25/05/2017 BBC Business Live


25/05/2017

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

:00:00.:00:08.

Can Opec fire up the price of oil without fuelling

:00:09.:00:15.

Live from London, that's our top story on Thursday 25th May.

:00:16.:00:38.

The price of Brent Crude is already on the rise as the Opec cartel

:00:39.:00:41.

recommends a nine month extension to production cuts.

:00:42.:00:50.

President Trump comes under pressure from European leaders to stick

:00:51.:00:57.

with the Paris agreement on climate change.

:00:58.:01:03.

He is meeting with them today and we will tell you all you need to know.

:01:04.:01:11.

Markets are trading higher, taking their lead from Asia.

:01:12.:01:14.

And I sit down with the man who makes Hollywood Blockbusters

:01:15.:01:17.

Jason Blum tells me why making movies on the cheap gives him more

:01:18.:01:21.

And as the boss of J Crew says he underestimated how technology

:01:22.:01:27.

We want to know how has it tech changed the way you shop?

:01:28.:01:34.

Do get in touch about your online retail shopping experiences. What

:01:35.:01:59.

did you buy in the midnight hour after a big night out? That will be

:02:00.:02:01.

interesting! We start with the price of oil

:02:02.:02:03.

and whether that goes up or down will be decided later at a meeting

:02:04.:02:06.

of the world's top producers. Opec - the Organisation

:02:07.:02:09.

of the Petroleum Exporting Countries is led by Saudi Arabia,

:02:10.:02:11.

with other major producers including They're being joined by non-Opec

:02:12.:02:14.

members inclduing Russia and are expected to announce a deal

:02:15.:02:19.

later to try and push prices higher. In December Opec and non-Opec

:02:20.:02:23.

countries agreed to cut production by 1.8 million barrels

:02:24.:02:36.

per day, about 2% Those cuts were agreed for six

:02:37.:02:38.

months, but that expires in June. After yesterday's meeting to monitor

:02:39.:02:45.

progress on that a nine month The price of Brent rose sharply

:02:46.:02:48.

in December when those That was the trigger point in

:02:49.:02:53.

December last year. But it's been volatile

:02:54.:02:59.

since then and struggling Russia can cope with this level -

:03:00.:03:01.

Moscow has based its budget But the biggest Opec producer

:03:02.:03:08.

Saudi Arabia wants $60 per barrel. Shale oil production

:03:09.:03:18.

in the US fell sharply when prices hit rock bottom -

:03:19.:03:27.

it just wasn't worth their while to But now prices are higher they're

:03:28.:03:30.

back - and their technology is improving making it cheaper

:03:31.:03:35.

and more efficient. And it means US oil production has

:03:36.:03:39.

surged by a million barrels a day over the past year

:03:40.:03:44.

and all that is adding With me is Alan Gelder, an expert

:03:45.:03:49.

at oil analysts, Wood Mackenzie. Welcome to the programme. A lot to

:03:50.:04:11.

get through, Saleh laying out some of the issues and that is what Opec

:04:12.:04:19.

the break even point, what price do the break even point, what price do

:04:20.:04:25.

certain countries needed to be. That will be a key point of the

:04:26.:04:31.

negotiations. Saudi Arabia has declared 60 and other countries need

:04:32.:04:34.

a higher number to achieve a fiscal balance. If not, they need to borrow

:04:35.:04:40.

Opec need a higher number, Opec need a higher number,

:04:41.:04:46.

Venezuelan would be the highest. How hopeful of a that they will get the

:04:47.:04:53.

higher price? If they sustain production cuts over the next nine

:04:54.:04:58.

months, we might get to level the Saudis are expecting towards the end

:04:59.:05:01.

of the year, but something that is high 50s by the end of the year. We

:05:02.:05:08.

should say non-Opec members, Russia involved in this. They are concerned

:05:09.:05:12.

about the United States. We talked about shale production coming

:05:13.:05:16.

online. A real contender because it is the traditional producers we

:05:17.:05:23.

associate this with. When the price fell saw a lot of the production

:05:24.:05:28.

falling away, but this is coming back? This is Opec's dilemma, there

:05:29.:05:35.

is a new player in town. They can do it in a commercial way, so the

:05:36.:05:40.

challenge for Opec is, with these cuts, when do they online the cuts?

:05:41.:05:44.

What is the pacing of that, how does the manual group work? We're looking

:05:45.:05:49.

at the extension to nine months because the first quarter is when

:05:50.:05:54.

demand dips and that is not when you want to return barrels to the

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market. We saw parallels as far as the price is concerned in trying to

:06:00.:06:03.

push shale producers out of business, so there is a threshold,

:06:04.:06:07.

there is no point in getting this oil out of the ground in terms of

:06:08.:06:11.

shale because it is expensive. We have seen technology improve that

:06:12.:06:17.

makes it cheaper to get shale out of the ground, so that argument doesn't

:06:18.:06:21.

work any more? It is a balance. We have seen a number of companies

:06:22.:06:27.

fail, but we have seen consolidation, costs come down and

:06:28.:06:30.

technology improvement has meant it has gone from break evens of 60 to

:06:31.:06:34.

50. The question we have, what the balance between technology

:06:35.:06:41.

improvements and cost inflation as a result of activity which requires

:06:42.:06:46.

higher prices. There has been a big development in West Texas, that is

:06:47.:06:50.

where most of the growth is coming from. Other places near higher

:06:51.:06:56.

prices. Opec is facing a different dynamic now than its traditional

:06:57.:07:00.

market. It is so different how things have changed. Thank you for

:07:01.:07:01.

explaining that. The White House has denied

:07:02.:07:05.

accusations that the President's budget proposals contain

:07:06.:07:11.

a serious maths error. Former US Treasury Secretary Larry

:07:12.:07:12.

Summers says the spending plan $2 trillion of extra federal revenue

:07:13.:07:18.

twice - by using it to both to cut But White House's budget director

:07:19.:07:22.

says he stands by the numbers. The budget unveiled

:07:23.:07:29.

on Tuesday proposed deep cuts Aston Martin has posted a

:07:30.:07:40.

first-quarter profit for the first time in a decade. Revenues in the

:07:41.:07:44.

first three months of the year more than doubled after strong sales of

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its new model. It was sold by Ford in 2007 to its investment firms. The

:07:50.:07:56.

company has gone bankrupt seven times in its history and is now

:07:57.:07:59.

reported to consider a stock market flotation in London next year.

:08:00.:08:03.

Mongolia has received a $5.5 billion aid package

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to stabilise its economy and push through much-needed reforms.

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In return, Mongolia agreed to cut spending and raise taxes

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as well as build a stronger network for its financial services.

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The resource-rich nation which holds presidential elections next month

:08:17.:08:20.

suffered a slowdown after commodity prices collapsed, and demand slowed.

:08:21.:08:31.

Not often we talk about Mongolia and not often we talk about the next

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story either. A Chinese group is buying

:08:37.:08:37.

the world's second Humanwell Healthcare Group will pay

:08:38.:08:39.

the Australian health care giant Ansell $600 million

:08:40.:08:43.

for the business. It is a big deal? It is. It is a

:08:44.:09:04.

condom brand named after James bond. They are selling their business to

:09:05.:09:16.

the Chinese consortium. You have Humanwell health care group,

:09:17.:09:23.

partners and among the brands its selling sounds like James Bond.

:09:24.:09:30.

China's condom market is lucrative, set to triple by $5 million and that

:09:31.:09:38.

is according to a report out. There is a lot more awareness of the

:09:39.:09:42.

benefits of condom is. Sales in China have jumped in two double

:09:43.:09:48.

digits in a year. And also the manufacture of wide range of drugs

:09:49.:09:57.

to contraceptive drugs to HIV test kits. There are many Chinese

:09:58.:10:01.

manufacturers seeking to buy foreign firms to try to expand beyond their

:10:02.:10:06.

home market and no big surprise that the shares have jumped above 4% in

:10:07.:10:11.

Australia today but we note the transaction is still subject to

:10:12.:10:14.

regulation and approval. It is expected to be completed by the end

:10:15.:10:18.

of September. Could be a breaking news story when the regulators give

:10:19.:10:21.

its approval. Thank you very much. I have to say, it is green arrows

:10:22.:10:34.

across the board. The broader market in America, with another record high

:10:35.:10:39.

on Wall Street. Markets across Asia doing well, a weaker dollar of the

:10:40.:10:46.

back of what was said on the back of the Federal Reserve minutes. We will

:10:47.:10:50.

cut that in a second. Let's look at Europe now. Slightly higher. Could

:10:51.:10:57.

see another record high for the FTSE 100? Another record close. It is

:10:58.:11:01.

interesting to see how markets are trading around the world and we will

:11:02.:11:04.

talk about that in detail in a moment, but let's look ahead to what

:11:05.:11:06.

is on Wall Street. On Thursday, Sears will be reporting

:11:07.:11:14.

earnings. They warned investors in March there was a chance it may not

:11:15.:11:18.

be able to continue operating after years of losses and declining sales.

:11:19.:11:25.

But Sears has said it is expecting a net profit as it undertakes a plan

:11:26.:11:30.

to cut $1.25 billion in costs this year. In contrast, dollar tree is

:11:31.:11:35.

expecting stronger earnings this quarter and are boosted by a higher

:11:36.:11:40.

in-store traffic. Several retailers have blamed low traffic in stores

:11:41.:11:45.

for very weak sales. Finally, there will be a new company trading on the

:11:46.:11:53.

New York Stock Exchange on Thursday. Wide-open West is the sixth largest

:11:54.:11:58.

cable operator in the United States and will trade under the symbol Wow!

:11:59.:12:03.

Joining us is Tom Stebenson, Investment Director

:12:04.:12:04.

Good morning. Let's talk the Fed. I like your glasses. Where are your

:12:05.:12:15.

glasses by the way? I just haven't got them on. All eyes were on the

:12:16.:12:22.

Fed yesterday and expectation is still of June rate rise, but some

:12:23.:12:25.

doubts creeping in yesterday, is that fair to say? Yes, two keywords,

:12:26.:12:33.

the first was soon. The Fed rate setters said they felt if things

:12:34.:12:36.

carry Dom on their current trajectory it would be appropriate

:12:37.:12:41.

to raise interest rates soon. The second was transitory. The reason

:12:42.:12:44.

why they think they will raise rate is because they think the recent

:12:45.:12:49.

sockless in economy, softness in the inflation is transitory and it will

:12:50.:12:54.

pass. The odds are very short on June rate rise and another one in

:12:55.:12:57.

September and then potential will turn to how the Federal Reserve

:12:58.:13:02.

starts to unwind its balance sheet. It has bought $4.5 trillion of bonds

:13:03.:13:08.

to try to underpin the economy. It has two let them role off an

:13:09.:13:13.

reversed that easing policy. In the meantime you have the SNP closing on

:13:14.:13:20.

a high, the FTSE 100, it would suggest markets are on the up? Yes,

:13:21.:13:25.

markets are looking at not rising interest rates, but the reason why

:13:26.:13:29.

interest rates are rising. The reason why the Feds feel relaxed

:13:30.:13:33.

about pushing rate is because the global economy is picking up pace

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and that is what markets are focused on. For now, thank you. Retail

:13:38.:13:45.

shopping disasters, have a ponder on back.

:13:46.:13:47.

I meet the man who makes some of Hollywood's biggest

:13:48.:13:52.

And without the big money pressure, Jason Blum tells me it means he can

:13:53.:13:57.

You're with Business Live from BBC News.

:13:58.:14:08.

Bicycle and Motoring chain Halfords saw a 10% drop in profits,

:14:09.:14:11.

The retailer blamed the weak pound for driving up the cost of imports.

:14:12.:14:20.

Andrew Walker has been looking at the figures.

:14:21.:14:31.

Did you cycle in this morning? I normally would have done, but sadly

:14:32.:14:42.

not. Let's talk numbers. Halfords, the same tale, the weak pound

:14:43.:14:46.

affecting their bottom right? Yes, this is a business whose revenues

:14:47.:14:52.

are in Stirling, selling stuff to British customers but has a high

:14:53.:14:57.

proportion of its costs on imported goods. It has two convert sterling

:14:58.:15:04.

into Borren currency. That has been reflected in a decline in the

:15:05.:15:08.

profits despite relatively good performance on revenues. The chief

:15:09.:15:11.

executive says she has been pleased with the performance in that

:15:12.:15:16.

respect. The company puts a figure of ?14 million on the cost of the

:15:17.:15:24.

decline in sterling. The way in which it has impacted its outgoings.

:15:25.:15:29.

That is more than the decline in profits. It does suggest the company

:15:30.:15:34.

is, if you like, getting on top of this issue. But it is an unwelcome

:15:35.:15:38.

development for shareholders. It is a striking contrast compared with

:15:39.:15:47.

many in the 100 share index, bigger companies who make a lot of money in

:15:48.:15:51.

foreign currency, they have done well. But those more dependent on

:15:52.:15:55.

the bridge 's consumer have suffered. If you look at the share

:15:56.:16:01.

price, it fell sharply by 25% in the immediate aftermath of the

:16:02.:16:04.

referendum. It has recovered a lot of the ground since car but not all

:16:05.:16:20.

Thank you. Other retailers out, Pets At Home looking pretty good, they

:16:21.:16:23.

are making their money in the grooming service and the veterinary

:16:24.:16:27.

service as well. They saw a big rise in the veterinary business, up 25%,

:16:28.:16:31.

but they are having to admit they will have to bring down their pet

:16:32.:16:38.

food prices, which I would imagine for Pets At Home, that is your

:16:39.:16:41.

bog-standard. I am just looking at that hairdo, quite a bow on the dog

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in the picture. You're watching Business Live -

:16:44.:16:47.

our top story... We are watching closely the price of

:16:48.:16:57.

oil today, and Opec and non-Opec members who are meeting in Vienna to

:16:58.:17:01.

decide on whether they will extend their supply cuts and whether that

:17:02.:17:06.

will have any impact on prices. Something that might use a lot of

:17:07.:17:09.

oil, a rocket launch. New Zealand has successfully

:17:10.:17:12.

launched its first test rocket into space -

:17:13.:17:14.

the work of a Kiwi-American The seventeen-metre high craft

:17:15.:17:16.

took-off from a private launch pad on New Zealand's North Island

:17:17.:17:20.

and is designed to carry small A company in New Zealand has sent

:17:21.:17:22.

a rocket into space from the world's The launch was a success but

:17:23.:17:35.

crucially didn't get into orbit, explained that for us? This is a

:17:36.:17:40.

Little Rock it, much smaller than something you might see Nasa launch,

:17:41.:17:48.

only 70 metres tall, and designed, as you say, the tiny cube satellites

:17:49.:17:51.

that are revolutionising the markets. They made it into space,

:17:52.:17:55.

took about three winners to get up there but not quite into orbit. The

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company stressed this is just a test, in fact the launch was

:18:00.:18:06.

codenamed hashtag it's a test, just to make sure everyone knows this is

:18:07.:18:11.

not good for them, and they will launch later this year again, also a

:18:12.:18:15.

test, then on the third test they will take a pay payload with them.

:18:16.:18:20.

This fast developing market is really what they want to get into.

:18:21.:18:26.

It is companies not countries in the space race at the moment, and it is

:18:27.:18:30.

a beak -- a big leap forward for this.

:18:31.:18:33.

Making films on a tight budget isn't easy -

:18:34.:18:35.

One firm that's made its name with micro-budget films

:18:36.:18:38.

One of its first films was Paranormal Activity.

:18:39.:18:50.

It cost just $15,000 to make - but made nearly $200 million

:18:51.:18:53.

It then went on to produce another horror film called Insidious -

:18:54.:18:57.

production costs there were a bit higher -

:18:58.:19:03.

And it's a niche it's continued to pursue.

:19:04.:19:11.

Get Out - released in January this year -

:19:12.:19:13.

has already made more than $230 million at the box

:19:14.:19:23.

office but cost just $4.5 million to make.

:19:24.:19:25.

So I caught up with the founder and chief executive

:19:26.:19:27.

of Blumhouse Productions - Jason Blum.

:19:28.:19:28.

And asked what makes these low budget films so different

:19:29.:19:31.

It allows us to try very different things. We did the purge, get out,

:19:32.:19:36.

split, all low-budget movies, but they wouldn't have got made at 820

:19:37.:19:41.

or $15 million, typical studio budget, because their ideas were

:19:42.:19:45.

such oddball ideas. But by doing low-budget movies we can try weird

:19:46.:19:50.

ones. So talk us through the financing. This is very much about

:19:51.:19:53.

not spending a lot of money up front, and then with the marketing

:19:54.:19:56.

budget you manage to turn these movies into really big returns. The

:19:57.:20:01.

green light about movies is very simple because again they are

:20:02.:20:05.

low-budget, not a lot of risk. The real big moment for our movies is

:20:06.:20:09.

whether or not they get a wide release around the world or not.

:20:10.:20:19.

And, oddly, the marketing budget for our movies is six times the negative

:20:20.:20:23.

cost. So our green light is we are going to release it in 3000 screens.

:20:24.:20:28.

That we don't determine until after the movie is finished, we determine

:20:29.:20:31.

it with a studio, and that is when we know we have a winner, when we

:20:32.:20:37.

will get a big release. So what does this low-cost model do that you

:20:38.:20:40.

couldn't do if you had a multi-million dollar budget? You

:20:41.:20:45.

don't have two cast movie stars, you can kill the hero of the movie

:20:46.:20:48.

halfway into it, it is a great freedom, and also not to have a 3000

:20:49.:20:53.

screen release hanging over your head. So it really allows us to try

:20:54.:20:58.

different things. Sometimes it works, sometimes it doesn't, but

:20:59.:21:02.

when it doesn't work we don't get hurt too badly. If you had a massive

:21:03.:21:08.

budget, what could you not do? Expensive movies by definition have

:21:09.:21:13.

two appeal to all four quadrants of the audience, so the storytelling I

:21:14.:21:16.

think gets watered down, and the decision is very much by committee.

:21:17.:21:22.

The fun of movie-making is I think if this rated, the bigger the budget

:21:23.:21:26.

is. Then they'll like the storytelling and everything else

:21:27.:21:29.

gets compromised. We only only make a certain kind of movie, thrillers

:21:30.:21:34.

and genre movies, which really benefit from low-budget. I don't

:21:35.:21:39.

presume to think that every movie could be made on a low budget. If I

:21:40.:21:45.

go and see a vengeance, we want to see -- if we go and see the

:21:46.:21:52.

avengers. We want to see big budgets. You have to spend a bit

:21:53.:21:57.

more money on TV, why is that? Micro-budget doesn't work the TV

:21:58.:22:01.

because the television market is a much healthier market. The way we do

:22:02.:22:05.

low-budget movies, everyone works are free, we don't take a fee, the

:22:06.:22:09.

actors, the director, the writer, they all work for low pay scale, if

:22:10.:22:19.

it works, people get paid, if it doesn't, they don't. For TV, in a

:22:20.:22:23.

movie, we say we're not going to pay you but you get to do what you want

:22:24.:22:27.

to do is very a feeling in the movie business. In television if you said

:22:28.:22:29.

that, they would say it is good to hear that, but this guy over here is

:22:30.:22:33.

going to pay me and I get to do what I want to do. So it is much more

:22:34.:22:38.

competitive. For that reason micro-budget in TV is not the

:22:39.:22:40.

solution. We have a different idea of how to crack TV but it's not

:22:41.:22:45.

that. Are you ever surprised when you see the success of your movies,

:22:46.:22:50.

how well they do? Well, a hit movie is a magical thing. No matter how

:22:51.:22:55.

many times it happens, when we have one, get out was our most recent

:22:56.:23:00.

success, and we thought it was going to do quite well, and it opened, and

:23:01.:23:04.

it had a very good opening, not our best but a very good opening

:23:05.:23:08.

weekend. But when we knew it was something special was the second

:23:09.:23:11.

weekend, because typically genre movies dropped 50 to 60% from the

:23:12.:23:17.

first weekend to the second. Yet Outcrop about forgiveness and. We

:23:18.:23:26.

knew the magic had happened -- Get Out dropped about 20%. If I stop

:23:27.:23:30.

getting thrilled it is time for me to do something else because that is

:23:31.:23:33.

the fun of the business, that no one really knows until these movies come

:23:34.:23:37.

out into the world, and when they resonate or connected a big way

:23:38.:23:42.

there is better. Really interesting chat with him about how he does it

:23:43.:23:45.

on the cheap. That brings in some massive returns on those films. Tom

:23:46.:23:51.

is back and we are going to talk about President Trump, who is in

:23:52.:23:54.

Brussels right now meeting with European leaders. There is lots to

:23:55.:23:58.

discuss. But from the point of view of Brussels, they will be putting a

:23:59.:24:02.

lot of pressure on the US president to stick to the Paris climate

:24:03.:24:05.

accord. Front page of the Financial Times today. It follows on from his

:24:06.:24:10.

meeting with the Pope yesterday, which was a similar theme. That's

:24:11.:24:14.

right, when the Pope handed him one of the that can's in cyclicals, a

:24:15.:24:20.

big report on climate change, to encourage him to changes thinking.

:24:21.:24:23.

Donald Trump hasn't achieved everything he planned to deliver one

:24:24.:24:27.

of the things he has done, a lot of executive orders reversing climate

:24:28.:24:29.

change issues. The Europeans are very keen to change his view on

:24:30.:24:34.

this. The German line is particularly interesting, because

:24:35.:24:37.

what they are saying the President Trump is, look, it is not just jobs

:24:38.:24:42.

or reversing climate change, you can have both, but actually these

:24:43.:24:46.

measures can be good economic growth and the jobs as well. It is quite

:24:47.:24:49.

interesting, because when you think about this, during the election

:24:50.:24:53.

campaign he said many times he would rip up the Paris accord. When you

:24:54.:24:57.

think about the time, the effort and the energy to get to these accords,

:24:58.:25:02.

the transpacific partnership, Obamacare, Paris climate change, it

:25:03.:25:06.

is years of negotiations and hours and hours of discussions.

:25:07.:25:09.

Absolutely, and what we are seeing is a real split in the White House

:25:10.:25:15.

actually between those who are really firmly against action against

:25:16.:25:18.

climate change, and those who are more persuaded. I think Peter this

:25:19.:25:25.

might be his daughter, Ivanka, and her husband Jared Kushner, who

:25:26.:25:29.

really are much more along the European way of thinking that maybe

:25:30.:25:33.

the president. Tom, thank you, really good to see you. I want to

:25:34.:25:39.

talk about shops and retailing. You are getting in touch with us and we

:25:40.:25:43.

have asked about the underestimation of the power of technology. This

:25:44.:25:47.

went as I can't remember the last time I bought something in the

:25:48.:25:52.

street. I use my phone and return it using the label. Not good for bricks

:25:53.:25:57.

and mortar retailers. That is all from Business Live, we will see you

:25:58.:25:59.

very soon. Good morning. Yesterday was the

:26:00.:26:12.

warmest day of the year so far. We got to 26.6 Celsius in

:26:13.:26:16.

Worcestershire. Today is actually going to be even warmer. Hot across

:26:17.:26:21.

most parts of the UK and there

:26:22.:26:22.

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