16/08/2016

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:00:00. > :00:00.This is Business Live from BBC News, with Sally Bundock

:00:07. > :00:13.Mining giant BHP Billiton tells us it lost nearly $6.5 billion over

:00:14. > :00:35.Live from London, that's our top story on Tuesday the 16th August.

:00:36. > :00:38.The fatal mining disaster in Brazil and the plummet in commodity prices

:00:39. > :00:41.have taken a huge bite out of the world's biggest mining

:00:42. > :00:46.We'll get an expert view on where BHP is headed next.

:00:47. > :00:49.Also in the programme - how about this deal?

:00:50. > :00:55.Well, if you live in the US Volkswagen is giving you cash

:00:56. > :00:58.as compensation for the emissions scandal and will fix your car.

:00:59. > :01:03.In Europe, it's a bit of pipe to fix the problem.

:01:04. > :01:05.And the markets are headed lower in Europe - watch out

:01:06. > :01:09.for the UK inflation data that is due out this morning.

:01:10. > :01:11.What will it tell us about what the Bank

:01:12. > :01:18.And put on your science caps - we'll be looking at

:01:19. > :01:34.Lasers are used in everything from drilling to cancer treatment

:01:35. > :01:37.and we'll find out from a leading UK firm how they're improving

:01:38. > :01:39.Are all technological innovations positive?

:01:40. > :01:42.Or do we rely too much on technology to help us?

:01:43. > :01:44.Can you go a day without Google maps, for instance?

:01:45. > :02:07.Quantum physics, my specialist subject!

:02:08. > :02:09.It's a record loss for the mining giant BHP Billiton -

:02:10. > :02:14.That is the company's worst result since it was founded in the 1850s.

:02:15. > :02:17.The world's largest miner, like many other commodity firms,

:02:18. > :02:19.has suffered greatly by the collapse in commodity prices

:02:20. > :02:28.But also hitting BHP's bottom line was the fallout from the Samarco

:02:29. > :02:34.Last November an iron-ore mine dam collapsed and released

:02:35. > :02:37.a torrent of toxic mud, killing 19 people and

:02:38. > :02:44.Brazilian prosecutors have brought a multi-billion dollar law

:02:45. > :02:45.suit against the company and its partner there,

:02:46. > :03:02.So a lot happening as far as BHP Billiton is concerned. Over to you,

:03:03. > :03:07.Aaron? James Butterfill is head of research

:03:08. > :03:13.and investment strategy at ETF Securities. Great to have you. Let's

:03:14. > :03:18.start with this. It is almost like a perfect storm, the slowdown in the

:03:19. > :03:23.commodities, the dam disaster and BHP is a bit of a bad bet on US

:03:24. > :03:29.shale, the fracking story in America, it has all come together?

:03:30. > :03:31.Saudi Arabia has employed a strategy of trying to destroy the shale

:03:32. > :03:36.business in United States. The marginal cost of production, how

:03:37. > :03:46.much it costs to produce oil per barrel, it is around $60 per barrel,

:03:47. > :03:52.the price has fallen to about $47. It is not cost-effective. It has

:03:53. > :04:00.really hurt BHP. Coupled with that, we have seen a 13% fall in iron ore,

:04:01. > :04:03.roughly 20% fall in silver over the financial year. It has picked up

:04:04. > :04:09.recently but that will not be reflected in results. To make

:04:10. > :04:14.matters worse we had the disaster, they had initially said it will cost

:04:15. > :04:21.about $1.3 billion, they have pushed that up to $2.2 billion. So a total

:04:22. > :04:27.write-off for earnings of around $7.7 billion, pretty grim. They set

:04:28. > :04:33.aside 2.2 for the dam disaster in Brazil, but what is the civil

:04:34. > :04:37.lawsuit? $48 billion, it is a bit unrealistic, a bit like BP with the

:04:38. > :04:40.well incident, it was never the amount that the initial estimate

:04:41. > :04:46.said, it will probably come down, but they will have to start making

:04:47. > :04:58.provisions for this. Sally wants to join in as well, but this commodity

:04:59. > :05:01.slowdown, it has been building up, has BHP done a good job in battening

:05:02. > :05:03.down the hatches for the storm, could they have done better? They

:05:04. > :05:06.went on a massive capital expenditure spending splurge to help

:05:07. > :05:10.China building its infrastructure. Since Chinese growth has slowed

:05:11. > :05:17.down, they have cut that back. They were spending $22 billion a year, in

:05:18. > :05:22.2017 they will be $5 billion. That is how much they are scaling back

:05:23. > :05:26.investment. It brings in concerns about future profitability if it is

:05:27. > :05:31.not investing any more. What did they say about the dividend? Chief

:05:32. > :05:36.executive Andrew McKenzie was forced to say we will not stick to the

:05:37. > :05:41.promise of keeping or upping the dividend? If you are an investor,

:05:42. > :05:46.quantitative easing has meant you are yield starved, you want some

:05:47. > :05:49.form of income. Yields have been exceptionally low recently as a

:05:50. > :05:57.consequence, people have been looking for places. Mines have been

:05:58. > :06:02.paying fantastic dividend yields. Except for BHP, it can only cover

:06:03. > :06:09.its dividends, earnings only cover about half of it, so it has divided

:06:10. > :06:14.from elsewhere. It is likely that it will cut the dividends. And the

:06:15. > :06:18.gates are easing. James, short and sweet, we appreciated.

:06:19. > :06:21.We will talk to you sometime again. BHP shares are opening down 1.7% in

:06:22. > :06:22.London. In other news, Australia's central

:06:23. > :06:25.bank has explained why it cut interest rates for the second time

:06:26. > :06:27.in four months earlier this month. It said inflation would remain

:06:28. > :06:30.low and the economy It also said that house price

:06:31. > :06:33.concerns had cooled, Indonesian Airlines have been

:06:34. > :06:46.cleared to begin flying to the US US transport officials said

:06:47. > :06:49.Indonesia's aviation sector had met international standards

:06:50. > :06:51.and its safety rating had been Indonesia's fast-growing aviation

:06:52. > :06:55.market suffered several high-profile accidents

:06:56. > :07:15.and was downgraded in 2007. They were banned from entering the

:07:16. > :07:19.United States then. Oh, we have the #BBCBizLive page! That is your job,

:07:20. > :07:27.Aaron. BHP is quite heavily on there. You

:07:28. > :07:29.caught me by surprise, I forgot I had the tablet. I will tell the

:07:30. > :07:32.viewers. Investment firm Berkshire Hathaway

:07:33. > :07:34.says it has added a large chunk The investment firm,

:07:35. > :07:38.which is run by legendary investor Warren Buffett,

:07:39. > :07:44.increased its stake in Apple That is quite interesting, he has

:07:45. > :07:50.not traditionally been keen on tech stocks but is tipping his toe in the

:07:51. > :07:54.water. Have you found something else? I have not had a chance to

:07:55. > :07:59.look at the latest Apple share price. But that is a lot of money.

:08:00. > :08:02.OK, it's that time to head over to our Singapore bureau and talk

:08:03. > :08:04.about why shares in the commercial property group Dalian Wanda,

:08:05. > :08:07.owned by China's richest man have been climbing today.

:08:08. > :08:21.Why are they going? They have risen. Stocks under the deli and wander

:08:22. > :08:29.group are trading almost 2.5% higher in Hong Kong on Wednesday --

:08:30. > :08:33.Tuesday. The billionaire won shareholder approval on Monday to

:08:34. > :08:36.buy out the company for a whopping 4.4 billion US dollars, clearing the

:08:37. > :08:41.way for the biggest ever privatisation deal in Hong Kong,

:08:42. > :08:46.less than two years after the company was first floated. This sets

:08:47. > :08:50.the stage for Dalian Wanda group to relocate its Hong Kong listing to

:08:51. > :08:53.mainland China, which is where companies are fetching higher

:08:54. > :08:59.valuations than in Hong Kong. It would be a relief for the

:09:00. > :09:02.billionaire owner, who has faced difficulties completing

:09:03. > :09:06.transactions, but not everyone will be pleased. Wanda is one of many

:09:07. > :09:11.companies hoping to take advantage of higher mainland valuations, some

:09:12. > :09:21.worry about a risk to the Hong Kong market. For Japan, it was a day of

:09:22. > :09:24.decline. It was not like that to the whole trading session, it was

:09:25. > :09:30.enjoying some gains, then it all went sour because the dollar got a

:09:31. > :09:33.much weaker and the yen strengthened significantly. Just to say that the

:09:34. > :09:39.big exporters listed in Tokyo are having a very tough time today. Hong

:09:40. > :09:47.Kong is a little bit flat. Wall Street, higher. The S 500 enjoying

:09:48. > :09:51.record gains. Let's look at Europe. As mentioned earlier, declaims right

:09:52. > :09:57.across the board. BHP Billiton dragging down the FTSE 100/1% at the

:09:58. > :10:04.open, shares in general are a bit lower. Let's not forget the time of

:10:05. > :10:08.year, mid-August, very thin trading. Samir Hussein has the details about

:10:09. > :10:14.what to expect on Wall Street. The number one improvement chain will

:10:15. > :10:18.report earnings on Tuesday. Home Depot is expected to continue its

:10:19. > :10:23.streak of strong results as customers spend more on homes and

:10:24. > :10:27.home improvement. Speaking of homes, housing figures are not expected to

:10:28. > :10:32.have changed much in July compared to one month earlier. The numbers

:10:33. > :10:36.indicate slow progress in residential construction. Also in

:10:37. > :10:41.economic news, the consumer Price Index is not expected to have

:10:42. > :10:50.changed in July. Given the very slow pace of inflation, economists

:10:51. > :11:00.believe it allows the US central bank to maintain monetary policy, to

:11:01. > :11:07.keep interest low. Bronwyn Curtis joins us, a familiar face. We will

:11:08. > :11:10.talk about the US in a bit, but in the UK, inflation numbers today.

:11:11. > :11:16.Inflation is looking backwards, right? We want to look forward. We

:11:17. > :11:22.have seen ten plus percent drop in the value of the pound, that will

:11:23. > :11:27.take some time. That is not good for inflation? Inflation will go up,

:11:28. > :11:31.because you import, you pay more for goods. That goes through to

:11:32. > :11:36.inflation. It is not happening yet, it will probably be the latter part

:11:37. > :11:40.of the year. But a year on, we're looking at inflation, according to

:11:41. > :11:53.the Bank of England, back at 2%, higher than the target of 2% after

:11:54. > :11:56.that. Some of us are looking at something like 3% by the end of next

:11:57. > :11:59.year, very high. The Bank of England today, it is its second week of the

:12:00. > :12:03.bond buying programme, it has not been going very well? They are

:12:04. > :12:07.trying to push down long-term rates. Everybody knows they are doing it,

:12:08. > :12:11.the big fund managers and the pension funds are holding out for

:12:12. > :12:16.better prices. They will be able to get these bonds, but it will take

:12:17. > :12:21.some time. They are trying to push down yields across the board so that

:12:22. > :12:25.companies and households will borrow and spend to help the economy. They

:12:26. > :12:31.are not worried about inflation, they are worried about the economy.

:12:32. > :12:36.If we go across the Atlantic, Samir is mentioning things, we got the

:12:37. > :12:43.minutes from the US that meeting, that should give them an indication?

:12:44. > :12:53.They have got other data out this week. We saw the dollar weakened

:12:54. > :13:01.today and although the Fed minutes would say the risks have diminished,

:13:02. > :13:03.anyone would be able to push any rate higher into the future. People

:13:04. > :13:09.are a bit nervous about what is going on with the Fed with rates,

:13:10. > :13:13.will they had to pump more money in it is hovering, the markets are

:13:14. > :13:19.harbouring and waiting for somebody to push them one way or the other.

:13:20. > :13:23.We are at very high levels now. No hope in hell that they will do two

:13:24. > :13:29.rate rises between now and the end of the year.

:13:30. > :13:31.I hope you will not have to eat your heart!

:13:32. > :13:34.I will if I had to! Still to come, we'll be looking

:13:35. > :13:37.at the world of lasers and how they can be used to make your life

:13:38. > :13:40.and health better. You're with Business

:13:41. > :13:47.Live from BBC News. We were just discussing the

:13:48. > :13:51.inflation data coming out for July which will be the first data on

:13:52. > :13:57.consumer prices since the vote to leave the European Union in June.

:13:58. > :14:01.But the pound's fall, since the referendum should, in theory,

:14:02. > :14:06.increase inflation. As imports become more expensive, it's going to

:14:07. > :14:12.take some time but it could return to the 2% target by the end of the

:14:13. > :14:18.year for the Bank of England? Andrew joins us from our flashy business

:14:19. > :14:21.newsroom. Andrew, is this the way... OK, the first number since the

:14:22. > :14:27.Brexit vote, they're not going to take much into account, are they?

:14:28. > :14:31.Not much. We'd been living at inflation last year, and we just got

:14:32. > :14:34.one months worth of the impact of that depreciation in the value of

:14:35. > :14:39.the pound and of course it's going to take time to feed through. This

:14:40. > :14:45.is what inflation have been doing all year. It was 0.1% it has picked

:14:46. > :14:51.up since then and the most recent figure, June, 0.5%. And that,

:14:52. > :14:56.frankly, is what most economists are expecting to see a game in the new

:14:57. > :15:02.figures. No change, not yet, at least. Worth mentioning that we're

:15:03. > :15:07.also going to be getting producer price indices, the prices charged by

:15:08. > :15:11.manufacturers at the factory gate and more importantly the prices I

:15:12. > :15:14.have to pay for raw materials and components including imported stuff,

:15:15. > :15:18.which might just show a little bit more of the impact of the decline in

:15:19. > :15:22.Stirling. At least you would expect to do feed through to that part of

:15:23. > :15:27.the supply chain rather more Rickie Lambert prices paid by consumers.

:15:28. > :15:32.Andrew, I know we all watch this data like a hawk and so do people

:15:33. > :15:37.like the Bank of England and traders in the city, but for those in the

:15:38. > :15:42.rest of the UK, how important is it? To what extent does it impact them?

:15:43. > :15:46.In terms of how the Bank of England responsible as interest-rate policy,

:15:47. > :15:50.there's also the question of these particular figures about regulated

:15:51. > :15:53.rail fares. The figures for retail Price index, different one from this

:15:54. > :16:00.one, and will be higher, they will be used as a benchmark for train

:16:01. > :16:04.fares the next year. This particular figure actually does affect us in

:16:05. > :16:13.the pocket. Andrew, thanks, mate. Andrew Walker. You were videoing

:16:14. > :16:21.your husband earlier. It was a freebie conversation. Google Duo

:16:22. > :16:25.launches today. Another one. Dignity out of a deep hole,

:16:26. > :16:28.Digging itself out of hole, a deep hole - BHP Billiton

:16:29. > :16:31.ever in the company's history, $6.5 billion, as falling commodity

:16:32. > :16:33.prices and a deadly dam failure in Brazil hit hard.

:16:34. > :16:37.it was just below 6.5 to be precise. 6.3 85.

:16:38. > :16:41.A quick look at how the markets are faring.

:16:42. > :16:48.They are all in the red. A real change in fortunes because these

:16:49. > :16:53.markets have been going higher and higher for days. Ending higher on

:16:54. > :16:56.Monday, but we saw a weakness in Tokyo, Japan down 1.6 at the close

:16:57. > :17:04.of the dollar weakness affecting Japan. And general selling going on.

:17:05. > :17:07.Our next guest works with light and in particular lasers to create

:17:08. > :17:09.products for areas as diverse as computing and medicine.

:17:10. > :17:14.Dr Graeme Malcolm co-founded M Squared Lasers in 2006,

:17:15. > :17:19.originally to create lasers for use in academic scientific research.

:17:20. > :17:22.The Scottish firm now has offices in the US including San Jose,

:17:23. > :17:28.The firm explores, develops, and manufactures next-generation

:17:29. > :17:33.lasers for use in oil and gas exploration, cancer detection,

:17:34. > :17:40.through to the discovery of explosives through spectral scans.

:17:41. > :17:43.A large growth area for the company is the application of quantum

:17:44. > :17:47.technology which is being harnessed to create a new generation

:17:48. > :17:48.of electronics, including sensors, communications systems

:17:49. > :18:02.The man himself is in the studio and I've been dying for you to come in

:18:03. > :18:08.and help us out because it's great to have you with us. Quantum

:18:09. > :18:13.physics, for us, can you break it down? What are we talking about?

:18:14. > :18:18.Everybody said about quantum leap. Einstein 100 years ago, a lot of

:18:19. > :18:22.great scientists wrote a theory about quantum and it was a big leap

:18:23. > :18:26.forward in understanding but it's taken a long time for people to

:18:27. > :18:32.catch up selling quantum physics we take a particle, and atom, a

:18:33. > :18:35.building block of matter, or a proton, a particle of light, and

:18:36. > :18:40.reprocessed them using quantum physics, strange things happen and

:18:41. > :18:46.we can exchange information through teleportation. We can create more

:18:47. > :18:53.powerful computer bits which can be not just on and off but both on and

:18:54. > :18:58.off at the same time. It lets technology moves forward. We've had

:18:59. > :19:04.analogue electronics with TVs with valves in them, digital for and and

:19:05. > :19:11.quantum is the next layer of that technology journey. You can put it

:19:12. > :19:19.into lasers and you are telling me in the Green room, using your

:19:20. > :19:24.smartphone here, lasers are used... I'm bamboozled how much lasers are

:19:25. > :19:28.used in manufacturers. The 20 or 30 different processors inside a cell

:19:29. > :19:35.phone. Everything from the glass, the touch-screen, so, really, the

:19:36. > :19:39.way the lasers replace mechanical drills and processing over the last

:19:40. > :19:43.10-15 years has been a phenomenal rate of progress. So who are your

:19:44. > :19:47.clients and who do you sell stuff to and what are you selling? Laser

:19:48. > :19:56.technology and systems based on laser technology to everything from

:19:57. > :20:01.academia, the world's best universities, MIT, Stanford, Oxford,

:20:02. > :20:05.Cambridge, through to government, so for the detection technology trying

:20:06. > :20:09.to help counterterrorism for the week and fingerprint materials, so

:20:10. > :20:18.we work with different governments in Europe and the USA. And more and

:20:19. > :20:19.more we are starting to see the industrialisation, so

:20:20. > :20:24.instrumentation companies and big blue-chip companies that could not

:20:25. > :20:30.be solved about starting to move into this technology. How did you

:20:31. > :20:35.are a kid, did you used to take are a kid, did you used to take

:20:36. > :20:38.things a and put them back together? Yes, not always successfully putting

:20:39. > :20:39.it together again. I kind of got into this because I had a great

:20:40. > :20:47.physics teacher at school. He physics teacher at school. He

:20:48. > :20:53.inspired me. Mr cocky. Mr cocky? You have done well. When I went to

:20:54. > :20:57.university, I must make my choices, and it seemed like the future and

:20:58. > :21:01.now, as we move forward, it's become mainstream. Moving forward, there

:21:02. > :21:05.are some things you're working on now which will make a big impact in

:21:06. > :21:11.30 years' time, affecting us all. What sorts of things? We are working

:21:12. > :21:17.in London on a science using laser imaging to look at how the brain

:21:18. > :21:21.works and to generative rain disease is begun to become a bigger problem

:21:22. > :21:27.as medical science letters live longer. A la understanding of the

:21:28. > :21:30.brain is not a very great at the moment. We don't understand how it

:21:31. > :21:34.works and how to solve diseases of the brain so we can do work in a

:21:35. > :21:47.particular area. OK, it's fascinating. It's fascinating how

:21:48. > :21:51.without it, we don't have anything. Usually our guests bring something

:21:52. > :21:52.in. I've got a smartphone. Nice to meet you. Thanks very much.

:21:53. > :21:55.In a moment we'll take a look through the Business Pages but first

:21:56. > :22:01.here's a quick reminder of how to get in touch with us.

:22:02. > :22:08.Our pages where you can stay ahead of the braking business news. We

:22:09. > :22:13.will keep you up-to-date with the latest details, with insight and

:22:14. > :22:17.analysis on the BBC's editors around the world. We want to hear from you,

:22:18. > :22:29.too, get involved on the BBC business live web page. And on

:22:30. > :22:31.Twitter. And on Facebook. Business live on TV and online, whenever you

:22:32. > :22:34.need to know. Bronwyn is back to look through some

:22:35. > :22:44.of the paper stories. This is one of our headline stories.

:22:45. > :22:49.The Volkswagen scandal. We knew they were going to pay up in America and

:22:50. > :22:52.not Europe so the Americans, if you own a Volkswagen with a dodgy

:22:53. > :22:58.system, you get 20 grand compensation. And the car is fixed

:22:59. > :23:06.as well. In Europe, you get up plastic type. Interesting. It's all

:23:07. > :23:11.about being able to do class action suits, and in the US, you can. In

:23:12. > :23:15.Europe, the legislation is such that you really can't do that. So what

:23:16. > :23:23.they are trying to do, there are lawyers getting together trying to

:23:24. > :23:27.do online so they can get enough people together to do the equivalent

:23:28. > :23:32.of a class-action suit, so this would be extremely costly, because

:23:33. > :23:39.there's about half a million vehicles in the USA and I think 8.5

:23:40. > :23:46.million in Europe. So imagine the cost of that because, you know, at

:23:47. > :23:50.20,000 a throw, dollars, that is, you rose, whatever, it's an awful

:23:51. > :23:54.lot of money. Let's look at this story which I thought was really

:23:55. > :24:01.interesting. It's about hedge funds is using small satellites in space

:24:02. > :24:04.to keep an eye on stuff to help them make their decisions about future

:24:05. > :24:11.investments. I think it's a fantastic idea. If more central

:24:12. > :24:17.banks looked out of the box... These are tiny shoe box sized satellites

:24:18. > :24:23.which are going into places, for example, looking at oil tanks in the

:24:24. > :24:27.USA, and they have floating lives and by looking at how high load the

:24:28. > :24:35.lids are, you can see really what the infantry is of oil. I thought of

:24:36. > :24:39.something because I used the run an office in South Africa counting the

:24:40. > :24:45.pods on cocoa trees in Africa. We used to do it every three weeks. We

:24:46. > :24:48.used to forecast the crop. We wouldn't have to do that. We were

:24:49. > :24:55.just send in the satellites and look at it, so I think, what they are

:24:56. > :24:57.doing, Nasa scientists about this company together with the satellites

:24:58. > :25:03.but then they sell the data to somebody else. We'll hedge funds

:25:04. > :25:06.management companies have to have a new technology team to manage this

:25:07. > :25:10.side of the business? They have got a data company who is going to

:25:11. > :25:17.actually provide insights, forecasts. We'll publish have them

:25:18. > :25:23.on here. Who is sending up the satellites? Commercial space? A

:25:24. > :25:29.private company. The hedge funds by the predictions from the data

:25:30. > :25:34.company. In about 15 seconds, we've seen banks in the UK with

:25:35. > :25:38.interest-rate cuts, savers, let's be honest, we are screwed, aren't we?

:25:39. > :25:41.There are more savers and borrowers but was going to happen. I had

:25:42. > :25:43.someone on Sunday just saying that they were getting 3% but they are

:25:44. > :26:12.not now. OK, always a pleasure. Hello. It's been a cool but

:26:13. > :26:15.sparkling start to the day in many parts of the British Isles and our

:26:16. > :26:19.weather watchers have been out in force capturing the full majesty of

:26:20. > :26:21.the morning. The satellite picture