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Quest Means Business

US Markets Tumble As Economic Warning Signs Grows; Russia: Ukraine Was Behind Death Of Darya Dugina; Ukraine's Zelenskyy Warns Of Independence Day Attacks; Carlsberg Says Beer-Buying High Despite Inflation; Mexico Faces Severe Water Shortages In Harsh Drought; Carlsberg Pulling Out Of Russia, May Take 12 Months. Aired 3-4p ET

Aired August 22, 2022 - 15:00:00   ET

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

[15:00:33]

RICHARD QUEST, CNN INTERNATIONAL HOST: You know what they used to say, viewers have a nervous disposition. Look away. It's a bit like that on the

markets today, it's the worst day in weeks for US stocks.

We are down and we may well go down further, as you can see, the slow slide off. The triple stack shows that the broader markets aren't any better. In

fact, they're worse both for the S&P and for tech NASDAQ off very heavily.

The markets are down and the events of the day explain why.

The Jackson Hole jitters, there are fears of what is Jerome Powell going to say when he gives a speech later this week.

There's also -- looking this side of the Atlantic back to the 70s. Britain is hedging for historic inflation numbers says Citi.

And gas prices hit a record in Europe as the war in Ukraine escalates, and of course, the winter is only around the corner.

With all of that, although we are still live in New York, and today is Monday, the 22nd of August, I'm Richard Quest and I mean business.

Now, tonight, reality is setting in on Wall Street with recession fears growing on both sides of the Atlantic. You saw the numbers at the beginning

were tootling around that. The worst is the NASDAQ tech stocks, which suggest this has got some way to go, yet the S&P and the NASDAQ are off

heavily, and the worst of the day.

Behind the gloominess is a new survey from business economists: 72 percent of them think the US will be in recession by the middle of next year if it

isn't already. Investors are saying and agreeing that these are incredibly difficult times. In the true meaning of Shakespeare's bated breath, they

are waiting for Jay Powell to speak later this week.

Matt Egan is with me.

Matt, you know, whenever we have the sort of stories like today, I always feel like saying, yes, but tell me something we don't know. I mean, in the

sense that nobody really thought inflation had tamed or was off its tops just because we had a bit of a breather from lower fuel prices, did they?

MATT EGAN, CNN REPORTER: Well, Richard, I hope not. But look what happened in the stock market. We saw this massive rebound since mid-June. Some

people saying it's a bear market rally, some people saying it might be the beginning of a new bull market, but I think that party on Wall Street is

over, for now, at least, right? I think reality is setting in. Investors are waking up to -- yes.

QUEST: Okay. So, no, you talked about a bear market rally, but look, it is clear, the Fed isn't done with cutting rates. They've told us that. Because

if you just left rates where they are, you wouldn't get inflation down from eight percent down to two percent.

So we know that the Fed is going to raise rates more and we know that there is going to be a slowdown in the economy. We can disagree and argue about

whether it'll be a technical recession.

EGAN: Right. I think we do. We should all agree on all of those points. I think the market though had been celebrating this idea, this hope that

maybe the Fed was going to slow down its interest rate hikes, that perhaps that was something that they could do in the next few months.

But I think that the message from Fed officials in recent weeks is no, you know, they are nowhere near being ready to declare victory in this war on

inflation, and that is problematic for the economy and for the financial market.

I mean, 53 percent of economists in this survey, they say a recession is going to happen by middle of 2023, nineteen percent think that there is

already a recession. So almost three and four, are saying we're either headed to a recession or we're already there.

Now, there is obviously a lot of positives in this economy, right? The jobs market is very strong, arguably, too strong; gas prices are falling. But I

think Richard, it is clear that investors are waking up to the fact that there are some real challenges ahead if the Fed keeps aggressively raising

interest rates.

QUEST: You're right at the beginning of all of this. We had the Deutsche Bank economist on who was the first one to call it a recession and he said

back then, I remember very clearly, a couple of months ago, he said the recession will hit at the back end of 2023.

[15:05:10]

Now, that makes perfect sense. If you've got two or three more rate hikes probably sizable, it's coming from the Fed and you've got a six to nine-

month monetary lag for economic policy, into the middle of next year.

EGAN: Yes, absolutely. And I think what you're getting at, though, is the timing issue, right? Markets were freaking out this spring, early this

summer about an imminent or ongoing recession.

I don't think the recession fear went away, it just got pushed back -- some kind of backed towards the Deutsche Bank case of the second half of next

year.

And so I think that it makes sense for markets to be concerned about what happens over the next 12 months, and you know, there are just a lot of

challenges out there.

I think we should remember, though, that, you know, these economists, they don't have a crystal ball, just because they say there's going to be a

recession doesn't mean that there's going to be one, and Richard, just because they say there's going to be a recession doesn't mean it's going to

be a deep one.

Hopefully, if there's a downturn, it's a mild one.

QUEST: Finally, the markets, I mean, I'll say, you don't need to it was a bear market rally. It was a bear market rally of prices that were very low

in June and everybody has thought, well, it's a chance to pick up quality stuff at a cheap price.

EGAN: I think that we may very well look back and say that that was the case. In fact, I saw some analysis that the rebound from the lows in the

stock market was precisely what the median rebound from the lows is in a bear market rally.

So that would make some sense if history is right, and then we have Jay Powell speaking on Friday at Jackson Hole. And you know, he's in a tough

position because obviously, markets would love it if he sort of gave them something to hang on to, that maybe the Fed is happy about inflation

peaking, that maybe they're getting close to slowing down interest rate hikes.

But the problem, Richard, is that that kind of would be counterproductive to the Fed's own goals. They don't want the markets to get too frothy,

because that's actually going to feed inflation.

So, there is a lot of reasons why Powell -- you know, he is not going to necessarily give investors what they want to hear.

QUEST: I agree with you, sir. I think there is no way that Powell is going to do that.

EGAN: Right.

QUEST: The Fed and the Fed Governors are way too busy trying to rebuild their own credibility, their own inflation busting credentials to do

anything like that.

EGAN: And Richard, just one other point, don't forget that Powell has no reason to really telegraph exactly what they're going to do because we

still have another jobs report.

We have another CPI inflation report to come before the Fed meets in late September, so he's not going to box himself in there.

QUEST: Matt, thank you. Matt Egan, thank you.

Now, there is a new stock trading on Wall Street today. It's known as APE. It stands for "APE," and it's a nod to meme investors who call themselves

the APEs. So this APE is a preferred stock from AMC, which is the world's largest theater chain.

AMC's primary shares are sharply down, the losses are much less when you combine share values of the two classes. AMC's rival Cineworld confirm that

it is in fact weighing bankruptcy.

Paul La Monica is with me. Let's do first of all, the APE shares.

Which is the key share now? Is it the APE or is it the normal AMC stock?

PAUL LA MONICA, CNN BUSINESS REPORTER: It is still the normal AMC stock, Richard, the APE, the fun ticker symbol APE, a nod to the APE investors

bidding AMC higher in recent years. That is a preferred share class of equity that does not have all the same rights that you would get with a

common stock.

But as you pointed out, AMC is tumbling today, but if you take the share price of AMC plus APE, it is still down from Friday because there are these

worries about the movie theater business in light of the Cineworld, which owns Regal Cinemas here in the US, their bankruptcy filing.

QUEST: So listen to the CEO of AMC who was on the show recently. He had results, he put a very good face on. They were good results and he talked

about what they want next.

(BEGIN VIDEO CLIP)

ADAM ARON, CEO, AMC: Like every other company in the New York Stock Exchange, we were 80 percent institutionally on. And a year and a half ago,

retail investors descended on AMC, and they bought control of our company.

Retail investors own somewhere between 80 and 90 percent of our shares now, and they do it for -- they own it for a variety of reasons. Some of them

just want to make money, some of them have theories about how stocks will trade, but so many of them are in our stock, because they love the idea

that movie theaters should thrive.

(END VIDEO CLIP)

QUEST: And that's an interesting point, isn't it? But if we look at Cineworld, and you look at AMC, what's it going to take for them to thrive?

I mean Cineworld has blamed a bad slate of films for which seems a bit like -- seem to be like sort of blaming the raw material for the craftsman's

goods.

[15:10:10]

LA MONICA: Yes. I mean, I think that there is not necessarily a bad slate of films, per se, Richard that might be overstating it. I think the issue

though is that because of the nature of movie watching now, there are a lot of people who would prefer to stay home and watch movies on streaming

services, watch TV shows, which are very cinematic in nature, also on those same streaming services.

So there are still blockbusters. You have all these Marvel movies, you have the "Minions" movie, which is a hit with kids, and people will go to big

blockbusters at AMC and Regal and other theater chains, but those blockbusters now are few and far between.

QUEST: So "House of Dragon" from our own HBO Max, which is part of, of course Warner Brothers-Discovery, parent company of this network. "House of

Dragon," how did it do?

LA MONICA: "House of Dragon," it's hard to say how it did because we obviously have, you know, the combination of a debut on the linear HBO

cable channel, as well as streaming. There were some reports of a couple of people that did have problems accessing the stream, which HBO Max seem to

be blaming on Amazon and its Fire service.

So interesting, given that Amazon obviously also has its own streaming service, and you have these two media giants. You know, possibly in a bit

of a kerfuffle over whether or not the HBO Max subscribers were able to access this show, without any major difficulties.

But clearly, HBO Max needs a lot of big hits and "Game of Thrones" is arguably one of the biggest franchises in HBO's history. So whether or not

this will turn into a new juggernaut for HBO Max, I think that remains to be seen. It's too soon to say after one episode.

QUEST: Paul La Monica, I'm grateful, thank you.

So we're talking a great deal about the economy and how bad things are, but if you want to look forward, one of the things you're going to look at is

natural gas prices. They've spiked heavily in Europe to record levels. And now Russia is planning to shut down the Nord Stream pipeline for

maintenance, to make more repairs says Gazprom.

We will talk about it after the break.

(COMMERCIAL BREAK)

[15:15:16]

QUEST: European natural gas prices have surged on Monday. It's a benchmark which closed five percent higher after spiking 10 percent earlier in the

day. You can see the way -- you can see the trend in the field, and it is because of fears over Russian supply cuts.

So Europe's markets were off. Germany suffered the worst for obvious reasons. It is the most affected, down more than two percent lower.

Meanwhile, Russia is blaming Ukraine for a car bombing that killed the daughter of an influential ally of President Putin. According to state

media, Russian authorities say the attack was planned by Ukraine's Special Services and carried out by a Ukrainian woman.

It says the device was detonated remotely.

Darya Dugina was killed on Saturday night near Moscow. Ukraine has denied any involvement.

CNN's Fred Pleitgen is with me from Moscow. And so, there we have the situation and a difficult one it is, too.

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, it is an absolute difficult one and it certainly is one that could lead to an even

further escalation of the situation in Ukraine. There certainly are some in Moscow who are calling for that, and you know, not the least of which is

actually the father of Darya Dugina who is of course, Alexander Dugin, who is an idealogue here in Russia, who is said to be, at least in his thinking

very close to Vladimir Putin.

Some even think influential in the way that Vladimir Putin thinks about Ukraine and the things that he is doing in Ukraine right now. Of course,

what Russia calls the Special Military Operation, Richard.

And there are some in the sort of top echelons of Russian-state controlled media who are already calling for being tougher on Ukraine even calling for

strikes on Kyiv, well at the same time, you have the Ukrainians categorically denying that they were behind any of this, saying they had

nothing to do with it, accusing Russia of essentially living in its own world coming out with this.

So it is right now really, I have to say it really charged up situation here in Moscow -- Richard.

QUEST: Okay. But it is -- it is the prospects of what has happened in Moscow, as you say, emboldening a right and a hardline response, which then

puts pressure on President Putin to ratchet up the attacks.

PLEITGEN: That certainly is something that could happen. One of the things that Alexander Dugin has called for over the years was, you know, being

tough on Ukraine taking back or taking, I would say parts of Ukraine.

He was often pictured with people like Denis Pushilin, who is, of course, the head of the Donetsk People's Republic, and very much supported them in

the quest to have those territories be annexed by the Russian Federation.

Now, whether or not this is going to lead to a stronger tougher line on the part of the Russian Federation, it is very difficult to say, but you do

feel how things are charged up and how a lot of very senior figures in Russian politics, and also in the Russian media establishment are calling

for a tougher line against Ukraine.

So certainly, this is something that right now, you can feel how it is charging up the situation and how there are some calls to get very, very

hard on Ukraine, even tougher than the Russians have been before.

So again, right now, a situation where there is a lot of anger in the air here in Russia, and certainly a call for revenge, if you will, as well

while the Ukrainians say they have nothing to do with this.

QUEST: Last point, I want to just raise with you, this business of gas prices rising in Europe. Now Germany, Nord Stream 1 is running at about 20

to 25 percent of capacity because of maintenance.

Now, there is talk that Gazprom is going to shut it down for more maintenance. We've got that turbine that is still in Germany that Russia

refuses to take back, or at least has now.

I mean, what's going on here, Fred? Another maintenance on Nord Stream 1?

PLEITGEN: Well, yes, sir. A lot of maintenance on Nord Stream 1, that is the case. And the Germans obviously, have already said that they don't buy

any of the things that Russia is saying about this. They said even without the turbine, that is still apparently stuck in Germany, it would be

possible to send a lot more gas through Nord Stream 1 than what the Russians have been sending.

If you recall, even without the turbine, that gas flow was at 40 percent when the pipeline was reopened, and it was then put down to 20 percent and

it is now going to go to zero for about three days, I think the Russians are saying that that maintenance is going to happen.

You had Olaf Scholz, who came out and visited the actual turbine and said it's all the Russians' fault. They could take it back at any time, whereas

the Russians are saying because of the sanctions, there are certain paperwork that doesn't seem to add up and they're simply not going to do

that.

The fact of the matter is that pipeline is not getting -- or not very much gas is being sent through that pipeline and it certainly is a big problem

for Germany and what the Germans are trying to do is they're trying to fill up as much gas as they can until the winter comes, but there is also the

realization, Richard, that that probably will not be enough to get Germany through the winter.

[15:20:20]

There is a real issue right now with gas in Germany, you look at the consumers who are already paying a lot more than they had actually

bargained for. And quite frankly, there's a lot of fear in Germany that it could be a seriously tough winter, not just for consumers, but of course,

for that gigantic German industrial machine that just craves a lot of energy and right now seems to be in, it could be in for some real trouble -

- Richard.

QUEST: Fred Pleitgen, the weather in Moscow and you'll be watching it for us. Thank you, sir.

Some Russian pundits are calling for a strike on Kyiv in retaliation for the car bombing. President Zelenskyy is already warning of possible attacks

on Wednesday, when Ukraine celebrates its Independence Day and many festivities have been canceled.

He says Moscow may be planning something particularly ugly. Several cities have banned the celebrations and officials fear for gatherings could be

targeted by Russian forces.

David McKenzie is with me.

So, David, if we -- I mean, we are not being unduly pessimistic if we say that when Russia retaliates for the bombing, it will be brutal.

DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT: We don't know Richard, but I know that that warning from Zelenskyy -- President Zelenskyy came in

fact, before this bombing in Moscow happened over the weekend.

So there was already a heightened sense of at least alert here in the capital, Kyiv. As you described, this is an important week for Ukraine.

It's an anniversary of their independence from the former Soviet Union 31 years ago, and already they had looked to ban gatherings, festivities,

commemorations here in the capital and that has expanded to several major cities in Ukraine, in the Northeast in Kharkiv, Richard. They, even putting

in a 36-hour curfew from the eve of that anniversary through the whole next day into the following day.

There is this concern that Russia may strike decision making centers as the Ukrainian officials have called it. That concern was there even before this

bomb blast in Moscow, and I think it's even more so now -- Richard.

QUEST: And, ultimately, I mean, give me a feel, if you will, David, what is -- what does it feel like in Kyiv? I mean, bearing in mind that the

events of the last 24 hours to some extent, have shifted the ground quite a bit because of --within the domestic Russian market. So, what -- is there a

heightened state of anxiety tonight in Kyiv?

MCKENZIE: Well, certainly it has been quite striking how this city which was under direct threat of Russian ground troops several months ago, in

fact, at the beginning of this conflict and into the first few months, Richard, that life has gotten to a certain extent, back to normal here, or

at least people are trying to get it back to normal.

I think it's symbolic that they put a series of burned-out tanks and armored personnel carriers on the main streets in downtown Kyiv as the

commemoration for this anniversary, perhaps to remind people who are further away from the frontline that this war is going on.

And in the south, the east, and the Northeast, Ukrainians are dealing both the soldiers and the civilians with grinding conflict and relentless

artillery barrages from Russian forces, and from them back to the Russian forces, of course.

So the war is never quite far away here, but the worry is at least there is the next 72 hours or so where people worry that the frontline will come to

them -- Richard.

QUEST: David McKenzie in Kyiv tonight for us. Thank you, sir.

The Governor of the US State of Indiana has landed in Taiwan, I mean, weeks following the visit by the House Speaker Nancy Pelosi, which of course in

itself, as you're well familiar, inflamed tensions with China.

So this time, it is Governor Eric Holcomb, who met Taiwan's President Tsai Ing-wen and the two reaffirmed their commitments to building a more

resilient chip supply outside of China's influence.

Taiwan's farmers are facing the possible consequences of Nancy Pelosi's visit.

CNN's Blake Essig spoke to some of those farmers and growers who have lost access now to the Chinese market.

(BEGIN VIDEO CLIP)

BLAKE ESSIG, CNN INTERNATIONAL CORRESPONDENT (voice over): In a small township in the south of Taiwan, farmers like Li Meng-han are battling more

than Mother Nature to make a living. But geopolitics, that's something is hard work can't change.

LI MENG-HAN, CHINGCHUAN ORCHARD, OWNER (through translator): It is some kind of political issue between Taiwan and China. We simply want to

grapefruits and sell them at a good price.

ESSIG (voice over): A reasonable request, but one that just got a whole lot more difficult following House Speaker Nancy Pelosi's recent stop in

Taiwan.

[15:25:10]

REP. NANCY PELOSI (D-CA): We will not abandon our commitment to Taiwan.

ESSIG (voice over): China reacted by flexing its military muscle, executing at least six days of live-fire drills, while at the same time

exerting its economic power over this democratic island. This time going after what some consider low hanging fruit.

ESSIG (on camera): Citrus fruit like this pomelo was included on the most recent list of Taiwanese items banned from entering China. Beijing says the

reason, it is because of excess pesticides, accusations that farmers here deny. It is a move that experts say is less about healthcare or the economy

and all about politics.

LI MENG-HAN (through translator): I didn't see the ban coming so fast. We were caught off guard.

CHIAO CHUN, AUTHOR, "FRUITS AND POLITICS" (through translator): We all know that politics is behind the bans. This is a politically motivated

economic sanction on Taiwan to exert economic pressure on Taiwan.

ESSIG (voice over): The latest sanctions on fruit and fish went into effect on the same day Speaker Pelosi met with Taiwanese president Tsai

Ing-wen, sanctions that will cost farmers like Li a lot of money, and if things don't change, it could force him and other farmers to let employees

go.

SUN TZU-MIN, GENERAL MANAGER, MADOU FARMERS' ASSOCIATION: It's been hard for farmers, a sudden ban can put everything on hold. The pomelo trees can

live for decades, and their fruits gets sweeter as the trees get older, so it's impossible for farmers to abandon them.

ESSIG (on camera): Each year, roughly 72,000 tons of pomelo are produced here in Taiwan, only about seven percent are exported to China, the vast

majority being sold and processed here locally in places like this.

ESSIG (voice over): A small number on paper, but one that will have a big impact on farmers financially and mentally.

CHIAO CHUN (through translator): I think psychology is a bigger factor here and they can say that they have banned a large number of food items

from Taiwan in one go.

ESSIG (voice over): Well, Pelosi is now gone, the impact of her visit still being felt, but farmers forced to get creative by transforming the

pomelo into something different, to make up for that loss revenue.

LI MENG-HAN (through translator): Taiwanese people shouldn't suffer from the tension between the US and China. They always come and then they leave

the next day, but the impact is felt here by Taiwanese farmers.

ESSIG (voice over): It's the collateral damage of world powers going toe to toe, whereas is usually the case, it is not the politicians that suffer,

but everyday people just looking to pick some fruit and feed their family.

Blake Essig, CNN, Madong, Taiwan.

(END VIDEOTAPE)

QUEST: As we continue together tonight, the cost of living is surging across the world. People still need after-work pint. The CEO of Carlsberg

is going to talk about robust beer sales. Are we simply drowning our sorrows?

QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

[15:36:02]

QUEST: The cost of living is going up and consumers are still thirsty for a beer or two. And that's why Carlsberg, the world's largest -- third largest

brewer says inflation has had no impact. Apparently, sales are back to pre- pandemic levels. And the company is still working to exit Russia with more than 8000 employees. Also, these new bottles, a cleaner way to enjoy a

pint.

Here, these are their new fiber bottles, free of glass. They are biodegradable that allows the company admits on the back itself. Do we

still have some way to go? Probably. But at least they're doing something. Carlsberg chief Cees 'T Hart joins me from the head office in Copenhagen.

Good to have you, sir. Thank you. Look, the old -- the old question is economic times get tough is beer and the products that you are involved

with at least recession resistance? Or do people trade down within the -- within what you -- what you offer.

CEES 'T HART, CHIEF EXECUTIVE OFFICER, CARLSBERG GROUP: Right. And good afternoon. It's really sure that when we look over the last 20, 30 years,

beer is a very resilient category. And we see sometimes people trading down but also we see people trading up. Because at the end of a difficult day,

not being able to go on holidays or afford another fridge or a new clothes, people like to end up with a good beer.

QUEST: So what for you and looking at your comments about the way in which the market is developing, what for you now becomes the hardest issue? Is it

for example, wage inflation, and higher producing economies like Europe that will eventually push your prices up or eat into your margins?

'T HART: Well, basically, the first thing is that our hatches will roll over the second half of the year. So we will anticipate higher costs. For

that we need to exercise our value management tool very well. We need to -- we need to take some prices. And we indeed look very much --- not so much

at margin, but at the gross profit per hectoliter, which we would like to maintain or in order to improve in the coming months and year.

QUEST: The -- you said in your statement earlier, you said you're satisfied with a strong set of results with severe challenges stemming from the war

in Ukraine rising commodity, energy and the pandemic you said. Now, I don't see many of those going away, which suggests you have to shift your own

trading mentality.

'T HART: Well, first of all, we have a very strong brands. And we have good positions, number one or two positions in most of the countries where we

operate in. We have a strong business in Europe, Eastern Europe accepted at this amount of time for Russia and Ukraine. And we have an extremely strong

basis in Asia. So we have ways if you like to recover from some of these severe challenges, indeed.

QUEST: And when it comes to be Russia, you've exited the country. And that is obviously had a -- had an impact. I am guessing you've written off

Russia for the long-term foreseeable future. Even if the war were to end tomorrow, it's going to be very difficult to get back in again.

'T HART: Yes, indeed, we have announced that we will exit and at this moment of time we are in a process to really handover the business, sell

the business to another party. And that will take some time because you can imagine and appreciate that this is a very complex process.

QUEST: I am sure. Now we've got these great bottles, that Carlsberg bottles, these new fiber. I'm sure that there's a good dose of your love

them or you hate them. Some people will absolutely adore them. Other people will say, what a travesty that they have created. How did you come up with

them?

[15:35:07]

'T HART: Well, if you look at this bottle, it's a -- I think it's a beautiful bottle. It's biodegradable. Looking at -- let's say the future,

we really think that over time, we will be able to make this a commercially viable packaging, very much for those of our customers and consumers that

are really focusing on sustainability. Again, they're biodegradable, they can really be recycled. And in that respect, we have high hopes for the

future.

However, it's a long process, it will take some time before this product is hitting the shelves.

QUEST: I was going to say finally, is there the evidence in the drinks market that the consumer is looking for sustainability? I mean, there are

some areas where we know that they are asking for specific things. But do you feel that that is something or do they just really want to get their

hands on the product and drink it?

'T HART: The majority is still like that, of course. But people see that at the moment that they have a good alternative for more or less the same

price. They're really interested to try that.

QUEST: Sir, grateful for your time tonight. Thank you for joining us. I appreciate it.

'T HART: You're very welcome.

QUEST: Now before we finish, I want to show you the markets because they are -- they've been in a really, really grotty mood. And we were off two

percent at the beginning of the show. We're down there. We've got 24 minutes still to trade. So I'm guessing we'll hold roughly 33,000 may or

may not go. NASDAQ is off 2-1/2 percent. S&P is down two percent. We'll update you of course before we finish.

Mexico is experiencing its worst drought in decades. Appropriately, I still carry these bottles. Now the communities where the taps have literally run

dry or having severe difficulties. CNN's Rafael Romo reports.

(BEGIN VIDEOTAPE)

RAFAEL ROMO, CNN CORRESPONDENT (voice over): Some of it had the feel of an outdoor festival or county fair, but this public gathering in northern

Mexico is a citizen's group response to a crisis, a severe drought that has caused extensive water shortages in Coahuila state. During a recent daylong

event they called Waterton, they were collecting bottled water for distribution in neighborhoods where taps have run dry barrel.

It is urgent to send truckloads to those communities, this organizer says. Adding that their goal was to collect 10 metric tons of bottled water for

people in need.

ROMO (on camera): Coahuila is not the only Mexican state facing a severe drought, it's so dry in Nuevo Leon which borders with Texas that Mexican

president Andres Manuel Lopez Obrador declared that emergency there late last month, as most of the country suffers rain shortages since 2020 and

2021.

In an emergency situation, people's needs should be the priority the president said. His decree means that the government can tap into

industrial and agricultural water allotments to quench people's thirst. The leader of the largest industrial association in Monterrey rejected any

suggestion that companies are taking more than their fair share of water.

GUILLERMO DILLON, DIRECTOR, NUEVO LEON INDUSTRY TRANSFORMATION CHAMBER (through translator): There are companies that are not using all their

water but on paper, they have the right to use that much water. Well those permits can be transferred so the water utility company can legally take

more water from the subsoil to inject it into the drinking water network of the Monterrey metropolitan area.

ROMO (voice over): Monterrey, one of Mexico's most important cities is Nuevo Leon's capital state. The industrial hub of nearly six million

depends mainly on two reservoirs, including Cerro Prieto. But as these NASA satellite images show, its water levels dropped to 0.5 percent of its

capacity of 393 million cubic meters in the last seven years.

For residents like Ruth Gonzales, the situation means spending several hours every day in a desperate effort to find enough water for her family's

daily needs.

She says there was no water in her neighborhood and was afraid she wouldn't be able to find any at the vending machine, which proved to be true for a

third day in a row.

Earlier this month, drought conditions and low levels at our reservoir in central Mexico prompted rationing measures in Mexico City, the capital and

the adjoining Mexico state. At more than 26 million together they formed the most populated metropolitan area in the entire country and one of the

largest in the world.

Rafael Romo, CNN.

(END VIDEOTAPE)

QUEST: Whether it's drought or whether it is questions of the war in Ukraine, the rising price of gasoline and gas futures.

[15:40:04]

Look at the market and you'll see why the markets are so unhappy. They are -- we were holding at this level, which gives me an idea that this is

roughly where we will end unless there's something that happens in now on the top of the hour. But otherwise, whether it's that, the Dow 30, the

whole lot, all showing that the markets are deeply unhappy. There's an element of -- there's an element of realism that's coming. Look at that,

not one stock is up in the Dow 30.

And the biggest loss is Intel at 4-1/2. And even P&G, which is really expected during the best periods, consumer products is down as well.

All right. That's QUEST MEANS BUSINESS for the moment. Top of the hour together, you and me, well, dash for the closing bell. In a moment, Living

Golf.

(COMMERCIAL BREAK)

[15:58:27]

QUEST: Hello. I'm Richard Quest. Together we have a dash to the closing bell. We're exactly two minutes away. And the investors are setting off as

they wait to hear from Jerome Powell. The Fed Chair later this week. The Dow is on pace for its worst day since June. It's off more than 600 points.

It's still up about 10 percent on its June lows. The S&P and the NASDAQ are both down heavily too.

Tech stocks Apple and Microsoft are down more than two percent. Wall Street's ugliest day in almost two months is almost over. Dow 30 shows

everything just about down -- well, not just about anything is down, Intel is the worst. It's off some four percent. Chevron pulled down despite

energy's run. Disney's down over its bumpy summer.

The U.K. is heading for inflation of more than 18 percent according to a forecast from Citi. The bank says prices will hit that peak in the first

quarter of next year for the nine times. The BOE's two percent inflation target. And much higher the central bank's October estimate of 13 percent.

Energy prices are adding the most pressure as they continue to throttle the economy. Natural gas jumped 15 percent in the last week alone.

Go to look again at the Dow 30 before we leave you because that really does show exactly how -- I mean you've got P&G, J&J, Chevron and Verizon. Now

they would normally be the best performers, gainers where you've got tech stocks and growth stocks out of favor. And that's exactly what you're

seeing but this market is so unhappy even the perennials are down as well.

[16:00:09]

And that's it after the bell. I'm Richard Quest. Whatever you're up to in the hours ahead, well, the ties today, I hope it's profitable. The closing

bell is ringing. "THE LEAD" is next.

END