has a significant shortage of up savings domestically. act session on occasion to international markets. sometimes there's elements of political cronyism coming through over this last

hundred-year period. so if you think about where you would invest, at the top of the list of places to be. >> some analysts have been saying to us this is not a repeated history and it's around a technical default with argentina. not necessarily agreeing is james riccard, chief global strategist. he joins us on the phone. james, i noticed you've been tweeting, saying that anyone who is telling us that the argentina default is contained has never read the cross default or termination clauses in a credit soft agreement. so this suggests you think there would be ripple affects for over argentine loans. >> well, there certainly could be. now, it is true that argentina, because of its prior default, has been somewhat cut off from the rest of the global economy. but there are about 20 billion credit default swaps outstanding over and above the 30 billion or so bonds that are in question

right now. and you don't know who wrote the swap, so who is the aig of the argentinian default? we don't know. the collateral itself can move around in value so there could be some shortfalls. it will be interesting to see how that plays out. the other thing is, there are so many inner linkages in the international financial system today that it's just impossible to say one thing won't get out of control. i mean, you have to put this in a larger context. let's look at what's going on in syria, libya, iraq, israel and gaza, ewe krab and russia. we've got economic sanctions, a form of financial welfare back and forth between the united states on one hand, russia on the other. now along comes argentina. you can say they're the one related. from a global perspective, these are all sort of the straws in the window. so i think it's too soon to say this is contained. >> james, some people might want the how here and the why. you've mentioned this cross

default clause. let's get into a little bit of detail around it. basically, it means that a bank can deny access to balances of any loan in their accounts. so if one loan goes into default, a bank can -- balances. so it suggests that if people are holding an exposure here, they say the risk and see some of the of the other assets from the argentinean government.. is that how it works? >> that's partly how it works. the next big event is to declare argentina in default for purposes of the credit suisse default swap. now, in greece, they show there is a corruption organization, heavily political sized at this point. they should have put greece in default long before they did, but they stopped short of doing that. the world wasn't quite braced for it. now the -- is back and are they going to declare argentina in

default or not? if they do, that's going to trigger the credit default swaps. so the people who wrote that will possibly have to sell other assets. selling the other assets, that puts pressure on other asset markets. you don't know where it ends. a very firm example, in 2007 when set prime all day long start to default, everyone said oh, there's only $11 trillion, it's a $200 billion problem. but, fak, there were 6/trillion of swaps linked to those mortgages. so it was really a multi trillion dollar problem. so, again, you don't know where the cost default clauses are. one thing goes into default. if argentina is in a basket. again, you have to go agreement by agreement. but there's thousands of these agreements all over the world. so i think it's too soon to sort of say this is contained.

>> on that timing issue quickly, you're right there this, the fact that some investors don't know how to react. banco espirito is one example. you saw the initial reaction and people got back into the stock. you mentioned when it comes to argentina is going to make some sort of recommendation or a vote. how long is the time frame that they keep watch on this story? >> well, i think the next one, it will play out every week. they don't think this is one-day event. the world didn't come to an end this morning doesn't mean the story is over. we had demonstrations in ukraine last february and by march everyone said, well, that's over and kind of went back to business as usual. well, it was far from over. then we have crimea, the malaysian airplane shooting down, russia has troops on the border. these stories don't go away. one of the problems with markets there, the market has a

two-second attention span and it's unfortunate because these stories have long tails. >> thank you so much for joining us today. plenty coming up today, including meet the new boss. target has found its new ceo three months after the u.s. fired -- or the retailer fired its top executive. we needed 30 new hires for our call center.

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the u.s. markets are in the red as argentina defaults on its debt for the second time in 13 years sdmroop shell beats q2 estimates ahead of u.s. oil majors due out today. and generali's ceo says the eurozone is in deflation as the headline number drops to a five-year low. target is on target. reports say the struggling u.s. retailer has finally found the right person to take the ceo job. jackie deangelis joins us from cnbc headquarters with more. jackie. >> hi. good morning. that's right. target set to hire pepsico executive brian cornell as its ceo, the first outsider to run the u.s. retailer. cornell spent nearly a decade at pepsi. he was previously ceo of

walmart's sam's club warehouse chain and he ran michael's, the u.s.'s largest arts and craft retailer. target has been looking for a new ceo since may. his departure followed target's disastrous multibillion dollar expansion into canada and reports that the decision on key issues slowed significantly during his tenure. target has more than 1900 stores and reportedly nearly $73 billion in revenue last year. but the data breach shook consumer confidence, denting holiday sales and keeping shoppers away for months. sales started to improve in march as target ramped up discounts. but the company expects that same-store sales will be flat to slightly higher in the second quarter. the journal says that cornell first started talking to target several weeks ago after business leaders in the company's

hometown of minneapolis mentioned him as an attractive candidate. he will start his new job on august 12th. the journal says cornell has been a possible successor to pepsico's ceo andrew nuei. the company says it will announce his successor soon. the journal says target's interim ceo john mulligan will return to his role of cfo. target shares today up 0.3%. 45.73. back to you. >> thank you very much for that. coming up, geopolitics has affected major oil suppliers. stay tuned.

exxon mobil reports second quarter results 8:00 a.m. eastern. the world's largest oil company is forecast to earn $1.85 a

share, boosted by rising natural gas prices and higher production. conco philips reports second quarter numbers at 8:00 a.m. eernlg. the companies's profits were likely listed by higher oil prices. john stephenson is the president and ceo at stephenson and company capital management. john, there is a saying as so goes exxon mobil, so go the major companies in the industry. what do you think exxon mobil's numbers are going to look like today? >> i think they're going to look pretty good. exxon is trading at a relative discount to the other majors. this is a free cash flow machine. this company in 2012 has more combined free cash flow than total, chevron, shell, and bp combined. so this is an enormous machine. they're driven by strong geopolitical events. i'm expecting the 1.95 a share. >> john, a bunch of companies

here in europe exposed to russia, edf one company warning about the russian exposure. but exxon mobil has taken a bit of a gamble with the optic front tier. it was a place where people thought there would be rich profits down the track. there could by an impact on the development process for some of that's companies. what do you think exxon is going to say on this front? >> well, i think it will be an obstacle for them. but i think this is the best managed company in the industry in terms of capital discipline, its return on capital is far and above anything else in the space. so i really think that while they'll be cautious on it, i think in fact what you're pointing out is the story over big oil over the last decade. they've been chased out of russia, out of venezuela and nigeria. but i think what exxon has in its favor is the diversity of supplies all over the world. that's something you can't say abouttory majors.

>> speaking of conco, we saw the average prices in terms of gas. is that going to continue to increase? >> i don't think the theme for natural gas will continue. this is a shoulder month, but i think you'll see fairley decent production numbers out of conco. maybe a little bit light. the streets expecting around $1.60 a share. i think you can see less from them because they've been higher capital expenditures as well as the month plan maintenance. i think what we're going to be looking for on the call is the guidance towards catalyst prices, which is malaysia, foster creek, and unconventional properties that in the u.s., those are some of the areas where the company is focusing on. so they had the most momentum of any oil company that followed. i actually think that overall is a good place to be. >> sometimes ceos are reluctant to comment on the price of oil.

brent and wti, very interesting with the geopolitics. it's hard to get a handle on whether they're going to go higher or lower from here. what do you think is going to crop up from that front? >> well, i think actually oil base is pretty sticky at $100 a barrel and wti. in terms of brent, what has been notable is the compression between the fed of nearly $20, you know, a couple years ago down to 5ish dollars now. i think brent stays around 109 for the foreseeable future. and i think crude or wti is about 105. that will be true largely because of shale oil flowing in the u.s. >> thank you so much for that, john stephenson, president and ceo at stephenson & company capital management. now, u.s. futures called open weaker after soft inflation this side. but coming up to jobless claims

stateside. thanks for watching "worldwide exchange." i'm karen cho. thank you daddy for defending our country. thank you for your sacrifice and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life.

good morning. argentina failing to reach a debt default deal. target may have found its new leader from the ranks of pepsico. kraft, whole foods and yelp with oil giant exxon mobil and conco philips on the way. "squawk box" begins right now. it's thursday, july 31st, 2014. good morning, everybody.

i'm becky quick along with andrew ross sorkin and michelle caruso cabrera. we've been watching to u.s. equity futures and they are pointing to a rough start on wall street. there are a lot of major global market stories that have been impacting things. you'll see right now dow futures are down by about 90 points below fair value. s&p 500 futures are off by 12 points and the nasdaq is down by 26. among those stories influencing the markets this morning, argentina has defaulted for the second time in 12 years. the can you know has been in a long legal battle regarding hedge funds. kate kelly will be joining us in just a moment with the full story. she'll be checking out the implications, what this means for global markets. that's coming up in just a few minutes. in the meantime, in early european trading, you're going to see right now that italy is down by 1.6%. the dax in germany, off by 0.5%. the ftse is down b