Transcripts For CNBC Worldwide Exchange 20140521

Russia fails to reach an agreement with china over gas sales as his trip wraps up. But putin assures he has support over ukraine just days ahead of elections. A leading president ial candidate tells cnbc his country is not ready for a union with europe. Youre watching worldwide exchange, bringing you Business News from around the globe. Good morning, everyone. Yes, youre watching worldwide exchange, Ross Westgate and julia chatterley are out today. Lets get back to one of our top stories. The deal is not done an a blow to president putin, china wont reach an agreement to import natural gas from russia during his visit this week. The trip had been hailed as a key test, a sign of russian ties with russian leader calling china a reliable friend and russias leading trade partner. If seened, the deal could be worth 400 billion over 30 years. Meanwhile, the white house has, again, reiterated it sees no need to sign russian troop withdrawal from the ukrainian boarder. Countering claims from vladimir putin. U. S. Vice President Joe Biden has been visiting strategic ally romania where he says nato continues to monitor developments in ukraine. America and our nato allies have urgently stepped up our military presence in the air, land and on the sea of natos eastern flank. The first members of the organization for security and koomgs cooperation in europe arrive in kiev. 900 observers are due in the country. Julia is not sitting in this seat today because shes covering this in kiev. Julia, were seeing backlash against the separatists in the east. Ahead of the president ial elections over the weekend, how much activity are we still seeing on the ground, though . Its a crucial question. I think its one well continue to argue over the next few days 0 are at least come back to. What we saw in the last 24 hours in fact was armed Gunmen Attack some of the polling stations in the east. They removed some of the ballot papers. The intimidation weve been seeing over the last few weeks will continue. You have to expect that will continue right up until the election. The key question is, of course, is that going to impact what countries like russia say about the legitimacy of this election in particular. While we continue to talk about whats beginning on in the east, i think its an incredibly important time to talk about a voice we havent talked about over the last few months, that is the party of region and the president ial candidate for them, dobkin. He would argue he best represents russian speakers in ukraine right now. This is the former ruling party that was overthrown with the protests and the revolution just a few months ago. If i separate out the different candidates, the one thing that does unite them is this call for united ukraine. When i spoke to dobkin, i asked him about reports that his party, the party of regions is in fact funding the separatists in eastern ukraine. Listen to what he had to say. Translator no, party of regions stand for a united ukraine. The wishes and goals of the people who want to separate from ukraine do not coincide with ours. Moreover, i can say this particular region when asked what is more important, we will choose the first. You didnt also finance the ant anti translator not only some parts of ukraine would have been voicing their opinion. These protests were absolutely peaceful and these people that were coming were backed by party of regions, never took part in any riots or actions that would bring harm to people. They just used their right to voice their point of view. Reporter so a key point, hes not denying that the party was perhaps involved in some of the antimydan protests but saying they werent part of the violence. What weve got here are accusations, perhaps, that the party of regions is financing the separatists in the east but its a bit more complicated than that. The financing behind the party of regions is from ukraines wealthiest oligarch. He came out against the separatives. What we seem to be seeing here is actually a lining up now of the oligarchs against the separatists and perhaps behind the leading candidate in this election. I asked mykhailo what he thinks of the oligarchs and power in this country . Do you believe the oligarchs have too much influence on politics. Translator are you asking how it is in reality or how you think it should be . Both. Translator i think people who have special abilities, lets call it that, are influencing the political process of ukraine. This tradition is part of modern ukraine. Unfortunately we havent arrived at a point where Political Parties can operate without this funding. They are going to vote for someone else to run this country. He used to occupy different chars in ukraine. He won the do anything surprising. The main issue is how hell be able to realize the improvement of the whole country. Will he become a president just for some regions of ukraine or will he be a president for the whole of ukraine . This will depend mainly on him himself. Reporter to sum up, this party right now, the key differences between this candidate and the other candidates is that first hes not criticizing moscow. Hes not criticizing vladimir putin. The second thing, hes not promising closer ties to europe. And right now, thats not resonating with voters here. Hes only pulling around 4 of the votes. Well be talking more about that later on in the show. For now, i hand back to you. Thank you so much for that. Well cross back out to you within an hours time. This a day after the military imposed nationwide martial law. Sri is covering the story in bangkok. Watching your reports earlier, it seems as though theres a lot of calm on the streets. If you look at the benchmark index, were seeing calm as well. Would it be fair to say this martial law decree is positive for politics, the economy and the markets . Reporter i think that is a fair assumption. The markets are off the view. We did see adverse reaction, kneejerk panic yesterday. In retrospect, the markets are letting the dust settle here and have come to the conclusion that someone is finally taking charge to try and break the deadlock of the past six or seven months. This is being viewed as positive and the army are getting down to the business now of the mediation process. Peace talks as they describe them. Earlier on this afternoon, around 1 30 p. M. Local time, army chief general pryor met with the leaders of the main parties, the main political rivals, in a way to try to break this deadlock. As i understand it, theres no breakthrough. I dont think there will be any breakthrough for quite some time now. Could be months. Both of the sides have dug in pretty deeply. Pretty entrenched positions. So getting a deal, finding a way forward and negotiating a settlement is going to take some time. The markets are welcoming this military intervention now despite the fact that some describe this as a slow motion coup. It was interesting, i took a walk earlier on this afternoon down the main street here in central thailand and i walked past the Royal Thai Police headquarters. The gates were open. There were no soldiers there. Sand bag positions, there were no soldiers there. They may very well been redeployed to another part of this metropolis. Clearly, the military, a very sensitive, i would expect, to whats being shown in the media, both here and overseas. Soldiers, troops in the streets and that being synonymous with some kind of coup detat. They want to dial that perception back, which is why they escalated their presence. Joining us now is a credit analyst. Thank you so much for joining us this morning. Lets kick things off with thailand. Some say this is a stealth military coup. Others say this would be the way out, out of the political stalemate were seeing. Whats your view on this . It is more likely that it will support a path towards forming a new election date. I think the army was the only party currently that could put some order in the arrest which was going or if some time and had an effect on the economy. I would consider this as a move that could lead to a resolution and most importantly, a new election date over the next coming months. Youve talked about the impact on the economy. Earlier on this week, we have gdp data out for the First Quarter. Huge negative impact. A few things, though, this was the truck, bottom for the thai economy. Clearly, the impact was there. It was inevitable after a few months of unrest. Generally speaking its not as dramatic. Thailand has a very long history of political unrest. In past crises, the impact has not been that significant. Obviously if this unrest continues for a very long time well see more impact coming. Generally speaking, businesses can still operate. More important is the fact that the fundamentals, the macro fundamentals of thailand still remain quite strong and should provide a buffer to whi. The country has Foreign Exchange reserves of 170 billion. At the same time, its external debt is very low, about 6. 5 of gdp. One of the lowest rates within the emerging market. Again, these are significant buffers that can with stand more pressure going forward. All right. Lets also talk about the impending president ial elections in ukraine. Talking to julia earlier, really getting a picture that the sentiment is waning or the support for the separatist is waning. And also russia is taking a softer stance visavis the ukrainian elections. So once the elections are over, what are the next steps again to be for the ukrainian new government . Well, clearly, it looks like the elections now are going ahead on schedule. Tensions have moderated. The rhetoric has come down from both sides, however, there are a number of key issues, quite important issues that will need to be resolved. They will come after the election date. Most importantly, of course, is the fact that ukraine will need to find a resolution on the pricing term of its contract and also pay the hefty amount due. At the same time, the new authorities in ukraine will have to show some sort of will in order to provide autonomy to certain eastern parts of the country. Again, if that doesnt happen, we may see, again, an escalation of the political events s is i eastern ukraine. The imf will have to provide the full economic package which is critical. Thank you so much for this. Credit analyst. Thank you. All right. Lets have a look at european markets then, roughly an hour after the open. The 600 now hovering around the flat line. We were softer to the tune of 0. 3 this morning for the stoxx europe 600. Lets have a look at the individual european markets. Were seeing the xetra dax seeing a fair bit of outperformance but higher by 4 points or so. The ftse 100 is up by 4 points, burberry, one of the big news items on the corporate front. Well talk more about that in just a second. The cac 40 is showing underperformance today, down by more than 0. 1 . Bnp is one of the big decliners because of reports about a huge fine from the u. S. Well get more on that in just a second as well. Lets talk about burberry, posting an 8 rise in annual profit. The company warned of currency headwinds ahead. Were seeing the stock up by 1. 2 . It did underperform a little bit. And the Moller Maersk is higher. The company beat with First Quarter net profit. The group confirmed its outlook for the first year. Speaking first to cnbc, ceo was asked about the impact of the Global Economy. Freight rate continues to be under pressure. Weve seen most of our competitors come out with quite poor results. So the industry is under quite a lot of pressure. Also taking a look at shares of britvic. The shares were sent nicely higher. They say rollout in the United States have gone nationwide. Shares of bnp paribas have sunk to the bottom of the markets in paris. The bank may be facing a fine as much as 5 billion from u. S. Regulators. Thats because it violated u. S. Sanctions. And swiftly moving on to the bond markets, we are seeing tenyear treasury rates. 2. 5 , just about that crucial 2. 5 level. Languishing near the sevenmonth lows. Yesterday we got more dovish comments from William Dudley, talking about the surprising softness in the u. S. Economy. Tenyear bund yields at 3. 5 . And a tenyear italian yield close to the highest levels since april early april at 3. 26 . Weve seen the selloff in periphery of late. And a quick look at the markets as well where were seeing dollar softness on the back of the lower yields. Euro dollar is pretty much range bound at 1. 3711. The u. S. Dollar seeing weakness as well against the japanese yen. And aussie dollar is coming under pressure this morning against the green back down by 0. 1 . Fairly weak wage growth and also we had the fall in the mining shares and the iron ore prices at twoyear lows. Coming up, what kind of europe do you want to live in . With eu voting to start in 24 hours, we speak to Eu Parliament and Commission Candidate scott keller about her hopes and ambitions. Thats coming up after this short break. Dont go away. Youre watching worldwide exchange. Welcome back to the show. Shares of pnb paribas have sunk in paris. They may be facing a fine for as much as 5 billion from u. S. Regulators. Stephan has been covering the story. Reporter its a report from bloomberg news. That would be much higher than the amount that the Financial Times was reporting last week. It says pnb could pay 3. 5 billion to settle a legal case in the United States. In any case it would be much higher than the provision of 1. 1 billion that pnb paribas set aside a few months ago to cover this legal case in the United States. Pnb dont have any comment yet. The bank only indicated a few weeks ago that the final amounts be well in excess of the 1. 1 billion the bank set aside. 5 billion, its more or less the earnings, net profit, that the bank posted for 2013. So that would be not only a record fine for a french bank but also very high amount. Because its the level of the earnings for full year for the largest french bank. Definitely seems as though the doj is getting tougher on european banks as was the case with credit suisse. As we saw yesterday. Germanys siemens requested further information from alstom. This is the latest development in the ongoing battle between ge and siemens to acquire the energy and transport giant. Stephan, earlier on this week, we got reports that siemens was going to make an offer as early as this week. With the latest new now, do you think that will be delayed . We dont know. We dont even know what type of information siemens has been requesting from alstom. Alstom claims that siemens has been given access to the same nonpublic information as General Electric. We are still expected the german group to make an offer for the power units of alstom. Its going to offer probably its business plus cash. Also to get the french approval, siemens is now expected to hand over the wind and Nuclear Assets to another french company. Yesterday the ceo of another company said they would be interested in the wind buyings of altom as siemens could make an offer by the end of this week. So far, General Electric made a formal bid, its offering 1 . 9 billion for the power unit of alstom. As were talking about train scouting, the french realize its new trains which will be put in service in the next coming years produced by alstom wont fit the french train stations. The new trains are wider than the old models. As a result, in france, well have to change a lot of stations to modify them to accommodate the new trains. It will cost the taxpayer 50 Million Euros. And it shows that size matters. 50 Million Euros for only 20 centimeters. Thats a huge amount for 26 centimeters. Thank you so much for that, stephan. Appreciate that. Great story. All right. Starting tomorrow, europeans will head to the voting booths to elect the next European Parliament in brussels. But with continuous protests across the eu over austerity, immigration and youth unemployment what kind of europe will be elected into power . Joining me on the phone from berlin is ska keller, thank you so much for joining us this morning. Youre the lead candidate for the green party. And in this final stretch ahead of the elections, it doesnt look like they will get the top job. What would be a good outcome for you . Were hoping to give up the Stronger Group in parliament. For that it looks really good. For example, in the uk were hoping to get more meps than the two brilliant ones we currently have. We get meps from countries where were not represented so far from the czech republic, from hungary but also from croatia, from spain. We could really see a more diverse and a Stronger Group. It looks like as though youre polling very well in belgium. But that certainly wont be enough for you. Ska, this could be europes big moment. The euro crisis is pretty much done. Were on a recovery path. Despite that, though, it seems there isnt a whole lot of enthusiasm for these elections. Why is that . I think its because i wouldnt be under the assumption were out of the euro crisis. We have 26 Million People inside the eu being unemployed. Among them 5. 5 million young people. Were rally not out of the crisis. Were still deep in the middle of the crisis. We have to overcome that in order to give people hope and perspective again. For that we need to make sure that we overcome the current austerity measure which is have only brought deeper and deeper into the crisis and which have drought many jobs and brought people to poverty. We need to make sure people feel its going upward. For that they need good, quality jobs with perspective and they need more Social Security like possibilities for securing their social well being also all across europe. All right, ska keller, thank you. Candidate for European Commission presidency and member of European Parliament. Still to come on the show, sterling is gaining momentum ahead of the bank of england. Minutes set to come out right after this break. Stay tuned. And crowd cheeringhing band sfx sounds of marching band and crowd cheering so, im walking down the street, sfx sounds of marching band and crowd cheering just you know walking, x sounds of marching band and crowd cheering and i found myself honoring americas troops. De ich is actually ite fitting because ico has been servingng band and crowd cheering and i found myself e military for over 75 years. Aawh no, look, i know this is about the troops and not about me. Right, but i dont look like that. Who can i write a letter to about this . Geico. Fifteen minutes could save you fifteen percent or more on car insurance. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if it becomes simpler. If frustration and paperwork decrease. If grandparents get to live at home instead of in a home. The gap begins to close. So lets simplify things. Lets close the gap between people and care. Youre watching worldwide exchange, bringing you Business News from around the globe. The yen jumps as kuroda stumps the market with his optimism. The bank of japan governor says the country is already halfway to meeting its 2 inflation goal. Full steam ahead for mollermaersk. Burberry says japan will be a key platform for future growth. The deal is not done. Russia fails to reach an agreement with china over gas sales as putins trip to shanghai wraps up. All right. Lets get straight to the boe minutes for that april meeting. The bank of england minutes show the mpc voted 90 in may to keep Interest Rates unchanged at 0. 5 . That of course is in line with expectations. And the mpc has been in accord over the rates since july 2011. For some mpc members, the decision on whether to raise rates is, quote, becoming more balanced and that, too, really shouldnt be a surprise given that weve seen this surprisingly strong uk economic growth. All members agree the need to see more evidence of slack reducing before raying rates. How do measures slack . That is the big question, though. There has been considerable uncertainty and range of views about the boes 1 to 1. 5 gdp estimate of slag. It could be argued that the more gradual, the intended rise in rates, the earlier the boe needs to start tightening and just to continue with some of the commentary this morning. It would be premature rise in rates and could risk a, quote, substantial cost in lost output. Lets just have a look at what sterling is doing. Also as were getting uk retail sales up 1. 8 in the three months to april versus the previous three months. This is the sharpest rise since march 2004. And in anticipation of that, we have seen quite a jump in sterling dollar. Take a look. Its rising further, up by roughly 0. 5 at 1. 6914. Were back to the levels we saw just a few weeks ago, close to that fiveyear high, i would argue. Again, cable at 1. 6912. There had been rumors about stronger than expected retail sales. That was helped by the easter effect as well. Lets get more analysis on this. Joining me now is adam cole. Head of strategy at rbc. Any surprises here . Not really, no. I think as we go into the mpc meetings and minutes going forward, there will be a growing expectation that we see some dissent on the mpc and one or two members starting to vote for a hike. Clearly that didnt happen at the may meeting. Even if it does, we think were still many months away from a consensus forming for higher rates. Were still reasonably constructive on sterling. The right dynamic in particular has probably run about as far as it can with the market priced for a hike in the early months of next year. Were seeing cable coming off the session high, 1 9. 10. Still up by 0. 4 . Do you want to take profits here . Yes, on cable probably. If we wanted to play sterling strength, wed pay on the cross rather than against the dollar. The activity data very good today. We dont think theres an awful lot more in Market Pricing in terms of higher rates from here. What about the retail Sales Numbers . Up 1. 3 , monthonmonth in april. That is much higher than expected. We know that retail sales data, not just in the uk is usually volatile. How much attention to do you want to Pay Attention to this . Clearly the data have been usually volatile recently. There are some effects due to the timing of easter, of course, were not sure the statisticians can probably adjust for. The trend is undoubtedly very good. Retail sales are robust and the consumer and root health. In terms of the monthtomonth changes or monthtomonth volatility, i think the market has quite a high tolerance for surprise given the uncertainty around that data. Lets cut back to mr. Carnies comments about the Housing Market over the weekend, saying this is the biggest risk to the uk economy and the recovery right now. Is the boa behind the curve when it comes to howsing . We all know it was slightly behind the curve when it came to rates and uk growth. The key point for us is that Interest Rates arent the only instrument that can be used to slow the Housing Market. We do see risks. The policymakers have a whole range of macro prudential tools without using the blunt instruments of an early rise in Interest Rates thats where we look next month, first of all, for policy action rather than necessarily higheren treft rates. All right. Stay there while we talk about the bank of japan. The bank of japan, keeping policy steady amid solid signs of grown and stability in the economy, following the new sales tax. There were fears that the new tax may have required the boj to introduce further monetary stimulus. But there was no sign of worry from governor kuroda. In a press conference he said japan was already halfway to meeting the 2 inflation goal, adding there were clear improvements in the labor market and wage growth. His comments moving the dollar yen quite significantly. The dollar falling to a sixmonth low against the yen. Adam, let me bring you back in on this. Theres been so much disappointment about the lack of further easing by the boj. We all know they want to first wait to see the effects of the sales tax hike. I guess were not expecting anything until july. Thats the consensus, indeed. And its certainly true that analysts have been overly optimistic in terms of how soon the boj would ease again. Realistically, i think if there is going to be further stimulus wont come until weve seen the full numbers for the Second Quarter with a problem comprehensive picture of how the economy held up to the sales tax increase. That doesnt come till august. Even then i think its far from a foregone conclusion that the boj will ease from here. I think the risk is that that drifts lower from here and takes dollar yen with it. Every time i speak to you, we talk about the lack of volatility, close to sevenyear lows. What does this signal . Last time we saw these levels thats with a precursor to the financial crisis. Is this the same indicator. Youre right, of course. Last time it fell to these levels it was just before it spiked up during the financial crisis. With hindsight we were premature in calling tit cyclical. This time, the drivers are different. We see it much more as a result of regulatory change, of microstructure of market thats holding down vol rather than being a consequence of overconfidence in policymakers, which i think was the case in 2007. So overall, we are more convinced this time that its structurely lower. If vols are low to stay, how do you make money in the typical markets. Low vol means you can hold a position without volatility stopping you out. The Interest Rate spreads are so tight at the moment, vol would have to harbor gain from here before carry strategies start to make sense in g10. What i do think, if you look at g10 versus emerging markets with be there are selected Currency Pairs where you are properly compensated for holding high yielding market currencies by the low volatility. All right. Selective carry strategies. Thank you so much for that. Adam cole, head of currency stj at rbc. Breaking news relating to egypt, egypt sentences the former president , Hosni Mubarak to three years in prison. He was sentenced on charges of stealing funds or stealing from public funds, rather. Moving on, Stanley Fisher is one step closer to joining the fed as vice chairman after he cleared a key procedural hurdle and the u. S. Senate on tuesday. Lawmakers voted to limit debate on his nomination virtually assuring the form ahead of the bank of israel will join the feds board within days. A final vote is set for this afternoon. Votes on two other nominees, brainard and Jerome Powell havent been confirmed but are expected to be confirmed from june 17th. Peter prett proposed a ten basis point rate cut. Here is a take on the Central Banks policy options. She asked whether the eurozone crisis is over. We have seen the recovery starting last summer and this recovery is instilling hope and confidence to some extent in sustained recovery. We also have still some problems. There are some problem areas, reform agendas left. The debt overhang, private and public debt has been reduced but its still there. In some countries, the Banking Sector is fragile in many european countries. And in particular, the competitiveness of companies in some of the euro area countries are quite low. So it has to be enhanced. Thats one problem set. The other one is that the architecture of the euro area has still to be completed and has advanced. Its more resilient than before the crisis but it has to be made more resilient. How . There will be no fiscal union as such. There is not the willingness in individual member countries to hand over part of the fiscal sovereignty and this recognizing this, you need to have some provisions that make individual sovereign fiscal behavior and common Monetary Policy work together. The vehicle to do that has been the no bailout principle. It has not worked obviously. It was not credible. One of the big tasks is to make this credible and that can only be happening if there is Something Like a debt restructuring of sovereign debt built into the structure if really a severe crisis is emerging. Do you think its a give than were going to see ecb policy action at the june meeting and would the ecb Additional Support do anything to help some of the areas that you talk about . Well, in any case, the recovery in the euro area is not selfsustaining. You need an expansionary monetary stance anyway. Theres not much room left for lowering it. Even if you move into the negative realm, if you were to do so, you shouldnt expect too much from it. Monetary policy anyway can only sustain the Economic Activity over some time. But the real problem solving has come from reforms in the product markets and must come from budgets. Burberry sees a boost in sales but warns of macro head winds ahead. Well find out whats up for the luxury retailer, up next. Dont go away. The white house has again reiterated it sees no sign of a russian troop withdrawal from the ukrainian border, countering claims from vladimir putin. U. S. Vice President Joe Biden has been visiting strategic a y allies. Theyve stepped up our military presence in the air, landing on the sea of natos eastern flank. The first members of the organization for security and operation in europe arrive in kiev to monitor the president ial election. A total of 900 observers are due in the country. Mykhailo dobkin is one of the contenders. Julia asked him if hes ready. Translator ukraine is not ready for any kind of union. We should follow the policy of open doors and work on relationships where we have strong interests. We should work with the eu where we have close ties with the Trading Union of russia, we should follow those interests. The more partners we have from different parts of the world, the more chances we have for healthy, economic development. Do you think you can ball ons those things, closer ties with the eu, it doesnt have to be about joining the european union, its about trade or whatever it is, and closer ties with russia. Thats the cross roads we seem to be at right now. Whoever becomes the president of the ukraine will have to normalize and balance relations with the United States of america, the european union, russia and other countries. We cannot zoom in on bilateral Politics Today as it would be bad for our economy. As far as russia is concerned, if we manage to normalize economic relations with this country, it would be a socalled guarantee of the future. So lets talk about the regions. You support decentralization of power to some degree. Does that extend as far as federalization if thats whats necessary . I still think that federalization is the best way for ukraine to overcome the kind of conflicts we have right now and bring back peace. For now unfortunately, its impossible to make the federalization process work. Without damaging the unity of our country. So i am for decentralization and giving more powers to the regions which would almost give the same rights to the region in the United Country as in a federal one. Julia will be joining us live later with more of the interview with dobkin. Burberry reported a 17 jump in annual sales in its first set of results since new ceo Christopher Bailey took the helm, however, the luxury retailer warned if Foreign Exchange rates reman at current levels, profits no 2014 and 2015 would see a, quote, Material Impact. Burberry shifted focus to japan, planning to open stores in tokyo and osaka. Joining me now on set to discuss these numbers and the outlook for the luxury market is ben voyeur, consumer psychologist and marketing professor at europe business school. What do you make of burberry reports apart from the sterling impact. I think whats interesting at burberry, its at a key state of development in asia. Its been strong, reinventing itself. Burberry brand made it a loud brand for chao i these customers. Chinese customers, their preferences are evolving. Its quite interesting that just recently burberry has opened an online store on alibabas team mall. A lot of people say this will hurt burberrys brand. Its certainly going to drive volumes, isnt it . On paper it looks good. Youre reaching your customers, have additional sales. In some countries it makes sense. The u. S. , you have large geographical spaces. But three things can hurt a brand that goes online exclusivity. When everyone can buy the brand online, it becomes less exclusive. How do you represent the atmosphere online . You walk into a Louis Vuitton store, its magical. Some brands like chanel have decided not to sell online. Another strategy is away to bring Additional Services to the market. Analysts have been bearish in terms of the luxury mark net china because of the crackdown on corruption, because of fact that the market is maturing. Its not all bad, is it . The market is still growing. We tend to forget that, dont we . Exactly. The growth is expected to be around 2 , down from 7 to 15 in previous years. You have two part of the markets are interesting. First of all, affordable luxury, american brand like coach are thriving on the chinese market. The other segment is that whereas the big cities are saturated, the smaller region or cities have potential for luxury market in china. Lets say youre a european or u. S. Company, a Luxury Company and you want to gain your foothold in china. Is it as simple as buying local chinese luxury player . In that way you gain your exposure to that market . Theres a major difference between the chinese customer and the western customers. I published a study in which we review the cycle we call differences in consumption. Chinese customers are driven by collectivist values they want to belong to groups. Very different from the western customers that are all about being unique and different and want limited edition. Western brands benefit from the origin effect. Consumers want to buy not just into a well crafted handbag but they want to buy into a lifestyle. That lifestyle is often the western lifestyle. Some brands like ermens has been working with zhenga. The market is shifting towards a stronger local platform. Obviously the chinese now want products that are less loud, in a way that theyre less flashy. How are european and u. S. Luxury companies adapting to that . Are they doing a good job here . Theyre slow at understanding basically what made the success of Louis Vuitton, the bag with the lv logos and the burberry check are something people dont want anymore. Theyre struggling to adapt. Chinese customers are changing and they want something different. It benefits from other brands, quiet brands from the group. For instance, another brand that produces less loud items are benefit from this. Weve been talking about the western sanctions against the market. To what extent is it impacting the luxury market . Is there any effect . There will be eventually. The luxury market in russia is already a bit stumbling because of the ruble, the Exchange Rate is quite low. The crisis in ukraine has been affecting the richest who usually have money to burn stopped or lessened their spendings. Eventually this might create a negative association with western products and western brands might suffer from being a western brand in russia. Thank you so much for your time. Ben voyeur, consumer psychologist and marketing professor at europe business school. And mollermaersq has confirmed its outlook for the full year. Speaking first to cnbc, the ceo was asked about the impact of the Global Economy on freight rates. Freight rates continue to be under pressure. And weve seen most of our competitors come out with quite poor results. So the industry is under quite a lot of pressure. Meantime, they beat forecasts. Sending shares higher. The firm says rollouts in the United States have gone nationwide. Google may be about to go on a mega shopping industry on tuesday. The Company Publicly disclosed a letter it sent to the s. E. C. In december. Saying it needs up to 30 billion in overseas cash to help finance purchases of technology rights. It passed on a potential 4 billion to 5 billion deal for a finance company last year. Wonder who that was. The disclosures came in response to the questions about overseas profits and how it plans to spend them. Google shares in frankfurt, slightly higher by 0. 2 . Twitter passes on a deal to make sweet music. Reports say the company considered buying german Music Streaming Service sound cloud but walked away from the talks. Twitter let an exclusive debt line pass reportedly because the numbers didnt add up. The deal could have been the largest ever deal for twitter. Sound cloud has more than 250 million members and was valued at 700 million after a round of funding earlier this year. Twitter shares in frankfurt modestly higher as well. Microsoft made a fresh play for the tablet market, enveiling the allnew surface pro 3. Reporter the microsoft ceo was in new york just hours ago for the launch of this, the surface pro 3, very thin, slightly thicker than the iphone 5. It will sell for around 800, another 130 for the keyboard itself. Microsofts arguing this is the first device that actually brings together the tablet and the laptop with no compromises. This really attacks pretty much the high end of the laptop market more than the tablet market. The fullsize ipad starts at 500 bucks which you can get cheaper if youre going for an 8 inch or 7 inch tablet from apple or one of the android members. Microsoft continues to push this devices and services strategy. Hardware is a means to an end. Nadella argues that hes not trying to compete with oems, vendors like lenovo, hp and dell but rather trying to raise the bar, inspire those others to do well with their devices. I talked to an analyst about that. Heres what he had to say. Microsoft is starting to position themselves as a provider of services that work well on their devices but will work on other peoples devices as well. Well have to see if it works out the way that microsoft has envisioned for the surface pro 3. The holiday season, q4 in particular will be a key test. For cnbc, im jon fortt. Lets give you a look at what u. S. Futures look like a couple hours before the start of the trading session, the s p 500, dow jones and nasdaq seem to be bouncing back from the fairly big losses yesterday. Small caps once again underperforming. Well be back with plenty more after this short break. Welcome to worldwide exchange, im carolyn roth. The end jumps as kuroda stems the market with his optimism. He says the country is already halfway to meeting its 2 inflation goal. The deal is not done. Russia reportedly fails to reach an agreement with china over gas sales as putins trip to shanghai wraps up. Burberry and vogue, the fashion house posts an 8 rise in annual profit and says japan will be a key platform for future growth. The fed may soon fill a vacant seat at the fomc round table as the u. S. Senate could vote to convert Stanley Fisher to vice chairman as early as today. Youre watching worldwide exchange, bringing you Business News from around the globe. Good morning, everyone. Is the second hour of worldwide exchange. And let me show you what u. S. Futures look like early on. The s p 500, the nasdaq and the dow are all seen opening higher, just a tad. But at least it is some form of stabilization, a bit of a bounce back after yesterdays heavy losses. The dow was down 0. 8 , the s p down 0. 66 . Small caps once again bearing the brunt of the losses, down by more than 1. 5 . The losses on the main markets really being led by retailers after we got those disappointing numbers from the likes of home depot and staples. Today all eyes on the fed minutes, of course. All right. Lets have a look at european markets then. We are pretty flat here in terms of european markets. Want to show you the individual market one by one. We are seeing underperformance in the french markets with the banking stocks leading the decliners on the back of that bnp speculation about a huge fine as big as 5 billion coming from the doj about the bank violating u. S. Sanctions, the cac 40 off by 0. 3 , the ftse 100 off by 0. 2 , despite the fact that uk retail sales came in much higher than expected and the boe signaling a more balanced view to hiking rates. The extra dax pretty much up by four points. Seeing nice outperformance. Looking at the bond market, its quite interesting to see that. The italian yield was at the highest level since early april. We have seen that selloff in the periphery of late. Whether this is a buy signal, who knows. The yield at 3. 22 . The tenyear gilt yield shooting up to 3. 6 on the back of the betterthanexpected data we got out. And the tenyear treasury yield stuck about that 2. 5 level, languishing at the sevenmonth lows and the lowyield environment that was reinforced by William Dudley. I want to show you what the markets look like. We saw a spike in the pound sterling, specifically against the u. S. Dollar. Weve got cable at 1. 69 up by 0. 4 on the day. Were seeing yen strength coming through on the back of the boj announcement. No change in Monetary Policy. And thats disappointing a lot of abeonomics believers and euro dallas, waiting for the ecb meeting early june, arent we . 1. 3710. Pretty much flat on the day. The white house has again reiterated. It sees no sign of a russian troop withdrawal from the ukrainian border, countering claims from vladimir putin. U. S. Vice President Joe Biden has been visiting strategic ally romania where he said nato continues to monitor developments in ukraine. America and our nato allies have urgently stepped up our military presence in the air, land and on the sea of natos eastern flank. The first members from the organization for security and cooperation in europe arrive in kiev to monitor sundays president ial election. In total, 900 observers are due in the country. Want to get back out to julia whos standing by in kiev. Julia, how much activity are we seeing from separatists in the east in the runup to the elections . Its a very important question. In the last 24 hours weve had reports of up to 12 voting booths being attacked, the ballot papers being confiscated. The intimidation of people who want to vote in the east tonights. Well come back to that in the next two days as we see if people are able to get to the voting polls. One of president ial candidates who comes from the party of regions, the former ruling party here, somebody who i think would agree he believes he best represents the russian speakers in this region. His name is mykhailo dobkin. Let me give you an understanding of the key differences between him and the other candidates. Hes not criticizing moscow. Hes not criticizing vladimir putin. Neither is he talking about a closer relationship. Thirdly, hes not promising to bring crimea back to ukraine. Thats where i started. I asked him, why isnt he . Surely thats a votewinning tactic. Listen in. Translator its because i dont like to lie to my electorates. I dont think the crimea issue will be solved by empty promises. We will need patience an a balanced approach. Do you still recognize crimea as part of ukraine . Translator absolutely. Now, dobkins party, the party of regions has actually been accused of funding the separatists in the east, the party have denied it. But at the same time, the partys also funded by the biggest oligarch in it country who just in the last 24 hours actually spoke out for the first time against those separatists. What were now seeing is a lining up of some of the big oligarchs in this country. It has to raise all the questions about corruption, where the true power in this country has always laid. Listen in to what he had to say about the role of the oligarchs in the power play in this country. Do you believe oligarchs in this country have too much influence on politics and will you change that. Translator are you asking how it is in reality or how you think it should be . Both. Translator i think people who have special abilities, lets call it that, are in some way or another influencing the politics of ukraine. This is part of modern ukraine. Unfortunately we havent arrived at a place where parties like this can exist. Human psychology will vote for another person to run this country. Translator he used to occupy different shares and different governments in ukraine. He wont do anything surprising. The main issue is how hell be able to realize the improvement of the whole country. Will he become a president just for some regions of ukraine or will he be a president for the whole of ukraine . This will depend mainly on him himself. Ill be talking about all the candidates over the next few days. But i think the one thing that does unite all of them is this belief that they want to see a united ukraine going forward, end the violence, lift the economy and the crucial element to this now is an election to get a president to allow them to do that. Four days and counting. Back to you. Four days. Julia, thank you so much for that. Despite the recent equity market slide state side, Legendary Fund manager bill miller has been sticking to his bullish call on the market. Longterm investors should relish current conditions, said this man. I aids great market for people who want to invest who have a tom horizon longer than the next 30 minutes to three weeks. Joining me from new york, george, good morning to you. Is this stealth correction that weve been seeing in the market, is it ending . Theres been a stalemate for quite some time, really. But not so much in the bond market. The bond market finally broke free from trading sideways from pretty much the beginning of the year and just on the back of expectations changing on where the fed will go and really how strong and robust this recovery is. Thats the big question in the markets. Why the yields . Break through that 2. 55 level. Is it because the fed is essentially still easing . And it is, even though its tapering or is it because we are now significantly downgrading our expectations for growth . I think its a function of both. At the beginning of the year, most forecasters, economists were extrapolating the good data we had in the second half of 2013. And expecting it to continue uninterrupted all throughout this year. Obviously we had a tough spot with the weather but we cant completely blame it on that. I think investors are realizing that the u. S. Still requires some stimulus to keep growing and you know, the fed also doesnt want to disrupt the apple cart and pull back on easing too quickly. I think were getting people to a place where they realize that rates probably have to stay low. They shouldnt be at zero forever either. They know the tapering process is a gradual one and its ongoing. All the comments we heard from dudley, although bernanke is no longer at the helm, the things he said over the weekend and yellens dovish sentence, it seems like the fed doesnt mind staying this low. 2. 5 , thats the bottom for the tenyear, whats the trading strategy. We shouldnt call it a bottom we dont know what the bottom is at this point. Theres still uncertainties out there. If you look at last year, the gap in rates from 2. 25 to 2. 50 created an air pocket. Where most of the time those sort of technicals get filled. The market is reluctant to trade under 2. 50. I think there is scope for a little bit further lowering yields. George, thank you so much for that. Stay with us. Well talk plenty more about the fed and the upcoming fomc minutes later on today. Todays minutes could be lackluster. Should investors be prepared for them to spark increased volatility . Well discuss right after this break. Youre watching worldwide exchange. These are your headlines this morning. The Federal Reserve looks to add Stanley Fischer to its ranks. A spike in the yen as the bank of japan claims its halfway to its inflation target. After ten years, still no deal. Russia fails to agree with china over gas sales. All right. Lets give you a look at whats on todays agenda in the United States. The minutes from last months fomc meeting will be released at 2 00 p. M. Eastern. Fed chair janet yellen is giving the commencement address at nyus graduation at 11 30 a. M. Well hear from two other fed official this afternoon. Target, pet smart, tiffany and American Eagle outfitters report before the open while elle brands and willia sonoma are out after the close. New york fed chairman dudley speaks to a group of economists. He reiterated that at central bank will wait a while before raising rates and he says inflation will drift upwards toward the feds 2 goal. Stanley fischer is one step closer to joining the fed as vice chairman after he declared a key procedural hurdle in the u. S. Senate on tuesday. Lawmakers voted to limit debate, virtually assuring the former head of the bank of israel will join the feds board within days. Vote oz two other nominees, brainard and Jerome Powell havent been scheduled but are expected to could be confirmed before the next fomc meeting on june 17th. Lets get back to our guest, george, what are you expecting from the fomc minutes today . A lot of people say this will be a nonevent. What kind of information do you want to glean from that report . Volatility has been low and in general, we get a pickup of volatility around fed events and key economic data. The fact that most people are expecting very little gets me cautious. I think if you look at the statement of the release after the meeting, it was a pretty blase temper. We get to learn got exit strategy. That discussion keeps coming back to the fed, trying to figure out how theyll leave these extraordinary programs. Ultimately theyll start the process over the course of the next few months into next year, what i call the four hows. How soon, how quickly and how high do they get rates up to . Theres been a lot of discussion about the tools, the fed funds rate at a tool, many people say wont be as efficient as its been in the past. There are now talk about reverse repos, is that going to be any clearer in terms of communicating those tools . I think the fed will spend the next couple of months, quarters, educating the market. Just think about it. Were here on cnbc and the fed says they raised the rrp rate . People will say what exactly is that . People are more familiar with the fed funds rate. I think they will still rely on that as a communication channel but create a corridor where the reverse repo rate will be a floor and the roe rates will be banned. Theyll try to raise rates by moving those over time. They have a lot of work ahead of them in terms of educating people. I think the market will come around to understanding where this is a time where they had extraordinary easing. They cant shrink the balance sheet. That ill ha theyll have to use the unconventional tools. The market assumes the fed is on Cruise Control when it comes to tapering. Is it really . I think so. What would require the fed to stop tapering would be something dramatic thats coming from left field. Not knowing the outcomes of the future that you have to take as your base case if the we can it market is down 10 over the summer, theres a probability that it will stop tapering or at least rethink it. It needs something dramatic to stop the easing or the tapering of the easing. I think that sets them up for gauging how the economy can stand on its own two feet without stimulus and whats in store for next year as they get ready for hiking. George, thank you so much for your comments this morning. And in other news, more incumbent republicans beat back Tea Party Challengers at primary elections on tuesday. Mitch mcconnell won the gop nomination. Hell face democrat Allison Lundgren grimes this fall. In georgia there will be a june offbetween congressman Jack Kingston and former dallas general ceo, david perdue. The gop needs to pick up six seats to gain control of the senate. A former top jpmorgan executive in china has reportedly been barred from leaving the country and could face charges in connection with a probe into the banks hiring practices. A chinese Business News site reports he was arrested by hong kong authorities and later released on bail. He left the bank in march and was according to the New York Times the subject of a u. S. Investigation into alleged allegations and hired relatives of chinas officials in order to win business. Meanwhile, the bank of japan kept policy steady amid solid signs of growth and stability in the economy, following the new sales tax. There were fears that the new tax may have required the boj to introduce further monetary stimulus. But theres no sign of worry from governor kuroda. In a press conference he said japan was already halfway to meeting the 2 inflation goal, adding there were clear improvements in the labor market and in wage growth. His comments moving the dollar yen paired quite significantly, the dollar falling to a sixmonth low against the yen. Still to come, pill the latest earnings purr or bite . Pet smart, the company attempts to beat back the competition from the likes of walmart. Cars are driven by people. Theyre why we innovate. Theyre who we protect. Theyre why we make life less complicated. Its about people. We are volvo of sweden. Welcome back to the show. Lets have a look at u. S. Futures. Theyre indicating a slightly higher start. A bit of a bounce from the selloff we saw across the board yesterday. The s p 500, the dow jones and the nasdaq all seem modestly higher. The dow jones taking fair value into account is seen up by 35 points. Okay. Lets get back to earnings. Burberry posted an 8 rise in annual profit, meeting expectations. However, the Luxury Fashion group has warned that if fx rates remain at current levels, there will be a Material Impact on current year profits. Burberry said outerwear, leather g goods helped boost the sales. Salesfarce. Com reported a wider First Quarter loss. Adjusted results beat analyst forecasts. Revenue rose a betterthanexpected 37 . Prescription and support fees which make up a bulk of the Company Sales rose 36 . Salesforce shares in germany are down almost 2 . And pet smart will report before the u. S. Opening bell today. The companys surprised to the upside in its last earnings score card but faces ever increasing competition from traditional retailers such as walmart. Michael, good morning to you. What are you expecting from pet smart today . Im expecting that pet smart wasnt immune from all the retail choppiness weve seen in the last few months. Its been a difficult quarter throughout the retail complex. Thats probably weighed on pet smarts performance. Were looking for a 1 increase in samestore sales. The risk probably is to the down side. There are most likely able to make up any sort of sales shortfall with better margin performance but still, we dont know that the market will necessarily reward that. Amazon and walmart increasingly penetrating that market. Hows pet smart dealing with that . Retail is definitely a zero sum game. Pet smart is trying to deal with the intense Competitive Forces by focusing on channel exclusive items and services. Those are differentiating factors. If you could only get certain items at pet smart stores or through its website, youll be more likely to shop there. You can take your animal to get groomed, traded or boarded at pet smart. Those are differentiating factors that should enable it to compete over time. If we look at the sales breakdown, 88 of revenues coming from merchandise. And the rest from services. This is not a good sign, is it, because Services Carry a much higher margin. Well, i dont know necessarily just because of the way the sales break down its a bad sign. Whats been tough is the way this model has worked in the past. They drive all this traffic to the stores because every month consumers have to get food for their animals. When theyre in the store, they add items in the basket like collars, leads, all those discretionary items. Those are highly profitable. Thats where pet smart makes a disproportionate amount of the money the issue and concerns in the market recently has been, if consumers are increasingly gravitating to baying consumers online and theyre less likely to go to those stores, that will hurt pet smarts profitability. There are signs that traffic has softened. What pet smart needs to show is they can accelerate traffic trends. Buy, hold or sell . Were a hold. Until theres stability, the stock will stay stuck in its recent range. Thank you. Still to come on the show, will targets data breach and unsuccessful canadian expansion cause the retailer to miss the mark . We preview the earnings after the break. Predicting the future is a pretty difficult thing to do. But, manufacturing in the United States means advanced technology. We learned that Technology Allows us to be craft oriented. No ones losing their job. Theres no beer robot that has suddenly chased them out. The technology is actually creating new jobs. Siemens designed and built the right tools and resources to get the job done. Welcome to worldwide exchange, im carolyn roth. These are your headlines from around the world. The yen jump as kuroda stumps the market with his optimism. The bank of japan govern every says the country is already halfway to meeting its 2 inflation goal. The deal is not done. Russia reportedly fails to reach an agreement with china over gas sales as putins trip to shanghai wraps up. And burberry, the fashion house posts an 8 rise in annual profit, saying japan will be a key platform for future growth. The fed may soon fill a vacant seat at the fomc round table as the u. S. Senate could vote to confirm Stanley Fischer as vice chairman as early as today. Youre watching worldwide exchange, bringing you Business News from around the globe. Good morning. If youre just tuning in, thank you so much for joining us here on the show. Lets have a look at u. S. Futures. The dow taking fair value into account is seen higher by around 35 points. Were expecting a positive start to the trading session for the s p 500 and the nasdaq. The nasdaq down by 0. 7 yesterday. Keep in mind we have seen volume at a onemonth low. Thats not necessarily helping traders out there. Also want to show you what european markets look like early on this morning. The ftse 100 is off the session lows but still in the red after we got the retail Sales Numbers, much better than expect. The boe showing a more balanced view so the hike in rates, the xetra dax, up by 0. 3 , the cac 40 turning around a little bit. And the ftse mib is seeing outperformance to the tune of 0. 7 . How do you make money in these markets . Heres what some of the experts have been telling us this morning. The surprise element in the u. S. Treasury bond market has been recently, perhaps the last month where there has been evidence of a recovery that actually hasnt filtered through into higher yields. How long can that last in the fundamentals always play out in the end. That will dictate the market news. The fact that he hasnt signed a deal with the chinese is quite interesting. It tells you the economics and cost of what hes doing is nontrivial. So our best expectation is that there wont be further aggression in the ukraine. So its probably, broadly speaking, good for risk assets. Market sources tell us we could be reaching the bottom sign. The iron ore stocks and the steel mills in china are running low, 10, 20 days right now. I think the price is getting to a level whereby its becoming attractive for buyers to come back into the market. Weve got some breaking news for you. Surroundi surrounding gazprom. Russias gazprom signed a gas agreement with china, this is according to reuters. Reuters saying this has actually gone through. A little bit of confusion as to whether this deal has gone through. Now, according to the ft this morning, there was a delay in the signing of that deal. Its been in the works for about ten years and if it is delayed or if it falls through altogether, obviously that would be a huge blow for mr. Vladimir putin. Obviously because he wants to show the west that he still has some friends in the east. Now, according to some of the flashes, the gas deal between china and russia would be for 30 years to supply 38 billion cubic meters of gas. As soon as we have that confirmation, that final confirmation from gazprom, well bring that to you. Interesting comments coming from mr. Barroso, the commission head. Hes told russias putten in a letter that it is up to gazprom to ensure that gas is supplied to europe, calling on him to maintain europes gas supplies and, again, in that letter that he sent, hes urging russia not to interrupt gas flows through ukraine. Remember, this is against the backdrop of russia warning ukraine that if they dont get payment for their gas payments up until june 2nd, they would cut those supplies on june 3rd. Its been a tough start to the year for target. First the Company Fired their ceo and now their head of canadian operations is out, too. New ceo John Mulligan will face tough challenges, especially while traying to convince investors to keep faith with the trigger happy u. S. Retailer as well. Here to tell us more is managing director at strategic resource inside group. Bert, how bad are the numbers going to be . The numbers will be bad. Target will struggle to make 71 to 72 cents a share and struggle to make 71 billion in retail sales. Consumers lost confidence in target because of the credit card breach. As much as tesco struggled coming to america, target is struggling even more in canada and across rus operations. Canada is the elephant in the room. At what point will we see a positive contribution from that market or at least a break even . Carolyn, its going to be years. Targetly stupidly outsourced distribution of groceries to sobes. Target gets shipped last. Target finishes last. Target should finish first in canada, the same way william pitt did when he moved the french out of north america out of the french and indian wars that ended in 1763. Canada should have been targets easiest move, the same way it was when tarring eight choired gemco. Instead, canada has become targets waterloo and its going to become worse. Its all about online. Target has outsourced that to amazon. They stopped doing that two years ago, now they have a tieup with twitter. Im getzing everything that comes now in rm its of the online space is too little too late. Do you agree . Completely correct. Too little too late. Nordstroms. Com, macys. Com, omni channel, click and collect works superbly. Its not working. In canada, many of the retailers are owned by the western family. They know the detail of retail. Target thinks its too cool for school to quote Quinton Tarantino in one of his movies and target doesnt learn the lessons in its own stores, doesnt listen to its own associates at store level and shoppers. Very long road to recovery. Burt, very briefly, they have a new ceo but hes really just a temporary one. What do you expect . What do you want to see from a new permanency to turn things around. From a new ceo, you have a bad board of directors. Bob metler from macys west turned around a number of retailers. Brilliant cofounder of the target stores. They both need to turn this bad board of directors around in this rutterless Retail Management team, too. Thank you so much for your time this morning. Burt flickinger, managing director of strategic resource inside group. On a programming note, well be speaking with John Mulligan, target interim ceo at 2 00 p. M. Eastern. Stay tuned to are that. Coming up, as the world awaits alibabas mega ipo later this year is set to go public today. But is it worth the investment . Well find out after this short break. Youre watching worldwide exchange. The Federal Reserve looks to add Stanley Fischer to its ranks. A spike in the yen as the bank of japan claims its halfway to its inflation target. And reports suggest that Russias Gazprom has signed a 0year gas agreement with china. Lets stick with this gazprom story. Royal reuters and dow jones are saying this contract has been signed today. There were reports that the signing would be delayed. There is no pricing details on a deal which is believed to involve russia supplying 38 billion cubic meters of gas per year to china. That is a new eastern pipeline linking the countries but unofficially that deal has been valued at over 400 billion. So obviously a huge deal for russia. Okay. And lets move on. Alibaba could end up being one of the largest tech ipos ever when the chinese internet join the goes public later this year. Investors appetite for chinese offerings will be tested today when another online retailer prices its ibo. See seema moty has the details. The Company Launched online in 2004 and finally changed its names to jd. Com last year. Its seeking to sell 3. 7 million shares for 16 to 18 each. That could raise nearly 2 billion. Jd. Com will list on the nasdaq under the symbol jd. Its the Largest Online sales Retail Retailer behind alibaba. Jd. Com Sells Everything from tricks to mobile phones, clothing, dvds and ebooks. While its prices are more expensive than alibaba, jds strong ties with suppliers enables it to offer Higher Quality products to customers who are less price sensitive than those who shop on alibaba. Analysts say the companys focus on building infrastructure, including more Fulfillment Centers offer samedelay delivery faster than competit competitors. They project revenue margins to rise from the current 0. 5 to 1. 3 by 2017. Jd also recently secured a big investment from chinas 10 cent holdings which gives it exposure to we chat. One potential negative for future shareholders, they may not have much say in how jd. Com is run. Founder and ceo richard lou will control nearly 84 of the Voting Rights after the ipo. Hell also own a 21 economic stake, thanks to special shares that carry 20 votes apiece. Jds board alcant hold an official meeting without mr. Lou. Were expecting jd to price tonight. Something to watch out for. Google may be about to go on a mega shopping spree. On tuesday, the Company Publicly disclosed a letter it sent to the s. E. C. In december saying it needs up to 30 billion in overseas cash to help finance purchases of companies and technology rights. Google didnt take any specific takeover targets but did say it passed on a potential 4 billion to 5 billions for a Foreign Company last year. I wonder what that company was . The disclosure came in response to the s. E. C. s question about googles overseas profits and how it plans to spend them. Lets have a look at google shares in frankfurt. Twitter passes on a deal to make sweet music. Reports say the company considered buying german Music Streaming Service sound cloud and walked away from the talks. Twitter led an explosive negotiating debt line pass reportedly because the numbers didnt add up. The deal could have been the largest ever for twitter. Sound cloud which allows users to post and share music files has more than 250 million members. And twitter shares in frankfurt off by 0. 7 . Salesforce. Com reports a wider First Quarter loss as rising costs upset Strong Revenue growth. Adjusted results beat analyst forecasts. Revenue rose better than expected 37 and subscription and support fees which make up a bulk of the companys sales rose 36 . The Cloud Based Software vendor also giving upbeat outlack and is raising its fullyear guidance. Mcdonalds is not loving it these days. The fast food giant will be besieged by more protesters seeking higher wages and the right to unionize over the next two days. As many as 2,000 people are expected to gather outside mcdonalds headquarters. The proetesters plan to make themselves very visible. A mcdoneled as spokesperson said we respect everyones rights to peacefully protest. Still to come on the show, as Tea Party Candidates suffer at the hands of moderate conservatives, we reveal the super tuesday election results, after this. Free hot breakfast options. Hampton, enjoy our you did a great job. It looks good . Then fuel up with Double Points or double miles on your next getaway. Make every stay more rewarding and feel the hamptonality carstheyre why we innovate. Theyre who we protect. Theyre why we make life less complicated. Its about people. We are volvo of sweden. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if it becomes simpler. If frustration and paperwork decrease. If grandparents get to live at home instead of in a home. The gap begins to close. So lets simplify things. Lets close the gap between people and care. Lets get back to breaking news. Gazprom says the gas contract with china is economically viable. The ceo of gazprom refuses to disclose the price in the china gas deal. It is said to be worth over 400 billion. Obviously a huge boost for mr. Putin as he clenched a deal, the longawaited deal with china as he wants to show the west that he has friends left, especially in the east of the world. Gazprom rises 2 after signing that longterm gas deal. It is long term, indeed, for about 30 years. Lets get back to the markets. U. S. Futures, the dow, the s p 500 and the nasdaq all set for a little bit of recovery after yesterdays heavy losses. Were expecting a moderate rise for the dow, s p and nasdaq as well. Retailers leading the decliners yesterday. Today it will be all about the fed minutes. More incumbent republicans beat back the Tea Party Challengers and primary elections on tuesday. In kentucky, Senate Minority leader Mitch Mcconnell won the gop race. In georgia there will be a runoff between kingston and former Dollar General ceo david purdue. Our chief political strategist joins me from washington, d. C. Good morning to you. Is it fair to say that the tea party has lost against the establishment . I think the insurrection has been crushed within the republican party. I think youve got to say that after last night, the tea party is really a diminished force. Is the Tea Party Really on the ropes here . Is this the start of the big decline . Yes. I think even more importantly, carolyn, you have a situation where the republicans will have establishment, wellfunded probusiness candidates running this fall. This is not good news at all for the democrats. All right, greg, stay there. Chief political strategist at Potomac Research group. Lets give you a look at whats on the agenda. The minutes will be released at 2 00 p. M. Eastern. Fed chair janet yellen is giving the commencement address at nyus graduation at 11 30 a. M. And well also hear from two other fed officials this afternoon. This after new york fed president William Dudley says he sees a relatively slow pace of tightening. Speaking to a group of economists, he reiterated the central bank would wait a while after winding down its Bond Buying Program before raising rates and thinks inflation will drift upwards. Meanwhile, Stanley Fischer is one step closer to joining the fed as vice chairman after he cleared a key procedural hurdle in the u. S. Senate on tuesday. Lawmakers voted to limit debate on his nomination, virtually assuring the former head of the bank of israel will join the feds board within days. A final vote is set for this afternoon. Two other nominees are expected to be confirmed before the next meeting on june 17th. Still with me, chief political strategist at Potomac Research group. The fed facing a credibility test later on this year because they believe growth in the u. S. Will be much stronger than expected and there are Monetary Policy stance simply isnt equipped for that. Your view on this . We have not seen this much stronger growth. Everyone is revising downward their Second Quarter gdp forecast. I think thats a major raeason why the markets have been choppy over the last couple weeks. If we get stronger growth, its important to remember that despite all of this cacophony of comments from fed officials like plosser, george is speaking today. The center of power, headed by yellen and soon to be stan fischer believes theres a lot of slack in the labor market. As long as they believe theres slack in the labor market, the fed will take its sweet time on raising rates. Were probably a year away from the fed seriously thinks about hiking rates. The trouble is, how do you measure slack . We have the same problem in the uk. That makes communication by the central bank ever more difficult. Do you think that communication will work better for the fed this year around . Well, its tricky because if they get really explicit, then things can change and being explicit sometimes can backfire. If theyre vague, people will say theres no direction. I guess i would stick to the oldest cliche out there, that is this is all data driven. It depends on the upcoming data. Theyll react to it. If we start to see unemployment fall below 6 , any sign at all of inflation, maybe we get a hike in 10 or 11 months. If its a slower pickup with unemployment showing problems, i think they wait for another 15, 18 months. Theyll raise rates eventually but i think its a long way off. Have a fantastic day, chief political strategist. Sergio marchionne will be speaking exclusively to cnbc, today at 10 30 eastern. Well be back with plenty more action tomorrow, same time, same place. Byebye. Good morning and welcome to squawk box. Targeting target. The retailer is one of todays top stocks to watch as it gets ready to roll out its Quarterly Results. Taming the tea party. Thats what the wall street journal is calling it. Senator Mitch Mcconnell is one of several gop leaders scoring big primary victories over some Tea Party Candidates. And more fed speak today. At least three fed president s giving speeches today. Remember mehmet oz said that naps are good. Thats ahead of the fed minutes and fed chair janet yellen will be speaking at Yankee Stadium today. Shes one of the luckiest people on the planet. Its wednesday, may 21st, 2014. Squawk box begins right now. Good morning, everybody. Welcome to squawk box. Im becky quick along with joe kernen and andrew ross sorkin. Target, the retailer is set to post Quarterly Results before the bell. Analysts are looking for earnings of 71 cents a share on revenue of 17 billion. This release comes a day after the retailer announced it fired the president of its canadian operations and two weeks after the abrupt departure of its ceo. Well bring you the numbers as soon as it hits the tape. Later today, the first on cnbc interview with the companys interim boss. Minutes from the last fed meeting will be released at 2 00 eastern time today. Investors will be looking for details or hints about the fomcs post bond buying strategy. We