States funnel billions of dollars to the internal government. Hello. Welcome to todays program. Plenty to get through on the show, including, of course, looking at oil. Will middle east tensions keep driving up the price of oil. Perhaps supply will yet outstrip demand . Well talk about the price of oil in ten minutes. Bank of thailand offered no surprise by holding its policy rate steady. The central bank warned a slowdown in chinas affecting growth. Well take the economic temperature of the country and its neighbors. Brazils central bank due to release its Interest Rate decision later today 11 20. Well ask if the country can find the path to inflation and slowing growth and a weakening currency. And u. S. Food joint smith field agreed to a multibillion takeover. Theyll seek assurances on the deal. Can food safety be guaranteed . Do sovereign issues play a part in a countrys food supply . We have a Panel Discussion at 11 30 cet. Right. Also some italian industrial output up 1 in may. Thats weaker than the forecast plus. 3 as well. And we got any thoughts or comments about what we have got coming up today. Email us, worldwide cnbc. Com. We did get down as 127. 54, threemonth low on the back of the s p downgrade of italy. As well as comments out from mr. Asmussen which will likely try to withdraw meant the guidance would keep rates for a 12month period. Tried to qualify. Didnt actually mean to say that, but too late. It was already out. Concern about china. June trade data shows growth slowing. Imports were down. Exports also missed expectations by a wide margin, down 3 . They were thought to rise. 4 . This as chinas first export decline in nearly 1 1 2 years. Beijing is blaming weak external demand. This latest drop also comes after chinas officials began a crackdown on illegal capital inflows disguised as trade bills that inflated earlier export figures. Data having an impact on european activity. This is where we stand now. Take a look at the heat map. Weighted to the downside now. 7 to 3, decliners outpacing advancers on dow jones 600. The ftse was up another percent, buck the trend this morning. Individual stories not too badly. Burberry listed in london. Well get into that. Ibex is off twothirds, the cac off four points. Slim losses, of course. The focus on italy after that downgrade, citing weak negative outlook growth for italy is one of the reasons. S p adding there was a one in poli three chance of another downgrade in 2013 or 2014. Leta told local tv the cut was proof that the situation in italy is complex. Rome is due to sell 9. 5 billion euros at a tbill auction today. We have btp sales coming up tomorrow. This is where we stand at the moment with some of the banks impacted by the rate cut. Look at the italian bond curve. You can see yields are higher across the board. The tenyear, 4. 3 . The fiveyear, 3. 25 as well. That did drag the euro down, down to 127. 54, threemonth low. Above it at the moment as far as eurodollar is concerned. 128. 14. Dollar yen, above the 100. Hit the 101. 54 late last week. Aussie dollar was impacted by chinese trade data, but on the 148. 12, the threeyear low for sterling against the dollar. A little off that at the moment. The people now talking about 1. 45 as targets. Thats where we stand right now. As far as european traders are concerned, sixuan joins us with an update. Thank you, ross. A mixed bag for asian forces as markets reacted differently to that weaker than expected china trade data. Japans nikkei 225 and south koreas kospi ended marginally in the red. China markets rallied after dismal data spurred easing hopes. The shanghai composite jumped nor m more than 2 . Brokerage and banks extend their gains in the afternoon session as we see that founder securities surged over 8 . And Property Developers also among top gainers. China merchant s jumped nearly 9 . And among the actives in hong kong, jewelry shops outperformed. Shell soared over almost 13 after importing over 60 surge in its q1 revenue helped by the gold rush after the price of bullion plunged. Consumer mood slipped in both japan and australia in june. Index giant fast retailing waved on the nikkei 22 5 down 1. 2 . In australia, retail chains were also broadly weaker. Harvey norman down 2. 4 today and surf ware company billabong plunged another over 10 falling yesterdays 16 tumble. Back to you. All right. Thank you for that. Now, shares of burberry beat expectations with an 18 rise in Retail Revenue for the first quarter. They saw double digit growth where the latest collection received a warm welcome from rich chinese shoppers. Burberry maintained fw eed guidr the year but warned of an uneven trade environment as they shift from wholesale markets into Branded Store sales in latin america and asia. Burberry group stock up 4. 6 in london. Now, on the eve of key signing talks in washington, regulators showing a willingness to play ball with the s. E. C. They say it will hand over all documents related to a u. S. Listed chinese company, something the s. E. C. Has been pushing for saying it hit roadblocks. Csrc protective of state run business secrets didnt say which companys records were being leased and beijing is resisting request to open up se hearing at 2 30 on the planned takeover of smith field foods. The 4. 7 billion deal would be the largest ever chinese acquisition of a u. S. Company. Lawmakers are expected to ask smith field ceo larry pope about food safety issues and Foreign Ownership. The deals approval lies with the committee on Foreign Investment in the u. S. Which is chaired by the treasury department. Smith field stock, in fact, still up. 8 and no surprise up 30 over the last three months. So chinese trade dadia much weaker than expected today. Exports down 3 on the year ago. Imports down. 7 on a year ago. Is this to do with the external environment or a sign that the government is succeeding on cracking down on businesses that were overstating their positions . It is a little bit of both, actually, ross. On the one side, a lot of people were focusing on the numbers coming out of hong kong saying they were reflective of the fact that the government has been cracking down successfully on the fake invoicing in that special zone. On the other hand, people were focusing also on the external demand and how it doesnt look very healthy. The numbers that were we saw for europe, for japan, as well as for the United States werent very strong. And then on top of that, people were also looking at the it part numbers which also disappointed. We were expecting imports to rise 8 or so from a low base from the previous month. As you noted, it contracted. What was interesting also about the import number was that when you break it down, a lot of the weakness in the import number was from pieces of parts that were actually shipped here to china and then would later be exported. So thats actually the import figure that people said we saw some weakness in. However, the imports just for commodities and other imports that you need to feed the chinese economy, those imports held up a little bit better. It is not necessarily going to make people feel better overall about the chinese economy because it is quite clear at this stage that in the Second Quarter the chinese economy isnt going to be doing quite as well as a lot of people had hoped. Does it suggest that domestic demand is actually holding up better and, i mean, look, people are looking at this transition towards that side of the economy. Well, if you look at that particular set of numbers with the imports, people are saying this is going to provide a little bit of relief. Were seeing here the commodities, the import commodities are a little bit stronger than the imports that were, you know, coming in for reexport. But at the same time, the overall trend that we have been seeing in terms of the trade figures, and all the manufacturing data, everything over the past couple of months, suggests that were still trending towards a weaker economy. Definitely for the Second Quarter, but possibly even into the Third Quarter. A lot of people here have been talking about the downside risks. Thanks for that. Good to see you. Joining us on the phone from taipei is louis, chief economist at rbs. Louis, good to see you. We have seen the breakdown of that. What are the implications of this for gdp and, indeed, for policy . Right. Yes. So i share that view that when you look at the export data, it is all pretty poor, which reflects weak external picture. Also it reflects a pretty Strong Exchange rate. And then on the import side, we do see that imports overall are pretty weak. If you adjust it for profit, not as weak. And then if you look at the split between imports that are used for exports, then that latter part, the imports feeding into china, hong kong, theyre holding up a little bit better. That provides some support that also probably will strengthen the case for those in beijing who are still resisting the which is something very interesting today that the market in china, they were responding favorably to the weak overall data because they were thinking maybe this will mean more stimulus. Actually the government is Holding Quite firm on that mark. The Senior Leaders so far say we dont think the economy is collapsing. Domestic Growth Continues to be okay and the labor market is holding up. Therefore, for now, we dont want to give into those calls for stimulus. Do you think they will need more stimulus . Well, i think it all very much depends on how the data is going to look in the coming months. I think as of now, i think Senior Leaders have a good case to do what they are saying they want to do, working on reform and stimulus. But the picture is not looking good. And the export weakness, it is also starting to spill over into the domestic economy. All the industrial companies, they are having shared capacity, profits are easier. So the longer this weakness is goes on, the stronger the case will become for stimulus. We saw yesterday the inflation numbers. There is mostly driven by food and pork prices in particular. How sensitive will the government be to increasing food prices . I think they will not be very sensitive because they do see that the overall setting for prices at the moment is one that is very weak inflationary pressures. We see core inflation very well behaved and Commodity Prices that are still coming down year on year. There is no setting for inflation. I think they will not have to worry and will not be worried about inflation. Louis, thank you very much. Well take a short break. Still to come on todays Worldwide Exchange, saudi arabia leading a share of support among gulf states for the interior government. Will it be enough to stave off financial instability . Yousef will join us from cairo. The arab spring saw the brent crude price explode. Right now, that spread has closed back. Well ask why. [ agent smith ] ive Found Software that intrigues me. It appears its an agent of good. [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Itse. Egyptian economist and former finance minister has been named interim Prime Minister one week after president morsi was ousted by the military. The same time saudi arabia and the uae are throwing their support behind the transition government with a combined 8 billion in aid. For the latest, you receive is in cairo. Yousef, how important is this money, how long will it last for . Well, several developments, ross. You mentioned the cabinet formation at least. The top tier of that, you have a new Prime Minister and veteran economics professor, hes going to oversee the transition and we understand hes reaching out to the islamist parties to take part in the transition and mohamed elbaradei. Still a long way to go. Six months is what theyre planning to keep this road map under the umbrella at least. And the pledges that have been made are critical in a time when the egyptian economy is in a very vulnerable, very weak position. No doubt about it. 8 billion in total. 5 billion from saudi arabia. Two of that in fuel. And the other 3 billion in cash and loans. And then the United Arab Emirates, theyre giving away some 3 billion, about a billion of that is a grant up front. So that support is coming now that the Muslim Brotherhood has fallen out. And is out of power. Theyre now coming in to infuse some stability. Economists i speak to make it clear to me the government needs to move fast to address some serious structural problems in this economy. Were talking about a bloated budget deficit which doubled over the course of the last year. Youre looking at dwindling foreign reserves, unsustainable subsidies and wage will as well. If they dont burn that money in the transitional process, were back to square one. How much of this pentup frustrati frustration one fundamental problem was wheat delivery, food delivery, at an affordable price. Is that the case . Is that how much a factor is that . If that is so, what on earth is any interim government going to do about it . Thats key, isnt it . That is the affordability of a lot of the regular goods if you will for most egyptians. And that has not really lived up to expectations thus far. It is that which moves the people, and the masses is when the brent prices start going up and when, you know, getting from one place to another becomes very, very difficult and fuel lines become much longer and the power cuts keep coming. The government has moved quite quickly on that in as much as it can to begin with. Remember the power cuts have ceased. And the long lines at pet role stations because of the arbitrary arrival of fuel in this country. Egypt is a net fuel importer. That has come to a halt. But the violence is not making it necessarily easy. Remember that in the Early Morning hours, northern sinai actually an attack on a checkpoint killed at least two soldiers and the militants went in there with rpgs. A sense of trepidation still, ross. Yousef for now, thank you very much. Well have more later in the show. Natural gas and oil is leaking from an old inactive well in the gulf of mexico after a crew working to plug the well lost control of it. Fiveman crew was evacuated out of caution. The well is owned by talas energy and river stone holdings. U. S. Coast guard says the well did not blow out and there was no explosion or fire on the platform. A sheen of around four miles wide and quarter mile long, which is expected to evaporate. Talas says the crew should plug the well today. Week. Prices are hitting a high the American Petroleum institute says u. S. Inventories fell by nearly 9 billion barrels versus analyst forecasts of a drop of 3. 3 million. Sopex due out at 12 30 cet. Interesting has been the closing in the gap between wti and brent as a result. Wti getting up to 104. 6, which is a 52week high for west texas and closed the spread against brent. Joining us for more, hassan. Thank you for joining us. What is interesting here is the narrowing of the spread between wti and brent, is that on the basis that the Global Economy is actually fairly weak, but the u. S. Economy is an awful lot stronger . Thats part of it. But a bigger part of it really is they have been able to get that oil that is locked up in the United States from all the shale formation theyre drilling out to places where it is required. We had bottlenecks there in terms of the pipelines all feeding into the middle of the United States. Now the takeaway capacity is that much greater so they can start to get that oil out. What we really saw was a very depressed wti price relative to brent. Now it is coming back to become more on equal terms as they get that takeaway. We now have more shale oil flowing and that means the price is rising. Yeah, it is an odd well, the reason is that wti was depressed relative to brent. Brent surged on the geopolitical risk. Were seeing wti coming up to something approaching its normal paraty with brent. Not so much a reflection of the United States, it is a reflection of geopolitics and wti is accessible elsewhere. That inventory drop we saw suggests that actually were getting u. S. Crude flowing more freely around the country. Yeah. Still not sure i completely understand greater supply means higher prices. Youre saying because you get it out, people are deciding to buy it overseas instead of brent. Is that i need to explain this, why more supply means a higher price. It is because brent has always been the global marker price. The price of wti has not reflected Global Situation of oil. It has been brent. So what we have seen is a big rise in brent on the basis of geopolitical risk in the middle east and syria and egypt and syria. And were now seeing wti beginning to close that gap with brent. So the reason is because now you can get it around the rest of the country. It is no longer depressed relative to brent. It is on paraty terms and what is driving the overall Global Market at the moment is geopolitics and also a little bit of possibility that were getting stronger growth in parts of the United States, but i think thats a minor factor. Do you think was wti for a long time was had a spread over brent. Do you think it will go back to that . Eventually. Were not quite there yet. Well see more supply out of the u. S. Still not able to be taken away. A few more bottlenecks to come. A little up and down but two or three years in the future, we should start to see that unusual situation we have had for the past couple of years coming to an end and, yes, wti at least the same as is it going to matter what the dollar does . The dollar is on a strengthening pa