14/07/2017 BBC Business Live

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