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Quest Means Business
Global Stocks Up, Dow Enters Bear Market; Trump Discusses Coronavirus Impact with CEOs Of Major Banks; The British Have Come Out With Billions In Fiscal Stimulus. Aired 3-4p ET
Aired March 11, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:47]
RICHARD QUEST, CNN BUSINESS ANCHOR, QUEST MEANS BUSINESS: Sixty minutes to go before we are closing the shop. It won't be a moment too soon today when
the closing bell rings.
We are at the worst of the day, down nearly six percent. Who knows what will happen over the next hour. Look at the broader market, and you see,
the Dow is actually off the most, technology stocks. Well, it's all pretty horrible. We're under 7,000 and 8,000 there; 25 -- this is almost -- this
is just about a bear market at the moment.
These are the markets. And really, you know, the reasons why. Today, it was because the World Health Organization officially declares Coronavirus
outbreak a pandemic.
Governments are responding. President Trump is meeting with bankers this hour. The head of the E.C.B. is urging European leaders to do more.
And absolutely dire warnings across the travel industry. One airline is warning it might not survive.
We're live in the world's financial capital, New York City. It is a glorious day today. It's Wednesday. It's March the 11th. I am Richard
Quest, and yes, I mean business.
Hello and good evening. Tonight, the main headline of course the bull-run is on the brink after yesterday -- after Tuesday's brief reprieve, stocks
plunging again and neither stimulus in Europe nor remarks from the U.S. Treasury Secretary seem able to halt the volatility.
Look at the market at the moment. It is broad based. We are at the worst section of the day, the worst low, lowest point of the day. Every sector is
down. And these numbers 23,060.54. We are at a bear market territory. So we are well actually in a bear market -- it could be -- if it closes, if it's
sustained. We'll talk about that in a second.
A double whammy of what's happening. The coronavirus pandemic and an oil price collapse is threatening to drill a fatal blow to Wall Street's 11-
year bull market.
The Dow is in a bear market range. That's a 20 percent decline from the previous high, and that was only on February the 12th.
Goldman thinks the slowing business activity will crunch corporate profits and officially end the longest economic expansion in American history.
On our air tonight, well, we brought out Julia Chatterley --
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: With the big guns.
QUEST: We bought out the big guns because we need to understand. Julia, what's going on now in a bigger market picture?
CHATTERLEY: Well, I was going to say, in a small term, in the short term here, bear market territory. A bear market -- just remember the level and I
do think this is important, 23,641 is the level on the Dow to technically say we are then in a bear market.
Goldman Sachs Of course today didn't help. They predicted that the bull market run, the 11-year bull market run is already over.
What we're seeing to your point, big picture here is sheer volatility. Investors do not know how to price the implications of a number of things.
One, the coronavirus outbreak, the economic impact of that outbreak. Oil, what's going to happen with the clash of the titans going on there? It's
simply too much to deal with.
And for me, the price action today particularly is interesting. Bonds. Bond prices have dropped today. Yields have risen. At the same time as stocks
going down, too. We're not seeing that flight to safety today in bonds.
And that tells me that it's just people taking risk off the table, paring their positions.
QUEST: You say, I mean, it's not a panic. It's a sort of -- it is -- there is a strong reason behind what we're seeing because the level of
uncertainty, as you rightly say, is so great.
CHATTERLEY: This is so hard -- this is such an important point, Richard. We can't call this panic because we're trying to grasp, businesses are
trying to grasp the impact.
We're only really seeing the beginning of this. Airlines -- they are the one who at least are able to say look, we are cutting capacity by 50, 60,
70, 80 percent in certain cases, what we're seeing is worse than September 11th in terms of cut capacity.
[15:05:10]
CHATTERLEY: We're starting to understand the impact for certain companies. We have no clue for the rest.
QUEST: The U.K., the Bank of England cut rates by half a point. The U.S. has already done that. And that's not good. I mean --
CHATTERLEY: Symbolism. We are trying to take action here. We're slashing rates. We were already at low level.
QUEST: I've got a U.K. mortgage and it's tied to base rate.
CHATTERLEY: It's flexible is it, as opposed to a fixed --
QUEST: Yes, yes.
CHATTERLEY: So your mortgage payments just lessened.
QUEST: It did. But by about 80 quid, but you know, 80 quid is better --
CHATTERLEY: It's your house, Richard.
QUEST: No, it is better in my pocket then the government's or the building societies, but my point is, monetary stimulus isn't going to do much good
now. It's really for the Central Banks ensuring the financial plumbing doesn't seize up.
CHATTERLEY: Absolutely. Short term loans filling that gap, the financial gap that's going to take place if workers are told to go home and
quarantine. What about for those that are paid by the hour? If they don't work, they don't get paid. Where's the backup?
And this is not just a U.K. problem, of course. This is broader, making sure that banks say, okay, you can have a mortgage holiday, something that
we've seen in Italy, too.
It's thinking about these things, making borrowing cheaper for businesses. This is important. So base rate cuts do help. Stimulus is more important,
and I think the U.K. actually sent a message to the entire world with the steps they took today -- spend.
QUEST: We're well and truly low, six and a half percent on the Dow. Thank you.
CHATTERLEY: Yes, it's a sad day.
QUEST: Thank you, Julia. Thank you.
CHATTERLEY: Yes.
QUEST: All right, and as we take a look, we're covering this from every angle and as you'll be familiar, we talked about the markets. We talked
about the travel industry. We talked about the economic impacts, and of course we've talked about the health sector as well and the numbers
involved.
Today is all about stimulus. That's economics -- all about stimulus.
The U.K. has announced its plans already. The U.S. is trying to get its response together. The White House plan is not yet clear.
The White House is looking to Wall Street for guidance on exactly what would be acceptable, what would likely help against the coronavirus.
Right now, at the White House, the President is meeting his CEOs of JPMorgan Chase, Bank of America, Citi and Goldman Sachs and holding close
talks on containing the economic fallout and the market panic.
Kaitlan Collins is at the White House. She joins me now. So this is a case of, come on, get on with it. Everybody is waiting to see what this plan is.
How close do you think it is, Kaitlan?
KAITLAN COLLINS, CNN WHITE HOUSE CORRESPONDENT: Well, it doesn't appear that there's any final decisions that have been made, and if you're looking
at what's happening on Capitol Hill that seems to be hinting from the House Democrats that they may try to pursue their own economic package here,
though we are hearing from officials here today, the President still does want to do something, something big, he says.
The question is just what is the reaction going to be? And how helpful is it going to be to really try to blunt the economic impacts that we are
seeing this spread of coronavirus have.
Now, he's meeting with these bank CEOs, obviously, they are incredibly concerned about exactly what their future is going to look like, given the
economic side of all of this. But what you saw yesterday was really telling of where the administration is on this because the President hinted that
they had this final deal. It was going to be major and dramatic, he said.
But then he went and had lunch with Senate Republicans, his own allies on Capitol Hill, and they were very cool to the idea of having this payroll
tax cut, other ideas like that. But one thing that is getting common ground is that paid family sick leave, though.
QUEST: Right. Hey, I can understand paid family sick leave. That's sort of merely humanitarian. Why are Republicans in the Senate against a payroll
tax or against -- I mean, I understand the conservative philosophy that you don't bailout businesses. But this is -- the house is on fire and it's
raging.
COLLINS: Yes. But I think their concern is that if it is not bringing a water hose to that house fire, it's bringing something that's not actually
going to help put the fire out. That seems to be their concern with the payroll tax cut, especially a lengthy one that they said would at least go
until December because the President wouldn't want to stop it before the November election, he told those Republicans yesterday.
They don't think it's actually going to help because sure, it'll put more cash in people's pockets, but that's not going to help if those people are
being advised by health experts that they should not be leaving their homes and going and spending that money on, you know, vacations, trips, things of
that nature.
So that's really the concern there. That's why it seems they seem to try to focus on other things, though, I am still told that is something that
President wants to pursue, but it's unclear if he will abandon it if he keeps getting these messages from Republicans.
QUEST: This is all very, very risky for a controversial President who's facing reelection.
At what point do we see almost panic and drastic action from the President?
[15:10:07]
COLLINS: Well, that's the thing. People in the White House are trying to get him to take this more seriously, so are people outside the White House
because they feel like so far, he has been dismissive of it.
And instead of trying to, you know, focus on it, give this sober analysis, he is saying things like, stay calm. It is going to go away. The people
around him fear that it is not going to go away. And if it is, it's not going to go away soon.
And if it does, it's not going to go away before things get worse and they've got to deal with that. So that's really the concern here.
The President certainly does get the economic aspect of all this. I mean, he can turn on his TV and watch the stock market, something he does pretty
often.
So he certainly does get that, but it privately, he keeps blaming the media saying they're over exaggerating these concerns here.
QUEST: Thank you, as always. Thank you very much. At the White House, come back when we have more. If you think we're over exaggerating, let's just
quickly bring up the stock market at the moment. What the Dow Jones is doing, and you can see exactly.
We're now off some six percent -- 6.3 percent, down 1,500 points. Well, emergency measures can help start a struggling economy and those economic
levers, if you will, can help get the engines of growth running here.
And all of this, to some extent is traditional economics. First of all, you have the lever of monetary policy, pull that lever. Well, you've already
had emergency interest rate cuts from the Fed and the Bank of England, both of which lowered rates by a half a point.
Quantitative easing is potentially on the cards. The E.C.B. will discuss this tomorrow.
Then you have the lever, which can be pulled, which of course, is what everybody's saying is fiscal stimulus, and that would boost government
spending. It would give tax cuts for workers and corporations and put more money in the hands of consumers. That of course, is what we were just
talking about with Kaitlan, just a second ago.
So as terms of stimulating the economy, they are the two big ones. But you also want the government to pull the lever of private sector health,
emergency aid for industries worst hit by the virus. You're talking about the airline, the cruise industries, hospitality -- all under threat.
And expand the paid leave for sick or quarantined workers. Remember, in many countries, this will be part of the national social services
structure. Here in the United States, you take your paid leave out of your leave, and there's no paid leave in many, many cases, per se.
Ethan Harris is head of Global Economic Research at Bank of America Securities. He joins me now from New York. Ethan, very good to see you,
sir. We seem to have entered a new stage of this crisis today.
ETHAN HARRIS, HEAD OF GLOBAL ECONOMIC RESEARCH, BANK OF AMERICA SECURITIES: Yes, I think as you said, the problem right now is we're talking about a
bunch of policies that don't address the media problem and what you need is exactly what you're describing, stuff that directly addresses that people
may -- who may not be able to go to work due to the virus.
But another thing which you didn't mention, which I would add to the list is supporting people who don't have health insurance and making it clear
that they do not have to pay out of pocket to be tested and treated for the coronavirus.
Because this is the big hole in the U.S. healthcare system. We have all these uninsured people and you cannot get the coronavirus under control. If
you can't find the people that have the virus, test them, and then give them treatment.
If they're hiding in their home or continuing to go to work because they think they're going to lose their paycheck, you're just going to persist
the virus.
So I think the best thing for the markets right now would be to refocus the whole policy debate on the immediate issue at hand and show that we're
serious about fighting the crisis.
QUEST: It's uncertainty about earnings that's causing a lot of this danger. Companies warning, you simply can't price stocks at the moment in
terms of what their forward guidance is, but I'm just looking here.
Boeing has said it's confirmed that the company is drawing down the remaining amount of $13 billion bank facilities. It's already taken seven
and a half billion.
When you get -- I mean, Boeing is dragging the Dow down today. But until we get any form of clear transparency on all of this, Boeing down 17 percent
today, this is -- this is devastating. This is catastrophic for the markets.
HARRIS: Yes, I think you're absolutely right. The uncertainty is killing the markets right now. People want to have a sense that they know where the
bottom is here in terms of the negative impacts to the economy.
So getting going on to addressing the virus and getting statistics out there that we can believe that suggests it's getting under control,
adopting policies that are directed at the real problem, because until you do that, you have all this headline problem for the markets where you've
got rising cases, you've got companies reporting negative effects.
You've got people reporting that they're sending everyone to work from home. That headline risk will continue until you address the crisis and get
it under control.
[15:15:16]
QUEST: This is somewhat academic, but it's worth talking about in the sense, will the U.S. skirt a recession? And we're all obsessed by it. I'm
not sure why it matters in the sense that if you grow by point one, it's the same as losing by point one. It's a very small difference.
But we are obsessed by this. Do you think we will see whether the technical or otherwise two quarters of negative GDP in the U.S.?
HARRIS: Well, we think we'll be close, but we're saying we don't get an official recession. But as you said, that's kind of irrelevant. The reality
is that we're likely to get two very weak either small positive or negative quarters in the second and third quarter.
That should be seen in Europe as well as the U.S. So whether you call it a recession now is semantic. The reality is it's a very weak economy.
QUEST: You seem to suggest that just then maybe, you're being kind that Europe might skirt the recession, and most of them are pricing in a short,
but nasty recession in the Eurozone.
HARRIS: Yes, I think so. I think that's right. There'll be a little -- there will be negative -- enough negative quarters to call it a recession.
In the U.S., it's a little harder to get there because we're coming from a pretty strong economy coming into the year. But for Europe, it was tilting
on the edge there.
So I think that's right. This will be an official recession in Europe.
QUEST: Good to see you sir. We should talk on more pleasant circumstances.
HARRIS: Thank you.
QUEST: Just trying to find out exactly what the markets are doing. We're down six -- over six and a half percent. Thank you, Ethan.
Now whilst the U.S. hems and haws, the British have come out with billions in fiscal stimulus. It's a new pledge to do whatever it takes, and it came
from the New Chancellor as part of the budget.
And coronavirus costs are spiraling on land, sea and air for the travel industry. Now that has to be factored in as well.
It is QUEST MEANS BUSINESS. We are live in New York.
(COMMERCIAL BREAK)
QUEST: The U.K. has unveiled a raft of emergency measures, helping fight the economic fallout.
First on the monetary side, the Bank of England slashed interest rates by a half a point. It was an emergency cut at record lows.
[15:20:07]
QUEST: It's now -- the base rate is at a quarter of one percent bank rate. Their newly appointed Chancellor, Rishi Sunak provided the fiscal side
announcing $39 billion worth of tax breaks and spending and made a pledge to do whatever it takes to protect the British economy.
Anna Stewart in London. Let's split it down. Let's look at what the Chancellor has done. All the headlines.
ANNA STEWART, CNN REPORTER: Well, huge spending, Richard and this was of course the Chancellor's first ever budget. He's only been in the job for a
few weeks, and it really was a coronavirus budget spending of $39 billion in this fiscal stimulus package and around 40 percent of that is just
corona related.
Now there are three main points when we look at the virus related measures. Number one, providing six and a half billion dollars for the N.H.S. and
public services to deal directly with the virus.
Then second point, what do you do with employees who have to take time out of work? Not just because they get the virus, but of course, if they have
to self-isolate. There are plenty of measures ensuring that there will be statutory sick pay from day one, usually it is day four.
If you're self-employed, making sure there's some sort of benefits that they can access because they might not be able to get sick pay and thirdly,
for very, very small firms of less than 250 employees, they'll actually be able to get a refund for any sick pay they give out for up to 14 days.
And the third and final point is that they're actually going to abolish business rates to some small firms, in retail, in leisure and in
hospitality and provide some pretty massive loans as well. All aimed at just bridging that gap when some of these business may find it very
difficult on cash flow -- Richard.
QUEST: Right. But these are excellent measures to help those who are affected and companies. But any idea of a general tax cut, or as the U.S.
is contemplating, a cut in the payroll tax, which would pull considerable amounts of money into people's pocket to act as a stimulus. There's nothing
there?
STEWART: No, no big announcement there, Richard, but I have said there is fiscal headspace and they will review fiscal spending rules.
So that's something that you could see to come, and I think what's important to note is that this was a coordinated effort between the
Treasury, also the government and the Central Bank of England which we'll get onto in a minute.
So a coordinated effort, but also the fact that they're not doing everything right now. There is further room for maneuvers. Of course, this
isn't going to be done or wrapped up this virus and the spread of it and the effects on businesses probably for months to come.
QUEST: And talk about the Bank of England's emergency half point cut. Record lows. Well --
STEWART: Record low and an emergency, Richard.
QUEST: Yes, but it is an emergency.
STEWART: Yes, it was interesting because they're not meeting until later in the month. They decided to do this today. And I think the coordination
between the government and the Central Bank was very assuring for investors. We did see the FTSE 100 higher when the news came out early this
morning.
The cutting itself though, will that do a huge amount? I mean, making money cheaper to borrow is good for some businesses, it won't of course stop
supply chain disruption, it won't get people spending or taking to the skies. It will not do anything to contain the spread of the virus.
But it was one part of a much broader package that will probably help some businesses, offering banks ultra cheap money for four years, a new funding
scheme and obviously. changing capital buffer rules as well.
So plenty there --
QUEST: That's important.
STEWART: Of course, we could see some more of that sort of coordinated action tomorrow from the E.C.B.
QUEST: Thank you. We'll talk about the E.C.B. now. Thanks, Anna Stewart in London, the half a point rate cut by the Bank of England help lend some
early support to U.K. stocks.
The FTSE gave up the gains later in the session, after all, it was trading in the face of Wall Street and it ended the day in the red, but it -- and
it was the worst of the day as you can see there, similar -- quite similar losses though across the continent with most markets ending down.
Europe's Central Bank, the E.C.B. may be about to be the next the bank to move. Pressure is mounting for it to cut rates as it gathers for a two-day
policy meeting.
Its President, Christine Lagarde is calling for urgent action, warning that without a coordinated response, Europe will see a scenario that will remind
many of us of the great 2008 great financial crisis.
That's a line according to a source speaking to Bloomberg, the E.C.B. is due to make interest rate decisions tomorrow on Thursday.
Now speaking to me on Tuesday night's program, last night, Mohamed El-Erian told me even if the E.C.B. moves, there's no guarantee it will help.
(BEGIN VIDEO CLIP)
MOHAMED EL-ERIAN, CHIEF ECONOMIST, ALLIANZ: I don't know what they can do. I know what they will do, but I'm not sure it's going to help. They will
probably give us a notional interest rate cut of 10 basis points.
They will talk about being ready to increase the asset purchases where they go and buy bonds, but rates are so low. This is not about funding costs.
This is about something that the E.C.B. cannot alter itself. I hope that they will be focusing like a laser on the functioning of markets and the
health of banks.
(END VIDEO CLIP)
QUEST: Ian Stewart, the Chief Economist at Deloitte. He joins me now from London. Ian, very good to see you, sir. What -- we will talk about the BoE
in a moment, let's just look at the E.C.B. What are you expecting them to do tomorrow?
IAN STEWART, CHIEF ECONOMIST, DELOITTE: Well, I think they've got to show a determination to lean against the economic effects of coronavirus. We've
had the Fed move last week, the Bank of England today in coordination with fiscal policy.
So I think that they are going to need to do something. I think, probably a combination of more quantitative easing and measures to support bank
lending and liquidity in markets.
I mean, this isn't a financial crisis. This is a crisis which originated outside the economic system.
But the key to avoiding it, becoming a more protracted slowdown is to ensure that it doesn't reinforce and magnify in the financial system.
QUEST: Cutting rates is a fairly symbolic effect now, but doing what you're talking about in terms of ensuring the stability of the financial
plumbing, are you hearing any suggestions that there is tightness in credit markets?
STEWART: Well, we can see that credit spreads have risen the cost of insurance against the risk of default and corporate bond market. The BBB
corporate bond market has gone up.
So some signs of off stress are rising just as you would expect, but no, there isn't. This is very different from 2008-2009.
And I think what Central Banks are seeking to do to preempt problems.
QUEST: Today, we saw in New York trading a dramatic fall off in stocks, but which is still underway at the moment. But we also saw a rise in bond
yields. Bonds didn't -- I wouldn't say they sold off, but the price of bonds fell and yields rose.
Now that is counterintuitive to what we normally see as they act as hedges against each other. Why are bonds falling? Or put it the other way? Why a
bond yields rising when stocks are falling?
Can you hear me?
STEWART: I can't hear --
QUEST: No, no. We seem to have lost the line there. Can you hear me sir? Nope. The line appears to be having some problems.
The markets -- and now they're trading as we come towards a break, and we will get an answer by the way, at some point. It's a fascinating issue at
the moment today why bond yields rose when stocks fell.
Normally you don't get that sort of coordinated relationship between the two. It's the opposite directions.
In just a moment, the ever rising cost of coronavirus to the travel industry. One new estimate is pushing the impact towards trillion dollars.
In a moment. This is QUEST MEANS BUSINESS.
[15:30:00]
(COMMERCIAL BREAK)
RICHARD QUEST, CNN INTERNATIONAL HOST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. The U.S. Treasury Secretary is
warning the travel industry is facing economic damage on the scale of 9/11. Damage on top of damage for Boeing. It's announced a hiring freeze; shares
are dramatically lower. We'll get into all of that. This is CNN, and here on this network, the news always comes first.
The World Health Organization is now calling the coronavirus outbreak a pandemic. Its threat (INAUDIBLE) the new language does not change the level
of threat or how country should respond. He says the WTO -- WHO is concerned by alarming levels of inaction, adding the virus can be
suppressed and controlled.
President Trump is speaking to leaders of the biggest banks, U.S. banks at the moment about how to calm the markets and contain the economic fallout.
In the U.K., the Bank of England slashed interest rates to record low quarter percent to mitigate the damage. U.S. Senator Bernie Sanders is
vowing to stay in the presidential race, despite losing several key states in yesterday's primaries. Major CNN poll shows Sanders trailing former Vice
President Joe Biden among moderate as well as African-American Democrats. However, the Senator says he's looking forward to debating the former Vice
President Joe Biden this weekend.
The former Hollywood mogul Harvey Weinstein has been sentenced to 23 years in prison. Weinstein was convicted in New York last month of rape and
criminal sex acts. All six women who testified against him attended the sentencing. Weinstein faces similar charges in California.
OK, we're at the session lows at the moment. The Dow is -- the Dow had been off a little bit more, but we're at a -- but we're at a bear market, at
least a number that suggests a bear market, which is 20 percent down from its recent highs, it doesn't have to close there. And I venture to tell you
that one night's closing at this level would not make a formal bear market. You got to have a sustained nature of it. But that's highly likely.
Look at the way we are. We're down 4.8 percent on the NASDAQ, that's under 8,000. This is under 3,000 comfortably under we're under 2800. And this.
Now, all these are recovering the coronavirus outbreak and we're doing it from every angle as you are aware. We are -- we are looking at now the
travel industry, and one industry group is putting a price tag on the damage, $820 billion. Now, that estimate is up sharply from last month.
Asia is the hardest hit, more than 75 percent members of the global business, GBTA, Global Business Travel Association, have cancelled trips to
China and other Asian countries. The U.S. Treasury Secretary says the current situation for travel sector is like the aftermath of 9/11. Steve
Mnuchin has been speaking before Congress, he said the travel industry is taking the toughest hits.
(BEGIN VIDEO CLIP)
STEVEN MNUCHIN, U.S. TREASURY SECRETARY: The travel industry in particular is going to be the hardest hit. That what we're seeing is that similar to
after 9/11, there was a big impact on airline travel. Unlike a recession, where airlines lower the price of tickets and more people fly. This
obviously we just have a complete decrease in volume. So, as I said earlier, there may be needs to come back to Congress like we did after
September 11th. And again, I don't want to -- this is not a bailout. This is considering providing certain things for certain industries.
(END VIDEO CLIP)
[15:35:15]
QUEST: Now, warnings from airlines who have been pummeled by the concerns. So, look what we've heard so far. Lufthansa today announced its canceling
23,000 flights in April. The German airline warns more cancellations are expected but it's aiming to smooth out across the across the -- across the
group. Reports say Korean Airs warned employees the carrier is questioning its own survival if conditions continue. It's already cut more than 80
percent of its international capacity. And Cathay Pacific is cutting flights by 65 percent in March and April. The carrier says it expects a
substantial loss of the first half of the year. Kristie Lu Stout has our report from Hong Kong.
(BEGIN VIDEOTAPE)
KRISTIE LU STOUT, CNN INTERNATIONAL ANCHOR: Cathay Pacific is in a world of hurt. It was a brutal second half of last year for the airline. It posted a
28 percent plunge in profit compared to the previous year after months of anti-government protests kept travelers away, and the airlines chairman
says he expects Cathay to incur a substantial loss for the first half of 2020. This is all due to the coronavirus outbreak. And it's not only
Cathay, the global airline industry is suffering, as passengers cancel their travel plans and governments impose more and more travel
restrictions.
According to the International Air Transport Association, the sector could lose up to $113 billion in revenues this year. South Korean media outlets
are reporting that Korean Air is questioning its own survival in a memo to staff. We asked Korean Air for a statement on this, and the president of
Korean Air tells us this, quote, "Our industry faces significant challenges now, and we're trying to minimize sacrifices of our employees."
The crisis has forced Cathay Pacific to slash capacity, cutting all flies by 30 percent in February and 65 percent in March and April. And you can
see it on the tarmac at the Hong Kong International Airport. That's where we filmed rows of dozens and dozens of grounded Cathay planes. In February,
Cathay said 75 percent of its staff would take unpaid leave, affecting around 25,000 employees. We've been speaking with the flight attendant who
has worked with Cathay for seven years. She is taking the unpaid leave, was afraid that she could lose her job.
Driving home the impact of the outbreak we've learned that a 22-year-old Cathay flight attendant has tested positive for the coronavirus. She worked
on a weakened flight from Madrid that carried an infected passenger from Dongguan, China. Kristie Lou Stout, CNN, Hong Kong.
(END VIDEOTAPE)
QUEST: Boeing says the virus pandemic is causing global economic disruption, that's somewhat of an understatement. And Boeing shares,
though, are down more than 17 percent. To preserve the cash, the plane maker says it's immediate freezing, hiring and limiting overtime. And
Boeing also said it is drawing down the rest of that bank facility it has, $13-billion bank facility. Already challenged by the 737 Max crises. Clare,
one year since those planes, but why is Boeing down so heavily today?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: I think it's a combination of those factors that you just talked about, Richard. They are now
acknowledging that this is going to -- they are going to need to try to preserve cash. And that is a big statement for a company that had about 13
billion in free cash flow in 2018. Only then to see its free cash flow turned negative last year, as it tried to deal with the fallout of the 737
Max. And now, cash burn seems to be in an even more acute phase that it's having to draw down this loan today.
Now, they say that that's a backstop. They don't need the cash right now. That's to deal with the market -- the market volatility and stay safe. But
when you have measures like hiring freezes, you have measures like limiting overtime, ending discretionary travel, all of that. There is a question
hanging over this, Boeing haven't gone near this yet, about when these sort of temporary measures start to translate into something more permanent.
Don't forget that Boeing's biggest supplier Spirit Aerosystems has already laid off 2800 people as a result of the production stoppage of the 737 Max.
It's a question that hangs over this industry. When will the layoffs begin?
QUEST: Right. But also, when does the -- where do we stand with the Max, and its return to service?
SEBASTIAN: Well, the same that we've been hearing from the new CEO, David Calhoun, they expect at the beginning of that process to be in the middle
of the year. Now, he says the production will restart before that, and they will start to ramp up from there. But we don't know whether the coronavirus
changes anything on that score. I imagine that that is something that Boeing internally is dealing with, because of course, they don't know --
they don't know like the rest of us, how long this is going to go on.
QUEST: Tough question. Is there a risk to Boeing? I mean, about that we're talking, you know, it's not going to go out of business.
SEBASTIAN: No.
QUEST: It's not going to go out of business. But is there a risk that Boeing has to seek protection?
SEBASTIAN: I think, right now, the situation that we're in is that everyone is in this together. Boeing had a negative net orders for the month of
February. But Airbus also reported no new orders in February. So right now, they're in it together. This is a sort of global plane making duopoly.
[15:40:07]
But even before this day, we're seeing a drop off in demand from China. You can't really imagine that these airlines that are grappling with this
catastrophic drop in demand in air travel, the confidence issue that's going to go on long after that, that they are going to be in a position to
order new planes. And Boeing is already, of course, seeing these cancellations. So, it's a precarious situation, but right now ...
QUEST: But I haven't seen Boeing stock under two bucks -- under 200 bucks for a long time.
SEBASTIAN: It's still is more than half its value in about a year, Richard.
QUEST: Oh, really, yeah, absolutely. And in fact, at the height of the Max crisis, it was at 363, 340. It's lost again, from there.
SEBASTIAN: Yes, I mean, this is -- this is a crisis now layered on top of another crisis. Don't forget that the Max crisis is such a -- it's such a
systemic issue as well to the growth to the U.S. economy. It was expected to shave -- the stoppage was expected to shave half a percent off U.S.
economic growth in the first quarter.
QUEST: The graph we're showing at the moment really does make the point of where things were and where things are today and that -- and that, by the
way, it doesn't include today just looking to see where we started. January of last year, $316 on the share price. Today, 193.
SEBASTIAN: 193, yes.
QUEST: Clare, thank you. The coronavirus is now a global pandemic. In these Chinese cities where the outbreak first began, the tide appears to be
turning, which is one bit of cheer we can bring you tonight. And the markets coming back by a couple hundred points.
(COMMERCIAL BREAK)
QUEST: Turning to the public health impact of the virus outbreak, as the WHO declares a pandemic, the tide appears to be turning in the city where
it began. China says it will close all temporary hospitals in Wu Han as the number of patients continues to drop in the city. So far, China is the only
one bearing the heaviest economic load from the outbreak. Millions of people are still under lockdown in their homes and many businesses remain
closed. Dexter Roberts is a former China Bureau Chief to Businessweek and author of "The Myth of Chinese Capitalism." He is with me now. And this
idea of the way China handled the virus. Everybody said it was strong, it was robust, it was draconian, but it was needed.
DEXTER ROBERTS, FORMER CHINA BUREAU CHIEF, BLOOMBERG BUSINESSWEEK: Yes, well if you look sort of at the progression of what happened, initially,
there was an enormous mess up, there was a cover up by the Chinese government. Some doctors came forward with information about the virus,
they were silenced.
[15:45:12]
And because of that initial cover up, the disease spread to a degree that it wouldn't have, and frankly, people died. So initially, it was -- it was
not a very impressive performance at all.
QUEST: Do we believe the Chinese numbers when they say that things are getting better?
ROBERTS: It does seem to be actually the fact that things are getting better. And really, in the second stage, this draconian measures that have
been taken with the lockdowns, with the quarantines of whole cities, as you mentioned, shutting down transportation, ordering businesses to stop, that
really seems to have slowed the spread of the virus. So, this is really a two-stage response. The second part, rather impressive,
QUEST: And which, of course, has been followed by Italy in the sense of the complete lockdown. You call your book, "The Myth of Chinese Capitalism,"
The Chinese like to -- the Chinese still like to portray to the rest of the world that they are a capitalist country or a quasi-capitalist country with
market economics behind it, but you don't buy that.
ROBERTS: I do not, no. The myth of my book is that China is becoming more capitalistic, that the reforms that did start and have been very real, are
continuing, and that they will continue to grow. They're already very large middle class, and continue to be a driver of global growth for countries
and for companies. I don't think that's happening anymore.
If that doesn't happen in China, what does the country do, as G.E. has tightened its grip to where I don't think anybody knows now it's always,
you know, I won't say dictatorship per se but you know, it's I mean, it is a -- it is an authoritarian regime with its hands around the neck of the
Beast. And what sort of economics will it follow and corporate structures?
ROBERTS: Well, they're in a very interesting position, it's probably the biggest -- they're facing the biggest economic transition since Deng
Xiaoping --
QUEST: Right.
ROBERTS: -- in decades. The idea is they need to move from this factory of the world model that has driven this amazing growth for the last few
decades to a much more consumer driven economy, a service driven economy, and they do want to continue to manufacture but they want automated
factories, wages have gone up, and they want to produce much higher quality goods. The problem and the another myth that I deal with in my book is the
idea that they can actually make that move when about half the population, migrants and farmers are still treated as second-class citizens.
QUEST: Good to have you with us, sir. Thank you.
Now, amid the market chaos and virus worries, it's still an important day for CNN. Children activists around the world are mobilizing for My Freedom
Day, our annual call to end modern-day slavery.
These children from Royal Orchard School in Nigeria. Showed us their dance for freedom. Schools all over the world have come together to demand an end
to human trafficking as part of our CNN Freedom Project. It's a special cause to them, to CNN, and to this program. Now, you remember in 2014, I
visited the Ivory Coast, where I met cocoa farmworkers who never even tasted the project that they work so hard to create.
(BEGIN VIDEO CLIP)
TEXT: It's good. It's good to eat.
QUEST: That is your cocoa.
(END VIDEO CLIP)
QUEST: The fight for freedom and fairness continues in the chocolate industry. Zain Asher spoke to one of the heads of one company that wants to
make chocolate 100 percent slave free.
(BEGIN VIDEOTAPE)
YNZO VAN ZANTEN, CHOCO EVANGELIST, TONY'S CHOCOLONELY: Young people love our chocolate anyhow, so we really tried to communicate directly with them
through our packaging, but also a lot of emphasis on social media and online engagement with these children. We also have school packages
downloadable on our Web site, etc, etc. So, it's really about talking to them and engaging them. And it's mostly the kids that come home and tell
their parents, you know, this, we need to change the kind of chocolate we've been eating, you need to hear this story. And they share their story
with their friends and with their parents and their family.
ZAIN ASHER, CNN INTERNATIONAL HOST: It's one thing to work on your own supply chain and your own value chains to make sure that you deal in a sort
of slavery-free, exploitation-free environment, but you want all the chocolate in the world that is produced to be completely free of
exploitation. That is a great task. No small feat, certainly. How do you go about doing that?
VAN ZANTEN: That is when we launched -- I mean, I think we would say that we need to get 100 percent market share in chocolate to change the world,
we've come to realized that that's a bit of a struggle.
[15:50:04]
So, for us, it's much more now about inspiring other organizations to also take their responsibility. So, we show them, by leading as an example, that
you can be financially successful as a company while still doing good in the world. And last year, we launched Tony's Open Chain Platform, where we
actively invite retailers and other producers of chocolate bars to simply join forces and follow the same five sourcing principles that we use to
really make sure that these farmers that you work with, have a higher income and actually a living income, I would say.
(END VIDEOTAPE)
QUEST: Now, it's not too late to be part of this global celebration. Tell us what does freedom mean to you? Share your story on social media using
the #myfreedomday. Donald Trump tell bankers he'll make a statement on the coronavirus sometime tonight. That's what the market is waiting for. We're
just about at bear market. Well, if we close at this levels, then we find a piece of paper that reminds where we've got to be -- Yes. If it clears at
these levels, we could technically say a bear market has arrived. Let's wait and see.
(COMMERCIAL BREAK)
QUEST: OK, last few minutes of trade on Wall Street. By my reckoning, Clare is with me.
SEBASTIAN: Yeah.
QUEST: By my reckoning, we are just off a bear market on all three, but it's really we're in that territory. We're well and truly down to that
level.
SEBASTIAN: Yes, and this looks like, Richard, is going to be the second biggest point stroke in history on the Dow. Of course, the biggest was
Monday --
(CROSSTALK)
QUEST: Right.
SEBASTIAN: -- we're continuing this trend of alternating between, you know, multiples of thousand points up and down.
QUEST: If we stay down, around about 19, 20, 21 percent.
SEBASTIAN: Right.
QUEST: How long before we can say it really is a bear market?
SEBASTIAN: Well, we have to see the S&P 500 close at the level where it's - - where it's 20 percent down from its closing high, which was about a month ago, Richard, that just shows you the speed of this decline. It looks like
it could be the steepest decline into a bear market since World War II, according to experts I've been speaking to.
QUEST: And if you look at the actual -- those within it.
SEBASTIAN: Yes.
QUEST: All right. So, Boeing is down. We've already talked about that. And what else is interesting in terms of the groups and the connections?
SEBASTIAN: Well, there's just very little relief today isn't it? I mean, even up here where you see the least impacted, this looks like a bit of a
balance maybe from previous losses for the energy companies. Verizon --
QUEST: That's the Sanders' effect.
SEBASTIAN: Right, exactly. Verizon has been sort of as, you know, an island of relative safety because of, you know, it's more of a consumer staple
issue the same thing with Walmart. But that's also down 3.9, today. I think what we saw today was, you know, the expectation of stimulus not being met
in the morning. There were -- if we -- I don't know if we can pull up the Dow. You can see a slight attempt to rally towards lunchtime. But then, of
course, we've got the -- here, you see the slight attempt to come back up towards lunchtime. But then, of course, it fell 30, you got the
announcement from WHO that this is now amid --
QUEST: Right, and there's no appetite.
SEBASTIAN: (INAUDIBLE)
QUEST: In this graph, does sort of little hinges (INAUDIBLE) just as we look at this. Is this capitulation? Everyone talks about this important
thing, capitulation? It's when retail investors throw that -- everybody throws the towel in, and that's often seen as the moment of the beginning
of the -- the end of the beginning and the beginning of the end, do you know what I mean?
SEBASTIAN: Well, I think what the markets are now pricing in, it's gone way beyond the supply chain issues impacted from China. It's even gone beyond,
Richard, the issue of earnings being impacted this quarter and in the next quarter. What we're now seeing markets price in is really a global economic
event, a slowdown that's going to affect, you know, some of the biggest systemically important economies, and I think that we are now sort of
really hovering around that bear market territory for the Dow. We're not quite there on the S&P500, but it's close.
QUEST: All right. I'll take a "PROFITABLE MOMENT". Hopefully, you'll be with me after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "PROFITABLE MOMENT," just before we came on air, one of my colleagues in the studio saw the Dow and there was a shriek -- and she
said, Oh, no, she said 90 percent of my 401(k) is in the aggressive stock funds. Well, you and I can have a good discussion about the wisdom of her
investment strategy, which leaves much to debated, but it does add, but the truth is every one of us, I don't care whether you're rich or poor, whether
your 401(k), whatever it is in your particular country, every one of us is looking at our portfolios tonight, and thinking, what did I do wrong?
Should I have sold? When do I buy? What do I do now?
I've said it a million times. I'll say it again. In a market like this, you do nothing. If you haven't sold it's too late. And you sit on your hands
and you make the best guess for when you think it's time to go back into the market. This is not 2008 all over again. Far from it. No, but it is
something serious. And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it is
profitable. Here's Jake Tapper with "THE LEAD."
END
