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First Move with Julia Chatterley
President Trump Says That The U.S. Should Have Mario Draghi Instead Of Jerome Powell; Iran Sends Its First Oil Shipment To China Since The U.S. Revoked Its Waiver; NBC Is Taking "The Office" Off The Streaming Site. Aired 9-10a ET
Aired June 26, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT: Live from the New York Stock Exchange, I'm Eleni Giokos, I'm in for Julia Chatterley this week,
and here's what you need to know. President Trump is on the attack. He says that the U.S. should have Mario Draghi instead of Jerome Powell. And
on the move, Iran sends its first oil shipment to China since the U.S. revoked its waiver. And Netflix becomes the assistant to the regional
manager, NBC is taking "The Office" off the streaming sites. It's Wednesday, let's make a move.
All right, so welcome to FIRST MOVE, great to have you with us. And it's a big market moving day not because of fundamentals perhaps but just because
of what the things we've been hearing coming through from President Trump and of course, Steve Mnuchin as well, that's really driving sentiments, as
we are 30 minutes away from the start of trade here in New York.
So let's take a look to see how things are going. Right now, we've actually got the U.S. futures looking to a positive start and that of
course, is on the back of the fact that the S&P 500 fell one percent there, the same with NASDAQ, it was also in the red.
In fact, yesterday was the worst day for U.S. stocks this month, and not forgetting that we did hit an all-time high on the S&P 500 last week, but
all focus is going to be on some of the comments we are getting about the G20 meeting between Trump and Chinese President Xi as well.
Now Steve Mnuchin, the U.S. Treasury Secretary has been talking about the fact that a trade deal was 90 percent complete before talks derailed last
month, and believes there is still a path to getting the deal done.
Now in comments this morning, President Trump says fresh tariffs on China are still on the table if a trade deal isn't reached. So conflicting views
here perhaps, but that is definitely something people will be focusing on today.
And as futures improve, we've also got the 10-year yields once again above two percent. Remember, as yields rise, it shows more appetite for risk.
But even at these levels, yields are pointing to a possible reverse in fortunes for the U.S. economy.
Now big moves on oil over the last few weeks, that's definitely one to watch. According to the Bank of America, oil prices could tumble if trade
talks between the U.S. and China falter. That's in a scenario where the Chinese yuan weaken significantly.
Today, however, shorter-term dynamics are playing a role and oil prices are higher. New data is showing that U.S. inventories fell by a greater amount
that was expected last week offsetting perhaps those concerns about the war of words between the U.S. and Iran.
So time to get into the drivers right now. In the past hour. We've heard from President Donald Trump, he has been very vocal about monetary policy.
He's been very vocal about Jerome Powell as well. This during an interview with Fox Business, he hits on tariffs, trade and doubled down and he's
attack on Fed Chair, Jerome Powell. Let's take a listen.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Here is a guy, nobody ever heard of him before. And now I made him and he wants to show how
tough he is. Okay. Let him show how tough he is. He is not doing a good job. I have the right to demote him. I have the right to fire him.
(END VIDEO CLIP)
GIOKOS: All right, Christine Romans joins me now. It's pretty jaw dropping stuff. I mean, we had Jerome Powell yesterday saying we're
independent, no one can intervene. And now you've got President Trump saying, "Listen, I can demote, I can fire."
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: And he said the President of the United States said Jerome Powell, "I made him, let him
try to show how tough he is. I made him." The point of the Fed, that appears to escape the President of the United States is that it is
independent. It is appointed by the President, but then there are these terms that are long, meant to withstand, you know, the ebb and flow of
politics because every President would like low interest rates heading into an election year.
If you did that, you'd have boom and crash and burn economies, one after the other. So it's sort of like the Supreme Court. It's not a coequal
branch of government, but it's sort of designed like the Supreme Court to be something that sits aside outside of the White House.
And this President very publicly, is trying to send this signal that he wants lower rates. He said he wants Mario Draghi to be the Fed Chief
because in Europe, they are talking about stimulus and cutting rates, and injecting stimulus to the economy and the President was waxing poetic about
that.
[09:05:03] ROMANS: And Eleni, he has talked about President Xi Jinping before and he has sort of lamented that the United States isn't like China
-- Communist China. He has lamented that the United States is not like China, so the President can just devalue a currency or inject stimulus
whenever he wants, for whatever reason.
GIOKOS: I mean, the Mario Draghi comments really just threw me off, because Europe is dealing with a whole state of other issues. They need to
stimulate to grow the economy, the U.S. is growing. I mean, you know, the holy grail of an economy is basically the way the central banks conduct
themselves and of course, monetary policy is part of that.
We've perhaps, you know, learned the lessons of overstimulation in the past, and that has led to an overheated economy and a financial crisis. I
mean, surely they should be looking at this as well, because it's a big risk.
ROMANS: Here is what's so amazing. And I've even pulled up -- pulled this up for you, you know, the President, this President, when he was citizen
Trump, and the Fed was lowering interest rates during a financial crisis during the backup Barack Obama administration, this President was
criticizing the Fed for lowering interest rates, criticizing the Fed for easy money policies that would lead to too much trouble or inflated stock
market down the road.
So this President today is demanding from the Fed Chief what he has criticized Janet Yellen in the Obama administration in a much, much weaker
economy, for doing. So he is on the record, saying that easy money policies are dangerous. He is likened --
"She is obviously political," he says, "And she is doing what Obama wants her to do." Talking about Janet Yellen. "That's why it's low rates,
because as soon as they go up, your stock market is going to go way down. I believe it's a false market." That's what he's asking for here.
GIOKOS: Exactly. Very different to what we heard from Jerome Powell yesterday that they've been reticent. They're going to be proactive, if
needed. But also, what else did President Trump say? He was talking about so many things from trades to monetary policy, I mean, he even said,
Vietnam is even worse than China. And everyone was talking about how Vietnam is going to be the next big play.
ROMANS: I have to tell you that these interviews with the President, he has been speaking. He just wrapped up actually, so has been speaking for
more than an hour and when he did this on CNBC maybe last week, and it's like, you know, the pinball game where you watch, you pull back the
trigger, and the ball goes all around. That's what the thought processes here on trade.
And in that pinball conversation, what I heard was, I heard him slamming the Europeans, threatening potentially the idea of big tariffs on the
Europeans down the road -- that could be a headline, I think we should watch for down here -- slamming Vietnam saying it's much smaller than
China, but that they're looking at tariffs in Vietnam, slamming the Canadians, but saying they had recently come to the table.
He talks as though he is aggrieved that the United States is someone who has been just kicked on the beach in the sand, with its face in the sand
for years and years. He talks about China taking $500 billion a year from us, only looking at the one side of that trade relationship of course,
American consumers receive $500 billion worth of goods in exchange for that $500 billion that cross and also the benefit of so many multinational
corporations of their supply chains.
So the President has a very simplistic view of things, and he ties a thread between sometimes unrelated items to really push what I think -- I think a
lot of business leaders realize this is the way the President thinks, so they have to kind of adjust around that because he is not changing his
mind.
GIOKOS: Christine, thanks so much for that insight and of course, all market moving comments as well. We are watching that closely as we head
closer to the start of trade here in New York.
And just speaking of trade, we know that China has banned all meat imports from Canada. It's claiming that customs documents were forged. We've got
Anna Coren joining us now live from Hong Kong. And the reality is that this comes at a time where the relationship between China and Canada has
deteriorated. Is there more to the story than just forged documents?
ANNA COREN, CNN INTERNATIONAL CORRESPONDENT: Eleni, many serious issues. This is just a further deterioration in relations between China and Canada.
But as you say, China has announced the suspension of all meat products from Canada after the detection of residue from a veterinary drug and feed
additive in a batch of Canadian pork products.
Interestingly, the drug that's called ractopamine is banned in China, but not in Canada or the United States. Now an investigation also found there
were forged customs documents as many as 188.
Beijing has called on the Canadian government to stop issuing health certificates to meet exported to China effectively cutting off Canadian
suppliers.
Now, the Chinese Embassy in Canada, they've issued a statement. I'd like to read that out. "We hope the Canadian side would attach great importance
to this incident, complete the investigation as soon as possible and take effective measures to ensure the safety of food exported to China in a more
responsible manner."
Now, the Canadian Agriculture Minister said the Canadian Food Inspection Agency identified an issue involving inauthentic export certificates and
had informed authority. She described it as a technical issue and was working with industry partners and Chinese officials to sort this out.
[09:10:11] COREN: Now, they believe that this will just be a temporary ban. It's also worth noting that in recent months, China suspended import
permits for three pork producers and stopped imports of Canadian canola.
Now, the diplomatic dispute all stems from the arrest of Huawei's Chief Financial Officer, Meng Wanzhou in Canada at the end of last year at the
request of the United States. She obviously faces extradition to America over allegations she helped Huawei evade U.S. sanctions on Iran.
The Chinese government maintain the arrest was politically motivated. The Chinese then arrested two Canadians earlier this year, they were accused of
gathering and stealing sensitive information and other intelligence since 2017. And of course, the timing, Eleni is interesting.
Canadian Prime Minister Justin Trudeau is about to leave for the G20 in Japan, which Chinese later Xi Jinping is attending. Trudeau however, he's
relying on U.S. President Donald Trump to raise the issue of the arrested Canadians when he meets with Xi -- Eleni.
GIOKOS: All right, thank you very much for that, Anna, and of course, we've got to remember that China is Canada's third largest export market,
so we've got to keep a very close watch on that.
Let's shift gears now. We are moving over to Iran where the first oil shipment to China has been sent off and that's since the U.S. has revoked
those rules, and of course, we've got Fred Pleitgen standing by for us in Tehran.
It's a really interesting move because essentially, this move defies U.S. sanctions, essentially. And at the same time, China is saying that the
U.S. has got to get back to the negotiating table and even saying and urging that the U.S. government needs to uphold the nuclear pact as well.
This is a really strong signal that's coming through in terms of what China is viewing in the region.
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: I think you're absolutely right, Eleni, I think that the Chinese are making a clear signal
to the United States, and of course, they want to go back to the nuclear agreement. The Chinese, of course, are big supporters of the nuclear
agreement. They get a lot of their oil out of the Persian Gulf region, and they've been getting a lot of oil from Iran, as well. And it really seems
as though that's something that is continuing.
I can tell you this news item about that tanker going to China for the first time since the U.S. kind got rid of those sanctions waivers, that's
big news here in Iran, because of course for the last couple of months, all the Iranians have been hearing is that their oil exports have been cut down
because of the U.S. sanctions that they're almost at zero.
The Iranians now are saying that in the past couple of weeks alone, they exported around $585 million worth of oil and petrochemical products to
China, that's in May.
But now this tanker obviously was on the high seas for a while, it is the first one to arrive since the sanctions waivers have gotten rid of and the
Iranians are saying that there's actually more tankers on the way to China that they're going to be exporting more oil to China.
And of course, the Iranians have been saying they want to bust the sanctions in any case, but it's quite interesting to see that the Chinese
would still be buying Iranian oil, of course, also defying the U.S. in all of this.
And of course all of this also, as you have those talks between President Xi and President Trump coming up at the G20 as well. It will be
interesting to see if that's going to be one of the topics so that the Chinese, not abiding by the United States' sanctions continuing to take oil
from the Iranians and the Iranians obviously, making quite a big deal of that as well.
It's been quite interesting, by the way, Eleni, today, there was an Iranian Professor who was out giving some numbers and he said generally, they
believe that their oil exports are somewhat stabilizing after they've fallen off a cliff because of those U.S. sanctions. They also think that
their economy and their currency might be somewhat stabilizing as well.
You never know how much bluster that is. You obviously have the Supreme Leader of Iran also talking and saying they could develop despite the
sanctions. But the Iranians seem to think that things might have bought them out, and certainly this will be a welcome news for them to hear that
they are able to still get oil to one of their most important trading partners -- Eleni.
GIOKOS: And basically the goalposts are changing every single day because we heard that new sanctions are going to mean, you know, no deal and no
diplomatic solution, then you've got President Rouhani saying come back to the negotiating table regarding nuclear.
And then you've got President Trump, who was speaking a short while ago in the media, and he was saying a hypothetical war with Iran wouldn't last
very long. So this is just sending so many different signals and it is just creating even more uncertainty within the region.
PLEITGEN: It's absolutely mind boggling. I can tell you what some of these leaders have been saying over the past couple of days. If you take a
look at the Iranian President Hassan Rouhani who yesterday, said, essentially, that the White House was in a state of mental disability. And
today, he came out and said, he is urging the United States go back to the nuclear program. He said -- the nuclear agreement I should say, he said,
it's the best thing to do. It's what the people and all of the countries want. It's what the international community needs as well.
[09:15:10] PLEITGEN: You have President Trump, who for his part, on the one hand, keeps saying that he wants the Iranians to go back to the
negotiating table. He says there's no preconditions for that. But then he goes out and says something like you said just a couple of minutes ago on
Fox that a war would not last very long.
And then at the same time, of course, all of this is taking place while there is an extremely tense situation going on in the Persian Gulf. I
mean, this is an area where you have a lot of American forces and a lot of Iranian forces in very close proximity all the time.
I mean, that's -- it's been a tinderbox for a while, even more so over the past couple of weeks. And certainly the kind of statements that we're
hearing, especially from the U.S. President also yesterday, for instance, saying that he doesn't need an exit strategy, if there ever was an armed
conflict with Iran. Those are all things that certainly won't do anything to calm this region down -- Eleni.
GIOKOS: Exactly. I mean, and the Straits of Hormuz as a choke point for oil exports so, we will be watching that. We will be touching -- getting
up with you over the next few days. Thank you very much for that, Fred.
We'd like to now turn our attention to some of the stories making headlines around the world and also caution you to this very disturbing picture,
which of course, is heart wrenching, and it's something that is moving a lot of policymakers here in the U.S.
It's a shocking photograph, capturing the tragic reality of the escalating migrant crisis in the U.S. Twenty-three months old Angie Valeria was found
drowned alongside her father as they tried to cross the Rio Grande River. They died as a little girl's mother watched on. The family from El
Salvador had reportedly been waiting to receive political asylum from the U.S.
We've got to Ed Lavandera in Clint, Texas for us standing by. This picture, Ed, is absolutely heart wrenching. It's so difficult to look at.
And it basically shows that people are so desperate for a better life that they willing to take a big risk. How has the U.S. government responded to
this?
ED LAVANDERA, CNN NATIONAL CORRESPONDENT: Well, this has gone on here along the Texas-Mexico border for many years and the current in that river
is incredibly strong, incredibly dangerous. And what critics of the Trump administration have been saying for months is that because of the Trump
administration's crackdown on the number of people who can request asylum at legal ports of entry, that that is driving migrants to make the much
more dangerous and treacherous decision of crossing between the ports of entry and that means crossing through the river.
So this has become a very dangerous situation. We've seen dozens of high water rescues that Border Patrol agents have jumped into the river to
rescue people who are nearly drowning, but this one has come to a fateful end. That father and his daughter had reached the U.S. side. He had put
his daughter on the shoreline there and when she went back to try to get his wife and help her across the river, the young girl jumped in. She was
afraid that she was being left behind there. And then everything unfolded in that horrible dramatic way.
And that is really testament to just how dangerous of a situation many of these migrants are finding themselves in.
GIOKOS: Ed, thank you very much for that update and for your work there near the border. Appreciate it. We're going to a short break. We'll be
back right after this. Don't go anywhere.
(COMMERCIAL BREAK)
[09:21:02] GIOKOS: All right. Welcome back to FIRST MOVE. I'm Eleni Giokos live from the New York Stock Exchange. U.S. stock futures pointing
to a positive open, but they are off session highs as you can see, down a quarter of a percent and President Trump said in an interview with Fox
Business a short time ago that new tariffs on China are still on the table if a trade deal isn't reached.
Earlier, as Treasury Secretary Steve Mnuchin said that there is a path to competing to trade deal, President Trump will discuss trade with Chinese
President Xi at the upcoming G20 Summit. Conflicting messages that we're seeing coming through. And of course, this all needs to be absorbed by
what we're seeing in the markets as well.
So despite this, pullback on Wall Street, U.S. stocks remain close to record highs that was actually reached last week on the S&P and they are up
strongly this month with blue chip stocks as well performing really well.
We've got Tracy McMillion, Head of Global Asset Allocation Strategy for the Wells Fargo Investment Institute joining us now. Great to have you.
TRACY MCMILLION, HEAD OF GLOBAL ASSET ALLOCATION STRATEGY, WELLS FARGO INVESTMENT INSTITUTE: Great to be here.
GIOKOS: And I know that you were listening to President Trump's interview this morning.
MCMILLION: I was.
GIOKOS: Just so many different things that came through, and some would say it's conflicting, you know, some of the things that we're hearing from
his policymakers that he has put in place like you know, Jerome Powell and the like. What are you reading into this? And do you think that it's a
negative or a positive for the U.S. economy and U.S. markets?
MCMILLION: Yes. For the U.S. markets, I would say that he just laid out his next steps. So if we were to get a deal with China, I don't think that
investors can check trade off and say everything is okay with trade from here, because he just said the Eurozone was worse than China. He mentioned
Vietnam. So, you know, it's probably going to be a long time before we get trade wrapped up with all of these countries.
GIOKOS: So multiple trade wars occurring in multiple jurisdictions around the world.
MCMILLION: Yes.
GIOKOS: A global trade war so to speak scenario.
MCMILLION: Global trade negotiations, let's call it.
GIOKOS: Okay, let's call it that. Let's be a little bit more optimistic. But the reality is, that's also been driving sentiment quite a bit. But
it's interesting when you look at the S&P, very close to record highs. But you've also come out with a report where you've looked at what investor
optimism is doing, and that's down 18 points from the year before. What are investors telling you at the moment?
MCMILLION: Right, so investors are saying that they are concerned. We've been trending downward since the end of 2017. They're worried about a
recession. More than half say that they think a recession could happen within the next 18 months.
But at the same time, they say that they're generally pretty optimistic about the current economy. So they feel like currently the economy's doing
okay. They're worried about what's down the road.
GIOKOS: Exactly. But I mean, just before 2021, hitting a recession or getting into recession, that's around the corner in reality, so people are
going to be adjusting the books, perhaps by the end of the year, come early next year and becoming more defensive, getting into defense of stocks, you
know, what are they doing at the moment? Obviously, enjoying the ride, but then you've got to get out, you've got to know when to get out.
MCMILLION: Right, right. So what investors are telling us that they're doing right now, and actually about two thirds say they feel prepared for a
recession, so that's good news. They're reallocating some of their portfolios. Some of them are raising cash. Our recommendation to our
clients is to watch a range from 2,800 on the S&P to 2,900. We get above the 2,900, and we take some gains, we get below. We buy some stocks.
So we think that it's going to trade within a range, and that they're going to be opportunities on either side of that range.
GIOKOS: Any specific stocks that you are looking at right now that are good players? I mean, obviously, you want to stay away from the
multinational companies that have big exposure to China and obviously now you've got to think about Europe as well, because that could be the next
move. I mean, how are you looking at things in terms of asset allocation and company allocations?
MCMILLION: And so we look at the various asset classes within equities and right now, we think that us small caps is a place to sell and emerging
markets is a place to buy.
[09:25:10] MCMILLION: So we will be selling some of those small caps because we think they tend to do worse late cycle. Expenses start to rise
for them. So they think, wages increasing, finding labor is more difficult for them.
Whereas emerging markets are actually really well priced right here. You can buy much more earnings in emerging markets per dollar than you can here
in the United States.
GIOKOS: Exactly. And I mean, yields are looking better within the emerging market space. But some would say emerging markets are just very
prone to any risk aversion globally. And then usually, when that happens, emerging markets usually fall off a cliff, even if fundamentals are looking
good. Are you pricing that in?
MCMILLION: They are definitely more risky, yes, emerging markets are more risky. And because they're more risky, we would have a higher overall
long-term allocation to U.S. large cap stocks. But we do think that an allocation to emerging markets is appropriate. And we'd be increasing that
allocation right now.
GIOKOS: How much is hinging on the Fed cutting rates? Because that's been a big debate, a big conversation and the markets are very clearly pricing
in big moves on rates at least now, and we've heard from Jerome Powell yesterday. We heard from President Trump today saying Mario Draghi did a
better job.
MCMILLION: Right, so the Feds got a tough balancing act right now. They have to determine how much the trade negotiations are impacting the
economy. They've got to see that flowing through the data and then respond to the data. So they're just saying that we can and we will cut rates if
need be. So they're watching that data to see if it's necessary.
GIOKOS: Tracy, really good to have you with me. Thank you very much for joining us.
MCMILLION: Thank you.
GIOKOS: Much appreciated. We're going to short break. Right after this, New York starts trade and we'll be bringing you the latest numbers. Stay
with us.
(COMMERCIAL BREAK)
[09:30:00] GIOKOS: Welcome back to FIRST MOVE. I'm Eleni Giokos live from the New York Stock Exchange. That was the opening bell. Big cheers today
and U.S. stocks are rebounding from Tuesday's losses. Let's take a look at those numbers. As you can see, the Dow Jones only slightly higher.
It showed in premarket trade that we would actually get a bit on the start of the day, but perhaps being pulled lower by some of President Trump's
comments today on Fox Business this morning. And he was just talking about tariffs against China if the negotiations don't go well. He was talking
about his next move in terms of targeting trading partners.
So lots of things to absorb this morning, and I think market participants taking that very seriously. S&P 500 reached an all-time high last week.
We're off those highs, of course, and we're down a quarter percent in early trading, as well. G20, on the mark as well. We are focusing on what will
happen later on this week.
In the meantime, gold is pulling back from six-year highs. It's been an upward trajectory on the back of accommodative monetary policy, as well as
uncertainty regarding trade, as well as on the Middle East instability and low rates. As you can see, it's trading slightly lower.
Okay, so let's move on now. I want to take a look at the big movers this morning. We've got Blackberry, it's down almost two percent at the moment.
The company's quarterly revenue beat expectations, boosted by its recent takeover of a cybersecurity firm. That's interesting right now as you can
see, it's coming under pressure this morning.
We're also watching Wayfair. It's an interesting company to look at. As you can see, it's up six tenths of a percent. Today, the company is
selling furniture to migrant camps. Wayfair senior management says it still plans to work with detention facilities. That stock is moving up
this morning.
And in the meantime, Micron Technology is also an interesting company. This morning, the maker of computer memory chips was really hard hit last
week after the U.S. government basically said that Chinese companies couldn't buy any products from them. But they were then able to do so.
They circumvented some of those rules and are selling back to Huawei.
We've got Clare Sebastian joining us now and I'd like to talk on Micron. It's getting more than one tenth of its revenue from Huawei.
In the quarter, Micron wrote down around $40 million worth of inventory related to that company. So it's interesting play now that they were able
to get around the regulation and actually see which products were bad and which products actually aren't, and that boosted stock price this morning.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Absolutely, Eleni, and not just Micron, but across the chip sector, which as you know, has been really
beaten down by fears around this trade war. It's extremely exposed to China and in particular, to Huawei.
As you say, Huawei is about 13 percent of Micron's revenue in the first half of this year. So I think investors are looking at this news that they
now have restarted some shipments to Huawei in the last two weeks as a really positive thing.
The blanket ban that they had been expecting on all exports to that company after it was placed on the entity list by the Commerce Department has not
turned out to be a blanket ban.
Now Micron hasn't said which of its products or how many of its products it can still ship to Huawei, but we know that there are certain exceptions
when it comes to the entity list, perhaps items with less than 25 percent U.S. content that most of them foreign made can still be shipped.
But clearly, this is something that their lawyers have been heavily focused on. Having said that, the stock has been so beaten down that this jump has
to be viewed in that context, Eleni. Micron is down, or it was before today some 25 percent from the end of April. So certainly that won't go
anywhere near reversing that trend.
GIOKOS: Yes, and I must say, Clare, you look good in your safety mining gear. But it's good to have you back in the studio today. You've just
returned from a rare earths mine and we spoke yesterday. You were talking about the fact that rare earth concentrates are actually shipped to China,
and they process, you know, the resource there. But the point is if the U.S. really wants to ensure its independence, it has actually got to
produce and create processing clients here in the U.S. What did you learn when you were at this mine?
SEBASTIAN: Yes, Eleni, it's interesting, I mean, talking about Huawei, because this was -- the blacklisting of Huawei was seen as one of the
biggest weapons that the U.S. could deploy in a trade war. And in the wake of that, China stepped up its hints that it could deploy a weapon of its
own, and that would be to restrict rare earth exports, which is a supply chain that it has its stranglehold over.
But we traveled to a place called Mountain Pass, California. It's about an hour from Las Vegas. This is the only rare earths mine in the United
States and it's a key part of the U.S. strategy to reduce its dependence on China. Take a look.
(BEGIN VIDEO CLIP)
[09:35:02] UNIDENTIFIED MALE: Three, two, one. Fire in the hole.
SEBASTIAN (voice over): Blasting through the rock.
UNIDENTIFIED MALE: Very good.
SEBASTIAN (voice over): To reach the precious metals underneath.
UNIDENTIFIED MALE: Beautiful sight to see.
SEBASTIAN (voice over): These are busy times here in Mountain Pass, California. The mine thrown into the spotlight by the U.S.-China trade
dispute.
SEBASTIAN (on camera): Is it the busiest you've known it?
ROBBY REUSCH, MANAGER, MINES AND ORE DELIVERY, MP MATERIALS: Right now it is and we continue to accelerate more and more each day.
SEBASTIAN: This is the only rare earths mine in the United States. But just two years ago, it was sitting idle after the previous owners went
bankrupt. Now, though, it's well and truly back up and running.
The current owners say it accounts for more than 10 percent of global rare earths supplies.
SEBASTIAN (voice over): Rare earths, 17-naturally occurring element, crucial ingredients in everything from cell phones to electric cars.
UNIDENTIFIED MALE: This is very valuable product right here.
SEBASTIAN (voice over): The cochairman of the mind, James Litinsky is aware he is leading a lone U.S. competitor in an industry dominated by
China, where labor costs are cheaper and environmental rules less strict.
JAMES LITINSKY, COCHAIRMAN, MP MATERIALS: If there's going to be an American rare earth industry, it's going to be led by us. We're it.
So this is actually the product. This is the concentrate coming out of the mill and we will package this into those containers over there. And that
is currently the product that we're shipping.
SEBASTIAN (on camera): So right now, everything you produce, everything goes to China.
LITINSKY: Yes, that's correct.
SEBASTIAN (voice over): That's because China processes much of the material from other countries currently producing 90 percent of the world's
supply.
Beijing recently threatened to use that dominance as leverage in the trade dispute, hinting it could restrict rare earth exports, cutting off not only
U.S. companies, but also the military, which uses rare earths in jet engines, satellites and missile defense systems.
The Pentagon told us they are quote, "Working closely with the President, Congress, and the industrial base to mitigate the U.S. reliance on China
for rare earths."
LITINSKY: My first reaction is, "Wow, what have be bought."
SEBASTIAN (voice over): Mountain Pass has its own plans to reduce its reliance on China, this massive processing facility that they plan to get
up and running by next year.
LITINSKY: There really is nothing like this facility in the world. The scale of it, the amount of investment that has gone into it and there were
a lot of people who doubted that we could get this thing going again.
SEBASTIAN (on camera): Has the trade war provided more impetus to get this off the ground?
LITINSKY: So there's definitely a greater sense of urgency.
SEBASTIAN (voice over): This plant would allow them to sell separated rare earths directly to global companies. Litinsky says it's a mission he feels
the U.S. government needs to support.
LITINSKY: And if the United States of America is going to be a leading power in the world, we need to continue to grow our economy and so there
needs to be a recognition that the industries of the future drive GDP, they drive employment, and ultimately that will drive your military budget.
And so as a matter of national security, we need to lead in these industries of tomorrow.
SEBASTIAN (voice over): A recognition that could help turn this mineral rich soil into an American rare earths revival and a viable alternative to
China.
(END VIDEOTAPE)
GIOKOS: All right, thank you so very much for that update and insight. Clare Sebastian, great to have you on the show.
All right. So up next, China's fragile growth and new report warns of threats to the economy. We will bring you all the details right after
this.
(COMMERCIAL BREAK)
[09:41:24] GIOKOS: So welcome back to FIRST MOVE. China's economy improved slightly in the second quarter. But its growth is unstable and
the risks, serious. Those are the findings of the most recent independent China Beige Book report. For more on this, I'm joined by Leland Miller,
CEO of the China Beige Book. Really good to have you with us. Thanks so much for joining us.
Okay, so you're looking at economic data out of China. But the big question is, do you believe the economic data that's coming out of China so
that you can make your own assumptions to create this report.
LELAND MILLER, CEO, CHINA BEIGE BOOK: The Chinese have a lot of reasons to announce their data and then part of them are political, so we started
China Beige Book back in 2010 for the reason -- for the sole reason that you cannot rely on data coming out of China. There's too many things that
the government wants to tell people that that may not be good news, and then they don't like to really release bad news.
So you've got to be very careful when you rely on this stuff. It's politically manipulated, and quite often it's -- well, it's nontransparent,
but quite often, this is lagged. So you might be three or four months at a time at any given point.
GIOKOS: It's interesting retail sales out of China for the month of May were out yesterday showing a 0.6 percent growth, which is looking pretty
good, it seems that the Chinese consumer is faring quite well.
But again, you're getting other views saying China is slowing. They need to embark on stimulus. You're saying it's not sustainable growth in the
second quarter. So what are we going to see?
MILLER: Well, you know, on the positive side of the ledger, retail did perform well in the second quarter. So the idea that the Chinese consumer
is going to sweep in and take care of China's debt problem, that has always been overhyped, it's wrong.
But you do see ebbs and flows of retail, and we saw it actually improving retail situation in the second quarter. We also manufacturing improve,
which is not consensus either.
So there are good things happening. A lot of this is undergirded with an enormous amount of credit support they are giving you the economy.
GIOKOS: And I guess the big question is just to what extent is the trade war with the U.S. going to impact the Chinese economy? Do they have tools
in the box to counteract the big play with the U.S.? I mean, I know everyone's trying to divert routes, but I mean, is there enough demand in
other economies to counteract the issues that we're seeing with the U.S.
MILLER: They do have tools, the key is they're already starting to use these tools, most of which they haven't admitted to. So one of the things
we saw in the second quarter, probably the most interesting thing is the return of shadow banks. The last several years, we haven't seen that
trend, and all of a sudden, we've seen this reemergence.
They do have tools. Q1 was heavy credit support to a very disadvantaged -- typically disadvantaged borrowers. Q2 is the return of shadow banks. So
they have options here. But they're really having to turn them on in order to get this juice.
GIOKOS: And this shadow banking play is really interesting, because it just goes to show that traditional banks just find investments too risky at
this point in time. But you know, I think when we look back at the financial crisis, it was China who helped stimulate the economy as a whole
out of the trouble it was in and now we're kind of, you know, we're playing this different game with China. It's a big economy, it's got 1.3 billion
consumers. If it slows down, what effect is it going to have on the rest of the world?
MILLER: Well, it's going to slow down. I think people need to get that in their head. There's a best case scenario and there's a worst case
scenario, and both of them involve China's slowing dramatically over time.
Now, if they restructure and reform and do it the right way then they can come out the other end, very strong with slower, but healthier growth.
If they keep pushing this off and pushing this off, then they're going to have a fallen growth down the road due to the fact that they've accumulated
too much debt and return on investment is so paltry that they can't keep up these high growth rates, and there will be social problems connected to the
labor market.
So they have to make a decision. I think a lot of what they would like to do right now is deal with the trade war, come to a deal and then get back
on the road to try to --
GIOKOS: Are you optimistic about a negotiation happening this week?
MILLER: Yes, I think right now, you know, we spend a lot of time working with the administration on some of these issues. The administration wants
to come in and they want to reset the talks, and they're willing to pump at the last tranche of tariffs in order to do it.
[09:45:07] MILLER: So you could have some very positive headlines coming from Osaka. That doesn't mean a deal is done. That means that they're
going to restart the talks. They're very close. Secretary Mnuchin said they're 90 percent done, I'd say they are 95 percent done. But those last
five percent -- not easy and it will take a little bit to get over the hump.
GIOKOS: I mean, we're also seeing Fitch was saying that, you know, the trade war could actually take off north of 0.4 percent of global growth.
What impact is it going to have on Chinese growth as a whole? Have you got a number that you guys are looking at? What's the prognosis?
MILLER: We try to stay away from the GDP growth number, but we can say this, on the one side, the tariffs are threatened -- that $500 billion
tariffs or 25 percent, that's an enormous nightmare scenario for the Chinese economy.
At the same time, you have Trump hitting their technology companies, Huawei may be the most important there, so in China. If they don't come to a
deal, and make no mistake, Xi would like to come to a deal.
If they don't come to a deal, then you're going to have very, very, very difficult conditions for the Chinese economy in the second half, in
addition to the fact that we are going to see significant repayment pressure, because all this credit that was spewed out the spigots in the
first half of the year has come at a very high capital cost. So there will repayment pressure trying to meet those higher capital costs second half of
the year. They don't want to see this happen.
GIOKOS: Yes, absolutely. I mean, China is such a big holder of U.S. Treasuries as well, so there is a play. And I see the geopolitics that
occurs, I mean, Iran is sending oil to China. It is defying U.S. sanctions. There's so many other messages that we are seeing.
In the lead up to this conversation, I mean, it almost seems like a show of force, a show strength by all sides. It's not a good way to get to a
negotiating table.
MILLER: That's right. I mean, one of the questions we get all the time is how can President Trump afford to come to a deal with China when China is
the enemy and there's so much anti-China tension in the United States, I mean, with 2020 coming up.
Well, the reason is you can come to an end of the trade war for now, but you still have so many other different routes that you're competing with
China on South China Sea, technology, et cetera. So this is not going to calm down with China even if you have a trade deal in the next few months.
GIOKOS: Leland, thank you very much for joining us. Great to have you on. Much appreciate it. Okay, more to come on FIRST MOVE. Out of the office,
Netflix loses its biggest TV blockbuster. I'll update you right after this.
(COMMERCIAL BREAK)
GIOKOS: Welcome back, the global market for electric scooters could hit nearly $30 billion by 2025. This as E-scooter company, Lime announces it
is launching a major expansion in Latin America.
I sat down with Lime's Global Head of Operations and Strategy, Wayne Ting and asked him about the vision behind his company's rapid growth.
(BEGIN VIDEOTAPE)
WAYNE TING, GLOBAL HEAD OF OPERATIONS AND STRATEGY, LIME: We've been focused on North America and Europe, we're the number one provider, but we
actually see a huge opportunity in Latin America.
It's got some of the biggest cities in the world, some of the densest, most congested, and it's actually got a young population that embraces
technology. And so we're going to be going all in Latin America over the coming months, launching in Brazil and Argentina, and Peru, scaling in
Mexico. And we actually see it as a huge opportunity. It's in many ways a perfect market for micromobility.
GIOKOS: Do you have to engage with the governments and the regulators when you're heading into these new markets? And what kind of negotiations do
you need to embark on there?
TING: One hundred percent. So, our strategy is to always partner with cities. We are there. It doesn't work unless the communities feel like
this is something they want. And I think our best argument is that this is good for the local community.
It's cheaper, it's oftentimes faster, especially with congestion and it's more environmentally friendly. The future is going to have fewer cars and
more forms of transportation and micromobility is going to be part of that future.
[09:50:11] GIOKOS: And of course, it's very interesting. I mean, all these cities, Brazil and Argentina, Mexico City, they want to get rid of
congestion on the road, you know, and now you're kind of filling that gap, as well.
You launched in Germany not too long ago, as well. Do you think this is going to be a real replacement for motorbikes and for, you know,
traditional bicycles that people have been accustomed to in these territories?
TING: So, I actually think the biggest replacement is going to be for the personal cars. Most of the world's transportation in big cities actually
are dominated by personal cars. There are 90 million cars in Brazil, 45 million cars in Mexico, and 30 plus percent of the trips are less than two
miles. The car is not a good way to move around. It's expensive, it's congested. And it's not good for the environment.
And this is where I think micromobility is going to replace it. That 30 percent of the trips that are less than two miles, you're going to see
scooters, you're going to see bikes, you're going to see other forms of lightweight electric vehicles replacing that over the next decade.
GIOKOS: And at the end of the day, it's also about the design itself. How you evolving within that space? Because we've actually seen people coming
up with new designs, wanting to enter that space saying, you know, the space to hold your bag and for women and these, you know, if you want to be
on your scooter with your suit and your laptop. I mean, how are you evolving within the design spectrum?
TING: So hardware is so important, right? Hardware is, is critical for safety, critical for quality, ride-ability, durability of the scooters. We
have invested from day one in our own hardware. We have over a hundred people working on R&D on the scooter side, and that means that we have more
iteration of our scooters, it means that our scooters have more investments than any of our competitors.
And so things like what you're describing is that: Can we create scooters for different terrain? Different countries? Different climates? We're
looking through all that. And when you try a Lime scooter, you're going to know it feels different, it feels different than what's on the market.
GIOKOS: When I think of motorbikes, for example, they're always seen as a hazard. I mean, you know, there's lots of accidents within that space. Do
you want a lane specifically for e-scooters? Do you think that these are going to be kind of going through the traffic like we see with traditional
motorbikes?
TING: Right. So safety is incredibly important. And I think what you pointed out is one of the things that's really important for safety is
making sure that there are bike lanes and protected bike lanes for scooters and bikes, I think we should share that.
GIOKOS: So do you think its scooters, bikes and bicycles?
TING: Totally. Yes.
GIOKOS: In the same kind of category?
TING; Exactly, I think we should have a lane that is for kind of micro light mobility options and that's really important. Because when I think
about what makes scooters and bikes, oftentimes, not always safe is that they have to share the roadway with cars.
And so the more we can build up infrastructure, the safer that experience will be.
GIOKOS: Alphabet and Uber investing in the company $335 million last year, that's really good. You know, these are really good partners to have.
What are you offering bring them in return? Exposure to these markets? Exposure to the next big thing on the transportation front?
TING: Right. So we think it is a huge differentiator that some of the biggest technology companies in the world -- Google, of course, has the
biggest mapping software in the world. Uber is the world's largest ride sharing business. The fact that they said we're going to invest in Lime
shows that they see us as emerging as the leading micromobility provider. It's both a sign of confidence, but it also shows the type of partnership
that we can bring to the table as we go into Latin America.
GIOKOS: Okay, so the most congested cities in the world like Beijing, Lagos in Africa, in Nigeria, Johannesburg, where I'm from, what's the plan?
TING: So we're going to Latin America over the next few months. And I think Africa is something that should be on the roadmap, when you look at
congestion, young population.
GIOKOS: You have no idea. Lagos, the streets of Lagos.
TING: Right. And you know, and one of the things that's fascinating about Africa is that Africa also have skipped technology generation, right? So
for a long time, people said, "Oh, you've got to lay landlines." No, Africa went directly to cell phones. And I actually think Africa could be
a case example where they skip the world of personal car ownership and go directly to shared and go directly to micromobility.
(END VIDEOTAPE)
GIOKOS: Right, "The Office" has become the latest battleground in the streaming wars. Netflix will lose the U.S. version of the hit series in
2021 when NBC takes it back to us on its own streaming platform.
"The Office" was the most watched show on Netflix last year. We've got Brian Stelter joining me now. Many people are really upset about this.
And of course, it's basically the opposite of pretzel day for office fans, yes?
BRIAN STELTER, CNN CHIEF MEDIA CORRESPONDENT: Yes, that's absolutely right. This is an expected move by NBC. But it's still going to be
disappointing to fans of the show who liked to stream it on Netflix. I would say "The Office" has traced the trajectory of streaming television.
A decade ago, I had to pirate the show. I wanted to watch it. There was no easy way to watch it online. Then NBC.com and Hulu came along. This
was a streaming hit when it was actually on TV with new episodes.
[09:55:03] STELTER: Now a decade later, it has a second life on Netflix and NBC has been paid quite a bit of money by Netflix to be able to replay
those episodes on Netflix.
But the world is changing. We see all of these companies launching their own streaming services, NBC is one of them. And NBC has decided it needs
to bring some of its content home, bring it back inside its own walled garden in order to gain subscribers, but this will not take effect until
2021.
GIOKOS: Brian, yes, and I want you to look at these tweets and it's basically what we saw Netflix saying that, you know, members can binge
watch the show, content ad-free on Netflix. Basically, it's taking a stab at NBC that is launching an ad related streaming service. And that's the
thing with content producers are going to be taking back the content and putting it on their own platform.
So you've got to produce your own content. I mean, it comes down to that.
STELTER: Yes, we're seeing this all across the industry. Netflix in the case of "The Office" saying hey, go ahead and watch it for the next two
years. And by the way, NBC is only taking in the domestic rights.
So internationally, this show will be available on different platforms. Big picture, though, this is a move we're seeing across the industry and
Netflix is prepared for it.
In fact, what did they do recently? They went on and ordered a new show called "Space Force" with the star of "The Office," Steve Carell. So there
will be a new version of "The Office" in space on Netflix.
GIOKOS: Excited exciting times. Brian, thank you so very much. Well, that's it for FIRST MOVE. Thanks so very much for watching. I'm Eleni
Giokos. "International Desk" with Robyn Curnow start starts right after this short break and let's quickly take a look to see how the markets are
doing. We are seeing flat with a positive bias. All right bye for me, I'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
