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Quest Means Business
Stocks Dive As New Coronavirus Hotspots Erupt; Oil Price Plunge As Coronavirus Spreads; Italy Battles Biggest Outbreak Outside Asia. Aired 3- 4p ET
Aired February 24, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:21]
ZAIN ASHER, CNN INTERNATIONAL HOST: The Dow has been plunging all day as fear and panic. Red spread across Wall Street right now. We are down 808
points or so.
As I mentioned coronavirus is spreading panic across global stock markets as the Dow suffers one of the biggest single day drops in history.
The coronavirus gains a major foothold in Europe, paralyzing Italy's most important economic region.
And a watershed moment for the #MeToo movement as disgraced movie producer is found guilty of rape.
Coming to you live from the world's financial capital here in New York City. It is Monday, February 24. I am Zain Asher in for my colleague,
Richard Quest and this is QUEST MEANS BUSINESS.
Good evening, everyone, I'm Zain Asher. We are in the final hours of trading on Wall Street and let me tell you, a major selloff is underway as
I speak as new coronavirus hotspots erupt outside China.
The number of cases in Italy, Iran and South Korea has surged and as we speak, the Dow is on pace for its worst single day loss in two years. Its
gains for the year -- all gone. All sectors are down on the day.
Energy and tech stocks are right now the worst affected. Investors are also fleeing to the safety of gold and the U.S. government bonds as we would
anticipate at a time like this.
Losses in parts of Europe are even worse. Stocks in Milan closed off more than five percent. That's the worst drop in that four years. The Italian
government has put restrictions on nearly 100,000 people in order to contain the coronavirus outbreak.
The Director General of the World Health Organization says the outbreak has the potential to become a pandemic, but it's not quite there yet. We'll
hear more from him in just a moment.
But first let's get to Art Hogan who is the Chief Market Strategist at National Holdings. Art, thank you so much for being with us. So just put
this in perspective for us, Dow is right now down 800 points. Is this the beginning of a correction? What are your thoughts?
ART HOGAN, CHIEF MARKET STRATEGIST, NATIONAL HOLDINGS: So if you take today's three percent and the two percent we were down coming into this,
about five percent off the all-time high with just a week ago.
So this is how corrections start. I think what's really happening is this is a market that had fell into a bit of complacency about the fact that
this coronavirus was largely contained in China and China was doing a lot about it.
A lot of fiscal policy stimulus, a lot of monetary stimulus and they were certainly getting experts after this problem, so I think the market said,
okay, I think the economy can be okay if this gets contained and the effect, some of the new case numbers started to plateau a little bit.
And then over the weekend, half of the new cases were outside of China and this just erupted into more concern about what's going on and how much
economic damage this might do.
ASHER: Why was the market reaction coming into this weekend so muted? When do you think about it, Apple had a read and various companies that already
come out and said, listen, our supply chains are going to be disrupted.
Apple on top of that said, not only is our supply chain going to be disrupted, but we're going to see significant slowdown in terms of demand
in China for our products as well.
So why did it take a few more cases or several more cases outside of China in order to see this?
HOGAN: Yes, I think that's a great question. Apple is the perfect example of how you can actually rationalize this. You look at Apple and say, they
get cut both ways. Right? They can't produce in China, their Foxconn manufacturing plants are shut and China is an end market for them. So
they're losing the demand from China.
But both of those things represent demand that is delayed, not demand that is destroyed. So we look at Apple as someone that's going to be able to get
Foxconn back going and manufacture again. Two of their four plants are back open and that demand is always going to be there.
So if you didn't buy your iPhone this week, you're going to buy it next week or next month.
ASHER: Right, I see.
HOGAN: Whereas if you're in travel and leisure, if you're an airline, if you're a restaurant, if you're a casino, that demand has been destroyed.
So we actually think the logical way to look at this in the market is very much the way the market is pricing this and the companies will actually get
that demand back and actually play catch up in the second quarter and in the second half.
And then the companies that have lost this for the rest of the year and aren't going to get this first quarter back and I think that's what we're
trying to rationalize now, and I think that's why we went into the weekend, saying, I think we've done the calibration, as long as this was just China
-- and then all of a sudden it shows up in Italy and South Korea and Afghanistan. And we're like, okay, this is larger, we need to step back and
recalibrate.
ASHER: So which stocks are going to be keeping you up at night? Is it tech stocks, for example, chipmakers? Is it airline stocks? Travel stocks? That
sort of thing?
HOGAN: Yes, so it's travel leisure for sure. I think they are the worst affected by this. But you know really keeps me up at night? It is how many
people are in the safety trade? The defensive trade has been nervous. People pile in to utilities trading at 26 or 27 times. That's expensive.
Treasuries, the 10-year only yielding 1.38. That reverses pretty quickly if we get some good news. Even gold has threats here. You know, getting close
to $1,700.00 an ounce. So if you have gotten nervous and gotten in some of those defensives, I'd just be on the edge of my seat and get ready to get
out because they're all very stressed and very expensive right now.
[15:05:26]
ASHER: All right, Art Hogan, we'll keep an eye on it -- for us. Thank you so much.
All right, if the virus takes a toll on economic activity, it will certainly hit demand for energy. Oil prices in the U.S. and around the
world were down more than five percent before coming back slightly.
WTI Crude are now down to $51.00 a barrel. Brent crude, the global benchmark is down about $3.00 to $56.00 a barrel. Let's bring in John
Defterios who's in Riyadh for us where coronavirus dominated the meeting of the G-20 Finance Ministers over the weekend.
John, thank you so much for being with us. So when you think about the fact that China actually accounts for 20 percent of global oil imports, what is
going to be the impact for oil demand when it comes to the coronavirus?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, it's a huge question right now, Zain, because there's an emergency meeting taking place
in Vienna on March 5th and 6th. And in fact, I'm joining an energy conference here in Riyadh tomorrow to pose the questions to the Energy
Minister of Saudi Arabia, the CEO of Aramco and others, because China, as you suggested, sucks up commodities. And that's why we saw that five
percent drop.
We've come off the lows of the day with the loss of about three and a half percent. But this is a classic rotation out of risk, not just oil, but we
saw the emerging markets of Asia because they're in the firing line of China, of course, and the spillover economically.
But the Monday, twist I think, which was a surprise was the severe selloff that we saw in Europe. And this is due to the double I's, Iran and Italy.
The industrial north of Italy coming under pressure, it is a $2 trillion economy, but the see Milan plummet by five percent, it's an indication that
the core of Europe is weak right now, Zain.
As Art was suggesting, the flight to quality, gold testing $1,700.00 an ounce, and then it poses the other question, are we going to start seeing
collaboration from the G-20?
Zain, remember 10 years ago, it was Gordon Brown, the former British Prime Minister who said we have emerging markets on one side, the developed world
on the other, let's bring them together, tap their resources and move globally.
Are we at that stage yet with the coronavirus? I'm not so sure of it. But the communication from the G-20 was really clear. We're ready to act
multilaterally if necessary. I'm not sure if that's the view from Wall Street.
Clearly, what we saw in Italy today, what we saw in Iran here in the Middle East and what has transpired over the last two weeks in China would suggest
yes.
ASHER: So what will this mean specifically for oil prices, though, John? I mean, how much lower can they get in the short term? Are we going to see a
repeat of 2015?
DEFTERIOS: I don't think we're going to see a repeat of 2015, but there's a lot of pressure on oil, Zain. We've been on this yo-yo ride, if you will,
since the start of 2020 because of what happened in Iran at the start of the year. We had prices go up to $70.00 a barrel. We came down to $50.00 to
date, testing the lows, that mid-range, perhaps $60.00, they're pretty happy in the Middle East because of the baseline price of production.
But there's the other transition taking place, the energy transition and the ESG, the Environment, Social and Governance going forward.
Sustainability here of the energy sector and that's the real test going forward.
So if you have a drop in demand because of the coronavirus, a rotation out on Wall Street, the percentage of oil and gas companies in the S&P 500 has
dropped by 50 percent in five years because of the rotation. It's renewable energy. It is a challenge for the Middle East as a result, as you were
suggesting -- Zain.
ASHER: All right, John Defterios live for us there. Thank you so much.
The dramatic jump in cases outside of China now prompting fears of a pandemic. Cases in South Korea has spiked by more than 30 percent Monday
alone. The country now has more than 800 cases and seven people have died. President Moon Jae-in has declared a red alert to the country's highest
level of emergency.
In Iran, meantime, officials confirmed 61 cases while conflicting reports put the death toll anywhere from 12 to 50. The country now facing further
isolation as neighboring states have begun closing that borders.
Meanwhile, the biggest outbreak outside of Asia is in Italy. Cases there jumped from three to 219 over the weekend, forcing 10 cities to go into
lockdown. Fears now growing about the virus moving across Europe's open borders.
Melissa Bell is joining us live now in Italy. So Melissa, just explain to our audience how and why Italy has emerged as the epicenter of this virus
in Europe.
[15:10:00]
MELISSA BELL, CNN CORRESPONDENT: Well, Zain, it has happened very suddenly. When you consider that only at the end of last week on Friday, we
were at fewer than five cases reported and at least very much what we are seeing in other European countries, suddenly we've seen those number of
cases rise over the weekend. Those emergency measures taken. The Carnival here in Venice stopped prematurely.
So on Sunday night was its last day, and all those villages and towns, at least 11 of them on lockdown, some hundred thousand people now affected by
that.
It's the first time that in Europe, we've had to see this kind of measure taken. And bear in mind that there is a great deal of uncertainty for the
time being about the virus as it spreads here in Europe.
Patient zero has not been found, which means a number of things, Zain. It means that they don't know how the virus got here. They don't know why it
spread so quickly, and they don't know exactly how far it may have spread.
That, as you mentioned a moment ago brings all kinds of questions about what happens next. And the European Union with open borders, but no
harmonized public health policy and the European Union that, frankly, so far is not prepared in terms of organizing itself to prevent the
transmission across the borders, to prevent that spread.
And with all of these questions, it's very unclear what's going to happen next.
For the time being, Italian authorities are saying, look, it's still okay to travel to Italy. But this has been a very sudden change in a very few
days. So we're keeping a very close eye on what's happening here. And there are many questions, Zain, about what happens next.
ASHER: And how are officials and authorities there in Italy ensuring that there isn't a panic response to this?
BELL: You know, you put your finger on it. I think that's exactly the kind of difficulty they're facing. We've seen that play out over the course the
last few weeks in Asia.
This is the first time that we've seen a Western liberal democracy grapple with some of those questions, placing citizens under a lockdown for an
untold number of weeks and that's what Italian authorities said.
Those people who are in quarantine, it is unclear how long those towns and villages are going to stay locked down. Will there be adequate food
supplies? They've put in place all kinds of measures, like prison sentences for anyone who might try and leave or enter these areas without
authorization. How is that going to play out over the long term? For the time being, we simply don't know.
And it's a very delicate balance that European countries are going to have to strike just as Asian countries did before them between trying to protect
public health without sending the country into a kind of panic situation, which would have huge consequences for the economy.
And as you watch the authorities grapple with this very difficult situation, we've been speaking to a number of shopkeepers around this place
and marketplace here in Venice. They've been saying look, we're just not getting enough information about what here in Venice, one of those cities
that has not been locked down yet we should be doing. Should we be wearing masks? Should they have closed it off to tourists before they did?
All kinds of questions that come probably, Zain, from that very difficult balance that authorities are having to strike.
ASHER: Melissa Bell live for us there. Thank you so much.
The World Health Organization says that the coronavirus outbreak has the potential to become a pandemic, but it isn't quite that just yet.
The number of new cases in China has fallen off, but officials are worried about new cases in places like Italy and South Korea.
WHO's Head of Health Emergency Programme says he doesn't know yet whether efforts to contain the virus will be successful.
(BEGIN VIDEO CLIP)
DR. MICHAEL RYAN, EXECUTIVE DIRECTOR, WHO HEALTH EMERGENCIES PROGRAMME: The virus may settle down into an endemic pattern of transmission, into a
seasonal pattern of transmission or it could accelerate into a full blown global pandemic.
And at this point, it is not possible to say which of those realities is going to -- is going to happen.
(END VIDEO CLIP)
ASHER: All right, CNN's Elizabeth Cohen joins us live now. So Elizabeth, what can we learn from the new cases in Italy and also South Korea about
how exactly this virus is spreading so quickly outside of China?
ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Okay, so Zain, let's talk about the basics of what's happening there. In South Korea, they
announced just today 70 new cases. That is a huge number of new cases, bringing the total 833 and seven deaths.
Now part of the issue there is that many members of the military have been affected and they're concerned people in the military live close to each
other. They also work with militaries from other countries. And so there's great concern about the spread there.
Now, we talked a bit about Italy before, but to go over those numbers, 219 cases and five deaths. They have cancelled soccer games. They have canceled
public transportation in some parts of the country. In Milan, they have canceled school for the next week.
And in Italy, there is a particular problem, which we talked about a little bit earlier in your show, and that is, is that they're having trouble with
the most basic element of public health, and that is contact tracing.
You want to know who was the first patient who came in here with this problem so that we can get their contacts, tell their husband or wife that
they need to stay at home, tell their children they need to stay at home. They can't do that, because they don't know who the first case is.
Once you've lost that you've lost to that so-called patient zero is, you are really at a disadvantage because then it can start spreading out of
control -- Zain.
ASHER: So just in terms of technically referring to this virus as a pandemic. The WHO says it's not quite there yet, but what needs to happen
for this to actually be a pandemic?
[15:15:18]
COHEN: Right. So Dr. Ryan, who we heard from before, says the whole world needs to be at risk. So let's take a listen to something else he had to say
today.
(BEGIN VIDEO CLIP)
RYAN: It is time to prepare. It is time to do everything you would do in preparing for a pandemic. But in declaring something a pandemic, it is too
early. We're still trying to avoid that reality. We're still trying to avoid that eventuality. And countries are having success in doing that.
(END VIDEO CLIP)
COHEN: So to be a pandemic, you need to have what epidemiologists call explosive transmission, diffuse transmission all over the world, not just
in a few hotspots, but all over the world.
And the issue here, you could make a case that that's happening that there's explosive transmission in China, you could pretty easily make that
case. It's hard to make that case for the entire world.
ASHER: All right. Elizabeth Cohen live for us there. Thank you so much.
Still to come, the spread of the coronavirus outside China is particularly worrying to investors. It's set to deal a fresh blows the travel industry
as well.
And from the bright lights of the film festival circuit to prison. Harvey Weinstein is convicted of a criminal sex act and rape. Former New York City
prosecutor Paul Callan join us on the story next.
(COMMERCIAL BREAK)
ASHER: The leaders of the #MeToo and Time's Up movements are hailing a new era of justice. Harvey Weinstein wants, once of the most powerful men in
Hollywood is in custody tonight.
A short time ago, in a New York court, Weinstein was found guilty of committing a criminal sex act in the first degree and rape in the third
degree.
The Manhattan District Attorney said the survivors who spoke out against Weinstein were heroic.
(BEGIN VIDEO CLIP)
CYRUS VANCE, JR., MANHATTAN DISTRICT ATTORNEY: Words can't describe adequately the sacrifices the survivors made to pursue justice. Weinstein
with his manipulation, his resources, his attorneys, his publicists and his spies did everything he could to silence the survivors, but they refused to
be silent. They spoke from their hearts and they were heard.
(END VIDEO CLIP)
[15:20:07]
ASHER: Paul Callan is a CNN legal analyst. We've also got Brian Stelter, joining me, who is CNN's chief media correspondent. So Paul, let me begin
with you. He was found not guilty of the more serious charges and guilty of the lesser charges. Did that surprise you?
PAUL CALLAN, CNN LEGAL ANALYST: Well, it didn't surprise me because on Friday, the jury had come in with a question that indicated that they were
hung on the top two counts.
I should say, though, that even though he was only convicted on the lesser charges, the sentence available on those charges are very, very serious.
One of them is called a D felony, 25 years in prison, and the other you can do four years in prison. So he is facing tremendously high jail exposure on
these charges.
ASHER: Brian, this verdict changes the way Hollywood does business. Hollywood and the acting game, especially has always been rigged in favor
of powerful men.
BRIAN STELTER, CNN CHIEF MEDIA CORRESPONDENT: Yes, think about Harvey Weinstein. You know, there were rumors about his conduct for more than 20
years. He was able to suppress those secrets, bury those secrets, buy people off, pay people off in order to keep his misconduct under wraps.
And it is incredible to think about how we've now broken history into two pieces. There's before Harvey Weinstein and after Harvey Weinstein. Before
those stories came out in "The New York Times" in "The New Yorker" in 2017, there was no such thing as a #MeToo Movement internationally, there was a
hashtag by Tarana Burke, but it hadn't caught on -- caught fire around the world. It did. Thanks to the reporting by those two news outlets and the
bravery of the survivors who spoke to those two news outlets.
And that's really what led us to this day. It's kind of like the domino effect that began in October 2017. And the dominoes are still falling
today.
ASHER: In terms of the charges he was found guilty of, third degree rape. Some people in our audience might not -- might be uncertain as to what
exactly that is. Just walk us through that, Paul.
CALLAN: He was charged with two counts of rape, rape in the first degree and rape in the third degree. He was convicted only of the rape in the
third degree.
Rape in the first degree is a forcible rape, which is the kind of rape I think everybody understands. You could pull a gun to somebody's head or put
them in physical fear of their life, to get them to have sex with you.
The rape in the third degree is that the woman in question did not consent to the sexual conduct. So that's why it's a lesser charge and that's why
the penalty for rape in the third degree is four years, whereas it's much higher for rape in the first degree, which is 25 years.
ASHER: Despite that difference, still a massive victory for the #MeToo Movement.
STELTER: Yes, I think it absolutely is. And we are hearing that from advocates today, who are saying, you know, look how quickly the world has
changed in terms of women and men who have accounts of sexual assault and misconduct, the way the stories are taken seriously now versus just a few
years ago. It is a monumental change.
And when you see the court system function the way it has, this is essentially the first #MeToo court case. You see it, it is a complicated
verdict, a complicated case, as many of these are and perhaps this is a reality or a reflection of that reality as well.
But it is a victory for the journalists. It's a victory most for the survivors who were believed, who were taken seriously.
CALLAN: You know, on Brian's point, too, as a former prosecutor, I can tell you that a case like this would never have been prosecuted 10 years
ago, because many of the women here were involved in consensual sexual conduct with Weinstein after the rape or after the sexual assault for which
he was convicted.
Experts testified though that he was able to use his power and his money to coerce them essentially, into returning to him. He was grooming them to
make sure that they wouldn't file a complaint with the police.
ASHER: One thing that I found extremely troubling is that Harvey Weinstein, in an interview told our Chloe Melas, that if he was to be
acquitted, he would go straight back into making movies.
STELTER: Yes, he was going to try that.
ASHER: It's like, haven't you learned anything from the past two years?
STELTER: He thought he was going to have a comeback and find financing and make more films. We thought that was laughable at the time, but he really
believed it. His friends, the ones that were still left stuck with him, still remaining friends, they were supporting him in that kind of thing.
ASHER: He knows nothing else.
STELTER: No.
ASHER: He identifies that that is who he is.
STELTER: And it speaks out that this is about power, you know, and for the first time in his career, he has lost his power. He's up in Rikers Island
right now, put into the prison intake system.
That is an incredible fall for a man who three years ago was making movies.
ASHER: I am being told I have to wrap, but just quickly, Bob Weinstein has his own new production company. This is Harvey Weinstein's brother.
STELTER: Yes.
ASHER: I mean, does he stand a chance in terms of actually -- he is also Weinstein.
STELTER: Right. But the name Weinstein is not going to be on the door anymore. That's for sure.
ASHER: All right. Gentlemen, thank you so much. Appreciate that.
CALLAN: Thank you, Zain.
ASHER: Coronavirus has struck another key market for the cruise industry. Italy is taking steps to contain the virus. We'll hear from the cruise line
international association, next.
(COMMERCIAL BREAK)
[15:28:03]
ASHER: Hello everyone, I'm Zain Asher. There's more QUEST MEANS BUSINESS in a moment when we'll look at how the coronavirus is wreaking havoc on
Italy's economy and the global tourism industry.
And we'll have a special report of Richard Quest in Seychelles where he's been speaking to the country's Finance Minister. Before that, though, these
are the headlines we are looking at, at this hour.
The number of coronavirus cases in Italy now tops 200 as authorities there race to contain the first major outbreak in Europe.
The epicenter is in Northern Italy, where at least six people have died, about 100,000 people in that region are now under strict travel
restrictions.
The largest cluster outside China is in South Korea. The country has now confirmed more than 830 coronavirus cases. These people are lined up in the
nation's fourth largest city to buy face masks.
And Iran, the Health Ministry says that there are 61 cases and 12 confirmed deaths.
German police have arrested a 29-year-old man after a car plowed into a Carnival parade in Volkmarsen. At least 30 people are injured.
Witnesses say it appeared the driver intentionally drove into the crowd. The police still have not revealed any motive.
The U.S. President kicked off his first State Visit to India by addressing a massive rally at a Cricket Stadium. It was in India, Prime Minister
Narendra Modi's home state and tens of thousands of people cheered on the two leaders.
Mr. Trump and First Lady Melania then took in one of the world's most famous monuments, the Taj Mahal.
A memorial is underway in Los Angeles paying tribute to basketball legend, Kobe Bryant. Beyonce, Alicia Keys and Christina Aguilera have performed so
far and Bryant's widow Vanessa Bryant delivered a powerful eulogy for Kobe and Gianna Bryant.
In the last hour, we heard that Vanessa Bryant is actually suing Island Express Helicopters alleging the wrongful deaths of her husband and
daughter.
[15:30:10]
Returning now to our top story tonight, the spread of coronavirus is wreaking havoc on Wall Street and the markets around the world. Gains for
U.S. stocks have been wiped out for the year. The Dow is now down 1-1/2 percent in 2020. It was up three percent when it hit an all-time high just
two weeks ago.
The FT 100 was up nearly five percent on the year, it's now just up half a percent, barely staying in the green. And while tech stocks have been
powering the NASDAQ to a spate of all-time highs, they're now feeling the brunt of the virus and they are falling fast.
Let's bring in CNN's Global Economic Analyst, Rona Foroohar, who joins us live now, also an Associate Editor at the Financial Times. So, you and I
was talking about this last week, one of the, sort of, lessons that the U.S. economy may end up learning from all of this, is the fact that it is
so heavily reliant on China.
RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Yes.
ASHER: And as a result, we may end up seeing a gradual, it's already happening --
FOROOHAR: Yes.
ASHER: But even more so of a decoupling between the U.S. and China, but that is clearly not going to happen overnight.
FOROOHAR: Not going to happen overnight. But it's a process that as you say, was already happening for the last couple of years, certainly because
of the trade war. Even before that, though. I mean, there's some benign trends like just-in-time production and consumers wanting things faster and
stores that have favored more regionalization.
But now you have supply chain executives, CEOs taking a close look at China and saying, what are the real risks of doing business here and I think
coronavirus brings up a couple of those. One, is that there is still so much the U.S. supply chain, particularly in the tech sector, that is in
China, I mean semiconductors, Apple, you're saying, one of the first companies to issue a revenue warning and say sales are not going to meet
expectations because of China.
I think a lot of companies are going to look very carefully now and say, all right, this is an economy that has a government that is not always
transparent. There are political risks. What can we move to Vietnam to Mexico? They might just take this opportunity to make those changes that
were already in the pipeline.
ASHER: So, which countries do you think are going to be benefiting from the gradual Exodus, do you think? I mean, you talk about Mexico as being one,
Vietnam possibly being another.
FOROOHAR: A hundred percent. Anyone that has a relatively cheap labor, particularly compared to China, and that's another thing to remember. You
know, we always thought about China's the factory of the world, cheap labor. Actually, Chinese labor prices have been rising pretty steadily for
the last decade. And so, you had executives already saying, look, what can we move to Thailand, China, Malaysia? I think Eastern Europe is going to
benefit. I think Mexico is going to benefit.
I think probably the world is moving to three hubs, the U.S. and Latin America, Europe and the Middle East, and China and the rest of Asia kind of
creating their own supply chains.
ASHER: What's going to be the impact on global growth of the coronavirus, especially given the worldwide manufacturing slow down we're seeing?
FOROOHAR: Well, it's already having a big hit in Asia. You know, you're seeing countries like Japan and Korea are really being hit hard in the
mainstream economy. The question is, what's it going to do to stocks in places like the U.S., I think that you're probably not going to see too
much of a real GDP growth hit. But I think you could see, depending on how many companies started issue warnings, stocks get shaky. And this is,
again, coming off the back of an existing trend. We're at the end of a recovery cycle.
We've had a really long period of a bull market. We haven't had a lot of income growth recently. Corporate margins are tight. So, stocks were ready
for a correction. We know it's coming. Will coronavirus be the thing to tip it.
ASHER: What's interesting, as you and I were talking about this, about half an hour or so ago is that, if Bernie Sanders ends up being the Democratic
nominee, markets will assume that will mean Trump will actually win the election.
FOROOHAR: Yes.
ASHER: Therefore, that that might end up helping markets.
FOROOHAR: It's incredibly counterintuitive. Right now, markets are thinking there's no way Bernie can win. First of all, Bernie will probably be the
Democratic nominee, that's what the market thinks. They think that there's no way you can win against Trump. Trump's been good for the markets, who
knows he may cut taxes again, try and keep up for another couple of years.
And so, they're discounting the Bernie effect. Now, you can look at, let's say, we did get president Sanders, on the one hand, if he was able to get a
lot of his plans through, that would be bad for markets, because we're talking about a big shift in the way business gets done in the U.S. But
there's also a sense that Sanders is not a guy that can work with other people, that he may get gridlock, that the Democrats just may not have the
leverage in Congress.
And so, once again, you get market stable. Hard to know. A lot in play right now.
ASHER: Well said. All right, Rana Foroohar, thank you so much.
FOROOHAR: Thank you.
ASHER: Stocks in Italy fell more than five percent Monday. The government is trying to contain the coronavirus outbreak, that with lockdowns and
other restrictions, that is thrown a massive wrench into Italy's economic engine. The affected area is responsible for nearly one third of the
country's economic output, it includes tourist center, Venice and the financial center of Milan. Automakers, banks, fashion houses, farms and the
tourism industry are all affected.
[15:35:09]
The top Italian Football League Series A has postponed at least four games. The fashion houses Giorgio Armani and Laura Biagiotti has actually held
their fashion shows behind closed doors on Sunday. And in Venice Carnival has been cut short. The cruise industry has been hit particularly hard by
the coronavirus outbreak.
Joining me live now is Brian Salerno, Senior Vice President for Maritime Policy, at the Cruise Lines International Association. Brian, thank you so
much for being with us. So, just walk us through what has been, in the short term, and what will continue to be the impact on bookings for the
industry.
BRIAN SALERNO, SENIOR VICE PRESIDENT FOR MARITIME POLICY, CRUISE LINES INTERNATIONAL ASSOCIATION: Well, saying that, clearly there have been
effects on our industry, particularly in East Asia. Many of our member lines have modified their itineraries or canceled itineraries outright. We
have a number of ships that are idle or repositioned outside of the area. So, it's had an impact. We're also continuing to watch, you know -- you
know, developments in places such as Italy. You know, Venice is a very important cruise port, as well.
So, what we have done as an industry is, almost within 24 hours after the World Health Organization declared that coronavirus was a -- was an
emergency with international effects, we put enhanced screening measures in place. So, we look at travel history, we look at contacts that our
passengers may have had with people who are affected. And we also screen for symptoms as people go to board our vessels.
And the intent there is to unfortunately deny boarding to anyone who may be very high risk of transmitting that disease on onboard any of our ships.
It's unfortunate for the people involved but we have to put the safety and public health of our passengers first. And at the risk of inconveniencing a
few, we have to look after the health of the ship. Since we put those measures in place, so far, they appear to have been effective.
There's only been one ship that has had confirmed cases of coronavirus on board, that was the ship in Japan. That ship, it's unfortunately, you know,
its voyage started before these measures were put in place, before the World Health Organization made their declaration. But since we've put these
measures in place, so far, they appear to be working.
ASHER: So, will the health screenings and various sort of security measures that have been put in place, will that be enough to encourage otherwise
reluctant passengers to actually continue their vacations, continue their bookings?
SALERNO: Well, we certainly are doing everything we possibly can to lower the risk of transmission of this illness on board any of our ships. So,
that's why we've taken these enhanced screening measures and to the point of turning some people away if they appear to be a high risk.
We will continue to work with health authorities, monitor the guidance and advice of the World Health Organization, the Center for Disease Control,
European Gateways, make sure that we are keeping pace with, if not, you know, exceeding the recommendations in order to prevent transmission.
ASHER: All right. Brian Salerno (INAUDIBLE) 1535 0:03:26 thank you so much. Appreciate it.
SALERNO: You're very welcome.
ASHER: As the coronavirus disrupts global tourism, Seychelles finance minister says the country means to rely more on visitors. He told Richard
Quest the country's path forward is different from his past as a haven for offshore bank accounts.
(BEGIN VIDEOTAPE)
MAURICE LOUSTAU-LALANNE, FINANCE MINISTER OF SEYCHELLES: Well, I think the end game with everything that I see and everything that I've discussed, I
think the end game is definitely to close down the offshore jurisdictions of small island states.
RICHARD QUEST, CNN BUSINESS EDITOR-AT-LARGE: If that were to happen to Seychelles, how damaging would it be to your economy, which seems frankly
to rest on tourism, and offshore banking?
LOUSTAU-LALANNE: Well, we have to weigh the costs. I think the reputational costs of Seychelles, like in this case, it has been listed. And we are
having this interview, that if you could put a cost to the reputational damage, the sovereignty damage to my country, we may want to actually
abandon it.
QUEST: But if you abandon it, tourism is already indirectly 60 percent of the economy here. That would make you basically a one-horse town tourism.
LOUSTAU-LALANNE: Not necessarily, I think when I see I abandon it, there are some CSPs. There are some IBC companies in our jurisdiction, which
actually do their due diligence correctly, and they do not take on board.
QUEST: But there's no purpose in having you. There's no purpose in having an offshore banking center if you can't hide who you are. You don't --
people buy -- people use offshore accounts to -- for better -- don't say -- I'm not saying nefariously, but to hide beneficial ownership or at least
ownership of assets.
[15:40:10]
LOUSTAU-LALANNE: Yes. But as I said, at the end game, everybody, all these small island jurisdictions would have become clean, and they would have had
to pass laws to enable everybody to know who the ultimate beneficial owner is, wherever it may be. So, we will all be playing a cleaner game.
QUEST: Do you think that's the -- that's the -- that's where it's headed?
LOUSTAU-LALANNE: That's where it's headed.
QUEST: So, really, it's only an issue of how much damage you can avoid now.
LOUSTAU-LALANNE: Correct. And how much time you can take for you to ultimately be a clean sheet jurisdiction.
QUEST: On tourism, and the island's economies, you're doing very well. You are one of the world's top destinations.
LOUSTAU-LALANNE: Thank you.
QUEST: But that must be a constant economic battle for you to balance the books.
LOUSTAU-LALANNE: Hundred percent. Because every year, we have more expenditure coming on, you know. We have an aging population. You know, in
20 years' time, we'll have more people over 65 than we would have youngsters, which is a complete demographic change that we would never have
known. And this was a huge impact on our social services.
So, tourism is the driver of the economy and has to be. We, as you know, protected 50 percent of our environment to safeguard against this, but we
need tourism to yield better. So, we want tourism, we want to steal aim on the higher end, and to yield better. So, if we make this happen, then we're
on a good score, because they would not want to visit anywhere else again, and only come here time and time again, like you.
(END VIDEOTAPE)
ASHER: And we will hear more from Richard Quest in the Seychelles, lucky him, at the end of the show. Coming up, a new report says climate change
will pose a national security risk in the decades ahead. Now, farmers are using animal waste to fight the problem.
(COMMERCIAL BREAK)
ASHER: All right. We are turning now to our top story. The Dow is down three percent. It's on track to give up its gains for the year, a spike in
coronavirus cases in Italy and South Korea is causing the sell-off, you can see behind me, the Dow is down 950 points or so. The S&P 500 and the NASDAQ
are also down heavily, as well.
The global energy challenge now where we explore a future of the energy sector. A new report warns of a threat of climate change, the Center for
Climate and Security says there will be increased risks to global security over the course of the century. Meanwhile, outside Mexico City, farmers are
using ways to try to fight the threat. John Defterios has more.
[15:45:18]
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: According to the latest data, energy poverty continues to affect around one in seven people
in the world. In areas like Calpan, a small agricultural region, two hours' drive from Mexico City, the health impact of having no access to
electricity can be severe.
ALEXANDER EATON, CEO & FOUNDER, SISTEMA BIOBOLSA: More people die every single year because of poor indoor air quality from cooking on wood fuel or
not having clean sources of energy than all war and violence combined. So, it is a serious health issue.
DEFTERIOS: In 2010, Alex Eaton started Sistema Biobolsa, a social enterprise that manufactures equipment to help farmers turn their waste
into a clean and sustainable energy source.
EATON: We feel that there's been a poor framing of the idea of waste. So, we believe that there is no waste in natural ecosystems that's how we've
designed our business and how we've designed our product, to allow the waste streams from small farms to be turned into something productive and
doesn't produce greenhouse gases.
DEFTERIOS: Their solution is this biodigester which has a novel feedstock.
EATON: Dump the manure in, flows in via gravity.
What our system does is takes the organic waste that's generated at the farm, so mostly animal manure that ferments using naturally formed bacteria
that produces a methane gas which we can capture channel straight to the energy use so we can cook, we can keep water, we can do all the things that
a household or a farm needs to do. And what comes out the other side is actually an organic fertilizer. So now this waste has been completely
transformed, and it's safe to use as a soil amendment that sinks carbon into the ground and helps people actually have healthier and bigger
harvest.
DEFTERIOS: For farmers like Jose Fermin, installing the biodigester is not only providing clean energy, but also brings financial benefits.
JOSE FERMIN, FARMER (through translator): I used to spend between $180 and $200 on natural gas each month. It's been two years since we installed the
biodigester and now I don't spend any money at all.
EATON: I believe that on the order of about 2 billion people could be using this type of technology around the world, that would really transform rural
economies in a way that I think would change the inner energy sector and make that linkage between energy and agriculture a little bit stronger.
DEFTERIOS: With operations up and running in four continents already, Sistema could play a vital role in keeping regions like Calpan up to speed
with the global energy transition. John Defterios, CNN.
(END VIDEOTAPE)
ASHER: The toy industry could be in big trouble as the coronavirus keeps factories shut. We will go live to the New York Toy Fair for the impact toy
makers are anticipating.
(COMMERCIAL BREAK)
[15:50:00]
ASHER: The coronavirus could take a massive toll on the toy industry, as factories in China are force to remain shut down. In fact, 84 percent of
all toys sold in the U.S. come from China. It could mean fewer toys in the shelves this summer as according to industry experts gathered this week for
the 117th annual New York Toy Fair. Clare Sebastian joins us live now.
And so, Clare, we know that China is the largest manufacturer and exporter of toys in the world, given the factories that have been shut down, what's
going to be the impact of the coronavirus on the toy sector?
CLARE SEBASTIAN, CNN INTERNATIONAL CORRESPONDENT: Well, Zain, so far, at the Toy Fair here, we're hearing that everyone is pretty much in the same
boat from the makers of toys like Baby Shark to Beanie Babies, this company Basic Fun! is behind the likes of K'NEX and Care Bears, of course, they're
all in the same boat. They're all talking to their Chinese factories wondering when they're going to be able to ramp up production. Right now,
it's sort of a patchwork, they've started work. There's a lot of uncertainty. So, I want to bring in the CEO of Basic Fun!, Jay Foreman.
JAY FOREMAN, CEO, BASIC FUN!: How are you, Clare?
SEBASTIAN: Great. Care Bear, we'll sit him down here.
FOREMAN: For sure.
SEBASTIAN: Jay, you know, you contract with 16 partner factories in China, you were telling me.
FOREMAN: Yes.
SEBASTIAN: What is the situation right now? Have they started back work again?
FOREMAN: So, we're on a rolling, sort of, regime right now. So, the factories are open, that means the staff is in, the office staff, the
management is in. But now, we're waiting for the workers to start to come back. So, the workers that are in the local areas are starting to come back
so slowly the factories are opening it up. The real issue is when do the bulk and the majority of the laborers come from the other provinces?
SEBASTIAN: Right.
FOREMAN: When can they start to travel? When can they come back from their outer provinces to the factories? How long are they going to have to wait
before they can get back to work? That's what we're really waiting for right now.
SEBASTIAN: How long have you got with your current levels of product until this really starts to hit consumers?
FOREMAN: Right. We all feel that we've got March and April, we've got enough inventory now, the stores have inventory to get through. But what
happens in May and June, that's when all the big production starts to ramp up for the all-important holiday season, the Christmas season. So, we start
shipping in May, June and July. All the toys you'll see on shelf in October, November and December.
So, our hope is that things settle down, our heart goes out to all the people involved in China that are dealing with this, and we hope that
things can start to get resolved, and the factories begin to open up through the month of March into April, and by the time we get to May, we're
in full production again.
SEBASTIAN: Is -- has this sparked sort of an existential question for you and other companies in this industry, are you too expose to China? Talk to
me, for example, about the K'NEX Golden Gate Bridge behind us?
FOREMAN: Right.
SEBASTIAN: I know that some of this is made in China, and some of it made in the U.S.
FOREMAN: So, listen, we -- there's no doubt about the toy industry makes about 80 percent of its products in China. So, for our industry, China is
hugely important. Our hope is that -- listen, China is a first-world country in a second-world country surrounded by a third-world country. And
we're hoping that they slowly get up to speed, and they really sort some of these issues out, like making sure these food markets that sell all this
exotic produce and live animals gets cleaned up because there's no problem with China being production partner.
The problem is the interruption in China with the health issues, the SARS, bird flu, and now coronavirus. So, the government there really needs to
work hard on getting their food regimen and their food, you know, cleaned up those markets, cleaned up so that they can become and continue to be a
reliable source. But our businesses in China, we're dependent on each other for this. We're working hard with them and to straighten this all out, and
see if we can get things rolling again, so we have Christmas.
SEBASTIAN: Right. Well, Jay, thank you so much.
FOREMAN: It's a real pleasure.
SEBASTIAN: Bes of luck, sir. As you hear, Zain, this is an industry facing a significant amount of uncertainty. Right now, we're hearing a lot of
optimism here. Things will get back up and running. But the big picture, they've had tariffs, they've had the collapse of Toys 'R' Us, and now they
have this. So, this is just going to be yet another year where they're sort of working with these exogenous factors while they try to innovate to
compete with each other.
ASHER: Yes, their industry has been through so much. Clare Sebastian live for us there. Thank you so much.
All right. There are just moments left to trade on Wall Street. Let's take a look. The Dow has actually moved lower in the past hour. We're on pace
for the biggest single-day loss in two years. This is huge.
[15:55:00]
The Dow at one point was down 1,000 points -- more than 1,000 points, I should say, now it's hovering right around there. The spread of the
coronavirus outside China has really spooked Wall Street, so has the impact on various companies' supply chains. Investors are really piling into gold
and government bonds as well.
Let's look at the broader markets. All market sectors are in the red. It's really, though, about energy and tech. Those are the two sectors that are
really going to be worst affected through all of this. Oil prices are also down sharply as we spoke with our John Defterios about that earlier on the
show.
The NASDAQ is the worst of the three indices, as we mentioned, tech stocks really taking a beating in all of this. And that is it for me. Thank you so
much for watching. I'm saying Zain Asher in New York. Richard Quest is going to be back with a special profitable moment from the Seychelles after
this.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment from Seychelles. As you heard earlier in the program, the Minister of Finance is worried now that France has
blacklisted Seychelles, refusing to pass on tax details. Ultimately, the authorities here believe that their offshore banking industry will
eventually conform to all the same rules and regulations as the rest of the world. Which begs the question, of course, why bother having it if you're
just like everyone else? As long as there are certain jurisdictions that continue to ally -- allow dirty money to be hidden, then all offshore
banking sectors are going to be attacked and tried to be closed down. And that's what we're seeing at the moment.
The Seychelles is clearly worried. The economy rests on banking and tourism. Tourism, of course, is its big winner. But to lose banking
completely, will be difficult indeed. The one thing I've learned since being here in Seychelles is despite all this beauty, there's some very real
serious, difficult challenges to solve. And that's QUEST MEANS BUSINESS for tonight, I'm Richard Quest in Seychelles. Whatever you're up to in the
hours ahead, I hope it's profitable. I'll be back in New York tomorrow.
ASHER: Thank you so much, Richard. We go now to "THE LEAD" with Jake Tapper already in progress.
END
