Transcripts For CNBC Worldwide Exchange 20140728

U. S. Company haspira and this could avoid another u. S. Tax aversion. Youre watching Worldwide Exchange. Bringing you Business News from around the globe. Welcome to todays Worldwide Exchange. Nissans First Quarter profits beat on the back of strong u. S. Sales. We cross to tokyo for all the details plus get full details from comiccon as superheroes assemble to showcase this years biggest blockbusters. And the tech sector is the large nest the s p 500, but some elements performing more poorly than the headlines suggest. Well be talking technicals a little bit later on in the show. A a slow start for the stocks this morning. The red and green taking the stoxx 600 down. 10 . A quick look at the market this is monday morning, the ftse 100 is relatively lower, the French Market is slightly higher, and the micex in russia is lower by. 80 . Sentiment on friday dipped on the talk to see a step up to tier three sanctions as early as tomorrow, so investors will continue to watch this over the next 24 hours. Obviously, right now, as you can see keeping the russian market under water. Well look at the top movers. Haspiro could be in a deal worth about 5 billion. This is according to the wall street journal. A deal would make the u. S. Based fapharmaceutical and Delivery Company to be the latest in the tax aversion deal. They are higher by 1. 2 . Well talk through the details of that shortly in the show. Rsa group could be set for hundreds of millions of pounds of writedowns with devon hester speaking with sundays telegraph to decline to put a value on the writedown but said making tough, Strategic Decisions could allow them to recover fully within three years. Well check that to make sure that stock is performing properly. We are just shy of a half a percent. They have raised the possibility of a future breakup of the group with farreached reforms for the top drugmaker. Andrew witty said they have the option to spin up the consumer business but said there are no such plans in the near term. Thats a new story on that one. Well wait to talk through the details on that. Rosneft is lower by. 25 . They have been trading lower after the newspaper reported moscow must pay 50 billion for extrorpuating the assets of the defunct producer youkas. The low cost carrier upped its Profit Guidance to between 620 and 650 Million Euros in the year march 2015. You can see right now ryanair is up just shy of 4 . Tnt express is down 5. 5 . The restructuring process has improved results for them in the fourth quarter. A they say the outlook strategy is on track reducing 330 Million Euros in loss for the quarter. The Company Proposed the firarm suit calls to have a separate listing. You can see banka is up to 432 Million Euros. That set the net interest for lende lenders up 31 on a year ago. Well have a look at the Foreign Exchange markets with the dollar expected to remain right now with the dollar index at sixmonth highs with plenty of data to come for gdp and the second quarter. We have the fed and the payroll. A lot to focus on. Euro dollar trading at 134. 33 right now. Its taking up previous lows at 1. 3433. We have germany to watch for right now. We are seeing the rally in dollar yen losing ground near the 102 level. We have to expect that to continue right now. Certainly right now, 1. 6975. Eight successive down days for that currency pair, in particular. The dutch Prime Minister mark reuter has ruled out securing the site of mh17. This has violence over the weekend prevented inspectors from assessing the area ch. They have many heavily military men along the border. Not even if we opt for a military deployment, even then achieving military achievement is not realistic. This proves russias military involvement in ukraine. The Russian Forces are rocket launching into the eastern part of the country. Some of the selfpropelled photos are only found in Russian Military units. This comes as the Russian Foreign ministry Sergey Lavrov says the u. S. Sanctions will not achieve their goal. The eu is expected to unveil a raft of wider economic sanctions as early as tuesday including plans to restrict russias access to European Capital markets as well as the arms embargo. Joining me is Gabriel Stine at oxford exmommics. Thank you for joining me this morning. Is this what we are going to get in the announcement tomorrow . If youre asking, are we going to get sanctions to stop russia from supporting the rebels in ukraine and contribute to a peaceful solution . No, i dont think so, not in the slightest. And thats partly because the motivation for russia is not driven by economics. If it were driven by economics, why would they bother with ukraine, in particular. This is power politics restoring the russian empire. So i doubt very much if we will do anything that will actually lead to russia seizing its support of the rebels, sadly. This is about a power play. It is interesting to see comments from over the weekend to say that theres now increasing tension between some of the oligarchs and Vladimir Putin. Them putting pressure on him right now with economics over the politics. Does this make a difference . I dont think so. Because if you compare russia with ukraine or russia to putin to russia to yeltsin, the oligarchs ran the country. Broadly speaking, we have the slight power that will be brought abroad. They are told what to do with him and his circle. As you just mentioned there, what could make putin break ties with the separatists . Ive been asking this question for two weeks now. I honestly dont know. Possibly a situation where the Ukrainian Army completely cuts the separatists off from any supplies from russia. Completely secures the borders, secures rail, road and air space. And then putin would have to choose between an open attack that is nondeniable or we have evidence now that hes prone to evidence of the launching rocket in ukraine and he denies that. You believe it and i believe it, but he thinks he can get away with denying it. I think what would stop him is if the choice is open war or not. And that might be a step too far, but on the other hand, i never thought he would go as far as he has. One more question if were talking about sanctions tomorrow. The mystery sanctions are always a problem here, are we missing the point . Well, you will always have an economic tie, and should they be included . Yes, they should, but what business does britain or france have in selling arms to russia. Whatever scenario you can think of during your geopolitical terms will always be arrival at the very best. Last week i was speaking to someone who called it capital lockout. It kind of simplifies it but makes a strong point. That would be a very good idea. On the same subject, well bring you the latest of stakeholders in the russian giant that wop their 100 billion case over the m misproneryuation of the assets. They will see separation of around 50 billion. Tim osborne is joining us to discuss the details and what is next as far as that is concerned at 11 40 cet. Some said what happened there was they were politically motivated there as well, gabriel. It looks like the west is ganging up, to a sense, on russia. Where was this court case . In the hague. In the hague. Okay. What if the russians say, all right, youve had your case, we are still not paying. I honestly dont know. Again, its a but i have great difficulty seeing the russian government with sanctions, stomping out 50 billion to shareholders. Gabriel, thank you for staying with us. Israel ended the humanitarian ceasefire in gaza fighting incessant rocket fire from hamas. The u. N. Called for an extension ahead of the eu period. The statement from the military sources says it is to currently stop the tax on gaza and calls the halt on fire limited instead focusing on Tunnel Networks. The death toll in the crisis has spiked to 1,000 palestinians and 46 israelis. Benjamin netanyahu took to u. S. Talk shows on sunday defending his action saying he is taking all the necessary steps to eliminate threat. First of all, i think like every israelly, looking at these casualties, nobody is happy. Everybody regets to see a single civilian death. A single civilian death is something we duply regret, but it is not our responsibility. Ive always been in combat and been to war. And i know what efforts the israeli army takes to minimize civilian casualties and direct the terrorists. The United States has been une quif equivical and that support is necessary. If hamas comes out winning the propaganda war but it shows that we received a lot of goodies, i think that piece will be very hard pressed. It will be hard to move peace forward. If hamas is demilitarized, that opens up the path for peace. Something that israel and the u. S. Wants. Do you believe theres actually a military solution to israel hamas problem . I think that we have to make a decision between the palestinian israeli conflict with those who are willing to go this way and there we can have a real solution. And any kind of political solution with hamas, hamas is a Terror Organization committed to our destruction. Supported bin laden and condemned you for taking good action against bin laden. You want to eradicate the state of israel. You dont have a deal with them. Hadley is joining us this morning now with more on this. Criticism that john kerry has lost the confidence with the israelis in this. Do we need someone else . I think certainly the United States is stretched. I dont know if they have the bandwidth to deal with everything happening in the middle east. The crisis in iraq. We have what is happening in libyan and we have not begun to look at in terms of what has to be done. They have what is happening on the bigger stage with russia and ukraine. Fortunately, they are stressed but they didnt deter kerry from trying to come to some sort of agreement with hamas, with israel, but of course hamas, having to deal with qatar and turkey is raising red flags with palestinian authority. Thats not going to make everyone in the west bank very happy. And the israelis are criticizing john kerry for saying hes cowtoeing hamas. So a little bit of a blunder nor the u. S. In dealing with the middle east crisis. It is likely this conflict will add in the coming weeks and hamas is likely to engage in the war given the idea it is better equipped. Have you changed your view at this same . You mean you were on then, mr. Stein, how would you like explain that . I am surprised it turned into a ground invasion. Hamas cannot i mean, what are hamas aims . They cannot defeat ilz real, so their aims are to defeat the political organization. And if necessary, hamas is also happy if arabs are killed because it makes for good copy. So from their perspective, escalating makes sense as long as they dont believe they are going to be completely destroyed. It doesnt make sense unless you are prepared to proceed with a brutality that i think today would be unacceptable and not really work. However, i think much more importantly because, really, my role here is to discuss economics and not politics, from the Economic Perspective it doesnt really matter. From a political perspective, this is one of the least significant conflicts in the middle east. You have iraq, you have syria, you have libya, each of which is bloody and costs terrible on a daily basis. Economically, this conflict for israel and ga da and the rest of the world, in terms of the rest of the world. If we look at what happened in 2008 and 2009 with the International Ve response there, it was far more aggressive and has been falling this time of the round. Theres always other distractions . Theres always other distractions and we were also seeing the amount of merchants and organizations like isis in iraq and so on, which perhaps makes International Observers and commentators and politicians somewhat more weary of taking and believing in the purity of motives of an italian movie like hamas. Quickly, this is just speaking to the water picture here with games. Specifically, we have found a bigger problem. And then they had to remain their focus on is there for the fear future. Thank you, gabriel stein. As i sit there, we have to take a quick break. But still to come on the show, investors are finding a way to bank earnings. Well look at the more troubled financial institutions. The next guest says to bring back the crystal ball. Find out why after the break. Stay with us. I voted for culture. With a k. how are you . I voted for plausible deniability. I didnt kill her, david. And i voted for decisive military action. America, you cast your votes. Now, go to xfinity on demand and select the peoples hotlist to see this summers top 100 shows and movies. I voted mcdonalds is taking more meat issues off their menu after a safety scare and investigation into its management. The press conference was held a few minutes ago, eunice, what more did we learn . So far they have unveiled the initial findings of the ongoing internal investigation. And what they found is that the china operations did fall short of their standards. And because of that, they have announced a wideranging and widesweeping change at their china operation. They said they plan to add more managers to oversee the operations. They also said they are going to be unrolling a Food Safety Education Program over the next three years to cost them about 1. 6 million. And finally, they are going to have a full review of all of their factories here in china to make sure that the standards didnt slip at other places. This is creating a lot of uncertainty for mcdonalds young brands that owns kfc, also burger king and starbucks. And because of that disruption, a lot of them either cut ties with the supplier altogether or suspended the sale of this meat at their restaurants. Mcdonalds said the decision to suspend all the osi meat at their restaurants has suspended sales. It will be hardpressed to see a big mac or chicken mcnuggets. The company says the disruption will last about a week. Julia . Thank you, eunice. The next guest takes ma mathematical risks. And he says its time to bring back the crystal ball. Tim, the crystal ball is more active than Everything Else . Well, it probably isnt but it just might as well be because this is the theme that is worgt discu discussing. Economics is remodeling itself. Well rebuild models if you like. They were wrong and didnt work. Most of the big theories are left hanging in the area, he will try something, but mine is pretty rubbish so dont use mine. Im sure yours is reliable in getting home, but we do need to think about how markets react to data, how we interpret the data and how we go forward. We have banks in europe this week, if we look pack to what we got at the the u. S. Bank, we are looking at regulation come plips. The scandals and the social ek noums of it rather than business. Is regulation going doing half or a little more. It is about discussing what is going on, is it right, is it wrong . Thats not so easy. I think it is for all of us to judge as a society. I think we need a lot more screen of what is being done. But she said consistently while my parents are here, i dont know how to make it up. This is them wanting to exit this trade. Well, this is something we all need to worry about with the ica, the International Capital association, we want to know where is liquidity. Can we measure it . Is there any . Because a lot of it is fake liquidity. We are watching funds from the central banks. We have seen extraordinary contraction across government and risk markets. Look at bank paper. Look at the difference shl between the covet bonds and the seniors. All of this is the artificial squeeze. When the markets turn, at some point they will, what happens is theres nowhere to go. We are missing the shock absorbers in the market that we used to have in abut dance back in the days of fixed income. What about regionalization as well as globalization. Banks are more concerned about the capital they employ in different areas. And thats a restriction, too. This is called the organization of banking. We were talking, and ive been in the business three decades, and we saw the rise of global. Everything had to be global. If we didnt have global in your job cycle, you were nothing. Global head of something or other. These days you are probably better off being the regional head of something because thats where the industry appears to be going. This may be a good thing, but side effects as well. Who is doing the lending, who is doing the borrowing, where is the capital located . Tie it down, who is best placed as far as the banks are concerned, who is benefiting the most . In one sense, you have to look at the u. S. The u. S. Has had a dramatic aboutturn. They repaired their Banking Industry extremely quickly. And they have launched it again. The american banks are doing pretty well right now in most of the Investment Banking niches, but dont write off europe yet as we are adjusting to this. The businesses are trying to understand and the process has not finished. In the u. S. We got over quickly, in europe we are still working on it. If you look at the discussion on leverage ratio, we are not to tend of that debate yet. Thats to be continued. Thank you very much, very important point. Work in progress. Tim, great to talk to you this morning. Now still to come on the show, looking at the medical nutrition unit. Well take a closer look at this story right after the break. The cadillac summer collection is here. During the cadillac summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. Youre watching Worldwide Exchange bringing you Business News from around the globe. Welcome back to Worldwide Exchange. The dutch Prime Minister says the option to secure the mh17 crash site is not realistic. And israel and hamas break down the latest ceasefire. So far its left more than 1,000 dead. If hamas is condemned or weakened, discredited and demilitarized, it is something that the u. S. And israel wants. And who is in favor of shareholders at the oil giant ordering moscow to pay up to 50 billion in damages. Lavrov refuses to deny an appeal. And the sale of the medical business. The u. S. Rival haspira is looking for another tax aversion. We are seeing a pick up in European Markets with the ftse 100 up. 20 . Right now, trading at the flat line, the French Market is higher by half a percent and the ftse is relatively up changed in the session right now. The two key gapers, the sector higher by. 60 . The Household Goods also managing to lift the European Markets. The bond market, we heard on friday that we should see new lows in u. S. Treasurely down to the 240 level before we see a spike in bonds. Right now the tenyear german yield is 1. 16 . The dollar Index Trading at sixmonth highs. Euro dollar at 134. 34. The level is taking out the years low at 134. 77. So we are well ahead of the eurozone pmis, unemployment data and in germany, and when you were there in particular, too. The dutch Prime Minister ruled out using military forces to secure the crash site of mh17. This as riots over the weekend prevented International Inspectors from accessing the area. The eastern ukrainian region is seeing many Russian Armed men near the border. Achieving military superiority is not realistic. The u. S. Government has released photographic evidence it says proves russias military involvement. The aerial images showing them launch i launching right into half of the country. Gaza is seeing incessant rocketfire from hamas. The u. S. Is looking at more than 46 israelis who have died so far and more than 1,000 palestinians. Israels Prime Minister Benjamin Netanyahu had this to say. We cant allow them to stack their arsenal or well be stuck in five to six months with the same problem. We want to recognize the want. Here is the latest report filed from the ground. Reporter this man is learning hes lost everything, his home, his possessions. But in this rare moment of relative safety, hes looking for something much dearer, the body of his son. This is the most crowded neighborhood where two weeks ago 200,000 people lived here. Only hints are left of what life was like. Torn laundry on a line. A single plant unmoved. A crib perched under a ruined apartment building. It took days of delivering it and shelling out because this is their way of saying if you fire a rocket, this is what you get. But even after all the destruction and after more than 1,000 killed including several hundred children, many here are still supporting hamas. And stubborns doctor says half of the people are tired of this and the others are not feeling the pain he feels here. To understand what hamas is fighting for, it helps to look at a map. Gaza is a tiny strip of land under a tight blockade. In the west fishing is limited to six miles offshore. In the east, gaza is fenced in by razor wire. In the north, israel tightly controls two lens crossings are he here. They want to open the egyptian crossing, but the egyptians are feeling the pain of war, too. So far they have lost more than 40 soldiers, but it is also fighting for wider goals. Athis is not enough. This is stronger military power and it needs to send a strong message to the region, to the neighborhood. Reporter hamas uses two main weapons against israel. An elaborate network of tunnels to kidnap Israeli Soldiers and civilians and its rockets. Now including longer range rockets to reach deep into israel. Israels Main Objective, destroy the tunnels and demilitarize the trip. So far they have destroyed 40 of the air strikes but neither side can claim victory. Im looking for a way out and gets muggilyier which is w. Israel says they have no choice in this war and cannot accept more than 2,40 rockets being fired at its city. Those palestinians we have spoken to say israel doesnt have to flat up the entire neighborhood and kill hundreds of children to do it. Thank you so much. Shares are closed to 60 after the Quick Company has a strategy and outlook. Joining us this morning. Haply take us through the shareholder in the given the roller coaster we have seen over the last several months with this stock, what is weird is we have had all the International Standards and everybody was wondering and speculating that this means, did you buy a profit market and another was a huge burst that we saw in 2008, but essentially this property stock is very much exposed because there are not many options for traders, but essentially if you look what is happened over the last couple of months, that impacting the dog. And what people are now realizing within the dubai market is that the management shakeup has nothing to do with the confidence of the abu dhabi government in this stock. Now they have a challenge to explain how they are Going Forward to continue with the products, but they talk about a 50 billion deal. And we are talking about the developments on the hague arbitration. The court is saying the primary objective of russia was to bankrupt and expropriate your nationals. According to the police, no claims can be made top company due to unrule iing the the Russian Court will prevent to jail political rivals. As mentioned, well be seeking further detail later in the show about this. What next . A profit warning. Do we take Companies Rising to threeyear highs . In the First Six Months of here, average accounted for more than and fifth of her percentage. 90 of the profit warning stay ready for price compression fwhaurks is withogoing to show per unit outside the economy to translate as a sterling as people become more confident in the way it is seen this year to put pressure on the discount yields as well. I am staying here as you pay stock market and we have benefited from great u. K. Growth and a more promising overseas economic outlook. We are seeing a bit of the reverse at the moment. So what does this mean as far as mark is concerned. Should we be concerned about the company that the companies will dominate by elsewhere. This shouldnt affect what connie has been thinking out. Well be stuck on the backside of things. The recently soft sighal an and other economic numbers as a whole will see the pound strong to remain ahead when grouping. It is still okay for the u. K. Sector as that is about earnings separated primarily from the u. K. Consumers. I think it is quite industry in their report they feature these as a low level of property warning. They get mixed ones as they look amid the controversial and said say how competitive the Retail Sector is. But from mark carneys perspective, when you look at the disruption throughout the spry change, you can see it is ultimately a weak inflationary environment. And the underlying things investors are focused on would be denation in their pressure and what that means for new growth, if anything. So what do you see as far as the next three months and the three months after that Earnings Period if were looking at the highest lfl of profits for the next three years. Is this something to worry about right now . And this is what we see in new york managing expectations to avoid this kind of thing. Of course, it goes on the guided further down. Then when you get to earnings season, you get a decent sheet. General european seats so make me a dry show. It looks like the numbers are there. The investor is not the same. The Pricing Power for the companies that we are focusing, the reality is that some cases there is and some there isnt. Beef, be specific. Its environment to make a big bang for my buck. The First Quarter earnings were reported for the first fiscal year saying the profit rose to 37 through june. At the nhk, we are taking us through the details. Reporter strong sales ov oversaw this in america. And u. S. Sales in the u. S. Were up 14 while in china it climbed 21 . Overall, the firm managed to increase 10 over 24 billion dollars. He also made a cap for the profit year ending in march. Thats it for now. Thank you. The malaysian markets are closed for the celebration, but we have retail sales and Household Spending and jobs numbers out of japan. We also have big earnings including honda, japan airlines. And the multibillion deal against russia. Well speak to the director right after the break. Stay with us. A potential deal with the u. S. Firm could lead to the best talks in months. We are hearing the high 30s here, so what am i missing . According to the two companies in the negotiations, they would pay up to 5 billion in cash for this acquisition. We know danone has been working on selling its medical nutrition level for a while because it is too small. Its between 6 of its last year and the growth was too weak for earning them three years average between 5 to 6 compare to the up no saytive growth per year in 2007, so thats the reason danone wants to sell the business. According to the financial times, the potential buyer hospira would move the tax base much higher that it is in the United States. We are talking about Corporate Tax. 33. 3 plus a 3. 6 for companies with a large revenue. The actual tax rate for the Large Company is much lower according to the official data from the french final ministry. I should ask capitals at thisle age and 8 to debate the tax rate in 2010. So it means she actually packs and cleans and france is attractive. Very conducive to business. They need to make a bigger point to start telling people about this, dont they . If haspira plans to move to french, im sure the french economic minister will promote it a lot. So dont worry, we are going to talk about that story further, i think. Youll make a point to tell us about the tax rate every time you do it. Stephane, we cant wait for that. Thank you. The shareholders have won the battle against the courts asking for them to pay up for the largers arbitration award ever. Joining me is a former sharehold shareholder, jim, how are things going . We have been citing ever since 2004 to get competition for our shareholders. How do you expect russia to respond to this . I think that they will probably apply to use the dutch court and delay further from them having to pay. One would hope given they took a full part in the arbitration that they would ekize, but it has every right to open force this on them to go out. But you have every other country in the world as well. How much longer do you think the appeal process and the fight as far as russia is concerned will take . Well, one would hope that russia would behave reasonably and try to talk to us and resolve the issues. But if he doesnt, well have the collection process that could be talking about just us for five years or longer, but the great news is we will enforce and award. We we want into this to get damages for the shareholders and thats where we will finish up. You have always maintained what happens is politically motivated right now. What do you make of the events between rush shap and russia the tribunal is showing the deal to be briefer. Normal negotiations will get back on foot with russia, but that wound is out of the legal aspect. How do you believe normal relations with russia are restored when the europeans right now are talking about stiffer sanctions, even up to tier three sanctions . Well, im not a politician, so maybe i wish i hadnt said that in the first place. But having said that, these things have a habit of just going through a cycle. And i think that archery is too big of a Company Using from the international world, but at some point they will recognize what they are. Ultimately, they will get back to some level of normality. Do you think russia and Vladimir Putin will see the events of the arbitration cold case as another way to see the getting russia here. Attacking russia. I think they may put the spin on it publicly, but i think they will understand that this had been a back pier. And that is simply the result of the expropriation on that. A deal between haspira could be in the works. Well discuss it after the break. Welcome to Worldwide Exchange. Im julia chatney and these are your headlines from around the world. The dutch Prime Minister says the chance of securing the mh17 crash site is not realistic. Fighting continues between hamas and israel after the c ceasefire breaks down. If hamas is weakened, discredited and demilitarized, that opens up for catastrophe which is something israel and the u. S. Wants. And a tough Arbitration Court rules in favor of the oil giant ordering moscow to pay roughly 60 billion in damages. Jack lew calls on congress. The secretary says the risk of loopholes have been increasing by breaking speed. And the 5 billion sale of the medical business haspira avoiding yet another tax aversion. Youre watching Worldwide Exchange bringing you Business News from around the globe. If youre just tuning in, thank you for joining us on Worldwide Exchange. Well give you a look at how the markets are faring ahead of the u. S. Open. Futures are indicating a lower start. The s p 500 a couple points lower with the dow jones indicating just over 16 points lower and the nasdaq 2 points lower. Sentiment is dented on friday. Session with talk about potential step up in sanctions from europe to t sk a if concerned. That is certainly impacting sentiment right now for investors. We also have a group of earnings coming up this week. Watch out for the dow, the nasdaq and the s p 500 up. 50 in yesterdays trading session. Looking at the European Markets this morning, lower trade volume, but the ftse 100 is relatively up changed. The German Market is lower by. 10 . Earlier in the session it was down by. 40 kt. Well see the micex continue to trade poorly down 1 in the trading session. All eyes are on sanctions from the europeans tomorrow. Well give you a look at what is on sundays agenda in the United States coming up at 10 00 a. M. Eastern time. Well get pending home Sales Numbers and earnings from herbalife. Jack lieu is urging congress to close the loopholes on up versions. The Company Moves this as a way to lower Corporate Tax rate. We have to reform the business tax code to make the u. S. More competitive and say to host congress as soon as possible. Jay Scott Nicholson was here with the latest scan dl to hit the Banking Industry. And Deutsche Bank is reporting earnings on tuesday. They will update on their performance on wednesday for bes and bbva. And thursday it will be santander. Great to have you on the show again. Looking back to the u. S. Earnings and the surprises we got from there and the commodities, i break down what was seen to i would say twothirds is good. Onethird is driven by social. You have Peanut Butter as a surprise for them in second place. Its a normal volatility fixed income at a 15 to 10year low, and that clearly means negative news for fixed income revenues so far, but that also could be a big upside potential in the future. As far as regulation is concerned, youre attributing that to a third of the decline right now. So for those who say bulk is not working having the impact we were hoping for, it is having an impact. It is having an impact. Many of you have resulted in low inventory levels for the investment banks. And that means that limits trading. On top of that, we believe overa overall that the investment banks are being reduced to half by legislation. Now we are expecting post regulation of 10 putting all the regulatory climates in to meet the paints. He almost halved it. The investment banks are seeking a model where they are reducing the assets field is here. We are also looking into the regulatory comments. You may see the load and maybe investors are necessary around the idea industry. If you are talking about the ship that has moved away from the relicense as far as 16 income cars, i kidnapped Morgan Stanley to talk about this. When will volatility pick up . I think you have to put the investment playing in one category. You also put Credit Suisse and these are players that have to adopt to the current metal. But theres Deutsche Bank, citi group, b of a, they will stay in the business. Once volatility picks up, the skill players will benefit from this. The underpricing of the volatility of the markets being concerned, it is too bullish. I would say on the Banking Industry, its trying to not take a lot of activity. If you look at the Current Division relative to the store pricing. They are looking at this to go up 10 as they restructure the business model. In our view the market is turning negative. Theres clearly no big signs of improvement but we would say the market is pricing in too much of negativity at this point. Thank you. Stay with us, well continue that discussion. For now i want to bring you up to speed on the latest developments of the dutch government scientists right now know their way to the mh17 crash site. Right now they say it is impossible to access the site. This is an announcement of them possibly reaching the crash site early this morning, so well bring you developments. But safety for this area. It ended a humanitarian ceasefire. This is an extension of the truce ahead of the holiday today. The sources say its attacks on gaza and describes more than 1,000 palestinians dead and 60 israelis. The white house says the president stressed the need for unconventional ceasefire in ga gaza. And Benjamin Netanyahu took to u. S. Tv to say it is taking all the necessary steps to eliminate the threat. This weeks totals, we just got this arsenal and will be stuck in five or six while we are there we can bring it along. Martin, ive got to talk over the weekend that as far as the israelis are concerned they have lost confidence in john kerry and that perhaps we need to see somebody else pushing for negotiation here. What are your thoughts and what you are hearing there . Reporter this would be a huge disappointment expressing the media in john kerrys attempt to rain a ceasefire. There was a very sharp ffrgs from the israeli Prime Minister last night israel time. And that has resulted in an effective ceasefire. But there must be an immediate situation and thats the situation today. So actually things are all quiet now inside gaza and inside of israel. There was one rocketed fired but israel came back. That was proposed right in the begin. So now almost three weeks later of fighting, we are back to the relationship here with a humanitarian effort in place right now. Its an effective longterm ceasefire as well as no one breaks it, but essentially it is quiet at the moment. Martin, thank you for that. So, hadley, an unexpected hue maptarian ceasefire. We have until you to i will ask you the same question as martin, is john kerry still the right man to bring these two sides together in the Peace Agreement . Unfortunately, theres nobody else coming from the west other than short of the pope or president obama himself. I dont see anyone else has the weight behind him that john kerry carries with him. But at the same time, hes managed to peeve off some people. He was peeved off the israelis to an extent because unfortunately hes handling cals to mast. His thumb swelled because hes getting a hot dog. Hes done that as a terrorist organization that the United States cannot talk to the Terror Organizations. But essentially, you seem the inevitable wondering over the last decade or more in the middle east, but this also speaks to the broader question of the United States bandwidth. It doesnt bring up the realization from the Obama Administration of what putin is doing and how we should respond as a United States. So at this point we are stressed and still struggling off to do something. If he was not trying to do something, it would be more rep rehenceable because the United States would be the only power in the world able to do anything or affect any kind of change. So at least hes hoping but we are all hoping this is just an extension that the u. S. Is overstressed. I would say with watch iing e tunnels, the risk is then to pull out the tunnels that will be rebuilt. The threat will be restored. The reason behind the blockade in the first place according to the israelis is they have all these things like, i dont know how crayons play into this with Richard Engels report earlier today, but at the same point, they do have to continue to blockade and thats important. Still to come on the show, forget saving the world, can the superheroes save the box office . Hollywood needs a hero and we are going to find out more on characters, stay with us. Welcome back to Worldwide Exchange. These are your headlines. The dutch government confirms a team of forensic scientists is now on the way to the mh17 crash site in ukraine. Netanyahu defiant as israel hopes to ease tension in hamas tunnels. And jack lew sent to criticize tax inversion as they eye a deal of their own. As Payment Companies assemble their biggest superheroes to promote upcoming comiccon, well have all the action reported from san diego. Reporter about 150,000 people are expected to attend this years comiccon. And take a look at these costumes. Fans get really invested. And thats why comiccon is so valuable. Brands can communicate directly with their fans and then fans can go spread the word on twitter, facebook or youtube. And it is not just superheroes, but this is pop culture ground zero. This is where they expand far beyond just comics. For marvel regarding the new movie the galaxy to upcoming films. And streaming video and video games are here. Microsofts xbox looking to build excitement for the upcoming game and show. Comiccon is a time for new ideas and creative ideas. Its when the brands and Companies Bring their best foot forward and unveil them in a big grand way. Of course, it is very competitive. Big advertisers are teaming up with media brands to cut through advertising clutter and reach techyoung savvy consumers through tv commercials. Two great examples of branded sons, pizza hut is teaming up with the teenager Ninja Turtles film to launch the prison da thrower. And uber is partnering with fx network through san diego on a 130foot uber zipline for the show. We are not looking like the police cars in that video to help people get around the city. It is not just here, it is men, women and kids, people of all ages. And this is really the place where we want to come to spread the word about everything coming up on the schedule. Back over to you. Showing no signs of tiring there, the latest captain america film the Winter Soldier brought in 187 million at the global box office, but how long before the comic book heroes wings are clipped . If you want to join the conversation here on Worldwide Exchange, get in touch by email at worldwide cnbc. Com. Or you can go directly to me. Still to come on the show, we continue the banking conversation ahead of a slew of earnings from the European Banks this week. Jpmorgans ceo unveils his top picks after the break. And well leave you with a look at how the European Markets are faring right now. Stay with us. Welcome back. Right now we have the stock market. Well show the s p 500, dow jones and nasdaq all down. The European Banks, important week this week n particular, what should we be looking out for . I think the focus will be less on earnings but more around how are they changing the business model. We clearly have barclays with a material, with a restructuring plan, how much capital are they releasing from the restructuring, how many staff redup d redundancies are they achieving. Are they going to surprise us on the restructuring . On the other hand, you are going to look at deutsche and ubs reporting tomorrow, and the focus will be on capital generation. We have a lot of litigation issues outstanding. The question is, do you generate enough capital to take more litigation hits. And are they . Deutsche is a particularly interesting one. We know they raised 8. 5 billion worth of capital back in june. How comfortable are you with the position of deutsche, specifically. . We recently upgraded Deutsche Bank because they raised 8. Billi 8. 5 billion euros like you said. The stock is still at 6. 5 times earnings. Basically the market is saying ill cap your rate and it will be used for litigation. And in our view, 8. 5 billion euros will be enough to offset all the regulatory litigation issues. We upgraded the stock because we dont think theres a capital risk anymore to Deutsche Bank. And thats why we became more positive. We have seen the b p issue quite specific. And i think the market is assuming every fine will be 5 to 10 billion and we are saying thats not true. A lot of the fines will be significantly lower. So what are your concerns . We have the tax offshore issue. The other is commerce bank. These are two banks which cannot take very big hits. Credit doesnt have a lot of capital for litigation available. Those are the three to highlight. But if you look at barclays, deutsche, ubs, these are stocks where we seem pretty comfortable on the litigation front. Im always worried about talking about litigation in case people fall asleep, but we are talking about transparency in the markets. They are called swap execution facilities. Everyone is in danger of sleep, so this is crucial for banks and margins in particular Going Forward, isnt it . Yeah. Then i mentioned tInvestment Banking is going from 16 to 10 . But half of that, 3 , is to what you mentioned, a thing called an Execution Facility to bring transparency into the overthecounter market where you dont have a lot of information on the pricing of fixed income products. A lot of them will be on a scream. And that will reduce a spread as you bring in transparency. And that is actually a big regulatory change. It is happening now, but we will have some time to observe it and what we are seeing is that the spread will come down for fixed income products. But again, the re will be 10 and not zero as the market is assuming. Nice to talk to you, head of the European Bank research of jpmorgan. Still to cook, the tech sector is the large nest the s p 500. But and lists are performing more poorly than the headlines suggest. Well talk all things tech right after the break. And well leave you a look at how futures are trading ahead of the open on wall street. Welcome back to Worldwide Exchange. The dutch Prime Minister says military invention in ukraine to secure the mh17 crash site is not realist, but forensic scientists are expected to arrive later this morning. And ruling in favor of shareholders to debunct this case for yukos. We are trying to resolve the issues. Rising crisis between israel and hamas. The conflict so far has left more than 1,000 dead. If hamas is cop demed, if hamas is discredited and demilitarized, that opens up the path to something israel wants and the u. S. Wants. Jack lew calls on congress to tight up tax rules on up version. The secretary says the use of the loophole is increasing at breakneck speed. And a 5 billion sale of the medical Nutrition Business to u. S. Arrive haspira. They say this could mark another u. S. Tax inversion. Youre watching Worldwide Exchange bringing you Business News from around the globe. If youre just tuning in, thank you for joining us on Worldwide Exchange. A look at how the markets are faring ahead of the u. S. Open right now. You can see the dow and s p 500 and nasdaq indicating lower right now, though we are only talking less than. 10 for the markets. In fridays session, they end the threat of sanctions weighing on the market to filter in to the sentiment we are seeing right now in the markets. The European Markets are traded in and out of positive and negative territory. The ftse 100 is so far in the positive territory by. 20 . And the russian markets are continuing to see pressure in trading downtown by 1. 4 in this session. Lets take a look at some of todays top stories. Treasury secretary jack lew urging congress to close the tax loophole on inversions. This is when a Company Moves overseas to become quite popular over the next you months to lower the tax rate. They want to make the u. S. Economy more competitive. And an International Company has ordered moscow damages in excess of 50 billion. The fine is said to be the largest arbitration awarded ever. A panel of judges is being reviewed or has been reviewing the case since 2005. We spoke with the director, a former shareholder, who told us the russians would likely divert to delaying tactics. Although one would hope given that they took part in the arbitration, they would recognize this is a binding rule. If they dont, we are going to start the geoconvention to allow us to go out Russian Federation. All eyes are on argentina with time running out. Their number three economy is accepting a default on its debt for the second time in 12 years. Negotiations with investors reportedly are not moving while some say a lastminute deal could potentially happen. No meeting is currently scheduled between argentina and the courtappointed mediator. A deal may be done for gold man saks according to sources close to the investment bank. They are reportedly discussing a settlement with the Housing Finance agency for mortgagebacked securities sold so fannie mae and fred dooek mac leading up to the financial crisis. This deal could cost between 800 million and 1. 2 billion. The busiest week is behind us but the key players are delivering results live. Chief market technician katia is joining us from new york. You have compared this to the overall Market Performance right now, and tokyo is about your findings. Reporter sure. We know the s p 500 itself is dominated by its very biggest names. Names that become household names and become 300 to 400 billion of marked cap, whether it is exxon on apple, but if one looks at the performance of the average stock equal weighted, the picture is not as good, if you will. And the weighted picture is what you suggest. So what youre referring to is a piece that we speak out. Hes not as good as the market would suggest, but theres and addage quite deflickable. The market deteriorates on the back of blue chip stocks. So big names are acting well and more pedestrian midsize small stocks are starting to falter. And how long can markets typically rally when we see this kind of divergence within the index itself . Well, thats right. That gets to the heart of it. At some point one has to be right and one has to be wrong in a sense that even the breast faltering is right or wrong, or the breadth does matter. It often can lead by two to three or four quarters. Structure changes gradually even as the aggragate goes higher. Thats the circumstance we have here. We are seeing this in the smaller cap stocks, too. Right. Well, and that is the absolute opposite end of the spectrum, if you will. If you look at the russell 2000 index, for instance, this is now an index unchanged on the year. And if you were to look at it as a performance of being a fund, it has a drawdown in the year of 11 up changed. So the risk reward basis has offered nothing and yet one entered poorly at the top of the year has endured a selloff of 11 . Small caps dont end well. In fact, we believe they are in the early stages of a fullfledged bullish too bearish reversal, a break in trend. I want to go back now to the s p 500. A lot of focus right now on the tech sector, in particular. Looking at the semiconductors, you can see the diversion with the performance itself. Whats going on here . Well, i think exactly that. Youve hit it right on the head. We have huge names, apple, microsoft and intel, facebook, are up between 20 to 40 on the year, and yet in many ways if you think about it, those are not tech names at all. Microsoft is more of a utility. These are being treated as safety names with good yields. But if you look at semiconductors as the most cyclical element of the sector, they do not act well even though intel is. But if you look at micron devices, very bad action in the philadelphia economic index this month. Up changed down a little bit as the sector goes higher. So its the same shade and tone of the market but maybe amplified if you will. The beach greenhouse at ing made news over the weekend. If you put aside whether you can invest in European Market debt, right now theres nothing that compares to u. S. Equities. How do you feel about that . That is one of the great cases that has been made and continues to be made about, well, ive got no choice, what do you want me to do, gamble in the gold market or speculate in real estate . London or new york or maybe take my chance buying bonds where one can do what you implied to get a highquality dividend from a u. S. International company and took your chances there. In many ways, its the sort of default position. And yet its not really a strategy. Its sort of a mindset, which is to heck with it, what else can i do kind of approach. And thats a fickle thing that can change easily. I like that quote. So great to talk to you. Chief market technician at stern energy. Also to come, as jack lew urges congress to avoid a possible tax inversion, well speak to american companies. Stay with us. Xkc welcome back to Worldwide Exchange. These are your headlines. A group of forensic scientists are on the way to the crash site in ukraine. And netanyahu is defiant to stop bombing hamas tunnels. And jack lew is criticizing tax inversion loopholes. Jack lew has been voicing his opinions on tax inversions. Jackie deangelis is live at cnbc headquarters with the latest. Treasury secretary jack lew published an oped today urging congress to close the loophole on tax inversion. This is basically when a Company Moves its tack home overseas. And has become popular as companies are searching for ways to lower Corporate Tax rates. It also made headlines because of a recent transaction to look to take advantage of the tactic. Recalled last month, the Drugmaker Mylan made a deal to buy a company outside of the u. S. It will allow it to incorporate from the Current Location in the u. S. To the netherlands. Medtronic is looking to avoid paying higher u. S. Taxes as well. Secretary lew says theres nothing wrong with crossborder merger activity and the economy is stronger for an investment overseas and for Foreign Investment in the United States as well, but he stresses economic efficiency not tax savings should be the issue. And he says he hopes that congress will pass antiinversion legislation as soon as possible. Also remember, for legislation to be effective, lew says it must be retroactive. And while lew says closing the loophole is no answer to comprehensive tax reform, he says its a necessary step toward the path for an efficient tax system. Tech is the talk of the up to. Well take a look at the key corporate reports coming up this week right after the break. Stay with us. Lets take a look at one of todays top stories. Israel has ended a humanitarian ceasefire in gaza saying they are ending incessant rocket fire from hamas. In a statement from military sources, israel said they want to stop attacks on gaza say they are focusing on Tunnel Networks instead. The death toll has spiked to more than 1,000 palestinians and 46 israelis. President obama called israeli Prime Minister Benjamin Netanyahu on sunday. The white house said the president stressed the need for an immediate need for the ceasefire in gaza. Net and netanyahu took to u. S. News stations on sunday to defend himself. We want demill itirization of gaza. Reporter in this rare moment of relative safety, hes looking for something much dearer, the body of his son. This is whats left of gazas most crowded neighborhood. Two weeks ago 200,000 people lived here. Only hints are left of what life was like. Torn laundry on a line, a single plant unmoved. A crib perched under a ruined apartment building. It took days of deliberate shelling and air strikes to reduce this neighborhood to rubble. This is no precision war against hamas and its weapons. Its far more basic than that. Its punishment. Israels way of telling gaza if you fire rockets, this is what you get. But even after all the destruction, even after more than a thousand killed, including several hundred children, many here still support hamas. This man says half the people are tired of hamas after all this. The other half support hamas thinking the israelis should feel a little of the pain that we feel here. To understand what hamas is fighting for, it helps to look at a map. Gaza is a tiny strip of land under a tiny blockade. In the west, fishing is limited to six miles offshore. In the east, gaza is fenced off. In the north, israel restricts Building Materials and strangely even kra ycrayons. In the south, hamas is demanding to ease the israeli blockade and open the egyptian crossing. Israelis are feeling the pain of this war, too. So far it has lost more than 40 soldiers, but it is also fighting for wider goals. This is a leading israeli expert on military affairs. This is asymmetric war. For hamas, it is not to remain standing after three weeks of battle. For israel, this is not enough. It is the stronger military power and it needs to send a strong message to the region, to the neighborhood. Hamas used two main weapons against israel. An elaborate network of tunnels to kidnapping Israeli Soldiers and its rockets. Now including local range rockets that can reach deep into israel. The Main Objective for israel, destroy the tunnels and demilitarize the gaza strip. So far more than half the 30 tunnels hamas has have been destroyed. And hamas shows it can strike at israel sending hundreds of thousands to shelters, but neither side can claim victory. We now they are both deep into the escalation and looking for a way out. And it gets messier and uglier and more violent as we proceed. Reporter which is why now the International Efforts to reach a lasting ceasefire have become so urgent. Israel long said it has no choice in this war, that it simply cannot accept more than 2,400 rockets being fired at its cities. Palestinians we have spoken to ununderstand that but say israel doesnt have to flat up an entire neighborhood and kill hundreds of children to do it. The u. S. Government is releasing photographic evidence that proves rocket launches into the eastern half of the country. The Eastern Administration says some of the selfpropelled artillery seen in photos are only found in Russian Military units. This comes as Sergey Lavrov was in moscow within the last couple of hours easing u. S. Sanctions but says it wont achieve the goal. The eu is expected to unveil wider exmommic sanctions as early as tuesday to include plans to restrict russias access to European Capital markets as well as the arms embargo. The Arbitration Panel ordered them to pay damages in excess of 50 billion. The fine is the largest arbitration awarded ever. A panel of judges has been reviewing the case since 2005. We spoke with the director at gml and the former shareholder who told us the russians would likely revert to delaying tactics. One would hope given that they took a soul part in the arbitration that they would recognize this is a binding award. If they dont, then we have every right to open force it on somebody that allows us to go after Russian Federation assets or diplomatic assets anywhere in the country, which is pretty much any country in the world. Right now bp is trading down half a percent. Many of the costs are being attributed in this case. Well take a look at the European Markets right now. The micex is giving a spin to further sanctions coming up tomorrow down 1. 5 in trading. The yoEuropean Market is lower. The general market is under water by. 10. Thank you so much kicking off with full force in europe this week, but well give you a look at todays agenda in the United States. Coming up at 10 00 eastern, well get june pending home Sales Numbers. And well get results from tysons fioods and herbalife. The nasdaq is down to 3 points lower. Very up significant losses right now it seems as far as the features are concerned. As we approach the half of the u. S. Earning season, thats where you were. With 63 beating expectations on revenue, im overall reporting Profit Growth of 6. 5 . The chief Market Strategist at tesla is joining us now, bob, what more could investors want at this stage . I think the price tag is showing they want a little more. And i dont disagree. I was listening to carter earlier and one of the points he was making when you include the russell and the overall mac pictures. The russell has gone through corrections, the s p and the dow has not. Im starting to see some of the signs that it may be beginning. When talking about earnings overall. The revenue has just been okay, but the guidance for q3 is above average in terms of negative predictions for q3. When you talk earnings per share, its different when you see the potential for ubs growth included in the math of the shared buybacks we have. We would like to see it in stronger earnings but right now are being guided the other way. Absolutely. I didnt inject enough sarcasm into that question. Perhaps the last big week of data before we head off for a bit of a summer low. We have the feds, too. So once he sees the key driver, is it going to be the macro or earning . I think its going to be the macro as earnings wind down. I dont think anyone is expecting a huge outcome for earnings in q3 at this point, but we are still in the midst of the q2. When you talk about the summer low, theres not a whole lot going on with fictional money along the sideline. Again, we have ubs near 16. But thats not where the bull markets go to die, usually its in the lower 20s. You may see that in q3. Thank you so much. Thats it for todays show. Thank you for watching Worldwide Exchange. Squawk box is on in just a few minutes time. Good morning. Welcome to squawk box. A giant week ahead for earnings. A job report with a big fed meeting in the middle of all of it. And secretary treasurer jack lew coming out swinging against inversion. And global risk continuing to rise with more violence in ukraine and gaza. It is monday, jewel 28, 2014. Squawk box begins right now. Good morning. Welcome to squawk box. Im becky quick along with andrew ross sore kksorkin. Joe is off this week. Maybe thats why joe is on vacation this week, we have six dow components coming. Among the interesting names, go pro will mark its public debut as a public company. And the fed begins a twoday meeting tomorrow getting a First Reading on the gdp on wednesday. And it is jobs friday this week. The july employment report will be released. Also on the docket on the week ahead, we have reports on home prices, Consumer Confidence and sentiment as monthly auto sales and the ism manufacturing. The market backdrop for all the reports, the s p is up 7 year to date. Stocks continue to make new highs. This is all coming despite calls from many strategists who have been expecting a correction in a pullback of 5 to