♪ love stinks! i'm maura fogarty. here in asia, china hits back at the u.s. saying the tire trar yifs are against wto rules. >> i'm ross westgate. here in britain, alistair darling plans to force back to drop living wills in the event of another financial crisis. >> and president obama calls for sweeping financial reforms to prevent a financial crisis from ever happening again. >> hello and welcome to "worldwide exchange." the cnbc ftse 300 just dipped down 2 points. the ftse 100 had mild gains yesterday, xetra dax down 0.2%, cac 40 up 0.25%. a lot of people have been questioning how long the rally we had going could keep going. on the currency markets, most people say it's short covering. 91.10 is where we stand with dollar/yen. we're trying to see whether we can maintain a move above that level and sterling/dollar, 1.66 at the moment. got some breaking news out on jal, maura, so i'll hand it over to you. >> yeah, that's right. ja l is certainly in the news today. we didn't see any big rallies across this region. nonetheless, we did manage to hit 14-month highs in some of these markets. korea up 1% today. the shanghai composite up by about 0.2%. that's a one-month high for the shanghai composite there. so very interesting news. a little showing a moderation of the drop of the direct investment into china. august alone was up 7% compared to august of the previous year. now, you talk about the breaking news on jal, let me give it to you right now. the ceo of jal is saying that the airline is going to undergo its largest ever downsizing. we know jal is in talks so far with several airlines, including some in the united states about a capital infusion, possibly an alliance, as well. the company has announced it is going to reorganize as it has been loss making, but we're getting more details on what that is going to look like. the comments coming out so far is that they're going to conduct some firm and drastic measures to reduce their costs. let's move on to oil prices right now. oil is around the $69 mark here. $68.77 is where nymex light sweet crude traits at the moment. futures, contract on the brent side is at $67.95. good morning to you, julia. >> good morning, maura. we're going to take a quick look at futures in the u.s. we'll see how the dow is trading right now. the dow is down about 11.5 from fair value. nasdaq futures are down about 5 points from fair value and the s&p 500 is down about 3 points from fair value. now taking a look at the bond yields, the ten-year bund is at 3.27% and the 10-year t-note, that's at 3.4%. it's down just slightly, down 0.024. now, ten-year t-notes did fall on monday amid speculation that these yields can't be sustained. maura, back over to you. >> joining us now, paul ramskot and reginine. there are a couple of head winds. we had the trade spat between china and the u.s. potentially weighing on the markets. for now, they seem to have ignored it. today the market seemed to take that in stride. what phase are we in with these markets? >> i think we're in the phase of two realities. on one hand, in the short-term, you have a lot of liquidity in the markets, companies to a certain extent are in a sweet spot because they're picking a lot of cost out and a final demand stabilizes, given the leverage that we have, that being in a very good position. then what you have is a medium term time horizon where people are having a lot of questions and there's a lot of uncertainty, which of which is what happens when quantitative easing ends, what happens with regulation. we know we need much stronger bank regulation. however, governments are in a difficult situation because they can't impose them too fast. we know we need capital requirements, we need probably will, the will that we've been talking about for banks. we know we have losses to come, etcetera, but it's still very unclear. and so that creates, i would say, a tale of two realities and the market goes from one to the other. within that, so a lot of volatility within that, asia is still extremely well placed. now, japan is not held by a strong yen and on a long-term basis oim i'm a very strong bear of the yen. however, from a competitiveness standpoint, asia, ex japan, with as you know, is very well positioned. if you look at the key trend that we have auto a 10 to 15-year basis, asia is well positioned in terms of democracy, in terms of middle class demand and consumption in particular. and we'll have to do a lot of continued investment in urbanization, climate change, etcetera, which will drive demand. so overall, a very strong, long-term picture. >> all right. paul, you're a bit more closely located here in asia, based in hong kong at the moment. what is your reading of how the markets are behaving? do you have a similar tale of two markets that virginia just outlined? >> yes. i mean, at the moment, we've got two very distinct economy he. we've got the u.s., which seems to be slowing down, and we've got china which is just rolling ahead. we've now got the market above the ,000 level which is another key psychological level of investors. we're in china, as you know, and we have been for some time. we're not completely writing off the u.s. yet. we think there will be growth there in the future. but at the moment, we're not heavily in the u.s. at the moment. so we're favoring china. >> now, just to jump in a moment, one year after the lehman brothers collapse, i know you see more weakness in the u.s. dollar, but where do you see the u.s. and asia in terms of positioning, in terms of asset allocation, and what's your sense of how a potential trade war between the u.s. and china could affect things? after that, i would also be curious for virginnie's response. paul? >> sure. yes, sure, sorry, i had a problem with the ear piece there. yeah, i think, look, this is what should happen with china and the u.s. it's nothing new. it's happened with past presidents. i don't think it's going to be a major concern. i think what would be a major concern is if the chinese turned around and said we're going to start selling off bonds and start selling our reserves. the u.s., a lot of people are saying at the moment that the u.s. is getting weak and people are jumping up and down and saying, what is the problem? but the u.s. has been getting weaker for some time. the past three decades is weaker by over 50% or so if you look at the u.s. dollar index. so i was reading a report from credit suisse just before i came to the studio and that's the beauty, we can do independent research. they are, in their report this month, it's called the world post crisis. they're saying that the u.s. dollar cannot be the anchor currency for the future. you know, the world has changed. we've come a long way in three decades. so i think there's going to be a lot of pressure on the u.s. dollar. perhaps we'll first get a reserve currency, with asian currency or perhaps we'll have a global reserve currency. >> talk about global reserve currencies. how do you make one up? the dollar would be part of it, wouldn't it? >> yes, i think the dollar would be a part of it. let's not forget we have china who is coming through as a strong contender. in my personal view, i think it would be a basket of strong currencies and strong countries that are doing really well. you know, the u.s. could turn around and like i said before, we're not writing them off completely. there could be growth. the interesting thing about the china market and the shanghai market in particular and the asian market is that it accounts for less than 1% of foreign investments. so even in the future, when we do start to get the growth in the u.s. market, there won't be a major shift out of chinese markets. so the chinese market, i think, is quite a safe market to be in for the present and for the future. >> going back to the initial question about allocation, i'm still underweight the u.s. in global funds. however, i increase my location to the u.s. and it's all bottom up. for me, the currency, the stock, and top down decisions with completely separate. i believe the u.s. economy is an economy that reacts very quickly. the size of the benchmark of the financial sector means that given that i'm still cautious about a financial sector, we're still underweight. we have a very large overweight because it's not in our benchmark is emerging markets. some of my clients allow me to go up 30% within emerging markets. within that, it's china, brazil and india with a large weight in china. so i agree with that. the one question i'd like to ask is everybody is bearish the dollar. at the point when we start thinking about taig taking away quantitative easing, the country that does it first will see, i believe, its currency supported, everything else being equal. so that's one point. the other point about a common currency, as you said, i think it's a healthy debate to have. and if you look at the attention now put on to g-20 as opposed to g-7 before, and the need particularly for climate change to include emerging market economies, it's clearly very important that those economies are integrated from a trade standpoint we know the renminbi is poignant. there is a difference, though, between getting into a globally accepted currency. and i think that is the thing that is going to take years. >> and we've already got a chinese yuan with peg, anyway. thanks so much for joining us, virginnie. >> thank you. >> we'll let you go and get your voice a little better. paul ramscar, thank you, as well. now, the british finance minister, alistair darling, plans to force countries to drop a living will. this is according to the financial times. it says the proposal will be included in new legislature this autumn. >> we were on the brink of seeing a collapse in the world's financial system. no one should be in any doubt about that. the problem that lehman brought about is that a chronic problem became acute. >> kraft foods says it's still interested in bargaining on cadbury. tomorrow, the ceo, todd spitzer, will plan to update shareholders on the company's growth strategy as a stand alone business. meanwhile, gdp is not enough. the french president nicholas sarkozy wants to ditch gdp with a measure in mace of one that includes well-being. he's asked for reform ideas and then he'll have for those to be integrated for future economic analysis. could be interesting, maura. we ditch gdp and we go to a well-being index. i like that idea. >> i like that. well-being. what do you include in that, ross? meanti meantime, let me give you an update on japan's new cabinet. according to local media reports, democratic party of japan leader yukio hatoyame has picked hirohisa ps fujii as the finance minister. he's known to back loose monetary policy, but some analysts worry he may detach japan from reliance on its ex ports too quickly and allow the yen to rise. separately, reports say 72-year-old yuki kamei will be the leader of the people's new party. also, we've heard more news saying that there will be drastic reorganization of their roots and it will be the largest job cut ever at the company, the airline. according to reuters earlier today, air france klm is joining delta and american airlines to invest monies into jal. this would be in exchange for code sharing agreements. shares of jal's potential suitors look like this. they're all trading to the upside, both in the u.s. and currently in europe. jal's ceo says the tie-up talks should concludely october. it's going to be cutting about 6,800 jobs. shares today in tokyo lost nearly 3.5%. finally, china is saying america's move to impose added duties on chinese made tire sess an abuse of the safeguard measures. according to chinese ministries, the move is protectitionist. gm unveiled data today showing tire ex ports to the u.s. fell during the first half of this year, rebutting information that china was flooding the u.s. market. >> thanks, maura. president obama said we must learn from our mistakes and make the necessary changes. >> we were going to have to do financial regulatory reform to make sure that this doesn't happen again. we were going to have to build an economy that was based not on boom and bust, but on a firmer foundation of sustained economic growth. >> president obama made several reform proposals, including a new consumer financial protection agency. an oversight council of regulators and a, quote, with resolution that allows government to unwind firms that post systemic risks. jeffrey lacker argued on monday that these proposals could back fire. he says the leading proposals before congress concentrate almost exclusively on expanding government protection and regulation, but i believe we would be bestiary placing greater reliance on market inventives for brunt risk management. meantime, eli lilly plans to slash 5,500 jobs. the company is facing steep revenue declines when four of its top five drugs lose their patents. the sales of these drugs account for almost $11 billion. here is a look at how eli lilly is trading right now. that is $32.90. ross, over to you. >> thank you. still to come on the program, we're expecting the latest speculation out of england. also, one year on from the bank of america/merrill lynch deal, we'll take a look at the shotgun wedding. and we'll be in frankfurt to speak to phil lebeau who is on the ground at the auto show. on to a wrap of weather, starting off with becky in london. >> the ftse 100 did open a little higher. we're just down now by one of two points. let's call it flat. above 5,000, though, pointing by about 17 points. amongst the gainers today, quite a bit of analyst activity, moving some of the biggest gainers. john semathy, analyst at goldman sachs decreed their rating to neutral. that's shepg shares at johnson matthey. bt, they've raised their ratings on that stock and increased their price target to 170 p. shares of bt are up about 3%. we're seeing a bit of movement in the shares of that company, as well. i want to mention bg, as well, bg group has announced another oil and gas find off the coast of pa zill. they had another one announced on september 9th. today, another find is helping bg group to add to that .7%. sylvia, how is it going in germany? >> going might not be the operative word here. there isn't a lot of movement. we're zigzagging around the flat line a little bit, but we're still in profit taking mode. that isn't surprising. we took out one high after the other. 300 points we added in succession. the underlining trend is cautiously upward. the zew index, of course, we've seen the sentiment indices being better than expected or at least improving. there is a continuation of that theme in there. by and large, the macro story is still playing with us in the right direction. corporate news, not too much to rock the boat. a little bit from e.on and a possible swap with edf. we've been talking about cross share holdings there for quite some time. we've got the chairman of the supervisory board of volkswagen cryptically saying that he might want to add a couple more brands to the volkswagen group. he didn't say more than that. stephane, what sup in paris? >> well, the french market is still trading higher still yet, driven by eds on reports that the company will soon charge more for its electricity. the french government has reached an agreement with the eu commission in order to increase the competition in the electricity sector. the agreement would include the end of the regulated lower prices in france. that is potentially good news for edf. that's the top gainer. in good shape today, with air france klm, which started negotiations with japan airlines. the company doesn't want to comment. and the deal wab of course, would give air france klm access to the network of japan airlines routes, some sharing agreement, air front klm up 1.4%. now let's have a look at the asian markets with adam in singapore. >> it was a pretty positive session in the asian session, at least. once again, the fortune tied to the movements in the japanese yen versus the u.s. dollar. as a result of that, we saw the japanese yen weaken both the u.s. dollar below that 91 level and that helped prop up some of the exporter stocks. the yen did weaken on the back of the yasono's comments. it does have a negative implication for them. but as you know, he's leaving that position and making way for the new finance minister, fujii, and he says that the government should refrain from all sorts of activities in terms of weakening the yen. some of the financial stocks were lower today and that's why the topix index is down 0.2%. glad to see that the typhoon didn't below you away, emily, in a shortened trading day in hong kong. >> shortened trading day, but it was a weak picture here. the hang seng index closed up about 30 minutes ago, ending the day lower down by about 0.3% closing at 20,868. and our h shares ended the day flat. we were watching shares of alibada.com. this is after two years after alibaba.com went public and after its shares to date has quadrupled. the company's founder and chairman unloaded shares worth $35 million. we were waiting for results out from long coming's biggest property developer by market value. the shanghai composite closing at a one-month high. 3,033 and this was supported by the latest august fdic data. for now, back to you. coming up next on "worldwide exchange." bank of america is set to prepared to litigate over the fdic decision on merrill lynch bonus disclosures. and we've got the latest inflation figures out in the uk. u i'm maura fogarty. here in asia, japan's incoming prime minister picks a fiscally conservative veteran for the finance minister post. >> i'm ross westgate. in britain, the finance minister alistair darling says he's planning to force banks to drop living wills in the event of another crisis. >> and i'm julia boorstin in the united states. president obama seeks to rethe financial regulatory system, but not everyone is in favor. >> we are just getting cpi figures out in the uk for you. we were expecting it to dip down a little bit. i can tell you right now that cpi for august is up 0.4%. up 1.6% on the year. it's a little stronger than expected o annual rate. the uk cpi, up 0.6% on the year. all services 279%. it is still the lowest rate since -- the biggest downward came from gas, electricity food. the biggest upward impact from transports. so just a reminder, month on month, 0.4% on august. year on year, 176%. sterling just al getting a little more on the back of that figure. the rpix, the annual rate 1.4%. the annual rate, 1.46%. sarah hewin, what do you make of this figure and where is it going from here? >> well, it's a citi step down from where it was previously. but interestingly, uk inflation has been very slow to fall. this has been largely due to the impact of the depreciation in sterling that we saw last year. 1.6% year on year is a bit stronger than expected. in terms of where it hits from here, we should see a significant step down from november's data as a result with a comparison from a year ago. obviously, energy prices essentially higher than a year ago. that is going to be reflected in a fall in inflation in the next couple of months. >> how much is down to how much retailers respond? it appears to have slowed down in the last month. >> well, i think there is still quite a bit of sluggishness in the retail. the sales that we saw, of course, came earlier in the year. but over the next few months, our view is that rising unemployment, consumers reducing dead is going to have a reducing effect on dampening. but the key effect on inflation in 2010 is going to be the rise in vat. so inflation is likely to start start to rise sharply in the first quarter of next year. >> sarah, here in the united states today, we will be getting retail sales out. what are your expectations there and how is that affecting your insights in terms of investment? >> that core measure is likely to continue to show weakness. we are concerned about the u.s. consumer. it's probably the key weak spot in the economy going forward, again, due to rising unemployment and household rebalancing their ded debt, rebuilding savings. for the producer price index, headline inflation has been negative. we expect that that is going to stay true, but will become less of an impact over the next few months. but we don't see any problems in inflation well into next year, even into 20 1 we would expect inflation to be at or below what the fed wants to see. >> sarah, it's maura here in asia. would you expect rising protectionist sentiment to start merging any time soon? given the trade in china and the u.s. and in terms of protecting their own financial industry, do you see protectionism as a major threat to the global economy in the next, i don't know, 6 to 12 months? >> well, if protectionism were to intensify, then it would be a major threat to the global economy. we've seen signs, of course, of sort of a sharp pick up in ex ports in demand of -- for autos, particularly from lines from germany, and anything that threatens to dampen trade flows or to hold trade flows weak is going to be a threat to the global economic recovery. in terms of u.s. and china, it's somewhat of a strange time ahead of the g-20 meeting, ahead of the u.s./china meeting in november. it's a bit of a strange time for the measure toes be imported. it's not going to have a huge effect. so our hope and our view is that this is something which will be the sort of discussed and hopefully smoothed out around the time of the g-20 meeting or possibly the bilateral meeting between the u.s. and china. >> sarah, thanks for joining us today. sarah hewin, senior economist at standard chartered. >> a federal judge has rejected bank of america's $33 million settlement with the s.e.c. calling it unfair. in addition, reports suggest the new york attorney general, andrew cuomo may file civil charges against some bank of america executives over the two companies' merger. kenneth lewis and chief financial officer joseph strike could face civil charges. not only did the takeover lead to allegations of misleading shareholders about payments, but they did the deal and actually spread more risk than it contained. steve sedgwick has been investigating. >> it was a historic moment. >> they were being offer a porsche for $100. it was such a great deal that they tried to push it forward as quickly as possible. >> quickly, things got ugly. merrill had lost several billions of dollars from subprime mortgage mistakes. the new financial empire was forced to season seek $45 billion of federal aid. the merger was fraught with difficulties in the early days, which included a rash of infections. but now bank of america merrill lynch are experiencing a return to strong trading continues. jonathan molt, the president of europe and middle east africa believes the opportunities are abound. >> we see a distinct difference in the way clients are looking at us now, in terms of the success we're getting for clients. i also think with regard to the overall platform, people see that a year on, a strategic benefit of bringing these two organizations together is extremely compelling. >> indeed, the group beat expectation wes a second quarter profit of $2.42 billion in jewel. >> we're out there hiring aggressively. i think you will see that -- you know this. the early part of this year, we lost some talent. i think it's often overplayed in the press. the depth of the time that we lost, but certainly right now, we're out there looking to build that talent base. >> a year ago, ken lewis louded it as the opportunity of a lifetime. now bank of america merrill lynch is louding its wait out of the downturn. it's its ability to capture news clients and make money will depend on its ability to succeed. >> president barack obama said there was still some way to go. >> we're not out of the woods. the financial system hasn't stabilized, but what we're seeing, at least, is some sense of normalcy returning. and as i said today, the key is making sure that normalcy doesn't translate into complacentsy. >> now, you indicated that you thought wall street hasn't learned that much in the way of cries is sis. what has washington learned and what have you learned? and i noticed you didn't go on the floor on the new york stock exchange today. >> what i've learned is that if washington doesn't provide the kind of regulatory oversight that provides transparency, clear rules of the road, what you may end up with is moore mess in the market than it otherwise would have been. so everybody who is listening, i want to be absolutely clear. i believe in the market. i think that's the way we generate jobs. i have absolutely no interest in having the government maintaining the levels of intervention we have right now in the market. >> but now you didn't want to give those traders on any love on the floor today. you didn't walk over there. >> no, no, that was the fact that these days, i create disruptions wherever i go. nothing symbolic there. >> one of the things you said in your speech was a warning to wall street that taxpayers will not step in and break your fall if the same thing happens again. but since the purpose of those interventions was to save the whole country rather than the institutions themselves, wouldn't you end up doing the same thing all over again, because it would be in the interest of the country? >> oh, i would do the same thing that we've done so far if i were back in the same situation back in january. the point is that we want to create some sish cut breakers here. we want to make sure that a, when you have large institutions that are deeply interconnected so that their failure could bring about a meltdown in the financial system, they're going to have to have higher capital requirements, the oversight is going to be much more rigorous, there are certain specters of the financial system, like derivatives that currently have no regulatory oversight whatsoever and we need to set those up. so what we want to do is position our rules in such a way that you don't end up in a situation where your only choice is financial meltdown or having taxpayers having to makes these huge bailouts. i think that is a tenable position to sustain and i think the american people are very frustrated with it. >> japan's incoming prime minister, yukio hatoyame has reportedly picks new members for his post. but will he and his team be able to deliver on their promises? let's ask david whitesetter. david, thank you for joining us on "worldwide exchange." first, your initial thoughts on some of these key posts, like finance minister, for example, what does that tell you? >> well, the incoming prime minister, mr. hatoyame, has given careful attention both to a smooth transition from the outgoing ldp-led government. so there is a minimum of disruption. secondly, there is no doubt that an incoming administration, after 54 years in power by the soon to be opposition, needs to gain the confidence of the voting public, but also the population and the markets and the economic sectors and corporate leaders in japan. and so had he come in and named individuals without fairly deep experience, that would have sent the wrong signal. the signal, instead, is one of great maturity and of confidence building both in the public and also in parliament where he will assume the prime ministership from tomorrow, we expect. >> when you look at the entire cabinet in whole, though, he has to show an element of change, as well, right? because that's what he's promising. >> sure, sure. >> does the new cabinet lineup give you any indication of what his policy priorities are going to be? >> very little is evident just from the lineup. and i confess that we need to study it a bit more and see it in action. what i think is very important is the public perception, but also the commitment to change in a way that government is handled. today was -- or yesterday was the actual last session of a 123-year-old tradition. every monday and thursday, all of the leading bureaucrats got together in the prime minister's official residence and talked policy while the incoming democratic party of japan-led government has pledged to turn that on its head, that the bureaucracy will no longer be in the driver's seat, but will implement policy and deliberate what passed by politicians. so we are going to see a shift in the color, the way that this government is run so that it's not just the lineup of the cabinet showing that very careful balance between maturity and new faces, but also the matter in which the public is represented in the policy making circles of this government. >> david, how do you expect these fundamental government changes to affect japan's perspective towards its relations with united states and its approach to trade in general? >> well, first of all, with respect to the relationship with the united states, there is no question anyone who would be elected in the democratic party is certainly no exception will place very key -- in the ongoing solid relationship in the u.s. including the security relationship which comes up with its 50th anniversary next year. in terms of trade with the rest of the world and with its asian partners with the united states, china, of course, has been japan's main trading partner for well over three years now. the incoming administration has placed considerable emphasis on improving relations with china, with its asian neighbors and will continue to do so. but not at the expense of the relationship with the united states. i think there's going to be a very careful reassessment, but also a very careful balancing of foreign and foreign relations and in economic relations policy, as well. >> david, thanks for joining us today, david satterchiet, joining us live from tokyo. from there, let's head on live to india. >> well, thanks for that. it's a very strong day for the indian market. after the past five days of consolidatio consolidation, we are seeing some very up moves. the nifty is currently positioned at 4487, off that 4,900 mark. sensex is higher by about 1.4%. the broader index doing very well. the advanced decline ratio has stood firmly in favor of the advancing line through the trazing session. a lot of the companies have come out with their advanced numbers. we have got some very positive signs coming out. sbi has come out with one -- given up one. a huge up move. dcs jumped from 53 to about 220, a quarter on quarter compares yop. but the stocks that are on the move today are the entire metals and the real estate packs. we have shares odswd showing gains ranging between 5%, a couple of the real estate plays, as well. it's turning out to be a very, very strong session. >> rhema, thank you very much. meantime, the race to join hands with japan airlines is heating up. air france klm is joining delta and american airlines to invest up to $300 million in jal. this would be in exchange for code sharing agreements and minority stakes in asia's biggest carrier by revenue. shares of jal today looked like this. they were all higher in the u.s. trading session today. they're up more than 1%. in france, shares of japan airlines sank near 3.5% today. the ceo saying a short time ago that tie-up talks should conclude by mid october. it's cutting about 6,800 jobs. >> thanks, maura. we just had the uk inflation data out. it came in not quite as weak as we expected. the annual rate dropped to 6.1%. the governor of the bank of england, mervyn king, is currently giving some testimony. his view that the risks of inflation is still on the downside. there are signs growth has resumed in the third quarter, but the 2010 growth is likely to be volatile. he says the consequences of the financial crisis will be pervasive and long lasting. he says there is a long road ahead to restructure the financial sector. so basically still giving the impression that next year if we have growth, it will be patchy and bumpy, as well. which is a suggestion that he's made before. that monetary policy will be pretty loose throughout next year. magna will cut 10,500 opel jobs in germany. good time europe employs about 50,000 workers in total. julia. >> thanks, ross. martha stewart and home depot are teaming up. home depot will develop an exclusive martha stewart brand in home improvement products. it was not noted if any of this will have any impact on its deep with k-mart. products in the outdoor living category will start launching starting in january 2010. coming up, a war of words between the u.s. and china, we'll discuss the inimplications of that in the next hour. let's bring you up to speed with where we are on the currency markets right now. sterling/dollar is getting a lot of focus. it just bounced back in the last half hour against the greenback because, of course, we saw the inflation data come in not quite as weak as we expected. the annual rate, 1.6%. but then in the last few moments, we're getting comments out from the bank of england's governor, mervyn king, who said 2010 growth is likely to be volatile and that risk inflation is to the down side. it's a long way to head to restructuring sector. banks have to be cautious on lending, dragging down the demand in decline of activities. moderating the growth is set to return. but the slowing of the pace in the economy as are what he terms extraordinary stimulus measures, which brings you on to the debate how much of growth you've got is because of extraordinary stimulus measures. but he said there is still a significant margin of spare capacity in the economy and that will bear down on inflation. of course, there is a big debate about how much spare capacity there is or not in the economy. there is a view that some of it is not capacity that could be switched over very quickly and say, therefore, in a way, it's been taken out. so that is where sterling has traded, 1.6616. as far as the rest of the markets, everybody is wondering if there's such a bearishness on the dollar in the last year or two, wondering whether we will brake new levels. dollar/yen is pulling up to 91 on short covering. producer prices, retail sales is going to be key, as well. euro/dollar, we are looking at the key technical levels just above 1.46 on euro/dollar. we haven't made i guess what the technicians would say is a decisive break above it. so i think right now, there's a bill bit of a tug of war going on about whether from here we will push the dollar down to new levels or not. and the key question is has the dollar become the key funding currency of the world, taking over from the yen. as far as the stocks are concerned today, currencies are a little range bound. so are the stock markets. the ftse cnbc global 300 absolutely flat, down 2 points. european stock markets, up 1.1% for the ftse 100. the cac 40 up just a little bit. we're waiting for direction which we may not get until the u.s. opens later, maura. >> yeah. of course, in the meantime, we did see asian markets heading higher, ross. we did see some key numbers being hit in some of these markets. first of all, the korean market up by 1%. shanghai up by 0.2% here. we're at about one-month highs here for that index. the mblth there essentially trading off the trade issue between the u.s. and china. nymex slight sweet crude at $69.08. a gain of 22 cents. brent crude is trading below that at $68.16. it is higher than where we were about an hour ago. julia, how are futures shaping up right now in the u.s.? >> we're going to take a look at that right now. on monday, the dow did end up 21 points. as of now, dow futures are off 11.8 from fair value. nasdaq is also down. down a little bit less than it was earlier today. down by about 7 off fair value. s&p 500 is off a bit more than three from fair value. so the futures are looking a tiny bit better for the nasdaq and s&p than they were this morning, but still looking like they're going open down. the 10-year bund yield is up 3.28%. but then the yield on the 0-year note is at 3.41%, down 0.011. maura, back over to you. >> coming up in the next hour of "worldwide exchange," in just a few moments, we'll get the latest numbers for zew from germany. what will this tell us about the latest recovery of europe's largest economy? >> plus, we'll see what new models are motoring ahead at this year's auto show. um bill-- why is dick butkus here? i hired him to speak. a lot of fortune 500 companies use him. but-- i'm your only employee. we're gonna start using fedex to ship globally-- that means billions of potential customers. we're gonna be huge. good morning! you know business is a lot like football... i just don't understand... i'm sorry dick butkus. (announcer) we understand. you want to grow internationally. fedex express identify i'm maura fogarty. in asia, japan focuses on its biggest ever down siding, jal planned to cut about 5,500 jobs. and i'm ross westgate. we're about to get breaking data out in the uk. and i'm julia boorstin in the united states. president obama plans to institute regulations to prevent this financial crisis from ever happening again. >> we're just getting the latest snapshot of investor confidence out in germany as evidenced by the zew institute. the september german zew index, a little below the consensus. the current conditions indicator, minus 74 versus minus 77 in august. again, a little bit weaker than the consensus. the zew says economic expectation ves stabilized further. the euro is hitting a session low against the dollar after that figure. as i say, just a little weaker than expected. mathias kohler is with us from the zew. thank k for joining us. what's the key take away here? >> we think that positives for the news -- positive news for the german economy are rising retail sales, for example, incoming industrial orders. consumer confidence has improved recently. it is, however, still on a lower level for the future consumption maybe burdened by rising prices and unemployment. for this reason, we think that the economic outlook for germany mainly depends on the recovery of the world economy. and we think that this may explain why economic expectations for germany remained unchanged this month overall. the prospects of the german economy are good, it seems to suggest it takes place at the slow pace. >> how much of the prospects of the next six months will be governed by, i guess, things like riding unemployment and also if we get an end to the car scrappage theme? >> in the last month, consumption was very important for economic growth. in germany, particularly -- yeah, economic growth in the last month. in the moment, it seems that consumption is still quite robust. however, it will certainly be burdened by the rising prices and unemployment and for this reason, i think our hope that experts will pick up and, yeah, lead to further growth of the german economy. >> okay. matthias kohler, good to speak to you, as always. a little weaker than expected investor confidence. as a result, the euro has fallen two cents against the dollar to 1.4587. we were around that 1.46 mark just before that data came out, so the dollar just benefiting slightly from that. emphasis where, alistair darling is forced to join the companies to drop living wills to allow them to be dismantled easily until the event of another financial crisis. it says the proposal will be included in new financial services legislation this you a item. in an interview with cnbc's guy johnson, looking back from last year, they talked about just how close we came to -- >> we were on the brink to seeing a collapse in the world's financial system. no one should be in any doubt about that. the prok that lehman had was a chronic problem could be acute. it was lehman's, which made people come up short. she realized there was a huge problem. we had to recapitalize our banks. so did most other companies. we were near the h. pooem people were looking at the abyss. and it was only because governments stepped in like they did that they could have avoided catastrophic problems. >> we audible know the response, you know, of the legislature year has been a huge monetary fiscal stimulus. we had a greenspan post lpm and we got this ee norm yumus pot which is channeling a huge amount of liquidity into the system. is that what's behind the rise in asset prices that we have? >> if you pump that much money into an economy, they kind of bounce and it reduces a huge amount of liquidity. of course, in terms of people investing in things that yield nothing plus a lot more. therefore, if you would expect asset prices to be stronger than they were last august. >> so the big question now is if that stimulus is still in place, despite the fact everybody is saying, growth, we've got growth back, will the strength of the stimulus still outpace whatever the economic story is in the short-term? >> yeah, look. it's quite clear that there are a lot of stim ewe lieu in place at the moment. your research from the zew was talking about a microcosm of that. the question is what happens when you start to dwinldz dwindle that experience? how much sustainable growth do you get? certainly over the next few months, i would expect it's going to be relatively robust and probably into next year. >> and asset prices go higher from here, don't they? >> yes. i suspect they probably can. again, the question for equities is that we know we've got recovery. that's not the question. the question is that for equities on the real economy, what happens down the road? and then i think there is a fundamental disagreement between those of a more bulis and those of a more bearish disposition. >> richard, julia boorstin here in the united states. what is your perspective on asset allocation, whether investors should be investing more in developed markets or in eye merging markets. >> i've been overweight emerging markets most of this year. i've been underweight developed markets, still underweight, not as much as i was. but it seems to me that the way in which you want to look at it is not so much emerging versus developed other than the way you want to play that. the question is, do i want to be in equities? emerging market credit is up by about 45%. it still looks pretty cheap to me. >> richard, it's maura here in asia. is it too soon to discuss exit strategy in terms of these policymakers? >> whether it's too early to exit is a different question. look, as the developed world, we are going to have to put fiscal houses in order at some state. the lesson of japan in the 1990s is if you try and do that too quickly, they raised the consumption tax in the 1990s and consumption fell off again. if you do 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not only on boom and bust, but on a firmer foundation of sustained economic growth. >> president obama obama meets several proposals, including a resolution authority that allows governments to unwind firms that post systemic risks. jeffrey lacker argued on monday that these proposals could back fire and encourage more risk taking in financial markets. he said, quote, the leading proposals before congress concentrate almost exclusively on expansing government protection and regulation, but i believe we would be better off placing greater reliance on market based inventives for prudent risk management. meanwhile, eli lilly plans to cut about 14% of its staff by tend of the year. the company faces steep declines after patents for four exclusive drugs expire. mau maura, however to you. >> julia, china says its move to add tariffs on chinese made tires is an interviews. the move is protectionist according to the chinese ministry. today, beijing unveiled data rebutting the acquisitions that china was flooding the u.s. economic. now, some bad news for australia's biggest phone company. it's going to have to split up its wholesale and retail operations. under draft legislation, telstra will have to adhere to the new rules or will not be allowed to acquire additional broadband spectrum. it could likely leave large parts of telstra's copper lines redundant. kraft says it's still interested in holding official talk is with cadbury. is says aer would be a win-win for both firms. tomorrow it's ceo is going to update the growth strategy as a stand alone business. meanwhile, gdp is not enough. that's what nicholas sarkozy is going to try and tell others. he wants to ditch a measure of unique strength and include it with one that includes well-being. he'll have the statistics agency to integrate those findings for economic analysis. richard, what do you make of that idea? i find it sort of an appealing notion. >> especially if you're french because you've got great quality of life there, right? the question is whether anybody takes any notice of it. if you're hard wired to loot at gdp as a measure of strength -- >> the point joesive has said is it looks at a measure of -- >> i don't think anybody looks at gtp as economic restraints. there are other things that people look at. inflation was one of them. i suspect there will be a long, long hard look at measure of strengths or null nerbility. i think these are better things for policymakers to look at. other imbalances to build up, it mentions inflation in the grand total of four times. it's not the be all and end all. >> richard, where do you think we should be looking? would you recommend creating another measure that's different from what sarkozy is suggesting? do you think we need a new measure of growth? >> it depends on what you're trying to look at. are we oog trying to look at the causes? that's one thing. you're trying to say, are we trying to measure people's well-being, are we trying to measure their happiness, i guess what i was saying is you can have fast growing economies, look at the baltics, that were extraordinarily vulnerable. >> richard, thanks so much for joining us, richard cookson from hsbc joining us. meantime, still to come on "worldwide exchange," we're going to examine the post lehman operating banks and find out if the worst is indeed over for the sector. we would like to hear from you. do you think the hong kong banking sector is solid? e-mail us your thoughts and your views at worldwide@cnbc.com. - ( classical music playing throughout ) - wireless can bring even more freedom to the freest country on earth. so why should you be penalized for talking to someone, just because they're on another network. shouldn't you be able to call any mobile... on any network, at any time? it's a free country. knock yourself out. announcer: introducing the revolutionary any mobile, anytime. now on the sprint network you're free to call 250 million mobile phones nationwide without worrying about the meter running. only from sprint. the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com. magna's co-ceo said magna is sticking to its plans to cut 10,500 jobs from its german opel operations. phil, you've been to plenty of auto shows in the last year. how is this one? is the feeling here any different than the others? are they feeling any better about themselves? >> much more opt mimp mystic. that's the huge difference from this show. over the last year, when you would go to an auto show, you would talk with executives, their heads would be hanging down, they would say i don't know when we're going to see an end of how bad things are around the world. that's not the case here. at this show, there's more optimism. nobody expects auto sales particularly in the united states and europe to rebound as quickly as some would like. but there's no longer a sense that oh, boy, we're never sure when we're going to see the bottom. they believe they've seen the bottom. so the sense of optimism here, that's one thing we're seeing a lot of. the other thing we're seeing a lot of, pluggin technology. vehicles, the hybrids in particular, a number of companies unveiling pluggin hybrids. we'll see the pluggin preyumm being unveiled by toyota today, mercedes unveiling a pluggin. bmw showing a pluggin hybrid concept. this is that middle stage as we see the auto industry move toward electric vehicles. so those are really the two things that we're noticing here today. more optimism and that future technology. everybody is bringing it in as quickly as possible. >> the optimism continues beyond the scrappage schemes. cash for clunkers has wrapped up. what happens after that, phil? >> nobody expects much for the next couple of months. i think the next couple of months, you are looking at an industry that is going to be slogging as they work up inventory again. they realize that they soaked up a lot of sales over the last couple of months in the united states as well as over here in europe with these clunker programs. now we'll see them rachet up over the next six to eight months. for this year, of the automakers are expecting much. >> phil, thank you for that. let's check on the asian trading day now. let's take a look at the hong kong financial sector. emily. >> hi, maura. we had a shortened day here in hong kong due to the passing of a typhoon, but managing to end the day cloefrs lower, at 20,866. now, after the market closed about 30 minutes ago, we got numbers out from hong kong's biggest property developer. this is sanhoon properties, and it fell to $1.3 billion. this is do you know due to a loss in its investment property. that translates to about $1.5 billion u.s. and that is better than expected. and the company declared a final dividend. traying ahead of these numbers, its shares did end the day lower, down 0.8%, and it's going to start trading in hong kong tomorrow at $112. now from properties, to hong kong banks. a hong kong bank entered the financial crisis on a healthy footing, but on a low point. a lack of confidence in the financial system resulted in a run in ra major bank here. bank profits took a hit in the first half of this year, but a rebound is expected in the second half, riding on a recovery and the hong kong economies. but one risk that still remains is a deterioration in loan quality and higher impairment charges as hong kong banks are increasingly financing investments across the border. henry chan owns this factory which makes velvet. his company generates revenues in excess of $32 million u.s. dollars. but the onset of the financial crisis saw customers cutting orders and demanding lower prices. >> translator: originally, you would think there would be money in a month, but it would never come. so we go to a bank, but the bank couldn't help, either. so this was a problem for cash flow. >> in a bid to help the smes weather the downturn, it has helped. but a loss of confidence caused a run on a major bank here. but the monetary authority was quick to move in and put a guarantee on all bank deposits until the end of 2010. >> i think that globally the central bank has done a great job in introducing loosening monetary policies, so that brings down the xwreeld curve substantially. that would certainly help the revival of the exposures in hong kong. >> they are using the funds for expansion and investment across the border. according to a fitch ratings report, the first signsof deterioration in loan quality appeared in late 2008, particularly in the manufacturing and trading sectors. they expect higher profits to keep banks under pressure this year. and they're optimistic on the coming 12 months. sglt. >> credit growth in the second half should come back. also because of this revival of the stabilized global economies, that means trade volume is likely to pick up, as well. that would further alleviate the mpo pressure and i'm expecting at this 20% to 40% gps growth in the coming year. and the banks here do not face policy risks as those banks in china. >> the hong kong monetary authority said results from its own stress tests show that the banks will continue to be profitable, all be the it at low levels, with even in the worst case scenario. >> looking ahead, hong kong banks are going to have to manage their exposure to funding expansion in china. we're dealing with increasing competition from their mainland counterparts. julia, back to you now. >> thanks, emily. today in the u.s., we'll be getting two economic reports from the opening bell. producer prooin price index numbers and retail sales, strong gains in oil price res expected to edge the producer price index higher. core ppi, which excludes food and energy believe we will see a 0.1% increase. the consensus for retail sales overall is a gain of 2% due the in part to the cash for clunkers program. they also received a rebate from the government for $4,500. sales excludeing autos are expected to see slight growth of 0. %. coming up after the break, lehman brothers' collapse sent a shock wave through the global financial system, but it created opportunities for other banks. these days, when you have to spend, shopping online can help save. doing it with bank of america can help save a lot more. up to 20% cash back from over 300 online retailers with our add it up program. just sign up and use your bank of america debit or credit card when you shop online. it's one of the many ways we make saving money in tough times a whole lot easier. welcome back to "worldwide exchange." in the united states, president obama calls for a sweeping financial reform to prevent this financial crisis from ever happening again. >> in europe, weaker than expected data from germany's gew suggest the country is face ago slow economic recovery. >> and here in asia, china says u.s. tire duties are against the wto rules. beijing says it will raise the issue of protectionism at the upcoming g-20 summit. >> let's take a quick look at u.s. futures ahead of the market open. they were trading down slightly, and they've been flat all morning. nasdaq is off even more than it was earlier from fair value. the nasdaq is off by over 13%. and the s&p 500 is down by about 4.5 -- 4.5 points. the nasdaq is down by 4 points there. so we're going to take a look at the u.s. ten-year bond yield. it looks like it's at 3.41%. it's down by 0.016 for the t-note. >> let's show you where we are for the european stock market. pretty much either side of the flat line, really. xetra dax down 0.4%. ftse 100 down 0.25%. it's just a little more weighted down downside. retail stocks are the weakest sectors right now. initially it bounced up against the euro after inflation came in not as weak as expected. but then we've just had some comments out from bank of england governor mervyn king thinking about having a deposit rate because that's may prompt banks to buy assets and it may be a useful supplement. at the moment, banks are getting remuneration from having deposits. of course, with the bank of england, we think maybe we have a deposit rate of going negative. so that has meant sterling has now falling to 1.6525 against the dollar and the euro has driven, as well. we'll get comments on that in a few moments time. >> no real momentum factor. nonetheless, some of these index he are at multi month highs. the kospi, for example, trading at a 14-month high. we did see technology stocks leading the way higher there. shanghai stocks trading off with the united states. the beijing stock saying they might be waging the issue with the g-20 summit baulg because they're calling the tire duties unfair and against the spirit of the wto. at the same time, we had some good news out of the foreign direction investment front for china, showing ta in the first eight months of this year, fdi levels fell 17.5% compared to last year. it seems like a lot, but you compare it to the first seven months of the year, writ drops about 17 z pz%, that's seen as an improvement. f did i rose by 0.7% compared to the year earlier. we went above 69. we're now currently at 68.$68.8s you can see there. brent crude is at $67.95, in tandem, but not reaching that $68 level. >> the blast oh lehman brothers shook the financial system to its core. it brought in unique opportunities for competitors. in japan, for example, nomura took over the failed business of the london investment bank. >> nomura has long dominated the retail brokerage market in japan. but global ambitions were unrealized until it jumped at the chance to buy lehman last year. thanks to the acquisition and rallying stock markets, nomura posted its first profit in six quartzers. business in europe has been particularly breakfast, with nomura recently topping trading volume on the london stock exchange. >> how much of all of this do you attribute to the acquisition of lehman last year? >> i think for a success of fixed income. and equity businesses in japan is almost at 1 you 00%. >> until high flying deals materialize, analysts say nomura mas may opt for job cuts to trim costs. nomura's job are up 57% from a year ago. when those guaranteed end soon, analysts say there could be a brain drain, especially if it's competitors are hiring, some at 2007 levels. >> one needs to live within the constraint of the marketplace. when the prices are up, costs will go up. >> the other challenge has been to instill a more competitive risk taking culture. >> people will be more repaired to embrace china and we will see more revenue-based compensation structures coming into place. >> analysts say nomura needs to prove it can regain the market share. but new capital requirements could make the task higher. >> common capital has dropped to 70% of precrisis levels. so capital raising will be one option. they need to strengthen their long-term capital base if they want to take more trading risk. >> analysts say they're certain risk can be managed in tokyo. despite all the change the community has weathered over the last year, the intersang item remains largely the same. >> meanwhile, there is a concern that some of the banks are making too much money out of the stimulus they've been given. he's talking about possibly a cut in interest rates to buy assets and a deposit rate might be a useful supplement. let's get a view of whether we might see more of this. joining us is paul schatz. london, richard cookson is still here in the studio. just your view on this, the fact that the bank of england governor is talking about the possibility of cutting deposit rates and we're up 0.5%, i think. we're talking about the possibility of negative interest rates. >> they're quite attractive in theory. by cutting the amount of interest, you pay by holding reserves in central banks, you encourage banks to go and lend to companies and households more. the problem is banks have been earning quite a lot of money and risk free money from those deposits to central bank. so the question is, do you want to undor do hard work you've stabilized on your financial system? a. and b, i guess the big question is that even if they did cut the deposit rate, it could mean that they go by short-term government, instead. >> paul, is it your view that these reserves that the banks have and the money and institutions are being funneled, they're getting funneled from quantitative easing, it's not being lent out. how much of that is the reason they've had in equities and in bond markets at the same time? >> well, first of all, i agree with richard that it's just another creative way to try to get banks to lend money. and the governments have done essentially everything they can do almost to force banks to push money out the door. it's not going to happen. and also one of the reasons why you're not seeing this, you know, spike in inflation, there's a ton of money in the system, but it's being kept at the banks. i do think liquidity is the number one reason we've seen the financial markets so strong since the march 5th bottom and i see that continuing. to me, we're getting the first opportunity for a significant equity market correction come early to mid october. >> paul, it's maura here in asia. we have seen some of these banks back in october of last year seem to be on the brink and then turn around and post in some cases record profits for the first couple of quarters of this year. when you look at the overall health of the financial sector and the businesses and the weeding out between the weak and the stronger, does it make you more confidence about investing in financials at this point in time? >> absolutely not. listen, if your business wag struggling on the verge of failure, and i write you a blank check, how do you fail? the government essentially said to banks, whatever you need to survive, we're going to write you a blanks blank check. we're going to funnel as much money aus need. so by default, you had to survive. what's going to happen when the spigot gets turned off? you'll have a liquidity vacuum. >> paul, hi. i was wondering on the timing of your equity market correction, you were talking about mid october. any reason for that? >> i mean, a couple. first of all -- and you could say does it have to happen in mid october. but we've had just a vertical run from the march 5th bottom. similar to the run we had in 2003. coming out of the run from the 1974 low from december to the summer of '75, so timingwise, this is about the longest a rally has ever run. i can make an argument that some of the fed's programs are being quietly unwound behind the scenes, some of the liquidity is being pulled and the rally is beginning to get a little more selective. october, once you get by september, people will breathe a sigh of relief, wow, we got by the worst month. typically you get an october pullback. i just think because we've run so far, because the rally is getting more selective, the pullback correction is going to be deeper than anyone is prepared for. >> paul, here in the united states, we're talking about president obama's reform at the banks. how do you think that could affect your outlook if we see some of that reform? >> people always ask me. unintended consequences. my biggest fear when i go to bed every night is what is washington going to do to derail the rally, the almost economic recovery. and my worry is come october, i heard barney frank yesterday, i hear them jaw boning. i'm worried if they push health kay care and the financial reform together, you'll have a big blowup. and the markets hate uncertainty, hate all the spending. maybe that's the reason that none of us can even fathom right now. >> richard, a final thought on that? >> yeah, no, i guess my big problem in all of this is we don't know what positioning is at the moment. i find it quite difficult to get a rid read on that one. i don't find it difficult to think. and while that's the case, it's difficult for me to see financial markets and equity markets in particular for that march. i guess my bigger betts have been on credit. i think credit is extraordinarily cheap, even given the problems he's talking about. so i'm pretty comfortable with that. i wouldn't rule out an equity market correction. i don't think it's going to be very big. >> richard, thank you very much. head of asset allocation at hsbc. paul, you'll stick around and we'll talk to you some more. thank you for now. >> thank you. let's check on the japanese markets. asuka kondo joins us now from the nikkei business market. >> hi, maura. some late dip buying listed the nikkei 225 back to modest gains while the topix was weighed down by financial shares. the nikkei has learned that japan airlines has decided to scrap another 20 international flights to a fiscal 0 2011 starting next month. there are new calculations to roughly 20% of its international routes represent the deepest cuts jal has ever inflicted on its service. the latest cutbacks will reduce 30% of its operating costs. meanwhile, japan's largest airline is in talks with both american airlines and delta air lines for a capital payout. american airlines officials will visit japan as early as this week. in political news, the democrat party of japan president is about to finalize the cabinet lineup. the new party leader over postal and financial affairs. similarly, the leader of the social democratic party was asked to take the post of state minister in charge of consumer affairs and declining birth rate. hatoyame plans to appoint hirohisa fujii finance minister. that's the nikkei business report. back to you, maura. >> thank you, asuka kondo from the nikkei. stim stim still to come, president obama's speech to wall street, will it fall on deaf ears? by the end of 20 1. the company is facing steep revenue decline when four of its top five selling drugs lose their patents between the years 2010 and 2013. the sales of these drugs account for almost $ 1 billion. here is a look at how eli lilly is trading right now. it's up 31 cents. patrick swayze lost his battle with cancer at 57 years old. ross. recovery will be slow, according to the bank of england governor mervyn king who says the risks for inflation are still to the downside. he says falls in output from come to an end and there are small signs of positive growth. at the same time, german business sentiment rose by less than expected in september. the latest zew survey says its expectations index is up 57.7, which points to a slower recovery for germany, as well. >> well, of course, china is now saying that its ability to impose added duties to chinese-made tires, the move is protectionist, according to the chinese ministry. >> we are just around ten minutes away from "squawk box" today. carl is with us to tell us what's coming up this morning. hey, carl. >> hey, ross. we're calling it the month that shook the world. an insurance giant in the middle of a meltdown. the fed decides to give it a lifeline a year ago. congressman elijah cummings was critical of the bailout. he'll comment on what has not been fixed since last september. and illinois governor rod blagojevich will be in our studios. our guest host is richard la frak. talking real estate. and becky is here to talk to economic adviser larry summers. we'll start in about nine minutes time. >> carl, looking forward to that. she's chalking up the air miles, becky? >> yeah. by the way, we both got the red tie/blue shirt memo today. you carry it off better than i do. >> i wouldn't say that, carl. looking forward to the program. >> thanks. >> up next, we'll be talking to paul chaps. we'll be right back. that places aren't growing according to the government formulas. we're still caught in this tug of war between moderate deflationary forces and the slightest bit of inflation, so all in all, i see the price index remaining very, very tame. and i think retail sales, i'm not sure now is the greatest way to measure it with all that government money and programs. i think as we go out to november/december, it will be a little more accurate as to where the economy is going. >> so what do you think are some important economic number toes be looking at right now? what do you look at for a real indication of where we're going and whether or not we will see that pullback that you mentioned earlier? >> i'm not sure the pullback will be base odd any economic number. i think we're still a little too -- believe it or not, even though it's a month away, we're still a little too early to figure out what it's going to be. and if i think it's early to mid october, maybe earnings aren't as robust, for lack of a better word, as people are hoping for. but i think the problem with a lot of the numbers now is that so much is based on government spending and government money and free money in the system that the comparisons don't hold up. and frankly, now we're a year removed from the real disaster. so numbers will be easier to show readings. but the thing i was talking about is the treasury bond. treasury bond yields have been coming down and the bond market usually is smarter than the stock markets. the bond market is saying, we're not worried about inflation. we're worried about slowing economic conditions. >> paul, unfortunately we're going to have to leave it there, paul schatz, president of heritage capital. thank you so much for joining us. that's it for today's show. i'm julia boorstin here in the united states. i'm ross westgate in europe. >> and i'm maura fogarty in asia.