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Quest Means Business
From The Oval Office, The President Accused The Fed's Policymakers, Most Of Whom He Picked Out Himself, Of Being Out Of Control; Trump Says Sanctions On Saudi Arabia Would Not Only Hurt U.S. But Saudi Arabia As Well; Turkey, Saudi Arabia to Investigate Khashoggi Case; U.S. Officials Believe Pastor Andrew Brunson Could Soon Be Released from Jail in Turkey; Soyuz Rocket Crew Safe After Emergency Landing; World's Longest Passenger Flight Takes Off From Singapore To New York; Banksy Gives Shredded Artwork A New Name; Dow Pares Losses In Final Minutes Of Trade; FANG Stocks Still Under Pressure; Foursquare Shares Plunge After CFO's Departure; Chinese Markets Swept Up In Global Sell-Off; Six Dead After Hurricane Michael Left Parts Of Florida In Ruins; Nearly 500,000 Are Without Power In Three U.S. States; U.S. Stocks Swing Wildly Ahead Of Closing. Aired: 3-4p ET
Aired October 11, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: Yes, it's ugly, people. Stay with me, the selling isn't stopping. We are close to the lows of the
day in the last hour of trade here, buckle up. Here's what's driving the day on Thursday, October 11th.
Stock markets turn sour again as heavy losses return at the end of what has been an incredibly volatile day, the kind of day where you blink and you
miss it. In the meantime, Saudi Arabia faces economic fallouts in the mystery of the missing journalist. And you thought trading was tough, try
flying nonstop for 19 hours, Richard Quest is doing it right now on-board the world's longest flight. I'm Paula Newton, and this is "QUEST MEANS
BUSINESS."
OK, so you get the picture, right? The US stocks are swinging wildly, hang on because this could get worse before it gets better. This is the final
hour of trading that we are bringing to you here on "QUEST MEANS BUSINESS." The NASDAQ, interesting here has just fallen into correction territory.
That's a fall of 10 percent or more from recent highs and that is exactly what it has done.
The Dow has pulled up slightly from the lows of the day. It was down 700 points and that was just moments ago. All sector are down. The S&P 500 is
on pace for its worse month in more than three years. Asia and Europe in the meantime, they are not sitting this one out. They also suffered steep
losses.
Investors are growing anxious about those rising interest rates -- that trade war and now, President Trump's verbal attacks on the Fed. From the
Oval Office, the President accused the Fed's policy makers most of whom, keep in mind, he picked out himself of being out of control.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: That is far too stringent and they're making a mistake and it's not right and it's -- despite that,
we're doing very well, but it's not necessary in my opinion and I think I know about it better than they do, believe me.
UNIDENTIFIED MALE: Mr. President, (inaudible) ...
TRUMP: No, I am not going to fire him. I'm just disappointed at the flip. I think it's far too fast.
(END VIDEO CLIP)
NEWTON: And we will get more on the politics of all of this in a moment, but first, we go to Alison Kosik who is at the New York Stock Exchange. I
mean, Alison, I am having a hard time just even looking at all of the red. You're living it there on the floor. I mean, what seems to be happening
because there has been a lot more selling just in the last hour.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: There definitely has been. I mean you're right, if you blink and look away, you're going to miss it and
in a matter of 15 minutes, I've watched as the Dow swing literally hundreds of points. Even stunning, traders here, hearty traders who do this and
handle this kind of thing every day. This is even shocking to them.
What's changed? Really nothing. I mean, we've just entered the last hour of trading of a two-day sell-off. The situation is pretty much still the
same except the one difference which I find interesting is that the yield on the ten-year is down today. So you can point to the bond market to
blame for this second-day sell-off as we see the Dow sit lower by 473 points, really just volatile trading today.
A lot of traders I talked to said, "Look, we expected this to come at this time because we watched the movement of the market throughout the day, and
it was really trying to make up some grounds and it really couldn't stick. This is kind of what they expected, but even when it happened, they were
still stunned, Paula.
NEWTON: Yes, and Alison, there are some buyers in this market, they are trying to claw their way back. Is there a sense that this though -- we
know that traders love volatility, right? They don't like a good steady market. They say, you can't make money in that. Is there a sense that
we're at a different inflection point here, that this is a game-changer?
KOSIK: Some are saying, yes, this could be an inflection point, but look, I mean, if you think about that inflection point, we're talking literally
about interest rates moving higher, but that's been telegraphed for a very long time from the Feds. So many say, "Look, this shouldn't be a huge
surprise."
Secondly, markets shouldn't just go up, up and up. It needs to go down like this. Many will say, "Look, this is healthy for the market. This was
something that was coming and it just was a matter of time, Paula."
NEWTON: Yes, a matter of time, and yet, a lot of people seem to have not heeded that warning even though it's been coming for weeks now. Alison
Kosik. We will continue to watch these markets in what has been an absolutely roller coaster ride the last couple of days in the last hour of
trade. Alison, thank you.
Meantime, as we were just talking about the President's comments. His topic and economic adviser insists the Fed is independent. Extraordinary
words that his economic advisor even has to say that, but over the last 24 hours, President Trump has managed a sustained attack on the Central Bank,
its policies, and the man he chose to run it, Chairman Jay Powell.
(BEGIN VIDEO CLIP)
TRUMP: I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy. It's the correction that we've been waiting for,
for a long time, but I really disagree with what the Fed is doing.
[15:05:16]
TRUMP: The Fed is going wild. I mean, I don't know what their problem is, but they are raising interest rates and it's ridiculous. The Fed is going
loco and there is no reason for them to do it, and I am not happy about it.
The Federal Reserve is getting a little bit too cute, that's all because that's ridiculous what they're doing.
I'm paying interest at a high rate because of our Fed and I'd like our Fed not to be so aggressive because I think they're making a big mistake.
(END VIDEO CLIP)
NEWTON: Blunt language there. It has been in fact the Fed's great experiment, right? Finding that right temperature to help the economy
create jobs, but also keep those prices in check. Now, the Fed's low rates over the past decade have lit a fire under the economy. Low rates make it
easy to remember and cheap for businesses to borrow money.
When they invest that money, jobs are created. More jobs means more people, like you and I spending and paying for those goods and services,
which in turn grows the economy. Now if the Fed keeps rates too low for too long, what happens? The economy overheats. Business borrow and spend
in an unsustainable way, known as a bubble, but when there are more jobs than workers, wages rise quickly. That pushes up prices.
So far, inflation isn't out of control. That is key. You want to keep an eye on that inflation number. The latest number show consumer prices rose
less than expected in September, but if the Fed raises rates too quickly, this is the other problem and the great debate out there right now because
the economy could -- the heat could go out of the economy far too quickly and that economy then cracks when rates go up too high, too much, too fast.
Businesses borrow less and hire less. Companies that relied on easy money suffer, job growth slows or goes in fact in reverse.
And when that happens, consumers spend less. The Fed thinks equilibrium is a few rate rises away, big mystery there. How many do you need? Rates
have gone up eight times since the crisis, with another three to four rate hikes expected in the next year. A lot to talk about here.
Joining me now is Stephen Moore. He served as an economic advisor to the Trump campaign. He is a distinguished fellow at the Heritage Foundation
and Catherine Rampell. She is an opinion columnist for "The Washington Post," and a contributor here at CNN.
All right, we've got a lot of time her which is a good thing, because in fact, we are going to need it. Let's get first to the Fed comments and the
President. Stephen, you know I am coming to you for this one. These comments were extraordinarily blunt and even to say something like, "No, I
won't fire him," as if that would be easy or as if there is cause. You have been much more orthodox on these on the President, I want to say.
I mean, are you happy with the fact that he's calling out the Fed and do you think it spooks the market?
STEPHEN MOORE, DISTINGUISHED FELLOW, HERITAGE FOUNDATION: I don't know if I'd call my views orthodox. I tend to agree with Trump that there was no
real reason for these rate hikes, and I think one of the things that's really spooked the markets is not necessarily this particular rate hike,
but their announcement that rates are going to continue to go up and up and up and I think that their benchmark for 18 months from now was like 3.7
percent, well, that's well above the inflation rate.
And I think that has spooked investors and I think it's wrong. I mean, the Fed has one job and one job only, and that is to keep inflation under
control, in my opinion, and look, we've got -- as you just said, you know, inflation is under control. That was exactly spot on ...
NEWTON: From what we've seen.
MOORE: Yes, but I mean, it's been under control for a long time and there's no real indication that prices are going to rise, except for the
fact that you do have wage increases and that's something we wanted to see.
NEWTON: But isn't it something? We're just going to throw out Fed independence here. The President just ...
MOORE: Now, look, the Fed is independent that nobody is calling into question that. The question is whether it's appropriate for the President
as the Chief Executive of our economy to call out the Fed when he thinks they are wrong, and I don't have a problem with that. I think they are
wrong.
NEWTON: Catherine?
CATHERINE RAMPELL, OPINION COLUMNIST, "THE WASHINGTON POST": I think they are two issues here. One is what the Fed is doing appropriate and
reasonable people can disagree about the pace of Fed hikes, but we are into one of the longest recoveries on record. We have, as I am sure you would
love to point out, unemployment at whatever it is, 49-year lows. Inflation has been picking up a little bit. It's still not out of control,
obviously. Trump just dumped $2 trillion worth of fiscal stimulus in the economy. These are exactly the conditions under which you would expect a
Federal Reserve to decide to tighten gradually as they have.
So that's one question, which is, is what the Fed is doing appropriate? And I think a lot of economists would agree even if they might quibble with
the exact pace. The second question is, is it appropriate for the President of the United States to job-own the Fed and it is absolutely not
appropriate.
Central Bank independence is incredibly crucial to the long-term health of this economy and the Fed has fought over decades to safeguard both its
actual independence and perceptions of its independence. Part of the reason why we had inflation in the 70s that Volker then had to tamp down is
in part that Presidents in the '70s were job-owning the Fed.
[15:10:11]
RAMPELL: Were publicly putting pressure on the Fed. The Fed has worked very hard to make sure that people credibly believe that they are looking
out for the stability of our currency, for the stability of prices, and as long as the President of the United States is making these public comments,
calling them loco, that puts all of that into question.
NEWTON: He was bilingual. That was very good. Loco and crazy. I give the President full credit.
RAMPELL: Gone wild, yes.
NEWTON: But Stephen, it's a point to be made here. If you believe in the Fed's independence, why say anything at all unless you're just using it as
a political statement and you don't care that the market is down more than 500 points right now.
MOORE: The reason I disagree with it. There is this view out there that somehow these people run the Fed have some kind of oracle where they know
what the answer is and they don't.
RAMPELL: It's about the public perception about whether there is political influence.
MOORE: But the public perception is wrong. I mean, you mentioned the 1970s, only idiots would have been doing what the Fed did in the 1970s
where they created 15 percent inflation and 20 percent more interest rates. I mean, only a moron would be in favor of that.
RAMPELL: That's because ...
MOORE: And let me mention another example though. We had a major financial crisis, right, in 2007 and 2008. The Fed had a major role in
that by inflating the economy zero interest rates and it just pumped money into the housing market. I was at the "Wall Street Journal" for five years
before that.
We were warning month after month after month after month that they were creating a bubble, so this idea that the Fed ...
RAMPELL: It's interesting that you only care about inflation when Trump is not in office, but not when he is in office.
MOORE: Look, my point is -- no, I am making a different point that the Fed is not -- the Fed is not like the Pope. They are not infallible and
they've made a lot of mistakes ...
RAMPELL: No, no. I don't have a problem with you criticizing the Fed. I don't have a problem with Paula criticizing the Fed. I have a problem with
the President of the United States criticizing the Fed.
MOORE: Well, he runs the economy, I mean why shouldn't he ...
RAMPELL: You don't ...
NEWTON: But then why you have Fed independence if you think that you interfering and you as Catherine says, job-owned the Fed?
MOORE: Because I think the Fed should take into account what the President's view on this, right?
RAMPELL: No, they absolutely should not because Presidents always have an incentive to play the Phillips curve, to pump a little bit more money into
the economy, especially during an election year so that you can keep a little bit more growth out of it, which runs the trade of risk of having
inflation down the line that's why you want the Central Bank to be independent so that they have the freedom to do unpopular things, like jack
up interest rates, like take the punch bowl away.
And if there is a public perception out there that the President is in fact threatening the Fed behind the scenes or is screening potential Fed picks,
as Kevin Warsh who was shortlisted for the Fed chair actually said he was screened. He said, Trump was asking him elaborate questions about his
views on interest rates ...
MOORE: That's true, but what's ..
RAMPELL: Because you want the Fed to be independent.
MOORE: But why have the President even pick who the head of the Fed is. Look, my point is this, the real economy is as strong as it's been in 30
years. I mean, every indication in terms of investment, employment, we're going to get 4 percent GDP growth for the third quarter ...
RAMPELL: And yet, it's not appropriate for these tightening?
MOORE: ... these things are all ...
RAMPELL: Give those circumstances?
MOORE: And it's the best of our world. We have no inflation, so my point is ...
NEWTON: So far ...
MOORE: ... and I think Trump is making ...
RAMPELL: So keep the punchbowl.
MOORE: Yes, exactly.
RAMPELL: More punch. More punch for everyone.
MOORE: Don't take the punchbowl away just because the party is rolling. The biggest problem with the American economy over the last 20 years, I
think you'd agree with this is that wages haven't been rising for middle class workers. We made this the central focus of our agenda. How do we
get middle class wages up? They are finally starting to rise and the Federal Reserve says, "Oh, no that's inflationary." How are we going to
get ...
RAMPELL: ... and they have said nothing close to that.
MOORE: They have been looking at wages. They have been looking at wages.
RAMPELL: ... they look at PCE -- core PCE.
MOORE: And they look at wages. I know they do. I talk to Fed economists all the time and how are we ever going to get wages up if every time we get
a wage increase, they take the punch bowl away and say we can't have it.
RAMPELL: If you have a fiscal stimulus and that's what's goosing the economy, then it is perfectly appropriate for the Fed to see ...
MOORE: It's not a fiscal stimulus, it's an investment led recovery. That's not ...
RAMPELL: That is not with the Fed. That's CBO, the IMF -- every single outside independent forecaster ...
MOORE: Catherine, look around the country, every single city from Portland, Maine, to Portland, Oregon has the biggest construction bloom in
the history of this country.
RAMPELL: Every single outside independent forecaster says ...
MOORE: Have you looked with your two eyes at what's happening in America?
RAMPELL: I have. I have ...
MOORE: Look at the construction numbers. They're off the charts. That's investment.
RAMPELL: Would you let me finish, please? Every single outside independent forecaster including the Fed, including the CBO, including the
IMF, including the Penn Wharton Budget Model, every single one says that we will have a temporary boost from the tax cuts and then we will ...
MOORE: Wait a minute, Catherine, these are currently the same people who didn't predict the Trump economic boom, so they've got to -- you're citing
the very people who said that Trump's policies are going to cause a recession and not a boom ...
NEWTON: I've got to call time for this moment as we continue to watch the market claw back from there. I invite both you guys to have ...
MOORE: It's a good time to buy stocks right now. Stocks are really cheap now.
NEWTON: Now, Stephen ...
MOORE: Buy stocks now ...
NEWTON: Listen, we will have you guys back. I love these interviews where I don't have to do anything at all. I will advice, believe it or not,
folks, these are the debates that Catherine and Stephen just had that are going on within the Oval Office because I know there is a lot of debate
between Treasury right now and the West Wing about what should be done about the Fed if anything at all. Thank you, both.
[15:15:13]
NEWTON: Now, an international mystery is pitting Donald Trump against a key ally. Trump says sanctions on Saudi Arabia would not only hurt US
companies -- would only hurt -- not only hurt US companies, but Saudi Arabia as well. Senators say the Saudi government must pay a price if it's
behind a journalist's disappearance.
And I told you before, Richard Quest is taking the longest flight in the world, Singapore to Newark here in New York City.
(BEGIN VIDEO CLIP)
RICHARD QUEST, CNN INTERNATIONAL HOST: The twin Rolls Royce Trent XWB engines have spurred to full power and we're now on our takeoff roll. Any
second now, (inaudible) into the air, rotator -- there we go, wheels up.
(END VIDEO CLIP)
NEWTON: We are going to take a quick look at the markets here. As you can see, they are clawing their way back a bit. We were down more than 2
percent, now down about a percentage and a quarter there. Again, as I said in the beginning of the show, you're going to blink and you're going to
miss this whole thing. Two hundred point swing just since this program started.
Now, the NASDAQ is only off about half of one percent at this moment. Of course, we will continue to keep an eye on the markets for you. Now,
pressure is mounting tonight on Donald Trump to find out what happened to Saudi Arabian journalist, Jamal Khashoggi in response to what happened.
A group of United States senators are vowing to target the Saudi economy for Khashoggi's disappearance. "The Washington Post" columnist has been
missing for more than a week after he went to the Saudi consulate in Istanbul. Speaking to my colleague, Christiane Amanpour, Senator Bob
Menendez warned that sanctions against Saudi Arabia could be triggered.
(BEGIN VIDEO CLIP)
SEN. ROBERT MENENDEZ (D), NEW JERSEY: If the facts deduced that in fact they were part of the disappearance rendition and/or murder of Mr.
Khashoggi, then they must pay the consequences.
(END VIDEO CLIP)
NEWTON: OK, pay the consequences, but so far, Donald Trump is ruling out any sanctions that would block lucrative sales to the Saudi government by
US companies. the President says it would be a very tough pill for the US economy to swallow.
(BEGIN VIDEO CLIP)
TRUMP: I will tell you up front right now and I'll say it in front of the senators, there's been $110 billion purchasing military equipment and other
things. If we don't sell it to them, they'll say, well, thank you very much. We'll buy it from Russia or thank you very much, we'll buy it from
China. That doesn't help us.
[15:20:16]
TRUMP: Not when it comes to jobs and not when it comes to our companies losing out on their work, but there are other things we can do. Let's find
out what the problem is first, okay?
(END VIDEO CLIP)
NEWTON: OK, just to put some context on all of this. Donald Trump's first trip abroad as you remember as President was not to a traditional Western
ally but in fact to Saudi Arabia. He sat with Saudi Crown Prince, Mohammed Bin Salman and welcomed deals worth more than $160 billion for those US
firms, firms like Lockheed Martin, Raytheon, Halliburton, and others are providing armored vehicles, helicopters, ships and missile systems to the
Saudis.
GE meantime is upgrading the Saudi energy grid. Dow Chemical is building a manufacturing plant. You get the idea here. Alex Marquardt is with us in
Washington and had been following the details of this investigation. We are learning in fact that the Trump administration is trying to work with
both Saudi and Turkish officials to try to get to the bottom of this. But what does all of this mean especially when you have senators saying that
they looked at the intelligence and it clearly points to the fact that the Saudis were involved.
ALEX MARQUARDT, CNN SENIOR NATIONAL CORRESPONDENT: Yes, Paula, when you're asking about the reaction in DC, there really have been two completely
different reactions. On the one hand, as you noted, there is a group of now more than 20 senators from both parties -- Republicans and Democrats --
who have come together to sign a letter to the President that was sent yesterday calling for an investigation that would raise the prospect of
sanctions against Saudi Arabia, that would be under the Magnitsky Act which of course as you know was passed in order to punish Russia for the murder
of a lawyer in Moscow.
So, it would be absolutely incredible for Congress to then -- the concept of them going after Saudi Arabia, which is the closest American -- closest
Arab ally to the US on the possibility of sanctions is really quite extraordinary, and then you have the White House's reaction.
Initially, after the disappearance of Khashoggi, it was relatively muted. They had been pressured to come up with a more robust answer in the
following days, and really, the line -- the tightrope really that the White House is trying to walk here is one between American values and the
economy. The President has said that he is very disappointed, very sad at this turn of events, the disappearance of Khashoggi, but as you noted in
that -- by playing that sound right there, he is a top priority, if not, the top priority is the American economy and that $110 billion in economic
deals.
So the White House is really -- is at a tough position right now coming under increased pressure from Capitol Hill, from citizens, from people
around the world to do something while also trying to balance what has become a very close relationship between the Saudi monarchy and the Trump
administration.
NEWTON: OK, Alex, thanks so much. You'll continue to follow this investigation from Washington. Appreciate it. We have to say that many
administrations going back from both Bushes and Barack Obama and Donald Trump have all been very transactional when it comes to Saudi Arabia,
ignoring many times what is an abysmal human rights record.
President Trump as you heard earlier was quite blunt about why he doesn't want sanctions on Saudi Arabia. Saudi money means a lot to the US economy,
but Saudi Arabia may now have compromised its own economic future as well.
Earlier, I spoke to our emerging markets editor, John Defterios about the billions of dollars of investment now on the line.
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, EMERGING MARKETS EDITOR, CNN: I would almost say it's the two faces of Mohammad Bin Salman, one is the reformer who had this 2030
vision to wean the country off of energy. This is the man who toured Wall Street and Washington and went to the West Coast and toured Hollywood and
Silicon Valley saying, "I'm going to invest in the outside world. We are going to transfer their technology to boost Saudi Arabia in the future."
This is also one, less than a year ago, Paula, that it arrested more than 300 millionaires and billionaires in Saudi Arabia, extracted $100 billion,
but to your point here, he earned that money back for the state, but at the same time, it was a reputational and financial damage as well.
I think two key numbers stand out for me. One is foreign direct investment which is now at the lowest level in 12 years. It was less than $2 billion
in 2017 and then capital flight as measured by JP Morgan & Chase of $80 billion in 2017 and they are suggesting another $65 billion this year.
That is about a third of the government reserves on order right now. So this is a real damaging influence for him.
And then I think we have to touch upon the major issues of the last two years since reform was underway. The Shell -- the Saudi Aramco IPO -- he
is saying it could happen in 2020 or 2021, but the word that we've read from the palaces is not going to happen at all. The economic embargo
against Qatar, the Saudi-Canada dispute on a scale of one to ten, it went to a 10 very, very fast and this is also the author of the ...
[15:25:16]
DEFTERIOS: ... very strict policy against Iran. He got Donald Trump to tear up the nuclear agreement. He holds a very tough line against Iran.
It has a proxy war in Yemen. It's made the situation in the Middle East extremely tense under this 33-year-old crown prince.
NEWTON: And the United States has stuck by him by and large, if again, we talk about the money issues and what's at stake here. There's a lot at
stake for the US administration in terms of them, this was Donald Trump's first foreign trip let's not forget and he came out of that trip really
touting billions of dollars in deals.
DEFTERIOS: Yes, but I think he is running into a US Congress that feels emboldened. You saw that letter that went from 20 senators from both
sides of the aisle suggesting to Donald Trump, that change is needed.
And this puts Donald Trump in a very difficult position as you know, and as you suggested, it was his first overseas trip, he has embraced -- literally
almost a bear hug against or around it that crown prince here, he has said now that he would like to protect the arms sales. But what does it mean
financially? $110 billion in arms sales, Paula, another $200 billion in contracts for US companies over a span of a decade here. Blackstone has a
$40 billion plus infrastructure fund that its developed with this crown prince and Softbank which is ubiquitous both in Japan and Silicon Valley
has $100 billion maybe growing to $145 billion, that's all outbound investment by Saudi Arabia to basically burnish his name going forward, but
also to try to diversify the economy.
Now, even back at home though, Paula, he has five major mega projects here underway. One of them, NEOM -- it had 19 members on the international
advisory board, three has stepped aside, one was a former US energy secretary who was also involved in the Iran talks, by the way and two
others decided to duck out, some major names. I would imagine as time goes on, they'll have second thoughts as well, they are advisory board members,
but the name or the brand of Saudi Inc. is tarnished because of this and I think it's going to be challenge going forward.
NEWTON: That's such a good point and a good point made with a lot of -- and crucial numbers attached to them. John Defterios, thanks so much.
Appreciate it.
(END VIDEOTAPE)
NEWTON: Now, when we return, an update on what has been an incredible day on the stock market. The sell-off continues, but they are clawing back
those numbers and this is going to affect the stocks around the world.
And if you are wondering where in the world Richard Quest is, what the heck is he doing there? This is my attempt to ridicule, Richard. He is a
minion. No, he's not a minion. No. Those are apparently some fancy glasses that are supposed to prevent jetlag. I will ridicule him here,
live tomorrow, but in the meantime, he is in his second hour of the world's longest flight -- 19 hours -- in case you're wondering and I am going to
ask him, I'm going to make him wear those glasses on the set. Stay tuned.
(COMMERCIAL BREAK)
[15:30:00] NEWTON: Hello, I'm Paula Newton and we'll give you a quick check of the markets in just a moment. But first, these are the news
headlines we're following on CNN at this hour.
A joint Turkish-Saudi team will investigate the disappearance of journalist Jamal Khashoggi, that's from a Turkish presidential spokesperson.
Khashoggi went missing after walking into the Saudi Consulate in Istanbul this month.
A key U.S. senator accuses Saudi Arabia of killing him, the kingdom denies that. U.S. officials believe Pastor Andrew Brunson could soon be released
from a jail in Turkey. That's according to a source familiar with the matter, the officials are warning the release is not yet a done-deal.
Brunson has been held since 2016, accused of helping a failed coup attempt. A U.S. astronaut and a Russian cosmonaut who were on board a Soyuz Rocket
are alive and in good condition after the rocket that was carrying them to the space station suffered a booster failure. Their capsule plummeted back
to earth shortly after take-off.
U.S. and Russian officials are investigating what caused the incident. The world's longest passenger flight has taken off from Singapore en route to
New York. The Singapore Airlines flight is 19 hours non-stop and lands on Friday morning East Coast time.
Our very own Richard Quest is one of the passengers, of course he is, we'll hear from him later in the program. Sotheby's said the person who bought
that Banksy painting -- you all remember this story, you remember it shredded itself, still wants to own the painting.
The buyer says he was shocked at first, but is now happy to own a piece of art history. Banksy's gallery says the artist has renamed the piece that
used to be girl with balloon, now it shall be known as Love is in the Bin, OK.
OK, it is the last half an hour of trade and I'm almost afraid to look. The market sell-off is tapering off a little though. The Dow has climbed
back from session lows, around 300 points in the red right now as you see, like I said, don't look away, you're going to miss something.
Because we're adding this drop to the 8,800-point drop we saw yesterday, and this is turning into a monumentally bad week for U.S. equities. Few
market sectors though have been hit harder in recent days, FenTech. The FANG index is lower again today after suffering its worst one day drop ever
on Wednesday.
There you see -- look, I mean, Google off a bit but parent company is calling back as is Facebook a bit, Amazon though and Netflix are still
struggling. And it has been a punishing few weeks for tech stocks. Amazon and Alphabet had seen their 2018 gains absolutely slashed.
Facebook shares have lost almost a fifth of their value since the end of January. Samuel Burke is in London, Samuel, those are absolutely ugly
numbers. What does that work here? Although the run-up of those FANG stocks from the tech stocks really has been extraordinary for a few years
now.
SAMUEL BURKE, CNN BUSINESS & TECHNOLOGY CORRESPONDENT: Well, Paula, I've got to say I just came back from a tech conference and I heard a lot of
leaders praising Donald Trump for his tax cuts, saying all of that money that we're getting back, we're plowing it back into research and
development.
Then this happens, and I want to just put up on the screen what the main drivers are, because one of them has to do with Donald Trump, and those are
the tariffs on tech. A lot of people thought the headlines was -- oh, there aren't any tariffs on Apple, on the iPhone, but there are tariffs on
cloud computing equipment.
Paula, this touches everything we do. The Netflix shows you watch come from the cloud, Amazon has their cloud services, so this is catching up to
these tech stocks. Now, plus data protection, we've seen so much about these data breaches.
[15:35:00] Facebook may have to pay a $1.6 billion fine to the EU because now we have GDPR. So it's amazing how people just weren't really keeping
up with a lot of what was going on in tech, choosing to ignore it. And Paula, as I landed back here in London this morning, I sent you an e-mail
with that advertisement from Google -- pretty ironic.
Just showing you how quickly things can change. There's this ad from Google that said "spot the data leaks before they happen." If the director
can just drop the banner for a second, you'll see there that then it has an advertisement for the Google card -- just a few weeks ago, Google was
saying they could spot the data leaks.
And now we know, they had a self-inflicted wound that was leaking the data out. Things can change very quickly in the tech world.
NEWTON: Yes, actually, when you sent that to me this morning, I actually thought it was a joke, a spoof, not something that Google actually put out
there, extraordinary. Quickly, Samuel, Foursquare, what a day for them, not good.
BURKE: No, this is Jack Dorsey's other company, the mobile payments company which has done incredibly well over the past year. Now, the CFO,
the woman who has been really leading the company because he's so focused on Twitter, she's leaving the stock down big time about 15 percent to 1-
point.
This is a great day for women in tech, so we applaud her, she's going to be the CEO now, but people are upset to see her leaving, and upset that Jack
Dorsey who is so focused on Twitter didn't just make her CEO.
He should have let her take over the reins of the company because now she's running another company and his stock is running down.
NEWTON: Yes, a stock to watch especially when we notice who is going to replace her. Samuel, thanks so much, I appreciate it. Now, the selling as
we've been telling you on Wall Street pales in comparison to what's going on in China.
It is scary. Stocks in Shanghai closed down a whopping 5 percent, salt in the woods after a bruising year for Chinese stocks. The Shanghai Composite
is now down almost 22 percent in 2018. The escalating trade war with Washington has weighed heavily on that investor sentiment.
Stocks aren't the only thing though that's losing value. Look at this, China's currency, the Yuan is down 9 percent against the dollar in the past
six months alone. U.S. Treasury Secretary Steven Mnuchin says he's watching the situation carefully.
We're going to tell you what that means from Washington now. I'm joined by CNN Global Economic Analyst, Rana Foroohar. Rana, thanks so much for
joining us. You know, this has been an open question about whether or not China is going to be labeled a currency manipulator.
We're going to get that information possibly next week from the Trump administration. But how does this affect everything when Donald Trump
himself has complained about this, and the fact that if China has got a cheap currency and that U.S. dollar is still riding high, it actually takes
a lot of the bite out of those tariffs.
RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST AND ASSOCIATE EDITOR, FINANCIAL TIMES: Yes, absolutely. Well, for starters, Trump is not the first to
accuse China being currency manipulator, Obama did, a number of other presidents have.
And it's true that China does toil with its currency on occasion. You know, when it does that, how it does that, the markets judge and you know,
we'll get a read on politically next week. But let me talk about the ramifications of this.
When China's currency goes down, it does make Chinese goods cheaper, that's a way to make the more competitive on the global stage. But it may also
give China breathing room if Donald Trump being Donald Trump decides he wants to come to the table before the mid-term elections in November and
cut some kind of a deal, smooth over the tensions between the U.S., China trade debate.
That will give China room to reflate and then let Trump say that he is declaring a victory. That's one strategy that might be going on here.
This could be the reaction of the markets, this could be a legitimate effect of the markets, saying, look, the U.S. and China are in a prolonged
conflict.
This is going to be bad for both regions. That could be what's happening here? We just don't know yet, my bet, frankly, are the businesses going
away. I think we may see a head fake where you could see the currency reflate and it's moving over tensions before November.
But I think we're going to be back talking about these exact trends a lot in the next 12 to 18 months. And I personally think we are at the
beginning of a long trade war that could turn really into a cold war between the two countries.
NEWTON: And Rana, everything you're saying, people seem to be listening, because it seems that, that isn't elements spooking the market. At this
point, it's spooking the Asian markets big time and many are even talking about a slow-down in China.
But do you think there's a recognition that this could also boomerang onto the U.S. economy event eventually. The Chinese economy is the third --
FOROOHAR: Right --
NEWTON: Largest in the world.
FOROOHAR: Yes -- no, I think that there is, and you're bringing up an interesting point because you know, I talked to a lot of CEOs. There's a
real existential crisis going on in the C-suite right now. I think the American multinational company leaders have wondered to think that this was
all going to go away somehow, it's not.
And I'll tell you why? It's not just Donald Trump we're talking about here, but Lighthizer; the U.S. trade representative, Navarro; the very hawkish
economic adviser, the security community in the U.S., all these interests would like to see the U.S. detangle itself economically from China.
Not just for reasons of economic security, but national security. Those folks aren't going away, I think that this trend is here to stay.
[15:40:00] NEWTON: Yes, and the proof of that was even that new trade agreement with Canada and Mexico, language in there, saying that, you know,
basically, the U.S. has veto power on even starting a trade arrangement with what Lighthizer calls -- wait for it, economies that are not market-
based.
So interesting. Rana --
FOROOHAR: Exactly --
NEWTON: Rana, thanks so much, we will continue the conversation, I'm sure, really appreciate you being here on this topic. Now --
FOROOHAR: Thank you.
NEWTON: Parts of the state of Florida are facing other devastation tonight, we'll be live in Panama City after a record-breaking hurricane
swept the village.
(COMMERCIAL BREAK)
NEWTON: Well, six people are now confirmed dead after Hurricane Michael left behind catastrophic damage in the U.S. state of Florida. I mean, look
at those pictures, this is Mexico Beach. The government is referring to it as ground zero, everything is devastated there.
And says that the former beach front has been completely wiped out. Now nearly half a million people are right now without power, some places are
now only accessible by helicopter. Our Dianne Gallagher is in Panama City, Florida, she's been there trying to assess the damage.
I mean, Dianne, I'm speechless just looking at the pictures.
DIANNE GALLAGHER, CNN CORRESPONDENT: Yes, and Paula, I think that's probably a good way to describe how most people who live here felt when the
sun came up and they got a chance to really see how their community looks today.
We have a lot of recovery vehicles and convoys that are coming through Panama City throughout the day with the power trucks and the generators,
and emergency services search and rescue crews. A large portion of it is due to the fact that once Hurricane Michael came through, and I kind of
want to give you a good glimpse at this because it's sort of micro -- on was every single block in Panama City looks like now, Paula.
This is auto care center firestone and it has just been shredded by those winds. And we're seeing this where basically the intense winds of
Hurricane Michael ripped buildings in homes, in churches and schools apart in Panama City.
As it did along most of the floor to panhandle. We have talked to people at this point, most of them do not have cellphone services, people do not
have electricity right now, there's no water right now.
[15:45:00] And so, at this point, the first thing on their minds is survival. It's not even rebuilding. It's how do I get food, water, and
how do I tell my loved ones that I am OK? We've been giving them -- we have a phone that is working right now, and we've been letting people call and
tell them because they're seeing these images on the news and they want their loved ones to know that they survived.
But Paula, a lot of people did choose to ride the storms out here, some of them say look, I really regret that decision now, I wish I had not done
that, I honestly didn't think it was going to be this bad. Others have said, you know, I wouldn't be allowed back in right now, so I'm glad I did
it.
It was scary, but I'm glad I did it, it was worth risking my life. And part of that because here in Bay County, they have restricted access, no
one is allowed in, unless you're a rescue vehicle of some sort to come into the county.
Because they've got to get the power lines and those snapped trees off of the roadways before they can even begin cleaning things up right now,
Paula.
NEWTON: Yes, and I'm sure, people very anxious to get back on their feet. But from the look of the destruction behind you, it is going to several
weeks, and not long. OK, appreciate that --
GALLAGHER: Yes --
NEWTON: Update. Now, for more on Hurricane Michael's impact on the U.S. economy, Ryan Sweet is director of Real-Time Economics and he's Monetary
Policy Researcher at Moody's Analytics. He is in West Chester, Pennsylvania. You know, you look at that devastation and of course, all of
us, our hearts go out to the people that have to go through this and have to look on how to rebuild.
It is an open debate at this point in terms of how it actually impacts the economy. Now, in an analysts that you guys put out last Fall, I was
reading that -- it's interesting here, it's a mixed picture. Why is it a mixed picture?
Does it depend on the storm and where it actually hits and how it hits?
RYAN SWEET, DIRECTOR, REAL-TIME ECONOMICS: You know, it's a mixed picture because you know, the first assess, the regions that was affected and
generally with natural disasters including hurricanes. In many instances, it's more of a regional economic event more than a national economic event.
Because the U.S. economy is $20 trillion, and you know, the area that is affected by Hurricane Matthew for example makes up 1 percent, 1.5 percent
of U.S. GDP, roughly 1 percent of employment. To the areas that's been affected is pretty small, but it's still -- I mean, that area that's been
impacted by Hurricane Michael, you know, has a long road ahead of him.
But you know, rebuilding is going to begin in angst, these economies have bounced, will bounce back. We can look at past lessons from Hurricane
Katrina, Harvey, even ones in Florida -- including Irma and Andrea.
You can see that the regional economies bounced back from -- but from a national perspective because we -- a $20 trillion economy, this is unlikely
going to make harvesting, ready for the impact on the broader economy.
NEWTON: And that opens another really interesting debate here, because a lot of people debate whether or not these disasters can actually be
stimulative. No one would suggest that they're a good thing, but in terms of giving people hope in rebuilding.
SWEET: Yes, exactly, this is a big debate among economists, every time we have a natural disaster, and they disperse this idea of this broken window
fear on that. Destruction doesn't create economic activity, but there's a big important distinction between economic activities or the production of
homes, the rebuilding, the replacement of any of the vehicles, people rushing out and, you know, going to Home Depot and Lowe's to repair their
homes versus economic welfare.
I mean, this region that's been impacted by Hurricane Michael isn't better off from an economic welfare perspective, but over the next several months
in the course of next year, there's going to be a lot of economic activity because insurance money is going to flow into the area, federal funding is
going to flow into these areas.
So these residents are going to rebuild and that's going to spur a lot of economic activity over the course of the next year or so.
NEWTON: And before I let you go, some people are going to be wondering, look, this is the United States that has a strong economy already, but even
Puerto Rico; that is a part of the United States still hasn't recovered, and of course we see devastation in other parts of the world.
Does it really depend on where you start from as an economy?
SWEET: It does, I mean, the severity of the storm, the type of the natural disaster, where we are in the business cycle, you know, can have important
implications on whether or not it has a more noticeable impact on you, the aggregate economy, so the U.S. economy overall.
But also keep in mind, I mean, some of the measures that we used to look at the health of the U.S. economy, for example, GDP, gross domestic products,
employment, right? These aren't going to accurately reflect all the impacts of these natural disasters, particularly Hurricane Michael.
And then when you look at Hurricane Maria that hit Puerto Rico, Puerto Rico is not included in U.S. GDP, therefore, you know, that impact of that storm
isn't accurately reflected in some of these measures of economic activity.
But if from a fourth quarter GDP perspective, Hurricane Michael will likely have a very small impact on U.S. GDP. The biggest, most notable effect is
going to be regionally --
NEWTON: Right --
SWEET: But cases from past storms, you know, these areas were rebuilt.
NEWTON: They'll bounce back, Ryan, thanks so much, appreciate it. Now, it has been an absolutely wild session on Wall Street -- don't look now, the
Dow was down almost 500 points, we'll look at those numbers and give you some context when we come back.
[15:50:00] (COMMERCIAL BREAK)
NEWTON: All right, see minus 10 and counting here, you see it there, down 440 points at the moment, better than about 1.7 percent. Every single
sector is down and most are down 2 percent. Worst affected, energy and financials, real estate and help.
Paul La Monica, you know, the day started with people wondering would we have people buying a bit, the dip -- part of me, clearly, not enough buyers
out there.
PAUL LA MONICA, CNNMONEY DIGITAL CORRESPONDENT: Yes, turnaround Thursday did not --
NEWTON: True --
LA MONICA: Didn't materialize today. I honestly don't know, Paula, that what happened at the end of the day just about, you know, an hour ago where
--
NEWTON: Yes --
LA MONICA: Out of the blue, you know, we seem to be stable, Dow down maybe 253, a 100, and then the next thing you know, it was 456, almost 700, you
know, before we stabilize --
NEWTON: Adjusting 25,000, I didn't think we break through 26,000 yesterday --
LA MONICA: No, I have my doubts, 20,000 had at my desk, I'm hoping I don't have to take it back out on the flip side, but you never know the way this
part has been going lately.
NEWTON: Quickly, before I let you go, I've been asking other people this question. From people you talked to, are we a game-changer in the market
right now where more people are getting out of stocks and equities and more on fixed income.
LA MONICA: It does seem that way because rates are going to likely continue to head higher no matter what President Trump says. I think
Jerome Powell and the rest of the Fed realize that there's central bank, they have to be independent, and if the data justifies it, they're going to
keep rates right --
NEWTON: And that's the key thing, they're looking at the data, not necessarily listening to Donald Trump --
LA MONICA: More of them are --
NEWTON: They -- let's see, Paul, thank you --
LA MONICA: May dependent, not tweet dependent.
NEWTON: Not tweet dependent. Thank you. Today's trading session, if you think this has been a grueling ride, Paul and I do, just in case you're
wondering, it's nothing compared to Singapore Airlines Flight 22. It debut today from Singapore to New York, the longest non-stop passenger flight in
the world.
A full 19 hours in the air. One man's heaven and is another man's hell and that's why we couldn't keep Richard from boarding this flight. Here he is,
testing out what we're told -- yes, so they claimed, they're anti-jetlagged goggles.
We'll see when I'm annoying him tomorrow, how much that jetlagged is affecting him. He's sending us updates every hour, take a look at this
one.
(BEGIN VIDEOTAPE)
QUEST: It's always exciting doing something new, doing something different. The longest flight in the world. The sheer achievement,
mechanical and human to make it happen.
[15:55:00] Amazing, and here we are --
UNIDENTIFIED FEMALE: Good evening, Mr. Quest, how are you?
QUEST: Good evening --
UNIDENTIFIED FEMALE: Good evening, welcome on board.
QUEST: Thank you. You want my boarding pass, there we go.
UNIDENTIFIED FEMALE: Thank you.
QUEST: You assume I know where it is.
UNIDENTIFIED FEMALE: Right, I guess, I know. Thank you very much, Mr. Quest, kindly go (INAUDIBLE) right into your seat --
QUEST: Are you ready for this?
UNIDENTIFIED FEMALE: Yes, I am.
QUEST: Have you been preparing?
UNIDENTIFIED FEMALE: Yes --
QUEST: You've got some --
UNIDENTIFIED FEMALE: Here, sir.
QUEST: Good, let's do it!
UNIDENTIFIED FEMALE: OK --
UNIDENTIFIED FEMALE: Welcome on board --
QUEST: Hi, good evening, welcome aboard.
(END VIDEOTAPE)
NEWTON: They man logged (ph) more hours than 747, but doesn't know where his boarding pass is. Moving on, you can see flight 22 is off the coast of
China right at this minute, Richard, has another 14 hours or so to go, yes, wearing those glasses, you can follow his progress and his reports right on
our home page at cnn.com.
Now, thank you very much, the end of the trade is almost over, we will take you to that closing bell up next.
(COMMERCIAL BREAK)
NEWTON: Oh, you know, this is going to happen. U.S. stocks are swinging in the final moments of trading. The Dow was down 699 points as we came on
the air, it's now off as you can see there more than 500 points about 2 percent.
Microsoft is the only stock in the Dow Industrials as you can see there, that is in the green. We want to take a look at the bottom of the markets
though, the S&P and the Nasdaq are solidly in the red, the Nasdaq has fallen into correction territory and guess what? Comes back out again.
The S&P meantime extended its losing streak, it's having its worst month in more than three years. What's driving all this? Well, those investors are
still anxious about that Fed. That is QUEST MEANS BUSINESS. I'm Paula Newton. "THE LEAD" with Jake Tapper is next.
END
