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FIRST MOVE WITH JULIA CHATTERLEY

Trade Tweets And Rate Cuts Making It A Pretty Choppy Ride For Investors; The Ride Hailing App Shares Soaring Premarket After An Earnings Beat; Alarming New Report On Climate Change. Aired 9-10a ET

Aired August 8, 2019 - 09:00   ET

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


JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE, and here's your needs

to know.

Buckle up. Trade tweets and rate cuts making it a pretty choppy ride for investors. Lift off: The ride hailing app shares soaring premarket after

an earnings beat. And eat less meat. Just one key takeaway from an alarming new report on climate change. It's Thursday, let's make a move.

Welcome once again to FIRST MOVE where we are gauging the first move for U.S. stocks this morning on what's going on with China's currency and where

current bond yields sit, and I'm not joking either.

These feel like the key drivers right now, if you take a look at what we're seeing, futures are higher after what was one heck of a roller coaster

session. Let's call it that yesterday. Tech right now, is outperforming what we saw yesterday, at the end of the session was stocks unchanged.

They clawed back losses of one percent or more after a dramatic turnaround midway through the session. What happened? The reason bond yields, I

think. We had the U.S. 10-year old rising from multiyear lows and that provided some to support the stock markets.

The U.S. 10-year yield is the current fear gauge, I think for markets. What do I mean? Well, the bond markets around the world are warning us, I

think of a significant slowdown.

This is the point where I argue, are we being too pessimistic? Is there too much of a slow down here baked into the bond market cake. We'll keep

asking the question.

Right now, European stocks are higher adding to gains yesterday, but similar story there. Investors, I feel are watching the bond market and

the signals being sent their -- lower bond prices, higher yields means higher equities.

Over in Asia, Chinese stocks also rising for the first time this week, helped along by a stable to slightly stronger Chinese yuan versus the U.S.

dollar and better than expected trade numbers for the month of July.

Chinese exports rising over three percent year-on-year, and we got another rate cut overnight, too, this time from the Philippines, as its export

driven economy slows to the weakest level in four years.

Bottom line, it's still all about trade. Let's get to the drivers because Matt Egan joins us now. Matt, you and I were talking about this yesterday

during the volatility, you really get the sense that stock market investors right now are watching what's going on in the bond markets and eyeing those

safe havens very closely.

MATT EGAN, CNN BUSINESS LEAD WRITER: That's right, Julia. Calm has returned to global financial markets, for the moment at least. And I think

you're right. I think that stock investors are taking their cues from the bond market.

Just 24 hours ago, it was that really dramatic stampede into Treasuries that seemed to freak everyone out and cause the stock market to drop. Now,

the fact that the 10-year Treasury yield has climbed back above 1.7 percent, after yesterday, collapsing below 1.6 percent briefly, I think has

added to some of this stability.

And the other factor, as you mentioned, is what was going on in China's currency. You know, it seems like just like four years ago, really all

eyes are on China's currency. I think that investors can live with a gradual weakening of the yuan.

In some ways that only makes sense given the trade war and the economic pressure there, but any sign of a sudden devaluation, really spooks

investors, just like it did four years ago. And so that's another source of stability is the fact that overnight, China did fix yuan a little bit

stronger than expected, they also released some better than expected economic numbers. Exports unexpectedly rose in July, imports fell by less

than feared.

Nothing is really all that great there. But again, adding to this sort of sense of stability. And you mentioned that there was another Central Bank

rate cut, the fourth that we've seen, this time from the Philippines. And so that is also adding to a little bit of the more bullish sentiment this

morning -- Julia.

CHATTERLEY: Yes, it's interesting, isn't it? Markets are sending certain signals. Central Banks are saying, "Look, we're going to cut now

preemptively," perhaps to support their economies. The question is, where does this end?

Another big indicator, I think is what's going on in the oil markets falling into a bear market, oil yesterday, we've bounced a bit in the

session today, but there's chatter that perhaps the Saudis are having conversations about doing something here to support prices that have global

implications if we're talking about materially slower growth going forward.

[09:05:11] EGAN: Yes, oil has just gotten clobbered here. Brent finished in a bear market. U.S. oil prices have fallen even deeper into a bear

market that they first joined in June. And all of this is about these worries that the trade war on top of an economic slowdown is going to

deepen this demand problem that oil has.

But oil prices are getting a bit higher. As you can see, WTI, up almost three percent this morning, and that is again on hope of a rescue from

Saudi Arabia, which is kind of like the Central Bank of the energy world.

A Saudi official told Bloomberg that they're not going to stand for an outright collapse in prices, and that they are talking to OPEC officials

about some sort of an unspecified response.

One thing they could do would be to cut oil production. But listen, they've already done that pretty significantly. I think that they'd be

loath to cut production even further and see more ground to U.S. shale oil producers, but they also can't have prices drop too far, either, because

they've got to balance their budget.

At the end of the day, Julia, I do think a lot of this is going to be decided by the trade war, because if the trade war deepens, that's going to

hurt demand for all risk assets. On the other hand, if we get some sort of a relief here, then we can see oil prices rise.

CHATTERLEY: Absolutely. The buck stops here, quite frankly, with the Twitter perhaps and what we hear as far as the trade talks are concerned.

But the good news, of course overnight, is that both sides are still saying that the trade talks in September are going to go ahead so we'll continue

to watch for that. Plenty more headlines, I think in the meantime. Matt Egan, thank you for that.

All right, let's move on to our next driver. Lyft shares up some eight percent premarket right now. The ride hailing company boosting its 2019

outlook. Clare Sebastian joins me now.

Clare, lower losses unexpected, boosting their guidance here. Is the price war with Uber over? Or am I getting a little bit ahead of myself here?

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, it's certainly getting better, Julia. This is about two things. This is about Lyft's own

execution, their ability to grow revenue and bring down costs in a lot of areas. And it's about the industry trend overall. This is something that

we've been watching since both of these companies went public earlier this year. It is the competitive landscape here.

They've both been having to heavily discount, right, essentially subsidized every dollar that they earned to win market share; now, that does seem to

be easing. The CFO on the call today saying we're focused on trying to win on brand preference and experience, not coupon. So that is something that

Wall Street is very much welcoming.

But of course, you know they had expected 2019, this year to be their peak loss year. They now say that that might actually be behind them. They

expect to lose less money this year than they did last year. That again, a big plus for the Street and the broader industry picture here, Julia, is

why we see both Lyft, and in fact Uber up premarket.

Uber reports earnings after the bell. I think the Street will very much be looking for comments there again about how this price pressure, this

discount war is easing in the U.S.

CHATTERLEY: Yes, it's interesting, isn't it? The question is, can both of them raise prices and still get away with making more money? Or is it a

gain for one is damage to the other one here? Obviously, the difference between the two of them is Uber has got a far more global business right

now perhaps?

SEBASTIAN: Yes. Uber, of course, international; Lyft operates just in the U.S. Uber's costs as well are likely to be higher because they're in R&D

heavy areas like restaurants with Uber Eats and then various other kind of moonshot ideas.

Lyft -- was interesting, they did say that they were able to significantly bring down sales and marketing expenses. They were 35 percent of revenue

last year, this year down to about 19 percent in this quarter.

They say that that's partly due to drop in incentives, those coupons as they call them for riders and also just broader execution. They do seem to

be doing better.

And so we see a lot of analysts quite bullish on this, this morning, Julia. But don't be fooled. This is still a two horse race in the U.S. and we are

looking at those growth numbers. Lyft's revenue growth of 72 percent this quarter, far outpacing Uber's in the last quarter of 20 percent. It'll be

interesting to see how they do later in the day.

CHATTERLEY: Yes, one quarter does not a trend make. Watch this space. Clare Sebastian, thank you so much for that.

All right, next driver. Samsung's big reveal, unveiling changes to the Galaxy Note 10 including a change that might perhaps raise some eyebrows

over at Apple.

Samantha Kelly has all the details on this. Now, Samantha I remember when Apple removed the headphone jack from the iPhone 7. Samsung laughed at

them. They poked fun at them. And now they're following suit. Interesting.

SAMANTHA KELLY, CNN BUSINESS EDITOR: Yes, exactly. You might even remember they had an entire ad campaign around this very thing where they

showed people kind of fumbling for their dongles and how upset they were about the news.

But the decision, Samsung said recently that they basically wanted to make more room for the battery. But I think overall, it kind of signals that

people are using more Bluetooth wireless headphones and EarPods.

[09:10:24] KELLY: Apple when they made the decision a few years ago, people were upset. And now the AirPods are one of their more beloved

products.

So I think it's all about change, and people getting used to that. But it is certainly interesting because Samsung was one of the longest holdouts

still having the headphone jack. So it'll be interesting if we'll see this on the Galaxy line, the S line that is expected to come out in February.

CHATTERLEY: Yes, it's fascinating, isn't it? I still get excited about particularly the premium smartphones. We know, we believe that the market

is saturated here. What does get me excited, though, is 5G capable phones and Samsung shortly is going to have two on the market.

The question is, is it time to buy a 5G capable phone? Or do you have to wait for the networks and the technology itself to catch up? What do we

think here?

KELLY: Yes, exactly. Like you mentioned, it's one of the more aggressive brands, especially here in the U.S., with two models now. I've tried it on

a few different networks in different cities. And like you mentioned, it's pretty -- it's spotty. It's incredibly fast, and it will open up so many

different opportunities for the future. But right now, it's inconsistent.

So, I think a lot of people are thinking, you know, "Do I want to buy a 5G phone now? Why don't I just wait until the networks are ready?" But a lot

of people are -- it's taking them longer to upgrade now. Phones are faster, and they hold out a lot longer.

So if you are not going to upgrade for another three or four years and get a 5G phone then, the networks will probably be ready by then and you'll be

behind the curve with using the 5G.

So some people might be interested in kind of getting a 5G phone now. And you know, being a part of that working out the kinks process when it'll

eventually be much faster.

CHATTERLEY: Yes, it's fascinating, isn't it? And that also gives people time to catch up and some of the other makers time to catch up. What was

your sense of this showcase that Samsung provided here today?

You know, I made the point about struggling to get excited about smartphones here. They were clearly playing to an audience here that

wanted to hear the news. What was your -- what was your sense of what they provided here, and how receptive the audience was and will be?

KELLY: Yes, sure. So smartphone sales in general have been kind of down. And Samsung has been one of those players to kind of try to drum up

excitement. They've taken a lot of risks. We've seen that recently with the foldable phone, which had some early problems. So it's trying to

innovate.

There wasn't anything completely out of the box. We saw one of the big things with the Note is the stylus, it now has more sensors. It can kind

of be a remote or like a wand. Some of the stuff can be a little gimmicky.

But you know, I think to your point earlier about 5G, you know, we've had 4G now for 10 years. It's brought us Uber. It's brought us FaceTime, and

now we've kind of reached that capacity, and I think 5G is going to launch us into an entirely different world with services we haven't even thought

of yet.

And that's when the innovation from these other smartphone makers will really start to come into play. So we're sort of just waiting for the

technology to catch up with it. But I think for the most part, it was -- you know, it's still one of the best, smartest, sleekest smartphones out

there. So it really depends what you're looking for.

CHATTERLEY: It does. Samantha Kelly, great job. Thank you so much for that. All right, let me bring you up to speed now with some of the other

headlines that we're following around the world.

Tensions between Pakistan and India is still running high after India's move to assume more direct control over its portion of Kashmir. India is

calling on Pakistan to reconsider its decision to downgrade diplomatic ties.

Japan has approved the first exports of sensitive materials to South Korea since the trade dispute escalated last month. Companies such as Samsung

use them to make computer chips and other high tech products, but Japan is warning it may still expand the list of materials subject to those export

restrictions.

Typhoon Lekima is barreling across the Pacific carrying winds of over 200 kilometers an hour. It is expected to strengthen into a super typhoon.

The island chain stretching from north of Taiwan to southern Japan are expected to be the hardest hit. The storm is forecast to hit southeast in

China, too, with winds of up to 160 kilometers per hour.

A United Nations report warns that the way we `eat farm' and manage land has to change if we are to better control global warming. The

Intergovernmental Panel on Climate Change says consumption ships and population growth have degraded the environment to an unprecedented degree.

Nick cotton ball

The Intergovernmental Panel on Climate Change says consumption-ships and population growth have degraded the environment to an unprecedented degree.

[09:15:10] CHATTERLEY: Nick Paton Walsh joins me now. Nick, I've scanned through the headlines, and the bottom line for me was we simply have to eat

less meat. But walk us through some of the conclusions because they were pretty alarming.

NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, I mean, that's one of them. The reason why everyone talks about meat,

specifically, red meat is because that's kind of the biggest culprit. You have to grow so many crops in order to feed the cows, and also remember to,

the pigs and chickens, they essentially create an essential part of human diet.

And they say that agriculture itself, including land use, deforestation is responsible for about 23 percent of the greenhouse gases created between

2006 and 2017. Food production because remember, you've got to move --

CHATTERLEY: I think we briefly lost you there for a second. We're just going to bring you back in here. Carry on, please.

PATON WALSH: Yes, absolutely. Don't worry. From Central London to Central New York, what could possibly go wrong? So speaking of kind of the

looming collapse of the daily life, as we see it, the third of greenhouse gas is created by a food production.

Well, the good news is that we can potentially modify our diet and maybe reclaim a lot of that. The bad news is that there are a lot of signs

exposed in this report. And remember, this isn't just some activist group out of nowhere telling you you've got to, you know, behave with a hippie

lifestyle. This is the consensus of United Nations experts, all the countries in the world, choosing language they can all agree on. It's the

truth.

And the truth is basically, that half a billion people now live in areas that are affected by desertification. That is essentially soil eroding, so

it can't grow crops anymore. And it shows how the word "cascade" worryingly appears a number of occasions, how the effects that we're

seeing, and you know, people debate whether or not we're seeing records spells of heat and forest fires, et cetera and they may have somehow be

interlinked and rolling with each other to make things worse, faster than we thought.

The report says that we're seeing these moves faster than necessarily we thought we might be. Now as I say, it suggests we can change our

lifestyles, our diets. We can change how we use land and improve that. But it does show, there's been a huge impact on the planet already.

Seventy percent of the land not covered in ice is currently used by humans. That's a startling number.

And while the first IPCC report told us we had to shape up and stop warming above 1.5 degrees centigrade, this says, you've got to rethink what you're

doing right now. If not certainly tomorrow -- Julia.

CHATTERLEY: I couldn't agree more. It's real and we need to talk about it more. Nick, great to have you with us. Thank you so much.

All right, we're going to take a quick break here, but still to come. Chinese shoppers going overboard for Adidas, but if there's a currency war,

what then? The CEO speaks to me about the months ahead.

And the colossal challenge of 5G. Find out how Cisco is rewiring its workforce to face the future. That's all coming up. Stay with CNN.

(COMMERCIAL BREAK)

[09:21:12] CHATTERLEY: Welcome back to FIRST MOVE live from the floor of the New York Stock Exchange this Thursday, and we are looking at a positive

start for U.S. stocks. Who knows though where the session ends, given the volatility that we've seen over the past couple of days? In particular,

stocks plunging early in the session yesterday ending up relatively unchanged, tracking what we were seeing the movements in the bond market.

We've got the 10-year yield right now sitting at 1.76 percent. We clearly need clarity on trade. But for now, it does feel like a to and fro between

stocks and bonds.

Joining us now, Kristina Hooper, Global Market Strategist at Invesco. Always a great to have you on the show. I think making the point that it

does feel like stock investors are watching the bond markets right now, and some of the message is that lower yields are sending about concerns about

the outlook, would you agree?

KRISTINA HOOPER, GLOBAL MARKET STRATEGIST, INVESCO: Absolutely. But I think interestingly, what stock investors are doing is actually taking some

comfort from Central Bank actions, because we know from that playbook, that that's usually a positive for risk assets.

And so even though yields have moved lower, stocks have actually held up fairly well in the last day.

CHATTERLEY: Particularly if it is insurance rate cuts as well rather than real concerns about imminent recession risk, perhaps. And that seems to be

what we're seeing globally now. I mean, plenty of the Asian Central Banks -- the Philippines, India, New Zealand, another example -- rate cuts galore

this week.

HOOPER: Yes, but those are insurance cuts, certainly some fears about a slowdown. But then of course, we've got very good China data today about

their exports, and that is giving markets a reason to keep a sigh of relief.

CHATTERLEY: The other big risk that we were looking at earlier this week, and what I think made people very nervous was the sharp move lower that we

saw, admittedly only one and a half percent, but still for the Chinese currency. How closely are you watching that here just to set the tone?

HOOPER: Oh, I'm watching it very closely. I think what China is doing is flexing its muscle a little bit and reminding us that it has so many tools

in its arsenal, that it is not going to be very eager to use, but it certainly can.

So it's pulled back. It's been very judicious, I would say China is, but we certainly know that the yuan could move significantly lower.

CHATTERLEY: You're somebody who stands out to me as having said all the way along, "Look, a trade deal here is not going to be simple." And

actually, stock investors -- global investors -- need to not be too optimistic here and just bake into the cake the idea that a trade deal is

going to happen. I guess you're reiterating that message and I'm getting it right.

HOOPER: Oh, I stand by that. I said the scariest tweet of 2018, the scariest words ever spoken in the past few years is that tariff wars are

good and easy to win. They're not and they could really send the world into a recession.

CHATTERLEY: What about the U.S. bond market in particular? Because I do feel like a lot of people are watching the 10-year yield very closely, and

you point out that this is kind of the fear gauge right now. What do you mean by that?

HOOPER: Well, when we see the yield go down, it's because investors are piling into treasuries and that is the safe haven asset class.

Interestingly, we see them going into other safe haven asset classes like gold.

But in particular, Treasuries are very symbolic, because they're viewed as giving us a sense about global growth expectations. And so we can only

assume that investors are expecting a slowdown. The question is how big a slow down?

CHATTERLEY: You know what's fascinated me over the past couple of days in particular is how much focus we're seeing on cryptocurrencies, on so-called

safe haven assets, and people, those in the industry saying, "Look, it makes no sense with Central Banks cutting rates with broader concerns out

there, not to have at least one percent of your portfolio in an alternative asset, like cryptocurrencies," what do you make of that?

[09:25:01] HOOPER: Well, I certainly think there are good reasons to be in alternative asset classes. That's part of having a diversified portfolio,

but there are a lot of alternative asset classes without going to Bitcoin.

In fact, for many, gold holds a lot of the same characteristics that people are looking for in Bitcoin here. It is not controlled by a government.

CHATTERLEY: Right.

HOOPER: It's also historically been an inflation hedge, for those who are worried that one day we could see inflation rear its ugly head, but it is

also secure in that you can own physical gold.

The problem is that Bitcoin, the assumption was that people could own it physically, essentially, because it would be in the wallet of their

computer. But most people aren't technologically sophisticated enough to own Bitcoin that way. So they own it on exchanges that can easily be

hacked, as we saw with Mt. Gox.

CHATTERLEY: So, you're saying that even though perhaps Bitcoin itself might be an interesting asset, the way that investors have to go about

acquiring it actually is enough of a deterrent for you as far as investors are concerned right now?

HOOPER: Exactly. I expect, we we'll see some kind of cryptocurrency that is appropriate for investing, like a Fed coin. But we are a while away

from getting there.

CHATTERLEY: The Federal Reserve coin coming to tackle Bitcoin. Underlying message here to investors, "Don't panic."

HOOPER: Absolutely. Do not panic. Be aware that there are risks that the trade situation is not easily ameliorated, and we're likely to see this

continue, and we're likely to see flare ups. But that could represent buying opportunities, and especially for long term investors, it's

important to stay diversified, but stay in the market.

CHATTERLEY: Is this a buying opportunity right now or too early to say?

HOOPER; Well, there are buying opportunities that present themselves intraday, as we see with these wild swings. So it's paying attention to

those securities, one wants to add to their portfolio and deciding on attractive entry points and waiting for it to happen.

CHATTERLEY: Makes sense? Kristina Hopper, always great to have you on the show. Thank you so much. All right. We're counting down to the market

open. Stay with us. We're back in three with that. You're watching FIRST MOVE.

(COMMERCIAL BREAK)

[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE. Thursday's opening bell there here at the New York Stock Exchange and it is a solidly higher

open here for U.S. markets in early trading after yesterday's volatile session.

A huge dramatic turnaround, I think for the session yesterday. Very closely tracking what we saw in bond yields in the United States; as yields

rose, so did stocks.

Also keeping an eye on what's going on in the oil market, a gauge of the concern about the global economic outlook. We did fall into bear market

territory, as we've already discussed on the show today.

But moving higher in the session today, Saudi Arabia reports, it will be discussing fresh ways to support prices here with fellow OPEC members.

What about currency land, too? As I keep reiterating, we continue to watch the actions of the Chinese Central Bank on what they do with their

currency.

The yuan the one is slightly stronger against the U.S. dollar today. Remember, the key here China moving to weaken its currency below that

psychologically important seven level to the dollar this week, as Kristina Hooper just said to us, perhaps a warning shot across the bow to the United

States.

Well, they took it, labeling China a currency manipulator this week, too. Kevin Rudd is the former Australian Prime Minister and now President of the

Asia Society. His view was labeling China a currency manipulator will only harden China's stance in the trade talks with the United States.

I spoke with Rudd about what he sees as the best way forward here and how on earth to get a trade deal done. Listen in.

(BEGIN VIDEO CLIP)

KEVIN RUDD, PRESIDENT, ASIA SOCIETY: Well, number one would be just for the President to shut up for a while. That would be very handy, President

Trump, I mean. I've been, you know, basically supportive of his obvious efforts so far to bring pressure to bear on the Chinese. But these

statements of recent times simply make the degree of political difficulty, too high, in my view, and unnecessarily so.

Two, on the substance of the actual negotiation, where the Chinese need to move and to concede further is against President Trump's expectation that

there will be a series of purchasing agreements by China of American goods in order to narrow the bilateral trade deficit. That's critical for

Trump's political base.

But three, where the Americans need to yield is on this question, namely, their position that they can retain tariffs post a deal, or within the deal

and the agreement, maintain a view that -- or a provision that they can re- impose punitive tariffs in the future, if the Americans unilaterally judge that the Chinese have violated the deal in the future.

So the architecture of the deal, I think, is broadly there, it can be done. But what the President seems to be permanently doing is adding to the

degree of political difficulty unnecessarily to bring this thing to a close.

(END VIDEO CLIP)

CHATTERLEY: The President of the Asia Society there, Kevin Rudd, in particularly punchy form, as you heard there. All right, so let me bring

you up to speed now with the global movers that we are watching in the session today.

Caterpillar, despite Goldman Sachs downgrading the stock from buy to neutral, a touch higher here. The company of course being hurt by the

trade tensions as you were listening to there, when Kevin Rudd was speaking.

Lyft as we've discussed already on the show, still loss making, but their four-year revenues now expected to hit $3.5 billion. That's 200 million

more than previously forecast. We've also got competitor, Uber, reporting after the close, too. So that's something to watch. Right now, up some

eight percent.

Kraft Heinz also in focus. The profits for the company, halving. They were hit by over $1 billion worth of charges and write downs, down some 13

percent right now. The challenge continues for Kraft Heinz, of course there.

All right, next story. U.S. retailing billionaire, Leslie Wexner has accused the disgraced money manager, Jeffrey Epstein of misappropriating

tens of millions of dollars from both him and his family. Wexner who founded L Brands, the company behind Victoria's Secret made the claim in a

letter to members of his Charitable Foundation.

Paul La Monica joins us now on this story. So, this is Les Wexner saying, look $46 million were misappropriated. And that was only discovered in

2007, when of course the claims against Jeffrey Epstein were made him Florida. Talk us through the details here because the timing I think very

interesting.

[09:35:06] PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, this obviously, you know, happened a while back. You know, it was discovered according to 2008

tax statements and Wexler saying in a letter, too, you know, people that has been obtained by CNN, that this is possibly just a small portion of the

money that was allegedly misappropriated by Jeffrey Epstein. So, it looks as if Wexner, by no means has been able to recover all of the money that

possibly was taken away from him by Jeffrey Epstein.

CHATTERLEY: This is a very uncomfortable relationship, and we're only understanding the details of this relationship right now. It's

uncomfortable for Wexler. It's uncomfortable, I think for L Brands as well at this stage, and we don't really know where it ends.

LA MONICA: Yes, exactly. I think what a lot of people, Julia, are grappling with is that was Wexner just a client for Epstein? Or was it

something more?

I mean, the fact that one of the women who has alleged abuse by Epstein; that incident allegedly took place in a property that's owned by Leslie

Wexner. So that is something that just adds to the confusion surrounding the relationship here, which, you know, some might argue, was deeper than

just a business relationship between a billionaire retail magnate and a money manager.

CHATTERLEY: And this is the big confusion, I think, we can't really get a sense or understand where Jeffrey Epstein's money came from. So that's why

the ties here to Les Wexner and L Brands therefore, continue to be prodded. Where did the money come from?

LA MONICA: Exactly. When you look at the accounts run by Jeffrey Epstein, you know, most people really are focusing on Wexner because it appears as

if Leslie Wexner is the only major significant client that Epstein had. So that obviously is raising a lot of questions.

And, you know, it's just more bad news I think for Lex Wexner and L Brands, which is a company that putting all these awful issues aside is a company

that is really struggling because it lost taste with what consumers want that you know, focus that L Brands and Victoria's Secret, in particular,

have continued to have on you know, sexy lingerie and the whole angels/models on the runway strutting around it. It really is tone deaf in

the #MeToo environment that we're in right now.

CHATTERLEY: Yes, the story will continue to run. Paul La Monica, thank you so much for that. All right, we're going to take a quick break here on

FIRST MOVE. But coming up, we've got the CEO of Adidas. We talk growth in China, currency wars, trade wars and how to make shoes from plastics taken

from the ocean. That's coming up stay with us.

(COMMERCIAL BREAK)

[09:41:17] CHATTERLEY: Welcome back to FIRST MOVE. Tech giant, Cisco, says it will spend $5 billion on 5G -- getting ready for 5G over the next

three years. That's in addition to its investment in Artificial Intelligence, both of which will have significant impacts on their

workforce.

Joining us to discuss it Cisco's Executive Vice President and Chief People Officer, Fran Katsoudas. Fantastic to have you with us, Fran.

FRAN KATSOUDAS, EXECUTIVE VICE PRESIDENT AND CHIEF PEOPLE OFFICER, CISCO: Thank you.

CHATTERLEY: We spend a lot of time on this show, too, talking about the impact that 5G technology in particular will have and Artificial

Intelligence will have on consumers. We don't have to talk about what it means for employees within a workforce. You're spending a lot of money

getting ready. Talk to me about what you're doing.

KATSOUDAS: Yes, so first of all, the $5 billion absolutely shows our commitment. As it relates to our people, I think what they experience is

that they know that this means that everything is changing. And in some cases, I think we know exactly where it's going; in other cases, we're

going to learn a lot for our employees. They realized that their skills and their capabilities are going to have to evolve as technology changes.

CHATTERLEY: I mean, you've spent $3.3 billion already training the workforce globally just to be more digitally savvy to get them prepared.

What does it mean in practice? And does it matter without wanting to be ages?

Does it matter with some of the age group of the people that you're tackling because, you know, for millennials in particular coming into the

workforce, a lot of the things that they use on a day-to-day basis -- mobile phones, computers -- it is natural to them? As you get

progressively older for the workforce, change is hard. Re-training is hard. Technology is kind of hard.

KATSOUDAS: Well, it's funny, because you're getting to the key, and I think this applies to every demographic, which is we're going to have to

change our mindset.

CHATTERLEY: Yes.

KATSOUDAS: And we're going to have to realize that our roles are going to be changing on a regular cadence. I think learning now will be something

that we just do on an ongoing basis. It won't be an option for us to remain relevant.

So across the demographics, I see similar responses, and what that means is that we have to prepare our people ahead of time. And so we're using

technology now to help them understand the skills they have, which is really important.

And then we're working with them to understand what roles they want in the future and bridging the gap, and so that's something that we're doing today

to really help our people make sense of the change.

CHATTERLEY: I mean, you're in the cusp of a period of time where technology is moving really quickly, where we have to prepare for something

that's going to change things dramatically, like 5G technology and the future will be almost too late by the time you get into the workforce.

I guess I'm asking whether governments need to step up here and the education needs to start way earlier.

KATSOUDAS: Absolutely, yes. So I think there's a big role for government. But I also think there's a big role for tech. Some of the insight that we

see right now help us to understand that tech has impacted industries in very different ways.

And for us to ensure that we don't see a broader divide, we're going to have to do more to bring tech to some of those industries that really need

to see the revolution.

What's fascinating now is we also see some of these changes, bringing out more of the humanity. We're using tech at this moment to really help from

a mental health perspective. We're using our technology to bridge teams and people around the globe to counselors and people that can support them.

And so I think our people are seeing baby steps around how technology will be incredibly positive as well.

CHATTERLEY: You know, I was looking at an OECD report and they said that they were looking at automation and Artificial Intelligence and they said

14 percent of jobs across 32 countries are highly vulnerable in light of the changes that are coming, 32 percent more will see significant change.

Is it going to cost jobs because for some people, the degree of change, the degree of learning, the skills gap that this will create is simply beyond

them? Is that a fact that we have to accept?

[09:45:10] KATSOUDAS: It is and we're seeing it already. And so I think it's something that we have to acknowledge. It's interesting though, with

every study that you review that shows the jobs that are going away, there's a lot of great insights around the jobs that are emerging.

And again, some of them, we don't know. There's a crazy stat right now that 60 percent of the jobs that will be available to our kids don't exist

today.

CHATTERLEY: I mean, that's terrifying.

KATSOUDAS: And so that's pretty amazing. And so again, what that means is that we have to have tremendous focus. We have to be deliberate. I would

say, from a U.S. perspective, I would love to see us have a state by state plan around how we look at these industries.

CHATTERLEY: I think the key thing is you've got to be flexible.

KATSOUDAS: That's right.

CHATTERLEY: You've got to be open to your point that you're simply going to have to acquire skills as you go along. And actually a rigid

educational system is not the answer because you kind of need to be flexible.

KATSOUDAS: Yes, we're seeing universities start to really rethink and engage with us in a different way. We also have some pilots right now

we're high school students are coming straight into Cisco, and we're bringing the college education to them.

CHATTERLEY: Right.

KATSOUDAS: My sense is in this next world, there's going to be many different paths, not one.

CHATTERLEY: Skip me. That might be odd.

KATSOUDAS: I wouldn't say that.

CHATTERLEY: Fran, fantastic to have you on. Thank you.

KATSOUDAS: Thank you very much.

CHATTERLEY: Thank you so much. Fran Katsoudas there from Cisco. All right. You're watching FIRST MOVE. We'll be right back. Stay with us.

(COMMERCIAL BREAK)

CHATTERLEY: Welcome back to FIRST MOVE. Adidas citing supply chain issues for a slightly softer than forecasts sales report in their latest earnings,

though they did reaffirm guidance. The news pushing in the German sportswear company down, as you can see, just over 1.3 percent. We have

seen a pickup in shares on hopes they might actually lift that forecast.

I have to point out though, shares are up more than 50 percent year-to-date and Adidas expect sales to accelerate in the second half of this year.

I managed to catch up with the CEO, Kasper Rorsted earlier. And I began by asking him about the risks right now of the escalating trade or whether

we're talking trade tariffs or the risk of a currency devaluation coming over in China. Listen in.

(BEGIN VIDEOTAPE)

KASPER RORSTED, CEO, ADIDAS: If we look upon -- over our overall business, we do 25 percent of revenue in China, and we have 20 percent of our

capacity in China. So tariffs will have very little impact for us, maybe in one or two quarters. It is actually not one of the areas that we are

concerned about.

What is much more concerning is, if you have a real currency war between the U.S. currency and the Chinese currency; the U.S. says that we do 25

percent of our business in the local currency in China. And I think that's going to be a no win game. And that will be the same for all global

companies with very large presence in China and the same for the U.S.

So we hope that some kind of sense will come in and a resolution between U.S. and China can be reached because that's one of the areas that we

simply can't mitigate.

[09:50:02] RORSTED: We can mitigate anything that surrounds tariffs. We cannot mitigate currency fluctuation, and that's why we continue to say we

believe that the world will stay the way it is and confirming our guidance.

But of course, if the world completely changed when it comes to currency, it will change for everybody, not just for Adidas.

CHATTERLEY: Absolutely. And you know, you were one of those that signed the letter to the White House saying, "Please don't do this because it will

be chaotic for everybody, and it will impact the consumer."

I appreciate it differs by company, but can you give us any sense of how much additional cost in terms of tariffs you could absorb versus simply

saying, "Look, we can't absorb this, and we have to pass this on to the consumer." Because that's the ultimate cost here is that things cost more

for the consumer.

RORSTED: So if we look for the American consumer, he or she will be impacted when he or she buy shoes. For the American Adidas consumer, they

will not really impacted because as I said, most of the delivery we have of our shoes to the U.S. is coming from a non-Chinese country, you know,

Vietnam or Indonesia. But it does have a significant impact.

So I would estimate between 10 percent and 20 percent would be the price increase for shoes in the U.S. For those that are manufactured in China,

as I said before, that won't have an impact for the consumer. But it's bad for the economy. It is bad for the U.S. consumer and it is bad for the

U.S. retail.

(END VIDEOTAPE)

CHATTERLEY: From the moment Kasper took over as CEO, he put digital e- commerce sales front and center. Growth in the quarter of e-commerce sales hit 37 percent. They use Instagram. They've got connections with stars

like Kanye West. I asked Kasper, what's the most important tool for boosting e-commerce sales? Listen in.

(BEGIN VIDEOTAPE)

RORSTED: Fortunately, we can say, one is having real cool products, which we hope we have either created by ourselves. So with Farrell, Kanye or

now, Beyonce. But then having the right technology that allows consumers to interact with us.

We do 90 percent of our marketing spend, it is now digital. We have a digital app. We have a loyalty club. We have our online side. We are

customized for consumers. We give preferential drops. And that is now a few months ago that we've had.

We had a similar growth rate last year, we expect the same this year. So if you look upon without any comparison, the most important store in the

world for Adidas is our online store. And that's where we're putting most of our resources.

Last year and the year before, 80 percent of the new hires in our company was hired into the digital space. So we are becoming more and more digital

as a company. That's where the future lies. That's where the consumer is. And as a consumer company, we've got to be with the consumer is.

CHATTERLEY: Wow. That was a stunning fact. Ninety percent of your marketing now is digital.

RORSTED: And that has transferred over the last several years. But if you look, we have very young consumers. Their primary engagement device is the

mobile phone -- the mobile device. And that's -- we go with the consumer is.

So, you hardly see any TV advertising. I don't think you've seen any of us over the last three years. And the only country right now where we do

still do TV advertising is in China, despite the fact that China is more digitally enabled than any other nation in the world.

(END VIDEOTAPE)

CHATTERLEY: Interesting fact about China there, too, and the marketing strategy. Now, Adidas says it is racing to make its products more

sustainable, too. It is committed to only using recycled plastics by 2024.

The key here is so it doesn't just have to be good for the environment. It can also make good business sense, too.

(BEGIN VIDEOTAPE)

RORSTED: It is great for business. Approximately three years ago, we got the idea to take plastic out of the oceans, recycle the plastic and build

shoes for us. So that was the starting platform. This year, we will sell 11 million pairs of shoes made out of ocean plastic.

But we're going beyond that. So with football jerseys, so when a Real Madrid or Manchester United launched their jersey, sometimes, it is made

out of ocean plastic.

We have, you know, outdoor. We have shorts, and so we have expanded more and more to the entire portfolio. And that business will be close to half

a billion for us now.

And what we just announced about a month ago was a fully recyclable shoe. In 2021, we will come out with a product that in all of its component, it

will be fully recyclable. And that resonates with the consumer.

Sustainability is playing a huge influence on all our consumers, particularly the young ones, and having products where you have a

sustainability value proposition makes a big difference in the market. And we see this as a business opportunity and at the same time also an

obligation to help make a better environment.

(END VIDEOTAPE)

CHATTERLEY: The Adidas CEO there. All right, let's take a look at today's "Boardroom Brief."

Ryanair's pilots in the United Kingdom will go on strike for five days this summer. The move comes as negotiations with the low cost carrier on pay

and working conditions broke down. U.K. pilots re scheduled to strike the two days in August and for three days in September.

Shares in Germany's Thyssenkrupp was up some four percent despite the company issuing its full profit warning in a year. The stock hit 16-year

low earlier this week as the steel maker struggles to restructure in the face of falling demand.

From Russia with love, not so much for tech giant, Apple. The Russian anti-monopoly watchdog FAS is investigating Apple for unfair competition

practices.

[09:55:07] CHATTERLEY: This follows a complaint from cybersecurity firm, Kaspersky Lab saying Apple played favorites with smartphone app updates.

FAS is investigating why non-Apple security apps didn't update and stopped working.

Now, before we go, bringing back the 90s.

(BEGIN VIDEO CLIP)

KEVIN MCCALLISTER, FICTIONAL CHARACTER: I'm up here, you morons. Come and get me. You guys give up? Or are you thirsty for more?

(END VIDEO CLIP)

CHATTERLEY: Well, Disney says "it's thirsty for more." It revealed plans to reboot the classic "Home Alone" film now that it has most of the 20th

Century Fox's assets under its wing.

There's only one Kevin McAllister and that's Macaulay Culkin and he seems to be on board. He tweeted this picture of how he thinks Kevin would look

while home alone today and wrote, "Hey, Disney, call me." "Buzz, your brother, woof." Yes, I am not sure about that.

That's it for the show. I'm Julia Chatterley. You've been watching FIRST MOVE. Time to go make yours.

(COMMERCIAL BREAK)

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