and the tropical island of puerto rico cuts the debt to junk status and warnings of more downgrades. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. and a warm welcome to today. you're wearing green, very appropriate. >> exactly. >> the final pmis out of the eurozone, january final services bmi, 51.6. it was the flash, 51.9. so it has come down slightly. new business pmi, 51.8, the flash is 50.1, and the final composite, 52.9. a little weaker than the flash of -- i was trying to pull up the french number, as well. >> the composite employment pmi in line, as well, on that one is worth pointing out, as well. >> so it's the high final reading since june 2011. it separates expansion from contraction. a little weaker than the flash number. but an encouraging start to the year, so says chris williamson in for market who was in on monday. we'll get the visit breakdowns on that. i'm very interested in the french number in particular. hang on. 47.8. january services pmi, 49.4, stronger than the forecast, as well. so the french number, encouragingly a little better than we might have thought. euro/dollar, 135.14. now, plenty to get through on today's show. >> and gente suffers from a drop in profit. we'll hear from the ceo a little later and hair how he's dealing with markets like brazil. and nadella will get nearly double the salary of his predecessor, steve balmer. is he worth it? more on that, coming up. >> just over an hour and 20 minutes into the doppler radaring day here in europe. advancers outpacing decliners at the moment around 6/3 the. 3/2, in other words, and matching julia's dress. i'm not allowed to touch the wall, but i just did. they don't like it for some reason. the head of our technical development gets very upset. the ftse 100 is up 16 points at the moment. it was down some 16 points yesterday, so flat over the last two sessions. the xetra dax is flat. as is the cac 40 and the ftse mib up 0.5%. yields, 2.58% later on monday's session. we'll move this on for you, it will magically appear here. we have nudged up from those three-month lows on the yield. as have ten-year bund yields, as well. oi ats, 2.655. very important services pmi number coming out in the uk in around about 30 memberships time. of course we'll keep our eyes on sterling as a result. 1.6310. slightly weaker today. aussie/dollar, a big bounce yesterday after the rba came in and look and said we're getting rid of our easing. 86.60 was our 3 1/2 low. currently 0.8903. dollar/yen, 101.26. and euro/dollar, 1.3512, not far away from the two-month lows that we hit on monday. what about what's happened in asia and in tokyo after that big sell-off previously? adam is with us out of singapore. hi, adam. >> good morning, ross. we saw a rebound here today as we saw markets pretty much normalize after the previous day. we actually really did see a volatile trading session for the equity markets here in japan with the major benchmark, the nikkei 225 meandering out of positive and negative territory. and if you overlayed a dollar/yen rate versus -- with the nikkei 225, it was pretty much a move that mirrored or moved within the shadows of the currency. in the meantime, there's a lot of caution in the equity markets up in japan. we're a long, long way off for making up for that huge beating we saw at the beginning of the week with the index climbing back up. many of the technical analysts suggest that the 200-day moving resistance is providing a significant resistance to the equity market. that stands about 14,425. so we did see the dollar/yen bounce back at already the euro/yen. however, in the course of the trading day in asia, we've seen those gains unwiped. we're almost back to where you just put it at the 101.20 plus levels for dollar/yen. notwithstanding that pullback, we saw a very strong session up for japan. the showstopper had to be panasonic. up at one stage, almost 18 plus percent as it unveiled its nine-month numbers, back to the black, first time in three years. very strong showing, up about 20% profits to about 700 million u.s. dollars. sony in focus on media reports suggesting that the company, according to people familiar with the matter, may be looking at selling off its pc business and could reap in about 40 billion to 50 billion yen, the company obviously not confirming those reports, but thursday sony will be coming out with october to december numbers. many expectations, including that of bank of america merrill lynch that they could potentially reduce their full year estimates for the second time in as many months, as many as three months. in the meantime, a number of corporates coming out with profits today in japan after the market closes. so you want to watch out for the orders, particularly mazda and mitsubishi and fantastic numbers, just like toyota, which was a stellar performer in terms of market reaction today. their numbers moving up five bold in terms of net profits, mazda like toyota hiking their full year forecast for net profits and also operating profit on the back of the weaker yen. the operating profit numbers have been tremendous, obviously, because of the weakness in the japanese yen and the october to december quarter. the dollar/yen was standing at about 100 to the u.s. dollar. as you well know, they have fallen a lot more since then, down to about 105 levels, ross. but we've come back from the 105 levels. so long as abe-nomics is going to work, japanese -- will want to see a weaker yen and those outlooks rather rosy. >> adam, thanks for that, joining us from tokyo. british retailer top shop is betting even bigger on the u.s. the fashion chain has unveiled plans to unveil five new stores. you're a better person than helia to brush us up with that. >> yeah. actually, it's a massive expansion and it's a huge stop on fifth avenue. it's 40,000 square foot. that's huge. it's all about phillip green's international expansion. >> no ego. >> no, why would i say that? topslop, a really profitable nd of arcadia. in the last few years, he's been pushing forward in the u.s., especially after the 2012 deal with leonard green, who bought 25% of arcadia. >> he's in a good mood, isn't he? >> he's in a very good mood and i caught up with him yesterday asking about this expansion plan. >> well, i think it's sort of -- you know, this store, fifth avenue, probably one of the most relevant streets in the world as far as retail, tourists, local people. it's our second biggest store after this store. so pretty key in terms of building our u.s. business. >> how is the tie up with nordstrom going? are you still in business there? >> we're in discussions to grow there. i think we can do business in a way inside the department store and our flagship stores will be different. different piece of business. >> and what about other brands alongside topshop, will there be rooms for things like wallace and dorothy perkins? >> it's not on our radar at the moment. and there's been some talk of a deal with macys. is that o cards inspect. >> i think there are discussions going on from time to time with different brands to see what we can do. i think those are ongoing and if something comes to fruition, we'll do it. >> you said your u.s. expansion is going to deliver you $1 billion in sales in the near term. is that realistic? >> no, not this year. these five stores are opening over i think 15 months and hopefully we grow our online business. i think we have a bit of a way to go. >> you said one of your regrets wasn't moving into emerging markets fast enough. you're now in honk hong kong trying to recreate the success of h&m. has a recent slowdown in those markets and concerns about emerging market currencies, does that worry you? >> well, if it was a slowdown, why would we regret it? we would be happy. >> but are you still as enthusiastic as growing your business and -- >> i think the answer is we're enthusiastic about going to market. we think we've got long-term sustainable growth, not doing anything crazy. and as those opportunities arise, you know, when we're offered, we'll have a look at them. we're currently negotiating on a couple new stores in hong kong. it will take us to three. we continue having china dialogue. we just haven't got there yet. no doubt we will. >> you've achieved a lot already. are you still ambitious? >> 40,000 feet on fifth avenue is not ambitious, is it? >> as well as very serious subjects like the emerging markets, i also asked phillip green about his recent meeting with kim kardashian. >> last week, you were -- you had lunch with kim kardashian. >> did i? >> apparently. apparently she flew into london just to see you. >> not that i know. >> you did business with her and her sisters with dorothy perkins. could there be an opportunity with the kardashians and top sddz shop going down forward? >> no. >> definitely not? >> who knows what the future holds, but that wasn't the purpose of our meeting. >> what was the purpose of your meeting? >> do you have lunch? >> what did you eat? >> what did we eat? i can't even remember now. some fish. >> he also had a go at the government over business rate taxes. they're paying lip service. he also went ahead and talked about internships, unpaid internships, he's been a big advocate. obviously, top of my agenda was asking about his tie-up with these women. >> he didn't know where to put himself, did he? he was shifty eyes and then smiling the whole time. >> is he still working with kate moss? >> i think he -- not at the moment, but they -- obviously, they have a very successful tie-up. and they had a tie-up with the kardashian sisters with perk yips. he said nothing is on the line. but arcadia last year, the results that they had down by bhs and some of the other brand. hopefully, topshop will be the flag ship in boosting those earnings. >> he was quite coy about emerging markets, wasn't he? >> he must be very relieved, right? >> yep. >> sometimes it's better to be lucky than good. sometimes. not all that often. >> like helia. >> she's good and lucky. moving on. now, good thing you're not doing an interview today because commuters in london are facing chaos because of 48-hour tube strikes protesting the closure of ticket offices on the underground. we're be outside a central london underground station later in the show to check on all the people who aren't there. so we want to know, who do you think has the best public transport infrastructure? oh, yes, with who has the best public infrastructure and why? please e-mail us, [email protected], tweet @cnbcwex or direct to us @rosswestgate or @jchatterl @jchatterleycnbc. there's plenty of new cities, singapore, the transit system in london, any of the big major capital cities. >> the gap between the train and the platform. >> you wouldn't know. >> exactly. how would i know? >> jules has no idea. >> got my heels stuck. >> and when i tie my horse up, i don't really care, either. >> his chariot. >> look, we want to know what you think. still to come on the show, we're going to be in basul. an 11% drop in his company for syngenta. emerging market turmoil? that's something new. welcome back to "worldwide exchange." let's have a look at where markets are recapping right now. we're in the green. completely unwinding the losses we saw in yesterday's session. the italian market adding to yesterday's gain between 0.2% and 0.7% in trading today. joining us now, the chief investment officer of axis investment, johnny, good morning. >> good morning. >> in your notes, you said you're still comfortable right now being long large caps, equities and property. heading into futures and options right now is very cheap. tell me what your net position is right now. >> i think we've had this ongoing debate as to whether the equity market has rolled over and is it time to consider the party over. on a long-term view, it will be difficult to replace the asset holdings. one could argue bonds have had a bit of a resurgence. it's been a spliet flight to qu. we don't view sovereign debt as having any long-term value. irrespective for your forecast for long run inflation, i can't see any value of having long-term debt. as a third long run, third place in our portfolio, we probably have corporate bonds. >> how hedged are you at this moment? what is your risk profile looking like? >> we're probably majority hedge, i'd say probably at least 80% hedged at this point. we do vary it. we ran a few different variety of spreads. and we had the ten-year u.s. treasury. those are the authorities we use to endue late ourselves from unforeseen events. >> you're accumulating -- out sectors. >> i like to do that. >> which is the staple, the caps, the drillers. what kind of time horizon are you looking at there? >> we would be comfortable holding even medium term. so our universe is always a quality run business universe. we don't really do a dash for trash. that's not the thing we tend to go for. the reason being is that the margin for error and the scope for disappointment with a company that's so highly valued or so niche, it's too risky for us. e even with a huge amount of money, the expectations for a company that's so high and you have that with all companies with these hundreds of pes and peg ratios. you'll find the smallest amount of disappointment or the slightest bit of investor nervousness is going to result in a 5% to 10% growth. >> do you have a view on acadia? obviously, the pe multiple is rather different. >> i watched it. and i have mentally screened it out of my universe completely because so many years have gone by with no revenue that i can pretty much, you know, value. it's nice they've done a deal with morrison. morrison is a company we might see as having a bit of a self-help story. but ricardo, i'm not key. >> we're going to come back to that. don't move a muscle. we want to get a quick earnings update. swatch is trading at the top of the stoxx 600 after the watchmaker reported a 20% drop in profits for 2014. shares in the swedish banking group seb jumped after the company posted a better than expected profit of 5 billion swedish crowns for the fourth quarter. the group says it will pay out four crown aes share for 2013, way above analyst expectations. don't forget, at 10:40 cet, the qfo of seb will be speaking to cnbc about the company's results. a 6% fall in revenue for broker icap. the british banker activity is reducing activity and new regulations hurt the firm. meanwhile, syngenta has announced it will step up its cost cutting exercises. carolin is in basul and has been speaking to the ceo. this is an amazing market for turmoil yet he seemed to play it down. >> not really. syngenta has long been everyone's darling, shares have done fairley well except for last year. so far, everyone has been banking on those markets. 20% of the revenues come from brazil. with the brazilian real falling steadily since last year, it creates a huge headache for the company. part of that is also unhedged. so i spoke to the ceo this morning. mike mag told me that despite those headwinds, he's fairley sanguine about those markets. >> 52% of our sales now in emerging market, it has what has powered the firm's revenue up. we've had exposure all along. we've been here before with brazil, we've been here before with argentina. we've got some hedges, sure, and that's cost us money. by and large, this is something we've seen before. >> it's not just emerging markets, but it's the fact that commodities have come down drastically. corn and wheat are trading at multi year lows. that gives farmers less incentive to invest in crop protection. the ceo says there is concern about that. there is plenty of concern out there. on that note, back over to you. >> thanks, carolin. thanks for sticking around. >> shares in london petroleum are trading down. they did return to profit in the last three months of the year. joining us first on cnbc is ashley heppenstyle, the ceo of lundin petroleum. that's the wrong still, but anyway, ashley is with us. revenue, $282 million versus 246 million a year ago. why has the revenue fallen? >> basically, our revenue is pretty much in line with last year. oil prices last year close to $115. this year we're slightly below $110. our production is down about 5% to 10% this year from last year. and what we'll see, that will double over the next year as we bring new projects on stream. >> as you produce more oil, what's happening on the cost side? what will happen to your margins? >> this field we found in norway has probably the lowest cost in the industry. this is the largest discovery made in the north sea since 1985. it will have cost curves in the bottom part of the lower quartile. obviously, when uven 250 million barrels of oil brent based in the north sea clothe to infrastructure and a cost for barrel higher than what you would have seen still very low relative to our deep water and harsh environment projects. >> ashley, there's been uncertainty still around the project, the cap ex, the production. can you give us any further clarity on that and what we're looking at over the next 12 months in particular? >> yeah. well, the front end engineering product has been awarded to acker. ourselves and our partners are very much aligned and ready to move forward with that project. i think what we have said, there will be more details available when that announcement is made, but this field will produce at over 500,000 barrels a day when it reaches plateau. that will represent between a quarter and a third of all norwegian oil production. so it's material not only for norway, but for ourselves. >> it's a very transitional time for the company to a full cycle ent business, and i guess that takes time for the value to be monetized. the stock fell over 32% last year. is this a case of the shareholders needing to stick with you? >> very much so. my opinion is that the future for the company looks fairley bright. we'll double or projection. by 2015, we'll exit at 75,000 barrels of oil per day and that will probably double. i think that the international independent enp sector has been badly hit as the u.s. counterparts have done very well. the valuations for some of the other independents look quite compelling at the moment. from a business perspective, things are going extremely well. i think when we deliver on this is projects, then the market will take care of itself. >> ashley, great to chat with you. ashley heppenstall, ceo of lundin petroleum. services pmi, 58.3 in january, 58.8 in december. there was an expectation it might actually kick up to 59. that's the lowest since june. the expectations component, up to 74.3 in january. that's the highest since march 2010. the composite pmi as a result down to 59.11 is in january from december's 59.4, the lowest since june, as well. the survey suggests the uk economy is on course to grow. although that's a tick down, the long run averages of the services pmi is 58.5. so we're still very much above the long run average. sterling just coming down to 1.6293. joining us is russ walker, senior economist at ubs. ross, a little tick below what the consensus was going to be there. but nevertheless, are we in a very sustainable growth phase for the uk? >> well, that depends what you mean by sustainable. if you're talking about the next 12, 18 months, then yes, i think there is enough short-term momentum. confidence is improving. the strong employment data i think will underpin some recovery in consumer spending. beyond that, there are still these underline structural imbalances in the uk. there's still a lot of debt in the household sector. i think the supply side of the uk economy has some serious problems, which policy hasn't really addressed over the last few years. but over the next year or so, yes, i think we'll broadly maintain the pace of growth we've seen since the spring. >> yeah. you mentioned -- okay. fine for a year and a half. but if you look at the underlying problems, is that the going to be the thing that stops the bank moving on rates earlier? because there's plenty of houses now saying that they could go, you know, the end of this year. but if you've got those concerns, you wouldn't, would you? >> no. i mean, i think the outlook for monetary policy is more dovish than what the consensus is expecting and what the market is pricing in. partly because the bank of england keep telling us that, you know, whatever the intermediate thresholds, whatever the unemployment rate is doing, they're still not convinced that recovery has not taken root. and the poll signal is still dovish. so lower rates for some time and because of this huge sector debt stop, once the bank of england begins to signal that a rise is coming, monetary policy and expectations of rate rises i think will have quite a powerful and quite an immediate effect in reigning in consumer demand. yes, a delayed rate rise, probably mid 2015 and once rates starts to rise, that will happen at a fairley cautious pace. >> are you taking into account in terms of policy for your investment? and how much does it matter what happens to the banking of the uk investment? >> well, i think the bank of england is clearly a factor. but i think we've heard what carney thinks already. i think the uk is on a decent path. i'm not particularly fussed about this pmi data. >> do you look more at the ftse 650 or the ftse 100 or -- >> if anything, it will be the ftse 100 in the uk. but our perspective is global, is completely global. good quality prices covering good quality liquidity. it wouldn't be very difficult for us to be nimble in this escape essentially. >> we're going to talk more about this after the break, but property, where specifically are we talking about? >> principally, still the uk and principally still m-25 region. >> great tour. >> good to see you. thanks for that, johnny. ross, stick around. we'll come back to you in just a few moments and more breakdown on the uk policy. here's a word you should keep in mind "unbiased". some brokerage firms are but way too many aren't. why? because selling their funds makes them more money. which makes you wonder. isn't that a conflict? search "proprietary mutual funds". yikes!! then go to e*trade. we've got over 8,000 mutual funds and not one of them has our name on it. we're in the business of finding the right investments for you. e*trade. less for us, more for you. the fund's prospectus contains its investment objectives, risks, charges, expenses and other important information and should be read and considered carefully before investing. for a current prospectus visit www.etrade.com/mutualfunds. european markets edge into the green. >> and a volatile day of trade visited by strong earnings from panasonic. >> growth is ticking along nicely for swatch. the ceo is telling cnbc that he's seeing strong sales in china. over the tropical island of puerto rico, s&p cuts the u.s. territory's debt to junk status and warns of more downgrades. >> european equities a little firmer today. the services pmi, a tad weaker than we must have thought. the ftse mib is up 0.75%. we are higher than we were 30 minutes or so ago. >> in line with the eptment we're seeing in the equity markets, we're seeing bond markets trading tighter in terms of the yield. we've got ten-year gilt yields, a couple of basis points higher in terms of yields. >> and as far as the currency markets are concerned, we are lower on dollar/yen. but below that low we hit on tuesday. euro/dollar, just above the two-month lows of below 1.35. pmi back to 1 .6274. harvard economist larry summers has repeatedly criticized george osborne's plan a of economy cuts. george osborne says that he wasn't convinced by the economist's accusations. >> i'm not whole by persuaded as a sector stagnation argument as larry summers and other have advanced. because i think it's too pessimistic about the potential of western economies, he principally is referring to the united states, but the uk and others to be centers of innovation. >> chancellor osbourn warned that britain's housing shortage is likely to persist for at least ten more years. however, he defended the actions in the property market and played down fears of a bubble forming in residential prices. ross, weigh in here. we keep suggesting that the bank of england could use macro prudential tools in order to cool the housing market if it has to. interestingly, bank of america suggested this week that that is not going to be sfusht and rauf. >> yes, i'm sympathetic to that view. mark carney keeps talking about monetary policy being the last line of defense in dealing with financial stability issues, including housing, market and credit issues. i think at some point that will have to be supplemented by higher interest rates. if you raise the price of credit, you'll limit the demand for it. so, yeah, at in point, i agree monetary policy will have to be tightened. but i think it's still 12, 18 months down the line before we get there. and it's certainly too early to be talking about a problem in the housing market. either a price bubble or mortgage borrowing racing away. mortgage borrowing is still rising at let me tell less than 1% a year. the borrowing, the credit situation is still quite muted. in your note this week, you're talking about phase two of forward guidance for mark carney and for the bank of england. what does that look like? if they start to pull in a number of different factors in order to guide policy, doesn't it actually become less clear and less able to guide the markets in a sense? >> it does. it was regarded as a real proxy for the real economy and because it was a variable which normally you would expect to change gradually and in a predictable way. well, of course, since they've adopted it, it's done anything but that. i think that will caution them either from trying to find a single replacement or from reversing back to a much more -- a much looser form of guide yaps. wh guidance. i think what they will probably do is adopt a rate forecast. i think that would be the simplest way of signaling the policy outlook and it's also a variable that the bank of england controls. they don't have the problems they have with the bank of england rates performing in a uncontrollable way. >> that's what been a failure or not? >> i think it's a problem they'll be quite happy with. we've got a recovery in growth. the labor market is improving and inflation is back to target. so in a sense, i think they would probably have this situation than one in which you have a weaker economy. in general, i think they'll be happy. >> ross, good to see you. thanks for that, senior uk economist at rbs. shares in swedish banking group seb have jumped after the firm posted a stronger than expected rate in the fourth quarter. the group, which has a dividend policy to pay out 40% or above per share said it's going to pay out a 59% payout ratio, a long way above analyst expect ages. joining us on the phone from stockholm, jan erik back. what are you confident about? >> well, i think we have built our balance sheet in a good way over the past few years. so i think we're -- you know, we're sitting today with a very sound capital situation. so it's just a reflection of that. >> how would you describe your loan loss portfolio? >> we've been very quality minded for a long time. loan lows today are extraordinarily low. we've been there for a couple of years now and i think this year is not going to look very different. asset quality is good throughout. that goes for the baltics, as well. at 35, 40 basis points, you know that's where that's going to be. asset quality is something we're quite comfortable with. >> you mentioned the baltic region had a significant increase in predictions as far as lithuania is concerned. can you give us a bit more speculation? >> i think what's coming through there is the ramp up of some of the assets that we took over in terms of property assets during the crisis. >> can i ask you about the recent volatility that we've seen and how concerned you are about that potentially impacting numbers in trading activity going forward? >> well, you know, for us, it's all customer flow driven so it's no proprietary trading. and it's really coming as a result of confidence coming back into the market. i think we can see from some of the measurements done in this market that consumer confidence is pretty good and so -- and that's true in the corporate sector, as well. and as soon as confidence in activity levels pick up, you know, that generates the flow of business into our trading business. so that's where it's coming from. and i think that is -- it's at a much better level than it was previously in 2013. >> jan, when we spoke to your ceo back in november, she said there's so much liquidity out there, but it's tough to find the right kind of demand. bearing that in mind, would an announcement of further liquidity from mario draghi be the right move, do you think? >> yeah. it probably is the right move. i think europe still needs quite a bit of support. now, where we operate, it's northern europe and scandinavia, primarily. we do feel the liquidity sensitivity in a german operation, primarily. but where we're up in sweden, norway, denmark, finland, that's less pronounced. .i think the underlying business that we're aiming for is to deepen your relationship with the customers. so we're not so much lending driven, which is a good thing. we're more towards commission and customer driven trading income. and that's less sensitive to liquidity flows. >> interesting. thank you so much, jan. great to talk to you, jan erik back, the cfo of seb. now let's cross over to asia. expecting to post fg profits is mazda ucako ohno has the story. >> yes. mazda revised up its net profit for the year more than three times on the year. global sales are quickly recovering thanks to its eco friendly sky active technology. enjoying greater sales in the u.s. and other foreign markets in which the company had formally been outnumbered by its rivals. the weaker yen gave a boost to its sales. the carmaker announced today that it will be paying out dividends for the first time in four years. a mere one yen, but the president told reporters today that paying out profits to investors had been his top priority and vowed to keep it up for next year onward. that's all from nikkei business report. back to you. >> thanks for that. good to see you. still to come on the show, it's been a bumpy ride for asian markets as the nikkei managed to climb out of the red, as we heard. we have your asian markets, right after this. activity in india's all important services sector continued to shrink in january albeit at a slower pace than the month before. the data comes in sharp contrast to a rebound in manufacturing where activity grew at its quickest rates in ten months. aggressive rate hikes appear to be hitting the brakes on indonesia's rapid growth. the emerging economy slowed to 5.8% in 2013, down from 6 of.2% in the year before. it's the slowest pace of growth we've seen in four years. a cooling commodities market has also helped to slow the country's growth. and north and south korea are making another try at holding family reunions. the two enemy nations will allow some war torn families to rejoin. north korea continues to call on seoul to cancel military drills with the u.s. let's give you a look at what's on the agenda in asia tomorrow. it's another big earnings day in japan with sony, renesas and suzuki. we've got singapore airlines and starhub releasing results while over in the philippines, the central bank makes its latest policy decision after sounding warning on inflation. it's been a volatile session for the nikkei starting the day in positive territory, then dipping below the 14,000 level for the first time since october only to come back again at the ends of the day ending 1.2% higher. this ends the japanese government's four-day losing streak. mark from jewulius baer joins u now. mark, it's rare to see a more than 4% drop for this market. what's going on here? what is in the cards? >> well, i think there's two things going on. there's an economy where they've firmly put deflation behind them. i'm very confident that they're going to get about 20% eps growth this year for now it's about 11 times price to earnings. so a very fundamentally decent looking market. but on the other hand, a very harry market in terms of the volatility. and i think it's been exacerbated by external events. it's nothing to do with japan internally, but it's the emerging markets contagion. people have been buying yen and that's pushed it back to 101, thereabouts. wherever the yen goes down, there seems to be an inverse correlation with the nikkei. just general risk aversion takes the hot money out of japan. and i can't deny that there is hot money in japan, but i still think that, you know, if you can look out six, 12 months, i feel it's the most conducive story in asia. >> the relationship between dollar/yen and the nikkei, either the nikkei is too low and dollar/yen is too high. will that continue to work, do you think? >> well, i think so for the very simple reason that the u.s. is going to probably clock in decent gdp growth of anywhere oo i'll say between 3% to 4% this year. the fed should continue its tapering program. meanwhile, the bank of japan is, you know, continued to affirm that they're going to maintain their quantitative easing program. so if i just put the two together, i don't -- i also don't see that happening. so, you know, if the yen weakens, that's nice. if it doesn't, i still think they're going to be clocking at some decent earnings growth this year in japan. >> yes. so, mark, you know, we're going to get some decent earnings growth. we've had these falls, what's your core strategy, then? what's the key? >> well, i mean, we as a house are long japan. we're staying long japan. as i said earlier, it's a harry asset to own. it certainly gets your heart pumping with these wild gyrations. but i still think it's worth owning. as i said, 1 1 times for approximately 20% eps growth. i actually can't find that anywhere else in the world. so, you know, japan is a good market and elsewhere in asia -- >> i suppose what i'm asking, mark, is how much pain are you prepared to take? how much conviction have you got? >> i've got a lot of conviction in japan. you know, i -- i think, you know, if you look at the rest of the world, the u.s. looks quite heavy this year. it's in the midst of a correction. but statistically, if you back date to 1930, thereabouts, years when you've had a january is down as much as the one we've had down now, we're probably not going to be out very much in the u.s. europe still looks good, i'll give them that. but here in asia, i think japan still stands out and, therefore, i'm willing to tolerate pain. >> brilliant, mark. great to chat with you. now, the manipulation of the foreign exchange market could be just as serious as the libor reading probes, according to the uk's financial watchdog. the sca's chief executive martin wheatly said that the allegations that traders colluded to rig prices were ever bit as bad as they had been with libor. the global investigation into forex manipulation has prompted at least 15 banks to cooperate with regulators in london, europe and the u.s. and s&p is cutting puerto rico's debt to junk status limiting its access to the markets in coming years as its obligations pile up. it's suspended much of its bond program last year after yields on its debt soared. it jumped more than 10% on tuesday after s&p's move. around 70% of the u.s. muni mutual funds hold puerto rico securities. commuters in london are facing chaos this morning thanks to a 48-hour strike. great data, ross. i'm going to save it until after the break. but what we've been asking is which city do you think has the best public transport infrastructure and why? mark anderson tweets, the best public transit is in tokyo. if you want to join the conversation here on "worldwide exchange," get in touch with us by e-mail@worldwide, @cnbcwex or directly to us @rosswestgate or @jchatterl @jchatterleycnbc. >> they have the people with the bullet trains where they are pushing them but they have the guards on each door, they're pushing people in. it is one of my favorite transport pictures is this man pushing this woman in to close the doors. >> i thought you were going to say one of my favorite ways of taking transport. >> no, no, but it's -- >> the picture only. >> it's sardine like, just like being on the central line. still to come, is it time to start kicking the bottom? >> we'll get the lowdown from the chief global equity strategist at goldman sachs coming up aet aftfter this shor break. to manage your money. that's not much, you think except it's 2 percent every year. does that make a difference? search "cost of financial advisors" ouch! over time it really adds up. then go to e*trade and find out how much our advice costs. spoiler alert. it's low. really? 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[buzzer] dangnabbit. geico. fifteen minutes could save you...well, you know. welcome to "worldwide exchange." i'm julia chatterley. >> and i'm ross westgate. the headlines today from around the globe. >> european markets heading into the green taking cues from asia and the u.s. as investors start to buy back into the market. japan's sell-off comes to a halt. the market closed at session highs after good earnings from panasonic. a chill falls over the tropical island of puerto rico as the s&p cuts its debt to junk status and warns of more downgrades. and investors get a fresh snapshot today on the labor market. expected to show a slowdown in private sector hiring last month. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> if you're just tuning in, thanks for joining us here on the show. let me give you a look at always at how the markets are fairing ahead of the u.s. open today. we saw a rally yesterday. a bit of paring into adp. we've got dow futures indicating lower by around 45 points right now. this morning, we've got the nasdaq, indicating lower by around 14 points here. and the s&p 500, did nice to gain around .75 of a point yesterday. right now indicating up by around 6.2. that belies what we're seeing for the european markets. we did see a bit of a negative open to the session this morning, but right now we are trading higher into the green. we've got the ftse 100 gaining around 0.4%. so adding to some of the gains that we saw in yesterday's trading session, too. the german market relatively unchanged. same story for the cac 40, g around 0.4%. and we have the ftse mib, the italian index here higher by around 0.7%. this is the outperformer here this weekend in particular, gaining around 0.7% yesterday, too. a bit of a volatile session in asia, too. so, again, a bit of a mixed bag. >> that's okay. we've had a bit of a sell-off. you blend very nicely. we did see, of course, equities a little higher. the yields just coming off lows. ten-year treasury yields, just below 2.62%. 2.58% is what we hit on monday, a three-month low for treasury yields. today, gilt yields, 2.67%. services pmi came in a tick weaker than we might have thought. 58.3 last month. it was 58.8 in december. still, the longer average has been 55, so still above that long-term average. sterling is weaker on the news, down to 1.6269. aussie/dollar, it had a big bounce yesterday, up over 2.7% post the rbi coming out with dropping easing by. just come back a little bit. dollar/yen, 101.10 is where we stand at the moment. 101.6 was the 11-week low that we hit on tuesday. 1.35, not far away from 1.3477 which is a two-month low from monday. back to european trade, let's recap what happened in asia particularly, as well, out of japan. adam is with us out of tokyo. adam. >> hi, ross. good morning. it was a positive day for japanese equities, but, you know, looking at the wall that you just displayed for us in terms of foreign exchange movements, the rebound that we saw in tokyo stocks could be short lived if the dollar/yen continues the trend it's been on for the course of the day. at the high, we struck 101.75. right now, 101 plus levels. we could see a lot of these gains, but a lot will depend obviously on what happens on wall street. back to the trading day, stocks rebounded about 175 points on the nikkei 225. that is a far cry from the massive data we saw on tuesday when the index lost 602 points and a technician suggests that breaking that 200-day moving average is a very stiff resistance. that sticks at about 14,425. moving to the stock movements, we saw no shortage of huge data in terms of gains, so some of the big ticket names, including panasonic. that was a showstopper today after they reported that their october to december numbers jumped 20% to 730 million u.s. dollars. the nine-month numbers returning to the blank black after being in lows for the past three years because of some of their less than known niche businesses helping to overtake their traditional television businesses. in the meantime, autos in focus, the world's biggest being toyota. their numbers were reflected in the positive optimism we saw in the share price today. a number of automakers did report an increase in operating profits, they are concerned about was happening in emerging markets, particularly in the hot spots where we see political troubles in thailand, which is certainly a big center for the auto production particularly with the japanese automakers. tomorrow, julia, we're going to get more numbers out and tony will be the one to watch, as well. you know the stories swirling around in the media is they might be jettisoning their loss making pc business. we'll see whether that manages to confirm that strategy tomorrow. >> wow, adam, finally. am i allowed to say that? we'll be watching, anyway. have a great evening. >> maybe daniel loeb will be happy about that. >> i'm sure he won't. great to chat with you. now we're joined by peter oppenheimer. joining us now on set, peter, great to have you here. >> thank you. >> there's a lot of things to consider be it central banks, be it general risk sentiment and the data. where are we now? lay out the land as you see it. >> well, i think the underlying trajectory for risky assets and equities in particular is still up towards over the course of this year. we are expecting to see a good rebound in global growth led by the u.s. through the course of the year. understandably, we've seen a correction, given the scale of the rise that we've had particularly towards the end of december. and the length of time we see markets with no correction and a very sharp fall in volatility that we saw at the end of the last year, so i think the combination of this, the slowdown in the macro data in the u.s. has led to this correction. but we think it's relatively temporary. >> we've seen a number of analysts come out now and saying that this opportunity in terms of valuation, particularly in emerging markets, i want to get your views because i know you've done some work on just at what point investors should be getting back into some of these real problem emerging markets, like the fragile five. >> yes. well, i think two things. first of all, it's important to differentiate between emerging markets. most emerging market equities moved closely together, despite the fact there are some with external deficits, some with credit status, some commodity producers, other commodity users. we think there will be more differentiation. in aggregate, though, i think it's still early to look at those coming under pressure because of external deficit. if you look at previous emerging market crisis, we found that generally you've needed to see much bigger improvement in underlying current accounts and balances. >> does that have to be the catalyst? it's not about valuation, it's about seeing the data shift? >> i think that's right. obviously, the valuations have improved a lot, and that will provide the platform, but i think you need more of a fundamental improvement to come through before we get that trigger. >> and give me an example. i know you pointed out the 3.5%. is that what investors need to keep in mind? >> that would be our view. if you look at the previous crises, that's very much the scale of improvement we've needed to see in current account deficits, before you get a rebound. coupled with re-evaluation, i think that will come, but it's probably a bit early yet. >> when is cheap cheap enough? >> right. >> for us risk you're taking abroad. we've seen some examples, obviously somewhat different, but in europe. european equities were cheap for a very long time. they were factoring in a lot of risks and there was a lot of risk. when you finally started to see an inflexion point in the fundamentals, and some sense that the systemic -- >> it was a break-up. >> then the underlying valuation attraction gave that trigger for a very strong rebound. but younied to see an improvement in the fundamentals first. >> what would an improvement. >> fundamentals to you look like? >> well, in particular for the countries where you're seeing big foreign exchange weakness, you would need to see quite big improvements in their external funding positions. big improvements in their current account deficits. i think the other hurdle, of course, is also related to u.s. monetary policy. if there is a concern that the yield starts to move up -- >> how about the data? did given the macro data, i don't think that is -- >> what about the fact that this time around, we've seen ten-year yields come down to 2.60 and em has not been given any respite on that. it feels different this time. we have the china wealth projects, too. having said that, what's the risk of a snap back at these markets? >> i think we need to know what's happening at the moment related to a number of different issues. in addition to that, you have some slowdown in the chinese economy and concerns about the shadow banking system. they're not entirely related. that combination has brawn down the long curve in the u.s., but it's led to a sense of the risk off given the scale of rises that we've seen up to that point. >> peter, you're staying with us. don't move a muscle. let's give you a quick look at what's on the agenda today in the united states. the january adp report out at 8:15 eastern. forecast calls for an increase of 190,000 in private sector payrolls, following a rise of 238,000 back in december. at 10:00 a.m., we get the january ism services index. a pair of fed officials speaking about the economy today, charles plosser and atlanta's dennic lockhart. we've got merck, humana, time warner reporting results before the opening and after the close, we hear from disney, twitter, allstate, green mountain coffee roasters, pandora and yelp. >> there you go. still to come, as well, we'll find out why france is hoping to make things a bit more taxing in the future of google. [ male announcer ] the new new york is open. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. we're open to it. some brokerage firms are but way too many aren't. why? because selling their funds makes them more money. which makes you wonder. isn't that a conflict? search "proprietary mutual funds". yikes!! then go to e*trade. we've got over 8,000 mutual funds and not one of them has our name on it. we're in the business of finding the right investments for you. e*trade. less for us, more for you. the fund's prospectus contains its investment objectives, risks, charges, expenses and other important information and should be read and considered carefully before investing. for a current prospectus visit www.etrade.com/mutualfunds. european equities are in the green despite lower than expected numbers out of the uk. puerto rico gets downgraded to junk status by the s&p. >> and we'll get a first look at the jobs market this week with the adp report due out later today. commuters in london are facing chaos today because of a 48-hour tube strike. that's the underground. tom mackenzy joins us from the streets in london. presumably the underground are quiet. how busy are the streets? >> the london underground is very quiet. the streets are packed with pedestrians, a lot of cyclists we've seen as we hot footed it from station to station today. this is all because two of the biggest transport unions in britain have decided that enough is enough. they are very sangry about plans by the overall transport for london, the organization that runs the london underground to close ticket office necessas in stations and to ax 247 jobs. it comes two drivers and train workers and people around the station have come out on to the streets today to express their anger. for london and the mayor's office said this is all about modernizing london's underground system, which is the oldest in the world. they say it's about making it more efficient by including technology and swipeless tickets and also just speeding things up basically making it easier to get people through the underground doors every single day. the problem for commuters is we've got another 24 hours of this and next week planned strikes on the 11th and 12th. commuters have having to rip up their travel bans and think again and they're looking ahead to next week with some trepidation. >> tom, where are you? which underground staying are you outside of? i can't work it out. >> it's london bridge, so pretty central, ross. just a few moments ago, the mayor of london was here to pay the picketters a visit, he actually went back on his word in 2008 saying that he wasn't going to close the offices, now he's saying he will. he says that's because of technology and advances in technology and he wants to modernize the underground. >> that's right. he turned up on his bike. i don't know how you're getting back, tom, but anyway, thanks for that. that's the latest on the underground strike. we've been asking, which city do you think has the best public infrastructure and why? charlie tweeted without a doubt vienna has one of the best urban transport systems in the world. in my humble opinion, the trams are excellent. >> it's a beautiful city. >> it is a beautiful city. e-mail us with your views, [email protected], @cnbcwex. >> i cycle into work. so i'm not affected. >> handy. handy. let's take a look at today's other stop stories. microsoft will pay its new ceo nadella a base rally of $1.2 million according to an s.e.c. filing, more than 70% higher than steve balmer's base pay in his third yee as ceo. microsoft made him the third person to leave the company since it was founded in 1975. nadella will also get a stock award for the fiscal 2015 years worth about $13.2 million. amore group of investors reportedly pressuring yahoo! to change its pay practices. "the wall street journal" says ctw, part of labor federation change to win, wants yahoo! to take steps to ensure it won't overpay for talent. the chief operating officer will get an estimated $109 million for just 15 months on the job. ctw, which owns less than 1% of jobs wants mayer to give up her seat on walmart's board. yahoo! stock is just down 0.1%. goiogle is awarding eric schmidt $1100 in stock due to the company's performance last year. google continues to post strong revenue growth, alleviating concerns that the shift to mobile devices would hurt its flag ship surge business. google stock is up about 60% since the start of last year. meanwhile, google may get hit with a $1 billion tax about it bill from france. that's according to a report in france's magazine. stephane is in paris. oh, stephane, we thought that francois hollande was building a strategy to be kinder to businesses, a responsibility pact. he's going in the opposite direction. >> i know. but it's not secret that the finance ministry was looking at these internet giants to look at their fiscal optimization policy. this has been going on for three years and focuses on the strategy that google implemented not only for france, but for europe. in 2012, google declared a revenue of $193 million in france and paid $6 million in taxes. they were quoted this morning by the ifs news wire. without being submitted to the french taxes, but according to the fnl finaninance ministry, t unit should pay taxes in the country. the french finance ministry declined to confirm or deny on this report. google cede its company policy never making comments on rumors, so we just have to wait to watch the share price and to wait for -- to have some official announcement from the french finance ministry. over to you. >> and we'll wait with bated breath. still to come on the show after the break, we continue the conversation with goldman sachs's peter obenheimer. >> see new a moment. pay my bill. phone: your account is already paid in full. oh, well in that case, back to vacation mode. ♪boots and pants and boots and pants♪ ♪and boots and pants and boots and pants♪ ♪and boots and pants... voice-enabled bill pay. just a tap away on the geico app. ♪ huh, 15 minutes could save you 15% or more on car insurance. yup, everybody knows that. well, did you know that some owls aren't that wise. don't forget about i'm having brunch with meagan tomorrow. who? seriously, you met her like three times. who? geico. all right. the s&p up 13 right now the futures are suggesting we're going to snap back down. the s&p 500 currently 6 points below fair value. the dow around 44 points lower t opening call at the moment. the nasdaq concernedly called down 13.5 points. let's get back to you, peter. we were just talking about emerging markets. what about the influence of emerging markets in european stocks? it's not a new thing. we've seen a bit of underperformance. but to what extent is turmoil in emerging markets priced in some of these european stocks? >> europe is quite exposed to emerging markets, relative to, for example, the u.s. you've got something like 16% or 17% revenue exposure. i think it was important to look at the type of exposure for emerging markets. not something we had done in a recent report. companies in europe that are heavily exposed to the industrial sectors and the commodity sectors. these are the ones that saw a huge outperformance in the last decade, looming infrastructure in commodities and these are slowing. >> the ftse 100 is a key example, i guess. right. so we remain quite cautious from the miners, for example. which has had the highest exposure of any sector and the uk has large exposure to that sector and commodities forwardly. >> to quickly pick up on the report that was out earlier this week from reuters saying that there's $3 trillion worth of exposure to markets within the european banks. it set alarm bells off. what is your take? >> well, i think that it's important to differentiate between the types of exposures. and how capitalized the subsidiaries may be. our view is that if you take the emerging economies where the exposures are most risky at the moment, the countries with the biggest deficits where currency appreciation is quite significant, overall exposure is quite small. the overall estimates, for example, is less than 2% of equity. so that's the sort of asset exposure that you have. and although there's concentrated risk in some individual 2345i78names. in aggregate, that's relatively small. >> so some of these numbers were alarming. peter oppenheimer, brilliant. thank you. >> thank you. always good to see you. still to come, futures indicating we're going to open lower this morning. well, we'll look ahead to the day. [ male announcer ] the new new york is open. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. woke to "worldwide exchange." i'm julia chatterley. >> and i'm ross westgate. the headlines today from around the globe -- >> european markets edging to the green in early trade. taking queues from asia and the u.s. japan's sell-off was at a halt. the equity market closing the session higher after a volatile day helped along by stronger earnings from panasonic. a chill up over the tropical island of puerto rico as s&p cuts the u.s. territory debt to junk status and warns of more downgrades. and inest verse get a fresh snapshot on the employment data today. the adp report is expected to show a slowdown in private sector hiring last month. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> if you're just tuning in, thanks for joining us here on "worldwide exchange." let me give a look at how the markets are fairing as we head towards the u.s. open. and it was a solid day yesterday as far as the trading session was concerned. modest gains on relatively strong volumes, too, but it didn't seem to last long. right now, we've got the dow futures indicating lower by around 39 points. so far this morning, gains of around 0.5% in yesterday's trading session. the nasdaq indicated lower by around 12 points this morning and the s&p 500 right now lower by around 6 points, too. let me give you a look at the largest 300 stocks across the globe this morning in the trading session. a volatile session in asia overnight. ending the day up around 1.25%. let me give you a look, too, at the european markets are concerned. despite a weaker open earlier on in the session, we're now trading higher into the green this morning. the ftse 100 higher right now by around 0.4%. we've got the german markets relatively unchanged so far in trading this morning. the benchmark, 0.2% higher and the italian markets continuing to add to yesterday's gains were higher today by 0.6% so far. ross. >> yep. so european equities up, u.s. futures down. what's on the agenda in the states? we've got the january adp report out at 8:15 eastern. forecasts calling for an increase of 193,000 in private sector payrolls, followed by a rise of 238,000 in december. at 10:00, we'll get the january ism services index, a fair of fed officials speak about the economy. philly fed president charles plosser and atlanta's dennis lockhart. merck, time warner will report results before the hels. after the close, we'll hear from disney, twitter, allstate, green mountain coffee roasters, pandora and yelp. i'm not quite sure what -- green mountain coffee roasters. it is all one. >> we're together in that. >> a bit of a bounceback yet. treasury yields still around 2.6% mark. i think they're just going to wait now for the -- >> adp and payrolls, exactly. >> ism today, as well, nonmanufacturing. yes, that's right. this time yesterday, the u.s. saw the worst, the worst start to february. and i saw some great stats that said it was the worst start to the s&p since 1933. however, that year, it rallied 46%. and guess what was the best month to buy? >> february. >> february. >> there we go. >> smart. >> there you go. there's that. >> you never know. >> that is very well worth pointing out, the worst start since 1933 ended up being a great year. >> a great year. let's take a look at some of the earnings we've had out today. swatch trading near the stoxx 600 after the watchmaker earned a 20% jump in profits. meanwhile, shares in the banking group seb have jumped after the company posted a stronger than expected operating profit of $5 billion swedish crowns for the fourth quarter. the group says it will pay out 4 pounds a share for 2014, way above expectations. meanwhile, challenging conditions are behind a 6% fall in revenue for broker icap. reduced investment bank activity and new regulations hurt the firm. mean wile, crop chemicals manufacturer syngenta has announced it will step up its cost cutting exercise. the ceo mike smack said he was not overly concerned about the current emerging market headwinds. >> look, the emerging markets, carolin, had been a source of our growth. 52% of our sales now in emerging markets, it has what has powered the firm's revenues up. we've had exposure all along. we've had here before with brazil, we've been here before with argentina. we've got some hedges, sure, and that's cost us money. by by and large, this is something we've seen before. >> other stories we're following, morgan stanley has agreed to pay $1.25 kmillion ovr mortgage bonds it solved to fannie mae and freddie mac. it's the eighth bank to settle claims by fannie and freddie, the federal housing rating agencies. morgan stanley stock today, do we have it? maybe not. >> getting over -- oh, no, there it is. >> it wasn't really worth it when we got it, either. just up 0.2%. jpmorgan is paying $614 million to settle a mortgage fraud case with the u.s. government. among the settlement, the bank admits that it approved thousands of mortgages that weren't eligible for the federal housing administration or the veterans department of affairs. both agencies incurred substantial losses when those agencies failed. trading is slightly lower for jpmorgan, just down over 1%. >> think about morgan stanley and having to pay fines. it's amazing to hear what martin was saying yesterday in the uk about the foreign exchange, this brewing scandal. >> libor. >> and it's essentially much worse. in libor, they were just estimating. on fx, it's real trades, it's real spot prices. and it's a much bigger market. >> it's a much bigger market. imagine how much data you've got to go through to try and find that. i don't know. i think it's as long as a piece of string, but -- if we thought that we knew what banks reserves were going to have to be, if that explodes and it's bigger than libor, it's another whole ton of pain coming down the pipe. what does that do for their capital levels? >> it could be really painful. they have to find a way to measure it and i'm not sure. still to come, s&p moves puerto rico's debt to junk data. the motives behind that move and the impact it could have on investors, coming up next. ♪ [ cellphones beeping ] ♪ [ cellphone rings ] hello? 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[ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. residents in the northeast united states are bracing for another storm. forecasts call for anywhere from a few inches to a foot of snow in some areas. the weather channel's reynolds wolf joins us now. reynolds, tell us what we should be expecting. >> you know, i think we're going to be seeing a bit more of what we have around me. a lot of snowfall. this is the light and very fluffy variety that we've been getting. much the snowfall really started during the late afternoon and last night really began to kick in to the tune of around about 7.1 inches of snowfall. by the time we get through mid day and that's when we expect the snow to begin to end. around 7 to maybe 10 inches of snowfall. a little bit more. i have to tell you, the city of indianapolis has handled it very well. the governor actually put out an order for over 800 trucks equipped with both the plows on the front, salt spreaders in the back and they've been servicing the roadways all around indianapolis and roads, all things considered, are in pretty good shape. government offices for now remain open. city schools are open. but outside of the city itself, it's kind of hit or miss with some of the schools. many of them will remain closed. travel is okay, again, under the circumstances in indianapolis. other forms of travel, especially the airport, that is also taking a hit from the winter weather. since 9:00 in the morning and earlier have all been canceled and now it's just a wait and see approach as we make our way through the mid day hours and beyond. now, the snow we've expected to end, this will come to a screeching halt. however, the cold air that's locked in place will drop a bit more. temperatures well below the freezing point over the next several days. in fact, we're not expecting an improvement in terms of the temperatures until next thursday. so what you have here on the ground will likely stick around for days to come. back to you. >> reynolds, thanks for that. good to see you. doing a good job there. thank you. puerto rico may be sinking under the weight of a mountain of debt, prompting the s&p to slash the island's credit rating. kayla is with us. a bit of a surprise. >> yeah, a little bit of a surprise. people thought this might be coming, but surely not so soon when s&p cut its rating to puerto rico to double e plus. that's an important distinction. the s&p sites the u.s.'s territory's inability to tackle debt in the coming years. it's been in recession for years and has a 15% unemployment rate. the government suspended much of its bond program last year after yields on that debt soared. yields on some longer term bonds rose above 10% just in the last day following s&p's announcement. now, the cut comes less than two weeks after puerto rico was put on review for a possible downgrade. rating agencies typically take up to 90 days to follow through with the action. but in an interview with reuters, the s&p analyst in question here, david hitchcock, said the decision was based on confidential information on the island's government, raising fresh concerns about its cash flow and activity. hitchcock said he felt he couldn't wait for the bond offering that puerto rico plans to put together in the coming weeks. he said he doesn't believe the downgrade will create a sustained risk in the coming market, but s&p's move may be followed by action from fitch and moody's. now, the junk rating is unlikely to cause a wave of forced selling by investors, but now 70% of the bonds to have exposure to puerto rico. many have limits to how much junk debt they can hold. the power shares insured new york's muni bond fund with 18%. that's a lot. puerto rico's governor is reassuring island residents that the government will operate normally and he's pressing ahead with economic development eft efforts. ross and julia, banks have been flooding into puerto rico and offering to underwrite bonds at extremely high interest rates. so it's not for lack of capacity. it's just can they afford what some of these bonds will end up costing. >> thanks for that. have a great day over there. european markets stay in the green, quite lower than expected services pmi numbers out of the uk. puerto rico gets its debt downgraded to junk status by ratings agency s&p. and we'll get the first look at the u.s. jobs market this week with the adp report set to come out later today. plus, after a five-month long search, microsoft as named na d nadella for its top spot. we'll is ask if he is the right man for the job. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. european eks are hours into the trading session, we have some gains on the board. the ftse 100 is up 0.3%. uk pmi came in a tad weaker than we might have thought this morning. still well above the long run average. plenty of expansion in the uk. the composite number pointing to quarterly growth around 0.8%. xetra dax is flat. the cac 40 is up 0.2%. the italian a little bit more than that. although u.s. futures have been suggesting a negative start this morning. and the wait, oh, yes, folks, the wait is over. after months of speculatinspecud i tell has been many months, microsoft has named satya nadella as its company's ceo. the appointment concludes a five-month search to replace steve balmer who stepped down last year. mean while, microsoft's founder, bill gates, announced he's going to step down as company chairman to assume a new role as a technology adviser. gates said there was no better person to lead the company. right. cnbc's gosh reed has filed this report on that. >> after a six-month search, microsoft ultimately chose an insider as its new ceo. satya nadella is a veteran of the software giant who has been working here for more than 20 years. supporters of nadella said he was the best choice. his background will help microsoft maintain momentum in the commercial side of the business. there are concerns about nadella, including how he's fix the major sides facing the company. >> i don't think this addresses the biggest challenge, which is consumer, whether it's consumer devices, consumer businesses or consumer software. consumers are looking to apple, google, and companies like samsung for those types of products and services. >> analysts say nadella either figures out how to win in the consumer space or exit those businesses. another worry, nadella has run various business divisions, buts has never worked as a ceo. >> i think for satya, not having been a ceo and stepping into what will be a 130,000 person company it's going to be a work in progress for a while ramping up. there's so much for him to accomplish strategically and operationally. >> bill gates will step down as chairman and into a new role as technology adviser. john thompson will assume the role as chairman. his record is mixed as ceo of semantic, he grew revenue ten fold, but oversaw the controversial acquisition of veritas in 2004. as for steve balmer, he remains on the board, at least for now. one issue for nadella, will he have room to operate as the ceo or will gates and ballmer try and dominate the board room? can nadella help transition to a company focused on technology? we'll soon find out whether he has the ability to take on the many challenges facing microsoft. josh lipton, cnbc, silicone valley. joining us now, danny, good to see you. it's an interesting one that with gates and ballmer still on the board whether, in fact, nadella does get the free reign that new ceos need. i'm just thinking of manchester united. alex ferguson stepped down, but he's still there looming over the manager who is not having an easy time of it. >> yeah. it feels like he has a short leash, to some extent. this is all part of the startgy with picking a core insider. the company looked for six months around the world and ended up pacificing some down the hall from steve ballmer's office. i think this is one that's going to be a slow step into the strategy, but with gates as the mentor, that's sort of the role, especially with him stepping down from chairman of the board. >> is it the right thing for the company? nothing radical is going to change, is it? one presumes. but it's going to be more gradual. but if you brought in an outsider, it would be somebody that could have a completely new look at the company. >> yeah. i mean, look, when this whole thing started, i mean, you were looking for the home run candidate, the outsider, new blood, a white board with nothing on it. instead, they went with an insider. again, you went for the home run pick, i'd call it a single or a double at best. that's kind of the issue here is that you feel it's going to be more of a status quo, is he going to operate it like we've seen in the next decade or is he going to have a new strategy with an outsider? i think that's the issue investors want to hear from him. >> daniel, what about the likelihood of more share buybacks here? i know they have the program, but they want to see more cash back, don't they? too much sitting on the balance sheet. >> yeah. especially with value act on the board. i mean, i could see more buybacks, you know, increase in the dividend. but again, the core issue here, it's about growth. the vast majority of revenue exposed to a pc environment which remains very sluggish. again, nokia's $7 billion they've spent, they really need to turn that around. they need to turn the tablet strategy around. that's been very underwomening th thus far. >> thank you for joining us, daniel. we have to move on. the january adp report is out at 8:15 eastern. forecasts call for an increase of 193,000 in private sector payrolls following a right of 238,000 back in december. we've got kevin evans from hinderson global investors here. kevin, what should we be expecting here? if we look back at the ism data we got earlier this week, the employment component was quite worrying. it's a risk here. but payrolls later this week in particular has impacted a gain by the weather. >> yes. and we certainly got that weather impact coming through in a lot of the data we're seeing right now. it's very hard to extricate what might be a small slowing in the economy. our view is that actually the u.s. economy will continue to make progress. it was doing fantastically well in q4 last year. so to come off the board a little bit is that that surprising, actually. that's probably weather related. >> yeah, look. it's amazing to look at the deals done at 2.58%. is that -- can we go lower than that? >> well, we can. we can and we have in previous times. but we think that -- >> yeah. the cycle. >> we think that we can go a bit lower if we get some soft data coming through, down to 250, below 250 to 240. but to go down to the 160s, 170s is unlikely. >> jobs number this friday? >> 245 is not impossible. >> what string of bad data would it take for the fed to pause tapering? >> it would take a really bad string of data. payroll numbers, a hundred or below on a kind of consecutive basis. i think the fed are very much set out that they're on this plan of tapering and they want to be very clear to the market they're on a plan and the taper process will have finished by the end of this year and it's going to take an awful lot for them to deviate. >> what about credit markets here. i know you invest in credit markets in particular. i had a couple tell me yesterday they feel quite fragile here. >> credit markets have done better than equity markets during this latest setback we've had. if you look at the movements in credit spreads, they've backed up a bit, but nowhere near to the extent the equity markets have backed off over the last three or four weeks. so credit, we think it's ongoing demand, definitely demand from investors who have no alternative from the near zero interest rate from their bank account. so that demand is still onbog. actually, the fundamentals of credit is still pretty good. companies are still generally in good shape. so credit is good, but it's not as stunningly good value as it was. >> kevin evans, thanks. great to have you. quickly look at the futures there. >> "squawk box" up next. [ male announcer ] first the cookie at check-in... then a little time to kick back. earn double hilton honors points with the 2x points package and be one step closer to a weekend break. doubletree by hilton. where the little things mean everything. good morning. welcome to "squawk box." the adp report is on the way with the government's employment data just two days away. at&t becoming the first olympic advertiser to protest russia's anti-gay laws with the opening ceremony set for friday. if you're just waking up in the new york area, better get your shovel. another snowstorm causing commuting havoc with me this morning. it is wednesday, february 5th, 2014. "squawk box" begins right now. good morning and welcome to "squawk box" here on cnbc. i'm sara isen along with andrew ross sorkin and steve liesman. becky quick and joe kernen are off today. we'll see them on friday live from pebble beach. wall industry rebounded yesterday given a boost to stocks in asia. the nikkei in japan closing about 11% higher. chinese markets remain closed for the lunar new year holiday. hong kong benchmark hang seng index finished lower following choppy trading. in europe european trading, we are seeing pretty mixed stock. the ftse 100 over in london, a little higher. 0.3%. not much movement, though. among the catalysts here, data showing output in the eurozone in the economy there, expanded at fastest pace since june 2011. a quick check here on u.s. equity futures early this morning. set to open just slightly lower. a rebound in yesterday's trading. today's big test for the markets is going to come from a jobs report. the january adp employment report.