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QUEST MEANS BUSINESS
Stock Market Takes a Drubbing; Britain Election Results
Aired May 7, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: A stock market drubbing. The week started badly. It's ending horribly.
In Britain the market's worst fears have been realized, it is a hung parliament.
And "legitimate claims", but what does that mean? The CEO of BP reveals what he will pay for his company's oil spill.
I'm Richard Quest. It may be the end of the week, but we have a busy program, because I mean business.
Good evening to you.
Before we go any further I do need to update you with events taking place in New York at the moment, where police in Times Square are checking out a suspicious cooler, a box, basically that has been found in Times Square. The New York Bomb Squad has been responding to a report that this cooler, it is one of those chilled coolers, found around 45th Street and Broadway. The suspicious package seen near the location of the vehicle used in Saturday's Times Square failed bombing.
You can see there, this is a camera that we have from the roof looking down on Times Square. The building on the right, if I'm not mistaken, or am right is the Marriott Marquee, and you can see that, of course, the roads have been cleared, pedestrians have been kept back. An earlier report from an administration official that the incident cleared, referred to another suspicious package found hours ago. The current situation has not yet been clarified. When there is more information on that we will bring it to you.
We need to begin with the markets in New York. When you and I were together yesterday-well, what a roller coaster of a day, the Dow falling nearly a 1,000 points before clawing itself back.
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This is the way the market has traded. Now, look at that. What the difference 24 hours makes. Down just 66 points. Well, off the lows of the day, the lows being more than 200 points lower, 10,453. But-a slow end to the week. I beg your pardon, it is down-it is down 108 now, I'm being told. Our numbers here appear to be a little bit frozen. So, not entirely accurate behind me, but you get the gist.
There is trouble on the trading floor, though, of Europe tonight, where shares dramatically fell for the second day. The only thing that is rising is anxiety. All this despite the fact that in Germany lawmakers approved sending emergency measures, the $8 billion or so now that they have got to provide this year to Greece, investors remain really fearful about the long-term implications about European debt at the moment.
So, look at the numbers. And I want to draw your attention right away to the Paris CAC currant, which was down 4.6 at the close. The CAC has now lost all its gains that it made since last July. The London-and I need to point out, as well, that was a very broad based loss. Everything from energy stocks, to banks, to financials, to conglomerates, the whole Parisian market was sharply lower.
London is back where it was three months ago. The Xetra DAX is back to March levels. A very, very sad and sorry show. Look at the markets' losses over the course of the week. And, again, focusing on Paris, where the CAC 40 down 11.1 percent; one of the worst losses in percentage terms that we've seen since the financial crisis.
Now if this was bad, hold your breath bearing in mind it's a Friday. Look what happened for the rest of the markets. The benchmark indices in Athens, Madrid, Milan, and Lisbon, each were off. All this, and what's worrying about these numbers. The things to note about these, Athens was heavily down despite the fact that the deal has been agreed and the money is flowing. IBEX and Madrid, and Portugal, Italy and Madrid, they were sharply lower because, of course, fears of contagion. Even though the Spanish prime minister said any talk that Spain was going to need some form of fiscal help was what he said complete madness.
New York is where the action is at the moment. Maggie Lake is on the floor of the New York Stock Exchange.
Maggie, as they deal with the ramifications from yesterday's fall out of bed, everybody is still saying-why?
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Exactly. And, Richard, we don't really have any clear answers to that. And, you know, certainly you mentioned, the mood much calmer here than it was just 24 hours ago. But there is a sense of sort of volatility and uncertainty and an unsettled feeling underneath the markets. The markets swung from a loss of about 300 points earlier today. It was up by more than 50 at one point. As you can see, we're hovering right around this loss of about triple digits.
Everyone should is still trying to figure out what happened, who was responsible? And these larger issues of if there is some sort of technical issue involved, is this the impact of more and more electronic trade and what can you do to prevent something like this from happening again? Those are very big issues. So a lot of that still going on. Of course, you know, SEC officials looking into it.
There is also a lot of uncertainty about what you mentioned and that is the situation in Europe. And it is not about Greece. For folks here it is about the European political response; the ECB and the European leaders being in front of this, not behind it. We saw all of this happen. Equity traders are watching what is happening in the bond market. The fear building, the liquidity drying up and yet nothing from the ECB and European leaders, and it distresses them, especially as we head into a weekend, Richard.
QUEST: Maggie Lake, who is in New York on the floor of stock exchange. Maggie, many thanks for that.
Kevin Cook is a market analyst with the brokerage of Peak6 Investments. Kevin always makes sense-well most of the time-makes sense, when we are in agreement. And Kevin joins me this evening from Chicago.
Kevin, listen, this argument that is now taking place, between the Nasdaq, with the glitch over the P&G trade, the questions about the canceling of trades. Some couple of several 100 stocks trades that took place. Are you in favor of canceling those transactions.
KEVIN COOK, MARKET ANALYST, PEAK6 INVESTMENTS: Definitely the ones if you are talking about big cap stocks trading down to a penny, yes. Those need to be cancelled. Listen, electronic trading provides tremendous benefits for capital markets. You've got tremendous liquidity. The planning field is leveled for average investors. And there is transparency.
But we are going to discover some errors along the way, things are going to happen. Yesterday we had sort of a car accident. And I'm surprised that the markets are reacting as well as they are today. Because there is a tendency to withdraw and there is a lot of emotion. So as we progress with technology-and the markets need technology, we can't go backwards here-we are going to run into some problems. And so we discovered a new one. And we are going to recover from it and new rules will be put in place to make sure that this doesn't happen again.
QUEST: There is still a dispute though, isn't there, between "adjust and bust" on the actual transactions that took place between many of the futures markets that still haven't decided, including the futures markets, the Chicago markets, and the CME, that haven't decided whether they are going to cancel yesterday's transactions?
COOK: Well, the markets here in Chicago work as they should, so. And you have to understand that the S&P futures contract is a derivative that just trades based off of what the cash market is doing. So, it wasn't the futures market that drove stocks in New York lower. There was a problem, in New York, between the NYSE and the Nasdaq. And we're not sure exactly what.
QUEST: Yesterday was a runaway train that could have done serious long-term damage.
COOK: And look where we are now. And look where we are now, Richard. When you have a computer glitch, with electronic trading, what do you do? You turn the computer off and humans come in and look how quickly the market recovered. Because human traders, investors, fund managers, took a look and said, listen, this isn't right. Something is wrong here, and brought facts back to a level that was more reasonable. We are in a decline phase here because of sovereign debt fears and the potential for a systemic banking crisis in Europe. That is getting priced in. The electronic problem was an accident that happened. It is going to give us time to fix systems and improve them. But fundamentally, the markets are intact and this will be looked back at-you know, it will be reminisced about but it is not a big factor for the economy or the markets long term.
QUEST: Kevin, good to talk to you at the end of the week.
COOK: All right, Richard.
QUEST: Whichever way we come-whichever way we slice this the traders are going (ph), we have both had an extremely tumultuous week in markets. Try and have a peaceful weekend and maybe see you next week. Kevin, joining me there from Chicago.
Now, we know that the British electorate cast their votes. That doesn't mean we know who is in charge. After weeks of fighting one another it is time for the politicians to make friends. They are going to try and work together and that will be easier said than done.
QUEST: Let me update you with what is happening in Times Square at the moment. You will be aware that the New York Bomb Squad has now been responding to a report of a cooler found at the 45th Street and Broadway, on Friday afternoon. It is outside the Marriott Marquee. And the suspicious package has been seen near the location of where the vehicle was in the last weekend's failed SUV bomb, or improvised explosive device. So far the streets are cleared, as you can see, from these pictures. And we are awaiting further word on, of course, when this-when anything has been discovered as a result of this.
Political leaders in Britain are trying to find out and thrash out who will run the country. The voters have had their say but left things up in the air. The conservatives won the most seats in the election, but not enough to form a government without the help of others. Which is why they have set out to woo the Liberal Democrats, the third biggest party.
CNN's political analyst Robin Oakley joins me now from No. 10 Downing Street.
Robin, let's just put the election result to one side and just leave that as we know what it is. It is a hung parliament with no one having a majority. But today, Robin, we got the most extraordinary open, horse trading that I have ever seen.
ROBIN OAKLEY, CNN POLITICAL ANALYST: Well, they know how to do these things in Brussels or Berlin, or Rome, Richard. But this is welcome to the new politics in Britain, and as you say, horse trading is the name of the game. Everybody is talking about the national interests in sonorous tone, what they're talking about is getting the numbers together to be able to run a program through the British House of Commons.
Now, you look at the first thing that is on, Nick Clegg, leader of the Liberal Democrats, did that poorly in the election, but they are the kingmakers. And who is he talking to first? David Cameron, the leader of the Conservative Party, who must have tempted to say he was going to operate as a minority government on his own. He's come forward and said he's making a big open, comprehensive offer to the Liberal Democrats to come to work with him.
Why is he doing that? Well, he's short of the 326 votes to give him a majority in the House of Commons, with the Liberal Democrats' 57, he'd have quite a decent working majority. But they not natural soul mates, the Liberal Democrats and the Conservatives, and Gordon Brown is saying well, he'll give the civil servants to the other two and let them help them out while they try and work out a deal. But he's still sitting there, as prime minister, in No. 10, and he said if Nick Clegg and David Cameron can't cut a deal, well, Mr. Clegg, you can come and talk to me afterwards. The problem with that is it would be a coalition of the losers, and they don't quite have the arithmetic between them, Labor's 258 seats, Liberal Democrats 57, to bring themselves up to a majority, Richard.
QUEST: Robin Oakley, with the overview from Downing Street tonight. Robin many thanks, indeed.
Joining me is he editor of "The Financial Times" Lionel Barber.
Lionel, tonight you have in your newspaper, the "FT", you have very fixed views, don't you, about how you believe this should proceed?
LIONEL BARBER, EDITOR, "THE FINANCIAL TIMES": Well, we haven't been elected to any office, Richard, so let's have a little bit of modesty here. And it will be in tomorrow morning's paper. We will say that we favor strongly an agreement between the Conservative Party and the Liberal Democrats, in the interests of a stable and decisive government to tackle the crisis in public finances. We believe this would reassure the financial markets.
QUEST: Within the that framework, are you thinking more of a formal coalition, or as David Cameron hinted and has offered up the possibility, some form or loose alliance, where the Liberals would support them in return for support on certain policies?
BARBER: Well, that is up to the parties. As I understand it from conversations today, the Conservatives have a completely open mind, whether they go for a loose alliance, or actually, a coalition, a formal coalition.
QUEST: The vote that our viewers will be seeing tonight, around the world, and the general condemnation of all parties in some way or other, the unrealistic swings from one side to the other, the inability to perhaps extrapolate anything from this. It is worrying for all parties, isn't it?
BARBER: Well, the British electorate decided not to decide. There were many important local factors whether some MPs were caught up in expenses scandals, we also had strong regional factors at play. The Tories only got one seat in Scotland. I mean, the Conservative Party is a party largely of England and Wales, almost exclusively. So that is why we think it would be in the national interest for the Conservatives to strike an alliance, a deal, with the Liberal Democrats, which would give them many more seats, a working majority, to take difficult decisions in the national interest.
QUEST: Lionel, finally, there could be no perhaps-there is never a good time to have an election and a constitutional crisis at the same time. However, in the middle of financial instability and the Greek debt crisis and electronic trading hiccups on Wall Street, it is a rather bad time by any definition, isn't it?
BARBER: Well, this is about as bad as it gets. You might actually say September 2008, Richard, when the financial world almost melted down, that would have been a pretty bad time. But you know things look very-very unstable out there. There is talk about a big rescue, perhaps, coming next week, with liquidity operations from the European Central Bank. In these circumstances we need a quick decision on what kind of government we're going to have in this country.
QUEST: Which of course perhaps exactly the thing we may not get at least in that same timely fashion. Lionel, many thanks indeed for joining us. Lionel Barber of the "FT", always good to have you on the program. Nice to see you now.
Professor David Blanchflower is professor of economics and was part of the Bank of England monetary policy committee. We are always delighted to have David with us. He joins us from Dartmouth College in New Hampshire.
David, well, now David come on, last week you said there was nothing wrong with a hung parliament. You've got your wish.
DAVID BLANCHFLOWER, PROF. OF ECONOMICS, DARTMOUTH: Yes, and actually the week before on your show said I thought we would see a Lib-Lab pact, without Gordon Brown as the leader. I still think that is what is going to happen. I think that the possibility of a Lib-Tory alliance is slim in the long-term. I mean, this is not a one-shot deal. The previous guest sounded as this was what was going to happen for the long term. I think such an alliance would not last very long, because as soon as there is a piece of legislation lots of the Lib-Dems would vote against it.
So, I think the most likely thing is that we will see an attempt by the Tories and the Lib-Dems to come together and they won't. And eventually we'll see some attempt by the Labor and Lib-Dems to form an alliance. And I think that is probably what will come.
QUEST: Yet. Yet.
BLANCHFLOWER: But the big deal is the markets didn't really respond much. The yields remained OK. The pound came down a little. And triple A rating, as I kept saying, was going to stay as it was. So, basically for most people this was not a surprise. So, the hung parliament was, you know, what I expected.
QUEST: David, I-
BLANCHFLOWER: And if you had read the polls correctly instead reading the newspapers, you'd got it right.
QUEST: Now, David, I'm going to throw one word back at you on the question of the market. And that is, yet. The markets haven't responded yet.
QUEST: But in a scenario, when you can have a 1,000 off the Dow, up and down. You can have the euro drop in 2 or 3 cents in a day, next week could be the day where you see the reaction.
BLANCHFLOWER: Well, obviously, that is a possibility, but I think what we have illustrated here is that the UK isn't Greece. There are great problems in the euro area, thank goodness we didn't join the euro. Thank goodness we have an ability to move our own interest rates.
And now actually look what happened today was that the U.K. exchange rate against the dollar fell and gave the U.K. a nice little stimulus. And so all the shenanigans going on in Europe are not going on in the U.K., so I think actually, this was quite good news. Because what happens-if you read the polls, you absolutely got it right. This was not a surprise and the people who lost were the people who didn't read the polls, thought the Tories were going to win, and those were the ones who bet wrongly. So, I think this was pretty certain. All the parties expect and want to have to deal with the fiscal crisis. But this will stop the possibility of crazy cuts in 2010. I think that is the good news.
QUEST: David, we have come to the end of the election period, as such, but I hope we haven't come the end of having you regularly, at least, come and join me on the program.
QUEST: It is always good to have you. David Blanchflower joining me from Dartmouth.
When we come back, in just a moment, encouraging news for U.S. job seekers. After all, they need all the encouragement they can get. We go into the numbers. It is QUEST MEANS BUSINESS . It is the end of the week, but we made it.
QUEST: Welcome back.
When we report something and tell you that something has happened, like the cooler in Times Square, we are obliged and we want to tell you when things have come to a resolution.
Look at these pictures now, coming to us, from New York. And I think this makes it quite clear, that the afternoon gridlock of Friday afternoon in Times Square, outside the Marriot Marquee, the tourists enjoying the new pedestrian-ized area, that obviously means the crisis is over. It was a cooler. It was a cooler full of water and I suspect somebody has some very embarrassing questions to answer.
Jobs are making a comeback in the United States. April was the best month in four years to be looking for work. The U.S. economy created 290,000 non-farm pay jobs, most economists were thinking of a far smaller number. There is the 290 right at the end of our graphic. I'll get out of the way. Surprisingly the unemployment rate rose to 9.9 percent from 9.7 percent. Now, you may well say to me-
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-and you would be right, isn't there a contradiction? How can it have more jobs created, but a rising unemployment? Doesn't that suggest things are going the wrong-contradicting each other?
Well, of course, what happened is the improving the economy enticed 100s of 1,000s of people to return to the labor market. People who are now looking for work, who had said they weren't even trying to find a job, and also, people who of course, had unemployment benefits that was coming to an end.
Joining us now for his thoughts on where the markets go from here, Tig Gilliam, the CEO of Adecco Group. Adecco is the world's largest temporary employment agency.
Tig, I mean, there is no question things are getting better. But it is incremental and slow.
TIG GILLIAM, ADECCO NORTH AMERICA: Yes, Richard, things are definitely getting better; 290,000 jobs gains is very impressive for the month. But remember we have 15 million people unemployed and at this rate we'll need about 26 months or just over two years to replace the 8 million jobs we lost in the recession. But the labor market is now following the economic recovery and we're on track for an improving market going forward.
QUEST: The evidence of course, and the things you will be looking for is that growth rate speeds up. But if we only get economic growth of 3.2 percent, which is what we saw in recent numbers earlier this week. That is certainly not enough to make decent sizable inroads.
GILLIAM: Well, we do see a continuing sequential improvement in some of the leading indicators for the job market recovery. Of course, as you would expect, Adecco was very interested in the temporary sector and we have now added 330,000 temporary jobs in the U.S. job market over the course of the last seven months. That, and an increase in the average workweek, by a 10th of an hour, both indicate that companies are getting more-more positive and more aggressive in bringing in additional resources.
QUEST: Let's just explore that idea for one second. The new jobs may be created, but there will inevitably be a worry that the benefit package that goes with temporary jobs, or even permanent jobs is no where near as generous, the health care question, all these issues, companies have cut back and employees bear the brunt.
GILLIAM: Well, the health care questions is obviously one that will take months now to play out in terms of how that will actually implemented in the work force. You need to remember though, in the U.S. labor market, in Adecco's case half of our business is professional skills and resources, and in some of those categories, like information technology about 40 percent or our consultants do use our health care plans. So, there is certainly more strain in that direction and we'll have a restructuring of health care in the U.S. market over the next few years for sure. But I don't think that is going to be a major hindrance to the recovery of the overall labor market.
QUEST: So, I suppose as we've had a fairly torrid week in the markets we take today's jobless-the numbers that we've seen today, we have to take them as being the scintilla of hope that people have been looking for.
GILLIAM: I think it is inconsistent with what we've seen over the past few months. And the recovery is accelerating on the jobs front. I think your comment earlier on the unemployment rate was right on target. We see that in the Adecco business today. People who have been sitting on the sidelines now have more confidence in the job recovery. They are hearing about their friends getting jobs and they're coming back into the labor market.
QUEST: Tig, many thanks indeed, always lovely to talk to you and put into perspective the issue of unemployment. And we'll talk more in the future.
GILLIAM: Thank you, Richard.
QUEST: Now, when I come back with you in just a moment, a rescue mission is underway in the Gulf of Mexico. This is the containment dome that could mean the difference of life and death for wildlife in the path of this massive oil slick. We are going to get an update on the process of installing it, and it comes from the very top.
QUEST: Hello, I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN.
Well the markets in New York-
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-are trading down 151. It was off considerably more, more than 200 points, although that might give you a bit of indigestion on a Friday afternoon, and Friday evening, down 1.4 percent. That is better than it had been and it is certainly under control compared to the roller coaster we experienced yesterday.
The oil giant BP says it is rushing to position the emergency containment dome over the gushing oil leak from its well in the Gulf of Mexico. They are close to actually doing this. David Mattingly has just spoke to Tony Hayward, the BP chief executive. David joins us now from Venice, in Louisiana.
David, I mean, all anybody wants to know, really, at this point is when will the thing be in place and when will it work?
DAVID MATTINGLY, CNN CORRESPONDENT: They actually hope to have this on the ground and positioned the way it is supposed to be sometime in the next few hours. If that goes well, then they will spend the next day or so connecting it and by early this week, early next week, we could see them pumping oil up from the floor of the Gulf of Mexico, but this is the most critical time of this operation.
And we talked to the CEO of BP, he says they are doing everything they can to make sure this works the first time.
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TONY HAYWARD, CEO, BP: We are the responsible party. We are going to clean this up, fully and completely. And we have said very clearly where there are legitimate claims for business interruption, then we will be good for them.
MATTINGLY: Legitimate claims for long-term, short-term?
HAYWARD: Legitimate claims.
MATTINGLY: How many years are you prepared to pay fisherman for a bad catch?
HAYWARD: I said, legitimate claims. All those things we'll need to sort out. What we're doing today is focusing on ensuring that people who have been immediately impacted are being dealt with. We have claims offices now open here. They are paying money. Our immediate concern is to ensure that the fisherman here, who aren't fishing, are either working in the response and being paid for it. Or, if they are not, then we are providing them with the funds that they would have got from their fishing activity.
MATTINGLY: We know there is a $75-million limit, but how much are you willing to pay beyond that?
HAYWARD: We have said that it is inevitable that the $75 million limit has no relevance in this case.
MATTINGLY: Are you looking at billions?
HAYWARD: I think that is all for the future. We are absolutely, as I said, going to take full responsibility for cleaning this up and we will honor legitimate claims.
MATTINGLY: Again, Richard, this is an extremely critical time of this operation right now, lowering that containment dome over the leak at the bottom of the Gulf of Mexico. Anything can go wrong write now. The worst- case scenario, they could do something to the pipe that is there and actually make this problem worse. The CEO that you were just listening to compared this to Apollo 13. They are having to try things engineering-wise that they have never attempted before.
QUEST: David, I just need to focus on what Tony was saying, Tony Hayward was saying. It seems to me, and perhaps put me right if I am erroneous, but he can't be any clearer than what he's just said. The $75 million limit doesn't count. Legitimate claims will be taken care of and the company will do what it needs to clean it up. So one is left with the cynics and the skeptics, who say they don't mean it?
MATTINGLY: Well, he's been very consistent with his message. But he cannot answer questions among the people around here, who are asking, well who gets to decide what is legitimate? Who is going to decide how much should be paid. Who is going to decide when BP has done enough? Will it BP? Will it be the people who have been affected? Will it be the U.S. government? Or will it be the courts? Most likely the last is the answer.
QUEST: David, once again, many thanks putting it crystal clear for us tonight and making the situation as understandable as possible.
In just a moment, as anger continues to simmer on the streets of Greece, we'll take you to Athens were (AUDIO GAP) of the protests. And, of course, it's teachers, it's nurses, it's pensioners, and we'll hear them speak for themselves.
QUEST: Greece's debt problems have played a starring role in the convulsions that have passed through the financial markets. On Friday Germany finally extended a helping hand to Athens. Lawmakers approved billion dollars in loans available to keep Greece solvent. The loans over several years, the funds are part of the wider rescue plan put together by Euro Zone countries and the IMF.
EU leaders are meeting now in Brussels. They are expected to hold a news conference in around an hour and a half. The aid plan has been deeply unpopular in Germany. The Greeks are the ones who will really pay the price. Their government's austerity plan sparked sometimes violent protests. Diana Magnay our correspondent shows us the kind of people who have been taking to the streets.
DIANA MAGNAY, CNN INT'L. CORRESPONDENT (voice over): Every day the streets of Athens are filled with protestors.
MAGNAY: Workers furious at government reforms that will massively cut their spending power, spelling out their hatred for the IMF and the wrongs of capitalism. But who is who in a Greek demonstration? There is the angry public sector worker who will have her wages cut, the nurse who feels she is paying for bankers greed.
UNIDENTIFIED FEMALE: They have villas, they have very rich houses with a swimming pool and we are hungry.
MAGNAY: There are, of course, the riot police a staple of any good Greek protest. Also, incidentally facing wage cuts, though, they are not allowed to go on strike.
There is the pensioner, believe it or not, who is looking at $100 less each month.
(On camera): You are retired already?
UNIDENTIFIED FEMALE: Yes. At 50, if you have a small child you can get retirement if you have worked 25 years, as I have.
MAGNAY (voice over): And the private sector worker who feels cheated by his government.
UNIDENTIFIED MALE: I live a simple life. I never took a penny from anyone. And now, I owe a lot of money to the government to the borrowers.
MAGNAY: There is the secondary school teacher who will lose $170 each month.
UNIDENTIFIED FEMALE: We must face that to demonstrate that we need hope and we have needs and rights.
MAGNAY: And then there are the anarchists, out to pick a fight. Add all that together and you'll see why this, so quickly turns to this. When Greece's workers vent their anger on the streets of the capital. Diana Magnay, CNN, Athens.
QUEST: It was at this time yesterday while you and I were talking and watching those violent scenes on QUEST MEANS BUSINESS that the Dow began to plummet. And if I am not mistaken it was at exactly this time in the program.
So, the stocks began the day slightly down. That is where the market started, 10,842 and change. Around 24 points about where they closed, 10, 042. By 2:30 in the afternoon, which is just around now, New York time, the Dow was off by more than 300 points. As those scenes from Greece flashed across our screens it all began to unravel by a quarter to three in New York. That's in five minute's time. The Dow was down nearly 1,000 points. It's biggest intraday loss since 1987. And frankly the largest and fastest move I have ever seen in the market. It cut the value of U.S. shares temporarily by $1 trillion. That is one with a lot of zeros. Ten minutes later the losses had shrunk to half that size and the Dow ended the day with a thumping great loss, but small by comparison. It really does depend on the idea of-by comparison to what you've seen.
The shear speed of those moves, it is that which takes your breath away, and it is clear it couldn't have happened without the involvement of machines, which buy and sell stocks worth billions of dollars at the blink of an eye. We now know it was the computer trading and the program trading that not only made a mistake but made things worse. And it is that trading that the experts and the regulators are now looking into. Jim Boulden has been examining how our computers became the traders.
JIM BOULDEN, CNN INT'L. CORRESPONDENT (voice over): You may not be familiar with the term, "high frequency trading". Buy and selling shares in milliseconds is now coming out of the shadows. Big banks and hedge funds have invested millions of dollars in ultra-high speed computer trading platforms, each with a sophisticated mathematical formula to spot trends and move faster than traditional investors. There is a whole host of new electronic trading platforms, each trying to be faster than the others.
JEREMY GRANT, "THE FINANCIAL TIMES": What makes this so interesting, I think, that at no time in history of markets have we had such a step change in the ability of people to trade because of technology. The technological development has been like a hockey stick. It has just spiked up.
BOULDEN: This is the London trading floor of a two and a half year old stock trading platform known as Chi-x. It is a small office with fewer than 40 employees. Chi-x has quickly eaten into the business of the incumbent stock exchanges. Chi-x and other new entrants with names like Turquoise, and Burgundy, have a fraction of the employees and use the theory behind high-speed trading to full effect. Making small amounts of money on each trade, which is executed nearly at the speed of light, much faster than what older stock market platforms can do. But there is no room to rest.
MARK HOWARTH, CEO, CHI-X EUROPE: Unless some very bright chaps at MIT come up with faster than light, we are going to reach those constraints, probably in the next 15 to 18 months, at which point speed of operations, speed of transaction, starts to become a common service, becomes a commodity provision. And that part of the debate will die down over that time.
BOULDEN: But other parts of the debate are just heating up. The U.S. Congress and the Securities and Exchange Commission are asking if high frequency trading creates an unfair advantage over slower moving investors. Brussels will also soon begin a review of its two-year-old directive that opened Europe to high-frequency trading. The rules around high frequency trading are likely to change, as is the marketplace as well. The London stock exchange announced just before Christmas it will create a pan- European trading platform with Turquoise. Better late than never in a trading world where speed counts for everything. Jim Boulden, CNN, London.
QUEST: And it was, of course, those computer trading and that high frequency trading that caused so much of the problems. We need to leave you tonight, with a look at how the markets in New York are. Now, down just 107-just 107. The market is off 1 percent. And it is now-it is still 600, 700 under what we saw in recent gains.
Look at how we end over the course of the week on some of the bigger- smaller markets, not only the majors, but also the med markets, the double Ms. The Athens market, IBEX, the Midtell (ph), the Portuguese market, even the big four, the FTSE, the DAX, down 7, 6, 11 percent, Paris is the worst by a long way, with the Zurich SMI.
It has been one of those torrid sort of weeks that, frankly, you hope you don't see too often. Because if it does continue, that sort of turmoil, it is very difficult to know when the contagion becomes a conflagration, and the feeding cycle begins. And then it all get out of control.
But that is all for next week, because that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest, in London. And thank you for your time and attention this week. And remind you that whatever you are up to in the hours ahead, I hope it is profitable. MARKETPLACE MIDDLE EAST is next.
I'll have a new bell next week.