16/01/2014 World Business Report


16/01/2014

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headlines from BBC World News. Now for the latest financial news with

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Sally Bundock and World Business Report.

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41% and rising: Italy looks for a way out of its youth unemployment

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crisis Plus, the most expensive real estate in the world. But is Hong

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Kong's property market a bubble about to burst? Welcome to World

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Business Report I'm Sally Bundock. Also in the programme, a new record

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close on Wall Street, I'll bring you all the details in just a moment. We

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start in Italy, where this man is offering himself as the solution to

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the country's economic woes. He is Matteo Renzi, the 39 year old mayor

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of Florence who was recently elected leader of Italy's Democratic Party,

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and has his eye on the Prime Minister's job. Later today he'll

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outline plans to reform Italy's labour market, make the country more

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competitive and tackle soaring levels of youth unemployment. To

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give you some context, in November Italy's total jobless rate hit a 37

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year high of 12.7%. But in the same month the jobless rate among 15 to

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24 year olds hit an all time record of 41.6%. A job for life culture

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among trade unions and a web of red tape make hiring and firing

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notoriously difficult and expensive in Italy. Many young people have

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simply given up trying to break into the jobs market and left the country

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to find work. Mr Renzi is promising a radical change in his Jobs Act to

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be outlined today. Let's talk to Rome correspondent Alan Johnston

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full . Just reminders of the role he plays in Italian politics. Whether

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see fit? Sally, right now he is the most dynamic figure on the Italian

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political stage. The Mayor of Florence in just 39 years old. He

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brings the promise of youth and freshness. He is often likened to

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Tony Blair in his early days. Matteo Renzi has captured the leadership of

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the biggest and most influential party in the country, the central

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left Democratic party. He will try and arrange Italy out of its

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economic stagnation. Nothing will be easy or straightforward for him. His

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party has already in government. It dominates the coalition. Although

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Matteo Renzi leads the party, he doesn't need the government. He is

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not the Prime Minister. That belongs to another Democratic party man. As

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he tries to drive through his agenda, he will have to work through

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the Prime Minister and through the coalition administration which she

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doesn't actually control. Tell us more about what he is proposing and

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whether people believe it will work. Italy is just beginning to emerge

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from its longest recession since World War II. It still feels like a

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country in an economic crisis. Youth unemployment is beyond 40%. Creating

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jobs and stimulative growth is the priority. This afternoon we will see

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him put out the core of his party 's agenda. He will make the Italian

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labour market more flexible and dynamic and accessible. A new style

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of contract which young people find more easy to get work. They won't

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have all the protection they would want, but they will be phased in

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over time. Crucially, Matteo Renzi would want to drive down the cost to

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employ people. Reducing the tax is at satiated with taking on employees

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in Italy. He will reduce the red tape and regulations and labour

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codes surrounding work. He will trade drive down the cost of energy

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which is such a burden to Italian firms. Thank you very much. A very

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interesting day ahead. China's holdings of US Government debt hit a

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new record high in November according to official US figures due

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to be released later. They show Chinese holdings of Treasuries

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jumped by 12 billion dollars to a record 1.3 trillion dollars

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according to Bloomberg, which got an early sight of the figures when they

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were posted in error on an official website. China's vast foreign

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exchange reserves hit a new record of 3.8 trillion dollars at the end

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of last year according to its own figures. Microsoft's board is

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considering Ericsson CEO Hans Vestberg as a potential successor to

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departing leader Steve Ballmer, according to sources quoted by

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Bloomberg. Former Nokia boss Stephen Elop is also thought to be on the

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short list. Microsoft's lead independent director John Thompson,

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who is heading the search, wrote in a December blog post that the board

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plans to decide by the early part of 2014. Bank of America says profits

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surged to more than 3.4 billion dollars in the fourth quarter.

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That's four times what it made in the same period a year ago, when bad

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mortgage debt was still weighing on its earnings. The results were much

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better than Wall Street was expecting, and Bank of America's

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shares hit their highest in more than three and a half years. They

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are up some 250% from their post-crisis lows. This week, we have

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been looking at global property hotspots. The next stop is Hong Kong

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where prices have skyrocketed since 2009 as Asia was spared the worst of

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the global financial crisis. Chinese buyers have been pouring in. But is

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Hong Kong in danger of another property collapse? Our chief

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business correspondent Linda Yueh reports from Hong Kong.

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The most expensive properties in the world are found here in Hong Kong. A

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house sold for 70,000 US dollars per square foot. The street down the

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road is the most expensive property in all of Hong Kong. Overall prices

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hit a new high. The capital gains tax and Chinese money mean that Hong

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Kong is an attractive place to invest. To deter speculation,

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foreigners now have to pay tax equal to a quarter of that purchase price.

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The transaction costs have become so high that it has made Hong Kong a

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less attractive place to speculate and invest. They are now trimming

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its cash injections which give higher global interest rates and

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mortgage costs. It is hard not to wonder if there is a bubble. House

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prices are estimated to be overvalued by 30 to 40%. One of the

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most overvalued markets in the world. When the last bubble burst

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during the Asian financial crisis, house prices fell by 60% and

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continued to decline for six years. The trouble with bubbling markets is

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that once interest rates rise, so does the risk of collapse. Property

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developers say that it is different this time. In 1987, the interest

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rate was above 10%. Now it is only 3%. -- 1997. House prices are 13

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times the average salary. Even higher than during the last bubble.

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I work in a hotel, and I need to spend about 50 to 60% of my whole

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salary to pay for the mortgage. Even if they spend nothing, I have to

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save for two years for the deposit. Adding further pressure, public

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housing is inadequate. It covers only 30% of the population. This

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lady and her family live in a 400 square feet flat. The size of a

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studio. TRANSLATION: The rent is really high. It is our biggest

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expenditure. It takes half of our monthly income, and we don't earn

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much. She still one of the lucky ones. Illegal flats on rooftops have

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sprung up to cope with the unaffordable and inadequate housing.

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This is the dark side of being a property hotline.

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The biggest in Australia today is the unemployment figure went up

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surprisingly high. A real expectation that the central bank in

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Australia is poised to cut interest rates to stimulate growth. You can

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see the market is up. Japan having a good session up 2.5%. Another strong

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close in the US. This trend all three year low against the US

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dollar. Just to say, the earnings we have mentioned that the bank of

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America. Goldman Sachs released earnings today. We are keeping an

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eye on that as well. The number of cases of gout being

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recorded in the UK

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