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Passengers Facing The Reality Of A Fortnight Aboard Japan's Quarantined Cruise Ship; Yum China And Chipmaker Qualcomm Warning About The Q1 Impact; Mattress Firm Casper Going Public On The Softer Side. Aired 9- 10a ET
Aired February 06, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:05]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE, and here's your need to
know.
A floating prison. Passengers facing the reality of a fortnight aboard Japan's quarantined cruise ship.
Costing coronavirus. Yum China and chipmaker Qualcomm warning about the Q1 impact.
And cheap sleep. Mattress firm Casper going public on the softer side. It Thursday. Let's make a move.
A warm welcome to FIRST MOVE wherever you are watching us around the world, we will have the latest on the coronavirus outbreak coming right up.
But for now, as always, a look at the markets right now and I can tell you the message they're sending is one of optimism at this stage.
Take a look at what we're seeing around the world here. Start with the United States, the United -- the S&P 500 -- my apologies -- and the NASDAQ
set to open at fresh record highs.
The Dow actually just a fraction away from doing exactly the same. Take a look at what U.S. stocks have done. We've regained virtually everything
lost since the market began amid the coronavirus outbreak last month. It is actually though a global theme.
European stocks also sitting at record highs at this moment, and the Asia recovery continued as well. The Shanghai Composite rallying some 1.7
percent today. The Nikkei gaining 2.3 percent.
More context on what we're seeing and why in Asia coming up shortly, but for now, I can pinpoint I think a few potential reasons here. The first
what looks to be a goodwill gesture from Beijing, China. It says it's going to cut tariffs on some $75 billion worth of U.S. goods by half.
It's been taken as a show of commitment to that Phase 1 trade deal, even of course, as we've been discussing day in day out as the nation battles the
coronavirus outbreak.
Plus -- and I think this is ultimately key, Central Banks are acting here. We've had China, Thailand and the Philippines, all taking steps to support
their economies.
And one final point, I'll make here, analysts are discussing the fact that while cases of the virus are going up, the growth rate of transmissions
appears to be slowing down.
We will fact check that fact in particular later on in the show for you, but for now, let's get to the drivers and those on the front lines of this
outbreak. The latest for you.
The number of people who have lost their lives as a result of the coronavirus has now jumped to more than 560. Only two of those deaths in
fact occurring outside of Mainland China, but the virus has now reached more than 25 countries. The number of people infected has gone past 28,000.
Two to cruise ships are under quarantine off the coast of Hong Kong and Japan with thousands of people on board. Will Ripley is in Yokohama for us
and has been looking at this story.
Will, great to have you with us. I've been looking on social media, too, and the reaction from some of the passengers. That's where the prison ship
came from. Others are saying it's simply just the boredom here.
But for most people, it's their worst nightmare. Talk us through this.
WILL RIPLEY, CNN CORRESPONDENT: Yes, I mean, clearly, Julia, this is a first world problem type situation and things could be a lot worse for the
3,700 people on board the Diamond Princess. However, cruise ships if you've ever been on one, the cabin is a place for you to sleep and recharge and
then get out and enjoy all the public areas, the pools, the shows, the buffet that's, you know, open 24/7.
A week ago, people were dining on lobster, you know, after spending thousands of dollars having the vacation of their lives. And yet now, they
find themselves under quarantine, which means they cannot leave their tiny cramped cabins.
The lucky ones might have a window or a balcony. But the people with less expensive rooms, the interior rooms, they have no window.
They're in basically a tiny room, breathing in other people's air, wondering if the passengers next to them might be one of the you know,
patients who are sick with coronavirus because the number doubled in one day, Julia from 10 to 20, and really nobody knows what tomorrow will bring.
So that kind of mental anguish on top of the fact that you know, they're having to deliver everybody's meals to their rooms. Sometimes breakfast
hasn't been arriving until, you know, the afternoon and you know, the cruise ship staff are dressed in full protective gear with goggles and
whatnot.
It's a very unpleasant and unsettling situation for these people.
CHATTERLEY: Yes, it's like something out of a movie. You can just imagine it here. To your point though about food, about supplies, about medical
supplies, too, what is your sense of how that's being managed here? Breakfast in the afternoon sounds worrying.
[09:05:08]
RIPLEY: Well, because the cruise ship has had to basically on the fly, you know, reconfigure how they operate. I mean, yes, they have over a thousand,
you know, crew members to take care of the more than 2,000 passengers on this ship, and it's the same situation, by the way for that ship off of
Hong Kong.
It's a total of 7,300 people that are on these quarantined cruise ships right now.
But, you know, all of the passengers would not be ordering room service at once, people go to a dining area. So they have to figure out, you know,
because people can't congregate too closely in public spaces, because that will spread the virus.
And you know, that's also unsettling for passengers who are healthy because they're saying I don't mind being quarantined. But why am I being
quarantined in essentially an enclosed space where I could potentially be exposed?
I mean, people feel, you know, basically as if they're -- you know, they're in this, you know, as you mentioned, kind of a prison ship and, you know
with people more people getting sick or reported being sick every day. There's still dozens of samples that haven't come back yet.
But what they've done now that they're -- you know, now they're docked here in Yokohama is they've taken the confirmed sick patients out and they're
now being treated in hospitals here in Japan as opposed to, you know, having the medical staff on board who are grossly under equipped in a best
case scenario for anything like this.
I mean, yes, cruise ships have been known to have outbreaks before, but never, you know, a situation where you have a brand new type of virus where
there's no cure, and obviously, there could be real hysteria that comes from that.
So what they've done, you know, they've taken the sick passengers off, they've gotten food and supplies back on the ship. There are also Japanese
quarantine officers who are supervising everything to make sure that it goes according to plan.
And so when passengers tomorrow are allowed to briefly step outside for the first time in days, they have to stand one meter apart. They have to wear
masks at all times, and they will be closely supervised by the Japanese who have said that if the passengers are not following these rules, if they're
putting themselves at risk of exposure, everybody is going to have to go right back in, get basically locked up in their cabins.
CHATTERLEY: Yes, well, you raise some great points here. Also, the ship -- we don't really know what we're dealing with here, and there's a lot of
misinformation and confusion about how this spreads, too.
That is something we're going to try and tackle later on in the show. But for now, great to have you on this story. Will Ripley, thank you so much
for that.
Now, as we watch the health crisis evolve and the efforts to quarantine and to tackle this, of course, businesses, investors around the world trying to
mitigate the economic impact and the consequences, too.
John Defterios on this story for us. John, great to have you with us. I just wanted to talk about what's interesting about the Asian market
reaction because that's really the epicenter here, China and beyond here.
And I'd mentioned the word optimism here, resilience about the potential impact here, even as companies are coming forth and saying, look, this
could have a Q1 impact, if not beyond. It's interesting here.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Yes, it certainly is, Julia. I call it the world of dual realities.
You still have measures being put forward by the cruise liners, as Will was talking about here, and also the airlines. And then you have investors
making a bet that this will not spill into the second quarter of 2020.
Remember that big selloff that we saw on Monday in Shanghai of eight percent, and market cap of nearly a half a trillion dollars? This seems to
be forgotten.
Let's bring up those Asian boards again, and you'll see this rally that was right across the board, right out of the starting gate today with the major
markets, the Big Four, if you will -- Tokyo, Hong Kong, Seoul, and even Shanghai -- up anywhere from one to two, two and a half percent, nearly
three percent on the day.
There's kind of three factors at play here, though, Julia. First and foremost, I think is this idea in the market that the Chinese Central Bank
is ready to pounce if necessary, with reserves of $3 trillion, they can do so.
And perhaps even cut interest rates in February 20th. We saw the Filipinos do the same thing. The Philippines Central Bank cutting interest rates.
There's a caveat here though, this will put downward pressure on the Asian currency, something we've seen in previous crises, upward pressure on the
dollar.
There still is hope that a vaccine will emerge faster than expected from the Hubei Province, and that is just a wish right now. But that's the word
from state media.
And finally, I think there's also the Trump factor, if you will. Nobody really thought the impeachment would go through, Julia. But it was a dark
cloud kind of hanging over on Wall Street and global markets.
And I have to say, today, the big news is, of course, the tariff cut by the Chinese willing to work with the United States. But again, another caveat
there -- can they meet the promises that they made to Donald Trump, particularly when it comes to oil and gas demand going forward in a
situation where it's all hands on deck domestically in China.
CHATTERLEY: Yes, I mean, you raise all the points I think that investors are looking towards here for reasons -- for optimism. A thousand years ago,
when I was directly involved in financial markets, we look at things like shipping rates and commodities demand.
Just to get a sense, electricity use in China really to get a sense of activity there, and the manufacturing sector even as we've seen,
consumption actually take a greater proportion of the economy here.
So I want to get your gauge on what you're hearing about commodities demand, John, but also oil.
Because there is a rumor, it seems in the market that the Russians simply aren't on board with seeing something, some kind of measure cuts here to
support prices. What are your sources telling you on both of these points - - we're going to the expert here.
[09:10:32]
DEFTERIOS: Well, there's a lot of cross currents in the market, so we can talk about the demand for oil and what's some of the trading houses are
looking at. Let's cover that news that you're talking about there.
In the last 30 minutes, I spoke to a source very close to the negotiations in Vienna, who suggested that the Russians needed more time to assess the
recommendations coming out of the so-called Joint Technical Committee in Vienna OPEC headquarters.
What does this mean and the bottom line? Originally, the Saudis were looking to see an immediate cut of 800,000 to a million barrels a day,
which would be implemented in April.
I was told that they compromised to 600,000 barrels. But the Russians didn't feel comfortable making a snap judgment. They want to assess what's
in the pipeline and demand going forward.
Now linking this two together, I was on the phone about two hours ago with the CEO of a major trading house in Asia, and he did confirm to me from
their orders and what they see in the pipeline that demand is down three million barrels a day, about 20 percent in China right now.
And they said that the bus traffic because that is a key indicator, down 90 percent, internal air traffic down nearly 50 percent. He did not think
looking at the back end of the curve, Julia that this is going to last beyond April, hence why the Russians didn't want to jump on board with the
Saudi proposal today.
CHATTERLEY: Yes, that's so fascinating. So actually, it probably makes sense, the dangers here of a knee jerk reaction and cutting perhaps ...
DEFTERIOS: Exactly. Exactly.
CHATTERLEY: ... would be the wrong move. John Defterios, thank you so much for your wisdom this morning. It's great to have you.
All right, let's move on and talk more about the corporate reaction here because as I mentioned earlier, we've had a warning from Yum China, the
largest restaurant owner in the country saying 2020 sales could be hit by the coronavirus.
Anna Stewart joins us on this story. Anna, I know you'll give us all the details of what Yum China was potentially saying here.
But for me what was fascinating about this earnings release was not the impact to seeing customers coming into restaurants, but actually the
relative resilience of contactless deliveries here in the country, too.
ANNA STEWART, CNN REPORTER: Yes, some nifty innovations and very quick thinking, I feel from Yum Brands here. Contactless delivery.
So this involves a biker arriving to a location and leaving the food at an agreed spot and then backing off several meters while the customer collects
it and then the delivery box on the bike is completely disinfected as are the driver's hands and they are actually now rolling this out in terms of
contactless pick up in some of their stores.
There's some really quick thinking, lots of attention, of course on the virus on the earnings call today. They said that all their employees have
face masks. They're having regular temperature checks. They're doing everything they really can to put themselves in a good position.
But those headline figures are pretty shocking. Over a third of all their restaurants in China are shut and of the ones that are open, they are
seeing a huge hit in terms of sales.
So compared to the Lunar New Year last year, 40 to 50 percent down on those sales. So we are going to see a big hit for the quarter and they did warn
that not only could they see losses this coming quarter, but also they said if the sales trend continues, we could see it in the full year.
CHATTERLEY: Anna, I am going to have to interrupt you there because President Trump is speaking in Washington at a Prayer Breakfast, fresh, of
course after that acquittal last night. Let's listen in.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: They put themselves far ahead of our great country.
Weeks ago and again yesterday, courageous Republican politicians and leaders had the wisdom, fortitude and strength to do what everyone knows
was right.
I don't like people who use their faith as justification for doing what they know is wrong, nor do I like people who say, I pray for you, when they
know that that's not so.
So many people have been hurt, and we can't let that go on, and I'll be discussing that a little bit later at the White House.
We're joined today by two people whose faith inspires us all. Our amazing, wonderful friend Vice President Mike Pence, and his wonderful wife, Karen.
(APPLAUSE)
TRUMP: Thank you, Karen.
[09:15:05]
CHATTERLEY: I just want to bring in Joe John's here joining us from Washington. Joe, clearly, the President here and he is expected to speak I
believe at midday today in the United States as well, him fresh off that acquittal vote in the Senate yesterday. Final victory, I think for him, or
at least that's what he's saying this morning.
JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: All right, and he certainly set the tone, didn't he right there with those remarks before the National
Prayer Breakfast.
And I mean, listen to some of the things he said, he talked about the family ordeal. He referred to corrupt leaders who created this impeachment
scenario, said they hurt our nation.
He said he does not like people who say I pray for you when they know that's not true. That's an apparent reference to Nancy Pelosi, the House
Speaker who made similar comments during the impeachment ordeal.
Nancy Pelosi, of course, was in the room and actually delivered a prayer before the President spoke.
So that sets the tone and tells us a little bit about the direction the President is going. You know, in just about three hours, we do expect the
President to speak here at the White House to expand on his remarks, if you will, around noon Eastern Time, that's going to be in the East Room.
Pretty clear, the President is ready to fight, ready to talk about his pain, and not necessarily use the language of healing. But I don't think a
lot of people really expected them to do that in the first place.
CHATTERLEY: Yes, perhaps using the moment. We shall see how he adds to that, of course when he speaks at 12 Eastern Time today. Joe Johns, thank
you for joining us on that.
All right, we're going to take a quick break here on the FIRST MOVE, but coming up, into reverse. Maybe it is temporary, the stock rally in Tesla
suddenly losing power.
Plus how coronavirus is expected to impact global growth. That's coming up. Stay with CNN.
(COMMERCIAL BREAK)
[09:20:17]
CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange. We're counting down to the market open this Thursday and we are
looking at a stronger open for U.S. stocks, building on the recovery that we've seen for the past a couple of sessions.
All the major averages in fact on track to hit fresh records at the open. The first record high is for the Dow in fact since mid-January. Is that --
oh goodness -- investors applauding China's move today, I think to slash tariffs on U.S. goods and fresh measures from other Central Banks to
support their economies during the coronavirus crisis.
We're talking Thailand, of course, and the Philippines. Don't forget as John Defterios was mentioning earlier on the show, the U.S. economic and
political backdrop to impeachment uncertainty, at least as far as the House and the Senate is concerned is over.
Also keep an eye on tomorrow's jobs report. Expect that. That's expected to be solid here in the United States as well.
What about bonds right now? Ten-year U.S. Treasury yields on track for a rise for the fourth straight session to above 1.6 percent amid signs that
the U.S. economy is holding up well so far in the New Year.
Distinct difference, though, and we'll keep reiterating this between what the bond markets are saying even at a rate of 1.6 percent versus that
record highs for the U.S. markets.
All right, U.S. ratings agency, Moody's currently has a Chinese GDP growth forecast of 5.8 percent. For the United States, GDP expected to come in at
1.7 percent in 2020, in light of the coronavirus outbreak -- has any of that changed? Let's discuss.
Moody's Vice President William Foster joins us now. William, just coming into vision there. Great to have you with us -- all very strategic here on
FIRST MOVE.
Talk to me about your outlook for China here. Are you in the process perhaps of revising that 5.8 percent GDP target this year?
WILLIAM FOSTER, SENIOR CREDIT OFFICER, MOODY'S: We're in the process of reassessing Chinese growth forecast as well as for the broader G-20 global
economy because obviously, this is something we hadn't anticipated, you know, a month or so ago and it is moving very quickly.
But the duration of it and the severity of it are unknown, but we're factoring all those potential scenarios.
CHATTERLEY: You know, we've been talking on the show about the consumption side of the Chinese economy and the corporates that we're hearing from. Yum
China is a classic example today with 30 percent of their restaurants shut right now versus the supply side -- Apple, Tesla, also with their factories
potentially impacted, too.
What's your sense and what you're hearing both on the consumption side here and the impact on that target, but also the labor shortages, production,
too?
FOSTER: Well, it's obviously very different than the basis of comparison that people are working with, which is 2003 SARS outbreak, right?
Three main things that are different today than in 2003 is, number one, the Chinese economy is much bigger and contributing much more to global
economic growth.
It's about 16 percent of real GDP versus four percent in 2003.
CHATTERLEY: Yes.
FOSTER: Second, the composition of growth has changed. The drivers of growth are much more related to consumption, like you said.
CHATTERLEY: How much more? Because we often see this talked about, but can you quantify it for us?
FOSTER: Well, sure. We look at three-year averages, and basically, if you look at three averages for consumption, it's been about 64 percent of the
driver for growth in China versus what was below 50 percent back then.
So it's been -- so there's been a shift.
CHATTERLEY: Okay. So it is significantly more, but --
FOSTER: It is, but it's -- you know, this is a very large economy.
CHATTERLEY: Yes.
FOSTER: And this is a huge market. So there's a lot in demand, it is rising wealth levels and a growing middle class effectively. So that's a lot of
purchasing power that's in China.
CHATTERLEY: A lot of that purchasing power as well is spent elsewhere, tourism from the Mainland to other areas, and I'm not just talking Hong
Kong, I'm talking Southeast Asia in particular, too.
I mean, I was looking at some of the statistics on this. Tourism in terms of the Southeast Asian economy, 12 percent of GDP in Thailand. Six percent
in Malaysia, 16 percent in Cambodia, what are your thoughts on the economic impact even if we just take tourism, for example, on the region.
FOSTER: Well, tourism is the most direct impact on the global economy. So particularly in Asia, because the Chinese tourists are the biggest
contributor to tourists exports in that region. So for example, 25 percent of tourist earnings in Vietnam, and in other countries coming from China.
Countries that have been majorly affected by this, so include Singapore, Japan, I mentioned Vietnam, and that's going to be weighing on growth in
the future.
We have three million tourists a year that come to the U.S. from China. So with those tourist dollars also come consumption and they buy things within
the retail space.
CHATTERLEY: So are you in the process of revising perhaps those growth targets to Southeast Asia, too, and the obvious thing to bring in here
would be Central Banks.
We've already seen the Chinese Central Bank adding liquidity, the Philippines, Thailand, cutting rates here. They're reacting immediately.
To what extent do you look at that and go, that's going to at least kick in at some point over the coming quarters, if not in Q1?
[09:25:35]
FOSTER: Well, that would certainly provide some support, right? But it can't make up for the entirety of the loss. So as a temporary measure to
provide liquidity to the system that would provide an offset.
Lower oil prices will give some, you know, some back to consumers as well.
CHATTERLEY: That's a good point.
FOSTER: But on the production side, that's -- the longer this takes, the more it's going wear on the global economy, certainly.
CHATTERLEY: So we have to see now. To what extent is it when you're looking at an annual growth target as well? Do you reduce that versus just say,
look, you may lose something from Q1. But actually, this is only a one- quarter, two-quarter event.
That pent up demand then kicks back into the third and fourth quarter because that's as an economic analyst, you're always juggling that.
FOSTER: That's the hope. It's more or less what you saw with SARS, it is a sharp, more severe drop off in output, but then a quick rebound, and also
in financial markets --
CHATTERLEY: A V-shaped recovery.
FOSTER: Hopefully -- more or less, and that's obviously what global economy hopes for today. But the longer it persists, the more that will not be the
case and it will have a greater impact on global growth forecasts.
CHATTERLEY: Yes. Economic analysis is really tough, particularly in these moments of uncertainty.
Fantastic to have you with us. William Foster there from Moody's.
All right, we are counting down to the market open this morning. Record highs expected for the U.S. majors fueled by global optimism it seems. Is
it justified though? More analysis coming up. You're with FIRST MOVE. I'll see you then.
(COMMERCIAL BREAK)
[09:30:02]
CHATTERLEY: Welcome back to FIRST MOVE live from an incredibly noisy New York Stock Exchange even by ordinary going public standards, I can tell you
that's a loud one.
The opening bell is being rung this morning by bedding company, Casper, celebrating its IPO, but I'm going to tell you, a little time for -- no
time for snoozing here on Wall Street today. I can tell you.
We've got record highs for all the major averages as U.S. markets gain back just about everything they've lost since the start of the coronavirus
crisis.
The S&P is coming off its best three-day gain in fact since June.
European stocks rising senior, too, to record highs today. And of course, we saw China's move to cut tariffs on U.S. goods, $75 billion worth of
goods here by half. I think that's helping boost the sentiment globally, a sign that they're willing to stick to the terms of that Phase 1 trade deal.
We've also seen some solid corporate results as well from leading global firms. What about Finland's Nokia? They've reported a surprise rise in Q4
profits.
We've also had French drug maker, Sanofi reporting an 18 percent rise in Q4 net income. Steel giant, meanwhile, ArcelorMittal saying 2020 demand is
looking strong. That's an interesting sign amid concerns about Chinese demand in particular, too.
So I think that will be one to watch in coming quarters.
All right, so let's take a look at our Global Movers this morning as well. Twitter shares rallying after the social media giant posted its first ever
quarter of revenues above $1 billion dollars.
User growth exceeded expectations, too. That's helping offset an earnings miss and softer guidance in the current quarter.
More shares of cosmetics company, Estee Lauder are also higher in the session, up some 3.3 percent. They beat Q4 earnings expectations by a full
21 cents a share. Revenue was market friendly, too.
Peloton on a bike to ride to nowhere it seems this session. The bike fitness firm company reporting a loss of 20 cents a share. Wow, look at
that, down almost 10 percent. That in fact was better than expected.
We did see a revenues making solid gains, but they did lower their guidance for the current quarter, perhaps that's what's driving the stock lower
earlier on in the session today.
Tesla shares once again under pressure after falling more than 17 percent yesterday. Investors touching the brakes of it here as the coronavirus
delays production in China.
Peter Valdes-Dapena joins us now on this story. Peter, great to have you with us. I say, touching the brakes here, because in light of what the
rally that we've seen so far or had seen some 70 percent plus, seeing 17 percent losses and then a further six today is requiring context, I think.
But what was it that we heard yesterday about China and potential Chinese production delays because a lot of the optimism here, right now that we're
seeing in the share price is being fueled by production in China.
PETER VALDES-DAPENA, CNN BUSINESS SENIOR AUTO WRITER: Yes, that factory in China, as you said, is temporarily delayed or shut down during this virus.
Also, Tesla, remember is an automaker, like any other automakers around the world are looking at what's going on in China with concern because China
also supplies a lot of parts, and there are many parts companies that say they are suppliers to Tesla.
So the question is how much will Tesla's production be disrupted beyond just the shutdown of their own plant? And that's an issue for other
automakers around the world, too.
Hyundai has had to shut down a plant in Korea. Other automakers are concerned about possibly having to shut down because you can't make a car
with most of the parts, and if any of your parts are coming from factories in China, you're going to have a problem no matter where in the world your
final assembly plant maybe.
CHATTERLEY: Yes, I mean, this is such a great point to make here as well. You know, it's interesting, I was just looking through some of the numbers
here in terms of what analysts are thinking here.
That medium type price target is $444.00, forty percent less than the lowest point that this stock was trading on Wednesday morning. So the noise
around this stock, quite frankly, is pretty incredible at this stage, which is why I'm glad we've got you here.
Because a lot of the debate has been about the valuation on this. Is this an auto company versus a technology company and whether we're going through
ultimately that transition?
Peter, what's your sense here of the auto performance of this company when we're talking about electric vehicles, particularly in context versus other
players that are moving into this space?
[09:35:05]
VALDES-DAPENA: It is a really tough and critical time for Tesla. They've done -- they've done really well. I mean they've got the Model 3 going on.
It is by far the bestselling electric car. So that's doing well for them.
Model S and X are falling in line with pretty much other major auto manufacturer of electric cars out there.
But right now, you've got Ford getting ready to come out with a Mustang MACH-E. You've got other automakers coming into the market with electric
cars.
It's hard to imagine that some of those electric cars aren't going to be very good, and these other companies have big dealer networks to sell those
electric cars.
So this is a very critical time for Tesla. When they come out with the Model Y that one needs to do very well. It's a crossover a popular segment
in the market.
My concern about the Model Y is it's not terribly different from the Model 3. It doesn't have three rows of seating, it's only a little bit taller. So
I'm not sure how many customers they're going to get who are holding out just for that particular vehicle.
It's a critical time. Tesla has done very well so far. I just don't know how they get to -- how their valuation gets to be where it is multiple
times other automakers that are transitioning into electric vehicles as well.
CHATTERLEY: Yes, a tech company, not an auto company, and that's the bottom line here. What about China specifically --
VALDES-DAPENA: It's a tech company that makes autos.
CHATTERLEY: The batteries though, Peter, the battery technology.
VALDES-DAPENA: True.
CHATTERLEY: Fight me on this one, too.
VALDES-DAPENA: They do. They have an excellent -- I mean, one thing about Tesla is they are a head of the learning curve from everybody else on
making electric cars.
I keep saying other companies know how to make cars. Tesla really does know how to make an electric car very well. They know how to do the battery
thing. They know how to get those efficiencies in the drive line.
They give the car that kind of range that they can get while still getting very good performance.
So in that sense, Tesla is ahead of the curve on some other automakers, but in the end, I mean, let's face it, I have a hard time believing that
companies like Volkswagen, General Motors are not going to have a pretty easy time catching up in those areas.
They're going to learn quickly and Tesla is going to have some serious competition.
CHATTERLEY: Even in China?
VALDES-DAPENA: Yes, I think even in China. Remember, China is a very, very competitive market. And yes, the Chinese government is pushing electric
cars may be less than they were before, but they're still pushing customers towards electric cars.
But there are also a lot of electric car companies in there like Neo and others that are going to be competing heavily in that market, and some of
them also have some interest in looking at self-driving or automated driving technology, which is also a big selling point for Tesla. So it's
not going to be easy for Tesla there.
CHATTERLEY: Oh, Peter Valdes-Dapena, great to have you with us. We will debate this for many weeks and month, I'm sure. Thank you so much for that.
All right, we're going to take a break here on FIRST MOVE, and up next, virulent rumors, we sought fact from fiction amid conflicting reports on
just how the coronavirus spreads. Stay with us.
(COMMERCIAL BREAK)
[09:41:17]
CHATTERLEY: Welcome to FIRST MOVE. As coronavirus spreads, Hong Kong is planning to impose a mandatory 14-day quarantine on all visitors from
Mainland China. The legacy of the 2003 SARS outbreak weighing heavily on the city.
Kristie Lu Stout has the story.
(BEGIN VIDEOTAPE)
KRISTIE LU STOUT, CNN INTERNATIONAL CORRESPONDENT (voice-over): Even after nearly two decades, former SARS patient, Alex Lam is haunted by his
experience.
(BEGIN VIDEO CLIP)
ALEX LAM, FORMER SARS PATIENT: I was put in a big room with many other patients. I heard some coughing a night, crying, and that's really sad.
It's really sad.
(END VIDEO CLIP)
LU STOUT (voice over): SARS infected around 8,000 people globally and killed 774 nearly half of them in Hong Kong. The isolation of cases
eventually led to the end of the outbreak.
The new coronavirus outbreak is already larger than SARS, and unprecedented measures are in place to control it.
The rapid construction of hospitals, mass production of medical supplies and protective equipment and sweeping travel restrictions and temperature
checks.
When will these measures stop the outbreak? Well, the answer lies in understanding the virus itself.
LU STOUT (on camera): Inside that building is the world's first lab grown copy of the Wuhan coronavirus outside Mainland China. It's a major
breakthrough that allows researchers here at Hong Kong University to better understand the behavior of the virus.
LU STOUT (voice over): Inside the lab, we are required to wear face masks.
(BEGIN VIDEO CLIP)
DR. JOHN NICHOLLS, PATHOLOGIST, UNIVERSITY OF HONG KONG: My feeling is that this is just going to be like SARS. It is that the world is going to get
basically a very bad cold for about five months.
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LU STOUT (voice over): But with one major caveat, it appears the new virus unlike SARS, can spread before symptoms arrive.
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NICHOLLS: But the problem with this virus is that it does appear, is that there is a period within the first four or five days where people say they
can be shedding, but maybe asymptomatic.
So for that reason, it is going to be far more difficult to manage.
LU STOUT (on camera): And I want to shake your hand, but it's during an outbreak. So --
(END VIDEO CLIP)
LU STOUT (voice over): The masks are off when I meet Malik Peiris in his office. He advises the World Health Organization on the virus.
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MALIK PEIRIS, PUBLIC HEALTH VIROLOGIST: Either Indian way of greeting or the Japanese way of greeting.
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LU STOUT (voice over): He says there are two extreme scenarios. The outbreak is brought under control or --
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PEIRIS: The other extreme, of course, is that the viruses like influenza, which means that it cannot be contained and it will spread.
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LU STOUT (voice over): This has already happened with H1N1, also known as swine flu. The strain emerged in a pandemic in 2009, and now, it's a
seasonal virus.
For Alex Lam, humankind doesn't need another disease to contend with.
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LAM: We must stand together. We need to think positive, because one day the disease will go away.
(END VIDEO CLIP)
LU STOUT (voice over): Now the head of a group of SARS survivors in Hong Kong, he is calling for the government to take tougher measures. Whatever
it takes to end the latest outbreak.
Kristie Lu Stout, CNN, Hong Kong.
(END VIDEOTAPE)
CHATTERLEY: All right, despite what you heard there, there are questions being asked about whether the virus can in fact spread before symptoms
show.
Public health experts tell CNN, a report suggesting the virus can be transmitted by apparently healthy people, outwardly healthy people were
flawed.
The question of how the virus spreads is key to understanding just how contagious it is. Let's get some context. I'm joined by Eric Feigl-Ding.
He's an epidemiologist and health economist at Harvard Chan School of Public Health. Eric, fantastic to have you with us.
Can we sort fact from fiction here and help us understand, how is this virus transmitted and can somebody that's not outwardly showing symptoms
pass the virus on to someone else?
[09:45:11]
ERIC FEIGL-DING, EPIDEMIOLOGIST AND HEALTH ECONOMIST, HARVARD CHAN SCHOOL OF PUBLIC HEALTH: Yes. That's a very good question, and it's a question
that the scientists been contending with since the very beginning.
What we do know is that the virus has reproductive number of between two and three, which means for every one infected person, that person infects
two to three additional, which is a pretty large number.
The seasonal flu has a 1.3 and the swine flu. The other pandemic of Spanish flu, 1.8 and SARS had also around 2.3.
But SARS was not infectious when you did not have symptoms, which allowed containment much easier.
But there's a lot of early indications that this virus, you could actually transmit it even when you don't have symptoms, albeit a little bit slower,
the airborne droplets and through bodily fluids.
But this recent study says that Munich case of the woman who transmitted in Munich, she did have symptoms, and "The New England Journal" paper
publishing that and took that back.
But there's lots of other cases in China that says, you could still transmit it even without symptoms. And U.S. N.I.H., Allergy and Infectious
Disease Director, Anthony Fauci agrees with that. He still believes it is potentially infectious, even without symptoms, which makes containment much
more difficult.
CHATTERLEY: Okay, so just so that I've understood, you mentioned the word R Nought, which is the baseline, the mathematical term that indicates just
how infectious the disease is and what you're saying here is, actually it's double as infectious as flu, just about.
FEIGL-DING: Yes.
CHATTERLEY: Which is very concerning. But to your point as well, and I think this is the key here, the suggestion at this stage is, someone who is
outwardly healthy can pass this on.
FEIGL-DING: That's right. That's right. There's an incubation of five days and during that period, for SARS, you cannot pass it on, which allowed
containment much more easy for someone who flew on a plane got off and got sick the next day, you didn't have to find everyone on the plane.
But now with this virus potentially being able to spread during that five- day approximate window in which you have no symptoms, it makes containment extremely difficult.
But that said, the R Nought clearly shows it infects what every infected person affects two to three others, which is pretty worrisome.
Just for context, SARS, it took three months to hit 8,000 cases worldwide. We've hit 28,000 cases in one month. That's about three times three, nine
times faster than SARS in terms of incidents from the beginning.
So this virus is definitely faster than SARS, whether it kills more, we don't know. But we'll see.
CHATTERLEY: But the key here is -- and I think it's an important one that the Beijing government accused the United States of overreacting, of
spreading panic. You, yourself actually came under fire for creating alarm just by actually stating what you believe is fact here and the data
suggests.
How do we handle this and make sure that we are aware of the risks here, responding appropriately, but people aren't fearful. What's the advice
here?
FEIGL-DING: Right, so this virus, you know, it does spread very quickly, and that's what I was trying to express that this has a potential to become
a pandemic, which experts now at WHO and many other global health institutes agree.
There is a pandemic potential, but it's not a pandemic yet because the mortality outside of China is still very, very low, and we still have to --
we are in this wait and see period.
But the fact is, other -- for example, plane travel, someone said, there was a research from London that says for every 100 infected person who
travels, we're only able to detect about less than 40, about 37 cases out of 100 that travels on a plane, and that's very worrisome. And that's from
London School Hygiene and Tropical Medicine researchers.
So containment of this virus is a little bit worrisome. Traditional measures, such as quarantine does not work perfectly it seems, but the jury
is still out how infectious it is during the early phases of the virus.
CHATTERLEY: This is early days.
FEIGL-DING: So this virus will be here for some two to three more months to come, maybe even longer.
CHATTERLEY: What about hopes for the vaccine, Eric, very quickly?
FEIGL-DING: Yes, the vaccine -- well, they're trying to put out a rapid vaccine into the field to test in four months, but that's just for
additional starting testing. We won't have a vaccine ready to deploy for nine to 12 months.
And just so you know, we contained SARS faster than developing the vaccine. So when the vaccine arrived for SARS we had already contained it.
[09:50:09]
FEIGL-DING: So, there's still hope. But long term, it looks like this virus does spread faster than SARS and we will need a vaccine in the long term.
There are some antiviral drugs that are also being tested. But again, they're also six, nine, twelve months away.
So in the meantime, public health measures -- handwashing, covering your mouth and not spreading it as much as you can is the best public health
thing we can do.
CHATTERLEY: Yes, good advice. Wash hands, cover mouth. Eric, fantastic. Thank you so much for that. Eric Feigl-Ding there, epidemiologists and
health economist at Harvard Chan School of Public Health.
All right, let me bring you up to speed now, with today's Boardroom Brief.
LinkedIn's CEO will have to update his profile. Jeff Wynn is stepping down after more than a decade at the helm. The SVP of Product, Ryan Roslansky is
taking over LinkedIn, which is owned by Microsoft. It has 16,000 employees and nearly 675 million members.
Royal Mail stock fell today amid problems with its transformation plans, strike threats and the declining letter delivery business.
The group says the year ahead will be challenging, especially with continued economic uncertainty.
And ride sharing app, Uber, reports fourth quarter results after the close today. The company's losses are expected to accelerate, but new cost
cutting measures are expected, too.
Uber shares up some 24 percent so far this year.
All right, after the break, on FIRST MOVE, they say you snooze you lose. Well, we'll see what investors make of Casper, the mattress company whose
IPO is just a little soft right now. That's going to start trading today. More on that, next.
(COMMERCIAL BREAK)
CHATTERLEY: American mattress in a box company, Casper starts trading today priced at the softer end of expectations. Clare Sebastian takes a look.
(BEGIN VIDEOTAPE)
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT (voice over): Whether you like it firm or soft, memory foam or with a pillow top, buying a mattress has
become so complicated, it's a joke.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Hear ye, hear ye, delivery from the Mattress King.
UNIDENTIFIED MALE: Hey, you.
HOMER SIMPSON, FICTIONAL CHARACTER: It's cool. How many?
UNIDENTIFIED MALE: Are you sleeping in the middle of my department store?
(END VIDEO CLIP)
SEBASTIAN (voice over): Over the last decade, startup --
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UNIDENTIFIED FEMALE: This is the box that started it all.
(END VIDEO CLIP)
SEBASTIAN (voice over): Well, that startup has woken up to the problem.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: We are now on the path to sleep enlightenment.
(END VIDEO CLIP)
SEBASTIAN (on camera): Well, Casper wasn't the first and it's certainly not the cheapest among the online mattress disruptors.
But it has risen fast starting online in 2014. It's now a $400 million business with 60 retail stores and 18 retail partners.
SEBASTIAN (voice over): Like this one, Raymour & Flanigan on New York's Upper West Side.
In just four months, Casper has become one of their most popular brands.
(BEGIN VIDEO CLIP)
STEVEN KOZAK, SLEEP CONSULTANT, RAYMOUR & FLANIGAN: The moment we started putting the Caspers on the floor, putting the marketing and the products in
the window, people are walking past Broadway all day long and it's bringing them in.
(END VIDEO CLIP)
[09:55:06]
SEBASTIAN (voice over): First impressions of the mattress aren't bad.
(BEGIN VIDEO CLIP)
KOZAK: Keep sinking, sinking into the mattress.
(END VIDEO CLIP)
SEBASTIAN (voice over): For Casper's business though, there might be a little too much sinking.
The company says it expects losses of about $94 million in 2019. In 2018, the company spent about $155 million on sales and marketing expenses alone.
(BEGIN VIDEO CLIP)
SCOTT GALLOWAY, PROFESSOR OF MARKETING, NYU STERN SCHOOL OF BUSINESS: It's losing money, and it doesn't appear to be reducing those operating losses
even as against top line, meaning there is no scale benefit here.
(END VIDEO CLIP)
SEBASTIAN (voice over): Casper didn't comment for this story ahead of their IPO.
The sleep economy can be unforgiving. In 2018, the U.S.'s largest mattress retailer, Mattress Firm filed for bankruptcy having expanded too fast.
(BEGIN VIDEO CLIP)
KOZAK: The coil systems at the bottom will finally kick in and give you a little more pushback or resistance.
(END VIDEO CLIP)
SEBASTIAN (voice over): And that's causing some resistance when it comes to Casper's bottom line.
Clare Sebastian, CNN, New York.
(END VIDEOTAPE)
CHATTERLEY: We'll see if it rises and stocks trading on the squishy side.
All right that's it. You've been watching FIRST MOVE, time it to go make yours. Look, I'm going to sign off. Now, I'm going to do it every day. No
don't feed the beast.
Have a great day, everyone.
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[10:00:00]
END
