02/08/2012 World Business Report


02/08/2012

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BBC News. Now for the latest financial news with Alice Baxter

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and World Business Report. Hello and welcome to World Business

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Report. Looking for the shock and awe factor - investor hopes are

:00:15.:00:17.

high for today's European Central Bank meeting. And events in Europe

:00:17.:00:21.

are set to take another chunk out of profits from the American car-

:00:21.:00:31.
:00:31.:00:32.

maker GM. There's a lot on the line at today's European Central Bank

:00:32.:00:42.
:00:42.:00:46.

meeting. In the Milun sells a stake to a European Investment Group.

:00:46.:00:50.

Hopes are high that the ECB will act to help out eurozone woes -

:00:50.:00:53.

specifically by announcing that it may buy up Italian and Spanish

:00:53.:00:57.

bonds therefore bringing the countries borrowing costs down. If

:00:57.:01:02.

there is no action, some analysts have warned of market chaos. The

:01:02.:01:05.

head of the ECB, Mario Draghi, lifted expectations at a conference

:01:05.:01:15.
:01:15.:01:17.

last week. Here's what he said. Within our mandate commander the

:01:17.:01:25.

CBD is ready to do whatever it takes to preserve the euro. It will

:01:25.:01:31.

be enough. Believe me. So what are the options open to the ECB? Well

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there is some speculation that interest rates could be cut again

:01:34.:01:37.

by a quarter of one percent - from 0.75 to 0.5% - although most

:01:37.:01:40.

analysts expect a cut later this year What markets really want to

:01:40.:01:44.

see is the central bank re-start its bond buying plan - as we

:01:44.:01:54.
:01:54.:01:57.

mentioned earlier - but that is not without its problems. The

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Bundesbank is against the idea. Germany's Bundesbank is against the

:02:00.:02:04.

idea - with the head of the central bank warning that the ECB must not

:02:04.:02:08.

overstep its mandate. I'm joined by Tom Rogers, senior economic advisor

:02:08.:02:16.

at Ernst and Young. Many analysts saying this is the most exciting

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meeting and a long time. Expectations running high following

:02:19.:02:24.

his comments last week. There was a rally on the market. Using the

:02:24.:02:31.

expectations have been wrapped up to high? There is a danger that

:02:32.:02:36.

people have interpreted his comments too literally. If you

:02:36.:02:40.

think about the the first of what he might say, difficult to imagine

:02:40.:02:43.

him not saying they would do everything to preserve the

:02:43.:02:51.

stability of the euro. We have been saying for some time that the SNP

:02:51.:02:57.

rien -- reactivated would find it fun solution to the crisis going on

:02:57.:03:04.

with the eurozone. There are some other options open to the bank.

:03:04.:03:10.

Another cut in interest rates, is that likely? Reading nothing there

:03:11.:03:15.

will be a cut in interest rates. All the signals from the previous

:03:15.:03:19.

meetings and press conferences suggest they want to wait and see

:03:19.:03:25.

how previous interest rate cuts will impact be, the before cutting

:03:26.:03:32.

rates again. The other option open to the bank is the resumption of

:03:32.:03:37.

its bond buying programme. We already know Jimmy's Bundesbank

:03:37.:03:44.

feelings on that. How likely is that as an option? It is the most

:03:44.:03:50.

likely option. The Bundesbank published the interview on its

:03:50.:03:54.

website this week, with the Governor of the Bundesbank rarer it

:03:54.:04:00.

raided his opposition to that. The compensate -- the conversations

:04:00.:04:07.

that they have behind the scenes and policy makers may its move over

:04:07.:04:13.

some of the objections. Some people have taken his comments last week

:04:13.:04:20.

too literally. What it out the third option about giving the

:04:20.:04:29.

rescue fund licence to borrow money from the CBD? They will be an

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option for the EC it to take the 500 billion US it has and use that

:04:34.:04:40.

as collateral to borrow from the CBD. And expand the money it has.

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There is a measure that would needs to be approved by leaders. Cannot

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be done by the CBD in isolation. General Motors, which last year

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regained its position as the world's largest car maker, is

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expected to report a drop in quarterly profits later today. The

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firm's biggest problem is its business in Europe which is losing

:05:07.:05:16.
:05:17.:05:18.

money. But perhaps more worryingly, this week GM reported a six percent

:05:19.:05:21.

slide in July sales as high US unemployment and weak consumer

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confidence kept would-be buyers on the sidelines. So is GM's revival

:05:24.:05:29.

under threat? Mark Gregory reports from New York. GM nearly went under

:05:30.:05:34.

in the global financial crisis. It was saved by a huge government

:05:34.:05:39.

bail-out. Since then, it has gone back to health, leaner and more

:05:39.:05:43.

efficient with lower costs and fewer deaths. Sales are up and up

:05:43.:05:49.

profits restored. But recently, the clouds have appeared. Here at this

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GM Chevrolet branch in Brooklyn, the business environment is like

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the weather. Damp and gloomy and overcast. Sales are holding up

:05:59.:06:04.

reasonably well. But with the US economy on the slide, this is not

:06:04.:06:09.

an easy moment to be selling expensive items like new cars. It

:06:09.:06:12.

is getting more difficult because people are conscious about losing

:06:12.:06:18.

their jobs, how can they make the car payments. If their car is

:06:18.:06:22.

running, they would rather spend a few hundred dollars to get it

:06:22.:06:27.

maintained then go through the transection of buying a new car.

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Thanks to cost-cutting and efficiency gains, GM does not need

:06:30.:06:36.

to sell as many cars in its core US market as it once did. The

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company's biggest problems are at its factories in Europe we are it

:06:40.:06:45.

has yet to wield the axe on costs and sales have slumped due to the

:06:45.:06:52.

economic crisis in the region. There is a lack of demand in Europe

:06:52.:06:58.

and it has come bounding oversupply. What we have seen from Ford and

:06:59.:07:04.

other auto makers deep discounting going on and it's a direct hit to

:07:04.:07:11.

profitability. We would expect similar results for GM. Also some

:07:11.:07:17.

anxieties that home. The latest US figures show GM and Ford sales

:07:17.:07:22.

slightly down what Japanese rivals like Honda and Toyota have seen big

:07:22.:07:28.

gains. A few more months of data like that could be deeply worrying.

:07:28.:07:31.

China is getting into the olympic spirit - it's investing in an

:07:31.:07:41.
:07:41.:07:42.

Italian football team. Sharanjit Leyl is in our Asia business hub in

:07:42.:07:48.

Singapore. Sharanjit, why the interest in Italian football?

:07:48.:07:56.

Football of all sorts is huge in Asia. Asians love European football.

:07:56.:08:01.

We're seeing a group of Chinese set to become the second largest

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shareholders in the top Italian football club into an alarm. They

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have many fans and will parts of Asia. They are holding the parent

:08:13.:08:20.

company and the group would require a stake but the main family would

:08:20.:08:30.
:08:30.:08:36.

retain control of the team. The Italian said the club wants to

:08:36.:08:44.

increase its presence in Asia. Three players would become members

:08:44.:08:54.
:08:54.:08:59.

of the board of directors. It wants to enhance its future development

:08:59.:09:04.

and future perspectives. This is not the first time Asians have

:09:04.:09:09.

taken stakes in soccer clubs. A former Thai Prime Minister had a

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founder of air Asia took over another English club, Queen's Park

:09:17.:09:27.
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Rangers earlier this year. In other news - the New York stock exchange

:09:31.:09:34.

is investigating trades in at least six stocks after a technical glitch.

:09:34.:09:36.

An electronic trading system is thought to have malfunctioned,

:09:36.:09:40.

causing prices to fluctuate wildly in the first 45 minutes of trade.

:09:40.:09:43.

The Japanese electronics firm Sony is expected to report a sharp drop

:09:43.:09:46.

in profits this morning - hit by the on going eurozone problems and

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