14/07/2017 BBC Business Live


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This is Business Live from BBC News with Susannah


Banking on better times - Wall Street's giants have been


getting a bump from Trump, but what will their


Live from London, that's our top story on Friday 14th July.


Will profits soar for three of America's banking big guns?


And what will they tell us about the state of


Also in the programme, the company behind many of Amazon


and Alibaba's warehouses in Asia and the US is set for


And we'll have the latest from the financial markets -


this is the picture in Europe as stocks around the world are


And as the UK is warned that its public finances


are in a perlious state, we'll be getting the inside track


on that and the other big stories of the week with our economics


Also today, as the payments giant Visa vows to put


cash out of business, we want to know what do


Let us know - just use the hashtag #BBCBizLive.


Hello, and welcome to Business Live.


We start on Wall Street, where three of the giants of US banking


We are talking about Wells Fargo, Citigroup and -


the biggest of them all - JP Morgan Chase.


Investors have been betting that the good times are back


for America's bankers thanks to the election of Donald Trump.


That's helped stock markets hit record highs.


Well, today's results could give us a better idea.


Take a look at these share prices - especially JP Morgan's -


They all got a boost from hopes he would help the US economy grow,


The slow pace of policy change has, though, cooled that


In particular, President Trump has promised to scrap the heavy


regulation of banks brought in after the financial


But his new more lenient rules, the Financial Choice Act,


are unlikely to get through Congress in their current form.


What could help the case is that the top banks


all comfortably passed so-called stress tests last month.


It basically means they've been judged financially solid enough,


with ample money in reserve to withstand another


And those tests could be eased in future.


This week President Trump nominated this man, financier Randal Quarles,


for a leading role in overseeing the banks at the Federal Reserve.


He's seen as much more sympathetic to big banks.


Ken Odeluga is a market analyst at City Index.


Thank you for coming in. Let's start with the main bit, these results are


coming out in a few hours, what are you expecting to hear? This is in


many respects are holding water for the large six banks, we have these


today and next weekend the last of the three. We are really only


expecting growth in terms of earnings for JP Morgan and


Citigroup. For Wells Fargo and BankAmerica, they are more likely to


report earnings which are flat compared with the same quarter last


year. So really reflective of the fact that generally speaking


second-quarter earnings, first-quarter earnings are not


necessarily the best banking earning quarters for the year, and really we


are getting stronger results from JP Morgan. Susannah showed us some of


the figures of where the share prices have been going up, not just


affected by the results put external factors like Donald Trump's


election, the Financial Choice Act, something the banks were looking


forward to, explain why they wanted and how likely it is to happen? For


many years banks have either complained or lobbied, I should say,


that the low interest rate environment that we had up until the


end of 2015 and also cumulatively probably the strongest regulatory


regimes seen in decades had served to really crimp their net interest


margins, the margins they actually managed to retain from lending and


borrowing as profit. The reason why they wanted the deregulation was


that it would enable them on the basis that they had strengthened


their capital and were complying with all sorts of other rules,


enable them to start to grow again. But of course that has got stuck in


the logjam in Washington. Let's talk about the banking stress tests, we


hear they all passed them with flying colours but how true are


they? Before the financial crisis many of these banks passed the


stress test. Can we really be a certain they could withstand another


shock? There is always a possibility that of course many of them would


not be able to withstand that shock but the fact is that many of the


stress tests were the toughest stress tests in many ways of any


stress tests that have been held on these banks, and the fact they


passed speaks to the fact they have been forced to take all sorts of


measures, dealer bridging, production of risky capital, asset


sales, that sort of thing, that contributed to their ability to pass


and, going forward, the stress tests, the difficulty will be


ratcheted up yet again to a more qualitative level in a way that it


is not necessarily just rules-based but based on their ability to


demonstrate that they are compliant in spirit with what is required. I


think we can have a bit more confidence in that.


OK, thank you for your time. Let's take a look at some of


the other stories making the news. Visa is set to offer up to $500,000


to a selection of US-based companies willing to stop using cash


as a form of payment. 50 restaurants and food vendors


will receive $10,000 each Visa currently processes 59%


of all card payments A racist AirBnB host has been fined


$5000 by authorities in California after she discriminated


against an Asian-American guest. Tami Barker cancelled Dyne Suh's


booking, telling her in a message, "One word says it all -


Asian." The fine was imposed due


to a new agreement between AirBnB and California's Department


of Fair Employment and Housing. Singapore's economy has narrowly


dodged a recession after strong electronics exports helped it grow


in the second quarter. It grew by just 0.4%


between April and June. Revised figures show it had


a sharper than expected contraction of 1.9% in the first three months


of the year. Two quarters of contraction in a row


constitute a technical recession. The company behind many of Amazon


and Alibaba's warehouses is Asia and the US is set


for an $11.6 billion takeover. Global Logistic Properties,


which is based in Singapore, is the largest warehouse


operator in Asia. Let's get more from Monica


Miller in Singapore. This is a pretty big deal?


It is, set to be Asia's biggest ever private equity deal. Global Logistic


Properties have sealed the deal for more than 11 billion US dollars. The


industrial property company has been aggressively expanding over the last


two years due to the growing demand of online shopping. They currently


have distribution centres in China, Japan and Brazil and part of that is


a development company in the US which has warehouse properties in


several different states and some of their largest tenants are Amazon,


Starbucks and Williams and Sonoma. But the warehouse operator makes two


thirds of its revenue from China where it has a dominant market


position. The offer is well above the firm's market value of more than


$9 billion. OK, Monica, thank you very much.


Let's look at the financial markets. Global stocks are scaling record


highs - equities in Asia rose The Nikkei ended higher


with a weekly rise of 1%. The head of the Fed,


the US Central Bank, Janet Yellen, said this week that US interest


rates will continue to rise That was welcome news


for many investors, who don't want to the era of cheap


money ending quickly. Her comments have pushed up stocks


in Europe as well this week - this is the picture


so far this morning. A weaker opening in Frankfurt but


France just about in positive territory.


And Samira Hussain the details about what's ahead on Wall Street today.


On Friday there are a few bits of economic data coming out that we


should pay attention to. CPI, the consumer Price index, for June is


expected to go up 1.7%. That is good but lower than 1.9% increase we saw


back in May. The core CPI, which strips out food and energy costs, is


forecast to go up 1.7% on a year-on-year basis after making a


similar game in May. Also coming out our retail sales numbers, and it


seems it may have gone up just a bit in the last month. After falling in


May. Call retail sales, sales excluding autos and building


materials, gas and food services, forecast to go up about 0.3% for


June. Finally, PNC financial services group based in Pittsburgh,


Pennsylvania, is expected to report a rise in quarterly profit topped by


a higher interest rate income and higher income from commissions and


fees. Joining us is Lucy MacDonald,


chief investment officer in global equities at


Allianz Global Investors. Let's start with the Nasdaq, I'm not


sure if it was you or someone else in the studio a few weeks ago, we


were discussing issues with the Nasdaq starting to fall off, but it


seems to be ticking back up again? Yes, it is the strongest sector in


the markets this year, up about 16%. Markets generally in the US sector


at nine so it has definitely been the place to be. But it is not that


much more expensive because underlying earnings have


outperformed as well and as we go into the season when investors focus


on seeing how deliverable high levels of growth are, so you see


Facebook growing 30%, Amazon a similar level, and the whole issue


is whether that rate of growth can be sustained, said that is what we


will all be looking at, seeing how that plays out. And that will depend


on innovations coming through down the line. It is unlikely there will


be key disrupters eating away at those big players' earnings. It is


very hard to compete? The rate of mobile and digital advertising is


what is driving Facebook in particular and you can see that is


still growing very quickly so the demand is still there. You should


get some warning if it is going to slow down, you would think, because


we do get quite regular updates. But that will be the focus for


investors. Let's talk about Janet Yellen, head of the US Federal


reserve, she has been speaking this week. What did she say that piqued


your interest? She slightly changed her tone on inflation, which was


interesting. The expectation has been that inflation will be trending


slowly upwards but her description of it was slightly different, she


was saying that maybe some of the downward issues are a bit more


structural, she mentioned drug prices, so I think there is a bit of


a change in tone there but still a bit of uncertainty about white wage


inflation is so subdued and it is highly likely it could be technology


but we don't really know at this stage so if we are a little bit in


the dark, and I think the Fed is also just watching and seeing how


things develop. Do you think this wage stagnation is why she said


interest rates will rise but not as quickly as people thought initially?


Exactly that, it has been a huge focus, seeing how employment is


developing, that is one of the objectives of the Fed, employment as


well as price stability, so watching the labour market and how it


develops, something there is huge focus on, and they have been


surprised about the fact that wages have not really followed up. OK,


thank you very much for now, you will be coming back to blog about


the papers' stories, particularly why we still need cash in our


society after These are saying they want to aim towards a cashless


society. We will have to see what you still need cash for.


Certainly school fires! You have got to pay for your bouncy castle with


cash! Not contactless, unless it is a very


poor school!


We will get the inside track on all the big stories of the week, still


to come. You with Business Live from BBC


News. A recent graduate from UCL has won


the 2017 Wolfson Economics Prize. The competition posed the question,


"How can we pay for better, safer, more reliable roads in a way


that is fair to road users and good for the economy


and the environment?" The 27-year-old is the youngest


winner of the ?250,000 prize. Well, let's find out


more about the winner with the Wolfson prize


director Julian Glover. What did he come up with, what was


his key idea? His key idea was that way we pay for roads right now, the


money is falling away, we have to get rid of it, scrap petrol tax,


scrap the charger has in the UK to have a car on the road and come up


with a simple, clear intelligent way to charge people as they drive, and


not to load people with tonnes of technology and is systems, things


that would cost a lot and be hard to introduce, but do it through


insurance payments. We all make them at the moment, you could link it to


distant and have a simple, clear bill, which would get more money


into roads, fund them better, fix potholes which are a big problem,


get them serviced properly, invest in new roads and without a huge


piece of technology. Give us a sense of the importance of the prize, who


has won it before with what ideas and have they been implemented? It


is an important prize, a big prize, a quarter of ?1 million, and the aim


is to take difficult policies, things Government are afraid to get


involved in, politicians backed off but we know they need to be sorted


out, so one of the once we had a couple of years ago was about


housing, how do we build new housing in


the UK which people are happy with, people who live nearby are happy


with, we create decent communities without battles over planning, which


seems to be the way we do it. That put forward new ideas for shaping


the city of Oxford and people in Oxford are working on that now, and


I hope with this roads prize, in Government there is huge amounts of


interest so it is not just about publishing an idea and leaving it


but getting inside Government, working with politicians and drawing


on some other ideas. We had 120 ideas from around the world,


America, Australia, Asia, getting the best of their thought as well,


work and good Government in the UK and elsewhere to sort out the


problem. Julian Gover, wolves and prize director, thank you for your


time. That winning prize that he could get


rid of Britain's potholes within five years, quite a challenge!


Interesting to see how things will change with electric cars.


Investors are watching Wall Street, where three of America's largest


banks are due to publish their latest results shortly.


A quick look at how markets are faring....


It is Bastille Day Lynne France, a public holiday, but the CAC 40 is


still open, it is the only market in the green, it is up 0.15%.


And now let's get the inside track on all the big economic


Starting right here in the UK where the public spending watchdog


is warning that the UK's finances are in something of a perlious state


and that Brexit is making the risks all the greater.


Our economics editor Kamal Ahmed is here.


Kamal, let's talk about these warnings. Interestingly, the Office


for Budget Responsibility, OBR, said it is not necessarily the Brexit


divorce bill which could be the sticking point, it is more the


trading relationship going forward? It said the divorce Bill, if it is


the size and people think, which might be like 70 billion euros to


100 billion euros, would be a one-off head to the public finances


but not substantial. Of much more concern is Britain's ongoing


economic relationship with the rest of the EU, Britain's largest trading


partner. What is interesting about the OBR


report, the International Monetary Fund has said all countries should


look at what they call fiscal risks. The US desert, Australia doesn't,


Canada does it. It is about understanding, if there is a big


shock, how well-prepared is your Government and your public finances


to combat those risks? What they have found for the UK, this is very


similar to so many western economies, high levels of debt,


still running a deficit. If there is a shock to the system, like a Brexit


shop, or a new housing crisis if house prices slump, a recession, how


fixed with those economies be to be able to act on those? We have been


in a situation where there is not a lot of money left on the banks. I


spoke to Robert Choate, the head of the OBR, yesterday. He said raging


population will pose a big fiscal risk, health, it is something


perhaps people are not thinking about with the focus on Brexit -- he


has said an ageing population will pose a big physical. Brexit is a


short, medium and long-term issue. It ageing populations, health and


social care needs, they are challenges for all governments, how


to fund the fact that we live, frankly, a lot longer and health


costs are rising rapidly. Stephen King, the HSBC economist, said what


happens when the money runs out? The problem is we are not yet clear. We


are in an ultra-loose monetary situation with very low interest


rates. But there is no more of that available if there is a big problem


in the economy. Let's talk about protectionism, we had headlines this


week, Germany is tightening the rules on takeovers by non-EU


companies? It is an interesting debate, is the world becoming more


protectionist, should it become more globalised? Germany made an


announcement this week that it will have more control over takeovers,


particularly when they describe there is technology at stake in


Germany could lose intellectual protection over the property it has.


With one hand Chancellor Angela Merkel says we need to be free


trade, but all economies are national and all governments have to


face their national populations, their voters, so with one voice they


say we should be more open, but the facts on the ground are often much


more protectionist. There are six on the other side, the EU has just


signed an outlying free trade agreement with Japan. We have seen


President Trump has been here with President Macron affronts, no real


trade announcements came out of that. We know America has already


pulled out of the transatlantic possible deal between the EU and a


yes -- and the US. There is a concern that globalisation has too


many behind and people voted for people like Donald Trump because


they were worried about it. Lots of is out there, this latest German


move is about protecting home markets. Most people warned that if


you do that to too great an extent, it will be damaging to the global


economy. You had a story about China putting


$53 billion back into the banking system, which was a bit of a U-turn?


China has been signalling it might be tightening the way it regulates


banks and the amount of support for banks, but the Chinese central bank,


too much relief to many who watched the Chinese economy, has announced a


new injection of cash. Some of the banking regulations they announced


will be delayed. Of course Chinese banks are carrying a huge amount of


debt, if they are seen as a problem it can be damaging to the Chinese


economy, and anything damaging to the Chinese economy is damaging to


the global economy, so some relief at the slight monetary loosening.


Thank you for coming in and casting some for us.


Who needs four wheels when you can have three?


The tuk-tuk or auto-rickshaw started life in Italy in 1947 but now


dominates Asian roads from India to Indonesia to Thailand.


Now Indian manufacturer ATUL is punting the little


machine as a cheap solution to Africa's transport problems.


It has set up assembly plants across the continent.


We went to one in Port Elizabeth, South Africa.


Behind me other vehicles in the condition which they arrived from


India, then they are flown into a full manual assembly line. That


assembly line is purposely designed in that manner because it creates


employment and gives us the necessary personal controls in the


assembly line. The top three in our check list, the first one being


unemployment. The second is the ability to empower people to start


micro-businesses, not only locally in metropolitan areas but also rural


areas. Thirdly, the contribution to society. The whole idea is to try to


get different vehicles to provide specific services to these


communities. All we are trying to do with this vehicles is to ensure that


those communities... We have game plans to navigate those areas, they


are the responses to the problems we have seen. It has happened almost


throughout Africa. What other business


stories has the media been Lucy MacDonald, Chief Investment


Officer, Global Equities at Allianz Global Investors


is joining us again to discuss. Lukey, let's talk about a story to


do with the Financial Conduct Authority in the UK, changing the


rules about a possible listing. Why is it significant? Because of the


reputation of the UK is having some of the highest levels of corporate


governance in the world. That is quite a hard one... A hard


reputation. So for that reason, investors are very interested to see


that is maintained. And this change of a new type of premium listing,


that is a normal listing on the stock markets, this would be a


different sort, specifically for sovereigns. With lower standards of


governance, lower standards of investors being able to influence


the independent directors and also of transactions within the company.


Why do you think they are so prepared to bend the rules? Why do


they want Aramco's listings so badly on the London stock exchange?


Commercial reasons. It is going to be huge. We are not sure how huge,


but if it were even half of the 2 trillion mentioned, it is very


significant. Let's talk about the new incentive unveiled by Visa to


push cashless transactions. We asked why you still need cash.


Our friend Jeremy from World First says, "Can't flick a debit card


Liz says car park machines, vending machines, farmers market, pocket


many decades, car boot school payments. There is a psychological


view about cash, people using cash are more careful about what they


spend. Removing it completely, about 30% of transactions is cash, if you


remove it completely there could be more of a consumer credit problem


than already. Kerry says, "Because technology


often doesn't work and you're left holding a bit of plastic


and no options." And you spend more. Thank you for


coming on to the programme, Fed. Enjoy spending your money, whether


it is cash or card, this weekend. Good morning. There is a fair bit of


cloud this morning, with 12-macro showers. Conditions improving


through the day, becoming mainly


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