04/02/2016 World Business Report


04/02/2016

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Now for the latest financial news with Sally

:00:00.:00:00.

Oil prices soar as the dollar slumps.

:00:00.:00:19.

Have traders finally seen the bottom of the barrel?

:00:20.:00:25.

Plus, communication error: The Bank of

:00:26.:00:26.

England gives its quarterly report later, but is guidance from central

:00:27.:00:29.

Also coming up, the Trans-Pacific Partnership is

:00:30.:00:38.

Some investors are even daring to call the bottom of the market now,

:00:39.:01:19.

That's wiped out all of this week's losses.

:01:20.:01:27.

Several reports are suggesting OPEC and non-OPEC countries could be

:01:28.:01:32.

planning an emergency meeting to try and cut oil production.

:01:33.:01:34.

But a bigger reason is this: the plunge in the value of the US

:01:35.:01:49.

Remember, oil is priced in dollars so a weaker dollar makes it more

:01:50.:01:53.

So the biggest question, has the oil market found the bottom?

:01:54.:02:23.

A big rise, but still uncomfortably low for many in the industry.

:02:24.:02:36.

Certainly, the oil is low and I would expect it to stay there for

:02:37.:02:47.

some time. There is too much supply, there has been for some time, and

:02:48.:02:51.

there are some question marks over demand. Those two things have to

:02:52.:02:55.

match, and I think the big thing we have learned in the past is that it

:02:56.:03:01.

takes time for supply to stabilise and allow the gap between supply and

:03:02.:03:06.

demand to close. So it will take a bit of time, so I think we are back

:03:07.:03:10.

to a period of relatively low prices, much as we had in 1986 -

:03:11.:03:20.

2004, a 17 year period, where the price was about 30-$35 in real

:03:21.:03:23.

terms. Lord Browne,

:03:24.:03:27.

former boss of BP there. We will have the latest results

:03:28.:03:29.

from rival Shell later. Of course it's not just oil

:03:30.:03:31.

companies struggling with low crude prices, oil producing nations

:03:32.:03:34.

from Russia to Algeria to Venezuela Our reporter Abdujalil Abdurasulov

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sent this from Kazakhstan. Kazakhstani has always been a

:03:38.:03:52.

country with high ambitions. Just recently it was bidding to host the

:03:53.:03:57.

Winter Olympic Games and planned to join the top 30 most developed

:03:58.:04:01.

countries in the world. Luxury lifestyle became a symbol of the

:04:02.:04:07.

booming economy, but that was when oil prices were high. The day of the

:04:08.:04:12.

shopping spree is clearly over. We see that the absolute wealth of the

:04:13.:04:15.

people is decreasing, and it will over the next two years. So we think

:04:16.:04:26.

that the buying in US dollar will decrease, but we don't know to what

:04:27.:04:31.

extent. The extent can be very serious, because 70% of revenues

:04:32.:04:38.

come from oil sales, and when oil prices fall, the entire economy is

:04:39.:04:43.

affected. TRANSLATION: When oil prices are high budget revenues are

:04:44.:04:47.

high. The government starts spending on investment project. As a result

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the construction sector starts growing, pushing the banking sector

:04:52.:04:55.

up as well. That provides cheap credit to companies and consumers,

:04:56.:05:00.

new jobs are created and people earn more and consumption grows. With

:05:01.:05:08.

increased consumption, increased production also grows. That is how

:05:09.:05:14.

we get a bubble. At the moment, the bubble has exploded. Investment

:05:15.:05:16.

projects have halted, the banking sector is in crisis. Companies are

:05:17.:05:21.

losing profit because people spend less, and as a result the economy is

:05:22.:05:27.

struggling. In 2015, economic growth slowed down to 1.5%. The current

:05:28.:05:34.

account balance dropped to -3%. The currency lost half of its value. The

:05:35.:05:39.

budget deficit increased because of the fall in oil revenues. To fix

:05:40.:05:52.

this situation, the country must fix its currency, and they may find it

:05:53.:05:55.

difficult to finance this project. We are also looking at the Bank

:05:56.:05:58.

of England. It gives its quarterly inflation

:05:59.:06:00.

report later when it's also expected Just a matter of weeks ago

:06:01.:06:03.

its governor Mark Carney was preparing us for higher UK interest

:06:04.:06:07.

rates, now he has signalled that's Dominic Rossi is Chief Investment

:06:08.:06:11.

Officer of Fidelity, one of He says it's not just the Bank

:06:12.:06:15.

of England that has failed in its communication,

:06:16.:06:19.

but all the major central banks. They have consistently understated

:06:20.:06:33.

the disinflationary forces in the world economy. If you look at the

:06:34.:06:36.

ECB, the Bank of England, the Chinese and the Fed, they have all

:06:37.:06:41.

consistently over egged their inflation forecast, and they have

:06:42.:06:49.

been too aggressive in their communication strategy around future

:06:50.:06:52.

interest-rate hikes, and we are constantly seeing them grow back.

:06:53.:07:02.

While it is wise that they do row back, Vieira in the first place

:07:03.:07:06.

causes a certain amount of damage, and I think that is one reason why

:07:07.:07:09.

equity markets have been so unsettled in recent weeks.

:07:10.:07:11.

The vast Trans-Pacific Partnership trade deal, or TPP,

:07:12.:07:13.

has been formally signed in the New Zealand capital Auckland.

:07:14.:07:16.

The US-led deal aims to free up trade and investment between the 12

:07:17.:07:19.

countries across the Pacific Rim, including Singapore, Australia,

:07:20.:07:21.

Together they account for about 40% of the global economy.

:07:22.:07:25.

However President Obama has struggled to get

:07:26.:07:27.

And there have been protests by those who claim big business

:07:28.:07:30.

will profit at the expense of small farmers and workers.

:07:31.:07:58.

Rico Hizon has been following the story for us in Singapore.

:07:59.:08:01.

It is a done deal? They signed it at the ceremony in New Zealand, the

:08:02.:08:14.

second half of it, it says that there are two years to ratify this

:08:15.:08:19.

trade arrangement. And if only ten nations ratified without Japan and

:08:20.:08:23.

the US, unfortunately it will not be enforced. It needs both economic

:08:24.:08:32.

powers to improve it, and then Congress will support it. Earlier I

:08:33.:08:38.

spoke to the New Zealand trade minister, and I asked him why

:08:39.:08:43.

critics say corporations are the winners and ordinary workers are the

:08:44.:08:49.

losers. It is fair to say that there are a number of people who have

:08:50.:08:52.

different views from the governments who have negotiated this agreement.

:08:53.:08:58.

In the case of New Zealand, this is of significant net benefit to us.

:08:59.:09:05.

The central bank did a study on short time ago, and forecast

:09:06.:09:07.

economic benefits for all of the countries. New Zealand have been

:09:08.:09:13.

placed about fourth best off in terms of benefits, and some of them

:09:14.:09:19.

are more significant than the assessment our government has done.

:09:20.:09:24.

There are also ideas that this will mean higher prices for products that

:09:25.:09:32.

are subject to longer copyright periods and more stringent patents.

:09:33.:09:36.

Sumner Redstone has stepped down as executive chairman

:09:37.:09:41.

He will be replaced by president and chief executive Leslie Moonves.

:09:42.:09:44.

There is now speculation that Mr Redstone will also step down as

:09:45.:09:47.

chairman of Viacom, which owns MTV, Nickelodeon and other media assets.

:09:48.:09:50.

Mr Redstone, who is 92, has been facing questions

:09:51.:09:52.

and legal action around his ability to lead the companies.

:09:53.:09:55.

Mr Redstone owns an 80 percent voting stake in CBS

:09:56.:09:57.

The former head of the International Monetary Fund, Dominique

:09:58.:10:03.

Strauss-Kahn is joining the board of a bank owned by Ukrainian

:10:04.:10:06.

Mr Strauss-Kahn resigned as IMF managing director in 2011,

:10:07.:10:09.

after being accused of a rape at a New York hotel, allegations

:10:10.:10:12.

He will join a newly-formed supervisory board

:10:13.:10:14.

Here are the markets, they are still headed higher. The only market

:10:15.:10:40.

headed south as Japan, and that is because the yen is much stronger. A

:10:41.:10:47.

mixed and to the day on Wall Street. People quite concerned about some

:10:48.:10:49.

economic news out of the US.

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