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First Move with Julia Chatterley
China Accuses The United States Of Overreacting To Coronavirus; Hong Kong's Carrie Lam Suspends Ferries From Macau And Restricts Border Crossings From The Mainland; Iowa Voters Officially Kick Off The 2020 Election Race. Aired 9-10a ET
Aired February 03, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:10]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE. And here's your need to
know.
Fear mongering. China accuses the United States of overreacting to coronavirus; stocks there slump.
Taking no chances. Hong Kong's Carrie Lam suspends ferries from Macau and restricts border crossings from the Mainland.
And a raucous at the caucus. Who will come out on top? As Iowa voters officially kick off the 2020 election race. It's Monday. Let's make a move.
Welcome once again to FIRST MOVE this Monday morning. Great to be back with you. Great to be back here at the New York Stock Exchange.
But I have to tell you, the action is not here. It's all about Asia and what we saw in the overnight in session today, take a look specifically at
what we saw in China.
The Shanghai Composite plunging more than seven and a half percent. That was the worst daily drop in some four and a half years.
It was the first day of trade, of course, since before the Lunar New Year holiday. So much of that punch that we saw at the Chinese stocks is about
playing catch up on the weakness that we saw in the region last week.
It's just one session, I have to say, but it was less than many have feared, perhaps due to the actions at the Chinese Central Bank. They cut
rates and pumped and billions of dollars of cash into the system to calm investors' nerves.
Elsewhere though in Asia, and this is important, too, I think, things seem to stabilize. The Hong Kong markets actually ended the session in the green
and that's how the U.S. session is shaping up right now. Futures are higher taking a cue from a stronger European session, too.
It does though follow the worst day for U.S. stocks since October. U.S. majors fell one and a half percent plus in Friday's session.
I'll tell you what. Now, the Dow and the S&P negative on the year. The Dow has fallen three percent from record highs set just a week or so ago only -
- three percent. I should perhaps add there.
What about the 10-year yield as well? A gauge of sentiment at this moment, a little bit firmer today after that felt October lows on Friday, too.
Wells Fargo warning that yields could fall a further 30 percent if the global health crisis intensifies.
The coronavirus outbreak is once again our top driver. Let me bring you up to speed with the latest at this moment.
The Philippines has confirmed the first death outside China this weekend. Right now, more than 17,000 cases and over 360 deaths have been reported
worldwide.
Hong Kong closing all but three border crossings to the Mainland, as I mentioned and China is accusing the United States of overreacting to the
outbreak.
David Culver joins us once again from Beijing. David, great to have you with us. I want to hone in on what the Chinese government have said today
about the U.S. reaction, spreading a degree of panic by shipping their nationals out of China and restricting travel.
And then we've seen other countries follow suit, talk us through what they had to say today.
DAVID CULVER, CNN CORRESPONDENT: Oh, Julia, they were furious and the Foreign Ministry coming out through their spokesperson and they held this
on an online chat with journalists because they're trying to avoid congregated masses together, and so they don't want to spread the virus
even more.
So even on this online chat, you could feel their fury. I mean, they expressed this in several paragraphs, part of it essentially saying that
they believe the U.S. has overreacted here, that they were the first to start this travel restriction against China.
They were the first to bring out there diplomatic personnel and that they were the first to essentially move forward with these growing concerns that
this is larger than it's being portrayed.
And they say, you know, this is a concern. The coronavirus is an issue here, but they also point to the U.S. and they say, look at the flu and
look how many people die and are infected with that each year and this year alone.
So that's where the Foreign Ministry is coming forward with this, but they also seem to be using this as an opportunity to question the U.S. bringing
in their planes to evacuate American citizens. And here's why I say that.
There was a plane that was scheduled to take American citizens out of the City of Wuhan, and that they would bring them back to the United States.
But that was delayed.
I was talking to some of those Americans who said we don't know what happened, we're just told it got pushed back.
That seemed to coincide with the Foreign Ministry issuing these very harsh remarks against the U.S., and one thing the Foreign Ministry pointed out
when we asked them if this was punishment for the U.S.'s actions, they said no comment on that.
But they did point out that Wuhan's Airport only has a certain amount of capacity, and that they need to make capacity for aircraft that had medical
supplies.
What are they implying there? Well Julia, if you look at other nations that have evacuated their citizens -- South Korea, Japan -- they have brought in
planes of supplies, so as to help out with the dire need here.
It seems to suggest that the U.S. should be doing the same if they're going to be landing aircrafts in Wuhan, and the Secretary of State Mike Pompeo
said that they would consider doing that -- Julia.
[09:05:21]
CHATTERLEY: Yes, I mean, that's a quite stark comparison, isn't it, between the two nations here. I just wonder, I mean, if we go back to last
week, the World Health Organization deciding not to suggest/recommend restrictions to trade and travel here, it meant that countries like the
United States and others had to act unilaterally.
You have to make a choice whether you do what your nationals are perhaps asking and that is, please get me out of here. It's a tough balancing act.
But to your point, premium medication and support is helpful.
CULVER: Yes, no question, Julia, and you're right. They feel the pressure from the U.S. side of things. It wasn't only the citizens who are raising
pressure there, but you could look at certain unions.
I mean, you have the airline union there with flight attendants and pilots likewise saying, hey, we're concerned about going to and from Mainland
China. So that's something they had to face.
And then other countries were also moving forward with certain restrictions that weren't as widespread, I would say, as the U.S.'s travel restriction,
but still, they were suggesting that, for example, in Singapore, if you were a student or a staff member at a school, and this was early on, they
said, if you had gone anywhere in Mainland China, you couldn't come into a school for 14 days.
So it just seemed that the U.S. came in with this oversleeping kind of travel restriction all together that really has angered the Chinese Foreign
Ministry.
CHATTERLEY: Yes. And clearly a very delicate moment politically between the two nations already. David Culver there in Beijing for us. Thank you so
much for that.
All right. I want to move on and talk about the market reaction. $445 billion worth of market value wiped from Chinese markets in the session
this Monday. The first trading day of course, since the Lunar New Year holiday.
John Defterios has been watching all the action for us, not to take any attention away, John, of course from the people that are infected ill here,
but wow, what a reaction from the markets and currency weakness. It was cross asset reaction here in the Chinese markets.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Yes. In almost a whiff of desperation, I would say by the Central Bank of China, Julia,
coming out with a very bold statement saying we're going to put liquidity of $173 billion, and then the other signal was, we're going to keep
interest rates low.
And even the criticism of the United States here showing the fact that China is a little bit more vulnerable now than it was during the SARS
crisis of 2002 and 2003. What a market route as you were suggesting here, a nearly half a trillion dollars if you take the combined indices of Shanghai
and Shenzhen, a loss of an average of eight percent.
If you're looking for a silver lining, it was the fact that the Nikkei wasn't down sharply. Hong Kong actually went up after the route that we saw
last week.
But I think -- and we had this conversation last Thursday in London -- we have to think in a larger context of the influence of China. Everybody is
looking at the supply chains within the country and Hubei Province where Wuhan is based.
Right now, yes, it's clogging up the system, no doubt about it. But number two, this is an economy that ranked at $13 trillion at the end of 2018.
We're looking for it in the final numbers, but the next seven economies in Asia add up to $12 trillion.
So I'm looking at a much bigger influence of what's going to happen in China going forward, overseeing the early expectations of a drop of two
percentage points in terms of their growth, but coming from a very low level of six percent, which is the worst in nearly three decades for China.
So there's more trouble ahead, and it's going to filter out into other economies in that region.
CHATTERLEY: Yes, and assuming you believe the numbers, I mean, when we're talking about, a full handle here for Chinese growth, it's in comparison to
a country like the United States, perhaps zero to negative just on a relative basis.
But I do want to hone in on that and the reaction that we've seen in the oil markets because clearly, oil investors are suggesting that the economic
fallout here perhaps could be really significant.
There's now rumors and you were talking about this when we were in Davos two weeks ago, the prospect perhaps of OPEC coming together here and OPEC
Plus and deciding to do something to shore up support for these oil prices. What are your thoughts here, John?
DEFTERIOS: Well, the narrative is changing rapidly because the sources I was speaking to just a week ago, Julia said they didn't want to show any
signs of panic whatsoever.
But this is China, the vacuum cleaner if you will, of the world. It Hoover's up all kinds of commodities -- oil, iron ore, the grains -- but
we're seeing the sharpest response when it comes to oil right now.
Saudi Arabia is the exporter to the world, two million of the seven million that it exports goes to China. So we're hearing reports that the new
Minister of Energy, Abdulaziz Bin Salman wants to call an emergency meeting and be bold about it and say let's cut another million barrels a day.
But that would take the OPEC Plus agreement, Julia, listen to this to 2.7. The other option is to go to half a million barrels a day and send a signal
to the market that we're ready to do more. I don't think that would move the needle on prices.
So they're almost backed into a corner here now to act and act swiftly. They have a technical committee meeting in Vienna, so we'll start getting
some indications either tomorrow or the day after.
[09:10:21]
DEFTERIOS: But the Russians were not on board with us. They kind of reluctantly in December, when I saw the Minister in Vienna said, we'll go
along with the deeper cuts, but they were hoping for some easing of this measure in the first half of 2020.
So I don't see them rushing to take a million barrels a day off the market. They don't know if this drop that we see which is three million barrels a
day already in China is going to last into the second quarter or not.
So they don't want to be giving a knee jerk reaction and then having to respond right away and put oil back on the market.
CHATTERLEY: Yes, creating some of the volatility that they're trying to avoid here. So much uncertainty.
DEFTERIOS: Indeed.
CHATTERLEY: John Defterios, thank you so much for that update there.
To Macau now, I mentioned that Hong Kong's Chief Executive Carrie Lam suspending ferries to Macau. Ivan Watson has been looking at the fallout.
Listen in.
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Julia, Macau is arguably the world's gambling capital, but the coronavirus crisis has
really put the administrators of this city in a real dilemma, because their economy relies on millions of Mainland Chinese tourists coming across the
internal boundary to this semi-autonomous corner of China to come and spend money in its casinos, and in its hotels.
But now the city's government, they're trying to find a way to stop the flow of those people without completely killing the economy because they
don't want the deadly virus to take root in this former Portuguese colony.
(BEGIN VIDEOTAPE)
WATSON (voice over): This is what the coronavirus crisis looks like. An ambulance delivers a patient to the emergency room in the tiny former
Portuguese colony of Macau. Health workers fully protected against the new disease.
WATSON (on camera): The authorities in Macau aren't taking any chances. They are informing the public that if you suspect you have symptoms of
coronavirus and that you've been in touch with somebody that you fear may also be sick somewhere in Mainland China, call for an ambulance, which will
deliver you here to the emergency entrance of the city's main public hospital.
WATSON (voice over): Images from inside the isolation ward, at least seven patients are being treated here.
The health emergency has had a startling impact on this semi-autonomous corner of China. Macau with its small population of around 600,000 people
is normally a major tourism hotspot, welcoming nearly 40 million visitors last year alone.
The main draw, Macau's towering casinos. This is the gambling capital of the world with the casino industry that dwarfs Las Vegas.
But since the coronavirus outbreak, tourism to Macau dropped 87 percent in January, compared to the previous year.
(BEGIN VIDEO CLIP)
WATSON (on camera): You've never seen it this empty before?
UNIDENTIFIED MALE: Yes, I never.
ALBANO MARTINS, ECONOMIST: I never saw something like this.
(END VIDEO CLIP)
WATSON (voice over): Albano Martins is a Portuguese economist long based in Macau.
(BEGIN VIDEO CLIP)
MARTINS: You go to the streets, I never saw streets empty. You go to the main square, totally empty. I never saw this in my life and I am here from
1981, so too long. Never.
I think people are scared, maybe scared because of the speed of these infections.
(END VIDEO CLIP)
WATSON (voice over): The Macau authorities say they have been rounding up every visitor from the Chinese province of Hubei, the origin of the
coronavirus. Those people get a choice, either leave the territory or go into quarantine.
But they're drawing a line when it comes to the critical engine of the city's economy.
(BEGIN VIDEO CLIP)
WATSON (on camera): Could one of your health measures be to close the casinos?
(END VIDEO CLIP)
WATSON (voice over): We do not rule out this possibility, the city's Economy Secretary tells me, but at this point in time, the casinos in Macau
are totally safe.
For now Macau's glittering gambling houses are still open. But like the rest of China, this city is struggling with a new virus, and everyone here
agrees, this is just the beginning of the crisis.
(END VIDEOTAPE)
WATSON (on camera): So Julia, what a drastic measure the city's officials took sending the police around to dozens of hotels here and rounding up
every person they could find from Mainland China's Hubei Province.
Now on top of that, the President of a casino workers union has argued publicly that all of the city's casinos and hotels should be close to
protect the people who work there, but of course the city's administrators, they're not ready to take that dramatic step yet.
I walked through one of these huge casinos, the Galaxy Casino, which feels like it's longer than a football field in length, and that was a surreal
sight because you couldn't see a single exposed face there.
All the workers, the waitresses, bartenders, card dealers, security officers all had masks on, and these relatively small number of customers
there, were wearing them as well.
The only time anybody exposes their faces is when they're going through security to get into the casino. And that's when you have to show your face
to a thermal camera to ensure that you don't have a fever -- Julia.
[09:15:52]
CHATTERLEY: Ivan Watson there in Macau. All right, let me bring you up to speed now with some of the other stories that we are following around the
world.
In Washington, the U.S. Senate will reconvene in the coming hours for closing arguments in the impeachment trial against President Donald Trump.
This comes after Senate Republicans blocked Democrats effort to call witnesses last week. The trial is expected to conclude on Wednesday with
President Trump's acquittal.
And the stakes are high in the U.S. state of Iowa as the 2020 presidential nominating contest kicks off with the State's first in the nation caucuses.
Eleven Democratic candidates are currently running in the race for the White House and Jeff Zeleny is live in Des Moines for us. Jeff, great to
have you with us.
If you're in the United States, you can't get away from this and you probably know what's going on, but for international viewers, why does Iowa
matter so much and tell us what to expect?
JEFF ZELENY, CNN SENIOR WASHINGTON CORRESPONDENT: Julia, Iowa matters because it's the beginning of this long process to pick a Democratic
presidential nominee to challenge President Trump.
Iowa has been one of the first stops for really several decades onto New Hampshire next week and then other states.
So it matters because it is first. It doesn't matter because it's more important than other states. But there's no question, all of the candidates
have been spending most of the year here, investing millions and millions to get their message out.
It is the place that launched Barack Obama back in 2008. It is the place that launched George W. Bush back in 2000. President Trump -- Donald Trump
narrowly lost Iowa, but it showed that he was a serious candidate.
So this is a place where voters have taken a strong measure of these candidates for the last year, asking them questions or seeing how it's
going, so that's why this is important.
So this will not determine who the Democratic nominee is, but it will determine what voters are thinking as they move forward.
And Bernie Sanders is ending this in a strong position. So all eyes are on Bernie Sanders. If this is the moment for him, a lot of certainly high
stakes for Joe Biden, the former Vice President here who has been campaigning aggressively.
This is the third time he is running for President. His hopes have always been dashed here in Iowa. We'll see if they are tonight. But of course,
Pete Buttigieg, Amy Klobuchar, Elizabeth Warren and the other candidates as well, so this is the place that can make or break a candidacy before this
show moves on to New Hampshire next week -- Julia.
CHATTERLEY: Yes, what a show. Jeff Zeleny, great to have you with us. Thank you so much for explaining that there.
All right, we're going to take a quick break here on FIRST MOVE.
But coming up, former Australian Prime Minister Kevin Rudd joins us. He gives his views on the coronavirus outbreak, the reaction from nations and
of course, the bush fires in Australia. Stay with CNN.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE live and from the floor of the New York Stock Exchange where U.S. stocks look set to bounce back from Friday's
losses. The big theme of course, too, what we saw -- losses in China overnight.
I want to talk this through, Solita Marcelli is Deputy Chief Investment Officer for the Americas at UBS Global Wealth Management and joins us now.
Great to have you here.
SOLITA MARCELLI, DEPUTY CHIEF INVESTMENT OFFICER FOR THE AMERICAS, UBS GLOBAL WEALTH MANAGEMENT: Thank you. Great to be here.
CHATTERLEY: Happy Super Bowl Monday. One of your big themes for 2020 was the re-emergence or the emergence of emerging markets. Explain why and then
we're going to talk about whether anything has changed in light of current events.
MARCELLI: Sure. So there are two main reasons why we believe emerging markets were going to be emerging. And by the way, putting aside, you know,
barring aside the delay that might come from the spread of the coronavirus, we still feel confident that this might actually get realized this year.
So the first reason is around growth, right? We believe emerging markets provide better growth prospects competitive to developed markets, that the
difference between growth differential will widen this year. And the second reason is valuations.
So on growth, two reasons for that. One is the benefits of the Phase 1 deal signing is going to accrue we think more to emerging markets. And the
second is that accommodative Central Bank policy. The Fed's cut last year, started a chain reaction of global monetary easing.
And even though Central Banks are still -- developed markets Central Banks have paused for the time being, but emerging markets are still continuing.
And in terms of valuation, the second reason there is right now, emerging markets are trading at a historically cheaper levels than developed markets
and we think there's going to be a catch up there.
CHATTERLEY: So growth outperformance in emerging markets versus developed markets and valuation just relatively cheaper. Okay.
And by emerging markets in particular, you were talking Asia, you were talking Japan or Asia not just Japan, let's be clear.
MARCELLI: Yes.
CHATTERLEY: Okay, so now talk coronavirus and what you're thinking is here.
MARCELLI: Look, you know, the spread of the coronavirus at its core is a human tragedy with an unknown outcome, right?
CHATTERLEY: Agree.
MARCELLI: It's impossible to predict that right now with hundred percent certainty how this is going to evolve, and markets hate uncertainty. We
have that in spates right now resulting in this increased volatility and selloff in markets.
That said, we are encouraged by the extraordinary measures China has taken, coupled with unprecedented global mobilization to contain this virus, and
we think eventually, it will prove to be effective.
So it will certainly have a negative impact on growth in the near term, but we think the impact on the long term economic growth should be limited.
CHATTERLEY: You know, it's interesting, there were a couple of things that you mentioned that actually stood out for me, it's tough to gauge what the
economic impact is going to be.
One, because of spread of misinformation, because of the prevalence of social media particularly compared to SARS.
But also if you look on a relative basis, the growth of e-commerce in China and Southeast Asia in particular actually provides a kicker to consumption
there that perhaps wasn't there in, you know, decades past.
MARCELLI: Yes, exactly. I mean, the three structural changes, two of which you mentioned, the online spending is actually -- it could limit consumer
damage there, but the spread of fear through social media is very important and fear really drives economic behavior as well.
And the third thing I would say is the rise of China's role in global manufacturers.
CHATTERLEY: Yes, far bigger.
MARCELLI: So that will actually be a reason for supply chain disruptions more than we expected.
CHATTERLEY: But what you're ultimately saying is it's a delay not a derailment of your call.
[09:25:31]
MARCELLI: Exactly. It's a delay, not a derailment. We think with a successful containment, we think the growth is going to pick up in the
latter quarters.
I think China is certainly going to be impacted this quarter, maybe into next quarter. But with a successful containment, we could see growth pick
up in the latter quarters because there's pent up consumer demand, but also there's potential government stimulus.
I mean, China is doing all it can, going all in to make sure that they're most likely going to be stabilizing the economy and making sure the market
is orderly.
CHATTERLEY: Yes, I mean, we saw that already overnight and all Central Banks, I think around the world on the front foot here to react if
necessary.
Great to have you with us. Thank you so much for that.
MARCELLI: Thank you.
CHATTERLEY: Solita Marcelli there, Deputy Chief Investment Officer for the Americas at UBS Global Wealth Management.
We are counting down to the market open this morning. Let me give you a quick look at the futures. We're expected to see gains taking back some of
the losses that we saw in Friday's session where we lost more than one and a half percent across these U.S. majors.
We've got the S&P 500 what? Some three percent off recent record highs, too. So a bit of a pull back, but on a relative basis as the market is
pretty resilient in the face of great global uncertainty.
Plenty more to come from FIRST MOVE. You're with CNN. Stay with us. The market open is next.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE. That was the opening bell here at the New York Stock Exchange, and as we were discussing earlier, we do have
a higher start to the trading week and the fresh new month, of course, too.
First trading day of February. Tech stocks, as you can see, are the best gainers in early trading after the one and a half percent drop that we saw
on Friday. I showed you that in reverse order, so apologies, if I confuse you.
This follows though a weaker session in China. Overnight, the Shanghai Composite finishing the session as you can see down some 7.7 percent on the
first day of trading since the Lunar New Year holiday, a bit of catch up there I think, pent up selling pressure. More than $400 billion in market
value was lost in today's session alone in China.
We'll see what Tuesday's session brings, but beyond the persistent coronavirus fears, important U.S. factory data is out at the top of the
hour here in the United States.
We've also got jobs numbers on Friday, too, and plenty more earnings. More than 70 percent of S&P 500 firms have beaten profit estimates so far, just
to give you a sense of what we've seen so far.
Let's take you through the Global Movers today, too. Investors are closely watching airline stocks like Delta and American today. Shares of both
carriers are higher after falling some two percent plus on Friday. Delta, American and United have all announced that they are suspending flights to
and from China.
Apple shares are also in focus today, down some two percent, shutting down all of their stores in Mainland China until February 9th due to the
coronavirus outbreak. Shares fell more than four percent on Friday.
Shares of Exxon Mobil also lower today trading near nine-year lows in fact. Goldman Sachs downgrading the stock to a sell today, citing the weak
outlook for oil prices. Exxon giant reported weaker than expected Q4 earnings on Friday.
All right, let's bring it back to the United States. The U.S. state of Iowa is holding the first in the nation caucuses in the coming hours.
According to recent polls, the top tier candidates are Senator Bernie Sanders, former Vice President Joe Biden, Senator Elizabeth Warren and
former Mayor Pete Buttigieg.
Senator Sanders and Warren have proposed big Federal spending plans with new taxes on wealthy Americans. Former New York City Mayor Michael
Bloomberg is skipping today's caucuses, but announced his own plans.
In fact over the weekend, investors are keeping a close eye on Iowa. In seven of the last nine Democratic primaries, the Iowa winner went on to
become the party's presidential nominee.
Financial forecaster and futurist, Jason Schenker joins us now. He is President of Prestige Economics. Jason, great to have you on the show. Do
you agree with that? How closely are investors watching the outcome here, particularly if we see strong gains or wins for the likes of Bernie Sanders
and Elizabeth Warren?
JASON SCHENKER, PRESIDENT, PRESTIGE ECONOMICS: Well, I think that's what investors are looking for. There are a number of Democratic candidates out
there, but there's a couple that investors are a bit worried about from a tax implication standpoint. It is Sanders and Warren.
If they do well here, then that could rile the markets a little bit, because there's never been a case where you've had a winner here or in the
top three that didn't get the nomination.
So if they even place in the top three - that increases the odds that they would get that nomination, and as you've already noted, really, if we look
at the last 10 times, the person who won the Iowa caucus eventually does get the nomination.
CHATTERLEY: The Democrats handled this very differently from the Republicans here. If we're looking ahead to 2020, how much does incumbency
matter here, when we look at President Trump? How important is that for who ultimately wins an election?
SCHENKER: Well, Julia, the thing is, this is the number one, statistically most significant factor that determines whether you become President,
whether you get elected President, is if you already are President, and so that incumbency, it matters a whole lot because you can get eyes on
screens, you're not competing against a lot of candidates. You're not spending a lot of money in the primaries.
And as the President, you have the ability to really direct the media to show up when you're making announcements. It's a little bit tougher as a
candidate to get as much attention especially if there's still a wide field of folks competing and that's why most of the time, incumbents get
reelected.
CHATTERLEY: You know, it's interesting, because we'll talk endlessly about Iowa then move on to some of the other primaries, but you also talked about
the shy votes, the shy vote for Donald Trump here that was so impactful in the 2016 elections. What's your gauge on what that shy Donald Trump vote is
today? Is it higher or is it lower or about the same than it was in 2016, particularly in light of what we've just been through with the impeachment
process, too?
[09:35:16]
SCHENKER: Well, I think there's a couple of really big takeaways and one is that donations, money fundraising, what always was the proxy for if you
win, it doesn't really work anymore, because in 2016, Hillary Clinton spent almost 50 percent more money than Donald Trump and Donald Trump still won.
The polls really discounted what the shy Trumpers -- folks who would vote for Trump who didn't want to say they would -- and I would wager now the
economy is quite good. Equity markets, despite recent pullbacks or high unemployment at the lowest level in 50 years.
There might be quite a few shy Trumpers out there and that might make polls a bit foggy in terms of what we might expect.
CHATTERLEY: Money doesn't matter as much as it has in the past, even when you've got someone like a Mike Bloomberg here literally throwing as much
money as he chooses at the campaign.
SCHENKER: Well, on the Democratic side, you've never had someone who didn't place in the first three named candidates who went on to get the
nomination. The fact that Mike Bloomberg is skipping the Iowa caucus means you'd have to have a real first in order for that to happen.
But you might see a real protracted slug between the different Democratic candidates. You see the poll numbers, a lot of them are quite close here in
terms of how you see Sanders performing or Biden performing or Warren performing, and I know we didn't get a recent Iowa poll.
But the Texas Lyceum did a poll in Texas, for example, and we saw Biden had the lead, but Sanders was pretty close behind. We see that in a lot of
different polls and that means that you could see a pretty protracted slug to get to a Democratic nominee and that means Mike Bloomberg might have a
shot to skip the Iowa caucus and New Hampshire primary and then come in and still get the nomination. It's still a possibility, but it would really be
a first.
CHATTERLEY: You know, I love your adherence to data points in it for all the books that you've written, and actually, I love the latest on "The
Dumpster Fire Election," talking about 2020. You point out the importance of the economy, and that the data point that connects the four Presidents
in the last century that haven't won reelection is a higher unemployment rate between the midterms and then going for reelection in that two years
later.
Jason, talk to me about coronavirus and the impact that that potentially might have on the economy, and then the impact perhaps, that that could
have if we've got a GDP figure for the United States on a one handle in the first quarter. It's not the three percent that Trump promised.
SCHENKER: Well, you know, I think the U.S. economy is still doing pretty good if we look at the U.S. economy compared to other advanced economies,
the U.S. is doing well.
The Q4 number came in at 2.1 percent, a little bit better than expected. The business investment recession is likely to end. There's been three
consecutive quarters of contractions in U.S. business investment, likely to end, likely to see positive business investment in the year ahead. That's
all good.
The coronavirus thus, at risk. I think that's more maybe on a global basis, but we do have things -- earlier, you had a guest talking about things like
e-commerce and the like that could have a positive impact for what we've seen in consumers where there's sort of this assessed risk.
So I still think we're going to see a decent GDP number this year, between the one and a half and two and a half percent number, probably a little bit
above two.
It's going to be a pretty good year. The unemployment rate still likely to remain low and if the unemployment rate is lower at the time of the October
number, which gets released at the beginning of November, if that October unemployment number is lower than the 3.7 percent we saw in November of
2018 by the last century of data, we would expect that President Trump would be reelected, but if it's higher --
CHATTERLEY: Wow.
SCHENKER: We would know.
CHATTERLEY: All bets are off. Jason Schenker, President of Prestige Economics. Great to have you with us and we will get you back soon.
Up next, China lashes out at the U.S. over Washington's reaction to the coronavirus crisis. But what is the right response in this scenario? We'll
discuss that with former Prime Minister of Australia Kevin Rudd. He's up next.
(COMMERCIAL BREAK)
[09:42:33]
CHATTERLEY: Welcome back to the show. China has accused the United States of creating fear and panic over the coronavirus outbreak.
The U.S. has imposed strict travel restrictions beyond those advised by the World Health Organization. Washington has also evacuated much of its
embassy staff from China.
Joining us, Kevin Rudd, the former Australian Prime Minister, and now the President of the Asia Society. Fantastic to have you on the show.
KEVIN RUDD, FORMER AUSTRALIAN PRIME MINISTER: Good to be back.
CHATTERLEY: What do you make of the Chinese accusations of an overreaction from the United States?
RUDD: I think the first thing we need to understand is the Chinese domestically are under huge political pressure.
CHATTERLEY: Yes.
RUDD: I mean, if you're President Xi Jinping at the moment, and you've got this virus, which is being rampaging around Wuhan, then across the broader
province of Hubei, and then into Hunan and then the now infections at every single province of the country, you've got a political problem
domestically.
So therefore, what you're looking at domestically is maximizing international support, and the World Health Organization is the primary
means for doing that.
But if in the midst of all of that, I think if you have statements like Secretary of State Pompeo's that the world's greatest threat in the 21st
Century is the Chinese Communist Party, personally, I just think that's pretty tone deaf in the midst of a world public health crisis.
The Secretary of State could make those statements anytime he wants, not just now, I think that gets a big bucket of fuel, says there's a fire there
and goes woof, and I'm not sure that's all that smart.
Let's deal with the health crisis first and that requires all hands to the pump.
CHATTERLEY: I mean, we had a conference call between the G-7 nations today, does a more coordinated response -- is a more coordinated response
here needed? Because if the World Health Organization last week would have said, look, we do recommend travel restrictions. We do recommend trade
restrictions, then countries wouldn't have had to act unilaterally and make decisions independently here.
RUDD: Well, institutionally, the World Health Organization is a relatively weak global body.
CHATTERLEY: Yes.
RUDD: We know that not because of its leadership. Tedros from Ethiopia, I know very well. He's a strong individual. He understands public health
intimately. So this is no criticism of him at all.
But he leads an institution which constitutionally is weak, given the structures and we saw that evidence through its handling of the Ebola
crisis some time ago. So that's one point.
However, underneath that or surrounding that, we need to use other collaborative mechanisms. Though the G-7 Health Ministers are talking, but
can I just suggest this?
[09:45:10]
RUDD: The G-20 exists for a purpose as well. It's 20 of the world's largest economies. It represents 90 percent of GDP. The G-7 does not
include China, the G-20 does.
Now, I would have thought that's not a bad way to actually prosecute this at a political public policy and public health and security way while being
mindful also where it's kind of bounced to, as far as economic consequences.
CHATTERLEY: You know, it's fascinating to go back to your point about pouring lighter fuel on the fire here and the relationship between U.S. and
China, an incredibly pivotal moment.
You've just put together a series of speeches that you gave in the past year, the title, "The Avoidable War: Reflections on U.S.-China Relations,
the End of Strategic Engagement."
One of the themes that comes off is the idea of a decoupling here and I pulled out one quote, "Prepare for a decade of living dangerously."
Never mind the decade, what about the next year heading into the 2020 elections? How do you see this playing out? Even in light of the last
couple of weeks of events, tensions are still fraught.
RUDD: You know, they are raw. There's two factors at work here, I think. One is structural. You have this massive country, the United States of
America, we're in the New York Stock Exchange at the moment. It's the world's largest economy, it's going to remain that way for a while to come.
But now, we have structurally a huge challenger, which is the Chinese economy. If you do any analysis, so aggregate economic size, aggregate
military size, these two countries are getting closer in terms of a comparison of their net power.
We haven't had that since the days of the Soviet Union, and even then, we didn't have it because the Soviets never had a global economy. That's a
structural factor.
Underneath it however, you have also a new strong assertive leader in China, Xi Jinping who is pushing out in a way in which his predecessors
never did. And now we have the Trump administration, which has drawn the lines on trade, open question mark about where we will now go on the rest
of the U.S.-China relationship.
So when I say a year of living dangerously, I look at those structural factors. I look at the personalities of leadership. Then I look at
incendiary things like we've just been discussing.
And goodness knows what happens as the decade progresses on the future of Taiwan. That to me is the continuing looming geopolitical problem.
CHATTERLEY: There's so much to discuss. We could continue that conversation, but I do want to get your views on the Australian bushfires
because you have everybody -- it's something that you've been passionately talking about for a decade.
You've criticized the Australian government for their response. But it's far more broad than that. Again, it's a global issue where I think
particularly in the last few weeks coming back from Davos myself, suddenly the whole world seems to be focused on climate change. What more from a
national perspective, but also globally again do you want to see here?
RUDD: I think what the world saw and I think many Australians saw with the bush fires this Australian summer, northern window, was an unfolding
apocalypse.
I call it the greatest trade inferno, because this is not just bushfires.
As a kid growing up, I grew up in a farm, I remember what fires were like. You have a big one every several years in one part of the country or
another. This is across four states, simultaneously hundreds of fires. So what is it saying?
I think Australia is the first canary down the climate change mineshaft, and we need to understand that where we go as a country is a warning light,
and if you like a beacon light to the rest of the world that climate change is not this esoteric, exotic thing to be discussed in political and
scientific circles. It is a real unfolding economic and humanitarian and ecological disaster, which we can stop with effective political leadership.
It just takes us to bring down greenhouse gas emissions, and we keep temperature increases within 1.5 degrees centigrade.
CHATTERLEY: Which we tried with the Paris Agreement.
RUDD: With Paris, which is the best one-third committed. We tried at Copenhagen, partly failed. National actions -- some of the actions we took
in Australia in my government have continued, others have been repealed by the conservatives.
But leaving politics to one side, for God's sake, I think Greta is right, and she is just letting out this how to the world, and a part of my kid's
generation is saying, for God's sake --
CHATTERLEY: Act.
RUDD: Get with the project and you know, something, it's doable. It's not beyond the realms of doability.
CHATTERLEY: So much more to discuss, but no time. Sir, fantastic to have you on the show.
RUDD: Thank you.
CHATTERLEY: Kevin Rudd, former Australian Prime Minister and the President of the Asia Society Policy Institute. Thank you for that.
All right, rounding off big tech's strong earnings now. Big expectations ahead of Alphabet's numbers. We will discuss, next.
(COMMERCIAL BREAK)
[09:52:02]
CHATTERLEY: Welcome back to FIRST MOVE with a look at today's Boardroom Brief. Shares of Ingenico soaring in France after payments giant, Worldline
agreed to buy the company for $8.6 billion.
The deal will create the world's fourth largest payments provider. Worldline stock which also trades in Paris slightly lower in the session as
you would anticipate for a buy here.
And shares of RyanAir are up in Ireland after the company reported a $98 million profits for its third quarter. That compares with a loss of $73
million a year earlier.
Europe's largest budget airlines said it raised average fares by nine percent from a year ago.
Bernie Ebbers, the former CEO of telecoms company, Worldcom has died. Ebbers was jailed in 2006 for his role in an accounting fraud worth $11
billion. He was released from prison last month due to poor health after serving 13 years. Ebbers was 78 years old.
Google's parent company, Alphabet to report its latest results after the closing bell. Clare Sebastian joins us now for a preview.
Of course, it's the first numbers that we've had since the Google CEO took over the full company here. Real expectations for more information, more
clarity it seems. The question is, will we get it, Clare?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, this is a big question. A lot of analysts have been calling for more transparency really, from
Google, when it comes to their earnings reports more information on how their YouTube segment is growing, how their Cloud segment is growing.
They don't really get much in the way of guidance, and perhaps they'll be looking for more in terms of that. But Cloud is really a big area for
Google. They are fighting to take on the giants in this area, Amazon and Microsoft.
They're investing heavily to do that. They have been growing in terms of market share, so there will be a lot of scrutiny on how they're doing that.
And the other issue, Julia is regulatory issues. Facebook, the other competitor in terms of online advertising said that the headwinds from
global privacy regulations will continue to impact their ability to make money through online advertising.
So it seems that Google will likely be hit by those headwinds, as well, and then, of course, the investigations into antitrust issues here in the U.S.
There was a report about a week ago that state attorneys general had met with the Department of Justice signaling some potential coordination
between the two when it comes to antitrust investigations into Google. So all of that is likely to come up on the call.
But meanwhile, Google had a couple of misses last year in terms of profit and revenue. So there will be a lot of scrutiny on those results. Can they
continue to see revenue growth around the 20 percent mark? And will they see profits come back after a miss in the last quarter?
CHATTERLEY: Yes, I remember interviewing Eric Schmidt a long time ago when he was still the Chairman. And he said, look, advertising revenues are
always going to be the bulk of our revenues, of our profit generation for this company.
But the other interesting thing for me is what we get in terms of their other bets, the non-core items because I've seen a number of analysts
looking at this and saying, actually, if they broke this down and told us what was going on that might help their overall valuation. What do we think
of that?
[09:55:07]
CHATTERLEY: Especially since the other bets are losing quite a lot of money, Julia. It's still a rather small part of the business, but in the
last quarter, they lost six times more money than they actually made in the other bet segment.
These are things like self-driving cars, like drone deliveries, all of that. So I think there will be some scrutiny on that and not least, because
if you look at this sort of one trillion club, as we call it, to the likes of Apple, Microsoft, Amazon, Alphabet, we include because they tipped over
that valuation mark a couple of weeks ago. They are all looking for the next product.
They're all still growing revenue. You know, just slowing down in a lot of cases, but they have to look for, in Google's case, the next billion user,
and in all of their cases, the next big product to drive that next real sort of growth push.
CHATTERLEY: Yes, other bets, some I find exciting. Thanks, Clare. That's it for the show. I'm Julia Chatterley. You've been watching FIRST MOVE,
time to go make yours. I'll see you tomorrow.
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[10:00:00]
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