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Quest Means Business
Powell: Interest Rates Will Likely Rise Higher Than We Thought; White House: US Does Not Seek Conflict With China; Elon Musk Versus Employees; Ukrainian Forces Repel Constant Attacks On Bakhmut; FTSE Risks Becoming "Jurassic Park"; Dash To The Bell. Aired 3-4p ET
Aired March 07, 2023 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: There is an hour to go in trading on Wall Street and the markets, well, have a look yourself. Lay your own mind
There's a lot for us to talk about. Why are we off nearly two percent and the other three, I'll share the triple stack in a moment, but they are all
down very heavily.
The markets and the main events that are driving this: Jerome Powell says bigger rate rises could return if inflation remains hot, 50-basis point
Former Twitter employees tells CNN the company misled them before letting them go.
And on the program tonight, the chief executive of the London Stock Exchange. I will ask him what he thinks of talk that the LSE is past its
We are live in New York, it is Tuesday. It's March the 7th. I'm Richard Quest and I mean business.
We start tonight with the Chair of the US Federal Reserve, who says interest rates in the United States will likely rise higher than previously
thought, and markets are down sharply as a result.
Chair Powell was speaking on Capitol Hill. It is the first two days of testimony, and he told lawmakers the job market remains extremely tight,
that the road back to two percent inflation is likely to be bumpy.
(BEGIN VIDEO CLIP)
JEROME POWELL, US FEDERAL RESERVE CHAIRMAN: The latest economic data have come in stronger than expected, which suggests that the ultimate level of
interest rates is likely to be higher than previously anticipated.
If the totality of the data were to indicate that faster tightening is warranted, we'd be prepared to increase the pace of rate hikes.
(END VIDEO CLIP)
QUEST: Now take a look at the Dow and the point I want to just point out to you is this bit at the top, because there we actually had just a smidgen
of green in the morning before the market just went on a fall and I think if you look at the bottom, 568, we are at the lowest point of the day.
If you take the triple stock overall, you can see the larger losses right across the board. You've got one-and-three-quarters for the Dow, you've got
the broader market down one-and-a-half, and the NASDAQ, which has had bigger losses in recent weeks, but that is now down just one-and-a-quarter
percent. They are the growth stocks.
So it is the industrials that are being hit hardest because obviously of a slowdown in the economy and I will show you briefly the Dow 30, twenty-nine
of the 30 are all lower, it's only Merck on a frolic of its own and that is barely got its head above the parapet.
The expectations of a bigger rate rise have now jumped and the markets are pricing it all in. This is what they are pricing in, a half a percentage
increase roughly twice as likely as a 25 basis points and that is the way it is.
Matt Egan is with me.
Matt, so we have -- he is not yet really putting it on the table that 50 is the expected, but he is certainly putting 50 as the possibility.
MATT EGAN, CNN REPORTER: You know, Richard, he is opening the door to 50 basis points, which is a big deal. Remember, the Federal Reserve raised
interest rates by 75 basis points, four straight meetings, and then in the last two meetings, they slowed the pace of the rate hikes.
They were basically lowering the dosage of this inflation fighting medicine and that was seen as very good news by economists and by investors, but if
they have to reverse course, that would be a disappointment.
I think there is a growing sense here that this war on inflation that the Fed is waging is going to drag on. If you flash back to early February,
there was hope that maybe the Fed could wrap this up this spring. Now, there is a fear that they're going to keep having to raise interest rates
through the spring, maybe through the summer.
And Richard, of course, the problem is that the more they do, the greater the risk that they do too much and that they slow the economy right into
QUEST: But that Matt is almost a sine quanon now of the situation. They can't get inflation down unless they ratchet up rates and it is going to be
a cost of doing business that they tip the thing over.
EGAN: Yes. That is the concern that is the cost of business. The other concern though is the timing factor here, right? Because, you know, when
you take medicine, sometimes you don't feel the impact right away and the worry is that if they keep injecting medicine into this economy they're
going to end up doing too much and kind of over medicating the patient.
Instead of, you know, a few minutes or a few hours, this actually takes maybe three months, six months, nine months. They don't even know how long
it takes for all these interest rate hikes to actually be felt by the real economy.
We know that some of the interest sensitive parts of the economy, especially housing, technology, manufacturing, they are feeling the impact
of the rate hikes, but the service sector is not really and that is concerning to the Fed Chair, and so he has certainly opened up the
possibility for more rate hikes ahead.
QUEST: So Matt, look at the Dow 30 with me and if you -- as we look at the market there, I'm just thinking, you know, everybody is down heavily,
but the banks are absolutely being creamed hard.
JPMorgan is off three percent, Goldman is off sharply. Interest rate sensitive stocks are down. This is a move that's taking everybody with it.
EGAN: It is, and I think the reason why the banks are feeling the brunt of this is because they're at the frontlines of this economy and so, to
whatever extent this war in inflation ends up slowing the economy down, and perhaps even causing job loss, the worry is that that means less demand for
loans, and the loans that they've already extended, the mortgages, credit cards, some of those might go bad if people lose their jobs, and they can't
pay them back.
QUEST: Matt Egan, thank you.
Bill Lee is with me, chief economist at the Milken Institute.
The reality is, as I know, you've said, if you start late, you will have to go harder for longer, and they were about nine months to a year late in
what they began.
So, I'm guessing you are not surprised by what you heard Chair Powell say today.
WILLIAM LEE, CHIEF ECONOMIST, MILKEN INSTITUTE: Not at all. In fact, what we're seeing is real-time policymaking and the nightmare of every
policymaker is that the data he is looking at or she is looking at, is not telling what is going on in the economy because of data revisions and
because we got a big surprise in January.
So what we're expecting to see going forward is the advice from most policy rules that are used to assess policy is that we should have gone earlier,
and if we're going to go late, we're going to have to go higher, and most policy rules are suggesting we should go maybe six or even seven percent,
not the five percent that is being priced in by markets right now.
So markets really are yet to be surprised by even more tightness, if the data keep coming in as strong as it has been.
QUEST: Now I was reading your notes and thoughts. The Taylor rule, the famous Taylor rule, which we don't often -- we don't talk about enough on
this program. The Taylor rule says it should be six or seven percent.
LEE: Absolutely, and I've modified my estimates of the Taylor rule to take into account the fact that we have a very different economy than John had
in his earlier papers, and I think that every policymaker is going to tell you, oh, these policy rules are way too simplistic.
We never follow them mechanically, but they do provide guidance as to what would happen if you followed some rules that are very specific and
principles set in those rules are that if inflation goes up, you raise rates by a little bit more to get the real rate of interest into a
tightening condition that will allow the economy to slow down inflation to slow down. We haven't done that yet.
QUEST: But I just wonder, are we not the ones who are the fools to some extent? This was always going to be how it was, the strength of the
economy. Have you ever known inflation to just be tamely and meekly walk out the door because rates have started to go up? It always ends up as a
LEE: Well, this time it was supposed to be different because it was COVID- induced and supply side induced and supply chain brokenness was supposed to be the source of this. You heard that in the questioning by the Democrats
throughout House testimony.
Now, there's a lot of people who believe that it's all supply side. Well, I think that Chair Paul was trying to correct and say it is both supply and
demand. The demand, side is still extraordinarily strong even as the supply side is coming back online.
QUEST: We have the traffic lights, the QUEST MEANS BUSINESS traffic lights that will help us understand exactly what is happening.
So what color would you like? Obviously, red means he is going to have to do more, and it's going to slow the economy. Amber, well, thinking about
it. Green, this is full steam ahead for the economy. It's bad news. Which is he going to do?
LEE: Powell told us he's definitely going to be doing more depending upon how the data come in. So look at the next two weeks' worth of data and look
at the CPI, the employment numbers, and the retail sales.
If it continues to strong as it has been in January, you betcha, it is going to be full speed ahead and rates are going up.
QUEST: So which color would you like have the lights?
LEE: Can I have a red/amber.
QUEST: No, is the short answer to that. But what I will give you instead, because we have the ability to do it.
LEE: Amber. Amber.
QUEST: I'll give you a flashing amber. How about that? A flashing amber means absolute caution, that we're worried about what's happening. Does
that satisfy you, sir?
QUEST: Thank you very much indeed. Good to see you, Bill. We'll talk more about it.
The flushing amber.
LEE: Thanks, Richard.
QUEST: After all -- oh, no. I beg your pardon, Bill, you're staying with me a bit longer.
Now, the United States says it does not seek conflict with China after the Chinese Foreign Minister issued a stark warning. Wang Yi said conflict and
confrontation were inevitable if the US does not change course. Ties between the countries have been more strained than usual since the US shot
down the balloons last month.
Beijing's Foreign Minister told the National People's Congress what the incident showed.
(BEGIN VIDEO CLIP)
WANG YI, CHINESE FOREIGN MINISTER (through translator): An accident can reveal something fundamental. In this case, the United States' perception
and views of China are seriously distorted. It regards China as its primary rival, and the most consequential geopolitical challenge.
This is like the first button in a shirt being put wrong and the result is that the US' China policy has entirely deviated from the rational and
(END VIDEO CLIP)
QUEST: Well, let's ignore the somewhat bizarre idea of buttons and shirts, but Bill Lee is still with me. So, what are the Chinese basically
LEE: The Chinese are telling us, you know, most of your stories about global recovery depend upon China. We are an integral part of the global
economy and you better treat us seriously. And I think the threats that he is putting out there is that any attempt on the part of the Biden
administration or the Western alliances to cut China off from technology to interfere with the kind of trade that we've been having with them, the
unbalanced trade is going to result in consequences and the threat of wolf warriorism is really right in the air right now.
QUEST: Who loses most? Because obviously I was in Asia last week, and I can see how the reopening of China is dragging up all the other economies
here and in the fullness of time, will actually arguably be the savior of the EU, and perhaps even the US in terms of the engine, the pump primer. So
who loses out?
LEE: Well, Richard, that's the traditional story. But I think Xi Jinping also gave us a warning in his speeches lately, that says he's going to try
to emphasize domestic demand and domestic service sectors. That means that China may not be as much of a locomotive as it has been in the past.
So truly, the Europe will lose out tremendously because of their trade connections, especially Germany, and the United States will lose out
somewhat in the sense that China is an export engine to supply us a lot of cheap electronics and cheap goods.
QUEST: Bill, quick thought. Is this the most difficult economic scenario in times that you've seen in recent years?
LEE: I've been at the IMF for over 18 years, in the Federal Reserve before that, and as a Chief Economist at Citi, I have never had chance to have to
tell clients, you know, I can't figure out what's going on with China and what impact it is going to have on the global economy.
QUEST: Bill Lee, very grateful to have you. We will talk many more times. I will get you to a green or a red before we finish, sir. Thank you.
K-pop is one of the world's most popular genres. There's a fight as you know, we've talked about it on this program brewing over which company will
control some of its popular artists.
A report from Seoul on the K-pop battle comes up next.
QUEST MEANS BUSINESS.
[VIDEO CLIP PLAYS]
QUEST: That is the band, Red Velvet. They are never far from my gramophone, one of the many K-pop groups signed to SM Entertainment.
You're aware the battle is now on for SM. Kakao a major Korean tech company has doubled down on its efforts competing with HYBE, which controversially
bought a major stake directly from SM's founder.
I spoke to the Chair of HYBE about the takeover effort when I was in South Korea.
(BEGIN VIDEO CLIP)
(BANG SI-HYUK, CHAIR, HYBE ENTERTAINMENT speaking in foreign language.)
TRANSLATION: I believe it is crucial to clarity terms first. The term "hostile deal" is n9ot obscure, but it has a clear meaning. In economics,
it basically refers to a case where a company is collected in the market against the will of a major oligopolistic shareholder.
However, we took over their stake with the consent of the major shareholder through due process.
I think it is propagandistic to call it a hostile deal.
Rather, I think, it is a serious problem that management wants to run a distributed company as they wish without a major shareholder.
(END VIDEO CLIP)
QUEST: Now, the -- whatever we call it, hostile or otherwise, the reality is it is very nasty and getting worse.
CNN's Paula Hancocks is in Seoul and she explains the current state of play for SM Entertainment.
PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT: It is a K-pop tug of war and the prize at the center of it all is the iconic music agency, SM
Now, what has happened today, this Tuesday is we have seen the Internet giant, Kakao here in South Korea launch a $962 million offer for SM
Now that comes just days after it failed to launch a direct offer. It's had to do it through a tender offer now because a local Court actually blocked
their previous efforts.
So this is really Kakao doubling down, trying to get control of SM Entertainment, an iconic company which manages the likes of Girls
Generation, but they're not the only ones in the running.
We know that HYBE who manages BTS, a very influential label here in South Korea and really around the world have been trying already to gain that
controlling share of SM Entertainment. They also had a tender offer. It wasn't accepted by investors though, which really opened the door to Kakao
being able to make this offer.
We don't know if it will be accepted. We know that this offer is valid until about March 26th. So we could still see some twists and turns here.
We don't know if HYBE for example will up their offer, but we certainly have seen some very interesting and very public spats between the
management, the shareholders of all these companies and of course, the prize at the very center being SM Entertainment will be a significant price
in the K-pop industry.
Paula Hancocks, CNN, Seoul.
QUEST: Elon Musk is feuding with a former employee, he responded to a Twitter employee asking if he still had a job. The employee said he had had
been locked out of his account and HR wasn't telling him if he'd actually been fired or not.
What then took place was essentially an exit interview. It ended with Musk calling into question the employee's disability and the employee confirming
he had indeed been let go.
It is the most public, in a series of unceremonious firings that have left Twitter employees very much in the lurch.
Clare is with me. Clare Duffy is in New York.
When I read this this morning, I sort of felt very sad for the employee, particularly when Musk then promptly attacked him perhaps unfairly and
CLARE DUFFY, CNN BUSINESS WRITER: Right, Richard. I mean, this is -- it is just sort of shocking to see the world's richest man calling out an
employee who has just been let go from his company, sort of mocking his disability.
I think this situation is really characteristic of how these Twitter layoffs have happened. You have this employee who is confused about whether
he's been laid off or not in the first place, you know, has to go to Twitter to ask Elon Musk about it, because he is not getting a response
from the company, and then Musk responds by mocking his disability.
And this is an employee who was the founder of a company that was acquired by Twitter, who has been recognized for his charitable work improving
wheelchair accessibility. It just, you know, seems sort of characteristic of Musk's management style here.
QUEST: Okay. Right, but Clare, how unusual it is? Is this a one-off? I know you've been talking to other Twitter employees, what's the, if you
like, the underlying tone?
DUFFY: Right, Richard. So this is not a one-off. Musk has previously marked employees previously on Twitter. I think the thing that I'm hearing
from employees, former employees is just the sense of confusion, uncertainty that has really characterized the last year of working for the
I sat down recently with three former Twitter employees. One of the interesting things though, that I asked was, what their initial reaction
was to Musk's involvement with the company about a year ago. Let's take a listen.
(BEGIN VIDEO CLIP)
JUSTINE DE CAIRES, FORMER TWITTER EMPLOYEE: At the time, I did think he had something important to offer to the company perhaps a new perspective that
could have been really interesting.
DUFFY (voice over): Justine de Caires spent more than three years as an engineer at Twitter. Bim Ali, a former engineer on Twitter's core
technology team was pregnant with her first child throughout the months of uncertainty over Musk's Twitter takeover.
BIM ALI, FORMER TWITTER ENGINEER: We were on the Twitter coaster, the Elon Musk chapter for seven months and during that time, he was in he was out.
It was happening. It wasn't happening.
I was just trying to preserve my peace, to be honest. I was pregnant. My priority was the health of my child.
DUFFY (on camera): What were you hearing from Twitter's current leadership throughout the months of the back and forth. Is he going to, is he not
MICHELE ARMSTRONG, FORMER TWITTER EMPLOYEE: We have no idea of layoffs -- anything about layoffs. That was the number one question everybody asked.
DUFFY (voice over): The former employees said Twitter's leadership at the time was vague about the possibility of layoffs following Musk's takeover,
but Musk himself assuaged some of their concerns in an all-hands meeting he attended with employees in June.
ARMSTRONG: He joined an all hands and he said significant contributors had nothing to worry about, about layoffs, regarding layoffs. So you know, of
course I thought, well then, I don't have anything to worry about because I'm a significant contributor.
SHANNON LISS-RIORDAN, ATTORNEY: There had been these promises made --
DUFFY (voice over): Labor attorney Shannon Liss-Riordan represents about 1,500 former Twitter employees taking legal action against the company,
including the three CNN spoke with.
She says the company broke promises following Musk's takeover, in particular offering workers a smaller severance package than employees had
previously been told they would get.
LISS-RIORDAN: So to keep people there, they made these promises. They reassured them. They put it in writing. They said it in response to
questions at all-hands meetings. That didn't happen.
And these promises were made to people to keep them there when the market was different last summer.
DUFFY (voice over): Twitter has opposed some of the legal claims saying its layoffs were lawful and pushing for private arbitration instead of a Court
DUFFY (on camera): How did you find out? How did you hear that you were getting laid off?
DE CAIRES: I was on one of the tiger teams that was working on the new Twitter Blue, and so it had just been a really long week. Like I remember
one night that week, like I had stayed up all night working on this thing.
And so that night, I had just submitted a code change and maybe an hour later, I like heard of some of my coworkers they were posting, "Hey, my
laptop has this really weird screen on and I can't log in," and they were like in London so -- and slowly we realized what was happening and we just
got on a Google Meet together and watch everybody dropped like flies. It was a really weird sense of whiplash.
DUFFY: Obviously, you have massive layoffs at many of the big Tech giants. Is that something that you're running into?
DE CAIRES: As I lovingly put in, the market is hot garbage right now. I was sitting down earlier this week after a wave of rejections and I was kind of
like, wow, maybe you know, maybe I should go be a firefighter or something.
DUFFY (voice over): Ali gave birth to her first child in January, days after her official termination date from Twitter and was left without the
five months of maternity leave she was expecting.
She says she was also left without health insurance, which wasn't included in Twitter severance offer.
ALI: But I would like for us to be compensated fairly. A lot of us put in a lot of effort, because yes, we loved the company and we love to excel.
DUFFY (on camera): So, you know, I think what you're hearing there, Richard, is just this sort of frustration that employees stuck with the
company throughout the last year of uncertainty over this acquisition, and then were let go, which really, you know, upended people's lives. They were
kicked out into this tech labor market that's now really challenging.
And they say the company hasn't provided the kind of severance that it had previously promised them.
QUEST: Clare, it is fascinating. Thank you. You'll keep watching that for us and come back when there's more to report. Thank you very much,
Lego, 90 years old and strong earnings. In 2022, the Danish toy company reported a revenue jump of nearly 17 percent. Store traffic is hitting pre
pandemic levels and I assure you, I did not make this and I'm going to about to destroy it, but here you go. Transatlantic Lego, the White House
and Big Ben, and somebody spent hours making both.
Earlier the Chief Executive spoke to Julia Chatterley. He said new products are reasons for the firm's success.
(BEGIN VIDEO CLIP)
NIELS B. CHRISTIANSEN, CEO AND PRESIDENT, LEGO GROUP: We did raise prices on the select part of the portfolio, and because of those LEGO prices going
up, we have seen to your point it has been coming down a little bit from the peak. And we hope to see that continue throughout the year, hopefully
then we can avoid actually having to increase prices more.
And as always, we would like to make the product as attractive and as good price value as we can across, and I think we've been pretty okay with that
during the COVID pandemic, not raising prices until a little bit in the autumn of last year.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, "FIRST MOVE": We can talk about two things in terms of investment in both digitization, but also in new
products as well, and I think one of the other things that stood out from these results, almost half the products you sold last year, so 48 percent
were new in 2022.
Just that upcycle of continuing to innovate and provide new products is also surely key to the kind of growth that you're managing to sustain.
CHRISTIANSEN: Yes, it's quite very selective, you know. Typically, I say we are no better than what we've just invented. So we have to renew
ourselves all the time, I should say with half of the product line being new every year. So we are as good as the creativity and the innovation we
can bring about all the time.
But it also allows us to be super relevant and cool to our kids and adults with the life right now, and in that sense, I think it's also a huge
strength that we put it off, with the right type of innovation, with the right relevance, then it also really puts us I think, in front of what the
consumers want right now and that was very successful throughout 2022.
(END VIDEO CLIP)
QUEST: LEGO, 90 years and still counting.
QUEST MEANS BUSINESS tonight. The London Stock Exchange has fared relatively well over the last 12 months. The FTSE 100 is up more than four
percent so far this year,
Sunrise Companies are sitting out the markets. Many see better value in New York.
After the break, I'll be speaking to the Chief Executive of the London Stock Exchange.
QUEST: The battle for Bakhmut isn't over. Despite constant attacks from Russia, Ukraine says its forces are holding their ground.
President Zelenskyy has ordered reinforcements to defensive positions inside the besieged city. He has told CNN, he won't withdraw troops nor
abandon any part of the city, speaking exclusively to Wolf Blitzer.
(BEGIN VIDEO CLIP)
WOLF BLITZER, CNN HOST: I want to start with the battle for Bakhmut. Ukraine has put up a tremendous fight and inflicted massive losses on the
Russian side. But in recent days, Russian forces have made some critical gains there.
Why have you decided not to withdraw from Bakhmut?
VOLODYMYR ZELENSKYY, UKRAINIAN PRESIDENT (through translator): We understand what Russia wants to achieve there. Russia needs at least some
victory, a small victory. Even by ruining everything in Bakhmut. Just killing every civilian there, they need to put their little flag on top of
that to show their society.
It's not a victory for them. It's more like to support -- to mobilize their society, in order to create this idea of they're such a powerful army.
For us, it's such a difference. This is tactical for us. We understand that, after Bakhmut, they could go further. They could go to Kramatorsk, to
Slovyansk. There would be an open road for Russians after Bakhmut to other towns in Ukraine, in the Donetsk direction, in the east of Ukraine. That's
why our guys are standing there.
(END VIDEO CLIP)
QUEST: Wolf Blitzer's exclusive interview with Ukrainian president Volodymyr Zelenskyy is on Wednesday night at 9 pm Eastern time, that's 10
am Thursday in Hong Kong, 2 am In London.
A decision by the British chip designer Arm to pursue a U.S. listing is raising questions about the U.K.'s ability to attract growth companies. Arm
is regarded as a crown jewel of the U.K. tech sector. It was bought by Japan's Softbank in 2016.
The British government has been trying to woo the company to float shares in London. The latest in a list of snubs and defections, it even has "The
Times of London" newspaper asking, is this a sign?
The editorial board has written of London's "stock market has been derided as a "Jurassic Park," full of dinosaur companies that will be displaced by
the high technology sector in the coming decades.
"The danger is, the city will become a backwater as the action focuses increasingly on America and Asia."
David Schwimmer is the chief executive of the London Stock Exchange Group, he's with me now.
I'm guessing, A, you'll say that's not the case at all.
You would say that, wouldn't you?
And B, you must have been either hitting your head on a brick wall or seething when "The Times" wrote what it did?
DAVID SCHWIMMER, CHIEF EXECUTIVE, LONDON STOCK EXCHANGE GROUP: So the London Stock Exchange Group is performing very well and one that continues
to be by far the most attractive and international financial center in Europe.
Just a touch for a moment on how well we as a company are doing, we announced our results last week, very strong results for 2022. Great growth
across each of our businesses, capital markets, post trade and our data and analytics division.
SCHWIMMER: And so we're very pleased with the business performance. This issue that has arisen has raised some interesting questions.
And I think an important discussion about a number of the reforms that are in the works, in terms of improving the attractiveness of the London market
and continuing to make sure that it is the most competitive and attractive financial center in Europe.
QUEST: OK, so if you have, and yes, it's the largest by a long measure. But it's not the depth and breadth and size of the U.S. market. And it
doesn't enjoy the benefits of the single market, at least not at the moment, from within the E.U.
So you've got one hand down, one hand -- they can arguably a patch over one eye.
What is your plan to stay on top?
SCHWIMMER: So there are a number of reforms in the works in terms of continuing to make this mark it as attractive as possible. In the past
year, a shift in terms of allowing lower free float requirements, dual class share structures.
I think there's a very important discussion going on right now in terms of what happened with the U.K. pension funds investment in U.K. equities,
where, over the last 20 years, it has dropped something like 90 percent.
So I think the government is taking a close look at that. There are some accounting standards that apparently incentivize the investment in fixed
income instead of inequities by U.K. pension funds.
So we have a bizarre circumstance now, where you have more investment in a bunch of U.K. companies by Canadian pension funds than by U.K. pension
funds. So that will change. But there are a number of other aspects that are continuing to make this market very, very attractive.
I would just say, there's a lot of noise about this particular issue right now. But what is lost in that noise is there are many aspects of listing in
London that are much more attractive than listing in the U.S.
The higher level of litigation in the U.S. is very painful for a number of companies there. I think the quarterly reporting more painful for companies
in the U.S.
So the -- this issue, there's a much more balanced way to take a look at it. Last year was the strongest year for IPOs in this market in many, many
years. So a little bit of recent noise but this continues to be a very attractive market.
QUEST: And if we look at this shift of the LSEG into analytics, into data management, I mean, you and I both know, you can pretty much trade the
stock anywhere. And arguably the trading aspect is the least growth part of the business or the listing business. But the analytics is the growth area.
SCHWIMMER: Well, first of all, I would just say, the stock exchange, the London Stock Exchange continues to be a very attractive business for us;
very high margins. The listings, the IPO market opens and closes. That will go up and down a little bit with the markets.
But it's a relatively small percentage of our overall business. And we do have a very robust business in a number of other areas just within trading.
We do fixed income trading and FX trading, both of which are doing great.
To your point, we are also one of the world's leading providers of data and analytics. That business is growing very well. It's also a subscription
style business. So very persistent revenues with great transparency. And we can see that growth really almost a year ahead.
So very robust business model across the organization and, as I said, at the front, LSEG is doing very well as a company.
QUEST: The whole thing of the Refinitiv business and the Microsoft deal and all these various bits which, on their own, can mask -- men going in
top hats and the trading floor is a lifetime ago.
The future is what?
SCHWIMMER: So LSEG is a very different company today from what it was even just a few years ago. And 70 percent of our revenues are data and
SCHWIMMER: As you mentioned, so we have really done very well in terms of integrating the Refinitiv business. We have met or beaten all of our
integration targets. We've raised some of them as recently as last week in terms of raising our revenue synergy targets.
We are really focused now, kind of shifted our focus from that integration of Refinitiv, to the transformation of the broader organization. And we
announced this partnership with Microsoft in December.
SCHWIMMER: That is going very, very well. We've got our teams of people working closely together to build some great new products that are really
going to change how financial market participants interact with each other.
QUEST: I'm almost embarrassed to say so but I thank you for coming on tonight. I'm almost embarrassed to say I remember the big bang at the
London Stock Exchange in 1986. You are too young, sir, I suspect, to remember that. But unfortunately, I do. Good to have you on the show, sir,
I'm very grateful for your time, thank you.
SCHWIMMER: Thank you.
QUEST MEANS BUSINESS for the moment, I'll be back at the top of the hour, as we make a dash for the closing bell. Coming up next, "CONNECTING
QUEST: Hello, I'm Richard Quest. Together have a dash to the closing bell with about two minutes away. The chairman of the Fed said interest rates
will likely go higher than expected. And his comments have sparked a selloff on Wall Street.
You can see how the Dow has reacted. We were positive until the comments, then as the day just went on and on, the market fell further and further
with Jay Powell's testimony on Capitol Hill. And we are now at the lowest point of the day, down some 580 points.
If you look at the other major markets, they're all down. The S&P, the Nasdaq, but it is the Dow that's bearing the brunt of the markets. With the
Nasdaq of 1.25 percent. The Fed and others initially blamed inflation on supply chain issues.
The Milken Institute's chief economist Bill Lee told me Powell is trying to catch up from being late to start tightening.
(BEGIN VIDEO CLIP)
WILLIAM LEE, CHIEF ECONOMIST, MILKEN INSTITUTE: Well, this time, it was supposed to be different, because it was COVID-induced and supply side
induced and supply chain broken, as were supposed to be the source of this.
You heard this in the questioning by the Democrats throughout Powell's testimony. And there's a lot of people who believe that it's all supply
side. Well, I think chairman Powell was trying to correct and say, it's both supply and demand. The demand side is still extraordinarily strong.
(END VIDEO CLIP)
QUEST: So to the Dow components there, Merck is the only one that is in the green. That is because, a Credit Suisse analyst says, its new heart
drug could generate $10 billion sales. Otherwise it is red across the board.
Walgreens is way near the bottom. That's unusual. But it's California refused to do business with the company, saying it won't dispense abortion
pills in some states.
As for the banks, there you have the main ones, you've got Goldman, you've got Visa, JPMorgan. They are bouncing on the bottom as well. That's the
dash for the bell, I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable. The closing bell is ringing. Indeed, Jake
Tapper is now.