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Quest Means Business

Rising Prices, Declining Approval; U.S., Europe Step Up Sanction Threats Against Russia; Oil Prices Up On Fears Of Russian Invasion Of Ukraine; The Decline Of Cathay Pacific; L'Oreal, Verily To Study Skin Care And Consumer Habits; Call To Earth; Beijing Reports Five New COVID-19 Cases Ahead Of Olympics. Aired 3-4p ET

Aired January 20, 2022 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[15:00:17]

RICHARD QUEST, CNN INTERNATIONAL ANCHOR: It is one hour to go of trading before the closing bell rings, and finally some relief for investors.

If you look at the big board, they were buying this morning after the NASDAQ became an official correction at yesterday's close. The markets up

135, had been higher, so let's just think of a dead cat bounce perhaps, I don't know, we will find out as the day moves or as the hour moves on.

That's the markets and the main events we are talking about. Europe and the U.S. are now warning Russia of serious economic consequences as President

Biden suggests that Vladimir Putin will make a move on Ukraine.

Hong Kong's COVID policies costing Cathay Pacific Airline dearly. Morale hit rock bottom at one of the best airlines in the world.

And inflation threatens to derail the President's economic plans as he marks one year in office, time for an economics scorecard, me thinks.

Tonight, I'm live from Dubai. It is Thursday. It's January the 20th. I'm Richard Quest, and in Dubai, as at home, I mean business.

Good evening. Tonight, the U.S. and Europe both say there will be massive economic consequences for Russia if it invades Ukraine. At the same time,

Joe Biden, of course said last night at his news conference, he thinks Russia will make a move against Ukraine. And so he is allowing America's

Baltic Allies to send U.S. weapons to Kiev.

Mr. Biden says an actual invasion would trigger a severe response.

(BEGIN VIDEO CLIP)

JOE BIDEN (D), PRESIDENT OF THE UNITED STATES: I've been absolutely clear with President Putin. He has no misunderstanding, if any, any assembled

Russian units move across Ukrainian border. That is an invasion.

But that it will be met with severe and coordinated economic response and let there be no doubt at all that if Putin makes this choice, Russia will

pay a heavy price.

(END VIDEO CLIP)

QUEST: Now, the U.S., as part of this has also announced sanctions against four Ukrainians, who helped -- are accused of working with Russian

Intelligence to undermine the country. Two of them are actually members of Ukraine's Parliament.

CNN's Clarissa Ward is with us from Kiev. She joins me now.

Well, the Biden comment at the press conference about an incursion, which will get a proportionate response, clarified today, will that be good

enough for the administration in Kiev?

CLARISSA WARD, CNN CHIEF INTERNATIONAL CORRESPONDENT: Well, as you know, Richard, there was a lot of consternation when President Biden made those

comments basically saying that some kind of a limited incursion from the Russians might be met with a smaller reaction from Ukrainian and NATO

forces, and that, of course -- and the international community that had a lot of people here, in the words of one Ukrainian official shocked and

stunned.

We saw again, just recently, a few hours ago, the President -- Ukrainian president Zelensky, saying in a tweet, "We want to remind the great

powers," and by that he means the U.S., " ... that there are no minor incursions and no small nation."

A lot of people here really interpreted President Biden's comments as essentially offering a greenlight to the Russian, saying to them, that they

could probably get away with some kind of limited incursion, and also revealing that there might be mixed feelings within NATO about how to

respond to some kind of limited incursion.

Now, obviously, we've seen a lot of damage control today from the White House in a real effort to clarify those comments. We also heard comments

from Secretary of State Tony Blinken where he really underscored the hugely important reasons that everyone should be in concert acting together,

standing against any potential Russian aggression, calling this a matter, not just of Ukraine, but of international legal norms, a question of

sovereignty and self-determination.

So that will have gone some way. I am sure to offer some form of conciliation to the administration here, but there has been a lot of

discomfort over those comments, certainly -- Richard.

QUEST: So, then you have the NATO diplomat, the anonymous NATO diplomat who said, look, what Biden said we all pretty much -- you know, everybody

knows, it's commonsense. If you send a few troops over to steal a few chickens or steal the milk at a nearby village, you're not going to go to

full out war.

But it was the truth that dare not be spoken out loud at this point. Do you see that?

[15:05:17]

WARD: I think a lot of people see that. I don't think many people said, oh, I can't believe President Biden said that. That's fundamentally untrue or

it's a distortion of the truth. I think it's more as that NATO diplomat said that there are certain things that you just don't say out loud,

because they undermine your cause.

And I think the other thing that has really caused a lot of discomfort is this idea that different allies within NATO have different ideas about how

there should be a response and what that should look like. Because, as we've heard so many times before, President Biden saying, you know, NATO,

we are stronger together, alliances, we are stronger together, if you are underscoring or revealing in such a public platform that there are so many

existing divisions about how to deal with this sort of imminent threat of a Russian invasion, that, of course, will be seen to be many -- by many to

weaken the situation and the ability of NATO to act in a sort of defiant and unified manner.

QUEST: Clarissa, good to have you in Kiev tonight. Thank you, Clarissa Ward, our chief international in Ukraine.

Staying with this, the European Commission, President Ursula von der Leyen, said Europe will respond with massive sanctions if Russia attacks. The

German Foreign Minister Annalena Baerbock says, all measures are on the table and that includes the Nord Stream 2 pipeline, which would allow

Russia to export natural gas directly to Western Europe.

Now this, of course, is not operational up and running yet, but the threat of what could be a future lack of energy has rattled the markets.

And look there, they're down at the moment, but that is only -- I mean, don't -- this is a live price, so don't take that because what you're

looking at is coming off the top. So recently, elevated seven-year high, and the way the markets are moving at the moment, they could soar further

in the event of any form of formal conflict.

The I.E.A. Chief Fatih Birol told Julia Chatterley, Russia is already squeezing Europe.

(BEGIN VIDEO CLIP)

FATIH BIROL, EXECUTIVE DIRECTOR, INTERNATIONAL ENERGY AGENCY: Russia has more than a hundred, at least a hundred million cubic meters per day of

spare capacity, which means -- which means easily, they can increase their exports to Europe by 30 percent, which would immediately comfort European

gas markets and would help the prices to go down and support the economic growth in Europe, especially their vulnerable segments of population, they

would be in a better situation.

But Russia is not doing this. It's a choice. It is true that they are -- they are fulfilling their obligations, but if you want to be considered as

a reliable partner, a reliable supplier in days like this, like the other pipeline exporters like Norway, Azerbaijan, Algeria, you can increase your

gas exports or provide more gas for the spot sales which they are not doing.

(END VIDEO CLIP)

QUEST: Timothy Ash is with me with Blue Bay Asset Management, the emerging markets senior sovereign strategists, this is a mess. This is an absolute

mess at the moment.

And I'm asking you, what do you what -- what does the market now want to see that would ease the pressure to some extent?

TIMOTHY ASH, EMERGING MARKETS SENIOR SOVEREIGN STRATEGIST, BLUE BAY ASSET MANAGEMENT: It's very hard to see a resolution here. The market is very

sanguine, if you read the investment reports of international banks, they think there's not going to be a war. But I think this is one of those read

my lip moments.

Biden said exactly what he said he thought last night. He thinks war is coming, and if you talk to intelligence analysts out of D.C., guys who've

seen a lot of the intelligence, they think it's going to happen.

Now, Putin, it's now or never. And it's not about NATO, it's very difficult to see a solution. I mean, remember, Putin put red lines in place last

week, red lines that were not deliverable.

You know, he is positioning I think, to go into Ukraine, and that's going to be very painful for markets.

QUEST: Right, but which markets? Which markets will hit -- obviously, energy because any form of disruption there even though Nord Stream 2 isn't

online yet, but Russia can turn off other taps, so energy gets it, but sovereign debt?

ASH: Well, Russia and Russian assets have underperformed in the last couple of months. I think they're going to really struggle if it's a proper

invasion and it is an extended period of time. Ukrainian assets obviously, regional assets, energy, but it's interesting, if you go last week, the

Polish Foreign Minister described this as the most serious security crisis in 30 years for Europe.

[15:10:18]

ASH: This is a European problem, and I think broader European markets will struggle if it seems likely we see a major conflict in Europe.

QUEST: The strategy then that an investor would follow -- factor this, we've already got high inflation, we've got rising interest rates in the

U.S. and in the U.K. We have unemployment, we have all these other issues, well, we haven't even mentioned COVID yet.

So where do you place this geopolitical strategic potential war? Where do you place that in that maelstrom?

ASH: Well, unfortunately, it's another -- it is another factor that is going to weigh on inflation. So, Lagarde today was like head in the sand in

terms of inflation problems. But I mean, this is going to be brutal in terms of European energy prices.

So I think, you know, it adds to this global inflationary story. You know, we all know Russia supplies 40 percent of energy to Europe. This is going

to likely further disrupt those inflows, cause more problems there.

I mean, you know, investors should, you know, wake up and smell the coffee, I mean, Russian assets, I think this --

QUEST: Right, so let me take that, finally, this idea of, do you believe a potential armed conflict is priced into the market at the moment?

ASH: Absolutely not, and particularly not in Russian assets, and I think energy markets and European assets in general. This is going to be a big

war.

I spoke to one very experienced D.C. based former security official, and she described to me this is the most serious crisis since the 1980s in

terms of the security situation in Europe. I mean, just think about that.

QUEST: I'm afraid, Timothy, you and I are probably old enough to remember it.

ASH: I'm afraid we are.

QUEST: Which makes the point. All right, good to see you. We will talk more, please, sir. Come back and talk more about it as we work our way

through this crisis, however it transpires and unfolds.

As we continue tonight on QUEST MEANS BUSINESS, President Biden's presidency is one year old, and we need to grade the President on his

economic progress so far.

(COMMERCIAL BREAK)

[15:15:21]

QUEST: A rebound is underway on Wall Street. Well, sort of. Look at the triple stack. You see the Dow is about to turn turtle. The NASDAQ is down,

the S&P 500 is down. That just shows you when it was written off an hour ago, it all looked very different.

But the averages, well, they seem to be marginally more stable or at least holding their own for the moment.

Shares in Peloton quite the opposite. Shares there have fallen sharply, plunged, if you will on a report that it is pausing production temporarily

of its fitness bikes and treadmills. CNBC says it is a report based on company documents. CNN has reached out to Peloton, but has not yet heard

back or received a response.

Shares are now down. Look at that, you see down 24 percent on that.

The high flyer of the market during lockdown for workouts at home now coming back to Earth.

Art Hogan is with me. He is the Chief Strategist for the National Securities. Now Art, so what's gone wrong there? What's gone wrong?

ART HOGAN, CHIEF MARKET STRATEGIST, NATIONAL SECURITIES CORPORATION: Well, you know what's interesting here is a couple of things. So, in the general

market, I would offer up that we are getting to a place where we're very oversold. So, if you look at just this year, and what we've seen in terms

of damage, the NASDAQ is, you know, off 10 percent from its all-time high which was just set in December.

But if you look underneath the hood and say, okay, well, what's the average stock doing? The average stock in that composite index that has about 3,600

names, it's down about 40 percent. So we've done a lot of damage in a short period of time. And it's not just, you know, the first two and a half weeks

of 2022. It's the, you know, the better part of the month of December as well right when the Fed, you know, made its pivot, dropped transitory and

started talking about hiking rates and tapering their asset purchases.

We've seen a lot of multiple compression in those fast growth technology companies and clearly, that seems to continue. And every once in a while in

these multiple compression periods, we have these short-term bounces, and we got one of those today, a pretty significant bounce from the opening

until about a half an hour ago, to your point, and now, we seem to be rolling over into the close, we'll see what the next 45 minutes brings.

QUEST: That's really -- I mean, Peloton aside, there really is only one question that investors ask at the moment. We know these higher interest

rates are coming throughout the course of the year. But is this a buy on the dips moment? Is this a sit and wait it out for clarity? Or is this run

for the hills?

HOGAN: Yes, and I think it's much more the former than the latter. And I will tell you, I think -- the reason I say this is if we go back over the

last 30 years, look at four distinct rate hike cycles. The two things that have happened is that during that rate cycle, especially initial parts of

that, the market has actually done better.

And surprisingly, when we look at the price action in different sectors right now, the sector that's done distinctively well on those four rate

hikes cycles has been technology.

The problem is, it is the anticipation of this. So, this is all the action you get before the actual first rate hike, which will likely happen in

March. And also coupled with all of that anticipation is everyone in the street seems to be running and run around with their hair on fire and

saying it's not going to be 25 basis points, it is going to be 50 basis points in March. And oh, by the way, they're not going to raise three

times, they're going to raise four or five times.

I think that's getting far in front of what a very transparent Fed has told us. They've got three rate hikes scheduled for 2022. The first one likely

happens in March, they will likely be 25 basis points. And oh, by the way, that likely isn't going to be a detriment for markets, but this is just a

change. It's a massive change in our understanding of monetary policy the way we've seen it over the -- you know, since 2018 and 2019, so --

QUEST: But Art, is the long -- I say long term -- forgive me. It is a misnomer. Is the medium term -- is this year -- are we -- is there

something smelly at the back of the fridge that we need to be concerned about that is going to bring the whole thing crashing down?

HOGAN: Yes, it's such a great question, and the market certainly acts like that's the case. I would argue that we are likely to have above mean GDP

growth, and that is for the entirety of 2022.

We are likely to have low double digit earnings from the S&P 500. Away from that, we'll likely have rising rates and then probably have an average of

one and three quarters or two percent yield on that U.S. 10-year for the entirety of the year.

[15:220:03]

HOGAN: None of those things to me really spell out a disaster for the market. In a rate hiking cycle, you typically do half as well as you did

the year before you had a rate hiking cycle in the S&P. So that would mean with a 28 percent return on the S&P 500 last year, we'd likely will have

high single digits or low double digit returns in the S&P 500 for 2022.

So I don't think there is some, you know, cabbage that is spoiled in the back of that fridge that is somehow going to tip over the applecart and

propel us into a bear market. We're not going into a recession. I don't think we're going into a bear market either.

QUEST: Art Hogan, really glad we had you on the program tonight. I'm grateful, sir. Thank you.

Unemployment is rising in the United States. More than 280,000 Americans filed for first time jobless claims last week. It's the most since October.

Analysts were expecting the number to go down.

The Biden administration has touted jobs growth as a major accomplishment of his first year in office. The U.S. added six and a half million jobs in

2021, and the most recent unemployment rate is at 3.9 percent. That's off from 6.7 a year ago.

But of course, there are so many millions unemployed. Inflation is now -- was at 1.4 percent last January. Now it's over seven percent. It was the

story of the year and trying to curb it will be the story of this year, and then there is President Biden's legislative agenda.

Congress passed the $1.9 trillion American Rescue Plan, but that was COVID based. That was very firmly COVID economy based.

It passed the $1.2 trillion infrastructure bill in November. However, the Build Back Better bill didn't pass. The President believes he can still get

part of it done this year.

Catherine Rampell is with me.

Catherine, if you have to take all of that, and you know, I suppose it's vulgar to grade from one to 10, but grade from one to 10?

CATHERINE RAMPELL, CNN POLITICAL COMMENTATOR: How would I grade? I don't know, maybe a seven. This is all very imprecise, obviously.

I think what Biden had ahead of him when he came into office was a really, really challenging task with healing our economy and he did quite well as

you point out and part of that task, chiefly the job market, unemployment fell much faster than people had expected.

You know, the number of jobs that have been added in the past year were the highest on record. GDP growth is up. Consumer spending is up. Household

balance sheets look pretty healthy. So there are a lot of things to celebrate.

However, there's that big however, it's the inflation numbers and the inflation numbers are not good, and part of the reason that they're not

good, of course, has to do with the very same measures that Biden took, that Democrats took to heal the job market. That is their fiscal stimulus

last year.

QUEST: Right, now, one shouldn't be surprised in a sense that the inflation is higher with this much monetary stimulus and fiscal stimulus, as an

element of normality returns to the economy. Simply, you know, gasoline on the flames.

But how far is the President going to be blamed for the fact he is the President, when the flames finally got going, and the Fed has to be the

fireman?

RAMPELL: Well, the President always gets, in my view, too much credit, too much blame whether economic conditions are good or bad. In this particular

situation, Biden has relatively few tools at his disposal to do a lot on inflation, and even the tools that he has available, he has seemed somewhat

reluctant to use things like reducing tariffs, or accelerating the processing of legal immigrants, for example.

So he hasn't been willing to use those, they might have some modest effect. But to your point, it is the Fed's job to deal with price stability and I

applaud the President for saying, we respect the independence of the Fed.

That said, of course, Biden kind of dragged his feet in announcing who he would appoint to the Fed, even though he knew well in advance that he would

have three vacancies coming up.

So it's hard to know how seriously they're taking a lot of this even as they claim that inflation is forefront in their minds.

QUEST: Even if it's all going, you know, he's got the right -- he's got a bit of -- he's got blamed for what he inherited, et cetera et cetera. The

inability to get through his flagship -- flagship -- policy of reforming social welfare, because of one of his own -- members of his own Senate,

that is just extraordinary and that surely damages beyond any question.

RAMPELL: Yes, I think actually, in retrospect, the biggest downside of the fiscal stimulus that Biden pushed through last year with the party line

vote is that it may have crowded out the political will within his own party for some of these other in my view much more important and much more

valuable economic and safety net measures, whether we're talking about universal preschool, or access to child care, climate investments, a whole

bunch of other things that obviously have been on Democrats' wish list for a long time, but that are also quite popular.

[15:25:25]

RAMPELL: And part of the reason why Biden is having trouble getting that legislation through right now is because rightly or wrongly, one particular

member of his party, Senator Joe Manchin is concerned that this bill will add to inflation.

Now my view is the bill based on how it is structured over 10 years, mostly paid for et cetera, probably won't have much effect on inflation either

way, but it doesn't matter what I think about it, it matters what Joe Manchin thinks about it.

And if that is the main source of his hesitation to vote for this piece of legislation, then in retrospect, yes. The bill last year that has

contributed to that inflation was poorly designed, you know, it was too big, had a poor composition, and maybe they should have saved more of that

firepower, fiscally and politically, for this other much more expansive social project that Biden has staked his legacy on.

QUEST: Catherine Rampell in New York, I'm grateful. Thank you.

RAMPELL: Thank you.

QUEST: Hong Kong's flagship carrier, Cathay Pacific is in trouble. Cathay is buckling under pressure from Mainland China's zero policy. We will have

a report after the break.

(COMMERCIAL BREAK)

QUEST: Hello, I am Richard Quest. We have a lot more QUEST MEANS BUSINESS this evening, when Sir Martin Sorrell will be with me. The next great

frontier could be the metaverse.

[15:30:00]

He has a lot on that. Hopefully he'll tell me what it means.

And Cathay Pacific in crisis: Hong Kong's zero COVID-19 policy has taken the biggest airline to the brink, all of which we'll get to, I promise you,

but only after I've updated you on what's happening in the world because this is CNN and, here, the news always comes first.

(MUSIC PLAYING)

QUEST (voice-over): A damning report is accusing the retired Pope Benedict of mishandling sexual abuse cases when he was archbishop of Munich. The

report by a German law firm found that the former pope knew there were priests who abused children and he failed to take action.

The pope emeritus has responded to the accusations by expressing his pain and shame for abuses in the church.

Scores of people are feared dead following the massive explosion in southwest Ghana. They say a vehicle carrying mining explosives collided

with a motorcycle and we don't have details yet but authorities say most of the injured have now been rescued and admitted to hospital.

The small town appears to have been completely leveled in the blast.

Australia's parliament has voted to make COVID vaccines mandatory for all adults, to take effect on February the 1st. Pregnant women and people's

health who may be endangered by the shots are exempted. The legislation is the strictest COVID-19 mandate in the E.U. -- I do beg your pardon; I said

Australia, which is, of course, Austria that I should have been talking about, Austria.

(MUSIC PLAYING)

QUEST: COVID-19 has spread further in China and has prompted officials to further tighten restrictions ahead of the Winter Olympics. Beijing just

reported five new cases this week, four of them were workers in a frozen food storage facility. The building and those workers who live in them have

now been put into lockdown.

Hong Kong's zero COVID policy is crushing the city's homegrown airline. The new border controls that include restrictions on transit mean that Cathay

Pacific is a shadow into what it was before. It's been a remarkable fall for one of Asia's leading carriers.

Founded in 1946, Cathay Pacific grew into a powerhouse for both long haul and regional connecting traffic to the West.

(VIDEO CLIP, CATHAY PACIFIC COMMERCIAL)

QUEST: As Kristie Lu Stout now reports, the city's COVID policies have badly damaged morale among the airline's employees.

(BEGIN VIDEOTAPE)

KRISTIE LU STOUT, CNN ANCHOR AND CORRESPONDENT (voice-over): Once the gleaming aviation hub that drew pilots from all over the world, Hong Kong

is now locked in one of the toughest quarantine regimes on the planet and some pilots at Cathay Pacific airlines are at breaking point.

UNIDENTIFIED MALE: It just seems like a ever downward spiral of hopelessness, despair.

STOUT (voice-over): Speaking anonymously for fear of reprisals, this pilot says Hong Kong's quarantine rules are damaging his well-being.

UNIDENTIFIED MALE: For weeks on end, I'm just eating hotel room food, no fresh air, there's no real way to get exercise and you sort of sit around a

lot. I find your health really suffers.

STOUT (voice-over): Like most airlines, Cathay has been hit hard by the pandemic. But the challenges it faces, as a Hong Kong-based carrier, are

among the toughest around. Hong Kong pursues a zero COVID policy with strict quarantines.

All Cathay flight crew are fully vaccinated. But pilots tell CNN that the airline has a strict policy for those traveling to countries deemed as high

risk, like the U.S. and U.K. To staff those flights, Cathay runs what they call closed loop flights on a voluntarily basis.

STOUT: Cathay pilots tell CNN, they involve five weeks confined to hotel rooms. The first three weeks they fly; they're confined to hotels during

layovers and the last two weeks they're in Hong Kong hotel quarantine.

The process is so grueling, the company has set up emotional support groups.

STOUT (voice-over): And weighing on all crew, the risk of ending up at a government run quarantine camp with their families, if someone tests

positive for COVID. Cathay is also under fire for sparking a fifth wave of infection after two crew members broke self-isolation rules, spurring Hong

Kong's top leader to threaten Cathay with legal action.

UNIDENTIFIED MALE: We have apologized publicly.

STOUT (voice-over): The airliner apologized and fired the staff involved. Without naming the airline, Hong Kong police arrested and charged two

former flight attendants for allegedly breaking COVID-19 rules.

Cathay confirmed the arrests to CNN.

As the city tightens restrictions on the Omicron outbreak, Cathay has cut more flights with passenger flights slashed to 2 percent of prepandemic

levels this month.

[15:35:00]

UNIDENTIFIED MALE: And I salute you for your service to the community.

STOUT (voice-over): In a message to staff, company chairman Patrick Healy thanked them for their sacrifices. He also said he was acutely aware that a

small number of our crew have brought the company into disrepute by breaking self isolation rules. Despite the turmoil, analysts say the

airline's prospects remain positive.

UNIDENTIFIED MALE: They're still in relatively good shape, financially compared to other airlines in Asia, as well as other airlines based here in

Hong Kong.

STOUT (voice-over): After working at Cathay in Hong Kong for over 10 years, this pilot plans to leave by the end of the year. He says flying a plane at

a time of zero COVID could turn into a safety issue.

In response, the company emphasized how it supports staff while adding, "Pilots who wish to withdraw from the closed loop roster pattern can do so

without prejudice at any time."

In another era, Cathay promised an experience for its passengers to arrive in better shape, it's a message the iconic airline and its pilots need more

now than ever -- Kristie Lu Stout, CNN, Hong Kong.

(END VIDEOTAPE)

QUEST: So the cosmetics company, L'Oreal, is taking skincare to a new high tech level. In collaboration with Alphabet, the parent company of Google,

L'Oreal and Alphabet say their research will look at whether there's a link between consumer habits and skin condition.

So they can determine what products to recommend. They're also expected to develop a telediagnosis platform to give people quicker access to skin care

information.

Barbara Lavernos is the deputy chief executive of L'Oreal and she joins me tonight from France.

Barbara, it's kind of you to join us, thank you. This is fascinating.

But at the same time, I hear that L'Oreal and Alphabet, I wonder who gains most from this deal?

BARBARA LAVERNOS, DEPUTY CEO, L'OREAL: Oh, hello, Richard, thank you for having me with you tonight.

The question is, if I may, on this one, because the two of us will benefit.

But who will most benefiting from this partnership?

Which is really the strategy from the (INAUDIBLE) bringing together science and technology, our consumers, our patient. Because, you know, Richard,

(INAUDIBLE) in the world, one in four people are suffering from skin disorders; 1.9 billion people -- eczema, acne, those types of things.

And on top of it, all people are looking to better manage their skin health for wrinkles, UV exposure. So the benefits will be for consumer.

QUEST: But how does putting yourself -- I say I find it fascinating because it's clearly at the forefront of what we know and will be doing.

So tell me, how does it benefit?

What do you do with them and what do they do with you?

LAVERNOS: Absolutely. On the one hand, you have to understand, on the one hand you have L'Oreal, a century long beauty leader, dedicated to science

(INAUDIBLE) out of science. We have 4,000 researchers at L'Oreal, 1 billion euros spent a year dedicated to science to provide people with better

solution for beauty. That's on the one hand.

With our latest in knowledge in skin and biology and the solution in beauty. On the other hand, you have Verily, the health tech company,

working with the best pharma, university and association on Earth.

And we would bring together our science of skin and beauty and that tech power that our scientists will work together and then propel in a new era

of discovery, because I'm sure, with this combination, that data algorithm, AI-powered platform we will build together in joining forces, we will

unlock and move further this, the discovery of a biomarket, you know, the biology underneath the skin to --

(CROSSTALK)

LAVERNOS: -- yes?

Sorry?

QUEST: So when, well, I'm just curious -- typical pesky.

But when would you expect to see the first product?

Or when would you -- let's not even be as blunt as that.

When would you expect to see some result as a result of this?

LAVERNOS: We just signed the deal and we just announced today this partnership. So -- and it's (INAUDIBLE) deal and partnership. It is

exclusive for beauty. And we expect first of scientists to continue to further strengthen their performance in term of new active new solutions

for beauty.

This will last for a while but if we power with data and algorithm.

[15:40:00]

LAVERNOS: And I think this will speed up our power of innovation. But we are also expecting 12 or 18 months from now to get already, to life, a

platform that will allow dermatologists and patients to connect, to have no more reactive but a proactive way to manage their skin health.

QUEST: Barbara, I'm very grateful this evening. You've stayed up late to talk to us. Thank you, I appreciate your time. Thank you. Thank you.

When we come back in just a moment, more QUEST MEANS BUSINESS.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

QUEST: Call to Earth: astronaut Thomas Pesquet quite recently returned from six months aboard the International Space Station. From there, his view of

Mother Earth was as alarming as it was breathtaking. In today's "Call to Earth," he tells us how, even from space, the effects of climate change are

visible.

(BEGIN VIDEOTAPE)

(MUSIC PLAYING)

THOMAS PESQUET, ASTRONAUT, EUROPEAN SPACE AGENCY (voice-over): When you look at Earth from the space station, it's absolutely magical. It glows in

blue and it's the most beautiful scenery you could possibly imagine.

When you take a step back and you see the Earth in its entirety, you understand it's just an oasis in the cosmos. All around is nothing, no

life, it's blackness, emptiness. And there's this blue ball, with everything we need to sustain human life and life in general, which is

absolutely fragile and it makes you want to cherish the Earth.

I'm Thomas Pesquet, I'm an astronaut for the European Space Agency. I'm coming back from my second mission to space, on board the International

Space Station as a permanent laboratory that orbits the Earth.

Just like onboard the space station, the Earth is a spaceship and we are its crew. It flies around the sun. It has limited resources. It has some

protection means but they can be overcome. You don't control the amount of resources you have on board. But you have to manage them.

[15:45:00]

PESQUET (voice-over): And what you can control, the way you care about the spaceship, the way you maintain it, because you want the flight to be as

long and peaceful as possible.

You can see a lot of the consequences of human activities from space. Some of them climate change, some of them just plain old pollution.

My first mission was in 2016, launched 2017 landing, was second mission was five years later in 2021 and I could see a difference. The most visible

effect is glaciers retreating year after year, mission after mission, you know, the ice caps melting in the poles.

What you can see as well is all those extreme weather phenomena. They're getting more and more frequent. We've seen a couple of hurricanes, we've

seen a ton of wildfires in California, in Canada, in the Mediterranean.

From my first mission to the next, it was already a big increase. It is definitely my experience of being in space and seeing it with my own eyes

that made me want to advocate against climate change.

I'm an ambassador for the Food and Agricultural Organization of the United Nations. During my mission on the space station, we had a lot of research

done on plants because space is a harsh environment for plants.

By studying plants in the environment of space, we can study how they can resist to drought or water scarcity and then we can feed all those results

to research being made on Earth, and to create some more resistant crops, the crops that will resist to climate change.

We've also worked on all our packaging. Just like on Earth, we're trying to limit the use of plastic, of production of waste. And so we came up with

edible packaging, which is just such a fantastic and simple concept.

We need foam to protect everything, from shocks during launch into space. So what we did is we turned that foam into food. It's like gingerbread. Now

our packaging is at the same time a source of food. It reduces the need to send cargo up, it reduces the production of trash. It's brilliant.

So hopefully that technology can also transfer to packaging on the ground and then we can reduce our environmental footprint every time we go buy

something in the supermarket.

If we set ourselves on the right path, there's nothing we cannot do. We built that unbelievable facility in space. We're using it everyday,

peaceful cooperations between countries that were not always friends.

So if we can transfer that model to the way we deal with the environment, I think we'll get there. I'm optimistic for the future. If we can make a

space station fly, then we can save the planet.

(END VIDEOTAPE)

QUEST: I do love the optimism. Brilliant. Now let us know what you're doing to answer this call. Of course, you know where it is. It's the

#CallToEarth.

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[15:50:00]

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QUEST: Before we move on, I just need to show you the market of what's happened in the last few minutes. Remember we were down about 30 or 40

points or so, round about, now we're down the best part of 200 points. It is a gradual dropoff through the afternoon.

But the last half hour, I sort of suggested or predicted this might happen at the beginning of the show, beginning of the program, but now we're off

200 or so points, we'll see how that goes.

And you see that acceleration in the Nasdaq, which is off 1 percent. So the rout, maybe it's not accelerating but it's certainly still there.

Sir Martin Sorrell is a good name, good friend of this program. He made his name by building one of the world's biggest and most prestigious

advertising agencies. Now he's hoping to build a new advertising empire in the digital world. He's going further than that; he's actually managing.

He's the executive chair of S4 Capital and in doing so creating $150 million capital fund for ad tech startups.

One report says it will target ad tech data analysis, content development and new digital media and tap into firms developing ad services for new

platforms like the metaverse. In doing so, Sir Martin has made huge drives, pissed off some of his old colleagues on the way.

But Sir Martin, I mean, the metaverse.

What on Earth are you doing?

SIR MARTIN SORRELL, EXECUTIVE CHAIR, S4 CAPITAL: One of the things we're doing Richard -- your caustic comments are always welcome. We built it over

the last three years to a $4 billion enterprise, with about 7.5 thousand people in third-degree countries.

We're a services business, Richard, we're not in tech; we evaluate tech agnostically. But a lot of the knowledge we had with our 7.5 thousand

people in third-degree countries can be used to advise venture capital outfits on where they should be investing their money and data -- in

advertising technology, in marketing technology, in creative technology and in digital media and content.

So the sort of things that we've done around the metaverse, with Meta, with Facebook, as it was, the sort of things we've done with Epic Games,

Fortnite, technology around their engine, those are the sort of things we will advise.

We're not putting any S4 capital at risk, any capital that's put at risk will either be personal from the entrepreneurs within our company or our

people. But we're basically advising a venture capital outfit with Stanhope (ph) and a fund manager that came from my old firm at (INAUDIBLE) --

(CROSSTALK)

SORRELL: -- and will be investing about $150 million in those technological areas that I mentioned.

QUEST: Right. I want to just ask your thoughts on the Olympics, if we may. In a sense, China, on China, NBC's in a bit of a difficult position over

what it does.

How difficult is it for those who spent millions, tens of millions, to sponsor the Winter Olympics, with the current political, geopolitical

situation with China?

SORRELL: Well, it is difficult, Richard. This is not the only area where clients have difficulty. We're seeing difficulty around advertising for

fossil fuel companies, for example. Historically, it's been with tobacco companies as well.

So there are areas of -- controversial areas and the area you are pointing to, with the Olympics and Beijing is another one. But the real heart of the

issue is the lack of relationship between the U.S. and China and the fact that, in essence, we're in a, certainly, a coldish war.

That's not just a function of the Biden administration but it's been there, Richard, under President Obama, under president Trump and it remains the

same under President Biden. So these frictions and these lack of relationships are causing -- because, after all, China is the second

biggest economy in the world, like it or not.

It will be the biggest economy in the world in fairly short order, not on a per capita basis but in absolute terms.

[15:55:00]

SORRELL: And therefore, these issues you are pointing to are serious issues that people really are going to have to take under consideration. To expand

businesses in China for U.S. companies is becoming increasingly controversial and difficult. Not so much, though, I think, for European-

based companies to be fair.

But it is an issue that has to be considered very, very carefully.

QUEST: Sir Martin Sorrell, we need to look at the markets, so you'll forgive me on this occasion if I, pardon the phrase, cut you a little bit

shorter than normal.

SORRELL: Oh, all right, Richard. Right.

QUEST: Thank you, sir.

Looking at the markets, because we do need to, they have taken a really serious twist and turn in this late hour -- really serious. In the last

four minutes I was talking to Sir Martin, we've lost another 100 points and there's no obvious -- look, within our -- I have to tell you what it was,

the reason why.

The why at 355 in the east, it suddenly turned turtle, is not immediately clear. What the presage was for this fall. And the Nasdaq goes down further

as well. "Profitable Moment" coming up, well, our moment, profitable or otherwise, after the break.

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QUEST: I won't deign to call it a "Profitable Moment" tonight, because the way the market is shut, it's closing down. I need to show you instead,

tonight, exactly where we stand, starting with the Dow itself.

If you look at it there, we're down 324 points. It seems to have settled at that particular point. But it is 1 percent lower. And those losses are

across other markets as well, all the major indices. The triple stack shows the losses bigger in the sense -- or were a second ago in the Nasdaq, down

1.3 percent so the Dow is holding up, it's the tech stocks.

If you're looking for a reason for this rout, I can only say it's more of the same and similar. And I'm suggesting that whatever optimism there was

earlier has evaporated, whatever presage or whatever scintilla of optimism, now it's brand-based. Forget those that are -- Goldman Sachs obviously may

be up just a tad because it was off so heavily.

Now the rout continues, I'm afraid. Whether and how long it goes, no one knows but that is QUEST MEANS BUSINESS for tonight. I wish I could leave

you with a bit better than that. But unfortunately, that is the way it is.

Look, whatever you're up to, the garden, the cooking, the markets, whatever you're up to, I hope it's profitable. I'll be in Dallas next week and

hopefully you'll join me there.

END