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First Move with Julia Chatterley

Morgan Stanley Buying Online Brokerage ETrade For $13 Billion; Goldman Sachs Warning On Stocks As More Firms Cite Coronavirus Risks; The Former New York Mayor Gets Pummeled On His Democratic Debate Debut. Aired 9-10a ET

Aired February 20, 2020 - 09:00   ET

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[09:00:25]

JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange. I'm Julia Chatterley. This is FIRST MOVE and here is

your need to know.

Lucky 13: Morgan Stanley buying online brokerage ETrade for $13 billion.

Correction risk. Goldman Sachs warning on stocks as more firms cite coronavirus risks.

And Bloomberg terminal. The former New York Mayor gets pummeled on his Democratic debate debut.

It's Thursday. Let's make a move.

A warm welcome once again to our FIRST MOVErs around the world. Great to have you with us. We're recovering I can tell you from a feisty Democratic

debate night in Las Vegas, but for now, at least what happens in Vegas stays in Vegas.

Let's bring it back to Wall Street because stocks are softer premarket as you can see. Europe has also been gently in the red for most of the

session, too. We're taking a pause, I think after hitting record highs on both sides of the Atlantic on Wednesday.

And now of course, digesting what's been a whole slew of corporate warnings related to the coronavirus outbreak.

Goldman Sachs analysts are now saying that investors may be under estimating the threat to earnings and that the market correction in the

short term at least, is a real possibility.

Remember, they initially played down the economic impact and we've been talking about that for a few days. Analysis on this in just a moment of

time, but again the real action coming during the Asia trading hours.

The Shanghai Composite rallying almost two percent in the session after China lower borrowing costs further. Stimulus hopes, of course from China

and around the world helped boost global sentiment on Wednesday.

Indonesia also following suit, the Central Bank cutting base rates today for the first time in four months.

Now, in terms of U.S. Central Bank action, however, Minneapolis Fed president Neel Kashkari said he sees the Federal Reserve holding back on

rates for now, though he did say he thinks the next move will be a cut rather than a hike.

An insurance rate cut, anyone? Hmm. All right. Let's get to the drivers.

We are betting big. The U.S. banking giant Morgan Stanley buying the online brokerage firm ETrade in a $13 billion all stock deal. Paul La Monica has

been pouring over the details of this story for us.

Paul, great to have you with us. That clears up some of the suggestions we were making a few weeks ago about whether or not they could stand alone in

the face of consolidation in the sector, but an interesting move for Morgan Stanley, too.

What do know here?

PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, yes. I think this is a very fascinating move for Morgan Stanley, Julia. This really makes the company

an even bigger powerhouse with average retail investors.

Morgan Stanley has done an admirable job over the past decade under James Gorman of really boosting its wealth management unit. A lot of that has to

do though with more affluent customers.

When you look at, you know, the typical Morgan Stanley client, you are, you know, talking about much wealthier people.

Now, you add ETrade into the mix, you get younger, you have millennial investors, who are very tech savvy and this is something that I think is a

good move for the future because I think the hope here is that these younger consumers that are setting up, you know, trading accounts on ETrade

will eventually become wealthier people that will need more of Morgan Stanley's wealth management products.

CHATTERLEY: Yes, it's quite fascinating. One of the things that I read this morning on this deal, and it's seen as the crown jewel of ETrade, but

we don't often talk about it.

The number of accounts that they hold with corporates that then have stock that have been given two employees that they're holding. The hope, of

course, is that the value of that stock will rise.

And after this deal, Morgan Stanley will have 4,000 corporate customers holding $580 billion worth of stock. That could be a lot of future rich

people's money to manage in the future. Is that what we're saying?

LA MONICA: Yes, exactly, and that is something that James Gorman touted on the conference call just a couple of minutes ago, talking about this deal.

He said that this is a killer business. One of the things that attracted Morgan Stanley to buy ETrade in the first place. You do wind up, one,

obviously it helps offset some of the pressure that ETrade was facing since all of the online brokers have now gone to zero commissions.

You have this business where you have potentially wealthy consumers down the road, you know, managing their stock holdings through ETrade, and now

by virtue of this deal, eventually through Morgan Stanley.

[09:05:12]

CHATTERLEY: Yes, I mean, we have to take a step back here as well and look at the broader banking sector. I think, this is the biggest deal in the

U.S. banking sector since what -- 2008 -- when many of these companies were forced to acquire other businesses.

It's also a testament to the turnaround that James Gorman has achieved with Morgan Stanley and shifting the business away from trading, boutique

investment banking to, to your point, wealth management and smaller players here, smaller customers.

LA MONICA: Yes, and I think it was inevitable when everyone went to zero commissions last year. We already had another big broker deal with Charles

Schwab buying TD Ameritrade. Clearly, this deal I think, forced ETrade into looking in the mirror and saying, hey, we're going to be an independent

when two of our biggest rivals are getting together.

And not to mention the fact that Robinhood has taken the financial world by storm as well, so Morgan Stanley, I think being savvy here, ETrade being

opportunistic. The big question now, Julia, what does Goldman Sachs do, if anything?

Goldman Sachs was another rumored possible takeover candidate to take over ETrade. Now that ETrade is out, does Goldman just try and boost Marcus --

that division -- even more to gain more average consumers or is there anyone left that they could go out and buy?

I mean, could Goldman Sachs go after Robinhood for example? That would be insane. I don't think a lot of people think that will happen. But you know,

just throwing out names. There aren't that many other companies left for Goldman to acquire to get some more scale in this business.

CHATTERLEY: Yes, that is such a great point. You may have heard it here first. Robinhood right now, rubbing their hands together. Paul La Monica,

thank you so much for that.

All right to China now, where the number of new coronavirus infections appears to be dropping. The reason for that development though, could be

because Beijing has reverted to counting only lab tested cases.

Two deaths have now been reported among passengers from the Diamond Princess docked in Japan's Yokohama, the 14-day quarantine of the cruise

ship lifted on Wednesday.

Meanwhile, fresh warnings from the airline industry. Air France KLM and Qantas say the outbreak could cost them hundreds of millions of dollars.

Clare Sebastian joins us on this. Clare, I was looking at Qantas on what they were saying about the impact already. Their expectations actually is

that this lifts as of April, some bold expectations here about this easing pretty quickly.

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, both Air France KLM and Qantas basing their assumptions on the fact that the flights to China can

resume in April. Obviously, that is very uncertain, but these companies have to try to model this in some way.

Now, Qantas saying this could cause them a $100 million hit to profits in the first half of this calendar year, the second half of the fiscal year.

They say though that is actually mitigated partly by the drop in fuel prices that we've seen.

We've seen commodity prices come down as a result of this virus and the potential for reduced demand from China. So that is potentially one

mitigating factor for this, but don't forget, Julia, these airlines, particularly the regional ones like Qantas are already facing headwinds.

The protests in Hong Kong have dented traffic. They saw cargo come down as a result of the U.S.-China trade war, so the timing is not great here.

But certainly in the case of Qantas, they say they are going to use staff annual leave to try and protect jobs. They're going to bring forward

maintenance on the planes that have been grounded. Their stock is actually up today, because they announced the share buybacks.

So they say they can weather this, but of course we don't know how long this is going to go on. When it comes to SARS, that cost the global airline

industry $6 billion in terms of lost revenue, and it took nine months for traffic to come back.

Analysts do say, this time, it could be worse.

CHATTERLEY: Yes. It's interesting. A lot of analysts, Goldman Sachs being one of them did a compare and contrast with SARS initially and said,

actually, the impact here in the medium term isn't going to be so bad. There will be a V-shaped recovery.

Those analysts coming out yesterday and saying, actually, we could see a short term stock correction. One of the quotes from this report, the

Chinese economy six times bigger now than it was then.

They also say that Chinese tourism accounts for 0.4 percent of global GDP. The number of missing work days in China will be roughly equivalent to the

entire U.S. workforce taking an unplanned break for two months. Wow.

Clare, what do we make of that?

SEBASTIAN: Well, this, I think, is critical, Julia, for understanding how this could play out. The world has changed almost unrecognizably since

2003. China was then about four percent of global output. It's now about 16 percent and that is why Goldman Sachs in the note say that comparisons with

the SARS period may not be totally relevant.

They say that because of the growth of the Chinese economy, global companies have now piled in. They are much more exposed, and this means

that they believe the markets could be underestimating the overall impact of this.

We've seen stock markets reaching record highs, despite this, despite the warnings that we're getting from global companies.

But the trigger point for this, Julia, may have been Apple that we saw earlier in this week. That company, one of the most valuable in the U.S.,

if not the world, saying that they could miss revenue estimates for this quarter because of the drop in demand from China.

They've had to close their stores because of the impact on the supply chain and that Goldman Sachs says, could bring down earnings estimates overall.

So I think that is crucial here. Of course, we don't know how long this is going to go or know how long this will play out. But the equity markets,

according to Goldman, could be under estimating this.

[09:10:42]

CHATTERLEY: Yes, fascinating. Clare Sebastian, great analysis. Thank you so much for that.

All right. Let's move on to our next driver and it's a blooming disaster. Billionaire and former New York City Mayor Mike Bloomberg was bombarded

with sharp attacks in his presidential debate debut on Wednesday night in Las Vegas.

(BEGIN VIDEO CLIP)

SEN. ELIZABETH WARREN (D-MA), PRESIDENTIAL CANDIDATE: I like to talk about who were running against, a billionaire who calls women fat broads and

horse faced lesbians.

And no, I'm not talking about Donald Trump. I'm talking about Mayor Bloomberg.

SEN. BERNIE SANDERS (I-VT), PRESIDENTIAL CANDIDATE: Walmart, we have to subsidize Walmart's workers on Medicaid and food stamps because the

wealthiest family in America pays starvation wages. That's socialism for the rich.

I believe in Democratic socialism, for working people, not billionaires.

MICHAEL BLOOMBERG (D), PRESIDENTIAL CANDIDATE: What a wonderful country we have. The best known socialist in the country happens to be a millionaire

with three houses. What did I miss here?

SEN. AMY KLOBUCHAR (D-MN), PRESIDENTIAL CANDIDATE: I think we need something different than Donald Trump. I don't think you look at Donald

Trump and say we need someone richer in the White House.

(END VIDEO CLIP)

CHATTERLEY: Arlette Saenz is live in Las Vegas for us. Arlette, even the jokes there from Mike Bloomberg seems to have fallen a little bit flat here

and he was well and truly eviscerated by Elizabeth Warren. What's the tape in there of his debut performance?

ARLETTE SAENZ, CNN POLITICAL REPORTER: Well, Julia, this basically -- this debate basically turned into a Michael Bloomberg pile on. Each of the

candidates came out ready to pounce and had their lines of criticism that they wanted to draw with Michael Bloomberg.

And for the most part, Bloomberg appeared to be a bit flat footed during this debate. You know, his advisers has said that he had been preparing for

quite some time.

But as he faced questions or criticisms about his alleged treatment of women or his past record relating to things like stop and frisk and

redlining, he didn't always have the most direct answer to provide back to those candidates.

Now, one person that emerged largely unscathed from this debate was Bernie Sanders. He is now the front runner and these Democratic contenders decided

to train their focus and train their fire on Michael Bloomberg, and they didn't really go after Bernie Sanders all that much.

Now you heard Bloomberg landed a bit of a punch in that clip that we just played when he said that he didn't know that Democratic socialists were

millionaires who owned three homes, referring to Bernie Sanders. That was one of the knocks against him.

But you also in addition to this Bloomberg pile on, you saw a bit of a fight between Amy Klobuchar and Pete Buttigieg over experience. You could

tell that Amy Klobuchar in particular was rattled a bit by Pete Buttigieg at one point.

Now this debate is all playing out as we are just two days out from the Nevada caucuses. Michael Bloomberg isn't competing here or in South

Carolina. But those other Democratic contenders are hoping for a strong showing in the state particularly Joe Biden, who really needs to get a good

showing strong finish here in order to get -- propel him into states like South Carolina and more diverse states on Super Tuesday.

Now this evening, CNN is going to have two Presidential Town Halls with Joe Biden and Elizabeth Warren, and all of the candidates

remain in the state today except for Michael Bloomberg, as they're trying to make their pitch to Nevada voters.

CHATTERLEY: Yes, emphasizing the term leaving Las Vegas ASAP, I think in this case. Arlette Saenz, great to have you with us. Thank you so much for

that.

All right, let me bring you up to speed now with some of the stories making headlines around the world.

More details have emerged about a deadly mass shooting in Germany. The gunman was found dead in his apartment after nine people were killed in two

bars in the east of Frankfurt.

Police are treating it as an act of terror. Let's bring in CNN's Melissa Bell on this story. Melissa, good to have you with us. What more do we know

about the individual that carried out this attack? And what his motives perhaps were?

MELISSA BELL, CNN CORRESPONDENT: Clearly -- and this has been said over and over again by German authorities, a racist xenophobic far right motive.

There was no words minced when it came to talking or trying to deal with what might have motivated the gunman who began his attack just behind me

here in that bar, The Midnight Sisha Bar.

It was at 10:00 p.m. last night here in the center of Hanau that he began his rampage, moving on then to another bar. In all, as you said, nine

people killed and then he was found after a manhunt in his apartment. He had also murdered his mother.

[09:15:20]

BELL: Now, we are hearing just a little bit more from authorities. The German Interior Minister just visited the scene saying he was here to

express his sympathies and vowing that all would be done to get to the bottom of this.

We've also been hearing a moment ago from the German prosecutor who said that not only have nine people been killed, but also six people have been

injured including one who is in a critical condition.

But a great deal of shock in Germany today. You're going to see a lot of German politicians making their way through Hanau today, including, we

expect the German President later today.

Angela Merkel has been speaking to it, and clearly this is something that had been on the radar of German authorities for some time. The rise in the

threat presented by far right people motivated by far right causes, far right motivations, and this is what has happened.

Earlier, the Foreign Minister said it was the third far right attack in Germany this year.

CHATTERLEY: Yes. And that's exactly what I wanted to ask you, Melissa. What have the AFD, the far right party said about this attack, to your

point about perhaps what's inciting some of this kind of violence?

BELL: Well, they came out very quickly with a statement that was very clear in its condemnation of the attack and in its support to the

investigation that's now underway, saying that they had full faith in the investigation that it would get to the bottom of what went.

Very clear in its condemnation, but interestingly, Julia, the statement did not talk about a terrorist act, as so many other politicians did. It talked

about a terrible act and I think perhaps has the slight difference with some of the other statements that you've seen here today.

But they did come out very quickly and make that condemnation as did all sorts of European politicians, European leaders vowing their support for

Germany in this time.

And I think what you've seen in what all of the politicians have said today is really a sense that this is a real problem in Germany and saying it is

something they need to tackle and get their hands on in order to prevent this sort of atrocity from happening again -- Julia.

CHATTERLEY: Yes, a terrible act versus an act of terrorism. Slight difference, but a vitally important one. Melissa Bell, thank you so much

for that.

Now, at least two people a day and after a train derailment in Australia. It happened near a town around 50 kilometers north of Melbourne. The train

was headed to Melbourne from Sydney. The cause of the derailment is not yet known, but if we get any further details, we will bring them to you.

To Washington now, longtime adviser to President Trump, Roger Stone will be sentenced in the coming hours. He was convicted on charges of obstruction,

lying to Congress and witness tampering. Stone has requested no prison time.

All right, we're going to take a break here on FIRST MOVE, but still to come, the end of the Ermotti era. The Swiss bank, UBS getting a new boss.

And the shipping forecast. The CEO of Denmark's Maersk talks coronavirus, trade wars and a global trade slow down. Stay with us. We're back after

this.

(COMMERCIAL BREAK)

CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange.

U.S. futures right now indicating a softer open. The S&P and the NASDAQ pulling back from record highs as you can see. That said, I'll make the

point, we're still less than two percent away from that 10,000 milestone on the NASDAQ even as more global firms warn about the impact of the

coronavirus outbreak.

Now, as we were saying earlier, in Mainland China, the number of confirmed coronavirus cases dropped 77 percent in just one day. The government

briefly started counting clinically diagnosed patients -- those that show symptoms, even if they tested negative, but has now reverted to lab

confirmed cases only.

Meanwhile, biotech firms are racing to produce faster tests and one called Novacyt says, it can get results within two hours.

The CEO is Graham Mullis and he joins us now from their lab in Surrey, England. Graham, great to have you on the show.

Just explain exactly what you have here. Do you have a test that will give a positive even if a patient isn't showing symptoms, but does have the

virus?

GRAHAM MULLIS, CEO, NOVACYT: Yes, potentially, we have the ability to test a patient that is in the early stages of infection. And our test

specifically looks for the COVID-19 virus.

CHATTERLEY: How did you find this so quickly? Is it something else that you've adapted or did you simply start from scratch to create this test?

MULLIS: So this part of our business, which is all to do with molecular design and manufacturing. We keep a very close eye on what's happening

around the world.

So in the past, we have been involved in supporting crises like Ebola, such as the SARS epidemic of a number of years ago. And the way we are able to

do that is we keep track of global databases for various infections, including flu.

And we are then able to respond very quickly through our research and development process, and that's exactly what we've done with COVID-19.

CHATTERLEY: Yes, what I'm trying to ascertain is whether or not this is a one off, but as you're pointing out, it is something that you've done for

other different viruses that we've focused on in the past.

Your share price, I saw an astronomical rise with the news that you'd had 288,000 requests for quotations. I'm assuming that's a quotation on price

here and availability. What proportion of those quotations have you already transferred to orders? And can you give us any sense of actual demand here?

MULLIS: So, first of all, I would say it's very, very early days still in this particular situation. And I mean, in the past, the SARS epidemic

actually lasted for around nine months. And so, first of all, I would, you know, have to say that it's very early in our delivery of product to

support, you know, countries process.

To date, around 50 percent of our quotations have already been converted into orders, and that's something that obviously is changing almost on a

daily basis.

CHATTERLEY: How soon, to your point then, can you deliver these tests and can you fulfill 114,000 orders approximately, if 50 percent right now have

converted -- how long is that going to take you?

[09:25:10]

MULLIS: Actually, from a stock point of view, we are able to fulfill all of the existing demand that we see in front of us today.

Obviously, we are in multiple discussions with many different countries and looking at, you know, generating a forecast, which would then enable us to

continue to manufacture assuming that the demand, you know, continues to grow and develop further.

So, at the moment, manufacturing capacity is not an issue for us.

CHATTERLEY: Interesting. I mean, what we were just describing there in China is difficulty with how they're simply counting cases and the

numbering here.

How quickly given your operations in China, too, and your connections there could China be using your tests? Can you give us a sense?

MULLIS: So the key barrier there is to make sure that the product is accepted by the Chinese F.D.A. authorities, and just like the U.S. F.D.A.,

there is a fast track mechanism and we are in discussion with multiple parties about taking our new CE mark product through the C.F.D.A. process.

Typically, you know, that will take a week or so to get through because, you know, the Chinese authorities are quite desperate as I understand it

for tests to support their problem.

CHATTERLEY: Fantastic work. Graham, come back and talk to us again, please. We'd love to hear how it's going.

Graham Mullis, the CEO of NovaCyte.

MULLIS: Okay.

CHATTERLEY: Thank you so much.

MULLIS: Thank you very much.

CHATTERLEY: All right. We're counting down to the market open this morning. A softer open expected for U.S. markets. That's the picture. Stay

with us. Plenty more to come. You're with FIRST MOVE.

(COMMERCIAL BREAK)

[09:30:00]

CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange and the opening bell being rung by Battalion Oil Corporation

there.

As expected, we've got a lower open here on Wall Street, though a blockbuster M&A deal is that what we're focusing on in the financial

sector.

Morgan Stanley buying discount broker ETrade for some $13 billion. So that's creating some excitement in the financial sector, but it is the

whole slew of corporate warnings related to the coronavirus outbreak that I think investors are cautiously pouring over today and that's something that

is foremost on investors' minds right now, including, of course, that warning of a potential short term pullback from Goldman Sachs out last

night, too.

Meanwhile, shares of Maersk are lower in Denmark. This after the company reported today a disappointing fourth quarter set of results posting a net

loss of $72 million down from a profits of $46 million in the same period a year ago.

The Danish shipping giant also one of those warning that the coronavirus outbreak is expected to hit its earnings this year.

I spoke to the company's CEO earlier this morning.

(BEGIN VIDEOTAPE)

SOREN SKOU, CEO, MAERSK: Typically, there's quite a run up in cargo volumes being shipped off to the Chinese Navy which was beginning on the

27th of January, and then after the Chinese New Year, there's kind of a period of lull where we normally make quite a number of cancellations.

This year, we have cancelled more than 50 sailings more than we would otherwise have done because of the coronavirus.

So the impact right now is quite substantial. We have around 30 percent of our businesses is really related to China.

So, it's significant, but what will be really important is what happens in the coming weeks.

CHATTERLEY: What percentage of the total shipping volume then is those 50 cancellations? Can you just give us a sense of, of how material that is?

SKOU: It's the 20th of February today, and I think it's really impossible to tell how this will play out. You know, we're still relatively close to

Chinese New Year. We would have expected seasonal weakness to begin with.

So I think we need to get, you know, two to three weeks further down the road before we can really quantify the impact of the coronavirus on global

shipping volumes.

CHATTERLEY: But in terms of getting back to capacity, just to get back to your earlier point, you suggested a sort of a four-week time horizon. Is

that what it takes simply to get things going again once China is back working in the manufacturing sector in particular is up and running again?

SKOU: Yes, so we expect this week as we speak here today that the manufacturing capacity across China is back up at 50 or 60 percent, and as

workers return in the coming week from the current scene that they have been imposed on them, you know, usually, when workers returned to their

cities, they have to stay at home for two weeks before they can start work.

And that will -- people will be coming back to work in the next week and a half, and that's why we say by the second of March, we expect factories to

be at 90 percent across China. With the 10 percent missing really being the factories in the Hubei Province where the virus outbreak is the strongest.

CHATTERLEY: What adjustments will you have to make, at least in the short term, if this is optimistic, and your judgment here is optimistic and

actually there's greater delays, because there is still a great deal of uncertainty and confusion really about how quickly they can reduce the

quarantine efforts in particular in China, what adjustments will you make and have to make?

SKOU: So obviously, we have plenty of risk still. The risk of new outbreaks as migrant workers will start to travel around not just in China,

but in the world. So we can definitely not say today exactly how this is going to pan out.

Obviously, if new outbreaks outside of China and other parts of China were to occur, then we will be on a path where the coronavirus will have more of

a long lasting effect on the global economy and on global supply chains.

What we can do is really to adjust the capacity that we offer to the market in order to save cost.

CHATTERLEY: Yes, it's a tough one. The other challenge, of course, has been a reduction in global trade anyway, the impact of tariffs,

particularly between the United States and China. We got a Phase 1 trade deal and there was then hopes that perhaps that situation would stabilize.

What are your thoughts as far as that is concerned? And did you see any pickup as a result of the Phase 1 trade deal or the seeming agreement on

that? Or is it too early to tell?

[09:35:15]

SKOU: Well, we, in 2019, we actually were able to grow our earnings by about 14 percent on quite weak global trade, and we also have ambitions to

continue to have reasonable earnings this year, also in an environment where global trade is not growing as much.

We saw the Phase 1 deal being made last year that was helpful. It's probably unlikely that we will see a Phase 2 deal this year. But there are

other areas of the world where trade deals -- new trade deals are being made that actually liberalized straight fences between E.U. and Japan and

so on.

So, all in all, our estimate is that we will see a global demand growth, global trade growth in the order of one to three percent this year.

CHATTERLEY: And that's even with the impact of coronavirus or are you separating that out from your prediction at this stage?

SKOU: Well, we believe that the impact of the coronavirus can be contained within that band of one to three percent global growth right now.

(END VIDEOTAPE)

CHATTERLEY: The Maersk CEO there. All right, let's move on. Change at the top, UBS, the Swiss bank has got a new CEO. He is Ralph Hamers, who is the

current Chief Executive at the Dutch lender ING. He comes as Switzerland's other top bank, of course Credit Suisse is also seeing leadership change.

Anna Stewart joins us on this story. I'm a little bit surprised by the timing here and how swiftly actually the UBS CEO is moving out, but I'm

more surprised by the bold choice here of Mr. Hamers. What does that say about the direction now for UBS?

ANNA STEWART, CNN REPORTER: You did hear me laugh, Julia, because earlier this week, we were discussing HSBC, which has had an interim CEO for six

months and could do for another six months.

We only found out that Ermotti was stepping down last week. So it feels very, very fast. The Swiss bank of course, it's probably had succession

planning in the works for many, many months, possibly even years.

Such an interesting choice because UBS is all about wealth management and Ralph Hamers isn't. He doesn't have much experience there. ING is all about

retail commercial banking.

However, I guess what we could say we've seen ING through a very successful transition out of the financial crisis, lots of cost cutting, lots of -- I

don't know -- due diligence and seeing it through a digital transformation as well.

So perhaps that is why we're seeing the Chairman saying he is the right CEO to lead this business into the next chapter.

UBS needs a lift. It missed its financial targets last year. Its investment bank is struggling, so perhaps it's just fresh blood at the top and he will

take up that role in November -- Julia.

CHATTERLEY: Yes, absolutely. And you know, the other thing I will say about Mr. Hamers, he is not afraid to be punched, smacked around the

European Central Bank on negative rates. He's not afraid to weigh in on bonus caps, too.

And speaking of bonus caps --

STEWART: Speaking of famous caps, this ship is coming in, Julia, because Dutch law is very strict on bonuses. They are capped at 20 percent of

salary versus the E.U., which is 100 percent capped or 200 percent with shareholder approval.

To put that into context, in 2018, Hamers actually earned less than $2 million, don't feel too sorry for him of course, but compared to Ermotti,

he went over $14 million.

So he is about to get a huge pay bump.

CHATTERLEY: Yes, lucky him. The job to do at UBS though, as well. But I do want to pick up on a point you just made very quickly. HSBC without a

leader. Leadership change at Credit Suisse. UBS now shifting.

There's a leadership gap not only with those companies, but elsewhere with SocGen, another one. Challenges are tough for the European banking sector.

STEWART: Yes, it's all change at the top. It's really interesting, isn't it? HSBC's SocGen, ING now joining that too, and they may struggle with

that bonus cap.

Speaking to analysts. There's an interesting idea, perhaps, we're moving away from the era of financial crisis. The CEOs that saw those banks

through that bumpy area and now is in search for growth.

They need a change in strategy, and also like HSBC, a lot of restructuring -- Julia.

CHATTERLEY: Anna Stewart, great job, as always. Thank you so much for that. All right, we're going to take a quick break here on the FIRST MOVE.

But still ahead, Mark Zuckerberg faces a cookie-pocalypse. I'll speak to the analyst that cut Facebook to a cell. He says fewer online cookies could

hit Facebook's business model pretty hard. We will explain next. Stay with us.

(COMMERCIAL BREAK)

[09:42:44]

CHATTERLEY: Welcome back to FIRST MOVE with a look at our Global Movers.

Shares of discount brokerage, ETrade rallying over 24 percent. Morgan Stanley buying the firm in a $13 billion deal. Morgan Stanley shares are

down around four percent on the news, as you would expect for an acquiring firm in this case.

Media giant ViacomCBS falling some 13 percent after reporting weaker results. It's the company's first earnings since the merger of Viacom and

CBS late last year.

Take a look at their shares of L Brands there also under a bit of pressure here. They're selling a controlling stake in Victoria's Secret unit to a

private equity firm for around $500 million. It seems investors may have hoped for a higher price here, yes, down around three and a half percent so

far. Victoria's Secret going private.

Facebook, as you can see, little changed in early trading today, but shares that the social media giant have recently lagged other big FAANG names.

They're up around five percent year-to-date.

Pivotal Research Group recently downgraded the company to sell. They say investors are under estimating the challenges to Facebook's advertising

model.

Michael Levine joins us now. He is Senior Research Analyst at Pivotal. Great to have you with us.

MICHAEL LEVINE, SENIOR RESEARCH ANALYST, PIVOTAL RESEARCH GROUP: My pleasure, Julia.

CHATTERLEY: Cookie Apocalypse. We have to explain what this is, and what's going on with Google's Chrome 80 update, because it's making significant

changes that you argue impacts Facebook more than anyone else. Explain what's changed and then we can talk about what's happening.

LEVINE: So when you think about the way Facebook is able to target users, they have a combination of first party data. So they actually -- you

register, you're on the site, you're looking at pictures of your friends, you're messaging, but what they're also doing is they're looking at your

behavior around the web.

They can do that even with their privacy tool recently, and you can actually do this, and it will show the 600 different sites that you've gone

ahead and visit and they're taking in the way I would describe their behavioral targeting. It's like this mash of first party data and third

party data.

CHATTERLEY: You said they're on the efficient frontier. They collect most data. They've got cross platform. They can build a huge profile of who you

are as a buyer, and then target you incredibly efficiently in order to provide you with images of what you might want to buy.

LEVINE: Exactly.

CHATTERLEY: It works.

LEVINE: It works. This was the promise -- I mean, I worked in the advertising business before moving to Wall Street and I remember this is

what we tell clients, like behavioral targeting, we're going to get the right message in front of the right user at the right time.

[09:45:13]

LEVINE: And I'm sure you've noticed, Julia, in the last five, six years, it's just gotten better, like because these companies are doing a better

job looking at your behavior around the web, looking at her profile to do that.

CHATTERLEY: Totally, I get chased by pairs of shoes I've looked at all the time. I have to tell you. It's very, very concerning.

So talk to me about the changes. Google Chrome, Apple as well. Why suddenly, are you worried about an impact to their behavioral targeting

here of customers?

LEVINE: Well, I think we underestimated as did the Street, what they were actually already seeing disruption wise, out of Apple. And I think that

that happened around the half of Q4.

We saw it in some of our data that showed a downtick in December. We had thought when the companies talked about negative impacts, there's the

things they need to change because of GDPR, CCPA.

CHATTERLEY: Privacy rules.

LEVINE: Exactly.

CHATTERLEY: Yes.

LEVINE: But the biggest one that concerned us has been the things that are out of their control, specifically, as you're mentioning Apple and Google.

So we had thought that they didn't know when Google was going to make the announcement of the exact release date. Apple comes out. You're already

seeing them lose some signal with regards to location based data. Many more people are holding up their hands and saying like, no, I'm not interested

in sharing with you exactly where I am.

CHATTERLEY: So more and more restrictions on the use of data.

LEVINE: Exactly.

CHATTERLEY: Is reducing the impact of their behavioral targeting and because they are so good at it, it has a more negative impact on Facebook,

perhaps than some of the others.

Google, Alphabet, for example, they are also well and truly target advertisers and that is their business model.

LEVINE: I call it the winners -- for market leaders, sometimes, you have the winners curse, right? You're like you're so good at what you do. Like

you're doing everything you can.

I'll give another analogy would be booking.com, formerly Priceline when desktop started to move towards mobile. I mean, they were the best company

on the planet advertising with Google and then all of a sudden, you just could not grow queries.

CHATTERLEY: How much pushback are you getting on this call? Because if I look at other analysts out there, you know, they're not listening because

Facebook to their credit are saying, guys, we're going to see a slowing in the numbers. We are seeing an impact.

LEVINE: Yes.

CHATTERLEY: But the Street seems to be going on, yes, they're just managing expectations. It's going to be okay.

LEVINE: I think it's a little bit of pattern recognition of people saying they're just sandbagging. This is what they've always done, which I think

they probably are doing on the cost side. I just tend to take them a little bit more at their word with regards to revenue.

So the pushback I've gotten has been mostly from holders of the stock, but Pivotal, just in terms of our legacy. We have a lot of industry

relationships. So our notes go out to 3,000 or 4,000 folks in industry. I've gotten almost no pushback.

Like the only things that I've heard has basically been, look it will hurt more of the rest of the web, then it will the walled gardens. Stock is

cheap. And like one of the big pieces of feedback that would probably change my mind is they have to get payments right. Like this is the

important part, Julia, about the signal that they lose, they still have the first party data.

They're seeing everything you're doing on the site. But aside from responding, let's say to a different shoe ad and thinking, okay, maybe

Julia is interested in shoes. They really need the purchase intent that comes from the rest of the web.

CHATTERLEY: How long is it going to take them to get that set up? I mean, they have the user base, two billion daily active users. They have the

infrastructure in place to be able to provide that payment system. How long does it take for them to get it organized?

LEVINE: I really don't get it. I mean, we were a lot more positive. It seemed like there was a lot of regulatory potential hurdles around Libra,

but seems like it's dead on arrival.

CHATTERLEY: Yes.

LEVINE: They've got David Marcus out of PayPal, who is by far one of the sharpest payment executives out in the valley. And like, everybody is like,

why is this not happening? Why is this not coming?

CHATTERLEY: I mean, I think they were shocked by the excitement around it. They haven't even got started when they announced it. They should have done

a bit more work first, but that's just my view, and this is a sensitive subject with me.

Your price target hit for Facebook $180.00. You say better to buy Amazon or Alphabet. We have to wrap up this conversation, but we will get you back

because we'll talk about those names, too. Great to get your analysis.

LEVINE: My pleasure, Julia.

CHATTERLEY: Mike Levine, Senior Analyst at Pivotal Research Group. Thank you once again.

All right up next on FIRST MOVE, the highly disputed sentencing of Roger Stone, President Trump's longtime friend and adviser will be announced in

just a few moments. We will analyze what to expect after this.

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[09:51:29]

CHATTERLEY: Welcome back to FIRST MOVE. Roger Stone, longtime adviser to President Trump is due to be sentenced shortly on charges of obstruction,

lying to Congress and witness tampering.

The case has become a test of judicial independence among other things. The U.S. President has attacked prosecutors, jurors and the judge in this case.

Sara Murray joins us now. Yes, who would want to be this judge, Sara? What are we expecting to come from this ruling in this announcement today on

sentencing?

SARA MURRAY, CNN POLITICAL CORRESPONDENT: Well, this is going to start any minute now, and really, it's the judge's turn to weigh in on what

punishment she thinks Roger Stone deserves for the seven crimes he was convicted of. They include obstruction, lying to Congress, as well as

witness tampering.

Now, Stone's attorneys have said he should not get any jail time, and prosecutors additionally told the judge, Stone should serve seven to nine

years behind bars. And then we had this extraordinary thing play out where the Attorney General decided to insert himself in the case. He decided that

sentencing guideline was excessive.

He overruled the prosecutors on this case and asked the judge to soften the time she might give Roger Stone and that prompted the four prosecutors who

had been shepherding this case across the finish line to resign.

So they're actually going to be new prosecutors from the Justice Department who are in court today to handle the sentencing and you know, we will see

what kind of punishment the judge decides to hand down.

And then obviously, we'll see how President Trump reacts to it. As you pointed out, he has also weighed in on this case, essentially attacking

everyone involved and defending his longtime friend, Roger Stone, saying Stone has been treated unfairly. And Trump has continued to tweet about

this case overnight.

So we're all waiting to see if he is going to weigh in at some point and potentially pardon his friend.

CHATTERLEY: Yes, and that's the key, Sara and I just want to explain that for our international audience. You've caught him President Trump's friend

here.

For many people, they will be like, why? Why is President Trump tweeting a sentence of several years is too long? Who is Roger Stone and why is he so

important to President Trump?

MURRAY: You know, Roger Stone and Donald Trump has been friends for more than 40 -- roughly 40 years. They've had some periods in their relationship

that were rockier when they barely spoke.

But for the most part, they've been friendly and Stone has been sort of a longtime political adviser to Trump. He was one of the people who was in

Donald Trump's ears for decades telling him that you should run for President.

He was a senior adviser to Trump's campaign when it first got started and he continued even after -- he either quit or was fired from the campaign.

It depends on who you ask.

He continued to stay in touch with Donald Trump, who was a presidential candidate to give him advice throughout the campaign.

And one of the points that prosecutors made when this case was at trial, you know, they said that the reason Roger Stone lied was because he was

trying to protect his friend, Donald Trump. He was trying to protect Donald Trump, the candidate and Donald Trump's presidential campaign.

So it's really extraordinary when you think about the idea that Donald Trump could pardon his longtime friend and political strategist who

prosecutors say lied, in part to protect Donald Trump.

CHATTERLEY: Sara Murray, great to have you with us. Thank you for the explanation there. And we'll wait to see what that sentencing provides in

the coming minutes.

All right, let me bring you up to speed with today's Boardroom Brief. Tesla CEO Elon Musk skipped the chocolates this Valentine's Day and bought $10

million worth of Tesla shares instead. A filing with the market regulators reveals he raised his company stake to 18.5 percent.

Tesla stock has doubled in price since the start of the year and of course, he may have bought chocolate, too.

[09:55:03]

CHATTERLEY: The U.S. casino operator, MGM Resorts says it was hacked last year. Tech website ZDNet reported that the details of over 10 million

guests have been compromised. MGM says no financial data or passwords were stolen.

Now, take a look at this if you dare. Fastfood giant, Burger King is remolding the image of it signature burger. The company's new ad aims to

promote a preservative free burger by showing how it decomposes. Yes, remolding, you see. Yum.

The whole natural whopper will be available in all Burger King restaurants in the United States by the end of the year.

Yes, yes. I'm not sure how I feel about that. I am not sure I'll ever eat a whopper ever again.

That's it for the show. I'm Julia Chatterley. You've been watching FIRST MOVE, time to make yours. I'm off for a salad.

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