good morning. welcome to "worldwide exchange." we have two hours together. right now on the wires, we are just looking at the ecodata hitting. and just a note from my producer, my wire has just gone down, so we are looking at the german business climate falling for the month of august. revisions to july indices are seen as well, but the expectations index coming in at 101.7 for the month of august. the consensus forecast was for 102. so the expectations index a little bit light. they are stating no revisions to the july indices. and again, the expectations index coming in just slightly light. current conditions, 111.1. which means that we're also looking at that particular reading being a bit light as well. not by much, but we are still seeing a bit of a drop there. let's talk a little bit about the markets. we are seeing the euro/dollar at 1.31, just shy of where we have been the last few sessions. down the line we are at the hag hague. good morning this morning, how are you? >> good morning. how are you? >> we are doing well here at the beginning of the week with a bank holiday in the u.k. we have economic data, inflation data out, later this week housing data, what are you looking at and where are you taking your pointers from? >> well, i think you pointed to the iphone which is an important data move, but it is not well within the range of expectations. so it is mainly what policymakers are sending for a new signal. we got the news about the french government this morning. we are still digesting, especially mario drugge's speech and what the direction is for the future of the ecb and the possible consequences to be a bit more flexible on the fiscal complex in europe and whether or not they are seeing shifting tides there. i think that's the main thing to focus on right now. the picture is looking bleak. the underlying european economy is largely digested by the markets. >> i think drugge's comments over the weekend are very interesting. he was talking about a decline seen in short, medium and longer term inflation expectations. he indicated that would be noted somehow at the september meeting, september the 4th is when the ecb meets next week, do you think we're in for maybe some surprise tools coming out of the tool box from the ecb earlier than anticipated? >> well, i'm not so much thinking surprise tools, but if he talks about that, he clearly pointed to the fact that if expectations get sort of out of sync of where the ecb wants to have them there, is a reason to act further and more aggressively on the policies. i don't think he'll introduce new ones but obviously the market is not going to blame, whether it is an escrow program but better sovereign is getting better. and if inflation heads toward zero, it is difficult to escape that move. so the market will be considering the timing of moving to qe for the ecb. >> so what do we do with the investment prospects in the meantime? >> well, i think still we need to realize that risks are attractive in markets. and even that with ten-year yields in germany below 1%, generally government bond curves are not very flat. so even in the bull market there's still a risk out there, let alone equity price is still attractive. so i would still consider a risk on stance, especially real estate and maybe commodities because the big risk out there which now markets are a bit more comfortable about the geo political accommodations getting out of hand as well as commodities. the softer numbers from europe are not enough to really become very negative on the global growth outlook, so there's enough growth to support this, i would argue, and enough qe to support the bonds. >> okay. you are going to be staying with us to talk about real estate commodities later on in the show. we'll get more analysis. come on back and we'll chat a bit more. in the meantime, french president hollande announced that the prime minister has submitted his resignation. he said the new government will be presented tomorrow, on tuesday, this coming a day after the french economy minister has called for alternatives to the german-led austerity stating the deficit reduction measures are chipmenting the economies across the eurozone. stephane pedrozi is joining us next, stephan, good to see you. we have a new government to be presented tomorrow. >> we are expecting a strong reaction from the prime minister after the comments made this weekend by his economy minister. over the weekend the economy minister called for new policies and openly criticized the chairman's obsession with budget discipline. yesterday the prime minister did say that the line had been crossed and this morning all the french media were speculating about the replacement of him. nobody was expecting the whole government reshuffle. so what is the procedure? the prime minister has presented the resignation of the government to his president, francois hollande. he would like to present a new member by tomorrow afternoon. it is not reaction to what the economy minister said this weekend officially. the team will be adjusted to reflect the new direction that was set recently by francois hollande last weekend. the president called for the government to speed up economy reforms, to lift the country out of stagnation, but he made clear that it would not change its economic policy. the government is going to implement $40 billion euros in tax reduction for business to improve and create jobs. on this policy, it has been openly criticized by the left wing of the socialist party because it's a gift made to companies. at the time french people have to make efforts to reduce the deficit. >> thank you very much for that. and we'll check with stefan later in the show. still with us, are you concerned about the overhauls that still need to come from the french economy? >> obviously we are concerned by that. almost everybody is in the financial markets. and the main discussion is not so much whether or not things should happen on the reform side in france, but whether or not the lack of reforms pulls and immediate danger for growth out of financial stability in europe. i would say that probably they do not post a danger but they create a very firm hatwind on the medium term to france as a consequence for the european region. and that's a problem and needs to be addressed, so maybe this change in government can help a little bit here, but i think caution is justified in the reform side for france. a lot of people still concerned about france as you indicate as well. still concerned about some of the periphery markets despite the fact we had seen stabilization and now it seems more of the rockiness at least when looking at some of the overall data is coming from core europe. is europe still in for -- is there still a chance that europe could outperform this year? we keep hearing how u.s. evaluations look stretched and we have seen outperformance stateside and it was europe's turn this year, but has that changed? >> for us it has changed. over the summer we have moved europe from the open position on the equity side, for example, to being underwait. now from an evaluation perspective, there are opportunities there, but it is just a combination of factors weighing on europe. i touched upon geo politics earlier. obviously europe will be impacted mostly if the crisis with russia escalates again. and also the growth numbers are showing very clearly, but at least for now the momentum in the recovery in europe has faded. that's not so much to argue that i think we really move back to a recessionary environment. i do think later on european growth will strengthen again, but the combination of the two factors and the remarkably stable downslide in inflation in europe has shifted our minds and therefore the next couple of weeks or months we see other opportunities if you think about the region to invest in globally. >> so what would you be buying at the moment then? >> so within equities, like i said, we are still overweight equities and real estate commodities. within equities, we prefer japan, emerging markets. this is clearly more the destination that investor flows are now moving. and europe is actually our least flow region. meanwhile, also in commodities and real estates, big opportunities are there. also be cautious of the european exposure, but remember that a lot of the real estate markets are now supported by a very low level of interest rates. and that also it translates to persistence that we tend to call a surge for yield, sort of dynamic or sentiment in global markets. and real estate stands out quite attractive and still has a decent rental yield comparing to what you're getting on fixed income yields. that is really attractive and as long as we don't move into a sharp contraction again in the global economy, these flows will continue to go, to come. >> it's all hinging on that, isn't it, as usual. good to see you. are you having a chance to enjoy your summer as well? we are in august, it's supposed to be a vacation. >> obviously i try to do that. and i was lucky and unlucky in a way. i went to france, corsica. i had a beautiful summer, but the day i got back the russian crisis escalated. so my sense of holiday is long gone. >> it's timing for you, right? that's the way it always happens. it's like it always rains two minutes after you're done with your day, right? a beautiful day all day long and then it rains when you go home. anyway, we'll talk soon again. lovely seeing you. get involved, worldwide@cnbc.com. that's the e-mail address. worldwide@cnbc.com. the other address is the afternoon show. you can also find us on twitter directly, i see a number of you with us already. charles, good that you're with us. he says he has time now to go make a quick cup of tea and get comfortable in front of the tv. the perfect thing to do if you're watching from the u.k. where it is terrible weather outside. terrible weather in london. i just want to mention that we just had the ecodata come through on the wires. it was weaker than anticipated, but the current conditions and the expectations as well. and the economists from the world harbor are stating that they expect third quarter german gdp growth to be close to zero. he's also saying germany is far away from recession but they are looking at growth being close to zero. he is stating that the auto and chemical industry may have been the recent bright spot seen in the german economy. coming up here on "worldwide exchange," another monday where we discuss roche's $8.3 billion dollar bid for intermoon. and just talking about the real estate sector. positive underlying performance could suggest the real estate is an equity alternative in the search for yield. and we trade the tape of a different sort as we take a walk down the road to investigate a famous tailor's pivot toward the east. but before we do all of that, helpful just to check in on the markets and what we are seeing. here in europe we've seen a bit of a positive start to the week. we have no trade coming through from the u.k. today due to a bank holiday. but by and large we have seen just a couple of points gaped on the vast majority of the european equity markets. out there, very light volume, very light volumes. when it comes to what we are seeing in the debt markets, a little bit of selling in the u.s. treasury yielding 2.4%. while yields are pushing lower here in europe over the gilt below the 1% trade level. currency markets, you have the euro sitting tight right around a one-year low against the green background, just shy of 1.32. it goes back to the drugge comments over the weekend from the jackson siymposium. that's how some market participants are receiving the comments. he was talking more about inflation, the lack of inflation in europe. and we get the flash data through on friday this week as we look at a forecast of .3% reading slightly lower than the .4% reading we had previously. we'll look at what's taking place for inflation this week gearing up to the meeting on september 4th. let's move on. the european markets, i did indicate the positive territory. that's what you're seeing here somewhat higher between half a percent and 1%. now, rush has agreed to buy intermune for $8.3 million. the pharmaceutical giant will pay $74 per share in the all cash transaction. news of the tie-up sent shares in chugai farm supharmaceutical by 9%. there are also reports that roche will no longer increase its stake in the japanese firm to 100% ownership. there was speculation about that. cnbc spoke to the ceo of roche shortly after the deal was announced, severin schwan. >> we are very excited about this opportunity. i would say it's perfect, actually, from many dimensions. and roche will benefit. >> the deputy editor of biopharm is here, surani fernando, what do you make of this deal? >> a lot of people were expecting something to happen with the companyies with the exploration of the sale of the company. there's been a lot of positive results here for them this year. so we were expecting something to happen here, but i think the value, 8.3, that's a pretty big deal for intermune and shareholders will be pretty happy. >> so what does roche want? what's the strategy? >> well, i think the deal is primarily about that one drug. that drug is, has a pending approval in november, and it's really a drug that is going to serve a rare fatal lung disease, which is really hot in the states in terms of other companies going after different assets to cure this or to treat this disease. these will probably really help roche grow in pulmonary disorders. they have some drug that is are treating some disorders and they are going more to that base on that need. so roche is getting in there before approval is expect ed to come out. >> there are reports that roche potentially or speculation that roche is looking to increase in the japanese pharmaceutical company, but now we know that's not the case. do we get out of this company and think somebody else is going to come along and snap it up? >> well, i don't know. i don't know if the company has completely dismissed it. i think a lot of the talk has been interested in sort of acquiring the rest of the stakes or not. in terms of the synergy there between roche and intermune, paying that amount would be less of a risk than if another company would come on board. but obviously they have been a bit of a target over the year and we could see a custom company try to get into the base. >> surani, thank you for being with us, surani fernando there. we are just getting flashes through on the wires in regards to what's taking place in ukraine. the russian foreign minister lavrov has stated that russia told ukraine it intends to send another aid convoy into the country, into ukraine. we saw the first convoy being allowed through at the end of last week and according to lavrov we are looking at another aid convoy heading there. coming up here on "worldwide exchange," who will come out on top at the emmys? we preview the awards and ask you, who do you think will win the red carpet event? stay with us for that. more to come here on "worldwide exchange" with a full morning for you. strategy and analysis coming right up. where the reward was that what if tnew car smelledit card and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits. so every time you use it, you're not just shopping for goods. you're shopping for something great. learn more at buypowercard.com welcome back, everybody. in asia, we are looking at slightly mixed markets. the nikkei and hang seng pulling up a tick, but the others are slightly lower. michael, good to have you with us joining us from asia. i'm interested to get your take in what you think is taking place in the markets. in europe we closed pretty stellar gains last week despite the fact we've had all the nervousness surrounding data and politics. stateside we are hitting new highs as well. what's your read? >> yeah, i think the asian markets are responding very appropriately to the fact that underlying the news we got from the federal reserve last week is an increased confidence in the underlying demand recovery in the u.s. and the job recovery. that ultimately means wage inflation, but one person's wage inflation is another person's household income, and that household income translates to more american consumption of the things asia produces. so there's uptick in risks, particularly over the weekend with the political risks we are all watching, but asia comes in monday morning to decide the situation is actually perhaps slightly better than it was a week ago. >> you say wage inflation, we keep being told, michael, there's no wage inflation and also we keep talking about inflation but looking at the figures. they are still telling us inflation is very much capped. >> yeah, i think the best way to interpret both the fonc minutes last week as well as janet yellin's commentary is to say that the fed now sees an increasingly normalizing market environment. that doesn't mean that wage inflation is raging yet at these levels, but it does mean that we can increasingly project with some confidence that as the u.s. economy continues to expand incrementally, we'll get to the point where, as you would expect under normal circumstances in an economic recovery cycle, you'll see more bargaining power in the labor markets and therefore some pick up in compensation for u.s. workers. it is useful to keep in mind that in the recent second quarter labor cost index data in the u.s., we did see a significant pickup in the quarter over quarter rate of wage and salary growth to 0.6% sequentially from 0.3% in the first quarter. and that is a substantial pickup in the sequential growth rate in labor compensation. >> michael, we've got a break coming up which i have to hit, but i just want to get to the actual trade because you think they are emphasizing the emerging market trades, which ones? >> well, the idea here is that it's a double-edged sword. you've got pickup in u.s. growth on one hand but it comes with a rise in treasury yields and u.s. interest rates on the other hand. so you want to go into those emerging markets where you get the best leverage to u.s. demand growth, and that will be through the export intensive economies, but the least negative exposure to the rise in dollar funding costs means avoiding the current economies or the economies with very high domestic yield environments. in asia that puts us into markets like korea and taiwan. makes us more weary of markets like several of the southeast asian economies. and also hong kong where you've got that direct link fed policy through the hong kong dollar peg. >> are you a suit guy? do you like tailored suits? >> i do, indeed. this is the only kind of clothing that makes me look halfway presentable. >> it's amazing what a good cleanup in the clothing can do for all of us. michael, thank you very much. global head of equity strategy, you're perfect just the way you are. don't change anything. chinese businessmen no long very to make the journey to london for a 4,000-pound handmade suit because the top tailors are bringing their spokespeople to beijing for the first time. will the move pay off, though? good morning, you're watching "worldwide exchange." >> it's a little exciting but a bit daunting in others. >> not always the best fabric which we can supply, which is quality. e cadillac summer collection is here. ♪ ♪ [ male announcer ] during the cadillac summer's best event, lease this all-new 2014 cts for around $459 a month or purchase with 0% apr. hurry in -- this exceptional offer ends soon. you are watching "worldwide exchange" bringing you business news from around the world. >> you are, indeed. good morning, i'm louisa. the economy is indicating strength and a sluggish third quarter start. and france's president is handing in papers saying a new administration will be presented tomorrow. and roche betting $8.3 on u.s. firm intermune. and there may be no solution to you crain's crisis before the prime minister meets russia's putin later this week. ukraine is celebrating e independence day, but captors are there in doneske. good monday morning. it is very quiet and rainy in london, but we are looking at the remainder of the european market trading in positive territory. xetra dax is up 1.16%. it may just be to what mario drugge hinted to over the weekend because the head of the european central bank is raising the prospect we could be looking at some type of an easing mechanism as early as next week, before september is when the ecb meets next. so that's how his comments are being interpreted. we'll talk about that in the remainder of the show. in the meantime, the bond markets. we are just looking at the treasury yield for the ten-year in the u.s., 2.4%. germany and the u.k. and italy, south of 1% now for the german ten-year. the currency markets, the euro sitting at the lowest level in approximately a year against the dollar. shy of 1.32 in trade. dollar/yen, 104. a lot of the focus is now on the next hike moves to come from the bank of japan. now, the california governor jerry brown has declared a state of emergency after an earthquake shook northern california with a magnitude of 6.0. it's believed to be the biggest in the region in 25 years. nbc's leann greg is joining us now with the latest. leann? >> reporter: louisa, this morning the cleanup is underway and officials are going building to building to try and -- excuse me, to try to continue to assess the damage. it's still just getting underway. as you mentioned, it happened at 3:20 local time in the morning on sunday. people were sleeping. it literally rocked them out of their beds. dozens of buildings were damaged, including this one behind me. it's a historical building here in downtown napa. more than 200 people were treated in local hospitals. six people were critically injured. the conditions of all but one of those have been upgraded. so far 33 buildings in the downtown area have been red tagged, in other words, that means they are uninhabitable. so still much work to be done today as the cleanup and damage assessment does get underway. louisa? >> leann, thank you very much for that. leann greg joining us live from san francisco. now, rescue efforts in japan to find the 38 people still missing following a landslide that left 50 people did is hindered by is heavy rain. the residents who lost their homes in the disaster started applying for government housing. the city has offered 157 apartments for free. japan says it could offer an unapproved drug for treating ebola if circumstances call for it. the world health organization has not yet made the request but the country's chief cabinet secretary said doctors could call for the use of the t-705 drug in the event of the emergency. its makers fujifilm holding are in talks to approve the use of the drug for treating ebola. and sony's playstation network has been attacked again by hackers bringing down its online distribution site for games, music and movies. in related development, the plane carrying a top executive in the u.s. received bomb threats and the flight has been diverted. mikiko is live from tokyo with this story. makiko utsuda? >> yes, they say the site is inaccessible as of sunday evening. and it is relief that in short, no users information has been compromised. the fbi is investigating an american airlines flight on sunday carrying the sony entertainment president john smedley. the plane was diverted from the original destination due to a bomb threat by a hacking group named lizard squad. they said on their twitter account said it was meant to pressure the firm to spend more profits on online security. the same group said they also targeted the servers of another video game maker called blizzard entertainment whose website was down and also threatened to attack microsoft online game service as well. sony's gaming network has suffered a similar attack in its online service in 2011 with over 100 million users' information breached. since then, the firm has taken steps to strength tennessee network security. that's all from the nikkei. back to you. >> makiko, thank you for that. we'll look at what is on the agenda for asia tomorrow. china is kicking off the troubled airline sector in the region. we will be getting an idea of how china's flagship carrier is doing after the rivals issued profit warnings earlier this month. also reporting on tuesday, china's third largest lender is facing scrutiny for a rise in underperforming loans. now the french president hollande announced over the last hour that the prime minister has submitted his resignation. the president's office said a new government will be presented tomorrow on tuesday. the senior manager of global corporation is joining us, franco francois, what does this mean for france now? >> well, i do not believe there will be any real changes as such. yes, there will be change in terms of minister of economy, quite likely. what happened over the weekend, you may recall that the minister of education decided to complain somehow about the government policy. so clearly there's been a very strong reaction from the president and the prime minister to change the government and potentially to exclude mr. mu mumbai and others. i think they will still be aiming at the same target, i.e. cutting the budget deficit down to close to 3% by 2015. >> do you worry about the performance of the french market for the rest of the year? some saying separate to the government changes, but some stating we still need to see a clearout of the french market based on legging reforms. >> to be totally honest, i do not believe there will be a major difference between the performance of the french market and other european pie peers. now the clear issue is growth and how to stimulate the european economy. somehow the release of the weaker iphone than expected is good news because you know that the germans are quite reluctant in trying to stimulate their economy with that kind of iphone. they may be deciding on further positive measure toward the economy. and french is very dependent on what the german decide and overall what will happen at the european level and not so much at the french level. the only thing that the germans are asking is for the french to continue to control the budget deficit. and i believe mr. hollande's commitment there is very strong and will not change. >> francois, where do you see value at the moment? what other prospects for the european market for the rest of the year? >> well, somehow i believe at this very short-term that we could get a nice rally. what mr. dragge has been saying and obviously the consequence on the dollar, which is extremely important. because if the dollar continues to strengthen, which is our scenario, it means an addition to potential growth in europe. right now we all know we are looking for flat economy growth toward 2014. and a slight improvement in 2015 if the dollar continues to strengthen. then we have the potential of maybe aiming at over 1%. why not toward 2%? that's extremely positive. meanwhile, and very short-term, i believe there's a potential for a sharp recovery on markets, i.e. recovering the level we have seen at the beginning of july, which is from current levels. the potential of 3% to 5% in the very near term. >> okay. and how much of that potentially has to deal with what the ecb's next moves are, especially looking at drugge's comments over the weekend indicating that we could be looking at more tools out of the tool box earlier than anticipated? >> that's obviously a key element and could be very strong positive. should it decide for somehow to be quantitative easing at the level, it should be take up extremely well by the market. there are signs it could do so, obviously the figures on economy growth and obviously the fears of the figures of inflation that we would see deflation. and last but not least, the geo political situation in ukraine and potential risk in the middle east. all that means is that we need to inject more liquidity into the market to secure some kind of growth. so dragge's measure could be a strong trigger for the european markets. >> and how are you, francois? are you enjoying summertime this year? >> yes, somehow i would say so. obviously, the geo political concern is a strong negative, but other than that, i believe the prospect is extremely good for the european market. >> francois, good to see you. joining us from kepler. the acclaimed actor richard attenborough has died at the age of 90. he was director and producer and won two oscars for historical epic "ghandi" starring ben kingsley. good morning, everybody. welcome back. iraq's prime minister says that international efforts are needed to push back islamic state militants. the comments came during talks in baghdad with iran's foreign minister who said that tehran would continue to stand by iraq's side during the insurgency. their meeting came as britain's ambassador to the united states told nbc's "meet the press" that intelligence agencies were close to identifying the murderer of journalist james foley. >> i think we are close. i've been in touch over the last day or two with my colleagues at home. we are not in a position to say exactly who this is, but there's sophisticated voice technology and other measures we have got which should allow us to be very clear about who this person is before very long, but let me underline, it is not just about one brutal murderer. there are a whole lot of other people and hostages under threat, as you have just been mentioning. we think that it's probably as many as 500 people from the united kingdom have gone to join jihad, gone to join isis, so we are focusing our efforts across the board on how to counter this terrible threat, as my foreign secretary said this morning, in a betrayal of everything we stand for. and on to breaking news regarding iraq, they say that talks on the new government are constructive and that hopes for a clear vision on a unified program, they assume they will be getting that within two days. that coming from iraq's new leadership al abadi. and hadley is here to talk about what's happening in the middle east. iraq is calling for global action to combat isis but this is going to be ongoing. >> absolutely. we have seen the response in the west to the tragic events of the death of james foley. the response has been a flurry of what are we going to do next? we know that the air strikes alone can't combat this terrorist threat. and it's very interesting to watch everyone peddling as quickly as possible. dave cameron as well leaving vacation coming home to decide what is the next and appropriate response. but really the administration in washington seems to be playing catch-up. rumsfeld talked about the unknowns, what we don't know, we always have to expect the unexpected. but it is not like u.s. intelligence failed here. we knew isis was a problem but it feels like the administration is running from behind. >> and a lot of pressure on president obama from the republicans. >> and from his own party because people are worried now. we are finally getting recognition in the west about the fact that the people have american and western passports and can come back easier. on "meet the press" congressman foley was just saying they are one air flight away from making this a problem here at home. one air flight away. so certainly there had been much more concern, i think, in the ongoing days from western leaders on this. >> hadley, thank you very much for now. we'll speak a bit later as well. i just want to tell you what's taking place in the middle east and geo politics and move into the market. we are joined now from frankfurt. you published a piece called "why the oil price is falling in spite of geo political tensions." i was looking at it, why is the oil price falling? >> well, good morning, louisa. it's very easy to answer. the market has been extremely pragmatic in this -- there might be some danger for the supplies from the middle east, from iraq, from libya and other countries, but until now those three failed to lead to any significant slowdown in exports from this area. quite as often are the exports with increasing supply from china and europe. so the market has been extremely pragmatic and the speculators keep cutting inflation in effect with their positions and bets on higher prices. >> what's the significance of oil markets being contained now and how long do you think it's going to last for? >> oh, it's very significant and definitely what is really interesting to see. the market is reacting to the current geo political situation, but probably not the longer term futures say with delivery starting from 2020. those increased over the course of this year by 20%. so definitely there is a danger for the longer term supply. there is a danger for the mission investments in the russian oil production in the oil production in iraq, but for now the market has been probably relaxed and we are looking forward. that's why we see the contained with the upward movement for the next month. if the market is very well supplied at the moment but there is dayer in the future. >> so where does that leave us for a target price? how are we closing out the year, do you think? >> we are staying at probably lower prices but staying at the price above dollar for longer than was expected before. and i think the danger at the moment, the risks at the moment are not to the down side. the down side risk is limited. the brent oil prices could fall further, but the risk of this on the up side if some of the risks realize, but until now the market is very complacent in looking very, very comfortable in the future. >> so when putting it all together and also in looking at fed and ecb strategy at the moment, what happens if we do get some type of cut from the ecb or some type of aid to european markets from the ecb earlier than anticipated? how do you think that's going to translate through to commodities? >> i am asking myself how long should it take more for the investors to look at the commodities yet again. it's a new investment class of its up. it doesn't correlate much to the equity market. it doesn't correlate to u.s. dollar anymore. so i think that those kind of steps by the ecb are likely to provoke reaction from the investors and for the investors to move again back to the commodities, which will be helping the oil crisis and other commodities alike. >> good to see you. thank you very much for being with us. the head of commodity research joining us live from frankfurt there. now once the home of britishbritis britishbritish tailors, they are bringing direct services now to china. we took a trip down the street to find out more. >> reporter: london's savile row has more than 5,000 miles in beijing, but that does not stop them from coming here to bring back the famous suit with a starting price of well over $6,000. while the tailors of savile row are making note of the trend and are pushing into the chinese market to date. henry pull and company opened its doors to the tailor of the military company. they count winstop churchhill among their famous clients. and now they are boosting their presence in china. i spoke to the sales manager straight off the back of his latest trip to beijing to ask why they are bringing the spoke services direct to the mainland. >> what we are now trying to offer them is the option of doing fittings out in our shops in beijing. hopefully it will be beneficial in the sense that it will at least allow us to look after our customers out there far more easily than we can if we are waiting for them to come back here. otherwise it just lengthens the whole process time for them to be made. >> reporter: if someone is fitted in beijing, how long does it take? >> normally it takes 10 to 12 weeks here. certainly for china and beijing, it could be a bit quicker. again, what we are trying to do is in the sense educate them a little bit in the sense that, yes, it does need to take time. it's not a quick thing. they are used to things being quite quick. >> reporter: is there the risk that expanding to china diminishes the brand anyway? >> no, because they have their own labels. we have a london label. and if the suit carries that label, then it is made in london. and that's very important to emphasize. >> reporter: a few doors down this label has yet to make the plunge into emerging markets, but the founder is keeping the door open to china. >> it's a market i think we would love to be part of. we do have a huge spending power and they do like excellence and like comfort in cloth as well. so it's and influence we must all address. >> reporter: there's no denying that lop london's top tailors are emerging to meet every customer, but here the challenge going forward is how to main taint this unique craftsmanship to make this district famous around the world. >> tailoring is taking place both east and west out of london now. what do you think? do you like to get your suits tailored? do you pay 4,000 pounds for a suit? let us know on twitter and e-mail, worldwide@cnbc.com. there's something nice about being fitted for clothes, right? because they fit, basically. there's speculation that macy's is close to signing a deal in china. womenswear report that is the publication didn't cite sources on that. so macy's in the close on friday up by a shy of 2%. looking at the u.s. futures heading into the short break, we've got a couple hours to go before the open of the u.s. markets. we have been going just a couple points higher. there across the board, we have light volumes in europe. no trade in the u.k. due to a bank holiday. we'll be back with a second hour of "worldwide exchange" in a second and i look forward to seeing you then. good morning. welcome to "worldwide exchange." i'm louisa borjeson. the french government resigns. the prime minister is handing in papers to france's president saying the new administration will be presented tomorrow. roche betting $8.3 on the u.s. bio technology firm intermune in a cash deal both firms agreed on. and after being held captive in syria for two years, the terms of his release are unclear as no ransom was paid. >> you're watching "worldwide exchange." bringing you business news from around the globe. hi, everybody. welcome back to the second hour of "worldwide exchange." if you are just joining us, fantastic stuff. we are glad you are with us. just glancing at what is taking place in regards to the future and the indications of the open stateside, we have four-and-a-half hours until the u.s. markets open. the dow, the s&p 500 and nasdaq numbers are here. on friday we saw a negative close but managed to see rallies across the board for the european markets last week. and overnight, we've had a pretty lackluster session in asia, but not really following through here in europe as stated with gapes seen also here in europe this morning. speaking of europe, we'll just show you that. you can see across the board, i'm not lying to you. the dax is higher by 1%. 9448. in regard two the current situation and with regard to the business, the cac is up by a percent or so. and the smi is higher by .30%. and the euro/dollar is at 1.3197. i was looking at what was stated over the weekend at the jackson symposium, interesting comments. if you read between the lines, like the market is doing, it is basically looking at the comments to say they are raising the prospect of easing as early as next week. they did use stronger language, or mario drugge used stronger language when he talked more on inflation. so that is driving the markets today. the world's second central bank or two central bank heavy weights spoke in jacksonville, wyoming, this week. the fed chief janet yellen is weighing in on the respective markets each with a contrasting message. steve leesman has the details. >> reporter: janet yellel and mario drugge addressed this in jackson hole speaking of growing differences in the interest rate, policies and economies. in fact, mario draghi made a strong appeal to increase their spending and said the european central bank was about to lose two programs to stimulate the economy. yellel said the labor market in the u.s. is approving and gave a summary debate over how much labor slack there is. yellen said if progress accelerating, the fed could move up the timetable for removing stimulus. draghi nor yellen made any promises. the real debate is between raising rates in the spring or summer of 2015. >> i'm holding to the mid-2015 view as the time in which i think the conditions will probably come together to make it a sensible move, but as i just said, and as janet yellen said this morning, if we see strong data that exceeds expectations, it could possibly be moved forward, but as of now i'm a mid-2015er. >> i don't think a little measure hawkish slant has to be bad news for the economy. it mean that is the committee could be more confident that the economy is going to improve in the future and is going to be able to handle the higher rates that will eventually come. >> reporter: a new appearance at the meeting this year was a small group of around ten protesters that urge the fed to keep rates low and focus on unemployment. >> the federal reserve has its hands on the levers of mac co economic policy and we need the fed to know raising interest rates would send millions of people out of work and be a terrible way to try to combat asset bubbles. >> reporter: the conference focusing on labor is looking in-depth at the effects of demographics, fed policy and wages in unemployment. and it may influence policy in the months ahead. steve leesman, cnbc business news. speaking at the jackson hole symposium also was -- well, we have martin here to talk about this, do you think we'll start to see more wage inflation or is wage inflation going to continue to head south, which tends to be the current trend at the moment? >> yeah, we believe that this inflation really is a reality that apart from some specific high skill industries that the corporations are in charge because of the workers. >> so where does that then leave fed strategy? i mean, we are back to talking about whether we should be focusing, not only, but primarily on labor market slack which januariett januaret yelle. the data doesn't show that. what are you focusing on? >> well, the reality is that it's a really old song now. and that's the song of we are in this period of deleveraging, which began after the great recession. and it's a multi-year, actually probably a decade long process. so we believe the deflationary force is such that inflation is not coming back any time soon. the big critical thing is that everyone is talking about is interest rates and interest rates rising. the sort of opinion we have is that interest rates will rise. however, we are simply going to go from an environment where we have negative real interest rates to probably zero interest rates. and that there is a lot of -- still a lot of slack in the system, and we just don't -- we think the economy is still sluggish. >> you talk in your musings about how u.s. stocks currently look quite expensive. and you say it's highly probable they won't be delivering any better than 2% to 3% return above inflation over the next decade. what makes you say that? >> because there are a number of metrics we look at, there's some value line metrics we use, proprietary metrics, but the thing that most viewers would probably be familiar with is the cape ratio, which is the cyclicly adjust ed p.e. ratio which has gotten criticism because it does not play out well to the long-term market thesis, however if the data is pretty inconvertible, if you start with any asset at a very high level of valuation, then the long-term return from that asset will be low. and right now american stocks are trading around 25 times the cyclicly adjusted ratio compared to, for example, singapore at 11 or china, which is around 10.5. and continental europe, some of the stronger economies like the -- well, obviously the u.k. is not continental europe, but the u.k. is trading near 13. trans france is trading near 13. our devout competitors are trading in some instances at half the evaluation of the american stock market. >> i wonder with the u.s. market exposure, you're overweight with the chief market economists as you call them, where in europe would be be buying n particular? >> well, we buy europe in terms of you have the great glamorous stocks of the loreal's of the world, which we believe are expensive but probably worth it as well as some of the great swiss firms and the sgs's of the world and nestles and so forth. but particularly belgium and france, you have small to mid-cap companies, which are trading at eight, nine times earnings pre-cast flow yields of 10% to 11%, paying out high dividends of 4% to 5%. that's where we would be focusing our attention. >> martin, incidentally, did you ever watch the comedy series that took place under world war ii? a very funny comedy series, do you know it? >> i do. i lived in london for nine years. >> we were just reminiscing about it because of your name. he was a really, really old guy there, the resistance guy. a fantastic series. i need to go home to watch re-runs. martin, the chief investment officer and portfolio manager at backyard advisers. although i should probably be saying leclerk if he's american, right? we'll look at today's agenda stateside with the new focus on new home sales data with the july numbers out at 10:00 a.m. new york time. wall street expects a gape of 120,000 units. that's what's happening today. we also have new home sales. durable goods tomorrow and house prices tomorrow as well. on thursday, revised second quarter gdp data forecasted here with a steady 4%. just a little bit of what's coming up, not just today, but over the course of the week. now california governor jerry brown declared a state of emergency after an earthquake shook northern california with a magnitude of 6.0. it's believed to be the biggest in the region in 25 years. nbc's leanne greg is joining us now with the latest. leann, as far as we understand, no casualties although quite a lot of damage, though. >> reporter: louisa, that's right. this is one of the historical buildings in downtown napa tomorrow apart by the earthquake. the state of emergency is in effect. later this morning officials will go building to building to try to continue to assess the damage. right now dozens of buildings have been damaged. 33 have been deemed uninhabitable. more than 200 people were treated at a hospital from injuries suffered in the quake, six critically. however, the kps conditions of but one of the six critical injuries has been upgraded. so that's good news. all the bridges have been inspected and determined to be safe. also, the epicenter, it was six mimes southwest of napa. and the strongest quake in this area in 25 years. so a lot of cleanup and assessment to get underway today. >> leanne, thank you very much, joining us there from the states. we'll look at the other top stories making the rounds today. roche has agreed to buy the california-based company of intermune in the drug sector. the pharmaceutical maker will pay $74 per share in an all cash transaction. the lead product is a drug for treating pulmonary fibrosis, which is a fatal disease to scar the lungs. news of the tie-up between the companies sent shares in chugai lower as they are no longer pursuing the buyout of the japanese company that already owns 60% of the shares. and burger king is in talks to form a new publicly openlist business in canada. the tax rate in canada is less than what is seen in the u.s. a burger king tim horton's merger would create the third largest fast food restaurant chain. now, coming up here on the show, britain's ambassador to the u.s. says the agencies are close to identifying the killer of the u.s. journalist james foley. we'll be talking iraq just after the break. we've also got more with regards to u.s. housing and we'll talk about what's coming up stateside, too. stay with us here on "worldwide exchange." [ woman ] the cadillac summer collection is here. ♪ ♪ [ male announcer ] during the cadillac summer's best event, lease this 2014 ats for around $299 a month. hurry in -- this exceptional offer ends soon. ♪ welcome back. i'm louisa bojesen. a whopper of a deal for burger king as it is circling canada's tim hortons. welcome back. a ukrainian pro-government militia commander is saying 50 armored vehicles have now crossed the border in the process of russia near moscow. most of them are heading for the seapo seaport. we are just getting this through on the wires. another aid convoy is heading from russia to you crain. we saw the first aid convoy through last week and this morning we hear a second aid convoy is on its way. on top of that, when glancing at what's taking place in the debt markets here in europe, granted low volumes. the u.k. is out for a bank holiday today. so all you lucky people that aren't at work enjoying a day inside as it's ferociously raining outside. at least it was a second ago here in london. but yields, across the board, heading lower. german, italian, portuguese ten-year bond yields hitting record lows in today's trade. the bond yield now at spot below 1%. we are hanging on to the lower levels today. an american citizen held in syria for almost two years by al qaeda-linked militants has been freed. he was released after the government of qatar negotiated a deal. relatives of kurtis say although they did know the exact terms of the deal, ransom had not been paid. hadley gamble is joining us to talk about what's happening in the middle east. we have the release of this american having been held for two years. we have iraq as well still on the agenda with iraqi officials calling for more global action. and interestingly i think, too, it seems we have kind of a united front, at least verbally between iraq and iran in combatting isis, too. >> the foreign minister is saying we don't have boots on the ground in iraq right now, but there's a long history of a run-in action over covert in iraq, but there's a major threat from isis. what will be interesting is what the gulf countries decide to do with this. they were talking about not just the threat of isis overtly but the threat at home. for the longest time until april of this year, a saudi citizen can take time off. say i'm going away to be in syria to help my sunni brothers and go fight and then come back, so the saudi government recognized this is a problem. nobody wanted to say that's not a good idea to help those of the same religious background as yourself, but in april they decided this could be a problem. so they stopped the back and forths that were happening, going back and forth to syria. but obviously now the gulf governments are aware even more so there is disaffection at home and they need to monitor it just like we do in the states and the u.k. >> in the u.k. alone, they are focusing on people traveling to fight with isis or against isis in the middle east and that's been ramped up, too. >> it is quite frightening. when you look at the fact that 500 u.k. citizens we know have gone back and forth to syria. at least 50 americans are fighting there as well. and are on the side of essentially isis. it's a big problem. but also, when you look at when we're talking about james foley and the ransom not paid on his behalf by the u.s., they are saying with the latest occurrence, the united states does not negotiate with terrorists. we don't pay ransoms unlike european countries. we know a major source of the financing for isis and al qaeda has come from paying ransoms for europeans, mostly, who have been taken and held hostage. so it's a big problem. >> hadley, thank you very much. and we'll talk soon again. still to come here on the show, something completely different. the property market's safest underlying performance says real estate is an equity alternative in the search for yield. we'll talk housing coming up on "worldwide exchange." find us on e-mail and twitter. see you just after the break. you, my friend are a master of diversification. who would have thought three cheese lasagna would go with chocolate cake and ceviche? the same guy who thought that small caps and bond funds would go with a merging markets. it's a masterpiece. thanks. clearly you are type e. you made it phil. welcome home. now what's our strategy with the fondue? diversifying your portfolio? e*trade gives you the tools and resources to get it right. re you type e*? you'll understand what's happening in school and better support them. the more you know. hi, everybody. welcome back to "worldwide exchange." marcus & milichp say the labor market will support purchases going forward. joining me nice and early is wh hasam naji. is it really that simple that the improving market will bump up the house prices? >> good morning, louisa. great to be with you on the program. it is that simple. and at the same time it's not. the last few months have reaffirmed the u.s. as a global standard for flight of safety and the interest rates have therefore declined contrary to predictions. that in turn is expanding the time period for an accommodating time period and for commercial real estate. coup that wile that with the fa we are seeing this combination bringing about a steady and impressive recovery for real estate and the housing economy in the u.s. >> you say stocks are reaching frothy levels, how are they going to compare with equity markets? >> well, they have really been on the cutting edge of property operations. they have economies of scale. very advanced management capabilities. and they are very strong buyers in the marketplace today as well as developers. so because of the strengths that the industry has coupled with the fact that the market fundamentals look very favorable, we expect the rates to perform very well. there's an interest rate sensitivity factor in 2013, for example, the rates were overly punished because of concerns of rising interest rates. but given the fact that expectation is for interest rates to move up very gradually and in a very balanced way for additional job growth as that materializes, i think they will continue to perform very well. >> hang on one second, hasam. i want to mention that angela merkel, it's her second day of her visit to spain. she's meeting the prime minister there in a joint news conference taking place right now in spain. we are looking at live pictures of that here as we sit on air. hasam, coming back to you and the property market, just compare what we're seeing in residential property to non-residential stateside. is there one that's recovering a lott lot fast her? >> on the residential side we saw the deceleration as interest rates grew last year and we saw amazing price gapeins in las ves and atlanta partly due to a lot of investor purchases and very high levels of foreclosures, which have waned. and that transition from the investor type of an environment to a more fundamentals driven real consumer marketplace brought about a slowdown in the market. we have seen the worst of that play out. we believe now we are positioned to see steady gains in the prices and sales activity for the rest of the year. the commercial real estate on the other hand has been on a steady gain since 2010. because prices adjusted and the 5% to 6% range on average nationwide, across multiple types of properties, has attracted a lot of investors. mainly because the financing has become a lot more available. construction is very, very limited. and along with the job growth, we have sbeeen a very good retu of occupancy gains. >> hasam, thank you for being with us. thank you. still to come here on the show, russia's 8.3 billion buyout of intermune gave the swiss drugmaker a shot in the rm a. we'll discuss that after the break and bring in more on the press conference taking place between angela merkel and the spanish prime minister marion lahoi. and it doesn't even fly. we build it in classrooms and exhibit halls, mentoring tomorrow's innovators. we build it raising roofs, preserving habitats and serving america's veterans. every day, thousands of boeing volunteers help make their communities the best they can be. building something better for all of us. ♪ thank ythank you for defendiyour sacrifice. and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. hi, everyone. welcome back to "worldwide exchange." i'm louisa bojesen. and france's president says a new administration will be presented tomorrow. and roche betting $8.3 million for intermune in a cash deal they both agreed upon. and ukraine is celebrating its independence day but military members are still prominent in donesk. >> welcome to "worldwide exchange." we are bringing you business news from around the globe. thank you for tuning in. i know it is very early if you are just switching on in the states. here in europe we have a day off in the u.k. it's a bank holiday, so no trade in the u.k. our u.s. markets, the futures indicating that u.s. markets will be opening just a couple points to the up side. so continuing on that long-standing round of gains we have had recently, but that said here in europe our european markets seeing very low volumes but still trading higher across the board. we are flattish to a bit higher as we look at the markets up by 1%. but again, very low volumes and no trade out of the u.k. still deals to talk about. roche agreed to buy intermune for $8.3 billion. the latest in a string of mergers in the sector. the swiss pharmaceutical said it will pay $74 per share in an all cash transaction. the lead product is a drug for treating pulmonary fibrosis, which basically is a fatal disease to scar the lungs. megan terro spoke to the ceo of roche shortly after the deal was announced. >> i am very excited about this opportunity. i would say it is a perfect fit, actually, from many dimensions. and we all look very much forward of bringing intermune and roche together. >> we are now joins from cnbc headquarters with more on this deal. meg, good morning. good to see you. what does this deal mean for the sector, in general? >> well, the idea is we have been seeing a ton of deals in health care, but they have been driven by tax inversion. when u.s. companies are buying companies overseas in order to lower their tax rate. this has nothing to do with that. this is the return to the traditional company buying a big pharma. what you tend to see with the deals is much higher premiums. this was a premium of 38% for intermune from where it closed on friday. and lists said it was a little higher than they expected, but that could have been the result of a bidding war. there were potentially several parties interested here. and the drug for the pulmonary fibrosis, there's nothing on the market here, so it's a big opportunity. a analysts believe this could bring in a billion dollars. this affects 100,000 people in the u.s., this disease, so it's a big need. this is a return of big pharma buying the traditional business, so it has nothing to do with taxes. >> thank you very much. we appreciate it. we just need to get you a look at what is taking place on the agenda in the united states. the big focus is new home sales data around 10:00 a.m. new york time. wall street is expected to gain 406,000 new homes since june. the 2014 emmy awards held tonight in los angeles in the drama category, "breaking bad" is facing off against "game of thrones," and "house of cards," and "madmen" and "downtown abbey." "veep" and "louie" are in the new category. have you seen any of these? i haven't yet. who do you think should win? join us at worldwide@cnbc.com. it's always a good thing to watch cnbc. we'll look at the other top stories making the rounds table. california's wi ee's wine count assessing the damage done from the 6.0 earthquake. the roof caved in at the warehouse sending barrels of high-priced wipe tumbling to the floor below. the local wine association says the region's wineries contribute $50 billion per year to the u.s. economy. and some traders were off to a delayed start overnight. the cme group holted the electronic futures trading due to a technical problem that delayed the opening of the overnight session by four hours with the exception of malaysia. now a whopper of a deal brewing at burger king as the fast food giant is in talks to pick up tim hortons. we'll discuss this after the break. it is monday, everybody, good morning. see you in a second. where the reward was that what if tnew car smelledit card and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits. so every time you use it, you're not just shopping for goods. you're shopping for something great. learn more at buypowercard.com welcome back. these are your headlines this morning. merger monday. roche has agreed to buy intermune for $8.3 million. and europe's biggest economy losing strength as a disappointing reading from germany sends the euro lower. and a whopper of a deal for burger king with reports suggesting it is interested in acquiring canada's tim horton's. hi, everybody. welcome back. if you are just joining us, these are live pictures we are just getting through of german chancellor angela merkel and the prime minister of spain holding talks on the spanish economy and the formation of the new european commission as well. merkel is absolutely stating they are in agreement with spain that the eurozone needs closer economic cooperation to happen. so that press conference just taking place right now as we sit here live on air. as mentioned, burger king has an appetite to make a deal with a major fast food company in canada. courtney reagan has more from our cnbc headquarters. the deal, courtney, would be a big deal. they would end up being a giant between them. >> that's exactly right, louisa, it would be a big deal. which is why it tops the headlines today. burger king is in talks with buying out canada's tim hortons. the potential deal could ignite further debate involving tax inversion. the tax rate is 26.5% versus 40% in the u.s. according to an accounting firm's website. 3g capital would continue to own the majority of the shares in the new company. a merger between burger king and tim hortons would create the third largest fast food chain. we'll take a look to see how shares of tim hortons are trading before this deal. they are up substantially, almost 14%. perhaps the market is bidding that this would be a good deal. investors might very much like it. of course, it would very much increase the size of that company and cause potentially some waves when it comes to tax inversion, too. >> courtney, thank you very much. good to see you. we'll talk again soon. courtney reagan there from the states. let's move on and talk a little bit about what is on the u.s. agenda. the big focus is on new home sales data, which is out around 10:00 a.m. new york time. wall street anticipating a gain of 425,000 units compared to the increase of 406,000 units seen back in june. we were talking about the housing market. a real estate attorney and author of "foreclosure nation" is here with us. sherry, good to see you. what are you anticipated in regard to the housing data this week? >> well, good morning. the housing data is looking healthy now. we had, new home starts up last week, 20%, which is awesome news. existing home sales are also moving up month over month, but when you dig a little deeper, there's a little bit of an underlying troubling trend that is sort of entrenching home rentership as opposed to home ownership. with the home construction numbers that came out last week, we know new starts are up 20% from last year, but single family permits are up by less than 1%. we are seeing builders seeing more opportunity in renting and it goes back to the affordability issue. housing is becoming more and more unaffordable for more americans. >> you state a third of housing is less affordable now than what it's been the entire century. >> yeah. and that really goes to purchase price, but there are multiple components to affordability. for example, rents now are so high that in 80% of u.s. markets, renters are having a hard time saving a down payment. so we have the saving up portion of affordability. then we have the actual closing and the purchase price like you mentioned, but then ownership. for example, local and state governments are so in the hole from the last few years they are looking to increase tax revenues and count on property openers, local governments at least for 75% of the tax revenues. so even that is becoming a bigger and bigger owness on owning a home. >> what happens if rates go up, sherry? >> interesting question in that, too, goes to affordability. if rates go up by a quarter of a percent, we may see literally hundreds of thousands of americans being priced out of home ownership. we are seeing an interesting trend, louisa, with sellers starting to offer to buy down the rates even though the rates have not gone down significantly. i would expect that trend to continue and folks will just find other ways to deal with it. we may, for example, see a re-emergence of the adjustable rate mortgage products as rates go up, but that's one more component of affordability. and the other problem for the broader economy is when builders are building, we mentioned between 400 to 500 or thousand new units, those new units cost a third less to build and add only a third of what a home would add to the economy. so you're talking about less jobs, you're talking less consumer spending, less in revenue, which is why even though construction is moving up, we're still missing hundreds of billions of dollars that housing would normally add to the overall economy. >> sherry, thank you very much for being with us. >> have a great week. >> thank you, likewise. also the author of "foreclosure nation." looking at the other top stories making the rounds, the global response to the danger posed by cyber attacks has been uneven and must be addressed by regulators and businesses. this is according to greg medcroft, the chairman of the board of the international of security commissions. speaking with the financial times, he said the next financial shock will come via cyberspace and a more concertive effort to tackle the problem is required. recent high-profile attacks to big businesses included a breach at u.s. company target where millions of customer data was stolen. the playstation network was taken down by a denial of service attack, although the tech giant says no information was accessed. the report says the group lizard squad reportedly carrying out the attack. and the sony entertainment president was on a flight that was diverted because of a bomb threat. nobody was hurt on that flight. and a press conference is happening in spain, the second day of his visit to meet with the spanish prime minister. angela merkel says this is affecting the german economy but expects good growth this year. scheels also saying the german economy is less dependent on countries like spain. that press conference is still occurring. we'll bring you more flashes of what they are saying throughout the rest of the program. see you on the other side of this short break. xkç hi, everybody. welcome back. you're still watching "worldwide exchange." we are hanging on to the gains across the board a half percent to 1%. we are looking at the dax to the left of the screen with weaker than anticipated ecodata with regards to current conditions and future expectations. u.s. futures indicating that u.s. markets are set to open slightly higher this afternoon our time in europe. once they come on the tap, the u.k. is off for a bank holiday today. so a thin trade here in europe. how do you make money in these markets? this is what some of the experts have been telling us this morning. >> they should still outperform. we still see more room for the like of spain and strategically we like spain more on fundamental grounds out of what we have seen from the italian space. >> the opportunity in terms of breath in the market is better, especially in the local currency debt market than the high-yield market or the hard-currency debt market. within equities, like i said, we are still overweight equities and real estate commodities. within equities, we prefer japan. we prefer emerging markets. this is clearly more the destination that investor flows are now moving and europe is actually our least preferred region. the founder and president of bernhill partners is with us this morning, michael, good early morning. the u.s. markets are being called a little higher today in trade when looking at the futures. where are you taking your indications? what catalyst are you looking at? >> well, it would be hard for me not to see the ecb this morning, at least draghi's comments in influencing equity markets in europe. and for that reason alone and for housing as you have been speaking n the states there's reasons to believe that you're going to see higher equity prices posed back in the same direction, which again i think is one of the reasons why we are really keeping an eye, not just on employment data these days, but how the housing market is starting to kind of fester itself into the commodities realm also. >> do you think that markets are going to react significantly if we are to see or if we were to see the ecb act earlier than anticipated? so i'm saying that draghi's comments over the weekend indicate precisely this and that we could see this over the september 4th meeting? >> well, really the markets themselves believe this is going to happen for quite a while. not necessarily the implementation, but the whole focus on when the fed comes into play and is the ecb going to be on the same side of the fence. clearly it seems as though companies are going to profit from this scenario and it looks as though also that it's very positive news, i think, as we get towards the middle and down to the end of the third quarter. >> so where are you putting your money, michael? any tips? any ideas? >> well, i believe at least that this correction that we have seen that has been a little bit longer than anticipated in crude oil, lower, probably will continue. i'm not certain if we see an 89 print this week. it won't happen that abruptly, but one of the indicators right now seems as though gold mass gone through some significant moving averages. and for those reasons really keeping an eye on 1240. any touch near violation of those levels we could see lower scenarios, so out of precious metals and energy commodities themselves i would be short and stay short. the trend is good for you in that regard in the same as long equities. so the only misnomer is that treasuries will continue to drop off to the levels in ten-year treasuries around the 30 level up to 30 to 40. i think right now the range is probably going to get extended further to the upside. >> michael, really lovely to see you this morning. thank you very much. go wake everybody up now, huh? it's a bit quiet behind you. >> i sure will. >> michael, we'll talk soon. the president of bernhill partners. that's it for today's show. we'll be back tomorrow with another "worldwide exchange." for now, back to my colleagues stateside and see you this afternoon for european closing bell. $1,000 turbocharged reward card with a new volkswagen turbo. so why are we so obsessed with turbo? because there's nothing more exhilarating than a powerful ride. and you can get that in places you might not expect. like the passat. and also in the fun-to-drive jetta. in fact, volkswagen has sold more turbos than any other brand over the last ten years. that is a lot of turbo. get a $1,000 reward card on new 2014 turbo models or lease a 2014 passat s for $189 a month after $1,000 bonus. ends soon! good morning and welcome to "squawk box." 200 people are injured after the biggest earthquake to hit california in 25 years. the large quake hitting napa valley wine country by felt all over the place. residents dealing with more than 50 after shocks. developing, isis militants capture this base from syrian forces and control the power along the syria/iraqi border. and late breaking, developing news and late-breaking news. burger king could be shopping for donuts and coffee. it is monday. and lower taxes, maybe. it is monday, august 25th, 2014. "squawk box" begins right now. good morning and welcome to "squawk box." michelle caruso-cabrera is in for becky today. we have a busy morning this morning. roche buying intermune for $8.3 billion. more than a 60% premium to intermune's close on august 12th right before reports said the company was evaluating strategic opgs. we'll have both ceos coming up on "squawk on the street" later this morning. the other big story, burger king in talks to acquire canadian coffee and donut chain, tim hortons. this would be make it the latest

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