01/11/2016 BBC Business Live


01/11/2016

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This is Business Live from BBC News with Ben Thompson and Sally Bundock.

:00:00.:00:07.

Oil giant BP takes a beating as the low price of crude

:00:08.:00:10.

But it's a different story for its rival Shell.

:00:11.:00:14.

It posts a surprise rise in earnings.

:00:15.:00:17.

Live from London, that's our top story on Tuesday 1st November.

:00:18.:00:36.

BP's profits virtually halved in the last quarter,

:00:37.:00:38.

We'll get an expert view on the differing fortunes of these

:00:39.:00:45.

Also in the programme, dramatic numbers from

:00:46.:00:50.

Our team in Asia will tell you all you need to know.

:00:51.:00:59.

And, the trading day in Europe has just begun.

:01:00.:01:01.

Shell shares have spiked, BP shares are slipping.

:01:02.:01:06.

Plus, two key central banks in Asia made decisions today.

:01:07.:01:09.

And we'll get the inside track on 50 years in the entertainment business.

:01:10.:01:16.

The nightclub mogul Peter Stringfellow joins us

:01:17.:01:18.

later to talk clubs, cocktails and Brexit.

:01:19.:01:22.

But with the closure of several iconic nightclubs, we want to know,

:01:23.:01:28.

do nightclubs have a future, amid rising costs, falling visitor

:01:29.:01:30.

Oil doesn't just help our engines run, it fuels the world economy too.

:01:31.:01:57.

And in the last couple of hours global oil giants BP and Shell have

:01:58.:02:02.

given us the latest snapshot on how things are going.

:02:03.:02:05.

Their latest results come amid the continued slump

:02:06.:02:08.

BP posted profits of $933 million in the third quarter of this year,

:02:09.:02:19.

but that's down 48% on the same period a year ago.

:02:20.:02:23.

But there was better news at its rival Shell,

:02:24.:02:27.

which beat expectations to make $2.8 billion in the same period.

:02:28.:02:32.

In January, it dropped to its lowest level in over a decade,

:02:33.:02:42.

It's currently hovering around $50 a barrel,

:02:43.:02:52.

weighed down by persistent oversupply.

:02:53.:02:57.

In September the Organisation of the Petroleum Exporting Countries,

:02:58.:03:01.

or Opec, agreed to do something about this.

:03:02.:03:04.

At a meeting in Algeria they announced a modest limit

:03:05.:03:07.

on oil-output levels in order to prop up prices.

:03:08.:03:12.

This is the first cut in production since 2008,

:03:13.:03:17.

but the details of how the cuts will work are yet to be finalised,

:03:18.:03:23.

and any further agreement has yet to be reached, following a meeting

:03:24.:03:26.

of both Opec and non-Opec members over the weekend.

:03:27.:03:33.

Alex Holburn is a director at the merchant bank Hannam

:03:34.:03:35.

What is so interesting is the diverging fortunes, BP reporting a

:03:36.:03:52.

nearly halving in earnings, but a 20% rise at Shell. Both companies

:03:53.:03:58.

have been in different positions over the past couple of years. VP

:03:59.:04:04.

has had a number of legacy issues and has been shrinking, not least

:04:05.:04:08.

the oil spill issues in the Gulf of Mexico. Meanwhile, Shell has

:04:09.:04:15.

capitalised on the downturn in markets and purchased BG earlier

:04:16.:04:20.

this year, and is starting to see that reap rewards. When we are

:04:21.:04:25.

looking at the low oil price, we have seen all of the big firms

:04:26.:04:29.

having to change their business fundamentally. Shrinking their

:04:30.:04:34.

business, reducing profiling. Is that the story now for the future,

:04:35.:04:39.

the only way they can win any market or profitability back, by reducing

:04:40.:04:44.

what they do? Absolutely. There has been a deemphasis in the parts of

:04:45.:04:49.

the business but are not profitable, and the refining marketing has

:04:50.:04:55.

bailed out some of the integrated in the past couple of quarters. The oil

:04:56.:05:01.

price bottomed in January, West Texas intermediate did in February,

:05:02.:05:06.

and since then we have seen a substantial uptake, and the upstream

:05:07.:05:11.

divisions are starting to see the benefits. The clear focus amongst

:05:12.:05:17.

all oil and gas companies is on being able to continue to pay their

:05:18.:05:21.

dividends going forward. They are substantial contributors to

:05:22.:05:25.

pensions. The emphasis is on cash flow, trying to maximise that, and

:05:26.:05:30.

do every thing they can on the other side to reduce costs, a combination

:05:31.:05:32.

of reducing capital expenditure, some companies have introduced

:05:33.:05:37.

prescription dividends, offering shares instead of cash, but an

:05:38.:05:41.

emphasis to maintain the dividend yield, which is around 6%. When we

:05:42.:05:50.

talk about Opec, basically cannot come to an agreement anymore. It is

:05:51.:05:55.

to be what they said went. Now they cannot seem to get their act

:05:56.:06:01.

together. It looked as though we might see some kind of agreement at

:06:02.:06:04.

the end of September in Algiers. We are now awaiting confirmation of how

:06:05.:06:09.

they are going to potentially achieve that 32.5 to 33 million

:06:10.:06:13.

barrel a day production level. The meeting will take place in Vienna on

:06:14.:06:20.

the 30th of November. There are a number of nations which require

:06:21.:06:24.

volumes in addition to the prevailing oil price in order to

:06:25.:06:26.

maintain and meet their budgets domestically. A reluctance from the

:06:27.:06:33.

likes of Iraq, Nigeria, Iran to be a part of those cuts.

:06:34.:06:40.

Activity in China's manufacturing sector has expanded at a faster pace

:06:41.:06:47.

than expected in October, adding to views that the world's

:06:48.:06:53.

second-largest economy is stabilising thanks

:06:54.:06:55.

The official Purchasing Managers' Index stood at 51.2 in October,

:06:56.:07:03.

compared with the previous month's 50.4, and above the 50-point

:07:04.:07:08.

mark that separates growth from contraction.

:07:09.:07:11.

It's a week for central-bank meetings, and the latest

:07:12.:07:14.

to announce its decision is the Bank of Japan.

:07:15.:07:17.

No surprises this time, it's kept its existing level

:07:18.:07:20.

of asset purchasing and interest rates, but it's reduced

:07:21.:07:22.

its inflation forecast for next year to 1.5%.

:07:23.:07:27.

In September, the Japanese central bank pledged to hit its 2% target

:07:28.:07:31.

at the "earliest possible time", though inflation still remains

:07:32.:07:35.

Lots of stories on our page, including an update on sterling. It

:07:36.:07:52.

is following the news that we got late yesterday from the Bank of

:07:53.:07:56.

England boss, saying he will stay in position until June 2019. Sterling

:07:57.:08:01.

is up now slightly against the dollar. And against the euro. That

:08:02.:08:07.

gives a sense of the markets breathing a sigh of relief. The

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announcement came at 6pm London time yesterday.

:08:12.:08:17.

We will talk more about that yesterday -- later, especially to do

:08:18.:08:21.

with timing and the UK leaving the EU.

:08:22.:08:23.

Sony's profits have taken a dive in the second quarter.

:08:24.:08:28.

Dramatic numbers. Explain this for us. We have seen tough times. Really

:08:29.:08:44.

bad numbers coming in from Sony. This is largely due to the soaring

:08:45.:08:49.

value of the Japanese currency. Over the last few years Japanese

:08:50.:08:52.

companies have benefited from a weak yen, it has made that products

:08:53.:08:57.

cheaper overseas, but since the uncertainty over Brexit, nobody

:08:58.:09:02.

expected it, investors have rushed to pick up the game, because it is

:09:03.:09:07.

seen as a safe bet. That has pushed the value higher, even from earlier

:09:08.:09:11.

in the year, when we saw the negative interest rate policy pushed

:09:12.:09:17.

in, people rushed to the yen and pushed it higher, which means that

:09:18.:09:20.

now it is more expensive than ever before to purchase the firm's

:09:21.:09:25.

products overseas, and that is why you are seeing such bad numbers

:09:26.:09:31.

coming out of Sony. The news coming after the trading day finished in

:09:32.:09:37.

Japan. Japan up slightly. Shanghai and Hong Kong given a massive boost

:09:38.:09:40.

in the manufacturing data coming out of China. No change from the bank of

:09:41.:09:46.

Japan to do with its policy. No change from Australia either. They

:09:47.:09:55.

also have their meeting. BP and Shell dominating in Europe. We saw a

:09:56.:10:02.

chart with oil share prices, because not updated, and nor are these! It

:10:03.:10:08.

is not possible they are all on zero! Our data is not working. But

:10:09.:10:17.

BP shares are down around 1% of the back of their earnings, but Shell

:10:18.:10:21.

opening up nearly 4% higher. That gives you a sense of how markets are

:10:22.:10:23.

digesting the news. And Michelle has the details about

:10:24.:10:25.

what's ahead on Wall Street today. Third-quarter earnings season rolls

:10:26.:10:36.

on. On Tuesday the biggest name in the spotlight is the pharmaceutical

:10:37.:10:41.

giant Pfizer. The largest drugmaker in the US beat rivals in a bidding

:10:42.:10:48.

war to acquire medication in August. Investors want an update on how the

:10:49.:10:54.

takeover is working out. Also, Kellogg are reporting, it's over

:10:55.:10:59.

seals sales are forecast to have fallen, thanks to the weakness of

:11:00.:11:04.

currencies in key South American markets, and the important market of

:11:05.:11:06.

the UK, with its much weakened sterling. The other big market event

:11:07.:11:13.

that we issue will generate no news is the latest meeting of the Federal

:11:14.:11:17.

Reserve's open market committee. It meets the two days, and everybody

:11:18.:11:22.

expects business rates -- interest rates to stay on hold, at least this

:11:23.:11:23.

time. Our market numbers may not be

:11:24.:11:28.

working, but Simon is! Yesterday Mark Carney was the story,

:11:29.:11:45.

how long would he extend his stay. He is going to stay for another year

:11:46.:11:50.

beyond the five years, but it is not the full term. It is fascinating.

:11:51.:11:55.

When he came into the role, he talked about only staying in for

:11:56.:12:02.

five years and staying until 2018. Then there was talk about taking the

:12:03.:12:07.

full term and going until 2020. Most people's expectations were that he

:12:08.:12:13.

would serve the full term. There has been a lot of negative comments

:12:14.:12:19.

aimed at him in recent weeks from Conservative politicians, columns

:12:20.:12:22.

written in newspapers, there was a sense he was come under increasing

:12:23.:12:26.

pressure. Interesting last week we heard the slightly ambiguous comment

:12:27.:12:34.

from -- and the sense he would make a statement this week. What is

:12:35.:12:38.

interesting, it is a half and half, by only going one year. He has that

:12:39.:12:47.

2018 will be the darkest point in the negotiations, so he has said,

:12:48.:12:51.

you need a safe pair of hands, but going to 2019, he is saying, as soon

:12:52.:12:57.

as we have got out of the woods, I am off. Maybe that is a measure of

:12:58.:13:04.

the political criticism. Neither too hot nor too cold. Sterling reacted

:13:05.:13:09.

on the back of that, but the lack of a big recovery in sterling tells you

:13:10.:13:18.

investors see what he is doing. It is an enormous week, we have the

:13:19.:13:23.

Federal Reserve decision, the Bank of England this week, the bank of

:13:24.:13:27.

Japan today, so many earnings stories, and we have an American

:13:28.:13:31.

election next week, so there will be a lot of inactivity. The Federal

:13:32.:13:35.

Reserve is highly likely to move on interest rates. They will wait until

:13:36.:13:41.

December. Interestingly, over the past few weeks, markets have

:13:42.:13:47.

factored in a Hillary Clinton victory. With the shift over the

:13:48.:13:55.

weekend, the comments coming out, the prediction markets are moving

:13:56.:14:00.

sharply the other way, they now have only a 70% chance of Hillary Clinton

:14:01.:14:05.

Winick. What is fully priced in suddenly looks at risk. It is giving

:14:06.:14:08.

you busy! Something has been! The inside track on 50 years

:14:09.:14:14.

in the entertainment business. The nightclub mogul

:14:15.:14:17.

Peter Stringfellow joins us later to talk clubs,

:14:18.:14:19.

cocktails and Brexit. You're with Business

:14:20.:14:21.

Live from BBC News. Business confidence rose

:14:22.:14:29.

in the three months to October, according to the latest assessment

:14:30.:14:34.

from the CBI. Exporters saw the largest boost

:14:35.:14:38.

in confidence as they cashed Theo Leggett is in our

:14:39.:14:42.

business newsroom. We could be forgiven for thinking

:14:43.:14:54.

business would be pessimistic, given the uncertainty around the

:14:55.:14:57.

referendum and the vote to leave the EU, but not so? Absolutely. This is

:14:58.:15:06.

a survey of over 400 small and medium enterprises, the companies

:15:07.:15:09.

which were a bit more keen on leaving the EU than their big

:15:10.:15:13.

business colleagues. What this survey has shown is that a small

:15:14.:15:16.

increase in overall confidence, you expect that, because there was a lot

:15:17.:15:23.

of uncertainty, but the big area where confidence is increasing is

:15:24.:15:28.

related to export. Let's go to my chart, which is working. This shows

:15:29.:15:33.

what happened to sterling over the past month alone. A big fall at the

:15:34.:15:39.

beginning of the month. That is on top of falls earlier in the year. It

:15:40.:15:45.

is looking up for small businesses who export, because their products

:15:46.:15:47.

when purchased overseas will be cheaper. But there is a downside.

:15:48.:15:54.

Things coming into this country that manufacturers need, they are getting

:15:55.:15:56.

more expensive, so unit costs are more expensive, so unit costs are

:15:57.:16:00.

rising. It is a two-way street, it is good news if you are an exporter,

:16:01.:16:07.

if you import products, it is not so good. The other problem is they are

:16:08.:16:11.

struggling to recruit enough qualified staff. They struggling

:16:12.:16:17.

more than they have done at any time since 2007. The picture is

:16:18.:16:20.

confidence is increasing, export confidence in particular, but costs

:16:21.:16:26.

are rising and well-qualified staff can sometimes be hard to find.

:16:27.:16:32.

you. Let me take you to a story on the live page. This may not come as

:16:33.:16:45.

a surprise to employers. 80% of school leavers lack essential

:16:46.:16:49.

business schools. This is a story from the chartered Institute of

:16:50.:16:56.

accountants. That is actually worse than last year, when it was 75%.

:16:57.:17:02.

There is clearly a question about what people are being taught in

:17:03.:17:06.

schools and whether it is relevant for the world of work.

:17:07.:17:07.

Profits at oil giant BP have fallen 48% compared to this time last year

:17:08.:17:12.

as the firm grapples with the flagging price of crude.

:17:13.:17:17.

Meanwhile, Shell has beaten market expectations with a rise in profits,

:17:18.:17:21.

but it says that capital expenditure will be towards the lower end

:17:22.:17:24.

For you and me, they will spend less on things like exploration.

:17:25.:17:42.

Now, our next guest needs little introduction...

:17:43.:17:44.

He's a mainstay of the British clubbing scene spanning 50 years.

:17:45.:17:47.

He is the nightclub mogul Peter Stringfellow.

:17:48.:17:50.

Now in his mid-70s, Peter Stringfellow is a self-made

:17:51.:17:55.

multimillionaire who has been running nightclubs and gentlemen's

:17:56.:17:57.

with the likes of Prince, Marvin Gaye, Rod Stewart Tom Jones

:17:58.:18:05.

Not content with the business of partying -

:18:06.:18:12.

Stringfellow also dabbles in politics and has donated tens

:18:13.:18:15.

of thousands of pounds to the UK Conservative Party -

:18:16.:18:19.

recently noting his admiration for Prime Minister Theresa May.

:18:20.:18:21.

Originally a strong supporter of the UK remaining

:18:22.:18:23.

IN the EU, He now says he wants to make the most of the UK's

:18:24.:18:27.

decision to leave, saying "it's more romantic to be for Brexit".

:18:28.:18:30.

Good morning. There is so much to talk about but for the benefit of

:18:31.:18:48.

our viewers and around the world, tell us how it began. Quite an

:18:49.:18:52.

amazing story about the hiring of a hall on a Friday night and signing a

:18:53.:18:59.

little-known band called The Beatles. I left school when I was --

:19:00.:19:09.

in the 1950s, when I was 21, I started looking at church hall in

:19:10.:19:20.

Sheffield. On Fridays, it cost me ?3, and a new record came out cold

:19:21.:19:30.

Love Me Do and some girl said, what about this record. Nobody bothered

:19:31.:19:34.

with records because you could hardly hear them. So I booked The

:19:35.:19:38.

Beatles, it took us three days to negotiate it, ?85. I came out

:19:39.:19:44.

sweating, I thought, I can always cancel them. Luckily I did not. Come

:19:45.:19:52.

February, their record was number one, they played for me on that week

:19:53.:20:05.

and the rest is history. Spin forward 50 years. Let's talk about

:20:06.:20:10.

the market you find yourself in now. You could create an industry from

:20:11.:20:13.

nothing. Now it's a difficult industry to be in. You can still

:20:14.:20:25.

rent a hall and put a band on. You've got to start somewhere. I was

:20:26.:20:33.

a disc jockey for 20 years. By the way, I was fantastic. You've got to

:20:34.:20:37.

live it like I did and it cannot be a part-time job. When I started with

:20:38.:20:43.

my church hall, within the second Friday I'd booked in an outfit which

:20:44.:20:50.

made me ?65. Sheffield had never seen this group. Fantastic. Once you

:20:51.:20:57.

start that kind of thing, I live that life. I did not do anything

:20:58.:21:01.

else and I've never done anything else since. Nightclubs for me. What

:21:02.:21:06.

is the future? I understand you're looking into virtual reality. Very

:21:07.:21:16.

much. There's always something happening here that other countries

:21:17.:21:26.

come and look at. I had someone who wants to come into London. There is

:21:27.:21:36.

something special about where we live and we can do it. As far as I'm

:21:37.:21:46.

concerned. I was four Remain but we cannot go back to that. We are

:21:47.:22:00.

Brexit. You spoke about the future and adapting to the way people go to

:22:01.:22:08.

nightclubs. A lot of people say people prefer to stay inside and

:22:09.:22:14.

nightclubs are dead. That has fundamentally changed. That is how

:22:15.:22:34.

it happens, it was Strictly Come Dancing kind of stuff, I was

:22:35.:22:42.

bringing people from America. Rod Stewart. All it went. Brand-new

:22:43.:22:46.

stuff, you did not know where you're going, it is like that today, we

:22:47.:22:51.

don't know where we are going. So what? There will always be people

:22:52.:22:54.

who want to be together and see each other. Culturally, things have

:22:55.:23:00.

changed significantly. Gentleman is clubs are no longer viewed in the

:23:01.:23:04.

same way they were 30 years ago. When I started it was outrageous and

:23:05.:23:12.

that was 1996, they are accepted now and I'm very happy about that. It is

:23:13.:23:19.

really good to speak to you. We've only scratched the surface. Come

:23:20.:23:25.

back and talk to us soon. I want to hear about virtual reality

:23:26.:23:34.

nightclubs as well. Do stay with us but in the meantime here is how to

:23:35.:23:46.

stay in touch. You can stay with us and all the latest news on the BBC

:23:47.:23:51.

website. We want to hear from you. Get involved on the BBC business

:23:52.:23:52.

live web page. What other business

:23:53.:24:10.

stories has the media been The BBC's Dominic

:24:11.:24:12.

O'Connell is with us. This is a great story. The Saudi

:24:13.:24:21.

king appoints a new finance minister. It tells us a lot about

:24:22.:24:27.

the oil prices. With them we are seeing the corporate pain but the

:24:28.:24:32.

real pain is countries that rely on it. It has been running down its

:24:33.:24:37.

reserves at a rate of knots and trying to rebuild the economy. One

:24:38.:24:42.

of the visible symbols has been the remaking of the Cabinet. The finance

:24:43.:24:48.

minister has only been in the job for 20 years. Sony has just done one

:24:49.:24:57.

of the biggest bond issues in history, $7.5 billion. Timing is

:24:58.:25:11.

everything. Interestingly announcers before a bond issue. Replacing the

:25:12.:25:19.

oil minister, who had been there for 20 years, the new Crown Prince

:25:20.:25:24.

trying to remake the economy so it is not reliant on oil. There is a

:25:25.:25:29.

big jump to be made there. Your take on Mark Carney. He will stay until

:25:30.:25:33.

2019. It's about the best compromise, I suspect. George

:25:34.:25:43.

Osborne, remember, he did not fill out a job application for eight

:25:44.:25:50.

years. Probably about right. Thank you for your company. That's another

:25:51.:25:55.

business live. We will see you again tomorrow.

:25:56.:26:13.

It is time to reorganise the wardrobe. After

:26:14.:26:15.

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