Transcripts For CNBC Worldwide Exchange 20131015

Out record amounts of in the First Quarter. A shareholder pact is wound up ahead of time. All right. A warm welcome. This is the tuesday edition of Worldwide Exchange. Lets to get to on tuesdays show. Angela ahrendts is heading for silicone valley. Well get a closer look at the deal in just a few moments. Rio tinto is up after a bullish sign from miners as rbs morgan john wilson. Julia will be in luxembourg in around 30 minutes. And could the debt loss in washington finally be over or are investors rushing to conclusions . Well hear from a panel of political insiders at 11 45 cet. Plus, forget the debt ceiling. Theres a lack of innovation is the real threat hanging over americas economy. The former Nobel Prize Winner joins us here on set with his new book in the next hour. But first, u. S. Senate leaders say theyre optimistic about a possible deal to end the Government Shutdown and extend the nations debt ceiling. Senate majority leader harry reid said on monday theyve made tremendous progress. Sentiment is echoed by the majority leader Mitch Mcconnell. Reports say their plan would fund the government through mid january keeping in place the sequester cuts but give mortgages a way to ease their impact. It wie raise u. S. Borrowing costs through to at least mid february. Were doing our best to make everybody happy, but everyone knows were not going to be able to do that. Everybody understands were doing the very best we can with all the frailties we have as people and legislators. Senate republicans and democrats will hold a separate meeting today. House republicans have a closed door meeting at 11 00. The spokesman for House Speaker john boehner says republicans will review whatever plan the senate passes. Julia is with us chief International Economist at barclays. Tricky job. Julian, what do you make of the senate plan . Clearly, there has been some progress. We must bear in mind, as you say, if it happens, the deal through january or into mid february, theres still a lot of tough bargaining thats needed. I think whats important is that it shows the congress is seeing some sense here, its recognizing the dangers that if there isnt an agreement, this could mean for the u. S. Economic situation and the financial market. So, as well, its clear Public Opinion has been moving against really all parties here. Its not just the republicans. Although they might have suffered more greatly. The uncertainty can be toxic for business confidence. What weve noticed is this incredible effect that the Financial Markets have over the real economy. Which i dont think we really experienced so much historically. And, you know, programs like cnbc are their role. The information flow is really in force. That means the confidence goes down together and uncertainty plays a very Important Role in that process. Thats why its very important that just as were starting to see the u. S. Economy get momentum, get some traction, that this comes together. Most people now think offerings for 2014. The thing is, at the time when you thought tapering might be in january in february, we have another deadline. Actually, when you look at that, we might not have any taper now until march, the Second Quarter. For us, its a question if its not going to be the middecember meetings, its going to be in march. We know we have another battle looming in january, right . It makes it difficult. And the other problem is theres not a lot of information flow youre going to get. For us, if its not december, its more likely to be march. Youve got the fed transition. Thats really important. And youve got a lot of movement coming from the fomc. So it seems to us that janet yellen is going to want to take stock of the situation, get a very good assessment. Its an enormous move, lets face it. In hind site, first of all, its going to take them long enough just to get some data, isnt it . Sure. Julian, stick around. News out of china, we have a delegation in china at the moment. Apparently theyre saying china will grant 80 billion yuan to the uk. To set up wholesale branches in the uk. They hope to track more banking business. Keep our eyes on that. As we begin today, the Global Markets are broad and those senate talks mean expensive green. Take a look at the Dow Jones Stoxx 600. Theres green on the board, 8 to 2 advancers xurnt krptly outpacing decliners at the moment. The ftse 100 was up 20 points yesterday, currently up another 40 points. 0. 5 higher for the xetra dax. The cac 40 up 0. 3 and the ftse mib is up, as well. Burberry is currently down 3 . It does open down more than 6 after more than seven years with the ceo of burberry. Angela ahrendts will be replaced by christopher bailey. The british mps will investigate whether the initial pricing was set too low or not. Rio tinto, up 3. 3 today after confirming a record level of iron orout put in the quarter. Its going to decide on a potential 5 billion investment in new australian mines. We saw record iron ore data. The iron ore section, as i mentioned, pretty strong. Rcs media group is up 3. 4 today. A lot of these shareholder packs are being winded up in italy. This is the struggling issued newspaper. Take a look at bond rates, as well. Spanish yields, 4. 28 for spain. 4. 265 for italy. Gilt yields, 2779 . Next time around well put treasuries back in. Euro dollar, exactly where we were trading at this time yesterday, 1. 35. The aussie is firmer at 0. 9543 and sterling cable pretty much trading where we were, just below 1. 60. The currency markets are unmoved in the last 24 hours. What about the asi asian tradin session . Sixuan is with us for the latest. Thank you for that, ross. Asian markets are getting a lift on hopes of a u. S. Debt deal. The Prime Minister shinzo abes sweep about Economic Reforms, the nikkei 225 extended a fiveday winning streak, but a slightly stronger yen against the dollar is putting the cap of further up site and it gained a quarter of a percent in todays trade. In china, the shanghai composite saw recent gains ending down by 0. 2 . Hong kong markets are playing catch up to the rally after yesterdays onedaybreak. The hang seng ended higher by 0. 5 reaching the threeweek high. Hong kong listed chinese banks are higher as chinese data on monday showed september new lows reached 787 billion u. S. Topping expectations. Elsewhere, south korea kospi gained 1 today. Asx 200 ending higher b by almost 1 despite the rbas reluctant to cut gainers. Back to you, ross. Thanks very much, indeed, for that. Well take a short break. Still to come, well get to some of the Corporate News. Whats going on in the luxury sector and what does it mean for Angela Ahrendts . Plus, the latest on rio tinto. More to come on Worldwide Exchange. City Group Reports First Quarter earnings at 8 00 p. M. Eastern. Is bank is forecast to earn 1. 02 a share. Thats revenue of more than 8. 2 billion. Up 40 in the last year. Every week, cnbc is asking you to set the trend by taking part in an online poll. This week, two of wall streets banking giants reports were asking how do you trade Goldman Sachs ahead of results on thursday. Would you be long, short, maybe put a hold on the stock inspect cast your vote. Straightaway, youll be able to see the trend. You can have your say on twitter. Use traderpoll. Blackberry, meanwhile, says were not dead yet. Theyre publish ago news article trying to reassure people that theyre here to stay. Blackberrys chief marketing officer says the uncertainty is why its publishing the letter. 6 million android and iphone publishers have preregistered for the launch of its messaging service. Blackberry up 0. 3 today. And walmart is holding its annual Investor Conference today. Its expecting modest gains for fiscal 2014 had. And managed described the climate as challenging. This is amid higher u. S. Payroll taxes, lack of wage growth, inflation and high unemployment amongst lower income consumers. Walmart at the moment, just up about 1 . And what would you ask Marissa Mayer . Streams live on the web. This time, youll get the chance to ask management, including the ceo a question. Submit them by meal to yahoo earnings yaho yahoo earnings yahoo inc. Com. Or yhooearnings. Questions must be in by 3 00 p. M. Eastern. So what would you ask the yahoo ceo Marissa Mayer . Let us know. Get in touch with us. Email us, worldwide cnbc. Com, tweet cnbcwex or direct to me rosswestgate. Backs to one of the Corporate News stories in the u. S. , Angela Ahrendts is going from purses and pumps to ipads and iphones. Shes announced she will be stepping down from burberry to take up a new Vice President at apple. Since she took up the role in july 2006 at burberry, shes prided over an area where the share price has been up. It has had a few fluctuations along the way, though. Christopher bailey is going to be taking over mid 2014. The tech giant, shes now going to work for. Its a collaboration with apple to date. Just takes the brand reach and the Brand Awareness to a totally new levels and the imagery that we were able to capture on the iphone 5s with their collaboration, you know, we always use these shows to keep burberry on the forefront, to take the brand to new heights, and thats really i think what the collection and the collaboration did today. Julian is still with us and stock opens down more sharply this morning. What is burberry losing with Angela Ahrendts and what are they keeping with mr. Bailey taking over the reigns . Mr. Bailey started to work for burberry back in 2001. He was 29 years old at the time. We know hes a fantastic creative director. Its much more difficult to know if hes be a very good ceo at the time where burberry has many challenges in japan in terms of the beauty ranges. On the other side, angela, she has been one of the most or the most ceo last year. We know shes very good at her job. Shes very good, shes been very good in terms of pushing the brand into digital and i think she will do very well at apple. Yeah. This digital, is it important, this whole session strategy, you talked about burberry was the forefront. How important is it for burberry to really utilize dish or how important is the younger client base . Its extremely important. Its really the difference factor for burberry to any other brand. If you look at the strategy on digital, burberry is by far the best. Gucci is doing okay. Every brand now has some strategy, but in terms of percentage, its a tiny portion of their brand. A job at burberry, i think it started in 2009 where burberry was a much Smaller Company and he decided to really experiment with social media and digital. Its created Media Contests being created, as well. Not a problem being on top, is it, the issue is he has to have the right people around him to do the things he necessarily cant. She left, i think, back in march this year. So the entire team is going to be new. Theyve been hiring quite a lot of new people, as well, on the beauty sector. Some other sector. The company will be very different. Burberry is the most bullish investment you can have in the sector. They are a bit more leveraged than the competition. If you are i dont like to think im being brave when im putting money into no, but if you think emerging markets are very rare and china issues growth and you look at assets, burberrys well, reporting, as well, Third Quarter sales today. Weve got mark jacobs. Its completely different. Its much more diversified. Its a different product line. Many different segments in terms of pricing and many different brands. Its emerging markets, as well, but not only. What do you think burberry might do next . You mentioned other companies are much more diversified. Where can you see burberry going into the future in terms of i think trying to be a brand like chanel, not only fashion, but beauty. Beauty can mean perfume and they want to bring back perfume. Right now, i think theyre number 25 in terms of sales of perfume, so theyre really not up there yet. Can you be too exposed to china . Or not . Right now in china, china is a very important part of their business. In fact, if we look at someone else more exposed to china, macau, hong kong, singapore, theyre exposed to traveling chinese city, all in all, it is a very, very exposed brand to china. One final question. The its very fashionable sort of coat, you see it on a ski resort. Is that going to be of interest or how much interest is that going to be . Well, i think the plan was like a thousand these things start at like a thousand ponds, the jackets. The quality, img for this kind of brand, it remains as an investor. The main focus will be can they could it be a target . I mean, in spending Something Like 9 billion euros since 9 11 in purchasing other companies. Or recently the key on Smaller Player it can be a target. Yeah. I dont know i have to find out how much theyre planning to list the free flow. But well see. If in three months time, burberry share prices go down, i mean, its farfetched today. But burberry could be a target. Okay. We heard it here. Good to see you, as always. Lets move on and remind you of whats still to come on the program today. Italy, ireland and portugal are all going up to present their budgets for eu approval. Julia will join us from luxembourg. Weve got uk inflation data coming up prosecute more to come. And these are the headlines from around the globe. U. S. Stocks are raising losses on the news that Senate Leaders may be getting closer to a deal to avertd a possible debt default. Shares in burberry fall, the British Fashion giant unveiled the departure of Angela Ahrendt to apple. Christopher bailey will be taking over. The company has seen a 40 gain in the stock during her time as ceo. Rio tibto sets up its guidance after churning out error amounts of iron ore for the Third Quarter. And rcss Media Group Stock is up in milan. Theyre expecting less incidentser feerns in the running of the newspaper corriere della sera after a Shareholder Group has been wound up. Senate liens leaders sketch out a deal which they need to put to the house. The xetra dax and cac 40 up about 0. 5 . Ftse 100 up 0. 7 . Treasury yields, 2. 72 is where we stand. The aussie has moved firmer today, a fresh fouryear high. Its not on there. Dollar yen, just above 98. Euro dollar, where we were at this time yet as is cable at 1. 5979. China is continuing to weigh in on the drama in washington. Eunice yoon has more. The political gridlock in washington is almost as big a topic in china as it is in the u. S. Thats what happens when your country is the largest foreign holder of american debt. I hope they can talk it out, this man says. Thats hour hard earned cash. China is frustrated that the u. S. Is playing what it sees as a political game with the global economy. If american lawmakers cant reach a deal by an october 17th deadline on raising the debt ceiling, the United States could default on its debt, potentially hurting the world and china. The u. S. Debt ceiling debate is in all the chinese papers. This one says the clock is ticking. China urges United States to clean up its debt problems. And this one says that u. S. Debt ceiling is ruining americas credibility. It won state backed editorial, the official news agency is calling for a new deamericanized world order. But america isnt the only one being blamed. People here are angry at their own government, too. Chinese politicians need to do something about this, he says. China maintains controls on its currency, helping to support exporters here. So its amassed huge dollar reserves and cant do much about it, other than invest in u. S. Treasuries, 1. 3 trillion worth. People in the Chinese Government probably want investments. But still, i guess right now, u. S. However it works out, americas reputation is taking a knock in the eyes of a bewildered chinese public. America sees itself as a super power, he says. Now we know theyre just like everybody else. Eunice yoon, cnbc, beijing. We have data out of the uk. September inflation up 0. 4 . Monthly annual rate 2. 7 . A little stronger than the forecast 2. 6 . Core cpi running at 2. 2 on the year. That was forecast to be running at 2 . Deflation numbers are stronger than we might have thought. September rpi, january on that 0. 23 . That was as expected. August house prices up 0. 5 on the month. 2. 83 the rise. Increase the fastest since october 2010 and the house price index now sur is passed the precrisis peak to hit the highest on record. House prices for first time buyers, this is the group targeted by the governments help to buy scheme. Got an annual increase of 4. 9 , the fastest since august 2002. Producer prices, meanwhile, posted to slow its annual rise since may. Lets get reaction. Just around 1. 60. Julia keller is still with us. We keep thinking inflation is going to dip down and here we have another number not doing it for us, julian. You mentioned the core rate has moved higher. That is problematic, i think. The uk economy is definitely showing some good signs of improvement here. And were seeing a little bit of evidence that gaps are starting to narrow. Were seeing some improvement in hiring intentions coming through. That was particularly evident in terms of the recent survey numbers. And, therefore, to have this inflation stickiness right now does suggest that governor mark carney is going to look out carefully to see if theres going to be some kind of pass through further down the road and the risk is certainly rising. Why is uk inflation so much stickier than elsewhere . Why is it so much higher . Youre looking at things like energy prices, right . Well, yeah. Its notable that if you go back from 2005 to where we are today and you take Household Energy bills, they basically more than doubled according to the official statistics. If you take the euro area equivalent series, thats gone up by 50 . So theres really quite a big difference there. Enormous difference. And you have to ask yourself, why is that going on . It seems in the uk, frankly, there might be specific reasons for energy. But in the uk, we do seem to have less resilience to having higher inflation. You know, we seem to be more tolerant of inflation and i think the retail side, you know, shops are able to push through margin increases in the way thats not really possible, say, in mainland europe right now. Youre seeing in the case of the United States where inflation is very low. So if you take core inflation in the uk, you say its running at about 2 at the moment, maybe higher with todays number, at the same time, in the u. S. , and in the euro area, coinflation on the same measure is running only at about 1 year on year. So the uk is kind of in a way you could say where you want it. If we start to see further tightening in the labor markets and maybe theres a margin increase, then the bank of england is going to have to consider running at such low Interest Rates for such a longered prd of time. Lets take a look at iron ore producers. Rio tinto is closing 2. 5 higher in australia today. The mining major reported a report iron ore and call output in the Third Quarter along with rising copper production. A big mine in mongolia is pushing up capacity levels while it remains on track. The cfo made cost cutting a priority and the firm says it should beat its target of 750 million from its exploration budget this year. Jon, good evening. Thanks for joining us. Yesterday, we heard from china. They had record iron ore imports. Does this mean that these guys are coming out of the weak spot . Well, i guess it does, ross. Thats the true test. And, however, ive never been a believer than china was really in a weak spot. Its a little misleading when we compare year on year growth now and say that, you know, when it gets down around that 7. 5 or 7 yearly growth that thats a calamity. And the numbers are massive and it seems to me to be floored to compare whats coming from a very high date to one thats, you know, five or ten years ago was coming from a very low base. So as i say, i havent ever believed that china was in any major problem, but having said that, these numbers now are really good for iron ore producers and rio is a big one of those, of course. A year ago, iron ore producers were talking about cutting production and not developing plants. Is that going to change now . Well, i think it already has, ross. The the alarming part for iron ore producers or the alarming time was in september last year when the price of iron ore dipped below 90 per ton. And at the time, the aussie dollar was very high. That resulted in a whole sequence of events which included one of their big monitors, fortesque, the development of kings mine and that resulted in some people being put off. That happened almost snan takenusly. I think they did the right thing at the time. One of the repercussions was that a lot of analysts started to put into their models a price of iron ore around that 90 a ton add infenitum. Yes, it hit 89 a ton, but stayed there for only a short period of time. In fact, yeah, this year, its been up around that 120 per ton. And now and over the last couple of weeks, its been above 130 a ton. So wsh r, you happen, you put that in conjunction with an aussie dollar that has already fallen to 94 and most people think its going to go there. So the combination is called 120 a ton at 94 or lower u. S. Dollar. Its been a massive turn around and thats only occurred in 12 months. You mentioned the currency. The aussie dollar is up at a fourmonth high today against the dollar. What sort of levels do you need the aussie to be trading at to stay bullish . Well, i think that its still a very lucrative business in australia. However, we as a house believe that it is likely to be a long way below that within the next 12 months. And we are talking about sub90 cents. That would make an enormous difference to the profit line for our producers. John, thanks so much, good to see you. The tbill down from september the 17th. Well take a short break. Still to come on the show, its investment week in the uk. After the break, well hear how companies are climate engagement are likely to show a stronger financial performance. Thats a good thing, but it doesnt cover everything. Only about 80 of your part b medical expenses. The rest is up to you. So consider an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, they could save you in outofpocket medical costs. Call today to request a free decision guide. With these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. Join the millions who have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp. And provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. With all the good years ahead, look for the experience and commitment to go the distance with you. Call now to request your free decision guide. Bank of italy is releasing the latest number on italian debt. Just over 2. 06 trillion in august, down by 13. 9 billion versus july. The tax in flow, 257. 1 billion january to august. The public debt up 570. 6 billion, the january to august period up, as well. Now, that latest news coming out of the italian cabinet attempts to agree to 2014 budget later today when it begins discussion on the draw. The Prime Minister letta will attempt to revise the struggling economy by cutting taxes and spending offering relief to commercial banks and giving incentive to firms offering workers permanent contracts. This as portugal is expected to today. Julia is in luxembourg and join us for more. So are we comfortable those budgets are going to deliver sustainable finances and not damage growth too much, jules . Well, ross, its a fair question, isnt it . I think the suggestion would be that the Movement Continues as far as consolidation is concerned. What were going to see next year is less than the consolidation weve seen in previous years. Putting growth at the tart of these budgets, still very difficult for countries like ironland, like spain, despite the fact that we are hearing positive nous noises here from the european commission. This dominates your decisions over the last 24 hours. Theyve stated just what the current play is as far as greece is concerned. Listen in. The mission to greece, to conclude the review is interrupted. So its up now to the greek authorities to do what is needed that the review can be concluded. And its first and foremost important that they close the significant gap for the next career. Second, the euro group will have a First Exchange of views on how to close the financing gap of the existing program. Its not about a new program. Theres a financing gathering the second half of next year. The financing gap is around 5 to 6 billion euros. It depends on how much the country is able to privatize so i cannot be more precise here. But we must find a way to close this financing gap and theres absolutely no way that it can be done in a rollover bond which results in monetary financing. This is not possible for the ecb and not for the whole eurozone. So the greece officials have come into this meeting with high hopes that that financing gap that mr. As musen was talking about there could ultimately be filled by rolling over some of their debt. Remember the greek ves promised no further austerity next year. So it will be interesting to see how they can bridge that gap here without being able to use the benefit of rolling over debt. That left the other european officials with pretty good news yesterday at the press conference. Its too early to say. The discussions between the troika institutions and the greek government on the steps taken, both in terms of Structural Reforms as well as fiscal issues, budget issues are still continuing. I could certainly not pin any number on it. Those discussions as far as the Banking Union are going to continue on today. But you started by mentioning the budget in italy, ross. I did catch up with the finance minister a few minutes ago, so ill bring you later what he said. Julian is still with us. Julian, lets go back to italy. Its interesting, actually, when you look at europe, that spanish tbill auction, yields are down. They had a 30year last week and yields on that pretty much match what theyre paying for shortterm for the financial crisis. Clearly things have change enormously. Thats right. I think in a word its about growth here and investors are starting to see prospects for spain to start finally coming out of recession here. And that is giving them a lot of encouragement. Whats interesting about spain is the recovery and loss of competitiveness. A few years ago, these countries looked like they had lost so much competitiveness. They might even have to leave the euro. Its led to a huge raise in unemployment. But they have actually recovered most of that competitiveness. That is of great credit to them. The one outliar is italy. Most analysis would suggest italy has a competitiveness problem. And i suspect its going to have to go down the same route as a lot of these other countries. A lot of it has to do with what are the changes in the government . Irela ireland, we know, has had a very flexible labor market. It has been encourage canning for Corporate Investment to come through. Spain has been moving in that direction and even portugal, i think, has made some stunning progress in terms of its export performance. But in the case of italy, you still see very weak flows of Corporate Investment going in there. In the last ten years, here is a really easy statistic. Italian gdp hasnt grown ending last year. The demographics are not good for italy looking further ahead. Since the crisis, italian corporates have been underinvesting. By that, i mean theyve been investing less on afternoon than the depreciation of their Capital Stock. So the italian Capital Stock is shrinking which doesnt bode well for future growth. If they start ripping up shareholder pacts and it doesnt come from the private sector. So from the Small Companies and from the big companies. But i think its clear to all these countries theyre not going to get bailed out here. By the ecb or by germany. Theyre going to have to work laughed and, really, thats why whats happening in greece and spain and portugal and ireland has been so prnt. Julian, good do you see today. Thanks so much. Lets move over to japan. The Ruling Coalition of Prime Minister shinzo abe is regaining full parliamentary control today. Puck chicco has more for us. It was an extraordinary session today in japan. The Ruling Coalitions hurdle for the government to pass key legislation as abe ames to pass bills to support its abenomics policies. In his policy speech, he pledged for more Economic Reforms to pull japan out of the long lasting deflation. To start, the government hopes to establish special economic incentives to boost business beyond regulation. They want to pass a bill to set up a Japanese Version of the u. S. Security council to boost its Peace Keeping efforts around the world. Opposition parties are expected to question abe on issues such as the sales tax hike, the Fukushima Nuclear crisis and the free trade negotiations. Back to you, ross. Fushiko, thank you very much indeed on that. A little bit out of so softbank. Its going to buy a 50 game stake in the finish gamemaker supercell. On the agenda in asia tomorrow, the bank of thailand makes its latest policy decision. Bun of indias biggest motorcycle major bajaj auto reports Second Quarter earnings. And in singapore, keppel transport telecom releasers Third Quarter results. Meanwhile, its investment week in the uk. And a recent survey found nearly twothirds of british investors wants to be offered sustainable or ethical options. The poll coincides with a report which says uk green and resale funds have now over 12 billion pounds investment in them at a alltime high. How does it all work . Kevin parker, ceo of Investment Fund at the Sustainable Capital markets. Kevin, thank you very much for joining us. I know its very early over there. We appreciate it. I always wonder when people talk about sustaining investment, i have to say i got rather confused by what companies meant. There are all these acronyms. Csj, ri, the list goes on and open what do we actually mean . Yeah, i mean, it is unfortunate all these acronyms have crept up over the last 15 or 20 years really serving to confuse the asset owners. Lets start with etical investing. Thats on the part of the asset owner wanting to represent their views in the marketplace, their belief system, which is perfectly in line with all the rest of this in the terms of the way we look at investing. We have certain beliefs and we want to represent that through our portfolios. Thats part of a larger question and a larger segment which really is now taking up the mantle of Sustainable Investing. Theres a lot of subsectors to that ethical being one, impact investing, sri and so on and so forth. And the markets struggle to find its footing in how it represents that to asset owners. And how would you characterize or define Sustainable Investing . Well, Sustainable Investing is really a common sense approach in, really, managing companies in the way that managements are approaching global mega trends in terms of things like the demographic changes, globalization, urbanization, resource scarcity and so forth. And companies are responding to those trends in managing their companies, managing their resources and so forth in a sustainable way, in a much more sustainable way. That is the emerging theme in the world of Sustainable Investing. Yes. I mean, you can have an impact by investing in businesses or industries that are dealing with the big issues like aging population, obesity, resource scarcity, is that where the opportunity is . Yeah. And these issues are becoming material because of the changes in demographics that were seeing. We saw population pass 7 billion this year. Theyre going to be 9 billion in 20 years. These sustainable scarcity issues are rising in importance and becoming material issues for management to contend with. And that is really the big change. And asset owners are recognizing that because owners are paid to look out 15, 20 years on risks on the horizon. What theyre realizing is these demographic shifts are creating the scarety issues which is giving rise to the materiality of sustainability. And its interesting, over here, trust net has figured to suggest if you put your money in standard life, 52 , hinderson global care, 46 . The cis sustainable index 38 over that period. What sort of returns have you achieved in the United States . Well, what were seeing and what our Research Demonstrates is that actually companies that are behaving sustainablely are outperforming financially. But the stock market is not necessarily having picked up on that yet. Which for Equity Investors i think is an interesting story. The implication being that you can make as much money if not more from sustained investment. Thats the message youre putting out. Well, we think were at a pivot point where the market is beginning to understand the materiality of sustainability with respect to corporate bottom line. Yet the stock market is not fully pricing either the risks of a lack of sustainability or the upside of sustainability into the share prices. Kech, good to see you this morning. Thanks for joining us. Well take a short break. In the second hour of Worldwide Exchange, u. S. Senate leaders may be nearing a deal to raise the debt ceiling and avert a possible default. Will their plan be enough . To satisfy all the wings of the democratic and region party . A free checked bag ing 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. There is a pursuit we all share. A better life for your family, a better opportunity for your business, a better legacy to leave the world. We have always believed in this pursuit, striving to bring insight to every investment, and integrity to every plan. We are morgan stanley. And were ready to work for you. Gloebl equities edging higher after u. S. Stocks raise losses on news Senate Leaders may be getting closer to a deal that would avert a possible set default. Shares in burberry fall after unveiling the departure of Angela Ahrendts. Shes going to apple. Shell be replaced by christopher bailey. Global Miner Rio Tinto puts up its guidance after shelling out record amounts of coal in the Third Quarter. And city group leads earnings reports st. They will release results before the opening bell. Well get the latest from washington in just a few moments. Before that, we have the latest snapshot of german investor confidence. The zew october Economic Sentiment index 52. 8, up from 49. 9 in october. The current continue, 29. 7. Its down from september, expected to be 31. That Economic Sentiment, though, is the highest since april 2010. Financial market experts remain optimistic. The euro dollar has just dipped on the news. They seem to be concentrating on the Current Conditions rather than the sentiment index. With some reaction, bill blain at mint partners. Good morning. Why are investors more optimistic generally, but currently less optimistic . Who knows. Who can tell . Its a shortterm reaction, wondering about what is in context with the big story of the day. Apparently something going on in the states. Yes. Which is a fair point. Lets talk about that. Im going to recap was going on and then well talk about it. U. S. Senate leaders say theyre optimistic about a possible deal to end the Government Shutdown and extend the nations debt ceiling. Senate majority leader harry reid says theyve made tremendous progress, a sentiment echoed by Mitch Mcconnell. They would propose to fund the debt ceiling through january, raising borrowing costs through at least to mid february and the plan would include a new round of budget talks to try and reach a new bargain by the end of the year. Were doing our best to maybe everybody happy, but everyone knows were not going to be able to do that. Everybody understand were doing the very best we can with all the frailties that we have as people and legislators. Mean wile, Senate Republicans and democrats will hold separate meetings today. House republicans will have a closed door meeting at 9 00 a. M. Eastern. Eric cantor says theyll suggest a way forward. Spokesman for House Speaker john boehner says theyll review whatever plan the senate passes. At the same time, preparing for a possible u. S. Debt default, the banks are exploring ways to impose limits on the use of term term treasuries as collateral. Both have large clearing operations and counterparties to guarantee trades to default. Some clients may not accept tbills maturing in the next few weeks at collateral, asking if those they could substitute those for others due at a later date. Thats a real practical response to whats going on. Yeah. Because if we get the unmentionable happening, it will be the shortterm tbills that are affected immediately by it. I suspect well see interesting markets develop. It is not the end of the world if the u. S. Defaults. It will simply be a changed market. It will make the u. S. Political process and the concentrational process weve seen look very complex and stupid. But we would see tbills trade. People will be buying them in the expectation they are going to be paid at some point in the future. But the fact that banks are now asking for alternatives forms of collateral demonstrates how people are preparing just in case it happens. But you say its the unimaginable. It is. Its actually against the constitution. Article 14 clearly says you will not question u. S. Debt. And thats exactly whats going to happen. If we do get to default, it will be technical, it will be resolved. How much confusion will it cause in the Global Markets . Considerable amounts, but it will not be the end of the world scenario that some people are predicting. Responding to that was a get out clause for u. S. Treasury just to keep perhaps. But i think the more interesting thing is we look at that potential solution that you were just talking about there. Were going to be extending this debate right into the beginning of next year. Yes. And that doesnt cure anything because i think there is another political battle shaping up on the next sequester. The democrats want to see more cash made available to government. The republicans are arguing keep it where it is. So youve got that going on even as we have another negotiation going on. Here we are trading today, 2. 73 . The interesting thing, of course, is the timing of the next if we push this back till the next days deadline to january or february, theoretically, that would be where most investor now think the fed would consider tapering. If the fed didnt taper before because they were worried about the discussion, doesnt that push tapering back to march or april now . I think, in fact, we will see taper diminish the discussion and it will get pushed back. We have the next fed governor afoupsed, janet yellen, she will be coming in place. There will be a new fed voting board coming in place, which many people think will be distinctly less stoppage than the current one is. But that said, i reckon yellen will be looking to establish the new regime, get her message in place, and saying we need to examine what the effects of the current government slowdown has been on the u. S. Economy. I doubt well see the taper even mentioned again until march. Meanwhile, the dow yesterday up 64 points. The s p 500 up 7 points. This is where we stand. Thats where we are right now. Futures are once again above fair value. Dow currently up 17 points above fair value. The nasdaq at the moment is around 6 points, nearly 7 points above fair value and the s p 500 at the moment is around 1. 5 points above fair value. Take a look at the ftse cnbc global 300. Its up. Not a huge amount, around 0. 2 . Yesterday the ftse 100 was up 0. 2 . Its been a half more than where we were yesterday. This is where we stand. Now up at the best levels of the day, 0. 75 higher for the uk, the german markets. The cac 40 up 0. 6 . On bond markets, we saw treasury yields up 2. 73 . Italy still yielding less than spain. Gilt yields nudged up to 2. 8 . Inflation a short while ago in the uk, the annual rate coming in stronger than we thought, as well, 2. 7 . 10year bund yield, 1. 89. We did think uk inflation would start falling back, but its remained on the currency markets, not a huge amount of move. Dollar yen, 13528. Kind of where we were yesterday. 98. 59 dollar yen is where he we stand. Aussie, up to fourmonth highs. The rba suggested they are in no hurry to cut rates further. So the dollar just on the front foot at the moment. How did that Asian Session go today . Theyve closed up shop for trading. Sixuan has the details out of singapo singapore. Sixuan. Thank you for that, ross. Asian markets got a list on hopes of a u. S. Debt deal. Prime ministers shinzo abes speech about Growth Strategy and those Economic Reforms. The nikkei 225 extended a fiveday winning streak, ending higher by 0. 25 to date. But a slightly stoppinger yen against the dollar is putting a cap of further up side. In china, we saw profit taking after recent gains. Hong kong markets played catch up to the rally after yesterdays oneday brent. The index gained 0. 5 today reaching a threeweek high. Hong kong banks abruptly higher on monday showing september new lows reached 787 billion yuan, topping expectations. Now to some big gainers, in south korea, the europe sensitive shift builders gained ground helped by bullish ground data. And hyundai heavy ended bier by 3. 3 . Australian resources outperformed. Rio tinto just reported a strong Third Quarter production results. Iron ore production up 2 on year. Copper and terminal Coal Production saw double digits increases and shares gained 2. 5 today. Back to you. Thanks for that, sixuan. Angela ahrendts is leaving burberry and taking up a newly created position at apple. Since she took over the role at burberry, shes provided over a period in which the stock price has been up 52 . Christopher bailey, her current chief creative director will take over from her in mid 2014 as the new ceo. And the last time we spoke to Angela Ahrendts, that was in september, she spoke about the importance of working with the tech giant that shes now going to work for. The collaboration with apple today takes the brand reach and the Brand Awareness to totally new levels. And the imagery that we were able to capture on the iphone 5s with their collaboration, its just you know, we always use these shows to keep burberry on the forefront, to take the brand to new heights. And thats what i think the collection and the collaboration did today. Maybe thats the sort of stuff shell be doing at apple. Elsewhere, yahoo is holding another Video Conference call after it reports Third Quarter herbings this afternoon. Youll have the chance to ask management, including ceo Marissa Mayer a question. You can submit them by email to yahoo earnings at yahoo inc. Com or via twitter yhooearnings. Questions might be in by 3 00 p. M. Eastern time. What would you ask yahoo s ceo Marissa Mayer . Let us know. Get in touch with us. Email us, worldwide cnbc. Com, tweel cnbcwex or direct to me rosswestga rosswestgate. Its a new democratized world. Meanwhile, publishing details of the National Budget from next year, well hear from the italian Prime Minister as soon as we come back. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. And a recap of the headlines today, Senate Leaders hint that a debt deal is in sight. Thats boosted global stocks. Apples hired Angela Ahrendts to take over some operations. And citibank is set to report earnings later today. On the u. S. Debt debate, before that, the italian cabinet will taempt to address its 2014 budget later today when it begins its attempts to a draft goal. The Prime Minister reportedly attempt will revive the economy by cutting taxes and spending, offering the lease to commercial banks and giving incentives to kms who offer permanent contracts. We have vast and important hurdle in parliament and receive confidence with the program that had been outlined. And i think we are now trying to implement it to this first budget law, which is an important document. And i think the emphasis on reviving growth and fighting unemployment while remaining within the sort of the limits agreed at the european level for our budget deficit, i think, is important, in our view, because we expect that they would be rewarded by the markets, by lowering the cost of our debt. You talked about support for growth and support for businesses in particular. That includes support for the likes of alitalia in that. Weve seen International Airlines group suggest what youre doing is illegal that its a protectist measure. What is your response to that . Well, i think all the actions are in a way premature. The company has decided to increase its capital and theyre trying to attract a new sort of shareholders. And but the government is obviously not directly involved in this. We are monitoring the situation. We hope that alitalia will be one of the Major Airline groups. Sort of importantly, its in the market which is now moving towards the further and further consolidation. So we think that a stand alone solution for alitalia will be releasing in this scenario and the government would favor this integration in an International Group is achieved quickly and without too much noise. The comments come amrid pressure for the eu to intervene in alitalia. Phil blain is still with us. Phil, last week we had a spanish auction, yields at which were pretty much what they were at the shortterm debt at the height of the crisis. No one globally know seems worried about the eurozone, just looking at this on a pricing issue. Where is is the firm with italian growth still . I think there has been a fundamental change in the way that people have looked at the eurozone crisis. Now its just seen as a problem. Previously it was seen as an opportunity. There were opportunities to compare it one way or the other either to short the markets in the belief the whole thing was going to collapse or because you had faith the whole thing would pull together so you then bought. And if you had bought european markets when the crisis indicator was at its worse, it made less sense. Now weve mott moved into a new, and i will say it, very, very dull boring phase. Economic news like this problem that the italians are going through with alitalia, like were seeing across europe in terms of the French Election at the weekends which some people have inflated into the end of in the euro which, of course, is nonsense. How we have now are low threshold ongoing ambushes. We dont have a major conflict any more within europe and thats why people, i think, are taking a more san gu in view, stepping back and buying the longterm. Yeah. And demand for spanish and italian debt because theyre still yielding you believe theres no default risk and you want to hold the paper. I think the thing weve learned from this crisis is there should be a proper credit spread between the different european governments. I would argue that perhaps italy is possible tighter than it should be. I think spain is going to get better. But who snows . Phil, good do you see today. Thanks so much. Thank you very much. From mint partners. Still to come, will cost cutting at citigroup show through in its earnings . Well have that preview, next. [ male announcer ] united is rolling out global, satellitefed wifi to connect you even 35,000 feet over the ocean. Thats. Wifi friendly. 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. Sfi group is forecast to earn 1. 04 a share versus 1. 02 a year ago. Thats a revenue of 18. 7 billion. Citigroups earnings come near a year to the day mike culbert took over as ceo. The stock is up around 40 in the last year. Joining us from boston this morning is john butler. John, very good morning to you. What are you looking to hear from citi . Well, as you mentioned, ross, citigroup, the estimate is for 1. 04 a share. We have it versus 1. 06 a year ago. So looking for a slight decline. Citigroup is part of the Financial Sector which is expecting the second is weakest Earnings Growth overall of the ten sectors in the s p 500. Its expecting a decline of 3. 5 . And so this will be a big week for financials. We hear from a number of companies this week and get a better feel for how those numbers might change. You talk about the weakness in financials. How much of that is down to jpmorgan . Right. Well, we saw the decline in the Financial Sector this past week due to jpmorgan. The Company Reported a loss that was well below the expectations and as a result we saw the growth rate for the financials go from 9 last week down to a decline of 3. 5 today. And if you look at the financials overall, its really a tale of a number of companies. Last quarter, we have broad based growth across the sector. But this time around, the jump is concentrated in bank of america and morgan stanley. If you exclude those two companies, the growth rate for the Financial Sector drops from a decline of a double digit decline. The growth in Financial Sector concentrated on two companies, bank of america and morgan stanley. Yeah, okay. Look, stay there, john, because i want people to know, as well well, were asking you to setd the trend by taking part in an online poll. Weve got city reporting today and were asking you how Goldman Sachs is going to do ahead of its Third Quarter were eggs on thursday. What would you do with the stock . Long, short, hold . Head to traderpoll. Kcnbc. Com. Have your say on twitter traderpo traderpoll, as well. Dallas fed president Richard Fisher and John Williams both speaking this city. Citigroup, cocacola, j j, charles swhab, intel, skr sx reporting earnings, as well. John, looking out at the broader earnings season so far, from what weve heard, what does it look like compared to previous seasons . Were actually off to a weak start thernings season, both versus analyst expectations and in terms of year over year growth. So far, 31 companies have reported. Of those 31, 61 have beat the bottom line. You might think thats a good number, 61 , but thats below the fouryear average. On the revenue side, 52 of companies have beat the estimate and thats below the full year average of 58 . Although its early, we are off to a weak start versus analyst expectations. As we talked about earlier, we have seen the growth rate decline from an expectation of 3. 1 at the start of the quarter down to 0. 8 today. So a weak start overall to this earnings season. Wa about guidance . Well, in terms of guidance coming into the earnings well, in terms of guidance coming into the earnings season, we did see it more negative than weve seen in the past. Coming into the earnings season, 91 democrats issued negative guidance. And if we finish there, that would be a record high going back to 2006. We saw a lot of negative guidance coming from companies in the technology sector, Consumer Discretionary sector. And those would are two of the sectors that we did see the numbers come down quite a bit during the course of the quarter. Jauven, its good to see you this morning. Thanks for joining us. As we continue, the debate continues in washington and were told theres a more political question u. S. Lae maushgs are refuse to go address. What is it . Find out when Worldwide Exchange continues after this. This is Worldwide Exchange. Im ross westgate. Global equities edging higher after u. S. Stock ves raised losses on monday on news that Senate Leaders may be getting closer to a deal that would avert a possible debt default. Shares in burberry are down. The British Fashion giant is unveiling the departure of Angela Ahrendts. Shell be replaced by christopher bailey. And citigroup leads the second wave of u. S. Earnings reports today. The bank set to issue its results before the opening bell. Announcer youre watching Worldwide Exchange, bringing you Business News from around the global. All right. A very good morning. If youve just joined us stateside, welcome to the start of your Global Trading day. Global equities have been firmer overnight. The s p up 7. Dow up 4. We are called high he at the moment. S p up not by much, currently 3 points above fair value. The dow is currently some 32 points above fair value. European equities down 0. 75 . Up nearly 0. 8 for the ftse and the xetra dax, as well. Sentiment index ticked higher and sentiment was down a little bit. Maybe that was concern about whats going on in the u. S. Cac 40 up 0. 6 and the ftse mib up around 0. 25 , as well. This is where we stand right now. What are investors to do among the Political Uncertainty . Here is a recap of what some of the experts on cnbc have told us today. Buying into risk is buying into equities in principal. But if youre looking for dividendes and yields, youre looking for Capital Appreciation in the equities market. I dont think thats a great idea. I think you really want to at this stage be looking much more closely at the emerging markets strategy both in debt market terms, preferably in the foreign currency stuff. The local currency stuff, im not so sure. Given that theres going to be more fiscal drag than we had expected. Fiscal drag will be less this year, but it will continue into next year. The economic growth, it wants investment and equities on the road to evaluation. So relative value is wa a lot of investors particularly with u. S. Investors earlier in the year. But with the back up in bond yields, its just nowhere near with some bonds. In the en, indicated that they could be hiking in april. Weve got the norwegians could be hiking at the end of the summer. Weve got the ka nad yaens who could be hiking next year or maybe if the u. S. Growth slows, that will alter that argument. So theres going to be a lot of interest next year in Interest Rate differentials. And it seems that the dollar is going to be the least of that. All right. Thats reports from some of the guests weve had on today. And there could be some relief in sight to the impasse in washington with Senate Leaders reportedly close to a compromise in the debt ceiling. While the next guess says theres a larger and more critical issue thats being ignored on capitol hill. In his new book, mask flourishing, Edmond Phelps says its languished over the last several decades, squeezing out the diamonds needed for home grown innovation. Thanks for joining us. Thanks for inviting me. I always think about the United States being the place innovation can flourish more than anywhere else. Youre saying thats been undermined. How . Innovation has been narrowed. If you fly over the country, you see not much going on in the heartland. The innovation has narrowed to a relatively small, talented group of innovators sort of clinging to the west coast there, clinging to the ocean from seattle down to san diego. And that innovation is still going on. But in the big established companies, most of them in the heartland of the country, i dont think you see much innovation. Its never been really good at innovating, isnt it . Isnt that why you get new companies coming up to replace the thats right. But if you look at American History between 1830, say, right up to 1850, to the 1950s or 60s, you do see plenty of innovation in established companies. Its not all start ups. But also, i think its now harder to start up enterprises. And one reason is a lot of existing corporations have a kind of stranglehold on their position. They have managed, through lobbying and so forth, to make it very difficult for new competitors to enter the industry. In their space, i would agree. But you could also argue that the internet has never made it so easy to launch a company and compete globally. Thats true. Globally, yes. But, you know, most innovators have started with the american market. That is where that is where consumers are that like to try out new stuff. Historically, new products have always started their life in the american product. And then leaped boarders to other countries. In your book, wa do you say is the solution . What would your advice be to these folks who are currently trying to resolve themselves around the debt ceiling or what have you . What would you say they should be doing . It can press a lot of buttons. We can deal with shorttermism and corporate governance. We can deal with tax policy. We can do a lot of things. But i think at the end of the day, we cant make a huge dent in the situation without a big National Conversation on what kind of an economy do we want to have. Do we really want to get back, as i do, as i hope we will, do we want to get back to an economy of dynamism, or do we want something thats much more static and much more protective in which the government and pressure groups mediate things and bargain over who gets what and whats produced . Sounds like a good conversation. Actually, that feeds into youre right, that does feed into actually where the bigger debate that the country needs to have. Stick around, edmund. Were going to come back to you on that, as well, Edmund Phelps joining us. Still to come, blackberry wants everybody to know that the company isnt dead and buried just yet. The smartphonemaker has been writing a letter to customers. Well have the details of what it says after this. The ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Afghanistan in 2009. On the u. S. S. Saratoga in 1982. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation because it offers a superior level of protection and because usaas commitment to serve current and former military members and their families is without equal. Begin your legacy. Get an Auto Insurance quote. Usaa. We know what it means to serve. Blackberrys investors may be ready to throw in the towel on the struggling smartphonemaker, but the company is telling them not to give up just yet. Bertha is at cnbcs hq in the states with the story. Hi, bertha. What are they saying . Hi, ross. You know, its not even just the investors. I think they are just appealing to people to hold on to their blackberrys. Those of us who cling to our keyboards. Theyve got big ads in papers in nine countries. This one is in the washington post, full page ads that are basically saying, yes, we know that weve delayed people, we know weve lost market share, we know we may be exploring sales but were here to stay and saying this is a tool you want, the blackberry, if youre trying to take care of business. Certainly they want to keep that core clientele when it comes to the enterprise and thats what theyre appealing. Theyve published that letter in nine countries, including the washington post, the wall street journal, the toronto globe mail. In the letter, the company says these are no doubt challenging times for us and we dont underestimate the situation or ignore the challenges. Were make the difficult changes necessary to strengthen blackberry. It goes on to say one thing we will never change is our commitment to those of you who helped build blackberry into the most trusted tool for the worlds business professional. Lets not forget president obama wanted to keep his blackberry when he got to the white house. In an interview with reuters blackberry chief marketing officer says uncertainty is the reason why they published the letter because the company is financially stable and has to debt. He also says blackberrys products and services, saying 6 million android and iphone users have preregistered for the launch of its blackberry messenger service. The companys future was thrown into doubt this summer when it announced it was weighing options, including an outright sale. Reports say its in talks with s. A. P. , cisco and google on a possible alternative deal to the preliminary buyout offer made by its largest shareholder, fairfax financial. Last week, blackberrys cocounters said theyre considering making a bid themselves. Blackberry has struggled to compete against the likes of apples iphone and devices running googles android software, new line of phones running its blackberry 10 operation failed to spark sales prompting the company to announce last month its going to cut a third of its workforce. Checking blackberry sales in frankfurt at this hour, theyre trading up about 1. 3 . I dont know, ross, i have a hard time giving up my physical keyboard when i really, really need to write emails. So i hope they stick around. Edmund said the same thing, right . Right. Love my blackberry. There you go. Same thing. Thanks for that, bertha. Good to see you. Angela ahrendts meanwhile is going from purses and pumps to iphones and ipads meaning shell be stepping down from ceo at burberry taking up a new position with apple. Since she took up the role in july 2006, shes prided over a period which has seen burberry Share Price Rise 252 . Fist fer bailey, her creative director is going to take over as the new ceo from mid 2014. U. S. Senate leaders say theyre optimistic about a possible deal to end the Government Shutdown and extend the nations debt ceiling. The Senate Majority leader harry reid said on monday theyd made tremendous progress. Reports say their plan would fund the government through mid january, keep in place the sequestered budget cuts that took effect in march but give agencies more leeway to ease their impact. Senate republicans and democrats are going to hold separate meetings today. House republicans have a closed door meeting at 9 00 a. M. Eastern. Joining us for more from washington, sara faghin and lauren oppenheimer. Welcome to you both. Laura, if the deal that ive just highlighted is what gets put in a bill, what would the House Republicans make of it . Well, i think thats the milliondollar question this morning in washington, ross. We do know that Speaker Boehner and the minority leader, Mitch Mcconnell here in the u. S. Senate have been talking. They met yesterday and they had several conversations throughout the day. So we dont believe that the minority leader, Mitch Mcconnell, would put his caucus to a vote if he wasnt confident that the speaker was going to be able to get the Senate Package through the house. Okay. So are you feeling confident, then . Yeah. I feel, i would say, mildly optimistic that this deal can get through the house. We see a number of considerable smarting. But the prospect of having a set time frame for budget negotiations, which we believe would commence right after this package and go until the middle of december, with the promise of further cuts in social security, in medicare, medicaid payments potentially, that that package would hold out enough hope for enough conservatives in the house to cast a positive vote for this budget deal and allow for longer term negotiations. And look, there are some deadlines in addition to certainly what would occur in december, but, you know, january 15th is when the government would essentially shut down again earn this package. February 7th youd see the debt ceiling need to be raised again. So there are a number of back and forth around those dates. The january 15th date is significant because thats when the next tranche of sequester cuts would go into play. So democrats dont want to see another 20 billion cut from Discretionary Spending in january. So there are a number of other triggers that theyre talking about that could lead to some sort of grand bargain o mini grand bargain in december. Lauren, what do you think . Sara put out those milestones, but she talked about there would be stuff there on medicare kudz and entitlement cuts. How are democrats going to deal with that . Sure. Sara made a lot of really good points. I think the thing that washington often misses is the need for certainty in the markets. And i know a lot of folks on our program are going to talk about that in different contexts. But i think the thing about washington and wall street is that they dont necessarily always understand each other and the goal of this next couple of days is to make sure we can come to a compromise and the markets can accept what fwgoes on. Yeah. We come to a compromise only to continue the talking and then be back here again potentially in, you know, a couple of months. Theres not much certainty in that. Thats the only thing thats certain. I know were going to have this discussion again. Sure. I mean, its true. I think everyone around the table would rather have a longterm deal. But i think this is what we can get at the moment and this is better than default. What do you think is the chance, lauren, and ill ask sara, as well, do we need to have a discussion . This is what edmund was hinting at earlier, a discussion, actually a proper adult discussion about the size and influence of the American Government on the economy and in peoples lives . I mean, is that actually what we is what were debating without actually recognizing that . Lauren . Yeah. I think that is the debate that republicans have wanted to have. And unfortunately, got, i think, side tracked on the notion that they could take down the entire obama care law. And had they focused more aggressively on entitlement reform, perhaps we would be in a different place today. But i think one positive out of this process is it looks like we are going to set up another commission, of course, that is going to take a longer, harder look at what the government needs to do to right itself financially over to longterm. And that will be good for the country and that ultimately could produce the win for Speaker Boehner that he so desperately needs for Speaker Boehner out of himself and his caucus. Briefly, lauren. Yeah, i agree. I think the republicans painted themselves into the corner and theres going to be paint on the ground as we try and resolve this. But i think were get to go a really good point now. Lets hope youre both right. Boosting global stocks, apple poaches burberrys ceo Angela Ahrendtss retail operation. [ taps baton ] [ dings ] [ male announcer ] every thought. Every movement. Carefully planned, coordinated and synchronized. Performing together with a single, united purpose. Thats what makes the worlds leading airline. Flyer friendly. [ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. [ female announcer ] today, cisco is connecting the internet of everything. Stick with innovation. Stick with power. Stick with technology. Get the flexcare platinum. New from philips sonicare. Ahead of the u. S. Open, u. S. Equities up nearly 0. 5 for the ftse. 0. 5 for the spanish markets. The dow currently 35 points above fair value. The s p at the moment 3 points above fair value. Still with us Edmund Phelps. How grassroots innovation created jobs, challenge and change. Edmund, what do you think about the debate and discussion going on in washington . Is it sort of disgust you a little bit or do you think theyre focusing on the right things or the wrong things . Fascinating, but i can its a serious distraction. Theres such a focus on getting the deficit down, never mind how, and to the extent that anybodys paying attention to the structure of wa the government is doing, there is a such an intense focus on reducing entitlements. But it seems to me that the larger picture is that the American Economy has been pretty sick for a long time, since the 1970s. And the symptoms of that are low employment, participation, and high unemployment, as well as slow growth and probably and i think some decline of job satisfaction. And nobodys addressing what the government could do and should do to fix that problem. And i think the government is first of all, its helping the established companies to set up barriers through car bouts and exceptions and regulations so that new every nignterprises caa foothold in the cities that have these established giant companies. Secondly, even with a guard to start up aiming at creating new industry, they are so burdened by the regulations that, as somebody said, if he were a start up entrepreneur now, he would need more lawyers than he would need engineers. Which is a bit of the government is doing a tremendous amount of damage and its failing to help a very sick economy. Its been great having you on set today. Thank you so much for joining us, edmund full hes, author of mass flushing. Thats it for todays Worldwide Exchange. Coming up next, squawk box with plenty more developments in washington, d. C. Goodbye for now. 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. Futures are up. If we close higher on tuesday, october 15th, 2013, squawk box begins right now. Good morning. Im becky quick along with joe kernen and andrew ross sorkin. Senate majority leader harry reid and republican majority leader Mitch Mcconnell both sending out positive messages after yesterdays talks. Its safe to say weve made substantial progress. Were doing our best to make everybody happy, but everyone knows were not going to be able to do that. Everybody, understand were doing the very best we can with all the frailties that we have as people and legislators. The deal under discussion would end the shutdown and reopen the government through the middle of january. Negotiations are focusing on raising the debt ceiling through mid january. Of course, this is only the senate. The house would still have to sign on, too. Well have more from john harwood in just a few minutes. Stock hes ending a volatile session yesterday with small gains. The futures are morning are up indicated by 22 points. The bond market reopens today after columbus day, the holiday. The wall street journal looks at an important trend taking place in the market. Investors who are worried about debt in washington, theyve been unloading billions of dollars of u. S. Treasuries. The banks have reduced their holdings, trimmsh