Transcripts For CNNW World Business Today 20110727 : vimarsa

CNNW World Business Today July 27, 2011



edge this country s. five days after the massacre, we know there are undercover armed policemen on patrol. we also know that breivek amassed six tons of fertilizer, according to his manifesto. the police are suggesting to us that there is a certain amount of that fertilizer which is not accounted for in the explosives found on the island or the bomb here in oslo. they say it is possible that that missing amount of fertilizer could be enough to produce a bomb. so definitely a very, very significant part of their investigation. now, breivek's lawyer yesterday gave some insight into his client's mental state saying this whole case does suggest that he is insane, that breivek himself was surprised that he was able to get away with as much as he did on the island, that police hadn't stopped him any earlier, and he was taking some sort of drug before his attack to sort of keep him steady during that horrific massacre. and as you can see behind me, as lowans, norwegians continue to lay flowers for those who lost their lives. >> cnn's diana magnay reporting. that's an update here on cnn. "world business today" starts right now. i'm zain verjee. good movrng from cnn london. i'm nina dos santos. >> i'm aneesh shah tank. timing running out for a u.s. debt deal. who's got the most to lose if the country goes into default? >> one cred et rating agency has already downgraded u.s. debt. we'll speak to its ceo. three years and $15 billion later we look back at china's lichl picks as the countdown begins to the games in london. >> first, the clock is continuing to count down in washington. just six days to go until a possible u.s. default unless lawmakers can come to some or the of agreement on raising the debt ceiling. a vote on republican john boehner's bill has been expected on wednesday, but it did run into opposition from his own party and now as a result it's already being rewritten. this is coming after republicans complained it didn't cut spending and deficits as much as originally expected. a vote is likely to take place on thursday at the earliest. in the meantime with a default looming, a compromise is loong more appealing to some. conservative senate republican leader mitch mcconnell is calling for new negotiations with president barack obama urging the party to move away with some of its demands. the implications of a u.s. default strach far beyond the country's border. a crisis of solvency in the u.s. government could cause a crunching recession. fareed zakaria sat down with imf chief christine lagarde and asked just how concerned she was. >> i am worried because this debt ceiling issue has not been cracked. it's being addressed from multiple angles, but the debt ceiling is still on the table. the united states is the largest economy in the world, one that matters, one that has spillover effects, not just around the borders, but on a complete basis globally. it's an issue that really is lurking in the background of each and every economy of the world which is why i think there's a very, very high level of pressure and tension so that issue can be, not only addressed, dealt with and addressed properly with a solution. >> the current stalemate in u.s. debt talks is pushing some key world currencies to record strengths against the u.s. dollar. right here in asia pacific we're talking about the australian dollar and the japanese yen. let's check in with ramy inocencio for the details. >> we've seen the u.s. dollar weaken over much of the past year, ever since june of 2010. this is a graph showing the u.s. dollars index. it tracks the greenback's strength against other currency including the euro, jach knees yen as well as the british euro. the big news out of australia today, well, basically the aussie dollar is near a 30-year high. since last year alone the aussie dlar has risen this much, 18.6% against the u.s. dollar. tony morris told cnn there will be winners and losers because of this. >> certainly going to make it more difficult for exports overseas, particularly manufacturing. will make it much harder for the retail sec tor to compete with cheaper goods from overseas. another direct impact, it makes it much more expensive for tourists to visit. those parts of our economy for the tourist sector, we're not going to benefit so greatly from that. the wig guest winners for this are the consumers. find it far cheaper to buy hopefully things on the shelves, for example. >> so the aussie dollar's record strength comes partly thanks to the debt ceiling deadlock in the u.s., but also linked with higher-than-expected inflation down under. australia's latest cpi reading came out today at .9%. many analysts were expecting .7%. because of this higher figure there's a higher chance that the reserve bank of australia may raise interest rates to keep inflation down. some soy asser li as next month when its board next meets. the japanese yen is gaining ground against the greenback today, at its strongest point since march 17th, just after the march 11 quake and tsunami. right now at about 77.64 yen to the dollar. this is not much good for sony, cannon, toyota. a stronger yen here hurts them because when dollars from u.s. sales are repatriated to japan, they're worth fewer yen. toyota estimates if the yen stays up by one unit against the dollar for 12 months, it will actually lose about $380 million. japan's market closed lower today, the third time in the past seven days. if the u.s. debt deadlock isn't broken, the market will keep getting hit and the nikkei will probably keep falling. >> currency moves not helping at all. ramy, thanks very much. i wonder how stocks are fair in europe, nina. >> the currency factor an enormous issue for some of these european markets as well. a number of the companies listed on these stock markets also, of course, have rising currencies, appreciating currencies against the dollar. that makes the goods and services less competitive. as you can see, we have all the european markets falling at the moment with the steepest declines coming from the cac 40 which is down by .75%. the banking sector coming under pressure, and one bank in particular which came out with figures is banco santander. it's listed in spain, based over there. reported its first half earnings saying net profit came in at $5.1 million. that's still down about 21% and comes in well short of expectations. this was mainly due to a fact it had to set up a compensation fund for claims on payment protection insurance in the united kingdom, manisha. >> so far as stocks go, generally a down day in asia. in sydney a strong consumer price index raised an interest hike there. in shanghai, the day -- composite managed to end the day about .6% to the good. there once much movement for hong kong's hang seng and the nikkei slid .5%. hovering just above the 10,000 mark. tokyo electric power, mean mile, or tepco which runs that damaged fukushima dich chi power plant rose almost 616. that came amid reports it's considering selling almost 3 billion in shares. about half an hour ago, after the bell went, i suppose, in japan, japan's second largest carmaker nissan reported earnings, net earning for the quarter came in at $1.1 billion, ahead of expectations. uncertainty continues to exist over the u.s. debt seal, investors are once again turning their attention towards the ultimate and traditional safe haven which is, of course, gold. that, in turn, is sending the price steeply north, hovering above about $1,623.63 an ounce. it's currently up about $4.38 at the moment. it is covering just a couple dollars below its all-time high that was just above $1,624 just the other day. gold very much the beneficiary here as everybody seeks a safe haven, manisha. >> very much so. piling into the precious medal. struggling throughout trade on tuesday, the debt ceiling, a host of corporate earnings figures made for a mixed session. at the close when the bell rang, things were pointing south. the dow losing 91 points to 12,501. as you can see, the nasdaq and s&p 500 also dropping as well. let's take a look at the futures. u.s. markets look set for a mixed open when trading begins later this wednesday. that's where we stand, pretty much flat, unchanged. no one really pushing things anywhere. but we'll keep an eye on those futures for you. nina? >> coming up after the break, his credit rating agency is not one of the big three. but sean eeg en's firm has downgraded the u.s. debt. he'll explain why his company did that. coming up on "world business today." any questions? no. you know... ♪ we're not magicians ♪ we can't read your mind ♪ ♪ read your mind ♪ we need your questions ♪ each and every kind ♪ every kind ♪ will this react with my other medicine? ♪ ♪ hey, what are all these tests even for? ♪ ♪ questions are the answer ♪ yeah ♪ oh you're looking at the capitol in washington, d.c. where lawmakers are desperately trying to come to agreement to raise the u.s. debt ceiling. welcome back. this is "world business today." >> i'm smirking slightly because it looks ever so quiet in washington right now. it's going to be anything but, isn't it? executives from moody's and standard & poor's will testify today to discuss the credit rating and its role in the u.s. debt limit debate. with the drama in washington intensifying before america's debt limit is breached next tuesday, the world is wondering if moody's s&p or fitch will move to downgrade the rating. one agency has already done just that. sean egan of the lesser known eagan-jones sat down with our maggie lake. >> reporter: in an industry dominated by three global players, standard & poor's, moody's and fitch, sean egan stands apart. the co-founder has battled the primacy and cloud of the big three for years, crediting with making gutsy calls well before the come decision. after his downgrade of u.s. debt one week ago, he finds himself in the spotlight as never before. >> sean, you already lowered the rating on u.s. debt. why? >> eagan-jones did because of our concern about the relatively high level of debt to gdp. that's a primary measure for the credit quality of countries. >> it doesn't matter whether they get a deal on the debt ceiling. >> it's almost secondary. that is secondary. it's akin to your forgetting the pay the mortgage payment before you go on vacation. it doesn't affect your ability to pay. the issue of a slight delinquency is far less important to us than the overall ability. granted, the u.s.'s reserve currency still has a huge number of resources. but in our view it doesn't quite rise to the aaa level. >> lowering even a notch even a rating o of the u.s. is a controversial thing to do. politicians are not happy with that type of action. have you had any response to the fact that you have done it already? >> yes, we have. it hasn't risen to the level of our other cuts. in the case of gm and ford, we had a number of death threats. not yet. we've had a number of calls but no death threats that i'm aware of yet and hopefully it doesn't rise to that. it is crossing the rubicon. we were the first rating firm to do that. the nsro rating firm to do that. we felt as though we had no choice. basically it's a reflection of, as i said, the dramatic rise of debt to gdp and hopefully some steps will be taken to ameliorate the problem. >> even if they raise the debt ceiling, there's some talk if it's a patchwork, short-term deal, that you might get company, and other rating agencies might also downgrade. what happens if that's the case? what do you expect in terms of reaction in financial markets? >> the short answer is no one knows because the u.s. has been at the aaa level since 1914 or thereabouts when rating firms were organized. it's not clear what's going to happen. >> are you hopeful? >> i am very hopeful. i think this is a fantastic country. i don't think there's anyplace on the face of the earth like this. i think that if anybody has the resources, we should be able to do it. if we don't do it, it will be looked upon -- this is really an inflection point. this has never happened in the history of the country. if we don't do it, it will be a real shame. >> sean egan there speaking to maggie lake. of course, it would be a great shame for many people if the united states were to default in its debt. but it seems not for everyone. in fact, an american default would be a money maker for some investors who are currently betting against a debt ceiling deal. a small group of investors are currently wagering that washington will default on its debt and putting nearly $5 billion of money on the table in the form of credit default swaps. if you compare that with the investors who are betting on the success of the deal, the stakeholders are huge from hedge funds to the chinese government. together they currently hold more than $9 trillion of u.s. treasury bonds and they're counting on washington paying up when those investments are caused maturement. across the atlantic the countdown for the london 2012 olympic games has begun as britain's capital appears to bask in the sport spotlight. we'll look at how the sit difficult that held the last games has changed. that's just ahead. like new sp™ no calorie sweeteners. this bowl of strawberries is loaded with vitamin c. and now, b vitamins to boot. coffee doesn't have fiber. unless you want it to. get more with new splenda® essentials™, a small boost of fiber, or antioxidants, or b vitamins in every packet. same great taste with an added "way to go, me" feeling. new splenda® essentials™. get more out of what you put in. look in this sunday's paper for a three dollar coupon. when i got my medicare card, i realized i needed an aarp... medicare supplement insurance card, too. medicare is one of the great things about turning 65, but it doesn't cover everything. in fact, it only pays up to 80% of your part b expenses. if you're already on or eligible for medicare, call now to find out how an aarp... medicare supplement insurance plan, insured by unitedhealthcare insurance company, 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any city that hosts them. some of the changes are long lasting and some are not. stan grant joins us from beijing with a closer look at the olympic legacy there. it was quite spectacular. being someone who comes from london, stan, i worry, can we match up? >> reporter: every olympics is spectacular in their own way, manisha. they all have their own way. london is having it for the third time. for beijing it was the first time. while it all came off successfully they spent a lot of money on it and had to answer a lot of questions. >> reporter: the eyes of the world were fixed right here. this is the fabled bird easinessed, the stadium of the beijing olympics, a place of dreams that now hold so many memories, and four years later, the people are still coming. it's a memory that will last forever, he says. it made china greater and stronger. on giant screens around the stadium, those magical moments live on. the grand opening ceremony, the lighting of the caldron and those extraordinary athletes. >> the olympics brings you everything. there's great passion. there's great tragedy. there's a real sense that the world comes together. >> tracey holmes is a sports broadcaster. for various international networks she's covered nine olympics, winter and summer. she's doing her phd on the olympics and politics. >> when people talk about politics and sport not mixing, i think they don't understand the olympic games. it's all about politics and all about making changes in a country. >> reporter: china's olympics games was a political statement. she says one world, one dream. that was the official games slogan, but this was china's world. a coming-out party for an emerging superpower. the cost of all this, officially $15 billion. unofficially three times higher. an expensive public relations campaign. >> there were lots of negative images surrounding beijing and china before 2008. now when you look at the images shown, it's of modern cities, new infrastructure, it eeps of winning and glory and power. >> reporter: one of the winners was not even on the track or in the pool. he was a sports marketing graduate who heard about the so-called green olympics and saw big bucks. he formed an irrigation company, bid for the contract to water the olympic park and stadium and found his fortune. >> translator: it was a $30 million you juan bid, $4 million. winning the project laid the foundation for our company. >> reporter: he now has contracts all over china, his company turning over millions of dollars a year. all of beijing's olympic venues are still in good use. the bird easiness stadium is a tourist attraction. the water cube has been transformed into a water park drawing people in their thousands. china is still celebrating. the all powerful communist party is marking its 90th anniversary. china's influence an power continues to grow. it topped the tally in 2008, the most dominant sporting nation on earth. but for all the glory, one painful image remains, the pride of china, at the time the reigning world and olympic 110 meters hurdles champion limping off the track crippled by injury. his anguished face is still beamed around the stadium. this is china's unfinished business. his bid to win the gold medal in london that's lewded him. >> i can see him running. even though he didn't, we chinese are proud of this. >> reporter: the beijing olympics are really just a memory now. of course, what remains is this magnificent stadium. the torch is being passed to london. full steam ahead, london 2012. you know, as we said before, london is now hosting it for the third time. you can bet after one successful games, beijing is already planning its next bid as well. manisha? >> i'm absolutely sure about that. thanks so much, stan. back to the story that just keeps getting bigger and bigger, talking about th

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