16/12/2015 BBC Business Live


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This is Business Live from the BBC with Sally Bundock and Ben Thompson.


Today's the day America's Central Bank prepares to raise


But what does this mean businesses, consumers and the global economy?


Live from London, that's our top story today,


You have to go back to 2006 for the last time


Some stockbrokers had to provide training to younger members of


staff. Also in the programme,


from Handbags to Haute couture, Prada has enjoyed huge success


in recent years as the appetite A strong day in Asia followed


through to Europe. We will keep you across every twist and turn as we


ready for that decision in Washington.


What does a slump in commodity prices mean for the firms that


extract and sell oil, gas and metals. I sat down with the Chairman


of one company to get the inside track of a company that began


trading scrap metal, but took him to the top of a multibillion giant.


Today, we want to know what's the best invention of the last decade or


the most significant change? Use the hashtag BBC Biz Live.


So this is it, nearly every financial expert out there is saying


We are talking about a rise in interest rates


Since December of 2008 the cost of borrowing there has been held


But Federal Reserve chief Janet Yellen has strongly hinted


that now is the time to make the change.


As you can see, you have to go all the way back to June 2006


to find the last time the Fed raised its key interest rate.


Well, the cost of borrowing was originally lowered


during the financial crisis to support banks


By making borrowing cheaper it helps to encourage


However, as an economy picks up so can inflation,


and with the recovery in the US now looking firmer interest rates


are likely to go up by a little today with further gradual increases


Our business editor Kamal Ahmed is with me.


Kamal, I don't know what's been hyped more, the new Star Wars film


or the interest rates decision that we expect today. Talk us through the


significance of this? This really is historic moment. Not since the


financial crisis has any major Central Bank raised interest rates


and certainly not in America. It is important because it really is a


signal of economic strength and confidence in America that if Janet


Yellen does raise interest rates this evening that the American


economy is performing well and therefore, is able to have a more


normal monetary policy. We have been in the monetary policy experiment


basically since the financial crisis and also it will have huge effects


on the global economy. So what will it mean for emerging markets? Their


debts denominated in dollars will become more expensive. What will it


mean for economies of Brazil and Turkey? What does it mean for


currencies? It will lead to a strengthening of the dollar, but


possibly a weakening of other global currencies, the yen, the euro in


particular and what does it mean for the big flows of capital around the


world? Big global investors are looking for return on the capital


they invest and America suddenly becomes more attractive. It is a


higher interest rate economy. Money could start flowing into America and


away from Japan and like Europe and like emerging markets. The economic


picture is very different since the Fed last met and I think it is fair


to say they have talked themselves into a corner whereby all the


expectation is that today is the day that they will do it even though the


economic picture is very different. I suppose it strikes me that they


will be about managing the fall-out and managing the expectation


expectation as a result of this? Today's increase will only be a


small increase if it is the increase that we all expect and Janet Yellen


will be keen to say this is what is described as a dovish hike. When the


federal verve starts tightening monetary policy, it is done so


aggressively. Interest rate rises follow interest rate rise at every


single meeting. This time, I think, that is less likely. I think she


will be signalling, if she does agree to a rate rise, that the rate


rises will be slow and will not hit the prefinancial crisis levels of


interest rates what we were used to. The new normal is a far lower


interest rate environment in general. If she does raise rates,


she will be in reassurance mode about how quickly those rates will


rise in the future. And what do you think about the


timing Kamal? Many say this should have happened months ago. They


should have got on with it and we could get used to, markets and


economies some, but some are saying that today shouldn't be the day, it


should be next year? We are here in September thinking the Federal


Reserve would raise rates and they didn't and that was because there


were concerns about China and the China slow down. The market feeling


is she should get on with it now the signals have been so strong, that if


she doesn't again, central banks have to communicate clearly what it


is they want to do to maintain market stability and if she doesn't


again and leaves it until the New Year, that's seen as more damaging


than a small rate rise now. We are only talking about 0.25%. It is


significant more almost for the political and economic message it


sends rather than the actual effect of a small rate rise.


Kamal, thank you. The Australian and British


arms of the pizza giant, Dominos, are joining forces to buy


a rival chain in Germany. The $49 million deal to acquire


Joeys Pizza will create Germany's The deal will give Domino's more


clout in the German market where it's struggled


as a small operator. Forrest fires and haze pollution


in Indonesia have cost the country That's more than twice the amount


spent on reconstruction efforts after the 2004 Aceh tsunami,


according to the World Bank's The bank says the cost of the fires


this year amounted to 1.9% of Indonesia's gross


domestic product. Rolls-Royce will revamp


its management structure and recruit a chief operating officer in a bid


to revive the ailing company. Tony Wood, the head of aerospace,


will depart, and Lawrie Haynes, who runs the land and sea division,


will step down next year. The changes, reported


by the Financial Times, are expected to be


announced on Wednesday. Removing the top layer


of management is a bid Let's check-in with the Business


Live page. It is dominated by the Fed potential rate decision that we


may get later today. They are pointing out on the live page, a Fed


rise nothing to get too excited about. We are talking a rate rise of


25 basis points. 0.25%. The suggestion here that's not


interesting until rates start rising to 1% or 1.5% and in context


remember the Bank of England interest rate is only 0.5% and no


one has been calling for rates to be cut. I want to take you to a story,


the Bank of England has been assessing what would happen if


interest rates in the UK were to rise and what it would mean for


households and borrowers. Well, they have said if they were borrowing


money, 55% would cut the amount of money they spent as a result of a


rate hike. Savers said half of them would do nothing because interest


rates for savers have been so low for so long, not very excited by a


potential offering of 2%. Quite a few viewers have been


getting in touch, talking about the fact that interest rates going up is


great for savers who have been, you know, languishing with low rates for


many, many years. Let's mention the story we touched


on earlier. Prada, disastrous numbers coming from the company.


What's going wrong for Prada? The slowing growth in China, that's


having an impact and not just on Prada, but other luxury brands as


well. For Prada profits and the most recent quarter falling by almost 40%


and not just a slowdown in growth, but a crackdown on spending and


lavish spending by officials, all a That is taking its toll and it is


sending its shares down to a record low level, down 6.5% today or down


nearly 40% from its IPO price. Also a strong Hong Kong dollar is having


an impact as well because Hong Kong has traditionally been the


destination for mainland shoppers to go and spend their money, but a


strong Hong Kong dollar made Hong Kong a very expensive destination.


Thank you. Not a good day for Prada on the


financial markets, but the markets across Asia had a bumper session. It


follows a similar situation on Wall Street the night before. Japan


closing up 2.5% today. Hong Kong up 2% and this is being felt to a


degree in Europe. Not such strong gains for share markets in Europe


today. Most of the markets in Europe closed up over 3% yesterday. So most


of that gains was done on Tuesday. Today, though, the FTSE got its head


above water. All markets trading very ten tatively ahead of that


decision in the US just to say oil is still at multiyear lows and the


dollar weakening a bit today too. Ben back to you.


Joining us is Richard Dunbar from Aberdeen Asset Management.


Richard welcome. Let's talk Fed, but in a bit of context because all eyes


are clearly on America's Central Bank about what it will do today.


The numbers will be in a holding pattern until we get some news, but


it is interesting if you contrast it with what the European Central Bank


did last week and it is a very different response to what are


different economic climates. The European Central Bank were expected


to cut interest rates and they didn't do that. Contrast that with


the United States where Janet Yellen is likely to outline a view of a


strong US economy and a more Sangin view of what is going on in the rest


of the world which might be supported from what we saw from the


ECB and what we saw in Asia and in other parts of the world. What do


you think is going to happen tomorrow when we get the rate rise?


It is priced in. We have known about this and prepared for it for a long


time, but we're coming into the Christmas silly season as well, it


is slow and markets in the western world are slowing down and heading


to a long holiday break? If Janet Yellen raises rates tonight, that's


what everyone in the market expects. So the surprise would be if she does


anything different or if there is anything in the statement that


surprises markets either about the size of the rise or indeed, the


trajectory of rate increases. That would be the major surprise the we


are looking what her view is what's going on in the rest of the world


and that may inform investors as to how the path over the next few weeks


and months may go. One we will watch closely, Richard, thank you very


much. At any other time, you might think the economic data would


suggest a rate rise. But they have almost backed themselves into a


corner where they have to do it now. in commodity prices is taking its


toll on the world's mining giants. The boss of Vedanta told me how he's


weathering the storm, and why his first job,


selling scrap metal, If you're hoping to get your cards


and presents delivered before Christmas, you're fast


running out of time. Royal Mail staff are trying to make


sure millions of letters and parcels get to their destination


before the big day. Steph is at a sorting office


in Sutton Coldfield. Steph, we're sending fewer


and fewer cards every year, but it's online shopping


and all the parcels that Good morning everyone. Yes, it is.


We are not seeing as many letters, but it is a very big day for Royal


Mail. The busiest for them. In this sorting office they are expecting to


be delivering 160,000 letters and that's 60 more than your typical


Wednesday, but as you said Ben, it is about parcels because there has


been a decline in the number of letters that are being sent, but an


increase in the parcels and this area around me was really busy


earlier on with the posties getting ready to get the parcels out and ten


million parcels will be delivered today alone. We can grab a word with


the posties. Lynn, tell me about how it is going this time of year for


you. It's so busy, so stressful but we try and work as a team and help


each other out for you. You have been in this business for over 40


years, have you seen a change? Letters have gone down a lot, there


are small packets now, but definitely, postcards, Christmas


cards have really gone downhill. It's about the big parcels you have


to deliver, I'm going to let you get on with it and I'm holding you back,


I have been a pain, getting in everyone's way! This operation is


all about hand sorting and automation and there are machines


over the other side, they will also be sorting things because automation


is a key part of this, something that Royal Mail are trying to do to


increase the efficiency and bring down the costs of the business. If


you have any post to send, get it in soon! Always good to be reminded! I


have a tonne of cards in my bag, I'm feeling good about that. And if it


doesn't arrive on time, you know you can blame Steph! I just want to show


you this on the website, an interview with Mark Carney, whether


landlords will sell if prices fall. You're watching Business


Live - our top story: Of course, the big day, the Fed


reserve in the US is expected to raise interest rates, we are right


across it for you throughout the day, online, on radio and the telly!


This could be big news around the world for commodities, stock markets


and for the value of the dollar and sterling and other currencies.


It's been a volatile week, to say the least,


Oil dipped below $37 a barrel and other energy


And we've already seen the impact that's having on firms like Shell


and Exxon - they, along with rivals, have cut spending, investment


But what about miners and metals firms?


As well as oil, Iron and aluminium have taken a battering


on the markets in recent months due to oversupply and slowing


One company that has seen its share prices tumble as a consequence


is the London listed, but Indian owned, Vedanta Resource.


The firm was founded in 1976 by current chairman Anil Agarwal,


who still owns over 60% of the company.


after leaving school at just 15 to trade scrap metal,


he has risen to become India's 24th richest person with a fortune


Well a little earlier I caught up with Mr Agrawal,


and asked him about how he manages a business that has to cope


with highly volatile raw material prices.


The whole world is in slump but India is growing, double digit, so


it is an exciting time. Of course, the prices have come down, so we


have to tighten our belts but going forward, being in a geographical


location that India helps us. You've talked about being more efficient in


the day-to-day operation, has that manifest itself on the ground, what


are you telling your teams on the ground? You have a budget to spend


on your holiday copies of the work at everything in that so today you


have a commodity price which is this and within that, you have to work


out everything, this is the money we have, this is the cost we can


afford, our cost has been reduced, our teams are working better. The


other part, we have been spending a couple of billion dollars every year


to build the plant and expand it. The share prices down from ?30 a


share in 2010 two maybe ?6 today. What do you shareholders tell you,


what is your responsibility towards you see such a significant fall? It


has gone to almost ten times, people have made a lot of money, we have


given them, what I have raised, more than three times back to them, so I


did what I'm supposed to do. Does it worry you when you see a share price


fall like that. Other business leaders have said it doesn't reflect


the reality on the ground but equally you say it is the perception


of the shareholders, that they want to invest or they don't, are you


worried by such a significant fall? I don't worry because among my


peers, I do better so that confidence is there, and the


geographical location. Today, I am focused on my company and innovation


and technology, I am working on exploration with the best technology


in the world. What concessions do you have with local people if you


want to open a plant in an area and they have environmental concerns?


What do you tell them? To be transparent. There are so much of


pro at this point in time, in India, we have almost 3000, they just want


to start a factory. We have a high standard of environment, we have to


make sure we follow that. The two things mutually exclusive,


Environmental Protection Agency economic growth? Can you have the


same things? Absolutely, today's technology is amazing. 50 years


back, things were different, it just requires discipline. And without


industry, you can't progress. So once you balance that, there are


norms. 102 to 105. Within those norms, you have to make sure you


stand by. You have made a lot of decisions in your long career, was


there any point you wanted to give up? As a human being, these things


come, but I have my father, who is a very strong... You can go to him,


put your head on his shoulder, he says, you can do it. Try one


wartime. -- try one more time. Get your work done, Pat your people on


the back. And this kind of word helps and you start again. Speaking


to me about the indications of falling commodity prices.


One of the consequences as well is investment coming out of those


Middle Eastern, oil-rich nations, not so oil-rich anymore, in terms of


property in places like London, that's going down. There are lots of


wealthy individuals and sovereign wealth funds, read oil and


resources, with prices having more than halved over the last couple of


years, that source of investment, is much less than it was, we are seeing


that in fairly significant amount of the moment. Perhaps it will come


from other sources, beneficiaries of lower oil prices and other metals


prices may be the ones that step up to the plate. We tend to think it is


just high end property but we should remember that has huge repercussions


all the way down the chain, if the top end of the market is suffering,


that has invitations for everybody in the middle, falling oil price has


huge imprecations in areas you wouldn't expect. We are seeing that


in London, the top end of the market is weakening and that is having


ripple effects further down. There are worries at the bottom end of the


market. Mark Carney is talking about the buy to let market, there are


worries in that end. Starbucks is in a lot of the press today, it


released its results is today and in that news, there was the information


about the tax paid. UK corporation tax of ?8.1 million. That's nearly


matches total contributions paid over the past 14 years, a long time


coming. We continue to focus on the tax that multinational companies are


either paid or in many cases not paying, I suspect that focus will


continue but in this case, Starbucks sales are down on the year, profits


are up, around 30 million. I suspect they are up to two accounting


changes, they made 30 million profit rather than 8 million survey are


paying a higher rate of tax than the standard corporation tax, but I


expect the executives will be more concerned about the falling top one


and the prospects for the profit line and we should be concerned


about the profits for the tax line as recipients of that tax. I just


wondered if the negative press surrounding them with regards to


this issue has affected sales, because some believe it has, people


have chosen to get their copy somewhere else. It's hard to say but


anecdotally there are many consumers who if they have a choice and there


is plenty of choice as to where one takes 1's cup of coffee, some will


choose other venues. It is hard to determine at what the tax they are


played on what profit, the company are appearing the pay a fair tax but


we have no clue whether the profits on which the paid is fairly stated.


Accounting is art as well as science so the bigger is open to debate.


Great to have you on the show. We will see you soon.


The warm coats, scarf and gloves can stay in the cupboard today, a very


mild day


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