27/01/2017 BBC Business Live


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This is Business Live from BBC News


with Aaron Heslehurst and Rachel Horne.


Trading with Trump, Britain's Prime Minister becomes


the first foreign leader to meet the new US President,


but can she strike a bargain with the world's biggest economy?


Live from London, that's our top story on Friday the 26th of January.


Live from London, that's our top story on Friday the 27th of January.


As Britian leaves the European Union, we'll ask which side


of the special relationship has more to gain from a boost


And when is a $5.3 billion profit in three months just not enough?


We'll tell you why investors are not happy with Google and also find out


if its parent company Alphabet's other bets will pay off?


And the markets still loving President Trumps pro-growth


drive of tax cuts, big spending and deregulation.


And as the head of BT Europe resigns over an accounting scandal,


we'll be getting the inside track from our business editor,


Simon Jack, on that and all the rest of the stories he's been


After ten years of almost constant growth, the sales of soft sugary


drinks in Australian supermarkets has fallen by more than $60 million.


We want to know - are you more aware of sugar,


We start in the US, where, as you have been hearing,


UK Prime Minister Theresa May will become the first world leader


to meet President Trump when they hold talks later today.


Mrs May has called on the President to renew the special relationship


She is keen to show Britain can prosper outside the European Union,


so lining up a post-Brexit trade deal is high on her agenda.


But is it really a priority for the US?


In terms of individual countries, the United States is the UK's


Britain sold goods and services worth


Taken together, though, the European Union is by far


Britain's top export market, worth $280 billion, 44%


Any drop in those exports as a result of Brexit could see


Britain is far less important to the US than the US is to Britain.


America sold $65 billion of goods and services here in 2015,


half the amount that went the other way.


And to put that in the context of the vast US economy,


that is little more than 4% of total US exports - and less


So putting aside the warm words, will this really be a priority


Dr Brian Klass, fellow in comparative politics


at London School of Economics is with me.


Thank you for coming in. Let's go to the figures we were talking about.


It looks like the UK on paper is far more dependent on the US than the


other way around. Why is Donald Trump making such positive noises?


For both politicians this is about an early political whim for people


trying to transform their countries and trading relationships with the


world. I think Trump needs to say he has dealt with a global power and


come away with a deal. He makes himself out to be a deal-maker and


wants to show results. It's much more important for Theresa May who


wants to show there will be a soft landing from Brexit and this US


trade deal is one way this can be achieved. In the UK its headline


news, but how aware are people in the United States of this meeting


happening? I don't think they are aware at all. It's in the New York


Times and Washington post. It's not on the New York Times right now. Is


the 35th story on the Washington post. It's not headline news for


Americans, who are much more concerned with things like the


Mexican War. Trump was not chanting about trade deals with the UK. A


little bit of a problem that I believe the UK faces. All well and


good that the Prime Minister and President will be talking. But they


are not the ones who really do the negotiating. It's the teams behind


them. Apparently the UK lacks trade negotiators where America has some


of the best in the world who will wipe the floor, so I hear. That's


right, the UK hasn't negotiated trade deals independently for a long


time and they only developed a new office last summer. They are getting


up to speed to the US has done for a long time. Combine that with the


leveraged the US saw the ball is in the US's court. Both politicians


looking for an early win. What sort of headlines tomorrow will give that


impact? I think they will commit to working on a trade deal and try to


have one in place, a framework, to be in fermented as soon as the UK


leaves the EU. Those are the headlines. What's not clear is


whether they can battle the deregulation concerns that make the


trade deal difficult to hash out and whether it will be a good deal for


Britain in the end. Thank you for joining us, really interesting.


When is $5.3 billion profit in three months just not enough?


The parent company of the internet giant saw its shares fall


in after-hours trade after its quarterly results


As Dave Lee reports from San Francisco,


there are concerns about a slowdown in the growth of online


advertising and just how future-proof the company may be.


The final three months of 2016 were important for Google -


it launched a new smartphone range, the Pixel, and went big


with its voice activated assistant, Google Home.


The company didn't break out the numbers for those new devices,


so it's hard to know exactly how they have performed, but Google's


chief executive, Sundar Pichai, said he was "comfortable"


with the direction things were going with the new products.


Alphabet's revenues, which are up 22% on this time last year,


still rely heavily on earning money through Google's advertising.


As even more of us turn to mobile computer in,


people are clicking - or rather tapping -


on Google ads more than they used to, but advertisers are paying less


Aside from Google, Alphabet has what it calls its other bets -


things like superfast broadband, smart thermostats


The revenues of these other bets has doubled compared


to this time last year, but overall in the past three months


those bets collectively lost the company $1.1 billion.


Toshiba has said it will split off its operation that makes memory


chips for smartphones and computers and will sell a stake


The Japanese company needs to raise funds after revealing a heavy


one-off loss at its US nuclear power business.


Toshiba will unveil the size of the writedown next month,


but some estimate it could be around $6 billion.


Swiss banking giant UBS beat expectations in the last three


months of 2016 to post a pre-tax profit of $847 million.


It said that rising interest rates and stocks boosted the US wealth


management and securities units, whilst the bank also put less money


UBS is among the few European banks still facing a US probe into sales


The bank has $3.2 billion in reserve for legal matters.


Always good to see you. Happy Friday. Ali Bacher doing it again.


Didn't they recently buy something in the states?


They are making a big push in the States, but the country we are


talking about today, the affiliate is called Ant Financial. They are


buying Moneygram. Ant is China's biggest online payments company, and


it's one third owed by the boss of Eilidh Barbour. It's an interesting


deal. The business of international payments is a really tough one. It


looks quite counterintuitive given that the world is deep globalising.


Ultimately, this is what Ant financial get through this purchase


of Moneygram, a big brand name and network in America as well as


immediate expansion of the global remittances business. How do you say


happy New Year in China? ... Right back at you. Chinese New Year


tomorrow. The Dow on Wall Street continued


extending those gains after breaking And that rebound continues rippling


around the world markets. The third straight rise


for Japan's Nikkei, banks and exporters


leading the charge today. Europe is expected to follow


that optimistic wave, because despite President Trump's


words toward trade protectionism, investors are betting the new US


President will embark on a pro-growth drive of tax cuts,


big spending and deregulation. So let's find out what'll be making


the headlines in the US today. The end of the week has finally


come, and what a week it was! But before we look to the weekend,


there are still a few bits Now, investors here will be focused


on the fourth-quarter GDP estimate, Now, the US economy grew by 3.5%


in the previous quarter. Now, economists are not


expecting anything that high, but they will be closely


watching this metric. Also happening on Friday,


durable goods orders. Now, that is really looked


as a proxy for how businesses Now, after seeing a drop


in the month of November, analysts are expecting to see


an increase for the And finally, in earnings news,


American Airlines will be reporting. Now, it is the number-one airline


by passenger traffic, but that may not be reflected


in their earnings. Cheap airfares and higher wage


costs have really hurt Joining us is Jane Foley, Senior


Currency Strategist at Rabobank Thank you for coming in. Let's start


with currencies. Sterling is on a much firmer footing this week. It


is. It's off the highest levels of the week but if you go back to the


beginning of last week, it's much stronger. A lot of this is to do


with UK politics. Theresa May's speech last week, what the market


liked was the idea that the government in the UK has a plan, and


not only that it has a plan on Brexit, but Theresa May has been


busy filling up her agenda. She has a busy to do list. She's talking


about trade with the US. That will garner positive headlines for both.


That will give sterling a bit more a boost? It'll be in the press.


Sterling coming off its highest levels, so what the market often


does is price in, wait for the news and see if it matches expectations.


Theresa May has talked about industrial policy this week and says


she's lining up talks with China about trade there. She's trying to


firm up this belief that the UK does have a strong outlook post Brexit.


But Brexit talks haven't yet begun. So we still have a volatile ride for


sterling for the rest of the year. Going to the US dollar, which has


had a ride recently. We are getting US GDP growth numbers out today.


It's a funny old game because President Trump doesn't want a


strong dollar. Others do, though, in the US. The US Treasury, is in


charge of dollar policy, not the central bank. For years the US


Treasury has been saying they've had a strong dollar policy but we


haven't heard much about it recently, because if you have slow


growth and inflation, you don't want a strong currency. They kept quiet


about it. The Treasury Secretary said yes they wanted a stronger


dollar but he has backed down again. Donald Trump wants to export more,


import less, and if you want to export more, you want a weak dollar.


So products are cheaper for us around the world? Precisely. You're


coming back to take us through the papers. We will see you shortly.


Still to come, we'll get the inside track on the big


business stories of the week from our business editor, Simon Jack.


Tesco has agreed to buy UK's biggest food wholesaler, Booker Group,


The companies said the deal would create


The joint announcement also said the deal would bring


benefits for "consumers, independent retailers,


caterers, small businesses, suppliers, and colleagues,


as well as delivering significant value to shareholders".


Our business correspondent, Theo Leggett,


This is really a boost for consumers? Isn't this just Tesco,


which is a whopper as it is, just getting bigger? Certainly, there may


be concerns that Tesco is gaining an even bigger slice of the UK food


market than it already controls, and some analysts are saying that


competition regulators may want to look into it carefully. Tesco says,


we're not buying any more big stores, so there is no reason for


competition regulators to get involved, but that is a discussion


for the future. Tesco says it is looking to broaden its business, so


the supermarket business itself, which is its core business, is very


competitive, dominated by a small number of large players, very hard


to gain market share, hard to grow your business and expand revenues or


cut costs in that way. So it is taking on a different part of the


food business, making itself bigger in that way, expanding what it has


to offer. It says it is particularly interested in what it calls the out


of home offering, so people who go to supermarkets, prepare at home,


that is traditional business for them. But restaurants, catering,


convenience stores, that is another part of what it is looking at here.


Tesco says this is not about refining its supermarket business


and making that cheaper, it is about expanding its business and


increasing its offer into new areas. OK, great stuff, enjoy your MG! On


the weekend, I meant! It is the Chinese New Year, it is


going to be the year of the Rooster, give me your Friday fact. President


Trump and the Chinese leader were all born in the year of the Rooster.


Were you? No idea! Let's look into it!


Welcome back for our international viewers, you are watching Business


Live! Britain's Prime Minister


says she's delighted that new American President


Donald Trump's has made a trade deal between


their countries a top priority. Theresa May is set to discuss it


when she becomes the first foreign They are going to do that in the


Oval Office in a few hours' time. Let's have a look at how the markets


are getting on, just up ever so slightly in London, a bit of


profit-taking on the DAX and the CAC 40.


on some of the big business stories of the past few days.


is the growing accounting scandal at BT's Italian operation.


It's now being reported by Reuters that


BT's head of continental Europe, Corrado Sciolla,


is to leave the company as a result of the crisis.


Simon, you broke this story earlier in the week, it is your baby!


Well, no, the boss of BT Europe, I was told, was leaving several days


ago, he has taken a long time to write his resignation letter, he is


leaving today! This scandal broke at the end of last year, back in


October, they said, we have a ?140 million poll in their Italian


division, but it turns out to be much worse than they previously


thought, more than ?500 million, a whopping black hole for a business


which is a tiny part of BT's total revenues. So something has gone


seriously wrong. What has happened is that employees and customers have


been colluding to pad out invoices, hitting profits targets. It was


missed by the external auditors, PwC, and I am told that BT is


reviewing whether it even wants to have a subsidiary in Italy anymore.


A couple of interesting things, it is the one country where when you do


a forensic investigation like this, personal e-mails of employees do not


have to be handed over. And the authorities' approach to this is


generally to find against the company, the company did wrong, not


the individuals. So if you put that together, you have the potential for


scandals like this to happen. BT, a big worldwide company, it is facing


challenges and a number of fronts, it has a whopping pension deficit,


it has got a stagnation in its core revenue, some of its biggest


customers are not spending money, and that is worrying for the wider


economy. When a company as big as BT sees customers holding off, some


people say it is to do with Brexit, then they have a problem, and


Moody's downgraded them the other night, saying that things look


pretty rough for the company. I know we will keep across that. The US, we


get growth numbers, and there is... 1:30 UK time, 2.2% is the consensus,


which is not brilliant but not bad. They have been adding jobs pretty


well. Better than Europe! But not quite as good as the UK, actually.


The interesting about this, we have this term animal spirits knocking


around, basically the Trump traders that he has been talking about, he


has a couple of big plans, cutting corporate and individual taxes, and


the other is spending big on infrastructure, including a wall.


That does two things, people think it will stimulate growth, because,


briefly, if you cut corporate taxes, they get to keep more money, spend


more of it, shares are worth more, so you have seen that trade. So a


strengthening of the dollar, the Dow Jones going through 20,000. People


are just wondering now, where do we go from here? As you say, some of


these protectionist talk about trade makes people think, is ego to throw


sand in the engine of the global economy? -- is he going to. Could it


reverberate around the world? It would be a damp and on global


growth. It is till the world's biggest economy. It will be


interesting to see how the dollar reacts to this number. We have to


wrap it up, but interesting out Trump is trying to talk down the


dollar in some ways, he once a weaker dollar. Correct. Have a great


weekend, Simon Jack. US car giant Ford has


made its second-best annual pre-tax profit to date of $10.4


billion according to its But what effect could President


Trump have on the auto industry? They have revealed they are


cancelling a planned new plant in Mexico, it has cost $200 million.


Earlier I sat down and spoke to Jim Farley, their boss for Europe, the


Middle East and Africa, and he explained why free trade was very


important to them. Our industry is based


on free trade, you know, a good example is here in Europe -


we build all of our engines in the UK, we export them to Europe,


put them in cars, We are the number-one brand


here in the UK, so you know, this model of free trade


is the basis for our business. But that could change, couldn't it?


President Trump is talking about 20%, your cars, whatever party make


in Mexico to bring to the States, you may have to pay 20% on those. It


is early days, we don't really know, so we will see, but it seems like a


lot of his policies are friendly to business. He is talking about trade,


currency manipulation, talking about data driven regulations. We will see


what happens. Really wait and see, everyone is


saying wait and see, Jane is back, are we going to start with my neck


of the woods? We are, do you buy sugary drinks? Not that we are


allowed to, but I love a Diet Coke once in a while! Other drinks are


out there! But that has got no sugar in it. Anyway, consumer backlash


being reported here in the Sydney Morning Herald, Australian


supermarket is seeing a huge fall in the sales of sugary drinks. 2.2%


down year on year, and they are talking about $80 million in lost


sales, a fifth of their revenues, because of these sales not going


through. And of course what they are talking about is the studies done on


obesity, particularly sugar. So there is the possibility of a tax on


that, and we have heard of this in other developed countries, but one


thing about this is that there is a lot of lobbying from some of these


big companies, and of course now we also have companies coming up with


natural sugar alternatives too. So the industry is quite complex, but I


think there is a movement by some of these big manufacturers, instead of


selling sugary drinks, to get hold of branded waters. Is it that the


money has gone out of the market, or is it being spent on alternatives?


It is switching, all of the big drinks companies, over the last ten


years or so, have been rushing to buy up those smaller branded water


companies, and generally they are owned by bigger companies.


Certainly, if you go back 20 years, we all know that the amount of water


is sold in a supermarket has grown considerably. A huge market. That


coconut water, 1 billion just in the UK! I hated! We saw that luxury


goods do very well in China, then Beijing had a corporate crackdown


and things, luxury sales dropped in China, but they are coming back. If


you go back to 2015, you will remember the terrible stock market


crash, it caused a lot of consumers to backtrack. Last year, really


since February onwards, a lot of confidence in the outlook for China,


although we are very cautious. That has brought some consumers back, and


now they are doing things in duty is to encourage spending. Jane Foley,


thanks very much for coming in. That is Business Live, bye!


It's a cold and frosty start for central and eastern parts


of the UK with patches of freezing fog and in East Anglia


and the south-east of England there is the risk of some icy


patches on untreated surfaces from this area of cloud


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