05/01/2018 BBC Business Live

This is Business Live from BBC News,

with Susannah Streeter

and Samantha Simmonds.

More record highs for the US stock

markets, but are they a sign

of what's to come in the year ahead

for the world's biggest economy?

Live from London, that's our top

story on Friday 5th January.

Wall Street was boosted

by more positive job news,

so can President Trump keep

the party going, and will America's

lowest paid finally start

to feel the benefit?

Also in the programme...

The lure of the long-term.

China says it will offer highly

skilled foreign workers 10 year

visas as it tries to light up

economic growth

This is the situation on the

financial markets in Europe

following from record highs on Wall

Street yet again.

And as Apple reveals iPhones

and Macbooks are also affected

by the computer chips flaws, we'll

be getting the inside track on that

and all the big stories of the week

with our economics editor Kamal

Ahmed.

Today we want to know...

UK MPs are calling for a "latte

levy" on disposable coffee cups -

and a total ban unless recycling

improves.

What would make you switch

from disposal cups?

Just use the hashtag #BBCBizLive.

Hello and welcome to Business Live.

We start in New York,

where the temperatures may be

sub-zero but the financial markets

are hotter than ever.

US shares hit new record highs

yet again on Thursday,

the Dow Jones Industrial Average

closing above 25,000

points for the first time.

It's all being driven by Wall Street

optimism about the state

of the world's biggest economy and,

despite all the controversy

in the White House, the pro-growth

policies of President

Trump.

On Thursday, a report showed the US

private sector created 250,000

new jobs in December -

a third more than was expected.

That could bode well for official US

jobs numbers out later today.

Earlier this week,

the Federal Reserve revealed it has

boosted its growth forecast

for the US economy this year to 2.5%

- keeping up the pace seen in 2017.

Those Fed minutes also showed this

was at least partly down

to the $1.5 trillion worth of tax

cuts President Trump signed

into law just before Christmas.

And these graphs speak

for themselves - US shares

setting record after record

since the President

was inaugurated a year ago.

Despite all of this,

millions of working Americans have

yet to feel the benefit,

with average earnings stagnant

for the past decade.

Ethan Ilzetzki is a lecturer

in economics at the London

School of Economics.

Thanks for being with us. These

record figures from the Dow Jones,

but a muted response because people

were expecting it but the

predictions are it will carry on

going. What is your assessment of

what is driving it, is it the growth

in the jobs market?

Yes, I think

there are the Trump tax cuts which

have been boosting the stock market

for a while but also there seems to

be a global rise in stock prices,

possibly still because of the loose

monetary on a scissor of the last

few years.

It is interesting, isn't

it, we had that reassessment of US

growth for 2018 but the outgoing

chairman of the Fed, Janet Yellen,

has said, actually, we have to

temper so what the optimism

surrounding growth for the US

economy, she doesn't think that

necessarily those tax cuts planned

world really boost the US economy to

the extent that has been forecast?

Absolutely, I think that is quite

true. The fact that we are seeing

only forecasts of 2.5% growth, which

is quite moderate, on the back of

these very ambitious tax plans is

actually a little disappointing and

the performance of the US economy

has been quite disappointing over

the past few years. It shows that

really the expectations of the

market and the Federal reserve are

that the tax cuts will have very

moderate effects on US economy so we

are dealing with far deeper

structural problems in the economy.

Which sectors are doing well, and

which are struggling?

The high-tech

sector, the silicon valley sector,

continues to take the lead in the US

economy, but there is quite a

polarised economy in terms of the

job market, where these high

education high-tech sectors are

performing, workers in those sectors

are performing very well but the

working class is still seeing wages

at the same levels as they were in

the 1980s, so not seeing a pay rise

in real terms for a generation.

Supporters of the tax plan would

say, because taxes are being cut for

big corporations, it means they can

put more money into investments and

potentially create more jobs.

What

is your take on this trickle-down

theory? I don't think really there

is any sign that this is going to

have that desired effect, and really

the tax plan was not engineered in a

way that it would incentivise

specifically hiring or wage

increases so it is equally likely

that the dividends from this tax cut

will go to investors and not to

workers in the economy.

Interesting

as well, the number of people

invested in the stock market, those

small investors, isn't as great as

it used to be, is it? People seem to

have stepped away, so even though we

are seeing record gains commit it is

only benefiting a few?

It is the

same polarisation we see in other

effects, so if you have a good job,

you have a good pension plan which

is invested in the stock market so

you are seeking gains, but if you

are living pay cheque to pay cheque

without a good pension plan, you are

neither seeing wage rises all the

benefits of the increase in stock

prices.

Even, thank you for your

analysis, thank you for coming in.

Let's take a look at some

of the other stories

making the news...

The tech giant Apple has

said that all iPhones,

iPads and Mac computers are affected

by two major flaws

in computer chips.

It emerged this week

that the world's leading

computer chip makers Intel,

ARM and AMD are all racing to fix

bugs with the chips that

power most of the world's

computers and smartphones.

The Meltdown and Spectre

problems could allow

hackers to steal data.

Saudi Arabia has taken a major step

towards selling off a chunk

of its state-owned oil company.

Saudi Aramco is now a joint-stock

company, something that is required

of Saudi companies before

lisiting their shares.

There has been speculation

the plan may be abandoned.

The firm is likely to be valued

at about $2 trillion when 5% is sold

in the biggest

share-listing in history.

Music streaming service

Spotify says it now has

70 million paying subscribers.

The announcement comes a day

after reports that the company plans

to list on the New York Stock

Exchange.

The firm says it has another 70

million people using its free

advertising backed service.

A UK parliamentary committee

is calling for an extra charge to be

made on disposable coffee cups.

The MPs are concerned

about the damage they to do

the environment and says a 25p

"latte levy" could be

used to improvements

to recycling facilities.

They also say that if the 2.5

billion cups thrown away each year

can't be recycled by 2023

they should be banned.

China has big ambitions when it

comes to growing its economy,

and is poising itself to take over

from the US as the world's biggest.

But it thinks recruiting top talent

from abroad is key and now says it

will offer long-term visas to try

and lure those highly

skilled workers.

Our correspondent Robin

Brant is in Shanghai.

Tell us more about this scheme?

Well, the battle for talent across

the globe is what this is about.

China is changing the terms, two

years ago now it announced that

visas will be granted the Twenty20

and five years to these highly

skilled individuals, that is not

possibly going up to ten years,

there will be no fee, they can bring

their children and family with them

as well, perhaps spend up to 180

days working in this country, which

sounds very different to the Visa

process that I go through. This is

about getting top talent in key

industries and for China, as it

looks to expand and changed its

economy, it

means things like avionics, and

electronic vehicles, and robotics. I

think the critics, and there will be

some, will look at what, on the face

of it, looks like a win-win, all

very good in terms of attracting

talent in a global market but when

it comes to big companies that

continue to want to get into China,

particularly American firms, they

still face tough hurdles, they are

required to have joint interest

here, and there are massive

subsidies for state owned companies

as well.

OK, Robin, thanks very much for that

update. Let's check in with the

financial markets now.

Asian shares followed on from that

record close on Wall Street.

The Nikkei closing

at a 26-year high.

Share prices also up in Australia,

All Ordinaries Index,

the Hang Seng hanging onto positive

territory as well.

The latest boost for Wall Street

came from a jobs survey

which indicated that US private

sector employers had added 250,000

jobs last month -

the biggest monthly increase

since March and well

above economists' expectations

of a rise of 190,000.

All eyes now on official government

jobs figures out later today.

Here in Europe, here's the situation

since the markets have opened -

stocks tracking those rises in Asia

and the US.

We will have to see what happens

later today. Let's get more details

about what is ahead on Wall Street

later as well.

Apart from the jobs numbers,

investors will have more economic

indicators to look out for. The

commerce Department will release

data for factory orders and those

are expected to have risen by 1.1%

in November. A month earlier, they

had declined, so an increase would

be good news. What is not likely to

be that great, though, trade

numbers. The US' trade deficit with

foreign countries is expected to

have widened to $49.5 billion, about

$800 million more than October.

Balancing the gap has been a big

focus for the Trump administration.

Among major corporate reporting

earnings is Constellation brands,

the maker of Corona beer, and their

profits are likely to have fallen.

Why? People are not buying as much

beer, because it has been so cold.

No, I don't really fancy drinking

beer when it is cold. I like a

latter-day, but whether it is

takeaway or not, we will have to

chat about that in a moment.

Joining us is Mike Amey,

Managing Director and

Portfolio Manager at PIMCO.

Do you like a latte in the morning,

did you go for recycled cups?

I am more of an Americana than a

latter-day fan.

I think they are all

the same, they come in the same

cups!

It is the amount of caffeine,

if I'm honest, the caffeine to milk

ratio!

The markets have certainly

been very hot, haven't they, and it

has been fuelled by all of this

optimism about Trump's tax plans?

That is right, there are a couple of

things going on, the expectation the

US economy will improve further, as

you were talking about earlier, and

the stock market is all about

corporate profits and if you cut

corporation tax then it has a

powerful impact on earnings so what

you are seeing now is the knock-on

effect of the tax agreement at the

end of last year and you get this

big boost in the stock market in the

early part of the year.

We don't

want to put a damper on the

celebrations but let's talk about

global debt, which is your business,

because that is at a record high,

$233 trillion. What is going on?

There are a couple of things to say,

one is that the reason that stocks

are doing well is because interest

rates are low and because interest

rates are low it makes it cheap for

companies and some countries to

borrow money. So debt levels are

still going up and that is something

which all central bankers are aware

of so even if rates start to go up,

they go up quite slowly, and the

other thing is that the amount of

debt gumming up has been giving up

slower than our ability to pay,

which is GDP, so it is not all bad

news but there is an important point

that there is still a lot of debt

out there and if interest rates

start to rise rapidly it could

create problems for the economy long

time.

As far as the bond market is

concerned, there is an early warning

system for recession, the yield

curve, a flattening in the yield

curve, tell me more about what that

shows and what potential there could

be for a downturn?

We are a cheerful

bunch in the bond market! What the

bond market looks that is

expectations for what the market

will do over the next years so what

we see now in the bond market is

that markets are expecting interest

rates to go up but once they have

gone up, they would go up that much,

and that will slow down the economy,

and the reason for that is if

short-term rates do go up, it makes

it more expensive for banks to

borrow money off you and I will put

our deposits in, which makes them

less enthusiastic to lend money out,

so the markets give an early warning

signal, in truth it is probably one

or two years down the tracks, but it

is out there.

Briefly, retailers

particularly that we should watch

with grubbing debt piles?

Yes,

retails as one of the other early

warning systems because consumers

are the first the pinch and you can

see that in the numbers coming up so

we tell is definitely one to look

out for.

Mike, good to see you,

thank you.

Still to come...

Kamal Ahmed will be here to give us

his take on the big stories of the

week.

You're with Business

Live from BBC News.

Figures out from the Society

of Motor Manufacturers and Traders

show that in 2017 car sales fell

by 5.6% to 2.54m vehicles.

It's the first annual

fall in new car sales

in the UK for six years.

Let's talk to Mike Hawes from

the SMMT about what's happening.

Mike, what do you put these figures

down to?

It's a combination of

factors. Obviously the slower growth

in the economy means that consumer

confidence is suffering, especially

when it comes to big ticket items

and office leave the car is the

second biggest ticket item you will

purchase. Obviously there has also

been confusion around diesel and

what the Government policy will be

on that. The decrease of the value

in sterling has made the cost of

imports more expensive and a

significant number of cars sold in

the UK are imported.

It is diesel

where we have seen a significant

drop in sales. Our people switching

to petrol and electric vehicles

instead or do you think they are

simply holding off from purchasing

at all?

There is a small amount of

switching. Hybrid and electrics are

undoubtedly growing but it's a very

small base. Last year we sold 2.5

million vehicles, only 32,500 were

battery vehicles. Its growing but it

needs to grow much faster. There is

some shift from diesel into petrol

but most diesel owners are sitting

on their hands and waiting to see

what the Chancellor is going to do,

what the potential changes may be in

terms of taxation and access to

cities. There is much more clarity

now and it generally means new cars

are exempt from those restrictions

that may come into cities and we

hope that gives back confidence to

diesel owners.

Mike, thank you.

Also, some of the reason why there

has been worries about things with

cars is diesel taxes in cities.

Absolutely. We need to buy a new car

and we are absolutely factoring out

into the equation.

On the business live website, we

also have news of this latte levied.

Would you pay 25p for your coffee

cup? That's a proposal put forward

by a committee of MPs. Please let us

know your thoughts.

You're watching Business Live -

our top story...

US shares hit new record highs yet

again on Thursday. The Dow Jones

industrial average closed around

35,000 points for the first time. It

was boosted by more good jobs but

the official figures for December

are out later today.

A quick look at how

markets are faring...

Those key figures are a rout due in

the US later divided whether the

Private survey was correct. We will

have to see what happens from the

rest of the day, will that climb

continue?

And now let's get the inside track

on the big economy stories of a week

which has seen more record highs

for the world's top stock

markets and more signs

of the great synchronisation

of global economic growth.

Also problems with Apple because all

of their devices were affected by

the meltdown and Spectre glitches.

Kamal Ahmed is here to discuss this

with us. What have the company,

Apple, had to say?

Overnight, Appell

has joined other companies saying

they could be -- Apple has joined

other companies saying they could be

affected by the glitches that... I

did mine this morning after reading

about it on our website. I think the

issue here is interesting and

twofold. Firstly, transparency.

Google first notified Intel about

the potential for an issue with the

bugs in their chips last June. There

is a notion that how quickly should

we have known as consumers?

But the

problem is if you let consumers

know, you let to be hackers know as

well?

Exactly, there is a trade-off

between consumer confidence in the

devices they have and that. It is

also to do with the chips that drive

them. As they become more

complicated, how do you cover up any

security flaws becomes more and more

difficult. That becomes difficult.

As we... The only way to absolutely

cover yourself against any security

risk is to update your toll IT

system, so to break down and closed

out what you have had to completely

update, which is of far too

expensive. This is the new world we

live in where you balance a security

risk with speed.

That has really

difficult implications, doesn't it,

for companies around the world?

Doing that is very expensive, isn't

it?

That's the big point. We are in

a situation now where many people

are looking at their hardware and

thinking, do I need to update the

whole system? Are these patches and

updates sufficient? And the hackers

themselves are looking, what are the

bin abilities? How can we get in

here, cause damage and hold

companies to ransom?

Now, Germany

seem to have done the opposite to

what is expected and their debt club

is going backwards?

Although debt is

at record levels, be more positive

story for 2018 is that the ratio of

debt to economic growth is actually

falling out, so as growth increases,

our debt becomes more under control.

As you say, Germany has now turned

back the clock on debt and it is

falling in gross terms, not just in

terms of its ratio with GDP.

Is this

to do with the two speed Eurozone

economy?

Possibly, although Eurozone

growth was much stronger lasted than

predicted, it stronger this year,

but also this morning German retail

sales for November, just announced,

very, very strong. Although we are

concerned about the pinch consumers

because of the slight increase in

inflation, no evidence yet that

consumers are putting away their

wallets are not spending. German

retail very strong. Manufacturing

across the red zone, very strong.

This is a reasonable stock market

growth. The great synchronisation,

global growth in all the major

centres since the financial

meltdown. That is the boost to stock

markets around the world.

Thank you.

It is Friday, so let's get the

latest in our million-dollar idea

series. Aaron has or has has been

looking at how bubble wrap became

the world's most popular rap.

There

is no mistaking that sound. It's

bubble wrap. It protects fragile

things in transit. But how did it

start off? As wallpaper. These two

engineers in New Jersey were

designing a new groovy type of

wallpaper filled with air bubbles.

It didn't sell that well. But then

one of them had an idea on a flight.

He imagined the clouds were

cushioning the plane as it was

descending, so could his bubbly

wallpaper also cushion things? The

inventors changed the product to

bubble wrap and they got their first

customer, IBM, he used it to wrap up

computers. Nowadays, bubble wrap and

its makers, sealed air, more than

$700 million a year and it has its

spin off uses. Some people pop to

relax. Others put it in their

doorways as a burglar alarm. Hey,

get out of here! There's even an

annual bubble wrap appreciation Day.

It's the last Monday of January when

people get together and pop to their

hearts content. I'm going to join

them!

I don't know about you, but my

three-year-old was more interested

in the bubble wrap and she was about

her presence.

Of course! Who doesn't like doing

that?

We have been asking you about

whether you think they should be a

levy on takeaway coffee cups. April

seven, how about addressing those

making big cups? And you can also

have your own cup rinsed and have a

discount if you take it with you.

Let's bring in Mike to talk about

the day 's business stories.

What

you make of this? I think it's a

good idea actually. 2.5 billion cups

is staggering. Something has to be

done about it and you have to start

somewhere. You have to start the

discussion somewhere.

Paul says this

is nonsense. This is not difficult

to resolve with a bit of design

innovation. Why does everything have

to be taxed?

I guess it's to do with

the plastic in the interior, which

is needed to stop leakage. I suppose

the other parallel here is plastic

bags. When you look at plastic bags,

when the levy was placed on those in

2015, the annual fall was 85%.

Yes,

I refuse to pay for a carrier bag.

You feel guilty now if you use a

carrier bag.

I have my trusty flask

on every train. Now this story,

Waitrose ban the sale of energy

drinks to under 16.

There is already

a health warning on high caffeine

and high-energy drinks for teenagers

and younger adults.

Even as an adult

we know the effect it has on you.

I

think the issue is there is a

greater consumption amongst the

younger generation than the older

generation.

Schools have been

warning about that. Thank you very

much, Mike, for coming to discuss

all of that.

Thank you for being with us business

life today goodbye.