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Quest Means Business
Economy in Focus; Fast Food Strike; Ford Detroit Jobs; Detroit's Homeless Dogs; NASDAQ Glitches; Dollar Up; Make, Create, Innovate: Saving Soles
Aired August 29, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: Tonight, there's a respite from the recent selling. Stocks are rallying, investors are focusing on the improving US economy.
A fast food walkout. Workers across the United States are rallying for better pay. We'll tell you more about that.
And Vodafone, Verizon, rekindling relations, and it could be a deal $100 billion-plus.
I'm Richard Quest, I mean business.
Good evening. We are monitoring the situation in Syria, as you would expect. You've just been hearing from Hala, there. We're also looking at the various global events stemming from it, and we will keep you informed of any breaking news on CNN.
Certainly we will give you an update of the situation just about 25 minutes from now at the halfway heads, as we say. And as the United Nations prepares to consider what to do in Syria and any resolutions or even informal discussions, we'll keep you informed.
While we wait for those developments, let's turn our attention to our diet -- our regular nightly digest of business news. And financial markets are continuing to -- in some cases, not worry about what's happening in Syria, but they are focusing on the economies.
Concerns over the imminent intervention in Syria have eased. Western powers debating maybe using military force. The markets are looking instead. If you join me --
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QUEST: -- over at -- over here, you'll see we're now just up 38 points. At one point, the Dow Jones had been up more than 90 points, you can see on that graph there. If you get right in, you'll see we started and, oops, we went over the top, and now those gains have dwindled away throughout the course of the afternoon.
The catalyst for this upbeat start to the day was a report on the US economy. GDP in the US rose at an annual 2.5 percent between April and June. It was a faster pace than the 1.7 percent originally in the advance.
This is the second estimate. The advance said 1.7, the second says 2.5. We get, of course, the final in September, when we'll have more details on that. So, it was 1.1 percent in Q1, 2.5 in the second quarter.
And European shares rebounded when they saw the news of what was happening in the United States. The big company movers, of course, will come to in just a moment. London had a strong session, as indeed did Milan, with the MIBTEL index up 1 percent.
It was telecoms that were moving the London market, particularly Vodafone, a giant company in the FTSE, which jumped 8 percent in London. The company says it is now in talks with its US partner, Verizon, to basically sell its 45 percent stake in their wireless business in the United States.
The -- if that deal goes ahead, some suggest it could be well over $120 billion worth of value to Vodafone's shareholders. Other gainers were Deutsche Telekom. Obviously, if deals are being done, it spreads from one sector to another. Deutsche Telekom, owners of T-Mobile in the US, and that was a gain of 0.45 percent.
Oil prices pulled back on signs that any activity -- or any military activity might be delayed. Brent Crude -- I say pulled back, but we shouldn't make too much of it -- Brent just off 12 cents, and NYMEX WTI, West Texas Intermediate, those are the two prices, $116 and $109.
Yra Harris, a partner at Praxis Trading joins me from the CME. I hesitate, Yra, to make any form of mass generalization about what we are seeing in the markets today because the uncertainty still remains.
YRA HARRIS, PARTNER, PRAXIS TRADING PARTNERS: Absolutely, Richard. The uncertainty remains. And don't forget, you also have now month-end, which is -- tends to be a window dressing period for fund managers, if they're able to pull it off.
The market's been a weak performer this month, this has been in a correction mode. And the issue of Syria, there's so many moving parts that it's very difficult to discern any type of outcome there.
QUEST: In that scenario -- I mean, you and I could talk which way until Christmas about various scenarios, who's up, Russia, China, oil producing, OPEC. In this scenario, what do investors do? Is it a straight flight to safety?
HARRIS: It is, because -- I've been doing this for 36 years as a currency trader, and all things global, and I tongue-in-cheek say that money is fascist, meaning that money always loves stability. If fascism is a stable state, if it's Mussolini, then we know that money craves stability, and any sense of uncertainty drives it to the sidelines.
Even in the shape or real high returns, it gets nervous because it wants to -- it wants some sense of certainty, and right now, we're not seeing it.
QUEST: So, I -- let me put the dollar on the table, because the dollar has been -- has not got so many conflicting forces coming against it. It's got, obviously, the question of September's potential tapering. Now it's got, of course, Iraq -- it's got Syria. And it's got a potential debt ceiling debacle coming along. Does the dollar stay strong?
HARRIS: Well, the dollar has really been doing not much of anything except, if you look at it in terms of the emerging markets. Against the euro, 1.34 seems to be the level. Of course, the sterling, the cable, has been fairly stable, too.
So, we're kind of locked in here. A lot of people were making huge investment decisions that the dollar was going to be quite a bit stronger, especially with all the problems in Europe, and we just haven't seen that.
So right now, the markets are just stable. Even with the tapering, we have not seen the reality -- or the tapering talk with a high lift in the long end of the curve, we have not seen the dollar rally whatsoever, and that has to be disconcerting to a lot of people.
QUEST: We'll talk more about this. Good to have your -- analysis, and I very much appreciate your -- I like the idea that the markets are fascist. They like certainty.
(LAUGHTER)
QUEST: Thank you for joining us.
HARRIS: Money. Money.
QUEST: Money. Beg your pardon, money is fascist.
HARRIS: My pleasure.
QUEST: Absolutely. As we always say, money just doesn't really matter which way it goes as long as they know the certainty at the end of it.
Across America, restaurant workers are on strike, the fast food workers. When we come back, we will hear from those involved about why they're not serving up the fries.
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QUEST: Now, organizers -- according to the organizers of one of the biggest strikes in American fast food, the strike is underway at the moment. They claim that it's taking place in more than 60 cities, and the strikers came off the job at all the major fast food groups.
It was organized by the group called Fast Food Forward, which says staff in New York only earn a quarter of what they need to survive at the moment. And these include employees of big chains. It's obviously the McDonald's, the Burger Kings, the Wendy's, the big national chains. Strikes have also been called in Boston, Chicago, Los Angeles, all the major cities, and they are demanding higher pay for what they do.
So, this is what they are fighting for in terms of that. At that moment, the minimum wage is what they're being paid, is $7.25. Now, that's the US minimum wage at the moment. But of course, the average pay in the industry is $9.02. That's roughly what they're getting at the moment. Well, if you work it out, it's $18,500 a year.
But the best guess and best analysis says that people need $23,000 a year with a family of four to survive. Not thrive, survive in this country, according to the Census Bureau. So, you already see there's a discrepancy between the minimum and the average, and that's why they are demanding $15 an hour. That's the demand, a huge discrepancy between the minimum and the demand.
Of course, as well as -- what's interesting is, if you go to the BLS website and you put in $7.25 for 1960 and you extrapolate what that's worth today, well, that's what it would need to have an income today. So, that's what they're looking for.
Alison Kosik has been talking to various workers about why they believe it's so crucial to go from the average to the demand.
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SHENITA SIMON, FAST FOOD WORKER: My name is Shenita Simon, I work at KFC in Brooklyn, and I make $8 an hour.
PAMELA POWELL, FAST FOOD WORKER: My name is Pamela Powell, I work at Great Wraps, and I make $9 an hour.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT (voice-over): Tale of two people, but one story: Pamela and Shenita are just two of the three million workers living on a fast food wage.
POWELL: Should I pay my light bill, should I pay my gas? I never can pay it all at once.
KOSIK: Pamela loves her job --
POWELL: Fries, fries, fries.
KOSIK: -- but says she has to prioritize.
POWELL: So right now, the gas is off. I've had lights to be cut off, too. But -- it's kind of hard to live without lights.
KOSIK (on camera): How do you make ends meet? Let's say you go to the grocery store.
SIMON: We have this pocket money. Either my husband eats today and I eat tomorrow, or -- just make sure my kids eat.
KOSIK (voice-over): Pamela and Shenita both work less than 40 hours a week. Neither of them get benefits.
POWELL: Kind of hard to build a future if you don't know what it's going to bring you next week. You don't know what's going on next week. It's kind of hard. So, that's like a big struggle for me.
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KOSIK: Because of that struggle, fast food workers across the country are taking to the street. In July, there were strikes in seven cities, including Chicago, New York, and St. Louis. And they're spreading.
SIMON: We don't want handouts. We don't want pity. We just everyone to understand our reality.
KOSIK: The average fast food worker makes just under $19,000 a year. The government's poverty threshold for a family of four, $23,000.
The National Restaurant Association tells us, "These jobs teach invaluable skills and a strong work ethic that are useful for workers throughout their professional careers. We welcome a debate on fair wages, but it needs to be based on facts, and the facts show that the majority of workers who earn the minimum wage in the United States are not employed in the restaurant industry."
As for Shenita and Pamela, they're hopeful.
POWELL: I want to own my own business. Fast food business. I love food. And I like dealing with people, too.
SIMON: I'm not going to ever stop dreaming for my children. They want to be ballerinas, and yes, we cannot pay for it right now, but we're going to give it to them one day.
UNIDENTIFIED CHILD: Thank you.
SIMON: Yay!
UNIDENTIFED MALE: There you go!
KOSIK: Alison Kosik, CNN, New York.
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QUEST: Terrible indictment when people have to admit that they eat one day and their spouse eats the next just so that they can provide food for their children.
Today, 1400 auto workers in Detroit started new jobs helping to assemble the first Ford Fusions to be built in the United States. The extra employees are based at Ford's Flat Rock assembly plant in Michigan. The factory in Mexico couldn't keep up with orders for the model. Detroit needs the boost in employment. The city, as you will know, filed for bankruptcy after decades of economic decline.
And staying in Detroit, animals in the city are also feeling the impact of what's taken place. Some dog owners are abandoning their pets because they can no longer afford to care for them. Packs of stray dogs roam free, and their numbers are increasing, as Poppy Harlow explains.
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UNIDENTIFIED MALE: I just found her today.
POPPY HARLOW, CNN CORRESPONDENT: You just found this dog?
UNIDENTIFIED MALE: Yes.
HARLOW: Stray?
UNIDENTIFIED MALE: Yes. Running up the street, running up Seven Mile.
HARLOW (voice-over): In America's biggest bankrupt city, where people are fleeing in droves, there's another problem: thousands upon thousands of dogs roaming Detroit's streets.
HARLOW (on camera): He's a stray. He's so thin.
HARLOW (voice-over): Most are pit bulls, starving for food and affection.
UNIDENTIFIED MALE: Somebody had moved out and left him behind. He was tied up in the back yard.
HARLOW (on camera): This is a young stray pit bull that was just brought in here to the Michigan Humane Society, completely malnourished, injured, having a really hard time walking. And unfortunately, this is something that they see here every single day.
One of the biggest problems facing Detroit and the stray dogs is the fact that so many are not spayed or neutered, and so the problem persists.
DEBORAH MACDONALD, CHIEF INVESTIGATOR, MICHIGAN HUMANE SOCIETY: They're disposable in people's minds. They don't vaccinate, they don't spay, they don't neuter.
HARLOW: Kristen Huston is trying to curb the problem, educating owners to spay and neuter their dogs. She also provides free food.
KRISTEN HUSTON, ALL ABOUT ANIMALS RESCUE: A lot of people have lost their homes, lost their jobs, and they just don't have the funds. They love their animals, but it's very hard to feed their own kids and their family.
HARLOW (on camera): So, what are you going to do?
HUSTON: Exactly.
HARLOW: Are there more people living on this street or more stray dogs?
TOM MCPHEE, FOUNDER, WORLD ANIMAL AWARENESS SOCIETY: There are -- right now, there are more stray dogs. In all of the houses on this street, all of them are empty except one.
HARLOW (voice-over): Tom McPhee with the World Animal Awareness Society took us to deserted homes to see the strays living there.
HARLOW (on camera): Would tearing down these abandoned homes help solve the problem?
MCPHEE: Absolutely. People are just quickly absorbing animals, and then passing them onto other people. There's no sense of guardianship and responsibility of having an animal.
HARLOW: So, we just found this dog in the back yard here, but the issue is that the house is burned out, it's obviously an abandoned home there's trash everywhere, the house next-door is burnt down, and we have no idea how long this dog has been here or if the dog even has an owner.
MALACHI JACKSON, DETROIT ANIMAL CONTROL: Morning, Animal Control!
HARLOW (voice-over): Detroit Animal Control, hit by staffing shortages, is overwhelmed.
HARLOW (on camera): In one week, they could be euthanized.
JACKSON: That's quite possible.
HARLOW (voice-over): Seventy percent are euthanized.
JACKSON: This is one of those prime examples of a discarded animal that someone just discarded, let go.
HARLOW: Malachi Jackson has seen a lot, too much, in his 19 years doing this.
HARLOW (on camera): How bad is the problem?
JACKSON: The problem is as bad as the economic problem, I think. The whole society is pretty bad. People don't have jobs. They use animals to build revenue and protect their properties. Times are just tough.
HARLOW (voice-over): Tough to say the least. And like so much else in Detroit, man's best friend is waiting to be rescued.
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QUEST: Poppy Harlow reporting there. And the NASDAQ has just issued a statement providing more updates on last week's outage. You remember, the NASDAQ stopped trading for some three hours because of a technological glitch.
Now, the NASDAQ is admitting a number of these issues were "clearly within the control of the NASDAQ, and we regret them. As with any technology, the capacity is finite," and there are plans for greater capacity in the future.
Just thought I'd update you with that, statement coming from the NASDAQ. They're clearly admitting that much of what happened last week was a result of maybe their own technological problems.
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QUEST: Tonight's Currency Conundrum. The Indian rupee has been falling steadily against the dollar. How much of the value has been eroded over the past two years of the rupee? A half, a quarter, or a fifth? The answer later in the program.
You can probably guess where the dollar is if you heard our interview earlier, up against the pound and the euro, down against the yen. Those are the rates --
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QUEST: -- this is the break.
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QUEST: You may be wearing a lifesaving invention and you're not realizing it. I'm not talking about any elaborate stuff, I'm talking about the humble rubber sole on the foot of your shoe -- or the sole of your shoe. The idea was born in the aftermath of a tragic mountain-climbing accident, and it changed footwear forever, as Nick Glass explains.
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NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: This is a story that begins in the Alps in northern Italy. A tragedy that prompted an Italian cobbler, an Alpine guide, to revolutionize the soles of our shoes.
PAOLO MANUZZI, SALES DIRECTOR, VIBRAM: Vibram is the best rubber soles in the world.
GLASS (voice-over): The word "Vibram" comes from its creator, "Vi" for Vitale, "Bram" for Bramani. In September 1935, Bramani was caught in a sudden snow storm in the Alps. He was leading a party of 19 friends. Six of them died.
MANUZZI: When he went back, he was shocked by the tragedy. One of the main problems are the shoes, because shoes in certain condition, they get wet, they get heavier, they are slippery, and they are becoming more difficult for people to reach the top of a mountain.
GLASS: In the early 1900s, climbing boots had soles made of wood or leather with metal nails. Bramani turned to his friends at the tire manufacturer, Pirelli, for inspiration.
MANUZZI: The car industry, they are using tires to increase the stability of a car, so why don't we transfer the idea of a car, the tires, and having a kind of tire on the shoes. With the help of Pirelli, he designed the first soles, Carramato, and he asked Pirelli to help him to make it.
GLASS: Bramani carved his new sole out of wood, but crucially, manufactured it in 1937 out of rubber, a world first.
MANUZZI: It is a lug, rubber lug, that give you pushing and breaking, when you go uphill or downhill, whereas these lugs, designed in this way, like a cross, give you all the lateral stability.
GLASS (on camera): This shoe is the revolution.
MANUZZI: This is the revolution.
GLASS (voice-over): The first major success for his invention came in 1954 on the second-tallest mountain the world, K2. An Italian expedition became the first to reach the summit. They personally thanked Bramani in letters and signed photographs.
Today, 40 million pairs are produced every year. Turnover last year was $275 million. The basic raw material is natural rubber from Vietnam, mixed with other ingredients, like silica, wax, and sulfur, and a bit of coloring.
Add the rubber to molds, process under high pressure and intense heat, and hey, presto, high-performance rubber soles.
GLASS (on camera): How many different kind of soles do you make now?
MANUZZI: Now, we make many. Average -- our average is around 200, 250 new designs per year. The market has changed a lot. Most of the customers want their own design, or they do different kinds of shoes, or for any kind of shoes, they want their own design.
GLASS (voice-over): Each sole is tested here by a team of researchers for tensile strength, shock absorption, durability and grip.
Vibram began as a way of making climbing safer. Their soles are now used for running, skiing, and high fashion. For Vibram, their original aim remains the same.
MANUZZI: It's a protection of your body, of your feet. Because human body is already the perfect machine. Our philosophy is we are a perfect machine to go everywhere. Sometimes to do some activities, you need some extra protection, and we just put a second skin on your feet.
(END VIDEOTAPE)
QUEST: So, now you know. That's, indeed, how you manage to climb up a mountain and stay safe. What you don't use is a pair of these, which of course, have absolutely no traction at all.
Coming up after the break, Vodafone is back online with Verizon. The two companies may be about to hang up on a joint venture. Verizon's final bill, it could be huge.
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QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news always comes first.
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QUEST (voice-over): President Obama's national security team is briefing members of Congress on Syria this evening. Ninety members of U.S. Congress signed a letter urging the president to consult with them before launching any military attack. The White House reiterated today that the U.S. remains on a compressed timeline for action against Syria.
The deputy press secretary Josh Earnest told reporters that President Obama spent the day consulting with international allies.
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DAVID CAMERON, PRIME MINISTER, GREAT BRITAIN: Thank you, Mr. Speaker. And I beg to move the motion standing on the order paper.
QUEST (voice-over): The British Prime Minister David Cameron has been presenting his case for military intervention in Syria to the House of Commons. He says a new intelligence report demonstrates the regime carried out chemical weapons attacks near Damascus on August 21st.
CAMERON: It is not about invading; it is not about regime change or even working more closely with the opposition. It is about the large-scale use of chemical weapons and our response to a war crime -- nothing else.
Anything we do would have to be legal, proportionate and specifically focused on deterring and preventing further use of chemical weapons. I am deeply mindful of the lessons of previous conflicts and in particular the deep concerns in the country caused by what went wrong with the Iraq conflict in 2003.
But this is not like Iraq. What we are seeing in Syria is fundamentally different. We are not invading a country; we're not searching for chemical or biological weapons.
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QUEST: The United Nations Security Council is currently meeting behind closed doors, and we're learned that Russia called for the meeting on Syria.
Nick Paton Walsh joins me from the United Nations and from CNN New York.
Nick, the -- what are they hoping for in this particular meeting? We know the British have put down -- or are planning to put down a proposed resolution.
So what's this meeting all about? Talks about talks?
NICK PATON WALSH, CNN CORRESPONDENT: Well, impression we're getting, an initial impression from a diplomatic source with direct knowledge of the talks is this could kind of be the end of the road for the resolution, that they have consulted with their capitals, the members of the P5 -- Russia, China, France, U.S. and the U.K. -- and the meeting getting underway is to exchange the information that comes from that.
But my source suggesting the Russians don't really want to see this pushed to a vote; the Chinese don't want to have to exercise their veto. So may actually not even be the haggling you've seen before, Richard, over what exactly the wording of the resolution's going to be. But it's basically dead in the water.
We saw yesterday all sides really far apart on this, the U.S. themselves saying they see no avenue forwards for that resolution at the U.N. So the question really is what are they meeting for? The most likely answer: to kind of put the last nail in the coffin of this idea.
QUEST: Nick Paton Walsh, in the hours ahead, we'll find out more about it and you'll be there to report it for us. We thank you for that.
So back to the business agenda, Verizon is angling to buy Vodafone's share of its U.S. joint venture Verizon Wireless -- nothing new about that; they've been trying to buy it for years.
However, what's different now is that they seem to be prepared to pay some serious money. Success would give it ownership of the largest wireless operate in the United States. Vodafone's 45 percent stake, it could cost Verizon as much as $130 billion if they bought it out completely. It would be one of the biggest deals in corporate history.
Jim Boulden is live in London for us.
Verizon, well, Verizon's wanted to buy this for some time.
Vodafone hasn't wanted to sell. So now why would they do so?
JIM BOULDEN, CNN CORRESPONDENT: Well, they have wanted to sell it, but they wanted to sell at the right price, Richard, and that's been the issue. And we're talking about something now, news reports saying $130 billion. It's an extraordinary amount of money for this doing venture created back in 2000.
And but if you look at the Vodafone's share price, I think we can show that the last few hours, last few days, Vodafone shares have been a dog, really, for about a decade. And you can just see the relief in the markets when this deal was finally leaked and at least Vodafone admitted the two sides are talking again as they have on and off for a couple of years.
So but let's go back and look at Vodafone for the last 10 years. This is a share that's taken some 11 years, really, to get back to the same level where it was in 2002. It's a big utility nowadays, Vodafone is. Wanted to shed this and go into somewhere -- more European cable, for instance.
QUEST: Right. I'm just jumping in here, because as I've read this story today, why would Vodafone -- all right. So get $130 billion, which it can invest in other -- and do other deals in Europe and its German thing -- operations and all this.
But why would it want to give up exposure to the U.S. market, competitive though it is? It's the largest market.
BOULDEN: Well, it needs the money to write down debt. If you look at Vodafone's strategy of writing down debt, this money would help that.
Number two, yes, Verizon Wireless is number one. And where do you go when you're number one? Usually you go down, because you can't get any bigger because there's so many competitors.
So -- and also it hasn't been getting the dividend from Verizon Wireless until recently. What does that mean? It means it's invested money many years ago. But it hasn't been getting the investors, the shareholders around the world haven't benefited from Verizon Wireless as far as the dividend goes.
And so in that sense, they're refocusing what they want to do; maybe the U.S. has peaked. Maybe it's matured as far as Verizon Wireless goes. And Vodafone could put that money to better use, maybe even a share buyback.
And recently, they -- as you said, they're looking at buying German cable; they'll get back Vodafone Italia in this deal. They're looking at a very unsexy European market again, not for wireless but maybe looking at it, putting broadband together, high-speed, 4G, blah, blah, blah, put all that together, become more of a European focus, India focus and then, of course, maybe more into Asia as well.
QUEST: Jim, you've explained it beautifully. Thank you.
Jim Boulden at CNN London.
(Inaudible) now as we follow the events of what happened at Zurich Insurance.
The chairman of Zurich Insurance has now stepped down, saying that he felt under pressure from the family of a top executive who was found dead on Monday.
Josef Ackermann quit today with immediate effect after little more than a year in the job. Mr. Ackermann said he was under pressure to take, in his words, "a share of responsibility" over the death of Pierre Wauthier, the chief financial officer. Police suspect Mr. Wauthier may have taken his own life.
Zurich Insurance is refusing to say what sort of allegations the family may have made or why Ackermann believes that Wauthier's family think that he is partly responsible.
More QUEST MEANS BUSINESS in a moment.
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QUEST (voice-over): The answer to tonight's "Currency Conundrum," how much has the Indian rupee lost against the dollar over the last three years, the answer is 49 percent, half its value, to be precise. The rate went from 46 rupees to 69 -- 68 yesterday, remembering of course there is a reverse currency for going the opposite direction, because it takes more rupees to buy a dollar. That's the way it works in that sense.
Jenny Harrison's with us at the World Weather Center.
Well, no, she's -- old habits die hard.
JENNY HARRISON, CNN METEOROLOGIST: I'm here. This is the World Weather Center for all purposes that we (inaudible).
Yes, nice weather, Richard, my goodness, glorious weather in London. You're not there; you're here, but even so, not lovely everywhere. We've had some more of those ferocious thunderstorms, pushing through the Mediterranean. You can see the cloud giving you that indication. Despite the cloud, you can see across central and northern regions.
There really hasn't been much there even in the way of rain and temperatures are really bearing up pretty well. But look at the rain that came down. You can see here in Hungary and also Romania, 54 millimeters, 46 millimeters, all of that in a very short space of time in the last 24 hours.
This still the setup as we continue through the next couple of days, high pressure by far the most dominate weather feature across central, northern regions, some glorious sunshine, some good mild weather continuing, still more of those severe thunderstorms really through eastern areas of Spain and again working its way across towards the Black Sea and across into Ukraine.
So that's where we expect to see more in the way of thunderstorms. But in fact, we could also be seeing some more thunderstorms. You can see along the north coast of Africa, Morocco, Algeria, Tunisia, some severe winds, tornadoes, always a possibility and more of that large, damaging hail. We saw some of that a couple of days ago.
And as I say, more of those severe thunderstorms just off the east coast of Spain. But look at this, yes, end of the summer sun maybe. We are getting to that time of year, of course, September is just a couple of days away. But they're certainly continuing to enjoy it very nicely in Germany. Some very interesting seats they seem to enjoy on the beach in Germany. We're looking at this in our weather team and just wondering if they're seats for one or seats for two. We couldn't quite decide. Perhaps you know and you can tell us the answer to that.
You can see there is some more rain in the forecast. Trying its best to push across Scandinavia, more of those scattered showers across the south and as for the temperatures, not bad at all. And because of all that, no real weather delays at all the major airports, maybe 15 minutes at most. So you know that really means not a lot, those temperatures pretty good, mid-20s, the coolest place you can see there, 16 Celsius in Kiev, not a bad picture at all, Richard.
QUEST: Thank you very much, Jenny Harrison at the World Weather Center.
You always wanted to do this. Come on.
HARRISON: Oh, I get to do it?
QUEST: When I tell you to -- when I tell you.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead.
HARRISON: Thank you very much.
QUEST: I hope it's profitable.
(LAUGHTER)
HARRISON: (Inaudible).
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ISA SOARES, CNN CORRESPONDENT: Hello and a very warm welcome to MARKETPLACE EUROPE from the banks of the River Thames in London. I'm Isa Soares.
The Eurozone is finally merging from its longest-ever recession while growth figures are lower, there are reasons to feel cautiously optimistic. So on this week's program, we've seen how two consumer focused businesses are gearing up to take advantage of (inaudible) green shoots of recovery.
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SOARES (voice-over): Coming up, the Scottish farm that's aiming to become Europe's biggest producer of the most expensive beef in the world. And room for a bit of home improvement, Nina dos Santos meets the boss of Europe's biggest DIY retailer.
IAN CHESHIRE, CEO, KINGFISHER: We've moved into Romania, which is a country of 21 million people. We think is now nudging out of a very difficult period, tremendous opportunity for home improvement there.
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SOARES: The U.K.'s home to the second largest beef herd in Europe. It represents the largest sector of agriculture in Scotland, accounting for roughly $950 million every year. Now Scottish beef is renowned worldwide for its quality. But as I discovered, expansion plans on one (inaudible) farm are being driven by a herd beef from the other side of the world.
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SOARES (voice-over): This calf is only 2 days old, but already he's making history, becoming one of Scotland's prized possessions.
He's the pride and joy of Mohsin and Martine (ph), the husband and wife team behind an ambitious breeding initiative.
In 2011, they bought Wagyu cattle and embryos from Australia and started to cross-breed them with traditional Scottish pedigrees. The aim to produce the most expensive beef in the world.
MOHSIN ALTAJIR, HIGHLAND WAGYU: What you do is you take, for example, 50 cows or 50 heifers -- we prefer heifers. And we'll put 50 embryos in.
SOARES: Right.
ALTAJIR: And from these embryos, (inaudible) 50 percent will lose 50 percent of them, because they don't all take.
So to save time and have to reprogram them again, you put the bull in. So he'll cross whatever hasn't got an embryo, will fall in calf with the bull. So you'll have a cross shorthorn or a cross Angus.
SOARES (voice-over): With 25,000 acres of grazing land, it's an environment conducive to raising healthy Wagyu. To improve the fertility rates and the quality, they have their cattle on a strict regime.
ALTAJIR: We want the best steak in the world. We're not look at Europe. But in order to get there, you have to do everything precisely.
We found that we brought in seaweed from Oakley (ph). We also used omega-3. We condition the animals; we kept them happy and content. And we found that our conception rates started going up from 60 percent to about 90 percent in the last fresh implantation.
SOARES (voice-over): These somewhat unorthodox methods have raised a few eyebrows in the small Scottish community.
ALTAJIR: People look at you as if to say, "Why are you breeding Japanese cattle -- ?"
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MARTINE CHAPMAN, HIGHLAND WAGYU: And they're very ugly cattle to them. They don't look beautiful. It's just completely opposite to what they're used to breeding. I think a lot of them are scared right now. But I think when they see the quality of the beef, I think they're going to start coming on board.
Angus is marbled and there are other traditional breeds that are marbled. But this one is serious (ph). It's like butter in your mouth when you eat it.
SOARES (voice-over): That may be so, but the cost of rearing this animal may just deter other breeders.
The feed's a vital part of raising premium Wagyu beef, but it does come at a cost. These animals are fed a low-energy concentrate which can cost up to $1,500 each every year. After 30-34 months, they're ready to go to market, where they can fetch $12,000 each.
The care and welfare of these fragile calves is paramount, producing the best quality beef. But Martine is frustrated by European regulation which allows lower quality beef to flood the market.
CHAPMAN: We jump through hoops to bring the best steak and supply the food chain. And yet they're bringing cheaper beef from outside, from Brazil, from South America, from these places that don't have the rules that we do in Europe. And we have to follow strict rules. And yet they're undercutting the British farmers or the European farmers by bringing in cheap beef.
ALTAJIR: And these things arrive on our shores. They're at half the price that you can put things on the market. And it destroys us small holders.
SOARES (voice-over): Undeterred, Mohsin and Martine predict they'll have 1,500 Wagyu by the end of next year. At $300 a kilo, they're hoping there's a healthy appetite in Europe for Wagyu.
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SOARES: It's time for a makeover after the break. We talk home improvements with Europe's biggest DIY retailer, the CEO of Kingfisher. That's next.
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SOARES: Welcome back to MARKETPLACE EUROPE from London. The demise of the property market has been felt across Europe with the effects of the crash rippling through to the wider economy as consumers tighten their belts.
Here in the U.K., though, it seems activity is returning. Easy access to home loans are seeing mortgage levels at their highest since 2008, and of course any improvement in consumer confidence is good news, especially for DIY companies.
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SOARES (voice-over): Kingfisher is the largest home improvement retailer in Europe, with over 1,000 stores in eight countries. Nearly 6 million customers a week shop in its outlets, which include B&Q, Castorama and Screwfix. The company generates annual sales of over $16 billion.
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CHESHIRE: Overall, I think in Western Europe, consumers are still pretty under pressure, I would describe it as. There are signs now developing positive outlook in probably the U.K. most -- maybe a bit in Poland. But in France, you've got real uncertainties. So but overlaying that for us was a particularly violent swing in the year-on-year because this time of year we're very weather-dependent; we sell a lot of garden furniture, barbecues, you know, people are either outdoors or they're not. And we've gone from having a huge year-on-year negative in March to a really positive period in sort of June-July.
NINA DOS SANTOS, CNN HOST: One big problem, though, has been the fact that we've seen the housing market collapse in the U.K. over the last five years. It is picking up gently. But in places like the Netherlands as well, we've got a huge depreciation of house prices. That means people aren't moving with these low mortgage rates. They're not doing up their houses.
CHESHIRE: What we've seen is three different dynamics, actually across Europe, which has been a big slowdown in the U.K., which was probably overinflated with credit, but peaked at maybe 1.5 million transactions a year. Maybe this year we'll be about 900,000.
So we're coming back up and it's great to see the forward indicators in the housing market beginning to look more positive. But actually for us, it's sort of still early days in the U.K. But the market has changed in the U.K. because of the funding for lending scheme the government put in; the banks are back in the mortgage market. That's very different.
By contrast in France, actually the market didn't really disappear. In fact, home ownerships continue to grow in France. There's only really been this year when we've seen people get nervous about what's happening with the market with (inaudible) the government, the people are saying, well, actually, how confident am I about this value? Will it start to go down?
And then by contrast, Poland has been up and down, much more volatile, probably beginning now to be more optimistic. But there in the emerging markets, most people are still very early days of home ownership. They've really got a long way to go.
So actually longer term, there's great opportunities, particularly in places like Russia.
DOS SANTOS: Where do you see Europe going forward? Because the recovery is very much in its infancy.
CHESHIRE: Absolutely. Well, I think one of the striking things about Europe at the moment is that there are two sets of Europe. There is a Eurozone Europe, which is dealing with particularly the ongoing banking aftermath, which hasn't been finished as well as the sovereign structural issues.
So places like Spain, places like Greece and Italy, I think, have got real challenges on their hands. You're not really seeing a single picture across Europe. You've got quite specific country-by-country situations, even between, say, Germany and France. So we have to run the businesses and retail is, you know, (inaudible) we just open the store and you trade what's in front of you.
It's quite different country by country at the moment, as opposed to being a general Eurozone issue.
DOS SANTOS: So where do you expect the growth to come from, then?
CHESHIRE: Firstly, there are certain still emerging market areas. So for us, Poland and Russia, Turkey and most recently we've moved into Romania, which is a country of 21 million people. We think is now emerging out of a very difficult period, tremendous opportunity for home improvement there.
DOS SANTOS: You've often talked about how governments aren't really updating the tax regime and all sorts of paperwork to cope with the fact that many businesses are very present online, more present online than they are in the stores.
CHESHIRE: Yes. At the moment, if you're an online player trying to export into the E.U., the single market is not really there yet. And it's largely about the application of local practices. That's means you have to have proof of physical presence here, where you have to have certain payment arrangements there.
And instead of an approach which maybe might say, look, if you pass the operating test in a single individual market, you should be there for (inaudible) operate in all the E.U.
DOS SANTOS: What about the U.K.'s position on the European Union? You've written in the past that perhaps the people of the U.K. and indeed further outside in other E.U. countries aren't really being sold this idea of a referendum on an honest footing.
CHESHIRE: Well, we've got as a Eurozone, which is following its own perfectly sensible (inaudible) logic is going to have to get closer. If you're going to have a single currency, you're going to have to work more closely.
But that's going to create a different Europe in some areas. I think there is a general recognition that we need to work out what the future Europe is if you've got a real Eurozone on one side and you've got at least 10 countries outside the euro who want to be part of Europe.
So how do we find the right balance? And that also includes this question about what powers are held in Brussels, what are held locally? And there are lots of countries around certainly -- even traditional Europhile (ph) country like France, I know, they're concerned about the way the E.U. is developing in certain regulatory areas, because that's not compatible with the way the French want to run their country. There is a real value in Europe. If we get the right Europe.
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SOARES: That was Ian Cheshire, the CEO of Kingfisher, bringing this week's edition of MARKETPLACE EUROPE to a close. From London, thank you very much for watching. We'll see you again next week.
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