welcome to "worldwide exchange." these are your headlines from around the world. global markets sink as investors take risk off the table. president obama authorizes targeted air strikes against islamic militants in iraq. >> earlier this week, one iraqi in the area cried to the world, there is no one coming to help. well, today america is coming to help. >> israel confirms it has resumed strikes into gaza, while hamas fires several rockets towards the country. this as negotiators fail to extend a three-day cease-fire.

the world health organization declares the ebola outbreak an international health emergency, warning the virus will continue to spread globally. and the stock trading higher in front thanks to a drop in revenues. the firm's cfo tells cnbc he's backing bill gross to turn around the fund's performance. >> you're watching "worldwide exchange," bringing you business news from around the globe. hello, and welcome. you're watching "worldwide exchange." julia still on vacation. i'm going to be filling in for her for the rest of today and next week, of course. we've got a very busy show for you today. turkey prepares to shoate.

wage his political grip on the country. plus, as the w.h.o. declares the ebola outbreak a public health emergency, how is the virus actually treated? we find out. and are we amid a market correction? we preview your trading day with a guest who thinks the moves are much ado about nothing. let's get back to our top story. u.s. president barack obama has authorized air strikes against islamic militants in northern iraq to prevent what he called a "potential act of genocide." it comes amid mounting concern over the fate of tens of thousands of members of iraq's yazidi sect. obama said it was time to act. >> i've therefore authorized target air strikes, if necessary, to help forces in iraq as they fight to break the siege and protect the civilians' trap there. already american aircraft have begun conducting humanitarian air drops of food and water to

help these desperate men, women, and children survive. earlier this week, one iraqi in the area cried to the world, "there is no one coming to help." well, today america is coming to help. >> our middleeastern correspondent joins us now. the u.s. considered air strikes in iraq before. that was about a month ago. why now? >> that's a good. . .

>> but also now the krg is being threatened. the foreign minister of kurdistan came out a couple days ago asking for help. so now it's not just the iraqi government in baghdad. they're asking for the u.s. government to step in and help, because they're now under threat as well. and the difference here is a couple weeks ago, even three weeks ago, we had this feeling that the forces from the kurdish regional government were going to be able to at least protect their own. we saw major failure of the iraqi forces to protect iraq, but we did think the fighters were going to be doing a better job and that isn't the case. we're talking about oil fields. we're talking about the autonomy of the krg as well. it is an obvious thing that the united states would not only want to help them, but they would also want to protect the americans that they've already sent in. hundreds of advisers have already gone in to iraqi government. >> about a month ago, there was a big question mark as to why the islamic troops were so powerful. where they got their weapons

from. just how powerful are they in terms of what kind of arsenal they've got? >> i think that it's become pretty apparent that they're incredibly powerful, and there are various areas of funding for these guys. i mean, this is something that grew out of the situation in syria. that the roots of this were already fomenting in the region. this has been an interesting saga, when we had the war in iraq for so many years. we had all of these fighters coming from syria. they were being funded by iran via hezbollah. they were coming from lebanon. they were coming from syria. they were coming into iraq. from all parts of the world. that was their point of entry, the porous border with syria. and then the precursor to isis, that was another flow from the iraq side of the border back into syria and over the last couple of years, there's been major funding from the gulf and other sources. and now you have very well-funded -- and we've seen logistically very astute isis

fighters. quite frankly, it just seems like it was a shot in the dark when it should have been quite obvious that these guys were inevitably going to move to broaden their base. >> for ow -- our viewers, stay tuned. i'll be joined by paul brinkley. that interview is coming up at 11:20 cet. israel's military has confirmed that it has resumed rocket fire into gaza, this after hamas fired several rockets toward the country, as a three-day cease-fire came to an end. in a statement on twitter, the idf said in response to the renewal of rocket fire by gaza terrorists at israel, we're striking terrorists sites in gaza, adding that over 20 rockets have been fired towards israel this morning. it's quite encouraging to see that this has been the longest pause in fighting since this war began on july the 8th. but what are the sticking points about continuing the cease-fire? >> the issue here, if you talk to the israelis, they're going

to say hamas just broke the most recent cease-fire. but inevitably, hamas understands that they're going to have to -- there's just been too much destruction. the casualties have been so very high. the sticking point really is what are they going to get out of this? as we say, they've come under pressure, even from their own people. they want to have some sort of measure of success to come out of this. and what this really means is are borders going to be open? are they going to allow the palestinians, the palestinian authority to run the gaza strip? these are the big questions. so essentially, when they come back to the table, when a cease-fire ensues, which it inevitably will, will they be able to come away with some kind of victory? >> it's all about the economic sanctions that are put on gaza, aren't they? because they really continue to bite the gaza economy. unless there's a lifting of that, they don't want the cease-fire. >> that's pretty much the argument. this is an issue in the sense that these people are economically disenfranchised to

a severe degree. so this, of course, is breeding this resentment. this is, of course, the reason that hamas is so revered by many palestinians, because they feel like this is the only arm of the palestinian government or the representatives that they have that are actually taking the fight to what they see as oppressors. so they see this as a purely economic question. of course, the israelis feel that this is a fight for survival and a fight for their own state. >> you sent out an interesting e-mail before. you say maybe now it's getting really interesting because gaza has been accusing israel of war crimes. what are the latest developments here? >> it's interesting. so, a couple of years ago in 2012, the palestinian authority was recognized, the palestinians were recognized as an entity by the u.n. this was a move the israelis did not want and the united states also did not want. they wanted to work on a two-state solution first, before they were recognized by the u.n. as a body. but it's interesting now, there are more questions being raised

about whether or not a case at the international criminal court would be successful, if there's impetus behind a move for this. is this the impetus to make this a reality. and i would say that they're much closer they've ever been to making this an international discussion. >> it's very interesting. thank you very much for that. you are one busy lady this morning. >> my region keeps me busy. >> absolutely. all right, let's take a look at the market response, and no surprise, we are under heavy selling pressure on these european markets. let's have a look at the stocks.

>> political risks left, right, and center. keep in mind, greece and portugal are up 20% from their year highs. italy actually in correction mode. let's also have a look at the risk aversion and the flight to safety and what it's doing to some of these safe havens. of course, we're seeing buying into treasuries. buying in bundes. 1.029%. the ten-year treasury yield has dropped ten basis points over the past 24 hours.

that is a big move. dollar/yen, obviously pressure and some safe haven flows. we're back to the 101.72 level. not too long ago, an analyst told me look, in a couple weeks time, we'll be seeing that 106 level for dollar/yen. i guess that is out of reach for now. also want to take a look at how commodity prices are doing. because we did see an increase in oil prices. crude up by over a dollar overnight. 106.37 as president obama has authorized these air strikes in iraq. crude up by three quarters of 1%. ahead on "worldwide exchange." will food be the mortar to stick bricks together? we analyze brazil's opportunity to fill the european side's gaps on russian shells.

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russian officials have met with a number of latin american representatives to source additional food providers. this is a day after moscow imposed import sanctions on products from the west.

countries like brazil are looking to capitalize on the gap that will be left on russian shells. and russia made the retaliatory move yesterday in response to a series of embargoes on russia that have been imposed by russia and europe. the ecb president mario draghi sent a warning about the possible effect on these sanctions. let's take a listen. >> i would say we're at just the beginning. we're still assessing what the possible likely impact of sanctions might have on the euro area economy. we see risk especially coming from the price of energy. >> joining me on set is a partner. is it clear to say that brazil is the clear winner here? >> i think the starting point is no one's going to be a real winner in this. businesses will suffer. consumers will suffer. it is true to say that there may be some impact in trade flows

and brazil and other latin american countries might be -- some of those might pick up some additional trade deals with russia. >> president putin has said before launching those retaliatory actions that they should be careful about the effect it's having on russian consumers. we know inflation is already above target. huge conundrum for the economy overall. so with these retaliatory actions, in terms of the imports coming from the eu, the u.s., australia, you name it, prices are going to go up. it is going to hurt the russian consumer, isn't it? >> that may well be the case, but i think it's probably been well thought through on the russian side in terms of who may be impacted and i think they would have carefully calculated how wide an impact these sanctions would have in terms of russian consumers. it's also important to note that from the u.s. and the eu side, when they introduced sanction measures, there probably is not an intent to really hurt individual consumers. i think the intent is really to

go after certain officials and certain specific businesses with whom the eu and the u.s. have concerns. >> is it possible to say just how long these sanctions will stay in place for? >> so, what is really unique about the russia sanctions, especially if you compare it against other measures like iran or syria or north korea, i think first off, it's how fast-moving they are. where we are today is very different from where we thought we'd be two weeks ago. second, it's the unpredictability. i try to look ahead in a month's time and i'll be honest, it is difficult to predict where we will be. you've talked about the fact that there's been retaliatory measures by the russians against the food and agriculture sector. people are also talking about other impacts potentially by way of retaliatory measures of transportati transportation. and we'll just have to see what. that really means for businesses now is some contingency and risk planning. let's face it.

businesses are used to doing that. and they prepare for more remote risks. so now is the time for them to be really sort of settling back and thinking about how this could impact on medium future as well. >> so exactly what are you telling those businesses? because that's your main job, essentially to tell the businesses how to navigate around these sort of sanctions. again, very unpredictable. very, very fluid in nature. what are some of the practicalities here? >> the starting point is look at the measures today. what have we just seen introduced over the recent couple of weeks? there have been impacts against the energy sector. defense in aerospace. the banking capital market sector. so what i'm telling clients is understand what the current measures are and work out what the impact is on your business today. >> how much temptation is there still by corporates to sort of circumvent these sanctions, to find these loopholes? because they still want to do some very profitable business. i guess that tendency has gone down with the massive fines that have been imposed on some of

these companies. >> in terms of reputable businesses, there is no circumvention going on because that is a problem in itself. but you're right, the banks are very nervous about this as well given the significant enforcement actions they faced as well. >> thank you so much for that. >> pleasure. >> sunny mann, partner at baker & mackenzie. let's take a look at some of the big corporate movers. two stocks in milan down this morning. they blamed weakness in china and the united states for its 26% decline and net profit. currently down before it was suspended 10.9%. and bmps shares were also suspended today after they opened down nearly 10%. the italian bank reported a bigger than expected second quarter net loss, due to charges for loans triggering a slew of

orders. nokian renkaat with a slowdown of sales in russia, which dropped off by more than 40% on the year. and last by not least, allianz, a rare stock in the green so far, as the german financial giant reported better than expected operating profit in the second quarter. this thanks to strong sales in its insurance division, outweighing persistent woes in its acid management arm. we are under a fair amount of selling pressure this morning. we are off by 1.3% approximately. actually, overwhelm improved just modestly. we're only down by 1.2% now. but this follows a very patchy trading session, and maybe early stabilization early this week, but we really have extended the selloff that we've seen going on about a week or so. geopolitics, this is all we care

about this morning. it's interesting, valentin. at the start of these geopolitical worries, the markets were pretty sanguine, but now increasingly, they are more worried. are you changing your asset allocation on the back of this? >> well, you know, i think before doing that, you need to put it a little bit into perspective. if you look at global equity markets, we seem to be heading for a 4% to 5% correction, similar to what we saw when the geopolitical tension over ukraine broke in february, and fairly similar to at least once or twice a year, corrections that you tend to see in global equities. so the question now is having seen that correction on a day like this, you know, do you want to respond and get more defensive? we are for now staying off that move and remaining a bit cool,

anticipating at least a technical bounce probably next week. more recently in recent weeks, obviously this was building up and we have scaled back some risk in high yields, in credit space, and especially in european assets. >> you want to be invested in any asset as long as it isn't cash. well, what are you using as your safety buffer then? >> well, obviously, government bonds are still the ultimate safety buffer. look where german bundes are trading. hitting the 1% almost. clearly providing, as they tend to do in all these risk periods that we have seen ever since the great financial crisis, providing a cushion for diversified portfolios, compared to let's say they are doing, who are clearly moving lower across the board. despite all the talks about high government deficits, i think

investors need to understand that the more credible government bonds are out there are still a clear area of protection in a diversified portfolio in these types of environments. >> what does it mean for equities? you still have a strong overwait in equities. does it mean the more defensive sectors as we're constantly hit by these geopolitical factors? >> well, you know, the first thing i think, it is obviously broader than only russia-ukraine, given what is happening in the middle east. so there is more at play also now with obama's announcement yesterday that they possibly could move to air strikes in the middle east. but still, i think that is the core of the concern of global markets. so that's also why we think in sector and regional allocations within your equity holdings. you need to adapt. that is what we have done. we have moved european equities

to an underweight, already moving neutral earlier this summer and also scaling back a little bit on our sectoral tilt. but again, i want to emphasize that clearly this last week, let's say six or seven trading days, seems to be very much also a technical correction. the fundamentals about the global macro picture have not at all deteriorated. so be cautious to start selling really at the peak of the panic. >> that's a good point. that said, though, the vix has increased 16% over the last month. that is for the s&p. volumes pretty low, though, still. so do you really just want to dismiss some of the volatility that we've seen on the markets and point that to august trading essentially? >> well, i don't want to dismiss it, but i think we need to take into account that we came from a period where we were all talking about this remarkable calmness and these record low levels and other volatility metrics and

that it isn't that unusual then to have a temporary spike. whatever the reason might be. and we're obviously always needing a trigger and now we got a trigger. one key factor for me also to point out is the reaction of the oil price. generally, the core channel for geopolitical tension to translate into really more pessimistic, sustainable more pessimistic outlooks for markets is the oil price. and it needs to spike higher on the back of geopolitics to scale back your macroeconomic outlook and get on a more lasting basis concerned over global markets. we haven't seen that. oil prices are moving up a little bit yesterday and today. but still well below the levels we saw a month ago. that is a key factor in deciding whether you really want to move a lot more defensive. >> all right, always great to get your perspective. appreciate it. the head of strategy at img investment management. let's get back to some

corporate stories. the fda has lifted a hold on an experimental ebola drug, which could clear the way for its use in patients. the fda is modifying safety restrictions on tkm ebola. last month, the agency halted a small study of the injection due to safety concerns. there is a $140 million contract with the u.s. government. currently in german trading, they're up a whopping 33.3%. boeing and united technologies are reportedly stocking up on titanium parts from a russian supplier, in case tensions from moscow and russia disrupt shipments of a critical material used to make jets. the effort began in march. boeing united technologies and air bus buy much of their titanium from the world's largest producer. boeing off by 1.3%.

united tech also off just modestly. a u.s. judge will hold a hearing this afternoon on argentina's debt dispute with holdout creditors. the country defaulted on some of its bonds last week for the second time in 13 years after a 30-day grace period on an interest payment expired. the judge has to decide whether some bondholders governed by uk and japanese law can get their payments, which he blocked unless argentina also pays the holdouts. on thursday, argentina filed a lawsuit against the u.s. at the international court of justice, alleging the u.s. violated its sovereignty. and still to come on this very busy show, will domination of turkish politics continue? that's up next.

you're watching "worldwide exchange," bringing you business news from around the globe. >> these are your headlines from around the world. global markets sink as investors take risk off the table. what the dax of germany slipping below that key 9,000 level. president obama authorizes targeted air strikes against islamic militants in iraq. >> earlier this week, one iraqi in the area cried to the world, there is no one coming to help. well, today america is coming to help. >> israel confirms it has resumed strikes into gaza, while

hamas fires several rockets towards the country. this as negotiators fail to extend a three-day cease-fire. the world health organization declares the ebola outbreak an international health emergencisy. warning the virus will continue to spread globally. and allianz, a rare out-performer today. a jump in quarterly revenues. the firm's cfo tells cnbc he's backing bill gross to turn around the fund's performance. we've got some uk trade data for you, and the uk trade gap widening unexpectedly in the month of june. brita britain's goods trade deficit widing unexpectedly as exports of goods fell. the deficit fiell in the month f

may. a bit of a negative surprise for the uk trade balance here this morning. let's have a check on european markets. once again, we are under severe selling pressure once again on the back of the u.s. authorizing air strikes in iraq. continued worries about russia and the impact of those retaliatory measures. the ftse 100 falling to a four-month low, off by three quarters of one point. the xetra dax slipping. 8,950 is where we're trading. the ftse mib is bucking the trend. maybe a bit of a bounceback after defaults earlier on this week, but keep in mind we have a couple of very disappointing trading reports out of two companies, as they have been halted for trading. this may not be incorporated in that. let's have a look at the bond markets where we've seen continued flight to safety. we've seen the u.s. treasury

yield, a 14-month low. 2.37%, a massive drop overnight of more than ten basis points. the ten-year german yield is also at another record low, 1.04%. ten-year yields at 2.43%. no surprise, we are seeing continued buying of some of the safe havens. the yen is doing pretty well today, is at an eight-month high against the euro. dollar/yen down by over a third of 1%. euro/dollar performing a little better today, after yesterday's cautious comments coming from mr. draghi, as he mentioned the geopolitical risks increasing. turkey's first direct presidential election will be held on sunday with prime minister recep erdogan widely expected to become head of state. let's take a look at his record. >> for over a decade, he has dominated turkish politics. under his leadership, the country experienced phenomenal economic growth, evolving as an emerging market and giving rise

to a new middle class. but as recep erdogan campaigns for the office of presidency, his office as prime minister is under fire. >> more violence in turkey today. protesters angry at the government for this week's mine disaster that killed as many as 300 people. >> new images of riot police firing tear gas on hundreds of protesters. >> the police are starting to use water cannons. >> reporter: a series of political blunders have tarnished mr. erdogan's image. his decision to force peaceful protesters from a sit-in last year in istanbul, scuffling with mourners following the country's worst mining disaster in recent history, and an active government campaign to stop the use of social media sites like twitter, facebook, and youtube. all this on top of a growing concern over his government's conservative social agenda. >> it's very, very important to all of us, given turkey's size, its economic power, and its role as a stability factor in the

middle east, that a democratic stable government continue and prosper in turkey. so we are concerned about these manifestations of a more authoritarian approach. but i want to emphasize, erdogan is not undemocratic. he believes in the vote, particularly as he assumes he's going to always win. >> reporter: but it's his recent approach to turkey's finances that has economists and investors worried. more than a decade of economic growth unleashed a juggernaut of spending. but analysts say that momentum has slowed and the prime minister's hard line rhetoric when it comes to what he terms the interest rate lobby has put his understanding of economics and the importance of an independent central bank in the spotlight. >> over the past six months, advance of elections, erdogan has really undermined the credibility of the central bank by pushing it to do rate cuts, even though inflation is at over 9%, far past the target of 5% for turkey. >> and so with the economy expected to top the agenda for voters heading to the polls on

sunday, it's as yet unclear where turks will be willing to trade mr. erdogan's policy prescription for upward economic mobility for a less open society. or whether that's a price that's just too high to pay. >> let's talk more about this. joining us now is the head of research at ashmore investment. and hatley joins me once again as well. are you worried about an overconcentration of power here? we're clearly looking at a paradigm shift in turkey. >> i don't think we're going to see any major shifts in the power balance in turkey in the next 12 months. i think erdogan is going to win this election, most likely in the first round. if it does go to the second round, there will be a little bit of nervousness around that, but then he should win the second round very convincingly. the underlying constitutional framework is not likely to change in the immediate future. but it is possible, depending on the outcome of the election, and particularly the parliamentary

elections next year, that there will be an attempt to change the constitution and invest more power with the presidency. but at the moment, the presidency is not particularly powerful in turkey. >> i want to ask you about what we're seeing right now with the turkish lira. with what's happening in iraq, and what the possible u.s. military intervention might be. but i want to ask you, in terms of turkey, you know, how real is the threat of isis to the turkish government and to the erdogan as the next president? >> i don't think it's a major threat to turkey. turkey is quite a powerful military power in the region. but of course, it will -- it does have the power to destabilize the kurdish regions of northern iraq and that could have spillover effects into southern turkey. that's not something that's going to pose a major threat in any way whatsoever to the broad investment proposition to investing in turkey. >> won't it impact their energy

equation? >> no, i don't think so. >> all right, let's talk about the independence of the central bank, or the lack thereof. there is a lot of political pressure on the central bank. we saw that huge hike earlier this year. then we saw that cut. maybe that was ill-timed. what do you think after these elections? does it change anything about how independent the central bank and the governor can actually be? >> i think one of the questions people will be asking after the presidential election is whether there's going to be a cabinet reshuffle and a change in the economic team. that's suddenly going to be a near-term focus. they're essentially a couple of possibilities. either erdogan continues with shimshek at the central bank, or we see a move further out after the parliamentary elections where we get perhaps a cabinet change then.

but i think macroeconomic policy is going to remain relatively unchanged between now and the parliamentary elections next year. essentially macroeconomic policy is serving a broader political agenda. the key to power in turkey is still the parliament. that's why the parliamentary elections next year are going to be so important. >> we're still waiting for that negative revision if it actually comes through. ahead of that, there was a lot of pressure from the turkish officials on moody, on them being too harsh on turkey essentially. do you think that a negative revision would be justified? >> no, i don't think so. turkey's broader macroeconomic fundamentals are pretty solid. most western economies would die for that. 43 billion of reserves. i think there is still a question of the cyclical imbalances in turkey, particularly the very rapid credit growth that has taken place in turkey, which does make it difficult for the central

bank to raise interest rates. and that raises some short-term concerns. but those are mainly cyclical in nature. the broader macroeconomic backdrop is actually pretty solid in turkey. it's a very entrepreneurial economy. it's got very competitive businesses. it's a very flexible economy. it's got decent infrastructure. so i think it's -- i had no idea where the ratings agencies are going. i have no idea how they make their decisions and i frankly don't really care. two of them have got turkey on investment grade. i just don't think one should allocate money to emerging markets on the basis of what ratings agencies do, because they're most often behind the curve, and often their ratings bear no resemblance to what's going to be the investment outlook going forward. >> we heard that criticism many times before. thank you so much for being so blunt today. head of research ashmore investment management. you asked him about the energy impact. you disagree with it, right?

>> i do in a sense. certainly maybe in the short-term, this isn't going to have a big impact on turkey's energy equation, but you have to look at what the turks have built over the last five or six years. they're teaching turkish to people in kurdistan right now because there's become a strong relationship in terms of trade, in terms of energy. and i think if you see isis making any further gains in that area towards those oil fields that are going to become increasingly important to turkey, i think that certainly that's going to end up having an impact. >> you're going to be all over these turkish elections. thank you so much for that. let's move on. the trial of a british investigator hired by gsk along with his u.s. wife has begun in shanghai. the pair are accused of allegedly trafficking personal data. eunice has this report from beijing. >> reporter: the foreign business community is closely watching this trial because it highlights the risks of doing business in china and the dangers of researching local

corporate investments. the british investigator in question is a man named peter humphr humphrey. he and his american wife are known here to be very good and highly regarded investigators. in fact, gsk, the british drug maker, hired them over a year ago to look into the background of an employee who the company suspected of being a whistleblower. now, this trial is not officially linked to gsk, but many people believe that it is because of the timing of the events. the couple was arrested soon after gsk was accused of funneling hundreds of millions of dollars in bribes to doctors as well as hospital staff. the couple faces charges for illegally collecting information, personal information, of chinese citizens. this is what china considers an open trial. the court is live tweeting the events and the proceedings in the court. also, there's supposed to be a media briefing later today. and the family of the couple is also present in the courtroom.

the son has said that he is hoping for leniency. his parents face up to three years in prison, and so far, nobody expects a verdict to be announced today. eunice yun, cnbc, beijing. >> like the ecb, the bank of japan is taking note of geopolitical tensions and leaning it to cut the nation's export performance, its second downgrade in six months. this sent the nikkei to its sharpest decline in about five months. let's have a look at the nikkei. it is actually down by 2.9%. what a steep fall there. the central bank's pessimism comes out of taiwan. the domestic economy is still dealing with the impact of april sales. tax hike, the boj did maintain its overall economic view of a modest recovery and left its monetary policy unchanged. joining me now is the head of economic research at diawa capital markets europe. basically the boj is saying

forget about our export dependence because it's not going to be helping us anyway. sit right to really focus on the domestic consumer? >> i think it probably is, because everybody had been originally pinning their hopes on the big depreciation of the yen that we've seen since middle of 2012. would give a big boost to exports. and that just hasn't happened. it really hasn't mattered, because domestic demand accounts for 85% of gdp in japan. so if you get domestic demand moving, you get the whole economy moving. that's what happened over the past year. obviously we got noise now associated with the increase in the consumption tax hike. actually, i think the boj is right to look through that noise. look at the surveys which are upbeat. hard data are also suggesting a return to growth in the third quarter and say that things are okay. >> we're getting second quarter gdp data next week. a lot of the banks, they have already downgraded their four accounts. we could be seeing a dip as well as low as 6% to 7% in the second

quarter. is that what you're expecting? >> on an annualized basis, we think it will probably be even more than that. it could be more than 8%. >> but it's just the sales tax increase. >> i would treat that as noise. we had a big increase in consumer spending ahead of the tax hike. we've seen a big fall since then. investments has been also infected. but also in terms of machinery items. so i would look through that. as i say, there's a lot of indicators. for example, the vehicle sales numbers we've seen from july, which suggest that spending has come back now into the third quarter. and whilst we'll see a big drop in the second quarter, we might well see a very substantial boost to gdp in the third quarter. maybe something in the range of 5%, 6% annualized. that's not bad. >> well, that's the hope, isn't it? >> that's the hope. >> i'm wondering, earlier on, everyone thought, okay, we're

just going to wait for the impact of the sales tax hike, then we're going to be getting more monetary easing from the boj. we thought maybe july. now that hasn't happened. hasn't happened in august. do you think oblgt might be the month, or do you think we're waiting in vain? >> i think you're waiting in vain. don't hold your breath for further boj easing. only if we get a significant downward surprise of the data, which suggests that gdp growth will be very modest indeed, and also it's having an impact on inflation, should we expect the boj to move. i don't think they're going to move again for a long time. we haven't seen them change policy for to consecutive meetings. i don't think they'll change policy for another 20 consecutive meetings. probably more than that. inflation is positive. that's a good step. it's likely to level off for some time. i don't even think it's necessarily going to push much higher next year. won't fall back, but they're just going to keep on plowing away with quantitative easing with buying assets of the

current rate on and on. throughout next year, probably into 2016 as well. >> don't hold your breath then. thank you so much for that. chris scicluna. caviar, truffles and champag champagne. parents had a tough time investigating what's keeping the top end restaurant scene in london booming. we'll find out after this short break. don't go away. >> this is the most opulent dining room in london. coming up, find out how one of the couple's hottest chefs is satisfying the insatiable appetite for high-end dining. where the reward was that what if tnew car smelledit card and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet,

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you're watching "worldwide exchange." >> for jason authorton, being a chef is about much more than just cooking. karen met up with him and asked how he had built a restaurant empire over a decade when many said fine dining was dying. >> it was a case of taking away a lot of the stuff that was a bit irrelevant to someone's dinner and charging them way over the top for it and deformalizing fine dining in today's market. >> are you worried about interest rate hikes?

there's already talk about it, that we are going to see some form of a rate hike before the end of the year. >> we've been really lucky and the british community have been really smart. where i benefit and all restaurateurs benefit is people had this surplus of cash to spend because their mortgages weren't going through the roof, so they maybe couldn't afford the holiday to miami, but they could afford to go out for a dinner. >> how do you stay on trend? raun restaurants traditionally have tended to go bust more so than any other industry. >> it's always just been about really high quality. almost like chanel. chanel will never die because it's really high quality clothes. and everything they produce is really high quality. so that goes from a generation down, you know? and it's the same for restaurants.

>> reporter: this has been described as the defining restaurant of the decade. what is that like? >> we paid a lot of money for that quote. no, we didn't. there's no way of defining that. all you've got to do is try and get a really beautifully designed restaurant and make sure the quality of what you serve is paramount. making sure when the guests come through the door, an ambiance is crucial today. people want the whole night out. it's not just about the food. it's about the music, the decor, the way the staff interact. what the staff look like is also important. every detail is really super important. >> what does it cost to achieve such an opulent dining room like this? what's the price tag? >> i mean, this is sort of like a different dining room to what you would normally get. it took a lot of money to restore and put together. but you're talking in the millions. that's what it is to put a millions together. >> how many millions? >> this was about 5, 6 million pound project. people say to me, why do you keep expanding restaurants? i say look, i know nothing about property. but one thing i know is

restaurants. when we make money, and i see a talent in the kitchen, surely i'm better investing in those guys. it just means that i'm expanding my business portfolio in a way while i can control it. >> just how profitable is the restaurant game these days? >> it's very difficult. as property prices increase, we have, as of next year, when we open up in new york and sydney, we'll be the only british restaurant group with a spread over five continents. our business plans are very simple. we can fill our restaurant 60% and still make a profit, then we'll dive into that restaurant deal. if we can't, then we don't. never, ever can our restaurant be more than 10% of turnover because it's a deal breaker for us. it's a really difficult game. inflation is uncontrollable. staff costs are getting higher. minimum wage is increasing. running restaurants has to be a lifestyle. if you're doing it as a business, it's very difficult. >> you worked with gordon ramsey for many years, i believe it was about a decade-plus. >> yeah, that's right. >> reporter: how different are you to gordon ramsay in the way

you operate? >> we have very different personas in the kitchen. i'm deadly silent. where gordon's very loud and boisterous. i'm deadly silent. you can hear a pin drop in there. unless i have to lose my temper for the right reason. >> michelin stars are something that some restaurants work for years to try and achieve. you seem to collect them in your wake, after just a few months of opening a new venue. what is the secret? >> for us it's about every single customer gets the exact same service as the next person. if we do that, our restaurants will remain full. >> looking very yummy. it's not even lunchtime yet, but yeah. looks very good. let's take a look at one of the big corporate movers in today's session. allianz is a rare stock in the green, as the german financial giant reported better than expected operating profit in the second quarter. this thanks to strong sales in its insurance division, outweighing woes in its asset management arm. earlier, the european squawk box team caught up with the allianz ceo and asked him about the

performance at the asset management arm of pimco. >> pimco had a performance a years ago and it's recovering nicely. when you look at a 36-month performance, which is more midterm and includes the dip, we are still at 89% outperformance, which is actually a testimony of a long-term performance and return for the customers. >> is bill gross past his sell-by date? >> i think bill is working hard on the recovery and our front performance, also the 12-month performance is now back above 80, is certainly based also on his contribution in the last month. >> anything at the level that needs to be done to address perhaps the continuing outflow of money from his key fund? >> i think that it's certainly

money which is leaving, and i think that the detailed customers may be more sensitive to newspaper articles. institutional investors are just looking at the great performance p. >> the total return fund posted its 15th straight month of investor withdrawals. so that suggests to me that even as performance improves, people are still uncomfortable with the stewardship of the fund. i ask you again, this is not just about a few newspaper headlines. this is the market falling out of love with mr. gross. >> no, i think that it's too much regret into it. i think that the true line numbers are already, as you are just mentioning it, look much better. we are now close to break even. >> you pinned him into a bit of a corner because you can't really replace bill gross.

the marker would probably be just as uncomfortable if an unknown was pushed into the top job now at pimco. >> i think we have a strong bench there, and maybe external perception that pimco is about bill gross and nothing else. that is the one perception. we have a really great team. look, there are more than $1.5 trillion u.s. dollars to be managed and that is not done by a single person. and still to come on the show, are we amid a market correction? we preview your trading day ahead with a guest who thinks the moves of a correction would be much ado about nothing.

welcome to "worldwide exchange." these are your headlines from around the world. global markets sink as investors take risk off the table. what the dax in germany slipping below that key 9,000 level. president obama authorizing targeted air strikes against islamic militants in iraq. >> earlier this week, one iraqi in the area cried to the world, "there is no one coming to help." well, today america is coming to help. >> israel confirms it has resumed strikes into gaza while hamas fires several rockets towards the country. this as negotiators fail to

extend a three-day cease-fire. the world health organization declares the ebola outbreak an international health emergency, warning the virus will continue to spread globally. and allianz a rare out-performer. the stock trading higher in frankfurt. the firm's cfo tells cnbc he trusts pimco boss bill gross to turn around the fund's performance. let's get back to our top story. u.s. president barack obama has authorized air strikes against islamic militants in northern iraq to prevent what he called a potential act of genocide. it comes amid mounting concern over the fate of tens of thousands of members of iraq's yadizi sect. obama said it was time to act. >> i've therefore authorized

target air strikes, if necessary, to help forces in iraq as they fight to break the siege and protect the civilians' -- civilians trapped there. already american aircraft have begun conducting humanitarian air drops of food and water to help these desperate men, women, and children survive. earlier this week, one iraqi in the area cried to the world, "there is no one coming to help." well, today america is coming to help. >> meantime, israel's military has confirmed that it has resumed rocket fire into gaza, this after hamas fired several rockets toward the country. in a statement, the idf said in response to the renewal of rocket fire by gaza terrorists at israel, we're striking terrorist sites in gaza, adding that over 20 rockets have been fired towards israel this morning.

if you're just tuning in, let's show you what u.s. futures are doing this morning. we're expecting a pretty steep drop at the top of the trading session. the dow is seen off by 33 points. the s&p could drop by five points and the nasdaq is seen dropping by 12 points. this is after the s&p fell by 0.6%, holding on to that two-month low. the dow dropping to a three-month low, and yes, it is all about geopolitics. we've got russia and then we've got iraq, and then we still have worries about an earlier than expected fed tightening. let's not forget about that. want to show you what european markets are doing one by one. yes, we're still in the red. very deeply entrenched in negative territory. the ftse 100 falling to a four-month low. the xetra dax has slipped below that crucial 9,000 level, down by 0.9%. we do have one slight

out-performer, the ftse mib, actually trimming some of the gains we saw earlier on, but we've got a couple of companies that have come out with earnings on the ftse mib today. those shares were halted. one of them bmps. actually now dropping into negative territory as well. want to show you the extent of the flight to safety and the risk aversion that we're seeing on the market. the ten-year treasury yield dropping to a 14-month low. 2.36% its level here. we saw a big fall in yields overnight. the ten-year bund-year-old at record lows. commodities are looking like this. no surprise with obama authorizing selected air strikes. we're seeing oil prices moving higher. crude gaining almost a dollar

overnight. spot silver also seeing some modest gains. let's get out to ken, he joins me now, is this a correction that we're seeing? because technically, we would have to see a 10% drop. do you think we'll be getting there? >> well, we certainly could with all these geopolitical events that are happening. as you said earlier, we're looking at things everywhere from iraq to russia to what's going on in gaza. so yeah, can we get that? sure. is it something we should all be freaking out about? no. >> you've been looking at past corrections. tell us what you've been finding? >> yeah, i was looking at the idea that okay, so we're going to get a correction. we're already somewhat 5% or so into it. if we get 10%. so i went back and looked historically. past and future aren't the same. keep that in mind. doesn't mean it's going to

repeat itself. if you go back and look from 1950 to the present, there's been 22 corrections of between 10% and 20%. i didn't look at over 20% corrections because those are associated usually with recessions, and that's really not what we're looking at now. but if you look at the past 60-some-odd years, we've had 22 corrections from 10% to 20%, and it's taken on average only 3.7 months for the market to regain all the ground that it lost during, you know, that 10% to 20% correction. so i think it's very important for investors, maybe not traders, but investors that are certainly looking to, you know, save for their future or 401k plans, retirements. that corrections are a normal thing. you could argue that maybe the market got ahead of itself. i don't think it did get ahead of itself. but it hasn't had a correction in quite a while. that's been a story we've talked about a lot through the years

here. so the fact that the market's pulling off here is probably a long-term healthy thing and should give people an entry point to come into stocks that maybe got away and got the valuations they didn't feel comfortable owning them at, or so someone that's got some cash sitting on the side that was concerned about the market in general, you know, markets like this are a chance to lag some of that money into the market. so i think this could be a market-friendly event, but we are seeing geopolitical things rock the market, and you just said it in the ten-year return. it's a pretty strong low. >> i actually think you make some very, very important points. and a very important distinction talking about long-term investors on the one hand and traders on the other hand. it's very difficult, isn't it, to call the bottom in this selloff, in this correction, whatever you want to call it. so how should traders navigate this? >> well, the one point i'll say, you can never call the top or the bottom. these are things you only know in retrospect. a trader should maybe not be on

vacation. with headlines new almost every week about something happening, whether it's ebola or gaza or all the things we've been talking about. a trader has to look at this thing and say okay, where is this market going for the next day, week, or month? but investors -- this is somewhat of noise. if you look at the economic data that we're seeing out of the united states, you know, jobs are coming back. the gdp is improving. we're starting to see some pickup in inflation, which should give companies pricing power. when you look at all those things, you know, it's actually -- the wind is into the sails, if you will. i think that things look good when you take out the geopolitical issue. so for the long-term investor, i think you have to use this as an opportunity, as i said earlier. for the trader, though, they're playing an entirely different game. they're looking at how can i wring out little bits of money over very short periods of time. i often say the trader is trying to make millions of pennies, you know, millions of times a day,

whereas a long-term investor is just trying to make a million or $2 over a lifetime and that's the distinction. >> you're telling the traders don't go on vacation. did you go on vacation, though? mine is still coming up. >> no, i haven't been on vacation all summer and i won't be until the fall. >> maybe that's a good idea. ken, thank you so much for that. ken kamen. we've got some breaking news for you. the world health organization says ebola outbreak is likely to get worse before it gets better. and prepare for ebola outbreak to be at a high level for a number of months. so these are some of the comments coming out of the latest from ebola. up next, we speak to doctors without borders and ask how the virus can be contained. ♪ ♪ over 1.2 billion eyeballs are on us during the two weeks at wimbledon. true tennis fans want to know what's happening.

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you're watching "worldwide exchange." these are your headlines this morning. global shares trade lower as president obama authorizes air strikes in iraq. israel confirms it has resumed strikes against hamas after several rockets are fired from gaza. and the world health organization declares the ebola outbreak an international health emergency.

in the last few minutes, the world health organization has said the ebola outbreak is likely to get worse before it gets better and has warned that the outbreak could be at a high level for a number of months. earlier this morning, the w.h.o. declared the ebola outbreak as an international health emergency. the agency warning of "particularly serious consequences of a further international spread of the virus." nearly a thousand people have died in west africa from that outbreak. i'm now joined by vicky hawkins, the executive director of doctors without borders. she's joining me on set. thank you so much for coming in. >> thank you. >> what does this classification by the w.h.o. mean exactly? >> i believe that it puts an obligation on u.n. member states to take certain actions recommended by the w.h.o. in order to be able to contain the outbreak. >> but it doesn't automatically mean that more funds will be disbursed by member states or by the w.h.o. in terms of fighting this disease? >> i think basically what it does, which is very welcome from

our perspective, is brings a great deal more attention to the situation. and yes, with that should come resources, because undoubtedly, we do need more resources dedicated to controlling thisout break on different levels. particularly we need resources dedicated to the coordination effort, because we see this is a regional swrout break now, and therefore a very complex thing to manage. but we also need a lot more resources dedicated to actually controlling the outbreak itself. >> how many of your employees are on the ground, and how do you make sure that you've got the right in place? >> we've got over 350 staff trying to control the outbreak. nsf is quite experienced at dealing with ebola. this is the 15th outbreak we've responded to since the '90s. we take very careful precautions in terms of the way our staff

are protected in the treatment centers and a very careful layout of the treatment centers to ensure there's no risk of contamination from one zone to the other. >> now the areas that are affected, they're completely blocked off. do you think that is the right approach to deal with the spreading of this disease? is this the only solution possible effectively? >> what we're concerned about with the more sort of draconian measures such as isolating whole communities is that you drive the outbreak underground. this is a border area that's affected, very pourorous border. what's really needed is much more attention to the communication effort, so we can allay their concerns. spread the message that the best thing to do for suspected ebola patients is to bring them in early because we have a much better chance of providing the treatment and the patient recovering. >> what do you make of the test drugs that have been given to u.s. citizens who have been

affected, have been given to a cup of other people that have been affected. even though you don't know anything about the safety features, do you think that's a good idea? because anything can help right now. >> at the moment, nsf is totally concentrated on providing treatment and the information that the communities need in order to be able to allay their concerns. obviously, the potential of a treatment is very exciting. however, there's a lot more hoops, and we can roll that treatment to the communities affected by this. >> all right, thank you so much for this. vickie hawkins, the executive director of doctors without borders. and let's talk about one of these test drugs. the fda has listed a hold on an experimental ebola drug made by canada's pharmaceuticals which could clear the way for its use in patients. the fda is modifying safety restrictions on tkm ebola.

tekmira has a $140 million contract with the u.s. government and shares did rise 8%. they're up by a whopping 33%. still to come on the show, what's next for iraq? after the break, i'm joined by paul brinkley, the former u.s. deputy undersecretary of defense who headed up an iraq task force.

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and make this the summer of style. welcome back to the show. let's have a look at u.s. futures. the selling pressure is expected to continue in today's trading session, following on from the weakness that we saw in asia and europe today. the s&p 500 taking into fair value, the dow jones off by 57 points and the nasdaq could fall by 14 points. this is after the dow fell to three-month lows yesterday. the s&p 500 rather sticking to those two-month lows. let's get back to our top story. u.s. president barack obama has authorized air strikes against islamic militants in northern iraq to prevent what he calls a potential act of genocide. it comes amid mounting concern over the fate of tens of thousands of members of iraq's

yazidi sect who have been driven out of their homes. the u.s. has already begun humanitarian air jobs, but speaking yesterday, obama said targeted air strikes had also been approved to protect u.s. personnel in the country. >> i've authorized targeted airstrikes, if necessary, to help forces in iraq as they fight to break the siege and protect the civilians trapped there. already american aircraft have begun conducting humanitarian air drops of food and water to help these desperate men, women, and children survive. earlier this week, one iraqi in the area cried to the world, there is no one coming to help. well, today america is coming to help. >> i'm glad we're now joined by paul brinkley, the co-founder and ceo of investment firm north america western asia holdings. a former u.s. deputy undersecretary of defense. hatley gamble, our middle east correspondent also here.

paul, thank you so much for coming in. is this too little, too late in terms of the president's response to this? >> well, there's different perspectives. i think anything that arrests forward momentum that isis established in northern iraq is a very positive step. we've seen this crisis emerge with the community, but we've already seen mass displacement of christian communities in northern iraq. this rampant intensification of an already sectarian conflict. i think is not positive for any as pekt of u.s. or international relations in the region. so i think this is a positive needed step and hopefully this will begin to arrest the momentum. >> president obama is the fourth president to tackle the issues going on in iraq now. it hasn't really been effective over the last couple decades. what should change now? why would it be different now? >> one of our dilemmas is we get caught up in -- you can look

over the sweep of american example and you can see ample examples of mistakes and those have been well-documented. in my opinion, what is needed now is the ability to learn from the mistakes to be made, the international community to not repeat mistakes that have been made and not look at everything in terms of extremes. we tend to fall into oh, my gosh, should we invade iraq again? or oh, we should do absolutely nothing. there's a whole continuum that is available to us that can help arrest this degradation of social infrastructure in northern iraq before this becomes something that we have to deal with on a much larger scale. >> paul, you talked about some of the mistakes that the u.s. has made in trying to tackle the problems in iraq. i think we can probably safely say that we really backed the wrong horse with prime minister malaki. maybe that's as a result of there not being many other choices. in terms of what this current situation means for the office of the prime minister, are we going to see malaki go as western powers have suggested,

or are we going to see him sticking this one out? >> there's certainly a huge amount of pressure to establish a nonsectarian minded governing structure in baghdad. and the current prime minister's ability to form that sort of government is in question and there's a lot of international pressure. it has been ten years. setting aside all of the issues, in an information age, it's really hard for a politician to stay popular in any country after ten years. so a change in baghdad may or may not be forthcoming. the question now is how do we take the venom out of this sectarian intensification that's taking place in iraq and move it in a direction where positive development can be restored. >> a few years ago, vice president biden when he was still a senator was talking about the biden plan and partitioning of iraq and leaving the south autonomous and leaving it run by the shia essentially. you spend a lot of time in iraq. you know that country very well.

we're looking at the current situation. what's happening in the south of iraq where the oil is? >> there's a lot of concern. so among normal iraqis, not necessarily in the government, there's a great deal of frustration and concern because believe it or not, there is a strong iraqi identity and a sense of national pride and a sense of a frustration with the degradation and security throughout the country. the issue of dividing the country that you raised is very, in my opinion, naive. looking at it from the outside, it seemed to simple. but there are major parts of the country that are very, very mixed in terms of both ethnicity and religious sect, and to say that it's going to be divided sounds very casual, and it's a very easy thing to put into a policy framework or a paper, but the bloodletting that that could lead to and the violence, the extended period of balkan style -- or lebanese-style violence that could emerge from that sort of cavalier decision i think is something people really need to think about before they start advocating particular

policies. >> once again, is the u.s. going to go this alone, or do you think they can actually rely on a little bit of help from their european friends. france, for example, saying that we need a u.n. security council session later on to discuss iraq. calling for support for the forces fighting isis. is it more than just words? >> well, i think that there is a broad-based cynicism. i go back to the 20-year sweep of history. there's a broad-based cynicism about the effectiveness of military action in iraq. i do agree that the idea that this is a military problem that has a military solution is way too simple. this is a complex, politically driven frustration that's been brewing among sunni communities in the west and the north of iraq for quite some time. and removing that venom is necessary, and that has to take place through a political process. how ready the international community will be to commit

forces or beyond this sort of resolution discussion is very unclear at this time. >> paul, it's been absolutely great to have you on the show. >> thank you. >> and to get some insight and perspective on this. paul brinkley, the co-founder and ceo of investment firm, and the former u.s. under secretary of defense. also want to thank hatley gamble, our middle east correspondent here at cnbc. how does the u.s. labor market look to the fed? we preview the productivity data coming up next. and we leave you with a look at how the futures of trading ahead of the open on wall street, and once again, we are expecting some downside pressure for these indices. the s&p 500 almost eight off points.

welcome to "worldwide exchange." these are your headlines from around the world. global markets sink as investors take risk off the table. president obama authorizing targeted airstrikes against islamic militants in iraq. >> earlier this week, one iraqi in the area cried to the world, "there is no one coming to help." well, today, america is coming to help. >> israel confirms it has resumed strikes into gaza. this as negotiators fail to extend a three-day cease-fire.

the world health organization declares the ebola outbreak a world health emergency. and allianz a rare outperformer, thanks to a jump in quarterly revenues. the firm's cfo says he trusts bill gross to turn around the fund's performance. >> you're watching "worldwide exchange," bringing you business news from around the globe. >> if you've just woke p n up i the u.s., thanks for tuning in. here's how markets are faring. we're expecting a drop at the start of the trading session. the dow, the s&p 500 and the nasdaq are seen lower across the board. this is after the dow hit a three-month low yesterday. it's all about geopolitics. the s&p 500 clinging on to two-month lows and we're

expecting volatility once again to increase in today's trading session. we're still deeply in the red, with one exception, the ftse mib in italy. xetra dax off by 0.9%. and the cac 40 at 4,131 points. israel's military has confirmed it has resumed rocket fire into gaza, this after hamas fired several rockets towards the country as a three-day cease-fire came to an end. want to get out to our jim maceda, who joins us from tel aviv. who's to blame for those failed talks? >> reporter: well, first of all, it seems that war really is back on. you say that there have been rockets fired. it's true. and there has been retaliatory strikes by israel. israel says that it blames

hamas. hamas blames -- because hamas actually launched physically the rockets first. but hamas says that israel has been recalcitrant and hasn't moved at all in accepting any of its demands. the israeli delegation left cairo this morning and returned here, returned to jerusalem first without a deal. hamas officials reportedly offered to extend the cease-fire if israel lifted the blockade around gaza and released a number of militant prisoners. israel rejected that offer, apparently, and dozens of rockets since have been fired. israel after holding its fire for a while officially began about an hour ago or so to retaliate with "force", meaning airstrikes, tanks, and artillery fire are on the table. the sense coming out of the talks was that israel seemed willing to discuss humanitarian issues, like the opening of border crossings for gazans but wouldn't bend at all on security

issues, so the israeli defense forces are saying that strikes across the table, across gaza are going to happen throughout the gaza strip, and that rocket sirens are once again sounding throughout the southern region of israel. those peace talks are looking pretty desperate. that said, it appears that there was or may well still be a last-ditch effort to try to keep the talks going by some palestinian and egyptian officials in cairo, even if that meant simply that both sides agreed to hold their fire without any kind of formal truce, to just build on some of the minor demands that israel has been amenable to, like extending palestinian fishing rights, for instance. but that hasn't happened yet. and now israelis have been told by the government to reopen their bomb shelters and not to congress rega congregate within 20 miles of the gaza border.

it's back to square one. back to you. >> thank you so much for that. let's give you a look at what's on today's agenda in the united states. the first read on second quarter activity is out. unit labor costs are expected to rise, and at 10:00 a.m., we get a wholesale trade forecast. just one notable earnings report out today. sotheby's before the closing bell. good morning to you, steven. how much of a bounceback do you expect in productivity? we've got that productivity puzzle here in the uk, which you are very well aware of. do we have a similar one in the u.s.? >> we have it in spades in the u.s. our economists are more optimistic on q2 activity.

say you draw it out from 1990, you see this real slowdown in productivity beginning around 2004 and then getting exacerbated beginning about 2011 or 2012, where it's growing by less than 1% over a period of cyclical recovery. and that really sets a limit to how fast federal wages can grow and, you know, sort of how low unit labor costs will stay. >> steven, do you think that maybe there is a little bit of a silver lining in all this geopolitical risk that's hitting the markets this week in terms of the fed maybe holding off on an earlier than expected rate hike? >> look, i don't think there's any silver lining whatsoever, because the only reason that they would hold off from a rate hike is because activity is really, really disappointing. there's no -- you know, the net -- there's no real upside to it. i think they would much rather have normal geopolitical and do

what they have to do. >> i guess you're right on that. it really isn't great for the global economy. it's a humanitarian crisis, too. want to talk to you about the u.s. dollar. every time we see that rally in the u.s. dollar -- and you can't really call it an outright rally. guess it's more of a stealth rally. all of a sudden it's capped by geopolitical concerns once again and a drop in yields. when are we finally going to see an undisturbed rally in the u.s. dollar? >> well, i think that in the initial stages of the geopolitical concerns, when the russian ukraine crisis -- as last week, the dollar was rallying. but the problem that the dollar has right now is that the market is quite long dollars. certainly against g10. as a result when uncertainty rises, risk managers tell people to cut their positions. so investors are cutting their long dollar positions because that's the longs that they have. the dollar would do okay.

i think if these geopolitical issues were exacerbated, because it is a safe haven. but for now i think we're seeing the position cutting, you know, dominate. ultimately, it's going to be the fed, and the fed is likely to start shifting its ground. i think the market is not prepared for it. so i do think the dollar will rally on that. it's been particularly sensitive to upward moves in two-year yields in the u.s., which is where the market is looking at what the fed will be doing the next couple years. and the correlations are very strong. >> they are very strong. but then once again, wouldn't you want to see an upward move, a sustained upward move in the ten-year yield as well? i mean, currently at 14-month lows. that rally simply isn't going to materialize, is it? >> the dollar hasn't been that correlated with the ten-year. so, you know, last i looked, we were below 1,900 on this. if we rallied back to the highs

because of the geopolitical was pushed away, we'd see ten-year yields rally back above 250 very quickly. but as far as we can tell, the segment of the bond market that's driving the dollar is, you know, say two to five years. it's not really ten years, which is more -- i don't want to call it the victim, but the outcome of what's happening in equity markets and market fears and so on. >> appreciate your insight this morning. steven englander. and let's take a look at today's other top stories. the world health organization has declared the ebola outbreak as an international health emergency. the agency has warned that things will likely get worse before they get better, saying there could be particularly serious consequences of a further international spread of the virus. nearly a thousand people have died in west africa from that outbreak. the fda has lifted a hold on

an experimental ebola drug made by canada's tekmira pharmaceuticals, which could clear the way for its use in patients. the fda is modifying safety restrictions, which targets the genetic material of the virus. last month the agency halted a small study of the injection due to safety concerns. tekmira has a $140 million contract with the u.s. government and shares did rise 8%. shares are jumping by 35%. and elsewhere, a u.s. judge will hold a hearing this afternoon on argentina's debt dispute with holdout creditors. the country defaulted on some of its bonds last week for the second time in 13 years after a 30-day grace period on an interest payment expired. the judge has to decide whether some bondholders governed by uk and japanese law can get their payments, which he blocked unless argentina also pays the holdouts. on thursday, argentina filed a lawsuit against the u.s. at the international court of justice alleging the u.s. violated its

sovereignty. >> the company behind the fico credit score is changing how that score is calculated. fico is used by more lenders than any other score. the changes include no longer factoring in debt that's been referred to as collection agency, but has been paid off or settled. the move will make it easier for u.s. consumers to borrow money and banks to lend. it could be most beneficial for people applying for mortgage loans. boeing and united technologies are reportedly stocking up on titanium parts from a russian supplier in case tensions between the u.s. and moscow disrupt shipments of the critical material used to make jets. "the wall street journal" says the effort began in march after russia annexed crimea. boeing united technologies and air bus buy much of their titanium from vsmpo, the world's largest producer. boeing shares off just modestly. united tech off by one and a half. and coming up, striking a

deal. li lululemon averting what could have been a costly proxy fight for the retailer. details and many more yoga pictures coming up next. xkç

you're watching "worldwide exchange." >> global shares trade lower as president obama authorizes airstrikes in iraq. israel confirms it has resumed strikes against hamas after several rockets are fired from gaza. and the world health organization declares the ebola outbreak an international health emergency. let's get to some news. allianz reported better than expected operating profit in the second quarter. this thanks to strong sales in its insurance division, which outweighs persistent woes at pimco. speaking earlier to cnbc, the allianz cfo defended pimco boss bill gross, saying the negative perception of him is wrong. shares are trading higher in germany. one of the rare out-performers because the market is deeply in the red today. allianz shares up by almost

0.9%. a slightly worse performance at todd's. shares sharply lower after a missed forecast. the firm blamed weak sales in china and the u.s. as well as the negative currency impact. shares are trading down by more than 11%. early on, they were actually halted for trading. zynga is delaying several new titles, including zynga poker and is cutting its full-year outlook. on a brighter note, zynga is expanding to new categories, including sports and assigning licensing deals with the nfl and tiger woods. in germany, they're off by almost 5%. now, lululemon was once a market darling but struggled mightily in the past few years. however, there could be some light at the end of the tunnel, as the company will avert a proxy war with its outspoken founder. we've got all the details from

courtney reagan. >> chip wilson has agreed to sell half of its 27% stake in the maker of yoga wear. the yoga wear maker to private equity firm to advent international. as part of the deal, wilson and advent have signed a standstill agreement preventing them from waging a proxy fight until after the company's annual shareholders meeting in 2016. they also won't be able to attempt or support a hostile takeover for the next year and a half. lululemon will give advent two seats on the board and one of the new directors will also become co-chairman. the board has agreed to submit to a review of its corporate governments practices, including how the board is made up and how directors are selected. lululemon has struggled after announcing a recall of see-through black yoga pants in march last year that led to the eventual resignation of ceo christine day. the stock has lost a third of its value this year. wilson's sale of his shares could dilute influence, which has at times put the company in

a harsh light. last fall, he appeared to blame the problem with the pants on overweight customers. in june, he launched a public fight with the board, saying they favored short-term results at the expense of long-term goals. wilson then reportedly teamed up with goldman sachs to explore his options, who reached out to advent, which had previously held a stake in the company. if we check out the action overseas in europe, still up about 6 1/3 percent at this point. this has been a name that's really moved all over the map with every single news headline. shares have gone up or shares have gone down fairly dramatically. back to you. >> thank you so much. i wonder if you can ever, ever recover from such a snafu with those see-through yoga pants. coming up, geopolitics could continue to dominate the markets today after stocks wobbled on headlines out of russia and iraq. we've got some insights on how traders are setting themselves up ahead of the weekend.

that's coming up next.

our top story today, u.s. president barack obama has authorized airstrikes against islamic militants in northern iraq to prevent what he called a potential act of genocide. it comes amid mounting concern over the fate of tens of thousands of members of iraq's yazidi sect, who have been driven out of their homes. obama said it was time to act. >> i've therefore authorized targeted airstrikes, if necessary, to help forces if iraq as nay fight to break the siege and protect the civilians trapped there. already american aircraft have begun conducting humanitarian air drops of food and water to help these desperate men, women, and children survive.

earlier this week, one iraqi in the area cried to the world, "there is no one coming to help." well, today america is coming to help. >> and let's take a look at the market reaction here at europe. we're still seeing very, very entrenched selling. ftse 100 off by 0.7%. the xetra dax losing that 9,000 point level. the cac 40 off by half a percent. only the ftse mib is bucking the trend. we did fall to four and a half month lows, despite the fact that chinese exports actually were stronger than expected. also want to show you what commodities are doing. we're seeing gold move higher on the back of this flight for safety. no surprise, really. gold at a three-week high. 1,316, up by a third of a percent. crude and nymex also moving to the upside on the back of president obama's announcement to authorize airstrikes in iraq. brent crude at 106.26. let's have a look at u.s.

futures. no surprise, we're expecting selling pressure to continue in the u.s. trading session as well. the s&p 500 taking value into account. in the past, by the dip hasn't worked really well. do you want to do that today going into the weekend? >> i think we're now in that much-awaited correction. i think now you want to switch sides and sell the rally. however, there will probably be some dip buying in there today. a lot of selling this week. if we stay down here, the cash will be below 1,900. i think 1920 on the upside would be the new resistance that we'd be looking to sell against. but i think we're first going to target here probably 1860 on the downside. but i think we're going a lot

lower as the geopolitical fears work on. remember, we're only 4% from the high after 175% rally. so the selling is not really intense, but we are starting to see some weakness here. >> what correlation is the biggest? is it the s&p 500 with other equity markets in the world, or is it the ten-year yield? >> i think the ten-year yield has been coming down now, with the chinese buying a lot of u.s. debt. but i think the biggest thing to watch should be the s&p. but more importantly, i think you want to watch the russell. >> where do you go for safe h n

havens, though? is it cash? is it gold? is it treasuries still? >> i think you want to diversify a little bit. i think you want to look at gold. i think gold is okay. silver is okay. some of the higher dividend paying stocks. some of the safety stocks. the safety stocks have not been under as much pressure as the regular market. the chase has been going on because there hasn't been any place to go. the fixed income people have been getting punished because they have no place to put their money. at the end of the day, you have to try to find the best place to actually now have safety versus trying to gain yield. >> do you care about macroeconomic data points at this point in time? the jobless claims number, looking really good. but it seems no one really worried about that. everyone just worrying about the geopolitics. >> i think when you look at the numbers, we've had such a big rally coming into this. if you figure the market, think six months ahead, we've gotten here and the numbers are not as good i think the market was

pricing in. remember, although the jobs numbers have been better, where are we getting the jobs? most of the jobs are coming in the service industry. if you take the middle class or the average joes of the world, they're still in a recession. they have never come out. the wall street and main street separation has gotten so much wider over the last five years that we're still seeing a bunch of pressure in the middle class, higher gas prices, higher food prices. not enough discretionary income and not enough earning power in the fact that the jobs number and the participation rate has stayed low throughout this entire time. so although the numbers appear to be good, i think if you look on the surface, they're not as good. >> todd, just very briefly, are you going on vacation in this environment? >> no, i'm looking to short the market in this environment and have been for a little bit here. >> all right, so todd, thank you so much for that. todd horowitz, author and founder of "average joe." thank you so much for watching

"worldwide exchange." have a fantastic weekend. i'll see you on monday.

good morning. welcome to "squawk box." a big news morning. president obama authorizing airstrikes in iraq, if terrorist group isis makes a move on the city. meantime, u.s. forces carry out humanitarian aid drops, happened last night, it's going to probably happen again. u.s. futures and global markets tumble in the wake of rising tensions in iraq. the nikkei falling 3% overnight. and the big island of hawaii getting slammed by the hurricane, with hurricane julio following close behind. it's friday, august 8th, 2014, and "squawk box" begins right now.

good morning, everyone. welcome to "squawk box." i'm becky quick along with andrew ross sorkin. joe is off today. president obama authorizing airstrikes against rebel militant group isis, if it decides to make a move on irbil. u.s. forces have conducted air drops of humanitarian aid to thousands of iraqi people, fleeing territories occupied by these militants. these people are trapped without food or water, and again, the president speaking last night about this. a three-day cease-fire in israel has ended with a rocket attack from gaza. two rockets were intercepted by israeli defense forces. others went down in open areas. there were about three hours left before the truce was to end. the latest round of attacks threatens peace talks. and the world health organization declaring the ebola outbreak in west africa a international health emergency. the disease has also spread to