19/12/2013 World Business Report


19/12/2013

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says it will map 1 billion stars. Now for the latest financial news

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with World Business Report. The beginning of the end of cheap

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money at the Fed begins to scale back its massive stimulus programme.

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Plus, no more taxpayer bailouts. Europe strikes a deal that will see

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investors put the Bill, -- foot the bill for future failures.

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Also in the programme, we will join our team in Asia to get the latest

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on market reaction there to that fed decision. The world economy has been

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watching and waiting for some time, and it is now finally happening. The

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US Federal Reserve, the most powerful Central Bank in the world,

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says it will start to scale back its economic stimulus programme from

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January. The Fed has been pumping $85 billion per month into the US

:01:10.:01:14.

economy, for just over a year. It has been buying of Treasury and

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mortgage bonds. It will trim that to buy 10 billion a month. -- it will

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trim that by 10 million per month. It may keep interest rates lower,

:01:27.:01:40.

and now the tapering has started, Wall Street seems to be reassured it

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will happen slowly. The stock market closed at record highs.

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The decision taken by those inside this building will have consequences

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around the world. But their actions were driven by what is going on

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right here in the US. In fact, Ben Bernanke talked about the

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improvement in the US economy, in particular what is happening in the

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jobs market. Reflecting an improved outlook for

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the job market, we decided to moderately reduced the monthly

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pace. If incoming information supports the committee's expectation

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of further progress towards its objectives, the committee is likely

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to reduce the purchases in further measured steps in the future. The

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Federal Reserve doesn't believe this is job done, in fact Ben Bernanke

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talked about how many Americans had dropped out of the workforce

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completely. They will continue to support the US economy, buying up

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$75 billion worth of bonds each month. In combination with reducing

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the amount of bonds they will buy, they will keep interest rates lower

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for longer. It seems they have managed this shift in policy quite

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successfully. The Fed decision was not the only

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big news from Washington being digested on Wall Street. The US

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Senate voted through a two-year budget deal, already passed by the

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House of Representatives last week. The vote brings to an end for now

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the deadlock between Democrats and Republicans over public spending

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that saw the large swathe of government shutdown in government,

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and brought them to the brink of defaulting on debts. That has

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removed a major worry for Ben Bernanke, as we explain.

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A few months ago, when we heard from Ben Bernanke when he was testifying

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on Capitol Hill, he mentioned the dysfunction in Washington as being a

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hindrance to the US economic recovery. The fact that the US now

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has a budget, it has not had a budget in three years. So what the

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government has passed today is actually going to fund the

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government well into 2015. It is a major hurdle, both for Washington,

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in terms of its politics, but also a significant for the economy because

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that gives the economy some sort of stability, and that is really

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important when we are talking about an economy that is recovering from a

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recession. How has this all being digestive in

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Asia? Rico Hizon is in Singapore. A black screen, that's not looking

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good at all! Let's hope we can get to Rico Hizon, because we mention

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the fact that the markets on Wall Street had a really strong session.

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There you are, a black screen is never a good seem Dominic thing --

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in to see. When you speak to policy makers they say the negative effects

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of this US paper on markets would likely be limited. For example,

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South Korea promised it will act swiftly to stabilise markets if

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necessary, but they say the move is basically reducing a lot of the in,

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uncertainties. There could be a period of instability between May

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and June, but has for the Asian markets, they are mostly higher.

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They see the Fed's position as a vote of confidence that the US

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economy is in the strengthening. They say an expanding US economy is

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positive news for Asian X -- exporters, with as many US consumers

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buy from Asia. The yen has fallen yet again to the US dollar, to

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levels not seen since 2008. Australian shares are rallying the

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most in nearly eight weeks, with mining companies leading the charge.

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There are two major markets that are currently on the other side of the

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spectrum, China and Hong Kong, currently in negative territory. The

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cost of stock trading has been pushed up. Emerging Asian currencies

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are falling as well, the Indonesian rupiah hitting a five-year low. The

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Singapore dollar and the Philippine peso are all touching their lowest

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levels in three months. We have to wait and see what will be the short

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and medium-term impact of this tapering off of the programme of the

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Federal Reserve, which will begin in January 2014.

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A story that will affect European trading possibly as well, when we

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start the day he later. Let's move on, because the question of who

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should pay when a bank goes bust was grappled with into the midnight

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hour. Not the taxpayer, says a new rule to be signed off by European

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leaders at the Brussels summit today. It would see rescue money

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come from the banking industry and its investors. The aim is to prevent

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a repeat of the turmoil of recent years when failing bank in countries

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from Ireland to Cyprus were brought to the brink of bankruptcy.

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The banking and financial sectors are vital to recovery. European

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leaders know it is essential to their recovery that they police

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whether big banks can live or die. Member states have argued over the

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fine details write to the wire, footing the collective bill of

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ailing banks to stop whole states being dragged down with them. The

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plan on the table is that if it bank has to be shut, shareholders and

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creditors take the first hit, then the home country. We are introducing

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revolutionary change to Europe's financial sector. This is so that

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taxpayers no longer foot the bill when banks make mistakes or face

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crisis. Indeed, the era of massive bailouts is over. This will be

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merged into an all Europe resolution fund. It has been a long road, and

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this Brussels analyst says it is inevitable it will take a long time

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to complete. What is missing is that they are trying to put in place a

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resolution stability fund, but that will be in place over the next ten

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years. It will take a while to have it in place. The question is, how

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will you deal with potential bank failures in the meantime? Here, you

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need a strong financial backdrop, and can ace debility mechanism be

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that backstop? -- stability mechanism. It was said bluntly at

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the European Parliament this week. We should not create a single

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resolution mechanism that is single in name only. Whatever is agreed

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this week, the banking union won't be ready for some important European

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Central Bank health checks on banks like this which are due to be

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competing next November. This breaks the loop between banks and their

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sovereign countries, and it could take years. It does seem that at

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last they are making a start. That his World Business Report, we

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will see you soon as we look through the papers. Stay with us.

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An independent enquiry into breast care services in hospitals in the

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West Midlands will be published this morning. It follows an investigation

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into surgeon Ian Pattison, over allegedly botched operations on 1200

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