23/06/2017 BBC Business Live


23/06/2017

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This is Business Live from BBC News with Ben Bland and Rachel Horne.

:00:00.:00:08.

As US energy producers ramp up production, can the OPEC cartel halt

:00:09.:00:11.

Live from London, that's our top story on Friday 23rd June.

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Crude is down some 20% this year - despite OPEC's attempt to prop it up

:00:35.:00:45.

Also in the programme, we'll cross live to Asia

:00:46.:00:49.

where the world's biggest bank has moved to calm fears over the level

:00:50.:00:52.

It's caused some cautious sentiment on the Asian markets that flat lined

:00:53.:01:01.

up the end of their trading session. Here's the European markets at the

:01:02.:01:05.

start of Friday. And we will look ahead to Wall Street as well.

:01:06.:01:08.

The British Prime Minister offers to ensure the post-Brexit rights

:01:09.:01:10.

of three million EU citizens living in the UK.

:01:11.:01:13.

Later we'll have a wrap up of this week's big economic stories

:01:14.:01:16.

with our correspondent Andrew Walker.

:01:17.:01:20.

Research in The Daily Telegraph has found well-qualified people

:01:21.:01:24.

who voluntarily talked about their flaws in job interviews

:01:25.:01:27.

Today we want to know, what are your weaknesses?

:01:28.:01:34.

Being gay perfectionist is not allowed!

:01:35.:01:38.

Get in touch - just use the hashtag BBCBizLive.

:01:39.:01:40.

-- being a perfectionist. Always horrible when that question comes

:01:41.:01:50.

up. We will share hours with you later.

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We start with the price of oil, because once again despite the best

:01:53.:02:04.

efforts of the oil producing nations to prop it up, it is on the slide.

:02:05.:02:07.

Let's show you what's been happening.

:02:08.:02:09.

This week the talk's all been about this guy - he's back.

:02:10.:02:15.

Traders refer to a "bear market" when the price of an asset falls 20%

:02:16.:02:18.

It often signals a loss of confidence

:02:19.:02:25.

Since the start of the year crude has done just that -

:02:26.:02:33.

it's down over 20% - from above $56 per

:02:34.:02:35.

to below $45 by the middle of this week.

:02:36.:02:42.

Back in November the Organisation of the Oil Producing Countries -

:02:43.:02:44.

OPEC - together with 11 other countries - agreed a landmark deal

:02:45.:02:47.

to restrict oil output to try and prop up prices.

:02:48.:02:50.

Between them they are supposed to be cutting production

:02:51.:02:52.

Although there are questions about whether everyone is sticking to it.

:02:53.:02:57.

And last month they agreed to continue that policy

:02:58.:03:03.

for another nine months, to March 2018.

:03:04.:03:05.

But there's still too much oil around.

:03:06.:03:07.

US shale producers were hit hard when oil

:03:08.:03:19.

prices crashed in 2014 - many were put out of business.

:03:20.:03:21.

But this year, thanks to OPEC's action to boost prices -

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as you can see here, the number of active US oil rigs has

:03:26.:03:28.

That's just added to the global glut of oil.

:03:29.:03:39.

Cailin Birch, Commodities Analyst at the Economist Intelligence Unit

:03:40.:03:42.

The problem with a bear market is once you get into it it can be

:03:43.:03:52.

difficult to get out. It can become and we have seen a switch where we

:03:53.:03:56.

have seen future prices for 2018 lower than current spot prices,

:03:57.:03:59.

signalling a loss of confidence in the market. What can be done? Opec

:04:00.:04:07.

have come together in a way that's been very surprising compare to what

:04:08.:04:13.

they have done in the past. You said earlier they don't always keep up

:04:14.:04:19.

their promises on production, but they have pulled together. The

:04:20.:04:23.

problem has been US shale gas. We have seen a couple of times in the

:04:24.:04:26.

last couple of decades where Opec has tried to get together around a

:04:27.:04:32.

table and limit production to impact prices, and both times we saw

:04:33.:04:36.

compliance of around 40 and 60%. We have seen compliance of close to

:04:37.:04:44.

100% this time because of the Saudi Arabia approach. That's a real

:04:45.:04:53.

progress. We think of Opec representing around 40% of oil

:04:54.:04:56.

production, and the US has risen rapidly in recent years. The problem

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in terms of keeping prices stable is the US is able to respond to even

:05:01.:05:07.

modest increases in prices. Shale drilling is relatively

:05:08.:05:10.

cost-effective compared to offshore. It's a more nimble industry that can

:05:11.:05:16.

react faster. Do you sense that at this level it's reaching, this lower

:05:17.:05:22.

level, is the new norm? As far as we see every time Opec take action to

:05:23.:05:27.

boost prices, it encourages shale to come back on stream. Will we see oil

:05:28.:05:34.

at these prices for the foreseeable? I think so. And it could potentially

:05:35.:05:42.

go further down. We tend to see a six-month lag between where the US

:05:43.:05:48.

rig camped moves and the US barrels per day. At the moment we still see

:05:49.:05:55.

rigs going up meaning to US production will continue to rise. A

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lot of it is confidence based on because confidence is weakening

:05:59.:06:02.

considerably, it could go lower than 47 dollars per barrel. It's not

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gangbusters by any stretch of the imagination yet, but it is growing,

:06:10.:06:14.

and it will probably not fall back to the $30 per barrel level we have

:06:15.:06:18.

seen, unless something dramatic happens in the market, which is not

:06:19.:06:22.

our forecast. Thank you for joining us.

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Let's take a look at some of the other stories

:06:25.:06:27.

UK government plans for a new $23 billion nuclear

:06:28.:06:37.

power station have come under fire from public auditors,

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who call it "a risky and expensive project".

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The National Audit Office say the case for the Hinkley Point C

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It says the deal with state-controlled French energy firm

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EDF and Chinese company CGN to build the plant is "not value for money".

:06:48.:06:51.

The 34 largest banks in the US have enough money on hand

:06:52.:06:53.

to withstand a severe recession, according to the US central bank.

:06:54.:06:58.

The finding comes from an annual "stress test" conducted

:06:59.:07:00.

The tests were put in place after the financial crisis

:07:01.:07:05.

to strengthen financial capacity in the event of a downturn.

:07:06.:07:10.

American Airlines has received an "unsolicited" approach

:07:11.:07:13.

from Qatar Airways which wants to buy 10% of the US carrier.

:07:14.:07:17.

In a regulatory filing, American Airlines said Qatar

:07:18.:07:24.

intended to buy at least $800 million of its shares - and it

:07:25.:07:27.

Analysts say Qatar could be trying to strengthen its relations

:07:28.:07:31.

with the US amid the diplomatic crisis with its Gulf neighbours.

:07:32.:07:37.

To Asia now - and the Industrial and Commercial Bank of China -

:07:38.:07:41.

known as ICBC - has moved to calm fears about the health of loans

:07:42.:07:44.

to some of the country's biggest companies.

:07:45.:07:46.

What a ground can you give us to this story? Before that I have some

:07:47.:08:00.

breaking news. We had news break that Toshiba, which has been trying

:08:01.:08:05.

to sell its chip unit in order to raise enough money to cover the

:08:06.:08:09.

losses in its US nuclear division, its shares have just been downgraded

:08:10.:08:16.

to the second section of the Tokyo stock exchange as of the 1st of

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August after the company repeatedly postponed earnings results. The last

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we heard we were supposed to find out by the end of this month but the

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company has just applied for another extension until August ten, which it

:08:30.:08:33.

got the approval for, but in exchange its shares have been

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demoted to the second section of the Tokyo stock exchange. You are asking

:08:38.:08:43.

about China and we are talking about some of the massive overseas

:08:44.:08:45.

acquisitions that have been making news headlines lately, such as the

:08:46.:08:54.

purchase of Hollywood studios. Yesterday when authorities appeared

:08:55.:08:58.

to start cracking down on overseas acquisitions, the shares fell. One

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fell 10% until they were suspended. Them the ICBC came out and said it

:09:09.:09:15.

was just a routine and we should see shares recover this Friday. The

:09:16.:09:19.

message is that Chinese companies and their spending and shopping

:09:20.:09:20.

spree isn't yet over. Thank you. We can see the effect it's having on

:09:21.:09:25.

the markets... Asian shares flatlined but remained

:09:26.:09:29.

on track for a weekly gain. Crude oil prices pulled away

:09:30.:09:34.

from this week's 10-month lows. Crude enjoyed a rare positive day

:09:35.:09:39.

on Thursday after hefty selling that sent it to a 10-month low,

:09:40.:09:43.

but the gains were small change as concerns over a global supply

:09:44.:09:48.

glut and US production overshadow The sharp losses -

:09:49.:09:50.

oil is down around 25% from its recent highs seen

:09:51.:09:58.

in January - has hit energy firms and,

:09:59.:10:00.

despite another pick-up in the commodity, they

:10:01.:10:02.

continue to struggle. The European markets starting Friday

:10:03.:10:13.

with a modestly lower start across the board.

:10:14.:10:20.

In the US, investors are eyeing Donald Trump's revised healthcare

:10:21.:10:23.

bill hoping its success will open the way for his economic agenda.

:10:24.:10:26.

And we now have the details about what's ahead on Wall Street Today.

:10:27.:10:29.

The company that bears the name of the once

:10:30.:10:32.

very popular smartphone will release its

:10:33.:10:33.

Remember, the company's on a big turnaround effort,

:10:34.:10:40.

so this will be the first chance that investors will be able to take

:10:41.:10:43.

These days, BlackBerry is better known for losing

:10:44.:10:46.

in the smartphone wars to Apple, Samsung and Google.

:10:47.:10:51.

But the Canadian firm is gaining traction as it tries to really

:10:52.:10:54.

reinvent itself as a maker of industrial software.

:10:55.:10:59.

In economic news, new US single-family homes sales,

:11:00.:11:02.

those numbers will be released on Friday, and likely rebound

:11:03.:11:08.

in the month of May, suggesting that the housing

:11:09.:11:11.

Joining us is Lucy MacDonald, CIO, Global Equities

:11:12.:11:22.

We were just talking about what she wanted to start with. Is it health

:11:23.:11:34.

care? Tell me more about the bill they are trying to get through in

:11:35.:11:39.

the States. Part of Donald Trump's plans to repeal Obamacare. Looks

:11:40.:11:41.

like they might have some issues, but what impact does it have on the

:11:42.:11:46.

stock markets? The health care sector has been very strong in the

:11:47.:11:49.

last couple of weeks but it's not actually to do with the health care

:11:50.:11:53.

bill as such. It's more to do with relief about pricing of drugs.

:11:54.:11:57.

That's because there has been a leaked draft of a order that Trump

:11:58.:12:04.

is preparing, that is much more lenient towards drug company pricing

:12:05.:12:08.

than he was saying even six months ago. That has created enormous

:12:09.:12:15.

amounts of relief in the market, so the biotech sector has been the

:12:16.:12:17.

strongest area in the last couple of weeks. We will watch and see that.

:12:18.:12:23.

It has been a complete U-turn as far as that's concerned. Pointing more

:12:24.:12:27.

towards using deregulation to keep pricing under control rather than

:12:28.:12:33.

regulation. The other interesting thing in the States is the Federal

:12:34.:12:37.

reserve moving from a policy that has been broadly loose in terms of

:12:38.:12:46.

interest rates to starting to tighten up. Do you anticipate there

:12:47.:12:50.

will be much response in the markets? It has been very well flat

:12:51.:12:55.

and you can give the Federal reserve a lot of credit for that. We have

:12:56.:13:02.

seen a plan that has been set out on how interest rates are likely to

:13:03.:13:09.

move. But now, as of the last Federal reserve meeting, we have a

:13:10.:13:14.

better idea of how the balance sheet will be unwound. 4.3 trillion of

:13:15.:13:22.

Treasuries mortgage-backed mortgages on the balance sheet. It's over a

:13:23.:13:27.

time that is yet to be defined, but that's the path of travel. That it

:13:28.:13:33.

is being seen as another way of tightening. Therefore the impact of

:13:34.:13:39.

that is being taken in conjunction with the rates as well. So managing

:13:40.:13:46.

that is going to be quite something to do, particularly as there will

:13:47.:13:50.

possibly be a change of the Federal reserve governments next year. You

:13:51.:13:54.

will join this again at the end of the papers and think of your floors

:13:55.:13:59.

to announce at a job interview. I would imagine there are none!

:14:00.:14:03.

The British Prime Minister offers to ensure the post-Brexit rights

:14:04.:14:06.

of three million EU citizens living in the UK.

:14:07.:14:08.

Later we'll have a wrap up of this week's big economic stories

:14:09.:14:11.

with our correspondent Andrew Walker.

:14:12.:14:12.

You're with Business Live from BBC News.

:14:13.:14:22.

Today marks the one year anniversary of the day Britons went to the polls

:14:23.:14:27.

and surprised themselves by voting to leave the European Union.

:14:28.:14:30.

Earlier this week, the UK government started the arduous task

:14:31.:14:32.

of negotiating a Brexit deal with politicians in Brussels.

:14:33.:14:40.

Let's talk more with our business correspondent Ben Thompson.

:14:41.:14:42.

What can you order for us? Good morning and welcome to South London.

:14:43.:14:55.

We are talking about that anniversary, one years since we

:14:56.:14:57.

decided to vote to leave the European Union and turn our back on

:14:58.:15:01.

40 years of membership of the club. A lot has been said since then. All

:15:02.:15:06.

sorts of debate about what it means for jobs, trade and the economy on

:15:07.:15:11.

both sides. With meat this morning to discuss it are our Brexit panel.

:15:12.:15:15.

It's neatly split down the middle. I have levers and Remainers. I can

:15:16.:15:23.

introduce you to a couple of them. Lindsay and David. Lindsay, you run

:15:24.:15:27.

businesses and there has been so much uncertainty in the last couple

:15:28.:15:29.

of months, but are we closer to getting answers?

:15:30.:15:35.

I don't know if we are closer to getting answers, lease we are

:15:36.:15:42.

getting something coming out of the government now about their plans.

:15:43.:15:47.

What is giving businesses problems over the last 12 months is the lack

:15:48.:15:50.

of planning, lack of certainty of where we are going. The uncertainty

:15:51.:15:55.

is an issue, I think. People I work with, over 50, leaving work, they

:15:56.:16:00.

are looking to travel, they need their money safely, they need a

:16:01.:16:04.

pound at a safe rate, they need the economy to be strong and support

:16:05.:16:08.

their portfolios. Lots of them are setting up businesses after they are

:16:09.:16:13.

50. They need certainty about what the future is for them. What is the

:16:14.:16:18.

future, David? There is no certainty, we don't know what is

:16:19.:16:24.

going to happen. It is exciting. The opportunity is to maintain

:16:25.:16:26.

relationships with individual countries in the EU, we have a great

:16:27.:16:33.

big wide world out there. The disgraceful way we have treated the

:16:34.:16:36.

Commonwealth, let's have them back, Africa, Asia, America, South

:16:37.:16:41.

America, so much to go for. A lot of clarity last night. Great news. The

:16:42.:16:51.

debate continues. I am staying safely down the middle here, but

:16:52.:16:57.

much more on the BBC throughout the day. See you soon.

:16:58.:17:01.

The UK Prime Minister Theresa May has revealed details of what she's

:17:02.:17:11.

called a generous offer on the rights of EU citizens

:17:12.:17:13.

Around 3 million EU citizens would be allowed to stay in Britain-

:17:14.:17:20.

let's get more on this now with our economics

:17:21.:17:22.

How significant do you think this is for business and economics, the

:17:23.:17:31.

offer Theresa May has made? It is certainly important in that it sets

:17:32.:17:34.

a favourable tone for the whole negotiations, and there are a dozen

:17:35.:17:41.

to areas where they matter for business. She has had a positive

:17:42.:17:44.

response from the German Chancellor Angela Merkel, which is encouraging.

:17:45.:17:50.

What is clear with this area is, there is a political will on both

:17:51.:17:55.

sides to get a deal. There are technical issues, certainly,

:17:56.:17:57.

questions about other things beyond rights to work and live in the UK,

:17:58.:18:03.

access to health care, education, writes to have family members

:18:04.:18:09.

joining and forth, and the one politically difficult element in

:18:10.:18:12.

this is the question of the jurisdiction, where will disputes be

:18:13.:18:17.

settled? The European Union side would like that to be the European

:18:18.:18:20.

Court of Justice, which the Prime Minister has said is a red line. But

:18:21.:18:24.

it does look like it is going to be a relatively easy thing to resolve,

:18:25.:18:28.

certainly in terms of the political will. It is clear that it is strong

:18:29.:18:33.

on both sides. The settled status is one thing. Another issue is migrant

:18:34.:18:37.

workers, we saw headlines yesterday in the UK talking about difficulties

:18:38.:18:42.

that some growers were facing getting seasonal workers this year.

:18:43.:18:47.

BBC research was done but looked at particular issues about migrant

:18:48.:18:51.

seasonal workers. We found that there was evidence that soft fruit

:18:52.:18:58.

growers, leafy salad grows, two particular trade Association, found

:18:59.:19:00.

that their members were having some difficulty getting workers. They

:19:01.:19:06.

said it will certainly harder than the year before. A significant

:19:07.:19:08.

number of their members were concerned about whether we would

:19:09.:19:13.

have enough people for this season. It is partly about the uncertainty

:19:14.:19:15.

to do with Brexit, although one has to say, for the time being, those

:19:16.:19:19.

people have the same right to come and pick the fruit and veg as they

:19:20.:19:26.

had a year ago, but it is more to do with the decline in Stirling. People

:19:27.:19:29.

coming here temporarily want to take the money back to their families. In

:19:30.:19:33.

terms of foreign currency, it is worth less than a year ago because

:19:34.:19:38.

of the decline after the referendum. Because of the decline in pounds

:19:39.:19:41.

sterling, there is talk about whether interest rates need to rise

:19:42.:19:46.

to prop the value up, a bit of a diverted at the top of the Bank of

:19:47.:19:50.

England, it seems. A recent committee decided to keep interest

:19:51.:19:57.

rates unchanged at their all-time low. We discovered, to our surprise,

:19:58.:20:03.

that there was a 5-3 split in the voting on that. Three wanting to

:20:04.:20:06.

start raising rates to deal with inflation that has been feeding

:20:07.:20:10.

through as a result of the decline in pounds sterling. And the delayed

:20:11.:20:16.

effect of rising international commodity prices. But strikingly, we

:20:17.:20:23.

had the chief economist, he said that there was a case raising rates

:20:24.:20:28.

soon, within a day or so of his boss, the governor, saying now is

:20:29.:20:32.

not the time. Now and soon are not necessarily quite the same, but it

:20:33.:20:36.

does seem as though there is a division opening up there. One

:20:37.:20:41.

person, one former Treasury adviser, suggested that Andy Halliday's

:20:42.:20:49.

position is whatever will oppose the governor. What was your take on the

:20:50.:20:55.

Queen's speech this week? It was striking. Dominated by Brexit and

:20:56.:20:59.

the enormous legislative programme that will generate, but wasn't it

:21:00.:21:03.

striking how so many Conservative Party manifesto commitments were not

:21:04.:21:07.

there. Social care costs for the elderly, grammar schools, the

:21:08.:21:13.

so-called triple lock on the state pension, and I think that reflects

:21:14.:21:17.

something that may also be reflected in due course in the Brexit issue,

:21:18.:21:21.

which is the difficulty they may have in getting a parliamentary

:21:22.:21:25.

majority for everything they want. Bearing mind, the details of what

:21:26.:21:28.

Brexit will mean, something parliament will have a view on, and

:21:29.:21:34.

there are wide divisions, even with those that accept reluctantly that

:21:35.:21:39.

it will happen. Thanks for your time.

:21:40.:21:48.

How did Velcro come to be what we know it is today.

:21:49.:22:03.

It is sticky, multifunctional and probably in use somewhere in your

:22:04.:22:09.

house. Velcro! The idea was the brainchild of a Swiss engineer, and

:22:10.:22:19.

in 1941, George was walking through the woods when he wondered if those

:22:20.:22:22.

annoying birds had stuck to his trousers and his dog would be of any

:22:23.:22:31.

use. He began by experimenting, and eventually came up with a means to

:22:32.:22:35.

replicate the action, with two strips of material. One with

:22:36.:22:40.

thousands of tiny hooks, and one with thousands of tiny loops. George

:22:41.:22:46.

patented the technique in 1955, just in time for the space race. And the

:22:47.:22:52.

Apollo astronauts loved it in the 1960s. They used it to stop their

:22:53.:22:57.

plates from floating in space. Before long, everyone was using it,

:22:58.:23:02.

hospitals, airlines, the military, eventually George was selling

:23:03.:23:08.

50,000: that is a year of the stuff, and he made millions. So where did

:23:09.:23:15.

George get the name, Velcro? Two French words stuck together.

:23:16.:23:26.

What other business stories has the media been

:23:27.:23:28.

Lucy MacDonald, CIO, Global Equities at Allianz Global Investors

:23:29.:23:31.

Quite a significant one from the US, big banks passing the first hurdle

:23:32.:23:42.

in the stress test. Things are looking more robust than they were

:23:43.:23:47.

just a few years ago. The banks have all made a good effort to get their

:23:48.:23:51.

capital levels up. You can see that. When you look at the minimum

:23:52.:23:58.

regulatory tier one 4.5%, they are all well above that. Even with the

:23:59.:24:01.

extra leveret put in, most of them still have a good buffer, Morgan

:24:02.:24:07.

Stanley was a bit on the weak side, but they are looking better. They

:24:08.:24:13.

have got better at working through it as well. From that perspective,

:24:14.:24:18.

it does underline the fact that the whole of the US banking system has

:24:19.:24:23.

really just mended its balance sheet in a way that we have not yet seen

:24:24.:24:26.

in Europe. Although we are seeing signs of it in Spain in particular.

:24:27.:24:30.

Is it the kind of thing that people should breathe a sigh of relief,

:24:31.:24:34.

they are a bit more spots will looking towards a rainy day, or

:24:35.:24:38.

getting better at answering the questions? It is definitely the

:24:39.:24:42.

former. The numbers are a lot better. I think that is known now.

:24:43.:24:47.

When you look at the valuations of the banks in the US, they certainly

:24:48.:24:52.

have started to reflect that, but there is a lot of work to do in

:24:53.:25:00.

Europe. So a survey saying that you should give some of your floors in a

:25:01.:25:05.

job interview, and you are more likely to get the job. What does it

:25:06.:25:10.

say in the article, any tips? It is all about self verification. I am a

:25:11.:25:14.

bit of an expert in this because I have been helping my son, who is

:25:15.:25:20.

doing a level psychology. It says that if you are honest about your

:25:21.:25:25.

flaws in an interview, you are more likely to get the job. There is a

:25:26.:25:31.

secondary part of this that is definitely, having the

:25:32.:25:34.

qualifications in the first space. If you don't have the qualifications

:25:35.:25:37.

and you are not confident in the job, it is best... What is a good

:25:38.:25:47.

flaw to say? Personally, I would say, feedback I have had is that I

:25:48.:25:51.

can be detached. Therefore, being here in this interview, being on the

:25:52.:25:55.

BBC, it clearly shows I am trying to do something better. You would never

:25:56.:26:02.

be able to tell! Asked a flaw, I would say answering silly questions

:26:03.:26:03.

like that.

:26:04.:26:05.

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