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Quest Means Business

Meta Shares Down 25 Percent After Earnings Miss; Major Averages Down As Meta Drags On Tech; BoE Raises Rates Again, E.C.B. Keeps Near Zero Amid Inflation; Pentagon Spokesperson Says Russia Could Fabricate Pretext To Invade Ukraine; European Union Weighing Long-term Options To Deal With Price Hikes; Automation In Japanese Agriculture; Xi Jinping To Meet With Vladimir Putin Ahead Of Winter Games. Aired 3-4p ET

Aired February 03, 2022 - 15:00   ET

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

[15:00:24]

RICHARD QUEST, CNN BUSINESS ANCHOR: An hour to the closing bell and just when you thought it was safe to go back in the market, blame it on

Facebook.

Meta is off some 26 percent and it is taking PayPal, Spotify, and a whole load of other stuff with it. That's why you see the NASDAQ down more than

three percent. It's a horrible day on the market. We'll get to the details. The markets and the main events of the day.

More than $200 billion gone in a single day as Meta shares plummet It's a reality check for tech.

President Lagarde -- Christine Lagarde takes a hawkish turn. The E.C.B. boss refuses to rule out a rate hike this year.

And Xi and Putin preparing for an Olympics one-on-one as many Democratic leaders are shunning the Games. What a day.

We're live in New York. It's Thursday. It is February the 3rd, I'm Richard Quest. And yes, I mean business.

Good evening, today was a reality check for investors who are now punishing Meta, what we used to call Facebook. It's the parent company of Facebook.

Meta posted a rare profit decline, and it sent a tremor through the NASDAQ that's reverberated all day. Meta shares itself, they're off -- look at it

-- 26.5 percent. And why? Because last night after they reported fourth quarter profits down eight percent from the previous year.

The company also said it was shifting its focus on the social media platform, Facebook, and spending a lot more on its burgeoning, Metaverse

indicated by the new name.

Joining yesterday's earnings call is CEO Mark Zuckerberg who also said competitors like TikTok and shifting to form -- people were moving to

TikTok and short form video, and that was pressuring growth, adding that the company is headed in a clear direction even if the route to get there

is uncertain. Twenty six percent down.

What does that mean in reality? Well, it means it is on track for the largest one-day drop in corporate history. The company was worth $880

billion yesterday, a quarter of that, pfft, out the window, gone. It has now lost $220 billion -- the value lost today.

The market cap that it has lost roughly equals the market cap of Shopify, Uber, Twitter, and HP Enterprises combined. It's the largest in corporate

history.

Matt Egan is here. Matt, we'll get into the wider issues, but what Zuckerberg said, why was it so revolutionary? Why has it scared the horses

into stampede?

MATT EGAN, CNN REPORTER: Yes, Richard. It really is incredible how much money Meta has lost today. I'll just give you three other companies that

are worth that much money.

If you took Starbucks, Boeing, and Domino's Pizza combined, that is still not even $225 billion. It's also on track for the biggest percentage

decline since Facebook went public way back in 2012.

Now, I think that one of the most interesting things in this earnings report is how many times Meta or Facebook executives mentioned a competitor

namely TikTok. They mentioned them five different times talking about how that has slowed user growth and how that is impacting their Instagram Reels

program. I just think that's so amazing that they mentioned another competitor that many times and they really talked up this competitor.

At one point, Mark Zuckerberg said: "We face a competitor in TikTok that is a lot bigger. It'll take a long time to catch up there." He said, "TikTok

is so big as a competitor already and it also continues to grow at quite a fast rate."

So listen, I think that anytime you hear a company talk about another competitor, I think that can sometimes unnerve investors. You also have the

fact that, you know, their ad business is under pressure, first from the Apple iOS platform, changing their rules, also from the fact that major

advertisers right now are not spending as much because they're dealing with their own inflationary and supply chain problems and so you put it all

together and you have this brutal, brutal day for Facebook shares.

[15:05:07]

QUEST: But what about the Facebook or the Meta investment in the Metaverse? Zuckerberg also spoke about that.

Now, if there is a -- if there is going to be a change in direction, if he is investing in the future, doesn't that make sense? Except the Metaverse

is still so unknown?

EGAN: Right. It doesn't even exist. I mean, isn't it kind of incredible, if you had told me 10 years ago that Facebook was going to change its name

to Meta platforms to emphasize an investment in the Metaverse, which is something that doesn't even exist yet, I would have said no way, but that

is actually what happened.

And to your point, these results showed in really stark detail just how far off the Metaverse is, in terms of something to be profitable for this

company. They are spending a lot of money to build it, and that is a big factor here.

Another element that I think we can't forget about here, Richard, is the fact that this is happening at a time when easy money is going away, and I

think the fact that the Federal Reserve is raising interest rates, ending QE, the fact that even the E.C.B. is not ruling out interest rate hikes, it

means that investors can no longer just simply close their eyes and bet on any tech stock. They need to look at things a little bit more carefully,

and I think that that is causing a rethink in terms of valuation on everything, including even Meta.

QUEST: And that's where we're going to go next. Thank you, sir. Elegantly, moving me on, almost as if it was planned.

Matt Egan. Thank you.

Because as Matt says, Meta isn't the only company that has seen very steep sell offs over recent weeks, sometimes 20 percent in one day. Meta is down

36 percent of its market cap since August, but it was valued at a trillion.

Netflix, which lost 25 percent in a day, lost 30 percent -- 38 percent in value since its peak in November. PayPal is off 59 percent since July and

Spotify, 55 percent since its 52-week high.

Putting this together, to really understand what's happening with all these companies, which had very high valuations. This is the perfect example, if

you will, of what happened. Take a watch.

Think of it as what happens when Wile E. Coyote chases the Road Runner, a momentum and then, that's what happened. There's no ground beneath you, and

so you come falling back to Earth.

These stocks have been Wile E. Coyote running forward at huge speed, and suddenly everybody looks and says: Well, yes, they're making money in some

cases, they're doing business, but what's supporting the share price?"

Sam Stovall is with me, Chief Investment Strategist at CFRA Research. He joins me now.

I mean, that's what's happening here, isn't it? People have had a -- it's not a dot-com boom and bust. These companies have got real customers and

real money and real revenues, but they can't justify that price.

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA RESEARCH: Absolutely.

Well, when you look at what's been going on, we've been seeing a revision, a reassessment of the valuations for these companies where expectations

were just so high. But now because we're expecting to see a softening in GDP growth in the first quarter, because the Fed is raising interest rates

what we're expecting to see is therefore, possibly a reduction in the earnings, not only for the coming quarter, but for the coming year.

QUEST: Right. But the reduction in earnings -- the reduction in earnings, I mean, irrelevant necessarily to the Facebook issue of Meta, but the

reduction in earnings don't per se -- don't justify 20, 25, 26 percent falls in prices. So, why are they falling so brutally?

STOVALL: Well, I think because what has happened is as the Wile E. Coyote analogy shows that there really was not enough support underneath them

based on the overly optimistic assumptions that essentially, no growth was going to continue to go on forever and that when they actually told us that

no, revenue growth is likely to be between three and 11 percent, but the street was looking for something closer to the mid-teens, then you have

nowhere to go but down.

And also, when you see the prospect of higher interest rates, that too, is putting pressure and causing the coyote to fall even faster.

QUEST: So for investors who have to make decisions, it's almost impossible in this environment. I mean, you know, we still accept for instance, this

is the conundrum here -- that rates are going up, economies might slow somewhat. We're not looking at a recession. Unemployment is still low.

Inflation will come down. One assumes, and I can see the logic here, Facebook, Netflix -- they must regain some of that value surely.

[15:10:19]

STOVALL: Oh, they will just as the stock market regained its value back on October 19th of 1987 when it lost 22 percent. We ended up recovering that

fairly soon thereafter. So, I think what is happening is, investors are saying, okay, the company is not going to earn $357.00 as a -- or have that

be a price target, but rather maybe $294.00. Earnings are going to go up by maybe 14 percent in the coming year, not at some astronomical number that

had been anticipated.

So essentially, the angle of ascent has been re-adjusted, it's still higher, but at a much more reasonable pace.

QUEST: So when we look at the Ackman purchase of a billion in Netflix last week, because the argument goes, Sam, you're still paying your 20 bucks a

month to Netflix, I'm still paying my 20 bucks to Netflix, maybe it can't justify $700.00 a share, but certainly $400.00 or $500.00 and it's down at

$410.00. This isn't buy on the dips, is this a time for investors to make judgment calls?

STOVALL: I think investors do have to make judgment calls. We've been seeing waning momentum in the growth group. By that I mean, communication

services where you would find Netflix, where you would find Facebook, also a readjustment in consumer discretionary where you would find Amazon as

well as technology. These groups have been slowing, even prior to the markets decline that began in the beginning of January, essentially saying

that maybe it's reached its peak for now and that we want to digest some gains, take some profits.

So right now, I think investors have to generate a shopping list, what stocks do they want to buy at what price and not allow their emotions to

become their portfolio's worst enemies?

QUEST: Sam, that's fantastic. Thank you, sir. I shall write that down. I shall write -- emotions worst enemies and I write there, shopping list.

Good idea. Thank you, sir. Appreciate it.

It's QUEST MEANS BUSINESS.

Now, we have talked about what is happening with the companies. Well, what we're going to move to next shows exactly why. Two Central Banks in Europe,

fighting inflation, different policies, the BoE, Bank of England hikes again, and the E.C.B. is testing how long can it stay on hold?

QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

[15:15:28]

QUEST: QUEST MEANS BUSINESS this evening and two key Central Banks facing the same problems and reaching different decisions on interest rates.

The Bank of England raised its main rate to half a percent as part of its effort to contain U.K. inflation. We had a quarter percent back in

December. It's the bank's first back-to-back hike in almost 20 years. If I think that long enough, I'd probably remember it.

The European Central Bank, the E.C.B. is keeping its rates near zero for now, despite record Eurozone inflation in January. The President, Christine

Lagarde says the situation has indeed changed.

(BEGIN VIDEO CLIP)

CHRISTINE LAGARDE, PRESIDENT, EUROPEAN CENTRAL BANK: It might very well be significantly higher than what we had expected over the course of the year,

and possibly higher than we had anticipated at the end of the year. So risk is to the upside and particularly in the near term.

(END VIDEO CLIP)

QUEST: That's as close as you get to walking in front of interest rates with a red flag as you're going to get and the response, putting it

together, if you look at the major economies since the beginning of the pandemic, well initially, it was the most harmonized we've ever seen.

Now, as we face inflation and tightening, it is much less coordinated for good reason.

So you've got the Bank of England in the U.K. has already covered two hurdles, raising rates for a second time towards inflation at 5.4 percent.

Jerome Powell in the U.S. is fast approaching his first hurdle likely to be next month, probably more rate rises, because he is staring down seven

percent inflation.

The E.C.B. still at the starting line, and as you've heard, Christine Lagarde previously saying, rate hike is unlikely, but today, she wouldn't

say if that's still the case.

Finally, Turkey? Well, inflation is at 48.7 percent and they are actually running in the opposite direction, cutting rates despite that limit. It is

worth pausing and just taking in what we're showing you there because it gives you an idea of who has got to move and how fast they're likely to go.

Anna Stewart is in London. The BoE is ahead of the game. Why?

ANNA STEWART, CNN REPORTER: A second rate rise in a row. They are ahead of the game in many ways, just looking at those inflation figures. They do

think like the E.C.B. that they're largely driven by energy, by food. They do believe that will come back down.

But at the same time, they can see an issue here, they are raising rates. They are also tapering back some of their asset purchase programs, that was

a slight surprise today. It wasn't a surprise that we saw the rate rise. But you know, what was interesting was just how divided the MPC was. It was

five, four, and the minority actually wanted to see a bigger rate rise.

Now, Richard, you love graphics, you've just had a lovely one. Let me show you another. This is inflation expectations from the Bank of England from

November to now and you can see a huge difference between the green line from November, the blue line from now in terms of inflation this year. They

expect it to hit seven and a quarter percent this April.

Interestingly, where we kind of pull back from a slightly hawkish feel there is where they see it going. They see it hitting two percent in their

target at the same time in two years' time, and then you see it underperforming after that and that is what the ECB is worrying about, the

potential for inflation to actually underperform.

QUEST: Right. But keeping that graph up, and as you can see, the BoE, in fact, they all did a horrible job of getting to the target drawing two

percent. I mean, we were facing almost arguably, deflation at one or two points.

What makes anybody think this is going to work to get down to two percent now without more dramatic activity, probably by the ECB.

STEWART: Possibly. I mean, it's interesting to see what we expect coming next. You know, is it two more hikes? Is it three more hikes? Where do

economists see this for the year ahead? But also, I think we have to put this in perspective with some of the fiscal policies we're seeing because

we are seeing obviously huge inflation, particularly with energy prices. But you saw the Chancery today trying to dampen some of that down, trying

to give some relief for some customers.

So you've got to see it as a whole picture. And frankly, it'll be data incrementally changing over the next few months. That really gives us the

answer.

QUEST: Anna Stewart in London, thank you. Philipp Hildebrand was the head or the chair of the Swiss National Bank, the Central Bank, now Vice Chair

at BlackRock, he joins me from Switzerland. Good to see you, Philipp, you know, should the E.C.B. be moving sooner and harder than they are? Are they

not storing up exactly the same transitory mistake made by the F.O.M.C.?

[15:20:08]

PHILIPP HILDEBRAND, VICE CHAIRMAN, BlackRock: Richard, I think it's very important to distinguish between the kind of two phases of monetary policy.

What's going on here is we're in a restart. This restart no longer requires emergency stimulus, and so Central Banks should begin to take the stimulus

off, take the foot off the accelerator. That's what they're doing and that is what they're signaling. That's what we're seeing either in speeches or

in actual rate decisions as in the case of the Bank of England.

And I think that's entirely appropriate. It's a whole different story, what you're pointing to, you know, should they hit the brakes? And I think the

answer there is no, simply because this inflation, this uncomfortably high inflation is principally supply side driven, it's a result of bottlenecks

that are related to the restart, and you would have to -- you would have to hit the brakes very, very hard to get inflation down.

So there are two different things going on. You have normalization, yes; hitting the brakes, I think that's a long way off for the time being

because it will not be the right answer to get the inflation rates down.

QUEST: But if you look at what the BoE decided, and yes, certainly the BoE did a five-four with the minority wanting half a percentage point, but they

also completely changed, if you will, the repurchases, no more repurchases, the running down of mortgage-backed securities, the sale of them.

Now, I know that there are monetary, technical plumbing issues in doing all of that, but I wonder how far the E.C.B. risks being behind the curve,

because inflationary expectations are high?

HILDEBRAND: Well, in the case of Europe, inflation expectations, long term inflation, there are actually inflation expectations that are pretty well

anchored, so they're not in a particular rush to hit the brakes. Everything we've seen so far is about taking the foot off the accelerator, it's not

about hitting the brakes, it is about taking away the emergency stimulus that is no longer required.

What is challenging for the Central Banks here is they know that this inflation is principally bottleneck driven on the supply side. They also

know that, you know, interest rates is not really going to take care of that. So what they have to be careful about is not to confuse the market

about sort of saying we're normalizing and at the same time letting the market believe suddenly, inadvertently, that they are getting ready to

really hit the brakes hard.

And I think that's what we're seeing, so I would expect the market to be confused for some time until the Central Banks become very clear. We should

expect some volatility here. But ultimately, I continue to believe that this rate cycle, Richard, and you alluded to it earlier, will be much more

muted than what we would normally see in this kind of environment and the reason is that it doesn't really address just raising rates, hitting the

brakes here will not address these bottlenecks that are caused by the restart that are the underlying cause of the higher inflation.

QUEST: How concerned should the Fed be at the market dislocation that we're currently seeing? Now in the past, only on very few occasions has

Central Banks really responded to equity markets? Or certainly obviously money markets, they respond to any dislocations there.

But should they be worried when the market is coming? Or is this a good thing, we are seeing froth off the top?

HILDEBRAND: Well, you know, Central Banks, I used to do this for a living, you always think about all factors and how they affect ultimately long-term

inflation expectations and how they impact output. So they're going to pay attention to these things, not from a day-to-day basis. They're not day

traders, it's a different longer term perspective.

But market conditions are an important input into determining the amount of stimulus or in this case, the amount of withdrawal that is required to get

monetary policy back to neutral. So I think this is all part of an overall equation and you take it into account, you're not driven by it from one day

to the next.

QUEST: I suppose people like myself are all sort of hoping you can tune it like -- fine tune it like a Swiss clock or a Swiss watch, when it's

anything but.

HILDEBRAND: Absolutely. And I think the key here is this is particularly difficult because it is -- the inflation that we're seeing, Richard, is not

the result of an overheating economy. It is the result of these bottlenecks that are related to the restart. So, the best thing we can all do is to

open up the economies, of course, we need to consider the health implications, but you know, that will ease the inflation pressure and

that's the right response here, not simply to hit the brakes.

But for now, all we're seeing is the beginning of normalizing policy, taking away this emergency stimulus, seeing some tough talking, that's

creating the confusion, but in terms of action it's about withdrawing stimulus, taking the foot off the accelerator.

And it is good to see you, sir. I wish well. Thank you for joining us, I appreciate it. Thank you.

[15:25:13]

QUEST: And we continue to look at this issue in terms of gas prices in Europe are soaring largely on the same reasons, consumers are feeling the

crunch and officials, well what can be done to manage the crisis when you see energy prices up some 50 percent that's going to hurt.

QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, there is more QUEST MEANS BUSINESS in just a moment. Consumers across Europe have seen their energy prices

quadruple in the past year. The E.U. Commissioner of Financial Services will be with us to talk about the crisis, and President Xi and President

Putin are meeting at the Olympics.

Relations with the West are continuing to fray. We will get to all of that. But only after I've updated you on the news because this is CNN. And here,

the news always comes first.

President Biden says an American raid in Northwest Syria that killed the leader of ISIS sends a strong message to terrorists around the world. Mr.

Biden said the militant blew himself up in a final act of cowardice. He was identified through fingerprints and DNA analysis. The Pentagon says four

civilians are amongst the dead.

Massive winter storm in the U.S. has more than a hundred million Americans under winter alerts. Snow, sleet, and ice have disrupted travel by air,

rail, and road and knocked up hundreds of thousands of customers. Half of those outages are in Tennessee.

An oil tanker exploded and caught fire on Wednesday off the coast of Southern Nigeria. Ten crew members were on board before the explosion.

Their fate is not known.

The cause of the blast is under investigation.

[15:30:00]

(JOINED IN PROGRESS)

QUEST: Nominations for the BAFTA Film Awards have been released. "Dune" leads the pack with 11. It's the year of fresh faces with 19 first-time

nominees in 24 performance slots. That's on March 13th.

(MUSIC PLAYING)

U.S. officials say they have evidence that Russia is preparing a false-flag operation as a pretext for invading Ukraine. It comes as Moscow's

continuing its massive military build-up, surrounding its neighbors on all sides.

Russia's E.U. ambassador is denying this. The Pentagon spokesman, John Kirby, describing how this fake attack might happen.

(BEGIN VIDEO CLIP)

ADM. JOHN KIRBY (RET.), PENTAGON PRESS SECRETARY: We believe that Russia would produce a very graphic propaganda video, which would include corpses

and actors that would be depicting mourners and images of destroyed locations as well as military equipment at the hands of Ukraine or the

West, even to the point where, some of the this equipment would be made to look like it was Western-supplied to Ukraine equipment.

(END VIDEO CLIP)

QUEST: Now Russia is being partly blamed for Europe's soaring energy prices by restricting oil and gas supplies.

In the U.K. for instance, energy bills are set to rise by more than 50 percent as regulators increase a cap on prices, wholesale costs have gone

up more than 300 percent across Europe in the past year.

And in the U.S., oil prices are now above $90 a barrel, $91.14 for Brent, $90 for the West Texas, you're familiar with the difference. It's the first

time that the numbers have been that high since 2014.

Mairead McGuinness is the European Commissioner for Financial Services.

Commissioner, it is good to see you always, I'm grateful, thank you, ma'am. Look, it's not going to be long before European citizens, if they're not

already, are absolutely fuming at higher energy prices, filtering through the production process into higher inflation, that can't be met by wages.

How concerned are you?

MAIREAD MCGUINNESS, EUROPEAN COMMISSIONER FOR FINANCIAL SERVICES: Well, good evening, from Brussels here. And I think what is of concern is that

we're not just saying the energy problem is up today.

We've been talking about this at the end of last year. And you're right, citizens in Europe already feel the impact of higher energy prices. And I

suppose we have many factors coming together, coming out of a pandemic; we hope that will continue.

But that has caused, as you have been discussing, bottlenecks and other issues. There's a question of lower stocks generally of energy within

Europe. And then there are higher demands.

So I think the combination of these factors, at a time when we're also trying to diversify our energy sources, is impacting in a real way on

citizens. It's very interesting, if you look at our commission figures on inflation for January, 5.1 percent.

But if you strip away unprocessed foods or commodities and energy, the rate will be 2.5 percent. So we are seeing an impact here.

And I suppose what we need to try to predict and we will be having those figures out next week is, does that continue?

And what are the consequences?

But clearly, for citizens, they're seeing higher energy bills in their home, when they're commuting to work, as many of them are returning to

work. So it's a real live issue, not just in Europe but I know today in the U.K.

And indeed, this is a pressure point. If energy supplies are tight, it's impacted right across the globe.

QUEST: At the commission, if you look at the tensions between, say, Ukraine, Russia, obviously the U.S., is there a tension in Brussels at what

might happen and perhaps a feeling that, I mean, this is an area now of NATO, a national government, and what role the commission or the E.U. per

se plays in this?

MCGUINNESS: Well, I think on the whole Russia-Ukrainian issue, as the commission speaks with one voice with the member states, we've expressed

our hope that diplomacy will sort this out but we've also expressed very strongly, if that is not the case and there is an escalation, then we will

be ready to react.

So I think our role is very much speaking for and with our member states on this crucial issue. But we are concerned, very concerned about what's

happening in both Belarus and, indeed, in Ukraine.

So I think, beyond that, what we are seeing is diplomacy is the best way forward. But clearly -- and I've listened to your reports and many others

just today -- there is a fear of what might happen. And that, too, could have consequences and impacts for global supply chains and, indeed, for

global energy prices.

QUEST: And we look at the area you're particularly concerned with, financial services, the number of new entrants -- and I don't mean just

cryptocurrencies but digital wallets.

[15:35:00]

We've got the Fed with its latest discussion document on a central bank digital currency, CBDC, the number of different ways that we are now using

digital currency, how difficult is it for you to regulate that across the members of the union?

MCGUINNESS: Well, of course, the rate of change in the financial system is quite incredible. And I think COVID has accelerated that because --

(CROSSTALK)

-- because people needed to be able to do transactions and to do it remotely. And that's been positive because we've got good products and good

apps doing that.

When it comes to regulators around the world, we are conscious of the need to regulate for the future, not the past. I do think it's a challenge but

it's one that we can face up to.

What we need to see is that the risks that apply, if you like, in the virtual world, have to be regulated the same as those risks apply in the

real world, on transactions. What we need to do is harness the benefits of innovation.

So these are really good innovations that are there but acknowledge the risks, including for money laundering and for privacy issues.

You mentioned, which is interesting, about digital central bank currencies and, of course, the ECB, with the commission, are looking at this. We don't

expect, you know, an immediate, if you like, decision and a way forward. We have to look at all of the consequences.

But clearly, digitalization of the financial system is real and it will only evolve more rapidly as time goes by.

So we are alerted to this. In fact, we have just completed as well, to go through the European Parliament and the member states very shortly, two

pieces of legislation on, you know, cryptocurrencies and on cybersecurity, which is a key issue in this ever-digitalization age that we're living in.

QUEST: And we'll talk more, Commissioner, in the future, on CBDC. I'm not sure about it all. But anyway, that is a subject for another day, for the

two of us to get to. Thank you ma'am, for joining us this evening. I appreciate it.

MCGUINNESS: Thank you.

(MUSIC PLAYING)

QUEST: Four top aides to the British prime minister Boris Johnson have now resigned. Downing Street spokesperson said the chief of staff, Dan

Rosenfield, and the prime minister's principal private secretary, Martin Reynolds, have tendered their resignations. The director of communications

and its head of policy quit earlier in the day.

CNN's Bianca Nobilo is with me.

Look, this is about comments the prime minister made, when he basically accused his opposite number, the leader of the opposition, for not doing

enough to prosecute a very famous sex offender in Britain, Jimmy Savile.

But why now?

BIANCA NOBILO, CNN ANCHOR AND CORRESPONDENT: So Munira Mirza, the head of policy, resigned for the reason you just stated, Richard, and that was

something the prime minister did on Monday.

And he didn't just get backlash in the form of this resignation today; his back benches were fuming about that comment. I think everybody thought it

was unacceptable and I'll read you an excerpt from the resignation letter today.

Munira Mirza said, "It was an inappropriate and partisan reference to a horrendous case of child sex abuse. You tried to clarify your position but

you did not apologize for the misleading impression that you gave."

She finishes the letter saying, "It's not too late for you but I'm sorry to say it's too late for me."

And to remind our viewers, MPs aren't liable for defamation for what they say in the chamber, which is why there are such strict rules.

QUEST: Why are the other two gone?

NOBILO: Some of these were expected. So there are two ways of looking at this. First is the wheels are coming off the Downing Street operation. You

and I have seen it many times before, sometimes together.

First come the public condemnations, then the resignations, then the letters, then the leadership contest. It could be we're just on that

trajectory.

Or the fact that the prime minister was promising a shake-up of his Downing Street operation to appease his back benches, the rest of his party, who

said it was shambolic, sometimes during when Dominic Cummings was often after he left but also the fact that they felt so excluded from it.

Some of these resignations, particularly the chief of staff, the director of communications didn't come as a huge shock. They were expected to happen

at some point. But the fact they're all coming together, it just adds momentum to this movement, seemingly, against the prime minister.

QUEST: Well, I assume you'll be talking about it, because you can hear more on the story, the anchors with you, "THE GLOBAL BRIEF" in 90 minutes

from now.

Thank you, Bianca, 9 pm in London, 11 across Central Europe.

The opening ceremony of Winter Olympics is only hours away, China's president is getting ready to welcome several world leaders, including

Vladimir Putin. The concerns are growing over their increasingly close relationship. We'll talk about it after the break. QUEST MEANS BUSINESS.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

[15:40:00]

(MUSIC PLAYING)

QUEST: Travel restrictions put in place because of COVID-19 have made Japan's existing labor shortage even worse and noticeable. And as a result,

it's impacting Japan's farmers.

As we look at ways and means this week and exploring individuals and businesses in Japan, in the world beyond the pandemic, today, we want to

take you to look at how technology companies are providing support for farmers.

(BEGIN VIDEOTAPE)

(MUSIC PLAYING)

BLAKE ESSIG, CNN CORRESPONDENT (voice-over): Considered such a delicacy, they're often sold at auction, from a crate of mandarin oranges selling for

$9,600 to a bunch of ruby Roman grapes for 11,000.

ESSIG: You may have heard of Japan's high quality and rather pricey fruits and vegetables or the coveted domestically and internationally, there's a

problem, there's simply not enough people to grow and harvest them.

ESSIG (voice-over): take Nozomi Fukuyama, for example. Following in his parent's footsteps, he's been growing bell peppers here in the town of

Shintomi in Miyazaki prefecture for 25 years.

Throughout the years, help around the farm has increasingly been harder to come by.

NOZOMI FUKUYAMA, FARMER (through translator): We want to hire more people. In my case, most of the workers have quit because they have started their

own businesses or because they're old.

ESSIG (voice-over): So he helped a Japanese robotics firm, AGRIST, develop a harvesting robot, this guy. It uses a camera to automatically recognize

the peppers and, using its arms, it snips off the peppers at its stems as it moves along a suspended wire, allowing it to get around obstacles more

easily.

As it collects more and more data, artificial intelligence will be able to analyze growth rates and detect potential disease.

While still in testing and development stages, AGRIST hopes to rent it to farmers one day.

YOSHIHIKO TAKAHASHI, CO-FOUNDER, AGRIST (through translator): This robot might only harvest a small amount. But it gives the farmers more time to do

other things and increase their yields and profits.

ESSIG (voice-over): Yoshihiko Takahashi cofounded AGRIST in 2019. He was in charge of its day-to-day and overall operations until the end of

December 2021, when he left the company.

Rather than target older farmers, Takahashi says AGRIST hopes to work with farmers in their 30s and 40s.

TAKAHASHI (through translator): When young farmers want to make their farming sustainable or expand the scale of their farming to protect their

local agriculture, they will inevitably need more manpower.

[15:45:00]

KAZUNUKI OHIZUMI, MIYAGI UNIVERSITY (through translator): Due to the coronavirus, the inability to supply foreign workers has become a major

problem. Farmers, especially small scale ones, are decreasing. Consumption is also declining. A big concern now is whether it will return to normal.

ESSIG (voice-over): Beyond the next harvest, AGRIST has big plans in the making, what it calls highly reproducible agriculture.

TAKAHASHI (through translator): Our next goal is to create data-driven agriculture. To achieve this we would like to develop not just this

harvesting robot but also artificial intelligence and entire facilities, such as greenhouses. All in all, we want to innovate in agriculture and

contribute to the future of humanity.

ESSIG (voice-over): Innovation in the agricultural space, giving businesses like Fukuyama's a fighting chance.

FUKUYAMA (through translator): I don't know if the solutions are through automation or technology but I believe that the future of agriculture is

bright in Japan.

(END VIDEOTAPE)

QUEST: As you and I continue tonight, the Beijing games kick off in a few hours from now. Some world leaders will be absent from the celebrations.

President Xi will be welcoming his Russian counterpart, as the two grow ever closer and increasingly distant from the West.

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QUEST: It's already Friday morning in Beijing; 5:00 am to be precise and final preparations are underway for the opening of the Winter Games in just

15 hours, 11 minutes and 2 seconds or so.

The 16 day competition will officially begin. At the opening ceremonies, missing, of course, will be top diplomats and political representatives

from Western countries, as they boycott over China's human record.

However, President Xi will welcome 20 world leaders and arguably none more prominent than the Russian president, Vladimir Putin. Various summits,

meetings, talks before the games begin.

A growing cooperation that's got the West wondering what is going on, as the West looks to see the relationship deteriorate. David Culver is in

Beijing.

David, thank you once again.

[15:50:00]

I always feel obliged to thank you, I mean, it's 4:49 in the morning. Sterling work.

Look, with Xi and Putin, is this a case of my enemy's enemy is my friend?

DAVID CULVER, CNN INTERNATIONAL CORRESPONDENT: Richard, always a pleasure for you, to do this at any hour. Look, it seems that way. I mean, these are

two countries that do have a lot of issues with each other.

There are confrontations with economics in the Middle East, for example; there's underlying doubt and mistrust over certain geopolitical intentions.

And they do share that one common adversary, the United States.

We're already hearing the messaging, though, coming out here in state media. Before flying in, President Putin telling Chinese state media that

he and President Xi are good friends, who largely share the same views on addressing the world's problems.

So let's take you through the history of these two leaders' relationships and how they're viewing the many rising tensions with the West.

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CULVER (voice-over): A mesmerizing opening ceremony, expected to be attended by two strongman leaders. Chinese President Xi Jinping will soon

be hosting his Russian counterpart, Vladimir Putin, as their countries stand shoulder to shoulder in defiance of the West.

Despite lingering disputes over issues such as economic interest in the Middle East, Beijing and Moscow manage to see past those differences and

focus instead on one common adversary, the United States, which has launched a diplomatic boycott of the games over Beijing's human rights

record.

And as tensions rise between Russia and NATO over a possible Russian invasion of Ukraine, Beijing has publicly backed the Kremlin. In a recent

phone call with U.S. secretary of state Antony Blinken, Chinese foreign minister Wang Yi stressed that Russia's reasonable security concerns should

be taken seriously and resolved.

CULVER: This will be the 38th time that Presidents Xi and Putin have met face to face since President Xi took power here in 2013.

CULVER (voice-over): These frequent interactions, a sign of increasingly close bilateral ties, despite how different the two leaders are. The images

tell it all. The pair in 2018, happily sampling together a traditional Chinese pancake.

A few months later, they made a Russian version of the dish, complete with caviar and vodka.

They visited with China's iconic pandas the following year and took in an ice hockey game. Later basking in a sunset boat tour, the cozy China-Russia

relationship, not stopping the U.S. from trying to sway China on the Ukraine crisis.

(BEGIN VIDEO CLIP)

VICTORIA NULAND, ASST. SECRETARY OF STATE: We are calling on Beijing to use relationship with Moscow to urge diplomacy.

(END VIDEO CLIP)

CULVER (voice-over): But analysts say Beijing sees little benefit to side with the West.

(BEGIN VIDEO CLIP)

DANIEL RUSSELL, ASIA SOCIETY POLICY INSTITUTE: What Putin and Xi Jinping have in common here is actually the desire to undercut U.S. credibility, to

drive a wedge between Washington and its allies.

(END VIDEO CLIP)

CULVER (voice-over): Other democracies and U.S. allies like Taiwan will be watching closely, as China steps up its military activities across the

Taiwan Strait.

(BEGIN VIDEO CLIP)

RUSSELL: If the people in Taiwan saw that, despite all of Washington's efforts and all of NATO's tough talk, that they didn't succeed in deterring

Putin, they're going to ask themselves, can we, on Taiwan, really count on the United States in a crisis?

(END VIDEO CLIP)

CULVER (voice-over): After the U.S.' disastrous withdrawal from Afghanistan, Ukraine presents the latest test on the U.S.' capability to

maintain global peace and security. And the outcome may further convince China and Russia of an emerging new world order that both have long sought.

(END VIDEOTAPE)

QUEST: The two also do have disagreements. There's the long border; there are various issues relating to that. And, of course, Russia does sort of

feel China is stealing its position on the world stage.

CULVER: It does. And these issues are not publicized nearly as much as the friendship that we see being pushed over and over. And that's something

that state media is continuing to dwell on.

And over the next few hours, they're even laying out the agenda ahead. It's a busy one. You've got Russian and Chinese delegations, holding these high

level negotiations, talking about the significant trade that has increased over the past year.

In fact, you look at 2021 and imports and exports between Russia and China increased by roughly 33 percent or so. And so there is significant back and

forth that's increasing on the economic front.

And militarily, they're starting to share more joint training, although they avoid using words like "alliance" that the U.S. has created, for

example, with AUKUS, between the U.K. and Australia. They push back on a lot of that. But this is going to be one of the big events leading up to

what is supposed to be the big event, the opening ceremony.

[15:55:00]

QUEST: David, thank you -- and you're -- well, I was going to say you'll watch it. But you won't, because you're outside the loop. You'll see the

fireworks maybe, if you stand on a big building and get your binoculars out. Sorry.

CULVER: I'm going to try to get a view, yes, for sure.

QUEST: Good luck.

David Culver with that. And update you on the markets, take a look at the last hour or so, the Dow is down horribly, that's oil, that's the Dow. The

lows of the session now, down 509 points, off 1.5 percent. The Dow 30 will show the misery for you.

The Nasdaq and the triple stack will show it's also off, Honeywell down 7 percent, Salesforce, Microsoft, technology stocks, absolutely being beaten

to bejeebies. And the Nasdaq is off 3.5 percent, all because of Meta and all because -- you're also seeing, of course, oil going up at $90 a barrel,

which we showed.

Don't get too upset about it. I'll address exactly what I think about this in our "Profitable Moment" after the break.

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QUEST: Tonight's "Profitable Moment": this morning, Amazon delivered household goods to my apartment. And when I leave here, I'll go home and

maybe I'll watch Netflix. I could listen to some music on Spotify before bedtime. And, of course, I've already paid a friend on PayPal, unremarkable

transactions.

And they reflect what me and I suspect most of you are doing on a daily basis.

Are we going to stop any of this?

No, of course not, which is why the tremendous fall in stock prices is so difficult to understand. We're not abandoning Amazon or Netflix or PayPal

or whatever. No, this is a reflection of how, firstly, these share prices got out of kilter with high P/E ratios that relied on continued fast

growth.

And perhaps stock growth will be slower in the future because of saturation, in the case of Netflix, or new social media, like TikTok, for

Netflix.

If this fall in prices is a return to realistic valuations, then, of course, it's to be welcomed. However, if it's just volatility for

volatility's sake, driven by momentum, trading speculation and greed, at the end of the day, we'll be no better off. We simply don't know at this

moment.

And that's QUEST MEANS BUSINESS for tonight, I'm Richard Quest in New York. Whatever you're up to the hours ahead, it's probably not profitable today

but we wish you well for tomorrow.

END