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Quest Means Business
Eurozone Inflation Weakens; Deflation Risks; Eurozone Deflation Fears; Price of Climate Change; MH370 Final Transmission; Search for Flight 370 Resumes; Discovery Petition Dismissed; Analysis of Search; Staff Suicides at Orange
Aired March 31, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: So the quarter comes to an end, the live close at the New York Stock Exchange, where the Dow is higher. It's still down for the year. And as the gavel is hit, yes! A good strong gavel on March the 31st, it is a Monday.
Tonight, deeper into the danger zone. Fears of deflation in Europe are more than just hot air.
New information from the cockpit in the search for 370. We'll explain what the pilot's last transmission could mean.
And also on the program tonight, it's called high frequency. It has high risk. And the man behind Money Ball says the markets are rigged.
I'm Richard Quest. We start a new week. I'm at the CNN Center, where I still mean business.
Good evening. The threat of deflation looms large over a fragile European recovery, 0.5 percent. Look at the number!
(RINGS BELL)
QUEST: Naught-point-five percent. It's the annual rate of inflation in the eurozone in March, according to Eurostat. It's weaker than many economists had expected. Inflation on food prices is slowing, and there's been a big fall in energy costs.
And if you look at the trend, it is a downhill slope. Inflation is now at its lowest level since November 2009. It's a sign the European economy is not generating jobs fast enough, from 1.7 all the way down.
The danger zone is pretty much around 1 percent. Worryingly, for the ECB, which meets on Thursday, for the last five months, it's been wallowing in the danger zone, 0.9, 0.8, 0.8, 0.7, 0.5. And that fall to 0.5, well, it's well below the danger red line drawn by the ECB president Mario Draghi himself.
These numbers raise expectations that the central bank will use interest rates or other tools at its disposal to reverse that trend, and everyone agrees, complacency means disaster.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: It is very difficult to put it back into the bottle, if you will. Once deflation is out, economists are hard-pressed to find ways to get out of deflation, as Japan is trying to do it at the moment after ten years of deflation.
ANDERS BORG, SWEDISH FINANCE MINISTER: So, there is still a deflation risk in Europe and in the global economy, and the European banking system is weak. So I think that the ECB, the Fed, needs to stay the course. And there are some risks if we are going to see too much of tapering.
MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: It's still, I would say, premature to declare any victory. And I think that's why we are using, as someone observed at the very beginning, why we are using an even firmer language for our forward guidance.
(END VIDEO CLIP)
QUEST: Strong words from important decision makers on the question of deflation. And prices are now falling in five eurozone economies. Well, it might not sound bad for the consumers, but there's much more at stake. Join me at the super screens and you'll see what I mean.
Deflation puts a stranglehold on hope for the recovery because consumers like you and me delay their purchases, hoping, of course, that things will get better, prices will go down, and they'll get a better deal in the future.
It chokes off consumer spending. It erodes profits, it destroys jobs. Now, persistently low prices held back Japan. It was known as the lost decade. To get out of the hole, the Japanese, the Abenomics, is spending more money and has brought in a completely different, expansive monetary policy.
But it's taken them many years and many attempts within which to do so. Risk is too high to ignore. Last month, Societe Generale put a 15 percent probability of deflation striking the zone. It's a low risk, but in their words of Societe Generale, the risk is too high to ignore.
So, joining me now is Jeffrey Sachs in New York. Jeffrey, the risk of deflation. Bearing in mind the numbers that we've just seen, do you consider this to be a real, credible risk in which action needs, now, to be taken?
JEFFREY SACHS, DIRECTOR, EARTH INSTITUTE, COLUMBIA UNIVERSITY: Well, we know that the eurozone remains fragile, and nothing very much has helped with the Ukraine crisis, geopolitics, a slowing down in China, China's got its own financial difficulties right now with defaults and malaise in its financial markets. It's not an easy situation.
I would caution, though, two things. One, the idea that there's some magic limit that makes all the difference. I don't really view it exactly that way. Second, I don't think central banks really have all that much to do, now, with medium-term growth.
I do think that there does need to be a reorientation of economic policy, more investment-led growth, less waiting for the consumers. More public --
QUEST: But --
SACHS: -- investment as a key part. But all of this does show that the recovery in the eurozone, which we've known to be very fragile, is indeed continuing to be fragile.
QUEST: And yet, the structural versus the cyclical inflation risk here, if we take -- if the ECB does not get a grip of it, either this meeting or the next meeting, interest rates can't fall much lower, but they are -- but they can do things on reserves, and there are other technical things they do. Then surely there is -- the wiggle room, if you like, has got so much less.
SACHS: There isn't much wiggle room, but there isn't much scope for monetary policy playing a decisive role in our economies right now. Interest rates are basically at zero, of course. There's been a tremendous amount of liquidity expansion that's been, on the whole, to be desired.
But it has definitely boosed asset prices. There's bubbly elements of the current environment. There's just not too much more that central banks can do out of a magic -- bag. It doesn't exist.
QUEST: Jeffrey, I need you to stay with me, because we're going to squeeze every little bit of information out of you that we can tonight. Reports of another risk facing the global economy, the devastating effects of climate change. It could cost the world governments as much as $100 billion a year.
The UN report released on Monday from the intergovernmental group on climate change, it takes into account potential crop losses, rising sea levels, fresh water shortages. The study warns the world's poor could be disproportionately affected and says climate change could exacerbate poverty levels even in high-income countries.
The report's authors are calling on world leaders to take action. The UN panel chair says climate change and steps must be taken to combat the impact of greenhouse gases.
(BEGIN VIDEO CLIP)
RAJENDRA PACHAURI, CHAIRMAN, UN INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE: The one message that comes out very clearly is that the world has to adapt and the world has to mitigate. And the sooner we do that, the less the chances of some of the worst impacts of climate change being faced in different parts of the world.
QUEST: Jeffrey, if it looks like a duck, walks like a duck -- you know how this one goes -- quacks like a duck, what more needs to happen before something happens?
SACHS: We are -- in a very bad situation, and it is getting worse, and it's obviously the case. And the science, the evidence continues to build. You have countries and regions all over the world right now suffering massive shocks of climate.
Brazil, with a major drought underway, California --
QUEST: Right, but --
SACHS: -- with a major drought. Huge inundations in the UK this winter. We know it
QUEST: Right.
SACHS: We have --
QUEST: Right, right, OK. We know it, Jeffrey. So, what needs -- I need you to look forward. What needs to happen to actually -- because as far as I can remember since I was a journalist knee-high to a grasshopper, people have been talking about something must be done. So, tell me the next step that needs to be done.
SACHS: Let me take the two pieces of bad news and turn them into a piece of good news.
QUEST: Please.
SACHS: We have the eurozone and other economies not growing well, we have an urgent need to transform our infrastructure and our energy systems to make them more resilient and low carbon.
If we took the two pieces together and said yes, let's use this excess saving right now, not for consumption that households don't want, but for the investments that can make the planet safer and convert our energy systems, then we'd have growth and we'd have a safer world. So, all of this points to investment-led growth --
QUEST: Quite.
SACHS: -- in sustainable, resilient infrastructure. It's a ready- made package. I've been discussing this with European leaders in the past week. I actually think this is real and can be brought about.
QUEST: What do you do about those countries, like China, that say we missed the industrial revolution, we need time not only to industrialize, but also to put in place the various preventions that the developed world can do at lower cost?
SACHS: I was in China just this past week. The air is almost unbreathable, as you know. They have a major environmental crisis, plus a crisis of drying of the northern half of China. They of all countries know that they can't go on this way.
They're going to make massive investments in nuclear power, which makes a lot of sense for them. They are already leading investors in wind and solar.
They can make, actually, a growth leadership for the world because of the scale of the urbanization and the energy transformation that they need to make. This would be good for their growth and also make the air breathable again. So, I think that they are understanding that this is an opportunity, not only a threat.
QUEST: Jeffrey Sachs, thank you very much for joining us from New York.
SACHS: Pleasure.
QUEST: After the break, we have details of the final transmission of the missing Malaysian jetliner. It's not "All right, good night." We'll tell you what it was, and we'll be in western Australia. This is QUEST MEANS BUSINESS. Good evening to you tonight.
(COMMERCIAL BREAK)
QUEST: We're learning new information about the final communication between the crew of the missing Malaysia Airlines plane and air traffic control. Malaysia's Transport Ministry says the last voice transmission from the cockpit was, "Good night, Malaysian 3-7-0."
Probably in the way he said, more like "Good night. Malaysian 3-7-0." Previously, a Malaysian official had said the words were, "All right, good night."
In the next few hours, ships and aircraft resume their search in the Indian Ocean. Earlier, they scoured the area without finding anything connected to the plane. Those objects are earlier described as promising, which turned out to be old fishing gear.
An Australian ship carrying a US ping detector set sail today to join the search. It will take about three days to reach the search zone. Kyung Lah is in Perth, western Australia. Kyung, the time now in Perth is, what, ten past 4:00 in the morning? I'm slightly losing my way on the clock here.
(LAUGHTER)
KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT: Well, that's certainly understandable, because it's been a very long week for the search crews who are taking to the air. And the search is set to resume in the next couple of hours or so.
We're going to see very much what we've seen throughout the week, throughout this seven to eight days that the search has been taking off here from Perth. A number of countries taking to the air with military planes. They're going to try to spot something from the air, Richard, and then we have a number of sea vessels that will go check out anything that is sighted.
It has been disappointing so far, as you point out. A lot of fishing materials, jellyfish, junk that has been found. So far, no debris, Richard.
QUEST: OK, here's the question, though. We were told this was the new search area. Now, I know it's still a vast area, but one might have expected, perhaps -- and I was one of those who thought, well, since they've refined the area, and since the planes are seeing so much -- so many objects to start with, they must be onto a good thing here, or at least the right thing. So what, if anything, has gone wrong?
LAH: Well, I don't know if you should say that anything's gone wrong per se, but this certainly highlights what a challenge this area is. The story has never changed from the search plane perspective.
When we've spoken to the people who are taking to the air, the message has been consistent, the people who are executing this search. This is not easy. This is still, even though it's a little more northeast, still one of the most remote spots on the entire planet.
It is a large, large area. We've heard comparisons that this search area is the size of Poland. So imagine a few planes, maybe a dozen plans, trying to search an entire country and trying to look for debris on an ocean that's completely flat and it sometimes has waves. It is not a simple task. The task at hand is considerable, Richard.
QUEST: Kyung Lah in Perth, western Australia. The Australian prime minister says if any country can find the plane, it's his country. Tony Abbott spoke exclusively to Atika Shubert about Australia's commitment to the search.
(BEGIN VIDEO CLIP)
TONY ABBOTT, PRIME MINISTER OF AUSTRALIA: The effort is ramping up, not winding down. We'll have more aircraft in the sky tomorrow. We've got more ships in the area. So we are ramping this effort up.
We owe it to the families of the 239 people onboard. We owe it to the anxious governments that want to know what happened to their citizens. We owe it to everyone who travels by air and wants the skies to be safe. We owe it to the whole world, which has been transfixed by this mystery, now, for some time. We owe it to everyone to find out as much as we can, and that's exactly what Australia is doing.
ATIKA SHUBERT, CNN INTERNATIONAL CORRESPONDENT: I want to ask, now, about the coordination not only of the search but also the investigation. Australia is the coordinator and all that.
But there's been conflicting information coming from Malaysia, China has been very aggressive in its search efforts, saying that it -- suggesting it might even get involved in the investigation. How frustrating is that for you to have so many countries involved, and what are the challenges?
ABBOTT: Obviously, Australia is leading the search. The legal responsibility for the investigation rests with Malaysia as the flag of the airline that went down. We will want to work very closely with Malaysia. I've certainly offered Prime Minister Najib Razak of Malaysia the full cooperation of Australia.
We've also just appointed a chief marshal, Angus Houston, a former chief of our defense force, very well respected in our region and in the wider world as the chief of the coordinating center. So, Angus Houston can liaise with the officials -- the senior officials of all the various countries who have a stake in this.
(END VIDEO CLIP)
QUEST: The Australian prime minister, Tony Abbott. And one piece of news to bring you coming out. Apparently, it's reported that the discovery petition, misnomer as a lawsuit, but the discovery petition filed against Boeing and Malaysia Airlines has been dismissed, according to an official in the office of the judge who reviewed the petition.
You remember, we talked about it on this program last week that one law firm in Chicago in Illinois had already filed a petition for discovery of documents -- a real fishing trip, to be frank -- against Boeing and Malaysia Airlines. It's now been thrown out.
Now to our aviation analyst, Miles O'Brien, who joins me from CNN Washington. Miles, I want to talk with you about the change in the wording that we have got that apparently whoever said it no longer said, "All right, good night," but actually said "Good night, Malaysia 3-7-0." Now, it's not significant wording per se, but why is it significant in the bigger picture here?
MILES O'BRIEN, CNN AVIATION ANALYST: I think it's significant, Richard, because it reminds us how much we have not been told. I looked it up.
In the wake of the Asiana crash at San Francisco, 777 there, you all recall that crash. Within two days, the National Transportation Safety Board had released a transcript and recordings of air traffic control communications between the tower, ground controllers, and the crew.
And we are now 25 days in, and we are being told -- we've been given once phrase, and now the phrase has been slightly modified. It's still slightly off standard. What is standard for the crew in that case is to repeat the frequency.
But without the preceding information, either the transcript or the recordings themselves, which would be my preference, because we can hear tones of voice, maybe clicks on the radio, who knows what? It's difficult to know what any of that really means, and that's the problem with this investigation, which has been so opaque.
QUEST: So, we're at the situation where, frankly, until we get more data, or until we actually get some debris, speculation on the why remains impossible and fruitless. It comes down to the where, and that's just long, hard, trudge now plowing up and down the ocean. Is that right?
O'BRIEN: Yes, and let's remember how we've identified the general area of where, which as we know is the size of the US state of New Mexico, it's a huge area that's been identified. And that's based on technology that really, it was pushed into a realm it was never intended for.
Inmarsat satellite, geostationary satellite, measuring the distance, the time it takes for a ping, a transmission to go from the aircraft to the satellite back down again, and the relative difference between that to come up with circles on the globe where the plane might possibly be.
Coupled with some fancy mathematics involving the Doppler shift, which is too complicated to get into here now. But the fact is, this system was not designed as a tracking device. It was simply to get basically text messages to and fro the aircraft. And so who knows how accurate that might be at this juncture? And the time is wasting.
QUEST: OK. So, pull the strands together. It's looking highly unlikely, unless, please God, a miracle happens, that they'll find the black boxes as a result of the ping. Now, one can't be sure. But I suspect you wouldn't violently disagree with me on that front.
O'BRIEN: Oh, absolutely. I -- listen, Richard, I think we will be lucky if we find any wreckage at all floating in the time allotted at the rate it's going. And just as you well know, finding that to hindcast 25 or however many days it might be when they finally find it, to wherever that might have originated, wherever the impact zone might be, will be a big challenge for oceanographers.
The more time in the water, the more difficult it will be to figure out where it came from. So, the idea that with winter coming and the amount of resources available on station, as it were, that we're going to find wreckage and then the debris field, and then the black boxes, all before winter and we can all go home now, folks. That's just -- I think that's unrealistic.
QUEST: All right. Miles O'Brien, thank you, as always. Good to have you. Thank you.
Coming up, we'll look at the French telecoms company where a number of employees took their own lives. We'll explain more about that after the break.
(COMMERCIAL BREAK)
QUEST: The French telecoms company Orange is investigating a spate of suicides amongst its staff. Ten employees have taken their lives so far this year. The company's own mental health watchdog says the majority of deaths have been linked to work. CNN's Jim Bittermann is in Paris.
(BEGIN VIDEOTAPE)
ANNE MARIE SERVILLA, SISTER OF NICOLAS FOUCHER, SUICIDE VICTIM (through translator): My mom gave him a book entitled "The Art of Therapy" so that he could relax.
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Nicolas Foucher's family says he never talked about suicide, but they say he was having trouble at work, and one day last January, he threw himself in front of a train.
SERVILLA (through translator): I understand his gesture, even though I don't accept it, because he had reached his limits.
BITTERMANN: The 42-year-old Foucher worked here, not far from Paris's Champs-Elysees, at the offices of Orange, the privatized version of the French telephone company, which has about 100,000 employees. His death might not have attracted much notice if it had not been part of a pattern of suicides by Orange employees.
Since the beginning of the year, Foucher is one of ten workers at the company who have taken their own lives, a suicide rate which is far higher than the national average for France, which already has one of the highest suicide rates in the world.
What's more, this is not the first time there has been a rash of suicides at the company. In 2008 and 2009, after 35 suicides at Orange, the CEO resigned and remains under criminal investigation for what were described by investigators as his brutal management methods and harassment, something the CEO denies.
Under government pressure, a worker management surveillance committee was created to address the problems, which the committee found relate mostly to the ongoing reorganization plans at Orange.
While experts say there may be multiple reasons that a person might take his own life, the committee found that eight of ten of the most recent suicides directly related to work. Workers like Yves Minguy, who went through the privatization of the telephone company, says he very nearly committed suicide himself he was so depressed.
YVES MINGUY, ORANGE EMPLOYEE (through translator): I found myself mise au placard, thrown to one side, as we say in France. That is, I was pushed into changing my profession. They removed all my tasks, all my work, and you find yourself during a certain period of time without work, without order, without vision, and that generates depression and illness.
BITTERMANN: Other workers have complained about the constant threat of layoffs or reassignment to jobs far different in location or function than originally assigned.
BITTERMANN (on camera): CNN has repeatedly offered Orange the chance to respond after the recent suicide, but the company has refused all comment, including by the company representative on the surveillance committee which was set up to deal with the perceived management problems.
However, Orange has been quoted in other media as saying that each of these acts stem from different contexts, but that Orange remains vigilant.
BITTERMANN (voice-over): And the government is now also vigilant about the problems at the company. Said the French minister of health, "I know the company is aware of the situation. The unions, of course, are at the forefront, but also the management because we cannot let such a situation continue."
Anne Marie Servilla, Nicolas' sister, also hopes the situation at Orange will not continue.
SERVILLA (through translator): My brother is not here to speak anymore, but I am. I want to tell his story for the sake of the Orange employees and for all the employees in France.
BITTERMANN: Jim Bittermann, CNN, Paris.
(END VIDEOTAPE)
QUEST: And we will be back after the break. QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest at the CNN Center. There's more "Quest Means Business" in just a moment and this is CNN, and on this network the news always comes first. Around six people have been killed and about 18 injured in an explosion in Nairobi in Kenya. It happened in a largely Somali neighborhood in the east of the city. A Red Cross official said the blast appeared to be a deliberate attack.
Germany says Russian President Vladimir Putin has told the German Chancellor Angela Merkel that he has ordered a partial withdrawal of his troops from the Ukrainian/Russian border. Tens of thousands of soldiers have been massed there for weeks, raising fears of further incursions into Ukrainian territory. Russia insists they're engaged in exercises.
The U.S. and Russia are both expressing concern over increasing tensions on the Korean Peninsula. North Korea fired artillery shells into the Yellow Sea. Its defacto maritime border with South Korea so responded with artillery fire. Malaysia's Transport Ministry now says the last words from the cockpit of the missing jet were "Good night, Malaysian 3-7-0." Officials are not sure whether they came from the pilot -- the captain -- or the first officer. Earlier a Malaysian official had said the pilot's last words were "All right, good night." The cause of the discrepancy or a deeper significance is unclear.
It's worth ringing the bell (RINGS BELL) -- high frequency traders are helping to rig Wall Street says acclaimed financial writer Michael Lewis. He claims traders with the fastest machines in computer programs are using this advantage to extract tens of billions of dollars from less nimble investors, even less nimble professional investors. It's in Lewis' new book. It's called "Flash Boys, a Wall Street Revolt." Talking on CBS 60 Minutes, this is what he said.
(BEGIN VIDEOCLIP)
STEVE KROFT, NEWS CORRESPONDENT AT CBS 60 MINUTES: What's the headline here?
MICHAEL LEWIS, AUTHOR, "FLASH BOYS, A WALL STREET REVOLT." Stock market's rigged. The United States stock market, the most iconic market in global capitalism.
KROFT: By whom?
LEWIS: By a combination of the stock exchanges, the big Wall Street banks and high-frequency traders.
KROFT: Who are the victims?
LEWIS: Everybody who has an investment in the stock market.
(END VIDEOCLIP)
QUEST: So, this rigging or skimming or whatever you want to call it is happening within a fraction of a millisecond, because that's what this is really about. This is how Lewis says it was. So, the trader places the order -- a large order for stocks. Now, it travels along fiber optic lines and then it will hit the closest electronic exchange first. It might be the New York Stock Exchange, it might be some other exchange, but it goes down the fiber and gets to an exchange, but in the meantime, there has been a high-frequency trader that gets a glimpse at the size of the order coming through the system, usually by computer and this program of the computer gets in there first. It really a case of one -- as you'll see here. It really is a case of one order moving forward and somebody else coming in and getting there just to beat out beforehand.
The first trader ends up paying more because the other trader pushed up the price. The algorithm had the edge, and of course the technology and the trading methods are all perfectly legal. The computer buys stocks and therefore raises the price. The trader pays more, and that could be your pension, it could be my stocks, it could be all sorts of things. Edgar Perez is author of "Knightmare on Wall Street," and he joins me now from New York. When we look at what has been happening and we talk about this, you don't believe it's rigged.
EDGAR PEREZ, AUTHOR, "KNIGHTMARE ON WALL STREET": Richard, the markets, if we follow that definition of rigged, it could be rigged from the moment we started trading stocks. Because we earn better when there were some wars and people expected prices to go down. The Rothschild used (spingeans) for transmitting information from one place -- from the battlefield to the trading financial centers and they would trade ahead of other people. What I'm saying with this story is that people are using technologies available -- legal technologies available -- to get an advantage, to keep an edge. And that happens to be also the use of the knowledge at this moment.
QUEST: Right. The problem with this is though, Edgar -- the problem is the markets are making this up because technologies are moving so fast. Five years ago, ten years ago, is high frequency. Yes, there was computer trading, there was program trading, there was portfolio trading, but the high-frequency trading didn't exist in the same way. So, is the market keeping up with rules and regulations to ensure a fair deal all 'round?
PEREZ: Well, high-frequency trading are born because of regulation. Remember, now in 2005 that's when we had a big change in the U.S. stock markets when we allowed this competition. Forty years ago, we only had New Stock Exchange. Then we had NASDAQ, now we hour four -- three -- exchanges . We have many DAC pools, very/many (ph) different venues brokers is sponsored (ph) is something for people to trade. So there is more competition. That is true, some people are using technology to get ahead, but that's not suddenly that deterministic. They're using models to estimate people who are going to be trading up or down, to calculate, to trade sort of ahead. But that's --
QUEST: Right.
PEREZ: -- discounting the fact that people are getting paid less in commissions. So if you talk to Iree (ph), she will say yes, I might pay one penny more for my share, but when I'm buying this, but at the same time they're paying less in commissions. And that's something you recognize but also the mutual fund concept (ph) --
QUEST: No, no, no, no, no. As a matter -- you're talking about practicalities, Edgar. You're talking about I might pay a penny more for a stock -- for a share -- but I'm paying less on the commissions. But that's the effect of deregulation. On a matter of strict principle, is it right that a high-frequency trader gets to go to -- not only gets to the front of the queue, pushes ahead of you because of technology, but in doing so as a matter of principle, can push up the price of the stock.
PEREZ: Well, what I'm saying is that the high-frequency trading -- that's a no -- that's going to happen for sure. They have models. They have estimated that certain people will be trading this stock, and therefore they have estimated the price they're expecting to pay, so they are giving an offer or an order, that is going to go before this person. So, they might be wrong, they might be right. They have the technology to be faster, and most of the time, that's true, they are right. That's why they're making millions of dollars.
QUEST: Well, then -- well then, they should be stopped. Or at least the rules should balance it out, because if they know in reality -- whatever the theory -- if they know in reality they are going to be able to get -- to push ahead -- to the front of the line, push up the stock and somebody else has to pay for, I think you have to accept that is not a fair (gain/game) (ph).
PEREZ: Richard, I would encourage you to read my book, "Knightmare on Wall Street" when we talk exactly about these type of situations. As I said -- high-frequency and using technology --
QUEST: Right.
PEREZ: -- that is available to any financial player. I'm a retail investor and I really don't complain because the fact that I'm getting more liquidity in the market is thanks to the technology advances of the last decades. It's true. My people might say, oh you're getting a hail and a Q (ph), and you're paying less for value paying a price (ph) for other people.
QUEST: Right.
PEREZ: But, again, that's happening because it's not deterministic. It's just a possibility and you got to be able to --
QUEST: All right.
PEREZ: -- get ahead of the queue.
QUEST: Hold up the book so we can see it -- hold up the book. Let's take a look at it.
PEREZ: "Knightmare on Wall Street" it's about actually -- it talks about the progress of technology -
QUEST: Right -- send me a copy -- send me a copy, I'll read it and we'll talk more about it in the future. How about that?
PEREZ: It will be my pleasure to do so, Richard.
QUEST: Lovely. Thank you very much. Edgar joining me there. Well I got a free book out of it if nothing else. I may lose out on the stocks and me shares and me pensions on what Michael Lewis calls a rigged market, but at least I got a free book. (RINGS BELL). U.S. stocks rose on Monday. The S&P is near its all-time high, the NASDAQ at one percent. It was news from the chair -- Janet Yellen at the Fed that will continue to support the economy. It marks the end of the quarter. For the quarter overall, NASDAQ's up 1/2 a percent. The S&P's up 1.3 percent, the Dow so far this year is down just about 3/4 of 1 percent European stocks -- a larger-than expected drop in Eurozone inflation. It fed the deflation fears, so all three major markets -- London FTSE, London Frankfurt and Paris -- were lower. Zurich, it got a nice gain of some 1 percent. I suspect that's on the back of a currency prospect.
In France today, the Prime Minister Jean-Marc Ayrault has resigned. The French President Francois Hollande has chosen the Interior Minister Manuel Valls to replace him. It comes after big losses for the Socialist Party in local elections on Sunday.
One thing to keep in mind if you're traveling 'round Europe or indeed globally this week, Lufthansa, the German airline -- the pilots there are to go on strike for better pay. It's a major strike -- 3,800 flights are to be canceled on Wednesday, Thursday and Friday. About half a million passengers are to have their travel plans disrupted, and this of course applies -- doesn't just mean if you're going to -- if your destination is Germany, but obviously Lufthansa is a network carrier through and from Germany through its hubs in Frankfurt and Munich, Dusseldorf will all sout (ph) out of course. The airline endured strikes last week as well. A three-day walkout expected to go to biggest in Lufthansa's history. Lufthansa groups other airlines -- Swiss, Austrian and Euro wings will be still running around 500 flights and customers will be rebooked as necessary.
Pictures of Beijing's smog-filled streets. We talked about it earlier in the program is seen the world over. When we come back, some blue sky thinking from the chief exec and a luxury carmaker.
(COMMERCIAL BREAK)
QUEST: Today's U.N. report on climate change will have resonated in Beijing, where people live with smog levels which pose an imminent danger to human health. One chief executive is out to prove you can take positive action and still enjoy some of the finer things in life. In today's "Executive Innovator," Pauline Chiou meets Karsten Engel, the boss of BMW China.
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PAULINE CHIOU, AN AWARD-WINNING ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL BASED IN HONG KONG: The traffic is terrible, the pollution even worse. China has been battling this problem for years. But finding a solution is tough, especially now that China is the biggest car market in the world.
KARSTEN ENGEL, CEO, BMW CHINA: And this model is one-third of the entire volume we are selling in China.
CHIOU: Karsten Engel, the CEO of BMW China is pushing a strategy of green luxury with all BMW models.
ENGEL: In general we have this evolutionary and revolutionary approach in BMW. When we look at the air quality and find that it's not really wonderful, so we know we have to reduce the emissions of the cars -- all BMWs, the entire model range, the fuel consumption, the CO2 is going down. But that's probably not enough. So on the other side, we have this revolutionary approach. That's the BMW i brand where we launched the i3 and the BMW i8.
CHIOU: The groundbreaking i series will come to China in the fall. The BMW i3 is a carbon fiber electric car manufactured in Germany. They've also got a locally-produced electric vehicle. BMW's Chinese joint venture has introduced the Zinoro. Despite generous government subsidies, electric vehicles still have not captured the Chinese consumers' heart. Of the 20 million vehicles sold in China last year, only 20,000 were electric or plug-in hybrid. It's a small slice, but Engel says taking this risk is part of his long-term strategy.
ENGEL: To be there, to have the right products in the market, to communicate it to the right people. Once we have reached the trigger point, then the demand will grow very strongly and then very fast.
CHIOU: Plugging in your car seems simple enough, but one of the challenges in China is finding a charging station before you run out of juice.
JAMES CHAO, HSI CONSULTING: On-the-road electric vehicle infrastructure is quite thin in China. But more than that perhaps is the electric infrastructure to charge it home. Most Chinese consumers except for the very wealthy will live in apartment complexes -- not in individual stand-alone homes with garages and the chance for home charging solution. So that's another roadblock for electric vehicles in China.
CHIOU: You can come up with the most innovative electric car but people are not going to buy it if they think that they're not going to be able to charge conveniently.
ENGEL: When we sell the cars, we will have our own people to go to their houses or to go to their landlords in the apartment buildings, and our people will discuss and make sure that they will have the infrastructure in the house to recharge the car. That's absolutely necessary.
CHIOU: How difficult is it going to be to convince an apartment building to put up a charging station?
ENGEL: It's easier than we thought. Most of these developers, they are very conscious of the sustainability.
CHIOU: BMW is looking to the future as it builds on its brand heritage. Let's take a look at some cars.
ENGEL: OK, good.
CHIOU: If you're a tall German, it's difficult. Now here we are, the i8. It's sleek, it's intelligent and the crown jewel of BMW sustainable fleet. Pauline Chiou, CNN Beijing.
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QUEST: To the weather forecast now. Samantha Mohr is at the CNN World Weather Center. What have you got for us tonight?
SAMANTHA MOHR, METEOROLOGIST WITH CNN: Hi, Richard. Well, a lot of folks woke up to some dust on their fine automobiles this morning because we did have a phenomenon called Sahara rain that moved in over the course of the weekend and this is part of the weather pattern that brought in that fine layer of dust that coated a lot of automobiles as folks got out and about this morning. Here's that low that was working its way in from the West, and had dust storms in the Sahara Desert over the weekend, and that ended up being pulled up across the sea by some high-level winds. In fact those dust storms can extend well up into the atmosphere and they can travel long distances. All that dust can travel long distances on these upper-level winds. So here's the source of the dust obviously here in the Sahara Desert being brought up with those high-level, very strong winds being brought the sea -- across the Mediterranean and into much of Europe. And as it makes its way on through, it's transported by the clouds and then of course as the clouds continue to grow and then you get water particulates -- the water moisture clings to the particulates and of course it falls as water droplets in the form of rain. And when you get a very light rain like we had, we end up seeing that light coating over the cars and of course that creates a few headaches out there, but nothing really all that big time.
We're seeing the rain move in across the area right now, across much of the West -- most of it on the light side and that's the way we expect it to stay as we head into the beginning of the week, and then a little bit more rain as another system works its way in. And it's quite possible that by the end of the week, we could again see that same scenario with dust expected here in the northern deserts of the Sierra, and that could once again get tapped into these upper level winds. So, we could once again be seeing more of that bothersome dust around as we head towards the end of the week. If all those conditions come together we were just talking about, temperatures well above average. I mean, some really, really nice, warm, balmy temperatures here in Berlin -- it's several degrees above average. Similar conditions in Bucharest as well as in Warsaw, Richard. So at least the temperature's feeling pretty fine out there
QUEST: Thank you for that. Now, just over three hours ago, London's newest TV channel hit the airways. It's called "London Live." It's a 24- hour channel broadcasting news and entertainment, completely dedicated to the British capital. It's backed by Evgeny Lebedev, the owner of the independent "Evening Standard" newspapers. Charles Hodson asked him about why he made this rather bold move.
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EVGENY LEBEDEV, OWNER, "EVENING STANDARD": The idea came about mostly because to me personally because I'm a Londoner. I've been here since the age if eight. I own a pub in the east end, London's only newspaper, "The Evening Standards" and I thought if any city, any capital city in the world is to have a channel of its own, it should be London. And it's amazing to think that London has never had a channel dedicated to London. So, the idea behind it -- the main idea -- is to launch a channel which goes live tonight at 8:30 p.m. on Channel 8 Preview -- is to launch something that will be about London, for London.
CHARLES HODSON, ANCHOR, CNN INTERNATIONAL'S "WORLD BUSINESS TODAY" SHOW: I mean, it's clearly -- it is odd because it is a city of nine million people, and cities of nine million people -- in fact, nations of nine million people have their own TV stations. The worry is whether it can be profitable. Do you think you can turn a profit and if so, when?
LEBEDEV: Well, I can't really give you an exact date when, but I think it is definitely possible because we've certainly shown that with "The Standard," when the newspaper was purchased, it was -- when the company was purchased -- it was losing in the region of 30 million pounds, and the circulation was drastically dropping. Now, our circulation's gone up to $900,000 and it's read by over two million people, and it's actually making a profit. So, as a company, we've proven that we can turn 'round companies, and this is a startup company. But I think it is possible to have a successful London channel. London has so much to offer, whether it's art, film, sport, music, theater and all of that apart from news and current affairs which will be a big channel. The channel will be brought to television sets of Londoners.
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QUEST: The chief executive of General Motors faces her toughest test yet. Lawmakers want answers from her over a recall scandal which cost lives. Her forthright response comes next.
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QUEST: Some news just in. General Motors is recalling a million vehicles or more in the U.S. over a safety issue. The latest problem affects the power steering in cars up to ten years old which could fail without warning. It comes as GM's chief exec Mary Barra is about to give evidence to U.S. lawmakers about the ignition switch scandal. Members of Congress want to know why it took ten years to order a recall. In prepared remarks ahead of the evidence, the U.S. House Energy and -- Committee -- and Commerce Committee, she said, "I cannot tell you why it took years for a safety defect to be announced. But I can tell you that we will find out. When we have answers, we will be fully transparent with you, with our regulators and with our customers." Mary Barra's performance before the Committee will be crucial in shaping her tenure at GM. Maggie Lake now looks at the chief exec's make or break moment.
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MAGGIE LAKE, BUSINESS ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL: Less than three months on the job and Mary Barra is facing a test that would challenge the most seasoned of CEOs. The message Barra must deliver to Congress is clear. She's in charge, and GM will get to the bottom of its recall crisis.
MARY BARRA, CEO, GENERAL MOTORS: Something went wrong with our process in this instance and terrible things happened. As a member of the GM family and as a mom with a family of my own, this really hits home for me.
LAKE: GM has appointed a safety tsar and is using social media to respond to customer concerns.
BARRA: We intend to make this recall as smooth as possible for you, so we will not let it ever happen again.
LAKE: But Barra's job is just beginning.
Male: She's laid out a very proactive, positively action-oriented plan to resolve this, and now we have to see if her plan works.
LAKE: In two closely-watched hearings, Congress will demand answers.
REP. TIM MURPHY, CHAIRMAN, HOUSE OVERSIGHT AND INVESTIGATIONS SUBCOMMITTEE: Just tell me the truth. Just tell us what happened. Was this miscommunication? Were things learned by one department that wasn't passed on to another? Was it just some incompetence that people weren't even seeing the things before them.
LAKE: GM admits that it knew as early as 2004 there were problems with faulty ignition switches that have been blamed for at least 12 deaths. In a statement it said quote, "The chronology shows that the process employed to examine this phenomenon was not as robust as it should have been." Barra is also not satisfied.
BARRA: Clearly the fact that it took over ten years indicates that we have work to do to improve our process.
LAKE: GM is recalling more than two million vehicles for ignition fixes. Repairs begin soon. But Congressman Tim Murphy, who is chairing the hearings in the House, says consumers deserve better.
MURPHY: They can put a device in a car, you can press a button and they find out where your car is, they can check your engine, check your brakes, check to see if a light's gone off -- all of these things. You can get directions from anywhere in the country -- they can tell you that stuff, but when there's a safety defect, they haven't quite figured out how to do this.
BARRA: Simply by listening to the customer.
LAKE: One thing is certain, the solid performance from Barra will be key not only to her success but to GM's immediate future. Maggie Lake, CNN New York.
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QUEST: Tonight's "Profitable Moment." Michael Lewis says the U.S. markets are rigged. Whether he's right or wrong, it's a serious accusation. Of course we're in very different times now there's high- frequency trading. Because even though computers have been around in the stock market for many years, the speed of these high-frequency deals takes us into a new quantum, a new realm, a new market. And the point is this -- whether it's true or not, markets require a perception, and if the perception is that it's not a level playing field, that things aren't fair, that it's not fair do's all 'round, then that's an accusation to be taken seriously. And that's "Quest Means Business" for tonight. I'm Richard Quest at the CNN Center. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you back in New York tomorrow.
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