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Deadline Looms for Debt Repayment as Shares in Chinese Property Firm, Evergrande, Surge; Fed Lays Out Plan for Ending Stimulus, but Warns on Debt Ceiling; Sports Stars versus Social Media. Aired 9-10a ET
Aired September 23, 2021 - 09:00 ET
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[09:00:15]
ALISON KOSIK, CNN BUSINESS ANCHOR: Live from New York, I'm Alison Kosik, in for Julia Chatterley. This is FIRST MOVE and here is your need-to-know.
Evergrande endgame. Deadline looms for debt repayment as shares in Chinese property firm surge.
Taper timetable. Fed lays out plan for ending stimulus, but warns on debt ceiling.
And sports stars versus social media. Our exclusive interview with Romelu Lukaku on racism and tech.
It's Thursday. Let's make a move.
A very warm welcome to FIRST MOVE. Great to have you with us and we begin as always with the check of the markets. U.S. stocks are on track for a
second day of solid gains after Wednesday's one percent advance.
Europe is mostly higher and key Asian markets finished in the green despite continued uncertainty over the fate of Chinese property developer
Evergrande. We are still awaiting word on whether the firm has missed the crucial debt payment due today and how that may affect lenders and how it
could affect the Chinese economy.
The action in markets today suggests investors aren't too worried as of yet about a wider global fallout if Evergrande defaults. Traders also taking
the latest policy statement from the Fed in stride.
Half of the Fed's policymaking committee now see rate hikes beginning as soon as next year, and the Fed could announce that it will begin phasing
out its emergency bond buying program as soon as November.
We've got complete coverage of both Evergrande and the Fed for you this hour. Let's get right to the drivers and the latest from China. Shares of
the country's embattled property giant, Evergrande jumped nearly 18 percent after the company said it reached a deal to settle an interest payment on a
domestic bond.
Today, there are some reports swirling around on Beijing's response. Bloomberg says regulators have asked Evergrande to avoid a near term
default on its dollar bonds. This, as the company faces the dollar bond interest payment due today.
Now separately, "The Wall Street Journal" is reporting that authorities are telling local governments to prepare for a possible storm, but there are
still no official comments from Beijing or Evergrande today.
Let's bring in Clare Sebastian. She is live for us in New York with the latest. Good to see you, Clare, so I'm wondering, what more do you know
about this interest payment?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Alison, the interest payment today on that dollar denominated bond worth more than $80 million,
that is really being seen as a crucial test of not only Evergrande's ability to pay, but their willingness and ability to negotiate with
bondholders to come to some arrangement.
Obviously, it's not in the interest of bondholders to see them collapse, they will want to try to reach some kind of deal, and either way, there
will be a 30-day grace period. So, we're not expecting to see any sort of immediate reports of defaults.
But as I said, a crucial test. I can tell you that bond is a five-year dollar bond, it's currently trading at around 28 cents on the dollar. So
that is a sign of pretty extreme concern among investors.
And as you say, Bloomberg is reporting that they have been urged by regulators to try to negotiate with bondholders to come to some arrangement
to avoid default on that dollar bond.
Now, as for who owns Evergrande's debt, well, this is obviously concentrated in China. But there is some exposure around the world. And
according to Morningstar Direct data, there are some funds belonging to BlackRock, HSBC, and UBS that have been adding to their exposure over the
summer months. That just shows the sort of search for yield out there as we see such low bond yields in the Western world in the U.S. they've been
looking to sort of corporate bonds out of China for really that higher yield.
Others are more wary, PIMCO and Allianz have been net sellers. But I can also tell you, this isn't the end of it yet. There are more payments coming
up. There's another interest payment on a dollar bond due next Wednesday, so we can expect more of this kind of tension and market concern around
Evergrande to come.
KOSIK: Sure. You will be following up on those payments as well, but before you go, I know there's a lot of speculation about, you know what
Beijing is going to do and what do you know from that end?
SEBASTIAN: So what we know for sure, at this point, Alison, is that they are injecting cash into the financial system. We saw another 120 billion
yuan in today, that's after 120 billion yesterday and around 200 billion over two days at the end of last week.
So that does sort of look like they are bolstering the defenses of the financial system in the event of a potential default, but as for official
comment about what they're going to do that silence is still sort of one of the hallmarks of this crisis. We don't know yet.
[09:05:12]
SEBASTIAN: If you talk to analysts, most of them will say they don't expect a full bailout. That would fly in the face of the kind of financial
discipline that Beijing has been trying to inject into the property sector. But they do expect perhaps, that they might try to sort of guide the
company through some kind of orderly default.
Although if you look at "The Wall Street Journal" reporting today, according to unnamed officials, they are saying that they're preparing
provinces around China to sort of brace for potential storm and only step in to manage the fallout at the last minute. I think that would show just
how Beijing sort of was to set an example with this company.
KOSIK: Okay, Clare Sebastian, thanks so much for all that great context.
I want to bring in David Culver. He is live in Shenzhen. David, I know that you have been talking with those Evergrande employees, investors,
homebuyers, what are you hearing from them?
DAVID CULVER, CNN CORRESPONDENT: In monitoring closely, Alison, some of the discussions on Chinese social media, and early on, you saw that there
were actual protests outside of Evergrande headquarters right here in Shenzhen. I want to show you some video because we drove pass it a short
time ago, and you'll notice that there is a lot of security still in place. They have a lot of local police and private security guards surrounding the
financial complex there. In fact, you have to go through a massive security checkpoint just to get in.
And so while it seemed that those were continuing with protests for a few weeks, they've seemed to have stopped. Some of the venting has continued on
social media, and what you see from these employees, as well as from folks who are homeowners, perhaps who have invested and are waiting to have a
house delivered for them is that they are given generally here in China, this window, an opportunity of time to express their frustrations.
The government allows that venting, and then they tend to try to clamp down a bit. Now, they are strategic in how they do that here, in the sense of
they still know that there's a lot of desperation and concern. So, they want to do that in a very tactful manner.
Nonetheless, it is interesting to see just how heavily secured this building is that we were able to go by today, and how there's still a lot
of looming uncertainties in place -- Alison.
KOSIK: Much uncertainty and Evergrande struggles. They are just compounded by this broader trend that we're seeing come out of China to kind of move
away from capitalism, right?
CULVER: You're speaking exactly to the core of all of this. So, this goes well beyond Evergrande because we've talked in recent weeks about the
crackdown on tech giants. You've seen it on DiDi. You've seen even several companies like Tencent also based here in Shenzhen, putting forth billions
of dollars, some say perhaps out of goodwill, others say they're donating that to social causes that are really important to President Xi Jinping
because they're compelled to do so.
Nonetheless, what we're seeing is this larger strategy that's at play here, and this goes well past Chinese regulators, it goes all the way to the top,
to President Xi Jinping himself, who if you go back to when he took office in 2012, was focused heavily on cracking down on corruption also pushed
this common prosperity.
And you've got to look at that term and break it down a bit because it's not about just getting materialistic and in fact, it pushes against
materialism, as President Xi Jinping has really tried to enforce in recent weeks, especially trying to shut down any sort of lavish showcasing of
somebody's personal wealth, for example, all of that has been pushed aside.
And so what they essentially are trying to portray is this idea of leveling the playing field, making it so that folks who are really seen as
disadvantaged in many ways, have these opportunities going forward.
Now, it's going to be interesting to see how much they can push back on the capitalistic aspects of this economy, the capitalism that really allowed it
to grow in recent decades and have skyscrapers like you see behind me in cities that you go back 30 to 40 years, were really just rural lands, and
in some cases, swamps and now, they are massive metropolises, and they're bustling.
So how much of this are they able to push back against while at the same time sustaining the common prosperity that they're looking for here? And
they are looking at this as even a redistribution of wealth, too.
So as it's described here, Alison, it's socialism with Chinese characteristics and it is something in this 100 years that they are marking
the founding of the Chinese Communist Party, President Xi Jinping is determined to move forward with
KOSIK: David Culver, thanks so much for all that great perspective. Appreciate it.
The U.S. Federal Reserve believes the storm clouds are parting in the American economy, half of the Fed's policymaking committee see interest
rates rising sometime next year and Fed chair Jerome Powell says the Central Bank is poised to cut its emergency bond buying soon.
[09:10:02]
(BEGIN VIDEO CLIP)
JEROME POWELL, CHAIRMAN, U.S. FEDERAL RESERVE: Although decisions were made, participants generally view that so long as the recovery remains on
track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate.
(END VIDEO CLIP)
KOSIK: That said, challenges remain. The debt ceiling debate and the battle over trillions in fiscal stimulus, all that is still raging.
Matt Egan joins me now live. So what I'm curious about Matt, is where do things stand on Capitol Hill? Are lawmakers getting any closer to agreeing
on, you know, a debt limit? Or are they farther apart today?
MATT EGAN, CNN REPORTER: Yes, you know, that still needs to be settled clearly, by Congressman. Republican leadership have really signaled that
they're not going to sign on to raising the debt ceiling, even though the vast majority of the national debt was accumulated long before President
Biden took the oath of office.
And so we do have some reporting from our colleagues in Washington indicating that, you know, perhaps, a Democratic leadership is going to try
to Plan B where they have to raise the debt ceiling, on a party line, on a totally partisan basis. They clearly don't want to do that, in the past.
This has been done on a bipartisan basis.
The Treasury Department has pointed out that, you know, there's been 79 times in the past that we've raised or suspended the debt limit, almost 50
of those times were when there was a Republican in the White House.
But clearly, this needs to be taken care of, and Jerome Powell was asked about this issue during the press conference yesterday. And first, he said,
the United States should not default on its debt. I think that's something that everyone can agree on. But second, and this is important, he said, no
one should assume that the Federal Reserve, or anyone else can sort of come to the rescue of the economy, or financial markets if there is a default.
And I think that is a message to Washington that, you know, this is on lawmakers to figure out, they can't rely on the Fed here.
KOSIK: That's interesting that you pointed out that he said that the Fed can't come to the rescue. And you know, we've got Janet Yellen ringing the
alarm bells, and it just doesn't seem to be resonating.
Going back to the process in which an agreement can get done, you're talking about a reconciliation process, right? And if that happens, though,
is there a time enough to actually try to push this through on party lines?
EGAN: That's right. It has been done through reconciliation, and there is a time crunch here. Because remember, the Treasury Department has said that
they're going to run out of cash and these accounting moves, that they call extraordinary measures, they're going to run out of those steps, at some
point in October, and October is coming up pretty soon.
So if they don't get this figured out on Capitol Hill by then, then there is this risk of, you know, a default, maybe a technical default, where
bondholders keep getting paid, but other people like people who rely on the Federal government for paychecks or Social Security or Medicare, maybe
there's a delay in those payments. That of course, would be a disaster. No one wants to see that. I mean, the United States has never defaulted on its
debt.
And we heard from six former U.S. Treasury Secretaries yesterday, they sent this urgent letter to Speaker Pelosi and other congressional leaders, and
they warned that, you know, this can't be done at the last minute, something has to be taken care of with a debt ceiling, because there is
this risk of what they called a, quote, "accidental default" and Alison, that's the notion that, you know, the closer you get to the edge here, the
greater the risk that you fall over, even if you never intended to,
KOSIK: Oh, sure, and any one of the three ratings agencies could go ahead and downgrade the U.S. credit rating, even before just because of the
uncertainty, right?
EGAN: That's right. Now, we remember that in 2011, Standard and Poor's, they downgraded the United States for the first time ever and U.S. still
does not have AAA rating from S&P as a result of that episode. Fitch and Moody's, the other two big ratings companies, the United States still has
AAA rating.
But I asked Fitch about this, and I said, well, what if there's a technical default where bondholders get paid, but others don't? And Fitch said, well,
that is not what we would consider consistent with AAA sovereign credit. In other words, there could be a downgrade in that situation. And that, of
course, would raise borrowing costs for the United States.
KOSIK: All right, Matt Egan, thanks so much for your reporting.
And these are the stories making headlines around the world. We have breaking news on the Haitian migrant crisis. The U.S. Special Envoy for
Haiti has resigned from his post in protest at the mass deportation of Haitians.
Earlier, the U.S. said 1,400 migrants had been returned to Haiti from a camp in Texas. Thousands more are still in the U.S. or at the border having
fled from their own country. Those who were sent back to Haiti have denounced the way they were treated.
CNN's Melissa Bell joins us now from Port-au-Prince.
Melissa, what are you seeing as migrants step off flights at the airport?
[09:15:09]
MELISSA BELL, CNN CORRESPONDENT: Well, essentially, they've now closed off that gate out of which they emerged from the tarmac at Port-au-Prince
airport, so it is a steady trickle of disheartened migrants speaking of their despair, their shock, their trauma at what's been done to them. These
are people who have crossed a continent over many weeks, gone through extraordinary hardships, only to find themselves denied the possibility of
applying for asylum once they got to the United States.
Many told us they hadn't even known where they were being taken when they got on the plane that ultimately brought them back to Port-au-Prince.
Now, on that breaking news regarding the resignation of the U.S. Special Envoy here to Haiti, his resignation letter, which was sent to Secretary of
State Blinken yesterday is absolutely damning, Alison, speaking of what he described as a counterproductive and inhumane migration policy and
reminding Secretary of State Blinken that American officials here in Port- au-Prince are essentially confined to compounds given the level of gang violence that prevails here in the Haitian capital.
He describes a country that is mired in poverty, hostage to violence, ruled by gangs, and a corrupt government with alliances to gangs. He also speaks,
and I think this is important as well, of the cycle of foreign intervention that has allowed this situation to prevail, condemning therefore not just
the current migration policy seeing those migrants being brought back to Port-au-Prince against their will and without due process, but also
fundamentally the historical intervention of the United States in Haitian politics, and its support once again, for a government that he described as
being led by a man who was the unelected and de facto leader now, Ariel Henry, the man who took over after the assassination of Jovenel Moise in
July.
So a damning indictment there of American policy on both fronts, Alison, even as that steady trickle of migrants continues with heartbreaking
stories being brought from their trips across South America through Mexico up until they get to the worst point of all they say, once they reach the
United States.
KOSIK: Okay, Melissa bell in Port-au-Prince, thank you.
The U.S. Food and Drug Administration says it will grant emergency use authorization for a booster dose of the Pfizer COVID-19 vaccine. The third
shot will be offered to people ages 65 and older and other vulnerable groups.
Just over two million Americans with specific health issues have already received a booster shot.
And you're watching FIRST MOVE. Still ahead, how having your head in the clouds can sometimes pay off. We'll be speaking with the CEO of Cloud
computing company Freshworks about its strong NASDAQ debut.
And not so much a vanishing act, but a vanishing actress. Why has a major Chinese star disappeared from the internet there?
(COMMERCIAL BREAK)
[09:20:37]
KOSIK: Welcome back to FIRST MOVE, I'm Alison Kosik. U.S. stocks remain on track for another solidly higher open after the S&P 500 first rose in five
sessions, that happening yesterday. The S&P 500 is set to regain much of what it lost during Monday's 1.7 percent selloff. That's despite the
ongoing murkiness of the Evergrande debt situation in China.
Evergrande is due to pay nearly $84 million in interest on an international bond today. But there is still no official comment from the company about
its plan. This, as Evergrande claims it resolved an interest payment on its smaller domestic bond.
Derek Scissors is the Chief Economist at China Beige Book. He is also a senior fellow at the American Enterprise Institute, and he joins me live.
Great to see you.
DEREK SCISSORS, CHIEF ECONOMIST, CHINA BEIGE BOOK: Thank you, good to be here.
KOSIK: So, you know, we hear about Evergrande making the deadline on one payment, and then we're waiting to hear about another bigger, more
significant payment. Talk to me about how you see this playing out.
SCISSORS: Well, we're in the process of the Chinese government telling Evergrande who they're going to pay back. It is possible that in the short
term, they'll pay back everyone. They're not going to pay back everyone over the medium term, someone is going to lose out the haircut. People will
watch this international bond payment, because the obvious group to lose out is foreign bond investors, they're the least important to the Communist
Party.
So we're starting the process of sorting out who is going to get their money and who is not going to get their money. Probably at the top of that
list is ordinary Chinese savers. They will be made whole in some way. It could be very complicated. And at the bottom is foreign investors.
KOSIK: Now China's Central Bank did inject money into the banking system. So it looks like policymakers are at least looking to stabilize the
financial system. But how likely is it that China will actually come and bail out the company? I mean, does Beijing even have an obligation to do
that?
SCISSORS: It doesn't have an obligation. Evergrande is, you know, private. There's always private by Chinese standards, because you're responsible to
the Communist Party, whether you're private or state, but by Chinese standards, Evergrande is clearly private. Beijing, the central government,
local governments never back them up.
I don't think it bails out the company if the company's debt situation is that bad. And the problem we have now is a lack of transparency, then it's
going to fail. But I do think it props up the company until it sorts out who should get paid, and who shouldn't get paid. What are they going to do
with company workers? What are they going to do with company development projects?
So I think Evergrande probably ends up failing, and again, maybe gets reconstituted in some way. But it's not going to fail immediately, because
the central government needs time to sort out what it wants to do with the assets.
KOSIK: So the thinking at this point is that there won't be widespread contagion beyond China. But you look at real estate, it is such a huge part
of GDP of China and Fitch, by the way, just downgraded China's GDP. And because China is known as the manufacturer of the world, if the fallout
from Evergrande hurts China's economy, could that impact other countries that rely on China, let's say for trade?
SCISSORS: I think there's a split effect here. First of all, as you said, this is not a finance issue. There is not going to be contagion. This is a
property issue and a macroeconomic growth issue, and they matter.
The property sector is already struggling, it was struggling before this event. It is going to struggle worse, that's going to drag down
macroeconomic growth. Of course, the Chinese control growth announcements, so they may announce everything's fine, but no one will believe that.
I think the split here is interesting. A lot of countries supply commodities that go into Chinese property development, especially metals,
iron ore, copper, bauxite, and so on. Those countries are facing weak Chinese demand. On the other hand, when property is weak, China is going to
turn to manufacturing. And so we're going to get Chinese exports be a focus of Chinese policy, maintain that export performance.
So we're probably going to get a bigger Chinese trade surplus causing political problems in the U.S., continued strong Chinese exports to supply
foreign demand. But if you're selling commodities to China, you're in for a rough patch.
KOSIK: In for a rough patch, specifically, the U.S.?
SCISSORS: No, commodity suppliers like energy may be less so, although I think there will be a secondary effect on energy. But people who sell
Chinese metals. That's the countries in Africa, Brazil, Australia, and so on because those metals are used in property development.
[09:25:11]
KOSIK: Okay, thanks for clarifying that. Okay, Derek Scissors, great to have you on the show. Thanks for all that great analysis.
Some great actors are said to have the ability to disappear into their role. But in China, an actress has disappeared from the internet. You'll
now struggle to find a trace of Zhao Wei's movies or TV work online in China though she has since been spotted in person.
Ivan Watson explains what's going on.
(BEGIN VIDEOTAPE)
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): Imagine one of Hollywood's biggest celebrities erased from the internet in a single
night. That's basically what happened to Zhao Wei, one of China's most successful actresses.
A star of Chinese television and film, Zhao was also a wealthy entrepreneur who bought vineyards in France, and acquired a stake in one of China's
biggest film studios.
WATSON (on camera): That all changed one night in August, when Zhao suddenly inexplicably disappeared from the Chinese internet. Her movies and
TV shows removed from streaming sites, her social media accounts erased.
JENNIFER HSU, RESEARCH FELLOW, LOWY INSTITUTE: To imagine that someone's name, history is eliminated from the internet, it shows the power and the
infrastructure of China's internet architecture and who really is in power. It is the Chinese party state.
WATSON (voice over): China experts say the cancelling of Zhao Wei is part of a much bigger crackdown now underway in China.
WEN ZHAO, INDEPENDENT CHINA ANALYST: The whole entertainment industries was targeted by Xi Jinping.
WATSON (voice over): Candidate based analyst Wen Zhao argues there's only room for one real star in today's China, Chinese President, Xi Jinping.
ZHAO: Xi Jinping deliberately eliminating independent social influence that might be out of his control. He wants to take control over everything.
WATSON (voice over): This summer, Beijing issued new rules cutting back the activities of China's wildly popular celebrity fan clubs. Other
regulations Beijing says are aimed at restoring morality, ban male celebrities from appearing to effeminate on TV and limit minors to three
hours of online video games a week.
Meanwhile, the government introduced a new subject to the curriculum for students of all ages from elementary school to universities, Xi Jinping
Thought, an approach that some say echoes the cult of personality of Mao Zedong, the Founding Father of Communist China.
ZHAO: People have only one voice to be heard, only one leader to worship.
WATSON (voice over): In recent months, Xi also cracked down hard on China's huge tech and private education industries, wiping out trillions of
dollars in market value from some of China's biggest companies, as Xi pushes for so-called common prosperity and a more level economic playing
field while shaping people's minds to his worldview.
So where does that leave people like this cancelled actress Zhao Wei? She appears to have recently reemerged in several photos that went quickly
viral. The glamorous actress almost unrecognizable in a humble t-shirt and shorts.
Ivan Watson, CNN, Hong Kong,
(END VIDEOTAPE)
KOSIK: You're watching FIRST MOVE. The market open is next.
(COMMERCIAL BREAK)
[09:31:50]
KOSIK: And welcome back to FIRST MOVE. I'm Alison Kosik. And U.S. stocks are up and running this Thursday and we've got a higher open on Wall
Street, a continuation of the positive action that we saw yesterday. Investors getting some clarity over when the Fed may begin cutting its
emergency stimulus. Fed members believe the economy is close to the point where it doesn't need as much support with tapering beginning as soon as
November.
That said, the U.S. reporting today that first time jobless claims continue to rise from pandemic lows, up by a greater than expected 351,000 last
week. Bank stocks meantime are higher for a second straight session amid signs that the Fed may begin raising rates next year. Banks earn more on
the dollar on the dollars that they lend out when interest rates are higher.
It took 11 years for Freshworks to go from startup in India to a multibillion dollar IPO in New York. Its NASDAQ debut went down well with
investors on Wednesday. And right now, the Salesforce rival is higher.
Freshworks offers customer service management software including messaging platforms and chat-bots. It also manages systems for IT support and human
resources. Girish Mathrubootham is the CEO of the company. And he joins me live. Great to see you and congratulations on your IPO.
GIRISH MATHRUBOOTHAM, CEO, FRESHWORKS: Good morning, and thank you for having me.
KOSIK: First of all, for our viewers who want to hear a little bit more detail, talk us through what Freshworks does.
MATHRUBOOTHAM: Sure, at Freshworks, our mission is to make it fast and easy for every business to delight their customers and then employees, and
we do that by offering modern and intuitive customer engagement and employee engagement software.
KOSIK: Okay, you had an impressive public debut yesterday raising over a billion dollars. What do you plan to do with the money raised?
MATHRUBOOTHAM: I think at Freshworks, we are operating in three massive markets. We are building the customer service product of the future, the
employee engagement software for modern IT teams, and we have an early disruptive new play in the CRM market. I think we -- it's time to keep our
heads down and keep executing on the opportunities that we have.
So no change or dramatic shift in plan, so keep going, invest more in R&D and expand the good markets.
KOSIK: You've got a big competitor in Salesforce, also Zendesk is a big competitor as well. I'm curious how do you stand out? How do you
differentiate yourself? Your company?
MATHRUBOOTHAM: So our differentiation is very simple. Our customers choose Freshworks products primarily for three reasons. One, all of our products
are designed to delight the frontline users of the software. Think about the support folks or the sales reps or the IT engineers who are using the
product. And many times these are the folks who actually come online, evaluate our software, and actually take us into their organization. So
that is the number one reason.
[09:35:04]
MATHRUBOOTHAM: Second, the most important thing that big businesses love about our software is the time that it takes for them to go live. So
Freshworks products are designed to go live in days, or in a matter of few weeks, as opposed to the 12-month or 18-month long implementation cycles
that business variants with other legacies as vendors, and all of this results in a lower or a more affordable cost of ownership, which obviously
businesses love. And that has helped Freshworks get more than 52,000 customers in more than 120 countries, truly making this -- allowing us to
actually democratize enterprise SAS and making it accessible to companies of all sizes.
KOSIK: You know, in your S-1 filing, I noticed that -- to go public, I noticed that you said Freshworks is the company which wasn't supposed to
win, that the doubts were always there. Can you quickly explain what you meant?
MATHRUBOOTHAM: I think it is common with any startup, like people always find reasons why it's going to be so hard, and just to give you an example,
like when we started with customer service, there were 600 help desks in the market. So many people came and told me, hey, like this is like a
crowded market and there are 600 help desks. How do you expect to win in this crowded market?
But I think we truly saw the opportunity to build software that the people who are using them would love it. And we did this before the term product
lead growth became a buzzword in the industry. We have been doing it since 2011.
So I think our bet on making our products intuitive, easy to use, easy to set up and rapid time to value paid off, and that's the validation that we
have received from all by delighting all of these customers.
KOSIK: Well, more validation, your company is now valued at more than $10 billion, I would say I think you won at least yesterday.
Girish Mathrubootham, CEO of Freshworks, thanks so much for your time.
And you're watching FIRST MOVE. More to come.
(COMMERCIAL BREAK)
KOSIK: Do you believe in life after Merkel? That's a question German voters are being asked as they head to the polls on Sunday. The Social
Democratic Party and center right CDU tend to dominate German politics. Now, the Green Party has emerged as a contender, too.
Fred Pleitgen has more.
[09:40:05]
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): It might not look very exciting, but this is a rally for the frontrunner in
Germany's election campaign.
Olaf Scholz speaks softly, has no catchy slogan, and yet, he is ahead in the polls.
Olaf Scholz, Social Democratic Candidate: I am a Social Democrat, the people know this. But they know that I am a very pragmatic man, that I want
to rule the country with -- all because having in mind what is necessary for such a big country in Europe.
PLEITGEN (voice over): After 16 years of Angela Merkel, Scholz, who is the Finance Minister in Merkel's Cabinet is trying to pull off a win by
appearing to be very similar to Angela Merkel.
And his no frills style seems to be resonating with voters.
PLEITGEN (on camera): Only a couple of months ago, it seemed as though Olaf Scholz had no chance of winning the upcoming election. But now, he is
firmly in the lead and could be well on his way to becoming Germany's next Chancellor.
PLEITGEN (voice over): Folks at this rally outside of Berlin say they believe Scholz would govern with a steady hand, just like Merkel has.
UNIDENTIFIED FEMALE: And he appears very confident in what he promises.
UNIDENTIFIED MALE: Well, one thing is his experience, certainly, and what he has achieved in the past.
PLEITGEN (voice over): But not everything Olaf Scholz has done in the past as Finance Minister is viewed positively. He faced criticism after failing
to detect the impending bankruptcy of electronic payments firm, Wirecard, and was recently questioned by a Parliamentary inquiry committee
investigating about allegedly not following through on a money laundering investigation, which he denies.
Scholz's main rival, Armin Laschet, who is actually from Angela Merkel's party accuses Scholz of wanting to move Germany to the left and possibly
cooperating with the left-wing Socialist Party.
We have to be clear because the people don't want the leftists in the Federal government and tonight once again, you have not been willing to be
clear, Laschet said. But Scholz told me, Germany would not seriously change its domestic or foreign policy if he wins.
SCHOLZ: The transatlantic partnership is important for us, and it is important for the United States. And I'm willing to make -- to work very
hard that this will be a strong base for our international politics.
PLEITGEN (voice over): Olaf Scholz's personal popularity is much higher than his party's popularity. And while his Social Democrats are currently
polling in first place, the race to succeed Angela Merkel is far from decided.
Fred Pleitgen, CNN, Kleinmachnow, Germany.
(END VIDEOTAPE)
KOSIK: And Hala Gorani will have special coverage of Germany's election as the votes come through. Join CNN on Sunday from just before noon, New York
time for the very latest.
Another check of the markets now, the bulls are trying to make it two for two on Wall Street. Stocks are gaining back most of what they've lost
during Monday's sharp pullback. That's despite the ongoing Evergrande crisis and uncertainty over when the U.S. Congress will raise the debt
ceiling. The Dow currently up more than one percent.
Let's get more now from Michael Feroli. He is the Managing Director and Chief U.S. Economist for JPMorgan, great to see you.
MICHAEL FEROLI, MANAGING DIRECTOR AND CHIEF U.S. ECONOMIST, JPMORGAN: THANK YOU. GOOD TO SEE YOU.
KOSIK: So this was the meeting we were all waiting for. Any surprises?
FEROLI: Not really. The Fed did a pretty good job of signaling their intentions before yesterday's meeting -- I'm sorry. And so they've been in
emergency setting really since March of last year. And yesterday, they signaled that they're slowly stepping away from that emergency setting.
But as I as I mentioned, it was very well-signaled. The markets are okay with that, because it has been so well-signaled. So, no major surprises
really coming out of yesterday's meeting.
KOSIK: Okay, but then there's the dot plot, which I'm hearing a little confusion about that. I mean, that the dot plot for anybody who doesn't
know, because why would you know, is the projections of where policymakers see rates going over the next few years.
You know, you look at how many voted, you're seeing nine who voted for an interest rate hike for next year, and so on and so forth. What surprises
did you see there? I mean, it just depends on interpretation, doesn't it?
FEROLI: Again, no huge surprises. And again, they're not voting for a rate hike next year. You know, half of the committee participants are saying
it's likely to be the case that by the end of next year, a hike would be needed.
Now, keep in mind, again, not only are those forecasts, but many of those people may not even be on the committee next year, certainly in 2024, which
is as far out as the dot plot goes. So, it's a best guess, and it is consistent with the fact that yesterday, they not only told us they're
going to start tapering back asset purchases in November, but that they're going to include them, anticipate concluding them by the middle of next
year, which gives them all the second half of next year an opportunity to raise rates again if the economy performs as expected, but again, that
wasn't a huge surprise to the market.
The market is currently pricing the first hike in early '23. So while '22 isn't a game changer and sometimes, the market is skeptical of the Fed's
forecasts as being overly optimistic, as it has often been the case with the dot plot in years past.
[09:45:27]
KOSIK: How surprised are you that the market seems pretty complacent about the debt ceiling drama?
FEROLI: A little surprised, but then again, we've been through the same Kabuki dance several times over the past decade or two. And so I think the
market right now is expecting the usual, you know, theatrics to go on, but that at the very last moment, cooler heads will prevail and that the debt
ceiling will be raised.
We'll see if the market keeps cool as we get further on into October when we get closer to that drop dead date that would lead us to a technical
default. But right now, I think you're seeing a few little signs of some concern and technical aspects of the Treasury bill market.
But right now, overall markets are expecting that, you know, once again, Congress will go through all the usual, you know, chest thumping, but at
the very end, the adults in the room will raise the debt ceiling. And I think that's the expectation, it's our expectation. But again, you never
know with these things, and there always is a risk that that is, you know, it can give you some knots in your stomach for sure.
KOSIK: Yes, I mean, if the U.S. would actually default, is there anything that the Fed can do? Any tools that the Fed has?
FEROLI: Not -- only the tools they've used in the past, which is large scale asset purchases, but there are some -- and you know, it's
interesting, the Fed has been very cautious in how they have talked about what they can do because there are certain issues with -- if there's a
technical default, Treasury collateral, Treasury bonds and bills would be considered bad paper. And by the Fed's own rules, they can only accept good
paper.
So that raises some questions about the Fed's legal ability to really step in here. But look, if there's a technical default, we have bigger problems
than ones the Fed can deal with in addition to some of the market functioning issues which the Fed might be able to deal with. There are huge
issues related to confidence and uncertainty and the global investing public's confidence in investing in the U.S., and that's not something the
Fed can really easily address if you have an evaporation of confidence.
And you know, I think you saw a hint of that in 2011. You didn't have a technical default, you just had one rating agency downgrade the U.S., and
you know the risk markets really had a -- you know, fell out of bed that day.
So I think there are problems here that are -- look, the Fed is -- they showed us during the coronavirus crisis that they can be extremely
resourceful, but there are some issues that even the Fed can't deal with and a technical default will be really tough.
KOSIK: All right. We will be watching the drama along with you. Michael Feroli, thanks so much.
FEROLI: Thank you.
KOSIK: Coming up after the break, the soccer star taking racism seriously. He says it is high time social media ends its silence over hate directed at
the players, an exclusive interview next.
(COMMERCIAL BREAK)
[09:50:46]
KOSIK: From booing at players taking the knee to hatred splashed all over social media, racism directed at soccer stars continues to be a plague on
the game. Now Chelsea striker, Romelu Lukaku wants players to meet Big Tech CEOs, the government and football bodies to figure out a way to tackle it.
Amanda Davies spoke exclusively to the Belgian superstar at a photography competition promoted by Chelsea under the name No to Hate.
(BEGIN VIDEOTAPE)
AMANDA DAVIES, CNN WORLD SPORT: What does it feel like when you take a knee in the stadium and there are boos?
ROMELU LUKAKU, CHELSEA AND BELGIUM STRIKER: To be honest, in the first few games that I've been here really, it didn't happen. So I haven't been
through it like that, you know, but as we were taking statements, but I think sometimes we can take stronger statements then only taking a knee.
DAVIES: What would you like to see done?
LUKAKU: I think we should -- basically the captains of every team and four or five players, like the big personalities of every team should have a
meeting with the CEOs of Instagram and governments and FA and the PFA, we should just sit around the table and have a big meeting about how we can
attack it straight away.
But also not only from the men's game, but also from the women's game. I think just all of us together and just have a big meeting and have a
conference and just talk about stuff that needs to be addressed to protect the players, but also to protect fans and young players that want to become
professional footballers.
DAVIES: Do you ever get tired of the fight of the responsibility?
LUKAKU: No, because I have to fight because I'm not fighting only for myself, I'm fighting for my son, for my future kids, for my brother, for
all the other players and their kids, you know, for everybody. Because at the end of the day football should be an enjoyable game. You cannot kill
the game by discrimination. That should never happen.
Football is joy, it is happiness. And there should be -- it shouldn't be a place where you feel unsafe because of the opinion from some uneducated
people.
(END VIDEOTAPE)
KOSIK: And Amanda joins me live. Amanda, great interview there. What are the chances though that a meeting is going to happen and that action will
actually be taken?
DAVIES: I mean, that's the big question, Alison, and as Romelu Lukaku himself put it to me, if we can beat the ill-fated European Super League,
you might remember in a day, why can we not take any action against this online hate with all the tech at our disposal? It's really been a growing
problem, particularly in the last few months.
But the good news is the response to what Romelu called for there, a meeting from the football organizations that we have spoken to. The Premier
League have said they will be contacting him to have discussions with him. The Football Association here in England say they've been in touch with
Chelsea to arrange a discussion with Lukaku saying, "We always welcome conversations on this important subject with players and others across the
game."
But -- and there is always a but -- you then move to the social media, the tech companies and as far as Facebook and Twitter are concerned, whilst
they have responded by issuing a statement, fairly generic statements that we have heard from them in the past that they do not tolerate any form of
racism, hate or discrimination on their platforms, they haven't specifically responded to those calls from Romelu Lukaku for a meeting
about what is actually going to happen and that is really the growing momentum that we're seeing, Alison.
You know, what happens next? We've got it, talking about the gesture of taking a knee in football. Does it still have the impact as when it started
18 months ago and the same trend is happening here.
[09:55:12]
DAVIES: We've had Words. We've had discussion, but what real action is going to take place, and that, we still haven't heard from the social media
companies.
KOSIK: Yes. Statements are only statements. They can only go so far. We shall wait and see.
Amanda Davies, thank you so much.
And that's it for the show. Be sure to connect with me on Instagram and Twitter @AlisonKosik.
"Connect the World" with Becky Anderson is next. I'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
