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Asia-Pacific Markets Finish Mostly Lower; European Markets Look To Rebound; Justin Wilson Dies; France Train Suspect Was Under Surveillance; North And South Korea Reach Deal To Defuse Tensions; New Signs VP Biden May Jump Into U.S. Presidential Race; Bush Clarifies Use Of Term "Anchor Babies"; Indian Stocks Struggle To Rebound From Big Losses; Oil Producers Fight For Market Share; College Fraternity Suspended For Derogatory Signs. Aired 3-4a ET

Aired August 25, 2015 - 03:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(COMMERCIAL BREAK)

ROSEMARY CHURCH, CNN ANCHOR: Financial markets are opening this hour in Europe following another day of heavy losses in China.

ERROL BARNETT, CNN ANCHOR: Plus a British Indy car driver has died following a crash on a U.S. racetrack.

CHURCH: Three Americans and an Englishman are given France's highest honor for helping stop a potential massacre.

BARNETT: Hello and welcome to our viewers in the U.S. and those of you tuned in from all around the world. Thanks for joining us. I'm Errol Barnett.

CHURCH: And I'm Rosemary Church. This is CNN NEWSROOM.

Stocks in the Asia-Pacific region struggled to rebound one day after the markets plummeted there. We are looking at the numbers. China's Shanghai down more than 8 percent. It's starting to look a little like yesterday and it had been at 4 percent at one point there, 4 percent loss and we'd seen positive territory in the other markets but not the case now.

BARNETT: You see Tokyo's Nikkei is down, the ASX in Australia up at the end of its trading hour. Hong Kong has an hour to go in trading, but we saw volatility for the most part, it's red there in Asia. We won't know for a while how other world markets will react.

Yesterday U.S. markets had a wild response to the Asian markets, plunging more than 1,000 points at the open rebounding and falling hard again. The Dow closed down almost 600 points.

CHURCH: European markets are just beginning their trading day. Isa Soares joins us in just moment from London with that.

BARNETT: But let's begin with Andrew Stevens in Hong Kong, who is watching the Asian markets. Andrew, as we just saw there, there was a lot of volatility today, some evidence of gains, but all of that is erased at the close. ANDREW STEVENS, CNN ASIA-PACIFIC EDITOR: I think it's important to look at the markets around China, particularly Hong Kong and to a lesser degree, Australia, Errol, now Hong Kong is down but not by much.

It suffered a big 5 percent follow through at all today, and I think it's important to point out that China, the Shanghai market is really a market disconnected to just about everything else at the moment. It is not following global trends.

It is not really even following the China economy. It is small investors who are very, very keen to get out as soon as they possibly can and they have been trying to get out since mid-June of this year. This selloff is a continuation of that.

Yes, it is another 8 percent fall on Shanghai today. That hurts local investors, but local investors are the main part of the investment community in Shanghai. There aren't that big influences across China itself. That's where we are at the moment, definitely a lot of volatility.

The Nikkei is a very interesting one, down another 4 percent. That may be a reflection on the fact that there are concerns still about, sort of the strength of the global economy and what it's going to means for an exporting country like Japan.

BARNETT: OK, today looking a lot like yesterday, Andrew Stevens live in Hong Kong giving us the Asian market reaction there. Andrew, thanks.

CHURCH: All right, let's head to Isa Soares in London. Isa, of course, European markets just opening now. It might be a little too early perhaps to start to see a trend, but they finished way down yesterday.

ISA SOARES, CNN CORRESPONDENT: They did, indeed. Good morning to you Rosie. Good morning, Errol. They fell quite substantially. I think the stocks took quite a tumble once we knew how much Dow futures were looking down 600 points.

We saw going from 2 percent all the way 4 or 5 percent. But look at those markets, Rosie, really turning around, obviously still on edge following those sharp and very wild and brutal swings we saw in Asia as well as in the U.S.

But you know, coming up pretty much strong this morning, the FTSE up 2 percent. And look at the Xetra DAX up almost 2 percent. This is quite a turnout.

Xetra DAX yesterday, Rosie, it had fallen quite substantially at one point more than 4 percent. The Xetra DAX in particularly had lost, pretty much in their territory -- it lost 20 percent of -- since the beginning of the year of its high.

[03:05:06] It really goes to show how closely linked they are with Asia. And the reason the Xetra DAX fell so much is because Germany is Europe's engine of growth and has the biggest exposure to China. It's the third biggest trading partner with China.

So I think concerns there over what exports would mean for German exports and look at Xetra DAX, it has entered bear territory down more than 20 percent yesterday since its highs. It really paints a picture.

But today in the last 45 minutes or so we got some very good data out of Germany. GDP actually grew 0.4 percent in the second quarter. What it showed it that its exports are still doing fine, but it paints a bleak picture when you look ahead to the third quarter.

We're talking about what companies are -- have very strong exposure to China. We're talking about automakers and we know that Diameler and BMW are down 15 percent in August.

So many concerns here regarding what this and what China may mean, the growth in China may mean for exporters here in Europe. Nevertheless, European traders starting the day positive, let's see if they can hold on to those gains.

It's still pretty much a day where investors are going to be on edge, closely monitoring those numbers out of China. Waiting and hoping with a baited breath to see what China does in the next coming days -- Rosie.

CHURCH: Good to see those markets in positive territory. We did see that in Asia though in the beginning. We will watch it very cautiously to see what happens with those markets. Isa Soares in London and Andrew Stevens in Hong Kong, many thanks to you both.

BARNETT: Now to the other big story we are following, the world of motor sports mourns the loss of a 37-year-old, British Indy car driver, Justin Wilson, who died from severe head injuries suffered at the Pocono Raceway in the U.S. on Sunday.

Now Wilson was struck in the head by nose cone of another car that crashed. He remained hospitalized in a coma after the race accident before dying Monday evening. Wilson was remembered by one of his fellow drivers.

(BEGIN VIDEO CLIP)

ED CARPENTER, INDYCAR DRIVER: I think he exemplified, you know, what the reason that we all love doing this, you know, he fought so hard to get back and as challenging as today is and yesterday was, you know, he's doing what he loved to do and what we all love to do. And why we'll all be back competing in his honor in the near future.

CHURCH: Mark Miles, the CEO of the parent company for Indycar in Indianapolis Motor Speedway said this is a monumentally sad day for Indycar and the motor sports community as a whole. Justin's elite ability to drive a race car was matched by his unwavering kindness, character and humility.

BARNETT: This time yesterday, we watched live as four men hailed as heroes were awarded France's highest honor in a red carpet ceremony at the president's palace. The three Americans and one Briton are credited with stopping a potential massacre aboard a Paris-bound train on Friday.

CHURCH: French President Francois Hollande presented the men with the Legion of Honor on Monday and praised them for their courage. British citizen, Chris Norman helped subdue the gunman and said he was emotional meeting with France's leader.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: You sound emotional today. How do you feel in your heart?

CHRIS NORMAN, RECEIVED FRENCH LEGION OF HONOR AWARD: I feel happy to be alive. Frankly that was the real thing and I'm happy that nobody got hurt.

(END VIDEO CLIP)

BARNETT: Now we didn't have this information at this time yesterday, but now we do know the identity of another hero who helped stop the gunman. Mark Moogalian was actually the first one to try to take the gun away from the shooter on Friday. The French-American was shot in the neck and is currently recovering in hospital. He will receive his own Legion of Honor when he is better.

CHURCH: French sources say the suspected gunman Ayoub El Khazzani was well known to European authorities before the attempted train attack. The Moroccan national was the subject of an intelligence notice, which would put him under special surveillance. El Khazzani's lawyer says her client denies he was trying to launch a terror attack and was planning only to rob the passengers.

BARNETT: For the latest on the story, let's bring in our senior international correspondent, Jim Bitterman, who joins us live from Paris this morning. And Jim, for all of the criticism of security on European trains, at least officials were aware of El Khazzani to some degree. He was on the radar, so to speak.

[03:10:02] JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: That's right, Errol. But because he was on the radar, politicians and commentators are beginning to ask why it is that security officials didn't do something to head off the attack ahead of time.

(BEGIN VIDEOTAPE)

BITTERMANN (voice-over): Long before Ayoub El Khazzani was taken down and hogtied after the train attack on Friday, he was well known to European authorities. According to French intelligence sources, the accused terrorist was the subject of what is known of an s notice that can signal intelligence communities across Europe that a person merits special surveillance.

It was that notice reportedly provoked by El Khazzani's connection to radical mosques in Spain, which brought to attention his trip from Berlin to Istanbul in May. It's not known if he also travelled to Syria at that point.

A senior European official says it is believe he was likely linked to a cell of French ISIS fighters in Turkey. The cell is thought to have directed another foiled attack in April against a church in the Paris suburbs.

The gunman in that attack is awaiting trial after accidentally shooting himself in the foot and turning himself in to medical personnel. El Khazzani according to those who wrestle his weapons away also does not appear to have been highly trained especially after his assault rifle apparently jammed.

ALEK SKARLATOS, AMERICAN WHO HELPED SUBDUE GUNMAN: Yes, he clearly had no firearms strange whatsoever. And, yes, if he knew what he was doing or even just got lucky and did the right thing he would have been able to operate through all eight of those magazines and we would have all been in trouble and probably wouldn't be here today.

BITTERMANN: El Khazzani who is still undergoing questioning at this French intelligence headquarters outside Paris, was not, according to his lawyer, a terrorist at all. She says he was trying to pull off an armed robbery of the train with weapons he found in a Brussels public park.

El Khazzani's father in Southern Spain interviewed by a British newspaper said his son never talked politics, but just liked football and fishing although he admitted that the 25-year-old had been arrested on drug-related charges.

Given El Khazzani's track record and the amount of weaponry he allegedly brought on the train, French authorities are apparently not buying the lawyer or father's depiction of his motives because the case remains under the jurisdiction of France's top terrorism prosecutor.

(END VIDEOTAPE)

BITTERMANN: And that prosecutor has to make a decision before the end of the afternoon today, basically under French law, the El Khazzani can be held 96 hours for questioning without charge, but that period ends this afternoon and the prosecutor is going to have to either bring him before an antiterrorism judge and bring charges or let him go.

That latter thing seems to be pretty much impossible at this point. I think there will be charges brought. It will be interesting to see exactly what charges are brought. The prosecutor, I don't think is buying into that lawyer's argument that this was just an armed robbery gone bad and it wasn't a terrorism offense -- Errol.

BARNETT: And there is plenty of evidence we have seen and heard from witnesses that puts holes in that argument, but let's wait and see what the charges will actually be. Jim Bitterman live for us from Paris. Jim, thanks.

CHURCH: Fourteen people are under arrest in Morocco and Spain accused of recruiting for ISIS.

BARNETT: The Spanish interior ministry announced the suspects were arrested in suburb of Madrid and several locations in Morocco. This is a result of a joint ongoing operation between the two nations.

CHURCH: Now to the Korean Peninsula where the North and South have reached an agreement to ease tensions after days of marathon talks. South Korea has now stopped its propaganda broadcasts over the border as part of that deal.

And North Korea has expressed regret over recent landmine blasts that wounded two South Korean soldiers. Our Kathy Novak is standing by live in Seoul with more on this deal.

So Kathy, an expression of regret from North Korea, an end to cross border propaganda broadcasts from South Korea, how significant is this?

KATHY NOVAK, CNN CORRESPONDENT: It is significant that they were able to come to any sort of agreement, Rosemarie. When you look back to the build up to this, we saw Pyongyang issuing a deadline of 5:00 p.m. local time on Saturday for South Korea to stop these propaganda broadcasts or North Korea saying it would attack.

And South Korea and the United States were preparing themselves for that possibility, but instead we saw these very high-level talks that went for several days. They talk for about 43 or 44 hours.

And you can imagine that there must have been a lot of back and forth on these red lines for both sides that North Korea wanted these broadcasts to stop and South Korea was demanding an apology over the landmines.

President Park Geun-Hye said that publicly yesterday. An expression of regret seems to be the compromise that was reached. Any expression of regret from North Korea is significant. North Korea doesn't apologize for much, if anything.

[03:15:02] But it does get it out of taking responsibility, specifically. Because back when these accusations were made by both South Korea and the United Nations, that North Korea was responsible for planting the landmines on the South Korean side of the demilitarized zone, that border between North and South Korea, North Korea denied responsibility.

So now it is able to express regret saying it is regretful that this incident occurred and South Korea is taking that as an apology and that seems good enough to stop the broadcasts that were so angering the North Korean regime -- Rosemarie.

CHURCH: And Kathy, both countries agreed to work towards the resumption of reunions of families separated by the Korean War in the early '50s. This is significant if the North and South are able to achieve this.

NOVAK: Absolutely. And it's all this picture of mending fences or having some kind of a bettering of relations between North and South Korea, which have not been good to say the least recently. The crux of this meeting was to get over the recent tensions the brink of war situation.

But as we say, they were in there talking for so long that much more must have been on the table. It was this rare opportunity to bring together these high-level people to talk about the things that have been plaguing this peninsula.

We had discussed the possibility that perhaps economic sanctions were brought up. We know that's something that North Korea wants lifted that didn't make it on to the final statement, but significant that family reunions did.

We understand is that more talks will be held next month with the view to having these reunions around the end of September when the Koreans mark their Thanksgiving. That will be significant if they are able to come to an agreement and see that happen -- Rosemarie.

CHURCH: Certainly be watching the progress there on the Korean Peninsula. Kathy Novak reporting from Seoul in South Korea.

BARNETT: Now he is still thinking it over, but word is he has his boss's blessing. Coming up the U.S. vice president's political plans.

CHURCH: And the verbal ceasefire is over. Ahead, what Donald Trump has to say about Megyn Kelly. We're back in a moment.

(COMMERCIAL BREAK)

[03:21:21]

BARNETT: In U.S. politics, Vice President Joe Biden is sending new signals that he just might jump into the race.

CHURCH: Momentum seems to be building for a Biden challenge to Hillary Clinton for the Democratic nomination. Joe Johns reports on the factor that suggest a run and the obstacles Biden could face.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT (voice-over): Joe Biden arrived at the White House today with a lot on his mind, his weekly lunch with the president in the oval office taking on new meaning, with speculation swirling about whether he will run.

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: Everybody is pretty interested to find out, what decision the vice president will make. The president has indicated his view that the decision to add Joe Biden to the ticket as his running mate was the smartest decision he had ever made in politics.

JOHNS: A Democratic source in touch with Biden's associates tells CNN that the vice president is now leaning more towards running for president than against it. The buzz about a possible Biden candidacy has intensified after his secret meeting with influential liberal senator, Elizabeth Warren, this weekend.

DONNA BRAZILE, CNN POLITICAL COMMENTATOR: She's a leading voice in our party, and I'm not surprised that Joe Biden and others would seek her counsel.

JOHNS: So as far the Massachusetts' senator has refused to endorse frontrunner, Hillary Clinton, saying this last week.

ELIZABETH WARREN, U.S. SENATE DEMOCRAT: I don't think anybody's been anointed. I want to see all of the presidential candidates lay where they stand on key issues.

JOHNS: Biden associates see a possible opening because Clinton has been battling trust issues with voters over her e-mail controversy.

UNIDENTIFIED MALE: Did you wipe the server?

HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: What, like with a cloth or something?

JOHNS: The latest CNN/ORC poll shows 53 percent have an unfavorable opinion of Clinton while 43 percent view Biden that way. Democratic candidate, Bernie Sanders, sees Clinton's numbers as helping him.

SENATOR BERNIE SANDERS (D), PRESIDENTIAL CANDIDATE: I think the evidence is pretty clear, we are gaining, and the polls seem to indicate that her support seems to be receding a bit.

JOHNS: Biden still would face major hurdles if he got into the race this late, raising enough money and quickly starting up an organization. In the last few weeks, he's been talking to advisers and supporters about whether a run is realistic. Biden has been told he needs to make a decision by October 1st. One plan would have him announce his intensions the first week of October.

(END VIDEOTAPE)

BIDEN: The official message from the vice president's office is that he has not made a decision about running for president and any speculation to the contrary is false. Joe Johns, CNN, Washington.

CHURCH: Republican presidential candidate, Jeb Bush is trying to defuse a controversy over his use of the term "anchor babies," but he may have created a new one instead. The term sometimes used to describe children born in the U.S. to illegal immigrants.

With birthright citizenship seen as a means to security legal residency, but such children are also born to people legally here as well. At a stop at the Mexican border, Bush insisted he is not using the term in a derogatory way.

(BEGIN VIDEO CLIP)

JEB BUSH (R), PRESIDENTIAL CANDIDATE: My background, my life, the fact that I'm immersed in the immigrant experience, this is ludicrous for the Clinton campaign and others to suggest that how I'm using a derogatory term.

What I'm talking about is the specific case of fraud being commit where there are organized efforts and frankly it's more related to Asian people coming into our country, having children in that organized efforts taking advantage of a noble concept, which is birthright citizenship. I support the 14th amendment.

(END VIDEO CLIP)

[03:25:02] BARNETT: Unfortunately, that did not clear up controversy for Bush because after that statement, a senator from Hawaii called for an immediate retraction and an apology to the Asian community.

A spokeswoman explained that Bush was referring to birth tourism where pregnant Chinese women come to the states on a tourist visa, give birth, and obtain U.S. passports for their newborns.

CHURCH: Meantime, Bush is challenging the Republican frontrunner's position on immigration in general. In a new Bush video, Donald Trump's immigration plans comes under attack. The video includes a conservative columnist assessment that Trump's plan to deport 11 million illegal immigrants is catastrophic.

BARNETT: Trump in turn is using words from Bush's own mother against him in a video on Trump's Instagram account. Take a look.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Would you like to see him run?

UNIDENTIFIED FEMALE: No, I really don't. I think it's a great country and there are a lot of great families. But there are other people out there that are very qualified and we've had enough Bushes.

(END VIDEO CLIP)

BARNETT: That from a number after of years ago. Trump says Bush's low energy and lacks any substance or ideas on how to leave the country.

CHURCH: And Trump isn't restricting his (inaudible) to fellow candidates. He is rekindling a feud with a Fox News anchor. On Megyn Kelly's first day back from vacation, he too somek verbal shots at her on Twitter. He wrote, "I liked the "Kelly File" much better without Megyn Kelly. Perhaps she could take another 11-day unscheduled vacation."

BARNETT: Now he also retweeted this comment to all of his followers, quote, "The bimbo back in town, I hope not for long." Trump had accused Kelly of being unfair to him during the Republican debate when she asked him about insulting remarks he's made about women.

CHURCH: There is nowhere he won't go apparently.

The trading day is just beginning for stocks in Europe. Ahead, we'll see how they are reacting to the Asian market's lackluster performance.

(COMMERCIAL BREAK)

[03:30:34]

BARNETT: You are watching CNN NEWSROOM. Your last half hour of the day with the both of us. I'm Errol Barnett.

CHURCH: I'm Rosemary Church. We are checking the main stories right now. Some sad news from the world of motorsports, Indycar driver, Justin Wilson, has died from injuries sustained at the Pocono Raceway in the U.S. on Sunday. Wilson was struck in the head by the nose cone of another car that crashed. He was 37 years old.

BARNETT: North and South Korea have reached an agreement to ease tensions on the peninsula. The South has now stopped its propaganda broadcasts over the border as part of this deal and North Korea has express regret over recent landmine blasts that wounded two South Korean soldiers. Both sides also agreed to hold additional talks.

CHURCH: Europe's major stock exchanges are now open a day after stocks tumbled there in the wake of Asia's selloff and look at the difference. What a difference a day makes. And look at the FTSE 100 and the DAX up more than 1.5 percent. Paris heading in a similar direction as is Zurich so all in positive territory.

The stocks in Asia struggled to regain ground on Tuesday, but by the end of trading hours most of the arrows were down. You can see there, the Shanghai Composite lost more than 7.5 percent. The Nikkei in Tokyo had actually got itself into some positive territory.

But as you see there, it ended the day nearly 4 percent down. Australia was up doing pretty well there. Hong Kong was up about 0.5 percent.

BARNETT: Now let's take a look at markets in India struggling to rebound from steep losses on Monday. Malika Kapur joins us live from Mumbai with the latest on this and we do have a bit of a broadcast delay. But Malika, when the markets there opened, there were gains to brag about, already that has been erased, what's happening?

MALIKA KAPUR, CNN CORRESPONDENT: That's right. We lost some of the gains we made earlier this morning, but just about 5 minutes ago when I last checked the numbers the markets are once again in positive territory. Just by a little bit. The Sensex was up just about a third of 1 percent.

The Nifty pretty much flat, up 0.05 percent, but what this does shows us is the extent of the volatility we are seeing in the Indian stock market.

I spoke to traders this morning who are heavily invested in the stock market and they said we are just sitting here watching the knives fall and wondering which knives do we try and catch?

There is so much volatility and trading is really choppy. It's not surprising to see markets go up and markets come down. The stocks are becoming cheap, but many traders say that they are really high value stocks, the good quality stocks, they haven't come down yet, which makes them think there is more room for this market to go lower even.

So we can expect a lot more volatility for the Indian market in the days ahead. Having said that, the one piece of good news here is that people aren't really panicking over here in India, at least not just yet and that's because the fundamentals of the Indian economy are still pretty strong.

If you look at growth in India, the economy is growing. It's in pretty robust shape compared to several other major economies. Inflation which is usually been a big drag on India's growth, that has been coming under check.

The fiscal deficit which is another huge problem for India, that's been brought under control over the last couple of months. Commodity prices are low. Oil prices are lower, which is a boom for India. All these things combined stand well for India.

The fundaments are good. The Indian finance minister made that very clear yesterday. He reiterated that any factors that are causing the losses in the market are all external. He said there is not a single domestic factor causing the market to come down.

But people are waiting and watching and wondering whether this is -- as some people are calling a temporary tantrum in the stock market or the beginning of something more serious and the one cue they are waiting for which is rest of the world is waiting for is to see what the U.S. Federal Reserve does in September.

[03:35:06] Is it going to raise the interest rates? If it does we are likely to see more losses in the stock market. If this is the beginning of a global recession, then, of course, Errol, all bets are off.

BARNETT: That's right. Well, at least for the time being there is no panicking happening where you are and reasons to be optimistic. Our viewers seeing CNN's global resources at work here as we look at the fluctuating global markets. Malika Kapur, great to see you joining us from Mumbai.

CHURCH: One cause of the Asia market selloff is the falling price of oil. It dropped to a 6-1/2-year low on Monday and the slump in prices has prompted something of a showdown among the three largest oil producers, all fighting for global market share.

(BEGIN VIDEO CLIP)

JOHN DEFTERIOS, CNN CORRESPONDENT (voice-over): Call it an east-west oil showdown for market share, the world's three biggest players, Saudi Arabia, Russia, and the U.S., producing nearly a third of global supplies. In November 2014 at this OPEC meeting, the kingdom doubled down the stakes as prices were spiraling lower.

ROBIN MILLS, BLOOMBERG DOHA CENTER: They had to devise a strategy and they went to keep production high and this year increase production and accept lower prices and in an attempt to drive out the competition. And I think that's what they have to do, but they have to stick the course.

DEFTERIOS: And OPEC has not let up producing near a three-year high of just under 32 million barrels a day adding to a daily over supply of 3 million barrels, a 17-year peak.

(on camera): A third of the 12 OPEC producers are based right here in the gulf and they voted as a block to support Saudi Arabia in this fight for market share. Regional sources tell me they are expecting prices to be at $60 or above at this stage planning for the U.S. shale producers to be out of business.

(voice-over): The number of active U.S. oil rigs has fallen like a rock by more than half in a year, but not American production as companies squeeze costs. Chris Faulkner, a Texas fracker was recently in Dubai.

CHRIS FAULKNER, CEO, BREITLING ENERGY: We are paying less to drill and frack. Not 60 percent less but the margin has helped us. We are getting discounts from the service providers to keep on fracking.

DEFTERIOS: The price advantage clearly sits in the gulf producer' camp where their cost hovers around $5 a barrel on shore. The problem in Saudi Arabia is prolific spending especially by a new king who has opened up the coffers to maintain domestic stability while fighting a war at its southern border in Yemen.

MONICA MALIK, ABU DHABI COMMERCIAL BANK: If we look at Saudi Arabia's budget break even oil price it was $100 a barrel. There is an absolute need to pull back on spending especially with the weak outlook for oil in the medium term.

DEFTERIOS: If history has any gauge, this price war could take longer than most expect. Saudi Arabia took a similar strategy nearly three decades ago, which is the last severe U.S. oil bust.

MILLS: In 1986 they did the same, but it took 15 years for them to rebalance the markets and drive out the high-cost producers. Maybe it won't take as long this time, but it still might take several years and they have to be ready for that.

FAULKNER: OPEC players from Algeria to Venezuela certainly are not ready. But the gulf producers have over $2.5 trillion in the bank and are being forced to use it. John Defterious, CNN, Abu Dhabi.

(END VIDEOTAPE)

BARNETT: After the break, we'll have an update for you on deadly flooding in Turkey and what has really been terrible weather there. Stay with us.

(COMMERCIAL BREAK)

BARNETT: At least eight people have died in northeastern Turkey after two buildings collapse in heavy flooding. A local governor says an adult and a child are still missing.

CHURCH: We want to turn to our meteorologist, Pedram Javaheri, to get more on the conditions there. Pedram, the images are awful and of course word of this adult and child missing.

PEDRAM JAVAHERI, AMS METEOROLOGIST: It is a devastating story, guys. This is something with flooding over this region. It's not unusual to see the geography is prime to have these events taking place. The town of Hopa is a town of 18,000 people where upwards of a foot of rainfall came down in this region.

As we bring in the terrain and take you over the black sea. The moisture comes in a northerly fashion and forced to rise and runs into the mountains here. And the mountains within 10 miles are going from sea level up to 6,000 feet or 2,000 meters high.

This forces the air to rise and cools and condenses and squeezes out the rainfall that is high elevation and it flows back down to the community where the flooding took place and becomes a devastating scenario.

You look at the numbers, the rainfall total is staggering. Upwards of 10 inches coming down where in an entire month you would get 8 inches or 170 millimeters of rainfall in this region of turkey. We know that rain showers across the area are going to improve in terms of the severity and the strength.

But talking about the northwest side of the United States, we know widespread wildfires over this region. We have a center of circulation. The jet stream takes a nose dive and we get a marine influence here and the cooler temperatures are going to help the firefighting efforts.

The next six the ten days above normal for rainfall and the temps in the 80s and cools off significantly down to 70 Fahrenheit. Good news there.

And watching a tropical threat in the Atlantic Ocean, we have Tropical Storm Danny. Tropical Storm Erika that is forming and it will strengthen as it heads to the Leeward Islands.

And all of this is going to be beneficial in an area where water rationing has been in place in Cuba and Puerto Rico. Good news when it comes to some of the rainfall that is needed of this region.

Severe to exceptional drought over eastern Puerto Rico. The storm systems come in on the weaker end of a tropical depression with Danny. Not going to be a problem with the winds but going to be beneficial when it comes to rainfall coming over this region in the coming few days.

CHURCH: A lot of activity.

BARNETT: Thanks, Pedram.

[03:40:08] CHURCH: Many thanks. Russian President Vladimir Putin is attending the first day of the International Aviation and Space Show near Moscow today. And reports say Russia could sign a weapons deal with Iran at this event.

For the latest let's go to Matthew Chance live in Russia. So Matthew, what all do we know about the weapons contract the Russians might sign with Iran?

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, it's pretty much a done deal as far as we're aware, Rosemarie. We're talking about a deal for Iran to buy some very sophisticated surface- to-air missiles called S-300s.

They first signed the deal to get those Russian missiles back in 2007, but because of a United Nations arms embargo, Russia decided to suspend that sale, but that restriction was lifted back in April by President Vladimir Putin, the Russian leader.

What we are expecting here at this International Aviation and Space is for an Iranian delegation to arrive and to finally ink that deal that would see them take possession of one of the most sophisticated surface-to-air missile systems in the world.

It's controversial because once they get those S-300s it would make it more difficult for countries like Israel, for instance, to strike at its nuclear facilities. The missiles are capable of taking out fighter aircraft and bomber aircraft of the kind that Israel and the United States use.

So that's why it's controversial, but the expectation is now there is a deal over Iran's nuclear issue, that missile sale will go ahead if not today then very soon.

CHURCH: What is the fallout from this contract?

CHANCE: As I say, it's been criticized. The potential deal has been criticized by western governments, particularly the United States. But there is nothing they can do to stop it, particularly at a time when Russia is under a lot of pressure to sell its weapons.

It's a big export earner and Russia is under sanctions because of its role in Ukraine and it is cut off from any western markets, forcing the country to focus on its traditional markets in the Middle East and Far East as well.

The Chinese authorities and Indians as well will be here at this max arms fair to see what they want to purchase. The Jordanian king and Saudi king will be here as well. That is interesting because Saudi Arabia has not bought Russia weapons before.

But the expectation today is that it may be looking at making some significant purchases here at this arm's fair. Saudi Arabia traditionally buys American weapons and other western armory as well.

Also the Egyptian president, Abdel Fattah Al-Sisi is expected to be here later on this week. So Russia is really pushing hard to make as many arms sales as it can to countries that don't fall under this western embargo over Ukraine so countries in the Middle East and Far East as well.

CHURCH: Yes, interesting. Matthew Chance live there at the aviation show in Russia. Many thanks to you.

BARNETT: Still to come here on CNN NEWSROOM, a fraternity at the U.S. College of Virginia now suspended for displaying offensive signs and banners. While a few thought they were funny, most weren't laughing at all.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We thought it was a joke.

UNIDENTIFIED FEMALE: This is not a day or time and never should be a time when you should expect that when you come to college. It was sickening and it's unacceptable.

(END VIDEO CLIP)

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[03:50:00]

BARNETT: A fraternity at a university in the U.S. state of Virginia has been suspended for derogatory banners.

CHURCH: The signs including one that read "hope your baby girl is ready for a good time" were seen hanging outside a home near campus. Nadine Yanis, from our affiliate WTKR has more on the reaction.

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NADINE YANIS, WTKR REPORTER (voice-over): Students a part of the Sigma Nu fraternity were behind these banners hang off the balcony at a home right across the street from Old Dominion. Banners displaying sexually suggestive messages like "Freshman daughter dropoff" and "Hope your baby girl is ready for a good time." Message these freshmen took it as a joke.

UNIDENTIFIED FEMALE: I thought it was funny.

YANIS (on camera): You didn't take offense to it?

UNIDENTIFIED FEMALE: No, I didn't. Not personally.

UNIDENTIFIED FEMALE: College boys. It was kind of expected.

UNIDENTIFIED FEMALE: It's something we were expecting to see.

YANIS (voice-over): It makes the ODU's vice president of Student Engagement and Enrollment Services sick to her stomach.

UNIDENTIFIED FEMALE: They thought it was a joke.

UNIDENTIFIED FEMALE: No, this is not a time and this should never be a time to expect that when you come to college and it was unacceptable.

YANIS: The signs were up on Friday, on moving day, and seen by parents as they were dropping their kids off to college. ODU says they were removed at the request of campus police but the message spread to all ends of social media.

UNIDENTIFIED FEMALE: To have this happen during move in weekend was just really disheartening.

YANIS: The university president himself sent this letter to the campus community saying he is outrage and that there is apparently a gap on their education in sexual assault saying, quote, "This incident confirms our collective efforts are still failing to register for some."

(on camera): What are you doing to fix that?

UNIDENTIFIED FEMALE: We will not stop. This topic is important to me personally and to the university. The president is out in front of it. We're not going to tolerate it. When an incident happens like this it shows us we're going to be redouble our efforts. We've been leading in education and we are going to do even more.

(END VIDEOTAPE)

[03:55:05] CHURCH: And that was Nadine Yanis from our affiliate WTKR reporting. The university and Sigma Nu Fraternity are investigating the incident.

BARNETT: It's a good thing they brought an end to it, but you imagine a young girl on campus for the first time. You want just a much a right to education as the young men do and a sign like that sends a different message.

CHURCH: And there needs to be more respect for women.

BARNETT: It's only August, but a new Halloween costume is already drawing controversy. The Caitlyn Jenner costume could be headed to a store near you. The outfit is inspired by the "Vanity Fair" magazine cover where the former athlete came out to the world as a transgender woman.

CHURCH: A petition on change.org is calling for the costume to be scrapped, saying it mocks transgender people. But at least one costume wholesaler says the outfit is meant to celebrate Jenner, not mock her.

BARNETT: Let's try to get you in the feel-good mood. The dead have risen again for the cable channel AMC. The series "fear The Walking Dead" brought in just over 10 million viewers Sunday making it the top cable series premier in cable history.

CHURCH: Sunday's figures are expected to rise once DVR and on-demand devices effected in. The new series is a companion show to the original series "The Walking Dead."

BARNETT: That's the end of our two hours. You're watching CNN NEWSROOM. I'm Errol Barnett.

CHURCH: We are almost the walking dead. I'm Rosemary Church. Stay with us "EARLY START" is next in the United States.

BARNETT: And for the rest of you another edition of CNN NEWSROOM begins after the break.

CHURCH: Have a great day.

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