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QUEST MEANS BUSINESS
Australia Raises Interest Rates; Stocks & Commodities Up; Boeing's New Planes Delayed
Aired October 6, 2009 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: On the up down under, Australia becomes the first developed nation to ratchet back stimulus. It has led to a kangaroo bounce. Stock markets surge as confidence flows.
And as that pendulum swings, well, gold burnished to new highs.
I'm Richard Quest, I clearly mean business.
The green light is clearly on, good evening. One of the world's leading industrial nations is heading for the exit. Australia has raised its key interest rate up from 3 percent to 3.25 percent. It's the first G- 20 nation to ease off stimulus since the beginning of this global crisis.
It's a sign of the startling shift in the ballast of economic power, from the old industrial West to Asia. And investors around the world are growing more confident about the strength of this recovery.
Just look at how the markets are trading at the moment. In New York, this is the best gain that we've seen from the New York market in several days, up 102, more than 1 percent, and we're over 9,700 for the Dow Jones Industrials.
In Europe, we've also seen solid gains for all the main markets. The picture is positive in Asia. Even in Australia where normally, of course, the rise in interest rates would clobber equities, it got more expensive to borrow money. Investors focusing that big picture.
And so are protesters in Istanbul where Turkish police used tear gas and water cannons against demonstrators at the IMF annual meeting. Turks fear the IMF could impose severe spending cuts on the country in a bid to ratchet back deficits. The IMF and the World Bank are, of course, meeting to discuss the way forward.
So time to pull these strands together. Let's go to Istanbul, Ivan Watson is there at the moment.
Ivan, we'll deal with economics in minute. Protests at IMF meetings are the norm, but what were they protesting particularly about this time?
IVAN WATSON, CNN CORRESPONDENT: Well, here these are predominantly leftists denouncing the IMF, saying that -- and the World Bank, saying that these are symbols of imperialism and colonialism. And we did see one of the reports that came out, one of the statements calling for this protest this morning, an anarchist group saying that "we are going to make the so- called capitalists miserable, the way they are making us miserable."
And, Richard, these raging battles were going on with the riot police less than a mile from where I'm standing right now at the conference center where delegates are having a very nice cocktail hour right now and there is live music playing and flutes playing.
But it was a very different scene less than a mile away, about five minutes' walk away where you had the riot police and those protesters really clashing out there.
Eighty people at least arrested today, Richard, according to Turkish authorities.
QUEST: Now as we -- let's turn our attention to the agenda at the IMF. We know that exit strategies and economic growth is their big talking point. Do you get any feeling that there is any agreement between them? What are you hearing in Istanbul?
WATSON: Well, one of the things that we're hearing that is very interesting is some of these developing economies, Richard, like Brazil, for instance, declaring that it is going to buy $10 billion worth of shares in IMF bonds. And this added attention and weight that is being given to some of these developing -- developing economies.
We spoke with the foreign minister of Nigeria today. He said the fact that voting quotas are going to be added, that developing economies are going to have more of a say in the IMF and the World Bank as a result of these recent meetings, that's going to give more legitimacy to these international institutions, the kind of legitimacy that perhaps the demonstrators today find lacking.
Let's take a listen to that Nigerian finance minister, Richard.
(BEGIN VIDEO CLIP)
SHAMSUDDEEN USMAN, NIGERIAN FINANCE MINISTER: We have the opportunity now to have greater presence, representation on the boards of these institutions. For African countries in particular, we have an extra seat on the World Bank's board of executive directors. And in the IMF, we have an alternate executive director position.
But we are clamoring, we are advocating for more.
(END VIDEO CLIP)
WATSON: Now the big question, of course, what about those Western economies, those Western governments, Richard, that don't necessarily want to give up power that they have enjoyed over the past 44 years in the IMF and World Bank?
QUEST: You are being charitable. Name and shame, Ivan. We're talking particularly about the U.K., France, Germany, to some extent, the United States, which is the only country that has an in-built majority that can actually veto IMF decisions, they are the ones that have to resign themselves to a shift towards China, to India, to Brazil, and to emerging markets.
WATSON: Absolutely. And what we heard from the World Bank chief here is he is saying that the global economy cannot rest on the shoulders of American consumers any longer. That's one of the big changes that we've seen over the course of this latest global economic crisis that he's now saying that there have to be multiple nodes of growth.
And he singled out Latin America, Southeast Asia, and other places that they should help be -- provide some kind of an engine for global economic growth -- Richard.
QUEST: Ivan Watson in Turkey, in Istanbul, many thanks for joining us at the annual meetings of the IMF and World Bank.
Stock Markets have been rallying around the world over the last few months. Well, the man who predicted the global downturn originally is at it again, Nouriel Roubini. He became known as "Dr. Doom" because of the early warnings of the financial crisis.
Back then, nobody believed him. Now we're all being too optimistic, he says, the stock market rally that we've seen since March can't continue. Whenever Professor Roubini speaks, it certainly makes news. We were delighted when he joined me from -- on the line from New York. And I could ask him fundamentally what is he worried about?
NOURIEL ROUBINI, STERN SCHOOL OF BUSINESS, NEW YORK UNIVERSITY: Well, the fundamental problem is that the market is pricing a V-shaped recovery for the U.S. and the global economy, we have rapid return to potential growth.
While I see that this recovery is going to be anemic, subpar, below trend, the labor market is weak, the consumers are shopped out, there is a capacity glut and the firms are not going to do much cap-ex spending. The financial system is still having a credit crunch. You have these global imbalances, they overspend, are spending less like the U.S. And over- savers like China, Germany, Japan, are not increasing their domestic spending.
So I see a period of slow economic recovery, that may lead eventually -- not right now, because there is a wall of liquidity, to a correction in financial markets.
QUEST: Now a correction, of course, is not a collapse. And arguably, a correction is quite good because that would allow cement to be put into the market to prop up the gains that are there.
ROUBINI: Yes. I don't expect a collapse to occur, the fundamentals have improved, even if the recovery is going to be anemic, there is light at the end of the tunnel. But since March, risky assets like commodities, equity, and credit have been rising so much, so fast, so soon, that the economic fundamentals seem to be inconsistent with this sharp rise in asset prices.
QUEST: What's driving that -- that very sharp rise? Is there any reason other than hope, prayer, and perhaps a bit of goodwill and good wishes?
ROUBINI: There are fundamental reasons for this increase in asset prices. We avoided a near-depression, so asset prices should be higher. Whether the recovery is V-shaped or U-shaped, there is light at the end of the tunnel and asset prices are forward-looking, like stock prices. And now investors are less risk-averse because we avoided a catastrophe and moving away from short-term treasuries to longer-term risky assets like equities, credit, and commodities.
All of that is due to fundamentals, but the increase has been so much driven also by momentum and herding (ph) and by this wall of liquidity chasing assets that there is now a gap between what asset prices are doing and the underlying economic fundamentals that are much weaker in the U.S., in the Eurozone, in Japan, and other advanced economies.
QUEST: We saw today Australia has begun -- the first country to raise interest rates, the exit strategy. Now Australia's economy has unique factors in relation to China and Asia and trade. But it does appear that exit strategies are now well and truly on the agenda.
ROUBINI: Yes, they are. At some point we have to take this quantitative easing and start re-raising interest rates. But there is a dilemma. If you do it too soon, you end up with another recession and deflation, if you wait too long and you have large budget deficits being monetized by central banks, you end up with high inflation.
Of course, different countries are going to do the exit at different stages. Countries like Australia that avoided recession and now because of increasing commodity prices and the growth of China are growing again, should be exiting sooner rather than later, therefore see the exit occurring at different stages for different countries depending on how robust and early is their own economic recovery.
QUEST: You have just come back from Istanbul, from the IMF, are you confident -- are you confident that the G-20 is either, A, the correct form for dealing with this post-crisis, or competent to deal with it post- crisis?
ROUBINI: Well, it's clear that the G-7 or the G-8 were obsolete because to deal with the global economic issues like global imbalances, global climate change, oil and energy security, and other ones, you need to have all the key players at the table, and need the most important -- systemically important emerging markets, you know, China, India, Russia, Brazil, South Africa, Saudi Arabia and so on.
Of course, a group of 20 is not very cohesive, it's just an experiment, but most likely it could become the main center of international economic policy-makings, because you need to have emerging markets at the table.
QUEST: Rarely do you hear somebody talking such common sense when it comes to economics, or at least so clearly. You can hear more from Nouriel Roubini, nicknamed "Dr. Doom," you can hear more at cnnmoney.com, cnnmoney.com.
Now the news headlines and you're up-to-date with your business, we bring you up-to-date with the news. Becky is with us at the news desk.
BECKY ANDERSON, CNN INTERNATIONAL ANCHOR: I am, Richard, thank you.
One of the most wanted suspects in the Rwanda genocide is now in custody. Interpol agents arrested Idelphonse Nizeyimana at a hotel outside the capital of Uganda on Monday. Authorities say he was a captain in the Rwandan armed forces during the 1994 genocide. He has been sent to Tanzania to stand trial before an international criminal tribunal there.
Well, the death toll in India is now at least 300 as thousands of soldiers and rescue workers try to help victims of the floods that have ravaged two southern states. More than 1 million people have been driven from their homes by the torrential rains.
Are more U.S. troops needed for the war in Afghanistan? That will be the question on the White House table in about 15 minutes' time. That's when U.S. President Barack Obama will hold a strategic session with congressional leaders. The Taliban have the momentum right now in Afghanistan, that's the assessment of U.S. Defense Secretary Robert Gates. The secretary hasn't said whether he supports sending in more troops.
And Italian Prime Minister Silvio Berlusconi's political future may be on the line in Rome. Italy's constitutional court is weighing a 2008 immunity. It grants immunity to the prime minister, the president, and to the speakers of parliament while they are in office. If the law is deemed unconstitutional, Mr. Berlusconi could face corruption charges for allegedly bribing a British lawyer to deliver false testimony.
And at this hour, today, those are the headlines from the newsroom. Richard, back to you in the studio.
QUEST: I trust, Ms. Anderson, you will be moving amongst us later in the evening?
ANDERSON: I will, I certainly will, with my show, "CONNECT THE WORLD."
QUEST: Absolutely. Thank you very much.
ANDERSON: Thank you.
QUEST: Becky Anderson. Doesn't even charge me for the promotion.
Right, and that wonderful material -- well, I say wonderful in the sense that it's very shiny, people seem to like it. Gold soaring to an all-time high. The metal has its selling points, we'll explain why. We're also going to show you that it's not just gold, "aluminium" also -- aluminum, depending on how you like to say it, whether it's "aluminium" or aluminum, the prices are rocketing.
QUEST: Now we've been talking about commodities and particularly the price of gold which has reached record highs on the London Metal Exchange and on other trading exchanges. Commodities, whether it's gold, oil, any of the major ones, have been roaring ahead and we need to understand why, because it's believed that there is potential issues and problems with the rocketing rise of these things. And its particularly the metals and the oils which have been giving concern.
Let's start with gold and the intra-day high at 1,043.55, it was up from yesterday's close. There are a variety of reasons. Some say it's because the dollar is declining, well, that's a double-edged sword, because it could be that the dollar is declining because gold is rising. So you pays your money, you takes your choice on that one.
Other people say it's because of inflation worries, especially if you bear in mind Australia raising interest rates, first G-20 country to do so. It doesn't really matter the reason, the fact is you can't argue with the numbers. And the numbers show that it is at an all-time high and it seems to have solidified that.
Another commodity worth pointing out, crude oil prices now over $70.91 a barrel. On this one, this is a really interesting one. This is rumors, which have been denied by oil-producing countries, that they are thinking of abandoning the dollar as the main currency for denominating the price of a barrel of oil. Instead they would go to, for example, a basket of currencies, maybe the Swiss franc, the pound Sterling, and certainly the euro. They denied it, but not before that rocketed up.
There is another reason why oil may be higher. If Asian economic growth is faster, and we're seeing that with Australia, then, of course, demand increases.
But it's not just gold or crude, it's all commodities seem to be in demand. They're rising at the fastest pace in some 18 months. And the question and the real worry is whether what is being seen in these commodities is a natural reflection of economic activity or something more serious.
Take, for example, those commodities which are used in the production of manufacturing. Let's talk, for example, about the metal aluminum. Aluminum right now, a ton would cost you $1,759. Now we might not realize it, but we all depend on aluminum.
It's a vital component of whether it's my laptop, the mobile phones, the packaging, probably there is even some of it in the bell.
Aluminum is so versatile, it can be used again and again.
QUEST (voice-over): This is what 1.5 million recycled drink cans looks like, 27 tons of aluminum. At their U.K. plant in Warrington, Novelis produced around 21 of these giant ingots each and every day.
JOAN CHESNEY, NOVELIS EUROPE: What we do here is the cans that the public has collected and saved for recycling. We bring them here and we melt them down and we turn them into the material for brand new cans again.
QUEST: The plant processes 11 billion cans each year.
CHESNEY: When the plant was commissioned here in 1991, the recycling rate in the U.K. was some 2 percent. Now that has grown over the years. And in fact, we're now over 50 percent recycling rate for used aluminum drinks cans in the U.K.
So not only is it good business, but it's also good for the environment. Every time you recycle, you're saving 95 percent of the energy when you compare that with making aluminum from raw materials.
QUEST: Turning cans into ingots takes around three hours. Ged Wright has been watching this process evolve for 26 years.
GED WRIGHT, NOVELIS EUROPE: Well, we bring the cans in. We pop them through the shredding process while we feed them through a hammer mill where we break the cans down into sort of 50-pound sizes.
They're then fed via a conveyor system to deculture (ph), where the paints, the lacquer, any moisture is removed from the cans. After the deculture, they're then fed into the melting furnaces where they're submerged into the side well and then they're melted. And then down to the casting heads where we cast three (INAUDIBLE) at a time to (INAUDIBLE) 8.3 meters.
QUEST: This is a business, pure and simple. Novelis pays around $850 per ton for used cans. By the time they've been recycled, the ingot sells for $50,000, or roughly $1,800 a ton. And therein lies the profit after the operating and transport costs.
CHESNEY: The ingots from Warrington are all -- they all go to our rolling mill in Germany, near Dusseldorf, which is actually the world's largest rolling mill. Each ingot, I believe, is some 18 kilometers long when it's rolled into sheet. And that sheet we supply to the can-makers who then turn them back into cans.
And that process, from you drinking your can to being recycled and made into a new can and back onto the supermarket shelf can take as little as six weeks.
QUEST: Aluminum and its alloys are the most widely used metal commodities on Earth. They are light, pliable, resistant to corrosion, and yes, fully recyclable.
CHESNEY: It can be recycled again and again without any loss of quality. So in fact the end customer cannot tell the difference between recycled aluminum and aluminum made from raw materials.
QUEST: Almost 40 percent of all aluminum used in Europe now comes from recycled materials. And that number is growing all the time. Something to think about the next time you throw away that can of fizzy pop.
QUEST: Got to admit now, that is fascinating, there is nothing nicer than actually seeing industrial production like that, whether it's a smelting plant or a bottling plant, I always love watching those really exciting -- OK, look, when we come back in just a moment, Jim Boulden will join me. He has got the tale of Boeing, which has a jumbo problem.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: It's another delay again, Richard, another delay for one of their airplanes. This time it's the 747-8 freighter.
QUEST: Hang on, you mean and more problems. This -- you're not going to bang on about the Dreamliner?
BOULDEN: No, no, a different airplane.
QUEST: All right. In a moment.
QUEST: Welcome back. Boeing is set to take a billion dollar pretax charge against its next quarter, the third quarter earnings. And it's again delaying delivery of its next new generation high capacity 747-8 cargo planes, the jumbo jet.
Now the slug of the charges reflects higher-than-expected costs to produce this plane as well as difficult marketing and market conditions. A delivery of the cargo version is now scheduled for Q4 in 2010, about three months late.
Delivery of the passenger version remains on schedule for the fourth quarter of 2011. The only problem is they've only really got one customer for the passenger version, that's Lufthansa, and a few wealthy people who have bought individual planes.
Let's talk about this with Jim Boulden, who has been looking into it. Now.
BOULDEN: Yes, amazing really, isn't it? One analyst said -- sent me an e-mail and said, well, this is a shambles but hardly unexpected from Boeing. This is what happened. They had to get more people working on the 787, the Dreamliner, to get that thing off the ground...
QUEST: Which it isn't.
BOULDEN: ... which still hasn't happened.
QUEST: Which it isn't.
BOULDEN: But the end of next -- end of this year, they say. So...
BOULDEN: ... people moved away from the 747-8. Why does this matter? This is the 747. This is the plane Boeing is known for. This is the new generation plane. This is the new freighter. Freighters -- you know, a lot of companies want freighters, and then they thought people would migrate from the 747 to this newer, lighter, more fuel-efficient dash-8.
But they can't get it finished.
QUEST: Hang on. So Boeing has classically bitten off more than it can chew, both with the Dreamliner and with the 747-8. It proves the point you can't have two major development projects at a time.
BOULDEN: They say they can do it. They say they could put eight development planes at a time. They said they can have planes taking off all of the time, you know, the test flights and all of that, they said they've done that before. The difference this time is the 787 has sucked up so much of everything.
And we know, of course, who has lost his job, Scott Carson, the head of commercial planes, someone we've both interviewed. He lost his job last month because of all of these problems. We didn't know, of course, at that time, that we were going to have this hit as well.
QUEST: So they've taken a 600 million, 700 million charge for -- what, no, 2 billion against the Dreamliner in the previous quarter.
BOULDEN: Two-and-a-half billion.
QUEST: Two-and-a-half, thank you very much, sir. Forgive me.
QUEST: Two-and-a-half billion, and they're not finished yet with that one. They've taken another billion, so they've basically taken a $3 billion hit.
BOULDEN: And analysts are saying...
QUEST: And the planes -- neither plane has flown yet.
BOULDEN: Yes, well, some people thought a couple -- last week, well, maybe they'll both fly at the same time, Boeing will have a really good P.R. coup and have them both fly at the end of this quarter. Now it doesn't look like we're going to get test first flight for 747 until next year.
QUEST: We need to talk about BA in just a moment. I just need to put -- be absolutely fair, am I being, or are we being, or are you being fair to Boeing in our criticisms?
BOULDEN: Let's be very clear here, some of the airlines are very happy about this. Airlines don't pay for planes until they're delivered. You delay the delivery, you delay the amount of money that has to go to the bank account of the airlines to Boeing.
And a lot of airlines are looking for rebates. A lot of others were looking for delays anyway.
QUEST: What has British Airways done today?
BOULDEN: Well, another set of cutbacks. Another thousand jobs are going to go.
QUEST: ... I noticed, though.
BOULDEN: Yes, 3,000 jobs they want to say part-time. They say they're going to cut back on cabin crew, and you would know better than I would about this. I don't know how you fly a plane with fewer cabin crew.
QUEST: You go down to the legal minimum.
BOULDEN: Which is...
QUEST: You go down to the legal minimum. You cut back capacity. You do whatever you can.
BOULDEN: They said they're serious financial...
QUEST: Yes, that was what I found interesting. That came from Paul Marston, who is the deputy head of comms (ph) at BA, said that they are in serious financial trouble.
BOULDEN: Yes. And we've -- you know...
QUEST: But then Willie has already said that. Willie Walsh has actually gone on the record and said the airline is fighting for its survival. We thought that was hyperbole, perhaps.
BOULDEN: Well, now we hear the word "serious" financial problems.
QUEST: All right. Jim Boulden, many thanks.
QUEST: Thanks, indeed.
QUEST: Talk more about that in the weeks ahead.
In just a moment, "JobQuest," Beirut to Barcelona.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Usually am not that optimistic, but for some reason I am today. I hope I make a good impression. The already have my credentials. They know what I can do. And I hope they don't squeeze me too with the pay.
(END VIDEO CLIP)
QUEST: On this program, you meet real people seeking real jobs. In a moment.
QUEST: Good evening. I'm Richard Quest. QUEST MEANS BUSINESS. This is CNN.
The world's top finance chiefs are in Istanbul, and they're talking about how to handle the recovery following the recession. The very real effects of the crisis are being felt. On this program, you'll know we're putting a human face to global recession. And to that end, we continue to follow the journey of two men as they search for work.
First, we'll bring you an update on Raja Kanafani, a freelance copy editor who lives in Beirut. And tonight, we introduce you a new "JobQuester," Rodrigo Medina (ph), Rodrigo is looking for a sales position in Barcelona in Spain.
UNIDENTIFIED MALE: (voice-over): Last week on Job Quest...
UNIDENTIFIED MALE: Every one of these is either a collection notice or some sort of -- some sort of notice about payment that is due, payment that's pasts due. They called and called and called. I finally had to have my phone number changed for that reason, because of so many calls.
Getting by is really tough in Beirut. Day to day expenses are quite high, whether for gas, tele -- you know, telecommunications, transportation. It's -- it's not cheap in Beirut.
UNIDENTIFIED MALE: At this point, I swear, I don't care what I look like. I mean I just -- I've always been in a -- I've always had the same style for the last lifetime. If -- if the people want to hire people according to the way they look rather than what they can deliver in terms of job responsibility, then whew, I -- I've got a thing or two to learn.
RAJA TALAFANI: We're going to "Elle" magazine, if we can cut through this traffic. They're looking for an editor, an English editor for the magazine. I've been a copywriter in advertising for the last eight years. So if I was to be editor with them, it would be only like, you know, tapping into like half of my -- my skills. Plus, I'm a photographer. Maybe that could come in hand for them, as well.
I usually am not that optimistic, but for some reason, I am today. I hope I'll make a good impression. They already have my credentials. They know what I can do. It's -- and I hope they don't squeeze me, too, with the pay.
UNIDENTIFIED MALE: Yes, it's over there -- straight.
UNIDENTIFIED MALE: Hi. How are you?
UNIDENTIFIED FEMALE: Fine.
UNIDENTIFIED MALE: (INAUDIBLE) telephone?
I'm Raja Talafani.
How are you?
UNIDENTIFIED FEMALE: Good afternoon.
TALAFANI: OK. I started in advertising very briefly and I went to publishing.
UNIDENTIFIED FEMALE: I don't know if Altan (ph) explained to you, the main position we're looking for (INAUDIBLE) is to start in French.
UNIDENTIFIED MALE: The most important for us is the spirit of (INAUDIBLE) in English.
UNIDENTIFIED MALE: It's so easy for us in French. It's not easy for us in English. It's not easy to -- to make because "Elle" (INAUDIBLE).
TALAFANI: My forte is definitely Arabic to English.
UNIDENTIFIED FEMALE: OK.
TALAFANI: I'll show you a small selection of black and whites. And I do color, as well, but it's 90 percent black and white, 10 percent color.
It was nice meeting you.
UNIDENTIFIED FEMALE: Very nice meeting you. So we're looking forward to reading you now.
TALAFANI: Well, great.
UNIDENTIFIED MALE: So how was it?
TALAFANI: It was pretty good. It went well, I think. We have to -- we have to share my credentials with someone else in Dubai. I guess he's a shareholder. I think they'll have the final say from there. I'm keeping my fingers crossed. I think -- I think it went well. I got homework.
UNIDENTIFIED MALE: Hello.
My name is Rodrigo Medina and I've been looking for a job in Barcelona for the last year. The last job that I had was for an American multinational in the cosmetics sector. And I lost my job pretty much due to the crisis. So since then I've been just looking for a job and I haven't been able to find one.
I've been doing many things. I've been really, really proactive from what -- just looking at jobs into -- into the Internet, doing a lot of networking, trying to meet a lot of people. Also, I have a couple of ideas of startups for businesses that I'm trying to develop right now. So I'm trying to do that, too.
And, on the other hand, I'm also -- on the other side, I'm also trying to survive. So I'm just trying to make a little bit of money on the side so I can keep going until I find my new direction or my new job.
At this point, I'm -- I'm a very uncomfortable situation because I've been without a job for the last year. Also, another thing is the salaries here in Barcelona are not as high as they are in other cities, so I couldn't save as much money as I wanted to, to -- all my career. Also, my unemployment security just ran out in June. So I'm out of that, too.
So pretty much, I have a couple of more months to pay for all the expenses for my flat, for -- for food and then October, I'll probably have to move with my -- my fathers-in-law or find another solution.
But I'm -- I'm optimistic that by then I -- I'll find a new job.
(END VIDEO TAPE)
QUEST: Beirut and Barcelona, part of our Job Quest.
On Wall Street, the Dow Industrials are looking to close out a second straight session of triple digit gains. We'll go live to New York, to the Stock Exchange. We'll be there with Susan Lisovicz, when QUEST MEANS BUSINESS returns in a moment.
QUEST: Welcome back.
There has been much talk on Wall Street about whether or not the Dow can pull out its second triple digit gain in as many days -- a thing we haven't seen since back in April.
Susan Lisovicz is on the floor of the New York Stock Exchange -- afternoon to you, Susan.
We -- there is a feeling -- there is a generosity of spirit that's going on there and I'm not sure what's backing it up.
SUSAN LISOVICZ, CNN CORRESPONDENT: You would have me scratching my head, as well, Richard. You know, there's just not a whole lot of news the last two days. And having said that, today in particular, the news is really not on this trading floor. It's whether it's Australia raising interest rates, the first major economy, if you will, raising interest rates; that's signaling, perhaps, recovery on track.
We have, obviously, a lot of action in the commodity markets and so you see the dollar getting pounded. And stocks are getting some lift. Well, I was going to tell you we have back to back triple digit gains for the first time since April, but right now we're just shy of that and there's talk that maybe this rally will wither out altogether by the time the closing bell rings in less than 90 minutes.
QUEST: OK. We talked -- in fact, it was our lead story tonight, about Australia and the -- the rise in interest rates.
So is -- in New York, where -- which is often a rather parochial market in the sense of the U.S. economy, and are they con -- are they looking at Asia, are they looking at Australia and saying hey, recovery is on its way?
LISOVICZ: Well, I mean I definitely think it improved sentiment and people are talking about that. Having said that, I don't think a rise in interest rates is -- is going to happen any time soon here. And Ben Bernanke has pretty much gone on the record saying that.
You know, we have a report out today that says, you know, retail sales for the holidays are going to be down 1 percent. Not as bad as last year, but down 1 percent, at a time when the U.S. economy is recovering. So consumers are not back into it. You have all sorts of telltale signs that life is different. Even though things aren't as bad, life is different and it's going to be different for some time now.
QUEST: On that note, I see the price of gold at a record high and I can't work out, is gold high because the dollar is low or the dollar low because gold's high?
I mean is it -- it's a case of the chicken and the egg.
Which comes first?
LISOVICZ: Well, I think that is true many days. But I think today in particular, I think you can say that the dollar is low and gold went higher. I mean, you know, there are these reports that everybody is talking about coming from the Persian Gulf, that ministers are talking about replacing the dollar with a -- a basket of -- of -- of currencies. And what -- despite the denial, there are still people -- people I've talked to who don't believe it.
So, yes, I think that's pushed gold higher. And you notice I'm wearing some today.
QUEST: I was about to say...
QUEST: Yes, absolutely. That's -- that's a -- that's a -- that's a piece around your neck, isn't it?
LISOVICZ: It's what we call hardware, OK?
QUEST: Is it real gold?
LISOVICZ: You know, you never ask a question like that, Richard.
I mean what do you think?
Yes, of course. Of course is it, Richard. And it was a gift, for that matter, too.
QUEST: And at that point, it comes under the rubric of TMI -- too much information.
QUEST: ...clothes are out.
Susan Lisovicz at the New York Stock Exchange.
And I think we've just about got away with that, just about.
Now, the upbeat mood on the Street added some fuel to the financial flames in Europe. You need to know how the euro bourses closed.
The major indices extending the gains they made on Monday. Mines and metals the biggest movers this session. Not surprising, we've talked about commodities and aluminum.
Anglo American helped pushed London's FTSE 2.25 percent higher. Germany and France tacked on more than 2.5 percent. Zurich's SMI just a touch higher, but it was definitely on the up side.
Ericsson closed slightly on the good today. The company has got a new chief executive, Hans Vestberg, who is currently attending the ITU -- the International Telecommunication Union's gathering in Geneva.
Adrian Finighan talked up with Mr. Vestberg and asked him about a rough year in telecoms, but the future -- well, what's that going to be like?
HANS VESTBERG, INCOMING ERICSSON CEO: I think that when we saw this crisis coming up basically one year ago, we said it would be unreasonable that Ericsson wouldn't be impacted. And we saw through the fourth quarter basically no impact. The first quarter we started to see some markets, actually, where currency had devaluated very strongly. It was harder for them to invest.
In the second quarter, we saw a little bit more.
So we have seen a -- a gradual impact of the -- of the crisis.
Then, of course, looking forward, it's difficult to say where we are. And, of course, I would say that there are so many people having an idea about this crisis. So we've tried to control what we can control. That's our own costs in our -- in our business. And now we're going to see where the marketplace takes us. So we're going to see that along the year now, how this crisis will impact or if this not will impact.
ADRIAN FINIGHAN, CNN CORRESPONDENT: There's been a lot of talk at ITU World this week about bridging the digital divide, about helping to create and empower people economically using digital technology. And all of that sounds very promising, but, of course, it requires investment.
And coming out of a recession, do you think there's the appetite to pump in the kind of money that -- that is needed for that sort of rolling out of technology?
VESTBERG: Definitely I see it, because it's not -- not a contradiction anymore about sustainability and CO2 emissions and investment in ISAT (ph) because they're going hand in hand. I mean just look at the - - the pure figures. When we have four billion mobile subscriptions right now. We believe it's going to be six-and-a-half, up to seven billions in a couple of years.
But more notable is that we probably have half a billion broadband users today. That's probably three billion broadband users in a couple of years. Because many people, for the first time they're ever going to have broadband it's going to be through a mobile network, not through the fixed network.
So, of course, and that will enable a fantastic opportunity for improvement of efficiency, of people, consumers, corporation, enterprise and government. So that investment is really just a very good investment for many reasons, not only sustainability, but also from an efficiency point of view.
So I'm fairly confident that that will happen and the predictions that we had before, we were always around this quarter. So I believe we're going to do it.
FINIGHAN: Of course, one of the -- the knock-on effects of -- of the stimulus packages that have been introduced over the last year is a return of public money to the telecommunications sector.
What's your -- what's your view on that?
Do you see opportunities, as far as Ericsson is concerned, to work in public/private partnerships?
VESTBERG: Public and private partnership is going to be very important going forward. But a couple of things about investment from government. I think that they have seen the coordination about having a broadband penetration or a mobile penetration in country, that that can lead to a sustainable GDP improvement. And that, of course, how we -- we have seen this (INAUDIBLE) where we can see 0.3 to 0.5 improvement on a GDP, when we have 10 percent more penetration.
What we are now are looking this, of course, (INAUDIBLE) the penetration -- how much will that give to a GDP improvement?
It could be 2, 3 percent. So, of course, it goes hand in hand in this financial environment, also, to make investments.
And then, on top of that, when you have the -- that network laid out, that highway or -- or broadband, what you're going to do with that is have applications. And here you need to work cross-sectors. And here government has a -- a big role to see that the different sectors on transport, power, telecommunications works together to find applications that use that highway.
So, yes, I think it's important.
(END VIDEO TAPE)
QUEST: Adrian Finighan talking to Ericsson's incoming executive, CEO Hans Vestberg.
If I got rained on once, it was twice and then it was three times. Pretty much every time I put my nose out of the front door, I got rained on.
QUEST: Oh, delighted that you found it funny. Well, I've -- it's gone right on my chest, I'll tell you.
Guillermo is at the World Weather Center.
GUILLERMO ARDUINO, CNN METEOROLOGIST: We've got a (INAUDIBLE) of rain, too.
Well, I think that we are going to see rain for tomorrow. Then Thursday is going to get a little bit better. Friday is going to get a little bit better and on Saturday we'll get more rain.
But, Richard, look at Ireland in here, the southern parts; look at Germany. I mean I can tell you so many citizens in Germany, from Nuremberg to Munnerstadt to Munich to Leipzig in the east into the south, as well, into Gossel, Hanover, Gutersloh -- so many cities getting the rain.
Manchester is getting pounded right now with rain. And we're going to see so much more rain. But it's because of Grace. Not very gracious, but in combination with this front, brought so much rain and will continue to bring some more rain.
Now the north, you know that the winter is here to stay. You know that the winter is here to stay. You know there are locales in Norway that are getting snow right now and the temperatures are really, really low.
Now, let's -- let me go back to England right now, Manchester. You see these reds. That is suggesting that we're seeing big time storms. I don't want to be at that airport right now.
The southeast not that bad compared to it. So a little bit of patience.
Once again, here it is. Wednesday with rain; Thursday, Friday, a little bit better; Saturday come back and we'll see the influx of unstable weather. Whoo, it could be worse.
Well, Portugal's northern sections is where we have some alerts posted. Still in Galatia, many areas -- Ponteverdra (ph), Lugal (ph), Vigal (ph) with high seas also on the coast. So the weather is bad there.
Germany, we'll continue to see winds, especially in mid-portions. But it doesn't look that bad when I look at airport forecasts. You know, Brussels with some winds; Amsterdam with some winds. Ireland is in bad shape. Then we have Copenhagen with the rain showers and all those German cities that I was talking about.
But it seems that the long-term things are getting better. We see a very definite contrast right now between the south and central parts of Europe, with temperatures, and the north, what I was talking about before - - Glasgow at 13 for tomorrow; Stockholm the same temperature; but 26 in Vienna.
Hey, how many -- how many more days are we going to have of those temperatures in the forecast?
I don't think we'll have many. Paris, 23. And the rain continues here in coastal parts of Syria. So choppy seas over there. But it's improving in Turkey and Cyprus. If you're watching from there, first of all, thank you for watching CNN. Secondly, you know what I'm talking about. And, also, if you have to travel through the English Channel or the North Sea, it's going to be extremely choppy. So boarding that ship, you know, with advice.
And then Asia -- Parma and Melor. Melor is actually over Okinawa and bringing bad weather there. It's going to bring so much rain in Japan. But Parma is over Luzon right now. We're looking at Manila. We are very worried about the rain that we're going to get there, the winds that continue to pummel Taipei. Tokyo with windy conditions and a lot, a lot of rain in the forecast.
So that's what you can expect. In the meantime, central parts of the U.S. with some advancing storms. The South looking fine. The Northeast, for the time being, looking OK.
Don't leave us. Richard will be back after the break from London.
QUEST: Let's return to Istanbul and the get together of the world's top financial policymakers, the International Monetary Fund's annual conference. Few of the delegates attending the meeting will get a chance to see the real poverty that exists outside the conference hall. That's not to say they don't know it's there, it's just that they're not exposed to it at these big conferences.
Ivan Watson met a taxi driver who's trying to draw attention to the city's poorest residents.
IVAN WATSON, CNN CORRESPONDENT (voice-over): Shepket Shahintosh (ph) works the night shift, driving his taxi from night until dawn. His route takes him past symbols of wealth, both old and new. Periodically, he stops, not for customers, but to take photos. In addition to being a cabbie, Shahintosh is also a self-taught photographer. His lens focuses on the poorest segments of Istanbul's society.
"I saw people sleeping in the street in winter," he says. "It made me sad and angry. I started taking photos," he adds, "because I want government officials to see these poor people the way I do and do something to help."
Armed with a small point and shoot camera, Shahintosh photographs the homeless, who often sleep in bus stops next to billboards advertising luxury products. He also shoots the street kids, prostitutes and garbage pickers who roam the city's streets at night.
"I judge a country's wealth on how its income is distributed," Shahintosh says. "If just a few people control most of the money," he adds, "I think that shows a country's poverty, not its wealth."
Shahintosh says the global economic downturn has hit the city's taxi drivers, cutting clientele. The crisis has even hurt business for the city's freelance garbage pickers. Men like Yasher, who earns $7 a night recycling paper to feed his family of six. Over a cigarette, he tells the taxi driver business has slowed down for Istanbul's shopkeepers. The consequence -- there's less packing paper and cardboard boxes for him to scavenge.
Shahintosh's unique perspective has won him some international attention. His work has been displayed abroad and here at home in Istanbul.
But he doesn't make enough money off of his photos to earn a living. For that, this photographer still has to work the night shift.
Ivan Watson, CNN, Istanbul.
(END VIDEO TAPE)
QUEST: Now, when I return in a moment, Profitable Moment. We've talked a lot tonight about the price of gold. I'll consider why this is going up in value, in just a moment.
QUEST: And a quick look at the closing markets before we have our Profitable Thought.
The Dow Jones Industrial (INAUDIBLE) could be to the second day of double digit gains, up 106 points, 1 percent, 9705 on the Dow -- a strong performance on equities on both sides of the Atlantic.
Take it away.
Tonight's Profitable Moment -- gold has hit a record high of $1,040 an ounce. There are no shortages of the reasons why. There was the rise in Australian interest rates and that suggested economic growth picking up thanks to stronger Asian economies, especially, of course, China and Southeast Asia.
Commodity prices also rising -- all metals. There are reports, for example, that oil producing countries are secretly planning and plotting to replace the dollar as the pricing currency for oil. Now, they've denied it and whether or not it happens isn't really the case. The mere whiff was enough to boost the price of gold.
Gold, it seems, for the gold bugs, the high price reaffirms their messianic love of the precious metal, even though no one can really come up with a single strong reason why, except it is a good hedge, a good investment in uncertain times. And, yes, these times really are uncertain. There are still large deficits and that old worry, inflation, is still with us. In other words, it's a worry.
And that's QUEST MEANS BUSINESS.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I do hope it's profitable.
Christiane Amanpour is next, after the headlines from the I Desk.