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Quest Means Business
Dow Plunges For Second Day; C.D.C. Says Coronavirus Will Hit U.S. Aired 3-4p ET
Aired February 25, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:20]
RICHARD QUEST, CNN BUSINESS ANCHOR, QUEST MEANS BUSINESS: An hour to go before the final bell, the last hour of trade, and look what's happening.
The market had been down over 900 points. It's clawed its way back, but we are in that volatile last 60 minutes.
Broader and tech stocks as well have also being badly hit. Two and a half percent and just over two percent for NASDAQ and S&P, 9,000 look a little
risky there.
The markets are in an ugly mood, and of course these are the reasons why.
It is coronavirus. The World Health Organizations warning officials need to act quickly to stop the outbreak from escalating into what they call a
pandemic.
And this could get bad. The American C.D.C. is warning Americans brace for more outbreaks.
And European governments and businesses taking extra ordinary measures to try and contain the virus. More cases confirmed across the continent.
We are live in the world's financial capital, New York City. It is out there somewhere, it is an appalling day for the weather, but it's Tuesday.
It's February the 25th. I'm Richard Quest, and of course, I mean business.
Good evening. Breaking news here on CNN on QUEST MEANS BUSINESS. It's the recovery that wasn't. Stocks a plunging for a second day. Officials are
warning it's not a matter of if, but when a coronavirus outbreak hits the United States, as they put it through community spreading.
The market is pulling back. Now, there was a morning reprieve when the market was actually higher and fear was voluntarily taken hold on Wall
Street.
The Dow was up 188 points after 1,000-point fall yesterday. Then it fell up to 929. So we're looking at 1,100 point swing as investor groups come to
grips with the possibility that the virus could cause a dramatic first quarter global slowdown.
Now, if you look at the market, you'll see there was a thousand-point drop on Monday. The S&P and the NASDAQ are now both negative for the year so
far.
And European stocks, they fared badly, too, although they hadn't seen -- because they've really seen the worst to some extent of New York with
Zurich and the SMI of the worst of today.
Not surprisingly, safe havens are doing well. Bond yields are falling as people are plowing into bonds, pushing up the price and pushing down the
yield.
Look at that. It's down at 1.3 percent, so the 10-year is now is not at an all-time low.
Clare Sebastian is here and let's deal with the bond in just a second. What was it about today? Yesterday, it was the Italian stuff if you like, and
all the Italian announcements. Why today is it falling?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: More countries -- we saw Australia, we saw Croatian and now Switzerland. So the spread is continuing
throughout Europe.
And then the C.D.C. warning, Richard, saying it is a matter of when not if that we see community spread so that similar types of clusters that we're
seeing in Europe happening in the U.S. The C.D.C. is dusting off its pandemic containment strategies, and that is leading the markets to sort of
run for the hills, although we are actually significantly off the lows of today.
So that suggests that with this broad based selling, there are some stocks where people see buying opportunities.
QUEST: Okay. So that's what I just wanted to talk about this idea of community spread and how that's different from patient zero spread.
SEBASTIAN: Right. Well, so, community spread is when you see, like we've seen in South Korea, like we've seen in Italy, clusters of people within
communities that sort of catch it from each other, rather than the likes of what we've seen so far in the U.S., people coming back from China and other
countries and bringing it with them, but not so much spreading it within the U.S.
So that's the big worry. That's when you see what's happening in Italy, locked down in 10 cities, 100,000 people affected.
And we're in a situation now where markets aren't just looking at the illness itself, they're looking at the remedies. These quarantines, these
travel restrictions, all of these means a hard stop in economic activity and that is proving --
QUEST: And it may not even work then.
SEBASTIAN: Well, I think the travel of the illness now across borders is showing that it's almost impossible to stop that.
QUEST: Okay, but if it does spread, and we'll talk more about this with others. But if it does spread, if there is this community spread that
people talk about. How does that differ from what we saw in China? Are we talking about having to lock down large parts of Europe?
SEBASTIAN: I mean, they've already sort of started.
QUEST: Italy, of course.
SEBASTIAN: Italy has started to do it. Yes. I mean, I think that will depend on the national authorities. The European Union, of course has said
that they don't want to go too far.
[15:05:09]
SEBASTIAN: And within the U.S. you know, we don't know yet. We're not -- we have to say we're not at this point yet. We haven't seen the community
spread yet.
The C.D.C. is just warning people to be prepared. I think that's the message out there. Be prepared right now.
But Richard, this isn't just about global multinational companies today. The Russell 2000 which is the smaller cap U.S. focused that was even more.
QUEST: That was interesting. That was the interesting thing. Thank you very much, Clare Sebastian.
Now, China is trying to get back to work. Local governments are chartering flights and buses to bring back workers and companies like Foxconn are
offering cash bonuses to get workers back onto the assembly lines.
Meanwhile, President Trump says the virus won't have any long lasting effect, he believes, on the global economy.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: We lost almost a thousand points yesterday on the market and that's something, you know
things like that happen where -- and you have it in your business all the time. It had nothing to do with you.
It's an outside source that nobody would have ever predicted if you go back six months or three months ago, nobody would have ever predicted.
But let's see, I think it's going to be under control.
(END VIDEO CLIP)
QUEST: The President said it is going to be under control. James Sweeney is the Chief Economist at Credit Suisse. Why is the market if you like,
suddenly woken up to this over the last 48 hours?
JAMES SWEENEY, CHIEF ECONOMIST, CREDIT SUISSE: I think it's the significant contagion that we've just seen in Korea and Iran. It's a number
of countries where now we're seeing secondary outbreaks, which brings home the idea that this seems like it can happen anywhere.
QUEST: But even though China, which is such an instrumental part of the global economy, didn't get that same reaction. Do you think the market
underestimated what was going on in China?
SWEENEY: Yes. Yes, I think it did. China is 30 percent of manufacturing globally and we know that Chinese manufacturing plunged in February.
QUEST: So for the U.S. market still continued rising, as it did over the last five, six weeks, was a bit of a false dawn or false hope.
SWEENEY: Well, what I was hearing from people was that they were saying, well, manufacturing slowdowns don't cause recessions and Central Banks ease
when you get those slowdowns, so things should be fine. And I think that was a little complacent.
QUEST: Okay, looking at your note, which you put out at the beginning of the month. So you're quite at liberty to say this does not now reflect your
views.
You say, we remain of the view that the drivers of final demand in developed economies will not be impaired by this shock. So we expect much
stronger growth in the second half.
Now, obviously, pullback is obviously going to be strong with the V-shape, but do you still stand by your view that major developed economies will not
be impaired by this shock?
SWEENEY: Well, in the near term, I mean, we are looking at potential contractions and economic activity in the Euro area, in Japan. So I think
we've tweaked that a little bit already in the United States.
The labor market is not at the point of being disrupted by this. But of course, how much contagion we ultimately get is going to determine how much
damage is done.
So right now, everyone has to question their forecasts.
QUEST: All right and as you question it, I assume your risk is firmly on the downside here.
SWEENEY: Yes, absolutely. I mean, this is not a shock that is similar to any one that we've had in many years.
QUEST: Why not? I mean, whichever -- I suppose SARS didn't really affect in the same way, H1N1 didn't really affect, but the traditional view on
this, and we talked about this on this program is, you know, the classic, you go down very sharply, but when things get back to get to normal, you go
back up, just a sharply.
You're probably not buying that this time.
SWEENEY: Well, actually, we may well get a V-shaped recovery in manufacturing because when factories get shut off, eventually they get
turned on, but that V stands for vacuous. I mean not helpful.
The question is how much damage is done when you're in that V? If factories aren't working --
QUEST: Damage to what?
SWEENEY: Damage to payments, defaults. How many households, how many businesses are not paying their bills right now because they couldn't get a
part to finish good and they couldn't sell the good?
Often when you have that kind of damage, you're not going to see it for a few months, but the market can start to sniff it, and we're sniffing it now
and we know this disruption in Asia in particular is large.
And based on the patterns of contagion, we know that it can travel.
QUEST: I always choose my words carefully when dealing with these sort of stories because one doesn't want to be alarmist.
SWEENEY: Right.
QUEST: But at the same time, one has to be a realist.
SWEENEY: Right.
QUEST: So was the arrival of clusters, community spread in Italy a turning point in your view?
SWEENEY: It was the turning point as a trigger for the market's performance, especially the equity markets performance. It didn't really
give us new information relative to what was there before.
And there's two stages of this. The first stage is really, China's preventative measures, shutting down parts of economic activity in order to
stop contagion and the effects on economic data from that. That's what we're seeing now.
[15:10:12]
SWEENEY: The second stage depends on how much contagion we get. And the more contagion, the more prevention, the more prevention perhaps the more
panic. That's the real downside. And we have no idea whether we're going to have that. We have no idea whether this thing can go away in the spring,
which some think could happen, but it's by no means and assured event.
QUEST: The market seems to be telling us that it believe we've got a handle on this, that the authorities have got a handle on this, or that
there's a potential that's becoming into a reality, despite what the President said today.
SWEENEY: This is a new disease. This is a new virus. It's not fully understood. And until it's fully understood, we're not going to have a
sense of the contagion and the risks from it just yet, and I think it's that natural uncertainty and we have to wait for the scientists to tell us
some more.
QUEST: Final thought, and I realized you're the chief economist, not the market strategist. But you're hearing what people are saying and trading
rooms.
To those who had wanted to get into the market, but the frothy prices of continual records had made it adverse.
SWEENEY: Yes.
QUEST: This could be a buying opportunity. I'm not suggesting, you know, we like buying opportunities because of health pandemics. But you know, we
are a business show, there will be people looking and saying, hang on, I can now get that stock 10 percent less than it was and the fundamentals
haven't changed. Am I right? Is that right?
SWEENEY: Well, you can get it cheaper. I think the question is whether the fundamentals have changed. In the near term, they have certainly changed in
terms of consensus forecasts that will be coming down.
The question really is how V-shaped is that V? How much damage is done? And what is the path later in the year? And we're going to have to wait for the
science on that.
QUEST: Good to see you, sir. Thank you.
SWEENEY: Thank you.
QUEST: Now, the coronavirus is hitting the price of oil. OPEC is scrambling to form a plan.
The CFO of Aramco has been speaking to CNN. We're in Riyadh after the break.
(COMMERCIAL BREAK)
QUEST: We are to fall of the best part of 2,000 points in just 48 hours, U.S. markets are heading towards a correction as we normally described as a
10 percent fall as coronavirus cases -- new ones -- emerge across new countries.
[15:15:11]
QUEST: So the Dow is off 770 points, which you can see there, 774, which is seven percent below its recent high and it started the day up a hundred
points to the better. So we're bearing in mind that we are now 930 odd, at the worst point lowest.
Alison Kosik is at the New York Stock Exchange, not only Alison, are we seeing down pressure, we are seeing extreme volatility again.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes, we are. We're seeing the volume really pick up now in the final hour of trading as well.
Helping to kick in that pressure, of course, is what the Centers for Disease Control said about the coronavirus coming to the United States,
that it's not a question of if but when, and how many people will have severe illness.
So this props up a lot of unknowns for those investing in the stock market. There are a lot of unknowns how this virus could affect the U.S. and what
are the economic implications?
What's their gauge at this point? China and the pictures that you saw on TV of the empty streets in huge cities like Beijing, those are the things that
come to mind.
So when you talk about correction, that's an easy figure to think about here, because we can almost bank on the fact that we're going to have a
correction here. We're more than halfway there.
But then the question is, what else you factor in if the virus does come here in a big way, then what happens to each company?
Because one trader told me, this is probably going to affect every single company.
QUEST: Alison, thank you. In the last hour, if the market moves, we'll be back of course if it does suddenly go adverse.
The World Health Organization says officials need to act quickly if they are going to stop the coronavirus epidemic from escalating into what's
called a full scale pandemic.
Now the countries, as you will see here in blue on the chart, well, you've got first of all, Australia, Croatia, and Switzerland have all confirmed
their first cases of the disease in the last 24 hours.
Local authorities in Europe are trying to wall off the virus by preventing human to human contact. And these are just some of the measures they are
taking.
In Tenerife for example, hotel guests are asked to stay in their rooms, whilst Italian guests are being tested positive for the coronavirus.
Looking elsewhere, on trains between Paris and Milan, crews are changing at the border.
In Italy, you've got a case of Inter Milan is to play Ludogrets behind closed doors, six of 10 Serie A matches this week, all affected.
So the effects across the continent are serious in that sense. Melissa Bell is tracking all the developments.
Italy in Europe at the moment, Italy seems to be where the focus of attention is. Why? Why are the cases there, Melissa?
MELISSA BELL, CNN CORRESPONDENT: It has been the source of this first major outbreak outside Italy. This is of course Mardi Gras, Richard. This
is all you will see of what should be a very festive evening in Venice.
In fact, St. Mark's Square and I'm on the edge of it is entirely empty because they've stopped the Carnival two days early. On Sunday night, it
came to an end and what's been happening, Richard, and they have yet to identify patient zero here, but this very fast spread over the course of
the weekend, we were fewer than five cases at the end of last week, we are now close to 300.
And when you look at that spread beyond Italy's borders, those new countries that have confirmed that they had cases, many of them involve
Italians in Croatia and Austria, the latest case in France. Tenerife you mentioned a moment ago, that involved an Italian holidaymaker, who was in a
hotel.
And I think it's a reminder of how fast this can spread because of that incubation period.
So, authorities here are doing all they can to stop the spread. They've canceled the end of the Carnival. They've closed schools in a number of
different regions. And of course, there is that lockdown. A hundred thousand Italians even now locked into their villages and towns, and this
for some weeks, which is just quite extraordinary when you think about it.
But it's very difficult to imagine to see how even with those very drastic measures, they could have stopped the spread of this.
This is Venice, Richard. You have cruise ships coming in and out all the time. You have tens of thousands of tourists who have been milling around
here for weeks. It's very difficult to imagine that none of those tourists will have come through here and won't in the next couple of weeks be
diagnosed.
So this is the beginning of an epidemic here in Europe that I think in many ways we hadn't seen coming. It was very much contained towards Asia. Now,
it's very difficult to see how it's going to stop.
QUEST: Melissa Bell in Venice. Thank you. Now, the C.D.C. is warning it expects to see the coronavirus spread in the U.S.
An official said earlier, it's not so much a question of if, but when it will actually happen.
"We are asking the American public to prepare for the expectation that this might be bad."
Dr. Sanjay Gupta is with us. He is in Atlanta at the CNN Center. Okay. Now, I sort of feel that public health officials would say this is a statement
of the bleed and obvious that eventually it's going to sort of have some -- if you look elsewhere, it's going to have some sort of spread and the
public just needs to be ready for it.
[15:20:44]
DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT I mean, that is what they're saying. It's the context I think that is important here, Richard,
you know, with regards to the quarantines and the isolation efforts, some of these quarantines, the largest ever in human history, I think for a lot
of people they were saying is this going to solve the problem?
And I think all along, public health officials were saying, look, we're dealing with a little tiny virus that doesn't respect boundaries or
borders. It's not going to solve the problem, but it is going to slow it down. That was the main goal, slow it down and buy time. And by buying
time, you might be able to do better planning.
So I think they are being more candid about it now, even though in the United States, for example, there are 57 patients with the infection here
in this country.
I've interviewed the head of the Centers for Disease Control, and he was quite candid. He said, this is probably going to last beyond the season.
It's probably going to get a foothold here in the United States. It is going to start spreading around communities, as it will likely in other
parts of the world.
QUEST: So paint that sketch for me, not just obviously in the U.S., but in Italy, and elsewhere. As it spreads in communities, how severe do the
measures need to be by the authorities or is this just some that we will learn to live with.
GUPTA: Yes, that is the crucial question and let me just point out that 2009 was the H1N1 pandemic, and it is now a known flu virus that circulates
around the world that is something that is even included in the flu vaccine to protect against H1N1, so it's become part of the entire Infectious
Disease milieu.
I think that that's the question here. We don't know for certain whether or not that's going to be what happens with this novel coronavirus. But it's
looking more and more that way, meaning that it's spreading like a flu virus and to get to the point where they call it a pandemic, that means you
have sustained transmission in many communities and in many places around the world.
So one person gives it to two and a half to three people. They each give it to several people. And then by five or six generations, you have you know,
several hundred if not a thousand people who are infected from that one person.
QUEST: So as I do my travels around the world and have done considerably over the last few days, what does one do about it? Because the other thing
is, I mean, one has a tickly throat or a cough, and I see people on planes in the last 24 hours not daring to cough lest anybody thinks that they've
got coronavirus or anything like that.
Because we are also at the height of the winter flu season.
GUPTA: Yes, I mean, that is very true and statistically, it is still much more likely when you hear someone with a little tickle in their throat or
whatever, statistically much more likely to be either common cold or flu versus coronavirus.
So you know, I think what you do about it is the basics still apply here. This seems to be spread primarily through respiratory droplets. So avoid
sick people. You know, washing your hands because you touch surfaces.
You touch your nose and your mouth. And that's how people primarily get infected. It sounds almost silly, Richard, to be boiling it down to these
basic terms in the midst of an outbreak, but they work. They've worked in the past as well with SARS, for example.
Another important point, Richard is that calling something a pandemic, or even a series of epidemics is really a statement about transmissibility and
how much this has spread, not about lethality and how likely this is to cause someone to die.
If you look at the largest study thus far, some 45,000 people studied out of China, 80 percent of the people, eight out of 10 people either had no
symptoms or minimal symptoms, right?
So keep that in mind that, you know, the fatality ratio still, it hovers around two percent or so. But the vast majority of people are not going to
get sick or even have any symptoms from this.
It's not to minimize this. This is still something that people need to be very mindful of. But you know, flu, seasonal flu, so far in this country
has killed over 14,000 people in the United States. So keeping the context I think is important.
QUEST: Good to see you, Sanjay. Thank you very much, as always.
GUPTA: You've got it, Richard.
QUEST: Let's look at the markets as we go to take a short break. The Dow - - it is bouncing, isn't it, between 950 and 750? We're off 840 at the moment, and those falls -- I don't think we're going to -- it's too tricky
to say which way this could go in the last half hour because that's when the market makers really get involved and decide how they want to end the
day as the coronavirus spreads, so we'll watch that closely.
Travel stocks are falling into corrections as well. This is QUEST MEANS BUSINESS live from New York.
(COMMERCIAL BREAK)
[15:28:43]
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. We're going to hear from the chief executive of the world's
largest company, the Aramco.
Saudi Aramco CEO tells us how the virus is hurting the oil industry and therefore, his business.
And the Democrats closing ranks take on Bernie Sanders at a pivotal South Carolina debate, that's tonight.
Before any of that, this is CNN and on this network, the facts always come first.
The coronavirus has claimed another four lives in Northern Italy. It brings the death toll there to 11. Italy is now dealing with more than 300 cases
of infection. The most confirmed cases outside of Asia.
Iran's Deputy Health Minister has now tested positive for coronavirus one day after appearing on television to warn Iranians about the outbreak. He
appeared ill wiping his brow several times. He was standing next to a government spokesman. Iran is facing the largest coronavirus outbreak in
the Middle East.
President Trump is heading home after wrapping up a two-day visit to India. There was a State Banquet at the end. He says his trip was a tremendous
learning experience. The President and the Indian Prime Minister announced agreements on defense and security, but not on the contentious issue of
trade.
The former Egyptian President Hosni Mubarak has died at the age of 91.
[15:30:10]
He'd been in a Cairo hospital since having surgery last month. Mubarak's 30-year of rule ended during the 2011 Arab Spring protests. He was
convicted and later acquitted of conspiring to kill protesters.
As from now and Democrats who hoped to be the ones to take on President Trump in November, will again be on the debate stage, this time in South
Carolina on Saturday. This the presidential primary in the state. Seven candidates have qualified for the face-off, the frontrunner Bernie Sanders
is likely to face attacks from his rivals.
The standing on Wall Street has accelerated with 30 minutes left in the trading day. We are off the lows of the day, but you can see the Dow is of
807 odd points. The NASDAQ is down. They're all off roughly two to three percent, three percent for the Dow. Paul is with me.
And Paul, on top of yesterday's 1,000-point or four, 3-1/2 percent, I mean, I can see it's obviously serious. And but what is the market afraid of?
PAUL R. LA MONICA, CNN BUSINESS REPORTER: I think the market is afraid of the unknown, which is how much worse the coronavirus outbreak will get. And
I think everyone was spooked by the news over the weekend, about the cases in Italy and South Korea and Iran. I think there had been this sense that
it was mainly a China story and that things were improving there. Now, that doesn't seem to be the case anymore. And, you know, I spoke with one fund
manager earlier today and he said the big problem right now is that everyone wants for the Fed to come in and save the day or other central
bankers.
QUEST: And do what?
LA MONICA: That's his point. He says, when you have financial crises, the Fed can do things to inject liquidity in the market. The Fed can't solve a
health crisis with lower interest rates. So, that's the big problem right now.
QUEST: The Fear & Greed Index, the CNN Fear & Greed Index is virtually verging on extreme fear. How's that -- how's that measured?
LA MONICA: Yes, extreme fear is where this index is. Now, this index looks at seven components of market sentiment. The VIX is one, it looks at demand
for stocks versus bonds and looks at junk bonds, looks at a lot of variety, variety of factors to get the true market sentiment. And right now,
obviously, it has plummeted because there are just so many worries about what the economic -- not to mention the human toll -- impact will be as a
result of the coronavirus.
QUEST: Bonds obviously a gain. We've seen a rise in the price of bonds and the corresponding fall in the yield to almost record levels.
LA MONICA: Yes, record lows now on the 30-year and the 10-year so I mean to --
QUEST: So, even though --
LA MONICA: I believe this is a great time to refinance, if you haven't done so already. But obviously, you know --
QUEST: But even though -- even though than we saw --
LA MONICA: Lower than we saw in 2008, and lower than we saw in 2016, which is the last time that the 10-year was at this level.
QUEST: It was a couple years ago -- last year, we also saw the bond during the '17, '18, when we saw the markets -- the equity markets tumble. And so,
what do you do in this scenario? Because if you're holding bonds, you want to keep holding them. And is this a moment to look at whether to go into
equities in the fullness of time?
LA MONICA: Yes, I think that investors who don't already have significant exposure to stocks probably could bargain hunt right now and try and find
some values because it is the proverbial case of the baby being thrown out with the bathwater. Everything is getting hit. There are very few
exceptions. You know, Clorox is a stock that is held up well as everyone expects her, you know, run on their wipes. But I think that right now, just
about every stock, if you liked it a week and a half ago with the market at record highs, you shouldn't fear it like it even more now that there's 10,
15 percent discounts on them.
QUEST: Provided you've got the stomach to see this out.
LA MONICA: Of course.
QUEST: Good to see you, sir. Thank you.
LA MONICA: Thank you.
QUEST: As the virus spreads, it threatens to dump an economic activity. And if economic activity slows, there'll be less demand for oil. That's the
nuts and bolts if you like. The mechanical way in which the coronavirus is affecting the price of oil. Crude sound for a second straight day. Futures
are below $50.00 a barrel. OPEC is going to meet to form a consensus plan if they can. The CEO of Aramco has been speaking to John Defterios in
Riyadh.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Richard, a terminal 48 hours in the financial markets, especially for oil with concerns about the
coronavirus hitting demand, especially in Asia. Saudi Arabia's Minister of Energy told me this is no time to be complacent, and they have an emergency
meeting scheduled next week in Vienna.
[15:35:00]
But what does it mean for the major Middle East oil exporters right now? I spoke to the largest, Saudi Aramco. The CEO Amin Nasser was on a panel I
chaired here in Riyadh, and he said that the first half of the year is basically a wash out because of the challenge of the coronavirus.
(BEGIN VIDEO CLIP)
AMIN NASSER, CEO, ARAMCO: Let me say that I think it's a short term, first of all, issue that will be hopefully -- the second half it will be
(INAUDIBLE) to be over. This is not something new or something that we have not been through, through our history. We have are -- have been through
these cycles so many times. We are adapting very well to manage whatever the situation call for.
DEFTERIOS: So, you see it as first-half challenge that can be cleared up in the second half of this year?
NASSER: That is our view.
(END VIDEO CLIP)
DEFTERIOS: So, some fresh guidance from the CEO of Aramco, now a publicly- traded company. And for a context, we have to remember, China is the number one importer of crude, so a slowdown there will, of course, have wider
implications. And other top customers for the Middle East exporters', South Korea and Japan, call it the "Asia ripple effect", all linking back to the
coronavirus. Richard, back to you.
QUEST: John Defterios in Riyadh. Disneyland Shanghai isn't looking like itself as usual as the coronavirus disrupts the park's operations, in just
a moment.
(COMMERCIAL BREAK)
QUEST: Stock seeing companies concerned with travel and of course, taking us strong and heavy hitters, markets continue their fall on Tuesday. So,
for example, Royal Caribbean is down, it's down seven and off percent of the company warned of a material impact from the virus. Other cruise stocks
and airline stocks are down as well. Delta is off six, United off seven.
And you will not be surprised that theme parks are (INAUDIBLE) Disney has warned the profits from its parks in China could drop by hundreds of
millions of dollars this quarter alone. CNN's David Culver is in Shanghai.
(BEGIN VIDEOTAPE)
DAVID CULVER, CNN INTERNATIONAL CORRESPONDENT: When it opened in 2016, Shanghai Disney instantly became an iconic attraction for mainland Chinese
tourists. CNN was there as crowds packed the theme park. But amid the novel coronavirus outbreak, China's work to prevent mass gatherings like these,
so as to stop the spread, and that's meant halting business.
[15:40:07]
Shanghai Disney's vibrant walkways now nearly empty, you can spot one person strolling the grounds, likely an employee given it shut down to
visitors a month ago. Its parking lots deserted, and the many roads surrounding it clear of traffic. It comes at a cost if the park stays
closed another 30 days, Disney projects operating income for the Shanghai resort could drop $135 million this quarter alone. But the burden does not
all fall on Disney. The Chinese government owns a majority stake in the venture.
This is pretty much as close as you can get to Disney Shanghai. Can you see it? The castle way back there. The reality is it's not only the theme park
that's feeling the economic hit but several of the surrounding communities and those businesses likewise feeling the pain.
LIU CHANGDONG, SHOP OWNER IN SHANGHAI: Estimate the loss of business will be 20 to 30 percent.
Liu Changdong's convenient store sits on the outskirts of the Disney property. He relies heavily on the crowds that normally pass through.
LIU: If this goes on for another month, it will be really hard to keep open.
CULVER: Nearby hotels, already closed. We found several homes listed for rent on Airbnb with a clear travel advisory posted. We drove to one of the
communities in which the rentals are located. The road leaving in was sealed off to protect against the virus. The guard telling us --
UNIDENTIFIED FEMALE (through translator): Now that Disney is closed, all the bookings have been canceled.
CULVER: It goes beyond Mainland China. Hong Kong Disney also shut down. It had already been affected by months of protests, now, the outbreak. Disney
says this park could lose roughly $145 million in operating income over the quarter. Here, it's the Hong Kong government that owns a majority stake.
The closure has ripple effects beyond the park.
RONALD WU, EXECUTIVE DIRECTOR, GREY LINE TOURS: This coronavirus came in and, you know, pretty much -- pretty much -- this is -- has been -- has
been, you know, even worse than what it was during the protest time and we're looking at 95 percent even more drop and this is compared to the
times same time last year.
CULVER: In Japan, Tokyo Disney staying open, for now at least, as the country works to contain the virus. It seems that mostly local crowd is
still determined to enjoy the park. But notice the characters are not the only ones wearing face masks. Many of the visitors and staff encouraged to
sanitize their hands and keep a comfortable distance from one another.
Back in Shanghai while you cannot physically take in the shows, Disney's releasing online clips of their characters trying to lift spirits and keep
people moving amidst the lingering lockdowns. David Culver, CNN, Shanghai.
(END VIDEOTAPE)
QUEST: We will take a short break, but the Dow is off three percent. We've sort of taken another tumble again. We just in one point we're down 950
points on last session lows. So, we've come back a bit off that, but you can see the numbers on pretty across any of the indices, the major indices.
We'll get into more of it later. Let's take a break in just a moment. Back (INAUDIBLE)
(COMMERCIAL BREAK)
[15:45:00]
QUEST: Threats of Ransomware should put terror into the hearts of every CEO or chairman. But too many companies are still not taking it fully seriously
even though the outlook for a company that (INAUDIBLE) could be dire. Rob Wainright is a senior partner to Deloitte, who's working on cyber and
financial crime projects. So, sir, good to see you. And the -- what is it about Ransomware that you're getting more concerned about than before?
ROB WAINWRIGHT, SENIOR PARTNER, DELOITTE: Well, the scales going up. I mean, just last year, we saw that the average price being paid for ransom
is double, just in the space of a few --
QUEST: To what?
WAINWRIGHT: Is approaching $100,000 now.
QUEST: Yes.
WAINWRIGHT: And so more companies getting hit, more companies having to pay ransom. And if you think about it, why is that? Because it's so easy still
for a lot of criminals to make a lot of money. When you think about it, Ransomware is just a digital age term for one of the oldest criminal tricks
in the book extortion. Criminals have been blackmailing businessman for over 100 years.
In the past it was unless you -- unless you do this, all right, unless you give me $10,000, I'm going to do this, meet me under the bridge of
midnight, don't tell the cops, he didn't know if the cops will be there. Now, cryptocurrency changes all that. Because the criminal can do it in a
perfectly anonymized way, offline, no physical handover cash, doesn't even have to put the money through a regular financial system. And so,
technology, in this case, cryptocurrency, has been a great criminal opportunity as well.
QUEST: I understand that, but in the old days, the person, meet me under the bridge with a suitcase, they were usually only threatening reputational
crisis. Here with Ransomware, they're threatening existential crisis that the company might not be able to operate.
WAINWRIGHT: You know, that's a good point. Because I think, you know, up until now, at least, you know, Ransomware has been a scattergun approach,
throw out 100 hope you can hit two or three. Now what we're seeing in the most dangerous forms of ransom in just in the last six months as they go,
you're targeting the bigger companies and knocking systems, not just your systems offline, but your backup systems as well. And that is that then
about existential catastrophic loss (INAUDIBLE).
QUEST: Right, but you can understand the CEO saying final paid. I mean, my company's a couple of billion, they're asking for 100K. We think they're
pretty good, we think that legit in the sense of, they're going to give us our company back. It's fine for the police and the cyber authorities, and
you and your former job to say don't pay, but you don't have to run the business.
WAINWRIGHT: No, I don't. But there are risks in paying as well, because you might invite them to come back for more. So, there's always risks here, and
I think -- I think with the threat going up, it is -- it is very difficult. I'm not here to criticize.
(CROSSTALK)
QUEST: No, but I want you -- what would you like them to do?
WAINWRIGHT: Well -- I think that the kind of discussions that we're having at a lot with many of these little companies right now --
QUEST: Yes.
WAINWRIGHT: -- is, for example, it's completely changing the notion of what it is to have, for example, disaster recovery plans. We've been writing
these plans for 30 years, and it's been about do what we need to, we need to store all of our data in an offline environment continuously replicated
no longer because by continuously keeping it online, you run the risk of exposing yourself to cyber-attack. So, now this is about looking at what
your critical data is, your mission critical data, do not connect it with your main systems, keep it offline as much as possible, so that you --
(CROSSTALK)
QUEST: Should you pay or should you now?
WAINWRIGHT: No, you'll never going to get me as a former cop to say that, come on.
QUEST: I could try.
WAINWRIGHT: No, there are different ways of doing this, and we're fighting back.
QUEST: Right. (INAUDIBLE) before I let you go, election fraud, election hacking the whole system of this, and -- I mean, in a sense, it's different
from cyber security, but it's not. And, if it wasn't so serious, because now we're talking about somebody hacking our democracies, which I sound --
I realize that sounds pretentious when someone say pompous, but that is what we're talking about.
WAINWRIGHT: Yes, it's about trust, trust in the democratic process.
QUEST: Right.
WAINWRIGHT: There's nothing pompous about that. You're absolutely right. And it reflects the fact that software is now an everyday, everywhere
issue. This is about, you know, more -- we put our social lives, our business lives and run a democracy online, we run the risk of that kind of
criminal intrusion. Look, like in the U.S., the federal authorities under equivalents in Europe, for that matter, are clearly taking it seriously.
You only have to look at some of the statements put up with the Department of Homeland Security, for example. So, they have now got their eyes on the
ball. And from what I know from my former job about their skills and capability here, I think they'll do a pretty good job.
[15:50:00]
QUEST: I guess what I worry about with this particular aspect is it doesn't matter which for are we talking about. The U.S. election, the U.K.
referendum, the general election 2012, the next set of Euro elections, U.N. -- it doesn't matter what we're talking about. The potential for cyber
mischief and disinformation is now one of the greatest threats, and I don't know why anybody does about it.
WAINWRIGHT: Well, it's a fact of life.
QUEST: Yes.
WAINWRIGHT: And the way in which we manage our business. As I said, it's a fact of life for governments in the way that they manage the relationship
with other countries. And we have to get used to the fact that there is no silver bullet and no magic solution to remove cyber. It's here to stay.
That's why we need people like me and my colleagues. What can I say?
QUEST: Would you buy a used car from this man, is the key question tonight? Good to see you, as always.
WAINWRIGHT: Thank you.
QUEST: Now, tonight, question of buying used cars, what would you vote for? Seven Democratic presidential candidates facing off in the South Carolina
debate. Bernie Sanders may have to play to play defense. The target is firmly on him. Since he's now the frontrunner with back to back victories
in New Hampshire, Nevada, it could be the most hostile environment yet, out of this weekend's primary and then Super Tuesday.
Cristina Alesci is in Charleston, South Carolina. As they get ready tonight, and who, who has to do the most to stay in the game?
CRISTINA ALESCI, CNN POLITICS AND BUSINESS CORRESPONDENT: Well, from a fundraising standpoint, it's definitely going to be Elizabeth Warren, Pete
Buttigieg, and Amy Klobuchar, who are going to have to really say in this, for fundraising purposes, perform well tonight. But I think all of the --
all of the energy is really going to focus on attacking Bernie Sanders, as you said, he's established himself as the frontrunner up until this point,
although it's early in the race. And there's a lot on the line just from a reputational standpoint for Michael Bloomberg, because he had such a poor
performance last time around, it really undermine this argument that he is, you know, the most selectable, the most -- the candidate in the best
position to take on Donald Trump and really be a tough competitor for Donald Trump
QUEST: Reading in my weekend reading, the call really is now for some of these moderates to get out of the way. They're a nuisance. They stand no
chance of getting the nomination. They've got their agenda items raised, it's time for the moderates to coalesce around one candidate.
ALESCI: Yes, the moderates are going to have to fight that storyline. And like I said, they are going to try and paint Bernie Sanders -- the
moderates who will try and paint Bernie Sanders as a socialist, as you know, as he pushes these policies that have a lot of question marks around
them, because how do you pay for them? He hasn't been able to really articulate a clear answer on that that appeases the moderates on stage.
Also, we would expect to see them attacking him for these favorable comments that he's made about Fidel Castro, and that he basically handed
the moderates over the last two days. Again in the town hall, Bernie Sanders repeating this favorable -- this favorable comments about a brutal
dictator, and Pete Buttigieg, you know, stepping up in his town hall and basically saying, yes, I know that we have to, you know -- literacy
programs are great because Bernie Sanders was praising literacy programs that Fidel Castro had in the country, but why are we highlighting the
achievements of a brutal dictator? These are the kind of attacks that Bernie Sanders is preparing for tonight. And there are a lot more around
his more socialist leaning policies, in addition to the fact that several candidates, including Michael Bloomberg are going to try and attack him for
being divisive and not bringing the party together.
QUEST: Cristina Alesci, is there and we'll hear more over the hours and days. All right. You know, we're in the last few minutes of trade on Wall
Street. Definitely need to update you before I love you and leave you tonight.
And so, let's do the big picture first, the Dow starts the morning of just not really very much, but it is higher of the thousand point fall, but it
did not take much for that to reverse. It was the CDC saying this is going to get worse, community spread, and the market falls. You have a little bit
of buying. I'm guessing that's buying on the dips, but it just -- it's got no strength behind it and straight down again. 950 off of the day, it's the
lowest point, but you're now talking about an 1100, 1200-point range for the course of the day. Down 844, off three percent. The McDonald's,
probably because it's -- I don't know, maybe people still buy burgers in the times of virus. American Express, the travel companies, the big banks,
they are off the worst of the day, as indeed is that Goldman Sachs down three percent. We will have a profitable moment after the break.
[15:55:00]
(COMMERCIAL BREAK)
QUEST: Tonight's "PROFITABLE MOMENT," it is an ugly sight to behold. For the second day running, the Dow looks like it's going to fall the best part
of 1000 points. One wonders why the market is so surprised all of a sudden. After all, as you had on this program, we've known the coronavirus was
hitting Chinese manufacturing very badly. China is such a major part of global manufacturing and supply change, but somehow the market blanket
itself and continued on in some happy go lucky fashion, that is until South Korea became a serious coronavirus country, and now Italy. And now the CDC
says it's highly likely that they'll be community spread in the United States.
So arguably, all you're seeing here is the market growing up and waking up and seeing the reality of what's likely to happen. We won't know how this
plays out. And yes, they'll be a V-shaped recovery once it is over. But if for those who think this is by on the depths, word of caution, if this gets
worse, those tips will be greater. So now you got to decide, is this the depth that you actually want to buy into or wait a little bit more? There
are no easy answers in this market where this virus is concerned. And that's QUEST MEAN BUSINESS for tonight. I'm Richard Quest in New York,
whatever you're up to in the hours ahead, I hope it's profitable. "THE LEAD" with Jake Tapper is next.
JAKE TAPPER. CNN HOST: It'll all go away soon. That's not really a plan, though. THE LEAD starts right now.
Confident in public unloading in private, President Trump trying to convince the U.S. that he and his administration are doing enough to
contain the novel coronavirus. His critics suggest he's asleep at the wheel and the virus spreads.
It's Bernie versus the bunch of critical debate tonight, the last chance for Democratic candidates to knock down frontrunner senator Sanders before
a major chunk of the country has it say on Super Tuesday.
Plus, as President Trump tries to weed out perceived this loyalty inside the Trump administration, he is also gripping liberal leaning justices on
the Supreme Court suggesting they, too, should get out of his way
END
