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Quest Means Business

US Markets Selloff Continues For Third Day; Musk Argues Whistleblower Proved His Case Against Twitter; France Accuses Russia Of Using Gas As Weapon Of War; U.S. Shale Producers Face Volatility, Market Opportunity; Most New COVID-19 Cases In Shenzhen Are Omicron BF.15; Quest's World Of Wonder. Aired 3-4p ET

Aired August 30, 2022 - 15:00:00   ET



RICHARD QUEST, CNN INTERNATIONAL HOST: So, there is an hour to trade left on Wall Street. You and I come together for this last hour and make sense

of the day. The stocks are lower, we are near the low points of the day, but we may just be off the lows of the day, and there is all sorts of Fed

talking and economic news swirling around the markets, and those are the main events of the day.

For instance, German inflation has neared a 50-year high as energy prices are stifling European growth.

Russia making things worse, squeezing gas supplies further to France.

And the saga that won't go away: Elon Musk again tries to terminate his Twitter accusation. This time based on the accusations from the company's

former head of security.

We are live in New York, Tuesday, August the 30th today. Here in New York, I'm Richard Quest, I mean business.

Good evening, it is day three of the Fed-induced selloff in US markets. Shares and stocks are lower. They fell sharply in the morning and it didn't

really fall back and never really recovered.

The Dow is off over one percent. That's more than 1,500 points from Friday's open, three days of solid losses. The S&P are down even more. If

you look at this, it is off one and a half percent, and the NASDAQ is today off 1.5 percent.

Investors are weighing the likelihood of a recession and the oil and gas demand; Brent and West Texas are heavily lower.

Rahel is with me to make some sense of all of this. So, where do we begin?

RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: Well, let's start with the fact that energy is the worst performing sector coming off of those losses for

WTI and Brent crude. Perhaps no surprise.

Richard, last week, we talked about heading into Jackson Hole that the markets were looking for some sense of direction from Powell. Well, they

got it. But clearly they don't like where we're headed, which is higher rates for longer.

We heard it from a different Fed leaders today and we heard it from Powell in those comments. So, we are likely to be in this period of at the very

least, volatility for some time to come.

QUEST: So, we've got that. We've also got these German inflation numbers and we have this idea of cutting the pipeline. So, why is oil lower today?

SOLOMON: Well, I mean, I think you have just as part of the broader selloff, right? I mean, continued recession fears, right, and what that

does to global demand. So, that's certainly being felt in the market.

And again, just this likelihood that we are headed, even more likely now after the Fed's comments. And by the way, Richard, we got some econ data

today, some jobs data that show that further tightening in the labor market that we are not seeing any loosening in the labor market, which of course,

Powell has been very vocal about.

So, we're just not seeing any signs of growth here. We're not seeing any signs of anything that would allow the Fed to take its foot off the brake,

and that's clearly not being appreciated in the markets.

QUEST: No, they don't like it, Rahel, but now we -- I mean, I think you summed it up. They were looking for direction. They've got a direction.

They just don't like the way in which it is going, but there is no other alternative at the moment.

SOLOMON: No, and I think Powell made that very clear, right? I mean, until we start to see really meaningful declines in monthly inflation, there is

no other way to the other side of this inflation equation that Powell is essentially saying that look, by not restoring price stability now, it

creates further pain in the future.

So, it is sort of like deal with it now or deal with a bigger problem in the future and Powell saying that they will be absolutely resolved to fight

it now, but that will cause some pain.

QUEST: All right, Rahel. Rahel with the details on the day. And now to Randall Kroszner for some understanding of what it means.

Randall is the Professor of Economics and a former Fed Governor.

Randall is with me from Chicago.

Randall, just before we get into this, John Williams of the New York Fed, President, basically threw cold water on the idea of a pivot or a cut in

rates next year, and arguably said that rates actually need -- real rates need to be positive, which suggests a much, much higher level of interest

rates. Is that your understanding, too?


RANDALL KROSZNER, PROFESSOR OF ECONOMICS: So, I think that's exactly right and exactly as you said, Jay Powell made it really clear what he was

saying. The markets didn't want to hear what he had to say. But now, they are finally sort of digested it and it's not going down so well.

I think what John just said was he is hoping that inflation will come down and I think inflation will come down significantly from the very high level

that it's at. It is not going to be back at their two percent goal quite yet.

So it will, let's say, get into the fours or maybe a little bit below that. So, they're going to have to bring interest rates up into the fours. I've

been saying that for quite some time and I think, now the markets are getting it.

QUEST: The markets are getting it and then I imagine, of course, that we then have to -- we then had that up to lose the cost, you know, the share

prices, because obviously EPS isn't all the like. You can't see -- there will be less profits and less valuation in markets. Are we looking at that,

do you think?

KROSZNER: So, one of the reasons why, for example, the tech stocks have gotten hit so much is because interest rates rather than being close to

zero for a very long time are now going to be pretty positive.

And tech stocks tend to make a lot of promises about the long-term future, but we are not making much today, but we're going to make a lot in the


Well, when interest rates are zero or close to zero, the future profits are just as good as today's profits. When interest rates are four percent,

future profits don't look nearly as good, so stocks get hit and that's why the ones that have particularly long horizons before they make profit, tend

to be the ones that get hit the most.

QUEST: Jay Powell, his integrity, not his personal integrity, his professional integrity is on the line here -- the Fed's integrity.

You saw Mohamed El-Erian writing in the "FT" said that this Fed was probably the least credible in the market's estimation, particularly when

it comes to guidance and statement. Would you agree with that?

KROSZNER: I think that's a little bit -- a little bit harsh. But I do think that the Fed's credibility is on the line and that is one of the

reasons why they're now moving so rapidly. They, as well as all the Central Banks around the world were too late to see that inflation was not

transitory, but it had much longer legs.

And I think to their credit, they basically said, we didn't have the right approach back then, but we now need to move quickly to maintain our


And it seems like they have because if you -- you know, the main place to look for lack of credibility is in inflation expectations.

Inflation expectations certainly moved up, but they didn't move really much out of the range they had been in over the last decade, and now they have

started to move down, which suggests that the markets are believing that they're going to be able to fight the inflation.

QUEST: You and I can discuss, probably ad nauseam whether or not there will be a recession or not, and what sort of recession and the depth of the

recession, but isn't the reality here, you cannot have this level of market dislocation with economic uncertainty and rising rates without having a

serious effect on growth?

KROSZNER: For sure. You're exactly right, and Jay did say that in his speech, that we will undoubtedly have a period of below trend growth and

the question is, how long will it be below trend and how much? Will it actually be a formal recession or not?

Certainly, the chance of recession is quite elevated, and then, you know, we're in a fragile situation. And then, of course, we have a lot of

geopolitical tensions, you know, choices that Mr. Putin can make can put a fragile situation over the edge.

QUEST: Right. So, let's talk about President Putin. He has, as I suspect - - well, he always he always knew that if he put his foot on the neck of Europe's gas that it would have a dramatic effect and even if -- I mean,

this winter, there is no way -- Germany still needs that gas. So, how powerful does this make President Putin in your view?

KROSZNER: So, I think it makes it very, very difficult for Europe to make it through -- Europe and the UK to make it through without a recession.

You've got such dependence upon Russian gas. Of course, the Germans are trying to fill storage tanks, maybe we will be lucky and get a very mild

winter, but I think the chance of those prices going up quite a bit. So a lot of pressure on prices and inflation, as well as restrictions on ability

to keep warm, to produce, are really kind of a toxic mix and it would make it very, very likely that a recession will hit.


QUEST: Randall, good to have you, sir. I'm grateful for your time. Thank you.

Twitter shares, horrible day for them. They're down around 82 percent off. You can see the number on the screen.

Twitter has rejected Elon Musk's attempt, the latest one, to back out from the bid. Elon Musk's lawyers say a whistleblower's claim that caused to

terminate the offer of $54.00 a share, $54.20.

The whistleblower basically said that the company knew all about the rogue and fake accounts.

Paul La Monica is here.

As soon as that whistleblower story came out, you almost knew that this was going to be what Musk would be claiming and now, the company is

surprisingly rejecting it.

PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, I mean, Elon Musk, obviously was trying to back out of this deal, Richard, before the whistleblower

allegations. Now that you have this, it is just more ammo for him, so to speak, in his legal argument to try and claim that he no longer should be

obligated to buy Twitter at that $54.20 share price, $44 billion.

Twitter obviously wants to hold Musk to this deal, because concern about the deal collapsing has caused the share price of Twitter to go into

freefall. As you showed before, the stock price is now below $40.00. You don't need to be a math genius to know that that's a lot lower than $54.20.

QUEST: I've got that feeling, I mean, I know it's going to end up in the Delaware Court. You and I have talked about that, but I can't feeling that

sooner rather than later.

LA MONICA: I think that is possible. There is probably going to be more urgency, Richard, for there to be some sort of settlement and I think also,

there are still a lot of questions about what Musk's true motivation is.

Will he really want to back out of the deal entirely? Or would he still do it if the price started with a three in the share price instead of a five?

I have no idea whether or not Musk is still interested, but you have to think that at any time, if Twitter wanted to go back and say, all right, we

recognize that we need you, you kind of want us. Maybe we do it at a lower price, not saying a deal gets done. You know, Musk, obviously had some

buyer's remorse before he actually made the purchase official, but there was a legal obligation for him to, as Twitter claims, go through this deal.

So, they're going to try and hold him to it.

QUEST: It's extraordinary. I can't decide what this -- I mean, what should I know? The strategy? What Musk's strategy is? Does he want Twitter or does

he not?


QUEST: I mean, it's that old joke. "No, all we're arguing about is the price."

LA MONICA: Yes, I mean, whether or not Musk still would want to do this deal remains to be seen. Obviously, he is the richest person on the planet.

If he wanted to start a rival social media service, I'm sure that he could find the funding, secure it, so to speak, to launch one of his own


But you know, Elon Musk loves Twitter, right? There is no denying that.

QUEST: Right.

LA MONICA: I mean, he may not want to own the company, but he is pretty vocal user. So, the thought of Musk not being on Twitter, I find that hard

to believe.

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

As you and I continue our evening conversation digest on economics, Russia is throttling Europe's energy supplies. The winter target today, France,

after the break.



QUEST: Now, we've just heard Russia's Gazprom says it is completely suspending gas supplies to France's NG and that'll be from Thursday. It

comes as France is accusing Russia of using its natural gas exports as a weapon of war against Europe.

Gazprom has already cut supplies to the French retailer, NG earlier over what it claims as a contract dispute. Now, if it shuts down the whole lot,

that will make the situation much worse. At the same time, it is closing down the main gas pipeline to Europe for three days, Nord Stream 1 being

shut because it says it needs vital maintenance.

Russia's weaponization of energy is taking a devastating toll on European economies. New figures show inflation in Germany is nearly nine percent,

the highest since the 1970s.

Scott McLean is with me from London. The situation, show me exactly how it all fits together in terms of the supply of Russian gas to Europe.

SCOTT MCLEAN, CNN CORRESPONDENT: So Richard, you mentioned France's gas being totally cut off by the Russians. So, just to put that one into

context. So normally, before the war, France got about 17 percent of its gas from Russian sources; post-war, we're talking about only about four

percent, so they were already down significantly. Obviously, this is going to hurt quite a bit.

Right now, across Europe more than 40 percent, or sorry, normally you get 40 percent of natural gas coming from Russia, but at the moment, well as of

June, that was only about 20 percent.

And so this is typically the trajectory that we would see in terms of imports to Europe from Russia. This is roughly where we were last year.

This is where we are right now. And so we're talking about down 77 percent. That's massive.

And you mentioned the Nord Stream 1 pipeline. This is part of the problem that runs from Northern Russia down to about here in Germany, and the

Russians have only been sending about 20 percent of the capacity that they normally could.

You mentioned some of the issues that we had in July and you mentioned another three days of shutdown. So, this is another problem. And yet, the

Germans, they are German-level-efficient when it comes to stocking up on gas for the winter.

So Richard, this black line here, this is roughly give or take the storage capacity that the Germans have when it comes to natural gas. It doesn't

really change. The peaks here that you see -- this is where we are in the fall months; the valleys, this is where we are in the spring -- and look

where we are right now compared to where we were at last year.

The Germans have their storage capacity about 83 percent full. The Chancellor says that, look, this is going to make things a lot easier. And

there are other countries that are doing well when it comes to storage capacity also. Portugal, hundred percent. Amazing.

The Pols, they might as well be at a hundred percent, I think it's 99.6 percent. The French have 91 percent, didn't draw that very well, did I?

But look, the reality is that in the winter months, only about one quarter of all of the gas being used in Europe comes from these storage reserves,

so it has to come from somewhere.

So if you're Germany, you are getting more from Norway, you're getting more from the Netherlands, you're getting more from the Azerbaijanis. You're

also making new LNG terminals along the north coast of the country, and there is one in particular in a city called Lubmin, where the company just

announced that this one should be online by the end of the year, so this will open up, sort of a whole world of new possibilities for the Germans.

Obviously, none of this though doing much for inflation. You mentioned the German number, it is 8.8 percent.


MCLEAN: We also have the British number, it is around 10 percent, and so European countries now really are trying to figure out what to do.

Go ahead, Richard.

QUEST: So, just on this one. If only 20 percent is coming through Nord Stream 1 at the moment, do we know how they're making up the difference? I

mean, obviously, we're seeing the reaction in the market. But since -- I know that they've cut back and people are cutting back and lights have been

switched off, but where is the difference coming from?

MCLEAN: Yes, so obviously, there are other countries in Europe. Italy is one, Spain is another where Germany can get more gas. Obviously, they are

sort of limited in what they can actually get.

They are also getting more gas from the United States, and if you look at the natural gas prices in the US, those have actually been ramped up,

because all of a sudden, normally, it's not that feasible, it's not that economical, to get natural gas, to ship it all the way to Europe. Now all

of a sudden, there's a lot more of a business case to be made there because North American natural gas, very cheap. Europe desperately needs it,

because you have the supply cut off from Russia.

And so really, they are trying to get it from wherever they can. I mentioned Norway sending more, the Netherlands is sending more, they're

making deals with Azerbaijan to send more. And so wherever the Germans can get it, that's where it's coming from. And obviously, those terminals along

the north part of the country, that's going to make a big difference as well when it comes to more LNG getting into the country -- Richard.

QUEST: Fascinating. Thank you. Thank you. Scott with the latest details, and as Scott was showing, Europe is clearly prepared in getting stockpiling

enough natural gas for the winter.

The overall EU limit if you like or target, 90 percent full by November 1st. France as well on the way, will get there. Germany's Economy Minister

says the country is ahead of schedule. Other countries like Hungary and Austria are lagging behind.

Thomas Matussek is the former German Ambassador to the UK and to the UN; now, Senior Adviser at Flint International.

Ambassador, the difficulty is that even if they get to the storage levels necessary, which they probably will, that doesn't guarantee and far from

it, a pain-free winter.

THOMAS MATUSSEK, FORMER GERMAN AMBASSADOR TO THE UK AND TO THE UN: Well, that's definitely right. It will not be pain free. We will be happy if we

get through the winter without a major recession. We will have a recession anyway.

But as you see, there are already a number of energy saving regulations in place for the private sector, and for the public sector. But all these

regulations make up to two percent, a very far cry from the 15 to 20 percent we ought to save because our industry is dependent very, very much

on energy and on gas.

And it's not just that it can be easily subsidized by LNG, by coal, and others, because for instance, steel industry, chemical industry, glass

industry needs gas and that gas has to be flowing and we don't know after this so-called maintenance, if this is going to get on the line again or if

it's political maintenance and further squeezing it down.

QUEST: So in this environment, and I'll ask you the question that I asked our last guest, Randall Kroszner. President Putin, now, I mean, he always

knew, but now fully appreciates the powerful position he's in. Yes, it may hurt his economy, but if he stops gas completely, then Europe is done.

MATUSSEK: Well, I think we have prepared to a certain degree and it was mentioned earlier on the program that our gas storage facilities are filled

up 83 percent. By October, it should be 90 percent. But still, we have to do more, and especially we have to protect the lower income groups, because

these are the people who are going to be hit most.

And the fact that is taken so seriously is reflected in the so-called conclave. You know, the whole German government is away from Berlin for two

days in a country retreat to talk exactly about the painful measures, which have to be taken and that is not a very easy task.

It's still too early to say what it will be, but I'll give you an example. There is for instance, the plan out that the pain is going to be spread

evenly that every gas consumer has to pay 2.14 percent more per kilowatt hour on the already increased gas price.


MATUSSEK: Now, this isn't something, which hits the rich, but it is the poor. So, they are back to the drawing board to find out a way where there

is much more alleviation for the lower income groups for instance.

QUEST: And talking about German industry. Now, you know, we've got rid of Russian oil. That's already -- that's sort of -- the EU has agreed on that.

The ability to reach agreement on further cuts in Russian gas is very, very difficult.

The Hungarians don't want it. The Germans don't want it. The Italians have problems with it, but I guess I'm asking now, I'm asking for your

ambassadorial overview, in a sense, the geopolitical reality is in direct conflict with the political will.

MATUSSEK: In the short run, yes. In the short run, it is going to be very hard. But on the other hand, it acts as a catalyst for much, much faster

development of alternative natural energy sources.

We are building with haste LNG terminals. We have three remaining nuclear reactors, which probably will stay on the net, the government is at the

moment haggling about it. So, there are a number of possibilities to soften the blow in the medium and long term.

But in the short term, you're absolutely right. The situation is very, very difficult.

QUEST: So who bears the blame? I mean, in the sense of within German politics at the moment. A new government, a new chancellor, experienced

politician, deeply inexperienced at dealing with this sort of stuff, in terms of at the top. Are people in Berlin mourning the fact that it's not

Frau Merkel there?

MATUSSEK: Well, definitely not. Because there are many people in Germany who now wake up to the fact that for 16 years of Merkel, we were not

prepared for a case like the situation we are in at the moment.

We willfully created this over dependence on Russia, in the belief that it's a win-win situation, if we have close interdependencies economically

with Russia, and that was wrong.

And we woke up to the harsh fact with the war of aggression in February, and we have to make do with this. So, I think a lot of these dependence on

Russia is self-inflicted. And unfortunately, the majority of the Germans were all behind it.

QUEST: Sir, I'm glad to have you on the program tonight. Thank you very much indeed.

Now you're listening to what the Ambassador was saying about the shift in energy -- the energy transition, if you will.

Tonight on this program, after the break, our guest is going to basically say, ah, not so three decades from now, the vast majority of global energy

will come from hydrocarbons.

So, why aren't shale producers in the US producing considerably more?

After the break, you're going to hear from a shale producer, the CEO of Liberty Energy. His view of course, well, don't get rid of us yet, you're

going to need us.





QUEST: Allow me to revisit the top story tonight. Markets are sharply lower. Look at the Dow and you'll see exactly recession fears are rattling

investors' nerves.

Oil stocks have been among the hardest hit, as crude prices tumbled. A complicated pictures for U.S. shale producers. In shale, they've had to

weigh price volatility against production costs.

Shale, nontraditional fracking, whatever you want to call it. The break even price for shale, U.S. shale, is $56 a barrel. And the market has not

cooperated often. And that risk looms over producers looking to expand as customers turn away from it.

Look at this graph.

You see those sharp drops?

Those sharp drops in 8, in 20, they are what frighten the shale producers, that they will be caught out. I visited a shale drilling facility in Texas

in 2013. Then, oil prices were $100 a barrel and shale was fueling the recovery from the last financial crisis.

Chris Wright is the CEO of Liberty Energy, the second biggest fracking services company in the country. He joins me from Denver, Colorado.

This is a real fear, isn't it?

That they don't want to be on the wrong side of a dramatic price fall, because either OPEC suddenly produces more or China opens up or whatever it

might be.

CHRIS WRIGHT, CEO, LIBERTY ENERGY: Absolutely, Richard. We are a market with volatile prices. So supply and demand are finally balanced and they

move abruptly. I am thrilled that you visited the Permian. But I would say the outlook today, the risk of a great price drop is probably lower today

than it typically is.

QUEST: So since 2020, we look at that graph, we see the production increase again along with crude prices. Production does go up again. But

what we are not seeing in both in rig count at the moment and in terms of production from the U.S., we are not seeing a remarkable increase.

Why not?

WRIGHT: Yes, we've seen the remarkable increases in the past. Then the U.S. has flooded the world with oil and natural gas and process collapsed.

So yes, it's definitely more disciplined, more measured this time.

But we are still growing U.S. oil production at nearly 1 million barrels a day year over year. We are the dominant source of additional oil supply

globally. So we are still growing. But maybe not in the drunken sailor fashion you saw a few years ago.

QUEST: Can the U.S. do more to help Europe?

If so, how?

WRIGHT: Yes, we can.


WRIGHT: Certainly Europe's bigger problem for sure is natural gas, even more than oil. The U.S. could easily, meaningfully grow our natural gas

production. Our problem is the pipelines to move that gas and the export facilities, the LNG compression facilities, to put that on the ship and

send it over to Europe.

I think the country would love to do. It but our country as your country in Europe have been gripped in this delusion that hydrocarbons are going to be

gone soon. So there has been opposition to building the necessary infrastructure to move this energy from where it's produced to where it's


QUEST: So let's talk about that. Your view is that hydrocarbons will provide the backbone of our energy requirements for the foreseeable future,

decades ahead. At the same time, everybody is rushing to EVs -- everybody is doing solar and you are saying it's not realistic.

WRIGHT: Yes. I began my career, I went to MIT to work on fusion energy. I worked on solar energy. I worked on geothermal energy. So I'm just an

energy guy.

But almost everything you hear about solar and wind -- we hear mostly about those -- or geothermal or nuclear, they are all in the electricity sector.

All of that combine is 20 percent of global energy. The other 80 percent of global energy does not come via electricity.

There is no solar or wind that is going to provide process heat to manufacture materials to fly airplanes. So we chip away slowly at the

energy but this belief that hydrocarbons will be gone in a decade or three decades, there is no possibility of that happening.

QUEST: How difficult do you think this winter is going to be in terms of oil and gas, if Russia does continue to throttle Europe, as we are seeing

with Nord Stream 1 today and with a shutdown tomorrow, if they do that in the middle of November in a really cold spell, even with full tanks?

WRIGHT: Extremely difficult. It's really a crying shame to see what is going to happen. Factories will be shut down and have already been shut

down. People are not going to be able to reasonably afford heating their houses.

That is something that happened a century ago. That is not something that should happen today. This is really the product of these bad energy

policies that have been naive about the ability to just change how an energy system works. And it's also a misunderstanding of climate change.

It's a real global phenomenon. But it's a slow, gradual process. We need much different to really change global greenhouse gas emissions. Wind

turbines and solar panels will barely move the needle. They're not the answer.

QUEST: Glad to have you with us tonight, sir. Very grateful. Thank you.

WRIGHT: Thanks, Richard.

In most parts of the world, city authorities and governments would be delighted, and a huge sigh of relief, if only 35 COVID cases were detected

in a day.

But that country is China, of course. That's how many infections were detected in Shenzhen on Tuesday, the second day of a snap lockdown that has

shut down the world's largest electronics market. CNN's Will Ripley is monitoring the situation from Taiwan.


WILL RIPLEY, CNN CORRESPONDENT: As much of the world continues to return to what is a new normal post COVID, China is one of the last places on

Earth still clinging to this zero COVID policy which many scientists say is simply unsustainable with new variants becoming more contagious and more

transmissible, like Omicron BF.15.

It's been detected in the southern Chinese city of Shenzhen, a tech hub, home to 18 million people, that has in many areas ground to a halt because

of 35 infections, 11 asymptomatic, 18 million people.

There are neighborhoods that are under mandatory four-day lockdowns. They have shut down the world's largest electronics market. They have basically

categorized neighborhoods as high risk areas, which means strict lockdown orders.

Residential buildings blocked off with barbed wire fences. They're closing entertainment venues and public parks and banning all gatherings. They are

basically suspending service of public transportation; 24 subway stations, hundreds of bus stations.

All because this new subvariant was detected and they're worried that those 35 infections in a city of 18 million could grow into a much larger

outbreak that they would not be able to handle.


RIPLEY: Because a lot of the high risk elderly in China still have not been vaccinated. And yet China is investing big in zero COVID. With digital

surveillance, mass testing, extensive quarantines, snap lockdowns, all of those resources to enforce a policy that is championed by Chinese president

Xi Jinping.

But that is dealing a heavy blow to the slowing economy in China. Youth unemployment hitting a record high; one in five young people are out of

work. And many of those young people with nothing else to do but sit in their apartments or their homes once again and ride out the latest COVID

lockdown in zero COVID China -- Will Ripley, CNN, Taipei.


QUEST: Before we go tonight, I just wanted to show you live pictures from Wilkes-Barre in Pennsylvania. Joe Biden is addressing gun violence in

America. The U.S. President stops there before heading to Philadelphia on Thursday.

He'll give a major evening speech. He's calling it a continued battle for the soul of the nation. And as he speaks, we'll give you developments when

we get them.

That is QUEST MEANS BUSINESS. At the top of the hour, you and I will make a dash for the closing bell. Maybe a small saunter will be more appropriate

with the way the markets are looking. Before we get there, enjoy "World of Wonder."


QUEST (voice-over): If you believe what they say, Lisbon is half on land, half on water. I spent a lot of time on land so now time to explore the

River Tagus on this magnificent boat. Portugal is rightly proud of its 500 years of sailing, exploring the world vastly beyond its shores, deep into

the unknown.

Are you the navigator?

RICARDO DINIZ, SAILOR (voice-over): Yes.

QUEST (voice-over): And all the others behind him?

DINIZ (voice-over): You will Vasco de Gama there, Magellan, Pedro Cabral.


DINIZ (voice-over): This is the tower of Belem. Belem is this area of Lisbon.

QUEST (voice-over): This is Ricardo Diniz, our Portuguese seafarer, a solo sailor, now a corporate coach.

We're here in Lisbon and the one thing I do notice and the reason I'm talking to you, of course, is this relationship that this place has with

the sea, with the oceans.

How would you describe it?

DINIZ (voice-over): We're very proud of our past. We achieved something incredible over 500 years ago and we're reminded about this every single

day. We are on the ocean, we have this incredible river.

QUEST (voice-over): What makes Lisbon different?

DINIZ (voice-over): Well, Lisbon is the European capital of the oceans. It's the only capital on the ocean, on the Atlantic Ocean. We have this

very special light that attracts photographers and artists from all over the world.

The relationship with the river, with the water and the proximity to beaches, is a great location. It's a great city.

QUEST (voice-over): I always think that Lisbon is understated. Lisbon is - - it's not forgotten about but it doesn't have, if you like, the chaos and pizzazz of the other major southern European capitals. But that's its


DINIZ (voice-over): I find that, in the last five years, especially, many people who come from abroad to Lisbon, are surprised at what they find. And

I think they are the true ambassadors of our city and our country.

It's people from abroad, talking beautifully about Portugal -- great food, very, very safe, wonderful people, very accommodating, very generous. So

it's a great country.

QUEST (voice-over): Do you see what you're doing as being the lineage to the great explorers?

Can you trace what you do to what they did?

DINIZ (voice-over): For me to have been born in the same country as Magellan, on the same day as Magellan, and some would say we even look

alike slightly, the nose, the profile, it's part of my power system to achieve what we need to achieve.

QUEST (voice-over): What do you feel, what happens inside Ricardo when you come under that bridge and you see this?

DINIZ (voice-over): When I come back here, it's almost like I'm feeling it from 500 years ago. It's that coming back to where it all started.


DINIZ (voice-over): It's unassuming but you know we're getting (ph) --

QUEST (voice-over): Unassuming?

DINIZ (voice-over): Yes. We've caught up. The tourists found Portugal before the Portuguese found Portugal. And now we are like, oh, these people

from other countries are saying good things about us. Maybe we should take them seriously.

We weren't very good at saying good things about ourselves until others came and said good things about us.

QUEST (voice-over): There are a great many good things to say about Lisbon. Each is magnificent, both from the water and from high above the

city, where the golden hour of every moment enchants and leaves me wanting more.




QUEST (voice-over): I've been in Lisbon a matter of days and I've got a confession. I'm loving the place.



QUEST (voice-over): I'm totally disarmed by the charm, entranced by the friendliness. If you ask the Portuguese, it won't be long before they

remind you of the great explorers and age of discovery and will conveniently forget that that was 500 years ago and begs the question, well

what have they done lately?

I think much of that's changed in the last 20 years. There is a new spirit of confidence and looking to the future here. You can feel it.


QUEST (voice-over): This confidence, it seems, comes from the very country itself, Portugal, which now embraces its own identity.

Now, Chef (ph), this looks like a very nice restaurant.

Do you know owns it?

JOSE AVILLEZ, CHEF (voice-over): I have an idea.

QUEST (voice-over): You do?

Acclaimed chef Jose Avillez knows all this well. He's championed Portuguese fine dining for years.

I've asked him to make a simple dish that speaks to the DNA, the backbone, the very meaning of this country.

The thing that that I was struck by during the festival, just the sheer number of sardines and meat sandwiches I ate. It's as if this is part of

the culture, the DNA, everything.

QUEST: Oye, avo sardines (ph).

AVILLEZ (voice-over): When the sardines arrive, the season starts right there. In Portugal, the fishermen start to bring the first harvest at that

time and it starts the chaos (ph).

QUEST (voice-over): When I said to you, we wanted you to make sardines, did you think, oh, bloody hell, not sardines?

AVILLEZ (voice-over): No, actually I have to tell you something. For us, sardines are something very, very special because it's something that we

have only three, four months a year. Because they are the fat of the island (ph), beautiful. And it's something that I started to try to bring to fine


QUEST (voice-over): Oh.

AVILLEZ (voice-over): I would say 15 years ago.

QUEST (voice-over): But without destroying the essential quality of it being a Portuguese sardine?

AVILLEZ (voice-over): That's the big essence of all it because when the Portuguese arrived to a continent bringing Portuguese welcome (ph), he

expects to have more than food but to have the soul of the Portuguese food. So we have a lot of respect for the sardines.

QUEST (voice-over): There's that word, "soul."

AVILLEZ (voice-over): Soul.

QUEST (voice-over): But there's a Portuguese word for soul, isn't there?

AVILLEZ (voice-over): Alma.

QUEST (voice-over): Alma.

AVILLEZ (voice-over): Alma.

QUEST (voice-over): These sardines are waiting for your attention.

What have you done with them?

AVILLEZ (voice-over): Well, we just got them this morning, very fresh, already very fat. We just took out the fillet and we marinate it with olive

oil and a little bit of vinegar.

QUEST (voice-over): And those sardines bring back memories of holidays with the family.

AVILLEZ (voice-over): So we have here, the sardines.

QUEST (voice-over): Oy, yoy yoy.

AVILLEZ (voice-over): They are slighted cooked with acidity. We are using the torch to offrate (ph) it. Well, here you start to having the smell of

the sardines.

QUEST (voice-over): Interesting. Interesting.

AVILLEZ (voice-over): This is our version of the very typical Portuguese sardines. And I can tell you, you close your eyes, you eat these sardines

and you have your own.

QUEST (voice-over): Well, my eyes are closed.

AVILLEZ (voice-over): You want to eat it now?

Want to try it now?

Let's go.


AVILLEZ (voice-over): No, no, no. Let's go.

QUEST (voice-over): Absolutely delicious. But it is a refined, elegant taste. But it is a sardine.

The sardines are delicious.

If you had to sum up Portuguese cuisine, in your philosophy, what would it be?

AVILLEZ (voice-over): I would say that Portuguese cuisine that is transmitted from grandmothers to granddaughters, from mothers to daughters,

is the art of bringing the flavors with simplicity, with love.

And it's what we decide to do, even if you do it very creatively, with a lot of creativity, what you need to bring to your guests is something

delicious. And I would say, 90 percent of the time, it's quite simple.


QUEST (voice-over): Sardines alone cannot truly satiate. Of course, there needs to be a Portuguese custard tart, pastel de nata. Life is too short

not to have dessert.

AVILLEZ (voice-over): I promised you a dessert.

QUEST (voice-over): You say it's -- you did it right.

AVILLEZ (voice-over): We have here the dish called nata.

QUEST (voice-over): Oh, that pastry is very light. And the custard, nice and firm but not too firm.

I love it.

Now are you finishing yours?


AVILLEZ (voice-over): I'm talking too much.


QUEST (voice-over): We have to be careful with waste not, want not, don't we?


QUEST (voice-over): Don't you worry about me.


QUEST (voice-over): Lisbon is a feast and I'm hungry for more.

Ah, thank you, sir. There is always time for a final pastel de nata and an espresso before I leave Lisbon with my good friend, Fernando Pessoa, the

famous Portuguese poet.

Very nice hat, sir.

In the past, you might have been tempted to give Lisbon a miss, the city being overshadowed by more boisterous European capitals. Well, today, that

would be a big mistake because Lisbon has it all -- sophistication, elegance, charm, all wrapped up in Portuguese hospitality.

And so to the word I think that describes it, "alma," "soul." You've heard it said, again and again. And you're the one to come to Lisbon and

experience this soul for yourself. Lisbon, definitely part of our world of wonder.




QUEST: With less than two minutes to go, let's you and I do a dash to the closing bell and see how we're looking. U.S. stocks now falling for a third

straight day. We are well off the lows of the day, down nearly 300 but we had been much more, as you can see from the chart there.

So the Dow is set to close down, more than 1 percent overall. The triple stack and you will see where we stand on that. A similar decline for the

S&P 500, now below 4,000. And the Nasdaq is down 1.25 percent or so.

Investors haven't like the Fed's signal on interest rates. Randall Kroszner explained.


RANDALL KROSZNER, FORMER GOVERNOR, FEDERAL RESERVE SYSTEM: I do think that the Fed's credibility is on the line. That's one of the reasons why

they are now moving so rapidly.

They, as well as all the central banks around the world, were too late to see that the inflation was not transitory but it had much longer legs. And

I think to their credit, they basically said we didn't have the right approach back then. But we now need to move quickly to maintain our



QUEST: And the Dow components that shows where the damage was done, Dow Chemicals was down near 3 percent. Caterpillar, Chevron, and you get -- all

the big names were down. You have three on a frolic of their own that are each inched up. And that is the way the world looks in the financial world.

I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.