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Quest Means Business
A Preliminary Trade Deal Between The U.S. And China; President Trump Signs Order Authorizing U.S. Treasury To Place Very Significant Sanctions On Turkey; NYT Says A Task Force Is Finding Big Problems With The Certification Process Of The 737 MAX Jet; Pentagon to Send 1,500 More Troops to Saudi Arabia; Former U.S. Ambassador to Ukraine Testifies in Impeachment Probe; Trump Loses Appeal to Stop House Subpoena of Tax Documents. Aired 3-4p ET
Aired October 11, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:12]
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: We are on a roll on a tear today in the market with 60 minutes to go before the closing
bell. Up all day, just about at the best of the day. These various peaks and troughs tell their own individual story of the market and these are the
reasons why.
A preliminary trade deal between the U.S. and China. President Trump is to meet the Vice Premier of China during this hour. A sanctions threat: The
White House warns it can shut down Turkey's economy if it needs to. And a pathway to a Brexit deal. No, I'm not joking. There's new optimism about
an agreement. There's only three weeks to go.
Tonight, we are live from London on Friday, October the 11th. I am Richard Quest, I mean business.
Good evening, a deal that's in the offing, well, sort of. In the final hour of trade tonight, the Dow surging on reports that China and the U.S.
have secured a partial trade agreement. The terms of such a deal have not been released, but the report suggests it includes a currency pact, a
Chinese commitment to buy more American farm produce and the U.S. holding off on raising tariffs on Chinese goods.
The White House is where we're watching at the moment, because the China's Vice Premier, Liu He and President Donald Trump are due to a meeting
anytime around now.
Clare Sebastian is watching it in New York. If this is true, is this is -- I mean, one has to be grateful that it's a de-escalation, but it's a far
cry from a full trade deal.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Richard, it is a very long way from addressing any of the structural issues that are at the core
of this entire trade war.
This, don't forget was an investigation into China's unfair trade practices, forced technology transfer, IP protection, industrial subsidies
-- all of those things.
What we're hearing is that it is far from addressing those things, it's going to do things like perhaps increase Chinese agricultural purchases,
and the U.S. for its part might hold off on further tariff increases. Don't forget, they are imminent next week, October 15th is when the tariff
rate on $250 billion in Chinese imports to the U.S. was supposed to go up from 25 to 30 percent. That will significantly increase costs of
businesses who are already hurting from this.
So look, yes, it's a de-escalation. It is the first time really we will have seen a de-escalation in a number of months ever since the talks
collapsed back in May.
So certainly for the business community's perspective, that is a good sign, but it remains to be seen what the exact details of this are, and whether
it crucially paves the way for future talks.
QUEST: See that's the answer. I mean, that's the trick, isn't it? Does it pave the way for what comes next? China buying some more Agri stuff is
not particularly original. If there is a currency element to it, an agreement of some sort not to manipulate the currency. Well, arguably,
they haven't been doing that anyway.
SEBASTIAN: Right. This is all ground that has frankly been covered and then walked back over the course of the last few months as the tensions
have ratcheted up between the two sides, Richard.
But crucially, yes, we'll be looking for what comes next. Will there be details of a planned trip perhaps to Beijing by Robert Lighthizer, the U.S.
Trade Representative and the Secretary of the Treasury, Steve Mnuchin? Will that come before an APEC Summit in November where it's rumored that
President Donald Trump and President Xi might meet and might discuss trade and what will that lead to?
That is, the big question, and so I think the details of this will be crucial, but certainly a de-escalation is a positive step. It just remains
to be seen what the U.S. is giving up and how much incentive this will leave for China to come to the table again for a broader agreement.
QUEST: And the markets absolutely seemed to love what's happened. I guess the weakness that we've seen in recent weeks, but it's worth jotting a
reminder, isn't it? That we're still only one or two percent off all-time highs. It's not as if there's been a complete collapse.
In certain markets, in certain stocks, some of the all-time favorites, it's down. But we're not that far off the top.
SEBASTIAN: Not at all, Richard. And I think the reaction today is really just a measure of the flip flop that we've seen on this over the course of
this week. You know, just a couple of days ago, it wasn't even clear that this meeting between President Trump and the Chinese Vice Premier was going
to happen.
We were told that the deputy level meetings in Washington hadn't gone very well, and now we're at a point when all of today, we're being told that the
progress was very good. And now this preliminary agreement.
So the markets have gone down on the trade news, and now bouncing back to get back up again, but I think it's crucial to remember, they are still
extremely sensitive to all of these headlines, so we may continue to see volatility here.
QUEST: Volatility and sensitivity. Thank you very much, Clare Sebastian. Sarah Westwood is with me at the White House. Have the meetings, actually
begun? Is the Vice Premier there?
[15:05:03]
SARAH WESTWOOD, CNN WHITE HOUSE REPORTER: Yes, Richard, the Vice Premier has arrived at the White House. Reporters have just been taken back. They
are waiting to go into that meeting.
Originally, this was going to be closed to reporters. The fact that the White House has opened it up is perhaps the signal that there is optimism.
CNN is reporting that there was a preliminary agreement reached between the U.S. and China that could involve easing tensions. But it's not
necessarily the comprehensive agreement that President Trump was pursuing.
It would involve delaying a scheduled increase of tariffs, so keeping tariffs at the current level. So that could be something to look at here
out of the White House today. Of course, we'll get more details, Richard when President Trump and the Vice Premier appear together.
QUEST: Right. I mean, if the President sells this as being, you know, an incremental deal while we build towards a larger one, that's all fair
enough, but surely he is not about to abandon what he has always said, which is that only a significant bid deal will do.
WESTWOOD: That's right, and that's why we're hearing that the tariffs would likely be kept at their current levels. We just wouldn't see them
ratcheted upward. That was the direction that the relationship with China was going and officials headed into these meetings this week, Richard with
relatively low expectations for any kind of breakthrough.
And CNN has learned that there wasn't much progress on the broader technological hang ups that the administration had had with China in the
past. But surely, this could be seen as something of a ceasefire if those scheduled tariff hikes are not going to go into effect, a sign that perhaps
the Trump administration laying the groundwork for potentially a more comprehensive deal and potentially laying the groundwork for President
Trump and Chinese President Xi to meet face-to-face next month at the APEC Summit in Chile -- Richard.
QUEST: All right, so you've got your work cut out for you for the next few hours, Sarah. I'll let you get back to your newsgathering duties.
Please, if you get more details while we're on air, do come back and tell us more about it. Sarah, thank you very much, at the White House.
Now, we will stay with issues in Washington, where President Trump has signed an order authorizing the U.S. Treasury to place what is calling very
significant sanctions on Turkey.
The U.S. Treasury Secretary, Steve Mnuchin says the President is concerned about keys military offensive. The sanctions are not yet being activated
just yet, although they are potentially hard hitting.
(BEGIN VIDEO CLIP)
STEVE MNUCHIN, U.S. TREASURY SECRETARY: These are very powerful sanctions. We hope we don't have to use them. But we can shut down the Turkish
economy if we need to.
(END VIDEO CLIP)
QUEST: Shut down the Turkish economy. Arwa Damon is with me. As Turkey begins on its assault on what it says are terrorists only days after
President Trump pulled back troops, death toll is climbing, but this threat to shut down the Turkish economy, will anybody take that seriously where
you are?
ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, two ways to answer that question. One, yes, it will get taken seriously in the sense
that Turkey's economy is in a fairly precarious situation.
Look, you'll remember very well what happened last year when the Trump administration slapped sanctions on Turkey and the lira took a nosedive.
The lira has only just really begun recovering and relatively speaking, sort of stabilizing against the dollar. This move if those sanctions were
to be imposed, most certainly would have an impact on the economy here.
Now, Turkey for its part has been trying to, in the past, at least build up an economic foundation that would sort of buffer the impact of potential
sanctions part of an overall effort to boost the economy that's on one side, Richard.
On the other hand, will this impact the way that Turkey is carrying out this offensive? The sense that we're getting from the government is no,
because no matter what the Turkish President is being told, no matter what he is being threatened with, he is adamant that this operation is going to
go forward.
This for Turkey is an existential threat -- these Syrian Kurdish fighters, the YPG in Syria, because Turkey views them as being one and the same as
the Kurdish separatists group, the PKK against which Turkey has been waging war for decades now.
QUEST: Right.
DAMON: So Turkey is adamant that this is going to move forward no matter what happens, no matter what the cost Turkey is doing this.
QUEST: Regardless of the -- as you say, of the sanctions issue, which Turkey will see out, is the -- I don't want to be dismissive or pessimistic
here, but is the outcome in any doubt, bearing in mind the military difference between the two sides.
DAMON: This is one thing that isn't in doubt going to be very bloody, very painful and it's highly unlikely to remain confined to this stretch of
border because what Turkey wants to accomplish is incredibly ambitious.
[15:10:17]
DAMON: Pushing 30 kilometers into Syria and then along a stretch of border that extends hundreds of kilometers up against a fighting force that yes,
is inferior when you look at Turkish military might, but one that has vowed to fight until the very end and one that does possess its own capabilities
and one that is allied to the PKK that does continue to operate inside Turkey.
So the potential for this to spread beyond the border region is very real, not to mention what's happening to the civilian population. We've already
had 100,000 civilians fleeing the border area inside Syria.
And on the Turkish side, Richard, they're beginning to push back against the border area as well because of cross strikes that are happening.
QUEST: Arwa, thank you. Arwa is in Turkey. We appreciate it. Now, Iran -- now, let's look turn to oil and Iran says one of its oil tankers was
attacked earlier today in the Red Sea of Saudi Arabia.
According to Iranian state media, two missiles hit the ship. If we look at the oil prices, well, they jumped by about two percent as speculation
return that hostilities could hit global oil supplies that came off the top.
Nic Robinson is with me. Nic, you're very familiar with this area. Who was hit and why?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: We don't know why and at the moment, we don't have actually evidence -- hard evidence -- that
anything was hit. What we have are statements from Iranian authorities, one from the National Oil Company that was running the tanker that said it
was hit by two missiles in the early hours of the morning, 60 miles, 90 odd kilometers off the coast of Saudi Arabia near the port city of Jeddah.
Initially, it had said oil was leaking. There was a fire, subsequently saying no oil is now leaking, no fire, no casualties on board. The ship
was tracked continuing in its movements.
QUEST: Is there any suggestion that nothing was hit at all?
ROBERTSON: I wouldn't be as bold to sit here and say that, but the Saudis have kept very quiet about it. And certainly conspiracy theorists in the
region could run you any number of narratives. Why this -- you know why a narrative could emerge that says it actually wasn't hit.
But the reality is, and as you've said, the markets are nervous enough.
Now, the Saudis when their facilities were hit a few weeks ago, essentially said Iran was responsible and got the British, French and the Germans to
believe it with the evidence they had.
A lot were surprised that the Saudis -- that this hasn't pushed forward, that the Saudis haven't made those findings public, and the thought always
was they are trying something asymmetric. And this would fit that bill if it were the case. There's no evidence to support that it was even that may
have happened.
QUEST: Nic, change your hats if you'll be as kind, as our International Diplomatic Editor. I want you to put some strands together for us tonight.
Because you can bring together the, if you like, the business world, and the geopolitical world and the strategic.
We've got tonight, Turkey with Syria and sanctions, which would have an economic -- a very severe economic effect, and could cause all sorts of
economic problems.
You've got Saudi Arabia in the in the region, and you've got the Iranian sanctions, which continue. Put this together for me as to how precarious
we are, in terms of the economic situation, leading to further greater problems.
ROBERTSON: Look, I think for anyone that studies global economic markets at the moment and the global - and oil markets in particular, they know
that there is a fundamental global strategic realignment happening at the moment.
Very big picture -- the rise of China, the United States coming down, add to the scenario you just painted, President Putin of Russia going to Saudi
over the next couple of days and that puts another piece in the jigsaw puzzle that the power brokers in the Middle East are changing.
And that anytime that there's change, you have the risk of mistake, you have the risk of a situation being inflamed. And the markets tell us that.
The oil going up the way it has done today.
QUEST: Are these leaders are aware of how precarious the global financial position is at the moment? Economically?
Because Arwa was just saying that Turkey is prepared to weather any storm - - economic storm -- to prosecute its claim in Northern Syria.
ROBERTSON: Turkey has a window of opportunity in terms of time before the United States could impact it to the point that it would actually feel the
pain and have to stop.
Erdogan has a political price to pay. If he costs the economy too much, if he loses too many soldiers, but he is in a precarious political position
and at the moment anyway, losing support.
Yes, people like Putin. Yes, people like Trump. Yes, people like King Salman. Yes, people like President Erdogan and Turkey. Understand that
it's in flux. But that's why the game is so intense.
I call it a game. I use that word advisedly because there are things to play for that weren't in play before. Stakes of who controls what and has
what influence in the Middle East.
[15:15:20]
QUEST: Thank you very much for your time with us tonight. Thank you, just what we needed tonight.
As we continue, a bad review for Boeing, "The New York Times" says a task force is finding big problems with the certification process of the 737 MAX
jet.
Also stunning testimony on Capitol Hill. Washington's former Ambassador and what she said. The Trump impeachment latest chapter, in a moment.
(COMMERCIAL BREAK)
QUEST: The panel reviewing the Boeing 737 MAX scandal severely criticized, both the plane maker and the F.A.A. which is the United States' main
aviation regulator. According to "The New York Times," it says the task force examined the plane's certification process and found major failings
in communication. And specifically, of course, MCAS. This is the anti- stall system, which played a role in two fatal crashes.
The joint authorities' technical review found one. MCAS was not evaluated by the F.A.A. as a whole in its complete, integrated function. The F.A.A.
had inadequate awareness of it. There weren't enough specialists at the F.A.A. who knew about it anyway, and Boeing placed its own employees under
due pressure.
Our Mary Schiavo is with us. She is the former Inspector General at the U.S. Department of Transportation and an attorney. Let's be fair though,
you have pending lawsuits against Boeing and joining me now from Charleston, South Carolina.
I'm guessing that these sorts of findings are exactly the sorts of things with your legal hat on for your clients, you would turn around and say,
yes, this is where the liability is.
MARY SCHIAVO, CNN AVIATION ANALYST (via Skype): Well, yes, that and many, many more things. Reports like this, of course, helpful on an overview
level, if you will.
But in the lawsuits, obviously, the technical level and the detail level is many, many levels lower or higher in a deep dive. I mean, we'd really have
to parse it.
But the report is helpful because it emphasizes what has to improve and that's what everyone wants to come out of this review is making things
better and, and I agree with you, they focused on the pilots.
There is one other thing they focused on, they said that Boeing had test pilots flying these planes and not the average pilot, the tens of thousands
that fly these planes.
Obviously the process was faulty. And they also said, look, you can't look to one angle of attack airspeed indicator. So they looked at process
pilots and PO tubes among many other things, but it's a very helpful report as a sort of a roadmap.
[15:20:22]
QUEST: And when I look at it, I mean, each time I look at it, the way MCAS took on a life of its own that the original specifications became far more
severe and therefore risk-oriented. And yet they didn't have to join writing, if you like, for the inspectors, because what they say as I
understand, it is if the F.A.A. had been fully informed, then their technical expertise would have realized MCAS was a ticking time bomb.
SCHIAVO: That's right. I mean, what they're saying is that, you know, they were each working silos. There wasn't a communicative effort. And
that one would stretch the rubber band a little bit more, and the next move would stretch the rubber band a little bit more and no one stepped back and
said, hey, this rubber band of safety is stretched to the breaking point.
But each time somebody tweaked it, no one went back to the beginning and said, hey, how many times that we tweaked the system, and at what point is
it simply not safe?
QUEST: I constantly come back -- I was doing a bit of research today because we're talking to you. I constantly come back to this, the
improvements that are being made to MCAS are so fundamental, such as not relying on a single indicator, not allowing it to do two or three moves,
not allowing it to get to the stage where a human being can't override to physically pull it.
I just wonder how they got it so wrong, Mary.
SCHIAVO: Well, I think the way we were just talking, they just kept putting one more thing on and one more thing on and the report also
emphasizes the huge pressure and not just this report, there's criminal investigation going on looking at the pressures that were on employees to
hurry it up.
The F.A.A. has said this, obviously the lawsuits are looking at this, but there was tremendous pressure to hurry to the finish line. And so if
someone did step back, there was often not enough time to feel like somebody could step back.
And so, the report -- the joint technical report today does also say that they want to see it such that MCAS cannot be activated, unless the other
problems are resolved. In other words, the angle of attack indicators have to agree. Airspeeds have to agree.
And if there's disagreement that this MCAS can't kick in, obviously that would have saved the lives of 346 people, but the report gets into that as
well.
QUEST: Good to see you. Thank you so much, Mary. Always lovely to have you with us tonight. Have a good weekend. Thank you.
SCHIAVO: Thank you.
QUEST: A key witness in the Trump Impeachment Inquiry has given potentially damning testimony. Marie Yovanovitch is Washington's former
Ambassador to Ukraine.
Behind closed doors, she was speaking and "The Washington Post" and "Times" -- "The New York Times" says they've seen a prepared testimony, reporting
she alleges there was a concerted campaign to get her removed.
Three Democratic lawmakers say the White House efforts to block her testimony provide more evidence of presidential obstruction.
Sunlen Serfaty is with us. Now, look Sunlen, if the President wants to remove an Ambassador, well, so be it. That's the President's prerogative.
What's the complaint about her trying to get removed?
SUNLEN SERFATY, CNN CONGRESSIONAL CORRESPONDENTL: And I think we'll certainly hear, Richard that argument coming from Republicans when they
emerge from this room today. They've now been behind closed doors for about five hours.
From what we've seen, though, from the opening statement, as you said, obtained by "The Washington Post" and "New York Times," she describes not
only the efforts and the pressure campaign she describes as a smear campaign behind the scenes to get her out, but what she pins that on.
She says that it was pinned on unfounded and false claims, she says clearly by people with questionable motives that there are reference to the
President's personal lawyer, Rudy Giuliani, who we know who had been working behind the scenes with some Ukrainians in this pressure campaign.
So she, according to this opening statement isn't holding anything back, it sounds like and there certainly has been so much drama leading into this
moment just to get her in the room. So much speculation whether she would appear, whether she would be allowed to appear up until literally the last
moment when eyes were spotted on her on Capitol Hill, and she walked into the room.
And we're now learning a bit more about the drama behind the scenes of that moment and what led to that. We're learning according to the three House
Committees that she is speaking to now.
They say that they were informed that the State Department directed her, they say at the direction of the White House, to not come in and testify
today. To not come in and speak with lawmakers today and that forced them to this morning -- the morning of her appearance to issue a subpoena and
the House Committees investigating really holding nothing back and a statement just saying that any efforts to prevent witnesses from
cooperation will be deemed obstruction of a co-equal branches of government.
[15:25:19]
SERFATY: So again, another layer in this stonewalling, at least according to Democrats -- Richard.
QUEST: Right. But just on a procedural point, you talk about three committees - House committees. I am just curious, are they all sitting
together? I mean, is it one big group of people? Or is she going from room to room to room to answer pretty much the same questions in different
fora?
SERFATY: It's a great question and the behind the scenes moments are so important here. This is a large secure room on Capitol Hill. It's got
something called a skiff, where they can discuss classified information. So a room large enough to host three Committees, not only Democrats, but
Republicans on the Committee, and we've seen lawmakers go in and out all day.
Some have spoken a little bit about what they've learned, others have not. They've gone in and out for lunch break now over five hours.
But yes, any lawmaker on those committee who wants to attend, they can do so -- Richard.
QUEST: Good Lord. Can you imagine what the mood must be like in the room? Good to see you. Thank you. Have a good weekend. Thank you.
Now, the U.S. Fed says it's going to buy billions of dollars of debt each month. It is not quantitative easing for the purposes of lowering interest
rate, which begs the question, why would you buy 60 odd billion of bonds? What's the purpose? It is to boost your bank balance. In a moment.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. CEOs are exiting en masse and it is shaping up to be a
record year for executive departures. We need to understand why they're going.
On a pathway to a deal, Brexit talks are entering something called a tunnel phase, a topography of negotiations for that. This is CNN and here on this
network the facts always come first.
[15:30:10]
The Pentagon has announced around 1,500 troops will be deployed to Saudi Arabia. Additional troops according to the U.S. Secretary -- Defense
Secretary informed Saudi Crown Prince Mohammed Bin Salman of the decision this morning. And it was partly because the U.S. Navy is unable to send a
carrier to deter potential aggression from Iran.
A key witness in the impeachment inquiry into President Trump has been testifying before lawmakers. She's the former U.S. Ambassador to Ukraine,
Marie Yovanovitch. She said there was a concerted campaign against her and that Rudy Giuliani's associates might have thought the anti-corruption
policy in Ukraine could help them financially. She added that President Trump pushed for her removal.
Meanwhile, the president has lost an appeal to stop a house subpoena for tax documents from his accountants. The court upheld a previous ruling
that the accounting firm must return and turn over eight years of records. The president can appeal against the decision to the Supreme Court before
it goes into effect.
Japan is bracing as a powerful typhoon is expected to make landfall on Saturday. More than a thousand flights have been canceled from Tokyo's
various airports, and a number of major sporting events could be in jeopardy including Formula 1's Japanese Grand Prix qualifying session which
is postponed to Sunday morning.
This year's Nobel Peace Prize goes to the Ethiopian Prime Minister Abiy Ahmed. The Prime Minister is being honored for his role in ending the two-
decade long war between Ethiopia and Eritrea which a 100,000 people died. The Nobel committee acknowledged there are unresolved issues in the region.
The Federal Reserve is moving to ease pressure. The overnight money markets is launching a program to buy $60 billion of treasury bills each
month. Now, the Fed's massive trove of assets already $4 trillion will expand. But the Fed is not doing this as a new round of quantitative
easing. The gambit it used in the great financial crisis to help revive the U.S. economy.
Julia Coronado is on the New York Fed's Advisory panel, she's now president and founder of MacroPolicy Perspectives, and she joins me now. OK, Julia,
now why is there a lack of liquidity? Why have bank reserves, central bank reserves fallen to such an extent that the Fed feels the need to boost them
in this way?
JULIA CORONADO, PRESIDENT & FOUNDER, MACROPOLICY PERSPECTIVES: Well, the Fed made a conscious decision this year because as they were reducing their
securities portfolio, it was reducing the reserves in the system. And it made the conscious decision, let's explore the frontier, we want to get
that balance sheet as small as we possibly can during normal times.
And so, they did, they found the frontier, the frontier turned out to be where we hit in September, and there was a tremendous bout of market
volatility. And now they're moving to reinitiate expansion of the balance sheet --
QUEST: Right --
CORONADO: To alleviate that liquidity squeeze.
QUEST: OK, but, how do they have to prevent the issuance of this 60 billion from being if you like, too accommodative? It's not a huge amount
in the great scheme of things. But it will not only allow greater liquidity within the overnight markets --
CORONADO: Right --
QUEST: But it could actually move into the wider economy. So, it doesn't --
CORONADO: Right --
QUEST: Need to be sterilized?
CORONADO: No, I think and remember this is a temporary program. So, it says they announced that it will start at 60 billion, that means they could
phase it down, and it will last at least through the early part of --
QUEST: Right --
CORONADO: Q2. So, it's not like we're going to be running at 60 billion a month forever. This is a restocking of the buffer of reserves after which
they will resume a much lower level of balance sheet --
QUEST: Right --
CORONADO: Expansion just to keep up with currency growth.
QUEST: So, to help the viewers understand, it's a good opportunity. We have a minute or two more tonight being a Friday. So, Julia, the Fed buys
these bonds from various banks and institutions or well it's not bonds, is it? It's short-term instruments --
CORONADO: Right --
QUEST: That they're buying --
CORONADO: Right --
QUEST: In this particular case.
CORONADO: Right.
QUEST: It buys them, it creates the money to pay for them which it then puts in the various banks --
CORONADO: Right --
QUEST: Into their central bank reserves.
CORONADO: Right --
QUEST: What do the banks do with it?
CORONADO: Well, then there's more money that just circulates around. And again, this is short-term money, this is overnight money, this is treasury
bills, and so it can be used for very nimble funding purposes, just to finance transactions between one bank and another or within the bank. So,
it's really is just a greasing of the wheels for the financial market infrastructure.
[15:35:00]
QUEST: But if it's very short-term money --
CORONADO: Right --
QUEST: Which of course rolls overnight. Then you actually have to -- I mean, in terms of a RPPO, you have to -- you have to repeat the action the
next day, otherwise you're going to withdraw the money from circulation again.
CORONADO: Right, so they're doing both things. They're doing overnight repurchase operations which are, you know, from one day to the next as you
say, and they're going to do those, they said until the end of January. And in the meantime, they're going to be building up a more permanent
buffer of reserves, that's the 60 billion, that's going to go for the next six months or so.
QUEST: Right --
CORONADO: And then that stock of reserves will stay in the system and then they can presumably pull back on some of those repurchase operations.
QUEST: So --
CORONADO: Which is the intent. The intent is not to be in the markets on a frequent basis. That is their stated policy.
QUEST: But wasn't this always going to be the problem? The -- I mean, if you go back to the taper tantrum. The Fed spent a lot of time looking at
the plumbing problems of exiting QE and the extraordinary measures they'd taken.
CORONADO: Right --
QUEST: This is one of them.
CORONADO: Yes, and again, it was a decision to explore the frontier, to push that balance sheet and those reserves down as far as they could go.
There was mixed views of that on the FOMC. Some people thought why are we doing this? What's the end result going to be if we just initiate a bunch
of market volatility?
And others thought no, we really want to get out of this game as much as possible and see where the financial market can kind of operate without --
with as little help from the Fed --
QUEST: Great --
CORONADO: As possible. So, there are mixed views, at the end of the day, they have decided to be a permanent presence in markets, to operate with a
large balance sheet, with a system --
QUEST: All right --
CORONADO: Of plentiful excess reserves, moving around the system, liquidating the system. And so that's the policy --
QUEST: Right --
CORONADO: They kind of hit a bump in the road and they're sort of recalibrating and readjusting.
QUEST: Julia, very glad you put that into perspective for us. We need to talk about the pluming in the financial system of these sort of issues,
thank you very much, much appreciate it --
CORONADO: My pleasure.
QUEST: Now, across the Atlantic, markets have been getting a boost on hopes of a deal between Britain and the EU. What's next from the journey
up Mount Brexit. We'll be back.
(COMMERCIAL BREAK)
[15:40:00]
QUEST: Some breaking news to bring you tonight. Turkish artillery fire came close to hitting U.S. special forces operating in Syria. Now, the
incident apparently happened, it was a mistake when the contingent of U.S. special forces got caught up in Turkish shelling near the Syrian city of
Kobane up here. You can see the border up the top there.
Of course, there's no indication any casualties, once we get more details, we will bring it to you. But this of course is the area where the Turkish
forces are actually now engaged. And so to Brexit and the pound sterling which has risen to its highest level since Boris Johnson became Prime
Minister. It climbed nearly 2 percent against the dollar, making its largest two-day jump in a decade.
Investors clearly growing increasingly optimistic that a Brexit deal can be reached. Economists at JPMorgan thinking today that a deal will be done.
And speaking of deals and scaling heights, please join me on a journey. I want you to join me on what we're calling the Brexit adventure trail, and
if you look at the way the day has gone, you'll see exactly how it's all taken place.
So, remember hiking boots are necessary because we've just made it on what's known as the pathway to a deal. That's what the British and the
Irish leaders said on Thursday. There were talks today between the Brexit secretary and the U.S. top negotiator also describing as positive a pathway
to a deal.
Now things could get rocking because from the pathway, we are now moving into the tunnel. The tunnel is a phrase that none of us has heard of
today, but we all sort of had to learn. This is a phase of private and intense negotiations, it's called the tunnel because you go into it and
nothing comes out. The issue of course is whether there will be light at the end of this tunnel.
If there is, then the further challenge becomes you have to get to the summit. You reach the apex of what's needed of the political mountain. In
other words, the summit is the EU Summit and that's hosted next week by the president of the European Council Donald Tusk.
The pathways, the summits, the tunnels. Well, the British Prime Minister is warning the road to Brexit is ultimately uphill. And there's plenty
more twists and turns.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, PRIME MINISTER, UNITED KINGDOM: I had a good conversation with the Irish Taoiseach, Leo Varadkar yesterday, and I think both of us
can see a pathway to a deal, but that doesn't mean it's a done deal. There's a way to go. It's important now that our negotiators on both sides
get into proper talks about how to sort this thing out.
And, you know, if they can't, then we have to be ready as this country is, and will be, to come out with no deal if we absolutely have to.
(END VIDEO CLIP)
QUEST: Come out with no deal if we absolutely have to. Bianca is with me on this, are we any closer? What is this pathway? What's been negotiated?
BIANCA NOBILO, CNN REPORTER: Yes, pathways, tunnels, mountains, there's a lot of geography going on. Are we closer to a deal? Well, both sides
obviously trying to show that they think it's possible. And that they're trying to show commitment and that they're both trying to be constructive
and neither want to be blamed if there isn't a deal.
Boris Johnson said it has to be his new deal or no deal. But realistically, we know parliament is going to block a no deal.
QUEST: Right, but again, if you take his deal that has already been written off by Angela Merkel and co., so there has to be some of the
tinkering within it to get this through, not only the -- not only parliament --
NOBILO: Yes --
QUEST: But it's got to pass the summit next week.
NOBILO: Yes --
QUEST: What's going to do it?
NOBILO: Yes, he's spinning a lot of plates, and sources that I've spoken to have said that Boris Johnson has at least made a bold indication to the
Europeans that he is willing to make more concessions on this, otherwise they wouldn't have intensified the talks in the day that they have.
Whether or not he is fully genuine in that kind of promise that he's made remains to be seen. The problem is, to continue with your mountain
analogy, the EU know there's essentially an emergency rescue service here, and that is in the form of the Benac, which means that if Boris Johnson
hasn't agreed to a deal by the 19th of October, he's got to ask for an extension.
So, the EU don't have a massive amount of incentive to provide more concessions --
QUEST: Well, the --
NOBILO: And the U.K. side feel like the EU has taken their concessions for granted from the ministers I've spoken to.
QUEST: OK, so there's two things that have to happen. Firstly, it has to get through next, the summit.
NOBILO: Well, they have to agree to a deal, yes.
QUEST: All right, so, they have to agree to a deal which then has to be able to get through the summit, which is enough to get through parliament.
But both sides know that if either of those fail, they're stuck with each other.
NOBILO: Yes, well, to come back to your first question, we're closer than we've been. Because when Theresa May had agreed to a deal with the EU, it
was clear that parliament was overwhelmingly against it. This time round - -
QUEST: Sure --
NOBILO: Interestingly, Brexiteers within Boris --
QUEST: But --
[15:45:00]
NOBILO: Johnson's own government who ordinarily would not want to make any compromises definitely have sounded like they're more open to this, in a
way that they just want to get it over the line because they're concerned if they don't pass this deal, then whatever is left will just be a softer
Brexit still.
QUEST: So, what can they offer that will agree with -- that will agree for everybody and will keep the ERG and hard-line Brexiteers. I mean, what is
there, out there that we haven't thought of before?
NOBILO: Oh, we've been doing this for three years. I'm honestly out of ideas at this point. I've been on the Brexit venture account for three
years, and I feel a little lost to be completely honest. I'm not sure what else they can offer, whether it will be something substantive or whether it
will be a lot of words in order to get them over the line. A lot of woolly --
QUEST: Right --
NOBILO: Language, I'm not sure, but there isn't a lot of ideas coming out of this, not from the people I've spoken to. They don't really know what
Boris Johnson is prepared to concede --
QUEST: We'll find out.
NOBILO: We will.
QUEST: Your briefing at the top?
NOBILO: I am briefing --
QUEST: Ten O'clock --
NOBILO: Ten O'clock --
QUEST: Eleven O'clock in Europe, thank you. More on our breaking news, Turkish artillery fire came close to hitting U.S. special forces operating
in Syria. Barbara Starr is at the Pentagon. It was an accident we're told that the two got that close. But I guess if there's large-scale Turkish
operations in the region, it's probably inevitable.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, this has been the big worry, Richard, that our senior U.S. military commanders have had now for
several days. According to the first reports, they do believe it was inadvertent, they have no reason to believe the Turks were targeting them,
and they do believe it was Turkish artillery fire.
So-called indirect fire that landed several hundred meters away from a U.S. special forces position in Kobane in northern Syria. But now the question
is what next? Because the U.S. has been concerned about this. It's one of the reasons they withdrew a small number of U.S. special forces several
days ago from that northern Syrian area.
They didn't want them caught in the crossfire, and now it has almost happened. So really, the question for the Pentagon, the question for the
White House may now well be -- as this Turkish advance proceeds, will it even be safe for additional forces to stay in Syria? Will they have to
regroup?
Will they have to withdraw more? Because we learned today that of course, as you would expect, the U.S. military has emergency evacuation plans for
its troops if it comes to that. Richard?
QUEST: Barbara, thank you, and if there's more to report, please, come back. We'll be back in a moment. Eleni Giokos now reports as we take a
short break, "IN THE MAKING: SOUTH AFRICA".
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: I don't think we never had like an authentic African brand that represents our South Africa.
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT (voice-over): It's a one- stop shop for surfing.
UNIDENTIFIED MALE: To have an African surf brand like Mami Wata is really important in a way that it's a motivation for us.
GIOKOS: Surfer Apes Churcher(ph) is not alone in his love for Mami Wata. The South African brand makes all things surfing.
NICK DUTTON, FOUNDER, MAMI WATER: We make a wide range of products.
GIOKOS: The company was founded in 2017 by Nick Dutton and friends.
DUTTON: We were standing on Muizenberg Beach, and saw everybody surfing, and we were like, well, everyone is wearing international brands, and
nobody is wearing anything African.
GIOKOS: And so Mami Wata which translates to mother ocean came into fruition.
DUTTON: In West Africa, Mami Wata is the sea spirit. And people who believe in her believe if you go into the ocean, and she takes you to be
her lover and you survive, you'll come back and be better looking and more successful.
GIOKOS: Surfing, a roughly $13 billion industry is making waves in South Africa. The country which is nestled between two oceans has a growing
surfing community.
DUTTON: The wonderful thing about surf culture in Africa is its diversity.
GIOKOS: And with that growth comes demand for more surfing gear, and Mami Wata's home-made products are filling the gap.
DUTTON: Our mantra is where we can, we'll use African materials. But critically for us is we manufacture everything here.
GIOKOS: Including the most important tool for the sport, the surfboard.
HUGH THOMPSON, MANUFACTURES SURFBOARDS: I custom, shape surfboards.
GIOKOS: Hugh Thompson is a well-known surfboard shaper working with Mami Wata.
DUTTON: I was pretty excited about it to have an African label with African colors, vibrant colors. You know, it's a more inclusive label, can
be sold in other retail stores in Switzerland, Japan and Germany. But we're about to add to that. And I think it's very important for people on
the continent to know that you know, you go to Tokyo, there's an African store there.
(END VIDEOTAPE)
[15:50:00]
(COMMERCIAL BREAK)
QUEST: Renault is to get its third CEO in less than a year. The boardroom turmoil continues -- the French car maker appointed its finance director to
take over as interim boss. She replaced Thierry Bollore who took charge after Carlos Ghosn was arrested in November over allegations of financial
misconduct.
Bollore wasn't the only prominent CEO to leave his job today, SAPs Bill McDermott announced his departure along the line of C-suite shakeups.
Let's remember we had WeWork's Adam Neumann, eBay's Devin Wenig, Nissan's Hiroto Sakawa, Comscore's Bryan Wiener and JUUL's Kevin Burns. The list
goes on and on.
In fact, CEO departures are on course for a new record. According to a report from Challenger Gray & Christmas with Vice President Andrew
Challenger is with me from Chicago. If the average tenure of a CEO is about three years, two to three years, why are they all going now? Why are
they more of them leaving this year?
ANDREW CHALLENGER, VICE PRESIDENT, CHALLENGER GRAY & CHRISTMAS: Yes, there's no simple answer for that. A lot of different reasons CEOs are
leaving in the U.S., we're having the longest economic expansion in American history.
And so some segment of those CEOs are leaving when they can depart on top when their company is in good financial shape, they can put into implement
their succession plans and cement their legacy. But we also, like you mentioned, the WeWorks CEO Adam Neumann, we've also had this long
expansion, seen a lot of companies start, be founded and then grow to a new phase of their life cycle. A more mature organization that requires a
different type of leadership.
QUEST: So, are these CEOs being pushed or are they jumping with a golden parachute?
CHALLENGER: Yes, it's a definitely a mix, and it's a little opaque when you look at announcements, you can't always tell the motivations. But we
are certainly seeing corporate boards are being more strict on kind of personal issues. CEOs are having their more trigger-happy on letting CEOs
go there.
But they're also demanding a lot more of their CEOs, like we saw at eBay, which saw decent growth over a period of time, but it wasn't substantial
enough --
[15:55:00]
QUEST: Right --
CHALLENGER: Not exponential enough for what boards expect in this business environment.
QUEST: There's never any shortage of people who want to be a CEO. Would you say tonight that the CEO's lifespan is getting shorter?
CHALLENGER: We haven't -- when we're looking at tenure, we haven't seen much of a change in the average tenure of a CEO. As they depart, we track
that we've been tracking that since 2002. It's not a huge change, but what we are seeing is that when a CEO comes into a position, and they're not
performing quickly --
QUEST: Right --
CHALLENGER: Boards are not scared to move them out.
QUEST: OK, rise to the top, easy come, easy go. Good to see you, sir, thank you, have a good weekend, I appreciate it. Now, a short time ago,
President Trump --
CHALLENGER: Thanks --
QUEST: Said the U.S. and China have reached a substantial initial trade agreement, and the Dow is well off the highs of the day around 340 points
now. So, we're off nearly 100 points or so from where we were. The trade- sensitive stocks are doing well, the chipmaker Caterpillar and Apple are all sharply higher.
But the substantial trade agreement, a first phase some are saying -- we'll get more details of course when we actually hear what the president said,
and get the tone of the negotiations. And we'll have our profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. So, it does look as if you and I are going to the weekend with the U.S. and China agreeing a de-escalation of
tensions, and that is good. But real progress won't be made until we get to phase 2 or 3, when you don't just de-escalate, but you actually remove
some of the tariffs that have been put in place.
That will be hard for a president who seems to be addicted to the money coming in from tariffs, whoever seems to be paying it. The long-term goal
must not be lost here, and that is to reform China's trading practices, to actually make a difference on IP, on theft, on market access and all the
issues that have become so painful and less optimistic.
I think what will happen of course or could happen is very much de- escalation, fudging of deals, removal of tariffs, and you really ask yourself, are we nothing more than back to square one? And that's QUEST
MEANS BUSINESS for tonight, I am Richard Quest in London. Whatever you're up to in the hours ahead, I hope it is profitable. The day -- the bell is
ringing, the day is done.
(BELL RINGING)
[16:00:00]
END
