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QUEST MEANS BUSINESS

Wall Street Is Feeling Lucky As Chinese And U.S. Negotiators Meet For A 13th Round Of Trade Talks; Turkish President Erdogan Issues Stark Warning To European Countries; Climate Protesters Wreak Havoc At A Busy London Airport; Sixty Thousand Civilians Displaced In Northern Syria; Two Giuliani Associates Indicted On Criminal Charges For Allegedly Funneling Foreign Money Into U.S. Election; U.K. Minister Warns E.U. Citizens Of Facing Deportation. Aired 3-4p ET

Aired October 10, 2019 - 15:00   ET

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


[15:00:12]

RICHARD QUEST, CNN INTERNATIONAL HOST: We are an hour away, 60 minutes from the end of trading on Wall Street. The day has been up, right the way

up the board as you can see -- rather across the board, yes, it has been up. But we have given back most of -- at least, a lot of the gains from

the earlier part, which is right about 11 o'clock this morning. Those are the markets. And these are some of the reasons why.

Donald Trump says, let's do things face-to-face. He is planning a meeting with China's Vice Premier. That's boosted the market.

Fidelity is joining the race to the bottom. The latest broker to go zero commission.

And climate protests at a major London airport. The airlines are taking action. We'll hear from Willie Walsh, Chief Executive of IAG on this

program. Tonight, live from London. It's Thursday. It's October the 10th. I am Richard Quest, and of course, I mean business.

Good evening, Wall Street is feeling lucky as Chinese and U.S. negotiators meet for a 13th round of trade talks. You saw the numbers there and that

reflects exactly what's happening.

The Dow looks set to close with triple digit gains and it is because President Trump said he will meet face-to-face with Vice Premier Liu He by

on Friday. There is not much time for the two sides to strike a deal if they are to prevent extra tariffs. After all, the U.S. tariffs on $250

billion worth of goods are due to increase to 30 percent next week.

The President has hinted he'll need some convincing not to do that. "Big day of negotiations with China. They want to make a deal, but do I? I

meet with the Vice Premier tomorrow at the White House." CNN's Kevin Liptak is in Washington.

Since everybody wants a deal. Why would the President be sort of playing hard to get if it's the right deal? Why is he saying, do I?

KEVIN LIPTAK, CNN WHITE HOUSE REPORTER: Well, I think the big question for President Trump is what the Chinese are willing to put on the table in this

round of talks.

Now, people I've talked to here in Washington today say they're somewhat optimistic that the President will meet with the Vice Premier in the Oval

Office tomorrow. There is precedent for positive steps for it after those types of meetings. The last couple times the President has met Liu He in

the Oval Office, there have been progressive talks.

But it still remains to be seen and officials say they doubt that the type of big comprehensive deal that the President says he wants with China will

be on the table this week.

At best they're hoping for some kind of de-escalation in the tensions between these two countries. There's some talk that the U.S. would put a

currency agreement on the table again, that the Chinese would agree to do farm purchases from the U.S.

But the big type of agreement that would include structural changes to the Chinese economy, that sort of thing does not appear to be on the table this

week.

QUEST: But just getting the talks back on the rails, along with a de- escalation from the next round of tariffs from both sides would be an achievement, surely.

LIPTAK: Yes, certainly wouldn't it, something that the President is looking for. He is coming under a lot of pressure from business leaders in

the United States, from farmers, from his Republican allies to make some kind of agreement that will help ease tensions.

You have to remember this is all coming against the backdrop of impeachment proceedings here in Washington.

The President is really looking for a win right on any kind of thing, and a small trade deal of China could certainly be among those things. It's not

the deal that he wants. In the end, he'll still be working towards that. But it would amount to some level of progress -- Richard.

QUEST: Thank you. Let's develop that thought further because the deal that he wants -- well, there is speculation that both sides may try to

reach a mini deal, some sort of tit-for-tat by China, in exchange for the easing of new tariffs.

In the past, Donald Trump has been very firm, it's all or nothing.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We are looking for a complete deal. I'm not looking for a partial deal.

My inclination is to get a big deal. We've come this far. We're doing well.

This isn't going to be a small deal with China. It's either going to be a very big deal or it's going to be a deal that we will just postpone for a

little while.

(BEGIN VIDEO CLIP)

QUEST: Now, the U.S. market is optimistic. Ben Phillips is with me, the Chief Investment Officer at EventShares. He joins me from Los Angeles.

You heard the President there. It's going to be a big deal or no deal at all. But the way things are moving at least at the moment suggests

incremental rather than revolutionary.

[15:05:02]

BEN PHILLIPS, CHIEF INVESTMENT OFFICER, EVENTSHARES: Yes, and it is dependent on which day you ask me this week. It feels like it's been a lot

of fits and starts really since, you know, we started these China trade negotiations well over a year ago.

So it has been a lot of miss -- a lot of noise, I guess this week, really. I've heard people saying that it looks like we're going forward, and then

we hear they're leaving early on Thursday today. And so it's been a lot of noise this week.

So we'll see if they stay tomorrow, and President Trump actually meets with the Vice Premier, I actually do think that is constructive. But more to

that mini deals scenario or a truce.

QUEST: And in terms of the market, so we should perhaps ignore days like today, where you just get a bit of froth and a bit of excitement, which

could easily just evaporate at the first whiff and probably do a lot more damage.

PHILLIPS: That's right. I think on both sides, I mean, this current weakness in the U.S. economy and the U.S. markets was caused by U.S. and

China trade disputes and other trade disputes globally.

So the confidence crisis that you're seeing in the markets of institutional investors, and why you're seeing just a little bit of nervousness is

because of policy. And if you see the policy go either way, I think that's, you know, what's going to be the catalyst for the market and then

the next leg up or down.

QUEST: And on the matter, should we be concerned when we look at what's happening with the Fed, and the way they are starting QE, because liquidity

is low because of the rundown of the balance sheet?

I mean, are these not all the sorts of problems in the plumbing that we will always forecast to happen with QE, but could make the transmission of

monetary policy very difficult?

PHILLIPS: It's a great point. I think that's absolutely right. Like we've gone into this Neo-Keynesian, if you want to call it that, or just

overly aggressive monetary policy that's really unprecedented in all of human history.

And so we don't know what the unintended consequences are going to be. But I think we're seeing the first cracks, really, and you just pointed them

out. It's liquidity. It's everyone heading for the same exit. There is not as big an exit as there used to be in many markets, credit markets, you

know, junk bonds, investment grade, and treasuries, and even repo.

So, yes, we are seeing you know bank balance sheets are smaller these days, and that's why.

QUEST: But why is that? Because even allowing for -- even allowing for the Fed to be running down, it's a very measured pace, its balance sheet,

why is there a liquidity issue at the moment?

PHILLIPS: Well, the thing last month was pretty unique where we saw, you know, tax payments due and we saw a big Treasury issue. And so there were

two major events that took out almost $100 billion liquidity out of the global financial system of dollars, you know, right, in kind of one day

almost over a two-day period, really.

So that was a pretty unique event. But the Fed wasn't right there to step in and kind of alleviate that pain. And so I think people kind of missed

that, that there were these interesting factors causing liquidity to come out of the system. So now the Fed is reintroducing that liquidity, and I

think they're going to be more thoughtful about that short term market.

QUEST: Finally, we look at the market overall, and it is pretty much nothing this year. And it looks like it'll continue. I mean, I'm sure

some people will disagree with me, they'll point out a few percent here or whatever. But I think, by and large, compared to previous years, I suppose

we should be grateful that we're not down on the year so far, with less than a couple of months ago.

PHILLIPS: Yes, we have a few months ago, and you know, we're up, you know, don't sell that short, like we have had a good rally. But if you look at

the one year number, you know, we are kind of flat over a 12-month period.

So we had a lot of pain in Q4 that was, you know, baked into buying lower in January. So that's why we are up year-to-date, but fair point.

QUEST: Ben, always good to see you. I appreciate your time, sir. Thank you very much.

PHILLIPS: Thanks for having me.

QUEST: The Turkish President Erdogan has issued a stark warning to European countries. He's threatening to inundate them with 3.6 million

refugees if they dare criticize the military operation in Northeast Syria as an occupation.

It's an offensive that is raising concerns of humanitarian disaster, a mass displacement after 60,000 people fled their homes in one day. Turkey

claims the goal is to create a safe zone to resettle around two million Syrian refugees.

But the U.N. stresses that any return of Syrian refugees to Syria must be voluntary.

Clarissa Ward is with me from Northern Syria. Clarissa, first of all, before we get into the underlying philosophies and politics of it, just

update me on the military situation, please.

CLARISSA WARD, CNN CHIEF INTERNATIONAL CORRESPONDENT: So Richard, we spent the day in the town of Tall Abyad, which is right up on the Turkish border,

essentially a steady stream of artillery, hitting targets around that town throughout several hours when we were there.

For the most part, the town was deserted. Shops shuttered. People basically had left after those strikes began.

We did also hear Kurdish forces returning fire at least two or three outgoing rounds back into Turkey. We also saw Kurdish fighters, burning

large piles of tires in an apparent effort to create some kind of a smokescreen, and more broadly speaking, that's a picture that has been sort

of repeated across several places in Northern Syria today with Turkish strikes continuing.

[15:10:17]

WARD: No more whispers of a sort of ground incursion, which a lot of people have been talking about last night, but for civilians on the ground,

some 60,000 of them now displaced from their home, that number expected to go up to hundreds of thousands.

That is little comfort. They are simply waiting to see what tomorrow will bring. And I think it's fair to say most people here are not terribly

optimistic -- Richard.

QUEST: And this threat to the E.U. of several million refugees. How would Turkey actually execute such a threat?

WARD: Well, that's good question. But you'll probably remember, Richard, just a few years ago, Syrian refugees were flooding in droves across the --

from the Turkish coast across to the Greek islands trying to gain entry way into Europe, many of them of course successful.

Ultimately, the E.U. and Turkey brokered a deal, whereby Turkey agreed to stop or stem that flow, but they can open the floodgates, so to speak,

anytime they want.

And that is a very real incredible threat for Europe, which Germany especially has already been really straining under the weight of nearly a

million refugees.

So Erdogan knows full well, Richard, that this is a threat that is going to speak to the European Union and give them a bit of a shock or a bit of a

scare -- Richard.

QUEST: Clarissa, the Kurds can look where for help now? I mean, I've heard everybody suggest everything from, you know, the Russians through to

even Assad himself, in a sense to, you know -- we're at the point of my enemy's enemy is my friend now, aren't we?

WARD: Right. We are certainly at that point. And the Kurds don't have a lot of good options here. In terms of where they go, who can provide them

with some protection, you're exactly right. They are looking at potentially the regime of Bashar Al-Assad, which has killed hundreds of

thousands of its own citizens.

They are looking at the Russians, who of course, are Bashar Al-Assad's backers, but who have also become frankly the kind of kingmakers and

international power brokers in the Syrian conflict. That's a position that the U.S. sort of neglected to take back under the Obama administration.

And really under President Trump, Richard, we're just seeing a continuation of that, of total abdication of leadership from the U.S. who basically want

to retreat, disengage, extricate themselves from the Middle East, no matter what the cost to their allies on the ground who have been fighting and

dying to help them defeat ISIS.

QUEST: Clarissa, thank you. Clarissa is in Northern Syria tonight for us. I appreciate it.

When we return in a moment, back to our business agenda. Fidelity announced it will no longer charge commissions on online trades. They are

joining a trend that's taken a hold. Shareholders don't like it for obvious reasons.

As climate protesters wreak havoc at a busy London airport, one of the large European airline groups, IAG is making a bold pledge -- carbon

neutral by 2050. The CEO, Willie Walsh, in a moment.

(COMMERCIAL BREAK)

[15:16:16]

QUEST: The protesters have blocked roads. They have stopped trains and now, they are grounding traffic in Britain's capital. Flights from London

City Airport were delayed after activists from Extinction Rebellion caused chaos in the airport's main terminal. Some stationed sitting outside the

entrance.

One man climbed on top of a British Airways plane before being removed and arrested. Another flight was delayed after protesters started giving a

speech in the cabin.

Amid all the chaos, some in the industry are trying to take notice. One of the world's largest airlines groups, IAG has promised to remove or offset

all carbon emissions by its fleet by 2050 and that would include carriers like BA, Aer Lingus and Iberia.

It's estimated the aviation industry is only about two percent of global manmade carbon emissions. But that number doesn't really go down because

air travel is expanding. So if anything, that number becomes more of a threat of actually rising.

In a recent survey from UBS, one in five travelers claim that flight shaming has encouraged them to shun air travel for the sake of the planet.

The CEO of IAG is Willie Walsh. He joins me now live from Toronto in Canada. Always good to see you, Willie. First of all, why this pledge

now? And why is it going to take you 30 years to get there?

WILLIE WALSH, CEO, IAG: Well, thank you, Richard, it is really on the back of the decision by the British government to adopt the zero net emissions

by 2050.

As you know, the airline industry has adopted a target of 50 percent reduction in net emissions by 2050. But it's clear from recent scientific

evidence that that's not going to be enough.

So based on the scientific research, the Paris Accord, we believe that we need to demonstrate that we're prepared to go further.

So you're quite right. It's a very ambitious target. And we clearly have a lot to do to get there. And it will take time. And as you quite rightly

pointed out in your presentation, given that we don't have an alternative to fossil based fuel to kerosene, in the short and medium term, we're going

to have to start doing something else.

And that's why we've got to focus on our net missions where we can provide financial incentives to others to reduce their --

QUEST: But the British Airways itself is going to go net zero emissions sometime in the next couple of years for the domestic flights in the U.K.

Why is it so difficult?

Since there are a myriad of carbon offset schemes, why is it so difficult to go zero emissions over 30 years instead of sooner?

WALSH: What we're doing with British Airways is to offset all of our emissions from domestic flying because domestic flying is currently not

included in the International Accord, which is called CORSIA, which deals with international flying.

So we've gone step further and we've said in addition to the offsetting that will come about through our participation in CORSIA, we will also

offset our domestic CO2 production at British Airways from next year, 2020.

I think the critical issue here is that to do this properly, we need to satisfy ourselves that these off-settings are real, they can be measured.

QUEST: Right.

WALSH: It's very clear that they must be additional to business as usual. It must lead to a permanent reduction in carbon emissions. They must not

have any unintended consequences or drive permission somewhere else. And they must be capable of being ordered to the highest standards.

And that's why you've got to put these schemes in place. They have to be available on a global basis and that's the reason our focus is on that zero

emissions by 2015.

[15:20:06]

QUEST: We've talked before, Willie, that the airline industry, to some extent is on the back foot here. Flight shaming Greta, all of these

various incidents and protesters. You saw today at London City.

However regrettable, it might be for an airline trying to fly planes. The argument is not yet getting through from the industry.

WALSH: I think you're right, Richard, and you and I have talked about this for nearly 15 years now. We are doing a lot. The reason I'm in Toronto

was to bring a group of journalists on the new Airbus A-350 aircraft that we've introduced into British Airways.

And I made a point yesterday talking to these journalists that this aircraft, which in our configuration carries 331 passengers. The fuel burn

on the flight yesterday was 43 tons of fuel. Had that been on a 747, in other words, we operated on the aircraft that this is replacing. The fuel

burn would have been 70 tons.

That's 27 tons saving in fuel burn and clearly then that's about an 86 tons saving in CO2 production. So we're doing a lot. We've just got to get

that message out.

But more importantly, I think we do have to address the longer term ambition and the vision for the industry to ensure that our customers can

have confidence that we're playing our part.

QUEST: Final question, Willie, I just want to look at the industry in Europe at the moment. I mean, you and I spoke a few months ago at IATA and

you were pretty clear that some others were going to go and you weren't wrong. Do you think the shakeout is over?

WALSH: No, no. Not at all. I suspect we'll see more failings through this winter period and into the first quarter of next year.

It's clear there are a lot of fragile airlines out there. And I can't see anything that's going to keep them in business.

QUEST: Willie Walsh joining us from Toronto. Thank you. Good to see you, sir.

WALSH: Thank you.

QUEST: Now, European markets closed higher on Thursday. The trade talks between the U.S. and China fueled investor optimism.

President Trump tweeted that he will meet the Chinese Vice Premier on Friday.

And Fidelity has announced on Thursday, it will no longer charge customers to trade stocks online. It's only the latest U.S. broker to cut

commissions to zero. Charles Schwab does it. Ameritrade, E-Trade -- all have dropped commissions.

Investors though in the companies, maybe investors who are buying shares like it, but investors don't like the trend. The stocks in all three

companies have fallen 10 percent or more since the beginning of September.

Paul La Monica is in New York. Is this a -- I mean, I was going to say this is a race to the bottom, but it's already at the bottom.

PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, everyone is at zero. So barring the unlikely news that they will start paying you to trade stocks,

I think we are about as low as we can go, Richard.

Fidelity, obviously not a publicly traded company. So a little bit more leeway for them to make this news and not have to worry about being, you

know, viewed by Wall Street, as you know, losing revenues that could lead to lower profits at a lower stock price.

QUEST: But, Paul, well -- what's the purpose? All right, everybody likes to have something free. I agree with you. Somebody gets zero commission,

but you get what you pay for in life.

And if all you're getting is an execution service, I mean, I suppose it makes a certain sense of it. But why does it -- why have they pushed it

down to zero? Is it just the competitive advantage?

LA MONICA: It really is the competitive landscape, Richard. I mean, we talked about those big publicly traded brokerage stocks, then obviously

Fidelity, a mutual fund giant, but don't forget about Robinhood.

Robinhood launched a couple of years ago as this hot app, particularly for millennial traders and they were pretty much from the get-go offering zero

commissions. And it took some time for the traditional brokerage industry, the discount brokers to realize that hey, it is $4.99 a trade, $6.99 a

trade that might sound cheap.

That may have been great when they first launched discount brokerage services, you know, many years ago, but now that Robinhood is out there

with an app and called free, you kind of have to do it. They were all losing market share to Robinhood and other services like that.

And I think the Schwab's and Fidelity's of the world just threw up their hands and said, all right, enough is enough. We've got to go to zero if we

want to keep customers.

QUEST: But this, the whole question of analysis, and, you know, portfolio building. Nobody is giving you that, I suppose.

I suppose if they all give you that for free, it's probably not really worth it. Because anybody who pays a proper broker to do a balanced

portfolio knows that this is a specialized task.

And yes, I'm sure people can do it on their own, with a bit of reading round, but you get what you pay for.

LA MONICA: Yes, I think that is a valid point. As long though, Richard, I think the argument that a lot of these brokerages would have and they're

just following what investors want, as long as you have big ETFs, index ETFs they own the top companies.

So do I really as an investor need to take time wondering whether or not I should buy Apple versus Microsoft? Which one is better? I just buy the

S&P 500 or NASDAQ 100 ETF, I get them both. And I don't have to worry about pesky little things like who's got higher earnings growth and who has

a more attractive PE ratio? Because apparently we don't do that anymore.

[15:25:26]

QUEST: You just --

LA MONICA: I would love for people like me, my job security would be enhanced if we had more fundamental research that people cared about, as

opposed to just set it and forget it ETFs, to be brutally honest.

QUEST: But let's talk about ETFs. I mean, even ETFs have revolutionized the fact of the mutual fund. The ETF is such an easy vehicle. It's a

complex beast, this idea of a traded company that invest in the underlying security. It's a complex thing, but they've revolutionized over mutual.

LA MONICA: Yes, definitely. The virtues of ETFs. You know, and you can get into whether or not passive index ETFs are making an active stock

picking obsolete. Whether or not it's a passive ETF or an active ETF, the fees are typically much lower than what you have with mutual funds.

And since an index typically will outperform your average actively picked mutual fund, then why not buy something that will be doing better in the

markets at least over the last couple of years, and it's cheaper.

QUEST: Buy index funds. Those seem to manage to do anything more than anything else, I think. I think maybe I should be abandoning zero

commissions and coming to you for some guidance --

LA MONICA: When you come back to New York. We'll look over your portfolio.

QUEST: Now, I'm in real trouble. Good to see you, Guru. Good to see.

As we continue, the Brexit clock is ticking and the chances of a deal actually tonight are looking up. Now, the British and Irish Prime

Ministers say there is a possible pathway.

That question, I suppose is, whether it's a pathway at the garden.

(COMMERCIAL BREAK)

[15:30:00]

QUEST: Hello, I'm Richard Quest, there's a lot more QUEST MEANS BUSINESS. As we continue, one of South Africa's most infamous families, the Guptas

now the subject of U.S. sanctions. On cnn.com-slash-join, we're talking about Apple pulling an app, accused by Hong Kong protesters. You can vote

on whether Apple will make the right call, cnn.com-slash-join.

Did they -- should they -- should they have allowed that app that's being used by protesters to know where police are? Anyway, the facts always come

first on this network because this is CNN. International Rescue Committee says more than 60,000 civilians already have fled their homes in northern

Syria as Turkey presses its military operation against the Kurds.

And there's a warning as many as 300,000 more could be displaced. Turkey is battering towns just inside Syria and Kurdish forces are fighting back

between three Turkish border towns. Two associates of Rudy Giuliani; the president's private lawyer are now under arrest and they've been indicted

on criminal charges for allegedly funneling foreign money into U.S. elections.

The two men who were also connected to efforts to dig up dirt in the Ukraine on Democratic presidential candidate Joe Biden. Meanwhile,

Ukraine's president is speaking up about his controversial phone call with Donald Trump back in July. Volodymyr Zelensky says there was no blackmail

at all during that call and he was unaware the U.S. military aid was being held up at the time.

German prosecutors say there's no significant evidence that the suspect in Wednesday's deadly shooting outside a synagogue is connected to a right-

wing terror group. The suspect is believed to have written a manifesto expressing far-right racist and anti-Semitic views. He's accused of

murdering two people.

European Union citizens living in the U.K. could be deported if they don't apply to stay following a no-deal Brexit, that's according to Britain's

security minister. Around a million EU citizens living in the U.K. have not yet applied for settle status.

U.K. economy is getting a double boost. First, new GDP numbers show the country is on course to dodge a recession at least in this quarter. And

Boris Johnson, the Irish Prime Minister say there's still a chance for a Brexit deal. Nic Robertson has more.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Well, both the Prime Ministers agree that they could see a pathway to a possible deal. This of

course seems to break a sort of a log-jam at the moment. And the Irish Prime Minister Leo Varadkar -- the two shot -- actually came out speaking

to journalists a little after he got away from the meeting which lasted about three hours or so.

Speaking to the journalists actually sounded quite positive about how it had all gone.

LEO VARADKAR, PRIME MINISTER, IRELAND: I think it is possible for us to come to an agreement to have a treaty. Agreed to allow the U.K. leave the

EU in an orderly fashion and to have that done by the end of October. But there's many still between and lots of things that are not in my control.

ROBERTSON: Now, positivity does seem quite a distance away from where we were earlier in the week where there seem to be a blame game, where the

talks seem to be on the verge of breaking down. The thorny issues that was said in the joint statement after the meeting were the issue of Customs and

the issue of consent.

Now, Customs, whether or not Northern Ireland stays in the European Union Customs union, that's an issue consent. The people of Northern Ireland,

can they -- will they be in a position to give their consent for whatever Brexit deal comes about? So, those are the thorny issues. Those bridges

not cross the optimism breathed into the fact that progress can be made.

Progress, where does it go from here? Well, the British Minister for Brexit Stephen Barclay will meet with the EU chief negotiator on Friday, Michel

Barnier. So, that sort of gets the idea that the talks can continue. The optimism now that the talks can be concluded or an agreement can be made by

the end of October. It still sounds very positive, but it is a lot different from where we were just a few days ago.

So, some optimism at the moment, haven't heard yet from Boris Johnson at Number 10, Nic Robertson, CNN, Merseyside, England.

(END VIDEOTAPE)

QUEST: Now, Christian Schulz; an economist at Citi joins me from Frankfurt via Skype. Let's really get to grips with this now. What is the market

expecting from the next ten days or so as we move towards the European Summit.

[15:35:00]

CHRISTIAN SCHULZ, ECONOMIST, CITI: It's difficult to say, we've had -- I mean, a sterling dollar, sterling euros, probably the best indicators to

look at. We have had some stabilization in sterling in recent weeks. Mainly because it looked like the U.K. parliament had taken away the risk

of no deal Brexit at least for the 31st of October, of course, not forever because there could be an election and that could change everything.

So the downside risk was -- looked a little lower, whether it was a little less optimism on any upside risk of a deal or perhaps even a second

referendum in the U.K. ending up to stay in the E.U. And that is of course the big change --

QUEST: Right --

SCHULZ: On that we get today.

QUEST: But we saw today some interesting economic numbers on GDP from the U.K. that suggest although it was down for August that the country will

miss skirt, if you like, a recession for the latest quarter. But it's a very close thing.

SCHULZ: Well, it's interesting the August data itself was actually as weak as expected. No growth in services and quite a big decline in the

manufacturing sector. The one that's probably most exposed to Brexit risk. But what was interesting is that it seems that July and June, so previous

months, were actually quite strong.

So, early Summer was good, late Summer getting weaker. I guess into the deadline, September, October, it will be even weaker. But even with a

little bit of further weakness pressing, it looks like the U.K. economy will indeed avoid a recession. So, two quarters -- consecutive quarters of

negative growth.

QUEST: I want to just turn to Greece briefly if I may. Greece is now one of the countries with negative interest rates. Now, the way it's done, of

course, it sold half a billion euros worth of 13-week bonds at a rate of negative .02. How is Greece managing to do this? Why is it able to now --

it's out of its programs, it's not got the support behind it.

Why is it now able to borrow at rates not that dissimilar from other better rated in the union Eurozone.

SCHULZ: Well, I cannot comment on the specific Greek situation on this issue. But what is -- has been clear in Europe over the past two years I

guess is that markets appreciate where you have reformed momentum, where you have a pro European --

QUEST: Right --

SCHULZ: In government that does not put at risk this support from the rest of Europe. We have in particular seen that in Italy where last year we had

an anti-European -- anti-EU government and that led to widening spreads between the boring costs of Italy --

QUEST: Right --

SCHULZ: And Germany, and then when that was replaced by pro-European government recently, these spreads came right back in. We've seen it in

other countries where we have pro-Eu governments, Portugal, Greece and various instances that this really -- it's the risk of Euro exit which is

diminishing and that it drives down the spreads.

And then the overall level of interest rates, of course, going down because the European Central Bank is helping so much by buying bonds and keeping

interest rates low and that of course, means that governments will for quite some time have very low borrowing --

QUEST: Which --

SCHULZ: Costs.

QUEST: Which of all the EU countries at the moment bothers you most, gives you most worry, most cause for concern?

SCHULZ: I think I know where you're going with this. In 2011, 2012, we had the big Euro crisis, and there was the weakest countries, so periphery

which was at risk. This time around, we're most around about the co and particular about Germany.

QUEST: Yes --

SCHULZ: Germany's manufacturing sector is in deep recession, and that is increasingly risking to spread into the labor market and therefore the rest

of the economy as well. Germany would probably need to do something and it of course can do something, it has enough fiscal firepower.

So, it's a different kind of crisis in the Eurozone from the one that we had in 2011 and '12, one that should be much easier to resolve in many

ways.

QUEST: Provided that there's a political will. Good to see you, yes, that's exactly where we were going, and thank you, good to see you,

Christian, as always, appreciate your time tonight. Now --

SCHULZ: Thank you.

QUEST: The Guptas, the Guptas, the family name that halted the presidency of Jacob Zuma. Today, the Guptas are facing sanctions from the U.S.

Treasury, what that means from Johannesburg in just a moment. QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

[15:40:00]

QUEST: U.S. Treasury sanctioning members of the Gupta family, accusing one of South Africa's most well known families of significant corruption.

Eleni Giokos has stayed up late for tonight in Johannesburg. Essentially, it's there any -- it's corruption, but what extra has the U.S. Treasury

come up with?

ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT: I mean, this is what's interesting. Is that they basically reiterated exactly what the media,

what civil society, what the state capture report has said. But this is a significant corruption network operating in South Africa that has used

every means to infiltrate many departments within Jacob Zuma's government that was able to capture the president himself and also many institutions

in the country.

And this is significant, Richard, because we have a very public commission of inquiry that is on-the-go in South Africa right now. You have sitting

cabinet ministers that have had to testify that the former President Jacob Zuma has testified. And the big aim here is to have someone facing justice

and the court of law to try and recoup some of that money.

And essentially, what the U.S. Department -- you know, Treasury is doing is they are smoking out, they're helping the South African government smoke

out the three Gupta brothers as well as one of their business associates. And they will not be able to do any transactions with dollars, they cannot

accept any payments from a dollar account, it cannot open any businesses in the U.S., holding any assets in the U.S., travel to the United States or

hold any business, 50 percent of a U.S. business.

And in fact, when the U.S. has so many allies, U.S. allies might even decide to take this void as well. So, essentially, you've got so much

pressure coming through, and we've also heard that the South African government was working very closely with the U.S. government to get this

going. And they've also revealed another seven countries have received the same request.

QUEST: Right, but this is -- it could arguably be punishment.

GIOKOS: Yes --

QUEST: I know it is, but it's knocking the head -- it's knocking the stable door after door, horses bolted. The Guptas have done their damage

in South Africa, and they're now believed to be in Dubai or somewhere in the Middle East. Where was the U.S. Treasury with its sanctions earlier

on?

GIOKOS: Well, this is the interesting thing. We don't -- I mean, look, you have Cyril Ramaphosa's -- you know, presidency coming into effect

essentially over the past year. So when you had a change in administration, clearly law enforcement started to get involved.

[15:45:00]

And this is what the correctional services and Justice Department revealed today, that they have for months now been working with the U.S. State

Department to try and get this order in place and then invoke this Act against global corruption. So this is why they're involved now. And this

is why the South African government is trying to get other countries involved.

They've already bolted. In fact, on the U.S. State Department's website, you've got the addresses and even the ID numbers of the three Gupta

brothers and their business associates. And you see that they live in Dubai and of course in South Africa as well. So we've got the details.

And the question is, what is this going to mean for them from a business perspective? They are going to be totally crippled, and yes, they've done

the damage and you can't reverse that damage, Richard, no matter how hard you try.

QUEST: All right, Eleni, good to see you in -- good to see you live tonight. As we elegantly move to a report that you did just on Beyond

Meat. Now, the shares are down more than 2 percent on Wall Street, but South Africa's appetite for plant-based meat is still growing. Eleni is

back with "IN THE MAKING".

(BEGIN VIDEOTAPE)

GIOKOS (voice-over): Employees at this Afro's chicken shop in Durban have more than just the food to be happy about. Business is booming, thanks in

part to this.

UNIDENTIFIED FEMALE: Fries has been an amazing addition to the menu, and I don't think we would have had the growth had it not been such a high

quality product.

GIOKOS: Fry's, a South African company makes part Jay's(ph) meat alternatives.

UNIDENTIFIED MALE: The idea of Fry's was born out of the need for me personally to become vegetarian.

GIOKOS: Wallie Fry's(ph), wife and daughter were vegetarians and he wanted to join them.

UNIDENTIFIED MALE: Event product, a food product which I could use is something that could mimic meat, so the protein and the taste and so on.

GIOKOS: And so Fry's Family food company was born.

UNIDENTIFIED MALE: We started the business in 1991, and it was my wife and I, and probably three people in the factory. Today, Fry's say they employ

over 300 people at their headquarters, they make 27 products that are exported to more than 20 countries and supply major chains around the

world.

UNIDENTIFIED FEMALE: We replicate almost every meat that there is in the market. We have an alternative for that particular meat.

GIOKOS: Fry's was way ahead of the recent global vegetarian trend before the success of Beyond Meat and Impossible Burger. And their success didn't

come easy.

UNIDENTIFIED MALE: So, it was difficult because we'd go to food house(ph) and we'd present our product to people. And you know, we had all the

typical comments or insults thrown at us, mostly in gist, but people would no, they don't eat that kind of stuff.

GIOKOS: Eating plant-based is the 'it' thing right now, but Debbie Fry's(ph) thinks it will become even bigger.

UNIDENTIFIED FEMALE: I believe plant-based is going to take over the world.

GIOKOS: And so then, Fry's will continue to play its role and make the world greener one burger at a time.

(END VIDEOTAPE)

QUEST: "IN THE MAKING", Chinese criticisms strike again. Apple drops two apps after China slammed the company for supporting Hong Kong. In a

moment.

(COMMERCIAL BREAK)

[15:50:00]

QUEST: Apple has removed a controversial mapping app from its store. The app enables Hong Kong protesters to track the police. The company says it

withdrew the app HK Map live because authorities said protesters were using it --

(COUGHING)

Excuse me, to attack law enforcement. Apple has also just taken down the business website Quartz from its store in China over content concerns.

Quartz has been covering the unrest in Hong Kong closely too. So, get out your phones and go to cnn.com or other digital device.

Tonight, we're asking are foreign companies operating in China too sensitive, not sensitive enough, or they're too quick to respond to

criticism or oblivious to the problems in the first place? Foreign companies operating in China. Too sensitive or not sensitive enough to

criticisms and that? Now, Hadas Gold is here. This is a real mess because --

HADAS GOLD, CNN BUSINESS REPORTER: Yes --

QUEST: Companies find themselves in trouble by accident. And it seems to then run up against western values.

GOLD: By accident, just by hosting what might seem otherwise just be a map service. By just running news, but this is the constant sort of delicate

dance that you have when you're doing business in a place like China. The place, the country is so important to so many people's business. If you

look at Apple for example, they removed the HKmap.live app, and this is an app just to explain that helped people track where police activity was

taking place in Hong Kong.

Now, extensively, HKmap.live says they didn't in any way condone any sort of action against police, they were saying it's more for people to

understand what tear gases might be deployed somewhere. But Apple says that they've removed the app because they received information from Hong

Kong security that was being used to target and ambush police.

But Apple's -- so much of Apple's business is in China. So, they have to - - they have to be aware of this, and that's I think part of the reason why they're removing this app.

QUEST: No, but you see, that's the point. You know, Apple is saying that is not the reason.

GOLD: Right --

QUEST: Apple is saying the reason is because of these other law and order issues. But what many people are saying is we don't believe you.

GOLD: Well, because the takedown comes right after the official paper for the Communist Party of China criticized Apple for hosting this app. This

app had been live on their site for a few days already, so why not take it down before?

QUEST: So, for companies though, I guess they are stuck in between the proverbial rock and a hard place.

GOLD: It is very difficult. And think about for Apple, Goldman Sachs estimated just a few months ago, that if they were to -- if China was to

ban Apple products, then Apple's earnings would drop by 29 percent, that's not something that they take lightly --

QUEST: But -- right, but Apple would say -- I'm putting words in their mouth, but I'm sure Tim would say if he was here, no, we would walk the

narrow line, but we're not going to abandon our values. The NBA's Adam Silver was very clear, you know, we'll take the punishment as it comes.

GOLD: Yes, but it is very fine line that they have to walk. And it's -- but this is the issue with so many businesses in China. We're seeing

everything from clothing designers to airlines to now Apple. This is --

QUEST: So, what is -- I mean, I am not a -- what is the perceived wisdom in terms of what the answer is. You're doing your best and hope for --

you're doing your best and hoping that the worst doesn't happen?

GOLD: I mean, this is the thing. I think companies have to decide. Are they going to think it's better for them to stand on the side of what they

may believe is free speech and maybe more western values, American values, or do they stand them more on the side of making sure that they have good

business with China, a place that is increasingly become -- becoming more and more important to company's bottom lines.

QUEST: Good to see you, thank you.

GOLD: Thanks --

QUEST: Nice to be sitting next to you. Now, the NBA has apologized to our correspondent Christina Macfarlane after her question at the press

conference was silenced. This was what happened.

[15:55:00]

(BEGIN VIDEO CLIP)

CHRISTINA MACFARLANE, CNN CORRESPONDENT: The NBA has always been a league that prides itself and declaring its coaches being able to speak out openly

about political and societal affairs. I just wonder after the events of this week and the fallout we've seen, whether you would both feel

differently about speaking out in that way in the future?

UNIDENTIFIED FEMALE: Excuse me, we are taking basketball questions only.

MACFARLANE: It's a legitimate question. This is an event that's happened this week during the NBA --

UNIDENTIFIED FEMALE: It has been answered, we're taking the last question --

MACFARLANE: This particular question has not been answered.

JAMES HARDEN, POINT GUARD, HOUSTON ROCKETS: Wait --

MACFARLANE: James?

UNIDENTIFIED FEMALE: Any other questions?

(END VIDEO CLIP)

QUEST: Now, the NBA's Mike Bach(ph) says "during today's Houston Rockets' media availability, a team representative inappropriately interjected to

prevent CNN's Christina MacFarlane from receiving an answer to her question. We've apologized to Macfarlane as this was inconsistent with how

the NBA conducts media events." And on that note, a profitable moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment on the program, Willie Walsh of IAG in a very good defense of what the company is doing and the way it's going to

go carbon neutral by 2050. Arguably as I asked him, why not do it sooner? But as Willie points out, these various carbon schemes, many of which still

need to be properly audited, ramped up to scale to be able to deal with an industry the size of the aviation industry.

That's all going to take time. But the other thing of course is that the aviation industry is doing a particularly awful job of putting forward its

own arguments. Huge moves are being made to make flying better for the environment, everything from carbon fuel offsetting the way in which planes

will be tagged, new aircraft, the cost of the new aircraft.

It's all having an effect, but the industry is also growing at the same time. Hence the carbon emissions from aviation remains stubbornly stuck at

around 2 percent. But make no bones about it, of all the industries that are moving forward, aviation is certainly one of those that's doing more

than most.

Now, they just have to convince the critics that actually there is progress and it is in the right direction. Now, tonight -- and that's QUEST MEANS

BUSINESS for tonight, I am Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable. The Dow is up, the day is

done.

(BELL RINGING)

END