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First Move with Julia Chatterley
The U.S. Federal Reserve Releases Its Latest Policy Statement; Skeptical Lawmakers Voice Concerns Over Facebook's New Crypto Plan; Blackstone's Stephen Schwarzman Tells CNN That He Doesn't Think The Trade Wars Will Pull The U.S. Into A Recession. Aired: 9-10a ET
Aired June 19, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ZAIN ASHER, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Zain Asher, and here is what you need to know.
Is Powell out of patience? We will soon get the read on the Fed's tea leaves to find out if cuts are coming. And facing backlash, skeptical
lawmakers voice concerns over Facebook's new crypto plan. And Blackstone's Stephen Schwarzman tells our John Defterios that he doesn't think the trade
wars will pull the U.S. into a recession. It is Wednesday, and this is FIRST MOVE.
All right, everyone. I am Zain Asher. Welcome to FIRST MOVE. The main event for Wall Street is just hours away. The US Federal Reserve releases
its latest policy statement and Fed Chair Jerome Powell holds a news conference at about 2:00 to 230 Eastern Time. Many investors hope the
Central Bank will pivot on policy and announce that it could soon introduce interest rate cuts as markets brace for the Fed, it is looking like a
mostly flat start to the trading day.
U.S. stocks soared Tuesday on stimulus hopes not only in the United States, but in the Eurozone as well where ECB head, Mario Draghi said he is ready
to do more to boost growth. News that President Trump and Chinese President Xi Jinping will discuss trade at the G-20 Summit next week, also
gave the market a bit of a boost as well.
But as we begin today's session, the S&P 500 sits less than one percent away from record highs. Global stocks are at near two-week highs, whether
the rally can continue, it certainly has a lot to do with what the Fed end up deciding.
One person who will be following today's developments especially closely will be none other than President Trump, who has reportedly considered
demoting Chairman Powell for keeping rate levels that he believes aren't too high.
Clare Sebastian is joining us live now. So Clare, a lot of people are expected that we won't see a rate cut until July. What can we expect
today?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Zain, the probability if you look at the markets is less than 25 percent for today, but that rises
in July to about 65 percent, and by September, according to the CME groups Fed Watch, there's only a six percent probability that rates stay where
they are today.
So certainly over the coming months, the expectations are pretty much unanimous that this will come. But as for today, the challenge for the Fed
is how they communicate what's coming.
There's a lot of expectation on Wall Street that they will change the language in the statement that they will take away the word "patient" that
they've had in there since the beginning of the year, since they've had rates on hold.
So they really need to try and deliver in a way what the markets are looking for. We've seen what happens when they don't do that. In the
December, when the Fed came out slightly more hawkish than the markets were expecting, the markets fell sharply.
So all eyes will be on that statement. All eyes will be on the press conference from Jerome Powell today, and he has a very delicate balancing
act when it comes to communicating this.
ASHER: And another thing that is sort of pushing -- putting pressure rather or seeming to put pressure on Jerome Powell is of course, the way
that Donald Trump seems to address him. I want to play for our audience what the U.S. President had to say about Jerome Powell.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Well, let's see what he does. I want to be given a level playing field. And so far, I haven't
been.
(END VIDEO CLIP)
ASHER: Trump also intimated about potentially demoting Jerome Powell. He said, "Let's see what he does." How unprecedented is that for the U.S.
President?
SEBASTIAN: I mean, this is very unusual, Zain. The whole job of the Fed is to stay independent, and in a way to provide a counterpoint if the
government's economic policy needs to access the economy or the opposite.
So this is extremely unusual, and the interesting thing is, as market expectations have risen of a rate cut, as it's looked increasingly like
Trump might get actually what he wants, his pressure has only increased.
So the Fed now has to grapple with not only, you know, a mixed picture when it comes to the economy, not only the challenge of the market expectations,
not only an unpredictable trade war that is also in the hands of the President, but the challenge of not appearing to bow to political pressure
that is a huge communication challenge and it further complicates this picture.
ASHER: So aside from the trade war, what are the factors go into the Fed Chair's decision making when it comes to potentially a rate cut in July?
SEBASTIAN: So their mandate, Zain, is twofold. It is price stability and full employment. So, you know, price stability, when it comes to inflation
has been a bit of a complicated picture. Inflation has been persistently under shooting, it's never quite managed to consistently reach the two
percent target that the Fed has been looking.
For unemployment, the jobs market had been extremely strong up until this month, and we got the May jobs report. It came in well below expectations.
It also had downward revisions to the previous month.
[09:05:13] SEBASTIAN: So there are signs, not so much of a slowdown, but of an economy that may be losing momentum. We've also got data points that
the Fed will be looking at when it comes to manufacturing consumer sentiment. They have also been showing signs of losing momentum.
So there are certainly data points out there that are increasing in number that could lead them to shift that stands to something more flexible. But
overall, this isn't an economy that's on the brink of recession. So they have to signal that while also saying that they're going to stay flexible,
and that's why this is such a delicate moment for them.
ASHER: All right, Clare Sebastian live for us. Thank you so much. Appreciate it. Probable end to the China-U.S. trade war is lifting
investor spirits pushing Asian shares higher. U.S. President Donald Trump said talks between the two countries will be resuming today. Will Ripley
is joining us live now from Beijing.
Well, Will, we're also hearing that the U.S. President and Xi Jinping are going to be meeting on the sidelines of G-20 next week. Could this clear
the path to a deal in terms of a trade deal between the U.S. and China?
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: Hey, Zain, I think at this stage, the best hopes of many analysts who are watching the situation and
certainly investors here in Asia and around the world is that the two leaders will agree to put a pause on the additional tariffs that are
currently being discussed right now in the United States, tariffs on $300 billion in additional Chinese goods. That is what China wants to avert.
And I would imagine the United States would like to avert it if they can get closer to what they want in terms of some of the key issues when it
comes to U.S.-China trade.
Of course, one major issue of contention that seems like it's going to be very difficult to resolve, certainly in the informal discussions in the G-
20 in Japan between presidents Trump and Xi is the treatment of Chinese telecom giant, Huawei. That is a major, major issue of contention between
the two countries.
But there is hope that because Trump and Xi have a good personal rapport, that they can perhaps secure some sort of an agreement much like they did
in Argentina, when they last had that dinner meeting. Of course, that dinner meeting was held in the same day that one of Huawei's top executives
was arrested and taken into custody in Canada and has since been extradited or is in the process of extradition and facing charges in the United
States.
ASHER: And so just in terms of -- I mean, obviously, Huawei is a key issue, as you mentioned, but just in terms of the trade war so far. How
much of an impact on the Chinese economy has this ratcheting up of tariffs had on Beijing, especially given the slowing economy there?
RIPLEY: Well, China's economy is expected to grow once again this year, but the growth is undoubtedly slowing. And it puts President Xi in a
difficult spot because he has amassed so much power in this country, only to see the economy slowing and the trade war with the United States
escalating.
Those are two fronts that have been very problematic for the Chinese President, which may be one factor as to why he is also going to be
traveling to Pyongyang, North Korea tomorrow morning local time to have discussions or perhaps sign some sort of an agreement with North Korean
leader, Kim Jong-un just before he goes to meet with President Trump in Japan.
Obviously North Korea is one of President Trump's signature policy issues. And so if President Xi can come to Japan with some insight on that front,
well, it certainly is a valuable card to play potentially for Xi as he also tries to talk with Trump about trade.
ASHER: And so what have been so far, Will, the major sticking points that have thwarted the U.S. and China from reaching a deal and obviously, even
if a deal is reached, the issue then becomes how the U.S. ends up enforcing it. Just walk us through what the major sticking points have been.
RIPLEY: First of all, there is a major trade imbalance and President Trump has talked for a long time about the fact that the United States is buying
hundreds and hundreds of billions of dollars more every year from China than the United States is selling to China.
President Trump wants China and Chinese consumers to consume more American goods. He also wants it to be easier for Chinese markets to open up to
American companies, and the United States wants to do away with things like forced technology and information sharing.
There's been a long held claim that in order for foreign tech companies in particular to do business here in China's lucrative market, they have to
partner up with Chinese entities, share their secrets, and then those Chinese entities can take that information that they've learned and produce
their own versions at a much cheaper price.
Then, of course, the issue with Huawei, which is a big one is national security. And that is something that China is trying to fight with the
United States about right now, because Huawei holds a lot of patents in the United States that can be enforced, unless the U.S. can prove that Huawei
is violating U.S. national security.
Obviously Huawei is a pillar of the Chinese economy and they're going to fight very hard to protect the business dealings of that company, which has
essentially been blacklisted by the U.S., making it impossible at the moment for U.S. companies and U.S. allies to do a whole lot of business
with Huawei without facing serious repercussions.
[09:10:22] ASHER: Will Ripley live for us there. Thank you so much. Appreciate that. Facebook's bold plan to release its own crypto currency
is already facing fierce global political backlash. Concerns of data privacy and security have led to a leading American lawmakers to call for
the project to be put on hold.
And the G7 has been asked to hold its own investigation into the currency. Brian Fung joins us live now. So really, already, Brian we are seeing this
massive sort of uphill battle for Facebook just in terms of trying to win over the trust from consumers, general public, and also lawmakers as well.
BRIAN FUNG, CNN TECH REPORTER: Yes, absolutely. I mean, we're seeing a very strong reaction now from members of Congress. You had the chairwoman
of the House Financial Services Committee, Maxine Waters, saying that this is another example of Facebook's unchecked expansion.
You had Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, saying this is another example of how Facebook is too big and
too powerful.
Obviously, all this comes as Facebook is facing a lot of scrutiny from regulators both in Congress and at the Federal Trade Commission, and the
Justice Department, you know, over its practices on privacy and the rest of the tech industry too, is seeing a lot of skepticism from regulators about
whether or not they're too big and too powerful. You have lots of, you know, Democratic presidential candidates calling for the industry to be
broken up.
So all in all, a very challenging environment that Facebook is seeking to inject itself into with a new product.
ASHER: So how has Facebook -- I mean, obviously, it is early days yet, but how has Facebook already responded to calls, for example, from Maxine
Waters for Libra to be put on hold?
FUNG: That's right. So you know, Facebook has said it is willing to engage with lawmakers and will be open to answering questions about them in
the future. But you know, as you pointed out, you know, Congresswoman Waters has called for the cryptocurrency to be placed on hold and not
developed further, while some of these questions get sorted out.
You had both her and the top Republican on that committee asking for hearings into the issue, and Waters has also asked for Facebook to submit
providing testimony with executives, even testifying to Capitol Hill on this issue.
Now, obviously, Facebook wants this cryptocurrency to become mainstream and to potentially become a part of the global financial infrastructure,
bringing on billions, potentially to the global banking system, especially particularly in the developing world.
So this raises real serious questions about what kinds of data Facebook could collect with the results of this technology, what it might be used
for, and all of those questions are still relatively unresolved at this point.
ASHER: Right, Brian Fung, appreciate it. Thank you. Okay, so these are the stories that are making headlines around the world right now. The
first independent investigation into the death of Jamal Khashoggi has found the journalist was the victim of a deliberate, premeditated execution. The
UN Special Repertoire also said that the Saudi Crown Prince Mohammad Bin Salman should be hit by targeted sanctions unless evidence can be provided
clearing him on the actual involvement in this particular execution.
Four people will face prosecution over the downing of Malaysia Airlines Flight MH17. The plane crashed in Eastern Ukraine five years ago, killing
298 people. Three Russians and a Ukrainian have been named as suspects by international investigators. One of the suspects says the separatists
cities in Ukraine were not responsible for the downing of the plane.
Donald Trump makes it official, the U.S. President has launched his bid for reelection with a rally in Florida. Obviously, he used it to bash some
familiar targets and talk up the economy as well, promising even greater prosperity if he is given a second term. We are going to listen to part of
it.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Our economy is the envy of the world. Perhaps the greatest economy we've had in the history of our
country.
As long as you keep this team in place, we have a tremendous way to go. Our future has never ever looked brighter or sharper.
(END VIDEO CLIP)
ASHER: Joe Johns is joining us live now down in Miami, so John, you heard the President speaking in his usual superlatives. Whether you love him or
hate him, one thing you cannot deny, this the man who does come on rock star adulation.
[09:15:10] JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: He certainly does. And that's what he got. It's so different from when he first got
into the race going down that escalator at Trump Tower in New York City.
There were quite a few people there, but certainly nothing like this. It was an enormous crowd in Orlando, and they really soaked up every moment of
it.
Of course, Florida is very important for him. The President sees Florida as his second home. So it was right and fitting, I suppose that they go
ahead and do the kickoff here.
The President has a new campaign slogan this time around, Keep America Great Again. And the fact of the matter, though, is as I think you can see
from all the transcripts, as well as the sound bites that have come out of that Orlando appearance, the President really harked back to many of the
themes that we've heard from the countless rallies he has actually held over the last years.
He talked about Robert Mueller. He talked about Hillary Clinton. He talked about fake news, immigration, border security -- these are all
things we've heard before pretty clear that while the campaign was seeking a reset for the President of the United States the second time around, they
are not at least at this stage, planning on changing things very much -- Zain.
ASHER: And Joe, even though obviously, the President is adored by his base, the fact is, he does have relatively low approval ratings, and you
could compare him to other recent Presidents, what are the major hurdles to him getting reelected, do you think?
JOHNS: Major hurdles, as always, really, for any presidential campaign is going to be the middle of politics, those are the swing voters and states
like right here in Florida, people who don't necessarily vote Democratic, don't necessarily vote Republican, and are waiting for the incumbent as
well as the challenger to give them something they can hold on to.
The President has clearly alienated a certain segment of the voting population. And we know that from the strength of the opposition to him on
the Democratic side, particularly among Liberal Democrats. So he is also going to have to stand on his record. The last time around, this is a man
who ran against the Washington establishment and draining the swamp.
Now, he is the leader of the Washington establishment, at least as far as Republican politics is concerned. So he is going to have to run on his
record. And there's also that sticky issue of immigration, very important to mention that simply because immigration is something he ran on four
years ago, and he had quite a voice, didn't he, on that issue?
And arguably, if you use almost any metric, the immigration problem in the United States has gotten much more challenging since this President took
office. The question is, whether that's a reflection of some of his policies.
ASHER: All right, Joe Johns live for us there. Thank you so much. Appreciate that. Still to come here, breaking up maybe hard to do, but
activist shareholders think it's for the best. We look ahead at Google's contentious annual meeting and getting into bed with the competition,
Airbnb joins forces with a brand new or rather a hotel app. That's next, after the break.
(COMMERCIAL BREAK)
[09:21:40] ASHER: All right, welcome back to FIRST MOVE. I am Zain Asher. We are live for you here at the New York Stock Exchange and it's just a few
minutes to go before the opening bell on Wall Street, in about nine minutes or so from now. Futures -- let's see -- are pointing to a bit of a flat
open, slightly higher, but relatively flat.
The markets are in a wait and see position because we've got the Fed's decision coming out in about five or so hours from now. U.S. Treasury
yields sell sharply in the previous session and with expectations of a new global stimulus. They are stabilizing today, but the 10-year yield remains
below 2.1 percent.
To discuss it all, we've got Greg Peters, Managing Director and Senior Portfolio Manager at PGIM Fixed Income. So let's talk about the Fed.
We've got the Fed decision coming out in a few hours from now. Do you expect like most people that there will be a rate cut in July not
necessarily this time around?
GREG PETERS, MANAGING DIRECTOR AND SENIOR PORTFOLIO MANAGER, PGIM FIXED INCOME: Well, there's more drama around the meeting than the initially
anticipated. So Mario Draghi yesterday kind of pulled for the debate on what the Fed should do and called to arms.
That being said, I do think it's not a likely probability of a breakup today. July is definitely on the table. But I think it's really important
to take a step back and think about where we were just at the end of last year where the market was pricing in two rate hikes.
And now the market is pricing in three rate cuts through this year. So that's a dramatic shift. And the Fed ultimately has to deliver on that or
the market is going to be really disappointed.
ASHER: How much has anticipating will there be a rate cut in July already been priced into the markets?
PETERS: It's already priced in. That's the whole thing. So the Fed actually has to deliver what the market is expecting, or I think the
markets will kind of react negatively around it.
ASHER: So when you think about, as you mentioned, what a dramatic shift, you know, compared to this time last year to now with rate hikes versus now
rate cuts. What have been the factors, the key factors?
I mean, obviously trade is obviously probably the most important factor. But what about the other factors that have gone into the Feds decision
making?
PETERS: Well, growth has come down, clearly, and so it's particularly come down on the manufacturing side. And globally as well. The consumer still
remains pretty strong, the labor market is pretty strong, but it is manufacturing and then its inflation.
What the Fed is looking towards is the weak inflation data. And so inflation continues to run below their mandate under two percent. And so
they feel they have ample room to stimulate in order to boost that inflation number higher.
So I think it's really around inflation more than the economic data itself. But it's a confluence of those two factors that is ultimately feeding into
the Feds decision.
ASHER: So when we saw markets really rally yesterday, how much of that was about the potential of a deal in terms of trade deals with the U.S. and
China. Obviously,, the Xi Jinping and Donald Trump are getting to be meeting at the sidelines of G-20. Markets seem very optimistic about that
versus other factors, you know, including the potential for rate cut and that sort of thing.
PETERS: Yes, so I think the answer is both. And so the markets reacted strongly before the open around Draghi's comments, and then the Trump tweet
around a meeting at the G-20 just accelerated that.
[09:25:07] PETERS: But prior to them, the markets were really quite negative around the prospect of anything coming out of the G-20. So the
expectation was really quite low. So that's been raised now as well.
So once again, you have a situation where the markets are really expecting action out of the G-20 and out of the Fed. And so we're really kind of
pushing the limits here, in terms of the ability to deliver both those items.
ASHER: Some analysts believe that, you know, because we've seen an inverted yield curve and in about 12 to 18 months from now that a recession
could be on the horizon, do you share that view or no?
PETERS: Well, the risks are rising. I think it's always important to remember that forecasting a recession is literally impossible, and so we
look for certain fragments and segments to kind of point to, but growth slowing and so it's something to watch out for, but no, it's not a base
case for this year, but the risks start to arise you know, 12 to 18 months down the road as a lot of the fiscal stimulus here in the U.S. rolls off,
which still are around trade -- what that means ultimately -- so it's really hard to figure it out because there's so many moving parts.
ASHER: So what are the consequences of this sort of low rate, low growth environment that we're in right now, low inflation environment that we are
in right now?
PETERS: Look, I mean, I think this is the reality of the world that we live in. The demographics are working against us. You're not seeing the
same kind of productivity boost that we have in the past. I think low rates, low growth, low inflation is the future quite frankly.
ASHER: All right. Greg Peters, live for us. Thank you so much. Appreciate that.
PETERS: Thank you.
ASHER: All right, we have the opening bell for you in about four or so minutes from now. We will be back with that bell after the break.
(COMMERCIAL BREAK)
[09:30:00] ASHER: All right. The Australian Treasury Department there ringing the opening bell on Wall Street. Welcome back to FIRST MOVE,
everyone. I am Zain Asher coming to you live from here at the New York Stock Exchange. That was the opening bell.
As I mentioned, the markets, let's take a look now, are pretty much flat right now. Basically in a wait and see sort of holding pattern as we await
the Fed's decision at 2:00 Eastern Time.
A lot of people are expecting there's not going to be necessarily an interest rate cut this time around, but in July, people are pointing to
July as when we will be seeing that rate cut.
That Fed announcement as I mentioned is expected to come at 2:00 p.m. Eastern Time. We did see a broad based rally in the previous session on
hopes for global stimulus and progress in the U.S.-China trade talks as well.
President Trump and Xi Jinping have actually confirmed they will meet next week on the sidelines of the G20 Summit. Could that mean there could be a
trade deal on the horizon? We shall wait and see.
In the meantime, major U.S. companies are bracing for what could be years of trade uncertainty. A report out today says Apple is looking into
whether major suppliers can move as much as 30 percent of their Chinese manufacturing to other Asian countries.
All right, let's talk about the global movers now. Adobe is higher right now. The software company's second quarter earnings came in five cents a
share above expectations and its revenues rose 25 percent. Guidance for the current quarter was soft, but JPMorgan Chase is raising its price
target for the company.
Mattel, you can see there is slightly lower, down about almost one percent or so. The toy maker's shares are under pressure amid harsh words from MGA
Entertainment. MGA had considered buying Mattel, but it says, it is walking away from the deal because of Matte's many balance sheet
liabilities. MGA which makes the Bratz line of dolls says Mattel quote, "cannot be salvaged."
Facebook there at the bottom of your screen is down about one and a quarter percent. Also shares under pressure after the company unveiled Libra,
their brand new cryptocurrency.
The Head of the U.S. House Financial Services Committee is calling for hearings in to Libra and France's Finance Minister Bruno Le Maire wants the
G20 to actually investigate.
Now it is not unusual for activist investors to call for a company to be broken up, and that is exactly what some Alphabet stakeholders are doing.
The Google parent company holds its annual meeting today and activist investors are urging it to beat regulators to the punch by separating parts
of its business.
I want to bring in Hadas Gold who joins us live now. So Hadas, it is not just this idea of potentially Alphabet breaking up into several different
sort of subsidiaries. It's also the fact that there are 13 different shareholder-sponsored proposals that are on the table, which is in itself
quite unusual. It is quite high.
HADAS GOLD, CNN BUSINESS REPORTER: Zain, that's a record actually, the 13 activist shareholder proposals. That's double the number that we've seen
for Alphabet in previous years starting with that first one about breaking Google.
This comes from the group SumOfUs whose goal is to curb the growing power of corporations, they want Alphabet to break itself up, as you said to get
ahead of regulators, because they think shareholders could -- and I'm quoting here, " ... receive greater value from a voluntary or strategic
reduction. Because alphabet may be too large and too complex to be managed effectively."
Now, this is as you said, one of 13 proposals, and at least five of them are actually backed by Alphabet employees themselves. And those proposal
specifically deal with some of the issues we saw in previous months, those walkouts around how Google handles sexual harassment cases.
They include things like a ban on NDAs in all harassment and discrimination cases, rescinding of executive compensation. Another interesting one calls
on a human rights impact assessment about Google's plans in China.
Now, as you can see on the screen, the Board is recommending against all 13 stockholder proposals. It's very unlikely to pass because Alphabet's two
top executives hold 51.3 percent of all the shareholder votes.
But all of these proposals are a clear reflection of this sort of growing trend, not only to the concerns over breaking up big tech, but also how
employees and activist shareholders are feeling they want to take matters into their own hands when it comes to things like sexual harassment,
executive pay.
And we're not only going to see the action during this meeting itself inside. Outside, there are hundreds of people who are planning to protest
Alphabet for various things, everything from Google's dealings in China to housing crisis in Silicon Valley and how Alphabet has contributed to that.
So we will be keeping a close eye on this, Zain, it's supposed to start in about three hours or so 9:00 a.m. on the West Coast in California, and
we'll see if we'll actually hear any more comments from Alphabet regarding to any of these 13 proposals -- Zain.
[09:35:05] ASHER: Hadas, it has actually been quite a bit of a difficult year for Alphabet. I mean their share price fell after their last earnings
announcement in April, and they haven't really recovered.
They've also dealt with a record number of E.U. fine when it comes to unfair competition. Just walk us through what the year has been like for
Alphabet.
GOLD: Yes, it's been a difficult year for them, and actually, when you look at their share price, it's been underperforming compared to its rivals
when you think about Facebook and Amazon and they have been really sort of been a target for regulators around the world, and for politicians as well
have been targeting them talking about breaking them up alongside Amazon and the rest.
But you do hear from some analysts who think that sometimes Alphabet has maybe almost been unfairly bearing the brunt of all of this sort of anti-
Big Tech protest where in the last few months, we saw those walkouts from Google employees themselves walking out in protest of how they say the
company handles sexual harassment cases when it dealt with very high ranking executives. And there were some changes that were enacted after
those protests.
But we're seeing that that is still having an effect now that we have these proposals coming forth. Like I said, very unlikely to pass, but I think
we're starting to see a lot more activism not only from employees themselves, but also from shareholders -- Zain.
ASHER: All right, Hadas Gold, live for us. Thank you so much. All right, coming up, Oxford University receives its biggest donation in centuries
from the head of Blackstone. We'll hear from the Wall Street billionaire, next.
(COMMERCIAL BREAK)
ASHER: All right, welcome back everybody. Within the next half hour, pilots, flight attendants and their unions will tell American lawmakers
about their concerns over Boeing's 737 MAX planes.
Congress is investigating Boeing's handling of two fatal crashes which killed a total of 346 people. Drew Griffin joins us live now from
Washington. So Drew, what are the sort of main concerns we expect pilots to say at this hearing?
[09:40:09] DREW GRIFFIN, CNN SENIOR INVESTIGATIVE CORRESPONDENT: Zain, I think that the pilots here in Washington, D.C. want to make sure that the
Congress is looking back directly at this plane and the U.S. Federal Aviation Administration's search certification of it.
There have been a lot of recent comments lately trying to blame the pilots for these crashes, especially foreign pilots who may not be trained
properly in this, and the head of the Allied Pilots Association here that represents American Airlines pilots is really fuming about those
statements.
He wants this to be squarely about the plane, its design, and why the U.S. F.A.A. actually certified this plane to go up in the air in the first
place.
So you're going to see a lot of fireworks based on that not blaming the pilots, and if the pilots did have anything to do with this, Zain, that it
was the fact that Boeing had a system on board that was not known to the pilots that the pilots were not properly trained on, and even that should
be the focus of the F.A.A.'s certification process.
So I think the point of this hearing is to take it from the stakeholders who will actually be asked to go back into these planes, back flying these
planes. It's not just the pilots, it is the flight attendants, too who want to make sure that Congress and the F.A.A. are going to take their time
and completely make sure that this plane is safe to fly again, and there's no rush to get it back up in the air -- Zain.
ASHER: No rush, Drew, but how rigorous will this certification process be for the F.A.A., when it comes to just trying to get those planes back off
the ground and resuming flying?
GRIFFIN: Well, I can tell you that that process has been ongoing now, Zain, for months, even though the handoff per se hasn't happened yet
between Boeing and the F.A.A. The F.A.A. has been very involved in what Boeing is doing, the changes being made to the plane, the changes being
made to flight training manuals, to simulators, there's about a lot of give and take going back and forth between the F.A.A.
As for what happens next, there's going to be a certification flight done by the F.A.A. Look for that in the next two weeks, and then it'll be
another four to six weeks after that, when a completely different review board, it's called the Technical Advisory Board will check everything that
the F.A.A. has done to make sure that nothing has been missed.
So, the F.A.A. is trying to tell us this is going to be a very rigorous process. It's not being rushed. Look at the earliest for these planes to
be okay to fly by U.S. airlines probably end of September, October, and then it'll be up to the international aviation authorities to determine how
they will move forward -- Zane.
ASHER: Drew Griffin, live for us there. Thank you so much. Appreciate that. All right. Here's today's "Boardroom Brief." The head of
Blackstone is donated $188 million to Oxford University. It is the single biggest donation since the Renaissance and the pledge from U.S. billionaire
Stephen Schwarzman will fund a Center for Humanities and will include an institute to study the ethics of artificial intelligence.
He spoke to our John Defterios about the investment and why he thinks it's so urgent to take action.
(BEGIN VIDEO CLIP)
STEPHEN SCHWARZMAN, CEO AND COFOUNDER, BLACKSTONE: Usually governments react to crises, so you make a mess, and then they pass something to
address it. Since we know a mess is coming, we need not wait. And I'm not a regulatory, you know, advocate ordinarily, but this is something where
business, the academic world and the government world and the media need to come together so nobody panics.
And the introduction of the technologies are fazed and nobody likes to be fazed. And so it presents a challenge, but it's a challenge that has to be
overcome because if you don't address it, the outcome is going to be pretty clear.
(END VIDEO CLIP)
ASHER: All right, John Defterios joins us live now from London. So John, Stephen Schwarzman has also been speaking out about trade. He talks about
the fact that even though there is some optimism about the fact that Donald Trump and Xi Jinping are going to be meeting on the sidelines of the G-20
Summit that he doesn't anticipate the deal is going to be reached there and then. It may indeed be some time.
You spoke to him about trade as well. What did he have to say?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, it's a pretty sober view, Zain, but some context on Blackstone itself, a half a trillion
dollar is under management under the tutelage of Steve Schwarzman. So that's why everybody wants to hear what he has to say.
By the way on artificial intelligence, he told me, "Look, if I didn't think I could make a difference on the dialogue around artificial intelligence
and the disruption of jobs, I would have stayed out of the debate," but we wanted to talk to him about those two issues that are on the table today,
and in fact, throughout the week, and that's the U.S.-China trade war, and also the very aggressive position by Donald Trump against Jay Powell at the
Federal Reserve and the Feds decision coming forth.
Let's start on the first topic, U.S.-China trade, and can we get a deal or not? He says not yet.
[09:45:28] (BEGIN VIDEO CLIP)
SCHWARZMAN: At the moment, the trade talks are basically not talking, and so the two Presidents need to reset their mutual expectations and if there
is no overlap, then they'll end up being more tariffs and more divisiveness and less business confidence and slower global growth.
DEFTERIOS: So you've had experience in China and success? Do you think a deal can be done though, in that short of a timeframe?
SCHWARZMAN: No. A deal can be done by next week. That really, completely unrealistic. What the meeting between the two Presidents is meant to do is
say, you know, we were close to a deal, you know, the Chinese have backed off it. And to make a deal, you have to know where they stand.
If they really want to do something, they'll come back and say, "Well, I don't know why we did what we did," or, you know, "Here's why we did this
on this one point, maybe you can solve it," but if things stay the way they are, and you just have pleasant handshakes, there won't be anything.
DEFTERIOS: Should the Federal Reserve be more accommodative as a result of the trade tensions with China? With India? Even south of the border with
Mexico? Should they be more aggressive in your view or will they fight for that independence and hold the line against President Trump's request?
SCHWARZMAN: Well, the U.S. economy is -- particularly in the manufacturing area is slowing, and so you can make the case regardless of what the
President says or doesn't that the Fed should take another look at where they are.
Also, because European interest rates are so low now, negative, that it's starting to affect currencies. So is it fair to take a look? Yes, the Fed
is independent and the Fed was set up to be independent and they should operate as independent.
And so usually, when the President says something the way he is, he is expressing a point of view. I'm sure they've heard it, and they should do
whatever they think is right, that's their job.
(END VIDEO CLIP)
DEFTERIOS: Steve Schwarzman once again, a little bit of nuance there, Zain, suggesting that the Fed should take another look at where we are,
we're slowing down. But the thing that stood out for me, not part of that clip here. But part of the interview overall, he does not think that the
U.S.-China trade war will tilt the U.S. into a recession in 2020.
But he says he sees the slowdown in manufacturing and the Fed should be responsive, perhaps to the call -- the pipeline, the data that they're
seeing today, not the calls from the President and the aggressive nature on Jay Powell.
ASHER: All right, John Defterios, live for us there. Thank you so much. And by the way, programming note to all of you, you can actually see more
of John's interview with Stephen Schwarzman in a few hours from on "Quest Means Business." That's 3:00 Eastern Time. Thank you, John.
All right, still to come, Airbnb checks in with its rivals. We will speak to the CEO of his latest acquisition. That's next.
(COMMERCIAL BREAK)
[14:50:50] ASHER: All right, welcome back. Airbnb is better known for disrupting the traditional hotel industry than investing in it. But as the
company gears up for an IPO, it did just that.
A few months ago, it bought HotelTonight, and that offers discounted last minute hotel rooms from brands, including Sheraton and Hyatt as well.
For one the value HotelTonight brings, I'm joined now by a CEO, Sam Shank. Sam, thank you so much of being with us. So let's just talk first and
foremost about why the synergy between Airbnb and HotelTonight makes sense. What do you guys both give each other?
SAM SHANK, CEO, HOTELTONIGHT: We are -- it's such a great match because we are so complimentary as brands. We bring a lot more supply that Airbnb
doesn't have and we also bring a use case that Airbnb doesn't have.
We do a lot of business travel and it's mostly last minute for us. That's where we started with Tonight, and with a couple days ahead, and Airbnb is
wonderful for - and more focused on the longer term stays that are planned further out.
So together we can bring something really, really great and complimentary.
ASHER: So how much autonomy do you still have, despite being bought by Airbnb?
SHANK: HotelTonight is a separate entity, separate brand completely autonomous. And that said, we are working together to bring the
HotelTonight partners and the HotelTonight hotels partners to Airbnb and we're also looking at ways to bring Airbnb customers to HotelTonight when
that's the best thing for them.
ASHER: I see. Okay, so just talk about some of the trends we are seeing in the hotel space right now. You know, you and I were just talking a
second ago during the break about the rise of sort of themed hotels -- Equinox, I did a story on this several years ago, Equinox was coming out
with their own hotel chain, The Gym coming out with their own hotel chain.
I know that West Elm, the furniture store is also looking at hotels as well. Walk us through some of these new sort of trends we are seeing in
hotels.
SHANK: It's a really fascinating trend where you have a lifestyle brand that stands for something unique, and then mashed up with a hotel and this
experience of being out of your regular routine.
And for the Equinox brands, it's about wellness and it's about fitness. And as I toured it, it was a really amazing product and an amazing -- it's
going to be an amazing hotel.
There's also brands like Away which is a luggage company, a luggage startup that's been very successful that's planning a hotel. And then there's even
-- there was a pop up hotel that Taco Bell did, and the Taco Bell fans went crazy for this place. And it was only open for a weekend or a week or
something. But it was a big hit, especially on social media as you can imagine.
ASHER: I am sure. But some of the trends we're seeing in travel right now, especially with millennials, we're seeing more sort of last minute
vacations. This summer is going to be record high travel. There's what's known as "bleasure," which is when you mix business and pleasure travel as
well. Walk us through that.
SHANK: The millennials and Gen Z and the younger generations, they look to optimize their life around experiences. And a big part of experiences for
them is travel. So for them, it's about how many trips can I get in? How many experiences can I get in?
And so they look to places like HotelTonight and Airbnb for on-demand travel where they can fit in regional trips is a really big trend.
So going like just a day outside of the city or even a staycation within the city and having a very different experience staying in a hotel with a
pool and then instead of having just two or three big trips a year, having, five, six, ten trips a year is the big trend.
ASHER: So now that you -- I mean, obviously HotelTonight, you accept last minute bookings. That's how you built your business. But you accept
bookings in advance now. So how do you fend off competition? Or how do you distinguish yourself from competitors like Priceline and Expedia,
booking.com?
SHANK: We looked at three things to make us better than the competition. First is our simplicity. And you can book a room in just 10 seconds, in
three taps and a swipe on HotelTonight.
Second is value. We have amazing deals. We have a new deal feature called Daily Drop, which is an ephemeral deal. It's a deal that you unlock, and
you get this really amazing discount. It's one of our best discounts. And then you get only 15 minutes to book it.
ASHER: How much of a discount are we talking?
SHANK: I've seen 30 percent to 35 percent off of that -- the discount varies and sometimes, you can even go higher than that. And then the last
is our playfulness and the gamification. We have a rewards program that the more you book, the better the deals get.
[09:55:13] SHANK: We have achievements, so collect the number of cities and states and countries you've been to. And we love to celebrate travel,
we love to make it fun. It ultimately is fun. And booking travel should be just as fun.
ASHER: So one trend that we're seeing everywhere is personalization. So how do you cater to that? I mean, do you have a profile of people knowing
what sort of rooms they like, knowing where they tend to go -- that sort of thing?
SHANK: Yes, absolutely. The more you use HotelTonight, the better it gets for you and the results that we show you become more personalized and
curated to your own tastes and it happens invisibly, and it just becomes that HotelTonight as you trust it more and more because it is showing you
better and better things for you.
ASHER: All right. Sam Shank live for us. Thank you so much. Appreciate it. All right, that's it for us. Thank you so much for watching. I'm
Zain Asher. International Desk with Robyn Curnow starts after the break. You are of course watching CNN. Have a great day.
(COMMERCIAL BREAK)
[10:00:00]
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