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QUEST MEANS BUSINESS

Royal Baby on the Way; GKS Admits Employees May Have Broken Chinese Law; Profit Jump for Philips; Drag on US Markets; European Markets Mixed; Dollar Down; McDonald's Q2 Results Below Expectations; Netflix Stocks Rally

Aired July 22, 2013 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


NINA DOS SANTOS, HOST: Tonight, the royal baby is on its way. The world waits to meet the future heir to the British throne.

China widens its bribery investigation as GlaxoSmithKline admits that it may have broken the law there.

And a mess for McDonald's. The fast food giant's earnings fall short of expectations.

Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.

Good evening. We'll have a full update on the day's business news in just a moment's time, but first, of course, we turn our attention to the big story of the day in London. The Duchess of Cambridge has been in labor for several hours now. Her child will one day inherit the British throne. Let's go over to our very own Becky Anderson, who's over at Buckingham Palace with all the excitement. Becky?

BECKY ANDERSON, CNN INTERNATIONAL CORRESPONDENT: A very good evening to you, Nina, and a very good evening to our viewers around the world watching where the royal baby is well and truly on its way. The Great Kate Wait will soon be over.

You are correct to say that the Duchess of Cambridge went into labor more than 12 hours ago, now. William and Kate arrived at St. Mary's Hospital to the private wing there, they were ushered in through the back door. Only a few minutes' drive from Kensington Palace, where we believe that they were last night.

And the duchess, we are told, experiencing a "normal labor," in the words of the palace, although it can't feel that way if you're -- what? -- 13 hours in, can it?

The royal standard has been raised over Buckingham Palace. That means the queen is inside, also awaiting confirmation of that new great- grandchild. Her son, Charles, who will be a new grandfather, was greeted by crowds of well-wishers.

He was on a tour of Northern England earlier on today at the National Railway Museum. One of the crowd there was determined to give him a bit of a fright, all in the spirit of fun, of course. Have a look at this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It's triplets!

(LAUGHTER)

UNIDENTIFIFED MALE: Well, I just felt like saying, "Congratulations, sir, it's triplets" just for a bit of fun. Not knowing what it was going to be, if it's going to be a boy or a girl, I thought -- I gave him a broad smile and started from the sound of it.

UNIDENTIFIED FEMALE: You're not repeating that baby thing again?

(LAUGHTER)

UNIDENTIFIED MALE: He was very jolly. Obviously, everybody's excited, the country, for it all, and just waiting to see what happens on the big day.

UNIDENTIFIED CORRESPONDENT: Do you think it could be triplets?

UNIDENTIFIED MALE: Well, who knows?

UNIDENTIFIED CORRESPONDENT: I'd go and get a fiver on it, if it's going to be.

(LAUGHTER)

(END VIDEO CLIP)

ANDERSON: Well, the event that everybody is waiting for is the birth of what will be the third in line to the British throne. It'll be the 43rd king or queen of England since William the Conqueror, a big day for the United Kingdom.

Let's get to Max Foster, who is outside the Lindo Wing amongst a bevy of journalists. Max has been there for some days. It is still very, very hot, the hottest day of the year. Max, what do we know at this stage?

MAX FOSTER, CNN ROYAL CORRESPONDENT: Thank goodness the sun's gone in on this side of the press pen. A huge amount of media here, Becky. And we're going to be told by sort of physical technique if you like that this baby's been born. You're going to see the press secretary, Ed Perkins, coming out of that door at some point with a note of paper.

It may have happened already, this -- she may have had the baby already. We're -- there's going to be a delay in us being told simply because there's a whole slew of very important people who have to be told first: the queen, the prime minister, the prime ministers of the realms, the Archbishop of Canterbury. Lots of people need to be told before that notice comes out of the door.

But everyone very excited, I have to day, about this moment in British history. Tourists and Brits have come down here. This is just one of the roads coming towards the hospital, just one of the public areas already full. But down the other end, there is a similar sort of scene, and around the back of the press as well.

Still, though, Becky, press outnumbering the crowds, which is extraordinary. But it sort of says a lot about the global interest of this story. There are five crews from Poland, four from France, several from Germany. They really do come from all over the world.

ANDERSON: Yes. Listen, there's one lady giving birth -- or as you say, may have given birth already -- who's had a very, very long day of it, but let's just talk about the press presence, because I know that nobody -- or certainly the palace hadn't given us an exact due date, so we don't know whether this baby is late, what day it was due on.

I was where you are about 10 or 12 days ago, and at that stage, there were an awful lot of press there. You're talking about this sort of bevy of journalists and paparazzi.

Now, I believe that this morning, when she was ushered in through the back entrance, none of those who'd been waiting for days, if not weeks, to report on this story, actually caught the moment. I think there was -- what? -- one paparazzi, one photographer there? Did he actually catch the moment they went in or not? Do we know?

FOSTER: Well, there -- it was -- he got a shot of a car and one of the security detail, which pretty much confirmed it was -- well, there's two cars, actually. It pretty much confirmed it. He's a pretty reputable, if I can say that, paparazzi member, so he sort of had that notice. And then, that was about 6:00 when she did come in. And then, a couple of hours later, we had the official notification.

But I have to say, the press out in the front weren't scouting out the back, because we'd decided it wasn't necessarily fair to show a woman in labor live on TV.

ANDERSON: Sure, no, that's totally understandable, and good for you guys. All right, Max, thank you very much, indeed, for that. Max, there, of course, awaiting the notification, or at least the first moment we will know that there has been a baby born, and that is when a royal aid will appear at that door of the Lindo Wing.

The birth notice will then be brought here to Buckingham Palace. I just want to get you a shot so that you can see the crowds gathering here. What they are gathering for is the notification of this birth, which will appear on a gold easel outside the front -- or in the forecourt of Buckingham Palace.

Our royal commentator, Kate Williams, is with me, and she's been with me last week and will be here for the next couple of days, one assumes, because even when we find out the gender, the weight, and the time of this new prince or princess, we won't know its name, we won't have seen Mum and Dad, probably, and we won't probably see them for -- what? -- 24, possibly 48 hours.

KATE WILLIAMS, CNN ROYAL HISTORIAN: That's exactly right. As you say, we'll expect to see the easel just there outside the palace with the name -- with the weight, with the age, with time of birth, but not the name. The name may not appear for the next two or three days. And at the moment, we just don't know what the name could be. It is -- there are raging, raging bets --

ANDERSON: Yes.

WILLIAMS: -- there have been raging bets going on about it, what's the name going to be? Alexandra is the front-runner for a girl.

ANDERSON: Let's bring those up for our viewers, because I know we've got a -- some vision to show you of just the names that are in the offing, as it were. You tell me what you've heard and what you think.

WILLIAMS: Alexandra is one of the top choices for a girl. Charlotte also. I think everyone expects Elizabeth to be in there somewhere. Perhaps not number one, maybe number two or three. Also Diana and also Victoria. These are the lead names at the moment.

ANDERSON: We were giving our viewers a bit of a history lesson earlier on, and I just want to repeat it. There was an Ethelred in the past, way back when, some near 1,000 years ago, before William the Conqueror in 1066. You wouldn't expect an Ethelred this time?

WILLIAMS: No, I don't think we're going to see that. That were the Anglo-Saxon kings, and "Ethel" actually meant "royal," so it meant Royal Red. So possibly that would be a good name for Prince Harry, I'm not sure. We could rename him Ethelred. Don't know if he'd like that.

But yes, I think we'll certainly see a more conventional name. Alexandra, very stately, middle name of the queen, the name of Edward VII's consort.

For a boy, we're much more likely to see George, possibly James. I'm not very sure about that one myself, but George --

(CROSSTALK)

ANDERSON: Catherine's brother is called James, of course.

WILLIAMS: -- William. Yes, but the thing is about James is that it's a very political name if we're approaching a referendum about Scotland, because James VI of Scotland became the first king of England. So, I doubt that one, actually, but you never know.

ANDERSON: Yes.

WILLIAMS: I think William, I think George, I think Charles. So, we are going to see -- the royals like to recycle the same names --

ANDERSON: Yes.

WILLIAMS: -- over and over.

ANDERSON: What they also do is whatever you are called, you might change your name when you become king or queen. And of course, this is the third -- this will be the third in line to the throne, given the new succession law.

So, for example, the queen's father, Albert, called himself George VI. Charles, it's mooted, possibly will call himself George VII. So, it sort of doesn't really matter what this child is called, because in the near future --

WILLIAMS: Yes.

ANDERSON: -- well, not near future, probably 50 years from now, it could possibly change its name, right?

WILLIAMS: Completely changing it. Yes, good point. That's the thing. Royals have a lot of names. You and I only have one or two. They have lots. And that's so they can choose one when they come to the throne. So, as you say, the queen's father was Albert, came to the throne as George, really to remind people of his father, George V.

And they're saying that yes, we might see that again with Prince Charles. He might come to the throne as George. So, what's interesting about a girl is that if she is, perhaps called Alexandra Elizabeth Diana, she could, if she feels like it, come to throne as Queen Diana.

ANDERSON: That's fascinating. Thank you very much.

WILLIAMS: Good to see you.

ANDERSON: Kate Williams, always good to have onboard when we're doing all things royal. We believe, Nina, that William is at the hospital with - - well, we know he's at the hospital. We believe he's in the birthing room. We don't believe there's anybody else apart from the gynecologist.

In days of yore, there would be -- have been as many as 30 or 40 people in attendance, not least the home secretary, here, who would have been there to make sure that the baby wasn't swapped and that a commoner wasn't sort of swapped in as opposed to a new royal baby.

So, not the sort of thing that happens these days. Let's hope it's private, that she's doing well, and if she's already given birth, we congratulate here at this stage. Nina?

DOS SANTOS: Yes, we certainly do. And the eyes of the world on this woman on this momentous occasion. Becky Anderson, there, joining us live from Buckingham Palace, thanks so much for that. And of course, we'll check in with Becky later on in the hour to find out how Kate Middleton, now the Duchess of Cambridge is doing and as well as her baby.

Now, let's move along and tell you about what we've got expecting later on in the show. After the break on QUEST MEANS BUSINESS, UK drugs giant GlaxoSmithKline makes an admission as Chinese authorities hold all workers. We'll be back with more on that.

(COMMERCIAL BREAK)

DOS SANTOS: Hello and welcome back. You're watching QUEST MEANS BUSINESS. Now, GlaxoSmithKline says that its employees appear to have broken the law in China as the UK drugs giant faces bribery allegations over there.

The GSK executive that's been sorting out these kind of problems is Abbas Hussain. He made a statement today saying essentially this, as you can see on this screen here. "Certain senior executives of GSK in China who know our systems well appear to have acted outside of the processes."

He also goes on to say that that means -- "they acted outside the processes and controls, which breaches Chinese law. We have a zero- tolerance approach for any of this kind of behavior." The exact words that he used was "behavior of this nature."

Well, his statement follows a meeting with Chinese representatives. Four senior GSK officials have now been detained in China, with state television broadcasting an apparent confession, here, of one of them.

The Chinese and also -- the Chinese have been widening their net beyond GSK. Officials from the Public Security Bureau reportedly detained an employee of this firm, another British drugs giant, AstraZeneca. That detention happened on Friday.

The company would not confirm to CNN this, but it had said that it has a statement, and this was the statement that it came out with. Quote, "We believe this investigation relates to an individual case. We have no reason here," it says, "to believe that it's related to any other investigation."

Now, what all of this means is that obviously companies are facing a tough time in places like China. Let's go over to Jim Boulden, who can tell us a little bit more about GSK and about other companies that are having a tough time in China, but betting big on it. Good to see you again, Jim. Take it a way. What's the latest with GSK? Because this has been on the cards for some time.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: I think what's so interesting here, Nina, is that GSK, like a lot of other companies, would normally say things like, well, we need to do some more investigating, we don't know exactly the information the authorities have.

But for GSK to come out out on Monday and say basically that they think that certain senior executives in China appear to have acted, quote, "outside of our processes and controls." It means basically that GSK is pretty much admitting that there was corruption going on in China. So, that's an astounding statement for a company to make this early into an investigation, isn't it, Nina?

And of course, we saw executives from Rio Tinto back in 2010 actually serve jail time after a similar case, not connected at all, of course. And other companies, as you said, as well, that have been caught or allegedly caught doing this.

Also, GSK, interestingly, said, Nina, that it's likely to lower its prices on its drugs, its pharmaceuticals in China. Now, why I think that's interesting is that one of the claims was that they were artificially upping their prices as part of this whole alleged bribery scandal.

And to come out already and say they're going to lower the prices they say, GSK, because they're going to reconfigure their operations in China that will lower the costs, and they can pass that onto consumers.

But one of the issues that the Chinese government has had very publicly for a number of these pharmaceutical companies is they think they're getting charged too much by companies who charge different prices, as we know, around the world.

And so, some of the pressure on this story could very well be that the Chinese wanted to see why these companies were allegedly charging too much. And for GSK to come out on Monday just a few weeks into this scandal and say they were start to lower prices is quite dramatic, I think, Nina.

DOS SANTOS: Well, it just goes to show, doesn't it? China is a huge market. Shareholders -- and these are all listed companies we're talking about here -- demand returns, they demand growth. And you've got to have access to fast-growing markets like China to be able to deliver that.

Now, that means that obviously this country's crucial for other companies around the world, no matter the kind of compliance and governance issues, I suppose, Jim?

BOULDEN: Yes. Every time a company results come out, one always looks to see how they're doing in emerging markets, especially for mature European companies because they're just not going to be growing very much in this market, so you look at China.

And one of them today was Philips, the big electronic consumer health company and, of course, light bulbs, et cetera. And they are growing very well in China. So, I asked the chief executive, Frans van Houten, how come they're doing well in China compared to some other companies. Take a listen.

(BEGIN VIDEOTAPE)

FRANS VAN HOUTEN, CEO, PHILIPS: The second quarter showed a satisfactory result with a 30 percent operational profitability improvement and a 3 percent overall growth.

The main growth we were able to record in the emerging markets, the growth markets, where we see good traction of our innovations in heath care, energy-efficient lighting, and especially in the lifestyle area, where we introduced a slate of new products, such as a machine to make noodles in China, a multicooker in Russia, soupmaker in France.

By catering for the local needs of consumers, we can unlock a lot of growth for Philips.

BOULDEN: Now, some European companies recently have said that China has been a bit of a trouble area for them, but you're saying that China still grows for you?

VAN HOUTEN: China, we are doing very well. But I have to say, we have been investing in China. We have quite a sizable research and development activity there. We have business units and management over there. We treat China as our second home, where we are allowing a lot of decision-making on the local level.

We believe that our fundamental needs for more health care technology in the China market and a transformation from conventional to LED energy- efficient lighting is growing well and also very much supported by government policies, who are keen to reduce the electricity consumption.

And finally, on the consumer side, the Philips brand name is very well-known in China, and by specifically bringing innovations that cater for local needs. Think about the air pollution in Beijing. Philips has been pushing air purifiers and humidifiers and that has driven a tremendous growth rate for us in the China market.

BOULDEN: Well, you have been cautiously outlooking the second half of this year, so you're still remaining cautious, which I presume you would say is prudent.

VAN HOUTEN: Well, we need to be cautious, because the world economic theater is not an easy place. We say currency volatility. Think about the yen coming down 20 percent. A slowing GDP growth. Health care reform in the United States. And of course, Europe is still in the doldrums.

I like what the G20 said over the weekend. The G20 said we need to combine austerity and investments for growth, and that exactly describes how Philips is operating. We are improving productivity, and at the same time, we are stepping up research and development.

And that makes us, also, a case of self-help. We are able to improve the economics of Philips while at the same time we see a world that has a lot of uncertainty in it.

(END VIDEOTAPE)

BOULDEN: As you know, Nina, Philips has been going through a great reorganization for the last two years, trying to become more nimble and cut out a lot of costs while still growing in emerging markets. So, I think what we've heard tonight is really the tale of two companies in Europe with very different stories to tell in China, Nina.

DOS SANTOS: Yes, absolutely. That's a very good way of summing it up. Jim Boulden, there, in London for us this hour. Thanks for that.

Well, it's a case of wait and see on Wall Street as corporate earnings continue apace. We've had a number of these earnings coming out, with the likes of McDonald's, that was the biggest drag on the markets, as you can see, it fell 2.5 percent on the back of disappointing figures, particularly on the profit front, but also on the top line revenue as well.

Broadly speaking, second quarter earnings have come in quite a bit better than many people had been fearing. It was a mixed day, though, on the European markets on the back of the kind of issues I was just addressing before with Jim Boulden in London. GlaxoSmithKline, as you'd expect, falling, this time around about 1.2 percent off of the back of its problems in China.

Barclays rose by the opposite amount, though, in London, trading up about 1.3 percent on the day. And as we were saying before, companies like Philips as well, very much setting the tone, because they're big bellwethers across the European region.

Now, let's move away from equity markets and talk about currencies. The dollar is down against the British pound and the euro. It's also down around about 1 percent against the Japanese yen, which means the Japanese yen is strengthening. That's not good news for exporters over there. We're back after this.

(COMMERCIAL BREAK)

DOS SANTOS: Welcome back. McDonald's has seen its second quarter profit fall below forecasts as it warned of a tough year ahead. The fast food giant blames tougher competition in the United States as well as weaker sales in key European markets. Let's go over to Maggie Lake, who's live in New York with the latest for us this hour. Maggie?

MAGGIE LAKE, CNN INTERNATIONAL BUSINESS CORRESPONDENT: Spring for a Big Mac. You know you're having a -- we're in trouble, but seriously, even informal eating out proving to be a challenging environment, according to McDonald's. Consumers are constrained, and that has investors paying close attention.

Listen, it shouldn't be a surprise, given the fact McDonald's, such a global name, we've seen China slowing, we know the problems Europe is having. But the fact that they're sort of flat or hurting a bit here in the US, I think, has some people unnerved.

And we do have higher gas prices. The country's been gripped with a heat wave, so maybe some of those higher air conditioning bills are feeding through. But the CEO, Don Thompson, also saying that the rest of 2013 is going to be challenging, and that's a worry when you get that kind of poor guidance.

And analysts we talked to said consumers are -- and investors are gripped by the same problem, and that is fear. Have a listen.

(BEGIN VIDEO CLIP)

ALAN KNUCKMAN, SENIOR MARKET ANALYST, TRADING ADVANTAGE: We had about the 5 or 7 percent sell-off that people were looking for. People said they were going to step up to buy, very few did because they're paralyzed by what they think's going to happen in the future. They're not embracing what the market's giving them right now.

The trend of the market -- if we look at things right now, I've got a target on the S&P of 1810, another 7 percent higher.

(END VIDEO CLIP)

LAKE: Paralyzed by what they fear is going to happen. That's sort of interesting, Nina, whether you're talking about investors in stocks or consumers, there just doesn't seem to be confidence about the economic future, and that is weighing on what would otherwise be a recovery here, and it's really calling the second half of this year into question, I think.

DOS SANTOS: Yes, it's interesting, if you talk about a company like McDonald's, obviously, it's the cheaper end of the restaurant market, you'd have thought that people would be reining in their budgets and buying McDonald's meals.

The other thing people tend to do during times of recession is watch movies. Netflix is another one that's on your radar today.

LAKE: Oh, my goodness. This is such interesting story. They're going to have their earnings out after the bell. We cannot wait to hear what this company has to say, because they have sort of not overnight, but in a short period of time become this sort of force in Hollywood.

Netflix, the movie streaming service, used to send those red envelopes to your home, now they stream it over the internet. They made that transition. The stock was absolutely hammered last year on a few missteps, but boy has it rallied.

If you go year-to-date, it's up more than 200 percent. Nina, if you go from the lows of last year, it's up almost 400 percent. They just got nominated for 14 Emmys, so they're getting a lot of buzz.

However, for as many people feel that they are the future -- and this is just in "The New York Times" today an article, "TV foresees its future, Netflix is there." Not Google, not Apple, Netflix. Those are the bulls.

On the other side of the equation, though, you have a lot of people who say listen, they don't give audience numbers for this original content that they are not creating. The stock has run up an awful lot, content is expensive to make. Is the best news already priced in, a gain of 400 percent, should you be careful?

One thing is for sure, this is a stock that is heavily traded, heavily watched, and is going to be a big news maker overnight. Reed Hastings, the CEO, also a bit of a controversial character. Nina?

DOS SANTOS: All right, Maggie Lake there in New York with those two key stories on the stock markets. Thanks so much for that.

Now, it's almost 12 hours since we heard that the Duchess of Cambridge was in labor. We'll be back in the British capital with the latest after this short break.

(COMMERCIAL BREAK)

DOS SANTOS: Hello and welcome back. I'm Nina dos Santos. These are the main headlines that we're following for you on CNN this hour.

Egyptian state media says that one person was killed in clashes near Cairo's Tahrir Square. Witnesses say that supporters and opponents of the ousted president, Mohammed Morsy, began fighting earlier today. Several injuries were reported.

China's Shenhua news agency says that the death toll is now 89 after a strong earthquake in the northwestern part of the country. Rescue teams are being sent to the affected region in Gansu province, but their efforts could be slowed by rainy weather in the area.

The E.U. has agreed to list the military wing of Hezbollah as a terrorist organization, according to a European diplomat. The U.S. and Israel already categorize the Lebanese Shiite group as terrorists. Its fighters recently excited with the Syrian president in the country's bloody civil war.

And it's almost exactly 12 hours since Kensington Palace told us that the Duchess of Cambridge was going into labor. Catherine is about to give birth to her first child with William, the Duke of Cambridge. Their child will be third in line to the British throne.

Finally, Nelson Mandela is showing what's being said as sustained improvement according to South Africa's presidential office. He remains in critical condition in a Pretoria hospital where he's been since early June. President Jacob Zuma paid a visit to Mandela just a few hours ago.

(MUSIC PLAYING)

DOS SANTOS: Well, for the more observant of you out there, you've probably noticed that today QUEST MEANS BUSINESS is coming to you live from Atlanta. But over in London, where we're normally broadcasting from, everybody's waiting with their eyes firmly fixed on St. Mary's Hospital in London because that's where the Duchess of Cambridge remains in labor with her first child.

Let's go over to Becky Anderson, who's live at Buckingham Palace with the latest.

Becky?

BECKY ANDERSON, CNN HOST: Yes, she is, Nina, and live with a chalkboard here, and Rory Scott (ph), who is with Patty Power (ph), the bookmaking company, this is probably a first, that a bookmaker has set his stall out in front of Buckingham Palace. I hope this isn't a treasonable offense.

As we kick our heels awaiting confirmation that the Duchess of Cambridge has indeed given birth and we are something like 11 or 12 -- sorry, more than 12 hours, nearly 14 hours into the period of labor.

Now the bookmakers are still taking bets on what the royal baby will be named, girl or boy.

Rory (ph), whiz me through what we've got.

RORY SCOTT, BOOKMAKER: We are, indeed, royal baby betting is booming; money is pouring in by the pramload. We've taken 50,000 pounds today alone as pushed the --

ANDERSON: Eighty thousand dollars today alone?

SCOTT: Yes, that's pushed the total market past half a million dollars. It's bonkers. I think we've all got sunstroke.

Alexandra has been the consistent front-runner on the girl front, the Queen's middle name; we all know that by now. Name of Princess Alexandra, Prince William's godmother; Victoria 5:1 favorite. It's been very well backed recently. Charlotte, old pippersville (ph) name, has been pushed out. Pocahontas, 500:1, not quite sure if that will come in.

ANDERSON: Pocahontas? Anybody -- what the point of (inaudible) bet on for a quid, thinking you might win 500 -- really, (inaudible).

SCOTT: It'll pay for the summer holidays. We'll have to wait and see.

ANDERSON: Go on, (inaudible).

SCOTT: On the boy front, George, the regal George obviously; James, name of Kate's brother; Alexander's been very, very well backed recently. It was 25:1 a couple of days ago, into 14:1 as is Henry, Harry's name, obviously. Hashtag, another dummy name, 500:1. Who knows.

ANDERSON: The senior producer in Atlanta who tells me she's looking at Alexander, and I think Victoria. She tells me to bet on (inaudible) got my purse out when we finish. And if she wins, she says I can get half the money. I'm not a betting woman myself, of course.

How much interest has there been in these bets?

SCOTT: Crazy amounts. I mean, the Windsor's our longest running reality show. It's been rattling on for 90 years.

ANDERSON: Because it's not just names.

SCOTT: It's not just names. Boy or girl, Cancer or Leo. Is Kate too posh to push? Who's going to be holding the baby outside the hospital? Which magazine will have the first pictures? Will the baby, if you're a patient punter, will the baby represent Team GB in the Olympics? Will it be a journalist? Will it be a bookmaker? (Inaudible) work in charity? Will it go to St. Andrews, where mother and father met obviously? So there's a whole plethora of bets.

ANDERSON: Excellent stuff. Well, that's as things stand at the moment. Royal baby girl or boy, neither of which we know at the moment. We are awaiting not a bookmaker's easel, but a gold easel outside of the Buckingham Palace in the hours to come, which is the first time that we will have official confirmation of course of the baby's gender, of its weight and of its time of birth.

Rory, thank you very much indeed. And I'll get my money out shortly.

Before I go tonight, a royal riddle for you.

Which financial institution was conceived on what may be the birthday of the new royal baby? Was it the World Bank, the European Central Bank, or the African Development Bank? I'll have the answer for you later on this show.

Nina?

DOS SANTOS: Gosh, Princess Pocahontas, His Highness Hashtag, always interesting stuff from those guys of Hoody Power (ph) because I distinctly remember when covering the royal wedding, they haps offered people the chance to put a bet on whether corgi would be on the menu at the royal breakfast reception.

Anyway, QUEST MEANS BUSINESS is coming up after the break. Do stay tuned.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

DOS SANTOS: Hello and welcome back. Well, Britain's prime minister is upping the pressure on Internet search companies as part of a crusade against illegal and violent pornography. David Cameron wants firms like Google, Microsoft and Yahoo! to blacklist key search terms specifically for child abuse images by October.

If they fail to do so, they could face new tough, stringent laws. Countries right around the world already are using different approaches to fight child pornography. Let's take the United States for instance. Over there, the law requires Internet search providers to notify the National Center for Exploited Children if they discover a violation. The center's (inaudible) the tipline has received more than 1.7 million reports of suspected child sexual exploitation total since it was launched some 15 years ago.

Across the European Union, and also in Russia, a coalition of child protection hotlines dealt with more than 420,000 reports of illegal content in just 2012 alone. And on the other side of the planet in Australia, federal police in the country's Communications Authority signed a new agreement in February to try and combat the flow of child abuse material on the Internet.

The British prime minister says that Internet search companies have a moral duty to tackle child abuse images.

Here's Dan Rivers with more.

(BEGIN VIDEOTAPE)

DAN RIVERS, CNN CORRESPONDENT (voice-over): While the Internet has been a catalyst for untold progress, it has also become an outlet for horrendous images of child abuse and violent pornography.

Now the British Prime Minister David Cameron has decided to take a stand, promising a crackdown to protect children.

DAVID CAMERON, PRIME MINISTER, GREAT BRITAIN: Now the first challenge is criminal, and that is the proliferation and accessibility of child abuse images on the Internet. People always talk about that (inaudible).

The second challenge is cultural, the fact that many children are viewing online pornography and other damaging material at a very young age and that the nature of that pornography is so extreme it is distorting their view of sex and relationships.

RIVERS (voice-over): On Monday, he met parents concerned about what their children can access online with promises to improve controls.

These will include new Internet customers being asked specifically to opt-in to allow their household to access pornography. Existing customers will be asked whether they wish to turn on filters controlling such content. And public wi-fi will soon ban access to pornography in the U.K.

The new plan will also include an online photo database of children thought to be at risk of abuse in the U.K. to help catch perpetrators.

Peter Davies heads Britain's Child Exploitation and Online Protection Center and welcomes the measures.

PETER DAVIES, CEO, CEOP: I've never met anybody who felt that allowing children to be sexually abused was a price worth paying for some kind of ultimate form of freedom of speech. That doesn't apply in the real world; shouldn't apply on the Internet.

RIVERS (voice-over): But something censoring the Internet won't work.

JIM KILLIAN, ONLINE RIGHTS ORGANISATION: If we have default filters, then the chances are some parents will think, great. The problem's fixed. I don't have to talk to my children and I don't have to worry about what content is on the Internet. And the fact is, that won't actually be true.

RIVERS: David Cameron's crews say it is a bit of a gamble. His critics will say inevitably there will be loopholes and it won't work in practice. And besides, more should be done to help the victims of online child abuse. But it has won the backing of several influential newspapers like the "Daily Mail," which has long campaigned for the U.K. to take a lead against the porn industry.

RIVERS (voice-over): It's all, no doubt, a relief for parents like these. The question is, will it work in cutting down on online child abuse and ensuring children aren't exposed to violent sexual imagery online? Dan Rivers, CNN, London.

(END VIDEOTAPE)

DOS SANTOS: Let's get an update on the state of the weather forecast for you out there. Tom Sater is at the CNN International Weather Center.

Tom?

TOM SATER, AMS METEOROLOGIST: Well, Nina, first of all, welcome to Atlanta, the world headquarters here. I see you've left the heat behind back in London.

DOS SANTOS: And brought the rain.

SATER: Yes, well, to make it more like home.

There were 400 millimeters above average in Atlanta. But let's talk about the heat and what you left behind.

The hottest day of the year so far today, 33.5 degrees. It's the hottest since the 19th of July in 2006. You've been above average since the 4th; the longest hot spell.

Now to give you an idea of what 2006 was like, so far for this month of July, we've had five days in London that have been 30 degrees or higher. However, the hot spell in 2006 for the month of July alone, 13 days, big difference. Nowhere close to 2003; that was a deadly heat wave. It was tragic across all of Europe, some 70,000 lives were lost.

But it could be one of the driest in history. You've had overall about 4 millimeters. The record is 8. But we have some rain on the way, which is good news for Paris. You hit 34 degrees. London as mentioned, 33; Brussels, you're in on the heat. This is 10 degrees warmer than average and the heat continues.

Paris, you're doing everything you can. You're doing the right things. You're outside. You're finding the little misters. They brought in 5,000 tons of sand, make it more beachy, of course right on the Seine River. Unfortunately, I think we're going to find here is the heat's going to continue from areas of central Spain right up across France and into Germany. I mean, obviously even Berlin, currently at 30 degrees. It has dropped at only 29 in London.

Let's talk about the forecast, because rain plays a critical role in dropping the expected high temperature. Although you're still going to be above average by 3 degrees, the heat will continue in some areas, still upper 20 in Brussels, Paris, you're still back into the low 30s on Thursday.

A little dip in the jet stream. We have an area of low pressure; it's not a powerful area of low pressure. It's an upper level disturbance. So I think it's going to spin out here for a while. Nothing tremendous, slides across the entire areas of the west. But we have prefrontal thunderstorms that have been developing in parts of France. We've seen it even down in Corsica, in Sardinia as well.

Here's the frontal system right now. This is good, cloud cover, kind of keeps things a little bit cooler in parts of Portugal and Spain. But even the next 48 hours we're not seeing a tremendous amount of rainfall with this. In fact, we can take a look at the next 48 and what we could see, everything's the bottom of the scale, but still a centimeter is a centimeter. And that is beneficial. But it looks it could be one of the driest that we've seen in some time.

In fact, if you include parts of Wales and England, your modern-day records go back to 1910. But it could be one of the driest since 1825. Here, this is a current look, radar picture; we have tremendous thunderstorms off into areas of France, off toward the west. We definitely have hail most likely and possibly some damaging winds.

But the temperatures have been the bigger story. As you take a look at your Tuesday, Bucharest, you're at 32; Istanbul, 30; Kiev, not too bad at 18 degrees. But again, it's the heat, and of course waiting off course with a baby, as you know, Nina, nothing like being pregnant for the hottest day of the year. (Inaudible) but at least she's indoors.

DOS SANTOS: Yes, it seems as though the Duchess of Cambridge has drawn the short straw on that one. But for all the thousands of media around the world waiting outside the hospital --

SATER: For weeks.

DOS SANTOS: -- perhaps it's good for them.

SATER: Right.

DOS SANTOS: Tom Sater there, joining us from the CNN International Weather Center. Thanks so much.

So as Tom was just saying, the world has been waiting for the first child of Prince William and his wife, Catherine, the Duchess of Cambridge. Well, it's not certain that either a boy or a girl could inherit the crown. There's another title that could be out of reach for a daughter. Find out which one straight ahead.

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DOS SANTOS: The royal baby will be third in line to the throne regardless of its gender. But it will only be able to claim another key title if it's a boy. If the eldest of Prince William and his wife, Catherine, the Duchess of Cambridge, is a girl, she won't be able to claim the lucrative Duchy of Cornwall. That's the estate currently held by Prince Charles, the Prince of Wales, and the rules governing the 700-year- old duchy have not changed, despite the fact that the old rule succession laws may have been altered.

Let's bring in Max Foster to explain all. He's outside St. Mary's Hospital in Paddington, Central London, where the Duchess of Cambridge has been in labor for several hours.

Now, Max, obviously, it sounds premature to talk about succession without knowing whether the baby's been born or not.

What's the latest where you are?

MAX FOSTER, CNN HOST: Well, you know, there's just a huge media presence and a lot of anticipation. We know that she's in there. She's been in labor for well over 10 hours now. So the baby could have been born. We could be at that point now where the prime minister and Queen and senior figures from around the commonwealth are being informed.

We don't know because we're going to find out after all of those people are informed. We'll get a strong hint that baby's been born when the press secretary comes out on the doorstep with a note of paper that -- which then goes on to Buckingham Palace.

But around us, very big crowds, gradually developing because this is, Nina, a moment of British history of course. You know, this is the future heir to the throne. And there is an opportunity here to see that heir, a future king or queen, for the very first time. And as you say, the rules are changing to allow succession to apply to the firstborn child whether or not it's a boy or a girl. In the past, it was a very sexist rule.

And in terms of the Duchy of Cornwall, this is a crucial sort of thing, really, because Prince Charles' whole income, all his public work, is paid for by the Duchy of Cornwall, which is an estate worth more than a billion dollars; includes much of the coastline of the U.K., prime parts of London as well. And it basically pays for not just him and Camilla, but also Kate, William and Harry.

And one day William will inherit that. And after that, his firstborn should also inherit it, but the rules have to change there because at the moment, still, that's outdated. You have to change the system to allow the firstborn child to take it on otherwise you could have a situation where there's a queen in waiting, as it were, and she would have the income to be able to do her job.

But more crucially is the succession of the throne. And Tom Foreman and I take you through now where we are in that process. It's pretty complex, but we'll try to make it simple.

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TOM FOREMAN, CNN CORRESPONDENT: The Queen is the only head of the royal family that most of us have ever known. And yet as a woman in this role, Max, she is unusual.

FOSTER: Well, she was the oldest child. But there was two girls, so she went on to become monarch. But if she'd had a younger brother, then he would have become king and she would have been passed by.

FOREMAN: And that was sort of the natural progression and would be with her children, the boys would rule.

FOSTER: Oldest boy is Prince Charles; he'll go on to become monarch.

But it's seen as fair because he's the oldest child anyway.

FOREMAN: Same thing applies to the next one?

FOSTER: Absolutely; William, oldest child, boy; will go on to become king.

FOREMAN: And now comes the puzzle, though, because the child is coming along, a baby could be a boy, could be a girl. And times have changed.

FOSTER: Absolutely. I mean, the general feeling is that whether it's a boy or a girl, the oldest child should just go on to become monarch. At the moment, it's the boy who will take precedence. And it's seen as unfair.

FOREMAN: So people are talking about a rule change. And that means an entirely new venue. So we wind up over here in the House of Lords, where, Max, some very special legislation has been in the works.

FOSTER: This is the Succession to the Crown Bill. It was rushed through Parliament. It states that succession to the crown no longer depends on gender. Up until now the eldest son would go on to become king, whether or not they had a more capable, older sister.

In future, the plan is that the oldest child, whether or not they're a boy or a girl, will become monarch.

FOREMAN: But it's not as simple as all that, is it? Because there have been thousands of laws promulgated in this country for many, many, many years.

FOSTER: And for centuries, they've really assumed this sexism.

Take, for example, this: the Treason Act, 1351, and it states that it is treason to kill the king's son and heir. That's had to be changed to eldest child and heir. It's the example of the type of thing they've had to change. And it's been very complicated. But they have managed to do it, at least in the U.K.

FOREMAN: And just to make it a little more complicated, think about this: this is a country that has enormous influence and scope all around the globe. And how is that going to play out, Max?

FOSTER: Well, the British monarch is also head of state in 15 other countries around the world. You can see them marked in yellow on here. And they all have to legislature for this rule to come into force. And most of them have managed to do it, but we're still waiting on Australia; they probably won't get 'round to it until after the birth. But we do know that this rule will be backdated. So it will affect this baby.

FOREMAN: An awfully big fuss in any event over a very little baby.

(END VIDEOTAPE)

DOS SANTOS: Well, there you go, an awfully big fuss, but of course, it's an awfully long wait as well for the mother-to-be, the Duchess of Cambridge, who, as we were saying before, has been in labor for several hours at St. Mary's Hospital in central London.

Well, this baby has just over four hours left to share its birthday with one of the most important institutions in the world of international finance no less. Forget about the English throne. The answer to tonight's royal riddle is next after this.

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DOS SANTOS: Hello and welcome back. Well, as promised, let's get the answer to tonight's much anticipated royal riddle with Becky Anderson at Buckingham Palace.

I'm sure the suspense has been killing you about this one. But really, it's the royal baby (inaudible).

(LAUGHTER)

ANDERSON: That's right. Let me tell you the answer to tonight's royal riddle. And the answer is the World Bank. This would be if, indeed, the baby is born today, July the 22nd, because the Royal Bank -- sorry, the -- Royal Bank -- the World Bank was conceived on this day in 1944, along with the International Monetary Fund, of course, or the IMF, at a conference in Britton Woods (ph) in New Hampshire. The idea was to build a framework for economic cooperation and development, which still stand today. So history is being made again, possibly, on this day, although we have heard nothing from the palace at this point. It is nearly 8 o'clock, which means the Duchess of Cornwall -- the Duchess of Cambridge has been in labor for some 14 hours. We do wish her the best. Much anticipation.

DOS SANTOS: Yes, we certainly do, even on this side of the Atlantic, there's plenty of anticipation as well. Becky Anderson there, live on the other side of the pond in Buckingham Palace.

And that's it for this edition of QUEST MEANS BUSINESS. I'm Nina dos Santos at the CNN Center in Atlanta. Thanks for watching. I'll be back for the full recap of your headlines (inaudible).

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DOS SANTOS (voice-over): You're watching CNN. These are the latest headlines this hour.

China's Shenhua news agency says that 89 people have died following a strong earthquake in the northwestern part of the country. Rescue teams are being sent to the affected region in Gansu province, but their efforts could be hampered by rain in that area.

Violence has flared in Egypt's capital, Cairo, between supporters and opponents of the ousted president, Mohammed Morsy. At least one person has been killed. A witness told CNN that a gunman opened fire into the crowd which had gathered in Tahrir Square with an automatic weapon.

The pope has arrived in Brazil just recently. The 76-year-old Argentine pontiff is paying his first official visit to the home of the world's largest Catholic population. Pope Francis will be taking part in the world's youth day over there, a week-long celebration aimed at revitalizing the faith among young people around the world. It is his first foreign trip as pope.

And Catherine, the Duchess of Cambridge, is in labor with her first child. The Duchess was taken to a London hospital at 7:30 in the morning London time. That's 'round about 12 hours ago. The child will become third in line to the British throne whether or not it's a girl or a boy.

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DOS SANTOS: Well, that's a look at some of the stories that we're watching for you here at CNN. "AMANPOUR" is live from Buckingham Palace next.

END