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First Move with Julia Chatterley
U.S. Stocks Fall As The CDC Warns The United States Needs To Prepare For Coronavirus; The Hong Kong Government Announces A Raft Of Measures Including Cash Giveaways To Support The Economy; Disney's Bob Iger Steps Down, Bob Chapek Steps Up. Aired 9-10a ET
Aired February 26, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:43]
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.
Volatility rains. U.S. stocks fall as the CDC warns the United States needs to prepare for coronavirus.
Helicopter money. The Hong Kong government announces a raft of measures including cash giveaways to support the economy.
And a fairy tale farewell. Disney's Bob Iger steps down, Bob Chapek steps up. It's Wednesday. Let's make a move.
A warm welcome once again to FIRST MOVE on another day of fast developments in the global coronavirus crisis. And of course, some developments in stock
markets, too. Pressure, volatility on global markets.
Let me bring you up to speed with what we're seeing at this moment. I can tell you, U.S. futures are now solidly higher. They flipped from being
deeply negative just a couple of hours ago. This kind of pattern and sentiment isn't so surprising after one of the worst two-day drops on Wall
Street in years.
The Dow and the S&P have both fallen some three percent in each of the past two trading sessions. It was all not helped by a warning from the CDC here
in the United States yesterday saying that coronavirus will likely come to the U.S. and authorities like schools need to be thinking about how they
prepare.
The result, all three major markets close to falling some 10 percent from their most recent highs. That's the classic definition that we use for a
correction.
Beneath the surface, some 64 percent of S&P 500 stocks are already in correction territory including firms like Apple and MasterCard. Both have
warned about the coronavirus risks just in the past week.
We also saw pressure, too on Asian stocks. The Shanghai Composite you can see there falling some 0.8 percent, but I will tell you what we're seeing
in the European session has been equities trying to claw their way back from earlier losses. They are in the red at the moment, but just tilted as
you can see to the downside.
It's not just stocks though, the selloff in oil continues, too. Brent crude falling through $55.00 a barrel. U.S. crude below $50.00, too. Bond yields,
however, firming up slightly here after falling to record lows yesterday. Yields dropping of course as investors bet on fresh stimulus. We're talking
fresh rate cuts here from the Federal Reserve.
The bottom line here is, guys, uncertainty is what's driving these markets. Let's get to the drivers because I do want to bring you up to speed with
what was saying. With regards to coronavirus outbreak.
President Trump has announced a press conference later today on the coronavirus outbreak, this of course as global health authorities scramble
to contain the outbreaks outside of China.
In South Korea, the number of people infected with coronavirus continues to soar, 12 people now officially confirmed dead. A U.S. soldier stationed in
the country has also tested positive.
Iran, meanwhile, the worst nation hit in the Middle East, 19 deaths have now been reported there and there is concern that thousands of cases may
have gone undetected.
Meanwhile, in Europe, they are working to contain the outbreak in Italy, too. Twelve deaths have been reported there. France also reporting its
first fatality just a short while ago.
Not wanting to detract from that crisis, and of course, the humanitarian impact that it's had, but the uncertainty has at the same time wiped $3.3
trillion in value from global markets.
Clare Sebastian joins us on this. Clare, again, I want to reiterate, we don't want to take away from the humanitarian impact that this crisis is
having. But at the same time, I think investors trying to gauge what the economic impact is going to be and it's tough to gauge how you reflect that
risk in terms of the level here for markets not just in the United States, of course, but globally.
[09:05:05]
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, I think it's interesting because in actual fact if you look at the headlines that we've
had overnight, things have got worse in terms of the spread of this virus.
But we're seeing a bit of a bounce in the premarket action this morning on the markets. And that really suggests that despite these negative
headlines, despite the fact that the virus continues to spread, despite the warnings in the U.S. from the Centers for Disease Control, there are those
out there who still believe this will be a V-shaped recovery that some of the demand lost will be recaptured.
But in terms of how you assess the risk here, I think it's critical to look at what some of the companies are saying because it's very clear now that
this has been going on for long enough that wait and see just isn't good enough for some companies.
The airlines, a critical case in point here. We've heard this morning from Lufthansa and Air France KLM, both of them are -- actually Air France KLM
stock is now up today, but both of them are aggressively cost cutting in the face of this. Lufthansa saying that it's reassessing new hires. It's
offering employees unpaid leave, cutting budgets in administrative areas.
Air France KLM saying that impact on revenues will be very significant and it is urging people to only do must do expenditure. That was a letter from
the CFO this morning. So companies are increasingly concerned.
But I think the markets sort of after the last two days of losses are approaching a technical level where people are thinking we might see a
little bit of a bounce, but perhaps not the end of the volatility around this.
CHATTERLEY: Yes, you raise a great point. We've moved a long way to the downside in just a very short space of time. So consolidation perhaps makes
sense at this stage. It's tough to gauge the part where we say where next.
I think that messaging here is also very important. I mentioned the CDC, the Center for Disease Control, saying look, in the United States, schools
and businesses need to be thinking about seeing greater clusters of coronavirus in this country and need to prepare, at the same time, the
message from the White House has been, look, this is under control.
Even Larry Kudlow coming out yesterday and saying investors should be buying the dips here. We don't want to incite panic. These are relatively
small numbers at this stage. But the uncertainty is great. The mixed messaging isn't helping.
SEBASTIAN: And I think equally unhelpful, Julia is, you know, we've got reporting from our White House team that this is an example of what we've
seen repeatedly from the President. That is sort of a feedback loop with the markets.
He is playing this down, because he is worried about the market falls based on that rather than facts around the virus itself. And that sort of sets up
the view that the administration might be unprepared and further sort of, you know, exacerbates the confusion around this given the warnings that
we're getting from the CDC
And the fact remains that you know, you talk to a lot of market experts you have on the show. I've spoken to some who say this isn't just about the
coronavirus. They could have been anything.
The market was so over bought. It was so complacent around this. Don't forget, it was just one week ago today that the S&P 500 hit a record high.
This was a very frothy market. So I think it was very vulnerable to any kind of shock. It just so happened that it was this virus, but obviously
the calculus changes as we start to see economic growth really tank around the world.
CHATTERLEY: It's exactly what Peter Oppenheimer was saying to us yesterday, just taking some of the complacency out of these markets is healthy at this
stage, the tragedy of coronavirus aside. Clare Sebastian, great context. Thank you so much.
Now, one place where they're not hanging around to take action is Hong Kong. The authorities there announcing a raft of stimulus measures to the
tune of some $15 billion in fact, including cash giveaways.
Kristie Lu Stout is in Hong Kong and joins us on this. Kristie, great to have you with us as always. What's the reception been? You can talk us
through some of these measures. But what's the reception been to, to the announcements today?
KRISTIE LU STOUT, CNN INTERNATIONAL CORRESPONDENT: Yes, the big cash handouts that you mentioned, Julia, that may have lifted some spirits but
it failed to lift the markets during this very difficult time for Hong Kong.
This major global financial city has been struggling through those anti- government protests, the trade war, now, the outbreak.
So earlier today, the Hong Kong government announced this dramatic economic relief package worse than $15.4 billion. The Hong Kong Financial Secretary
Paul Chan says that this relief will go towards low income households, hospitals, as well as training in healthcare.
Now, he also announced that big cash handout, every Hong Kong permanent resident above the age of 18 will receive 10,000 Hong Kong dollars or
nearly $1,300.00 in cash as a bid to help stir local consumption and spending.
Now, the virus here has caused widespread fear, also spurring the panic buying of items like facemasks, food and even necessities like toilet
paper. There are now as of this hour 89 confirmed deaths -- sorry, confirmed cases and two deaths here in Hong Kong. Schools have been closed
for over a month now. They will not reopen until April the 20th at the earliest.
We know that residents are hunkering down. They're staying away from shopping centers, staying away from restaurants. And with that fall in
consumption along with tourism, the Hong Kong economy as you can imagine, is getting hammered -- Julia.
CHATTERLEY: Yes, the problem with giving cash is it to be able to even spend it, where vouchers have been better, but we'll see how it plays out.
Kristie, great to have you with us. Kristie Lu Stout there.
[09:10:12]
CHATTERLEY: All right, let's move on to our next driver. The stakes couldn't be higher in the race for the White House. Voters in South
Carolina will choose their democratic candidate for President this Saturday, then it's Super Tuesday next week when 14 states will vote.
Frontrunner Bernie Sanders had a bull's eye on his back. He took the brunt of the attacks from Democratic rivals in Tuesday night's debate.
(BEGIN VIDEO CLIP)
PETE BUTTIGIEG (D), PRESIDENTIAL CANDIDATE: If you think the last four years has been chaotic, divisive, toxic, exhausting, imagine spending the
better part of 2020 with Bernie Sanders versus Donald Trump.
TOM STEYER (D), PRESIDENTIAL CANDIDATE: I am scared. If we cannot pull this party together, if we go to one of those extremes, we take a terrible risk
of reelecting Donald Trump.
SEN. AMY KLOBUCHAR (D-MN), PRESIDENTIAL CANDIDATE: If we spend the next four months, tearing our party apart, we're going to watch Donald Trump
spend the next four years tearing our country apart.
(END VIDEO CLIP)
CHATTERLEY: CNN's Jessica Dean joins us now. I have to say that was some of the less shouty moments where they were all talking over each other and at
each other rather than seemingly at the voters, Jessica, but what are your highlights here? And who do you think came out on top, most importantly?
JESSICA DEAN, CNN WASHINGTON CORRESPONDENT: Yes, I think, Julia, you make a very good point, which is, the takeaway from this was there was just --
there was a lot of yelling, there was a lot of the circular firing squad, a lot of talking over each other.
Look, it is South Carolina, the last of the early states, a lot on the line for these candidates as we head into Saturday's primary here. And then of
course, Super Tuesday, where a number of states are going to vote with a lot of delegates up for grabs. And this was really the last chance for them
to all be on that stage together before those two things happen and really draw those contrasts out.
So for Bernie Sanders, the frontrunner, the challenge was to make sure he could handle all the incoming. And the question was, how could he do that?
You saw him get agitated at times, but other times you saw him really reiterate his points.
He is very consistent on his message and is always able to come back to those talking points that he has.
The challenge for everybody else was to see if they could stop or even slow Bernie Sanders' momentum. And you saw Joe Biden have really a stronger
debate performance than we have seen in the past.
He is the favorite here in South Carolina, although polls have shown Bernie Sanders creeping up on him now within striking distance here in South
Carolina. But this has been Joe Biden's to lose -- South Carolina. This has been his firewall.
So he is under a tremendous amount of pressure to perform here and to perform well. And so Julia, for last night that was what he was hoping to
do. Does any of it move the needle? Does any of it matter? We're going to find out on Saturday and then into next Tuesday -- Julia.
CHATTERLEY: Yes, palpable sense of emergency, I think from all of the players here, the candidates. Jessica Dean, great to have you with us.
Thank you so much for that.
All right, the biggest prize from the Magical Kingdom, Bob Iger stepping down as the Disney CEO. The head of the theme parks now is going to be
taking the reins, Bob Chapek.
Frank Pallotta joins us now. Frank, I have to say this was the most delayed departure in the history of U.S. companies it seems, and yet even with
that, yesterday felt like a surprise. Do you agree with that? And what do we know about the man who is set to take over?
FRANK PALLOTTA, CNN MEDIA REPORTER: Yes, it was a complete surprise, but it shouldn't be because Iger has tried to retired multiple times over the last
couple of years, and he hasn't been able to stick the exit.
This looks like he is actually on his way out. But at the same time, he is not really going anywhere yet. He's going to stay on as an Executive
President, as you said, and focus on the creative side of the company.
What does that mean? Well, it means that Bob Chapek who used to run the parks and resorts unit, it's kind of like the business side of the company
and Iger is going to focus more on the creative side of the company and this can kind of work for Disney more so than other companies, because it
kind of harkens back to their early history when Roy Disney and Walt Disney, the brothers were the business and creative side of the founding of
Disney itself.
CHATTERLEY: So in terms of reporting lines, to your point then actually, Bob Chapek is still going to be reporting into Bob Iger. Bob Iger is still
going to be Executive Chairman until 2021, and given the business that's been built here in the sort of three-pronged approach that they're doing,
particularly with things like Disney Plus, not that much is going to change surely, at least in the short term, in terms of the direction of this
business.
PALLOTTA: I don't see much changing. Even the name of the new CEO is not changing. It's still another Bob. Like it seems like a huge, huge story.
CHATTERLEY: Continuity.
PALLOTTA: Yes, it seems like a huge, huge story, but in reality, it's kind of just, you know, Iger saying I'm ready to go at the end of 2021, and here
is who is going to basically run this company in my stead.
It's a classic Disney story. It seems really, really big, but when you kind of dig into it, it seems like nothing has really changed at all, but it
makes sense for Iger. It just seems really big because look at that screen right there, all of the things that Iger has done, he's one of the most
important people in the history of the Disney Company behind probably only Walt himself.
There would be no time where he would leave where it would not be surprising.
[09:15:23]
CHATTERLEY: There's that song from "Bedknobs and Broomsticks," bobbing along, bopping along, in terms of approach --
PALLOTTA: Not exactly the same, but hey, I liked it.
CHATTERLEY: There we go. Frank Pallotta, thank you so much for that. Quickly moving on, let me bring you up to speed with some of the other
stories that are making headlines around the world.
Indian Prime Minister Narendra Modi is appealing for calm after days of clashes over a controversial citizenship law. At least 24 people including
a police officer have been killed in rioting between supporters and opponents of the law.
The act fast tracks citizens from non-Muslim asylum seekers from three neighboring countries.
Egypt meanwhile is observing three days of mourning for former President Hosni Mubarak, a military funeral was held in Cairo a day after Mubarak
died at the age of 91. He ruled Egypt for nearly three decades only to be forced to resign admit the Arab Spring protests in 2011.
All right, we're going to take a quick break here on FIRST MOVE. Of course, we are going to be watching for the market open. We are counting down
expected to see gains, but as we mentioned, volatility remains the name of the game here. We've got that covered for you.
And of course, as you were hearing there, the end of a favorite tale, Bob Iger handing over the keys to the Magical Kingdom, but is it infinity and
beyond for the new Disney CEO?
And watch this space. Losses for Virgin Galactic even as Wall Street predicts a stellar future. Stay with CNN. More to come.
(COMMERCIAL BREAK)
[09:20:04]
CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange. We're counting down to the market open this morning. It has been
pretty volatile premarket, I can tell you here on Wall Street. We've been all over the place, up and down premarket.
We're currently seeing a higher open to the trading session, but you know, word of warning, we did, if you remember this time yesterday predict a
stronger open for the market and then the selling began. So we'll take it very cautiously, but at this stage, we are looking to see a bit of a bounce
back after yesterday's three percent drop.
All the major averages are in negative territory now for the year, currently trading, in fact, at 12-week lows.
To Asia now where the operator of the Hong Kong Stock Exchange reported a rise in profits. Record revenues despite the political and economic turmoil
in the territory. Now, the company warns the coronavirus outbreak will bring fresh uncertainty.
Charles Li is the CEO of Hong Kong Exchanges and Clearing and joins us now. Charles, fantastic to have you on the show and to speak to you once again.
You know, as I was looking through your numbers, resilient actually was the word that came to mind, despite as you pointed out a very challenging
backdrop here.
CHARLES LI, CEO, HONG KONG EXCHANGES AND CLEARING: Yes, absolutely. I mean, you know, you cannot expect or hope for anything better despite the
broader, you know, very, very dismal part of the market.
You know, we we've gone through a lot of difficulties and challenges last year in which the protests first and now with the virus. But I think the
market has shown that, you know, Hong Kong is resilient.
Hong Kong is as strong as ever. You know, we've been there. You know, we've been to SARS. We've been to returns of sovereignty. We've been through a
lot of, you know, the challenge of financial crisis in '97 and I really don't -- I think the city obviously, we're going to come out strong and --
But right now, it is really uncertainty. We don't know how this whole virus is ultimately going to end. The big question is, how far is it going to go?
How fast is going to spread? How long is it going to take to get to a natural end? Or whether there is going to be a natural end?
And if we do get there, what's the cost? What's the human cost? What's the cost to the economy? What's the cost to global supply chain?
A lot of those big questions that are yet to be answered. So it is those uncertainty that is driving, you know, the current market volatilities.
CHATTERLEY: You know, you're the beating heart of the business community there in Hong Kong, whether it's looking at some of the measures that the
government took this morning to try and support businesses and of course, consumers, too, or beyond just some of the broader challenges.
I mean, we were talking -- you and I in Davos -- about the trade tensions, the protests in particular, do you think that the business community feels
comfortable managing the various different risks or is more support needed?
LI: Yes, I mean, clearly the Hong Kong local economy, the local society, the community are going through a lot of challenges in the last 12 months,
and a lot of this is going to result in slower economic growth, you know, significant challenges in the property sector, in the retail sector.
But sometimes people do not fully appreciate that the Hong Kong local economy is a small economy. It's a seven million people, a thousand square
kilometers, and our GDP, you know, for every dollar of GDP that the market have, a dollar of the market cap of the company listed in that market.
But in Hong Kong, you know, GDP is $1.00, but the market cap listed on our exchange is $13.00 to $14.00. So it's a small market, it's a small economy
supporting a very large market.
The large market is largely a China underlying global capital and increasingly global underlying in Chinese capital. So that $14.00, $13.00
of which really have very little to do with the Hong Kong local economy.
And obviously, what happens in Hong Kong matters. But the market, largely electronic, largely operating on its own without a lot of the physical
activities necessary anymore, it is a very, very strong global market.
The whole idea is connecting with China, with the global and obviously, the liquidity and volatility from both markets tend to manifest itself big time
in Hong Kong, but that's why we are resilient and that's why we have to be resilient and that's how this particular results for 2019, you know, shows
that even in that environment we are able to achieve record revenue and record profit.
[15:25:02]
CHATTERLEY: You did see a significant drop in trading which traditionally would be the back stone of your revenue creation. Can I ask what you're
seeing, given the current volatility that we're seeing in the markets, not just in terms of the impact on trading, but also the conversations that
you're having with potential IPO customers, too?
Other conditions for them even considering coming to market tightening up here as a result of perhaps the economic impact of the coronavirus? Can you
just give us a sense of what you're seeing?
LI: Yes, I think the IPO market last year and you know, we are globally number one in IPO fund raised and that's seven out of 11 of the last, you
know, a seven year out of the 11 years, you know, we've been number one.
And I think this year, you know, again, in January we had 21 IPOs. The pipeline is very strong. There is a large number of Chinese companies --
technology companies -- that listed in New York are considering at least moving back to do a secondary listing or even do a primary listing. Those
are coming. They will definitely come.
But I think right now, the actual offering, the actual market operation, you know, there are no issues, but the marketing, the physical traveling
and the roadshow arrangement sometimes is becoming a challenge.
So I think for the first quarter, we are probably going to see a diminishing activity, but broadly speaking, our IPO, typically the bulk
happens the second half due to accounting particularities, and very few, usually during the first quarter anyway.
So I don't really think -- it's just at worst, it would just switch into a later time table into the fall.
CHATTERLEY: Let's hope we move through this crisis as quickly as we can. Charles, fantastic to have you on. Great to chat to you. Charles Li there,
the CEO of Hong Kong Exchanges.
The market opens next. Stay with us.
(COMMERCIAL BREAK)
[09:30:04]
CHATTERLEY: Welcome back to FIRST MOVE here at the New York Stock Exchange and the opening bell for the third time this week, and we do see a higher
open for U.S. stock markets. Let's call it consolidation, at least at this moment after one of the worst two-day drop for U.S. stocks in around four
years.
We saw the Dow and the S&P falling some three percent yesterday. We've actually not had a session that ended in the green in a week at this stage.
So I'm very cautious about dictating the mode of play throughout this session at this moment, but right now we are in the green.
What we're also seeing is a bit of consolidation going on in the bond markets, too. Ten-year yields at this moment are a touch firmer. They hit
record lows in the previous session, a warning there perhaps, about the growth risks.
In the meantime, President Trump has announced that he will hold a press conference on the coronavirus outbreak after the market close today with
officials from the Centers for Disease Control in attendance, too. Their warning yesterday, seemingly creating some jitters in the market as well
about the need to prepare here in the United States for greater outbreak. So that certainly could play into market sentiment today, too.
Let's get some context. Jim Keenan joins us now. He's Chief Investment Officer and the Global Head of Credit at BlackRock. Jim, great to have you
on the show. Thank you so much for joining us.
Your sense right now of what we're seeing across global assets.
JIM KEENAN, CHIEF INVESTMENT OFFICER AND GLOBAL HEAD OF CREDIT, BLACKROCK: Yes, I mean, obviously, as we came into the year, there was a pretty strong
view on what the expectations were of growth -- global growth, U.S. growth and what that meant for kind of corporate earnings. The markets really
quickly adjusting obviously.
There's a lot of unknowns with regards to the virus itself and how that filters into what that means for growth, and so that's very quickly getting
reprised in asset prices, because the range of outcomes is pretty broad, right?'
We're still trying to figure out what the true mortality rate is even if it is low. This is obviously something that is very contagious. You've seen
very quick escalation in Korea and Italy. And then obviously, there's questions with regards to, is this seasonal? You know, is there immunity
associated to this? You know, can you get it multiple times?
So all these things are driving into questions, not just where we were maybe a month ago, which is what does it mean for the supply chain because
it was more concentrated in China? But now the markets are trying to adjust.
If this is to roll over the next several months and quarters through Europe and through the United States, what does that ultimately mean from an
economic standpoint, and therefore from an earnings or cash flow standpoint for stocks or credit?
CHATTERLEY: You know, it's a very worrying thing. There is a humanitarian health crisis here that we have to worry about. But at the same time, and I
do think this is an important point, the message, particularly from European health authorities has been don't panic.
Even the White House is saying it while the CDC is saying we need to prepare here. Is what we're seeing in the markets, in your mind, a healthy
adjustment, reflecting the sheer degree of uncertainty that you mentioned versus some have suggested we're seeing panic?
KEENAN: Yes, I would say obviously, this is an unhealthy event, right? I mean, this is a virus that's going around that's impacting a lot of
families and people around the world, so that obviously is not a healthy component part.
I would say, the markets have to adjust in the sense of the range of outcomes are still uncertain, right? And so the potential that this gets
worse, the potential that the economic impact is going to get worse has to get priced into assets.
And, you know, that is a very different picture than where we were a month ago or even a week ago, as you started to see this escalate in regions like
Korea and Italy.
So the risks are still unknown. I think assets or the equity markets or rate markets around the world are adjusting at a very quick pace because
people, investors were positioned for one outcome, and now we very quickly have to have an uncertainty associated to that.
So I think the markets have been rational with regards to the repricing of earnings expectations or multiples in the equity market, as well as spreads
in the rate market.
The question is, is how ultimately is this going to play out over the next couple of quarters? We know that the first quarter, the data is going to be
weak in Asia, we know that is ultimately filtering into other parts of the world when it comes to the supply chain.
But if this gets more broad, the impact that this has not just because of the Chinese consumer or the Chinese supply chain and the size of the
Chinese economy, but ultimately what that means as it goes because the response mechanism to the coronavirus is very different than anything else.
Even if it has a low mortality rate with the data that we've seen today, it is very much slowing down economies and keeping people at home and being
very cautious because of the high level of contagion, and that can and will have an economic impact. But we just don't know how much at this point.
[09:35:22]
CHATTERLEY: It is such a great point. To your point as well, we have seen interest rates adjusting lower. I mean, the U.S. market investors here,
anticipating two quarter point cuts from the Federal Reserve now this year. Is that investors being a little bit too hopeful about potential support
from Central Banks like the Federal Reserve going forward and is the risk higher that they overreact, perhaps rather than under react to provide
support?
KEENAN: Yes, I think -- and there's two questions around that -- I think, you know, before the virus, I would say that I think that growth was going
to be pretty stable and pretty strong this year, because for the last 12 months, you've actually seen a lot of easing or financial support from
Central Banks around the world, including the Fed.
And I think that was leading into stability and stabilization of data or growth data in the United States.
With regards to the virus, obviously, there's a question of the impact that we just talked about. If the Fed cuts, I think, you know, the Fed is going
to help and I think the fiscal government will help if the economy starts to get weaker, but the transmission mechanism might be a little bit
different.
Even if you cut rates with regards to the impact or what is going on with the virus or how businesses and people and households are dealing with the
virus, I'm not sure that rate cuts have any immediate impact with regards to stimulating economic activity.
So I do think you'll see support, but I don't necessarily think that will mean the data. This, I think is going to have an impact certainly to the
first half of this year with growth. How long it lasts and how much it affects 2020 growth is still I think is of an unknown.
With regards to the structure of the market though, long term, I think ultimately this is something that we do start to see stabilization of data.
And I think, the virus in itself is creating some cyclicality of data and pulling forward some, I would say risk to growth in 2020, but I don't think
this is long lasting a structural change.
CHATTERLEY: Jim, you answered my final question there already in your answer. I'm going to thank you very much.
Great to have you with us, as always.
KEENAN: Thanks, Julia.
CHATTERLEY: To get your insight and wisdom. Jim Keenan there from BlackRock.
All right, we're going to take a quick break here on FIRST MOVE, but coming up, a new king of the castle. The magical one of course, Bob Iger stepping
down as CEO of Disney. Some leadership shake up in that Empire. But what does it really mean? That's next.
(COMMERCIAL BREAK)
[09:40:58]
CHATTERLEY: Virgin Galactic shares under pressure today. The space tourism starts up posting a loss of $73 million for the fourth quarter, and $211
million for 2019.
It can't take paying customers into space of course, until it finishes dealing with regulators. This is the first earnings report since going
public last year.
Now, despite today's slide, Virgin Galactic shares have soared almost 200 percent in the last two months.
Matt Egan joins us now on this story. So, Matt, a little bit of cautiousness with a wider loss here. But the biggest story is the
stratospheric rise that we've seen in the share price since their IPO.
MATT EGAN, CNN BUSINESS SENIOR WRITER: Well, Julia, this stock is coming back to Earth just a little bit after what was really a meteoric rise, and
what I found most striking from this first earnings report since Virgin went public isn't necessarily that they lost money. We definitely expected
that.
I was really struck by the revenue. They only generated $529,000.00 in revenue last quarter. Now, usually Julia, you and I are not talking about
companies that only generate a few million dollars in revenue, let alone a few hundred thousand dollars in revenue, but here we are. And that's
because Virgin has really become the latest play thing on Wall Street.
Just like the cannabis company Tilray, Beyond Meat and more recently, Tesla, Virgin has just become this hotbed for speculation. And that's
because just like those other companies, Virgin is a pure play.
If you're excited about commercial spaceflight, there's really nowhere else to put your money other than Virgin. Yes, Jeff Bezos has Blue Origin and
Elon Musk has SpaceX, but those companies are not public yet. And that's why we've seen this 200 percent increase in Virgin.
Now clearly, this is not a stock that is trading on fundamentals. It's really all about hype and some obscure metrics like registrations of
interest. Virgin said that that last category has more than doubled during the last quarter.
And crucially, Virgin is making some progress on the regulatory front that you mentioned, Julia. They said that they have cleared 20 of 29 testing
milestones that are required to get the greenlight from the F.A.A. to approve commercial flights.
But let's watch this stock pretty closely, because recent history shows that when you have ultra-profitable companies like Apple and Google getting
knocked around in the stock market because of turmoil, speculative ones like Virgin have the potential to fall even further.
CHATTERLEY: Yes, that was what I was actually going to point out, the fact that it's bucked the broader trend of the pressure that we've seen across
markets. It's been a relative safe haven and I say that really loosely. Flights still cost $250,000.00, though, so I'm still saving my pennies.
Matt Egan, great to have you with us. Thank you.
EGAN: Thank you.
CHATTERLEY: All right, let's look at some of our other big movers today, a day after a 28 percent surge, Shares of Moderna are jumping again at this
moment after the biotech companies said its coronavirus vaccine is ready for testing. As you can see, yes, up 26 percent almost in this session so
far.
Disney, meanwhile, down just two tenths of one percent as Bob Iger steps down as CEO, Bob Chapek, the head of Disney Theme Parks will replace Iger
immediately.
They spoke about their new roles shortly after that surprise announcement.
(BEGIN VIDEO CLIP)
BOG IGER, EXECUTIVE CHAIRMAN, FORMER CEO, WALT DISNEY: In terms of confusion, when I'm really concerned about that, Bob is going to be running
the company and running the day-to-day businesses.
As I said earlier, all of my direct reports shift to him. I have one direct report and that's Bob. I will be focusing on the creative, but any of the
big creative decisions that have to be made, I fully intend for Bob to be at my side.
BOB CHAPEK, CEO, WALT DISNEY: It's certainly a privilege to have Bob, you know, still available and there for guidance. I've had a front row seat to
Bob Iger's magic at Walt Disney now for 15 years and to be able to extend that for the next year and a half or so, while I make the transition into
this new role is just a luxury that frankly, I couldn't ask for more.
(END VIDEO CLIP)
[09:45:10]
CHATTERLEY: Tuna Amobi joins us now. He is media and entertainment analyst at CFRA Research. Great to have you with us on the show once again.
I mean, this was it telegraphed, postponed step down that's been coming and coming and coming, but it did feel like a shock coming yesterday. What are
your views?
TUNA AMOBI, MEDIA AND ENTERTAINMENT ANALYST, CFRA RESEARCH: Indeed, Julia, I think this one came as a surprise to us much like a lot of others in the
investment community.
With that being said, I think you alluded to it's been, you know, telegraphed, you know, for quite some time. We were a little bit surprised
as to the choice of Bob Chapek over Kevin Mayer who runs the direct-to- consumer business.
But with that being said, I think there's something to be said about the resolution of the management succession question in Disney World or The
Walt Disney Company, which as you know, over the last several years can be quite dramatic at times.
But I think looking forward with Bob Chapek is going to continue executing on the core strategy, which, you know, frankly, having Bob Iger take him
under his wings for the next two years should help to ease any potential concern that investors might have.
CHATTERLEY: Yes, I agree with you on the reporting lines, it still feels like Bob Iger, given that Bob Chapek is going to be his direct report, is
still very much going to be a front and center in terms of control.
But to your point, why do you think they chose Bob Chapek? Because a lot of people initially came out and said, surely, it would have made sense to
have someone with far more experience of technologies of the future, the streaming, somebody that had a real firm control over Disney Plus here. Why
do you think they made this decision?
AMOBI: You know, I think ultimately, I think it came down to you know, who was going to have maybe the steeper learning curve. And while Bob Chapek
still faces some steep learning curve in television and streaming, if you look at Kevin Mayer, I think his exposure to the core, you know, creative
side has been fairly limited, it's the television and the theme parks et cetera.
So ultimately I think, you know, I think this is a choice that we can live with. Because I think, as I said, having Bob Iger kind of, you know, kind
of take him under the ropes, Chapek, that should help to ease the transition.
Disney is a very sprawling company. Bob Iger will always have very big shoes to fill. So it was always going to be difficult to find someone who
was going to step in from day one and hit the ground running whether internally or externally, I think investors understand that.
So that's why I think, you know, Bob Chapek is someone that can, you know, handle that role. We were on a call last night, and I think my sense is
that he is going to basically reinforce the core tenets of business strategy, which Bob Iger has been executing on for the last 15 years.
CHATTERLEY: Were you comforted that there wasn't any health reasons, anything that didn't have something specifically to do with the business
and just making a decision at a given moment in time for Disney and allowing this, to your point, two-year period where Bob Iger is still
there, and can still be overseeing the new CEO. You're not worried about anything else as far as Bob Iger is concerned?
AMOBI: Well, I have to tell you, we're also trying to read the tea leaves as to why now? I think that's what your question is getting to why now?
CHATTERLEY: Yes.
AMOBI: And frankly, we don't have a great answer to that. And especially in the light of Bob Iger having delayed his retirement multiple times in the
past, you know, but ultimately, I'm quite comfortable with the fact that this is as good a time to do it as any other and there's been, of course
theories as to why they chose this moment whether this could be any signal of potential, you know, undisclosed things or changes that may be around
the corner.
But it's really hard for us to think about that, and especially knowing that they've still got a lot of work to do in integrating Fox assets and
pivot into this new direct-to-consumer strategy.
All of that, I think, as Bob himself explained very clearly on the call last night, he wants to focus a lot more on the creative aspects of the
company, while at the same time, Bob Chapek can begin to learn the ropes in the other areas.
So this is something that we take at face value, frankly.
CHATTERLEY: Yes, I think the answer -- the short answer to that was why now, why not, quite frankly.
You have a buy call at $160.00 twelve-month price target. Just very quickly, do you think given the structure of this monster business now
that's been built into Bob Iger, the ship sails the same way as it would have done if Bob Iger was the CEO, they will follow the path and work on
things like integration, and and actually very little will change in the short term, and that's probably a good thing.
[09:50:06]
AMOBI: Well, the short answer is yes, having Bob Iger there in the Executive Chairman role, still heavily involved in a day-to-day operations.
You know, there's a lot to be said about that.
That being said, there's still broader concerns about, we were just talking about the coronavirus and how that impacts Disney and a whole lot of other
companies.
So these are kind of a near term issues that they have to navigate and having Bob Chapek already dealing with that issue, I think will really help
to ease that transition to the extent that they can control it.
CHATTERLEY: Yes, integration, huge growth businesses. There's a lot of challenges to come. Tuna, great to have you with us. Tuna Amobi there,
thank you.
All right, we're going to take a break again here on the FIRST MOVE, but coming up, hard debate, part -- well, a shouting match.
U.S. Democratic rivals clashing ahead of the Super Tuesday vote. We will look at why the stakes are now that much higher in the race for the White
House. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE at the New York Stock Exchange. I can tell you, we are seeing some pretty nice gains in early trading.
All the major averages are high up by around one percent as you can see clawing back some of the steep three percent losses that we've seen over
the past two sessions.
It is early days, I will make that comment. But what we are seeing is widely held FAANG stocks all rallying. Apple is higher after falling into
correction territory i.e. down 10 percent or more from recent highs earlier this week.
Other FAANG names have been close to falling into that 10 percent correction territory, too. We've got Netflix higher by some 3.3 percent as
well as you can see the outperformer there.
All right, here's a look at today's Boardroom Brief. Going solo. The co-CEO of Salesforce Keith Block is stepping down. He leaves Marc Benioff to be
the sole CEO of the business software company.
Block was seen as a potential successor to Benioff and the news sent shares lower, as you can see by some two percent.
The Chairman of Bayer stepping down, saying the company is making good progress towards settling a cascade of lawsuits. The German chemicals maker
is battling claims that its weed killer Roundup causes cancer.
Wenning was one of the architects of Bayer's $63 billion purchase of Monsanto, which makes roundup.
Panasonic sees its ending its solar cell production venture with U.S. electric car maker, Tesla. Instead, it wants to focus on sales of its own
solar panels in the U.S. market. The Japanese electronics makers says it will make electric vehicle batteries with Tesla still.
And a quick programming note, now, be sure to tune in to CNN over the coming hours. The Democratic Town Halls with Michael Bloomberg, Joe Biden,
Amy Klobuchar and Elizabeth Warren are live from South Carolina starting at 8:00 a.m. in Hong Kong, midnight in the U.K., and 7:00 p.m. in New York
right here on CNN.
[09:55:01]
CHATTERLEY: And no surprise, there's plenty of reaction to Tuesday night's Democratic debates, too, but I do think talk show host, Stephen Colbert may
have summed it up best. Watch this.
(BEGIN VIDEO CLIP)
STEPHEN COLBERT, TALK SHOW HOST: Seven candidates, five moderators, two hours, and one powerful message for America.
BUTTIGIEG: I can't allow this, because it's just not true.
KLOBUCHAR: Bernie, let me respond to this --
BUTTIGIEG: Let's talk about it.
SANDERS: First of all ...
COLBERG: It's going to be tough to fit on a bumper sticker.
(END VIDEO CLIP)
CHATTERLEY: Hopefully, voters understood better than perhaps I did. All right. That's it for the show. I'm Julia Chatterley. You can listen to our
podcast at cnn.com/podcast.
But for now, you've been watching FIRST MOVE, time to go make yours. We'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
