18/05/2017 World Business Report


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18/05/2017

The latest business news with informed analysis from the world's financial centres.


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Now it's time for World Business Report.

:00:00.:00:18.

US markets have their worst day since the presidential election

:00:19.:00:22.

China's $300 billion e-commerce giant looks to America -

:00:23.:00:34.

Also in the programme, Japan's economy

:00:35.:00:54.

grows for the fifth quarter in a row - has Abenomics finally paid off?

:00:55.:00:58.

But first, we start on Wall Street where for months optimism

:00:59.:01:18.

about the Trump presidency, the markets have been powering

:01:19.:01:20.

But late on Wednesday the Trump Bump turned into the Trump Slump -

:01:21.:01:25.

as US stocks and the Dollar suffered their worst day

:01:26.:01:27.

Growing concern that the President's promised tax cuts and pro-business

:01:28.:01:33.

reforms may never materialise, as the White House battles one

:01:34.:01:35.

The Dow Jones industrial average fell 372 points,

:01:36.:01:40.

and both the Dow and S 500 suffered their worst falls

:01:41.:01:43.

The Nasdaq had its biggest loss for almost a year.

:01:44.:01:47.

In fact the last time the Nasdaq fell this much was on June 24 -

:01:48.:01:51.

The US dollar has also tumbled to the lowest in six months -

:01:52.:01:59.

This is the US Dollar against 10 leading currencies over the past

:02:00.:02:12.

year - as you can see it's lost all its gains since Donald Trump

:02:13.:02:16.

became President and is now back to where it was in November last

:02:17.:02:20.

year, around the time of the election.

:02:21.:02:22.

Some analysts say this correction was inevitable.

:02:23.:02:24.

I think the Trump trade was largely a group fantasy,

:02:25.:02:26.

so I don't really know that it was all that deeply

:02:27.:02:29.

or well-rooted at any point, to be honest...

:02:30.:02:32.

Part of, a significant part of what's produced the six month

:02:33.:02:35.

market rally is the notion that we're going to have radical

:02:36.:02:38.

deregulation particularly, but not exclusively,

:02:39.:02:39.

around financial issues, and we're going to have massive tax

:02:40.:02:42.

cuts, particularly, but not exclusively for large companies.

:02:43.:02:44.

The weaker the president is, the less likely you are to get those

:02:45.:02:47.

tax cuts, and some of those premiums start coming out of the market.

:02:48.:02:51.

And I think that's what we're seeing right now.

:02:52.:02:53.

Jeremy Stretch is market strategist at CIBC World Markets.

:02:54.:03:01.

Good morning. We have talked about this many times since November. We

:03:02.:03:08.

knew that some kind of correction would be coming. All the promises

:03:09.:03:15.

have not materialised, deregulation of banking, tax cuts, bringing back

:03:16.:03:23.

ports of cash from overseas, they are just not coming through? That's

:03:24.:03:27.

right. We have seen a lot of promises on the agenda, ultimately

:03:28.:03:35.

investors have reacted to that. The fact that we have seen this slew of

:03:36.:03:41.

allegations or uncertainties, not just relating to Russia at the

:03:42.:03:45.

difficulties that the Trump administration felt, healthcare for

:03:46.:03:50.

example, that has pushed this reform agenda further back down the

:03:51.:03:55.

process. Ultimately, it is the case of realisation that the great hopes

:03:56.:03:59.

and dreams of an enormous fiscal boost to drive the economy on a fast

:04:00.:04:07.

at trajectory has been postponed. In the last 48 hours, it has become

:04:08.:04:11.

very intense because of the nature of the controversy surrounding the

:04:12.:04:17.

Trump administration. Some people out there say that we could see an

:04:18.:04:22.

impeachment. There is that kind of conversation going on, that does not

:04:23.:04:26.

bode well for markets around the world? We have seen the same story

:04:27.:04:31.

in Asia and Europe? Indeed. Political instability is one of the

:04:32.:04:37.

greatest threats to any market. We have seen in the last 24 hours has

:04:38.:04:41.

amplified that. The announcement of Robert Mueller does appear to have

:04:42.:04:47.

provided at least a little bit of temporary calm. Look into the

:04:48.:04:51.

future, it looks as though they may have found some stability. It is

:04:52.:04:57.

fascinating, despite this slew of uncertainty that has been emanating

:04:58.:05:03.

around the White House, market advertisers have been really high.

:05:04.:05:10.

Volatility trading has been very low. Perhaps it is a temporary blip.

:05:11.:05:19.

Thank you for coming in and providing an analysis. We will show

:05:20.:05:23.

you how Asia is staring at the end of the programme. It is being felt

:05:24.:05:25.

in Asian trading as well. We are also looking at Alibaba -

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the Chinese e-commerce giant that has been described as the country's

:05:30.:05:32.

eBay and Amazon rolled into one. It certainly makes more revenue

:05:33.:05:36.

than both put together. It's expected to report another jump

:05:37.:05:38.

in profits later today, its shares have soared since it

:05:39.:05:41.

floated in New York and it now has a stock market value

:05:42.:05:45.

of some $300 billion. But the vast majority

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of its business is in China - something its billionaire founder

:05:48.:05:50.

Jack Ma wants to change. A great entrepreneur, one of the

:05:51.:06:08.

best in the world. For President Trump, the best way to show his love

:06:09.:06:16.

for this country is to make it easier for Americans to sell their

:06:17.:06:22.

wares to China. This sneaker shop is an example of that. It has a

:06:23.:06:27.

physical store, but 90% of its business is done online. Since

:06:28.:06:31.

August, they have been selling on Alibaba. That has been a big boost

:06:32.:06:36.

to their Empire. We earned over $100 million this year. They run like a

:06:37.:06:42.

start-up. That has been really refreshing. We are not dealing with

:06:43.:06:50.

lots of competition. They treat us like we are a trusted,

:06:51.:06:56.

multibillion-dollar company. The leader of China's biggest e-commerce

:06:57.:07:00.

retailer has big ambitions. He wants to bring a million American

:07:01.:07:05.

businesses to China and 2 billion customers in next decade. There have

:07:06.:07:11.

been talking about making a big push out of China for the last several

:07:12.:07:17.

years. Perhaps even prior to that, when they filed to become public a

:07:18.:07:23.

number of years ago. You look at the revenue, it is almost entirely

:07:24.:07:27.

contributed by China. They may well have aspirations and they may well

:07:28.:07:31.

talk about that, but the numbers suggest there is a lot of work to be

:07:32.:07:38.

done. The chief President is not afraid of a little hard work. He

:07:39.:07:42.

will be in the US next month to make is pitched directly to the

:07:43.:07:44.

businesses. -- his pitch. To Japan now where in the few hours

:07:45.:07:51.

official figures show the economic growth picking up fast -

:07:52.:07:59.

in fact, much better than expected. Japan's economy grew at an annual

:08:00.:08:02.

rate of 2.2% in the first three months of the year -

:08:03.:08:05.

up 0.5% on the last quarter of 2016. It's the fifth quarter in a row that

:08:06.:08:09.

growth has improved - that's the best run

:08:10.:08:12.

in more than a decade. So does it mean that

:08:13.:08:15.

Prime Minister Shinzo Abe's massive stimulus programme has

:08:16.:08:17.

finally done the trick? Joining us now, Hiro Shirakawa,

:08:18.:08:23.

Chief Economist, Japan, Thank you for being on the

:08:24.:08:35.

programme. Good afternoon, in Japan! Give us your take on these numbers

:08:36.:08:40.

and what you think about how the Japanese economy is faring? First of

:08:41.:08:47.

all, it is true that the economy is doing quite well. If you look at the

:08:48.:08:52.

GDP numbers, it is. There are two risks. One is the global outlook,

:08:53.:09:02.

the US situation is getting messy. Number two, we tend to think that

:09:03.:09:09.

any fiscal stimulus, it cannot be sustained. Projects are not

:09:10.:09:16.

necessarily about doing well in stimulating the economy. So we think

:09:17.:09:21.

those are the two risks. Despite the fact that the economy seems to be

:09:22.:09:25.

heading in the right direction, there still seems to be concerned

:09:26.:09:29.

about the Japanese economy. What needs to be done now? I think that

:09:30.:09:37.

the country has done a massive... They have done a monetary easing. We

:09:38.:09:42.

have experienced or implemented a large number of fiscal stimulus

:09:43.:09:49.

packages. Still, economists and others. We now shift our focus to

:09:50.:09:56.

economic reforms and we tend to think that Labour market reforms

:09:57.:09:59.

should be the most important thing, because we are now suffering in

:10:00.:10:07.

their sales industry. We tend to think that Shinzo Abe house to shift

:10:08.:10:14.

his focus on the Labour market and stimulate productivity. Thank you

:10:15.:10:27.

for your time today. US and EU officials have decided against a

:10:28.:10:31.

laptop ban on flights from Europe. That was after a meeting to discuss

:10:32.:10:35.

the threats to aviation security. They said other measures were still

:10:36.:10:40.

being considered. A previously said they were looking at extending a

:10:41.:10:44.

Europewide ban on electronics on flights from eight mostly Muslim

:10:45.:10:48.

countries. The measure was introduced over fears that a bomb

:10:49.:10:50.

could be concealed in a device. Looking at the Asian markets now,

:10:51.:11:07.

nearly all of them are falling. Japan is down, a lot to do with the

:11:08.:11:12.

fact that the yen has strengthened in value in the last 48 hours. You

:11:13.:11:20.

are now up-to-date, I will see you soon.

:11:21.:11:29.

Representatives of Britain's GPs say the system of local family medical

:11:30.:11:34.