Transcripts For CNBC Worldwide Exchange 20130917

We bring you an exclusive interview with the ceo. Plus, shares trading lower as data shows european car sales fell nearly 5 in august. The biggest loser of the lot suffering an 18 drop in registrations. Welcome to todays program. Plenty to focus on todays show. Were going to strap on those heels and get running. Its London Fashion week and the worlds Beautiful People are in town. Well catch up with the big world of fashion in around 15 minutes time. Moments later, well discuss the earnings of milan fashion house prada. Strong growth in china will help the double didnt rise in profit. So is the stock a buy. And dutch firm philips has announced a new set of financial stars 2016. Well speak exclusively to the companys ceo in the next half hour. And the price of gold in the u. S. Has fallen more than 20 with syrian tension easing. Could a u. S. Political battle provide the next boost to the precious metal . Well discuss that and other commodities at 11 30 cet. Meanwhile, its said key rates will remain low for an extended time. They continue with the guidance. More is needed to restore confidence. Euro dollar, as you can see, is up at the top end of a recent range. 1. 3347. Well be talking more about currencies quite a lot this morning. Meanwhile, washingtons police chief says investigators are convinced there was just one gunman responsible for mondays attack at a Washington Naval yard that killed 13 people, including the shooter. Hes been identified as 34yearold aaron alexis, a former contractor and former Navy Reservist who was discharged in 2011 following two gunrelated incidents. He was armed with an assault rifle, shotgun and handgun. He had legitimate access to the navy yard and used a valid i. D. Pass. Its the worst attack at a military install agdz since major nadal killed 13 and wounded 14 at ft. Hood in 2009. The fed kicks off a twoday policy meeting today. Central banks widely expected to announce a mod onnest tapering in its Bond Buying Program with some predicting an increase of nearly 10 billion in asset purchases. The decision is due around 2 00 p. M. Tomorrow. It will then be followed by Ben Bernankes News Conference at 2 20 p. M. The fed, of course, is the main focus for equity markets. Lets show you where we stand on the Dow Jones Stoxx 600. Around about 7 to 2, nearly 7 to 3. Were kind of on the session low, the ftse up just 39 points during the course of mondays trade. Right now, down 23 points. We saw the dow and s p closing higher up at fiveweek highs. Xetra dax has come down from that, down 25 points at the moment. Cac 40 is down 0. 5 . Down 0. 75 for the ftse mib, as well. In terms of individual stocks, were looking at philips, its launched a 1. 5 billion euro Share Buyback program. Nokia will be speaking to the firms ceo france van houten a bit later. Nokia has delayed its lineup following a hand set. Originally it had planned to launch a new range of products at the end of the month. The stock off 2 today. Down for continental. German auto partiesmaker said it was looking to take a advantage of the high in continentals share price. Renault down nearly 2 this morning. European car registrations may have fall nn august, although the firm was trying to buck the trend. The vehicle manufacturing showing a 6 rise in new registrations. Lets get more on that. Stephane a in paris. Stephane. A meek performance from french carmakers. Peugeot citron has lost even more market shares with an 18 decline of new car registrations. Its about four times the contraction of the european car second, 4. 9 decline and its worst performance among the carmakers. In the meantime, renault, the second largest french carmaker regained shares last month with a 5. 8 rise in new car registrations. This is due to the launch in new models. Also, a mean lead to the success of its local which was one of the main drivers for the group as during the crisis situation in europe. Both carmakers, peugeot and renault believe that the European Market will stabilize towards the end of the year and they both believe that it will gradually recover over the next year. But for the time being, the only carmaker that shows some signs of recovery is renault because peugeot, as i was mentioning, the performance was really negative and the Market Reaction is negative. The stock is off 3. 4 right now. Stephane, thanks for that. Lets recap where we have been with asian markets, as well today. The shanghai deposit down another 2 this morning. The nikkei off 93 points, 14,311. The s p asx is flat and the bombay sensex is flat, really. Tenyear treasury yields, 2. 48 . Its a little higher than yesterday. Were back up to 2. 9 on the tenyear gilt. We have inflation coming out in around about 20 minutes time in the uk. We got a nudge down in july from june, as well. The annual rate at the moment, currently running about 2. 8 in july. Meanwhile, the big thing is what happened with the fed. And ahead of that, the dollar, well, today its been edging lower. Seen in a tight range before. Euro dollar, 1. 3347. Weve been unable to maintain the break above 100 on the dollar yen. Aussie dollar is a little weaker. Sterling dollar is still above 1. 59. Investors wait to see what will bernanke do . And if he does as expected with a moderate taping of the bond budget program, how will the markets react . Speaking to squawk box earlier, the head strategist at commerzbank said investors have given the dollar the benefit of the doubt and explained why he believes there was a possibility the fed may modify its guidance. Weve seen tenyear treasuries modify significantly. So that move is done and perfectly priced in. The question, however, is the fed will obviously be reasonably happy about that. But what theyre not going to be so happy about is whats happening at the shorter end of the yield curve, twos, threes, fours and five. They could lower the unemployment ratio from in and around 6 . That was peter joining us in the studios. Jeremy stretch, good to see you. Good morning, ross. Whats your own view . We saw such big reaction, of course, to summers withdrawing. How are we positioned now post that going into the feds announcement . Markets were getting ahead of themselves in terms of really thinking about the transition to who will be running the fed from fed first rather than necessary, focusing on the key event which, of course, is this event about tapering and how much tapering we may or may not see tomorrow. Also, i think that issue relating to the Forward Guidance is significant, as well. I think markets have taken a little bit of steam and heat off the table. Weve seen u. S. Yields edging back lower again. We may well see them continuing to soften as we go through the next session or so possibly to around the 2. 8 level. Well probably see the dollar remaining relatively soft if and when we get to that fed decision. The markets will get to the scale of any tapering but anything that goes alongside that with the guidance. If its as expected, so 10, 115 billion a month, but a lot of question is what comments come with that. As they say, this is going to what do you think would happen to the dollar . Well, i can, as you say, if you look at how the markets are positioned, if you look at the analyst forecast, 10 to 15 billion is very much priced in. That you would argue would say, should we see any Material Movement . And you could argue perhaps we may see a down square. Weve built up to this event and obviously weve seen that massive squeezing up in treasury yields as a result. It may well be the case of the classic rumor by the fact. But i think its also the question about what comes with that because its forcing the updated fed forecast, the press conference, so there are a number of factors to go around that. So i think markets have been careful that theyll react to the headline news, 10, 15 billion, which may be something of a disappointment. We may see something that goes along with that. For European Markets, it comes off the close. So that makes it that much more difficult in order to get the Immediate Reaction from this space. Okay. We just saw the aussie climb a bit higher. The Australian Central Bank said while they preferred to hold rates, they were open to further cuts if the economy didnt improve. That varied from what investors thought previously. I think its interesting because if you think when that meeting took place at the beginning of september, weve seen the aussie rally to Something Like 3 . In fact, only the key wears have performed better than the aussie today. Weve seen an appreciation. Better than europe, but not exactly particularly a set of stunning numbers. We know the rba are keen to offset the Mining Investment boom by a cheaper, more competitive aussie to try to make manufacturing exports more competitive. As we go into the final three months of the year, the rba moved back into much more aggressive easing. I wouldnt be surprised if there would be another cut to come. So i think at these sort of levels, the aussie looks well positioned for short positions once again. I think we want to fade in the aussie strength in this environment because there are inherent risks of both an easier Interest Rate environment and further talking down of currency by the rba. Good to have you on board with us this morning. If you have any comments, email us, worldwide cnbc. Com. Still to come, cnbc catches all the action from yesterdays bur bury fashion show. I think, like i said before, you know, its iconic british and, you know, they dont try and do anything to crazy and to go really out there. They stay at what theyre good at and what theyre good at is obviously what makes them such an iconic british brand. [ tires screech ] [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Its great. [ male announcer ] the best thing to share . A data plan. At t mobile share for business. One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. Now, im got some information coming out, pung yong counters allegations of human rights abuse. The u. N. Wants to focus on accountability of north korean institutes and officials. Keep our eyes on that. Meanwhile, in corporate news, shares in philips today lower despite the companys plans to raise its full year tarlths. They launched a 1. 5 billion Share Buyback program. Speaking exclusively to cnbc, the firms ceo said in the longterm, hes fairly optimistic. We are flagging ongoing concerns around the economy and head whippeds. And this affects, basically, health care driven by north america and the reform thats going on there. Europe, because of the general Economic Situation and the ee emergencying markets, as well. For example, think about all the currency movements going on with india, the rupee up and down, the rupee indonesia up and down. So the world is still very much restless. And that affects, of course, in the shortterm, the possibilities to grow. Over the longer run im opt on mystic that the world is heading in the right direction. And burberry debuted its new collection on the cat walk yesterday. Cnbc caught up with the ceo and talked about the bottom line. Its not just the profitability. Its a very important growth drive for the business. Our business is very small. We have said we would like to be in the top ten in the intermediate care. Were launching skin care. By using fashion and beauty, using digital technology, we can do things in a very unique way. Weve got the beauty way set up back here. As all the girls are being made up, were doing the tutorials, but they can go into the beauty booth but they can tweet and instagram and help get the messages out there. We know that the u. S. Is starting to grow, that the turn around here in the uk, emerging markets are not as strong as they were. So what does this mean for your strategy . Have you had to pivot a little bit in terms of the way youre chasing growth now . No. Were not changing our strategy at all. Steady wins the race. And the only thing thats changed for us is the acquisition of our beauty business. Its only been five months. Theres a lot of focus there. Were still very focused on investing for growth in the developing markets, as you said, in the brand, in the creative that weve created with the company to keep us on the forefront. So strategy wise, absolutely nothing has changed, but we are having a great time integrating and optimizing our new beauty business. I have to ask you, finally, about china because this caused a crater in the stock previously. You managed to reassure the market there, but nonetheless, chinese authorities are cracking down on too much luxury purchases trying to push back on that message. Is it having any impact whatsoever . Well, i think this is the new normal is how were treating it and how we budgeted for it. There was absolutely a point in time about a year ago and it was not just burberry that was academy. I think burberry is the only one that was transparent and open about it. But the entire sector was affected. I think we bounced back nicely. As long as you plan for china right and its not just china. Next year, 100 Million Consumers will exit that country and travel the flagship markets all over the world. So its really offering the ultimate in service for the Chinese Consumer wherever they are. Thats why weve been investing in Flagship Stores in key flagship markets so that we can service them better. Prada is expected to purchase a 4 rise in profits for the first half of 2013. It reports later today. Analysts expect strong sales in china to drive growth for the fashion house. Joining us in the studio, Allegra Perry from cantor fitzgerald. Nice to see you. What do you think of prada . Its stock has done okay, but its lagged some of its european peers despite better sales. Why that . First of all, it is hong kong listed, which tends to have different dynamics. Its a volatile sector. Its only up 9 yeartodate. Most of the sector is up about 25 . It looks like a laggard. Thats despite having outperformed. Organic sales go up 14 driven by healthy likeforlike sales growth. Its a very balanced growth coming from new stores as well as comparable growth news stories. Relative to the rest of the sector, most companies have reported the high single digit organic sales growth. Theres been a big outperformance. Going forward, thats set to continue. Its has minimalist appeal, so that brand dna is trapping into the current trend. Its very popular with men, which is timely considering the growth in china and the majority of purchases are men. What is their strategy . Theyre talking about opening six, 17 Net New Stores next year. What will the balance be between the u. S. And the economy there and emerging markets . About half on their new stores will be in emerging markets and about half in developed markets. But even with that growth trajectory, they still have a significant lower footprint relative to other competitors. Theres still significant scope for them to continue opening at that rate. Theres some degree of discipline thats involved and clearly image is very, very relevant. Its going to have to be measured Going Forward beyond a certain point. They have a discreet logo. How important is that going to be in a place like theyve talked about the crackdown on luxury amongst government officials. She says, look, its affected everybody, were the only ones talking about it. Yeah. I think there has been clearly, about a year ago, there was a big crackdown on lifting relating to construction. And that, of course, has affected a number of brands, primarily on the watch side. Thats been perhaps the most high profile luxury good in that market. I think right now there is tend to go be a move away from logo perhaps away from those initiative necessary china. As a result, i think prada has done very well. It does have a logo, but its discreet relative to the other players. So i think its well positioned. You mentioned the number of stores in prada, compared to its competitors and it needs to close that gap. Will it be able to deal with the competitors from that footprint . I think it has taken some market share, probably because of its positioning but because of that store opening. That plan is set to continue for at least another couple of years. I guess about 150 stores relative to the other players. Its still unclear what the number of stores is, and that is probably a moving target at all times. I think prada is in a position to condition opening share. High single digit percentage to sales growth just on its own. Then, of course, you add on the like for like. But for the year, its likely to be more like high single digits. That gives you a solid organic growth rate. How do you see china developing over the next year for luxury goodsmakers . In particular, you described this as a hard versus soft trend. I guess watches versus handbags. Is that hard and soft . Yeah, exactly. I think china continues to be the key engine for growth in this sector, whether its on shore, so chinese buying in the domestic market or whether its offshore. Flagship markets globally are attracting increasing numbers of chinese. So as a whole, the chinese are sending more year over year and they have so even in the year of 2012 in the beginning to 20 is 13. Were not going to see probably the 30 , 40 , 50 growth we saw a few years ago. I think were returning to a more normalized level of growth. But i think theres still a lot of upside in china. I think were still scratching the surface. Today it accounts for about 20 , 25 of luxury markets on a whole. For soft goods, lower than the average. But i think were in a good position. Theres still huge demand for the product. Clearly, there is a new normalized rate for growth that we have to become comfortable with Going Forward. But in terms on of that growth, were just scratching the surface and the penetration is low. Thank you so much for now. Talking about china, Foreign Investors continue to put more money to work in august. Investors up more than 0. 5 from a year ago. So far this year, 80 billion has entered the country and thats 6 above last years level. But the countrys push to keep up its highest growth rate may be racking up dangerously high debt at the local level. Local government borrowing may have doubled in the past couple of years. He estimates local governments are burdened with more than 20 doctoral yuan in debt. Around 3. 3 trillion. Beijings leaders have recently been more vocal on the need to stabilize local borrowing. And could technology or your Technology Habits be harmful to your health . Smartphones, Tablet Computers and Office Keyboards are riddled with more dangerous bacteria than your average toilet seat. The alarming findings released by the consumer magazine says a big part of the problem is because people fail to clean twices properly or even worse when they take gadgets into the bedroom. So is a tablet in the toilet a step too far . Do you trust your keyboard . Email us or tweet me. Still to come, whats the latest snapshot of uk inflation . Well get a view, right after this. You really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . These are the headlines, Global Equities trading cautiously. Philips unveiled a buyback and raises its profit and sales target. But shares fall as the dutch conglomerate warnings that economic difficulties persist. We are flagging ongoing concerns around the economy and headwinds. And this affects basically health care driven by north america and the reform thats going on there, europe because of the general Economic Situation. And auto shares trading lower as data shares european car sales fell nearly 5 in august, the biggest losers of the lot being peugeot, suffering an 18 drop in registration. August cpa, the annual rate 7. 2 pirs. Up 0. 4 had on the month. It is another nudge lower from the july figure when the annual rate of inflation is running at 278 . Core cpi 2 on the year. Thats a little bit lower than the forecast 2. 2. Rpi running at 3. 3 on the year. Forecast as 3. 2 , as well. July house prices, as well, this is the bank of englands price index, up 3. 3 on the year calling up 0. 3 on the month. That house price index xieds the precrisis peak to hit a record. And theres been a lot of talk about the impact of houses. Sterling dollar, just dipping a little bit on the news at 1. 5914. Lets get some thoughts on that. Still with us, jeremy stretch from cibc and now joined by melanie baker, uk economist at morgan stanley. Melanie, we got that dip down in inflation we were thinking about. Weve got this Health Price Index from the bank of england up, as well, up 3. 3 on the year. How will these two bits of news be viewed by the bank of england . Well, i think the inflation number will be a particular surprise. The bank of england going for were expecting about 2 inflation over the cause. I dont think its particularly different to what theyve been expecting. We think it will stay elevated for a few months. Were expecting price rices to affect our numbers somewhat. And on the house Price Inflation data, that inflation number is sort of, again, i think broadly in line with expect ages and to the markets. Were going to hear from the minutes of the last bank of england meeting tomorrow. Although they keep saying, look, whats important is bank rates and firms and house holds guided off banks rate, what kind of discussions have they had about market rates . Gilt yields clearly going up higher than they would want, bearing in mind theyre saying their bank rate is going to stay low. Yeah. I think they have had a discussion about ta, i would think. And i would expect to get a repeat of the kind of sentiments we got in the last set of minutes where you saw that most mpc members thought that bond yields moved ahead of what the data implied. Yeah. He made this point that if you if youre a central banker and you keep telling if you keep saying something and markets dont listen, you get to the point where you need to act. Which i guess in the bank of englands case, they would have to say clearly its not working for investors. Maybe we need to think about more qe. Do you think of any members will be thinking like that . I think more stimulus is necessary. You want to wait and see what guidance they have. I think, you know, given the way the data is coming in, i wouldnt expect anyone to have voted for qe at this stage. The pound has had quite a good right in the last few weeks, up to 1. 59, just coming off at the moment. Whats the key now . Well, it has had a very good run. The data has been very supportive. And i think investors have been quite slow to catch on to that. Not only are we seeing positive data, but weve continued to see positive m a flow. So that has provided getting us back to eightmonth highs. Sort of the 1. 59 and low 1. 06 area, quite a few areas of relative resistance. As you get to either extreme of that, you would need to start to think about fading the moon. I think thats still the scenario that will play out here. Not to say we couldnt see a speak out 1. 62. You probably need to go back to the tapering argument and say the disappointment on the what did u. S. Sterling euro thats more interesting because, of course, were not that far away from the 8333 level, which of course is 1. 20. Again, weve come a quite relatively long distance, but i think there is more sterling alongside the crosses. Maybe looking at sterling at the Australian Dollar, for example, i think that may be an alternative way to say that we want to buy into the recovery story in the uk and all the prospect of how that plays into full year guidance and looking purely at the dollar. Jeremy, for now, thank you. Melanie, thank you. Good to see you. More on the uk, of course, over tomorrows minutes and we get retail sales, of course, on thursday, as well. Jeremy, talking about the pound, lets bring you up to speed with the rest of the cross rates. We havent been able to maintain a break above 11 is 00. Euro dollar, 1. 3350. Kind of where we were at this time yesterday. The ftse was up 39 points. Right now, its 0. Down 0. 3 . 2 down for the xetra dax. Jeremy just mentioned lloyds. Five years after its disastrous takeover of lloyds was announced, the British Government has launched a sale of part of its stake. Its sold 6 of its holding in the lender in a bid to raise over 3 billion pounds. And the sale has reduced the governments stake to 32. 7 . Lloyds shares have risen over 60 this year alone. Significantly outperforming the ftse, which is up nearly 12 . Take a look at lloyds stock today. Theyre currently at 75. 60. Brown was basically paid 73. 6 on the shares in september 2008. Profits at mizhu profit group has spurred this years rally. Domestic lending 10 billion higher over the next two 1 2 years all thanks to abenomics. The mizuhoceo told kaori enjoji hes worried about a prolonged slowdown in emerging markets after the fed tapers. I think chinas economy is facing very fundamental issues, which is quite relative impact to asian economy. In japanese economy. This is one threat on the economy. I believe within this month, september, they will stop from the three, which is the big impact of the i should say the reverse capital form from emerging market to the united states. I have big question in my mind whether this preserves of the capital is temporary one or full one. I should say 60 , 65 possibility. It could be fundamental change. I think emerging market economy wont last for a while. Talk to us about your investment pore part followo. For a long time, putting your money in jgbs was the safe bet, but everything changed in april. Have you aggressively reduced your holdings of jgbs as a result of that move . For the future. This is a possible risk. We are reducing the demand of jbg holding. We are shorting the jgb holding from three to five years to now 2. 2 years, whatever. If something bad happens, we can get up from this exposure immediately. So that is the money. And speaking of japanese banks, Private Banking operations in china or japan. We have the story from tokyo. Hi, ross. Theyre strengthening their Business Group in china. It was opened to its subsidiary to offer secured loans for individuals. It will start operating trust Bank Business in october, as well. Mitsubishi ufj Financial Group is taking charge in emerging markets. Japans market group is buying a majority stake in thailands bank. With a 5. 6 billion investment, a takeover bid is scheduled for november. It will be the biggest acquisition by a japanese Financial Firm in southeast asia. Japanese local banks mainly lending to smaller firms are looking into emerging markets. For example, setoshiki bank which has many smaller car related customers eager to start business in emerging markets opened its first overseas business in august. Ross, back to you. All right, thanks very much, indeed, for that. Weve just had a spanish tbill auction. They sold 1. 4 had billion euros to the sixmonth t bill versus 1. 34 the previous aungz. The bid to cover there, 11. 8 versus 2. What is interesting, of course, jeremy, is that the spanish yields have come below italian yields in the recent week or so. What do you think of yield compression at the moment in the eurozone . Well, its kind of interesting. Obviously, a little bit has seemingly dropped off the radar screen. We still have the problems with the italian governing coalition. We dont know how thats going to work out with the burl scone fee i thought they were trying to budget extend it. And inevitably, if you dont reach a resolution, you can sort of push it into the middle. Thats still there. I think from a spanish perspective, you can see the data looked improved in terms of the pmi industry. In that context, you can say maybe were past the worst, or the low point has been reached. It has been largely ignored by the markets. I think its interesting. I think also when you look at some of the data points in the eurozone, i think going back to those european car Sales Numbers wrp talking about that you mentioned earlier, if you look at somewhere like the netherlands, for example, where sales were down 13 year over year and youve got a Housing Market under stress, then, you know, the dutch government who was presenting their budget may well be missing their target. Underlines of the peripheral risk are edging closer to the central area of europe. I think that is a larger issue which will start to play out under the election. Jeremy, for now, thanks. Still to come, as well, philips ceo speaks exclusively to cnbc. More after this. [ tires screech ] [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. Shares in philips are trading lower be spite the companys plan to launch a Share Buyback program. The firms ceo france van houten spoke exclusively to cnbc just a bit ago. Yes. Shares down 1. 4 this morning. Right at the start of trait trade, shares were down a little more, 277 . First of all, youve got profit taking. Shares in the company have had a really good run, up from 23 yeartodate. Second of all, some analysts were expecting the margin targets to be raised by even more. Yes, they already increased them. Morgan stanley, for example, was expecting the consumer lifestyle business target to be raised to 12. 14 . Philipss own target came in at 11. 4 . Saying philips is likely to deliver based on the targets it came out with today and its generating better margins. So i put that question to france van houten, the ceo, why was philips more conservative that the rest of the company . For me, running this is a marathon and we will take this step by step. Its important that we do both product activities as well as investment for growth. Theres so many exciting opportunities in the market there, in health care, in Energy Efficient lighting, in Consumer Health and well being. We want to benefit from the big demand that is out there. I think the initial reaction is typically caused by people needing to digest the wealth of information that we have provided. And maybe people were looking at a big headline whereas our message is actually a bit more sophisticated, where you need to understand wa we do to drive productivity and what we do to drive future growth and how that will create a big return. Youve repeatedly told us that you are running your business, you are setting your targets, irrespective of what the broader Economic Conditions are. But do tell me, just how healthy is the Global Consumer . In fact, we are flagging ongoing concerns around the economy and headwinds. And this affects basically health care driven by north america and the reform thats going on there, europe because of the general Economic Situation, and the emerging markets, as well. For example, think about all the currency movements that are going on with india, rupee, up and down, the rupee and indonesia up and down. So the world is still very much restless and that affects, of course, in the shortterm the possibili possibilities to grow over the longer run. Im optimistic that the world is heading in the right direction. Youve also launched a new 1. 5 billion euro Share Buyback program over the next two or three years. Now, im surprised by that because youve told us before that you are not this euro Share Buyback company, so why are you not rewarding investors with a dividend or lets say even a special dividend . The way to look at our on Capital Allocation policy Going Forward is that we invest strongly in organic growth. We see many opportunities to boost philips positions all across the world through innovations. Secondly, we will consciously look at bottleneck positions. We maintain we want to maintain our credit rating. We commit to our shareholders the sustained dividend policy of 40 to 50 of continuing net income. And then we look at the remaining cash proceeds where we do believe that we will be quite cash generative over the years to come and we believe a Share Buyback is a very good tool to return money to shareholders. Soits so its a balanced capital policy and we believe i tell will be well received by our shareholders. That was france van houten, ceo of philips speaking to me earlier in an exclusive interview. We also talked about the impact of the u. S. Health care reform. Theres still a lot of uncertainty and a lack of around that. Thanks for that. We have comments out from george osborne. He says they will consider retail offering to general public in a future lloyds share sale. This is after successfully placing 6 of the business for 611 Million Pounds profit last night with institutions. And osbourn says the lloyds share sale was the first in a multi staged bail program. Right. Not long to go before we finally get federal elections in germany. A new poll shows Angela Merkels coalition is running neck and neck with those elections. How does it work . What is up for grabs . Carolin has been looking at that, as well. Lets take a closer look at the who, what and how of the german elections. First, the who. The chancellor candidates play a very Important Role in the campaigns, but their office is not regulated. So it is up to each party to pick a name. The incumbent is, of course, christian democratic candidate Angela Merkel standing for a third term. Her main opponent from the social dpic party is the outspoken finance minister fear stein br uck. And we have rainer bruderle. The smaller parties do not name a chancellor candidate as it is improbable for them to be elected chancellor. They, instead, name one or two people, socalled spitzendagen who are to become the faces of the party. So who will make it into government . In germany, coon ligzs are formed when a single party does manage to get an absolute majority. The last time this happened was in 1957. So lets take a look at the possible combinations. First, a combination between the cdu and the fdp. Angela merkel has called the current yellow black or socalled tuck coalition her partner. Second, a grand coalition between the two largest parties, the cdu and the spd. In the last year, polls have repeatedly shown this being the most popular option. In polls for germany, though, there have only been two grand coalitions. There are three more options, a red green tieup between the spd and the greens, which in the past led to successful governments. A Red Coalition between the left and the green which has never happened at the National Level or the sds, the green t and the left form a Lebanese Coalition referring to the colors of the lebanese flag. The with a combined 332 seats form the government while the fdp is the strongest opposition with 146 seats. Left and the greens make up the rest. In total, at least 598 members of the dundestag are elected. In addition, there are circumstances in which candidates win overhang seats are allocated because all directly elected candidates are guaranteed seats. So lets finally look at how the system works. The german voter has a first and a second vote, each serving a district purpose. The first is intended to personalize the election, allowing a citizen to directly choose a local representative. 299 seats are distributed in the first path, the postway. The second vote determines the relative power of a party in the bundestag, enabling the elector to vote for a party. The aim, of course, is to achieve a proportional representation. That was carolin, as well, with that update wearing a slightly different dress from earlier. Meanwhile, according to the german finance minister, he says markets should rejoice, rejoice in the slew of better than expected Economic Data from the region which provides evidence that eurozone leaders have made the necessary Structural Reforms. Im mott sure thats how you might see it. No on. I think rejoicing may be excessive. You have to remember that he is rising in the week of a german election, so maybe hes rising for the Financial Times and the Financial Times deutschland or the domestic voter as much as he is for the international audience. Clearly, weve seen some degree of improvement. Weve seen some benefits and evidence of the Structural Reforms starting to have an impact in the peripheral economies. Is there any reason why eu euro dollar is going to trade out of its its sure to be in this range, 1. 28,. 35, there isnt any reason why that should he change, sl . In the shortterm, perhaps not. Were waiting to see how the growth trajectories in the u. S. Play out into next year. I think there is still the risk that the ecb maintains and will have to maintain a relatively dovish path in order to justify some degree of rejoicing that the eurozone economic isnt getting worse. So i think the spread argument will move in favor of the dollar. And i think also some of those peripheral strategies which weve been ignoring, while weve been in aggregate seeing pressure points in portugal, concerned about the dutch Housing Market, these aggregated issues will start to come back before. I think once weve gone beyond in issue of markets being primarily fixated which is tapering, once we understand the tapering dynamics, then i think we can perhaps focus on some of the other external risk factors, unof those has been europe because its been essentially sidelined partly because germany had to make sure that the eurozone problem wasnt an issue during the summer because they wanted to make sure the alternative didnt get above that 5 threshold this sunday. Dollar yen, the dollar is clearly unable to sustain anything above 100 at the moment. Is that going to change . Well, if it is, then we need to see treasury spreads versus jgbs widening out. When we were seeing front end spreads moving out last week, then that was the justification for dollar yen to move higher. Unless we see further impetus in terms of those spreads, and i think its going on be very difficult to see an explosive move higher. Weve got investors maintaining very significant yen short on positions, almost back to the cyclical high. So its very difficult in order to see additional positioning coming through to actually justify a shortterm spike higher. So i think we need to see a correction, which were probably seeing now. Then when weve gone through the events of this week and perhaps we start to see the prospect of stronger growth in the u. S. Next year, starting to underpin yields and yield spreads again and jgbs, i think thats going to be the scenario alongside stimulatory packages to go along with the package hike 37. We have to get the fed out of the way. Well, i think weve constructively anticipating a stronger dollar in the fourth quarter. I think the Australian Dollar is one of those which has a legacy of utilizing that strength in fading it. And i think still from a sterling perspective, we want to look at that from some of the crosses. Its good to see you. Just a quick reminder, tomorrow australias government gets down to work as the new cabinet is sworn in. China and south korean markets are closed for the rest of the week for thanksgiving holidays. The second hour of Worldwide Exchange continues right after this. Youre watching Worldwide Exchange and im ross westgate. Police say they are now convinced there was own wunl gunman in the shooting in washington, d. C. At a naval installation. Shares fall in philips as the dutch conglomerate warns that economic difficulties persist. We are lagging ongoing concerns around the economy and headwinds. And this affects basically health care driven by north america and the reform thats going on there. Europe, because of the general Economic Situation. And auto shares trading lower as data shows european car sales fell nearly 5 in august, the biggest loser of the lot being peugeot sheg suffering an 18 drop in registration. Welcome if youre just joining us stateside. We have the german zer number he out, up from 42 in august, the best levels of the session currently at 1. 3362. Better than the poll of 20. 8, substantially better than 18 in august. The zew saying the economy is still gaining momentum. Optimism has increased due to the improved Economic Outlook generally for the eurozone and recently released german data, though, have fallen short of expectations. Unless theres a jump up particularly in the Current Conditions component of that. And that comes ahead of the fed, which kicks off a twoday policy meeting today. The central bank widely expected to announce a modest tapering in its Bond Buying Program with some predicting a decrease of around 10 billion in monthly asset purchases. The fed decision is due around 2 00 p. M. Eastern on wednesday and then well get ben bernan bernankes News Conference at 2 30 p. M. Right. So that is the outlook, of course, for investors as we wait for that fed policy meeting. This is where we stand at the moment for futures are down. The s p yesterday, of course, up 118 points for the dow. The s p up 9. 6, up at fresh fiveweek highs. Right now, were just above fair value. So were about, what, sort of 14 points or so above fair value at the moment. The nasdaq at the moment is about ten points above fair value. The s p is he moment is just a little bit below fair value. European equities have been fairly sluggish this morning. Currently down 17, 0. 25 lower. The xetra dax do you know 0. 2 . The cac 40 off 0. 3 . The ftse mib off 0. 4 , as well. Philips has raised its full year financial target. Its launched a buyback program. The stock, though, is down 1. 4 . The ceo warned of global headwinds. Nokia stock down 2. 5 after a big rally posted the microsoft deal. Originally it had planned to launch a range of new products at the end of this month. Continental, the auto partiesmaker down 3. 7 . The auto partsmaker sate it was looking to va advantage of the high in continentals share price. Renault today down 1. 6 . European car registrations are down in august, but ree nault are trying to buck the trend. That went against the auto stocks today, as you can see. In asia, fairly flat today for the bombay sensex in india. And australia pretty flat, as well. Slightly more dovish from minutes from the rba than we might expect. The nikkei was down 0. 6 and in shanghai were off 2 , as well. On the bond markets, were taking our eyes off treasury yields. Gilt yields, 279 . We had uk inflation dipping down. The annual rate of cpi coming up 2. 7 in august as expected. We continue to see a rise in house prices, as well, from the government index. And sterling today, because the inflation number was more than expected, just saw it dipping back a bit, 1. 59 against the dollar. The dollar today trying to make slim gains ahead of the dollar. We still cant get above 100. And euro dollar, 1. 3361, just bo boosted by that zew survey. The fed kicks off tapering in washington. How will the markets react . Speaking to squawk box earlier, peter consella, senior strategist at commerzbank said investors had given the dollar the benefit of the doubt, but he then explained why he believed there was a possibly the fed may modify its Forward Guidance. Weve seen tenyear treasuries significantly. Weve gone from levels around 1. 6 in and around 1. 8 . So that move is done and its perfectly priced in. The question, however, is the fed will be reasonably happy about that, but what theyre not going to be so happy about is whats happening at the shorter end of the yield curve, twos and threes and fives. So there is a potential for the fed to come out and change the forward mandate a little bit, to lower the unemployment ratio from around 6 . Right. That said, the fed policy, well have more on that in the next hour. Washingtons police chief says investigators are convinced there was just one gunman responsible for the attack at the Washington Navy yard that killed 13 people, including the shooter. Hes been identified as 34yearold aaron alexis, a former contractor employee and former Navy Reservist discharged in 2011 following two gunrelated incidents. He was killed in a gun battle with police, armed with an assault rifle, handgun and shotgun. He had legitimate access to the navy yard and used a valid i. D. Pass. Its the worst attack at a u. S. Military installation since major nadal killed 13 and wounded 31 at ft. Hood in 2009. Well have the latest from washington on this story with nbcs tracie potts in just under 20 minutes. Meanwhile, a United Nations report has found that sarin was used in syria, but failed to positively point to the government. It was confirmed war crimes had been committed and said the attackers must be held responsible. Meanwhile, the u. S. And russia continue attempts to seal a deal to rid syria of its chemical weapons. Joining us for more is Anthony Skinner and hadley gamble. Haddy, to you first of all. I think basically what youre saying here is the u. N. This report is nothing unexpected. The u. N. Coming out saying there was a massive chemical weapons attack, but refuse to go sign any kind of blame. And were seeing a sort of in R International fervor over who did this. Obviously, the u. S. , the uk, france all says assad was the perpetrator of this attack and russia refusing to get on board with that. But what you continue to see, despite new evidence of war crimes on both sides of whats happening in syria is the continued no support that president obama is getting from the u. S. , theres no support in the uk, theres no support on the ground in france in terms of going in and getting involved and doing something about this crisis in syria. So the support continues not to be there. Thou are things going to progress now . Well, as you were saying, it doesnt fundamentally change the parameters and the positions of the parties concerned. Well likely see a u. N. Security Council Resolution moving ahead with a strict timeline involved. But and what sort of resolution . One with consequences if they dont get what they want . Theres likely to be a push in the process between the russians, i would say, and the uk and also france. And on the one side, also, the supporters of the regime in damascus, namely russia on the other side. So this is fundamental. But in terms of actual implement aegz, its going to be an incredibly difficult situation because syria is in a state of civil war. The overall dynamic continues to shift, so the major question is, how is it possible for weapons inspectors, sport expert to be able to access sites, sites that may be surrounded by conflict, by warfare, when theres a strict timeline involved . The reports from the pentagon a couple of years ago where they said it would take as much as 80,000 troops to clear the space, to clear the area for people to actually go in and find out where these weapons are and identify them and get rid of them. This is a massive undertaking. The timeline, as you were saying, is almost a bit ridiculous. It is, absolutely. Are they setting themselves up to do something they cant achieve . This is a primary risk. Bashar al assad calculates that president obama doesnt have the support in the senate, he doesnt have the public support, and if he were to go down the road again of potentially launching strikes against facilities, against the regime itself, he calculates that it would take at least a week worth of lobbying before they were on the brink of deploymentment. Then Bashar Al Assad could restore again. He can say look, im pulling something out of the bag, im sincere in my efforts with the russians on board. It could pull the carpet from beneath obamas feet again. How does this all play into, again, what happens with iran and how its viewed in iran . Rouhani comes in with a slightly more moderate agenda. He would like to try and have some sanctions lifted. But thats the bigger in the iranian move, its the birth picture. Absolutely. There is clearly some debate within tehran as to what position should be taken in relation to the nuclear issue. But the fundamental issue relies on the fact that the leader call tess shots. And iran has invested so much in the conflict in syria in terms of financial aid, in terms of deploying the force, so this is the Foreign Branch of the revolutionary guard, in terms of so many perhaps that its unlikely to do a uturn in the shortterm. What we are potentially likely to see, if russia does moderate its position visavis syria, which doesnt look like its imminent at the moment, but were it to do so, iran would probably strengthen its support, as well. And hadley, weve seen putin, obviously, setting the agenda over syria. Is it a different view, Time Magazine two separate covers the. Which this explains i mean, i wonder if this is reaction to the New York Times article. Its an interesting little problem i came across. On september 16th of on Time Magazine internationally, and magazines often do an International Cover as well as a waffling cover. They said russians rich and resurgentant. What you say in the u. S. Was a cover about lets start paying college athletes, rosy cover, blue skies, so it just demonstrates where the focus is in the united states. Its back to school time. People are very much not focused on the problems in syria. And, of course, this isnt something thats a total surprise. I think this weeks cover is a bit different, as well. Youre talking about five years on from the financial crisis in the u. S. , but in the international version, they have Angela Merkel. Its not going to play as well in the united states. Its not something that happens normally, but it was quite indicative of where the american mindset is at this point. Hadley, thank you. Anthony, thank you, as well. In the united states, jack lew speaks on the state of the u. S. Economy and the need for washington to avoit void stepping to the brink of default again. At 8 30, we get the august cpi. Consumer prices are set to right 2 and 2. 1 when you strip out foods and energy. At 10 00 a. M. , the National Association of Home Builders releases its monthly survey. Look for earnings from coty and Adobe Systems. Still to come, cant wait for twitter to begin trading . You could be in luck. Find out why after this. All right. Lets just remind you whats going on today. The taper countdown is on. The fed expected to announce a gradual wind down of stimulus tomorrow. On Police Search forever a motive in washingtons Navy Yard Shooting that left 13 people dead. And warning of ongoing global headwinds in an exclusive cnbc interview. Now, twitters forthcoming ipo said investors tongues wagging, but they are now able to trade the social networking firm stock and not just talk about it thanks to the grey market. Ieg is enabling its clients to trade on twitter once it is lifted on nasdaq. For now, were joined by david jones. Good to see you this morning. Is on key question is, whats the price . At the moment, the estimate is on the first day of trading, it will be around about 15 billion market cap. When we launched it a week ago, we started at around about 10 billion. So were seeing fairly steady trade and all buyers. It was pretty similar client activity to what we saw 18 months ago when we did the facebook market. So very optimistic. Yeah. How did the grey Market Pricing in the enmatch up to the eventual pricing for facebook then . I think it ended up being quite a flop when it debuted. There was that delay, if you remember. It didnt start trading until about an hour avenue after the markets opened due to a glitch. Our clients had bid it up to 1. 8 million. Im sure if we still see the buyers coming in, well have a slightly more cynical approach if we see the market cap pushed higher to where it is now. This grey market, can they trade 24 hours a day . Is this on an electronic basis . It is electronic. He think its uk and u. S. Trading hours where they can trade at least 13 hours a day and its very often driven by client sentiment. Its not really our view on where its going to be. Its the reaction and buying and selling of other clients. You said its nearly all buying. 95 , i think, of the business weve seen so far has been all buyers pushing it higher. Its kind of interesting to see where we go. And weve got a way to go, i suppose, a little bit. I mean, the other thing is, this ipo will test the pecking order, as well, on nasdaq. Thats true. And it will be interesting to see, i think, how it does end up on the first day. I think after facebook being quite a disappointment in the early days, i think this maybe a bit more reality around the twitter floats. All right. Thanks very much, indeed, for that. A gray market, a good gauge of appetite in the Company Shares or not . For more detail on igs grey market, head to cnbc. Com and dont forget, follow us on twitter cnbc world. Twitter seems to be the place to follow the twitter ipo. Also, could your technology be harming your health . According to a new report, smartphones, Tablet Computers and Office Keyboards are riddled with more dangerous bacteria than your average toilet seat. The alarming findings, if you think they are alarming, says a big part of the problem is when people fail to clean devices properly or even worse, when they take gadgets into the bathroom. We want to know if a tablet in the toilet is a step too far, should antibacterial wipes be on every desk or do you trust your keyboard . If you want to join the conversation, let us know. You can indeed tweet to me direc direct rosswestgate. More on that still to come. Well get the latest on the shooting at the Washington Navy yard. Well be in the nations capital, next. [ tires screech ] [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Its great. [ male announcer ] the best thing to share . A data plan. At t mobile share for business. One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. Mris in washington, d. C. Say theyre convinced now that the gunman in mondays shooting at a Washington Navy yard acted al e alone. Tracie potts has the latest for us in washington. Tracie. Ross, good morning. The navy yard is closed today except for essential personnel. Theyve reopened the schools and the roads in the area, but inside the navy yard, fbi investigators are trying to figure out not only what happened, but why it happened. We know that the man who was killed who was the suspect, aaron alexis is a former Navy Reservist, he was a contractor. And as a contractor, he had legitimate access to the navy yard. Theres been a lot of questions about how he got in. Apparently he did have legitimate access because he was a contractor. But authorities still dont know all of the specifics. Theyre looking into his background in texas where he apparently worked as a computer consultant there. In washington state, where he previously had a runin with the law over a gun and in texas, as well. In new york where his relatives say theyre shocked and saddened by what happened. And then, of course, here there are the victims, those who were killed. And authorities told us avenue of late last night, theyre still trying to get in touch with the next of kip, about half a dozen people, innocent workers at this facility who were killed. Do you know anything about a motive . Authorities are trying to figure that out on. What we know is that he came to this area about four months ago. We know that he purchased a handgun, authorities tell us, in virginia just in the last few weeks. And apparently at some point he may have lost his job and theyre trying to figure out more specifically if that may have been his motive for what happened here yesterday. Yeah. Tracie, thanks very much. Nbcs tracie potts in washington. Well have the latest on that. Lets remind you of where we are as far as u. S. Futures are concerned. After good gains yesterday, the dow, up 118, the s p up 9. Up at fiveweek highs. We are cautious this morning as the fed begins its twoday meeting. The s p 500 currently down at one point. The dow is called up 14. The nasdaq is just down a point. A lot of caution in the european equities, as well. Keep your eyes up. We will be talking about this. We never sustained a move above 1400. Tension necessary syria eased, gold came back down. Still to come, Goldman Sachs is now forecasting new lows for gold into next year, saying a more hawkish move into gold could accelerate the decline. Were going to hear from one analyst saying there is reason to be bullish. Plenty more on Worldwide Exchange after this. This is Worldwide Exchange. Im ross westgate. Im ross westgate. Global equities are trading cautiously today as investors await the specd tapering announcement of the fed after its twoday meeting concludes tomorrow. Police say theyre convinced there was just one gunman at a Washington Navy yard that killed 13 people. The worst incident at a u. S. Military installation in four years. And philips unveils a 1. 5 billion euro buyback. The shares fall as the dutch conglomerate warns that economic difficulties persist. We are flagging ongoing concerns around the economy and headwinds. And this affects basically health care driven by north america and the reform thats going on there. Europe because of the general Economic Situation. And auto shares trading lower as data shows european car sales fell nearly 5 in august. The peugeot is the biggest loser of the lot suffering an 18 drop in registration. Youre watching Worldwide Exchange, bringing you Business News from around the globe. A very good morning to you. Equity fairly cautious as the fed begins its two day meeting which is expected to end in the announcement of its twoday tapering. Closing up to fresh fiveweek highs. Right now, fairly mixed sort of performance. The dow at the moment is about, what, 12, 13 points above fair value. The s p is he moment is about a point below fair value. And the nasdaq is some seven points nine points above fair value. So very cautious as far as futures are concerned at the moment, not really giving us any clear direction either way. The ftse cnbc global 300, meanwhile, down 11 points. Equities were negative. And european equities two hours into the trading session are also down. The ftse yesterday was off, what, some sorry, was up some 39 points. Currently down 18 at the moment. We had inflation tipping down again in august. The annual rate of cpi coming in at 277 . Was 2. 9 the in june, 2. 8 in august, as well, is what the markets were expecting. We also had the ols coming out saying there was still an increase in house prices. The annual rate of house prices, up 4. 3 in july. The fastest rate appreciation since the financial crisis. The xetra dax is down 0. 25 . Investor confidence coming in much stronger than expected, particularly Current Conditions. With all that data and ahead of the fed, what are investors to do . Here is a recap of some of the thoughts weve had on cnbc today. Right now, we like i think we either have to go very big or very small. But we still like citigroup in particular. They are still below book value. And despite the fact that the headline risk is still there, jpmorgan is quite appealing on a price to earnings basis. You look the a sort of very statistic measures of the Balance Sheet and ratio and things like that, the markets have given the dollar the benefit of the doubt. Given that theres no Interest Rate differential, euro dollar is trading at policy. On that measure, euro dollar must be trading up towards 1. 40, 1. 45. You think if youre looking for longer term investment, in a nonu. S. Equities at the moment, there is a bit of value in emerging markets if you can take the shortterm volatility, value into some parts of europe, as well. I think if were looking at this sector, it is impaired, it is the treasury near three, better paying stocks you would be doing very well. Some of the thoughts on the channel already. Meanwhile, washingtons police chief says investigators are convinced there was just one gunman responsible for mondays attack at the Washington Navy yard that killed 13 people. Including the shooter. He had been identified as 34yearold aaron alexi of ft. Worth, texas. He was a contract employee and former Navy Reservist. He was discharged in 2011 following two gunrelated incidents. Alexis was killed in a gun battle with police. He was armed with an assault rifle, shotgun and handgun. He did have legitimate access to the navy yard and used a valid i. D. Pass. Its the worst attack at a u. S. Military installation since major nadal hasan killed 13 and wounded 31 at ft. Hood in 2009. The French Foreign minister is hold ago press conference in moscow with his russian counterpart Sergei Lavrov with the russian minister of foreign affairs. Well keep you updated with his comments as we work towards plans for syria. Meanwhile, oil prices have slipped on the back of the u. S. russian deal with u. S. Crude futures touch ago twoweek low and brent posting the sharpest drop in almost three months. Gold price ves slumped to a fiveweek low, signaling reduced appetite on the safe haven trade. Joining us for more, harry chiligarian at bnp paribas. Harry, we had some print at 116 has come out of the price. What happens next . Well, i think as you were indicating earlier, a lot of the geopolitical risk premium has come out of oil prices. And weve seen essentially wti and brent return to presyria crisis levels. But we are convinced here at bnp paribas that were find ago floor in the market because theres so many other things happening and in particular actual supply disruptions in libya. These are companies by supply disruptiones and other opec countries such as nigeria and iraq. With improving economic environment, i think the fundamental combination means that oil prices are going to rise through the course of this year. So this pullback is a very Good Opportunity if were going long oil. So just under 110 at the moment on nymex, you would call that the floor . Yes. Were back to presyria crisis levels. Again, dont forget, were kicking the can down the road here in terms of that diplomatic break through between the russians and the americans. No one knows how this is going to be implemented, what kind of timetable. I mean, there is so much uncertainty as to where they could go that the syrian gee your political premium could easily seep back into the prices within a month. And you talk about the global economy. What is showing up in the data in terms of demand . Well, we like to focus at bnp paribas is on the emerging markets and in particular china. China has slowed over the first half of this year. And the pmi data have been supportive in terms of china arresting its slowdown and in beginning to recovery. Industrial production is up, sales of exports are up to u. S. And to the eurozone. Electricity output is up, which is a good proxy in terms of watching activity in china. So and with a bit of stimulus from the government, i think china could have a strong finish this year and achieve its 7. 5 gdp growth target. So demand conditions are benign. Multiple supply risks on the market. What more do you want for oil supply risks to go higher . Sfwh what would be the price if it goes higher . Were looking for a minimum average of 1. 24 and an implication it could average 1. 20 by the end of the quarter. How comfortable are oil producers, particularly opec with this sort of range, harry . Well, you know, with opec, the funny thing is i guess their reaction function is always asymmetric. Theyre always fast to act and cut production. When the price is higher, theyre, lets say, a little slower. So i think opec producers wouldnt mind having prices above their fair target of 00, at least on for a couple months, just as long as it doesnt impact the Global Economic recovery. I think if we sustain brent at 120 to 130 for over on a period of time, thats when producers will react and bring in more supply. But then again, spare Production Capacity is quite constrained. Harry, take a pause there. Youll come back and join us a little later, as well. Well look at how the fed may impact things, as well. Some of the other stories were looking at today, auctions trading on several u. S. Exchanges as hope monday average because of a glitch with the Computer System that handles price quotes. The problem occurred with the Options Price Reporting Authority or opra which disseminates prices. Its overseen by several exchanges, including the mic. Trading did resume at around 2 15 eastern, but did outage comes just days after the officials met with the s. E. C. To ramp up to prevent trading glitches. Christmas, meanwhile, is still more than three months away, but its never too early to start thinking about holiday shopping. Research firm shoppertrak starts to loot at numbers. Hole daily sales are set to rise less than in 2012. Theres one fewer weekend between thanksgiving and christmas and six fewer days between the holidays. General motors, meanwhile, is working on an electric car that can go 200 miles on a single charge for around 30 on,000, which would challenge the more expensive tesla model s. A gm executive disclosed the information on monday. He wouldnt say when it will be available on the market. The cost of the batteries is still too high to pull off the feat today. General motors is down around 1. 2 . One step closer to closing the book on the damaging Wales Trading scandal. Details on that, next. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. The big u. S. Banks say theyre now better equipped to with stand a shook to the Global Markets than they were in march. Several are released results from internal stress tests which shows they have been helped by building up recent levels as the economy improves. Analysts are saying high capital levels and lower loss projections may be less meaningful than they appear and a previous stress tests were more closely overseen by the fed. At the same time, a u. S. Grand jury has indicted two former jpmorgan traders at the center of the bank london wales scandal. Seema has more for us in the united states. The federal grand jury returned charges against the two men for allegedly hiding losses on the betts. They are accused of manipulating and inflating the value of positions in a credit derivative portfolio within the banks chief Investment Office if london. Theyve been charged with five counts, securities and wire fraud, security, making false statements to the s. E. C. And falsifying books and records. Now, the trades in question were made by bruno exhale. He hasnt been charged and is reportedly cooperating with authorities. The Justice Department filed criminal charges against the men last month. The grand jury indictment allegeds they hid the trading losses to boost their chances for bonuses and promowings and martinathio hoped to stop them from 3406g the credit portfolio to another position. They needed the indictment to move forward with his extradition from spain where he was arrested and released in august. Jpmorgan has not been charged criminally in the case. Cnbc has learned the bank is reportedly close to a settlement with regulators, including the s. E. C. And fed for about 800 million. Investigations by the cftc and new York Attorney Generals Office continue and could result in additional fines. Checking jpmorgan shares in europe, just down about 0. 6 . Ross. Seema, thanks for that. A recap of the headlines, the countdown is on. The fed expected to announce a gradual wind down of stimulus tomorrow. Search for motives in the shooting of washingtons navy yard that left 13 people dead. Philips hikes its profit targets warns of ongoing global head winds in an exclusive cnbc interview. Wrerl, we toll you about a new report suggesting that smartphones, tablets and keyboards are riddled with more germs than toilet seats. A big part of the problem occurs when people fail to clean device properly or even worse, when they take gadgets into the bathroom. Were saying, is that a step too far . Should antibacteria wipes be on every desk . To you trust your keyboard . Thats why i keep my devices next to the uv ionic air sanitizer when i sleep. Very sensible advice. Right. Keep your thoughts coming in with investors. Meanwhile, in a hold onning pattern ahead of the fed decision tomorrow, well get a closer check on the commodities trade. Just how much pressure is going to be under . All that and plenty more, right after this. You really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. Shaers in philips are lower. And hes speaking exclusively to cnbc, the ceo france van houten said in the longterm, he is optimistic. We are flag ongoing concerns around the economy and headwinds. This affects basically health care, driven by north america and the reform thats going on there. Europe, because of the general Economic Situation, and the emerging markets, as well. For example, think about all the currency movements that are going on with india rupee, up and down, the rupee in indonesia up and down. So the world is still very much restless and that affects, of course, in the shortterm the possibilities to grow. Over the longer run. Im optimistic that the world is heading in the right direction. And other stocks that are in focus today besides philips, nokia has delayed a revamp of its luminia lineup. Originally, it was going to launch a new range of products at the end of the month. Continental down 3. 6 after Shaffer Group sold their stake to reduce debt. It wants to take advantage of the fact that weve had a 20year high in share surprise. Yesterday was at fresh alltime high peps renault stock down 1. 7 today. Renaught did manage to buck the trend. The manufacturer at a near 6 rise in its figures. But it hasnt helped the stock out. Sentiment today is just against autos. European equities, as youll see also down. Not by much, about a third of the percent lower across the board today. So weve come down from early sorry, come up from session lows. Xetra dax slightly better, just down 14 points. Uk inflation fell as expected. The annual rate of cpi, now 277 in august coming down from july and junes numbers. It was 279 in june. As far as the u. S. Agenda is concerned today, lets remind you of whats coming up on that. Weve got treasury secretary jack lew speaking at 8 15 eastern on the state of the u. S. Economy and the need for washington to avoid stepping to the brink of default again with another fight over the debt ceiling. At 8 30, well get august cpi, Consumer Prices there are set to rise to 2. 1 when you strip out food and energy. At 10 00 a. M. , the National Association of Home Builders releases its monthly survey. As earning look for results today from cotc and Adobe Systems the. U. S. Futures are fairly mixed at the moment. The dow up 118 last night, s p up over 9 the points. Both closing at fiveweek highs. Right now, the dow is 6 points above fair value, the nasdaq is currently 9 points above fair value and the s p is about a point below fair value. And while we look across to whats going to go on with the fed, we are expecting them a to announce a gradual winding down of the Bond Buying Program tomorrow, what happens with commodities . You can see where we stand at the moment. Crude ask brent both down. We were saying earlier, its because weve taken away tensions over syria. Gold changing at 1315 at the moment. Spot is a little firmer. Harry is still with us from bnp perry pass. Also join onning us now, mike. Thanks for your patience. I know youve been waiting. Good to see you today. Nice to be here. Lets talk about gold right now. Look, we were up to 1400 on gee your preliminary feares and back down. Goldman sachs is saying they think its going to go weaker next year. What do you think . I think gold is going to strengthen next year. Certainly the tensions in libya subsiding, the expectation of this weeks momentous fed announcement, and the u. S. Equity market continue to go make new highs, certainly pressured gold over the last few days. I do think that the aspect of strong physical demand for gold, continued central bank support and continued liquidity, even though the fed may taper a small bit this week. Excess liquidity will continue to support gold going further. Why would you hold gold if the dollar strengthening and bond yields are rising . Doesnt the hurdle rate become higher if you can start to get something for money on deposit . No. Understood. So in the last weve had a gold bull market for the last 12, 13 years. And there have been many times, even in the bond market rally from the early 1980s where people would call the end of that market. Certainly, the data thats been coming out of the u. S. Has been relatively mixed. I think theres expectation that its not just the u. S. , but the rest of the world is still going to be concerned about the currency flows and liquidity aspects into the marketplace. And as we get through the debt ceiling issues and some of the concerns through the second half of this year, i think gold will still find a place in peoples portfolios, even if the dollar which hasnt acted too well over the last couple of months continues to trend that way. Whats interesting, as well, gold and silver equities in august, certainly outperforming the gold price moves that we had. Is that reversed on the down move in gold prices . This they underperformed as prices moved down . Yes, ross. Over the last couple of weeks, the gold and silver equities have underperformed with the gold price moving lower. Typically, the shares are higher, relative to the gold and silver price. It has not been a good period for goal and silver equities over the last nine to 12 months. Certainly had a good lift in july and august. But certainly the down draft in the last few days has put pressure under those names, for sure. Okay. Lets bring harry back in, as well. Harry, what is the fed position and the fact that summers has dropped out, what does that mean for oil . You know, i think what were going to see in this afternoons well, today and tomorrow is that, you know, a lot of people are seem to be forgetting the Great Lengths that the fed has gone to in terms of communicating data dependency of its policy. So bnp paribas do not spicket announcements this afternoon, probably by tend of the year. In any event, in terms of gold, i have to disagree with your guest. Gold is going down. We have to get over it. The fed basically sealed golds fate at the june fomc indicating tapering and eventual exit in 2014. Yields are going up, dollar is getting stronger. Emerging market currencies, such as the rupee and, of course, the turkish lira all going down against the dollar, removing physical demand. I think in the end, gold is on a downward trend. You may have a few technical bounces, a few runs with geopolitical risk. We at bnp paribas advice buying december 2014 puts on gold at a thousand. You could probably finance that quite easily by selling 1600 calls for the same tenor. What do you think of that . I will tell you, i think indians who have been holding gold have been quite pleased with that investment given the decline in the currency. I think you could say the same thing for folks holding dollars over the last 10, 15, 35 years. Near term bliss and technical aspect is certainly what makes the market move. But i think the market is overly discounting the end of gold as we know it. All right. Twice, good discussion. Thanks very much, indeed, for that. Mike thanks for joining us. Harry, always good to see you, as well. That just about wraps up todays edition of Worldwide Exchange. As we go to the break, futures here pretty flat, really. Were sort of the s p is below fair value. The dow is kwurnt will i above it. But well track all the action and continued discussion. Squawk box is coming up next. Whatever happens, we hope you have a profitable day. Goodbye for now. Good mortgage. Our top stories, more than a dozen people, including the gunman in Washington Navy yard are dead. In market news, the fed is going to begin a twoday meeting. On the corporate front, jpmorgan is close to agreeing to about 800 million related to the london wale. It is tuesday, september 17th, 2013, and squawk box begins right now. Good morning, everyone opinion welcome to squawk box here on cnbc. Im becky quick along with joe kernen and andrew ross sorkin. And the Washington Navy yard remains closed this morning except for essential personnel. Today, Law Enforcement officials are trying to learn more about navy veteran aaron alexis and the grudge he may have had against the military. Officials believe he was the lone is shooter and that as a contractor, he had legitimate access to the navy yard. But they dont know why he might have opened fire yesterday, killing 12 people. We dont know what the motive is. We continue to work to determine where he has been, who he has talked to, and what he has done. Ayman jabbers will be joining us from the navy yard with the latest in just a few minutes. But first, andrew has a lineup of other headlines this morning. The fed will begin a twoday meeting in washington. A decision is expected tomorrow afternoon. That will be followed by Ben Bernankes News Conference. The fed is expected to announce it will begin tapering