Transcripts For CNNW World Business Today 20120131 : vimarsa

CNNW World Business Today January 31, 2012



i suspected u.s. drone strike in southern yemen on monday night. security officials say american missiles struck a province near the areas taken over by militant group. u.s. republican presidential candidate newt gingrich is blaming what he calls dishonest campaign ads by opponent mitt romney for his poor performance in the poor with the florida primary hours away, romney surged ahead of gingrich by 14 points. united nations nuclear experts say japanese regulators need to improve their plans for dealing with severe accidents. they've been studying the stress tests that tokyo ordered after the fukushima daiichi. whether the plants themselves are safe. those are the headlines from cnn. the world news leader. i'm zain verjee and "world business today" starts now. good morning to you from cnn london. i'm nina does santos. >> i'm andrew stephens. welcome to "world business today." it's tuesday january 31st. the e.u. has all but sealed the fiscal future of the eurozone. greece has seven weeks left to ensure that it isn't voted out of the single currency. if you live in florida, you've got a four in ten chance that your home is worth less than your mortgage on it. how will that play into the race for the republican presidential nominee? >> an annual filing from the owners of the costa concordia shows just how much the disaster is hurting the company. most e.u. nations put their confidence in angela merkel's plan to safeguard the euro. in turn, asian and european market are cautiously following suit this tuesday. u.s. futures are moving absolutely higher after monday's down day on wall street. there's good reason that the enthusiasm is staying contained and no surprises for getting what that reason is. nina, it's always the same. it's greece. >> greece is certainly the word these days. in the meantime, while investors haven't gotten the deal they wanted, angela merkel got the deal she wanted in brussels on monday. 25 out of the 27 countries have now backed her plan to fiscal rules aimed at protecting the eurozone. any protection for greece is far from assured. jim bold en reports. >> after six hours of talks in brussels on monday, european union leaders agreed on some things in order to help stabilize the euro zone and try to calm the stock market. the first thing is they've agreed to start the stabilization mechanism starting in july. a year earlier than planned. this is a permanent bailout fund that will be available for any country that may need a bailout in the future, including greece. the idea is that if you put enough money in a permanent fund, maybe the market will think that europe is very serious about the euro and won't go after these economy's bond market. however, they weren't all able to agree on the stability pact. 25 of the 27 e.u. countries have agreed to try to find a way to more tightly integrate their economies. the czech republic couldn't go along with it and britain has rejected the idea and will work more closely -- the euro has signed up for this, others, including sweden and poland who originally might not have signed up, did find today things they could agree with. the swedish prime minister told me why they have agreed to sign the stability pacts. >> for he sweden it was possible because the things brought forward were expected. it has no legal impact on sweden. they respect the fact that we take our own decision on when and if to join the euro. for our wage setting model. it gives us at the same time, influence and presence during the summit meeting. that combination was, of course, the support i needed from swedish parliament to bring sweden in. >> what wasn't on the agenda was greece. they're still waiting for the greek government to have an agreement with the banks, the insurance companies and the hedge funds which own greek debt. an agreement was reached earlier to allow greece to have a big cut in its bonds and the interest rate on the bond and to save billions every year in bond pam. however shall the final details have to be worked out. once with it's worked out, leaders can discuss how to give greece a second bailout to pay its bills. we heard in brussels, they need to have that agreement very quickly to put in place things by mid-february. jim boulden, cnn, brussels. you heard jim talking about need for speed in sorting out greece's financial woes, but it's not just athens who need to compromise. would even if they do, sovereign -- germany and france must also agree on what happens next. greece is becoming under repeated fire for failing to see through austerity measure that will promise in return for one of the bailout for this country. germany, in particular, is suggesting that an e.u. budget commissioner. however, the french president, nicolas sarkozy backed the greek finance minister calling that particular proposition by angela merkel and her government unreasonable and undemocratic. this isn't the only discord ant note at the crisis. austerity in athens is emblem attic of what merkel seeks to achieve across the european continent. she's at odds with mr. sarkozy's compatriot. the cost cutting must be tailored and excessive cuts would only strangle growth for the euro. there's a third thorn in mrs. merkel's side. the british minister, david cameron. he isn't going to stand in the way of the fiscal treaty, but, however, as the man who refused to sign that pact, his vow to go to the courts if he feels british interests are undermined by these proposals. here's a look at how it's playing how. major indices. they're responding positively to some kind of statement coming out of brussels albeit across 25 of the 27 e.u. member states. as you can see, we have the likes of the ftse 100. the biggest gains come from paris. there's one particular country not on the markets, but it is an important bell weather, we're talking about spain here. we all know that the spanish economy has been suffering earlier in the week. we found out that it slumped to the tune of .3 of 1% in terms of gdp. we know that the net profit plunged 98% over the course of the fourth quarter of the year. it's coming at about 47 million euros. compare that to one in excess of 2 billion euros this time last year. it shows how much the spanish banks are hurting andrew. 98%, that is some fall. these are the numbers here in asia today. slightly choppy thought of the day. you take this one. sort of up and down all over the place. inching up, i should say by three tenths of 1%. china, the steel makers warning about profits, weakening profits in china. this is all straws in the wind showing how the broader economy is weakening under the tough monetary policy imposed by beijing. the corporation of china down nearly 4%. gives you an idea of how the can ps are feeling the heat. steel down by nearly 11%. a strong yen hampers the exporters. corporate news after the any key closed tenth of a percent higher. honda and toshiba releasing earnings and they were disappointing. after the earthquake and tsunami and after the thai floods. third quarter profits down 41% for honda. down to $624 million. toshiba, third quarter earnings down 72% from last year in at $138 million. big falls there. there was some positive news from japan today. industrial production came in better than expected in december. up 4% from the previous month. was looking a gain of around 2.9%. a pretty bumpy ride. december's increased factory output was largely led by japan's car and sem conductor makers. that pickup in production came after the flooding in thailand forced a a slowdown of car and electronic plants there. put a lot more pressure on the ones locally producing. forecast, industrial output has continued to rise steadily this month and next month. on a lessen urging note in japan, the jobless rate came in 4.6% in december, that compares to 4.5% the previous month. nia? >> "world business today," greece reclaims center stage in the european debt crisis. italy is banking on a -- ta 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[ female announcer ] travelocity. get great deals on all kinds of beach vacations. quarter past 5:00 in the afternoon here. welcome back. you're watching "world business today" live from hong kong and of course, london. >> greece is the immediate focus of the european debt crisis, italy perhaps is the lingering threat in the background. this country is seen by many as too big to fail. it's under close scrutiny as the new government tries to put finances in order. italy's bank chief was among some of the movers and shakers attending the forum last week. his attendance coincided with a drop in costs. that was largely thanks to intervention by the european central bank. richard quest asked if italy is now over the worse. >> it's not out of the crisis but made a lot of process. thanks to its own act and the policies being conducted started by the acb on the liquidity front for banks. >> we'll talk about that in a moment. the new government, reforms have been put in place, now it really is a question of implementing those reforms, isn't it? if the gains in the market are to be sustained? >> you're right. i think reforms, structure reforms have also already been implemented on the pension front, which is an extremely important area of the economy, even if it is on the fiscal side and not on the real economy or the gross side. on the gross side, i think there's a clear idea on the part that reforms have to be comprehensive. they started liberalizing the number of sectors. they'll reduce the number of burdens and to do something on the labor market. >> are you comfortable with the reforms will not slide and backtrack and what has happened before, you know as well as i do, good promises, poor delivery. >> know. no. i think this is -- obviously, i have to be confident. but i think i'm optimistic because i see there is a lot of action on the part of this government and i think also the commission is backing it. >> the greek situation has raised fears about the strength of the banking system if banks have to take serious haircuts on their greek debt. how worried are you about any effect or, indeed, any credit crunch that there will be in the italian banking system? >> first of all, the italian banking system is not exposed directly to greece. so it is an indirect effect. there has been a substantial reduction in wholesale fund and there might have been not so good prospects on the debt renewals. sent by the ecb has improved the liability side and this means that the credit crunch has been substantially reduced. >> everything i've read on the ltro says that it's basically the ecb funding large swaths of europe backed euro -- >> this is not so. the ecb substituted for freezing of the funding -- >> they are the primary funder for the markets. >> what they're doing now with these, they have help banks maintaining their assets both in terms of loans to houses and interprices in terms of leveraging. >> really the ecb's ltro three-money was crucial? >> i think so. it will be crucial in the months coming. >> why? >> because it will put the banking sector in safe territory. most of the risks for a real economy are coming from the financial sector and banking sector. italian banking sector is in terms of fundamentals in good shape. the risk of a substantial -- o in the funding may be seen on financing the real economy. >> so the point though, the ecb is in many cases, playing a role as lender of last resort to the banking structure. >> of course. it is not the lender for the states -- it is not the lender to the state first off. but it is performing the role of lender to banks and this is part of a monetary policy action and convention perhaps under today's way of saying, but certainly very conventional under yesterday in order to reduce the risks even on priceability from the bank problems. >> so that's the head of the bank of italy. visco speaking to richard quest. improvements in italy has he was saying. the yield on ten-year italian bonds is currently hovering at just over 6%. that is 1% down from the 7% danger level. but let's put this into context here. it is still three times more expensive for italy to borrow money on the open bond market compared with germany. interesting. that was really interesting discussion with richard and the central bank government because i was looking, there's a story in the financial times which we were commenting about earlier, nina, saying they expect the european banks to have to borrow about twice as much, this much from the ecb, about a trillion euro. they've already borrowed $500 billion last month. it shows you how the ecb remains this critical lender of last resort to the banks. it looks like it's only getting worse. the credit crunch, the trust between the banks seems to be getting steadily worse and worse. fascinating stuff. still ahead on "world business today," the world trade organization a landmark ruling against china over the decades old restrictions on mineral export. now there's another trade on the horizon. the details just ahead. time for eye look at the oil price. iran transformed the parliamentary debates. the e. wu is due to implement its own bans. it's assured opec it can make up short form supply. you're watching "world business today" live on cnn. now, in a blow to beijing, the world trade organization has ruled that china's export limits on raw materials violates international trade rules. following that decision on monday shall the e.u. is pressuring the chinese government to loosen restrictions on the export of rare earth minerals as well. they are essential in the wide range of high tech products from smartphones to flat screen television to rockets. asencio joins us. this is a significant ruling for about everyone involved, ray. >> that's right. the ruling is a win for certain nations. china is going to respect that decision and analysts say it could lead to something bigger. the unraveling of beijing's restrictions on rare earth. there's a bit of back story. back in 2009, the european union and mexico filed a joint complaint against china basically accusing them of raising prices. some imposed export quotas. the nine industrial minerals came under the chinese restrictions, including bobbing iet and zinc. they're used in steel to batteries to ceramic ware. china filed an appeal against the complaint and it was that decision yesterday that upheld the original wto ruling. what does this mean? can't legally hoard raw materials right now. pretty much it's been doing that for the past decade. since china joined the wto in 2001, it's held on to those raw materials by taking advantage of an old legal exception. that has allowed it to slap tariffs or quota to protect the environment or to conserve a rare interest. with china unable to do that anymore, the playing field is level portrayed in the minerals. >> this is a fascinating development. on the rare earth side of the story. we have talked about this in the past about how china is such a big producer of raw -- of these rare earths now and how difficult it is to get them if you're not chinese. will it mean that beijing is likely to loosen controls on the export of those minerals or will they ignore it? >> as it stands now. u.s. and the e.u. have not filed complaints against china over these rare earths, not yet at least. it's clear that's where the focus is headed to right now. china produces more than 90% of the rare earths. it's a political and economic tool in 2010 for example it stopped exports over to japan over a little territorial dispute. that made the prices soar. after monday's ruling, e.u. trade commissioner came out and kept the pressure up on beijing and he was saying this. china must comply sbift swiftly. i expect them to bring their export regime including for rare earths in line with wto rules. even though they're called rare, they're not all that rare. it's just that production is limited in getting them out of the ground can be difficult. for example, last year, hugh deposit found off the coast of hawaii. guess what, it was several kilometers below the surface of the pacific ocean. that would take years if not decades to get to. that's why focus is on china's rare earth. >> thanks very much for that ramy asencio. >> nina? >> coming up next on the show, florida republicans vote on who they want to see lead their party's bid for the white house. the costa concordia's say what they expect the financial fallout to be. that's all next. i'm andrew stevens in hong kong. i'm nina dos santos at cnn london. welcome back. you're watching "world business today." let's look at how the european stock markets are moving today. about 90 minutes into tuesday's trading session. largely speak, very positive gains here after yesterday's heavy losses. this is on the back of the fact that we now have news out of brussels, 25 out of the 27 e.u. states agreeing to move forward with this closer fiscal union. we should also mention that we have a spanish bank, big barometer there in one of the countries that has many people worried in the eurozone, spain. it has come out with a 98% plunge in the fourth quarter profits. that's just one of the things tempering the optimism given what we've heard out of brussels, andrew, overnight. >> yeah. nina, the asian numbers here. there was a fairly choppy sort of a day. you'll see, though, mostly green arrows. not huge gains. hong kong more than 1% much the rest fairly straightforward. china was interesting again today. a lot of the big energy producers and the steel producers particularly warning on profits, which is interesting because it just shows another sign that the chinese economy continues to slow. the steel makers. that knocked down the energy stocks and surprisingly australia down a quarter of a 1%. the only loser across the main markets today, nina. andrew, concerns continue over greece and they continue to weigh on u.s. stocks for monday's session. so by the time the closing bell rang on wall street, the major indices recovered most of the losses from earlier in the day. but didn't make it into the black fully. the dow jones industrial closing just below the left. the broader s&p 500 index dropped about a quarter of one percent for its part. i'll tell you who was outperforming on the wrong

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