Transcripts For CNBC Worldwide Exchange 20130220

Welcome to todays worldwide exchange. Ross westgate is away. Im kelly evans. These are your headlines from around the world. A new chief executive after dropping profit. But cnbc reports the leadership change isnt related to the results. This is a process that started years ago. Happens to coincide here today with a weaker pricing environment. But two totally unrelated events. Teleco stocks on the move. Kpns 4 billion Capital Raising plan is backed. Full year earnings below expectations. And comedianturnedpolitician says his moving is unstoppable. In an exclusive interview, he says italians need to step aside. The rush to set up shop in china is down. The fastest decline in more than three years in january. Okay. Lots happening on the program today including a grew interviewer coming up. Well be counting down to the bank of england minutes after Andrew Bailey is to lead the new banking regulation unit. The minutes will be out in a halfhours time. Well bring those and u. K. Unemployment figures. The Central Bank Watch extends overseas as investors stand by for minutes from the Federal Reserves latest meeting. Theyre due out later this afternoon in the u. S. Will the fomc offer clues on an end to qe3 . Were joined at 11 30 to weigh in. With indias government clouded in corruption allegations, well speak to one of the countrys wealthiest individuals and what it means for business. Billionaire udai kotak joins us in 20 minutes time. Plenty coming up including sony which is heading to the bill apple for a major on, national endowment. Will the game console giant take the wraps off its rumored playstation . Expert analysis at 11 20 cet. And bhb bulletin has posted a steep fall in earnings for the first time in the year. The Australian Mining giant announced change at the top after the 43 drop in profit. We have more on this report from sydney. Reporter the surprise at bhp, billitons ceo mariu Marius Kloppers announcement coming earlier than expected. Coincided today with a weaker pricing environment. But two totally unrelated events. Reporter he will be replaced by Andrew Mckenzie, current head of bhps middles division. Hes well regarded in the industry and says dont expect a change in strategy. Listen in. Theres lots of things that are great about this company. I have no intention of changing. We have a fabulous strategy thats served our shareholders extremely well. Youve heard from jack and marius about that. I am going to continue this momentum that weve built together to put a sharper focus on the execution of that strategy. Analysts welcoming his experience in oil and gas saying thats key given a forecast drop in iron or e demand. They report a drop in profit to 5. Billion after 3 billion in writedowns on its aluminum and nickel businesses. On the upside, executives are looking for demand to improve over the next 12 months. Shares finished almost 1 down. Back to you. Joining us is john meyer, analyst from s. P. Angel. Welcome. Good morning. Bhps results, your take . Wellcrafted statement. I think a very good move to bring in Andrew Mckenzie at this point in time. Its quite defensive, it says were going to focus more on the Petroleum Division. Thats kind of a bedrock for the business. Where its as iron ore and other commodities are more dependent on what goes on in china. Of course, nobodys got control of that. With the new chinese leadership in place, there is some uncertainty as to how aggressive theyre going to be on their france spending and that sort of Infrastructure Spending and that sort of thing. Theyll carry on growing infrastructure within china, but at a slower rate. Whats interesting is to look at the results today which fell on weak iron ore prices. They bottomed in september and are up now. Expecting a price of 140 to 130 a ton. Whats your view, and is bhp going to be successful in diversifying their business if they dont set a target to make the Oil Petroleum unit one of the worlds biggest . Theres nothing low about iron ore prices now. Theyre quite high. Theyre not as high as they were last year, they were at exceptional levels until midway through last year when they started coming off. Still very good levels, probably unsustainable in the longer term. We would expect to see prices come down by maybe 1 3, for example. That will not back profits of the division. Iron ore is still bhps biggest profit area. And other businesses, for example aluminum are showing writedowns as with rio tinto not going so well. Meantime, the Petroleum Division continues to run quite well. Good Oil Production but a disappointment on the natural Gas Production side of things. I think they need to work on that business. Lets not forget that bhp is differentiated from the other minors by its oil business. Rio tinto, extrata, they dont have that business. Rio tinto down 1 , bhp down. 9 . A little different revenuation. Despite despite bringing on Andrew Mckenzie, if iron prices will fall by 1 3, you cant recommend bhp, can you . Its well diversified and a sol solid business. They will increase iron ore. We wouldnt expect another 4 billion, 5 billion profit from the iron ore business. Thats likely to come down a bit. The other business of looking fairly strong, bhp is a wellmanaged company, no doubt about that. Weve seen so much management turnover, not just at bhp but at several Mining Companies. Take a listen. Weve spoken with the ceos outgoing in some cases, incoming ceos of Mining Companies in the last week or two. Heres what they generally said about management transitions. We know that the world has become a more volatile place. We recognize that since the gfc, weve seen gyrations in economies that we wouldnt have ever seen before. There have been challenges, but changing regulatory environments in emerging countries are not easy. And i think we understand that, and weve gotten through the worst. There used to only be one regulator that applied territory to the deal, now there are many. Hurdles are increasing. Are we through the worst . Yeah. I think we are actually. I think theres quite a lot going for the sector now. I think currencies may well provide boosts for this year. Commodity prices look relatively stable. Yes, well see some volatility in iron ore, but i think coal prices should start to recover. And theres a whole raft of other commodities that are looking solid now. Its not looking like a bad outlook. I still think well see pretty good earnings numbers from these companies. So your favorite picks . Im going for reo tinto. Im backing sam walsh. Hes Proven Expertise in holding down costs in iron ore. He will, play that across the world. Hes universally popular in the industry. Any prospect for major m a . American is a target out there, the 20 billion market cap. Its easy for others to buy. Mick davis will be on the street looking for something to do. Im sure hes got lots of plans. Im sure hell start his own business well backed by Financial Institutions. We havent seen announcements. Watch the space. We will indeed. John meyer, we will have you back to watch it with us. Analyst from s. P. Angel on set. Thank you very much. In markets, quick movers the largest cement maker is near the top of the stock 600 after swinging back to profit in the Fourth Quarter. Different story for lufthanza, shares down 5. 5 on the back of the airline scrapping dividends and Going Forward with a 9 9 billion euro order for plans. France telecom reported slowing earnings broadly in line with analysts at citis expectations. Trades been volatile. Shares fractionally lower. Lets check the broader landscape. Two european markets are a little higher. Xetera dax adding. 3 after a Strong Performance yesterday on the strong zew survey. Bond rates, we havent seen as much focus on the space. It tells you something. The ten year in spain, 5. 15 , under 4. 4 for italy ahead of the elections on sunday. Over to forex, the euro yesterday was initially stronger. Gave up ground. Today, adding. 2 to 134. The yen giving up another. 3 , heading back toward the 93 level. For more lets check in with li from singapore. Reporter thank you. Asian shares climbed to the highest level in 1. 5 years on an improving global outlook. The nikkei managed to close at a 52month high despite a record trade deficit in january. Investors are still awaiting the decision for the next boj chief. Toyota shares gained 1. 7 after thenique reports. The carmaker will ramp up production in april by 10 on expectations of higher domestic sales and more profitability due to a weaker yen. Japan tobacco lost 1 an reuters reports the japanese government will begin selling its shares of the company in the next few days. The Mainland China markets rebounded from losses over the past two sessions. Investors are looking for policy cue s in the upcoming sessions f the National Peoples congress and the chinese peoples political conference in march. Environmental stocks surged on hopes of more government supported. Local meadad say china will invest over 56 billion to control air pollution by 015. 2015. Shares in hong kong also finished in positive territory. Gaming stocks fell after reports say gambling revenue will be weak in february. Elsewhere, south korean automakers Technology Shares and n brokerages led the rally on kospi ending higher by 2 . And the esx 200 hit a fresh 4. 5year high helped by gains in banks. The major minors ended weaker after bhp reported a sharp rise in costs. Sensex trading higher by a modest. 1 . Back to you. Thank you very much for that. Well check back again in just a little bit. Kpn shares, want to draw your attention, down almost 7 this morning. This after carlos slims company and one of its biggest shareholders approved a capital raise. Investors, though, generally looking at the company and say figure it needs a capital raise, potentially the business is in worse shape than previously thought. Giving up almost 7 today. Well keep an eye on that throughout the morning. Italys caretaker mario monty has come out swinging against Silvio Berlusconi saying he didnt keep promises he made in the past and that someone else could govern well. This comes as the outspoken comedianturnedpolitician whipped a crowd into a frenzy in milan. Julie is in milan. In fact, she was at the rally. What was it like . Reporter it was incredible. Some of the estimates suggest up to 100,000 people here. This square behind me was absolutely packed. And i have to admit he was treated like a rock star. They made a human chain to get him to the stage that was on my right. The press, italian press, literally mobbed hip as he got out of his camper van. Hes on his tsunami tour, he calls the process of the rallies hes been going through. In direct contrast, i have to say, to the rally that we saw earlier which was far more sedate and far fewer people. He really is managing to monopolyize on this monopolize on this austerity and i dont think we can discount how much this has gripped in some ways like greece, for example. Reminded me of the second election and seeing the support. So you can ride that wave a long way. Now, when i spoke to him yesterday, i asked whether hed managed to monopolize on the corporate scandals and whether that and the political fallout has to get worse before it gets better. Listen to what he had to say. Translator this country is falling down like a house of cards. This is the biggest financial scandal in the history of the republic. Everyone from the upper echelons of government are involved. All Political Parties are volv theyve tried to cover it up with misleading information, misleading news. In this country the media is has conclude colodue colluded with the government. Its coming down, and we have to rebuild from scratch. We need to start with those people who can no longer live in the situation, w a salary for citizens. We must immediate help the small and medium enterprises. Were running out of time. Reporter all the other parties seemed to attack it, do you think theyre scared . Translator yes, theyre out of the game. They belong to history. They have Television Studios where they go because the journalists that interviewer them work for those parties. They cannot put their noses outside. They live in a parallel dimension like a truman show. They realize citizens have turned their back on them. Like the old fascist officials that would go on saying bring out armies here and there, when in reality the armies had ceased it exist. These parties are like old actors acting before an empty theaterment theyre the past. In six months we will not even remember them. Reporter do you think that if you dont win this election and somebody else forms a coalition well actually have to go back to the polls again in a few months time . Translator absolutely, yes. Its only a matter of time. Either they give up now or give up in six months. One year at the most. No government could rule a country in ruins. Most certainly those who reduce it to ruins cannot be allowed to govern it. We guarantee we will fill a void. In other countries this void is filled with fascists, by the pen in france, the party in hungry, greece. We are keeping people calm. These parties need to understand that it is over for them. Reporter now, grillos effectively ruled himself out of power saying on no account would he form a coalition or what the likelihood is. Were looking at a coalition between mario monty centrists and the center left party of basani. Thats where the ultimate question mark remains just how stable is a coalition that they can form. Do think its interesting. In the papers today, suggesting that blackrock will send a convoy here to talk to pollsters to assess the risks surrounding this election. Perhaps the concern that weve been talking about over the last few days reflected at least in the front end of the italian move over the last couple of days. For now, back to you actually, i want to mention one thing. We are actually going to be talking exclusively to the ceo to get an idea of the business environments and what theyre thinking here post this election versus, of course, the politicians that weve been speaking to for the last few days. Wanted to mention that at the end there. Perfect. That interview will be coming up on european closing bell. Great to see you. More from julia later on in the program. India is facing an economic slump thats meant its top growth pace has cooled, and so are businesses feeling the chill. Coming up, well speak to one of indias wealthiest individuals, udai kotak live from mumbai. Well be right back. Great, everybody made it. We all work remotely so this is a big deal, our first full Team Gathering i wanted to call on a few people. Ashley, ashley marshall. Here. Since were often all on the move, ashley suggested we use fedex office to hold packages for us. Great job. [ applause ] thank you. And on a protocol note, id like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh im sorry guys. Ah sometimes the caps lock gets stuck on my keyboard. Hey do you wanna get a drink later . [ male announcer ] hold packages at any fedex office location. Welcome back to the program. Chinas reputation as the worlds factory remains in dispute as the countrys Foreign Direct Investment dropped. 3 on the year in january, coming in at over 9 billion. In 2012, chinas fullyear fdi hit nearly 112 billion although it was shy of the 120 billion target. It was also the first annual drop in three years. Meanwhile, japans trade deficit hit a record 17 billion in january. To put that into context, exports climbed 6. 4 , the first gain in eight months. Imports rose at a faster pace, up 7. 3 from a year ago. The weaker yen is a doubleedged sword. While it makes japanese exports more effective it costs the costs of import which are largely priced in dollars. French bank agripol posted the loss of 6. 5 billion euros. The sharpest loss since the bank went public in 2001. Theyve added 3. 7 , and stephan has more from paris. Its extraordinary that the company is doing worse in 2012 than during the financial crisis. Reporter yes, absolutely. But the bank believes that the worst is not over. It has turned the page and thats the reason the stock is performing well this morning. Credit agricole will reveal the Restructuring Plan after the summit. Theres not much details, but were expecting the bank to cut its expenses. Thats precisely what other banks have been doing in recent weeks. Bnp parabas said they would reduce the cost base by 2 billion over the next three years. And Societe Generale simplified its structure in order to reduce its cost base. Thats precisely what were expecting from credfrom Societe Generale. The rate was at 9. 3 at the end of basal 3. They will improve without any capital increase. That also from a market point of view was a positive announcement from credit aricole. The loss was wider than expected because of a significant charge on the former greek unit, on the italian unit, on the portugal unit and the tax change on the sale of its greek unit. That was not planned. Thats the reason why the loss was wired than expected in the fourth wider than expected in the Fourth Quarter. Thats over, what the ceos say this morning. The bank has transformed itself and will announce a plan in september. The share price up nearly 4 . Thank you very much for the background on that. Investors today are putting that toward the top of the stock 600. In fact, the fourth best performer on the day, Credit Agricole up 4. 1 despite the writedown. We mentioned that foreign direct. In in china had fallen. Were also getting foreign direct in china had fallen. Were also getting that they will have expanded property tax trial and implement property purchase limit. The shanghai composite addi adding. 6 today, nearly 2,400. It was below the 2000 level last fall when iron ore prices bottomed out adding 18 over the past three months. China will take additional measures to curb property speculation. In india, trade unions have begun a twoday strike in protest against the governments economic reforms. Nearly a dozen unions plan to block transport links and disrupt staterun bank. The strikes come as the government aims to revive a flagging economy and avoid the threat of a down grade for indias credit rating. Joining me exclusiveliy is uday kotak, managing director at kotak ma hintdra bank. Thank you very much for joining us. We understand you had an Investment Conference drawing people from around the world. Were also learning that investment into china is falling. Do you think Global Investors see india as the new china here . I think that would be little bit of a stretch, but indias just about a week away from a budget which is a crucial budget. And the finance minister has promised to control the budget deficit down to 5. 3 and going down hopefully into the next year at 4. 8 . We hope there will be easing of Monetary Policy in march to revive the investment cycle. The current gdp growth estimate is around 5 to 5. 5 . And indias working hard to try and stem the slowing down of growth which indias experiencing right now. Do you need more supply side reform if it pursues quantitative easing like youre calling for, wont it boost inflation, potentially hurt the currenc currency . I think india needs to do a combination of tightening risk and easing monetary before you start controlling longterm inflationary trend by controlling budget deficit. At the same tim you need to spot the investment cycle which requires easing of the Monetary Policy. What about changing regulations to make it easier not just for banks in india to expand and compete with each other but for foreign banks to enter the market . I know as a managing director of a major bank there, perhaps you enjoy thing, perhaps you enjoy the status quo. No, i think we are very happy to see Global Investment coming to india. I think right now india needs more foreign, direct investment. Indias continuing to see a Pretty Healthy investments. For 2012, india saw about 30 billion. January and february have seen a good amount of portfolio interest in indian equities. If anything, are you concerned about the money coming into the indian market . Going back to what we were saying before . Is there any sign that its Global Capital flows that are adding to indias inflation problem . At this stage, india needs capital flows. Theyre running a current deficit. And therefore, capital flows clearly are welcome. And indias going all out to woo capital flows. The finance minister went around the world to invite portfolio capital. India is very welcoming for Global Investors to come in. The u. K. Prime minister is in india saying the country needs to do more to open its market to banks and financials. Is he wrong . I think hes right that were open to more competition. At this point a lot of global institutions have their own challenges including challenges on capital. The Financial System is extremely robust, particularly the private sector. And reasonably well capitalized. So compared to whats happening around the world, the private indian Financial Sector is well capitolized, robust capitalized, robust, and can take on growth. Lets see if we can keep the pictures. We want to talk about your own company. You know of the biggest banks in india. Whats your own biggest challenge for 2013 . I think we are quite focused on ensuring the maintenance of credit quality and at the same time decent loan growth. We see our bank being able to grow loans 20 to 25 per annum and have a very high level of focus on quality of credit which we like. And underwriting standards we observed. That is more generally a challenge in the indian banking sector. A lot of banks have significant exposure to infrastructure. We are relatively fortunate to have low exposure to infrastructure and have maintained a healthy loan book and growing at 2 0 to 25 . We think it is possible to marry a robust flip india with nominal growth in the 20 to 25 range and at the same time maintain decent margins and credit quality. Building on the success youve had both with your company and personally and being so relatively young whats next for you . Whats the next phase here . Is it taking kotak internationalflation . I think if you look at, say, indias nominal gdp which is regular i mean, which is the real gdp plus ininflation, india grows at between 12 to 15 nominal. It is possible for us as a Financial Institution to build a business in india which grows between 1. 5 to 2 times nominally in gdp. And at that level, if you grow at 25 a year, my First Principles you can double money every three years at 25 . Therefore, that itself is a pretty interesting place to be in the world at this point of time. And therefore, well continue to grow both organically and inorganically in india. And very selectively outside of india where growth expectations we would have for investment should be similar at least to what we make in india. And well leave it there. Uday kotak, managing director. We wonder if Warren Buffett has comment given the prospects. We want to bring you minutes out of the bank of england hitting the wire. Showing a 90 vote to keep the bank rate unchanged. Interesting, it was 63 on keeping the Quantitative Easing Program at 375 billion british pounds. King, fisher, and miles wanted a 25 billion pound increase. The vote was the biggest split since june, 2012. The Monetary Policy committee saw the case for more q. E. To help the economy rebalance. Some of the tollways saw it as a more targeted form of q. E. But said drawbacks remained and that q. E. Was the most effective tool to lower market rates. And that there were encouraging signs in funding for lending scheme. A reasonable chance of a modest u. K. Recovery in 2013, and the threat of a disorderly eurozone adjustment remains. James knightly is a u. K. Economist at ing and joins us. What do you make of the 63 split . Its interesting actually. Its more than we expected really. Expecting another 81 split with david miles being the main lead on the extra q. E. I guess it ties in with the comments weve had from the bank of england of late. The press Conference Last Week was dovish. Its quite clear the bank of england are moving toward emp emphasizing looking through the target of above target inflation. I think well get another round of q. E. In the next few months or so. James, im looking at sterling. Its 153. 77. Its fallen through the 154 level. Significant from a psychological point if nothing else. Weve seen other analyst suggest if it breaches 154, it could have plenty more downside to go. What i know youre not a currency analyst here. But does the reaction make sense to you and does a weaker sterling here i guess, how would you interpret that . Yeah. I think, you know, most people expected the ponlt of further q. E. , especially with mark carney taking over and its relatively dovish leanings. For king to have shifted with fisher, as well, its indicated that were perhaps closer to kwan taf easing in the near term. Of course thats more likely to add in sterling. Given the fact that the u. K. Could lose its aaa rating in the next month or two following the budget and also the uncertainty created by the u. K. E. U. Referendum and Scottish Referendum on independence. Theres a lot of negatives surrounding sterling now. I think it has further to fall. Well leave it. There we want to get your thoughts on employment, as well. Well be right back. Welcome back to worldwide exchange. Lets go straight to a look at whats happening with sterling. We have seen it drop below the 154 level. Bank offen land minutes just of england minutes just showing fisher and miles would have liked to see a 25 billion pound increase in the size of the Quantitative Easing Program. Also comes as we learn that the u. K. Unemployment rate held at 7. 8 . Slightly better than expected drop in jobless claims. Average Earnings Growth remains weak. Heres whats happening across the gilt curve. Yields coming in at 2. 4 . And james, at least the gilt yield is coming in. I suppose the markets would be most worried if the opposite happened, if it were to push out here. Its interesting to hear the bank of england say they think pound appreciation is expansionary. Perhaps they look at this and are pleased. Yeah. I think so. I mean, the way that theyre going to get growth, given that austerity is continuing, Household Finances continue to be squeezed. Rebalancing of the u. K. Economy that weve long talked about. That means more exports and the plunge that weve seen in sterling really over the last month or so is beneficial for that argument. What about king being outvoted again when it comes to wanting to do more . Were learning that they had discussed rate cuts . Yeah. It is interesting. Happened before obviously. But i think, you know, by him pushing the case and if we do get any data disappointment its a clear sign that more q. E. Will be on its way, especially with uncertainties in europe and the u. S. Fiscal story come back and start to dent risk sentiment a bit. Is it fair look separately at the average Hourly Earnings figures which show a 1. 4 growth in december. Some of the weakest growth since the 1. 1 increase in the three months of december, 2009. Is it really the case given the nature of the dynamics of britains economy that quantitative easing is actually helping, or is it basically just continuing to rob from from consumer purchasing power . Yeah. Its a difficult one because the data is contradictory in the u. K. You obviously have the u. K. Which is in pretty dire straits in terms of economic activity, gdp is still 4 below previous levels. Yet, of course, employments at record highs. We saw another huge increase in u. K. Employment. That sort of jobs are coming at a cost. Youre not getting the wage writers coming through. Its sort of a little bit all over the place. Its difficult to discern a true trend in whats going on in the u. K. As you say, q. E. , it is it probably is going to be continuing. I guess from the bank of englands perspective, theyre suggesting that most of the inflationary pressures coming from factors that are out of their control. I guess, you know, in terms of the administered price thats they were talking about, rise in utility bills, rise in education costs, as well. Thats largely out of their control. They cant really do a lot of that with q. E. Or interest rates. Theyre left really in a problem. They are focusing on the growth story. Okay. And again, from their point of view, a weaker sterling here is going to boost growth. Want to once again put up a picture of what were looking at. James, thank you very much for his time this morning. Now, half a percent, you see just that straight drop as soon as those minutes came out. The real question is what happens as market carney takes the helm over at the bank of england this summer. Lets get a sense of Broader Market reaction, too. Put up european markets and stocks and ftse rallying up 0. 15 , not a mauj move. Xetera dax adding. 1 . The cac and ibex are barely positive. The bond space, we mentioned what was happening with gilts. They were retrenching a bit on the news, 2. 14 . Weaker, as well, i should say potentially stronger given that it suggests investor demand. N spain and italy, seeing yields fall respectively. Own the bund yield is moving a little higher this morning. Now japanese Prime Minister abe is speaking out about a fund for the country. We have more on the nikkei live from tokyo. Good morning. Reporter good morning. Prime minister shinzo abe said a need for the government in the private sector to set up a joint fund to invest in foreign bonds has considerably declined. Forex traders took the comment as a sign that the yens strength has been corrected enough causing a wave of yen buying. Speaking at a parliamentary session, abe added that the need for the joint fund will likely diminish as bold monetary easing by the bank of japan gets off the ground. The comment is also seen as abe trying to send a message to market that he and his finance minister are on the same page. There have been speculation of raift between the two a rift between the two based on conflict over how far monetary easing should go. Until today, abe made it clear at that creation of the fund is on its policy agenda, while the finance minister stated the government has no interest in having the doj buy foreign bonds. The difference in position is seen as reflecting the difference in preference for the next governor. Abes choice more radical, asos more restrained. Abe will finish his thinking on the new governor after he returns from his trip to washington this weekend. Back to you. Thank you. Japanese officials werent the only ones in asia touching on forex. South koreas incoming president told business groups that her administration is ready to take preemptive action to stabilize the rising uan. Its put pressure on korean exporteders. Over 13 months there. The yen has weakened, 13 , 14 against the won. And new zealands bank chief told executives that the royal bank of new zealand will intervene when circumstances are right, using the official cash rate if needed. And on the back of that, the new zealand kiwi giving up about sorry, almost 1 against the u. S. Dollar s. There anyone not trying to talk their currency down . A great question for our viewers perhaps. Lets look at the agenda tomorrow. Sony shares will be in focus after tonights Playstation Event thats widely expected to unveil the p. S. 4. Otherwise, its all about corporate earnings especially in australia. Amp, asx, fairfax, and aluna are names well hear from. In singapore, results are due from genting, sim corps marine and costco. And companies in the Fourth Quarter seek a higher buyout offer. We have the numbers. Reporter dell came out with results last night that were better than expected. Wall street was looking for 14. 1 billion in revenue, they turned in 14. 3 billion. Dell did 40 cents. But they said theyre not going to give guidance given that theyre in midst, the process of trying to go private. Silver Lake Partners trying to take dell private at 13. 65 a share. Many shareholders saying thats enough, you have to up it considerably in order for us to surrender our shares. And given that backdrop, michael dell was not on the Earnings Call. And the dell executives on the call said were not going to talk about the buyout. Clearly they wanted get that subject as far away from results as possible. The Earnings Call was short, less than a halfhour. Shorter than usual. What did we learn from the call . A few thing. Some of dells Growth Markets not growing. China in particular doing a little bit better than the others. Dell described it as flattish. India and brazil down considerably. Public, the public business which is government, largely hospital and schools but also federal government business. Dell saying the margins were thinner than they have been in quite a while. Some hope, though, dell executive saying that the corporate refresh would pick up again in the back half of the year. Dell mentioning that around 40 , they estimate, of the install base of corporate p. C. S are still running x. P. And vista. And eventually those companies will have to upgrade to windows 7 or possibly windows 8 but upgrade to something because microsoft will stop supporting some legacy operating systems in april of 2014. Back to you. Lots of interesting developments in tech news. Well actually have more on that coming up in the program. In the meantime, though, another executive is making headlines stateside. Brian moynihan just got a late christmas present. The bank of america ceo saw his pay jump 72 last year to just over 12 million. This as the company gave him a bigger package of restricted stock and performancebased shares. Moynihans base salary, 950,000. He didnt receive a cash bonus. Bank of america shares last year rose 109 . They were, in fact, the top of the dow industrial average. Yesterday added 1. 3 in what was generally a riskon day in the u. S. Doing a lot of yelling does not appear to have used e. U. Negotiators resolve a cap over here. Lawmakers in the European Parliament backed by germany and france argue that caps on banking bonuses will prevent reckless risk taking. However, talks have broken down with at least one witness claiming negotiators were shouting at each other. Talks over the bonus cap will resume next week. On that note, we wonder, are the e. U. Plans to increase salaries and lower bonuses in the sector an effective way to curb risktaking . Let us know on worldwide exchange. Keep me company. Ross isnt around. Email worldwide cnbc. Com, tweet me, or wish roswell on his halfterm break, rosswestgate. Will the smartphone get them back in the race . Well have it when we come back. Blam welcome back to worldwide exchange. Is britains visa system hurting the countrys able to capture a piece of chinese growth . Yes, says or guest who think the u. K. Is missing out on vital tourists from emerging superpowers like china. Hes calling for tover to have adopt a system that allows chinese travelers borderless access across europe. President and ceo of the world travel and Tourism Council joins me. Good morning. First of all, whats the problem . It problem is the u. K. System is not fast enough or good enough to encourage visitors from places like china. China is a massive growth market, lots of people come from middle classes, 84 million traveling abroad. The u. K. Gets 154,000 of 84 million customers. Just 150,000 chinese travellers . Thats extraordinary. The key thing is if youre a chinese visitor you can get a visa to travel 26 countries. Why would you go through the process of more bureaucracy and paying more to get a u. K. Visa just to come to london for two or tree days . Right. Or three days . Right. Why isnt britain part of the system in. There are lots of reasons, but if i give an analogy, the Mexican Government last year decided that if you had a u. S. Visa, if you fought your way through the u. S. Visa mechanism to get a u. S. Visa, that was good enough for the mexicans. You didnt have to get a separatea. Thats all im asking that china consider. Theyre a big market, theres estimates of losing two billion pounds a year through retail outlets. Chinese tourists big spenders. At a time when theyre looking for any way to increase growth why not pursue this obvious one . When chinese come, they come in groups. At the moment, theyre not coming to the u. K. If you look in the reverse direction in beijing and shanghai shanghai,theyve decided people can go without a visa. Theyre trying to encourage them to stop on the way to somewhere else, but the u. K. Is not listening to the approach. When we look at the olympics, that was such a way for britain to make its p. R. Case to the world the way beijing did in 2008. It would theme is that would be an obvious peg to say, by the way, come visit, were reforming our visa system. Why not . Last year was such a showcase for the country. For china, its a magnet to come here. Given what happened in the u. S. , the u. S. Since 9 11 lost around 600 billion of tourist income because they were overly aggressive with their visa regime. Within the boirvegz you had the Commerce Department Obama Administration, you had the Commerce Department saying we want these people in and the state department saying, no, we want to keep them out. The only person that can resolve that debate in government is the president in that case or the Prime Minister. Obama based on understanding the Economic Impact of people not coming to the u. S. Basically instructed the state department to make changes. China isnt helping itself with all of the headlines with hacking and its involvement in spying potentially. Maybe all allegations. But if theres political concern from the top about opening whether for tourism or work more generally, this is maybe a difficult time to make the sell. Its difficult. Thats always the excuse that the interior ministries come out with. We produced Research Last year just inside the g20 countries. If the u. K. , india, china, and u. S. Relax some of these visa policies, it would create another five million jobs, bring another 60 million of income into the countries. Security forces and interior ministers need to do their work, keep the border safe. Equally, they need to relax visas and automate them, make them electronic. Theres talk that it might be scrapped i dont think that will happen. The agreement for visas is robust. As a consumer flying into the countries, its perfect. You motor around all these countries, and you visit them. But youre not coming to the u. K. The u. K. Is missing out big time on all of this economic prosperity. Exactly. Maybe the bank of england should instead of debating more quantitative easing should simply ask the government to revise its visa policy. Would help. All right. Maybe president and the ceo of the world Tourism Council will be next. Thank you very much. Hbc ramping technology to take on samsung and apple in the smartphone race. The company pinned hopes on the latest invention, the htc1, and hoping it will be set apart from other Google Android devices on the market. The smartphone uses new software to replace icons with personalized news streams, social media, and videos. I caught up with the companys ceo, peter chow, at its Product Launch in london for an exclusive interviewer. Exclusive interview. We are so confident in our product and wanted to be targeted, innovative, experience for the people who are wanting to find differentiation. How can you compete with the market and manufacturing muscle that apple and samsung have to fight back and win market share from the companies . We are confident to rely on our own innovation and provide unique differentiation to the market. And of course, we continue to innovate our marketing approach, try to be smart and nimble. How much will it cost . Well, it costs a lot of money. And we are going to we are committed to invest. That was peter chow speaking at the htc launch event yesterday. The culture has generated buzz around this new device. The trouble, though, is how much it will have to spend and invest in o to really get the message out against major rivals apple and samsung. Speaking of developments in the mobile world, 4g, the next big thing. Its hoping governments hoping that its the next big thing for their budgets, as well. Britain, of course, when it auctioned off 3g spectrum hoped to raise tens of billions of dollars. The 4g auction did not go off as hoped, raising well shy of the 3. 3. 5 billionpound target that was included in chancellor osbornes last budget. With that spectrum auction coming at 2. 4 billion pounds and following the results from Everything Everywhere that is the company e. Suggesting that consumers arent exactly banging down their door in order to get 4g access, the question about next week is how attractive 4g is and whether companies will see it worth the investment. Spain is selling a new fiveyear dollardenominated bond tomorrow as the recessionstricken country hopes to diversify its investor pool and tap into the yieldhungry economy. The transaction set in the area of 300 basis points over mid swaps according to market sources. It would be the first spanish dollar denominated bond issue since december, 2009. Greece is bracing for its first general strike of the year as workers renew protests against austerity measures. Todays 24hour strike will disrupt transport, close schools and all staterun offices. The industrial action comes ahead of a visit by the troika scheduled for next monday in which theyll check on the progress of greeces reform program. I suppose its a good thing theyre not there today. In bulgaria, meanwhile, austerity measures have toppled the countrys government. The Prime Minister and his cabinet announced their resignation en masse earlier following nationwide protests at planned reform measures. The premier did not say if elections for july one brought forward. And french president hollande wrapped up his time praising Reform Efforts but warned that fiscal reform couldnt be achieved by austerity alone. Hollandes visit went largely unreported in local media because, yes, greek journalists were on strike. Thats the common first lathrea connecting the austerity stories. Give us your thoughts at worldwide cnbc. Com or tweet us. Well keep an eye on the sterling dollar, down. 6 . Just sitting there after the big selloff following minutes from the bank of england. Mervyn king is no ben bernanke, that seems to be the case. Ahead on the program, u. S. Consumers are feeling the pain at the pump as rising gas prices threaten to dent an already weak recovery. Is there any relief in sight . Great, everybody made it. We all work remotely so this is a big deal, our first full Team Gathering i wanted to call on a few people. Ashley, ashley marshall. Here. Since were often all on the move, ashley suggested we use fedex office to hold packages for us. Great job. [ applause ] thank you. And on a protocol note, id like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh im sorry guys. Ah sometimes the caps lock gets stuck on my keyboard. Hey do you wanna get a drink later . [ male announcer ] hold packages at any fedex office location. Welcome back to todays wrecks. Ross is away. Im kelly evans. These are your headlines from around the world. The bank of england reveals a larger than expected split on its seat repurchase program, sending its assets repurchase program, sending to lows. A drop in first half profit, but the outgoing and successor tells us the leadership change isnt related to the results. This is a process that started years ago, happens to coincide here today with a weaker pricing environment. But two totally unrelated events. Dells profits slump, but the Company Turns in Strong Enough results to support investor views that michael dells buyout offer undervalues the p. C. Maker. And the intern politician tells cnbc his movement is unstoppable in an exclusive interviewer. Grillo says the italian Political Classes need to put their hands up and step aside. It turned out to be a pretty strong day in u. S. Markets yesterday after we got back from the holiday. The s p 500, 1,529. Fiveyear highs. The nasdaq and dow industrial average powering higher. The dow breaking back above that 14,000 level. And its not just in the u. S. Where we saw key thresholds. If you look at the cnbc ftse global 300, give a look at trade overnight. Adding. 25 , relatively quieter session in asia even though china has come back from the Lunar New Year holiday. In europe, its also been a case of strengths for the ftse, the dax. Today, trying to rally. There are individual names which are weighing on markets including lufthanza. Lets start with lafarge. The Worlds Largest cement maker. Near the top of the stock 600 after swinging back to a profit in the Fourth Quarter, up 5. 6 , helping the cac try to stay in the green. Again, a different story for germanys lovea tanza. Lufthanza. It will go forward with a new order for planes down 5. 5 . France telecom reported slowing earnings due to a price car in its home market price war in its home market. It was in line with citis expectations, for example, but down 1. 6 as investors sort through those results. Also, kpn. Take a look at this name. The Company Getting the go ahead from carlos slims america mobile to go ahead with the rights offer. Thats actually sending shares down 8. 5 . People suggesting the company is weaker than earlier expected. In the broader sense, the european market, the cac cac trying to stay in the green but fractionally lower. The ibex down. 2 . The xetera dax after a rally on better german Investor Sentiment, adding another. 3 . And the ftse up. 3 after the bank of england suggested it would review or would have liked to nature the size of its asset purchase increase the size of its asset purchase product. German bunds down to 1. 5 . Sterling was initially coming in, as well. Now holding at 2. 1 . For spain and italy, yields moving up so slightly, 5. 17 and 4. 38 respectively. The euro was also rallying this morning. Over here, well show you adding about. 2 a to 1. 34. The real story then, over there at the end. Sterling dollar down. 6 . Importantly below the 154 level. A lot of analysts say figure it breaches that, look out before. The next stop could be below the 152 range s. 150 in sight . Well explore that. The dollar yen giving up. 2 a , headed toward the. 25 , headed toward the level. And we have a recap of asia from singapore. Thank you. Asian shares climbed to the highest level in 1. 5 years on an improving global outlook. Who says the abe rally is over . The nikkei closed at a high despite a record deficit in january. Abe said the next doj governor must have a strongwall to defeat inflation, if stoking easing hopes. Toyota shares gained 1. 7 after the nikkei reports the carmaker will ramp up production in april by 10 . Japan tobacco lost 1 an reuters reports the japanese government will begin selling shares of the company in the next few days. In china, investigators shrugged off a slowdown. The rebound was. 6 after losing for two sessions. Environmental stocks surged on the hopes of more government suppo support. Local media saying china will invest 56 million to control air pollution by 2015. Shares in hong kong finished in positive territory, up. . No thanks to gaming stocks which werent so lucky. Revenue will be weak in february. Todays outperformer was the kospi up nearly 2 . Automakers Technology Shares and brokerages led the rally as the Prime Minister said shes ready to take action on the rising wuan. Another 4. 5year high, up. 3 helped by banks. The major minor the ended weaker after reports of higher costs. Indias sensex ended higher by. 1 . Back to you. Thank you very much. Idea we saw disappointing news on the home builder front. Toll brothers may continue the string of weaker news. The Company Coming in reporting earnings of just three cents a share for for the fiscal First Quarter. That compares with the estimate of ten cents that most analysts were looking for. The revenue figures also shy, 42 million 425 million versus 500 million. They reported a backlog up about 66 in dollar terms and 57 in terms of volume if a year earlier. A healthy product pipeline. Again, First Quarter results for Toll Brothers which is a key homebuilder in the upper end of the market, well below expectations. Keep an eye on shares today. Also to watch, dell. Fourth quarter earnings may add fuel to investor demands that the company seek a higher buyout offer. Cnbcs john fortt has more. Reporter dell had estimates better than expected. Wall street was looking for 14. 1 billion in revenue, they turned in 14. 3 billion. Dell said theyre not going to give guidance given that theyre in the midst, in the process of trying to go private. Michael democrat and silverLake Partners trying to take them hi many of the largest shareholders saying wait a minute, thats not enough, youll have to up it considerably. In order for us to surrender our shares. Given that backdrop, michael dell was not on the Earnings Call and executives who were on the call said were not going to talk about the buyout. Clearly they wanted to get that subject as far from the results as possible. The call was short, less than a halfhour. Shorter than usual. What did we learn from the call . A few things. Some of dells Growth Markets not growing. China in particular doing better than the others. Dell described it as flattish. India and brazil down considerably. The public business, government, largely hospitals and schools, but federal government business, dell saying that the margins were thinner than theyve been in quite a while. Some hope, though, dell executives saying that the corporate refresh would pick up again in the back half of the year. Dell mentioning that around 40 they estimate of the installed base of corporate p. C. S are still running x. P. And vista. Eventually theyll have to upgrade to windows 7 or possibly windows 8. But upgrade to something because microsoft is going to stop supporting some of those legacy operating systems in april of 2014. Back to you. U. S. Retail gasoline price vs. Climbed nearly 14 on the week to 3. 75 a gallon, the highest level since last october. Its also in line with the aaas daily report which shows the average price for a gallon of regular gas up more than 40 cents from last months average. Joining us now with more, managing director at jbc energy. Thank you very much. Sure. In the u. S. , the story is getting more and more attention. Not least because it seems to be hitting consumer purchasing power, confidence. Should we expect gas prices to keep climbing . In theory, yes. I mean, its exactly the right time of year. Gasoline prices have always been climbing ahead of the start of the driving season. So its a preseasonal buying that is quite normal. You would expect that to start sometime in the second half of january, going through the beginning of the driving season. That means we will have the situation eventually till may. But of course high gasoline prices are not only a question of the attractiveness of gasoline and the interest of gasoline, its also a function of the underlying crude oil market. Because you have the crude oil price and on top the margin for gasoline. This is getting focus. We havent seen huge moves to the upside in nymex. If anything, people are talking about the potential for it to go lower from here and offering people relief. Thats clearly not happening. Yes. I mean, lets say like this the crude oil Market Worldwide is now unreasonably high. I say unreasonably because the underlying fundamentals wouldnt indicate that. For prices for both nymex and brent here . Well, first of all in brent. Nymex has owned logic, more a u. S. Logic which is related to the supply and demand in cashing oklahoma landlocked area. If you talk about gasoline prices, international prices, you are talking about brent, brentrelated crude oil which is about 20 higher than wto right now. Now, the margins of gasoline very much would look on what is the brent price. And on top of that, the margin for gasoline. The u. S. Still occasionally is importing on a net basis. Especially around the east coast and other areas, correct . Yes. First of all, the u. S. Is importing bigger amount of gasoline. But they export a lot of gasoline. We see in the last two years, regularly in the Fourth Quarter of the year, the u. S. Even becoming a net exporter. Overall, you only can import gasoline if you are paying a market price. And so you have to pay a market price which is an International Market price. And that would not really look on wti. What are the prospects for the u. S. Weaning its reliance on imported gasoline . I mean significantly weaning, say, this year . Rather unlime. Its not unlikely. Its not in the industry of the oil industry. If it were not importing gasoline from abroad, it means they were selfsufficient. If they were selfsufficient, they only can ask for a margin which on top of wti which could be much lower. Really, i think it doesnt serve anyones interest if the u. S. Were not importing or in the need of importing gasoline. It would serve consumers interests. What youre saying is that these companies are able to maintain a higher gasoline price than they might otherwise because of whats happening with brent. Because they can point and say, yes, but we have to import this costlier gas. Well, i mean, its effect they have the need to import. You know, if you look on the balances, weve talked 600,000, 700,000 barrels a day of imports. At the same time thats a regional exercise. As you rightly pointed out, in the east coast it would be importing. Gulf coast refiners, a big of the refinery, exporting big volumes into mexico, into latin america. Partly into canada. Nowadays you see the occasional cargo going to nigeria. The u. S. Are very good in importing one thing and exporting a finished product. And making money out of that. But it is fair to say that the Gas Companies themselves are contributing to the higher gasoline prices above what the fundamental nymex price would suggest. Yeah, i wouldnt be that hard on that. I mean, you you should not assume that you have an oil company out there that is able to control the market. Right. So were not there yet. I think the balances may flip at some point in time, but not yet. Okay. John, well have more with you in a bit. First, we also want to talk about whats happening in italy. Still to, come comedianturnedpolitician grillo had a rally last night ahead of the election last night. Find out what he said about why europe has failed. An exclusive cnbc interviewer coming up. [ male announcer ] whats the point of an epa estimated 42 miles per gallon if the miles arent interesting . The lexus ct hybrid. This is the pursuit of petion. Welcome back. These are your Headlines Bank of england reveals a larger than expected split on quantitative easing sending the pound lower. Bhp appoint a new man for the top job after revealing a 40 drop in profit. Dell reports better than expected earnings, potentially fueling calls for a sweeter buyout offer. Weve been talking about prospects for a sahale boom. I want to pick up on the point because as you say, it seems that all the signs are pointing toward the u. S. Being oversupplied with gasoline, oil products i should say. Shale gas even. And yet consumers continue to pay more at the pump. Yeah. Number one, you have a trend. The trend is that the u. S. Will need less gasoline. That is the overwhelming trend because efficiency improvements are also coming into the u. S. Efficiency improvements you always have in europe. The u. S. Are introducing more efficient miles per gallon. In the years to come, there will be less need for gasoline. Refiners on the other side have to adapt and will export on one side and will switch their Refining Capacity to export more diesel. Still maintaining profitability for their refineries. Shale, of course, is one of the components that is supporting the u. S. Industry right now because it yields the Lower Crude Oil price. Crude oil prices in the u. S. Are disconnected from the Global Market to some degree simply because you must not export crude oil from the u. S. You are having a slightly lower price right now. Its difficult also to export because a lot of crude oil is sitting in the mid continent. What is happening now, a lot of pipeline and tanker projects bringing crude oil to the markets, into the gulf coast, east coast, west coast, everywhere. Above ground pipelines when the underground ones arent available. Anything, yes. Whatever makes it worthwhile. Shale Oil Developments happening that helps the u. S. Industry. We overestimated. We think the estimate for u. S. Shale is overestimated, not taking into account the huge decline rates that are happening because you have about 50 of the initial production after five months. That means you have a massive decline rate on every well. If you then want to maintain production, it means you have to drill more wells initially that may work out. If you want this as a sustainable development, its something not so easy to do. 50 decline rate, not something that most people are talking about, but extremely important. Well get more from you in the months ahead. Thank you for joining us. Straight ahead on the program, sony gearing up for a big announcement in the big apple. Will we get a sneak peek of the new playstation 4 . What im banking on. To grow, we have to boost our social media visibility. More likes. More tweets. So, beginning today, my son brock and his whole team will be our new senior social media strategists. Any questions . Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. There. I said it. They dont have pictures of my kids. They dont have my yoga mat. And still, i feel at home. Could it be the flat screen tv . The not so mini fridge . The different free dinner almost every weeknight . Or maybe, its all of the above. And all the rest. Am i home . Nope. But it almost feels that way. Homewood suites by hilton. Be at home. Sony is expected town veil new details on its playstation 4 game console. This more than six years after the launch of the p. S. 3. It is under pressure from nintendos wii and xbox as well as online games. The new p. S. 4 will feature a smaller touchscreen controller. Sony is attempting to win market share from tablet devices. Joining us, Technology Editor at computing. Welcome. Thank you. Theres a lot of competition, what are the stakes for this p. S. 4 launch . Sonys been having a rough try over the past probably 20 years. They were big in the 80s, big in the 90s. Everything they had at the top of the Hardware Market they had pulled away by the likes of apple with the music hardware and various cheaper tv manufacturers that can kind of replicate the quality that sony used to kind of sit on top with. So the playstation really has been the major hardware avenue for sony. So the playstation has how important is this device to the Gaming Market . The Gaming Market, its one of basically the big three. You know, this generation, youve got nintendo, microsoft, sony. Next generation is supposed to be the same. Its just whats changed in the past seven years since the launch of the last load of kind of home consoles. Of course, mobile has come in. Tablets have come in. You know, people are spending a pound on the game on the ipad now rather than 40 pounds to play at home. Is there a future for traditional gaming device . I dont think theres a future for the device as it is now. And i think, you know, the rumors that are coming out in both camps certainly, you know, from microsoft and sony is that, you know, including mobile in the plans now and having, you know, ipads work with games and mobile phones work with games, its in the home is probably the way forward. So sony obviously has, you know, it has mobile phones. It has televisions. And may be able to parcel things together. You know, we could be seeing possibly a smart tv with a a console built into it. Right. Stream games in. Sony bought a streaming game startup called giki last year. They spent 380 million on that one. So theyve clearly its important to them. Also important is the idea of total immersion in the game. Weve seen from all type of dwiers makers, things that device makers, things that allow you to not touch controls and be surrounded by the environment. Is it important for seasony to demonstrate some of those indovative features . Probably. I mean, microsoft launched their connect, the motion camera controller, a couple of years back. Its done very well. Sold very well. The sort of hardcore gamer is not necessarily adopting it because theyre still kind of simple games that work with it. Its definitely a part of the market which has proven popular. There are, again, rumors that this playstation 4 will have a camera controller included. So theyve got that one covered, i think. What about the xbox coming on its heels . Is there a first mover advantage here for the p. S. 4, or is there just the threat that whatever they do, microsoft would do something cool and steal their thunder . You know, a lot of people say that its the fact the xbox 360 launched a year or so before the playstation 3 last time that that gave it the lead for a long while. So you could argue that if they were to come first and really get this one out this year, it could give them a step up. Wow. Lots of pressure. And the event later today, well keep an eye out for the device. The p. S. 4. Maybe ill even, who knows, try it for the first time. Peter, Technology Editor at computing. Thank you very much. Thank you. Brian moynihan got a late christmas present. The bank of america ceo saw his pay jump 72 last year to 12. 1 million. This as the company gave him a bigger package of restricted stock and performancebased shares. Mountain hains pace salary moynihans base salary, 950 million. Bank of shares rose 109 last year, the top performer in the Dow Jones Industrial average. And yelling didnt help resolve a cap on bankers bonuses discussed here. Lawmakers in the European Parliament backed by germany and france argue that caps on bonuses will prevent reckless risktaking. Still, talks have broken down with a witness claiming negotiators were shouting at each other. Talks over the bonus cap are due to resume next week. We asked you earlier, are the plans on bonuses which include increasing salaries and lowering the bonuses themselves an effective way to curb risktaking . John tweeted, it would be nice if other jobs offered big bonuses. Maybe they can call the industry Something Else to escape the bonus cap. Jeff tweets that he refers shareholders and stronger boards to limit salaries rather than governments. Keep your responses coming. If you want to respond to that or anything youve heard. A lot of people talking about our segment with johannes beneni and even as america exports oil and oil products, gas prices rising at home. Tweet us, cnbcwex, and kel and kellyevans. Days before spending cuts go into effect. And the u. S. Playing the sequester game game. Well look at the standoff and its effect on the committee and a look the economy and a look at the boards. Welcome back. The bank of england reveals larger than expected split on its Asset Program sending sterling to fresh multimonth lows. Dells profits slump but the Company Turns in Strong Enough numbers to suggest that the p. C. Maker is undervalued. A new chief executive following a 43 drop in first half profit. The outgoing ceo and sexor say the change isnt related to the results. This is a process that start started years ago. Happens to coincide with a weaker pricing environment. But two totally unrelated events. And comedianturnedpolitician beppo grillo says his movement is unstoppab unstoppable. He says the italian Political Classes need to put their hands up and step aside. The minutes from last months Federal Reserve meeting will be released at 2 00 p. M. Today. Traders highly anticipating the point. After all, the december minutes rocked the market when they showed several fomc members wanted the third round of quantitative easing to be slowed or stopped by the end of the year. Will it be a repeat . U. S. Economics editor at the economist joins me now. Greg, good morning. Hi, how are you . Great. The interesting thing about the fed minutes the last time is the way they set the tone for trade. In retrospect everybody said, look, it was an overreaction. Do you think knowing that, knowing the reaction, do you think the fed might be using minutes as a way to indicated that theyre going nowhere fast . The minutes surprise you because you dont know what they talked about but failed to disclose after the last meeting. That was the days december. Im not expectation marketmoving set of minutes today. The meeting itself was routine without big chanchlge to their statement or anything. What the market is going to be looking for is further texture around the schedule for quantitative easing. Does it continue to the end of the year, does it stop sooner or go longer . In particular, two things i would like it hear more about. What do you think in terms of the costs, number one, of financial instability. We had an interesting speech from governor jeremy stine warning it the possibility of overheating in credit markets as a result of these low interest rates. Also, the possibility that a few years down the road as the fed exits from the program, theyll stop paying profits to the treasury. Some fed officials are worried about that. Those are the things ill be looking for more texture on. Greg, were obviously going to watch the dollar, as well. To compare and contrast, the bank of england came out, mervyn king, governor, outvoted 63 on increasing the size of their Quantitative Easing Program. Just the fact that there was this split with three people pushing for more had this immediate impact, sending the pound below 154 to the dollar. The bank of england saying they say the falling pound as stimulative even though average Hourly Earnings continue to lag the inflation rate. Over in the u. S. , is there a m similar dilemma . Not so much. In the case of the United States, as you know, the notion of currency wars started up about two years ago in the Federal Reserve kicking off the second round of quantitative easing. That sent the dollar down fairly sharply. In some sense, the japanese and the british are only catching up. Exercising their own quantitative easing and getting their salvo in on the socalled currency war. It actually gets into sort of a good place. You now have the three major Central Banks all trying to ease policy and stimulate the economies with monetary expansion. You know, i thought the minutes from the bank of england were really interesting. Comes on the heels, i think, of a week ago when the banks Inflation Report said they expected inflation to be above the 2 target for two more years. And in spite of that, three members of the Monetary Policy committee including the outgoing governor are thinking of easing policy further. I think it speaks to a real sea change in how Central Banks are downplaying the significance of inflation and uprating the importance of employment and output in terms of their policy. Absolutely. Because we separately learned that employment in the u. K. Hit another high. And the u. S. Kind of a similar story. Inflation has not been as strong as it has been in the u. K. But the employment side of things have held up all right. As other countries today weve got people from korea to new zealand to japan again out there talking about a weaker currency. Weve got what happened with the pound just now. Will the fed look to actually target a lower dollar here . Absolutely not. Absolutely not. That is a line the fed will not cross. They wont cross it because, number one, theres a long tradition in the United States that the fed leaves that to the treasury department. And the treasury departments not going do it either. I mean, every opportunity it gets the treasury, whether its the outgoing secretary, tim geithner, or his remakes, jack lew. They say replacement, jack lew. They say it would be the height of hypocrisy if the United States stepped in and started influencing the dollar. All that said, what theyve what the americans have said and what the g7 said last week is that insofar as these monetary policies are aimed at bolstering domestic demand, not driving the currency down, theyre okay. So well see more of that. Right. Almost a different form of stimulus. Speaking of which, on the fiscal side, there are nine days before automatic defense and spending cuts go into effect. Yes, the sequester. With the deadline looming, the budget fight between president obama and Congressional Republicans has shifted from how to stop the cuts to who to blame if they happen. And its amid all this, stocks are hitting multiyear highs, completely shrugging it off it would seem. I know. It looks to me like theyre kind of running on some monetary fumes or Something Like that. I mean, the Economic Data in the United States has not been that great. Retail sales, industrial production, employment all weaker in january than they were at the end of last year. Consistent with the payroll tax hike. Now these higher gasoline prices taking the wind out of the consumers sails. Frankly, i dont think the market had full economy to grips with the fact that the sequester is almost certainly going to happen. At least for a few weeks. Now, the Positive Side if there is one is that obama and the republicans in congress both agree that the sequester is a terrible thing and shouldnt happen. So you sort of look and say, well, if you both agree that this shouldnt happen, surely there must be a way to get to that point. Well, maybe so, but first they have to i dont know, theres like a 12step program involved. First of all, they have to go through denial and anger. Then maybe a few weeks of actual shutdown of the government before they come to some sort of ugly agreement to lift these lift the sequester. Sequester avoiders anonymous or Something Like that. Yeah. Im signing up for that, kelly. Ive had quite enough of fiscal cliff i think for a lifetime. Exactly. I mean, if as you say this could happen for a couple of weeks, it would turn around and face the march shutdown, what actually is your baseline view, greg as to how many of the cuts go through and what it means for growth this year . I think my baseline view is that we do have a sequester that kicks in for probably some short period of time. I would not say the full remainder of the fiscal year, but at least maybe a month or so. I think it takes a little bit of energy out of the economy this year. I do think that whatever agreement we have to get past a sequester will also include a fix so that we do not shut down the government at the end of march or allow a another debt ceiling crisis. I think it will be more of the same. Like muddle through without that, you know, cathartic relief from all the fiscal uncertainty. But neither a catastrophe. All right. And stocks continue to run on monetary fumes as greg said. Greg, thank you again for your time. Great to see you this morning. All right. Thanks, kelly. The major news event in europe, the italian elections on sunday. Italys caretaker Prime Minister mario monty has come out swinging again the former premier, Silvio Berlusconi, saying he didnt maintain promises made in the past and that the new governor could govern well. This as the foul mouthed comedian politician whipped a route into a frenzy into a rally in milan we have more. Reporter supporters of the fivestar movement out in force. Some estimates suggest up to 100,000 people gathered in the square to hear him speak. He was treated like a rock star by the supporters that surrounded him as he left his camper van, the tsunami tour is what hes allegedly on right now. He certainly is gathering and moplizing on this rising sentiment monopolizing on this rising sentiment to rule out the old guard. He said he wont form any kind of coalition after this election. And hes also suggesting that he wont be the leader of this party due to a criminal conviction not allowed in his movement. I asked when i spoke to him exclusively yesterday what is the future for this party after the election. Listen to what he had to say. Translator this is an unstoppable movement. Its an epidemic. The current Political Class has to come out with their hands up. No, im not antieurope, im for a different europe. This one has failed with different economies thats led to crisis in a number of countries. Were about a different europe. The problem isnt being inside or outside the eurozone, the problem is debt. Reporter given the people weve been talking to, i think its dangerous to underestimate the force behind the fivestar movement. Ultimately, what were looking at in this election is a Coalition Forming between mario monti center tryst and the center left party centrist and the center left party. They recognize the importance of forming a stable coalition after this weekends elections. I think its interesting, though, one of the articles in the press this morning suggesting that blackrock is going to be sending a party here just to talk to pollsters and assess the risks surrounding this election. From the people that weve spoken to, officials and the public, a suggestion perhaps that it is going to be more difficult than it seems to bring all parties on both sides of these coalitions together ultimately to form a government. Julia chatterly there from milan where she will be until that election on sunday. She actually told us earlier this morning that in some ways covering this remind her in terms of seeing the people in the streets of being in greece. And on that note, we want to bring pictures from greece today where antiausterity strikes have more or less brought the country or at least athens to a standstill. Its a 24hour strike that comes ahead of the troikas return trip to assess conditions on monday. It is the first general strike of the year. And you can hear the atmosphere as that gets underway. As tesla motors gets in gear to report earnings, phil lebow has taken it for a test drive. Find out what happened when he reported the infamous New York Times trip. [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. This is the pursuit of perfection. Overmany discounts to thine customers [old english accent] safe driver, multicar, paid in full a most fulsome bounty indeed, lord jamie. Thou cometh and we thy saveth what are you doing . We doth offer so many discounts, we have some to spare. Oh, you have any of those homeowners discounts . Here we go. Thank you. He took my shield, my lady. These are troubling times in the kingdom. More discounts than we knoweth what to do with. Now thats progress welcome back to worldwide exchange. These are your headlines the bank of england reveals a larger than expected split on quantitative easing sending the pound sharply lower. Bhp send a new man to the top job after theres a 40 drop in profits. Dell reports better than expected, potentially fueling calls for a sweeter buyout offer. Also, tessly tesla motors reports numbers after the closing bell. The luxury carmaker has had a fair amount of news after a test drive by a New York Times reporter led to a spat with the highprofile ceo. Our phil lebeau decided to recreate the test drive to see if teslas mileage claims hold up. Reporter well, after more than eight hours of driving, 445 miles and a couple of stops to recharge, the tesla model s, we have made. We are pulling into the tesla store. Just outside of boston. Actually, were in natick, massachusetts. As we pull in, one thing stands out about the drive. The tesla model s in terms of performance and what it delivers on a long drive, it does meet expectations. You have to passion you have manage your expectations. This is the 85per kilowatt battery in this tesla, this has a range of 265 miles. We did the longest stretch, a stretch of more than 200 miles between delaware and a recharging station in massachusetts in connecticut, and it performed as expected. The bottom line, the tesla model s, while it is primarily a vehicle that people will be driving in smaller areas, in cities where they know theyre only going to be driving fewer than 100 miles, the bottom line, on a long drive the tesla model s does perform. Thats the story from here outside of massachusetts. We complete our tesla model s test drive. Not a bad assignment to recreate the test drive. I miss roadtrips. In other news this morning, herbalifes Fourth Quarter profit rose 12 , beating forecasts as the Nutritional Supplement company is also raising its 2013 earnings outlook. Herbalife, of course embroiled in a battle between activist investors, confirms the sec has asked for information about its business operations. The wall street journal last month appropriated the sec had opened an informal probe. Ackman claims the company is a pyramid scheme. Look at the shares. They are adding. 6 , having given up 15 over the last three months. Boeings Engineers Union is split on whether to approve the companys latest contract offer. The professional members who perform the main engineering duties on boeings planes voted nearly to accept it while a Smaller Group of technical workers are rejecting the contract. Both groups have voted in favor of authorizing the union to call a strike. And United Airlines is dropping the boeing 787 dreamliner from its schedule through the end of march. United has six dreamer liners. Air india says its hopeful to have the six dreamliners back in the air in april. On that news, boeing shares are trading down about. 4 in frankfurt this morning. Given that the dax is up, they are underperforming. A u. S. Judge has declined to make a quick ruling on green light capitals request to block a proxy vote at apples Shareholders Meeting next week. Green light is opposed to a measure that would change the rules for issuing preferred stock and filed lawsuit. The judge says greenlight produced enough evidence to indicate it could succeed. Hes only being asked to determine whether holding the vote would cause irreparable harm to greenlights case which hes questioning. Apple shares are down by. 2 today. Look at that. Still extraordinary to look at. 342 share price, giving up 21 in the past three months. Coming up, tensions running high between washington and beijing ads the u. S. Has blame as the u. S. Has blame to the east on cybertheft. Analysis on the hacking allegations when we come back. Today is gonna be an important day for us. You ready . We wanna be our brothers keeper. Whats number two we wanna do . Bring it up to 90 decatherms. How bout ya, joe . Lets go ahead and bring it online. Attention on site, attention on site. Now starting unit nine. Some of the worlds cleanest gas turbines are now powering some of americas biggest cities. Siemens. Answers. To grow, we have to boost our social media visibility. More likes. More tweets. So, beginning today, my son brock and his whole team will be our new senior social media strategists. Any questions . Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. U. S. Futures are trying to build on gains from yesterday. The dow breaking through 14,000, adding five or six points more today. The s p 500, 1,529. The rally supported by what weve seen out of asia and europe overnight. Although trade has been mixed. The ftse 100 pushing through 6,400, adding. 4 after bank of engla england. The cac and ibex slightly weaker. How do you make money in these markets . Heres what our guests have been telling us this morning i think its difficult for investors to move to other stocks because the stocks worth investing in are on higher ratings. There are a very small group of tech shares that you should be in, and theyre higher rated. If youre looking to invest in tech shares on the basis of low p. E. , youre not going to have much success. A lot of people out there that expect dollar yen to keep rising, go through 100 and who knows where it could go. From the fundamentally when you look at the underlying reasons for the dollar yen rally, i know people give a lot of reasons. Many of them arent particularly well founded. We like novartis. Its pretty straightforward. Theyre, in my opinion, the only company to have general innovation. Before the u. S. Agenda, a recap of the german bund auction. 1. 66 yield on the ten year, that is its highest funding cost since april, 2012. The increase in bond yields also does mirror the general increase in equities across germany. And the rebound to some degree in felt inner sentiment in Investor Sentiment about growth. 1. 66 for the bund auction. The january ppi report will be out at 8 30 eastern. Theyre expected to show a. 5 increase, only. 2 when you exclude food and energy then january Housing Starts and minutes from the fed meeting. We spoke about that earlier. And st. Louis fed president James Bullard and san franciscos John Williams will both be speaking this afternoon. As for earnings, look for devon energy, dish network, mgm resorts, and sodastream before the open, then crocs and tesla after markets close. The Obama Administration is expected to release a report today under which the u. S. Government would consider fines or trade actions against china or any country found guilty of cyberespionage. This comes as beijing disputes the findings of a Security Firm that a secret military unit is responsible for a recent slew of hacking attacks on u. S. Companies. The latest possible victim is apple. The company says a small number of macks at its macs at its offices were hacked, although it appears no data was gleaned or stolen in the attack. For more, john reed, National Security staff writer at Foreign Policy joins me. Thanks for your time. And first of all, you know, this report, does it basically bring to the public issues that people behind closed doors have been concerned about for some time . Exactly. Confirms des evidence of a problem that weve known about for a long time. Thats this broad chinese governmentbacked campaign of cyberespionage against a number of u. S. Targets from businesses where they want to to leapfroghead technologically to looking for government secrets. Chinas denying it, though. They always have. Thats why everybody said its important to find evidence. Be able to confront them and show, boom, that youre doing this, look at. This many know theyll deny, and it may be the start of u. S. Confronting china with evidence. The government hasnt even done it yet because the government, there are a lot of diplomatic issues associated with this. You dont want to give away your spycraft secrets. John, how much of this is happening behind closed doors, and how much now that this report has been made public, now that we are hearing from Companies Like apple and others, highprofile examples of security breaches, is now going to play out more in the public sphere. Right. Thats thats what were seeing. The beginning, the very beginning of this. Companies may start coming forward, you know. A year ago, companies didnt want to come forward. They didnt want to restleel they had been hacked. Reveal that they had been hacked. Theres increasing pressure on the u. S. Government to divulge, you know, what evidence it has that shows china has been conducting a massive Espionage Campaign again against the government and against private businesses. So everybody from the private sector to capitol hill is pressuring the government to come forward and confront china more aggressively on this. At the same time, chinas such an important source of sales of demand for multinational u. S. Companies. So its almost as if theyre equally concerned perhaps about raising some of the issues that theyve been dealing with. Wondering if there wont be a kneejerk response by regulators here that could harm them. Thats the other issue. And theres no doubt that this is going to be used on the hill to push cybersecurity legislation. Thats up there right now. And again, the white house is going to highlight that this is another example of why the cybersecurity executive so ordered needed. John reed, National Security staff writer at Foreign Policy. Ahead of the report were expected later today. Appreciate your time. An issue that will plague not Just Companies in the u. S. But worldwide over the months ahead. Thank you for joining us on the program today. Can i help but show you the sterling chart yet again before we go . Keep an eye on this one. Its one to watch. More on the Market Update in squawk box. Well hand it over to the team in the u. S. Now. Well see you back here tomorrow morning. Have a great day