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Quest Means Business
President Trump Takes A Victory Lap After The Strongest U.S. Job Report In Almost A Year; Uber's Safety Report Revealed Thousands Of Sexual Assault Instance Last Year In The U.S.; Jurors Hear Closing Arguments In The Elon Musk Defamation Case; Nancy Pelosi: Democrats Proceeding with Articles of Impeachment; Ukrainian Lawmaker Says He Met with Giuliani in Kiev; Italian Sports Newspaper Defends Black Friday Front Page. Aired 3-4p ET
Aired December 06, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:15]
RICHARD QUEST, CNN INTERNATIONAL HOST: Final hour of trading on Wall Street. You could see we are up and have been up throughout the whole
session. Good strong gains, over 300 points, 1.2 percent over 28,000. I'm going through and stating the obvious, because those are the markets. And
these are the reasons why.
It's the economy. President Trump takes a victory lap after the strongest U.S. job report in almost a year.
Uber's safety report lays bare thousands of cases of assault on customers and drivers.
And trial of Elon Musk. Tesla's CEO invokes the former British PM, Theresa May. He is trying to defend his Twitter attack.
We are live from London on this Friday, December the 6th. I'm Richard Quest, and yes, I mean business.
A good evening to you. President Trump is taking a victory lap and stocks are surging as you saw that at the beginning, and it's all because of the
blockbuster jobs report.
The American economy added 266,000 jobs in November. The previous two months were also revised higher as well. Unemployment fell back to its
500-year low, and perhaps most interestingly of all, wage growth continue to be above three percent for the year.
It's all helping tamp down fears of a recession. The Dow, as you can see, is up strongly, up 333 points, a gain of 1.2 percent. And Paul La Monica,
Guru La Monica has been digging into the jobs report. It's the -- I mean, first blush and beyond. There's -- it's good news all around.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, I would agree with you, Richard. I don't really think that there is much in the report to be
critical about. Those revisions, you know, you had the last two months higher job gains than previously reported. That is great news.
And the thing that really struck me here is that we all knew going into this report today that we'd have a pretty good number because those GM
striking workers returned to their jobs, and that was going to give the market a boost.
But even when you factor those workers at about 50,000 or so, you're still left with what? 215,000 or so new jobs added, which is better than what
the forecast were. So this is a very strong number and you said, the President is doing a victory lap.
You know, we can all debate whether or not politicians deserve credit for the economy or not, but to play it fair, this is a good jobs report under
his watch.
QUEST: The market is up. I suspect because it's the prospect of no recession, or at least recession is receding. But it also means that the
Fed certainly won't cut interest rates any further, but may just hold this current level through 2020.
LA MONICA: Yes, I think that right now, the market is comfortable with the Fed being on hold, especially because you have the presidential election
next year looming large and we know that Powell, if he had his way would probably not like to be part of the presidential debate and the
conversation among President Trump and whoever the Democratic nominee is going to be.
So if he can sit tight because the economy is still chugging along, then I think the market will be happy with that. I mean, you know, three rate
cuts have done their job so far, arguably,
QUEST: Okay. However, the market is up. But I'm trying to sort of fathom this because the market was down earlier in the week, so to some extent,
it's a bounce back.
The good job numbers show that the economy is growing and growing strongly, but the market usually is looking for either cuts and certainly doesn't
respond well to the prospect of higher rates.
LA MONICA: Yes, I think, though, that the market probably is not expecting higher rates anytime soon, because wage growth, you know, it's creeped up a
little higher at 3.1 percent, so that is good news for American workers, because it's higher than the rate of inflation.
But you're still not seeing wage pressures creating major excesses in the financial markets. That's what the Fed usually looks at and worries about.
So unless you start to see inflation really creep higher and you have assets that start to get ridiculously overpriced, the Fed can sit tight and
I think that's what everyone including probably the President, if you asked him honestly would want.
[15:05:10]
QUEST: Now, we need to put this in perspective. Paul La Monica, thank you for joining us there. The President says the jobs report is great when he
described it as an early Christmas present, a Christmas gift for the President and arguably, to the country, and it's not the only economic gift
on his tree.
Here we have the tree up and running. A stock market that is booming even though the pace of trade negotiations has faulted. The major indices are
all within one percent of their all-time highs.
And an economy that is growing faster than two percent a year. It's not the three or four percent the President had promised at the beginning, but
it's better than the other leaders are getting in their stocking at the moment. Think about Europe where you're very lucky if you're talking about
one, and in some of the cases like Germany verging recession.
So jobs, stocks, GDP. Diane Swonk is with me from Chicago, the Chief Economist at Grant Thornton. It's very difficult to see, you know, what is
-- what's going wrong in a sense, the U.S. performing spectacularly economically at the moment?
DIANE SWONK, CHIEF ECONOMIST, GRANT THORNTON: Well, certainly, this jobs report was great news and we really welcome it even with the GM strike
bounce back as we have said, the underlying jobs growth was over 200,000. I think that's very important.
Another caveat, though, is that the manufacturing weakness, if you want to adjust it for the GM strike - that was still there. It was basically flat
manufacturing activity from a year ago and overtime hours actually fell even though GM workers came back.
But what's good about it is that it didn't spread into the service sector where we're seeing all these job gains. We saw leisure and hospitality
picked up, healthcare picked up, professional services stayed strong. Those are all really important because it means we're not seeing the
contagion many people have feared from the manufacturing sector to the broader economy.
QUEST: But people like you continually worry about the level of debt at all levels -- consumer debt, corporate debt, leverage -- this is going to
be something that will -- it may not affect today or tomorrow, but it's weighing on views and sentiment.
SWONK: Well, what we are seeing, sentiment is higher in the month. But we are seeing that the U.S. economy for as good as it's been in the longest
expansion forever, where it's not had a momentum, it has had in sustainability and that sustainability is finally producing these lower
unemployment rates.
As you mentioned, three percent wage gains, that's great. But that's still a small fraction of what we're expecting, if we would have ever gotten down
to this kind of unemployment rate in the 1990s. We had much stronger wage gains in 1990s and higher confidence in the 1990s boom, despite the fact
that the economy had higher unemployment rates. So I think that's important as well.
We're also lacking -- we're having all the wage gains on entry level jobs. That's terrific. But we're not seeing that trickle up into supervisor jobs
that we'd like to see as well.
QUEST: Are you convinced that we are in a new normal? Or are we waiting for the old rules to come back and bite us?
SWONK: I think there are some old rules that will come back and bite us. You mentioned debt. Corporate debt is at extremely high levels and debt
defaults have gone up.
There's not a lot of room to redo it over again, even though the Fed has cut by three quarters of a percent. There's not a lot of lower interest
rates that companies that can't sustain that can refinance on. And so, bankruptcies, we think are going to go up over the next year and during the
next recession, hopefully not soon, but during the next recession that could exacerbate the next recession because we have a lot of what's -- you
sort of almost term zombie companies out there. Companies that were able to sustain themselves with these ultra-low rates without a lot of revenue
growth and their margins have been compressed.
QUEST: And those zombie companies, is there evidence that they are being weeded out? Or is the life support --
SWONK: No.
QUEST: Well, thank you, you've just answered the question. And then then what is the worry? What do you do with those zombie companies? Because
eventually rates are going up. Now, it won't be in 2020 and it won't be significantly, maybe until 2021 or 2022. But does not matter?
SWONK: It does actually, and it doesn't even matter if rates don't go up. If rates don't go down a lot further, and frankly, there's only a limit
before zero, right? They are not going to be able to restructure their debt, and already we are starting to see. I wasn't really honest. We are
starting to see defaults pick up in the junk bond market and the junk bond market is not quite as giving as it once was.
Those are going to sort of start to tick away. I'd rather see those companies turn over now. They're dragging down productivity growth in the
U.S. as well. I'd rather see them sort of get restructure now when the economy's still strong rather than have it all happen during a recession
because that would make the next recession deeper.
QUEST: Good to see you. Have a lovely weekend. Thank you for joining us.
[15:10:00]
QUEST: Now, the solid growth and low unemployment and stock market records, well, it's quite clear that the U.S. is by far the best at the
moment.
The lone -- in fact, it is the lone bright spot in the global economy. Just look at the rest of the world and those key economies, and you'll see
exactly where we're going next and why we're putting so much emphasis now on the U.S.
We learned today that German industrial activity plunged again due to weak demand. Now, we know that the country have narrowly avoided recession in
the last quarter, but frankly, there's no difference between narrowly avoiding and actually hitting a recession. The way at the moment, it's so
low.
France, we are well aware has been gripped by national strikes that's dragging down productivity and those strikes don't look like they're going
away anytime soon.
And the United Kingdom, Britain is enjoying its third general election in four years, bringing massive uncertainty for businesses over Brexit and
Brexit is still unresolved.
Japan also joins the troika if you like. Japan is now resorting to a massive new stimulus program. Shinzo Abe is hoping to avoid a recession
and he is doing it with $120 billion shot in the arm keeping recessions at bay.
But remember, Japan still had deflation in the past. It never really recovered from that. The sluggish growth has been there forever.
Paul Gruenwald is the Chief Economist at S&P Global Ratings. The S&P Macro Outlook says U.S.-China trade war will continue to be a downside
risk. He joins me now.
The downside risk from the U.S.-China talks seems to be hitting those participants or non-participants i.e., Germany, the U.K., Japan, everybody
else harder than the United States, which is the protagonist.
PAUL GRUENWALD, CHIEF ECONOMIST, S&P GLOBAL RATINGS: Yes. Hi, Richard, you're right, in a sense, because we've had some collateral damage from the
trade war, the large, domestically driven economy such as the U.S., I would put China in that camp as well. They've come through with only moderate
pain, but the countries that are more open to trade and manufacturing such as Germany, Korea, maybe Japan in that list as well, you're right that
they've been hit harder.
So as you said earlier, the U.S. is looking relatively well amongst the advanced economies for 2020.
QUEST: So as we look at 2020, where does it go in the sense that, you know, if the U.S. continue to chug at a respectable, if not exciting pace,
whilst there is no evidence that those other countries pick up speed? Far from it, they may actually worsen.
GRUENWALD: Right. Well, as you mentioned earlier, we're very long into this expansion. It's been 10 years since the global economic crisis. So
the criterion right now should be to prolong the expansion as long as possible. So we want countries close to their speed limit. The speed
limit for the U.S., economists would call that the potential growth rate is a bit below two. That number is about one and a quarter in Europe.
So if we're at two percent growth and three and a half percent unemployment 10 years into an expansion, that's a good spot. I think Chairman Powell
had the right language there. So the objective next year and maybe beyond to 2021 is to try to maintain that.
We're not looking for a V-shaped sort of trajectory over the next couple of years. We want slow and steady and two is a good number for the U.S.
QUEST: All right. What about emerging markets? I'm starting to read a lot -- I mean, they've been clobbered badly so far both on a dollar trade
basis, and indeed on equities and because of the China deal, but I'm starting -- or lack of a deal. But I'm starting to hear people say that
the main market activity in 2020 could be EM.
GRUENWALD: Well, if the U.S. is slow and steady and the Fed is on hold which is our forecast, that's not bad for EM and that's not bad for risk
appetite. There are economies as you mentioned that have had collateral damage from U.S.-China, but there's other countries such as Vietnam,
Malaysia, and Mexico that have had some upside.
The real worry about emerging markets is usually sudden stops of capital flows and volatile flows, so if we're in a calm Fed environment and a calm
U.S. growth environment with a low vol and a low VIX, that's probably a decent year for EM as well.
QUEST: If I had to ask you what your gut is telling you, into 2020 because we're in December, I mean, do we sleep easier on the economic front? Do we
sleep easier next year?
GRUENWALD: I would say we still have the big issue unresolved, which is U.S.-China tensions. We've been arguing for a while that this is not about
trade, it's about technology, intellectual property, China's place in the global order. The U.S. and China don't appear to be making a lot of
progress on that.
So although our baseline output or outlook, which we've been discussing is good, there's still that big cloud hanging over the outlook. That's
probably enough to keep some of us, at least partially awake at night.
[15:15:02]
QUEST: Paul, I'll see when I'm back in New York and we can discuss our remedies for getting a good night's sleep in difficult times. Good to see
you, sir. Thank you very much.
GRUENWALD: My pleasure.
QUEST: Now, Uber's safety report certainly raise eyebrows. This revealed thousands of sexual assault instance last year in the U.S. The company
says it's not as bad as it looks.
Jurors are hearing closing arguments in the Elon Musk defamation case. In a moment.
(COMMERCIAL BREAK)
QUEST: Uber has released a major new report on safety. The ride hailing app received nearly 6,000 reports of sexual assault from both passengers
and drivers in the U.S. during 2017 and 2018. Of those, more than 400 involved allegations of rape.
In the report, the company repeatedly put the numbers into context or attempts to saying out of 1.3 billion journeys, 99.999 percent of rides
occur without incident.
Drew Griffin joins me from Atlanta. Drew, I want to put this into -- to get this because the headline number is appalling. And obviously, any
incident is dreadful and appalling in its own right. But A, Uber has announced them and B, the context of the number of journeys.
DREW GRIFFIN, CNN SENIOR INVESTIGATIVE CORRESPONDENT: Well, it's true, the frequency is exactly as they stated. But as for being transparent, you
know, you have to add the numbers up yourself in this report, you have to do that, Richard by going to Page 59 and looking at some graphic and try to
cull these numbers.
So they're not transparently saying we've had 5,900 sexual assaults over the past two years, you have to do the math as a reporter. And I think
what is missing here is the subset of people who are actually at risk.
Of course, Uber does all these rides all across the world, which are safe day after day. But there's a certain subset that we've been reporting on
and these are women who find themselves alone in the backseat of an Uber after a night of drinking or coming home from a party, and they remain to
be the most vulnerable targets of people.
And while Uber is being transparent and has made steps to improve it, this still is a problem of not knowing who your driver is, riding with a
stranger and if you're a vulnerable person, you are opening yourself up for potential attack.
[15:20:11]
QUEST: Right. So what's the answer here? Because in that sense, because Uber would say, well, we've got all these different procedures in place. I
mean, certainly London is questioning the way they are investigating drivers and checking their credentials. But what would Uber -- what's the
answer here?
GRIFFIN: Well, I think there's two answers. One, Uber is trying to do more, they're trying to improve their background checks. It's easy to
defeat the app in terms of getting on and claiming to be somebody who you're not. We've seen that in our reporting time and time again.
The City of London has suspended the license of Uber for this very thing. You really don't know who is driving. So I think if you want this service,
and it's convenient in your life, you the rider, it's incumbent upon you to know what you're getting into, and not getting into when you consider
yourself a potential target.
And I would just caution, late night, single female riders are the most vulnerable, Richard, it's just no doubt about it, and to use the app
wisely, and try to be with friends and just be aware that this may not be your safe ride home, it is just a ride home from a stranger.
QUEST: Very good point. I mean, and the relevance of that is that to some extent, we have been lulled into a sense of security and to be fair, you
know, the numbers are overwhelmingly safe. But we have been lulled into a sort of belief of security.
GRIFFIN: And Uber has been behind that, right? They've advertised themselves as you're safe ride home. They've put out television
commercials and other commercials showing women getting out of the bar and oh, getting into the Uber. You know, it's fun. It's great. It's super,
but there is awareness that comes with it.
QUEST: But hang on. But Drew, surely they are entitled to say a safe ride home when you're talking about a 99.999 percent, you know, a good safe rate
that they put out.
GRIFFIN: If you're willing to play those odds, which are very much in your favor, but are they willing to say that -- are they okay to say that,
Richard, when, as we've found out, they have got convicted murderers driving. They have got people pretending to be somebody else driving.
They don't know who is driving. They've got people who are unlicensed driving.
So, you know, I think everybody has a role to play in this. Certainly, Uber has got the most at stake, but passengers really just need to be aware
that this is not the end all safe ride home.
QUEST: Drew Griffin, as always, thank you, sir, for joining us from Atlanta. Appreciate it, as always. Thank you, sir.
Now, jurors are hearing closing arguments in a lawsuit brought against Elon Musk. It's a British diver who is suing the billionaire for defamation.
That's after Musk called him "pedo guy" on Twitter. You remember that event?
Musk's lawyers say that this photograph of the diver, Vernon Unsworth with Theresa May after the event shows he was not harmed. He was not defamed.
His reputation was not destroyed by the tweet. Unsworth of course helped rescue the boy soccer team trapped in Thailand last year.
Clare Sebastian is with me from New York. Where are we in the final trial now?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: All right. So Richard, so we've had the closing argument from the attorney for Vernon Unsworth. And
the same from the Musk side is going on now. The evidence has all been heard over the course of three days, and after these closing arguments,
there will be jury instructions and then they will make their deliberations.
So this is now the fourth day of this trial, but clearly that picture of Unsworth with Theresa May shows the kinds of arguments that the Musk side
has been trying to make.
Essentially, Vernon Unsworth has to prove damages to be able to win this case and they are saying that his reputation wasn't harmed. He was given
awards. He was given an MBE. He was given a hero's welcome by the then Prime Minister Theresa May back in the U.K. So that would show that far
from being defamed and harmed by this, he has actually benefited from his work in, you know, his involvement in the Thai cave rescue.
His testimony, though, was very emotional, very tearful. He said that he was ashamed, humiliated. He called this a life sentence without parole
because this is now all that anyone has associated with him.
His lawyer in his closing argument just today called it a nuclear bomb, and he has suggested to the jury, Richard, that they go for $190 million in
damages. That's $5 million in damages, $35 million in actual damages and another $150 million in punitive damages. That's a far cry from the
$75,000.00 that was the original number put on this when Vernon Unsworth sued.
[15:25:02]
QUEST: And of course we have no idea whether or not what efforts have been made to try and settle this or indeed if Elon Musk has tried to. When does
this go to the jury?
SEBASTIAN: It should be today, Richard. The judge, in his conclusions yesterday said he hoped to get it to them before lunch. It is in Los
Angeles, so that they're around that time now. And they will have to deliberate on whether this is a -- the "pedo guy" statement was a false
statement. Elon Musk says that it was an insult rather than a statement of fact, that doesn't actually mean pedophile. They have to deliberate on
whether it's false and they had to deliberate on whether, as we've been talking about, on whether this actually harmed Vernon Unsworth. So that is
the big question for them.
QUEST: And a very high bar there is in defamation cases. Clare, thank you. Have a good weekend. Thank you.
Extraordinary growth in the U.S. labor market is forcing a rewrite of the economics textbooks.
The President of a manpower group says this is who would have thought moment and she is with me after the break. QUEST MEANS BUSINESS, Friday
night. Back in a moment.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. We'll investigate how the booming U.S. labor market is
defying traditional economic thinking.
The climate activist, Greta Thunberg has delivered her message to industry leaders at COP 25 in Madrid.
As you and I continue, this is CNN and on this network, the facts always come first.
Officials say the gunman who killed at least three people at the Pensacola Naval Air Station in Florida was in the Saudi Air Force. He was training
at the U.S. facility. The gunman was killed in an exchange of fire with U.S. law enforcement. The F.B.I. has now taken over the investigation.
A few moments ago, President Trump said he had spoken by phone with the Saudi King who offered condolences.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The Saudi people are greatly angered by the barbaric actions of the shooter and that this person in no
way shape or form represents the feelings of the Saudi people who love the American people so much.
(END VIDEO CLIP)
[15:30:00]
QUEST: Business in a moment. We'll hear an exclusive interview with the new managing director of the IMF. And also the pound is soaring one week
from the U.K. election. An election where Brexit might be more certain afterwards, but we need to examine why selling is so strong.
And we'll do so after we have the news because this is CNN, and on this network, the facts always come first. U.S. House Speaker Nancy Pelosi says
Democrats are moving forward with articles of impeachment against President Trump, saying the president leaves them no choice. For his part, Donald
Trump is telling the house to impeach him fast so the process can move to the Senate where he says he'll get a fair trial.
President Trump's personal lawyer Rudy Giuliani may still be investigating conspiracy theories in Ukraine. In a Facebook post accompanied by this
photo, a controversial Ukrainian lawmaker says he met with Giuliani in Kiev to discuss what he described as Ukraine's inefficient use of American tax
dollars. In a text exchange with CNN's Dana Bash, Giuliani wouldn't confirm whether or not he is in Ukraine.
Italian newspaper is defending its front-page amid widespread criticism. It's a Rome-based sports newspaper and says its headline Black Friday has
been twisted into poison. Now, it refers to two star footballers in a preview of tomorrow's match between the homeland AC Milan. Both clubs say
they banned the newspaper from training facilities for the rest of the year.
The new managing director of the IMF has warned that U.S.-China trade tensions will cost the global economy $700 billion by 2020. Kristalina
Georgieva spoke exclusively to CNN's Eleni Giokos in Senegal. I beg your pardon, the satellite is working. Eleni, Kristalina has -- is new in the
job, very experienced from the --
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT: Yes --
QUEST: World Bank -- very experienced in the World Bank. But now she's got to actually get structural changes. So what does she want?
GIOKOS: Yes, so firstly, it's very interesting. This was a first big trip as the MD of the IMF. And she came to Africa and I'm just off the plane
from Dakar, Senegal. And it's interesting that she chose to come to the continent. And they spoke about two major things, so firstly, its
sustainable debts and sustainable developments.
These two topics, Richard, are not only very important for Africa, but the rest of the world. And we know that the world is more leverage now than
it's ever been, and the question is, can economies handle these levels of debt and still ensure that you've got economic growth. And in the back-
drop, of course, you've got the global trade war that's playing out.
We've heard these numbers before, $700 billion wiping off a significant amount of global growth. But the question is, is it going to be a new
normal? The fact that we're going to see a prolonged trade war, trade tensions between China and the U.S. And she says, well, we better gear up
for it. Take a listen.
(BEGIN VIDEO CLIP)
KRISTALINA GEORGIEVA, MANAGING DIRECTOR, IMF: First, we have been very clear what is the cost of trade war. By next year, we would lose as a
planet$700 billion. This is 0.8 percent of the global GDP. Everybody loses. Second, we have been also very clear what can be done so this
slowdown in a synchronized manner we have seen can be stopped and reversed.
And we say to countries three things, one, if you have monetary space, if you cut -- if you can cut the interest rates, please do it. Very few
countries now have that much space. Two, if you have fiscal space, please use it. Some countries do have fiscal space, and we're seeing even more
reluctant players like Germany --
GIOKOS: Yes --
GEORGIEVA: The Netherlands, South Korea, they're coming up with stimulus packages. Three, most important, everybody can do it, structural reforms,
labor market reforms, eliminate red tapes or private sector can boom, jobs can be created. So one, two, three, and I think we see governments around
the world actually listening.
GIOKOS: But a lot of countries don't have fiscal room to take up more tools out of the monetary policy box, that's the big problem. And the
world is very leveraged right now.
[15:35:00]
If you see a further slowdown or this trade war continuing, is the IMF ready to step in? Do you guys have enough resources to do that?
GEORGIEVA: That was the very good news that we got during our annual meetings in October, my inaugural. Our shareholders committed to provide
the IMF with fiscal financial capacity of $1 trillion. So, we do have sufficient firing power to step up. But we tell countries, do the right
thing so you don't need to come and knock on our door for money.
GIOKOS: Right now, at this moment, how are you feeling about all the uncertainties, you feel optimistic that we're going to work as a global
team because that's the message that you've giving everyone.
GEORGIEVA: What we see is that we need each other more, but it is harder and harder to come together. And institutions like the IMF have a duty to
bring our 189 membership and seek that consensus to take action together when this is necessary. I do believe that the world is changing much more
rapidly today than 20, 30 years ago. This is the new normal.
Uncertainty is the new normal. And therefore, we have to help our membership to be more agile, more adaptable to this fast-changing world.
Enjoy the pace of change today, it will never be that slow in the future.
(END VIDEO CLIP)
GIOKOS: And she makes it sound easy, right? Three things that we have to do to ensure that we don't continue on a global slowdown when we get rid
of the uncertainties, but it's easier said than done because there's politics involved. There's so many things that economies need to do. And
one thing we know for now is, there isn't a lot of political will and everyone is becoming a lot more protectionist.
So, Georgieva wants to create a global team, whether she's going to be able to achieve that through the IMF and its efforts is going to be an
interesting one to watch as she heads into 2020.
QUEST: Thank you. Eleni is in Johannesburg, thank you. To the markets, the Dow -- well, look at the Dow, it's down, but now it's back up -- but
now, it's down -- now, it's back up again. But we're only talking about 40 points, which does suggest that might eke out that gain by the closing
bell.
But it's really -- it was -- look, it's all about China and trade again where officials in China -- officials said trade negotiations are back on
track. They gave a boost. The U.S. Secretary -- Treasury Secretary confirmed that as well. Chad Bown is in Washington, a senior fellow at the
Peterson Institution Service economic adviser to President Obama.
The trade question -- the markets are still hanging on it. They haven't quite, you know, decided, well, to hell with it, we don't really matter.
Every time there's a movement that we're in the talks, we see it in the markets.
CHAD BOWN, SENIOR FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: So, that's right, so our next big deadline is December 15th --
QUEST: Right --
BOWN: Which is 10 days from now when the next slot of tariffs on $160 billion of U.S. imports from China are still scheduled to go on. So, you
know, we'll see if they get a deal, if President Trump gets a deal and announces at least a temporary pause on the tariff escalation. But for now
at least, you know, I think the markets are right to be a little bit concerned that those tariffs are still out there.
QUEST: So what do you make of this linkage that the president is trying to do between trade and those countries that don't meet their NATO
requirements? It's not flushed out, but there's a veiled -- well, wasn't a veiled suggestion, that if you don't meet 2 percent, then there'll be trade
action taken against you.
BOWN: So we've seen the president do this sort of thing before. President Trump likes to use tariffs as, you know, sort of the hammer with which to
address every international challenge that are seemingly out there. We saw this before this Summer, even after Mexico for example signed up to the new
NAFTA, the USMCA agreement and they were putting it through their Senate.
At the same time, President Trump out of nowhere said, well, you know, if you don't deal with my problems, my concerns on immigration and the
southern border of the United States, I'm going to hit you with tariffs. So, you know, he's sort of threatening to do the same sort of thing to NATO
allies here, and we'll have to wait and see. This is you know, kind of a common theme that comes out of President Trump.
[15:40:00]
QUEST: You were an economic adviser, you know how these thinking -- I agree, this particular White House is perhaps a little more unusual, the
most. But what will they -- what will they make of this spat with Canada? The Trudeau comments about advisors draws hitting the floor. The president
calling Trudeau two-faced.
Is it your thought that this somehow the U.S. President retaliates or is it just -- get forgotten?
BOWN: Look, this administration is different from any in modern memory. They -- you know, they choose to conduct diplomacy, if you want to call it
that differently than most traditional administrations would. And I think they've put trading partners and friends and the allies even in different
positions than they would otherwise have been.
And so, you see, you know, diplomatic gaffes being made on all sides. And you know, we're --
QUEST: Right --
BOWN: Just kind of in a new normal. What this ultimately leads to, who knows?
QUEST: Right. Finally on that new normal, interest rates. There seems to be a consensus that the ECB and the FOMC both on -- what -- different
levels, of course. But hold rates where they are for most of 2020. Do you subscribe to that?
BOWN: Well, I think it's going to be hard to tell. And obviously, it's going to depend on, you know, how the economy actually starts to perform as
we head into next year. And as you know, the IMF indeed indicated in your last segment, you know, what the implications of the trade war ultimately
are, and you know, what actions -- other actions on fiscal policy that some of these governments take. So, I think it's possible.
But I think a lot of it is still dependent on how the economy is ultimately going to, you know, start performing over the next -- over the next couple
of months.
QUEST: Thank you, sir, much appreciate it joining us tonight. Now --
BOWN: My pleasure --
QUEST: In a moment, a new merger could be on the horizon this holiday season. The owner of Gucci is reportedly looking to buy Moncler. It's
Italian company -- Anna Stewart, the sort of person who will know about this sort of luxury will be with us after the break.
(COMMERCIAL BREAK)
[15:45:00]
QUEST: A distinctive belt with the double -- Gucci's owners Kering could be joining in on the shopping spree, sweeping up the luxury market,
reportedly looking to add Moncler to its wardrobe. The Italian sportswear company is famous for making jackets like these, and during a long list of
big-name tie-ups in the fashion industry.
What have we had so far? Last week, Louis Vuitton, the owner of course, LVMH added Tiffany to its collection. That deal was worth $16.2 billion.
And there are rumors there could be more on the horizon. Burberry of course, its shares in Burberry's Ferragamo and Tod's have all risen on
speculation they could be next year's takeover targets.
Remember not forgetting of course, Burberry's had a very difficult time in recent years. Now, maybe turning itself around. Tod's independent and
wonders what's next, say with Ferragamo, perhaps that's why you're seeing these independents up more than say Burberry. Anna Stewart is with me to
talk about this. What is it about Moncler and its jackets that's got everybody excited at Gucci.
ANNA STEWART, CNN REPORTER: Well, this is definitely one of the most successful, soft luxury brands, even more so than Ferragamo, frankly, in
Italy right now. Two-thousand-and three was when Remo with only bosses, he took it public six years ago, since then, the share price has actually
quadrupled. So big success story, great brand, but not much value that you can add if you were to buy it because it's already very successful on its
own.
QUEST: So, it's successful on its own. What does it add to Gucci?
STEWART: Well, it adds to Kering of course, is to rely on Gucci. Gucci represents --
QUEST: Right --
STEWART: Sixty percent of its sales --
QUEST: So, we're putting it in terms of that. Gucci doesn't have this, there's a bit of division, those are for Kering, it is a -- it is a
suitable babble.
STEWART: It is, but you know what? Analysts today were saying to me, yes, it is a very attractive brand, it's doing very well. It doesn't add much
value, and you know what? It doesn't bring what Kering really needs here which is hard luxury tools, Richard, watches, that is what it needs. That
is what LVMH brought in Tiffany's. That's where the Swiss bought his -- that is the fastest-growing segment in luxury.
QUEST: OK, when we look at those three that we've seen Ferragamo --
STEWART: Or a flatter --
QUEST: All of it -- Burberry. Now, look, Burberry has had numerous difficulties in the last 10 years.
STEWART: It has. It's had problems with management, it's had problems with style. Some of these things do go out of fashion. Burberry is
looking pretty hot today, but I think there's an interest here in how long can stand alone brands last.
Yes, they have great years, they have fantastic seasons, but do they all need to be swallowed up by these big groups. It's all about Richemont,
LVMH and Kering.
QUEST: Good to see you, thank you. One week from now, the polls will be just about to close in the United Kingdom. Tonight, the "Financial Times"
says it can't endorse either of the two top parties.
(COMMERCIAL BREAK)
[15:50:00]
QUEST: This time next week, there will only be one hour left of voting in Britain's general election as voters go to the polls for a new parliament.
The pound hit its highest level since May on Thursday, Conservative Party look set to secure a majority, investors see that as the most market
positive outcome. It allows the Prime Minister to finally push through his Brexit deal.
Business leaders certainly have a lot to consider whether they want to win. The Labor Party is promising to hold a second referendum, that could give
businesses more time to prepare to leave the EU and pledges to raise the minimum wage to 10 pounds and nationalize companies in the front and
center.
(BEGIN VIDEO CLIP)
JEREMY CORBYN, LEADER, LABOR PARTY: To share wealth, we need to share power, and that's what we'll do in government with bold, radical measures.
A labor government will mean better wages, greater security and more say, putting power in the hands of people. And we'll bring rail, mail, water
and the national grid. It's a public ownership.
(END VIDEO CLIP)
QUEST: Now, the conservatives promising not to raise income tax to reduce business rates, and above all Brexit by 2020. The Prime Minister says
ultimately that's what his opponent is missing. A concrete Brexit plan.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, PRIME MINISTER, UNITED KINGDOM: What we want to know is what is his plan to deliver? Brexit and what's the deal with what he wants
to do, and which side would he vote on that deal, and we still don't know. And do we have answers to those questions? Until we get Brexit done, none
of this carries any economic credibility whatever.
(END VIDEO CLIP)
QUEST: Edwin Morgan is director of Policy with the IOD, Institute of Directors. He's with me now, good to see you. To clarify, you don't take
a position on --
EDWIN MORGAN, DIRECTOR OF POLICY, INSTITUTE OF DIRECTORS: No, we are not party political.
QUEST: No, but the Labor Party's manifesto and its policies, many cases, it must be not so much, the idea of nationalizing first waves of the public
economy.
MORGAN: I think it's fair to say there are large sections of the laid manifesto that our members are absolutely not on board with, I would say
nationalizing water, rail, broadband, it's the latest one, open reach the actual -- so this is the Broadband networks, combined obviously with -- or
perhaps actually to give Broadband for free, which is something that I just don't think -- well, I think most businesses find quite hard to understand.
But it's not really been a very good election for business as a whole. All the parties are talking about increasing spending -- some increased
spending on infrastructure businesses do like, but with I feel this kind of getting out of control. Normally, businesses end up paying in the end.
QUEST: The "Financial Times" tonight says it can't endorse any party in this election because essentially no party is -- particularly in the
leaders. "The past elections, the FT variously supported the conservatives or a moderate labor. This time the main parties put ideological purity
before the good of Great Britain. Neither can command our support." What do you make of that?
MORGAN: I mean, I think that, you know, I have to say there are a range -- definite range of views within our membership, within businesses nor
homogenous. But I don't -- I think in general, they feel that actually (INAUDIBLE) much on the last few weeks talking to them, talking about
business. Brexit is obviously one that really divides opinion -- our members are very fed up at the moment. But it's not like any of them is so
business friendly --
QUEST: But your members -- even on Brexit --
MORGAN: Yes --
QUEST: Your members are split.
MORGAN: Yes, absolutely. So, I mean, they were heavily leaned towards remain at the time of the referendum. But since, most of them have sort of
got to a place where they're really just so fed up with where we are now. They want some kind of resolution.
QUEST: So --
MORGAN: A majority do back Boris' deal before when it came back.
QUEST: Right, and it's interesting to note the pound today went up because the view is if Boris Johnson wins next week, then Brexit becomes a
certainty, but that certainty is helpful to your members.
MORGAN: Certainty is sort of certainty answer is maybe of an overused term. Because this whole get-Brexit-done mantra -- well, yes, we'll get
the first stage of it done. We will leave the EU, but we still don't know the shape of the future trade deal --
QUEST: Right --
MORGAN: And that still may even matter --
QUEST: But do you still have a real fear that they won't be able to trade deal by the end of next year, and that the clock will run out on the
transition period or the implementation period.
MORGAN: Yes, that absolutely is fair. It's very -- it's for a short time to do a trade deal.
QUEST: Right --
MORGAN: Even if we're starting from a place where we're integrated --
QUEST: And if you have a government with a healthy majority, it will not need to -- we won't have any of the shenanigans that we've had over the
last 18 months.
MORGAN: Yes, I mean, hung parliaments, narrow majority is clearly and definitely doing just a bit of uncertainty. But at the same time, all our
members really care about is getting a deal that enables them to trade freely with the EU.
[15:55:00]
They don't care so much about how long it takes. That's the message we always get back from them.
QUEST: Business has had to adapt in the most phenomenal ways as a result of all of this. The thing that strikes me is that Britain is doing quite
well at the moment despite all this.
MORGAN: Yes, I mean, the thing is, yes, it's a testament -- I would say this to the strength of British companies, entrepreneurs, the ideas, all
those things are great. The big problem is that people aren't sitting on their hands and they're not investing.
QUEST: And you're seeing that of course in the numbers.
MORGAN: Absolutely, yes, we've seen there's been a consistent trend. We can see it between our members lower confidence, low investment and that's
the problem.
QUEST: This week is the election, thank you very much indeed.
MORGAN: Thank you.
QUEST: Thank you. We will have our profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, when Oscar Munoz became chief executive of United Airlines, he was a member of the board, and the airline
was in a terrible state. Jeff Smisek had been fired, the CEO on corruption allegations. And the airline was bottom in all metrics.
But interestingly, and I criticized Munoz at the time because he been on the board of directors during all these bad times at United. And I was
wondering, was the board asleep at the wheel? When they should have been holding things together. No, but truth be told, the first thing he did
when he came in, he acknowledged, he had to get a union agreement between the flight attendants from the old Continental and United.
He managed to do it. It was a priority, he did it. He had to get on-time performance back together. He to buy new aircraft for the fleet. He
managed to do it. Now all of the good things that he did and particularly, it was all about making the staff feel that somebody cared. That there was
somebody actually at the top.
The David Dao incident cannot be overlooked when that passenger was dragged from the plane, much of the good work that Munoz had done evaporated out
the window. His comments were crass, they were chosen, the PR guy who was in charge, he left the company to spend more time with his family.
And now Oscar Munoz is leaving United. But what I think is most important is here we had a CEO who actually came in and did something. And he
recognized that his principle task was to find his successor, his replacement, which is what he did with Scott Kirby. If more CEOs were
concerned about who comes next, not how long can I grab on, all companies would have been in a much better shape.
And that's QUEST MEANS BUSINESS for tonight, I'm Richard Quest in London, whatever you're up to in the hours ahead, I hope it is profitable.
(BELL RINGING)
A quick some between -- the day is done. All the lighting in-between tonight on Wall Street.
END
