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First Move with Julia Chatterley
Investors Respond to Fed's Warning on Rate Rises; Internet Outage as Banks and Airlines Hit as Web Suffers its Second Big Epic Fail in Just 10 days; Footballers Leave their Sponsors in a Spin at the Euros. Aired 9-10a ET
Aired June 17, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CNN INTERNATIONAL ANCHOR: Live from New York, I'm Paula Newton, in for Julia Chatterley and this is FIRST MOVE. Here is what you
need to know.
Connecting the dots. Investors respond to the Fed's warning on rate rises.
Internet outage. Banks and airlines hit as the web suffers its second big epic fail in just 10 days.
And not a lot of bottle footballers. They leave their sponsors in a spin at the Euros.
It's Thursday. Let's make a move.
And a warm welcome to everyone once again. This is FIRST MOVE live from the New York Stock Exchange. Great to have you with us this Thursday, and this
is, of course, the day after the Putin-Biden Summit in Geneva, and that all-important Federal Reserve headline though is also getting some
attention from D.C.
Here on Wall Street, U.S. stocks are set to fall for a third day as investors react to the flurry of news from the U.S. Central Bank,
suggesting that a strengthening economy might soon lead to less monetary stimulus. A mixed day, however, in Europe and Asia.
Fed officials, meantime, suggesting in their closely watched dot plots -- remember these -- that the first Fed rate hike of a new tightening cycle
might come sooner than expected. That would be sometime in 2023. Actually, looking for two moves possibly in 2023 as opposed to one.
Now, the Fed also starting to talk about talking about cutting its $120 billion worth of bond purchases each month, many saying they should have
already gotten on top of that. Fed Chair, Jerome Powell, meantime bending to reality, too, hinting that the current rise in inflation might not be so
transitory -- that's temporary for you and I -- after all. The Fed's outlook is less dovish than in the past, and these new timelines create new
uncertainty for investors.
That said, a brighter Fed economic outlook is obviously ultimately good news for the United States, suggesting that the massive monetary support
currently in place for the economy is indeed working.
A bit of a disappointment though in the U.S. labor market today. Jobless claims rising for the first time in almost two months. This is curious --
claims once again, above 400,000 last week.
Let's get more on all of this in our drivers. Christine Romans joins me now. I know how closely you watch all of this data. So much to look at. The
Fed says inflation may still be temporary. This was interesting the way they tried to thread that needle, but they really seem to move on the
theory that look, they just don't know. Right? They too are waiting to see what the data says.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: And there's no playbook for this, to be honest. There is no blueprint, we haven't quite
turned off the economy and turned it back on again. And all of these supply disruptions seem to be at the core of why the Fed thinks that inflation
will be transitory -- translation in Fed Speak, temporary -- and they'll work themselves out.
Listen to the Fed Chief and what he talked about and what he said about these supply bottlenecks and rising prices.
(BEGIN VIDEO CLIP)
JEROME POWELL, U.S. FEDERAL RESERVE CHAIRMAN: If you look behind the headline numbers, you'll see that the incoming data are consistent with the
view that prices -- the prices that are driving that higher inflation are from categories that are being directly affected by the recovery from the
pandemic and the reopening of the economy.
(END VIDEO CLIP)
ROMANS: You know, think about cars and chips, right, these semiconductors that are delayed and backlogs and so you can't make the F-150 pickup truck,
and so car prices are rising and used cars prices are rising, too. That's going to work itself out at some point and those year-over-year and month-
on-month inflation numbers that you're seeing in some of these categories are going to smooth out. So, we haven't seen that smoothing out just yet.
Lumber, you're starting to see that. I think it's down, and up again this morning here. But all of this is supply disruption, reopening disruption
that has distorted these numbers. And you know, in terms of the Fed, Paula, you know, I'm always searching for the metaphor for the layman for what
this means, what the Fed is -- it means here -- and essentially, I heard it best late yesterday, someone said it is, you know, it's basically last call
at the bar, right?
They called last call, you know, the party is still on, you've still got another maybe hour or so in the night, but eventually, they're going to
close off the beer taps and we're going to have to go back to normal and that's what we're talking about. And that eventually appears to be at least
two years down the road.
NEWTON: Yes. And it's interesting, right? Because even at these, you know, really high valuations across so many sectors in the stock market, you
still see that investors are staying there. They are kind of staying there. They are kind of staying put. There certainly hasn't been a huge selloff.
I want to talk to you about the fact that we've had monetary policy doing the heavy lifting for so many years. Many people are now turning their
attention to obviously the fiscal stimulus, obviously, unprecedented in more than a year.
And now, we may have also a bipartisan deal on infrastructure. Do you think that is closer to being a reality here in the United States?
ROMANS: You know, the President was asked about that on his way back from his overseas trip yesterday. He said he hadn't seen the sort of the details
of this bipartisan plan where apparently there are 11 Republicans on board with a bunch of Democrats to get something done. It's about a trillion
But he said that Ron Klain, his Chief of Staff had said that there was room to work with Republicans. So, I'm feeling more optimism than I have had in
some time as Dana Bash, my colleague reported just moments ago on "New Day," at least they are coming out of rooms where they are talking. For
weeks, they hadn't even been talking to each other about what kind of -- what a deal should look like.
And we have known that the President has said from the very beginning, he wants to talk, he wants to deal. What appears to be on the table right now
is about less than half of what the President at first proposed, it is around a trillion dollars here.
But look, let's talk about the timing. I mean, the Fed yesterday said the U.S. economy will grow seven percent this year. You look at 10-year note
yields, still relatively historically very low to borrow money. There is going to be a lot of arguing about how to pay for it. But at the very
least, it seems like a perfect time to do infrastructure, something that is desperately needed in this country, whether there's political will in a
very divided Congress to get something done, that remains to be seen.
NEWTON: Yes, and as you pointed out so many times in recent days and months really, Christine, this is unprecedented, right? So, when you look
at infrastructure, and even start to talk about the labor market, and how that might react to that, we have to wait and see because we just have
never been here before.
Christine, thanks so much for going through those numbers with me.
ROMANS: Welcome. Nice to see you, Paula.
NEWTON: Nice to see you.
Banks and airlines, meantime, and the Hong Kong Stock Exchange were hit by a major internet outage this morning. Now, the failure of a key piece of
internet infrastructure brought down the company sites and it is the second such disruption in 10 days.
Anna Stewart joins me now to go through it for us. Now, so far, right, Anna, there is no indication that this is a hacking event, but how much
disruption did it cause?
ANNA STEWART, CNN REPORTER: I don't know about you, Paula, I was getting a little deja vu this morning, another internet outage. This one also caused
by a CDN, a Content Delivery Network. This one is called Akamai, and it largely impacted Asia Pacific and particularly, it feels like in terms of
disruption, banking, this impacted, ANZ Banking Group - ANZ, Westpac, Commonwealth Bank of Australia, and honestly this morning social media was
awash with reports of people getting to the checkout at a grocery store or going to a gas station and feeling stranded because they couldn't pay, some
ATMs weren't working.
Airlines impacted included Southwest, United, Postal Services in Australia, and also, lots of website including Amazon and Minecraft.
So, this wasn't as big a global outage perhaps as last week, but in terms of the services that were disrupted, particularly I think online banking,
particularly frustrating and really quite worrying for people -- Paula.
NEWTON: Yes. When you start to hit infrastructure like that, you think to yourself, what is going on here? This is really testing the limits of the
internet, but it is highlighting what we've talked about -- it is the fragility involved here.
STEWART: Yes, the fragility, twice in 10 days, and it is largely people getting worried at this stage that a single point failure at one CDN can
have such a huge impact for so many different businesses, so many different people, millions of people right around the world.
And the idea is here, this could be a target for cyber criminals. You can have a huge amount of impact for just one single point failure. And the
other big concern, Paula, is just the fragility side of things. Just are there enough CDNs? Are too many businesses using just one little company
for a lot of internet infrastructure? Should there be more?
Should some services like banking or government websites, which of course is so important, particularly during a pandemic -- should they have better
backup systems, so they come back up and running fast if something like this happens? Should they use more than one CDN? Lots of them actually do,
and the good news I think from today was this outage like last week was pretty quick. Most websites were up and running again within an hour or two
NEWTON: Yes, and again, we hope everyone is learning lessons from this and that is not the hackers that are learning something from this.
Anna Stewart, again, thanks so much. Appreciate it.
Now, it is just over a month left to the Tokyo Olympic Games. It appears local spectators could be allowed into the stadiums. Now, according to the
public broadcaster, Japan is lifting the COVID state of emergency in all but one prefecture which has, of course big implications for the games.
Selina Wang joins us now from Tokyo to explain all of this to us. You know, this is obviously relief for all of Japan. I know the one prefecture isn't
lifting that state of emergency, but still, obviously good news when it comes to the pandemic.
What does this mean though for the spectators? And we should point out, international spectators are still not going to the games, right?
SELINA WANG, CNN CORRESPONDENT: Yes, exactly. We already know, Paula, that foreign spectators are banned, but this is a clear sign yet that there will
at least be some fans in the stands.
Now, Japan's top medical adviser said that once when this state of emergency measures are completely lifted, Japan will allow up to 10,000
people at venue. So, if we're talking about the Olympic opening ceremony, that would still mean more than 80 percent of the seats would be empty.
Now, Tokyo and large parts of Japan have been under a state of emergency since April 25th, but as these COVID cases have come down to about 2,000
per day, the government is now lifting that declaration on June 20th, but Tokyo and other parts will be shifting into a quasi-state of emergency.
Now, Paula, none of these declarations in Japan have been hard lockdowns. They've asked some businesses to close down, to shut down early. So, even
under these quasi-state of emergency measures, restaurants will still be asked to close early, but they will be allowed to serve alcohol until 7:00
But there is major concern here from the health community that these Olympics are going to lead to a rebound in cases as emergency measures lift
and more people move around and travel to celebrate and watch these Olympic Games.
And the Prime Minister did make in his remarks that while COVID cases are coming down, they are not declining everywhere. And as you mentioned, there
is one prefecture, Okinawa, which is not going to be lifting its state of emergency.
NEWTON: Yes, it's interesting here, too, because we have heard a lot of people speak out about the delta variant, of course, and whether or not
that could actually be seen during the Olympic Games.
I want to talk to you about the vaccine rollout. It has been underwhelming in Japan. You've covered it well.
I know you've been looking into the new push, though, to really ramp up vaccinations. I see that they may now include a vaccine passport. None of
this will have an impact on the Olympics, do you think, Selina?
WANG: Well, Paula, that vaccine passport is really going to be geared for these business travelers who want to be able to travel internationally as
soon as possible. And there has been reporting from local media for the domestic spectators that can go to the Olympics, they may need to show
proof of a COVID-19 vaccine or of a negative COVID-19 test.
Now, you mentioned the word underwhelming, I think that is an apt description among developed countries. Japan is among the slowest in its
vaccine rollout. We are just a month away, but still, less than six percent of the population here has been fully vaccinated.
And it's not a supply issue, it is a lack of medical staff to administer these doses, and while the central government has set up these mass
vaccination centers here in Tokyo and in Osaka, many of these local governments are struggling.
And I recently took a trip to Kobe, where Rakuten, which is known as sort of the Amazon of Japan. It's a big e-commerce tech giant, they have used
their own resources and technology to set up a mass vaccination center there.
I spoke to the CEO who said that they think they are three to five times more efficient than what the central government has set up, and they hope
to use this model they built in Kobe and set it up around Japan.
Now, the Prime Minister has pledged to speed up the rollout to reach to up to one million doses per day, but Paula, to put that into perspective, even
if that pace is reached, it would still mean that by the time the Games begin, less than a quarter of the population here would be fully
NEWTON: Yes, it's already too late for the vaccines really to take hold before these Olympics begin, certainly for Japan. As you said, the private
sector now stepping in to make sure that that country does exactly speed up this rollout.
Selina, thanks so much for the update. Appreciate it.
These are the stories making headlines now around the world. China successfully launched three astronauts into space this morning. Their
rocket lifted off from a launch site in the Gobi Desert and docked about six hours later with a module on the space station that's now taking shape
Now, it is China's first manned space mission in nearly five years. CNN correspondent, David Culver is following all of this from Shanghai. You
know, how significant is this in terms of China's progress in space? And does it necessarily mean that, look, we are getting ever closer to a very
hot space race?
DAVID CULVER, CNN CORRESPONDENT: I think it means exactly that, Paula. This is a major milestone for China. I mean, this is a country that has
poured billions of dollars into what is a very ambitious space program. And in recent weeks, it's proved very successful.
They've had a successful mission to Mars, a landing of a rover there, as well as to the moon. But this one was more unique in that it seemed to
counter what was really a very difficult situation for China in the space race for many years and that is being left out of the International Space
Station. They were barred from that by the U.S. government.
And so this mission essentially said, if we can't be part of yours, we will create our own.
CULVER (voice over): Three astronauts bound for the Heavenly Palace. That's China's Space Station still under construction.
From a launch pad in the Gobi Desert, the rocket ship dubbed "The Divine Vessel" blasting off, designed to arrive at its destination in just six and
a half hours. But at a total length of 55 feet and a living space of just 50 cubic meters, these astronauts are going into orbit in a capsule a bit
larger than a city bus. Any claustrophobic thought, surely forgotten when the men do two planned spacewalks to install equipment on the exterior of
the Space Station.
Inside, they'll test the tech in the living area and run experiments. Two more laboratory modules expected to be launched in upcoming missions with
the aims to have its Space Station fully operational by the end of next year.
China wants its own because the U.S. government barred it from participating in the International Space Station project. China says their
Heavenly Palace will be truly international.
ZHOU JIANPING, CHIEF DESIGNER, CHINA MANNED SPACE AGENCY (through translator): Foreign astronauts are certainly going to enter the Chinese
space station one day. There are a number of countries that have expressed a desire to do that, and we will be open to that in the future.
CULVER (voice over): In just the past seven months, China has put a rover on the moon and one on Mars becoming the second country in history after
the U.S. to land a rover on the Red Planet. They also plan to send humans to the moon in the 2030s.
But for now, these three men will spend three months building the foundation of the Space Station.
NIE HAISHENG, COMMANDER, SHENZHOU-12 (through translator): We will obey orders and instructions and keep calm while meticulously carrying out the
CULVER (voice over): Chinese experts likewise confident in this mission and its safe return to Earth as the vessel carries precious cargo along
with the pride of a nation rapidly advancing its work in its new frontier.
CULVER (on camera): Paula, a lot of folks here making note on Chinese social media of the timing of this very successful launch. It comes just a
few weeks before the country is celebrating 100 years since the founding of the Chinese Communist Party -- Paula.
NEWTON: Yes, no doubt, a point of pride there for the Communist Party. David Culver, thanks so much, live for us there in Shanghai.
CULVER: All right.
NEWTON: Still to come on FIRST MOVE, President Biden says, he and his Russian counterpart lay down, quote, "the rules of the road." We take a
look at this historic Summit.
And shipping delays hit global trade. That means they hit the things that you were buying as well. We take a look at unraveling the congestion on the
NEWTON: Positive and constructive, U.S. President Joe Biden and his Russian counterpart striking an upbeat tone as they describe their first
face-to-face encounter. Now, President Putin said each side understood the other's red lines.
Mr. Biden made very clear that one of his runs right through cyberspace.
(BEGIN VIDEO CLIP)
JOE BIDEN (D), PRESIDENT OF THE UNITED STATES: I talked about the proposition that certain critical infrastructure should be off limits to
attack. Period. By cyber any other means. I gave them a list, if I'm not mistaken, I don't have it in front of me, 16 specific entities, 16 defined
as critical infrastructure under U.S. policy, from the energy sector to our water systems.
(END VIDEO CLIP)
NEWTON: Now, as you might have expected, Russia's President denied that his country was involved in cyberattacks in America, but said Russia was
willing to work with the United States on the issue.
(BEGIN VIDEO CLIP)
VLADIMIR PUTIN, RUSSIAN PRESIDENT (through translator): As far as cybersecurity is concerned, we agreed that we would both begin
consultations on that issue, and I believe that is extraordinarily important.
And obviously, both sides have to assume certain obligations there.
(END VIDEO CLIP)
NEWTON: Joining me now is Heather Conley. She is Director of the Europe, Russia and Eurasia Program at the Center for Strategic and International
Studies. Good to see you this morning. Thanks for joining us.
Now, this Summit was likely useful, as we were just saying, for both leaders for their own separate political reasons. But on this issue of
cyber hacking, Biden seemed to indicate that there is, of course, this new understanding. Clearly, though, this will be tested in the coming months.
HEATHER CONLEY, DIRECTOR OF EUROPE, RUSSIA AND EURASIA PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES: Yes, Paula. I think you're absolutely
Previous Presidents have tried to form U.S.-Russian cybersecurity working groups, President Trump tried to do that. They don't typically get that far
because we have very different views and principles on the use of cybersecurity.
Again, we've seen over and over where Russian criminal groups are a tool. The state may not coordinate them, but they benefit from them. So, it will
be really interesting to see if the Kremlin follows through with these guard rails, this list of 16. But you're absolutely right, we will only
know and we perhaps won't know how it's tested.
But if they do bump up against those 16 critical infrastructure projects, it's going to be a time to see if the U.S. fulfills its words and its
strong rhetoric and to see if there would be consequences for that behavior.
NEWTON: Yes. And you point out that this Summit, really, in terms of whether it gets results is a gamble for Joe Biden. You know, you had a real
substantive take on that contentious exchange between our own chief White House correspondent, Kaitlan Collins and President Biden that's been
playing and going viral around the world.
He really snapped when she asked him if he thought Putin could change. You say Biden is sensitive to this for a reason, because he doesn't know if his
gamble of actually inviting Putin to the Summit is going to pay off.
CONLEY: That's exactly right. So, we were all scratching our heads a little bit as the Summit was announced, particularly as we were seeing an
increase in ransomware attacks. You know, Russian troop movements on Ukraine's border. These were not the right atmospherics, necessarily for
such a significant Summit.
Again, all the history and the drama, trying to pull from the Reagan- Gorbachev era. They were even using similar language from the 1985 Summit. This was a lot of platform and pageantry for Mr. Putin.
But President Biden is betting that if we demonstrate respect to the Russian government, to Vladimir Putin, that then he in turn will respect
our demand for their following the rules of the road, so we can get to that stable and predictable language.
I think what the White House has been so sensitive to, and I think culminating in that incredible exchange was they're not entirely sure this
bet is going to pay off. So they just gave great advantage to Mr. Putin calling him a great power, a worthy adversary, bright and tough, all of
those flattery words to get him to respect those rules.
If he doesn't respect those rules, then we have a real dilemma. We've given them something and now, we have to enforce our own red lines.
Again, Paula, just today. Russian spokesman Dmitry Peskov, just highlighted a red line for Russia -- Ukraine's membership in NATO. So, we're already
going to see this as a tough slog.
NEWTON: Yes, and we did notice that Joe Biden really giving assurance on that when asked about if Ukraine was close to joining NATO, so Russia got
what they wanted out of that one as well. And I will point out that Joe Biden was wagging his finger at our correspondent, Kaitlan Collins,
something that even Vladimir Putin didn't do in the press conference, and quite frankly, he has never done with me during tough questions.
NEWTON: So, you really saw how he bristled at this suggestion. Heather, before I let you go, I want to ask you about what economic levers the
United States has to kind of get what they want from Russia in a way? I argue that they're gone now. The U.S. sanctions are really muted at this
point. Energy prices, again, at healthy levels, not where they were, you know, years ago, and especially before the pandemic. Is there any other
points -- touch point of power that the United States could use?
CONLEY: Well, it's a great questions. U.S. sanctions have been losing efficacy against Russia for quite some time, in part because Russia has
been using the last several years to try to self-isolate itself, protect itself from the most crushing sanctions.
But yes, the U.S. does have additional tools. You saw that in the White House's most recently released executive order, which sort of streamlined
our sanctions process. Clearly, the next step is going after Russian sovereign debt in the primary market, you could potentially see again. This
would have to be sort of devastating consequences department here, removing Russia from the SWIFT banks transfer, going after deep, sectoral issues
like oil and gas.
But again, we would need our European and our Asian partners to support us in that and I don't think we could achieve that.
CONLEY: So, you're right. Limited pain.
NEWTON: Yes, and that is key, right? The European allies certainly would not go along with that or wouldn't like to. Anyway, Heather Conley, thanks
so much for going through this with us. Appreciate it.
And we will be right back with the market open when we return.
NEWTON: Welcome back to FIRST MOVE. Online education companies, Skillsoft, is ringing the opening bell here on Wall Street. Meantime, take a look at
the indices there. Investors are getting an education in how markets are reacting or I would argue not reacting to the Fed right now.
Stocks are weaker across the board after the Fed's clearest indication yet that it is set to tighten monetary policy as the economy improves with rate
hikes coming now, as soon as 2023. Now, rate sensitive tech stocks getting hit the hardest in early trading.
Stocks in the news now, this session include German biotech firm CureVac. Now, its shares are down more than 40 percent in European trading on news,
unfortunately, that it's experimental COVID vaccine has a less than 50 percent efficacy rate in late stage trials.
Now, Wall Street winners meantime do include automaker, Ford. It is raising its second quarter profit guidance due to quote -- this is interesting here
-- "lower than anticipated costs and favorable market conditions." You wouldn't think that given the headwinds on things like labor and supply
issues, but there you go, a little bit of an uptick there for Ford, more than one and a half percent.
Global shipping, we've been talking about it, those costs are now spiking as a rebound in consumer demand coincides with severe bottlenecks in
freight transport. Now, some of the world's largest ports in Southern China are at reduced capacity amid fresh COVID-19 outbreaks, while ports on the
U.S. West Coast are chock-full of container ships, just waiting to offload a rising tide of imports.
Joining us now, Patrik Berglund, he is the CEO of Xeneta, which tracks global cargo flows and prices. You know, we're not used to hearing about
shipping really, until it becomes a problem. You make the point that the root cause of these challenges really started back years ago. But of
course, the pandemic has made what maybe choppy waters, like a category four storm, and worse. Which problems are temporary, but which are here to
stay for some time?
PATRIK BERGLUND, CEO, XENETA: Hey, great question. Thank you for inviting me, first and foremost, to CNN, Paula. I really appreciate the opportunity
to speak about this topic.
I think it is structural challenges that becomes very obvious now, and it is an industry that has been, you know, for decades -- decades --
struggling with weak market conditions on the seller side, and in this case, that would be the shipping lines, right. And through that, they
haven't had the ability to invest into the infrastructure that is required to let, you know, these supply chains better absorb these types of shocks.
And the situation we now seeing in Yantian is, you know, an accumulated amount of events that has happened over the last, I would say 18 months.
Think about it, from China shutting down to Europe shutting down, partially U.S. You have Brexit, congestions in LA and Sydney, port strikes at the
East Coast, Evergiven, and then Yantian, these are just some of the events, right?
And the infrastructure is sort of strained to the maximum where supply is in the wrong places of the world and empty boxes are hard to get ahold of.
And the carriers have been struggling for decades with this. And then COVID comes like the perfect storm on this. Right?
So, at this point, where, you know, we're seeing a market that already now looks to have put in Christmas season at risk, and if this continues over a
longer period of time, there will be either new entrants appearing or there will be political interests to step into this industry, to you know, help
Asia as the mecca or global hub of production remain there.
I mean, the consequences of this situation is potentially nearshoring as well, right?
NEWTON: Yes, it's so interesting that you say, in fact that Christmas here, that the supply chain through to Christmas is at risk, you know, the
increase in costs have been incredibly disruptive. I mean, some of the stuff that was in the research was eye popping -- 800 percent increase in
the shipping costs in some cases.
So, where are the solutions that will actually have an impact on that cost structure and supply chains? I mean, I noticed here in the United States,
there's a lot of pressure on the U.S. for them to do something on their ports and infrastructure, but what will turn it around eventually?
BERGLUND: Yes, well, as you can see now, a lot of the shipping lines are investing in new builds and empty boxes, but these are longer term
initiatives. I mean, it will take a lot of time before they enter the market and put any relief to this industry.
So, the problem here is really, that it is the shipping lines who struggled financially and are heavily in debt, they are now making a fortune, right?
So you can see that on their earnings. It's through the roof. And they are the one that needs to fix the situation.
But if you think about these decades of what I said has been troubling, what is really their incentive to move fast on this when they are making
such a good money? Right?
And this is partially the conundrum here that the cargo owners, the ones paying the shipping lines, the big companies we work with, whether it's,
you know, General Mills, John Deere, Nestle, Electrolux, Unilever, all of these have enjoyed beneficial ocean freight rates for decades, whereas the
supplier side has been trimmed down to a handful of companies that are now finally making a fortune out of these market conditions, and now, we're
hoping that they will, you know, fix it.
But really, what is their incentive to do that in at least the short run?
NEWTON: Yes, and I hear you on that. And yet, that's going to add to cost structure. If we talk about what some companies have been doing, they have
been going to extraordinary lengths. What have you seen, given everything that you guys track in terms of timing and pricing? What are some of the
companies doing just to try and get around some of this? Get the goods where they want them to be?
BERGLUND: Yes, I mean, we've seen anything from train operating from Far East to Europe as an example, which is, you know, less utilized before. But
on the extreme side, you can find situations like trucking from China to Europe, which is absolutely bizarre, even from an environment --
NEWTON: China to Europe?
BERGLUND: Yes, even from an environmental perspective. And then then you can see Home Depot coming out with, you know, their own chartered vessel
that will move on the Transpacific just to make sure that they get their goods into the shelves, right? So, this is all sort of signs of a very
NEWTON: And before I let you go, I don't have a lot of time, where does your company step in there in terms of how does Xeneta help?
BERGLUND: Yes, well, we help -- we empower them with market intelligence. We help them understand the market and what they need to pay in order to
get shipped, and which budget adjustments is really required when the market moves with several hundred percentage points, right? And what does
competitive freight rates really look like?
And I also want to just mention that I'm really happy to announce that we raised the $28.5 million Series C round from a hedge fund in the U.S. named
Luxor Capital, that we will, you know, deploy the capital to provide even greater insights over the next few years to old companies navigating these
NEWTON: Sure thing. It will certainly help to make that shipping market more efficient. I hear you, though, get those Christmas gifts early because
this could really end up being a problem.
Patrik Berglund, CEO of Xeneta, thanks so much for joining us. Really appreciate it.
BERGLUND: Thank you, Paula.
NEWTON: Now, coming up next on FIRST MOVE, putting fitness and wellness front and center. We speak to the CEO of Planet Fitness, which has seen
growth that's exceeding -- yes, exceeding pre-pandemic levels. We'll see.
NEWTON: The pandemic has made many of us reassess our own health and wellbeing. Yes, count me in, I'm included. And some new numbers suggest
many are acting on those concerns.
One of the world's largest fitness brands, aptly called, Planet Fitness says more Americans at least are signing up for the gym than ever before.
It says 40 percent of newcomers have never been to one before.
Now, the fitness chain also says most of the new customers initially opt for the digital subscription. What does that mean? We are now joined by the
CEO of Planet Fitness, he is Chris Rondeau.
Chris, thanks so much for joining us. Before we get to that digital component, you know, you are a fitness vet, you really are. Three decades
in the business now almost. You've seen it all, right? And then came COVID. You guys say you didn't lose a single location due to COVID. How is that
CHRIS RONDEAU, CEO, PLANET FITNESS: Yes, you know, a real testament to the brand, and the model we have and our franchisees, quite frankly. We have a
great group of franchisees that are with us, you know, most of them was day one of franchising in 2003. And testament to the model, they're very well
capitalized. We were able to weather the storm.
The industry has 17 percent of the gyms in this industry have permanently closed, and we did not lose one store. We have 2,100 plus locations, all 50
states and a couple of other countries.
NEWTON: Now, I want to talk about this whole move to digital in a way. We talk about hybrid work a lot. This is really the hybrid workout. It's the
app, it's digital. Everyone though, is in the game now, not just Planet Fitness. What's your competitive advantage here?
RONDEAU: Yes, I think what we really have here -- and I'm looking at digital fitness separate from home fitness. And digital fitness is really
fitness anywhere, right? And we kind of started down this road, even pre- COVID, where people would be working out in our gyms and they would be following a routine on their phone, but it wasn't getting it from Planet
So, we went down this road pre-COVID to supply our members exercises so that they could learn how to use the equipment better and get better
results which would drive retention. Then with COVID happening, we saw people utilizing our content, but they were home because our gyms weren't
open. So, then we accelerated our digital strategy here and provided more and more at-home fitness, so that now, we're able to provide our members a
bricks and mortar experience when they can, and when they can't because of convenience, they can do something at home.
So, it's better than any app you could possibly have. We have 2,100 locations you can utilize when your time allows, and at home, we can still
engage our customers outside our four walls. So, it's been -- you know, people really accelerated their digital life here with everything they do.
Even our joins, right now, Paula, we're signing up about 60 to 70 percent of our joins digitally and that was half of that in 2019. So, they join
either through our app or through the website. So it's -- life has changed.
NEWTON: Life has certainly changed. And yet what -- is this an app, certainly, based product that you guys are offering? And again, what does
Planet Fitness have that maybe others won't? Because all of us are used to either going on an app or even going on YouTube, quite frankly, and kind of
following along with a workout. Is this different?
RONDEAU: Well, I think it's similar, but one thing is different. It is, our home model, the judgment free zone, our $10.00 a month price point. We
really cater to casual first time gym members, and to your point, 40 percent of our joins pre-COVID have never gone to a gym in their life, and
40 percent of our joins post COVID have still never gone to a gym in their entire life.
So, our content is directed to the first time or casual fitness person and not a fitness guru or making the fit, get fitter. We really want to get
people off the couch and get them active.
NEWTON: Yes, some of the things that you've pointed out are alarming because obesity, obviously, a problem in many, many countries, and this is
something people have to pay attention to. Very difficult for all of us to pay attention to this during the pandemic.
I want to talk to you a little bit about the larger economy. You know, what are you seeing out there are? Are you having trouble hiring workers? Are
you paying a lot more? What is the real estate projection? What are your franchisees telling you?
RONDEAU: Sure. So, you know, the payroll and staffing, slightly. You know, we run our stores about 15 employees. Luckily, it's not a huge workforce
that we're trying to bring on board and a lot of our -- you know, who are competing with for customers, for staff would be fast food. QSRs, retail,
and I really feel like a gym setting is a much more fun atmosphere to work in. So, they tend to gravitate towards us, and we've never really had an
issue in the past.
Real estate couldn't be better. I mean, it was good pre-COVID, quite honestly, even since like 2009-2010. But now, with the gym closures here in
the U.S., 17 percent of them have closed, like I mentioned, it's only made it better for us. So, it allows more real estate to open up for the
franchisees to get back to development.
So yes, I couldn't be happier with it.
NEWTON: So, you're saying at your price point, because it is a different product compared to some of the upscale gyms, you're saying at your price
point, you guys can still do this?
RONDEAU: Yes, absolutely. And I'll tell you, you know, the one thing with our price point is, I always say that we built a $50.00 Month Club, we just
happen to sell it for $10.00 a month. We have some of the best equipment money can buy. There are 20,000 square feet, beautiful locker rooms. I
mean, you'd really be surprised of the park you get it for 10 bucks a month. But it's really the get you off the couch, for first timers. I can
do this, it is 10 bucks a month. Let's give this a shot. And that's really what we want to do here.
And, we've been, you know, we've been here for almost 30 years now. I've been through all kinds of economic climates throughout this. We've made it
through COVID without any closures, thank God, to the strength of the model and the profitability of this model. And, I don't see us ever changing that
$10.00 price point.
NEWTON: Yes, Chris, it is a good point, right? You've been in this a long time and it is that price point, maybe in the end that'll get a lot of us
off the couch, hopefully. Chris Rondeau, CEO of Planet Fitness. Thanks so much. I really appreciate you being here.
RONDEAU: Thank you, Paula. Pleasure.
NEWTON: Now coming up, some of the world's most powerful beverage makers being kicked hard by football stars, details next.
NEWTON: Expo 2020: the world's largest in-person event takes place this year. It opens this October in Dubai. Becky Anderson visits the woman
responsible for delivering this event.
BECKY ANDERSON, CNN INTERNATIONAL ANCHOR: We are in what is the beating heart of the Expo site. This is the Al Wasl Plaza and this is where people
will gather during this six-month event. What can we expect?
REEM AL HASHIMY, MANAGING DIRECTOR, EXPO 2020: Well, what we are really hoping for is when people do gather in this garden that they see a
phenomenal show, that when they come to the Expo site, they have the opportunity to experience and explore countries from all around the world
who are all present here as well, and really use this as an opportunity to chart the path forward for what the next couple of years are going to look
ANDERSON: We are three and a half months out, we are still in a COVID crisis, how will that affect the visitor experience?
AL HASHIMY: So first, their safety is paramount. I mean, we're not compromising that at all.
We also believe that there's enough science and there's enough metrics out there that show that wearing your mask, being distant, having a touch-free
experience, being vaccinated, proper ventilation is all going to really help significantly in ensuring that this is a safe environment.
ANDERSON: Your target was for 25 million visits. Is that still a target?
AL HASHIMY: So, we're very keen on fulfilling that 25 million visit target. Our mix is probably going to be a little bit different. Certainly
in the beginning, we're going to rely a little bit more on domestic visitation as opposed to international visitation. Having said that, we
think there's going to be a pretty good rebound. You're already seeing a little bit of that now in the summer.
ANDERSON: This isn't a cheap infrastructure project, it came at a cost of something like $7 billion. Will Expo 2020 deliver for the wider good of
Dubai and the UAE?
AL HASHIMY: The investment was not to build an Expo. The investment was to have a new city of the future. This is a 480-hectare site that's very well
connected with, you know, top notch infrastructure, with 5G technology.
What's interesting to me on a personal level is that I see how new technologies have emerged as a result of COVID. There's more focus on Ag
tech. There's more focus on biotech. They are new industries that can bring more value to the economy. This is the perfect place to be able to do that.
NEWTON: And our thanks to Becky Anderson for that.
Now, some of the world's biggest football stars have publicly snubbed sponsors at Euro 2020, which is nearing the end of its first week. Now,
France's Paul Pogba removed a Heineken bottle at a news conference, you see him do it there. That was after Tuesday's match.
Earlier Portugal's Cristiano Ronaldo, no one less than that removed to bottles of Coca-Cola as he sat down to take questions and held up a bottle
of water instead. I will say a bottle of water that was in a plastic bottle, but nonetheless.
And an Italian player also got into the act, moving bottles of soft drinks around.
Clare Sebastian joins me now with more. Okay, so we're going to call this bottle-gate, I guess, a trend -- Clare?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: I mean, three players, it sort of seems to be spreading. The videos, I think more importantly, Paula,
are going viral and that is why this creates a bit of a delicate situation for the brands.
Now, in terms of financial impact, it is not really material as of yet. We did see a little bit of a dip in Coke shares this week, on Monday morning.
That does seem to be sort of a reaction, but it's also trending down with the broader market.
Heineken shares though went up a little bit after the Pogba incident. They have now come down a bit as well. So, not super material when it comes to
these companies' market cap, but a delicate PR moment for them, not least because of the huge exposure they get from the sports tournament and the
amplified sort of risk reward of these relationships that is caused by the social media age.
Ronaldo, not just one of the top footballers of his age, but one of the most followed on social media. He has almost 300 million Instagram
followers, so he is an extraordinarily powerful influencer, and that's why that moment was so powerful.
We did get some responses. Coca-Cola referred us to a statement from UEFA where they basically made the point that they offer a range of different
drinks and then that players that turn up at these press conferences are offered both Coca-Cola, Coke-Zero, and water.
Heineken also treading carefully saying that they respect everyone's decision when it comes to their beverage of choice. It should be noted,
Paul Pogba is a practicing Muslim, so likely to avoid alcohol even though we know that that drink on the table that that press conference was
actually a zero alcohol Heineken.
But, look, it is a sort of a risk reward moment for these companies that the sports sponsorships, huge exposure versus the players who now have to
look after their own brands in the social media age -- Paula.
NEWTON: Yes, I don't have a lot of time left here, but do we think that this is really going to revive that debate between should you have alcohol
and these drinks even within sports sponsorship?
SEBASTIAN: I think it is going to revive the debate. This is an age old debate, Paula: should sports, which inherently promote fitness and wellness
be associated with brands that science has shown, perhaps lead to sort of less healthiness among the people who less healthiness among the people who
I think, it is clear that that is going to be heartily debated. We know that for example, tobacco products are severely limited from their
relationships with sports tournaments teams and individuals in a number of countries. I think, the question now is, are we going to get a movement
that wants, quote-unquote "unhealthy food" to be treated the same?
But of course, on the flip side, these companies spend millions -- billions of dollars, you know, supporting these sports franchises without which
they, you know, they would have sort of lesser exposure.
NEWTON: Yes, in some ways, they make it all possible. An interesting debate. We'll continue to cover here.
Clare Sebastian, thank you so much.
And finally to this, one of the world's largest diamonds has been unearthed in Botswana. The -- get this -- 1,098 carat stone is believed to be the
third largest gem-quality diamond ever found. It was discovered earlier this month. Botswana is Africa's largest producer of diamonds.
I won't be putting it on my hand, that is for sure.
That's it for the show. Thanks for joining us. "Connect the World" is next, with Becky Anderson.