12/02/2016 BBC Business Live

This is Business Live from BBC News with Maryam Moshiri

Global shares enter a bear market and banks

get another mauling as worries grow about the health of the financial

Live from London, that's our top story on Friday, 12th February.

Valentine's Day looms - but don't go overboard

Global market turmoil, banking woes and economic jitters

A lack of contenders for the top job at the International Monetary Fund,

Christine Lagarde has been nominated for second term at the helm. Stock

markets have opened higher in Europe after yesterday plotting massive

falls across the board. And we'll be getting

the inside track on the health of the Eurozone economy -

and find out what the European Central Bank might do - or can do -

when it meets in March. Today we want to know,

given what we're seeing on the markets and what's happening

with banking shares around the world, do you think we're facing

another crisis or is this just What a terrible week

for the financial markets. At the epicentre of the latest

financial hurricane Banks have seen millions wiped

off their share values over Warnings from the US Central Bank

have fuelled fears about the global economy, the downward spiral

of interest rates and worries about risky loan -

a toxic combination. Banks have been hard hit on worries

they will struggle to cope This week, US Federal Reserve boss

Janet Yellen spooked investors There's also the impact

of negative interest rates. Central banks around the world

are making it more expensive park money in a bank, to try to persuade

businesses to spend. And some experts fear

banks are saddled with too Meanwhile,

tougher regulation makes it harder Just take a look

at one Europe's biggest investment Shares down 43% this

year - a 27-year low. Deutsche Bank - down 39% this

year to a record low. US rivals Morgan Stanley,

Citigroup and Bank of America have all lost around

a third of their value this year. We're joined by Philip Augar,

independent banking analyst. Great to have you with us. Some of

this stuff, you look at it and it scares me. But if you look at what

the banks are looking at just now, in 2008 they were sitting on all of

this debt that was residential mortgage debt, we know what happened

there. Now there are sitting on this corporate debt, is it similar? Is it

the same picture? There is a couple of changes this time around. One is

the banks are much better capitalised and they were before.

They have a much bigger cushion in their balance sheets to absorb any

losses. Secondly, the principal area of worry just now is loans that the

banks have made to the energy sector. The energy sector is much

smaller than the hall that US mortgage sector that caused the

problems in 2008. Those are reasons to be more optimistic. Throwing that

into the mix, you're right about the commodities. Glencore, it also

something like $50 billion, more than the value of the company.

Because if you add the worries over China into that picture your

painting, the Chinese banking system, there are some well-known

highly regarded fund managers out there saying that Chinese banks

could be stung to the tune of three point $5 trillion. That is a good

point. What really worries investors is the uncertainty. They don't like

uncertainty and no one can be certain what is going on in the

Chinese economy and what the true extent of banks exposure to China

is. That is the uncertainty. That is why if there is doubt they will sell

and get out and stay clear of it. We talk about the banking crisis, how

worried are you that this could be a repeat of what we saw in 2008. How

expose our banks? How much rejection is there now compared to before? My

feeling is it's hard to say, particularly with the Chinese

conundrum. My gut feeling is this isn't a thousand eight again. I

think banks are better prepared and their extended the exposure to the

problem areas is probably less. As Mike 2008. What's worrying investors

is if you have a global recession that means interest rates will stay

very low and banks find it hard to make money when interest rates are

at the bottom. They have been over a long time in this country. But you

are looking at the possibility of negative interest. Which is

completely different. Banks cannot make money in that interest rate

environment, there is a risk of a credit impairment and exposure to

China and everything. And on top of that, the big banks you spoke about

in your introduction having all of these big share price falls, they're

still in the process of readjusting their business to a really different

economic environment. Put that together and you can understand why

the sector has been performing worse than any other sector in the world

economy. Thank you. We appreciate your time. Have a great weekend.

shares of Boeing plunged as much as 11% on Thursday

after a report that US regulators are investigating

According to Bloomberg, the Securities and Exchange

Commission is investigating whether the planemaker properly

accounted for billions of dollars of development costs from airliners

Morgan Stanley will pay $3.2 billion to US authorities to settle claims

that it misled investors about risky mortgage bonds sold before

In 2015, a tentative deal to pay $2.6 billion was announced,

but New York authorities pushed to increase that amount.

Morgan Stanley acknowledged it had misrepresented the quality

The head of the International Monetary Fund, Christine Lagarde,

has been nominated for a second five-year term at the helm.

The former French finance minister was the only nominee

Commentators had said there were no obvious challengers for the job.

Ms Lagarde has led the IMF since 2011 and received support

from the UK, Germany, China, and France.

Have you interviewed her? No. Not had the pleasure. I will call her

after the programme and get her on the programme. I'm doing a one plus

one, she will come in and see me personally. Can we talk about

Germany? German economic growth revised down. We will talk about you

is or later. Andrew welcomer, but this is interesting because all of

Europe on tenterhooks looking at these figures. The one we've had

already, France a couple of weeks on tenterhooks looking at these

figures. The one we've had already, France and probably score and

Germany today, up 0.2% in the GDP growth. What we expected. Some

experts are saying pretty much what Janet Yellen said about the US

economy about Germany, you have a positive factor is be slowing Tyner

and the emerging market crisis and problems and low oil price and that

can have an effect playing forward. That could have a perfect storm in a

negative way. India's Central bank chief, the rock 'n' roll star, says

lenders need deep surgery. He said the country puzzled lenders might

need to perform deep surgery to sort need to perform deep surgery to sort

out the bad loans. This makes the country's lenders. Let's find out

what is going on elsewhere. Straight to Alicia in Singapore.

Note here that Machenaud cheery news, right? It has been another sea

of red all across the Asian markets, Japan each and really badly having

its worst weekly performance since the 2008 work in the global

financial crisis, having to do with the strong yen and speculation that

the Government might intervene in the currency markets. They've not

done that since 2011. In Korea circuit Breakers kicked in,

concentrating to be halted after stocks plunged by more than 8%. As

one analyst wrote today, fear is in control of the markets just now.

What is causing the stampede out of stocks? You mentioned it earlier,

China's giant but slowing economy. There are fears Tyner's problems

could drag everyone else into a dark hole. And the Federal Reserve, what

will it do next? Janet Yellen said this week he will not rush to raise

interest rates because of the ongoing volatility and they even

considered negative interest rates. In a vicious cycle with his

uncertainty driving the volatility so all eyes will be on mainland

Chinese markets when they reopen next week on Monday. Thank you.

Let's look at those market figures. Banking stocks pretty much across

the board taking a battering. European markets rose on Friday,

rebounding from the previous session's steep losses,

with encouraging results from Commerzbank and a rally in oil

prices helping banks and commodity-related

stocks to regain ground. Gold is doing very well and Likud

Government bonds. As well as investors rushed to the traditional

safe haven assets. And now Michelle Fleury can tell us

us what will making the headlines in the business world

in the United States today. Many alarm bells have been ringing

on Wall Street since the New Year. One of the loudest was the US retail

sales report for December because everyone's surprise it showed a drop

in sales. That sparked fears the US economy was not as strong as we

thought. Since that release, a key assumption from markets has been

open to doubt. Maybe the next monthly retail sales number can

offer some reassurance. It is out on Friday morning and economists expect

that January's retail sales will have risen slightly compared to one

year ago. Reversing December's small but shocking decline. Nobody think's

one month's data transforms the picture but one small bit of light

could brighten the investor's on the -- gloomy outlook considerably.

Joining us now is Richard Hunter, market strategist.

They are really down then they are up, look at this. Is that

bargain-hunting? Is that investors thinking they've got enough, I will

snap some of? It could be. Could also be something of what they call

a relief rally, despite the 1.3% rise this morning for the FTSE 100

we are still down 10% in the year to date and we are all in mid-February,

giving you a FTSE 100 company 's yield between 3.5 and poor -- 4%.

That is something to bear in mind. We have seen many times over the

last 6-9 months a bit of a relief rally for some fairly tricky trading

days, that is what we have. If I was the investor at home, would this be

a good time? It is difficult to see how the market might turn in terms

of sentiment in the short-term. However, if you step back and

thinking I'm an equity or long-term investor, let's say for five years,

do we think we will see these kind of problems in five years? Or Bill

banks be stronger? World companies still be world-class companies? If

you're taking a longer term view and thinking five years plus you

investing things will be better. What is your is then? Any equity

investment should be taken on a 3-5-year view at least. If we say

that we will be a better place in five years this could actually

represent a pretty good buying opportunity. There you go. You're

going to come back and do the papers? Sure. We will speak them.

Still to come, Germany is barely tugging along. What will the

European Central Bank do when it meets in March? Will hear from

Andrew Walker. This is business life from BBC News.

And now a look at some of the stories from around the UK.

The engine maker, Rolls Royce, has just announced a 16% fall

in pre-tax profits from ?1.6 billion to ?1.4 billion.

The company is halving its dividend - the first cut in more

Rolls-Royce employs more than 21,000 people in the UK,

with more than 12,000 employed at its Derby aerospace engines

Last year, the company announced 3,600 job cuts and warned

that some of its 2,000 senior managers would depart.

Ed Stacyan, aerospace analyst at Haitong Securities,

says the issue is all about the way the company

Well, Rolls-Royce have talked about an issue with internal systems. The

latest profit warning in November, they said the transition from the

existing air bus wide bodies to the new air bus wide bodies was going to

be more costly than they thought. They should have known that and

planned for that. But the internal systems in Rolls-Royce were not good

enough. The new chief executive, Warren East has said he needs to

improve the systems and get his hands on the forecasts and have

better visibility. Some relief this morning that they are guiding in

line with what they said before, it's not a great outlook but it is

in line with what they previously had. Some people said they would cut

the dividend to zero because the balance sheet was quite stretched.

They have not done it, they cut the dividend but said it is not as bad

as they think, they don't need to cut to zero. The message is, the

balance sheet is not as bad as some people thought.

Large companies that fail to deal with the gender pay gap could be

named in new Government league tables.

Under regulations just released, firms with more than 250 staff

will have to reveal on their websites the pay

differences between their male and female employees

Latest figures suggest women still earn on average 20%

First-time buyers who purchase a house this year will have already

spent ?52,900 on rent, according to the UK's

Figures published by the Association of Residential Lettings Agents

suggest that rent will account for 16.4% of total lifetime earnings

for today's first-time buyers in England.

I feel sorry for them. I do! You have no heart!

A big fine for Glaxo Smith Kline, ?37.6 million.

banking woes and economic jitters will dampen any romance.

There's been no escaping the market turmoil this week.

A toxic cocktail of economic worries, banking jitters

So any fresh economic news is bound to be scrutinised.

In the Eurozone, GDP data for the region's biggest economy,

Germany, shows the the industrial might is chugging along

What a headache for Central Banks around the world, with no tools left

in their box to fix these economic problems.

Lets get the Inside Track with our Economic Correspondent Andrew

Let's talk about this because ultimately, we are going to see what

Mario Draghi has up his sleeve. So what is going on? The European

Central Bank is going to review its position to see if it needs to do

more. A strong hint that they think they are likely to take further

steps to stimulus the economy. He said after their previous monetary

policy meaning, "There are no limits to how far we are willing to deploy

our instruments". The instruments involved, the key one is going into

the financial markets and buying mainly government debt and there's a

lot of it so they could buy an awful lot of it. The aim is to try to

drive interest rates across the Eurozone economy down even lower

than they are, even lower than they can do by using their own interest

rate policies. I think the market turmoil that we have seen in the

last few weeks does, if anything, increased the odds that they will be

telling us they are going to take further steps when they meet in a

few weeks' time. We will come back to the central bank and their

particular issues but can I talk about Germany? We keep on saying it

is chugging along, it is moving along with some gross, last year was

1.6%. If that still coming from the German people putting their hands in

their pockets and spending? There is some of that. Germany is a big

exporter so that is an important factor. But Germany is particularly

exposed to what is happening in China. It is a big exporter of

capital goods, vehicles and factory abutment and things. It is an

important issue there. It is also worth bearing in mind, consumer

spending. Yes, it has been recovering but it is potentially

vulnerable to what is happening in the stock market. Capital economics,

the London consultancy put out a note in the last 24 hours or so, and

they reckon that on the basis of previous six period, a 10% decline

in the stock market could not about 1% of consumer spending. -- could

knock. We have seen. More than that since the turn of the year. They are

not saying there's going to be a Eurozone recession but clearly the

potential from what has been happening in the market, the

potential is there for it to have an adverse effect on consumer spending

and business investment because they used the stock market to raise money

to fund investment. You want Germany to do well for the greater good of

the Eurozone, you need to see the powerhouse Parang ahead more than

0.3%. It's not a particularly powerful figure and 0.3% is what we

are expecting for the Eurozone as a whole. The consistent pattern in the

last couple of years of recovery in the Eurozone has been, yet there has

been growth, very variable performance between different

countries but it has never been a really convincing recovery, not

convincing enough, it has to be said, to give us confidence that

they can effectively withstand the blows that may be coming in their

direction from what has been happening in the markets. Back to

the central bank because we have raised this on my show on World TV.

We could apply this to the ECB, about the situation that if we

continue seeing the slowdowns and we continue seeing sectors like the

banking sector being hit hard because of the slowdown, the worry

is that the central bankers don't really have any more tools in the

tool box left to fight that. Some of it is maybe negative interest rates.

Which we are starting with already. There's a limit to how far... It

used to be thought you could not go negative, the phrase the economists

used to use... That's a different question. It used to be thought that

there was something called the zero lower band of interest rates but now

we know you can go a bit below it. Frankly, for technical reasons,

there must be some lower limit. The no limit that Mario Draghi was

talking about was going into the financial markets and buying

government debt. That is an enormous market and of course, there is

therefore a lot of ammunition that the ECB could deploy there. The

question is, will it be effective? All that money made me think about

what you are saying, all the money so far they have been pumping in,

don't some critics out there say it does not end up in the right place?

It ends up back in the market, not the economy. Sure, what it does, it

eventually boost the amount of central bank money that the

commercial banks have. The hope is that it has also got the indirect

effect of driving down interest rates and the cost of borrowing for

businesses, for households. There are plenty of economists to say it

has some effect in that area but it has not been a very large effect.

Andrew, great stuff. Thank you for joining us. Have a great weekend and

we will talk to you next week. In a moment, we'll take a look

through the Business Pages but first, here's a quick reminder

of how to get in touch with us. The Business Live bait is where you

can stay ahead with the day's breaking business news. We can keep

you up-to-date with the latest details, insight and analysis from

the BBC's team of editors around the world. We want to hear from you. Get

involved on the BBC Business Live web page. Also on Twitter and you

can find us on Facebook. Business Live, on TV and online, whenever you

need to know. Stop that! I'm just getting it set

up. Let's take a quick look at some

of the stories making business headlines around

the world right now. The Telegraph reports that funds

that invest in gold have been flooded by nervous investors seeking

shelter from stock market volatility. The Guardian covers a

report that suggests digital tech employees are offered wages that are

36% higher than the average in the UK. When are we going to make our

start-up? The Independent has been looking at the resale value of goods

and apparently trainer brands fronted by Kanye West are a better

investment than gold. That can't be true! Over a 4% mark-up. This is the

flip side to what we are seeing on the markets, the mess at the moment,

the investors pulling their money out of the market and throwing it

into safe havens like gold. Yes, the investment book shows that gold is

the ultimate Stora value so it is a haven investment. You don't get a

dividend but the idea it is it will keep its value regardless. What you

tend to find in there was investment backdrops like we are seeing at the

moment is that those investors with less steely dispositions will move

their money into long-term cash or indeed gold. That always happens in

times of trouble, that is where they put their money. Absolutely. Gold

has been a bit strange in the last few years because it tends to mirror

and going the opposite direction to what the dollar doing, like oil. We

have been seeing a strengthening US dollar per the last couple of years

which has put pressure on the gold price but at the moment, it prevails

because of the market uncertainty. I know we only have a few minutes but

I want to get this in, another safe haven, and there is a bad side to

this for Japan is the currency, the yen. People have been flying into

it. That has an impact on bearing colony, being exporters, the

strength of the yen is not good for them. Yet another safe haven, Kanye

West's trainers! I know you don't believe me but the shoes retail at

$350, which means they have a resale value of 436% almost instantly. Who

buys them second-hand, though? Not Kanye West, I'm afraid. It is

interesting because that is also, they are saying that some of the

original Lego pieces are also showing lots of interesting

conditions, showing returns like the millennium Falcon, which originally

retell... If you don't keep the box, it does not count. They have to be

pristine but that is ?342, and it is worth about ?2000. You just wanted

to get Star Wars in the programme! The difference between Lego and

trainers is someone has had their feet in those shoes! Erin is quite

sensitive about cleanliness. He needs you to smell like roses. --

Aaron is quite sensitive. We have got to stop! Have a great weekend.

There will be more business news throughout the day on the BBC Live

web page and on World Business Report.