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Early Start with John Berman and Zoraida Sambolin

Markets Bouncing After Brutal Day; Asian Markets Struggle To Rebound; Candidates Spread Blame For Market Slide; Thwarted Train Attack Raises New Concerns; North Korea To "Express Regret" For Provocations. Aired 5:30-6a ET

Aired August 25, 2015 - 05:30   ET

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

(COMMERCIAL BREAK)

CHRISTINE ROMANS, CNN ANCHOR: Markets around the world rattled this morning. China stocks plunging overnight following the Dow's epic performance down 1,000 points in 10 minutes. Will the markets slide or find stable ground? Live team coverage breaking down our big story begins now.

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

ROMANS: I'm Christine Romans. It's so nice to see you. It is 30 minutes past the hour and a big morning because all eyes are on the stock market after yesterday's devastating plunge.

The Dow sinking more than 1,000 points yesterday in the first 10 minutes, the largest point loss ever during a trading day, and then look at the comeback. The Dow climbs some 800 points to only be down 100 points and then closes down almost 600.

Investors are selling riskier assets like stocks and commodities moving into safe havens like government bonds. Trading the heaviest in four years and look at some of these names, some of America's most held stocks were frenzied.

Bank of America, Apple, General Electric and Microsoft saw a lot of action and look at those declines. Today, U.S. stocks look ready for a comeback. U.S. stock futures are up significantly right now.

Really important to note here that the U.S. is bouncing back so are European stocks. That's not the case where the selloff started in Asia. I want to look at Shanghai's benchmark index down 8 percent almost for the second day in a row. The index has crumbled 40 percent since June wiping out trillions of dollars in value and rattling global markets.

Now fears about weakness in China's economy have sent stocks plunging and oil prices sinking. I want to bring in Andrew Stevens in Hong Kong. He is watching these Asian markets.

Andrew, it looks as though that selling frenzy has stopped in Europe. U.S. indications are the Dow will rise, but China still feeling a whole lot of pain. ANDREW STEVENS, CNN ASIA-PACIFIC EDITOR: Absolutely all of the pain, another 7.5 percent on top of the 8.5 percent yesterday. It is panic selling in China. People are getting out however they can. What is interesting here, Christine, there's been no apparent evidence of the government getting in to try and stem these losses. At least slow down the rate of descent.

It's 42 percent down now for the China markets in the space of ten weeks or so. Remember, early on in this, the Chinese government did enact a number of rather unorthodox measures try and stem the losses and show shareholders that it was leading by example. It could manage things for them. Apparently it hasn't.

There are a lot of angry shareholders in China with their anger purely directed at Beijing. Beijing needs to be seen as the ultimate voice of authority to show weakness. Such public weakness is obviously a big problem for them.

But I need to add here, Christine, is what goes on in the stock market does not necessarily reflect what is going on in the real economy. There has been a lot of research notes and banks out of Hong Kong and Asia this morning saying that this disconnect and saying that the actual economic conditions in China are not as bad.

They don't warrant this massive global selloff that we saw over the past 24 hours. It looks like investors are getting that message everywhere but China today.

ROMANS: Yes, can I ask you something? I mean, on the front page of every newspaper in the world basically is this selloff yesterday and the "Wall Street Journal" has a really interesting piece about China. For all of the test and clout, on the global stage, its economy is a black box, very little transparent.

One of the reason why there is so much market turmoil, there's just the mistrust of how well the Chinese are orchestrating the actions in the stock market and in the economy, and whether they really can.

You know, China's a different model than some of the other capitalist- based markets. What do you make of that criticism that China is just peering in there and there is not transparency?

STEVENS: Absolutely spot on, very little transparency. China says it's trying to introduce more transparency into its economic accounting, if you like. It doesn't happen, though.

I mean, year after year after year, China says we will hit this target for GDP. Lo and behold, it hits that target and exceeds it, sometimes by a little and sometimes by a lot. It sets these targets. It set the target for 7 percent for this year, the last quarterly economic growth report at 6.8 percent.

[05:35:03] But no one believes that anymore, at least economists, people who look more closely at China, Christine. They look at things like electricity consumption, rail traffic, tourist movements, those sorts of things. They are coming up with starkly different numbers, economic growth perhaps, you know, 4 percent, 5 percent versus official 7 percent. That is a big, big gap. It is a given now that China puts out the information that shows it in a flattering light.

It needs to be dissected and it's need to be taken with a bucket of salt. You come up with a different scenario. The trend is in the same direction.

ROMANS: A bucket of salt. All right, thanks for that, Andrew Stevens.

KOSIK: And China, what is happening there, a catalyst for the market panic we have seen. Another contributor for it is oil prices. They are bouncing back this morning, but still below $40 a barrel for the first time since 2009 in a middle of a global meltdown.

That is because supply continues to boom while growth continues to slow in Asia and elsewhere where demand is being hit. I want to bring in CNN's John Defterios. He is live in Abu Dhabi. So what do you think? Where oil prices are headed at this point?

JOHN DEFTERIOS, CNN CORRESPONDENT: Good morning, Alison. A sigh of relief you can put it. We don't see this massive selling in the stock markets minus China and even Japan. This is reflected in the oil market. It is a nasty two months for oil where we lost $20 a barrel and even worse for the last 14 months where as you can see here from over $100 a barrel down to below $40 a barrel.

And the pressure is likely to continue. We got spoiled by the fact that China was growing 9 percent a year for the better part of a quarter century. As Andrew was suggesting here, it's going to be a struggle to hold on to 6 percent.

Demand is falling in China. Demand is falling in Japan. This will feed through to the U.S. economy. It is good news for consumers at the pump, but a lot of dislocation for oil producers of the Dakotas, Oklahoma and Texas and even the oil giants like ExxonMobil and Chevron.

They will struggle with this. It is almost a perfect storm. Demand is falling from China and Japan at the same time production is rising. U.S. shale producers, the rig count is going down, but their production is not.

Saudi Arabia is fighting for market share in the Middle East along with Russia. Three major giant producers and nobody is cutting production. At the same time demand is falling. Expect prices to go lower here in the second half of 2015. Citigroup is suggesting we could get to $33 a barrel before the end of 2015.

KOSIK: Just amazing to hear that price. Let me ask you this, a wild card in this is OPEC. What are the chances that OPEC could cut production and throw a wrench in those lower prices? DEFTERIOS: Good question. I spoke to a number of my sources here in the Arabian Peninsula in the last 24 hours. They are saying despite this fall below $40 a barrel for U.S. benchmark, they don't feel a need to call an emergency meeting.

Iran in the last 48 hours asked for an emergency meeting to shore up production. There is a lot of pain within the 12 countries of OPEC, Algeria, Nigeria, and Venezuela. They are suffering because 90 percent of the revenues come from oil.

But the gulf producers here Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, they have $2 trillion in the bank and population less than 50 million. This is the global fight for market share right now.

Alison, it's not just about oil, we see commodities right across the board going down and as a result, capital flight leaving the emerging markets to the United States, a trillion dollars over the last 13 months.

We have to keep an eye on this. It has parallels to the 2008-2009 and also the Asia crisis 10 years before that in 1998 and 1999. It is that parallel right now.

KOSIK: All right, John Defterios live from Abu Dhabi, thanks for that.

ROMANS: The presidential candidates have no shortage of opinions when it comes to the cost of this global market slide. The Republicans blaming everything from the Federal Reserve and Wall Street elites to President Obama's spending policies. Here is Donald Trump sounding a warning we've heard from him before.

(BEGIN VIDEO CLIP)

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

(END VIDEO CLIP)

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

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

(BEGIN VIDEO CLIP)

SCOTT WALKER (R), 2016 PRESIDENTIAL CANDIDATE: I called on the president of the United States to cancel the state visit he is providing for the head of China, Xi Jinping. Why? Not because of what they have recently done to devalue their currency, but because of what they are not doing when it comes to upholding those very values. Why would we give that state visit to a country that doesn't share our values and our allegiances? I call on others to ask for the president of the United States to say we are not going to have that state visit.

(END VIDEO CLIP)

[05:40:12] ROMANS: On the Democratic side, this tweet from Bernie Sanders. He says, quote, "We need banks that invest in the job creating economy. We don't need more speculation with the American economy hanging in the balance." So far no comments on the market jitters from Jeb Bush or Hillary Clinton.

KOSIK: New information this morning about the suspect in the Paris train attack taken down by hero passengers. What we are learning about alleged the gunman and how safe trains are from terrorism. That's coming up next.

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KOSIK: Anti-terror police have until tonight to finish questioning Ayoub El Khazzani, the suspected gunman who was prevented from pulling off a massacre on a high speed train in France. El Khazzani was not known to U.S. authorities.

Let's go live to Paris and bring in CNN senior European correspondent, Jim Bittermann. You know, at the forefront of so many minds at this point is how safe we are on trains worldwide?

JIM BITTERMANN, CNN SENIOR EUROPEAN CORRESPONDENT: Well, that security issue is something that the French are worried about today and there are all sorts of plans out there and conversations about what can be done.

One suggestion from one minister this morning was that in fact you establish the same kind of security that you see at airports with magnetic detectors and that sort of thing. That is not practical given the thousands of train stations in France and the volume of people that take the trains every day.

[05:45:08] Another suggestion is that the police be allowed to carry their firearms 24/7. Now they have to check them in at the end of their shifts so that's also a possibility.

El Khazzani has been questioned for almost four days, 96 hours and at the end of that, the prosecutor has got to decide whether to charge him and I think we will hear some time in the next few hours what charges will be leveled against him -- Alison.

KOSIK: All right, Jim Bittermann, thanks so much for that.

ROMANS: Let's take a look at what is coming up on "NEW DAY." Chris Cuomo joins us now. We had kind of an eventful day. Are you there?

CHRIS CUOMO, CNN ANCHOR, "NEW DAY": I like you delayed the shot. I was getting my makeup done. I was eating oatmeal and getting my hair done. ROMANS: It takes a village to get Chris Cuomo ready.

CUOMO: It's like a NASCAR crew over here. We need just as many commands to get the Chinese economy going again. That's a good segue. Why is this happening? Why was it so precipitous and so quick? And why are so many experts saying it will be short lived?

We have Donald Trump, the candidate for president, saying this is all about them devaluing currency. We have very smart people on the show today who will explain why it is not simple and this is going on and what will end it.

We also have a real life on the show. We have Christopher Norman. He is one of the people who helped the three Americans stopped the bad guy on the train. Why did he do? What did he think was going to happen? What made him run toward the situation that most would run away from?

And remember the gun range instructor accidentally killed by a 9-year- old with an Uzi? His children are launching an initiative to keep automatic weapons out of kids' hands. It's more doable than you think and we will talk to them about it -- Ladies.

ROMANS: You look terrific. A little bit of -- right there.

KOSIK: Look how many hands are working on him.

CUOMO: These are mine.

ROMANS: Thanks, Chris.

North and South Korea reaching a deal to avert war, will the peace last? We are live after the break.

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[05:51:00]

KOSIK: North and South Korea agreeing to ease escalating tensions. The North is declaring its willingness to express regret for its provocations while the south will turn off the loud speakers that have been blaring messages mocking Kim Jong-Un.

Let's get the latest from CNN's Kathy Novak live from Seoul. You know it's a rare moment when the North and the South agree on anything. Who is to say how long this is going to last?

KATHY NOVAK, CNN CORRESPONDENT: Well, that's right, Alison. A couple days ago, we were in a situation where we had a threat and a deadline from Pyongyang. We had South Korean military on high alert we have the U.S. military reviewing how it would defend in the event of a North Korean attack.

Now it seems after these days and marathon of talks that both sides have agreed to step back from the brink of war. We just saw in the last hour the head negotiator for the North Korean side. The man in the inner circle of Kim Jong-Un's closest people, saying on KCTV that North Korea was expressing regret for these landmine explosions that badly injured two South Korean soldiers.

South Korea is interpreting that as an apology even though North Korea is not using that specific word. In return, South Korea is stopping those propaganda broadcasts that we know the North Koreans absolutely hate.

But almost as important as what was said after this expression of regret, this man who is making the statement on North Korean television also said to his people, and of course, this is all the propaganda that is played into North Korean homes.

That South Korea must have been taught a lesson by this whole episode and it must not provoke North Korea or make up stories. It seems to be implying it is still not taking responsibility for those landmine attacks while still expressing regret -- Alison.

KOSIK: All right, Kathy Novak live from Seoul, thanks for that.

Sweeping changes coming to Ferguson, Missouri, how city leaders are hoping to restore trust between the people they serve and the judicial system that's coming up next.

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[05:52:03]

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

Damaging testimony for the defense at the prep school rape trial in New Hampshire, current and former students testifying Owen Labrie told them he had sex with a teenage girl now accusing him of rape.

Labrie's former roommate says on the night of the alleged attack last year, Labrie claimed he took the girl's virginity. Prosecutors alleged the rape stemmed from a sex competition at St. Paul's school known as senior salute.

A fraternity at Virginia's Old Dominion University suspended for displaying banners with suggestive messages welcoming female freshman to the campus. The banners hanging outside the Sigma new frat house read "freshman daughter drop off" and "go ahead and drop off your mom, too." Officials say the suspension will remain in effect pending the outcome of a university investigation.

Firefighters in Washington having a really hard time gaining ground on the largest wildfire ever to hit the state. The Okanogan complex fires scorching over 250,000 acres so far. The blaze only 10 percent contained. People in eight communities now being ordered to evacuate. China's markets plunging overnight. World markets rattled following the biggest one-day Dow drop in history. Will the markets recover? "NEW DAY" beginning now.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Fear and panic have taken hold.

ROMANS: All eyes are on the stock market this morning.

KOSIK: We have not seen the end of it yet. There is still more to come.

UNIDENTIFIED MALE: Will Joe Biden run for the White House?

UNIDENTIFIED FEMALE: He really does want to be president.

JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: President Obama weighing in giving Joe Biden the green light.

UNIDENTIFIED MALE: This will be a panic move for the Democrats. Hillary's numbers are really bad.

DONALD TRUMP (R), PRESIDENTIAL CANDIDATE: Excuse me. I'll use the word anchor baby.

JEB BUSH (R), PRESIDENTIAL CANDIDATE: Taking advantage of the birth citizenship.

HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: The other candidates are just Trump without the pizazz or the hair.

UNIDENTIFIED FEMALE: Chilling words of the alleged killer captured on a squad car's dash cam.

UNIDENTIFIED MALE: You hear him breathing in there. Telling him you are lucky.

(END VIDEOTAPE)

CUOMO: Good morning. Welcome to your NEW DAY. It's Tuesday, August 25th, 6:00 in the east. We know what's happening in the markets. Do we? Why is it happening? U.S. markets echoing the distress of Asian markets and others now talking about a bounce back. We have answers on who is the blame and what comes next after these thousand points got stripped off the Dow at one point Monday.

ALISYN CAMEROTA, CNN ANCHOR: And if overseas trading is any indication, fasten your seat belts, today could be another bumpy ride. Shanghai with the second straight day as it's down almost 8 percent. What can we expect now?

Let's begin our team coverage with chief business correspondent, Christine Romans. What are you seeing, Christine?