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Quest Means Business
ECB Chief Pledges Support for Euro; European Markets Soar After Draghi's Speech; US Markets Also Up; Draghi's Impact; David Cameron On Offensive; Exxon Reports Huge Profits; Q25; Big Zynga Miss Bodes Poorly for Facebook; Statoil Profits Drop; Cauldron Lit at Hyde Park; European Currencies Up After Draghi's Speech; Olympic Shopping Spree
Aired July 26, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: It is a case of Draghi to the rescue.
(BEGIN VIDEO CLIP)
MARIO DRAGHI, PRESIDENT, ECB: The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.
(END VIDEO CLIP)
QUEST: And a case of relief all around. The markets shoot up.
And -- oh hell's bells! Morris dancers demand to be in the Olympic Opening Ceremony.
I'm Richard Quest, and this is your Olympic whining-free zone, because I mean business.
Good evening. "Float like a butterfly, sting like a bee." Those were the words of Mohammed Ali when asked about his fighting style. And on the eve of the London Olympics, the ECB president, Mario Draghi's come out with a fighting style of his own.
(RINGS BELL)
QUEST: "The euro is like a bumble bee," he says. "It shouldn't fly, but it does, and it will." And Draghi hinted upon buying plenty of support. Tonight on QUEST MEANS BUSINESS, we find out how much of this is a departure for the ECB president, who has previously hung back from intervention.
Mr. Draghi says he'll do whatever it takes to keep the EU intact and, crucially, he says it will be enough. "Whatever it takes to preserve the euro, believe me, it will be enough." The Central Bank president has said there are no taboos over what the ECB can and cannot do.
And today, he told a London conference that, if you join me in the library, the range of things, the pledge from Draghi. He will act to lower borrowing costs. Now, that of course is a thumping great big sign he might be about to go bring back the Securities Market Program, the SMP, the ECB's version of quantitative easing.
But here's the interesting thing he has said. It is to maintain price stability, and that part of the ECB mandate.
(BEGIN VIDEO CLIP)
DRAGHI: The important thing is that we want to do it within our mandate. That is what makes the thing which is both effective and right. We don't want to supplement actions that have to be taken by governments. We don't and cannot supplement actions that have to be taken by the -- at the European level.
(END VIDEO CLIP)
QUEST: Mario speaks, the market reacts. Look at that. Madrid up 5.5 percent, Paris up 4 percent, Germany 2.75, even London, up 1.33 percent. And indeed, the Spanish ten-year bond yield is back down below 7 percent.
Just as much as bad news is infections and contagious, good news seems to be the same way, too. The Dow's up 1.5 percent at the moment, the NASDAQ a gain of over 1 percent, and the S&P has now snapped four days of losses. So, it is a very robust session, and it seems to be on the back of one man's statement.
How accurate is that? Christian Schultz is the European economist at Berenberg Bank. Good to see you.
CHRISTIAN SCHULTZ, EUROPEAN ECONOMIST, BERENBERG BANK: Good evening.
QUEST: So, Draghi spoke. Did he -- do you think he's about to start buying bonds?
SCHULTZ: Well, this is an incredibly strong sign that the ECB is giving up its reluctance. Remember, the Fed has bought almost 17 percent worth of GDP of bonds to stem the financial crisis. The Bank of England, more than 20 percent, the Japanese, 15 percent. The ECB, 3 percent of GDP.
QUEST: Except there's no -- besides Spain now becoming the victim du jour, the sovereign du jour in trouble, nothing's changed. So, what's changed as far as Draghi's concerned?
SCHULTZ: Well, we're back in the contagion zone. We've had a period last November when this contagion was already there, actually, at the time. Italy was above 7 percent, Spain just hovering around 7 percent. And the ECB acted in September -- December with that LTRO, when they injected liquidity into the banking system.
This time, once again, this time it's Spain way above 7 percent, or was until today. Italy close to 7 percent. Again, it's contagion going on.
QUEST: What he's doing, isn't he, he's putting risk back on the table for the traders and for the -- for the market? He's basically saying, "Look me in the eye and you may regret it."
SCHULTZ: Well, he's saying there is risk -- there was risk -- in Spanish and Italian bonds. I'm taking out that risk. If you look for risk, look elsewhere. And elsewhere, there's lots of risk, and people can assess that and look at that. But this big risk that we've had --
QUEST: But what he's saying is "Don't bet against me. Don't bet against Spain. Don't bet against the fact that Spain's going to go down."
SCHULTZ: Exactly. The Central Bank has unlimitedly deep pockets. Nobody can speculate against the Central Bank if it's the Central Bank buying, because it can create money. So far, the Central Bank in Europe has been reluctant. The Central Banks elsewhere in the world have been much more proactive.
QUEST: Do you think this fig leaf that he says about -- "It's because I -- my mandate allows me to do it." His mandate is price stability. That is his mandate, period.
SCHULTZ: Price stability is his mandate, and price stability is what the European Central Bank has been delivering over its -- the period that we've had it.
QUEST: Right. But what I'm saying is, why does he need to dress up his actions as being "It's my mandate," the transmission of monetary -- the monetary transmission mechanism is affected by the yields in Spain.
SCHULTZ: Well, there's a discussion, especially in Germany, about the independence of the Central Bank, which is necessary, and the fact that it might be financing governments if it intervenes int eh sovereign bond markets.
Draghi is saying, "I'm not financing governance. I'm not doing it because I'm financing -- I want to finance governments. I'm doing this because I'm afraid that if I don't do it, we end up in deflation, which is just as much missing the target than having inflation.
QUEST: So, to pull this thing out of -- Christian, he's going to start buying, isn't he? Is he -- having set out this stall today, if he does not, if he disappoints, and you know better than I do that central bankers do not take courses of action. They're not in the ah! game, are they?
SCHULTZ: No. They -- this was a verbal intervention. Now, he has to convince his colleagues to actually do something. He has to go out there and send out a strong signal. It doesn't need to be buying, actually. It could be just saying at this level, the ECB would intervene. And whether, then, they actually have to buy, we will see.
QUEST: Many thanks for putting this into perspective. I appreciate it. Many thanks.
David Cameron, the British prime minister, is sticking to his guns. He told a global investment conference, the same attended by Mr. Draghi, that the government had acted decisively to restore confidence in UK finances, despite the country languishing in a double-dip recession. The PM said there was no need for a change of plans.
(BEGIN VIDEOTAPE)
DAVID CAMERON, PRIME MINISTER OF BRITAIN: We've taken a series of bold decisions to sort out our public finances and to earn credibility in the markets. As a result, in just two years, we've cut the deficit we inherited by more than one quarter, and our market interest rates are less than 2 percent.
And my message today is clear and unequivocal. Be in no doubt, we will go on and finish the job. We will deal with the deficit, we will keep UK interest rates low, and we will continue to take the tough decisions that are necessary for business leaders and investors to have confidence in the long-term future of the British economy.
(END VIDEOTAPE)
QUEST: David Cameron talking at a conference today, investing Britain, after 10 billion or so of Olympic spending, and he'll work with every penny that he can.
Coming up next, the Q25, our guide to who deserves gold this earning season. Looking at the companies Exxon, 3M, Colgate-Palmolive, UT and Hyundai. Who gets the gold and who gets the red, after the break.
(COMMERCIAL BREAK)
QUEST: Earnings season, and that means the Q25, our exclusive analysis of the corporate season. And Exxon Mobil has reported a record- breaking quarter. Exxon's income over $16 billion, by far its highest quarterly profit. Exxon, of course, the most valuable company in the world.
However, $7.5 billion of that came from divestments and tax arrangements, and falling oil and gas production is a cause for concern.
3M had slightly better earnings, up 4 percent, it's at $1.66 a share. The conglomerate's revenues fell short of expectations. Falling short, falling short, falling short. That is the theme. We need to decide which of the companies is deserving of a gold in our Q25.
And look at the way it's -- the Q -- they are just about even Stevens, which tells us the difficulty that companies are having. We're seeing too many reds, perhaps, for this stage of the economic cycle.
Maggie Lake's with me in New York. Exxon Mobil first. It was -- it's an automatic red because it failed on four of the five criteria, Maggie.
LAKE: Yes, that's right Richard. And that headline sounded great with record profits, but as you said, a lot of that asset sales. And it wasn't just falling oil prices, which were a problem for Exxon Mobil. They made big bets on natural gas, and that has seen a glut of supply, especially in North America.
I love this quote: Tillerson said last month that they're "losing their shirt in that market." Now, prices have spiked a little. That may turn around. But it's been a real problem spot for them.
QUEST: And that is one reason why even though they are still spending $37 billion, R&D and investment and infrastructure, they still end up with a red.
3M. No debate between the team, because remember, we have the criteria. If you lose on the criteria, there's no debate, and it is an automatic red for 3M. And I'm going to do it at the same time, Colgate- Palmolive, because they are both in similar areas. They are both, obviously, consumer products, they are both business products, and they also get an automatic red. These are companies that are doing their best.
LAKE: Yes, Richard, there's an interesting story here, though, because it looked terrible, and we thought, oh, exposure to the consumer, that's what's going on. But really, the story with both these companies is currency problems. Another aspect of this global economic crisis.
Listen to this. If you factor out currency for 3M, sales in every division rose. Health care sales in Latin America, up 10 percent. Colgate, similar story. They're actually executing well. Their products are doing well. Organic sales rose 8 percent, strongest in 8 quarters, volume up 5 percent.
So, the business itself is fine, it's the currency impact, when they bring those profits home, that's really hurting them. So, they still get a red, but it gives you a little bit of a different storyline.
QUEST: All right. Now, United Technologies, owners of Pratt & Whitney, a major manufacturing. On the sheet, Maggie, they got two out of five, and we had a debate about this. We had a real debate about this. How did we finally decide United Technologies?
LAKE: Yes, United Technologies, we're going to give them a red. They did do OK on some Q-on-Q. They beat expectations, which you know, I never go for that in terms of tipping the hand.
Listen, the thing for me that stood out is they cut their forecast for the full year. That is in a big contrast to some of their rivals, like GE and Honeywell, that didn't. They stood by. They were doing well. So, I didn't like that part of it.
QUEST: You might be a little depressed right now. A lot of red has been dropped, but I'm going to drop the gold, and we're dropping the gold for Hyundai, the car company, and we are dropping it as a gold, it got four out of four on the European criteria, but it had a very unusual story.
LAKE: Oh, my gosh. This headline, Richard -- I actually had to go back because I thought I was reading it wrong. Record profits on European sales. Double-digit growth in European sales. Car sales. That seems extraordinary. Up 15 percent. Compare that to the dismal story we talked about with Ford yesterday, just the opposite, double-digit decline.
QUEST: OK --
LAKE: And even Nissan, now some of that is due to a fair trade agreement, but still, that's an astonishing result.
QUEST: We need to pull some strands together before -- and briefly, Maggie. Gold and red are even Stevens. What is this telling us about corporate -- the corporate world and the ability to make money?
LAKE: You know, Richard, I think the quote of this entire Q25 is going to go to that interview I did with the Caterpillar CEO yesterday, and he actually said, "Listen, things are OK underneath. Some of the businesses are doing well. It's slow, but it's not that bad. It's the uncertainty that's killing us. It's the fact that politicians can't get out of their own way."
That's the fly in the ointment that you talked about. I think we're seeing that here. Some companies are getting a gold, they're doing OK, but the reds are really coming from that impact from Europe and the uncertainty and the inability to look ahead and figure out what the business is going to be.
QUEST: Thanks, Maggie. And that is the reason why we're seeing the stock market under such pressure. The inability to break 12,500, 600, 700, or move up towards 13,000 on the Dow.
In a few hours, Facebook released its first ever Q report since going public. If one of its partners is anything to go by, it may not be a "like" for investors. Zynga reported late last night, another internet company who went public, it missed expectations big time.
Revenues were short. The company recorded a loss of more than $22 million, and the shares are down -- Ay! Ooh! Ah! -- down nearly -- ugh -- 40 percent. That's serious problems for Facebook, which reports later.
The two companies have a major effect on each other: 18 percent of Facebook revenues come from online payments, Zynga's a major part of that, though they're basically scratching each other's backs. Payments are worth $187 million, its shares are down roughly 7 percent.
The Norwegian oil company Statoil reported a slight fall in profits for the second quarter -- you heard about Exxon Mobil a moment ago -- despite a solid boost in oil and gas production. I asked the chief financial how he was altering his strategy with the eurozone at the --
Before we go to that, going much more briefly to live pictures of the Olympic torch. The Olympic torch has arrived. They've just lit the cauldron.
The Olympic torch has been -- ah, there's the cauldron, right at the bottom, there. The Olympic torch has been on its 69th day across the United Kingdom. Today, it was in London. It has been past Buckingham Palace, where the Duke and Duchess of Cambridge were there. David Cameron at Number 10. It passed almost nearby our -- studios, here, on Regent Street.
(AUDIO GAP)
QUEST: Trafalgar Square. And now, the picture you're looking at, it's in Hyde Park, the last stop, where there will be a musical concert. A concert of popular tunes will be this evening.
Now, while they popular music and enjoy themselves, we will return to Statoil, the chief financial officer. I needed to know from him how he was altering his strategy with the eurozone on the precipice.
(RINGS BELL)
(BEGIN VIDEO CLIP)
TORGRIM REITAN, CHIEF FINANCIAL OFFICER, STATOIL: That's the art of being a part of a big corporation and take long-term view and see to that, you have all the defense mechanisms in place. You have your credit policy clear. You see to that. Your balance sheet is solid. And then, you have to see to that, your project portfolio, your underlying operation is running well.
And our project portfolio stands out in this industry, and I'm very proud of it, and I always become very enthusiastic when I talk about our 150 project that is going to be delivered over the next year. But then, you need to be really, really prepared to handle the situation at hand.
QUEST: OK --
REITAN: And then, we are not immune, but we have the troops in place, and we have the necessary flexibility.
QUEST: Finally, I never miss the opportunity with an oil company, I never -- to ask about prices. It's usually a forlorn gesture. But -- do you believe we are now -- we are now at a solid base of the price at the moment, or is there further to fall?
REITAN: I see solid fundamentals in the market, and it has been tested quite a few times over the last year. So, last August, it dropped to $100 and met some resistance. Last spring, strategic storages were released, and it dropped to $100 and found some resistance. The same has happened now.
So, we see strong fundamentals, because we are very prepared for large volatility. So, I wouldn't be surprised if we see prices significantly above where we are today, and also significantly very low. But there are some fundamental support for long-term prices. That is quite healthy as we see it.
QUEST: One of those wonderful days today where you go backwards and forwards between the various different stories, and you see -- let's take you straight back to Hyde Park so at least you can look at the pictures and enjoy the moment.
The mayor of London, Boris Johnson, a friend of this program, has been speaking as the cauldron was lit, 60,000 people in Hyde Park. We can't hear, because obviously, our picture comes via the helicopter, and we can't hear what the mayor's saying.
But suitably pugnacious. He looks like he's giving somebody a right drubbing of some sort. There we are. The torch has been across London throughout the course of the day.
While we move on, we will now take you to a Currency Conundrum. In 2011, which country released a series of coins in the shape of sports cars? Was it Somalia, Sri Lanka, Swaziland? The answer later in the program. And we'll even show you some of them.
These are the -- what's happened, the euro surged after Draghi's comments. A euro buys $1.23, give or take, up 1.1 percent. Sterling and the Swiss franc showing similar gains. Those are the rates --
(RINGS BELL)
QUEST: -- this is the break.
(COMMERCIAL BREAK)
QUEST: Live pictures from London's Hyde Park. The Olympic flame, the torch, has arrived there. The cauldron was lit. The concert is about to begin. It's all part of the final preparations. Crowds are gathered there for the relay final concert, including music like -- Dizzee Rascal and the Wanted.
Weaving through London earlier, the torch passed Downing Street, home of the prime minister, St. Paul's Cathedral, across Trafalgar Square, and it went to Buckingham Palace where the Duke and Duchess of Cambridge also saw it.
It will make the final journey to the Olympic stadium tomorrow, and it will be a starter at the Opening Ceremony.
The Games will boost the UK retail sector by more than $300 million, according to retail economics. Richard Dickinson is the chief executive of New West End Company, represents 600 businesses across central London.
I ought to warn you, I have declared QUEST MEANS BUSINESS an Olympic whinging-free zone. So, if your retailers are whinging -- well, what's the view on what is going on?
RICHARD DICKINSON, CEO, NEW WEST END COMPANY: They're not whinging at all. They love the weather, for a start. This is a great change for retailers at the moment, the weather has suddenly improved dramatically.
And we've seen today half a million people line Oxford Street and Regent Street to see the torch progress majestically down those streets. And certainly, there's an air of optimism, and there's anticipation.
QUEST: So, what's their fear, fundamentally?
DICKINSON: I think their fear is a little bit of an unknown with the different mix. We've got some very good management -- traffic management from TFL and Peter Hendy and his colleagues, and that has meant that there are less office workers coming in, probably. There are probably less people coming in from London that normally good. We've got more tourists, and that is good from a point of view of spend.
QUEST: The truth is, we don't know, isn't it? We just don't know how this is going to work out in terms of the retailers. Will, as the Olympics go on, there be a bonanza of tourism and spending? Or will it all just be dribble. We don't know.
DICKINSON: I think we do know from successful Games like Barcelona that there is a long-term dividend. We got 4 billion people worldwide watching this fantastic festival, and they're also, as well as watching running and swimming and all the rest of it, they're watching the UK and seeing London.
QUEST: London doesn't need that. London doesn't need that. It's one of the top five in the world. To that extent.
DICKINSON: Well, all cities can benefit from great PR, and I think we're in that international mix, and we've got to do that well.
QUEST: Would you agree that, from my perspective, that the biggest or one of the biggest benefits has been the city's been cleaned up, the infrastructure has been improved, the Tube may not be the best in the world, but it's certainly not the worst, and things are a little more ship- shape than they were five years ago?
DICKINSON: Absolutely. The Jubilee line now, 45 percent more capacity on those lines coming through the center of town. The legacy -- I think the prime minister was talking about it this morning, about the Olympic Park and so forth.
But we do go back to the point that actually a lot of these tourists and a lot of these nationalities love to shop, the Chinese, the South Africans, the Australians. They're coming, and part of their trip is about shopping, and we've got some great brands in the West End. We've got 200 flagship stores just outside the door here. And so, that's a real attraction for our tourists.
QUEST: If you take the totally, then, finally, the Diamond Jubilee, with its extra bank holiday, also brought tourists -- not as many, the weather was shocking and we've had a really bad June. But now, we've got July. Pull the strands together of how your members, in your views, will believe at the end of the summer.
DICKINSON: I think they're anticipating a huge uplift in shopping over the next two weeks. It's been a bit mixed this week because people have been arriving.
QUEST: Sounds a bit like a whinge.
DICKINSON: A really good option --
QUEST: Sounds like a whinge.
DICKINSON: -- for the next two weeks.
QUEST: No whinging.
(RINGS BELL)
QUEST: Many thanks for joining us. Coming up next, stocks are up, bond yields are down. Spaniards aren't buying the government's bailout line or, indeed, much of anything else. QUEST MEANS BUSINESS, good evening to you.
(COMMERCIAL BREAK)
RICHARD QUEST, CNN HOST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN and, on this network, the news always comes first.
Chinese state media say the wife of the disgraced politician Bo Xilai has now been charged with the murder in the death of a British businessman. The Chinese authorities say Gu Kailai and a family aide poisoned Neil Heywood. Gu and her son to have had a conflict with Heywood over so-called economic interests.
A mass demonstration against the Syrian government in a suburb of Aleppo -- activists say the regime forces are already attacking two districts of Syria's largest city. Rebels are gearing up for a major offensive also today the French foreign minister says he's confident the regime of President Bashar al-Assad will fall, in his words, "sooner or later."
The European Central Bank president Mario Draghi says he'll do whatever it takes to keep the E.U. intact. Mr. Draghi hinted the ECB may be ready to buy government bonds again to drive down sovereign borrowing costs. European and U.S. stocks were largely higher following the comments.
On the penultimate leg of its long trip, the Olympic torch has arrived at London's Hyde Park. It also has been at Birmingham Palace, where it was greeted by the Duke and Duchess of Cambridge, Prince William and Kate.
And in the park, thousands of people have gathered for a free concert. The torch's next stop will be Friday night at the opening ceremony.
(MUSIC PLAYING)
QUEST: What a difference 24 hours makes. When I spoke to you yesterday, when I was in Berlin, things looked very grim -- U.K., Germany and Spain. Now, suddenly, Spain looks a lot more attractive.
We looked earlier at how the European Central Bank's president said he'd do whatever it took to protect the euro and his comments set the Spanish stock market, even the IBEX, roaring, a gain of more than 6 percent on the day.
Turn the clock, and it fueled a spending spree on Spanish bonds. Whether or not any trade was done is moot. The fact is, the bond went down from 7.5 percent to 6.9 percent. And at the short end of the yield curve, there was an even greater fall on the two-year and the shorter.
Shares in the Bank Santander, which is Europe's largest group, surged more than 10 percent in Madrid, even as it announced Santander's first half profits were written down half -- the profits were half because of write- down. Net income shrank to a billion in (inaudible) as the bank wrote off more bad property debt, H1, half-yearly, at $1.7 billion.
With stocks up and bond yields back down, Spain may claim that it doesn't need a fully-fledged bailout. Well, it's not convincing Spaniards yet. They aren't assured and they aren't spending, as Isa Soares reports from Madrid.
ISA SOARES, CNN CORRESPONDENT: There's a sense of frustration, desperation and anger on the streets in Madrid. People are angry because they can't find jobs.
They are angry at the (inaudible) measures imposed on them by the Spanish government, and they are angry at the banks because they're not lending. I had opportunity to see just a couple of people this morning, and all in all, it's a very bleak picture. Take a listen to what some of them had to say.
UNIDENTIFIED FEMALE (through translator): I don't see solutions, to tell you the truth. The cost of travel has increased and so has the VAT and all that. But no solutions. But even when we say we are in a crisis, the shops are always full.
UNIDENTIFIED MALE (through translator): It is very hard for everyone to find a job, even if you look for it. People are suffering.
UNIDENTIFIED MALE (through translator): The government is not helping the Spanish people to overcome the crisis. It is not helping with the measures that they are imposing, nor helping young people creating jobs or favoring the creation of jobs. And the current situation is one of sadness.
SOARES: So you heard the last person there saying, talking about sadness. It's very sad, the economic state of the country right now.
But walking through streets in Madrid, you get a very different picture. People outside, drinking, they are smiling, but they're not buying. And that's really the main problem. We have to see what Mariano Rajoy (ph) can do to take Spain out of this economic crisis -- Isa Soares, CNN, Madrid.
(END VIDEO CLIP)
QUEST: When Lord Sebastian Coe jokingly promises Morris dancers, now they're finding their potential exclusion from the opening ceremony -- no laughing matter -- after the break.
(COMMERCIAL BREAK)
(MUSIC PLAYING)
(BEGIN VIDEO CLIP)
QUEST (voice-over): The "Currency Conundrum" answer, we asked you which country has released a series of coins in the shape of sports cars. The answer, A, Somalia. The $1 coin came out in 2010. This is the Lamborghini one. You can also get the Corvette, the Ferrari, the Aston Martin and a Mustang.
(END VIDEO CLIP)
QUEST: We are less than 26 hours away from the Olympics opening ceremony, as if we didn't know. It's been directed by Danny Boyle, the man who brought us the movie "Slumdog Millionaire" and "Trainspotting." The ceremony will showcase the talent of the U.K., the host nation. The details are a closely guarded secret.
As Neal Curry now tells us, one group of hanky-waving folk dancers will be furious if they're left out.
(BEGIN VIDEO CLIP)
NEAL CURRY, CNN CORRESPONDENT (voice-over): From Beijing to Barcelona, Athens and Australia, previous Olympics host nations have proudly featured some of their greatest cultural traditions in dance. So how can London raise the bar and provide an even greater spectacle?
The head of London's Olympic Committee, Lord Coe, jokingly suggested 5,000 of these. They're called Morris dancers, predominantly men wearing bells and ribbons, waving handkerchiefs and clashing sticks to the tune of a squeeze box, fiddle, whistle and drum. As English as cricket and fish and chips, it's a scene you can find at country fairs and on village greens across the country.
JOHN FURNESS, MERRYDOWNERS MORRIS: Probably some of the really traditional Morris dancers are actually from the oldest dances that are practiced in this country.
CURRY (voice-over): No one's really sure about the origins of the dance. Some suggest the Crusades, others the Vikings. But everyone agrees it's an ancient tradition and many assume these guardians of English folk tradition would be a shoo-in for the opening ceremony. But apparently not.
TONY MOORE, MERRYDOWNERS MORRIS: I think it's a pity, because Morris is traditionally English, and it ought to be at the ceremony. All the other countries have local dances.
CURRY (voice-over): Beyond Lord Coe's remarks, there are many for whom Morris dancing has always been more of a national joke than a source of English pride. But beyond the borders of cynical Britain, there's an enthusiastic response from visitors to London.
UNIDENTIFIED MALE (from captions): It's a beautiful dance, done by old people with a lot of energy. They seem to have a lot of energy to give. So it would be a good dance for the opening at the Olympic Games.
CURRY (voice-over): With such international enthusiasm, surely the Morris dancers should be included in the opening ceremony. We asked the mayor of London himself.
BORIS JOHNSON, MAYOR OF LONDON: Well, if they aren't, then I would be -- that would be an implicit criticism of the opening ceremony. And if they are, I'd be giving something away (ph).
CURRY (voice-over): Film director Danny Boyle did give something away with a sneak preview of his vision for the opening ceremony, a rural scene with what looked like maypoles, long associated with traditional country dancing.
Fellow director Stephen Daldry has ultimate creative responsibility for all ceremonies at both the Olympic and Paralympic Games.
STEPHEN DALDRY, LONDON 2012 HEAD OF CEREMONIES: To me, it's so funny that people say, oh, where are the Cold Spring Guards, where are the Morris dancers, where are the Pearly Kings, where's the this, that and the other. And what people don't realize here is actually you will be surprised at how many people, at the end of the day, you will see in all full ceremonies, so --
(CROSSTALK)
DALDRY: -- will be turning up.
CURRY: So you can confirm there will be Morris dancing in one of the ceremonies?
DALDRY: I can confirm there will be Morris dancing in one of the ceremonies.
CURRY (voice-over): But what about the man whose joke initially raised the hopes of the 15,000-strong Morris community?
SEBASTIAN COE, LONDON 2012 CHAIRMAN: That's entirely the matter of Stephen, you know, the creative content. That's not my expertise, nor should I be dipping my toe in that water. But both those shows will be great, and I know Stephen will be taking creative talent from wherever he can get it.
CURRY (voice-over): If the Morris men miss out, there have been threats to stage Morris flash mobs in protest. So if Lord Coe is kept awake by a distant jingling of bells, it may be the sound of England's cultural past claiming its place on an Olympic scale -- Neal Curry, CNN, London.
(END VIDEO CLIP)
QUEST: Quote of the day: "It's a beautiful dance for old people with lots of energy."
Talking of -- no, no, don't go there, Richard.
(CROSSTALK)
JENNY HARRISON, CNN METEOROLOGIST: (Inaudible), too, because I thought that was so funny. And, actually, he said, "done by old people with lots of energy." It's the perfect sport for you on your weekends, isn't it? Come back.
QUEST: Hey, hey --
HARRISON: Come back.
QUEST: -- time to actually put a sure foot up, Harrison.
HARRISON: Hey, you know what, yes. And I think you're going to like what I have to say. It's -- it looks as if things will be fine and dry for the opening ceremony. We have got a few rain showers on the way, but they should come and go before the actual ceremony begins.
You see all this cloud across the north and also in particular this little bundle of work. It's spread through the Bay of Biscayne. That is all heading in. But before I get onto that, Thursday, the warmest day so far this year in London, 31 degrees Celsius, the average is 22. And it was 36 this Thursday across in Toulouse in France.
Now, as I say, the rain, that, of course, is what we're keeping a very close eye on. It's still 23 degrees Celsius in London under those clear, sunny skies. It looks glorious. Elsewhere right now, 25 in Coventry, 24 across in Cardiff. So all is looking and feeling pretty good for now.
And as we go through the rest of what is left of Thursday, we have of course got some more football taking place. Cloudy conditions across northern regions, but further south that is where is the sun has been a lot brighter and also quite a bit warmer, 27 to 21 is the temperature there in Cardiff. This is it, the all-important rain forecast.
Look at the time, so here comes the rain as we're going through late morning, early afternoon on Friday. It should really clear out by Friday evening. Let me just show you that again. So there's the time, morning hours into the late morning. There goes the rain. It really should clear. We've got the system to the north, but it should stay across the north.
So that means if we actually have (inaudible), there's all the music, the music, the fanfare. Yes, there's fanfare in those showers in the afternoon. But by the evening (inaudible) mostly cloudy skies, pretty perfect (inaudible) for that opening ceremony. Now the next few days, Saturday should be glorious.
Sunday, not so good. We have got more rain heading in for the beginning of the week, in fact, a 60 percent chance on Sunday. So not so fine and dry there. Elsewhere in Europe, you can see we've had a few showers, as I say, working their way through the Bay of Biscayne, but in particular, very heavy rain Tuesday across areas of Serbia, 180 millimeters of rain. (Inaudible) skies continuing, there goes that front. Should be a glorious Friday evening, Richard.
QUEST: Thank you. That's all I could ask for. Many thanks, Jenny Harrison at the World Weather Center. You've done your business well.
And that is QUEST MEANS BUSINESS for this Thursday. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I do hope it is golden and profitable. "MARKETPLACE EUROPE" is next.
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JULIET MANN, CNN HOST: Welcome to MARKETPLACE EUROPE. I'm Juliet Mann in Stratford, as London plays host to the 30th Games of the Olympiad.
The sporting spotlight is on Great Britain, as 17,000 athletes from more than 200 nations compete in 300 events. What better showcase for grand Britain? But away from the track, who will be the business winners and losers in the battle for product awareness?
MANN (voice-over): Coming up, will sponsorship bring home gold for the companies who paid millions to be associated with the Games?
And one of Britain's most successful entrepreneurs explains why his marketing budget is going elsewhere.
RICHARD BRANSON, CEO, VIRGIN AIRLINES: I don't think I would have wanted to spend (inaudible) $30 million or $40 million. I'd rather put that money into building a spaceship.
MANN: Inside the Olympic park is the biggest McDonald's in the world. The Olympics is an incredibly effective international marketing platform. Over the next 21/2 weeks, the Games will reach billions of people.
Olympic fever is everywhere, plastered across products from batteries to washing powder, from clothes to Coca-Cola. But does it make business sense to spend millions on being an official London 2012 sponsor? (inaudible) finding out.
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MANN (voice-over): The streets of London appear to be paved with Olympic gold. (Inaudible) shop windows, (inaudible) buses display this familiar emblem. It's the mark of an official Olympic sponsor. So-called top tier Olympic partners reportedly pay around $100 million for sponsorship (inaudible) Olympiads get in return.
Cadbury is the official treats provider.
NORMAN BRODIE, GENERAL MANAGER, CADBURY LONDON 2012 PROGRAMME: We're in a position where we able to take advantage of this opportunity.
And Cadbury is a fabric (ph) British brand. It would have been wrong for us to not be part of the biggest event that is taking place in Great Britain in any of our lifetimes. It's the catalyst property and the transformation of property of being part of the Olympics which is most important. And that's the gold dust. That's magic dust. Right?
And what we've done is use that magic dust. And we've sprayed it all around with our consumers, our colleagues, our communities, our customers.
MANN (voice-over): A sprinkling of magic dust is what many sponsors are after. It's less about boosting sales, more about enhancing the brand image.
LUC BARDIN, GROUP CHIEF SALES AND MARKETING OFFICER, BP: Selling petrol is one of the activities of BP, and it's one of the ways we express and we serve -- we serve society. But it's by a long, long distance we're the only one. It is a global company.
And we live in many, many villages and many, many communities. It's incredibly important if we have the opportunity to actually live and associate in a way that people live in reality. If people are excited about the Olympics as we are excited about the Olympics, let's live it together.
MANN (voice-over): A new study by Brand Finance says the Olympics is the second most valuable brand in the world, after Apple . They value the Olympic brand at $47.6 billion. That's an increase of 87 percent from the Beijing Games in 2008, when it was valued at around $25 billion.
DAVID HAIGH, CEO, BRAND FINANCE: Companies will cough up large amounts of money to sponsor sports events teams and individuals if they believe they're going to get the money back.
And I think it is now becoming absolutely mainstream with companies to measure and demonstrate whether Formula 1 or football or the Olympics does produce a return. And where it doesn't, they stop and where they -- where it does, they enhance the spending. So far, things like the Olympics seem to work and they're getting bigger and bigger budgets.
MANN (voice-over): Non-sponsor say some of the strictest marketing restrictions ever seen as an international sporting event, including a ban on using words like "gold" and "London 2012" in their promotions. Are consumers paying attention?
MANN: Can you name me a couple of brands that you might associate with the London 2012 Olympics?
UNIDENTIFIED FEMALE: Oh, Nike.
MANN: You know what? They're not an official sponsor.
UNIDENTIFIED FEMALE: Well, if you look at the adverts on Houston (ph) Station, it struck me today they have to be.
UNIDENTIFIED MALE: I know Coca-Cola, I know McDonald's and I know that I think Cadbury.
UNIDENTIFIED MALE: AmEx (inaudible).
UNIDENTIFIED FEMALE: (Inaudible).
UNIDENTIFIED MALE: (Inaudible).
MANN (voice-over): While the world's finest athletes go for gold at London 2012, the only brand names you will come across would have paid for the privilege. They're hoping that makes them winners, too.
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MANN: Coming up after the break, the king of brands, Sir Richard Branson, says the key to success in recession is to be bold and brave.
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MANN: Welcome back to London. "Citius, Altius, Fortius" -- "Faster, Higher, Stronger" -- the Olympic motto is just as relevant to the corporate world as businesses struggle for survival. Companies, like athletes, need to be in peak condition to beat the competition.
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MANN (voice-over): Virgin Group is one of the world's most recognized and respected brands. Conceived in 1970 when a teenage Richard Branson decided to start a record label, it's grown into a global business covering everything from music, airplanes and mobile phones to holidays, trains and banking.
The group employs 50,000 people in 34 countries, and in 2011, rung up global branded revenues of over $20 billion.
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MANN: Do I sense a little tinge of regret that you didn't get on board with London 2012 as an official sponsor?
BRANSON: I don't think I would have wanted to spend the $30 million or $40 million. I'd rather put that money into building a spaceship. But I thought that if I was running the Olympics, I would have grabbed the opportunity to have had a space, you know, a spaceship fly over.
But we did offer the Olympics to do a fly-by at the Olympics, and even to do a space launch from the Olympics. But we're a spaceship and British Airways is an airline. But somehow or another, because they're one of the sponsors, it never happened. But one day, we'll bring a whole fleet of spaceships and we'll show them up.
MANN: Let's talk about the Virgin empire. You cover an enormous amount and soon -- we're sitting in front of it -- is the replica, but you'll be going out into space. How, though, has the current economic crisis affected the different areas of your business?
BRANSON: I think Virgin's very fortunate, because we've built a brand over 45 years, since I was 15 years old. And the public respect it. They like it and therefore we've actually ridden through quite many recessions over the years and seem to have come out the stronger for it.
You know, we're -- I think, you know, our belief is, you know, be bold and be brave at times when things are tough, you know, it's a good time to get properties much cheaper. It's a good time to employ people and so on.
MANN: This month, you've set out the first Virgin shop, banking shop. Now you are an official banker. Do you think that greedy bankers are to blame for the country and Europe's economic woes? Or is that pointing the finger (inaudible)?
BRANSON: I think that a few bankers have created a terrible mess in the world. But obviously you shouldn't blame all bankers for that. And it's sad, actually, to see so many decent people in that community have their reputations damaged based on a few greedy, very greedy people.
But, anyway, hopefully the banking industry will realize the mistakes they've made and get their act together. There's no point in going into an industry unless you're going to transform it. We won't get greedy like one or two banks in the past and damage the Virgin brand. We'll make sure that every product we offer is proper, transparent product with great value for money.
MANN: What do you think that European leaders and European business should be doing to get economies going again, get back to growth?
BRANSON: Well, obviously, it's important that the banks are stabilized (inaudible) governments encourage banks to lend to small businesses. You know, we've suggested to governments that instead of doing student loans, they should do entrepreneurial loans for those who want to set up businesses.
The British government have actually taken that idea on board. But I just think any company like Virgin has got the financial resources and the clout to invest, now's the time they should be investing. And in order to try to get us out of the mess we're all in. If we all sit back and just wait for the other person to invest, we'll stay in this mess.
MANN: You've sold tickets way ahead in terms of your tourist rights out into space, and you've had a room here full of people with a lot of money to spend. What's the feeling you're getting? Is -- are the people buying your tickets a privileged few? Or is this going to be something that we're all doing?
BRANSON: The initial (inaudible) who've bought tickets from Virgin Galactic are certainly the privileged few in the same way that the initial people who flew on commercial airliners across the Atlantic in the 1920s were the privileged few. But they're the pioneers that will drive the price of space travel down so that your children and your grandchildren will go into space, I'm sure.
And they will become astronauts. And that's the exciting thing. That's the challenge we've set ourselves at Virgin, is let's do everything we can to bring the price of a ticket down so hundreds of thousands of people will one day be able to become astronauts, not just the privileged few. What I promise you is that, in your lifetime, you will be able to go into space.
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MANN: So Richard Branson. Well, that's it for this Olympic edition of MARKETPLACE EUROPE in London. Do join us again next week. Goodbye.
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