Transcripts For CNBC Worldwide Exchange 20130725

Good morning. Thank you for joining us today. Lets get you up to speed with the latest ephone numbers that are crossing. It gives us a snapshot of the Business Economy in german. German Current Conditions index is at 110. 1 in july, versus the consensus which was sitting lower than this at 109. 7. Number coming out better than expected on that rate. In terms of what were seeing elsewhere on the other numbers, the german Expectations Index of 102. 4 in july, this is versus what the market was expecting at 102. 5. So this number coming in a little lower on that side. Just on the local expectations. Elsewhere, no revisions to the june indices. Lets dive into this and get the earnings reaction. The euro dollar tracking firmer today and ticked a little higher as well. 132. 19 is what were looking at. Joining us on the phone from munich is a researcher at ifo and annette joining us on the line from frankfurt for instant reaction too. Give us a sense of the key standout points. We have seen an improvement in the Business Climate indicator. In total, the conditions in the German Economy remain fair. We see manufacturing relatively strong and also the Retail Sector which has been not so strong in the past is picking up. So the Business Climate index coming in at 106. 2, slightly higher than consensus today. Does this suggest that german business is willing to spend coming up to the election, because you also think that even though the conditions across europe might be improving slightly, there may be political caution coming up. Well, there is some caution coming up, but at the end, i think nobody expects in the Business World a big surprise. I think companies are maybe a bit reluctant now to pick to spend in Capital Investment as much as they should and could, but for next year we see relatively strong increase in Capital Investment. Ge arnot, this is annette. Where does the optimism come from . Is that the eurozone sees a little the bottoming out and is overshadowing the chinese weakness . What are companies saying in germany . Well, in germany, first, the construction sector is in a strong upswing. It is different than we had the past years. The consumer is also spending more. Unemployment is relatively low. So domestic demand in total is buoyant and export is find something weakness in china is still doing fine and also todays figures show the expectations are in a positive mood. We have a balance, which is significantly higher than we had in previous months. Thank you very much for the instant analysis. Gernot nerb and annette joining us as well. You can see from the heat map, the tone that is playing out on markets today, we have a lot of red on the charts. Markets are very much on the back foot this morning as they digest some of the earnings. And the German Market is one tracking a little weaker today, not exactly helping out the rest of the benchmark index across europe. You can see currently were up about a quarter of 1 . And lets just move on to some individual indices and you see where the concentration is being felt. Were dissecting those ifo numbers and just the climate playing out across germany. It hasnt done anything for the German Market today. Dax still tracking where it was before the numbers came out, down. 6 . The ftse has also been softer today in the uk, down. 4 . The ibex has been putting in a fairly decent performance, a bunch of earnings coming up too from the spanish market today. And the unemployment numbers showed a little improvement at the margins. Enough to get the index into the green today. The cac, though, in france, is tracking a little weaker down almost. 2 . All this comes on the back of strength on the numbers that we saw yesterday. Modest gains across the european indices. As we look across on debt markets, we have got prices for paper pushing lower, which lifted the yield on trades, on bonds close to 1. 7 . Tenyear portuguese yield is below 6. 5 . Pressure really came off earlier this week when we saw the political parties, the Ruling Coalition reach an agreement. We have got the tenyear treasuries, 2. 60 . And slightly firmer on gilts, 4. 2 . Waiting for gdp numbers to come out for the Second Quarter shortly and this trade could move around. Lets dive into the euro trade on the back of the ifo numbers. We have been fairly supported as we track around the onemonth highs we saw yesterday and sill hovering around the levels of 132. Dollar yen rates still tracking close to the 100 level. Slightly on the back foot this morning for the dollar trade. The u. S. Dollar is firmer to other trades out there. The Australian Dollar being one of them. Just lost more mileage on this trade, backing away from the. 92 handle. 91 cents is what were looking at. And the sterling trade is a little firmer. So some confidence before the numbers come out. Lets get a picture of the globe and to asia. Red on the boards today. Down. 6 in china. Lets get to li sixuan in singapore for more. A tepid session in asia today. Ch markets under pressure, but losses are in fact capped by optimism on beijings measures. It comes two days after the 7 growth comments and yesterdays pmi data showed a further slowdown in chinas manufacturing floor. Nothing massive, but the muni version includes three asecreta asecretaaspects. Railway stocks and industries that are facing with overcompact issues like cement and steelmakers, they reacted very positively to the supportive measures. Earnings news also very much in play. Japans canon tumbled over 5 after cutting its 2013 profit forecast by 10 . And Lg Electronics down 2. 4 after reporting weaker than expected q2 profit. And a quick check on australia miners. They pulled back after the strong winning streak in recent sessions. Also tracking weaker commodity prices. Back to you, karen. Thank you very much for that, sixuan, well check in with you later on. We can show you instant reaction, fragrancemake r givaudan jumped up. Ranstad holdings, we saw the unemployment numbers come out of spain, this is a company that is very much in the staffing business. It is a dutch company. It said today it had a 73 rise in the Second Quarter profit. The result is due to low operating costs in the share price. One of the best performers across the European Space today, 5. 8 . Basf is right in the bottom of the dax. The company missed Second Quarter expectations and warned that achieving the fouryear earnings target looks to be like a significant challenge at this point, hence the reason were seeing the share prices under pressure today. And Credit Suisse has seen its share price drop as well. The Company Reported Second Quarter net profit of over 1 billion swiss franks, compared to 788 million franks for the same period a year ago. Carolyn is on the ground in zurich. Nice to see you this morning. I want to dive into the reaction, because ive got a broker report saying that the Wealth Management performance was a positive surprise. So why is the share price under pressure today . Lets just put this into perspective. Shares in Credit Suisse rallied since the beginning of the year, up 30 , versus the overall market, the smi, up only 16 . What were seeing today is a little bit of profit taking given that numbers were good, but no major positive surprises. But as i said, numbers were strong. Youve got analysts like citi pointing out capital was strong, inflows were better than expected, and the margin picture is improving as well. Overall, net income jumped by 33 . Investment banking profits actually doubled from a year ago. That was on the back of better than expected trading in both the fixed income unit, but also in terms of equities. I spoke to brady doogen, the ceo of Credit Suisse and here is how he felt about the numbers. It was a strong result for us in the Second Quarter, even given particularly in context of the volatility in the market. A billion five in pretax, up from a year go. Over a billion in net income and that was a 10 return in equity. And in particular, first half, we made close to 2. 4 billion in net income and 13 operating return on equity. So very strong returns overall. Clearly as you say, in june, given the transition in Interest Rates, clearly markets became more volatile, a little more unsettled. That impacted the business, but the business. So the Second Quarter is done. And what about the outlook for the rest of the year in that we are going to be seeing an increase in rates, we are going to potentially be seeing more volatility down the road over the second half of the year. I asked brady dugan about this, and he said were confident were going to be able to deal with the rate increases pretty well. Having said that, of course, there could be some losses on the bond holdings. On the other hand, for the Private Banking business, it means a nice boost to the net income. We have to wait to see what the net net effect on the overall business really is. But Credit Suisse says it is in a good position to deal with all the challenges. Carolyn, thank you very much for bringing us the latest there. Much appreciated. Joining us is Portfolio Manager at glen diven king asset management. We have seen the reaction, negative on the share price today. But there have been some positive comments the way brokers do it because of the Wealth Management performance. What was your instant fear . Im surprised by the direction of the market. Overall, i think one year ago no one would have expected such a good result. And well balanced result across different area of the business. And it is clearly a strong bank and a difficult environment. So compared to french or german or spanish bank, i think theyre doing very, very well. I was noticing too some of the contrary around the stock suggests could start paying the dividend fully in cash. That would be a surprise and a positive one for investors. Given the capital and everything, im not too sure they could start right away to distribute dividend, even though the result is strong, i think being one of the most conservative regulator, because, you know, in terms of gdp, the banking business is very large compared to the gdp of the country. I think it might be difficult for them to start it distribute increasing dividend. Can you get a clear read on what is playing out on earnings season. If you look at the market yesterday, we had highs across stock markets. Saw positive reaction to the pmis. Today, as we come through the trading session, we have got a negative reaction to earnings. It seems as though were on a bit of a seesaw here in europe. Well, it is a bit like an economic number in for the economy. We had very, very difficult to see a clear trend, i think. Some very positive results, negative results. One day is very yesterday was very different from today. So it is difficult right now, we still dont have a clear picture in terms of earnings. And, second, you have to keep in mind after a good expectation builder and it is very difficult to for the market to stay at level where expectation is too high. You could see some stock the best probably the one where the expectation is the lowest. Youre looking at a couple of stocks in particular. The Oil Exploration side. What stands at here and what are your expectations . Within the the oil price is doing quite well. It is holding up. Within the oil industry, where the money is made, since quite some time we think that most of the money is going away from the Oil Expression company itself. It is going more towards engineering. Today technique reported strong result across the board with very, i think, record high book. And therefore we think that within the oil industry, the engineering, we make most of the margin. The ceo from technique was saying no meaningful decline, sees strong cap growth in 2014. This suggests an appetite for investment out there in the sector. It is surprising. We have seen some project, whatever it is in gulf of mexico and australia, postponed because of high cost or because of higher risk. But this year very, very strong, robust from a large client. I think the demand for the services they provided, it is still growing. There is a clear differentiation between the Oil Services Sector and what were seeing in other mining services. The two are very far apart at this point, arent they . In terms of margin, in terms of growth, it is very different, yes. Thank you very much for that. Well have further discussion about some of the earnings out there today. Portfolio manager at Glen Devon King asset management. Lets move on to other earnings but state side. Facebooks Second Quarter profits beat forecasts as revenues rose better than expected 53 . Facebook has 1. 15 billion active monthly users. Thats up 21 interest a year ago. The Ceo Mark Zuckerberg is playing down concerns that teenage users are losing interest in the site, noting the number of teens in states has been steady over the past year. Facebook shares have soared 17 in after hours trade. You can see in germany, currently also tracking a little higher on market as well. We want to know are you still liking facebook . Or are you turning to other social networks . If you want to join the conversation, get in touch by email at worldwide cnbc. Com, cnbcwex or direct to me cnbckaren. Still to come on todays show, Spanish Banks swing back to profit as unemployment ticks lower for first time in two years. Well head live to madrid for analysis. Also, we check in on the british economy, with preliminary q2 gdp as consumer giant unilever sheds light on the global consumer. Our interview with the groups ceo is coming up. General motors set to report after rival ford beat the street. More good news, we get a report from detroit. Eunice yoon will join us live from beijing. 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. A Train Derailment in spain killed at least 77 people and left over 100 injured. Government officials believe the crash was an accident, and Prime Minister Mariano Rajoy is set to visit the site. The crash happened on the eve of the citys famous christian celebrations when thousands of pilgrims mark the festival of st. James. Spanish unemployment dropped for the first time in two years in the Second Quarter according to fresh data. Lets get out to stephane in madrid. The numbers are still terrible, but at least it is an improvement. Absolutely, 26. 26 for the Unemployment Rate in the Second Quarter. This is still one of the highest one in europe, but it was much better than a 27. 2 we saw in the First Quarter of this year. This is due partly to the strong tourism activity in spain, this sector accounts for nearly 10 of the spanish gdp and created a lot of jobs in the last three months. The question mark is about the sustainability of this improvement. Tourism, of course, is a seasonal activity and a lot of jobs have been created recently, unlikely to last until the end of this year. This spanish economy remains in recession, that is also a big question mark and impossible to create some jobs on the longterm without significant economic growth. On that point, well have an update next week with the publication, the first estimate of the spanish gdp for the Second Quarter. The bank of spain believes the gdp was nearly flat on the quarter, down only 0. 1 , but, again it wont be enough to create jobs on the longterm. Thats the reason why economies believe that the situation is not going to improve significantly on the longterm. Economies believe the Unemployment Rate will increase again in spain to the end of the year and will hit 28. 7 next year. Stephane, you have a busy morning looking at those numbers. On the earnings front, a whole bunch of reports to pour through. Yeah, we have good news, first from telefonica, facing increasing competition in this country, and revenues from latin america, which traditionally upset the weak performance in europe were actually weaker on the quarter. For that reason, telefonica posted 8 decline. But that was broadly in line with expectations. The net profit despite 1 contraction was stronger than expected. Telefonica also confirmed its plan to reduce its debt level to 47 billion euros to the end of the year. The debt level has been already reduced to 50 billions in the first half of this year, the company confirmed this morning the recent acquisition of aplus in germany will not impact its debt level. We had earnings in the banking sector. A record loss of 19. 2 billion euros, while it was profitable in the first half of this year, 200 million euros. Why . Well, you have to wait until tonight. We have an exclusive interhave with the cfo of the bank in europe in closing bell. The cfo. Over to you. Looking forward to that. Thank you very much, stephane. Back to our conference with yanek. Youve been following the telefonica numbers in particular. What stood out to you about the numbers . I think the first of all, the reduction of the debt. 14. 8, telefonica, it is very important for them to make sure they put the capital, the banking sheet in order. It is still high if you put it up against operating cash flow. It is. But theyre working on it. We saw in the process of selling the irish the irish company. Some 40 of Central America asset. We see that with the kpn they are even though it will spend cash up front, in the long run it will be beneficial for the margin. This is a company that should be making an acquisition now, just to flush it out for our viewers not aware of it, they had a planned acquisition of the german unit. The cost is 8 billion euros. Should they be spending this money even if some of it will be financed in shares, should they be going down this path at this point in time . Well, i think in terms of it is very important in terms of cash flow how much how much cost cutting they will do. Within europe, the game plan to adapt to the new environment is to do cost reduction, to do network sharing, and try to have a lower competitor. Now will be only three player in ireland. In germany, the number will reduce. So that will be the only way for them to keep certain the consolidation, does this suggest that profits over this way in the telecommunications space in europe are just hard to come by . You got to be bigger, need a economy of scale to make it work. Europe is one market. You need to be in every country, to be able to compete and to be able to be a economy of scale. Thats the only way. If you look at the number, the number is pretty bad. The expectation is even worse than in fact what they imagined. Similar to other jurisdictions too, there is significant regulatory uncertainty out there, which makes it hard for pricing and investment. What is the biggest concern you have in the european telco space on this side. The fresh concern is the end of the the gradual end of running within europe. The european commission, the agenda is dead set on this. It is a good thing for europe. That will challenge a lot of Telecom Companies because roaming is not the biggest activity. It is a very, very positive you had a disclosure on this as well. Yes. Im the backer of one european to the objective is to end roaming within europe, yes. Youre pushing for that. Okay. Thank you very much for that, yanek. Hes staying with us today. Still to come on the show, amid a wave of uk earnings, a miss to be unilever as the Company Struggles to perform in the united states. Well bring you the full interview with the companys ceo paul polman. Thats coming your way. [ 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. [growl] suddenly, faraway places dwe used to live with a bear. Wed always have to go everywhere with it. Get in the front. We drive. It was so embarrasing that we just wanted to say, well, go away. Shoo bear. But we cant really tell bears what to do. Moooooommmmmm then one day, it was just gone. Mom [announcer] you are how you sleep. Tempurpedic. A raft of earnings fails to lift markets with european stocks mostly in the red. Credit suisse tracks lower despite the ceo telling cnbc hes happy with the banks results. It was a strong result for us in the Second Quarter. Even given particularly in context of the volatility in the market itself. A billion five in pretax, up 38 from where we were a year ago, over a billion in net income and that was a 10 return on equity. Unilevers underlying sales miss expectations. The ceo tells cnbc that despite a recovery in the u. S. Economy, it hasnt benefited everyone. So the Real Estate Market might go up, but a new york apartment price might double. Thats not where our consumers are unfortunately. We need to be sure we get more people into the workforce that wealth is more and better spread and we will do better. Shares of facebook surge after the social networking giant reports better than expected earnings and demonstrates it figured out how to extract money from mobile. And a train derails in northwestern spain. 140 people are injured in one of europes worst rail disasters. We have the latest read of the uk economy crossing. Second quarter gdp, these are the preliminary figures, plus. 67 on quarter. This is what was expected. Now, it is slightly higher than the 0. 3 notched up in the First Quarter. So we are seeing an economy that is expanding in terms of the year on year read. 1. 4 . Also in line with expectations. It was helped by an extra working day. In terms of what this means, the uk gdp has been the strongest year on Year Growth Rate since the First Quarter of 2011. It has been driven by services, construction, production. Also expanding as well. In terms of the reaction on the markets, you can see sterling dollar is tracking firmer. Up about. 1 . It fell initially in line after the numbers first crossed. Sterling has been tracking a little firmer. You see on the day, it is Still Holding on to some gains. 153. 32 is what were looking at. Lets get some instant reaction. We have samuel tomb, and helia brahimi, uk Business Editor on the said. Yannick staying with us as well. What do you think of the numbers . In line with what the consensus was expecting. I think the economy is going to struggle to gain much more momentum from here. I think there is still fundamental constraints out there. I think debt levels are still too high. I think businesses are still very reluctant to invest and i think banks are reluctant to lend. Well struggle to see stronger growth from here on in. Why so negative . These are the best numbers we had in a long time. Isnt there any positives in here . Yes, i think there are. It is good to see this is another Second Quarter of expansion, first time that happened in two years. There are signs that the optimism we see over the last six months or so is feeding through to the economy. I think there is still some fundamental constraints out there that will keep growth subdued for the next year or so. I think samuel is right in that sometimes the gdp figures, especially the preliminary ones that seem to be revised again and again dont capture what life is like for citizens in the uk. And as you said, the real economy, incomes are still being squeezed, Household Debt is still high, median incomes have actually dropped in the last two years, so Living Standards will be hit again because of tax benefits being taken away and but, yes, it is great for the uk economy. As expected, 0. 6 up. We also got figures from the retail British Retail Consortium saying the retail unemployment is up 3. 7 . So, yeah, we had great Economic Data in the last couple of weeks. And a royal baby. So news is good. It is just important to keep in context how much of that we see in the real economy. The feel good factor is out there on the streets around the uk, isnt it . I think, you know, most of european country will be extremely happy to have this result. If you look at the numbers, we see from the eurozone, it is it is not a done deal and not the recovery is not Strong Enough to benefit to everyone. But it is a start of recovery. And you should enjoy it. I hope it is going to last. Have to enjoy it when we can see it. We dont get any more stimulus. Where does this leave mark carney and the Forward Guidance in august . I dont think it is going to change what the mpc does next month. I think mark carney is committed to putting out more formal Forward Guidance than we saw last month. It might make some other mpc members more reluctant to go even further. I think there will be Forward Guidance is the most well see next month. Helia . I think hes right. Forward guidance is going to be as we have seen some rowing back from qe, even from carneys people. So that will be in line. Lets just dive into earnings while youre here, helia. Unilever reported Second Quarter underlying sales growth at 5 . This fell just shy of forecasts. So youve been speaking to the ceo of the company. Yeah, i met up with paul polman earlier today. And asked him what that meant, just shy of earnings growth, but we did see some profitability extended. I asked him about it. Very happy with the results because in a market like this, where europe is actually slowing down, it is 5 growth, well above the market and in line with our estimates. Top line very good. Growing share as a result. But also we said to the market we have to balance this growth with strong bottom line. Core operating margin of 40 basis points. How did you do that with the laundry and ice cream categories . We have healthy growth. We said we need to get the growth back in this company. You cannot create value or wealth if you dont grow. We have now had five years of growth outperforming our competitors. I think we continue to do that behind these results. We also have to balance that growth. Two of our categories we were not satisfied, laundry category and the ice cream category. As you see in these results, 170 basis points improved for example in laundry, rigorous implementation of low cost business models, managing the mix, a new ice cream is up 7 . We see our innovations becoming more margin and better and thats what we told the market we would do. You mentioned the u. S. Being flat. How is the u. S. Recovery we have seen in equities translated to u. S. Consumers yet . Have you seen any of that . Though the u. S. Shows some signs of slight pickup, it is not equally distributed. If it is not equally distributed, Companies Like ours have a hard time benefitting from that. So the Real Estate Market might go up, but new york apartment prices might double. Thats not where our consumers are unfortunately. We need to be sure that we get more people into the workforce, that the wealth is more and better spread and we usually do better. You say it is very difficult to innovate in europe. Has that changed . What more needs to be done by european leaders . Ive been fairly on europe and fairly constructive to try to find solutions. Meeting with the italian Prime Minister a few days ago when he was here. Unfortunately europe is not addressing the key issue that needs to be addressed, which is the relative competitiveness versus the rest of the world. And we havent really moved forward out of that. To what crisis does it need to come before we see changes . There are some signs that the measures taken in southern europe, spain, have plateaued out to decline. We dont see that yet in too many other countries, but have to all work hard, especially on youth and employment, which is a concern to us. I think europe will have a tough ride in the next ten years and leads to a conversation of the citizens of europe that is currently absent. With unilevers 57 of its sales in emerging markets, i asked paul how the slowdown that we have seen in key markets like china and brazil have affected it, and though they had an increase, 10. 3 increase in sales in those areas, he did concede that those markets are really quite difficult still. A consistent theme that is coming through on earnings season now. Basf warned today it had Slower Growth in asia since the Fourth Quarter of 2011. This slowdown that is playing through, how concerning do you think it is for corporate profits . I think last year, most of the profit was driven by emerging market. This year if you look at unilever in brazil, turkey, there is pressure. There is pressure in terms of pricing and pressure in terms of bullion. It is not yet dragging down the company, but you cant expect the same level of growth as you can a few years ago. The uk market is one that has been told to go and chase growth in asia, make the deals with the chinese and it is doing that now. Yet china is pressing on the brakes. Isnt this going to trim some of the growth we might have expected here in the uk . I think thats a prospect for consumers improving. We could see a further recovery in consumer spending. Hopefully inflation will ease quite quickly in the second half of this year, supporting an increase in earnings. I think it would be wrong for companies to fully rule out increases in sales in the domestic market in the uk. I think we do have a lot of plc companies that have emerging markets earnings and we have been relying on those. If you look at unilever, europe and america slowed down 1. 3 . So it is relying more and more on that emerging market growth. And if that comes down, it is not just unilever, they have Hair Products and almost everything we have in our household, but a lot of uk plc will be affected by this slowdown. The remedy is you have to keep on getting the organic growth, dont you, in china . You need to keep growing the business there. If competition starts to come into the fore from the domestic players, thats when you have strife from the companies. You need a good set of products. Unilever, home care product, double digit, and food is up only 1 . So the Product Offering market by market i think it is interesting, i was asking about the Food Products area, and things like spreads, which are hugely important, obviously, they dont sell in the emerging markets. They sell in europe and in states. When you dont have that emerging market growth, you have problems. But where as products like tress may hair care where they launched in brazil have really done well, and helped the company grow. Also, the sunshine brazilian hair. Sunshine and ice cream, thats also a key mix for unilever. Of course it is. To a more serious point, reputation seems to be important. Youve been talking about glaxo all week. We had this flash, been showing the Chinese Commerce industry is saying glaxo investigation wont affect china fdi, but reputation is something that the western Companies Really rely on in the like of china. If you started to destroy that, doesnt that just remove the edge the western companies have in the profitability . Unilever had a strong story of corporate responsibility. So im not too sure what would be impact if there would be a negative impact in the economy or in china. In terms of corporate responsibility, i think one of the risk is probably in europe, in the uk, the government tried to introduce the traffic lights system. And a lot of company, like nestle, approved this labeling few company did not approve. Cocacola and unilever. I think it is odd with usually the high level of corporate responsibility. I think youre right. The multinationals risk has been increasingly important for all multinationals and Reputational Risk and supply chain risk is a big part of the focus Going Forward. We got to wrap this up. Thank you for joining us on the gdp numbers today. And helia, well see you later in the show. Elsewhere, south koreas economy grew at the fastest pace in more than two years in the Second Quarter. Thanks to a stimulus boost from the government. With more on the data and earnings roundup, sherry kang is live in seoul for us today. Sherry . The numbers looked quite nice, but do Pay Attention to what grew a lot and what did not grow at all. Government spending grew 2. 4 compared to 1. 2 of growth in the quarter before. Meaning the increased fiscal spending through an extra budget, but the new administration has come up with earlier this year. And private consumption grew just about. 6 . Facility investment dropped. So quality growth in these numbers is certainly necessary here. And speaking of decreased investment, costco, the countrys number one steelmaker, says it will do just that, reducing its capex by 1 trillion to 2 trillion, starting next year. This is coming out of its Conference Call earlier today here. That announced the Second Quarter earnings that missed market expectations, reporting a 51 decline in the Second Quarter on weak demand. Now, faced with the reality, posco says it is going to expand the sales of High End Products like automotive sheets to boost its operating margin moving forward. But on a good note, though, Hyundai Motor which reported q2 results to date towards the end of the market close here, china sales amassed the weaker performance in the domestic market here in south korea and in the u. S. This past quarter. China sales jumping by 36 , but operating profit down 7. 7 on one slow Domestic Production with problems that we all know about with its labor union, two, provisioning for the recalls that we heard about in the Second Quarter in the u. S. Market and, three, wage hikes for its workers. Well leave it there for now. Karen, back to you. Thank you for the update. Lets just dive into the uk gdp print again. We have got some more news crossing, this time from George Osborne, the chancellor commenting on the back of the rate we had saying the Second Quarter gdp is better than forecast. The uk economy is on the mend, but a long way to go. So suggesting that he is fairly upbeat, but dont get too carried away. Lets look at the reaction on gilt markets as well. It is going to be key for how mark carney views what is playing out in terms of policy action. So the gilt markets today in reaction, bring up that chart, the 2s, the 5s, the a little lower on the shorter term paper as well. So the market there, just pulling back a fraction on the back of those numbers, which came in fairly solid today. In japan, a weaker yen is fueling missile profits, beating expectations. But sluggish demand looks to put the brakes on the japanese automakers growth. The story live from tokyo. Sales slowed in china, good performers in the u. S. Saw Nissan Motors operating profit grow 23 year on year in its First Quarter earnings through june. China has been the biggest market for the last four year, but sales suffered since a diplomatic row last september. Nissans china sales fell 12. 7 from a year earlier. In the u. S. Car sales grew 8 for the same period. The nikkei reported today the japanese automaker is raising production of its luxury infinity brand cars by 40 , mainly to ship to north america. Unit sales fell 3. 3 worldwide in the First Quarter, but the company kept its earnings forecast for the whole year unchanged. New models such as the new infinity scheduled to hit the market in autumn are to push up sales. Thats all from nikkei business report. Back to you. Thank you very much for that. Lets move on, michelin is one of the worst performers in paris today. The tiremaker reported a sharp fallen first half profit citing weaker pricing and restructuring charge. The company did, however, reiterate its full year outlookseeing lower raw material costs for the remainder of the year. The share price down 5 . Yannick is giving us earnings reaction today. What was key, restructuring cost, take it out and look at the rest of the business . It is supposed to be an exception, but given the car industry, the company will have to constantly cut costs and restructure. I think what is important is the specialty tire, the tire for earth moving equipment, down 25 . All in all, very bad result. The picture in terms of the auto sector industry in europe, it is not as good as we could see in japan or in states. This has been a continuing story. If i had to dive in and try to find some positive news in this, the fact that europe. Chinas former commerce minister bo xilai has been formerly charged with bribery, corruption and abuse of power. Lets get out to eunice who has the latest. A fall from grace from a man who was once a rising star in the party. Thats right. He was once a rising star, once a very prominent business a very prominent figure in politics, but then became a very disgraced chinese politician. A lot of people believed he was going to be one of the men who would lead the country, he was very, very powerful for a very long time. However, he became embroiled in a political scandal that did lead to his downfall and also exposed the political turmoil within the party as well as alleged corruption. Now, today, what we learned is that his indictment was filed in the eastern city of ginan. Being accused of abuse of power, of bribery, as well as of corruption. In fact, he was also being accused of embezzlement of what people are here of what the indictment is calling a huge amount of money, public finances, in the form of cash as well as property. Now what people are expecting is the trial is going to take place sometime next month. And the timing really, karen, of this event and this announcement really is interesting because it does come at a point when the new leadership is ratcheting up an Anticorruption Campaign and it wants to appear tough on corruption to the public. We have seen that, of course, right across the pharma sector this week as well. Thank you very much for that, eunice yoon out of beijing. Profit at southeast asias biggest Property Developer dipped with its portfolio gains. Capital land earned just over 300 million in the Second Quarter. Nearly 1 less than the same period last year. We met up with the ceo and asked about his growth assumptions for chinas economy. The overall gdp number that the government has been work on is 7. 5 . I think this is a number, even if they undershoot that by a bit, i dont think thats i think thats a significant number, a Significant Growth rate, versus many other regions were seeing. And also what is very clear is what the Chinese Government is trying to do is to reform the economy, to put it on the path that is more sustainable for the longer term. So little bit of a shortterm pain for a longterm gain. Something im fairly comfortable with. Were longterm investors in the china market. Giving the slowing were seeing now, does that imply necessarily that you will be slowing down the pace of development in china . I think we have to be we have to differentiate numbers that we are seeing at a macro level. This is what we are seeing at operating level. I think we see for first half of this year a lot more activity in our sales, we see much more higher sales even on the same we see growth of 9. 9 . So these are all very strong numbers. All these things i believe are sustainable. And there is one level that we look at. Obviously we have to the property level. At a property level, at operating level, we are very comfortable with what is happening. There is no real need for us at this point to slow down in our development pace. Lets go back to the macro picture. What do you think will be the likely impact on the Property Market in asia when the fed does start scaling back asset purchases. I think what is happening is that when they do that, they are the condition underwhich they will scale back the quantitative easing will be when the u. S. Economy is very strong. So that, to me, is obviously we have a positive factor in that we have a strong u. S. Economy. I think that will be positive for asia. And the tapering in this case will be very much a normalizing of the Interest Rate from a very low level. On the whole, i think the market has more or less priced that in. Do you think that will happen in september . I dont think that will happen in september. I think most of the estimate has been i think the forecast im hearing from the various sources is likely to be perhaps later part of the still to come, find out why the china slowdown could be an anchor around australias next. [ 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 . Welcome to worldwide exchange. Im karen tso. These are your headlines from around the world. A raft of earnings fails to lift markets with european stocks mostly in the red. Credit suisse tracks lower despite the ceo telling cnbc hes happy with the banks results. It was a strong result for us in the Second Quarter. Even given particularly in context of the volatility in the market. A billion five in pretax, up 38 from where we were a year ago. Over a billion in net income, and that was a 10 return on equity. Chancellor George Osborne says there is still a long way to go. Shares of facebook surge after the social networking giant reports better than expected earnings. And demonstrates that it figured out how to extract revenue from mobile. And at least 77 people have been killed after a train derails in northwestern spain. And 140 people injured in one of europes worst rail disasters. Well, if you are just joining us, thank you for tuning in today. This is how were setting up on u. S. Markets. We are seeing a little bit of red across on the boards today, this is as we saw just a peel back from the highs in session yesterday. The dow weighed down by results coming out from at t and caterpillar. And you can see, nasdaq so far, looking a little soft as well. A bunch of earnings out, facebook might have an impact today. Looking for the reaction. Apple was supportive for the numbers, 26. 3 is the Unemployment Rate. But it is down from 27. 2 in the First Quarter. So the numbers in the Second Quarter showing some slight glimmer of hope about the direction, the cac too is weaker today, down half of 1 . Earnings have been impacting the way we have been tracking across European Space. But the numbers have been fairly mixed as well. So givaudan, numbers jumped in the first half. It was boost by better tax rate. A healthy 73 surge in Second Quarter profit for randstad came in on top of the same period last year. The dutch starting firm says the result is due to lower operating costs. And you can see the share price hit. 16. Basf missed its Second Quarter expectations. It also warned that achieving the fouryear earnings target looks to be a significant challenge at this point, why the share price shed more than 4 . Credit suisse reported Second Quarter net profit of over 1 billion swiss franks. The share price down 2. 7 . Now, some are scratching their heads over why the reaction has been so negative. Lets get out to carolin roth for more. In zurich on the ground. Tell us why the reaction has been a little cautious. There say couple of reasons here, karen. First of all, shares in Credit Suisse had a really good run since the beginning of the year, up by some 30 versus 16 on the smi, the general market here in zurich. Secondly, some analysts have pointed out that Investment Banking results, while they were strong, they could have been even better, in light of what the u. S. Banks have been reporting. Citi points up that fixed income revenues were down quarter on quarter versus a decline of 22 for some of the u. S. Banks. But lets not forget these are very strong, very solid numbers. Analysts do point out a very Strong Capital position, good inflow and improving margin picture. This is how they felt about the numbers. It was a strong result for us in the Second Quarter. Even given particularly the volatility in the market itself. A billion five in pretax, up 38 from where we were a year ago. Over a billion in net income and that was a 10 return on equity. And in particular, also, first half, we made 2. Close to 2. 4 billion in net income and 13 operating return on equity. Strong returns overall. Clearly as you say, in june, given the transition in Interest Rates, you know, clearly markets became more volatile, a little more unsettled. That impacted the business, but, again, a good return overall in the business. That was brady dugan, the ceo of Credit Suisse talking to us earlier. Were only three weeks into the Third Quarter, but he told me hes seeing signs of stability for the market and hes not too concerned about the increase in Interest Rates. He says his business can deal with it pretty well. Back over to you. Thank you very much for that. Nice to hear the bells ringing behind you as well. Im guessing that wasnt for Credit Suisse. Lets look at how were seeing bond markets shape up across European Space in the morning session. We were red across all the charts before. U. S. Treasuries including the bunch as well. We have seen ifo numbers push bonds around a little bit. 1. 46 is where were tracking. Away from the 1. 47 mark were heading for. Steady on the portuguese trade. The tenyear treasuries, 2. 58 . So were just a little bit below 2. 6. As for gilts, we have numbers out on the Second Quarter gdp at plus. 67 , coming back from 2. 4 mark. So futures on gilts tracking a little bit firmer. Lets look at forex rates, sterling, 153. 602, weaker after the gdp figures hit. Seems like much of the inflammation is priced in. The numbers came in line with expectations, that caused the selloff on the trade. Aussie dollar still weak today, down. 1. 915 is what were tracking at. But still weaker in session. And euro dollar, a little firmer has now pushed lower. We were above 1. 32, but now below that level. Lets get back out to asia and check on the action in the region with li sixuan. You have a lot of red on your charts today as well. Yes, youre right, karen. Asian stocks mostly in the red following wall streets lower close overnight. Corporate results very much many play as the earnings season hits full steam. The nikkei 225 lost about 1 today due to losses in blue chip stocks. Canon tumbled more than 5 today after slashing its profit forecasts. And its competitor knnikon was down sharply on fears it will also be hit by weak digital camera demand. And shinetsu chemical missed expectations. In south korea, Chipmaker Sk Hynix finished flat, despite posting a record profit. And Hyundai Motor closed just a tad higher, by about half a percent, after q2 profit beat forecasts thanks to strong sales in china. And the stock managed to extend a nineday winning streak. And chinas Building Materials gained on news that beijing will offer more funding support for rail construction. This comes as part of beijings mini stimulus plan to upgrade the railway system, eliminate tax on Small Businesses and also to reduce costs for exporters. These measures were released just two days after the premiers growth comments and after yesterdays pmi data showed a further slowdown in chinas manufacturing activities. Railway stocks cement and steelmakers have all reacted very positively in todays session. Back to you, karen. Sixuan, thank you for that. Joining us from new york, Boris Schlossberg, managing director at bk asset management. I want to get your take on china. We have been asking ceos for months now, at what point it is going to start impacting profits, the slowdown on the mainland. We are finally seeing declarations and this earnings season that it is a problem for them now. What is your view on how damaging china is going to be for profits . It is definitely damaging for profits. Also damaging for effects in a lot of ways. You saw yesterdays pmi and there was nothing good in the data. The only ray of sunshine we were trying to extract out of it is it went from hour rrrid to bad. China is not going to bounce back like a rubber ball off the lows. Having an impact on the Australian Dollar, which came under pressure and remains under pressure as we trade this week. We start to ask at what point this is priced in. The Australian Dollar has come back so far it was tracking above the break even point, above parity at the start of the year. People were talking about 110 and then it whipped around and went in the other direction. So how low do you think it can go . Well, you know if you listen to the rba and they dont communicate numbers but if feels like they want to drive it down, i think theyre concerned about trade in australia. They continuously keep communicating, want to see the Exchange Rate is they feel the Exchange Rate is too high at this point. So coming up at the next rba meeting, i dont think theyll cut rates just yet, but will keep pressure on the aussie. 90 level in the Australian Dollar has become a very rate key level, if we break below there, i think we can easily tumble down to 88. 50, just on momentum alone. Everybody is watching the level for the time being. Aussie has not been able to clear 93 for the last month and a half. And i think what youre seeing basically right now is consolidation, the next move, one way or the other, will tell us which way we go. Rough on the crosses too to the likes of the pound to the japanese yen as well. I want to bring up the stimulus, though, there has been so much talk that china is not going to do the big stimulus push that it did back in 2008, if the economy slow too dramatically because this is an economy that is very balancing. This week we heard that the country is pushing for mini stimulus, targeted reforms that will remove taxes on sma businesses, remove some costs for exporters and also try and push funds into railway construction. How positive do you think this is for the china story . You know, it is gradualist. Theyre trying to massage it around the edges. As you understand, there isnt much of a stimulus they can do at this point, given the amount of comments they have already made. They need stur i think thats what theyre ine sy as possible. Whether they can do it given the structure they have at this point remains to be seen. It is absolutely impossible to assume china would grow at double digit rates them. It reminds me of microsoft stock which went on forever, and ran up very, very high and then for basically ten years, stayed at the same rate and though it continued to grow. I think the chinese economy would be the same sort of situation. It will continue to remain positive, but not at these kind of fantastic rates we have seen before. Boris, well continue the conversation with you after this. Also some news is crossing, were talking a lot of Astin Martins yesterday in relation to favorite cars in the bond filmsment nfilms me. The two brands teaming up. In terms of just what it is going to be signing up to, it is to acquire a 5 stake in astin martin. So Single Digits still, but a stake in the company. And in terms of a little bit more detail, the company is to provide daimler, which makes mercedes, is to provide engines to astin martin. Do you think this is a good thing . Do you want to see under the Hood A Mercedes badge or something manufactured from a daimler factory in the astin martin . A lot of people passionate about this brand. Write through to us. American drivers are feeling the pain from higher gas prices. We find out how the prices figure into the real economy. Stay tuned for that conversation. [ 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 ] these are your headlines today. A raft of results fail to lift european shares, even as Credit Suisses Second Quarter profit jumps by a third. Facebook stock surges after the social networking giants earnings beat the street, thanks to strong mobile ad growth. And sac capital braces for potential criminal indictment over Insider Trading, but the hedge funds founder could escape a charge. American motorists are feeling the pain at the pump as gas prices continue to drive higher. Though prices have eased from earlier this week, they remain well above last Years National average. So could further price gains damage u. S. Growth . Still with us in new york is Boris Schlossberg, managing director at bk asset management. Just looking at the price of the pump, the average price now, 3. 3. 66 miles per gallon, versus last year, 20 cents higher. At what point is the pain barrier felt . The pain barrier is really felt at the 4 a gallon mark. But were still far away from that. Were starting to feel a little bit of the pain barrier clearly right now. Youre starting to see some of the Consumer Companies miss or at least shave their earnings less because, mcdonalds was one of them, on the lower end of the spectrum, the consumer is curving back. One thing about energy in the u. S. That a lot of analysts miss is while the businesses are benefitting from much Lower Energy Cost because of all of the change to natural gas and much better extraction, the consumer is still very, very sensitive to gasoline prices. The only price that matters on a daily basis is the price at the gasoline pump. From that perspective, that is one of those unexpected shocks that we need to be very careful of as we go. If these prices remain sustained through september time frame, i think theyre going to have a dampening effect on demand as we go forward. What does it mean in terms of autos, for instance, there has been resurgence in sales of cars. Does that mean people change their decisions when theyre actually in the dealership . Good question. So far they havent. Because the increase has not been dramatic yet, but i think if we get up to certainly very close to the 4 a gallon price point, yes, it is going to have a massive impact on automobiles. One of the big drivers of automobile demand has been one cheap financing and, two, a very, very long replacement cycle. We had a lot of old cars on the road. So for the time being, those try to stay in place. If gas mean prices continue to inch higher, theyll dampen automobiles down. I wonder if there is a twotiered consumer out there too. Whether it impacts zpre s discry income, how much people have at those point, those that had jobs and had them for a while have been doing okay, they had investments in houses that have gone up. There is a wealth effect going on there. How strong are they on the back half of this year . There is no doubt there is a twotiered economy in the u. S. Has been there for a long time. The key question is where marginal demand comes from. A lot of time it comes from the lower end of the spectrum. Thats why higher gasoline prices are such a danger point for the u. S. Economy. I dont think theyre fatal blow, dont get me wrong. I think the critical thing is are we going to increase our growth Going Forward or whether it is going to have a dampening effect. It may be a concern to the fed as well. If they watch the prices continue to rise, they see Consumer Sentiment decline, retail sales which we have seen curve back, all the notion of tapering is going to get shelved further down the road because theyre very sensitive to all the issues. And forced us to go look at every little piece of information to try to get this picture together on when tapering happens. Boris, youre staying with us, well come back to the conversation, Boris Schlossberg, managing director at bk asset management. To a break, but still to come on the show, spanish unemployment dropped for the first time in two years as the country battles recession. But is a recovery on the horizon . Well bring you more analysis live from madrid after this. With the spark cash card from capital one. Boris earns unlimited rewards for his Small Business. Can i get the smith contract, please . Thank you. Thats three new paper shredders. [ boris ] put em on my spark card. [ garth ] boris Small Business earns 2 cash back on every purchase every day. Great businesses deserve unlimited rewards. Read back the chickens testimony, please. Buk, buk, bukka [ male announcer ] get the spark Business Card from capital one and earn unlimited rewards. Choose 2 cash back or double miles on every purchase every day. Told you id get half. Whats in your wallet . A Train Derailment in spain has killed at least 78 people and left 140 injured. The government officials believe the crash was an accident and Prime Minister Mariano Rajoy is set to visit the crash. It happened on the eve of the citys famous christian celebrations when thousands of pilgrims mark the festival of st. James. On a different note, spanish unemployment has dropped for the first time in two years in the Second Quarter. According to fresh data. Spains jobless rate fell to 26. 26 , with 5. 98 Million People out of work, thats down from 6. 2 million in the previous quarter. Joining us from madrid is miguel cadalso, Research Head economist for spain bvva and staying with us, Boris Schlossberg from bk asset management. Weigh in in terms of the numbers here today. They seem to be showing an improvement. How much further does spain have to go . Well, to this improvement has been very, very good. If you take into account that over the last few quarters, jobs has been up on a snen lseasonal adjusted basis. This quarter around 40,000 workers. This number certainly increases the likelihood that when gdp data is released next tuesday that were going to see the spanish economy stagnated over the Second Quarter of the year, and increases the likelihood well see some positive growth over the second half of the year. Where is the improvement coming from . Basically at this moment, what we see is big implementing services. Spanish economy benefited from Political Uncertainty in some competitors, in terms of tourism. But also if you look at export, export growth has been one of the biggest has exporters have been one of the most successful in europe with some positive growth. And despite the recession that were seeing in emu. So both export of services and goods is what explains what were seeing in terms of job creation. Boris, come in here. Youre also looking at the eurozone. Do you see any bright spots in these numbers today . Here is a word we havent heard in a long time, green chutes. You start applying it to the periphery, you start to see this. Yesterdays flash pmi data was positive. I was in madrid a month ago and clearly i thought the mood, my own anecdotal view, was much bet, much more improved. Having said this, i think the real story in europe is really going to come down to germany, not going to be portugal, madrid, or rome. It is really goinging to be what is going to happen after the german elections. Raid an intere i read an interesting article, while German Companies are cosmopolitan in their outlook, german politicians are provincial. The question is after the elections are done, with merkel will take up the mantle and have germany lead europe with much better much more fiscal stimulus as we go forward. Miguel, come in here on this point. Well, for us, key to have recovery in both germany and france. If you look at our exports, were doing fine, were doing were exporting to emerging markets, but if you take a look at historical data, i mean, no recovery in spain has come from or has come without a recovery in europe. So for us, certainly it is key to have germany coming out of the recession. Appreciate the comments today, miguel, Research Head economist for spain at bvva, and e enjoyed your company as well. And Boris Schlossberg. Ge is expected to keep the good news rolling when it reports later today. Can detroits big three save the bankrupt city . More on that next. Welcome to worldwide exchange. Im karen tso. These are your headlines from around the world. Shares of facebook surge after the social networking giant reports better than expected earnings. And demonstrates that it has figured out how to extract revenue from mobile. Hedge fund under fire. Reports say the u. S. Dwoft is expected to file criminal fraud charges against sac capital today. The combination of its long running Insider Trading case. And a raft of earnings fails to lift european markets with stocks mostly tracking in the red. Credit suisse is lower despite the ceo telling cnbc hes happy with the banks results. It was a strong result for us in the Second Quarter, even given particularly in context of the volatility in the market. So a billion five in pretax, up 38 from where we were a year ago. Over a bill in net income and that was a 10 return on equity. At least 78 people have been killed after a train derails in northwestern spain. And 140 people injured in one of europes worst rail disasters. If youre just waking up in the states and tuning in, nice to have your company. Let me get you up to speed with how markets are shaping up before the open today. We have got some red on the charts. This comes on the back of selling in asia today. Some pain across on the european stock markets. We have got the u. S. Now open a little weaker, slightly on the back foot yesterday, damaged by earnings. At t, caterpillar negative for the likes of the dow. We had some support from apple stock, which soared 5 in session. The big one today is facebook, which has been strong in after hours trade. Well be looking for the reaction to that today. Earnings have been pulling back some of the major indices in europe. Also, a bunch of positive news having no impact in terms of supporting european markets. The ifo Business Sentiment index was positive. The dax continued to sell off, down 1. 2 . The worst performer in europe today. Second quarter gdp was positive. 0. 6 for the uk. This has done nothing for the stock market, down. 9 . The mib is weak and the cac in france also down today as well. Lets look at todays other top stories. A burger chain may be on the blocks. Cke, the owner of hardys and carls jr. , is exploring a possible sale after postponing ipo last year. Cke was taken private by Apollo Global in 2007. Reports say the company is working with Goldman Sachs in the early stages of a sale that could value at more than 1. 7 billion. Cke has more than 3,000 locations in 42 u. S. States, around 25 countries. I must say carls jr. Is certainly very tasty. Qualcomms Third Quarter profit woes matching forecasts. And revenue beat on estimates on Strong Demand for its mobile chips. The leading supplier of chips for the iphone and Android Devices says average selling prices are rising in developed countries and emerging markets. Qualcomm faces increasing competition from asian chipmakers and intel. But the company is projecting Fourth Quarter earnings above analysts expectations. Here is a look at how qualcomm shares are faring after hours trade. Up 4 and in frankfurt today, ahead 2. 6 . General motors is set to report upbeat secretary kwaeond earnings after the bell. The major focus will be on how much the automaker cut its losses in europe. Reporting yesterday, ford posted a Second Quarter profit of 1. 2 billion, driven by strong u. S. And china demand. Joining us from detroit is michelle crim, Senior Analyst at edmunds. Com. When it comes to gm and ford, you make the point that both need to launch a flurry of new models in the united states. What hits the spot these days in terms of these cars. What force the consumer to sign up for fresh finance or put out a wad of cash for a new car . Well, both companies have a lot of new products coming, not only here in the united states, north america, but here overseas. And so it is really important for them to get them launched in the market, have the consumers accept them. Because what we have seen in north americas product is what brings you out of turn around. Of course, in europe, there is a lot of restructuring going on, but which is important, but you also had to have the revenue part of the equation. Technology is king these days in cars. Ford has been spending a lot of time of putting new devices and technology in its cars and keep the price capped. Consumers say im getting so much more for my car than i would have expected in previous years. Is this the selling point theyre using . Well, they definitely have ford has been at the forefront in terms of technology, in terms of infotainment systems. There has been a lot of glitches, like my ford touch, consumers had complaints about it and it takes Consumer Education process. But they clearly have drawn the line in the sand saying thats the direction theyre going in and theyre kind of ahead of the rest of the industry. And what theyre finding is despite the consumer complaints, Consumers Want that technology and theyre able to charge higher prices because of that. Europe, though, proved a big black pit for the earnings for many of the automakers. Looking at the car registrations month on month, it is patchy. How do you think ford and gm are doing . Are they trimming the losss . Well, if we ford was encouraging yesterday because they had sales and market share up, they had an improvement in their Financial Performance in europe, despite the market being down because of all of the restructuring theyre doing and theyre going after different kind of customer, retail customer, versus their fleet customers. So i will be watching that very carefully with the gm this morning. I think there is a lot of has the market really bottomed out there and are we going to start seeing improvement . It looked that way at ford. Carlos said it hasnt bottomed out yet. I think this might be a turning point quarter to see if thats happening and if the restructurings are working. Stay right there. I want to get the latest out of detroit. We have been tracking the very spot youre sitting in, what has been playing out there. The federal judge overseeing detroits bankruptcy case hands an early victory to the citys emergency manager at a hearing on wednesday. The judge ruled detroits Public Employee unions and others cant go to a state court to pursue their grievances with the citys bid to shed its pension obligations but says they can still argue in his court that the bankruptcy filing is improper and unconstitutional. Michelle, you are in the motor city. How grim is it on the ground there . Well, it is kind of interesting because we have we are seeing a flurry of businesses open in detroit. Were seeing just this morning a 20 Million Shopping Center opening in the city of detroit, which has been a wasteland for shopping in years. Were seeing a ton of entrepreneurs in downtown detroit. Weav were seeing our Car Companies flourish but the city is were there, lets get on with it, lets hope there is a promise at the other side, much as we saw with the General Motors and chrysler bankruptcies. What is the role of autos in the recovery story . Detroit the home for many automakers. How much has the industry shrunk since the financial crisis and do you see it ever recovering some of the strength in detroit that enough so to help out the city . Well, definitely the detroit automakers are all in far healthier positions than they were. Were seeing tremendous growth. Were seeing ford made an announcement this morning, a couple of days ago, about some hiring theyre doing. But there arent that many plants left in the city of detroit. There is one that Chrysler Jeep grand cherokee, so, yes, it is important, but the city has problems on its own, like the shrinking population, legacy costs with pensions. Years of mismanagement of the city, that are separate from the automakers and while the automakers have done a lot to support them, supplying cars for the police force, for example, the city still has its own problems, the Auto Companies have no control over. Very interesting to hear perspective on that front. Thank you for joining us. Coming up, reports say criminal charges could be coming today against hedge fund sac capital. Well have the latest on this high profile corporate crime case 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 perfec. [ male announcer ] ive seen incredible things. 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Bertha coombs has the latest from cnbc headquarters. Bertha, what do we know about the story so far . Well, we have seen a lot of reports that it looks as though this could come down as early as today. Reports say the Justice Department will charge sac capital with wire and securities fraud as has been reported, the government is not expected to file charges against steve co n cohen. The action comes after a nearly sevenyear investigation into allegations of Insider Trading at the hedge fund. Legal experts say the decision to charge sac and not cohen is an admission by investigators they failed to find sufficient evidence against him individually. That may have been the case with the s. E. C. , which to file an administrative order against cohen last week instead of civil fraud charges. The agency accuses him of failing to supervise his staff and spotting potential red flags involving allegations of Insider Trading by two employees. A spokesperson says cohen intends to vigorously defend himself. Today, nine current or former employees have been implicated or charged with Insider Trading. The criminal charges against sac capital would make this one of the most high profile corporate crime cases since the u. S. Indicted Arthur Anderson for its role in the enron scandal. It could be the death nell for the firm, which is one of the largest payers of commissions on wall street, generating more than 300 million a year in trading fees. It is likely firms that lend money and trade with sac will stop doing business with the firm. But the company does have substantial resources to keep operating. With 15 billion of assets representing money for cohen and his employees. In other corporate crime news, former Goldman Sachs trader Fabrice Tourre will be back on the stand today in his civil fraud trial in new york. Hes accused of secretly helping the hedge fund paulson and company set up a mortgage bond deal it could bet against, costing investors 1 billion. On wednesday, tourre testified he wasnt trying to mislead anyone. He was questioned about a 2007 email he sent to a former executive which helped structure the deal. Tourre wouldnt say the email was false, just that it was, quote, wasnt accurate. Back to you. Bertha, thank you very much for the update. Chinas former commerce minister bo xilai has been formally charged with bribery, corruption and abuse of power. Lets get out to eunice yoon live in beijing. This is a man heavily intertwined in the communist party at one stage. This sends a message that no one is untouchable. Thats what a lot of people here have been saying. This man was a very, very prominent man, one of the most powerful men in the country. Most people believe he was going to be one of the new leaders of this nation, but then he and his family became embroiled in a political scand tosed the polit rifts within the as alleged cor. What we learned today is that his indictment was filed in the eastern city of jinan, charged with bribery, with abuse of power, as well as corruption. There will be a trial. We dont know a specific date. We also dont what we do know is what many people anticipate is it will take place sometime in the month of august. This was a very widely anticipated announcement, but the timing of it was really very interesting because it does come at a point when the government has been ratcheting up its campaign to crack down on corruption. We have seen the authorities really make some efforts, or appear to be making some efforts to clean up the health care industry. We are also, you know, also heard an announcement by the government that it was going to cut back o buildings. At this stage, a lot of people have been encouraged on some level at this very public effort to crack down on corruption, but we dont know whether or not this is more of a show as opposed to a real genuine effort for the government to clean up its ranks. Karen . Good point. Thank you very much for that, eunice yoon joining us live out of beijing. Investors welcome facebook results, sending shares almost 20 higher in after hours trade. Is the social net worworking gi turning the corner . Well have analysis coming your way. We have got a negative picture playing out across european markets today. As you look at the boards, you can see were tracking close to the intraday lows. Off 1. 25 on the German Market in particular. A bunch of data doing nothing to improve sentiment today. The ifo Business Climate survey was strong. Uk gdp for the Second Quarter positive at 0. 6 in the quarter. And spanish unemployment also improving, yet we havent had any bump up earnings seem to be destroying some of the confidence out there today. There has been a bunch of mornings of what has been playing out in china. A look at whats happening on todays agenda in the united states. Weekly jobless claims due out at 8 30 a. M. Eastern, forecast to rise by 5,000 to a total of 339,000. At 8 30, we get june durable goods with demand expected to rise 1. 9 . It is another hefty day of earnings state side. By the end of today, half of the s p 500 will have reported results. This is how u. S. Futures are shaping up. We had a negative turn as well across on the charts for the u. S. Markets. Not surprising after asia sawed off and on the back foot here in europe. It seems that trend will continue bringing these markets further back off their peaks. Investors seem to like facebooks latest earnings report, sending shares soaring in after hours trade. Cnbcs Julia Boorstin break down the social networks results. Facebook reported stronger earnings and revenue than expected as it revealed stronger mobile numbers, sending the stock up by 20 in after hours. In the Second Quarter, 41 of facebooks ad revenue came from mobile, blowing past expectations and up from 30 in the prior quarter. The number of mobile active users grew in half to 119 million, nearly half a billion people access facebook on mobile devices every day. Total revenue grew 53 , while earnings per share grew to 19 cents. Thats a nickel better than expected and up from 12 cents a year ago. On the earnings call, Mark Zuckerberg addressed concerns that teen use of facebook is dropping off, saying, quote, based on our data, that simply isnt true and when including instagram, teen engagement is growing quickly. Looking forward, the cfo warned that full year expenses would grow faster than revenue would grow. And that in the next few quarters, the Company Faces tougher comparisons. But the companys tone was positive. Sheryl sandberg saying shes optimistic about growth across asia and the rest of the world and revealed a nearly six time return on investment for advertisers using news feeds ads saying thats driving more ad spending. From cnbc los angeles, im Julia Boorstin. Baidu has seen shares jump nearly 14 in after hours. Thats despite a 4. 5 drop in net profit. What clicked with investor was a surge in online ad sales. Joining us from new york is Scott Kessler at s p capital iq. Whether youre a baidu, often compared to the likes of google or facebook, youre still in the business of trying to unlock the secret of how to make money from mobile. Both companies seem to have found that key these days. Right. I think when you consider the fact that there still is a tremendous secular shift going from traditional advertising to online advertising, Companies Like baidu and facebook have tremendous opportunities and were seeing accelerating growth. Coming up to the listing, the ipo of facebook, investors were so negative about the stock, questioning whether they could convert the mobile revenue with online users, still remaining active with facebook accounts. Seems like facebook has put a lot of this to rest. Would you agree with that . Absolutely. We actually initiated coverage of facebook a week after they completed the ipo and we had a sell opinion, in part, because we had concerns about mobile and montiization, those go hand and hand. But if you think about it, so q2 of 2012, they essentially had no material revenues from noble advertising. And then what we have seen is it has gone from 14 in q3 of last year, to 23 in q4 of last year, to 30 last quarter, to 41 this quarter. So a very substantial ramp indicating clearly, i think, that facebook is doing a very good job and executing on the mobile opportunity. There is this thing about news feeds that are on facebook. This is something that wasnt controversial with users who werent sure if they were liking them, some ad content has gone in there. Facebook told us this is now a premium product over some of its other forms of online ads. What is the pricing around this, what is the view of analysts now about news feeds . Right, so the company not surprisingly doesnt provide a lot of insight into specific pricing, especially around certain products, but what i can tell you is that they are gaining more and more attraction on mobile for one obvious reason, the advertising works for the folks that are buying it. Essentially, initially, i think there were concerns because it didnt seem like all the advertising was particularly targeted or relevant. What is happening is as more folks are looking to get online, they saw 51 increase in mobile users, and more advertisers are targeting that user, essentially you have a greater ability to reach that user in a relevant way and one that both the advertiser and the user can feel comfortable with. Scott, were almost out of time. I want to ask you about one negative, the amount of capex being spent on research and development in baidus case, up 73 in the Second Quarter. Right. No question that Major Internet Companies trying to seize upon tremendous opportunities are spending aggressively and we think that while that negatively impacts margins and earnings over the near term, it provides substantial Growth Opportunities over the longer term. We think it makes sense for the right companies doing it in the right way, like we think facebook is doing. Thank you very much, the analysis there, Scott Kessler, senior Equity Analyst at s p capital iq. Do you still like facebook or are you turning to other social networks . Peter tweeted he never liked facebook but he likes twitter and youtube. He deleted his facebook account before it went public. One positive, john writes through and says he still likes facebook. A particular approval from one of our viewers out there. Thats it for todays show. Im karen tso. Thank you for watching worldwide exchange. Appreciate your company. Good morning. Another earnings parade today being hailed as the busiest day of reporting season. Thursday, july 25th, 2013. Squawk box begins right now. He wakes up in the morning does his good morning, everybody. Welcome to squawk box right here on cnbc. Im becky quick along with joe kernen and steve liesman, who is sitting in for andrew ross sorkin, on vacation. Steve, good morning. Thank you for being here today. You have another name too. Well talk about that in a little bit. Do we have to . I think we will. The tip market. Go ahead. Okay. As has been the case all week, our top story today is earnings. Yeah. Among the names reporting before the bell, we do have General Motors, 3m, biogen, colgate palmolive, Southwest Airlines, star wood hotel, underarmor. Those only a few of the names. We will be joined by the only thing the whole staff, the crew, dunkin. Gary kelley will join us from Southwest Airlines and General Motors cfo will be joining us as well. And dow chemical chairman and ceo andrew liveris. Yesterday we saw