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First Move with Julia Chatterley
Markets Are Feeling The Heat After Two Days Of Dismal Data; The W.T.O. Says The U.S. Can Tariff The E.U; The First Witness In The House As Impeachment Inquiry Into President Trump Will Arrive On Capitol Hill. Aired 9-10a ET
Aired October 03, 2019 - 09:00 ET
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[09:00:16]
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Live from New York, I'm Christine Romans sitting in for Julia Chatterley. Here's what
you need to know. Markets are feeling the heat after two days of dismal data. Plus, Getting The Green Light: The WTO says the U.S. can tariff the
E.U. And any minute now, the first witness in the House as Impeachment Inquiry into President Trump will arrive on Capitol Hill. It is Thursday
and this is FIRST MOVE.
Welcome to FIRST MOVE. Glad to have you with us. Global markets remain unsettled this Thursday after two days of sharp losses and U.S. futures
have been dipping in and out of positive territory in the past few hours. It is now looking like a flat to maybe a higher open as we wait for some
key U.S. economic data.
Now, in the previous session, all the majors fell more than one and a half percent, building out a big drop, a one percent drop, Tuesday. The blue
chips hit the hardest with the Dow down almost two percent. You know, it was the first time the S&P 500 has posted back-to-back drops of one percent
this year, talking about it, it could spill over angst from Tuesday's weak U.S. manufacturing number.
As we have pointed out many times on this program, it is services not factories that are the main drivers of the U.S. economy making up some --
what? Eighty five percent of economic activity.
And we're expecting to see continued growth and services when a new report on non-manufacturing activity is released just about an hour from now. The
big concern is if we see any hit that manufacturing weakness is spilling into services.
Now, European shares trading mixed after suffering their worst single day of trading in almost a year yesterday, not only has Europe been hit by the
manufacturing slump, but key European industries from food to wine to airplanes will be hit with new U.S. tariffs as part of the Airbus subsidy
battle.
All of this as the U.S.-China trade talks are about to begin again. I'd say it's looking like a two pronged trade war right now. Let's begin our
drivers with a closer look at U.S. markets.
Very glad to have Matt Egan joining us here this morning. It looks like the market at least in the U.S. is going to try to find its footing, but
it's not a resounding bounce it feels like in markets, at least as futures are indicating.
MATT EGAN, CNN BUSINESS CORRESPONDENT: That's right, Christine. I mean, it's clear that October has really started with the growth scare, right? I
mean, it looked like U.S. stocks were cruising along last month, maybe getting ready to hit new all-time highs and then boom, we had that really,
really dreadful manufacturing report that came out on Tuesday, the worst month for U.S. factories since the end of the Great Recession.
Now all of a sudden, we've got the Dow down more than 800 points over two days, oil prices have also gotten hit because obviously oil needs strong
demand, and those manufacturing numbers are suggesting the demand might be weakening here.
And also, you know, investors are going into the safety of government bonds. We've seen the 10-year Treasury move sharply lower back below 1.6
percent; a really dramatic move in just the past few days.
So clearly, that manufacturing report has brought back those recession fears front and center. Now, as you mentioned, thankfully, consumer
spending, which is really the big driver of growth remain strong. And that's because unemployment is low, and stock prices have been relatively
high.
But the risk is that the manufacturing trouble infects the rest of the economy through job cuts and market turmoil. So that's why I do think that
we're going to see investors on high alert for any sort of signal that there's been any spillover.
And so there's these two really big reports out in the next 24 hours. You mentioned the U.S. services sector. That report at 10:00 a.m. New York
time is supposed to show a weakening of growth, but still expansion, unlike manufacturing, which is in contraction, and then of course the government
jobs report tomorrow morning. And that could also be another big mover.
So Christine, you know we've seen time and again where sometimes bad news is sort of perversely looked at as good news by Wall Street because it
might need more easy money. I think it's safe to say where not in one of those cases. I think bad news would be bad news here.
ROMANS: I'll be looking for manufacturing jobs in particular in that report tomorrow because those have slowed down -- job growth and
manufacturing has slowed down considerably over the past year.
Quickly, Matt, there's a political angle here, too, because you've got the President and his surrogates who are saying this is about a Democratic
impeachment probe that is weighing on stock market investors not on the President's own trade war, which has caused uncertainty in global trade.
What are you hearing from sources in the markets? Are they saying it's impeachment that's hurting stocks, or is it global trade and recession
worries the manufacturing?
[09:05:09]
EGAN: This is all about the trade war and the economy. Yes, the impeachment brings in another level of uncertainty. And yes, it does have
potential consequences for the 2020 election. But that really has not been the major driver in the past few days.
I mean, there are times where sometimes it's a little unclear what's moving the market, but that was not the case this week. At 10:00 a.m. Tuesday
morning, that ISM manufacturing report came out, stocks went straight down, bond yields went straight down, and that really had nothing to do with
impeachment at all.
ROMANS: All right, Matt Egan. Thank you. Nice to see you.
EGAN: Thank you.
ROMANS: A lot going on this week. All right. In the next hour, the Impeachment Inquiry into the U.S. President picks up pace with crucial
testimony.
The former U.S. diplomat at the heart of the whistleblower complaint is due to arrive on Capitol Hill any moment now. Kurt Volker is his name. He is
the former U.S. Envoy to Ukraine and he has just arrived we're told to tell his story behind closed doors in the coming hours.
This is the big event in Capitol Hill today. Suzanne Malveaux is here to walk us through it. Hi, Suzanne.
SUZANNE MALVEAUX, CNN U.S. CORRESPONDENT: Hi, Christine. Well, there is a lot of anticipation around this, and of course, a lot of people have some
questions that they want answered from Kurt Volker. One of them he has been named in the whistleblower complaint, really, what were his
discussions regarding Giuliani's role in this? And also what was his role as an interpreter, if you will of the President's wishes to the Ukrainian
President? And so all of that is going to be front and center.
This really is a make or break moment for the Trump presidency and this is day one.
(BEGIN VIDEOTAPE)
MALVEAUX (voice over): House Democrats eager to begin depositions as President Trump appears increasingly furious over their Impeachment
Inquiry.
Kurt Volcker, former U.S. Special Envoy to Ukraine will be deposed by three House committees about the whistleblower complaint, which alleges President
Trump repeatedly pressured Ukraine to investigate former Vice President Joe Biden and his son.
(BEGIN VIDEO CLIP)
REP. ANDRE CARSON (D-IN): I hope that he will be truthful. And I hope that he will give those questioners and investigators the tools that they
need to get to the bottom of this very pressing matter.
(END VIDEO CLIP)
MALVEAUX (voice over): Intelligence Community Inspector General Michael Atkinson will appear at a closed door briefing tomorrow, which is also the
deadline House Democrats have given the White House to submit documents related to the Ukraine phone call, or face subpoenas.
(BEGIN VIDEO CLIP)
REP. ADAM SCHIFF (D-CA): We're not fooling around here, though. We don't want this to drag on months and months and months, which appears to be the
administration's strategy.
(END VIDEO CLIP)
MALVEAUX (voice over): It comes after the State Department Inspector General gave lawmakers dozens of pages of documents that make many of the
same unproven claims about the Biden's that Trump allies have been making.
Congressman Jamie Raskin was the lone lawmaker to attend the briefing.
(BEGIN VIDEO CLIP)
REP. JAMIE RASKIN (D-MD): It's essentially a packet of propaganda and disinformation spreading conspiracy theories. Those conspiracy theories
have been widely debunked and discredited.
(END VIDEO CLIP)
MALVEAUX (voice over): The documents attempt to smear Joe Biden and former U.S. Ambassador to Ukraine, Marie Yovanovitch. President Trump's attorney,
Rudy Giuliani told CNN some of the documents originated with him. And he then gave them to the White House, a source telling CNN the White House
then passed them to Secretary of State Mike Pompeo.
(BEGIN VIDEO CLIP)
RASKIN: Why was Secretary of State Pompeo in possession of this packet of disinformation? It raises more questions than it answers.
(END VIDEO CLIP)
MALVEAUX (voice over): The President continuing to show his rage sending this profane tweet writing, "The Do Nothing Democrats should be focused on
building up our country, not wasting everyone's time and energy on bullshit." Trump's tirade continuing offline, too.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: You look at the whistleblower statement and it's vicious. Vicious. To impeach a President
over a fraud that was committed by other people that want to win an election in 2020, which they won't, is incredible.
(END VIDEO CLIP)
MALVEAUX (voice over): House Speaker Nancy Pelosi saying she thinks it is part of President Trump's strategy to divert attention.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D-CA): I think the President knows the argument that can be made against him and he is scared.
(END VIDEOTAPE)
MALVEAUX: And Christine, talking to one of the aides in the committee, the Intelligence Committee this morning. They say they're going to try to make
it as bipartisan as possible to have both Republicans and Democrats asking the kinds of questions their staffers as well that Volker can answer.
And they are looking forward again to tomorrow, the Intelligence Community Inspector General who will be back before that committee who is known and
has said that he believes that the whistleblower complaint was credible and urgent and of course, that critical deadline for the White House already
the Chair of the Oversight Committee, Elijah Cummings drafting that memo of the subpoena of the White House in case they do not produce the documents
around that critical phone call already making it very clear that if they do not cooperate, that it is going to be part of an obstruction of justice
charge -- Christine.
ROMANS: All right, Suzanne Malveaux on Capitol Hill for us. Another busy day for you, Suzanne. Thank you so much for that.
[09:10:07]
ROMANS: All right, the WTO has approved U.S. tariffs on $7.5 billion worth of E.U. exports. We're talking scotch whiskey, French wine, Italian cheese
are all affected. This is part of a long running dispute over subsidies given to Airbus.
Anna Stewart is with me now, and this is a win for the White House. A win 10 or 15 years in the making here. Tell us about it.
ANNA STEWART, CNN REPORTER: It's been an incredibly long running dispute. As you say, 15 years and so it didn't take long for the U.S. administration
to announce that it will be imposing tariffs it selected from a list that was actually a draft list published earlier this year. It had $25 billion
worth of goods.
So it selected from that and it's really interesting to see what's on there. You mentioned British cashmere, scotch whiskey, German waffles and
wafers -- a whole load of products. And this will really hurt some European businesses, particularly small ones like those cheesemakers, the
parmesan maker and actually, Emmentaler maker in Switzerland.
Many of these are reliant on exports and the U.S. is a huge market for them. We won't have long to find out whether it really does deep consumer
demand for some of these businesses. These will take effect October 18th.
ROMANS: You're showing some beverage companies there that are actually up. It could have been worse, right, Anna?
STEWART: Yes. Look at those. So you've got Pernod Ricard and Remy Cointreau there. Now what's so interesting is the fact that it's not just
what's on the list of tariffs, it's not what's on there. It is quite nuanced. They have missed a few products out that people did expect to be
on there.
Also Christine, they could actually have imposed -- the U.S. could have imposed 100 percent tariffs on those $7.5 billion. Instead it was 10
percent on planes. It was 25 percent on food and drinks. Why?
Well, there's a point that there could be retaliatory tariffs in the E.U. on the U.S. side of things next year. There is a parallel case about
Boeing's and the WTO will rule on that next year.
But also, Christine, analysts today are steering us towards the political side of things, States side saying that already the tariffs waged on
Chinese goods are becoming more consumer focused, they're going to start to hurt the U.S. consumer more particularly those being implemented in
December.
And as a result, perhaps they don't want to escalate that too much too much further, particularly ahead of course, the election next year -- Christine.
ROMANS: They could have put a 100 percent tariffs on $7.5 billion worth of E.U. goods and instead you have 10 percent rates and 25 percent rates. So
maybe the U.S. administration is being very strategic here not to let the U.S. consumer feel this right away, but take the political win for the win
the WTO. All right, Anna Stewart, thank you so much. Nice to see you.
These are the stories making headlines around the world, British Prime Minister Boris Johnson has presented his latest Brexit proposal to
Parliament. He said his government has made a genuine attempt to bridge the chiasm between the U.K. and the E.U. on the issue of the Irish border.
Opposition leaders say though the plans are unworkable and the European Union response seems less than enthusiastic. Hadas Gold joins me now.
What's in the proposal here?
HADAS GOLD, CNN BUSINESS REPORTER: Well, Christine, this proposal we've been talking for weeks that we have not yet seen from the new U.K.
government, the new U.K. Prime Minister Boris Johnson, what are his actual plans that are different than Theresa May's plans to get this Brexit done?
Now, we know he submitted these plans last night and these are all about Northern Ireland and to prevent a hard border between Northern Ireland
which will stay part of the United Kingdom and the Republic of Ireland, which will be part of the E.U.
Now in this proposal, Northern Ireland will actually stay in the single market, but will be out of the Customs Unions. But Boris Johnson has said
that he will prevent any sort of hard border, any sort of new infrastructure on a border between Northern Ireland and the Republic of
Ireland because, of course of the Good Friday Agreement.
He said, "There will be no checks on or near the border," and said, "There will be electronic checks and other checks somewhere in the supply line,"
and that their goal is to always abide by the Good Friday Agreement to keep the peace along the border. Take a listen to what he said in Parliament
just in the past couple of hours.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH PRIME MINISTER: There will be no need for checks or any infrastructure at or near the border between Ireland and Northern
Ireland. Indeed, I have already given a guarantee that the U.K. government will never conduct checks at the border, and we believe that the E.U.
should do the same. So there is absolute clarity on that point.
(END VIDEO CLIP)
GOLD: And Christine, this new plan will essentially create although they won't perhaps be real borders with fences and guard posts, but two borders
between the North and South and the East and West of Northern Ireland.
It will treat Northern Ireland differently and Boris Johnson says will give them some authority over their own future because the Northern Ireland
Assembly will be able to review this and approve it every four years.
But there is a little wrench in this one, the Northern Ireland Assembly actually hasn't been sitting for the past two years. Unclear how that will
play into all of this. We are getting some reaction. The Prime Minister of Ireland didn't seem too enthusiastic about this. The European
Commission is having their own lukewarm reaction to this. And then of course, there's the opposition parties in the U.K. who say this is not a
proper deal, that it violates the Good Friday Agreement, and it's only part of Johnson's plan to make the U.K. crash out without a deal -- Christine.
[09:15:07]
ROMANS: Just another chapter in what has been a Brexit mess. When will there be a vote? When will there be resolution?
GOLD: Well, right now, it seems there could be a vote actually, after the next European Council meeting that would place the vote around October
21st. We do not have a firm date on that yet.
But as of right now, if you're doing some of the sort of on the back of the envelope counting, the government right now does possibly have a slim but
shaky majority to potentially get this through. Of course, we are still waiting to get an official reaction from the European Union on whether they
would even accept this, and there is a fear that if Boris Johnson in any way sort of moves more towards Brussels and what Brussels wants, then he
could potentially lose that shaky and slim majority.
ROMANS: All right, Hadas Gold for us this morning. Thank you so much for that. Thank you.
All right. In other news, four people have died in a knife attack inside a police headquarters in Paris according to a police union source. The
attacker, who was a police employee was also killed. The police union secretary told local media the attacker had been with them for over 20
years. The area has been sealed off.
Curfews are in place in Baghdad and other cities across Iraq following two days of violent demonstrations which killed 15 people and injured more than
850. There is growing discontent at long power outages, unemployment, government corruption.
Authorities have shut down three quarters of the country's internet, according to a monitoring service.
All right, coming up on FIRST MOVE. Pepsi pops, the soft drinks company fizzes on earnings -- the opposite of fizzle. The CFO joins us after this
short break.
(COMMERCIAL BREAK)
[09:20:47]
ROMANS: Welcome back to FIRST MOVE. Let's take another check at out the markets right now. It's still looking like U.S. market is trying to find
its footing. Stocks have after two days of sharp losses, the Dow is now down 3.1 percent for the fourth quarter. That's the worst start to a
quarter in over a decade.
You know, stocks could get a boost from a strong read on the U.S. services sector. We're expecting that report within the hour. And of course that
big September jobs report is due out tomorrow.
We're also hearing quarterly earnings coming in here. Pepsi reported third quarter revenue and profit better than Wall Street had expected. This as
the soft drinks company's advertising push seems to be paying off. A range of new products for health conscious shoppers, also boosting sales.
Joining me right now is Hugh Johnson, Pepsi's Chief Financial Officer. Welcome to the broadcast. First of all, what was going right, I guess, for
Pepsi in this quarter?
HUGH JOHNSON, CHIEF FINANCIAL OFFICER, PEPSI: Thank you, Christine, and good morning. A lot of things are going right, quite candidly. Our
beverage business has seen a significant turnaround of performance over the last couple of quarters and continues to accelerate in North America.
And in addition to that, our Frito Lay business is really firing on most, if not all cylinders at this point. We, as you mentioned, have increased
advertising significantly over the year and consumers are responding to that advertising which has resulted in stronger growth for us and for our
customers. So we feel terrific about where we're going. We think our strategy is working.
ROMANS: What about these more health conscious categories?
JOHNSON: Well, I think we have a lot of product offerings in those categories as well. We have an enormous number of beverage products that
fall into the lower zero calorie category. And from a snacking perspective, we also have a variety of products that are lower calorie and
have an ingredient portfolio that's quite attractive to consumers.
So as we look at our approach right now, we want to offer a broad array of products when consumers want to eat healthy and clean, we had those
products; when consumers want to indulge in perhaps a bit more caloric product, we're there for them as well.
So I think our role is to provide that good balanced offering and then consumers will choose when they want to eat healthy and when they want to
indulge.
ROMANS: You talk about the broad offering of the products, but what does it say about the American consumer. I mean, you guys really literally have
your fingers on the pulse of the American consumer for so many of these different products. What are you seeing there?
JOHNSON: Yes, it's interesting, you know, there's a lot of discussion these days around the state of the American consumer, both from a spending
perspective and from a habits perspective.
From what we can see right now, the American consumer is actually doing quite well, and that's obviously supporting our sales growth. We do see a
trend over time to lower calorie products, and frankly, that plays generally quite well for us because we have a broad array of products in
the lower calorie area.
But mostly the consumer, as far as we can tell, is willing to spend when they see a product that offers them a terrific value proposition and it's
advertised well, and it is marketed well, and it comes at them at a good price.
ROMANS: Let's talk about it internationally as well. You know, we've had a strong dollar here, and it's something a lot of companies with you know,
big multinational companies have been noting. How has the strong dollar played into sales for you?
JOHNSON: Well, I would tell you internationally, our businesses are really doing quite well. Developing and emerging markets, we're up about seven
percent for us across the globe. China was up double digits. Mexico was up double digits. India was up high single digits, to name three of our
bigger markets outside the United States.
Obviously, as we translate those earnings back into the United States, the strong dollar does have a slight negative impact. It was about a point and
a quarter; and the overall for the year is about two points.
But frankly, there's so much consumption growth out there that we're happy to invest and play into those markets, because we think those represent a
terrific future for PepsiCo and extend the duration of our performance.
ROMANS: I mean, when I look at the Street, the last two or three quarters, you've over delivered, right? I mean, they've been very happy with these
results. The stock is up nicely this year. It's indicated to be higher this morning. What's the risk then? What's the risk for Pepsi at this
point?
[09:25:12]
JOHNSON: Frankly, I don't know that we're a high risk type of a stock. Investors, I think, typically look at consumer products and specifically as
PepsiCo, as more of a defensive stock. So I think for us, our focus needs to be on continuing to invest in the operating side of the business. And
with that investment, driving good growth and good returns out of it.
And for investors, we think that's a valuable part of their portfolio. And so far, they've rewarded us with purchases of our shares. So we certainly
feel good about that.
ROMANS: Can we expect the advertising push to continue? I mean, that was, I think, what? Advertising spending up 12 percent this year? Will that
continue?
JOHNSON: Yes, you're going to see us continue to invest in advertising. I mean, we certainly are seeing good returns on that. I don't know that
it'll be quite at the double digit level that it's at right now. But we're certainly going to continue to invest in advertising because we think
consumers are responding well to it, and it's having the right impact on our sales.
ROMANS: All right, Pepsi, beating estimates there for the quarter. Hugh Johnson, thank you so much for joining us. The CFO of Pepsi. Thank you,
sir.
JOHNSON: Thank you, Christine.
All right. Market opening in just a little under four minutes. Stay with FIRST MOVE. The opening bell will be next. When we come back, futures
indicated a little bit higher here.
(COMMERCIAL BREAK)
[09:30:00]
ROMANS: There it is. Welcome back to FIRST MOVE. I'm Christine Roman. That was the opening bell at the New York Stock Exchange on this third day
of October.
U.S. stocks trying to find their footing in early trading today, and having a little bit of trouble here. The bulls are hoping to claw back some of
the pretty steep losses of the past couple of days. This has been the worst start to a quarter on Wall Street in years. Why? Well, concerns
about weak manufacturing in the U.S. and what is now turning into a two- prong U.S. trade war with both Europe and China.
Now amid this steep selloff, it's so important to note that most of the major averages are still holding onto solid gains for the year and the
NASDAQ and S&P are still up about 15 percent and the S&P 500, really not very far from all-time highs.
Meantime, U.S. 10-year Treasury yields are down for a sixth straight session. But gold prices in the U.S. dollar are a bit lower in trading
today. Oil down for an eighth straight session. Let's get more of the markets now. I'm joined by Alan Ruskin. He is the Chief International
Strategist at Deutsche Bank and markets having a little bit of difficulty finding their footing here. This is really a trade story, a trade anxiety
and manufacturing story, or are they overdoing it here?
ALAN RUSKIN, CHIEF INTERNATIONAL STRATEGIST, DEUTSCHE BANK: Not necessarily. I think we need to see where this all ends. There's some
natural cyclical slowdown, I think that's occurring just as the fiscal expansionary influence that we saw in the prior two years is I think
starting to wane. So I think that's a bit of a factor over and beyond what's going on the trade side.
And then, of course, the global growth stories have been deteriorating for quite a while, left in the most part by China. So there are a few other
things going on.
ROMANS: Well, so let me ask you this, because the President and his surrogates yesterday and again, early today have been out with this
storyline that this is because of impeachment and political pressure from Democrats, not because of any concerns about global trade, and specifically
the trade war the U.S. has with China. Is that correct?
RUSKIN: I think most participants would say there's some elements in which politics is starting to intercede in terms of having an impact on the
marketplace.
At a minimum, it should create uncertainties, particularly as you get towards the election next year. I think there is a sense that you've had
investment, both globally and in the United States extremely weak, and that with the additional political uncertainty, that's going to still be weak in
addition, so I think the manufacturing sector is going to struggle if the investment sector is going to remain soft.
ROMANS: Yes. And I'll be looking into the jobs report tomorrow to see if there's still very weak growth in manufacturing employment. That's been
something we've been watching all year.
The WTO meantime, ruling in favor of the United States and awarding essentially $7.5 billion worth of E.U. goods that the U.S. can put tariffs
on at a hundred percent. Now, the U.S. has only put tariffs on at 10 percent, 25 percent in some of these categories. But what do you make of
this WTO ruling, this win for the U.S. and how it complicates the trade war?
RUSKIN: I don't think it necessary complicates the trade war too much, as long as the U.S. doesn't proceed really with pushing ahead on auto tariffs
that, you know, comes up at the middle of November.
I think, were the U.S. to open up that front, you know, that would be a more fulsome trade war with Europe, and I think that would be very, very
negative as far as manufacturing is concerned.
ROMANS: What's the appropriate reaction for the Fed at this point, do you think, if we're watching in the manufacturing sector that looks to be under
the weather if you believe two months of the ISM Manufacturing Report, you know, but still a consumer that remains very, very solid in this country,
what's the appropriate path for the Fed in your view?
RUSKIN: I think the process that the Fed has laid out, at least is that they're very data dependent. That can sometimes look a little bit
amateurish, because you get swung around by one data point.
But for example, Friday's employment data is extremely important. I think if you do see, you know, say numbers in the private employment side below
100,000 new jobs, that would be seen as further sign that the broader economy, not just in the manufacturing sector is indeed slowing down. And
I think it would secure an October rate cut.
I think you're looking at more than the one rate cut that the Feds dots have -- that's the FOMC's dot plot has suggested is most likely.
ROMANS: The Fed doesn't have very much room to move, though. I mean, overall, you still have an economy that's running it at two percent
unemployment rate that's near the lowest in a generation. I mean, there's sort of this, this weird position they're in when they don't really have a
lot more to move if you really do get some kind of a crisis in the economy.
RUSKIN: That's right. So I think the issue first is, is the economy growing at two percent? If it is, then the Fed doesn't have to do very
much. It's probably slowing a little bit beyond that. I think the underlying growth rates now have dipped maybe more towards say one and a
half percent. So that would push the Fed to do something.
I think what you've seen so far is that the bond market has front loaded a lot of the Fed easing. So that's good news in the sense that it will
soften and at least cushion some of the negative effects on trade and global growth. But I think going forward, it does mean that the Fed is
going to not have the same sort of traction that they might have been otherwise expected to have.
[09:35:41]
ROMANS: We know that a Chinese delegation is expected to come to the U.S. to do another round of trade talks with the U.S. What do you think is the
most likely scenario here that maybe it does get any worse? Or that there's some sort of symbolic win for the U.S. or that there's a real
comprehensive trade agreement? What is the most likely scenario?
RUSKIN: Yes, I think a comprehensive trade agreement is pretty tough to achieve. I think China has certain red lines. And I think that's going to
be tough for the U.S. to compromise on, you know, things like, for example, putting the intellectual property rights changes into Chinese law, et
cetera. I think China is going to ask for reciprocity.
I think, you know, what is more likely as some sort of mini deal perhaps, where China maybe buys more agricultural goods, that helps the President
enormously, and then the President would have to compromise on issues on technology in particular, and Huawei and then they can pretty much keep,
you know, tariffs where they are. We don't go through the increase in tariffs in the middle of December. That would be pretty negative for the
U.S. consumer side of things. And that could be the makings of some sort of deal.
ROMANS: All right, Alan Ruskin, Chief International Strategist at Deutsche Bank. Nice to see you. Thank you so much for joining us.
RUSKIN: Thank you.
ROMANS: All right, the global movers. Costco up slightly. The retail giant reports earnings after the bell tonight. Costco's shares are up more
than 30 percent this year. Analysts expect strong numbers on same store sales.
Pepsi also up. The soft drinks giant reported revenue profit better than Wall Street expected. That is an advertising push and a new range of
healthier options boosted sales.
And Tesla trading down today. The electric car company delivered fewer cars than Wall Street expected in the third quarter. Deliveries rose by
only two percent. Clare Sebastian joins me now and Clare, on that Tesla deliveries number in particular, what's going on there?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, so I think this is probably the curse of high expectations, Christine, the stock rallied quite
significantly last week when a letter from Elon Musk to staff was published. He said they had a shot at 100,000 deliveries in this quarter.
They were really ramping up towards the end of the quarter, something that we've seen multiple times from Tesla to try and meet that and they didn't.
They got 97,000 which is a record, but again below what people were expecting. But you know, if you talk to analysts, it's it still a pretty
solid number. They are seeing kind of this is a step in the right direction. But still big questions, Christine of whether they can meet
their targets for the year. They'll have to accelerate to do that. And whether they can return to profitability in the third or fourth quarter of
this year.
Tesla says they are targeting positive net income in the third quarter. I think some analysts are skeptical as to whether they're going to be able to
do that. Don't forget, the cars they're selling the most of are the Model 3, which are the cheaper lower margin cars.
ROMANS: You say analysts are skeptical. They have a lot of reason to be skeptical because Elon Musk has not delivered several times on some of his
best boasts about this company.
SEBASTIAN: You know, this is -- yes, this is something that we've seen. And again, you know, you see a divided analyst community on Tesla. Many
people simply take a leap of faith and say this is the future and this is where we want to have our money.
And people have wildly different price targets, for example, Christine, on this story, but there's another challenge that the company is now facing.
They have just released a new software update for their cars last week, and it includes a feature called Smart Summons, which basically allows you to
use an app on your phone to bring your car to you, to essentially pick you up in a parking lot or driveway.
So, what that means is the car is driving with no one in it and you can see here that it hasn't always worked very well. There's been a lot of reports
on social media, including this Twitter user, you can see him bringing the car towards him and there's a near miss. So this -- you know, there's been
a lot of jokes on social media but serious point for Tesla and we know that the National Highway Traffic Safety Administration is aware of these
reports and looking into it.
ROMANS: Fascinating. I can't take my eyes off that video. All right. Thanks so much for that, Clare Sebastian. Nice to see you.
All right, coming up on FIRST MOVE. Roadblocks for GM as the company feels the strain of its worker strike. Stay with CNN.
[09:42:48]
ROMANS: All right, General Motors set to take a $600 million hit to profits. That's according to an estimate from a consulting firm that
traces back to when United Auto Workers strike began in mid-September, 9,000 workers have been affected as Union action now stretches into its
third week.
Vanna Yurkevich joins me -- Vanessa.
VANESSA YURKEVICH, CNN BUSINESS AND POLITICS REPORTER: Hey there, Christine, yes, you pointed out some big numbers there. GM really taking a
hit now that they're in their third week. Some of those numbers as you said $600 million in loss of profits by the end of this week.
Now, there's also the losses to workers. We're looking at about $412 million for lost wages for union members, non-union members and suppliers.
And we're also learning from GM about the ripple effect. It's not just the striking workers off the job. It's now temporary layoffs from GM about
9,225. You see that number right there. That is in the U.S., Canada and in Mexico.
So as these numbers start to come out, we're starting to also learn what we could see next week, that group that you mentioned, Anderson Economic Group
is projecting that if this stretches, Christine, into next week, that'll be the fourth week, we're looking at losses for GM at about $90 million a day
that will put their total losses well into over a billion dollars per scene.
ROMANS: And you know, it's fascinating because Mary Barra, the CEO of this company, and union leaders both have a common anxiety here. And that is
transforming this company into a company that compete with the kind of car universe we're going to see in the not too distant future, electric in
particular.
And there's anxiety among the workers about what that future looks like for them and anxiety among, you know, GM management because they've got to
execute this strategy quickly and as efficiently as possible.
YURKEVICH: Right, Christine. You know, this contract will ultimately set a new standard for the industry. We know that some of the sticking points
between UAW and GM are still a lot of the sticking points that we heard a couple of weeks ago.
It's that the UAW wants to bring some of those jobs back from Mexico to the United States. We also know that they want greater profit sharing from the
company and they also want a road path for their temporary workers so that they can potentially become fulltime workers eventually with the company.
And Christine, it's the beginning of the month. This is when Americans start paying their bills. A lot of these workers on strike are only making
$250 a week from the strike fund. That presumably is not a lot of money to be covering some of these bills that these GM workers are now staring down
as we enter -- as we're in the third week of this strike -- Christine.
ROMANS: All right. Vanessa Yurkevich, the GM story, continuing to follow that for us. Thank you so much for that.
All right, here's today's "Boardroom Brief," the E.U.'s top court has ruled that Facebook should remove hate speech content in some cases. The
European Court of Justice says it must comply and pull the content down worldwide if it is deemed illegal. Facebook argue the ruling threatens
freedom of expression.
Shares in British fashion retailer Ted Baker are down 33 percent. The company is warning it is weak, already miserable financial performance may
worsen over the rest of the year. It's blaming increased competition by its rivals and unseasonably warm weather.
Shares of the H&M department store chain are sharply higher in Stockholm trading. The Swedish based firm reported its first profit rise in more
than two years. It says its turnaround strategy is gaining traction. H&M shares have risen more than 50 percent this year on turnaround hopes.
As the saying goes, breakfast is the most important meal of the day. But this isn't the case for Chipotle which seems to have energy without serving
breakfast. It is currently one of the best S&P performers for the year.
Instead, the fast food company is dining on tech, think ordering your next meal with gesture voice. I spoke to Chipotle's CEO on the CNN Business
live event series, "The Table."
(BEGIN VIDEO CLIP)
BRIAN NICCOL, CEO, CHIPOTLE MEXICAN GRILL: We've got some restaurants where 40 percent of the business is being done digitally. But right now,
we're just below 20 percent, and I think it could easily be 40 to 50 percent of the business.
ROMANS: What are the kind of tech innovations are you guys working on right now? I mean, you've done so many in just 18 months?
NICCOL: Yes, we've been busy. You know, I mean, we're introducing some voice now. So you'll see us be doing stuff with like the Alexa and the
Google Dots where you'll be able to order Chipotle through voice, and that's really the next thing we're working on.
(END VIDEO CLIP)
ROMANS: He is really the turnaround artists there. You know, a couple of years ago, this was a company that was mired in an E-coli scandal, a food
safety scandal. And now sales are up and he considers this company as much a burrito chain as a lifestyle and tech company. That's the way they look
at it. So a lot of changes coming there to Chipotle.
All right, any moment now, we expect to see the U.S. President leaving the White House. This, as a key player in the complaint against him arrives on
Capitol Hill to tell his story. We're live in Washington.
(COMMERCIAL BREAK)
[09:50:02]
ROMANS: All right, welcome back to FIRST MOVE. I'm Christine Romans, in for Julia Chatterley just for today. You know any moment now, the U.S.
President leaves the White House for Florida. It will be the first time he is seen in public since two explosive appearances and a series of tweets,
in which he vented his anger at the Impeachment Inquiry on Wednesday.
In Capitol Hill, the investigation continues to pick up pace. The Trump administration's former envoy to Ukraine is currently testifying behind
closed doors. He is of course a key figure in the whistleblower complaint against this President.
Very pleased to have Brian Stelter join me right now, Brian and I just think that performance or reaction or appearance by the President in front
of the cameras with the President of Finland, really needs to be scrutinized because that was a President as we have not seen him yet in
these rollicking past three years.
BRIAN STELTER, CNN BUSINESS CHIEF MEDIA CORRESPONDENT: Yes, we have seen him angry in the past. But this was a new level, this was a new volume.
If he has been at 10 in the past, now he's at 12 or 13. And I think this is important because we are seeing how the pressure of this formal
Impeachment Inquiry is getting to him, how it's affecting him.
You know, whenever we're going through a political process like this, you think about what is being lost, what is being missed, what work is not
getting done, what policies are not being moved forward. The President is clearly consumed by this Impeachment Inquiry and by what he believes is a
political attack by the Democrats.
And he is spreading so much disinformation and propaganda, really, at this point? But it's hard for the press and the public to keep up. And I think
that's going to be an ongoing story in the days ahead. Every time he is in front of the cameras, he comes up with a new way to attack the
whistleblower to smear the process and has suggested a legal impeachment process is actually an illegal coup.
ROMANS: What I saw was a surplus of fury and a deficit of facts, it's almost as if when the President is cornered, and he is cornered by
Democrats who are saying they want to be very focused, they want to be efficient, they want to be very careful and clear on their Impeachment
Inquiry, and this is a President who feels cornered and blames the press, blames the Democrats and makes things up.
STELTER: And I think the rule of thumb that I always apply, or the question I always ask is, what would we say if we saw this in another
country? Right? We're speaking with viewers around the world right now. They know full well what autocratic countries look like, what dictators --
how dictators act.
Now, the President of the United States is the leader of a democracy, and he was promoting democracy yesterday, saying we have a very healthy
democracy in the U.S., but his behavior, his attitudes, his conduct, his treatment of the press and his opponents. Yes, that is the kind of thing
that would shock people if it's happening in any other country. I think that kind of question just applies really well, on a week like this, when
he does seem to be spiraling into a worse situation.
Now, look every day is different. It's going to be interesting to see how he is doing from a very friendly audience, talking about policy issue,
talking about Medicare. I'm curious to see if he ends up going back to his witch hunt rhetoric, or if he actually stays on message today.
ROMANS: I will say, having been a young reporter in the beginning of the Bill Clinton presidency or the second term actually of the Bill Clinton
presidency when he was going through impeachment. That team stayed very focused on policy and the process of the presidency and kept the
impeachment stuff separate. I don't see that here.
STELTER: Right. Right. There is no coordinated plan, it seems from the White House. There's been a lot of press lately, saying there's no war
room. There's no messaging war room.
Well, I think the President has a war room. It's called Fox News. He has these primetime hosts and stars on Fox who are defending him no matter
what. If that starts to change, if that starts to break, if that firewall starts to break, then he could be in more serious trouble.
Right now, he has his defenders, but most Americans see through it. It is striking how in the polls we're seeing more and more support for
impeachment.
ROMANS: All right, Brian Stelter, so nice to see you. Thank you so much for your guidance as we follow this rollicking -- rollicking, bonkers sort
of story in Washington.
Many Republicans in the U.S. Congress have been silent about President Trump's phone call with Ukraine's leader, but not the Kremlin. Russia's
President thinks that call was just fine. Vladimir Putin even jokes he'll interfere with next year's U.S. election. CNN's Fred Pleitgen reports from
Moscow.
(BEGIN VIDEOTAPE)
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): Tonight, Russian President Vladimir Putin trolling the United States.
Joking about meddling in the presidential election and saying he'll do it again.
(BEGIN VIDEO CLIP)
VLADIMIR PUTIN, PRESIDENT OF RUSSIA (through translator): I'll tell you a secret. Yes, of course, we'll do it to finally make you happier. Just
don't tell anyone.
(END VIDEO CLIP)
PLEITGEN: Putin also backing the demands of some in Washington to see further transcripts of President Donald Trump's interactions with other
world leaders, including the Putin Summit in Helsinki last year.
(BEGIN VIDEO CLIP)
PUTIN (voice over): When there were attempts to launch a scandal regarding my meeting with Trump in Helsinki, we directly told the administration to
just publish it. If somebody wants to know something, just publish it. We don't mind.
[09:55:12]
PLEITGEN (voice over): But, Vladimir Putin also echoing President Trump's talking points on the now infamous Ukrainian phone call.
(BEGIN VIDEO CLIP)
PUTIN (voice over): They began this impeachment proceeding and always bring up Nixon. Nixon's team was wiretapping their rivals. But this is a
completely different situation. Trump was wiretapped. Some anonymous special service staffer leaked this information and based on what we know
from the calls, there was nothing wrong there. Trump asked his colleague to investigate possible corruption schemes of previous administrations.
(END VIDEO CLIP)
PLEITGEN (voice over): With the congressional Democrats turning up the heat and polls showing a growing number of Americans supporting impeachment
proceedings, the Kremlin has shown President Trump that he can count on Vladimir Putin to be in his corner.
Fred Pleitgen, CNN, Moscow.
(END VIDEOTAPE)
PLEITGEN: All right, that's it for the show. Thanks for watching. I'm Christine Romans. "Connect the World" with Becky Anderson starts right
after this short break.
(COMMERCIAL BREAK)
[10:00:00]
END
