28/07/2017 BBC Business Live


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This is Business Live from BBC News with Rachel Horne and Alice Baxter.


Amazon founder Jeff Bezos briefly becomes the world's richest person.


But Wall Street nerves about the company's massive spending


Live from London, that's our top story on Friday the 28th of July.


Sales at Amazon rise - but profits plunge -


as the e-commerce giant spends big on expansion overseas.


Will the latest figures on the US economy bring President Trump


In Europe things getting off to a muted start.


And chlorinated chickens, the electric Mini and tech titans -


we'll be looking at what's been a busy week in


Today we want to know does great wealth bring great responsibility?


Yesterday Amazon founder Jeff Bezos was, briefly,


the richest person in the world - what would you do if it was you?


We start with retail giant Amazon - it has seen its shares fall sharply


after its latest figures disappointed Wall Street.


The good news - it is raking in huge sums of money


The bad news - it's spending a fortune on developing its business -


and that is making investors nervous.


Total sales in the three months to June jumped almost a quarter


compared to last year - to just under $38 billion.


Unfortunately - they spent almost all of it!


Operating expenses surged to well over $37 billion.


That means there wasn't much actual profit -


a comparatively measly $197 million - and down


Amazon is investing massively in everything from TV


and movie content - to new warehouses for the global


Like this - the deal it announced last month to buy


the supermarket chain Whole Foods for over $13 billion.


Amazon has been putting increasing pressure on bricks and mortars


Optimism about the company's future has helped to push up


Since January Amazon shares have risen by more


than 40% to a new record - making the company worth


Which has proved very lucrative for this person -


the firm's founder - Jeff Bezos.


On Thursday, he became the richest person in the world -


As the share price has come down again, he has dropped


Joining me now is Ben Preston. Amazon don't tend to go for big


profits, so why were Wall Street disappointed this time? Well, the


shares are indicating they will be down a little today. In the context


today I think they're still likely to be satisfied with these results.


It's the same old Amazon in lots of ways. The amount they sell gets


larger but they don't let those profits fall to the bottom line.


They prefer to reinvest into the future. It's a formula that's worked


well for them. Building an empire is understating it, he is going global,


seems to be getting into every aspect of our lives, TV investment,


original content, where do you think they're going to go next? That's


right t all started with the smartphone which has redefined the


way we live a lot of our lives. We connect with people in different


ways. We take public transport in different ways and we shop and pay


for things now in different ways. The next thing perhaps is the living


room, they've been successful with the Amazon echo device, and he is


hoping that will force more of us to engage with Amazon and become prime


subscribers. Of course also supermarkets, we mentioned the


acquisition of Whole Foods and also they're moving into Cloud services,


data storage which is proving incredibly profitable already.


That's been a very successful story for them. It's a newer business for


them than retail but it's been more profitable. It continues to grow


rapidly. How do you compare Amazon to other big tech companies,


Facebook, Apple, results from Facebook and from Alphabet already


this week, it is a very different business, but they do tend to get


grouped together. It's amazing how quickly those companies have


continued to grow. The share prices this year have reflected that with


strong performances. Amazon is slightly different in that the other


companies tend to make a greater share of profits today, whereas


Amazon insists on reinvesting that for the future. As a group they've


all done fantastically well. Our job as investors is to try to judge how


much of that future growth is priced into the shares today and make the


investment decision accordingly. Ben Preston, thank you very much.


Op other stories making the news. The IT failure at British Airways


in May that left thousands unable That's according to


the airline's owner IAG. About 75,000 passengers faced severe


disruption when BA's system failed over the second Bank Holiday


weekend in May. BA said it was caused by an engineer


who disconnected a power supply. Air France-KLM is buying almost


a third of Virgin Atlantic, leaving Sir Richard Branson's parent


company, Virgin Group, with a minority stake


in the airline he founded. Sir Richard said he would remain


"very much involved" after the deal. Germany's transport minister has


announced a recall of 22,000 Porsche cars to remove what he says


is illegal He said that luxury make Porsche


would bear the cost of the recalls of the affected 3-litre diesel


Cayenne models. We have had figures through from


Barclays, millions of customers around the world, they've seen a


jump in half-year profits but will have to pay out an extra ?700


million to meet compensation claims for mis-selling payment protection


insurance, that's PPI. Barclays shares up over 1% on the


London markets this morning. Lloyds also having to put aside additional


money for claims, as well. Let's cross over to Asia now.


Let's go to Asia, where coffee giant Starbucks is splashing out in China.


It is buying out its Eastern Chinese partners, spending $1.3 billion


on the 50% of the business it doesn't already own.


It's the biggest deal Starbucks has ever done.


Chase the reaction to this given it's the biggest deal the chain has


ever done? Yes, it goes to show how important China has become for the


coffee chain, it is in fact the fastest growing market outside the


United States. Especially with the number of stores. As you mentioned,


they already own 1500 outlets fully but spending 1. 3 billion to buy the


rest, 50% stake in 1300 other stores. The goal is to own 5,000


stores in mainland China by 2021. But the announcement came just as


the company announced a fall in income for the three months to July


because its growth in the United States has been somewhat slowing


down. So I guess this big announcement in China going to prove


to investors how important China is and how it's going to grow even more


in the Chinese market. Thanks. Let's stay in the region.


Asian stock markets sagged on Friday -


that's after US tech shares retreated from recent rallies.


In Tokyo, the Nikkei closed lower as the market was dragged down


by some disappointing earnings reports and that fall


Across the pond, the tech-heavy Nasdaq's streak of all-time high


closes ended Thursday with Apple, Google-parent Alphabet and Netflix


One bright spot though over in China - with stocks ended higher


on with the Shanghai benchmark index recording the sixth consecutive


week of gains, bolstered by recent solid economic data.


Shares in Europe ending on a muted note.


In a few hours, the United States will announce second-quarter


Gross Domestic Product numbers, while consumer spending,


manufacturing and service-sector data are due next week.


Smaira has more now on what's ahead on Wall Street Today.


On Friday we get the latest growth figures for the economy. The GDP is


expected to have gone up to 2. 6% for the last three months of this


year. That would be a big improvement on the previous


quarter's GDP, which came in at just 1. 4%. As a candidate for President,


Donald Trump campaigned on bringing the GDP to 4-5%. Sips then. Since


then they have tempered anticipation. Among companies


reporting on Friday is the world's largest publicly traded oil


producer, Baker Hughes, the second largest oil fields services


provider. Goodyear and American airlines.


Joining us is James Bevan, Chief Investment Officer at CCLA


Thank you for coming in. Let's pick up talking about US GDP. We had that


1. 4% figure for the first three months. President Trump and his


advisors hoping for 3% for the second three months of the year. We


have had strong data, some strong corporate earnings out, do you think


they might do it? Absolutely not. It's great to hope but that is not a


number that I can get to. I think if you stretch all the numbers and say


let's be optimistic, you could say we get to 2. 9 but actually if you


think about the lower case numbers we have also seen, could be as low


as 2. 2 but I don't think we are going to see three. The run rate for


the US economy is much lower and I think this is going to be a year


that looks like 2014, 2015, 2016, no real change, bad luck, Mr Trump.


Some analysts saying that number was achievable at the height of the tech


bubble. Absolutely, the one - I think probably thought to himself I


don't want to asroi the boss and say it's going to go back to where it


came from, I am going to have to pitch a number less than the promise


made but I guess that's where it came from. I can't get that number


myself in terms of the lead indicators and if you look at the


structural content of the US economy it doesn't have the capacity to


drive that growth right now. What would the US need to do to achieve


that number? Invest heavily, it could be a greater output, more


productivity improvements. At the moment we have a challenge in that


there is not enough investment, companies have been using cash to


buy back their own shares. That's great if you are a chief executive,


you keep earnings roughly where they are and everything is fine. However


in terms of building a bigger economy they have to be investing in


plant and machinery, that's not happening. Thank you. You are going


to take us through the business papers later.


We will look at a busy week in the world of business.


You're with Business Live from BBC News.


Barclays has reported a heavy loss in the second quarter,


hit by the one-off costs of a big disposal in Africa and a further


knock from mis-selling payment protection


Theo Leggett joins us from the Business Newsroom with more.


They're pretty significant but you have to move away a little bit from


that headline figure, if you look at the day-to-day operations of the


bank and operating profit, and that was ?2. 3 billion, that's up from ?2


billion last year, an increase of about 13%, not bad but less than


analysts were expecting. Operating costs have gone up quite a bit.


There are a lot of reasons for that. One of them being increased security


to protect against cyber attack. But of course those headline figures


will be dominating and the story of the bank's restructuring is also a


big story today. That is where the Africa business comes in. Barclays


has had to write off a significant amount of money, it lost ?1. 4


billion on the sale of a 33% stake in Barclays Africa group and it also


lost another billion on the value of its remaining 15% stake but this


kind of brings to an end the process the chief executive had implemented


of trying to narrow Barclays focus, focus and zoom in on core businesses


and increase profitable. He says that process is at an end and


shareholders are going to start to benefit. Barclays has announced it's


to pay out more for the mis-selling payment protection insurance to UK


customers. It has, this goes on and on. It is going to pay out another


?700 million or at least provide another ?700 million against future


claims. Barclays had already set aside more than ?9 billion for this


kind of thing, it has used ?7 billion of it, so still ?2 billion


in the Kitty. The pace of claims has been accelerating, it's up since the


same period last year so it is setting aside another ?700 million


to make sure there is enough in the cupboard to meet future claims which


it expects will go up. Incidentally, Barclays isn't the only bank doing


this. Yesterday we had Lloyds saying much the same thing, also setting


aside a further ?700 million against PPI claims.


Thank you. Check out the tablet to all the


latest headlines. Sales at Amazon rose in the three


months to June but profits plunged as the company invested in global


expansion. The boss briefly became the world's chip man but went back


to second place. -- richest man. A quick look at how


markets are faring. And now let's get the inside


track on the other big Philip Hammond has told business


leaders he wants companies to have full access to the single market and


Customs union for two years after Brexit. The Chancellor of fixture


has been talking to the BBC and emphasise the importance of the


transition day. My view on transition is well known. I believe


it will be in the interests of Britain and the EU if, after we


leave the European Union and the single market, and the customs


union, on 29th of March, 2019, there is then a period, call it


transitional interim period, during which we will allow our economies to


adjust to the new situation rather than having a cliff edge in March,


2019, which will cause immense disruption to businesses and


citizens. How significant is this? It is quite a move. There has been a


two stage process in the past was that you get March and then you have


a transitional period. Then the next period, the full deal you do


overtime. What he is saying is, on the day after the 29th of March,


everything stays pretty much the same. If you were going through the


borders he would not notice. You stay in the single market and the


customs union. He is saying you come out of those you behave as if it has


not happened. Some people say it looks like a duck and it sounds like


a duck, it is still a duck. What you don't want our hold-up at the port.


He said this is the easiest way he was saying this morning to the BBC


he has indicated he thinks he has Cabinet support for this. There have


been split between Liam Fox, Boris Johnson, David Davis, the minister


responsible for getting us out of the European Union. They have always


been a bit reluctant. It looks as if he is beginning to win the argument


with the help of business leaders. Is this his version of the


transition deal? This is his deal. In a way you would not notice what


has changed. The fact he has managed to win over... If he has managed to


unite the Entire Cabinet behind his version of a Brexit deal, this is a


real achievement for him. Liam Fox is in Washington and to reason me is


out of the country. -- chorizo me. It looks like business leaders are


feeling a bit more relieved that the least disruptive path is the one the


Chancellor wants to find. When it comes to negotiating post-Brexit


trade deals, you have mentioned things like chlorinated chicken, all


of which we have highlighted in how compensated all of this will be. The


chlorinated chicken and the hGH powers, this has shown how difficult


it is to do. -- cows. Sometimes it is Corine and sometimes something


else that you do not get all the problems you can. -- chlorine. There


will be some harsh truths. What I would point out is we already export


25% of all about goods and services to the US. This is not the trade


relationship which is broken. It does work pretty well. There will be


trade off. If we want to export our beef, will we have to take their


chicken? 40 years worth of relationship with the EU which has


the own standards which we have been beholden to, it will be very


difficult. When you say we can get a trade deal done, I am sceptical.


Let's talk about Amazon. It is now worth half $1 trillion. What is your


reaction? Everybody says their shares went down to is that this is


part for the course for Amazon. -- their shares went down as well.


Amazon has been able to say quick you just wait for your money. I will


reinvest. When they have made a profit, in the first ten or 20


years, they have sunk everything back in. Now it is coming at us as a


company from all sides. I expect the boss will not have to wait very long


before he is the richest man in the world again.


Now, it hasn't been the easiest of summers for British Airways.


You'll probably remember the chaos at Heathrow back in May


when thousands of people were stranded because of a big


They've also had several walkouts from cabin crew staff over pay.


But this morning, the company that owns them -


IAG or International Airlines Group - has said it made a profit


of around a billion dollars in the first half of the year.


The problem was caused by disconnection of power and the


unauthorised and reapplication of the power which caused a power surge


and damaged the physical infrastructure of the data centre.


We have addressed the issue. We clearly apologise to all our


customers who were disrupted. The results we have released today show


the underlying performance of the airline is excellent. Passenger


numbers continue to grow well in excess of the capacity we are


adding. The airline has strengthened its financial performance and its


competitive performance. The airline has taken a hit. We have also seen


some very strong competition. There are issues we need to address. Some


of these have been handled well and some of them we could have handled


much better. We will get better going forward. The measure of


success is how it can sustain increase in competition and


challenges over a long period of time. Five years from now I would


expect British Airways to be in the top ten of airlines worldwide. We


can be confident that we will be one that is performing well. That was


the chief Executive of IAG. What other business


stories has the media been James is back to talk this through


the business pages. This headline from the Seattle Times. A lot of the


newspapers are covering this story that the boss of hours and briefly


became the world's richest man before slumping back down to number


two. Do great riches come with great responsibility? What should we be


doing with these levels of wealth? If I were him I would use my money


in scientific research to help find a cure of AIDS. A couple of other


tweets have also suggested a similar tack. That is interesting. Amongst


the world of the super rich here is unique in his lack of philanthropy.


I'm not sure that is necessarily true. We should acknowledge that


people like Mr Gates has given around 30 billion, he has made a


vast contribution to philanthropy. There is a history in the United


States of leading players providing large sums of money. He is spending


around $1 billion a year on his rocket business. It is all very well


saying he should give the money away. He would have to sell the


shares. Why should he want to do that when he is still building the


business? If you were to say what is the real motivation of Jeff Bezos,


it would be to build a ghastly successful business. Amazon has


changed Varsity over the years. It started selling books online. --


boss glee. The business is transformational. They will sell


more close this year than Macy's. I think he will do this he did tweak


it, what should my stance be on philanthropy question I think he


will do a lot more. I do not think we should criticise him for lack of


progress. We will have to leave it there.


Still no signs of hot, summery weather on the


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