welcome to "worldwide exchange." i'm carolin roth and these are your headlines from around the world. tesco's turn around plan is called into question. it issues another retail warning and slashes profits. the ceo of tesco tells cnbc that currency has things shifting in their favor. >> the faulty as ts is -- the

dollar. we have been producing 100% in italy and we have been struggling in the past two years. so with a strong euro -- >> germany and the u.s. warn moscow of further sanctions after nato releases images suggesting the russian military is supporting separatists in eastern ukraine. and one hour to go until we get the highly watched eurozone inflation data that could provide clues on the ecb's next policy move. we are falling again ahead of the release. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> good morning, everyone. the headline this morning coming out of tesco. tesco trading sharply lower today. down by 6.6%. it was down by as much as 9% before after the company issued yet another profit warning. the third time in three years the struggling grocer has slashed its interim dividend by

75% and announced that incoming deal, dave lewis will take up his post next monday. that is one month earlier than expected and that's obviously weighing on some of the our uk retailerses, including rival sainsbury. morrison off by 3.4% and ocado seeing some decline of 2.4%. helia, tell me exactly why we're seeing this partnership tuesday fall in shares today? what is the shock announcement? >> it is a shock announcement. and that wall of red you're looking at is red because this is the biggest share slide move with tess coy in 3 1/2 years. why is that? another profits warning. this is quite a serious profits warning. if we look at the numbers, they're saying they're expecting the first half bigger. now 1.1 million. that's about three or four billion less than it was last

year. for the full year, they're now expecting 2.3 billion, 2.4 billion, 2013, the full year with 3.3 billion. this is a massive falldown for tesco. after a really torrid time, remember their chief executive has only just phillip clark resigned after shareholders essentially pushed him out and you see the urgency of was going on in britain's biggest super market. their new chief executive, david lewis, from unilever is coming a month early and when you're talking about that dividend, that's going to be another disappointment to shareholders. and if you look at that wall again, that wall of red, you're seeing this is not just a problem for tesco, this is a problem for britain grocery markets. one of my former colleagues at the telegraph this morning said this is a retail revolution. and he's right. essentially, the entire

battleground for how consumers shop in the uk, that's changing. why is it changing? because we're offered more choice and because of two things very specifically and that is the german discounters, the likes of alvie, the likes of little who are just slapping up market share. if you look at the recent numbers from cantar, the reason all of the super markets are down is because tesco recently market share slipped. last year it was about 30%. this year it's down at 28%. falling 4% in the last reading. morrison, down, sainsbury, flat. look at albie, 29% market growth. little, 18% market growth. how do you battle with a thing like that? >> so are you saying tesco is fighting a losing battle or are you saying not even the ceo can manage the turn around? >> i think if the ceo manages

the turn around, it will be a market in bloom. >> i noticed steve was this morning talking about valuation and the fact that it's cheap. but the problem for grocery markets in the uk is the model of how consumers shop. that race for space that we saw ten years ago where tesco was in every single pace code in the uk, that was not important any more. people either want value and they're willing to go to places like alvie and little, or they want something very local to them, convenient stores, or they want the high end. so it's going to be a very tough ride for tesco. >> helia, thank you so much for that. we're going to be talking more about that at 9:30 cst. let's move on in terms of corporate news. shares in fiat driving higher after the italian automaker said he does not expect to block its

merger with u.s. based chrysler. the 500 million euro cap on such exit is not likely to be breached, indicating it will go ahead as planned in the month of october. italian luxury group as posted a better than expected rise in first half profits by improvement in its key china market. they sounded confident on the firm's current improving currency position. >> from asset core is the sanctioning of the dollar. we have been a company which produces 100% in italy, we have been struggling in the past two years so with a strong euro. so the improvement and the more favorable exchange, it will definitely benefit. we do not expect our segment to be impacted. i think on the united states, probably the best bout for this year but also for next year.

emerging markets have made emerging markets like latin america, africa, they are still very volatile. >> let's stay with italy because we just got italian july jobless data out. it rose to 12.6%. that was higher than initially forecast while looking for an execution around 12.3%. this is what the previous data showed us. july started coming in above forecasts, italy losing 35,000 jobs, losing 7.1,000 jobs on the year and the youth unemployment figure, the rate actually fell. it did fall, but it's still at a very lofty level at 42.9% in the month of july. so the trend is certainly not getting any better with regard to the italian and the french jobless markets. that's where we saw a record high earlier on this week. and more key data due out today with eurozone inflation hitting the wires at 1100 cet.

analysts expect the first prices rode by 0.1% nearing august nearing a five-year low. in space, the headline rate fell further into deflationary territory at minus 0.5%. >> not a great success story. speaking out at dinner for journalists, he also expressed concern about inflation across the area. no one intends to push a country that is in an economic downturn even deeper into the abit.

we are higher by around 0.3 pergs. you wouldn't necessarily expect that. but maybe this is a little bit of a bounce back from yesterday's losses. and for the week, we're still higher by around 0.75% for the ftse, almost 2% for the cac and the dax. around 3% this week overall. probably very much on expectations that we're going to get more qe or a ramp up in qe and monetary easing from the ecb. of course, cpi numbers. the xetra dax, off by 0.4%. the ftse mib, a little bit of outperformance today, up by around 1%. let's have a look at the bond markets where, once again, we're seeing record lows for the ten-year bund yields. still below that 0.9% level. once again, we're seeing a

flight to safety happening here and this is very much visible in the treasury yield. 2.33%. this is a 14-month low. once again, we're seeing end of the month lows, this could exacerbate some of the moves we're seeing here. in the currency markets, the euro is falling against the u.s. dollar once again. 1.3168. we're expecting 0.3%. 2 japanese yen is pretty much immune to the weaker than expected data points we got out of japan earlier on today. we're going to talk more more about that earlier on in the show. i also want to show you, the exchange rate target of 11720 that the s&p set out about three years ago. once gn, this highlights the risk aversion that is in the

markets. fresh images have been released which shows russian nato forces in ukraine. moscow is trying to create a land corridor. nato says well over 1,000 russian soldiers are supporting separatist rebels. u.s. president barack obama has ruled out military action in ukraine, but warned moscow got its basis, further sanctions. >> the fact that russia has taken these actions in violation of the sovereignty and integrity of the ukrainians has resulted, i believe, in a weakening of russia. not a strengthening of russia. that may not be apparent immediately, but i think it will become increasingly parent. what it's also done is isolated

russia from its trading partners, international business, and those i think are going to be very difficult to recover from. >> before we continue with the story, the latest flash, eurozone money market rains turn negative for the fist time. no real surprise given the geopolitical risk and the risk aversion that we're seeing out there. claudia, what can we expect from that meeting? >> the meeting, which is going to cover various areas because many are the geopolitical issues. what's going to dominate is ukraine. what can we expect? >> after the phone call to putin yesterday stating that sanctions are going to be stepped up,

these actions are inscoreble, the comments are clear, something will happen. it may not happen here in milan or tomorrow at the eu council, maybe more information on possible sanctions. so far, we know that the sanctions that have been put out are, of course, concerning arms and finance banks cannot access long-term debt within the eu. the russians have imposed counter sanctions within the eu, it has affected the berry market, fish, fruit, wheat and vegetables that are clearly having an effect on our economies. it needs about 157 billion euros in the next year to continue to work. so, of course, if these were somehow blocked then, of course, this would create a larger problem for russia.

so these could be some sanctions as well as countersanctions that then could come, of course, to us once again on aerospace, auto and naval industry. so it's a concern of what could happen in terms of stepping up these sanctions. we may know more tomorrow. obama will be in a nato meeting next week, so certainly the ukraine situation will stay top of the agenda. >> certainly. thank you so much for that, claudia. we're now joined by andrew, director of the center at the henry jackson society. andrew, what exactly do you expect from that meeting or do you have higher hopes from the nato meeting? >> first of all, after today's meeting, i would expect an expansion and a tougher sanctioning of the sanctions. the sanctions are limited in scope. particularly with regards to the russian financial system in the western market. and what about nato, then, do you think we can expect some

serious steps that would limit russia's anxiouses that it's taken over the last couple of months and weeks? >> assuming what nato fate is next week in whales, it's seen as very troubling and problematic questions. clearly, nato failed to deter russia's aggression in crimea and ukraine and it's likely failed to deter further aggression and further escalation in the ukraine. with the absence of military support, it remains to be seen really what nato can do. >> the thing is, russia doesn't have much leverage here. oil prices have moved lower contrary to what you would expect with all this geopolitical risk going on. why is the west not putting more pressure on russia? once again, it doesn't hold a trump card as far as russia is concerned. >> i think it's simply with regard to oil. most remember stiff.edly with regard to ukraine, ukraine is reliance on russia for its

supply of gas for the winter. 5 million square meters ukraine is used to taking receipt of. as the conflict continues, as we get closer to winter, russia's hand is effectively strengthened should any political negotiations take place. you don't think russian sanctions are likely? >> i don't think it's likely at all, to be honest. the west thus far has shown very little inclination to impose sanctions on russia. but i don't think they will be forthcoming after this. which, after all, it's simply a continuation of russia's tactics over the last three months. >> do you get a sense that mr. putin has lost control over what the rebels are doing even if he is secretly supporting them? >> i think there's been a reshuffling of the leadership in

eastern ukraine and amongst the pro russian separatists. it seems to me the treatments over recent days are meant to strengthen the positions. i don't think they're a precursor to their russian invasion. >> do you think there's the possibility of a further escalation or a further invasion? >> i think what we have seen is a continuation over what we've been seeing over recent months. it is an important notable escalation, certainly in the context that it disappeared that this conflict was de-escalating.

thank you so much for that. on today's show from driverless cars to self-run vehicles, we look at google's latest experiment outside the world of the west. coming to save the world this summer, more details of "ghost busters" returns to the movie theater to mark its 30th anniversary. and we've seen california start-ups, putting the core into the computer signs. wonder how you do that? stay with us.

a long time google executive megan smith is the top candidate for the u.s. chief technical officer. amazon isn't the only group looking to get into the drone

business. google is, as well. this flies up to 90 kilometers or up to 30 miles per hour. more than 30 successful flights have been made delivering items such as first aid kits. what do you think of google's drone program? is it a good idea or is google simply going too far? join the conversation here on "worldwide exchange." worldwide@cnbc.com, @cnbcwex or direct to me@carolincnbc. it will take a couple of years before they get government approval for this but maybe google and the likes of amazon would do well to work on something for e-commerce deliveries. japan is no closer to its 2% inflation target. prices fall in july. meanwhile, household spending slumped 5.9% from a year earlier. nearly double the forecast of

the april sales tax hike continues to weigh on the economy. charles dumas, from lombard aet's street research joins me now. charles, some say the data we got out this morning, it was impacted by bad weather and this is why we're off to a weak start in the third quarter. others say it points to failures of abe-nomics. which camp are you in? >> abe-nomics is sailing. the inflation rate, of course, is over 3%. if they were smart, they would leave the field. there's about two percentage points of a consumption tax in there. and the inflationary excludeing that, one of three quarters percent a few months ago, entirely because of import pricing increases which resulted entirely because of devaluation. for the last year, there's been no change in the exchange rate. as a result, import prices are

level and cpi excludeing the effect of import prices is going to drift back. >> okay. i see you're pretty skeptical of abe-nomics. i want to play devil's advocate here. cut him some slack. abe is shooting the third era in business about structural reforms. this is not going to take effect for a couple of years. maybe this won't even be visible for another two or three years. >> abe's structural reforms are making the basic problem of japan worse. japan's exports share of world markets has come down by half over the last 20 years. the main reason for this is that gentleman japanese businesses have huge cash flow and are complacent. japanese households have too little money and the economy stag nates. the abe-nomics third arrow is designed to give more money to japanese businesses at the expense of households as if they

need encouraging. but, in fact, what they need is a firm dose of fiscal discipline. >> what we need is higher wages, too, but we're not seeing that. >> you're not going to get higher wages because the mash force is relatively -- they're shifting away as a structural matter and the high wages being paid are under the lifetime employment system of big bonuses. more people retire each year out of that and the new people under the low system. in any case, the devaluation takes money from households and gives it to business. the cop assumption tax increase offset by corporation tax cuts and investment incentives takes money from households and gives it to business. literally, now they're trying to pretend that businesses will somehow give it to households. it's a bit like trying to scratch your left ear with your right hands, but behind your

back. it couldn't be stupider. >> so, what else, what do you suggest they do? >> yeah, absolutely, they shouldn't. they should roll back the first hike and roll back any proposals to give investment incentives and -- >> rolling back the first hike? >> of course it's feasible. they just have to decide to do it. the only kinds of things that will happen will involve, of course, the government changing habits of a lifetime. but that's exactly why japan is in trouble is because of the habits of a lifetime not being changed. >> can we bank on the boj to support the economy? >> well, the boj has a dilemma here and that is that it does what it needs to do in order to achieve 2% inflation on a sustained basis. it has to devalue a whole heap more and that is the consensus about what will happen and that has its reality. there's a better chance of that happening than not. but you need to remember that if

the poj does do this and does create 2% inflation, then at that stage, they presume to stop their qe because they've achieved their goal. and at that stage, the japanese government bonds move from 0.5% yield to about 3% or 4% yield, 2% yield, and since government debt is 140% of gdp, they could be plunging straight into a crisis. so the japanese -- the poor old bank of japan is left picking up the pieces from the mess that is abe-nomics. >> charles, thank you so much for that. i did realize that you had a pretty critical view, but i didn't think it was going to be this negative, but refreshing. charles, thank you so much for that, charles dumas from lombard street research. send in your e-mails to tell us whether you agree with charles or whether you disagree completely worldwide@cnbc.com or find me on twitter,

@carolincnbc. are uk bankers still getting the lion shares of bonuses? after the break, how many workers enjoy a bump in their pay packet this year.

tesco slashes dif depends by 75% sending shares lower. the ceo of the italian luxury group says currency headwinds are in its favor. >> from asset core is the strengthening of the dollar. being a company that produced 100% in italy, we have been struggling in the past few years with a strong euro. germany and the u.s. discuss tougher russian sanctions after nato releases images showing russia is supporting rebels in eastern ukraine. the euro is falling again ahead of the release.

the ftse 100 is up by 0.1%. tesco weighing on that index. we're seeing pretty encouraging gains. the cac 40 higher by around 0.3%. and for the week, the performance is actually pretty strong, obviously fueled by the expectations of qe by the ecb. the cac is up by almost 3% over the week. it may be a bis bit of a bounceback after yesterday's decline. a look at the bond markets, we're seeing a change in the flight to safety. now it's back after 0.9% levels. so below that, yesterday and was below that just a couple of minutes ago. the ten-year treasury yields, still very low at the 2.35%. ten-year gilt yields, 2.39%. let's show you the currency markets where the euro, once again, is lower against the u.s.

dollar, 1.3170 ahead of that crucial cpi. we're expecting a print of 0.3%. dollar/yen, not moving too much in response to the data points out of japan today. 103.86 and the swiss franc is actually just a touch lower against the dollar today. but keep in mind that the swiss franc has been gaining against the euro as a result of the safe haven. so it's very close to that 1.20 mark. simon, good morning to you. for the first time in many months, it is responding negatively to the geopolitical risk. why is that? >> well, i think it's not just the geopolitical risks. having clearly next week's ecb meeting is having an important influence on people's expectations. nevertheless, i do think you're right to say it is important to have something of an impact. we saw that yesterday.

and i think there's a dawning relation that you do get a kick through from the european markets and some of the austrian banks and people like that. there is a kick through you see it in place like the bond, obviously it is in the start. it's really about the ecb. >> you're absolute lit right. it is all about the ecb. today, about the cpi data, just how low does it have to go? does it have to go below 3% for the ecb to be overly concerned? >> it has been overly concerned for the last 12 months. i mean, we've been down here, we're going to see the lows and the rebound. we've never seen it. otherwise, mr. draghi wouldn't have made the speech in jackson hole. that's the thing that's changed sentiment around it. the question is what can he actually do? there are options available. maybe we're getting a little ahead of ourselves next week. >> so you're not exactly expecting qe? is jpmorgan expecting some twist

or some changes to be made to the attractiveness of the bnp this morning saying they expect a refund, the deposit rate cut by 10 basis points next week, but no qe? >> i think what we already know with regard to deposit rate, i'll be surprised. we'll probably head in, too. i think they may well drop some hints with regard to us with security purchases. but full scale qe, i think they're way too slow, as well. >> okay. let's talk about gold. interestingly enough, gold actually on track for its first monthly gain since june. year-to-date, up by 7%. a lot of people said at the start of the year, gold is dead. >> and i'm going to be one of them. >> at least you're honest about it. >> yeah. as far as i'm concerned, gold is in normal circumstances a reflection of u.s. monetary policy. we all heard what janet yellen had to say. that is geopolitics.

and what was fascinating yesterday was to see gold going up despite people's thoughts about u.s. monetary policy. if this continues to deteriorate in ukraine, my suspicion is i see gold continues to get forced higher for a little while. the canadian dollar, they turned suddenly into safe havens once again. so i think there is a little bit of a twist there. >> the obviously real interesting one, because it's been marching to its own beat over the last couple of weeks. it's been rising against the euro and against the dollar. why exactly is that? we're not getting any news from the -- >> look at when the australian dollar started rising and it's risen exactly and there's gold. they both bottomed out around the same time, august 21st and, again, the only thing you can see is significant change. around about them is actually a slight deterioration in the geopolitical situation. so it's only resembling to be with australia, china, i think it's with what it produces. >> all right, simon, you're not

exactly a gold bull now, are you? >> no. >> not a gold pair. somewhere in between. >> that's what we like. simon, thank you so much for that. and the latest flashes out of russia, he fears ukraine may siphon off the gas in the winter. we've heard this commentary before. tesco has issued another profit warning, the third time in thee years. the struggling grocer slashed its dividend by 75% and announced dave lewis will take up his post next month, a month earlier than expected. chairman richard broadband said the new chief executive will kick off with a full business review. tesco plans to cut further

spending by 4 billion pounds this year. paul, you've been talking about the demise of tesco. you don't think this is -- thinking? >> no. i think the timing is interesting because we have a new ceo who wasn't actually due to come on board for a few weeks. but i think he's cut short his holiday and he's going to be starting on monday. but this to some extent feels like a knee jerk reaction to the current trading conditions. the requirements for capital expenditure which, again, they're cutting back on at the moment, they've got to keep half an eye on their balance sheets. they have got quite a bit of debt. there is a risk that moody's had a further downgrade of that debt coming through. so they have to play to a number of different parties here. and most importantly for shareholders this morning, they have taken that all-important cut for dividend. now, once that's been looted over the course of the last few months, they may we will take a

look at the dividend, a cut of 75% for an incredibly aggressive move and to some extent takes the question what else are they concerned about that we're not concerned about at the moment? >> basically you're saying with a yield of 1.5% now, it simply isn't compelling. you would go to other grocers, you would gotory stocks. >> it's a reflection of the economic environment that we sit in today. when we talk about qe and everything else, this is this reach for yield. there's no question that over the course of the last few years, investors have become more and more conditioned to an expectation about their return and income plays a large part in that. and what you tend to find towards equities, particularly those that are attracting income money that previously would have been to the bond market, then naturally companies that can pay out a nice dividend yield have been the outperformers. they don't expect an organization like tesco to go backwards with its dividends.

you can to some extent saw it coming out of the banking industry, but a traditional business like tesco with a predictable learning streak, that wasn't part of the agenda. once again, i thought the dividend was vulnerable and at some point i wasn't expecting 75%. >> that's a huge cut, isn't it? at least this is cut, it's now freed up around 1 billion pounds in cash. that really should keep the debt from getting worse. that's a positive, isn't it? >> absolutely. and to some extent, the competitors could be the biggest fallers on the back of in this morning. you've seen this has not been just centered on tesco, but sainsbury down 5%. morrison, which had been hit pretty hard, anyway, down by 3%. one thing tesco has, it has a margin to invest in product. it has been doing that this year. and even taken another 400 million out of it, i can expect them to come back for further price cuts. that to some extent is going to keep this industry under a lot of pricing pressure over the next year or two. >> all right. thank you so much for that

fascinating story. partner and senior strategist. you're looking at live pictures of a press conference by vice president of the european commission in charge of energy and alexander novak, the russian energy minutester. we just got those flashes out. the russian energy minister saying that he feels ukraine may siphon off gas from the transit route to europe in the winter. he reiterates that russia is ready for a gas price discount for ukraine. we're going to keep you updated with more flashes and more commentary coming out of that press conference. vivendi has chosen te telefoni telefonica. they had been battling w over the unit. let's get out to stephane who is in paris. does it makes sense for vivendi to hold on to the stakes in the

telco company? really what it wants to be is a media company. >> absolutely. but it's the option that gives vivendi the best compensation. vivendi did pay around 3 billion euros to bay gvt in 2009. they're about to sell gvt for 4.7 billion euros. that is a significant profit for vivendi. they're both competent to take the control of gdp. plus, a 12% stake in the newly traded company. remember that telefonica wants to merge gvt with its own mobile phone unit in brazil to create the largest mobile phone on telecom country. it's a very good deal. it's a very -- move in america.

the telecom unit of a few months ago for 17 billion euros, it sold the telecom last year for more than 4 billion euros. it's sold most of its stake in activision. 17 billion euros, but will be in a positive cash position. so that's the end of the transformation and it leads the french group with a very sound financial situation. >> okay. stephane, thank you so much for that. and still to come on the show, no strategy on isis yet. that's the message from president obama as the white house scrambles to put together a clear road map on iraq. more details after this short break.

sdmroo and you're looking at live pictures with the russian energy minister. i want to recap some of the flashes for you. russia guarantees the gas supply to europe, according to the energy minutester. that's good news. it's not entirely surprising.

russia offers ukraine $100 per 1,000 cubic meters discount for gas. that is from the energy minutester. he said earlier that he fears ukraine might siphon off gas in the winter. some harsh rhetoric, obviously, coming out of that meeting. the angelina minutester reiterating russia is ready for a price gas discount as i just outlined and he's agreed on the trilateral meeting with ukraine, but no date has been set just yet. moving on, our uk business editor joins us now. still with us is paul cavanaugh. helia. >> thank god. i know we were all getting better about the state of bankers. me personally, i was the most worried of all. but we've just had o&s data out.

this is about bonuses across the entire uk economy. so it's not just bankers. it's talking about the entire economy. and it's saying in the year april 2013, march 2014, bonuses overall were up 12%. that's a massive hike and it's an increasing number in proportion of the overall pay. people are getting bonuses and if you look at bankers bonus webs probably the most controversial part of it, bankers bonuses for that period of time, again, from april 2013 to march 2014, up nearly 14%. up 13.4%. just 15 billion pounds. that's not quite the level of prefinancial crisis. 2007, 2008 where bankers bonuses hit 19 billion pounds, a massive proportion of the financial services pay was given in boepus

webs nearly 33%. so it shrunk down massively, but we've seen it edge up-and-up and up. the stuffest stance across the entire globe, seven-year claw back for bonuses. you've got tough regulatory regime. recently hsbc would increase the headlines. it would increase its six pay allowance. i think your degree of viewers know that the bonus, and there's always controversy. but it's not, remember, just a banking sector. we've got network rail here in the press today again. they paid for their directors.

massive bonuses, despite the fact that there were loads of engineering work. so there will be a lot of eyes on the number that's gone to bankers here. up a billion pounds from last year, that's massive in the face of all of this increased regulation. but overall in the economy, bonuses are up in general 12%, massive increase. >> and it's worth noting, interesting nugget of information, the public sector decreased from 6 of% to 1.3 billion pounds. this is partly due to the privatization of royal mail. of course. >> they've really pinned down core wages in the sense of he hasn't been this level of wage increase since they've used the back drop of the financial crisis to some extent to say we're all in this together.

but what they've properly introduced is that as we start to get economic growth, it starts to swing through to profitability, that maybe they've become a bit of a entrepreneur on the way that they're playing. >> you make a great point. i think the biggest problem at the moment facing the bank of england is wage inflation. and we don't have it. it's a massive problem. so even though we're seeing these bonus numbers click up and, remember, earlier in the year, we saw that if you stripped out -- if you stripped out bonuses from wage inflation, we're not meeting cpi. so this is a massive concern. are we earning more? it's a big deal for treasury, and it's a big deal for the economy. because unless people in the uk are really paid more, the growth that we've seen in 2014 is 3.1% gdp growth. a big problem for government, a big problem for government, and the uk economy.

24 billion, 25 billion in today's money. and that's the thing that when you get held back on wage inflation, that the cost of living having risen by 25%. it's led by bonus webs but at some stage, that wage inflation will start to kick in, i'm sure. >> before you go, i want to get your top picks for the uk stock market. you still like house builders, do you still like them even if we get a southeastern than expected rate hike? >> absolutely. and i think for me that there are seven or eight names that really dominate the house building sector. and survived through the session. so as a result of that. don't forget the financing of houses led to long-term rates. they've been going through for some time now and, therefore, demand is picking up.

it's picking up from a low environment. we need to build more houses. it's virtually utopia for house builders. >> they're reporting next week. >> all of them. and what they're doing, they're throwing off lots of cash with lots of capital discipline. we are in a world where rates are not going up far. i'm just surprised that we're talking about rate increases. they'll go up, but not by far. and i think long rates are more than accommodating what i expect to see at the base rate level. to some extent, i'm happy buying banks through a period of uncertainty. >> all right. thank you so much for that, paul, i appreciate it. thank you so much for breaking down the numbers for us. u.s. president barack obama has said the administration does not yet have a strategy on fighting isis militants. speaking ahead of a -- the

commander in chief said a decision has not been made on whether to launch further air strikes. >> we don't have a strategy. what i've seen in some of the news reports suggest that folks are getting a little further ahead of where we're at in the ukraine and we need to make sure we have clear plans. i want to speak with congress and make sure that their voices are heard. but there's no point in me asking for action on the part of congress before i know exactly what it is that is going to be required for us to get the job done. >> this immediately drew criticism from republicans in congress, but white house spokesman josh ernest said it was indecision on military options and stressed a diplomatic strategy is already

in place. hadley gamble joins us around the desk just now. that is very unfortunate choice of words or wording, rather, isn't it? >> it's one of those situations where there's bigger sound bites than the little bit you hear from everyone's replaying, granted. however, he has just told what's the singular greatest threat to the west that we don't have a plan. we don't have a strategy going forward. but, of course, the military, as you know, it's been working for, you know, weeks on different options. so there's no strategy, what have they been doing? that's a question. things are playing around here, as well, there's a media circus happening right now, at least two americans were killed fight, isis, the islamic state and they've reportedly soifd several others who have gone to fight in syria for isis and come back to

the united states. then the president comes out and unfortunately looks hesitant. this is a man -- basically, obama isn't at their best. this is a man who thinks even his deepest critics will say this is a president who really does try to think things out and think strategically. you can understand where he's coming from in a sense, but at the same time, he's told people that we don't have a plan. that can never be a good thing. >> if he does have a strategy in place, would he have congress's approval? >> that's very interesting. there are some democrats and republicans saying we're very worried about this situation. another thing will be if the pentagon has to go back and ask for more money. so just so you know, and they're going to end up having to use more resources and they'll probably have to go to congress to do it. >> hadley, thank you for that.

appreciate it. and we want to take a look at the exchange rate. 1.3178. not too far away from the one-year lows that we saw earlier on this week. pretty much unchanged on the day, though. but, in fact, the euro is on track for the second straight month of decline in expectation of more easing from the ecb. we will bring you that key eurozone inflation reading in just a few minutes. stay tuned. plus, google takes on amazon going into the skies to test a new drone program. all the details, coming up. xkç

welcome to "worldwide exchange." we are waiting for the eurozone cpi inflation data. came in at 0.2%. no, that is not the number. again, the august cpi estimate, 0.3% versus july of 0.4%. the forecast at 0.3%. the preliminary cpi, again, that is 0.2% the. that is below expectations, down 0.1% on the year. so once again, we are deeper into deflationary territory than what we would have expected. the estimate was for 0.3%.

this is a huge decline, once again, from the july number of 0.4%. and that is a number that you really have the ecb worried. remember, earlier on this week after mr. draghi's speech in jackson hole, expectations were running high that we would see more action coming from the ecb maybe in the form of full blown qe. then expectations were tempered somewhat, saying unless we see a very, very low number in the cpi read today, we are not going to be seeing any further stimulus coming from the ecb. whether that number of 0.2%, that preliminary number, whether that is low enough to warrant further action from the ecb, that is the crucial question and that will certainly have a lot of heads thinking at the ecb meeting, which is going to be happening next week. tesco's turn around plan is called into action. 2 retailer issues another profit

warning sending shares sharply lower. an italian luxury group tells cbnc that currency headwinds are shifting in its favor. >> there's an expectation. we have been leading with 100% in italy, we have been struggling in the past two years with a strong euro. >> no strategy on isis, president obama draws criticism as he appears that the white house doesn't have a clear plan for fighting mill at that points in iraq and syria. the preliminary cpi number for the month of august came in

at 0.2 -- 0.3%. excuse me. the numbers that i was giving you before, that was the italian number. once again, i want to correct myself, the eurozone august cpi, 0.3%. year on year versus 0.4% in the month of july. reuters forecast was for 0.3 the%. so a bang in line with expectations and we're seeing a bit of a spike in the euro/dollar exchange rate. 1.3190. slightly higher on the day. i want to get out to ricardo. your first reaction to the numbers? in line with expectations, but still in danger zones? >> yeah. with the consensus, so we have another tentative point. i think it's mostly due to lower energy prices in august, underlying inflation stable or slightly lower.

so i think this would have been expected at the ecb. i don't think it's a game changer. probably more important thing is how do they adjust their inflation targets next week before they meet for the council meeting. >> if you see these are temporary factors that the ecb shouldn't be worried about, would you automatically think this will not be followed up by any further action? >> no, no, i'm not saying that. i'm just saying it's in line with expectations. so i don't think it puts them under huge pressure to announce something stunning immediately. but they're obviously under pressure to do more. and i think ultimately they have to move to qe. this may well happen before the end of the year. i think what they will announce next week is the program to buy asset backed securities has been in the making for some time.

they've now appointed blackhawk as a consultant on this program. i think they now need to tell us more about the details of how this would work. and under what conditions they would be prepared to buy government bonds. >> what exactly would be the trigger for that? because there's been a lot of speculation about the buying of bonds. a full blown qe by the ecb. but what exactly would have to happen before we see that? >> i think they must convince themselves that we have a greater risk of deflation as a structural phenomenon over the coming years. a and, for example, the inflation expectations on a long-term basis are declining, as draghi mentioned in his latest speech. and then the other important thing is really how the economy performs because if we are at risk of falling to yet another recession, a triple dip for the eurozone economy, obviously,

they need to provide more stimulus. and finally, i think there is another factor which is that so far the ecb has injected stimulus via the banking system. they now have to think about nurturing the growth of the capital markets and then performing asset purchases to inject more liquidity into the system, induce greater risk appetite and, therefore, hopefully creating the macroeconomic conditions for an economic recovery. >> all right, ricardo, thank you so much for that. all right. let's geoff you a look at what markets are doing on this last trading day of the week and of the month. looking at futures, we're expecting a slightly higher start to the trading day, even taking fair value into account. this is after we saw the s&p 500 pulling back just a little bit in yesterday's session. you about it was below the 2000 level on ukraine, the s&p down by 0.2%. the dow off by 0.3%.

but once again, this is happening on very, very thin volumes. now as we move into september, the labor day holiday, the volumes should be coming back into the market and give the markets a little bit more direction at the conviction. that is the major averages, though, set for the second best month of the year. so it really hasn't been that bad of a month. let's have a look at the european markets after we got the cpi number that was in line with expectations for the eurozone. the xetra dax up by 0.3%. but we saw those levels even before the cpi number was out. the cac 40 up by 0.2%. maybe a bit of a bounceback for a decline. for the week, we're looking pretty good in terms of the major averages. we're up by almost 3% for the cac, up almost 2% for the xetra dax despite all that geopolitical risk. let's get back to one of the top spots that we've been watching this morning. tesco trading sharply lower after issuing another profit

warning the third time in thee years. they've slashed interim dividend by 75% and announced that incoming ceo dave lewis will take up his post next month. that is a month earlier than expected. sainsbury off 4.5%. morrison off 4.4%, and ocado off 3.4%. tesco share price is off by 6%, but it was down by much more than that, up to 9% off earlier on this morning right at the start of the trading. let's have a look at the bond markets. once again, we're seeing the flight to safety continues. the yield for the bunds, the ten-year bunch, though, leveling at 0.9%. it was below that level yesterday and in this morning's trade. treshy yield at 2.34%. that is a 14-month low and the ten-year italian yields adds 2.4%. remember the cpi data there at 0.2%. and the currency markets, let's have a look at how euro/dollar

reacted to the cpi data, 0.3% in line with expectations. we saw it shooting higher and maybe expectation was for even weaker numbers. the u.s. dollar against the japanese yen up by 0.2%. no great reaction to the weaker than expected japanese data points out this morning. and we are seeing still some safe haven buying into the swiss franc which is dangerously low now as the minimum exchange rate target about three years ago. i want to talk more about market levels with ken cayman, president at arcadan asset management joining us from the stage. good morning to you. you say we shouldn't be paying too much attention to the psychological level, whether it's 2,000 for the s&p or 17,000 for the dow. why is that? >> avltd of people put the market that's crossed 2,000 as if it's some sort of finish line.

it's the psychology of round numbers. we wait for the next level and we say, okay, we made it now now we're going from there and people think we're going to go down. i think to some stoent you're seeing that in the bond market, too. yields are getting lower and lower as people kind of park money off to the side. i think people need to keep in mind that, you know, s&p, you know, 500 trading at 2,000 is just a mathematical number that comes from averaging out 500 securities. there is no real significance to it. psychologically, everybody that's the market could go back that far, it's wow, where do we go from here? so i always caution people not to put too much stake into these round numbers, but yet psychologically, people always do. so i try to kind of warn people about that. >> and we're humans after all, aren't we? >> back right. >> back to work for many of the traders next week after the labor day holiday. with that, hopefully volumes will come back to the market, as well. and you've been saying for quite a while now that markets really

are in the sweet spot. can the stealth rally continue even though voels come back into the market? >> oh, yeah. i think the further the rally isn't all that stealth. it might not be getting a lot of respect, but it's not all that stealth. i think this people might want to be cautious going into the weekend with some of the international rhetoric and events that have been happening. but the logic for, you know, a continued positive trend in the market is there. we have the fed of the united states saying they're going to keep rates lower for longer. they don't seem to be concerned about falling behind the curve. you just had the uptick in gdp, the revision was higher. we're seeing employment numbers get better. when you think about it, the reason i called it the sweet spot, the yields are getting better and we have an accommodative mode from the fed and they're going to stay that way. everyone was so afraid of a huge

correction last month and then august turns out to be a great month. that's what i said on my last appearance, that a lot of times these corrections are much ado about nothing, that they wind up being blips on the radar screen. so i calling caution people looking for their retirement, as i always do, long-term investors to look at the numbers. they're pretty positive. a trader? you're probably watching the o geopolitical news for more uppes and downs. >> absolutely. depending on your time scale, really. next week, the big data points, what if we do see a number above 300,000? do you think once again we'll be going back to the good news is bad for the market? >> yeah, that's actually a great question. if we get a blowout number, it's going to start to push pressure on the fed to do something, maybe sooner or later. i'm not sure they're going to succumb to that. they've made it clear, as i've said earlier, they don't mind falling behind the curve, if you

will, to make sure that we don't slip backwards. so, yeah, there's going to be a time of handling. but in the long-term, it's a positive thing if people are going back to work. so we have to look past it for that concept. >> all right, ken, thank you so much for that, ken kamen. president obama warns moscow further sanctions as nato says the russian military is increasing its presence in ukraine. we bring you up to speed on the situation after this short break.

you're watching "worldwide exchange." >> and these are your headlines this morning. eurozone inflation falls, putting further pressure on marmar mario draghi next week. u.s. president obama admits to having no strategy when it comes to fight militant necessary iraq and syria. we've jut got breaking news with regard to the maker of angry birds. the angry birds maker, according to dow jones, the ceo michael

head is expected to step down. there's been a lot of discussion as to whether there would be a follow-up game to angry birds, a very popular game. let's get back to the top story. fresh images have been released which nato says showing russian forces operating in ukraine. it has raised concerns moscow is trying to create a land corridor between the annexed region of crimea and russia. nato says well over a thousand russian soldiers are supporting separatist rebels. u.s. president barack obama has ruled out military action in ukraine, but warned moscow that it faces further sanctions. >> the fact that russia has taken these actions in violation of the sovereignty and territorial integrity of the ukrainians, has resulted, i believe, in a weakening of russia, not a strengthening of russia. that may not be apparent immediately, but i think it will become increasingly apparent.

what it's also done is isolated russia from its trading partners, its commercial partners, international business in ways that i think are going to be very difficult to recover from. >> the escalating prospect from ukraine and russia is likely to dominate. a formal meeting of foreign ministers in milan. claudia is covering that meeting for us. claudia, should we keep expectations low for this meeting? >> well, this meeting where this actually is expected to start in just a few minutes. 28 foreign affairs ministers will be arriving here and, of course, ten of the agenda will be ukraine. what do we expect from here? it's not clear. we may expect some move in terms of sanctions.

some announcement might be made regarding the lengthening of the sanctions. developly, the idea is maybe address may come out from this meeting that will be presented at the eu council tomorrow where more decisions or something may be more finalized in terms of further sanctions. right now, sanctions are affecting russian banks, they cannot access long-term capital in the eu, affecting our factors like the military sector. but as they cover more sectors and affect many businesses in russia continue to be affected by not having the possibility to access capital in europe. countersanctions, though, it must be said are expected from europe first and foremost to limit the ban that has been put on the import into russia, agriculture goods clearly is one of the issues. further sectors could be affected like the naval sector, aerospace as well as the auto sector.

what has been made clear is that europe has spoken in unison. they were demanding some pullback be made by va lead mere putin. they did say this is a very serious consequence that could come from this intolerable escalation. so we are, of course, expecting more to happen, even tomorrow in brussels and, of course, at the nato meeting that will be held on the 4th of september. back to you. >> claudia, thank you so much for that. still to come on the show, the aisle days of summer give ways to back to school blues. but kids no longer have to deal with boring textbooks and calculators on the first day in the classroom. we talk about the spin on abcs of computer science. de with chocolate, soybeans, and apricots. what kind of chef comes up with this? a chef working with ibm watson, on the cloud. ingredients are just data.

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millions of school children head back to class this week and a growing number of students will be introduced to a new high tech curriculum. our next guest, the tech start-up is taking a look at this trend with an app that teaches kids how to code. thank you so much for joining us, christian. it is hard enough to teach those little kids how to do math, writing, you name it.

but to teach them how to program? how exactly does that work? >> so we introduced -- thanks for having me. so we introduce programming in a fun way where kids think that they're playing a game. they have to do program character by using a visual programming language. during the process, they learn how to think logically like a programmer. and we use -- and it develops from there on. and we give them a platform in which they can make things of their own, apps, games, music, stories. so they learn on their own. it's just like learning a new language, second language, if they can do it when they're small. >> maybe it's easier said than done, krishna. i'm not a big fan of that personally. but hey, how do you justify your pricing? because the tynker course, introduce to programming costs $50 for third graders and older.

some of your competitors, they've got apps which are free. so, again, how do you justify people having to pay for this? >> first and foremost, you know, we provide -- for school and teachers in classes can use it for free. if parents wants to have their kids from home to learn programming, we give them lifelong access to tynker with a course that runs for service weeks where kids learn on their open. it's just like buying a textbook and it costs less than a couple of dollars a day for every hour that is spent. it's not required that they need to buy that, but this enables them to build apps on their phones and they can build fun applications for the families. so the family committees take on those, they buy these courses

and otherwise a lot of schools are using the software for free. >> there's huge opportunity in the market. i'm looking at data from the u.s. by the year 2020, the bls estimates that the u.s. economy will need more than 1.4 million programmers, nearly four times the number of students who will graduate with computer science degrees over the next ten years. 90% of the schools don't offer any computer programming classes yet. obviously, they're skilled for a more market share grab and how to make sure that is your app being used, not anyone else's app? >> i think kids should learn to program no matter what app or online system they use. our goal is to kind of make it fun for them. and programming, think of it as a life skill that they can use in any discipline, whether it's

medicine, transportation, all sorts of technology changing every single thing that they interact with. so kids can use these kidz skills to apply them to what they're interested in. that's how we think about it at tynker. >> it would make a lot of sense if it works. thanks so much for that, krishna, who got up very early or stayed up very late. it is 2:00 a.m. in san francisco. still to come on the show, goolgel takes aim at amazon and heads to the sky necessary australia to test its new drone program. and a look at how the futures are trading ahead of the open on wall street taking fair value into account. expecting a slightly higher start to the trading day on this friday. what if there was a credit card where the reward was that new car smell 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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welcome to "worldwide exchange." eurozone inflation slumping to a five-year low. markets called to open higher on the last trading day of the month. no strategy on isis. president obama, the white house does not have a clear plan fighting militants in iraq and syria. preparing for takeoff, google will test drone deliveries in australia as part

of its latest experiment outside the world of the west. >> you're watching "worldwide exchange," bringing you business news from around the globe. and if you're just tuning in, thank you so much for joining us here on the show. good morning, everyone. it is the last trading day of the week and of the month. take a look at futures, taking fair value into account. we're expecting a slightly higher start to the trading session, the dow, the s&p and the nasdaq. this is after the s&p edged slightly lower in yesterday's trading session. once again, volumes were very, very low. we also had all these concerns about russia and ukraine. plenty of data points to look out for today. personal income july, chicago pmi, and the university of michigan sentiment index.

as you heard in the headlines, a five-year low. the ftse 100 is off by 0.9%. tesco is weighing on the index today. that is why it is underperforming. the cac 40 up by 0.1% off the session highs. apple and allergan were the most popular stocks bought by hedge funds in the second quarter. this according to the latest analysis from s&p capital iq. we're now joined by paba savich. walk us through some of the findings of the report. >> absolutely. so what we found was we -- the report is called hedge fund tracker. and it looks at the top ten huj fund index. what this does is allows us to look at the stock picking hedge funds, so we're not looking at, let's say, the super market

hedge funds which name that indices, other mutual funds, pension funds, but the ones that are going for the stock picks. what we saw was that allergan, with 1.4 billion in buying, there's a lot to do with ackman's kind of activist investor that was going on. the other one was apple. there was ambivalence because there was around about 100 billion buy. this quarter, there's no such ambivalence. we're seeing is the second top stock for the 100 top stocks of these hedge funds. and they've also opened up a store in the uae, which i know that my dubai -- will be very pleased with that. >> i also want to take a look at media stocks. two thumbs down for media stocks according to your report. is this because the mega m&a has simply fallen through? is that the main reason? >> yes. what we're seeing is exactly

that. we saw the 21st century fox did go for an acquisition of time warner. which actually fell through in august. they also did have some -- some pulling out of the s&p asx australian consumer discretionary index. this mixes to the industry. there was around about 1.27 billion of sell offs from five of the hedge funds that we looked at. they were actually pulling out of the stock. time warner was a third biggest sell-off and verizon was number two in terms of the biggest sell-off. >> what about the top funds? which are the top funds in terms of total equity holdings that you've singled out? >> good question. so not all ten, but the top five are citadel, then renaissance technologies, ma limb yum management. number four is icam. one of the biggest investors in apple.

to what extent are retail investors watching this and to what extent are they jumping on the bandwagon and investing on the same stocks based on the dae on the data that you're giving us? >> the data is on the filings which are publicly available. one, we have a proprietary model that allows us to aggregate and have a wholistic view of all these filings. >> you really want to look at what position these hedge funds are overweighting. you have to remember it's all about how much time they spent doing the analysis. and we're allowing this by looking at the pure play hedge funds. like i say, we're going to be looking at some of the index based bearing hedge funds.

and it's really about gd idea generation. also, hedge funds use this as a way of doing competitive analysis. so they will flag any of these that come up for similar stocks they're also investing in. the market follows this trend. what we're trying to do is make it easier and efficient to get to this data. >> thank you so much for that. u.s. president barack obama says the administration does not have a strategy on fighting isis militants. the commander in chief says a decision has not been made on whether to launch further air strikes. >> we don't have a strategy yet. i think what i've seen some in some of the news reports suggests that folks are getting further ahead of where we're at than we currently are.

they need to make sure we have clear plans, they are developing them. at that point, i will consult with congress and make sure that their voices are heard. but there's no point in me asking for action on the part of congress before i know exactly what it is that is going to be required for us to get the job done. >> the line immediately drew criticism for republicans in congress. but white house spokesman josh earnest said the comments refer to indecision on military options and stressed that a diplomatic strategy was already in place. we're now joined by hadley gamble. our middle eastern correspondent. this very much plays into the hands of the critics. was it really a matter of bad communication or does he really not have a strategy? >> i think the problem here is twofold. one, anytime that a president shows uncertainty, america looks weak. and that becomes -- perception can become reality in the sense that we know that the air strike

ves worked. we can get that further air strikes would also be very, very helpful. but at this point, we are talking about a threat that is inevitably going to come home. it's the single greatest threat that we've faced. it's unknown how easily these people can come back to the united states and to the west. he's basically told them, we don't have a plan to combat this threat. he's come forward and said yes, we know the air strike ves worked. there's no clear strategy and that makes america look weak. >> will congress be consulted or not? >> i'm sure they'll be consulted. the pentagon will inevitably have to ask for more money, if they're going to be doing more air strikes, if they're going to put anybody on the ground in terms of these strategists that

they have there already. but also, you have to remember the midterms are going to be looming, they're looming now and he's going to have to make the case that not only are we going to be effective in terms of whatever it is we do in iraq and possibly syria, but also he's going to have to work with bipartisan collision in some sense to do anything going forward. >> it really has worked over the last couple of months, hasn't it? track record there. fresh images have been released showing russian forces are supporting rebels in the ukraine. nato says well over a thousand russian soldiers are supporting separatists rebels. and still coming up on the show, watch out, google's latest secret projects is revealed, moving from the roads to the skies above. the company is testing drone deliveries.

will it get cleared for takeoff? details, coming up next.

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open. president obama admits he has no strategy when it comes to fighting militants in iraq and syria. and a big corporate story out of the uk this morning, tesco issued another profit warning, the third time in three years. the struggling grocer has slashed interim dividend and announced the incoming ceo will take up both next month, a month earlier than expected. on all the uk retailers, including the rival, morrison and ocado, tesco is off the session lows, but still down by 5.8%. same store off by 0.4%. obviously under threat by some of the discounters, the german ones. italian salvadano has been boosted by improvement in its key china market. sales directly at stores in greater china rose 15%.

the ceo speak to "squawk box" earlier. pretty confident on its improving currency position. >> the aspect is the strengthening of the dollar. being a company which produces 100% in italy, we are being struggling in the past two years so with a strong euro. so the improvement in exchange rates and the more favorable exchange rates will definitely benefit. we do not expect our segment to be impacted. i think on the united states, that is probably the best option not only for this year, but also for next year. emerging markets have made emerging markets like latin america, africa, they are still very volatile. johnson & johnson is reportedly seeking buys for its medical device unit. the process is in the early stages, but a sale could fetch

upwards of $2 billion. it treats vascular diseases. j&j is looking to shed slower growth businesses. earlier this year, it sold its blood testing unit for $4.1 billion. let's have a look at how j&j shares are doing in frankfurt, modestly higher by 1.2%. and helping fund the troika, the investment will involve financial recovery bonds. next tuesday, a u.s. bankruptcy judge will begin a hear keying into whether japan's trust of 18 million, they would take a look at what is fair. up next, more details in cnbc headquarters. >> annette, they're already

calling it game of drones. >> that's right. amazon isn't the only company looking into commercial uses for drones. google has been testing drone delivery for about two years in australia. it's part of a secretive google x lab working on so-called new shop projects, such as driverless cars. the prototype drone takes off vertically and can fly at speeds up to 60 miles per hour. google envisions using the supplies to fly into emergencies such as floods or earthquakes. meanwhile, apple has sent out media invites. the invite has a tag line, we wish we could tell you more. the event is being held in apple's hometown of cooper, california. it's the same place where steve jobs introduced the first mac computer 30 years ago.

the mac gamers website reports apple is building a massive structure at the site, keeping it under tight wraps. apple is reportedly working with touch chipmaker mxp to add short rake wireless technology could access another device.. the local payment market has struggled to take off. apple has a major advantage over rivals, thanks to the itunes and the app store. the company has credit card info for roughly 800 million customers. back to you guys. >> meg, thank you so much for that. love this next story. who are you going to call? for friends of the comedy "ghost busters," it's time to party what like it's 1984. the movie is being rereleased for one week in more than 700 thoughters in the u.s. to celebrate its 30th anniversary. a special edition blu-ray box will also be released on

september 17th. it's the second highest grossing film of 1984 and was nominated for two oscars. amazing movie. coming up in the show, going out with a bang, we look ahead to the new trading months as europe indices look upset to close august on a winning streak. we'll be back in two.

welcome back to the show. we're probably through the trading session. the xetra dax has just dipped into negative territory and bounced back. the xetra dax is pretty much flat with 9,462. keep in mind the german sales numbers. there were below expectations.

the ftse 100 is up by 0.1%. tesco is another decliner. the cac 40 off just dipping into the red. cpi, that was more or less in line with expectations, but still the danger zone five-year low. july personal spending is out at 8:30 a.m. eastern. at 9:45, we get august chicago pmi, expected to rise by more than 4 points from july. just before 10:00 a.m., the final report on august consumer sentiment is due out. let's have a look at u.s. futures early on this morning. taking fair value into account, we're expecting the s&p to open higher, could he up by 43 and the nasdaq seen up by 13 30i7b9s. the nasdaq helps back to back declines in about four weeks. the s&p was down 0.2% yesterday. the dow off 0.3%.

all of this happening on very, very thin volumes. let's talk more about the outlook or the u.s. benchmarks. scott, very interesting stuff that i've got for you. the s&p back below the 2,000 level. the s&p poised for the first four-week winning streak this year. the major averages set for the second best month of the year. the problem is, all of this is happening on very low volume. once again, there is no conviction behind these moves. >> no, there's no conviction. the big conundrum is how we keep accommodating news, but at the same time, we're doing well enough that we need to see rates rise sooner than later. they're looking at what they see

as mediocre numbers, but they're telling us they're better than expected. they've been telling us that the ten-year rate from 2% to, say, 2.34% this morning. the markets of the world are telling us we've got head winds ahead of us. i think that's the only thing we can look at as of late. >> with that automatic, does that mean we are going to see a pullback in the s&p 500. you say it's the treasury market that we should be looking at, not necessarily the s&p 500? >> right. because, you know, only 5% of americans own 82% of the stocks. so only 5% of americans really are benefiting from this big move up in the rally. that's why we've seen this big divergence between the rich and the poor, this big classified, which everybody has been talking about both here and in europe. but at the end of the day, the

man on the street is not really participating. so i think that the ten-year is telling us the broader market as a whole, that's why these person income and spending market and wages are all really big numbers. although the jobs have started to come back, they're not quality jobs. they're not filling the government offices with these cash money and that's going to give everybody a feeling about whether or not the consumer can come rescue us. >> i can't sit here and say we're going to have a pullback any time soon. we're going to have to keep accommodating to see the economy going or see something coming out of europe. number two is we think they're going to raise rates sooner rather than later. both of those are fed is going to move higher.

>> scott, what are you expecting in terms of the nonfarm payrolls report? >> well, i mean, we've been averaging now over 200,000. i don't know if it's really the number that matters any more. it's the quality and then the participation rate. so the quality of jobs created and that participation rate are starting to be more and more important rather than an overall number. as you've seen and as i've said, we have caught up to a lot of numbers as far as jobs that we had in 2008. but we're not replacing those manufacturing jobs with manufacturing jobs. we're replacing those manufacturing jobs with part-time jobs or average hourly jobs. so keep an eye on the participate rate and keep an eye on how quality those jobs are. those are going to be the low key things in that number. >> scott, thank you so much for that. have a fantastic labor day and see you very soon. it is almost the end of the show. but before we leave you, i want to make sure to tell you about something very special that we've got lined up for you for next week. we're unveiling a new on air

team for "worldwide exchange." we've have a new anchor on the program on monday. we're very excited that he has joined to our on air team. make sure to tune in on monday. we're all very excited to have wil around the desk as of next week. before we go, i want to show you what european markets are up to. we are pretty flat, off the session highs. the cpi number for the eurozone for the month of august, was in line with expectations, 0.3%. that is dangerously low. for the eurozone, this is something that the ecb should be and will be concerned about. and u.s. futures look like this. indicating a slightly higher start to the trading day. we've got plenty of macroeconomic data on tap today. but the s&p 500 sets to open around the 2000 level once again. that's it for today's show. it was a pleasure having you with me on the show. i'm carolin roth. we'll see you next week. bye-bye.

malaysian airlines cutting thousands of jobs in an effort to stop lows after the fallout from the two air sdraefrts. and the nfl toughens its domestic violence policy instituting some severe penalty. it's friday, august 29th, 2014 and "squawk box" begins right now.

good morning and welcome to "squawk box" here on cnbc opinion i'm andrew ross sorkin along with joe kernen. becky is off today. the drone delivery wars getting kicked up a notch. google is unveiling a project called project wing. a fleet of drones designed to deliver small packages. testing the drones in queensland, australia, about 30 test flights were conducted earlier this month. look out jeff bezos. sergei and larry are looking to dominate the skies and maybe i owe jeff bezos an apology. i remember after that "60 minutes" piece he had done when he had shown off that drone that was going to deliver packages and i sort of thought that was an advertisement for something that was probably never coming. here we are. >> did that hit anything.? were you watching the tape? i mean, they just drop it and it's just like falling into