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Anxiety Rattles U.S. And Global Economies; World Leaders Meet This Weekend At G7; Wildfires Burn In Amazon Rainforest. Aired 5:30- 6a ET

Aired August 23, 2019 - 05:30   ET



[05:30:21] JULIA CHATTERLEY, CNN ANCHOR: Cracks in the economy threatening a downward spiral. The Fed chief will try to calm investors today.

DAVE BRIGGS, CNN ANCHOR: Top world leaders gathering this weekend for the G7 in France as they try to calm growing concerns back home.

CHATTERLEY: Brazil's president pointing fingers over raging fires in the Amazon. He says they are being ignited to make him look bad.

BRIGGS: And a school superintendent in Tennessee got a $15,000 bonus. What he's doing with it will inspire you.

Welcome back to EARLY START. Happy Friday, everybody. I'm Dave Briggs.

CHATTERLEY: I'm Julia Chatterley. We are, what, 30 minutes past the hour right now.

And it is hard to recall a wilder 2-week period for the markets and the economy than what we've just seen. Cracks are beginning to form, some of them self-inflicted, admittedly, by the White House.

In just the last two weeks, the yield curve inverted -- investors demanding higher rates. In the short-term, harsh new deficit projections. Job estimates were revised down.

The president then repeatedly flip-flopped over fresh tax cuts and his ongoing trade uncertainty. And then yesterday, we learned the manufacturing sector is shrinking for the first time in a decade.

All that means is setting up to be a pretty big day for Federal Reserve chair Jay Powell. He faces a serious test with a high-profile speech in Wyoming, looking to reassure investors here. He's also facing pressure from President Trump and expectations to deliver yet more rate cuts.

Here's one of the president's economic advisers, Larry Kudlow.

(BEGIN VIDEO CLIP) LARRY KUDLOW, DIRECTOR, NATIONAL ECONOMIC COUNCIL: I'm not going to second guess Jay Powell. I'm just going to say I think the handwriting is on the wall for lower rates.


CHATTERLEY: "The Washington Post" is reporting top advisers notified the president some internal forecasts show the economy could slow over the next year, complicating his path to reelection. Now, that contrasts sharply with the positive rhetoric we've heard from the White House.

The "Post" is also reporting the administration has discussed creating a rotating Fed board where only some Fed governors would be able to vote at each interest rate meeting. Perhaps only the ones that want to cut rates can vote.

BRIGGS: Right.

CHATTERLEY: Let's bring in Matt Egan, lead writer for "CNN BUSINESS." Naughty, Matt, but it is a Friday.

What can Jay Powell say today to walk this fine line between providing support but not doing too much if it's not needed here?

MATTHEW EGAN, LEAD WRITER, CNN BUSINESS: He's got to reassure nervous investors and business owners and households. But it's a really, really delicate balance, right, because he wants to show that the Fed is willing and ready to come to the rescue.

But he does not want to suggest that there's an actual crisis because if he does that he could become a self-fulfilling --


EGAN: -- prophecy. So look for him to try to balance that.

But listen, this job is not made any easier when the most powerful person in the world is attacking you, seemingly, every day on Twitter.

BRIGGS: Not just that, but you've got his trade adviser, Peter Navarro, on Sunday, saying that the Fed will significantly lower rates over the holidays. Not hoping, but saying that will happen. They've put him in an impossible position.

But one thing you hear from business leaders is they always want consistency, stability, predictability, and that is not what we get from this White House.

Here's the president in just a 2-day period -- completely opposite stances on what he'll do to juice the economy -- listen.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We're talking about indexing and we're always looking at the capital gains tax -- payroll tax. Payroll tax is something that we think about and a lot of people would like to see that.

I'm not looking at a tax cut now. We don't need it. We have a strong economy.

Certainly, a payroll tax cut. President Obama did that in order to artificially jack up the economy.


BRIGGS: That's not 2016 and 2019, that's Tuesday and Wednesday. What does that erratic messaging do to the world markets?

EGAN: It leaves everyone really unclear -- a lot of uncertainty. But that's not just uncertainty about the idea of fiscal stimulus or not. There's uncertainty every day about whether the trade war is on or not -- whether it's getting worse or it's getting better.

And I think the problem is that it's not the direct cost of the tariffs, which we can kind of quantify. It's all these indirect costs.

I mean, how do you measure the uncertainty caused by the trade war? Business owners just don't know how to plan for the future. They don't know if they should be hiring more or laying off workers.

CHATTERLEY: The problem is as resilient, on a relative basis, as the U.S. economy is right now, we're seeing nations like Singapore, Hong Kong, Germany -- actually, Europe, overall -- weakening here.

[05:35:01] And one of my big questions is as resilient as the U.S. is right now, can it remain so in the face of everyone else slowing, and a lot of that is down to the trade war?

EGAN: Absolutely. The number one issue facing the U.S. economy is this global slowdown, which has been going on for some time.

But the problem is that the trade war is actually making that slowdown work. So that means that domestic policy from the Trump administration is actually making the number one problem facing the economy get worse, and that is a real issue. And I think we're starting to see investors around the world start to become concerned about that.

I mean, the bond market is flashing these recession signals and that's going to be a concern.

BRIGGS: And to your point about the trade war, "The Wall Street Journal" editorial board, this week, says this about the, quote, "uncertainty tax."

"If Mr. Trump wants to give the economy a policy boost to prevent a recession, there is something he can do. He can cut his trade uncertainty tax. And this is the pall over business investment that is a major result of his trade policies."

What would be the impact? Look, the president is right when you talk about unemployment is low, the markets are high. He should cheerlead the economy. But what impact would it have to stop the trade war?

EGAN: I mean, it would be absolutely a massive positive because it is the number one cloud hanging over the economy, so that would be a way to stimulate growth immediately.

And that's the thing. I mean, all of these attacks on the Federal Reserve -- listen, Jay Powell -- he may wish he had a mulligan -- no pun -- actually, pun intended -- on the last rate hike that he did at the end of last year.

But, borrowing costs -- that is not the number one concern right now. I mean, business owners are not complaining that it's just -- it's hard to borrow money or it's too expensive to borrow money. It's this uncertainty over global growth and the trade war, and those two things are intertwined.

CHATTERLEY: I want to circle back, though, to what you said in the beginning and I think it's so important. The trade war is an uncertainty here but the other risk here is this self-fulfilling prophecy.

We mentioned that the manufacturing sector has weakened here, but let's bring it back to two-thirds of the economy services -- consumer spending and right now, the jobs market -- wages are growing. That's a strong element here and we need to remember that.

EGAN: Absolutely. I mean, just because recession odds have increased, and they have, doesn't mean it's going to happen.

I mean, Goldman Sachs CEO David Solomon, he told Christine Romans --


EGAN: -- just a few weeks ago he thinks the chances of a recession are very low.

But he did cite the trade war as an issue because that's the concern is if this spillover -- if there's a spillover from the manufacturing slowdown, it's the consumer sector. That's where there's going to be trouble. And we are seeing early signs of unemployment rising in some manufacturing states.

CHATTERLEY: Yes. How much of the U.S. growth that we're seeing right now is President Trump willing to give up --


CHATTERLEY: -- in order to get a trade deal or to push China here, and that's a big question that we don't know.

BRIGGS: The last thing he wants to show his weakness, though, in the face of China.


BRIGGS: Let's all admit he would get hammered for that. Matt Egan --


BRIGGS: -- great to have you on a Friday. Enjoy the weekend, my friend.

EGAN: Thank you, guys.

BRIGGS: Appreciate it.

CHATTERLEY: Meanwhile, leaders of the world's major economies meeting this weekend at a sunny resort in Southern France, but storm clouds hover of the horizon and the person of disruptor-in-chief, Donald Trump. And with U.K. Prime Minister Boris Johnson bringing Brexit rows of his own, expectations for the summit are -- let's call them low, to say the least.

CNN's international diplomatic editor Nic Robertson is standing by this morning from Biarritz. It's great to have you with us, Nic.

Let's call it double disruption in the form of President Trump and, of course, U.K. Prime Minister Boris Johnson. All areas, perhaps, of contention removed by dumping the communique but what can they achieve here at this meeting?

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: You know, the French president really sort of sees himself as stepping up to sort out, if you will, the world's problems. This is in the absence of President Trump taking that position.

So, on Iran, for example, President Macron would really like to see a little concession from President Trump towards Iran so that -- so that he can encourage Iran back towards compliance with the joint nuclear agreement. That's just one part of the big puzzle here, though.

The bigger picture is, of course, that those expectations are played down and everyone's memories are very clear of what happened at the G7 last year. President Trump failed to sign the communique -- he left early. He had that stare-down in that infamous picture with the German chancellor, Angela Merkel.

And really, it's not just President Trump and it's not just Boris Johnson, who is potentially very weak at home, who are coming here in difficult circumstances.

The Canadian Prime Minister Trudeau, himself, faces elections coming up in a few months. Angela Merkel, lame duck leader, out in a -- out in a couple of years. Her economy in Germany is hurting. The Italian prime minister resigned just a couple of days ago.

So, these big, big issues that the French want to discuss here about inequalities -- gender inequalities, social inequalities, economic inequalities, trade, deals on taxation in the sort of digital industries. The climate -- that's another big issue for the French. [05:40:08] The United States, under President Trump, is really an outlier compared to these other six nations at the G7. This is why there won't be a communique. This is why the French are playing down expectations.

And perhaps, Boris Johnson, though, when he gets to meet President Trump, will have his day in the sunshine. Of course, he's hoping to hear good words about a future trade deal with the United States -- Julia.

CHATTERLEY: Yes, good news we will welcome. And we need to watch tomorrow for all those handshakes -- those extended handshakes that always take the attention as well.

BRIGGS: The optics are always interesting.

All right. Just in to CNN, a Boeing supertanker firefighting plane has now arrived in Bolivia to help combat wildfires ravaging the Amazon Rainforest there. But, Brazil's President Jair Bolsonaro says his country doesn't have the resources necessary to fight raging wildfires in the Amazon.

The Amazon is vast, about two-thirds the size of continental Europe. It produces about 20 percent of the world's oxygen. Some call it the world's lungs.

Bolsonaro, long opposed by environmental groups, is now pointing fingers over the cause of the fires.

CNN's Shasta Darlington in Sao Paulo with more.


SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT: Fires are ravaging the Amazon at an alarming pace. According to the National Institute for Space Research, there have been more than 72,000 fires in Brazil so far this year -- many of them in the Amazon, many of them started by loggers and ranchers.

The destruction has really been felt all the way over here in Sao Paulo, some 2,700 kilometers away from the Amazon, when earlier this week the city has plunged into darkness at 3:00 p.m. It looked and felt like nighttime.

And environmentalists blaming the government -- President Jair Bolsonaro, who has repeatedly said that the Amazon needs to develop -- to be developed and has also defunded many of the agencies tasked with cracking down on illegal activity there.

Ironically, when he was asked about the spike in fires he blamed the NGOs, themselves, without citing any evidence saying maybe they were starting the fires to make him look bad. But what's clear is not -- is that not enough is being done to stop them.

Shasta Darlington in Sao Paulo.


CHATTERLEY: All right. An important question coming up. Just weeks after a mass shooting in the same state, should an elementary school cheerleading team in Ohio be selling raffle tickets for a semiautomatic rifle? That's coming up after this.


[05:46:47] CHATTERLEY: Welcome back to EARLY START.

Some health insurance companies set to expand their Obamacare offerings next year. "The Wall Street Journal" reporting insurers are looking at stronger bottom lines after Obamacare's rocky start.

Oscar insurance adding six new states to the nine it currently serves. Also expanding next year, Cigna, Bright Health, Molina Healthcare, Centene, and Anthem.

In some cases, the companies are going into markets like Nebraska where there have been few options. Insurers say a sharp rate increase let them catch up to claim costs but increases for 2020 should be mostly moderate.

The number of Obamacare customers is actually shrinking overall, likely because the penalty for not having coverage was eliminated.

BRIGGS: Is Bernie Sanders looking to appease organized labor with a change to his Medicare for All plan?

According to "The Washington Post," companies with union-negotiated coverage would have to renegotiate contracts and use the money they save to give union members other benefits. That would effectively give unions more negotiating power than other consumers.

Analysis from "Politico" says Sanders' proposal does not change the legislation but does add requirements for a transition period to a single-payer system.


SEN. BERNIE SANDERS (D), PRESIDENTIAL CANDIDATE: The question arises is if under Medicare for All an employer saves money, as many employers will. What I want to see is the workers, themselves, get the benefit of those savings, not just the employer.


CHATTERLEY: The communications director for rival presidential candidate Kamala Harris, who has struggled to articulate her own health care plan, pounced on the change, tweeting, "Oh, how interesting. I thought no one was allowed to make any changes to Medicare for All plans at all, ever."

The Harris campaign adviser is acknowledging this week's CNN poll that showed a 12-point drop was the, quote, "The lowest of the campaign thus far." They say they're encouraged by private fundraisers. BRIGGS: Robocalls are the target of a new joint venture between telecom and law enforcement.

Companies including AT&T, Sprint, Verizon, and T-Mobile are teaming up with attorneys general from all 50 states. They announced a set of agreed-upon anti-robocall principles that will include call blocking technology at the network level at no cost to phone customers.

Americans receive an average of five billion robocalls every month.

CHATTERLEY: Yes, sort it out.

All right, let's get a check on "CNN Business" this morning.

Take a look at global markets right now. A strong session for Asia, up some half a percent. A similar story, gains outperforming over there in London, as you can see. That's the handover to the U.S. markets this morning.

On Wall Street, take a look. We are making things gains, too. Some four-tenths of one percent for the tech-heavy Nasdaq. But it was a rollercoaster day for investors after the bond market flashed warning lights that a recession could be coming, yet again.

Just the Dow managing to eke out a gain of around 50 points. The S&P 500 and the Nasdaq falling slightly.

Federal Reserve chair Jay Powell will try to calm investors a high- profile speech this morning. Expectations for a September rate cut are roughly 94 percent.

[05:50:01] DoorDash has finally revealed changes to its controversial tipping policy. DoorDash was criticized for putting customers' tips towards covering the base pay for its delivery workers.

Now, its CEO says the minimum base pay it provides its delivery workers will increase from $1.00 to $2.00 and could be as much as $10.00. All tips will be added on top of that.

DoorDash will also give customers the option to leave tips before and after delivery, rather than just before.

The new Apple credit card is here, but be careful where you put it. Apple is warning customers not to keep the titanium card by leather or denim or loose change. The card can get scuffed easily and the damage won't wash off.

If you do sign up for the card, Apple recommends putting it in a wallet or a pocket made of soft materials. It's sensitive.

BRIGGS: Let me guess. They have a $50.00 Apple card case they're going to sell you, kind of like our breakable iPhones. But they'll sell you a case, conveniently, to keep it protected.

CHATTERLEY: But the card is free, so just have them on regular, repetitive order, I think, here. BRIGGS: I'm on to Apple -- I'm on to you.

We'll be right back.


[05:55:35] BRIGGS: Breaking news.

An American detained by Russia on spying charges claiming in court that he had been injured in custody. That's according to the state news agency.

Discharged Marine Reservist Paul Whelan denies the espionage charges. A Russian court is considering whether to extend his detention.

The state news agency Novosti says Whelan claimed he was not fit to appear in court since he'd been taking painkillers. The U.S. Embassy in Moscow has formally protested Whelan's treatment in jail.

CHATTERLEY: Just 60 miles south and less than three weeks after the Dayton massacre, an Ohio elementary school cheerleading team is asked to sell raffle tickets for a semiautomatic rifle. Some parents are outraged.

Heather Chilton said she received an e-mail last month saying all members of the cheer team, including her 7-year-old daughter, would have to sell tickets for a rifle to raise money for the football and cheerleading squads.


HEATHER CHILTON, NEW RICHMOND, OHIO PARENT: This is absurd. You're having elementary kids sell your AR-15. Why? I can't see them selling some type of semiautomatic rifle -- when we have all these mass shootings going on -- going door-to-door.


CHATTERLEY: The head of the New Richmond football program says he understands parents' concerns and he's given them options not to sell the raffle tickets.

BRIGGS: Frightening moments for passengers when smoke filled the cabin on a Hawaiian Airlines flight. Seven people were taken to hospitals after the plane made an emergency landing in Honolulu.


UNIDENTIFIED FEMALE PASSENGER 1: We just all had to kind of go like this to breathe as we prepared for an emergency landing and evacuation.

UNIDENTIFIED FEMALE PASSENGER 2: They came by with some wet cloths for everyone to breathe through with the smoke because it was really getting thick.


BRIGGS: The airline now says a seal failed on a left engine, sending oil to hot parts of the plane, causing the smoke.

CHATTERLEY: A scientific breakthrough could save America's Great Barrier Reef. The Florida Aquarium in Tampa says it has successfully stimulated coral to reproduce two days in a row in a lab setting. That's a first for coral native to the Atlantic.

The effort is part of a program aimed at eventually repopulating dying parts of the Florida reef tract.

A would-be robber in Chicago left emptyhanded and in pain when he chose the wrong person to attack. Claire Quinn is a Golden Gloves boxer -- yes. She says a man who'd ask for directions grabbed her, punched her, and demanded her phone, but Quinn fought back.


LALO BEAS, CLAIRE QUINN'S TRAINER: And right away, she started hitting him wherever she could and the nearest spot was the groin area. He messed with the wrong girl and she had some skills.


CHATTERLEY: Quinn suffered a mild concussion and some bruising but she was clearly the unanimous winner. You go girl -- yes.

BRIGGS: She is six and zero in the ring.


BRIGGS: All right, a new nominee for educator of the year. Hamilton County school superintendent Bryan Johnson plans to spend the $15,000 bonus he earned to fund scholarships for his students in Tennessee. Johnson says the scholarships will be made in the name of his mother who passed away two years ago.


BRYAN JOHNSON, SUPERINTENDENT, HAMILTON COUNTY SCHOOLS, CHATTANOOGA, TN: She was a pastor's wife, and she raised my sister and I to serve and she raised us to press towards excellence. And so, we're just excited to be able to allow her legacy to live on.


BRIGGS: The fund will provide one scholarship for a senior in each of the district's learning communities. Good stuff.

CHATTERLEY: Oh, we love that.

BRIGGS: Indeed, we do.

CHATTERLEY: What a way to end Friday. And that just about wraps up the show. Thank you for joining us. I'm Julia Chatterley. BRIGGS: I'm Dave Briggs. Good to have you here this week, my friend.

CHATTERLEY: Thank you.

BRIGGS: Here's "NEW DAY." Have a great weekend.

ANNOUNCER: This is CNN breaking news.

ALISYN CAMEROTA, CNN ANCHOR: All right, we want to welcome our viewers in the United States and around the world. This is NEW DAY. It is Friday, August 23rd, 6:00 here in New York.

John Avlon is with me this morning.

We do begin with breaking news because Russian President Vladimir Putin has just announced that he is ordering his military to respond to recent U.S. cruise missile testing. This news comes just this morning, just in the past hour, John.

JOHN AVLON, CNN ANCHOR: That's right, and it comes as President Trump and world leaders are set to convene in France for the G7 summit.

So let's get right to CNN's Fred Pleitgen, live in Moscow with the breaking details -- Fred.

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Hi there, John, and we're just getting these details from the Russian government.

Essentially, what we had is a couple of minutes ago there was a call with the spokesman for Vladimir Putin, Dmitry Peskov, and he was already saying that Vladimir Putin was pretty angry. That he had had a meeting with his security council and that there would be a very important announcement coming very soon. Now, that announcement came in the form of a written statement.