brought to you live from london, singapore, and around the world, this is "worldwide exchange." welcome to the program. the headlines today from around the globe, delayed agreement in greece but not so the bank of england. investors expect more qe. well, china surprised spike in january inflation may signal less wiggle room for beijing to ease policy. and a surprise fourth quarter loss of credit suisse but the coo brady dougan sees encouraging signs for the beginning of 2012. >> it has been a very active market and it's been a strong start for us this year, so i

think clearly this year there has been some return of can have can den confidence and some return in the market. >> we'll hear more from brady dougan throughout the course of the show in a very busy earnings s season today here in europe. we've had key chinese data as well and we keep looking at what central banks are doing. it's a super thursday, christine. yeah, it is a little bit. we're watching for what the pboc is going to do after inflation out today suggests a spike in inflation, people expecting 4.1%. so what else is china going to think except that, you know what, any hope of a cut in reserve bank reserves will get delayed as a result of stronger inflation number but, guess what, market reaction was more muted. we had gains in some of the property counters helping to offset any disappointment that any easing 0 would be delayed. the hang seng, we had the financials pulling the markets lower because any hope of a cut in reserve requirements would actually benefit the banks, so that brought the markets lower.

today we had data out showing machinery orders falling more than expected in december, a sign that once again the strong yen, of course the external environment is starting to hamper capital spending in south korea, 0.5% higher. we had the bank of korea on interest rates staying pat. they could stay that way for an extended period given all these concerns about the external environment as well. the taiwan weighted index up. . new zealand 50 pretty much flat. the sensex over in india flat as well. a lot of wait and see and i guess we're waiting for greece. ross, given us something, please. there's any one thing now. [ no audio ] >> ross, we can't hear you. your mike may have slipped out. we will come up with a conclusion on grease. we have greek lawmakers failing

to reach an agreement. venizelos says the parties have agreed on all but one issue. and julia chatterley has more. julia, what can you tell us? >> reporter: thanks, christine. i can tell you that tensions that is the key sticking point now in the negotiations between the troika and the coalition parties are talking about 300 million euros worth as a proportion of that 3.2 billion euros worth of spending we're looking at this year and what they're talking about now is how to offset is that amount of money, that 300 million euros, in order to prevent a 15% cut in pensions here and a 15% cut in the is supplementary pension income. now what the media are talking about, what are the options? can they cut minimum wage if further? papademos says it needs further

discussion with the troika. there will be a decision by 5:00 p.m. london time today. the euro group is set to meet. venezuela as you mentioned, too, he left with the troika this morning and said he hopes that the meeting will take place and that they will see a positive outcome. positive in terms of a deal agreement but maybe not so positive for the population here. in terms of the details of this 22% cut in the minimum wage corresponding as well to a cut in the unemployment benefit, we'd heard about that. in addition to the 3.2 billion euros in cuts this year an additional 10 billion between 2013 and 2015. to give you some idea of the extent of these measures. ross, it's back to you. >> thanks, jules. i apologize. we had a technical failure. anyway, hopefully we've cured that. thank you. of course it does throw the attention on the ecb.

silvia is outside there in her monthly duties. we have no final agreement yet on greece as jules suggests. particularly about whether they want to get involved in any kind of official sector involvement. >> reporter: i think we can expect not much more of indications. the ecb's position has been, no, we're not taking any haircuts. the problems are somewhere else. they have to be solved on a political scale and then we can be talking. so without a deal on the table he can only give an indication if certain ducks are in a row, so to speak, then maybe the ecb can move and, of course, he can tell us more about ltro programs, et cetera, an indication where they might go on interest rates. we're not getting a new round of staff projections on the economy so it's pretty much going to be money market operations and greece. but maybe it's a case of reading between the lines. it certainly would have been in

jean-claude's case. >> let's bring in eric, silvia. stick around. not much on greece. do you think we'll get some details on the collateral? this seems to be the ltro that's been credited with sort of a much better risk sentiment. how important is it that they don't change collateral for the next round of ltro? >> i think it's extremely important. ltros have been in a accepts a game changer for the prospects of a banking crisis, a sovereign default crisis in europe, has been transformed by this stream of funding and the acceptance of peripheral debt as collateral against the cash from the ecb. there needs to be more. there's going to be more. maybe as much as a trillion euros more. a trillion euros on top of the half trillion would just about cover it the next three years.

that would be enough to mean there's enough funding in place to finance the debt in three years and that's what we believe is necessary. >> but, of course, it depends -- it depends on what those collateral rules are. is there any suggestion that they might try and tighten them up or not from the last one? >> reporter: no, i don't think tightening of klatt tcollateral is at the moment. just about when the money markets are calming down a little bit, when we see a bit more flow in the bank bond market in the sort of corporate bond market, when we see a little bit more calming of waters and a little bit more functionality again in the interbank market now sending out the signals saying we're tightening collateral rules with completely sort of turned the boat over again so i don't think they'll touch that one with a pole. we're going to stick to our guns here and maybe even

loosening. they have lowered their rules, they can get away with it. they even tweak it on the down side and at the moment they don't want to unsettle the market at all. >> will there be any paving of the way for an interest rate cut in march? the latest german data doesn't look great oregon not the pmi but, i mean, we have to decide whether that is sort of looking back at the fourth quarter, suggesting for the first quarter. >> i think they're not going to cut interest rates today. they should cut them -- they should have further cuts in 50 basis points. i don't see any reason not to do that in europe. the german economy has been rievley strong. europe as a whole is in a lot of trouble and theneeds all the he it can get. a further cut is to come. >> silvia? >> reporter: i do get the feeling that draghi's style is a new one and, me, i'm sadly enough old enough to be around

and covered many a press conference. i keep saying maybe draghi is more so. don't have to prep the markets too much. surprise them on the day. do you have that feeling, too? >> me, yes. i think he's a very different kind of character, a different political operator than trichet was. yeah, i think he is inclined to surprise the markets and could do so today. >> silvia for now, thanks. catch you later. chr christine? well, of course we're focusing on what's happening in china. we have latest inflation data today. dampening any hopes any immediate policy easing cpi this january hit a higher that expected 4.5%. january's increase has been attred to a shopping frenzy over the lou that aunar new yea.

they cite moderation in january's ppi data. eric, what do you make of that number? should we pay any attention to it? >> a little bit of economics for you. i know it's early in the morning for this kind of thing but china is a catch-up economy that's in a fixed kurp si with an advanced economy, the u.s. it is fixed against the u.s. what that implies is china should be running substantially higher inflation than the u.s. is running. i think higher inflation in china is be to be welcomed. it's not to be resisted. the fact that they're resist in it and likely to resist it by, you know, having no further easing in monetary policy in china suggests to me that what they're playing for still is this game of trying to increase their counter, drive their growth by a net trade and that option, i'm afraid, is not going to be available to them for the next -- for a month or two, kref. for the next five, ten years. that option has gone away. if they keep playing that option, there's a very, very dark world out there welcoming all of us.

>> maybe to a certain extent china already knows that, erik, and they're doing something to increase domestic consumption, to do something to boost domestic spending. do you see anything that seems to suggest that will take place in a big way this year? >> well, my concern is all the noises out of china are they're going to resist any rate of inflation in the range of 4% to 5%. they're going to try to reduce it from that range. it needs to be higher than that just to keep the current account balance where it currently is, never mind reducing it. >> what's this dark world? >> the dark world is one with where enormous amount of productive capacity they've generated in china is channelled to the rest of the world as it has been over the last decade. so the consumer for all of that stuff still is the u.s., the uk, developed economies around the world. we were the consumer in the run up pu we're not going to be that consumer going forward. we're trying to save now. if they're trying to save and we're trying to save, you're in

a global liquidity trap. you're in deflation. you're in a major recession at the global level and that's the world that they're pushing us towards with this tightening policy approach that won't accept inflation. >> no rebalancing. >> no, absolutely. >> erik, plenty more to come from you. credit suisse has a fourth quarter loss. we've been hearing from the ceo.

corporate news out in europe. shares in diaimler trading higher. the own er of mercedes-benz hikd after forecasts in the fourth quarter. patricia has more from frankfurt. ross, you may not have had the big earnings stories all week but when we are back with earnings we are back in full blast so at the moment these shares are the top of the gainer list after better than expected numbers, after record numbers for 011 and also very firm outlook. dividends we mentioned, ross, is a major party. they were increased last year to two euros 20 and the ceo who we will be interviewing at 11:40 later on is saying that in terms

of dividends will continue to remain positive year after year. what i thought was very interesting apart from the really good numbers if you want to go through the details, the fundamental idea here is that daimler sees growth going forward, growth in terms of sales, in terms of north american market developing. they are putting their money where their mouth is. 10.6 billion in the year 2012-2013. last year it was about 4.2 billion. so increasing there significantly. the same thing for r&d. they're willing to spend 10.6 billion euros in the current fiscal year. last year it was at 5.6. they are happy to invest, happy to continue from an employment point of view they actually see more and more stable markets so i think it couldn't get any better.

what is really interesting is, of course, despite the fantastic rally we've seen in the shares since mid-december it's continuing. >> patricia, thank you for that. the french advertising firm publicis. >> reporter: despite some strong numbers for the last year publicis has growth for 2011 which was stronger than originally forecast and stronger than the global advertising market. boosted by a strong demand out of asia and also strong revenue from digital. the margin was stronger than expected but, that's probably the reason for decline, it has been boosted by some cost savings measures such as the hiring freeze policy the company will extend in 2012. in europe publicis was quite resilient despite the economic crisis. i caught up with the cu to discuss that performance. >> when you look it at the

current situation in europe, there are a lot of issues regarding the eurozone. however, most of our clients have been very cautious and some have cut but not at 2008. >> reporter: publicis is confident aimed to grow faster than the global advertising market with a stable margin around 16%. ross, back to you. >> all right, thanks very much for that, stephane. shares in ing are trading lower today. the dutch banker is warning it is worsening and set aside more cash to deal with bad debt. this after reporting further write-downs on its greek holdings in the fourth quarter. they warn that even without direct exposure to the debt crisis the indirect consequences for lenders can could be significant. and one of the real standouts

today in europe is credit suisse, the shares today, as you can see, down 2.2%. it's fallen into the red in the fourth quarter. its investment bank unit recorded a loss of over 1 billion swiss francs. carolin, what was that loss for and what is he saying about the way the year started? >> reporter: well, obviously he's very disappointed about how it performed in the fourth quarter but there's two reasons, ross, for that very disappointing performance in that quarter. firstly, it's 1 billion swiss francs almost in restructuring costs. remember, credit suisse wants to make its investment bank smaller and less capital intensive, reducing risk weighted assets by 80 billion with swiss francs this year and it's ahead of schedule on that front. but even if you strip out all the one-offs and the cost restructuring measures, even if

you look at the underlying result there was a massive miss in terms of revenues. investment banking revenues were down 32% below consensus. i want to correct that here. fixed income revenues were just absolutely fell off the cliff. 56% quarter on quarter decline here so definitely this is a quarter that credit suisse is willing to forget, they want to look ahead, and there's a good reason why they should be looking ahead. >> the year started off well for us and the underlying roe for the quarter to date is around our 15% target so it has been a very active market and it's been a strong start for us this year. so i think clearly this year there has been some return of confidence, some return of activity in the markets and obviously it's hard to predict whether that will continue or not. so far it's actually been a much more favorable environment. >> reporter: and it's been more positive for credit suisse because its share price has

risen by some 124%. last year it fell by 42%. it said it's not going to take part in the next ltro, though. >> carolin, thank you very much. still with us our guest host erik brit it ton. does the outlook get worse or better from here? >> i think from here -- well, i think the outlook has improved over the last few months thanks to the ecb's intervention with the ltros and so forth, but the structural problem remains which is afflicting all of the national institutions in europe and elsewhere which is the problem that the sovereign debt has to be written off. there have to be haircuts. we though about it in greece, numbers like 71%, something like that. but it's going -- the same will apply to portugal, ireland, italy and spain over the coming months and years and that's a major headache for anybody who is holding that debt at the moment. the game is to offload it as far as you can and to buy collateral

the ecb in exchange for cash, the ltro and i guess they will all be engaged in the game but still the proper write-down of that debt has yet to be grasped really. >> erik, to what extent do you think these financial houses over in europe will now start to look elsewhere for growth? for instance they'll go to emerging markets like asia to expand in a big way in search of that growth? >> although 0 i think it's more likely they're going to be in a risk off kind of environment not try to build more risk into their portfolio but just reduce the size of that portfolio altogether. >> the eba is forcing them to sell all the good assets to raise capital. >> indeed. it's a vicious circle. that's exactly how it goes when you are approaching a credit crunch. it was the same last time the companies and the financial market participants were short of liquidity, not able to borrow

from people because they had bad assets on their books. what they had to do was sell their good assets and all that's left is deteriorating. >> intimated the ltro and we have another big one. we've sort of protected the financial system from a sort of systemic collapse. >> yes, exactly. >> so that's the good news. so what are we left with? >> what we're left with is two major hurdles remain. the first hurdle was, will there be enough liquidity to prevent the system collapse to take this tail risk off the table. answer, yes, seems to be. and that's a good answer. the catastrophe has gone for now. but the two major steps remain and they're big steps. one is you have to write down the bad debts somehow or other and decide who pays for that loss if it lives -- if it's collateral on the books of the ecb, are they going to call that in the event it's lost from the

banking sector? if if so that will force them into insolvency, require recapitalization, or are they just going to say do you know that the ltro wasn't alone, it was a gift? so we're taking the loss. and then what does that imply? the ecb has step one. those losses have to be realized, written off and accepted by somebody and, step two, is to hold the monetary union together, there has to be a price level adjustment between germany particularly on one side and the peripheral nations on the other to restore the levels of competitiveness that existed premonetary union and that means german prices have to increase by about 30% to 40% relative to the price level in the rest of the eu and that's a major problem. >> the germans wasn't the oil prices to go down. >> i don't think that's a sustainable answer if i were in greece, ireland, port dwal, italy, i would vote against that. i mean, i would rather leave the union than accept -- >> germany is about minimum wage

so that may raise the price. >> not enough i shouldn't think. >> cisco systems second quarter profits have is jumped 44%, the first gain in the year. revenues rose 11%. higher growth than the company was projecting in november. sales were also up following several quarters with no growth. they are boosting its quarterly dividend. for this quarter, cisco expects ref thank you to grow 5% to 7% which both say is conservative. >> 0 our strategy and vision is playing out the way we hope and the gross margins we're at 62.4% which i think is very good. we saw improvement in switching gross margins. we're back to where we were two years ago and we saw improvement in gross margins versus the last quarter. >> cisco stopped trading in frankfurt is pretty flat really, just up, what, two-thirds of a percent. christine? >> hey, ross. shares of diamond foods in f focus. the company plunging 41% in after hours after the company

ousted its ceo and cfo. diamond, the maker of emerald nuts, kettle chips, and pop secret popcorn says an accounting probe discovered improper payments to walnut growers. the can company will need to reinstate results for 0 the past two years and they are investigating and reports say federal prosecutors are opening a criminal probe. the news also cast out on diamond's deal to buy the pringles brand from procter & gamble. >> pringles. >> potato chips. >> at a certain time of night with a glass in your hand, it's amazing how you can go through one tub very quickly. without even thinking about it. still to come, qe, not to qe, how much? the bank expected to launch another bout. what will the numbers be? we'll talk about it when we come back.

this is "worldwide exchange" 0. the headlines today from around the globe. delayed agreement in greece could mute the ecb at today's press conference but not the bank of england. investors expect more qe. china sees a surprise 4.5% spike in january inflation leaving less wiggle room for beijing to ease policy.

and rio tinto swings to a second half loss. aluminum down. they offer a bigger dividend payout and says things can only get better. >> plus, in the u.s. cisco's restructuring efforts may be bearing fruit as the tech giant reports its first quarterly profit gain in a year. data out of the uk, so we'll bring that to you. manufacturing and output data to tell you that the december manufacturing output up 1% on the month. it was up 8% on the year. industrial output up 0.5%. that's stronger than the plus 2%. i have it wrong, december output up 1%. that is stronger. and december manufacturing output on the three-month basis minus 0.8%.

manufacturing output stronger than we might have expected. industrial output stronger than we might have expected. erik, comes on top of pretty strong manufacturing services, pmi for january, which suggests the uk will avoid sort of a double dip and an official recession. >> does it? i'm not sure about that. it's one month's data and it's the manufacturing sector which is only 11%, 1 is 2% of the uk economy. it's good news. i'm not somebody who reads that much into the pmi myself. i think there are better surveys. >> okay. is there a better leading indicate thor? >> yes, certainly. bcc, for example, the cbi, other survey that is do just as good a job or better. >> presumably nothing to stop the bank of england from more qe. >> well, yes and no. i think the chances are quite strong that they will launch another round of qe today, but

the issue for us is what sort of qe? to date they've essentially been printing money and using it to buy government bonds. our view is it's had little effect except on the price of government bonds. >> we could have gone lower anyway. >> right. and it doesn't seem to me the government bond yields almost the lowest ever point. it doesn't seem to me the problem facing the uk economy is the government bond yield is too high. >> should they be injecting money directly into the banks like the ecb or mortgage debt? >> yes, the latter in our view. our view is the source of the problem, the root of the problem in the uk is the bad asset in the uk which is in the housing seco sector and what needs to be put in place is a set of measures including qe but fiscal measures, too, like t.a.r.p. was in the u.s. that gets to that root source of the problem, that tries to achieve a situation where those bad assets are taken off the books of a private banking sector somehow or other

realize -- the losses are realized. the banking sector can get on with lending. >> presume you don't think it makes a difference 50 or 75? >> i don't think it makes a difference to the economy except maybe cruiserweights a bit of inflation next year. >> more to come from you, erik. christine? asian bourses are mixed. a lot of wait and see because there's no deal on greece. a lot of wait and see there. over in china we have the cpi data coming in stronger than expected, 4.5%. clearly that's dashing hopes of any imminent or any easing from the authorities. the pboc, that is. but in the end reaction was muted so the market ended flat to the upside but that brought the financials, the chinese financials in hong kong and end ing to the did you know side but still holding on to the 20,000 the level. nikkei 225 up 0.2%. we had data showing machinery orders coming in a lot weaker than expected.

the strong yen, the external environment really hampering capital spending. the kospi, bank of korea kept rates object hold again on the external environment. 3.25% is where interest rates. a lot of people are saying rates could stay there for an extended period of time. us a tr australian market is down. new zealand 50 flat. and the sensex trailing a little bit higher, 0.5%. a lot of wait and see again, ross, on what's happening in your neck of the woods, the eurozone. >> yeah, and here in the euro area and the eu stocks are slightly higher after another flat week of close last night. remember, we were up this time yesterday and it all dissipated to the end of the session. less than 73 decliners outpaced by advancers at the moment. the ftse 100 is up marginally. the focus on earnings, the ftse up a third after closing down a quarter. yesterday the xetra dax, up 0.6% for the cac and the ftse mib up a similar amount. we have a wall with eight of them. i won't go through all of them. credit suisse we talked about how that loss in the fourth

quarter but he's feeling better about the year ahead. rio tinto, stock down 1.3%. a 6% fall in the second quarter mainly due to restructuring in aluminum. a big dividend hike not doing too bad ly with investors. numbers just down slightly. ing down 4% this morning. they reported a bigger than expected loss in their insurance operations because of exceptional charges it's trying to prepare to sell or list the business and earnings international came out with not bad numbers. the stock off slightly this morning but they have an 18.3% rise in 2011 sales. luxury goods sector does seem to be standing out from the crowd because, of course, increased demand in emerging markets. as far as the euro is concerned, up to 1.33. another two-month high. just below that so keep your eyes on sterling. if there is more than 50 billion qe sterling might get knocked

more. as far as the bond markets are concerned, of course that will have an implication for gilt today, currently yielding 2.17%. but a big 30-year auction out of the united states, keim your eyes on here. btp still yielding around the 5.5% mark at the moment, not bad. and the spreads pretty consistent with bunds yielding below 2%. christine? >> hey, ross. as i said before, china reported inflation numbers, a surprise 4.5% spike in inflation in the month of january, of course. tracey chang joins us with more. january's 4.5% price rebound really is well above expectations. most economists had predicted cbi to become -- to come in as a steady 4.1% in line with december's data but january's increase is being attributed to a one-off shopping binge over the lunar new year which pushed the food prices up. economists say they expect inflation to ebb in the coming months. january ppi showed moderating price pressures supported the

view of china's decision to raise the ceiling price on gasoline and diesel also reflected beijing's les anxious stance on inflation. shares ended flat today. gains in report plays helped offset cpi disappointment. back to you. >> thank you for that. tracey chang. we have the head of research. you and i know what lunar new year is all about. food prices really soar through the roof. is this a one off? >> no, it's not a one off. we've had so much money mroeg into the system in china in various ways through various channels. first of all, through money supply growth, then through foreign influx and it's been a very, very difficult time for

the pboc to sterilize these in flows and it takes usually about 9 to 12 months before the actual decline in money supply growth actually securely anchors inflation. and we're not there yet. >> so what is the longer term trend of cpi in china? does it mean it goes much higher from here and how much higher? >> no, it won't necessarily go much higher but, you know, the fad price issue is not a one off. i can tell you that from living in hong kong. this is not -- if anything these food price increases are understated. and we're going to have to watch carefully what's happening there. the fact is the nonfood prices were essentially flat from the previous period and we will not go much higher but 4%, around 4% is where china has to be in the

long term. that is the long term steady inflation rate and anything above that politically is not acceptable. so i think we will see tight monetary policy continue for at least another six months. >> miranda, do you agree? >> well, i think there is some difference in the data. the big surprise this month was actually in the vegetable data. a lot of the rice and other sort of staples are trending down war wards. in terms of year on year increase. we're up about 23% month on month. a spring festival effect but much more pronounced than previous years. that's going to tail off but, yes, there is still a great deal of uncertainty about how much inflation there is remaining in the economy. and as related to the money

supply is how much is flowing in. in october, november and december we saw outflows from china. but if that reverses we have u.s. dollar weakness, then it's very likely that the influence could come in again and that's where people are holding off and the decisions are being held off until we see more certainty. >> what is china supposed to do? houchl of a policy dilemma do they have? pork prices up 25% on the year but house prices. >> well, the house prices are very, very helpful to the overall inflationary outlook and that's still a very, very key part of the overall policy and they try to get them down, increase housing at the low end but not at the high end. but you still have uncertainty about where the core numbers are going and that's where you have in terms of actually stimulating the economy, what you are seeing is instead of big headline

numbers like a cut in interest rates, what they're doing is providing liquidity, the banking system is, through the pboc so that's increasing lending but not making any big headline announcement saying we've tackled inflation. >> i want to pick up on your point where you said we can expect more policy tightening in the next six months or so. why is it up to today markets were expecting or hoping for a cut in banks reserve? >> well, that's equity analysts who like to believe what they like to hope for. right? i think we've got to be very, very careful with that. the talk in hong kong all along was there is going to be monetary easing in china and there was really no basis for that. people just were hoping for that and they made that into a re reality. the reality here is there is the

inflation has not been kicked out of the system. from a political standis point, the political leaders of china, the last thing they want is they tried to fight inflation and failed and, you know, perhaps even more importantly than all of that, we have a situation in which the chinese currency has actually depreciated meaning it has an inflationary impact on the domestic economy. so these are issues that the leadership has to deal with and the idea there would be sigmon tear easing is really not based on anything i can see that had any basis in reality. >> so does that mean that in your opinion equity markets in china, in shanghai, will tend lower as a result once they get used to the fact any hope of policy easing is not going to be in the picture? >> well, there's liquidity being generated in huge amounts in europe and this in the united states and some of that, of course, finds its way into

emerging markets and into china. we've seen india and china being, you though, performing very well so far this year. as a result of that inflow interest the united states and europe into emerging markets. so it's not just the local monetary policy condition that determines this, but i think, yes, china is not going to make a huge bull run here because the actual tightening -- or tight monetary policy will prevail. by the way, monetary policy operations, omos in a recent period have been tightening. the people's bank of china has been withdrawing liquidity not infusing it. >> erik, you are nodding your head. >> yeah, i agree with what you are saying about the starts of the pboc in china and the outlook for tightening versus easing. i agree with that. i think the authorities there should be thinking about their

legacy in these terms. how do we achieve rebalancing? how do we achieve the global needs? for that to happen in my view, in our view, china's inflation needs to be in double digits. i'm not talking about 4.1 to 4.5. i'm talking 10% to 12%. that's what we need, that's what china needs, what the global economy needs. >> can they do that? >> not inflation in double digits, no. but we did see an interesting thing on the rebalancing today that hear raising wages by at least 13% and that gives some balancing off authored to stimulate domestic demand because the key problem with china is -- i mean, the imf was forecasting the gdp growth could have based on europe. we have the export data out tomorrow and if china is hit very, very badly by the european and the export crisis, then it has no alternative but to

stimulate the domestic economy and that's through things like wage increases but also increasing lending and as we have a very, very tight monetary bank system at the moment, liquidity may be fine but the banks can't lend. >> might speed up the global rebalancing that we need. >> possibly. i think it puts us further into this liquidity. we're all savers. we're all savers. china needs to stop being a saver and that means it's real currency. >> it would help with the inflation. >> it's going the other way. >> good. >> if i can break in there for a moment, do not hope for huge inflation in china, okay? the little leadership of the communist party of china knows that's its own death seven sense. it will not go that way and it will not happen. >> interesting discussion. we'll have to leave it there.

thank you very much. and, erik, you'll continue to stay on with us as our guest host. the other big stories from around the world, still here in asia looking, of course, at what's happening still in china. china saying the u.n.'s recent climb is not connected to vice president's visit next week by xi. it would imply a manipulation of the exchange rate saying china has been diligent about advancing its exchange rate reforms and will continue to do so. xi is touted to be china's next president is scheduled to meet with u.s. president barack obama next tuesday. and some earnings to tell you about this time from the world's number two pc maker lenovo group are reporting numbers that beat market expectations. the company's profit surged 54% versus a year earlier while revenue rose 44% in the same period. however, growth was sluggish for the third consecutive quarter. the highlight of a crisis in

europe and a shortage of hard disk drives as key challenges for the global pc secotor. ross? and corporate news here, shares in credit suisse today are trading down, just under 2% lower. the banking giant has fallen into the red in the fourth quarter, recording a loss of over 1 billion swiss francs. it had been expected to of 430 million. that loss of 637 for the quarter, credit suisse said its cost cutting program is on track and that it had cut its 2011 executive compensation by almost 30%. daimler is one of the standout stocks in europe, its shares up over 4%. the owner of mercedes-benz hiked after profit forecasts. the maker says that it expects vehicle sales to rise significantly this year adding that it aims to maintain earnings at the same level as last. the bank of korea playing it

safe. holding rates for the eighth straight month. rhie? >> reporter: they kept rates on hold at 3.25%. the central bank took in concerns of inflation and uncertainty surrounding the global economy. despite macro indicators in the u.s. the b 0 ok expects recovery to come at a moderate pace. >> translator: even if the national debt problems in europe improve, we assume that the world economic growth will not be largely expanding due to a e decrease in the government expenditure of advanced countries and by the effect of financial regulations. >> reporter: for the months of january, cpi within the central bank's target of 2% to 4% while ppi released this morning also rose at its slowest pace in 17 months. going forward they expect the boa may stand pat but we have to be mindful of the fact south

korean economy is contracting. gdp slowed to a two-year grow 0.4% while january exports fell a shocking 6.6%, logging its first trade deficit since october of 2009. consumption shrank rapidly. for the first time since the first quarter of 2009. back to you at the sgx, christine. >> rhie, thank you for that. rhie-young lim. weak global demand. >> reporter: hi, christine. japan's machinery orders dropped a larger than expected 7.1% from the previous month. global demand weakens. the index shrank for the first time in four quarters. still, this was a little stronger than the forecast made

in september as firms managed to make up for the production halts in thailand. for the january-march quarter they are expected to turn upward thanks to construction orders. meantime on the markets the nikkei 225 fell on profit taking today after yesterday's three-month high closing. the fall however small. index managed to hold the 9,000 mark. that's all from the nikkei business report. back to you, christine. >> yukako ono from the nikkei,. ross? still to come, the ceo of daimler.

[♪...] >> announcer: bank robbers stole $43 million in one year. but identity thieves? try 37 billion! and guess how identity thieves are getting some of that money. by taking over our bank accounts. they may not even need your social security number anymore. all an identity thief may need are a couple of pieces of information, like your mother's maiden name or the city you were born in, and they could add their name onto your bank accounts in order to make your money their money. [whoosh, clang] you need lifelock-- the only identity theft protection company that now monitors bank accounts for takeover fraud. we have the most comprehensive identity theft protection available, so call now. try lifelock's service

risk-free for 60 days. if you're not satisfied within 60 days, simply notify lifelock and you won't pay. and now, keep your personal documents out of the wrong hands with this personal shredder, yours free with enrollment. call the number on your screen. [♪...] 

a euro group meeting this evening to sort of stamp the approval of the greek bailout agreement. the german government official has been quoted as saying he sees no decision on greece on thursday evening in brussels at the euro group meeting. at the same time greek labor unions are calling now a 48-hour strike for friday and saturday against the eu imf austerity measures. let's get erik's reaction to that. erik, the assumption has always

been when push comes to shove greece one way or the other gets the money, any kind of disorderly default. >> i say that's the hope more than the assumption. >> that's the assumption amongst investors, that has always been the assumption. nearly everybody that comes on this channel, well, yeah, one way or the other that's what we have priced in. i'm trying to find out what is the risk? >> there is a risk. i don't think the risk of not getting the bailout fund is that large. i think this is brinkmanship they are engaged in, woet sides have a lot to lose and a lot to gain by being the last to blink. the problem i see is it's one thing agreeing a set of cuts and all that kind of thing if europe the greek government. it's another thing actually implementing them. that's the protest on the streets and now indicating. you can say, oh, yeah, yeah, this time we nearly mean it. we nearly really mean it that we're going to do the austerity package. >> we're just trying to buy more time and aren't we just trying

to get the eurozone into a place where we can pull the plug finally on we're not ready to do it yet? isn't that the point? >> that may be one solution. you'd have to prevent or have measures in place to prevent that. >> that's what the game has been, right? >> that's what the ltros are for. >> we're not completely comfortable with that outcome, i agree, yes. >> erik, good to see you indeed. christine? hey, ross, are all these concerns about the eurozone having malaysian base rethinking its options, realigning, and one of them recently pulled out of lond london. much prized london group and london, paris, and of course india. and of course the eu emissions scheme is also not helping matters, too. i asked the ceo who is in town for the asia pacific conference and he seemed hopeful that things will change on the policy front. >> i think some things need to

change when you look at global pressure happening from india, china, the u.s., canada. there's a structural problem with the way it's defined. number one, it doesn't achieve its objective in reducing emissions because it leads people to take an alternative approach. in this case you'll find more people flying to the middle east as a stopping point in going out. >> and that was the ceo of airasia x talking to me there. i guess it just means, jackie, now that you are joining us, i can visit ross now. >> is that the only airline that flies between singapore and london? >> no, it's not. i'm just using that as an excuse. all right, coming up in the next hour, we've got a lot packed into the show on "worldwide exchange" for you.

as we wait to hear whether the greeks have signed on the dotted line and agreed to the conditions required to get their next bailout. we're going to get to athens live for the latest there and in the midst of a massive earnings day in europe we have the first on cnbc with the ceo of daimler. we'll get his outlook for the auto sector in 2012, and we also talk about cisco's latest numbers and see how it sees the year ahead. will tech give the markets more reason to be cheerful? keep up e-mails and tweets coming in. we'll put your questions to a great lineup of guests coming up on the show. i was having so much trouble getting around, i thought, end of the line... i was headed to a nursing home. well, i'm staying in my own home now, because we chose hoveround! hoveround's compact round design makes it easier for you to maneuver through the tight spaces in your home. and best of all, 9 out of 10 people pay little or nothing for their hoveround, so call now and

you can be the next to pay... zero...i paid nothing for the unit at all. and now only from hoveround, every power chair includes a handy tote bag, so you'll always have access to your favorite items and this sturdy cup holder, so your favorite beverage can ride along with you! the folks at hoveround really thought of everything. that's why i called them and so should you. call them right now! get your free dvd kit. you walk into a conventional mattress store, it's really not about you. they say, "well, if you want a firm bed you can lie on one of those, if you want a soft bed you can lie on one of those." we provide the exact individualization that your body needs. welcome to the ultimate sleep number event. not just ordinary beds on sale, but the bed that can change your life on sale.

the sleep number bed. this is your body there. you can see a little more pressure in the shoulders and in the hips. now you can feel what happens as we raise your sleep number setting and allow the bed to contour to your individual shape. wow! that feels really good. it's hugging my body. it's not about soft or firm. it's about support where you find it most comfortable. right now, queen mattresses start at just $599. and save an astonishing 50% on the final closeout of our innovative limited edition bed. you can adjust it however you want so you don't have to worry about buying the wrong mattress. hurry this week to the ultimate sleep number event. only at one of our 400 sleep number stores.

here are the head lines from around the globe. another two-day strike as germany says no decision on the bailout will be reached in brussels tonight. will the ecb weigh in at today's press conference. and in the united states, cisco's restructuring efforts may be bearing some fraught as the tech giant reports its first quarterly profit gain in a year. and china see as surprise 4.5% spike this january inflation leaving less wiggle room for beijing to ease policy. good morning and welcome

back. you're watching "worldwide exchange" with christine tan in asia, ross westgate in europe, and i'm jackie deangelis in the united states. great to have you with us this morning. let's take a look at the futures and see how we're setting up for trade on wall street this morning. looks like a modestly higher open if the markets were to open now, the dow would be higher by six. the nasdaq and the s&p 500 just botch the flat line there. of course this after uneventful trade yesterday although we did end higher. interesting to note, ross, the financials and the tech stocks were the standouts. health care in the u.s. was the underperformer. yeah, the european bourses up, closed down flat to lower. right now we're trying to inch higher. again, a super day of earnings out of -- i don't mean super in terms of fantastic. i mean a lot of earnings today out of europe. quite a mixed bag really but nevertheless stocks are trying to inch higher at the moment and because we haven't got a final adwre agreement out of greece, therefore can't expect the euro

group to expect anything tonight. actually don't have -- they can't agree on anything until the greek politicians have agreed if that all makes sense and that also means we'll probably get slightly more muted press conference out of the ecb. mario draghi likely to be questioned about the central bank whether they want to accept a haircut on greek debt holdings or not. silvia is there. silvia, if we don't actually have any agreement on the table then presumably he's going to say, well, i can't talk about it because we don't even have an agreement yet so i can't weigh in. >> reporter: yes, one might wonder why we have a euro group meeting tonight if we still have nothing on the table. they could have just had a phone conference if anything, but bottom line is you're quite right. in terms of the overriding question will the ecb take haircuts will they chip in on that score? no deal on the table, why should the ecb at the moment say anything or give way on

anything. we're hedging our bets, no reason there should be haircuts mao. next question, please. there will be plenty of questions. we can ask about the upcoming ltro. we can ask about collateral requirements. we can ask about the interest rate outlook. we can ask about the economic outlook. there are plenty of questions about but a lot of question marks because there are not a lot of answers mario draghi can give because we are a little bit in the waiting loop and the markets don't expect a rate move straight forward today. >> just worth pointing out the greek unemployment numbers just come out, 20.9%. it was 18.2% in october. so that's hardly going to make the unions want to back off their strikes. you talked about plenty of 0 other questions, of course, and the effectiveness of the three-year ltro will be one of them. james ferguson is head of strategy at west house securities. also with us tony fratto from the united states as well. james, let's bring you in on this.

the ltro has undoubtedly been a game changer, it's made everybody believe that we're not going to get a collapse of the eurozone financial system. what do you want to know today from mr. draghi? presumably collateral -- if they're kept the same, are we going to get the same or bigger amounts at the next ltro at the end of the month? >> it's worth bearing in mind the ltro consists of winners and losers and what the banks have to do still and ltro one, two and 17 are not going to change this. they have to recapitalize themselves. they're too highly leveraged. that either means shredding assets or capital. what was happening is the u.s. dollar providing funders and also presumably all other private sector funders were pulling out so the ecb stepped in under very generous terms and providing funding for the banks so that's great news for the assets the ecb allows the banks to post as collateral. good news for securities of all types but it still means we

might offer sharp credit contraction for the real economy in europe. the trade finance and all of those areas. >> i saw goldman sachs' poll of banks. they are only about 7% of the l it tro going into lending, about 36% was buying sovereign debt and i suspect the rest with the ecb. this is still about banks having cash, not doing anything with it, just so they can feel like they have cash. >> basically what a bank does when it has a banking crisis, as it works to surviving and the way it works to surviving is it derisks its assets. i'm going to lose all those h h high-risk assets and turn them into lower risk assets. you have really low risk like short dated government bonds or cash. they are saying i'm going to given you more latitude, leeway than that. i'll call risk free, a slightly

wider range and that's having a fantastic effect into financial markets. it should be nearer to zero. >> that was banks in a poll speaking to goldman sachs. >> defining loans as things like security. >> tony, i want to get your take on this. it's providing short-term liquidity and that has provided a boost in confidence but how long does that last before people start to peel back what's going on and say it's only a short-term fix? >> it can only be a short-term fix though it's a long-term operation. it's going to be another three-year operation. we're already getting questions about the stigma of banks having to go in and take up this very generous terms that are being offered here so it's terrific for the short term. it does help them with their

really near term liquidity concerns but the problems james was just describing with the real economy, looking it at the banks shedding their assets, a very, very flat it if not for a sustained period of time. there's no escaping that. that's the decision they're making if they're going to continue to help support liquidity operations and to deal with the greek operation and keep greece in the euro. if they want to deal quickly they could have a sharp return to growth in europe but that's not the decision they're making. we understand why they're doing it. it just means we're looking at a year if not more of very, very slow growth in europe. >> tony, you mentioned slow growth in europe. this is christine. what sort of growth are we looking at? a deep protracted down turn or is this going to be something that will last for a couple of years? i mean, what's your outlook? >> i think we are going to see a sharp contraction that probably started in the fourth quarter,

christine, and then we'll stay very, very slow for a long period of time and the question i have, you know, as we look at the global economy, what does that mean for the global economy if you have europe with a sharp contraction and then sustaining very, very slow or negative dwroet for a long period of time. the united states while improving will mott have very high, robust growth. we're going to be happy to see two to two and a half percent growth in the united states if we can get that. the mean for china? does the chinese economic model really work if you have japan flat, europe negative to flat, and the united states still at relatively low growth and we're going to have to see whether china can sustain growth on its own in that environment. >> and that's the point our previous guest erik was making, tony, about china has to change the model otherwise we're going to be driving ourselves into the

deflationary spiral. james, how long is the leveraging process and banks going to be and how much more consolidation do we have to do in the sector here and how does that feed back into the economy? >> tony was making a good point. basically the policy is makers vote, as it were, usually without asking us, as to whether we're going to have the short sharp version or the long, drawnout version and the voting in europe seems to be very much to the long drawnout version, we try to provide the liquidity in the short term but we're really looking at a sustained period where banks will be shedding assets. historically it's about 5 and a half and a half to 6 years. the u.s. went to an accelerated pace and is already starting to move bank loan assets back up. as tony was making it, the u.s. outlook now, i don't suppose it will shoot the lights out in 2012 but the u.s. is winning the contest in 2012 and by 2013 could be on a sustainable recovery path back out into normal

normalcy. china's problem is everybody else. europe is just beginning a banking crisis scenario that all of us who watched the swiss, it rish, the british and the u.s. banking crisis are familiar with now. but imagine this is around about spring of 2008 for europe and they've -- >> spring of 2008? >> really before everyone really appreciates the big problems. and you were talk iing about consolidation. we need to have a huge amount of consolidation. when the eba did a stress test, the only bank that's gone so far as the fourth was, the fourth strongest, in europe. which of the strong banks will help consolidation? we don't really have obvious candidates and, therefore, the ecb is stepping in saying i'm not going to have a liquidity crisis on my watch. but the solvency crisis remains front and center. >> great. you've done it again, james. you've come in here again and said we're only in spring 2008

european bank crisis. i keep trying to 0 feel better about myself and you knock me back. >> the liquidity provision is good for markets. if we're talking markets alone this is not such a bad environment but for economies very tricky. >> all right. good to see you nevertheless. thanks very much for that. james ferguson. tony stays. we're going to look at some charts on the impact of the l it tro, some asset classes, tony, so get your thoughts on that. we're going to get another 48-hour strike out of greece starting on friday. this, of course, as we still have no final agreement on the terms of the troika bailout package. jules joins us to remind us what has or more importantly hasn't happened in athens so far this week. jules? >> reporter: yeah, you're right. the latest sticking point, though the only sticking point we're hearing now is the pension cuts. we're talking around 300 million euros worth of pension cuts that we're looking to see whether

they can be offset to other things, wage cuts, plenty of other options on the table but it's just whether we can come to some conclusion. we're hearing the local media here saying they're going to given the coalition 15 days to work around and try and find a solution. we've also seen flashes, though, from a german government o official saying that there isn't going to be a decision on greece tonight, if that euro group meeting goes ahead. of course we don't even know if they're going to have something to discuss. we're hoping or papademos said there will be discussions between the troika and venizelos and himself in order to come to some kind of conclusion. a source told me last night, in fact, that if whatever doesn't get agreed to today on these reform measures could be pushed back to as late as june to come up again for discussion. so it begs the question whether there's a potential here that we just say, hey, we don't make a decision on these pension cuts

here. we come back them at a later date. he also mentioned to me that at the time of the talks this morning, the new democracy leader who given the poll readings at the moment could end up being the new leader of this country, demanded an election date in order to agree these reform measures so, again, you see the situation that papademos finds himself in, caught between the demands of the troika, the coalition government's demands here on pensions and the population set to strike again on friday and saturday of this week. ross, it's back to you. >> it sounds like -- well, they're going to take it to the wire and they're going to push the imf and the troika. maybe they're thinking we'll call their bluff. we'll see what happens, julia. thanks for that. still to come, china sees a surprise spike in inflation in january. is this the beginning of a trend or one-off blip.

good morning and welcome back. you're watching "worldwide exchange" and it's that time of the day, time for your global markets report. let's start here in the united states and take a look at u.s. futures and see how we're set for trade this morning. looks like now the picture has turned a little bit if the markets were to open now the dow would be a point above the flat line with the nasdaq and the s&p slightly under the flat line.

this, of course, after an uneventful trading day yesterday, christine, but we did see the markets close higher. the dow up nearly six points, its highest since is may of 2008. jackie, here in asia a little bit mixed today no deal on greece so investors are staying cautious but we did have some china cpi data and that was the center of focus. we had gains in property stocks offsetting any disappointment that the strong cpi number i just talked about might delay any sort of policy easing. in fact we'd an earlier guest who seems to suggest this is not a one off, inflation will grow at a steady place and prompt more policy tightening for the pboc. the hang seng, chinese financials getting dragged lower as a result ending down to the flat, to the down side. the nikkei 225 is up with core machinery orders falling more than expected. once again a sign of the strong yen and all this uncertainty

hampering in japan. the big story there the bok, the bank of korea, leaving rates on hold at 3.25% because of a slowing economy. outlook still remains uncertain. a lot of people are saying rates could stay that way for an extended period of time. weighted index up 0.5%. the australia market down. the sensex up 0.7%. so a lot of wait and see again, ross. a lot of wait and see. guess what, i don't know. >> amongst other things. one of the things we do think is quantitative easing to the tune of $50 billion. it might be $75 billion. here on the stocks wall, we're weighted to the upside 6-4 advancer outpacing deklainers. this is where where we were yesterday. we finished flat and down in the case of the ftse 100. so slim gains right now. the ftse up 14 points. xetra up higher.

the ftse mib up a quarter of a percent. it's a super or big earnings day today and that's really where the focus is not on the overall indices level but the individual stocks today. credit suisse had a loss in the last quarter because of its investment bank unit. ing came out with bigger than expected loss in its insurance operations, its stock down 3.8%. rio tinto down about a percent at the moment. they had a 6% fall in second quarter profit but they did talk about a big dividend hike. daimler, we'll talk to dieter zetsche first here on cnbc in half an hour but they upped their dividend by more than expected. pretty good results from vodafone. talking to stephane this morning, he thinks 2012 is going to be better than originally thought. just below that at the moment, 1 1.3280.

we'll keep an eye on the pound. as far as bond markets are concerned, gf il it ts, if it's bigger than 50 billion might get a ten-year gilt. ten-year btp yield steady. the spread over bunds pretty steady, of course, after yesterday being it at the narrowest level since early october. china's latest inflation data has dampened hopes of policy easing. hitting a higher than expected 4.5% from 4.1%. january's increase is attributed to a one-up shopping frenzy over the lunar new year holiday. economists said they still expect inflation to ebb citing a moderation in january's ppi data. tony, let's get your reaction. does it worry you when the whole world is looking for china to grow, china might be doing something to try and dampen consumer consumption?

>> it's really the conundrum china is in, christina, they have a very, very hard time dealing with macro changes in their economy. so inflation ticks up and what can china do do about it? they need to take really administrative actions, directives to the banks to try to get them to stop lending. and is that what the economy needs right now? i asked myself, can the chinese economy work with -- in a period of really slow growth? and i just don't see how they can do it until we're looking at a multidecade period of china trying to generate domestic growth. we're just not seeing it in strong enough numbers right now, so they need the external markets to work, and if they're not, we have to wonder whether the chinese mod 0 l works. and that's a risk for all of us in the global economy over the

next three to five years, i believe. >> china, tony, is taking steps to rebalance the economy. a lot of skeptics are say that go will take time because some of the policies are not actually in place yet. is that something the global economy can count on as a key driver of trade, of exports, of grow growth? >> well, look, like i said, i think it's not something that they can do overnight. this is something the chinese have talked about for about seven years now. this need to create domestic demand but it requires big structural changes to do that. they need the social safety net. they need to really deepen and strengthen their banking system. they need to allocate credit to consumers, consumers can participate in that in a much more sustained way. they're just not there yet. it's going to take time for them to do it. they can't do it overnight. so when the rest of the global economy goes through these periods of really slow growth or

below trend growth, it's hard for china. someone used the analogy of the movie "speed" where the bus can't get below 50 miles an hour. if it does, it blows up. that's the real risk with china. does china blow up if the rest of the world is sustaining slow growth for a very long period of time? we hope not. we hope they're making the right reforms to be able to deal with that but it's the open question. it's the big question for us, i think, over the next three to five years. >> and that's a great analogy and certainly a scary one when it comes to china. for now we'll have to leave it there. thank you, tony, for talking about these issues. we'll have more insight from tony coming up on the program. of course he's going to stay with us. chr christine? great to get tony's insights. that's it for me. i'll be back tomorrow. have a good one, guys. >> see you, christine.

and coming up next, cisco posts a strong second quarter profit, so is ceo john chambers delivering on the company's massive retruck touring program? we'll talk with one analyst who says there are plenty of concerns about cisco's future growth. ♪ ♪ [ male announcer ] offering four distinct driving modes and lexus' dynamic handling, the next generation of lexus will not be contained. the all-new 2013 lexus gs. there's no going back. ♪

good morning and welcome back to the show. let's get you a look at how the u.s. markets are likely to open

on this thursday morning. looks like we pulled back a little bit if the markets were to open now, the dow higher by two. the s&p and nasdaq under the flat line there. this after an up session with the dow hitting its highest low since may of 2008. meantime, taking a look at cisco, of course, reporting after the close yesterday, first quarter profits jumped 44% in the first gain in a year. revenues rose 11% higher. that was higher growth than the company projected in november. sales of cisco's routers and switches also rose following several quarters of no growth. the current quarter cisco expects revenues to rise about 5% to 7%. >> our strat they and vision is playing out the way we hope and the gross margins were at 62.4% which i think is very good. we saw improvement in switching gross margins. we're back to are where we were two years ago and we saw improvement in routing gross margins versus the last quarter. >> and joining us now is the managing director of m can km

partners. and let's talk about those results. and, in fact, cisco is the second quarter profits, michael. you recently downgraded cisco to neutral so let's start with that. >> thanks. i downgraded the stock last night after the report because on the is yosurface it looked l very strong report, certainly they came in well ahead of expectations on rech nouse, on margins on eps. my concern is the beat was very much backward looking and based on strong orders in the previous two quarters. when you look at the january quarter as reported last night new order growth which is only 7% year over year that missed my expectation. i thought it would be up about 13% to 15%. it was up 13% the reeve quarter. 11% the quarter before that. i'm always concerned when reporting revenues above the rate of the new order growth because that means we're down. historically you want to own the stock not drawing it down. and finally if you really strip out some strength in chinese

service provider demand and japanese rebuilding demand, it's actually a very weak quarter for orders. that mass me concerned about the future outlook. >> and those are fair. let me talk about the margins. chambers was very proud of the margin growth that we saw in the quarter. what's your feeling? are those sustainable? >> well, i do think they deserve a lot of credit. they are controlling what they do, control quite nicely and my colleagues demand picture and the enterprise demand for networking equipment. certainly on the gross margins they came in ahead of expectations. they also restructure faster than they said they would and achieve their goal early. but then they're guiding margins down going forward. one of the key problems here is that cisco fundamentally sells layer two and three routing and switching and that is actually turning in from a premium high-end market to more of a commodity market where you have hp, you have the chinese

players, dell, even intel itself is starting to compete in that market. margins are going down, so cisco came in at 28% but long -term model is 25%. so structurally it looks like going forward margins will probably come in a bit. >> okay. we made an interesting point during the break talking about cisco sort of as a bellwether for the tech industry and the global economy as well. when we look at cisco and look at where the strength is coming from you mentioned if we stripped out china, we really didn't see a lot of strong growth there and that is a scary prospect to me. >> that's really the problem. 70% of what cisco does they sell enterprise networking and we're not seeing evidence. we're hopeful that the economy is getting better. where we would be wrong on our down grade is if the macro is strongly decelerating and we're somehow missing that but cisco is not making that call. we're not really seeing it in our own checks and that's really the key concern as to what's going on with enterprise networking demand. i just describe it as very ho

hum and not delivering the acceleration that we were hoping to see at this point. >> is that a cisco story or a sector story? trying to extrapolate this, is it more about cisco competing in the space or a macro demand story that we should take as a signal about the u.s. economy right now? had. >> i think it's a macro demand story first andly it highlights position of being the leader in layers two and three which are commoditizin commoditizing. they compete in high er value areas and able to grow faster even in the very sluggish economy. cisco needs the macro to work in order for the stock to work. >> yeah, and that's a great point. it's going to be interesting to see how the market reads this today. sometimes the market reads it a little bit differently not necessarily looking at all of those details and if if the market wants to see it as a good result the stock may pop. it will definitely be one to keep an eye on. thank you for joining us today to talk about cisco.

managing director at mkm partners. still to come on the show, a lot more on "worldwide exchange." the u.s. markets have been on a steady march upwards since october with the dow, the nasdaq and the s&p thousand now in bull territory. is that slowing down? our next guest says it's in the late stages.

good morning and welcome to the show. the headlines from around the globe today in the united states cisco's restructuring efforts may finally be bearing fruit as the tech giant reports its first quarterly profit gain in a year. still no deal. another round of strikes and a record employment number. it's only midday in greece. is the ecb going to provide a glimmer of hope later? and a surprise fourth quarter loss at credit suisse. ceo brady dougan sees encouraging signs in the beginning of 2012. >> it has been a very active market and it's been a strong start for us this year, so i think clearly this year there has been some return of confidence, some return of activity in the markets. good morning. nice too much you here on "worldwide exchange" with us this morning.

if you are just joining us, let's take a look at the u.s. futures and see how we're poised for trade on wall street. looks like we can't find a clear direction if the markets were to open now the dow would be higher by one point with the s&p 500 and the nasdaq looking to be just slightly under the flat line. ross, how do things look over in europe? >> higher than we were this time yesterday. remind you no final agreement in greece. they're sticking over a supplementary pension. now another 48-hour strike to be called and as a result we're unlikely to get anything approved in the euro group meeting. a comment about their participation in a greek debt swap as a result although they may still talk about indications for rates in march and, of course, what the next had ltro might look like. stocks a little bit firm to say we're up this time yesterday, jackie. >> yeah, and joining us now, ross, is the partner and chief market strategist at bell curve

trading. and still with us our guest host tony fratto, managing director of hamilton strategies, and an nbc contribute aror. i want to talk to you about the markets. it does seem here in the united states we've seen these days of muted obsessions. we still have seen the bulls are out. we saw the dow have the highest close since may of 2008. the nasdaq is on a tear as well. the highest post since december of 2000. and seeing a lot of strength in the s&p as well. where is the strength coming from right now? >> well, i think the short term momentum, jackie, is still overall bullish. i wouldn't be surprised if you push the s&p a little bit higher from here. we got out of the gate really quickly. we've had some good economic data, but i think the bottom line here is it's too early to make that transition from what has been a bearish trading environment to a bullish one. people want to make that case because we've rallied 25% off the lows but i think at these levels that ship has really

sailed in terms of better gains. we've been telling our clients to reduce their equity exposure not add to it. we just think the risk/reward doesn't make sense here. if you take a step back, the bullish case in 2012 for u.s. equities is not that the market continues to run higher. i just think there are too many issues domestically and overseas for that to be the most plausible scenario. i think the case that makes the most sense on the bullish side is if the market basically trades between 1170 and 1370 and the u.s. economy recovers albeit it slowly and in europe they figure out how to balance austerity in the face of an economic environment that's extremely weak and avoid any more sovereign debt issues. if all those things happen, i think you can make the case later in the year we take out the may highs of 1370 in the s&p is in a significant way. right now i really want to be taking back or dialing back my equity exposure at these levels not adding to it.

>> okay. so it sounds like you're taking a little bit of a defensive strategy there which makes sense given everything you just said. if you are pulling back in equities, with where would you be investing your money, in the commodities space at all? >> well, i still think there are some opportunities. look, large cap pharma, a biotech. we've been a big firm. i think the usual suspects on the defensive side make sense, utilities, anything that has a decent dividend in the low interest rate environment. and some of the commodities as well. but i think the bigger point here is we've had had a great run since early october. it makes sense to take some profits and at least move some of that money to the sideline and with the money that you do have in the market i think you want to be in areas that are less cyclical, things like health care, utilities, et

cetera. >> bill, we're going to have to leave it there. we'll get more of your insight later. for now back to ross. >> yes, shares in daimler, one of the best performers here today in europe, up over 4% in frankfurt. mercedes-benz hiked its dividend after beating profit forecasts in the fourth quarter and expect vehicle sales to rise significantly in 2012 adding that it aims to maintain earnings at the same level as last year. joining us first here on cnbc i'm happy to say is the ceo dieter zetsche of daimler. thanks very much, indeed, for joining us. the stock has responded to your dividend hike. better than expected and you talk about unit sales increasing this year, revenue will continue to grow. the profitability is going to stay the same. why the disconnect? >> 2012 will be a transition year to 2013 where we expect to

reach our strategic profitability levels. we have lots of investments in r&d and capex for the years to come, significant expansion of our product portfolio, significant further reduction of co2 emissions and on that basis shooting for a profit at this high level is an ambitious target we want to accomplish. >> analysts i've spoken to, one thing they say about daimler, the mercedes unit, their concern has been structural profitability has never compared with the likes of bmw or audi. are you comfortable you're now going to get to grips with that? >> well, first of all, this assessment can be challenged. it's only one year ago we were leading among the three in 2010 as far as profitability is concerned and clearly going forward our target is to do both, to lead in profitability and ultimately in sales as well.

and we're well prepared to get to this position. our strategic target is 10% return on sales, audi and bmw are shooting for 8% to 10% strategic target. >> the great thing for the auto industry has been the growth of the premium segment in china. when you look at what's going on in that market, compare it to what you see in europe and the united states, how do you compare those regions? >> well, as far as their gdp is concerned and in consequence the car market expectations, obviously europe is the most challenge challenged region right thousand where we probably will see a certain decline of sales in the market altogether. shows very positive developments, the car markets we assume goes from 12.8 million to

14 million units and china continues to be the hot spot where right now gdp is 8% plus and the car market will continue most likely in the two digit growth pattern and we intend to gain market share in all these regions. >> and i'm interested in your future investment plans. are you going to be investing far more, i guess, in below deduction in china at a time when, of course, i'm also angling at what you think the f future of the eurozone is at the moment instead of economically as we go through a big period of us austerity and our politicians on the right track? >> well, obviously the growth will come from other areas than europe. even though we want to gain market share in europe, but we have today the vast majority of our capacity installed in europe, and so it's only natural that we adjust by investing in the future and other markets

including the united states and north america and china. we do believe that the politicians this europe are working on a big challenge that will not be a solution from one day to the next one but i think the development is going to the right direction and i am confident that the confidence of the financial markets will come back to see the positive opportunities we have in europe as well. >> zetsche, thank you for joining us. dieter zetsche joining us first here on cnbc. jack jackie? and still to come on the program, credit suisse shocks the market with a big loss in the fourth quarter. so why is the ceo optimistic about business this year? we'll find out after the break.

after the investment bank posted a loss of over $1 billion swiss francs dragging them into a loss for the quarter. carolin has been speaking to brady dougan and joins us for more. >> reporter: this is the first quarterly loss in about three years, ross. now we knew that the fourth quarter was going to be ditch but still points out this is the worst showing of an investment bank so far. let me tell you investment banking rech nouse if you look

at the underlying results still 32% below expectations of consensus, fixed income revenues fell 54% quarter on quarter. this is really a quarter to forget about and to look ahead and that's what credit suisse is doing. take a listen. >> the year has started off well for us and, in fact, the underlying roe around our business for the quarter to date is actually around our 15% target, so it has been a very active market and it's been a strong start for us this year. >> reporter: that was brady dougan, the ceo of credit suisse, speaking to me. credit suisse has also cut its dividend to 0.75 swiss francs down from 130 in the light of tougher capital requirements here and internationally. jackie? >> thanks for that, carolin. moving on to other stories that we're following here, u.s., federal, and state regulators have reached a $25 billion settlement with five big banks. reports say the deal which could be announced today came together after a holdout states in new

york and california signed on. bank of america, j p morgan, citigroup, wells fargo and allied financial have agreed to reduce loan payments for struggling homeowners and pay those who were wrongly foreclosed upon. analysts say it removes one more legal worry for the financial industry. and shares of diamond foods plunged 41% in the after hours yesterday after the company ousted its ceo and cfo. diamond, the maker of emerald nuts, kettle chips and pop secret popcorn says an accounting probe discovered improper payments to walnut growers. they are investigating and reports say federal prosecutors are opening a criminal probe. the newscasts doubt on diamond's deal to buy the pringles brandt. they say they are weighing what to do next. coming up on the show, pepsi-co reports before the bell. so will will the soft drink giant add some fizz to the markets? we'll going to preview the trading day.

today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers.

it's policy setting day at the ecb in frankfurt. silvia is there. we know there is a change in rates but what will mr. draghi feel he'll be able to talk about, greek debt, ltro, rate cuts next month? >> reporter: well, that's the big question, of course. he'll be able to talk about a lot, whether he wants to talk about it, of course, is a different question. in all honesty, all he can say is what he said before, we will be there with ltros. we give the money market as much money as it needs. please bid for it. and please pass it on to the

so-called real economy and from there on we can move. in terms of what he can say about -- in terms of what he can say about collateral, in terms of what he can say about haircuts for the ecb holdings of greek debt, et cetera, he could say something about it but, frankly speaking, it will probably be very unwise if we haven't got a deal on the table yet. we should probably leave it right there. so in a way it's a press conference that leaves us like with everything else a little bit in the waiting loop as mr. draghi heads for brussels to the eurozone finance minister's meeting, so we await tomorrow morning. >> thank you so much, silvia. as we wait fwor that, a look at the u.s. futures here and it looks like we've turned down for the session now if the markets were to open we'd be lower. the dow lower by seven. the nasdaq lower by two and the s&p 500 lower by about two and a half. that was after seeing some mixed futures earlier in the session before. now meantime weekly jobless

claims are out at 8:30 a.m. eastern time so we'll be watching for those, if being to rise by 3,000 to a total of 370,000. at 10:00 a.m. we're going to get data on december wholesale trade inventories, those are expected to rise about half a percent and then pepsico reports openings before the opening bell. make sure you tune in. we'll get numbers from coca-cola enterprises, phillip morris and dunkin brands. still with us, of course, are our guests. bill, i want to start with you as we look ahead to the economic data this morning and some of the big earnings on the table. what's the biggest catalyst in your view? >> i still think i want to focus on the jobless claims. that's critical in terms of how this recovery moves forward and, you know, we want to continue to see progress in that direction. >> tony, a final thought from you. >> i think that's right and see what we can read out of the

earnings statements. not so much looking backwards to the previous quarter but what we can glean to learn about how the businesses will be operating in the next quarter, jackie. >> and that makes a lot of sense. before i let you go, let's talk about the unemployment number we saw, that dip down. do you think that's a positive sign as we go into the rest of the year in a positive trend in terms of what we see for employment and president obama obviously it's a huge issue for him? >> yeah, i don't know if it's going to be possible to sustain job increases of 200,000 a month like we saw in december and january. hopefully that will be the case but, look, i think a lot of that number was a result of the unseasonably warm weather. you saw it in construction and retail impact the number positively. we'll have to see if we can sustain that going forward. i'm skeptical. >> bill, look, since the ltro in december 20th, we've seen a nice rally in stocks in the states and europe, a rallying in

currencies and gold. do you think the next one -- we'll hear about it today -- >> wi will give us as much a lift or not? >> every time you go through this it's probably a little bit less in terms of the impact. watch today. this area around 1340 on the s&p is critical. that's the objective off the late november lows. you take that level out and i think you probably have another 25 to 50 points on the upside in the s&p. so watch how the market reacts there. and we'll see. we'll take it from that level. >> all right. we're going to have to leave it there. thank you for joining us and being 0 our guest host today. we appreciate your time. that wraps it up for us on w "worldwide exchange." i'm jackie deangelis. >> and i'm ross westgate. have a profitable day.

today on street signs they're ready to build the first enthusiastic leer power plant in over 30 years.

good morning. greece goes to brussels without its homework done. the still no finalized debt deal. can a bailout be saved? earnings central, cisco looks to turn itself around. the tech giant beating the street and offering upbeat guidance plus the ipo everyone wants to hear every detail about. facebook disclosing more info on executive compensation. how rich will mark duzuckerberg soon be? it's thursday, february 9th, 2012 and "squawk box" begins right now. ♪ keep on rocking me, baby keep on rocking me, baby keep on rocking me, baby ♪ good morning and welcome to "squawk box" here on cnbc. sh