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Fears of a Greek Default; BA, Iberia Agree to Merge

Aired April 8, 2010 - 14:00:00   ET


JOHN DEFTERIOS, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: The safety net is ready but the markets won't believe it until they see it. Fears grow of a Greek default.

Flying in formation, British Airways and Iberia decide there is safety in numbers.

And a sorry state of affairs, Citigroup executives apologize, but say they were not to blame for the crisis.

I'm John Defterios in for Richard Quest and this, of course, is QUEST MEANS BUSINESS.

Good evening.

Despite assurances of support and the guarantee of emergency funds, Greece is losing credibility within the financial markets. Investors are hammering Greek government bonds yet again. This Thursday the yield on a typical bond shot up to a record high for the Euro Zone. Investors are now demanding an annual return of 7.35 percent to hold that Greek paper. Compare that to Germany where the yield on a comparable bond is just about 3 percent.

Greece's rising yield is a clear sign lenders are worried about its ability to stay solvent. Greece doesn't want to ask the EU for a bailout, and it is still aiming to meet its needs by borrowing from the financial markets. But in the last resort, the offer is there. Last month the Euro Zone governments patched together a safety net involving their own money and IMF funds. But it was pretty thin on the details so far. It wasn't looking great on Greece's stock market today, either. The main index in Athens fell by just over 3 percent. It was down better than 5 percent earlier.

Not surprisingly banking stocks were the main casualties there. Alfa Bank and National Bank of Greece, the commercial bank, were both down over 7 percent on the day. The country got the latest of a series of messages of support Thursday, from the president of the European Central Bank, in Frankfurt, Jean-Claude Trichet said he, for one, did not expect Greece to default.


JEAN CLAUDE TRICHET, PRESIDENT OF THE EUROPEAN CENTRAL BANK: As you know, I was present in the meeting of the heads of state and government, and I heard messages from the heads of state and government, again, I consider that what they have agreed upon is very important and I take it with a signature of all the heads concerned, as very, very important. I would say that taking all the information I have, a default is not an issue for Greece.


DEFTERIOS: Once again, Jean-Claude Trichet trying to stabilize the Greek financial markets. Trichet also talked about a workable framework for Greece in reference to the EU plan to provide emergency funds, if they were needed. Earlier I spoke to the economist Diego Iscaro, I asked him what he thought those comments really meant.


DIEGO ISCARO, SR. ECONOMIST, IHS GLOBAL INSIGHT: Well, the thing is we don't really have the details of how these proposed Euro Zone bailout is going to work. And that is why this time after Greek markets, that we don't really know how this is going to work, and that is why we have all this concerns. And that is why the situation hasn't really improved that much.

DEFTERIOS: At 23 billion euros of borrowing needs to be taken over in April and May, at what sort of spread over the German bund are we looking at here on the 10-year bond? At least 5 percent? That is the risk premium here?

ISCARO: Well, I wouldn't expect spreads to go down significantly. I mean, if anything, what we've seen during the last couple of days spreads are going up and that is one of the main problems the Greek government has at the moment.

DEFTERIOS: It is a population of 10 million, and 10 billion euros have been pulled out of the banks there, in the first two months of the year, about 4.5 percent of total deposits. Is that a run? Is this a potential run on the banks right now? Is that what we're looking at here?

ISCARO: Well, I wouldn't say you have a run now. What I would say is that the situation for the Greek banking system is extremely challenging. We not only have fallen deposits but we also have that activity levels and high unemployment are likely to result in an increasing number of non- performing loans and that is certainly is going to hit the banks balance sheets.

DEFTERIOS: It is fascinating, if the Greeks borrowed say, $30 billion in 2010, for the remainder of the year, the interest on that now, looking at the rates today, is about $2.25 billion. Right now they are $1.3 billion of extra cost because of the spread that we talked about. That is a heavy burden for a relatively small economy, is it not?

ISCARO: Oh, yes, that is why-I mean, what I said that one of the main problems that the Greek government has is that the interest rate that they are paying on the debt is really, really high. It was quite long that before the Euro Zone bailout package was unveiled demand was really strong, so they didn't have pull in terms of meeting the demand for Greek bonds, but the price was really high.

And unfortunately after the safety net was unveiled, the price hasn't really gone down. And actually it has been increasing bi-monthly.

DEFTERIOS: It is extraordinary, a backroom deal by the European Union, to get to where we are today. They talked about a potential role for the IMF. And now nobody is talking about the exact role of the IMF, that is quite worrying as a purchaser of Greek bonds, is it not?

ISCARO: That is one of the main concerns I think the markets have. We know that the IMF will have some part to play in an eventual bailout, but we don't really know what the role is going to be. That actually adds to the concerns people have about this eventual safety net.

DEFTERIOS: OK, you are a Greek bank right now, and you've asked to back into the rescue package, which is that fund is getting smaller and smaller each time. What happens in the second half of 2010, if you are a Greek bank and you need to reach out to the Europe Central Bank for more funding?

ISCARO: Well, I think, on the positive side, the European central banks have announced that they are not going to stop (UNINTELLIGIBLE) at the end of the year so that means that Greek bonds are likely to be eligible for collateral for funding operations. That is a positive thing.

And what I would expect is, I would expect Greek bonds to tighten the fiscal, the credit conditions very sharply, anyway. As I said before, deposits are going down, they have to go to market to get their funding. The funding is likely to increase, that is going to-the funding culture (ph) is likely to increase and that is likely to heat (UNINTELLIGIBLE). And I believe the result of that will be that banks will be unwilling to lend and that may have a negative impact on the economy as a whole.


DEFTERIOS: Once again, Diego Iscaro, there, analyzing the Greek financial markets situation. Well, in the stock markets over all, all that fresh speculation about Greece left investors in Europe wondering if shares have risen too far in the past few weeks. Indices across the region dropped for the second day in a row. These losses were the heaviest in six weeks.

Shares of natural resources companies have had a great run for the past couple of months. But today they went backwards as metal prices slipped again. Xstrata, a Swiss company that is listed in London, was down nearly 4 percent on the day. European Central Bank and Bank of England both kept interest rates on hold this Thursday. You can see the FTSE down nearly 0.9 percent. The Xetra DAX down 0.8 percent and the CAC currant down 1.2 percent.

We'll have more coverage on BA a little bit later, but that stock was up nearly 3 percent on the day. And Iberia up nearly 2 percent as a result of the merger talks. We'll have that with Jim Boulden.

Now, let's get a quick update on what's going on, on the Big Board. The market was under a little bit of pressure earlier, because of the jobs data that came out in the U.S., which was worse than expected. That was offset by U.S. retail sales showing that the economy may be recovering, and that bumped the market back up the positive line here, 10,927, with a gain of 30 points. There was some concern yesterday after the Kansas City Fed said that we may be needing to raise interest rates in the States, and that was off set again, by a strong consumer.

Now, let's get you up to date with the news headlines and for that we bring in Fionnuala Sweeney who joins us from the London news room.


DEFTERIOS: Well, British Airways has been ruffling a few feathers in its dispute with its cabin crews. It has arguments with its rivals, but at least it has found one set of people it can get on with these days. We look at BA's new best friend, called Iberia, next.


DEFTERIOS: The ink is drying on the deal between British Airways and Iberia. The British and Spanish flight carriers have agreed to merge. It is not a done deal, but there are major step closer to creating Europe's third largest airline group. Here is what it means for the travelers going forward, the combined fleet of 408 aircraft, flying to 200 destinations worldwide, the new company will be able to carry 58 million passengers annually. The two airlines announced a provisional agreement in November. It is now expected to be completed by the end of 2010. If it gets through all the red tape from regulators British Airways says the new company will create $533 million in cost savings. That is money both airlines badly need these days. Jim Boulden is following the story for us now and joins us now with all the analysis.

This is two carriers that have been bleeding a lot of money.


DEFTERIOS: If you look at the losses for 2009, and projected 2010 for British Airways, a loss of about a billion euros.


DEFTERIOS: But they are going to move ahead. They think there is a strategy here that is going to work for them?

BOULDEN: Well, I have to say one of the critics from Ryan Air said this is like two drunks holding each other up at the bar. That was a quote today. Because what they are thinking is these are two trouble airlines trying to get together. That may be a bit unfair because British Airways, of course, has been doing well up until the last few years. But it has a very specific strategy which is how to become a global airline without itself having to get bigger, or without having to compete with more and more airlines.

So, the idea is, combine with Iberia. That will give it really good access to South America, more access to Asia. You know, it has tried merge with Australian Airlines. It has tried to get a closer deal with American Airlines. So this is one pillar in this really grand strategy to truly be able to go against the Middle East airlines, which of course are spreading around the world as well.

DEFTERIOS: Yes, it makes sense strategically if you look at the map, but the one thing that keeps on kind of coming up in my mind, is culturally-


DEFTERIOS: You have flown both of these carriers, they don't seem to be a very good match. They say Willie Walsh will be the new chief executive of this new international airline group that is going to be the umbrella.


DEFTERIOS: Mr. Vasquez as the chairman.

BOULDEN: Chairman, yes.

DEFTERIOS: They are trying to marry the staffs, it's not easy.

BOULDEN: This is why they are going the route that KLM/Air France went, which is you keep separate brands, you keep separate headquarters. You still have your hubs and your home markets, but what you do is you allow your passengers to move seamlessly between the airlines. So, British Airways isn't going to fly people down to South America. Iberia will do it, but it will go through the British Airways network. And then you cut in the back office. You cut where the passengers don't see. That is the hope. It is different from what U.S. airlines have done, which is gobble each other up, get rid of that name, pretend the other airline never existed, and hope to hell you can survive.

DEFTERIOS: Yes, who did they have their sights on? Is it really Air France/KLM, and Lufthansa?


DEFTERIOS: Because if you fly Lufthansa right now, it is a seamless carrier and that is the big difference here.

BOULDEN: Yes, but Lufthansa is so much more than Lufthansa now. It is getting BMI in the-in this country it is Austrian. It is Swiss. It is a Belgium airline. It is becoming-it has decided to gobble up a lot of the old legacy carriers or some of the smaller carriers and bring them into the system again, allowing passengers to move seamlessly. But what is interesting, if you look at the passenger numbers, BA, Iberia, together, 58 million.

DEFTERIOS: Not that big.

BOULDEN: It doesn't take it up to the level of some of the others, because we have Ryan Air, for instance, very low-cost airline of course, 65 million passengers last year; KLM, 60 million, Lufthansa, 76 million. Delta, I always like to referring to one of these big American carriers, 160 million passengers. The U.S. airlines are so much bigger.

DEFTERIOS: Yes, in fact, does this stop the losses? Can they really generate the $500 million in cost savings within a five-year window? They still have the strikes to get through, and that looks better at this stage, but it is still a challenge?

BOULDEN: They still have to get their pensions scheme that they have come up with, with the British Airways, through the regulators. That still has to happen. And then you have to marry-you say these cultures. And try to get these things to work together. And, you know, M&A people tell you all the time, the vast majority of mergers don't actually work.

DEFTERIOS: Despite the fact that everybody gets excited and both the stocks were up today. One nearly 3 percent and the other-


BOULDEN: And the banks make a lot of money by getting these deals done.

DEFTERIOS: Don't talk about the fees.


DEFTERIOS: Jim Boulden on that story. Thanks very much.

Merger talk is revving up the U.S. as well. Reports say the U.S. Airways and United are at the table, yet again. Could a merger get off the ground this time around? Let's bring in Maggie Lake who joins us now from New York. So, a lot of airline activity. And a lot of discussion here.

We know that Mr. Tilton, the chief executive at United has been looking for a partner for a long time. And this is not the first time he has approached U.S. Airways. Is this one going to happen within several weeks or not?

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: We're going to have to-that is probably an aggressive time line. And you are right, John, this has been a decade-long attempt to find some sort of partner. You almost feel bad for them, and the question we are all asking today is this a real engagement, or is this just an attempt to make Continental jealous?

United has spoken to U.S. Airways in the past but really it seemed that it was Continental it really wanted to tie up with back in 2008, and they were rebuffed. So they were sort of circling back and going after U.S. Airways or talking to them about joining forces.

There are some benefits here. It does make sense if this is going to go forward. One thing is that United brings to the table very strong Pacific roots, international roots. It would create the second largest airline, first of all. So that scale, in terms of the two, as I mentioned. United bringing that trans-Pacific roots. U.S. Airways, on the other hand, has a very well-respected management team. I've heard people saying really good things about them being visionary today. And it also has strength on the East Coast.

But, as you and Jim were just going over, they are always problems especially when it comes to airline mergers. And labor is expected to be one of them. In particular the pilots and the flight attendants, it is issues of seniority. U.S. Airways has not even dealt with that issue, with America West, when it brought that into the fold. Now, you are entering another, a third group, so who has more seniority? How do you judge it? That could be a real sticking point. And the labor unions have scuttled attempts for United to merge before, so this could be a real thorn.

DEFTERIOS: OK, 80,000 workers if you combine the carriers. So, it does get that size, bigger than the combined BA/Iberia. But regulators, the Department of Transportation, the Department of Justice have had problems with this before. A lot of overlapping hubs, a lot of concentration on certain markets.

LAKE: That's right. And the alarm bells go off. That is the other big question mark and the reason why a few weeks might be an aggressive timetable. There are big questions about regulators. Again, this comes up often with airline mergers. The one thing that has changed and that might make people more confident that it gets done is that the Delta/Northwest deal got done. So, regulators in the past have shown that maybe they are rethinking things and allowing more consolidation as they see these airlines struggle to survive.

Having said that, the thing that makes people nervous is that this is a new administration, the Obama administration thought to be more warm toward labor unions. They said they are going to be really tough on anti- trust. They are going to look at these deals really closely. And as you mentioned, the regulators had issues before. So they are going to want to know, what is different? What has changed? Why should we let this go this time and especially when you are talking about hubs and closing routes. Always a cause for concern about how it is going to impact the flyers and the consumers. So a lot of question marks here, but it is getting the pot stirring, John.

DEFTERIOS: OK, one other thing I wanted to talk to you about, I was asking Jim the same thing. Who are they going after? Is it Delta now, because Delta has that size and scale? And basically they think this is something they have to do, they are forced to go ahead with the marriage?

LAKE: Certainly there is the rival. Catching up with the rival, watching what they did. But there is also just the practicality that-you know, in the best of times people will tell you that this is a terrible business. It is very difficult to make money. And so they are looking at trying to pull capacity out of the system. So, I think, even if-Delta and Northwest were first and sort of got out of the gate. But all of them, they have been talking about this for a long time and you mentioned, Tilton, United's management, and U.S. Airways management have been very vocal about the need to combine, reduce the number of airlines and pull some of the capacity out, if they are going to get those revenue numbers up.

So, I think both of those things, both the wider industry and specifically Delta, has really lit a fire and that is why we are hearing so much talk about consolidation.

DEFTERIOS: OK, global airline industry a buzz today. Maggie Lake, thanks for the other side of the Atlantic, side of this story. Maggie Lake in New York.

Well, Swiss Adventures are making strikes in their attempt to fly a solar plane around the world. The Solar Impulse completed its first 90- minute test flight Wednesday. The massive craft has the wingspan of a Boeing 747, weighs the same as a small car and flies and average speed of 70 kilometers an hour. It is a $94 million project and the team is preparing to circle the globe by the year 2012.

Up next on QUEST MEANS BUSINESS you don't have to live in Britain, to have a stake in runs the country, what the general election could mean for you if you do business here.


DEFTERIOS: Big business will be watching and waiting for the results of Britain's general election, that is for sure. What happens to tax rates, especially for higher earnings, will depend on who wins power on May the 6th. Richard Quest spoke to Stuart Fraser, a leading light of The City of London Corporation, with the job of promoting the capital as a financial center. Richard asked him if he's worried about London's reputation as a place to do business.


STUART FRASER, POLICY & RESOURCES CMTE., CITY OF LONDON: There is still considerable anger, justified anger, in the populous. All of the polls will tell you that. And not politician is going to be defending any part of the financial services industry I think until after the election, whether or not of course, they will then, is another matter. But politically I think it would not be sensible for any politicians to go that way. So we would expect still to see banker bashing, if that is what you call it, right away through the election period.


FRASER: No, I think that most people would-who are looking at London from a professional point of view do accept the political situation. I will say that it is not a lot different than the United States, of course.

QUEST: No, but is it damaging? The drip, drip, drip affect of banker bashing, it becomes very difficult for you, whoever wins the election, to turn that around.

FRASER: That is why after the election, whoever is in government, really does need to set out a clear statement of policy, travel (ph), if you like. What they expect to see over the first term. And obviously I'm clearly hoping to see that there will be a more positive attitude to the bankers. Not just the bankers. The thing that is worrying me is has spread outside. It is now anybody that earns X amount of money, even more than the prime minister is now, supposed to be not doing a proper job.

QUEST: Labour is quite clear, it will tax those higher earners. The Lib-Dems are quite clear. On this program last night Vince Cable said he wouldn't pull any punches. So, the Tories seem to be the ones who are the ones who are only saying there is hope for the high-enders (ph).

FRASER: What I would say is that for any party that comes into power you have got the trade off. You have got to be practical about this. If you raise taxes to high, you'll get diminishing returns. It is as simple as that.

QUEST: But all the threats, or all the thoughts, or all the warnings we had about a 50 percent rate of tax hasn't come to fruition. There may be a few people who have gone, but there wasn't the mass exodus to Zurich, or Geneva, that people had thought.

FRASER: There is not a mass exodus and at 50P I don't think there will be a mass exodus, but it doesn't mean a mass exodus. What it means is for those people who are highly talented, can earn an awful lot of money are in a huge global demand. There is not a huge number of them. But they can relocate. You don't need to take the whole bank out. So, the mass exodus is never there. But I will say, I OK, if at 50P they are going to stay. What will they do at 60 or 70 or 80? There has to be a tipping point, when it is no longer worthwhile being here.

QUEST: What is the single biggest thing that the corporation fears in this election? Because if we look at the latest statistics, New Yorkers caught up and they will surpass in the future. So, if London is going to remain predominant, what needs to happen?

FRASER: Well, the incoming government needs to make it quite clear that whatever taxes have been put in the past, particularly the tax on bonuses, is not going to be repeated. That we have a sustainable tax policy set up quite clearly. And obviously, I would like to see a long term view that the top layer tax can be reduced. I'm not politically immature to believe it could be done immediately, but I do believe that from our perspective a commitment to reducing it over a period of time would actually let people say, OK, we are in a temporary situation. It isn't permanent, we can sit this out.

But, we must stop this attack on high earners, because you are just saying to the rest of the world that if you are very talented and a high earner, go to New York. They are not doing it. They are not bashing them in the same way, or go elsewhere.


DEFTERIOS: Once again, Richard speaking to Stuart Fraser of the City of London Corporation, on the issues surrounding the elections. Of course, QMB will keep every aspect of this story, including the threat of higher taxes from Labour on the jobs market and the counter-balance argument from the Tories, at this stage. The election of course is on May 6.

Well, building bridges with Beijing. Find out what the U.S. Treasury Secretary is doing to defuse tensions over China's currency and its rate.


DEFTERIOS: Welcome back, I'm John Defterios in London, sitting in for Richard Quest, and this is QUEST MEANS BUSINESS, right here on CNN.

Is China gearing up to revalue its currency? U.S. Treasury Secretary Timothy Geithner made a hastily arranged stop in Beijing on Thursday. But no one was saying whether the exchange rate was part of the conversation when he met with the country's vice premier. In recent months some U.S. officials have blasted Beijing for allegedly undervaluing its currency. CNN Asia's Business Editor, Eunice Yoon reports on Geithner's tete-a-tete.


EUNICE YOON, CNN ASIAN FINANCIAL CORRESPONDENT: U.S. Treasury Secretary Timothy Geithner met with Chinese counterpart, Vice Premiere Wong Chi Shan (ph). The two discussed U.S.-Sino Economic ties. Neither side, though, would confirm if the men talked about the Chinese currency. But many believe that Geithner's last-minute trip was aimed at narrowing differences between Washington and Beijing. Many U.S. politicians and economists, think that the Chinese government keeps it currency artificially cheap. Geithner's meeting comes just days after the Treasury delayed a report that could label China currency manipulator. One prominent China watcher says that that label is some thing that China wants to avoid.


VICTOR GAO, In China does not want to be labeled as a currency manipulator. If that happens, you know, China will not only be very much grieved upon, but also we have to take retaliatory actions in response to such a very wrongful act by the United States.

Therefore, I think the visit by Secretary Geithner will help each other to exchange views, and also allow us to come up with a mutually acceptable method going forward. I think the ultimate goal of full convertibility of the renminbi yuan and the market readjustability of the renminbi yuan will be achieved.


YOON: There's a growing belief that China is willing to return to a currency regime from 2005, when it allowed the yuan to move 2 percent and trade in a wider band. The speculation now is that a move could come as early as the next several days.

Nothing has been confirmed, but indications are that the Chinese are reviewing their policies. Former Treasury secretary, Henry Paulson, who was also in China this week, weighed in on the yuan debate in an interview with Chinese broadcaster, CCTV. Paulson suggested a change to China's currency rate would likely have more to do with domestic economic concerns rather than international pressure.


HENRY PAULSON, FORMER U.S. TREASURY SECRETARY: The point I always made was for China to do storm, it's got to be in China's best interests. And I believed it was in China's best interests. And I sometimes described the disagreement that we had was not one of -- of -- of direction, but it was one of -- of timing.


YOON: Chinese policymakers have been debating the merits of a more flexible, possibly stronger currency. The argument is that an appreciation of the yuan could help ease pressure in the Chinese economy, helping officials manage rising inflation and encouraging Chinese consumers to spend more.

Eunice Yoon, Hong Kong.


DEFTERIOS: Well, like Europe, Asia's equity markets also saw red today. Weaker than expected core machinery orders one of Japan hit stocks right across the region. The Nikkei lost about 1 percent in Thursday's session. Shanghai, Sydney and Hong Kong followed Japan's benchmark index into the negative column, with losses of .25 to about 1 percent.

They say they're sorry, but they're not taking the blame -- two of the men who led Citigroup into the boom years testified before the Financial Crisis Inquiry Committee in Washington Thursday, the famed panel that heard from former Fed Chairman Alan Greenspan on Wednesday. Robert Rubin and Chuck Prince said they regret not seeing the mortgage meltdown on its way, but both said they were not aware of the scope of the problem at the time.


ROBERT RUBIN, FORMER CITIGROUP BOARD MEMBER: Almost all of us, including me, who were involved in the financial system, that is to say, financial firms, regulators, rating agencies, analysts and commentators, missed the powerful combination of factors that led to this crisis and the serious possibility of a massive crisis. We all bear responsibility for not recognizing this and I deeply regret that.

CHARLES PRINCE, FORMER CITIGROUP CEO: I'm sorry for the millions of people -- average Americans -- who have lost their homes and I'm sorry that our management team, starting with me, like so many others, could not see the unprecedented market collapse that lay before us.


DEFTERIOS: Once again, Chuck Prince and Robert Rubin testifying on Capitol Hill today. Former executives from troubled housing finance giants, Fannie Mae and Freddie Mac, will testify before a Commission on Friday.

Well, it's been an up and down day on Wall Street, as we talked about before, after the sell-off that we saw of about .5 percent yesterday.

Let's bring in Stephanie Elam on the big board, who has the very latest -- Stephanie.


Yes, stocks have actually managed to erase those early losses that we had here in the session. And getting a little bit of momentum, nothing really to throw the confetti over just yet. Jitters over Greek debt and a sharp jump in weekly job losses, they gave way to strong retail sales numbers.

Also, there's this merger news that is buzzing in the airline sector that's also piquing interest here. Airline stocks are soaring on rumors that U.S. Airways and United Airlines are talking about combining to form the country's second largest carrier. Of course, the deal is nowhere near being done. And overall, if you just took the -- take a look at the market, it's turning into a good day for the major averages, which are trying to make back some of Wednesday's losses here.

We've been pulling back further and further from 11000 and at this point, at least we're moving in the right direction -- John.

DEFTERIOS: Yes, indeed.

What are the retail chain numbers telling us about the recovery?

We heard from a Kansas City Fed yesterday and I know he's a hawk. And he was talking about raising interest rates.

Does this -- is this reflected in the consumer market?

Are consumers spending their money again?

ELAM: I think a lot of consumers would like to see rates not go anywhere right now. But this is a showing of confidence in the retail sector when the consumers are going out there and spending their money. After all, they're two thirds of the economic driver here.

Stores got a boost because there was warmer weather here. Also, the Easter holiday was earlier in the year. And, of course, it helps when you're comparing yourself to a really awful year. And March of last year, sales were just awful, making this year's numbers look even better.

But if you take a look at the which kind of retailers benefits, it's really across-the-board. You've got discounter Target, warehouse retailer Costco, Macy's, also apparel retailers like Gap and Limited Brands all posting double digit increases in sales that beat Wall Street's expectations.

And there's some concern that April's numbers won't be as good because of the fact that Easter was earlier this year. But most analysts agree that confidence -- that consumer confidence is slowly coming back into the marketplace.

Of course, a lot of consumer confidence depends on job security and we did get news today that jobless claims rose sharply last week and unemployment remains high. And as long as it does, there will be consumers out there who will not be doing as much consuming as we, perhaps, like -- John.

DEFTERIOS: Yes, in fact, if we can just talk about it quickly, very confusing signals, if you're a central banker, on what to do next. The job market is still soft, although that's a -- a weekly gauge. And the retail market looking quite strong. It's very difficult to see where we're going.

ELAM: Yes, and that's the exact issue, is that everyone is saying the reason why we see the markets not making any real moves right now is because of the fact that the signals are still crossing each other a bit.

But I think a lot of people do know that it's not going to be a straight trajectory back to where we'd like to see things be. But that's also the reason why you see this sort of emphasis on what will we see in April, to see if those retail sales numbers continue, since we do know that things were thrown off because of this early Easter.

But I think if you are an economist sitting back and watching all of this, it's going to take more than general -- just one month before you can make up your mind.


Stephanie Elam in -- in New York with the latest on the markets.

Thanks very much for that analysis.

Well, the people who run football have clearly been going to the movies and they want to ride the "Avatar" wave. Big ambitions for the beautiful game and it could make for a fascinating World Cup.


DEFTERIOS: Three million people will get to the matches at the World Cup in South Africa this summer. But for the rest of us watching it from a distance, the prospect of following it on TV just got a little more interesting.

FIFA and Sony want to make it a 3-D experience, as CNN's Phil Black reports.



UNIDENTIFIED MALE: FIFA and Sony welcome you to the world of football in 3-D.

PHIL BLACK, CNN CORRESPONDENT: (voice-over): Please don't adjust your television. It's supposed to be a little blurry with strange colors. This is 3-D TV when you're not watching on a 3-D TV. Originally, soccer's world body was only going to record some of the coming World Cup in 3-D for a documentary to be released later. But that's been fast tracked into a more ambitious plan.

Twenty-five matches will be broadcast live in 3-D.

(on camera): Why has it developed that momentum?

NICLAS ERICSON, DIRECTOR OF TV, FIFA: I think that a very important part of that must have been "Avatar".

BLACK: FIFA and its 3-D partner, Sony, want to ride the "Avatar" wave. The biggest box office earner of all time claimed that title partly because lots of people wanted to see it while sitting in the cinema wearing funny glasses.


DAVID BUSH, SONY: "Avatar" has become the big story in cinema. I think the FIFA World Cup is the perfect platform for live sports production. There isn't a bigger event in the world. There isn't a more iconic event in the sporting world.

BLACK: So 25 matches will be available for 3-D broadcast, but only three networks have signed up so far. Eight matches will be available live in cinemas that have the technology.

(on camera): Of course, it's just a slightly fuzzy image, unless you've got the right glasses, TV or cinema and most people won't. FIFA admits at best, only a few hundred thousand people around the world will watch each available 3-D match live.

(voice-over): That's a tiny fraction of the event's global TV audience, which is estimated in the billions. But FIFA expects that number to grow dramatically by the next World Cup.

ERICSON: We can only sell so many tickets in a venue. But, of course, if you can create an experience that you're feeling more that you're absorbed by the -- the atmosphere and -- and the feeling, of course, that will create further interest in our sport.

BLACK: FIFA believes 3-D is the future, despite the glasses.

Phil Black, CNN, London.


DEFTERIOS: A new experience for the World Cup.

Beautiful weather here in the city of London and also across the pond in the other financial capital on the western side of the world, that being New York.

Guillermo Arduino is at the CNN Weather Center to fill in the gaps everywhere else around the globe -- Guillermo.

GUILLERMO ARDUINO, CNN METEOROLOGIST: I think -- I think it's going to continue, in fact, for you guys in Britain, especially in the south. You see we still have some action in Scotland. But London looking fine. France looking fine. The Lower Countries looking OK. It's in Germany, also, and in Scandinavia, I must say, where we see most of the rain.

Copenhagen is reporting rain right now. But as you see, some white clouds and that's about it -- especially white clouds for tomorrow. Tonight, it's going to be clear. Tomorrow, white clouds and then some sunny intervals. So you see no delays.

Are you happy to see that, London/Heathrow?

I'm talking to the business traveler, who is always nervous about these things. I remember me, a couple of months ago in Paris, waiting for guys to deice the plane. Not fun at all -- like one hour-and-a-half waiting.

But here we see some rain and winds in southern parts of France and in Italy, though that is going to move away. No delays in Barcelona. Berlin with some rain showers. I mentioned Germany, but I would say Copenhagen is going to have the lingering effect of the rain and into Sweden north into Norway, as well. So these areas over here and this band is affecting Berlin.

Then a break. And as we go to the other side, the -- the Black Sea here. And then we see into Turkey, some parts of Russia, also in the south, with some rain showers. Double digits everywhere. Happy to report that.

Well, Copenhagen -- Stockholm is with six degrees.

And if you are going to India and you think that the heat wave is over, you're wrong. It will continue into next week. There's no relief in sight. The jet is locked there -- locked up, not allowing any colder or cooler air to edge in. It's actually here, behind this. And the heat continues all the way to the south. And it's not until the month of June in Delhi where we are going to get some rain. So it is looking pretty bad.

Singapore with some thunderstorms. You see the rain here that we had in Hong Kong is moving into Taipei, that area, southern parts of Japan, as well. But Beijing, Shanghai, the Korean Peninsula, Northern Japan into Hokkaido now is the time, especially on Friday, to clear today, because it's already -- it's 2:43 in the morning in Beijing right now. We may see some rain showers then clearing. Conditions are going to be fine.

And before I go, I want you to know that the estimation for the hurricanes -- the hurricane season this year is over. I am talking about this especially in the interests of oil prices, because you know what happens when we have a severe hurricane into the Gulf of Mexico.

Well, the Gulf of Mexico has cooler waters, which is a good indication that formation is not that likely, at least -- you know, this is June. In June maybe we're a little bit late into the formation because the water is cool. Where it's warm is in the -- in the Atlantic, you know, close to the Azores.

And remember the problems that we had in Madeira with the intense downpours?

All that water is pretty warm. But for the time being, the Gulf of Mexico looks fine -- John, back to you.

DEFTERIOS: OK, Guillermo.

Thanks for the analysis on that. That's the last thing we need, is hurricane threats for the oil industry, because oil prices are in the mid- 80s.

Guillermo Arduino in the CNN Weather Center.

Well, Tiger Woods is fighting for more than just the famous green jacket at the Masters Tournament. The world's best golfer is trying to shake off the cloak of scandal. In a minute, we look at the coming together of a great swing, a good scandal and a few million dollars.


DEFTERIOS: The world is watching Tiger Woods probably more than ever this week. The four time Masters champion teed off a short time ago at the home of the Masters in Augusta, Georgia.

The world's top ranked golfer is trying to rebuild his life and his career right now.

Just last night, one of the sponsors that stuck by Woods during his sex scandal made what some are calling an edgy move, using the voice of the father -- player's late father.


UNIDENTIFIED MALE: I want to find out what your thinking was, I want to find out what your feelings are and did you learn anything?


DEFTERIOS: Other sponsors, like Accenture and AT&T, ditched Tiger Woods, of course. Now, as he works to restore his reputation, how long could it take for new sponsors to come on board?

That's a big question.

Richard Laermer is a marketing expert and the author of "2011: Trend Spotting for the Next Decade."

He joins us on Skype from Palm Desert in California.

Richard, it's nice to have you on QMB.


DEFTERIOS: I looked at the spot time and time again online today and I thought, OK, black and white, pretty edgy stuff, the voice of the father. And my first impression was a very vulnerable Tiger Woods.

What's the motivation here?

LAERMER: It's -- it's a vulnerable Tiger Woods who has a lot -- who has a lot to lose and there's -- there's a lot of money at stake, as you mentioned, in the intro. And I think that they are trying to -- to show him as a guy who, you know, is -- is sensitive and, you know, has a little more to offer. And, actually, I think the ad was -- was kind of a mistake.

DEFTERIOS: No, in fact, the response -- if you look at the -- the blogs coming off of the -- the -- the spot itself, when you look at it, really, about 80 to 90 percent very negative, like, what's the motivation?

What is Nike thinking?

What is Wieden-Kennedy, the producer of the spot, thinking right now?

Let's start with the advertising agency.

Are they doing it...

LAERMER: Please. They're...

DEFTERIOS: -- to do -- make a big splash for themselves or do they really think this...

LAERMER: I think the ad...

DEFTERIOS: -- is the direction they have to be heading?

LAERMER: Yes. The ad agency has nothing to lose. They'll always be known as the guy that -- as the guys and -- and the women who tried to bring Tiger back.

For Tiger, you know, he's made nothing but mistakes since -- since Thanksgiving evening. And he continues to make them. I have no idea who he's listening to. My gut feeling is all of this -- all of this advice is coming from the PGA. And all of it is bad because it all appears quite phony and it -- it appears like a media manipulation.

And as somebody who's seen a lot of media manipulation in my life, I - - this is not good media manipulation.

DEFTERIOS: You know, there's another interesting side to this and that's the size of the media buy. I see initially they're going to start on ESPN and the Golf Channel, but not with heavy purchases.

Do they want this to be a social marketing phenomena or...

LAERMER: Yes, that's right.

DEFTERIOS: -- if it goes over well...


DEFTERIOS: -- and then Tiger does well, do they push it out and say we'll spend a lot more money over the weekend?

LAERMER: It's like a -- it's like limited -- limited engagement. You know, they always tell you it's only, you'd better catch it now.

No, the minute he does well, this thing will be appearing on MTV and - - and every Fox affiliate known to mankind. It will be everywhere.

And -- and the fact of the matter is he'll -- he will do well. And -- and these ads will be seen everywhere and -- and that may not end up doing good work for Tiger, in a sense, because people will get sick of him yet again.

He has not been forgiven. You know, people forget, it's not as though he just had, you know, a -- a single altercation and, you know, fooled around on his wife. I mean he has -- he has some serious mental problems, obviously. I mean this isn't an opinion.

And, you know, people like that, who are big in the media for -- for wanting privacy can't all of a sudden turn around and -- and be these public -- new public figures and expect people to -- to imagine that they're the same guy that they were before.

DEFTERIOS: OK. And let's clarify one thing there. I know what your position is on his mental state at this time.


DEFTERIOS: And Billy Payne of the Augusta National was very strong on that.

In 15 seconds, can he counter balance what the -- the chairman of the Augusta National was saying, though, do you think?

LAERMER: Well, you know, he's -- he's really -- he has to work really hard to -- to prove himself. And one of the best ways to do that -- and -- and I've said this a lot before -- is to go away for a while and come back and have people miss you. Nobody misses him. They're still -- they're still stuck on the new Tiger Woods and they're -- and they're not happy with him.

So he -- he needs to -- he needs a little bit more time and a little less in your face.

DEFTERIOS: OK. We'll leave it there.

Richard, thanks for joining us from Palm Desert, California, a marketing specialist, on the Tiger Wood ad -- the Tiger Woods ad that came out today.

Well, newly revealed documents show that some of Toyota's own senior executives were not happy about how the company handled safety concerns about faulty gas pedals and wound up scrambling to figure out how to deal with their huge accelerator problem themselves.

In an e-mail obtained by the Associated Press, one of the company's top public relations executives warned that Toyota needed to, quote, unquote, "come clean" about the sticky pedals. The executive saying Toyota, quote, "was not protecting our customers by keeping quiet about this incident."

In the e-mail by Toyota's recently retired U.S. vice president for public affairs, Herb Miller, he writes: "We have a tendency for mechanical failure and accelerator problems," quote, unquote. And he says, quoting yet again, "the time to hide this is over."

The e-mail was sent in January, days before Toyota's massive recall. What's more, Toyota had failed to alert U.S. regulators, even though the automaker was busy addressing the sticky pedal problem in 31 European countries and Canada.

Toyota's new chief quality officer for North America spoke about the disconnect last night at the inauguration of Toyota's Committee for Global Quality.


STEVE ST. ANGELO, TOYOTA CHIEF QUALITY OFFICER FOR NORTH AMERICA: Because we're not perfect and we -- we didn't share the experience that we had in Europe. We didn't know about it in North America. So that's why we're putting these -- these practices in place. We are looking for our weak points. We are looking for where we need to improve. And that's why I believe these six points that Aikido Toyoda has put upon us, his direction is going to make us a stronger and better company.

We've never said we were perfect.


DEFTERIOS: CNN tried to reach out to the author of the e-mail, which is now in the hands of U.S. investigators.

Well, if you're looking for work in the financial sector, it seems the Asia-Pacific is the place to be right now. A recent survey by PriceWaterhouseCoopers and Britain's Confederation of Industry said as many as 17,000 jobs may be lost from the UK's financial services industry in the first half of this year.

And things aren't much better off in the U.S. The financial industry was only one of two sectors that saw significant job declines last month.

But across Asia and Australia, banks like UBS, Citigroup and Deutsche Bank are actively adding positions right now. Well, that's a nice sign, considering what's been going on in the markets lately and the latest job numbers coming out of the U.S.

We'll get you up to date with the big numbers on Wall Street today and the rest of the market moves, right after the break.

Stay with us.


DEFTERIOS: In London, the spring sunshine put smiles on a million faces on Thursday. But the stock market did exactly the opposite. A frenzy of speculation about a deepening crisis for Greece sent investors heading for the exit yet again. Indices across Europe fell sharply, as you can see here, with losses of about 7.5 percent, all the way up to 1.2 percent in Paris.

The session was also dominated by interest rate announcements. The European Central Bank and the Bank of England both kept interest rates on hold, although that was not an entire surprise.

At a press conference after the rates meeting, ECB President Jean- Claude Trichet stressed that he wants to see reform of the banking sector and that change is needed for economic growth overall.


JEAN-CLAUDE TRICHET, PRESIDENT, EUROPEAN CENTRAL BANK: And a proper restructuring of the banking sector remains essential. Strong balance sheets, effective risk management and transparent, robust business models are key to strengthening banks' resilience to shocks and to ensuring adequate access to finance, thereby laying the foundations for the stable growth and financial stability.


DEFTERIOS: Jean-Claude Trichet there at his press conference.

What was more interesting was what he really had to say about the Greek financial crisis, saying it was a workable framework to go forward, but the big question on why the markets were under pressure is whether, in fact, the IMF will step in or not as the yields go up.

Let's take a quick look at the Dow Industrials. Back up about 36 points right now, trying to knock against 11000, at 10933.

And that's it for QUEST MEANS BUSINESS for this evening.

I'm John Defterios sitting in in London for Richard Quest.

"AMANPOUR" is next, right after the news headlines.