Transcripts For CNBC Worldwide Exchange 20150525

The italian market on reports that an offer for a merger was turned down. And iraq gains ground from isis. The situation have never reached this point. The whole of iraq should be a red line. Isis should not be able to take it over. This is the new strategy and the International Coalition should follow in the region. Greece has warned once again that it could default on its debts. The countrys interior minister says athens does not have enough money to pay loans due to the imf in june. Unless a deal is made on its International Creditors on funding. Speaking on local it television the money wont be given because its not there to give. Lets have a look at the greek yield curve as we look at things this morning and we are looking once again at yields slightly elevated, the tenyear 11. 4 and the five 16. 5 and two year, 24 . Mean while, the countrys finance minister has insisted greece has taken huge steps forward in trying to reach a deal with its creditors. Greece has made enormous strides at reaching a deal. Its now up to institutions to do their bit. We have met them 3 4 of the way. We need they need to meet us 1 4 of the way. Julia is joining us now. It does look like this payment coming up on june 5th is unlikely to happen. Its another voice that suggested they are going to struggle. Its nothing really new. They were using imf to pay the imf. The interior minister is part of the radical left platform who has a concern passing these reforms. There is a school of thought that these voices arent dealing with. Still ground to be made up. They are not going to let them get away with those crucial Pension Reforms even if they will give them a bit of latitude on labor reforms. I think you only have to look across at spain and the gains put in for the party they cant give them any more latitude here. It does seem as we get closer to june the 5th were getting closer to a little bit of default. Does a default mean a grexit . Were talking a missed payment. It is not a credited event, if they dont pay the imf. The one thing i would carefully mention is in the master agreement that the huge portion of money thats been lent to greece has the right to miss the payment to the imf which will accelerate the payments on the bonds. Fortunately, its discretionary, so it would be a choice. A missed payment wouldnt send a good message. The risk of course is that it precipitates further concerns as far as the banks are concerned. Were going to have a quick look at markets. Lets bring up european markets, first of all, which are largely closed today because of various Bank Holidays but as you can see italy, spain, and france and portugal all open and quite significantly in the red as we look at things. Italy in particular is down 1. 7 and we can see spain down 1. 4 . Last week was quite a positive week for european equities particularly the front half of the week when we saw the ecb comment that it could be pick up a little bit if necessary, that just reignited some of those europeanrelated trades. The u. S. Ended just positive and touched all time highs during the week. Weve corrected a little bit european equities what is open today and some of those greece fears weve mentioned taking a little bit of positivity out of the markets. Fiat shares slipping in milan after a report after the fiatchrysler sent a proposal for a merger of the two makers but it was rebuffed. Bond rates have moved over the last couple of months. We were looking at 0. 6 on the tenyear german. That had gotten up to 0. 7 ten days ago, pairing some of those changes. Spain, 1. 77. U. K. 1. 94. Somewhere away from the 2 mark. Lets have a look at the 4 x. It rallied to 114 in the middle of this current month. Its down 1. 0963. Its off a half percent of the day. Were looking at the yen, 0. 06. Lets check on the markets in asia. Good morning. The positive leadership coming from the north asian markets today. Another blistering rally on the shanghai composite. Were looking at fresh 7year highs for that market. Its driven from the infrastructure infrastructure. On positive, on optimism that were going to see larger shareholder pay outs from corporate japan, also the weaker yen, the trade numbers saw us that we saw a trade deficit in april for japan. The external picture the exports did grow. Australia, which is back in favor, investors scooping up some of the beaten down banking stocks. Elsewhere, on the losing end of the spectrum malaysia was an under performer down 1. 2 . The power utility was off by 4 . That was a big impact on the broader index. Lets talk a little bit more about markets. Joining me is pierreyvesga gautier. Weve seen a correction in the trades. Do you think thats finished or will it be reignited again soon . Our reading is that this quite unique scbinction of cheap energy cheap dollar is bound to knee jerk higher. If you were just speaking about the greek situation, it looks pretty much of a disaster in waiting and we havent seen much in terms of Market Reaction so far on this subject, it does show overall very few investors are committed to equities so far. This is a story we have been strak tracking over the last few months. The dynamic is upgraded earning in europe and that will pay in terms of exity are acceptable. Because of qe and the like theres further to go in the european markets, are you suggesting the potential risk of a grexit is not priced into markets . Quite frankly, i dont know. It looks like because weve had the comments youve just made about greece over the last month or so it looks increasingly impossible for the greeks to reach a solution. A bit like gm you may remember like when gm collapsed. I would take that view today. Im quite intrigued by the fact that we do not understand anything about the internal politics of greece and the lack of any initiative to prepare the people for a complete change of regime is a bit strange. I would have expected them to prepare for a referendum. Its a bit disappointing on that count. Lets talk about sector specifics. Banks. You are a little concerned about the Banking Sector is that right . I guess like everybody else. We do know that the flat yield curve is not helpful for the banks. We are like other people intrigued by litigation costs. You can recall a number of prosecution agreements for banks have been dropped. Its a case of maybe more substantial litigation costs for banks. That is not a proper background. Notwithstanding the fact that we have on top of the issue, we have some type of a yuber iization of the banks. Its not a great trade to be in banks. There is only one positive for banks is dividends will be going up. It may not be enough to support the sector. Is high dividend sectors things you are looking into at the moment . Its no news. One intriguing thing is that the bigger pairs are pretty cheap in the relative term. There seems to be in effect value for dividends. Pharmas could be one interesting term terms. And more capacity to pay dividends is really a good background. Pierre thank you very much for joining us. The Founding Partner at alpha value. Still to come here on worldwide exchange, paying the way for investment. We speak to world pay as it enters the fastgrowing ecommerce market amid expectations of an ipo. And Roger Federer is fed up with selfies. Stay here on worldwide exchange. The first big weekend of the summer for motor sports racing ended with a thrilling finish on both sides of the atlantic. Nico rossberg wins the monday acould monaco grand prix. Roger federer was left mifed of after a fan approached him for a selfie. It clearly wasnt a nice situation to be in. The fan also approached the 17time grand slam champion for an encore session after a practice session on saturday. Do you feel federers frustrations or are you sick of selfies now . Join us now. What do you think about selfises . Im sick of them. I think they link them to Mental Illness and people crying for help. I came late to the selfie craze . How many selfies a day, a week do you take . Probably a couple of days. Just so theres a nice record of how things look. Just take them for personal use. Here i was. Is that a cry for help or not that you publicize it . We should take one now, julia. Do get in touch throughout the show cbncwex. Spains Ruling Peoples Party has received a bruising in local elections with left wing and anti as austerity gained substantial ground. The socialist party came in second but both parties will need support from smaller groups in order to govern. As you know julia is on set with a huge story. This is a huge shake up in the spanish politics. They traditionally get around 70 of the vote. Here they took around 52 what weve seen is the rise of the radical left and then the Citizens Party which seems to be supportive of business but they have come from nowhere in the last six months or so. They are an existing party, they have been around since 2006 but it just shows you the presence that they have had and of course what weve seen and the struggles they are now having. They may struggle in these Regional Elections. The crucial questions are how good are we to cross the Regional Elections to the national elections. We dont really know. They have used coalitions of the left rather than branding hem receives out outright. Do you join coalitions now and show your hand or do you holdback and wait for the general election . The other important point is why again do we care about the regions of spain because its so decentralizized. As far as the recovery is concerned, if we do see a lack of ability to reach coalitions on these local levels will it impact the economy . The polish president has conceded defeat to the conservative challenger in the countrys national election. Announcement comes after a poll. Official results have yet to be released by the countrys authorities. They are losing ground against the euros by. 3 . George osborn is considering a commission to a study as to the british leaving the eu. The specific rules of the vote will be revealed in the queens speech coming this wednesday. Meanwhile, the bank of england is under fire after it accidentally revealed details of a project it is working on in the event of a brexit. It was mistakenly sent to an england newspaper. Julia is still with me on that issue. Its not surprising that the bank of england is trying to work out what may or may not be the fallout if we have a brexit. Its embarrassing they released the thing they didnt mean to release. Its Risk Management. Isnt that what Risk Management is about . You need to take the steps. The big issue for me is the steps that they would take to try and ask the prs the representatives within the bank of england to prevaricate regarding their preparations. Weve got an important week coming up. David cameron is going to be visiting various european leaders. Do we think that events over the last week both in greece and now in spain with how voting has gone there, does it make the likelihood of the eu renegotiating the terms significantly with britain any differently at all . I think the brexit question for them is one they could do without quite frankly when they are trying to deal with greece. I think some of them would have been happy for David Cameron not to have won the election and taken it off the agenda as far as its concerned. If David Cameron can go to them and say this is what the uk wants and just because the u. K. Doesnt want closer association with the eu it actually controls it. I think its a warning that perhaps a need for greater cohesion and the risks attached to the greek situation here and whats the preference here to allow a country to leave or set a precedent and risk further fracture. Is it a different situation for David Cameron . The u. K. Is far bigger in a greater sense. Theres a difference in the negotiating tactics of two. It is not about austerity. Here its about a better understanding and relationship for the e. U. At this stage. I think he has a lot of support. There are other countries like germany who thinks we should have less red tape. Well hear more on the queens speech later on in the week. New report suggests iraqi troops have recaptured territory near the city of ramadi which was seized by isis last week. The developments on the ground came amid Harsh Criticism from u. S. Defense secretary ash carter who says Iraqi Forces Lack the will to fight. Hadley joins me. What you have here is the u. S. Secretary of defense is saying these troops are not ready to get the job done and thats very interesting coming from the u. S. , considering not only have they train these troops over the last ten years but they have been training them with u. S. Special forces and special advisers to fight the islamic state. It isnt like they are unaware of the capabilities here. These guys are getting weapons from the russians and other deals as well from the french. Its interesting that the u. S. Is going to take this line with regards to isis because, of course, the response here is one of sort of frustration with the u. S. Administration. Not just from the iraqis themselves but from the kurds. I had the chance to sit down with the iraqi deputy Prime Minister and he essentiallily told me this is going to be a big problem Going Forward. Take a listen. Translator it is clear that there are targets that the u. S. Said that there are a red line and they remain a red line and isis could not reach there because the u. S. Can stop isis but isis managed to reach other areas because the u. S. Did not say these are within red lines. The whole of iraq should be a red line. Isis should not be able to take it over. This is the new strategy and the International Coalition should follow in the region. They should not just make strikes here and there that are ineffective. Deputy iraqi Prime Minister saying that these strikes dont need to be they need to be more targeted than they are being. Essentially that would basically mean they needed troops on the ground. Thats what hes saying. Whats being done right now is not enough. Ive also asked the president of kurdistan about it. Translator was the iraqi army who was not able to take advantage of it. However, for kurdistan were very grateful. As far as weapons we have not received them to fight isis. We are hopeful that they will respond positively and there will be some changes in this regard. What do you think is holding those weapons up . Translator maybe there are some misperceptions. In the u. S. There is a perception now that the Obama Doctrine is questionable when it comes to whats happening in the region and many in u. S. Congress are now raising questions about whether the president s streg is the right one when it comes to helping to defeat the islamic state. Is the u. S. Doing enough to fight this threat . Translator as much as we are concerned in kurdistan, the intervention was very swift and quick and we are very grateful for the support they provided but in general there is no a strong reaction to face and defeat isis. There is a need more for commitment and need to defeat isis quickly. That is across the board, no. Just the u. S. But also the other arab states translator the whole International Community in fact. The bigger question right now is what is the u. S. Going to do about this problem . What you are seeing from the administration they basically saying they didnt know how bad it was and they are running up against the fact that the iraqi troops are not able to take on the islamic state. What do you do next . Thats going to be interesting Going Forward. One of the greatest deals in its history, we hear from the vice chairman of ge on why its merger with alstom needs to happen soon. Well be back in a couple minutes. Welcome back. Another day, another warning from greece. The countrys interior minister warnings agoens does have the cash to repay the imf next month unless a deal is made with creditors. Spanish equities trade lower after the peoples local Party Receive a bruising in elections. Putting brakes on a deal. Fiat drops to the bottom on reports that gms president mary barra turns down an offer of a merger. Iraqs deputy pm tells us it never should have reached this point. Translator the whole of iraq should be a red line. Isis should not be able to take it over. This is the new strategy and the International Coalition should follow in the region. Lets have a look at what markets are doing here in europe. Of course some major markets are closed today. Those that arent open are down quite significantly. Volumes not hugely high. The u. S. Is closed today. Partly this is because of elevated fears on greece over the weekend and some political results coming out of spain as we just mentioned. There was also a slight correction of what was a strong week for european markets last week. The u. S. Last week was fractionally positive by the end of the week but did hit some alltime highs during the week. Were having a little bit of a correct from those levels. Lets have a look at forex rates. Its euro is 1. 0961. And the euro 1. 3. And draghi encourages countries to unite. In portugal the ecb chief said there is no better moment to push ahead for reform. In europe the structural component in low growth is much bigger. As all the data and discussions have shown yesterday. Thats why the need to by the way, the Central Banks, the ecb doesnt want to be intrusive. Doesnt want to tell people exactly governments what exactly what to do how to sequence who does what, so on. Its very much a policy appeal to action. For example, yesterday, there was the discussion on whether it makes sense to postpone reform that you know its good to times when the world will be a better place to live in. Now, its clear that from the other parts of the discussion theres not going to be any better moment for doing the right reform than now. And aneta has returned from frankfurt is life for us now. Thank you very much. That issue whether the ecb and Central Banks actually have a mandate into advising governments everywhere in the world was one of the big topics during various debates but it was rebuffed by all of these major central bankers, Stanley Fisher mario draghi and mr. Kuroda from the bank of japan and they are all saying they should voice their opinions when it comes to governments. Theres only so much you can do as a central bank. Essentially what mr. Draghi is saying they do their utmost to enable growth but that is what they can do. If the situation were to worsen they could do even more he said at one Panel Discussion but so far the Monetary Policy stance is quite clear. Of course, we had someone saying they are planning on front loading qe for some Market Participants. There was a clear sign that the ecb is planning on flattening the yield curve or managing the yield curve and that was also my biggest question to one of the most senior ecb watch dogs who is also one of the wise men here in germany, advising the German Government about economic reforms. I think its part of the unusual environment were in with this aggressive quantitative easing the ecb has engaged in strongly influencing longer term Interest Rates. The whole yield curve as you know in the safe in the countries with low risk its moved down into negative territory many years out. This is a situation brought about by policy. Were very concerned about it. What does it mean . All these uncertainties for the market and just recently we discussed whether there arent enough points. We just learned there are because prices have been going down and rates up. For the ecb, this means in this situation, volatility is not surprising high, right . Its to be expected and their decision at least suggests to me that their intention is to smooth this and to actually more or less try to manage the yield curve fairly far out and i think thats a very difficult under taking. It shows you what extreme policy were in. You say Going Forward they are planning on managing that yield curve, looking at potentially more volatility to come with the fed, et cetera. I mean my guess is yes, they will try that. This is at least a first step in that direction. Let us also look at what we were just saying recently discussing the potential scarcity of bunds or other government bonds, this is completely off the table according to you, right . I think if that had been true we wouldnt have seen the spike up and there would have been no need for the ecb to say oh were going to buy more to bring it back down where we wanted it. Another thing which is difficult about this remember in the forecast of the ecb, we have inflation recovering. We have pretty decent growth in the ecb. You wonder how can Interest Rates can be so low for so long. One issue is buying. When you think how inflation will be, i dont see how safe Interest Rates can be at zero eight years out. There is this conflict which makes it so hard to see what is the appropriate level. Yeah. Some people are also arguing that despite the fact the ecb is not officially targeting the Euro Exchange rate but that might also be like a Second Thought at least when intervening into the markets. Do you think so as well . These are this is just another one of the channels through which quantitative easing works. It works through risk and utility and Exchange Rates so of course they are looking at the mix. Since they are paying not foreign currency but government bonds, the first impact is on the prices and yields of those bonds. So essentially the message also from the ecb be prepared that they are going to implement the full qe program as announced in january, even though some Market Participants were already speculating that the ecb might taper earlier than this. Mario draghi says we will fulfill what we have seep and also be prepared that the ecb might intervene during that period of time they are having qe in place to flatten the yield curve and also to possibly lower the Exchange Rate in order not to hamper Economic Activity in the euro zone. Back to you. Thank you very much nor that. Were going to discuss markets in a bit more detail now. Joining me is simon gross hodge head of Investment Advisory in singapore. Weve seen quite a significant move, particularly in european markets over the last few weeks and months. Was that because people think qe in europe was going to end or that the trades relating to them had been overdone . Good morning, wilfred. I certainly dont think its because they thought that qe was going to end. As draghi said this is a first mile of a marathon. They have got an awful long way to go. I think probably the fact that the initial reaction from the markets was a lot better and more than people were thinking. As mentioned, we had some people pushing up their growth expectations for europe. Inflation expectations have come off the floor a little bit and that suggested perhaps that things had made a very good start and if they continued that way, then that would improve open mix that perhaps the policies wouldnt be needed. If we look at the other countries, most of these policies have had to go on much longer than the central bank would have expected or would have wished certainly as far as japan and even the u. S. With getting as far as qe 3. So to suggest after just a mere one or two months that there was any sign of an exit on the horizon i think is out of the question. Were going to need these policies to be there for quite some time. The markets need the support. Certainly we saw from the fed when they tried to end qe 1 and 2 too early the reaction was fairly negative and the ecb should learn from those mistakes from the fed and make sure that they keep this policy running for its entirety to give the market and the economy as much support as they can. If we look today at for example the german tenyear is yielding at 0. 10 is that set at a reasonable level . Are you happy its corrected far enough already . Yeah we would think so. If you look at the dynamics particularly may was a month of quite a lot of issuance whereas from june and the second half of year, we get back to a situation of negative net supply. We think in that situation in the ecb buying such a huge amount of that issuance there should be more natural pressure for supply and demand for those yields to be pushing down. I would agree with the comments that the ecb send a very clear message that they were very unhappy with both a spike in yields and the rally in euro. They are sending a clear message that they are going to be policing this market quite heavily. There seems to be little reason from our perspective to fight that. We think the yields will go back down the euro will go back down and thats a very supportive environment for European Equity markets. Were going to hit the pause button. Federal reserve janet yellen had a hawkish tone. Indicating inflation is moving forwards the feds target. For this reason if the economy continues to improve as i expect i think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing Monetary Policy. To support taking this step though i will need to see continued improvement in labor Market Conditions and i will need to be reasonably confident that inflation will move back to 2 over the medium term. Simon, it seems like the European Central bank had been driving bond prices across the globe over most of this calendar year. Is that focus going to shift back toward the fed as they start to raise rates . No we dont think so. We think that european influence is going to be very heavy. If you look at the message were getting from the fed, there are two things clear. They are really keen to raise Interest Rates. They want to get off of zero as soon as they can. They will probably do that in september. The more Important Message coming from all the fed officials is when they raise rates, its going to be at a very slow and gradual pace and that really shouldnt do a lot of damage to the treasury market and even after the speech from yellen on friday the reaction in treasuries was relatively muted. For sure yields could push a little bit higher especially if we get some Stronger Economic data but we dont think they are going too far and lower yields in europe are going to act as an anchor. They are going to make those u. S. Yields look pretty attractive on a relative basis and thats going to be attracting capital. Stick with us if you will please because were going to talk to japan next. Boj seconds inflation to sell accelerate in the 2015. He expects it to reach around 2 around the first half of fiscal 2016. Meanwhile, japan trade data showed the country fell back into a trade deficit in april but the gap is not as wide as feared. A jump in exports to the u. S. Helped. Simon, quite a lot of data out of japan the last week or so. Sum it all for us. Are we seeing enough green shoots of growth following this humg stimulus they have delivered or is it still a pretty wearing outlook . We think the outlook is improving. Inflation was moving very quickly in the right direction and until they got hit by the collapse of oil prices. The abe no, maam abemonics story. There is a domestic demand story to the japanese market rather than people trading on a weaker yen. On a global perspective, japan is still one of the best value markets out there certainly compared to the u. S. Its got good room to move quite a bit higher. Abenomics very slow but its still making progress. They are really getting that domestic background moving and thats a very key component in driving this market higher. So were staying bullish on japan. Simon weve been around the world in eight minutes. Thanks very much for joining us today. Now still to come on worldwide exchange, a top ge executive joins a chorus of critics to say the u. S. Was wrong to sit out in talk with the Chinese Investment bank. After the break. Ges vice chairman says hes company can wrap up its acquisition of alsymptom quite quickly. Hadley joins me on set. Incredible conversation we were on the sidelines of the World Economic forum in jordan. I asked him how the investment was going in egypt. He explained to me that the leadership is in such a place right now that he felt egypt was a good place to be investing that things would go forward in a positive way for the company. Its interesting as well, this is a company, General Electric they are used to working with these governments to make these deals happen. I asked him about the deal with alstom i said what are you guys willing to do to make this deal a success . Take a listen. Its been a long time since we announced the deal. Longer it takes, the more difficult it is on the people involved. We would like to get this done as quickly as possible. Were confident that we can, and we think it will be end up being one of the great deals in ges history. I also asked john not just about the alstom deal where hes saying were going to do whatever it takes to make it happen but i also asked him how is the u. S. Doing abroad because you are looking at the chinese moving to the middle east the russians are moving into the middle east. Is ge as a company and the u. S. In a good place essentially to get to where they need to be in term of market share and essentially he told me hes very worried just about u. S. Legislation if its in the right place to make that happen. Interesting conversation on the sidelines of that forum. Great stuff, hadley. Well be looking at more of the tape throughout the show. Russians are rushing to put money into indias ecommerce sector. Hedge Funds Investment firms and Asset Managers have pumped 3 billion dollars. Payment Processing Company world play is one company hoping to tap into that market. Joining us now is ron from world pay. You are a leader payer in managing car payments in the u. K. And your latest deal expanded. Were a fastgrowing Global Payments company. We processed 10 billion payments a across across 128 countries and india is a Natural Market for us to go into. It helps our customers to expand into that market. Its fastgrowing. Theres a huge growth in ecommerce. Something like 50 growth. Its a natural place for us to get to. And indian ecommerce is this all through the phone or is it through traditional pcs and computers as well . We operate across multiple channels. Typically the device that are used now increasingly in india, smart phones thats where its starting to grow. Were going to see smart phone usage increase and double over the next five years. There are 900 Million People in india who have access to a mobile phone. Its a massive opportunity for us. Think about the payment space globally. How will we be making payments in ten years times . Payments essentially are moving away from a standard proposition to something weve all got a smart phone, were all readily accessible in terms of using smart phones and using them will be one way to do it. Theres going to be a broeth in biometrics and information thats going to be available i think payments will be at the heart of everything that happens in the economy. World pay is already established. This fastchanging industry is that a threat or opportunity . It is an opportunity. We are fast growing and we are consumer and customer focused in terms of thinking about our business. Our business is about helping our customers. Who ten tor retailsers and helping them grow their business. Thats essentially what were doing. Also on the front, of course the private tech market at the moment is showing up valuations being incredibly high. It would be a convenient time for you to raise money, would it not . Essentially, at the moment were doing pretty well. Theres no urgency in our business to do anything along those lines. Our focus in the business is to look after customers, to grow their business and make sure that we can expand in territories and geographyies that weve been furthering our customers in. You dont need any more capital to achieve that at the moment. No. So plans to ipo at all this year . Theres a strategic set of options that weve started to consider and think about, and the reality is that the business has grown remarkably well over the last five years since its been owned by bain capital. The business has grown and its the right time to be thinking about our Strategic Options but its far too early to think about what it looks like. Is there other geographic regions you want to get into that you are not present in yet . Were pretty global already. Were already in china and japan, essentially its about making sure that we take our customers into those markets where they have access to the opportunities that present themselves. Thank you for joining us this morning. Amazon has complemented new Accounting Practices and is not now retail sales in european countries. Amazon will not channel all sales through low tax luxembourg. Lets look at markets. Germany and u. K. Closed for the holiday. France down 0. 7. Portugal down over 1 . Political developments over the week in greece and spain has hurt markets a little bit but just because of low volumes is why were seeing these red reads across european markets. Quick look at forex as well. Its 10974 at the moment. We will be back here in a few minutes time. Well be talking about grease after this short break. A very warm welcome. This is worldwide exchange. Im wilfred frost and here are your headlines from around the world. Another day, another warning from greece. The countrys interior minister warns athens doesnt have the cash to repay the imf next month unless a deal is made with creditors. Putting the breaks on a deal. Fiat drops to the bottom of the italian market on the report gms boss mary br br barra turns down an offer for a merger. The battle for Time Warner Cable continues. U. S. Media mogul John Malone Charter communications is reporting Francis Altice for a nearly 50 billion takeover from twc. And Iraq Forces Gain Ground from isis. This is iraqs deputy p. M. Tells cnbc never should have reached this point. Isis should not be able to take it over. This is the new strategy. And the International Coalition should follow in the region. Welcome to the show. So the u. S. Is closed for memorial day. We also have a bank holiday here in the u. K. And also in germany. Were looking at a relatively thin set of markets of european trade. That level of liquidity has also accentuated the moves were seeing. Italy and spain just shy of 0. 2 . Some Political Developments really over the weekend. Issues continue in greece. We also had some local elections in spain which didnt go the way of the incumbent party. It was quite strong for u. S. Equities just up but also hitting some alltime highs over the previous week. Lets look at bonds where the similar story of the last week has been we did have that big correction particularly in european bonds and we moved away from those moves. 0. 6 on the ten year. Were looking at 1. 94 in the u. K. And similar yields in italy this morning. Were looking at forex. It raled up to 1. 04 and it settled back just below 1. 10 today. Lets check in on markets in asia as well. Coming from the north asian market another blistering rally for the shanghai composite. The sectors that were really in demand were infrastructure and transport thats because beijing said they are seeking private funding for over over 300 million worth of public projects. Also fresh 15year high for the nikkei 225. Also optimism that were going to see higher shareholder payouts as well in corporate japan. Yes, we had trade data that showed deficits in the month of april. It was a slower pace of growth and we saw some weakness coming through in terms of demand from china. So that was a negative but the market really brushed that one off. Elsewhere, we see a rebound in australia. People picking up the sold out banking shares also rebounded. The benchmark off by 1 there. Thats lowest since january 27th. The power utilize was off by 4 . Thats how we stand. Back to you. Now the battle for Time Warner Cable continues amid reports that Charter Communications is locking horizon with frances altice over a take over bid. Charter is said to be leading talks with twc according to the financial files tsh financial times. Shares in twc rose over 3 on friday valuing the firm at 48. 4 48. 4 billion. Were looking at altices trade today in amsterdam. Its off by 4 and a half . And gm could pay a fine of 1 billion. This after the Department Found criminal wrongdoing in gms recall of ignition switches. It affected 2. 6 million vehicles world wide and causing deaths. The New York Times story says gm rebuffed the approach of a mernler. Greece once against says it could default on its debts. Athens does not have enough money to pay loans due to the imf in june unless a deal is made with its creditors on funding. And Yanis Varoufakis said it would be a ka tascatastrophe. It is up to the institutions to do their bit. We have thet them 3 4 of the way. They need to meet us 1 4 of the way. On set with me now is julia to give us an update on the situation. Mr. Varoufakis not changing his tune very much. Weve got 11 days between then and the current terms and obviously the Brussels Group are meeting to thrash out some kind of deal. They need to negotiate further as far as Pension Reforms are concerned even if they give them a bit of latitude as far as labor reform is concern because those are the two crucial red lines too. There is also a point of view that tsipras doesnt mind these voices. We only have to look at spain to look at the elections they have had. From singapore, phillipe, good morning from here. Good afternoon to you. Do you think in the market at the moment, the risks associated with greece are they correctly priced in at the moment . Well we are in a situation where no one wants to imagine that the that greece would exit from the euro zone. At the point we are in a political issue. On one side you have tsipras from greece and on the other side, you have Angela Merkel and mario draghi on the other. The question is how can they have an agreement on political issues . Thats besides the point. We know that the greek situation is not sustainable, but we know at the same time that none of this party from tsipras, no one wants to see greece exit from the euro zone. We need to have an agreement rapidly because it was mentioned, that they have a repayment of 300 million to the imf at the beginning of june so we have to find an agreement very rapidly. They have as it was mentioned this weekend, there is no more money in greeks pocket so there is a real issue now, at the same time we all make the positives that they wont exit and an agreement will be found between greece and the euro zone. Phillip ep how much what we saw in spain over the weekend play into the negotiations do you think . A real show of strength from the radical left over in spain, thats a huge concern for brussels. Encouraging voters to vote for a similar radical left party . I think theres a very different issue from greece on one side and from other countries in the euro zone specifically in greece. For one single reason is that in greece the situation is still very weak on the economic situation, on jobs on gdp, and so in that case you they have voted for a series at the beginning of this year just to imagine that the situation could stay where it was. In spain, for example, the situation is very different because you have now we have strong growth in gdp. We have a strong growth on employment and so the situation on these issues are really different and so we can imagine that the extreme parties in spain will no longer be as strong as it was expected a few months ago because the economic situation, the Employment Situation is now stronger than what was expected. So it makes a real a real difference and you have to see the how time goes by in different countries, and clearly greece is still in a very weak environment. This is no longer the case for spain and it makes a difference on political issues. Phillipe i want to take the focus away from greece and talk more generally around markets around the world. What do you think is the big driving force around them right now . Janet yellen was much more headquarterish hawkish than she has been for a while. What is driving it . We have a situation we have a very complicated situation. On one side you have the ecb that wants to lower Interest Rates for the next time period. You have china which is not doing well currently and we saw a lot of reform that has been shown presented by the government on the third part you have the Federal Reserve in the u. S. Where janet yellen last weekend said well we have to do something on rates but at the same time when we look at the Economic Indicators in the u. S. We are not very we do not imagine that they could change Monetary Policy rapidly. We have these three types of issues and in europe we understand the point at the very beginning of the year we feared deflation. We expect the qe from the ecb, so every investor has tried to take advantage of this situation, so we had very low Interest Rates add mid april, at 0. 06 for germany tenyears, so it was probably too low. We have had a correction. Now its at 0. 06 . Its different. But we still have very low Interest Rates and we will stay this way. In the short run, the main issue is what will be done by the Federal Reserve. Well they change their mind or not . Thats the point. Because we see that gdp for First Quarter was weak. Probably it will be weak for Second Quarter and inside case the fed has to increase its Interest Rates, im not sure they have to soften the dollar before before. Thank you very much for joining us. Now, as we alluded to during the course of our interview, peoples parties has received a bruising during the elections. Prime ministers conservative party won 27 of the vote nationwide. It did loose control and failed to gain outright majts in strongholds. The polish president has conceded defeat to his conservative challenger after the countrys president ial election. Official results have yet to be released by the countrys authority. Julia, thank you very much for joining during that segment. I failed to thank you more enthusiastically. It was a delight as ever. All of iraq should be a red line for isis. We hear from the countrys deputy Prime Minister on why Coalition Forces are launching a new strategy to combat militants. Stay tuned. With xfinity from comcast you can manage your account anytime, anywhere on any device. Just sign into my account to pay bills manage Service Appointments and find answers to your questions. You can even check your connection status on your phone. Now its easier than ever to manage your account. Get started at xfinity. Com myaccount welcome back. Lets give you some headlines. Greece back on the brink. Athens warns it will not make a june imf payment without a debt deal. Charter communications reportedly steps up a fight with altice for control of time wash warner cable and gm could be driving toward a summer settle the over a criminal probe. New reports suggest iraqi troops are recaptured territory near the city of ramadi which was seized by isis last week. This as the United States and its alliesrd carried out 27 air strikes over syria and iraq over the weekend. The developments on the ground come amid Harsh Criticism. Thats interesting. This is a different narrative than weve heard over the last week from the obama administration. They are admitting these guys dont have the will to fight. This is something they would have guessed this sometime before this. They have been training this guys and supplying them with weapons. They have a lot of weapons on the ground. The iraqis say they need more weapons. What else are they asking for from the United States . Translator it is clear that there are targets that the u. S. Said that they are a red line and they remain a red line and isis could not reach there because the u. S. Can stop isis but isis managed to reach other areas because the u. S. Did not say these are within red lines. The whole of iraq should be a red line. Isis should not be able to take it over. This is the new strategy and the International Coalition should follow in the region. They should not just make strikes here and there that are ineffective. Thats the deputy Prime Minister of iraq down there talking about red lines. Hes saying the u. S. Isnt doing enough. The alternative narrative is from the kurds. I spoke with their president and i asked him is kurdistan safe. How are you feeling about the u. S. Involvement there and are you looking for more from the United States and whats happening in iraq . Should the u. S. Be doing more. Take a listen. Translator i do feel the u. S. Has done a lot for the iraqi army. The iraqi army has not been able to take advantage of it. We have not received the kind of equipment that we demand and is required to fight and defeat isis. And in this trip to washington i have raised this issue with the administration and other government officials and we are hopeful that they will respond positively and there will be some changes in this regard. What do you think is holding those weapons up . Translator maybe there are some misperceptions. In the u. S. There is a perception now that the Obama Doctrine is questionable when it comes to whats happening in the region and many the u. S. Congress are now raising questions about whether the president s strategy is the right one when it comes to helping to defeat the islamic state. Is the u. S. Doing enough to fight this threat . Translator as much as we are concerned in kurdistan, the intervention was very swift and quick and we are very grateful for the support they provided. But in general there is not a strong reaction to face and defeat isis. I think there is a need more for commitment to defeat isis. Thats across the board. The whole intasht community. Its clear whether you are sitting in erbil or baghdad, you are looking for more support from the International Community. When mentioned before so many people in congress saying were not doing enough to support the kurds. They are getting weapons from iranians as well. They ought to take a look at whats happened in kurdistan. Thank you for joining us. Still to come here on worldwide exchange. Roger federer is fed up with selfies. Global steel output down in april. It was dragged lower by production in china and north america. We spoke to julia verden to ask about reports the firm could be taken over by u. S. Buyout firm apollo. I want to talk today about where we are in the distribution chain. It puts me a very difficult position to talk about where stemcor is. Last year the company was very successful in servicing of its clients. We maintained the volumes of all the things we targeted. Would it be a Different Company under private equity versus private family. When i took over as ceo, the mantra i delivered to the whole team at the company was one about delivering performance, delivering real accountability and what we see taking the company forward, under whatever ownership, we see it based on merit, profit p l, and based on delivering that service. Ive grown up all my career. Its going to be a company under whoever is the ownership which is run absolutely on merit grounds. The first big weekend of the summer for motor sport racing ended with a thrilling finish on both sides of the atlantic. Nico rossberg won his Third Straight grand prix. Juan pablo captured his second 500 victory. The tennis front, Roger Federer got off to a good start at the french open easily winning three sets on sunday. He was left miffed after a fan approached him on the court for aie a selfie. So this has got us thinking. We want to hear from you. Do you feel federers frustrations . Are you sick of selfies . Get in touch with us. It was a little bit grumpy of federer to come out and say that. This comes with the territory with what he does. Ive said it. In this morning on twitter im still into selfies and theres a couple of them up there if you want to to have a look at them. Time for another quick break. Still to come the battle for Time Warner Cable heats up. Who will gain the upper hand. Well have the latest on that story for you in a couple minutes. Welcome to worldwide exchange. Im wilfred frost and here are your headlines from around the world. Another day, another warning from greece. The countrys interior minister warns athens doesnt have the cash to repay the imf next month unless a deal is made with creditors. Putting the brakes on a deal fiat drops to the bottom of a italian market on a report that gms boss mary barra turned down an offer for a merger. This is has they settle up with with the department of justice. Charter communications is reportedly fighting frances altice for a 50 billion take over of twc. And Iraqi Forces Recapture ground from isis amid criticism from the u. S. Defense secretary that they have shown no will to fight. This as iraqs deputy p. M. Says it shouldnt have reached it this out. Translator the whole of iraq should not be a red line. The Federal Reserve chair janet yellen struck a hawkish tone on friday strongly suggesting Interest Rates could be raised this year. April Consumer Prices rose at the fastest price since january 13. Jelen said any tightening would be conditional on employment data. For this reason if the economy continues to improve as i expect i think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing Monetary Policy. To support taking this step though i will need to see continued improvement in labor Market Conditions and i will need to be reasonably confident that inflags will move back to 2 over the medium term. Okay. Lets have a look at the euro dollar which is off about 0. 3 . As you can see 1. 0977. Lets get out to boris sclosberg. This was quite a surprisingly hawkish tone from janet yellen on friday, wasnt it . You know you listen to that statement very carefully and i dont think its nearly as hawkish has the market interpreted it. It was hedge at the end yes we definitely want to raise rates but were not at any point where we can raise rates. Thats the ultimate message from the fed. Central banks anticipate think of themselves as anticipateory institutions. They need to see some growth in wages before they become committed to normalizing rates. I dont think were quite there yet. Boris, its an interesting point because the inflation data did show a pitt more of a pick up than people expected. If we wait a few more months and we start to have the comparison effects from the back end of last year when oil prices had already started to tank we are going to see the number of inflation pick up quite significantly. Rite. But they are always going to compare them at oil because they always extract energy costs from inflation its going to be core that were going to be comparing apples to apples. The core still stays very subdued. The thing about this that is interesting, when you look at qe policies across the world, you use japan as the key analog for everybody else, what happens there is a series of false hopes. Where you have hope that the economy recovers and it kind of just dampens and grows. So far weve seen the same thing in the u. S. Youve not seen the growth that gives people confidence. I think were in the same kind of trap for a couple more months here. We looked at the euro dollar range here. Whats driving euro dollar more . The european side of things or now the fed is talking about raising the u. S. Side of things . Oh, no i think the euro trade is a pure dollar trade in most cases. And maybe 80 of the euro trade is just a whole dollar trade. The whole point of 2014 was a anti dollar move. I think were sort of now in kind of a consolidation phase as we see this shift toward tightening Monetary Policy is going to be real or not. If the data in the u. S. Just doesnt show the kind of growth necessary for the fed to tighten rates. You can see it raise higher. Its really an anti dollar trade thats driving it at this point. That correction weve seen particularly in European Assets when we talk about the german bond as well do you think its corrected enough so far . The big question is going to be greece. At this point, the market is very complacent very san gien about the fact whatever happens to greece is really a nonevent. We really dent know. It looks like its coming down to june. There is no money there. They cannot squeeze blood from a stone at this point. Its going to be very interesting and telling. If there is disruption if we get to a point which i think well get to where greece decides to spin out of the euro zone you really dont know what happens to the european markets. You could have a massive spike in volatility there. Well hit the pause button there. Still to come here on worldwide exchange, a top ge executive joins a chorus of critics saying the u. S. Was wrong to sit out of the chinaled Asian Investment bank. We have that interview after the short break. The battle for Time Warner Cable continues amitt reports that Charter Communications is locking horizon from frances altice over a takeover bid. Charter which is bagged by john malone. The french firm has lined up financing from a number of banks to support a possible bid. Shares in Time Warner Cable rose over 3 on friday valuing the firm at 48. 4 billion. Shares are up 0. 5 . Ge says hes confident the company can wrap up the acquisition of al alstom quickly. Joining me now is hadley. One of the things we heard from john is that despite all of the chaos they are willing to go into countries like egypt, iraq and even into kurdistan as well. When i asked him how do you manage the business given this sort of uncertain political situation. He basically told me we operate beneath the politics but certainly in egyp we found a leadership that is really willing to work with us. That was quite interesting. I also asked him, what about this alstom deal when is it going to be done and is it going to be done in a timely manner . He said were going to make a real priority to get this deal done and do whatever it takes to make it happen. Its been a long time since we announced the deal and frankly, the longer it takes, the more difficult it is on the people involved and really we would like it get this done as quickly as possible. Were confident that we can, and we think it will end up being one of the great deals in ges history. Clearly ge willing to make any concessions necessary to get that deal done and i also asked him, in terms of the support you are getting from the u. S. Congress, from the obama administration, do you feel like you have the same opportunities as chinese countries, russian companies, and i asked him what implications the current legislation have for their deals Going Forward. At one level, it doesnt worry me because i think we ought to be able to compete with Chinese Companies and anybody else that shows up in the markets where were active but from a u. S. Perspective, it worries me in the context of things like authorization, it doesnt make sense to me that the u. S. Doesnt have an export credit agency. I dont understand it. I dont get it. I believe the u. S. Should have participated in the Asian Infrastructure investment bank. That would have been a great opportunity to get in on the ground floor and be part of something which is frankly needed. The world has a big shortfall on infrastructure. Like a trillion dollars a year when you look at the mckenzie work and what others have done part of the reason the infrastructure is not being developed is because capital is not available where it needs to be. We got to do . Stuff. Is this the whitehouse or is it congress . I think its congress. I think its congress. I think that there are a few people in congress who believe in a world that speaks for smaller government. Thats Something Like xm isnt necessary, if you take xm out, it generates a surplus. The debt goes up is it you stop xm. They make money. Theres no reason not to have xm. The vice chairman of g. Expressing some serious frustration with the u. S. Congress and this is something we heard across the board whether we are talking about Investment Opportunities or whether we are talking about geo politics. Over a thousand big businessmen there in jordan. Unfortunately for the United States there svent what weve seen in the forums is a big presence from the u. S. The secretary of state john kerry was not there. There was a willingness to hear more from the u. S. What more needs to be done unfortunately the u. S. Doesnt appear to be at the table. General motors could reach a settle with the u. S. Justice department by the end of summer and pay a fine north of 1 billion according to the detroit free press. This after the New York Times revealed that the Department Found criminal wrongdoing in gms delayed recall of ignition switches which led to over 100 deaths. Legal sources told the free press that gms fine could outpace toyotas if the Department Finds executive guilty of a cover up. Meanwhile, Fiat Chrysler ceo emailed gm mary barra on a merger which was rebuffed. Lets remind you of the headlines at this hour. Greece on the brink. Athens warns it will not make a june imf payments without a debt deal. Charter communications steps up a fight with altice for control of Time Warner Cable. Gm could be driving toward summer settlement with the Justice Department over a criminal probe. Well be right back in a couple of minutes. D. Welcome back. Its the neverending saga the greek situation. Another set of flashes coming up in the last few minutes. A government spokesman for greece says that they will reach a deal with lenders within quote, a short period of time. Saying also the government has a responsibility to pay all of its domestic and foreign obligations. The government is not looking into paying imf loan charges in june in one go however. It says. And they add there is no chance of imposing capital controls. This comes after reports over the weekend where greece once again warns that it could in fact default on its debts. Slashing contrasting those flashes we just brought you. Athens said they not do not have enough money to pay the imf. The money wont be given as it isnt there to give. He claimed the eu and imf were pressurizing greece to make unacceptable concessions in the current bailout talks. Now, aneta did speak to Nobel Prize Winner christof pissarides. A default can be happen within the currency union, right . The problem is if its properly regarded as default, in other words, if your bonds can no longer be accepted as bonds issued by a solvent authority, then the ecb cannot accept them as collateral and therefore can they cannot issue liquidity to greek banks. Greek banks retire almost entirely on the Emergency Assistance of the European Central bank. If they are denied that liquidity assistance very well to find it other ways. They will go bankrupt. The liquidity from that scenario will have to come from internal sources, from the greek government. Where do they find it to keep the banks going . It cannot. If it tries to issue a currency to provide that liquidity, it will be disaster. It will be the biggest hair cut that they have ever experienced and it will be borne by the citizens of the country. Its essential they do what is required from them to get the funding by ecb which is to come up with a credible program of reform. Which they dont it yet. They have been in power up to five months now. The question is what have they been doing all this time. Obviously, that is the obvious question. They are very optimistic coming from the comments coming out. You could say it could be a good idea, is that right . No. What i was saying how will the currency work . Would it be possible to get on working. For the reason that if say you issue a currency on power with the euro theres something that carries the guarantee of the greek government instead of the ecb and is worth one euro. As soon as you try and trade it. Its going to deappreciate. Maybe 60 Something Like that. Those who get it are suffering a 60 cut. Those people who lend the greek government money, twu it will be the Civil Servants who work with the government. It will be those who have contracts with the greek government and then suddenly they find themselves getting half the money that they were expecting from the government but we already have the biggest fall in wages in real earnings in the euro zone have been in grease. If you give another hit of 50 , the economy will simply collapse. Lets get back out to boris. We touched on this previously earlier. On the over all, are the risks of a grexit sufficiently price into the markets at the moment . I dont think so. The markets are very complacent in a sense they think something will be resolved. I kind of agree with the market. I dont care that they want to take greece to the brink and effectively force a bankruptcy on greece despite all the tough talk. You know, the problem is its much more political than it is economic. Because the money involved is tiny. They could really write the check tomorrow. The issue is because the greeks have not committed the kind of reforms the europeans want to see, the germans are in the mood they dont want to write a continuous blank check. Even if the actual bankruptcy of greece is not a big event, economically, initially, it opens up a whole pandoras box. And the really big problem is italy which has a huge amounts of debt against its gdp and could be the next target of shorts once you open up the ideas. I dont think they want to take it to that point. The stubbornness and the political factor could create a much bigger crisis than needs to be happening right now. Are there any protection trades that you look at in order to protect against a grexit . Well, you know the natural trade obviously is the short euro trade because if you do have a situation where it starts moving toward a grexit actually, the short euro trade and the short euro pound trade, you are starting to see the euro pound come down a lot usa the british pound seems to get a lot of the safe haven harbor flows. Lets talk about that ongoing debate in terms of equities versus bonds. We have seen bonds correct quite significantly over the last couple of months. Which is your preference between the two assets classes at the moment . Im sorry. What was the other class . And equities. Oh, equities. In europe equities still remain i think a much more favored asset class because of qe. We have very good evidence that long periods of qe are very favorable toward the equity class and european equities were under valued to start out with. Boris, thanks very much. Stick with us for one final more light hearted comment if you will. Weve also been reporting that the first big week of summer of motor sport racing ends with a thrilling finish. Nico rossberg wons the grand prix. Later in the day, Juan Pablo Montoya won his second indy 500 victory. On the tennis side Roger Federer got off to a good start at the french open easily winning his game on sunday. He was left miffed after a fan approached asking for a selfie. A fan also approached for an encore practice session selfie. Are you stick of selfies and boris, i wanted to get your take on this . Are you a fan of the selfie or are you board of them now . Im board of them now. As an american we have a much i think, more paranoid higher sense of security. The fact that the fan was allowed to go on the court unend unencumbered unencumbered. His personal security needs to be protected. I think federer can do no wrong. Hes a bit of a legend. On a personal level, im still a fan of the selfie. I have to say. Sorry to admit it. Thank you so much for joining us today. Were going to have a quick look at european markets before we go which are are the in the red. A thinly veiled today. A lot of red across the screen in terms of the markets that are open. That is all weve got time for today on worldwide exchange. Im wilfred frost. Thanks so much for watching. Well be back same time tomorrow. Lemonis hi, there im marcus. Tonight on the profit. We head back to some of the business ive partnered with over the past year. Carolyn . Carolyn im carolyn. Nice to meet you. Lemonis when i make a deal i come in with a plan and a check. Man thank you, marcus. Woman i was gonna work you a little bit more. Lemonis [ chuckles ] but what happens after the cameras shut down. Michael ive let it slide for three freakin years lemonis . May surprise you. One struggling novelty Sporting Good company has been totally transformed. Wow. Look at this place. But the owner is still making the same sort of shortsighted decisions that nearly brought them to the brink. Im pissed that you bought the printer. Im not gonna lie. If you were me, would you stop putting money in this business . At unique spa in long island