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Quest Means Business
Stocks Rise After China Cuts U.S. Tariffs Over Coronavirus; Coronavirus Death Toll Jumps Past 560; U.S. President Donald Trump Make His First Major Speech Since Being Acquitted; President Trump Celebrates Impeachment Acquittal and Slams Democrats and Romney; Venezuela's Guaido Says He had a Very Good Meeting with President Trump; Democratic Party Chairman Calls for Recanvassing in Iowa. Aired 3-4p ET
Aired February 06, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:14]
ZAIN ASHER, CNN INTERNATIONAL HOST: Look at that, green across your screen. U.S. clearly at record highs, despite all of the fears surrounding
the coronavirus, the markets have clearly moved on. They have simply shrugged those fears off.
These are the markets and those other reasons why. China slashes U.S. tariffs hoping to reassure investors nervous about the coronavirus
outbreak.
Acquitted and unleashed. President Trump takes aim at the lawmakers who tried and failed to remove him from office.
And a dream debut for Casper. The mattress giant jumps more than 20 percent on its first day of trade.
Coming to you live from the world's financial capital here in New York City. It is Thursday, February 6th, I'm Zain Asher, in for my colleague,
Richard Quest, and this is QUEST MEANS BUSINESS.
All right. Good evening, everybody. I'm Zain Asher. Tonight, trade optimism outweighs virus fears on Wall Street.
China's dramatic response to the spread of coronavirus is lifting U.S. stocks to record highs. Beijing is easing off its trade war tactics with
the United States. It is halving -- cutting in half -- tariffs on $75 billion worth of goods hoping to boost confidence as the coronavirus
outbreak gets worse.
All three of the major market indices on Wall Street are in the green and are setting record highs. Cristina Alesci is here to break it all down for
us.
Cristina, clearly coronavirus is still the headline. There's still fears about the coronavirus. But really, markets today certainly seemed to like
this news coming out of China.
CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: Of China, yes, so what's going on here as you accurately described in the
introduction is that China is lifting some retaliatory tariffs on American goods coming into the country.
And what this is, is easing up on tariffs on that last batch of goods subject to them, part of the $75 billion, part of the $75 billion did not
actually get hit with tariffs.
So part of that, basically, the tariffs that were 10 percent will go down to five percent. The five percent tariffs will come down to 2.5 percent.
But the big question is what happens to the other tariffs that still have - - the other U.S. goods that still have retaliatory tariffs on them and that sum is about still $100 billion, and included in that tally are
agricultural products that are very important to U.S. farmers.
And that is a big question, can China fulfill its promise to buy agricultural products with the tariff still in place on most of the
agricultural products they promised to buy? How does that happen?
And when the U.S. and China signed the trade deal, funny enough, the details on how to make those purchases happen were not included. That's why
everybody was kind of scratching their head on how China is going to do it.
So what we're really looking for in terms of easing of tensions between the two countries is an even greater lifting, you know, more lifting of tariffs
on that additional amount -- those additional goods.
ASHER: But this move by China, what does it mean for Phase 2 of the U.S.- China trade deal?
ALESCI: Look, Phase 2 is still nobody knows what that means. And China, especially, I was speaking to a few of my sources last night is eminently
confused about what the administration really wants.
It seems to China -- from China's perspective that the U.S. just wants to continue this fight for the sake of having a fight to talk about especially
when you talk about Donald Trump and his 2020 election promises, China really feels like you know, he created a problem in order to go out and fix
it for, you know, the U.S. population.
But the risk for the United States is, you know, will the farmers feel the impact of China restarting their purchases of U.S. agricultural products?
And that is very dangerous sort of risk that Donald Trump is taking in this whole back and forth.
But I do think that with both sides easing tariffs, it is a step in the right direction, a good sign for Phase 2 to answer your question.
ASHER: Yes, we'll see what ends up happening, but thank you so much for you keeping an eye on the story for us, Cristina Alesci.
And here is the latest figures for you for the outbreak. The number of people killed by the coronavirus has actually jumped to 565, all but two of
the deaths have come from inside Mainland China where there are 28,018 people to be specific confirmed with the illness.
Experts believe that this figure is drastically underreported and likely to rise. There are 259 cases of the virus outside of Mainland China and the
virus is now confirmed in 25 other countries and regions around the world.
There are actually 28 in Singapore, 25 in Japan and Thailand, 14 Australia and 12 right here where I am in the United States.
[15:05:13]
ASHER: More companies are warning about the impact the outbreak could have on that businesses. Yum China, for example, which operates KFC, Taco Bell
and Pizza Hut says it could actually post a loss in the first quarter.
Yum has temporarily closed more than 30 percent of its restaurants in China.
Qualcomm, the world's biggest maker of smartphone chips lowered its earning guidance. Nearly half of Qualcomm's revenue last year came from China and
Nintendo says the virus will delay shipments of it switch console. Nintendo mostly uses Foxconn factories, which are currently closed.
Ben Phillips is the Chief Investment Officer at EventShares. He joins us live now from Los Angeles.
Ben, thank you so much for being with us. So just explain to us this disconnect we're seeing here. We're seeing all of these companies suffering
because of the coronavirus outbreak, but at the same time U.S. stocks are at record highs. What gives?
BEN PHILLIPS, CHIEF INVESTMENT OFFICER, EVENTSHARES: Yes, it's an interesting phenomenon, right? I think we were looking as we went into the
beginning of the year for a potential pullback just because markets were pretty overextended, overbought, lots of liquidity out there and we weren't
sure what was going to cause it, but it looks like it was coronavirus caused the little pullback.
Now, I think in the past, any sort of these epidemics, we've looked at the past five, really have been buying opportunities. That's what the market
viewed them as.
And so I think the market view them as a buying opportunity. There's a lot of liquidity out there, chasing the same assets, which is stocks. And, you
know, I think the market is looking past this.
We've seen it look like it's peaked on a non-China basis. So that's the virus and still growing in China. And like you mentioned, tough to know,
the actual numbers.
But you know, I think the market is looking through it right now.
ASHER: And the fact that China is basically throwing a lot of money at their financial system, how much is that helping at all?
PHILLIPS: That is certainly helping, and I think as you mentioned, the tariff cutting is a little bit of a shock, right? I think China is doing
everything they can right now to goose their economy.
They're putting hundreds of billions of dollars into their economic system, into their financial system. You know, they're doing everything they can to
fill the void that this coronavirus clearly has caused in the economy.
I mean, we saw travel for the Chinese New Year down 80 percent year-over- year across all modes. So it's a big -- it's a big hit the Chinese economy and the government is stepping in to try to fill that gap.
ASHER: So when you think about SARS, and obviously that was relatively short lived, is there the same feeling that this time the same thing will
happen? That this is not going to go on forever? That at some point, it will be certainly contained?
PHILLIPS: Yes. I mean, it's tough, right? Like I'm not a doctor, but you do get kind of worried when you see things like this that spread quickly
and cause you know, potential deaths as well.
So it's tough to say. I think the market just looks at past events, and it's only a few different events, but SARS is the most recent example, and
so I think people said, you know what, after the peak fear in the market occurred there was -- you know, the markets rallied dramatically to new
highs within one to three months following that peak fear.
And so the question is, have we seen that peak fear? The market right now is saying yes. So I think, you know, looking pretty constructive, assuming
this doesn't get a whole lot worse and start expanding outside of China.
It looks like it's plateaued outside of China right now.
ASHER: China is obviously the world's largest energy consumer, what effect is this going to have on commodity prices going forward, do you think?
PHILLIPS: Yes, great question. I mean, we were looking at SARS, which was back in 2002, I think it was the time frame, but we're looking at 2002-2003
consumption.
China's economy was consuming, you know, something in the order of magnitude 15 percent, one five percent of kind of base metal, steel and
things like that, you know, five to six percent of oil.
Now they're at 50 percent, over 50 percent of all those base metals and steel. Oil is 30 to 35 percent. You know, you have semiconductors at 35
percent. So China is a massive part of the global economy now, and it is a much different phenomenon. We're more interconnected.
China matters more for global growth, and so if China does go through a prolonged period of weaker growth, the whole world is going to feel that.
ASHER: Ben Phillips, live for us there. Thank you so much.
PHILLIPS: Thanks.
ASHER: Fitch Ratings says the coronavirus will slow China's economic growth. It said the scale of the slowdown depends on the intensity of the
crisis.
Speaking earlier, China's Ambassador to the U.K. said there could be negative economic effects. Still, he urged the public not to overreact.
(BEGIN VIDEO CLIP)
LIU XIAOMING, CHINESE AMBASSADOR TO THE U.K.: It is understandable that there are concerns in the U.K. and the rest of the world about the
epidemic.
Some people are worried that it might have a negative effect on China's economy, or even the world economy.
There are also over reactions by individual countries, panic among the public, and even insulting and discriminatory remarks and behavior
targeting the overseas Chinese community with regard to this issue.
(END VIDEO CLIP)
ASHER: Rana Foroohar is the associate editor at "The Financial Times." She joins us live now.
[15:10:09]
ASHER: So, Rana, it's tempting to sort of look at the coronavirus and then look at SARS and draw comparisons.
But the world is fundamentally different now when you compare it to 2002- 2003, and China's role within the global economy couldn't be more different.
RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Absolutely. I mean, that's spot on. If you go back 20 years, China was a much smaller part of the
global economy.
Now SARS, you know, the economy took a hit, and there was a lot of fear factor around that. This time around, the sheer size of China, I mean,
since 2008, since the global economic crisis, China has represented the largest single chunk country-wise of global growth. It's about a third of
global growth.
It's as much as the U.S., Europe and Japan combined. So you know, I mean, as always, when you're talking about China, the numbers are big, and so
whatever happens, whether it be a hit to outbound tourism --
And it's interesting I was just in Istanbul a couple of weekends ago with my daughter, got upgraded to an amazing room because the Chinese weren't
there.
You know, all of these emerging market countries that now depend on this Chinese tourists are being hit. Supply chains are being hit. Wuhan, Hubei
Province is a big area for supply chains. That's why you're seeing companies on the tech sector and car companies start to give profit
warnings.
So there's just this ripple effect and we're going to see in the next few weeks, just what impact the size of China in the global economy has.
ASHER: When you listen to companies talk about the risk for them especially with closing down factories, shutting stores, I mean, you name
it. Estee Lauder, Nintendo, Qualcomm, all of these companies are affected.
Which companies and which industries and sectors would you say are most at risk at this point?
FOROOHAR: Well, I think that there's two ways to look at it. First is the consumer story and you've already got the Chinese tourists impacting a lot
of places.
The Chinese tourist is interesting because he or she spends a lot more money typically. They travel farther.
So in the U.S. for example, Chinese tourism was already tailing off because of the U.S.-China trade war, but Chinese tourists were coming last year to
the U.S. spending $8,000.00 a pop, staying for two weeks.
So you've got that retail sector being hurt, you've got airplanes, you've got travel and tourism. But then you've also got the supply chain story.
That's a broader story. That's going to hit the tech sector. It's going to hit consumer goods, white goods, luxury brands.
I mean, most luxury brands make the majority of their money in China now. So all of that is going to be affected. I think they hit will be very broad
based.
Goldman Sachs is actually saying that this could shave a half percentage point of growth not just off China, but off the U.S. this year.
ASHER: Chinese authorities are saying that this is overblown and the U.S. is overreacting to this. Do investors agree? Just given that the markets
are at record highs right now?
FOROOHAR: You know, it's an interesting question. I think that there are two things in the market right now.
One is worries about China and worries about China in some ways are just an excuse to trigger broader worries in the market.
A lot of people are ready to sell. You know, I mean, there's a lot of reasons to sell right now. But you've still got Central Banks with their
monetary policy easing going. You've got rates pretty low.
So there's this sort of 50/50 balance and you can see it. A lot of people are still in stocks, but a lot of people are in safety assets like gold. So
a very bifurcated story in the market right now.
ASHER: And just in terms of energy, commodity prices.
FOROOHAR: Oh, yes. Those are -- and those have been really tanking off the back of China.
I think what's going to be interesting is if China has to start doing a lot of its own monetary policy easing, and if you start to see this sort of
worry about the Chinese debt bubble, which we know is out there, right? It costs, you know, $4.00 of debt to create a dollar of growth in China.
At what point do investors say, no, that's not sustainable? I'm going to sell and then that starts a domino effect globally.
ASHER: Just in terms of China rebounding and coming out of this. Back in 2002-2003, during the SARS epidemic, Chinese growth dipped and then
rebounded 10 percent. We don't see those numbers from China these days.
But what's it going to take to really reassure investors that this is actually going to be okay.
FOROOHAR: Well, I think they're going to be looking to see the Chinese government do exactly what it's doing, which is say by any means necessary,
we're going to pump easing money into the economy. We're going to run down the Forex reserves.
But the thing is, China again is in a different place. Back during the SARS era, that was still the era of double digit growth in China.
So, you know, you had, a year after SARS, you still had 10 percent growth in China. Now, you're down to six percent. It is a whole different era.
ASHER: A whole different ball game.
FOROOHAR: So how much can authorities do to really calm investors? I think less so this time around.
ASHER: Rana Foroohar, always good to see you.
FOROOHAR: Thank you.
ASHER: Thank you. Okay, so President Trump may have been acquitted in the Senate, but he still holds plenty of resentment.
The President lashing out at one Republican who decided to vote against him.
And Casper Mattress's IPO was supposed to be a nightmare, so far today, the stock is a dream. Casper CEO is speaking to CNN. That's next.
(COMMERCIAL BREAK)
[15:17:25]
ASHER: U.S. President Donald Trump making his first major speech since being acquitted by the Senate in his impeachment trial.
He used the address to take a victory lap and attack of one Republican senator who voted with Democrats to convict him.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Then you have some that used religion as a crutch. They never used it before. An article written
today, never heard him use it before. But today, you know, it's one of those things -- but you know, it's a failed presidential candidate, so
things can happen when you fail so badly running for President.
(END VIDEO CLIP)
ASHER: Swiping there at Mitt Romney. Boris Sanchez is live for us at the White House. So Boris, did the President achieve what he wanted to achieve,
do you think with the speech?
BORIS SANCHEZ, CNN WHITE HOUSE CORRESPONDENT: Yes, I mean, this was a vicious victory lap. The President was at different times rambling with
unprepared remarks. He was dramatic in the way that he attacked his opponents, and in the way that he sort of showed pride in his supporters.
The President at one point even using expletives to describe this fiasco, saying that Nancy Pelosi, the House Speaker is a horrible person arguing
that she doesn't pray or that if she does pray, she prays for his downfall.
The President also going after, as you mentioned, Senator Mitt Romney, suggesting that Romney is sort of a Democrat, an enemy in hiding, arguing
that Romney voted for removal on that first Article of Impeachment because Romney is still bitter about having run in Trump's words, one of the worst
presidential campaigns of all time back in 2012.
The President also had these sort of awkward moments, where he was calling a roll essentially of his friends in Congress in the room.
He called out the Senate Majority Leader Mitch McConnell, Senator Mike Lee of Utah, the House Minority Leader, Kevin McCarthy, all of these lawmakers
in the room one by one, giving them praise and then pausing each time for them to get a standing ovation.
The President also getting a standing ovation for his legal team. We should point out there was some speculation about whether President Trump was
going to apologize about all of this in the way that former President Bill Clinton did after he was acquitted.
The President giving a sort of apology. He said, "I want to apologize to my family, for having them go through a phony rotten deal by some very sick,
evil people."
Zain, President Trump also not mentioning somebody who is central to this entire saga, his personal attorney, Rudy Giuliani not getting any thanks
from the President today.
[15:20:06]
ASHER: So Boris, can the President basically draw a line under this, put a button in this and then now move forward and focus on 2020? Is that going
to be the game plan?
SANCHEZ: Good luck with that. I think this is going to be central to his argument in 2020. The President is going to use this repeatedly going into
this battle that he's going to have with any of the potential Democrats running for the Democratic nomination.
Keep in mind, he feels momentum here. His approval rating is at an all-time high. Recently, he secured several trade deals that he feel empower his
argument.
Further, he is watching this fiasco going on in the Democratic side in Iowa with votes having to ultimately be recounted to determine a winner.
He feels strongly about where he is, and you can bet that he's going to exploit every possible opportunity to push for this idea that he is an
outsider who stands for his supporters taking on special interests in Washington-- Zain.
ASHER: All right, Boris Sanchez live for us there. Thank you so much.
And a programming note for our viewers at home. Don't forget, CNN is going to be holding four more town halls with President Trump's Democratic rivals
in a few hours from now.
We've got Bernie Sanders, Pete Buttigieg, Amy Klobuchar and Deval Patrick. It all starts at 8:00 p.m. Eastern Time, 1:00 a.m. Friday if you are
watching from London, of course, only here on CNN.
All right, New York residents caught in the crosshairs of a clash between their state and the Trump administration.
The Department of Homeland Security is banning all New Yorkers from enrolling or re-enrolling in the fast track Travel Program Global Entry.
The move essentially is retaliation over a new law that allows undocumented immigrants to obtain driver's licenses.
The D.H.S. has listed Global Entry as just one of several trusted traveler programs that New Yorkers are no longer eligible for. With Global Entry,
travelers can speed through borders and airport lines for five years after a thorough one-time background check.
Another program, Sentri is a similar one that let's qualified travelers reenter the U.S. quicker after traveling to Canada and Mexico.
Nexus is another one that expedites border crossings between the U.S. and Canada and FAST, the Free And Secure Trade Program or FAST clears
commercial shipments between the U.S., Mexico or Canada borders.
Marco Lopez is a former Chief of Staff on U.S. Customs and Border Protection. He joins us live now. Mr. Lopez, thank you so much for being
with us.
So just for our international --
MARCO LOPEZ, FORMER CHIEF OF STAFF ON U.S. CUSTOMS AND BORDER PROTECTION: Thank you, Zain.
ASHER: You're welcome. Just for our international travelers who might not be familiar with Global Entry. After this new policy kicks in by President
Trump, what changes for international travelers coming into New York at the airports?
LOPEZ: So look, this affects specifically the about 150,000 to 200,000 residents of New York that are members of Global Entry currently.
If they want to reapply or if a new person wants to apply, and they are a resident of New York, they will no longer be able to do that.
Of course, Zain, we know that this is nonsensical simply because it politicizes our security apparatus at Homeland Security.
When we launched Global Entry in 2009, we did it so that we could identify individuals who are coming to our airports.
Last year, by the way, 135 million air passengers crossed into America's airports, and so it makes that process a lot more difficult. And it's
really -- it doesn't make sense.
Only these rules apply to New York residents because of the whim of Donald Trump and probably his advisers at the White House. It does not make air
travel safe, and it only hinders our ability to screen passengers that -- those that we know, we want to get them through our lines quicker.
ASHER: Right.
LOPEZ: And by the way, it's voluntarily and they elect to give us information so that we know how their patterns are.
ASHER: So Marco, does it actually impact safety, this new policy in that, given that there will inevitably be longer lines at places like JFK, it
means that C.B.P. officers can no longer spend as much time as they might need to with unknown travelers? Is that what you're saying?
LOPEZ: That's exactly right. So I think passengers will experience longer delays, because now we won't have the ability to move those that we know
out of the -- needle in the haystack, right?
We're trying to identify that person that we don't know. So we can spend more time talking to them and interviewing them to see if we can let them
into the country or not.
And by the way, one of the interesting things about this is, there's 13 countries that are eligible to apply for Global Entry. The U.K. is one, but
there's 12 others aside from the U.K., and all those people don't have U.S. driver's licenses. So it's just a policy that does not make sense.
I don't know if somebody dreamt it up. But it really does hurt our ability to screen people.
[15:25:06]
LOPEZ: An officer at the booth has seconds to make a determination, should I let this person in? Should I ask him additional questions?
This, imagine now, you're going to have to do the same process for more people. Expect longer delays.
ASHER: So the President's argument would be actually, you know, even if this makes the country slightly less safe, it is New Yorkers or the
leadership in New York, the Governor, et cetera that have made -- that has made this state far, far less safe by allowing undocumented immigrants to
have driver's license.
Is that at all, in your world, a fair point?
LOPEZ: It is in no world a fair point simply because there's no requirement for you to have a driver's license to be able to apply for
Global Entry. It does not exist.
And so I think that it's just an attempt to put pressure on New York leadership to try to -- I don't know, give something in return for whatever
the administration is asking New Yorkers for.
So I don't think it's a fair point. I don't think it was thought up correctly. Again, having an individual apply for a driver's license.
ASHER: So what would you say would be the long term impact, do you think of politicizing the C.B.P. in this country?
LOPEZ: So look, I think that always in any department, whether it be Federal, state or local, the minute that you begin to use law enforcement
for political purposes, the bad guys take advantage of that, and will break through that system.
And so remember, every single day, C.B.P., Homeland Security has to be right a hundred percent of the time, so they can prevent a terrorist
attack, and the bad guys exploit that.
The bad guys just have to be right one time versus a hundred percent of the time that C.B.P. has to be right.
And so it makes that more difficult because in between the good guys are bad guys, and not being able to separate them so that someone I know you
travel every single weekend on an airplane, so I know who you are.
I should treat you differently than someone who boards a plane for the first time. I don't know anything about them, yet, they're sitting in front
of me. How am I going to treat them differently than I treat you that I know who travel every single day?
That's the danger that I think occurs when we begin to politicize law enforcement. It should not be politicized.
ASHER: Marco Lopez, thank you so much for sharing your thoughts with us.
LOPEZ: Thank you.
ASHER: All right, as markets rise, companies are dealing with the fallout from the coronavirus. Announcements from automakers are showing the impact
that is actually beyond just China. We will have that story after the break.
(COMMERCIAL BREAK)
[15:30:00]
ZAIN ASHER, HOST, QUEST MEANS BUSINESS: Hello, everyone, I'm Zain Asher, there's more QUEST MEANS BUSINESS in just a moment, when we'll look at how
the coronavirus outbreak in China could ripple through the supply chain for European automakers. And Casper didn't take fears of an IPO disaster lying
down. The mattress giant is soaring on its first day of trade. We'll hear from its CEO, before that though, these are the headlines we're following
for you at this hour.
And on chastened Donald Trump is celebrating his acquittal on charges of abuse of power and obstruction of Congress. At the White House Thursday,
the U.S. President calls his impeachment, evil, corrupt and unfair. He lashed out at Congressional Democrats accusing them of being vicious and
horrible, and he attacked the sole Republican Senator Mitt Romney, who crossed party lines to vote guilty on the abuse of power charge accusing
Romney of using religion as a crutch.
Juan Guaido; the president of Venezuela's National Assembly says he had a very good meeting with the U.S. President Donald Trump on Wednesday. He
also accused the Maduro regime of giving shelter to terrorists and says the opposition needs U.S. support to contain that threat. The U.S. Democratic
Party chairman is calling for re-canvassing of results from Monday's caucus in Iowa. Tom Perez made the announcement after technical glitches delayed
reporting of the results which are still trickling in with 97 percent of the vote counted.
Pete Buttigieg and Bernie Sanders are running neck-and-neck at the top. And the World Health Organization says there's been a slight drop in the number
of new coronavirus cases in China over the past 24 hours, but they warn it is simply too soon to say the virus is piquing. There are more than 28,000
cases, most of them in mainland China, Britain and Germany, each confirmed new cases today.
The virus has killed more than 560 people. All right, markets are at a record high this Thursday, and the Dow is up around 60 points, China
announced it would cut tariffs in half on $75 billion worth of U.S. goods. It is hoping to soothe concerns about the effect of the coronavirus on its
economy. Oil prices have plummeted as the coronavirus sparks doubt over global energy demand. The world's biggest oil producers are trying to raise
prices, still they're struggling to reach an agreement to cut production. John Defterios has more.
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR (on camera): The coronavirus brought an end to a robust oil rally despite high expectations at OPEC
producers plus Russia would come to the rescue with a fresh production cut. The so-called technical committee that includes OPEC and non-OPEC players
recommended a compromise reduction of 600,000 barrels a day. But a source told CNN that the Russians need more time to assess the recommendations.
Originally, another source said OPEC heavyweights Saudi Arabia proposed a much larger cut of up to 1 million barrels. Their deal was to reduce
production to cushion the blow from the turmoil in China, the world's largest oil importer. Prices initially rallied in hopes of a deal, and then
collapsed when the recommendations could not achieve a full consensus. The source added there's no date set for an emergency meeting, which would
eventually need ministerial sign off.
A regional head of a global commodity house confirmed to CNN that China's daily demand of 14 million barrels a day has dropped by 20 percent mainly
due to business grinding to a halt in many provinces. While it is clear according to the executive, that this will remain a challenge through the
first quarter of the year.
Median term weakness is not a given, and that is why the source close to the OPEC negotiation said, Russia was not eager to rush a judgment on a
production cut. John Defterios, CNN Business, Abu Dhabi.
(END VIDEOTAPE)
[15:35:00]
ASHER: The coronavirus is also taking a toll on the auto industry. Toyota is weighing whether to restart production in China after suspending
operations because of the virus. Hyundai is halting production in South Korea because of supply problems as well. And Fiat-Chrysler says that one
of its European plants is at risk if the outbreak worsens. Alison Kosik is with me now. So, Alison, the fact that this virus originated in Wuhan,
which is one of China's motor cities, how much damage is that actually doing?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: I mean, you think about it. The auto industry is particularly vulnerable because China makes more cars than
any other country. So then you factor in the fact that you know, this virus you know, emanated from Wuhan, and then of course, spread throughout China
where all those factories are, where all those carmakers are. And I want to list them just to give you an idea how many there are, and that this
probably is just a few.
General Motors, Nissan, Renault, Honda, Peugeot, Volkswagen, Hyundai, Toyota, Daimler, I mean, this is just a little over half a dozen car
makers, but they've had their factories shut down, which means they're not making cars. Those car parts aren't coming out of those facilities. All
right, so this is sort of like a picture of dominos going down. But even if those -- even if those cars and car parts were coming out of those
factories, guess what? They're not necessarily leaving China because what's happening now is, it's becoming a transportation issue.
Shipping companies aren't sending as many vessels because demand isn't there, and even if those vessels want to get into China, vessels are still
sitting at port because it's slow to discharge those items that are on those vessels. And then you've got vessels, others just sort of floating in
these quarantined zones as these countries like Australia and Singapore refuse to allow these ships that came from China to actually, you know,
unload their cargo until those on board are declared virus free.
So, as you can imagine, Zain, this is causing huge supply disruptions, and not just in China and their surrounding areas. I mean, you mentioned south
--Hyundai suspending production at its plant in South Korea because of disruption of supply parts. You think about it, Korea's car sector gets 29
percent of its parts from China. If those parts aren't coming out, they're not -- they're not -- let's say go for Hyundai, to go ahead and make its
cars.
Now, here is the thing, returning from the Center for Automotive Research, they're saying in a kind of tongue-and-cheek manner, you can't build a car
with 99 percent of car parts. You need all car parts, and since you don't have them, guess what? This is now the next domino that can come to the
United States. It's estimated that we could see here in the United States, a disruption to our supply in the next one to two weeks because China is
the number two or number three provider of auto parts imports to the U.S., and those of course come from China.
ASHER: And when you think about just the effect of the coronavirus on the auto industry overall, we're already seeing global car sales declining.
KOSIK: Right --
ASHER: How much does this prolong that do you think?
KOSIK: I mean, it's going to prolong it more, I mean, I think these automakers are expecting to take a hit to their bottom line at least in the
near term. I mean, the longer that this crisis drags on, the longer the supply chain gets disrupted, and the longer these car makers can't get
their cars out. The obvious is going to happen to their bottom line.
ASHER: Alison Kosik live for us there --
KOSIK: Yes --
ASHER: Thank you so much. All right, still to come, a turbulent week for Tesla. The stock speeding up, slowing down on everything from endless calls
to the coronavirus outbreak. We'll explain why it's been on such a roller coaster ride after the break.
(COMMERCIAL BREAK)
[15:40:00]
ASHER: Welcome back, everybody. Tesla shares are stalling after falling as much as 20 percent on Wednesday. They're now up about a quarter of a
percent of the highs of the day though. Shares hit an all time high earlier this week on bullish calls for the endless, yet news of the coronavirus
would actually delay, Model 3 deliveries caused the stock, as you can see there to fall and plummet.
Dan Ives is managing director of Equity Research at Wedbush Securities, he's here to explain to us what's happening -- what happened. It was --
this has been a massive roller coaster ride for Tesla.
DAN IVES, MANAGING DIRECTOR OF EQUITY RESEARCH, WEDBUSH SECURITIES: Yes --
ASHER: Up, down, up, down --
IVES: A roller coaster is an understatement --
ASHER: Yes --
IVES: Look, I think, first off, you've got to almost take a step back. It's the most emotional bull bear story that I've covered in 20-plus years
on Wall Street. So I think what started to happen is profitability that we saw last week, that really gave fuel in the engine for the bulls to take it
higher. Combined with China. The China thesis we think bull cases is worth about $300 per share. The bears are starting to go into hibernation mode,
then the straw that broke the camel's back was the Panasonic results.
That's the strategic battery maker, hugely bullish. Once that happened, that sent on a power bolic short squeeze for the history books.
ASHER: So just in terms of the coronavirus, where the Shanghai factory closing down temporarily. What sort of impact do you think that
specifically is going to have in the long-term?
IVES: Yes, I think the headlines are scarier than the fundamental impact.
ASHER: Right --
IVES: I think it's pretty contained, maybe 10 to 20,000 units that could push out. It doesn't really change that sort of China bull thesis for
Tesla. And that's fundamental, and that's the linchpin for Tesla. If you look at the stock over the last six months, China is probably 40 percent of
that rally because China's been, that's the door opener --
ASHER: Yes --
IVES: Because now from a unit perspective, Tesla just goes from domestic, not just to Europe, but China is five times as big of a market in terms of
U.S., in terms of EV demand.
ASHER: For you, when you think about where Tesla shares have been on the ride they've been on for the past 12 months, up about 140 percent in the
past year, has it risen too fast, too quickly do you think?
IVES: Yes, I think and then that's obviously the big question that we're getting. I think anyone else that follows the stock. I think the good news
is definitely been factored in ahead in terms of investors sort of discounting how big China is going to be. Look, I believe bold case is a
$1,000 stock. If you start to believe where we do that EV inflection, 2.5 percent all automobile to their eBay, that goes to 8 percent, 9 percent in
the next three to four years which is our prediction, then Tesla is a four- digit stock. So, it's one-ward, it's going to be up and down. No doubt about, although.
ASHER: I wonder what the short sellers would say to that.
IVES: And that's why I've had to shut my Twitter down. Because fundamentally as a short seller, right now, it's hard to sleep because
you're looking at Tesla, all the conspiracy theories, they've been put to rest because if you look fundamentally at the numbers, profitability,
everything must be accomplished. You'll get the giga 3 factory in Shanghai, all the credit that they deserve, they've gotten, that's why you're seeing
just a power bolic short squeeze, but also fundamental changes in the model that I think have shifted.
And I think fundamentally, many doubted Amazon and ecommerce in the move there. Look what's happened there, trillion dollar market cap. Look at
Apple, many thought smart phones was never going to be where it is today. Netflix doubted streaming. You don't want to doubt that next bolic run, so
I think that's also contributing to in terms of Tesla, you know, where they are in the Mount Rushmore, disruptive technology. I do not define them as
an automaker as some do.
[15:45:00]
ASHER: We'll certainly have you back on when Tesla shares reach a $1,000 a pop, we'll see --
IVES: Thank you --
ASHER: All right, still to come, expectations for Casper's market debut could not have been lower. The mattress company is giving investors a soft-
landing on Wall Street, shares are already up double digits, we'll have that story next.
(COMMERCIAL BREAK)
ASHER: Stock in online mattress company Casper jumped in its first day of trading. Shares were up around 15 percent after the company cut its
valuation twice in the past two weeks. It faces heavy competition in the growing sleep economy. Clare Sebastian has more.
(BEGIN VIDEOTAPE)
CLARE SEBASTIAN, CNN CORRESPONDENT (voice-over): Whether you like it firm or soft, memory foam or with a pillow top, buying a mattress has become so
complicated, it's a joke.
UNIDENTIFIED MALE: Hear ye, hear ye, delivery from the mattress king.
UNIDENTIFIED MALE: Hey you, it's cool, how many?
UNIDENTIFIED MALE: Are you sleeping in the middle of my department store?
SEBASTIAN: Over the last decade, start-up --
UNIDENTIFIED FEMALE: This is the box that started it all.
SEBASTIAN: Plus the start-up has woken up to the problem.
UNIDENTIFIED MALE: We are now on the path to sleeping right.
SEBASTIAN (on camera): Now Casper wasn't the first, and it's certainly not the cheapest among the online mattress disrupters, but it has risen fast,
starting online in 2014, it's now a $400 million business with 60 retail stores and 18 retail partners. Like this one, Raymour and Flanigan on New
York's Upper West side. In just four months, Casper has become one of their most popular brands.
STEVEN KOZAK, SLEEP CONSULTANT, RAYMOUR & FLANIGAN: The moment we started putting the Caspers on the floor, putting the marketing and the products in
the window, people are walking past Broadway all day long and it's bringing them in.
SEBASTIAN (voice-over): First impressions of the mattress aren't bad --
KOZAK: Keep sinking, sinking into the mattress.
SEBASTIAN: For Casper's business though, there might be a little too much sinking. The company says it expects losses of about 94 million in 2019. In
2018, the company spent about 155 million on sales and marketing expenses alone.
SCOTT GALLOWAY, PROFESSOR OF MARKETING, NYU STERN SCHOOL OF BUSINESS: That's losing money, and it doesn't appear to be reducing as operating
losses, even as against top line, meaning, there is no scale benefit here.
SEBASTIAN: Casper didn't comment for the story ahead of their IPO. The sleep economy can be unforgiving. In 2018, the U.S.' largest mattress
retailer Mattress Firm filed for bankruptcy, having expanded too fast.
KOZAK: The coil systems at the bottom will finally kick in and give you a little more pushback or resistance.
SEBASTIAN: And that's causing some resistance when it comes to Casper's bottom line. Clare Sebastian, CNN, New York.
(END VIDEOTAPE)
[15:50:00]
ASHER: Casper's returns so far today are simply dreamy. Most of last year has been a nightmare for IPO investors from Lyft and Uber to Pinterest and
SmileDirectClub, they all pranced on to the market with high expectations, but their stocks have stumbled. WeWork famously failed to reach the
starting line at all. The one exception, Peloton, even after today's major fall, it's still up since its IPO.
Casper has been lowering expectations for days. On Wednesday, it cut its initial offering price and its valuation in a dramatic fashion. Now, the
stock has jumped up so much, Julia Chatterley asked Casper's CEO why he made the decision to cut.
(BEGIN VIDEO CLIP)
PHILIP KRIM, CHIEF EXECUTIVE OFFICER, CASPER: Whenever you're raising capital, it's a moment in time around valuation, and so that's interesting,
but it's really not what our focus is. We're focused on building a long- term business, building a brand that stands for the best night of sleep possible, and that continues to be what drives us every day.
JULIA CHATTERLEY, CNN: How much was it to do with company sensitivity versus market conditions right now? Because we are coming off a period
where we have the WeWork situation. A greater sensitivity perhaps to profitability.
KRIM: You know, there's -- you know, what investors are thinking about today. But for us, again, this is just one moment in time and it doesn't
change what we're building with Casper. So, we think we have the right plan and the right strategy, we're going to continue to be really focused and
regular in executing that. And that's going to lead us to building the world's first sleep brand.
CHATTERLEY: Is the market saturated? The number of times when I've looked at this speculation coming into this IPO, and people have said, look, the
market's saturated, the competition is fierce. Even if Casper has a great product, it only takes you so far. Your response?
KRIM: Disagreed. I think people turned to the best when it comes to sleep. People know they're getting a great night of sleep is really important for
their overall wellness. And so they wanted that. So investing more and more dollars into sleep as part of their overall approach to the best wellness
equation possible. And that's where Casper comes in. The reason we're the number one rated mattress on Consumer Reports, the reason we're able to
launch innovative products is like our Pole Light(ph) or because we really focus on elevating sleep quality with everything that we do.
And that's something that we're maniacal about. And so we're going to continue to help the world sleep better through our innovative products
very different than having industries operate it.
CHATTERLEY: You know, the last time we spoke, you were talking to me about the importance of the online presence of the bricks and mortar. The key
with this though, and it kind of circles back to the profitability point is that it takes investment. And we can see that in the numbers. And again,
part of the sensitivity was your losses in 2019 were a touch higher than 2018.
Talk to me about managing the cost? Are you perhaps going to open less stores than you planned? What's the game plan here in the next six to 12
months?
KRIM: So we think that our path to profitability is something that we're marching well towards in the near term. And part of that is that we
continue to see real growth in our business.
CHATTERLEY: This year?
KRIM: Not commenting on specifics --
CHATTERLEY: OK --
KRIM: But near term path to profitability, and you're seeing that happen in the business. So, we're seeing operating leverage throughout our PNL, we
see a clear path to continue to drive growth and take real market share, and it's built on having a great brand and great products.
CHATTERLEY: You've also talked about being a wellness company, goes beyond the framing here of a mattress company.
KRIM: That's right --
CHATTERLEY: Talk to me about what that involves and looks like going forward.
KRIM: So as obvious as it sounds, it's very different in how we approach building our business. We say how do we help our customers sleep better?
That's not how our competition thinks. And when we ask ourselves that, we're thinking holistically about sleep. So, Casper has the end-to-end set
of products that you need to get the best night of sleep possible.
We're hoping -- organize the sleep economy in a way that no other company is doing. And for us, that's really exciting, and that's what consumers
want. They know that they need to exercise and they trust other brands around that. They know that they need to eat well. Casper's been the brand
that they trust for the best side of sleep possible, and we're helping them think about that holistically.
(END VIDEO CLIP)
ASHER: All right, breaking news now here into CNN. A Chinese doctor who sounded the alarm on the Wuhan coronavirus died of the virus in the early
hours of Friday morning according to a statement from Wuhan Central Hospital. Li Wenliang has -- was rumored -- was rather accused of rumor-
mongering by Wuhan police after raising concerns about the virus in December. There was some confusion earlier with state media reporting that
he had died, then later saying that, he was alive but in critical condition.
But now the hospital is now confirming that he has indeed died. CNN spoke to the doctor just days ago. David Culver joins us now from Beijing. So,
David, just first of all, just explain to us all of the confusion rather surrounding whether or not this doctor had died or not.
DAVID CULVER, CNN CORRESPONDENT: All right, Zain. So you've got two different narratives that are emerging here right now. You've got what is
obviously the very heartbreaking loss of Dr. Li Wenliang, he was 34 years old. He was a doctor, an ophthalmologist, as you pointed out, somebody who
sounded the alarm early on in this in December, told his friends in a WeChat group that something SARS-like was going around, warned them to be
careful.
[15:55:00]
Well, that got leaked out. The Health Commission got involved, police got involved. They reprimanded him, they said you are not to spread rumors. He
kept quiet, went to the hospital, and then seeing patients in early January at some point, contracted coronavirus himself. Now over that period of
time, his story started to emerge and state media and social media brought it to light.
People called for him to be vindicated. He was among several whistleblowers that emerged in that moment. Even the Supreme Court of China said that had
local authorities listened early on, and Wuhan police in particular, things might have been different when it comes to the current outbreak that China
is experiencing, and really the global community is experiencing right now.
The second narrative that's coming out of here now is this concern with state media and how they first reported this. It was late Thursday night,
just a few hours ago, they suggested that he in fact did die, and then the outrage and the emotion and the anger on social media here was quick. And
it was sudden. I mean, it came through and erupted. It was trending and folks were really starting to express themselves like you had not seen here
in years to be quite honest.
Then what happened was state media pulled it down, and they did that in citing Wuhan Central Hospital. And Wuhan Central Hospital said he's not
dead. He's in critical condition and we're trying to resuscitate him. And they maintained that statement for several hours. Meantime, the tweets that
came from global times, the tweets that came from "People's Daily", which is the ruling communist party's official newspaper, those were deleted and
folks online continued to express their concern.
And what we're now seeing is, they're posting back again, but the one top comment that's getting a lot of likes right now is somebody saying, you can
repost this in the middle of the night, thinking we're not watching, but we are up and we are watching. Zain?
ASHER: We got a lot of questions about transparency here. David Culver live for us there, thank you so much. There are moments left to trade on
Wall Street, we'll have the final numbers and the closing bell right after this.
(COMMERCIAL BREAK)
ASHER: All right, there are moments left to trade on Wall Street. The Dow is up 92 points or so despite some early stumbles. Boeing shares are
providing most of the gains for the Dow. The company has disclosed a new software glitch in the 737 Max, but says it won't affect the aircraft's
return to service.
(BELL RINGING)
We of course have record highs, and that is the bell, it's QUEST MEANS BUSINESS, I am Zain Asher in New York, the news continues right here on
CNN.
END
