02/08/2011 World Business Report

Now it is time for World Business Report.

A deal is struck on Capitol Hill but that does not mean that the US

is out of the woods. They still have a huge deficit to consider and

the rating agencies are lurking in the wings.

Japanese markets on the alert for a possible intervention in the

currency. Asian stock markets are on the

downturn as investors digest more weak economic data from the US

despite the debt agreement. As many have predicted, the debt --

deadlock over the US debt ceiling was broken out the last minute.

However, as the fears of the default on US debt have receded,

America faces the task of dealing with its deficit. Rating agencies

have not made a comment on the deal and their threat to downgrade

America's credit rating remains. America's politicians may have

averted one crisis but the country is unlikely to default on the steps

Saines to a deal that would increase borrowing. -- default on

its debts as a result to a deal. will avoid default. But they could

be another problem around the corner. America still owes

trillions of dollars and faces losing its triple A credit rating.

That would be bad for Wall Street and the US economy. This would be

very bad for a number of reasons. The credibility and standing of the

US on a global basis. Despite the spectre of a credit downgrade and

rising interest rates, investors are still eager to buy US debts in

the form of Treasury bonds. The US needs to keep the confidence of

investors. The US relies heavily on overseas investors to finance its

budget deficit. If those investors find the US to be a poor place to

invest, they will lose faith and go home. America is still the most

powerful global economy, the holder of the world's reserve currency.

But with these unsustainable debts, the fight over cutting spending and

increasing taxation is only just beginning.

The strength of the Japanese yen has turned into a problem for the

government there as they struggle with reconstruction after the

earthquake and tsunami in March. On Monday, the currency traded at a

record high. There are concerns about a possible intervention to

force the currency down. The finance minister of Japan has said

that Tokyo is in close communication with eurozone and US

counterparts in relation to the strength of the yen. And what have

you been hearing? Certainly there are reports in Japan that the

government is considering some sort of intervention. There is the

possibility that when the Bank of Japan convenes later this week, it

will expand an easing policy to purchase assets, a form of quality

to be easing. The government is not confirming those reports. The

finance minister has said that it is desirable that the market rate

reflects the economic fundamentals. He says that when you look at it

like that, the yen is stronger than it should be. The problem is for

Japanese companies. At the moment, the currency is trading at 77.5. On

average, companies have been hoping for betting and that the yen would

trade at 82.5. That underlines the quality of exporters. Why has the

currency been so strong considering all the troubles we have seen in

that country over the last few months? There are a number of

factors. Japan is being seen as a safe haven. Even if a deal is done

on the debt in the US, there are signs that the US economy is

slowing down. Companies that want to diversify their holdings are

looking at Japanese bombs. The disaster in March, the earthquake

and tsunami actually serve to strengthen the yen. Rebuilding will

cost hundreds of millions of dollars and that money is going to

have to come from Japan pulling out of its foreign investment abroad.

That has helped to make the yen stronger as well. That is what is

happening in Tokyo, but what about the Asian markets? Our

correspondent is in Singapore. It is a negative day for most of

the regional markets. Investors are not focusing on the debt ceiling

agreement passing in the US House but on this native US data fuelling

fears that the economy might be sliding back into recession --

negative. And these markets are being shared by -- scared by the

sell-off. Analysts are saying that investor sentiment has shifted from

focusing on the debt issue to the states of the American economy.

They will also examine the US monthly jobless numbers this Friday.

The economy generated only 1,000 -- 100,000 jobs in July and that is

not enough. Barclay's, the world's sixth-

biggest bank, has announced its own in today. Its bond trading

operations have taken a big hit because of the European sovereign

debt crisis that we have seen over the past few months.

Barclays has gone from being -- has become the world's sixth largest

bank. It is expected that they will announce profits of $4 billion

compared to $6.4 billion last year. They had to set aside money mis-

sold a law and insurance. Other aspects of its investment arm have

been hit by volatility in a European bond markets. Barclays is

exposed to European sovereign debt. They hold a $2 billion worth of

government bonds in Spain and others in Portugal and Ireland.

will see banks like this and German banks taking cuts on their

expenditure. The concern for Barclays is going to be their

particular exposure to Ireland, Portugal and Spain. If those

companies -- countries in any shape or form renegotiate their debt...

With these pressures facing the Bank, there is talk of a possible

split up between its risky and unprofitable international

investment banking Into -- investment banking operations and

is risk free and profitable UK retail operations. A split up of

Barclays would be made more likely if the UK government goes ahead

with ring-fencing the money of retail banking operations so they

cannot be lost in investment banking operations. That would

result in some major structural changes. There are already rumours

that the investment bank as a whole might be split off if the

government is too harsh in terms of this ring-fencing of capital.

Analysts say Barclays will try very hard to avoid a break up but to

restore its profits, it may not to slim down both its foreign holdings

and investment banking operations. Ford is recalling 1.2 million pick

up trucks in the US and Canada over fears that their fuel tanks could

fall off and start fires. It is feared that the straps holding the

tanks could be corroded by road salt.

The Harry Potter franchise has lost none of its magic with the final

film rising to the top spots in the international box-office ratings

this weekend. The American markets closed down

low over worries about the debt ceiling and at the prospect of a

downgrade from credit rating agencies. That's all we have time

for on BBC World Business Report. Thank you for joining us.

In the UK, a report from the Trade Unions Congress suggests that more

than 2000 charities across England have seen their funding cut by

local councils. More than �10 million has been cut from the

charity's budget but the final figures are likely to be higher

because some charities have not yet finalised their savings plans.

An autograph book containing signatures from RAF pilots who took

part in the Battle of Britain went up for auction today. Winston

Churchill referred to the art of that as a book of heroes. Never in

the field of human conflict was so much owed by so many to so few.

Winston Churchill said it was their finest hour. Today, a unique

memorial of the Flying officers of the Battle of Britain does under

the hammer. An autograph books signed by 107 men as they returned

from duty. Many of these people never survived the war. To have

their signatures is very unusual. Page after page, named after name,

some of the true heroes of the Second World War. Not least the man

who is said to have found the book would never he cut from a chair in

his mess hall. The story is immortalised on the silver screen.

Despite losing two lanes in flying expeditions, he returned to duty

and flew in the battle. When told about the book, Winston Churchill

described it as not a book of names but a book of euros.

-- heroes. Breakfast is next. And we will be

looking at one of Britain's biggest secret gardens.

This is BBC World News. The headlines: The US House of

Representatives has voted in favour of an agreement that would raise

the debt ceiling. The legislation was passed by 269 votes to 161. The

tension over future cuts and possible tax rises are due to

intensify. These new members of Congress, these so-called Tea Party

people, believe in smaller government and lower taxes and they

are extremely influential. They are shaping this debate. Bear in mind

that there are still large decisions to be taken about the

nature of these cuts that have been agreed upon. That debate will

continue over the months ahead. UN Security Council has held

emergency talks over the situation in Syria following reports that

tanks have been shelling residential neighbourhoods.

The African Union has announced it will hold a summit to plait held

for victims of Somalia's drought. The crisis is spreading across the

country's southern regions. 25 people found dead in a boat that

landed on the island of Lampedusa in Italy were killed by