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Quest Means Business
The Fed's Jerome Powell Strongly Hinting At A Rate Cut Today; Former Bosses Of France Telecom Awaiting On A Verdict In A Case Involving Multiple Workplace Suicides; France Is About To Become The First Country In Europe To Introduce A Tax On Tech Giants; President Trump to Make Announcement on Citizenship Info; Storm in Greece Kills 6, Injures Dozens; WTI Surged Wednesday as Storm Threatens Rigs. Aired 3-4p ET
Aired July 11, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: Sixty minute so the close of business on Wall Street. The market has been up throughout
the day -- pretty much since the get go, and has held on to the gains with a few wobbles on the way that we will discuss, but we are at record levels
throughout.
The markets are up, and these are the reasons why. The Fed's Jerome Powell strongly hinting at a rate cut today. We'll hear from his second day of
testimony, and why the markets like it so much.
The French are taxing Big Tech. The Americans don't like it and they are threatening to retaliate.
Also the British Navy to the rescue after a BP tanker is menaced in the Persian Gulf.
We are live in the world's financial capital, New York City, where it's just started to rain, otherwise, a beautiful day in the city. It is
Thursday. It's the 11th of July. I'm Richard Quest. Yes, I mean business.
Good evening, a record day -- a record breaking left, right and center for U.S. markets, as hopes for a rate cut by the Federal Reserve is propelling
Wall Street and markets to new highs. And if you look at what's happening in the market, well, we're talking some serious numbers here.
The Dow Jones has topped 27,000 for the first time, and the S&P 500 could also close at a record of its own. It has crossed 3,000. It's been
bouncing up and down throughout it, but it is touch and go now as it traded virtually flat.
The NASDAQ, however, no records there. It is in the red for this session. But it has been -- you know, perspective, perspective, perspective. It is
easing back from the all-time high that it only set on yesterday. And the main driver in all of this remains the U.S. Fed where investors are
absolutely certain now -- the futures market has 100 percent certainty of a rate cut because of the economic and economic uncertainty in the situation
at the moment.
In testimony before the Senate Banking Committee this Thursday, the Fed Chairman Jerome Powell said concerns about U.S.-China trade were very much
at play in these decisions.
(BEGIN VIDEO CLIP)
JEROME POWELL, CHAIRMAN, U.S. FEDERAL RESERVE: The trade negotiations that have been going on have injected uncertainty for those businesses into
their supply chain. So many of them have moved their supply chains, some moved them to Mexico, and then found that Mexico might be the target of
tariffs. Others are considering what to do.
In any case, it's -- at a minimum, it's a distraction from going out there and you know, rolling out new products and that sort of thing. And so it
shows up a lot in the Beige Book just overall concerns, and I think it's weighing on the outlook.
(END VIDEO CLIP)
QUEST: That is fascinating, Clare Sebastian listening to the Fed Chair. He was he was almost like an economist pundit, rather than the Chair of the
Fed. It shows up in the Beige Book. That's the anecdotal report that the Feds regional banks provide. But there's no easy sign of solution on this.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: No, absolutely not. And we've seen again today, President Trump has been tweeting that, you know,
China is letting the U.S. down by not buying more farm products.
So look, the Fed Chair clearly sees a real world impact. He says it's also showing up in the data, lower business investment, manufacturing is
starting to suffer. And I think, you know, obviously, this is why the market is up today, perversely, because this is yet more evidence that the
Fed is now moving towards a rate cut at the end of July. He doesn't see the truce at the end of June, as a lifting of the uncertainties.
QUEST: Is this rate cut justified? I mean, Anthony Chan yesterday said it was. Peter Tuchman at the stock exchange says you've got low unemployment,
you've got growth -- strong growth -- there is no honest justification other than presidential pressure for this rate cut.
SEBASTIAN: And market pressure. And I think that should be taken seriously because there is a real risk that if the Fed does nothing at the
end of July, that they inadvertently cause a tightening in financial conditions by causing a drop -- the serious drop in the market.
So I think they have to an extent been boxed in here, not necessarily by presidential pressure, although that is something that people are worried
about, but by the markets themselves.
QUEST: Looking -- we talked yesterday about the Minutes and when one read the Minutes as I know, you will have read them closely. The Committee --
it's going to find it very difficult not to cut rates having come out and said well, we all pretty much think we should at some point.
SEBASTIAN: Right. I think certainly, we are now looking at a 25 basis point cut at the end of July. They were divided at that meeting. There
wasn't a major consensus towards a cut. But most people were edging towards that.
So I think what we're going to see now, one economist described it to me as an immunization shot at the end of July, a way of kind of insulating the
economy against the coming risks. What happens after that? I think, it is very much up for debate.
[15:05:23] QUEST: But people are now talking about growth of under two percent.
SEBASTIAN: Right.
QUEST: Which is not on -- I mean, I don't see that on the horizon, yet. We've just had a 3.1 percent growth. So it's a fairly dramatic drop to
suggest that by the end of the year, what are your economists telling you?
SEBASTIAN: That it is going to start to slow and it's not just about the U.S. economy, but the global growth picture is really starting to weigh on
the U.S. There's uncertainty about trade that is slowing economies around the world, all of this is starting to hit the domestic economy.
And you know, we see it from the big international institutions, the IMF, the OECD -- everyone is predicting that growth is going to start to slow
over the next year or so.
QUEST: Good to see you. Thank you. Your thoughts on this particular matter are most important. Join the conversation, as always. Now,
whatever your favorite digital device is, we want you to join the conversation. And you can do it at cnn.com/join. The issue there is
whether the Fed should be cutting interest rates cnn.com/join.
Robert Reich is with me. He is the former U.S. Labor Secretary. He joins me from Berkeley in California. Mr. Secretary, it is always good to have
you. Thank you, sir for taking time. Firstly, on this question, do you think the Fed has been bullied into a prospective rate cut at the end of
July?
ROBERT REICH, FORMER U.S. LABOR SECRETARY: Well, Richard, it certainly looks like the Fed has been bullied in the sense that Donald Trump has been
very, very outspoken unlike any other recent President about the importance of the Fed cutting rates. He has even said that he is looking into the
possibility of getting rid of Jerome Powell if he doesn't like what Jerome Powell is doing in terms of rates.
It's very important, but at the same time -- and Powell is in a very difficult spot here. It's very important for the Fed and for Powell to
show or at least give the impression that the Fed and Powell are not being affected by the President and that they are independent.
And as Julia just said, there are reasons to worry about an economic slowdown, and also a global slowdown and uncertainties, particularly with
regard to China-U.S. trade and that trade war. So I think the Fed is in an almost impossible position right now.
QUEST: Right, in that impossible position, they will probably -- I mean, it would be extraordinary if they did not cut now, having basically
telegraphed it to the market. Are you as concerned as Jerome Powell? It clearly seemed to be in his testimony about this slow down predicated on
the back of the trade problems?
REICH: Well, yes, there is a lot of reason to be concerned. But here's the irony, the uncertainty is mostly coming out of the White House. I
mean, this is a President who basically runs his entire administration on uncertainty, on fear, on him pulling rabbits out of hats.
And in that atmosphere, you have a Fed, and a Chairman of the Fed trying to keep the rudder, trying to keep the ship of the economy going straight.
And it looks like -- and it is going to continue to look like Jerome Powell is sort of bailing out Donald Trump from Donald Trump's trade wars or his
threats of trade wars.
QUEST: Don't you find though, because there's a sudden uncomfortableness of position here, because they use us -- for example, you had been a critic
in the past of China's trade policies. And now of course, somebody is doing something about them.
But of course, the issue is whether they're doing the right thing. Does it make sense to be going into battle against with China in this way?
REICH: Well, the question of what tools does the United States have or the rest of the world have with regard to China? And exactly what does the
United States want from China? And those aren't slightly different questions.
I mean, with regard to a trade imbalance, yes, China and the United States can look at that trade imbalance and see if progress has been made over
time. But the Trump administration has been very ambiguous about what else it wants from China.
It doesn't like the fact for example, that China is seeking dominance in a lot of high technology areas and people in the Trump administration have
been quite vocal about the importance of China not becoming a national security threat in terms of technologies like 5G.
Well, you can't as a matter of American national policy and trade policy, bully China into not trying to become a world leader in the technologies of
the future. So you see how uncertain this entire system is.
And finally, Richard, just to add to another bit of uncertainty with very, very low interest rates and the anticipation of very low interest rates,
we've got a lot of borrowing going on that itself creates instability in the system.
[15:10:24] QUEST: While we were just talking, we've got the early answer on should the Fed cut rates with markets at record highs? Seventy eight
percent of the QUEST MEANS BUSINESS viewer, the wise viewer says no, 22 percent say yes. If you were voting on that, should the Fed cut rates with
markets at record highs? What would your vote be?
REICH: I would say in the very short term, yes, but I would -- because I am concerned about the long term as many of your viewers are, I would say
this adds to instability. This is the wrong time, the wrong place. The Fed should not be playing or appear to be playing politics.
QUEST: It's a difficult situation. We'll talk more about with you in just a moment, sir. Please don't go too far. We're going to be talking on the
new French tax on tech and hearing your views on that in just a moment.
Because some of America's biggest brands are about to be hit and hit hard. It's a tech tax in France, and it's likely to trigger serious retaliation
from the Trump administration who have already started an investigation.
The company where dozens of staff took their own lives, on trial where the boss is accused of creating a toxic environment and creating an environment
where people felt the only way out was suicide.
(COMMERCIAL BREAK)
QUEST: Former bosses of France Telecom are waiting on a verdict in a case involving multiple workplace suicides. Prosecutors allege that the
executives including the former CEO Didier Lombard created a toxic work culture that contributed to 35 people killing themselves. CNN's Melissa
Bell reports from Paris.
(BEGIN VIDEO CLIP)
MELISSA BELL, CNN PARIS CORRESPONDENT (voice over): The anger of the unions goes back a decade when a wave of suicides hit France Telecom. The
unions say, they blame ruthless management methods aimed at shedding 22,000 jobs when France Telecom went private and became Orange.
Top executives including the CEO at the time, Didier Lombard on trial for moral harassment. His lawyer told the court his client was innocent and
was being accused of moral harassment against people he'd never even met. The labor union that represents Orange workers said that 19 workers that
committed suicide between 2007 and 2010, another 12 employees attempted suicide during the same period, several at work.
[15:15:27] BELL: One former employee told us of some of the examples given in court.
(BEGIN VIDEO CLIP)
VINCENT TALAOUIT, FRANCE TELECOM VICTIM: One person was a technician. He was an expert in his field. He loved his company. He stabbed his belly
during a meeting because every week, week after week, he's been said "Your job is no more. You have no more job in the service. Find you another
job. Maybe a mobility at 300 miles away from your home." So he stabbed himself.
(END VIDEO CLIP)
BELL (voice over): Samira Guerrouj who says she still works for the company attempted to throw herself under a train in 2010 driven to despair
she says by corporate bullying.
(BEGIN VIDEO CLIP)
SAMIRA GUERROUJ, FRANCE TELECOM VICTIM: I told my manager, please give me the work. Give me the work, I can't stay like this. They destroyed me,
ma'am. They destroyed my physique. They destroyed my body. They destroy everything -- everything. For what? Tell me, for what? For only to
economic plan? Only for the make a profit plan? That's it. No, it's not logic. It's not normal. It's called --
(END VIDEO CLIP)
BELL (voice over): We reached out to Orange for comment and the company referred back to its original statement in which it had denied any
wrongdoing and vowed to defend itself in court. Melissa Bell, CNN, Paris.
(END VIDEOTAPE)
QUEST: That verdict will be handed down in due course. Staying in France, the country is about to become the first country in Europe to introduce a
tax on tech giants. Now, the U.S. is investigating the move saying it could discriminate against large tech companies, you know the names:
Facebook, alphabet, Apple and Amazon. Because of the way the taxes are constructed, designed on certain revenue bases, it will be the large U.S.
tech companies that will be hit hardest.
In return, the U.S. is open to 301 investigation and that could lead to retaliation with tariffs on French goods. Robert Reich is still here,
former U.S. Labor Secretary. Mr. Reich, the French have got the bit between the teeth on this, whilst other countries are looking at whether
Big Tech should be broken up or restricted or regulated, the French have decided to tax. A good idea?
REICH: Well, it's certainly an opening salvo, Richard in what is expected to be, I would say a year or two or five, a long drawn out fight with the
tech giants as to what their responsibilities are to various nations.
Even in the United States, there's a big debate about whether tech ought to be broken up and what tech ought to be required to do. Whether there ought
to be new regulations.
I think what the French are doing, and this is almost typical of the French, and I say this in a very positive way, is they are putting
themselves out there as the kind of canary in the coal mine.
And yes, the Trump administration is likely going to respond. But remember, these tech giants are not just American firms, these are global
firms. They make their money all over the globe, a lot of what the money - - that Amazon and Facebook and Google are making comes from places like France.
QUEST: But you would agree that the tide of opinion is turning against them on certain areas. So for example, if it's Facebook, there's questions
about Messenger and WhatsApp. And, you know, effectively, it's the new telephone exchange for the 21st Century.
If it's Amazon, there are questions about, yes, they pay the tax that the law says, but is that the right level of tax? Is that the fair level of
tax?
REICH: Well, absolutely, Richard. I mean there are questions about market power that underlie all of these things, because these tech giants really
are based on what are called network economies that are beyond economies of scale. They really -- it's very, very hard for anybody else to get in the
market.
And so you've got these five American tech giants that are increasingly dominating the market with regard to all kinds of consumer technology
products and this causes ripples of problems in the economy all over.
QUEST: Straightforward question. Are they too powerful and should they be broken up?
[15:20:00] REICH: Well, my own view and I have expressed this in a variety of places is that they should be broken up, but it doesn't require -- I
mean, in other words, there are different ways of breaking up. You can require the technologies be licensed to other competitors. That's one way
of so-called breaking them up. You don't have to literally take a sledgehammer and do what we did to MaBel, the giant AT&T monopoly in the
United States. There are many other things that can be done.
But what I've noticed is that in Washington, among Republicans, as well as Democrats, there is an increasing concern about the market power of these
tech giants.
QUEST: Final question. It just occurred to me. I can't have you here -- which of the candidates for the Democratic nominees do you like the look
of?
REICH: Well, I'm not taking sides at this point, Richard. I think it's very important for the -- no, no, I'm not being coy. Democrats have got to
stay together. I mean, if we are going to and I say we, as a Democrat, if we're going to defeat Donald Trump in November -- next November, it is
very, very important for Democrats not to get involved in the same kind of antagonizing primary fights that they got into in 2016.
QUEST: Mr. Secretary, good to see you. Thank you, sir. I appreciate it very much.
REICH: Good to see you, Richard.
QUEST: Thank you. Now, we should take a moment and have a look and check on the markets. To Europe. Now, that French tech tax is weighing on the
market investors' minds, especially if it means retaliatory tariffs on the U.S. But it is years away.
It widened an earlier rally, which was driven by optimism over Jerome Powell's comments. And you may also think, of course, that there's to be
an eco-tax, and as a result, all of Europe down, which is interesting because they had seen a strong open in New York, and they simply were
unable to follow on through.
You may not realize it, but many of the American films and TV shows we're watching weren't filmed in Hollywood, instead, they were filmed in the U.S.
State of Georgia.
Now some Hollywood's big players want to cut production because of Georgia's new law that would ban most abortions after six weeks. The law
seems to be out of step with the American public. A majority say abortion should be legal in all or most cases. According to a new Washington ABC
poll. Robyn Curnow talked to a number of people in Georgia's film industry who say a boycott is the wrong approach.
(BEGIN VIDEOTAPE)
MATT SCHEIB, STUNTMAN AND OWNER, ATLANTA JUDO MIDTOWN: Ducking this way, out, and down.
ROBYN CURNOW, CNN INTERNATIONAL CORRESPONDENT (voice over): A body slam, throws, and a fake jab, this group of Atlanta-based stunt professionals are
perfecting film fight scenes. They and thousands of others who work in Georgia's film industry have also though found themselves in the middle of
a political fight between Hollywood and the State's lawmakers.
When Georgia's Republican Governor signed one of the strictest abortion laws in the nation, major film and television companies threatened to end
productions in the State if the law goes into effect next year.
Stuntman, Matt Scheib, has worked on movies like "Avengers: Endgame." He and many others in the industry here are worried about the unintended
consequences of a boycott of Georgia's thriving film industry.
(BEGIN VIDEO CLIP)
SCHEIB: So, most people are transplants from other places. So, if work goes away, that creates a real issue. Yes, keep people working, keep the
jobs here, don't yank that rug out of all these people here.
(END VIDEO CLIP)
CURNOW (voice over): Celebrities like Spike Lee and Alyssa Milano are calling for a boycott to defend women's rights. It's a call that many
women in the film industry agree with in principle, but disagree with in practice.
(BEGIN VIDEO CLIP)
KALENNA BOLA, HELPS COMPANIES FIND BEST LOCATIONS TO FILM: Any major production that's come to Georgia, you name it, it's been shot here on
Broad Street.
(END VIDEO CLIP)
CURNOW (voice over): Kalenna Bola, helps companies find the best locations to film. She shows us that Atlanta's city center has been used as a
backdrop for everything, from bank heist thrillers to the zombie apocalypse. Like this street scene in "The Walking Dead." "Fight, but in
a different way" is her message to Hollywood.
(BEGIN VIDEO CLIP)
BOLA: Put money behind interest groups that support left-leaning policies, instead of boycotting. Money talks at the end of the day, right? And I
think that people who are conservative look at the bottom line a lot more.
(END VIDEO CLIP)
CURNOW (on camera): No matter where you stand on the politics of this, there is no denying that money is also at the heart of this issue. That's
because here in Georgia, the State offers massive tax breaks to production companies and film studios. And then in return, Hollywood invests heavily
in the local economy. Investing billions and billions of dollars.
This is one of these facilities where you can see this massive investment. This is Black Hole Studioz where the most recent "Godzilla" movie was
filmed.
(BEGIN VIDEO CLIP)
MICHAEL MOSHER, MAKEUP ARTIST FOR FILM AND T.V. SHOWS: I have really mixed feelings because boycotts can work.
(END VIDEO CLIP)
CURNOW (voice over): Michael Mosher does special effects makeup like this for the T.V. show, "Legacies."
(BEGIN VIDEO CLIP)
MOSHER: Laws like this directly affect me because it may put my business out of state. But I always have supported women's right to choose.
(END VIDEO CLIP)
CURNOW (voice over): Men and women across the political spectrum urging the Hollywood power brokers to make a statement without hurting their jobs.
(END VIDEOTAPE)
[15:25:10] QUEST: Robyn Curnow reporting from Atlanta. A quick look at the markets before we take a halfway break. You'll want to see exactly
where we are in the record. Yes, still at records -- records for the Dow. The S&P slightly more questionable. We are -- we were over 3,000 but
bouncing up and down between that at the moment for the broader market.
After the break drama on the high seas. The U.K. says an Iranian attempt to impede a British oil tanker is reported by the Royal Navy.
(COMMERCIAL BREAK)
QUEST: Hello, I am Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. Military forces are upholding international law after an
Iranian boat attempted to impede a British tanker in the Persian Gulf. Sam Kiley is in Abu Dhabi to tell us about that.
And the founder and driving force of Norwegian Shuttle steps down. He will leave the legacy of a long haul, low cost carrier and a very strong one at
that, but we we'll sort through the financials. As we continue, this is CNN and on this network, the facts always come first.
A tense standoff in the Persian Gulf. The United Kingdom says its Navy intervened when Iranian vessels tried to force a British oil tanker to
change course into Iranian waters. This comes a week after the British seized an Iranian oil tanker off Gibraltar. We will have a live report in
just a moment after these news headlines.
U.S. Federal agents are getting ready to start rounding up undocumented immigrants across the country. A U.S. official says the raids will start
on Sunday and they'll target to thousands of people who are already under deportation orders.
He has been lobbying to include that in the U.S. Census and he is expected to table that effort and order the government to get citizen data through
other means.
[15:30:10]
In Greece, police have located the body of the missing American scientist Suzanne Eaton, calling it a homicide. Two residents found her body deep in
this tunnel which was once used as a military bunker. A molecular biologist who had been attending a conference in Crete, she disappeared
whiles jogging.
And a freak storm in northern Greece has killed six tourists and injured dozens of people. The storm which only lasted 15 minutes included almost
constant lightning and violent winds and rain. Such storms in the Mediterranean are rare and occur when sea surface temperatures are warm.
The British government says it's concerned by Iran's attempt to stop a BP oil tanker from passing through the Straits of Hormuz. Now, British
Heritage -- so, let's remind ourselves what was happening. British Heritage was sailing out of the Persian Gulf into the Straits of Hormuz.
Coming -- hang on, kind of sorts of a nice bit of color here, try another color, given that -- well, you get the idea. It was sailing this way out
and Britain says three armed Iranian boats tried to block its passage and tried -- here we go, tried to block its passage and in doing so, now, they
were only turned away when a Royal Naval frigate warned them off.
At that particular point, the Iranians then withdrew. The State Department has condemned Iran's -- what it describes as unlawful action. But if you
look at this particular area, you'll see just how close and how tight and how important it is. Bearing in mind, the amount of traffic that comes
through this choke point and the ability of any of the countries around to actually influence what is going on.
Sam Kiley is in Abu Dhabi and is very familiar with the Straits of Hormuz and that choke point that we're talking about. But Sam, as I look at this,
now, how risky was it for the HMS Montrose to try and protect the heritage whiles the Iranians were jockeying?
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, given that the Montrose has and did brand this as 30 millimeter automatic cannon, a
numerous 7.62 chain-fed machine guns against a 3 fast moving but armed Iranian gun boats, Richard, not much of a match and the Iranians backed
off.
But that would have been the moment had they clashed there. And there would have been only one victor, but there would have been no winner in
this. It would have escalated in all probability to something much more catastrophic. For that reason, the Minister of Defense have been trying to
play down this incident when it first came out, actually through the Pentagon and Barbara Starr's exclusive report last night that this clash
had occurred a long time before the Ministry of Defense would really give any detail on it.
And when they did, they said that the Iranians had indeed tried to effectively herd this BP tanker into their own territory and this making
good on pledges by President Rouhani, not very many hours earlier on, who said that --
QUEST: Right --
KILEY: Iran would extract retribution for the seizing of that ship at Gibraltar.
QUEST: But as I look at this map, what becomes clear is the ability for this to re-occur. If the Iranians have got the bit between the teeth in
this way, largely on the back of the taking of the -- of the Gibraltar vessel, then their ability to cause mischief around this area is pretty
much unlimited.
KILEY: It's pretty unlimited. There's only 31 kilometers between what is the tip of that peninsula which is a money territory and Iran. It's a very
narrow choke point, indeed, the amount of international waters, of course, even less. So, if you don't want to go through Iranian waters, the
congestion is very serious.
Now, insurance rates have gone up 10 fold, just to go through that area is an indication of the potential for Iran, as you say, to disrupt and cause a
degree of economic dismay. And that's part of the pressure that Tehran is trying to put on the international community, but especially on the United
States to return to negotiations.
[15:35:00] QUEST: Sam, thank you, good to have your interpretation on that. Sam Kiley joining me. Jakob Larsen is the head of Maritime Security
for BIMCO; the world's largest international shipping association. He joins me now from Copenhagen via Skype. When you look at this situation,
and you think about what's happened in the last 24 hours, how concerned are you that a BP; a major tanker was -- there was an attempt to interfere with
it, which one of the world's leading navies had to prevent?
JAKOB LARSEN, HEAD OF MARITIME SECURITY, BIMCO: Obviously, we are concerned and we see this as an escalation in an already very tense
situation. So, I think it was very good that the Royal Navy were at the scene and were able to prevent the situation escalating any further. And I
think it actually demonstrates that armed escort vessels or convoys can actually make a difference, a positive difference to Maritime security
levels in the region.
QUEST: But that's a fascinating concept in the sense -- I mean, there's a certain traditional aspect to it, an armed convoy, and if you think, of
course, of the Saudi ships and those that were mined and those that have been damaged. But how do you really want armed escorts going from the Gulf
of Oman through the Straits and into the Persian Gulf? What happens when you have multiple armed escorts?
LARSEN: In the event that there are multiple war ships present in the Straits and we see this already. I mean, obviously, those that are working
together, they will need to coordinate closely to avoid misunderstandings, and they will also need some pretty good strong doctrine where they are
very clear on what their intentions --
QUEST: Yes --
LARSEN: Are to avoid unnecessary escalation of the -- of the --
QUEST: Right --
LARSEN: Situations with for example Iranian Revolutionary Guard or Iranian Navy.
QUEST: Is --
LARSEN: But that said, I think it's something that has been done before, and I'm quite sure that capable Navies are able to manage themselves in a
sensible fashion here.
QUEST: If we look at what happened yesterday, is this, in your opinion, is this an accident waiting to happen?
LARSEN: I think this was an accident waiting to happen. After the Iranian tanker was seized in Gibraltar, the Iranian authorities have clearly stated
that they want to pay back in a similar fashion. So that was expected. On the 13th of June, we saw two vessels attack them in the Gulf of Oman, and
since then, we haven't seen any attacks in shipping in the Gulf --
QUEST: Good --
LARSEN: But I think it's the fear across the whole industry that it might just happen again, especially if the U.S. is keeping up the pressure on
Iran.
QUEST: Good to see you, sir, thank you, thank you for joining us tonight, much appreciate it. Oil prices are shedding some of the gains that they
made on Wednesday. Several factors, and it depends on which side of the Atlantic we're talking about, the upside and the downside. For instance,
OPEC is forecasting a surplus next year, less demand for oil even as OPEC members are keeping a lid on production.
And I'll counter that with the tensions in the Straits of Hormuz which are keeping prices from falling too much. So, you have within those, you've
got Brent particularly being affected. And then you've got WTI, West Texas, it's dropping less because of a tropical storm Barry which you can
see there, bearing down on the southern U.S., and that's putting a lot of oil rigs, not as many as first thought, but there are still sizable number
of rigs in the danger zone in what could become a category one hurricane.
As you and I continue our evening chat, the chief executive of Norwegian is stepping down after two decades. He was a former fighter pilot, he took a
brand from a local operator, made it into a low-cost carrier, and then a global giant as the first true global low-cost long haul. We'll talk about
that after the break.
[15:40:00] (COMMERCIAL BREAK)
QUEST: Some news to bring you. Twenty five people have sustained minor injuries as a result of turbulence. They're on an Air Canada flight from
Vancouver to Sydney. The plane was over the Pacific Ocean about 600 miles off Hawaii when it encountered violent turbulence. According to the
airline, the flight diverted to Hawaii where it landed in Honolulu less than three hours ago.
Stephanie Elam is in Los Angeles. And this was -- this was, I mean, the plane was in the cruise and then everything went wrong.
STEPHANIE ELAM, CNN CORRESPONDENT: Very quickly too, Richard. And just to update that number, the airline say it's 35 passengers --
QUEST: Right --
ELAM: That may have been minorly hurt during this. Now, they're saying this -- the airline calling it "unforecasted and sudden turbulence". They
were 600 miles southwest of Hawaii when this happened, and they decided to turn around because of the injuries, they could tell that people were hurt.
In fact, take a listen to what some of the passengers said happened on the flight.
(BEGIN VIDEO CLIP)
SHARON THORNTON, PASSENGER ON DIVERTED CANADIAN FLIGHT: We were all sort of dozing, and the cabin was pretty dark, and it just seemed that the plane
just sank and then flew up. A lady in front of us, I don't think she had her seat belt on, she hit the ceiling.
LAURIE TYLER, PASSENGER ON DIVERTED CANADIAN FLIGHT: It went bang and the people just shot up and then down again, and then it was over.
MICHAEL BAILEY, PASSENGER ON DIVERTED CANADIAN FLIGHT: A lot of people hit the ceiling, and a lot of screaming. Sitting in front of me, they hit the
place together, hit and actually snapped and broke it, and the oxygen masks came down, and you had a lot of panic, but we're sort of straight away -- a
lot of people were injured, yes.
(END VIDEO CLIP)
ELAM: And our affiliate "KHNL" in Honolulu talking to those passengers, saying that nine people have gone to the hospital, they may have some head
or neck injuries. Some of them, they're saying we're superficial like scratches and the like. But they're saying some of the flight attendants
may have been hurt as well when one of those rolling carts may have toppled over onto one of the flight attendants.
It's worth noting that this happened about four hours into the flight. The plane was dark, service was done for the period, and most people were
snoozing at the time when this happened. They're also saying that a lot of the injuries seem to have been sustained by people who were not wearing
their seat belts.
We know that two pregnant women were on board. One was wearing her seat belt and that gave her some pain after the turbulence, the stress of the
seat belt there. The other one was not wearing her seat belt. But the passengers telling our affiliate that the flight crew was very reassuring,
and that after this happened, which was just mere seconds, five minutes later, they said the captain came on the PA system to tell them that the
plane was fine, but that they were going to turn around and return to Honolulu to make sure that the passengers were OK.
Ambulances were there to meet them. At this point now, those passengers, Richard, are in line at Air Canada figuring out if they're going to re-
route to continue on to Sydney still today or whether or not they're going to have this unexpected stay in Honolulu and travel out tomorrow. But
scary for those people who were definitely asleep, and really important to point out that keeping that seat belt on while you're flying is --
QUEST: No --
ELAM: Good advice.
[15:45:00] QUEST: No one believes the importance of it until it happens. Stephanie Elam, thank you. Let's stay with aviation. The founder and
chief executive of Norwegian Air is stepping down after 17 years. Bjorn Kjos says he will stay on as an adviser to the chairman. The former
fighter pilot changed the airline business.
He took his low cost airline and he went long haul low-cost across Europe and then to the U.S. and Asia and Latin America. It's led to soaring
costs, high debts and the airlines struggle to control. Now, in 2013, Norwegian launched its first low-cost long haul flight.
By last year, the financial picture had worsened to such an extent that the airline needed a partner. It received takeover offers for example from IAG
which it rebuffed and indeed Lufthansa also. In late 2018, Norwegian announced a program to save $230 million a year, it cut routes, it closed
some bases outside Norway.
And this January, IAG said it had sold its stake that it was taking in hopes of forcing Norwegian into some form of negotiations. Norwegian
announced it was asking shareholders to stump up another $350 million. I spoke to Bjorn Kjos in 2018 and asked him about the future for Norwegian in
a crowded market.
(BEGIN VIDEO CLIP)
BJORN KJOS, FOUNDER, NORWEGIAN AIR SHUTTLE: All this have competitors. It's just about who really you have. We got up to scale and certainly
served so many of the cities in U.S. and the other huge networks in Europe. So, we are at the level now, we should definitely release our harvesting
now.
QUEST: And what will it take though to become profitable?
KJOS: Well, we run top the long haul this year, tremendously. No, we are all on the peak now, we can -- no, we can start harvesting. So we should -
- our future as I see it will be bright.
(END VIDEO CLIP)
QUEST: Simon Calder is with me, travel editor at "The Independent". We have to -- we have to divorce here, don't we? The fact, the admiration that
people have, that we all have beyond for what he's built with Norwegian Air shuttle and now the long haul with the reality that he's finding it very
difficult to get the long haul low-cost profitable.
SIMON CALDER, TRAVEL EDITOR, THE INDEPENDENT: All right, he certainly is, and -- no, I mean, they've done tremendously well. They are the biggest
non-U.S. carrier to the New York market. Bigger than Lufthansa, bigger than Air Canada, bigger than British Airways, which is quite an achievement
except that in the airline business, as you know and Bjorn Kjos knows, you don't get any marks for scale if you're losing money and they have been
losing money prodigiously.
And it's simply the kind of expansion that we have seen --
QUEST: Right --
CALDER: So many times that has cost airlines dearly.
QUEST: But the airlines itself, I mean, the European sector, the low-cost sector is profitable and is well regarded. I mean, if they got into really
serious trouble, which they have been to some extent, there are plenty of people who take them over.
CALDER: Well, are there? I mean, they got the absolutely golden opportunity last year when IAG; the parent company of British Airways and
Iberia of Spain effectively said here you are. Here's -- oh, I think at the time, $1.3 billion. I don't think you'd find anybody who would be
paying that much money for Norwegian now.
They've certainly done well in the sense that they have rattled the long haul airlines. They forced them into making their own moves to cut costs
long haul, but we still have the problem --
QUEST: Right --
CALDER: That they're trying out routes, they're not working, they are retrenching, and now, they're actually -- I think we probably see in this
current calendar year, we'll probably see them actually reduce the number - -
QUEST: Right --
CALDER: Of aircraft and number of routes, but of course, lots of that still with the Boeing 737 Max.
QUEST: Quick question. That plane going -- the Air Canada from Vancouver to -- I mean, it wasn't sustained turbulence --
CALDER: Oh, yes --
QUEST: It was just obviously one very nasty jolt.
CALDER: Oh, sure, but terribly upsetting experience for the passengers. And as we have all been saying, make sure you are strapped in. It's now a
big logistical headache, of course, for Air Canada who have passengers in Honolulu where they don't want to be.
They've got other passengers waiting in Sydney to go back to Vancouver. It's going to take a few days to sort this one out because their pilots
are, I hope, in Waikiki enjoying a cocktail.
(LAUGHTER)
QUEST: There's a -- there's a wistful -- sorry, when there's a wistful tone in your voice. It's good to see you, sir, thank you as always.
CALDER: Thank you.
QUEST: We're into the last few minutes of trade on Wall Street, and the Dow is set to close at a record. Thanks to dovish tones of the Fed Chair
Jerome Powell in a moment.
[15:50:00] (COMMERCIAL BREAK)
QUEST: Well, looking at the eye, we're at the best of the session. We're up 207, we're 212 a moment ago, last few moments of trade on Wall Street.
The Dow is on a track for a record close, the S&P is also heading for a record. The Nasdaq has pulled back slightly, you can see exactly why the
Dow is doing so well.
The two largest components, Boeing and United Health Group are amongst the leading of the day. Goldman, which is number five is at 2.7 percent. So,
a really strong -- banks across the Dow are up, in fact, the only weak points are some of the tech stocks further down.
It's all lifted by Jerome Powell's testimony, I talked to Peter Tuchman on the floor of the New York Stock Exchange on "EXPRESS", he told me, the
markets could be in trouble if they need another rate cuts in the near future.
(BEGIN VIDEO CLIP)
PETER TUCHMAN, QUATTRO M. SECURITIES: I think it's more of a risk of lowering rates into a strong market that in fact if things do slow down,
and we will need to once again need a stimulus and lower rates once again - -
QUEST: Oh --
TUCHMAN: That we won't have another bullet in your chamber, that's my fear. I don't think we're rising quickly. This market has been growing
beautifully from 26 out of 27 file(ph) right off of the Christmas eve lows that we saw, we're up 20 percent for the year, solid market.
(END VIDEO CLIP)
QUEST: Paul La Monica, guru is with us.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes sir --
QUEST: What do you make of it? I mean, we're at a record for no obvious reason --
LA MONICA: Well --
QUEST: Other than rate cut which may happen later -- which will happen later this month, that may or may not be necessary.
LA MONICA: Yes, that obviously is what we need to debate, but it is the reason why this market is grinding higher yet again because, say what you
want about the political pressure from President Trump, but it's the market pressure, the market, I think you could argue, has bullied the Fed into
this position where --
QUEST: I want to know why?
LA MONICA: They need to --
QUEST: Why, the market has -- how has the market bullied them?
LA MONICA: Well, you have the Fed's funds futures and things of that queue up, people going on TV networks like ours and competitors and talking about
how the Fed has to really take action to avoid a big drop-off in the stock market that could eventually lead to a slowdown in the economy.
And I think it just creates this sort of fear environment where if you're Jerome Powell, and if you don't do what the market wants, there's this
violent reaction that then starts to feed on itself.
[15:55:00] And I think --
QUEST: But --
LA MONICA: It's an unfortunate situation that the Fed has lost control so to speak, and is letting the market bully.
QUEST: But the Fed, I mean, what they're really doing when they cut in two weeks, three weeks is reversing that last rate rise which many said was the
last -- was the straw in the camel, and that's when the market went down very sharply --
LA MONICA: Right --
QUEST: Right, that's where we had all that volatility --
LA MONICA: Right --
QUEST: In December. It was a terrible holiday on Wall Street, and I think it is fair to wonder if Jerome Powell and the rest of the Fed, did they
make a mistake by going too far with that rate hike in December, and that by taking it back now, it's essentially their admission of guilt, their
admission of error.
That would be the all well and good, the problem though is that once you cut rates once, the market gets greedy. I can bet you President Trump will
get greedy, he'll like the way that the market has reacted and though want more. Give me more, give me more. They're like gritty kids in Willy
Wonka.
At some point, Powell has to say, enough is enough, no more candy, go brush your teeth.
QUEST: Eighty percent of our viewers say the rate rise is not justified. We will have our profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. David and Goliath, the Norwegian struggle to be one of the world's great airlines, and Bjorn Kjos who is
without doubt one of the great pioneers in aviation along with the likes of Sir Freddie Laker and yes, Richard Branson.
He took this airline, Norwegian air shuttle, he grew it into a low-cost carrier across Europe, free Wi-Fi, great service, friendly staff, a lot,
and then decided low cost long haul was the way forward in the future. Now, we can argue whether he's gone too far, too fast and yes, he has.
He's grown the airline too fast, he's got his 787s, he's now got 737 Maxs, but you cannot take away the brilliance and genius and pioneering spirit of
Bjorn. It is upon people like him that aviation has been born and grows and thrives. And the fact he's now retiring for the time being is to be --
is to be celebrated as his career.
And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York.
(BELL RINGING)
Whatever you're up to in the hours ahead, I hope it is profitable. Records! The Dow is at a record!
END
