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QUEST MEANS BUSINESS

All Indices Are Down In The Stock Market; Democrats Urge Trump To Hang Tough On China; The Decision To Rewrite Istanbul's Mayoral Elections Has Spooked Investors. Aired: 3-4p ET

Aired May 7, 2019 - 15:00   ET

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


RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: We are an hour away from the close up business on Wall Street. It is not pretty.

Look at it. The market has been down and falling the most of the session. It reached a low point down 600 points just about 20 minutes ago.

Interesting to see how we recover or do we go further down? All the indices are down and I want you to look, the NASDAQ suffering the most down

2.3 percent. S&P is off nearly two. They've been pretty much in lockstep for the whole of the session.

Put the markets together, and we need to show you these are the reasons why. It is real. The tariffs are coming and the stocks are sinking. New

number show Europe's biggest economies, at the bottom of the class when it comes to growth. We will show you table; and while Istanbul, voters go

back to the polls, Istanbul traders are left with a market fallout.

We're live in the world's financial capital, New York City, stunning, beautiful late spring day on Tuesday, the 7th of May. I'm Richard Quest, I

mean business.

Tonight, it was the fear of another trade war that pushed the Dow to its worst single day loss in some four months. Yesterday started bad and got

better. Today, it started bad and got worse. All three indices and all sectors in the S&P 500 are down. Those companies exposed to China trade

are hit the hardest.

So for example, chip makers, industrials and casinos, like Wynn really felt the full force and ferocity of the markets. If you look at the Dow

Industrials, well, you've got Intel, 3M, Caterpillar and Boeing. Boeing is off the worst, by the way, on the Dow down 4 percent. And that's because

it's also been downgraded by Barclays. But you see that Apple is way down there as well.

And so the market is absolutely hitting those stocks hardest that will be most affected by China. Alison is on the floor of the New York Stock

Exchange. Alison, I know, it's always very difficult to take one minute from the next. But there was a burst of selling that took the market down

more than 600 points. Was there any specific reason why?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know what, I think it's just because it's getting closer to the final hour of trading. You're seeing

investors wanting to kind of get in position for the closing bell. We are seeing it come back just a little bit.

But listen, we've still got an hour to go and a lot can happen in that hour. I think different from yesterday, and you mentioned that in your

open, I think we're not going to see the U-turn that stocks made yesterday. I don't think we're going to see that today.

No positive headlines have come out to turn the market that way. Different from yesterday, when we heard that Chinese delegation still will come to

Washington to negotiate terms of a trade deal, possibly between the U.S. and China.

So that is what traders at this point, Richard are watching. They're watching for any headlines. They're not getting any. But it's those

headlines that are really -- they are driving the action, and they're driving the tones here on Wall Street.

QUEST: Right. But this is a market that was very cheerful on the back of earnings, GDP growth at 3.2 percent. Much better than Europe, which we'll

talk about later. And does sentiment really turned on that quickly?

KOSIK: I think it did. I mean, you can see it in the trading action. I mean, you know, there are the traders, of course, the part of them who want

to see this kind of volatility, because that's where the money is made. But the sentiment has changed because no one really knows how this deal is

going to end up, if there's going to be a trade deal.

And if there's no deal, traders are telling me you can expect a big selloff, because in that case, the question is what are going to be the

trading rules of the road? How do you do business in that environment? And when it comes down to it, guess what makes up Wall Street? Businesses

and you want to be able to trade knowing the rules of the road and that's really the biggest worry here, Richard.

QUEST: Alison, thank you. Alison is at the exchange. Paul Donovan says investors should get used to the uncertainty. Now, Paul is the global

chief economist at UBS Wealth Management and he is with me now.

And, Paul, we've got a good bit of time to deal with Europe, and issues there. Let's just stick for the moment on the U.S. and the trade worries.

This sudden sell off on the back of some tweets and the prospect of a failure, what do you make of it?

PAUL DONOVAN, GLOBAL CHIEF ECONOMIST, UBS WEALTH MANAGEMENT: Well, I mean, I think it's fairly obvious, frankly, and we saw exactly this last year.

What we've got to realize is what the President tweeted on Sunday was, "I'm going to tax American companies very hard."

[15:05:13] DONOVAN: That's bottom line what he said, because a tax on trade is a tax on listed companies in the global economy. Eighty percent,

eight zero percent of global trade is done by large listed companies.

If you're taxing trade, you're taxing companies. Is it any wonder the equity market is a little upset by this? So whatever the President's

motives, he may have very good reasons for doing what he is doing as the negotiation starts. But this is going to add volatility. And of course,

the equity market isn't going to like it when it is being subject to a new, aggressive tax.

QUEST: Is that fear that the lower profits as a result of the tax or the reduced business because of the tariffs? I guess that's one and the same

thing to some extent, because ultimately, the companies make less money?

DONOVAN: Well, actually, the impact of the tax has been felt indirectly, perhaps even more than it's been felt directly. And the irony is that when

we were going into Sunday, last Friday, there was a lot of optimism about the economic outlook.

UBS does a survey of our investors, our entrepreneurs around the world. And obviously a lot of the world's largest entrepreneurs bank with us. And

our Investment Sentiment Survey was extremely positive. We were seeing, you know, people with very optimistic views about the global economy, clear

majority saying things are going to get better. That was because there was hope for a trade deal.

Now, what the trade uncertainty has done, is delay investment by companies. And that in turn, has exaggerated the slowdown in trade, over a third of

global trade is for investment purposes and it has slowed the manufacturing sector. Consumer good production is just fine. Investment goods have been

really weak. So what's happened is this uncertainty over trade. The "will they, won't they" has made things worse.

QUEST: Is there a bounce back if there's a trade deal or does this rot set in?

DONOVAN: So I think if we get some kind of trade deal this week, or let's say, by the G-20, let's be charitable, give it to the end of the month. If

we get some kind of trade deal in that time, then I think that the positive sentiment that our investors are telling us in our surveys, the nascent

positive growth that we're starting to see emerge in the economic numbers that has time to bet itself in.

And okay, we have a week or two weeks of wobbles and the market goes up and down. People will look through that. But if this drags on, then the

uncertainty drags on. And if the uncertainty drags on, then firms continue to delay investment. It's sort of like Brexit on a global scale and

believe you me, nobody wants Brexit on the global scale.

QUEST: On that related issue, Paul Krugman writing in this morning's "New York Times," I'm not sure whether you've seen his column, he makes the

point that the current strength and growth in the U.S. economy is not predicated by the tax cuts or by economic policies, but by the deficit

spending as a result of those policies.

And he says that without it, you wouldn't have anything like the low unemployment number. Do you go along with that?

DONOVAN: I think that certainly the U.S. had a sugar high last year coming through because of deficit finance tax cuts. Has that pushed unemployment

further down, it's probably had some effect. You would expect it to have some effect, but the U.S. economy was jogging along okay.

We've got to put this into a global context as well. I mean, globally, unemployment is at a 40-year low. This isn't just the U.S. has got a good

labor market. Everyone has got good labor markets -- well, almost everyone. And so as a result, we're seeing a pretty strong global labor

market environment, rising labor share of GDP.

So I wouldn't say we can say everything is due to deficit, finance and the explosion of the U.S. budget deficit, certainly that's pushed in a

direction, but it was already fairly good to be starting out with to be honest.

QUEST: Don't go too far. I know it's late where you are, but don't go too far, because I want to talk Europe, with the latest numbers that we've had

from the Commission on that. Paul, standby.

Now as President Trump negotiates with China, he is getting support from his political opponents. The Senate's Democratic Minority Leader, Chuck

Schumer tweeted out this message over the weekend, "Hang tough on China. Don't back down. Strength is the only way to win with China."

So that may be but under President Xi, China has taken a tough stand in trade to streets around the world. The U.S. has accused it of reneging on

its promises. Europe is calling China a systemic rival. The E.U. has claimed some success or concessions on curbing forced technologies in state

subsidies.

[15:10:08] QUEST: And in the South China Sea, President Xi has claimed a vast area rich in natural resources that has set off territorial disputes

with other nations in the region, and of course, with the United States. Join in our conversation here. Get out the phones, all the tablets, all

the computers. Tonight, we're asking you, is Donald Trump being too tough on China? You can have too tough, not tough enough, or just about right.

cnn.com/join joy and you'll see the results on your screen.

Michael Pillsbury served as an outside adviser to President Trump. He is urging the United States to stay aggressive. His book is called "The

Hundred-Year Marathon." Mr. Pillsbury argues that China has a plan to replace the United States as the global superpower.

Michael joins me now. Good to see you. Thank you. And I would imagine if you were to answer the question is Donald Trump's too tough? You'd

probably say either not tough enough or just about right?

MICHAEL PILLSBURY, DIRECTOR OF CHINESE STRATEGY, HUDSON INSTITUTE: Well, as of Sunday, it's just about right. Don't you think?

QUEST: What purpose did it serve to make those tweets and those comments?

PILLSBURY: Well, I argue in this morning's "Wall Street Journal" in great detail why the tariffs being increased are good idea. It's not to seek a

short term confrontation or drive the market down, obviously, it is to have an agreement that the Chinese have an incentive to comply with.

There have been a lot of problems, including Nancy Pelosi's criticism in 2001, with the Chinese not following the WTO rulings against them. So if

they have the tariffs increased a bit now, and then they believe, which I think they do, that they can earn their way to lower tariffs by

implementing faithfully the agreements that they've made, then this is a short-term tariff problem. It's not a permanent thing. The President has

said several times. He wants zero tariffs with China, that's the goal.

QUEST: But this ratcheting up, comes about not because they've broken an agreement.

PILLSBURY: Yes, it does.

QUEST: Well, hang on. Hang on.

PILLSBURY: They've reneged -- they reneged all these written agreements. That's the problem.

QUEST: Those agreements haven't been signed yet, and they're negotiating documents that are between the two sides and the suggestion is that the

Chinese are not going to follow through on what they said they would do. That's basically the gist of it. And that relates to technology transfer

issues.

But my point is, in the battle of the carrot and the stick, it seems to be lots of stick and little carrot.

PILLSBURY: No, there's quite a bit of carrot. The Chinese have what they call their 10 negotiating points, which were leaked, I think, by the

Chinese about a year ago, and they're going to get some of those points. They also want to better action says to the American market, they want to

purchase high tech American goods. They've got a list of things they want and they're going to get some of them.

So the prospects for a good deal are still very good. I'm an optimist. I've been involved in some of the details of what's been happening. I

think you mischaracterize the reason for the tariffs put on Sunday, the word "renege" the President use the word "renegotiate," this was expanded

on by a briefing yesterday that they're taking back things that they agreed to. You're right, it was a verbal agreement. Liu He didn't sign anything.

But there were texts, and they were worked on in great detail. When they began to take that back over the past week in a very aggressive manner,

that's what triggered the President's response. I don't think he wanted to do this. I think it was caused by the Chinese negotiating in bad faith.

Now there's a reason for that. They've got hawks and doves or hawks and reformers in Beijing. It's possible that reformers were okay with the

deal. The hawks finally got to look at it, the whole 150 pages, and they were shocked by the concessions that had been made.

So they got their chance, you know, now the President has called them on it. So President Xi, I suspect is now going to move more toward restoring

the original agreement, and these tariffs then can be used as an incentive for China to keep their commitments. You can be very optimistic about

this.

QUEST: It's interesting that Chuck Schumer is also urging very hard line - -

PILLSBURY: And Nancy Pelosi as well.

QUEST: Yes, which suggests that the President I mean, enjoys broad based support. I mean, we can discuss, you know, we can argue about the tactics

of tariffs being raised and what it does to the market but versus the strategy which everybody seems to be on message with.

PILLSBURY: I think its accumulation, Richard, of intelligence information over the last four or five years that the Chinese really have been engaging

in misconduct in a whole variety of ways. One of the most dramatic is the WTO ruling against them that they weren't letting American credit cards be

used in China.

They said, okay, you know, we agree, then they didn't do it, they still haven't and just five years has gone by. And in the meantime, their own

credit card got boosted worldwide, so they now have the most the highest revenue of any credit card in the world. That times a hundred gives you

some idea of what the Chinese have been up to. It's got to stop.

[15:15:34] QUEST: Right. Do you believe that the greater tariffs -- I guess the final issue is, don't take a bad deal. Don't be fobbed off with

some mercantilist, we'll buy $2 trillion worth of your stuff. If you don't fundamentally alter the balance, then it's worth having the tariffs with

the attendant market disruption.

PILLSBURY: Well, that's right. And the good news is Xi Jinping's speech last week, the Belt and Road Summit in Beijing, he endorsed a lot of this

in principle. That's why I present to you the theory of the hawks versus the reformers that it seemed as though President Xi was going along with

all this in his speech.

Somebody got a chance and said let's try -- let's have a test of strength with President Trump and see if we can back off on some of these

concessions? It didn't work, but it doesn't mean the end of the talks. It means the process goes forward.

And frankly, if we can get a good deal where there's no cheating in the next year or two, we avoid a lot of trade friction that would also drive

the market down next year during the election in 2020. Nobody wants that in the White House.

QUEST: We'll talk more about it. Michael, thank you very much. We did need you today to help us understand the wherewithal all of all of this.

It's much appreciated that you've given us time.

PILLSBURY: Thanks, Richard.

QUEST: Thank you. Now according to those of you who voted at cnn.com/join, a half of you think Donald Trump's stance is too tough. I

wasn't expecting that on today's program.

All right, as we continue Brussel is warning Europe's economic problems are far from over. The continents biggest economies are suffering the most.

Turkey's plan to scrap election results in Istanbul after the President's party lost. The opposition doesn't like it. Investors don't like it.

Nobody does really, except maybe the President of Turkey.

(COMMERCIAL BREAK)

[15:20:07] QUEST: The picture on Wall Street is bad enough and in Europe markets faired pretty much down. Now remember, they haven't seen the worst

of the day when everybody were up and went, but they did see the market down sort of 400 to 500 points. So we have losses of 1.6 or even, the ones

that has been off is Zurich, but these two -- London and Paris -- are bearing the brunt.

Now the U.K. stocks saw the worst of the selling. After all, it was playing catch up from the May Day bank holiday break and trade fears were

mainly to blame.

We had weak industrial data from Germany and that of course weighed on the Xetra DAX. Germany's economic prospects are going from bad to worse.

That's the warning from the European Commission.

It's just slashed German growth forecasts, once again, cutting it in half to -- look at those numbers. The largest countries in the E.U. are now the

ones with the slowest growth. You've got the numbers. Italy is barely growing. Germany, just a little bit more. Belgium 1.2. U.K. and France,

Spain, of course is not in that number.

Paul Donovan continues to be with me, the global chief economist at UBS Wealth Management. When you look at these forecasts, at this point in the

cycle, Paul, this is rather depressing.

DONOVAN: Well, sort of I mean, you know, we always say better late than never. I'm not sure that really applies to European Commission forecasts.

They are just late and better never. What we've actually seen is, is an expectation of this moderation of growth this year for some time.

Remember, the European economy, even on the Commission's forecast, it is growing at about trend in the European economy because it's got an aging

population, parts of it have got a falling population. It's not an economy that's going to be growing at two percent to three percent. It's an

economy that's going to be growing about one and a quarter, one and a half percent, something like that. And you know what? That's what the

Commission is forecasting for this year.

QUEST: Is that satisfactory? I had to draw the connection to the United States or the comparison to the United States where trend growth is higher.

And as a result, productivity is higher, and as a result, the standard of living is higher?

DONOVAN: Well, no, that's where you're wrong, Richard, I'm afraid. The standard of living in the States is not higher, at least in terms of the

growth rates, because what we're talking about here is GDP per person. And when you look at the GDP per person comparison, over the last 10 years --

Europe, Japan, the United States -- they all do about the same. That's the standard of living.

Now, what you've got is an economy in the United States where there are more people doing more things, and that increases the size of the economy.

But it doesn't mean any individual's share the economy is going up dramatically faster. In Europe, you've got fewer people doing things.

QUEST: But you -- in all of these countries, that we're looking at France, with exception maybe of the U.K., but Belgium, Germany, Italy, you have got

rich -- you still have high levels of unemployment, slowdowns of economies. And you wonder, did you enjoy the best of it before you're starting to see

the worst?

DONOVAN: Well, you've got to remember it, you are more likely, in fact, significantly more likely to have a job in Europe than you are in the

United States today. The employment participation rate in Europe is significantly higher than it is in the United States. So again, if we're

talking about living standards, it's not necessarily quite so bad.

European wages have picked up not as much as the United States admittedly. But wage growth in Europe is running at a bad a 12-year high at the moment.

It's not that bad. What we've had in Europe is problems with Germany. And basically, we can blame the Germans for a lot of this.

The Italians helped as well. But a lot of this is down to the Germans where about 70 percent of developed economy manufacturing slowdown is due

to the problems of German industry. The auto sector problems with the chemical sector around the River Rhine -- things like that.

Those problems are fading and as they fade, we get stabilization this year. That's what we're looking for -- stabilization around trend.

QUEST: We haven't discussed Brexit, we'll have to save that for another day, Paul. Good to see you, sir.

DONOVAN: Sometime towards the end of the year would be a good time, I think.

QUEST: Around October the 25th, or just about a week before. I suspect we will not be so fortunate. There will be Brexit on our agenda. Good to see

you, Paul. Thank you.

In Turkey now, the decision to rewrite Istanbul's mayoral elections has spooked investors. The lira fell to a seven-month low versus the dollar.

It's now paring those losses. Investors are fleeing Turkish stocks. The main index in Istanbul was down one and a half percent. President

Erdogan's ruling party narrowly lost the Istanbul mayoral race back in March.

[15:25:10] QUEST: Subsequently, it won an appeal to hold the poll again after raising questions about possible voter fraud. John Defterios is in

London.

Before we get to the lira, the judgment that's decided to rerun the election is -- it's been questioned as being from biased judges.

JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Yes, it certainly is, Richard and I think the attitude by the AK Parti, the ruling party

since 2002, is that failure is not an option.

The opposition party, the CHP was suggesting this is very personal for President Erdogan himself because he was mayor of Istanbul, he even said

himself, if you lose Istanbul, you lose Turkey.

Now let's kind of weave into this idea how the international investors sees that lira was down 1.6 percent today, but we're looking at a loss of 14

percent in 2019 because of this political intervention, it was down 30 percent in 2018.

You remember the spat they had with the United States over the tariffs and the verbal combat with Donald Trump didn't play well for the lira overall.

And even though the stock market didn't have a horrible sell of 1.6 percent today, ever since Richard, they started to talk about intervention and a

revote, the market corrected at 7 percent over the last 30 days. It doesn't look very good and this is a grasp perhaps for the AK Parti as the

challenge of the economy percolates up to try to hold on to power in the power base of Istanbul.

QUEST: The party, the ruling party lost by a very small amount if I am right, about 14,000 votes over the -- I guess if and when this election is

rerun, it will not be difficult to ensure one result or another.

DEFTERIOS: Well, that's an interesting way of putting it, the CHP seems very confident now that this will inspire those from the opposition to make

sure they get out and vote and to try to send an even stronger signal to President Erdogan.

Richard, we can't overlook as well at the same time, this is an economy that contracted 4 percent in the second half of 2018. The same level of

contraction is expected in the first half of 2019, perhaps a recovery in 2020.

And there's that question mark that you and I have talked about before. His son-in-law is the Finance Minister and the Treasury Minister. He spoke

at the spring meetings in the IMF-World Bank. As he was speaking during that meeting, the currency was collapsing because they don't think they

have a strategy to get out of the recession and it was growth at all cost.

Remember going into the presidential election, the party elections last year, he was growing six - seven percent, Richard, and now they're paying

the piper and it's costing them votes in the major cities and Istanbul is particularly sensitive for him, his home base.

QUEST: Keep watching, please, because this one is going around. Thank you. John Defterios in London.

As we continue, you and I, U.S. markets are still falling as we head towards the close. There seems to be a bit of stability. Remember the low

point it's just about 230 in the afternoon, New York time, but we'll watch it closely. Talk more about it as we head to the final half hour of

trading on Wall Street.

(COMMERCIAL BREAK)

[15:30:00]

RICHARD QUEST, CNN QUEST MEANS BUSINESS: I'm Richard Quest. Hello. There's more Quest Means Business in just a moment. Following is just the

bottom of the Dow. There is a big downgrade on Wall Street. We don't understand why. One of the oldest names in German airline in history could

be on the block a German rival, maybe the buyer as we continue. This is CNN. And on this network, the facts always come first.

The U.S. Secretary of State, Mike Pompeo, was supposed to go to Berlin today but he abruptly canceled that trip and went somewhere else instead.

We don't know where. Journalists went with him though they have been told they may not be able to talk about it until the trip is done.

One of the two journalist just freed from custody in Myanmar says he can't wait to get back to work. They were released on Tuesday after more than 16

months in detention. Reuters say the two were been imprison after reporting on the massacre of Rohingya Muslims.

A British soldier in Africa was killed an elephant this weekend. Mathew Talbot was part of an anti-poaching operation in Malawi where the incident

happened. His patrol spooked a herd of elephants and Talbot was trampled.

The former U.S. actress, Pamela Anderson, visited Julian Assange in Prison today. She then tell reporters that the WikiLeaks founder is innocent,

calling him a good man. British police arrested Assange last month after the Ecuadorian Embassy in London withdrew his asylum. Assange is now

serving time for skipping bale, and thereafter is battling a U.S. extradition request.

So we're in the Quest Means Business trading post and we're now down then 610 on the Dow. I'm pretty certain that is the low point of the day, 2.3

percent. In fact, all the three major indices are down more than 2 to 2.5 percent. So it is a red for without any question or doubt for the exchange

or for the trading post. The fallout from President Trump's latest tariff threats is what's pulling stocks lower. And it's on pace, the market, with

the Dow of its worst day since January.

U.S. oil futures were also down on the trade tensions with China and market records are likely to say the same, certainly, obviously nothing in Europe.

We have only had four on the S&P and Nasdaq, that some way off.

Paul La Monaco is with me. And, Paul, there's more going on here than just a couple of presidential Tweets and few worries over a bit of trade talk.

What is going on?

PAUL LA MONICA, CNN DIGITAL CORRESPONDENT: Yes. That's a great point, Richard. Obviously, the market has done so well this year, some would

argue in spite of the -- what's going on at the White House, and some would say to give credit where credit is due. We've had solid jobs growth, solid

economic growth, solid earnings growth. So that's the reason why the market is headed higher.

But now, all the sudden, President Trump might be shooting the rally in the foot with this talk of higher tariffs and a potential trade war with China.

You know, the market came back yesterday after people were once again willing to shrug off the Trump threats, but I think the news after the

market that, yes, we are definitely getting tariffs going higher on Friday, that news coming from Robert Lighthizer. That clearly has spooked

everyone, and that's why you're seeing bloodshed in the market today. I mean, and there is not a lot of companies that are trading higher at all.

QUEST: Right. But let's put this in perspective, bearing in mind the rise in the market that we've seen since the beginning of the year.

[15:35:00]

This is really just froth of that market gain.

LA MONICA: Yes. I mean, clearly, the market is still having a very strong 2019. The question, of course, now, Richard, though is, is the party over,

did we peak? And now, it's going to be just darker days ahead, because all we're going to be worried about is what impact the potential trade war

we'll have on earnings going forward.

QUEST: And Anadarko looks like it's going to -- that has been settled one way or the other towards Occidental (ph) unless Chevron come back with a

better deal. Do you think they will?

LAMONICA: I don't think they will. It's obviously possible and, you know, it's clearly a very, very -- a good thing for Chevron to consider because

they have to be bigger in the shale industry and the Permian basin where, you know, Anadarko has huge assets. But they're not just bidding against

Occidental. If that were the case, they could easily outbid them. They're bidding against an Occidental that is backed by Warren Buffett. And Warren

Buffett is clearly, I think on, you know, the side of Occidental here. He wants that deal to happen.

QUEST: Paul La Monica, thank you, Paul.

Now, one of the oldest names in the German aviation could soon be snapped up by one of the biggest. Lufthansa has set its sights on Condor. It's a

65-year-old airline that helped pioneer commercial air travel in Germany. It was charter travel before it became more scheduled. The CEO says his

company has made an offer for Condor, which is owned Thomas Cook. He added that Lufthansa has also looked to buy other airlines from Thomas Cook in

Britain and Scandinavia. Shares in Thomas Cook grows more than 10 percent on the news. They've been looking to offload their airlines for some time.

Joining from Los Angeles, Brian Sumers, is the Senior Aviation Business Editor at Skift. Why would Lufthansa want Condor and would there be

regulatory issues bearing in mind the size of the Lufthansa group?

BRIAN SUMERS, SENIOR AVIATION BUSINESS EDITOR, SKIFT: Well, Richard, I think the answer is pretty simple. Condor is the second largest Airline in

Germany. Lufthansa is, of course, the first by far. And wouldn't it be great for Lufthansa to eliminate this competitor here? You know, it's

possible Lufthansa has also been trying to grow its Euro wings, long-haul, low-cost division. So Lufthansa could send some of the aircraft there.

But, essentially, I think that the name of the game here is eliminate a competitor. Lufthansa did this a couple years ago when it bought some of

Air Berlin's assets. The airline was able to grow but, of course, Air Berlin doesn't exist anymore. That was good for Lufthansa Group.

The interesting thing is you talk about competitive behavior and anti-trust here. Lufthansa has some experience with this, right, because they were

able to get the deal through for Air Berlin's assets. They didn't get exactly what they wanted, but they got it through. And I think there is a

lot of smart people out here that say, look, Lufthansa Group knows what it needs to do to get these assets from Condor. It will probably have to

divest some slots, but they could get the deal through.

QUEST: But do we now look upon Europe obviously as a single European market in this -- in thinking about these things with the commission,

because if you just look on a German basis, Lufthansa that owns Condor essentially is a monopoly?

SUMERS: Yes. You know, it looks pretty bad if you, look, I'm just the German basis. But, you know, Europe, I think, in this day and age is a

single market, right? I mean, you have airlines like EasyJet and Ryanair expanding in Germany. You have other airlines from Eastern Europe coming

into Western Europe. It's one giant market here and that makes it a lot different than it was 30 years or 40 years or 50 years ago.

QUEST: The consolidation in Europe, I mean, there all that -- besides EasyJet and Ryanair, which are two behemoths in their own right, you do --

everything else coalesces around IAG and the Air France KLM Group and Lufthansa Group. The Air France KLM group is in a mess. Do you see any

clarity yet?

SUMERS: There's no clarity yet. But if there's one thing that Carsten Spohr, the CEO of Lufthansa Group, says, it's that consolidation in Europe

is not done yet. I mean, we talk about the five big groups in Europe, they have huge market share but it's nowhere near the same as in the United

States.

QUEST: Brian, just wanted one thing past you (ph). Boeing is down very sharply. But the reason it is down very sharply is because there was an

analyst reporters that says passengers -- they believe, passengers may refuse to fly the 737 Max 8 when it starts flying again. Now, if that's

true or if it turns out to be the case, then that's really very serious for Boeing, hence, the stock is off very sharply.

[15:39:55]

Can you see a situation where there is such a stench over the 737 Max 8 that it becomes -- either it has to be rebranded, changed or something

major has to happen?

SUMERS: No. You're absolutely right, Richard. Barclays' analyst came out just today and they said that they surveyed 1,700 consumers and 52 percent

of them were not going to fly the Max for a year or more. You talk to U.S. airlines executives, and they say there will absolutely be a book away

phenomenon in the next year or so, people will be skittish about the Max. Airlines and Boeing seem to be betting that travelers will have short

memories and that after a while. They're still going to fly the Max. They're not going to care anymore.

I'm not sure that's true, Richard. It's possible Boeing will have to do something more drastic, maybe even rebrand the plane. But I think we're

just going to see how it shakes out.

QUEST: No, Brian, because what you can't do is we rebuild the thing. I mean, I'm reading a lot lot of noise from commentators saying it's a full -

- it's a state of the art on a 40-year-old (INAUDIBLE). But you can go back to square one and say, right, we're going to redesign the whole thing.

Maybe you can.

SUMERS: I'm sure that if Boeing had a chance to do it all over again, they might have not gone with the Max. It's a late for that now. So maybe w

rebranding is the best thing they can do. Or maybe people are just going to forget this at some point. I mean, you remember going back decades, the

DC-10 had its own issues and in the 90's. I was flying the DC-10 and I didn't remember what happened in 1979. I wasn't even alive.

QUEST: Oh, you ruined me. Not only do I remember the DC-10. I remember - - thank you there. I was going to say thank but I -- good to see you, Brian. We'll talk more again.

SUMERS: Nice to see you, Richard.

QUEST: You're not even alive in 1979. When we return, the Wolf of Wall Street, the Malaysian Government and $60 million that is getting back. I'm

wounded. I'm wounded.

(COMMERCIAL BREAK)

QUEST: The story of the history's great financial fraud on the one hand, and on the other, a movie about the Wolf on Wall Street. The film is about

Jordan Belfort. As little less profitable, thanks to a 1MDB scandal.

[15:44:58]

And literally as well as figuratively, the U.S. investigators have now seized $60 million from the profits of the film that's being given by --

the money is being handed over to the Malaysian Government as it seeks to recover $5 billion dollars allegedly stolen from the country's 1MDB

sovereign wealth fund. The film was produce by company co-founded by the stepson of the former Malaysian Prime Minister, Najib Razak.

Ken Brown is an editor at the Wall Street Journal. They didn't hand the money over sort of willy-nilly, did they? I mean, the U.S. government

basically said hand it over or else.

KEN BROWN, SENIOR COLUMNIST, WALL STREET JOURNAL: Well, the Malaysian government wanted it because the U.S. government wanted to get a guy who is

sitting in Malaysian prison, the Goldman Sachs Managing Director. The U.S. government wants to talk to him about the scandal.

QUEST: And they've got the money off the production firm, right, just scourged that money in the production firm which is now going to be paid

back to the Malaysians.

BROWN: Right. So the $60 million out of the production firm is part of the $200 million the U.S. government is giving back to Malaysia. They've

been seizing assets that were stolen from fund, boats, apartments, mansions, and now, they're slowly giving the money back to the Malaysian

government full with --

QUEST: A drop in the ocean compared to what was taken though, isn't it?

BROWN: It's a staggering amount. $4.5 billion was stolen from 1MDB. It's one of the greatest financial frauds of all time.

QUEST: And having read the book, of course --

BROWN: Yes.

QUEST: -- you know, it is. It is though. What remain -- where does this go now? Najib Razak is on trial.

BROWN: Yes, the Former Prime Minister.

QUEST: Right. You've then got the Goldman Sachs.

BROWN: Yes.

QUEST: It's angled to it with the banker, one who has been pleading guilty.

BROWN: Right. So the main banker in the deal, Tim Leissner, the senior guy, Goldman Sachs' partner pleaded guilty to a few felonies. Roger Ng,

who was this sort of partner, his managing director, he stopped -- he was fighting extradition to the U.S. He gave that at. He's in the U.S. He's

negotiating a plea agreement now with the federal government. He will talk to them about Goldman Sachs. The question now is, what happens to Goldman

Sachs.

So there's a debate in the Justice Department. Do you make them plead guilty to criminal charges, the firm? Do you fine them a lot of money?

It's all under negotiation. And a new testimony from this guy is going to make a difference.

QUEST: How much of a weight against Goldman Sachs is this? Because, I mean, the accusation is, what, that they knew, they should have known or

they went negligent about not knowing?

BROWN: All of those things, the very senior people. This was not rogue traders. These are very senior people and they went all the way up the

food chain at the firm, and they should have known. And so the question is, are the systems in place at Goldman Sachs to prevent other frauds? Did

they willingly ignore stuff? That's all the subject to these negotiations.

QUEST: The thing I find fascinating is when all this happen.

BROWN: Yes.

QUEST: This was not pre-2008, 2009.

BROWN: This was after.

QUEST: So we've had a financial crisis. We know miscreant behavior in interest rate swaps. We know there's been really bad things going on. And

this still is allowed to take place.

BROWN: Right. It's amazing. So Goldman Sachs, like everyone else, was struggling in those years, and this Malaysian business came along, super

lucrative business for them. And they pushed it and pushed it and pushed it and they did not see the red flags partially because this was the

brightest spot of their business in the world.

QUEST: But they blinded themselves.

BROWNS: That's what it seemed, yes.

QUEST: What about Jho Low, the man who actually -- I'll say allegedly for the record. I mean, the man who has the chutzpah, by the way, to complain

about the prize of the yacht when it sold, a yacht that he allegedly bought with ill-gotten gains.

BROWN: Yes. The Equanimity, it was named. And Jho Low was in China somewhere, as far as we know. He is out of reach with the Malaysians.

They want him back. The Americans want to talk to him. He's a very interesting character.

QUEST: Good to see you.

BROWN: Good to see you, thanks.

QUEST: Thank you so much. Kind of you to come in. We appreciate it.

Ferrari has had a good pace on the track. The stock is having a good phase on the stock exchange. There are two models and one country and for their

success in a moment.

(COMMERCIAL BREAK)

[15:50:00]

QUEST: A shocking day for the markets. There is one stock now that pressed (ph) to want to buy. It's red, it's shiny, it's fast, not the

stock, but the car. Look at that. There it goes. Look at that go. The ticker code race, if you look at the share price, has roared up as Ferrari

has beat estimates with particularly strong sales in China. Race is the ticker and up to 3.4 percent to the -- you see so far today. It's really

interesting for a stock to be up in today's market is an achievement, 137.

As with racing, it's about the season as a whole. And the stock is up 38 percent so far this year. But what I find interesting about this stock and

they way it's gone is the consistency of that rise besides this large rise just in the middle of February. It has continued against all the odds.

It's now just at 137 versus 96, where everything began.

Joining me now is CNN's Senior Auto Writer, Peter Valdes-Dapena. Why? What did Ferrari do right?

PETER VALDES-DAPENA, CNN SENIOR AUTO WRITER: Well, I think one thing they did was, as you mentioned, sell a lot of cars in China, where that increase

was particularly boosted by sales of the Portofino, that car we're seeing there, which is sort of Ferrari's, if you will, their entry level model

around $200,000. So it's been -- and China is an important market for Ferrari when they are looking forward to.

QUEST: But, I mean, given -- for those who of us who can't afford one, the difference between a Portofino and the main models would be what?

DAPENA: Oh, a couple of hundred thousand dollars. Let's say the 812 Superfast might be closer to $400,000. Portofino is around $200,000.

Portofino is a little more accessible of a car to drive also, a little more laid back and easy on the road, not quite white knuckle performance but

still a lot of fun.

QUEST: And looking at the share price, it is impressive. But this large gap, this large rise that happens in February, it is particularly

interesting.

DAPENA: I think that has something to do with some announcement Ferrari has made about new models and things that they have coming up. Again, we

mentioned the China market. One thing Ferrari is working on is a larger, more comfortable four-door car, more accessible for markets. Like China,

they don't have as much of a driving culture, for example, as Europe does.

QUEST: What does Ferrari do next?

DAPENA: Well, that one thing I just mentioned there, broadening their market -- their model lineup a bit just to appeal to drivers who aren't

used to the Ferrari legend (ph), Ferrari driving.

QUEST: Right. But in terms of the price point, in terms of how low -- I mean, if your main car is 300,000 to 400,000 and you're already slumming it

down with the Portofino at 200,000, 215,000, do you slum farther, Peter?

[15:55:00]

DAPENA: I don't think you do. I think you keep line on price but make the cars more accessible. Because there are more and more extremely wealthy

people, as you reach out into markets, as we've been talking about like Asia. So I don't think you want to lower the price or lower the

exclusivity too much but appeal to wealthier people who wants something a little bit different, but still want that Ferrari feeling.

QUEST: Next time they lend you one, take me along for the ride. That's it, Peter. Thank you.

The markets, the final parts of trading. And we're well off the lows of the day and our old friend, Verizon, is up. Chevron is up there for

specific reasons relating to Anadarko. They wouldn't be there if it hadn't had that problem with Anadarko and Occidental. Otherwise, it is Verizon

that is at the top end. And Boeing firmly lower, you heard us talking about that with Brian from Skift. Boeing is down because of these worries

about whether people would fly the Max 8 in the future.

The market, overall, we are off the lows of the day. The low of the is about 640, but still an ugly day. We will take a profitable moment to try

and put it all together after the break.

(COMMERCIAL BREAK)

QUEST: So the market is low. I am Richard Quest. Whatever you're up to the hours ahead, I hope it is profitable when you join my colleague, Jake

Tapper and The Lead for the closing bell.

JAKE TAPPER, CNN THE LEAD WITH JAKE TAPPER: --500 times. But today, the White House said

Don McGahn needs to ignore that subpoena from House Democrats. So will the former White House Counsel defy his old boss?

One top 2020 candidate has not been shy about his faith, but now, Mayor Pete has a new claim about God that potentially could offend basically half

the country.

Plus, America's top diplomat is excited about the global crisis of rapidly melting sea ice, why Secretary of State Mike Pompeo apparently sees a

silver lining and a chance for companies to profit.

Welcome to The Lead. I'm Jake Tapper. We're going to start with breaking news in The Money Lead, the Dow's huge tumble today, finishing nearly 500

points in the red. Let's go right to CNN's Alison Kosik at the New York Stock Exchange.

And, Alison, today's drop seems to have a lot to do with fears of a new trade war with China.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Hey, Jake. Ramped up concerns about the U.S. and China trade situation, that was actually what remains

(INAUDIBLE) with the big losses that we saw today.

[16:00:06]

And what a day it has been from the opening bell to the closing.

END