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Quest Means Business
Markets Fall Harder Over Virus And Oil After Trading Halt; Oil Takes Biggest Fall Since 1991 As Saudi Arabia Sparks Price War; Aired 3-4p ET
Aired March 09, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:20]
ANNOUNCER: This is CNN breaking news.
RICHARD QUEST, CNN BUSINESS ANCHOR, QUEST MEANS BUSINESS: Tonight, crisis on top of crisis. Good evening from New York. I'm Richard Quest, and we
start the final hour of trading in what's been an extraordinary session.
It began of course, with Saudi Arabia's decision to start an oil price war. That triggered panic selling in markets that were already slammed by the
coronavirus and wherever we look, investors are making it clear, the risk of recession is now very real.
Let's start with what happened in stocks, which fell from the open in New York within moments after opening down seven percent and that tripped the
market's circuit breakers almost immediately.
Seven percent. Now you'll see, we're down seven percent now, but trading is continuing. We've got to be down 13 percent for the next market circuit
breaker to kick in, and we're in the last hour. And if there's a -- if it goes down more than that, after 3:25 in the afternoon, that's in 25
minutes, they keep trading. We'll watch closely.
Energy shares are by far the worst affected. Crude prices having the single worst day since the Gulf War. We're down from $68.00 a barrel in January,
down to $35.00 a barrel tonight, and that's raising legitimate concerns.
Energy companies might default on their obligations, particularly in the shale oil areas of the United States.
Safety is the name of the day. Look at the bonds, both the 30 and the 10- year bonds, they are at record lows, 0.5 and 0.8. So we're down 28 percent on the 10-year today, and 27 percent on the 30-year.
By the way, these are movements and these are directions and dislocations that are almost unthinkable for seasoned hands in the market.
Those hands for example, like Mohamed El-Erian, the Chief Economic Adviser at Allianz. I don't think we've ever seen anything like it.
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ: Not since 2008-2009, Richard, no, we haven't.
QUEST: Are we going to see a recession? And I'll allow you to define it this way, the United States, the global economy.
EL-ERIAN: So let me just say we're going to have recessions in many countries. That includes Germany, Italy, Singapore, Japan, and that list is
going to get longer -- Korea.
The United States, it's still a 50/50 situation. But if the market disruptions continue, and if the coronavirus fear amplify, then
unfortunately, we will.
QUEST: But to this question of a global recession, I remember during the financial crisis and in the time after, there was a lot of talk, this is
the first time in decades there had been a coordinated global financial -- global recession.
So because there will still be growth, will that offset those that are in recession?
EL-ERIAN: No. And you've got to understand two things, one about the economy and the other one about markets.
The economy -- we are having demand and supply destruction at the same time. Why? Because the coronavirus creates a sudden stop. You and I no
longer want to travel. We don't -- we no longer want to go on a cruise. Things stop.
So you simultaneously destroy demand and supply. That normally happens in fragile and in failed states, not in modern economies.
Second, initial conditions matter. Where you start from is important. And if you remember that simple image I've shared with you over the last few
months. Valuation is up here, fundamentals down here. And the difference -- this difference -- is confidence in the Central Bank.
We have any three things happen, fundamentals are moving down. The confidence in the Central Bank is disappearing. And in addition, like you
mentioned, the oil price action by Saudi Arabia, while understandable, has taken a technical anchor out.
So look for this to do this, while this moves.
QUEST: Right, but what was Saudi Arabia's move -- I know why they did it. I mean, Russia said no to a one-year believing that Saudi had done the
dirty having originally suggested a few months, but for Russia -- sorry, I mean, for Saudi Arabia to then get and discount oil, increase production.
What's in it for them besides a power play?
[15:05:10]
EL-ERIAN: So there is a positive and a negative. The positive is this is the game plan they used in 2014, November, where they drove oil prices down
hard as a way of imposing discipline on other OPEC producers.
You know, the role of swing producer only works if everybody does it. If only Saudi Arabia does it, then it ends up losing both on price and on
quantity, which leads to the second reason which is, they didn't really have many alternatives.
If global demand is slipping fast, if Russia refuses to cooperate, your options are either you take the whole hit, which they're not willing to do,
or alternatively, you take some of the hit and let others benefit.
So they said you know what, if this is --
QUEST: This is the difference between the last time and the time when they played that game of chicken and they just increased production.
But first of all, they set out and made clear, they were going to see the price fall. They were going to keep producing. But the difference is
coronavirus.
The global economy is on fire, please do not pour gasoline on top of it.
EL-ERIAN: So absolutely, two differences, not just one. One is that the demand conditions are slipping very fast because of the coronavirus. And
two is that last time around, Russia was outside all of this.
So Russia joining what became the OPEC Plus was not losing face. This time is very different. You were reporting on what was happening in Vienna.
Everybody knows what happened. So Russia also is going to be more hesitant.
QUEST: Monetary policy. I mean, the Central Banks have two roles. First, they cut interest rates. It won't do any good, but they'll do it anyway.
Secondly, provide liquidity, vital, if we've got a gum up in the money markets, but what do you want to see governments do?
What can administrations like the U.S. tapped for cash with already a large budget deficit? What should they do?
EL-ERIAN: I'd like to see them do three things. One is immediate measures in three areas. One is help medical advances as much as possible to contain
this virus, and to come up with something that increases immunity.
Two, within that, protect the most vulnerable segments of population in the U.S. The uninsured won't even get tested, which is a problem.
And three, like you said, help Central Banks locate market stress. Then if you do that, put it all in a whole of government approach that allows you
to do things you and I have been talking about, which is pursue genuine growth, drivers not financing debt.
And finally, have a layer of international coordination. This is a shared problem and you need a collective solution.
QUEST: The coronavirus, CNN, as you know is now calling it a pandemic. We're pretty much sure it will only be a matter of days before everybody
sort of recognizes the truth of the situation.
How worried are you -- not that you're going to catch it or that you get it? But how worried are you that both the coronavirus and the economic
situation in the absence of strong leadership is going to get away from us?
EL-ERIAN: I'm very worried because you have another element, which is fear. You know, behavioral scientists will tell you that when you take us
out of our comfort zone, and boy, are we being taken out of our comfort zone. We don't know this illness, how is it spreading? So we're not even
analytically assessing the probabilities. We're just getting scared.
Two things happen when you take us out of our comfort zone, both of which are bad for the economy, paralysis and heightened risk aversion.
So what you're going to get is a disengagement of people from economic activity, domestically and internationally. And that means you have a layer
of fear that amplifies all the genuine disruptions to demand and supply.
So I am worried, Richard.
QUEST: I understand that, you know, unless you absolutely have to, one does not sell into this market. I mean, it's just a wait and see.
And I understand that it's different this time. I'm going to explain later. It's different this time from 2008 when it was the banks that had the
problems in there, but do you see this -- do you see this lasting well into the summer and beyond?
And I don't just mean coronavirus, I mean, the turning around of all this mess.
EL-ERIAN: So firstly, economic dislocations are going to last because even if we get these major medical advances, which I hope we will get soon, but
even if we get them it's not easy to restart a sophisticated economy. It is one thing stopping it.
[15:10:03]
EL-ERIAN: And if you don't believe me, think, you're the CEO. You just declared it a travel ban. The minute you say I'm going to lift it, the
legal person is going to say, hey, wait a minute, what about legal liability? Why are we lifting it now?
Some people say, wait a minute, I'm not safe to travel. So you're going to have a very difficult restart. So economically, it would last.
Financially, we will turn the corner before that. You know, finance has a way of leading the economy. So, so financial, we're going to turn around.
But in terms of the economic disruptions, unfortunately, they are with us for a while.
QUEST: Mohamed El-Erian, thank you, sir. I appreciate it. Thank you. Now, we were talking --
EL-ERIAN: Thank you, Richard.
QUEST: We were talking there about why it's different. Well, the Dow is on track for its worst day since 2008 and there's a lot of turmoil that we're
talking about throughout the program.
And the comparison we are saying between the financial crisis now and 2008, well, the stock market shocks may seem similar, but there are some complete
differences.
Remember, we've constantly talked about the economic house. The IMF always wants us to fix the roof.
Well, in 2008, as the subprime mortgage crisis got hold, the economies appeared to be on strong surfaces. We had the crash of the Lehman Brothers
which had a market panic. But what we discovered, banks worldwide from global banks like Chase and Bank of America, Wells Fargo, through to
Landesbank in Germany, we found out that the subprime mortgages and the default had infiltrated the balance sheets and the foundations of the bank.
They were loaded up with bad debt. They had high risk loans. And as a result, the foundations were risking 101.3 trillion in outstanding loans,
high debt risks.
The U.S. economy was unable to withstand this pressure. That was 2008.
Now, 2020 and the picture is very different. Of course in 2020, the market is still rattled by oil price wars, coronavirus, but look at the
foundations of our house, you'll see it's totally different.
The post crisis regulation has reined in lending. There's much higher capital ratios, tier one capital. There are far few subprime loans and the
banks have been stressed tested again and again, and again.
This is not 2008 all over again.
Gita Gopinath is the Chief Economist at the International Monetary Fund. She joins me now. Good to see you, Gita, as always.
We will draw comparisons with 2008 in just a moment. First, though, right at the top, what's the IMF now expecting? Are you looking for either a
recession in the U.S. or a global recession?
GITA GOPINATH, CHIEF ECONOMIST, INTERNATIONAL MONETARY FUND: I mean, Richard, I can tell you what we know now, which is that our estimate for growth for 2020 is going to be below what it was for 2019, which, if
you remember was 2.9 percent.
And also, if you recall, that was the lowest since the global financial crisis.
So we are going to go below that this year. And the question is, where do we end? Now, that's going to depend upon how the next several days unravel.
And there is tremendous uncertainty there.
But there is no doubt that this is a big hit to the economies. You know, it started out with China, the first quarter being particularly weak, but as
the health crisis is rolling over to many other countries, we can see other countries getting hit severely for one or two quarters going forward.
Now, how this ends something we still have to figure out.
QUEST: Right. So we can -- I mean, we can put the economic forecasting in the sense, I imagine, it's extremely murky with so many different
undercurrents at the moment.
But if we do look at what's concerting, the last thing, please, the last thing we needed was an oil price war between Russia and Saudi Arabia, would
you agree?
GOPINATH: I mean, it is -- the events that we saw today clearly raise a level of concern, significantly. I mean, a big collapse in commodity
prices. We saw a big one that happened in 2014. And now some might argue, well, that's good for countries that import with greater purchasing power.
But at net, we know that for the global economy as a whole, the big negative hit on commodity exporters kind of outweighs the positive hit on
importers. And so it tends to be a net negative for global growth.
So this certainly adds a whole lot more to the turbulence and the uncertainty and the cost for the world economy.
QUEST: We can -- your boss was telling us the other day, Kristalina, the Managing Director, she was saying that you were looking for countries to
spend more on to strengthen up the healthcare systems, to spend more in those sorts of areas. That's fair enough.
But would you also like to see that macroeconomic fiscal stimulus across the board?
[15:15:05]
GOPINATH: I think we're calling for what we call as large targeted stimulus. So this has to be substantial, but it has to be targeted because
this crisis is like no other.
There are shocks to demand, there are shocks to supply and some sectors a much bigger hit than others. If you look at airlines and tourism and
entertainment, the effects there are just much more substantial.
I think what we have to keep in mind is that inherently, the nature of the shock is transitory, it is temporary.
We just have to make sure that policies respond fast enough so that people can keep their jobs, businesses don't go bankrupt. So when things improve,
then there is a faster recovery.
QUEST: You make a very valid point and good point, ma'am, if I might say. The idea that it's transitory, coronavirus, will in some shape or form
subside, assuming the right policies -- healthcare policies.
So, that begs the question which again, you may not have the information here, but give me your thinking please. Is it V? Is it U? Is it -- I mean,
what will the next six to nine months look like in terms of a recovery?
GOPINATH: I mean, Richard, I think we have to stop talking about the alphabet soup here.
What is clear is that as the health crisis is rolling over to other parts of the world, each country is going to have a quarter or two where they're
going to get hit quite hard.
Now, that, of course has global implications if you're a large economy. On top of that, you add a commodity price collapse. And there are countries
with high levels of external debt. There are major commodity exporters who are also exposed to this.
And you have a financial crisis, big strain in financial markets on top of that.
So the question is, how do we get out of all of this?
If cool heads can prevail and policies -- targeted policies -- can be put in place soon enough and at the IMF, of course, we have the resources to
help many of our -- to help our member countries, both financially and technically.
If all hands can be on deck, there can be a collaborative response to this particular crisis, then we can see ourselves getting out of this in a few
quarters.
But in the absence of that, I mean, this could last longer.
QUEST: Good to see you -- there's a lot of ifs and rightly so, but there's a lot of warnings and sensible advice. Thank you so much. I know it's a
busy day for you. And I'm very grateful and appreciative of your time. Thank you, Gita.
Now, it is less than an hour to go before the close of trade on Wall Street. Alison Kosik is at the stock exchange.
Alison, we're in that sort of no man's land where we don't really get -- it could all go horribly wrong in the last half hour, but we do seem to be
within a range. Is there evidence that it's trying to test that range?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: There is evidence that there is a testing of the range, but you know, I sort of anecdotally went around to
a few traders to see where they think stocks will end up at the closing bell in less than an hour and honestly, they do not know.
This is really unchartered territory. It's really a historic day not just because of the circuit breakers being activated, but you know, you look at
oil prices plunging, you look at the bond market flashing signals and you look at just the constant worry about the unknown impact of the coronavirus
and it's just that pile on that is creating all that uncertainty and pushing investors to run for cover -- Richard.
QUEST: Alison Kosik at the Exchange, come back the moment there's more to report on that.
We talked Russia ditched OPEC; now Saudi is trying to punish Putin. We will explain why this sudden price war from the Crown Prince put the global
economy on edge.
And live pictures, thousands of passengers stranded aboard this quarantined cruise ship. The ship is finally alongside in Oakland, California. It'll
take some days if not weeks for all the passengers to be disembarked.
We will be there to tell you what's happening. This is QUEST MEANS BUSINESS live from New York.
(COMMERCIAL BREAK)
QUEST: Now, I need to update you on the markets and there's less than an hour until the closing about, 40 minutes or so. And we won't forget this
day in a hurry on the trading.
We were down -- we are off the lows of the day, but we're not far down.
Brent crude also is down 24 percent at $34.00 a barrel. Amid the biggest plunge in oil prices for a generation, let's step back and take a hard look
at how we got there.
There are three key players at the moment. Saudi Arabia, which is the dominant and leader of OPEC, the world's largest. Then you've got the non-
OPEC alliance that includes Russia. Remember a few years ago, three years ago, they did a deal.
But then you've got the United States with its shale boom, not in the cartel. Market price other than directed by central forces, and now
coronavirus.
So what you have is coronavirus causing a slump in demand for oil. Saudi -- it's really very simple. There's a slump in demand for oil. Saudi wanted to
cut supply and even got an agreement with other OPEC members. But, they wanted to put it to Russia.
Russia refused to go along with it because they said it was too long and it wasn't necessary. And in doing so, the U.S. will get an advantage.
MBS, the Crown Prince furious at President Putin reversed course. He slashed prices and increased production. He has gone against President
Putin to punish Russia, created problems for President Trump. And seemingly frankly, the only one who it's good for is arguably consumers. It could
hurt U.S. shale so far.
John Defterios is in London. John, I still don't fully comprehend why did MBS go in this other direction instead of just introducing the price cuts
and let Russia come along?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Richard, the Saudis have said time and time again, they're not going to go at this alone.
Now the question is, why did Russia put up such a force against another cut? And it's quite simple. The Russians actually told me at the OPEC Plus
meeting, this was going to be another 1.5 million barrels. They think it's like a club of production cutters, because that would have taken the cuts
over the last two years to 3.6 million barrels.
And they said, why are we Cutting to give more space to the United States, to your point, the U.S. at 13 million barrels, Russia around 11 million to
11.3 million barrels, and Saudi Arabia is going all the way down close to nine million barrels.
So when this hit a wall with Russia, they didn't want to move off that cut of 1.5 million barrels, Saudi sources told me there was a reverse, of
course, over the weekend.
I spoke to the Saudis on Saturday morning, they were saying, look, we thought we had the Russians on board here. They want to go after shale.
We're going to try to bring the group back together.
Come Sunday, as you were suggesting, they said they're going to raise production above 10 million barrels a day, Richard, and then they slashed
the prices to trigger a price war.
This seems to be coming from the very top of the government, with Mohammed bin Salman trying to mark a line in the sand with Russia saying you've been
fighting our cuts for the last two years and enough is enough.
QUEST: Will Mohammed bin Salman, will he not have taken into account the devastating effect on other markets and on global economics? Surely with
that response -- with that power comes the responsibility not to pour gasoline on the fire.
[15:25:10]
DEFTERIOS: Well, in fairness to the Saudi's ratio, they came up with the concept of the OPEC Plus. They're the ones that brought Russia and the
other non-OPEC players into the camp. It worked for a full three years.
Everybody said, when this started, it would never, never work. And I remember the December meeting when Alexander Novak, the Minister of Energy
of Russia leaving the building and having to agree to another cut of a half a million barrels a day. They weren't happy about it.
So when they came back in for this intermediate in March to address the coronavirus, which came in out of the blue and disrupted the market, they
were thinking, why are we going at this again?
So Saudi Arabia probably didn't think we'd see such a sharp reduction in prices that we've seen today, it has to think about its proven reserves.
Right now, in terms of cash, it is below a half a trillion dollars.
To go back to 2014, $730 billion. So there's going to be pressure on Saudi Arabia. This is an odd game. They produce it for $2.00 to $6.00 a barrel in
Saudi Arabia, but their breakeven budget, Richard, is above $80.00 a barrel.
So this is to your point, a very dangerous game for the young Crown Prince Mohammed bin Salman, obviously getting the sign off from his father, King
Salman at this stage, his half-brother running as the Minister of Energy and the chemistry between Russia and Saudi Arabia, which was so strong
before they changed Ministers back in September is frayed at its best.
I'm not sure what happens, Richard, who blinks first or does this bravado bring them back together? Too early to call it.
QUEST: John, you will call it -- you will be there to cover it when it does happen. I want to pick up on the point you were saying. Thank you,
John.
Let's develop further this question of the collapse of oil prices and the profitability of all the major producers.
Now Saudi and OPEC need the price to be around $80.00 a barrel and that's because of their budget deficits, their government spending -- the amount
of committed capital.
Russia can withstand this better with lower prices. Its oil is more expensive out of the ground, but they're profitable at $42.00. The U.S. is
profitable at around $50.00 in terms of out of the ground.
And remember, the U.S. doesn't have this sort of government expenditure as part of the price that needs to be raised in the same way Saudi does.
Antoine Halff is the Chief Analyst of Kayrros, the energy analytics company, also a fellow at the Columbia Center on Global Energy Policy, good
to have you with us, sir.
Let's just deal with this price business. Saudi produces at two to three, but needs a good 70 to 80 because of its internal economics.
The U.S. shale producers only care about profitability, and they're producing at what? Thirty five? Forty?
ANTOINE HALFF, CHIEF ANALYST, KAYRROS: It depends. It depends. Some of them do. Some of them are higher. It's a range of prices. So you're going
to have some reorganization and restructuring of the other shale play in the U.S. as a result of this price pressures.
The companies that are more profitable will perform better, obviously, those that were already under pressure before the price collapse will
experience more stress.
QUEST: But is there any way? I mean, there's -- I guess, in the antitrust rules, there's no way that the U.S. producers can agree to cut back
collectively.
HALFF: No, no, but the Invisible Hand of the market can do that.
QUEST: Exactly. And that's different to OPEC, where they make a decision. So let's go to the price today. Thirty -- whatever it is where we're at, 30
and change in the mid-30s on the price today. Who is really hurting?
HALFF: Everybody is hurting.
QUEST: Really hurting?
HALFF: I think, maybe Russia is hurting less because it's a bit more diversified. It is twice as a ruble denominated, lower price in a way. The
ruble varies with the oil price.
So in ruble terms, Boris Nemtsov used to say the oil price is always the same in Russia. But I think you have to look at the longer term as well.
So when the dust settles on all of this, the low cost producers will win and the low cost producers really are the Saudis and the Russians at the
end of the day.
QUEST: They are the low cost producers, but they're the ones who get clobbered every time. Shale, obviously, I remember the last time we went,
up to a hundred or whatever, and then prices came down to 30.
Shale became shale made itself more productive to the point where the U.S. is the largest producer.
HALFF: We're going to see some of that again, I think we're going to see the same episode of restructuring, cost efficiency improvements,
improvements in technology.
QUEST: Can answer the question I've asked all our guests in some shape or form? How responsible was it of the Saudis to not just accept the Russians
and work around it? But to launch this price war with Asian discounts and production? How responsible was that or irresponsible?
HALFF: So we have done some modeling of the oil market using game theory and we found is that it makes sense for OPEC to keep the price on a roller
coaster, to put a --
[15:30:10]
HERE
[15:30:00]
ANTOINE HALFF, FOUNDING PARTNER, KAYRROS: So, we've done some modeling of the -- of the oil market using game theory. And what we found is that it
makes sense for OPEC, to keep the price on the roller coaster to push the price up like crazy. And to then drop the price like a stone, that makes
perfect sense to do it from now and from time to time on a cyclical basis. Because when the price goes up, the competition becomes ineffective.
Everybody wants to invest at the same time, the cost of all services goes up, producers become very ineffective, very wasting money and resources.
When the price collapses, then they're ripe for cleanup. They get really hurt. So, for OPEC to maintain the ideal market share, optimize its
revenues. It makes perfect sense for them to go up and down to surprise the market. I think it was unexpected this time is the magnitude of the price
collapse.
RICHARD QUEST, CNN INTERNATIONAL HOST: And the coronavirus, of course. Good to see you, sir. I appreciate it. Thank you.
HALFF: Thank you.
QUEST: And when we come back, the circuit breakers kicked in this morning, when the market fell by seven percent. They appeared to have worked. A
route did not turn into a collapse on a riot.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's a lot more QUEST MEANS BUSINESS tonight on a very busy day. Keeping a close eye on Wall Street, as we went
to the last half hour of trade. You see the markets health. We'll show you the numbers in a minute. And we'll be in Paris, where stocks fell more than
eight percent. Chief Economist of BNP Paribas joins me live. This is CNN. And on this network, the news always comes first.
The coronavirus is spreading faster than ever in Italy. There's 97 people died in the past day, the number of confirmed cases have soared to nearly
9200. This huge spike comes despite a lockdown in northern Italy that's affected some 16 million people. It is the home to most infections anywhere
in the world after Mainland China. The World Health Organization says the coronavirus could be the first pandemic that could be controlled. WHO
director says the world is not at the mercy of the virus. He says all countries must take a comprehensive blended strategy for controlling their
own epidemics.
[15:35:12]
Israel -- in Israel, the Prime Minister Benjamin Netanyahu says anyone entering the country from abroad must enter self-quarantine for two weeks.
This rule applies to both Israeli citizens and foreign visitors says the decision won't be in effect for two weeks.
We're in the last half hour of trading. And the Dow is back near the session lows. It fell nearly 2000 points, but look at it now, rough 7.76.
We're eight percent off. Trading was halted, of course, this morning after the sell-off triggered the markets circuit breaker of seven percent. They
can no longer be used for the rest of the trading day. Whatever happens in the market, we live with until the closing bell rings at 4:00. Now, Saudi
Arabia's price war with Russia continues after Moscow refused to back Russia and OPEC's plan to cut supply in the wake of coronavirus.
European markets, look at the numbers, particularly look at Paris, down 8.39 percent. The FTSE was also off by a three-year learn, it's at least --
maybe index fail to open and then close down 11 percent. It's been in lockdown on 16 million people in an effort to contain Europe's biggest
virus outbreak, a quarter of the population in Italy are close to surpassing South Korea's.
William De Vijlder is the chief economist at BNP Paribas. He joins me now from Paris. Let's just begin with a straightforward prediction. Do you
believe that the Eurozone or the E.U. will go into recession?
WILLIAM DE VIJLDER, CHIEF ECONOMIST, BNP PARIBAS: Well, the likelihood of causes has become very high because there is the impact coming from China,
which still needs to show up in the data to any significant degree. And in addition, you now have the quarantine in Northern Italy, which is
representing 40 percent of Italian GDP. So, that country which in turn represents 15 percent of Eurozone GDP, in its own right, will already act
as a drag, but then it will have a knock-on effect via international trade to the rest of the Eurozone Parliaments, and then that is not without even
mentioning, of course, the impact now of the huge drop in oil prices and in financial markets.
QUEST: This chaos in some senses that we saw today also create its own self-defeating and downward spiral, doesn't it? Consumer confidence falls.
How bad is it at the moment you think in France, consumer confidence?
DE VIJLDER: Well, what's striking is that, all in all, the survey data, be it business surveys or household surveys have held up quite well. And also,
we should not try to make too close link between financial markets, equity markets, and consumer sentiment be it in France or in the Eurozone, because
all the whole households in the Eurozone and in France have are only a small percentage in equities. What we do see and we've seen the
announcement of the Bank of France this morning, is that the weakening of the business survey data has already pushed upon to France to revise down
with its estimate for first-quarter growth to 0.1 percent.
QUEST: Now, you might as well say recession zero, I mean, when you're at that sort of level, it makes not a lot of difference, whether you're plus
or minus in that sense. One important point is what you want now, as policymakers to do because The ECB is meeting this week, do you really and
seriously want them to push rates negative with all the consequences that come with that?
Let's be clear, this is not a story about interest rates being too high, as you know, they are incredibly low and for corporate borrowing, for
household borrowing, so interest rates is not the issue. I think what is important is to make sure that financial markets and the flow of credit and
corporate financing continues in a very fluid way. And that is why I think that should increase the volume of the asset purchases who do more
quantitative easing, and in addition, as well, to put in to actually kind of indicate show that if necessary, they will have targeted landing
programs that would benefit small and midsize companies which are really bearing the brunt of the economic shock that is coming towards us.
[15:40:05]
QUEST: I understand the reason for this, but more negative rates. Okay, I can get you on that. But more Q.A., more LTRO, isn't that just setting in
stone more problems for the future?
DE VIJLDER: Well, admittedly, we are kind of in (INAUDIBLE) a dilemma situation, which means that is it the kind of case of lose-lose. I would
argue that if you don't do anything, you're really running the risk that financial conditions will deteriorate gradually that spreads will widen and
that will accommodate that you will regret not having done anything, and that is I think you should go forward and do something.
QUEST: We hope you'll come back, as things carry on and help us understand. Good to have you on the program tonight, sir, very much appreciate it. So,
to the White House, the official message is that the Trump economy remains strong. CNN has learned the behind the scenes the President is hearing
about stimulus plans. We're live at the White House in a moment.
(COMMERCIAL BREAK)
QUEST: From top to bottom, the White House is staying on message, the Trump economy is strong and coronavirus can't change that. Markets are plunging
and even the U.S. Health Secretary Alex Azar began his briefing by issuing a defense of the President's policies.
(BEGIN VIDEO CLIP)
ALEX AZAR, U.S. SECRETARY OF HEALTH: Listen, the markets obviously have been very active today. President Trump has delivered a historically strong
economy. The fundamentals in this economy are unbelievable, whether it's employment, or wage growth, or productivity, or international trade deals,
the fundamentals remain what they are.
(END VIDEO CLIP)
QUEST: Now, we've learned that the President is sitting with advisors and aides who are presenting possible plans for economic stimulus. Kaitlan
Collins is at the White House. And look, the Health Secretary is probably right, the U.S. economy is in excellent, robust shape. And he's absolutely
right on all the numbers, but all this is in -- is in jeopardy unless they come up with a decent plan of what they're going to do. What is that plan?
KAITLAN COLLINS, CNN WHITE HOUSE CORRESPONDENT: Richard, it gives you an indication of just how worried the President is about the economy, that he
is sending out his top health official to talk about it. In that appearance there, Azar did not take questions from reporters about the coronavirus
afterward, instead just making those brief remarks on the economy. And so, that is essentially why you were seeing the President be, you know, so
irked overall this, as he's blaming the media saying they're exaggerating this and that's what's causing that stock market plunge.
Though we know it's due to all these other underlying factors that we've seen playing out and that people are genuinely worried about what's going
to happen and that they don't have a plan.
QUEST: So what -- so what are they looking at? I mean, one assumes that there is -- I know things -- help for airlines, help for health care, help
for tax cuts. What's the -- what's the -- what's the favorite at the moment?
COLLINS: Yes, payroll holiday is something that they floated. Potentially giving -- you know, helping these airlines if they came down to that.
Because, of course, they are concerned about no one traveling, paid sick leave for these families, so people can actually stay home if they do have
the symptoms of the coronavirus or if they do test positive for it.
All of those things are really on the table because they're really trying to take this widespread approach and try to find any way they can to blunt
this.
So far, you've just seen that Fed rate cut, that is something the president said he wants to see more of. Though his former economic adviser today Gary
Cohn said that is not what's going to help here, that's not going to help people who aren't booking vacations, who aren't traveling, who aren't
leaving their homes to go do things that typically they would do as a consumer. And so that's their concern.
That's why you're seeing the White House try to focus on that where the president is going to be meeting with these officials. His aides are going
to be presenting it with these ideas. You're seeing that they're calling in the CEOs of these banks to come in and meet with the officials as well
because they're really trying to figure out a solution here.
QUEST: I saw that. Thank you. Please come back when there's a plan that we can then --
COLLINS: I will never be back.
QUEST: That we can then -- we can then talk about. Good to see you. Kaitlan Collins at the White House.
Our coverage continues. Look at this, this is the Grand Princess cruise ship quarantined at sea, now alongside. And passengers in dribs and drabs
in a controlled way, being allowed to return. We'll discuss it in a moment.
(COMMERCIAL BREAK)
QUEST: Of course, we've been watching markets but other things have been taking place. Thousands of passengers stranded on the ground in Princess
Cruise line. They're now getting ready to disembark. The vessel have been quarantined off the coast of California for days. 21 passengers have tested
positive for the virus.
Dan Simon is there. It's a complicated way that they're going to disembark, isn't it?
DAN SIMON, CNN CORRESPONDENT: It really is, Richard. You can see the ship behind me. The good news is the ship is finally here, the bad news is the
folks on board, they're going to have to spend 14 days in quarantine.
[15:50:06]
SIMON: This is not going to be a quick process. We understand that the folks who are the most ill, they're going to be taken off the ship first
and taken to area hospitals. And then, the process begins.
First, we're going to begin with the passengers who are from California, they're going to go to a couple of military bases within the state. And
then we're talking about people outside of California and some of the international travelers.
How the international travelers ultimately get to their destinations is not clear, but we know that the State Department is working with various
governments across the globe, Richard.
QUEST: Dan, thank you for updating us on that. And we do need to turn to other matters. Thank you, Dan.
Clare Sebastian is with me. Carnival -- the U.S. by the way has told people not to take cruises, the State Department. So it's hardly surprising.
Carnival is off 20 percent and Norwegian is off 25 percent today.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: And that is on top of the fact that those cruise lines have lost give or take 50 percent of their value
since their peak in mid January, Richard. So this is (INAUDIBLE) a route on top of a route in one day losing in some cases a quarter of their value.
But this is because of the U.S. advisory -- you know, it's because the cruise lines -- you know, they met with Pence over the weekend, they're
coming up with a plan, which is going to involve extra entry and exit screenings, an imposition.
Of course, when you're trying to take a vacation, it's not just in the U.S., Egypt, is also carrying out checks or medical tests on passengers on
cruise ships (INAUDIBLE).
I think these cruise lines, they were exposed to the region, they're exposed to the confidence issue and they're exposed to a potential
recession.
QUEST: Yes, but the cruise -- so we've got airlines, cruise ships and tomorrow the financial sector is going to the White House as well and the
bank or at some point. What do they all want? I mean, what are they going to get?
SEBASTIAN: Well, I think in terms of the -- of the craziness in the travel industry, there certainly is talk from the administration that they might
be willing to do something to help them whether its defer taxes, or things like that.
Because clearly, this is a situation that's completely out of their control that the drop of in demand is something that's really going to -- going to
be lost revenue rather than revenue that's been deferred and recaptured later. I (INAUDIBLE) don't forget that it could be up to 113 billion in
lost revenue for the airlines.
It's impacting not just China and Asia, it's now we're now seeing some carriers in the U.S. cut capacity. So they're looking for the
administration to actually do something tangible.
In terms of the banks, that's a little less certain. I mean, I think that you know, partly that's going to be a discussion of how this could impact
the economy. It's going to be some fact finding from the administration itself.
QUEST: The appetite for buying at the moment, even the buy on the dips, you and I have talked about buying the dips many times. It's not there yet. I
mean, everything I read says there's more to come here.
SEBASTIAN: Yes, people have been very careful. Some people are dipping their toes in but they're taking a defensive posture based on the sort of
market participants and portfolio managers I've spoken. Say, healthcare, consumer staples, consumer discretionary, as we've seen Walmart is really
the one constant and --
QUEST: I'm going over there to talk about that, to talk about Walmart and the markets. Let's stay over here.
And actually, Clare, you can please, come on, come and join me. And we'll just talk about this as we're talking. You just sort of join me and stand
over there.
And Walmart is up and showing good gains. Why?
SEBASTIAN: Well, if you're going to shop anyway, Richard, you're going to shop at Walmart. I think the statistic is 90 percent of Americans live
within 10 miles of a Walmart.
QUEST: Right.
SEBASTIAN: So this is -- and they've captured some of this sort of stockpiling and there's a panic buying that we've seen.
QUEST: Boeing, down, why?
SEBASTIAN: Well, I mean, they are suffering their own. Of course, they (INAUDIBLE) 737 Max. Plus, the spillover from the airlines who have had to
cut capacity. I think we're going to possibly see people cut down on plane orders, who knows?
QUEST: Right, and as we look at the 30. You know, you've got your -- you've got your Verizon's one of them the best of the day that tells us. That's a
flight to dividends and to stocks.
But these in the middle Coca-Cola, McDonald's, and other people's stores are closed. Coca-Cola and Visa, banks. I suppose, there's all -- they've
all got their reasons and they all lead back to either coronavirus or the oil price.
SEBASTIAN: Supply or demand or -- you know, in the case of Apple, both. And the Coca-Cola's, well, they said that some of the sweeteners for example in
Diet Coke come from China, they might be impacted there.
3M an interesting one because of course they as we know make the protective gear, the masks that is in such dire need at the moment but still people
aren't buying that company. They of course have their own issues as well.
QUEST: All right, come over here. So what happens? Do we say do we believe that the circuit breaker did its business and actually was a success? It
held -- it held the lines and it's allowed for mature thought?
SEBASTIAN: Well, we we dipped into session when I was about here.
QUEST: 9,000, that was eight percent, yes.
SEBASTIAN: Right. So there was a -- there was a point at which I think it could have gone either way at this point. But I think we're coming back and
it's sort of -- I mean, it's hard to call 6.6 stabilizing but with sort of an array.
QUEST: The triple stack will show hopefully exactly where we stand in terms of the big three. We are down heavily on the Dow, we are down heavily on
the NASDAQ. We are down heavily on the S&P 500 and we will take a profitable moment after the break.
(COMMERCIAL BREAK)
[15:57:40]
QUEST: Tonight's profitable moment. Well, what a day, what a day. The circuit breaker kicks in at the seven percent off for the first time in
history. The market falls more than eight percent at one point. We are just teetering on a technical bear market down 20 percent. We're down about
seven -- or 16 or 17 percent, and the uncertainty predicating all of this both in terms of the coronavirus and now in terms of oil with Saudi and
Russia.
Well, that hasn't gone away. In fact, it's got worse. And that's the marriage. And that's going to be the way it is for the foreseeable future.
There -- you look, I know there are bargains galore out there in the stock market. And anybody who takes an interest in shares (INAUDIBLE), we're all
waiting for that moment when we think it's the bottom of the market, let's increase the portfolio.
Are we there yet? If I could answer that now, I wouldn't be doing this job. I would be on an island somewhere having made a fortune in the past, but I
haven't, and I'm not. And so I'm here. And that's why I'll be here tomorrow as well. And the next day to make sure that we do discuss this with the
best names in the business like tonight, Mohamed El-Erian, or the chief economist of BNP Paribas, all of who say there is more to go in this
crisis.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours head, I hope it is profitable. "THE LEAD
WITH JAKE TAPPER" and the "CLOSING BELL" is next.
[15:59:16]
JAKE TAPPER, CNN HOST: Welcome to THE LEAD. I'm Jake Tapper and we start with breaking news. Wall Street is about to close any minute now. The Dow
collapsing around 1,900 points today, its worst single day loss ever as an oil price war ads to fears over the coronavirus. The Treasury bond today,
the yield hit an all-time low. The Treasury bond yield as the government's interest rates --
[16:00:00]
END
