Transcripts For CNBC Worldwide Exchange 20130722

Probe while julius baer beats forecasts. And no turning back. Japanese Prime Minister shinzo abe promises to forge ahead with Economic Reforms after a bid for his Ruling Coalition. Youre watching worldwide exchange, bringing you Business News from around the globe. Welcome to the show, everyone. Ross is still feeling under the weather, so you get me today. Lets take a look at the markets. The s p 500 hitting a new record at the end of last week. So whats next for u. S. Markets . Well hear from one analyst who says we could retest 1,600. Find out why at 1100 cet. And forget asuring a countr health by its assets . Tune in to find out how china could overtake the u. S. As the worlds wealthiest built asset nation by as early as 2014. And mcdonalds reports earnings before the bell later today. So will investors be left satisfied for hungry for bigger profits . We head stateside for a preview at 11 30 cet. And late surge, four birdies and six holes saw Phil Mickelson win the british open, but is he scoring as well on his bank balance . We take a look at the worlds wealthiest golfers in the next hour. But lets come back to one of our top stories today. Japans Prime Minister, shinzo abe, says hell press ahead with reforms, thats after scoring a convincing victory in the upper house elections on sunday. With more on that is corey ajoju whos been covering the story from tokyo for us all day. A lot of people have said there is now the danger that abe will sit back and relax and tend to his pet projects like more nationalistic issues. What is the risk of that happening . Reporter well, i think those risks are there when you consider that the liberal democratic party, carolyn, is a very wideranging group and not all of them are reformers. But having said that, the message from shinzo abe, Prime Minister, after this landslide victory yet again in the recent elections in the upper house seems to suggest that the economy and getting the economy back towards recovery is continuing is going to continue to be his primary goal. Lets have a listen to what the Prime Minister had to say. Translator the economy is improving due to our brand of forwardthinking politics. Employment and wages will rise as the situation improves. Consumption will then rise, and companies can invest the money they make. We want to create this positive cycle as soon as possible so that people can feel the effects. Reporter he did meet with the press about two hours ago. He reiterated the stance, and he even suggested the first order of the day will be to cut the Corporate Tax rate here in japan which has been notoriously high in a move that many investors have said is needed to win back particularly foreign money back into the country. But this is a landslide victory for his party and their coalition partner, winning the 76 seats as the 121 that were contested over the weekend. And it really completes the comeback process for abe who is, of course, running this country as Prime Minister for the second time in his career. You mentioned some of the concerns about the nonreformers coming on board. I think, well, one of the first litmus tests of that will be august 15th, which is the anniversary of the end of the Second World War and whether or not he will visit the shrine which has always been a very controversial issue. We had one parliamentarian on cnbc who said he probably thinks that he will not make that visit. I think with the tensions simmering between japan and china, between japan and south korea, i think this is going to be one of the first litmus tests of his commitment to economic reform. Kaori, thank you so much for that. Well check back in with you later on in the show. Moving on, portugals president has ruled out snap elections and says the countrys Coalition Government will stay in place until lisbon has exited its international Bailout Program. Speaking last night, he urged the Coalition Government to move ahead with reforms to restore investor confidence. Translator it is essential that both parties that make part of the coalition be synchronized in a durable and unequivocal way to finish successfully the program of Financial Assistance and for portugal to be back in the markets to assure the normal financing of the state and the economy. Karen has flown out to portugal, and she is live on the ground with the very latest. Karen, the Market Reaction is pretty positive this morning. What is the reaction on the ground . Reporter carolyn, it seems to be a reaction based on the fact that were not going to get a snap election, so the status quo will remain for the time being, but walking on eggshells seems to be a metaphor that could apply here because we know that there are cracks within the Ruling Coalition. We saw the political classes flare up earlier this month when the finance minister signresign. We then had the foreign minister threaten to resign who is incidentally also the head of the ruling Junior Coalition partner. So this was key for the markets. And weve had this agreement to try and force all of the parties including the opposition onto the same page to agree to this National Salvation pack, which is basically to stay in the Bailout Program. They couldnt reach an agreement on that, so were now left with the president and the Ruling Coalition say they are committed to the bailout. We spoke to all of the main Political Parties this morning. Take a listen to cecilia, who is the member of the cdspp party, the junior party in that Ruling Coalition. Of course, we regret there was no agreement, but the truth is, we believe we gave all assurance to the president that we can have and i believe we can have a stable government, that portugal needs, that can finish the program and can fulfill its term. Reporter so as you can hear, weve got a commitment there to try and reach the end of this Bailout Program mid next year. But the concern is that were still seeing record high unemployment here, above 18 . Growth is also becoming even more elusive, 1. 1 growth is what we hope to see next year. This is going to be just 0. 3 as austerity bites. So we spoke to the opposition who says that portugal has been held up as opposed to austerity in these troika programs, but that is simply not true. Take a listen to a member of the socialist party. The European Union and its main institutions committed to inventing a Success Story. The fact is that that Success Story does not exist in portugal. The main indicators are much worse than they were initially predicted. And well, the Main Objective of this program is to make sure that portuguese debt is sustainable and it is not. Reporter and you must remember, the opposition, the socialists, were the ones that signed the country up to the Bailout Program initially. Theyre still committed to staying in the program, but theyre concerned about all this austerity. But they did make clear that they do not want to exit the euro. Now, can you hear a little bit of noise around here. This is actually one of the key spots where the demonstrators plan to gather, right in front of the parliament, carolyn. Carolyn, thank you so much for that. Lets look at how european markets are faring this morning. Europe 600, just in slightly negative territory. But were pretty flat, really. I mean, just take a look. Were seeing gainers underperforming the decline has been around 4 to 6. Were not seeing a lot of movement here. Keep in mind on friday we were at a sevenweek high, but were really being driven by earnings once again today. Well come to that in just a little bit. Were split between the xetra dax. The ftse down by 0. 2 . Now, i told you that today a lot was about earnings, and i do want to walk you through a couple of those companies, which have delivered earnings today. Philips, much better than expected, shares up by almost 4 , better than expected Second Quarter earnings for the dutch company. And that was driven by all three of its businesses and its costSavings Program. Ubs, unexpectedly prereleasing Second Quarter results, posting an operating profit. It also settled a federal Housing Finance agency lawsuit of a mortgage investment. And ubs, we dont have the stock up here, but it was also trading nicely higher. And julius reporting a jump in first half profits, saying its ready to make revisions into tax evasion claims but hasnt really said how much that would be. And shares wow dlai take a look, up by more than 5 . Mobistar down a whopping 28 after it cut its Earnings Guidance and suspended its dividend as price war wages in its local markets. Now, with so much focus on portugal today, i do want to show you how the bond markets are doing. And the portuguese tenyear, actually the yield has come down a little bit this morning. It is now trading at 6. 615 . So well below the 8 level weve seen earlier this summer. But keep in mind, in may, we were still at around 5. 3 . You are seeing still elevated levels for the portuguese. The tenyear yield sitting at 2. 47 , back below the 2. 5 level that we still saw last week. And finally, heres a look at the for ex markets. The dollar yen, now currently town by 0. 6 . A lot of choppy trading after abe overwhelmingly won the upper house elections. So initially the yen was weaker, and then it was higher, and now dollar yen sitting just above that 100yen level. And the aussie dollar up by 0. 4 . Lets check in on how markets in asia are trading. Lisa is standing by in singapore and has got an overview for us. Hi there. Thank you, carolyn. A positive session in asia today. Japans nikkei 225 gained a moderateest 0. 5 as the ruling party in the upper house election provides stability to japans politics and may also clear the way to key hurdles to abenomics. Many investors were also eyeing the upcoming earnings season. Elsewhere, south korea and australia also ended in the green and the shanghai composite also reversed early weakness to finish higher. And let me show you some individual movers. In japan, some tech shares were out of favor following ining e of their u. S. Peers. After the nikkei newspaper said the company may report a q1 operating loss. Also tumbled more than 3 . But nec, on the other hand, jumped over 4 on a report that it may partner with hewlettpackard to develop highpowered servers. Chinese financial stocks were also in stoke us and worries that the Interest Rate liberalization could bring in more competition and hurt banks profitability. Midsized lenders were under pressure on both the shanghai and hong kong after they are considered to be the most vulnerable sector to these Interest Rate reforms. As for the outperformers, gold miners enjoyed a very nice rally as the gold prices continue to track higher today following gains over the past two weeks. Australian gold stocks surged as some 8 to 13 in todays session. Back to you, carolyn. Thank you so much for that. And i just want to clarify something. We did show you the correct price of shares in ubs before. It was just the wrong company we were showing you. Ubs shares higher by 3. 63 on the back of better than expected earnings that were prereleased. Joining us is george gotber, fund manager. Thank you so much for coming in today. How are you . Very well, thank you. Fantastic. Now lets talk about portugal because weve seen yields spiking higher over the last couple weeks. And theres still a pretty elevated levels. But now that were not going to be seeing snap elections, are you more reassured about whats going on in the country . Well, i think theres two things with portugal. First, all main Political Parties have signed up for the austerity program. Thats very important. You havent had that anywhere else. However, the road is still a long way to go. Next year, 8 of gdp expires. Thats a very big number. So the refinancing theyre going to face next year is tough. Youve got to put the Building Blocks in place now. And as far as i can work out, maybe its not available to them. They did issue a tenyear bond earlier this year, but the omt is only available if youve accessed every part of the bond market. Now, maybe those rules can be changed, but it would be nice to know they had that backstop in place. Do you think that portugals worries remain in place for the next several months . Can it actually derail the rally weve seen on the european markets . Well, weve seen many, many times over the last three years that europe can always derail if it so chooses. I do think portugal is doing the right thing. Theyve taken a lot of pain. And importantly, if you look at the voter surveys, the country, despite the pain and high unemployment, theres still a majority of voters that see the euro as a positive. Its the point at which that starts to switch that i think europe can become a problem again. Well talk much more portugal later on in the show. I do want to pick your brain about japan. Interesting Market Reaction in japan on the back of that overwhelming victory by mr. Abe. To a large extent, it was priced into the market. So we only saw very, very modest move. It was very muted indeed. I think really with japan, weve seen the first days, the initial liquiditybased rally. The second stage weve seen in america is a much more subtle stage in markets. The initial pumping is very easy. The second stage is about language and political maneuvering. Dont forget, america tried target, you know, various other measures in between to try and get things moving. And they didnt work. And the language used around that. And i think thats the difficult phase that japan now faces. All right. George, thank you so much for that for now. But you are going to stay with us. Jpmorgan is reportedly close to a 410 million settlement with the federal Energy Regulatory commission to settle allegations and manipulate power markets in california and the midwest. The wall street journal says the bank would also forgo 20 on million in unpaid claims from electricity customers in california. The settlement will reportedly not include sanctions for three Jpmorgan Energy traders or the banks commodities. Lets take a look. Jpmorgan, it is currently higher by 0. 4 in the frankfort trade. Over the last three months, shares are up by around 18. 26 . And europes earnings season officially kicks off on a high note. All beating expectations. More on the results after the break. [ agent smith ] ive Found Software that intrigues me. It appears its an agent of good. [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] youre watching worldwide exchange. The duchess of cambridge has been admitted to hospital and is in the early stages of labor. Thats according to a statement from kensington palace. Now, she traveled by car from the palace to st. Marys hospital in london with prince william. Jim maceda joins us from outside the hospital. Jim, just how excited is everyone, and how are things going to proceed from here for the outside world . Reporter right. Good morning, carolyn. And yes, people obviously are now excited. And ive got to say, even the most hardened, exhausted journalists are also now the adrenalines pumping. We do know now that after those initial signs this morning at about 6 00 a. M. That some photographers had seen they tweeted that they had seen a convoy of vehicles come in, not in the door behind me, but in a Side Entrance into another wing, but ending up at the maternity wing, obviously, where she is now, kate. Kensington palace, shortly after that, did make that short statement. We know only at this point that she has been admit. We know that shes doing well and that as you say, and its worthy of repeating, she is in the early stages of labor. She arrived by car. There was no indication of an emergency. No ambulance. But ive got to say, what happens next now is that its going to be very unlikely that we have any news updates from the palace. It just doesnt do that kind of thing until the actual birth of the third in line to the british throne. And until we see coming out of the door behind me being carried by a palace official, a birth certificate, a medical bulletin carried well, then driven by car the 2 1 2 miles to Buckingham Palace where it will then be placed on the very same easel that announced prince williams birth 31 years ago for all to see. Again, carolyn, were not there yet. This could still be another substantial wait, hours, even days, heaven forbid, before we know if there is a baby and whether its a boy or girl. Now, once the baby is born, carolyn, we do know that the very first person to get the news from the delivery room will be the queen who is expected to get an encrypted phone call from her grandson, william. Back to you. Jim, thank you so much for that. A lot of excitement in the newsroom behind me as well. Jim maceda, our royal baby correspondent from nbc. Philips Savings Program pays off helping the Technology Giant offset a consumer slowdown in europe. As a result, the Company Reported better than expected Second Quarter earnings driven by all three of its businesses. Despite the positive figures, philips remains cautious, citing concerns over economic uncertainties. Shares in philips are nicely higher. Up by 4 . Ubs has unexpectedly prereleased earnings for the Second Quarter. The swiss Bank Reported net profit on operating profit of just over 1 billion swiss franks. The Early Release comes as ubs says it has settled a federal Housing Financing lawsuit over Mortgage Investments taking an 865 million swiss frank charge for litigation and impairments. And investors clearly welcomed the news because earnings were better than expected. Shares are moving higher to the tune of 3. 5 . And julius baer also has beaten forecasts with a 25 rise in first half profits. Thats thanks to increased activity. Shares in the Swiss Private Bank are trading higher even after the group said it faces headwinds from the u. S. Where authorities are still investigating tax evasion claims. Earlier on on cnbc, i spoke about the issue. As far as were concerned, were waiting to come to a final phase of agreement of what the facts were. And after that, we will enter into the negotiation. And the moment we will know on what basis we are, we will be assessed, we will be making a provision immediately. And belgium telecoms profit has cut revenue forecasts for to 13 and suspended its dividend. This after the company saw Second Quarter earnings tumble, missing analysts expectations hit by a sharp fall in mobile voice and data traffic prices in its local market. And lets continue our chat with George Godber, fund manager at miton group. We saw two of the swiss banks reporting today, better than expected. Will european banks, as they report throughout the next couple weeks, track their higher . Because what we got from them, that was far better than forecasts. I think it will be very much depends on the Regulatory Regime within the individual companies. The swiss have been very aggressive in terms of capital ratios its demanded, and the banks have followed suit with raisings, similar in the uk when they pushed ratios up and has continued to be forceful in its demands for the amount of buffers. We have not seen the same response in germany and france, spain, you know, and i do think that therefore you will see a sort of twospeed response in terms of the share price recovery. Clearly america has been very up front and is probably 18 months ahead of anyone at the moment. If you look at the uk banks, theres a lot of chatter. And citi came out with a note last week on lloyds. Whats your view on lloyds . Do you currently hold it . No, i dont offer any of the uk banks. They dont offer any value to me. I run a value fund and i think theres lots of good friends emerging, but theres still very limited retained earnings. Its difficult to put much of a value case on the sector. Lets stay with the uk. Im looking at an interesting piece. Profit warnings falling dramatically in the Second Quarter in the uk. The number of companies with profit warnings is the lowest since 2010. George, why is that . Is that because the economic fundamentals in the uk are improving, or is it just because managers have done a much better job as giving out guidance to investors . I think its a bit of both. Firstly, the domestic uk fundamental picture is far stronger. I think well definitely beat q2 gdp expectations. And the followon impact of that. Yes, youre exactly right in terms of management of expectations. Every chief executive i see at the moment gives a very similar message regardless of sector. Things are going well with fear of what weve seen in emerging markets. Europe is showing signs of improvement, but its really bumping long the bottom. And i think that people dont want to jump the gun and start saying everythings great. George, thank you so much for that. Well continue the chat on earnings later on. And well also incorporate the u. S. Earnings because we are heading into what will be the busiest earnings week in the u. S. This week. Still to come on the show, portugal avoids a political crisis for now. Vowing to complete the countrys ba Bailout Program. But are there more roadblocks to recovery . Well be back in lisbon after the break. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Youre watching worldwide exchange, bringing you Business News from around the globe. Portugal bond yields fall and banks lead the equity market higher as the countrys president rules out snap elections, instead backing the coalition to see lisbon through its Bailout Program. Earnings season heats up in europe. Philips shares jump as investors brush off concerns over the Global Economic outlook and focus on a better than expected net profit for the quarter. And ubs and julius baer also among the top gainers. Ubs profits surpass expectations despite settling a u. S. Mortgage probe while julius baer beats forecasts as client activity picks up. And no turning back. Japanese Prime Minister shinzo abe promises to forge ahead with Economic Reforms after a convincing upper house election win for his Ruling Coalition. Welcome to the show, everyone. Lets show you where we are in terms of european markets. Now, were turning a little bit more positive just over the last few minutes. The xetra dax, the cac 40 in paris, its also moving slightly to the upside. But what were seeing this morning clearly just very, very modest moves. Keep in mind, we did see that lackluster session last friday when the europe 600 was down by 0. 16 . We are close to sevenweek highs. Not too bad. And we saw markets today very much driven by earnings. And with all this focus on portugal, as you heard in the headlines, i do want to show you whats going on in the yields space and the Government Debt space. Now, portuguese tenyear yields are falling. Theyre now at 6. 52 . Remember, we were at 8 levels not too long ago, just a couple weeks ago. But of course, there is relief in the market that were not going to be heading for snap elections. The tenyear treasury yield, below the 2. 5 level since last week. It is now at 2. 48 , and the tenyear bond yield is sitting at 1. 52 . And finally, heres a check on how forex markets are doing. Very choppy trading for the dollar yen pair overnight, currently sitting just above that 100yen handle. Down by 0. 6 . We do see the yen strengthening quite a bit, thats after an initial fall after that overwhelming v ining victory fo abe. Euro dollar pretty steady. Now back to one of our top stories. Portugals president silva has ruled out snap elections, insisting the countrys Coalition Government will stay in place until lisbon exits its international Bailout Program. With more, we get out to karen cho whos been standing by in portugal. Karen. Reporter thanks, carolyn. We seem to have avoided an imminent political crisis for the time being. Both the president and the Ruling Coalition are saying all the right things to try to reassure investors that they can continue on with this Bailout Program and try and exit the Program Next Year in 2014, but the reality is the opposition hasnt come to the party on all the latest austerity measures. This is what the president was hoping to achieve in this National Salvation pact, getting the Ruling Coalition and the opposition to try to negotiate and come to the table with some form of an agreement. The opposition has refused to do that. So weve had the president then just reassuring the markets that the Ruling Coalition can get on with the job. But it has exposed cracks in the system here. And we saw earlier this month the fact that the coalition was not in agrememenagreement. We had the resignation by the finance minister and the foreign minister threatening to resign because of all the austerity taking place here. Just to paint the economic picture, growth was kpexpected return next year. Instead its 0. 3 . Debttogdp remains above 120 . We havent really seen that many positive numbers here to reinforce the situation that portugal has been the poster child of austerity. The only positive numbers have really been on the trade side of the picture. So many question marks about whether further austerity and whether the Bailout Program can continue in its current form, carolyn. Karen, stay with us because we want to continue the discussion about portugal and its future with antonio whos the chief southern european economist at barclays. And George Godber, fund manager, is still with us. Now, antonio, i do wonder, if the three parties cant even reach this National Salvation pact, why and how would they continue to Work Together as a coalition . Well, i think theres not many choices right now for portugal. Remember, its a country with an increasing public debt. It has a target in the Program Next Year. And even next year continue to increase. The reality is that portugal will continue with measures to stabilize public debt. And that is not a great political and policy agenda for the socialists in position. So in a way, it makes sense that theyve decided no the to take part in this salvation coalition. I just wanted to get your views on the domestic situation because although european pmis are showing some signs of life from a low base, portugals private sector level still remains particularly high. Do you think theres any hope for the government that they might get a sort of bailout for an improvement on the ground and Economic Conditions . Europe is showing tentative sign s of life at the moment. I think one of the key issues for the portuguese economy will be exports. Domestic demand, as you mentioned, will continue to be negative. Mainly because highly leveraged in the private sector, both corporates and households, but also the banks nied eed to be leveraged. In this situation, it will continue to bring negative Growth Numbers this year and next. So it will be key. But it remains relatively, you know, not very strong. Let me put it that way. So again, next year, you have portugal with growth nearly flat. With debt increasing. This is not a great situation in which you can exit and regain full market access. Antonio, lets come back to the political front because im told the end of this legislature by 2015, were still going to be seeing a lot of pushback coming especially from the socialists. I would think that theres still going to be a lot of disagreement behind doors which may even be carried out in the public. I mean, as far as yields go, to what extent do you expect this to be reflected in a higher premium in yields Going Forward . I mean, the key is whether the Coalition Government, the junior and the senior party, remain and unity remains. They have the majority in the parliament. They can pass laws. They can pass budgets if that unity remains. The yields to a large extent, obviously the political risks is one of the factors behind it. But the second most important, of course, is growth and the belief to implement the fiscal program. And that depends fundamentally on the unity between the conservative coalition. That is the key Going Forward in terms of politics. How bad will the recession be this year, antonio . We think this year growth is likely to be around minus 2. 7 . And again, mainly because domestic demand remains very negative. All the key demand kpoecomponen remain negative. Theyre not sufficient to mitigate this very negative tract from domestic demands. Let me ask you whether you think the euro is a curse. Do you think the currency is now just simply too strong for portugal to remain competitive . Well, the euro would certainly help. Remember, all these countries, not just portugal, remain fundamentally dependent on net exports. So a weak euro will help. But still you need to have also strong germany. And there the euro doesnt help you much, right . A lot of exports go directly or indirectly to germany including for portugal. So depending how well does spain, france and germany, certainly portugal will benefit from that. Reporter is it fair to say that the germans in particular chancellor Angela Merkel want the mood music to remain fairly muted coming up to the german elections, they need portugal to go very, very smoothly until that point . I think certainly the current German Government do not want initial prices, do not want any crisis. That is critical, right. So, you know, we think that the mechanisms there, the firefighting mechanisms will be in place, should there be any reason for another crisis. Theres no question about that. Antonio, thank you so much for that. That was antonio pascual. And karen, thank you so much for your insights as well. And head to our website to find out why disagreements between progrowth and austerity factions could still pose a threat to portugals fragile government. Thats on cnbc. Com. And lets change tack a little bit. Glaxo smith klines emerging markets chief says it appears its Senior Executives in china broke the law. Abbas hussain made the charges over bribery allegations. Gsk has been accused of bribing chinese doctors and officials with travel perks and other benefits to raise drug sales in the country. Hussain has promised to reform gsks Chinese Business and says the british drug maker will help root out corruption. Gsk says it will pass on any savings from its reforms in china to consumers through price cuts. Lets have a look at gsk shares now. They are down around 0. 75 . So far they havent taken a huge hit. The british drug maker which reports on wednesday told cnbc that the ceo may address chinese allegations at that time. Now, still with us is George Godber, fund manager. George, are you invested in gsk in yes, i do hold glaxo. Is that a big concern to you . Well, the reason i hold it is because of the change in law in america, the fda, and the ability to fasttrack some new drugs and whether theres a clear medical need, and thats more important. The Drug Companies are really driven by what happens in america. Of course, anytime you see bribery and corruption, it is of huge concern. Im monitoring the situation very closely. But i mean, lets not be naive here. Its certainly not the only company that engaged in these sort of kickbacks. Its very common even in the u. S. And especially in emerging markets. As companies are trying, especie especially Pharma Companies. Yeah, its huge in emerging markets, especially china and what is behind the sort of sales of highend clothes or fine wines is much of that because its an easy way for people to transfer a gift to, you know, an official in the right place. And weve seen it time and time again across different industries, and it is one of the risks with executing business in that part of the world. Apart from gsk and lets assume shares are not going to take a huge hit. So far theyve been pretty immune to this. Excuse the pun there. But are there any other Pharma Companies within the uk that youre interested in investing . Similarly, as i mentioned, the biggest exposure to Rare Diseases in the uk, and i think it offers a fantastic opportunity here. What weve seen from the fda, on the back of new cancer drugs the last ten years, theyve gone and said well tell you what we dont like in the data, whether theres a clear medical need. And having sort of got through the threat on its key adhd franchise, i think its a really interesting prospect. George, thank you so much for that. George godber, fund manager at miton group. The ceo of the uks largest Supermarket Group has warned food prices will rise unless more food is produced. Consumers in the uk typically spend 10 of their income on food, which is 2 less than the european average. Phillip clark says rising demand across the globe is putting pressure on supply, and producers need to increase their output. But a new ugov poll suggests that shoppers might be willing to pay a premium when it goes to local farmers over the grocery chain. The study which was commissioned to mark the National Countryside week says 80 of British Consumers think its important to buy uk produce. So we want to hear from you. Are you willing to pay more to buy from a local Farmers Market . If you want to join the conversation here on worldwide exchange, get in touch with us by email at worldwide cnbc. Com or via twitter cnbcwex or direct to me. Would you pay more just to get local produce . Absolutely. Im very careful where i buy my food. I grew up in the countryside. Oh, you did. Fantastic. Yeah. Im very concerned that i know where its been sought from. I try to use the butcher as much as i can. And you think thats a trend according to that poll that its only going to increase from here. Hugely. Dont forget the impact that people like jamie oliver have had in this space. And they really drive Consumers Behavior and thinking. I would do that, too, actually. But ive got to say, price for food has gone up quite significantly, especially in switzerland before i lived before. I think its much higher than the european average, especially as far as meat is concerned. Thank you so much. Moving on with the ruling partys landslide victory in yesterdays election, Prime Minister abe will now have to deliver on his promises of Economic Growth as well as restoring financial health. So where does he begin . Our reporter from the nikkei has the story live from tokyo. Hi there. Reporter hello. One issue in focus for Prime Minister abe is the controversial consumer tax hike. Its planned to be gradually raised from the current 5 up to 8 next year and then 10 by 2015. The law was adopted under the Previous Administration and states that Economic Conditions have to be favorable. Namely to achieve 2 growth in terms of real gdp. Although it is a nonbinding target. So all eyes are on figures for gdp growth during the april to june quarter to be released next month. But realistically, it wont be easy to scrap the tax hike since it is part of a pledge to bring down japans massive fiscal debt. And also because more legislation will be needed to freeze the hike. On the other hand, though, it is no secret that a tax raise will weigh on the stillfragile economic recovery. And one study says that the consumer tax act of 10 in 2015, it could result in lowering annual real gdp growth by around 1. 5 . Abe himself has admitted that it will be a difficult decision to make, but that restoring Fiscal Health is extremely important and something that the market is expecting. In a press conference today, he said he will make a decision sometime in autumn. If the tax does go up as scheduled, additional fiscal spending and ultra easing Monetary Policy as well as carrying out the governments Growth Strategy will be critical to ease the impact. And thats all from the nikkei business report. Back to you. All right. Thank you so much for that. So with a convincing win in the upper house elections, does this give judapans prime minisr the power he needs to push forward with abenomics . According to one analyst, it is now all systems go. To find out more, head online to cnbc. Com. Dont forget, you can also follow us on twitter cnbcworld. Lets give you a look at whats on the agenda in asia tomorrow. Fresh off his second election win, his government will join the u. S. Led Transpacific Partnership trade talks. Reporting output figures for the june quarter and fullyear earnings are expected from sgx after the close in singapore with Quarterly Results expected from two Technology Companies in taiwan. Now, rescuers in northwest china are struggling to get to survivors trapped by two deadly tremors that struck early this morning. A local official says at least 47 people have died and near ll 300 are injured as more than 1,000 buildings have collapsed. The magnitude 5. 9 to 5. 6 earthquakes were centered in a remote mountainous section. And the rough terrain has made rescue efforts more difficult. Still to come on the show, hows growth finally defeated austerity . After the break, well update you with sound bites from the g20 meeting in moscow. Dont go away. Japan and the u. S. Were seen as the big winners at this weekends g20 meeting in moscow as the communique called for growth over austerity. Finance ministers and central bankers vowed to back the policies already championed by the two countries to put stimulating the economy, Jobs Creation ahead of debt reduction. The discussions that we have over the weekend, particularly last night, were very constructive. There are clearly off interests for all the g20 countries with different perspective, depending on where they are on this Monetary Policy. And clearly there was an intention on the part of everybody to best communicate, clarify in order to better anticipate. Translator i think that theres an important signal coming out from this g20 summit. We all agree that the most important task is to foster growth and to create jobs. Global Growth Continues to be moderate, and the recovery is fragile and uneven among different regions. Above all, unemployment is too high in many countries. Some countries still believe that austerity is the key to the future. We dont. And i feel very close to what jack lew and the Obama Administration said. The priority in the short run must absolutely be growth and jobs. Without growth, its not possible to consolidate in a serious way. And without too much blow for the economy. Youve got conflicting forces and this con undrum of having a economy that is underperforming, that is operating in a wide and widening negative output gap which in principle would suggest that it might be in need of further, and some would argue even more stimulus and accommodation, but at the same time, on the other hand, youve got inflation pressures that are building that obviously cant be ignored. And that is this policy dilemma that we are sitting in. Translator for the investors, the main thing i think is the economic policies of the government. The economic policies remain the same. There are some events that happen in the world, but i dont think they can influence on the whole the Investment Climate in russia. Now, while gdp quantifies national income, a new report examines National Wealth by measuring a countrys build assets. It takes a look at property and infrastructure that fuel future growth. Topping the list is the u. S. , but hot on its heels, china, which could take the top spot as early as next year. Simon light is the property head who published the report, and he joins us now in studio. And of course still with us is George Godber. Simon, thank you so much for coming in. Now, why would you choose bblt assets as an indicator of a countrys growth rather than, lets say, gdp or unemployment . Whats the advantage here . Built asset wealth is focused on, it starts with the value of the value of a nation. What it seeks to do is act as an indicator that provides all property and all infrastructure. That in addition to gdp, it also manages predicts the wealth in terms of built environment. But does it really predict wealth, or does it predict how bubbly the market is . Because that was a huge issue. In the u. S. , currently huge issue in china, of course. It was an issue in almost every country before the financial crisis, even if you look at england and spain. How do you correct for that . Yeah, our research has been developed on the basis of actually looking at all assets in terms of their current states, their life cycle and how thats actually depleted over time as well. And so it is absolutely an indicator in terms of how effective a nation is in terms of producing for the future. But also providing for future social reform and sustainability for businesses. So you say that china could actually top the usa according to your indicators, even if were currently seeing a property bubble. Were seeing that nations are often differentiated. So you have emerging markets such as china and africa and the middle east. Where after this huge expenditure in capital projects, whereas markets like the u. S. , theres actually more focus around the state of existing assets, both in terms of property and infrastructure and how the difference in terms of focus needs to change to make sure that countries actually maintain that advantage Going Forward. Im going to turn it around on its head and look at those numbers, and it really scares me about china. Theyre coming out you know, we are really going to enter an incredibly difficult time. Chinas problem is its got incredibly low returns on capital. Its not really generating any Corporate Cash flow. It suggests to me that they have really very much overbuilt. And this is why Chinese Companies continue to fail to deliver on the chinese stock market. Its been such a dreadful place for investors. And i guess at what point do you link back, as carolyn said, the returns, you know, an asset is generating rather than just the stated asset value . I think its very important that when youre establishing investment projects, but the end user demand is defined very clearly, and so in chinas perspective, this Huge Population growth. Theres growing social demand as well. And the investment needs to stay different from i aloa longterm investment rather than short term. Simon, with your report, dont get me wrong, im not here to just pick it apart, but a lot of the countries, they actually build these socalled white elephants. That is purely for political for vanity reasons. Again, how do you correct for that . With all political statements, there are markets, and if i take the middle east as one, where actually theyre looking to make a statement to the world in terms of developing their infrastructure and built assets to actually fuel growth in their economies which is different to their resourcebased industries beforehand. Our report does actually allow for building those type of impacts into place and to make sure theres a fair base. But certainly Going Forward, were seeing that our next version of the report will be based on the value of the built assets generated as well. Okay. Thank you so much for that. I should note, although weve run out of time, that the uk is in 11th place in the rankings. 29. 2 below the average level of developed economies. Not boding too well for the uk. Simon, head of property, and George Godber, fund manager. Thank you so much for coming in. Now, jim is stepping down as coceo of s. A. P. The Software Company says it was a personal decision and the firm will now try and find a place for him on the advisory board. Mcdermott will take full control. Shares in the company have risen 66 since snabe took up his role in 2010. Still to come on the show, as u. S. Markets test new record highs, find out why our next guest says the rally may be running out of steam. Well tell you more as we preview another big earnings week for the s p 500. Thats coming up after the break. I want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. Our Business Needs more cases. [ male announcer ] where do you want to take your business . I need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, Small Business solutions from at t have the security you need to get you there. Call us. We can show you how at t solutions can help you do what you do. Even better. Welcome to worldwide exchange. Im carolyn roth. And these are your headlines from around the world. Earnings season heats up in europe. Philips shares jump as investors brush off concerns overthe Global Economic outlook and focus on a better than expected net profit for the quarter. Ubs and julius baer also among the top gainers. Ubs profits surpass expectations despite settling a u. S. Mortgage probe while julius baer beats forecasts as client activity picks up. The u. S. Investors will also be flooded with earnings reports with onethird of Companies Set to report results. And portugal bond yields fall and banks lead the equity markets higher as the countrys president rules out snap elections, instead backing the coalition to see lisbon through its Bailout Program. Youre watching worldwide exchange, bringing you Business News from around the globe. Japans Prime Minister, shinzo abe, says hell press ahead with reforms after scoring a convincing victory in the upper house elections on sunday. Kaori is live in tokyo. One of the big reforms that will have to be undertaken potentially is the increase in the sales tax. Is the japanese economy Strong Enough to stomach this, and will it have to come in conjunction with additional budget . Reporter well, i mean, you have to remember that japans economy, carolyn, grew at a pace of 4. 1 on an annualized basis in the first three months of this year. I mean, this is way faster than any other industrialized nation. Well be getting a better indication in a couple weeks time when we get the april to june quarter figures. Most economists are expecting a little bit of a slowing down in the economy to perhaps around the 2 level. But i think even beyond the question of whether or not the japanese economy can stomach it, i think forward Institutional Investors in particular will be extremely disappointed if the consumption tax hike does not go through. Because as the imf warned, they are encouraged by the signs of reform in the japanese economy, but they would be extremely discouraged if they didnt start to exercise some fiscal discipline. So i think when most of the economists i have spoken to all throughout the day, after this landslide election victory by Prime Minister shinzo abe, most of them seem to feel that the first step of the consumption tax hike is going to go through next year. Shinzo abe has made this election all about the economy. And i know there have been many naysayers who have said that after this victory, he may move towards matters that are closer to his heart. But at the press conference this afternoon, he said economic reform and getting to reflate the economy is going to continue to be his number one priority. Heres what the Prime Minister had to say. Translator i feel that the japanese are beginning to regain confidence and pride. Bold deregulation and structural reform transpractice sisk Partnership Negotiations and raising consumption taxes, all these are difficult tasks, but i must make a decision for the future of japan. Reporter he also mentioned addressing the Corporate Tax rate, which is notoriously high in japan compared to some of the western countries. Will be one of the first top of the agenda when Parliament Reconvenes in the fall. The voter turnout of this election was pretty low. About 50 . But you have to remember that for the last six, seven months, japanese public has been faced with a number of elections. So there might be a little bit of fatigue setting in. But at the end of the day, this is a landslide victory for shinzo abe, and it means that for the first time in more than six years, there will no longer be a Hung Parliament situation. So he can pass any kind of legislation that he wants. It also means that this Prime Minister, shinzo abe, is probably the most powerful Prime Minister japan has seen in over a decade. And returns to power the ldp back to the heyday of the mid1980s when they had a oneparty rule here in japan, cat. Kaori, thank you so much. If youre just tuning in, thank you so much for tuning into the show. This is how markets are faring ahead of the u. S. Open. Lets take a look at the implied open, the s p, seen higher by 5 points. The Dow Jones Industrial average seen up by 14 points. And the nasdaq seen higher by 10 points. Remember, the nasdaq was the big underperforming last week on the back of those disappointing tech earnings from the likes of google and microsoft. But the s p higher on the week to reach yet another alltime high. The dow jones also on thursday, not on friday, reaching another alltime high. Heres a look at the european markets this morning. The xetra dax, it is moving higher to the tune of onethird of 1 . Now, european markets actually opened lower this morning but have turned around just a little bit. The ibex 35 up 0. 8 . But the real outperformer as we talked about before is the portuguese market, up by a whopping 2. 3 . A lot of relief among investors obviously that were not going to be seeing snap elections. Now, lets continue with earnings because thats also one of the key drivers in the markets. Philips reporting better than expected Second Quarter earnings, driven by all three of its businesses and its cost Savings Program. Now, shares in the company up by almost 4 . Ubs also moving to the upside by a similar percentage, up by 3. 8 . The expect unexpectedly prereleased Second Quarter results posting an operating profit of just over 1 billion swiss franks and also settled a lawsuit over Mortgage Investments. And lets stick with switzerland where julius baer is showing very nice gains, too, up almost 4 . The Company Reported a 25 annualized jump in firsthalf profit. It says it stands ready to make provisions regarding a u. S. Investigation into tax evasion claims but hasnt so far told us how big these provisions would be. And finally, i do want to show you shares in the belgium telecoms company, mobistar down by 27 . The Company Caught its Earnings Guidance for this year and suspends its dividend as the price war rages in its local markets. And with all this focus on portugal, lets see how yields are doing. They actually came down somewhat. The yield now sitting at 6. 45 . Now, they were at 8 earlier in the summer, but they were also as low as 5. 3 in may. So were still seeing yields at fairly elevated levels. And lets see what the yield for the treasuries is doing at 2. 47 below the 2. 5 level. And the forex markets are looking like this. The dollar yen pair, that is the big mover today on the back of this overwhelming victory for Prime Minister abe in the upper house elections. Now, initially, just after the result was out, yen was actually trading lower, but is now strengthening against the dollar with the pair just over the last couple minutes falling below that 100point level or 100yen level, rather. It is down by around twothirds of 1 . And lets check in on how markets in asia are trading. Lisa shwen is standing by in singapore. Good afternoon to you. Reporter good morning to you, carolyn. Well, asian markets are in the green today. The japanese markets kicked off the week on a positive note after Prime Minister shinzo abes convincing victory at the upper house elections over the weekend. But a stronger yen, as you just mentioned, that did temper the rally. The nikkei 225 only gained about 2. 5 in the end. Shares jumped on reports that hewlettpackard to develop highpowered servers. And nippon paint surged to nearly 7 after it raised its net profit forecast by t20 thanks to strong sales. Under pressure today after beijing strapped the floor on lending rates. Analysts say theyll have a tough time competing with big banks as china pushes ahead with Interest Rate reforms. On the other hand, strong gains for aussie gold miners after the precious metal jumped to a onemonth high. Shares of evolution surged some 7 to 13 in todays trade. Back to you. Thank you so much for that. I just want to bring you more news on this chinese bribery case. We know that gsk has been investigated by authorities in china. Now weve got flashes, dow jones reporting that astrazeneca says that police have visited its shanghai offices. Chinese police, of course, this visit, of course, is related to the astrazeneca Sales Representative for the company says. So again, Chinese Police visiting astrazeneca comes amid the bribery probe of rival glaxo smith kline. It doesnt say anything about whether astrazeneca has been engaging in any bribery activities in that country. But as weve been discussing with George Godber before, this is a very, very common practice in many of these emerging markets. But again, not saying that astrazeneca is actually guilty of these bribery charges. Now lets give you a look at whats on todays agenda in the United States. June existing home sales are out at 10 00 a. M. Eastern. Theyre forecast to rise by 1. 9 . Its a busy week for earnings with about onethird of the s p 500 companies reporting. Today well hear from mcdonalds before the open as well as gannett, halliburton, hasbro and kimberlyclark. After the close, we get numbers from Texas Instruments and netflix. On friday, the s p 500 settled at a new record high for the second consecutive day. So will u. S. Markets continue to rally into earnings season . Michael pervis is chief global strategist. He joins us now. Michael, thank you so much for joining us today. Now, last week we saw the high flows into equity funds since 2008. That tells me that many investors out there are simply chasing a rally that may not be here to stay. Well, i think one thing that investors need to ask themselves is what is the catalyst in the course of this summer to take the s p decisively higher to new highs. We have had a pretty strong rally off this consolidation we had in june. The question is is going into the end of july and into august, are we really going to make new lifetime highs . And id argue that right now that the risk is really more to the down side. From a valuation perspective, where do you believe the s p is . I mean, i would say and many would argue its extremely expensive. Currently trading at 18 times earnings. In 2008, it was actually trading at 17. 7. I mean, that alone would be a reason to sell, wouldnt it . Well, valuation, you know, the law on s p argument has always been buttressed by the relative valuation to treasuries. And that argument has been changing with the rapid rise in riskfree rates there. So i think you make a very good point. That its not a cheap market. Weve seen more expensive s p environments on both the absolute and relative to treasury basis. But i do think that it is its certainly not what we had in 2012 where you had a very obvious case for multiple expansion when the tenyear treasury was decisively before 2 for much of the year. Michael, you bring up a very important point and that of the correlation of treasury rates with u. S. Equity markets. At what point will higher yields actually choke off the rally . Well, i think, you know, theres two issues here. The first is understanding where the feds policy really is. And bernanke has been kind of moving back and forth on this quite a bit. And that has obviously been very important to the whole s p rally since the 666 lows back in march of 2009. And then the second thing is what is the impact on the economy. You mentioned some housing statistics coming out at 10 00 eastern this morning. That is, you know, people are going to be watching this very closely. As we get further into the earnings season, one thing im really watching here is i think youre going to have a much wider dispersion of outcomes in terms of how earnings are shaping up here. So one set of Companies Might be do much better from a higher rate environment. And other companies are going to start getting hurt more and more by that. And so i think its harder for investors to really see that oh, wow, earnings season is good. You know, the majority of the companies are beating on earnings. Therefore its better because its a much more sector and stockspecific game right now as companies readjust to this higher rate environment. Yeah, michael, hold that thought because we are going to be talking more about u. S. Earnings season later on in the show. But for now, thank you so much. Michael perves, chief global strategist at weeden co. Portugal has averted a new crisis, but can the coalition deliver on its Bailout Program . Well get the very latest from lisbon with karen cho after the break. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. And these are your headlines. Philips, ubs and julius baer all enjoy a pop in shares as earnings impress investors. Portugal stock markets get a boost after the president says no to snap elections. And japans Prime Minister, shinzo abe, gets a strong mandate with a convincing win in the upper house elections. Detroits emergency manager says the city must help itself and cant wait to see if the u. S. Government will give it a bailout. Detroit filed for the largest municipal bankruptcy in u. S. History on thursday, setting the stage for a costly court battle with creditors over an estimated 18. 5 billion in debt. Speaking on fox news sunday, kevyn orr says any outside aid would be great, but hes not really counting on it. Weve operated under the assumption that we have to cure this process, this problem, on our own. We are not expecting the calvary to come charging in because we dug this hole. Detroit mayor dave bing says hes talking to government officials in washington about what they could do to help. But on friday, Vice President joe biden says its unclear how washington could step in. Now portugals president , silva, has ruled out snap elections, insisting the countrys Coalition Government will stay in place until lisbon exits its international Bailout Program. Karen is live in lisbon with the very latest. Now, karen, were seeing that relief rally in terms of portuguese stocks. Were seeing the yields come down, but just how much relief are you seeing on the ground given that austerity is here to stay . Reporter that is the big question, isnt it, carolyn. And you can see it is fairly peaceful on the ground here. The idea of a snap election has been avoided. Portugal has managed to steer around a political crisis for now. And we had the president silva trying to reassure voters in the International Community last night that the Ruling Coalition will continue on this bailout company ahead of the exit mid next year. Ive spoken to all the main parties here today. You can tell that it is a tenuous agreement so far. The political crisis has been going on a couple of weeks now. And this really just raised the issue with International Investors because the finance minister resigned saying he had lost Political Support for the Bailout Program and that we had seen the labor unions and employer associations started to rebel against just how deep these costcutting measures were starting to bite. Now, the question is whether the government will continue to meet its deficit targets and whether further austerity will be required. We had a conversation with the Opposition Party today. And they scoffed at the idea that portugal is the poster child for austerity and also for the troika program. Take a listen to the member of the socialist party. This is what he had to say. The European Union and its main institutions are committed to inventing a Success Story. The fact is that that Success Story does not exist in portugal. The main indicators are much worse than they were initially predicted. And well, the Main Objective of this program is to make sure that portuguese debt is sustainable, and it is not. Reporter joao might have a point there. Weve just seen First Quarter debttogdp rise to 127 here. Many think this could continue to peak next year. So we havent seen debt come down despite all the austerity. But an employment rate above 18 and growth which was pencilled in to be about 1. 1 finally taking the country back to positive numbers next year will just be 0. 3 at best. Ill leave you with those numbers to decide whether austerity actually works. That is the big question. I dont know if any of us can actually answer that question. Maybe that is for the next generation to decide. Karen, thank you so much for that. Looking beautiful there, a very sunny portugal. Do want to remind you of whats happening with astrazeneca, the uk drugmaker. Now, we have told you before that Chinese Police have visited astrazenecas offices in shanghai. This, of course, is after gsk, its rival, has been investigated for potential bribery in that country. Again, as we discussed before, for a lot of these drugmakers, very common procedure, especially in emerging markets as they do want to drive growth there. Astrazeneca coming out with a statement. It says it can confirm that it was visited by the shanghai Public Security bureau. It says it believes the investigation relates to an individual case. And it says while we have not yet received an update from the Public Security bureau, we have no reason to believe its related to any other investigation, saying astrazeneca is committed to acting with integrity at all times. Still to come on the show, the cochief executive of german Software Company, s. A. P. , is to move to the companys Supervisory Board. How does he feel about it . Find out as we bring you an exclusive enter rue with the man himself right after the break. And well leave you with a look at how futures are trading ahead of the open on wall street. Well be back very soon. [poof ] [clicks mouse] theres doughnuts in the conference room. Theres doughnuts in the conference room. Automatic discounts the moment you sign up. With the spark miles card from capital one, bjorn earns unlimited rewards for his Small Business. Take these bags to room 12 please. [ garth ] bjorns Small Business earns double miles on every purchase every day. Produce delivery. [ bjorn ] just put it on my spark card. [ garth ] why settle for less . Ahh, oh [ garth ] great businesses deserve unlimited rewards. Heres your wake up call. [ male announcer ] get the spark Business Card from capital one and earn unlimited rewards. Choose double miles or 2 cash back on every purchase every day. Whats in your wallet . [ crows ] now wheres the Snooze Button . Welcome to worldwide exchange. Im carolyn roth. And these are your headlines from around the world. Its another big week of corporate reporting with nearly onethird of the s p 500 companies updating the market later this morning. Mcdonalds, netflix and Texas Instruments will all report numbers. And tomorrow, apple will dominate the news with at t and u. P. S. Also reporting. Michael perves, chief global strategist at weeden co joins us now. Thank you for sticking with us here. In terms of the earnings season so far, of the 20 of the s p 500 companies that have reported so far, some 65 have beaten earnings expectations. But in terms of revenues, its looking a lot weaker. Only 51 . Does that dishearten you . Well, i think some of this can be expected. You know, if you look at as were getting further into the earnings season and its the large multinational corporations that really drive sort of overall Market Sentiment here, one of the concerns that i have is that were dealing here in the United States with a generally stronger dollar than weve seen. And as you think about multinationals, for example, mcdonalds, youve seen over the last ten years a generally declining dollar relative to the euro or the yen or many other currencies. And thats been very helpful for Companies Like mcdonalds. The combination has been very helpful to these types of companies for some time. This may be changing if we get into a generally stronger dollar here Going Forward. And i think that could be thats something that im going to be looking at very closely as we comb through earnings reports this week on these multinationals. Yeah, were going to be talking more about mcdonalds later on in the show. But i find it absolutely fascinating that those companies which are very much exposed to the domestic markets to the u. S. Have been doing relatively well. If you take ge, for example, it saw order growth, Domestic Order growth, up 20 in the Second Quarter. Given that we are seeing a slowdown worldwide, especially in china and a very sluggish environment in europe, would you just rather stick with companies that have this domestic exposure . Well, i think thats been sort of a defining theme for much of the last several months is the u. S. Has been the best house on the block. I do think, however, that given what weve been seeing in europe, that we may be getting much better, you know, getting towards sort of the trough of the european recession. And there will be investors looking for better returns there, as we just talked about a few minutes ago. The u. S. Is not as cheap as it once was 12 or 18 months ago here. And so i think, you know, right now the u. S. Is getting flows. That will continue. But i think theres also going to be people wanting to get ahead of the curve and looking at opportunities, you know, throughout the eurozone as well. All right. Its a more nuanced story here. All right, michael, thank you so much for that. Michael perves, chief global strategist at weeden co. Still to come, well be talking to Jim Hagermann Snabe in an exclusive interview after the break. Welcome to worldwide exchange. Im carolyn roth, and these are your headlines from around the world. Earnings season heats up in europe. Philips shares jump as investors brush off concerns over the Global Economic outlook and focus on a better than expected net profit for the quarter. Ubs and julius baer also among the top gainers. Ubs profits surpass expectations despite settling a u. S. Mortgage probe, while julius baer beats forecasts as client activity picks up. And u. S. Investors will also be flooded with earnings reports this week with around onethird of the s p 500 Companies Set to report results. Portugal bond yields fall and banks lead the equity markets higher as the countrys president rules out snap elections, instead backing the coalition to see lisbon through its Bailout Program. Youre watching worldwide exchange, bringing you Business News from around the globe. And hello, everyone. If youre just tuning in, thank you for joining us here on the show. Heres how markets are faring ahead of the u. S. Open. The european markets seeing a lot of green arrows, but gains at this point in time really are just very modest. The ibex 35, an outperformer among the four chips that youre seeing, up 0. 7 . But identify got ve got to tel portuguese markets seeing a nice rally on the back of news overnight that we are not going to be seeing a snap election. And this is how u. S. Futures are shaping up. Weve got a couple of hours to go, yes. But were looking at the dow, the nasdaq and the s p 500 all opening in positive territory. Remember, the s p 500 reaching another record high. On friday, the dow jones pretty much flat on friday, but remember, it also hit a record high on thursday. The nasdaq, a bit of an underperformer last week on the back of those disappointing numbers from microsoft and google. And mcdonalds reports Second Quarter results at about 8 00 a. M. Eastern. The fast food giant is forecast to earn 1. 40 a share on a little more than 7 billion in revenue. Now, jim yen is Equity Analyst at s p capital iq, and he joins us now. Thank you so much for speaking to us this morning. We know that the environment globally is very difficult for mcdonalds. Is it looking any better on the domestic front . Well, i think its slightly better domestic versus global. But however, u. S. Economy is going a little bit faster than some of the european. However, i think mcdonalds is somewhat hurt by higher payroll taxes that really hurt the middle and lower income. So overall, we still think that growth will be modest, at best. Jim, weve seen mcdonalds trying to focus on the mcrib to cater to some of its younger audience or to its younger customers, rather. Its also been focused on focusing on the dollar menu. To what extent are these strategies going to pay off . Well, i think the biggest problem facing mcdonalds is mcdonalds trying to be one restaurant to all types of consumers. Its trying to focus on the value people. Thats why its focusing on the dollar menu. Meanwhile, they also want to focus on growth. It wants to target the socalled millennium generation. They want healthier quality food. And because of more choices prefer some of these fast casuals such as chipotle and panera bread. Mcdonalds has a twopronged strategy. One, they want to focus on core constituent, which is the value menu. Also they want to target some of these healthier people want healthier food like the mcwrap. Theyre trying both strategies. Im not quite sure its working, but theyre trying to be one restaurant for all types of consumers. Michael perves, global strategist at weeden co. Is still with us. What do you think of this strategy . Do you believe that its going to be paying off . I think your guest makes a very good point with chipotle at 44 times earnings, thats going to be very appealing to the management of mcdonalds. But whether they can actually do that with the brand they have and with, you know, really focusing on value at the same time and having a sort of more broader products than chipotle is certainly a different one is going to be a real challenge. Theres one other theme i would just point out there as it relates to mcdonalds, which is that we are in a world of Higher Oil Prices here. And that may flow through to some of their Commodity Prices as well. That could be a theme that could maybe not show up in the historical results for the quarter but may be coming into the coming quarter. So thats something to watch for as well. Jim, i want to bring you back in because youve got a buy rating on mcdonalds. Interesting piece in the wall street journal overnight saying its really tough to bet against mcdonalds even if the Economic Conditions are really tough. Mcdonalds usually does a pretty good job of delivering and of grabbing market share from others. And with the pe in line with historical average and the dividend yield of 3 , its looking like a very nice alternative to bonds. Would you agree with that . Well, i think thats one of the fears i have for mcdonalds right now. Its always been historically been 3 relative to a tenyear bond is very attractive given the fact that its raised dividend for the last 40 years. We think that mcdonalds historically has been grabbing market share because theres value appeal, especially as the economy gets tough. So we think hopefully because the nearterm challenge, things look challenging, but i think longer term we like mcdonalds because it will hopefully gain market share and emerging markets. Jim yin, Equity Analyst at capital iq and jim purves. Jim Hagemann Snabe stepping down. It was a personal decision as the firm will now try and find a place for him on the Supervisory Board. Bill mcdermott will take full control. Shares in the company have risen 6 6 to 7 since snabe took up the role in 2010. Today shares are slightly lower around 1 . Jim Hagemann Snabe joins us on the phone for an exclusive interview. Mr. Snabe, thank you so much for taking the time to speak to us. Now, just explain this entire this very surprising move to us. Again, it was a personal decision, i understand. It was not related to the fact that two coceos are simply not working . No. Thank you very much. And thanks for the opportunity to be on the program. Weve always had great interaction. Let me first say, the last three years our partnership has been some of the most exciting years in my entire career. Not only have we been able to reinvent the most successful business, but weve also grown a unique partnership and even friendship. Thats certainly not the reason. I think were in a situation today where s. A. P. Is stronger than ever. So timingwise, i think its a good timing. We have a very, very strong team. And you look at that, and you add my personal reflection, you know. I have two main reasons driving my desire to change the path forward. One, of course, you know, i am constantly on the move in this job. My family lives in copenhagen. I havent seen much of them for the last three years. So thats one element. And secondly, there comes a moment in your career where, you know, you start focusing more on helping others to be successful than your own success. And i feel that the next phase in my career will be on an executive board level where i can use some of my experience over the last 23 years to help others be successful. So its quite an exciting moment i think both for the company and for me. Jim, im very certain that your family will be very relieved to be seeing more of you. But german media has been suggesting of late that with s. A. P. Expanding its activities in california and putting greater emphasis on cloud, you have somewhat been sidelined. Is that a fair reflection . Are you happy with that move into cloud . Well, ive actually been certainly one of the drivers of that move. I argued already three years ago that we needed to become a cloud company. Got a lot of, of course, support from bill, and weve taken some very decisive steps towards that. Two very Strategic Decisions or acquisitions with success factors the leader in hr in the cloud and the leader in procurement. We are now one of the leading companies in the cloud going faster than anyone else including startups. So i think that is why im arguing s. A. P. Is in a very strong position. Were reinventing the industry with the cloud for business. And with our nextgeneration database. So in that sense, the company is stronger than ever, lots of opportunities ahead, and im, you know, very pleased to see the strong team we have on the executive level. Bill is probably the best ceo in the industry, period. Running development, he is the innovator of business software, period. We have rob enslin running sales. I feel extremely good moving into the Supervisory Board and helping from that angle, leveraging the partnership i have with bill to continue the success and the momentum of s. A. P. All right. Jim, thank you so much for taking the time to walk us through your decision this morning. Jim Hagemann Snabe, coceo of s. A. P. Thank you very much for that. Lets change direction here. The duchess of cambridge has been admitted to hospital and is in the early stages of labor. Thats according to a statement from kensington palace. Our royal baby watcher, jim maceda, from nbc joins us from outside the hospital. Now, jim, we talked before, you told me about all the compiexcit going on in front of the hospital. Walk us through the next step and what we can expect in terms of communication. Reporter right. Well, we dont expect now to get any more official word, official communications, from the palace. They simply dont do that kind of thing. We have had an unofficial word that everythings going smoothly. This happened about 4 1 2 hours, 4 3 4 hours ago that she actually entered the hospital behind me, that very door, in fact. But what is going to happen is that when the birth occurs, there will be the whole world will be watching this door because out of it will come a palace official carrying a medical bulletin, really a birth certificate sign by all the attendant doctors. And he will then hand carry that bulletin by Police Escort in a vehicle the 2 1 2 miles between here and Buckingham Palace. He will then, in another piece of theater, actually hang that bulletin on an easel, the very easel that was used to announce the birth of william 31 years ago. So thats when the world will actually know, there will then be an official statement to the press. There will then be a peeling of bells at westminster abbey. We understand there will be two massive gun salutes, 62 and 41 gun salutes are going to happen. But none of thats going to happen until she gives birth, obviously. And right now we are just in a waiting mode which could take hours or even, heaven forbid, more days. Back to you. Jim, absolutely. Im hearing a lot of background noise there. Just tell me, how many other reporters, how many other crews are there . Reporter well, its been building up since 6 00 this morning. Ive got to say now were seeing probably 150, 200 people here, reporters in what they call the press cage or press pen. A lot of cameras. A lot of ladders. Its become a ladder farm for the snappers. Some of whom are here, some of whom arent. I mean, i cant complain. Ive only been here four or five days. Some of these people, some of the crew members came at the end of june because of the fear that they might miss an early delivery. Well, now its just the opposite that were waiting for. A late due. Back to you. Wow. Jim, thank you so much for that. You are one of the luckier ones, then. Lets move on. U. S. Lefthander Phil Mickelson has won golfs british open with that handy check, where will that place him on the money winners list . Stay tuned as we talk golfs richest. I want to make things more secure. 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Mary thompson is live at cnbc headquarters with the very latest. Good morning, mary. Good morning. The Federal Reserve is reviewing a landmark 2003 decision that first allowed banks to trade in the physical commodities market. The fed has debated for several years whether to continue allowing banks to own assets such as power plants and Oil Storage Tanks. This latest move announced in a short statement on friday may suggest the central bank is also reconsidering whether these companies should be able to trade Raw Materials such as gasoline tankers, coffee beans, and coffee beans. Goldman sachs, jpmorgan and Morgan Stanley all, of course, have businesses involved in the storage of physical commodities as well as being involved in commodity trading. The Senate Banking committee holds its first hearing on the issue tomorrow. Lawmakers are set to hear from miller coors. Also, the Commodity Futures Trading Commission is putting wall street banks and big traders on notice for a possible probe of their metals warehousing businesses following repeated complaints that theyve inflated prices. Reports say the cftc sent out letters last week telling firms to observe emails, instant messages and other documents from the past three years. These donotdestroy requests given to metals producers in exchange for Storage Space in their warehouses. Over the past few years, tons of aluminum and other metals have piled up in global warehouses that are part of the London Metals Exchange network, clogging the trading significance tesystem. And thats caused prices to surge, prompting allegations that some banks and traders are zporti i distorting supplies. Whats unclear is whether theyll move ahead with a formal probe. The agency opens dozens of investigations a year but only a handful result in actions. Well be watching, of course. Back to you. Mary, thank you so much for that. It was another record high for the s p 500 last friday, but are the good times here to stay in well preview the trading day after the break. [ male announcer ] come to the lexus golden opportunity sales event and choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfon. [ kitt ] you know whats impressive . A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . To experience the precision handling of the lexus performance vehicles, including the gs and allnew is. This is the pursuit of perfection. Golfs british open championship this weekend came with a total with a total purse of 8 million. Allowing winner Phil Mickelson to pocket a cool 1. 43 million. That will help him keep his position as zbogolfs second highest career winner. David friedman joins me now. Of course, david, the earnings king is tiger woods. How does he compare with his, well, total wealth . So i think the interesting thing to highlight is that even though despite the win this week, hes still about 400 million behind tiger woods, right. And so its interesting in terms of exploring kind of endorsements and all those different kind of things, especially in light of the fact that we saw these images this week of his family mobbing him afterwards. So we can definitely see an uptick in those type of endorsements and so forth, but still a long way away from tiger woods whos still the in terms of net worth and as an active athlete the highest. But is tiger woods actually worth all that net worth . I mean, 17 straight majors. Hes played without winning. I mean, can he still play well enough to justify all that money that hes owning . Yeah, its a good question, but, again, whats interesting is that, you know, its the endorsements that drive those are the key drivers of wealth, right . In terms of its not just the winnings, right. So as long as nike and, you know, the other folks around him that have decided to stay with him, stay with him. But theyre making a bet. So well see. But i think well see some migration to phil in terms of that social capital around the endorsements. But again, huge gap, though. And if you think more broadly about the spectrum, phil is kind of nestled in between kobe bryant whos around 220 million and Roger Federer who is about 180 million. In terms of comparison to some other sports. Yeah, thats absolutely incredible. David friedman, thank you so much for bringing us those stats and for joining us today. Mark sebastian, chief operating officer joins me for a look ahead to the u. S. Markets. Mark, weve got plenty of earnings on tap this week. It will be one of the busiest weeks for s p 500 reporting. Weve also got existing home sales. What is most important to you this morning . This morning, i think the elections in japan are going to be really positive as well as chicago pmi and new home sales. As well as the royal baby. Lets not forget if that babys born, i think the markets are going to rally really hard. You actually think so . No, absolutely not. No, im kidding. Weve got some earnings this morning. Mcdonalds, i think, could be a big driver. This apple news is kind of interesting, although the stock doesnt appear to be moving that much on it. All in all, what weve seen is s p 500 Movement Really slow down the last couple weeks. As we see earnings reports kind of slashing against each other. I think today and probably through the rest of the week into nonpharms next week, youll see stock picking do better than broad market buying. If there is any weakness in the broad market indexes, watch for the s p to outperform the nasdaq. Weve seen three really rough earnings out of the nasdaq last week. And if apple has another one, we could see s p really continue this major outperformance weve seen of the nasdaq 100. Mark, with ben bernanke out of the picture for the next couple weeks, what do you expect to be the key driver for markets right now . Isnt it really earnings . Oh, its yes, its earnings, but that underlying threat of a movement in treasuries is still there. And markets are paying attention to that. Every little thing said by bernanke is going to drive markets. But the problem with thinking earnings are going to really change things is you need earnings across the board to be catastrophic. And as weve seen so far, weve had positive numbers out of some Big Companies and then weakness out of your googles and your microsofts. So as long as earnings crossset each other, theyre not really whats going to be driving the markets. Its going to be economics. Its going to be the tenyear treasury which has really been the dog thats wagging this whole markets tail over the last month and a half. Mark, thank you for that, mark sebastian. And thats it for todays show. Im carolyn roth. Thanks for watching worldwide exchange. Good morning. Todays top stories. Earnings season about to go into overdrive. About onethird of the s p 500 companies are set to report this week. Regulators are rethinking a decision that first allowed banks to trade in physical commodities. And then the s. E. C. Versus s. A. C. The government taking administrative action against steven cohen saying that he ignored red flags that two of his employees were engaged in insider trading. It is monday, july 22nd, already. Its Phil Mickelson day on squawk box, and well begin right now. Good morning and welcome to squawk box here on cnbc. Im Andrew Ross Sorkin along with joe kernen. Becky is back tomorrow. Kayla tausche has the latest on the case against steven cohen. Weve got a quick roundup of the other morning stories. The big one being that the Federal Reserve is now considering whether to allow banks to continue owning Trading Assets like Oil Storage Tanks or metal warehouses. The regulator also reviewing a 2003 decision that first allowed banks to trade in physical commodity markets. Financial firms activities in physical markets helped generate billions in profits, and a Senate Committee will be holding a hearing on that topic this week. If you didnt see the frontpage article in the New York Times this weekend about aluminum and this idea of aluminum warehouses and moving all the stuff back and forth, check it out. Also, the cftc wants in on the action. The commodities market regulator has put banks and other big