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Early Start with John Berman and Zoraida Sambolin

World Markets Rattled; Oil Prices at 2009 Levels; White House Gives Biden Blessing to Run; Bush on the Border; Tensions Defused Between North and South Korea. Aired 4:30-5a ET

Aired August 25, 2015 - 04:30   ET

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

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[04:30:14] CHRISTINE ROMANS, CNN ANCHOR: Markets around the world rattled this morning. China's stocks plunging overnight following the Dow's epic one-day drop, 1,000 points in ten minutes.

Will markets slide or will they find stable ground? Live team coverage breaking down our big story begins right now.

ALISON KOSIK, CNN ANCHOR: And welcome back to EARLY START. I'm Alison Kosik.

ROMANS: What a day. What a day. I'm Christine Romans. I'm so glad you are here.

Thirty minutes past the hour.

All eyes on the stock market this morning after yesterday's devastating plunge. The Dow sinking more than 1,000 points at the open, the largest-point loss ever during a trading day.

Stocks recovered some before closing down almost 600 points. Investors in a panic, selling riskier assets like stocks and commodities moving into safe havens like government bonds, trading the heaviest in four years. And some of America's most widely held stocks were frenzied in their trading.

Bank of America, Apple, General Electric, Microsoft seeing the most action. Now, today, today, U.S. stocks look ready for a comeback. U.S. stock futures are up significant Dow futures up 3 percent. European stocks are rallying.

It's s not the case, though, where the selloff started. The sell-off started in Asia, it is there where the selling continues. Look at Shanghai's benchmark index down almost 8 percent for the second day in a row. The index has fallen more than 40 percent since June, wiping out trillions of dollars in value and rattling global markets.

Now, fears about weakness in China's economy, sending investors around the globe into panic mode, sinking oil prices and other commodities. I want to bring in Andrew Stevens in Hong Kong. He is watching Asia markets. Now, Andrew, two very different stories here today. I'm watching European stocks rally. I'm watching U.S. stocks futures perk up, but the selloff continued in Asia.

ANDREW STEVENS, CNN CORRESPONDENT: Yes, good morning, Christine. Absolutely, the selloff continued in Asia. But it was much more of a selective selloff. That is important to notice. It was Shanghai's bigger fall today than yesterday, 7.6 percent versus 8.5 percent. There are colossal numbers and no doubt panic ruling in Shanghai.

Japan also down today. That was a big fall in Japan and surprisingly big fall considering if you look around the rest of the region, particularly Hong Kong, it was up today. And Hong Kong has so much obviously exposure to mainland China.

The Australia market was up, but Seoul was up, but Tokyo is still down. The fear there is that is there a global slowdown in Japan is a big exporter would be hit by that. Obviously, but what we are seeing, Christine, this is becoming confined once again to Shanghai and the Shanghai composite index, specifically.

Investors there are being burned badly. They are not reacting specifically to bad news from the Chinese economy. There is a big disconnect with what happens in the markets in Shanghai and what happens in the real economy. They are being burnt. There's no sign of government intervention, which suggests this selloff will continue.

ROMANS: Let me ask you, Andrew, a lot of discussion of what kind of pressure this puts on the United States and the Federal Reserve in particular. The independent monetary policy setting body that a lot of people thought was going to start to raise interest rates very soon, a signal that the U.S. economy is now normal.

What are the rumblings about whether the Federal Reserve might -- has stepped back and allowed the China's story to play out before it raises rates?

STEVENS: The overwhelming majority in this part of the world is that the Fed will stay on hold on this, Christine. There's just not enough upside for Janet Yellen to pull the trigger yet, given that China is the world's second biggest economy. It is such a key export market for the U.S., for Europe, obviously for other economies in Asia, for Japan. I mean, all these -- every country in the world exports and many of them export significantly to China.

Yes, there is a slowdown in China. There's not a lot of clarity as to how bad it is at the moment. Not as bad as the numbers last week. That's what most economists tell me. But it's still saying nonetheless, there is no hurry for Janet Yellen to pull the trigger. That's coming in from this end as (INAUDIBLE) on hold. And, you know, anything to get rid of some of this uncertainty can only be a good thing.

ROMANS: Andrew Stevens for us this morning. A lot of the brokerage notes and analysts this morning are noting that the U.S. economy is growing. The U.S. economy is doing well. But Will the fed be ready to raise rates? Not so sure.

Andrew Stevens, thank you so much for that.

KOSIK: All right. So, China's economy and financial situation is a huge cause of market panic. Another contributor, oil prices. They are bouncing back a bit this morning, but they're still below $40 for the first time since 2009, in the middle of a global meltdown. And that's because supply continues to boom while slowing growth in Asia and elsewhere hits demand.

[04:35:04] So, I want to bring in CNN's John Defterios. He's in Abu Dhabi.

And, John, let me ask you this, because you look at what happened yesterday and we look at where we are today. Nothing has really changed, but we're seeing this bit of a bounce back in oil prices. What's happened here and where do you think oil prices are headed now?

JOHN DEFTERIOS, CNN CORRESPONDENT: A slight comeback on oil prices. It's interesting that the sellers took her hands off the buttons today, with the exception of China and Japan. This will provide some relief to the oil market.

But I think, Alison, the downward pressure will continue. This will provide relief for those at the gas pump in the United States. But it will cause dislocation very likely in the Dakotas, Oklahoma and Texas. And I'll tell you why -- we have almost a perfect storm playing out here in the energy market. We basically were spoiled by Chinese demand with 9 percent to 10 percent growth sucking in all of the oil that anybody can produce.

To give you a sense of that, daily demand for oil is 90 million barrels, just above. China takes in 10 million barrels of that. So, China slows down and Japan slows down, this will keep pressure on prices. But at the same time, we have the global fight for market share lead by Saudi Arabia starting in November of last year at the OPEC meeting. Russia, 10 million barrels a day. And the shale producers in the United States are very resilient.

So, jobs are being cut and rigs are going down, but production is very held steady. This will keep pressure down on prices and in fact, Citigroup put out a note with prices around $39 a barrel today, we could see $32.50 a barrel before the end of 2015. That's how nasty it's getting because of the slowdown in China and this rise in production worldwide in this fight that we see by Saudi Arabia.

KOSIK: As we see this pressure, what do you think? Can we draw any parallels to the 2009 financial crisis or the 1998-1999 Asian crisis? What do you think? Is this a big concern?

DEFTERIOS: I think we should start looking into that concern. And I'll tell you why.

We have seen $1 trillion come from the emerging markets in the last 13 months. You have to go back to 2008-2009 to see that. The emerging markets were drivers of global growth. They just grew 3 1/2 percent this year.

At the same time, oil has gone down. So, has a full range of commodities which have dropped 17 percent in price since the start of the year and are in a bear market in the last 12 months.

So, this will put a lot of pressure on economies in Southeast Asia, Africa, and Latin America. This will hurt the U.S. exporters and it will be a drag on growth. It's not the 1998-1999 Asian crisis.

But we have to keep an eye on it, because their currencies are falling and the capitals leading the economies with the concern of the U.S. Federal Reserve may raise rates. It's on the edge right now. I think that's the best way to describe it.

KOSIK: And it certainly is. John Defterios, live from Abu Dhabi, thanks.

ROMANS: The presidential candidates have plenty of opinions when it comes to the cause of the global market slide. Republicans blaming everything from the Federal Reserve and Wall Street elites, to President Obama's spending policies.

Here is GOP frontrunner Donald Trump sounding a warning we've heard from him before.

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[04:05:03] DONALD TRUMP (R), 2016 PRESIDENTIAL CANDIDATE: I have been telling everybody for a long time, China is taking our jobs, they're taking our money. Be careful. They will bring us down. You have to know what you are doing. We have nobody that has a clue.

(END VIDEO CLIP)

ROMANS: Former Hewlett Packard CEO Carly Fiorina blames the market slide on the Federal Reserve for its easy money policies. And New Jersey Governor Chris Christie insists it's the Obama's administration's fault for borrowing and spending too much.

Wisconsin Governor Scott Walker taking matters a step further, he wants a strong message sent to China.

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GOV. SCOTT WALKER (R-WI), PRESIDENTIAL CANDIDATE: I call on the president of the United States to cancel the state visit he is providing for the head of China, Xi Jinping. Why? Because to me, not just because of what they recently done to devalue their currency, because of what they're not doing when it comes to upholding those very values. Why would we give that state visit to a country that doesn't share our values and our allegiances?

I call on others to ask for the president of the United States to say we're not going to have that state visit.

(END VIDEO CLIP) ROMANS: On the Democratic side, this tweet from Bernie Sanders. He says, "We need banks that invest in the job creating economy. We don't need more speculation with the American economy hanging in the balance."

So far, no comment on market jitters from Jeb Bush or Hillary Clinton.

The intrigue building on Capitol Hill as Joe Biden ponders a run for the White House. The vice president scheduled to meet with Democratic fund-raisers after Labor Day. Another sign he is serious about challenging Hillary Clinton for the Democratic nomination.

We get more from CNN senior Washington correspondent Joe Johns.

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JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: After the White House lunch with President Obama on Monday, the buzz about the vice president's long exploration of his campaign options picked up in tempo after White House Press Secretary Josh Earnest seemingly went out of his way to praise Biden.

[04:40:00] JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: The president has indicated his view that the decision he made I guess seven years ago now, to add Joe Biden to the ticket as his running mate was the smartest move he ever made. And I think that should give +you some sense of the president's view of Vice President Biden's aptitude for the top job.

JOHNS: The vice president himself making a series of moves behind the scenes, including scheduling more meetings with supporters and donors. And just last night, meeting with key former Obama officials at his residence at the U.S. Naval Observatory. The official message from the vice president's office is that he has not made a decision about running for president in any speculation to the contrary is false. Still, a Democratic source telling CNN, the vice president is leaning more toward running than not running.

One plan that's been discussed if Biden decides to take the plunge is to have him announce his intentions the first week of October and the run-up to the first Democratic debate. Biden has also been making a few subtle moves that only add to speculation that he just brought on Kate Bedingfield, a veteran message manager who has worked at the White House and Motion Picture Association of America, as well as in John Edwards campaign in 2008.

And Biden met over the weekend with Democratic Senator Elizabeth Warren, whose endorsement as a favorite of progressives would be very useful for another seeking the nomination.

(END VIDEOTAPE)

KOSISK: Joe Johns, thanks for that.

ROMANS: It's going to be interesting.

KOSIK: It is turning out to be an interesting political season. Interesting for one.

ROMANS: That's right.

KOSIK: All right. New information this morning about the suspect in the Paris train attack taken down by hero passengers. What we're learning about the alleged gunman, next.

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[04:45:23] ROMANS: Anti-terror police have until tonight to finish questioning Ayoub el Khazzani. The suspected gunman who was prevented from pulling off a massacre on the high speed train in France. El Khazzani was not known to U.S. authorities and could have easily enter the U.S. by air, raising new concerns about train safety here on American soil and across Europe.

I want to go to Paris and bring in CNN senior European correspondent Jim Bittermann.

Good morning, Jim.

JIM BITTERMANN, CNN SENIOR EUROPEAN CORRESPONDENT: Good morning, Christine.

That question of safety is on a lot of people's minds this morning after what was a very lucky break on Friday when the three Americans stopped El Khazzani from committing some kind of terrorist act on board that train. We are waiting to hear what the prosecutor has to say. What kind of charges are going to be leveled against him.

Under French legal procedure, they can question him for 96 hours without bringing any kind of charge. At that point, they have to make the decision to let him go, which is not going to happen, or charge him with something. So, we'll probably know later in the day what the charges against him will be.

But the question of safety is something that is on everybody's mind, because there are thousands of train stations in this country, millions of people each day ride various trains across this country and across Europe, and how do you provide security for everyone? It's a problematic question for the authorities -- Christine.

ROMANS: It sure. All right. Jim Bittermann for us this morning on a beautiful morning in Paris -- thank you for that, Jim.

KOSIK: Sweeping changes in store for the municipal court system in Ferguson, Missouri. Among the most significant, a judge ordering all arrest warrants issued before January 1st, 2015, voided. The reforms are part of an effort to build trust in the police and court system in Ferguson after the Justice Department found both discriminated against African-Americans.

ROMANS: The racing world is mourning the death of indie car driver Justin Wilson this morning. Wilson was struck in the head by a piece of debris, a nose cone from a crashing car during an event at Pocono Raceway on Sunday. Wilson was airlifted to a hospital in a coma. He died from his injuries Monday. He was 37 years old.

KOSIK: So sad.

ROMANS: North and South Korea reaching a deal to avert war, but will the peace last? We're live after the break.

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[04:51:22] KOSIK: North and South Korea agreeing to ease escalating tensions. The North declaring its willingness to express regret for the recent provocations, while the South will turn off the loud speakers that have been blaring messages mocking Kim Jong-un.

Let's get the latest from CNN's Kathy Novak live from Seoul.

So, it seems they were able to find common ground here, but for how long?

KATHY NOVAK, CNN CORRESPONDENT: Well, that is the question, Alison. Those immediate tensions seemed to have been ease. And it was a situation that the United States and South Korea were taking very seriously.

We saw North Korea doubling its frontline artillery. We saw 70 percent of the submarines away from the bases. And we are hearing from the U.S. intelligence there was a possibility that North Korea was planning a Scud missile launch. So, these threats were being taken seriously and those tensions really needed to be eased. Everyone needed to step back, and that seems to be now what has happened.

Both sides are able to say to a certain extent they got what they wanted. Crucially, the propaganda broadcasts are off. They are not being broadcast across the border any more. In change, what South Korea gets is expression of regret from North Korea over landmine explosions that badly injured two of its soldiers.

But North Korea was able to frame this in a way that it didn't necessarily have to take responsibility for planting those land mines. It hasn't exactly apologized, but it has significantly expressed regret. South Korea is taking that as an apology. So, everyone can go back calm down a bit. But what we know is that it's still a tense time of year. The U.S. and South Korea joint military drills are still ongoing. So, everyone will be watching watch to see if everyone does step back and tensions really do properly ease, Alison.

KOSIK: All right. Everybody on edge.

Kathy Novak from Seoul, thanks so much.

ROMANS: All right. Also still on edge here, frankly, because it was an ugly day. Stocks crumbled 1,000 points in just ten minutes.

KOSIK: Jaw-dropping.

ROMANS: Something we've never seen before. Closing 600 points lower. The Federal Reserve is watching -- something that matters everyone, next.

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ROMANS: Good morning. Welcome back. I'm Christine Romans. Let's get an early start on your money this morning.

Another ugly day in Asian markets. Shanghai's benchmark index down almost 8 percent for the second day in a row, crashing now more than 40 percent since June, wiping out trillions of dollars in value and rattling global markets.

But in Europe, stocks are bouncing back. And U.S. stocks also look ready to climb at the open. Look at Dow futures, up almost 3 percent. Welcome relief from yesterday.

The Dow plunged more than 1,000 points in the first ten minutes of trading. That is the largest point lost ever during a trading day. And then they recovered. At one point, bouncing from the bottom some 800 points. Some stocks even turned positive, and then the close down almost 600 points.

Yesterday was the heaviest trading volume in almost four years and some of the widely held stocks saw a lot of action. Bank of America, the most heavily traded. It ended the day down 5 percent. Apple saw three times the typical amount of trade. General Electric, Microsoft, Intel, all wildly bought and sold.

The big question this morning, what now? What the selloff means for the looming Federal Reserve interest rate hike? A few weeks ago, a September hike seems almost certain, but now thanks to China's market crash and concerns, the first interest rate hike in almost a decade may happen in December, even March. Yesterday, Atlanta Fed President Dennis Lockhart, someone who votes on whether and when to raise interest rates said the rate hike will still happen sometime this year.

KOSIK: Everyone placing bets on when and if.

ROMANS: Absolutely.

KOSIK: All right. EARLY START continuing right now.

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ROMANS: Breaking overnight: China's markets plunge again after the Dow horror show yesterday, down 1,000 points in 10 minutes. Will stocks continue to slide or will they find stable footing? Live team coverage breaking it all down, ahead.

KOSIK: Joe Biden could be one step closer to entering the presidential race with new words of encouragement from the White House.

ROMANS: Jeb Bush campaigning on the border, suspending his immigration policy. But he may have found himself wading into new controversy this morning. KOSIK: Good morning and welcome to EARLY START. I'm Alison Kosik.

ROMANS: I'm Christine Romans. It is Tuesday, August 25th, 5:00 a.m. in the East.

Let's start with markets, shall we, because yesterday was horrific. A devastating plunge for the Dow Jones Industrial Average, down more than 1,000 points in the first 10 minutes, the largest-point loss ever in a trading day. Stocks recovered some. At one point, the Dow was only down 102 points. Stocks were actually higher and then, by the close, down almost 600 points.