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First Move with Julia Chatterley
President Trump Refusing To Tackle Infrastructure Spending With The Democrats Until The Investigations Stop; The U.S. Government Looks At To Subsidize Firms Hurt In The Battle Over Huawei's Technology; Tesla's Tumble, As More High Profile Analysts Raising Concerns For Stock Being Sold Premarket. Aired: 9-10a ET
Aired May 23, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE, and he is
your need-to-know.
Storming out. President Trump refusing to tackle infrastructure spending with the Democrats until the investigations stop. Playing the long game.
The U.S. government looks at to subsidize firms hurt in the battle over Huawei's technology. And Tesla's tumble. More high profile analysts
raising concerns for stock being sold premarket. It's Thursday. Let's make a move.
Welcome to FIRST MOVE once again where I can tell you, trade gloom is permeating the global markets I think. I think I've had enough of giving
you some of the signs of rhetoric that we've seen over the past few days. What about the real economic spillovers that we're seeing right now?
Well, look no further than Europe. The data there weakening and that's really setting the tone this morning. Take a look at U.S. futures at this
moment. We are lower off some 1 percent for the NASDAQ, too, adding to yesterday's weakness though I will point out, we did end the session off
the lows. So interesting price action going on here, too.
In aggregate, the S&P and the Dow trading prissy flat since Monday on the month though down, some two and a half percent, the NASDAQ really feeling
it, they are down 4 percent so far this month. Lots of names within that worse -- Apple down seven; Qualcomm down almost 10; Micron, the chip makers
of course, front and center, down 15.
As we've been saying all week, something material has changed in these trade negotiations or non-negotiations. I'm not sure we're getting that
right even with what we've priced right now.
Over in Europe, Germany, in particular, it's a sea of red, but Germany under pressure off over one and a half percent, 10-year yields in Germany
also falling further into negative territory. Noises of woe across Europe from the survey data, but German business activity and confidence taking a
hit.
Let's add some more salt to the wound, why don't we? The latest European Central Bank Minutes out today showing policymakers concerned that that
second half bounce that a lot of people were hoping for here simply might not happen.
Over in Asia. Asia stocks ending at the lowest level in four months. We know currencies have been bearing the brunt of the trade concerns for a
while. To add to the noise, the eye opening display, as I mentioned of what we can only call policy paralysis from Washington, D.C. yesterday,
President Trump refusing to work on an infrastructure plan with the Democrats while, the array of investigations are going on.
You can imagine what the Chinese are the thinking of U.S. politics right now. What was that quote that I gave you yesterday talking of rhetoric
from the editor of China's "Global Times," "Americans are about to have a nervous breakdown."
Let's get to the drivers because Joe Jones joins me from the White House. Joe, I don't think anybody really believed that we would see an
infrastructure spending bill coming anytime soon. But what was that display yesterday?
JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: It was an extraordinary display, Julia. I can tell you that. Highly unusual even for this White
House. But you're right. The idea of a $2 trillion infrastructure program, probably some -- was not going to happen simply because there were
a lot of Republicans on Capitol Hill, including, also, by the way, the President's Chief of Staff who was a budget hawk when he was on Capitol
Hill, all saying a $2 trillion proposal for infrastructure was simply a non-starter.
But what clearly happened here is the President went into this meeting with the Democrats from Capitol Hill. He had just heard the Speaker of the
House announce on television that in her view, the President was engaging in a cover up, he came out to the Rose Garden in what appeared to be a
preplanned speech that the journalists had only been told about shortly before, and he railed against the Democrats, their investigations,
suggested he wouldn't work on infrastructure.
There was an inference there that he might not be able to work with Democrats on other important issues that must come through the Congress
this year and then he left.
So today, here at the White House, the question is, what will the President work with the Democrats on? Just a few minutes ago, Sarah Sanders, the
White House Press Secretary was out here and she said that the President would work on a number of administrative initiatives, particularly on the
budget.
And we also know that as far as China goes, what you mentioned at the top, Sonny Perdue, the Agriculture Secretary is out here a little while ago and
he said that some type of program was anticipated that would provide something like $16 billion for farmers in the United States who have been
hurt by the continuing trade war with China.
[09:05:20] JOHNS: So it sounds like they're trying some workarounds, not clear how far they're going to go on legislation unless the Democrats,
however, unlikely on Capitol Hill decided to end their investigations -- Julia.
CHATTERLEY: Yes, it's interesting isn't it? Innocent or otherwise, making policy in this kind of environment has to be tough for this government, and
particularly the time when you have to show a united front to the rest of the world if you are tackling them on issues, like the Chinese intellectual
property theft, the U.S. politicians are kind of undermining each other right now.
Do you think it makes a deal more or less likely, because this is one thing that unites them. Even Chuck Schumer, himself has said taking a break
stance here against the Chinese is the right thing to do.
JOHNS: Well, I can tell you that this administration as a precedent- setting administration, they've thrown out the playbook in many ways. But on balance, if you look back to history, a variety of Presidents have
worked through a number of investigations, including Richard Nixon, who was under investigation and an impeachment inquiry. Bill Clinton, same thing.
Obama and Reagan, to a lesser extent -- all of them had investigations going on and they continued to do the business of the country in one way or
another and they continued to work with the Congress on issues that could come together on.
So the question is whether this President will do the same thing? Or if we will see, what is a de facto, a government shutdown until the
investigations are over; however difficult that could be on the country -- Julia.
CHATTERLEY: Yes. And a problem for the economy, too, if that means a suspension of an ability to reach a deal on trade. Joe Jones, thank you so
much for that. All right, sticking with this theme, of course, because as Joe mentioned there, support for farmers also, potential subsidies for tech
firms caught in the crossfire between the crackdown on China's Huawei, too, and the technology there. This is more global networks, including the
likes of Vodafone are now suspending business with Huawei in orders.
Samuel Burke joins me now. Samuel, as you and I discussed before the show, just continuing to count the cost here of the trade war.
SAMUEL BURKE, CNN BUSINESS TECHNOLOGY CORRESPONDENT: Yes, costs for American consumers or companies, interesting because now there's a proposal
in the U.S. Congress to actually set aside $700 million of U.S. taxpayer money to help those rural carriers in the United States that have become so
reliant on using Huawei's technology, especially their plans for 5G technology. So this bill would make it to they can't use that technology
and then that money goes to help them remove that and replace it with other technology.
I just want to put up on the screen for your viewers the market share when it comes to 5G equipment, because there is no natural American successor.
All those names that you see there are either Asian or European, you don't see one American company in there, although Intel does have some of that
space, but nothing significant, as you see there.
So this would indicate that it would be for national security reasons, maybe in the short term, but maybe in the long term, an American company
might want to get in that game, though, we've seen no sign of that whatsoever.
I do just want to note that just a few moments ago, Secretary of State Mike Pompeo, the U.S. Secretary of State, telling one of the financial news
networks that using Huawei is like putting your information in the hands of the Chinese Communist Party. I'm not so sure that he's ever put it that
bluntly.
But this, of course, is the heart of their argument. That's never been proven, at least publicly, though plenty of experts agree that this is a
real possibility, given that data law that requires companies to hand over data to the government in 2017 that went into effect in China.
CHATTERLEY: Yes, and increasingly hard to see a carve out for this company, even in the event of some future trade deal given the rhetoric
that we're seeing right now, how do you suddenly decide that this is no longer a risk, given how much weight you've put behind it?
Interesting comments from Huawei, too, overnight saying, look, in light of what we've seen from Google and them having to restrict their operating
system and apps, Huawei could have their own operating system up and running by the end of this year.
How useful is that when we're looking at Huawei's international business? All those consumers are going to operate under a Huawei operating system?
I'm not so sure.
BURKE: Never underestimate Huawei. I remember when people said they were just copying and then all the sudden they leapt ahead of Apple's phones.
I think it's really important to look at this new operating system that they're proposing in terms of China. That's, I think, a real possibility
and they're saying, just for the Chinese market, they could have the operating system ready by the third quarter of this year.
The issue here is internationally. They're saying that operating system wouldn't be ready until the following year for all the other markets. But
listen, even though I say don't underestimate China and Huawei, you also have to look at the history here.
[09:10:08] BURKE: This is an attempt that has been done by many companies to have their own app store, their own operating system, and it hasn't
worked, not even for Blackberry, which for all intents and purposes, really invented the smartphone. And even now, when you see a Blackberry, that's
actually an Android system. It hasn't played out that well for Microsoft either in their app store.
So to create a whole new environment, in it of itself is hard. But to get everybody into that ecosystem from Uber to Deliveroo, all the apps that
would need to be on there, I mean, every app that you use now would need to buy into this system and re-engineer. That is a huge feat.
CHATTERLEY: Such a great point -- BlackBerry and Microsoft -- although I have to say, I do miss my Blackberry, but maybe that's just me. Samuel
Burke, I know, I know. Old habits die hard. Samuel Burke, thank you so much for that.
All right, let's move on to our next driver. Tesla -- stock down some three and a half percent premarket. Key bulls or former bulls like Morgan
Stanley, Gene Munster, over at Loup Ventures weighing in here and raising fresh concerns.
Paul La Monica joins me now. There's been a sort of cascade effect since the latest results from Tesla. More and more analysts going at least in
the short term, "We're seriously worried right now." And some of them raising concerns about Chinese demand hereto in lights of the trade war, so
another victim there, too, Paul?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, there are big problems at Tesla right now and Wall Street has grown increasingly bearish, Julia.
You've seen analysts like Morgan Stanley's Adam Jonas, who used to be a big bull, the company saying that in a worst case scenario, shares could fall
all the way to $10.00.
Citi is a little bit more optimistic, you know, tongue in cheek, saying that in a bear case scenario, maybe the stock goes to $36.00. That's
clearly also a big drop from current levels. But you look at Loup's Gene Munster, he is worried about the impact of the China trade war on Tesla.
And then Dan Ives from Wedbush, who I know you're going to have on the show a little bit later, he is talking about the storm clouds are getting darker
for Tesla. He used to be a very big bull on Tesla as well.
CHATTERLEY: Yes, it's a huge sentiment shift all of a sudden, as I mentioned, the cascade effect and it'll be interesting to get Dan's take on
this. You know, when we start to hear the nervousness about Tesla, and we've been through these periods before, I think in the past, particularly
around that going private tweet, we talked about the possibility of them being bought by somebody like Apple, like Amazon, if the technology is that
good. What do we make of this?
LA MONICA: Yes, I struggle with the notion that Elon Musk would ever want to sell Tesla. I mean, yes, at some point, the cash concerns and the debt
level that they have could make an acquisition more palatable for a company like Apple or Alphabet, or maybe even a big auto company in the U.S. or
around the world.
But I don't see Elon Musk cashing in on Tesla. I don't see Musk working for someone else at a larger firm. Really, I think, unless it gets to the
point where he gets so bored with Tesla and decides to go all in on SpaceX and the Hyperloop, the boring company that he's working on, it doesn't
strike me as, you know, a rational idea for an investor to buy Tesla because they think this is an acquisition target. I just don't see it
happening.
CHATTERLEY: Yes, it's interesting, isn't it? ARK Invest of course, Cathie Wood, who's been on this show many times, too, they made their model free
access yesterday to say, "Guys, plug in some numbers. We remain bulls here." So we're going to be debating that later on in the show, too. For
now, Paul La Monica, thank you so much for that.
All right, let me bring you up to speed now with some of the other stories that we are following around the world. Twenty nine tornadoes have been
reported in the U.S. states of Missouri and Oklahoma in the last 24 hours according to the National Weather Service.
In Missouri's capital of Jefferson City, a violent tornado caused heavy damage and three people were killed during storms in another part of the
state. Many others remain trapped in the wreckage of their homes.
At this moment, voting is underway for the European Parliamentary elections as people in the U.K. and the Netherlands take to the polls. Over the next
four days, hundreds of millions of people within the 28-member Union will have the chance to vote for a new Parliament in the E.U.
Meanwhile, in the U.K., there's growing speculation that the end of May will come at the end of May. The Pound is sliding again under pressure as
the Prime Minister's pressure intensifies. A senior Cabinet Minister quit after Theresa May's latest Brexit plan opened the door to a potential
second referendum.
Nina dos Santos joins us now from London on this story. Nina, just bring us up to speed because we did see the intensification of pressure. We also
had that high profile 1922 Committee meeting later on in the U.K. yesterday and we spoke to one of their members. What happened there, too?
[09:15:00] NINA DOS SANTOS, CNN CORRESPONDENT: Well, what we're hearing, Julia is that overnight, at least yesterday evening, a lot of the political
reporters in the United Kingdom was saying that there had been a secret ballot of members of that powerful backbench committee, the 1922 Committee
that essentially decides the fate on who runs the Conservative Party, and therefore would be Prime Minister when they're in office.
And that the secret ballot has been held, that the ballots have been kept in sealed envelopes and that Theresa May, we know she is set to meet with
the Chairman of that 1922 Committee, Sir Graham Brady on Friday. The logic here that is circulating as yet unconfirmed is that if she does not go on
Friday, well, then they would unseal these ballots, and that could prompt a vote of no confidence, or at least be seen as a de facto vote of no
confidence.
Confusion abounds here, though, Julia, I have to be honest, because the reality is, is that according to the current rules of the Conservative
Party, Theresa May, has already faced one vote of confidence, and won it over the last 12 months, so in theory, she should be safe in her seat until
at least the month of December.
But always, she's had a wild ride so far, and at the moment, she is still holding on despite the fact that late yesterday evening, we also saw one of
her key Cabinet Ministers, Andrea Leadsom, a Brexiteer who was the Leader of the Commons, she resigned, saying she could no longer support Theresa
May's new version of her Brexit plan -- Julia.
CHATTERLEY: Every day of these negotiations, and back and forth, is a day lost in working out what the heck the country does next. "Capital
Economics" overnight came out and said the probability of every option here -- an election, a no-deal exit, whatever it is, a second referendum -- all
rise here. What happens afterwards? How long does it get for the Conservative Party to find another leader and to move on here?
DOS SANTOS: Yes, well, we've got to be careful about what we say at the moment today, obviously, because it is the day when the U.K. is going to
the polls. Voters in the U.K. and the Netherlands are voting as part of the European Parliamentary elections. And as such, any kind of speculation
over the positioning of these parties is off limits.
But whatever the outcome is, obviously that will also have a significant outcome on the direction that Brexit takes. Now, in the meantime, what we
know is that the planned Brexit vote that was earlier floated earlier on in this week when Theresa May gave a speech slightly a changing her Brexit
stance as she prepares to bring this withdrawal agreement over to Parliament to vote for a fourth time that was supposed to take place on the
third of June. It appears as though that has been pulled.
So the next round of voting again, is in disarray in terms of the timeframe. And as you pointed out, yet, again, each time we've seen the
opportunity of a second referendum bubbling up, it appears to go away, a hard Brexit bubbling up, that goes away. Now, we could be into leadership
territory and potentially as you said, a new election -- Julia.
CHATTERLEY: Yes, the three words I was going to say, "Not anytime soon." Nina dos Santos, thank you so much for that.
All right, we're going to take a quick break. Still ahead, facing a grilling. McDonald's work is taking their beef with management out into
the streets as activists turn up the heat at the company's AGM.
And staying grounded, regulators meet to decide the fate of Boeing 737 MAX jets, but the plane's next takeoff is likely to be further delayed. Stay
with us. You're watching FIRST MOVE.
(COMMERCIAL BREAK)
[09:21:26] CHATTERLEY: Welcome back to FIRST MOVE down on the floor of the New York Stock Exchange and we are counting down to what looks like more
losses for the U.S. equity markets at this moment, the NASDAQ under most pressure at this stage. Also Europe, the handover was weak with the ECB
warning and perhaps that we won't see a recovery in the back half of this year. That's adding over in currency land to some dollar strength.
Remember, we were talking yesterday on the show about the weakness in Asian currencies as well. The pressure that we've seen on those -- all currency
has -- related to what we're seeing in terms of the trade deal or the non- trade deal. Are we still too complacent?
Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management joins us now. Lisa, always a pleasure to have you on the show.
LISA SHALETT, CHIEF INVESTMENT OFFICER, MORGAN STANLEY WEALTH MANAGEMENT: Good to see you.
CHATTERLEY: You have been warning about complacency about the trade deal for a while and perhaps you don't get it? I mean, it's kind of coming to
fruition here?
SHALETT: Well, look, I think we're at a point where both sides feel that they have the wherewithal to wait out a little bit of a standoff.
CHATTERLEY: To --
SHALETT: Exactly. You know, so in the United States, clearly, you know, President Trump feels like he's got enough economic strain, enough consumer
and business confidence behind him, the markets are holding up, you know, and he wants to wait for his deal.
On the other side of it, I think, you know, Chinese policymakers feel like "Wait, we're in a recovery. We just inserted about $250 billion worth of
stimulus, and we're not prepared to just cave right when our economy is beginning to rebound as well."
CHATTERLEY: I know it's dangerous to talk in aggregate about these markets because when you look beneath the surface, particularly at some of the big
tech stocks as well, we've seen far greater pressure that we've seen, in absolute terms. Do you think we can make fresh record highs here in stocks
while we don't see a trade deal happening?
SHALETT: I do not.
CHATTERLEY: No.
SHALETT: I do not. So fundamentally, from where I said, I think that the markets are really going to stall out here, I think as we get into the end
of the second quarter and into June, people are going to have to start talking about those earnings estimates, again, for the quarter. And I just
don't think the fundamentals, in fact, are all that strong.
Yesterday's U.S. retail sales results from some of the players, I think it's indication of that, that there is this disconnect between the
confidence levels and what consumers are actually doing. I think we're going to see something similar with businesses where business confidence is
held up. But I don't think capital spending and some of those investments are following through.
CHATTERLEY: What you were just listening to there, by the way, was not cheering and clapping for us, unfortunately.
SHALETT: Unfortunately.
CHATTERLEY: That was for the U.S. Armed Forces entering the New York Stock Exchange during the opening bell this morning. So I will just point that
out.
SHALETT: It is saluting, yes.
CHATTERLEY: Yes, it is. And to bring back to what you were saying, I think which is a really important point, we've almost forgotten about
what's going on beneath the surface. Not necessarily with the fundamentals, but with earning season in particular.
I mean, if we look at what we've got, the bearishness that we had coming into earning season for the larger cap stocks, there have been
expectations. The smaller caps --
SHALETT: Yes. Destroyed.
CHATTERLEY: Destroyed. Talk me through that, too.
SHALETT: Yes, so it's very interesting and this is one of the things that we're trying to alert clients to, is that small cap stocks are typically
much more correlated with the underlying health of the U.S. domestic economy.
And the weakness here really, we think, illustrates the broader trend. And so while some of the large cap multinational companies may be benefiting
from some of the cross currents and some of the little bit stronger growth coming out of China, the smaller caps are not and that's the U.S. domestic
economy.
[09:25:13] CHATTERLEY: It is very interesting, because -- and we spoke to Eric Rosengren of the Boston Federal Reserve this week and he said
actually, if you could take the trade situation out of it, actually, the underlying strength of the economy, it is in pretty good shape. It looks
pretty good at this stage.
And obviously, the debate over inflation, and when look at oil prices, and I look at the impact of tariffs, I think, actually, we could be quite
dramatically surprised by inflation here.
SHALETT: Absolutely and this has been another one of our hypotheses at Morgan Stanley is that everyone is so convinced that inflation is dead.
That's exactly when you get the surprise whether it comes from wages, it comes from commodities, it comes from tariffs, you know, or some other
geopolitical event.
CHATTERLEY: Okay, so bottom line here what should investors be doing?
SHALETT: So I think now is the time to absolutely play defense here. So within the U.S. stock markets, we are you know kind of selling tech stocks
and we're buying things like staples, like utilities, like energy and really playing it safe.
CHATTERLEY: Defensive. Yes. Do not get excitable in these markets.
SHALETT: Not right now.
CHATTERLEY: Be careful and particularly, as you said the point as we head into the summer as well and perhaps a further rationalization.
SHALETT: Sow in May.
CHATTERLEY: Oh dear, now you've done it. Lisa Shalett, thank you so much for joining us.
SHALETT: All right, good to see you, Julia.
CHATTERLEY: The chief investment officer there at Morgan Stanley Wealth Management. All right, we are counting down to the market open this
morning. A weaker open as you can see, and you just heard there, avoid the tech stocks. Some of those, we will be discussing shortly, the likes of
Qualcomm, Apple of course with that ruling yesterday, and of course Tesla and the pressure continuing on that stock, too.
Plenty more to come. Stay with us. You're watching FIRST MOVE and the open is next.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange, a vigorous ringing of the opening bell from members of the
U.S. Armed Forces, not enough to shake these markets into positive territory though. We're expecting a lower open and indeed that's what
we've got right now.
The Dow in fact on track for five straight weeks of losses though it is only Thursday session, remember, continuing to keep an eye on what we're
seeing in terms of the semiconductors as well. Those stocks under pressure this month, the Chip Index has fallen some 13 percent. Context, though,
everything. Still up some 16 percent year-to-date, but we have to see as Lisa Shalett was just mentioning there, of course, the CIO of Morgan
Stanley. If this pressure continues to intensify, if don't see a trade deal, then watch this space.
The flight to safety as well that I mentioned earlier on in the show going on in Europe also happening here in the United States. We've got 10-year
U.S. bond yields down to 2.35 percent right now.
Okay, let me walk you through our global equity movers. Best Buy in focus posting better than expected profits, more people using the subscription-
based tech support and shopping online. Q2 sales and profits forecast also beat testaments. However, they didn't raise their full year outlook.
The CEO said the impact of tariffs at 25 percent will result in price increases and will be felt by U.S. consumers.
All right, right now up some 0.7 percent, Qualcomm also in focus and Mizuho Securities downgrading the stock from buy to neutral. They're concerned
over Wednesday's Financial Trade Commission -- the FTC's ruling, the judge said the chipmaker violated antitrust laws.
Qualcomm, of course said it's going to appeal the ruling. We will talk about this in few moments, but down a further 3 percent right now.
Tesla also in focus. Its stock has actually turned tired. It had been headed for a seven straight day of losses this week. The list of Wall
Street analysts concerned about its finances have been growing. The likes of Loup Ventures, cofounder, Gene Munster says Tesla will likely fall short
of delivery expectations this year as the U.S.-China trade will worsens.
He lowered his delivery estimates for this year by some 10 percent kicking off actually down half percent, so it is chopping around a bit here. We
will continue to keep an eye on that.
Now kicking off what was a cascade, I think of analyst reviews here. Dan Ives, Managing Director of Equity Research at Wedbush Securities. And of
course, he cut his target price early this week. And we discussed it the first time around, actually and the challenge that the numbers presented,
what do you make of what we see now from a whole host of analysts? And actually a lot of bulls on the street turning far more concerned.
DAN IVES, MANAGING DIRECTOR OF EQUITY RESEARCH, WEDBUSH SECURITIES: I think the math doesn't lie. I mean, when you look at what's happening with
unit growth, I think whisper numbers are coming down across the street. And it comes down to that "P" word, profitability.
If they can't hit profitability in the second half, they're going to have to raise another one to two billion in capital. Right now, there is a lot
of fear out there in terms of Tesla, shorts are starting to press the name. But this is a huge white knuckle period for the name.
CHATTERLEY: Why was this not evident before? I mean, I thought -- I agree that this quarter was alarming for a lot of people, but the bears here will
go, "Look, we've known this for a long time that the numbers here were really concerning and it was pretty binary one way or the other." Do you
push back on that?
IVES: Well, I'd say if you look at their guidance, you know, at first it kind of looked like there was numbers that they could ultimately hit. But
the big thing is, it is on the expense side. Expenses are ratcheting up that they can't hit profitability. I think that's why the bulls are now
starting to get more and more nervous just given what's happening with that debt load. That's the albatross around Tesla's neck right now.
CHATTERLEY: So ARK Invest who remain long term bulls, and we've spoken to them a number of times on this show, the likes of Cathie Wood, they came
out yesterday and said, "Look, guys, take our models, have a look. Input your own numbers. See what you think. We remain positive, we think that
they've got enough cash. They're going to be cash flow positive for the rest of the year," given what they've raised in terms of cash.
They were all talking about the trade-ins that we're seeing for the Model 3, the demand in the premium demand segment, but also pulling demand from
mass market buyers as well. They gave all sorts of reasons, at least in the short term to be more confident about what Tesla is doing here.
IVES: Look, it may all sound good on paper. But I think at this point, this may be a better chance of me playing in the NBA than them hitting
profitability in the second half and that's the worry right here.
I think investors are seeing through those numbers in the second half. The bonds -- the spreads are not wide.
CHATTERLEY: Yes.
IVES: I mean, the bond -- one of this is where you do the equity market or the bond market is wrong and even though what was happening is spreads
blown out, that's why right now, whisper numbers are coming down. And it's in ever side battle for them to hit those numbers in the second half.
Still a transformational company.
[09:35:10] IVES: But this is a defining period for Musk and Tesla to navigate this near term nightmare.
CHATTERLEY: Very quickly, how low do you think this price could go given what you said about short activity? The pressure that we're seeing in the
credit, the bonds as well here and the cost of credit, the cost of money effectively for this company rising quite dramatically.
IVES: Yes, right now, it's kind of a blindfold dark game in terms of where the stock could go because from a valuation perspective, if they don't hit
profitability in the second half, all bets are off.
So I think that's why right now, this is definitely a period where they need to kind of get that demand up. You need to see some tea leaves to
have confidence like some of you were talking about in the second half. If not, you're going to start seeing more and more negative numbers coming
down here.
CHATTERLEY: Let's move on and talk the chips. Qualcomm, what do you make of the FTC ruling yesterday? I feel like investors had a big sigh of
relief because of the settlement between Apple and Qualcomm. And now it feels to your point again, and I'll use the phrase again all bets are off.
What do you make of this?
IVES: I mean, when Apple settled with Qualcomm, it was viewed the FTC had a weak argument. And ultimately, this really came out of left field at
exactly the worst time given Huawei and the nervousness in the chip sector, it comes down to Qualcomm is the horse that the U.S. has bet on with 5G.
CHATTERLEY: Yes.
IVES: It dents their model, it hurts 5G. Now, you can say over the long term, it could be positive, but it just throws another wrench with what's
happened in the supply chain right now, and that's really the issue. It came by the worst time for tech investors. It's just adding to the odds
with the Huawei situation.
CHATTERLEY: Tech investors and the U.S. government as well because as you said, Qualcomm versus Huawei here, this is kind of the last thing you
needed ultimately at this point in the sort of trade tensions, trade battle.
IVES: Yes, I could tell you, at 1600 Pennsylvania Avenue, when this ruling came out --
CHATTERLEY: Pencils were snapped.
IVES: Pencils were snapped because it gives ultimately less power in terms of what's happened with Qualcomm versus China and 5G with Huawei and ZTE
and others. That's why right now, this is one where there's a game of poker right now. But in terms of what Apple and Qualcomm to negative for
stocks, it adds uncertainty and it just further fans the flames of what's happening with the U.S.-China worries.
CHATTERLEY: Yes, Dan Ives. I'm sure we'll be talking about both of these subjects more and more as we push on throughout the next few weeks. Dan
Ives of Wedbush Securities.
IVES: Thank you.
CHATTERLEY: Thank you so much. All right, let's move on now because we're continuing to watch Boeing as well and their stock today. Boeing 737 MAX
will be under intense scrutiny. Aviation regulators from around the world are meeting to discuss fixes to the model. That's following two deadly
crashes, of course that we've talked through continuously on this show.
The American regulators who will shares its safety analysis that said that it had no timetable yet for the jets return to service. Drew Griffin joins
us now with the details. Drew, 30 international regulators meeting today, but the acting head of the FAA already indicating that it could take far
longer than anticipated to get these jets off the ground again. What do you think we'll hear today?
DREW GRIFFIN, CNN SENIOR INVESTIGATIVE CORRESPONDENT: Well, what we have learned is that software package that Boeing said was completed last week
may have been a premature announcement, Julia. That package has not yet been delivered to the FAA. So today, here at FAA headquarters in Fort
Worth, Texas, with all of these global civil aviation partners, there is really nothing to present.
The FAA is going to tell these global aviation groups how it plans to certify the plane when Boeing presents that and also ask for feedback to
make sure that the FAA, the U.S. authority knows exactly what the global partners are looking for, but this -- there is no timeline as you said.
Daniel Elwell, the acting Administrator saying there is no timeline in the FAA, they're going to take as long as it takes. The bigger problem for
Boeing may be trying to earn back the trust of the people who fly these planes -- the pilots.
Dennis Tajer is with the Allied Pilots Association. They represent thousands of American airlines pilots. He's a 737 MAX pilot himself.
Listen to what he said just yesterday about getting back into the cockpit of the 737 MAX.
(BEGIN VIDEO CLIP)
CAPT. DENNIS TAJER, SPOKESMAN, ALLIED PILOTS ASSOCIATION: The aircraft is grounded right now. But no, our pilots don't have confidence in the MAX as
it was previously designed the MCAS. The MCAS is the thing here.
They are redesigning that. they're re-softwaring it, many of the things that we asked for, so we've got to see all those details. We're getting
many of them and we like what we see. But yes, our pilots, they're not ready to jump in the airplane now. Good gosh, no.
(END VIDEO CLIP)
GRIFFIN: Julia, Boeing has got to win back to trust of the pilots, of the flying public. The FAA here has to win back the trust of its global civil
aviation partners. Look for a bifurcated kind of approval process where the FAA eventually may approve this plane.
[09:40:10] GRIFFIN: But then the international partners would take their time to evaluate exactly what the FAA did to certify the 737 MAX. A long
way to go. I don't think that timetable that we heard about in August is going to make it.
CHATTERLEY: Yes, I agree with you. And I think probably the Chinese regulators will be right at the back of that queue. There's all sorts of
things here.
Drew, fantastic to have you with us. Drew Griffin there. Thank you so much.
All right, we're going to take a quick break here on the FIRST MOVE, but the biggest election in the world, turning into the one of the most
incredible. Find out why as we head to India, for the election latest. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE and an election that affects one in eight people on the planet has ended in a landslide. India's Prime
Minister Narendra Modi has claimed victory while the main opposition has conceded defeat. Sam Kiley is in New Delhi as we speak and actually, we're
showing you live pictures there outside Narendra Modi's party, the BJP's headquarters in New Delhi as you can see.
I can see rose petals being thrown at him. His hands together huge celebrations going on there. Sam, just explain how astonishing actually
the victory -- and a landslide victory that is for Narendra Modi at this moment.
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, it was quite a staggering scale this victory. He was expected to win just by exit polls
last Sunday, and indeed what we were seeing in the early stage of the of the polling. Now none of the seats or very few rather of the seats, Julia
have been formally declared, but the Electoral Commission has been doing a running tally of the seats where the BJP is in the lead out of 542.
[09:45:06] KILEY: They are now holding about 305. We understand and as part of their wider electoral alliance that would take them up to about 350
against the next major rival, the Congress Party at 50 and their alliance being around 80.
So it gives the Modi camp a massive lead, a really dominant hold now on Indian parliamentary politics, and builds on the majority that he won the
first majority success in 2014 in about 30 years. So he has emerged really as an indomitable force now in Indian politics.
The issue will be the extent to which his campaigning on a very strong Hindu nationalist line, whether he continues in that vein or whether he now
feels sufficiently politically confident to be more liberal in his approach. Most commentators fear that he will actually probably harden his
line.
Very quick to congratulate him on this victory were fellow populist leaders, Bibi Netanyahu and Vladimir Putin. Imran Khan of Pakistan,
India's longtime rival, even enemy, also quick to tweet that he congratulated Mr. Modi and said that he looked forward to peaceful
relations between the two countries.
Of course, it was Modi's handling of the response to what they said was a Pakistan-inspired terrorist attack in February, which led to Indian air
strikes deep inside Pakistani territory, which really gave him a political bump in the polls. He had been dwindling a little, particularly on
economic issues, but he seems to have been able to manipulate that into an enormous amount of electoral success -- Julia.
CHATTERLEY: Yes, quite fascinating. Because if it had been about economic reform, perhaps it would have been a different story, as you point out,
when the dust and the confetti and the rose petals settle, what does the outlook look like for India? It's going to be fascinating to watch. Sam
Kiley, thank you so much for that.
All right, more to come on FIRST MOVE. We'll be right back. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE and a look at today's "Boardroom Brief," happening right now, U.S. Democratic presidential candidates are
protesting alongside McDonald's employees across the country. This week, dozens of workers brought forth new allegations of workplace violence and
sexual harassment.
They're also demanding wages be raised to $15.00 per hour. The company is set to be grilled on all of these issues and more at its Annual Shareholder
Meeting today.
Clare Sebastian joins me live. Now, Clare, lively to say the least. We know that Bernie Sanders who is expected to be there too has been a key
proponent of a higher minimum wage here as well. What more can we expect?
[09:50:04] CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, this is a serious escalation. These allegations -- sexual harassment, workers'
rights, minimum wage -- all of these things is pressure that McDonald's has faced in the past, but a serious escalation today.
And I think a big part of that is the presence of these Democratic presidential candidates. It's not just Julian Castro that you see there in
Durham, North Carolina. Jay Inslee, the Governor will be out today as well. Bernie Sanders is holding a Town Hall livestreamed at Town Hall with
McDonald's workers. He has been, as you mentioned, particularly effective in getting big companies to change their ways.
Amazon, of course, raised its minimum wage. It said they had listened to its critics, including Bernie Sanders. Disney also raised the wage for its
theme park workers. So this is something that could make the company really set up today. It's only a very important frontier for these
presidential candidates to get their message heard.
CHATTERLEY: We're just looking at "The Times" though. It says Durham, North Carolina. I thought they were based in Chicago. Have we had a
location shift for this meeting as well?
SEBASTIAN: Well, we have. The meeting is actually in Dallas at a hotel near Dallas Fort Worth Airport. that has raised some eyebrows, because,
you know, people have suggested that the company might have been trying to avoid protests, which are happening in 13 cities across the country,
including Chicago and Durham, North Carolina, that you see there.
The company though told CNN that they did this simply to encourage the participation of more shareholders whether or not that is credible, you
know, when Chicago is also a good airport hub is another matter. But certainly, the pressure from workers, these lawsuits and this protest has
been mounting ahead of this meeting.
CHATTERLEY: Yes, or avoiding activist wrath. You can take your pick. Clare Sebastian, thank you so much for that. We will continue to watch
that throughout the day.
All right, Amazon shareholders, meanwhile, rejecting a proposal for the company to stop selling facial recognition software to governments. There
have been concerns over potential human rights violation, but investors rejected the proposals at the company's Annual General Meeting.
Now it's a week of AGMs, Deutsche Bank shares falling to an all-time low ahead of their Annual General Meeting, too. Investors, of course, wanting
to know how Germany's biggest lender plans to move past its failed merger plans, and, of course, money laundering probes, too.
Deutsche Bank, as you can see, off a further 2.8 percent in the session Thursday. Anna Stewart joins me now. Anna, it doesn't rain, but it pours
for Deutsche Bank. I mean, they've got a whole host of issues to deal with and very little clarity on the path forward here.
ANNA STEWART, CNN REPORTER: And that's what everyone was really hoping to get from some of the speeches in the AGM today. And I'm not sure investors
feel like they've really got the answer. And perhaps that's because there is no silver bullet to fix all of Deutsche Bank's problems.
It's facing, frankly, a very fragmented banking market. It still needs to make huge cutbacks, but it also needs to grow revenue. It has got huge
problems. You'll see the share price there. It's at a 13-month low, a record low. It's not ideal for the CEO standing up and delivering his
speech.
Now, you've got to feel him, let me bring you what he said in the opening remarks, because he is fairly new to the course, Christian Sewing, he says,
"Being the CEO is the full package. It's challenging, demanding, it's full of surprises. Now and then, it's highly emotional, and sometimes also
quite exhausting." You've got to feel very sorry for him. Big focus today. Lots of far reaching cuts, lots of cuts generally particularly to
investment banking, and more of a focus on the much less exciting, less sexy side of banking, global transaction banking -- Julia.
CHATTERLEY: Yes, the problem is as well, I'm just not even sure leadership change is the answer here, given the sheer quantity and the complexity of
the struggles, particularly the timing as well, if you look at the economics in Europe.
STEWART: Particularly, what we're looking for at the moment from the AGM is the votes which still haven't come through, I believe. And the key one,
of course, is just really interesting, when normally a very boring part of a German AGM, which is whether or not shareholders ratify what the Board
has done in the past year.
Now, this was really interesting with Bayer, where we had over 50 percent of shareholders revolting, and refusing to ratify the Board's actions, we
could potentially see the same today, that would be very interesting. There have been moves from some advisory groups that they should vote
against the Board, particularly as the Chairman who has been there for many years. He is one of the only constants on the Board. So some people think
that maybe that will help change. But as you say, it faces such huge problems here, it's going to take more than that.
CHATTERLEY: Yes, well, I wonder what a merger with another European partner might do, or is that just still so toxic to the German government
here that they won't allow it. Something has got to give here.
STEWART: Something has got to give and particularly after the failure of Commerzbank, and everyone wanted to know what the Plan B or Plan C was and
there wasn't a direct replacement. You know, there were discussions many, many months ago, a potential other options out there in Europe. I feel
like they all got ruled out.
And the problem is it does face so many problems, particularly with their money laundering probes, lots of investigations, you know, potentially that
brings big fines on to the table as well. So I'm not sure who would want to really approach Deutsche Bank at this stage.
[09:55:10] CHATTERLEY: Yes, I agree -- and morale -- imagination the moral inside as well. Ouch. We watch. Watch for those votes. Anna Stewart,
thank you so much for bringing us the latest on that.
All right, as we're wrapping up the show, let me give you a quick look at what we're seeing as far as that markets are concerned. We are right now
accelerating to the downside. Some one and a half percent for the NASDAQ as you can see, lower there. Dow and the S&P 500 also looking set to add
to the losses that we saw in yesterday's trading session.
As I mentioned earlier on the show, we didn't bounce off the lows yesterday and closed off the lows, so the price action again is something to watch,
important today.
Let me give you a look as well at what we're seeing for the energy sector. Oil prices also coming under a bit of pressure. It fits with the broader
risk off sentiment that we're seeing. The flight to safety in bonds right now, WTI off almost 4 percent.
So we'll watch that in "The Express" because I'll be back with you in a couple of hours' time, but for now, that's it for FIRST MOVE. I'm Julia
Chatterley. We'll see you tomorrow. Have a great day.
(COMMERCIAL BREAK)
[10:00:00]
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