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QUEST MEANS BUSINESS

Sharp Losses for Stocks Amid Volatile Trading; Lawmakers Appalled by Trump's Twitter Outburst; Major Murdoch Takeover Delayed in U.K.; U.S. Travel Ban Takes Effect Tonight; Ex-Apple Engineers on How the iPhone was Born;

Aired June 29, 2017 - 16:00   ET

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


[16:00:00] RICHARD QUEST, CNN HOST: Awful day on the market. The Dow Jones, the NASDAQ, the S&P were all off very heavily and it happened middle

of the day. And things got really nasty. We're going to analyze tonight why the Dow and the markets are deeply unhappy. Gone on. Oh. I guess

that explains that. Only one gavel, which rather wimpy to bring trading to an end it is. Thank goodness, the end on Thursday, the 29th of June.

Tonight, tumbling tech and central banks and volatility left, right and center on the markets. Donald Trump's latest tweets have Republicans and

Democrats, they are united in outrage. And the sky may be the limit for Rupert Murdoch. His big British takeover faces a lengthy delay. If you

want to know what tonight's really all about, this is the market. I'm Richard Quest, live in New York. Where tonight, I mean business.

Good evening, tonight, this tells the story of the way the day went. The Dow Jones Industrial, 30 stocks, only two of them are in the green. The

rest are heavily lower. The stocks have dived and the volatility spiked. And the reason was a series of hawkish comments from central bank

governors. Which spooked investors. Now if the worst single-day drop since May. When it was the existence of the James Comey FBI memo that

rattled Washington and Wall Street.

And down 167. Not the worst of the day. That was just around about half past 1:00, it was over 200. I think the significance of the day is it

actually starts healthily, with a small gain and it is just literally, in fact, just as we were about to go to air with "QUEST EXPRESS" at 11:30 that

we get this dramatic fall-off, which really pressured the way the day moved. Investors have been moving many out of tech. Tech blue chips

dragged down the Dow lower.

What we've got, what we've got here. We've got the rotation into financials on the back of what we saw yesterday with the stress test.

That's why the only two gainers are JPMorgan Chase. And even those financials that did lose ground didn't lose as much. You've got American

Express. Not a bank in that particular sense. But you've got Visa, which was a heavy loser. Otherwise tech -- look at it, 3M, Cisco, Intel, Apple,

all big lowers. The NASDAQ was down by as much as 2 percent overall. Paring it down to 1.4 percent. A loss of 90 points and recovering. Let's

talk about why. Here we go. Two men. If you two can't tell us what happened.

PAUL LA MONICA, CNNMONEY CORRESPONDENT: We're going to tell you.

QUEST: You're going to tell us. Let's start with you then. What happened and why?

LA MONICA: We did see as you pointed out, the good stress test results were positive for the banks. That's why the banks did rally today even

though the rest of the market was down. I don't think we can stress enough though, that you have to look at the calendar. It is June 29th. Tomorrow

is going to be a sleepy summer Friday with no economic news or earning news of note. Monday is a half day. The market is closed Tuesday, we're

closing out the first half of the year. The NASDAQ still up 13 percent. This hiccup today is nothing considering how strong a year we've had.

ALAN VALDES, SENIOR PARTNER, SILVERBEAR CAPITAL: He's 100 percent correct. You know, it's the end of the half. These portfolio managers around the

country, when everything is said and done, they're up about 8 percent, so cash is king. They're getting out. They're going --

QUEST: I don't buy it, guys.

VALDES: That's it.

QUEST: I don't buy it. Why at 11:15 on a random Thursday --

LA MONICA: But it's not a random Thursday, it's the Thursday before the long weekend.

QUEST: But why this morning? Why not yesterday? Why not tomorrow morning?

LA MONICA: It's weird how volatility seems to be back. We had a sell-off Tuesday. You had bargain hunters come in just yesterday and now they left

today. What they're going to do tomorrow, we'll find out.

VALDES: Tomorrow is probably a dead day. Again, I think they put all their money in cash. They're gone for the summer. I think there's

volatility back and forth. I don't see any volume going on the rest of the summer.

[16:05:01] LA MONICA: We have second quarter earnings coming in July. Not the first week back after the fourth.

VALDES: And with the healthcare. I mean, we were banking on the health care passing so we could pass the tax bill. Not so much the health care.

We want to get the tax bill passed before 2018. It could be off the table.

LA MONICA: It could be. But so far even without it, you know from being down there all day, as long as the earnings growth is there, the consumers

keep spending, it's a circus in Washington.

VALDES: And don't forget, the Feds, the central banks are still putting 300 billion a month into equity markets. So, it's not going to go down.

LA MONICA: Trump may not be helping the markets, but Janet Yellen is.

VALDES: That's in a nutshell.

QUEST: Let's pass this down. So, what you're saying Alan, is that today was technical. In the section that there was no real reason. We can, we

can say the banks stress test. But you know, what other reasons out of there.

LA MONICA: Yes. Like the Italian banks stress.

VALDES: They still have $400 billion in bad debt.

QUEST: So, nothing technical. So, this is something that is a rotation into cash that is going to continue or not?

VALDES: I tell you if you look what happened, the last ten days and the 20-year bond, more funds, more money went into 20-year ETF that all

combined equity --

QUEST: Explain why that would be to the viewer who is wondering what jargon we're talking about.

VALDES: They're leaving the market. They're going to the safety of the bond. The 20-year bond for 2.25 percent. Here's the weird thing. They

put so much money into the 20-year bond -- 20-years -- that for the next ten years, there might be no capital infusion into equities of any

consequence.

QUEST: Yes, but you can come out of that 20-year bond.

VALDES: You can.

QUEST: You can come back out of it. You don't go into the bond and stay there for the next 19 years and six months.

VALDES: But you could still be there for two years into this markets safety net.

LA MONICA: I spoke to someone today who had a great point that's not being mentioned enough. We'll have to wait and see what happens. At some point

the Republican leadership might have to look at what's going on in the White House and you saw it today from the reaction from some Republican

leaders to that tweet about Mika and Joe on MSNBC.

QUEST: We'll come to that in a minute. But I want it play something from the treasury secretary on the question of tax reform. Because you talked

about it. Health care versus tax reform. Listen to Steve Mnuchin.

(BEGIN VIDEO CLIP)

STEVE MNUCHIN, UNITED STATES TREASURY SECRETARY: I think that to the extent we can get health care passed, to the extent we can get tax reform

passed. To the extent we can roll back regulatory issues, which we're working on very carefully. Both in financial and in energy and in other

areas, we are very comfortable that we will hit these growth projections.

(END VIDEO CLIP)

QUEST: This is the growth projection of 3 percent to 4 percent. The IMF, in its Article 4 report yesterday, downgrades from 2.3, to 2.1.

VALDES: That's a stretch, that's politics talking. But we still would love to see that tax bill get passed.

QUEST: There isn't a tax bill to pass.

VALDES: That's the problem. That's the whole thing.

QUEST: We don't know what it would look like.

VALDES: I don't think we see anything before 2018. So that's going to stagnate the market right there. That puts a cap on the top of the market.

QUEST: The moment you're into 2018 you're into the mid-terms.

LA MONICA: That's what I was going to say right there. Because of the mid-terms looming. I spoke to someone today who said he's fairly confident

at some point if things proceed like this, the Republican leaders in the Senate and the House are going to be worried about their own jobs and not

protecting a president who isn't exactly the most conservative traditional Republican. They will do what it takes to not get embarrassed and lose

potentially the House and Senate. Because if they do that, it's a whole new ball game for 2020.

QUEST: As we finish, I get the impression, Alan Valdes, that you've switched off for the weekend.

VALDES: That's it. We're done. I'm dressed, I'm ready for the Hamptons. I'm out of here.

LA MONICA: I'm going on vacation next week, your old college town.

VALDES: That's it for the whole week. That's it.

LA MONICA: No comment.

QUEST: Right. Have a great weekend.

VALDES: Richard, thank you. Happy holiday.

QUEST: I'm British, we don't celebrate that one. That's the one we don't celebrate.

LA MONICA: I forget. Oh, yes.

QUEST: Yes.

LA MONICA: That whole Hamilton musical explains it. That the president doesn't like that much.

QUEST: Gentlemen, thank you. You get an idea where we're going tonight. Anarchy is broken out and it's not even the end of the week.

European stocks fell sharply on Thursday. Now let's look at the continuing rally in the euro. It's weighing on the broader market. The rally in the

euro makes it worse, of course, for European companies. Therefore, you see this. Now the French CAC suffered the most. It fell almost 1.8 percent.

The German Dax and the London FTSE also closed in the red. But obviously to see losses of nearly 2 percent in both Frankfurt and in Paris, is

disconcerting.

The international cyberattack damaging companies across the globe is likely to be a smokescreen, which is the view of the Ukrainian police, telling

"Reuters" the real target is the country's computer infrastructure. The Danish shipping giant Maersk said its terminals in Rotterdam and Los

Angeles are still not operational.

[16:10:02] Rotterdam is the largest port in Europe and Los Angeles is the largest on the West Coast. So, Maersk says businesses our running only

close to normal. WPP, Martin Sorrell's company, is warning some of its companies continue to be disrupted. But there's no evidence that data has

been compromised.

Europol has set up an urgent coordination cell to monitor its spread. Rob Wainwright is the director of Europol and all joins me from The Hague in

the Netherlands. Always good to see you, Rob. The issue here is -- how bad, how much of a handle have the authorities got on this outbreak? Or is

it just going to peter out of its own volition?

ROB WAINWRIGHT, DIRECTOR, EUROPOL: Well, we've got about 80 major companies that are victims. We think in about 60 countries around the

world. Most of them are in Europe. But like WannaCry before it, this ransomware attack has a worm-like virus attached to it. So, the numbers of

victims are creeping up. We're not out of the forest yet. That's certainly true. In this case I'm concerned that it seems to have more

aggressive attack capability. Exploiting many vulnerabilities in your system. So, if you're infected, it's probably going to be harder for you

to deal with it. That said, my message to business always on ransomware cases, don't pay. Certainly, don't pay. In this case the payment systems

aren't even working properly.

QUEST: We'll come to don't pay in a second. Is there any evidence that this was a targeted attack to logistics, energy, transportation, companies,

or as this just happen stance, that they are the ones that are most affected?

WAINWRIGHT: We're still trying to get to the bottom of that. Through our work in Europol and working with different law enforcement agencies.

Listen, this seemed to have happened in Ukraine. It started in there, and spread to other countries. It is targeted on some businesses and some

business sectors. The exact motivation at this stage, Richard, we don't know. But certainly, it's intended to cause a lot of disruption, not just

make a lot of money, we think in this case.

QUEST: OK. So, again, I'm just throwing questions that maybe you don't have the answers to yet. Organized crime? Mafioso? Government sponsored,

spotty teenagers wreaking cyber vandalism? Which is it?

WAINWRIGHT: Any or all of the above. We don't know yet in this case I'm afraid. The fact is, of course, the cybercrime scene is becoming more

complicated. Certainly, there's a huge criminal business as you know. Most ransomware attacks that happened the last two years are the work of

cybercriminal groups. But we're keeping our minds open about who may be behind this one and indeed WannaCry and what their motivations were.

QUEST: If we accept that this on -- part of this one that we know, did not infect because of a lack of a patch that Microsoft offered. There were

other ways that this infected. Can we now say that this vulnerability, that companies are going to be at this economic potential damage, is

something we have to live with? And it's more important to deal with it. Learn to deal with it than necessarily protect it.

WAINWRIGHT: Absolutely. I think a frontline risk of doing business for every major company, we need to wake up to that and treat it like any other

major credit risk like a credit risk in a banking sector. That's a leadership responsibility. Getting the right risk management framework in

place and cutting out the human error that cybercriminal cases in this case absolutely prey on. Got to get the basics right, is the first message and

the first learning point in cases like this.

QUEST: What do you need besides more money for your budget, I'll give you that one. What does law enforcement need? --

WAINWRIGHT: Thank you.

QUEST: -- I was getting there before you did. What does law enforcement need to get ahead, so that, because at the moment there's a feeling, not

just from yourselves or from any policing or law enforcement authorities that we are behind the curve when it comes to these cyberattacks? What

more do you need?

WAINWRIGHT: We're leveraging great collaboration efforts here. In this building of the Europol headquarters today we had 12 major banks in our

building talking about cybercrimes, financial crime risks and developing new ways of cooperating. So, that's a great step forward. We need more of

that. I think there's one other point. And this is having more consistent and better regulatory standards around, for example, the billions of

internet of things device that are being produced with little or no security designed into them. They're being hacked frequently and then

being used to be part of a massive denial of service attack on businesses around the world. That's a growing trend. It reflects the fact that we

have to take cybersecurity more seriously in Silicon Valley, in governments and businesses around the world. That's my message to most people who

might be watching tonight.

[16:15:04] QUEST: Director, Rob, great to see you. Lovely to have you on the program. Thank you. You're always kind and generous. Thank you.

As we continue tonight, President Trump is due to meet his South Korean counterpart. They'll be looking for common ground. The President's

threats to rip up their free trade agreement, however, that will be hard to ignore. It's QUEST MEANS BUSINESS, good evening to you.

(COMMERCIAL BREAK)

QUEST: Leaders of the G-20 nation are seeking a united front. As they prepared to face off with President Trump. And there's a potential clash

looming tonight. Less than two hours, the President will meet the South Korean counterpart. And the two men are united on the issue of North and

South Korea and divided on trade.

But I want to show you the areas of trade disagreement that exist at the moment. Let's start of course with Germany. Now here the Chancellor,

Angela Merkel, is quite clear, the discord is obvious. They have differences on trade. Particularly the way the U.S. is trying to, if you

like, broker individual agreements with European nations. Which is simply not possible under the EU treaties. They also have differences on climate,

which are very well known. And accord together Chancellor Merkel, the G-20 has to send a strong message.

(BEGIN VIDEO CLIP)

ANGELA MERKEL, GERMAN CHANCELLOR (through translator): I'm convinced that protectionism cannot be the solution. It harms everyone involved, and

that's why we need open markets. My goal therefore, is for the G-20 Summit to send a clear signal for open markets and against the barriers, as well

as a clear commitment to a multilateral trade system.

(END VIDEO CLIP)

QUEST: This is tricky stuff. Because Angela Merkel's warning that the G- 20 cannot isolate the United States. And that's something with which Emmanuel Macron of France agrees. Who says, and bearing in mind he's

invited Donald Trump for the Bastille Day celebrations on July the 14th. Macron is saying that the G-20 has to find common ground between Europe and

U.S. President.

(BEGIN VIDEO CLIP)

EMMANUEL MACRON, FRENCH PRESIDENT (through translator): Angela is totally right. It's not healthy to isolate a state. The United States, President

Trump has been very clear and we all immediately reiterated that we do not share his vision on this issue. But it's still better to have common

statements and to allow a country around the table to sign up in the medium term. And so, that varies depending on the discussions.

(END VIDEO CLIP)

QUEST: So, the G-20 we now go to South Korea. Now Donald Trump is due to meet South Korea's president in less than two hours from now. The issue of

course will be the $27.6 billion deficit he has with the country. The difficulty here is Donald Trump is talking about unfair trade and warning

he may terminate the South Korean free trade deal. But how do you do that whilst at the same time also insuring you hold together on the very thorny

and dangerous question of North Korea.

[16:20:00] Jeremy Diamond is at the White House. Well as I look at my map, doesn't matter whether it's France, Germany, South Korea, Australia, but is

the White House worried about these areas of disagreement with close allies?

JEREMY DIAMOND, CNN WHITE HOUSE REPORTER: Well we just had a briefing today, with the National Security Adviser, H.R. McMaster, as well as the

National Economic Adviser, Gary Cohn and both of them outlining the fact that the G-20 meetings will really be an opportunity for the U.S. to

discuss a range of issues with some of the top countries. A number of bilateral meetings will be taking place and clearly trade issues and other

economic issues are expected to be addressed. And as you pointed out earlier tomorrow or this evening actually, the president will receive the

South Korean president here at the White House. And tomorrow they'll continue those meetings, clearly some key discussions on North Korea to

take place.

QUEST: But Jeremy, the differences between the U.S. and those allies, they're not, they're not bagatelles and small matters. They are

fundamental on questions of trade treaties and for example, climate. Now, can you paper over those disagreements?

DIAMOND: No, absolutely not. We saw this kind of play out during the G7 meetings that the president attended just recently. Those differences very

much came out into the fore. Particularly when we're talking about Germany, which will be hosting the G-20. Chancellor Angela Merkel has made

clear that there are these major differences and that she doesn't expect to paper over those differences during the upcoming G-20 meetings. One of the

key points of contention, not only trade of course, but also the Paris Climate Accord, which the president said he wanted to withdraw from.

Angela Merkel and other European leaders continuing to try to encourage the president to take action on climate change.

QUEST: In a sentence or two, Jeremy, is the White House feeling beleaguered by all of this? Do they sort of feel or do they still feel

they're fighting the good fight?

DIAMOND: I think that's still very much the sense that this administration, a lot of folks who I talk to say often that they knew this

was not going to be easy. And that they intended to essentially shake up the way that business as usual is conducted on the world stage. Certainly,

though, they are facing intense opposition. I'm not sure they always expected the amount of opposition that they would face. Again, the

president, we saw him during the G7 taking some of these stands during those meetings. I think we'll expect him to continue to do so during the

G-20.

QUEST: Excellent to see you at the White House, Jeremy Diamond.

The White House -- let's stay with the White House -- it should come as no surprise that Mr. Trump fights fire with fire. A few hours ago, the deputy

White House press secretary justified a series of some would say, or everybody would say, perhaps extraordinary tweets sent by the president.

Those tweets leveled a personal attack on two American TV show hosts. The president called Joe, who is the morning joe show host, psycho. And crazy.

He then described the female anchor, who happens to be the male anchor's fiancee. He described her face as bleeding badly from a face lift.

Several Republican lawmakers have criticized the President. Lindsey Graham said, it represented what is wrong with American politics. But the White

House Deputy Press Secretary described Mr. Trump's actions, his tweets as, completely justified.

(BEGIN VIDEO CLIP)

SARA HUCKABEE SANDERS, DEPUTY WHITE HOUSE PRESS SECRETARY: I think that the president has been attacked mercilessly on personal accounts, by

members on that program. And I think he's been very clear that when he gets attacked, he's going to hit back. I think the American people elected

somebody who is tough. Who is smart and who is a fighter. And that's Donald Trump. And I don't think that it's a surprise to anybody that he

fights fire with fire.

(END VIDEO CLIP)

QUEST: CNN political commentator, Ana Navarro joins me now. Come on, gloves off. What is so wrong with the president fighting back, basically

battling back head-to-head.

ANA NAVARRO, CNN POLITICAL COMMENTATOR: Well the problem is that he is the President of the United States. He is not a TV host. He's not a

commentator. He's no longer private citizen. He is representing people like me, and a lot of other people who did not vote for him. He is

representing us in the exterior. He is representing us in front of our children. He is representing us. He is our face. And he is behaving like

an insane, immature, thin-skinned man-baby who attacks in a vile, vicious way. Other U.S. citizens.

[16:25:01] And anybody that enables that, should be hanging their head in shame today in that White House.

QUEST: You knew what you were getting when you bought it, Ana. The American people knew what he was like. He would say, justifiably so, hey,

I've not changed. This is what you bought.

NAVARRO: That's a very good point. I didn't buy it, right? I didn't vote for the guy and the reason I didn't vote for the guy is because I thought

he was unfit for the office. Because I thought he didn't have the moral character, the moral fiber for the office. It turns out I was right. Now

when he got elected, I hoped against hope, I hoped against logic that a 70- year-old man would be capable of changing. Would assume that gravitas of the office of the presidency of the United States and respect that office.

An office where people, where great men like George Washington and Abraham Lincoln have sat and have been burdened by that seriousness of that office.

And would have transformed himself into a presidential figure. I want to respect my president.

QUEST: What do you want him to do?

NAVARRO: Well I want him to stop tweeting. If he can't control his tweeting habits. If his tweeting habits, he's got to lie continuously,

offend continuously, attack continuously. I wish he would attack Russia that hacked our elections with the same passion that he attacks regular

American citizens who criticize him. Richard, you and I are on TV. We get criticized daily. I get called fat and ugly every day. I don't go and

start fights with people. Because I realize that I'm a public figure and it comes with the territory. He is not only a public figure, he bears the

burden of the presidency of the United States. And that comes with a level of seriousness. He is the commander-in-chief. There are American men and

women who have died for this democracy so he could be sitting in that office today. And he owes them the respect of behaving with the character

that the office requires.

QUEST: Let's us assume he's not going to change. Surely in this case what I found perhaps the most disturbing. Firstly, he only chose to criticize

the female anchor's look or whatever. Secondly, that the first lady, jumps in, and through a spokesman and says he will retaliate times ten. This

tells us volumes, does it not, about what we can expect for the next three years?

NAVARRO: Well it tells us that everybody around Trump enables him. That he's surrounded by a bunch ever yes men and yes women, including his

family. Because I can tell you if that was my man, if that was my father, if that was my brother, I would be having a very stern talk with him. And

he probably would be sleeping in the couch today.

And let me also remind you, that Melania Trump when she first became first lady announced that her signature issue would be combatting internet

bullying. Well nobody is the bigger bully than her husband. And nobody has the biggest bully pulpit than the President of the United States. And

he is using it to attack other citizens. So, she should begin her job. She should begin her mission, at home. With the guy lying next to her at

night. She would do this country and she would do this world a favor. And all of those people that work in the White House that lie for him. That

enable him. That justify him. That rationalize his irrational insane behavior. They are handing in their principles for a job. No job is worth

that.

QUEST: I suspect my he'll e-mail account has just gone into overdrive. As you give us your thoughts about this. Always lovely to see you, Ana.

Always absolutely lovely.

NAVARRO: Love to see you, Richard. A man who does not offend people.

QUEST: Well, not knowingly. Thank you, good to see you.

@RichardQuest. I think we do need the @RichardQuest. Because I'm sure Ana's strong views will have some of you wanting to retaliate back to me by

Twitter. As you always know on this program, it's an opportunity to have a full and frank discussion, @RichardQuest.

Now as we continue tonight our lively conversation. Donald Trump's new travel ban goes into effect in a few hours from now. The latest version,

you better have, you better be up to date with your family tree. And I warn you, grandparents do not count.

[16:30:00] (COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. When airlines and passengers preparing for Donald Trump's travel

ban to go into effect. That happens in a matter of hours. Ten years after the first-ever iPhone went on sale, you'll hear from the Apple engineers

who made Steve Jobs' dream a reality. That and more, as we continue, because this is CNN, and on this network, the news always comes first.

A coalition spokesman in Iraq, says Mosul's liberation is imminent. Iraqi forces are engaged in intense fighting for the final few blocks of the

Iraqi city, which is still under -- part of it under ISIS control. Troops have captured a great mosque of Al Nuri in a symbolic victory.

An Australian cardinal has been charged with sexual assault. He's the third-ranking official in the holy city to oversee the Vatican finances,

he's been granted leave to fight the charges against him. The cardinal says he is innocent.

The White House and the first lady are defending Donald Trump after a barrage of tweets many say crossed the line. U.S. President viciously

attacked a female news anchor on Twitter claiming she was bleeding badly from a facelift when he saw her on New Year's Eve. Members of Mr. Trump's

own party have called the remarks inappropriate.

Venezuela's Supreme Court has banned the attorney general from leaving the country and frozen her assets. It follows a pretrial hearing on Tuesday.

Luisa Ortega a critic of president Nikolas Maduro is accused of grave crimes.

The head of Europol, said companies must give cyber vulnerabilities the same importance as any other credit risk. Speaking to me on QUEST MEANS

BUSINESS, Rob Wainwright said he doesn't know who launched this week's major attack.

Said it seemed designed to cause disruption rather than extort ransom.

After months of legal battles, the new U.S. travel ban comes into effect in three and a half hours from now. The revised rules block people from the

six countries entering the U.S., unless they have a bona fide relationship. Family or entity. The Trump administration's clarified which family

members that includes. So, a close family tree, parents, spouse, child, adult son or daughter, son-in-law, daughter in law, et cetera, siblings.

The extended family tree does not count. And that includes grandparents and uncles, aunts, nephews and so on. Siblings-in-law and grandchildren.

is at Dulles airport in Virginia. How easy, this is, this is for people getting visas, it's also for refugees. But the visa bid will be the

difficult bit. How easy is it going to be to enforce this?

[16:35:00] DIANNE GALLAGHER, CNN CORRESPONDENT: So, at this point right now, Richard, we're at Dulles airport. In Virginia, this is where all of

that chaos happened initially when the president signed the first original travel ban back in January. We're probably not going to see that today.

Because the way that this has been written right now. If you already have a visa, you already have it in your possession, it's been given to you this

does not apply to you. Even if you don't have the close personal bona fide relationship as they're calling it, Richard, you can still go ahead and

come to the United States. On that particular visa. It also applies to people who have a close personal bone fide relationship with an entity.

You're an enrolled student, you have business here or are an employee, going to give a lecture to a university. This is all about some form of

paper trail showing you have one of these specific reasons for being in the states. We're not going to likely deal with what we saw in January. But

it still could be tough. Because the State Department saying that they're going to do things on a case-by-case basis. So even if you don't

necessarily fit this criterion, Richard, you still might be able to get in. But you also might not be able to get in. So, there is still some

ambiguity here we're talking about.

QUEST: Good to see you, thank you, at Dulles airport. Coming up, thank you. Travel line comes in amid new measures from U.S. Homeland Security

affecting all direct international flights to the United States. The new measures, that are described as seen and unseen, they include more vetting,

questioning of passengers, more targeted approach to airport and airline security. The chief executive of KLM says it's imperative that airlines

follow the new rules. If the country doesn't follow them, they may lose the privilege of being able to fly to the U.S. I spoke to him to ask him

what he knew about the rules so far.

PIETER ELBERS, CEO, KLM: The news came out yesterday, so at this point in time we're discussing with the authorities what exactly it is and how

they're going to be implemented in a next several weeks. I think it's important you fly to a country, you follow the rules of that country so

we'll implement that.

QUEST: In terms of the U.S., you say it's important. But is the yield there? Is the money-making capacity or is the U.S. now becoming so much

lower-end?

ELBERS: We operate together with Delta so we have our joint venture with Delta on the U.S. side and we have Alitalia, and KLM on the European side.

250 flights a day connecting hundreds of city flyers across the Atlantic we have an extraordinarily strong position here and we see if you want to fly

from a small place in the U.S. to a small place in Europe. We offer the best combination.

QUEST: The recent cyberattack is terrifying for you.

ELBERS: Yes.

QUEST: As a chief exec?

ELBERS: Sure. Cybersecurity and cyberattacks are a top priority I guess for every business and also for ours.

QUEST: But it's a top priority, but is it one of those responsibilities that has to remain under your watch as chief executive? You can't delegate

it, obviously you have a head of security and i.t. but you have to be responsible?

ELBERS: Yes, and I would say so the answer is yes. And in addition, I would say here we have to make use of professional firms we know how to run

an airline, but for cybersecurity we need to have close cooperation with companies who are specialized.

QUEST: When B.A fell over on its IT. systems, the one thing I do know is that no chief executive of any other airline sort of smiled and snickered.

Because everybody rushed to help. But what did you learn from the experience?

ELBERS: Well I would say that's a bit premature. It was huge for B.A. what the exact sequence of events was, I don't know. I'm sure B.A. is

evaluating it themselves. What it did for us is to put more emphasis in making sure we got all of the things together and again we are a company

with a long history, a long tradition of innovation. But we need to do it secure as well.

QUEST: For a company of long history of innovation, this is hardly the most innovative digital thing. But you still give these away on board the

aircraft, don't you?

ELBERS: It started with innovation. The history of these houses, they were made in the '50s. When yada, speaking about rules, decided it is not

allowed to make a gift to your customers. The prices were regulated, you were not allowed to give a gift. What we did, we said this is not a gift,

it's a drink, there's liquor inside. There's liquor inside. It has been so successful that we never changed it. So, the philosophy is still there.

So, when you fly with us in business cabin, you get one of these houses and we issue every year a new one.

[16:40:00] QUEST: People collect them.

ELBERS: It started out with innovation, but I must say, innovation of 40 years ago.

QUEST: Finally, once again, just remind me, the full name of KLM is --

[SPEAKING DUTCH]

-- Royal Dutch Airlines.

QUEST: Good to see you.

Look at them. Any regular flyer in business class on KLM will have collected one of these and it will be cluttering up your desk, your lounge,

your lobby somewhere in your house. And just to prove, just in case KLM, is the correct full name. The expansion of Rupert Murdoch's empire is on

hold. U.K. officials have denied him the chance to buy Sky for now.

(COMMERCIAL BREAK)

QUEST: Fox's $11.7 billion Sky takeover likely to face full competition investigation. Not the sort of headline that Rupert Murdoch wanted. But

the sort he got today. After the culture secretary warns the deal could give the Murdoch family too much influence over British politics. Join me

if you will. Let's go into Rupert Murdoch's living room. Now, as you can see, very nice to see all, most of the family are there in the pictures.

The vast global media empire.

And wherever we look Rupert Murdoch can enjoy his own journals and media. In New York there's "The Wall Street Journal," which will give him a bit of

indigestion, he owns it, Jerry Baker is the editor in chief there. And you've got "The New York Post," slightly more racy. Than perhaps the

"Journal." in the United Kingdom, he has the "Sun," the "Times" and the "Sunday Times" as well. All the biggest best-selling papers in the U.K.

On radio, he -- yes, you can always find a station, a Murdoch station, he owns lots of radio stations. And then you've got book publishers, which

include Harper-Collins. I do like a good read on a holiday. Now when it comes to television he has long coveted sky he first attempted to buy it in

2012. That failed during the phone-hacking scandal in the U.K.

[16:45:00] Now after the latest attempt, off come the regulator says the failings at Fox News on sexual harassment you'll remember is not enough to

disqualify it. So -- there is going to be an investigation. James and Rupert -- nice to see the family. James and Rupert have until the 14th to

respond to the culture secretary. Fox will pay $260 million if the deal fails. Claire Sebastian has been tracking the developments over in the

news room. So, what we make of all of this, because the core point here, at least from the Murdoch's point of view. They've got over the hurdle of

are they fit and proper.

CLAIRE SEBASTIAN, CNN INTERNATIONAL CORRESPONDENT: It was interesting, Richard you talk about the last time they tried to do this back in two 10,

2011. The whole thing was torpedoed by the phone-hacking scandal. Many had worried that the Fox News sexual harassment allegations would act in

the same way. Would torpedo this. That didn't turn out to be the case.

QUEST: We're back to old-fashioned grounds now for an investigation. Which is, do they have too much influence. Would they have too much power.

That stronger ground in some cases. Than say character.

SEBASTIAN: Well that is -- that's essentially it. Off comes today is if 21st Century Fox takes over 100 percent of sky. That would give them 10

percent of all news across all platforms. That's a huge amount of power. They said there's a risk that members of the Murdoch family trust may seek

to coordinate the editorial news policies omitting stories, highlighting others or using the same commentators in their newspapers or on television

news. They have a chance now to really, to really try and fix that. They have two weeks to submit a proposal and might be able to stop a full

investigation by the competition in marketplace.

QUEST: So, two weeks to stop the investigation. Or potentially stop it. If the investigation takes place, that's at least six months.

SEBASTIAN: At least six months. 24 weeks. That will take us almost to the end of the year. They announced this deal in December. So, it's

already been quite a long time. And delay is risky. This is not what the Murdochs want. It's not the worst-case scenario. This is still you know,

a setback. How much of this is business, how much of the opposition is political. How much of it is -- you know where I'm going. How much is the

bridge government doesn't want to do this, but it's got to find a way not to do it?

QUEST: I think we got a sense of how divisive the 86-year-old media mogul is. The opposition came out and accused the new government, the new tory

government with its wafer-thin majority of essentially trying to delay the inevitable. Of kicking the can down the road and trying to look tough by

delaying it. Murdoch has always been accused of being too close to tory politicians and the labor opposition is very much against this.

I'm going to do something very risky. I'm going to show my phone on -- got to be careful before you show a phone just in case somebody sends an

inappropriate text at the wrong moment but anyway, the iPhone, it's a big day, didn't get a chance to see a thing on that. The iPhone, it's a big

day, ten years ago it was in the store. When we come back we'll look inside how the most popular product nearly didn't come to be.

[16:50:00] (COMMERCIAL BREAK)

QUEST: It was ten years ago this very day. That people were lining up outside Apple stores across the United States and indeed the world to get

their hands on the very first iPhone. Now then it only worked on one network. The app store didn't exist. It was all extremely -- basic.

Spending $500 got you just 4 gigabytes of memory. Fast-forward today in this voice recognition, fingerprint sensors and apps like Snapchat and

Instagram, billion-dollar businesses on the back of the iPhone. We need to look at how Apple's most popular product ever came to be.

(BEGIN VIDEOTAPE)

FRED VOGELSTEIN, AUTHOR OF BOOK ON APPLE AND GOOGLE: None of this really could have happened without Steve Jobs. In order to build the iPhone, you

essentially had to bet the company.

UNIDENTIFIED FEMALE: Fred Vogelstein literally wrote the book on Apple and Google's war to

dominate the smartphone market.

VOGELSTEIN: You essentially had to shut down all product development on everything else and suck all his most talented engineers into this one

project. So, if the iPhone had failed, there are no other products in the pipeline that Apple could have fallen back on.

UNIDENTIFIED FEMALE: If Jobs wasn't willing to bet big, the iPhone may never have made it to your pocket. It's important to remember what jobs

was trying to do here. He wanted to put the experience of a desktop computer into your pocket.

VOGELSTEIN: On the one hand, while Jobs' reason for doing the iPhone was that everybody hated their cell phone, that didn't automatically mean that

you could then just go from making computers to making cell phones overnight. One of the top executives at Apple talked about the iPhone

project as like the moon mission. Just developing the touch screen would have for most companies been a very, very difficult single project to take

on. The other thing was that he had took a piece of software, OS X, running Apple's big computers and figured out a way to shrink it, so it

would fit inside the iPhone. Nobody had ever done anything like that before, either.

UNIDENTIFIED FEMALE: Eventually through all the work and problems and all the drama, the iPhone team had a prototype?

ANDY GRIGNON, FORMER SENIOR MANAGER, APPLE: I have the prototype with me in my car. And back then, this was probably 2006? The way you got around

wasn't generally by GPS, you would print out directions on where you were going. I had to go someplace, I didn't print out my directions, I was

lost. I stopped at a stoplight and I was like, I got my prototype. I went to safari, I went to map quest and I found out the directions and I have

them. I was like, oh, my god this thing is actually pretty cool. This is the first time I ever felt like we had a really interesting product on our

hands.

UNIDENTIFIED FEMALE: Andy was one of a few allowed to take a prototype off of Apple's campus. When it came to the iPhone, Apple's notorious secrecy

was in full force.

VOGELSTEIN: One of the things that was incredibly difficult about working on the iPhone for members of the team, most of them who had no idea who was

working on what. Apple is a very siloed and segmented operation. As the project got going, Jobs started pulling engineers off of existing projects

and pulling them into the iPhone.

STEPHEN JOBS, CO-FOUNDER, APPLE: We are calling it iPhone. Today Apple is going to reinvent the phone.

TONY FADELL, FORMER TEAM LEADER APPLE: I knew it was important, I didn't know if it was going to change, basically the planet. The way it did.

GRIGNON: Did we expect the iPhone to be as popular as it is today? No. We expected I think a successful product. We expected millions of people

to use them. Honestly, I don't know that I expected a billion people to use it.

(COMMERCIAL BREAK)

[16:55:00] QUEST: And can you see more of those interviews on CNN tech website and find out how the iPhone almost never happened. It's part of

our series on the iPhone anniversary, at CNNmoney.com/technology. It wasn't a happy anniversary for Apple, not as far as shares were concerned.

The shares down 1.5 percent as part of the broader market sell-off. Well worth showing you as we head towards our break. Down 167 for the Dow Jones

industrial average, off nearly, over .75 percent. It was a sell-off that started suddenly. As you heard earlier in the program, we can perhaps put

a lot of it to a long holiday weekend coming up and basically everybody has decided to go off and take a rest. You can download QUEST MEANS BUSINESS

as a podcast, all the main providers are there. Or indeed, you can listen to it at CNN.com/podcast. As we continue tonight, reminder, of course, of

our Profitable Moment that comes after the break.

(COMMERCIAL BREAK)

QUEST: Tonight, perhaps Unprofitable Moment. Two charts, two diagrams, whatever you want it called them that show exactly. That's the way the Dow

fell during the course of the day. Falling very sharply from 11:30 on and never recovering, really. Off the worst of the day. But look at the

breakdown of the Dow and you really do see exactly what happened. Only two stocks that were in the green. Both financials, both banks, both

beneficiaries of yesterday's stress tests by the fed. Everybody else down. And it raises the very real question -- has the market turned? Is the

sentiment now against it? Central bankers are pretty much universal, in saying their work is done, it's time to start normalizing interest rates.

Some will do it faster, some will do it slower. Draghi, Carney, Yellen, it's going to happen sooner probably rather than later. But the issue

becomes whether the sentiment has changed. Or do we just take today, Thursday, as a frolic of its own? I don't think we can. I don't think we

can, because France was down heavily, Germany was down heavily, the U.K. was down. And the U.S. I'm not saying a swallow on summer and I'm not

saying a canary in the mine. What I am saying is that here something took place today that we just need to keep a little eye on as we look forward in

the summer months ahead.

And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York, whatever you're up to in the hours ahead, I hope it's profitable.

We'll do it again tomorrow.

END