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First Move with Julia Chatterley
Hong Kong Protests Leave Two People In Critical Condition; Saudi Aramco Releases More Details Ahead Of Its Highly Anticipated IPO; Alibaba Breaks Its Singles Day Record With More Than $30 Billion In Sales. Aired 9- 10a ET
Aired November 11, 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]
ZAIN ASHER, CNN INTERNATIONAL ANCHOR: Coming to you live from the New York Stock Exchange, I'm Zain Asher sitting in for Julia Chatterley. And here
is what you need to know.
Violence escalating. Hong Kong protest leaves two people in critical condition.
And ready to run - Saudi Aramco releases more details ahead of its highly anticipated IPO.
And let the shipping begin. Alibaba breaks its Singles Day record with more than $30 billion in sales.
It is Monday, my friends, and this is FIRST MOVE.
ANNOUNCER: This is CNN Breaking News.
ASHER: All right, first we have breaking news to bring you from Hong Kong, a shocking surge of violence has led to a 21-year-old being shot by police
while a man who confronted protesters was doused in gasoline and set on fire.
Office workers were sent home earlier as protesters gathered in Hong Kong's central district rushing for train amid shouts of teargas, teargas. Video
of the shooting by police was shared online and we want to warn you, it is extremely graphic.
An officer is seen grappling with a protester, when another approaches, and the officer raises his gun and then shoots the protester at close range.
The victim is said to be in critical condition in hospital.
Ivan Watson joins us live now from Hong Kong. So Ivan, just set the scene for us there. What are Hong Kong Police saying? How are they responding
to accusations of excessive violence?
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, they're defending the actions of the police. They're saying that in the case of
the shooting, Zain, that the officer was firing in self-defense.
Meanwhile, here in the Mong Kok neighborhood, we have another face off. Demonstrators setting up barricades and several hundred meters down this
road here, in normally what would be a busy commercial district, riot police who have been firing teargas down this direction as the
demonstrators have been setting fires and committing acts of vandalism around here.
In one of the cases that the police had to address today, it involved a man on a motorcycle, a police officer swerving wildly smashing into
demonstrators. The police saying that police officer's case, they have suspended that officer from frontline duty and they're investigating the
incident.
To the best of our knowledge, that's the first time in more than five months that a police officer has been suspended in this cycle of violence
that is basically a low-level urban conflict at this stage.
And there are no signs coming from the city authorities, of any de- escalation. The Chief Executive Carrie Lam fresh from being endorsed face- to-face with the Chinese President Xi Jinping has basically said it's my road or the high road, and the demonstrators have grown more violent and
more radicalized as this process has gone on.
It feels like on the part of the law enforcement and on the part of radical protesters like this, it's a race to the bottom -- Zain.
ASHER: So Ivan, just recap for our audience what the protesters are demanding at this point. We know that the Extradition Bill which was
hugely controversial and one of their key demands was actually withdrawn. What more do the protesters want from Hong Kong authorities at this point?
WATSON: Well, they have a list of five demands, everything from universal suffrage to the release of all the protesters that have been detained.
There you can see some of the fires in the distance that they lit.
But there are a lot of calls for basically anarchy and revolution at this stage. One of the slogans is, if we burn, you burn with us, and the entire
city is suffering from this Zain. It's gone into an economic recession and the stock market, the Hang Seng Index fell two and a half points today, the
biggest drop in more than three months.
Every business person you talk to in the city -- services, hotels, retail, tourism industry -- they are all hurting very badly right now. And once
again, there is no sign of any let up anytime soon.
[09:05:07]
WATSON: The authorities have arrested more than 3,000 people. There's a growing number of casualties in hospital on the side of the police, on the
side of young people like this, who are out day after day. They called for a general strike on Monday, and they're calling for another strike to
continue on Tuesday, though we did not see signs of large numbers of laborers around the city joining into that strike -- Zain.
ASHER: And Ivan, if authorities don't yield to the protesters' demands, what happens next? Obviously Carrie Lam has come out and said listen,
violence isn't going to change things, but surely at some point, something has to give.
WATSON: Yes, but this has been going on for more than five months, and the message that I think we've gotten from Beijing -- after all, this is a part
of China -- from the Hong Kong authorities is they'll just keep going with this low-level urban war of attrition, and this is what you see as a result
of it.
Four or five months ago, these were peaceful protests, massive ones, with one to two million people in the streets calling for a controversial piece
of legislation -- hang on -- controversial piece of legislation to be removed, and in the month since then, many things have deteriorated and
rule of law, frankly, has suffered dramatically.
You see vandalism taking place on a weekly basis. You see actions on the part of the Security Forces which Amnesty International today denounced as
signs of police out of control taking place.
It really is completely counterintuitive to a city that was once known for its record of law and order, of safety and efficiency instead, scenes like
this have become very much the norm here.
ASHER: All right, Ivan Watson, thank you so much for that powerful reporting. Thank you.
As Ivan just mentioned there, Hong Kong stocks fell sharply in the session amid the escalating violence. The Hang Seng actually felt just a little
more than two and a half percent, its biggest one day drop since August.
Here in the U.S., futures are pointing to a lower open for stocks across the board. All major averages are set to fall from record highs that they
hit on Friday. The S&P 100 is coming into its fifth straight week of gains despite new uncertainties over the U.S.-China trade negotiations.
President Trump said on Friday he has not agreed to roll back tariffs on China as Beijing demanded. The President could have more to say on tariffs
on Tuesday when he delivers a speech at the Economic Club of New York.
Fed Chairman Jerome Powell testifies before Congress on the state of the economy on Wednesday and Thursday. Trading volume may be a bit lighter
than usual day. Today, it is Veterans Day in the United States and bond markets are closed.
All right, let's get straight to the drivers for you. With just hours still to go, Alibaba's 2019 Singles Day has already been a record breaking
success. Sales of the Chinese e-commerce giant blew past last year's $31 billion in the first 16 hours.
David Culver joins us live now from the company's headquarters. So David, another record breaking day for Alibaba. What have been some of the
strategies to boost sales this year on Singles Day?
DAVID CULVER, CNN CORRESPONDENT: Zain, this has been huge. As you mentioned, this is a new record already. They are at $35 billion and
they're expecting that to increase because there's still a few more hours.
Now, this is one of the many high tech installations they've got out here. But let me step out here. To your point and your question about how
they've been able to kind of diversify and to increase the sales year after year. It's something I asked the Chief Marketing Officer about when I sat
down with him.
And he said, a lot of it has focused on really trying to create a more diverse consumer base and really tapping into different markets within
Mainland China, that's been a huge focus of theirs, making those who are perhaps in rural areas even get more access to some of the high-tech
technology that allows them to make purchases and do e-commerce.
But for something that's so high tech, we're looking at the top three items that were purchased are pretty basic things. Number one, pants, trousers.
Number two, dress. Number three, hoodies. So that's what folks seem to be flocking to. Nonetheless, they're doing it in massive numbers.
This is also not just a China event, as it was pointed out, this is a global event and becoming increasingly so, so that's another focus for
theirs. They have 78 countries that are offering up brands that have been sold throughout the day here and are continuing to do so.
[09:10:03]
CULVER: Also, we can't forget, you know, despite how fun the environment looks, the climate that we're in when it comes to the economy in
particular, we were talking about the U.S. trade war. We've been talking about China's slow in GDP, the slowdown that has happened over the past two
quarters reported, and it's really near the all-time low in three decades.
So in the midst of that, people are looking at this as a real indicator. You've got some 500 million users, Zain, who have been logging on today and
making those purchases, they're going to be looking at that and analysts in particular will say, okay, what is the everyday Chinese citizen dealing
with as far as the money is concerned? And are they comfortable enough making that spending?
So this is going to be something that's going to suggest where things are really on the front lines.
ASHER: And how are Alibaba sales compared to JD and Pinduoduo or some of its other competitors?
CULVER: When you look at the market, Zain, as you mentioned, those other e-commerce sites are big, but Alibaba has the huge chunk. And really while
Singles Day is being used by several different e-commerce sites and different retailers as well, Alibaba is the one that kind of turned it into
the extravaganza that it's become. I mean, they market this as a festival, so they no longer even consider this to be a campaign or promotional
campaign.
They feel like it's just engaged the Chinese populace to a point that it's become so massive, but they are certainly seen the major chunk here and
then that's expected to increase going forward.
But it's also worth noting, they position themselves as an e-commerce site, so they're not in their minds retailers because they're simply connecting
the retailers with the consumers and it's something they're hoping to do in many different ways and allowing retailers even to brand themselves on
Alibaba's many platforms.
ASHER: All right, David Culver live for us there. Thank you so much. All right, a major milestone has been passed for Saudi Aramco, the oil giant
releasing fresh details for what could be the largest IPO in history.
It's still not saying exactly how much of the company is going on the bloc. John Defterios is live for us in Abu Dhabi. So, John, just walk us through
what was in the perspective, excuse me, for Saudi Aramco. What are their plans for their IPO?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: What's interesting Zain, in terms of context, Aramco is the talk of the town here in Abu Dhabi
in a huge oil and gas conference, but the major players from Aramco are now here. The CEO, the Chairman or the Minister of Energy, all hands on deck
to make sure this goes smoothly.
We do know now though, the details are coming out, that retail investors will get up to a half a percent to make their choice and this is something
of national pride there. It is going viral on social media back in Riyadh and in Jeddah and in the eastern province, where Aramco is. They have
between November 17th and November 28th to make the choice here. Institutional investors up until December 4th.
On the opening session here at ADIPEC in Abu Dhabi, I asked the former Secretary of State of the United States, Condoleezza Rice, who knows Saudi
Arabia very well, is this is a sign of transparency going forward for the Kingdom in a company that was secretive for decades. Here's her answer.
(BEGIN VIDEO CLIP)
CONDOLEEZZA RICE, FORMER U.S. SECRETARY OF STATE: In speaking with the Saudi leaders, as I've done over the last several years, as they prepared
for this, they understand the importance of transparency. They understand the importance of standards that are indeed global standards.
The UAE has led in many ways in the Middle East in doing this and I think this can only be a good thing for global markets. It can only be a good
thing for energy supply, and I must say that as we look to how to think about energy mix, because that really is going to be the question, how can
you get economic growth, energy mix and environmental sustainability all together?
Having Saudi Aramco as a part of that conversation, I think is going to be very important.
(END VIDEO CLIP)
DEFTERIOS: Condoleezza Rice, the former Secretary of State, also, what many people don't talk about, Zain, is that they're fighting the forces of
Wall Street.
The market cap of oil and gas companies in the last five years as part of the S&P 500 has been cut in half, as many people don't want to hold these
big oil giants anymore.
At the same time, though, I think that Crown Prince Mohammed bin Salman of Saudi Arabia is suggesting they need to get it done. He originally brought
up the idea three years ago in 2016, so even if it's smaller than expected, it is expected to go out by the end of 19 even if it's less than two
percent; they are still targeting a higher valuation, and I think they'd like to beat Alibaba in that revenue raising of $25 billion. Back to you.
ASHER: All right. John Defterios live for us there. Thank you so much. Okay. So these are the stories making headlines around the world right
now.
Former Bolivian President Evo Morales is calling on opposition leaders to quote, "pacify" Bolivia after a wave of protests led him to resign on
Sunday.
[09:15:06]
ASHER: Mr. Morales has blamed what he calls a coup attack for encouraging the violent protest. Patrick Oppmann joins us live now.
So Patrick, Evo Morales is calling this a coup. His opponents are saying good riddance to a man who they believe had zero respect for democracy. I
mean, just walk us through what exactly is going to happen next.
PATRICK OPPMANN, CNN CORRESPONDENT: And it is still very unstable situation in Bolivia, Evo Morales, tweeting just a little while ago that
his home in Cochabamba, which is really the stronghold for his support was sacked overnight, and there's actually videos of people walking around in
and out of his house that has been clearly broken into. So again, just one stunning development after another.
This has been brewing for weeks now ever since the opposition in Bolivia accused Evo Morales of stealing election, of rigging the vote that would
allow him to have a fourth term.
And yesterday, a report from the Organization of American States laid out in very clear detail that there was some serious voting irregularities and
that somebody, most likely supporters of Evo Morales may have tried to rig the election so he would win on the first go around, which would have
prevented him from having a runoff.
But it has completely backfired. Protests over the last several weeks, a couple of them were violent, and then over the weekend, we started seeing
police join in with the protesters, and then by Sunday, when the military said that not only would they go out and quell the protest, but then it was
time for Evo Morales to leave. That was really the clearest sign yet that his days were numbered. And by yesterday afternoon, he had in fact
resigned.
We do not know who is in charge of the country at this moment because official after official who were next to the line of succession have also
resigned.
Clearly, it's a priority to get somebody in as the role of Acting President because the country at this point does not seem to have one and to figure
out when new elections will be held because as one of his last acts, President Evo Morales ordered there will be new elections, possibly hoping
that would quiet down these protests. It did not work. He was forced out. And he says he will not seek asylum abroad and that he is staying in
Bolivia. But he also says that he is fearful that he could be arrested -- Zain.
ASHER: So what will the power vacuum mean for peace and security in the country?
OPPMANN: Well, it's still a situation that could go bad at any moment because Evo Morales was popular over the years and he did help the
impoverished in this country more than anybody ever had before.
He is the first President from the indigenous community which is a sizable part of the country. So he has the support and his supporters must be
seething right now. Certainly, other leaders in the region, in Cuba and Venezuela, here in Mexico are -- were trying to prop him up at the end, so
it's a divided continent. It's a divided country.
And he said he stepped down to avoid further bloodshed. We'll just have to see if by leaving power, he was able to accomplish that. Because on one
side, you have the opposition saying that an election was stolen, and that democracy was not respected.
And then on the other side, you have people that say that he was forced off by the military and that the country is kind of tottering right now. The
democracy there is in real danger until we get in civilian leadership back in power there and new elections are called. It's really anyone's guess
how this is going to play out.
ASHER: All right, Patrick Oppmann live for us. Thank you so much.
In the U.K., Brexit Party leader, Nigel Farage has just given a major boost to Prime Minister Boris Johnson. Farage saying his party will not contest
317 seats held by Mr. Johnson's Conservative Party in the upcoming general election.
In Southeastern Australia, firefighters are battling more than 70 bushfires in New South Wales alone. A seven-day state of emergency has been declared
and the Fire Service issued a catastrophic threat warning for the Greater Sydney Area as the flames march closer. Officials say at least three
people have died and more than 100 homes have been destroyed.
All right, still to come here on FIRST MOVE, can a credit card be sexist? U.S. regulators aren't the only ones looking into the Apple card, even
Apple's co-founder says that he thinks that something is very, very wrong.
And stacks of snacks. Mondelez CEO tells us appetites and profits are on the rise. That's next.
(COMMERCIAL BREAK)
[09:22:50]
ASHER: Welcome back to FIRST MOVE. U.S. stocks are on track for a weak open on this Veterans Day here in the United States. Dow futures pointing
to lower open, down already about 110 points or so. Stock market is set open about eight minutes from now.
It is Veterans Day here in the U.S. Stocks are set to pull back from the repeated record highs they set last week. Traders note that U.S. stocks
are already at their richest valuations in almost two years on the hopes that that the economy will turn a quarter if trade tensions fade.
Dryden Pence joins us live now. He is the Chief Investment Officer at Pence Wealth Management. He joins us live. So Dryden, thank you so much
for being with us on this Veterans Day. Certainly, an honor to have you with us. Thank you so much for your service.
So just walk us through the journey that stocks have been on from last week to this week. Obviously last week, we saw multiple record highs. This
week, it seems like we're having a bit of a lower open already on this Monday.
DRYDEN PENCE, CHIEF INVESTMENT OFFICER, PENCE WEALTH MANAGEMENT: Well, it's been the pattern over the last several times, we hit these record
highs and then everybody kind of takes a breather, takes a look at it, and you begin to see the stocks come back.
And it's not uncommon over the last several cycles for us to see even as much as a five to ten percent pullback after a record high and then it
straightens out and then recovers thereafter.
So, you know, pulling back from here is not necessarily unexpected, but a lot of those things that have created some headline are beginning to abate.
ASHER: What would you say were the major headwinds though on the horizon just in terms of risk to the market in the short term?
PENCE: Sure, well, you know, we did have the Fed as a headwind. That's kind of off the table. We had Brexit as a headwind, that's beginning to
abate some. And then we have the China trade tensions, which kind of is a day-to-day. One day you hear it's going to be fine; the next day, it's
not. Then you have a schedule.
So we have those things and then later on this month, you still have a couple of issues. You do have a Fed meeting coming up in December, but
then in mid-November, we're going to have the tariff situation that the President is going to have to make some decision about on auto tariffs.
So those are some things that could give rise to headline activity that could create one of these bumps in the road or stimulate some of this
volatility that we've typically seen after a recent high.
So those are the things to watch out more. More headline driven than actual economy driven. We're beginning to see some of these things level
out, although the global economy still looks like it's slowing down.
[09:25:29]
ASHER: In terms of another interest rate cut, I mean, almost everybody believes that probably interest rates will stay the same in December, but
when do you anticipate the next cut will be next year?
PENCE: I actually think that next year, being a Fed governor is going to be a fairly boring job. I think that they do have it about right. They
certainly raised twice last year. They shouldn't have. They've had to pull those out. Now, they've pulled a third one out to kind of cover this
trade tension that we have.
And I think the Fed says they feel like they've got it about right, barring any major changes in the economy. And I kind of take them at their word on
that. I think we'll probably level for a while.
I mean, the thing is, expectations have changed. Feds raise interest rates, it changes human behavior, and we found that a four percent rate on
a mortgage is about where human behavior changes, about the rates where they are right now of where people continue to buy things, where they don't
get spooked from too high of interest rates, and that has leveled off.
I mean, the Fed has found the right level at this point where behavior matches up where you don't have these major changes or a reduction in
demand.
So consumers change their behavior with a much lower interest rate now than they did 20 years ago. I think the Fed got it wrong about that. Now, they
understand that with half the population below the age of 45, I think that they've recognized that people's behavior changes with a much lower
interest rate and I think they found -- they found their path and it is right about here.
ASHER: All right, Dryden Pence, we have to leave it there. Thank you so much. Appreciate it.
Okay, so you are watching FIRST MOVE. The market open after this short break in just three minutes.
(COMMERCIAL BREAK)
[09:30:14]
ASHER: The opening bell has just rung here on this Monday, November 11 at the New York Stock Exchange. It is Veterans Day. You see members of the
military up on the podium there.
As expected, though, we do have a lower start to the trading week here on Wall Street as all the major averages are pulling back from Friday's all-
time closing highs.
We are already down about 130 points on the Dow. Investors are clearly hoping to get some clarity on the U.S.-China trade this week. President
Trump is delivering a speech at the Economic Club here in New York tomorrow. He must also decide by Wednesday whether to impose tariffs on
European auto imports.
European stocks are pulling back this session as well. U.K. stocks are performing the worst. New numbers show the British economy avoiding
recession in the third quarter. That said, economic growth was the weakest in a decade.
And looking at the Global Movers, we are watching Alibaba and JD.com, both Chinese online giants celebrating blockbuster sales for Singles Day. It is
the world's busiest, biggest online shopping day worth than Black Friday and Cyber Monday combined.
Also shares of Walgreens Boots are on the rise. Reports say buyout firm, KKR, has actually approached the drugstore giant to discuss taking the
company private. If that happens, it could be one of the biggest ever leveraged buyouts.
And Deutsche Bank stock is down in Frankfurt. It's been meeting British financial regulators to explain why its internal systems are having
problems processing high-value payments.
A New York regulator is looking at the allegations that Goldman Sachs Apple card is sexist. The flurry of accusations of gender buyers in the card's
algorithms erupted last week with one such criticism coming from Apple co- founder Steve Wozniak.
Let's bring in Clare Sebastian who joins us live now. So Clare, Steve Wozniak is basically saying that his wife was given a lower credit limit on
the card despite the fact that they share financial assets. Just walk us through how something like that could possibly happen without it being a
clear case of sexism.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Zain, this has really escalated in the past few days. It didn't actually start with Steve
Wozniak, it started with another tech entrepreneur called David Heinemeier Hansson.
He tweeted last Thursday, we think we can show you that tweet, "The Apple card is such a (explorative) sexist program. My wife and I filed joint tax
returns, live in a community property state and have been married for a long time. Yet, Apple's black box algorithm think I deserve 20 times the
credit limit. She does no appeals work."
So he goes on to say, after this now viral tweet that he spoke to Apple representative who implied it was the algorithm. They then upped his
wife's credit limit by way of consolation. He wasn't happy with that because he said, it didn't get to the root of the problem.
And meanwhile, as you say, Steve Wozniak, the Apple co-founder chimed in, let's have a look at his tweet. He said, in a reply, "The same thing
happened to us, I got 10 times the credit limit. We have no separate bank or credit card accounts or any separate assets. Hard to get a human for a
correction, though. It's big tech in 2019."
So damning comments that from the co-founder of Apple. Now Apple have referred questions on this to Goldman Sachs who are the credit card issuer
and Goldman Sachs, they put out a statement late last night. Let's have a look at that. They say, "As with any other individual credit card, your
application is evaluated independently. We look at an individual's income and an individual's credit worthiness which includes factors like personal
credit scores, how much debt you have, and how that debt has been managed."
They say crucially, "Based on these factors, it is possible for two family members to receive significantly different credit decisions. In all cases,
we have not and will not make decisions based on factors like gender."
But meanwhile, Zain, the New York Financial Services Department has come in and said, they are investigating this. They say that any discrimination by
any financial product is banned by the law.
So this is a very new product, the Apple Card. It only launched in August and already hitting a fairly big PR problem, if not a structural problem.
ASHER: So, given that regulators are investigating, how much trouble could Goldman Sachs be in if it is determined that somehow the algorithm --
obviously, they are denying it, but the algorithm could be discriminating based on gender?
SEBASTIAN: Right, so I mean, it's difficult to know exactly how much the sanctions on this are. I mean, I've reached out to them to find out what
they are. I think usually they do sanction every violation, so it could get potentially expensive.
But of course, Goldman coming out and defending themselves saying that we do not discriminate on the basis of gender and they are, you know, heavily
invested in this. Goldman has recently started branching out into consumer finance.
This is a big high profile product. Not to mention of course, for Apple which is crucial for its business that they really increase their services
portion of it of which Apple Pay is a big part.
So both of these companies are going to be really looking to defend this. So a big problem for both businesses.
[09:35:25]
ASHER: Clare Sebastian live for us there. Thank you so much. All right. All right. Up next here on FIRST MOVE, Singles Day brings record sales to
Alibaba as Chinese consumers discount the trade war balloon. That's next.
(COMMERCIAL BREAK)
ASHER: Alibaba's Singles Day has broken records and it is not even over yet. A couple more hours to go. The e-commerce giant smashed last year's
$31 billion sales record 16 hours into the day. The 24-hour shopping holiday ends in just over an hour.
This year, Singles Day is good news for Alibaba, which is under pressure from China's slowing economy and the trade war with the United States.
Joining me live now is Shehzad Qazi, Managing Director at China Beige Book. Thank you so much for being with us.
SHEHZAD QAZI, MANAGING DIRECTOR, CHINA BEIGE BOOK: Glad to be here, thanks.
ASHER: So given that the Chinese consumer isn't necessarily as robust as it should be, how much of a surprise is Alibaba's record breaking results
there?
QAZI: Yes, I wouldn't say it's much of a surprise really. Alibaba has been doing quite phenomenal every year for Singles Day. We've seen record
breaking sales in the past, but I think Alibaba is not the Chinese economy. We need to pull back and look at the larger context.
ASHER: It's an outlier.
QAZI: It's absolutely an outlier. You know, it also has people from other countries buying up, so it's not just domestic Chinese consumption, either.
There's a lot of discounting that takes place. So how much of that shows up in the bottom line? All those are questions that we need to look at.
But more importantly, all the data that's come out has consistently shown that Chinese demand is, you know, sort of very modest, even tepid.
In the third quarter of this year, China Beige Book data that came out, you know, we saw overall within the economy, we saw some of the weakest numbers
this year that we've recorded.
[09:40:10]
QAZI: All the official data that's been coming out in recent weeks sort of continuously emphasized that the economy as a whole is actually weak. You
know, PMIs are in contraction territory for half a year now. Imports have been falling for about half a year. Exports are contracting, I think four
months in a row, something like that.
The latest inflation data that's come out again, similarly shows factories are struggling. But even if you looked at consumer prices, they're quite
modest.
ASHER: And just in terms of the effect of the U.S. trade war with China on the Chinese economy, just every time, even with the -- you know, here in
the U.S., every time the market sort of feel as though we are approaching a deal and things are moving on nicely, we get a tweet or a comment from the
President that sets us back just a little bit.
QAZI: Yes.
ASHER: Walk us through that.
QAZI: Yes, absolutely. Both sides. This is a negotiation, right? And then one of the things they do in a negotiation naturally is you posture a
little bit. So every time both sides, you know, there's --you put on sort of just grand posture and say, no, we're not willing to concede. Of
course, there's going to be a big market reaction.
Also the markets are really just looking for a deal, some kind of a deal. They don't really, I think care what the deal actually really even entails
to a large extent.
In terms of some of the outlying bigger structural issues, right now, everybody is hoping and wishing that the December tariffs are gone. I
think we know that for a fact more or less. The Chinese have been told that there is going to be a punt on December tariffs.
The big question is, of course, the September tariffs.
ASHER: Right?
QAZI: What happens with that? That's where there's a lot of uncertainty. Now, one thing that we've been able to communicate out to our clients et
cetera is, of course that the September tariffs -- you know, there is more or less consensus within the organization.
The hawks are fine with the September tariffs being rolled back. There's just one person standing in the middle of that or in the way of that and
that would be the President himself who has not yet made that decision on whether or not he wants to roll back the September tariffs and give that
into the Chinese.
ASHER: And then just in terms of concessions that China is going to have to offer for its part in exchange for these tariffs being rolled gold back
and how much U.S. agricultural output are they going to have to buy et cetera?
QAZI: Yes, so one interesting thing here is that the President himself, he is very much interested in the Ag purchases, right? He wants to make sure
that the farmers feel some kind of -- are taken care of or they feel like they are taken care of. He is also looking for LNG purchases and
potentially having an energy deal with China.
The larger concern is that this deal, the mini deal, the interim deal should never be made to look like it is essentially American -- the
American side rolling back tariffs in exchange for Ag purchases only.
If that's the case, I think the President is going to have a lot of problems when he hits the election trail next year because it's going to
look like a very weaker deal that he struck.
So what the -- you know, what the Chinese side now is looking to do is potentially going back to the May draft, maybe making some IP concessions
on top of that. There has been recently some parts of market access, et cetera, intellectual property -- you know, protecting intellectual
property, and so forth. So those are some of the deal -- so some of the things that are be worked out right now.
ASHER: So some say that, you know, a trade deal has been more or less baked into the market at this point. But really the fact that it's going
to be done in phases, the fact that we're getting a piecemeal trade deal signals to a certain extent, at least to me that there's always going to be
room for one side to change their mind or pull back.
QAZI: Oh, yes, absolutely. I mean, first of all, there was an assumption that there was going to be a deal this month, now, first of all, that's not
-- that's not in itself a sure shot thing in any event.
And absolutely, I mean, this thing may very well play out to the last minute. I think one of the things that the President would like to do is
hold back on some of the bigger concessions until he is in the room with President Xi Jinping himself. You know, he wants to make that -- make the
final deal himself.
I think he is going to get it and he wants to also get a big market splash out of it, I'm sure. He cares about those things. So yes, there's going
to be likely uncertainty until the very end and markets are probably going to remain jittery until the two of them get in the same room.
Now, of course, the question is, can they agree on enough things beforehand to even get the two men in the same room? Because this thing needs to be
big enough ...
ASHER: Right, right.
QAZI: ... to justify the Presidents coming together.
ASHER: All right, Shehzad Qazi, thank you so much.
QAZI: Thanks.
ASHER: Appreciate it. As President Trump rejects reports that he is about to roll back tariffs on China, German giant Siemens says the trade war is
its single biggest problem.
The CEO, Joe Kaeser told John Defterios the world is watching and he hopes the two governments will find a way out. Take a listen.
(BEGIN VIDEO CLIP)
JOE KAESER, CEO, SIEMENS: I think the single biggest issue we have is still the ongoing trade war between China and the United States. Everybody
is looking because the number one and number two in the world are in disarray. People wait and wonder what the hell is going on. That could
actually get out kick off, quite a big rally because people have not been investing.
They are actually on the sideline until the dust would be settling. So, actually we are optimistic that this could actually in the second half of
2020, it could actually be quite productive.
[09:45:05]
DEFTERIOS: It is interesting you say that. The Trump administration would make a big miscalculation with a country that has $3 trillion of reserves,
and still growing five and a half to six percent. They're not rushing to a deal.
KAESER: Well, let me put it this way five or six percent in China would be looking great for Europe, but it's not looking great for China. I have to
say that, there's got to be an understanding on how trade is going to happen in the future.
By not saying that, well, look, if you look at energy here, oil and gas, 4.0. We look at the Internet of Things, all that great stuff, which
technology is actually helping us to achieve. And all the three Industrial Revolutions have brought out -- people out of poverty, have been making a
better world.
Now, we are at 4.0 forging a solution, which is Internet of Things. Everything is connected. The whole world is supposed to be connected, so
how can it be all connected, you know if people go back into nationalism and protectionism?
DEFTERIOS: Is that what you're banking on? You think they can have a major breakthrough?
KAESER: I do think at the end of the day, they will find a way to cooperate. They are the number one and number two in the world, so
everybody is watching this. So I am sure they are going to get something done.
DEFTERIOS: In Davos two years ago, you sat next to President Trump at the dinner. How much of a trouble is it this impeachment hearing do you think
on sentiment in the United States and what happens to him in your view?
KAESER: Well, look, that's a matter of the American people. You know, they need to decide how they want to design the leadership. We work with
every government which is being elected, which is in touch. Some are a bit more challenging, some are a bit less, but we work with everybody, and so
let's take it from there.
(END VIDEOTAPE)
ASHER: All right, coming up, Adidas powers off its robots in Germany and the U.S. is saying it's time for high tech manufacturing in Asia. That's
next.
(COMMERCIAL BREAK)
ASHER: All right, welcome back everybody. Here is today's "Boardroom Brief." Bernard Tyson, the CEO of Kaiser Permanente has died at age 60.
The first black CEO of one of the U.S.'s largest nonprofit health plans. Tyson was a champion for accessible healthcare, racial justice and
diversity in the workplace as well.
The CEO of Uber has walked back comments he made describing the murder of journalist Jamal Khashoggi as a mistake by the Saudi government. Dara
Khosrowshahi likened the murder to an accident involving one of Uber's self-driving cars, which killed a pedestrian last year.
(BEGIN VIDEO CLIP)
DARA KHOSROWSHAHI, CEO, UBER: I think that the government said that they made a mistake.
UNIDENTIFIED MALE: Well, they made a mistake. I mean, somebody is dead.
KHOSROWSHAHI: Well, it's a serious mistake. We've made mistakes too, right, with self-driving, and we stopped driving and we're recovering from
that mistake.
So I think that people make mistakes. It doesn't mean that they can never be forgiven. I think they've taken it seriously.
UNIDENTIFIED MALE: The CIA didn't suggest that they made a mistake and that was an oversight. Like with self-driving, that was basically a bad
sensor, correct?
KHOSROWSHAHI: Yes.
UNIDENTIFIED MALE: This was -- the CIA suggested that the Crown Prince had a role in ordering an assassination. It's a different thing. You guys
didn't intentionally run somebody over.
KHOSROWSHAHI: I didn't read that part of the CIA report. You're obviously deeper in it. But I think from a Saudi perspective, they're just like any
other shareholder, right? It's we -- now we're a public company, anyone can invest in our company if they choose to do so. And they're a big
investor, just like you could be a big investor as well.
(END VIDEO CLIP)
[09:50:40]
ASHER: The Saudi fund is Uber's fifth largest shareholder. The Uber CEO later e-mailed Axios to say, "I said something in the moment that I do not
believe when it comes to Jamal Khashoggi. His murder was reprehensible and should not be forgotten or excused."
A Chinese firm will by British Steel in a deal estimated to be worth 90 billion pounds. British Steel has been in compulsory liquidation since
May. The deal with Jingye Group could protect thousands of British jobs and it comes as the U.K. prepares for a general election.
Adidas says it will close two high tech sports shoe factories in Germany and the U.S., its first plants using largely robotic production. It has
only been open for three years. The company says it makes more sense for its Asian suppliers to use the technology in their factories.
Small bites, big profits. The global food conglomerate, Mondelez is raising its 2019 sales forecast with an increased demand for snacks,
especially in emerging markets.
Mondelez CEO, Dirk Van de Put sat down with Alison Kosik to talk about global snacking trends and the uncertainty surrounding Brexit and trade.
(BEGIN VIDEOTAPE)
DIRK VAN DE PUT, CEO, MONDELEZ: First of all, snacking is growing today of the adults in the world. Most of them now eat more snacks than they eat
full meals. And so that's an important consideration.
There's a number of interesting findings. Women snack more than men, millennials and Generation Z's snack a lot more than the older generations.
People in developing countries snack more. So snacking is on the rise and it's really a big trend.
The second big finding is that our relationship to food is changing. Foods 30 years ago was about nutrition, it was about hunger. Now, the
relationship to health is becoming clearer and clearer for every consumer and they take that into consideration if they eat.
But it's also about emotional mental wellness. It's about taking a break, about relaxing, re-energizing. And the last one, which I think we've seen
recently is about your identity. It's who you are. What you eat is a representation of who you are. If you're a parent, what you give your kids
as snack is very important.
Now that leads me to the third big consideration which is snacking is a bit more than just eating. It is about reconnecting to your roots.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: How much of a challenge is that for you and how maybe are you thinking about expanding Mondelez's product
line knowing that many consumers want the fresh over what's in the box or the bag?
VAN DE PUT: Yes, obviously we are studying that and we have projects to go into that direction. I would say packaged snacks are growing quite a lot,
too because there's the portability, there's the freshness. But yes, fresh snacking is a clear trend also.
KOSIK: You've really taken this global view about snacking and realizing that snacking is kind of three dimensional, isn't it? And that there are
regional tastes. How has Mondelez used that knowledge?
VAN DE PUT: Well, we adapt our product range to the different regions of the world. We have an assortment of brands, global brands, Oreo, Milka,
Cadbury and we have local brands, Cote d'Or within Belgium or LU in France, and as we connect to the local consumers, we understand better what they
like, what they don't like? Which brands do they prefer?
So we use that information and we also use the flavors. For instance, the Oreo flavors in China are completely different from Oreo flavors in the
U.S. because Chinese palate is completely different.
KOSIK: And let's talk tariffs for a minute. How has trade tariffs impacted your business? And despite, you know, signs of these trade
tensions ramping down, are you still factoring in higher costs because of these tariffs?
VAN DE PUT: In our case, we are largely local producers in the big countries around the world, so tariffs, not necessarily affect us in a big
way. But in January where our head was largely around Brexit and if Brexit would come, and the U.K. government was thinking about imposing tariffs,
some of what we sell in the U.K. is imported from Europe. So that was what was going through our head.
In the meantime, it does look like they are not really planning for that. And so tariffs for us, largely because we have local factories around the
world don't affect us that much.
[09:55:07]
KOSIK: So with Brexit kind of in a holding pattern, are you still kind of building additional inventory, stockpiling and packaging ingredients? Are
you still doing that?
VAN DE PUT: Again, it's the third time we're going to do it now for the potential January Brexit date, yes, yes.
KOSIK: So how does that affect your business though, to continue in this uncertain pattern?
VAN DE PUT: Well, each time Brexit might be coming, and the borders might become a problem. Since we ship from the mainland, not everything, but
part of what we sell in the U.K., in advance which we ship more products in the U.K., more raw materials in the U.K. We contract more trucks, so
that's an extra cost for us. And then as Brexit doesn't come, we ease that out again.
Then there was the second period of Brexit so we did that again. Now with January, so we'll do it again in December and January. So it's an extra
cost to our business. It is an extra complexity. It makes our people walk away from the day-to-day job having to do special things. So it's some big
disruption to our business.
(END VIDEOTAPE)
ASHER: All right, and one quick note, British Steel that deal is actually worth an estimated 90 million pounds, not billion as we said earlier. Just
a quick correction for you.
All right, that's it for the show. I am Zain Asher. "CONNECT THE WORLD" starts after this short break.
(COMMERCIAL BREAK)
[10:00:00]
END
