09/02/2018 BBC Business Live


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09/02/2018

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This is Business Live

from BBC News with Jamie

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Robertson and David Eades.

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Global stock markets plunge again -

as over 1000 points

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are wiped off the Dow -

for the second time this week.

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Live from London, that's our top

story on Friday 9th February.

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The main US indices have dropped

over 10% from their record

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at the end of January -

it's the official definition

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of a stock market 'correction'.

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Plus, clean up or pay up!

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The UK and eight other countries

have until the end of the day

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to come up with a plan to tackle air

pollution - or face EU fines.

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And the markets are all down again,

as expected. This is how they stand

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as they open on Friday.

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And it's been a jittery week

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with continued market

turbulence and worries

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about a raise in interest rates.

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here to make sense of the past few

days is our economics

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editor, Kamal Ahmed.

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Don't forget you can

get in touch with us

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about anything in the programme.

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Just use #BBCBizLive.

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Hello and welcome to Business Live.

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There seems to be no stopping

the global stock market sell-off.

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It was another gut-wrenching day

for investors on Wall Street.

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US share prices have plunged again -

the Dow Jones Industrial Average has

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wiped out more than 1000 points

for the second week.

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Major Asian markets also

suffered sharp losses.

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So let's look at the numbers.

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What have we got? The nick Owen is

down for that just have a look at

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the percentages. -- Nikkei. Down

2.3%. The Dow is down 4%. Whether

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you can see any difference, really

as anyone's. The Hang Seng was the

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worst of in the Asian markets will

do it looks as though the European

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markets will all follow. You will

get the knee jerk reaction as the

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markets have been open for 30

minutes. They will settle down and

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we will see which way the going.

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In a moment, we'll go live

to our team in Singapore but first

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Joe Miller in New York looks

at what sparked the sell

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off on Wall Street.

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After some of the most turbulent

days Wall Street has seen for many

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months it looked like the dust had

finally begun to settle,

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but then on Thursday volatility

returned with a vengeance

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and the Dow Jones recorded

its second worst one-day

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points drop in history,

plunging over 1000 points -

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in percentage terms

that's just over 4% -

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and falling into what's known

as correction territory,

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losing more than 10%

of its recent peak.

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All 30 shares on America's flagship

index fell in unison,

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in part because investors saw US

government debt prices

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fall to four-year lows,

that's indicating a broader concern

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that interest rate rises

in the coming months might

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hamper economic growth.

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And now the stock market is on track

to record the worst week

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since the financial crisis,

but it's fair to say institutional

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investors are not yet alarmed.

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Many felt that US shares

were already overpriced and some

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would sooner or later be let out

of the bubble.

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The White House claims

to be similarly sanguine.

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A spokesman for the President

who has often boasted

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about the stock market's rise said

he was focused on the country's

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long-term economic health

and he emphasised that unemployment

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was at record lows.

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But it's the Government's

own spending plans that would add

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billions to the deficit which risks

adding to the jitters

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on Wall Street.

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We are going to be looking at what

is happening here and what is

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happening in the US later on in the

programme.

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Our Asia business correspondent

Karishma Vaswani is in Singapore.

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What kind of

Karishma Vaswani is in Singapore.

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What kind of the

Karishma Vaswani is in Singapore.

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What kind of the day

Karishma Vaswani is in Singapore.

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What kind of the day have

Karishma Vaswani is in Singapore.

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What kind of the day have you

Karishma Vaswani is in Singapore.

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What kind of the day have you been

Karishma Vaswani is in Singapore.

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What kind of the day have you been

having?

It has been extremely busy,

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but for all the wrong reasons. If

you are an investor in Asian shares

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today, it has been a pretty

measurable week. We have seen shares

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fall across the board, as you were

talking about earlier. Mirroring the

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falls in south-east Asia as well.

All of this prompted by the sell-off

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in the United States overnight. Many

Asian investors and traders I have

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been speaking to today have said to

me they are not sure where this

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volatility will go. Will end in a

couple of sessions or is it a sign

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of more things to come in this

general direction, the downward

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direction we have been seeing for

the better part of this week?

Do

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people feel it is a problem located

very much in the United States or do

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they feel there are problems in Asia

itself. For instant squid debt

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problems in China, or problems in

Japan.

I think predominantly the

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feeling is this started because of a

sense in the United States that the

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economy there was actually doing

better than expected and so we are

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going to start seeing interest rate

rises at a faster pace than most

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people had anticipated. That is

primarily the reason why so many

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Asian traders had been saying to me

they are worried about the outflow

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of foreign cash. Asia was one of the

biggest beneficiaries of the low

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interest rates because it saw a real

inflow of money from overseas when

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interest rates were low in the

United States. It helped to pump up

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valuations in stock markets all over

the region. Emerging market

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valuations. With interest rates

rising in the coming months faster

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than most people had anticipated,

there is concern that many will

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disappear. That is the reason why so

many are concerned. The issues you

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mentioned like the Chinese debt

problem is or was at the top of

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peoples minds. Is not new or

something people have not been

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thinking about.

Thank you very much

indeed.

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Let's return to Europe now -

where it's deadline day

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for countries which have failed

to meet the EU's targets

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on cutting air pollution.

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They are being told -

clean up - or pay up!

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Let's show you the details.

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The UK and eight other states

are on a final warning.

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Today they must say how they intend

to comply with EU regulations

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on the quantity of nitrogen dioxide

and other pollutants in the air.

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Spit it out.

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London reached its annual

air pollution limit

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in the first month of 2018.

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If that sounds bad -

it's a slight improvement on last

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year when it reached

the quota in just five days.

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The EU's Environment Commissioner

says 400,000 people will die

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prematurely this year because of air

pollution - and enough is enough.

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Any countries that fail

to comply with regulations

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could face fines or sanctions

by the European Court of Justice.

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The UK Government has already

been sued three times

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in the British High Court

by environmental lawyers ClientEarth

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- most recently late last year.

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With me is Andrea Lee,

healthy air campaigner

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with environmental law charity,

ClientEarth.

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Still beating the drum because, for

all that this is D-Day, this is

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eight years worth of waiting for any

penalties and sanctions to be

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imposed.

It is astounding how long

the UK Government is taking and

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dragging its feet when it knows it

has a moral and legal obligation to

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protect people from illegal and

harmful levels of air pollution.

A

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number of countries across Europe

have been shameful in neglecting to

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uphold their duties on this.

Presumably this is an uphill battle

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for you. It would be helpful if

sanctions were applied. If you keep

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breaking rules and nothing happens,

you cannot feel that will encourage

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member states to change.

The process

started over four years ago. We are

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really... It is interesting these

governments have been given a last

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chance to rectify these mistakes.

This is not a legal argument but

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doesn't it indicate whether eight

countries who have been unable to

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meet the targets. The EU has not

imposed the fine is. Are the

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standards too much, too quickly?

They are asking too much of us. The

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standards were agreed by member

states, August 20 years ago. They

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have had plenty of time to get their

acts together. What they have

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decided is to continue business as

usual and not thought about how to

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protect people.

How far have you got

with this?

We have seen the UK

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Government slowly dragging its feet.

Our two previous successes in UK

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courts have caused it to create a

quality plans. We are seeing them

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introduce clean air zones across the

UK but they do need to do more. That

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is why we were in the court earlier.

What happens after Brexit? We only

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have a year left when we're meant to

be in the scope of this particular

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directive from the EU.

We hope the

UK Government does not use this as

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another excuse to not take action.

What we would miss from even the

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European Union is the enforcement

the commission gives. The UK

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Government has accepted they would

need to create an enforcement body

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but it would need to make sure it

can actually force the Government to

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act.

Thank you very much.

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Let's take a look at some of

the other stories making the news.

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The US

Senate approved a budget deal

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including a stopgap government

funding bill early on Friday,

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but it was too late to prevent

a federal shutdown that was already

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under way in an embarrassing setback

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for the Republican-controlled

Congress.

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The shutdown, which technically

started at midnight,

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was the second this year under

Republican President Donald Trump.

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The owner of Britain's Daily Mirror

newspaper has agreed to buy

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the company behind titles including

the Daily Express, the Daily Star

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and magazines such as OK!

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Trinity Mirror is to pay $177m

for the publishing assets

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of Northern & Shell,

which is chaired by

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owner Richard Desmond.

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US chip maker Qualcomm has rejected

a revised $121 billion

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takeover offer from its Singapore

based rival Broadcom.

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It says the latest bid "materially

undervalues" the company and wants

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more assurances of a payout

if regulators were to block the deal

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Nice to be undervalued at $121

billion, wouldn't it? It seems

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anything is overvalued at the

moment. We will have a look at the

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markets which have been doing their

bit throughout the week.

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Sue Noffke, UK Equities Fund Manager

at Schroders is here.

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It has been a tumultuous week. Havee

hit the buffers on the downward

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slope?

We have entered correction

territory. This is a correction.

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Some might say it was overdue. In

the context of the rises we have

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seen, certainly, this 10% is normal

for the markets. It just has not

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been normal for the past couple of

years where we have seen very low

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levels of volatility and small

levels of weekly or monthly moves.

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Is it normal within a week or a

matter of days?

Absolutely. In the

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order of 3% and 5% in a day or in a

week. What we have seen is down 10%

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in the US within five days.

You look

at this fall over the last five days

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and you think, what does this tell

us about the US economy? What will

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it tell us about the global economy?

I'm not sure it tells us much about

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the global economy. It tells us

about what inspectors have been

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pricing in in terms of good news on

the economy, which we know about.

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But also their enthusiasm for more

of that good news, more earnings

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growth, continued low interest

rates, and really the good times are

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here and appetite has increased and

at an all-time high. All of that was

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flashing dangerously.

What about in

terms of reaction, how authorities

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should react, the central banks?

Should they just let the markets get

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on with it or should they think,

there is a problem here, we should

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do something about it?

That is an

interesting question. I would be in

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the latter camp of letting the

markets play out. What he has seen

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at various times in history is that

central banks do come in. They come

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in to calm the markets and step in

the measures to support the markets.

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We have a new head chairs, who takes

over in March with his first

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meeting. That will be the real

question because, before the market

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correction this week expectations

have been that the US would continue

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to raise interest rates.

Your

message would be, hold on, hold

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tight.

The fundamentals have not

changed. What has happened is a bit

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of steam has come out from what was

quite a heated situation at the

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beginning of the year.

Thank you

very much indeed. Thank you.

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Still to come - that

was the week that was.

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Stock market turbulence -

a correction or something

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more serious?

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Our economics editor will be

here to explain all.

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You're with Business

Live from BBC News.

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In the last hour or so,

the Express newspaper group,

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which includes the Daily

and Sunday Express, has been sold

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to its rival Trinity Mirror

for £126.7 million.

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Earlier, Trinity Mirror's Chief

Executive, Simon Fox told the BBC

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that this was a good

deal for readers.

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It's a very good deal because by

bringing our two organisations

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together we can be stronger,

so by pooling, for example,

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our editorial teams together instead

of

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duplicating and, for example,

sending the same reporters to the

0:15:350:15:38

same football matches, we can be

much more efficient and cover more

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matches, more breadth of coverage.

0:15:400:15:42

So, it's good for readers, it's good

for advertisers, it's good for our

0:15:420:15:45

shareholders, it's good

for our pension funds.

0:15:450:15:47

There will over time the job cuts

because we are going to

0:15:470:15:51

remove duplication, mainly

in back office functions.

0:15:510:15:55

We are bringing two very

similar businesses together

0:15:550:15:57

and when you do that inevitably

there is a certain amount of

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duplication.

0:16:000:16:01

So, there will be some changes.

0:16:010:16:02

Obviously we will be talking

to those teams in due course.

0:16:020:16:05

But broadly this is very, very good.

0:16:050:16:08

This transaction doesn't affect our

regional newspapers at all.

0:16:080:16:13

We operate around 100 regional

papers, Manchester Evening News

0:16:130:16:15

through to the Plymouth Herald.

0:16:150:16:17

And Trinity Mirror as a group

makes over £120 million.

0:16:170:16:21

We are absolutely committed

to continuing our

0:16:210:16:23

investment in our great regional

titles, both in print and digitally.

0:16:230:16:26

The Daily Mirror is not

going to become right-wing.

0:16:260:16:28

The Daily Express is not

going to become left-wing.

0:16:280:16:30

We've got 100 titles in the group.

0:16:300:16:33

They all operate with their own

editors and those editors have full

0:16:330:16:36

editorial independence to take

the decisions that are right

0:16:360:16:46

for the readers,

so we are quite used to operating

0:16:490:16:52

a broad stable of titles.

0:16:520:16:53

What is fascinating is you have left

and right, the traditional left view

0:16:530:16:57

of politics in the papers and far

more right-wing coming together.

0:16:570:17:00

Politically it doesn't seem to make

any sense.

It doesn't seem to make

0:17:000:17:05

sense, can you have one owner with

papers of two different political

0:17:050:17:09

persuasions? It strikes me as an odd

thing to do.

You have to say to

0:17:090:17:13

yourself, he is not being truthful,

the proprietor is not being truthful

0:17:130:17:17

if he's reporting one way on one

thing and one way on another thing.

0:17:170:17:21

Maybe there is something more

important than the politics and

0:17:210:17:25

that's survival, and if newspapers

are going to survive they must find

0:17:250:17:28

a way to rationalise, one reporter

instead of two to every football

0:17:280:17:32

game.

Rationalisation, that's right.

0:17:320:17:37

You're watching business life. Our

top story, global stock markets

0:17:430:17:46

plunge again, more than 1000 points

wiped off the Dan Jones for the

0:17:460:17:50

second time this week. A quick look

at how the markets are getting on.

0:17:500:17:54

One would guess not so well. The Dax

has made a small game, pretty small,

0:17:540:18:00

to be fair we have seen a bit of a

recovery since it opened, which was

0:18:000:18:04

about 45 minutes ago, the Footsie

down 0.5% and the CAC 40 down just a

0:18:040:18:09

fraction. The pound against the

dollar, 1.3973. Let me put that into

0:18:090:18:17

context, two weeks ago I think it

was at 1.43, so you've seen about

0:18:170:18:27

four cents fat in the last two

weeks, so the pound is on a downward

0:18:270:18:31

stretch over the last two or three

weeks. The Footsie is a bit, but it

0:18:310:18:35

has been a heck of a week in terms

of the business world. The Bank of

0:18:350:18:39

England is signalling a rise of

interest rates sooner than

0:18:390:18:42

previously thought.

0:18:420:18:43

Meanwhile, spooked investors, as you

have seen, on stock markets in the

0:18:430:18:48

US and Asia have caused them to

plummet over the last 24 hours.

0:18:480:18:51

Our Economics Editor,

Kamal Ahmed is here.

0:18:510:18:53

It has been quite a week, there is

this issue about you've got the

0:18:530:18:57

markets and the economy, never the

twain shall meet but they are not

0:18:570:19:00

the same thing.

There is a big

signal in the markets about broad

0:19:000:19:04

macroeconomic trends and the Broad

economic trend that the markets are

0:19:040:19:09

nervous about is the synchronisation

of tightening monetary policy and

0:19:090:19:13

the announcement by the Bank of

England yesterday that they want to

0:19:130:19:15

become more hawkish on interest

rates and they have really joined

0:19:150:19:19

the Fed, which has announced more

interest rate rises in the future,

0:19:190:19:26

and the markets are concerned that

as the tide goes out on this vast

0:19:260:19:30

monetary easing we have seen over

the last decade since the financial

0:19:300:19:35

crisis, the fundamentals of the

market may be solid but there is

0:19:350:19:38

always froth on the top and lots of

investors are worried they are

0:19:380:19:41

holding the froth, let's get out of

the froth, creating something of the

0:19:410:19:45

issue and then there is the

automatic trading behaviour, so

0:19:450:19:49

algorithmic electronic trading

chases the dip and under all this

0:19:490:19:53

you have actual people trading on

volatility, which is why the

0:19:530:19:57

American market particularly has

been affected. Trading on volatility

0:19:570:20:00

is drags down the market further

because the trade is about low

0:20:000:20:04

volatility, so when volatility goes

up they are on the wrong side and

0:20:040:20:07

back and drag down the market.

Someone described this as the tail

0:20:070:20:12

grabbing the dog and swinging it

around the room. Solid fundamentals,

0:20:120:20:16

frothy top, the frothy top is what

we are seeing, particularly in

0:20:160:20:19

America, if you look at the

exchanges on the Europe, the Dax,

0:20:190:20:25

the FTSE 100, the CAC 40, much more

gentle.

People have been asking me

0:20:250:20:31

if I should be selling and getting

out of this market?

I bumped into

0:20:310:20:35

Rupert Harrison, at the Bank of

England doing the interest rate

0:20:350:20:38

announcement and the inflation

report and Rupert Harrison, who is

0:20:380:20:42

at Black Rock, former adviser to the

Finance Minister of the UK, said he

0:20:420:20:46

thought it was lots of retail

investors who went into the stocks

0:20:460:20:49

yesterday desperate for returns,

because savings returns were

0:20:490:20:52

incredibly low, they see the stock

market is going to a record high day

0:20:520:20:55

after day after day, all of these

retail investors go in and I think

0:20:550:21:01

you get the retail response.

They

are not a huge proportion of the

0:21:010:21:06

market.

Lots of retail via funds

have been withdrawn, we have same

0:21:060:21:10

stomachs in net outflows in markets

in America this week and that's

0:21:100:21:13

unusual, so there is an outflow in

equity markets as retail fund

0:21:130:21:17

investors start pulling out as well.

You mentioned earlier the readiness

0:21:170:21:20

to increase the interest rate and at

an accelerated pace, perhaps.

0:21:200:21:24

Everyone is interested one way or

the other, obviously. Any sense as

0:21:240:21:29

to how fast acceleration that is.

When can we expect this to kick in?

0:21:290:21:36

This again is the new normal, we are

talking about small interest-rate

0:21:360:21:39

rises in the case of the Bank of

England over the next two years,

0:21:390:21:47

maybe three 0.25% increases over

that year, that is unprecedented

0:21:470:21:52

historically. The ECB still has

negative interest rates. The big

0:21:520:21:55

tension is global growth is touching

4% and monetary policy is set for

0:21:550:22:01

recession. This has created a great

tension because people are... Lots

0:22:010:22:05

of investors are not sure where the

real value is, corporate earnings

0:22:050:22:09

are very good, 80% corporate

earnings are above profit

0:22:090:22:13

expectations, but there is froth

there, because you have this easy

0:22:130:22:16

monetary policy but act will large

global growth.

Very briefly, is

0:22:160:22:21

there anything we have missed this

week because we have been

0:22:210:22:23

distracted? Is there any particular

story?

I've probably missed loads of

0:22:230:22:29

stories and we won't have time.

I

think we will settle on 10% froth,

0:22:290:22:35

as much as you should have.

I'm sure

I miss something every week.

We all

0:22:350:22:39

do.

Kamal Ahmed, thank you.

0:22:390:22:47

In a moment we'll take a look

through the Business Pages but first

0:22:470:22:50

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when.

0:23:160:23:25

What other business

stories has the media been

0:23:250:23:27

taking an interest in?

0:23:270:23:28

Sue Noffke is back to look

through the papers.

0:23:280:23:30

Shall we focus on the Church of

England investment funds? A much

0:23:300:23:33

tougher, or at least publicly, on

issues of diversity, gender, climate

0:23:330:23:38

change. I think they had already

mentioned. But they are setting the

0:23:380:23:42

moral bar, aren't they?

They are and

they have written to the 350 largest

0:23:420:23:47

companies in the UK ahead of the

season four voting, the annual

0:23:470:23:56

general meetings, usually from

April. Companies have been given a

0:23:560:23:59

heads up as to having to explain

what they are going to do in regards

0:23:590:24:03

to voting against various members of

the board.

This is the Church of

0:24:030:24:08

England, it's the money they invest

and they've decided basically not to

0:24:080:24:12

invest...

It's not as Draconian as

that. It is a heads up, and orange

0:24:120:24:17

or a yellow card to say this is a

warning, so they will vote against

0:24:170:24:21

the appointment of certain

individuals.

This is a job or be

0:24:210:24:27

pushed situation for them. The

eyeballs are on their investment

0:24:270:24:30

funds and where they opened their

money and have been for some time,

0:24:300:24:34

much better for them to be seen to

taking the initiative.

Exactly, they

0:24:340:24:37

engage and have a dialogue with

companies and management on these

0:24:370:24:41

issues and if they don't see

sufficient progress, the next step

0:24:410:24:43

is to have a vote against, public

voice, and then the next stage is to

0:24:430:24:52

collaborate, or disinvest.

Have you

found other funds doing this outside

0:24:520:24:57

of the obviously moral?

Yes, it is a

theme that runs through a lot of

0:24:570:25:05

people and comes under the name

sustainability, or stewardship. So,

0:25:050:25:09

as investors we are stewards of our

clients' capital and we want to be

0:25:090:25:13

seen to be doing the right thing by

our clients by having a positive

0:25:130:25:18

influence.

Can we talk about hummus?

One of the other, hummus will get

0:25:180:25:23

people interested. The price of

Hamas has gone up 12%.

Healthy

0:25:230:25:26

snacks

0:25:260:25:26

-- the price of hummus has gone up

12%. There has been a drought in

0:25:300:25:39

India, the hummus harvest is and

what it would have been. Prices are

0:25:390:25:44

up.

It is not all bad. Pea and mint

dips are on their way.

Good.

Thank

0:25:440:25:58

you very much indeed.

0:25:580:26:00

That's it from Business Live today.

0:26:000:26:01

There will be more business

news throughout the day

0:26:010:26:05