Transcripts For CNBC Worldwide Exchange 20140820

Luxottica. And both sides of the pond battling low wage growth and pressure to rate hikes. Announcer youre watching worldwide exchange, bringing you Business News from around the globe. Very nice to see you all today here on this wednesday. Lets take a look at some of the key movements on the european market. Carlsberg has warned that 2014 will be even worse by its key russian market. They expect low to mid Single Digits falling operating profits and says it may shop some brewery necessary eastern europe. Heineken, meanwhile, huge disparity. 10 chang in the performance. Heineken reported better than expected profit in the first half of the year citing progress with its cost saving program. This is the worlds number three brewer. But i did say it was not immune to headwinds from russia. Groups and volumes increased in all regions except central and eastern europe. Mining sector, bmp billiton, failing to get some money back. That was why the shares declined to get better. In the black after swinging to neat profit of 1 is. 72 billion in the first half of this year. The reason why the market liked this one and didnt like bil billyton is theyve announced a share buyback. Its set to take place over the next six months. Lex ott ka, if you think the brand of sun glass you own is no owned by luxottica, its pretty much anyone and everyone who is in the eye wear market. Several newspapers have cited disagreements with the companys chairman as the reason for the ceos exit. Balfour, theyve rejected a third merger proposal from Construction Group carillion but says its open to other strategic opportunities. Its a put up or shut up deadline. Theres your act ra anymore for the day. Lets take a look at these european indices. A very strong day on monday. We had an okay day on tuesday. Wednesday, we clearly run out of steam, but there doesnt seem to be a lot of impetus to the downside. Participant research mode. The volume, as one said, was pathetic. Theres not a lot of buying going on on the uptick over the last couple of days. They werent gray stateside, either. Well see it later in the show. Talk about the u. S. Instance, some of the volume that is occurring is panicky shorting progress. Put on short positions and are now having to cover that 37 the ftse 100 is now having to be a complete and upper laggard. Is that because it has the basic resources and that exposure to china and that problem about overcapacity, ill leave that one with you. The xetra dax, of course, which has a disproportionate exposure to whats going on in russia. Down 0. 3 . The cac 40, down by a similar margin. Did you see that air france announcement . We might talk about that later. Air france, klm, it was ten years ago. At the time, i remember thinking when i was just a young man in Business News, i remember thinking, where are the shortcuts . Where is the big efficiency gain toes be made out of klm . Well, there werent. Now theyre talking about a big strategic turn around potentially with major cost cutting potentially in there, as well. The spanish assets on a bit of a tear, actually. Down 0. 2 . Have a look at some of the bond markets. What are we got behind me . There you go. Talk about a tear. What have you got in spain . Not a lot. Youve got nothing priced in with the risk going to an economy which has 50 youth unemployment, 26 over unemployment. 2. 4 is the yield. A lot to see what he has to say thats going to protect these assets. Italian paper, again, what do you want for that . 2. 6 . And remember berlusconi . You remember him. 7 the yields were trading with him. Now its a much improved picture . No, it hasnt. 2. 6 . Tenyear france, this is one of the most surprising things about this entire eurozone crisis over the last six years or so. Nobody ever tested the french debt, did they . And what do you get for your money . This is a safe haven. 1. 4 for france and france is the one that you always get from the economists, isnt it . They havent had their structural reforms, yet their paper trades at 1. 4 . This is where you get to put your money if you want a safe haven. No wonder people in germany are thinking about a property as a place to put your money to try sxvth some form of yield 3 , 4 , 5 on property yields. That is the pathetically low yields you get for earning german paper p you dont even get 1 . Foreign exchange, im almost out of breath, euro dollar, 1. 32. The aussie dollar, under a bit of pressure, 0. 9287. Were going to look at o s statistic webs were going so look at bank of england minutes, as well. We have a heavyish buyer on the united kingdom. Very interesting stats. Selfemployed, whats missing from the omf numbers . Well talk about that with our guest in around about to minutes time. Ive mentioned asia, havent i . Well look at those with Sri Jegarajah who is standing by in singapore. Sri, are you still there . Youre the last man standing still. They always get their pound of flesh from me, steve, you know that. Put up or shut up. I like that. Not a great deal of convicti conviction. Really, this is because investors are waiting to see what these major risk events, not only in this part of the world, remember, we got flash pmi numbers coming out of china from hsbc. Private forecast tomorrow, but fed minutes and, of course, you were talking about this, steve, an allimportant janet yellen address in jackson hole rounding off the week. We did get trade data out from jap japan, which did help to form some moves on the yen. Yes, it was quite a robust figure on the ex fort side, rising almost 4 in july. So recovery there. But a very different picture if you look at the trade deficit. That widened largely on account of the fact that japan continues to suck in a lot of fossil fuels on this post fukushima era with that hole in the deficit. That put the yen under some pressure. We were talking about that cross early on today. Dollar yen, gliding to a fresh 4 1 2 month high above 103. 15 earlier on today. So watching that cross. Elsewhere, no gray shade, really. You were talking about bhp and kiss disappoint that they didnt return any excess earnings to shareholde shareholders. That helped to drag down the broad index. Bhp is an index heavyweight. Shanghai composite, the weakness there, concerns about ipo activity which may breed some interest from those existing issues. Thats one of the reasons why the shanghai comp is on the defensive. All volume until we get some clairety tomorrow from china with the flash hsbc pmi numbers and jackson hole. Steve, back to you now, sir. Thank you very much, indeed, for that. How many of Commerce Bank group do you think the German Government has got . It has over 17 . You think commerzbank and you think all of those problems that weve seen throughout the eurozone and concerns about capital, concerns about zombie loans and all that. Did you know this stock is up 38 over the last 12 months . Yes, its coming off a bit. Not bad considering all the problems that this company has got. There you go. My screen says 38, but its 33. The German Government says its sees no reason to sell commerzbank stake now. According to an official, German Government has received the regarding the bank state says the finance minister. Maybe i need to read that one and get Geoff Cutmore to interpret it for me. Let us move on. Islamic state militants have released a video reportedly showing the beheading of a u. S. Journalist. The white house says its urgently working to verify its authenticity. This as the United States says it could extend its campaign of air strikes to prevent militants from taking control of a dam in anbar province. Hadley joins us now. Hadley, i dont know where to start on this one, really. You and i talked previously about pico. I want to mention it again because this is an artificial set of borders created by the british and the french shoring up old ottman empires and what have you in the midst of the first world war. Why does the islamic state, which is trying to be created, have any less credibility than the borders created by pico . The extending of this islamic state. The difference, i would say, is that under pico, they did make some attempt to have some kind of Representative Government which was not based the government fixed by western powers, correct . Correct. But from their viewpoint, from their world view in the 1900s, that was the best way to go. Colonial, though, trying to dictate who is in charge in iraq, who is in charge in syria, who is in charge in the middle east. Isnt that where the problem comes . Possibly. But i think theres more nuance from that. It isnt just all about oil. What we know is theyre ramping up Oil Production in the south and then theyre going to add 200,000 barrel capacity to this Iraqi Kurdish pipeline that goes to tehran and turkey. So Oil Continues to flow. Its just now we know, we understand this is a problem thats going to impact everyone in the west because everyone can, you know, these people have european passports, they have american passports or mobility. What happens next in the shortterm . Is there a mission kreeg from the likes of the united kingdom, the likes of the america . We already know that there are more advisers, we already know that the pentagon is looking for contractors, and i think that theyre looking at every avenue to get more people on the ground. To the iraqi army, to the kurdish forces, as well. Even if theyre not giving this a name, they understand this is a problem the u. S. Is going to have to tackle. Hadley, thank you very much. Lets tell you whats coming up on worldwide exchange. Could the German Property market deliver some bang for your buck . Needless to say, we will get some information on the prices in frankfurt with annette in a short while. Plus, your holidays, only 51 of americans apparently take a paid vacation he year. Well find out why people are reducing their fun in the sun. And as apple hits 100 for the First Time Since its split, well tell you the other tech stocks that could be a smart choice for your portfolio. All that and plenty more right here on worldwide exchange. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com welcome back to worldwide exchange. Geeley autos down 28 as consumers continue to shun domestic brands in favor of foreign namps. Exports didnt help, either, falling 42 . The company that owns swedish car brand volvo saw exports fall 32 . Lets talk about hertz. Its tapping the brakes on its full year forecast. The rental company now is said to be well below its previous guidance. Operational challenges, including Record Number of vehicle recalls this year and costs associated with a continuing order. Shares of the company fell 13. 7 this year. They fell 10 , as you can see on the screen there in afterhours trading, 13 . Lets take a look at what hollande is saying. When im not reading magazines in germany, im often reading this is president hollande saying he wants to accelerate reforms in france. I bet he does. This is the worlds one of the Worlds Largest brickmakers. What did they say their problem was . Not the uk. They said their problem was holla holland, the dutch market and the uk now. Theyre going to launch a plan to boost home building. Frances hollande announces tax reform, Welfare Benefits reform to help lower income households. All right. Germany is a nation known for its rental culture. This has been some property, not anything else. But in an environment of ultra low Interest Rates, people are turning to the Property World in search of a better return for their savings. Annette has been looking at how the trend could be creating a bubble after decades of steady prices. Gold, that is what germanys property book across some of the countrys biggest cities have. The prices, for real, things are so high now i simply cant afford it. Its too expensive and i am not quite sure that i will stay in germany. Where are you from . From germany. Offices are being transformed, turned to up Market Apartments and city districts are emerging. House prices, which are barely moved for decades, are on the rise and Property Values have jumped more than 42 since 2007. Its more and more attractive as a place to live and to work. We see a strong increase in populations and, you know, in the last three or four years. This happens in like five to ten years. Half a Million Dollars is buying a really nice onebedroom apartment in one of those buildings. Behind me, 50 to 55 square meter. Which equals into a square meter price of more than 6,000 euros with another tip of frankfurt. The bundes bank has warned house prices are in danger of ov overheating by as much as 25 . The bank blames both foreign buyers and the low Interest Rate environment of fuelling this rise. But the ecb could be contributing more to the environment than just low rates. The banks regulators is planning to hire more than 1,000 new people and keeping property in high demand. So as they curve germanys rental culture or save us just looking for a place to put their cash . Annette, you and i both know gaylord spartanshaun. Isnt that why theyre all buying property . Well, thats probably one reason why a lot of people are going into the property market. It makes perfect sense to invest the money and not have it sitting on a bank account. Rather, property markets are booming. But if that boom is here to stay, im going to discuss with my guest. Thank you very much for joining us. We were just discussing whether that Price Development weve seen in recent years will continue for the next years. Yeah. You know, annette, here in frankfurt, we have the last few years the markets and property markets here. The prices increased by 50 the last five years. You see still a development where the price increasing continues in some stock markets, but not everywhere. We have to look for where to invest now. Looking at those real estate papers in the internet that a lot of the new construction is still waiting to come to the markets, still in the states of being completed. Will that change the picture . I think it will make the blind side a little bit more the pressure out of the demanding side. Because we have a lot of new construction areas here in frankfurt and this will stabilize the market. But i dont think that the prices will drop down. Yeah. So in general, looking at the german market, not only frankfurt or munich and hamburg, do you think were already in an overheated territory . Not overheated. But maybe partly overheated in some area. But i think we have in most of the cities, we have reached the peak because a lot of people cant afford the prices any m e more. But you have to look for to divide the city because every city has its own story. If you take frankfurt, we have a lot of demand coming from new stuff like ecb and so on and they cant afford the prices. So what do you think, actually, that ecb people coming here only for two or three or four years would rent and not buy, is that the case . No, because the situation here in germany is that usually a german buys a property or a flat. If you look at 10, 15 or 70 years. But in other european countries, we buy and sell. I think we have to learn here in germany, we see a lot of new ecb stuff are buying, not renting. Thank you very much for your inside here. You see, steve, its so good to be a member of the European Central bank or at least an employee because they have nice packages. Indeed, yes. Thank you very much indeed for that, just talking about germany briefly. A german official, the government says the 2014 growth forecast of 1. 48 despite the contraction in the Second Quarter. Optimism at the government level. Im just on the website, actually, on cnbc. Com. Im taking a look at what 500,000 will get you around the world when it comes to property. Not a lot appears to be answer. But have a look. There appears to be some good stuff in there. Rio looks better and johannesburg, as well, if you want to live in south africa. But of the others, not a lot. But if youve got a little bit more to spend to, say, 400 million, you could buy this one, the sky penthouse located in the managerial heirmillionaires playground, monaco. Features including spending 400 million, apparently it includes a water slide. I cant imagine that will be top of the list. It takes you from your dance floor to your swimmi inming poo. Anyway, it has a kitchen on each floor, as well. Who could ask more . We want to hear from you on this. If money wasnt a problem, how would you pick out your home . Join the conversation here on worldwide exchange. Get in touch with us. Email, worldwide cnbc. Com. Also in the twitter sphere, as well, cnbcwex. So still to come on this show, forecasting the timing of the first bank of england rate hike has been exciting business this summer. Could we get a clearer steer from the minutes of the last mpc . Stay tuned and find out. Heineken is in the green. Investors after balfour rejects a third merger bid from Construction Group ka rillon. Confirms over its u. S. Business. And stocks slump in the land on a report the ceo could be leaving due to differences with the fashion groups founder. And central bankers on both sides of the pond battling low wage growth. Find out if bank of england policymakers think its time to move where we will break the latest Meeting Minutes any minute now. Weve had a couple of long days if youre long the European Equity market. The ftse down 0. 3 . The xetra dax down by a similar margin. A little bit more accelerated selling over in paris with the cac 40 down 0. 4 . And the ftse mib are already under a little bit of pressure, down 0. 2 . Lets have a look at the Foreign Exchange rates, as well. The euro dollar trading 1. 33. Weve got the euro Dollar Dollar yen, 103. 25. Ive got some flashes hitting the wires from the bank of england. Im going to get straight to those. This is interesting. I am pretty sure someone told me it was going to be 90 on the vote. It was 72 for rate action. Mccafferty to the mpc voted for 25 basis point rise in the bank rate. They said they need an immediate rise in that rate. They added these two. Pressure from wages, anyway. An early rise would facilitate a gradual rite rise rather than something more shocking later on. They saw insufficient wage growth to justify a raise in rates. The majority added higher business margins could absorb the shortterm. The majority adding the bank hike would put highly indebted households at risk. Who better to get through this than jane foley. Hello there. Hell allow. How are you . Very well, thank you. What do you know that we dont . To be honest, i was surprised. I didnt think they would vote i know a lot of people were out there anticipating we would have one or two hawks today. The reason for that is the inflation data. Im very much with the majority here. We have very low wage growth in the uk. Low inflation, too, as a significant hindrance to an early hike in uk rates. Theyve got a good point, isnt it . Theyre trying to boil the pond slowly rather than shock us all. They want to graduate hikes. What they were saying is a tightening now will make it easier to have a gradual tightening later on rather than something more shocking if wage growth is in the system without the higher rates. If you look at the world economy, i dont think anybody is facing a shockingly High Movement in rates, which has had four moments this year. We look at the eurozone economy, we look at the u. S. , over the last few years, by time we get to the end of the year, we have growth rates generally being revised lower. We have a whole range of structural factors causing slow growth. Economists havent yet made up their minds where theyre going to need us. One thing is for certain. Over the next few years, theyre probably going to have relatively slow growth in the year. This economic recovery, its distant to the other post recoveries that weve become used to. That means even if they hike Interest Rates in q2, q1, q3, the pace is almost certain hang on a second. The british economy, including the scotts for now because theyre part of us at least for the shert term is gang and we have the best growth in the g7. What im asking you is what is wrong with having rate hikes when youve got a 3 growth rate . I think 23 we look the a these growth rates since q4 last year, we have to put that into perspective. That is that the uk economy will have a significant downturn after the Global Financial crisis. That actually leaves the uk behind some other developed economies. This strong growth rate is really catch up that down turn that we had. It is short. When we look at the uk deficit, which is very interesting, one of the worst government deficits in europe and much worse than some of our french or greek counterparts, a little over a 6 deficit, despite this recovery, the financials have incited recovery and mr. Geoffry cut more is never pained in telling me both the government and the household levels are at record levels. Yes. And for that reason, nobody wants a shocking rate hike. Low Interest Rates are likely to sustain for a longer period of time. By this time next year, they will still be low and the pace of the increase is certainly low. The bank hike will put househ d households at a risk according to some. They created the problem by hiking the rates and now theyre afraid to pull the trigger. This isnt just a bank of england problem. If you look at canada, if you look at who is the bank of england . Bank of canada . Carney. This is why carney does have experience with thats the housing bubble. Its canada, its the uk, its freedman, its lloyds, its new zealand and its australia. Now, all of those countries have adopted macro production. So what the central bank is saying, but at the same time were right about the growth rate and consumer debt. The viewers and me have to earn around and say, wait a second, we havent heard about this one. Macro peru tental is use of means to tighten bubbles in your markets without using Interest Rates. That just went up for us. All of these other countries have been using this for the last few years. Its persuading consumers to take up debt. They are worried about this high level of debt and macro production. Well be talking about the need for balanced uk and the Economic Growth and the battle of sterling would come into that, as well. I think there is a fear that the new growth isnt balanced and one of the problems is the fact that sterling is too high for our exporters. Is there a serious argument . Its an inevitable argument from the politicians. If you look at the historical basis at the dollar, it cannot be described as particularly strong. Sterling is still a lot weaker. Now, interestingly, some academic measures are beginning to suggest sterling is a little overvalued. Certainly exporters are beginning to feel the pinch. When are we going to get the first rate in the uk . I think not before spring. If i think, i look for them to pull back. And where is the uk going . I think the uk is euro sterling is going to go down. Jane foley, strategist, thank you. Police in missouri have maid made further arrests overnight as tensions continue over the Fatal Shooting of a black teenager. Several hundred marched in ferguson last night marking the 11th day of protests. Jay, just update us on the last 24 hours, if you would. Good morning, steve. 47 arrests overnight. Some terrific news. No tear gas, no gunfire. It was a calmer night than weve seen over the last ten nights here. And so that is something that is a positive, that this community can build on. And a lot of it was the result of community policing. There were a lot of people from the community there that tried to diffuse situations as they started to erupt. Now, there were still items thrown at police. That led to some skirmishes and some of the arrests. But again, none of the tear gas, nub of the smoke canisters, none of the gunshots that weve heard over the last week plus here. As we move into this day, it could be one of the most pivotal that weve seep here since the death of michael brown. Well see the grand jury begin to hear some evidence in the case. Eric holder will be here as the civil rights Investigation Continues. So a lot is going on. A lot shifting on both sides of this. On the ground where the protests continue and as the investigative front moves forward. Jay, thank you very much for that update. Now, back to the Mining Sector, glencore back in the black supporting a net profit of 1. 72 billion. Gn core is the creation of enormous amounts of merger activity, first of all, by mcdavis when he was leaving xstrata and then by glencore absorbing into a Greater Group which covers mining to trading. In the first half of the year, they made this money. The mining giant announced a share buyback. Thats key of up to 1 billion. That will take place over the next six months. Lets get to nick who is an analyst. Im interested in this one. For all kinds of reasons that you and i have discussed previously. But primarily because youve got the tale of two miners over the last 24 hours. Youve got bhp billiton, and then youve got glencore supporting that. Im sure they knew beforehand about that buyback. And theyre giving the money back. And the actual structure of the company is back now in the minds of shareholders for the money, the divvy, the buy back. Under one time, targets a Credit Rating and low geopolitical risk. The spinoff is going to make the it pretty much a miner, huge resources in the basin. Its a bet in execution to m a, which has has, you know, in the past. So these are two complete different risk propositions. As well, im going to disagree because i thought this was all about the post overpass. What were going to do today. Weve all bought too much assets, as well, where glenn core is a product of enormous m a and thats the one with the huge debt. Yet the one that doesnt have the debt isnt returning the money. The one that does have the debt is something its sold the mine and the net proceeds of that were 6. 5 billion. So its only getting back 1. 5 billion out of that 6. 5 proceeds. So it has a magic its just sold a large asset and given back part of that large asset to shareholders. I dont go it, im concerned about it. For me, i simply see it as having higher leverage. Thats the fundamental point from an investor point of view. And youre comfortable with that . Our clients are very risk aversion. But from an investor point of view, it has always had access to the debt markets and at the current level of debt, it funds itself very, very successfully. So i dont think its a huge concern today. If the Marketing Business were to do badly in the future, if there were another leg down for commodity prices, it could certainly get into trouble at some point. If one of these two, particularly the highlights of one of the favorites in the sector, is there something our viewers need to know about . For me, because of the safety, a great dividend yield. Bhp doesnt have the high leverage risk that glencore has with the caveat that glencore has been successful in the past. And the success on the trade, they ring their hands when they think about this sector. The sector as a whole, theyre appreciating a slowdown in demand for the product now. Has he got time for a bit of a performance . I think its a rerating story on the back of better cash flows, more cash for discipline, lower beater, less correlated with commodity prices, Company Capital al kaegz and successful strategy. So i think its probably an outperformer next year for me. Very nice. Always good to see you. Thank you very much for joining us. Now, you can get involved. Worldwide cnbc. Com, cnbcwex. Get involved and well talk about your big points in the next hour. Were going to have a little more of a u. S. Focus as we go through the show. Still to come, the number of selfemployed is at a 40year high in the united kingdom. Well take a look at what that could mean for the british economy. Thats coming up next on worldwide exchange. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com habeing able to pay as we goo rawas crucial for a start up. S. Having to fork out a lot of money up front was risky. You can launch a feature really quick, and if the feature doesnt work, we havent lost anything and we can have something up and running in days. And this would not be possible without the cloud. We are now supporting over 25 million users each month. Ideas can be tried and tried again on the ibm cloud. The ibm cloud is the cloud for business. Here is a quin for you. When is a merger not a merger . Possibly when its klm. Shares up 3 so far this year. Reportedly unveiling now plans for the most ambitious restructuring since 1997. A young business reporter, kind of, i was when these guys merged in 2004. I remember being extremely disappointing that we werent into cost cutting. Is this the longterm cost cutting we were always waiting for . No, steve. This time the Regional Network in france will be addressed. Its not really addressing the problem of air france klm. Its what air france is going to do with this Regional Network which is losing money. Basically, air france is going to transfer more work to its new brand. Its not a low cost airline, but its a structure where pilots and cabin and crew are being asked to work a little bit more. This is how air france hopes to make it profitable. It will be transferred from air france to hub at the beginning of next year. The plan will speed up the air france placed an order for seven additional boeing 737s which will bring the fit to 21 aircraft by the next summer. The strategy, the plan is to bring air france more profit. The company will not make an announcement until september. The ups and pilots already plan to go on strike. They will announce at the end of the month the dates and details of the strike. They were asked to work more hours. Basically, its going to address one problem which is the unprofitable part of its network. Still, its not addressing what you were expecting so the merger between air france and klm. Maybe im being a bit harsh. I just remember it never happened. I look forward to this, to seeing what happens on the story and inevitable strike action will galvanize opinions in france. Uk selfemployment is higher than at any point over the past 40 years according to reports on the o m. The rise predominantly being put down to fewer people leaving selfemployment than before. Lets get into some detail about this. Jamie, lord gardner, as well, a Senior Research analyst and policy foundation has been writing about this subject, as well. Jamie, tell us what youre bringing out today. What is the news . Weve got about 4. 6 Million People in the uk who are selfemployed. Thats about 17 of the workforce. The question is always asked, what are these selfemployed people doing . What weve looked at is a question of how long theyve been selfemployed. From that, what we can introduce today is weve seen people leaving selfemployment over the last five years and at any point over the last 20 years. So enjoying selfemployment over the years, people are leaving, the same number of people have joined in. For the uk economy, why is it so important . So we kind of get a handle of whats going on with selfemployment. If you look over the last six years in the economic crisis, employment is 1. 1 million higher. The majority of that is being selfemployment. Its an important aspect of the uk economy into the jobs market. Another thing is being selfemployed, thats down 22 in Real Estate Investing with inflation. So weve seen fallen incomes in selfemployment as well as rises in the number of people employed. So more people doing it, but less people getting a higher salary on the back of this. Policymakers have government, have the bank of england been ignoring this very important path, 4. 5 Million People. Well, we do have a bit of a challenge in that none of the official mergers in our economy capture this growing grief of 4. 6 million selfemployed people. So it is a bit of a blind spot in terms of decisions and treasury theyre making at the moment. We try to estimate what our official measure of earnings with the best dates that we do have. We think although earnings would at times have been higher with the selfemployed included over recent years, the fall in earnings would have been 20 deeper. So your bone is not necessarily with the bank of england, its with these guys, isnt it . We think the importance of this group of workers and their growth in numbers means we need to have another look at capturing their earnings. We need to consider these people, but its very difficult to get a gauge on what theyre actually erping because they pay themselves in all kinds of ways. Households do underestimate the earningingsings of the selfemployed because they come from many different sources. There is a source being k4rud today and information with the selfassessment to kind of give you insight into this, as well. Im presuming, given this big debate were having over t bank of england says we need to have a rate rise sooner rather than later. But what youre saying about the lower rate of pay throughout the recession of these people. Of 15 is the uk population. That was the lower rate rise. Certainly the wage figures we got for employees last wednesday show no signs of recovery in real terms yet. And if the inclusion of the selfemployed were to make that pitch even worse, we would urge caution on an immediate rate rise. Although we have in an emergency situation with this low rate and we cant say that forever. This is about smes, isnt it . This is about small and Medium Sized Companies in the uk. Isnt it . Or am i wrong . There are kind of small businesses, these selfemployed people, which make up 4. 6 million of the uk workforce. We would agree. Its a real range of people that have been working on their own. Thank you very much indeed for the work youve been doing. Laura gardner, a Senior Research and policy analyst, and jamie jenkins, labor market analyst at the ons, office of national statistics. From uk to japan, the trade deficit widened in july for investors to digest. Exports rose 3. 9 on the month. The Energy Sector pushed imports higher by 3. 2 on the year. Why am i not surprised about that . The Energy Crisis post fukush a fukushima. Anyway, the data will fuel concerns that shinzo abe, the Prime Minister and his efforts to weaken the u. N. Are not going far enough to boost manufacturers. Ive been involved on that one. Isnt it incredible that all these gains from abenomics have getting knocked out by an awful situation they have in their energy mix at the moment. Anyway, citigroup is mulling a potential admit from its japanese Retail Business including ten banks. This comes as japan Banking Sector grapples with falling interest margins and weak loan demand. Anyway, lets give you a look at whats on the agenda in asia tomorrow. Were getting more clues on how the worlds second largest economy is faring. The earnings says, well, weve got the airport, afx ask treasury whines reporting in australia. In hong kong, we know wynnemaccau and wing hang bank. Two palestinians have been killed following the collapse of a ceasefire between israel and palestine. Gaza launched rockets nearly eight hours before the truce was set to expire. Hadley has joined us again around the desk. All right. Any progress at all in finding a way out of this crisis . Well, unfortunately, it seems to be the case that theres no progress thats been made and for the western powers, at least, their focus is elsewhere. So theyre not going to be on the ground pressuring hamas to come to the table, pressuring israel to come to the table. At this point, you have a situation where the egyptians are not on the side of hamas or the palestinians. They dont want this cross border flow of militants and weapons. Whats the latest coming out of d. C. On this one . At the moment, its muted. We havent seen them on the morning shows over the last couple of weeks. Its been the isis story. Americans, as we know, have a very short attention span. Presumably they will back the israelis . Its a noise issue. Either side is going to back the israelis. We know that. Hadley, thank you very much, indeed. Still to come, the countdown is under way for janet yellen at jackson hole. Investors get a preview of whats in store. More after this break. And a warm welcome to worldwide exchange. Rhyme Steve Sedgwick and these are your headlines. A split at the bank of england, two voting for a rate hike. This as investors turn an eye to the fed as it faces its own pressure to mormallize rates. The markets failing to track another rally stateside after the nasdaq hits the highest level since 2000. The russian risk hitting carlsberg earnings as the brewer says slower sales in key markets will hit 2014 earnings. But rival heineken in the green as the world cup sales offset weakness in the region. Elsewhere, shares of hertz hitting the skids as the car blames a record level of recall activity. Youre watching worldwide exchange, bringing you Business News from around the globe. Apparently it says here youre just tuning on in the United States. Thank you for joining us. Ill tell you what, you should have been watching on cnbc world. You could have watched a bit of squawk box. Nice to see you all if youre just getting up. The dow mini down 7. The nasdaq down a couple of points. Dont forget, your rally started after the europeans have gone on on friday. And as such, you were flat on friday. You had a good rally on monday. A decent rally yesterday. Numbers are okay. You had an apple rally, decent housing data and your inflation data was pretty bland so it didnt put any pressure on policy measures either way. Lets take a look at the European Equity markets. They havent really performed today. Its been disappointment on a few figures. Concern out of a couple of companies about management changes. The ftse 100, 0. 3 lower. 6762. Thats pretty much 2 trend across the board. The spanish market, the ibex, up changed. Do you have a look at the bond markets, im going to show you. Tenyear treasuries, look at this one. 104. 56. French data, not much better. 1. 39, the yield. Sterling at a session high after the bank of england meeting revealed a wider than expected split on rate hikes. It was voted to hike rates from the historic low of 0. 5 . We were expecting 90 in terms of mpc votes. We got 72. This move, some are saying, could raise expectations for consensus on tightening by the end of the year. But there is a wage growth issue. Mccafferty are arguing that we want to get ahead of those concerns about wage growth. The Federal Reserve releases minutes later this afternoon. Investors will be looking for any change in policy Forward Guidance haedz of the Central Banks annual summit in jackson hole which kicks off tomorrow. Brian, how are you . Good morning. What do we expect to hear from janet yellen . What are you looking for . Well, i think shes not going to help us because she doesnt really know. I think the fed is on target to end quantitative easing at the end of october. But its still anybodys guess. If we look at the Inflation Expectations, weve come down this month and theyre getting down to levels that actually are more consistent with the beginning of quantitative easing. The others in the end of quantitative easing. So if Inflation Expectations remain low, they may be able to hold off rate hikes for longer than most people think. And ive been reading your macro strategy report with interest. Watch the gap. Basically, people are waiting for a downtick in equities. If they dont have the rate hikes, presumably theyll be enjoying the right to the upside. Exactly. We had a bear rate in july. There was a lot of bad news. So the macro of their community brought a lot of pressure to the credit market. We saw junk yields go up by about 120 basis points in july. That scared a lot of Equity Investors and we had a brief correction. Every time junk yields have gone up in this cycle, its brought out stronger demand. So in the last two weeks, they reversed more than half of julys rise in just a couple of weeks. And that tells us that come september, every september theres a surge in Corporate Bond issuance. If that surge goes badly, its bad for Financial Markets for the rest of the year. But what that is telling us is that this surge this coming september is going to be a very big success. And that means more buybacks and more mergers and acquisition activities that take stocks higher over time. Which means all the shorts that investors put on this summer are going to eventually have to be covered. How refreshing to hear you talk about junk. No one talks about junk any more. They talk about high yields. They dont call it junk any more. Lets call it what it is, junk. Its a better entry point for people who have all this money hanging around the sidelines. They saw what happened in july, what you mentioned, and they wrote, i cant believe my luck. Im getting a decent yield. Is that what happens . Its any entry point they can find . The junk market is really in the institutional market. About 12 billion. But thats a tiny fraction of the junk market. While toss Retail Investors were leading the junk market, more than 50 major pensions have put more money into the credit market. That market hasnt hit yet. Thats probably not going to hit until september or october or november. And that means that rise in yields presents a better buying opportunity for those pension funds. Overall, yields are low and theres not a great investment opportunity, they dont want the risky, of stocks they put in the credit. That puts stocks on the Balance Sheets of companies and the Companies Use that cash to either buy their own stock back or the companies. Were going to have another chat with you in a few moments time, but i want to talk about how difficult it will be. Brian reynolds, chief Market Strategist. So we should tell you what else is on the agenda stateside beside tess fed minutes. Retail earnings continue. Lowes, staples and target reporting results before the opening bell. After the close, well hear from Hewlett Packard and l brands. We should take a look at some of the other top stories, including hertz tapping the braux on its full forecast. Citing operational challenges including a Record Number of vehicle recalls this year. And costs associated with a continuing audit. Shares of the company fell 13 in after hours trading. Well see you today now 14 higher. So not negating all of that gain weve seen over in hertz. Carlsberg, they make beer, they make lager. Carlsberg is having a tough time at the moment. Theyve warned back in may and now theyve warned again. 2014 profits will be hit by slower sales in its key russian markets. The danish brewer announced a fall in operating profit and says it may shed some breweries in eastern europe. Heineken, theyve reported a better than expected operating profit in fact fist half of the year. They cited progress with their Cost Savings Program. This is the worlds Third Largest brewer and its not immune from the headwinds in russia that grew, volumes increased in all regions sclusing central and eastern europe. Do you have sunglasses . Check out who makes them. Theres a high chance that lux ott ka makes your sunglasses. Apple shares closed at a record high. Are tech stocks ripe for the picking . Well have one of the analysts top buyers, coming up. I make a lot of purchases for my business. And i get a lot in return with ink plus from chase. Like 50,000 bonus points when i spent 5,000 in the first 3 months after i opened my account. And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a business even more rewarding. Ink from chase. So you can. These are your headlines. Watchers at jackson hole are looking to gain insight about what janet yellen has to say about low wage growth and rate hikes. Apple close he with 100 for the first time helping the nasdaq reach a new 14year high. And hertz outlook claim blaming automaker recalls for its fall in growth. American workers appear to be getting more when it comes to taking time off. A new study says workers use only 51 of paid vacation time. What are you doing . The Research Found 61 of americans work while theyre on vacation. Oh, the dreaded smartphone. Anyway, is this the enof the america . It looks like it for now. The wall street journal says the twoyear trend of big, newhouses appears to have peaked as more buyers seek out modest homes on the market. The medium sized u. S. Homes comes in just under 2,500 square feet. That number is unchanged from the first and Second Quarters of this year. Weve got a topical week going on here at cnbc. Weve been looking at what half a Million Dollars will buy you around the world. Its a sorry tale, im afraid. Head to our website to find out on cnbc. Com. We have about 11 slides on there and showing you all kinds of places. If you have, say, 400 million, this could be yours, this sky penthouse located in monaco could be the most expensive apartment in the world. Now, correct me if i am wrong, but if i had 400 million pounds, im not sure oregon 400 million, even, im not sure id want a water slide that takes me from my dance floor to my swimming pool. But hey, who am i . When i get 400 million, im sure a water slide will be on the top of my list. If money was no problem, how would you pick out your home . Worldwide cnbc. Com, or cnbcwex. Someone, im sure, hats 4 million. Briep, we wont talk about that, but we will talk about the shorts. How come the shorts, all those short of the options market, via volatility, why are they having such a tough time of it . Wild have thought the vix is relatively low, it would be wonderful to trade together at such high levels of the market and lower levels of premium. Sfwh well, most investors are fundamentalists. Weve been going up, the stock market has been going up the last five years because of engine nearing from the credit market. Since most investors are fundamentalists, they dont want to buy stocks because of that, they want to sell them. So every time we have these constructions like we just had recently, people evenly sell into them. This week, weve seen the 13fs, the filings from fund after fund and theres been a number of fund that have short the market of brought a lot of puts. But the thing is, companies have been buying their stock back and now theyre buying other companies. And that takes stocks higher over time. And that means most investors, most Institutional Investors who havent been fully arrested underperform. And that kind of builds on itself. They just cant believe its not going to end and so they sell in short and then they watch this again as engineering take stocks higher. You mentioned institution buying now because they havent been fully invested. Well, im sorry, theyve missed a fiveyear equity market rally, as well. Is the next cycle already happening, the fact that the Retail Investor is involved . Its very often the private individual who is seen as the last person to go in and pie the market. That is usually true. Last year, there was some mutual fund buying. But the vast majority of buying has been by companies themselves. Its purely Financial Engineering. We know Financial Engineering always ends badly. But the thing is, this credit cycle, because theres so many pension money coming into the credit market, its likely god going to last for years. So whether its the u. S. Getting downgraded or the fiscal cliff or the ukraine, people want to sell into it. But this Financial Engineering trend is so strong is that it crushes those short sellers, takes stocks to new highs and thats probably going to happen for the next couple of years. We just had an 80point rally on the s p in a couple of weeks. It took us back to the 1985 area on the s p, which was the july high. So theres a little bit of resistance there. So its natural for stocks to rest a little bit. But once we break to that new high, Financial Engineering takes us to a strong run and thats probably what were looking at in the fall. Its been really good speaking to you, brian reynolds, chief Market Strategist at rowsen blat securities. Were talking about booming equity markets. The nasdaq is back on track, sent it . Apple driving a rally to highs last seen in 2000. Is that ominous . I dont know. Are the good times here to stay . Well discuss. Let me show you european equities. Not looking good, is it . Around about seven out of ten stocks in decline. Were only down 0. 1 . Well be back right here on worldwide exchange. Theyre not looking that brittant today compared to the last couple of days. U. S. Futures seem down just a smidgenon. Youve had a good run, though, havent you . Theres been a rally in the last couple of weeks in the s p. Data was all right overnight. Did you see the home sales figures, as well . Pretty impressive. Housing starts up sharply in july. 16 increase. Youre annual rate is just over a Million Units now. The low in the crisis was about 500,000 units. The high, 2 Million Units. As we say in this country, middle of the road. Equity markets, as well, what a great legacy for you stateside, as well. The spanish market flat. 0. 3 to 0. 4 down for the major european equities markets. Apple closed above 100 a share. The First Time Since the 71 stocks in june. Wow, back up to see 700. Thats incredible considering it went down to 500 bucks. Prior to the move, Morgan Stanley up, its price target on apple with an overweight rating citing a potential iwatch launch later this year. Joining us with his tech picks in the space is ivan from tigress asset management. Thank you very much for getting up early with us. We start off with going. Its a oneway track for google, but you think it continues. Why are they going to go up so much . Because they dominate a key number of areas. And as we move to this connected internet of things, its the mobile platform that these things run on. No valuation concerns . Not at all because google is a relatively cheap stock. If you look at their excess cash, their growth, their cash flow, the stock is not expensive at all. Its very cheap. What would be a concern for you to your upward call on them . What was the one thing that you think ive just got to worry about this and apart from that, its great. If there were to lose significant Search Market and paid market share to yahoo or bing. That could be some concern. But not the key driver, so not much of a concern. Okay. Lets move on then. Lets take a look at broadcomm. This is about an spanish and chinese networks, yeah . Well, they make Wireless Connect chips for Wireless Connectivity, both wifi and blue tooth and these are key growth areas as we connect wirelessly for key use on mobile platforms. People are always looking for the key metrics to look out why this company is better, whether its a p, whether its return of capital, whatever. So youve highlighted a no pass. Net operate iing profits after taxes. Its looking at economic profit and that is nopat minus the cost of capital. Theres no greater driver of increasing shareholder value than increasing return on capital. Yeah. So excess cash, 4. 6 billion, as well. A large amount of that is coming back to shareholders, yeah . Yes. As they keep increasing stock buybacks and increasing divid d dividends. Same thing at google. I guess the question for my is when you say youre going to see advancements, my issue there would be a lot of people are putting a lot of money into the internet of things, as well. Is it going to be a crowded spade and why broadcomm is going to come out a winner ahead of the others . A couple of reasons is broadcom has key connectively chips used in a range of things. I think its a good acquisition of things for Something Like Texas Instruments or intel. Youve got a strong rating on this. Enterprise products, increased penetration, ultra books, desktops and servers, strong Growth Drivers for this company. Recent selloff buying opportunity, yeah . Absolutely. The key thing is for us for storage, theyre one of the largest producers and one of the largest innovators of the use of flash memory for storage and were going to see a huge amount of growth in drives over moving drives in all kinds you know, computers, servers, were seeing it now and all of these book are coming out with drives rather than moving drives. A lot of people are getting concerned whether these see these companies. Theyre not returning shareholders and are going out and making acquisitions, as well. Fusion low is one that you point out. Are you happy with the kind of deal this company is making, then . I thought fusion acquisition was a phenomenally good acquisition. A lot of these companies have shown that they use the cash widely to make good acquisitions. They incrementally increased their acquisitions and expanding horizontally. Leave it there. Iv ivan, very good to get your calles and nice to see some strong conviction calls on those companies. Ivan is a chief Investment Officer at tigress asset management. So lets stay stateside. Barnes noble is looking to turn a new package in its battle with amazon by paring with samsung. Barnes nobles, its flagship store. The product will run android and is expected to have an emphasis on ereading. Still to come on this show, another day and another setback for obamas Signature Health care overhaul. Well get the full story from washington after the break. What if there was a credit card where the reward was that new car smell and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com welcome to worldwide exchange. Im Steve Sedgwick. Here are your headlines from around the world. At the bank of england, two policymakers voting for a rate hike. That sending sterling sharply higher as investors turn an eye to the fed minutes. The nasdaq hit another level since 2000. Carlsberg earnings were hit saying sales in the key market will hurt 2014 earnings, but rival heineken in the green as world cup sales offset weakness in the russian region. And shares of hertz are hitting as the car rental giant blames a recall. A very high level of recalls with poor activity. Announcer youre watching worldwide exchange, bringing you Business News from around the globe. Keep saying if youre turning on stateside, thanks for joining us. You should be thanking me for being here. Anyway, its nice to see you all anyway, wherever you are. We are down just a smidgenon. Theres no great selloff going on. If youre down a little bit on your u. S. Futures, youve had a good run. Your rally started late on friday. Wud a great monday if you are long the market. And a gain of 1. 5 for the s p, for the dow, for the nasdaq. Your data was all right. We were broadly reassuring. You saw uk inflation data. Gasoline price going down, food prices going up negating any move in the figure. You saw stre strong housing starts, off the low basis we saw the last couple of years, but they were strong, up 16 in the month of julg. European equities arent doing you any favors today. Invested in upside cause. The ftse is down 0. 3 . The xetra dax is down 0. The 4 . The italians are trading on the flat line. Your French Market down 0. 4 . How do you make money in these markets . Lets just give you a bit of an insight from what some of the experts have been telling us this morning. Every friday, jackson hole was projected a bit cautious. In july based on the variation factors and risk aversion, the dollar has had a very good run already. At this point, i think some degree is necessary. The last five years, its a structural position in our portfolio. The Mining Sector has the biggest Free Cash Flow delta. When we look at 2014, 2016, versus 2011, 2013, theyre coming back on profits. Okay. Hertz tapping the brakes on its full year forecast. The rental car company now expects results to be well below its previous guidance, citing operational challenges including Record Numbers of vehicle recalls this year. And costs associated with a continuing audit. Shares of the company up 13 in after hours trading. Yeartodate, theyre still doing pretty well, now pacing the markets. Elsewhere, apple, wow, banner day for apple on tuesday. The tech giant closing above 100 a share. In old money, thats 700 bucks, isnt it . For the first time 100 a share since the 7 1 stock pick in june. The price target on apple up 110 with an overrate citing. Many mrooem believe the iwatch will be launched later this year. Carlsberg has warned that 2014 profits will be hit by lower sales in its key russian markets. The danish brewer now expects a low the single digit fall in after hours profits and say it may shock some breweries in eastern europe. Heineken cited progress with its Cost Savings Program is up by 7 . Its not immune to the headwinds in russia. It says volumes rose in all regions, excludeing that of russia. There is now video reportedly showing the beheading of a u. S. Journalist. This as the u. S. Says it could expand its campaign of air strikes to prevent militants taking control of the hadifa dam in anbar province. Meanwhile, germany says it will decide this week whether to arm kurdish fighters backing the insurgency. Hadley gamble joins us now middle creek from u. S. And uk coalition or Mission Impossible . Essentially what were looking at right now is what choices do they have . I mean, you know with air strikes, the air strikes we know are not going to be enough to combat the isis threat. The headlines out of the United States right now, you know, whatever paper that you look at, whatever talking head that you listen to is well, weve achi e achieved some measure of success, but we need to continue doing this. It will come diplomatically. Arabs are going to have to push the tribe to come together in terms of pushing isis out. This is much bigger than a few air strikes. And the fact that the administration hasnt named this operation yet is quite concerning. Air strike does not work in libya. So essential lir, when does the u. S. And uk wake up and realize theyre going to have a more coharnts policy rather than just air strikes where theyre likely to succeed . Argentine president krit Christina Kirschner is hoping to resolve the countrys sovereign debt default by offering to pay bondholders under national law. The bond swap would help. Side step an American Court ruling that has brokd the government from making regular payments to its critters before settling with a group of hold outs. Kirschner said she would seek congressional approval for the move. More controversy elsewhere surrounding president obamas Signature Health care law. Lets get back to Hampton Pearson who joins us live from washington. Hampton, what is going on now . This is a great story. So weve got a government audit that reveals an obama care tax on medical devices is falling short of the Revenue Target because thousands of companies simply arent paying for it. Initially to help pay for president obamas Signature Health care law, congress enacted a 2. 3 tax on the sale of medical devices used chiefly by doctors and hospitals such as pacemakers and cat scan machines. The tax took effect in january 2013 for the First Six Months of that year. The irs estimated it would collect 1. 2 billion from the tax, but the agency collected only 913 million. 24 less than the estimate. Now, theres a kind of cat and mouse game going on here. The treasurys Inspector General for Tax Administration says the irs needs to do a better job of policing the tax. While the irs says it doesnt have adequate tools to identify which companies owe the money. Now the majority of Congress Supports a repeal of the device tax, theres no consensus on how to make up for the lost revenue without adding that cost to the already large u. S. Budget deficit. You cannot love this one, guys. Quite incredible. Hampton, thank you very much, indeed, for that. Violent protests continue in the missouri suburb of ferguson. Well get the latest on the ground straight after the break. These are your headlines. Defending on jackson hole to gain insight on what janet yellen has to say about low wage growth and the potential for u. S. Rate hikes. Apple closing above 100 a share for the First Time Since has helped the nasdaq reach a 14year high. Hertz replotting its outlook claim blaming recalls for its stalling growth. You savers out there stateside who fed up to the teeth with these low Interest Rates youre getting because of the low fed funds rate, have a look at this one, okay . The germans have just sold over 4 billion euros worth of 2016 paper says twoyear paper, your twoyear paper in the states is trading what is it . 0. 4 this year. Okay. What do you think they got as an average yield . What do you think german investors got for their twoyear paper 2016 . 0. 0. Thats it. Thats what they got. They got nothing, no yield. No yield. Quite extraordinary. 0. 0 with the yield and a bid to cover ratio with two. This is the lowest twoyear funding cost since december 2012. 0. 01 . Lets move back to domestic stories stateside. Police in missouri have made further arrests overnight as tensions continue over the Fatal Shooting of an unarmed black teenager, michael brown. Reports suggest at least several hundred protesters took to the streets in ferguson marching to the 11th day of protests. Nbcs jay gray is joining us from ferguson. Had things beginning to build up and get worse or are tensions calming . Always good to talk to you. I think its dropping off a bit, which is great news for a city that needs that. Overnight, we had 47 arrests, three guns confiscated. But it was, without question, the calmest night weve seen here out of the past 11. There was no tear gas used, no smoke canisters used, no gunfire last night. There were several skirmishes, but they were quickly resolved and a lot of that due to community policing. A lot of the elders in this community, a lot of the Church Members showing up and diffusing situations before they could escalate here. Police have said theyre very appreciative for the help theyre getting from the community. So it looks like its taking a step in the right direction. Look, its going to be a very important day here on the investigative side. The grand jury is going to begin to hear preliminary evidence in this case. Earlier, much earlier than many thought that may happen. And the u. S. Attorney general eric holder will be in fergson today as the civil rights Investigation Continues here. So a lot going on in this always changing situation in ferguson. Steve. The discourse situation, thank you very much indeed for the coverage situation. Things are a little calmer, hopefully that will last. Target Second Quarter earnings expected to take another hit for last year. The retailer is forecast to support flat u. S. Sales come out before the sales. Well bring in new consumers. Im delighted to welcome to the show staysdy woodlands, a cnbc retail analyst. Nice to see you, stacey. Im going to start by giving you a curveball. Home depoit, they were great. Then i look at target and there are a huge number of problems. My question for you, stacey, are problems at target selfconflicted or is it a statement on the u. S. Consumer . Targets issues are largely selfis inflicted. Number two, weve seen some of the most promotional environment out there in years. You know, everybody has been talking about when will this commercial environment end and when will it get better . When will we see Gross Margins improve . Were not seeing signs of that. Target guided down just a couple weeks back and, really, the main issue is theyve been driving their sales through promotions and, therefore, profitability of the margin is really going to get hit here. What has an outsider, brian cornell, and hes only really just got his feet under the desk. Hes been very advice knowledge, reading copy, speaking to employees about their vast challenges. What can this man do to turn this company around . Hes inherited a really tough position here. I mean, target has really lost a lot of its luster in terms of its merchandising strategy and al also, you know, theyve gone into canada which has been quite challenging for them. Theyve made some execution errors and its cost them to the tune of 11. 5 billion in losses to go into canada here. Hes been handed a situation where not only is it continuing to get merchandising back on track, but he needs to decide what is he going to do with canada . Is he going to pull the plug and cut rates or is he going to, you know, embark on the long painful process of trying to recreate a First Impression in canada . Yeah. I mean, thats something theyre looking forward to for the announcement. But im looking at the valuation of this company on a forward pe, pretty much in line, maybe a slight premium to walmart but a discount to the others. Shares have been off quite aggressively when the u. S. Has been rallying over the last 12 months. The brokers, are all sitting on the fence with a hold. 17 of them. A fair bit of value here . You know what . I think that the issue here is you can look at the earnings estimates out there and the bottom line is we need to clear the deck. We probably need a significant guide down here to be realistic. Obviously, hes inherited a very tough situation. His opportunity is to do exactly that today, to come out and say im clearing the deck, here is the new realistic guidance. Here are the issues we need to fix and here is what its going to cost us. So once that happens, we can reset valuation and look forward. Oh, look at that recovery going on at target, as well. Theyre going to have their own promotional activity to continue to do so. The fourth largest u. S. Retailer. Absolutely. Certainly we just heard from walmart. Sales there were inline and have been disappointing for many quarters in a row. Certainly we expect walmart to keep investing in price, investing in people to get promotions. Again, its one of the most promotional quarters weve seen out there. Weve heard it from the high end to the low end. I would be cautious particularly in this space where its the middle income to lower income consumer. They remain extremely challenged here. Stacey, thank you very much for your time on worldwide exchange. Stacey woodliss, and cnbc retail analyst. Spetsmart has confirmed its in talk toes explore a potential the pet supply retailer oh. I cant read. Its too emotional, these pictures. Lovely animals. The pet supply retailer is facing competitors from walmart and amazon. The company has been under pressure from activist investor jayna partners to sell itself. But shares of pet smart, ive recovered my composure because theres no fluffy diagnosis on screen. But shares up 3. 97 in the most recent session. Million dollar forecasting error walgreens has cost two top executives their jobs. In april, the cfo of the drugstore chain forecast 5. 4 billion in fiscal 2016. He suddenly cut that forecast last month just 5 billion. Shortly afterwards, the pharmacy chief departed. According to the wall street journal, he was forced to leave after he failed to factor in the price of some generic drugs. Shares, 1. A higher in 2014. Supplies at the bank of england, to policymakers out at 89 oclock. They unexpectedly voted for a rate hike. Were going to ask if consensus is changing at the Federal Reserve bank as we preview the Central Banks minutes to today. Urman equities, seven out of ten stocks were down, but there wasnt a huge momentum on the stoxx 600. We have got some bit of a selloff on the major european bourses. There are some disappointing numbers from the likes of carlsberg. But by and large, numbers have been all right. The ftse down 6757, down 22 points at the moment. The italians, flat on the mib. Cac 40 in france and the xetra dax down 0. 5 . Futures for the u. S. , you may well have it on your hands later on when the cash flows come in. But the futures showing a small decline after some nice galleys over the next couple of days. Sterling, 1. 66 on cable after the bank of england minutes revealed a wider than expected split on rate hikes. From the historic low where weve been stuck for years in the uk at 0. 5 . The move could race sonnenceus over the end of the year. Mark, hello, how are you . What do you think these fed minutes are going to show us . I dont think were going to see too much. One of the things we are looking for, how did the language on inflation change . Given that ideas numbers were so benign, i dont think its going to be that beg of an issue for the markets. Its still too soon to hear a lot of talk about hiking rates. Theres probably only one or two potential fomc members that would even give that a thought right now. Jeff lacker being one of them. So, you know, you dont have a sometimes the bank of richmond president and you look at the dot map. I suspect he was the loan dot calling for a rate hike in 2014. The socalled core cpo, the cpi figure could have been a worrisome figure, actually. We could be talking about no inflation rather than the 1. 9 figure that we got. No inflation whatsoever, is there . Well, i dont know that theres no inflation. The core rate is inching up towards 2 . And i think that inflationary pressures are slowly building. In the u. S. And throughout much of the we shall world, one of the problems that were seeing is we have this huge split in the economy where easy Monetary Policy has lifted the upper end of the economy. But the lower and middle incomes dont have the purchasing power pog and buy. But were seg big price for stock markets. Including affordable for houses. But most million house incomes. Mark, we have to leave it there. Thank you for joining us, though, mark vitner from wells fargo securities. Thats it for it. It says on the screen here im julia chatterley. I can assure you im not, im Steve Sedgwick. Worldwide exchange will be back tomorrow, same time, same place. Have a good day if youre out in the markets. What if there was a credit card where the reward was that new car smell and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com good morning and welcome to squawk box. Stocks continuing to climb. The nasdaq again hitting a 14year high as apple trades above 100 a share for the First Time Since its 7 for 1 split back in june. And it is the season for travel in the nations airlines say its been a pretty good one. Why is car giant car rental giant hertz talking about trouble . Overtime, thousands of evacuates at yosemite at the height of vacation season. One of the two fires now threatening homes in california on wednesday, august 20th, 2014. Were going to start the show, squawk box, right now. Good morning and welcome to squawk box right here on cnbc. Were going to start the broadcast with a disturbing video this morning. Islamist militants released this photo along with a very graphic video of an apparent beheading of american journalist james foley. He disappeared in syria two years ago. Isis is now prepared to kidnap another player. Were going to have a live report from iraq in just a couple of minutes. Then well talk more about the role of the u. S. In the m