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Global Market Sell-Off Intensifies; Israel on High Alert Amid Fears of Potential Iranian Attack; Hurricane Hits Florida, Brings Life- Threatening Flooding; Tech Stocks Getting Hammered as Sell-Off Intensifies; Disappointing U.S. Jobs Report Added to Fears U.S. Economy is Weakening; U.S. Stock Sink at Open after Global Sell-Off. Aired 9-10a ET

Aired August 05, 2024 - 09:00   ET

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

[09:00:00]

(COMMERCIAL BREAK)

BECKY ANDERSON, CNN INTERNATIONAL ANCHOR: Well, it is 09:00 a.m. on Wall Street we are just 30 minutes away from the markets opening in New York and

a global sell off intensifying as concerns grow over the U.S. economy. Well, it's 02:00 p.m. here in London. I'm Becky Anderson. You're watching

CONNECT THE WORLD. Also, over the next two hours, a region on the precipice of war.

Iran vowing retaliation against Israel after the assassination of Hamas political chief Ismail Haniyeh in Tehran. After weeks of protests,

Bangladesh's Prime Minister resigns, ushering in an interim government there, and the UK Prime Minister Keir Starmer calling an emergency meeting

after anti-immigrant riots and a weekend of unrest.

Right. Now the red that we are seeing in U.S. futures today follows a historically bad day on the NIKKEI. Japanese stocks suffering their biggest

one day drop ever with fears of a U.S. economic slowdown sending shockwaves through global markets now all this of course, following last Friday's

weaker than expected U.S. Jobs Report.

Let's get you into CNN's Marc Stewart joining us now from Beijing to take us through what we have seen on those Asian markets. Why Marc, did the

NIKKEI plunge and take the other Asian benchmarks with it?

MARC STEWART, Right, Becky, as you know from having covered business yourself, traders like to buy when they have reason to celebrate, and

they'd like to sell when they have concern. And right now, there is just a lot of concern not only here in Asia, but around the world.

And to understand the Asia story, we really need to look back to Friday and the United States when that lackluster Jobs Report came out. Not the best,

not the worst, but it did not bode too well among traders in Wall Street. So, we saw a sell off.

Well, let's fast forward to Monday morning here in Asia, when traders woke up, they were faced with this ongoing news that high interest rates would

be a part of life in Japan. The Bank of Japan recently made some announcements to say interest rates are going to remain high for a while.

Well, that means the cost of borrowing is more, the cost of doing business is going to cost more and so we saw a sell off today.

Now what happens on one continent often transpires and moves to the next. So, so far today, we have seen low weak numbers in Europe. And now as you

mentioned, a very weak trade. I mean, almost -- I mean, a very big sell off already in the works on Wall Street.

Because if we look ahead to what the U.S. is facing some of the biggest companies in the world, American companies, brands that we know are going

to start to report their earnings. And the concern isn't how they did last quarter, but about the future as so many companies and so many CEOs -- you

know whisper about this idea of a recession.

It was just last week we heard Amazon executives expressed concern that in the months ahead, yes, they would see growth, but it wouldn't be as fast as

it was in the past. Intel announced layoffs. So, for all of these reasons, combined, markets as we follow the sun seem to be selling off and I think

Wall Street is certainly bracing for a very difficult day ahead.

ANDERSON: Well, the futures market down just shy of 3 percent as we speak. The NASDAQ futures market tech laden index there down over 5 percent and

the S&P 500 futures off some 5 percent sorry, some 3.98 percent. So just shy of four. We are keeping a keen eye on those futures market. Thank you,

Marc for the analysis of what happened in Japan. And that seeded, of course, through those Asian markets as well.

Let's get more on what these financial concerns could mean for the wider economic picture? Mohamed El Erian is Chief Economic Advisor at Allianz and

also President of Queens College at Cambridge University. He joins us now from New York. Two stories of -- here, of course, what's happening on Wall

Street and then what's happening on Main Street? And just give me your sense of what we are seeing on this futures market ahead of us talking

about the wider picture. What are your expectations for today?

MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: So, my expectations is that the markets are going to continue to adjust to two things they're

really worried about. One is what's called the growth scare.

[09:05:00]

The notion that the U.S. economy is slowing much faster and in a broader sense than many anticipated.

And then the other one is a worry about another Federal Reserve policy mistake. The view is that the Fed did not cut interest rates last week.

Now, we're going to wait till September, that may be too late. So, you have a growth scare and a policy scare coming together that has caught market

positioning of sides. And that's why you're seeing this very disorderly price action in the U.S. market that then spills over to the rest of the

world.

ANDERSON: So, the Fed, of course, meets every six weeks, I mean, will be keenly watched its decision in September. Meantime, you have said for some

time that you see the probability of a recession to be 35 percent. I've seen various numbers doing the rounds. And today we see numbers being

adjusted, does your view remain the same at this point?

El-ERIAN: So, my view remains the same 35 percent with the balance of risk to the upside, meaning that if 35 percent turns out to be wrong, it's more

likely to be higher than lower. But what has happened to consensus is amazing. I was pretty lonely at 35 percent, people tended to have much,

much lower number.

And now we're seeing consensus shift. Not only are some analysts urging the Fed to cut back by a half a percentage point when it meets in September

which will to be unusual to start the cutting cycle with half a percent. You have some asking for an emergency cut. So, consensus has moved

viciously from one side to another. And that's again, people being caught off sides.

ANDERSON: And that is reflected in the bond yields today, which are lower. Let's have a look at the currency markets. Japan's market, of course, had

its worst day since the 1980s. And you and I, by the way, have been speaking, I think -- you know since sort of the early 90s. And we all

remember the strength of the Yen back in the day.

And we are seeing a significant uptick in the Yen at present, which of course, you know, has a significant impact on Japanese stocks. You know,

what -- what's your sense of what we're seeing on those currency markets and the impact, broader impacts at this point?

EL-ERIAN: So, Becky absolutely right. The stronger Yen is adding to all the headwinds that Japanese equities are facing. And that is why the Japanese

market has sold off so violently. Now, why is the Yen strength? Well, one factor, as you know, that plays into currency values is the different

levels of interest rates.

So as the markets have forced down dramatically, U.S. yields, suddenly Japanese yields, would have been lower don't look so out of whack. So, the

interest rate differential has moved in favor of the Yen. And that has strengthened the Yen, which in turn has weakened the currency.

So, we are seeing the spill overs and spill backs that are happening when markets are surprised by certain development. And in this case, it is the

notion that the U.S. economy is much weaker than people anticipated.

ANDERSON: Mohamed Jerome Powell, when asked at the last Fed meeting, where perhaps infamously now they didn't move on rates. Was asked what his

decision making might mean for the U.S. election? And he said, there will be no political decisions being made at the Fed. He says the decisions that

are made at the U.S. Fed are not influenced by the U.S. political cycle.

Be that as it may, we are, what 90 days away from the U.S. election? What is what is going on today, and the decisions that the Fed has to make and

its impact on Main Street? And we already know that the U.S. consumer has not felt anything like as bullish as these markets have, for some time.

What effect is all of this going to have on this U.S. campaign and election cycle?

EL-ERIAN: Well, I think the last thing the Democrats want is to -- the U.S. to go into recession, as people go to vote in November, because the economy

really matters. And already, the lower income households have been under significant pressure. They've run down the pandemic savings. They've maxed

out their credit card.

The only thing keeping them going right now is labor income. And if the unemployment continues to go up then income insecurity will go up.

[09:10:00]

And then you'll have people cutting back on spending which then you get into the loop. So, I suspect that the White House is worried about what it

is seeing.

Having said that, I do not think that the Fed is a political institution. I think the Fed will react to what it sees. It needs to get its act together.

You've heard me say this for a while, they tend to lag developments. This is a fed that was so burned by making a disastrous call in 2022, about

inflation being transitory that they decided not to take any forward- looking view of the economy.

They've been highly data dependent. And because of that, they've been caught offside. I mean, it's just a few weeks, Becky, as you know, when the

Fed Chair was in Portugal at an ECB Conference, and he got up and said, we have plenty of time to cut rates. The economy is fundamentally sound. I

think he would rather have these words back right now.

ANDERSON: Mohamed, it's always good to have you on. Thank you very much for making the time for us today as we provide analysis and insight into what

is going on. And we will stay across this thank you. And just about 20 minutes from now, the U.S. markets will open as they always do, of course

at 09:30.

But it's anything from a typical day on Monday on Wall Street. CNN's own Richard Quest will join me and we will take a close look at the tech

sector. Apple and Nvidia both looking to open lower. Stay with CNN to see that opening bell.

But let's get you to the Middle East and to growing fears of Iranian retaliation against Israel. International diplomacy is in full gear,

including a rare visit to Tehran by Jordan's Foreign Minister making the case for de-escalation as concerns over a wider regional war grow.

Jomana Karadsheh is here with me. And I think we have to be very clear here and underscore the importance of the vision that we have just seen. Those

images of the Jordanian Foreign Minister in Tehran with his Iranian counterpart. Why is that so significant?

JOMANA KARADSHEH, CNN CORRESPONDENT: It's very significant. I don't think we have seen a Jordanian Foreign Minister or senior official visit Tehran

in more than a decade if not longer than that. The Jordanians have been very concerned since October about the situation in the region about the

widening of the conflict in Gaza.

You've heard the warnings from King Abdullah from senior officials. And now clearly, they see how serious and dangerous this moment is that you had

Ayman Safadi, the Foreign Minister traveling himself to Tehran, saying that he was willing -- he was invited by the Iranians to be there, and that he

was not there to deliver any messages to the Israelis. But that doesn't mean that he's not there to carry messages to the U.S.

As we know, we've heard Becky tonight at about 11:00 a.m. Eastern President Biden is going to be speaking with King Abdullah of Jordan, and we would

expect that he's probably carrying a message. He's delivering a message.

ANDERSON: So, this is really interesting, because the message from Tehran has been quite clear since the assassination of Ismail Haniyeh, the Hamas

political leader in Tehran. What I'm trying to think about five days ago now, six days ago?

The response has been, we will retaliate, you will suffer Israel. Now, of course, Israel has never accepted responsibility for that assassination.

But the Iranians clearly believe it was Israel. And we, of course, have been here before, to a certain extent back in April.

We saw what we could describe as a tit for tat although the react -- retaliation from Tehran in response to Israel, bombing an Iranian asset in

Syria was huge. But well flagged, well telegraphed to the region and to the U.S., and therefore the impact less than it might have been. Do we have any

idea what this today retaliation tomorrow, retaliation might look like?

KARADSHEH: And that is the big question. What is the scope? What is the scale of this retaliation? The only thing that is guaranteed right now

pretty much is that you're going to see an Iranian response because they are -- as they have said that this is a red line that has been crossed.

They have been humiliated with an assassination that took place on their soil. They're going to have to respond. They're going to have to set

deterrence again, for the Israelis. And obviously April did not work with what many saw is a very symbolic response.

ANDERSON: I have to just briefly ask you this last question. I mean, you know more about this region than most people will ever know. You're

Jordanian. The domestic story in Jordan is a really worrying one for the leadership explain why?

KARADSHEH: Well, absolutely. I mean, look, if you look at the situation on the ground since October, and the monarchy the leadership of the country

has been really trying to delicately handle the situation where they are a close U.S. ally. They have had a relationship obviously with the Israelis

for a long time.

[09:15:00]

One of the few Arab countries that has maintained this relationship for decades. And then you've got a population that is so angry with what it is

seeing happening in Gaza with the loss of civilian lives 40,000 people who have lost their lives now. And the longer this is going on, the angrier the

population is.

We have seen the people taking to the streets. We have seen the anger after the killing of Ismail Haniyeh tens of thousands took to the streets of

Jordan. So, they are in a very tough position here. If you end up in a situation like April where Jordan had to intercept or play a part in the

interception of Iranian missiles. It might be a very, very difficult situation for them domestically.

ANDERSON: It's always good to have you. Thank you very much indeed. And more on that, as we get it of course. The military in Bangladesh says it

will form an interim government hours after the Prime Minister resigned.

Sheikh Hasina stepped down after a wave of sometimes violent protests against her government. Demonstrators stormed her residence in Dhaka.

Protests started last month by students angry over the system for hiring government workers. And CNN's Hanako Montgomery is following this story for

us from Tokyo today. Just explain what's going on, on the ground, if you will?

HANAKO MONTGOMERY, CNN CORRESPONDENT: Yeah, Becky. So, as you described just there, the army has announced that an interim government will be

running Bangladesh for the coming days, weeks, if not months. And we're also hearing from the army chief who held a press conference earlier today

that Bangladesh will be consulting with the president of the country to decide who and what timing, they will be running the country.

Now the army chief declined to answer any questions about when or if there would be holding elections about the timing of that, because he said it was

too soon. But what he did say was that he wants these protesters to maintain peace, to stop protesting and to stop going out on the streets and

calling for these demonstrations, and instead cooperate with the army.

He's also promised that the police would stop using any violence, which is a very significant message because as we know, Becky, these protests have

turned quite violent in these past few weeks. Police have used tear gas against demonstrators. They've opened fire on these protesters, sometimes -

- you know near them, sometimes directly at them, according to one of our fixers on the ground there.

And demonstrators have retaliated by setting fire to buildings to homes, and even killing protesters and police in recent days. So again, you know,

these protests have been very violent, very disruptive to the entire country. But now we can assume that a new political structure will take

place.

And one thing I also want to note is that there's certainly a sense of jubilation and celebration in Bangladesh at the moment, because they were

successfully able to oust their political leader. The student protesters desperately wanted to see her being held accountable for what they say was

a gross mis-judgment and just simply a gross way of handling the country and these demonstrations. They felt that she needed to hold accountability

and responsibility for these deaths and many, many injuries.

ANDERSON: Good to have you. Thank you. Well, ahead on CONNECT THE WORLD life threatening flash floods forecast up and down the U.S. East Coast that

is from Hurricane Debby. A live report on that coming up.

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[09:20:00]

ANDERSON: Well, the British Prime Minister has chaired an emergency meeting today following a series of riots over the weekend. Rioters broke into

hotels, housing asylum seekers and tried to set fire to them. And the Refugee Council has condemned the attacks as you would expect. The riots

began after three young girls were killed in Northwest England. This was exacerbated by the far right spreading disinformation including claims the

attacker was an immigrant.

Elliott Gotkine joins me now in that -- in those murders a week or so ago. And since then, in cities across the U.K., we've had some really disturbing

images. What was the outcome of this meeting chaired by the prime minister today?

ELLIOTT GOTKINE, JOURNALIST: Yeah, quite shocking scenes over the weekend. We had a press conference with the prime minister yesterday. Today he's

also spoken after chairing this COBRA meeting after what just one month in office. And what he said following this meeting was that he had ministers

had agreed upon setting up a what he described as a standing army of specialist officers to tackle violent protests to ensure that officers can

get to where they need to get to more efficiently.

Also, to ramp up the criminal justice, the identifying, the arresting, the processing of these people who were involved in his violent disorder. And

we've already heard from judges saying that potentially the courts could run 24 hours a day in order to process this number of people and also

talking about how the law applies online as much as it does offline.

Because of course, the spark for these protests last week in the wake of that horrific killing of those three small girls, the injuring of eight

others, and two adults also still in hospital as well spread online, particularly X.

And I have to say it's not really been helped by the owner of X and the most followed person Elon Musk with almost 200 million followers, posting

amplifying comments, for example, from Tommy Robinson, the far-right activist who has also been very much involved in commenting, and perhaps

inflaming tensions here.

And -- you know responding to that and also talking about -- you know the potential for civil war in the U.K. and how if there's no integration, then

-- you know violence is inevitable. So that's clearly not been helping either.

ANDERSON: It is of course, there is integration here. But you know, this misinformation being spread on social manifestation of that is what we are

seeing on the streets with this violence. It's really, really worrying stuff. Thank you very much indeed. Hurricane Debby lashing Florida's Big

Bend region along the Gulf Coast right now.

It's coming ashore bringing life threatening flooding to millions of people, along with severe wind gusts. More than a million people under an

extremely rare level four out of four risk for excessive rain that may result in catastrophic flooding in some locations. Let's get you to our

Meteorologist Elisa Raffa, she joins us along Florida's gulf coast north of Tampa. And what's the projected path of this storm? I mean you are clearly

in amongst it at present.

ELISA RAFFA, CNN METEOROLOGIST: Becky, the wind and rain continues to pick up here in Steinhatchee, Florida where we were at the exact spot of

landfall this morning where the center of that storm came over land as a Category 1 Hurricane with 80 mile per hour winds. The storm surge has been

up to six feet apart to the Big Bend of Florida.

We are now here on the Steinhatchee River and we're starting to see it get aggravated. We've got high tide coming in with onshore flow and just look

at how intense the onshore flow is plus the rain and all this water just keeps rushing inland, rushing to the street here to the curb all that water

coming in.

I mean look at how much water there is back there too coming up from underneath those trees and then rushing its way to the streets here as this

wind again continues to pick up and the rain is incredibly heavy. Water is going to be our biggest concern with this system. Usually, I mean in most

all hurricanes, water is the biggest problem, right?

[09:25:00]

It winds up being the biggest killer in the storms and it will for sure be some of the biggest impacts that we see as we get towards later in the

week. Because what happens is, is Debby starts to work its way inland and then stall, we're talking about a scary slow crawl three to four miles per

hour, you could walk faster than this hurricane as we get towards the latter half of the week.

And what will happen is, is it will dump. We're talking about measuring rain here in meters. We're talking about 20 to 30 inches of rain in parts

of the low country of Georgia and South Carolina. Catastrophic flooding is definitely a main concern there will likely break records for the most rain

that those states have seen from tropical systems.

So, we're really on guard for this slow, heavy rain as we go through the next couple of days. Debby here was also able to rapidly intensify because

our oceans are just incredibly warm, a sign and symptom of climate change, Becky.

ANDERSON: Good to have you. Thank you and a massive impact on U.S. air travel as you can expect as of 08:30 a.m. Eastern time, which is about just

shy of an hour ago. 1150 flights were cancelled this Monday and on Sunday nearly 2500 flights cancelled. That is the third highest cancellations in

one day this year.

Places like Orlando and Tampa particularly impacted but still operating have to say. You'll find -- you'll want to find your flights and whether

they are actually moving check in if you are heading into or out of the U.S. East Coast today.

And we of course are watching Wall Street after the biggest one day drop ever for Japanese stocks. What is fueling this global sell off? And what

can we expect from these U.S. markets do to open about 3.5 minutes from now?

(COMMERCIAL BREAK)

ANDERSON: All right. Well, we are watching Wall Street, TXNM on the balcony today. That's an energy company Texas-New Mexico Power effectively ringing

the bell. And what a day to be on the balcony today. These investors both on Wall Street and those looking in from around the world from markets that

are open and those that have closed off.

[09:30:00]

We'll be keeping a very keen eye on what happens today. That's the bell. They are out of the gate. Welcome back. I'm Becky Anderson in London, where

the time is 02:30 in the afternoon, but 09:30 is what it's all about this hour because the opening of those markets important today. I want to bring

in CNN's Business Editor-at-Large Richard Quest who is live from New York.

And after, what was a massive sell off on the Japanese market overnight, the likes of which we haven't seen since 1987, which is about the time you

and I started covering business news, a very strong Yen. A horrible day on the Japanese stock markets. What can we expect here, two and three-quarter

percent down as we speak?

RICHARD QUEST, CNN BUSINESS EDITOR-AT-LARGE: It's going to be ugly indeed it is. You can see the ugliness in all its glory there with the data. In a

moment, if we look at the triple stock, you'll see how the S&P 500 and the NASDAQ are also going down. It is going to be ugly there you see it.

Oh, look at that the NASDAQ off 6 percent. So, the growth stocks down sharply. Becky, it's not where we are at the beginning. It's where we are

going to be at the close. And I don't think it's going to be as dramatic as that I don't think so anyway, because what's happened now is, as you know

very well, we are in a loop.

We are in a self-fulfilling downward spiral as the froth gets removed from the AI hype as the worries about a recession in the United States, which by

the way, are still only 25 percent chance of a recession, according to Goldman. So, we're nowhere near it's a racing certainty. But the market is

pricing it all in and they are worried and people are taking money off the table.

Whether this turns into a route, we're not there yet. We're at correction territory levels. But we've still got good growth. And you and I can

develop that as -- or we've still got good growth. We have got rising unemployment. But my final thought is Becky for the second. This is what

the medicine was designed to do. Higher interest rates were designed to slow the economy and raise unemployment, has the Fed got there in time.

ANDERSON: Look, this is primarily off the back of a weaker than expected labor market report last week.

QUEST: Yeah.

ANDERSON: One weaker than expected report does not make a trend, although we have seen a slowing down. And as you rightly point out, that's been the

point by these high interest rates. The question now, of course, is whether the Fed is behind the curve? And it can call an emergency meeting if it

wants to within the next six weeks or so.

But the question is what does it do in September at this point? And the wider question here is what does this all mean about what is happening on

Main Street not just Wall Street, but on Main Street and what's to come, Richard?

QUEST: Exactly, what was always going to happen if you have 10, 11 increases in interest rates in a short period of time, you have an 18 month

or not 10-to-15-month monetary lag, the economy is slowing down. People don't have money in their pockets. They've got higher interest rate debt

that they're paying on credit cards and consumer loans.

They can't -- inflation don't forget, 18 months of high inflation has taken more money out of people's pockets. So, although prices aren't going up as

fast, they are still high. People can't afford what they used to be able to buy. And this is going to play out and what you're seeing, you know, I hate

to age you any more than I hate to age myself, Becky.

But this is classic, there is -- you know part of me wants to scream, stop panicking everybody. This is what was meant to happen. The danger here is

in markets that move faster than before in meme stock trading and peeping in consumer trading. This can become a self-fulfilling prophecy much

faster.

And that's why I think you're right, to point out that the Fed could act before its next meeting in September. I don't think it will. I think if the

Fed were to act, at least at the moment, it may maybe if we have many days of this sort of selling, it could step in because it will be accused of

propping up the market, which is exactly the accusation that was levelled at the Bernanke Fed, the Greenspan Fed to some extent Yellen had the same

criticism.

So, Powell doesn't want to be seen as doing Wall Street's bidding when it knows Main Street is hurting. But I would expect from what we are seeing 25

certainly 50 basis points possibly in September, and almost definitely further rate cuts before the end of the year.

ANDERSON: That's right. And again, I mean Jerome Powell who is the Fed Chair of course doesn't want to be seen to be doing Wall Street's bidding.

[09:35:00]

QUEST: Right.

ANDERSON: He has also made it absolutely clear that he will not do Biden or anybody else's bidding.

QUEST: No.

ANDERSON: So, we're in this -- we're in this campaign, sort of run at present. We're 90 odd days before this U.S. election. The economy clearly

front and center for so many people. Jerome Powell said at this last meeting, that he is not interested in politics, and he will do what he

believes is right for the markets, but whatever he does at this stage?

QUEST: Yeah, absolutely. Don't move and you help Trump move and you help Harris. The reality, of course, is if you look at history, they've done

both. They have both moved, and they've not moved at during an election time. It's not a unique position for the Fed. What I think the current

situation?

If you want to talk pure politics, this is very dangerous for Harris. This is absolutely devastatingly dangerous because people are feeling bad to

start with this morning. Look, me, I've got a 401k, I don't even want to look at a pension fund. But they want to look at what is happening.

People are looking at this. They haven't got money in the -- in their pocket. They are straightened because of higher inflation. Interest rates

are still high, and now they're seeing their savings seemingly worse less. This is a very difficult time for Harris.

ANDERSON: Yeah. Let's have a look at what some individual stocks are up to --

QUEST: You really want to do this.

ANDERSON: I've asked for Tesla, Apple and Nvidia now. Interesting, Tesla's off 10 percent, Nvidia's off 12.

QUEST: Right.

ANDERSON: This is a company -- this is the biggest company in the world and certainly was as far as CapEx is concerned.

QUEST: Yeah.

ANDERSON: It's off 12 percent, which by my calculation is about $400 billion --

QUEST: Right.

ANDERSON: -- of its price las Friday.

QUEST: I've got a question for you.

ANDERSON: Go.

QUEST: Do you believe that AI may be hyped? But do you believe that AI is real?

ANDERSON: I do believe that AI is real.

QUEST: Right.

ANDERSON: I mean, you know Nvidia have got -- they've got a product that pretty much --

QUEST: Exactly.

ANDERSON: -- nobody else has at the moment. And it's a real product. And they're selling. The point is -- you know lots and lots and lots of people

have been buying that stock because they're getting involved in the fizz right, which is the atmosphere around AI. I mean I'm not giving anybody any

--

QUEST: So where will that stock be? So where will that stock be? This is Dot.Com boom and bust all over again.

ANDERSON: Right.

QUEST: So --

ANDERSON: They sell the companies survived, of course, those that had a product.

QUEST: Exactly. So, there will be many people looking and thinking hang on, Apple is down, let's say 10, 12 percent from its high. Apple is not going

anywhere. The question what the fair value is for Apple, 12 months down the road. And there'll be many looking at Nvidia and saying, hang on a second,

this is market bing, bing, bing and bing pendulum swings.

ANDERSON: It's fair value, yeah.

QUEST: And Tesla has a slightly different one because Tesla does have real serious new competition on EVs from China. Therefore, Tesla is repricing

because of its underlying trading potential. Apple and Nvidia is getting caught and swept up. What is the true value of Nvidia in an AI world where

AI is coming just a little bit later than you and I had thought.

ANDERSON: Yeah, we are not giving anybody, any stock advice here. This is Richard and me just --

QUEST: Definitely not.

ANDERSON: -- shooting the breeze as it were.

QUEST: Yeah.

ANDERSON: You know, understanding caveat.

QUEST: -- how many --

(CROSSTALK)

ANDERSON: -- we've been around for a long time and we've seen it all before. But --

QUEST: -- how many -- count up how many economic cycles you and I've seen? And then the number of years collectively, we have been covering business

and markets.

ANDERSON: Pop quiz at Becky CNN, at Quest CNN. We'll be right back. Thank you.

(COMMERCIAL BREAK)

[09:40:00]

ANDERSON: Well, we are 12 minutes into the U.S. trading day. Tech stocks getting hammered. Look at the markets here. It is a brutal start to the new

trading day in New York and on Wall Street. Those markets actually not as bad as they were on the open. But still, it's a massive story, isn't it.

And it's not only U.S. stocks indices around the world have been tumbling, as fears of a U.S. economic slowdown send shockwaves through the global

markets. And that was prompted by Friday's disappointing U.S. Jobs Report. Plus, Warren Buffett, the famed investor and CEO of Berkshire Hathaway sold

-- has says that Berkshire has sold off half of its Apple stock.

That is a very specific story. But there's a wider story out there as well there today. CNN's Clare Duffy joins us live from New York. All things to

tech stocks at CNN. I don't know where you want to start. I tell you what, let's have a look at the NASDAQ. It's just shy of 5 percent lower the S&P

off nearly 4 percent. Let's start with why we are seeing this global market sell off very specifically text. What's behind it today?

CLARE DUFFY, CNN BUSINESS WRITER: Well Becky, look the investors, tech investors went into the past two weeks of earnings reports with really high

expectations. They were expecting to see that the tens of billions of dollars that these tech giants have spent on AI infrastructure over the

past several months.

We're starting to return real revenue gains, but that's not what happened. Instead, we saw really mixed results overall, in some cases, lower margins

because of those big investments in some cases, weak guidance for the current quarter. And it was kind of a record scratch moment for investors

where they went wait a minute what are we doing here? And when are we going to start seeing these investments in artificial intelligence, making people

real money?

[09:45:00]

And the answer to that, Becky is that it's going to take a lot longer than I think a lot of people expected. Microsoft CFO Amy Hood said that, that

company is expecting to see monetization of its AI technology over the next 15 years and beyond. Meta similarly saying that expects to see generative

AI, revenue gains over a longer period of time.

And when it comes to Apple, you're talking about that Berkshire Hathaway sell off of Apple. Apple hasn't even rolled out its generative AI

technology to the greater public at all. So, we don't yet know what it's going to mean for that company in terms of revenue gains.

And investors are uncomfortable with that kind of time horizon. As one analyst that I spoke with last week, Gil Luria told me a 10-to-15-year

return timeline is more like a venture investment than a public company investment.

So, I won't be surprised if we start to see these tech companies say that they're going to pull back a little bit on that AI spending, and try to

reassure shareholders, especially in this moment where there's broader economic uncertainty.

ANDERSON: Let's talk about Nvidia very specifically here because when you talk AI, you have to talk Nvidia. They produce the chips that power, the

industry. And this wide AI sort of story is both about development of AI and indeed about deployment.

Nvidia, at the sort of development end of that. We're seeing a 10 percent sell off today. That stock is the world's biggest company by rev -- oh

sorry by metrics on the stock market. A 10 percent sell off is something like a, what, $350 billion sell off today. And is this just writing the

price at this point? Richard and I've been talking about this.

DUFFY: I think in some cases, it is writing the price a little bit. I mean, you've seen so much AI hype over the past few months, and so much of that

has funneled directly into Nvidia. But when you talk about these big tech giants, Apple, Google, Microsoft starting to potentially pull back on their

AI infrastructure spending, about half of what they're spending right now is going to Nvidia, it's to buy those chips.

And so, if we start to see these big tech giants pull back on that infrastructure spending a little bit that's going to hit Nvidia directly at

their bottom line.

ANDERSON: Warren Buffett selling off significant stable of Apple stock today that won't be helping the Apple share price, which is down some 6

percent. We've also got up on the screen, Clare, and it's really good to have you in today. We've got the Tesla stock there off some 7 odd percent

at this point. What's the Tesla story out there very specifically today?

DUFFY: Well Becky, look, I mean, Tesla has been struggling for months because there's increased competition in the EV market, especially these

lower priced EV producers from China. At the same time when fewer people are buying EVs. We're starting to see a sort of slowdown in people's

interest in this market as far as consumers go.

At the same time, I think Tesla struggles because it has to deal with its CEO, Elon Musk, who turns a lot of consumers off. In recent weeks, he has

endorsed Former President Donald Trump which I think potentially alienates some of the more liberal, you can imagine California consumers of this

company might be turned off by the CEO who is so sort of loud on social media about some of his more extreme views.

And so, I think there's a few different things going on there. But at the core, I think Tesla is really struggling with the competition and having to

cut its own prices, because it's dealing with that competition.

ANDERSON: Clare, always a pleasure. Thank you very much indeed. Look, we've got a macro story out there today, which is affecting global stock markets.

And that is a fundamental one is the U.S. headed for recession. We've then got this sort of myriads of other things beneath that not least, for

example, on a sort of one stop basis what's happening with Tesla across the board.

What's happening with tech stocks and beyond? And we'll talk about all of that over the next hour or so here on CONNECT THE WORLD. We will be right

back after this short break.

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[09:50:00]

ANDERSON: Right, before we head into the next hour of CONNECT THE WORLD, let us have a look at these markets, because this is our top story today.

U.S. stocks sinking in early trading getting hammered on the outset over recession fears looming over the world's biggest economy.

I want to bring in Ryan Patel, a Senior Fellow at the Drucker School of Management at Claremont Graduate University. It's very good to have you. I

have to say these markets are off their lows, but significantly lower today and sort of aping what we've seen on global stock market since the Friday

weaker than expected jobs report out of the U.S.

I want you to just give us a real understanding of what that labor market in the U.S. looks like today? And why it is that it's freaking investors on

Wall Street out?

RYAN PATEL, SENIOR FELLOW AT DRUCKER SCHOOL OF MANAGEMENT: Couple points, I think one jobs market report came out and it was a lot worse than the

estimates meaning that there's more jobs, there wasn't as many jobs, which is what the Fed wants, but for the U.S. economy in the consumer, it's kind

of scary because for them and for the actual consumer.

We're starting to see the wage growth gap continue to increase. So, in essence, the wages are staying flat, while costs are starting to increase

where it comes from -- you know foods to rent. And so, people start to kind of panic where that U.S. debt for the average consumer also is at an all-

time high.

So, when you add all those things together at a micro level, it starts to add on a macro level when people don't want to spend money as much where

people are starting to kind of pull back. And then it kind of hurts businesses where businesses are trying to not put investments into their

business and their companies, which then less profit, and then goes into the revenue as well.

And so all of this is starting to spark a little bit together with these variables that we're seeing that the market starts to be more fearful. And

then people start to do what we see on the market and not, you know, invest.

ANDERSON: This does beg the question, is this a correction? I mean, what goes up must come down at some point as it were.

PATEL: I mean, I think if you look at a correction from a definition, we think of the percentages, yeah, I think we're in that category. But I would

say there's a couple of things. I think there's a lot of this companies were kind of overvalued.

Yes, I know, you were just talking about the AI hype -- you know certain companies were -- you know realm worth the AI hype, because they're leading

it -- you know and maybe you can argue Nvidia got too big. But then there's other companies that say that they're AI companies.

And they were getting paid or sectors that were touching it. And now we're seeing a realistic aspect when investors are asking, OK, you put money into

the R&D. Now give me the return and they don't have it yet. And I think that's what we're kind of seeing, right? Like you said things were

overvalued. Some of its coming down and on top of that you on a global scale, right?

You're seeing interest rates still make an impact. We're going to watch the Reserve Bank of Australia in the next couple of days. It just sees their

monetary policy. Everyone's paying attention to everybody, because trade matters. And we are interconnected.

[09:55:00]

And so, I think, like you said, it's -- it is -- has to come down. The question becomes, how much further does it come down on? And how fearful

are people believing in the market over the next couple of months?

ANDERSON: Do you believe the Fed made a mistake in not cutting rates at its last meeting?

PATEL: Yeah. I mean, not only that -- I mean, it looks and I know it's hard to look at the data, they wanted to wait. But now we're in the -- Fed is in

a very tough position now, because now in the last meeting, they came back and said, well, we'll think about making cuts in September, which is not

something that they wanted to do anyway.

They wanted to do in December. But what does 25 basis points really mean at this point, as of today in a panic market, not very much just signaling

that you're going to make more cuts. So, I think, as of today, if we see more data like this, Becky, they're going to have to do more than 25 basis

points this year. They're going to have to be more aggressive.

And yet still, we won't still feel it until next year, but there have to be a little more aggressive. So, if the Fed didn't want to be aggressive, they

should have made a cut last time, which in June or in an aspect and now September comes, I think it'll be depending what's going to happen over the

next couple of weeks to see how hard that they will make a cut. Should they still want to hold that plan?

ANDERSON: Yeah. And today a great reflection of the interconnectedness of these markets around the world. We are reporting and discussing what sir

reporting on and discussing what is going on in the U.S. economy and its effect on U.S. stocks around the world.

There is a response to what is the world's biggest economy and its direction going forward. Thank you. It's really good to have you on. That's

the first hour of CONNECT THE WORLD done. But we've got a second hour coming up for you back with more of what is our breaking news, this hour.

The state of the U.S. stock market, and its effect on investors and people frankly, you and me wherever we are around the world.

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