16/10/2013 World Business Report

the latest headlines from BBC News. Now for the latest financial news

with Sally Bundock and World Business report.

Volatility on the markets after Fitch threatens to strip America of

its triple A credit rating over the debt deadlock. Yahoo reveals its

still a struggle to boost its core online business. `` it is. But

shares rise on a new deal struck with Alibaba. Welcome to World

Business report. Will also be hearing from the leading bond

manager to find out how markets are twisting and turning it this crisis

in the US. Now to the latest on that. The US debt ceiling drama

continues. Late last night one of America's leading credit agencies,

Fitch, warned its reviewing the government's top credit rating

following the failure of Washington to strike a deal on lifting the debt

ceiling. The news broke after the close of trade on Wall Street but

has caused markets in Asia to slump overnight, though they have

recovered some ground in the last hour. Our correspondents in Hong

Kong, India and London explain how their countries are being affected

by what's going on in the US. Here in Hong Kong, investors are keenly

watching the outcome. China is the biggest overseas holder of US debt.

So a failure by the US politicians to come to an agreement could affect

Chinese investments. As a result, Chinese officials have urged

Washington to shelter is responsibility and take drastic

measures to avoid a default. Here in India, the major worry is that the

crisis could impact the rupee in a big way. It has been the worst

performing currency in Asia this year, losing more than 25% between

May and September. Isn't it Indian equity market is worried. Foreign

investors hold a major chunk of stocks here ` more than $85 billion

worth. If they pull out it could downgrade the markets. Here in

London, the Bank of England has emergency plans in place, but won't

give details. Investment funds have effectively led the US $157 billion.

If their value fell, banks could be struggling to find solid assets. The

price of those US loans also sets the cost of borrowing here. A rising

rates could do a lot of damage. I am now joined by Stuart Cowley and

David Keogh from Singapore. He is with the motley full. Stuart, in

terms of the announcement late last night that it has put the US on

negative watch, no surprise? `` Fool. Not really, this is just part

of a long`term process in US credit rating in the markets. What impact

is this having? So far, the interest rates are starting to rise along

with the rising concern of investors. This is natural. In

September last year, you were paying the US to look after your money at

negative interest rates. Now they are paying you half a percent. It is

not much, but is symbolic that as this crisis goes on, long`term

interest rates will rise. David, part of your purpose is to make

sense of financial markets for the ordinary investor. What are you

telling people to do? We are asking people to stay calm. There are many

fluctuations in the market. Just keep your nerve. As solution will be

found. This is reflected by the Asian markets. They are

flip`flopping, but there is an eerie calm. One American bank says it

would much rather not take short`term treasuries. This is

understandable. Banks are naturally cautious. They would rather take

other collateral. But we are hoping things will sort themselves out. We

still have another 24 hours. We are keeping our fingers crossed. But

Stuart, in the meantime, the impact is being felt everywhere. Our Hong

Kong correspondent was beating about the Chinese angle, given that they

are huge investors in the US economy. They are furious. Even if

the American striker deal today and avoid defaulting, we could be in

this place in a few months again. Of course. This bullfrog in the

background for it sometime. Its democracy with eight gun. Do as I

say, or I will shoot myself. The Chinese have 1.5 tree of dollars of

US securities. Their rhetoric is becoming more shrill. `` 1.5

trillion. America plays up on this. But Chinese are livid. They called

them hypocrites yesterday, that they should continue this process of not

living within their means. When the Chinese try to control their

currency, it means for them they have very few alternatives back to

`` but to eye US Treasury bonds. David, obviously we pull revisit

this situation next year. What impact will that have, the fact that

we know this will roll on, the dispute based on political ideology?

Political ideology is very interesting, because when political

ideology comes in through the front door, common sense goes out the

window. That is what we are seeing here. There is no common sense.

Unfortunately, as far as America is concerned, they are living beyond

their means. The debt price `` crisis will continue until they can

come up with a budget without a deficit. Thank you, Stuart and

David. Today is the day. The clock is ticking. We will keep you up to

date as that they are aggressors. Staying with the US. Many of the

biggest companies have started reporting their latest earnings.

Internet giant Yahoo announced their results after markets closed Tuesday

night. It said revenues fell 5% as online advertising continued to

slip. Despite its poor performance Yahoo shares have enjoyed a huge

jump since the new boss took office. This back in the 1990s, Yahoo! Was

the dominant search engine. But since then, its market share has

shrunk because of its rivals, Google and eating. Marissa Mayer was

brought in from Google to turn the company around. `` being. Since she

joined, she has made headlines, especially with a huge acquisition

of up blog site. `` Bing. Yahoo! Is stock price has doubled since

Marissa Mayer became the CEO. But why do investors love her so much

when her core business has not performed well? The stock has been

driven by Alibaba than anything Marissa Mayer has done. She has not

done much. One major acquisition. She has changed a few things about

the homepage, but nothing radical. Alibaba dominates the Chinese

market. Its plan to go public is exciting Yahoo! Investors. Alibaba

may have attempted tour of treasured shave for Yahoo!, but Marissa Mayer

may look `` may need to look elsewhere to increase the fortunes

of Yahoo!. Let's look at the markets. The picture is very mixed.

Japan up, Hong Kong down, Shanghai down. Very mixed. The markets will

remain very volatile, in and out of positive territory in both Asia and

Europe as the day progresses. I don't need to explain why. We will

see you soon. We will look through the newspapers in just a moment.