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Quest Means Business
Jobs Growth In The United States Is Slowing While Wage Growth Is Tepid, Willie Walsh Tells Me He Is Not Worried About Brexit And He Can Handle High Oil Prices, Arlo Technologies Has Joined An Illustrious List Of Tech Firms Making Their Market Debut This Year; Special Counsel Mueller`s Team Interviews "Manhattan Madam"; Zimbabwe Opposition to Challenge Election Results; Zimbabwe President Calls for Peace and Unity; Harvey Weinstein Seeks Dismissal of Sexual Assault Charges; EU Faces a Sweltering Heat of Summer Problems; Heat in Spain and Portugal Soars to Near Record Highs; Scientists: China to have the World`s Deadliest Heat Waves; Jeffrey Sachs Takes Aim at Trump on Climate Change; U.K. PM May Meets Macron for Brexit Talks; Mark Carney: Risk of No-Deal Brexit is Uncomfortably High; Solid U.S. Jobs Report Lifts Stocks; Sonos Shares Rally After Thursday IPO. Aired: 4-5p ET
Aired August 03, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(CLOSING BELL RINGING)
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Charity: Water celebrating water for all with the market of 132. Closing bell ringing on Wall Street,
Dow is up over half a percent. The other markets are up. It was a good day one way and another. We`ll get to the details of how and why.
Thank you, sir. Yes, there we go. A good strong gavel on a robust day. It`s over, Friday, it`s August the 3rd. Job growth slows in the US, its
either a bleep or a bump for the Trump economy, but the numbers are still very impressive. Eighteen hundred dollars more for a Toyota Camry in the
US. Toyota is delivering a tariff warning about the effect on costs.
A special look at Europe`s deadly heat wave, counting the cost to the environment, the economy and of course, climate change. I`m Richard Quest,
live in the world`s financial capital, New York City, where of course, I mean business.
Good evening, jobs growth in the United States is slowing while wage growth is tepid to say the least. Today`s report from the US government showed
157,000 new jobs were added in July. But that is lower and less than previous months and had been expected. Look at the comparisons to previous
years, and you`ll see -- or previous months I should say.
Over the last three months, this 157,000 is the lowest so far. It takes us back to the levels of March and April. Concurrently, the unemployment rate
fell to 3.9% and there are economic headwinds ahead. First of all, the issue of debt. Now, debt levels are increasing. The national debt has
just passed the $21 trillion mark and it`s going to get worse. The treasury`s increasing bond auctions and there are concerns that the growth
won`t make up for the tax cuts.
It comes as China is hitting back at the US in the escalating trade war. Beijing has announced it will slap tariffs on US goods worth $60 billion.
According to Larry Kudlow, Donald Trump`s economic adviser, while China had best not doubt the US President.
(BEGIN VIDEO CLIP)
LARRY KUDLOW, DIRECTOR OF THE NATIONAL ECONOMIC COUNCIL: We said many times, no tariffs, no tariff barriers, no subsidy. We want to see trade
reforms. China is not delivering. Okay, their economy is weak, their currency is weak, people leaving the country. Don`t underestimate
President Trump`s determination to follow through, I`m just telling you. I can`t speak for the Communist Party in China. I can speak for our
President. Do not underestimate his determination to change trading practices on a fair reciprocal plane.
(END VIDEO CLIP)
QUEST: Diane Swonk, do not underestimate his determination to change trading practices on a far reciprocal basis. Well, he may have that
determination, but it`s ended up with another salvo in the trade war.
DIANE SWONK, CHIEF ECONOMIST AND MANAGING DIRECTOR, GRANT THORNTON: Yes, what we`re seeing here is the President certainly has a lot of bipartisan
support. Most people and most companies have their gripes about China. There`s no question about that. The question is how do you attack and deal
with this issue?
Certainly, from my perspective, it would have been better to get the rest of the world in line with us because a lot of the rest of the world is
unhappy with China as well and TPP would have done that. That would have isolated China outside of the trading group and also enforced intellectual
property laws forcing China if they wanted to trade more freely with other countries to adhere to those laws more closely. That was the primary
issue, that continues to be the primary issue and that`s not what this tariffs are doing with it at the moment.
QUEST: If we look at the jobs number today, effectively, the US has full employment by most definitions. This 157,000 -- should we look upon it as
a bleep, normally, the US likes that 200,000 jobs added or turnover of jobs. Should we look at it as a bleep?
SWONK: It is a bit of a bleep because we did have that 32,000 loss from the Toys R` Us shutdown in the month of July. They actually shut all their
doors and pushed all of their workers out the door, and that showed up in the month. We also had upward revisions to the previous two months. We
are seeing some interesting trends there in the wages that are not things that -- when I say interesting, I don`t think good. Manufacturing wages,
manufacturing jobs are up. Manufacturing wages have decelerated quite dramatically over the last year, and that`s because many employers are
actually moving down the skills levels and training more workers, but paying them less as they train them more.
QUEST: So, let`s just analyze this because we do like on "Quest Means Business" to explain economics. The traditional economic view is that we
should be seeing wage inflation now, particularly at3.9% unemployment with this level of jobs added, but we`re not. Two point seven percent is
actually down, and as you just said that the wage growth is dwindling. Why are we not ...
[16:05:16]
QUEST: ... seeing wage growth inflation?
SWONK: Well, there really is a cornucopia of reasons. I think the most important reason in the United States, it`s been the erosion of these ilea
of workers to bargain for their actual wages. We`ve seen everything from an erosion in unionization to monopsonies have more power to a lot of
workers being caught in employment in what are almost like zombie firms or firms without very much employment growth or very much productivity growth,
therefore, not a lot of wage growth and people`s mobility has gone both between jobs and upward in well beyond income.
So you put all of these things together and you start to get a picture of a much more stagnant wage story with low productivity growth. We are also
seeing that change in the structure of jobs where actual employers are moving down the scale and bringing people who they wouldn`t have looked at
before into the labor market at a lower wage, but perhaps enhancing their skills and giving them a chance to pick up some wages later on. That`s a
positive development, but it`s certainly on the average showing more job growth than wage gains.
QUEST: Diane, good to see you. Have a good weekend. Thank you. Let us continue to talk on China`s tariff plans. Chris Garcia is a former Deputy
Director of the US Commerce Department, he joins me now from Washington. Chris Garcia, you may have just heard Larry Kudlow -- do not doubt the
President to get fair trade, but the reality is, so far, China is meeting the US toe to toe on every action. So we can hardly say that this tariff
battle is being successful for the US.
CHRIS GARCIA, FORMER DEPUTY DIRECTOR, US COMMERCE DEPARTMENT: Well, I would respectfully disagree. I think that China is eventually going to run
out of goods to impose tariffs on. The President is serious about this and I think that Larry Kudlow is as well and reflecting that China is hurting,
their economy is hurting. They are trying everything that they can to grasp for something to clutch on to, some type of concession that they can
look to get out of the United States, but I think the President`s strategy has been very wise. You look at just exactly what we`ve been ...
QUEST: I don`t know, didn`t we just put the -- we got a warning today from Toyota as we`ll talk about later in this program that the domestic made
Camry will cost $1,600.00 more. The imported one will cost $6,000.00 more. We are seeing Ford warning that it is $800 million or so over next year in
terms of tariff costs. These are real costs being borne by US companies.
GARCIA: Sure, now these forecasts and we expect these companies to behave as they would. This is how we operate in a free market economy. Now,
again, if you`ll pardon me, this is a tactic and I think that your viewers will understand that the President is in fact serious. These tariffs --
they have to be imposed in order to have the level playing field that President Trump and his trade advisers have been seeking.
Again, number one, it`s zero tariffs, zero subsidies, zero non-tariff barriers. We want the three zeroes and as soon as we can get, and I think
your last guest put it quite well, we want to make sure that we do isolate China and that is in effect what we`ve done with the European Union coming
to the table and agreeing to increase the trade for the US. Japan, also Australia ...
QUEST: Now, come on, that European Union deal, as you know, was a Band-Aid to get out of a difficult position on both sides, but the reality is, as
long as agriculture is not on the table, which the French have refused to allow in terms of the EU negotiations, those talks on industrial goods or
whatever, they`re going to go nowhere.
GARCIA: Well, the facts prove otherwise. We are seeing an increase in exports, we are going to see quite an increase in exports in soybeans.
QUEST: Oh, window dressing, Chris, window dressing. The Europeans gave Donald Trump what he wanted, 200% increase in soybeans, which you probably
would agree is not going to make up for the loss of soybean business out of China.
GARCIA: Again, these are forecasts. These are forecasts, I think that we have to keep in mind that the President is looking to use tariffs as a
negotiating tactic. We need to put a little bit of short term pain in order to have long term gains. I think as Americans, American workers,
American companies are resilient. We`ve been through the great depression. We`ve been through the great recession.
We are at an all-time high right now and many figures economically speaking, I think right now is the perfect time to try to tackle some of
these issues and I`ll tell you this is exactly what we`re looking to do. We may take a couple of hits on the chin, but if we land a couple of hey
makers against China, and we put them in their place, because they have been stealing IP, they have forced joint ventures, they have stolen
military aircraft blueprints, I mean, the list goes on.
[16:10:08]
GARCIA: We have to get China to play fair and at this point, right now, we are in a position of strength and I think the President is very wise to
continue in this direction.
QUEST: All right, Chris Garcia. Good to see you, thank you.
GARCIA: Thank you, sir.
QUEST: President Trump has argued that the US farmers can take a whiff of war, tariff war that is. Christopher Gibbs is a farmer in Ohio and he
disagrees.
(BEGIN VIDEO CLIP)
CHRISTOPHER GIBBS, FARMER, OHIO: We`ve taken approximately 20% decrease in the price of soybeans since March, since this all escalation started and
certainly, $60 billion more of tariffs and I am not sure that the Chinese announcement, those are going to be -- that`s not going to be helpful, but
markets are built on a couple of different things. They`re built on the technical, they`re built on fundamentals, but they`re also built on
confidence -- market confidence and this continued rhetoric, this continued bludgeoning of our trade partners doesn`t give the market confidence so we
continue on a downward slide whether it`s corn, whether it`s soybeans, whether it`s hogs, all of those are on a downward slide since March and you
can relate that directly back to this tariff fight.
(END VIDEO CLIP)
QUEST: And as I alluded to earlier, Toyota is now warning tariffs will have an impact on its business and on the price paid for cars. The company
says duties on steel and aluminum will cause limited damage. The real blow would come from tariffs on autos and auto parts.
And when you look at the actual -- let`s open the shipping container and you`ll see what I mean. Models produced in the United States will cost
more. The Camry expected price will go up by about $1,800.00. That`s because of the steel and aluminum tariffs, and also the auto parts. They
go backwards and forwards between.
The Siena minivan will cost $3,000 more and that could hurt jobs at Toyota`s 10 American factories and the biggest of course will be on the
imported models, up $6,000.00. Now, let`s remember more than 700,000 vehicles each year come from Japan. Paul La Monica is with me.
I suppose on the $6,000.00 and the administration will say, quite right, too. Buy domestically and you only get a tariff increase of $1,800.00; you
buy imported and it`s $6,000.00.
PAUL LA MONICA, CORRESPONDENT, CNN: You could argue that that would be considered a win for the administration. The counter to that is that I am
sure that GM and Ford and Fiat-Chrysler would like to sell their cars to markets outside of the US as well without the threat of global trade war,
but that`s just me being a pragmatist.
QUEST: Okay, but when are these tariffs coming? So, in Toyota`s case, you`ve got the tariff on steel and aluminum that`s making the car.
LA MONICA: Right, but that`s a minimal impact as Toyota has said, that really ...
QUEST: So, where is Toyota`s impact?
LA MONICA: It`s the autos themselves and auto parts. These tariffs are going to be on actual cars.
QUEST: Going to this, these are not the tariffs we`ve got at the moment. This is the $200 billion-plus ...
LA MONICA: Right.
QUEST: That`s going to be at 25%?
LA MONICA: Right, that is correct and it`s the auto parts as well as the actual cars and that`s I think a big component of these higher costs as
well.
QUEST: And the -- Ford has also warned similarly about all of these?
LA MONICA: Yes, all of the auto makers have warned that back and forth, there are going to be problems for their profits because everyone is in a
global economy trying to sell their autos, not just to their own market. I don`t think Volkswagen, which obviously has a lot of problems beyond
tariffs just wants to sell cars in Germany and the rest of the EU, in the same way that Toyota doesn`t want to just sell in Japan and GM and Ford
don`t want to sell just in America.
QUEST: But it is interesting, Paul that we are getting this warning from the companies now.
LA MONICA: From all of the companies, and we`re going to see more of it, I think in the coming months as these tariffs really start to hit profits.
QUEST: Thank you, Paul La Monica. Have a good weekend.
LA MONICA: You too, thank you.
QUEST: And so, what trade war was going on was not the focus of investors, as you`ll join me at the trading post.
All right, so this is the trading post. No records even though we do have three strong markets. The Dow was up half a percent and the S&P similarly.
NASDAQ has had a small gain. It was actually lower during after the session, but it did come back. So, Dan the man, I think we go green. I
think we go green all along. Green across the board, and it was the US jobs report which also helped move some of these markets with manufacturing
showing strong growth. No records though. The NASDAQ still ekes out the most with 25 so far in 2018.
As we continue tonight, high oil prices and Brexit and it`s what happens to international airlines group. Willie Walsh tells me he is not worried
about Brexit and he can handle high oil prices.
[16:15:06]
QUEST: Stock is IAG, the owner of Iberia and British Airways -- well, the stocks have fallen after the earnings revealed the summer has been ruined
by strikes and exchange rates. Now, IAG is also planning to offload the shares at ports in Norwegian after Norwegian rebuffed two attempts at
takeover talks. IAG`s Willie Walsh told me there are plenty of reasons when you look at his latest results to be cheerful.
(BEGIN VIDEO TAPE)
WILLIE WALSH, CEO, INTERNATIONAL AIRLINES GROUP: We`re flying more people. We have seen passenger numbers increase by just under 8% and we`re flying
at a slightly lower yield, but that`s improving our revenue performance and improving our bottom line and improving our margin.
So, we definitely believe in what it is we do. We, as an industry clearly need to reflect our higher oil price over time, but I think at IAG, the
airlines have actually managed that very well this time.
QUEST: The governor of the Bank of England describes this morning the potential of a no Brexit deal is uncomfortably close and Mark Carney is
extremely concerned. He says it won`t be a catastrophe, but he is very worried. Are you worried?
WALSH: No, I`m not worried, Richard. I am disappointed but I am not worried. I`ve been in this industry long enough to have to deal with
challenges and I think we deal with them very well and this is just another challenge that we`ll have to overcome.
I think as it relates to the airline industry, there are a couple of issues that will need to be addressed, but I don`t see the most being that
difficult to sort out in the short period of time. I think the concern that most people would share and I know the governor of the Bank of
England, I think, is concerned about the impact on the UK economy because I haven`t heard anybody saying that it will be positive to the UK in the
short term.
There are people who believe it will be very positive in the longer term, but I think most people would agree that leaving the EU whether it`s under
a hard or soft Brexit, will have negative economic consequences in the short term.
QUEST: What about when your planes can no longer fly over islands or you`ll be banned from flying over parts of Europe because there won`t be
en-route access or your airlines will be shut -- I mean, you don`t give any credence to these worries and threats?
[16:20:03]
WALSH: No, not at all, because I think all of our flights are regulated by a completely different agreement, the international air service kinds of
agreement dating back to 1944, which doesn`t in any way come into play with regard to Brexit and that`s signed by 133 countries around the world
including the US, Ireland, the UK, most of the European countries, so that`s not an issue, and I think people sometimes misunderstand some of the
issues that we have to face, but there are complications associated with Brexit, but they`re not complications that will be that difficult to
address, and I firmly believe that at the end of the day, there will be a comprehensive air transport agreement agreed between the UK and the EU.
QUEST: All right, Norwegian, what are you going to do with this stake that you`ve bought, if Norwegian doesn`t want to, which it would seem that they
do not. I mean, are you going back to try and have more talks? And if it all falls apart, will you keep the stake?
WALSH: Very clearly, we won`t keep the stake. We bought that small stake to initiate a conversation with Norwegian. If they are not interested in
being part of IAG, in other words, with IAG as the owner, we`re not interested in being a small shareholder in Norwegian, and I`ve made that
very clear in a presentation that I gave to analysts this morning.
And so, if we don`t proceed with the acquisition, we will be selling that stake in Norwegian.
QUEST: But will you have another bash at trying to persuade beyond -- to come on board, I guess, the issue is it over? Is this run over yet or are
you going back for one more go?
WALSH: Well, I have nothing planned at the moment, Richard, and obviously, if we do something, we`ll be very clear about that. I have been clear that
we don`t want to be a small shareholder in another airline. We see no value in that. If it was directly to our shareholders, so this was, as I
said, very clearly stating our intention and putting a little bit of money where our mouth was. It`s friendly approach. I`ve been very clear
directly with Bjorn and stated that publicly that we are not going to do anything hostile.
So, I respect him as an individual and I respect what he`s done. We believe we can transform the financial performance of Norwegian, which is a
challenge, but we believe, as part of IAG, we can do that. If he believe he is better off on his own, I certainly will respect that view.
(END VIDEO TAPE)
QUEST: Willie Walsh with the Norwegian attempt. Arlo Technologies has joined an illustrious list of tech firms making their market debut this
year. Now, Arlo specializes in home security cameras and is the spinoff of Netgear. Investors certainly liked what they saw with the market. You
know, that market closed up 39% on the day, nearly 40% up and the IPO price was $16.00 a share.
So you`ve got to arguably say that when you have an IPO that on day one goes up 40%, then the brokers dramatically mispriced the IPO because
effectively, the company left money on the table. These were issues I`ve put to the Chief Executive, Matthew McRae.
(BEGIN VIDEO TAPE)
MATTHEW MCRAE, CEO, ARLO: I think we want to make sure everyone is successful in this transaction, but we were just worried about the quality
of the book as much as we were about the after price on the opening day.
QUEST: In what sense?
MCRAE: We want to make sure we have investors who were going to hold this up for a long term because we think Arlo is just getting started. We have
a lot of innovation and other features coming over time, so we`re focused on the long term building the stock price over time.
QUEST: Right, and so this gain though of 27% on day one, look, we`ve seen a few IPOs here and this is quite -- it`s not out of the ordinary, it`s not
off the charts, but it is unusual.
MCRAE: It`s strong. It`s a great day and I think people are seeing that the service component of our business is just as important as the hardware
piece.
QUEST: Right, this is the hardware. This is what you make, tell me what you do?
MCRAE: Yes, so this is a (inaudible) camera, totally wire free, battery operated. You can place it wherever you want. It`s also got two-way
audio, night vision and motion detection. You can set it up in 10 minutes. It`s absolutely do it yourself.
QUEST: The problem of course is that the hardware side of it can be replicated by other companies. I mean, your business model is such. Your
hardware part can be Google-ized or Amazon-ized.
MCRAE: Well, we have a lot of intellectual property including patents on RF and the battery power management. That some of the benefit of growing
up inside a network that had a decades` worth of RF experience, so the hardware itself is very differentiated as well.
QUEST: But longer term, does the company primarily look to the subscription service? You don`t -- it`s that you lack model in the sense
of you almost give this away, but it`s the money that you`re going to get from me every month?
MCRAE: I think as you see subscription services grow, it`s a percentage of our business. I think alternative business models do come to the front.
That attach rate to our 2.2 million registered users is something that we`re focused on right now.
[16:25:11]
QUEST: Okay, so in this business, integrity is everything.
MCRAE: Absolutely.
QUEST: Yes, there can be fly by nights that will arrive tomorrow morning and they will be gone the next day. So you have to ensure that people stay
with you how?
MCRAE: We have a high engagement rate. So one, we have 48% market share here in the United States, our nearest competitor is actually three times
less, so we are actually climbing the market ...
QUEST: But that means that the cake -- that means it`s your cake that somebody else is to eat.
MCRAE: Well, we are extending that case. So we are actually bringing in additional 10. We launched brand new products two weeks ago, the doorbell.
We`ve got smart lights, so we`ve dominated the core market and now we`re moving into adjacent markets if we need to get to that growth.
QUEST: How worried are you about cyber security?
MCRAE: Extraordinarily. So we spend a tremendous amount of time not only protecting the product, from a security perspective, but also data privacy,
making sure that we`re handing consumer`s data in the way they expect.
QUEST: And in terms of any CEO in any industry who is not yet on top of cyber security, what would you say?
MCRAE: I would say find a Board member and create a cyber security meeting and an actual committee and make sure it`s a primary focus of what you do
from the bottom all the way through the top of the company. People who handle the product, but other that -- even in customer service.
(END VIDEO TAPE)
QUEST: We`ve been talking about this so much on this program, the issue of cyber security and how it is a C-suite duty that cannot be delegated. When
we return, I`ll calculate the cost of extreme weather. We`re asking, is this is a bleep and certainly, one man`s view, Jeffrey Sachs will be with
us to tell us. Now, this is the future.
Hello, I`m Richard Quest. A lot more of "Quest Means Business" in just a moment. We`re going to be looking at the forecast for Europe and it`s
uncomfortable in place, and it`s more than just the weather what we are talking about. You are watching CNN and on this network, the facts and the
news always come first.
Sources are telling CNN, special counsel Robert Mueller`s team has interviewed Kristin Davis, the woman known as the "Manhattan Madam."
[16:30:16]
Investigators appear interested in her ties to Roger Stone; a long-time adviser to President Donald Trump. Davis once run a high-end prostitution
ring and she served jail time for selling prescription drugs.
Zimbabwe`s main opposition leader says his party will challenge the results of this week`s presidential election. Nelson Chioma says the power was
fraudulent and illegitimate. President Emmerson Mnangagwa says the vote was conducted in a peaceful and transparent manner.
The disgraced Hollywood movie producer Harvey Weinstein is seeking the dismissal of sexual assault charges against him. According to new
documents from court seen by Cnn, Weinstein`s defense team is claiming dozens of e-mails show that the woman he allegedly raped was actually a
consensual sexual partner.
(BEGIN VIDEO CLIP)
CHLOE MELAS, CNN ENTERTAINMENT REPORTER: What would you say to people out there that say, well, just because it may seem that in these e-mails, this
accuser continues to have a consensual sexual relationship with Weinstein that that just doesn`t dismiss a potential incident of rape years before.
BENJAMIN BRAFMAN, LAWYER: In this case, you have one allegation of rape, and this is not a matter of shaming the victim, this is not a matter of
going after the victim. We are not attacking this alleged victim of things that she may have done with other people at other times.
Our position is that from these e-mails, you should conclude that she was never a victim, period!
(END VIDEO CLIP)
QUEST: The grown records(ph) has began in France and large parts of Europe, indeed the United States, the northern hemisphere are now on
holiday as we go into August. However, it`s a Summer of misery for the continent. A confluence of factors making for uniquely nasty time in
Europe at the moment.
Let`s start with perhaps the most obvious and the heat wave across southern Europe and you`ll see exactly the sort of implications. The heat wave has
taken its toll with crops dying, the fires are burning, think of Athens and the awful things that have taken place there and the deaths that took
place.
We`ll talk about that in just a second. And then you`ve got man-made arguably or man-made if you like in terms of trouble when traveling.
Transit strikes in France have made it difficult to get around. You heard Willie Walsh there, strikes have been disrupting Vueling`s operations in
Spain and as a result, the strikes of French and other traffic controllers have hit the Spanish economy.
It wouldn`t be a Summer of misery if it didn`t have a Brexit component -- well, the British Prime Minister Theresa May has been meeting with Emmanuel
Macron at his official vacation home. Trying to end it in part, she`s selling her Chequers agreement, hoping that he will agree to a softer
Brexit that will give her something in terms -- that`s -- without a full single market access.
The worst that he could be in Portugal and Spain. Pau Mosquera is with Cnn Espanol in Madrid joins me now, good to see you sir, thank you. Just how
bad is it?
PAU MOSQUERA, CNN: Goodnight Richard, from Madrid, where though it`s tough at night, tough at staying at night, temperatures drop around 34 degrees
Celsius which is around 94 degrees Fahrenheit. The mercury actually has had no mercy on the capital as temperatures through the afternoon reach its
odds at 39 degrees Celsius.
That`s because much of the very ambiguous still has been affected by this year`s first heat wave which temperatures that are picking up to 45 degrees
Celsius. Actually, those temperatures were resisted yesterday in Cordoba, and today in Wellsburg(ph), both located in the southwest --
QUEST: Right --
MOSQUERA: Part of Spain. Which actually, this is a part more affected by the -- here to the border between Portugal and Spain. Forecasters have
already warned of potentially record-breaking temperatures through all the peninsula, though we still have not exceeded the continental European
record of 48 degrees Celsius, which is around 120 degrees Fahrenheit which was affecting Athens, the capital of Greece.
In 1977, this hot (INAUDIBLE) caused by a big mass of hot African air which is invading both Portugal --
QUEST: Right --
[16:35:00] MOSQUERA: And Spain, yes, autonomous humidity of Murcia has already reported that two people worked there because of those extreme
temperatures. Also authorities in Spain have warned both vacationers and population about avoiding walking through the streets in the middle hours
of the day as well as drinking as much water as possible.
But besides the temperatures, Richard, I can tell you that the national weather service has reported that the ultraviolent radiation is going to be
very high through the next few days as well. The risk of fire is going to be extreme for all the country, Richard.
QUEST: Thank you very much. The situation in -- the situation in Spain and Portugal, and it`s not only Europe that`s sweating through the heat,
from China to California, record heat waves have been recorded on four continents and they have been deadly.
Cnn`s Andrew Stevens reports.
(BEGIN VIDEOTAPE)
ANDREW STEVENS, CNN ASIA PACIFIC EDITOR (voice-over): Taking shade is just not going to toughen(ph) in China if temperatures continue to rise as they
have been. Scientists predict that the nations northern train including Beijing is said to become the world deadliest heat wave zone by 2070.
A study by the Massachusetts Institute of Technology predicts 35-degree heat combined with extreme humidity. Even healthy people may not be able
to survive the six hours or more in those types of conditions.
The region is home to 400 million people, the land is some of the most fertile farming land in China. In Japan, the heat is already deadly. This
week, a record high temperature was hit in Kumagaya city northwest of Tokyo. At least 100 people have died in Japan in the last month alone,
many of them, elderly.
UNIDENTIFIED MALE: Considering my age, I can`t really push myself, so I`m usually inactive or I just stay at home.
STEVENS: And people are struggling to cool down in South Korea, temperatures there hitting a record high in the capital on Wednesday. Then
there`s Death Valley in the U.S. state of California known for its scorching heat with a new record for the hottest month anywhere in the
world, an average of 42.3 degrees.
As the dry hot weather has made it hard for firemen to put out fires elsewhere in California. In other parts of the world, not normally known
for intense heat, Europe is set for record highs this week. After an already sweltering Summer for people all the way through Scandinavia to the
edge of the Arctic Circle.
UNIDENTIFIED MALE (through translator): Many record temperatures were reached in Scandinavia where at night, the thermometer didn`t go below 20
degree Celsius beyond the poly circle. So that`s really unheard of. Just the situation which has lasted throughout June and July and it`s quite
remarkable.
STEVENS: For Spain and Portugal, it`s got the worst of this Summer is yet to come. Meteorologist to expect heat waves across the world to get
hotter, start earlier and to last longer. We can already see what effect that`s having. Andrew Stevens, Cnn.
(END VIDEOTAPE)
QUEST: We`ll talk about the question of climate change and how this is factoring into it. In just a moment, before we go much further, we do need
to know what the weather is going to be this weekend. Allison Chinchar is at the Cnn Weather Center with the forecast.
And I guess, you know, you heard from Madrid, you just heard Andrew Stevens, I can tell you in New York, it`s sweltering, but is it that much
worse than in the past and as the forecast -- and the forecast.
ALLISON CHINCHAR, METEOROLOGIST: Right, it`s the long term, it`s not that we`re getting a day or two of records because a lot of these places, you
have records going back 30, 50, even some cases a 100 years. And yes, you get hot days here and there, but in some of these locations, you`re
breaking records multiple days in a row.
So the heat waves themselves are lasting longer. Take Pyongyang has had three consecutive days where they broke their all-time record high
temperature. The -- it would have been astonishing to even have that broken for one day, let alone three.
And yes, even again, when we come back to Europe, take a look at this, this was the high temperature today, in Cordova, 44, Lisbon, Portugal, 42, keep
in mind their average this time of year is only 28 degrees. When you factor in all of that excessive heat, again, this doesn`t just affect
children and the elderly where you normally hear us talk about, people at risk for heat illnesses.
But this can affect anyone when these temperatures get this extreme and last for this long of a period of time. The good news is we are finally
going to start to get some milder air, pushing back in, but it`s not going to be until the middle to late portion of next week.
So you still have several more days to deal with this. Take Madrid for example, 39 for the high Saturdays, same thing on Monday, we really don`t
see those temperatures cool down until Thursday and Friday of next week. And even then really, it`s just back to normal per se.
[16:40:00] Lisbon, 42, on Saturday, 36 on Monday, finally by the middle of next week, we start to see those temperatures coming back down. And again,
it`s not just the heat, it`s the drought that goes along with it. And you know, this can also have some economic issues with it too.
Take a look at this, London has only had 18 percent of their normal rainfall. Amsterdam, only 11 percent of their normal for the entire --
QUEST: Right --
CHINCHAR: Summer. Those are pretty drastic numbers when you think about it, Richard --
QUEST: All right, it`s -- I mean, you`ve got the numbers there, a billion euros that German farmers are requesting for drought aid and others will
happen. But if we look at this economic impact and we factor in, you know, the reason why -- I mean, was there a particular meteorological phenomenon
that has occurred this year that has led to this?
CHINCHAR: Right, on each continent, it was a little bit different, but you know, honestly, most of the time it`s -- you get this reach of high
pressure that sets over. And it`s very hard to move those. They can sit in place for days, even weeks at a time, and there`s nothing --
QUEST: Right --
CHINCHAR: That can push that out. And so unfortunately, when you get set up in that type of weather pattern, there`s not much you can do except run
your air conditioners, stay hydrated, you know, try to go to the pool or the -- you know, the oceans, things like that to be able to cool off.
QUEST: Right, and as you can see there, the economic impact, thank you, very much appreciative for that. And when we return, the global warming
debate, we`ve danced around this, is this a result of climate change. Jeffrey Sachs is the director for Sustainable Development, he is very blunt
and says we are all becoming climate refugees.
(COMMERCIAL BREAK)
QUEST: So let`s continue to examine this Summer of misery in Europe with the continent heading for record temperatures along with much of the rest
of the planet. The issue of course has had the relationship between these higher and hotter temperatures and climate change.
And Jeffrey Sachs is the director of Columbia University`s Center for Sustainable Development. And when he joined me a short while ago before we
came on air, he called no punches in his views of the Trump administration and its attitude to climate change.
(BEGIN VIDEO CLIP)
JEFFREY SACHS, DIRECTOR, CENTER FOR SUSTAINABLE DEVELOPMENT, COLUMBIA UNIVERSITY: It`s unbelievable that we`ve been going for decades where the
scientists have been saying for decades this is extraordinarily dangerous for everybody on the planet.
[16:45:00] And yet, we have Donald Trump, the fool that he is, who is today talking about ending all -- any remaining regulations to try to get this
under control. The irresponsibility of these ignoramus is so incredible with people dying around the world, it`s unreal.
And yes, people can say what they want, but those who for a living study this day-in-day-out are telling us why are we killing ourselves --
QUEST: But you are -- you are impugning malicious intent here.
SACHS: I sure am.
QUEST: You are saying that these companies are willingly ignoring this for the furtherance of short-term profit.
SACHS: We know it because when their e-mails are subpoenaed, when their records are subpoenaed, we see all of their clever advertisers telling them
just make it sound uncertain, just make it so it`s not sure, tell some good side, it`s been so phony for years and where are the leaders of Exxon Mobil
and Chevron and ConocoPhillips in our country to stand up to Trump who is the biggest ignoramus on this.
And say you are going to wreck the planet because you`re listening to people who are on the pay of Koch brothers and others who are trying to
stop us from thinking straight. This is -- this is obvious by the way.
And anyone who is in this watching, looking at the data, looking at the campaign money that`s flowing, looking at the lobbying money that`s going,
looking at the e-mail traffic that is subpoenaed by the Attorney General in New York state of Exxon Mobil and others.
It`s sorry to say it`s just unbelievable how we can walk into this continuing year after year, and now with the U.S. government absolutely
deliberately taking apart every last barricade.
(END VIDEO CLIP)
QUEST: Jeffrey Sachs talking to me earlier. As we continue tonight, Theresa May sat down with Emmanuel Macron at his holiday retreat and it was
Brexit business of course. While the Governor of the Bank of England pretty much reined on the parade -- in a moment.
[16:50:00] (COMMERCIAL BREAK)
QUEST: So we return to the misery that has happened, let`s focus our attention on Britain where the forecast of Brexit is a risk that`s
described as uncomfortably high. The British Prime Minister Theresa May was certainly feeling the heat, she sat down and had talks with the French
President Emmanuel Macron at an island retreat in the south of France.
And she was there of course, the German support, Chequers deal on Brexit. The pound didn`t like what it heard from the Governor of the Bank of
England and dipped below a $1.30. After Mark Carney said no deal warning and he gave a warning that this was getting uncomfortably close when he
spoke to the "Bbc".
(BEGIN VIDEO CLIP)
MARK CARNEY, GOVERNOR, BANK OF ENGLAND: I think the possibility of a no- deal is uncomfortably high at this point, yes.
UNIDENTIFIED MALE: So you`re saying quite clearly that a no deal Brexit would be a disaster.
CARNEY: It is highly undesirable.
(END VIDEO CLIP)
QUEST: Highly undesirable, Bianca Nobilo, but Theresa May -- Theresa May is trying to convince Emmanuel Macron to sign up to her, some say half
baked Chequers plan.
BIANCA NOBILO, CNN: Yes, and it`s probably for tutors that there are all these warnings about how undesirable a no deal would be, not just for
Britain but for Europe as well because that suits the Prime Minister`s purposes, doesn`t it?
Because she is going over to Europe to try and sell this compromised deal, saying you have to get behind it or else we`re going to be in trouble and a
no deal becomes even more likely.
QUEST: OK, how likely is it though that -- I mean, Emmanuel Macron, look, we know Angela Merkel probably is shifting towards sorting this out. We
know Juncker and co, Barnier and co wouldn`t move a muscle frankly towards the Chequers -- you`re looking critically?
NOBILO: I am, maybe well, Richard. Well, there were over chores, the rhetoric that we had from Barnier earlier this week implies that they might
be willing to get on board with it -- he softened his stance, he says the EU were going to go and have to look back and improve some of their
suggestions.
So it seems like he was given a little, and it could be a signal that there`s something -- you know, there`s discussions to be had about
Chequers, it hasn`t been dismissed out of hand by Barnier. We`ve heard him before and we know what being dismissed out of hand sounds like from him
and he didn`t do that with the very recent month --
QUEST: But the plan, the Chequers plan requires this very complicated free trade area for goods, not services and requires you know, the VAT
regulations and the collections -- well, you know it better than I do.
NOBILO: It is incredibly complicated, and obviously Macron, Barnier, none of them want to interfere with the pillars of the EU and the integrity of
the four freedom, so yes, that does present a huge issue and fundamentally as well.
The EU don`t like the idea that the U.K. would be in anyway responsible for collecting their customs and giving it back to them, I think that`s not
sitting well at all. But I think there`s potential in this plan as both sides keep saying it is a negotiation.
And the Chequers plan is very much still an active part of that. It is interesting that she`s talking to Macron because you know how pro-European
he is, he is not going to be -- he`s not the weak link in the chain here --
QUEST: OK, so --
NOBILO: Who is going to give her that backing.
QUEST: All right, but northern Ireland, you know, to add to the moment Brexit happens, I`m going to keep coming back and inconveniently reminding
everybody of the back stuff and the idea of no hard bordering northern Ireland, which is trying to square a circle that will not be squared.
NOBILO: Yes, northern Ireland remains the most fundamental issue and the issue which neither side is speaking about as much as the others, not
because they understand how inflammatory it is, how historically significant -- this isn`t just how intractable the issue is.
Many solutions have been put forward, a border in the Irish sea perhaps, but obviously that`s going to be completely dismissed by the DUP --
QUEST: Though I was going to say --
NOBILO: Cause the DUP --
QUEST: There`ll be open arms, the DUP -- before we finish quickly, just want to get your --
NOBILO: Yes --
QUEST: Stop piling of medications, is this really going on? I know Sanofi --
NOBILO: It is --
QUEST: And others and Nevada suggested they were doing a bit of it. How much of that just scare mongering, Bianca?
NOBILO: It`s definitely going on, actually, I`m going to Sanofi early next week and they`ve speaking to us about it, confirming that they happen to
stop piling momentous particularly (INAUDIBLE), the U.K.`s biggest supplier for that.
They say they`re going to add -- they usually provide 14 weeks` worth of stockpiles and they`re going to add another four weeks to that. So it
definitely is going on, these big companies making preparations, they need more warehouse space, that is happening.
[16:55:00] And they`re trying to communicate that to reassure consumers as well and people who depend on their drugs were going to have as much for
you as you`ll need. Don`t worry too much, it`s an important part of their messaging now, it`s very much, it is happening and they want people to know
that it`s happening too.
QUEST: Bianca, have a good weekend, thank you.
NOBILO: Thank you.
QUEST: The final check on the markets and the Dow closed -- and raised a bunch in 36 points with the Nasdaq and the S&P all higher, although one
sector gained very low volume, a couple of 100 million shares, just over 300 million shares or whatever.
Investors were focusing on the solid jobs report and trade off the tariff war. Apple shares, now they rose and by doing so it kept the market cap
above $1 trillion. One of the open markets, Sonos shares continue to soar, it was yesterday`s IPO.
Now, the stock in the sound company closed up a further 6 percent and we need to round off with Europe`s markets, London led the way, you see the
numbers, we`ll have a profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight`s profitable moment. On tonight`s program, we delve into the question of tariffs. And you heard Chris Cassirer(ph) give a strong
robust on defense, (INAUDIBLE) of the president in favor of the tariffs. At the same time, you got Toyota with the very real consequences, economic
consequences and they cost him a price of a car if these next round of tariffs come in.
It is the discrepancy between the two sides and complete failure and unwillingness to sort of recognize one or the other that`s going to make
this so difficult. But the reality is so far, China is staring down the United States. And to those who talk about the EU agreement between
Juncker and Trump, well, it doesn`t include agriculture, it is band-aid at best, and there`s no guarantee that they`ll actually come to a full binding
agreement.
Because unless Donald Trump does withdraw the existing tariffs, the other countries are simply going to say we are not negotiating at a point of a
gun -- oh, don`t get me wrong, they are sorted out somehow, the issue becomes how much damage is being done and whether that damage is justified
as a result of the final result.
If China comes to the table in reforms, arguably it is. It`s "if" -- and that`s QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York.
Whatever you`re up to in the hours ahead, I hope it`s profitable, have a wonderful weekend, I`ll see you on Monday.
END
