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tv   Worldwide Exchange  CNBC  August 23, 2013 4:00am-6:01am EDT

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welcome to "worldwide exchange." i'm carolin roth. and these are your headlines from around the world. wall street's latest trading glitch could give the nasdaq's reputation another black eye as the entire industry comes under scrutiny from regulators and investors. indonesia rolls out new reforms to try shore up investor confidence, but now sees growth falling below 6% this year. and the u.n. secretary-general warns of, quote, serious consequences if the use of chemical weapons in syria is proven, despite divisions in the security council ban ki-moon once again
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calls for immediate access to the alleged site. good morning, everyone. good friday morning. it is the final trading day of the week. ross is still out on vacation. he will be back with you next week. meanwhile, let's come back to one of our top stories. nasdaq ceo in his first comments after the glitch that halted trading for three hours on thursday is calling for higher standards for exchanges. he tells the wall street journal, our systems and the industries have to get to a higher level of robustness. the journal reports nasdaq officials internally pointed to a connectivity problem with competing electronic exchange as the trigger for the technical issue that forced the trading
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halt. arkia wasn't named in the official statement and the they have declined comment. nasdaq officials believe they should have been able to manage the connectivity problems. reports say nasdaq was able to fichlt issue in 30 minutes but didn't restart trading for another two hours due to the need for testing and regulatory approval. reports say banks trading desks were cautioning nasdaq not to rush to reopen, fearing a slew of technical errors could saddle market confidence. s.e.c. chair mary jo white plans to meet with exchanges in other market players to discuss regulatory practices. she says the halt was serious and she reinforce our collective commitment to addressing technological vulnerabilities of exchanges. former s.e.c. chief harvey pitt weighed in on cnbc's "kudlow report." >> this should not have
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happened. and the inability to tell people which securities would trade and which were opening ahead of others, that's pure chaos and it is wholly unacceptable. >> nasdaq chairman and ceo will be on u.s. "squawk box" today on a first on cnbc interview. that's at 7:30 a.m. eastern. head to our website to find out what is next for nasdaq. a number of analysts say the stock exchange's credibility is likely to bare the brunt of the fallout with the implications limited for broader trading and u.s. stocks, all on cnbc.com. the nasdaq flash freeze is the latest in a stripg ng of trading snafus in recent years. the flash crash in 2010, that botched that ipo, the fake ap tweet and the erroneous trades earlier this week from goldman sachs all raised questions about whether market participants are
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comfortable with the risk computer glitches can cause to markets. do you actually trust the system? if you want to join the conversation here on "worldwide exchange," get in touch with us by e-mail at worldwide@cnbc.com, via twitter, @cnbcwex, or direct to me, @carolincnbc. european markets are pretty much flat around one hour into the trading day. the stoxx europe 600 is flat as a pancake, close to its session highs. keep in mind that we did see a session lower just right after the start of the trading day. but then we have been moving higher and now we're seeing the indexes in the european markets pretty much mixed as well. let's look at the ftse, which has been seeing a little bit of an outperformance. we actually got it on the other side of the wall. if you want to come with me, you
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see the ftse is seeing outperformance, up by .2%. the xetra dax is flat. the ftse mib is seeing a little bit of under performance, down by a third of 1%. similar percentage declines for the ibex 35. strong finish to the trading day yesterday, on the back of a better than expected pmi numbers and also u.s. manufacturing numbers and, of course , the china hsbc pmis as well. in terms of the bond markets, we are continuing to seeing yields for the treasuries of ten-year treasuries at around two-year highs. but back below the 2.9% level, now at 2.88%. ten-year bond yields at 2.93%. treasuries were largely unchanged but took a bit of a dip they did rebound just a little bit after we saw that rise in weekly jobless claims.
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we're still close to the two-year highs. in the forex space, we're back to the other side of the wall. the euro dollar is coming under a little bit of pressure, but, again, this is down to dollar strength. and this is also very visible in the dollar yen pair which is up by around a quarter of 1%. this pair is trading at a three-week high. this is also because the yen safe haven appeal is easing somewhat. the aussie dollar coming under pressure, a touch, off by around .1%. sterling dollar pretty much flat at 1.5587. but details for the second quarter gdp reading in about 25 minutes' time. in asian markets, it is fairly positive end to what has been an extremely grim week. especially for some of the emerging asian markets. the nikkei 225 yet again an outperformer this morning, up by 2.2%. this is on the back of the weaker yen, of course, which is giving a boost to exporters, down in australia we're also seeing nice gains to the tune of
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1%. the kospi rebounding as well, up by more than 1%. but the weekly loss is still at around 2.7%. foreign investors have continued to put money to work in china, despite growth slowdown fears. new incentives and business zones appear to have helped sending fdi up more than 24% in july. that's year on year. and china's trade picture may be stabilizing too. beijing's commerce ministry says the august data will likely be strong given new policies to help out exporters. troubling times for china's everbright securities, first half net profit fell 2.2% to $133 million as the company warned of more losses ahead following last week's trading blunder. everbright is trying to raise funds through asset sales to make up for the trading error which cost the brokerage some $31 million. shares of the firm were further hit in trade today after its president resigned.
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also in earnings focus today, we can expect sino pec to post a 6.3% growth. joining us from hong kong is wendy liu at nomura. thank you for joining us today. it is fascinating that over the last week, when we have seen the big sell-off in asian markets, specifically emerging asian markets, china has been extremely resilient. is that because the pboc manages the currency and the current account picture is looking pretty bright? >> yeah, i think the backward data is stabilizing. at the same time our observation is that china, the equity market is too big, such that if the macro of its own doesn't cooperate, you don't have a
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sustainable pattern in the equities. i think first half, the backward growth was declining and the second half, quarter to date, it's been stabilizing, so, you know, not surprisingly it's been one of the best performing markets in asia pac. >> yes, that's definitely true. investors over the last four years have definitely been burned when investing into the shanghai markets. you know, we saw steep losses. what tells you that it is going to be different this time around in 2013 and going into 2014? >> 2013 saw its range bound market, so i think this market going up a little bit more, probably through october and november. a good part of the 2014 could be range bound again. i think it is going through a transition to try to upgrade its
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economy, to manage down the growth expectations for the private sector in a very steady fashion while resolving some of the local government debt issues, property issues. so it is a transitional phase, put i think the tactile market tends to want to see a one-way market, but for the regulators who manage the economy, they like to make changes while keeping things stable. so this is the perfect backdrop of a range bound market and this is what we saw last year, this year, and potentially a good part of next year. >> if we drill down into the sectors, wendy, looking at the financials, to what extent will they suffer from the government's push for further deleveraging. will investors take it as good news because loan growth will be more sustainable, healthier or bad news just because loan growth volumes will be down?
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>> yeah, i think what happens is probably a soft landing of asset prices over multiple years. and the listed banking sector should be better than the broader banking sector. so i think so far the reported bank results shows an accelerated pace of banks resolving the mpl, which is a positive surprise to the investor base. i think the bank tend to be taken as a macro proxy for china's economy, and i think in that sense the group has a bit more to go until october, november. but i bet, you know, subsequently there will be new issues on shadow banking and that could bring them down again. but i think we're at the lower end of the trading range on a two to three-year view.
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>> okay. wendy, thank you so much for that. have a fantastic weekend, wendy liu, head of china equity research at nomura. if you have any questions for anyone you see on the show today or any comments regarding the nasdaq's snafu or anything else, send in your e-mails to worldwide@cnbc.com. on today's show, indonesia revealed a policy plan to try to boost economic growth. can it work? coming up, we discuss the world's fourth most populous country. the uk has enjoyed a solid run of economic data, but will the second reading of quarterly gdp figures maintain momentum? we'll break those figures at 10:30 cet. a new report finds that the european financial transaction taxes unfairly benefit some markets while damaging others. who are the winners and the losers? find out at 10:35 cet. china was among the biggest players in green tech last year, while western renewable investments slumped. we discuss emerging markets, green credentials at 10:45 cet.
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gap reported a strong profit rise following higher sales. will the improved performance translate to a win for investors? we cross to new york for analysis of a high street favorite at 11:20 cet. [ male announcer ] it's time. time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪
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the u.n. has made its strongest comments yet on alleged united states allege ed use of chemical weapons. ban ki-moon warned there will be serious consequences and reiterated calls for inspectors to be allowed to investigate. the u.n. also announced that as of today, a million children have fled their homes in syria. yousef continues to cover the story out of cairo. time really is of the essence here, because the longer it takes for investigators to enter the area, the less likely they will get to the bottom of this. >> carolin, that's exactly where everybody's trying to move through. and that is trying to get some clarity to the situation. not just the united nations and member countries have been calling for that investigation and i understand sin speinspect
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in damascus. they have not been allowed to the site of the attack yet and that's due to logistical issues and maybe the government trying to stop them. we cannot verify yet whether this was a chemical weapons attack and who is behind it. now, the united states is also taking action, the white house has directed the intelligence community to conduct the appropriate investigations. though there is no time frame for that, it is being done with the utmost urgency given the scale of the -- that's according to an administration official. and also it comes as a direct response to what happened in damascus. now, we will have to wait and see what comes out of the investigations, but in any case, the u.n. security council will have to convene once again and try to come out with something. if that doesn't happen, if the political impasse continues there between the key members like china and russia, and the rest of the council, then you might see more independent action where you see countries like the united states and saudi arabia funding or arming the rebels and vice versa, russia would probably prop up its
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support of the syrian government. >> yousef, let's come back to egypt. egypt is bracing itself for a day of protest, supporters of mohamed morsi take to the streets. the demonstrations come a day after former president hosni mubarak was released from prison and to house arrest. yousef, tell us about the scenes on the streets, just how much -- let's say additional violence, unrest, was there as a result of the release? >> they're calling it the friday of martyrs, carolin. muslim brotherhood expected to host several marches from 28 mosques across the city and the rest of the country will be hosting them as well. and we will have to see how much they will be able to gather in the next few hours. so far, quiet but you know how it works on fridays. after prayer that things get a little bit heated up. now, the release of the former president into house arrest is unlikely to help the situation.
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and the army will be keeping a very close eye. they are on high alert across the city, there is still a state of emergency, there is still a curfew and many of the senior members of the muslim brotherhood have already been arrested. they're in disarray and they will need to make a show of force of some sort if they still want to keep a stance in what they're calling a fight against a military coup and deposing a legitimately elected president. carolin? >> yousef, thank you for those updates on both syria and egypt. brazil's central bank has launched a $60 billion program to prop up the country's currency. the money will be used to ensure liquidity and foreign exchange market through currency swap and repurchase agreements. the move comes after the brazilian real touched a five-year low versus the dollar. over the last 30 days it down by almost 10% against the dollar. new reforms in indonesia aimed at shoring up investor
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confidence faced with slowing growth and rising inflations. measures include tax relief for industries like agriculture, scrapping export quotas, curbing oil imports and cutting red tape for foreign investors. but reversing the slowdown won't be easy. that was made clear by yet another cut to this year's gdp outlook to below 6%. luka, are you convinced by the measures announced by the indonesian government today? >> you know, i don't understand what we're talking about because, i mean, if the problem of capital outflows is a nominal problem, okay, so capital inflows went into the country because of quantitative easing to indonesia and other emerging
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markets. but to a great extent they did not participate to growth. they did not contribute actively to growth. if you look at indonesia case, growth came mostly from in -- from commodity exporting. and what this commodity exporting has to do with capital inflows. so i don't think that the problem today in emerging economies is a problem of growth, although we are going to have a continuation of normalization of growth rates in this country. the problem is a problem of capital inflow, outflow, so it is a nominal problem and there is no fiscal package or monetary package that can do anything about this. money got in, money got out. >> you would argue the packages as announced by india, indonesia, brazil, they're largely ineffective as long as the tapering fears persist in the markets and as long as treasury yields go higher?
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>> that's exactly the point. it is capital -- as i said it a question of capital. and this capital, because of some restriction, in most of emerging economies, stayed in the financial sector, did not go into the productive sector. so inflows had nothing to do or very little to do with growth. so packages like the one of indonesia, like the one in india, of course, a lot of differences between indonesia. if you want, we can expand on this. are not just window dressing. and supporting the growth by 0.5% of gdp won't change anything in good and won't change anything in bad to the long-term perspective of this country. >> the bigger question then, luka, is to what extent does emerging market sell-off will continue and whether it will actually spill over to some of the developed markets. because right now the markets, investors are focusing on those
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countries with weak capital account pictures and with weak currencies, but do you think it will also hit those economies which have better current account or lower current account deficits? >> well, you know, i think that the outflows are deserving by two things. one thing is quantitative easing tattering across the globe. and also due to long-term yields increasing in developed economies. of course, the investment, some of the investment is repatriated. another thing that the capital outflows discount is lower growth in emerging markets, which is a story that has been around now for six and eight-month and it does have some substance. and growth will be on average lower than what it used to be in emerging markets. so that's the point. i don't think that just because of capital movements you have an effect on the economies, on
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developed economies, what you call spillovers, but, of course, i think that the developed economies will have to do with lower growth from emerging economies, with lower demand, especially lower demand for commodities, especially for energy and metals, coming from emerging economies and this is a fact. so i don't see spillovers on the capital side. i definitely see spillover on the economy side, on the fact that emerging markets will grow -- emerging economies will grow by much less in the future on average. >> luka, i appreciate your thoughts this morning. very interesting. luka, chief economist for asia pacific at natixis. should the reserve bank of india resort to more drastic measures? cnbc hears from an analyst who thinks the central bank should pull out the moves that paul volcker used at the fed 30 years ago. find out why on cnbc.com. let's change track.
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in china, the trial of bo xilai continued for a second day, but not like it began. courtroom feeds from the trial were limited, giving few details. and media sensors appear to be busy on microblog sites. the clampdown comes on wide global reporting of bo's defiance on day one. with more, let's get out to eunice yoon on the line from beijing. can you shed a little more light on what is going on today, given that some of what is coming out of the trial is censored? >> well, some of the information that has been coming out of the court is really quite interesting this afternoon. prosecutors have been attempting to link bo xilai to a french villa that the murdered britishman neil heywood had managed because they want to prove bo is guilty of corruption. they brought in testimony from
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bo's wife, fresh testimony, as well as a close confidant, but bo, again, just like you were talking about, you know, his performance yesterday, he put up strong dissent. he said the testimony was nonsense, he stressed his wife had mental issues and even suggested she gave her testimony under duress since her leniency in her own case. what was really interesting was the public reaction to his commentary today. people have been combing through the transcripts that were released and talk ing about how this is only circumstantial evidence and that he wasn't actually directly involved. and the effect that is having on the public is that a lot of people have been talking about how he might not deserve a heavy sentence, a sentence that many people had been expecting. >> eunice, thank you for that. still to come on the show, stay tuned for vital data, the second reading of second quarter
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gdp data is due any minute now.
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wall street's latest trading glitch could give the nasdaq's reputation another black eye as the entire industry comes under scrutiny from regulators and
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investors. indonesia rolls out new reforms to try to shore up investor confidence, but now sees growth falling below 6% this year. and the u.n. secretary-general warns of, quote, serious consequences if the use of chemical weapons in syria is proven. let's bring you uk second quarter gdp numbers, revised up to 0.7%, quarter on quarter. plus 1.5% year on year. that would be the biggest year on year rise since the first quarter of 2011. remember, the previous number was 0.6% quarter on quarter and 1.4% year on year. now, the second quarter gdp revision for the uk from upward revisions in the main sector is -- that's according to the
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ons. the biggest expenditure contribution to quarter on quarter gdp growth came from net trade. the uk says that net trade adds some 0.3 percentage points to second quarter gdp growth. as we get more details, we'll see what the quality of the second quarter gdp growth actually is, just want to tell you that gilt futures have fallen by 20 siticks after this revision to second quarter gdp. i don't think this is a surprise upward revision, because many people in the markets had actually factored this in. let's get out to melanie baker, uk economist at morgan stanley. this is not a big surprise, is it? >> it is not a huge surprise. we had some good construction number the other week and that meant that, you know, there was going to be a revision, the most likely thing is .1 revision. >> what are you going to be looking at in terms of the quality of the second quarter gdp growth. what are the key indicators that
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you want to see improving? >> well, i thought it was encouraging, you said there was a reasonable contribution from net trade. what the business investment number comes in at has been very weak over the last couple of quarters, to looking for a rebound in that number. we're expecting continued resilience in the consumer as well. looking for a number where it is not just driven by inventories. we're expecting a good quality number here. >> vince cable recently said for this recovery to be sustainable, what we need really is more business spending, we need further rebalancing from service to manufacturing. is that happening? >> i think there is some evidence of that happening. there has been encouraging signs on the export data for example. we have been waiting for a better number in the kind of business investment side. and we hope that would come through and it seems as the economy progresses you expect
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business confidence to pick up and business investment. >> how strong is the uk economy really given that yields are rising, given that real wages are still falling? >> i think that's absolutely a fair point. we're at the very early stages of a recovery from very quite weak levels. so i think that's absolutely fair. that's the kind of point i suspect governor carney will retrace in his speech next week. from our perspective, there are good reasons to think the uk should be picking up at this point. we do think the uk has entered a sustainable recovery phase now. >> melanie, all this data points we have gotten over the last month or six weeks or so, they certainly suggest that rates will have to rise before 2016. that challenges mark carney's forward guidance. will he have to revise his guidance? >> ultimately we think that is a good chance that rates will have
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to rise before kind of, you know, the third quarter 2016. a part of that will probably depend on whether the inflation gets hit, for example. >> okay, melanie, thank you so much for that. melanie baker at morgan stanley. let's take a quick check of european markets this morning. the final trading day of the week, fairly flat picture for the major forces. the ftse 100 seeing outperformance after the upward revision a few minutes ago. the xetra dax is now in the green, up by around .1%. the cac 40 down by .3%. we are little changed, basically, you know, a mixed picture, but we are on track for that first weekly loss since june. that's something to keep in mind. in the bond space, we saw gilt futures falling, the yields ticking higher or gilt prices falling rather. the gilt yield is at 2.74%. ten-year treasury yields, 2.89%,
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back below the 2.9% level and the ten-year bond yield is sitting at 1.94%. inching closer to the 2% level. in the forex markets, sterling rising on the back of the upward revision to the uk second quarter gdp data. that has jumped to 156.25 after hovering around the 156 level earlier on in the trading day, up by around a quarter of 1%. dollar yen seeing even more gains today, 98.91, back below the 90.9 level. figures show that although equity volumes are increasing and the uk and germany companies like france and italy have reported sharp declines. french market share of european equities plummeted nearly a quarter since introducing a national financial transaction tax last august, while italian
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equity volumes have almost halved since the start of the year. joining us now in the studio is tanuja renderi. thank you for joining us. take us through the details of the report. >> i think you started in the right way. what we have seen in the markets that have introduced the tax, so france and italy is, i think, france lost something like 30% market share in italy 45. but most interestingly while european volumes increased, roughly 14%, and the uk benefited by seeing an increase of 21%, these other markets have seen an outflow, and actually i think about the issues that the ftt is trying to address, supposedly to clamp down on fht trading, it isn't having that impact. nor is it having an impact on the system glitches we have just seen. you covered this morning the nasdaq glitch yesterday. we saw goldman's, we saw everbright, we saw knight capital. none of those are really going to be solved by a ten basis point or 20 basis point ftt.
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>> you're right. that's a good point. global investors have been becoming more and more bullish on european equities of late on the back of the really positive data. can france and italy which have implemented these financial transaction taxes, can they actually benefit from that more positive sentiment or are they left out in the cold? >> i believe they're left out, right? when there is positive sentiment, the whole market rises, which is a good thing. actually the markets that benefit are the ones that make it easy to trade. the uk has -- there are other countries that have stem duty. the problem with the ftt is it is an extremely broad tax, right? it starts to tax people double and triple and let me give you an example. securities lending transaction, right, so you're buying something and selling something. normally the return on these security lending transactions, a typical one, is 18 basis points. ftt could be as much as 20 basis points on that, right? which means the borrower pays
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once and then the beneficial owner pays again. that sort of thing is actually going to have a really negative effect on a market that is already quite beleaguered. we have regulations, we have costs. and at the end of the day, what do we really need? i feel we need system controls, okay, we need things that will prevent the trading glitch. we need the ability to stop erroneous orders going into a market. i don't believe we need to curb fht. fht can be a net provider of liquidity rather than a taker. >> that's what we're seeing in the markets, right? lower trading volumes, less liquidity and that's hurting some of the smaller investors, isn't it? >> absolutely. they're the ones that are the worst hit and actually pensions are worst hit because the value of the tax is going to affect the end consumer at the end of the day. >> just very quickly, the message that we can -- or the lesson that we can take away from this report is that a
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country really shouldn't go it alone. it should be a harmonized approach, otherwise you're losing out. what does that mean for germany after the elections? do you think germany will still adopt this if others aren't? >> i actually feel the ftt will not be implemented. that's my feeling. i think a lot of countries are already seeing the effects are not good. even a harmonized one would have a negative effect in europe and positive effect for asia. so i think you're going to start to end up with sort of have and have not countries. my gut tells me this will not be implemented in the way it was originally seen by any of the countries. >> okay. thank you so much for that. . the nasdaq says the cause of thursday's glitch that saw trading suspended for three
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hours has been, quote, identified and addressed. meanwhile, the exchanges ceo bob greifeld has commented for the first time, calling for higher standards across the itry a whole. the outage yesterday, the longest in recent memory, was caused by a connectivity issue. >> when the nasdaq is telling people, okay, to go to another exchange effectively, it is a serious issue. >> everybody is waiting for clear guidance from the nasdaq in terms of when and how exactly they're going to reopen. >> one thing to be down for five minutes. to be down for three hours is absolutely inexcusable. >> really need to hear from nasdaq. we are waiting on a statement. >> let's get back to tanuja. just how damaging will this be to the nasdaq reputationwise? >> well, i mean, the nasdaq is very large, you know, exchange. i think at the end of the day, they go through systematic checks. i believe all the exchanges do that. anybody that is managing
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technology has compliance, has audits and stuff like that. technology does fail. that happens a lot. the question is -- >> it happens often. >> what are they doing to prevent that. one thing i will point to, find as a vendor in the space, we're serving clients and we have got slas or service level agreements as they're called. our clients hold us to them. so similarly the exchanges, i believe, should have some sense of slas and liabilities which today they don't. today, if you trade with an exchange, something like this could happen and they have absolutely no recourse. so i think exchanges should have more of that implemented on them. >> but, of course, it wasn't just nasdaq. we also saw that flash crash on the nyse a couple of years ago, goldman committing this erroneous trade a couple of days ago. can we still trust those systems? shouldn't we go back to human traders? >> well, that's a great point. i think even in the human trader world you are having these
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issues. so if you go back, way back to when, you know, the depression times, right, you had pits and traders. and that stuff can also really move very fast when some use pits. i think traders are starting to deal with the issues better. there is not a panic now that used to be caused. i think we understand technology more. i don't believe that going away from electronic trading works because i believe it actually creates much more transparency and much more of an audit trail than human trading. and these are, in fact, human errors rather than technology errors. >> that's true. that's right. we do commit errors too. thank you for that. the nasdaq flash freeze is the latest in a string of market snafus, trading glitches and flash crashes in recent years. the flash crash in 2010, the botched bats ipo and facebook ipo, the fake ap tweet and goldman sachs erroneous trades earlier this week have all raised questions about whether market participants are
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comfortable with the risk computer glitches can pose to markets. we want to know from you, do you actually trust the system? if you want to join the conversation on "worldwide exchange," get in touch with us by e-mail at worldwide@cnbc.com, via twitter, @cnbcwex, or direct to me, @carolincnbc. and still to come on the show, china was among the biggest players in green tech last year, while western renewable investments slumped. we discuss emerging markets green credentials.
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greek prime minister has met saudi billionaire prince alwaleed as they step up their drive to increase foreign investment. they're hoping to benefit from the plans to diversify the portfolio of his kingdom holding investment vehicle. it comes as talk of a third bailout plagued athens. julia has more. does julia really have more? i don't think she does. moodys says it may cut the credit ratings on several major u.s. banks including jpmorgan and goldman sachs.
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in march, moodys says it would review the assumptions of how much federal support banks might receive. u.s. regulators are working with banks on liquidation plans in case of another financial crisis. why does moody do this now? meanwhile, checking shares of the banks, goldman sachs is a touch lower in frankfurt trading up by around .8%. jpmorgan, morgan stanley and wells fargo all trading higher. treasury secretary jack lew calling on congress to raise the u.s. debt ceiling speaking in california on thursday. he says lawmakers shouldn't wait for some unknowable last minute to resolve the issue. and the u.s. can't afford another self-inflicted wound. he estimates the government is weeks away from bumping up against the borrowing limit. congress returns from the summer recess next month. the tokyo city government plans to invest in six megasolar
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plants across japan. the total output would be enough to power 270,000 homes a year. we have the story live from tokyo. >> tokyo revealed plans for $170 million solar power project. last year the government set up funds to invest in power plants and this money will cover 20% to 30% of the cost. each plant will be built and operated by private companies. the facilities are scheduled to go online this year at the earliest. tokyo is hoping this will encourage the use of renewable energies and promote competition in the utility industry. many japanese companies are eager to get a foot hold in the electricity market because of the country's power shortages. this was caused by the closure of nuclear power plants after the quake and tsunami. a restaurant operator decided to construct a solar farm in northern part of the japan, with $50 million investment to earn income from southern
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electricity. trading invests $350 million in four solar power plants in eastern japan, making it one of the highest capacity solar facilities in the region. carolin, back to you. >> thank you so much for that. there is just over two weeks to go until australia's federal election and the opposition is currently ahead in the polls. cnbc's matt taylor filed this report from australia's battleground districts. >> reporter: we're here in the outer western suburbs of sydney where these key marginal seats are very important to the outcome of the federal election on the 7th of september. it is in these seats where the future government could be decided because they are so marginal. this current seat that we're in sits on a margin of 1.1%. so important, in fact, that the latest paid number of visits to these suburbs and seats today, the prime minister kevin rud, he paid a visit to the suburb of penworth where we are now, meeting and greeting with locals in the shopping center.
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didn't always go to plan. he was heckled on a few occasions. a lot of people out here concerned about jobs, the economy, and also health. take a look at the key issues that the electorate around the outer suburbs of sydney are really focused on. >> this is where the australian election will be won and lost, in the outer suburbs of our big cities. this is the city of lindsey, 60 clomers from the center of sydney, flanked on one side by the historic blue mountains and on the other side is the traditionally blue collar suburb of penrith. it is held by labor and the current assistant treasurer david bradbury, but on a margin of 1.1% and both sides of politics are going all out to try to win voter approval. the key issues facing the electorate were front and center at a debate this week, where the assistant treasurer faced off against his liberal party opponent, fiona scott.
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cost of living, the economy, jobs and asylum seekers, the issues that dominated. >> a strong economy means many things. but most definitely includes jobs, and jobs locally. >> but making sure we have the best quality health facilities here in our community and that our kids have the opportunity to get the best education possible. >> and that's why right from day one a coalition government would scrap the carbon tax. >> reporter: the seat of lindsay hasn't been without controversy during the election campaign. prime minister kevin rudd attacking the opposition leader's comments about the candidate fiona scott, at a public event last week. >> they're young. they're feisty. i think i can probably say a bit of sex appeal. >> reporter: in a bid to sway voters, both sides of politics started running a series of negative advertisements. the labor party telling the electorate that if abbott wins,
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they'll lose. and the opposition highlighting kevin rudd's many perceived failures when he was the prime minister first time around and also has pointed out so-called instability in government over the last three years following successive leadership challenges. >> dysfunction. >> reporter: now it is over to the voters who will have their say on september 7th. so that's the latest from the election trail today. we'll be back with plenty more next week. i'm matthew taylor, in sydney. back to you. >> very interesting. i didn't know sex appeal was playing into the election campaign in australia as well. that was matt taylor reporting from the suburbs of sydney for cnbc. let's come back to the solar story, japan's new focus on solar is part of a major shift into renewables, amid growing concern over nuclear power. according to a new study by frost and sullivan, japan led
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developed nations in green spending last year. this as emerging markets claimed a bigger piece of the green energy pie. globally renewable investing declined by 11% last year, that's the first major job since minor pairback following the financial crisis. spending still hovers near historic highs according to the survey. jonathan robinson is a consultant at frost sullivan and joins us now on the phone now from london. thank you so much for taking the time to speak to us about this report. what do you ascribe this 11% fall in renewable energy investment in 2012 to? >> i think there was some concern in the market after the financial crisis. some of the investment community got a bit hesitant on renewables. i think that drop in project finance around the sort of 10, 11 period was filtering out last year. i do think, though, it is likely to be a temporary fall and i do think that we will see a return to growth 2013 and i think we
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should see some strong growth in the coming years. i think particularly in the solar sector, a lot of growth in asia, lower growth in europe, plenty of growth in a lot of the emerging regions. and i think as well with wind technology as well, we see going forward. i do think it will be quite attractive going forward. >> jonathan, if we stick to solar for a second here, that sector has been dogged by over capacity, also in china. if you're bullish on more investment into solar, especially in the emerging markets, in asia as well, aren't we going to be seeing even more overcapacity, just as some of the less efficient players have been washed out? >> well, the overcapacity is a problem for the manufacturers who are facing a big situation with falling profits. but for the actual sector it is not a bad thing. because what it means is that prices are moving ever closer towards grid parity and really in germany, getting quite close it a situation now where subsidies are becoming less
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important. and we can see a situation where homeowners will invest anyway because the cost of panels has gone down. and this will have a big impact in some of the emerging markets as well, places like africa, india, which traditionally run on very expensive diesel jen sets will start now investing in hybrid solutions with solar pv panels and jen sets as well. it is a concern for the producers and manufacturers and they will be trying to reduce production a bit in order to get rid of some of the oversupply that is in the industry, but it is actually a great thing for the end users and those that are investing in the systems. >> overall, renewable energy is becoming more and more affordable. are we close to reefing the lowest point in terms of costs? >> i think there is still a bit further to go. i'm not sure quite how far, but we could see another 20, 25% drop over the next few years. i don't think we'll see the dramatic fall and solar pv prices have come down around 75% since around 2008.
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so that's quite dramatic. i think we could see further fall, really scale builds in the market. some of these markets in africa like the middle east and india are high growth rates at the moment. they are coming from low bases, but as we move forward towards 2020 and beyond, i think they'll gain momentum there as people see the advantages in these countries of having a solar pv and jen set solution. once your neighbor has it, you'll start investing and that could have a domino effect, would support the industry with a real second wave. >> keeping up with the jones here. thank you so much for that, jonathan. jonathan robinson, consultant at frost and sullivan. let's give you a look at what is on the agenda in asia on monday. hong kong earnings will be front and center. australian longyear expected to report and with emerging markets still in focus, we'll be watching july trade figures out of thailand and a raft of august economic data out of vietnam.
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ben bernanke may have given jackson hole a pass this year, but that hasn't tapered the taper talk this week, which may be appropriate since fed governor randy crossner says the term never came from the bearded one. take a listen. >> something you to remember is the chairman never used the t word. he's never said taper. and i think he doesn't think about it that way. he thinks there could be a stepdown, and they take a pause and think about what the consequences are, and then decide whether to go further or not. so i know everybody is -- says it is taper talk, but i think the chairman is never used that word and probably never will. >> it is a market term, isn't it? reducing bond buying. still to come, we'll bring you more analysis on how to position yourself as tapering speculation sends shock waves across emerging markets. that's coming up after the break. [ agent smith ] i've found software that intrigues me. it appears it's an agent of good.
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welcome to "worldwide exchange." these are your headlines from around the world. wall street's latest trading glitch could give the nasdaq's reputation another black eye as the entire industry comes under scrutiny from regulators and investors. the uk's economy grew more than previously thought in the second quarter. the government claiming unusually high bonus payments made in major contributions. indonesia rolls out new reforms to shore up investor confidence but sees growth falling below 6% this year. and the u.n. secretary-general warns of serious consequences if the use
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of chemical weapons in syria is proven, but despite divisions in the security council, ban ki-moon once again calls for immediate access to the alleged site. let's get back to one of our top stories. nasdaq ceo bob greifeld in his first comments after the glitch that halted trading for three hours on thursday is calling for higher standards for exchanges. he tells the wall street journal our systems and the industries have to get to a higher level of robustness. the journal reports nasdaq officials internally pointed to a connecti iivity problem. nasdaq didn't name arca its official statement. the nyse declined comment.
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the journal says nasdaq officials believe they should have been able to manage the connectivity problems. arca's connection to nasdaq's data feed on thursday morning was intermittent. nasdaq was able to fix the issues in 30 minutes but didn't restart trading for another two hours due to the need for testing and regulatory approval. reports say banks trading desks were also cautioning nasdaq not to rush to reopen, because they fear a slew of technical errors could zap market confidence. mary jo white plans to meet with exchanges and other market players to discuss regulatory practices. she says the halt was, quote, serious and should reinforce our collective commitment to addressing technological vulnerabilities of exchanges. former s.e.c. chief harvey pitt weighed in on cnbc's "kudlow report." >> this should not have happened. and the inability to tell people which securities would trade and
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which were opening ahead of others, that's pure chaos and it is wholly unacceptable. >> nasdaq chairman and ceo bob greifeld will be on u.s. "squawk box" today in a first on cnbc interview. that's at 7:30 a.m. eastern. and head to our website to find out when is next for nasdaq. a number of analysts say the stock exchange's credibility is likely to bare the brunt of the fallout with the implications limited from broader trading in u.s. stocks all on cnbc.com. the nasdaq flash freeze is the latest in a string of market snafus, trading glitches and flash crashes in recent years. the flash crash in 2010, the botched ip o and facebook ipo, the fake ap tweet and goldman sachs' erroneous trades earlier this week raised questions about whether market participants are comfortable with the risk that computer glitches can pose to markets.
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do you actually trust the system? david tweeted, he doesn't care about the glitches, but understand them. it doesn't affect him, but someone should be held accountable for negligent actions. keep your responses coming here on "worldwide exchange," get in touch with us by e-mail, worldwide@cnbc.com, twitter, @cnbcwex, or direct to me, @carolincnbc. here is our markets ahead of the u.s. open, taking fair value into account. the implied opening signaling another down day for u.s. markets. this is after the nice rebound we saw in yesterday's trading session. actually the dow jones was up by a half of 1%. markets buoyed by the better than expected economic data around the globe. the nasdaq, despite that three-hour trading halt, actually finished higher to the tune of 1%. remember, today, we get new home
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sales data, we'll see to what extent the higher yields are pressuring that data. in terms of the european markets, a bit of a mixed picture, though, with slightly positive buys, almost 1 1/2 hours into the trading day. the ftse cnbc global 300 up by .2%. just off the session highs here. a bit of a choppy trading picture this morning. but, of course, we did get a bit of a boost in terms of the ftse after the upward revision for the second quarter gdp number. and this is visible here in terms of its outperformance versus some of the other markets. the ftse is up by .1%. the xetra dax meanwhile pretty much flat and the italian market seeing a bit of selling to the tune of .4%. in the bond markets, on the back of this upward revision for the second quarter gdp data in the uk, we did see gilt prices coming down a touch. the yield is now at 2.72%, close to those two-year highs. ten-year treasuries unchanged.
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the yield sitting below the 2.9%, 2.88% and the italian yield for the ten-year at 4.31%. the forex space is seeing some yen underperformance yet again. it is down against the dollar to the tune of .1%. dollar strength still persisting in these markets, finally the dollar striking u.s. yields higher. the aussie dollar pretty much flat and the sterling dollar getting a nice lift from that upward revision, about half an hour ago, up by around a third of 1%. in asia, we are seeing a lot of green arrows, yes, finally after the markets really took a drubbing earlier this week, especially the emerging asian markets. the nikkei 225 outperforming the rest of asia, up by 2.2%. this is on the back of the yen weakness we're seeing, certainly the safe haven appeal of the currency is falling with sentiment improving. the kospi up by more than 1%. but still, showing losses for
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the week overall of more than 2%. now, what are the markets we have been focusing on this week, of course, is the indonesian market, because of its falling currency, because of its high current account deficit. i do want to show you the jakarta market. today the government unveiled new growth measures to stem the decline in the currency. they're aimed at shoring up investor confidence. of course, faced with slowing growth and rising inflation, the country's latest moves will try to cut dun on imports and keep money in the country. measures include tax relief for industries like agriculture and mining, curbing luxury car and oil imports and cutting red tape for foreign investors. on the back of the announcement, quite interesting, the market actually rose to the tune of 1%, but it has fallen back since. now, losses this week still amount to some 7.4%.
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maybe we did see a little bit of bargain hunting before, but that has now been reversed. the indonesian rupiah is up. yesterday it did hit another four-year low against the dollar, off 4% against the dollar this week. this will have been the worst week for the rupiah against the dollar over the last five years. central bankers meeting in jackson hole, wyoming, for the fed's annual monetary conference are expected to discuss the latest emerging market moves, and the impact of fed taper fears. we're being joined by kevin guardian, chief investment officer at barclays wells and he joins me now. thank you for taking the time to speak to us. maybe you just want to switch off your mobile phone there? >> i do indeed. apologies to that. >> no worries. let's do that. do you think the market rout in the emerging markets we're seeing -- do you think that is overdone on the back of tapering fears? >> not necessarily. i do still think -- we do still believe quite strongly the
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structural growth prospects for the eamericmerging world, asia particular, the best on the planet. in technical terms, if they repatriate funds to take advantage of more attractive short-term bargain hunting, say in developed markets, if they're going to be looking for higher yields from bonds in developed markets, interest rate markets, generally in the developed world, you see the portfolio outflows continue for a while yet. and to be fair, some of the emerging markets, you touched on one or two already there, very directly, they're not really following the script that was initially set out when we all collectively turned so much more positive on emerging markets a few years back. current account deficits not part of the emerging market story as it has been told. countries that are generating current account deficit ready looking particularly vulnerable right now. >> in terms of the markets,
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where do you want to be? >> well, in the short-term we're focusing on the exporting countries that are actually out in the asian block of the world. we do feel that normalization, tapering of qe, call it what you will, it is happening essentially because the developed world is a little bit less fragile economically than people were fearing. so countries in the emerging world which sell into the developed world in asia, countries like korea and taiwan, possibly even china, they're actually positioned to do a little bit better than the average. and their current compositions are stronger because they're export led in many ways. so if we are bottom fishing in the emerging markets, that's where we would be at the moment. >> kevin what is the risk of further -- of emerging markets, further liquidating their currency reserves to stem the declines in their currencies to prop up their growth and to reassure investors? do you think ultimately this
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will have a negative effect for treasuries and drive yields even higher in the u.s.? >> not necessarily. i would be surprised if things went quite that far. there would have to be a heck of a lot of selling by china, in particular, to actually have that impact, and, of course, the exchange rate is not floating in the way that it is elsewhere. that wouldn't be one of the primary concerns to have at the moment. >> okay. we'll leave it here for now. kevin, of course, we'll come back to the discussion later on in the show. let's give you a look at what is on today's agenda in the united states. a trio of fed officials will be on cnbc from jackson hole. atlanta fed president dennis lockhart, st. louis fed chief james bullard and san francisco's john williams. july new home sales out at 10:00 a.m. eastern. forecast to drop by 1.4%. just a pair of notable earnings today, retailers, ann and foot locker. gap had a strong profit rise following higher sales.
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will the improved performance translate to a win for investor. we get analysis of the high street favorite. [ male announcer ] it's time. time to have new experiences with a familiar keyboard. to update our status without opening an app. to have all our messages in one place. to browse... and share... faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. it's time. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away.
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electronic markets under scrutiny. the uk's economy grows more than previously thought in the second quarter. indonesia tries to prop up its flagging economy with a reform package. let's get back out to kevin garden from chief investment officer at barclays wells. kevin, why are investors so negative about the prospects of tapering? this is good for the markets, isn't it? because the economy is growing. >> i would think so. i think you're right. that's the way to view it. i think it is because a lot of people are still deeply skeptical about the ability of the u.s. economy to continue growing. and they felt maybe that qe is entirely responsible for all of the gains in the economy, and the stock markets since 2009. that's not how i would see it at all. i think the u.s. economy is very capable of underlying growth. i think the u.s. consumer in
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particular is demonstrated with their behavior and the performance of their balance sheet that they're stronger than people have been fearing. so i think it should be welcomed. and in a way having too much liquidity for too long, having interest rates at dying levels too long, that's not healthy. the sooner we get back to lower levels, the happier we'll all be. >> there is dangers lurking in the background. let's remind ourselves of the warning to congress to strike the debt ceiling deal rather sooner rather than later. do you think this time around we'll be seeing a drop in markets, a drop in consumer confidence, a drop in business spending yet again as we saw in 2011? >> it is possible. i think the risk of such a big sell-off is a bit smaller now. but we had had a good run in markets. we're very aware. i hope we're very aware that calling the short-term twists and turns in the market moves,
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even when the markets are open to trade, it is not that easy. but looking beyond the short-term, we think that the u.s. budget deficit, the perspective u.s. budget deficit, that's one of the reasons we're becoming more optimistic about u.s. growth going forward. it is disappearing. the u.s. budget deficit is dwindling far faster than anybody had anticipated. and we suspect that in a year or two time, this budgetary debate in the states is going to have largely moved into the background. we have been here before. i can remember nearly 1990s, very tremendously the u.s. budget deficit for a while, it went away and turned into a surplus. so whatever happens in the short-term, longer term i don't think we need to worry as much about the budget deficit in the states as people have been. >> finally, some good news. we have been worrying about it so many years. thank you so much for that, kevin. kevin garden, investment officer at barclays wells. the u.n. made the strongest
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comments yet on alleged use of chemical weapons by the syrian government. the organization's chief ban ki-moon warned there will be, quote, serious consequences and reiterated calls for inspectors to be allowed to investigate. yousef has been in cairo covering the story with the egyptian story. let's focus in on syria, yousef. how quickly do you think would investigators be allowed on the site? timing is absolutely crucial here. >> there is no clarity yet as to when u.n. inspectors will have access to the attack site outside damascus. u.n. security council making it clear it wants to get more details on what happened and also give that information to member states, to make their respective decisions. but the inspectors are stuck in damascus and we do not yet what the exact reason is why they have not been allowed to that area. but, the united states is moving from its end already, the white house has tasked the community
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to do a full investigation, and that with urgency because of the escalation of violence on the ground. keep in mind, the u.n. security council remains divided between states such as chin a and russia and the other states and that is likely to continue even if the investigation proves that chemical weapons were used in damascus. >> let's focus back on egypt, because egypt is bracing itself for a day of protest as supporters of mohamed morsi take to the streets. the demonstrations come a day after former president hosni mubarak was released from prison into house arrest. yousef, what are you seeing on the streets right now? >> well, it is the usual friday, carolin. things are fairly quiet before friday prayers and tend to heat up afterwards. remember, the muslim procedurehoprocedurbrotherhood faces a key test this friday after a series of arrests of its leaders by the military and the
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detention of many of its members. will they be able to regroup? that is what we will -- may or may not see in the coming hours. also the release of the former egyptian president is likely to fuel some public anger to some extent, but the military is on high alert. they're out in force today. and they're not going to leave anything to chance, but perhaps as well to many of our viewers of interest will be the fact that the market is graded to the upside in the last trading day by .6%. and it shows you over the course of one week by gains of 1.6% and for the most part confident of how the military is handling the matter at the moment. the prospect for violence remains and that is why we need to keep a close eye on the story. >> yousef, thank you for that. still to come on the show, gap's second quarter earnings beat expectations, but can the retailer sustain its strong sales momentum? our next guest is skeptical. find out why after the break. [ female announcer ] what if the next big thing, isn't a thing at all?
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it's lots of things. all waking up. connecting to the global phenomenon we call the internet of everything. ♪ it's going to be amazing. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco. tomorrow starts here. moodys says it may cut the credit ratings on several major u.s. banks including jpmorgan and goldman sachs. moodys cites the reduced chances of the government bailout would -- sorry, let me repeat that, moodys cites the reduced chances the government would bail out a bond investors if
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those companies run into financial trouble. in march, moodys says it would review the assumptions of how much federal support banks might receive. u.s. regulators are working with banks on liquidation plans in case of another financial crisis. checking shares of those banks in frankfurt, goldman sachs off by .8%. jpmorgan, morgan stanley and wells fargo, though, are up in terms of their share prices. but many of the markets have been wondering why would moodys do that now? treasury secretary jack lew is calling on congress to raise the u.s. debt ceiling, speaking in california on thursday, lew says lawmakers shouldn't wait for some unknowable last minute to resolve the issue. and the u.s. can't afford another self-inflicted wound. he estimates the government is weeks away from bumping up against the borrowing limit. congress returns from its summer recess next month. american airlines and us airways won a trial in the u.s. government's lawsuit on the merger to start in november.
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that's three months earlier than the date picked by federal officials. the airline's expected trial would last ten days meaning even if they win, the deal wouldn't close until late this year. the merger was moving toward final approval this month when the justice department and six states challenged it. that is, of course, on antitrust grounds. us airways shares in frankfurt are up by 2.9%. carl icahn has a dinner date with tim cook. the billionaire investor who recently bought a stake in apple reportedly worth more than $1.5 billion is planning to meet with coke next month. icahn tweeted on thursday, spoke to tim, planning dinner on september. tim believes in buyback and is doing one. what will be discussed is magnitude. quite an interesting tweet there. icahn has said he believes apple stock could rise as high as $700 if it increases its buyback. apple shares are up 10% this month, much of that since icahn disclosed his stake in the
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company. troubling times for china's everbright securities. first half net profit fell 2.2% to $133 million as the company warned of more losses ahead, following last week's trading blunder. everbright is trying to raise funds through asset sales to make up for the trading error which cost the brokerage $31 million. shares of the firm were further hit in today's trade after its president resigned. shares of the last seven days were down 3.5%. in china, the trial of fallen communist bo xilai continued for a second day. but not like it began. courtroom feeds from the trial were limited, giving few details. and media censors also appeared to be busy on microblog sites. the apparent clampdown comes after wide global reporting of bo's defiance on day one of the trial. the former leader rejected some of the charges against him, calling some of the evident laughable. european markets, couple of
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hours into the trading day, look like this. we are flat with a slight positive buy. the ftse 100 is an outperformer, up by .1% after that upward revision to the second quarter gdp numbers to 0.7%. elsewhere, we're seeing the xetra dax falling back into negative territory. it was actually positive territory, just a few minutes ago, down by .1%. the cac 40 is off by half of 1%. so maybe fed tapering concerns are coming back to the market, overshadowing the positive data points we got over the last couple of trading days. we'll leave you with a look at how the futures are trading ahead on wall street and we'll be back in two. [ male announcer ] come to the lexus golden opportunity sales event
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welcome to "worldwide exchange." i'm carolin roth. these are your headlines from around the world. wall street's latest trading could give the nasdaq's reputation another black eye as the entire industry comes under scrutiny from regulators and investors. the uk economy grew more than previously thought in the second quarter. the government claiming unusually high bonus payments made a major contribution. indonesia rolls out new reforms to try to shore up investor confidence but sees growth falling below 6% this year. and the u.n. secretary-general warns of serious consequences of the use
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of chemical weapons in syria is proven. but despite divisions in the security council, ban ki-moon calls for immediate access to the alleged site. hello, everyone. if you're just tuning in, if you're just waking up, thank you very much for joining us here on the show yet again. here is how markets are faring ahead of the u.s. open on this final trading day of the week. the dow, the nasdaq and the s&p 500 are set to fall at the open, looking at futures at these early hours. this is after we did see that nice bounceback in yesterday's session. the dow jones up by a half of 1%. the s&p 500, 0.9%. and the nasdaq, despite the trading glitch, finished the day higher to the tune of 1%. so markets yesterday were definitely buoyed by the better than expected economic data across the globe. the ftse 100 and europe seeing a bit of outperformance.
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the xetra dax, the ftse mib and the ibex 35 in spain seeing some very, very modest pullbacks here. so overall, we are pretty much flat, but keep in mind, we are actually on track for the first weekly loss for european markets since june. nasdaq ceo bob greifeld in his first comments is calling for higher standards for exchanges. he tells the wall street journal our systems and the industries have to get to a higher level of robustness. the journal reports nasdaq officials internally pointed to a connectivity problem with competing electronic exchange nyse arca as the trigger for the technical issue that forced the trading halt. nasdaq didn't name arca in its official statement, and the nyse has declined to comment. the journal says nasdaq officials believe they should have been able to manage the connectivity problems.
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arca's connection to nasdaq's data feet food on thursday morn was intermittent. reports say nasdaq was able to fix the issue in 30 minutes, but didn't start trading for another two hours. that was because, of course there was this need for testing and regulatory approval. reports say banks trading desks were also cautioning nasdaq not to rush to reopen, fearing a slew of technical errors could actually zap market confidence. mary jo white plans to meet with exchanges and other market players to discuss regulatory practices. she says the halt was serious and should reinforce our collective commitment to addressing technological vulnerabilities off exchanges. former s.e.c. chief harvey pitt weighed in on cnbc's "kudlow report." >> this should not have happened. and the inability to tell people which securities would trade and which were opening ahead of others, that's pure chaos and it
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is wholly unacceptable. >> joining us now from new york is darren scheringa. darren, thank you for joining us this morning. just a quick comment on this major nasdaq glitch yesterday, which was one of the biggest ones in its history. yesterday was actually a positive day for the markets. sentiment was pretty good on the back of better than expected data. what if this had happened on a down day for the markets? >> it potentially could have been catastrophic. it gives the markets, again, a reason to pause and be peerful and uncertainty is the exactly what markets don't need at this point in time. i think one of the first thoughts that came about in our shop was this some type of tack on the nasdaq. that type of fear or uncertainty at any time in any market is completely unacceptable. so yesterday's glitches, i agree
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with your earlier guests, or the clip that was shown, it should have happened. so it is hopefully it will be prepared -- repaired. >> yeah, darren, thank you very much for those initial comments. we'll come back to you in a few minutes time. gap second quarter profits rose 25% on higher sales at its namesake and old navy sales. six straight quarters of higher same store sales held by an improving product line. gap is raising its full year outlook and is also boosting its annual dividend for the second time this year. let's get out to the ceo of j. rogers. he joins us from the phone from new york. good morning to you, jan. wow. gap raising its profit target as the rest of the industry is suffering. how can gap pull this off? >> it has been amazing and it is great to be able to talk about a retailer that is actually got it right here in a quarter, because it has been so difficult in retail here in the states. q-2 was really tough for
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everyone. and gap has really been able to be -- to step out in front. their business across the board, banana republic was a little softer, but gap and old navy just knocking the cover off the ball. and here is a company also returning capital. we have got a much higher dividend, that's the one surprise in the report. we already knew they had a 5% comp. we knew that a 62 cent -- up to 64 cent earnings. they came in at the top of the range. but nobody knew they would raise the dividend enormously again, and so i think the only surprise we saw was that. and, you know, the stock reflected it. it has been a great run for gap. glen murphy has done a great job and they're selling basic product. the only real risk i see right now for gap is i just walked through the biggest clothes store you can imagine yesterday, and that's right in gap's market and, of course, fast retailing is bringing that to the states. want to look for risk, that's a big risk. >> the other risk could be
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valuation because shares in the company had an incredible run, up some 35% year to date. is there still any value left in shares of the company? >> well, i haven't been recommending the stock just for the reason you said. i think they're doing a fabulous job. they're very solid. but the expectations were that they were going to do a great job. that continues. so i think it is pretty hard to be super positive on the stock. on the other hand, it is easy to be super positive on the company, they're doing a great job. depends on your time frame and outlook. i think they're going to do a great job for a long time here. they seem to be you know, not just in the -- maybe the middle of what they're doing, but the world recognized it. and so, yeah, i'm not pushing the stock, but i'm sure appreciative of the great job they're doing. >> how is gap doing in the back to school sales? july same store sales were only up 1%. that's much slower than the growth that we saw in the month of may and june. is the promotional activity, is the discounting too heavy so
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that not even gap can compete, even though it is doing a really good job as you say? >> well, nobody had a good july for back to school. and you saw gap's number at 1%, which was as good as anybody's. but we do see a little life here in august, back to school. i was out looking at the stores just yesterday including gap and old navy. i think we're seeing some resurgence here. i think for strange reasons we said back to school is so spread out now, there is no real event. i don't think that's really true. i think we're seeing back to school being more compact here toward the back end. so heading into labor day. so i think actually we're starting to see that back to school event happen, but it is really much more august focused this year than it was in july. but i do think we're seeing it pick up. i think gap will be fine for the back to school season. i think most of the retailers are going to be a little better for back to school perhaps than we expected because we're all la looking at july now.
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>> prospects definitely looking better then. thank you for that, jan. jan kniffen. will the shale gas boom help the u.s. become energy independent or could environmental concerns stifle ambitions? we'll be back after the break. [ kitt ] you know what's impressive? a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪
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as part of our renewable special this week, we have been taking a closer look at the north american shale boom and how new natural gas and oil discoveries have the potential to redefine previous notions of alternative energy. the united states still dominates global production with some analysts predicting america could eventually become energy independent. so are we on the brink of an energy game changer and, if so, what is the best way to invest? still with us is darren scher g scheringa. darren, what is the best way to invest in this? >> the best way to invest in it is on asset class called master limited partnerships. actually master limited partnerships are only a structure, similar to reits, they pass through. most of the earnings and profitability are cash flow.
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goes to the investors. what they invest in is pipeline. and what are pipelines? pipelines are toll roads or another way -- they're the highways, the energy highways. so what is the traffic that fills the highways? oil, natural gas, refined product. and that's exactly what is going on in the u.s. now, the energy boom that has been fueled by unconventional shale plays. so very safe way of playing it is invest in the infrastructure. these are companies that have long-term contracts between five and 30 years. they have very little exposure to commodity prices so you're not making a bet on oil or natural gas. you say i want to play it safely, i like infrastructure. in the u.s., because of the energy boom that is going on right now, i call it a revolution, you actually get to invest in a growth asset in infrastructure, hard asset without the commodity exposure but still all of the growth upside potential that's coming from the shale revolution. >> it would certainly make sense because there have been a number
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of pipeline bottlenecks and that is also led to the underperformance of wti versus brent. what are the risks of investing into these master limited partnerships? this is a relatively new product, right? >> it has been around since 1986. the modern day inception has been since 2000. you've seen partnerships now, 425 billion. that's the total market cap of master limited partnerships. now, having said that, there is still only 100 partnerships in existence in a publicly traded right now. it is getting to be a more mature asset class. we look at it in the third inning or 30% of the way to where it is going to be. we see based on an example, north dakota. it is the second largest energy producing nation and we call north dakota a new energy frontier. ohio is another one and we have it again in pennsylvania. so these are opening up, new
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states that have unconventional shale plays are coming online, bringing production online. what they lack is infrastructure. so the investment needed in the u.s. based on our research is between 300 and $400 billion of additional pipelines will be needed to move this new energy from point a, the well head, to the end users. if it is a $400 million market cap approximately right now, and you expand that by 300 to 400 of in pipelines that need to be built, that's doubling at set class. that's the growth potential i'm talking about. and if you look at the companies that own pipelines, they're dropping them down to the partnership structure because it is more tax efficient, not taking corporate income taxes, passing it through. so there is another $300 billion there. we see this as a different asset class. that's where the tremendous upside potential comes when we look at master limited partnerships. >> darren, thank you so much for
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that. founder and portfolio manager at york capital management. a technical glitch knocks out trading on the nasdaq, bringing electronic markets under scrutiny. the uk's economy grows more than previously thought in the second quarter. and indonesia tries to prop up its flagging economy with a reform package. coming up, the latest on what we know about thursday's trading glitch at the nasdaq. we're live at the nasdaq market site next.
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back to our top story, nasdaq ceo bob greifeld in his first comments after the glitch that halted trading for three hours on thursday is calling for higher standards for exchanges. he tells the wall street journal our systems and the industries
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have to get to a higher level of robustness. bertha coombs is live at the nasdaq market site with more. >> that is what people have been saying over the last 24 hours about the system. what went down was essentially, you know, you see the ticker at the bottom of the screen, essentially it is the system that provides that feed, the secure information provider, which is a utility that is owned by all of the exchange. the nasdaq operates that feed for the nasdaq quotations. so everything seemed fine when the day opened yesterday. last night, though, the nasdaq said what they discovered was that there was an issue with an exchange participant and connectivity that caused ultimately that outage. nasdaq in a statement last night said it didn't learn of that until the afternoon. they didn't identify the exchange participant, but here is what we know. about 45 minutes after the
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opening bell, nyse arca, the nyse electronic platform, started sending out some notices to its traders and its members that there were some issues. about 10:15, there was a message with routed orders. they said that issue had been resolved ten minutes later. a few minutes after that, they said the nyse arca would be unavailable for tickers for tact through zyyc. this would be the continuing problem, the arca receiving of that feed from the sip. a few minutes later, they said it was resolved. then at 11:10, they issued another notice, they were continuing to have issues processing outbound quotes for that same range of tickers. now, they said it was resolved about 11:19, but then about an hour later, we start seeing notices from the nasdaq.
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the nasdaq saying that there were issues. nrbl l initially just with the nasdaq options, issues with the sip, the feed that gives the quotes. by 12:25, it was with all of the quotes on tape c, all of the nasdaq-traded stocks. that's when you see the intraday of the nasdaq composite flat line for the day. they didn't trade. by 1:00 p.m., they issued notices saying they think they have identified the issues, they're getting closer to open and they start talking about how they will open. now, the nasdaq last night said they had resolved -- identified the issue in about 30 minutes. then it would take another couple of hours to reopen. first with a few test cases, a few test tickers, and then finally at 3:25, they reopened all of the nasdaq trading and things seemed to have gone fairly well, fairleire fairly s
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once the markets with reopened. it didn't react to the situation. the stocks ended up higher on the day. going into the close, nyse arca had some issues and, in fact, nyse arca yesterday allowed some of those trades to be broken. so while the nasdaq has not said which exchange participant it is, there is some scrutiny as to what was the problem between the nyse arca and the feed and how that may have contributed or how that may have evolved from problems that were going on with the feed. still a lot to be discussed here. still a lot to find out. certainly regulators are on the case and taking a look at this. but, carolin, as you can imagine, a lot of folks are saying this should not happen. i was messaging yesterday with an engineer saying it is either a software problem, could be a note, a hardware problem, but ultimately it shouldn't have to bring down the whole system. >> you're absolutely right.
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bertha, thank you for running us through the details. let's get out to alan nachman, senior analyst. he joins us now. it is interesting, futures this morning pointing to a lower open across the board. yesterday, markets were up even the nasdaq was up after that three-hour trading glitch. to what extent will this have a big knock on confidence? and are futures this morning an indication of this? >> no, i don't think so. we're essentially unchanged as we stand right now in the futures market. we're at the 1650 level, which is actually where the market closed last friday. after all of this volatility and to me volatility is a good thing it opportunity, and this is how a lot of bottoms get made. we had the extreme sell-off, a recovery, another sell-off. yesterday, we made new relatively lows in the s&p and closed higher and above where we were last week. i look at that as a positive. i'm a guy that looks at the tape, watches the market action to give me the clues. what i was most encouraged
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about, when the news came out, the s&p was trading 1650, it backed off in the three points, but during the course of that outage, it drifted higher. so the market was not concerned. the tape was not concerned. so i look at that as an encouragement. these are technical snafus, these things happen. for -- the only people that were directly affected were the people that were active high frequency traders or day traders. if you're a position trader or have a portfolio or your retirement account wasn't affected, it is just -- it is just an issue that, you know, they have redundancy. i would imagine things like this happen from time to time everywhere. >> alan, if you're watching what is going on in the markets day by day, what will you be watching today? is it the new home sales data? >> what i'm looking at again it comes back to the tape. looking at the market follow through that we got from yesterday, again, yesterday was a key level in the s&p. it was the halfway point of the highs to the recent lows in june. it held that support point, that
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midpoint support, it held and bounced off it at 1630 in the s&p. i'm focusing on that, looking to see if we finish positive on the week, very interesting. the volatility really jumped this week. a lot of concern. what i'm focused on, i'm still perplexed by the tapering talk. you didn't bring it up for once. this is first interview i've done in a month that someone hasn't brought it up. nothing has changed as for as policy goes, but everything has changed as far as the treasuries go. the treasuries are reflecting optimism. they have already -- optimism in the economy. they already drifted higher on the fact that, yes, rates have to go up. it is not a policy change. i don't think there is going to be any policy change in the economy and everythibody is mak the prediction. we have specific rules on employment and inflation and we're not there yet. the focus now, i think, is the action in a stock market and the fact we held the 1630 and came back, but i think it is interesting that we have had a nice recovery in the interest rates and that reflects in the future people are expecting and
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the market more importantly is expecting things are getting better and better. >> alan, i was going to bring up tapering, just going to do it later in the interview. as a result of tapering, what are yields going to 3%? are we going to be seeing that level next week? >> 3% doesn't mean anything. it is something we watch and something we'll be talking about. the market doesn't care f you put it in historical perspective, 2.8% on a weekly basis is what i was looking for, the midpoint threshold of the last five years. yes, we have gotten above that, we're at 2.95% in the ten-year yield yesterday. 3% is not a magic number. headlines around the world, but the 2.8% is the midpoint of the last five years. we're now at the midpoint. the stock market had more than 100% recovery. interest rates had a halfway recovery of where we were in the last five years. not catastrophic. in america if you said you could get 4.5% mortgage, that would be great. >> alan, we have to leave it there, thank you very much. "squawk box" is up next. see you next week. [ male anno.
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good morning, welcome to a special split edition of "squawk box" here on cnbc this morning. i'm andrew ross sorkin reporting live from the nasdaq market site in times square. joe kernen and michelle caruso-cabrera back at headquarters. we'll talk about the shutdown of the nasdaq, trading in thousands of stocks, ground to a halt after a technological problem shut down trading. it is the latest disruption to the operations of the u.s. market. and now the s.e.c. chair, mary yo white, she's calling for a
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meeting of wall street leaders to help ensure the, quote, continuous and orderly functioning of securities markets. our newsmaker of the morning, nasdaq ceo bob greifeld will join us first here on cnbc at 7:30 eastern time. we have a lot to discuss from here with him and other issues. but before we do that, i'll send it back to joe and michelle for the other top stories. >> good morning, andrew. thank you. see how you like it down there. i think it is an effective use of -- your hair looks shorter with that backdrop, for some reason. >> i got a haircut yesterday. >> he got a haircut. it is not the -- okay. all right. i was just wondering. it is weird. >> he could sleep in. >> could sleep in, just roll out of bed. >> this was weird. the weirdest thing. how long do you have to know something is happening before you tell someone? i don't know. >> that's the issue. the issue of the morning is why did it take three

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