Transcripts For CNBC Worldwide Exchange 20141209

Outside the United States, is this the time for more hawkish tone for the fed . Tthe wall street journal reporting that is what we will get from the fomc next week. Another profit warning for tesco sends the shares in london sharply lower in trade. Announcer youre watching worldwide exchange, bringing you Business News from around the globe. Its been a roller coaster session for chinese stocks with the shanghai composite and shenzhen heading lower. The selloff appears to have come amid media reports the countrys leadership is setting the stage for lower growth as it meets today. The peoples daily running with a headline warning that a high growth was the, quote, new normal. Care horry, thanks for joining us. Lets kick off with china. An extraordinary move today. Is this based on the headline that they might cut to 7 . I dont think that a slowing china is news to anyone. Weve seen this happen in athens this year. Its clear that theyre going towards an economy that is more consumption. The problem theyre having is trying to find a balance to growth with transition. I think the pullback you see in the market today really is due to the fact it rose by 20 in the last few days and theyre basically taking a little bit off the top. Its not to do with the shanghai connect. You havent seen the volumes passing through there. Kerry, you could argue the gains weve seen, up 25 , theyre too optimistic in the first place because that really was built on shaky fundamentals. That was on expectations of further easing. When the pboc cut rates last month, they actually said this wasnt a policy shift. No, because it had been in the background for many months now. Theyve been doing all these targeted measures to try and ease the slowdown in the housing market, theyve been saying theyre doing these things all the time. All this did, the rate cut, was in the forward domain. The expectations further in the new year, the Monetary Policy easing will become easier as they try and keep growth at a certain level while they adjust their economy. Kerry, do you think this is the end of the chinese rally, then, or is this a brief breather, if you will, people take process right now and trying to allocate money for 2015 . I think this is actually exactly that. People are just saying the rally has gone too far, taking it off the top. I think you would expect that when the market moves quickly. People are really moving into the things that they think are going to be supported by the government and through the infrastructure because they know that investment has to come through that while theyre trying to balance their growth. So i think its just a tackling china in a different way, moving what the from it being a manufacturing country in terms of health care, technology, and in terms of environment, improvement. You need to focus on emerging markets in a different way now. Emerging markets has been favored by this for a long time. But they still form the fundamental base. Kerry, what is the big move today in the r b, 0. 5 decline which is the biggest decline since 2008. It was only a couple of years ago that we thought the only way was up in the r b. Are they going to be seriously under pressure as the u. S. Dollar continues to strengthen . I think you will see more liberalization Going Forward. China is opening up its economy, its opening up its Financial System. I would expect to see more fluctuations. You wont see just a oneway bit as many traders head throughout this year. I think the strengthening dollar is going to have a big impact in the year on many economies, not just china. Thank you for that. Well be back in the next half hour. The world bank has cut its forecast for russian Economic Growth for 2015. It is now expected to contract 0. 7 in 2015 accordsing to the world bank. That is the base case scenario. The assumption is for an average oil price of 70 per barrel for 2014 and 08 per barrel for 2016. You could argue even this is a little too optimistic. Probably not big given all the pressure from sanctions and falling oil prices. Carolin, thank you. Dont forget yesterday, the oil price declined and that helped the u. S. Market decline. Asia has declined and europe has declined, too. The stoxx europe 600 is now down 1. 25 . Markets globally in the last 24 hours have been in the red. But when you take a step back, it does just point to the fact that these are strong markets throughout 2014 and all the risk assetes have come off in the last 24 hours. The stoxx 50 down just a little bit more than the stoxx 600. Greece down 6. 5 . The u. S. , 2. 26 . We have had the opposite of that risk off rate. U. S. Yields down to 2. 26 . The tenyear in germany is ticking back to 0. 8 , back you to 0. 7 . And the uk back to 0. 2 . Greece is now at 7. 7 . Once dpen, very high yields. Thats moving in the opposite direction for the rest of the bond yields as is calls for the early president ial selection and in particular whether that president ial election could lead to the Prime Minister having to call early parliamentary elections. Lets look at forex and the u. S. Dollar giving up a little bit of ground today. Thats contrary to what we would expect on a risk off environment. Thats because yesterday the broader index hit a fiveyear high, giving up 30 basis points against the ur roy, 1. 2358. The yen moved incredibly sharply to the down side recently. Russia continues to suffer from Oil Price Declines and oil has declined again today. It declined about 4 yesterday and slightly smaller declines so far today. It doesnt look like were going to see commodities. We will move on from that. Here we go. Weve got it. Weve got it. Theyve essentially bounced back over todays trade. That is back today. Brent declined quite sharply yesterday. The latest on tesco which, again, this morning, shocked investors by bringing out its fourth profit warning in a year. The tesco ceo saying in koorchbs call hes quite optimistic about what the firm is doing and says they have started to rebase, the ceo saying were not walking away from rebates with our suppliers. Wruns again, tesco is down heavily, 12 . Down by as much as 14 many 5 yesterday. Another big commodity in focus is oil. The price in oil weighing on support that the fed could signal theyre ready to start hiking Interest Rates in 2015 when they meet next week. The fomc could drop their longheld pledge to keep rates low for some time. Some have hinted recently theyre looking at shedding the closely watched signal. There could still be debate at the meeting. Dennis lockhart said monday hes not in a rush to drop the phrase. So the guessing games continue. Lets bring back in kerry craig. My big question is if the fed is perhaps looking to raise rates in 2015, the fed has a dual mandate. It has to see an acceleration in jobs growth. Given the tumbling price of oil, thats weighing on headline inflation. How can we even talk about the federationing rates when right now inflation is not at the target that its looking at . Monetary policy down the line, that is being very clear. Theyve been talking about Energy Prices in their previous statements. Theyre saying theyre going to look through the knew term volatility. They look at their core pce measure that pitch and consumption and thats the thing that they really want to focus on. That doesnt have such a big impact on the oil. And they also look at the fact that theyre going to see a labor market that is tightening so much. Jobs have gone up 240,000 a month this year. The Unemployment Rate is tightening. Theres less slack in the market. This suggests you will see wage pressure start to build in the new year and Inflationary Pressure will start to build up. Theyre saying actually the economy isnt sick, it doesnt need policy rates any more, we can start to normalize that policy. Weve gone through this discussion time and time again. The fed has rebeet petedly said were not the central bank of the world, were the of the United States of america. Its the only one tightening. The rest of the world is still easing growth and the rest of the world is still very poor. Why should it tighten . It needs policy for its own country. Theyre looking very much at what the u. S. Needs. Theyve been criticized in the past for leaving Monetary Policy too loose, creating asset bubbles that did develop n past. 2004 had being a recent example. Thats when you get that expectation of a sixmonth increase afterwards. They know 24e6 to start monetizing policy earlier especially if they want to follow a path that is slow and gradual, not to upset equity markets in the long run. What is the biggest driver at the moment, is it that i think its the u. S. Economy is the strongest economy in the Global Economy right now. Thats whats driving the dollar up. There has been some concerns over the second half of this year about weakness in the yen, weakness in the euro and the u. S. Is looking like the best fit. Kerry, thank you. Well talk to you about your best picks for 2015 coming up in a bit. Tesco may be having major trouble in the uk, but that is not the case for some of its rival chess benefited from the latest u. S. Import black friday. In just one hour, we look at amazon plans for new york shoppers. And beyonce, daisy, chelsea clinton, president obama, its not a night out with wilfred frost, but just some of the people meeting will and kate. We will bring you something from their visit over the next two hours. Cute little guy, huh . This guy could take down your entire company. Stay with me. On thursday a hamster video goes online. On friday it goes viral a network choking phenomenon. Why do you care . Hes on the same cloud as your business. The more hits he gets, the slower your business may get. Do you want to share your cloud with a hamster . Today theres a new way to work. And its made with ibm. Welcome back. Lets look at individual stock movers today. Unsurprisingly, the stock reacting towards that mark, down 5. 15 . For more on the store, lets join stephane in paris. Good morning, wilfred. Its the end of the euroneck adventure for ice. I. C. E. Bought nyce next year but wasnt planning to keep the European Assets of the country. At the time, i. C. Kept a stake in the company, but wasnt planning to remain a shareholder on the longterm. This morning, i. C. E. Announced a 6 stake on euroneck. After the placement, ice will no longer hold any stake in the company. Shame shares of euronext on currency trading slightly higher than the basement price at 23 euros 40 almost. Thats more than a 5 decline compared to yesterday. Moving on, the ceo of se siemens says that business could get a hit if rates continue to stay lower. Stay tuned, well speak to the ceo at mid day of siemenses usa. Its was down as much as 14 , now down as much as 1 1. 6 . Its at a 12yee year low. Doesnt see proovts exceeding 1. 4 billion pounds. The ceo of tesco making some statements. We want to get you those headlines. The ceo of tesco saying were quietly optimistic about whapt firm is doing. The ceo says they have started to rebase a relationship we have with supplieres and that not walking away from rebates with suppliers and that were seeing encouraging signs from selective price cuts, this despite tesco issuing its forth profit warning of the year. As a ceo, what are you trying to do than try to maintain confidence of your investor base. He says tesco is no longer a viable investment and theyre still clearing their positions this morning. Why would you have bought in september . I wonder whether this could go down, flushing out mistakes . Why didnt he do that a month ago . This recent announcement has to be on his hands and because you he didnt know. And maybe in the meantime the environment has come to light. The sfo is carrying out criminal investigations into the accounting irregular layerties. Some of the investors in the uk are looking for those who were involved in the accounting issues still to go through some accountability. We havent heard of that. Advertiseco, the Athens Stock Exchange is sliding on the back of new Political Uncertainty in greece today. Off 6. 7 , a big decline in athens. Greece is heading to the polls to elect ultimately could lead to the election of alexis tisboro next year. Samras hopes he can regain momentum in the polls. But if samras fail toes win enough support for his candidate, a general election could be called at the beginning of february. The risk will continue to threaten. That guest is kerry craig from jpmorgan asset management. Were seeing deflationary policies president wouldnt you think those would trump the deflationary trend . I think the value, the fall in the oil price so far, how drastic its been, would you consider offsetting the impact in the fall in the eurozone. Especially that Inflationary Pressure is very much there. I think looking into the next few months in the eurozone, very low levels already, how investors are going to stimulate the eyb to take further action. That is really going to drive sentiment towards the eurozone. I think even though the Growth Outlook for the eurozone is not great, deflation is still very much there, the fact that you have this Massive Organization and the ecb standing to do something and beelg very vocal about what theyre going to do is provide a boost for european markets. So youre expect ago recovery in 2015 and a significant depreciatation in the euro, even though its down about 10 against the u. S. Dollar. What skters do you think are going to benefit the most . Forecasts have been down if youre getting more than 1 growth out of forecasts next year. But you are getting growth. I think you want to be based towards the cyclicals of the economy. Assets have improved quality review in the Financial Sector. I think theres some good stories that can come through there. At the same time, the low oil price is going to help consumers around the world. Its being driven by an increase in supply. This will help the consumer in europe. That is why you want to be in those consumer stocks. As you see an increase in growth rates, Financial Sector is going to improve from there. I think there are concerns ab t aboabou about and on a stock by stock basis, it will waiver. Certainly theres going to be pockets that suffer. Traditionally, emerging markets when the dollar is strengthen. The countries that are strngtenning are going to be more in supply with the Global Supply chain. Those are the countries that are going to benefit because theyre demanding more imports. Other economies are thog those reliant on foreign dollars. Kerry craig, thank you very much for joining us this morning. Amazon is bringing onehour delivery to the big apple. The wall street journal says the online retailer is testing the service in new york with bike messengers. Amazon is reportly using its new space near the Empire State Building as a base for service. Amazon is warning the faa it may shift drone testing outside the u. S. The Company Warns regulators to connect more outdoor trials. Amazon aims to deliver packages in 30 minutes or less. Trading in germany off by more than 1 . Wilfred, i know youre looking for a dreen to be under the Christmas Tree this year, right . A incorporator, which is that model that we tried out last friday. But it does cost 1,069 pounds. I know. Im surprised the drone is doing so well this holiday season. Snapchat has reportedly hired a star tag banker away from Credit Suisse to help the company justify its billion dollar valuation. It has brought in khan to be its chief officer. Khan helped Credit Suisse win advising rolls on alibaba. The journal says snapchat, which has been valued at 10 billion is looking to hire its first cfo. Carolin and wilfred, are you big fans of snapchat . Im not. My niece and nephew, thats all they talk about these days. Kind of phased out . You have instagram, though. Im a fan of instagram, fan of twitter and i love facebook. Just to get you some news on the cloud space, rack space staged a comeback in november. Take a three chart. Its almost 20 over what has been a volatile year in the industry. I spoke to the ceo with smaller players looking to go public. If you think b about a box or a drop box, lots of those companies are a Service Company. Were a Service Company at heart. When new tellings are coming out in the market, we get a chance to integrate those into our service. If a customer wants to use a service technology, we put it into a market and manage it for them. Ear in europe, theres been a lot of talk about the role that tech Multi Nationals play in europe. The European Parliament has pushed for the breakup of google. Does that scare you as a Multi National looking to strengthen your presence in europe . Of course. We are watching to see what new data laws or taxes are doing. The ability to compete at scale in the european markets. We would prefer to see governments take a business Friendly Technology friendly policy. Technology creates gdp essentially, especially when you can deliver it this a costeffective way. So we think its in the governments best interest to promote Technology Friendly policies. Are you bullish about europe . I think so. I think its here. It will take more time to play out. We certainly hope and feel like the worst is behind uts. Still to come on the show, the fallen oil extending em currencies to multi year lows. Whats the best way to play that market . Well be back in two. Chinese stocks finish the session with biggest losses since 2009. Reports suggest the government will cut its growth target to 7 for 2015. Heavy falls for stocks in athens on news the Prime Minister has brought forward a vote for the next president which could open the way for the radical left to take control of grooets early next year. Given economic weakness outside the United States, is the the time for a more hawkish tone from the fed . The wall street journal reporting that is what we will get from the fed next week. Another profit warning sends stocks sharply lower on the ftse 100. Lets get straight to data points out of the uk. Weve got fairley date for the uk for the month of october. Data tumbling 4. 7 . That is the biggest monthly decline since the month of may. Were also looking at the industrial data. Indeed. The Industrial Production for month on month on october came in at minus 0. 1 . In september, it was plus 0. 6 . So weaker than expected and in negative territory. The yearly number came in at plus 1. 1 against expectations of plus 1. 8 . So both the manufacturing data and the Industrial Production data has come in weaker than expected for the uk. Unsurprisingly, sterling softening on the back of that. Lets have a look at european market. Oil and gas really taking a hit today as were seeing continuing pressure on oil markets. Sweat ya dax off by 0. 73 . Greece was the worst prmper. Last we checked, that motorcycles was down by 6. 5 on the back of Political Uncertainty. We saw a slide in the u. S. Markets and the big selloff in the shanghai markets. Asia, a major focal point for investors. It has been a roller coaster session for chinese stocks with the shanghai composite ending the down down about 5 or month. Shenzhen shedding over 4 . This despite both markets up n beginning of trade. The peoples daily is running with the warning that a high growth is now the new normal. Meanwhile, officials clampd down on the Corporate Bond market. The currency weakening on the Slower Economy and stronger dollar. Eunice yoon joins us live from beijing with an update on all these stories. Thanks for joining us, eunice. Not at all, wilfred. Basically, theres a lot of stuff going on right now in the market. And from what ive gathered, the biggest concern is about a new rule that was instituted by the chinese regulators that banned the use or made it much more difficult, i should say, to use Corporate Bonds, especially low grade Corporate Bonds as collateral to sell off cash. Weakness in the chinese yuan and eventually even though we had a bit of a rally in the morning with the stock markets, we saw a huge decline in the stock markets in the afternoon because of that. And this also comes when already weve seen the market at a point where a lot of people believe we would see some profit taking. It had rallied for several sessions. A lot of people were expecting that we would see some investors wanting to take money off the top. Also, there have been, you know, a lot of these investors have been coming into the market and a lot of them are new investors. Weve seen many people coming in and opening markets. Now people are starting to pull back. One other comment that we were hearing quite a bit from different investors was that they were scared of all the volatility. They werent used to it. Another person that we spoke to said that they were getting more concerned by all the warnings, subtle or not, from the government about the outlook for the economy. So all of this is kind of setting itself in motion and youre seeing it all play out in the markets. Eunice, the rally that weve seen before todays fall is on easing that has taken place. So if today weve seen more headlines and the fundamental outlook is easier, why has the market reacted so badly . I think people are just spooked. Yesterday, investors were coming in saying the government is going to come in and save us, it will be good for investors. But today, there are more investors starting to realize the economic fundamentals might not be there and that maybe that wont necessarily be good for some of the profits for companies. So theres a bit of its not a really straightforward line that were seeing. Also, i think the fact that the chinese regulators made a decision to put in that rule started making some investors relatively nervous because ultimately what it means is that the government is trying to take some of the risk and the dead out of the Financial Sector. And so there are some people who are concerned about this. Yes, thank you very much for now. And lets talk more on the yuan and the big moves were seeing in asia. Lewis costa looks at fxn rate strategy at citi. Thank you b so much for joining thus morning. Thank you. So the bullish case on emerging markets is becoming less becoming given the volatility that weve seen in not only the markets, but specifically the currency markets. What would be your case if youre trying to tell the investor why they should stay bullish on these markets. In general, its going to be a lot more volatile as we go into 2015. Weve got different variables working through the market right now. We think that weve had a pretty decent run down with whats going on out of china. There is a conjunction of variables in there. Theres destabilization of the rates market which is allowing rates to basically trade more twoway. The dollar yuan is obviously making dollar yuan a lot more volatile and the fact that in general the slowdown in china is taking place. I think the fact that we saw the pboc with different measures, trying to slow down the duration and the global and local economy. You have to read that from the negative standpoint. So that means that the Commodity Companies would suffer a lot more. And on top of that, we are seeing that global trade is shrinking. So the environment with global trade volume, fx has to respond to that. We believe in the continued dollar yen move and more as we go into 2015. You would think Lower Oil Prices are positive for the energy importers. But even those currencies continue to fall. Why is that . At the end of the day, these currencies still have very clarifying angles of vul ner ability. Not so long ago back in 2013 q2, q3, we were looking at currency as part of the fragile play. He has benefited massively from this collapse in energy commodities. Bur from the other side, were still talking about a large current account gap that has to be financed by portfolio bonds. The u. S. Normalizes Monetary Policy going into 2015. We can be a lot volatile for 30, as well. In south africa, they are failing commodity medals to the world. The mining commodities are not exactly popular nowadays. A very poor price in iron ore and gold and etcetera. The amount of exporters stand to fare better than this. Is it safe to assume, though, that investing in the emerging markets is a game for the pros now . You have to be hedged when you do that. The small Retail Investor cant possibly do that. The hedging cost is very important variables nowadays. Thats the key to receive rates, to buy bonds, given the poor Growth Outlook in general. Growth rates on exports and now cyclical low. So it makes sense to receive rates. Of course its going to be more difficult to hemg in the high yielding surntsys as the central bank keeps hiking rates. But in general, the best value was the real money. They are buying bonds because they like the asset class, but they are being more cautious on the effect. I wanted to turn on the oil price again for emerging market currencies. How beneficial is the oil price for allowing them to start tory move these fuel price subsidies that has been such a political football for them for years that investors wants them to move . Absolutely. Generally, fuel price res coming down, so you expect the pi basically to absorb the shock. In india and indonesia, it can be the case of more encounters, as well. We are going to see structural measures. That actually benefits a lot in terms of creditworthiness, in terms of risk premium. So its definitely opportunities they can take advantage of. Thank you very much for joining us. Moving on, honda motor decided to voluntarily expand its recall of takata air bags to the entire u. S. With more on the story, well get out to the nikkei. Thats right, wilfred. This decision will bring honda as total b numbers in the u. S. To 4 million. The recall has been limited to the owner parts of the u. S. Until now. The defective air bags were made in mexico. Honda proposed expanding its recall to the entire country. In a proposal approached by the national Highway Safety administration, others are expected to follow this move, as well, to determine the cause of the problem. In the meantime, he said the company will respond in the same way everywhere, meaning it will expand the recall to the entire world. The total number of recalled vehicles may go up to 13 million. Honda will move more proactively from now on and expressed regrets for mott acting sooner. He mentioned his company will support takata if necessary so the supplier can focus on identifying the cause. Japans yoshinura holdings is looking to be boldish for the first time in 24 years. The countrys central bank is struggling to meet inflation targets. The 115yearold country cited the sliding yen as the primary reason for the move. Do you know how much theyre cession it . 27 . Thats a lot. Perhaps japan is about to go to hyper in flagz. 38 on , but three dollars. Coming up on the show, the secret is out. Lprandz, we discuss the stock stellar year and Global Expansion plans and a very view of its Victoria Secret fashion show. French employers are forecasting their strongest payroll gains since 2008. This is according to a new survey carried out by manpower. Muck the weakest regions in the survey was italy. Mark hale is managing director for europe middle east and africa and manpower and joins us now to discuss the findings. It lit last week passed the jobs acts. This wouldnt be included in the survey . That is correct. This is before all that happened. Were looking at it on a flat base in that regard. What red light main drivers for the hiring intentions . Is it the outlook for the economy, is it the domestic economy . What is it . Its quite a big picture as we go around europe. A lot of the reason for the uk is consistent, steady growth. We go across to germany, we have seen weak. Ed gdp figures coming through. And france is a big exception for us. Thats quite positive for q1 next year. Both france and the uk, interestingly, the construction sector happens to be driving both cubs. Is that right . That is correct. Were witnessing a still shortage in the uk and beginning to see some of that across europe, as well. Can you elaborate on trade skills . Is this a shortage on highly skilled workers . Where exactly are theyre trying to find strong talent . The flexibility around europe, it needs to travel and work where they can find the work. In the uk in particular, construction has been pretty low for a good 12 months. Its going to come further again. Weve seen people coming in to find work here in the uk. Spain and ireland are both strong strength in your report. Contrast to us why moss two countries are seeing strength while incidentally is continuing to be weak . Both starting to drop there, as well. In the it sector, i. T. Manufacturing, theyre coming over to the uk to try and find skills and spain is just seeing a general left up in their market. Im warning what your survey said about the oil and gas sector. Weve heard a number of Companies Cutting jobs and has that been reflected in the survey or was it too early for that . Were starting to see a decline on the growth that were seeing. Closer to home in the uk, our survey says in scotland thats not going to be as aggressive or optimistic as it has been in the past. We also think oil and gas is playing a part in that, as well. What is the key take away tr this . Globally, outside of your main arena saying there is a little evidence of broad based hiring. If i think about the u. S. , were seeing high growth intentions, weve seen quarter on quarter increase in jobs take up. If i look at india in particular, 45 growth were looking at there in our survey. Again, a skill shortage there. In italy and other parts of europe, were not seeing that optimism just yet. Wage Growth Continues to be a big issue. Do you think well see an improve in 2015 . Will employers increase wages of their employees . One issue is skill shortage and the other one is pay and pay reviews. Those areas where youve got the skills, they will command high pay increases. Third thirdly, theres lots of areas where i dont think weir well see that Wage Inflation just yet. Were going to leave it there. Mark cahill, managing director, thank you for your time. And america has imported many things to the united kingdom, including myself. But black friday, a new edition, data released overnight showed the promote boosted retail sales by 2. 2 in november. The director general said the data is encouraging in the lead up to christmas when she expects consumers will push the boat out even more. The fact that the british have embraced the u. S. Phenomenon of black friday and also this is, of course, a challenging time for retailers. Why not offer promotions . I think what the brits have embraced is the black and blue friday. Its not necessarily the black friday. We saw those scenes from the super market. Img theyre not as civilized as some of the guys in the u. S. But what i think the u. S. Should be exporting, what do you think it is . You want me to guess what you think or my own view . Yeah. I dont know. I think its oil. That is what they were talking about all along. Thats a brilliantly boring answer. It is. Much more to the uk, much more to europe. In terms of days that we celebrate, fathers day, mothers day, you celebrate that here, right . Yes. Thanksgiving is not as big a day, of course. We get the discount days now, which youre saying people obviously embrace. But i dont get the entire to go out and shop until after christmas. After christmas . Thats when we have our traditional discount days like boxing day. Im excited to experience that. Is that fun . Well, we want to hear from you on this. Whats the best import from the u. S. Or what would you like to see exported to the u. S. . He says import attitude and export beer. I agree with that. Send us your thoughts. Worldwide cnbc. Com or krps we can see. L brands, up about 35 yeartodate. One of the most successful mallbased retailers at the moment. Ubs calls l brands the best brand. One of its best performers, victorias secret. I think there was a lot of buzz around the fashion show last week. This is the first time that took place in the uk. Over time, they do look to expand into those markets. And its interesting. Even as mall traffic in the u. S. Is falling, people will always be going to bed, bath and beyond. That is why l brands is doing so well. Theyre so popular and they dont have to discount. Thats a create thing, isnt it . Yeah. If you look at the markets here in the uk, theres not too much competitors that offer the same price point. Im sure, will fred, you have some great im sure he has calls on that. My main story on this is you had two tickets to the fashion show last week and you didnt take me. Well get to that story and get you some more pictures around the fashion showing coming up. But here is another thing well be watching. U. S. Markets setting up to follow asia why and europe into the receipt. Much more market reaction, coming up. Welcome to worldwide exchange. A big market day. Im seema mody. And im wilfred frost. Chinese stocks finish the session with their biggest losses in 2009. Reports suggest the government will cut its target to 7 in 2015. And given economic weakness outside the United States, is this the time for a more hawkish tone from the fed . More pain for investors in tesco as yet another profit warning sends the stock sharply lower in london. It admits out putting a time frame is difficult. And it will attempt to repeat the 190 million in taxes relating to an alleged tax fraud. Display youre watching worldwide exchange, bringing you Business News from around the globe. Today, we got the correct that some were anticipating. We got more than. At the start of trade today, we were up about 2 . In the afternoon in trade in asia, we finished 7 in total. Finishing the day down a massive decline. They think leadership in china will raise. Its harder to leverage your positions in the markets. I think thats the debate that im sure investors will be having today. On that note, lets take a look at u. S. Futures. How does that weak session look in china . The nasdaq down just about 12. S p 500 down a couple points in premarket trade. A lower session in asia, in europe. We should take a look at european markets. British manufacturing output did fall in october. The uk economy perhaps not as vong as some may have been anticipating. Were looking at the ftse 100 trade down 60, 70 points. Yesterday, those Industrial Production numbers out of germany did weigh on the xetra dax. The losses accelerate here. Were down about 80 points in germa germany, france and italy in focus. Trading in negative territory. So all parts of this market being impacted by that data out of china or the speculation of growth slowing down even further in 2015. Were very much seeing risk off sentiment gripping global markets. The tenyear treasury yields currently at 2. 6 . And i want to draw your attention to whats going on in greece. The president ial election is drawing a lot of uncertainty into the markets. And the yield is raiding at 7. 83 . Quick look at currency market, seeing a mixed performance for the dollar this morning after a multi year high in yesterdays trading session. Were seeing some yen short covering. Once again, it is a flight to safety. But still, were seeing some of the commodity producing currencies up drastically against the u. S. Dollar. This is another fouryear low. The shenzhen sposit shedding over 4 despite both markets touching a 3 1 2 year high at the open. The selloff appears to have come amid reports theyre setting the stage as it meets today. The peoples daily run, a headline warning that an end to high growth was the new normal. The currency weakening on the stronger u. S. Dollar. Eunice yoon is live in beijing for us. Break down whats happening in beijing for us. Well, i think its a common factor for investors. The main issue has been the rule change by the chinese regulators who basically decided to milwaukee it difficult to use low grade Corporate Bonds as collateral for a company to borrow catch. So we started to see a sell yau in fact bokts markets and the chiep use yuan starting to show weakness. Eventually that negative sentiment hit the stokt markets. Later in the afternoon, a massive selloff. The Sector Factor i should say is theres a lot of people who were expecting to see a selloff in saying that the stock market was boysed and the reason for that is because we have seen a lot of investors come into the market and open up big brokerage acts. And so there isnt as much sophistication and the markets send to be volatile. A lot of people were talking about how they were nervous with the rapid rally. We had heard meant over the weekend from regulators saying they were hoping things would calm down. Today there was chatter in the market about how investors were concerned about what they were hearing from the government about growth Going Forward. So the combination of all of this together led to this pal. Eunice, thank you so much for that. Once again, we want to take a look at oil prices. Brent crude is if we could take a look at the moves, we are seeing some teddying once again. Brent crude down by 15 over the last five years. Yesterday brent was off by 4 and we saw a fiveyear low for nymex light sweet crude. Dennis gartman sells cnbc why he thinks the days of opec are numbered. I really do think were seeing the end of opec as a viable entity. I honestly think opec is a finish issue. Brent crude oil steadying. Weighing on market sentiment, plus reports the fed officials could start keeping rates low for a considerable time. They have hintded theyre looking at shedding the closely watched signal. Atlantas Dennis Lockhart said monday hes not in a rush to drop the phrase. So the guess continues on when and if they will, in fact, raise rates. What a great day to have you because, of course, this could potentially move markets. The s p 500 and the dow have been hitting highs despite yesterdays selloff. Do you think a fear in hikes could weight on Investor Sentiment today . I think certainly what weve been seeing is going to get everyone excited. You saw the highest number of jobs added to payrolls in the last four years. You saw how its worked at the highest in the last four years and you saw the month to month increase in waejs the highest in the last four years. The fomc always said its the labor market that theyre watching. Lets talk about some of the other factors. Is it what the fed is considering doing cha is driving the u. S. Markets or is it the fact that the u. S. Market is clearly the safe haven today . You have to look at it in the broader context. Its natural investors pull their horns in to what they know which is the u. S. Dollar. Could this reduce headline inflation even more so . It will benefit the u. S. Consumer, as well. But theres still a mandate. How can they raise rates when you dont have that inflation target . Its a balancing act. It really shouldnt matter whether rates will be carried next year. They care about the trajectory. What we dont want to see is another 2004 until 2006, that period when we saw two years of successful rate hikes. Do you think the fed will make it clear that we wont be a repeat of that . I think instead of being very careful, i think it has been quite clear in what it has signaled so that by time it has shifted, markets frully aware. So while weve seen volatility and run up, the fed is able to change it and put it behind them. What sort of investments are going to be doing well in this environment . Certainly anything that focuses on the consume ser doing well. Serm the falling priet of oil, that is extra money going into that pocket. If you think the price of fuel is now like a dollar lower per gallon, thats next to 100 a month going into consumer wal t wallets. I think its not just the chinese market, its the rest of the world economy. When you think earnings coming from overseas, you have to wonder what happened with the translation of those back into the u. S. , but what is happening with demand of those profits vts. Theres one area in particular youve been looking at. Yes. Payroll processing businesses. Chip and partnership, as we know it here in europe, has been around for a long time. In the u. S. , mag nettedic stipulates is still standard. Next year, retailers will have to bear the losses. Thanks very much for joining us, hue. And lets get you a rundown on what to watch this trading day. Wilfred, have you got that . We do. October wholesale trade numbers are out at 10 00 a. M. Eastern time. It can be a leading indicator of consumer trend. A handful of earnings on todays calendar before the open and krispy kreme oh, i do like krispy kreme after they close. Still coming up on the show, tesco may be having major trouble in the uk. That is not the case for some of its rivals which benefited from u. S. Imports on black friday. We look at amazons plans for new york shoppers. And beyonce, jayz, chelsea clinton, president obama, no, its not a night out for wilfred frost. Just some of the people meeting will and kate on their tour of the u. S. We will bring you the latest on that visit over the next two hours. Welcome back. China stocks post their biggest daily loss in years. The do you and s p had their worst day in over a month. Tesco shares hitting an almost 212year low. The company says it doesnt see profits exceeding 1. 4 billion pounds. Analysts were expecting profits of nearly 2 billion pounds. The ceo says they are encouraging funds from selective price cuts. Who is going to stick around and invest in the companys shares . What they might have to do now is go cap and hand with investors. I agree. This is not just a stocks issue. But its a structural issue. The uk food Retail Market is not a good place to be. We thought we got the worst of it and dave lewis, the new ceo, could make them turn the corner. Its down just about 50 just this year. Its lost half of its market value. The kwn is will they divvy up their assets . The full takeover looks unlikely. The careers in thailand are pretty attractive. But overall, a full takeout looks the industry is doing so poorly right now. The u. S. Government is Suing Deutsche Bank for tax fraud that occurred more than 14 years ago. Prosecutors are looking to recoup more than 490 million. In a statement to cnbc, Deutsche Bank says it plans to vigorously defend itself it is down about 3. 5 over the past month. The ceo of siemens says the firm will not be spending aggressively on m a next year. He said the oil and gas business could get hit if prices continue to stay low. Stay tuned, our colleagues stateside will be speaking to eeshg spiegel at mid day Central European time. Now, the glazer family plans to offer 3 million Manchester United shares. And still to come on the show, are storm clouds gathering for the likes of rack space as well as small players in the cloud space . Stha tuned with my conversation with the ceo of rackspace. Thats coming up. Shares in rackspace coming back almost 20 in what has been a volatile year in the industry. I caught up with the ceo and asked him if this would continue. Markets go through from hype to wisdom. I think sometimes that ris come comes with what is it good for and who is going to win and how is the market going to subcategorize. I think the good news is cloud is a very large market. There is room for lots of growth. Some say there are plenty of clouds in your future, forgive the pun, especially looking at the likes of google and Amazon Services playing a prominent role in the cloud. Right. How do you respond to that . One segment of the market is called management cloud. That is cheap fruft and with Management Services on top. What you have to ask is how are you going to manage it . As infrastructure gets cheaper and cheaper, software and tools that i advantage of that. Are you going to buy those services from an expert on who does this at scale for you . Weve seen plenty of companies in the cloud space go public this year. Does that scare you as leader of a Public Company in the cloud space with the entrance of these new players . Were a Service Company at heart. We take vej and put it in a service to our customers. We get the chance to integrate those into our Service Model four our customers. Thats our volume position. If a customer wants to use a technology, we can manage it for them. America has imported many things to the uk over years. One of which being black friday. And the question we always import, is it because of weakness or strength in the consumer . I would argue its not because of weakness that theyre looking for the low price. Given the economic outturn, maybe consumers are being lured in by the sales and discounts. So youre taking the opposite side . Yeah, i think so. Given the chaos on discount day, the idea of going shopping when it is going to be even more busy doesnt that is a true black friday experience. At the point to know what else should be imported from the u. S. To the uk robbie has tweeted, import more, and export more of that british accent. Well, seema, youve been learning a bit of the british act sent, havent you . I sure have. I cant do it well. But thank you, sitting by you, ive been able to pick up some key phrases. And youve learned the american accent a little bit. Sure i have. Sure i have. Its so cool when the market is declining. It really is. Wow. Lets move on. Well focus in on retail. Take a look at l brands, one of the most successful mall retailers at the moment. Ubs calls l brands one of the most successful mall stories. T looking to expand its stores in the uk as well as china and india over the next two to three years. There was a lot of buzz around this event. Victoria beckham, who i know ask a fashion icon in britain, she wasnt there. Maybe she was focusing on her own brands at her own stores. That is hideous. 2 million for that bra, apparently. Really . Not worth it. Still to come, put your portfolio on solid ground. Our next guest makes the case for buying into the bonds markets next. We are speccing a lower open across the board. 30 minutes to go before we hit 6 00 a. M. A global selloff. Chinese shares suffer their biggest daily loss in over six years. Oil prices bounce back now back above 63. But its more change for investors in tesco. The retailers, the ceo admits putting a time frame on the turn around is incredibly difficult. And Deutsche Bank tells cnbc it will vigorously defend the u. S. Government as they try to recoup 190 million relating to tax fraud. Thank you for joining us on worldwide exchange. Is this the start of a correction or just a breather . Some say a correction wouldnt be such a bad thing. That selloff that we had in october did not amount to a correction. German imports falling at its fastest pace in nearly three years. The ftse mib, italian markets down triple digits. The ftse 100 down 70 points. British manufacturing outpul put fell in december. So the uk economy not as strong as many may have expected. The selloff appears to have come amid media reports that the companys leadership is setting the stage for slower growth. The peoples daily running with a story that the end to high growth was the norman. Eunice union is in beijing with an july date on all of the facts. Hey, wilfred. There are a lot of different factors going on in the stock market. The mainly one im hearing from investors are people were more spooked by the fact that there was more regulation tightening. Chinese regulators are starting to make it tougher to use low grade Corporate Bonds as collateral to borrow cash. That was a trigger. Quite a bit of weakness in the renminbi. Its now at a fourmonth low. That negative sentiment slipped over into the stock market. In addition to that, there were investors telling us they were more and more concerned about the warnings coming out from the government about this outlook for droeth. So that combination of factors really made people nervous. Another story that has started to develop in the past couple of memberships, the currency regulator safe made an announcement saying they were simplifying the rules for forex markets. We saw from the government that the new rules are going into effect as of january 1st. That means nonbank Financial Institutions can now enter the on shore fx market. Now, the reason why this is significant is bags a lot of players here are seeing this as a as another st. Paul st government is making to try to liberal id the capital markets. The challenge is, of course, that they would still have to open up the capital currency controls a bit more, but people have been seeing this as somewhat encouraging that the government would be doing this because theyre trying to make the Financial System a bit more flexible. Upis, thank you so much for that. And i want to talk about oil prices. At the moment, were seeing brent at 66. 12. Were seeing some stabilization there after brent fell to fiveyear lows yesterday. Dennis gartman tells ynz why he thinks the days of opec are numbered. I really do think we have seen the end of opec as a viable entity. Well see what happens a year from now, but i honestly think opec as it has been years in the past is a finish issue. All the strategies that come on the show say we like equities going into next year. What about the volatility spillover effect from the oil prices into equities . Does anybody talk about that . Interestingly, not. That is a great point. What is the volatility in these countries in their respective currencies play in terms of forex charge Going Forward for earnings . The u. S. Dollar continues to rally. That is seen as a headwind for a lot of these nationals, as well. The last 24 hours has seen risk assets across the board globally decline. So whatever were seeing the reasons are, weve had a fantastic rally in the last six weeks since the middle of october. So whatever the stock is today, that is risk off assets. That is surely to be expected. Thes nasdaq underperformed the major indices. Yahoo apple, all moved to the down side after what has been a big run for a lot of these names. That in itself could be a reason why investors are booking profits here. He deed. Real estate in particular, commercial real estate rates are expected to continue their decline in 2015. If a rate rise does come in six months time, it could impact the sales and valuable of commercial property. Hasam, lets talk about these reports and notes. There has been in recovery in part of u. S. Commercial real estate. Youre saying increased total u. S. Employment is the main reason for that. Is that try snt. Yes, it is. Good morning. Thanks for having me on the phone. Weve seen more of a xhushlg real estate environment because of the employment. At the same time, were still seeing very disciplined and limited new supply of commercial real estate under way. And, of course, you put on top of that the yield profile in the 5. 5 to 7 average going inyields which is very competitive to internal investment, thats why were seeing a lot of activity in the marketplace. Were seeing occupancies xwrofr and a rent growth cycle begin to take hold throughout the industry. You mentioned youre seeing occupancy rates improve. Rates are still around 10 to 15 . How does that stack up in markets . We have some sectors like apartments that saw a great demand out of the recession markets. On the other end of the spectrum, we had a lagging recovery for a number of other sectors like office. And the Office Market in particular had a lot of excess space coming into the down turn. Weve seen tremendous job growth happen in the professional services sector. That is translating to much more demand for space. Weve burned through the excess space that exited three or four years ago. 15 , youre right, is still quite high. But 2015 and onward is going to bring about a factor roar in the office sector. And Federal Reserve officials are seriously considering an important shift in their policy meeting next week. Perhaps a hawkish tone if rates do, in fact, rise earlier than expected. Its a very critical factor. As Interest Rates are rising, because of better job growth, because of some inflation coming back into the system given the gradual fall in unemployment, that is basically showing us an offsetting factor against the higher Interest Rates because of the fact that its the better economic improvement thats generating the reason for Interest Rates to be higher. If Interest Rates had gone up very quickly without the accompanying improve in jobs, thats when we typically see at least a temporary market adjustment. Were not anticipating that because of the fact that theres very little inflation pressure given your prior segment talking about lower Energy Prices and the stronger dollar, which are very deflationary. So i think that the fed has plenty of flexibility still and even when Interest Rates begin to rise, they should be pretty well balanced with better job growth for the next year. Absolutely, its a debate we continue to have here, hasam, from marcus and millick chap. Thank you very much for your time. Thank you. And other stories on our radar right now, Deutsche Bank in focus. The u. S. Government is Suing Deutsche Bank for alleged tax fraud that occurred 14 years ago. Prosecutors are seek to go recoup more than 190 million. They accuse the bank of engaging in a series of transitions using Shell Companies designed to evade federal income taxes. In a statement to cnbc, Deutsche Bank says it plans to vigorously defend itself. Taking a look at shares of Deutsche Bank, down just about 0. 735 , down just about 4 over the past three months. And the big story in the uk today, tesco shares hitting an almost 12year low as the company says it doesnt exceed fouryear profit. An lefts were previously forecast ago profit of nearly a billion. The review of the Grocery Retail portfolio is still under way and hes, quote, quietly optimistic about the firm. Coming up, amazon delivers. The online retailer is reportedly testing a fast Package Delivery service in new york city using an old world mode of transport. Weve got the story coming up in two. The s p 500 had its biggest drop yesterday in since 2004. Alibaba lost about 2. 6 . Twitter, one of the jurchbd performers in the social media space losing about 2. 2 . But interestingly enough, it wasnt just the new tech social media gains. Even some of the oldest tech names like, lets see, intel and microsoft losing about 1. 5 . Whereas apple, which has had a stellar run this year thanks to betterthanexpected earnings, iphone 6 sales, apple losing about 2. 6 . From traders i speak to, they say its just profit booking, this is not the start of a correction, but time will tell. With the declines weve seen across markets in asia and now in europe, whether today will see more weakness outside of the tech and Energy Sectors in the u. S. But lets talk about amazon who is working on some big plan toes deliver packages to residents in new york city. With more on the story, lets join landon. Good morning, wilfred. Amazon plans a onehour delivery in new york city using bike messengers. The story is called amazon prime now. Its been Holding Trials with three companies. Messengers are given the package and told to get there within a certain period of time and once they arrive there, theyre told to take a photo of the building. It recently signed a 17year lease in new york city and messengers will be paid 15 appear sure and work an eighthour shift. Amazon try toes create its own option sight back in 1999, but couldnt compete with ebay. It went on to launch a lucrative marketplace which now accounts for 40 of quarterly unit sales. If thats not enough, amazon is warning the ffaa it could shift drone testing outside of the u. S. Unless it gets quick permission to conduct more outdoor testing. The company says outdoor testing is crucial to its Package Delivery service. Last year, the u. S. Government designated some companies could test drones for civil use, but the seattle area, where amazon is based, is not one of those sites. Back to you. I want to bring you the latest comments from madam legarde. She says Monetary Policy in the euro area needs to continue to play a key role in supporting demand and, as weve heard a number of times over the last year, the imf is pushing for more stimulus, rather, from the ecb. A regular season basketball game took on a regal air as Prince William and kate watched the Brooklyn Nets take on the Cleveland Cavaliers monday fight. They were shown on the jumbotron. I dont think they happen on the kiss cam, though. Will and kate met a few other royals, if you will. Music stur stars beyonce and jayz came over to shake their heads. Lebron james, of course, the cavs beat the nets, but i dont think anyone cares about that. Royal couples in their own ways, beyonce and jayz meeting the royal couple. This was a starstudded moment. Indeed. Do you think they chose to go to a basketball game. Do you think the Football Players and Baseball Players will be disapointed by that . No, not at all. Look at them, there you go, will and kate enjoying new york city. As we head to break, these are your headlines. Chinese shares posting their biggest daily loss in over six years amid reports that the countrys leadership is setting the stage for slowing growth. U. S. Markets poised to continue their fall after the dow and the s p had their worst day in over a month. And wti and brent crude prizes steady after hitting fresh lows on oversupply. Fears. Let us recap what happened in china in todays trading session. It sold off sharply in the afternoon. What was driving this news that perhaps the government will revise down its growth forecast of 7. . Also, some changes in the roouls which relate to holding Corporate Bonds which makes it harder to leverage their stock position. But lets put that move into perspective. This is the move yeartodate, still up 35 . Still a very, very strong rally in november, particularly from november 22nd when we saw a rate cut spop todays move of down 5 put into perspective there. An update on european markets, theres been a risk off sentiment over the last 24 hours. Greece, the laggard down 6. 7 . U. S. Frurchs trading lower across the board after the s p 500 recorded its biggest drop in seven years. Were looking at the Dow Jones Industrial down about 50 points in premarket trade. The s p 500 and the nasdaq trading the down. That will play a key role in this weeks trade. Carolin. Congress has until thursday to pass a potential spending bill to avoid a u. S. Government shutdown. Leaders could pass a shortterm extension to give the house and senate more time to approve the spending bill. Ben white, chief correspondent at politico and a cnbc contributo contributor. To the r do you think the government will pass this spending bill even if it includes Homeland Security . Its not going to include Homeland Security. Yes, theyre going to pass it. It may require another day or two extension. There will be methods along the way as there always are. But the Republican Leadership doesnt want to shut down. Its not going to happen. My guess is the lights stay on thursday. Ben, one of the factors that investors have not had to deal with this year is Political Uncertainty. That could change if congress does not pass a spending bill by midnight. Theres the likelihood of a government shutdown. Its very i think its very small at this point. Youve got a lot of the Republican Leadership saying, you know, we need to show that we can govern, were about to take over congress fully in the winter, in january. Both the house and the senate, they dont want to start that off beforehand by shutting down the government. They want to push their agenda on spending cuts, tax cuts, a bunch of positive prospective changes. They dont want to kick it off with a shutdown to end this year. Democrats dont want to shut it down, either. I think wall street knows at the end of the day, theres not going to be a shutdown. Ben white, thank you for your time. I want to get you some news on what oil prices are doing at the moment. It has been a risk off move in most risk assets. Oil has bounced back today, around about 0. 87 . Brent is up 0. 6 . But intra day, we did hit the lowest levels since july 2009 for wti, up 52. 25. Brent did touch 65. 29. Nonetheless, bouncing back, well see what that means for u. S. And what it means for energy stockses. The s p 500 yesterday losing about 4 . Indeed. Thats all that weve got time for on todays show. Im carolin roth. Im seema mody. Squawk box is up next. Good morning. Investors slamming the brakes on tesla. Shares of the carmaker on their worst sevenday slump ever, down 14 over that period. Another day, another adventure at amazon. The ecommerce giant sends bike messengers for onehour delivery in new york city. Meantime, the company is launching a function that lets you haggle over costs. Tuesday, december 9th, 2014, and squawk box begins right now. Good morning, everyone. Im becky quick along with joe kernen and andrew ross sorkin. Stocks down sharply with chinas benchmark index dropping as much as 6 in the final hour of trading. Shares there had been trading at more than threeyear highs. Among the reasons cited for todays selloff, a drop in oil prices, profits taking, lowered Economic Growth expect ages and the fears about new Corporate Bond restrictions. Eunice yoon will have more from beijing in just a moment. The drop in crude oil prices in the overnight selloff in asia putting pressure on Investor Sentiment. German