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Quest Means Business
Greek Protestors Locked In A Tense Standoff with Police As Lawmakers Vote On The Latest Round Of Austerity Measures
Aired May 06, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Greek lawmakers approve severe austerity measures. The demonstrators in Athens haven't given up.
The turmoil reverberates around the markets. Stocks, commodities and the euro are all down.
And companies have patchy performance. The chief execs of Alcatel, Lucent and Randgold, are in this hour.
I'm Richard Quest. And I mean business.
Good evening.
Protests are raging tonight outside the Greek parliament in Athens. In the past two hours lawmakers there have approved the government's program of punishing budget cuts. The Greek Prime Minister George Papandreou told lawmakers no amount of discontent on the streets would stop him making those reforms, even if it costs him the next election. He urged his opponents in parliament to back him.
(BEGIN VIDEO CLIP)
GEORGE PAPANDREOU, PRIME MINISTER OF GREECE (through translator): At this moment that the country is at this difficult position, at this moment that the foreign parliaments are voting, no matter which political party they are coming from, for the loan of our country, the national interest ordains the broad consensus in the Greek parliament.
(END VIDEOTAPE)
QUEST: Now, the austerity measures were passed by parliament, and passed comfortably, although the prime minister fired several members of his own party, who voted against the measures.
Meanwhile the demonstrations continue. Diana Magnay is in Athens tonight. She joins me on the phone where she is in the midst of the demonstrating crowds.
Diana, firstly, can you hear me?
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT (via telephone): I can hear you, Richard, hello.
QUEST: Good, Diana, tell me what's going on around you? These measures have passed so what do these demonstrators hope to achieve?
MAGNAY: Well, at the moment it is a fairly tense situation here. It is almost as though everybody is just standing there waiting to see what comes next. This is why I can hear you, because the chants aren't really that loud. Basically, the riot police are standing in one line in front of the parliament. And about 20 minutes ago it became darker and darker. People began to throw water bottles at them. There have been about three or four sticks of dynamite thrown at police, so large bangs. But essentially you just have this formation of people around that line of riot police.
No one is moving forward, no one is moving backwards, and there have been chants from the crowd of, "Thieves, thieves!" to the parliament building. And they have been chanting, "Burn the parliament down!" So, it is very tense. There are still thousands of people in the square. And I just get the sense that they're just waiting for that sort of flash point, at which point it really could erupt here, Richard.
QUEST: Diana, we are actually looking at live pictures, so we see very clearly that line of the police. We see the parliament. And we certainly see the thousands of demonstrators that you are referring to. But following on from the deaths, the three deaths, that burned-people who burned in the bank during protests yesterday, it seems that although there was shock and horror at that, that hasn't negated the protests, which some thought it might.
MAGNAY: No, it hasn't. It doesn't seem to have made much difference at all, for the level protest or at all what the government has been debating, the tenor of their debates. The government, unions, and people on the street who I have talked to have roundly condemned those attacks. They said that that is obviously the works of hooligans and that it is murder. The prime minister has said that those responsible will be brought to justice. But it hasn't made any difference to people's grievances. They have just said this is the work of hooligans. It has nothing to do with us, or our grievances, or the fact that we will still protest these measures, Richard.
QUEST: So, if that is the scenario, and Papandreou has not got his austerity measures through, one is tempted to say, what does happen next, Diana?
MAGNAY: Well, I think that this, in a way, is just the beginning of a long haul. You know the first round of austerity measures has already been taken on by these people. This is the second round. They haven't kicked in yet. So, this is just the beginning. People are going to get more and more annoyed, the poorer and poorer they feel. When these tax hikes kick in, when they don't get their Christmas or summer bonus. I think this is just the beginning of a long, long wave of discontent. I don't know what will happen four months from now. But I don't think that people will have stopped protesting by that point.
QUEST: Diana Magnay who is in Athens, joining us there.
Now, the longer this crisis goes on the greater the anxiety on the financial markets. The concern is not just about what is happening to Greece, or of course, other countries that could be caught up in the crisis, either through exposure to Greek debt, or because of growing doubts over their solvency and the credibility and the credit crunch. The rating agency Moody's is warning the banking system in Portugal and Spain and Italy could be susceptible to contagion. The investors are taking flight.
Jim Boulden is with me.
Well, Jim, we'll be with you in just a second or two, to talk about the wider implications in the ECB and put perspective. But first, before Jim does that, let's just look at these numbers and what happened.
The euro is not just over 14-month low at $1.2715. And interestingly, sterling has also suffered against the euro, it is off by about $1.49, under $1.50. So, the euro not withstanding everything we've heard from ministers and from euro politicians, it is still off. Moving on around and you see Paris is very badly affected, perhaps the worst of the big three or four. But the Spanish market was down sharply, down nearly 3 percent. And it was broad-based. Also the MIBTEL (ph) was down in Italy, that was off. In Madrid, other markets were very sharply lower.
It was the banking community. It was conglomerates. It was financials. And it was construction. And you can see, really, the damage that was done to European banking stocks and the reason for this was because of that warning by Moody's that there could be systemic risk within the system. Obviously, if that happens, then you'll see why. But to see Barclays and Societe off nearly 7 percent, that gives you an idea of the severity of the situation at the moment.
The European Central Bank is offering no fresh stimulus at this point. Speculation the bank would ease borrowing costs by buying bonds. The president of the bank, Jean-Claude Trichet, said it wasn't even worth talking about it.
Jim Boulden is with me now.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Exactly. I mean they asked them time and time again, did you talk about default with Greece? Did you talk about QE, did you talk about buying Greek bonds to help the banks in Europe? And he said they didn't talk about a lot of things. And I think it is really important for people to hear one of these statements that he had to make. So, let's show-let's hear one of the things he said about Greece and the default worries.
(BEGIN VIDEO CLIP)
JEAN-CLAUDE TRICHET, PRESIDENT OF THE EUROPEAN CENTRAL BANK: We did not discuss at all, anything like default, or such default procedure. And on the contrary, as you know, we are firmly on the side of the fact that the various-Greece, of course, which is the country that I quoted in my introductory remarks, will not default.
(END VIDEO CLIP)
BOULDEN: So, will not default. Will not default, despite what obviously we're seeing in the markets.
QUEST: There is a straightforward disagreement on this program last night. Vanessa Rossi of Chatham House said that it didn't look likely that the Greek numbers added up, the debts and borrowings were greater than the bailout amount. I've been reading on the stories, more and more economists saying there will-
BOULDEN: Restructuring.
QUEST: Restructuring.
(LAUGHTER)
BOULDEN: There are a lot of people who are saying that there will have to be a partial restructuring. That is the term they use. That somebody will have to take a haircut. Someone will have to take a loss on the current Greek debt out there. And that is why you saw the numbers from the banks. But I have to say, the banks themselves-a lot of the banks, like Barclays, you mentioned, their exposure to Greece is minimal. BNP Paribas said their exposure, $6 billion worth, that is 0.4 percent of their overall exposure.
QUEST: Yes, but-right, but hang on, Jim. This is all because?
BOULDEN: It is because of the fear that it is going to spread.
QUEST: And the systemic risk. You know, that it will take them down.
BOULDEN: Yes, but as far as Greece goes the banks are not that heavily exposed. Certainly they are in Germany, but not the rest of Europe.
QUEST: Yes, but those banks are heavily exposed, not to Greece, but they might be exposed to Italy or Portugal, or to Spain.
BOULDEN: Spain especially. You look at a bank like Santander. I had the number here, I'm probably going to lose it, but huge amount of money, exposure to its own country. No surprise there, 30 billion euros, to Spain, government debt alone for Bank Santander.
QUEST: Government bonds today.
BOULDEN: Exactly.
QUEST: We saw-you're shaking your head.
BOULDEN: Terrible. I mean, and it was accelerated in the last few hours. After Trichet spoke-some people, I guess, they wanted-they need leadership from Europe. We haven't seen leadership. And if someone is looking for someone to say something that is going to stop this. And Trichet said we're not going to have a default. And then you saw what happened to Portuguese bonds.
QUEST: That's Greek.
BOULDEN: Greek bonds, there you go, 10-years, almost 11 percent.
QUEST: It should be going in the opposite direction after the bailout.
BOULDEN: Yes, exactly. And look what happened to the U.S. Treasuries. They are so-the yield is falling so much now because it is a safe haven. The dollar, a safe haven. Italian bonds up over 4 percent. Now this is a government that does not have problems with its bond market. Spanish, up what is that? 4.5 percent. Way, way off of Greece, obviously, but when you look at these numbers compared to where they were in December, it is a completely different world for them.
QUEST: Right.
Finally, for those viewers who may not be as au currant, with bonds and yields and things.
BOULDEN: Uh-oh.
QUEST: Just remind us, what is the affect in terms of the costs of borrowing for these governments and why it is so serious?
BOULDEN: The yield is what they have to pay back to the person who takes the bond out. So, you have a 10-year bond and it goes up to 5 percent, 6 percent, 7 percent, that is the yield. That is what you have to pay back to people over time. So, it becomes more expensive, it adds more debt over time. And it is harder to pay off with taxes-not, you know, in the recession it is harder to pay off because you have less tax revenue. It just builds upon itself.
QUEST: OK. Busy day. Many thanks, Jim. Stay on top of those bonds.
BOULDEN: Yep.
QUEST: Nice job.
When we come back, shedding light on the darkest corners of the financial system. The past and present heads of the U.S. Treasury speak out on what really caused the global crisis, in a moment.
(COMMERCIAL BREAK)
QUEST: As Europe tries to contain the debt crisis of Greece, U.S. officials are continuing to investigate the causes of the meltdown that gripped much of the financial world 18 months to two years ago. The current Treasury Secretary Tim Geithner, and his predecessor Hank Paulson, have been testifying to that financial crisis commission. Both men said derivatives and other products churned out by highly leveraged, unregulated, shadow banking systems helped contribute to the panic.
(BEGIN VIDEO CLIP)
TIMOTHY GEITHNER, U.S. TREASURY SECRETARY: You had people trawling parts of the system. And parts of it that are very risky with nobody looking at it, nobody responsible, nobody in charge. And that was a-that was a tragic failure for the country as a whole. It was an avoidable failure I believe.
HENRY PAULSON, FMR. U.S. TREASURY SECRETARY: What happened was this grew very, very quickly, with no single regulator having the prevue of it; no one looking at it and being able to get information on the whole thing. So, it grew like topsy-turvy.
(END VIDEO CLIP)
QUEST: Hank Paulson and Timothy Geithner, perhaps sounding like grunts (ph) of meager (ph), "I wasn't responsible". Despite current efforts to pass a financial overhaul bill in Congress, Paulson says more financial crisis in the future are inevitable.
If you look at what is happening on Wall Street at the moment, you really-it's a very, very sorry sight. Down now 182, but we had been off more than 200. That is1.5 percent, just over 1.5 percent at the moment, another sell off is underway. The debt from the severity of that, we need to discuss. Stephanie Elam is in New York.
I'm wondering, Stephanie, I mean, we are near the lows of the session. Just off 220, I think, was the low so far. What is driving them down today?
STEPHANIE ELAM, CNN FINANCIAL CORRESPONDENT: Well, a lot of it has to do with what you were just talking about with Jim Boulden. These fears coming out of Greece are still affecting what's happening here in the markets. This is the third day in a row, now that we have seen the major averages tumbling. And it is all affecting because there is a lack of certainty. And we know the markets like to see certainty. And the reason that the U.S. markets care so much because of the fact that Europe and the U.S. are deeply connected through investment and trade. If you take a look at last year, for example, you take a look at U.S. exports to Europe; those goods, $258 billion worth last year.
But the problem is that if Greece's problems spread, and it spreads through these other countries, there could be fewer U.S. exports, and that could be a problem for our still-recovering economy here, Richard.
QUEST: That is so much so, but we know the Dow has risen sharply. And there will be those, and I suspect you are one of them, that within the next 15 seconds will remind me that it is probably due for a correction.
ELAM: There are a lot of people who would say that. You know, if you also take a look we have been getting some actually positive economic data of late. You know, you take a look at some of the numbers that we've been getting and you think, OK, you know what, we have seen that job cuts seem to be slowing down. You have seen the fact that we're going to get the unemployment report tomorrow, the big government one. And we're expected to see jobs added. So things look better here, but every day despite this news coming in, we are still seeing the markets go down.
And I think a huge part of that is the uncertainty factor here. And some were saying we were going up too fast. You know, people will-there is that drumbeat to 11,000, not too long ago. And look at this, we'll be able to do it again sometime soon.
QUEST: Stephanie, before we love you and leave you, just the number I've been showing on the board here. I don't think we have paid the electricity bill this week. It seems to have frozen. So, can you just remind me, please, from your numbers? What is the Dow doing, what is the Nasdaq doing?
ELAM: Sure, I can definitely do that. You know, if you take a look at the Dow right now, we are off, like you said, 201 points, 10,665. Nasdaq really taking a beating. Right now it is off more than 2.5 percent, right now. It is off 62 points at 2339. The S&P 500 off 2.25 percent. So that is something there as well.
You know, Richard, I forgot to point out one thing, too. We did hear from an analyst who said that it is possible that we could see the euro and the dollar hit parity in the next couple of weeks. Obviously, that would deeply affect U.S. trade here. So that is another reason why a lot of people here are a little jittery.
QUEST: Well, thank you for throwing that little bit of (UNINTELLIGIBLE) and good cheer in, right at the end. Stephanie Elam, who is at the-who is in New York.
(LAUGHTER)
When we come back, two CEOs who have-you know, it reminds me of the old story. There is: Do you want the good news or the bad news? Well, the good news, the economies are recovering. The bad news, why weren't these companies able to take advantage of it? The men behind two international groups, in a moment.
(DESK BELL CHIMES)
(COMMERCIAL BREAK)
QUEST: Keeping up with demand, even as customers rediscover the urge to spend. One or two companies say they are struggling to give customers what they want, even though the company has the product. Randgold is a company that is mining and growing volume of gold in West Africa. But as Randgold has been stepping up production, output has been limited, particularly by its Ludlow Mine, by the wear and tear of running the equipment. More intensively it has been running so badly or so much, that it is wearing out and will have to be replaced says the Chief Exec Mark Bristow.
A different equipment problem at Alcatel Lucent, which makes hardware, of course the telecom networks. Ben Verwaayen tells me this evening there has been a shortage of components that stopped the company from selling as much as it might.
All along, of which of course, while Alcatel's quarterly loss widened in the latest period. It was worse than Wall Street had been expecting. The question, of course, is whether or not Ben Verwaayen is now focused on dealing with the component issue first.
(BEGIN VIDEOTAPE)
BEN VERWAAYEN, CEO, ALCATEL-LUCENT: Well, we are in a transformation mode, as a company. And 18 months ago we had no market. And then after that we had probably not the portfolio that our customers really wanted. We have solved those issues. There is a market. And especially we see the market strongly in the U.S., but other markets are also turning around. We have a very relevant product portfolio, yes, and unfortunately we were hit by components issues.
QUEST: When you say component issues, is this because of the new forms of manufacturing and just-in-time management and all these issues that mean companies run so much leaner and meaner?
VERWAAYAN: No, you know, in a way I wish I could say yes to you, because that would be the easiest answer. The reality is not. I mean, our components issue that we have are not the more specialized, tailor-made, A6 (ph) and chip sets that you make. No, those components issues are components that are used by the car industry and by the consumer electronics industry, by the computer industry and by us. There was a run down in the past, there is a ramp up right now, and if you are not top notch in your supply chain you'll get these components issues. We have to work them through. But the good news is there is strong demand for our products. There is strong demand for our new technologies. And new products and I expect that we will be able to fulfill the promises to the investors for this year.
QUEST: Now that is interesting because you and I have talked many times over this-the tremendous task of turning the tank around and getting it steaming in the right direction. If I understand you correctly, you are still turning, but you are going I the right direction?
VERWAAYEN: So, here is the relatively strange message that I have to the market. If you lose $195 million in the quarter, you can't be happy about that. I'm not happy about it. But at the same time we are convinced that we have turned into relevance for our customers and that we have a market that is receptive to what we have to offer. So, we think that we can meet the guidance that we have given to the markets.
And I understand that people don't think that this is a very easy message to give. But it is what we have to tell them.
(END VIDEOTAPE)
QUEST: Ben Verwaayen of Alcatel-Lucent talking to me. And while we have been on the air, the disturbances outside the Greek parliament have become a little bit messy. This happened a short while ago. This was- you'll remember Diana Magnay talked about how the police and the demonstrators were head to head. It looks as if they are spraying either- it doesn't look like tear gas just yet, but it does look as if something is being sprayed. And there you see-well, you know, the pictures speak for themselves.
The demonstrators have been against-or head to toe, and toe-to-toe with the police for several hours. And these are pictures taking place at the moment. They are live pictures. The Greek parliament has voted, by majority, to implement the austerity measures of Prime Minister Papandreou. Greece, of course, has been experiencing several days of this unrest. Now that looks-that is tear gas, I would imagine, that you are seeing. As the police now try to disperse the protestors.
They are objecting to the austerity measures, which include pension cuts, cuts in social welfare payments, and for those who are employed by the government, the abolition, or at least the suspension of the extra bonus payments at Easter and Christmas. No section of Greeks lives will probably be unaffected by the-by the austerity measures that have been passed today.
Now, let's return to where we were talking about a moment ago. As we were discussing the question of those companies, here, having results. My next guest company is Randgold, and it is all about the forecast. The chief executive of Randgold is Mark Bristow, says he may have to ease back on his future guidance because of wear and tear on some equipment. It is particularly affecting prospects at the companies Ludlow Mine, in Malli (ph), in West Africa.
First quarter profit was up 70 percent and that is in the 12 month period, the price of gold shot up by a considerable amount. So, all in all, the gold prices at the moment are pushing the profits at Randgold higher. Gold has now risen more than $20 an ounce at this session. It is just under $1200. And I asked Mark Bristow if the first quarter profit growth had more to do with the market rising than the company's performance.
(BEGIN VIDEOTAPE)
MARK BRISTOW, CEO, RANDGOLD: I think that is a little unfair, Richard. You know, I think the Ludlow performance was very good under the circumstances, and when you consider the Marillow (ph) is a closing mine it is throughout another $30 million of dividends this quarter, so you know, it is not all in the accounting as I've said to you before. Sometimes it is in the cash flow.
QUEST: What is wrong with the equipment? I mean, what has to happen at Ludlow. I mean, from the way the I read it as a story is it is worn out and needs replacing. But I suspect it is lot more sophisticated than that.
BRISTOW: No, it is a lot simpler. We expanded the plant by nearly 50 percent its capacity last quarter. And some of the specific pieces of equipment, motors and pumps, took strain because of the extra volume they had to deal with. We are busy changing them, they will be changed in the next couple of weeks. We expected to change them, but we didn't expect them to start wearing so quickly that it forced us to change them early, that's all.
QUEST: So-
BRISTOW: So that is the only impact.
QUEST: So, obviously we can put this to one side as a-as an extraordinary that won't necessarily repeat. Let's look down at the fundamentals. We have gold in the euro in sterling terms, at record highs, or at least extremely high. We have, even in dollar terms, it is very strong at the moment. How much of this do you think is a factor of Greece's sovereign debt worries, all these other factors.
BRISTOW: Yes, I think it is, you know, what drives gold at this time of it cycle is sentiment. And right now there is, you know, there is a continuing fear that what the politicians are saying and what is actually structurally there in the global economy are two different things. And one would have thought that we wouldn't have had the sort of surprises that we have had out of Europe, given the sophistication and the economic data from that region. This is sort of the stuff you would expect from Russia, or even China, or some of the emerging markets.
QUEST: That is pretty brutal talk, Mark.
BRISTOW: Well, it is true, you know, these guys have been pumping lots of paper into their economies that have been shrinking and when that happens, the value of the currency goes down and people look to other forms of wealth storage.
QUEST: but then how solid, is that gold price at 11,000 plus. How much of that is speculative versus fundamental?
BRISTOW: Well, I think it is the definition between speculative and fundamental. I think it is fundamental, because the global economy is fundamentally broken. And people are looking other places to invest their money. In addition to that the global gold production is industry is X growth, as we see more and more major gold companies looking to expand into base metals. So, you have two fundamental drivers of the gold price, supply and demand.
(END VIDEOTAPE)
QUEST: That is Mark Bristow, the CEO of Randgold.
In a moment, a dreaded moment may have arrived on the shores of Louisiana. A turn for the worst in the BP oil spill disaster.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN.
We have been telling you for the past half hour about the disturbances taking place in Greece, where now it seems that some small scuffles have broken out between the police and the demonstrators in Athens. A few moments ago there was some rather-there were some running battles I would say, on the streets of Athens. They have been face to face for several hours as the Greek parliament voted on the austerity measures, a vote that went through for the government of Prime Minister Papandreou.
And then, as you will see here, for whatever reason, we're not sure of the catalyst, but the police decided it was time to disperse the crowd. And did so in a fairly robust, perhaps, graphic violent fashion. And there, tonight, some arrests being made on the streets by police.
But according to our correspondent, who (UNINTELLIGIBLE) things are at least under control.
We'll move on while we wait for more details from Greece.
It has, unfortunately, arrived. The U.S. Coast Guard says a patch of oil has been found on a small island off the coast of Louisiana. It is the confirmed first land fall of crude oil from the large containment, that of course, is happening from the spill in the Gulf of Mexico. All of this, while the containment foam is on its way. David Mattingly joins us now from Venice, in Louisiana.
David, lots to talk about, but let's begin first of all with the oil that has been found.
DAVID MATTINGLY, CNN INTERNATIONAL CORRESPONDENT: Well, we found out just a few moments ago is that the oil that is hitting this one particular island in this chain of barrier islands off the Eastern Coast of Louisiana, is being described as a sheen. Not a very thick of black streak of oil, but rather a sheen on top of the water that is now making contact with the shores of that island. This is still significant because this is the first confirmed contact this oil spill has had with land here in the Gulf of Mexico.
And there is a great deal of concern because those barrier islands are a haven for wildlife. They are environmentally sensitive, so the fact that the barriers that they have erected did not keep this sheen away, is definitely a cause for concern. They are out there replacing some of the barriers that were erected and possibly putting more out, if needed. But they did have crews go out there this morning, two on water and one by air to address this. And they did confirm that a sheen of oil has reached that island. So, but it raises concerns all across the Louisiana coast here, all along this environmentally sensitive area of where this oil might be going next.
QUEST: David, this all takes place as the containment dome is now on site. When do you believe they are going to try and lower? We know that there are no guarantees as to the success of this thing, which has not been tried before. But what is the schedule, and time schedule?
MATTINGLY: A BP spokesman told me they were going to start lowering this thing into the water sometime later today. And this is going to be a very slow and grueling process. They have never done anything like this before, lowering a device of this size into this much water. It is going to have to go down almost a mile, 5,000 feet down to the ocean floor and land precisely on where this leak is occurring in a pipe down there.
So, this is going to be very difficult. The barge that is going to be lowering this device is going to have a GPS stabilization system on it, where it is constantly going to be adjusting for winds and for currents to make sure that that huge device, that almost 100 ton device is going to be lowered carefully and in exactly the spot that they need to put it in. And they want to take a lot of care here, possibly taking a couple of days because this is the only device that they have made that is large like this, so far. If this doesn't work they don't have one waiting in the wings to try again. They want to do this right and they want to do it the first time, Richard.
QUEST: David, one quick question just occurred to me. How did they make this thing so quickly? I mean, to look at it, you know, this sort of thing normally I would have thought would have taken weeks. Or is this the sort of thing they have just sitting around, the steel, the iron, whatever it is made from?
MATTINGLY: This is a device that is based on a device that was used after Hurricane Katrina, only smaller back then, when they were going around trying to cap some oil leaks in the Gulf after that hurricane. Well, five years later now, they are putting that knowledge to use here. They are making a much larger one and now they had some equipment already pre-fabricated that they were able to use in the construction of this. So, they weren't starting from scratch. They were able to cobble together some other pieces of equipment they had and to make this device; this unique and stand alone device that they are now going to be using. And when it is finally on the floor, if everything works the way it is supposed to, it will cover the largest of the remaining two leaks in the floor of the ocean there. And they will funnel that oil up through a pipe a to a containment vessel on the surface. They hope to be able to contain 80 to 85 percent of the oil that is now leaking into the Gulf of Mexico.
QUEST: David, very grateful for that explanation, many thanks indeed. Eight years ago, what is happening now in the Gulf of Mexico, happened off the coast of Spain. The oil tanker, the Prestige, broke in two and sank. It spilled millions of gallons of toxic fuel. It lead to lessons to be learned. Ivan Watson is in Galicia, in Northwest Spain.
Ivan, they must certainly feel for those in the Gulf of Mexico, but what did they learn back then?
IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT: Well, Richard this crisis here really just ruined the live and the livelihood of people living in a picturesque little fishing villages just like this one. Mt. Peaka (ph), which was considered at ground zero of this oil spill disaster. This water here, full of a thick sludge that the locals called "La Medrea Negra", that means "The Black Tide." And it brought the fishing industry to a halt.
Now, the Spanish government did pay out billions of euros of compensation to the fisherman who were not able to work when their fishing grounds were closed. I don't know if you can see behind me, but there are seagulls wheeling around here, that seems to indicate that the quarter million seabirds that were killed as a result of the oil spill, that they seemed to have recovered, that population, since then.
But by and large, the people here were saying that this was a huge disaster, they have criticized the government, the Spanish government, at the time, of not moving fast enough to step in and help clean up. Instead, armies of 10s of thousands of volunteers came on the scene and worked with their hands on the beaches to help clean up the mess here. I've talked to medical researchers. They say that there wasn't enough adequate face masks and protective gear for some of those people. And they have seen signs of genetic mutation in the bodies of some of those volunteers who spent months on the ground. The equivalent of smoking cigarettes, basically.
And they say that this is another sign, another element that the U.S. government has to be careful about, when the oil starts to hit those beaches and people are at work trying to clean them up, Richard.
QUEST: Ivan, we could talk more about it, but you will forgive me tonight, I hope. We're going to have to draw it to a close. Ivan Watson, who is in Spain tonight.
We're bring that to a close briefly. This is CNN.
The markets, as you know, have been falling because of what is happening in Greece. What you don't know is this: The Dow Jones is now off more than 320 points. Nearly 3 percent for the market. It is a very sharp fall. The numbers aren't changing fast enough. If we look on the screen, here, you'll see actually on the screen. It is now down by about $350, 360 points. So, it-10,500 is looking extremely dubious at eh moment. That is the support level that traders will wanting to see about, but with the market off 3.25 percent, coming on the back of what else has happened in recent days and that 100 points here, 100 points there, over 11,000 you get an idea of the situation that we are in.
We'll be back with more. This is CNN breaking news. Good evening.
(COMMERCIAL BREAK)
QUEST: Good evening, tonight you'll need to have a strong stomach if you are an investor. The markets are extremely uneasy in New York at the moment. The Dow Jones industrial is off more than 412 points. That sharp fall of more than 250 of those points happening in the last 20 minutes. The market down nearly 4 percent. We can imagine, I haven't got the number to hand at the moment, but the Nasdaq was also sharply lower.
The reasons? Worries over contagion from the Greek debt crisis, and how this would affect the banking sector, and how the contagion would affect other markets as well. The Nasdaq, is down now 4.5 percent. We'll bring you more details and we'll watch that very closely.
The other major story we are following you tonight. Are the disturbances taking place in Greece, in Athens, where police and demonstrators have fought in the last half hour, as the authorities tried to break up the demonstrations that have been taking place outside the parliament. Inside, parliament, the Greek government was pushing through the austerity measures, which finally passed by a majority of 50 or 60 seats.
Our correspondent is Diana Magnay. She is in Athens. She joins me now.
Diana, those scenes look very ugly.
MAGNAY: Yes, they were. It was surprising actually, Richard. You have a sense standing in that square, we waited there with the protestors, for a good couple of hours. And as I spoke to you half an hour ago, there was just a line of protestors and, facing off against the police and throwing bottles. And then something sparked it off, at which point the riot police pushed into the crowd, and forced them all, these thousands of demonstrators into the side streets there with tear gas spray, pepper spray. You could smell it in the air. Every one running down the side streets.
We are just walking down one of these main avenues in Athens, which is completely cleared now, alongside the riot police. And there are fires burning on either side of the road.
But a lot of the thousands of people who were in that square do seem to have dispersed. It was almost like it was push by the police to get everyone out of the square. And now we're not quite sure, you know, whether there will be more of that sort of-those sorts of scenes to follow, Richard.
QUEST: How-yes, Diana, I understand you must be in difficult conditions at the moment, so do let me know the moment you have to break away. How widespread is this? Is it a square kilometer, just a few hundred yards, give our viewers a feeling and a size for what (UNINTELLIGIBLE) for that.
MAGNAY: Well, it is a central area where there has been demonstrating, I would suppose, I mean, we have walked a good 600 meters from the main square. And the riot police are still pushing down the street. And we still can't see demonstrators. I'm not sure whether they have dispersed. There are definitely far, far fewer people in the streets, at all, than there were yesterday. Which was, of course, a general strike, and there were as many as 25,000, police were saying. But now there seems to be more riot police than actual protestors. And you definitely got the sense that these protestors weren't the violent type of yesterday, Richard.
QUEST: Diana, I'll let you go and get on with your newsgathering duties. Take care. And when there is more to report, come back immediately.
The events that are taking place in Greece, the contagion from that is what is rattling markets around the world. In New York, at the moment-
(DESK BELL CHIMES)
-the Dow Jones is off more than 500 points at the moment. You see it on your screen, 513. Stephanie Elam is at CNN in New York. She joins me now.
Stephanie, you and I spoke not 20 minutes ago, when we were off 200 or 200 and change. What on earth happened?
ELAM: Yes, you know what Richard, this is really showing you just how jittery everyone is getting about this. From what I'm gathering, from one of our reporters who is down at the stock exchange right now, the traders have just been watching the TVs as this drama has been playing out on the streets in Greece right now. And that has really been spooking investors.
Keep in mind, we have already lost 300 points just about, between the last couple of days. And now we're off 600 points today, alone. This is a huge slide. The down off 6.33 percent. Nasdaq is off 7.33 percent, right now. The S&P 500 off 7 percent. So this just showing you that there is a lot of fear out here about how these things are going to be resolved. And the problem being it is not just Greece, if other countries are going to have this issue, because the European Union has spent this much time helping out Greece. Will they be able to help out, say a Spain or a Portugal, if these problems persist? So, right now taking a look at it, it-this is a big drop, now the Dow off 776 points.
QUEST: Stephanie, I was going to ask you, but I know the answer to my own question, here. To see the market fall this far this fast, this is panic. This is panic selling.
ELAM: Completely panic and it is because there is so much fear on the street of Greece and you look at those images that we are seeing. And it shows you just how volatile the situation is getting in Greece. That is freaking out the markets. I can't tell you how big of a drop this is and how quickly it is, with the Dow now off 850 points. Now, since we have been talking it is continuing to fall, Richard. We're about to go below-we just went below 10,000 right now. Just to show you exactly what we are talking about.
Nasdaq is now off almost 9 percent. So, it is off 211 points. The Dow just went off 900 points right now. My board is a little bit faster than the one on your screen.
QUEST: Whoa! Whoa! Stephanie! Are you saying, because our board here-that I can see, can't keep up with the numbers? Are you saying from yours, which is more accurate, that the Dow is off nearly 1,000?
ELAM: Yes, the Dow is off 950 points right now. We're at 9920, right now, on the Dow. So this is a massive slide and this is completely all about fear. This is panic, indeed, Richard.
QUEST: There is no justification for it on any of the fundamentals that we have seen today. If I understand that correctly, either. The economic numbers are good. The earnings are good. The banking situation in the U.S. is much more solid.
ELAM: Yes, no, there is no reason for this based on the economic data that we have gotten, based on the fact of what we have been looking at, jobs, if you look at earnings. All of these things are looking better, because keep in mind last year we had an awful comparison, so they are looking a lot better this year, because last year was so awful. These things have been coming in better. So we have been looking at a pretty decent set of numbers. This is completely related to what is going on Greece and right now, if you take a look at what is going on with the fear index, it is at a six-month high. So, it just shows you, that this is really all about fear and uncertainty.
QUEST: Just remind me that fear index, I just didn't quite catch it. This is the index that shows the contagion within the system, doesn't it? The fear index, it is one of those things that you are never quite sure the seriousness of what it shows. But what is it showing?
ELAM: Right, the volatility measure. And right now, it is saying, it has jumped as much as 21 percent based on the last thing I have seen. This comes out of Chicago here. And I'm looking at it and so it is showing that people are feeling definitely a bit of panic here. That is what we are seeing right now. And at least it looks like, perhaps, we've pulled back some on the losses, for the Dow and the Nasdaq. It is not as sharp, it has pulled back a bit, but it is still very, very, very, very strong selling going on here today in the U.S.
QUEST: Well, let you get on with your duties, but you have got more up to date numbers than I have, so just recap for me, where we stand at the moment on the major induces.
ELAM: Yes, sure. My numbers are definitely way ahead of yours. The Dow is off 703 points, 10, 164. Nasdaq off 6.75 percent, just about off 163 points, at 2239. The S&P 500 is off 6.33 percent at 1092, so it is off 73 points at this moment, Richard.
QUEST: Stephanie Elam many thanks indeed, putting that into perspective for us. The numbers obviously, necessarily are keeping on the screen, are having a bit of a hard task keeping up with what is taking place in the market. But we will have the up to date numbers for you in just a moment.
This is QUEST MEANS BUSINESS, it is CNN, good evening.
(COMMERCIAL BREAK)
QUEST: Welcome back. QUEST MEANS BUSINESS, tonight, where of course we are having and seeing some rather serious moves on the markets. It all seems to have been predicated by what took place in Athens, in the last hour. These are some pictures from the Dow Jones industrials, which is now off just 680-just nearly 700 points, it had been nearly over 900 points lower, at one particular moment. There were disturbances between the riot authorities and rioters outside parliament, which predicated all of this. When the police pushed back the protestors, leading to running battles and scuffles in the streets of Athens.
The two things were a volatile mixture, which exploded onto the markets of the world, taking the Dow down very fast, by about 400 to 600 points. But the events so far, it seems to be coming back a bit now, the Dow.
Let's turn to the other news headlines of the hour. Becky Anderson. Good evening, Becky.
(NEWS BREAK)
QUEST: Let's just us, you and I, turn now the markets. Diana Magnay is with us on the line from Athens. Stephanie Elam is with me in New York.
Start with you in Athens, Diana. It seems as though the events where you are, predicated or at least lead to this route that took place in the markets.
MAGNAY: Uh, well, I wouldn't be able to comment on that, but if it is any reassurance to investors, what I can say now is that those riots seem to have evaporated. The protestors have gone. We just got an update from police that of the 2,000 protestors left in the main Constitution Square, about half an hour ago. That was the group that we were in that were pushed out. Those protests have now dispersed. We have come down to the square where a remaining hard core of about 200 people were, but they seem to have vanished as well, into the subway. The riot police have gone and all we have now is a fire engine, firemen, putting out the fire that was set off here. But basically, the sum of it, Richard, is that it is over.
QUEST: Diana Magnay in Athens. Many thanks. Let's get straight to Stephanie Elam, in New York.
Stephanie, well-I mean, what a time? The Dow looks like it has come back remarkably. You know, one is not sure what to make of the last 25 minutes?
Can you hear me Stephanie?
ELAM: Hey, Don, can you hear me?
QUEST: Yes, yes, we are having difficulty just hearing Stephanie Elam, for the moment. Down 500 points at the moment for the Dow Jones industrials, off 4.6 percent, 10, 361. At its worst point we were actually under the 10,000 level. Down into 9,899 territory. And the market had fallen by 970, 980 points. And it did look-I mean, we were seriously questioning, whether a loss of a 1,000-now bear in mind this has all happened in the last 25 minutes or so. But as you can see, a pullback has taken place. A floor seems-and I use that term advisedly-a floor seems to have been fixed, around about this level. We are still off 3.9, 4 percent. Which means the Nasdaq must be off about 7 or 8 percent.
This is QUEST MEANS BUSINESS. I'll be back with more in just a moment.
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QUEST: Good evening, QUEST MEANS BUSINESS. It is a Thursday and if you have been with me for the past hour, well, then you will certainly know that we have had some exciting moments that we have brought you.
Pleased to say things are quieter, at least, quieter than they were when-half and a hour ago. Let's begin out recap of the days, or the hours events.
It all started about half an hour ago, in Athens, where protestors have been toe-to-toe, face-to-face, with riot police all day and then the riot police, according to Diana Magnay decided it was time to disperse the protesters.
Let me make clear, this is video that you're looking at from earlier in the hour. As the protesters -- as the riot police moved in, pepper spray and tear gas was used, all of which led to running scuffles on the streets. Our correspondent Diana Magnay tells me now that the protesters have dispersed and that all around the parliament where the government was voting in the austerity measures, well, there's the position (ph). The government voted in the austerity measures, 171 to 1 something, so they got the majority. But now as you can see, it's very quiet around there, no sign of any disturbances.
That is the situation as it looks. But however, on the world's financial markets, particularly in New York, the response was instantaneous. The Dow Jones, which had been off about 200 points, fell a total of 998 points. It went below 10,000 and below, almost to the 9,000 level. We're now off 502 points, minus 4.6 percent. The Nasdaq at one point was down nearly 9 percent. That has indeed now pulled back. I'll give you an update on the Nasdaq numbers in just a moment.
All this as I'm just telling you at the time when European markets fell very sharply as well because of fears of contagion from Greece. If you look at the European (INAUDIBLE) tonight, you can see that the markets were largely, particularly down in Spain and in Madrid, in -- down in Italy. Italy saw the largest losses, down something like 6 or 7 percent, 5 or 6 percent. Spain was up about 2.9 percent. Government bonds rose the yield in Greece and of course (INAUDIBLE) also rose in other major markets.
Let's go back to Diana Magnay who's in Athens. Diana, we've given the overview of what happened. What are you now seeing on the streets?
MAGNAY (via telephone): The streets are now calm Richard and we've had an update from police that the protesters have dispersed. There were fires down this main street as we were walking back up. They've all been put out. And that's something that I would stress that to you. It was amazing after the general strike yesterday where you had far more rioting than we've just seen. When you woke up in the morning, the streets were clean. The Athenian police are very good at clearing up after a riot Richard.
QUEST: Diana, while you're with me, I just need to update our viewers, QUEST MEANS BUSINESS. We are staying on the air to look at this. As a result of the effects of what we've seen in the markets, I can tell viewers now the euro has now dropped to about 126 against the U.S. dollar, so we're seeing very strong euro/dollar support and the pound has also dropped. The pound is now at 147.83 at the moment. That tells me that the dollar is becoming a flight to quality against all currencies. There's weakness in the euro. There's weakness in sterling and just over two hours from now, the UK election comes to an end.
Let's go back to you Diana just for a moment. What you've been seeing there has been the catalyst, but let's talk those austerity measures that the Greek government had wanted to get through managed to get through. It's now got through parliament.
MAGNAY: It has gone through parliament, a very unpopular austerity package and that's why protesters came into the parliament (ph) building today to sound their and demonstrate their dislike and their disgust for these austerity bills. It will now become law though, so very little options for them as to how to go on. People were shouting thieves (ph), burn the parliament down outside, while inside lawmakers basically deciding to cut public sector salaries, to hike taxes, VAT, to cut pensions across the private and the public (INAUDIBLE), very, very unpopular measures and that is why these people have come out onto the streets protest (ph) Richard.
QUEST: And Diana Magnay, who is in Athens at the locus if you like of the riots. Many thanks to that. Let's go to the locus of the markets instability this evening. Stephanie Elam is now in New York and we can talk to you. Stephanie, I can't remember a day like this. We need to start off with you updating us where the markets stand at the moment.
ELAM: Happy to do that Richard because when I was on with you last time, I couldn't believe how quickly the markets were falling and it's weird because I'm going to say it's actually a good thing. They were only down 415 points, because when I was on with you, we were off like 950 points. So we've come back a bit. The Dow off 3.75 percent, just about. Nasdaq off about the same, up 88 points at 2313 and the S&P 500 off about 3.75 percent, off 44 points at 1121. So some of the panic coming out of the market a little bit, but that's what today was definitely about Richard.
QUEST: Currencies have also really borne the brunt. I can see on my screen here that the dollar has rallied quite sharply. One would expect to see that at the moment. But even I'm surprised tonight at the speed of which not only it went down, but circuit breakers play -- not circuit breakers -- program trading and computer trading played a part in what we're seeing today, Steph.
ELAM: Yes, yes, you take a look at some of this, it was very quick. The drop was very quick and the rebound was very quick. Since you mentioned circuit breakers, I'm going to -- I will mention because we're after the certain mark in the day, after 2:30 Eastern time here in the eastern part of the U.S., there's no -- there's not going to be a hold in trading unless there was a drop of 21, 2150 points. So it was a huge drop, but we didn't get that far. So that's why we didn't see a circuit breaker jump in there which is worth pointing out. But definitely, this was a very quick move down and also coming back. So it shows a lot of this was a direct reaction to what people were watching, that video that we've just seen all around the world on the streets of Greece.
QUEST: We can look no further for the worries than the price of gold. Gold is up $12 and change which is just over 1 percent. That all shows this. But I think tonight as you bring our discussion to a sort of a close Stephanie, things seems to be -- I hate to use the analogy, but things seem to be all on troubled waters, but that's exactly what seems to have happened tonight.
ELAM: Yes, that's definitely it and also, I think a lot of it has to do with the timing of things Richard. The vote of all these austerity conditions in Greece didn't come until very late in the day in your part of the world. So because of that, our market is still open and trading. And so this volatility that was happening on the street played a role in that too and as things seemed to escalate, it played a part into what was happening here. But it was just crazy to see it fall below 10,000 again and now we're back above it. But still, if you keep in mind that we've already lost 300 points in the last two days because of this and right now we're off 360, it's been a round week, no way you can cut it any other way.
QUEST: Stephanie, let me know if you have to dash off. I know you have other duties, but if we do still have you for a few more moments and it is worth you and I just delving into this area a little bit, because economically, we know things are greatly improving in the United States. We know the first quarter earnings, about 80 percent of the S&P 500 companies, beat expectations and we still had this deep, sort of gut feeling that something's wrong.
ELAM: Right. We had people -- and you were talking about this before -- people saying oh you know what, the markets, they got back above 11,000 too quickly. There was time for some sort of correction that needed to happen. There's been a lot of arguments saying that, but at the same time, if you look at what we've been getting, the fundamentals we've been getting on the economy, it has been shown that things are improving. But also keep in mind that the comparisons are being made to last year and last year was just a terrible year. So it's making it easier for these comparisons. Tomorrow we'll get the big jobs report for April and we do expect to see that jobs were added. That should help out as well.
So overall things here look good, but it just shows you that's how fragile the recovery is and that people haven't completely removed themselves from this whole idea of the great recession, no matter how many analysts out there and economists say, more than likely we came out of the recession at some point last year. This fear is still very close and understanding now, especially as we learn through our own economic crisis that started here in the United States, the world is so much smaller and it's very hard to contain. What happens in one economic (INAUDIBLE) that economy. It usually is going to affect other ones at this point.
QUEST: All right, Stephanie, stay with me if you can for the moment. We need to go back to Athens for a second. We need to look back and catch up with what's been taking place in the Greek capital. Last we do this and while we look at these pictures, let me remind you of the events that took place during the course of the day.
In Athens today, there was of course the vote by the Greek government which has pushed through the austerity measures by the Greek parliament. Those austerity measures were passed by a vote of some 172 for the government to 121. The austerity measures were roughly 30 billion euros to the 2012. Now it will slash pensions. It will slash civil servants' pay and it will raises taxes. Not only will it raise VAT, it will raise the so-called sin taxes, the licensing taxes on beer and cigarettes. It is the prospect of -- and remember also, that the European Commission only yesterday came out with numbers showing that Greece was likely to contract in 2012 by 3 percent, minus 3 at a time when the UK and Germany for example were likely to grown by 1.2 percent. So the discrepancy and this is of course (ph) even before we've seen the austerity measures actually moving in.
Now let's go back to Stephanie Elam, is still -- Stephanie isn't still with me at the moment. Let's take a look at the Asian markets at the moment. Asia markets, these are the overnight markets that we saw from Wednesday into Thursday. The Dow Jones is off now just 3 percent. Looking at the Asian markets, there were some very serious and severe losses that we've seen for -- the Nikkei was off 3.75, the Shanghai composite was down 4 percent. Now if we pause and just look at the Chinese market, the worry there of course has been driven by the Chinese government which only earlier this week reintroduced or tightened the liquidity requirements that it required for other -- for banks to hold to keep this thing -- to make sure that they remain liquid and they remain solvent.
This is QUEST MEANS BUSINESS. I'm Richard Quest. I'll be back with more in just a moment. First of all, Stephanie Elam though is back with me. Stephanie, can you hear me?
ELAM: I can. I'm here.
QUEST: Good, Stephanie. I thought you'd left me.
ELAM: No.
QUEST: I thought you'd left me. (INAUDIBLE) with the markets.
ELAM: I'm taking a look right now. We are off 386 points, so we are coming back a bit here, 10,474 right now at the Dow. So we're off more than 3 percent for all three of the major averages right now, Nasdaq off 82, 2320 and if you take a look at the S&P 500, off 3 1/2 percent at 1123. Just trying to get a little bit more about what happened to lead to such a huge spike when we saw that drop of over 950 points or so on the Dow. And I'm looking into it as much as much as I can to see if we can get some clarity on what was behind that. Right now it looks like it was completely fear. It looks like it was driven by those images that we were seeing in Greece, but we're still looking a little bit further into this one Richard to see if there was more to this story.
QUEST: See, that's what's interesting Stephanie. Even allowing for fear, even allowing for Athens, even allowing for contagion, it was the speed with which this thing took hold that I think people will want to question how and why.
ELAM: I think that's exactly it. I mean it was so fast. Because it happened while I was live on the air with you Richard, I could barely even keep up with how fast we were losing hundreds of points at one time. That - - I've never seen it move that quickly. I've seen some bad days, definitely throughout the last couple of years alone, even back to 9/11 but I've never seen it move as quickly as it did. So that's why I'm trying to think we can find some more information about that because that was exponentially fast. It was like a matter of seconds because we were sitting there talking. It was tumbling more and more and we were down 7 percent or so. So I think at one point we were down more than 8 percent. So really a huge drop and it looks to seem like it's coming back a bit at this point.
QUEST: Stephanie, we'll come back to you in just a moment if we may. I'm going to just recap where we stand with markets around the world. What we know so far, the Dow Jones industrials we're now seeing is off just over 3.5 percent, round about 400 points, the Nasdaq off by a similar amount. In Europe, it was the London markets, the London market closed off, the FTSE was down 1.5 percent, the CAC down 2.2 percent, the DAX was off just around 1 percent. The largest losses on the market came in the (INAUDIBLE) index in Italy which closed down 4.5 percent.
If you like currencies tonight, you'll need to know that the dollar is strengthening. The dollar is strengthening against the euro which is weakening correspondingly obviously. The euro is now buying (ph) $1.26. The pound sterling is trading at this hour at $1.48. You're up to date. This is Quest, where I mean business.
(COMMERCIAL BREAK)
QUEST: Good evening to you.
It's worth you and I just taking a moment to recount and regurgitate the last 90 minutes or so. It really has been a day the sort of which frankly I can't see that I can remember in recent months, if not years.
It all happened when the Dow Jones and investors probably in New York saw what was happening in Athens. The Dow, which had been in a bad mood for most of the session, ended up being off the best part of 200 points, suddenly turned, went down fast and I mean fast, losing the best part of 700 points in a matter of half an hour.
Now the Dow which then fell to about minus 6 percent, the Nasdaq was off over 9 percent. It remained that way as there was great uncertainty in the investing community over what was actually happening in Athens.
What was fascinating about it was not only the speed with which it went down, but the speed at which it has now come back up again. It's widely believed that the falls that took place were exacerbated by program trading taking place in New York at the moment. Let me tell you where we stand at the Dow. We are now off some 300 points.
Paul is with me from CNNMoney.com. Paul, when we've looked at what happened with the markets in the last hour, the rhyme and reason of it is not entirely clear.
PAUL LA MONICA, CNNMONEY.COM: Yes, everyone is trying to say right now that it's about Greece, the very powerful and startling images of some of the protests taking place in Athens. But it is very difficult to understand or comprehend how quickly stocks dropped and then how they started to rebound a little bit. They're still obviously very well off of their highs of the day. But it's going to look like they're going to have a very ugly day, no matter where we end. But people are still scratching their heads about how this happened so quickly.
QUEST: As I look at the Nasdaq at the moment, the Nasdaq's off about 3.5 percent. S&P is off about just shy of I think 4 percent at the moment and Dow is off 4 percent. We've got just about 40 minutes left to trade. Is it your feeling that perhaps we've -- we've got a level here, or not?
LA MONICA: It appears that way right now. But if you were -- if you had talked to me an hour ago, and asked me if the Dow was going to suddenly fall 900 points in the matter of a -- a few minutes, I would of said be crazy. There's no way that's going to happen.
But it really is very difficult to try and find any rhyme or reason right now. But hopefully we have stabilized. And you know, we'll, you know, see what happens in the final half hour or so, and what happens tomorrow morning.
QUEST: Paul, here's an interesting theory. I've just got an email. Worst, the Dow plummeted -- there may have been a technical glitch in a trade with one or two stocks according to some sources. And not confirmed, so I'm not going to say we're going to (inaudible) whether or not -- I'm not -- I'm not putting my shirt on that rumor.
But if it's true -- if it is true, that would add weight to this continuing story we're seeing about computer trading, and program trading that made this situation worse.
LA MONICA: Exactly. I think there's no doubt that even if it turns out that there wasn't necessarily a major glitch, or dare we even say mistake that caused this. The advent and -- and increased use of computer trading really does exacerbate some of the moves up and down.
And also, you know, some people have pointed to how, you know, the 1987 crash for example was much worse than what happened this afternoon on a percentage basis. And that's true. Also because the Dow is trading at a much higher level right now, the point moves are going to be higher, even though the percentage moves won't be as drastic as some of the worse sell offs in history. It just seems a lot worse when it's 900 points of course.
QUEST: Paul, I need you to stay with me for the moment, cause you and I have got much more to get into on this. In fact, I'd like you to listen to Todd Colvin, the Vice President of the brokerage MF Global -- Global.
Todd, let -- let's start with you. Todd, the -- the falls that we saw, and the severity of them, can we lay it at the -- at the door of Greece contagion and worries about that?
TODD COLVIN, VICE PRESIDENT, MF GLOBAL: Well, you have to remember that the Greece predicament here, it's going to cause ripples. Yes, we know it seems to have been targeted at the southern part of Europe whether it's Greece, Portugal, Italy. But it has ripple effects. And we learned in September of 2008 when Lehman Brothers went down, that what -- you don't really -- you didn't really comprehend how intertwined the globe is when it comes to rates.
And right now Greece, you know, is -- is as big as Lehman was right now the way -- the way the markets are trading. And I think that we'll continue to see more defensive speculating as opposed to guys being on the offense here. And I think that's what we saw in stocks. Guys kind of getting out, looking to reposition. And as we go forward, I think risk is going to be at the top of everyone's list. And it's not going to be one of those overnight -- you -- you know, overnight things that we look past.
QUEST: So the unhappiness of what's happening -- we know the contagion theory. We're -- we're well familiar with that, Todd, on this side of the Atlantic. But what we need to know what -- from your side of the Atlantic is, what is it that you actually fear might happen?
COLVIN: Well, I -- I think what you're going to see is you're going to see a lot of money coming this way into the United States where the -- where the quality remains the strongest. We have the -- the currency of choice. And it -- it just seems that right now riskier assets are going to find themselves with lack of liquidity which is one of the issues when you buy a risky asset, whether it be from an emerging market, whether it be in the currencies, or -- or where.
Your liquidity is a key part of that equation. And when you don't have it, you want to get out, get somewhere safe, regroup. And I think we're going to see that. And yields here in the states are going to continue to go lower, as volatility goes up. Because we don't know when this is going to end yet. We don't see the light at the end of the tunnel yet.
QUEST: All right. And the -- we don't see that light. By the way, if you are watching, and you do want to join our -- you've got some thoughts about what's happened here, @richardquest is the Twitter address for myself -- @richardquest or quest@CNN.com. And we'll -- I'll get to some of your thoughts. Because you have been joining this and watching this with me. It was a pretty frightening event for -- for investors watching wealth going down the tubes like that.
Todd, it's -- @richardquest is the Twitter address. Todd, it's never a pretty sight to see a market in full flood. How much of this was real investor setting? And we'll see that from the volumes later. And how much is -- is -- was just computer trading, and -- and portfolio differentials.
COLVIN: I -- I think a great deal of the -- of the big plunge we saw, like for instance in the Dow from -- from say 300 down to -- I don't even know how low it got -- 700 -- 800 down today. That was most likely fund, and that would be computer generated trade. Likely was the buy on the way back up as quickly also was probably -- was also funds that --
(CROSSTALK)
COLVIN: -- had resting orders in, or were looking to get long stocks at certain prices. So I think individual investors probably didn't have enough time to react to what they saw today. And if they got out, they probably didn't get out at a very good level. But my guess is that this was all computer fund generated.
QUEST: Todd, stay with me a moment.
Ted Lifeberg (ph) is with me. Ted, always good to talk to you at Seaport Securities. You're at the big board at the NYSE. I don't know what you guys were doing over there today. But you've given a lot of us around the world a very nasty bout of indigestion.
Ted, can you hear me?
We're having difficulty with -- Ted, can you hear me? Ted Lifeberg, it's Richard Quest. Can you hear me?
Nope. We're having difficulty. Let's go back to you, Todd --
COLVIN: OK.
QUEST: -- to talk about the -- the market and what we can expect over the next few hours. Because as I look now, the Euro is sunk by a good -- I know one and a half cents in the last hour or so. The pound has also dropped about a cent or two. So the dollar becomes a very strong haven, even with its own weakness.
We -- we appear to be having some communications difficulty with various guests. While we sort them out, we'll take a break.
(BREAK)
QUEST: Good evening to you if you have just joined us. It is not only breaking news of events from Athens. But tonight also some pretty dramatic events taking place in the market in New York where we have seen the Dow Jones Industrials which about a couple of hours ago was off a couple of hundred points.
Saw the riots that were taking place outside the Greek parliament. And for that and other reasons suffered some very short, sharp falls. The Dow losing at one point more than 900 points before it recovered. And it's now down just off give or take around about 400 and change.
Paul La Monica joins me from CNNMONEY.COM. Paul, the -- the falls that we saw were -- I mean, it -- it really was the classic V shape, and back straight up the other side. And down 400 at the moment with less than 30 to trade. So I'm guessing -- guessing that things are fairly steady at the moment?
LA MONICA: We're hoping that's the case. It's obviously going to sound very strange to say hopefully we only lose 400 points on the Dow today. I think it would be a big sigh of relief if we just stay here as opposed to, you know, head back down to those really kind of frightening levels that we were at not that long ago.
QUEST: It does seem that we can now fault this -- I mean, as we -- whatever the -- whatever the exacerbation because of program trading. That -- we do now seem to believe it was as a result of the pictures from Greece, and the possibility of things getting out of hand that let the market down.
LA MONICA: Yes. It does appear that that is the case. I think that for many U.S. investors we've been hearing about the problems in Greece, Portugal, Sprain, for a while. And while there is definitely a recognition that this is a very serious concern. That there is a potential contagion - - it didn't really probably hit home with many people until you saw those pictures this afternoon. They were extremely powerful.
And I think that helped put a human face on many of the more jargony (ph) stores that we've been hearing about IMF loan packages, and you now, Greece debt getting cut to junk.
QUEST: Paul, stay with me. Paul La Monica at CNNMONEY.COM.
Senior Business Correspondent Christine Romans is in New York as well. She's on the line with me.
Christine, the one thing I'm seeing reading the technology is that it was the computer trading that certainly got away from itself if you like. Now you and I both know how that works. The trades kick in, and then it becomes a snowball going down the hill, doesn't it?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Yes. That's exactly right. But here's the thing. We're watching Proctor & Gamble (ph) shares at about 245 which -- and they plunged about $22.00 a share. And when that one component of one stock got hit on an already weak day, suddenly you had the Dow plunge and then you had all of this other activity happening in the blink of an eye.
So what we're trying to do, Richard, is -- is back up and figure out what was it that sent P&G in particular down, and what was exactly happening technically speaking to all of these different relationships between averages and -- and indices that pushed this down? No question that Greece and the concerns about Europe are at the heart of all of this.
The question is, why did the down go down to 997 points? Something I have never seen. Why did the Dow go down so quickly and so brutally like that. Came back so quickly as well. You've got a lot of traders, and a lot of professional traders at their desks, traders on the floor, and traders on their -- at their desks who are scratching their heads trying to figure out why did it go down so far, and why did it pop so quickly?
And what is the -- what is the value of the Dow here right now? And it looks as though it's -- it's settling around here about down 4 percent is where people are feeling most comfortable right now. But we have 25 minutes to go in the trading day. And you know that Vicks (ph) index -- that fear gauge that we've been talking about all week -- has been running very hot.
So that means people have been fearful even before today about the direction of stocks. And that could keep things pretty nervous here into the close.
QUEST: Stay with me as well, Christine.
Todd Colvin, you -- you -- listening to what Christine -- we could hear what she was saying. That relationship between the cash market and the futures market, which of course is used a great deal by the computers to arbitrage the difference looks as if it was very much at play here tonight.
COLVIN: Oh, absolutely. And I think that the futures market will typically -- will lead the market lower. The -- the cash market obviously has -- has a lot more going on with it as far as individual stocks go. Whereas the -- the S&P futures themselves -- the NASDAQ futures and whatnot -- tend to just see large clips -- large block sized trades go through when things get dicey.
And that's probably what happened here triggering stops (ph).
QUEST: So just to explain to viewers who are -- who may not be as (inaudible) with -- with these matters. It is as -- it -- it literally is cause and effect. And the snowball going down the mountainside. The cash -- the -- the shares get sold, the futures kick in, they do a transaction, which makes the whole thing get worse.
COLVIN: Correct. And the one thing you have to remember is that a lot of large funds will speculate in the S&P futures because of cost reasons. It's a little bit less expensive for them to do it than in the outright indices. And it -- especially the electronic e-mini S&Ps. They move very fast, and they -- they have a tendency to exaggerate moves, because people get in at the end. And get -- get in too late -- get out too late. But they tend to be the ones that lead the exaggerations lower and higher. So --
QUEST: All right, Todd. Very -- thanks. Todd Colvin who is --
COLVIN: Thank you.
QUEST: -- with us in Chicago.
Christine Romans is with us. Is Christine still with us I hope? No? Christine --
(CROSSTALK)
ROMANS: Yes. I'm here.
QUEST: -- Romans will be back. Oh, is she -- no. Christine Romans is still with us. Christine, so one -- one of the fascinating parts as we bring this discussion to a -- to a close is -- is really that in the hours and days ahead, they're going to have to analyze, you know, what was it that turned a -- a minor event into what could have been a major mistake on Wall Street?
ROMANS: Well, and here's another thing. I mean, we have something called circuit breakers that go into effect at -- at some point. And the circuit breakers are much -- I mean, it's something like 2,000 points of a decline you would have what are called circuit breakers to buffer -- to buffer the move.
Teddy Wifeberg (ph) on the floor of the New York Stock Exchange made a good point that in -- in the crash of 87 you saw the Dow down at one point something like 22 percent. That's nothing like what we're seeing here right now. This is a 3 percent move right now for the Dow Jones Industrial Average. Four percent -- 5 percent is worse. That's -- that is a -- a big move in one day.
But the Dow is up what -- 72 percent -- 70 some percent over the past year? Before we even headed into this week, Richard, you had a lot of people saying that this market was ripe for a sell off. So you have this combination of, as you were just talking about with the gentleman from M. F. Global, you have this combination of people thinking the market is right for a sell off.
You have a very nerve wracking situation in Europe with sovereign debt. Angelo Merkel (ph) who said that essentially the -- that the bailout of Greece was nothing less than the future of Europe. That clearly got some attention here in the U.S. And then you have a market that's already been losing some steam with some pretty big declines earlier this week.
Procter & Gamble goes down at 2:45 Eastern time very big. A big, big, unusually big move there that everyone is trying to figure out what caused that. And suddenly all those things come together in one big package that equaled a 997 point decline. But then a big bounce back. I mean, if you think of where the market has come back from its worse level to -- to now, well that was a pretty incredible move back up. What caused that?
We'll be dissecting pretty much second by second, nanosecond by nanosecond, the last hour of trading. This has all been in less than an hour this has happened -- to find exactly what the cause is. But at the same time all this was happening, Richard, were pictures of those Greece riots. And I think that it's really bringing the whole thing home to American investors, and the American public, just how shaky things are, and how small the world has become. And how nerve wracking we -- nerve wracked we all are about how fragile the global recovery is so far.
QUEST: Christine Romans who will be helping us understand these events in the hours ahead. Many thanks, Christine, in New York.
Slightly longer you and I had together than we originally planned when we started. But that is Quest Means Business for this Thursday. We're going to take a short break. Jim Clancy (ph) will be on the other side of it on a day which saw the Dow drop the best part of 1,000 points in less than 30 minutes. And then recover most of it.
I'm Richard Quest. Whatever you're up to, I hope it's profitable.
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