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First Move with Julia Chatterley

Queen Delivers The U.K. Government's Speech, Futures Are Falling Amid Fears A China Trade Deal Is Far From Sewn Up; Cracks In The Digital Currency Coalition. Aired 9-10a ET

Aired October 14, 2019 - 09:00   ET

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

[09:00:10]

RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Coming to you live from London, a pivotal week for Brexit. I'm Richard Quest. Julia is off today and here's

what you need to know.

The crucial week as the Queen delivers the U.K. government's speech. Britain wants to see and waits to see if a Brexit deal can be delivered.

On trade, a done deal. Futures are falling amid fears a China trade deal is far from sewn up.

And Libra, it remains in the lurch. Cracks in the digital currency coalition.

Put it all together. It's Monday and this is FIRST MOVE.

A very good day to you. Welcome. This is FIRST MOVE as we start a new week. Glad to have you with us. The markets, we need to take attention

to. Futures are pointing to a lower Wall Street open with reports saying China wants a fresh round of talks before signing the first phase of the

U.S.-China Trade Deal. That would be a major difference of opinion.

The Treasury Secretary Steve Mnuchin says today work still needs to be done on the deal. Exactly how far it is holding together is not very clear.

Mnuchin is stressing the two sides have a fundamental agreement in place. But what is that agreement and will it holds water? The President calls

the deal very substantial on Friday.

Morgan Stanley calls it an uncertain arrangement. It says new tariff hikes cannot be ruled out. Whilst China has released a weak import and export

numbers that is evidence the trade conflict is hitting the Chinese particularly hard.

However, optimism on trade helped propel stocks higher last week. All the major averages rose above one percent on Friday. The Dow and the S&P

finished the week higher and that's the first weekly rise so far this month.

Now, to the earnings season. Third quarter earnings begin to take center stage on Wall Street as wind our way through Monday with the major banks

beginning to report their earnings on Tuesday.

Brexit negotiations also drive sentiment. The pounds is lower, just a tad or so after its best week of gains in some three years, looking at 1.2563

and there is of course the Brussels Summit, the European Council in Brussels, that is going to be where all attention is paid.

So to Brexit and what actually happened in the U.K. today. Today's drivers.

In London the Queen has opened Parliament. It was a speech that outlined U.K. government's policy agenda and at its heart is this promise from her.

(BEGIN VIDEO CLIP)

ELIZABETH II, QUEEN OF GREAT BRITAIN: My government's priority has always been to secure the United Kingdom's departure from the European Union on

the 31st of October. My government intends to work towards a new partnership with the European Union based on free trade and friendly

cooperation.

(END VIDEO CLIP)

QUEST: Two weeks to go before the October 31st deadline. Nic Robertson is with me at Westminster. Nic, together, we heard what the Queen has had to

say. It's a domestic agenda. But it really doesn't mask the fact that Brexit, this week's Summit is going to be the key event.

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Yes, I mean, there's a lot of pomp and circumstance and an important message, of course for the

government. But the reality is that the real political football is now being played out in Brussels in those very secret negotiations -- technical

negotiators there have been with British negotiators and the European Union negotiators headed by Michelle Barnier.

Barnier -- when he briefed the E.U. ambassadors over the weekend clearly indicated that it is still a tough negotiation process; that it is still

not within sight that there's a deal. Both sides have said that there's an aspiration that they will get a deal.

But the stumbling block over Northern Ireland being in the European Customs Union or in the United Kingdom Customs Union or some variant between still

seems to be the tough issue that's open for negotiation.

So not clear come Wednesday, whether the British Prime Minister will have the bones of a semblance of a structure of a deal to have the E.U. leaders

at their Summit at the end of the week signed off on and then for him to bring back here -- Richard.

QUEST: But no deal, is it off the table bearing in mind -- I know I've been banging on about this for hours just today -- is it off the table

bearing in mind the Benn Act will require an extension from the Prime Minister if no deal has been arranged?

[09:05:10]

ROBERTSON: There is an understanding among some MPs in the Conservative Party that there are a number of ways and we heard one MP -- a Conservative

MP -- outlining that there were three ways when he was speaking with you earlier, but that he wouldn't articulate those three avenues open to

frustrate the Benn Act and even dodge around it.

He said, because obviously the Conservatives' political opponents would then seize upon those details, they'll find a way to shut it down.

So there does seem to be an understanding that there is a way to avoid going back -- for Boris Johnson to avoid going back to the European Union

and asking for a three-month extension whether or not those avenues will be frustrated isn't clear, and they certainly would appear from our

understanding at the moment to be against the law, but he has said this he will abide by the law.

We just don't know how Boris Johnson and his party, if they so choose, will decide to frustrate it.

QUEST: And the U.K. election when?

ROBERTSON: Sorry, Richard, I didn't hear you. Say that again, please?

QUEST: I do beg your pardon. A U.K. election - when is that likely?

ROBERTSON: Before Christmas, that seems to be the best expectation at the moment. Quite simply, if the Benn Act is acted upon and the extension --

the Prime Minister gets the extension, that's really believed to be the threshold, the trigger for the Labour Party to follow through a call for a

vote of no confidence in the government which would trigger an election.

The Prime Minister has been asking for it. The Labour Party has been shirking it, saying it wants to make sure that that extension is enshrined.

So before Christmas is the expectation and to that point, much of what we heard in the Queen's speech today, the social agenda, the security agenda

that was laid out by the Queen for the Prime Minister. That's really what the Prime Minister will be campaigning on.

QUEST: Nic Robertson. Nic Robertson in Westminster. Thank you.

The words candid, effective and constructive. Those are the ones being used by China to describe the latest trade talks with the United States.

Asian markets were higher, there are however reports that suggests China wants more clarity before signing on.

After President Trump touted phase one, here is what the U.S. Treasury Steve Mnuchin said earlier.

(BEGIN VIDEO CLIP)

STEVEN MNUCHIN, U.S. TREASURY SECRETARY: I wouldn't pay too much attention to all the daily headlines that speculate things one way or another. What

I will tell you is we made substantial progress last week in the negotiations.

We have a fundamental agreement that is subject to documentation and there's a lot of work to be done on that front, but it includes

intellectual property rights, and it includes financial services. It includes currency and foreign exchange, and it also includes very

significant structural issues in agriculture.

(END VIDEO CLIP)

QUEST: David Culver joins me from Shenzhen in China. What is the -- what are the Chinese waiting for? This idea that somehow they will delay

signing this until there is progress on the next phase? What's actually being said?

DAVID CULVER, CNN CORRESPONDENT: I think as of now, Richard, the sense of uncertainty that surrounds anything that as of this point has to do with

the Trump administration. From China's perspective, it's not that they don't see this as a positive impact. They characterize this likewise as

substantial progress.

Interesting to note, they don't say what President Trump says, as a very substantial phase one deal. They don't use that word - deal. They call it

progress.

And they know from past dealings that things can change very quickly with this administration. So it's a cautious optimism that they're going into

this one with.

But they also need this deal to come through. So this is not just the U.S. that would be benefiting from this. The economy here has been taken a hit.

We've been talking to folks who are reluctant to make big consumer purchases. When you look at the pork crisis, that's been huge and really

decimated a third of China's pork, the main staple meat here.

And so they're going to benefit from this surge of imports of $40 billion to $50 billion as President Trump has characterized it as much perhaps as

the U.S. would.

QUEST: And if you look at what the commentators are saying, does this deal at least start to pry open the Chinese economy in the way the U.S. has

said, or is it really just a buy some more, you know, fiddle around with the currency a bit, buy some more agriculture, keep the Americans happy?

CULVER: I think as of now, they're looking at this from the China perspective, as certainly a positive. They do see this as leading to

potential progress, but they don't characterize it nearly as positively as President Trump has come out to say it.

In fact, we took the claim that President Trump put out on Twitter saying that the agricultural purchases have started already, are currently

underway.

[09:10:07]

CULVER: And we brought that to the Ministry of Foreign Affairs. We wanted to get official comment on that. They wouldn't even go there. They

deferred it to the Commerce Department. The Commerce Department not even addressing it.

So they want to keep this for now, still back channeled, still out of the headlines. They've seen things fall apart in the past. And so what makes

this deal different? That was a question that was posed to President Trump in the Oval Office on Friday, and if you listen to the roll of that

conversation, I sat through that 30-minute conversation listening to the back and forth, and it was U.S. Trade Representative Robert Lighthizer,

along with Secretary Mnuchin, who weighed in saying that this one is different because of the structure and the framework that is in place.

They have in their mind dispute settlements that will allow some of the smaller details that cannot be agreed upon going into this to then be

discussed at lower levels to be figured out, solved before having to rise all the way up to the Ministerial level and further delay this progress.

So that's what they characterize as being different from past deals and negotiations, and hence being a positive going into this. But the timeline

here still remains uncertain, Richard. We're talking three, four or five weeks. Those are the President's words.

He says maybe it will happen in Chile when he meets with President Xi Jinping for the APEC summit. That's possible given that's kind of neutral

ground. It's neither of their countries and it perhaps would be the best backdrop for this.

QUEST: David Culver in Shenzhen in China. Thank you, sir. Now, Facebook's cryptocurrency Libra is in the balance as the tech giant meets

with backers on Monday. The Head of the Global Financial Stability Board is warning of a host of challenges posed by the digital coin.

Major payment companies like MasterCard and Visa have withdrawn their support. Clare Sebastian is with me. It was always going to be difficult,

but why are they all jumping ship?

As far as I can see, there's no new problems. It's only the same problems that have become crystal clear.

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: The same problems, but those same problem, Richard are mounting and that is the regulatory scrutiny that

this project is facing.

It's, you know, been -- there was a joint team back in September from France and Germany saying they wanted to block it. The House Financial

Services Committee wants to hold hearings. The Federal Reserve is looking into it.

And then we get this letter from Randal Quarles, he is head of the Financial Stability Board - that international body that monitors the

financial system, talking about a host of challenges and then they're looking into the need to fill regulatory gaps.

So Visa, MasterCard, eBay, Stripe, pretty much all the big payment companies that had partnered or has expressed an interest in partnering

with Facebook on this are out. Visa said that they are -- they're still evaluating this, but they're looking at a number of factors, including the

association's ability to fully satisfy all requisite regulatory expectations.

So clearly, the regulator issues are playing a role in this, but Libra -- Calibra remains, Richard defiant and they're pushing ahead with this.

QUEST: Clare, but surely, these issues -- regulatory issues -- they will always going to be there. I mean, it does strike me that these other

companies -- I mean, what did they think was going to happen when they signed on?

Their experts told them what the regulatory issues were going to be, and they've -- and those issues have arrived and need to be solved? Doesn't it

seem a bit weird just to be jumping ship because the goings got tough?

SEBASTIAN: Well, I mean, I think, certainly, Richard, you could have seen this coming, and Facebook said when they launched the white paper for this

project back in June that you know, we're not ready for launch yet. There's still a lot of things to be worked out. We're doing this early

because we want to start the conversation and have it publicly.

I think, to an extent that has backfired because we are also in this moment, Richard, whether this backlash against these big tech companies,

but this is -- these companies pulling out, Richard, is a big setback for Facebook because of the uphill climb they face when building trust towards

this project.

The answer that they've constantly given, as they've been questioned on why people should trust their financial information to a company that has such

a patchy track record when it comes to handling user data is that they're not just trusting Facebook. They are trusting this coalition of all of

these other partners that are going into this meeting today, Richard, where they're supposed to be finalizing some of the early members of the Libra

Association, really kind of on the back foot, at least in how this project is being perceived.

QUEST: Clare Sebastian, keep watching. And as that meeting progresses, come back and report more for us -- to us about it.

Now to the stories that are making headlines around the world.

The U.S. President's top former Russia adviser, Fiona Hill, is set to testify on Capitol Hill. She is arriving for her testimony. She did just

a few moments ago and the first of a number of witnesses to appear this week, including Gordon Sondland, the Ambassador to the E.U.

It's his text messages about Ukraine that are central to the Democrats' Impeachment Inquiry. Suzanne Malveaux is in Washington. Are they just

going around the same areas about who said what, where, when, why over these texts and the President's Ukraine conversation or is this now

starting to widen out to other areas that will be crucial?

[09:15:03]

SUZANNE MALVEAUX, CNN U.S. CORRESPONDENT: Well, there's one window that is going to be crucial here and that is the window of time between the text

message in which one of the U.S. diplomat said, I think this is crazy that you've got this exchange, if you will, for the aid going to Ukraine and

this delay and linking that to a political favor, and then you had Sondland jump in, but five hours later saying, no, no, no, no, no quid pro quo here.

What happened in that time period? Who actually had conversations about how that was actually framed? And so that's one of the new areas. But you

bring up a very good point, Richard, which is they're also just going through some of the same material that they already have to kind of flesh

this out and give it larger context.

So when you look at somebody like Fiona Hill, who was the Russian adviser at the National Security Council, she actually left her post a week before

President Trump's critical phone call with the Ukrainian President, and then she left the administration altogether in August.

So she is very able to speak freely and has no constraints whatsoever when she goes before the Committees here, and they're very excited about that

possibility.

But what Democrats want to know, is, during that period during that process, what would have been the impact, say, of withholding military aid

to Ukraine given that Ukraine is in a proxy war with Russia. Who was part of that decision making process to come to that conclusion or to try to do

that? Was it President Trump or was it some of these backdoor shadowy figures if you will, like Rudy Giuliani, for instance? Yes, go ahead.

QUEST: Suzanne Malveaux on Capitol Hill. Suzanne, thank you.

The Spanish Supreme Court has just handed prison sentences to nine Catalan independence leaders, including the former Vice President for Catalonia.

He was sentenced to 13 years in prison for sedition and embezzlement of public funds.

The former head of the Catalan regional government, Carles Puigdemont has called a sentence as an outrage.

A U.N. representative says the Ecuadorian government and indigenous groups who led anti-austerity protests have reached an agreement last night -- on

Sunday night.

The government is repealing a decree that ended fuel subsidies, a measure the sparked more than 10 days of protests.

And as we continue on FIRST MOVE, the Queen opens a new session of Parliament and the British Prime Minister starts a new week of fresh hope

for a Brexit deal.

And there's another deal in the works, the U.S. and China trade talks. The phase one has been done. We need to understand what's at stake. In a

moment.

(COMMERCIAL BREAK)

[09:20:46]

QUEST: FIRST MOVE today comes to you from London. I'm Richard Quest, in for Julia.

The U.S. futures are lower and European stocks are falling, and there are a whole host of reasons why. But if you do take a look, you've got the FTSE

and the DAX and the CAC all lower by roughly the same amount, half a percent.

And similarly if you look at the U.S. futures, both the narrow market through the Dow, the broader market through the S&P and the tech through

the NASDAQ, again, they are down and they're down by a similar amount to each other as well.

So there's a lot of commonality on losses, which suggests the same reasons are affecting all, and it's all about trade uncertainty. The reports say

China wants new talks before signing any trade deal.

Treasury Secretary Steve Mnuchin said today he is confident that a deal will be finalized. But the three-session winning streak is on the line.

The Dow and the S&P are still down slightly for October. The worst start to an October in a decade.

And the U.S. bond market is closed today, of course. It's Columbus Day, a holiday. So there's not much trading going on generally.

Scott Wren is with me, the Senior Global Equity Strategist for Wells Fargo Investment Institute.

Before we get into -- before we get hands dirty with the nitty-gritty of what's going on, where do you stand on this October run for the hills?

It's always horrible in October.

SCOTT WREN, SENIOR GLOBAL EQUITY STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE: Well, I think Richard, really, if you look back in time,

October on average, if you look from 1950s, about the middle of the pack of about a point nine percent gains, so we're not as fearful of October as a

lot of the media is and a lot of our investors are. We always get tons of questions.

But in the end, and this October, you know, we think the market, the S&P 500 is going to finish the year a couple of percent higher than where it is

now. So we're not we're not sweating October right now.

QUEST: Will we make a trade deal? I mean, is it just a rag bag of things, just to keep everybody happy? Or do you see some real opportunities within

phase one?

WREN: Well, for us, anyway, you know, we don't think that the market needs you know, much of a trade deal at all. I mean, something that would

promise not to put more tariffs on, hopefully take some tariffs off, and I think the market would be fine with that and I think that's what the S&P

500, what the market is anticipating right now. And we think that's the correct thing.

Although, for us, you know, we think that the solid deal, the on-paper signed deal, probably out into 2020. So I think that the talk that we had

on Friday, you know, you could see where the market sold off, going into the close from the highs.

And I think part of that was because we didn't know what was going to come out over the weekend. The press conference wasn't really finished.

And so I think there is more work to do that makes sense, as the President said, we're trying to get some things on paper here. So I think we're

going to see a little bit of up and down here. It's probably going to cause some more volatility day-to-day in the stock market.

But clearly, you know, the futures aren't down very much here before the open and I think the market is convinced we're going to get some kind of

deal at some point.

QUEST: Right, but what if some kind of deal at some point so much of the next direction of interest rates from the Fed depends on answering that

previous question, doesn't it? Because if you remember, what the Minutes said, and what Jay Paul said in his testimony, never have I seen a Fed so

concerned about a trade deal.

So where do you see the next -- I mean, what do you see as the Feds move next?

WREN: Well, I think you know, as far as the Fed goes, our call, we expect one more cut this year. We expect another cut next year. So we do think

there is going to be another cut. And I think the Fed is paying attention to that because of this international economy.

And let's face it, the S&P 500 gets 40 percent of the revenues almost from outside the country. So you know, we need these outside countries. We

need to know what's going on there and have a good feel for that.

And so, these trade frictions have caused a lot of headwinds. I mean, you look at earnings from -- China had decent earnings but big exporters into

China like South Korea and Taiwan, their earnings have been terrible in the last two or three quarters, and it's mainly due to the uncertainty over

this trade situation.

[09:25:08]

QUEST: Now, let's talk about that because you talk about the earnings and the spillover effect. If we start looking at Japan, Hong Kong -- well, not

so much Hong Kong -- but Japan, Singapore, all the other ASEAN countries that are feeling the effects of a slowing China economy. Are they about to

get clobbered or helped?

WREN: Well, if, you know, they are definitely going to be negatively affected. And as I said, you know, I mentioned South Korea and Taiwan got

their -- you know, their earnings were down 30, 40, 50 percent.

And so I think any of these economies that export into China and in general export around the world because let's face it, world trade growth is down.

The volume is down a little this year, they're going to be hurt. And so that's something that we need to think of. That's something that Federal

Reserve is thinking of. And I think that's going to play into their decision.

QUEST: Great to have you Scott, as always. Thank you so much for giving us a sense of what's happening in the markets. It's much appreciated. I

appreciate it. Particularly of course, as we talk about Asia and of course -- where of course, now it is coming up too late in the evening at 9:30 at

night, if you're watching us in Asia.

We will have the opening bell for you in a moment. Interesting day, interesting week ahead. It is going to be about trade. That's going to be

the sort of driving factor.

With the markets down, they will be looking for an element of optimism. The fresh week starts. The trading begins with the opening bell on Wall

Street, in just -- I don't know? Three minutes from now.

(COMMERCIAL BREAK)

[09:30:00]

QUEST: And we are off to the races. The opening bell has rung and trading begins on the New York Stock Exchange and all the major markets in New

York. Europe is open. The U.S. is open and we are looking at a lower open on Wall Street that will kick off the trading week.

It is trade uncertainties. It's the usual things. But there are some new elements even after Friday's agreement between China and the U.S. There's

reports about whether China wants more talk before signing.

But let's -- the new element that's going to come onto the table this week are earnings and we start off tomorrow with U.S. financial giants. We're

always going to get numbers from Netflix, IBM, some big names and that's crucial because that gives us direction.

Then we start to find out how much of this market is predicated on strong earnings versus trade, and the bond market is closed today, so trading is

likely to be subdued. You'll often see that subdued in that, and in foreign exchange, certainly in terms of with the bond market close.

At Westminster, the British Parliament has resumed business. Within the hour, the U.K. Prime Minister Boris Johnson will begin the debate on the

Queen's speech that reopened Parliament a short while ago.

And in it, the Prime Minister unveiled his policy. Carole Walker is with us who is our eye of course on U.K. politics. It was a very domestic

speech, but what did we learn? What was new about what Boris Johnson through the Queen told us?

CAROLE WALKER, POLITICAL COMMENTATOR: Well, essentially this was the Prime Minister setting out his priorities through the guilt-crusted ceremony of

the state opening of Parliament.

So the opening statement of the speech which was read out by Her Majesty was that the government's priority was to take the U.K. out of the European

Union on March 31st and to develop a new partnership based on free trade and friendly cooperation. An awful lot of what we saw in a total of 26

bills did relate to the Brexit process.

So we're going to have a withdrawal agreement bill, of course, we haven't gotten a withdrawal agreement yet. There's going to be new bills to govern

our fisheries, our agriculture, and a new immigration system post-Brexit, but of course, so much hinging on those talks still going on inside the

E.U.

The other thing that Boris Johnson was really trying to do here was to reach out to voters in an election which is going to be with us within

weeks saying, look, if we can just get Brexit done, we're going to put lots more money into your schools, into your hospitals. We are getting much

tougher on violent criminals, a very strong law and order slanted speech.

QUEST: Carole, is it likely that you'll get it through Parliament? It might be meaningless in terms of the great -- the greater picture -- but

the inability to get a Queen's speech passed by Parliament is usually equivalent to a vote of no confidence.

WALKER: Well, Richard, it is certainly very doubtful that he will get this Queen's speech through Parliament. We have five days of debate going on,

at the same time as those crucial negotiations over Brexit continuing in Brussels.

And at the end of that, there does have to be a vote in the comments on the Queen's speech, which sets out the government's program, what it wants to

achieve in power.

Normally, as you say, if that was to be voted down, that would be a case for the Prime Minister to resign and we'd have a general election, but we

know that bizarrely at the moment, we have a government that actually wants to have a general election and an opposition is not prepared to allow him

to do that, until he has requested a delay to that Brexit deadline due on October 31st.

And I should say, after all the pomp and ceremony and dignity this morning now that Her Majesty has moved on, the demonstrators are back with us down

here -- Richard.

QUEST: I know. It was quite peaceful. All we had this morning outside there was the Welsh Guards. Now, you've got the protesters back -- not as

melodic as the band of the Welsh Guards.

Carole, finally, briefly, does the -- is there a feeling that this is all just going in circles? That what's actually happening in the chamber

doesn't really matter because until there is fresh meat from Brussels for everybody to chew on, it's just trying -- to mix the metaphors -- treading

water.

[09:35:00]

WALKER: There is a somewhat unreal air to the proceedings today, Richard. Normally we have a Queen's speech after a new government has been elected.

We are now having one within what is likely to be weeks, if not perhaps a few months until we get to a general election.

And there's almost no one here at Westminster who thinks that much of this law that was announced today is actually going to become legally binding;

actually, be taken through Parliament before that general election.

So we'll see the real politics resume when the Prime Minister gets on his feet in the next half an hour or so. But he's going to use this

opportunity to make political points you can be sure at the same time as he knows that so much now depends on whether he can get a deal in Brussels.

QUEST: Carole, good to see you. Thank you. As always. Investors are watching U.S.-China trade talks. Beijing, according some reports, wants

more clarity before signing a deal. It follows President Trump touting a substantial phase one agreement.

The Chinese Vice Premier has described negotiations as candid, effective, and constructive. Ambassador Carla Hills is with me, former U.S. Trade

Representative and certainly knows around these waters.

Ambassador, what do you make of this deal? Is it just a cobble together or are there real structural improvements within it that are worth it?

CARLA HILLS, FORMER U.S. TRADE REPRESENTATIVE: There are no structural improvements. It's the first step in continued negotiations, and we were

all upset when in May the discussions fell apart. So we should smile that they're back together again.

But really all we've talked about and that's on the table is China's going to buy more agriculture, $50 billion may be and it's going to open its

market to the financial sectors, but it already had started doing that, and that it won't play around with its currency. And it hasn't done that for a

period of time.

But the fact that they're willing to talk and to continue to talk, I think is positive.

QUEST: Right. But then, even if the new tariffs are not imposed or the higher rates of tariffs, we are a long way it would seem from the removal

of any of the existing tariffs.

HILLS: Absolutely. The fact that the hike in the October 15th tariffs will not occur, has not eliminated the pain that we are feeling across our

economy, in consumers, workers and businesses with respect to the tariffs and is affecting our economy.

We have slowed. China has slowed and the global economy has slowed. This is a problem.

QUEST: And in the bigger picture, who is -- who has got the upper hand here? Because when I read on Friday what the Chinese had agreed to, and

now we hear that they may not go ahead with it until there's a phase two. One wonders whether the U.S. is just -- is just being offered things to

keep them quiet.

HILLS: I think that, as I said at the beginning, this is just a first step to come back to the table and work. I'm a little bit concerned because

they first step has not been applauded hugely in China. They've been relatively quiet.

And the question is, when they start putting pen to paper and put an outline together, is it going to fall apart as it did this past spring?

QUEST: One other area, of course, of great importance is Europe and the question of whether the President is going to move forward with auto

tariffs against Europe or whether going to turn up the pressure on European companies and governments. What's your feeling?

HILLS: Well, I certainly hope not. It's very hard to make the argument that the import of autos hurts our national security. And the real pain

would be aimed at our closest allies.

Surely, we can sit down and talk about these issues. Negotiations and diplomacy have a very, very important part to play in our prosperity and

security.

And I think we should try to come up with strategies and implement them through diplomatic efforts.

QUEST: Always good to see you. Thank you, Madam Ambassador. Carla Hills joining me from Washington. We appreciate your time.

HILLS: Thank you.

QUEST: The global market movers for you. Boeing shares are trading flat. The aerospace giant says the CEO Dennis Muilenburg has been removed as

Chairman. It is designed to give him more time to focus on getting the 737 back into the air.

[09:40:10]

QUEST: The former GE Exec, David Calhoun, takes over the Boeing Chairman's role.

Facebook shares under pressure. A crucial week for Libra, the cryptocurrency project. Now the Libra Association formed by Facebook is to

meet for the first time today, even though there have been key defections - - Visa, MasterCard -- and now the G7 believes the project should not go ahead without further review.

And Crowdstrike lower. Citi Group has begun coverage of the cybersecurity company and says sell citing the intense competition in the industry.

In a moment, changing alliances. A threat of potential ISIS and a resurgence, growing human suffering -- the latest from Northern Syria on

the picture from the ground as it gets ever more complicated.

(COMMERCIAL BREAK)

QUEST: Hong Kong stores, restaurants and other businesses have suffered in the four months of protests and clashes as the unrest isn't ending anytime

soon. Some protesters are now accusing businesses of being blue or pro- government and so called blue businesses are being deliberately targeted.

Kristie Lu Stout shares us what's at stake.

(BEGIN VIDEOTAPE)

KRISTIE LU STOUT, CNN INTERNATIONAL CORRESPONDENT (voice over): A city plunged in protest is struggling to stay in business. Time and time again,

some of Hong Kong's busiest shopping districts have descended into chaos.

The violent clashes have forced stores and restaurants to close repeatedly during four months of protests, including this famous snake soup restaurant

in Causeway Bay. Regulars usually line up at the door for a taste of its Michelin recommended dishes. But these days, it's far too easy to get a

table.

(BEGIN VIDEO CLIP)

LO CHEONG HEI, MANAGER, SE WONG YEE RESTAURANT (through translator): The number of tourists dropped due to the protests and local people also come

here less often.

(END VIDEO CLIP)

[09:45:01]

LU STOUT (voice over): Since the protest kicked off in June, Lo says business has fallen 40 percent. Many businesses have been forced to close

early because of their proximity to flash points like the Legislative Council. Others have been directly targeted for their perceived allegiance

to the government.

Restaurants owned by Maxim's caterers, including Starbucks have been targeted by demonstrators after the founder's daughter publicly condemned

protesters as violent.

On Twitter, pro-democracy activists Joshua Wong has called for a boycott of Starbucks, and protesters have spray painted this Starbucks cafe with

messages calling on more people to boycott it.

Other businesses have attracted ire for their direct links to China, including branches of the Bank of China and China Construction Bank smashed

and tagged with graffiti.

Demonstrators are sharing this interactive map to identify which businesses are blue or pro-government as opposed to yellow or sympathetic to the

movement.

Lists of yellow and blue shops are also making the rounds. They are circulated online and in the real world by activists like Emily, that's not

a real name and she wishes to remain anonymous.

(BEGIN VIDEO CLIP)

EMILY (through translator): Boycotting these restaurants is a way for people to express their thoughts. People feel frustrated. So this is the

way they choose to express it.

(END VIDEO CLIP)

LU STOUT (voice over): But when violent protests paralyze the city, most Hong Kongers take heed of the police alerts sent to their mobile phones and

avoid going out entirely and that means no dining, no shopping, no local consumption.

LU STOUT (on camera): The Hong Kong government has announced that August retail sales have plunged some 23 percent from a year earlier. That's the

worst year-on-year decline for a single month on record.

The government cited subdued economic conditions, as well as severe disruptions to tourism and consumption related activities.

LU STOUT (voice over): Lo Cheong Hei does not want to talk about politics. But since the start of the protests, he has had to lay off 10 percent of

his staff.

(BEGIN VIDEO CLIP)

LO (voice over): Business will be fine again, but I'm not confident that it can go back to the peak time.

(END VIDEO CLIP)

LU STOUT (voice over): As hardline protesters and police battle in the streets, local businesses are caught in a political crossfire and they are

struggling to stay afloat. Kristie Lu Stout, CNN, Hong Kong.

(END VIDEOTAPE)

QUEST: There are growing concerns over the fate of ISIS prisoners in Northern Syria, the Turkish Defense Minister says his military saw one ISIS

jail, he claims was being emptied by the Kurds, who had controlled the area.

CNN has not been able to verify Turkey's account. That as the Syrian government troops are joining the Kurdish-led forces in their fight against

Syria.

CNN's International Correspondent Arwa Damon is at the Turkish-Syrian border. This is exactly what everybody said was going to happen that the

ISIS alleged terrorists would somehow be released that the Kurds would merge or at least would work with that former enemies, the Syrians against

the Turkish.

ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Hi, Richard. A couple of things are playing out simultaneously inside Syria at the moment.

There's been a lot of claims and counterclaims as to who was released from what prison and exactly how, as well as what has happened specifically in

one of the camps that is housing a few hundred of the ISIS wives and widows as they are called and whether or not they have managed to escape from that

camp.

And then of course, you have the dynamics that are unfolding inside the Kurds, with no one left to turn to literally having to crawl on their knees

back to the Syrian regime.

Worth noting, though, Richard, they did not exactly fight against Damascus when the revolution against the regime of Bashar al-Assad began and they

always maintained loose ties with the regime. The regime always had its airport that was open in Qamishli, as well as a small military presence.

But both sides also were constantly talking to Russia. The Kurds were talking to Russia. The regime, obviously, backed by Russia and Russia has

a relationship with the Turks.

What Russia is going to have to manage right now is what sort of deal can it negotiate to prevent a direct confrontation between the forces of Bashar

al-Assad and those that are being backed by Turkey on the ground? That is going to be Russia's next challenge.

But at the moment, Richard, Russia is emerging as something as the clear winner at least when it comes to the geopolitical spectrum here because

without firing a single shot with Turkey's incursion into Syria, Russia has managed to get rid of the Americans.

QUEST: Arwa Damon on the Turkish-Syrian border. Arwa, thank you.

At this very moment, the British Prime Minister is set to defend the Queen's Speech in the House of Commons. A crucial week in British

politics.

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[09:52:03]

QUEST: This critical week for Brexit began a short time ago with the pomp and ceremony. Her Majesty the Queen open Parliament. It was a speech that

outlined the plans of the Prime Minister Boris Johnson. The real focus, of course is on Brussels, where Brexit talks are difficult, and the E.U.'s

negotiations are not quite certain.

Quentin Peel is with me, Associate Fellow at Chatham House. This morning had a little bit of an unreal air about it. Queen's Speech for a session

that probably won't last that long. What's your understanding of where we stand with Brexit?

QUENTIN PEEL IS, ASSOCIATE FELLOW, CHATHAM HOUSE: Well, I think we are very close to the line, obviously, in time terms, and it looks to me as if

it's a pretty hopeless task of really getting a deal across the line in the time available.

Over the weekend, we heard that the Brussels negotiators were baffled by the British proposals as to how they want to get around the problem of

having no border on the Island of Ireland.

And so I think they are grinding through detail and a long way from the result, which has really got to be delivered by -- well, at the end of

Wednesday at the latest.

QUEST: So if they go into this Summit without any real concrete proposals or even if they're going with a scintilla of an agreement that needs

fleshing out. At the end of the day, Boris Johnson still has to sign that letter if there's no deal by 11 o'clock on Saturday night.

PEEL: Yes, absolutely. That's what the law that the British Parliament has passed requires him to do that every day comes and he repeats that

we're going to be out of the European Union with or without a deal by October 31st.

So the truth is that all the opposition parties in the British Parliament don't trust him, and Boris Johnson has no majority in the British

Parliament. So he certainly seems to be in a very tight place.

But one way or another, he is trying to blag his way, if you like, to no deal.

QUEST: And on that issue, the DUP will stand for what? Labour will give what? I mean, what is it -- what is the key that unlocks a parliamentary

majority for Boris Johnson?

PEEL: I think the only possible parliamentary majority for Brexit is for a soft Brexit. That's to say, pretty much like the sort of membership we

have in the European Union.

But that sort of Brexit is absolutely not acceptable to the very hardest of the pro-Brexiteers in Johnson's own party and it's probably not acceptable

either to the very hardest of the pro-Brexiteers in Johnson's own party. And it's probably not acceptable either to the Democratic Unionists from

Northern Ireland, so he has a real problem.

[09:55:15]

PEEL: Every time he moves towards a compromise, that might be acceptable in Brussels and might be acceptable to a majority in Parliament, he loses

the hardliners on his own side.

So he is really stuck and it's exactly where Theresa May was. So he is desperate to have an election.

QUEST: Which of course raises a whole host of other problems that you and I will talk about on another occasion. Quentin, it is very good to have

you, as always, to make sense of it all. I do appreciate it. We do sometimes feel we are back to where we were and that's because we are back

to where we were. But where we were is where we are and that's where we've got to move from.

You get the idea. That's it for FIRST MOVE. I'm Richard Quest.

Our coverage of the Queen's Speech continues. "Connect the World" is next with Becky Anderson. That's after a very short break.

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[10:00:00]

END