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Quest Means Business
Canada Rejects BHP Billiton's Buyout Offer of Potash; Fed to Pour $600 Billion Into U.S. Economy
Aired November 04, 2010 - 15:00 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: It is a wing and a prayer. Airbus and Rolls Royce has some explaining to do on the superjumbo.
It's a no, not a never. Canada's industry minister tells this program why BHP Billiton was rebuffed.
And the truth about QE on this week's "Q&A" we answer the $600 billion question.
I'm Richard Quest. We have an hour together. And, yes, I mean business.
Good evening.
Before we get into the incident with the A380 there is another aviation story to bring you at the top of our program. A Delta Airlines flight has been grounded in Mumbai, in India, after it declared a full emergency because of something suspicious in the cargo hold. The plane was flying from Amsterdam to Mumbai and we'll have a live report on this within the next 10 minutes on what's happening.
The other story we are looking at tonight. Half the world's operational fleets of superjumbos is on the ground and under investigation. Qantas and Singapore Airlines are keeping their A380s, the flagship of the Airbus fleet, on the tarmac. Now 440 passengers and 26 crew were aboard the plane, this Qantas aircraft, which made its landing in Singapore. Witnesses report hearing at least one loud bang and seeing smoke and debris falling from the plane. The damage, you can see here, at the back and up here on the wing, came when one part of the engine casing blew off. Rolls Royce makes these engines the Trent 900, which is obviously that bit there, within the cell. And it is telling plane operators to perform safety checks.
So, imagine if you are sitting here. And you hear the bang, you see the flame, you witness the wing being damaged and you hear these words subsequently spoken by the pilot.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I do apologize, I'm you are aware we have a technical issue with our No. 2 engine. We have dealt with the situation. The aircraft is secure at this stage. We are going to have to hold for some time, whilst we do lighten our load by dumping some fuel and a number of checklists we have to perform. But as you can-I'm sure you are all aware-we are not proceeding to Sydney at this stage. We are making a left turn now to track back towards Singapore. And as we progress with this we will keep you informed. But at this stage, everything it secure. The aircraft is flying safely and we'll get back to you very shortly with further information. Thank you for your patience.
(END VIDEO CLIP)
QUEST: The calm, cool words of the pilot. No one was hurt. Shareholders have suffered. EADS, the parent company of Airbus, lost 4 percent this session. It was worse news for Roll Royce, which tumbled 5 percent in London.
It is a most unwelcome setback for Airbus, which has poured billions of dollars into developing the A380. The aircraft has been beset by delays, which angered customers, and also damaged the company's reputation.
It was all really, today, about what happened in Singapore. Our Correspondent Zain Verjee is in the city, and earlier I asked her what the passengers went through and what they said.
(BEGIN VIDEOTAPE)
ZAIN VERJEE, CNN INTERNATIONAL CORRESPONDENT: I spoke to one passenger who said this: "I heard a loud bang, a jolt and then a flash." He kind of said it was like lightening had struck us. He then went on to say that when he looked over at the wing, he saw four large holes, and when he looked around his cabin he noted that the passengers were pretty calm. There were some people crying, as well.
When I tried to speak to some of the other passengers they were bringing out, Richard, they were escorted by security and they were just whisked away. They really did not speak to us, the majority of them. And they only kept repeating, one after the other, that the airline was great, the staff was great, everything was excellent. So some people really did not want to speak. Probably they are still in shock.
But what has happened here is that tonight they have been put up in the hotels around Singapore airport, and they are hoping to leave tomorrow to go to Australia on a different flight, Richard.
QUEST: Now, the plane is on the ground and I suspect is the subject of intense investigation, from Rolls Royce, from Qantas, from-well, you tell me. What's happened to the plane?
VERJEE: Well, the plane is on the runway. We are not allowed to go anywhere near it or take any pictures. We were able, one reporter, to get pretty close to it. But that was many hours ago. But what they are doing right now is they have launched this investigation, the Singaporean authorities have done it. But it is actually going to be lead by the Australians. They are taking a very close look at the engine parameters. So they are going to be looking at things like the speed at the time, the temperature, the will take a look at the black box, also, to see what kind of communications happened, when the engine failed.
So, it is going to be a long process. But it certainly is an extremely worrying one.
QUEST: Right.
VERJEE: One aviation expert said that this is really damaging.
QUEST: Finally, Zain, Singapore Airlines has-is now preparing its own precautionary inspections of its own 380s with the Trent 900 engines. That will have delays for passengers who were going to travel on those 11 planes. What can you tell me?
VERJEE: Well, they certainly are anticipating those kinds of delays for Singapore Airlines. But I think the passengers here get it. They would rather things were checked out properly. That the blades were checked, that the combustion systems inside the engine, where given the OK, after what happened today. Nobody really wants to get on an A380 and have any kind of problem.
Because you know what, Richard, you travel all the time. I travel all the time. Millions of people around the world do. And we really get it. You hear a small sound in the cabin and it kind of freaks you out a little bit. So, I mean, we can all relate to what has happened today. And I think the passenger here will be pretty tolerant of the delay.
(END VIDEOTAPE)
QUEST: Zain Verjee in Singapore.
We need to return to that story I told you about right at the beginning. In India a Delta Airline flight has been grounded after declaring a full emergency. Our Correspondent Sara Sidner is in Delhi and joins me now on the line.
This is a rum one, isn't it? The plane declares an emergency. It is all to do with the cargo. What can you tell us?
SARA SIDNER, CNN INTERNATIONAL CORRESPONDENT: Well, here is what we know so far, Richard, that yes an emergency was declared for this Delta Flight 70 that was heading from Amsterdam to Mumbai, India. It did in fact land in Mumbai. So it wasn't diverted.
What we are hearing is that there was some sort of unidentified object on the palette in the cargo hold. It was apparently discovered in Amsterdam because the folks in India heard about it from the Delta staff in Amsterdam, who informed India. The question everyone has is, why did the flight take off in the first place? That is trying to be figured out.
But first, of course, the most important thing is to get the passengers, and there are 244 passengers on that flight. Get them taken off the plane, which has happened. And, now, according to the spokesperson there at the Mumbai International Airport, security checks continue to happen right now, with all of the cargo that is in that hold.
QUEST: Sara, come back when we know more about this mysterious unidentified package, on the palette of the Delta flight. Sara Sidner in New Delhi.
Returning to the other aviation story today, the A380; as you can tell, there was an enormous amount to talk about. There are 37 A380 planes in operation around the world, including the ones currently on the ground. This is where you will find them. Singapore Airlines has 11 of them. Qantas has six, going up to a fleet of 20. Lufthansa and Air France, three and four each, going up to similar size fleets, about 12, 14. But Emirates has 13 at the moment. That is going up to a fleet of 90, an extraordinarily large number of planes.
In all 234 planes have been sold to 17 airlines. But that shows you the geographical span, at the moment, of where are the A380s. Mary Schiavo is a former inspector general at the U.S. Department of Transportation. She joins me now via broadband from Charleston, South Carolina.
Mary, you really know your onions, as they say, when it comes to aircraft investigations, to safety, you have lived breathed and slept this stuff, so tell me, once and for all, how serious an incident was this today.
MARY SCHIAVO, AVIATION ATTORNEY: Well, this was a very, very serious incident. Qantas was very fortunate, because once you have an uncontained engine failure, meaning, exactly that. You are spewing parts of metal. It is probably what happened to the disk, one of the turbine disks came out. The engine cowling (ph) will not contain it. And in the United States we have suffered some fatal crashes, because of uncontained engine failure. So it was fortunate that the pilot was able to dump the fuel, get the flight safely to the ground.
There is secondary damage. You can loose your hydraulic system. You can loose some of your control systems. So it can really snowball.
QUEST: With that in mind, is it just an abundance of caution by Qantas to ground the fleet? After all, from your own investigations, you know very well, you tend to find that there is always an incident, a bad bit of maintenance, something-ah, something individual to a case. It is rarely systemic.
SCHIAVO: Right. Except here, because the plane is so new and because uncontained engine failures often are related to a flaw in the metal, in the jet engine, or metal fatigue, it is odd to see it on this new of an engine; unless you have some sort of problem, and you could have had a problem in manufacturing.
And also, Qantas had another uncontained engine failure coming out of San Francisco in September of this year, on a Rolls Royce engine. So that is why they probably are being extra cautious and self grounding their fleet. Now, remember, if they ground it themselves then they can determine when they are going to go back into flight. So, it is also important that they take the steps, rather than waiting on the government to do so.
QUEST: Right.
SCHIAVO: And so it is not just overly cautious. It is prudent.
QUEST: Right, well, yes, but then-you can see where I'm going with this. If they are being prudent, are airlines that are not grounding their fleet being reckless?
SCHIAVO: Well, some of the airlines don't have the same engine. Some of them have the engine that was manufactured by the Pratt & Whitney and General Electric Consortium. And since an uncontained engine failure really probably is going to be an engine problem not a body, an aircraft body problem, or a wiring problem. Those who don't have this particular engine really, at this point, don't have a great alarm, a great concern. Those who do have this engine and are not feverishly inspecting them, and at least checking if they have the same-the same kind of parts, same model. They need to look.
QUEST: OK, now, you have obviously been at the sharp end and you have had to take the decisions and advise administrations on these issues. Would you get on a 380 with a Rolls Royce Trent 900 engine, tonight?
SCHIAVO: No, no. And fortunately, for Qantas, you have choices. I mean, I flew Qantas out of Los Angeles, not too long ago, I picked the 747. I'm a 747-400 fan. But that, too, has a Rolls engine. But right now, no. I would need the authorities and I'd need especially Qantas and others who fly the plane, and Rolls, to really do a once over. And the most important thing is going to be, find the parts that fell off.
QUEST: OK, OK, but I need to ask you, are you not-because my viewers and my editors will be saying to me, well, she is just basically said don't fly the 380. Are you not just being alarmist here, Mary?
SCHIAVO: No, no, because you know this has happened to other models. For example, in the United States, we had the Boeing triple 7, and in its first few months, literally in its first 18 months of operations, it had a number of problems. At one point it had an electrical problem. It was grounded, and then they fixed it, and off you go and now it has a beautiful safety record. Same thing we had another problem on a new model plane, it had problem with the engine mounts, the engine actually fell off. That was a horrible fatal accident. It was grounded.
So that is a pretty typical response until you know what went on. If they can find the part that failed, I hope they are scouring the area where this happened. Because if they can find the part that failed, and it had a metal problem, they will know the answer right away.
QUEST: Mary, you and I agree on one thing, and that is the 744 (sic) is a beautiful plane to fly on. Mary Schiavo joining me from the United States.
In a moment, access denied. The answer is, no now. BHP Billiton's $40 billion bid for Potash is blocked. It is of no benefit to Canada, says the government.
(COMMERCIAL BREAK)
QUEST: Tonight, the Canadian Prime Minister Stephen Harper says the decision of the government to block BHP Billiton's $40 billion cash offer for Potash, was a rare case. Despite the decision, the country's industry minister insists that the country is still open for business.
We need to put this into context. Because Potash and BHP Billiton, it is the biggest bid in the market at the moment, and inflamed many others to follow on suit. The reason according to the Canadian government, under the Investment Canada Act, apparently there was no net benefit to Canada's economy. In other words, Potash being such a huge company, seems to be something of a sacred cow. No net benefit to Saskatchewan jobs and tax revenues. That is what we are implying, because we haven't received the full details of the decision.
As for what happens next, is BHP Billiton going to come together with Fasago (ph), instead-it is a Russian company-and study a joint bid, because the Canadian government has said Billiton has 30 days to come back with a revised offer. Could a Russian element sweeten the deal that the Canadians say no so far? And as for BHP Billiton, well, it has got these 30 days, but Billiton has been-has had numerous problems. Firstly, with its deal with Rio Tinto. Secondly, with its joint venture with Tinto, and now it has been told it cannot get hold Potash. Is Billiton simply too big to do any deals anymore?
These are the issues that actually now will face that company. But we need to turn our attention to the Canadian question. The Canadian industry minister, Tony Clement, insisted to me tonight that despite taking this decision to not to allow the bid, Canada is still open for international business.
(BEGIN VIDEOTAPE)
TONY CLEMENT, CANADIAN INDUSTRY MINISTER: Well, no, I wouldn't agree with that. Canada is, has been, and should always be open to business. But we have the rule of law in this country. There is an act. The investment Canada Act, which determines that large bids have to be of net benefit to Canada, similar to the national interest test that is found in Australia, for instance. So, these things are found in legislation throughout the Western World and that means that many bids do get approved. But there are occasions where a bid my not be approved.
QUEST: So that begs the question, why have you decided not to approve this bid?
CLEMENT: And that is an important and good question. Under the law, under the legislation, I cannot provide detailed reasons until the 30-day period is up. The 30-day period is there for the company, for the bidder, to consider the situation, perhaps to change some things and try to convince me that another course should be followed. And so at the end of the 30-day period if the decision stands then, at that time I articulate why and I want to do that because it is not only a question of the bidder in this particular case, but investors around the world have a right to know what the rules of the game are. I am perfectly conscious of that issue.
QUEST: The view in the markets, and the view of the analysts is, that the bidder, in this case, BHP Billiton, there is pretty much nothing that they can do, reasonably that will make this bid acceptable to Canada.
CLEMENT: Well, I-look, I don't want to comment on that, because that would prejudice the discussions before they even got going. But I will say this, I am obviously comfortable with my decision, otherwise I wouldn't have made it. I do believe from principled stand and within the four corners of the legislation that the bid, in its form, was not of net benefit to Canada. And I stand by that decision. Having said that, we do have a process and I have to be respectful of the process.
QUEST: Finally, when you talk about net benefit to Canada, and I understand that your full reasons will be given in the fullness of time, but give me an idea. What sort of things do you consider to be net benefit to Canada?
CLEMENT: Sure, what I can do, Richard, is go directly to the law, to the legislation, there is six different provisions that describe the factors that have to be considered. Factors like production and employment, of course, you know, Canadian content in terms of governance, and directors, those kinds of issues. But also Canada's place in the world, does it make us more competitive? Does it make us more innovative? Is it-does it help open domestic or international markets?
QUEST: Right.
CLEMENT: Those kinds of things have to be considered.
QUEST: And finally, I come back to the point I started with. Do you fear, and are you worried, that this could put a stain on the free market credentials of Canada?
CLEMENT: Actually, no. I actually think that people who want to invest in Canada make a business decision. They see Canada as a low-tax jurisdiction. We have the lowest business taxes within the G7. We unilaterally got rid of manufacturing equipment tariffs because we were the first country in the G20 to do that, because we wanted to enhance investment.
So, if you look at our record. If you look at our fiscal probity, we are the right place to invest.
QUEST: Minister, many thanks indeed, and hopefully we will speak to you again in 30-days time or so. Many thanks.
(END VIDEOTAPE)
QUEST: That was the Canadian industry minister, and as I say, we'll talk to him again when the final decision is made, but according to the markets, probably not going to be much different from the preliminary one.
In a moment, the great stimulus debate. It is "Q&A", Ali and I battle it out-to print, or not to print?
(DESK BELL CHIMES)
That is the question.
(COMMERCIAL BREAK)
ALI VELSHI, CNN ANCHOR, CNN NEWSROOM: QUEST MEANS BUSINESS and so do I. We are here together in the CNN NEWSROOM around the world.
Hello, Richard.
QUEST: Hello, Ali. Each Thursday you and I go to talk about world business, travel, innovation, and nothing is off limits.
VELSHI: Today we are in the business of printing money, which can only mean we are tackling quantitative easing.
Richard, should I go first?
QUEST: Go ahead, tell me all you can because, let's face it, I'll have to repair the damage. You have 60 seconds from now.
(DESK BELL CHIMES)
VELSHI: Hours after the victorious U.S. Republicans began threatening a U.K.-style pull back on government spending, the Federal Reserve added to the $2 trillion it has already injected into the U.S. economy since the beginning of this financial crisis, under the majestic sounding banner, QE2. I'm not talking about Richard's beloved boat, the Queen Elizabeth II, QE 2 in this case stands for a second round of quantitative easing.
That means the Fed is going to buy $600 billion worth of Treasury bonds from the banks that it deals with, in the hopes that they then turn around and lend that money to businesses, getting consumers and the economy chugging again. Interest rates, already at record lows, but it is not that easy to get a loan. The Fed figures that if there is more money available banks will feel freer to lend it out, businesses will use that money to expand and hire. Those people will spend some of the money the earned, creating demand. By the way, the 2 in QE2 means the Fed has tried this before and the results have been mixed so far, Richard.
(BUZZER SOUNDS)
QUEST: Well, well, well, have I got to put you right, once again? Here we go, with 60 seconds on QE, starting now.
(DESK BELL CHIMES)
The truth is this printing of money, that Ali, with his feeble little props tried to show you. The object is to push down interest rates, but it does it by buying those bonds. And if only it was that easy, because as Ali said, they have tried it before and it worked, just a little bit.
So, now, QE2 has to take to the seas, but this will not be smooth sailing. First of all, the dollar is going to fall. Secondly, emerging markets will be the recipient of that money. The money is going to pour into places like Brazil, not into consumer goods. And finally, Alan Greenspan and Ben Bernanke have warned in speeches the exit strategy is going to be difficult.
Be under no illusion. QE2 is a multi-billion-multi-hundred billion boat. But it is most certainly not a cruise around the Caribbean.
VELSHI: I bring real money and bonds, and you bring a speech?
QUEST: Yes, and my speech, I assure you, is more powerful than your pathetic bag from lunch time.
VELSHI: How did you know I brought my lunch in this?
All right. Time to separate the men from the boys right now. Let's introduce the voice for question time.
Hello, Voice.
THE VOICE: Hello, gentlemen. Last week Ali, you took home the "Q&A" Trophy. This week we have a clean slate. This time around we are going mano-a-mano over money.
Economists call it quantitative easing, better economists call it, simply printing more money. And we'll have to print more money to buy Ali better props.
As you just heard the Fed just announced a round of quantitative easing of about $600 billion U.S. dollars. Ali, Richard, here is your first question.
This round of quantitative easing is hardly unprecedented. The fed eased to the tune of about $1billion, in 1932, but were investors impressed?
What was the Dow's lowest point in 1932? Was it 124 points, 215 points, 321 points, 41 points?
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THE VOICE: Richard Quest.
QUEST: I'm going to say 215.
(BUZZER SOUNDS)
THE VOICE: I'm going to say you are wrong.
Ali?
VELSHI: I'm going to go for 124.
(BUZZER SOUNDS)
THE VOICE: I'm going to go for, you are wrong!
(DESK BELL CHIMES)
QUEST: I'm going to go for 41.
(BELL RINGS)
THE VOICE: Richard Quest, that is correct. 41 points.
Question number 2: The Japanese struggled with deflation and a flat economy for more than a decade. And when zero interest rates didn't result in the land of the rising GDP, they resorted to quantitative easing. In the early, 2000s, did they spend 30 trillion yen, 50 trillion yen, 900 billion yen, 10 trillion yen.
(BELL SOUNDS)
THE VOICE: Ali?
VELSHI: I think it is C, 900 billion yen.
(BUZZER SOUNDS)
THE VOICE: And I think you are wrong. Richard?
QUEST: I think it is A, 30 trillion yen.
(BELL CLANGS)
THE VOICE: Correct, 30 trillion yen.
One question left, Richard has two-
QUEST: Why bother I've won?
THE VOICE: Ali, this is for you, just to save face.
Question No. 3, if quantitative easing is just a fancy name for printing money, which country came up with such a wacky plan? Was it Italy, was it Egypt, China, or my friend Dave's basement?
VELSHI: Printed money, is what you are asking, Voice?
THE VOICE: Yes.
VELSHI: C, China.
(BELL CLANGS)
Whoa, I'm back in the game.
THE VOICE: Ali doesn't get a goose egg this time around, though, Richard, you won our contest.
All right. Ali, Richard could gain this time around. We'll get quizzie with it again next week.
VELSHI: All right, Voice, thank you very much.
And that will do it for this week, but remember we are here each week, Thursdays, on QUEST MEANS BUSINESS at 1800 GMT.
QUEST: And we are with you, Ali, in the CNN NEWSROOM, at 2:00 p.m., Eastern. Keep the topics coming on our blogs, CNN.com/QMB and CNN.com/Ali. And we will talk about what you want us to talk about next week.
See you then.
VELSHI: See you, Richard.
QUEST: Ah, victory, indeed. We'll have much more reaction to the Fed's latest round of QE.
I'm going to go and polish my trophy.
Plus, also, the wealth funds' warnings about European debt in a moment.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And here, the news always comes first.
So I need to tell you of the tense moments aboard a jet heading from the Netherlands to India. Delta Airlines Flight 70 landed in Mumbai under emergency conditions due to an -- an unidentified object in the cargo hold. Bomb squads are now inspecting the cargo. Delta says all 241 passengers are off the aircraft safely and authorities are rescreening the cargo.
The French interior minister says one of the printer cartridge bombs held -- herd -- headed to Chicago was diffused only 17 seconds before exploding. But U.S., British and UAE authorities have not confirmed that assessment. A White House spokesman says the forensic investigation is going to take some time. The two bombs were intercepted in Dubai and Britain almost a week ago.
In Greece, police blew up a suspicious package they found outside a bank. They say this one was not a bomb. But a different parcel found earlier today actually was. That bomb had been addressed to the French embassy in Athens and was also eliminated through a controlled explosion. It's the 14th explosive device discovered this week. It originated in Greece.
Winds are already picking up, as people make whatever preparations they can for the arrival of Tropical Storm Thomas on Haiti. Between 12 and 25 centimeters of rain is expected to fall in the next 24 hours. Up to a million Haitians are still living in tents and makeshift shelters, as they struggle to cope with the aftermath of this year's earthquake.
Drenching rains have triggered devastating mudslides in the most populated regions of Costa Rica. Rescuers say at least 16 people have been killed and 15 others are missing. The rushing water collapsed roads. Authorities are urging 800,000 people in the affected areas to boil their water before drinking it.
So, today, most hard up countries in Europe are finding it harder to borrow money. Some of the world's biggest sovereign wealth funds are refusing to invest in countries with a heavy debt burden. It's driving up the cost of borrowing.
What happened today was, once again, Greece's debt went over 11 percent and other countries, too, saw a rise in their borrowing costs.
Jim Boulden is with me.
JIM BOULDEN, CNN CORRESPONDENT: Thankfully, Ireland, as one country, doesn't need to borrow right now, or it would be suffering heavily from this. It's amazing that we're back talking about what we were talking about six months ago, isn't it?
We thought maybe the debt crisis was over. And then these sovereign wealth funds, who might have been dipping back in for a little bit, are saying, wait a minute, the peripherals in Europe, again, we shouldn't be going into these because it's a bit too risky for our -- our taste right now.
QUEST: What -- what -- so what are these -- who are these funds?
What do we know about them that have -- that have once again caused havoc?
BOULDEN: Well, the Russian Sovereign Wealth Fund is obviously fueled with oil money.
QUEST: Right.
BOULDEN: And it has said that it does not want to go into Ireland or Spanish debt. And there's talk that the Norwegian Oil Fund is thinking maybe it doesn't want Spanish debt. So they're just being very cautious again.
QUEST: Why now?
BOULDEN: I know, this is...
QUEST: Why now?
BOULDEN: This is what I'm looking at. Why, for the last eight days, has Ireland's debt been rising?
Why?
Because it seems that the market doesn't care that Ireland has taken a very serious attempt to cut its budget deficit. And they made more announcements today. Jean-Claude Trichet said today at the ECB press conference, he doesn't see Ireland as the same as Spain -- as Greece. He said it again today. But it doesn't seem to matter. The market seems to be going after Ireland again.
QUEST: What do they want, the market?
I mean if they -- you know, there is already the trillion euro fund to -- the stabilization...
BOULDEN: Yes.
QUEST: -- the stability fund. The -- the E.U. has already come out and said it's going to put a permanent one in place. They -- no country in Europe is going to be allowed -- or in the Eurozone -- is going to be allowed to go bankrupt.
BOULDEN: No, we saw what Greece did. Greece went and got the so -- got the money and things seems to be getting better in Greece.
QUEST: But now it's over 11 percent again.
BOULDEN: It is. So -- so, thankfully, Greece is getting money from the European Commission here in (INAUDIBLE)...
QUEST: It doesn't have to borrow it.
BOULDEN: It doesn't have to borrow.
QUEST: Yes.
BOULDEN: Ireland doesn't have to borrow. So right now, it's paper money -- it's paper worries. It's not actually happening to these countries. But we need to keep our eye on it...
QUEST: Why?
BOULDEN: -- because we know exactly what happened last time, when the markets got Greece all in a tizzy. We saw the euro collapsing.
What are we seeing now, of course?
We're seeing the dollar falling and the euro rising. So it's a different -- it's a different climate. So it would be -- we're not sure exactly what will happen if they continue to attack these bonds.
QUEST: Jim, can you remember a time -- and you and I have been doing this a year or two now -- when things have looked quite as murky and just downright difficult to work out which way this goes next?
BOULDEN: When we saw the economic crisis, we knew why things were happening. And we knew...
QUEST: Right.
BOULDEN: We knew what Greece had been up to. We knew what was going on. This time, we need to keep a close eye because we're not sure why Ireland is being picked on right now.
Will the government there fall?
Will they have to go to the European Commission and ask for money?
Will Ireland be able to survive all of this?
QUEST: Stay with us.
Jim Boulden with that part of the story.
And today was the morning after. The U.S. pumped billions into the economy or announced it was planning to do so. But the Europeans are not doing anything like that. Interest rates in the U.K. are staying at .5 of 1 percent, much as expected. So the Bank of England, no change on that.
The European Central Bank is also leaving rates unchanged. They will stay at the historic low of 1 percent. President Trichet explained why.
(BEGIN VIDEO CLIP)
JEAN-CLAUDE TRICHET, PRESIDENT, EUROPEAN CENTRAL BANK: With the (INAUDIBLE) going, inflationary expectations remain of the essence. Overall, the current monetary policy stance remains accommodative. The stance, the position of liquidity and the allotment moves will be adjusted as are proper here, taking into account the fact that all the non-standard measures taken during the period of acute financial market tensions are fully consistent with our mandate and by construction, temporary in nature.
(END VIDEO CLIP)
QUEST: So no QE from the BOE or the ECB, if that's enough pneumonics and initials for you.
So now let's go to W.S. -- well, Wall Street.
All right, pushing it a bit far.
Stocks are sharply higher, with just about 20 odd minutes to go in the session.
Alison Kosik is at the New York Stock Exchange.
You are more than 200 up on the Dow.
Why?
ALISON KOSIK, CNN CORRESPONDENT: Hey, Richard.
Yes, we are up more than 200 points because of two things. First of all, the mid-term elections, and, secondly, what the Fed did on Wednesday.
First of all, the mid-term elections. They put Republicans in control of the House of Representatives here. And Wall Street sees that as a good thing for big business.
As for the Fed, the Fed decided it's going to go ahead and buy up $600 billion worth of U.S. Treasuries, ultimately pumping a lot of cash into the economy and also pushing investors away from bonds and to stocks. And that's why we're seeing so much buying today. And it's really making traders here downright giddy. They think this rally is actually going to stick, Richard, until the spring.
And I tell you, it's a huge change for the mood here on the floor. Traders, you know, for several months now have been losing faith that the individual investor would put their money in the stock market -- in the stock market again. But they are back and they're back in a big way today. And it's because of what the Fed did.
QUEST: Right.
KOSIK: They're putting -- the Fed is putting cash into the economy and putting confidence into the American public -- Richard.
QUEST: OK. All right, let me pour a little bit of cold water on your ebullience from Wall Street.
KOSIK: OK.
QUEST: Is there any evidence -- too early, maybe -- but is there any evidence that long-term interest rates or that rates have come down and yields are going -- yields are going to be coming down and prices are going to go up on bonds?
KOSIK: I mean we're already seeing hints of inflation.
Is that what you're -- I mean is that what you're asking...
QUEST: No, I was...
KOSIK: -- about, Richard?
QUEST: -- I was talking about are we seeing a reaction in the bond market yet to what's been taking place?
Is there any indication that -- that long-term rates will be pushed down?
KOSIK: I mean the longer-term rates, if you're talking about the 10- Year or the 30-Year, no, we're not -- we're not seeing yields go down any. But in -- in the other -- in the yields between the 2- and the 8-Year, sure. I mean what we're seeing is investors flocking to stocks again. Volume is up today. They're not -- they're -- you know, investors are saying we're not going to make as much money in the bond market as stocks right now. And that's why we're seeing this kind of rally here -- Richard.
QUEST: All right, Alison on the New York Stock Exchange, getting all giddy at this rally.
We'll see if it lasts.
Many thanks, indeed, Alison.
Well, the Fed's decision to pump more money into the economy fueled European markets. These are the bourses. They hit a six month high. France's biggest bank also inspired PNP (ph) investors. Carnivale (ph) rose 3.6. In London, mining stocks enjoyed gains. Billiton added 6.5 percent, Extrata (ph) up 7 percent.
Now, that's what you call strong gains. And that's largely on the back of QE, because QE will bring down -- QE2 brings down the dollar. And that will push up the price of commodity prices and that, of course, is good for mining stocks.
Thinking outside the Xbox, gamers are getting a new sensory gadget. Talk about pressing buttons, this actually listens to your every command.
(COMMERCIAL BREAK)
QUEST: Microsoft is trying to feel its way back to blockbuster territory. It's got a new sensory gadget. It's called The Connect. It's a small device that those who play would add to their Xbox and use your body to play with, a lot like the Wii or PlayStation move. But it's got no hand-held controls. It responds even to voice commands. The company is banking on the sales in the run-up to the holiday season.
If you thought Jim Boulden only talked about bonds, you'd be wrong.
(BEGIN VIDEOTAPE)
BOULDEN (voice-over): If you want to play the Xbox with the new Connect Motion enhancement, you don't need to pick up a controller, no confusing buttons to figure out, no pointing at the screen. But I needed a bit of help to learn how to play one of the new 19 games designed just for the Connect. So, I turned to Connect's young guru, Alex Kipman.
ALEX KIPMAN, MICROSOFT: And you can see the game is simple and fun. As soon as you get in front of the sensor, no buttons, no controllers. The sensor understood who you are and is now tracking your entire body as we go down the river.
Jump.
BOULDEN: The Connect sensor also scans the play area.
(on camera): So it's looked around the room and decided we have enough space to play this game?
KIPMAN: Um-hmm.
BOULDEN (voice-over): And then, use your hands to pick a game.
(on camera): I keep wanting to push on this...
KIPMAN: You can...
BOULDEN: -- and leave my hand there.
KIPMAN: -- if you want, but the idea is you can just hover over...
BOULDEN: OK.
KIPMAN: -- and you can leave it there.
BOULDEN (voice-over): We played one title created to teach users how Connect works.
KIPMAN: Go straight, go straight.
BOULDEN (on camera): Jump?
Oh. I get the wall.
KIPMAN: And get ready for a big jump. Jump.
BOULDEN: We got some of them.
(voice-over): So players jump around a bit more with the Connect than with the Nintendo Wii and its wireless wand, which revolutionized the gaming world four years ago. For Microsoft, it's betting big that millions of Connects will fly off European shelves.
CHRIS LEWIS, MICROSOFT: While I can't be specific as to exactly how many, I will tell you it is millions. We have huge numbers to hit. We're very ambitious. But it will do particularly well in places like France, Italy, Germany and Spain, where there is a huge untapped market, from our point of view, of family oriented, more casual consumers.
BOULDEN: Until now, Xbox, with its Li (ph) component that requires a monthly subscription, has been geared toward serious gamers. But the game's market is moving fast.
EMMA BARNETT, "DAILY TELEGRAPH": I'm sure Microsoft is looking to make sure that things like the iPad and tablet computers, which are now making the Internet everywhere and much more portable and beautiful devices to play games with won't become the de facto gaming device.
BOULDEN: Xbox rival Sony, with its hugely popular PlayStation 3 games console, says it's already sold more than two million PS (ph) Move Controllers in the United States and Europe. The Move uses motion detection, too. The Connect has the added feature of speech recognition.
UNIDENTIFIED MALE: Xbox, close tray.
KIPMAN: So you can say things like Xbox, play movie.
BOULDEN (on camera): Xbox, order me a pizza?
KIPMAN: Xbox -- we're working on that one.
BOULDEN (voice-over): For now, anyway, it's about getting used to the body as the controller.
KIPMAN: And now, the final pose...
UNIDENTIFIED MALE: Oh.
KIPMAN: Let's party.
BOULDEN: Excellent.
KIPMAN: And tap it down.
BOULDEN: We did it.
(voice-over): Jim Boulden, CNN, London.
(END VIDEO TAPE)
QUEST: He moves quite smartly for a man of a certain age.
It's game on for Microsoft. The competition is tough.
Felicia Taylor is on the ground in New York with a gamers to see how this will play out with consumers.
(BEGIN VIDEOTAPE)
FELICIA TAYLOR, CNN CORRESPONDENT: Ah, the joy of being in control -- at least that's what Microsoft is banking on with its latest gadget, called The Connect. Thousands of people gathered for an extravagant midnight launch in Times Square...
(VIDEO CLIP)
TAYLOR: It's quieter now, but nevertheless, consumers are eager to learn about The Connect. But the point is it's not really a gadget because you are the one in control. It's got voice or motion and you direct the play.
(on camera): Microsoft is betting that it can attract not only its current Xbox consumer, but new customers, to hopefully gain about $5 million in the sales in the next quarter.
(voice-over): And when it comes to just $150, it's certainly giving the Wii a little run for its money.
UNIDENTIFIED CHILD: With The Connect you can like have all these like cool games where you can just control everything just by moving around, like I -- there might be like shooter games in the future with that and it would be pretty cool.
TAYLOR: Do you want one for Christmas?
UNIDENTIFIED CHILD: Yes.
TAYLOR: OK, dad, you're on the spot.
Are you going to get one for Christmas?
UNIDENTIFIED MALE: I don't know. We'll see what Santa brings.
UNIDENTIFIED MALE: I'm buying it right now. And this way I don't have to worry about the big crowds because they aren't going to have it soon. That's why I walked all the way here from work to get it right now.
TAYLOR: Well, I'm not going to stand in your way. Go ahead.
UNIDENTIFIED MALE: Thank you.
(END VIDEO TAPE)
QUEST: That's one way of looking at it.
Coming up next, explosive profits for Adidas. And that's the word from the company's chief executive on why nine month earnings have surged maybe 150 percent.
(COMMERCIAL BREAK)
QUEST: Welcome back.
The chief exec of Adidas, the shoe wear company -- well, that's being a bit pompous -- says the company has made an explosive comeback. You don't hear chief execs saying that very often. Nine months net income more than doubled, to around $800 million. That's an impressive number for the company. Investors weren't too happy with the sales forecast for next year, a rise described in mid-single digit growth. And they did punish the stock, actually. Adidas was down 3.3 percent.
Even so, whenever a chief like Herbert Hainer says that something is explosive in terms of the performance of the company, I have to ask, why?
(BEGIN VIDEOTAPE)
HERBERT HAINER, CEO, ADIDAS: I do believe so, because when you look to our numbers in the third quarter, then you can see that we are growing with all our brands, be it Adidas, be it the Reebok, be it TaylorMade. And we are growing everywhere in the world.
QUEST: Let's put emerging markets to one side, because everyone is doing well there. If we take a look at developed markets, the European Union and Europe and the United States, the fear is that slow down and austerity will take its toll.
But you're not seeing that yet?
HAINER: We don't see it yet. As you can see in the numbers, though, there is a high demand from the consumer for our product. And also, I do believe, going forward, yes, there are differences in the economy and the U.S. has definitely still some challenges ahead. But all what I hear and what I see from our retailer and the consumer, we definitely have a positive momentum, also, in the U.S. And we will further growth.
QUEST: Right. No, but are -- are you able to get any pricing pressure into the market yet or are you still having to see retailers offering quite large discounts and -- and reducing of prices to stimulate that cash flow?
HAINER: No it -- I would say it's, for us, the other way around. When you look to Reebok, with the new technologies, be it EasyTor (ph) or be it SciTech (ph), we are able to achieve higher prices than we have before. And although the Adidas products Speed, (ph) The F50, the football boot, or now the new basketball shoe, CRDCR (ph) and The Beast, which we are -- have launched just a week ago with Derrick Rosen (ph) quite hard, we are achieving higher prices than we have in the past.
QUEST: Within the brands, is it performance or is it just brand name?
HAINER: Luckily, in our case, it is both. You see that we are growing on the sport performance side where we have all the products that you really use for a sport, be it football boots or tennis boots, running shoes or basketball shoes. On the other hand, we have the sports style division, where all our Originals (ph) product and Yamamoto (ph) products are in, which normally will be used by people just to show that they are sporty but they don't do sport with it. This is fashion. This is sports fashion.
And this division has even grown by 21 percent. This is a clear indication that our brand is hot and cool around the world.
(END VIDEO TAPE)
QUEST: That's the chief exec of -- of Adidas -- hot and cool around the bra -- around the world.
And there's some very nasty systems around the world that are neither hot nor cool at the moment.
And Tropical Storm Thomas is nearing Haiti.
Guillermo Arduino is at the CNN World Weather Center this evening -- you know, whenever I hear one of these hurricanes, I -- one always knows the damage is going to be intense. But with it being Haiti, it's going to be even more so.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes. We are a little bit lucky for two aspects right now compared to what we were hearing before. It's not expected to become a -- to become a hurricane. It will be a tropical storm. It is a significant, very dangerous storm, anyway. And it's not going straight into Port-au-Prince, rather, it's going to affect this island over here. Port-au-Prince is toward the easternmost part of the peninsula. And here, it's going to make landfall closer to the edge of the peninsula.
You see, most of the rain here goes through that Windward Passage and then moving on into Turks and Caicos Islands, that I think are going to get the brunt of the system. And when I say the brunt, I mean the center, the eye of the system, that takes most of the energy of this bad storm, because it is a huge area of violent weather. Of course, you know, because of the situation that is going through in Haiti, there are many people who are being exposed to winds. Rain starting at any time, if it hasn't started yet. And winds in the increase.
But fortunately, it's going to be away from the island, most of the center of the system. No doubt -- no doubt that the system is going to through those areas. And then when we come -- when it comes to the Atlantic Ocean we'll see what happens. A little bit too early to say.
At the same time, we have heard that there is bad storms and also lots of rain in Wales and in Western England. London is not that bad. And I think that Saturday is not going to be a bad day. Then the rain is going to come back. The winds are going to continue to affect the area.
I think that winds all over, in the northern parts of Scandinavia and the sunshine is returning to the south, especially Italy, after so many weeks of very bad conditions. So the rain stays to the north. The south is not that bad. All across Europe, temps are not that bad for Friday. Again, Richard, Saturday, because London is going to be much better for you.
QUEST: Good, Guillermo.
Do you know, next week, you and I need to have a chat about the jet stream.
ARDUINO: Oh.
QUEST: I don't know why, but I just -- I -- the jet stream and explain why it takes longer to fly to the United States than from the United States.
ARDUINO: Deal.
QUEST: Guillermo...
ARDUINO: Will do.
QUEST: -- at the World Weather Center.
When you and I come back, we're going to talk about aviation, the Airbus A380 and a Profitable Moment.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment.
The decision by the Qantas chief exec to ground his super jumbos was probably inevitable and also wise. Qantas has had a series of potentially disastrous incidents in recent years and the airline is going above and beyond to prove safety comes first.
The only word from Rolls Royce today has been a two line bromide saying safety comes first and pledging cooperation. Well, frankly, Rolls Royce, this is hardly satisfactory. The engine makers will have to say more in the days ahead if the traveling public is to retain confidence in its engines. The A380 is a beautiful plane with magnificent quiet technology, even though we accept this was a serious matter with potentially disastrous consequences, I would still fly a A380, even with Rolls Royce engines. Book the ticket, first class, please.
And that's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable.
Fionnuala Sweeney and the closing bell.
END
