26/10/2017 World Business Report


26/10/2017

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Now it's time for

World Business Report.

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An end to stimulus or just

a slowdown in bond buying?

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Economists will pour over

the European Central Banks statement

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later for clues about

the bank's plans.

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And is the little

birdie flying high yet?

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Twitter will report

its latest results.

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Lots of new features over the last

year, but will it be enough

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to ignite user growth.

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Welcome to World Business Report.

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I'm Ben Bland.

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Economists are on tenterhooks,

awaiting the European Central Bank's

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policy meeting later.

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No, they are not expecting a rate

hike, but hoping for clues as to how

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and when the bank will bring

large-scale bond purchases

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to an end.

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That makes it one of the most keenly

anticipated meetings since early

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2015 when the program was unveiled.

Expectations are the bank will cut

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monthly asset purchases

from the present 60 billion euros -

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that's $71 billion -

and stretch them out for as long

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as capacity allows while it waits

for consumer-price growth

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to pick up.

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But are we really at

such a turning point?

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Or will it take a long time

for markets to "normalise?"

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With me is Vicky Pryce,

Chief Economist at CEBR.

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Do you think we are likely to see

the ECB take down its bond buying

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programme?

Not immediately. It will

say that it intends to. The

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expectation is that from maybe

January we will see a reduction from

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the 60 billion euros of bond buying

per month. This is of course the

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government bond buying in the

secondary markets. There is still

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money they are paying buying

corporate bonds, of course. We will

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see what happens to that. That will

be reduced, the government bond

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buying in secondary markets, to

possibly 30 or 40 billion per month

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from, perhaps, January. The

intention would be, I think, to wait

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and see what happens to the economy

as a whole. In other words, they

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would want to carry on through as

long as they possibly could buying

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those bonds over a period of time,

maybe an extra year, because of

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course Mario Draghi believes

strongly that the only reason, or

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the main reason, that the European

economy is doing as well as it is

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now, is because of his

unconventional monetary odyssey we

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have seen with quantitative easing,

the reduction in rates to negative,

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and of course the changes in the

banking system for companies. Until

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he started those measures, in fact,

lending was falling and the economy

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of the eurozone was in recession for

some time.

Is that why, if eurozone

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growth has been better than

expected, you might assume the bank

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would the more ready to move? But he

attributes that growth to the

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success of the bank's approach,

hence carrying on with it for

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longer, albeit perhaps at a slightly

less speedy pace?

Absolutely. If you

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look at his previous statements,

every time he has not actually moved

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rates up, or has continued with the

corporate bonds and the government

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bonds that he is buying, remember,

he started with 60 billion per

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month, then went up to 80, because

things were not responding as fast

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as he would like, then went down to

60. We have seen this change. The

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markets are ready for that. Every

conference speech he has given after

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the meeting with the ECB, and every

press release he has put out, does

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make that strong point. That

actually, just because of his

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actions, he has seen the fiscal side

being either negative or neutral.

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While that happens, the ECB is

really the only game in town. And he

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knows that. And so he will be wary

about changing that stance very

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radically, because we still have

problems in a number of countries.

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Unemployment is still high in places

like Spain and Greece. There are

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problems with what is going on in

Catalonia. So there are concerns

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about growth for the future. There

are still huge debt problems in a

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number of countries, where the debt

overhang is enormous and must be

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dealt with, not just increase also

Italy and Spain. And of course we

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still have problems with Ireland and

Portugal. That is still there. In

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addition, we have a banking sector

which is in some ways still in

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crisis. They have very large non-

performing the -- non-performing

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loans in a number of countries which

they need to deal with. All that

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suggests to me that he will be

cautious in terms of starting to

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tighten up.

Vicky Pryce, thank you.

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Any wannabe hobbits

out there, beware.

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If you have a dream of settling

in Middle Earth, or New Zealand

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as it's known to you and me,

there's just been a snag.

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Rico Hizon is in our

Asia Business Hub in Singapore.

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So Rico, what's going on?

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You are very own Gandalf, Rico. A

guide, a counsellor, with a

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mischievous sense of humour.

Do I

look old like Gandalf?

It was the

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mischievous sense of humour I was

thinking of.

I am sorry that your

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plans will have to change, but newly

elected Prime Minister Jacinto

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Dearne wants to clamp down on

foreign property ownership, which

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has led to soaring property prices

and a housing crisis. -- Jacinda

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Adern. It only applies to

nonresidents. So it you are thinking

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of buying one you have to kiss the

dream goodbye. Chinese investors

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have been among the biggest offshore

buyers, and reports say that hedge

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fund managers are buying farms and

rural properties, anything they can

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get a hold of, and this is also due

to the surge in the New Zealand

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immigration website from Americans

logging on after Donald Trump won

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the presidency last year. Apparently

the number of Americans who applied

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programmes of citizenship has risen

by 70%. Well, Ben, the ban follows

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fears that overseas buyers are

putting too much pressure on prices.

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There is also low interest rates,

limited housing stock, and

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immigration driving up prices in

recent years. Here is another

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important fact for New Zealanders.

Only one quarter of adults own their

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own property now, compare to 50% in

1991. Soaring prices have put home

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ownership out of reach for many

residents.

Rico, many thanks. We

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will see you later.

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Is Twitter facing

a crisis of confidence?

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The micro-blogging site is releasing

corporate results later,

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and many will be looking to see

if its popularity is waning.

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This is the number they need

to beat: 328 million

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monthly active users.

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That was the figure for both

the first and second

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quarters this year.

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In May, the Chinese micro-blogging

site Weibo overtook Twitter

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in active users, 340

million, up 30% from 2016.

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The once champion of free speech,

Twitter announced earlier

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in the month that it will implement

new rules to make the platform free

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from hate and abuse,

targeting unwanted sexual advances,

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hate symbols and tweets

glorifying violence.

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And of course Twitter,

like other social media,

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has pledged to be more transparent

about advertising: who is paying,

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and to what end.

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But is that all enough

to restore trust in Twitter?

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It will be an early morning for

Twitter, unlike other tech titans,

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Twitter reports their earnings

before markets open on Thursday.

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That means Jack Dorsey and his

colleagues will be up well before

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their 5am call with investors.

Hopefully they will have some good

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news, but that may not be the case.

Some of the same problems continue

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to plague Twitter. Their user

growth. At the beginning of the year

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they added 9 million new users. In

the following quarter that dropped

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to 1 million. Many analysts are

expecting the same for this quarter.

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It isn't just how many people have

joined the platform. The question

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is, how active are they on the site?

Working in Twitter's favour is that

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they are trying new things. They are

experimenting with lengthening

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tweets from 140 characters to 280,

and they have added a new feature

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called Happening Now, which lets

users see events happening nearby.

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Finally, there is the issue of how

Twitter handles the various

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accounts. It will be a precursor to

Twitter's appearance before

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lawmakers in Washington next week,

where they will likely face a

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grilling.

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Deutsche Bank has agreed to pay

$220m to resolve a US investigation

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into its manipulation

of interest rates.

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It is the latest settlement stemming

from banks' involvement

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in the rigging of the

benchmark Libor rate.

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The sum is more than twice the $100m

British bank Barclays agreed to pay

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last year to end a similar probe.

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And drinks giant Coca Cola

is the latest to beat market

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expectations.

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It reported earnings of 50 cents

a share in the third quarter,

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while operating revenue came

in at just over $9 billion.

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Coca-Cola's results were helped

by the recent relaunch of Coke Zero

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in the US, as it looks to offer

healthier, lower-calorie drinks.

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Let's take a quick look at the

markets before we go.

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Asian markets were largely muted

Thursday, tracking a retreat

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on Wall Street as fears

over the progress of US

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President Donald Trump's tax cut

plans dampened investor sentiment.

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But Tokyo edged up slightly,

bolstered by positive corporate

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earnings and a weak yen that boosts

Japanese exporters' bottomline.

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US stocks closed lower after hitting

several records in the last month,

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with disappointing reports

from companies including AT&T

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and Boeing prompting

a sell-off across the market.

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That is it

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