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QUEST MEANS BUSINESS
ECB Plan Light on Details; Bond Market Boost from ECB; Bailouts Must Come With Reforms; Eurozone Interest Rates Unchanged; Yesterday's Fed Statement; European Markets Down; US Stocks Drop; Facebook Shares Slide; Adidas' Personal Best; US Olympics Medal Tax Row; British Stamp of Approval; Euro Falls Sharply; Culture Secretary Says London Tourism on Track; Ghost Town Tourism
Aired August 2, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: More hints, no action. What the ECB did and did not do today.
Disappointment on the markets. We are live at the New York Stock Exchange.
And the Adidas chief exec tells me it pays to have pride of place at the Olympics.
I'm Richard Quest, and of course, I mean business.
Good evening. We may, we might, we must stand ready. Mario Draghi says he'll still do whatever it takes to save the eurozone, though not, it seems, just yet. "Whatever it takes." Those were the words that the market took to heart when he said them last week.
Well, today, the ECB president announced a plan that is light on details, long on script, and no commitment to immediate action just yet. The exact phrase: "Over the coming weeks, we will design the appropriate modalities for policy measures." In all, it was just an insistence that the euro will endure.
(BEGIN VIDEO CLIP)
MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: The euro is irreversible. In order to create the fundamental conditions for such risk premier to disappear, policy makers in the euro area need to push ahead with fiscal consolidation, structural reform, and European institution- building with great determination.
(END VIDEO CLIP)
QUEST: So, Mario Draghi said that there would be open market operations, he was in favor. That is shorthand for bond buying in the secondary market, the SMP, as it's become known.
But he also said there would be more non-standard policy measures, and those were the details to be worked out, including the question of seniority, who gets paid out first, if it all goes wrong. The Bundesbank is believed to be against anything to do with that.
Draghi urged the EU leaders on the bailout funds, the EFSF and the ECB saying they couldn't replace governments. Now, the problem here is, of course, governments have to come to these funds to actually ask for money. He said policy makers needed to get on with the reforms.
All right. This bit we knew. I could've told you this last night or three weeks ago. Eurozone interest rates remain unchanged. The governing council decided it was not the right time. The main refinancing rate stands at 7 -- 0.75 percent.
The Fed was all talk and too after its policy. The Federal Reserve offered no additional stimulus measures, though it said it was prepared to do more to boost the economy if needed.
The Fed has already done Operation Twist. The short-to-long-term bond swap measure will remain in effect until the end of the year. And it expects to keep interest rates ultra low until at least 2014.
David Bloom's with me, the global head of FX strategy at HSBC. So, we heard about what Draghi -- President Draghi. Let's pause before your answer: did he do what he did he needed to do today. Because last week, this is what President Draghi had to say.
(BEGIN VIDEO CLIP)
DRAGHI: The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.
(END VIDEO CLIP)
QUEST: We will do "whatever it takes," and "believe me, it will do enough." Did he do enough?
DAVID BLOOM, GLOBAL HEAD OF FX STRATEGY, HSBC: Not today. But it's all about manana. Just like the Fed said, we'll do something manana. The -- we waited for the Bank of England today. We thought a possibility of a rate cut -- manana. We heard from the ECB --
QUEST: What are they waiting for?
BLOOM: I think they're waiting for September because it's -- that's the way it is. It's a waiting game. They keep doing this to us, they keep promising things, and then saying "We'll do it later." They're really waiting for a recovery that just isn't coming.
It's just a matter of time before the Fed gets on those printing presses again, that the Bank of England cuts rates again, and that we get some serious bond-buying by the ECB.
QUEST: What does serious bond-buying mean? In the secondary market, or by the EFSF and the ESM? They've already stuffed to the gills with bonds.
BLOOM: Yes, but it's the power of buying in great amounts that drive yields down. Now, they don't want to do that. The Germans have argued these bond yields are what disciplines these countries, and we need bond yields to go up because it causes structural reforms.
So, if you come in too early and smash those yields lower, nobody's going to change. So, this is the game of chicken.
QUEST: So, do you think, even though there was unanimity on the decision -- there was a dissent, and we assume it was the Bundesbank --
QUEST: -- on the measures, do you believe there is a serious -- I won't say dispute or disagreement -- debate now within the council?
BLOOM: Yes. Whereas before it was unspeakable. So, that's some progress. There's a debate and there's differences in approach, whereas last year, you saw resignations by the Germans from the council itself. So, there's a lively debate. But it's just a matter of time. If he's serious that this euro --
QUEST: Then do it now! Then do it now!
BLOOM: Yes, but if we do it now, then you're not going to change your ways.
QUEST: But -- this is the argument that the Germans -- listen. Let's look at the markets while you and I are answering this next question. If we have a look at the markets and you see what happened in Europe today, you see all the gains evaporate just about from both Italy and from Spain. And we've started to see yields going up again on equities and bonds.
BLOOM: Yes. They've given back half their gains, don't forget, that equities in Spain got smoked today. Bond yields pushed up. The euro pushed lower. Everything started reversing. But it hasn't fully reversed themselves.
I think the market was hoping he would do something. But to say the ECB's disappointed you, it means you've learned nothing in the last two years. Since when have they ever come out and said, "Here's a slam dunk. That's fantastic." Never.
You do the same thing every time, which is we get one step closer, one step closer, and eventually, the bond-buying will have to come, because if he's going to do anything to save the euro --
QUEST: Too late! Too late! Too little, too late.
BLOOM: Well, that's just ten days to save the euro and Christmas, and here we are on August.
QUEST: David, good to see you as always.
BLOOM: Good to see you.
QUEST: Spanish and Italian markets fell after Draghi finished speaking. The two countries' prime ministers, Mariano Rajoy and Mario Monti appeared together in Madrid after the ECB press conference.
Neither was prepared to say if their countries will be asking the Central Bank to intervene, the exact measures that were required to be asked by Mario Draghi. Governments have to ask for assistance.
Investors weren't impressed with what had happened so far. If you'll join me over at the CNN super screen, you'll see exactly the worst losses. We -- I suppose we really do have to start in Madrid. Look at that. And that down 5.1 percent.
The other major markets were also down. London was off just a fraction, but it was Germany, Madrid, Milan -- they were the ones that fell very heavily. And the reason, of course, Germany -- because they're stuffed to the gills with bonds, and if there's any form of dislocation in those markets, they will have to pay the bill or, indeed, for the recovery. And the same, of course, in those.
Let's go to New York, now, immediately. Alison Kosik is in New York. We look and we see these results. First of all, tell us where the Dow is and how the market is doing, and -- aha! Whenever we see Kenny, we know we're in trouble.
ALISON KOSIK, CNN CORRESPONDENT: Oh, yes, we're in trouble now. So, yes. It's an ugly day on Wall Street, the Dow down 161 points, and it's all because of what Mario Draghi didn't do. It was building everybody up for something that he didn't own up to.
KEN POLCARI, ICAP CORPORATES: Well, you know what he did? He whipped the markets into a frenzy last week. And not just US markets, really. Global markets went into a frenzy when he came out last week and was so emphatic, the way that he -- the way that he directed that he was going to solve this problem.
And he delivered it with such force that everyone that everyone thought maybe this time it was different. It wasn't just kicking the can down the road.
And we saw the market rally two or three days very strongly. We saw the market kind of churn here for the last couple of days because we wanted resistance, we wanted support. It was waiting, it was hoping. And then today was disappointed once again.
And so, we've given it all back, everything we took on Thursday and Friday, we're giving it all back. And why should anybody be surprised?
KOSIK: And now the trend is going to be?
POLCARI: The trend, I think, is going to continue to be weaker because the focus is going to once again turn on the US macro data, starting with tomorrow's jobs report. We know that it's weakening anyway. We know that Europe is weakening, and even Asia's weakening.
So the trend, I think, is going to once again be lower. But you're going to have all the central banks, starting in Asia and over here to the US, that are going to come to the rescue, probably come September.
Certainly in this country after Jackson Hole, which is in a couple of weeks, we'll have Ben Bernanke and the Fed really come to the rescue again, so it should put a little bit of a floor underneath it.
KOSIK: Now, you say the Fed could come to the rescue again if there is bad data coming out of the US. What is considered bad?
POLCARI: Well, he said it yesterday, right? He changed his wording from they're "watching" to they "will provide." And so, you have to believe that that's after this Jackson Hole meeting, because he's not going to step in front of that.
But then, I think, what they're going to do is launch another QE3 program. I don't believe that they should. I'm one of those that said the Fed should stay away. The market's got to get to a place where it's got to get to. Until it washes out and it does it on its own, it's just an artificial level that we're at, right?
KOSIK: Yes, what would another QE type of stimulus do?
POLCARI: Well, it's not going to do anything other than boost it initially, maybe put a little bit -- a temporary floor underneath it and make everybody feel good, but feeling good, really, in the end, is not helping, because once they walk away, it rolls right over again. And so at some point, you've got to pull it -- you've got to let the market just find its own level.
KOSIK: Market find its own level, Richard --
QUEST: Tell Kenny -- tell Kenny he's wrong, and he's wrong because if they don't have QE3, we could have a catastrophe on our hands.
KOSIK: He said you are wrong because if there's no QE3, we could have a catastrophe on our hands.
POLCARI: But you know what, Richard? Maybe in fact that's what needs to happen is that the markets have to shake out. It's got to get a point where they -- where it gets the capitulation. People have got to get so disgusted that it's got to get to that point, and that's when you'll find the real bottom. Until then, it's nothing but artificial.
KOSIK: Artificial, Richard, what do you say to that?
QUEST: Eh -- I've heard the -- I've heard him use the "C" word, capitulation, and that's always wrong. Listen, say thanks to Kenny. You tell me how much misery there is after the trading glitch.
KOSIK: How much misery? Let's just say morale is not too high here on the floor.
QUEST: All right. We'll talk more --
KOSIK: Let's leave it at that, shall we?
QUEST: We'll leave it at that. Best not dwell on the private grief of the family.
QUEST: Alison Kosik in New York. We thank you for that. Now, check on the markets again. One stock in particular over at the tech-heavy NASDAQ, Facebook has continued to slide. Shares in the social network site have been hovering around $20 for more than an hour. It's a slide of nearly 48 percent since the ballyhooed hype of the debut in May.
Coming up next, priceless publicity and a major sales boost. The chief exec of Adidas on why Olympic sponsorship is a double dose of gold. Good evening.
QUEST: Official Olympic sports rep Adidas has achieved a personal best. The half-year net income jumped 30 percent to half a billion dollars, $553 million was the actual number. The company says it's on track for a full-year profits -- a record full-year profit, and that's not a short-term boost that's because of the Olympic Games. Adidas is a sponsor to the London Organizing Committee.
The chief executive Herbert Hainer told me the bulk of Olympics financial benefit still yet to come.
HERBERT HAINER, CEO, ADIDAS: The Olympics play a certain role, but don't overestimate it. First and foremost, it was the first half, which ended in June. Olympics started the end of July. And most of the things which we do around the Olympics are directly when the Olympics start.
So, there is from a commercial point in the first six months the effect of the Olympics is not that big. It obviously has helped our sales here in the UK, but if I look to the overall picture, to the $7.3 billion which we did in the first six months, it's just a minor factor.
QUEST: It doesn't matter whether the CEO is in soft drinks, sportswear, heavy manufacturing. You're all really grappling with this same difficulty, that no matter what you do with your company, the economic headwinds are against you.
HAINER: This is definitely correct, and sometimes it's also a little bit frustrating when the numbers of the company and the financial aspect is swept away by all the European discussion about the euro and countries like Greece and Spain and Italy.
But at the end of the day, I'm absolutely convinced that at the end of the day, the solid performance of a company will pay, and when you look to our share price, our share price increased 22 percent since year-to-date. We are developing better than the tax and better than most of our competitors. So, at the end, I think the underlying factors and figures of the company will pay.
QUEST: Are you still -- do you still have a plan in the bock pocket for a Greece exit of the euro and a complete splintering of the eurozone? Because obviously as a European company with major sales here, you really do have to be ready for the worst case scenario.
HAINER: But first and foremost, let me say that I personally do believe that the euro will stay and the eurozone will stay. But congruent to your question, we are dealing with, I do believe, around a hundred different currencies already, with the English pound, the Japanese yen, the Chines renminbi. So we are used to working with different currencies.
If at all odds Greece would drop out and will go back to the drachma, yes of course we can deal with that as well.
QUEST: It's said that you have invested about $155 million, we work in US dollars, in the Olympics sponsorship, and obviously, in all that happens that you have to amortize the cost and onwards. Is it really worth that much money?
HAINER: We had a target of selling 100 million euros merchandising product. This target is already fulfilled. We have done it, and therefore from the commercial aspect, I'm quite happy.
But the second point, which is even more interesting, is the exposure which you get for your brand. And I think there is no way that you can escape Adidas here. I'm here several days, and it's so great to see the exposure for our brand, be it through when you drive through London, be it when you see the athletes, especially when you see Team GB.
And this gives us a longevity here in the UK and around the world.
QUEST: And that's the CEO of Adidas.
Now, here's something you may not have known. In the United States, or American athletes have to pay tax on their medals and on their winnings as income and benefits in kind. Now, there's a move victorious athletes should be allowed to keep their prize money tax-free, according to one US senator.
If you join me at the super screen, I'll show you exactly what we're talking about here, the tax man will taketh his toll.
The US Olympics Committee gives a cash prize to -- a bonus, think of it like a bonus, like a CEO. And at the moment, they have to give a sizable chunk of it to the tax man. If athletes are paying the top rate of tax of 35 percent victory.
Now, this is the sort of numbers you've got. So, the prize -- the bonus, $25,000, and the top tax would be just about $9,000, that's if you get a gold. If you get a bronze -- a silver, it's $15,000 with a top tax of $5,000. And bronze, you get $10 grand -- $10 grand in the hand. Top tax you'd have to pay is $3,500.
What that actually means, of course, is that US Senate Republican Marco Rubio says he's bringing in the Olympic Tax Elimination Act. He says they shouldn't have to worry about extra tax bills.
It's created quite a debate in the office. After all, if you get a bonus -- forget on the medal -- if you get a bonus, shouldn't you pay tax? You do. I do. Everybody else does, @RichardQuest on that.
Here's the -- let's factor this in for Michael Phelps with all of his medals. So, Michael Phelps, it could mean some big savings. He's the most decorated Olympian, and if you add up to all his prize bonuses -- bonuses - - it would come to of the green stuff, $425,000. Now, how much tax would have to pay on that? Roughly $152,000.
So, there you have it. That's when it happens. UK athletes don't get paid a penny for winning gold. This year, they're getting their own stamp. The Royal Mail has released two of them featuring the cyclist Bradley Wiggins, that's the stamp, and it was the speed with which they brought them out that has amazed people.
And one for Helen Glover and Heather Stanning, who -- Helen Glover and Stanning who won the women's pair rowing final. Stamps for today's gold medal winners will be on sale within 24 hours. As an extra tribute to UK's golden athletes, the Royal Mail will also paint a postbox in their home town gold.
Our Currency Conundrum stays with stamps and their -- legal use as tender. True or false, if you're a shopkeeper in Britain, are you legally obliged to accept postage stamps as payment? The answer later. Yes or no?
These are the currencies. The euro fell sharply after Mario Draghi's comments. Right now, it's buying $1.21 and a half. Cable's steady, the Japanese yen 78.1. Those are the rates --
QUEST: This is the break.
QUEST: It may be quiet in places, but London is no ghost town. That's the view of the British Culture Secretary in reply to the claims that central London's been deserted as the Olympics take place. Local businesses say bookings are down so far, but the minister says it's business as usual.
(BEGIN VIDEO CLIP)
JEREMY HUNT, BRITISH CULTURE SECRETARY: This is absolute nonsense. We have about 10 percent more traffic on London's transport network than we would have normally at this time of year. In the West End, the traffic is about the same as it was this time last year. So, this is what you would expect for early August.
(END VIDEO CLIP)
QUEST: That's the minister's view. Falling visitor numbers might be bad news for the tourists here. Well, depends on your point of view. It's like having a whole city to yourself. We had heard these criticisms that London was deserted, so we sent our reporter Ayesha Durgahee with her own Tube ticket out into the yonder.
AYESHA DURGAHEE, CNN INTERNATIONAL CORRESPONDENT (voice-over): With my Tube journey relatively stress-free and easy, despite the weather, I'm ready for my day as an Olympic tourist.
DURGAHEE (on camera): Anyone coming to see Madame Tussauds, one of the main attractions here in Baker Street, would normally have to join the queue round about here. With London so empty, it's a tourist paradise, where there are no queues.
DURGAHEE (voice-over): Madame Tussauds doesn't release visitor numbers, but it's not the only one finding it hard to pull the punches in and make money from the Olympics.
ANTHONY SIBLER, SOUVENIR SHOP OWNER: Well, I hope to sell my Olympic sweatshirts or my London sweatshirts, t-shirts. The only problem we've got is that we haven't got any customers, so it's somewhat difficult to sell anything.
Our friend Boris Johnson, the mayor of London, who actually I like very much, decided to shoo away everybody and said keep out of London if you can help it, basically. We have seen a downturn over here, I would say, in the last two weeks of about 50 to 60 percent. It's completely and utterly dead.
DURGAHEE: With more elbow room on the streets, a quick photo with Sherlock Holmes before my bus tour.
DURGAHEE (on camera): One, please.
DURGAHEE (voice-over): A handful of Olympic tourists hop on and off as we make our way around the landmarks of London.
DURGAHEE (on camera): Ah, there they are!
(CAMERA SHUTTER SNAPPING)
DURGAHEE: No one's around.
ROYDON TEMPLE, OLYMPIC TOURIST: We thought it would be a gridlock with the transport agencies, but things have been very, very smooth, so we're enjoying ourselves.
DURGAHEE (voice-over): For a Londoner, this is the perfect time to enjoy and explore the city.
UNIDENTIFIED CHILDREN: Lion King!
KERRY BENNETT, LONDONER: It's very quiet, I think. Bliss, absolute bliss. We're going to the "Lion King" with the children, and they said that they still have tickets to sell, so I think the theaters are suffering.
DURGAHEE (on camera): Since the start of the Olympic Games, the "Lion King" has sold around 1,500 tickets a day instead of the sell-out crowd of over 2,000 tickets, so it's relatively easy to buy as may as you need. I'm going to see if I can get four for the matinee.
DURGAHEE (voice-over): It's bad for business, bliss for tourists. As more people realize the streets aren't as crowded and congested as expected, London may be able to get its Olympic flag flying again.
Ayesha Durgahee, CNN, London.
QUEST: Now, that's what you call work, isn't it? Next, a very unpleasant edition to an in-flight meal. Questions again on airline food control after a passenger finds something nasty in his sandwich, and I don't mean the meat and veg.
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.
The UN and Arab League's envoy for Syria has announced that he's quitting when his mandate expires at the end of the month. At a news conference, Kofi Annan scolded the UN Security Council for, in his words, finger-pointing and name-calling. And in an editorial in the "Financial Times," he wrote that the Syrian president Bashar al-Assad must leave office.
A Syrian opposition group says regime forces are preparing for an all- out attack on Aleppo. Video posted online appears to show tanks and reinforcements arriving in the city. Mobile phone and internet services in Aleppo have been significantly disrupted, and activists say 100 people have been killed today nationwide.
Spanish police have arrested three al Qaeda members in connection with a plot to launch a terrorist attack in Spain or Europe. A terrorism expert says Spanish security officials believe the men may have been planning to attack a joint US-Spanish navy base near Cadiz or British interests in Gibraltar.
The president of the European Central Bank has unveiled a plan to ease Europe's debt crisis. Mario Draghi says the single currency is irreversible. He announced no new measures to resolve the economic crisis dragging down the eurozone, and that lack of action sent stocks into a tailspin.
QUEST: As you know, we take the issues of business travel very seriously on this program, and certainly things to do with the airline and aviation industry. So when we heard this story, we knew we had to bring it to you in detail.
Air Canada says an incident in which a passenger found a needle in his flight meal on Monday has been taken seriously and well they might. It comes only weeks after needles were found in sandwiches served on Delta airline planes. The two incidents appear to be unrelated.
Even so, they raise questions about the measures airlines take to check the food served on board. As Brian Todd explains, it's all much more difficult than you think.
(BEGIN VIDEO CLIP)
BRIAN TODD, CNN CORRESPONDENT (voice-over): Two airlines, seven sandwiches, heightened anxiety -- a passenger found a sewing needle in a catered sandwich on board an Air Canada flight on Monday from Victoria, British Columbia, to Toronto. Canadian police say the passenger suffered a minor injury. The airline says it's investigating and working with its caterers to tighten security.
This follows reports of needles found in six sandwiches on Delta Air Lines flights from Amsterdam to the U.S. two weeks ago.
JAMES TONJES, DELTA PASSENGER: When I felt to see what that was, I pulled it out, and here it was a needle about 1 inch long with -- it looked just like a sewing needle. But it was sharp on both ends. It didn't have an eye on one end.
TODD (voice-over): The FBI and Dutch authorities are investigating that case. Dutch officials tell CNN some of those sandwiches, including one seen in an ABC News photo, have just arrived at Amsterdam's airport, where they're being forensically examined.
CNN contributor Tom Fuentes believes these are likely serious pranks, not terrorist plots.
TOM FUENTES, CNN CONTRIBUTOR: I just don't see why they would settle for needles, which would bring pain and suffering to a passenger biting into one, but not likely to be lethal in the long run, and it would be detectable.
TODD (voice-over): Canadian and Dutch officials say there's nothing at this point suggesting a link between the Delta and Air Canada incidents. But there is one connection.
TODD: Gate Gourmet is a catering company that serves Delta Air Lines. It has acknowledged that the sandwiches in the Delta incident came from one of its facilities. Gate Gourmet says it also serves Air Canada, but says it was not the catering provider out of Victoria.
TODD (voice-over): A Gate Gourmet spokeswoman says the company is working with the airlines to enhance screening of its food. I asked Rafi Ron, former top Israeli airline security official, about that process.
TODD: With everything being loaded onto a plane like, how do you screen all of those items for something that may be in here?
RAFI RON, NEW AGE SECURITY CONSULTANTS: Well, not everything has to be screened and not necessarily screening is the best solution to prevent forbidden items from getting on board. In the case of catering, obviously catering is being prepared in a specific location. And this is the place where the security procedures need to take place.
TODD (voice-over): Ron says airline caterers have to start by vetting their employees better. How tough is it to screen this stuff? One expert in the hospitality industry told us between food, knives, forks, blankets and other items, there are an average of 40,000 items loaded onto one jumbo jet for one long haul flight -- Brian Todd, CNN, Dulles International Airport, Virginia.
(END VIDEO CLIP)
QUEST: Now allow me to update you on the story we were reporting to you last night when we told you about the protests. Anti-gay marriage supporters who have now helped Chick-fil-A restaurants set a sales record yesterday.
Remember we told you that thousands have flocked to the U.S. fast food chain after Mike Huckabee declared Wednesday Chick-fil-A Appreciation Day. The former Republican presidential candidate urged people to back the company's chief exec, who recently came out against same-sex unions and has donated money to anti-gay groups.
Well, people did turn out, as you can see, in large numbers. And it was a record sales day for the restaurant. Now the gay rights group GLAAD has designated Friday, tomorrow, National Same-Sex Kiss Day, also to be celebrated -- yep, you guessed it -- in Chick-fil-A restaurants. So will it be the anti-gay marriage supporters or the pro-gay marriage supporters that ultimately prove the bigger sales? Doesn't really matter for Chick- fil-A, I suspect. They're making money hand over fist.
The Olympic brand is everywhere in this city. We've already heard from the big names. Now it's the small traders. Olympic brand police are on the case, next.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Is it true or false that U.K. shops are legally obliged to accept postage stamps as a method of payment? It's false. The Royal Mail says retailers are free to take stamps, but they don't have to. So you can't insist your taxi driver accepts those second-class stamps if you haven't got the money to pay them.
(END VIDEO CLIP)
QUEST: The Olympic Games aren't just a celebration of sport. They're a highly valuable brand. That much we know. We talk about it on this program. And it needs protecting, the brand. Businesses that haven't paid to use it at the plucky Olympic Cafe are under close inspection throughout the Games. Now, Neal Curry looks at why an Olympic breakfast could prove far more costly than a full English.
(BEGIN VIDEO CLIP)
NEAL CURRY, CNN CORRESPONDENT (voice-over): London 2012, summer, Games, gold, silver, bronze -- seemingly inoffensive words in themselves. But put them together in a certain combination to cash in on Olympic fever, and you'll find yourself as welcome as a dropped baton in a relay race.
I sought expert advice from one of the U.K.'s top creative consultancies whose clients include both official sponsors and non-sponsors of the Games.
CURRY: I've been playing around with a couple of designs myself, and these are, I have to say, in no way a CNN official things. But -- and CNN would never do this, but I just wondered what would you say to me if I brought that to you?
DAN RADLEY, START JG: You're using two of the most loaded words here, London and 2012. You're running the risk of an association. If you had this on a screen, and you were referring to Olympic events in the piece that you were doing, I think Olympic officials might take offense.
LIZ ELLEN, ASSOCIATE, MISHCON DE RAYS (PH): Big brand still have the resources, the legal resources, the creative resources to go out there and create amazing marketing campaigns, which steer clear of an actual breach of the association (inaudible).
At the other end of the spectrum, you've got the small businesses and those are the ones that are suffering because they don't have the resources. They don't have the power to fight back if they're challenged on anything that they're doing.
CURRY (voice-over): Without such resources, several small businesses use a risky but cheap and easy strategy of adopting the Olympic name, Olympic hair salons, cafes and car washes have sprung up all over London.
DEEPIKA CHANDRA, OLYMPIC BEAUTY SALON: (Inaudible) business and we're showing that we are part of it in Olympics area, and this is to show our dedication towards and the support towards the Olympics right now.
CURRY (voice-over): Martyn Routledge began collecting the new Olympians on camera and within a year found he had enough to publish a photo album, which he cheekily called, "Olym-pics."
CURRY: That's the one. Just stop us at there.
MARTYN ROUTLEDGE, AUTHOR, "OLYM-PICS": The Olympic Fish and Chips is one of the first ones that I saw.
CURRY: Have you encountered any evidence of people perhaps covering up the signs or changing the names back?
ROUTLEDGE: Yes, no, there's definitely one or two that we came across where it's might have been using Olympic logo and they were kind of asked to cover that up, certainly there's a cafe in Stratford that was just called Cafe Olympic and their -- I think they had a visit and were asked to change their name.
So they quite cunningly just changed the name by removing the O. So that became Cafe Lympic.
CURRY (voice-over): Such visits are conducted by someone dressed like this. The garish uniform may resemble a gaggle of tourguides more than a unit of elite enforcers.
But make no mistake. The branding police are armed with a range of sanctions, from a slap on the wrist to a $30,000 fine. The man who introduced sponsors to an Olympic movement facing financial ruin in the 1980s now says his rules have been abused.
MICHAEL PAYNE, FORMER IOC MARKETING DIRECTOR: To be clear, the sponsors weren't asking for this level of protection. If anything, the sponsors were saying you're being too tough.
If there's a potential backlash come on us, you know, we're not asking to stop the flower shop or the butcher or whatever from celebrating. We just don't want the other big brands associating. And I think that's a very, you know, fair case, which the public also accept.
CURRY (voice-over): As the London Olympics continue, attempts to jump on the Olympic brandwagon are becoming increasingly creative. Some becoming Internet hits, others just content to be working up an appetite for their Olympic brand -- Neal Curry, CNN, London.
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QUEST: Tonight's weather, Jennifer Delgado at the World Weather Center.
JENNIFER DELGADO, AMS METEOROLOGIST: Hi, Richard. You know, I know there was some rain around earlier in the day, delayed at times the dressage competition. But what are we going to see for tomorrow, Richard? Looks like another chance for more showers out there.
As I show you the radar, the rain came down, as we said, especially heavy over towards the west. We are going to see more showers rolling in as we head into Friday as well as into Saturday. But what are those rainfall chances? We're talking 20 percent chance for Friday.
But as we move into Saturday, Richard, we have a storm system that's developing just to the west, and that's going to bring the better chance for some heavier rainfall as we arrive into Saturday as well as into Sunday, a 40 percent chance of rainfall.
High temperatures still a little cool for this time of year, highs right near 20s and we're talking about overnight lows in the mid-teens. But, yes, as I said to you, still some rain chances around. In fact, we do have a level 1 alert in place for anywhere you're seeing in yellow, and that includes parts of London.
But that threat is going to be through Friday morning. So that means when the competition, the rest of the events for the Olympics go on the rest of the day, we are going to see that severe weather threat coming to an end.
But for central Europe, for areas also including parts of eastern France as well as into Germany, we're going to see the possibility of some storms, potentially bringing the possibility of a few tornadoes out there.
Now we got away with the bad. Now let's talk about the good. There are going to be some warm temperatures. We can see over towards eastern Europe, we're talking highs in the upper 20s, the lower 30s. And then 20s for Paris as well as in Berlin. Richard, we'll send it back over to you. I don't know if you went out to enjoy the festivities today, but it was kind of rainy, huh?
QUEST: Eh, we can live with that. Jennifer, many thanks indeed.
DELGADO: See you.
QUEST: And that is our report tonight. QUEST MEANS BUSINESS, I'm Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable. "MARKETPLACE EUROPE," that's next.
JULIET MANN, CNN HOST: Welcome to MARKETPLACE EUROPE, on the banks of the Thames in London. In the 19th century, this was the busiest inland port in the world, spices from the Far East, tea from India, tobacco from America, goods from all over the globe were offloaded in the city's docks. And with the Olympics in town, London's experiencing a 21st century trade invasion.
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MANN (voice-over): Coming up, getting a slice of the action, the countries muscling in on the sporting spotlight to drum up some business of their own.
And cashing in on consumerism, the boss of the Australian shopping center group Westfield.
STEVEN LOWY, CO-CEO, WESTFIELD GROUP: There's no certainty in life, but you can mitigate risk by investing in certain locations.
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MANN: British prime minister David Cameron is hoping that hosting the Games will boost the U.K. economy by as much as $20 billion over the next four years. Around 100 heads of state are in town, presenting diplomats with a golden opportunity to drum up business for U.K. TLC (ph).
But next to the homeside charm (ph) offensive is a foreign invasion, as delegations from around the world bring a piece of their turf to English soil.
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MANN (voice-over): Across London, various nations have taken over landmark locations to promote themselves during the Olympics to showcase culture and cuisine and offer a home away from home to athletes and fans. Here, they can watching sporting proceedings amongst countrymen, but there's fierce competition, too, for the attention of the business world. From official sponsors to representatives of every size of firm in town, the Games have transformed London into a giant trade fair.
Scotland House had a track record of using international sports events to attract inward investment.
ALEX SALMOND, FIRST MINISTER, SCOTLAND: We can trace directly 12 significant investments in Scotland through the commerce at Scotland House in Delhi (ph). And one investment particularly, which has moved thousands of jobs to Scotland, which came directly with the expansion out of the Scotland House.
I suppose, in a way, you could never absolutely say it would have never have happened under any other circumstances. You can't say that. But you know, in business, you've got to be quick on your feet. You've got to take the opportunities when they arise. If you don't take the opportunity, then somebody else will be waiting to take it the next day.
MANN (voice-over): Tourism plays a part that behind the scenes these national houses run networking sessions and facilitate meetings to push their business agenda. Switzerland says there's more to them than chocolate and mountains.
NICOLAS SIDEAU (PH), HEAD OF SWISS HOUSE: Beijing, the job was quite easy, because at that time the relations were moving between China and Switzerland and the Chinese were fascinated about Switzerland. So it was quite easy to catch each and every person.
(Inaudible) business people. Here in London, it's not the same. You get people know Switzerland. They are in -- they are fascinated but not as fascinated as the Chinese were. And we have to be competitive here in terms of communication. We have to be catchy. We have to (inaudible) people.
MANN (voice-over): They do that by displaying iconic brands like Victorinox.
ADRIENNE MERRILL, UK BRAND MANAGER, VICTORINOX: We had a micro site with (inaudible) artistic tool, work with artists that were performing here. It went viral overnight. We had 25,000 unique visitors, 4,000 people submitted designs and the very next day, 800 people came to our London flagship store on Bonn (ph) Street.
MANN: Casa Brazil is one of the largest hospitality operations because after London 2012, it's all eyes on Rio to host the next Olympic Games.
MANN (voice-over): But even those without an Olympic hosting remit see the chance to network and sell their wares.
ANNE VILLERNOES (PH), COMMUNICATIONS DIRECTOR, DANISH CROWN: What do you today know as a traditional British breakfast, English breakfast, 60 percent of the bacon they eat comes from us.
All we've got to do for the next week here is host events with business partners and customers and people we would like to get as customers. So we got to host them, because that's (inaudible) serving only one thing, that's the Danish bacon.
MANN (voice-over): Because while the Olympics is about flag waving and winning medals, the ultimate goal for business is building firm foundations for trade.
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MANN: Coming up after the break, the boss of shopping center group Westfield says that retail therapy is the key to economic success.
MANN: Welcome back to London, a city bursting with visitors from all over the globe, enjoying the sporting and cultural Olympic atmosphere. And hopefully with money to spend. When it comes to setting up a successful retail business, it's all about location.
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MANN (voice-over): Around 70 percent of visitors going to the Olympic Park in Stratford are expected to pass through Europe's biggest shopping center. Australia's Westfield Group operates one of the largest shopping center portfolios in the world. This Stratford city complex opened in September 2011, registering a million visitors in its first week.
Westfield has 110 shopping centers worldwide, housing 231/2 thousand retail outlets. It has total assets under management of $57 billion.
LOWY: We focus on the side independently of the Games. When the Games came, what that did, it really fast-tracked the infrastructure being built. It fast-tracked the planning and the approval process.
So while this building was not built for the Games, it was really built for the people of East London. We expect in excess of 35 million people a year coming through here independently of the Games.
So in one sense, the Games is an interruption to that normal footfall. In another sense, the Games is a massive opportunity in exposing new people to the building that wouldn't ordinarily have come here on a regular basis.
MANN: So you very much think that U.K. consumers are going to spend their way out of the recession here?
LOWY: The U.K.'s clearly in a recession right now. Europe is sort of enveloped with the euro crisis. Many parts of the world are suffering a lack of consumer confidence, a lack of spending. And countries are doing what they can to maneuver through that.
But you know, the U.K. is a country of more than 60 million people. London is one of the world's greatest cities. And so we're very confident that in time this will work itself out. And in the meantime, it's properties like this which are at the highest quality I think on the planet that really bubble to the top in more difficult times.
MANN: So when it comes to investment opportunities, where else is on your radar?
LOWY: We are focused on selling smaller assets that we feel won't be able to have long-term investment returns. We are using that capital to expand our business in areas like Milan, like World Trade Center, like here, like in Sydney -- we just finished our iconic asset just in Sydney -- to, you know, change the profile of our business, adjust it to the more iconic assets, because what's clear is that the world financial crisis has shown that the best assets in the best cities like London, like Milan, like New York, like Sydney, have proven their ability to withstand these shocks.
And other assets in lesser markets, particularly those that will take a long time to rebound, I think they'll prove to be more problematic.
MANN: Some analysts have said that you have a high risk strategy in (inaudible) growth areas. Where do you see the biggest challenges?
LOWY: Our company has really been built more on the (inaudible) western markets like the United States, like Australia, very solid markets, markets that have the ability to get a, you know, politically sound, economically sound, very robust.
When they go through a problem, they come out of a problem. The U.K., that's really the basis of our company, which has been around for 52 years. The first developing market we really entered into was Brazil. And that was last year.
And we've put a modest but important sum of money there to understand the market. And over time, I think a company like ours will be able to understand how to operate and be successful in those type of markets.
MANN: You've put the feelers out. It seems quite tentative. Is it that up until now, you've mainly focused on English-speaking markets?
LOWY: We are not a company that has a short-term focus. And so when we make a step like moving into Milan, it's a very important step for the long term. When we make a step of looking at Brazil, it's a step that we're looking to for the long term.
We entered England in an investment -- a small investment in Nottingham in the year 2000. And today, we have the two largest shopping centers in Europe.
MANN: But if you had a shopping list of companies or countries that you could cherry-pick, what would be at the top?
LOWY: We're looking for world -- cities that are important from a world context, cities that are important in robust economies, robust political markets, that give you some sort of certainty. There's no certainty in life, but you can mitigate risk by investing in certain locations.
MANN: It's like you're saying the key to economic success is shopping.
LOWY: Well, shopping is at the heart and makes us all happy and smile. It's a major economic driver. I mean, countries like Australia, America, you're talking more than 50-60-70 percent of economies are driven by retailing. They are the largest employer of youth. They have to be -- they have a huge multiplier fit on the economies.
So if you think of any one of the goods that you and I are wearing right now, somebody's got to produce that. Somebody's then got to transport it. Somebody's then got to distribute it. Somebody's then got to sell it, market it.
We would have a multiplier effect of, depending on the economy, of two to three times the value of the good that is actually purchased. So, you know, governments focus on consumer behavior, it is hugely important for any country from an economic perspective. And so we are at the fulcrum of that. And we do our best to make sure that our buildings produce enormous economic activity.
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MANN: Steven Lowy, the co-CEO of Westfield, bringing this week's MARKETPLACE EUROPE to the finish line. Join us again next week when Richard Quest will be finding out how the technology behind fighter jets is seeing engineers to help Britain's sporting elite get ahead of the competition. Goodbye.