20/06/2013 World Business Report


20/06/2013

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

:00:02.:00:12.
:00:12.:00:20.

Time to face life after QE - Fed chief Ben Bernanke says he'll start

:00:20.:00:26.

winding down stimulus measures if the US economy keeps improving.

:00:27.:00:30.

Plus, back on the market - the UK Government says preparing to sell

:00:30.:00:40.
:00:40.:00:42.

its stake in bailed-out bank Lloyds. Welcome to World Business Report.

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I'm Sally Bundock. Also in the programme - no end to the Eurozone

:00:45.:00:52.

recession this year, with unemployment continuing to rise.

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It was the news global financial markets were waiting for - and

:00:55.:00:59.

fearing. The head of the US Federal Reserve Ben Bernanke has confirmed

:00:59.:01:01.

he'll start to wind down his massive economic stimulus programme

:01:01.:01:04.

this year and end it altogether next year if America's economy

:01:04.:01:14.

continues to improve as it is doing. Let's just remind ourselves of what

:01:14.:01:17.

that programme is. Known as quantitative easing, the Fed has

:01:17.:01:20.

been keeping interest rates close to zero, below 0.25% and pumping

:01:20.:01:22.

$85 billion a month into the economy by buying US government

:01:22.:01:32.

bonds. It has had a vast global impact, boosting stock markets and

:01:32.:01:39.

assets around the world. But it could soon be coming to an end.

:01:39.:01:41.

Samira Hussain has been at the Federal Reserve in Washington and

:01:42.:01:51.
:01:52.:01:53.

sent his report. In assessing the state of the American economy, the

:01:53.:01:58.

chairman of the US Federal Reserve was fairly optimistic. He said the

:01:58.:02:04.

US is seeing growth. Given those gains, many people are asking when

:02:04.:02:07.

the central bank will start pulling back support from the hip American

:02:08.:02:12.

economy. The groans the chairman, the unemployment rate would be to

:02:13.:02:18.

fall significantly. Other economic indicators, but the number of

:02:18.:02:21.

people participating in the labour force, would need to increase

:02:21.:02:26.

significantly. I would like to emphasise the point that our policy

:02:26.:02:35.

is in no way predetermined. It will depend on the incoming data and the

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ongoing situation. If things go better than expected, we can reduce

:02:40.:02:46.

its more quickly. If it becomes less favourably, or financial

:02:46.:02:50.

conditions are inconsistent with the process in the labour markets,

:02:50.:02:57.

it just what will be delayed. US markets have been jittery,

:02:57.:03:01.

reacting to any possibility that the pullback may be started earlier

:03:01.:03:07.

than expected. Our policies are tied to how the outlook it evolves.

:03:07.:03:17.
:03:17.:03:18.

They should provide some comfort to markets. There -- they should

:03:18.:03:24.

understand we are providing would have the support is necessary.

:03:24.:03:31.

Stimulus may be around for the next while.

:03:31.:03:36.

Will have a look at another key economy. There is another sign this

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morning that the slowdown in growth in China is deepening. Rico Hizon

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is at our Asia business hub in Singapore. Thick smog behind you.

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Tell us about what is going on in China. Part of all Asia and

:03:53.:03:59.

Singapore. Right now we're seeing a slowdown in the manufacturing

:03:59.:04:08.

activity on the mainland. In the month of June. It is at its lowest

:04:08.:04:11.

point in nine months. That is due to weaker demand for Chinese

:04:11.:04:20.

products. HSBC's preliminary index fell to a reading of 48.3. A

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reading below 50 indicates a contraction. This follows a slew of

:04:26.:04:36.
:04:36.:04:39.

weak economic numbers. When you speak with economists, they said

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the drop in manufacturing output raises questions over whether there

:04:45.:04:52.

is a recovery taking place in the Chinese economy. Growth slowed

:04:52.:04:55.

unexpectedly in the first quarter. Analysts have now cut the growth

:04:55.:05:04.

outlook for the year. The basis his responses from 90% of 420

:05:04.:05:09.

manufacturing companies surveyed every month. The full data will be

:05:09.:05:14.

rich -- relies on 1st July. Britain's finance minister,

:05:14.:05:16.

Chancellor George Osborne, has signalled the UK Government is

:05:16.:05:20.

ready to start selling its shares in Lloyds Banking Group. He made

:05:20.:05:23.

the comments as part of his annual address to top London Bankers,

:05:23.:05:26.

known as the Mansion House speech. But he acknowledged a similar sale

:05:26.:05:33.

of rival Royal Bank of Scotland could be some way off. The British

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taxpayer has owned 39% of Lloyds and 81% of RBS since they were

:05:36.:05:42.

bailed out in the 2008 crisis. A sale of Lloyds shares could be this

:05:42.:05:47.

autumn. But any re-privatisation of RBS would have to wait until after

:05:47.:05:52.

the next election. And the Chancellor will consider if RBS

:05:52.:05:55.

should be split up, with its weak assets like bad property loans put

:05:55.:06:05.
:06:05.:06:06.

into a so-called bad bank. Here's what he had to say about Lloyds.

:06:06.:06:10.

Lloyd's is in a good position. Investor interest is up. Shares are

:06:10.:06:16.

trading at the price were selling would reduce the national debt.

:06:16.:06:21.

That is something we all want to see. We are actively considering

:06:21.:06:26.

options with a share sales. We will only proceed if we get value for

:06:26.:06:33.

the taxpayer. We have no prefix timescale of disposal. An

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institutional placement is likely to be the most effective way of

:06:37.:06:46.

managing risk and getting everything back. Five years on, we

:06:46.:06:49.

can take the first steps to returning Lloyd's to the private

:06:49.:06:55.

sector. For later shares and their sales, we will consider a retail

:06:55.:06:59.

offering to the general public. will talk more about that when we

:07:00.:07:04.

review the newspapers in about five minutes. As finance ministers from

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the Eurozone gather in Luxembourg, there's a warning this Thursday

:07:06.:07:09.

that Europe's recession is getting worse, with no sign of recovery

:07:09.:07:11.

until next year. According to a report by

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accountants Ernst & Young - the combined economies of the nations

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sharing the Euro will shrink 0.6% in 2013. That's a bigger

:07:19.:07:22.

contraction than last year - and they see no return to growth until

:07:22.:07:28.

2014. Unemployment will also keep rising this year - hitting a peak

:07:28.:07:35.

of 12.7% in the first quarter of 2014. Marie Diron is senior

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economist at Ernst &Young. You're out here with good news for us.

:07:45.:07:50.

am not, I'm afraid. This recession is going on for longer than we had

:07:50.:07:56.

expected. It has been going for six quarters. We believe it is coming

:07:56.:08:03.

to an end. The recovery is very weak. The only positivity is the

:08:03.:08:10.

relaxation of fiscal policies. One look elsewhere in the economy, we

:08:10.:08:14.

have just said about China not growing as strongly as we thought,

:08:14.:08:21.

that is important for the eurozone. The domestic side of the economy is

:08:21.:08:27.

still facing higher unemployment. Why is this phase taking longer

:08:27.:08:31.

than we first thought it would? Is it because of the key issues you

:08:31.:08:38.

have just mentioned? It is. Unemployment is a big one. It is a

:08:38.:08:43.

symptom of a deeper structuring. The reshaping of the eurozone is

:08:43.:08:48.

necessary. Companies are going through their pay rolls and

:08:48.:08:52.

assessing how many staff they need. They are going through balance

:08:52.:08:59.

sheets and trying to reduce. All this combined makes for quite a

:08:59.:09:06.

long process. In 2014 you say the eurozone could return to growth.

:09:06.:09:13.

When? Made year, when the think? expect some slight positive numbers

:09:13.:09:20.

from the beginning of the year. The fiscal drag will be less. We expect

:09:20.:09:25.

some recovery in the rest of the world. Some areas are already being

:09:25.:09:33.

more competitive in the eurozone. Thank you. That's all from World

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