12/05/2017 BBC Business Live


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This is Business Live from BBC News with Tanya Beckett and Rachel Horne.


Zooming exports and crumbling classrooms.


The paradox of Germany's lopsided economy.


Live from London, that's our top story


Growth accelerates in Europe's biggest economy but is Germany


Has Donald Trump opened the door to trade with China?


Beijing gives the green light to certain US exports.


We'll cross live to Asia for the latest reaction.


It is a flat start on the markets for Europe. Oil prices remaining


relatively firm of course. We'll hear from the young tech


entrepreneur behind the UK's It's been a long week for Barclays'


CEO Jes Staley and it ends with him fooled into replying


to an email he thought was sent by the bank's Chairman


but was actually from a prankster. We'll tell you what he wrote later,


but first we want to know have you ever sent an email


to the wrong person? We start in Europe's


economic powerhouse, because in the last half hour


Germany has released GDP figures for the first


three months of the year, and they show an economy


that's accelerating. It grew 0.6% on the


previous quarter. That translates to an


annual rate of 1.7%. It's being fuelled by global demand


for the country's exports, But it's not all cause


for celebration. Last year Germany clocked


up its biggest ever trade surplus, that's how much more it


exports than it imports. At $275 billion, Germany has one


of the biggest trade It's a source of tension


with its neighbours and allies. Look at how much more Germany sells


to these top economies The US in particular has accused


Germany of exploiting an undervalued euro to get an unfair


trade advantage. An over-reliance on exports


isn't the only problem. The European Commission says


Germany is just too frugal. It is saving too much,


and investing too little. It wants to see some of that cash


invested in the region's Paul Kavanagh, Director


of Patronus Partners, is with me. Growth of 0.6% for the first three


month we were expecting, sounds not bad, so why is there so much


criticism of Germany? It is to do with the imbalances within the


economy. Germany taxes its popular very highly, around 40% of GDP is


made up of taxes. As we approach the elections in September there is a


lot of pressure on trying to release some of these taxes that are being


imposed, to bring more euros back and to allow people to spend, and if


they spend, will be spend on things they need to import? To rebalance


this import export argument creating tensions particularly with the US.


There is also the issue over the euro. Explain that. Germany has a


very strong economy not only domestically but it is the strongest


in terms of exports. Normally if you were alone as a country with that


sort of thing you would have a very strong currency but they are


benefiting from the weak economy of France and Spain and others and so


they have had a very good year on the export front. The difficulty is,


my issue with looking at a trade surplus, is it is a gross figure, it


does not look at margins, profits, you could be selling something that


had a very small margin, Germany is not, but it is a pretty crude way of


assessing whether there is an imbalance. Absolutely. What happens


around the world, this relationship between economies and currencies is


becoming more tense and impacts on China and Japan and particularly the


US at the moment because the manifesto from Donald Trump has been


about protecting the US. It's feeling is that the US has been


subsidising the world with a strong dollar and weaker currencies against


the weaker yen and euro and when you look at the trade surplus numbers


and the strong balance sheet of Germany at the moment, which is not


being used to create new investment in schools, construction, and giving


more money back to the popular to buy consumable goods, there is a


feeling there is imbalance and you are benefiting from the weak


currency. Thank you. Let's take a look at some of


the other stories making the news. Shares in Macy's have plunged


after the US department store owner Rivals Kohls and JC Penney


were also down sharply, amid fears about the health


of the traditional US retail sector. The rise in online shopping has seen


US department stores shed more than 32,000 jobs in the past year,


according to US The South Korean government has


ordered carmakers Hyundai and Kia Motors to recall


about 240,000 cars, after a tip off The ex-Hyundai employee raised


concern about defects which affected It is the first time the country's


government has issued Kia is an affiliate of Hyundai,


and officials are asking the country's prosecutor to look


for any evidence of a cover To Asia now, and since US


President Donald Trump and Chinese President Xi Jinping met


in Florida last month, the two countries have been


in talks to try and reduce Well, it looks like those talks are


beginning to yield results. Our reporter is in Singapore


and can tell us more. They have unveiled a 10.8 package,


quite a meaty deal. China is resuming imports of US beef after 13


years and in return the US is allowing Chinese cooked chicken back


into their market. Other points of this deal include the entry of


Chinese banks into the US and for China they are opening the market to


US natural gas and financial services firms and credit rating


services. The US commerce secretary says that this deal should actually


reduce china's trade surplus with America by the end of the year. On


the campaign trail President Trump did a lot of sabre rattling when it


did to China. He has not did what he threatened. After the meeting with


the president in Florida it seemed like the situation is you scratch my


back and I will scratch yours. Thank you. Interesting mix of politics and


economics there. There is not a secular driving force


in the markets at the moment. -- particular. We know the US central


bank says it is ready to hike interest rates. The UK central bank


takes a different view about the UK economy which is predicted to grow


faster than the German economy this year. This is what is happening in


Europe so far. In percentage terms not much movement. This is France,


Merck on redefining the relationship between France and Germany. We have


the details on what has been going on in Wall Street. Two bits of


economic news, the consumer price index and retail sales. Economists


estimate that the CBI will increase by 0.2% in April after a fall of


0.3% in March. It seems it may be the same story for sales, the


expectation is they will be up by 0.6% after falling by 0.2% in March.


Speaking of retail sales JCPenney will be reporting earnings. The


company is looking to cut costs as sales continue to slide. They said


back in February they would close 130-140 underperforming stores over


the next few months and they will offer voluntary retirement for about


6000 employees. Joining us is Nandini Ramakrishnan,


Global Market Strategist at JP Yesterday we had the Bank of England


giving their inflation report and their inflation forecast has


increased but no sign of an interest rate move. Yes, a combination of


higher inflation expected and lower growth, which is making the Bank of


England remain on hold. A lot of commentary about the strength of the


UK consumer, a little bit of weakness coming from that consumer


but other parts of the economy such as exports and potential investment


from abroad should balance that. Things get complicated, the impact


of the Brexit vote and the potential for inflation to rise and growth to


stagnate at the same time, soft data comes in handy. Yes. This is


happening globally. Survey data coming out quite strong that we want


to see the GDP numbers, some of which we have been seeing coming out


quite strong, but we want to see the hard data come out strong as well to


support it which is what the Bank of England and lots of central banks


around the world are hoping for. Looking at the markets we have had


strong US earnings, resolution to the French presidential elections,


we are in the middle of the European earnings season, how are the markets


feeling? There's a bit of a positive breath after the French elections


and we had strong US jobs data last week. Nothing too big on the horizon


today or the early parts of next week that should shock the markets.


We will see as the data comes out. You will be back in a few minutes to


talk through the papers and to let us know if you have ever emailed the


wrong person. Let us know if you have done that. I have done that. It


was not nice! We'll hear from the young tech


entrepreneur behind the UK's You're with Business


Live from BBC News. Businesses in all parts of the UK,


particularly rural areas, are experiencing full or partial


not-spots in their mobile coverage according to the British


Chambers of Commerce. The survey shows that 70%


of firms experience mobile non-spots, areas of no mobile


coverage by any operator, or partial not-spots,


where there is some coverage but not from all networks,


in their local area. This is a survey put out by the


British Chambers of Commerce who have interviewed 1400 companies


around the country, many of them small businesses. Mobile phone and


internet access is but a clean important for small businesses


because often able running them are on the move that they have to keep


in touch with clients. 70% of these businesses report that they are


experiencing either not spots where they cannot get any 4G coverage or


partial not sports were one mobile provider might have coverage but


others do not, and it is particularly acute in rural areas.


It is a fairly small survey that echoes the national report last year


on preparation for five G coverage where it said that 4G, Britain was


56th in the world for 4G coverage, simply not good enough. The British


Chambers of Commerce are trying to turn this into an election issue.


What do they want to be done? What can you do? Surely operators will


already have done what they can do. One of the things the British


Chambers of Commerce is calling for is easing of planning laws to allow


for taller masts because if you are in a rural area that might improve


your coverage. The other point is that Ofcom it says must do more to


hold providers to account for the service advertised to customers, in


other words making sure that if it is advertised people get it.


Customers not getting a good service at all. Some rely on 3G but 60% are


only getting two G, which is not internet. Not good enough. Have you


watched paper pig? ?47 million of extra costs, shares down 2%.


Just because you're a tech startup doesn't mean


Instead, London-based virtual reality firm, Improbable,


has has raised $500 million in a landmark deal


Japan's Softbank is backing Improbable in a funding


round that values the business at more than $1 billion.


Well let's get more on this with Rory Cellan-Jones.


We should start with what Improbable dolls. And Improbable story. Founded


to Maggie years ago by two Cambridge University computer science


graduates. -- founded by two Cambridge University computer


science graduates two years ago. The gaming businesses don't make much


money. This is an early-stage company. It hasn't got a lot of


revenue. It has a huge vision. I've been speaking to one of the


co-founders, and I was asking why gaming was quite important. Where


they are going somewhere very exciting. It is when people stop


seeing games as a distraction and start seeing them as a source of


meaningful experience. The generation coming up, when they go


into the experience, which we are hopefully able to power, the


relationship with that medium will be different. Especially when it


comes to time spent and engagement with it. Seeing the technology, the


powers, that enables us to build a massive scale in the real world.


Those problems tend to converge with the technological path we are on.


From SoftBank's perspective, that whole spectrum of problems... How


significant is this that the UK Tech centre? This makes Improbable one of


the first unicorns. A unicorn is a company valued at more than $1


billion before it comes to the market. Let's stress what a huge bet


this is by SoftBank. SoftBank has a lot of money. It is spreading it


around the world. It bought the chip designer last year from the UK at a


huge premium. It is a bet. It shows that in the UK there is a lot of


great tech coming out. Particularly from universities. From the


artificial intelligence field, virtual reality field, and the


interesting thing about this is this company is staying independent. It


is not being bought. It is a minority stake. They have said they


want to stay British. That is a relief. Because we see so many


companies build to a certain size in the UK and then go. I am thinking


about Deepmind. Yes, they were unknown, it was bought by Google a


number of years ago for the same amount of money, roughly, as what is


being paid for a stake in Improbable. Difference there, Google


bought control of Deepmind, which has turned out to be fantastic, in


terms of reputation and a leader in artificial intelligence. Whereas


SoftBank just have a stake in this company. Snap gave their


first-quarter figures this week. Did not get a great result in the


markets, did they? They increased users, but 2 million fewer than


expected. They are not making a profit. The market share dropped by


more than 20%. Interesting parallels with Improbable. A huge bet being


placed on Improbable but at a much earlier stage. Equally, enormous bet


being made by investors on Snap, that that will be a communications


platform of the future. It is growing rapidly. The key thing is it


isn't growing as rapidly as investors bet. And it needs to grow


at a rate to justify that huge valuation. Question is, will this


follow the trajectory of Facebook, confound it... Or can Facebook


follow the trajectory of Snap? Exactly. On Twitter, which is


disappointingly struggling. The problem is, it isn't Facebook, and


it is being attacked by Facebook. Every time it comes up with an


innovation, Facebook, which is bigger and more powerful, imitate


it. That will weigh on their shares for a long time. The smaller social


media companies... The users is 166 million for snap chat, for Facebook


it is about 2 million. Do we assume they have to have the same number of


subscribers in order to be viable? No, that is where I think investors


are making a potential mistake. These companies can survive pretty


well and be useful. Twitter is a useful platform for its users. For


users like Donald Trump. Snap chat is loved by the young audience. But


that doesn't mean it will grow forever and is going to be quite the


moneyspinner investors bet it will be. Thank you so much for coming in.


Do you Snap? When I'm on this programme with rabbit ears, the


whole lot yet. I want to see that. You will see it later. The fact that


she knows what it is is pretty good. As for reality, why do you want more


of it? That is why we have rabbit ears.


Let's move on. OK, we are also looking at Iran


which holds its presidential election next week.


It will be closely watched by hundreds of companies worldwide


The current president, Hassan Rouhani, has opened up Iran


to foreign investment and has attracted some of the


But conservative challengers have said they would reverse his policy.


Later today the candidates hold the last in a series


of presidential debates, which will focus on business


Two years ago jubilation on the streets of Tehran. World powers


promised to lift sanctions on Iran after President Rouhani's government


promised to scale back its nuclear programme. Its economy, which was


close to collapse, is now growing at over 7% per year. Mr Rouhani says


foreign trade and investment are vital for future growth. They have


struck deals with Total and Shell. It has ordered new aircraft from


Airbus and Boeing. Renault and Peugeot are back in around again to


make cars. But Mr Rouhani's main conservative challenger says the


failing. One in eight Iranians is failing. One in eight Iranians is


unemployed. The wealth gap is widening. He wants to give Iranians


firms the lead in rebuilding the economy. And rather than dealing


with the West, he wants more trade links with countries like China,


Russia. He also promises to create millions of new jobs for young


Iranians, but he has not yet said how.


Nandini Ramakrishnan, Global Market Strategist at JP


Morgan Asset Management is joining us again to discuss.


The chief executive of Barclays Bank was sent an e-mail, which he


believed was from the chairman, after that, he replied to it. He


replied to a prankster. He said you have a sense of what is right, a


sense of theatre, you mix humour with grit, thank you, my respect for


your guile, one day I want to see an ad lib guitar solo in the ilk of


Eric Clapton. Cringe. But he sent it to somebody


who was not in fact the chairman. So it is awkward.


Have you ever done it? Not to him. I have sent text messages to


somebody I was with, and then maybe intended to send it to somebody


else, but sent it to them instead. Fortunately not offensive. The worst


thing I have done is I have picked up the phone to make a phone call,


and the phone rang at exactly the same time, and I happened to talk


quite badly about that person.


What did they say? There were very good about it. --


they were very good about it. How about you? Sometimes AutoCorrect


has allowed me to reply to the wrong person. What a way to end the week.


A difficult week. He just wants the week and to start, I imagine.


The background as the controversy over the whistle-blower. He


reversed out of that because it reversed out of that because it


appears he was trying to, maybe you should explain it better, control


what the whistle-blower's interaction was with the bank.


That's right, isn't it? Yes. Let's talk about...


The City of London. In the context of Brexit. There is a lot of debate


wane. Two arguments. One, certain wane. Two arguments. One, certain


deals cannot be done in the UK if it isn't part of the Eurozone. Another


argument is that it has a critical mass, so therefore that size is a


market and a market works best when you have all of it going on in the


same place. What is your prediction for the first couple of years? It'll


be interesting. London is infrastructure. The city, Canary


Wharf, built to handle that kind of volume of services and financial


services London provides. It has the benefit of being in the middle of


the time zone geographically. But you have these issues where if you


are settling trades, having collateral movements through certain


institutions, and it is based on institutions, and it is based on


euros, it must be in the EU for certain aspects of that. That is the


real challenge. All businesses move to other European cities? That is a


big argument. But also there is a fear from Europeans in general that


a lot of businesses go to New York a lot of businesses go to New York


or other big financial sectors outside of this region. It would be


based on the negotiations which come through with Theresa May and Brexit.


We have this image from the article from the New York Times, talking


about how nearly one fifth of the wild's banking transactions go


through the UK, mostly through London. They have another


interesting thing, saying the biggest cross-border banking


sectors, why New York is largely centred on the American markets,


London is more focused on the world, and we have $4.6 trillion moving


through London. It is staggering. It is a huge part of the UK economy.


Markets, not just investors, but global citizens will be watching.


Thank you very much for your time. Have a lovely weekend.


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