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US Markets Tumble; European Markets Down; Destabilizing Factors; US Debt Ceiling Warning; Stock Market Slumps; EU "Breathtaking" Corruption; Sochi Hotel Delays; Most Expensive Games Ever; Sochi Preparations Behind Schedule; Mandela Estate

Aired February 3, 2014 - 16:00   ET



RICHARD QUEST, HOST: A terrible start to a new week, the largest points lost so far this year. The Dow is off more than 300 points. What a way to begin Monday, February the 3rd.

Tonight, it's the wolves on Wall Street, and they're licking their wounds. Stocks suffering some savage losses. We'll give you some analysis.

Also on the program, a continent of corruption. The EU shines a light on crooked officials.

And no Entente Cordiale. It's Britain versus France in the battle for the tourists.

Look at the number. It's fairly horrible. But I'm Richard Quest, and I mean business.

Good evening to you. Well, I think it's a good evening, but it's been a grim start to February for US stocks with all the major indices deep in the red. And of course, it follows on from January, where the Dow Jones Industrials fell more than 5 percent.

Well, what happened at the start and today's session? Join me over at the super screen. But I do warn you, this is not for those of nervous disposition. The Dow Jones opened lower and it never looked up. In fact, as you can see, right at the end, the Dow closing off more than 325 points. It's a loss of some 2 percent.

So, the reasons why the Dow fell so sharply, the market was rattled by much worse-than-expected manufacturing data. The S&P and the NASDAQ are also sharply down. Investors are still reeling from what happened in January. The Dow finished off more than 5 percent. It was a rather brutal month. And the fear is that the market could fall even further.

To Europe, now, and there, markets were just as -- well, they weren't as badly off. We have 2 percent on the Dow. But you do have some fairly hefty losses on the major bourses. The session finished with losses after investors ignored reports of strong manufacturing activity in the eurozone. They focused on weaknesses elsewhere.

So, the numbers have settled and we're now to see how badly the market closed. Ben Willis is the managing director of Albert Fried and Company. He's on the floor of the Exchange. Down 2 percent. We're -- add on the 5 that we've already seen in January, we're starting to head towards traditional correction levels, Ben. But what's driving this down?

BEN WILLIS, MANAGING DIRECTOR, ALBERT FRIED AND COMPANY: Richard, my colleagues and I do not have a nervous disposition. We relish days like this and the week we've had. We were being driven down by the machinations of the central banks throughout the world, led in first and foremost by the Federal Reserve.

They began the tapering process, as they well should have. In my opinion, they should have done it a little bit earlier. That has led to a rattling of the cages in the emerging market sector, particularly those currencies we've seen them get smashed today in particular, even worse, as far as that goes.

So, that is the explanation for the much-wanted correction, the much- needed correction, for a market to remain healthy and be able to go higher by the end of the year.

QUEST: Right, but there's one thing to have an orderly correction, but if there is whiff that this is disorderly -- and note, I don't use the word "panic" -- but if this is sort of gaining momentum on the downside, even though tapering was expected, it's very hard to keep your nerve.

WILLIS: It is very hard to keep your nerve, and that's while I'll tell the viewers at home who are long-term investors and not traders -- those people in my business have to be able to keep their nerve and not panic -- what I'm telling you at home is draw up your shopping list, the same way you drew up your wish list for Christmas, draw it up in your stock portfolio what you want to buy.

They're going on sale. This is not a time to panic. You don't panic when Harrods puts the minks on sale in August. This is the time to be buying.

QUEST: Buy -- come on! Come on, Ben! You're not advancing the old bromide, buy on the dips?

WILLIS: I am not advancing -- I believe and I've told you -- the last time around, I talked about a correction.


WILLIS: It was sort of like Waiting for Godot. We -- the most we saw in the previous year was about a 5 percent correction in the S&P. We are finally starting to break even below those levels. I don't think this correction is over, but I don't think a long-term investor needs to pick the bottom. What they are seeing here is, again, the machinations of the central bank deflating what they have inflated.

QUEST: Right.

WILLIS: You have some unintended consequences, like the Argentine loaner today, of all things, deflating if you will. That came apart at the seems today. That's an unintended consequence of the Federal Reserve stimulus package.

However, that being said, the United States, in all the economic data we're reading, has been fine. The water's fine, don't panic.


QUEST: Ben, good to have your common sense for us tonight and putting it into perspective from the floor of the New York Stock Exchange. That's why you're watching us tonight, to take you right to the heart of the markets.

So, we know it was a bad day for shares. If we analyze just what Ben was saying, and you'll start to see, there were three big destabilizing factors, which seemed to be rocking the market. You can think of it as a game of Jenga.

We start, of course, with the weak earnings. Shares in Ford, GM, Toyota, all fell after the auto makers today reported declines in their US sales for January. Now, the falls in earnings were larger than analysts were expecting.

Overall, the S&P 500 has held its own, but in this market, if you -- I heard a lovely quote I read in the paper: if you promise a child a puppy, you'd better deliver it on Christmas Day. And that's not happening at the moment with markets.

The next, of course, we have weak data. The latest US manufacturing data has disappointed investors. January's factory activity expanded. The weakest pace, incidentally, since May 2013. And China's also seeing growth that has slowed over the last month. It sent Asian shares down.

And then finally, emerging markets. Slower growth in developing economies continues to hit the currencies, it's hitting growth levels. We've heard Ben talking about that.

Put this together: the fear, of course, is the Jenga syndrome. You take out one bit. You take out another bit, you have a bit of a correction over here. Something else comes out over here, and before long, if it continues at this sort of level, well, we know how that story ends. But we are some way off that.

The US Treasury Secretary has warned about a further threat to market stability in the US debt ceiling. Jack Lew says the US government will be unable to pay its bills past the end of February if the ceiling isn't raised.


JACK LEW, US TREASURY SECRETARY: The truth is, the longer we wait, the greater the risks become, whether it's the economic recovery, the financial markets, or the dependability of social security payments and military salaries, these are not things to put at risk.


QUEST: That's Jack Lew. This is the market. Now we've seen the final numbers, off 326, down 2 percent. Wherever you're watching us tonight, the thing you really need to understand, of course, is what to do and where this goes next.

Let's talk to Jens Nordvig, who joins me here in New York. Good to see you, sir. Thank you for coming in. The global head of foreign exchange strategy at Nomura, who is with me live. So, you've heard the question. You heard what Ben said on the exchange. A case of buy on the dips, or head for the door?


JENS NORDVIG, GLOBAL HEAD OF FOREIGN EXCHANGE STRATEGY, NOMURA: I think we can have a period of much more volatility. I think the problem is, we came into this year with expectations being quite inflated.

Everybody expected good growth numbers in the US, and everybody was bullish on the stock market. And now, we're actually seeing an asset location away from stock market and into bonds.

QUEST: Right, but hang on. First of all, that's a complete reversal of the rotation which we saw in 2013.


QUEST: Where we saw the rotation out of bonds. But that rotation from equities back to bonds is now based, what, on simply flight to safety?

NORDVIG: I think there's an element of that, and I think also just expectations got too high as to what the equity market could deliver. And now, there's a lot of fears that are combining. Emerging markets, now this US weak data. The US is supposed to be the pillar of strength --

QUEST: Right, but --

NORDVIG: -- so that's why the problem.

QUEST: But let's look at the Q4 number, which was high in the US. A strong number. Overall, the economy grew, what, 2 percent this year? It'll do 2 to 3 percent. So, the growth is there. The earnings are not that bad. Is this just simply a reaction to tapering?

NORDVIG: Well, I think it's -- I think you make a good point. It's very, very hard to distinguish what's noise and what's trend in the data --

QUEST: Exactly.

NORDVIG: -- because we had two quarters of really, really good growth, and now it looks a bit shaky here in the beginning, but the data goes up and down. The question for me is, is the Fed going to blink? Is the Fed going to start to react to this weaker data? That will be the shake-up market trend.

QUEST: But hang on. If the Fed were to suddenly -- for one of their six weekly meetings or every six week meetings -- not continue the taper, that would be the equivalent of shouting "fire" in the theater. That would be saying that they are seriously worried.

NORDVIG: I think that's right. So I don't think they're going to do that anytime quickly. But now, we had one weak payroll number, one very weak ISM. If we start to get another weak payroll number on Friday, I think these expectations will start to come into play.

QUEST: What is driving these weak numbers?

NORDVIG: I think weather's a part of that, but I think one -- the most important is probably that inventories was a huge contribution to growth in the second half of last year, and now it's reversing. That's creating the volatility.

QUEST: Right, but an inventory rebound is a classic follow-on following a recession. Inventories always get rebuilt in recessions.


NORDVIG: Correct.

QUEST: After recessions.

NORDVIG: And now, we have some mean reverse, and that makes it very, very difficult to interpret data. That's why investors are so nervous today.

QUEST: All right. The dollar. Foreign exchange. Let's just -- let's put this into the dollar, because I can make an argue which has the dollar going up as a haven of safety and down because of weakness in the economy.


QUEST: I can look at it every which way and backwards. Which way do you make it?

NORDVIG: So, we've been going into this year firmly believing this is going to be a strong dollar year, and so far, it's kind of played out. The dollar's stronger versus emerging market and it's stronger versus European currency.

QUEST: All right, dollar-euro, you're looking at?

NORDVIG: So, right now we're trading like 1.35. I think we can trade towards the middle of the year 1.30. But I think the big question now is, why is the dollar going stronger? Is it because the US economy is strong or is it because of risk aversion?

Right now, I would say the dollar is strengthening for the wrong reason, and that actually makes me a little bit nervous about my own call.

QUEST: Risk aversion --

NORDVIG: As opposed to strength in the economy.

QUEST: Basically, if everyone else is a basket case, people are going to plow into the dollar?

NORDVIG: That's what's happening right now.

QUEST: That's what always happens if you have the reserve currency of the world.

NORDVIG: That's right.

QUEST: Good to have you.

NORDVIG: Thank you.

QUEST: Thank you very much, indeed. Nervous. Nerves in the market. It's one of those days, isn't it? Glad you're with us to try and make some sense of it all, @RichardQuest for your thoughts and your views as well.

When we come back after the break, the scale of corruption in Europe. Apparently, it's "breathtaking." That's the verdict of a top EU official. We'll bring you the damning report of how widespread is the problem in a moment. QUEST MEANS BUSINESS.



QUEST: A top European official has warned that the perception of corruption across the EU is "breathtaking." The report says the problem is costing the European economy more than $160 billion every year. Join me at the super screen and I'll show you which countries are supposedly those that they are talking about.

Now, remember, this is the perception of corruption in the EU. The report surveyed business people in all 28 member states about their perceptions within their own countries, and here's how they responded.

The green countries, perhaps not surprisingly, the Scandinavians, the Nordics, the UK, and -- Ireland. People said -- less than 50 percent said that it was widespread.

If you look at the orange countries, 50 to 90 percent. Here you're talking about France, you're talking about Germany, you're talking about Bulgaria, and you're talking about Poland, where the perception of corruption, the number of people who said that was between 50 and 90 percent.

Let's take those two out, and if you look at over 90 percent, this is the perception of people in their countries. Greece, Spain, Portugal, of course, are there. Slovakia, Slovenia, Hungary are also there. Over 90 percent of the people surveyed had a perception -- said that there was a perception of corruption.

Put them all in at the same time and you really do see the picture from the north of the continent through the swathe in the middle right down to the bottom.

Now, the EU home affairs commissioner, Cecilia Malmstrom, has demanded governments do more to stamp out corruption. Jim Boulden is at CNN London and joins us now. Jim, this is all about perception, not reality, but when we look at these sort of colors and this sort of size and scale, it's enough to give cause and pause for concern.


BOULDEN: It is, and the reason she says it's "breathtaking," Richard, is because she says it actually stops companies from investing in the southern regions of Europe because of that perception that there is corruption.

What I thought was interesting, though, is the corruption numbers aren't as bad in those countries as the perception is. And that came out of the interview with Mrs. Malmstrom we had a few hours ago. Listen to what she had to say about that.


CECILIA MALMSTROM, EU HOME AFFAIRS COMMISSIONER: I think there's a general discontent with politicians all over Europe and people try -- tend to think that they're -- the politicians, the government or in the opposition there, they're all corrupt. They're not too good. So, probably, this is an overestimation.

But this is a subjective figure that they give. And, well, if the reality is not as bad, that's good, but still, it's a problem if perceive the politicians as so corrupt because it undermines the credibility of the whole democratic system.

BOULDEN: And then, central European countries, I thought it was interesting, a country like Poland said 15 percent felt that they have actually had to pay bribes mainly in health care. What is it about these countries -- Hungary, Slovakia, and Poland -- where a number of people are saying that they're paying bribes in health care. What does that tell us about those countries?

MALMSTROM: Well, it's a clear signal to those countries that apparently many people feel that they can't get proper access to the health care system. They have to pay a bribe. And this is very worrying because then, of course, those who can pay, they will get access to health care, but not the others. So, it's a very discriminatory form of corruption --


MALMSTROM: -- as well. But I hope it encourages countries to look closely into this sector to see how that can be addressed.

BOULDEN: Now, in your survey, overall, 8 percent of Europeans say they'd witnessed a bribe. Do you find 8 percent a big number or a very small number? I'm intrigued.

MALMSTROM: Well, that depends how you look at it. Ideally, it would be zero, of course, but it could be much higher. Last year, I think it was 9, so it seems to be constant. But still, it's a big number, if citizens feel that they need to pay a bribe. Probably higher in other parts of the world, but high enough for countries to take seriously.

BOULDEN: Did bribery get worse during the economic crisis? My thought is it probably did, but did the numbers bear that out?

MALMSTROM: It doesn't prove it. We can't really tell that it's getting worse. My gut feeling is also that it is getting worse. But we don't really have the figures to prove it. For this, we probably need a lot more independent academic research. I know there's a lot going on, but we haven't had any possibilities to insert that in our reports.

BOULDEN: Why do these numbers? What does the European Union do with these numbers once they have them?

MALMSTROM: Well, now we have them, we will discuss them with member states. We are also publishing issues where we think that each member state should go further and do more. And hopefully, we'll have a good discussion with them, together with the national parliaments, European parliament, and see how we can move further, learn from each other, and fight this.

There's a common commitment to get Europe out of the crisis, and it costs a lot of money as well. So, we must do more. This report shows that corruption exists in every country, even if there's more in some and less than others. And we can do a lot more, and we can learn from the best practices and work harder. There will be a new report in two years, hopefully showing progress.


BOULDEN: So, Richard, I think that the most interesting number was in sectors, if you look at sectors, construction, 50 percent of those surveyed said that they feel that there is corruption in the construction sector across the board in Europe, Richard.

QUEST: Jim Boulden at CNN London for us this evening. Jim, thank you. Now, let's stay with the thought and the theme of corruption.

Four days before the start of the Winter Olympics in Sochi, and there's some concern -- excuse me -- that some hotels might not be ready in time. The opening of one hotel designated to accommodate journalists has already been postponed, according to the organizing committee.

Now, these Games are the most expensive Olympics ever, costing around $51 billion. This is a website, Sochi 2014 Encyclopedia of Spending. It's been launched by the anti -- excuse me -- corruption activist Alexei Navalny, and it paints a vivid picture, as he sees it, of suspected costs and overruns.

So, for example, you call up various different things: organizing committee, the organizing committee center, and up will -- come up and tell you a summary of the allegation, the total cost, and it was over-priced by 1.3 times.

We can choose just another one at random. Let's just see what that one comes up as. The ice cube curling center, let's see what that comes up -- no, is it going to come up? No, that one's not going to come up. Gives you an idea of the sort of things that they are talking about, though, with the various things.

CNN's senior international correspondent Nick Paton Walsh is in Sochi and joins me now. I suppose we've known about these allegations of corruption or money -- some people say that 30 percent of the money went missing. But the Games are now upon us. Surely it's time to move on.


NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, certainly. The Russian government's answer to that is that much of that money was, in fact, spent on simply getting the infrastructure here of Sochi. Which way back was really developing Russian town, not part of the major infrastructure of this country.

Getting up to scratch to be able to accommodate the thousands of people who'll be arriving en masse in the coming days. And we see that in a lot of the roads constructed here. Some an astronomical, frankly, inexcusable cost.

But yes, opposition members make the point, too, that a lot of this money, perhaps even as much as half of it, may in fact have been pocketed by those in favor with Moscow. Now, that's nothing particularly strange or alien to Russia, frankly. Corruption endemic here, lots of costs, particular of government project, end up being embezzled.

So, those points made by Putin's opponents have a lot of basis in fact, but so, too, does the Kremlin's argument when you look at this city - - well, I'd been here about ten years ago -- substantially different now to how it was then. There's been a lot of building going on here.

QUEST: Right. All right --

WALSH: You can't really see why you'd need the $51 billion to do that, but -- sorry, Richard.

QUEST: I just want to jump in here, because I was in Moscow yesterday and over the last few days for "CNN Business Traveler." One of the views I heard again and again is stop beating up on these Olympics. They're upon us, we know there are security concerns, but it's time now to focus on the sport or the events that's going to be happening. Do you think they have a point?

WALSH: I think to a certain degree. Although, in many ways, Russia, I think, wants itself to be absolved from the normal criticism that any other nation necessarily faced. The Chinese had great scrutiny of their lack of readiness and the problems they faced ahead of their Summer Olympics, too.

So, I can't expect how necessarily they're expecting to invite the whole world here and no one to cast an eye on some of the issues being before it. Major issues about gay rights here, there are major issues about corruption.

Security is a genuine concern. The decision to hold the Olympics in southern Russia could, some say, be misguided. Sochi distant from the violence, but still in an area where there's been a very volatile violent insurgency and two wars in the past 15 years, Richard.

So, I think it's fair that they have received the scrutiny that they have. They're not used to it because the Kremlin have been stifling that for the past 14 years of Putin being the main political figure in Russia, so of course they're upset. But that's part of being part of the international community and inviting everybody here, Richard.

QUEST: Nick Paton Walsh putting it as it is. Many thanks, joining us. We'll talk more over the days ahead, of course, and certainly as the Games get underway.

Now, tens of thousands of athletes, fans, and journalists are on the way to the Russian city this week, and the builders have barely left. In some cases, they haven't left at all. It's all looking a bit last minute, as CNN's Ivan Watson explains.


IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: The Russians built all of this -- the ski lift, the high-speed train, this entire Alpine city, within just the last seven years. But now, four days before the opening of the Winter Games, it's clear that some of this massive development up in the mountains will not be ready in time for the Olympics.

WATSON (voice-over): The Associated Press reports three out of nine hotels reserved for journalists near the Alpine sports venues are not yet ready, while even an international hotel operators admits construction is behind schedule.

OLIVER KUHN, SWISSHOTEL SOCHI MANAGER: Well, it was slightly delayed. We actually planned to open already last month. Due to some challenges we had here, it's actually now on a short period, it's a short testing time for us, but our team is quite strong, quite trained, so we can handle it from our side.

WATSON: The International Olympic Committee insists everything is OK.

THOMAS BACK, INTERNATIONAL OLYMPIC COMMITEE: And there are still some issues to be solved, as it is always just before the Games. But there are also in this respect, we are in contact with the organizing committee and we hope that the situation will be solved in the next couple of days.

WATSON: Russia and the Olympic Committee are gambling that even if you don't build it in time, the people will come

Ivan Watson, CNN, Sochi, Russia.


QUEST: I think that's pretty much a sure bet. We've set up our special section of our website that highlights the Aiming for Gold coverage of the Olympic Games and a special interactive map, which gives you a tour of the various Sochi venues.

Everything from the arena where ice hockey is to be played -- it's known as the Puck -- to the mountain tracks where bobsledding and other races will also be held. It's at

After the break on QUEST MEANS BUSINESS, it's the last will and testament of Nelson Mandela. It's a $4 million estate, and we'll tell you, it's being split up to ensure his legacy lives on.



QUEST: The will of the former South African president Nelson Mandela has been made public. His estate is worth just over $4 million, and it'll be divided between family members and causes close to the former president's heart, as our correspondent in Johannesburg, Robyn Curnow, explains.


ROBYN CURNOW, CNN INTERNATIONAL CORRESPONDENT (voice-over): Nelson Mandela made his final journey in December. Now, his final wishes have been made public after being read to his large and divided family.

DIKGANG MOSENEXE, JUDGE, EXECUTOR OF MANDELA WILL: The will was read from page to page, and it therefore took longer than we had estimated. Virtually all of the Mandela family and descendants and so on were present.

CURNOW: Mandela left money to his children, step-children, and grandchildren, but nothing to his ex-wife, Winnie. As for his widow, Graca Machel, she gets the assets she brought into the marriage. Based on both their wishes, the will attempts to rectify that they were inadvertently married in community of property, so legally she's entitled to half of his personal estate, even though that was not their intention, says a lawyer familiar with the request.

MOSENEXE: The will would make available to her all what she would -- or she may opt to have exactly half of the estate. So, it's an election that has to be exiled in 90 days.

CURNOW: While Machel pondered her options, others are grateful for a share of the late South African leader's estate, estimated at about $4 million.

CURNOW (on camera): Mandela also provided for long-serving staff members who had supported him; the African National Congress, his political party; and some schools and universities.


CURNOW (voice-over): Educational establishments that he was close to during his lifetime.

ADAM HABIB, VICE CHANCELLOR, WTTS UNIVERSITY: I think it's symbolically important, because it sends a powerful message to leaders that education is an important tool for transformation. He was somebody who remembered that in their will, and others can do so as well.

CURNOW: So, for years to come, poorer children will be educated with money from Mandela's estate. As for his wife, his ex-wife, his children, step-children, and grandchildren, no comment so far on a will that was first drafted in 2004, almost ten years before Mandela died at the age of 95.

Robyn Curnow, CNN, Johannesburg, South Africa.


QUEST: Now, in just a moment after the break, and the Year of the Horse. China's tourists are expected to head for Europe at a gallop. Two cities are battling to draw them in. Who'll win, Paris or London?




QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news always comes first.


QUEST (voice-over): One person was killed and two were wounded when a suicide bomber blew himself up inside a public minibus in southern Beirut on Monday. The attack happened in Choueifat, a predominantly Christian and Druze neighborhood south of the Lebanese capital.

A Russian student is in police custody following an attack at a Moscow high school. The student, who was armed with a rifle, shot and killed a teacher before taking 20 people hostage inside a classroom. He opened fire on the police when they entered the school, killing one officer before being disarmed.

Ukraine's president is back at work after falling ill during the country's political crisis. Protesters rallied again over the weekend, demanding President Yanukovych step aside. Russia's foreign ministry is urging protesters to stop what it's calling their provocative steps.

It's been a brutal trading day in the United States. The Dow Jones opened lower and continued to fall sharply during the session, off 326 points at the close. It follows a grim January as emerging market volatility and disappointing earnings rattle the markets.

So far, the Dow is off 7 percent this year.

And Broadway is set to dim its lights on Wednesday in memory of Philip Seymour Hoffman. The actor was found dead in New York on Sunday of an apparatus drug overdose. According to law enforcement sources, an autopsy was due to be held on Monday.



QUEST: The year of the horse, the Chinese New Year is a few days old. And the weekend saw celebrations across the globe, including these in Beijing. More Chinese people than ever are looking forward to taking a vacation abroad in this year of the horse.

By 2020, which incidentally is the year of the rat, around 200 million Chinese will travel overseas. That's double the number that did last year.

So you'll get an idea of this huge level of growth. In fact, outbound tourism from China is the single largest growth market in the world. They are the world's most wanted visitors. They have a global reputation of being big spenders in the shopping malls of Paris and London.

The gloves are coming off. It is a battle royal. Isa Soares and Jim Bittermann report on the great grapple for the Chinese cash.


ISA SOARES, CNN CORRESPONDENT (voice-over): In one corner, London; the other, Paris; both battling it out in a tug-of-war.

Over there, the Chinese shopper, the titans of tourism right here in Europe.

JIM BITTERMANN, CNN SR. INTL. CORRESPONDENT: Absolutely right, Isa. The Chinese are among the world's most important shoppers at the moment. In fact, some cynics refer to them as walking wallets.

And of course the French would like to see them walk into their stores.

BITTERMANN (voice-over): The department stores and luxury brands got a big boost recently from the government, which has now speeded up the visa process for Chinese tourists, promising a visa within 48 hours.


PIERRE PELARREY, DIRECTOR, PRINTEMPS DEPARTMENT STORE (through translator): Chinese customers make up around 15 percent to 20 percent of our turnover and can rise to around 30 percent during their usual travel period.

BITTERMANN (voice-over): What's more, since France is part of the 26- nation Schengen area of Europe, where immigration and customs controls have been eliminated, once inside the area, tourists can move freely.

And easily just to top it off, the French stores are really making an effort, with hostesses and salespeople who speak Chinese and, in this store, an automated system where shoppers can obtain sales tax refunds even before they head to the airport to go back home.

BITTERMANN: I hate to say it, but Paris is a tough place to be.

(Speaking French).

SOARES: Well, Jim, with eight times more Chinese shoppers than the U.K., the French charm offensive may be working. But British retailers are saying the battle is not over yet.

SOARES (voice-over): Right now, London estimates that the U.K. loses some 1.2 billion pounds annually in retail sales to other countries like France. And with that, 24,000 jobs. But change is afoot.

RICHARD DICKINSON, U.K.-CHINA VISA ALLIANCE: Forty percent more Chinese tourists have arrived this year than last, and the government, to a large extent, are working with the industry, with retailers and with business to see where we can tweak the process.

SOARES (voice-over): In stores like the popular House of Hanover, David Basrawy is aggressively catering to the Chinese tourist. He's hiring more Mandarin speakers. He trades yuan for pounds and sells the traditional British brands that Chinese crave.

DAVID BASRAWY, DIRECTOR, HOUSE OF HANOVER: They're looking for an excuse (ph). They're looking for pure cashmere made in Scotland.

SOARES (voice-over): The British government has a plan. It has set a 100 billion pound trade target with China by 2015.

UFI IBRAHIM, BRITISH HOSPITALITY ASSOCIATION: We've seen a number of very senior political figures from the United Kingdom go to China to express their strong desire to reach the fantastic bilateral trade targets that have been set.

SOARES: But the Brits may have the final knockout punch. We have tradition, craftsmanship, modern Royals and Harrods.

So Jim, the battle is on.

BITTERMANN: In France, I'm Jim Bittermann.

SOARES: And I'm Isa Soares in London.


QUEST: So what does the British and the mayor of London make of it? At the World Economic Forum in Davos last month, I met the mayor of London, Boris Johnson, and he was keen to point out just how many French citizens had attempted to make London their home.


BORIS JOHNSON, MAYOR OF LONDON: Unfortunately, the statistics speak for themselves, my dear Richard.


QUEST: I don't agree with you.

JOHNSON: 4.9 million people came to London in the summer of last year, which is more than any other city in the world, where the mere populace -- you know, I'll just give you one statistic now.

We have approximately between upwards of 300,000 and 400,000 French people living in London. I'm now the mayor of the fourth biggest French city on Earth. There are 19,000 British people living in Paris. So that's 19,000 plays 400,000.

And you know, there may be all sorts of contributory factors, but there's no doubt in my mind that one of the things going on there is people see in London an incredibly diverse economy, big opportunities for jobs.


QUEST: You've got to hand it to Mayor Boris Johnson; he can turn any fact to his major advantage.

Coming up in a moment on QUEST MEANS BUSINESS, a little bit of American football and rather a lot of advertisements. Never mind the Super Bowl. We'll tell you who won the battle of the commercial breaks.





QUEST: Almost 97 million people watched last night's Super Bowl, America's top American football's biggest event of the year. And as we know, advertisers spent a fortune on trying to reach that captive audience.

It's not just enough to capture the audience; you've got to actually get their attention and make noise against all the other commercials that are shown at this crucial moment in television.

Christine Romans has been assessing this year's offerings.


CHRISTINE ROMANS, CNN ANCHOR: Monday morning quarterbacks are calling it the Boring Bowl. But no question, the ad trend has moved away from babes and beer and slapstick humor to more nostalgia, trying to reach a broader audience.


ROMANS (voice-over): Budweiser had puppies last night. This kid lassoed the Doritos from his older brother. And there was no shortage of cars. This cinematic Ford Fusion double-length ad. And then there's this debut of Maserati, a four-door sedan, the closest thing most of us will ever get to a Maserati. They price still around $7,000.

Radio Shack gave us brand reinvention with its nod to Gen X.

And maybe one of the most effective ads came after the game, after John Krasinski helped sell insurance, save money by advertising after the game. And you can save money, too.

In all, 90 commercials. If you watched the Super Bowl from start to finish, you watched 54 minutes of ads, 18 minutes of that half-time show and 132 minutes of Bronco butt kicking. But if $4.5 million for every 30 seconds of ad time, nearly half a billion spent to hawk their wares, no real standout ad this year -- Christine Romans, CNN, New York.


QUEST: And I can tell you, in the length that it took Christine Romans to do that report, it would have cost you $8 million, since it was about a minute long.

One company that might disagree with the last comment is the toymaker GoldieBlox. The firm made history with its Super Bowl advertisement last night.



QUEST (voice-over): With a staff of just 15 people, GoldieBlox is the first small business to show an ad during America's most watched TV event. The company creates books and toys aimed at getting young girls into science and engineering.


QUEST: Now how did this little company -- you'll find out what the turnover is in a moment -- manage to get a Super Bowl ad? It was a competition to get Super Bowl and small business on the same page.

Joining me now is the founder and chief exec of GoldieBlox, who joins me, Debbie Sterling.

Good to see you, Debbie.

DEBBIE STERLING, FOUNDER AND CEO, GOLDIEBLOX: Great to see you. Thanks for having me.

QUEST: What's its turnover? What's your revenues, roughly, of the company?


QUEST: Roughly?

STERLING: I can't reveal that. But what I can say is that we just can't make the toys fast enough. So we're racing to keep up with the demand.

QUEST: So here -- all right. Let's give you the free ad, since -- let's face it: it would -- you have a 30-second commercial last night in the third quarter, which would have cost $4 million, correct?

STERLING: That's what I hear. That's what they tell me.

QUEST: How did you manage to get somebody to give you a free $4 million ad?

STERLING: It's an incredible program. And QuickBooks ran a competition and 15,000 small businesses entered, including GoldieBlox. And it was up to public vote. And we begged people every day --

QUEST: Now this is --

STERLING: -- to vote for us.

QUEST: -- because how -- when you have one of the things, which is up to public vote, you've really got to gerrymander the vote. It's not just enough to ask your mum, your mother-in-law and Great Auntie Bess to vote.

You've got to do more than that.

So what do you do to make more people vote?

STERLING: Well, GoldieBlox isn't just in products. We're on a social mission. We're trying to disrupt the pink aisle and give more options to our girls than dolls and princesses.

QUEST: Oh, come on. It takes more than that to get -- how many votes did you get?

STERLING: I hear it's millions. But I -- the message really resonates with people. Parents are fed up with dolls and ponies and princesses. And they want more for their girls.

QUEST: What are you giving -- look, come on, then; what are you giving them that's different and, I mean, than dolls and.

STERLING: So the insight that I had when I was developing the company, I wanted to get girls interested. And what I learned --


STERLING: -- is that they love reading and characters and stories.

QUEST: All right.

STERLING: So instead of the typical instruction manual that says 1, 2, 3, here's how to build the thing on the box, GoldieBlox is stories and a building set combined.

QUEST: Yes, well, this male is having a bit of difficulty just opening the box, never mind -- which says a lot about me, I suspect.


QUEST: What's been the reaction? You had this commercial.

I can't open it; you'd better open it.


QUEST: I -- you had this commercial.

What's been the reaction to it?

STERLING: It's been overwhelmingly positive. Moms, dads, it's brought them to tears. People just keep saying they wish they had this toy growing up. They're excited to give their daughters --


STERLING: -- the opportunity.

QUEST: Enough of the plug of the -- you've plugged your toy enough, thank you.

Tell me about being on the Super Bowl.

Can you see today a reaction in the calls, in the sales, in the reaction to your company?

STERLING: It's been huge. I mean, even just entering the competition got us on the shelves of Target nationwide. So we're now talking international distributors; emails are just rolling in. People want to carry the products all over the world. It's -- our business has dramatically changed as a result. And --

QUEST: But what did you feel like yesterday when you saw the commercial going up? Because you and I've been talking, I think, now for about a minute and a half. So probably three or four times as long as your commercial actually ran.

But I'm guessing that 30 seconds seemed like a lifetime to you yesterday.

STERLING: You know, it really felt like we were making history. And I know it sounds corny. But it's true. I mean, this is such a powerful and important message for girls and to have almost 100 million people hear that message, it was -- it was just goose bumps. I mean, I had to pinch myself. I felt like I was in a dream.


I can't open it, those boxes.

STERLING: So this one's our brand new item --

QUEST: All right.

STERLING: -- GoldieBlox and the Dunk Tank. And --

QUEST: We're out of time, but open it up for me.



Thank you very much for joining us and I'm wishing you all the best of luck, a magnificent story --

STERLING: Thank you so much --

QUEST: And I know --

STERLING: -- for having me.

QUEST: -- a great deal more from your company. Thank you very much indeed.

Now if you watched the football from the comfort of your sofa, you may need to burn a few calories after the feeding frenzy that the Super Bowl generates.

Samuel Burke may have just the answer for you, those of you less keen on the traditional gym.


SAMUEL BURKE, CNN CORRESPONDENT (voice-over): This doesn't look like somewhere you'd usually work out. But now an Internet connection can bring a personal trainer right into your home.

UNIDENTIFIED FEMALE: Can you show me the jump shot again?

BURKE (voice-over): is one of the new services that uses your webcam and a web browser to allow you to work out with a trainer anytime, anywhere.

UNIDENTIFIED FEMALE: So you got it. Here's eight -- two more.

BURKE (voice-over): Yoga, Pilates, aerobics, strength training, group classes cost $14; one-on-one with a trainer, 29 bucks.

UNIDENTIFIED FEMALE: I feel like it works even better than gyms. And it's just really functional, useful and convenient.


BURKE (voice-over): Or you can use apps to lose weight or bulk up.

UNIDENTIFIED MALE: Put your foot crunch.

BURKE (voice-over): Passion for Perfection is a free app to guide you through sit-ups --

BURKE: It takes you through a series of eight exercises and is counting you through each one.

ALEX ZIMMERMAN, NATIONAL MANAGER, EQUINOX GYMS: Definitely technology and finesse, very, very much are colliding. On the technology side, you have engineers and venture capitalists. And then on the -- on the fitness side, you have, you know, scientists who are looking at evidence-based methods to change behavior.

BURKE (voice-over): Runtastic has a free app to track your pushups.

BURKE: It counts it by when your nose touches the screen of your phone. So it's making sure that you're going all the way down.

DR. TARA NARULA, CARDIOT, LENOX HILL HOSPITAL: I think these apps are great because they really make it easier for people to work out. And that's ultimately what we want is people to find ways to incorporate working out and exercising into their daily lifestyle and regime.

BURKE (voice-over): Dr. Narula says consult a doctor first if you have heart problems or any other health issues. But with more than one- third of the entire world overweight, she said any attempt to focus on exercise is worthwhile, whether it's pushups or sit-ups on an app or working out in the kitchen.

UNIDENTIFIED FEMALE: There you go. And then let's do jump rope.

BURKE (voice-over): Samuel Burke, CNN --


BURKE (voice-over): -- New York.

UNIDENTIFIED FEMALE: And then let's just punch it out.


QUEST: Now coming up after the break, it's pretty chilly in New York, and the weather shows no signs of letting up. We'll have the latest forecast when we come back.




QUEST: So I flew from Moscow to London yesterday; it was very cold in Moscow. And then I got to London and then I flew to New York today. You may have been following the tweets. The snow, as we landed at Newark Airport, why do you care, I hear you ask.

And a very good question. The extreme weather will not subside in the eastern United States and things are especially bad in New York and in Philadelphia. Look at the sort of dreadful conditions. This is a -- this is a live picture at the moment, just outside the TimeWarner Center, where our studios are, looking up towards Central Park, very nasty.

Many firms trying to leave after the Super Bowl in New Jersey have been stranded at airports in the region. Newark Airport was particularly badly affected. More than 1,800 flights have been canceled. And there are many more delays.

Grim and nasty. Now all in all, last month 30 million passengers were affected by the bad weather. Put this into perspective: that 30 million is the number of passengers that travel. It's more than were delayed by superstorm Sandy.

Tom Sater is at the World Weather Center and joins us now.

How bad is this whack going to be?

TOM SATER, AMS METEOROLOGIST: Well, Richard, I hate to be the bearer of bad news. But come Wednesday, you're looking at another system. Next Sunday into Monday, the snowfall could be even greater than what you're getting today.

So keep the boots, keep the shovels handy. Let's run through this.

And as you mentioned, you know, we had a Super Bowl. American football, and there are thousands of fans here, not just from Seattle or Denver, but the forecast was great. It was balmy. It was 10 degrees Celsius, 50 Fahrenheit. And now we look at Brooklyn and across the entire region, you're looking at, what, 25 centimeters today, 17 Wednesday, another 38 maybe. That's just all relative. We're talking about a forecast models, they help guide us in the forecast. I mean, there doesn't look like much.

By the way, back in the 1700s, we had Candlemas Day, sometimes in Germany they use the hedgehogs for kind of Groundhog Day. The Germans brought it over to Pennsylvania. I don't know how he saw his shadow yesterday, Groundhog Day in the U.S.

Six more weeks of winter. It goes hand in hand. This is a new batch now of warnings that are set up. This is brand new because they were -- this was absent of any watches or warnings just 30 minutes ago.

Here it is; the storm system leaving and you still see a little bit of New York here on the back edge but there is another one approaching, again as mentioned, three systems.

Here's number one, here's number two. This is a seven-day total of the possibility of your accumulation from areas of the Midwest that just get shoved in toward areas of the Northeast.

QUEST: Tom, I'm jumping in.


QUEST: Hang on; I want to jump in here, because all these systems and things, I can hear the viewers saying, give us some practical guidance here.

So the -- today's Monday; the first storm is here and just about gone.


QUEST: Second storm, and you're flying to the United States, is when?

SATER: It's starting as we speak. It'll get -- really get going throughout the day on Tuesday in the U.S. But then it looks like more of a Wednesday event for you.

QUEST: Right.


QUEST: So Wednesday up into the Northeast of the United States. And then next weekend, a third storm kicks in.

So if you're flying to the United States, you've got three -- particularly the Eastern Seaboard, three potential nasty storms, or two more to come, that could really delay you.

Carry on, Tom, sorry. Forgive me.

SATER: Yes. All right, thank you.

And as far as the delays, this is for Tuesday, we're looking this time at the D.C. area. So it's not just the Philadelphia region and New York. We're also looking in the next system to affect areas in the Midwest, in the Ohio Valley. SO we're talking, you know, maybe St. Louis, Cincinnati; Chicago's always been on the action. But Philadelphia on this as well.

This is just for Tuesday. Hey, you've had your problems, as you know, in England, I mean, it's just too much rainfall. We had a tidal bore of course; we've had flooding that's occurring everywhere.


SATER: And here comes another system, Richard, this is the second of three, believe it or not, this is going to cause more gale winds. I think the problem is the ground is so saturated, how the root system of trees can withstand these winds, look at this, this moves right over the region. That's the second of three.

But I've got to show you this, because it's the Mediterranean. We've had terrible flooding in parts of Italy. Let me show you the snowfall that has been making its way in the Alps. This is Austria's total. Look at the pictures here. They're measuring the snowfall by the meter. And you can see this, how this is creating this -- a mound of snow. They're so dangerous, even to the roofs, on areas that are considered, you know, used to stuff like this.

Look at that. That is just amazing, Richard. And again we're going to look at more snow and heavier amounts will continue. So we're going to look at problems, not only on one side of the Atlantic, but the other. This is down in Tbilisi, as you can see in Georgia, they've had snowfall which is good, because that's close to Sochi and we'd like to have some winter weather there.

But here we have some possible delays on Tuesday, mainly for winds across the U.K., you can see them there in London. Dublin's going to have probably over 100 kph winds all the way down into Lisbon. This is just something we continue to watch and it's never a great thing.

But it's winter. We'll have to do the best we can. Hang in there, Richard. You got more on the way. We'll keep you covered.

QUEST: Winter in the Northern Hemisphere, Tom Sater, and we'll keep you informed on what's happening.

And I'll have a "Profitable Moment," bad weather, bad markets. We'll put them all together after the break.



QUEST: Oh, dear, what can the matter be? Well, on a Monday in the markets off 2 percent in New York, it is difficult to know what to do and what to say except one thing: be very careful before you decide to sell into a down market. This is well just a correction. Seems to be the view of many.

And certainly nothing yet for causing panic.

And that's QUEST MEANS BUSINESS for this Monday. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you tomorrow.