22/06/2012 World Business Report

disturbance. Those are the latest headlines from BBC World News. Now

for the latest financial news with Susanna and World Business Report.

Welcome to World Business Report. Moody's downgrades 15 of the

world's biggest financial firms, blaming risks from the volatile

markets. The costs of salvaging the Costa Concordia are expected to hit

Carnival's profits, due out today. I am Rico Hizon in Singapore. Asian

stock markets fall after a gloomy manufacturing data from China, the

US and Europe and the credit ratings downplay -- downgrade of

the top global banks. The credit- the worthiness of 15 of the world's

biggest financial firms has been downgraded by the ratings agency

Moody's. -- credit-wordiness. Moody's says it is concerned about

the Bank's outlook for growth and profitability. HSBC, Barclays,

Lloyds and RBS all saw their credit rating cut and the biggest US banks

were also targeted. Bank of America's debt is now two notches

above junk status. Most of the big names in the eurozone were

downgraded too, including Deutsche Bank and BNP Paribas. Credit Suisse

saw its ratings slashed by three notches. Mark Gregory is in New

York. Why is this credit ratings/so significant? You have to remember

that all these banks are involved in complex trading activities. --

credit ratings slash. This downgrade will make it more

difficult for them to raise the funds needed to take part in these

activities. That is part of it. More importantly, it is a huge blow

to their finances. It becomes much more expensive for them to do

things like derivatives trading that has, historically, brought in

some of their biggest profits. Moody's is essentially saying that,

in the past, the inherent volatility and risks in this kind

of trading have just been systematically under recognised and

it is time for things to change. Of course, the banks do not like it

one little bit. It will cost them money, it is not good for bonuses

and seriously bad for their prestige. Why are Moody's doing

this now? You could say it is simply part of a process that has

been going on for some time. The environment in which the banks

operate has changed and so it is not so much that the risks of this

kind of trading have got worse, it is because of all the prices we

have had -- crisis we have had - especially the European debt crisis

- means that they have not been able to sustain the risks as long

as they have in the past. All these banks have been frantically

lobbying to get ratings changes dropped or changed in scope.

Moody's is now introducing different ratings for different

banks. Some banks will feel they have been demoted from the Premier

League, which, of course, they This is another twist in the euro

debt Backside of. -- debt saga. Let's look at the Asian markets now.

What effect has this had, Rico? Share markets are downbeat here,

with the Moody's credit rating downgrade of the top local banks

already impacting the market, which is already hurting by weak

manufacturing data. Japan, Hong Kong, Singapore and Australia are

all in negative territory but the drops are not as steep as Wall

Street, where the Dow Jones and the SNP dropped nearly 2.5%. The bad

news is also weighing on commodity prices and currencies like the

Australian dollar, which are links to resource demand. The world's

biggest cruise operator, Carnival, reported -- reports second-quarter

results later. The company has been hit by a $300 million bill to

salvage the Costa Concordia, which ran aground in January, leaving at

least 30 people dead. While that disaster has resulted in lost

business overall, the cruise holiday business has been resilient.

It will take one year to re-float and salvage the 114,000 ton Costa

Concordia. While coastal tours have been slow, Carnival is picking up.

They are aiming at a number of holiday makers. They can cater for

up to 4000 passengers at a time. The debt crisis has a downside for

US cruise companies. The dollar has been rising against the euro so

income is falling. The upside is the cost of oil used by cruise ship

has fallen by nearly 25% in just a couple of months. We are seeing

people delay the purchase of their product until a shorter time prior

to consumption. Bookings for nine to 12 months are under a lot of

pressure. Bookings for a shorter window, two to three months, our

way up on last year. After the Costa Concordia disaster, there was

unquestionably a 50% drop in bookings. The imagery of the Costa

Concordia on its side on the media screens for four or five days

naturally provoked questions in people's mind about the safety of

cruises. What we are seeing since then is the booking curve coming

back, an increase in demand. Cannibal's shares have recovered

after falling sharply when the Costa Concordia hit the reefs in

January. -- Carnival's shares. Analysts suggest there is more

growth to come as cruising becomes a mainstream choice for family

holidays. Four of the central figures trying to sort out Europe's

debt crisis meet in Rome today. Italian prime minister Mario Monti

will host Spain's premier, and Mariano Rajoy, German chancellor

Angela Merkel and French President Francois Hollande. They are under

pressure to come up with measures to restore confidence. On Thursday

a report from the IMF said the crisis had reached a critical stage.

Jonathan Bell is from Stanhope Capital. Those comments from

Christine Lagarde are piling on the pressure on Germany. We saw it last

week with the G20 meeting and again with Christine Lagarde's comments

yesterday. She is highlighting the stresses and proposing a solution.

She proposes that the monetary union needs completing, with the

completion of eurozone bonds, guaranteed by all governments, not

individual governments. The other thing she said was that if the

banks need recapitalising in Europe, that should be done by the ESM.

Mario Monti is also expected to push, today, for some of the

emergency bailout funds to purchase Italian and Spanish debt. That is

also resisted by Germany as well. You have everyone pushing Germany.

The meeting in Rome today will highlight that again. You have

France, Germany, Italy and Spain meeting and all of them will be in

agreement, apart from Germany. Germany is the one with the money

that can underwrite the system and they are saying, "We do not want to

write a blank cheque to Europe and we are only supporting the rest of

Europe if the rest of Europe puts austerity measures in place and

does what is needed for us to lend the money." I do not think we will

get any concrete solutions today but hopefully we will get something

next week. We will of course be watching closely all of those