17/06/2014 World Business Report

have devastated the small town in the area. Those are the latest

headlines on BBC World News. Now Sally has World Business Report.

Another safety crisis at General Motors, the US car giant says it is

recalling a further 3 million cars for technician issues. And the rise

and rise of London house prices, but could the bubble be about to burst?

We take a closer look. Hello and a very warm welcome. You're with World

Business Report. Also coming up, it is called high`frequency trading but

is it high risk? We looked at what it is and why US politicians are

worried. But first, more problems for American carmakers General

Motors. Late last night they announced they are calling 3.2

million cars relating to an ignition switch malfunction. `` recalling. On

Friday they announced a recall of more than 500,000 Cameros for the

same problem, both in addition to the 2.6 million cars they already

recalled earlier this year. The faulty switches have been linked to

more than 12 deaths. This latest recall of almost 3.2

million cars also has to do with an ignition switch problem. In this

instance, a driver's needs cannot the keys and sedately out of the

running position, causing an engine stall. Now this is in addition to

another recall earlier this year of 2.6 million cars and that also had

to do with ignition switch problem is. GM is now setting aside an

additional $300 million in the second quarter to cover the costs of

these new recall is. In 2014, GM has recalled almost 17 million cars,

that is more cars than the company sold in all of last year. Its Chief

Executive Officer Mary Berry will be facing some tough questions on

Wednesday when she goes to Washington to face congressional

leaders and they will be asking questions about these problems with

ignition switches, how much the company knew, and for how long.

Something the 2008 financial crisis brought into view was the fact that

due to the rapid changes in technology, the way financial

markets work have become incredibly compensated `` has. Regulators don't

understand a lot of the intricacies and even some of the chiefs of the

biggest banks had to admit they didn't understand what their traders

were up to. We all played a big price. Today a Senate panel is

focusing on high`frequency trading `` we all paid a big price.

The popular idea of trading is this. And surely this is closer to

what it really looks like, endless computers spitting out orders. US

lawmakers are concerned high`frequency trading, a type of

algorithmic trading, has created an uneven playing field. There are

concerns, especially about increased volatility and possible breakdowns.

What happens when the entire market is made up, or most of the market,

is made up of these firms that use computer algorithms. It's not humans

making decisions. If an algorithm goes wrong, what are the checks on

that? Scrutiny of high`frequency trading intensified with the

publication of the book/ Boys. In April the author told the BBC about

the problems he saw with the market `` Tim Mack to. We had crashes,

exchanges going down from hours at a time `` Flash Boys. Even within the

financial system, there is a misgiving about the way things are

structured and a concern that a catastrophe could happen because the

technology has become too compensated. The book has since

prompted the US Justice Department and others to investigate the

claims. The suggestion that US stock markets, the most iconic in the

world, could somehow be rigged, has sparked fierce debate.

High`frequency traders say they are being unfairly attacked and they

help promote greater market liquidity. But with regulators and

lawmakers now focused on this issue, this could be the first

chapter in the battle over fast trading.

Now, onto a UK accession and consequently it is a rare day to

pick up a newspaper and not see a headline about the soaring value of

property, especially in London and in the last year house prices in the

UK capital have risen sharply, driving fears there is a bubble

waiting to burst. According to RightMove, the average price has

gone up by ?80,000, just over $135,000.

Compare that to the national average,

The Bank of England committee has been tasked with stopping a housing

bubble forming in London. They meet today to discuss what to do about

these rapidly rising prices. I am joined by the head of UK residential

research at an estate agents in the UK. The Bank of England committee is

more arms than it was last week thanks to the UK Finance Minister's

speech. What are they likely to do to try to pull down these prices?

They have been given powers to intervene in the market and what

they could do is insist banks have more capital requirements so

mortgage lending is backed up by a bigger pool of money. Or they could

intervene and say to banks you can't lend over a certain loan to value

rate, or loan to income rate. If a borrower comes to you you shouldn't

lend over four times their income. Is that the problem with the markets

specifically in London? Not really. What we have seen in London is a big

return in demand domestically. The economy has improved over the last

year and people feel confident about making the move and they go to buy a

house and the supply isn't there. As forest and has acknowledged, we have

a chronic undersupply of housing in London `` as Boris John and has

acknowledged. London is very attractive to foreign investors. It

is a known fact that having a property in London is a good asset

in your portfolio. London has benefited from that safe haven tag,

as have property areas around the world. People want to invest in

property where there is safety. You have seen a benefit all around the

world from that trend. Is there a bubble waiting to burst? Or is there

a lack of supply, therefore this market can go on and on. There is a

lack of supply and that will underpin prices in London, we want

to see these apply stepping up so we can bring the house price to lending

ratios come down. When you start to see the interest rates come down,

that could weigh on sentiment in the market. Thanks very much. As I said,

and of session just like the weather for British people. The Chinese

Prime Minister is due to have an audience with the Queen today and

with... At a summit with David Cameron. He arrived in London

yesterday and the Home Office said they would announce a new visa

service allowing business and tourists to use a single application

to process their visa is for Britain, as well as a Shenzhen

visa, which allows access to 26 European countries. Royal Dutch

Shell is cutting its stake in Australia's Woodside in a sale that

will net it $5 billion. Upon completion its stake in Woodside

will be reduced from its current 23% to 4.5%. Shell said in a statement

it wants to focus its Australian growth indirectly owned assets. The

Russian energy giant gas prom has cut off its supplies to Ukraine

after a deadline passed for Kiev to repay $2 billion, which Moscow says

it is owed. The EU says European gas supplies should not suffer in the

short`term. Markets, investors still don't have much appetite for risk

because of Iraq and also the spat between Russia and Ukraine about gas

prices. In Asia, a better day for Japan. Japan was hit hard yesterday

because of the strength of the Japanese yen. You can see the

Japanese market is up by 0.4%. A quick look at the currencies, the

dollar is in favour a bit because of the issue as far as concerns about

the risk. The Yen is doing well as well. I will see you soon for a look

at the newspapers where we will talk about those stories a bit more.

The government needs to spend more money on flood defences or face a

repeat of the devastation we saw earlier in the year, according to a

report from a group of MPs, which says funding for clearing rivers and

routine