22/01/2016 BBC Business Live


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continues to dominate those talks at Davos. Live from London, that is our


top story on Friday 22nd January. A Relief Rally for global markets -


but for how long? It comes after days


of heavy sell-offs. The head of the IMF,


Christine Lagarde, And we'll bring you all the latest


from those financial markets where the prospect of cheap money


has re-awakened investors' animal And we'll be getting


the inside track on the encryption wars - it's all about the ongoing


battle between technology firms and governments over


the use of cryptography. We'll be talking to


the co-founder of Wikipedia, Let us know, how important is online


encryption? If you have a question you want to put to Mr Wales, just


use the hashtag. Markets have been trading higher,


giving some relief after the heavy Global turmoil has been


dominating talks in Davos with the slowdown in China,


the commodities slump and the strong dollar all issues weighing


on leader's minds. The BBC's been hearing a range


of views at the summit, Let's start with the words


of the economist, Kenneth Rogoff And this was the boss


of BP talking about oil - While Dr Min Zhufrom the IMF


is a bit more optimistic about the current climate -


he says: Our Economics editor Kamal Ahmed


joins us from Davos. He's been there for the past few


days. Great to see you. We know you've done a lot of the big over


we've been doing a lot of interviewing power brokers as well.


Can I take from this, from my own experiences, it seems like nobody


really knows what's going on, there. You've got half the camp saying it's


going to be, hang onto your hats, it's going to be held this year,


others who are more optimistic, huh? It is confusing when there are two


things going on, there is a market issue about volatility and


fundamentals issue which is slightly more positive, and all the business


leaders and politicians have spoken to are saying that is the issue we


are grappling with. On the market side, the reason for this volatility


is really the fallout from the 2008 financial crisis. Central banks


around the world pumped out billions, trillions of pounds of


money to save the financial system, the global economy. That meant asset


prices and equities went up, because all that money went somewhere. And


so market participants are rather nervous about what is the real value


of stocks and shares. That's why you get these huge bounces on a little


bit of bad news, little bit of good news. The markets over react. We


were a bit overconfident at the start of last year, probably a bit


over gloomy this year. On the fundamentals, yes, China slowdown,


yes, the oil price has gone down, but China is still growing, the UK


is still growing, America is still growing, the Eurozone is showing


some health, so there are still some green shoots of recovery. I spoke to


the US Treasury Secretary and actually asked him whether or not we


were heading towards a more serious global crisis. I am cautiously


optimistic watching many areas where there are downside risks. I think


it's important not to let down side risks become self-fulfilling


prophecies. I think the state of our financial system is not the same


today as it was before the financial crisis. We in the US and your


government in the UK, Europe and around the world, there is a


different degree of capital, there are different levels of tools in


terms of transparency and the ability to not have their beer


contagion that spreads through our financial system. -- have there be a


contagion. There we are. I've got to ask you this, it has raised its head


this week, those who are positives on the fundamentals, have they been


looking at the Baltic dry index? I don't want to put viewers off at


home, but that isn't indexed that tracks the shipping rates, the ships


that carry all the stuff around the world. When that index crashes,


typically the economy crashes afterwards, it happened in 87, it


happened in 2000, and it happened in 2008. This week that index hit the


lowest it has ever hit before. Now you are right, it is a very


important marker of world trade in manufactured goods, let's not


forget. But what is different from the 1980s and the 1990s is of course


a lot of global trade is now technological trade and is actually


high-value pharmaceutical trade. And that is either done over digital


platforms or is done via aircraft. And so actually the Baltic dry


index, although very important, is possibly less of a Mark Roe than it


used to be 20 or 30 years ago. -- less of a marker. It relies on


technology, high-value engineering, and that goes much more by air


flight. I agree that it does show there are big headwinds in the


global economy but still people here are saying, when they look at their


own business, what they want to invest in and where they are going,


they feel slightly more confident. Great stuff, really appreciate it.


Are you going skiing on the weekend? Sadly not, I'm going to be working


hard for the BBC. OK, OK, thanks. Do you believe him? Know, all the


others are going skiing! Anyway, let's talk about some other news


that's going on at the moment. The head of the International


Monetary Fund, Christine Lagarde, has told French media


that she will run for a second term. The UK, France and Germany have


already called for Ms Lagarde to be re-appointed; however,


she is due to face trial over payments to a French


businessman made in 2008. Under her leadership,


the IMF has made several significant reforms, including adding China


to it's list of global reserve Brazil's currency closed at a record


low against the US dollar on Thursday, after the central bank


surprised markets by not The country is in its worst


recession since the 1930s: it's been hit hard by the slump in commodity


prices, a sprawling corruption scandal and attempts to impeach


President Dilma Rousseff. The boss of JP Morgan Chase,


Jamie Dimon - saw his total pay package rise 35% last year -


to a total of $27 million. His basic salary was unchanged -


the rest is tied to performance Despite the increase,


his compensation package is less than those enjoyed by bosses


at rival banks Goldman Sachs Hey, listen, we were talking about


the whole mixed picture, here is why we are all confused, right, about


it, all the stuff coming out of Davos. We've got this. We've got Mr


Soros, right, many would say a genius investor. We are all doomed,


this is what he is saying. Doesn't his face tell it all, really? He's


seen it all and he is not happy. He says the EU was falling apart, he


says you've got panic in the European asylum policy, with too


many refugees to assimilate and integrate, everybody is out for


himself, he says. He talks about Russia. He says it's in a very weak


position, lots of people are forecasting that Russia will go back


into recession for a second time. He's saying it faces impending


collapse. China again, he uses the words hard landing. And he


criticises the US had come he says they are about one year too late in


doing the interest rates. But perhaps it happened too soon. Who


knows? We are all confused. Charlotte is in Singapore and


tracking the Asian markets. Better way to end the week than we started,


right? Most certainly. This rally across Asia was led by Japan which


bounced nearly 6%. Partly due to the higher price of oil and yen, but


also comments from the World Bank that it will consider more monetary


stimulus. The market was buoyed by a report that the central bank in


Japan is possibly planning to ramp up its massive stimulus programme.


Investors don't have this new round of spending in Japan confirmed but


they are hopeful it might be announced as soon as next week.


So we have seen the Nikkei with its best performance in recent months.


So yes, investors in this part of the world are breathing a sigh of


relief at this positive end to a volatile week. The elixir of life on


the markets, cheap money. For most of 2016 we've been talking


about falling markets. According to me, what I think is


going on. Investors who rode out the financial


crisis have become conditioned to rally at any sign of additional


central bank stimulus - and the prospect of the European


Central Bank making another move in March has triggered


that muscle memory. So we're seeing risk assets


and local sovereign debt becoming European stocks love


a weakening currency. So when the euro weakened


against the dollar off the back of those comments from


Mario Draghi on Thursday, we saw the value of export sensitive


indices like the DAX The FTSE at the moment


is trading about 1.6% higher. And it's the mining stocks and oil


services firms leading the way Now, Neda can tell us what's


going on in the US today. Another day of earnings, and it is


the turn of General Electric to impress investors when it reports


fourth-quarter results. The company is undergoing a massive


restructuring to slim down its portfolio in order to focus on


manufacturing in the digital age. It recently agreed to sell its


appliance business for $5.4 billion and plans to hire more coders to


transform the way it runs its engines, power turbines and medical


equipment. Wall Street will have more US economic data to absorb. The


National Association of Realtors will put out its report on existing


home sales through December. Compare to a sharp drop of 10.5% in


November, sales are expected to have risen by 8.9%. We will get a look at


the strength of US manufacturing in January.


Paul Kavanagh, CEO, Patronus Partners.


Paul, always good to see you, thanks for coming in. So, Mario Draghi


speaks, throws out the hint of more stimulus to come, and the markets go


up. Isn't the problem with the central banks pumping out that cheap


money, but all it does is end up propping up the market, it doesn't


prop up the economy as it supposed to be, that was the whole idea.


That's the lesson we learned from the first time they had a go at


quanta easing in 2008. That reduced interest rates and the return you


will achieve on your safest assets, the US Treasuries, and it we priced


every other asset out there, whether it be property, stocks or bonds. But


that game is over. We've had the full benefit of that. And it has


made things palatable for us during a very difficult period. And


markets, yes, I responding to Draghi's comments that he may be


doing more in March. But have we lost the effectiveness of QE? China


becomes the central story for us in the next 18 months, is that showing


the effects of QE. I want to ask you about China, because George Soros


says a hard landing for China is unavoidable and already happening.


Oldman sacks are coming out and disagreeing saying we are just


overreacting, what are you hearing? Somewhere in the middle of those


too. I think it is a timing issue. Goldman Sachs sees that China can


continue to keep the game going, whereas George Soros is positioning


his trade to say there is an endgame in China that will be ugly and


devastating for financial markets. I think what we are seeing within


China is the effectiveness of their policies is starting to wane. See


the devaluation of the currency at the moment. We've seen anecdotal


evidence. We were talking about the Baltic dry index and commodity


prices. All commodities are really going very badly wrong in the past


six months, and I think it's giving you more of an indication about what


is beginning to unwind within China than necessarily what is happening


with financial stimulus. We will come back because we've got papers


to go through, but we've got a bit more news before then. See you,


Paul. Still to come - how important


is online encryption? We'll be talking to Wikipedia's


Jimmy Wales about the ongoing battle between technology companies


and governments around the world. You're with Business


Live from BBC News. And now a look at some


of the stories from around the UK and what impact has this weeks


market turmoil had on our pensions? Tom McPhail is a pensions expert


at Hargreaves Lansdown. Tom, I don't know if you can see us?


Good morning. With a great beard! Let's talk first about what is going


on with the markets, is anyone not affected by what's gone on this


week? Clearly it is all scary news. Some people are looking at it from a


pensions context, just ignore it, tune out, it does not affect you. If


you are in a final salary pension scheme, the turmoil is your


employer's problem, nodules. You will get it promised pension every


time, there's no immediate cause all worry. If you are in your 20s, 30s,


40s, even your early 50s, if you are away from retirement, this


volatility will be in the past before you get to retirement. It


means you are buying assets cheaper than you would have done a year ago.


Keep putting money into your pension, don't worry. For a lot of


people, from the pensions point of view, the turmoil is not a concern.


For most people, it is not a cause for concern, who will it be trouble


for? For people who are already in retirement, if you rely on a


portfolio of assets to pay an income if you draw dividends from the


shares or portfolio committee had to be mindful as to why the turmoil is


going on. People worry about earnings, we've heard about oil,


gas, natural resources, earnings hit there, they could hit dividends. You


need to look at investment and think if you are in the right place and if


you will get an income stream coming through into retirement as the year


progresses. It's a link to be mindful. The people who have to pay


attention are the ones just approaching retirement. If you have


money in the market and are planning to sell investments to generate cash


or by a guaranteed income for life, it could be a problem and you might


have to readjust expectations as to how much money you have and the


income it might provide you with. Tom McPhail, pensions expert and


all-round guru, thank you very much! Do you note on, right? Of course I


do. What was the beard thing? -- do you know Tom McPhail?


You're watching Business Live, our top story - markets trade higher


after days of steep falls, buoyed by a rebound in oil prices.


Let's take a look at online security - and the so-called 'encryption


wars' playing out between governments and technology firms


After the mass spying revelations by Edward Snowden -


firms have been determined to appear to be giving control of data


But unbreakable encryption has been opposed by many authorities,


arguing access to information is needed to fight crime.


The UK's Prime Minister, David Cameron, has vowed to close


what he calls the 'safe spaces' used by suspected terrorists


Well, online security has been a big topic at Davos.


Let's go to Jimmy Wales, the co-founder of Wikipedia,


Good to have you on the programme. Apart from the possible financial


collapse around the world, cyber security is a big topic where you


are in Davos. I want to ask you before we talk about encryption,


generally, we've seen Hack attack after hack attack, we've talked


about it on the programme and a lot last year, big corporations


attacked, governments... Do you get a sense in 2016, that corporations


are finally getting it and realise this is a new battle ground and


spending the right money needed to build the walls? I think they're


starting to. I think it is a relief fantastic thing. We are seeing


corporate networks being hard and -- a really fantastic thing. Consumer


software is hard on. All around, we see the percentage of Internet


traffic that is secure, or encrypted, it's more than doubled in


the last year. We'll probably double it again this year. We are looking


at many more than 80% of traffic on the Internet encrypted. That's a


good thing because it means credit card numbers are safe, identity is


safer. Hopefully we won't see as many attacks in future. We will


probably still see attacks but hopefully we won't be as one ball to


them. Between encryption data, as a layman, that's who you are speaking


to, I'm trying to get my head around it -- vulnerable. Tech companies are


being very supportive of the consumer. They are saying, to the


government, if you are serious about data protection, we want to make it


easier for you. We have two making correction even more difficult, even


stronger? Yes, we need to have strong encryption, we have to make


sure that, as much as possible, all personal information is protected.


It's not floating loose on the Internet where it can be stolen.


It's an important thing and I think we are starting to pay attention,


finally. Jimmy, Victoria here. We are seeing increasing levels of


security, being stepped up by these companies. Quite frankly, they are


low barriers of entry to anyone who wants to come in and say they can


provide data solutions. Anyone who can speak computer jargon can set up


and do this. A lot of CEOs do not know the difference between


different products. Do you think some companies are being taken


advantage of? There are so many different products out there. I'm


sure that some of them are. That is always true. I would advise


companies to look for industry-standard solutions, open


source software. That can be examined. There are standard


solutions, very strong. Anyone selling and encryption that is


supposedly inventive and new but is not studied by the community... They


need to be careful. I have to ask, anything new? What is next for


Wikipedia? I think the biggest thing for us is growth, we are really


excited about things going on there. We are nonprofit, a charity, we'll


raise money from the general public and we just announced we are looking


to create an endowment, we are becoming more like a university,


cultural institution, we want to keep Wikipedia say. We are doing a


good job of raising $100 million for the endowment -- say. We aren't


close but we had a lovely gentleman who left as $1 million in his well


and maybe here in Davos maybe someone has some money! You are in


the right place -- will. At the weekend, apparently they all go


skiing. Hang around at the weekend. Unfortunately, I'm from Alabama and


I don't like snow! That's what you have to do, sit in the bar and


weight, ply them with booze! Thanks Jimmy.


In a moment, we'll take a look through the Business Pages but first


here's a quick reminder of how to get in touch with us.


We'll keep you up-to-date with the latest details, insight and analysis


from the BBC's team of editors around the world. We want to hear


from you, get involved on the BBC Business Live web page. On twitter,


and you can find us on Facebook. On TV and online whenever you need


to know. Paul is back to take us


through the stories in the papers. Let's begin with this in the Wall


Street Journal. It turns out the US Treasury Department wiped $1.7


billion -- sent. To run the same time as five Americans were released


from jails. The Wall Street Journal is talking about whether that


amounts to a ransom payment? It's dates back to the late 1970s, at the


time, Iran was a big purchaser of defence missiles from the US. At the


time of the overthrow of the government at the time. The US owed


Iran money. It was peeling fought through the courts, President Obama


has indicated it could run into sums of billions of dollars. -- being


fought. It seems he has resolved this particular case but it comes at


a time when the relationship has been much better, the best for over


30 years, particularly surrounding the nuclear programme and, in the


mix, this could mean the release of hostages. You could probably argue


there is a lot going on within this agreement. To pinpoint that it is a


ransom for the release of hostages would be unfair. The Financial


Times, we saw the US banking numbers, the big bucks are back.


Jamie Diamond, JP Morgan Chase, some would say that yes, he deserves


this, up by a third? -- Dimon. Not quite the peak that was achieved in


the good old days, where it was over $30 million. The main difference is


that it is about the three-year plan. The question is, do these


three-year plans work? At the moment, we have enough evidence to


suggest it changes the dilemma between all of the employees and


Chief Executive is at the bank. Bang on time, thank you.


Have a great weekend. There will be more business news


throughout the day on the BBC Live webpage and on World


Business Report. We did not mean ice scraper is this


morning, we needed windscreen wipers. Even the rain for most will


clear quickly. Milder air has replaced the


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