Rate this year. More heads are expected to role amid a growing pile of investigations and lawsuits. Abenomics under pressure. Prompting talk of further easing. Get in line. Apple fans form queues as the new iphone 6s goes on sale. Good friday morning. Im susan lee. Coming up on the program, a nice seafood dinner but will he call back. Its lobster on the menu as president obama and president xi jinping meet up in washington defendant d. C. And is this the end of the line for the flash crash. And find out how nike is staying ahead of the pack when it comes to sales. Welcome to the show. Now the Federal Reserve continues to hedge its bets. Speaking last night, chair janet yellen said the fomc expects conditions to be right to raise rates this year but caveated that by saying if the economy surprises to the down side judgments would change. Given the highly uncertain nature of the outlook one might ask why not hold off raising the federal funds rate until the economy has reached full employment and inflation is actually back at 2 . The difficulty with the strategy is Monetary Policy inflicts real inflation with substantial lag. If the fomc were to delay the start of the policy normalization process for too long we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Yellens hour long speech finished in dramatic fashion as she coughed and paused for composure several times before walking off stage to be attended to by medical aids. Our judgment is about appropriate. [ coughing ] excuse me. Let me stop there, thank you. The fed chair was simply dehydrated and continued with the rest of her evening schedule according to plan. Lets see what all of this means for u. S. Futures and were looking like a positive open. Quite significantly positive. Part of that might be from the fact that theres some strength that the economy might be relatively strong. This year a hike is possible. Close to a percent of gains for all the major indices but id say most of the positivity today is coming from the bounce back were seeing in european markets which, again, taking some lead from the u. S. But mainly after a very soft week here in europe were finishing strongly and the biggest reason we declined this week has been a stock specific one. Its been volkswagen. That dragged down the auto sector and the dax in particular but today were bouncing back finishing on a strong note. Thank you so much for that. Lets talk more about janet yellen. I dont know how you felt about the speech yesterday but i felt she was backtracking from a very dovish message she went out last week when the fed didnt hike rates. She focused a lot on the risk of not wanting to keep rates on hold for too long. She talked about excessive risk taking and that being a danger to financial stability. She talked about being forced to raise rates too abruptly and one commentator said this feels like a speech explain ing why the fe would have hiked rates but didnt. She said all along that they wanted to hike rates this year. She made that clear and she is pointing to the slack in the economy. They always talk about slack in the economy. To her its diminishing as we have inflation pressure set to build as that dollar should be coming off sometime this year and we have a recovery when it comes to oil prices as well. If she didnt change her tune, why is it that asian markets fell so heavily. No one wants to hold risk into the long weekend. Thats why. I dont agree with that at all. A lot of people are thinking the boj and ecob should not be raising this year. Thats what a lot of people felt. Boj we can come to later because of course further data on that but coming back to yellen the tune i dont think remains the same. She is trying to suggest the economy is Strong Enough for a hike but maintaining that aspect she used last week and will probably use again. Give me any excuse not to hike and ill take it. Theres the attempt to reassure that the economy is strong but i dont remain confident that theyll use that data to hike because no central banker wants to to an ecb, sweden, and norway and hike a little bit too early. They have seen what the repercussions are. But to make my point once again, why was the dollar up . Why were treasury yields up . They wouldnt have done that. Sure there was surprise in that. Yeah. But the dollar particularly against the euro is where we saw it. We havent seen treasuries move much so its hard to read into it on an individual day but i agree. It moves, particularly the dollar against the likes of the euro and the yen off of that. People thought about it. They took the whole session in asia to think about it and realized maybe theyre pointing to an Interest Rate hike at this point. So 35 probability, fed funds rate to move in december. That probability is increasing as we keep hearing from janet yellen. Dont you feel sorry for her. 69 years old. A 52 minute she looks good for 69. She ran a Half Marathon when she was 57. Really . Gosh. Fit, right. Thats impressive. All right. Lets get back to our other top story. German auto maker trading to the upside. This as Matthias Mueller is expected to be named new ceo. He is part of the deciding board and family that own the majority of vw voting rights. Meanwhile, california is getting ready to take action against volkswagen after the car admitted to rigging its air test. They issued a recall in the state in a bid to calm authorities suspicions. Lets get out to nancy outside of volkswagen headquaters in germany. Even a wider shake up is expected today. Thats right. A lot of focus is on the announcement for the new ceo today when the Supervisory Board meets. Theyre expected to announce that the porsche ceo will take over the top position. Who will follow the former ceo out the door and a lot of reports seem to suggest that the rnd chiefs of porche and audi could be following out as well. And you may remember on monday michael horn is at a party for volkswagen in new york. He said the only way you could put it is volkswagen screwed up but it does not appear that Brutal Honesty is going to be at this stage. They announce how far they intend to go with a suspected criminal probe and who knew what and when and what took so long . Even when you consider it all took off in the united states. Most of the diesel penetration is right here in europe. Definitely a lot of frustration and you might be able to tell, just behind me, were starting to see demonstration from the like of greenpeace. Just arrived here moments ago and on the top of volkswagen vehicles we have a giant pinocchio. Nobody likes a cheat. Head to our website cnbc. Com and youll find all the latest information and analysis of the diesel admission scandal as events develop. Chinese president xi jinping will spend a second day in washington d. C. Meeting with u. S. President barrack balm at the white house. Theyre expected to hold a joint press conference and xi will also be hosted at a luncheon by Vice President joe biden and secretary of state john kerry and then hell get the state dinner with a few hundred of these guests being invited. Meantime, lets get back to the markets and deflation, the d word in japan making an unwelcome come back. Data for august showing prices fell 0. 1 . Thats a year on year figure and thats the first negative inflation read since april 2013 when the bank of japan began fuelling markets with cash. Helping support the nikkei that closed at the short week because they only traded two sessions and we saw 2 gains and guys just about 24 hours ago we were paying attention to what shinzo abe was saying in his economy address and he said very firmly that deflation has been beaten in japan. Not the case when you had the first negative read in two years. Not so much but look at the core cpi number and that edged up. So in this environment we really have to take out energy. That was his message. Hes always said were at the mercy of energy prices. Energy prices, that job is going to be temporary. Thats what hes hoping for obviously. Yes but in general, most of the data weve seen has been pretty disappointing and for me it highlights how much more ineffective qe gets further down the line. The returns you get from it. The effect that comes through is always diminishing when it comes later. Thats something to take note of for europe and japan and other areas that might consider it. Even the u. S. If theyre considering delaying hiking. Its having much less effect and in japan they cannot change the mentality of consumers. Savings rate is high. We havent seen Consumer Spending leap. Its a problem when you continue to raise sales taxes like theyre going to do that in 2017 in april. I doubt they will now. No, he said yesterday theyre going to go ahead with the hike unless we have another recession of sorts. But qe in japan fed through to the corporate sector but it hasnt crucially fed through to the Consumer Sector and that is why i think well have to see some form of easing though i dont think its going to have enough form of effect. Its increasingly ineffective. It set out that qe target, growth of 22 . 22 . So for any other economy out there i would think thats too ambitious but maybe for that economy because theyve got the leeway of also tolerating higher inflation, maybe for them it will work. Maybe the two will go hand in hand. Lets give them the benefit of the doubt. They need to get higher inflation now. Maybe thats the goal. Sri joins us. Happy friday sri. Hi, susan. Great conversation youre having and i think you hit all the main points in terms of the outlook for Monetary Policy and structural reforms. What is interesting is that Prime Minister abe and boj governor did meet today so that got the markets thinking and front running the idea that the bank of japan could step to the plate with more stimulus. Possibly as early as october and thats certainly what the markets have been front running today. The yen has been weaker today. Nikkei up by 300 points and some change and closing in on that crucial target on the upside off of 18,000. On the opposite end of the spectrum wasnt such a hard day for the shanghai composite and Global Growth concerns from china plaguing the market. Were down by 1. 6 . Overall, quite a list, list session here in asia. Dollar is standing tall after yellens commentary and remarks about fed rate hikes happening sooner rather than later and i think that the market still believes, out here at least, that its going to be a 2015 this year story. Em assets made this adjustment toward normalization though we cant rule out some shock in volatility when we finally see the first rate hike. Among those most vulnerable its indonesia and malaysia. Thats where we stand. Back to you. Thank you. You have a good weekend. Lets tell you what else is coming up on the program today. Queuing up for apples, were not talking about the fruits. Were talking about the technology and crossing live to the am store right here in london as the iphone 6s hits the shelves. This just in 50 million customers data was not compromised this morning in a Security Breach that didnt happen. Wall street. Not rattled. At all. No. Not at all. Not at all. I mean, look at the day. Sir. Sir. What went right . What went right . Everything. Thank you. With threat intelligence, behavioral analytics, and 6000 experts, ibm security will help keep you out of the news. My dads company wasnt hacked today. Cool. Welcome back. A resoundingly positive end to what has been a disappointing week for european equities. Nine stocks in the red of the stoxx 600 up 2. 8 . A Strong Performance throughout today. It has been a very soft week thus far particularly lead by volkswagen. Lets have a quick look at the rates because we did see a movement yesterday to the upside after janet yellen hinted that theres possibility she could hike this year. Going back the other way today, the euro losing 1 , 11120. It has been a strong week overall for the u. S. Dollar. The euro losing ground. Lets have a quick look at commodities as well. Oil prices finishing on a relatively positive note but not too significant. 45. 3 wti. Brent, 48. 3. It is that day. That day that apple fans around the world are queuing up and lining up to be among the first to get their hands on the new iphone 6s. Lets get out right here. Can you gauge for me the level of excitement for those wanting to get their hands on the 6s. We got here at 5 00 a. M. And there were already a crowd of people. To give you a idea, there was a die hardcore group of fans that have been here since monday at 9 00 p. M. Obviously theyre very excited. Its a very oh, way too many people out there probably using their iphones and the signal got jammed or something. But can you believe people have been queuing up since monday night. Thats what they were saying. Not only was the first guy there since monday but the first guy there in london for the iphone 6. Its just an upgrade. Its not a relaunch. Dont you find it funny that technology breaks down at a technology launch. Its the networks not the hardware makers. Absolutely. So lets bring in our Senior Analyst and head of mobile at ihs. So all systems go here i have to say im not excited by it. What is this new success really offering the customer . The only difference is its simultaneously launched in china. Theyre competing with themselves and they have to prove its much better. But what are you getting in the 6s . Same screen size . Maybe different colors . It looks very similar but actually its very different. The biggest innovation versus been on the s years when the product looks the same but under the bonnet its totally different. The biggest thing here is the new 3d display, thats the key differ she yea to this year. What does that typically mean for earnings . The last time they did an s launch was the 5s year. They are going in significantly up. The 6s is better and should do even better still. Were forecasting, 236 million iphones shipped this year and 20 up on 2014. You have to wonder at what point does even the most die hard am fan going to hit that saturation point because its already got everything that you want in the echo system with an apple. At what point will we see the saturation point . Next year. This year theyre going into the quarter with such a strong upstart they will do well. Next year is the big one they have to sustain it and thats when i think theyll have the real challenge. Theyre capital iegz on the weakness of the new smartphone makers so do they have to rely on other peoples weaknesses still . I think they have done well to offer disposable spending. People spend more on their smartphone now than preiphone and they have grown the market. They have shaped the market to an apple market. Can i get relationship vent here and talk about the recent malware hack. Do you think that has any impact on people thinking about buying an apple iphone in the future if their software isnt safe . It effects all the smartphone makers. Theres problems with android and other platforms too. Apple hasnt had any significant issues prior to this. This largely effects apps in china so the effect globally not so much, in china, enormous. The equivalent in europe or north america would be the facebook app being hacked. Thats the equivalent. In the recent apple launch event, theres a couple of other announcements as well. Any of those take the pressure off the iphone as being the lead . This year, for the rest of this calendar year the iphone is going to be the main revenue generator and Profit Center for apple. The more iphones they sell the bigger the target market is the apple watch so the things fit together. The success underpins everything else. Im just amazed they still have the ability to raise prices. Next year could be a challenging year for apple. Does that also apply to pricing next year . Everything is difficult. The reason they pushed up asp this year, the average selling price is partly because of the launch of the larger screen iphone 6 and thats helped them push things up. They wont have that in their arsenal to roll out next year. And quickly, your price target . I havent got a price target. Ive got a shipment target. 226 million, 22 up and we expect the average selling price. That will have good impact on the financials out of the iphone. Thank you for joining us. Now apple users might be vulnerable to a hack through siri believe it or not. The work around allows people to bypass a lock screen and access photos and other private information. You can protect yourself by switching off access to siri in your settings. I like siri. Who else is going to wake me up in the morning. Do you like siri . I quite enjoy it. I remember when it launched and we were completely obsessed with it. If you could just talk to it and have your text dictated perfectly its great. Its like jarvis from iron man. If it were as efficient then great. But i dont think it is. You can read plenty more on apples new devices on our website. Head to cnbc. Com. Right, russian president Vladimir Putin may be meeting president obama at the un but that isnt the only high profile person he has in his sights following a russian pranksters call to singer elton john pretending to be from the Kremlin Putin decided to call him for real at this time. They hope to meet to discuss gay rights in russia. So today we are asking you what would be the most appropriate elton john song to sum up that meeting or to play in the background . Join the conversation here worldwide cnbc. Com. Here are some suggestions for you. Sorry seems to be the hardest word. Can you feel the love tonight . That was very apt. That would be perfect for the relationship. I wonder whether rocket man would get a play as well. I dont know that song. Can you sing it . Come on. Yes, lets get wilf to sing. I nearly did that. The reason we have this segment is to get you to sing. Our viewership would crash. But also tiny dancer i think is applicable. Putin hates people knowing how short he is. He does. Do you think he can dance though . Im sure he can dance. He can do anything. Fish, wrestle, anything. Im sure he can learn if he cant do it now. What about blue eyes . Doesnt putin have blue eyes . I dont know. You havent looked him in the eyes. Cant he just wipe your mind if you look too much in his eyes. But thats my suggestion. Blue eyes. I got one, what do you think about candle in the wind . Well, in what sense . Who is the candle in the wind in this regard. Putin would be because hopefully according to some. Benny and the jets i try to workout change the name to assad and the jets perhaps. Anyway, get your suggestions i