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Quest Means Business
Sri Lanka Death Toll Significantly Downgraded to 253; Deutsche Bank and Commerzbank Merger Talks Collapse; Macron Addresses Nation After Months of Protests. Aired 3-4p ET
Aired April 25, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: We are in the final hour of trade. The Dow is down. Let me give you a look. We're easing back from
those record highs, but we are off the lows of the day. It is a tale of two halves. So let me give you a look at the broader market.
The NASDAQ up four tenths of a percent and on pace for a fresh record. All about Facebook, all about Microsoft. Let me explain some of the details of
what we're seeing in this session today.
Well, I can tell you it was an earnings bonanza, tech soaring while 3M delivers a paper cut. A merger breakdown, meanwhile, Deutsche Bank and
Commerzbank going their separate ways. Some analysts though believe consolidation will be inevitable. And the End Game is the beginning. The
"Avengers" blockbuster is breaking records and it's expected to break even more.
Live from the world's financial capital, New York City, I'm Julia Chatterley. It's Thursday, April 25th. This is QUEST MEANS BUSINESS.
Welcome to the show. Once again, tonight, a tale of two indices. Let's take a look at the U.S. markets once again. Corporate earnings front and
center. Despair to 3M. These guys are the makers of Post-It Notes. It is dragging down the entire Dow. Meanwhile, it's the spring of hope on the
NASDAQ as strong tech results push it to record highs.
Come over here and let's add to our earnings Post-It wall. 3M, as I mentioned down more than 13 percent after an earnings with the company
slashing jobs and says it will undergo a quote "major restructuring." Facebook meanwhile, gets a yellow Post-It note. The results, stellar. The
stock rallying, but Facebook is bracing for a fine of up to $5 billion from the U.S. government over privacy violations. Red for Tesla. It was an
ugly quarter all around. Tesla lost more than $700 million. Revenues plummeted and investors are seriously concerned about the level of cash
burn once again. Finally, Microsoft, solidly green strong earnings across the board has sent its market cap into trillion dollar territory.
And we're not done yet. After the bell, we will get Amazon, Intel, Ford and Starbucks. All right, let's talk about the markets right now. Joshua
Wein is the Vice President and Co-Portfolio Manager at Hennessy Funds. He joins us from Raleigh, North Carolina. Joshua fantastic to have you on the
show.
Interesting tone in the market today. We had weakness in the Chinese stock markets overnight, then we had the U.S. manufacturer, 3M reporting weaker
results. China, Europe, you name it weakness, and the market got a bit nervous here.
JOSHUA WEIN, VICE PRESIDENT AND CO-PORTFOLIO MANAGER, HENNESSY FUNDS: It did. It did, Julia. Yes, the morning was interesting to watch, you know,
so we had some interesting earnings data, obviously, Facebook and Microsoft, you know, strong reports, a lot of growth. I think we all know
what's going on at Facebook and Microsoft and Microsoft.
Most interestingly, I would say are two things. One would be 3M, which you mentioned, the worst day in 32 years, and I think investors look at that as
a great source of information. You know, so it's more than Post-It Notes, as we know, it's telecommunications and healthcare that's embedded within
this company and industrials and a little bit of everything -- adhesives.
So it's not sexy, but it says a lot about at this point in the cycle, what investors care about, at least initially. So initially, it was, "Oh, maybe
things are slowing." We've had reports out of Europe and most recently, South Korea, some weak GDP numbers. But then to your point, yes, Facebook
and Microsoft, certainly today gave a bit to the market, at least the S&P.
And so yes, it's been interesting to watch to kind of get a sense of what people care about. And right now, its growth.
CHATTERLEY: You know, it's interesting to watch what's going on in the bond markets at this stage, too. If you look at the session yesterday as
well, bonds were going up, stocks were weakening. We saw rates coming right down. I mean, the market is very bearish about what's going to
happen.
I mean, the Federal Reserve could even cut rates this year. What's the risk that we see a bumper growth number tomorrow in U.S. GDP numbers, and
suddenly the market goes, "Yes, we're okay again."
WEIN: That's right. You know that's a great point. So looking at the bond market gives a lot of information. So 3M gives you a lot. Looking at
the bond market this morning, infinitely more information. So, the idea -- you know, looking at Fed fund futures and what does that imply for a rate
cut over the next nine months, it's a nearly 70 percent chance of a rate cut in the next nine months.
So GDP tomorrow, obviously, people will be paying attention to that. I would argue, maybe not quite as much as one might think. I think, the Fed
is front and center.
[15:05:11] WEIN: It probably shouldn't be that way. There's a lot of great growth stories out there -- the U.S. economy, U.S. corporate growth.
But ultimately, it's about a rate cut, and how accommodative will the market be? And right now, it seems like the Fed is on the same page as the
market.
CHATTERLEY: Yes, it's not doing anything. It is sitting on its hands. It's being patient. And yet two seconds ago, I was just talking about near
record highs for these markets, a record high for the NASDAQ right now. So as an investor, when the message the bond market is saying to you is, look,
we've got a growth problem here, when you look at China, and you get nervous there as well. What should investors be doing? Because I see lots
of confusing signals here?
WEIN: Sure. Well, you know, it's a great question. It always comes back to, you know, how do we use what we're learning from what the market is
telling us and then, you know, we would argue at Hennessy, is just to stick to a plan, be disciplined, have some kind of a repeatable, disciplined
process.
We focus on value and earnings growth and stock price momentum and don't get too involved. It's great to get a feel for what's going on in the
economy and around the world. But ultimately, it's about staying disciplined and having some kind of a process. So I think people should
stick to their plan. There will be pullbacks inevitably, most likely, given where the Fed stands, it's a great time to add to positions, add to
funds, top up the equity allocation for those that are a little bit underweight their target, but I would argue doing nothing is not the worst
decision here.
CHATTERLEY: So if January, in hindsight, which admittedly, 2020 was a great buying opportunity. You're saying at this moment, perhaps keeping a
higher allocation of cash sitting on your hands here? Not the worst thing to be doing?
WEIN: Well, yes, I think for those with cash, you know, when there are pullbacks, I think the Fed is, is watching quite closely. It's clear that
they are going to be accommodated. The ECB is going to be accommodated, the Bank of Japan were awash in liquidity. And I would actually say,
getting back to your question for those with cash, certainly on pullbacks, add to positions.
And for those even without a pullback, I think that it is hard to argue with the idea that with the 10-year around two and a half, and the markets
kind of earnings yield well above 5 percent, margins expanding, we're not over levered as a corporate society here. So it's a good setup, especially
with the market near highs. It's a good setup for a leg higher.
CHATTERLEY: Yes, it's tough to call it. Joshua Wein, thank you so much for weighing in.
WEIN: It always is.
CHATTERLEY: Yeah, it's tough. Great to have you.
WEIN: Thank you, Julia. I appreciate it very much.
CHATTERLEY: Thank you. All right, let's send to Facebook now. We were just talking about shares are up more than 6 percent, that's after strong
earnings offset the news that the company is expecting a big fine from the Federal Trade Commission -- the FTC -- between $3 billion and $5 billion
according to Facebook, ouch, or maybe not. So look how much Facebook's market cap has risen today alone. It is worth $32 billion more than it was
yesterday.
Let's get to the business side first. Brian Stelter is in Washington for us. Brian, I mean, there are two things here. The numbers ultimately, and
of course, the fine and the risk of future regulation here. But you know, I look at this and go, you know, fines, data breaches, users don't care.
Advertisers don't care. Facebook is winning here.
BRIAN STELTER, CNN CHIEF MEDIA CORRESPONDENT: Facebook is winning here. You can view Facebook on one of two levels. On the user level, you're
right. Yes, you walk into Facebook, it's like going into a graffiti-ridden mall. You know, all of this ugliness written on the walls, a lot of
trouble for Facebook. But on the Wall Street level, here it is, the stock up six and a half percent right now on the earnings yesterday.
Investors are thrilled with the performance of the company. Wall Street analysts are very pleased by the earnings, some of them upgraded their
stock this morning. And this is of course, a reflection that the regulatory hurdles, the cost of doing business, these billion dollar fines,
they've been baked in. They've been priced into the stock.
I think in some ways, investors were actually relieved that the FTC fines are not going to be higher. Of course, the guidance from Facebook is going
to be $3 billion to $5 billion, which is an unprecedented sum of money for the FTC to be fining Facebook, but Facebook had $15 billion last quarter,
as you mentioned, the market cap there. You know, there are $30 billion - $40 billion just on the back of this earnings report.
I kind of think for Mark Zuckerberg, this fine, it's just like an expensive vacation, you know. He'll feel it in his wallet for a week, and then I'll
move on and forget it ever happened.
CHATTERLEY: Yes, I'll call it peanuts.
STELTER: Yes, exactly.
CHATTERLEY: If this is how it comes out, they are laughing. What about very quickly Instagram here because analysts have come out and said, you
know, in 2019, this could be 50% of their revenue capabilities. The generation here. The risk here ultimately one day is that they go, you
know what we're going to have to separate out. We're going to break Facebook down and you can't operate.
[15:10:11] CHATTERLEY: Elizabeth Warren has taunted the prospect of this, then Facebook has got a problem. But until then, I think it's a buy here
and I never make judgment calls like this on television. I don't see anyone clamping down on them.
STELTER: I'm here in Washington. I've been at a conference today all about social media, regulation, regulation, regulation, what's going to
happen? I've got be honest, I don't think there's a lot of people to think that there's going to be serious, smart regulation of these companies.
The government is always trying to play catch up in these cases, and these companies, especially Facebook, they seem to be well ahead of any potential
changes to their business models. These companies, they're not just a mile ahead, they're out of sight in terms of how far they are ahead of
government regulators.
CHATTERLEY: The perfect setup. Brian stay there. I wanted to bring in Maureen Ohlhausen. She was the acting Chair of the Federal Trade
Commission until April of last year. Maureen, fantastic to have you with us.
MAUREEN OHLHAUSEN, PARTNER AND CO-CHAIR, BAKER BOTTS ANTITRUST PRACTICE: Thank you for having me.
CHATTERLEY: When Facebook comes out and says, look, we're managing expectations, we're provisioning here, a likely fine from the FTC is $3
billion to $5 billion. What do you say in response to that?
OHLHAUSEN: Well, the FTC imposes fines based on the power that Congress has given it right. And the power that Congress has given it is
approximately $42,000.00 per violation. So the question is, what's the violation? And if it's counted by the number of users or the number of ads
sent out, or something like that, you know, that that's how that fine is calculated.
But the number that's being floated, which is in the billions is orders of magnitude larger than the FTC has ever gotten in a privacy violation
previously.
CHATTERLEY: I mean, Google we can get back to an example of Google back in 2012. And it was peanuts. It was millions.
OHLHAUSEN: $22.5 million.
CHATTERLEY: Yes, not billions at this stage.
OHLHAUSEN: Right, right.
CHATTERLEY: Do you think it's enough to the base in the conversation we were just having there. I mean, when you've got a company that's got
revenues of $15 billion a quarter; $65 billion on an annual basis, is charging them even $5 billion moving the needle here? Do you think it
makes a difference?
OHLHAUSEN: I think it can make a difference on a number of fronts. And I think that's the reason why Congress has set it up this way, which is that
the company, the fine is not just the only redress or penalty or remedy that might be included. So typically, an order with the FTC also requires
certain behavioral changes, or provisions to be put in place. So the money is only part of the remedy.
CHATTERLEY: There has to be action to follow through.
OHLHAUSEN: Yes.
CHATTERLEY: Does Congress need to give the FTC more powers? Because you've said, your lead at the beginning -- you know, the FTC can only do
what the Congress is allowing them and the powers that they've invested in them. Would you like to see the FTC with more power? And would you like
to see ultimately a far higher fine, let's say than Facebook has speculated of $5 billion?
OHLHAUSEN: Well, I would like to see Congress gives the FTC some more authority. The FTC has done a good job with the power that Congress has
given it to address privacy and data security concerns. But there has been increasing concern that perhaps those powers need to be augmented, that the
FTC needs more resources. It's a relatively small agency. It punches way above its weight. But we could use more resources in this space. And also
the ability to, perhaps levy fines for initial violations, not just subsequent violations.
CHATTERLEY: Does regulation needs to look more like what we see in Europe, because in many cases, with Facebook, the likes of some of the scandals
that we've seen and the data breaches that we've heard about, we've only heard because of the European rules, and that they have to notify the E.U.
within 72 hours. Does the U.S. need the same kind of privacy rules as Europe?
OHLHAUSEN: So I disagree with premise because the FTC has actually been a rather active enforcer on the privacy front and has brought more than 500
privacy and data security cases, including against some of the biggest companies.
Now, of course, Europe has adopted the GDPR and there are questions about whether the U.S. should adopt a similar framework. I think there are very
good things in the GDPR, giving consumers more transparency and more control, giving a little more insight into what's happening with their
data. But on the other hand, the U.S. has been an enormously innovative market. And I would be concerned about something that would pull away from
that, really, so much of the online innovations has happened in the U.S. and that's not an accident.
CHATTERLEY: Brian, that's a valid point, the risk of over regulating, but you were just saying, look, we're so far behind the curve as far as
regulating for these kinds of issues in the United States. How do we find a balance here that that fits, that protects users, protects customers,
protects individual's data, even if they're not willing to protect their own.
STELTER: Yes, Facebook had eight percent user growth in this quarter, meaning in terms of daily active users, more than 1.5 billion, these users
must not be that concerned about what's going on with their data, or at least they've decided it's worth the cost.
[15:15:11] STELTER: All of this is essentially a cost benefit analysis. Can we reduce the cost of using these social networks and gain more of the
benefits? That's what we need to focus on. It's not a yes or no, it's a how. How to make this happen? And there are a lot of great nonprofits and
academics that are doing this work right now trying to figure out the right solutions. They are studying models from other countries and thinking
about how they could apply to the United States.
So I think what maybe needs to happen here in Washington is there needs to be more outreach to those academic and nonprofit sources to take a look at
what smart regulation might look like, if that's going to happen.
CHATTERLEY: Agree?
OHLHAUSEN: Absolutely. I've been involved in a lot of those discussions that are going on in Congress.
CHATTERLEY: We just need it to happen sooner. Maureen, fantastic to have you with us.
OHLHAUSEN: Thank you.
CHATTERLEY: Maureen Ohlhausen there. All right, when we return, Tesla's profitable streak, it comes to an end. The electric car maker's results
going into reverse and Nigeria's Oil Minister concerned about Donald Trump's style of nationalism. Don't miss CNN's interview with Africa's
biggest crude oil producer. That's coming right up. Stay with QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to the show, a troubling earnings report for Tesla. The electric car company lost $702 million last quarter. Its
shares now down some four percent, at one point hitting a 52-week low.
Some investors are having trouble figuring out simply how to value the company. That's because Tesla is a car manufacturer and the battery
company. It says it plans to establish a taxi network and is even promising to sell auto insurance. That means you can't analyze it like you
might Ford. This is what two Tesla watchers told me on "First Move" today.
(BEGIN VIDEO CLIP)
CATHIE WOOD, CEO, ARK INVESTMENT MANAGEMENT: Our minimum expectation for the next five years is that they will raise $10 billion. Our bull case,
this is our bull case is that they will raise $20 billion and the reason they will do it is because they are launching an autonomous taxi platform,
which is going to be hugely profitable. We should -- we want them to do this.
BRADLEY TUSK, FOUNDER AND CEO, TUSK HOLDINGS: Elon is a billionaire a global celebrity and icon because he says and does audacious things and
when they work, they're astounding. He is sending rockets to Mars and creating this totally electric car and really cool stuff. Most of the time
it doesn't work, but he pulls it off just often enough that we keep watching and keep paying attention.
(END VIDEO CLIP)
[15:20:10] CHATTERLEY: We definitely watch. Nick Colas is the co-founder of Datatrek Research. And he joins me now. Great to have you with us.
NICK COLAS, CO-FOUNDER, DATATREK RESEARCH: Thank you.
CHATTERLEY: Let's talk the numbers first, because it was a really tough quarter.
COLAS: It was. I mean, the company only sold 63,000 vehicles versus expectations of 75,000 to 80,000. And in an auto company, when you sell
fewer units, you make less money.
CHATTERLEY: So revenues plummeted from 37 percent in the quarter, as you said, this question is about demand. They are hoping to stimulate demand
from the likes of China, from Europe. Here, there was cash burn. Uber bull, Cathie Wood there of course of ARK Investment said, raise $10
billion, raise $20 billion. Would you agree that actually the market knows now they're going to have to raise money?
COLAS: Absolutely. The market understands they have a cash drain this year, we've seen that in the first quarter numbers. Mr. Musk talked about
it on the call, and that there's no secret, they're going to have to raise some money. The question is, how do you pivot to different business model
and convince the Wall Street that that business model will stick before you can go out and raise the $10 billion or $20 billion that you've heard
about.
CHATTERLEY: I call it a Marmite stock because you either love this or you hate it, and people are so passionate on both sides of this one. But
another thing that Cathie said to me and I kind of alluded to there was, "Look, a car analysts cannot look at Tesla and make a good judgment call
effectively, because it's not a car company, batteries." Whatever is going on with the autonomous technology, the sheer quality of the technology,
chips, as well, was another thing we discussed. You've been a car analyst for a long time, what do you make of that comment?
COLAS: I think it's accurate to the degree that you have to believe Tesla is going to be something more than a car company because otherwise it's not
even worth its current market cap of $46 billion. You do have to believe in that pivot.
But that means you have to believe that you can develop an autonomous vehicle in the next three to five years, get it onto the streets, get it
approved by regulators and have it produce revenue at scale. No one has done that yet. So it's a huge leap of faith.
CHATTERLEY: Do you believe that if anyone can do it, Elon Musk can do it? I mean, he's built a car giant, they are having technical issues, but when
you're taking on some of the incumbents that have been around for decades and decades and decades, like Bradley Tusk said there, you know.
COLAS: Yes, I don't think anybody thinks of anybody besides maybe General Motors with its cruise vehicle unit is being really a market leader on
autonomous. I think you look at, say, a Google's Waymo, as really being one of the preeminent companies, perhaps some other companies as well. So
it's a different field of competitors. But they're no less powerful than the traditional auto companies on auto design. Elon Musk is going up
against Google as much as he's going up against anybody else.
CHATTERLEY: Yes, look at the share price as well and we've bounced off that $250.00 level a few times, that feels just technically to me, a
really, really important level here, just in terms of investor sentiment. What do you say to investors about this one? Do you just say, look, if
you're in for the long haul -- like Cathie would like these long term investors? I mean, her bull call here is $4,000.00 on the share price,
it's that okay?
The second, there's a timing issue here. You have to survive as a company in a viable way, in the short term in order to reach the long term.
COLAS: Yes, I mean, I think you have to look at it and realize perhaps that Mr. Musk built the wrong kind of company out of the gates. He built a
car company that produces cars, where really what the market wants is a service company, like the robo taxis he described, but also like Uber and
Lyft that have managed to become public at very good valuations, still losing a lot of money in the trailing four quarters.
So you have to believe in a pivot that the market will accept that and you really have to believe that in the next five years, you'll be able to get
on your phone and call an autonomous cab. That's the critical technology you have to believe in. If you don't, you can't buy the stock.
CHATTERLEY: Do you believe in it?
COLAS: No.
CHATTERLEY: Interesting. Nick, I do. Yes. Come on. I believe it. I'm believing in the dream. Nick Colas, thank you so much for that. It's
because I'm lazy. In Elon Musk's world, we wouldn't need to talk about oil. Meanwhile, the crude is very much on investor's radar today, Brent
touched to $75.00 a barrel, a six-month high. Some European countries suspended imports of Russian crude fighting pipeline contamination. It
comes as the U.S. tries to crack down further on Iran. The Trump administration wants to prevent Iran from exporting any oil.
Nigeria's petroleum minister tell CNN, that's not happening. He spoke to our John Defterios and gave his take on President Trump and the rise of
nationalism.
(BEGIN VIDEOTAPE)
EMMANUEL IBE KACHIKWU, NIGERIAN PETROLEUM MINISTER: The reality is that even though this will affect production out of Iran, oil is going to come
from some other sources other than Iran, but you do need to be able to manage that properly. If everybody goes back to you produce whatever you
can, then we're back to the old, pre-2014-2015 situation.
And then of course, you know what happened. Oil went down to $20.00 a barrel. Nobody in OPEC wants that.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: So you have to be flexible to respond to the drop in Iranian production. But do you actually
see Iran going to zero as Washington is looking for -- is that realistic? Because they were hovering around a million barrels in terms of exports.
KACHIKWU: No, I don't think so. It's not possible. That's what they have. So they're going to sell oil somehow. But as small third parties
will add to true alignment with countries that are much more receptive to their causes, they will sell oil. They will have to struggle to sell the
same volume that they are selling today, but they will definitely sell oil.
[15:25:11] DEFTERIOS: How about Russia's role, perhaps with North Korea after the Summit? China seems determined to say that this is a legitimate
agreement. Why should they go to zero in terms of imports? Do you agree with me?
KACHIKWU: Yes, absolutely. They are countries that are very affiliated to Iran who worry about those because one economy down in OPEC is also -- it
has effect just like what is happening in Venezuela on the entire OPEC, so we are really very sympathetic to these countries.
DEFTERIOS: March 2018, we had $86.00 a barrel when the Trump administration was talking about getting out of the nuclear agreement. Do
you see that happening again?
KACHIKWU: The reality is that the market has got a much more stable. Oil sources have gotten much more diverse. Quite frankly, some of these --
even if you see challenges out of Venezuela, out of Libya, and out of now, potentially Iran, America has a million to a 1.5 barrels and they can
fairly quickly bring back into the market to increase the production.
DEFTERIOS: As you know, President Trump has gotten very Twitter happy when oil went above $70.00 a barrel. We're touching $75.00 now, but he only has
himself to blame. He can't look at anybody else and say you're being greedy.
KACHIKWU: The other countries also beginning to be pivot from that America First Policy into their own country first policy. And so you actually
bring a bandwidth of selective individualism, --
DEFTERIOS: Nationalism.
KACHIKWU: Nationalism and creates its problems. When you take away Iran, you have the problem in Venezuela and the uncertainties in terms of
governance of the big powers and they are self-inflicted crisis.
DEFTERIOS: You held strategic talks with Saudi Arabia with the Minister of Energy. Do you think they'll utilize Nigeria as a strategic springboard
into the rest of Africa?
KACHIKWU: Yes, getting into Africa, Nigeria as the springboard is key. Nigeria provides huge resources. Huge oil producer, certainly biggest in
Africa. Russia has some of the highest investments into Africa. So from Saudi's potential growth into the world. They are already in China. They
are already in the U.S. They are already in most of Asia. Africa is a market that is really untapped and there's no better place to go into
Africa than Nigeria.
(END VIDEOTAPE)
CHATTERLEY: And that was the Nigerian Oil Minister talking to our John Defterios. All right, we are going to take a quick break here, but still
to come when big bets don't pay off. Failed deals and new worries about the global economy and look at what happened to Commerzbank and Deutsche
Bank. Well, the same reason as they come to their dead end. That's coming up. Stay with us.
[15:30:00]
(COMMERCIAL BREAK)
[15:30:00] JULIA CHATTERLEY, HOST, QUEST MEANS BUSINESS: Hello, I'm Julia Chatterley, there's more QUEST MEANS BUSINESS in a moment. When merger
talks come to nothing. Two banks and two supermarkets go their separate ways and after months of street protests, President Macron announces his
economic reforms.
Before that though, the headlines at this hour. Sri Lanka's Health Ministry now believes 253 people were killed in Sunday's terror attacks.
That's less than previously believed. At the same time, officials have arrested a wealthy Sri Lankan spice merchant in connection with the Easter
Sunday attack, facing two of his sons were among the suicide bombers and they want to know where he held them.
Russian President Vladimir Putin says he's pleased with the outcome of his summit with North Korean leader Kim Jong-un. They held their first face-
to-face meeting in eastern Russia Thursday. President Putin later said North Korea needs international security guarantees to proceed with
denuclearization.
After months of deliberations, former U.S. Vice President Joe Biden has finally entered the crowded Democratic race to evict Donald Trump from the
White House. He launched his presidential bid today, saying nothing less than the soul of America is at stake.
Climate change protesters from the group known as Extinction Rebellion blocked the entrance to the London Stock Exchange on Thursday. Other
Extinction Rebellion protesters climbed on top of a tree at London's Canary Wharf, blocking it from moving.
The group says today was the last of nearly two weeks of high profile protest activities. Shares of Commerzbank and Deutsche Bank ended lower in
Frankfurt. The German rivals agreed to a ban in their merger talks, bowing to shareholder concerns and criticisms over likely job cuts.
A deal would have created a bank with over $2 trillion worth of assets. Now, the door could open for another player perhaps to buy Commerzbank.
Matt Egan is following it all in the CNN business newsroom. Matt, great to have you with us. As you and I were discussing earlier, the only person
you could really find that thought this might be a good idea was the German Finance Minister. What exactly happened with the failed deal here and what
next?
MATT EGAN, CNN BUSINESS SENIOR WRITER: So Julia, this corporate marriage may have been due much from the beginning. The Labor Unions hated the idea
of Deutsche Bank and Commerzbank joining forces because it could have caused the loss of up to 30,000 jobs just to make the numbers work.
And analysts all along had question the wisdom of having -- of combining too big, yet struggling banks just to create a bigger and still struggling
bank. German politicians and the Finance Ministers of course, they did like this idea. That's because it would have created this German super
bank with as you mentioned $2 trillion in assets which is the kind of scale they felt they need to compete against the big U.S. banks.
But the elephant in the room is that these are not the healthiest banks in the world. Commerzbank is still 15 percent owned by the German government,
and that's because of the bail out in 2009 after the great recession. And Deutsche Bank is trading near all time lows.
Which is really quite the statement when you think about the fact that U.S. stocks have never been higher, and major U.S. banks not named Wells Fargo
have produced really strong returns. But you know, just because this deal has not happened doesn't mean there won't be future deals in this space.
In fact, the UBS CEO Sergio Ermotti, told reporters today that he thinks that this simply just delays the inevitable, which is further consolidation
in Europe. And he should know UBS is reportedly in talks with Deutsche Bank over potentially combining the asset management divisions of these two
companies, that would be a way to create a competitor to BlackRock and Vanguard.
Commerzbank on the other hand has been rumored to be a potential merger candidate with other European banks, namely ING of the Netherlands or
UniCredit of Italy.
[15:35:00] And Julia, there's another idea that's making the rounds, and that is that the "Wall Street Journal" is reporting that Deutsche Bank is
considering creating a bad bank. And that would be an entity to hold some of the unwanted or less desirable assets and businesses there.
Of course, when you look at the long-term returns for Deutsche Bank, I think some longsuffering Deutsche Bank shareholders may argue that they
already own shares in a bad bank.
CHATTERLEY: Yes, I would perhaps agree with you there, Matt, yes, politically unfeasible, unpalatable at least, any of these options. Matt
Egan, great job, thank you very much for that. All right, on to another deal that will not be happening. British regulators have shelved Wal-
Marts' plans to sell its U.K. supermarket chain Asda to Sainsbury.
The merger was valued at more than $9 billion, and would have created a retail giant with 2,800 stores. Shares of Sainsbury's closed down 4.5
percent in London. Anna Stewart has more on the food deal that flopped.
ANNA STEWART, CNN REPORTER: Well, the U.K.'s competition watchdog says that simply no effective way of addressing their concerns. They say this
merger would have increased prices for consumers and reduced competition in the grocery market.
And that's actually despite the very best efforts of both Sainsbury and Asda to prove otherwise. They had in fact, promised 1 billion pounds worth
of price cuts for consumers and a cap on petrol prices at their gas stations. While disappointed, both companies have mutually agreed to drop
the transaction.
And it leaves investors worrying about what happens next for these supermarket chains. Both are struggling in a highly competitive market
with discounted retailers like Lidl and Aldi eating away at market share. Now, you can see from Sainsbury share price today, it really suffered and
actually fell 6 percent early in the session.
The Sainsbury CEO will be under pressure to unveil a plan B for the company's future strategy, and he can do so next week because it's earnings
time, he'll have that earnings call. You may remember this embarrassing moment for the CEO which was caught on camera just before an interview he
delivered when this deal was first announced last year, take a listen.
(BEGIN VIDEO CLIP)
(SINGING)
MIKE COUPE, CHIEF EXECUTIVE OFFICER, J SAINSBURY: We're in the money, the sky is sunny. Let's lend it, spend it, send it, ruining although.
(END VIDEO CLIP)
STEWART: Now, the CEO did apologize for that incident which is perhaps even more embarrassing now that the deal is off, and Sainsbury it seems is
far from being in the money. Now, as they face similar challenges, but it does have the backing of a big international owner Wal-Mart.
And Wal-Mart has steadily withdrawn from some of its international markets like Germany and South Korea. So there's some analysts speculation out
there, that it may seek a joint venture partner for Asda or even select after a private equity firm.
But since Asda has actually performed pretty well recently, it actually overtook Sainsbury in terms of market share according to research group
Cantor. It's unlikely to need an express checkout. Back to you, Julia.
CHATTERLEY: Anna Stewart, thank you for that. And these are tense political times of course in Europe, to Hungary's ruling party is on the
brink of being expelled by its conservative allies in the EU parliament and could be sanctioned by Brussels which has interviewed with the Hungarian
Foreign Minister is up next. Stay with us, we're back in two.
[15:40:00] (COMMERCIAL BREAK)
CHATTERLEY: Welcome back to the show, President Macron has responded to months of angry protesters on the streets of France. Macron is promising
tax cuts and other reforms. He's talking especially to the Yellow Vests demonstrators and those who support them saying the demands they've raised
are justified.
Melissa Bell joins me now from Paris. Melissa, this is after weeks and weeks and weeks of protest. Do we have any sense of the scale, the cost of
the kind of tax cuts and reforms that he's promising here. Did he go far enough?
MELISSA BELL, CNN CORRESPONDENT: Well, that is exactly the right question, I think. Because on one hand, we did have what were in any normal
circumstances in France a pretty radical set of announcements. Things like tax cuts for the middle classes, a minimum pension of a 1,000 euros a
month.
The reform of France's notoriously bloated civil service cuts within it. And yes, a great deal of questions really left unanswered about how
precisely this was all going to be paid for, yes, going after people who don't pay their taxes, taking on what the French president described as
fiscal measures.
But very little in the way of concrete changes and things like 35 hours a week, what kind of pensions overhaul will France be in line for? You kind
of sensed the French president trying to turn a crisis when it's clearly a crisis and those of his speech was about how he made mistakes in the past,
he now heard the people and he was willing to change.
But how to turn that into an opportunity to restart, to kick-start his stalled reform program, you kind of sensed that the French president was
really left in between trying to do both things, and there are so many questions tonight despite a two-hour press conference that remained
unanswered.
CHATTERLEY: I mean, he's deeply unpopular at this stage, his popularity is in the percentages in terms of we're talking 30 versus the 60 percent that
he had when he first came to power here. Just how bad a defeat do we think he's going to see when we get to the European parliamentary elections.
And do you think that changes anything here or sends a strong message back to him that perhaps you know, he's got to really take this bull by the
horns here and make significant changes or he's going to face real trouble come the next election?
BELL: I think that was definitely the spirit that inspired tonight's speech because he spoke for a good 40 minutes before the journalists were
allowed to ask any questions outlining those reforms that he proposed. And again, trying to do both things.
A piece on one hand say that he'd hurt people in trying to kick-start something that was always an ambitious reform agenda for France. But I
think that is in a sense a crucial question after these 23 Saturdays in a row of protests. Did he go far enough to convince people that he really is
changing, that he has heard them, and is going to change tap or on the country proceed with what has been his liberalizing agenda.
And that remains unclear. Clearly, he's trying to grab the things ahead of those European elections in which for the time being here in France, the
party of Marine Le Pen leads the polls ahead of his own. He clearly has a lot of work to do at home to convince people of a need to stick with him
rather than heading towards the populace.
But it's unclear whether tonight would have managed it. These 23 Saturdays in a row, Julia, I have seen the numbers in the streets grow smaller, but
their demands grow more radical and their mood more revolutionary and more directed at the person of the French president himself.
CHATTERLEY: Yes, reform is tough for successive French presidents of France. Melissa Bell, thank you so much for that. All right, as we were
mentioning there, there's one month to go until those European elections. Hungary's Foreign Minister says nobody can stop his government from
criticizing the European Union.
Hungary's ruling party has been suspended by the biggest conservative group in the EU parliament for peddling conspiracy theories about Jean-Claude
Juncker, George Soros and immigration. And the EU has triggered an article 7 violation, opening the door to sanctions on Hungary for attacking the
rule of law. Richard asked him if he'll commit to stopping the blatant anti-EU campaign.
(BEGIN VIDEO CLIP)
PETER SZIJJARTO, FOREIGN MINISTER, HUNGARY: The definite thing that Jean- Claude Juncker has failed. And he was a very unsuccessful president of the European Commission. He made very bad decisions, he made a lot of mistakes
as an outcome and the consequences of which European Union now is a weaker integration than it was --
[15:45:00] RICHARD QUEST, CNN: But --
SZIJJARTO: Before he had taken office.
QUEST: But was it -- was it the right thing to do to portray him with George Soros who is best we can tell has nothing to do with any of these
issue. You are setting up what some say is anti-Semitic. Other people simply say you are aiming to set up a division.
SZIJJARTO: Look, we think that one of the -- one of the worst decisions of the European Commission majoring this last -- there was this verdict,
decisions regarding migration. And definitely, George Soros has put forward a plan about how to bring migrants to Europe, how to get rid of the
national heritage and the cultural heritage of the countries themselves.
And the European Commission acted according to the plan of George Soros. That's what we have settled, that's what we have --
QUEST: And the other countries --
SZIJJARTO: Set with this billboards --
QUEST: And the other countries went along with the plan. The other countries went along it --
SZIJJARTO: Some of it --
QUEST: Well, majority --
SZIJJARTO: Some of it --
QUEST: Did --
SZIJJARTO: Yes, they did, of course --
QUEST: The majority did.
SZIJJARTO: But we didn't. Look at the central European countries, look at the central European countries, we were absolutely against that plan, we
wanted to protect our border, we were successful in that. We made it very clear that no illegal migrants would enter the territory of our countries.
This is absolutely supported by the people. Last year, we had one or two further majority elections --
QUEST: But not the -- but not the European cult, not the European cult and not the European parliament. Can you just have --
SZIJJARTO: But we have a serious debate with the European parliament --
QUEST: Right --
SZIJJARTO: You're absolutely right, a very serious debate about migration because we are absolutely going against the mainstream industry, God,
you're right. Because we represent a very strong anti-migration policy and European parliament represents a very strong pro-migration policy.
So obviously, there is a big clash and these big clashes will be decided by the people at the end of May, 26th of May, European parliament election
will take place. So it's the best thing to leave it to people.
QUEST: The only problem people have is the way you prosecuted your claim. Look, there is no other country that I can think of in the EU at the
moment, that is just about to be thrown out of the EPP except -- or party, except you were going to leave before you do.
Article 7 on the grounds of respect for the rights, enshrined with the union, around over campaign which is concerning the commission president
and a general feeling that you are, that Hungary does not follow the same values on the rule of law as the rest of the EU.
SZIJJARTO: So if I can address --
QUEST: Go ahead --
SZIJJARTO: All four --
QUEST: Please.
SZIJJARTO: Regarding European People's Party, a very serious debate within the EPP. You know, EPP is supposed to be a central right Christian
democratic group of parties in the European Union. Then we joined European People's Party, it was a true Christian democratic party.
Now, EPP has been in coalition with the socialist for a long period of years in the European parliament. And unfortunately, the socialists have
saved the European People's Party more than we would have saved the social. So that's what I can tell you.
That if the European People's Party opens up much more to the left than currently, they may not be able to follow that. So, that's a very serious
debate. We try to -- we try to form European People's Party back to where it had been before, but we are not quite sure that it is going to be
successful.
On Article 7, I can tell you that the base is for this whole debate within European Parliament between them and us is about migration. All other
issues around that are fake, are fake. You know, the report which has been passed by European Parliament is a fake report about Hungary.
QUEST: Ultimately, who do you want to see as the next commission president?
SZIJJARTO: Well, actually, we are members of European People's Party, so we definitely support --
(CROSSTALK)
With the top candidate of the European peace --
QUEST: The man you support, the man who came to Budapest to say take down the posters.
SZIJJARTO: Right, you know, once again, we are still members of EPP, we are loyal members of EPP, but we have a very serious debate within, and we
think it's very unfair how he himself, and some --
QUEST: Right --
SZIJJARTO: Others treat us. And we really do think that it's our democratic right to speak up and to be honest and straightforward. With
all these issues, we're not going to hide in our position about the future of European Union. We're not going to --
QUEST: Right --
SZIJJARTO: Hide in it.
(END VIDEO CLIP)
CHATTERLEY: Fascinating conversation there, Peter Szijjarto; the Hungarian Foreign Minister speaking to Richard. All right, let's take a break, but
coming up, "Avengers: End Game" is already smashing Box Office records, we're talking blockbuster numbers, next.
[15:50:00] (COMMERCIAL BREAK)
CHATTERLEY: Whatever it takes indeed. After 11 years and 21 films, this isn't the end, this is just the beginning. "Avengers: End Game" already
set the opening day Box Office record in China. In the United States, it's already racked up the most pre-sale tickets ever.
Some analysts say it could make $800 million globally this weekend. For more on what's about to happen? CNN's marvel-maniac Frank Pallotta joins me
now. Frank, what's going to happen, I don't mean the movie, of course, I mean, the Box Office receipts?
Because the Chinese here have really gone for it. I mean, films scheduled every 15 minutes blowing all sorts of records, talk us through it.
FRANK PALLOTTA, CNN BUSINESS MEDIA WRITER: I mean, look at it this way, "Infinity War" was last year, and that was the biggest global opening of
all time. It's $640 million, that was without China. So, now, adding potentially another 200 to maybe $250 million on top of that.
And you're looking at a close to a billion dollar weekend if everything goes right for Disney. And so far, it looks like everything is going
right. Great example is that Fandango; an online ticket seller has announced today that it is the number one pre-seller in its history,
overtaking "Star Wars: The Force Awakens" which if you ever heard of it is a pretty big film itself.
And that it's already sold out 8,000 show times domestically. That's an insane number. So we're just going to get more and more numbers as the
weekend goes on, but so far, great start for Marvel, the super heroes and Disney.
CHATTERLEY: Great expectations clearly, with all the pre-sold tickets as well. Frank, you have seen it, like I said, don't give us a spoiler here,
but is it that good?
PALLOTTA: It's very good. It's a very great conclusion to the story that they have been telling over the last ten years. A story that has been a
blockbuster story. A story that has been one of the biggest success stories in all of Hollywood, racking up $18.7 billion. That is insane.
What's great about this movie is that unlike other Marvel movies, you kind of felt like OK, well, it's going to continue in the next one, it's going
to continue in the next one. All those people will be back, all those people will be back. This one has a lot of finality in it.
This feels like an ending of a chapter. Obviously, there's going to be more movies, there's going to be more shows on Disney plus, this is far
from the last Marvel branded piece of content we're going to get. But in terms of the story, we have been telling or Disney has been telling, I
should say, over the last ten years, this seems like it's the ending.
It's almost kind of like a TV series finale more than a movie.
[15:55:00] CHATTERLEY: You know, it's interesting as well to see a big U.S. blockbuster doing so well in China just to circle back. It's
interesting just in light of the bigger tensions that are going on right now. You could have perhaps question going into this, whether American
culture would have taken a bit of a dent in China as a result of what we're seeing with the trade war.
And yet, what we're seeing here is that they can't get enough of it.
PALLOTTA: Yes, the thing is that Disney knows how to make a global brand. And one of the biggest global brands it has is Marvel. You take something
like "Star Wars", "Star Wars" is an incredible huge franchise, but it stumbles a little bit when it gets to international countries because it
didn't have the type of growing up with the products the way that I did over the last 40 years.
I mean, I haven't been alive for 40 years, but you know what I mean. In terms of Marvel though, the superheroes have always been around, everyone
kind of loves superheroes and it's a huge global brand. So it's not that crazy.
CHATTERLEY: OK, you've sold me, I'm going to go and see it over the weekend, Frank, thank you so much for that.
PALLOTTA: Go see it, I'll tell you exactly what happens right now, go.
CHATTERLEY: And we'll --
PALLOTTA: Go --
CHATTERLEY: Talk about it afterwards, thank you for that. All right, they're just moments left of trade on Wall Street this Thursday, we'll have
the final numbers and the closing bell right after this. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: We are in the last few moments of trade here on Wall Street. The Dow nearing its best levels of the day though, as you can see behind
me, still down more than 100 points. Three-M; the U.S. manufacturer to blame its shares are down more than 13 percent. The maker of Post-it Note
announcing a major restructuring after missing across the board on earnings, raising concerns again about global growth, U.S. growth, too.
What about Facebook though? Have a slew of solid tech results, Microsoft also in focus. Look at that, one of the top performers pushing the Nasdaq
to a record closing high. Now, the attention turns to a new crop of results after the closing bell, eyes will be on Amazon's revenue, Intel,
has a new CEO at the helm of course, Bob Swan, who will lead the call for the first time.
Ford kicks off earnings season for the automakers too, and Starbucks investors are keen to know how its expansion in China is getting on. So
those are all the results we are going to be watching. But as you can see, that is the closing bell in Thursday's session, and that wraps up QUEST
MEANS BUSINESS, I'm Julia Chatterley in New York, the news continues here on CNN. Stay with us.
(BELL RINGING)
END
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