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Quest Means Business
Growing E.Coli Scare Threatens Europe's Food Export Market; Hack Attack on GMail
Aired June 02, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN ANCHOR, QUEST MEANS BUSINESS: A deadly mystery. A growing E. Coli scare threatens Europe's giant food export market.
A warning on U.S. debt. Moody's says it expects to put it on review for a downgrade.
And this time it's personal. A hack attack on G-mail hits some high profile accounts.
I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.
Hello to you.
European vegetables are being stripped from the shelves in Russia and customs are stopping lorry loads at the border. Russian is banning the import of all fresh vegetables from the EU because of a deadly E. Coli outbreak. A spokesman for the foreign ministry says it is a natural protective measure. The European Commission says the ban is disproportionate. And it is calling on Russia to end the ban immediately. The E. Coli bug has killed 15 people in Germany and one in Sweden. More than 1,600 people in 10 countries have fallen ill.
The U.S. Centers for Disease Control and Prevention says it is a rare strain, but it has been seen before. The World Health Organization says there is no need for trade restrictions. But several countries are ignoring that advice. Russia's agriculture minister admits the ban will help Russian farmers. Our Matthew Chance joins me now from Moscow.
What's the latest word from there, Matthew?
MATTHEW CHANCE, CNN INTERNATIONAL CORRESPONDENT: Well, the Russians are standing by this ban. There has been a these very strong criticisms made by the European Union that the ban is unnecessary and is disproportionate, as you mentioned. But the Russian's entirely reject that. They say that they have done this to protect their own citizens from this E. Coli outbreak. They said the European Union have failed to pin point the location and the source of the outbreak of E. Coli. And because of that they have been forced to put this blanket ban over all vegetables coming from EU sources.
You mentioned they have been instructed customs officers to stop lorry loads of vegetables coming through the borders and the ports. They have also seized vegetables on display in shops and supermarkets and markets in the country. And advised Russians not to eat European Union imports but instead to buy locally, that led to some concerns that there could be some shortages as a result of this ban by the Russian government on these vegetable imports. That is not something the Russian agriculture minister agrees with. Let's take a listen.
(BEGIN VIDEO CLIP)
YELENA SKRYNNIK, RUSSIAN AGRICULTURE MINISTER (through translator): We have enough business proposals on vegetable supplies from other countries. Therefore we don't foresee neither a shortage of those food products nor any price increases.
(END VIDEO CLIP)
CHANCE: Well, it has to be said, we have some statistics here. It comes from some state television saying that only 20 percent of all the vegetable imports into Russia come from the European Union. That is a significant amount, of course, but the Russian agriculture ministry indicating that there maybe an increase in imports from other non-European countries to compensate for the shortfall as a result of the ban, Max.
FOSTER: OK, Matthew, thank you very much indeed for that.
Well, the European Union is the world's biggest exporter of food stuffs, so the economic impact is likely to be widespread. Let's take a look. Some parts, there we are-so Russia, some parts there import nearly 90 percent of their vegetables. The country is the third-largest importer of European food and drink. So, fruit and vegetable exports to Russia are worth up to $5.8 billion a year, according to EU estimates.
See if I can get rid of that? Oh, well, a little help there.
(LAUGHTER)
Let's have a look at the Czech Republic. Well, they are pulling suspect vegetables off the store shelves all together. So they are also concerned. In Austria inspectors have been sent to supermarkets but received produce from German companies. So they are assessing the situation in their shops, too. It is turning into a real problem for them. Germany, itself, they are warning the public not to eat any raw cucumbers, lettuce, or tomatoes. It is a huge consumer, Germany, the biggest economy in Europe.
Let's have a look at what is happening here, as well, because American Airlines have a story in relation to this as well. They are pulling all green salads, lettuce, and tomato garnishes from all flights out of Europe, as you can see.
Now the Spanish farmers say they are loosing at least $290 million a week in takings, and the crisis is jeopardizing thousands of jobs in a country with the highest unemployment rate in the EU. Al Goodwin went to a Spanish market to gauge the mood amongst traders there.
(BEGIN VIDEOTAPE)
AL GOODWIN, CNN INTERNATIONAL CORRESPONDENT (On camera): At this fresh produce store in Madrid, which has been here for almost 70 years, they say they are not seeing a drop in sales due to the E. Coli bacteria scare in Northern Europe that has caused the deaths and illnesses, especially in Germany. Now, that is a big change from what is going on in the south of Spain with the export producers, who say as a result of the Spanish cucumbers initially being implicated by German authorities as a potential cause for this bacteria. Their sales have dropped, they have lost millions of dollars, as most of Europe has basically shut out the Spanish product.
Now that the European Commission has cleared the Spanish cucumber, and says it is not the cause of the bacteria. The producers say they will seek economic compensation from the European Union. And in Germany, there may be a lawsuit against Germany.
Now the owner of this store has seen quite a lot in his time here, but never anything like this E. Coli scare.
(BEGIN VIDEO CLIP)
FELIX VAZQUEZ, GREEN GROCER (through translator): This is the first case of its kind. And as a profession, he says, I was surprised at how they said it was the cucumber, with so little evidence. Now they see that was a mistake. But a mistake that has been done and it is going to cost a lot of money. Besides the damage to Spain's image for its exports.
GOODMAN (on camera): While health authorities continue to search for the source of the outbreak the Spanish export producers hope their sales will soon get back to normal just like this store is. Al Goodman, CNN, Madrid.
(END VIDEOTAPE)
FOSTER: We are joined now by Spain's Ambassador to the United Kingdom, Carles Casajuana I Palet.
Thank you so much for joining us. I understand the Spanish now want compensation because they felt hard done-by from all of this. What is your view?
CARLES CASAJUANA I PALET, SPANISH AMBASSADOR TO U.K.: Well, first of all we are happy to see that Spanish vegetables are completely clear and they are not the source of this illness or this outbreak. We already suspected this because the epicenter of the outbreak is in Germany. And they have been no cases reported in Spain. Just one person, I think, an athlete who had been in Germany, in Hamburg. So, we are very happy to see that all of the consumption of the Spanish products, of Spanish vegetables, is safe for all consumers. That said, of course, this issue has damaged our producers, our farmers, and we are sure that there will have to be compensations. Our main concern is, of course, the health of all European citizens, not only Spanish citizens. We are sure that there will be compensations because that-
FOSTER: Where will that come from, the EU?
PALET: This is-this is, yes. This should be provided through European mechanism. And not only for Spanish farmers, but all farmers concerned.
FOSTER: But they are going to have to compensate all those other countries affected as well, then, on that precedent.
PALET: I think this is the normal procedure. We think the European Union, I'm sure that all countries will understand that a scare is-is-has created a damage to producers. We have lost jobs, we have lost-
FOSTER: Have you got a figure on the cost?
PALET: It is very difficult to say. We will have to wait until the complete end of the this. Now, the main thing is for the German authorities to identify the source of this outbreak.
FOSTER: You must be pretty angry that the finger was pointed at you, when there isn't really any evidence that you were the epicenter, ever.
PALET: Well, this is-probably we have to put this behind. And we have to look at the future. We hope that they will identify the source of the outbreak as soon as possible and that the health of all European citizens will be safe.
FOSTER: Carles Casajuana, thank you very much indeed for joining us.
PALET: Thank you.
FOSTER: The United States could be headed for a credit rating downgrade, meanwhile, Moody's says they will officially but the country's AAA rating under review if the U.S. debt ceiling can't be raised soon. Felicia Taylor is over at the New York Stock Exchange for us.
It sounds pretty damaging this. How do you read it?
FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: Well, it is damaging, I mean, there is no question about, Max. Obviously, you know, if Moody's is going to say that they are going to downgrade the ratings of significant banks, and we're talking about Bank of America, Citigroup, Wells Fargo, I mean, these are major banks in the United States. This review will allegedly focus on whether those ratings should be adjusted to include only pre-crisis government support. In other words, what would these banks look like without government support? And that is significant, because frankly, they could drop not just one or two notches, but up to four and five different notches, putting them in the sort of B category, as opposed to the A category, which is where they are now. Moody's warns that the Dodd- Frank reform bill might initiate these credit ratings to fall down.
So, highly unlikely, though, that the government wouldn't support these banks; nobody really believes the United States isn't going to support its own major banks. And that is actually why probably the stocks of these banks are trading higher. Right now, Wells Fargo is up about 1 percent as is Citigroup, and also Bank of America, which is interesting, but without the government support these ratings would drop fairly significantly. So it is definitely a significant issue in terms of whether or not Moody's is going to drop those.
FOSTER: And what was the reaction there when they heard this news? Is there a bit of a shock that Americans can be put in this position? The most powerful, most prestigious economy in the world?
(LAUGHTER)
TAYLOR: Yeah, exactly. I mean, it is more fragile than people believe. I mean, that is why the market right now is just that, very fragile at the moment. I mean, let's face it the economic numbers aren't panning out to be what they should be. So, yes, I mean, it is a reaction for the marketplace. Although, the market has come off its lows today, nevertheless, especially when you look at Goldman Sachs, and it now has received a subpoena from the Manhattan district attorney, requesting information related to its report about, you know, its trading when the mortgage market collapsed. So that also is very significant. Goldman Sachs shares right now are down over 1 percent, trading at $134. And if, you know, look back to January that stock was around $170. So, yes, it is significant but the market isn't taking it that seriously. Because like I said before, the United States-nobody really believes that the U.S. wouldn't support major banks, like Bank of America, Wells Fargo, and Citigroup, Max.
FOSTER: Felicia, thank you very much, indeed, for that.
And now G-mail users under attack. Google says it has traced the phishing scam back to China. We'll have the Chinese response for you and look at just who is being targeted. That is next.
(COMMERCIAL BREAK)
FOSTER: Google is warning that hundreds of G-mail accounts have been compromised. It is not just random accounts we are talking about here. It is government officials, military personnel, journalists, and political activists. This type of targeted attack is often called spear phishing and Google says this onslaught came from China. The hackers can get-can obtain your log on details in two ways, either through infected computers, which record user names and passwords, or by sending e-mails that look like they are from trusted sources, asking you for information. You have probably have seen something similar in your own e-mail in box.
Google says the attacks were launched from Jinan, in China's Shandong Province. A Chinese foreign ministry spokesman says China firmly opposes computer hacking and will severely punish anyone engaging in it. Spokesman Hong Lei added that, "Computer hacking is an international problem and China is also a victim."
He says, "Any accusation linking China to such activity is baseless and with ulterior motives."
The U.S. Department of Defense said today that cyber attacks by any foreign nation on U.S. computer networks may be considered an act of war. Google informed the U.S. State Department of the G-mail attack late last night. And Secretary of State Hillary Clinton says the FBI is already on the case.
(BEGIN VIDEO CLIP)
HILLARY CLINTON, U.S. SECRETARY OF STATE: These allegations are very serious. We take them seriously. We are looking into them. And because this will be an ongoing investigation. I would refer you to first Google for any details that they are able to share at this time, and to the FBI, which will be conducting the investigation.
(END VIDEO CLIP)
FOSTER: Well, John Abell is the New York bureau chief for the tech site Wired.com and he joins us now live.
Thank you very much, indeed, for joining us. If you could first of all just start by explaining spear phishing in as basic of terms as you can for us.
JOHN ABELL, NEW YORK BUREAU CHIEF, WIRED.COM: Well, it is the most basic sort of thing there is. It is really quite easy. You will get an e- mail, it purports to be from somebody that you trust. It says, look at this, click here. And that begins a process where your-at least this part of your identity is stolen. They then take over your e-mail account. They might then e-mail people from that account, get other information about you, and like that. But it is the oldest trick in the book.
FOSTER: So they can effectively get a-get, um, into your in box, and get all the information that you have in there, right?
ABELL: Well, sure. Once they have gotten your credentials for G- Mail, they can log into your G-Mail account, take it over, change the password, if they want to. In this case it seemed that they were doing- redirecting mail. So, that it was a stealth, silent sort of attack, where I wouldn't know necessarily, unless I went to that setting about forwarding and say, gee, I didn't do that. I would still be getting my mail, reading my mail, but they would also be getting stuff, too. So, it would be like reading the contents of my in box, that's right.
FOSTER: And normally these phishing scams are quite widespread. The e-mails get sent out to multiple people, it is almost anonymous, but this is different, isn't it? Because a particular individual is being targeted, one assumes, by an individual, elsewhere?
ABELL: Exactly. And for a very specific person that you can sort of reverse engineer by looking at the list of people that they went after. You are quite right. This is generally speaking the sort of classified ads approach, where you put out a classified ad and 0.1 of 1 percent of the people respond. And that is good enough for the usual phishing scam. But what looks like is going on here is they are going after certain, you know, thought leaders, political leaders, things like that. And since it is a silent attack, the purpose would be to see the kinds of conversations and e-mail exchanges that these very important people are having with other people, for what purpose one can only imagine.
FOSTER: And what do you make for the rhetoric coming from the U.S. government now. This talk of an active war if they are under attack by a cyber attack; so they are responding not with another cyber attack, they are effectively saying they are going to attack militarily against some one that is attacking them online.
ABELL: Yes, well, look, I mean, cyber is-cyber has been sort of taken-has become the sort of the war on terrorism version, too. There are a lot of things going on, of course, not to minimize the risks to government installations and individuals. But the rhetoric can get very, very heated up and there is really no point to that. That is probably not a good thing. You can deal with these things diplomatically, you can deal with them technically. But sort of threatening like that doesn't really help very much.
FOSTER: OK, John Abell from Wired.com. Thank you very much indeed.
Now, some people say you don't need to be conned to lose money in tech. And these traders at Nasdaq are caught in a bubble that is about to burst. We'll be having a transatlantic tussle over that issue in just a moment.
(COMMERCIAL BREAK)
FOSTER: Talk of a new tech boom has been rife in recent weeks. LinkedIn's recent IPO saw its price double on the first day alone. And bigger companies like Facebook and Twitter could be next. But when does a boom become a bubble? On this week's "Q&A" Richard and Ali go head to head on that very issue. Take a look.
(BEGIN VIDEOTAPE)
ALI VELSHI, CNN ANCHOR, CNN NEWSROOM: QUEST MEANS BUSINESS and so do I. We are here together in the CNN NEWSROOM and around the world.
Hello, Richard.
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: And a good day to you. Each week Ali and I coming to you from around the world, on both sides of the Atlantic. We are talking business, travel, innovation. We say nothing is off limits. And today we are all about LinkedIn, IPOs, and the general excitement that has caused so much excitement in the social media, and tech sector.
VELSHI: You know there is something going on when people who otherwise don't pay attention to the stock market are talking about all of these high-tech IPOs. So, specifically, Richard, our question is: Will the tech stock boom end in tears? You have 30 seconds-60 seconds.
QUEST: Of course, it is going to end in tears. Only a fool thinks otherwise. What is the definition of a bubble? It is a sharp rise in the initial price of an asset that generates further investment for the pure purposes of making money and speculation. You don't have to think of social media or even tech or Argentina. You don't have to think of Asia. You have of think of tulip mania in the 17th century. Ali might just about remember that. 300 or 400 percent increases in the price of tulips that all ended in tears.
And yet in Asia, there was investment, and in Argentina there was investment. And in tech there was investment. It was 250 odd days from IPO to bust for Pet.com. I don't say this is going to happen immediately, but if anybody believed that LinkedIn, Facebook, Groupon and the like, won't eventually see some tears-
(BUZZER SOUNDS)
QUEST: Then they are deceiving themselves and others.
VELSHI: Richard, you make some good points. But I'm going to take the other side of this. Give me 60 seconds.
There is no question that these companies are overvalued. LinkedIn shares surged 109 percent in their first day. Valuing the company at nearly 550 times its 2010 profits, that certainly takes us back to the tech boom, Richard. But this is just the beginning. You mentioned, Groupon, Zinga, Facebook, all of those may go public, with even bigger valuations than LinkedIn. Does that necessarily mean we are in a bubble? And if it does, does it mean it is going to end badly? We're only talking about a handful of companies, Richard. And unlike the tech boom in the past, these are real businesses. Sure LinkedIn only did about $250 million in revenue last year. But you'll recall Richard, that is a far cry from the '90s, when companies-with no revenues, just a dot.com on the end of their name- would go public before even bringing in a dime of revenue.
In fact, the whole Internet landscape, Richard, think back to the '90s. Most of us were still using dialup. Today we don't even do this particular "Q&A" segment-
(BUZZER SOUNDS)
VELSHI: a-until we Tweet out for topics. So, I think this is real. There might be some tears, but it is real.
QUEST: Ah, you're confusing the old-the path to profitability with projected sales. And once again-you'll be the first person, Ali, the first person to be commenting on this bubble when it finally blows up in our faces. Let's go to The Voice on-
VELSHI: It's a good thing we are recording this so we can play it back.
UNIDENTIFIED MALE: Good day, Gentlemen. The Voice here, hopefully I won't burst your bubbles with this quiz. Let's get started with No. 1.
General Motors November IPO became the world's biggest after underwriters took up additional shares within a week of the offering. What is the most successful one-day IPO in world history? Is it, A, the Easter Japan Railway Company; B; The Industrial & Commercial bank of China, C; the Japanese wireless phone company NTT Mobile, or D, Visa.
(BELL SOUNDS)
UNIDENTIFIED MALE: Richard?
QUEST: Visa.
UNIDENTIFIED MALE: Incorrect.
(BUZZER SOUNDS)
UNIDENTIFIED MALE: Ali?
VELSHI: Oh! I was going to go for that, too. I was going to say that too. So my next guess is going to be ICBC.
(BELL CLANGS)
UNIDENTIFIED MALE: That's correct. ICBC had the most successful one- day IPO in history with over $19 billion in new capital.
On to question 2: Looking at the top 25 all-time largest global IPOs, 13 different underwriters have been used. The accumulated bill size-we're talking the most money. Which underwriter has sold the most of these top 25 shares to the public? Is it A., Goldman Sachs; B., Goldman Sachs Asia; C., Merrill Lynch; D., Morgan Stanley.
(BELL DINGS)
UNIDENTIFIED MALE: Ali?
VELSHI: Following on my previous success, which was Chinese IPO, I'm going to go with Goldman Sachs, Asia.
(BUZZER SOUNDS)
UNIDENTIFIED MALE: Incorrect. Richard?
QUEST: Of these top 25 deals-
VELSHI: Go for A, go for A, come on.
QUEST: I-I-my logic-well, my logic says Goldman Sachs. All right. Goldman Sachs, but I think it is Merrill Lynch. Goldman Sachs.
(BELL CLANGS)
UNIDENTIFIED MALE: For once you listen to Ali and you got it correct.
(LAUGHTER)
UNIDENTIFIED MALE: They have underwritten the most, with over $42 billion in shares sold. Goldman Sachs, Asia, however, is second with over $37 billion.
On to the last question.
QUEST: Hey, hey, Ali, why are you being nice to me?
VELSHI: Yeah.
UNIDENTIFIED MALE: Enough niceties, let's go on to question No. 3.
VELSHI: I'm going to collect, one of these days.
UNIDENTIFIED MALE: Which company had America's first IPO? Was it A., Bank of North America; B., U.S. Steel; C., Standard Oil, or D; Stroh's Brewery?
(BELL DINGS)
UNIDENTIFIED MALE: Ali?
VELSHI: It was U.S. Steel.
(BUZZER SOUNDS)
UNIDENTIFIED MALE: In correct. Richard.
QUEST: I'm going to go for Standard Oil.
(BUZZER SOUNDS)
UNIDENTIFIED MALE: Incorrect, yet again. Ali?
VELSHI: Wow. Bank of North America, it can't be Stroh's.
(CROSS TALK)
UNIDENTIFIED MALE: Aha, that's correct.
(BELL CLANGS)
Bank of America had the first IPO. So, Ali, you are today's winner. Try not to gloat too much.
VELSHI: I can't believe that. I actually won, after helping you.
QUEST: That will do it for us this week. Remember we are here, each week, on QUEST MEANS BUSINESS 1800 GMT.
VELSHI: And in the CNN NEWSROOM 2 p.m. Eastern. Keep the topics coming on our blog. Go to CNN.com/QMB and CNN.com/Ali. Tell us each week what you want to talk about. Because we are in the tech age.
See you next week, Richard.
QUEST: See you next week. Good victory, Ali.
(END VIDEOTAPE)
FOSTER: Did he really mean that? Coming up, are European leaders practicing what they preach. While the systems cope with the cups, delegates are living it up. We'll tell you exactly how much they are spending in just a moment.
And still to come on CNN (UNINTELLIGIBLE). Piers Morgan Tonight, Donald Trump talks about his meeting with Sara Palin. CNN's Nancy Grace fills us in on the real-life TV courtroom drama that has the U.S. talking. And talk show host, Jerry Springer, gives his take on political sex scandals. That is 30 minutes from now, right after QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
FOSTER: Welcome back. I'm Max Foster, these are the headlines. Health investigators are rushing to track down the source of Europe's deadly E. Coli outbreak. The rare strain of the bacteria has already killed at least 16 people and sickened around 1600. That's caused Russia to ban vegetable imports from the EU. A move the European commission call disproportionate.
The capital of Yemen is torn by violence. News reports say dozens of people have been killed in fighting between distant tribesmen and government kids (ph). Witnesses tell AFP News Agency there are bodies on the streets, but the neighborhood is too dangerous for ambulance crews to enter.
Mitt Romney has officially thrown his hat into the ring for the Republican race for the White House. The former Massachusetts governor formally announced his second bid for the nomination. And he immediately went on the attack, saying president Barack Obama has failed America.
Now he's at stake just to make his first appearance at the U.N. Court a war crimes tribunal on Friday. But a lawyer for Bosnian's served war crime suspect Ratko Mladic says the former general is in a prison hospital and in poor condition because he hasn't had proper health care in years.
Multi-million dollar bills for private jets never sit too well in an age of austerity. Even worse of when the people responsible are in charge of a continent in crisis. As the rest of Europe tightens its belt, its leaders have some explaining to do, as Emily Reuben reports.
EMILY REUBEN, CNN CORRESPONDENT: Demonstrations on the street, spiraling debt. Economic crisis gripping the European periphery. Greece, Portugal and Spain are making painful spending cuts. Even the European commission is talking about the current austerity climate.
So, revelations of its own spending on jets, parties, and hotels, couldn't have emerged at a more awkward moment. According to the Bureau for Investigative Journalism, EU commissioners spent $10 million traveling in private jets over four years. The EU Commission president Jose Barroso and his delegation incurred a $40,000 bill when they stayed at the Peninsula Hotel a five star hotel for four nights in New York to attend UN general assembly.
Four hundred and thirty-three thousand dollars was spent on entertaining in 2009, including one party in Amsterdam which was billed as Discovery '09, a night filled with wonder. While the EU's generosity even extended as far as buying key rings and cuff links for guest speakers from Tiffany's at events like a global governors conference. Total cost, $29,000.
IAN OVERTON, EDITOR, BUREAU OF INVESTIGATIVE JOURNALISM: Everyone wants to see greater accountability for spending. And the -- the gilded cage of Brussels seems to sort of carry on without giving any sort of transparency. Without giving any sort of sense that there is a crisis on- going.
REUBEN: The revelations come at a difficult time for the European Commission, its encouraging member states to cut spending to get their budget balanced, while arguing for a 4.9 percent increase in its own budget.
UNIDENTIFIED FEMALE: Angry, yes. And --
REUBEN: Surprised?
UNIDENTIFIED FEMALE: No not surprised because I think everybody knows that.
UNIDENTIFIED MALE: It's a bit of a scandal, and there's probably people that need that money more than he does to fly around in a luxury jet.
UNIDENTIFIED FEMALE: Very angry. Because there's lots of people in this country that could do with some of that money as well.
REUBEN: The commission says it's completely transparent about how much it spends on expenses and that every effort is always made to get the cheapest price. Private jets are only used when scheduled flights are unavailable. Or, cost more than the hiring of a jet. But some argue it's time for the EU to change.
STEPHAN BOOTH, OPEN EUROPE: I think a large part of the problem is that these people do feel -- feel a lot actually in reality quite far removed from the electorate there at the commission. It's not an elected body; they don't have to ballot box every so often and -- to get re- elected. They can't be punished in that sense.
RUEBEN: This isn't the first time such criticisms have been made. But now pressure is growing on the EU to promote austerity, not just in member states, but closer to home. Emily Rueben, CNN London.
(END VIDEOTAPE)
FOSTER: Well on the note of austerity. European and IMF delegates will be in Greece tomorrow to announce if the country's on track for its budget targets. The troika is likely to finish his talks with the Greek government on Friday. He'll then announce whether Greece is doing well enough in cutting its deficit and raising funds.
Now that was part of last year's $159 billion bail out. I would not expect it to hear if Greece will get extra money in addition to last year's rescue package. Moody's doesn't believe Greece will hit those targets and says there's now a 50/50 chance of default. It's hit Greek funds with another downgrade yesterday. They're now at CAA1 with a negative outlook despite the fact that Moody's thinks Greece will get more support from the IMF, the ECB and the European Union.
Now the cost of borrowing money increased for Greece on that news. The rate of interest on a ten year Greek bond rose to 16 and a quarter percent. That's an increase of almost 2/3 of one percent.
European markets also got their first chance to react to the Moody's downgrade. And a -- and a second straight day of loses. Paris and Frankfurt both finish down by more than one percent.
And emerging economies are driving growth meanwhile at the advertising giant WPP. Next the company's CEO Martin Sorrell, tells us how the Brits are doing it differently.
(COMMERCIAL BREAK)
FOSTER: The world's biggest advertising company has just got even bigger. WPP has bought a majority stake in Brazil's F.biz, who specializes in online marketing. WPPs revenue for April grossed 6.2 percent on last year. It's a bit of a slow down in first three months of 2011 but CEO Martin Sorrell told me he's not worried.
(BEGIN VIDEOTAPE)
MARTIN SORRELL, CEO, WPP: Yes I think what we've seen is a -- pretty much a continuation. There has been some deceleration in relation to Q4, quarter four of 2010. But, basically, we're -- our budgets -- we're talking about five percent growth. Our quarter one revised forecast which we did in April talked about post the first quarter, talked about upping that to just over six percent, or over six percent and what we've delivered in the first four months -- if you look at the revenues it's about 6.2 percent. If you look at gross margin, which I think is a more accurate figure it's closer to seven percent. So I think we're pleased with that. We've hit our numbers for budgets and indeed for our quarter one revised forecast. Our performance in relation to last year at the profit level margin level as such has been quite strong. It's coming from where you would think. The BRICs and the Next 11, where you see China and India growing by 19 percent against an average of groove of six to seven percent depending what figure you choose to use.
FOSTER: Could you explain how the BRICs are spending their money differently?
SORRELL: Their spend is -- there's two elements to it really. One is the multi-nationals coming in. That's the big companies that we represent coming into the market. By via Ford, a You Deliver (ph), a Procter and Gamble, a J & J, a Nestle, whatever it happens to be. And then it's the national companies spending and developing their businesses, their franchises in the countries. And of course Chinese companies, or Indian or South Korean companies, whatever it is. Just like the Japanese companies used to do in a sense. Developing their brands not only in their country of origin, but also abroad. So we get double Whammy, in a sense.
FOSTER: Because the -- the emerging markets, they're in a race aren't they? To the top? They're trying to assert themselves. I'm just wondering whether they're using different media to do that. Well in the BRICs and Next 11, basically what you have is a situation where tradition -- what we would regard as being traditional media, that is free to air television, more modern forms of television, like satellite and cable, are extremely strong. Print is extremely strong. I mean if you're in the newspaper business in India, it's not as difficult, but it mildly is the newspaper business in the United States or Western Europe, U.K., France, Germany, Italy and Spain so again because these countries are at different stages of development, the development of traditional media, is at an earlier stage. The really interesting phenomenon is, I think, we're starting to see, not only twin peaks, if I can put it like that, in the west, but also, in the fast pay markets. Those twin peaks are free to air television, cable and satellite, and new media. I mean, PC driven, mobile driven, smartphone driven, IPod, IPad driven, we're going to have the ICloud now from -- in the music area, from Apple and Steve Jobs, I think, is next week. But what we're seeing is -- and obviously social networks. What we're seeing is the growth of new media as well as traditional media in these faster growth markets.
(END VIDEOTAPE)
FOSTER: It's all about those markets isn't it? Martin Sorrell there talking a little earlier on. Now, we're going to check the U.S. stocks today. Which we have very significant news, Moody's particularly becoming the second ratings agency to issue a warning on U.S. debts didn't have a huge amount of impact on the market, but it is down .2 percent. It did bring the dollar down a bit, but not a huge amount of impact on stocks. Let's just hear what Moody's had to say.
They said that if there's no progress on increasing the statutory debt limits, in coming weeks, that debt ceiling, it expects to place the U.S. government's rating under review for possible downgrades. Here's the crunch bit. Due to the very small, but rising risk of a short-lived default, so talk of default in the U.S. Although the markets aren't too concerned as they think the banks will always find some way of getting money.
Now on Friday the U.S. government releases non-farm (ph) employment figures of the max, but as they fall well short of initial predictions that's going to have an impact on the market I'm sure on Friday. We've seen the effects of that right across the global markets.
But, while the average un-employed American may be struggling right now there's one position search firms are keen to fill. And that's the top of the executive ladder. CNN's Money -- CNN Money's Poppy Harlow meets and American CEO selector.
(BEGIN VIDEOTAPE)
KEVIN KELLY, CEO, HEIDRICK & STRUGGLES: Even though the U.S. ranks in our global talent index number one, it still has its challenges. You know, for example, do executives today have the cultural quotients. You know what we see in terms of demand -- a supply demand issue is it's great if you have the IQ and we talk a lot about the EQ and the social skills that you need. But, do you have the cultural quotient that's lacking in many executives today. And there in lies the challenge when it comes to recruiting executive talent at the top.
POPPY HARLOW, CNNMONEY.COM: What about compensation? We spoke about this in Davos, but when you look at all the pressure, especially in the financial sector, to rein back compensation, for top executives at banks, is that taking its toll? Are we seeing talent flee that sector at least in this country?
KELLY: I think what's happened actually -- banking's been interesting this year. Specifically because you saw a lot of the major financial institutions retain employees last year given the jobs market, particularly when it came to certain sectors of finance, but what we've seen is all of a sudden there's been a push again to recruit top talent. Particularly in banking, investment banking and other areas who didn't -- and the walls just kind of -- or the -- it just opened up over the last couple, three weeks where there -- it was kind of quiet for the first two months of the year which is rare.
HARLOW: When you look at compensation for U.S. CEOs, are U.S. CEOs overpaid on a global basis?
KELLY: Well it's interesting you know. The -- there's different dynamics. For example in Europe, continental Europe the average CEO gets 850,000 plus euros, in the U.K. it's about 3.5 million pounds, in the U.S. it's roughly $7-$8,000,000. But, a large component of that is actually equity based. So, you know I think its relative. In Asia it's completely different. You have a lot of family owned businesses there.
(END VIDEOTAPE)
FOSTER: Now from vegetable patch to play Tuscumbia, tough keeping track of where your fresh produce actually comes from. With an E. Coli outbreak spreading that's never been more important. We'll be asking traders and their customers if they know where food's from. Coming up.
(COMMERCIAL BREAK)
FOSTER: Now shoppers in Europe are nervously check the labels on their vegetables to see if they're at risk from E. Coli. The inevitable question is how safe is your food? This isn't the first time we've heard of these kinds of concerns. Three years ago in China, at least six babies died after they were given contaminated milk. Another 300,000 people became ill because of the milk. And it contained melamine, which is a product usually used to make plastic products. It's been added to the milk to boost its protein content.
Europe has had brushes with avian flu over the past few years. Back in 2007 turkeys in both Hungary and the United Kingdom were found to be infected with the H5/N1 strain of the virus. Even chocolate has had health scares. In 2006 the chocolate maker Cadbury was found to have sold unsafe chocolate in shops in the U.K. and Ireland after a salmonella outbreak in one of it's factories. And Cadbury was fined $2,000,000 by a British court the following year.
Depending on the time of year, around one in ten cucumbers sold here in the U.K. is imported from Spain, where the cucumbers tied to this E. Coli outbreak originated. Although it's a bit blurred now isn't it. Our Ayesha Durgahee got the mood of consumers and traders on the busiest shopping streets here in London.
(BEGIN VIDEOTAPE)
AYESHA DURGAHEE, CNN CORRESPONDENT: What do you think about the E. Coli outbreak?
UNIDENTIFIED MALE: Oh, it's worrying, it's worrying basically. I mean I'm kind of like worrying every time I buy vegetables, things like that. But, it hasn't been kind of pre-occupying me at moment, no. But I mean, yes I'm just -- I'm just wary of it.
DURGAHEE: So you haven't stopped buying cucumbers or tomatoes?
UNIDENTIFIED MALE: Well I've actually stopped buying cucumbers for a little while, but I love tomatoes and vegetables. So I'll still buy them just try and wash them as well as possible.
UNIDENTIFIED FEMALE: Since I found out yesterday that I haven't eaten any cucumbers. And if I have they're domestic. So, my lunch is just something without cucumbers.
UNIDENTIFIED FEMALE: I'm surprised that people stopped buying cucumbers. There's really, no real -- reason to panic, you know. I think it's good to wash them thoroughly and definitely peel them, but not necessarily worry about not buying them altogether.
DURGAHEE: This market store here in central London no longer sales cucumbers because of the E. Coli outbreak. And down at the wholesalers in Covenant Garden, a whole box of cucumbers that last week cost around $10.00 is now half price.
UNIDENTIFIED MALE: Talks of itself. If they've gotten them half price they're not selling them there and it's a knock on (INAUDIBLE).
DURGAHEE: Have you seen a -- a drop in sales in cucumbers.
UNIDENTIFIED MALE: Yes there has been a drop in -- in tomatoes and cucumbers.
DURGAHEE: Do you know where your cucumbers are from?
UNIDENTIFIED MALE: We have cucumbers from the Netherlands. Tomatoes I think they -- they were like Spanish.
DURGAHEE: Where are they from? English tomatoes.
UNIDENTIFIED MALE: English.
UNIDENTIFIED FEMALE: When you buy something that's ready made, especially like a salad, even if you just grab it at the supermarket. There you worry because you don't know how somebody else has been peeling (ph) it. If it has been thoroughly washed.
UNIDENTIFIED MALE: Hysteria about cucumbers seems, a bit, I mean, over the top. I'm not worried at least.
DURGAHEE: So when you grab yourself some lunch or you eat out in a restaurant --
UNIDENTIFIED MALE: I don't think about the cucumbers at all.
(END VIDEOTAPE)
FOSTER: It's a big debate, would you believe, cucumbers here in London.
Now the Atlantic hurricane season officially began on Wednesday and mother nature is wasting no time posing a threat. Pedram's at the CNN International Weather Center with more on that. Hi Pedram.
PEDRAM JAVAHERI, CNN CORRESPONDENT: Hi Max. Yes it is day two of the hurricane season. And we knew it was going to be a busy season. The forecast had up to 18 named storms. We knew up to six major hurricanes could be expected with this season.
Of course, very early in the season, but two areas of interest. One of them a pretty weak storm. That's in the Gulf of Mexico. That should pose no threat just yet. Another feature, this one to the south, and the path right now that this storm is taking, if it does develop, takes it right around portions of Haiti, towards the island of Hispaniola, areas within Jamaica.
Certainly heavy rainfall in the forecast, and then the potential for the storm to become tropical. And right now it's tapping into plenty of moisture. Portions of Hispaniola, the Dominican Republic region reported very heavy rainfall in the past 24 hours. Upwards of say 100 plus millimeters to near 100 millimeters in Santo Domingo.
But, the concern now around Port Au Prince. We know what happened there about 15 or so months ago. And, of course, a lot of structures there, make shift shelters, that are going to get heavy rainfall to deal with and you can pick up that center of circulation with the storm system off the coast of Honduras and Nicaragua right now.
But, again, the outer band of it are pumping in plenty of moisture towards an area that we are watching very closely.
Now, other side of the world, very little to no moisture to work with, and an interesting image here, courtesy of NASA MODIS from space showing you what's happening over portions of Iraq and we can kind of pick out this gray or brown substance here. That's all sand being blown right across portions of Baghdad, and eventually the sand making its way farther south toward Kuwait City, and this area right veering with a major heat wave. And this time of year, expect it to be hot. About say 41 degrees or so is the average temperature for this time of year.
Temperatures well into the 50s, 51 in Kuwait earlier this afternoon. That's about 124 degrees Fahrenheit. In Iran, approaching 50 degrees Celsius in a few areas, and how about this for a three day forecast. A little cooler across Kuwait City, but sunny skies and temperatures well into the 40s for at least a few days.
But, you know, one area -- one area that arguably has some of the nicest weather on earth right now that's the northern portions of Europe. Around the U.K. London sitting at very mild conditions right now. Twenty- one degrees, looking at mostly clear skies. Glasgow, not bad, we'll take that, it's 20 degrees and even across portions of eastern and central Europe, mild conditions going to persist for the next couple of day.
There are storms in the region, but majority of them to the south around portions of, say Tunisia, Libya, a few storms just off in the Mediterranean, and another storm system off the coast of Spain there. But, overall the shower activity goes to remain to the south. And the conditions with mild readings.
And July like temperatures. How about that? Twenty-three or so degrees in the forecast for London, in the next couple of days there Max. And that's about July first, July second like temperatures as opposed to the first couple of days of June. So enjoyable conditions. Enjoy it out there my friend.
FOSTER: That's a heat wave in this country, Pedram.
JAVAHERI: We'll take it.
FOSTER: Thank you so much. There'll be people passing out all over the place. Thank you. Now once they were historical artifacts, now they are back in business. One group of fliers founded (ph) a bit of creativity. Even old World War II planes can be put to new uses. Felicia Taylor went to meet the Skytypers.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALES: Left, left, right, left.
LARRY ARKEN, COMMANDER, SKYTYPERS: You know we all started -- I started at a very young age flying aircrafts, as a lot of these guys did. A lot of us are former military aviators as well as professional airline pilots. And we do it because we have a passion for these airplanes, we have a passion for getting in front of the crowd and showing -- showing them what we can do...
UNIDENTIFIED MALE: In my day job I do marketing with a -- with a major farming company. So, I was a pilot before and we actually did some sponsorship work with them. And the joke with the team is they lost the sponsorship, but they kept the marketing guy.
UNIDENTIFIED MALE: I retired in 2006, and I either had to do this or get a job.
UNIDENTIFIED MALE: The camaraderie, the fun, and where else can you fly military airplanes and type formations and we're going to show you.
UNIDENTIFIED MALE: Alright boys, (INAUDIBLE) flying.
TAYLOR: But that choice suddenly came with a reality check.
ARKEN: This is the parachute that you will be sitting on.
TAYLOR: We got on board these planes that served their countries 70 years ago.
ARKEN: My dad actually started it when I was pretty young. I was about 19 years old at the time. And it started as a sky typing business. It was an advertising business where we put -- we put these giant messages in the sky. And, later on as we kept working the sky typing (ph) business, he actually moved into air shows -- a little bit of the air show business to kind of off set the advertising business. So this thing you had what they call seat of the pants. Pilots got in here, they had no navigation. They used charts as best they could. They flew in the weather with airplanes that were not made for it. They truly are my heroes.
You know it is a -- part of history that I'm allowed to be part of. You know the -- we're allowed to keep these airplanes up, but when I step back into it and you hear the engine, and you smell the fumes and everything coming off, it's exhilarating to be able to do that. This is the magic. This is where -- where we all began.
TAYLOR: What's it like to fly with your son?
UNIDENTIFIED MALE: It's -- it's pretty amazing. I never envisioned that I would ever be flying with him.
TAYLOR: Such an exhilarating thrill. Is it like that for you every single time?
ARKEN: Yes. Every time we fly it's a rush. And I never -- I have 25,000 hours of flying and I never get tired of flying these aircrafts.
TAYLOR: These men spend much of their lives in the clouds. And Skytypers, they left us with a message during the air show the next day. Felicia Taylor, CNN New York.
TEXT: LOVE LIFE.
(END VIDEOTAPE)
FOSTER: Felicia, getting out of Wall Street on a rare occasion. Fantastic. That is QUEST MEANS BUSINESS. I'm Max Foster. Now then "PIERS MORGAN TONIGHT" is just ahead. We're going to check the headlines for you though. Next.
END
