16/08/2016 BBC Business Live

This is Business Live from BBC News, with Sally Bundock

Mining giant BHP Billiton tells us it lost nearly $6.5 billion over

Live from London, that's our top story on Tuesday the 16th August.

The fatal mining disaster in Brazil and the plummet in commodity prices

have taken a huge bite out of the world's biggest mining

We'll get an expert view on where BHP is headed next.

Also in the programme - how about this deal?

Well, if you live in the US Volkswagen is giving you cash

as compensation for the emissions scandal and will fix your car.

In Europe, it's a bit of pipe to fix the problem.

And the markets are headed lower in Europe - watch out

for the UK inflation data that is due out this morning.

What will it tell us about what the Bank

And put on your science caps - we'll be looking at

Lasers are used in everything from drilling to cancer treatment

and we'll find out from a leading UK firm how they're improving

Are all technological innovations positive?

Or do we rely too much on technology to help us?

Can you go a day without Google maps, for instance?

Quantum physics, my specialist subject!

It's a record loss for the mining giant BHP Billiton -

That is the company's worst result since it was founded in the 1850s.

The world's largest miner, like many other commodity firms,

has suffered greatly by the collapse in commodity prices

But also hitting BHP's bottom line was the fallout from the Samarco

Last November an iron-ore mine dam collapsed and released

a torrent of toxic mud, killing 19 people and

Brazilian prosecutors have brought a multi-billion dollar law

suit against the company and its partner there,

So a lot happening as far as BHP Billiton is concerned. Over to you,

Aaron? James Butterfill is head of research

and investment strategy at ETF Securities. Great to have you. Let's

start with this. It is almost like a perfect storm, the slowdown in the

commodities, the dam disaster and BHP is a bit of a bad bet on US

shale, the fracking story in America, it has all come together?

Saudi Arabia has employed a strategy of trying to destroy the shale

business in United States. The marginal cost of production, how

much it costs to produce oil per barrel, it is around $60 per barrel,

the price has fallen to about $47. It is not cost-effective. It has

really hurt BHP. Coupled with that, we have seen a 13% fall in iron ore,

roughly 20% fall in silver over the financial year. It has picked up

recently but that will not be reflected in results. To make

matters worse we had the disaster, they had initially said it will cost

about $1.3 billion, they have pushed that up to $2.2 billion. So a total

write-off for earnings of around $7.7 billion, pretty grim. They set

aside 2.2 for the dam disaster in Brazil, but what is the civil

lawsuit? $48 billion, it is a bit unrealistic, a bit like BP with the

well incident, it was never the amount that the initial estimate

said, it will probably come down, but they will have to start making

provisions for this. Sally wants to join in as well, but this commodity

slowdown, it has been building up, has BHP done a good job in battening

down the hatches for the storm, could they have done better? They

went on a massive capital expenditure spending splurge to help

China building its infrastructure. Since Chinese growth has slowed

down, they have cut that back. They were spending $22 billion a year, in

2017 they will be $5 billion. That is how much they are scaling back

investment. It brings in concerns about future profitability if it is

not investing any more. What did they say about the dividend? Chief

executive Andrew McKenzie was forced to say we will not stick to the

promise of keeping or upping the dividend? If you are an investor,

quantitative easing has meant you are yield starved, you want some

form of income. Yields have been exceptionally low recently as a

consequence, people have been looking for places. Mines have been

paying fantastic dividend yields. Except for BHP, it can only cover

its dividends, earnings only cover about half of it, so it has divided

from elsewhere. It is likely that it will cut the dividends. And the

gates are easing. James, short and sweet, we appreciated.

We will talk to you sometime again. BHP shares are opening down 1.7% in

London. In other news, Australia's central

bank has explained why it cut interest rates for the second time

in four months earlier this month. It said inflation would remain

low and the economy It also said that house price

concerns had cooled, Indonesian Airlines have been

cleared to begin flying to the US US transport officials said

Indonesia's aviation sector had met international standards

and its safety rating had been Indonesia's fast-growing aviation

market suffered several high-profile accidents

and was downgraded in 2007. They were banned from entering the

United States then. Oh, we have the #BBCBizLive page! That is your job,

Aaron. BHP is quite heavily on there. You

caught me by surprise, I forgot I had the tablet. I will tell the

viewers. Investment firm Berkshire Hathaway

says it has added a large chunk The investment firm,

which is run by legendary investor Warren Buffett,

increased its stake in Apple That is quite interesting, he has

not traditionally been keen on tech stocks but is tipping his toe in the

water. Have you found something else? I have not had a chance to

look at the latest Apple share price. But that is a lot of money.

OK, it's that time to head over to our Singapore bureau and talk

about why shares in the commercial property group Dalian Wanda,

owned by China's richest man have been climbing today.

Why are they going? They have risen. Stocks under the deli and wander

group are trading almost 2.5% higher in Hong Kong on Wednesday --

Tuesday. The billionaire won shareholder approval on Monday to

buy out the company for a whopping 4.4 billion US dollars, clearing the

way for the biggest ever privatisation deal in Hong Kong,

less than two years after the company was first floated. This sets

the stage for Dalian Wanda group to relocate its Hong Kong listing to

mainland China, which is where companies are fetching higher

valuations than in Hong Kong. It would be a relief for the

billionaire owner, who has faced difficulties completing

transactions, but not everyone will be pleased. Wanda is one of many

companies hoping to take advantage of higher mainland valuations, some

worry about a risk to the Hong Kong market. For Japan, it was a day of

decline. It was not like that to the whole trading session, it was

enjoying some gains, then it all went sour because the dollar got a

much weaker and the yen strengthened significantly. Just to say that the

big exporters listed in Tokyo are having a very tough time today. Hong

Kong is a little bit flat. Wall Street, higher. The S 500 enjoying

record gains. Let's look at Europe. As mentioned earlier, declaims right

across the board. BHP Billiton dragging down the FTSE 100/1% at the

open, shares in general are a bit lower. Let's not forget the time of

year, mid-August, very thin trading. Samir Hussein has the details about

what to expect on Wall Street. The number one improvement chain will

report earnings on Tuesday. Home Depot is expected to continue its

streak of strong results as customers spend more on homes and

home improvement. Speaking of homes, housing figures are not expected to

have changed much in July compared to one month earlier. The numbers

indicate slow progress in residential construction. Also in

economic news, the consumer Price Index is not expected to have

changed in July. Given the very slow pace of inflation, economists

believe it allows the US central bank to maintain monetary policy, to

keep interest low. Bronwyn Curtis joins us, a familiar face. We will

talk about the US in a bit, but in the UK, inflation numbers today.

Inflation is looking backwards, right? We want to look forward. We

have seen ten plus percent drop in the value of the pound, that will

take some time. That is not good for inflation? Inflation will go up,

because you import, you pay more for goods. That goes through to

inflation. It is not happening yet, it will probably be the latter part

of the year. But a year on, we're looking at inflation, according to

the Bank of England, back at 2%, higher than the target of 2% after

that. Some of us are looking at something like 3% by the end of next

year, very high. The Bank of England today, it is its second week of the

bond buying programme, it has not been going very well? They are

trying to push down long-term rates. Everybody knows they are doing it,

the big fund managers and the pension funds are holding out for

better prices. They will be able to get these bonds, but it will take

some time. They are trying to push down yields across the board so that

companies and households will borrow and spend to help the economy. They

are not worried about inflation, they are worried about the economy.

If we go across the Atlantic, Samir is mentioning things, we got the

minutes from the US that meeting, that should give them an indication?

They have got other data out this week. We saw the dollar weakened

today and although the Fed minutes would say the risks have diminished,

anyone would be able to push any rate higher into the future. People

are a bit nervous about what is going on with the Fed with rates,

will they had to pump more money in it is hovering, the markets are

harbouring and waiting for somebody to push them one way or the other.

We are at very high levels now. No hope in hell that they will do two

rate rises between now and the end of the year.

I hope you will not have to eat your heart!

I will if I had to! Still to come, we'll be looking

at the world of lasers and how they can be used to make your life

and health better. You're with Business

Live from BBC News. We were just discussing the

inflation data coming out for July which will be the first data on

consumer prices since the vote to leave the European Union in June.

But the pound's fall, since the referendum should, in theory,

increase inflation. As imports become more expensive, it's going to

take some time but it could return to the 2% target by the end of the

year for the Bank of England? Andrew joins us from our flashy business

newsroom. Andrew, is this the way... OK, the first number since the

Brexit vote, they're not going to take much into account, are they?

Not much. We'd been living at inflation last year, and we just got

one months worth of the impact of that depreciation in the value of

the pound and of course it's going to take time to feed through. This

is what inflation have been doing all year. It was 0.1% it has picked

up since then and the most recent figure, June, 0.5%. And that,

frankly, is what most economists are expecting to see a game in the new

figures. No change, not yet, at least. Worth mentioning that we're

also going to be getting producer price indices, the prices charged by

manufacturers at the factory gate and more importantly the prices I

have to pay for raw materials and components including imported stuff,

which might just show a little bit more of the impact of the decline in

Stirling. At least you would expect to do feed through to that part of

the supply chain rather more Rickie Lambert prices paid by consumers.

Andrew, I know we all watch this data like a hawk and so do people

like the Bank of England and traders in the city, but for those in the

rest of the UK, how important is it? To what extent does it impact them?

In terms of how the Bank of England responsible as interest-rate policy,

there's also the question of these particular figures about regulated

rail fares. The figures for retail Price index, different one from this

one, and will be higher, they will be used as a benchmark for train

fares the next year. This particular figure actually does affect us in

the pocket. Andrew, thanks, mate. Andrew Walker. You were videoing

your husband earlier. It was a freebie conversation. Google Duo

launches today. Another one. Dignity out of a deep hole,

Digging itself out of hole, a deep hole - BHP Billiton

ever in the company's history, $6.5 billion, as falling commodity

prices and a deadly dam failure in Brazil hit hard.

it was just below 6.5 to be precise. 6.3 85.

A quick look at how the markets are faring.

They are all in the red. A real change in fortunes because these

markets have been going higher and higher for days. Ending higher on

Monday, but we saw a weakness in Tokyo, Japan down 1.6 at the close

of the dollar weakness affecting Japan. And general selling going on.

Our next guest works with light and in particular lasers to create

products for areas as diverse as computing and medicine.

Dr Graeme Malcolm co-founded M Squared Lasers in 2006,

originally to create lasers for use in academic scientific research.

The Scottish firm now has offices in the US including San Jose,

The firm explores, develops, and manufactures next-generation

lasers for use in oil and gas exploration, cancer detection,

through to the discovery of explosives through spectral scans.

A large growth area for the company is the application of quantum

technology which is being harnessed to create a new generation

of electronics, including sensors, communications systems

The man himself is in the studio and I've been dying for you to come in

and help us out because it's great to have you with us. Quantum

physics, for us, can you break it down? What are we talking about?

Everybody said about quantum leap. Einstein 100 years ago, a lot of

great scientists wrote a theory about quantum and it was a big leap

forward in understanding but it's taken a long time for people to

catch up selling quantum physics we take a particle, and atom, a

building block of matter, or a proton, a particle of light, and

reprocessed them using quantum physics, strange things happen and

we can exchange information through teleportation. We can create more

powerful computer bits which can be not just on and off but both on and

off at the same time. It lets technology moves forward. We've had

analogue electronics with TVs with valves in them, digital for and and

quantum is the next layer of that technology journey. You can put it

into lasers and you are telling me in the Green room, using your

smartphone here, lasers are used... I'm bamboozled how much lasers are

used in manufacturers. The 20 or 30 different processors inside a cell

phone. Everything from the glass, the touch-screen, so, really, the

way the lasers replace mechanical drills and processing over the last

10-15 years has been a phenomenal rate of progress. So who are your

clients and who do you sell stuff to and what are you selling? Laser

technology and systems based on laser technology to everything from

academia, the world's best universities, MIT, Stanford, Oxford,

Cambridge, through to government, so for the detection technology trying

to help counterterrorism for the week and fingerprint materials, so

we work with different governments in Europe and the USA. And more and

more we are starting to see the industrialisation, so

instrumentation companies and big blue-chip companies that could not

be solved about starting to move into this technology. How did you

are a kid, did you used to take are a kid, did you used to take

things a and put them back together? Yes, not always successfully putting

it together again. I kind of got into this because I had a great

physics teacher at school. He physics teacher at school. He

inspired me. Mr cocky. Mr cocky? You have done well. When I went to

university, I must make my choices, and it seemed like the future and

now, as we move forward, it's become mainstream. Moving forward, there

are some things you're working on now which will make a big impact in

30 years' time, affecting us all. What sorts of things? We are working

in London on a science using laser imaging to look at how the brain

works and to generative rain disease is begun to become a bigger problem

as medical science letters live longer. A la understanding of the

brain is not a very great at the moment. We don't understand how it

works and how to solve diseases of the brain so we can do work in a

particular area. OK, it's fascinating. It's fascinating how

without it, we don't have anything. Usually our guests bring something

in. I've got a smartphone. Nice to meet you. Thanks very much.

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.

Our pages where you can stay ahead of the braking business news. We

will keep you up-to-date with the latest details, with insight and

analysis on the BBC's editors around the world. We want to hear from you,

too, get involved on the BBC business live web page. And on

Twitter. And on Facebook. Business live on TV and online, whenever you

need to know. Bronwyn is back to look through some

of the paper stories. This is one of our headline stories.

The Volkswagen scandal. We knew they were going to pay up in America and

not Europe so the Americans, if you own a Volkswagen with a dodgy

system, you get 20 grand compensation. And the car is fixed

as well. In Europe, you get up plastic type. Interesting. It's all

about being able to do class action suits, and in the US, you can. In

Europe, the legislation is such that you really can't do that. So what

they are trying to do, there are lawyers getting together trying to

do online so they can get enough people together to do the equivalent

of a class-action suit, so this would be extremely costly, because

there's about half a million vehicles in the USA and I think 8.5

million in Europe. So imagine the cost of that because, you know, at

20,000 a throw, dollars, that is, you rose, whatever, it's an awful

lot of money. Let's look at this story which I thought was really

interesting. It's about hedge funds is using small satellites in space

to keep an eye on stuff to help them make their decisions about future

investments. I think it's a fantastic idea. If more central

banks looked out of the box... These are tiny shoe box sized satellites

which are going into places, for example, looking at oil tanks in the

USA, and they have floating lives and by looking at how high load the

lids are, you can see really what the infantry is of oil. I thought of

something because I used the run an office in South Africa counting the

pods on cocoa trees in Africa. We used to do it every three weeks. We

used to forecast the crop. We wouldn't have to do that. We were

just send in the satellites and look at it, so I think, what they are

doing, Nasa scientists about this company together with the satellites

but then they sell the data to somebody else. We'll hedge funds

management companies have to have a new technology team to manage this

side of the business? They have got a data company who is going to

actually provide insights, forecasts. We'll publish have them

on here. Who is sending up the satellites? Commercial space? A

private company. The hedge funds by the predictions from the data

company. In about 15 seconds, we've seen banks in the UK with

interest-rate cuts, savers, let's be honest, we are screwed, aren't we?

There are more savers and borrowers but was going to happen. I had

someone on Sunday just saying that they were getting 3% but they are

not now. OK, always a pleasure. Hello. It's been a cool but

sparkling start to the day in many parts of the British Isles and our

weather watchers have been out in force capturing the full majesty of

the morning. The satellite picture