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First Move with Julia Chatterley
The U.S. Secretary Of State As Visiting Regional Allies As Tensions With Iran Rise; U.S. President Donald Trump Is Considering An All-Out Ban On 5G Equipment Out Of China; Eldorado Is Betting $17 Billion It Can Conquer Las Vegas With A Caesars Takeover. Aired: 9-10a ET
Aired June 24, 2019 - 09:00 ET
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ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT: Live from the New York Stock Exchange, I'm Eleni Giokos. I am in for Julia Chatterley this week
and here's what you need to know. A Pompeo push. The U.S. Secretary of State as visiting regional allies as tensions with Iran rise. And a
blanket ban, U.S. President Donald Trump is considering an all-out ban on 5G equipment out of China. And a golden gamble. Eldorado is betting $17
billion it can conquer Las Vegas with a Caesars takeover. It's Monday, this is FIRST MOVE.
Hi, so welcome. This is FIRST MOVE, and of course the week begins with a focus on Iran and the U.S. and new sanctions expected to be announced later
on this week. We're going to be focusing on the G20 and a very important meeting between President Trump, and of course Chinese President Xi
Jinping. It is about trade and that is what is going to be driving markets and of course we will be taking you through every step of the way.
So let's begin with a quick check to see how markets are going to be faring in the U.S. today. We're around 30 minutes away from the start of trade in
the U.S. and we've got futures pointing to a positive start. And remember, last week, we had a really good close.
S&P 500 posted record highs. The Dow Jones was flirting with a record close as well on Friday. Driving sentiment is Central Bank stimulus
starting off with the European Central Bank last week, and then we saw the Fed also talking about potential rate cuts. So these markets are heavily
overbought, that's the big concerns if they get bad news this week that could threaten the rally.
Right now, European stocks, a trading mix, and of course in Asia, green across the board with Chinese stocks posting the sixth straight session of
gains.
All right, so a big one to watch this week, of course, is the Brent crude price as well, that's going to be really important. I mean, oil prices
rallying extensively last week. Brent crude was up five percent. We have the U.S. crude as well, up 10 percent. It's the biggest jump in a week
that we've seen in two and a half years.
So if we see more trouble in the Gulf of Oman that could mean supply disruptions and that of course could create much higher oil pricing. But
now with this uncertainty and of course very low interest rates, gold has been a real big favorite for investors.
We've seen it jump firmly above that $1,400.00 an ounce mark. In fact, it's the highest that we've seen in six years.
So President Trump taking a new shot at the Fed. He said on Twitter today that the strong gains in U.S. stocks this month could have been even higher
if the U.S. had lower rates.
So he said and we quote, "Think of what it could have been if the Fed had gotten it right. Thousands of points higher on the Dow and GDP in the
fours or even fives. They stick like a stubborn child when we need rate cuts and easing to make up for what other countries are doing against us.
Blew it." He says.
We'll be chatting about that a little later in the show. But let's get straight into the drivers right now, and Iran is dismissing what they say
are U.S. threats as propaganda. Trump's major -- of course, is focusing quite a bit on the Iran tensions right now. And of course, they've been
talking about new sanctions against the country and he is offering a carrot as well as a stick.
And remember over the weekend, he was talking about obliteration, or no war at all. So it's all or nothing. We've got Sam Kiley standing by for us in
Tehran to give us an update.
Sam, I mean, look, it's a fluid situation and any miscalculation could take us down a very dangerous path. What is happening there right now?
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, Eleni, it's rather fascinating time in terms of U.S. diplomacy, because clearly, and
I'd say this following an on-the-record briefing with Brian Hunt, who is the Trump administration's envoy on Iran, who has been traveling through
the Middle East as indeed is Mike Pompeo, who arrived in Saudi Arabia earlier today.
He is due here in the United Arab Emirates a bit later on today and what they're doing is trying to build or broaden the coalition of support for
their stand against Iran at a time when Britain, France, Germany, the European Union, Russia, China are still convinced that Iran must remain
part of the Iran nuclear deal that the Americans walked away from under the Trump administration last year.
[09:05:10] KILEY: And very tellingly today, Mr. Hunt said that he pointed out twice in this briefing that 60 percent of the oil consumed by Asia
comes from the Gulf, it transits through mostly through the Straits of Hormuz, that very tight area that is potentially threatened with closure by
Iran.
And he is looking now for a global solution, as he put it to a global problem ahead of the G20, talks that's highly significant that the Asians,
with the exception of India appear to have been relying on the United States to ensure the safe transit of oil through this region. India
already sent a couple of warships.
But I think that we're going to see increasing pressure on the Asian economies to contribute, perhaps troops, perhaps -- I mean, perhaps Naval
forces, certainly diplomatically to this dispute that the Americans are driving with Iran.
I think it's very important new development in the context of anxiety here in the Emirates that over the weekend, things could have gone to outright
conflicts and that would have been worrying both physically and economically for the region -- Eleni.
GIOKOS: Absolutely, absolutely. I mean, look, from an economic perspective, there is a so-called war that is going on in Iran, and that's
the reality. So any kind of sanctions, and of course, sanctions that are already in place are going to cause a lot more trouble and pain in the
country. The question is, will new sanctions get Iranians to the negotiating table? Or is it just going to amplify the problem further?
What is your sense?
KILEY: Well, the Iranians have said today, that it's difficult to see what sanctions -- new sanctions -- can be imposed by the United States, because
the sanctions are so heavy already. Bear in mind that their oil exports are down to a fifth of what they were. And that was only after a brief
increase following the nuclear agreement that lifted most sanctions or many sanctions, I should say, against Iran.
But also the Americans are pointing out that Iran is 17 months away from an end to the arms embargo on it, from an end to traveling restrictions placed
on General Soleimani who is head of the Quds Force seen as a very sinister force for destabilization by Iran's enemies in the Middle East, the United
States and Israel.
But I think that this stage, the Iranians are saying we're not going to talk at all until there is a dialing down certainly of U.S. sanctions.
Indeed, they're saying the United States has to stick -- rejoin the nuclear agreement, the nuclear deal that they signed, before any real diplomatic
breakthrough can be made. The Americans hitting back saying, well, that deal wasn't a treaty. It wasn't legally binding. It was a bad deal. And
they want to renegotiate it.
They do have support in that, particularly in Saudi Arabia, here in the Emirates, and of course in Israel -- Eleni.
GIOKOS: Thank you so much for that, Sam coming to us live from the Iranian capital. We are now shifting gears and we're going to talk about China
trade wars with the U.S. not made in China. That's the big push that we are seeing from the Trump administration wanting to get a complete ban on
5G equipment out of China and that's going to be really interesting to see how it plays out just days ahead of a really important meeting between the
two leaders.
We've got Christine Roman standing by for us. Christine, really not a good way to get into negotiations about trying to sort things out and perhaps
coming to an agreement when you're talking about a complete ban.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: I will say though, for negotiations for the near term, you're absolutely right. This
is a -- it is a new front in the trade war with China.
But for many years now, there have been serious concerns in multiple administrations about the reliance of technology from China on America's
growing telecommunication infrastructure, right.
I mean, this is the biggest -- the United States is the biggest telecom equipment market, services and infrastructure in the world, $250 billion a
year and there are no major U.S. manufacturers of cellular equipment.
And what the White House is trying to look at here is very early stages, according to "The Wall Street Journal," the beginning of its probe about
its reliance on Chinese manufacturing for this very important 5G technology. Why does the biggest market in the world have none of its own
players, and is it good for American national security, to have the Chinese have such an important part of America's communications infrastructure?
So that's the backdrop here, and "The Journal" saying that what the White House is considering or investigating is whether they could require all 5G
equipment to be made outside of China that would require those big wireless -- the big companies that sell equipment to the U.S.-- wireless carriers to
move their production out of China someplace else.
So you're talking about a big potential supply chain disruption, and you're absolutely right. The timing is fascinating. The President of the United
States and the President of China will meet face to face in Osaka at that G20.
[09:10:10] ROMANS: And we know that the President of the United States has said, you know, Huawei and China in general, its high tech sector is a
potential spying challenge to the United States, but has also the same breath said, but maybe that could be part of whatever kind of negotiation,
we get an overall trade deal. So it's not clear where all of this stands in trade negotiations.
GIOKOS: Yes, and this is really interesting, because it's more than just the traditional, you know, trade agreement. It's about politics. It's
about national security, it's about so much more.
So I guess, you know, we've been seeing the markets doing so well, because it's an anticipation that, you know, things are going to be rectified in
some way, or there's going to be some clarity.
But when you look at the intricacies of this, it seems to be quite far away of any kind of resolution.
ROMANS; Oh, I mean, I think what the United States is asking for is for China to change its business model, and China's business model is there to
stay, right?
And so you have just really almost a collision of worldviews when you're talking about trade with the United States. So what you hear from the
Chinese -- from the Chinese side of the table is that they want it to be equitable.
They want the United States to give up as much as China gives up in any kind of trade negotiation, and that is not where this President stands.
This President sees the United States have been giving up over and over and over again, and now it's time to rectify that.
So the United States doesn't want to give up very much. So I just think it's going to be fascinating to see what comes this weekend. I will say
something, Eleni, that I think is interesting and that is the markets and companies and supply -- people who run supply chains are starting to think
that tariffs are permanent, and not just a bargaining chip anymore.
GIOKOS: And there's so much more that's happened as well. I mean, we've got the likes of FedEx not getting a parcel through to a customer in the
United States, a Huawei phone, and then you've also got concerns about the fact that the U.S. Commerce Department as well as banning Chinese companies
from buying components here.
So it's going to be an interesting one, Christine. Thank you so very much for that update.
All right, so merger and acquisition activity, and of course, companies taking big bets. But Eldorado putting $17 billion on the table to buyout
Caesars and we've got Paul La Monica standing by to give us an update on this.
It's a mixture of cash and stock as well. When I look at the price to earnings ratios of both of these companies, they look really elevated, and
that's what's really interesting about this, it's the timing, it's the health of the U.S. economy, and it's just the sector that they are in --
casino, gambling and hospitality. What are you reading into this, Paul.
PAUL LA MONICA, CNN BUSINESS REPORTER: Oh, yes, clearly, Eleni this is a bet on the health of the U.S. consumer because most of these casinos that
these two operate are in the United States, about 60 properties in 16 states.
This is not a company that once they combine, we'll have a big presence in Macau, for example, which has become such a new mecca for gamblers around
the world, obviously, particularly in Asia.
This is primarily a U.S. company. This is a big win also for Carl Icahn. Icahn is the largest shareholder in Caesars. It was just a few months ago
that he pressed Caesars for sale and got three Board members affiliated with him on to Caesars board. So this is definitely something that Carl
Icahn likes, he says he is pleased with the transaction.
GIOKOS: Yes, I know. Okay, when I look at the premium, I mean, it's a 30 percent premium in terms of what we saw Friday's close for Caesars.
And at the end of the day, you know, people are quite worried about the health of the company. It's still, in a way recovering from what we saw in
the financial crisis. It accumulated a lot of debt. But at the same time, there's this optimism about what it can bring to the table down the line.
I mean, these fair prices that we're looking at right now, is there going to be a good return for investors.
LA MONICA: Yes, I think that's clearly what investors are hoping for when you look at, you know, how the stock is doing in premarket trading. For
Caesars, this is a company that has a story brand name. They also own Harrah's as well. And it's interesting that Eldorado is the acquiring
company, but Eldorado has no presence in Las Vegas.
They're going to be assuming the Caesars name since that is the one that really has more global cache. But again, I'm very curious to see once
these two combined, will they try and go after Las Vegas Sands and MGM and Wynn, the larger global casino companies and try and move more into Macau,
for example, which has become such a new hot growth area for all of these gaming and casino companies.
GIOKOS: All right, great to have you on the show, Paul. Thank you so very much.
LA MONICA: Thank you.
GIOKOS: All right, let's take a look at other stories making headlines around the world and big news coming through from Turkey. The opposition
candidate for mayor of Istanbul is celebrating a landmark victory in Sunday's rerun election. It's one of the biggest blows yet to Turkish
President Tayyip Erdogan and breaking his party's hold over Turkey's largest city.
[09:15:06] GIOKOS: So back in March, the President's party lost to regional votes by a slim margin, but challenged the result claiming fraud,
and we're back to step one, basically. Arwa Damon is standing by for us in Istanbul. A big blow to Erdogan. It's the largest city. It's an economic
hub in Turkey. And of course, it's also very symbolic.
You've got the Turkish lira performing really well today and markets are also up, so I think the investor community is liking what they see. But
what's happening on the ground?
ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Eleni, there's many we need to process throughout the course of yesterday and then after
Imamoglu's win. This wasn't necessarily about which candidate was going to end up being mayor of Istanbul. For them, this was really about trying to
safeguard Turkey's democracy.
Those margins that you were talking about, back in March, the ruling government's candidate lost by that slim margin. That was 13,000 votes.
Yesterday, he lost by more than 750,000 votes -- that in and of itself is sending a very, very clear message.
And during the course of the day, when people were voting, we spoke to people who had flown in from overseas to vote, people who were on vacation
and cut that short to come back and vote. People who have the right to vote in Istanbul happened to be outside of the city.
Also coming back really, as they were saying trying to ensure that their right to vote was what they were upholding, and we heard this in Ekrem
Imamoglu's victory speech as well thanking everyone who came out whether they came out to vote for him or not, for continuing to practice Turkey's
tradition of democracy.
Because for many within the opposition, when this revote was decided, upon, they felt as if it was perhaps eroding at Turkey's democratic institutions.
There were great concerns over that.
But even after his party's candidate lost the vote, President Erdogan himself came out and acknowledged that this is the national will of the
people. He also acknowledged Turkey's democracy.
Now of course there are going to be massive challenges moving ahead. Istanbul is the country's financial heart. Ekrem Imamoglu is going to have
to figure out a way to work with a city council that is still dominated by the AKP. He has already said that he's willing to reach out to the
President. He wants to work together across party lines.
So for the moment, Turkey is viewing this as being not just a victory in a mayoral election, but a victory for Turkish democracy as well.
GIOKOS: Thank you so very much, Arwa Damon for us in Istanbul. And still ahead, low on diesel. Another profit warning coming through from Daimler,
the third in one year as it faces fall out from the Diesel Emissions scandal and still pursuing their goal, the USA women's football team makes
a breakthrough in the battle for equal pay. Stay with us. This is FIRST MOVE.
(COMMERCIAL BREAK)
[09:21:16] GIOKOS: Welcome back to FIRST MOVE live from the New York Stock Exchange. I'm Eleni Giokos and we are still set for a higher open this
morning.
It's the last trading week of the first half of the year, and what a ride it's been. I mean, S&P 500 is up more than 17 percent year-to-date and
right now, tech stocks are looking set for the strongest gains in early trading today.
Last week, the Dow and the S&P both rose over two percent. The NASDAQ up over three percent. So rate cut optimism is the driving force here and all
three indices have risen for three weeks straight and on the track for their best June returns in the years.
Look at that, joining me now with his take on the markets, we've got John Petrides. He is the Managing Director and Portfolio Manager at Point View
Wealth Management. Thank you so very much for joining us.
JOHN PETRIDES, MANAGING DIRECTOR AND PORTFOLIO MANAGER, POINT VIEW WEALTH MANAGEMENT: Thanks for having me on.
GIOKOS: Good to have you here. I mean, I'm just looking at what the S&P 500 is doing, and I'm juxtaposing that against that 10-year Treasury yield,
and there are two opposing stories. The one is saying we're going to have fantastic strong growth, a really good economy, and the other is saying,
fear, recessionary type environment. Where do you stand when you see that graph?
PETRIDES: What a difference a year makes, right? A year ago, we were looking at the 10-year rising above three percent, and now we're 100 basis
points lower and you could see this move in phases.
So we started the year with the Fed really reversing course from saying they were going to raise rates two times to now it's how many times are
they going to cut? And on the other side is they're still concerned with tariffs, right?
So you had a bit of a fear trade there. But to me, this is all the mouth that you've seen here with the S&P 500 going up, and the 10-year going down
is a sign of massive quantitative easing happening globally once again.
And the market is viewing that as a safety net, as a moral hazard really here to push people off the risk curve and invest in stocks.
GIOKOS: Okay, so we had President Trump saying that if we had rate cuts, we would have had an even better market over the last month. We would have
even more gains. I mean, but is this artificial gains? I mean, are these gains reflecting a fundamental environment?
We've got earning season that's coming up and we've got to get back to reality because markets are heavily overbought and that's the risk.
PETRIDES: That's my biggest concern is that the market gets here is duped in the sense that valuations are rising. But we're expecting a negative
two and a half percent growth year over year for earnings, because we're still lagging and it accounts from the tax rate. Right?
So I'm very fearful with what we heard and seen on tariffs with China that that could pour some cold water on earnings season and you may have some
sell offs come July.
GIOKOS: Yes, and it's interesting, because markets are looking pretty good today for early trade. But yet, we've got U.S.-Iran tensions. We've got
the trade negotiations that are set to take place later this week.
Are we just pricing in too much good news and could we be setting ourselves up for disappointment?
PETRIDES: Clearly, you're seeing resiliency by the market. But I do think right now, that has a lot to do with just pure quantitative easing. The
fact that the market is baking in -- the Federal Reserve, by the way is not cut interest rates, but the market is sure pricing in that they are, but
also you're seeing on the European side, the ECB, right?
The ECB said, well, you will have to do more quantitative easing, and the state of the European Union was a big risk, and I think that's now being
removed off the table because you have before.
GIOKOS: So if we start to see the economy coming under pressure here and you've got already a super accommodative monetary policy situation, you've
got no tools left to fix, you know, any kind of dramatic fall in the economy. I mean, what's the worst case scenario that could happen here?
Because we're addicted to the stimulus, aren't we?
PETRIDES: Sure.
GIOKOS: And I mean, and that's the reality right now.
PETRIDES: So, I would push back a little on that, I think in the financial crisis, we rewrote the rules on the tool. So the worst case scenario is a
reboot of Lehman Brothers, where the credit markets dry up entirely. And we don't see that at all happening anywhere.
[09:25:04] PETRIDES: I mean, the banks are flush with capital. The stress tests are coming out, right? We know that there is massive capital and if
there is, the Central Banks are willing and able to stuff more capital into the banking system.
So you're right, it's a moral hazard. And the fact is that the market is viewing Central Banks as the safety net here, and people are just getting
pushed out the risk curve, saying, well, I always have central banks to bail me out if need be.
And right now, we're not seeing excess in the system, you know, outside of Bitcoin getting a bit of a bid here, it's not like valuations are
stretched. It's not like we have a bubble in the housing market.
You know, the biggest longer term risk is the amount of debt the U.S. has on its balance sheet at $21 trillion and growing, you know, what happens
then? But that's the Armageddon situation, but we're not there yet.
GIOKOS: Yes, we're not there yet. I mean, and the thing is, now we're just going to focus on earnings that are going to be coming through because
that's also going to be a really good barometer to understand firstly, how you know, the trade war is impacting sales and then of course, just
generally how healthy these companies are that have been rallying so dramatically.
PETRIDES: Here is my biggest concern out of the Fed meeting that Powell said. He said business spending looks soft and you saw a lot of CEOs come
out very vocal against President Trump on increasing tariffs.
So what that means to me is CEOs are concerned, they're uncertain about the future, so they don't want to commit capital, right? And/or they can't
pass through the rising costs and tariffs to pricing to their end consumers, so it could hurt their earnings growth.
So those to me why we're seeing this market rally of why I'm concerned going to earning season.
GIOKOS: Okay. Bullish or are you feeling pessimistic? Are you worried?
PETRIDES: So short term like the next month, I'm probably a little bit more nervous, but any sell off in the market come earning season in July,
I'm a huge bull because again, I do believe that the Fed has pushed it. We're going to go. You know, the U.S. 10-year is at two percent, cash is
earning you not much -- is an option, so you force that out in stocks.
GIOKOS: John Petrides, thank you very much for joining us.
PETRIDES: Thanks for having me.
GIOKOS: Really good to have you on. And after the break, opening bell here in New York. Stay with us.
(COMMERCIAL BREAK)
[09:30:10] GIOKOS: Welcome back to FIRST MOVE. I'm Eleni Giokos live from the New York Stock Exchange and that was the opening bell. And we've got a
higher open across the board for U.S. stocks as we enter a very busy news period for investors.
Only just in the green, but it's a positive start, and of course, if this is anything to go by, markets are expecting good news this week, and it
hinges on the meeting between U.S. President Trump and Chinese President Xi.
Remember, Trump has threatened to slap tariffs on some $300 billion worth of Chinese goods. And of course, it progresses and maybe that's going to
be quite bad for market sentiments towards the end of the week.
In the meantime, Fed Chair, Jerome Powell delivers a speech on the economy tomorrow. That's going to be really telling about the Feds' next move, and
we will also get quarterly results from FedEx, Nike and chip maker Micron. Earnings will be an important barometer for the health of the economy and
updates on the impacts of the U.S.-China trade war.
Of course, there's also going to be something you'll will be looking at as these earnings trickle in.
So global movers right now, Caesars Entertainment shares are up while casino operator Eldorado resort shares are down. Eldorado is buying
Caesars for more than $17 billion. It creates America's largest casino business and the combined company will keep the name Caesars.
Shares will continue trading on the NASDAQ. I mean look at that Caesars up almost five percent in early trade and Eldorado down just over nine
percent.
Spotify in the meantime is down. Evercore has downgraded Spotify from inline to underperform. It cut its price target from $125.00 to $110.00.
Evercore cannot see how Spotify profits can match Wall Street's estimates. So Spotify down two percent.
Now, the U.S. Secretary of State is in the Middle East and aiming to build a global alliance against Iran. Mike Pompeo just left Jeddah, Saudi Arabia
after meeting with King Salman. The trip comes as tensions between Washington and Tehran are at new highs.
The U.S. President Donald Trump is threatening to hit Iran with more sanctions. DJ Peterson is President of Longview Global Advisors, which
offers analysis on how political, social and economic trends can impact businesses. He now joins me from Los Angeles. Really good to have you.
More sanctions against Iran, and I guess with a hope to bring them to the negotiating table.
In the meantime, Iran is dragging its feet, it's saying that it's just propaganda, they're not going to buckle to these threats. I guess, with an
outside view, you've got to think, if we see more tension in this region, it is going to be bad news; for oil prices is going to be good news. But
at the end of the day, it's just more instability and more uncertainty.
DJ PETERSON, PRESIDENT, LONGVIEW GLOBAL ADVISORS: Yes, I think that the threat of sanctions is nothing new to Tehran right now. I think they're
already considering themselves at war with Washington.
So sanctions probably will not bring them to the table at this point. They've seen the United States back out of the nuclear deal. And so what
kind of deal would be appropriate and what would stick from the Tehran side?
I don't see a deal. I don't see them coming -- bringing them back to the table at this point. They've been under sanctions for many, many years.
The situation fundamentally isn't going to change their position.
GIOKOS: And DJ, I mean, we heard President Trump saying no preconditions involved, come and let's speak. What do you make of these comments?
Because obviously, there are preconditions in a way. I mean, we know uranium enrichment is no, no, they want them to abandon their nuclear
program.
PETERSON: Right. Well, the preconditions from Tehran's perspective are the new sanctions, for instance, that are being threatened, and the
increased military presence that the United States is beefing up in the Middle East.
So there are already preconditions in place right now. They want the United States to come back to the negotiating table or actually come back
to the table and rejoin the nuclear deal. That's the conditions on the table from Tehran's perspective. They see themselves as already at the
table. With that, they've been there for years.
They've seen the United States walk away, so they fundamentally have a different view than what Washington is saying.
GIOKOS: Let's look at the economic sanctions currently in place. We know that there are sanctions against a thousand firms in Iran, and the reality
is that it's actually squeezing the poorest of the poor and well, and I guess, it's an economic war in itself.
[09:35:03] GIOKOS: The question is, when is the Iranian government, going to say, "Well, we cannot allow this to happen to our civilians." Because
at the end of the day, civilians are impacted by sanctions on a day to day basis. And that is what, I guess, the U.S. also needs to think about
because it has been saying, at least over the last few days that it wants to have minimal impact on civilians in that country.
PETERSON: Well, if you look back through history, Iran has essentially been at war with the United States for 40 years. And we've had sanctions
for many years, and they've tightened.
So the idea that this is something new or that this is going to fundamentally change the calculus in Tehran among the leadership, it's
probably not going to happen.
In fact, the leadership right now from a domestic perspective, domestic Iranian perspective, does not want to be seen as cowering or bowing down to
Washington at this point, standing firm is what is important, and the regime has significant popular support, especially in these conditions when
there's an external threat.
So right now, there is very little political incentive to do anything except stand firm in Tehran.
GIOKOS: And the U.S. also wants to stand firm as well. Show force, it seems that we are seeing from both sides, and I guess embroiled in the
middle of this is just the global geopolitical situation, which could have a quite a detrimental impact if things aren't, you know, sorted out, at
least in the next, you know, while in the short term.
What is your reading of this about how it's going to impact the overall sentiment and risk profile of global economics? Because that's -- the Gulf
of Oman is really important in terms of transferring goods, especially oil to the rest of the world.
PETERSON: Right. That's a great question. And what you see is a very interesting situation right now in the world where you have significant
easing and liquidity being generated by central banks, and certainly the United States, counteracting against geopolitical risks such as Tehran and
the Iran issue and concerns about oil passing through the Straits of Hormuz.
So it's very difficult right now, actually to tease out what are the implications or whereas our geopolitical risks having an effect on the
markets? I think one way to look at it is the risk of a more of a black swan event.
If Iran -- if Tehran makes a move to more significantly cut off or threaten supplies that are going through the Strait, clearly, the United States
would not stand for it. They stand for freedom of navigation, and the movement of oil. So you might see short term blips caused by movements or
signals by Iran.
But it's probably unlikely that they're going to be able to close off oil supplies over the longer term without significant U.S. retaliation, but
that's a black swan scenario, and it's very difficult to predict.
GIOKOS: DJ, we've seen oil prices rally on the back of this. Just how much bad news has been priced into Brent crude?
PETERSON: I think it's about priced in as much as possible right now. I think it's very clear that from Tehran's perspective that they do not want
war at this point. They see the United States very trigger happy right now. The President of the U.S. just said that the other day.
So Iran and the regime in Tehran does not want to have an all-out conflict with the United States. So for them to take significant further actions to
threaten oil flows to the global markets is probably unlikely at this point.
GIOKOS: Thank you so much for your insights, DJ. Great to have you on the show. DJ Peterson in Los Angeles for us.
Now, Malaysia's Prime Minister says he is frightened by the tensions between Iran and the U.S. He also criticized President Trump as erratic
over his handling of the trade dispute with China.
Mahathir Bin Mohamad was speaking to our John Defterios who joins me now from the Malaysian capital, Kuala Lumpur. Great to have you on the show,
John. And you know, we keep talking about this.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Thanks, Eleni.
GIOKOS: Emerging markets always stuck in the middle of trade wars or any kind of big issues that you see between global powers, and that's exactly
what Malaysia is experiencing right now.
DEFTERIOS: Well, it's complicated because we're here for the Asian Oil and Gas Conference and you have about 2,000 CEOs trying to play the both long
and short game. The long game, they are trying to invest about a half a trillion dollars a year in oil and gas and trying to predict demand in the
future.
The short game are the shocks that are taking place right now. The U.S.- China trade war, and also what could happen in Iran and supplies coming out of the Strait of Hormuz.
The Prime Minister of Malaysia was blunt on both accounts, let's start with Iran and his fears of conflict going forward. Let's take a listen.
[09:40:01] (BEGIN VIDEO CLIP)
MAHATHIR BIN MOHAMAD, MALAYSIAN PRIME MINISTER: This may trigger another war and any wars now forward will involve the whole world because we cannot
escape from being dragged in into conflicts.
And it is not going to be good. It can be worse than the last World War because now we have nuclear weapons. So I'm frightened.
DEFTERIOS: Well, the Iranians seem to be digging in their heels, particularly the hardliners suggesting that they had a nuclear agreement,
and they don't think they should be that flexible with the Trump administration. So the art of diplomacy seems to be gone.
BIN MOHAMAD: The Iranians will fight for their country. This is not a young nation. It is a civilization that preceded Western civilization and
they have survived all this time. And I think they don't want to be wiped out, they will fight.
DEFTERIOS: Will it lead to regime change in Iran? This strategy by the Trump administration?
BIN MOHAMAD: I don't think so. I don't think so. There very determined, not just a few people, but the vast majority.
DEFTERIOS: The other major economic issue today is the trade war between the U.S. and China. If I'd read it correctly, President Xi seems
determined to go to the very end, and he's not up for reelection. How do you find a settlement between the number one and number two economies at
this stage?
BIN MOHAMAD: This is getting us nowhere. But you cannot expect China to just kowtow to the precious pressures by the U.S. They have their pride
and they believe in their own strength.
And if the pressure is very great, they will retaliate. They will fight back. I don't think China is going to surrender just because of a trade
war.
DEFTERIOS: Do you think you can see a breakthrough this weekend in Osaka? What are your expectations?
BIN MOHAMAD: I'm not so hopeful. Unfortunately, America has a President who is determined but erratic.
DEFTERIOS: Determined but erratic is what you're saying.
BIN MOHAMAD: Yes.
DEFTERIOS: Is Huawei really the security threat that the U.S. administration is suggesting today?
BIN MOHAMAD: Maybe America is worried that Huawei might be spying into their new technologies. But for other countries, they don't have any new
technology beyond Huawei, so they are not frightened.
I think if we react in this way by taking action against companies, I think this can be very bad for other companies as well.
(END VIDEOTAPE)
DEFTERIOS: Mahathir Mohamad, the Prime Minister of Malaysia, he is talking about contagion, Eleni to other companies -- how about contagion to the
energy market. One chairman of a consultancy told me today, their forecast if the trade war continues is demand today around 1.3 to 1.4 million
barrels a day dropping by about 30 percent in 2020.
Now that would be a shock to the energy market and really kill prices from the $65.00 a barrel we're witnessing today. Back to you.
GIOKOS: All right, John. Thank you so very much for that update. John Defterios in Kuala Lumpur for us. Up next, the diesel emissions scandal
continues to pollute Daimler's profits. The German carmaker slashes its outlook for the third time in a year.
(COMMERCIAL BREAK)
[09:46:25] GIOKOS: Welcome back to FIRST MOVE. Now, shares in German automaker Daimler are done more than three percent after the third profit
warning in a year.
Now the carmaker said it was setting aside hundreds of millions of euros to deal with the diesel emissions crackdown. We've got Peter Valdes-Dapena
joining me now.
Peter, you know, when you're seeing a revision of earnings down constantly happening, you know, three times in a year, it just goes to show that the
company does not really show, at least, it doesn't have a handle on how deep the problem is with the diesel emissions scandal that play out a few
years ago. Is this the loss of the bad news? You know, is that the sense the company is giving us right now?
PETER VALDES-DAPENA, CNN BUSINESS SENIOR AUTO WRITER: Well, of course, there's no way to know that yet. It's as you said, three times so far this
year, it could be more. The company said this time, it is setting aside triple digit millions of euros to deal with -- to deal with this issue in
the future.
And so we don't know, apparently, this is something that could go on. We hope that the company has finally got a handle on this with its new CEO,
and that this will be the end of it. But who knows?
GIOKOS: Yes, and Peter, this isn't the only thing that the company is worried about. At the end of the day, it's got to spend a lot of money on
moving new technology, self-driving cars, and of course, just cleaner technology as well. So it's a tough time for this automaker.
But if you juxtapose it against other players in the market, it's not like everyone is having a good time right now.
VALDES-DAPENA: No, certainly, well, first of all, the thing as you just mentioned, every automaker is having to deal with that. Volkswagen, a
close competitor is dealing -- going very heavily into electric cars and partnering with Ford on autonomous vehicles possibly. So everybody is
having to deal with those pressures.
Plus, all the German automakers -- BMW and Volkswagen as well have to deal with these diesel issues. Diesel has been a big part of the European
market for a long time.
Besides the scandal, new regulations are also shifting the market, not just towards electric, but away from diesel and automakers like Jaguar have had
some financial pain from that.
So it's a very difficult time for the industry on two fronts at once, not just a diesel scandal, but also regulatory pressures and market pressures
forcing them to invest in new technologies.
GIOKOS: And this is going to be interesting, are we going to see consolidation? Are we going to see companies you know, shrinking their
operations, cutting jobs, and maybe we might even see some in M&A activity, companies just want to get rid of divisions that are not performing well.
VALDES-DAPENA: Right. Well, we've seen some of that already. Recently, we heard what? Fiat-Chrysler and Renault talking about possible merger
that got scuttled for internal politics reasons apparently at the Renault- Nissan Alliance.
But we're also seeing other automakers as I mentioned earlier, Ford and Volkswagen have been talking about working together and making some deals
to work together.
And yes, automakers like Fiat-Chrysler are also shedding divisions that they think are, well, not working for them in the current environment while
they look to spend more money on those new technologies that I talked about earlier.
GIOKOS: Yes. All right, Peter, thank you very much for that update. Peter Valdes-Dapena, thank you.
All right, so still to come. On target for American women's football team, make a breakthrough in their fight for equal pay.
(COMMERCIAL BREAK)
[09:52:05] GIOKOS: Welcome back, here is today's "Boardroom Brief." FedEx is apologizing for another mistake with Huawei delivery. The company
confirmed Sunday, it returned a package from Huawei bound for the United States due to an operational error.
FedEx confirming the U.S. putting Huawei on a blacklist was not a factor. This has only reignited China's anger. State media suggests FedEx will
likely end up on the country's unreliable entities list.
Coca-Cola has extended its sponsorship of the Olympic Games through the next decade. It has teamed up with China Mengniu Dairy to sign a major
deal with organizers reported to be worth $3 billion.
It comes as the host city of the 2026 Winter Olympics is to be announced in the next few hours now.
Now, in women's football, Team USA have reached a crucial stage in their fight both on and off the pitch as they prepare to take on Spain in the
knockout stages of the World Cup. There's also been a major development for their bid for equal pay.
We've got Andy Shoals with that update. Andy, it is 2019 and we are still talking about equal pay regarding sports. Why?
ANDY SCHOLES, CNN SPORTS: Yes, well, Eleni, the 28 members of the U.S. women's national team, they did file a pay discrimination lawsuit back in
March and they have now reached a tentative agreement with the U.S. Soccer Federation to go to mediation. The players are suing for wages and playing
conditions more in line with the men's national team and a spokeswoman for the players are responding to the mediation agreement saying, "We hope
their pledge to submit a proposal to solve the ongoing gender disparities is genuine. The world is watching."
The U.S. Soccer Federation told "The Washington Post" that they welcome the opportunity to mediate after the World Cup and that they were disappointed
that this news was shared while the tournament was going on as it could create a distraction for the players.
While the players meanwhile say, there is no distraction and they can handle their business on and off the field.
(BEGIN VIDEO CLIP)
ALI KRIEGER, TEAM USA DEFENDER: Bring it on, you know we're not listening to any of the noise. We're here to win and we're here to do a job and do
it well.
And you know you work your entire life for this moment, so nothing is going to get in the way of that.
(END VIDEO CLIP)
SCHOLES: Now, the U.S. Soccer Federation originally responded to the lawsuit arguing that the, "Men's and women's national teams they are
physically and functionally separate organizations that perform services for U.S. Soccer in physically separate spaces and compete in different
competitions, venues and countries at different times."
They went on to say, "The teams have separate collective bargaining agreements and have separate budgets that take into account the different
revenue that teams generate." And the key word there is revenue.
The U.S. Soccer Federation in May of 2016 said men's games generated about $144 million from 2008 to 2015 while women's matches generated $53 million
and the revenue gap in the World Cup is a big reason.
This year, the women's champion will win $4 million of $30 million prize pool. France meanwhile, just brought home $38 million for winning the
Men's World Cup last year and that prize pool was $400 million.
[09:55:11] SCHOLES: So you know there's no dispute that -- disputing that you know the U.S. women's team is more successful and has more stars with
name recognition than their men counterparts, but Eleni, there's also no disputing that there's just much more money in men's soccer.
GIOKOS: All right, Andy, we're going to have to pick this up again, it's a deep conversation that needs to be had. Thank you so very much for that
update.
Well, that's it for FIRST MOVE. Thanks very much for watching. Let's take a quick look to see how the markets are faring right now. Dow Jones is up
almost a quarter of a percent. S&P 500 flat with a downside bias and NASDAQ also sitting slightly in the red.
Remember markets did really well last week. We've got big news flow this week. U.S.-Iran trade, tensions between China as well. There's just so
much happening on the agenda. Markets are on edge perhaps, but Dow Jones is looking good for now.
Also a spate of earnings that we are expecting later on this week. So the IDesk with Robyn Curnow starts right after this. I'm Eleni Giokos, see you
tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
