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First Move with Julia Chatterley
Deal Or No Deal, These Are The Only Brexit Options According To A Defiant Boris Johnson; Gambling Giant Paddy Power's $12 Billion Bet With Pokerstars; The Facebook CEO Caught On Tape Saying An Elizabeth Warren Presidency Would Suck. Aired 9-10a ET
Aired October 02, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:24]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE. And here's
your need to know.
Deal or No Deal: These are the only Brexit options according to a defiant Boris Johnson. Going all in, gambling giant Paddy Power's $12 billion bet
with Pokerstars. And Zuck's bad luck. The Facebook CEO caught on tape saying an Elizabeth Warren presidency wood suck. It's Wednesday. Quick,
let's make a move.
Welcome once again to the show, and to FIRST MOVE. As I mentioned there, we've got big deals going on in the lucrative gambling space, but I have to
say limited bets being placed on a global stock market rally today.
Take a look at what we're seeing for U.S. futures right now. We are well and truly in the red. It follows yesterday's rough start to the final
quarter of the year. Investors hit by the worst monthly reading for U.S. manufacturing survey data in over a decade. Has the long talks about
global manufacturing session now firmly arrived in the United States?
Well, it seems so according to that data, at least all the majors here in the U.S. ending down one percent plus. Interest rate sensitive stocks like
the financials, the banks were a real drag hereto as bond yields tracked lower.
Investors now believe there is a 60 percent chance of another Fed rate cut at the end of this month. But it's not just the United States -- Europe,
take a look at that session, too. Well and truly feeling the pain just two days in fact, after JPMorgan Chase said it's time to buy Eurozone stocks.
We had a prominent German economic research firm lowering their growth forecasts for this year and for next. They say the manufacturing slowdown
is spreading to the services sector in Germany, too. That, of course, is the real fear for the United States, too. Manufacturing data has felt
recessionary for months. We've talked about it plenty of times on this show.
But the big concern is whether that impacts future hiring, and then U.S. consumers decide to pull back. We already saw that sharp drop in consumer
confidence last week.
However, private sector job numbers today coming in line, even with revisions lower in the private -- the previous month, even as the pace
slows there, and we did see a slight uptick in manufacturing jobs in that reading, too.
I'll tell you what, nonfarm payrolls on Friday. It's going to be pretty critical.
Let's get to the drivers because Christine Romans joins us now. Christine, great to have you with us. You and I have talked about this. The
manufacturing data feels recessionary, actually, it's not just that, it is agriculture here in the United States, but real fears being raised
yesterday.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Absolutely, and that's September ISM number, I mean, it confirms what we saw in August,
remember, so we've got two months in a row of a contraction in manufacturing. And that's what's troubling so many.
You know, I keep looking at, at these slices of data and these surveys that say the worst since 2009, the weakest since 2009, and that starts to alarm
me a little bit. The World Trade Organization, WTO, also lowered its growth forecasts for trade -- global trade to 1.2 percent for the year.
That is the weakest since 2009.
You'll recall, the recession was ending in June of 2009. That was a deep and painful period here. So there are concerns that what has started in
manufacturing, in large part because of the President's trade war could be a recessionary problem for the broader economy.
At least that's what economists are starting to worry about because they're seeing in survey after survey these little signs of 10 years of economic
growth that seemed to be fizzling.
CHATTERLEY: Yes, I mean, there's two economies here. And again, we've talked about this. It's less than a fifth of the growth of the United
States, the economy of the United States here is manufacturing. The rest is the consumer and it's what happens there, whether what we're seeing
filters into job hiring, or less of them, even job losses, perhaps going forward. And that then filters into the consumer data. Because that's
what we're asking here. Is the recession risk for the overall economy here real?
ROMANS: That's absolutely right, and that jobs report tomorrow, you're so right will be incredibly important to gauge here. I'll be looking for the
manufacturing number, you're right that in today's private sector payroll number, there were I think 2,000 manufacturing job gains in that report.
We will look to see if jobs growth is slowing overall beyond the manufacturing sector in the government jobs report tomorrow. I suspect you
could see more census hiring. You know, every 10 years, they do this big hiring push for census.
So you could see -- those are highly paid jobs, by the way -- so you could see the jobs numbers lead tomorrow by that. But with so many people
watching the trade war and worrying that we're really at an impasse with the Chinese right now, next meeting is October 10th, can there be
meaningful progress or is this going to be a rough fourth quarter? That seems to be the million dollar question on Wall Street?
[09:05:35]
CHATTERLEY: Yes, and very quickly, the President here, saying it's the Federal Reserve's fault. They've not cut rates quicker. The strong dollar
is a problem hereto. And all of these are, you can argue factors, rates relatively high compared to other countries, the dollar is strong relative
to other currencies. But that's not what businesses are saying here. Particularly small and medium sized.
ROMANS: That's right.
CHATTERLEY: They are saying trade war uncertainty is the key here.
ROMANS: Yes, they're not blaming interest rates. When you talk to people who are running companies and who are the treasurers of companies and
purchasing managers and CEOs, they are not saying that Fed interest rate policy is their problem. They're saying a trade war is their problem.
CHATTERLEY: Oh, did we just lose, Christine or she finished. Sorry, I was distracted. I am very naughty.
ROMANS: No, that's all right.
CHATTERLEY: Live TV. All right, Christine Romans. Great job. Finished quickly. More for me. Now on to our next driver and I'll pay attention on
this one.
Boris Johnson unveiling plans, in his words to get Brexit done on October 31st. The British Prime Minister has been speaking at the Conservative
Party Conference. Here's a flavor.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH PRIME MINISTER: If we fail to get an agreement because of what is essentially a technical discussion of the exact nature
of future customs checks, when that technology is improving the whole time, then let us be in no doubt, conference, of that the alternative is. The
alternative is no deal, and that is not an outcome we want. It is not an outcome we seek at all. But let me tell you this, it is an outcome for
which we are ready.
(END VIDEO CLIP)
CHATTERLEY: Remember the Brexit deadline of course, October 31st. Nina dos Santos is there and was listening to that speech. He is always pretty
engaging and lively, I have to say but it did feel rather Brexit deal light.
What are they going to present today, Nina, because he is already being accused of presenting a deal here that simply is not going to fly with the
Europeans.
NINA DOS SANTOS, CNN EUROPE EDITOR: Yes, what's more, Julia, so this is the deal apparently, according to Downing Street insiders, if you believe
the latest rounds of briefings today that will be the final deal that the E.U. has offered.
So basically, the message is this is it. It is all or nothing. Why is he doing that? Well, largely because if you're speaking to the party faithful
here of the last four days as I have been in Manchester, he prefers to face the fire and fury of some people who don't want a no deal in the U.K., all
the fire and fury of Brussels rather than a certain political death of not actually delivering Brexit, albeit by October 31st.
So what is in this deal? Well, we don't really know at this point. Earlier today, we were speaking to senior Cabinet member advisers who even
intimated that their own Ministers hadn't been fully briefed on the legal text that Brussels will see. That is how closely guarded a secret this is
being held.
But some of the details, perhaps not the final draft, but an earlier draft were leaked to "The Daily Telegraph," which is a newspaper Boris Johnson
has written for, for many, many years. Those include basically a deal that is a revised version of Theresa May's deal with the unpopular arrangement
over the Irish border, the backstop scraps, and instead replaced it with a plan that would see Ireland -- effectually Northern Ireland have to borders
for about four years. That's what we're talking about here.
A distinct area for Northern Ireland, and a distinct time limited type of backstop arrangement until after the transition period when some kind of
border technology will be up and ready -- Julia.
CHATTERLEY: It is a challenge, isn't it? Nina, very quickly here again, there will be viewers looking at this situation and going, hang on a
second, wasn't the law changed to prevent Boris Johnson taking the U.K. out of the E.U. on October 31st. without a deal? We're mystified. Can you
explain that for me quickly? I know it's a challenge.
DOS SANTOS: Right. Well, nobody really has an answer as to how he is going to square this circle, if you like, apart from Boris Johnson in the
next 14 to 15 days or so because that's when he could have his hands bound. If he doesn't manage to get a deal with Brussels, remember, there's an E.U.
Summit coming up.
And if you haven't managed to get one by the middle of the month, then according to what he has dubbed the Surrender Act, the Hilary Benn Act, to
give it its full name which was voted to by Parliament about three weeks or so ago, he will be forced to ask for an extension from the E.U.
[09:10:06]
DOS SANTOS: But if the Prime Minister doesn't, this is a battle that many people have told me on the fringes of this Conservative Party Conference
will go back to the Supreme Court, so you can imagine more scenes like the ones we saw two weeks ago, surrounding that battle over whether or not
Parliament was well and truly prorogued or suspended. Boris Johnson lost that one in a spectacular fashion. It could be setting the scene for
another battle like that -- Julia.
CHATTERLEY: Yes, just ongoing uncertainty, unfortunately. Nina, great to have you with us. Nina dos Santos there.
All right, let's move on to our next driver and taking a punt. Ireland's Paddy Power and Canada's Pokerstars to unite. The merger will create the
world's largest online gambling Empire.
Anna Stewart is taking a look at this story for us. We've seen consolidation and shift of consumers to things like online gambling, which
has played a part here, too. But there's also deregulation going on potentially more in the United States, which is also playing a part here,
too, I think. Talk us through it.
ANNA STEWART, CNN REPORTER: Yes, I think three key drivers to this deal actually. What we have is, as you say, increasing regulation, legal
challenges, taxation of gambling industry here in the U.K., also, actually in Australia.
We also have the shift online, as you said, and that involves not just shift online, but also diversification of the product range. It's no
longer just, you know, flash from the GGs. We're talking about sports betting, poker, casino. Fantasy sports, Julia, also a big one.
And then perhaps the biggest is the legalization of sports gambling in the United States. Actually, this is what the CEO of Flutter, Peter Jackson
said on the call today.
He said that the opening up of the U.S. sports betting market is perhaps the most exciting development in the industry since the advent of online
betting. They've already been positioning themselves here, you'll see that Stars Group, they had a recent deal with Fox Sports, Flutter Sport FanDuel,
that is a U.S. fantasy sports business.
And it is traditionally of course, as you say, an industry that already is pretty high on the consolidation front. Of course, Flutter was created by
three Irish gambling companies followed by Betfair in 2016.
CHATTERLEY: Yes, I mean, it's quite fascinating. I was just digging around in the details, cost synergies of $140 million a year. It looked
pretty nice here, and then I get to the regulatory part, and the combination of these two companies, 40 percent of the gambling market in
the U.K. after this deal, and I say, U.K. regulators are going to have a real problem with that.
STEWART: And this was so what everyone wanted on the call, because this doesn't just need shareholder approval, and I'm sure they'll get it if you
look at the share price here. But yes, it needs approval from the regulators of the U.K., of Ireland, of Australia, the U.S., Canada, and the
U.K. will be particularly difficult. Forty percent market share is likely to raise some eyebrows. Of course, they have 40 days, the CMA, the
regulator here to make that call once this is all made official.
But all the questions they will -- will they dispose of any assets? They're just keeping tight-lipped on that one. Very confident, of course
that this will get through, but I think this is a story that will come up again in the next few weeks -- Julia.
CHATTERLEY: Yes, and we will continue to track it. Anna Stewart, thank you so much for that. All right, let me bring you up to speed now with
some of the other stories that we're following around the world.
And an update on the U.S. Impeachment Inquiry. A short time ago during his visit to Italy, U.S. Secretary of State Mike Pompeo spoke about the phone
call between President Trump and Ukraine's leader in July. He confirmed he was on the call, which he said is consistent with American policy.
Melissa Bell joins us now from Rome and was in that press conference. Melissa, what he didn't say, though, was whether that phone calls set off
any alarm bells while he was on it. Talk us through it.
MELISSA BELL, CNN PARIS CORRESPONDENT: That's right, Julia. No answer to the question of whether any red flags had been raised in his mind as he
listened to Donald Trump press the Ukrainian President in that phone call, but at last, a confirmation on the part of the Secretary of State himself
that he had indeed been on the call.
Now that's important, Julia, because it goes to the heart of what the chairmen of the House committees that are in charge of this Impeachment
Inquiry are saying in a joint statement that they published last night essentially accusing the Secretary of State of having a conflict of
interest in this Impeachment Inquiry, because he had been on the call. This is what Mike Pompeo had to say.
(BEGIN VIDEO CLIP)
MIKE POMPEO, U.S. SECRETARY OF STATE: As for was I on the phone call? I was on the phone call. The phone call was in the context of, now, I guess
I've been a Secretary of State for coming on a year and a half. I know precisely what the American policy is with respect to Ukraine. It's been
remarkably consistent and we will continue to try to drive those set of outcomes.
(END VIDEO CLIP)
BELL: He was also asked, Julia about those accusations on the part of the three committee chairmen that he was essentially stonewalling trying to get
in the way of their inquiry and certainly not being as forthcoming as he should with the production of documents that he has been asked for and
allowing for those depositions by the five current or previous members - officials from the State Department to make those statements to the
committees.
[09:15:16]
BELL: Now, he replied on that question that he would, of course do his constitutional duty, but that he insisted on protecting officials from the
State Department from what he described and has described during this week as act of intimidation.
So not being very clear there about how far he intends to go in cooperating with an inquiry, but suggesting that perhaps he wouldn't seek to be
standing in its way as clearly as he was earlier this week.
But clearly the headline from this, Mike Pompeo admitting that he was on that call. He also went on to talk about the Inspector General tonight on
whether he was asked about, whether he knew anything about what the Inspector General who is asked to Congressmen later on today, would have to
say to them, what were the documents that will be given to the Congressmen, he would not be drawing on that question at all -- Julia.
CHATTERLEY: Yes, plenty of questions to come from Congress, I think and only fueled by this presser. Melissa Bell in Rome there. Thank you so
much for that.
All right to Istanbul now where crowds are remembering slain Saudi journalist, Jamal Khashoggi one year after his brutal murder. The vigil
was held outside the Saudi consulate where Khashoggi entered on October 2, 2018, never to be seen again.
Turning to North Korea now and just one day after Pyongyang agreed to resume stalled nuclear talks with the United States, the country fired a
ballistic missile towards the Sea of Japan. This is the first time North Korea has launched a missile from an underwater platform since its talks
with U.S. President Donald Trump.
The 18-year-old protester who was shot by Hong Kong Police is under arrest for assaulting an officer. A source tells CNN, current and former students
staged a sit-in at the protester's school on Wednesday to denounce the shooting. Authorities say Tuesday's arrests count for the National Day has
risen to 269.
All right, so we're going to take a quick break here on FIRST MOVE, but coming up, Hong Kong's latest retail sales data highlight the business cost
of unrest and in the meantime, it is full steam ahead in the Chinese Mainland as Tesla prepares for production. Stay with CNN. We're back
after this.
(COMMERCIAL BREAK)
[09:20:29]
CHATTERLEY: Welcome back to FIRST MOVE. We're live at the New York Stock Exchange counting down to the market open as always this morning and we are
looking at a weak open for U.S. stocks following the weakness that we saw in yesterday's trading session, too. A shaky start to Q4 trading.
All the major averages are off more than one percent yesterday. We're down around three percent from all-time highs for the Dow and the S&P, so in
aggregate, always worth the context here.
Safe havens, also benefiting from some of this weakness. We've got bond yields here in the United States, the 10-year down in terms of rates for
the fifth straight session. The dollar at its strongest levels for some two years. The Dollar Index versus a number of different other currencies.
What about Japanese bond yields hereto? Ticking lower after a big jump higher yesterday after the Central Bank suggested they would buy less
longer term bonds hereto, so that's having a global impact on bonds.
There's a lot going on. That's the bottom line. To explain it all, Liz Young, Director of Market Strategy at BNY Mellon. Liz, fantastic to have
you on the show.
LIZ YOUNG, DIRECTOR OF MARKET STRATEGY, BNY MELLON: Great to be here.
CHATTERLEY: Let's start with the data.
YOUNG: Certainly.
CHATTERLEY: What we saw yesterday in the manufacturing survey data confirming pretty much a lot of data that we've seen recently that at least
as far as the manufacturing sector is concerned here, it is recessionary.
YOUNG: Sure, but I think the important thing to remember here is that this is not new news. The globe has really been in a manufacturing
downturn for a while now. A lot of which was due to trade.
So the fact that our manufacturing data is suffering a little bit, not entirely surprising, I'm not going to say that it's a positive thing. But
it's not a surprise, it shouldn't really be a shock.
CHATTERLEY: So some analysts coming out in the last 24 hours going, the overall recession risk here for the U.S. economy is real. Obviously, we
have to watch the consumer. Are people being alarmist even at this stage?
YOUNG: I think at this point, when you get this late in the cycle, no matter what your opinion is, you can probably find the data to support it.
So when you look at the U.S. economy and really remember what a recession is defined as, it's two consecutive quarters of negative growth, right?
And the US economy is still driven almost 70 percent by the consumer.
So the consumer is strong, and a lot of this positivity has been predicated on a strong labor market and a strong consumer, the consumer stays strong,
manufacturing is a concern, but the consumer piece is really the crux of the issue.
CHATTERLEY: You know what's interesting, the President came out and we've mentioned it on the show already blaming the strong dollar. He blamed a
slug Federal Reserve. It's interesting that when you look at what the small and medium-sized businesses are saying in the survey, they're
pointing to what we keep saying is the big risk here and that's trade -- trade uncertainty at this stage.
YOUNG: Right. Trade continues to be a risk. I think one of the bigger risks is that the market still sort of expects even a lightweight deal
before the election next year. So if we don't get one that could be somewhat of a negative catalyst.
However, I don't think anybody really expects a grand resolution, us, included anytime in the near future and when I say near future, I mean six
to 12 months.
CHATTERLEY: You also point to something that I find quite interesting, a 30 percent chance that a market pullback here actually does create a
recession in the United States. Talk us through that.
YOUNG: Right. So we could we could put ourselves into what's a self- fulfilling prophecy here, and I want to be clear, Julia. It's a 30 percent chance. We actually have a higher chance of there not being a recession.
CHATTERLEY: Yes. Good point.
YOUNG: But that risk, that 30 percent chance is that we have some kind of sentiment shock, and right now with the market near all-time highs, and we
continue to have some of these short term intraday rallies and the little pullbacks, but what's really the risk here is that if we have a sentiment
shock and selling pressure comes in, and it reverberates through, that bleeds through into the real economy that would probably cause a more
short-lived and shallow recession. But it is definitely a risk.
CHATTERLEY: Is that because people are owning stocks and they lose money and therefore they get nervous, or is it simply that you turn on the news,
you see the red arrows, you see people talking about stock markets falling, and it has a sentiment impact?
YOUNG: It is both of those issues. So Americans right now actually own more in equities than they did in real estate since before the crisis. So
they're more exposed to equities than they have been for a long, long time. So that's a big piece of our wealth.
And then the other piece is obviously, this market has been driven mostly by macro factors, mostly by rhetoric, mostly by monetary policy support and
not as much by fundamentals.
So if we get a surprise from those macro factors or from news pieces, that's what really breeds sensitivity into the market.
CHATTERLEY: So, my takeaway from what you're saying here is actually that you should still be invested in these markets and don't be concerned.
[09:25:07]
CHATTERLEY: JPMorgan said this week, time to buy Eurozone stocks and most of those markets are actually having a shock in aggregate today, I have to
point out, where -- would you be investing in Europe at this moment? What do you think of the United States?
YOUNG: I would split Europe up. I don't know that I'd be ready to put fresh capital into European stocks right now. I'd like to wait through
some of this fall nonsense that's going to happen. We still have to figure Brexit out. We have a leadership change that's going to happen at the ECB
at the end of this month.
So there's a lot of uncertainty there, and then obviously, we have a question mark about Germany may be falling into recession.
CHATTERLEY: Yes.
YOUNG: So I'd like to see some fiscal stimulus come out of Europe before I'm ready to put fresh capital in. But we do find an interesting buying
opportunity in the U.K. equities and with Brexit concerns, because a lot of that bad news has already been priced in and remember, we are years after
that vote.
So this is not -- again, this is not a new story. This is not new volatility that Brexit piece, so I think we could start to dabble in U.K.
equities.
CHATTERLEY: Interesting. We need to be prepared for volatility, though, at least by the end of this month.
YOUNG: Right.
CHATTERLEY: Interesting one. The United States?
YOUNG: Still positive on the U.S. We continue to be the best house in a bad neighborhood.
CHATTERLEY: Yes.
YOUNG; And we see growth slowing and continuing to slow, but not turning negative. And if the Fed does cut one more time this year, which is what
we're expecting, we have a chance to really turn that trend around. So 2020, could be a positive surprise.
CHATTERLEY: So the battle of the uglies, the United States wins. Liz Young.
YOUNG: That's true.
CHATTERLEY: Liz Young, thank you so much. There's nothing ugly about this show. Director of Market Strategy at BNY Mellon there. All right,
we're counting down to the market open. Coming up, we'll be talking about some excitement. Comments from the Facebook CEO. Ouchies. That's coming
up, and plenty more discussion and we will be heading over to Hong Kong. Tune in for the latest there. Stay with us. We're back in two.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Come back to FIRST MOVE and the opening bell this morning. U.S. stocks following what we've seen in the European session, too. Moving
lower early on in the session today, as we mentioned, that manufacturing survey data, a real kicker for sentiment over the last 24 hours.
The major averages, beginning the session at one-month lows, but remember just a couple of percentage points away from all-time highs.
We also had the ADP payrolls data here in the United States ahead of nonfarm payrolls on Friday, which we've already discussed. It will be
pretty key here.
The September numbers are coming in. Pretty much in line though, some lower revisions in August. The point I'll pull out here is the
manufacturing sector in the U.S. adding some 2,000 jobs. We will take whatever we can get amid broader worries here about manufacturing.
What about the oil sector, too? Because that all ties in. Turning lower in the session today, despite a surprise drop in U.S. inventory numbers.
Again, I think it's the kicker after greater demand fears outweighing supply fears here when you look at sentiment in that market today, too.
Okay, let's bring it back to stocks and the global movers. Stars Group trading higher in the session. The Canadian online gaming and betting
company merging with Ireland's Flutter entertainment. That's the parent company of Paddy Power. The tie-up will create the world's biggest online
gambling company as we've discussed, just as the U.S. sports betting market really gets opening up here. The question will be of course, regulators
elsewhere in the world as we've discussed on the show.
TD Ameritrade, the American broker announced Tuesday that its online operations will stop charging commissions on stocks and ETFs - Exchange
Traded Funds. This follows a similar move by rival, Charles Schwab. We'll discuss that in more detail later in the show.
And for now, the final stock to watch, Lennar, the homebuilder's profits and revenues beating Wall Street's expectations. New orders rising nine
percent compared to a year earlier. It's a nice indication there on consumer confidence hereto with big purchases.
All right, Facebook, let's turn to them. The CEO Mark Zuckerberg recently told employees what he thinks an Elizabeth Warren presidency would mean for
the company. Listen in.
(BEGIN AUDIO CLIP)
MARK ZUCKERBERG, CEO, FACEBOOK: ... someone like Elizabeth Warren who thinks that the right answer is to break up the companies, I mean, if she
gets elected President, then I would bet that we will have a legal challenge and I would bet that we will win the legal challenge.
Does that still suck for us? Yes. I mean, I don't have to have a major lawsuit against our own government ...
(END AUDIO CLIP)
CHATTERLEY: Ouch. The audio of that meeting was published by The Verge. Meanwhile, Democratic presidential candidate, Elizabeth Warren, who has
been a strong critic of big tech responded by saying, "What would really suck is if we don't fix a corrupt system that lets giant companies like
Facebook engage in illegal anti-competitive practices."
Facebook, of course, facing a number of antitrust probes. Donie O'Sullivan, joins us on this story. I mean, he was quite pointed there.
But you could argue he has a point. She is not the only person saying this. But she is the loudest voice and she has got the corporate sector
and big tech well and truly in her sights here.
DONIE O'SULLIVAN, CNN BUSINESS REPORTER: That's right, Julia. I mean, I think a lot of people who want to see these companies broken up and say
Facebook is too big -- remember, they own Instagram and WhatsApp as well -- say that, you know, this argument touch Facebook because it's a bigger
company, it has better resources to tackle election interference and provide better security.
If you look at the track record of the company over the past few years, they don't particularly have a good one. They let a lot of election
interference happen. We know there's been a lot of data breaches on the platform.
And speaking to somebody from one of the smaller companies -- competitor -- know, told me this morning that because these companies are so big, they
don't actually have that competitive pressure to really truly have to clean up their platform.
Another interesting point that Zuckerberg made was that the companies work together better if they're all within the one umbrella organization in
terms of let's say, tackling foreign interference or trolls, things like that.
But at the same time, Facebook is telling us and the U.S. government, that they're working well with Twitter and Google on coordinating ahead of the
2020 election.
And if you want to go back just to a month ago, we learned that the Chinese government were behind accounts that were interfering with protests in Hong
Kong trying to attack protesters there on online. That tip actually came from Twitter. So it's Twitter that told Facebook about that, and Twitter
is obviously a much smaller company.
[09:35:06]
CHATTERLEY: It's quite fascinating there. The idea that breaking up these big tech companies will make election interference worse, I have to
say, I think is a complete stretch.
If they're working together as different companies, surely they will still work together. I'm not quite sure I believe that, but I do want to go back
to what you and I concluded yesterday, Donie, as a result of politicians being allowed to post things, say things on Facebook, pay for ads
effectively, that could contain fake news.
The D.N.C. has waded in here, the CEO at least and she is not happy. Talk us through that.
O'SULLIVAN: That's right. So we know that Facebook has taken this massive effort to combat misinformation on its platform over the past three
years. But, Nick Clegg last week confirmed that when it comes to politicians, when it comes to somebody like President Trump, they will not
fact check his posts. They will let him post freely and not in any way sort of down rank those posts.
The Trump campaign has spent $20 million on Facebook ads since May of 2018, just in about a year and a half. So they're a big spender on Facebook.
The D.N.C. came out yesterday, the Democratic National Committee, and they said, look, President Trump doesn't have a good track record with the truth
and his posts should be fact checked.
Now, I think that goes back to a sort of bigger argument of well, how much power do you really want these platforms to have? You know, Democrats want
them to take responsibility, the likes of Facebook, but also we hear that they have too much power, and you know, would sort of censoring or in some
way, taking down the posts of the President of the United States overstep that boundary.
And this morning, we learned that Kamala Harris, a Democratic presidential hopeful here, wrote to Jack Dorsey, the CEO of Twitter yesterday, asking
him to suspend President Trump's account. We know President Trump has been tweeting about references to Civil War and things like that over the
weekend.
And she pointed to how Twitter had suspended other high profile figures, like the conspiracy theorist Alex Jones, but, I think Twitter who has told
us just in the past few minutes that they have received Harris's letter and intend to respond. I think they'll be very slow to want to suspend the
account of the President of the United States.
CHATTERLEY: Yes. So slow they will backwards on that one. What we can't ignore here is the President Trump has been great for business. Donie,
great to have you with us, telling it like it is. Donie O'Sullivan. Great.
All right, let's move on because we're going to take a quick break. Coming up though, after this, the summer of discontent over in Hong Kong, a
reflection of the price paid by the economy. All the details, next.
(COMMERCIAL BREAK)
[09:50:56]
CHATTERLEY: Welcome back to FIRST MOVE. In Iraq, the Prime Minister has announced measures aimed at fighting joblessness. The move follows two
days of violent protests there that left three dead and 230 injured after clashes with Security Forces, protests erupted in Baghdad and elsewhere on
Tuesday over employment, government corruption and the lack of basic services.
Meantime, Hong Kong dealing with the aftermath of Tuesday's protests, it was the most violent in almost four months of demonstrations. Dozens were
injured and police reported 269 arrests.
The 18-year-old who was shot by Hong Kong Police is among them, a source tells CNN. Current and former students staged a sit-in at his school
Wednesday to denounce the shooting.
This, as the city counts the cost of the protests, new figures suggests the unrest is hitting the economy hard. Retail sales dropped from 23 percent
in August to the worst level on record.
For more. I'm joined by Tara Joseph. She is President of the American Chamber of Commerce in Hong Kong. Tara, always great to have you with us
on the show. This day, too, I think reflects what you've been saying some time, whether it's the retail sector, hotels, leisure, tourism, it's really
bearing the brunt here of the ongoing protests.
TARA JOSEPH, PRESIDENT, AMERICAN CHAMBER OF COMMERCE IN HONG KONG: That's right. And when you look at those retail sales figures that you just
mentioned, Julia, that's for August. We're now in the month of October. And as far as retail sales goes, things aren't getting any better.
We're actually into a new normal when it comes to the local economy in Hong Kong, and to tell you the truth, it's starting to feel a bit surreal. You
were showing pictures before of the scenes from yesterday, you could walk into the middle of the Central Business District yesterday evening and hear
a pin drop.
All the shops were closed shopping malls were shut. Bars, restaurants, hotels are down to very low occupancy and that's on days when there are
protests.
But today was a normal work day and the metro was running, people were going to work, everything feels almost back to normal. And we're
experiencing this constant flip flop here that's become, as I said, the new normal and it's a little bit strange.
CHATTERLEY: Yes, we should also make the point as well. This is traditionally, this week is traditionally a great time for mainland
tourists from China to come to Hong Kong, even as you say things go back to normal on days where we don't see protests. What about Chinese Mainland
tourists coming to Hong Kong. Are they staying away or are they still coming back when things calm down?
JOSEPH: The numbers right now are definitely down and you can feel that in the streets when you walk around. The shops, especially the big luxury
shops and hotels are really feeling the pinch right now. And hopefully, if and when these protests end, they'll come back.
Hong Kong is a great place for people to come and visit and very close to Mainland China. It's one of the favorite places to come. The issue right
now is when will it end? And that's what businesses are really trying to figure out. Do you hunker down? Maybe close early? Et cetera. And just
wait for this to finish or at some point, are people going to have to lay off staff or think of other ways to keep going? So that's the issue.
But I do want to bring up the fact that multinational companies and many of the major American companies that are here, they're not leaving. It is
business as usual here, and I haven't heard of any real examples of companies saying, you know, we're out of Hong Kong. We're done now.
Many people are waiting to see how this is going to play out and hoping that Hong Kong can come back and be the amazing city for business that it's
always been.
CHATTERLEY: You know, it's interesting, Tara. We spoke to Victor Gao of the China National Association of International Studies yesterday and he
said there's a difference between peaceful protest and violent protest and from the business community members that you're speaking to, would they
like to see the police act to prevent the violence here? Or are they sticking away from what is a very sensitive subject?
[09:45:21]
JOSEPH: Well, it is a sensitive subject. But as far as businesses go and we have many businesses that have chambers here, it's a very international
city, nobody wants to see violence. Violence is hurtful. It's harmful to society. People are worried about their own employees and the dangers they
may face.
So it's quite easy to say the violence is rough and people would much prefer to see peaceful protest.
For the American Chamber, we really respect the right for people to have freedom of speech and to be able to express themselves peacefully, but the
difficulty with violence is that it gives people around the world for one, a very harsh image of Hong Kong, and that's going to be hard to overcome in
the long run.
CHATTERLEY: Yes, it's good to get your perspective though, as you point out, it's troubled but trying to carry on despite the challenges.
Fantastic to have you with us Tara. Tara Joseph, the President of the American Chamber of Commerce in Hong Kong there. Thank you for that.
All right. Troubles in Hong Kong, but one company not so worried about what's going on in the mainland. Tesla is stepping on the gas in China.
They're reportedly starting production this month. It's the first car manufacturing site outside of the United States.
Clare Sebastian is with me. Tesla faces broader challenges around the world and here in the United States, but not holding back in China. What
do we know Clare on this?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia. The report from Reuters citing sources familiar with the matter is that they are on track
to start production at their China Giga Factory, which as you say, is the first one outside of the U.S. this month. That is increasing rapidly fast
progress.
I think we can show you some pictures from July of the Giga Factory itself. They only broke ground on this in January. So it's pretty stunning at how
far they've come. And they, you know, are incredibly bullish on this.
Elon Musk saying in their July earnings call that it's going incredibly well. He visited China in August. He said that the work of the China team
is mind blowing. I think you can see from those pictures that he has a point there.
But according to the Reuters report, there's still no guarantee that they will meet their end of year targets of at least a thousand cars a week out
of this factory.
There's still issues with the supply chain, whether or not they can get the local employees up to speed, but this is a huge part of Tesla's business
don't forget, Julia, about a quarter of their revenue comes from China and that all reports suggests that they've actually been doing really well in
the country despite the slowing car market.
Their revenues were up in the first six months of this year, 40 percent compared to the same period last year. So this is a big bet on China, but
so far, it looks like that they are betting in the right place.
CHATTERLEY: Yes, doing well even as the broader electric vehicle market there slows. Clare, what about other numbers from Tesla? Because we're
going to get an update from them about the broader business today, too. What should we expect?
SEBASTIAN: Yes, so production and delivery numbers are expected. The third quarter was ended on Monday. Now, we did have a letter from Elon
Musk to staff that was published by "Electric" last week where he said they have a shot at meeting 100,000 deliveries this quarter. That would be the
first time they've ever done that. It would beat the previous record of 95,000 in the previous quarter.
But there are some challenges to this logistics. It remains a big issue for Tesla, there are questions over whether they can get the vehicles into
the right places to get them to customers. There's a Federal tax break, which was cut by 50 percent in July.
So straight in the start of this quarter, whether or not that will have impacted orders. There's competition from new players on the market, like
Hyundai and Kia who have all brought new electric cars to the market.
And of course, the big question for investors, Julia is whether or not bigger delivery numbers can actually translate into a smaller potential
loss in the third quarter. I think that is something that many people will be asking.
CHATTERLEY: Yes, critical question. I think investors have learned to just buckle up for these numbers, quite frankly. We shall see. Clare
Sebastian, thank you so much for that.
All right. Up next, a war without winners. Broker TD Ameritrade matching Charles Schwab in slashing online brokerage fees. The question is who can
survive a race to the bottom? We'll discuss after this.
(COMMERCIAL BREAK)
[09:51:30]
CHATTERLEY: Welcome back to FIRST MOVE. Tuesday saw an all-out price war erupt in the brokerage industry. Charles Schwab fired the first shot
announcing it would slash to zero fees on some online trades. TD Ameritrade swiftly followed suit.
Paul La Monica joins us on this story. The problem for these players is they've got different levels of the proportion of their revenues
attributable to this part of the business. It hurts some more than others here, Paul, and that played out in the market yesterday.
PAUL LA MONICA, CNN BUSINESS REPORTER: Exactly, Julia. It hurts TD Ameritrade and E-Trade who we have yet to hear from whether or not they're
going to match this and go to zero commissions as well. They have a higher percentage of their revenue coming from commissions in these types of
trading accounts. So it does impact them more negatively even than Schwab which is going to take a hit, of course, as well.
All three companies though, doing more advisory. They're going to probably, I would imagine, maybe do some more margin lending. They have to
find other areas to supplement the revenue that they're going to be losing by basically going all Robinhood in getting rid of these commissions.
CHATTERLEY: Oh, what a perfect link, because that is exactly what I was going to ask you. How much of the challenge that we're seeing here is
customers simply getting more sensitive and looking around and going, you know, I don't want to pay big fees, and so we've got this race to the
bottom here.
This is competition from some of the upstarts like Robinhood that are saying, look, we'll let you do it. We will let you do it on your phone,
and we'll let you do it cheaper.
LA MONICA: Exactly. I think the rise of Robinhood, particularly with millennial investors is one of the primary reasons why Schwab and TD
Ameritrade made this decision and also last week, Interactive Brokers, another smaller, lesser known online discount brokerage company also
getting rid of commissions.
So the key question I think that's going to be interesting, though now is this is obviously something that validates Robinhood. But there's also now
all this competition.
Robinhood, at last check, it was valued at about $7.6 billion dollars as a private company. Given this new competition and the crazy amount of
skepticism we now have for unicorns in general, in light of WeWork, what's their valuation going to look like if they ever go public? I wonder if
it's going to be as high as it is right now.
CHATTERLEY: When the disruptor set gets disrupted back, that's what you're saying.
LA MONICA: Pretty much. This is obviously a no-brainer decision, I think for Schwab and TD Ameritrade and I would expect E-Trade to follow suit and
that means all of a sudden, what does Robinhood have that really makes them stand out if everyone has zero commissions?
CHATTERLEY: Yes. I wonder if we get below zero as you keep people to --
LA MONICA: What? Is it the ECB?
CHATTERLEY: Yes, it's a possibility. We'll see. Paul La Monica, thank you so much for that.
All right. Let me bring you up to speed with today's "Boardroom Brief." Fitch ratings downgraded WeWork's credit status to junk territory after the
company abandoned plans to go public. The office sharing company had hoped to raise at least $3 billion in the IPO. Fitch downgraded WeWork to a CCC-
plus rating with a negative outlook.
Vice Media in talks to acquire digital media company, Refinery29. The two companies are hammering out a deal that would value the woman focused brand
at less than $500 million. The acquisition is part of Vice Media's strategy to compete for digital ad dollars.
[09:55:06]
CHATTERLEY: The CEO of Britain's largest retailer, Tesco, is stepping down. It comes after he the heat declared the retailer's turn around
complete. Dave Lewis launched Tesco's recovery plan after an accounting scandal hit the company in 2014.
And this, just in, Walmart has announced that it is suspending sales of heartburn medication, Zantac. It's the latest major retailer to pull that
drug from shelves on consents, but it's been contaminated by low-levels of cancer causing chemical.
Walmart is also pulling generic versions of Zantac from the shelves. Walgreens, Rite Aid and CVS have also stopped selling Zantac. The U.S.
Food and Drug Administration says it's investigating the risk to patients.
All right, that just about wraps it up for the show. Let me give you a look at what we're seeing for U.S. majors. This market, as we mentioned,
it was a tough start to the session. Where are we now? Well, it continues and we continue to see pressure for the majors. We continue to track the
changes. "Express" is up in a couple of hours' time, but for now, you've been watching FIRST MOVE, time to go make yours. Have a great Wednesday.
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[10:00:00]
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