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Quest Means Business

President Obama Answers Questions on Oil Spill; Stock Markets Up

Aired May 27, 2010 - 14:00   ET

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

RICHARD QUEST, HOST, QUEST MEANS BUSINESS: "No repeat," says President Obama. He calls for a rethink on deep sea drilling.

Fear, what fear? Stock markets are back up. Triple digit gains on Wall Street.

And an Apple a day, these days, keeps Microsoft at bay.

I'm Richard Quest, and for the next hour I mean business.

Good evening.

BP is 24 hours into its top kill, make or break attempt to stop the oil spilling into the Gulf of Mexico, from a leak on the seabed. We've been told that so far the plan is going according to plan, and yet we know that is no guarantee that it is going to be successful.

Government estimates are suggesting today that it is already the worst oil spill in U.S. history. These are live pictures coming to CNN from the spill site, on the seabed. Now, U.S. scientists say oil was pouring out at something between 12,000 and 19,000 barrels a day. That three times the 5,000 barrels that BP estimated.

Those pictures, by the way, it is believed, according to some reports, that those were, that was mud actually coming out of the pipe, the drilling mud that had been pushed down.

President Obama, under growing pressure to deal with the disaster, says the federal government has been in charge of the response from the start. At a press conference he said BP is submitting to U.S. government supervision.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We will demand that they pay every dime they owe for the damage they've done. And the painful losses that they cost. We will continue to take full advantage of the unique technology and expertise they have to help stop this leak. But make not mistake, BP is operating at our direction. Every key decision and action they take must be approved by us in advance. I've designated Admiral Thad Allen, who has nearly four decades of experience responding to such disasters, as the national incident commander. And if he orders BP to do something, to response to this disaster, they are legally bound to do it.

(END VIDEO CLIP)

QUEST: Now the prospect of success in capping the well has had a beneficial affect on BP shares, which gained nearly 6 percent in London, over the course of the session. Let's go to the scene of what President Obama is now calling an unprecedented disaster. Our Senior White House Correspondent Ed Henry joins me from our bureau in New Orleans.

Ed, Mr. Obama walking a very narrow tightrope here, isn't he? Between obviously knowing there is not a huge amount more that can be done, but has to deflect the criticism that he hasn't done enough.

ED HENRY, CNN SR. WHITE HOUSE CORRESPONDENT: You're right. He's walking a very tightrope there because I think ultimately the message the president was trying to send I with this news conference back in Washington, was to try to say, look, the buck stops with me, just as Harry Truman famously said, many years ago, as a U.S. president.

The president, at the very end, saying all of the responsibility lies with me. But there is some confusion here, because as you played in that sound, the president saying, look, the federal government, the U.S. federal government has been in charge all along, has taken the reins from BP, essentially, that is not what the administration has been saying for day, maybe weeks now. They have repeatedly said that BP was in charge, BP was responsible and while they are saying BP is responsible financially, they seem to be trying to revise things midstream here. In saying, look, the government is in control here. We're going to get this leak plugged up. We're going to get this done.

And the president also announcing there is a moratorium now for six months at least on any more offshore drilling. Also, today, the administration indicating that they have pushed out essentially a top official who was overseeing the permit process, who has now come under fire. Why is all of this happening from the news conference to the push out of this official? It is all about the fact that this is a major political crisis now for the U.S president.

Some even comparing it to his Katrina, it is just as George W. Bush had colossal political failure in the wake of Katrina, here in the Gulf Region, that this could be Obama's Katrina. The president was asked about that. He pushed back and he said, look, I'm going to let the media decide and characterize it, but I feel we have been on top of this from day one, unlike the Bush administration.

But he's getting pressure from all sides, not just Republicans, even fellow Democrats, from his own daughter. The president saying at the news conference, his young daughter, Malia, while he was shaving this morning, poked her head in the bathroom door and said, "Daddy, did you plug the leak yet?"-Richard.

QUEST: Ed Henry, joining us from New Orleans, where the president is due to be visiting in the next 24 hours.

As Ed was making clear, this is now turning into a crisis on many fronts, whether it is political, for the president, business for BP, or indeed, for the oil industry itself. The United States today announcing it will not grant any new permits to drill new deep water wells for at least six months, according to the White House. CNN's Jim Boulden joins me.

It is not just a continuation of the moratorium is it, Jim?

JIM BOULDEN, CNN INT'L. CORRESPONDENT: No it's not. It is also a cancellation of some of the oil leases. The deep water oil leases in the Gulf of Mexico. So, it is important to show why this is so important to the U.S. as far as domestic oil goes. The U.S. gets half of its oil domestically. And a lot of that comes from the Gulf of Mexico.

Now what is an ultra-deep well? This is the one that is leaking. It is anything that is 5,000 feet or more below sea level. And that has become a very important part of the Gulf of Mexico in the last few years. Now when you talk about deep water and ultra-deep water production we're talking about an increase of 786 percent, since 1992 to 2008, of all U.S. oil domestic production. So, deep water, the Gulf of Mexico, is crucial to the U.S.

Now who else has ultra-deep water, and deep water interests here? One of the biggest is Brazil, also West Africa, Nigeria, and Angola, two big players. A lot of the big oil companies are looking for ultra-deep water wells off this area. It is called a golden triangle. Some 70 percent of ultra-deep water oil is expected to come from these regions. Could be, could be, something up to 30 billion of barrels of oil. And that is why it is so crucial to the oil companies.

Now where else could there be some new deep water and ultra-deep water wells, before this disaster we're talking about, of course. Places like Mexico, Southeast Asia, India is also very interested in this. Even now, Mediterranean Sea, Black Sea, and the Arctic, and that is what is very interesting.

Now, we are going to look at a map, really quickly here. If you can see this, this is Louisiana, the well is around here. And what we're talking about, 7,000 oil leases in this region. Now, when you come down here a little bit more, you can't see it, but these are some deep wells, and Richard, some ultra-deep wells. These are where only the big player can be. They have got to spend a lot of money. It can cost $30 to $40 a barrel to extract oil in this region, where if it is on land in Saudi Arabia, it is about $1.00.

QUEST: Jim Boulden with a look at the deep sea, or the deep underwater wells. Many thanks, Jim.

Now I'm joined by Manouchehr Takin, senior petroleum upstream analyst at the Center for Global Energy Studies.

Sir, many thanks.

We need to get to grips with this. The significance of the deep-sea wells that Jim was just talking about, it is not an option for us to forget deep sea drilling, is it?

MANOUCHEHR TAKIN, SR. PETROLEUM UPSTREAM ANALYST: There is a knee- jerk reaction now let's stop and do away with oil. The realities are coming in and President Obama did mention it. That the United States and the world, for the next 20, 30 years they do require oil, the liquid fuels, the conventional ones, unconventional ones, until we get alternative sources of energy, etc cetera, etc cetera, in place.

QUEST: Right, right. But do we need to go deep sea? Or can we manage along nicely with all the other stuff? Do we have to go down there?

TAKIN: Oh, yes, I think so. I think the industry around the world have done very detailed exploration, it has gone on everywhere and they have combed through and these are the new realms. The Brazil, as was just mentioned, Jim, I think the estimates are about 100-only off shore deep reservoir (ph); 100 billion barrels, so that is really where the resources for the oil are in the coming decades.

QUEST: So if we got to go there, we are now looking at a situation where regulation-there were rules there, they just didn't seem to follow them?

TAKIN: I don't know. We have to wait until who-

QUEST: Well, what do you think?

TAKIN: I don't know. It is-you see, accidents occur. If there is an airplane, and airline air crashes, of course, it is a tragedy. But do we stop flying altogether? We do need. So, we have to find out if there was a mechanical error, something with the design, or that particular plane, and then correct them all, ground them and repair them. That type of-you see we should not have this emotional reaction. This is an industrial accident. It is a terrible one, it is a tragic one.

QUEST: Do you-

TAKIN: I think we have to go understand it before we make drastic action. That is my assessment.

QUEST: Forgive me.

TAKIN: Please.

QUEST: Do you support, then, this moratorium on future-at least temporarily-or do you believe that we do need to push on now?

TAKIN: I think temporarily it is justified, of course. Allot these six months, as the issue was, to understand really what was it? We have to really understand what happened. Was it a force of nature, which happens. Was it a human error? Was it technical problems? Was it regulations, and so on, we have to find out. As the case of the airplane disasters are. And then, go modify a whole series of airplanes, or improve training their pilots, or so on and so forth.

QUEST: We've been talking a lot about what this means for BP. Now clearly the billions it is going to spend in clean up and in damages, and in fines, means it is not going to be the player it once was in the Gulf, in these deep waters.

TAKIN: It is a certain shock on the public image. And financially it is a huge quantity. People are talking about $10 billion, $20 billion liability. And the profit before tax, off BP is of that order of magnitude, $10, $15 billion. So financially it will be very important. I think more important is not only for BP it is for all of the oil industry. It is a negative image. And I would hope that would not-

QUEST: An unjustified negative image?

TAKIN: I would say so, yes.

TAKIN: Maybe next time.

QUEST: We'll talk about that again in the future. Many thanks indeed, for coming in.

We need to update you on the market. It is so much of a remarkable day-

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-on the market. Look at that, up 2.3 percent. We are now over 10,000. I won't say comfortably over 10,000. Far from it, we are just holding onto it. But a 231 point gain. There were excellent gains in the Euro bourses. The all showed gains of 3 percent. I'll tell you about that in just a moment. QUEST MEANS BUSINESS, good evening to you.

(COMMERCIAL BREAK)

QUEST: Welcome back. Reports of the demise of the Euro Zone, greatly exaggerated. At least that is how it looks if you take the financial world and what happened on Thursday. There was life in the markets, even in the European stocks and in the dollar. And it all came about largely because China denied a report that it was about to dump European sovereign debt, or at least wouldn't be increasing its holdings in them.

Come and join me in the library and I'll show you exactly what I mean. Look at this. This is the sort of day that after the misery and turmoil we've seen, all the major markets showing gains of over 3 percent, except Zurich, just at 2.2 percent. The banking sector did extremely well. Man Group, the hedge fund in the U.K., was up more than 10 percent. Lloyds DSP, largely owned by the U.K. government, up 5 percent. Soc Gen, in Paris, had a very strong session. It was up more than 7 percent. And Deutsche, in the German market, in the DAX, was up 4.6 percent. So, good gains across the board.

These are some standouts to look out for. You will be aware that Prudential is attempting to buy AIA in Asia. It is trying to increase its footprint, if you like; a massive rights issue on the cards. Interestingly, PRU's shares were up 6.8 percent in London. And that was largely because the market believes the bid might actually fail. Some investors do not want PRU to go ahead with this AIA takeover. And that is why-PRU tonight, by the way, said it was still proceeding with its take over, notwithstanding that.

This is another interesting mover on the market. It was Daimler shares up 4.5 percent. It has agreed a 50/50 joint venture with BYD, of China, to produce and electric hybrid car. Now, we knew about the deal, but the signing of the deal, this 50/50 joint venture has risen the market by-risen Daimler by 4.4 percent.

So as you see, the cheer that we are seeing very much changing the tone of the investor sentiment at the moment; the U.S. Treasury secretary has been weighing in, though, on the European debt crisis. He was in London yesterday. Today it was Germany, where Tim Geithner glossed over differences between the U.S. and the European approaches to reforming the financial system. For instance, Germany's solo ban on some forms of speculative naked trade, short-selling. Mr. Geithner says the U.S. and Europe share a common goal.

CNN Correspondent Diana Magnay spoke to Germany's Deputy Finance Minister Joerg Asmussen. And she asked the minister about the likelihood of a global agreement on financial regulation at the G20 in Toronto.

(BEGIN VIDEOTAPE)

JOERG ASMUSSEN, VICE-MINISTER OF FINANCE, GERMANY: I think the crisis management was handled in a very professional manner. I mean, if you look at the huge rescue package that was adopted in Brussels. On a Friday evening, the finance ministers put together the details, then just next Sunday. Now we have already implemented all legislative measures that needs to be taken in Germany, just in two weeks' time. We're criticized in parliament that was much too quick for intense debate in our parliament. But we were the first country to adopt this.

DIANA MAGNAY, CNN INT'L. CORRESPONDENT: But the stabilization package is meant to stabilize the markets and it has had seemingly the opposite effect because of this impression that politics and economics are working against one another.

ASMUSSEN: Well, that is normally the case, because we have to deal with the national parliament. You have to deal with your own constituency. You have your constitutional court, with certain rulings which limits to what you do. So that is normally, and in a sense, Europe is Europe. That means in the Euro Zone we are 16 countries. You have 16 parliaments, 16 governments, so we have to closely coordinate if you share a common currency.

MAGNAY: Looking at Germany's ban on naked short selling, how far are you prepared to go it alone on these sorts of issues?

ASMUSSEN: We always have a strong preference to go first globally. That means the G20 framework. And second for us, the second level to act is always the European Union, that is the common market. We are the biggest benefiter from the European market. But thirdly, yes, we also stand ready to do things on a national level if necessary. And that might be necessary since your constituency is different, what is politically required is different. But also markets structures are very different. And we wanted to send a clear signal to the markets last week that we fight against speculation in this very moment when we need to calm markets and to stabilize the markets.

(END VIDEOTAPE)

QUEST: Now let's hear from one of the most senior economists in the financial industry Bronwyn Curtis is head of global research for the banking group HSBC. Bronwyn is with me.

Always lovely to have you with us, Bronwyn.

We're seeing such volatility. We're still seeing worries about sovereign debt. And yet we get a day like today where the Dow is up more than 2 percent and Europe is up 3 percent. Simple question, what's going on?

BRONWYN CURTIS, HEAD OF GLOBAL RESEARCH, HSBC: Well, there is a lot of volatility, which just shows you how nervous everyone is. If you think back to 2008, everyone waited too long-I mean, market participants, whoever they were-to get out of their positions. And so they took big hits. And we saw what happened to the banks then. So, I think, now when we see some problems in Europe, or some problems, whether it is Korea, whatever is happening it is reacting, they are reacting very quickly.

QUEST: Do you fear a liquidity crisis? We're seeing it with LIBOR. We're seeing it with CDSes (ph) going up. Do you believe there is the making of such a crisis out there?

CURTIS: Well, I don't think it is going to be as bad as it was before. So, we are seeing some difficulties in terms of liquidity. We're seeing problems with liquidity among the European bond market. In fact the ECB is one of the few buyers of those higher yield bonds, like Greece.

QUEST: Well, let's face it, the ECB has put a floor under European government bonds, particularly from distressed countries. There is a guaranteed-I mean, you see it on the trading screens, Bronwyn. They're not budging because the ECB is buying.

CURTIS: Well, that' right. But what's happened is that instead the euro being a pseudo-deutsche mark, you know, in other words as sovereign as German, as good as Germany, now everyone is saying, actually if you take an average of the whole of Europe its not really as good as Germany.

QUEST: What do you make on austerity? Today Spain passed it austerity measures by one vote in the Spanish parliament. Italy passed it, just. We had of course, all the other countries, Greece, we know, obviously. Portugal passed it. The U.K. is in the budget. And yet, as we are going to hear later in this program, this balancing act, are you in favor of these austerity measures.

CURTIS: Certainly they have to get their houses in order. Now, the problem is that if you've got-let's say they have to cut wages. It is easier to cut wages by 5 percent if inflation is running at 10 percent. If you have inflation running at 1 percent, 2 percent, and you want to cut wages by quite a lot. It's much tougher.

QUEST: But traditional economics tells us that these fiscal cutbacks- it's 101, Bronwyn. These cutbacks will have a depressing effect on activity. Therefore, we must see a slow down. I mean, what-and also, for example, what do you make of today's 3 percent GDP U.S. number? That shows it is not growing as fast as we thought.

CURTIS: Well, I think we have seen the recovery. We always knew it was going to be sluggish in Europe and the U.S. Some analysts were a bit optimistic about what growth might be. We weren't one of those. We were only looking for 3.1 percent world growth this year. And-but I think there is a problem. Getting that balancing act, having growth is what you need. So, what happens now? Is that what you were going to ask me?

QUEST: I was going to-yes. I was going to ask you what happens now, but also, tinged with that-let's put a bit of vinegar onto this, Bronwyn. Are you confident that ministers and policy makers will get that austerity balancing act right?

CURTIS: It is very difficult to get it right. Am I convinced? Not yet. Is the market convinced? Not yet, either. We have had a very good day today, but then we were going down, you know everyday for sometime. So, I think there is a lot to do. Either Europe gets its act together and gets much closer in terms of managing the politics and the fiscal policy, or we will have further problems.

QUEST: Bronwyn, many thanks indeed. How lovely to see you. Come back again very soon and help us understand this.

Now, when you and I come back in just a moment, traders have been dumping the euro right from the start of this year. The single currency is feeling the love from one quarter. The prime minister of Estonia, well, he's about to join the euro. He'll tell us why he's so keen to join in just a moment.

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(COMMERCIAL BREAK)

QUEST: Estonia, Israel and Slovenia, they are the newest members of an exclusive club. The three countries were, today, welcomed into the OECD. Now, you're familiar, it is the forum that brings together more than 30 percent of the world's most developed economies.

The OECD says members share their know-how on economic matters to finances to common problems. Now, the OECD members, the new members, will lead to a more plural and open OECD. They have a much wider range. It recognizes Estonia, for example, as a leader certainly, a leader in e- commerce. Estonia is also on track to join the Euro Zone.

At a meeting earlier this year the commission has now sanctioned that Estonia has met all the criteria. It was only one of many countries seeking, I think there was 10 of them. Estonia is one of the only ones that has met all of the criteria. Has a public deficit of 1.7 percent of GDP. It is already in ERM 2 and has been for some years. And it is likely to join the euro, notes and coins, the whole kit and caboodle, in January of next year. And the largely reason is the Estonia economy emerged from recession at the end of last year. It is expected to grow by 1 percent in 2010; 4 percent next year.

The problem, of course, is unemployment in Estonia remains very high at 19 percent. A short while ago this was put into perspective. When I spoke to Estonia's prime minister, Andrus Ansip, who was at the OECD. I asked him why Estonia was hit so hard. Bear in mind in the last part of last year, in 2009, Estonia's GDP dropped 14 percent. Why was this country hit so badly?

(BEGIN VIDEO CLIP)

ANDRUS ANSIP, PRIME MINISTER OF ESTONIA: This housing boom was a real boom in Estonia. The number of construction workers increased in Estonia during those pre-boom years, even two times. And now, one-third from all unemployed people, they are former construction workers. So, we have to help, if possible, those people with training, life learning, life-long learning processes, is now a reality in our country.

QUEST: The country has shadowed and pegged to the deutsche mark and then to the euro for many years. So, I'm wondering, why do you want to join the euro? You have been very successful running your own monetary and exchange rate policy.

ANSIP: We are using currency, both systems, in Estonia, and the rate of the Estonia crown is fixed to euro, according to law. And in fact we didn't change exchange rates in Estonia during the last 18 years. Practically, the euro is in use in Estonia already. All of the credits in Estonia they were taken in euros and it means, uh, the only difference with the euro is only on pictures on those bank notes. Our Estonia crowns, those bank notes they are more beautiful than euro bank notes, but unfortunately investors they cannot trust so much those small national currencies.

They can trust much more Europe. And we believe in Estonia that euro will support trade relations with other EU member states; 70 percent from our exports. So, they are going to other EU member states, and another 30 percent they are also based mainly on euros. Euros will make Estonia even more attractive for foreign direct investments. Euro will definitely support our (UNINTELLIGIBLE)

QUEST: Right, but prime minister, forgive me prime minister, the satellite time is running out. Do forgive me. Prime minister, that maybe true but if we look at the chaos of the euro system at the moment, and the very questions as to whether this thing will survive for the Euro Zone, one, one wonders wouldn't you be better off waiting and just seeing how this thing pans out?

ANSIP: I'm absolutely sure all those challenges we have today inside of the Euro Zone will find a really good solution and Europe will have a great future.

(END VIDEOTAPE)

QUEST: The prime minister of Estonia, talking to me earlier.

In just a moment the U.S. economy is growing. There was a surprise in the numbers today. Find out what is holding America back, in just a moment, QUEST MEANS BUSINESS. Good evening.

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(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN, where the news always comes first.

(NEWSBREAK)

QUEST: If you were watching this program last night you will of course recall that we had to cut short our interview with the secretary general of the OECD to bring you news about BP's efforts to stop the oil spill.

The OECD's Angel Gurria is worth listening to at all times. He says the recovery in the world's largest economies is gathering pace. Now, as you heard me discussing with Bronwyn Curtis a moment or two ago, it is a very fine balancing act between making sure you get the austerity measures right but don't push economies into recession once again. Here's Mr. Gurria.

(BEGIN VIDEOTAPE)

ANGEL GURRIA, SECRETARY-GENERAL, OECD: It is a very, very difficult balancing act. We're talking here about countries having to not withdraw the stimulus too soon, not withdraw the fiscal and monetary accommodation too soon. But at the same time keeping an eye on what they call fiscal consolidation, which is you can't keep up these deficits for too long. Start giving strong signals about how you are going to reduce the deficits, how you are going to get down to manageable size of the debt, so that it will not be hanging over your neck in the years to come.

QUEST: So if we take, for example, the U.K. with $9 billion or $10 billion of cuts, we've got Germany outlining 10 billion euros of cuts, starting next year. Are you satisfied with those measures, or should they do more now?

GURRIA: I think what is important is that there is a sense of order in this thing. This has all happened in a few days, because everybody realized the markets were demanding that everybody put out their plans. They say it is not good enough to say you are going to get there. I need to know how. I need to how, whether you are going to increase taxes, whether you are going to reduce expenses, and I need to know how ambitious you are. And also how long will it take for you to normalize the situation.

So, everybody came out. You know, Spain, Italy, and Portugal, and Greece, of course, had already come out. Germany, now it looks like a little bit of disorderly exit to-a rush towards the exits. But it is good in the sense that everybody now is saying fiscal consolidation is the name of the game, just don't do it too fast.

QUEST: You see, you can't-at this point I sort of bristle. Because policymakers seem to-like yourself-you want it both ways, don't you. And I say that in the nicest possible way, with great respect.

GURRIA: No, we want it both ways, we are schizophrenia, you are absolutely right. And the problem is if you withdraw the stimulus that is still ongoing, that is still being rolled out, if you withdraw the zero interest rates that we have had in the central banks, too soon, then the economies are not yet ready to fly solo. At the same time, if you do not get very strong signals today about what you are going to be doing, maybe next year and from there to the year 2016, like the Germans, or maybe even longer, about reducing the deficits and the debt, then the markets will come back and get you.

So it is a combination of the two things. How do you balance the two, as I said, it is much more difficult now for the policy makers the balancing act is very complicated.

QUEST: All right. Finally, and this is where I think your OECD act (ph) comes firmly on. Are you optimistic, because I'm not sure there is grounds for optimism, that policymakers have got it right?

GURRIA: The problem now is that the outlook-not to 2011, but to 2015 to 2025 is very mediocre. The legacy of the crisis is low growth, high unemployment, high deficits. The only way to deal with it is to apply policies having to do with education, having to do with competition, having to do with innovation, having to do with green growth. That is the only way that will turn the mediocre short term into a sustainable better medium and long-term.

(END VIDEOTAPE)

QUEST: The secretary-general of the OECD Angel Gurria talking to me. Now, we had economic numbers from the United States that showed the U.S. economy recovering a little less quickly than we first thought. GDP expanded at an annual rate of 3 percent in the first quarter. The governments first estimate in April put the rate at 3.2 percent. Now, that of course, may not seem a big difference, but you see economists had expected the revision to be up, not down. Personal spending investment and export activities all rising but cuts in state and local government spending and rises in imports are holding back the economy. It didn't seem to hold back the markets that much. There is a strong relief rally going on at the moment.

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Felicia Taylor is at the New York Stock Exchange joins me now.

Felicia, I mean, bearing in mind GDP was actually revised the wrong way, I'm at a bit of a loss as-(UNINTELLIGIBLE) numbers, as to why the market is roaring up three digit gains?

FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: Well, basically what is happening is that obviously the market is overlooking these numbers. They were slightly disappointing. We also got jobless claims. They were also not as strong as we wanted to see. But the markets here are following the rally both in Europe and in Asia. So they are overlooking the slightly weaker-than-expected numbers and it is a broad-based rally here; 29 of the 30 Dow components are trading higher.

Here at the New York Stock Exchange there are 11 advancing stocks for every one that is trading lower. Tech shares, big day today. Intel is leading the Dow. Apple and Microsoft they have now gotten nearly identical market values. They are both up. Apple is up about 3 percent. Microsoft is up almost 4 percent on an analysts upgrade as well.

We also heard from President Obama today. The oil disaster is his number one priority. BP shares, they are up 6 percent. That is because they have been beaten down so much as a result of this crisis. And one analyst said basically he is upgrading the stock because the sell off has gone too far. I spoke to one trader, she basically said, this session is a very organized move upward, without any swings either way. The truth is, about an hour after the opening bell things have been very quiet here on the floor. It is going to be a long weekend and people have been selling into it-excuse me, buying into it-sorry.

QUEST: I was about to-yes, I saw what you mean, they've got the message. They know what they're doing. All right. Have a good weekend. Felicia Taylor at the New York Stock Exchange.

Felicia mentioned, by the way, Apple and Microsoft shares. Later in the program we going to be talking about the reasons why those two shares are very much in the news. For the moment, though, Julia Coronado is a senior economists at BNP Paribas. Julia joins me from her dealing room in New York.

You heard Felicia Taylor, I hope, perhaps. It is a broad-based, it is orderly, but is it-whoa, well it was orderly until that happened. As you can see, we never did find out the question of whether or not, of course, it was going to be an orderly and justified.

We'll see if we can get Julia back from her trading floor in New York, in just a moment. When we come back in just a second or two, to the victor goes the spoils. In the long-running rivalry between Apple and Microsoft we are just passing sort of a milestone. We'll have those details after the break.

(COMMERCIAL BREAK)

QUEST: Welcome back. The technology may not be working as well as it should do tonight, but the technology world has a new ruler. Apple, on Wednesday, displaced Microsoft as the most valuable tech company on the planet, a market cap of $222 billion. Only one U.S firm more valuable than Apple right now, that is the oil giant ExxonMobile. We'll put oil companies to one side, for the time being.

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Maggie Lake is in New York.

It has made a phenomenal amount of furor that Apple is now more valuable than Microsoft. Is it justified Maggie?

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: I think it is Richard. Only because, I mean, you are talking about a turn around story for the ages. If you had been buying Apple shares back in the day, people would have thought you were mad. I mean, people thought the company was just going to be swallowed up and go away. And who would have thought Microsoft was vulnerable at all. Of course, fast forward and look where we are. Take a look at these stock charts and that really tells the story.

Microsoft has sort of been bumping along here. You know for the last, at least, five years. And look what Apple has done. It has absolutely been soaring. A little bit of a dip there, of course, in the financial crisis. But it is off to the races. Why? Really simple. Microsoft dominance was really centered around business and operating systems, PCs, right? You know and we all use it, but that market is saturated. And what Apple did is really tap into the consumer and mobility. And that is really just starting to take off, according to some people, and it is where all the growth has been.

Now, you can imagine some of the furor about this headline. No doubt banging around the offices of Microsoft, outside of Seattle, but so far Steve Ballmer, the CEO, is playing it cool. Have a listen.

(BEGIN VIDEO CLIP)

STEVE BALLMER, CEO, MICROSOFT: Certainly there is no technology company on the planet that is as profitable as we are. And I'm certainly proud of that. How the stock market chooses to reflect all of that is up to the stock market. And at the end of the day I think we are in the right areas. We're executing very well. And that is going to lead to great products and great success. Stock market will take care of the rest.

(END VIDEO CLIP)

LAKE: Well, they have got to convince investors, but maybe even more importantly, they have got to convince the consumers out there and we asked people what they thought about that headline.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I'm surprised it took that long. I have a McIntosh from 1984, still, that still works. And I can't even remember the last time I bought something from Microsoft that lasted 10 minutes.

UNIDENTIFIED FEMALE: It doesn't surprise us.

(LAUGHTER)

UNIDENTIFIED MALE: Doesn't surprise us.

UNIDENTIFIED MALE: I think I'd invest in both, to be honest, to kind of hedge my bets, because Apple has already peaked as you just pointed out. And although they continue to create new and amazing devices, but probably investing in both because to count Microsoft out, is not a good idea considering the span they have throughout all the businesses and in the world. So, I'm sure that both companies are here in the long term.

UNIDENTIFIED MALE: Frankly, it is good to have two going neck and neck. You don't want to have one guy dominating everything. So, I think it is good that Apple and Microsoft are both duking it out, and a competition is bringing out new things.

(END VIDEO CLIP)

LAKE: Half the time I think the man on the street, as we call them, are smarter than some of the analysts out there. It is probably good for competition. Two things that could change this, I mean, there is an Achilles' heel, here of course, Richard. A lot of people concerned about what would happen to Apple without Steve Jobs, should that day come. And of course, his health is always an issue. And, of course, Microsoft, on the flipside, has a lot of money. So, with a lot of money there is often opportunity. So it is not to say that they are not going to stage a comeback of their own.

QUEST: I mean, you are talking about staging a comeback, we're making it sound like Microsoft is sort of a little weakling heading out of the door, you know, with its tail between its legs. It is a fascinating-the supporters of both sides are vicious in their support for their leader there.

LAKE: They certainly are and the reason it does matter Richard, is because you are right. I mean, Microsoft is a huge company, a dividend paying stock with mountains of cash. The difference is in the tech world it is all about growth. It is all about the future. And the future markets and that is really what is being reflected in the stock change and the valuation change. It is not that Microsoft is not an incredibly profitable company, but it now it is sort of in with the rest of those slower growth companies. It is not the sort of innovator that it once was. And for tech investors, that is what they look for. That is what gets a premium.

QUEST: Maggie Lake in New York. And we haven't even got onto the iPad as it makes its way around the world. We'll save that for another day! Upt-Maggie Lake.

The weather forecast and it has turned-well, hurricane season, the forecast is out. Some above average activity is expected. I mean, Guillermo is at the World Weather Center. Good evening to you.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Good evening.

QUEST: It seems like we just get to the end of one hurricane season and well, obviously, we're on to the next.

ARDUINO: And the last one, we were lucky. We had El Nino that was suppressing activity. But this time El Nino died down, La Nina kicks in, so all the conditions from the point of view of weather right now are perfect for development, according to NOAA, we may see a high number, an extremely high number of hurricanes this year. Look at this: 23 named storms, three to seven major hurricanes, which means category 3 or more.

And I'm going to talk about the Gulf of Mexico, especially, because we have 4,000 oil rigs and when we look at the June tracks, the average tracks that we see with cyclone development in the month of June, though September is the most active month. We see that actually the Gulf of Mexico is over there. So we have to follow the story this year.

The temperatures of the waters in the Atlantic Ocean are at a record high level. So, perfect for cyclone development. This is one of the feature that we need for cyclone development. But, among others, we are going to see the presence of La Nina, the extremely hot conditions in the waters. The Pacific, in the meantime, despite the fact that we have a cyclone now, over El Salvador, so it is not expected to have an active season because of La Nina, on the contrary, not so active.

And the question that I'm sure that Richard has is what if we have a hurricane over the oil spill? Well, we have been entertaining this question and we superimposed now Katrina so we have an idea of the eye of the cyclone, the size of the cyclone, the size of the oil spill but we conclude that there would be no significant influence on it. No impact on the surge either. So that is the way-the only thing is that it would spread out the slick even more.

The storm that I was mentioning in the Pacific, it is expected to make landfall, to intensify and go though El Salvador. So imagine what is going to happen. Sorry to end with this, but the moisture is extending over to Haiti. So, Richard, we are going to see a lot of rain. Hurricane season is upon us. Haiti is going to be one victim, probably, of all of this.

QUEST: Guillermo, many thanks. We'll see you again tomorrow. And get an update on the weather forecast.

ARDUINO: Yes.

QUEST: We will be back in just a moment, QUEST MEANS BUSINESS, this is CNN. Good evening.

(COMMERCIAL BREAK)

QUEST: Welcome back. We were talking earlier-or we were about to talk to Julia Coronado, senior economist at BNP Paribas, when things went a bit funny. Julia is with me now and hopefully I can see you, you can hear me.

So, I can ask you, whether or not the Dow Jones rising so sharply is justified when the U.S. economy GDP is actually slower?

JULIA CORONADO, SR. ECONOMIST, BNP PARIBAS: I, personally, am a little bit skeptical of this rebound. We have been in a just a tremendous volatile period over the last three weeks. And I don't think that I'm ready to sound the all clear. I think there is still-the problem is we're facing a risk scenario coming out of Europe that is either going to be a very modest impact on U.S. growth or it is going to be very significant. And we just don't know which scenario is playing out, so we keep betting on one versus the other.

QUEST: Right. But if you take-obviously, the last quarter of last year, the 5.6 percent GDP number was a aberration, that was a one off. We saw 3.2 downward revision, there is a fear, isn't there, that if any form of fiscal stimulus was withdrawn the U.S. would be in deep trouble again.

CORONADO: Well, absolutely. Most of the big numbers we saw were driven by inventories which we know are purely a temporary factor. If you look at final demand, you are absolutely right. The rebound has been very subdued. Final demand growth for Q1 was revised down to 1.4 percent, from the initial estimate of 1.6 percent. And we have been basically hovering around 1.5 percent final demand growth since the recovery got underway.

QUEST: So, is the U.S., and this is something that we've batted around in our discussions, but have never really got to grips with it. Is there really cause for concern in the U.S. when it looks at what is happening in Europe? The sovereign debt worries, the euro crisis, are those genuine, legitimate concerns for the United States?

CORONADO: Not really, unless it gets very severe. So, in the scenario that this is limited to a fiscal issue for certain European nations, no, that is not a tremendous impact for the U.S. and the U.S. growth outlook. If on the other hand, we go into a financing crunch, where banks are unable to raise funds, and there is a dollar-funding crisis that takes out stock markets around the world, then that has to be a more serious impact.

QUEST: Sure, but if we are seeing dollar LIBOR almost doubled-it is still very low, it is still, I mean-

CORONADO: Still very low.

QUEST: I'll beat you to that one. It is still very low, but it has risen, the 11/12 of the proceeding sessions. Do you see that crisis, that liquidity crisis bubbling up underneath?

CORONADO: It's threatening. I'll say that.

QUEST: Ah.

CORONADO: And I think people are watching very carefully how the policymakers in Europe are progressing with their talks about fiscal conservatism and fiscal restraint. They are also watching the ECB, and what decisions they make.

QUEST: Right.

CORONADO: Whether or not further steps are needed, we don't know yet.

QUEST: Julia, many thanks indeed. As always helping us understand-

CORONADO: It's my pleasure.

QUEST: a-what is making sense in the U.S. economy. Julia Coronado joining us from BNP Paribas, in New York.

We've talked a lot about Apple and Microsoft, when I come back in just a moment, a "Profitable Moment" on the two companies. This is CNN.

(COMMERCIAL BREAK)

QUEST: Tonight's "Profitable Moment": Some of us are Windows, other of us are Mac, and some are both. The revelation that Apple is more valuable than Microsoft has everyone all of a twitter. Apple is the upstart. Microsoft is the backbone of most of our office computers.

But before we get too carried away, it is worth remembering Apple's phenomenal growth has only been over the past five years. Now let's remember, also, it has been on the back of the iPod, the iPhone, the iPad. Microsoft's problem is that there is not a Microsoft machine. You buy a Dell, you buy a Lenovo, you get an HTC, or a Samsung phone. Most people really don't care or know much about the operating systems. Operating lovers on the other hand, the know every nook and cranny of their gizmos.

There are, however, criticisms of the way Apple runs its software. Some say it is no longer the free-wheeling company it once was. It is by no means a one-way argument. The battle , though, between these two is healthy for you and me. Out of their tussles come better technology, better software. Oh, yes, there is nothing better than competition.

And that is QUEST MEANS BUSINESS for tonight. I am Richard Quest. Whatever you are up to in the hours ahead, I hope it is profitable. "WORLD ONE" is next.

END