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Early Start with John Berman and Zoraida Sambolin

Chinese Foreign Minister Qin Gang Suddenly Replaced; Israel Braces For More Fallout Over Judicial Reform Bill; Today: Final Day Of Fed Meeting, Rate Hike Expected. Aired 5:30-6a ET

Aired July 26, 2023 - 05:30   ET

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

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[05:32:44]

CHRISTINE ROMANS, CNN ANCHOR: There is a major shake-up in the highest levels of the Chinese government. China's foreign minister Qin Gang, who has not been seen in public for a month, is out of a job now.

CNN's Marc Stewart joins me live from Tokyo. And Mark, just over a month ago this man was meeting with the U.S. Secretary of State. He was once one of President Xi Jinping's top aides. What happened?

MARC STEWART, CNN INTERNATIONAL CORRESPONDENT: So much intrigue, Christine. Good morning.

Look, it has been about 24 hours since we were first alerted of Qin Gang's disappearance and his removal from office, I should say -- formally removed from office -- and there are still some big questions that linger, including where is he? Why was he removed from office? And then, what's next? Will he ever reemerge? Questions that the government is not very anxious to answer.

However, it did make a point today during its briefing at the Ministry of Foreign Affairs to address the current state of the pivotal U.S.- China relationship despite Qin Gang's departure. And the government is maintaining it's business as usual, but the spokesperson saying, quote, "Our position on U.S.-China relations has been consistent. We have always viewed and developed China-U.S. relations from the three principles of mutual respect, peaceful coexistence, and win-win cooperation."

And this disappearance and departure isn't just physical; there is a virtual aspect to it. Qin Gang's references in social media has been completely scrubbed. If you look on the Chinese government website all of his references there have also disappeared -- a move that a government spokesperson said was in accord with regulation.

So, Christine, the mystery very much continues.

ROMANS: Yes, and transparency not a hallmark of the Chinese government so we may never know all the details there.

Thank you so much. Nice to see you, Marc Stewart

Quick hits around the globe right now.

Deadly wildfires in Algeria have killed 34 people and forced the evacuation of hundreds during a blistering heat wave there. Algerian officials say those fires are now contained.

A Belgian court finds six men guilty of murder in the 2016 Brussels bombings and having a terrorist motive for those killings. The attacks killed at least 32 people and injured more than 300.

[05:35:02]

New video from Haiti shows people fleeing the area outside the U.S. Embassy after tear gas is allegedly deployed there. Earlier, brutal gang violence drove residents from their homes to the embassy district.

All right. Coming up, major backlash in Israel to the government's overhaul of the judiciary. And the Messi experience in Miami as he scores two goals in 20 minutes.

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ANNOUNCER: Messi off the post! Puts the ball in!

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ROMANS: Here is today's fast-forward lookahead.

Today, Hunter Biden will plead guilty for two tax crimes as part of his plea deal. The judge threatened Biden's team with sanctions over accusations they misrepresented themselves to court officials.

Today, the Federal Reserve widely expected to raise interest rates again, marking the highest rate in 22 years. The central bank may also hint at the possibility of another increase this year.

[05:40:00]

The House Oversight Committee will hold a hearing on UFOs today. GOP lawmakers have vowed to look into unsubstantiated claims that the U.S. military found a crashed alien spacecraft.

All right, Israel bracing for new fallout after the passage of the first in a controversial package of judicial reform bills stripping the Supreme Court of its power to block government decisions. The crisis could have perilous implications in the long run as protesters vow to keep fighting, military reservists threaten not to serve, and some in the U.S. are calling for a reconsideration of aid to Israel.

Elliott Gotkine live in Tel Aviv with more. That's quite a list of fallout. What can we expect to happen now?

ELLIOTT GOTKINE, JOURNALIST: Yes, and there's the -- excuse me -- Christine, there's also the economic fallout.

And what's happening right now is earlier today this reasonableness bill came into effect. It was voted on, of course, earlier in the week and it has now come into force.

And Israel's Supreme Court judges -- they are on an official visit to Germany. They have now flown back early in order to hear all these petitions against this bill.

So the Supreme Court could impose some kind of injunction preventing this law from remaining in effect while it considers it more broadly. And it could ultimately strike it down. It could decline to do so. So those are some of the things in terms of the actual law.

In terms of the protests, as you say, they've been going on for more than six months and they are set to continue. We expect big ones on Saturday evening. In terms of the reservists refusing to turn up for duty, we're expecting that to continue, too.

The Israeli Parliament actually goes on recess -- a very long recess at the end of this week until October. And, of course, during that time there could be negotiations about the rest of its judicial overhaul. But this government is planning to continue with other parts of its judicial overhaul when they get back from this long summer recess.

The other thing to watch out for is the economy. We saw yesterday -- on Tuesday, we saw Morgan Stanley downgrading its views on Israel. We saw -- we saw Moody's as well also saying that it -- that due to the unrest and due to this judicial overhaul that there could be negative ramifications for the Israeli economy and also its security situation.

And the impact of that has been a very weak Israeli shekel. It's close to a three-year low against the U.S. dollar. We've also seen the impact on the Israeli stock market, which has been underperforming other markets. And we've seen the impact in terms of investment in Israel's much-fabled start-up scene. Now, investment from venture capital firms has declined globally. It declined even more in Israel and that's a big deal here, Christine because high-tech exports account for half of all Israeli exports.

ROMANS: Absolutely. Elliott Gotkine, thank you so much. Nice to see you.

OK, to sports now. Messi mania kicks into high gear as the greatest soccer player of all time delivers more magic in his first start -- first start with Inter Miami.

Andy Scholes has this morning's Bleacher Report. It's so fun to watch.

ANDY SCHOLES, CNN SPORTS CORRESPONDENT: It is, Christine, and good morning to you. You know, after scoring that dramatic game-winning goal in his debut on Friday night, Messi's second game -- I mean, it certainly couldn't live up to the hype again, right? Wrong. I mean, Messi -- he's just incredible. Just eight minutes into this game last night, Messi -- he's going to

break away from the Atlanta United defenders. He hits the post but then puts the rebound into the back of the net. Then, just moments later after a back-and-forth pass here with Robert Taylor, Messi's going to score his second goal of the game in the 22nd minute. That sent the sold-out crowd of more than 20,000 just into a frenzy. Messi -- he would also get an assist before leaving the game in his 78th minute to a standing ovation.

The outcome would not doubt. Inter Miami won that game easily 4-nil. They now move on to the knockout round in the Leagues Cup. Their next game is going to be August second at home.

All right. The U.S. Women's National Team, meanwhile -- they're going to be back on the pitch tonight for their second World Cup match. This is their toughest test in the group stage. They're going to face the Netherlands -- the team they beat in the 2019 championship game.

Captain Alex Morgan says she's expecting this one to be a tough one.

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ALEX MORGAN, USWNT CAPTAIN: We approach every game like it's the biggest game and this game is no different. But we have played Netherlands historically in very important matches -- 2019, Olympics, even before then. So this is going to be an incredibly difficult match-up -- very challenging.

SOFIA HUERTA, USWNT DEFENDER: We all know it's going to be a competitive game and we're approaching this game like it's championship. Just like Alex said, that's how we approach every game.

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SCHOLES: Yes, and kickoff set for 9:00 Eastern tonight in Wellington, New Zealand. The U.S. has won a tournament-record 13 straight women's World Cup matches dating back to 2015.

All right, we have a new highest-paid player in the NFL. According to ESPN's Adam Schefter, the Chargers inking quarterback Justin Herbert to a five-year $262.5 million contract extension. Herbert's $52.5 million a year makes him the highest-paid quarterback in NFL history based on average annual salary. The 25-year-old now under contract there in L.A. through the 2029 season.

[05:45:02]

All right, and finally, we had a super rare play take place last night in the Red Sox-Braves game. Boston at first and second. They're going to hit a shallow fly ball to center field. Michael Harris catches it. Adam Duvall got too far off first base so Harris doubles him off there. Well then, they get Masataka Yoshida trying to take third.

It's the old 8-3-5 triple play. It's a play we have not seen in baseball since 1884 when the Boston Beaneaters turned it against the Providence Grays. ROMANS: Wow.

SCHOLES: Christine, Red Sox manager Alex Cora -- he probably would have been quite mad about the team's base running but they won the game 7-1.

ROMANS: Wow.

SCHOLES: So I guess he could have a smile at the end of the day.

ROMANS: I guess so.

All right, Andy Scholes. Nice to see you, Andy. Thank you.

SCHOLES: All right.

ROMANS: Coming up on "CNN THIS MORNING" Trevor Reed injured fighting in Ukraine a little over a year after his release from a Russian prison.

And next, right here, what's behind the spike in gas prices?

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[05:50:07]

ROMANS: All right, your Romans' Numeral this morning is the number five. Gas prices surging five cents overnight. That's the biggest one- day increase in a year going back to June last year. The average price is now $3.69 a gallon. Remember, though, today's pump prices are still much lower than the $5.00 records we saw last year.

The jump is part of a broader rally in commodities after Russian attacks on port infrastructure in Ukraine and a refinery shutdown in the U.S., in Baton Rouge.

All right, looking at markets around the world right now, Asian markets finished the day lower here. European markets also down slightly at this hour. Paris down 1 1/2 percent. Global markets, frankly, are bracing for a rate decision from the Federal Reserve. On Wall Street, stock index futures this morning are also leaning lower.

But markets cheered the latest round of strong corporate earnings yesterday. GE finishing six percent higher. It raised its profit outlook for the year.

The Dow extending that 12-day winning streak -- a feat not seen since 2017.

AT&T, Boeing, and Meta all expected to report their earnings later today.

But the big event -- the main event, the July Fed meeting. It wraps up today. No announcement made on Tuesday but we do expect one this afternoon raising rates to the highest level in 22 years. Joining us is Jeanna Smialek, Federal Reserve and economy reporter at The New York Times. And as it usually goes, it's two days of meetings and at the second day they will announce a statement, and then the Fed chief will give a press conference and talk to reporters like you about what he's seeing going forward.

So what we're expecting here -- a 25 basis point rate hike. And the question is do they do another one after that?

JEANNA SMIALEK, FEDERAL RESERVE AND ECONOMY REPORTER, THE NEW YORK TIMES: Right, exactly. The big question is all about what's next. It's been pretty well-broadcast that they're likely to move today. I think that's widely expected. But I think everybody is kind of trying to figure out what the criteria are for another rate increase.

We saw the Fed project that they would make another move this year but since then inflation has really slowed down quite a bit. And so I think there's an open question about whether they are -- they have more work to do or whether they think they're done.

ROMANS: And CPI at three precent. The target is two percent.

How hard does the Fed push, meaning keep raising interest rates to try to get down to that two percent, or are they comfortable with something a little higher than that?

SMIALEK: I think the critical point for the Fed is less that three percent number and more 4.8 percent, which is the number after you strip out gas prices and food prices, both of which move around a lot for reasons that have very little to do with the Fed. And so from their perspective, that 4.8 -- that's still a lot higher than two percent.

And so I think that while they've seen some really encouraging news they're probably still a little bit worried that inflation might get stuck too high.

ROMANS: Jay Powell, for months, has been saying that a recession is not inevitable, you know? And for a long time, many economists did not agree with him. And now, the idea of a soft landing is not -- it's not so rare. I mean, could they pull that off?

SMIALEK: People are clearly increasingly marking up their chances that they're going to be because we are seeing inflation coming down but the job market is really kind of hanging in there. We've still seen really solid -- above 200,000 a month job growth.

And so I think there's this really tempting, tantalizing moment where we're all ready to declare victory. I think the Fed is still going to be really cautious about that. We've been surprised by inflation over and over again. And when you just referenced the gas prices --

ROMANS: Right.

SMIALEK: -- though -- you know, we can get hit by external shocks. We can have surprises that push inflation back up at this stage.

ROMANS: Yes.

SMIALEK: And so I don't think the Fed is going to be quick to declare victory on this one.

ROMANS: The job market is still strong and while that's good news for Main Street, that could be a little bit of a problem for the Fed because that strong job market can contribute to those inflation worries.

What do you expect from the Fed chief today about the job market? I mean, reporters are going to keep asking them do you want to soften the job market a little bit.

SMIALEK: Yes. I think he has a really interesting communications challenge around the job market. Because on one hand, they are seeing, really, evidence that we're seeing some slowdown in wages, which is exactly what they wanted to see. They don't particularly -- if we can get continued job growth but wages cool down, that would be good news from an inflation perspective. It would say the economy can be resilient and we can kind of take that steam out of inflation.

And so I think we might hear a little bit of commentary in that direction -- that crushing the job market isn't the end goal. If we can get inflation down and maintain a strong job market that would be great news.

ROMANS: Yes, wouldn't that be great? That's the Goldilocks outcome, isn't it?

SMIALEK: Yes.

ROMANS: All right, Jeanna Smialek, thank you. You're going to -- you're on your way to Washington to go to that -- to go to that event today, so thank you so much.

All right. Hunter Biden expected to appear in court today after striking a plea deal with federal prosecutors. Details of that plea agreement ahead.

And the major blow to the Biden administration as a federal judge blocks the controversial asylum border policy.

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ROMANS: Our top of the morning, the top TV shows streaming right now.

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Clip from FX "JUSTIFIED: CITY PRIMEVAL."

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ROMANS: "JUSTIFIED: CITY PRIMEVAL" tops Rotten Tomatoes most popular list.

Here's number two.

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Clip from Apple TV+ "FOUNDATION."

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ROMANS: Season two of "FOUNDATION" on Apple TV+.

And number three.

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Clip from FX "THE BEAR."

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ROMANS: That's season two of "THE BEAR."

All right, thanks for joining me. I'm Christine Romans. "CNN THIS MORNING" starts right now.