23/08/2012 World Business Report


23/08/2012

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BBC World News. Now for the latest financial news in World Business

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Report. Hello and welcome to World Business Report. Europe's

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manufacturing sector is expected to contract further as Greece

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continues its appeal for more breathing space. The world's

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biggest drinks maker, Diageo, will reveal how much money its made in

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the last 12 months in a few hours. Qantas records its first annual

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loss in a 17 years and due to higher fuel costs to and labour

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problems. We'll have a better idea of how far and how fast the

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eurozone economy is sinking when the latest purchasing managers

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index numbers are released in a few hours time. Economists predict

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further contraction in the manufacturing sector following

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signs that even Germany is stalling. That will provide a bit of context

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for Angela Merkel and Francois Hollande, who are meeting this

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evening ahead of their respective meetings with Greek Prime Minister

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Antonis Samaras. At key talks with Jean Claude Juncker on Wednesday Mr

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Samaras appealed for more time to implement tough austerity measures

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and warned of deeper spending cuts ahead. Mr Juncker, who is head of

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the Eurogroup, said he's totally opposed to Greece leaving the

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single currency and that Greece is achieving greater stability. I'm

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joined by Christian Schulz, Senior Economist at Berenberg Bank. For

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the manufacturing data due out today, what are you expecting?

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are expecting values below is the 50 mark which separates expansion

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from contraction. It will be in the range for 45 for manufacturing, may

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be lower than that. Which means significant contraction. It is a

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slight stabilisation. Recession is not accelerating. It is staying at

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these levels. How worrying is the situation in terms of the economic

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news we are getting about the eurozone? It is a worrying. Jobs

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are lost and competitiveness may be lost in some company and that is

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not good for the long-term, especially in companies which from

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a fundamental point of view should not have a recession - like Germany

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or France. Manufacturing is the most globally integrated and are

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therefore dependent on the export sector. The services sector is

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looking significantly is better. Manufacturing is clearly hit. Every

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time the crisis hits home in Germany, every time there is a

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threat of recession, the German government seems more active in

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stopping the euro crisis from spreading. It motivates them to do

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more. Prime Minister Antonis Samaris is on a real offensive in

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terms of trying to get what he needs all what he believes is right

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for the Greek economy. Do you think he will be successful? There seems

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to be some flexibility on the German side. We have seen several

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senior lawmakers in Germany that within the amber light there is

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some flexibility. That also means there is not going to be any extra

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money. Angela Merkel will not spend any political capital off trying to

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convince the parliament to put up more money for Greece. She has

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elections next year. There is going to be a bit of a reality check for

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Prime Minister Antonis Samaris. It does not seem like they want to put

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Greece out of Europe. Nobody wants to take that the seizure. There is

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some flexibility. Prime Minister Antonis Samaris needs to convince

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the Germans he can use some extra time. Not just the Germans but

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other Europeans and the IMF which means the Americans. This is

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proving a very important week for the eurozone and the Greek economy.

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The world's biggest drinks maker, Diageo, will reveal how much money

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its made in the last 12 months in a few hours. Its also expected to

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tell its shareholders a lot more detail on its expansion plans.

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There's growing speculation the maker of Johnnie Walker Whisky and

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Guinness beer will add a Mexican tequila producer to its portfolio.

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Russell Padmore reports. The Diageo struggles with the impact of the

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region's debt crisis. That has not deterred the company from investing

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in its Scotch whisky business. In June, it revealed plans to spend

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$1.6 billion to expand production of a whisky. It takes a long time

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to distil whisky, but the product will be aimed at American drinkers.

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The world's biggest market for spirits. While North America and

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Europe accounts for two-thirds of its profits, the company is

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determined to concentrate more on emerging markets. China, for

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example, where foreign wristy -- whisky brands are barely 1% of

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consumption. Demand for spirits in Africa and Asia will continue to

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increase according to some. Scotch whisky does have at cachet in

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emerging markets. With current prosperity in these markets, there

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will be an increasing amount of people will be able to afford to

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drink these products. Beer brands produced by its rivals are a strong

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competition in Africa for Diageo. Brewers in Ethiopia and Tanzania

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are enhancing its profits. It is also selling Guinness in a Nigeria.

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Shareholders will be watching for the possible takeover of a Mexican

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tequila producer. This dark Irish BA is one of the stables. It relies

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however more on spirit sales. It is two-thirds of the business. Other

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predictions is that emerging markets will see a golden age of

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demand as young aspiring businessmen will get a taste for it.

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No wonder, Diageo is targeting half of its sale to come from emerging

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markets by 2015. Australian airline Qantas has posted its first annual

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loss since it was privatised in 1995, amid high fuels costs and

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growing losses at its international operations. And we know Qantas has

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had a tough time with labour dispute and all sorts. A reversal

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of fortune. What a year makes for the nation's flag-carrier. It

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announced $256 million net loss and that is at a higher for billion-

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dollar turn around from a net profit at in the previous month.

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Then driven by the European economic crisis and higher fuel

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prices, there was also the soaring Australian dollar, the bitter

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battle with unions about salaries which saw Alan Joyce grounding the

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entire fleet for 48 hours in October. Despite these crippling

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factors, its share prices is up. By about 4% up in Sydney trading.

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Investors, quite pleased and happy with the decision to cancel a major

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order of 35 Boeing 787 Dreamliner aircraft worth about 9 billion US

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dollars. At this point, the airline did not offer any forward looking

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proper guidance but it said that the operating environment and

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economic outlook remains challenging, volatile and dependent

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on a number of uncontrollable external factors. We will see how

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it fears in the next year. -- fares. Uncontrollable external factors -

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you never like to hear that phrase. Computing giant Hewlett-Packard has

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announced a monumental quarterly loss of $8.9 billion as it was

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forced to write down the value of some assets and take hefty re-

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organisational charges. Still, the world's largest technology company

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by sales did attempt to reassure investors and said they are "making

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decent progress despite the headwinds. Egypt has requested a

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$4.8 billion loan from the International Monetary Fund to help

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stabilise and revive its ailing economy. The formal request was

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made during talks in Cairo between President Mohammed Mursi and IMF

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chief Christine Lagarde. The IMF's technical team will visit Egypt

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next month to study the Egyptian government's economic programme and

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discuss possible forms of financial support from the IMF. Markets are

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up slightly in Asia. Some bad news out of China about its

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manufacturing factor. A first flash look at numbers - manufacturing has

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