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First Move with Julia Chatterley
Fed Chair, Jerome Powell Hints At Interest Rate Cuts; Iran Says It Shot Down A U.S. Aircraft; Slack Makes Its Market Debut Today Taking A Page Out Of Spotify's Book And Will Direct List; Secretary Of State Unveils U.S. Human Trafficking Report. Aired: 9-10a ET
Aired June 20, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Live from the New York Stock Exchange, I'm Alison Kosik sitting in for Julia Chatterley. And here's
what you need to know. Patience running dry. Fed Chair, Jerome Powell hints at interest rate cuts. Drone down. Iran says it shot down a U.S.
aircraft. And Slack makes its market debut today taking a page out of Spotify's book and will direct list. It's Thursday and this is FIRST MOVE.
Welcome to the FIRST MOVE. U.S. stocks look ready to rally amid new hopes for global stimulus. Futures at the moment are pointing to a sharply
higher open across the board with the S&P 500 close to record territory. Investors remain in a buying mood after the U.S. Federal Reserve signaled
that its next move maybe to lower interest rates perhaps as soon as next month. The Bank of Japan said today that it is ready to provide new
stimulus if necessary as well. The European Central Bank said the same thing earlier this week.
All the stimulus talk is helping to push bond yields to multi-year lows. The yield on the 10-year U.S. Treasury falling below two percent for the
first time since 2016. This happening on Wednesday. Yields are hovering around the two percent mark right now.
The U.S. dollar is also falling. Meantime, we're keeping an eye on oil. Oil is posting strong gains after Iran shot down a U.S. military drone near
the Strait of Hormuz today. The U.S. says the drone was an international airspace, Iran says the drone in its airspace. We'll have more on that
story later in the show. But first, let's get right to the drivers.
It wasn't so much what the Fed said as what it didn't say. The U.S. Central Bank capped rates on hold, but dropped the word "patience" from its
statement. Instead it said, "Uncertainties have increased." That is seen as a signal that a rate cut could be on the horizon.
It's all about the tea leaves, and Christine Romans is the translator for us this morning. You know, I was reading over the statement one more time,
Christine. And if there was another sort of translation needed with this statement, "We will act as appropriate to sustain the expansion," to me
that says, yes, we're going to go ahead and cut rates.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Yes, this is a dovish Central Bank. In fact, you're right to point out dovish language
from Central Banks around the world trying to keep the expansion alive and battle what could be slowing growth on the horizon.
What's ironic to me is that nine months ago, the Federal Reserve was raising interest rates to keep the American economy from overheating.
Remember how strong this economy was?
Well, the President of the United States came out with his you know, multi prong trade wars here, and in fact, now the President's trade wars, doing
the job of the Fed by cooling the economy. Now the Fed is trying to make sure things don't cool off too quickly and trying to navigate here what we
call a soft landing.
Dropping the word "patient" was really critical here because the Fed had been not too long ago thinking about maybe they could raise rates, maybe
they would stand pat or maybe they were lower rates. Now it looks like lower rates are on the horizon here.
One interesting backdrop is that that the President of the United States has been very vocal in his criticism of the Fed calling it dangerous,
calling it loco, saying that the Fed Chief doesn't understand and doesn't have the feel of the markets. The Fed Chief responded to that criticism
yesterday.
(BEGIN VIDEO CLIP)
JEROME POWELL, U.S. FEDERAL RESERVE CHIEF: I think the law is clear that I have a four-year term and I fully intend to serve it.
(END VIDEO CLIP)
ROMANS; Translation: The President's tons and tweets will not push Jerome Powell out of that job as the shock absorber to the American economy.
Remember, the Fed is -- the Fed Chief is appointed by the President, but then serves independently of the White House -- Alison.
KOSIK: So how dangerous, do you think this could be for the stock market? I'm talking about -- so the there's the expectation of at least one rate
cut, but you know how that goes. The fishbowl is brought -- not the fish bowl -- the punch bowl is brought over and the thinking is we want more and
more, so then there's the expectation for two and three rate cuts and when that may not happen, it potentially could make stocks tank. What are your
thoughts on that?
ROMANS: You know, it's ironic because you basically had the punch bowl for 10 years and it was the Fed trying to slowly take away that punch bowl.
And you know, and in fact it really never did. You know, you had a handful of rate hikes, but you're looking at rates here just above two percent.
The last time the Fed was cutting rates was in 2008, and rates were a heck of a lot higher than they were here. One other point I would say about the
markets, you're right, are really betting and banking on a rate cut and quickly. What if that doesn't happen? What if the economic news is still
strong and the Fed things it doesn't have to move and then there's also this outcome -- potential outcome -- over the past 25 years, there have
been four cases of rate cutting.
Those were for things like the collapse of long term capital management and an Asian financial crisis and a crisis in the United States, and I mean,
the Fed cuts rates for bad reasons, for bad reasons in the American economy. The President is still saying that this is the best economy maybe
in history. So how do you square this is the best economy in history with cutting interest rates? Cutting interest rates could actually send a
signal to global markets that hey, things aren't great.
[09:05:35] KOSIK: Absolutely, you know, there's that -- you feel that the Fed is trying to really justify its move at this point. And the question
is, who is buying that justification? Christine Romans great talking with you. Thanks.
ROMANS: You, too. Bye.
KOSIK: Moments ago, the United States released its annual human trafficking report. Secretary of State Mike Pompeo is due to speak about
the report shortly. He and Ivanka Trump who is an adviser to the President will be honoring people who have fought against modern slavery.
Paula Newton joins me live from the State Department right now. You know, this essentially is a scorecard on countries around the world on what they
are doing to combat human trafficking. Who was downgraded and who was upgraded in this report?
PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: You know, this is always such a contentious part of this report. It is a thick tome and the United
States says that they do the best that they can, throughout their embassies around the world to really collect accurate data.
And in that collection this year, they have in fact downgraded four countries to Tier 3 three, that's Bhutan, Cuba, the Gambia and crucially,
here, Alison, which we will talk about is Saudi Arabia. We will get to the other downgrades from Tier 1 to Tier 2.
But what I want to explain is what happens when you're in Tier 3. And normally getting to Tier 3 means this report will have some teeth to it.
Now, the President has the discretion, he has the final say, but normally that it means that the country will be sanctioned, that there will be some
kind of aid pulled and that will be an issue for those countries.
As I said, it is contentious in terms of the actual evidence that they gather, and where a country falls in the report. I want to point out --
and these are going to be interesting for many people that there were six downgrades from Tier 1 to Tier 2, and those included Aruba, Denmark,
Germany, Italy, Poland, and the Slovak Republic.
I mean, Alison, the issue here, this report lays out that they want to know that countries are protecting victims, preventing human trafficking in the
first place, and crucially, prosecuting those people. And I can tell you, some people might be shocked that a country like Germany or Italy might
fall down into Tier 2. But the issue here is the prosecution.
For instance, in Germany, the report lays out the fact that only 36 percent of those who were convicted of sex trafficking, for instance, actually got
any jail time and it is the impunity with which human traffickers work throughout the world that the United States is trying to address here.
It's interesting, Alison that the point that the United States started actually categorizing itself that started in 2011, when Secretary of State
Hillary Clinton was in charge here, and she decided that the United States would also grade itself.
We're going to pause there for a second, Alison, as I see Secretary Pompeo has come to the podium. We will get his remarks in a few moments. But as
I was saying, the United States also controversially does grade itself.
The issue here, though, is when you talk about the issues with Donald Trump and those border problems, many activists who follow trafficking say that,
in fact, the United States policies are not conducive to preventing human trafficking. And Alison having been to those border areas, I can tell you
that, in fact, what is going on here is there are people that are vulnerable in places like Mexico, or Guatemala or Honduras, or El Salvador,
precisely for the fact that they are being held in certain conditions that make them vulnerable to traffickers and make them vulnerable to forced
labor, and of course, also the sex trafficking.
So a lot to get through there in terms of this very needy report and what's being done around the world to end modern slavery.
KOSIK: Yes, and you make really a good point there about tying what's happening at the border, and what's happening with these new numbers about
human trafficking. You know, you've got so many people looking for refuge here in the U.S. But you've got the U.S. because of the administration's
policies, turning people away.
NEWTON: Yes. And that -- we're going to pause there, Alison, actually, because we're going to get the remarks from Secretary of State, Mike Pompeo
himself. Let's take a listen.
MIKE POMPEO, U.S. SECRETARY OF STATE: Welcome. First, I want to welcome all of the human trafficking survivors in attendance here today. You are
all heroes. This is a very special morning. You are all standing up to ensure that no one else suffers the abuse that you endured. And we are
proud of your commitment and inspired every minute by your courage.
[09:10:04] POMPEO: Let me also thank adviser to the President, Ivanka Trump for joining us here today and for continuing to speak out with
absolute moral clarity on the issue of human trafficking. She calls it what it is: modern-day slavery.
I'm also honored to welcome Members of Congress from both parties. If there was ever an issue that was bipartisan and transacts the politics of
the moment, human trafficking is most certainly it.
That's also clear from the attendance today of all the living former heads of the State Department's Trafficking in Persons Office from the past two
administrations. Thank you all for being here, and welcome.
And finally, we're glad to see ambassadors and representatives from around the world who have joined us here today. Human trafficking is indeed a
global crisis, and it requires a global response. So thank you all for being here and coming to join us this morning.
In just a moment, we'll salute those who are leading the fight against human trafficking: Our 2019 TIP Report Heroes.
But before we do, I want to speak for just a moment about why the fight to end modern slavery strikes at the very core of our moral responsibility as
human beings.
Consider one of the stories documented in this year's report -- the story of a woman from Venezuela who I'll call Melinda.
After Maduro came to power, Melinda found herself trapped in poverty and desperate to provide for her family. One day she met a man. She met a man
who offered to cover expenses to travel to Spain, where he promised he would find enough work to send money back home so that she could take care
of her family and those around her. He then forced her into prostitution and threatened to hurt her daughter if she resisted. So she stayed silent,
and after years and much anguish, she finally was able to get the police, and a raid finally set her free.
I wish that I could stand here this morning and tell you that her story is uncommon. But our report reveals the grim reality: there are 25 million
adults and children suffering from labor and sex trafficking all over the world - including in the United States and, indeed, in this very city in
which we're sitting here today.
It's a strain. Human trafficking is a stain as well on all of humanity. We detest it because it flagrantly violates the unalienable rights that
belong to every human being. Every person, everywhere, is inherently vested with profound, inherent, equal dignity.
America was founded on a promise to defend those rights including life, liberty, and the pursuit of justice. But too often we've fallen short, and
we cannot fall short on this challenge.
Human rights trafficking is not a natural disaster. It's caused by man. And therefore, we have the capacity to solve this. And I hope that this
report helps each us know the way to achieve this.
You'll see that the focus of the 2019 TIP Report is to encourage governments to address forms of human trafficking occurring within their
country's own borders.
That may seem surprising to many of you. Indeed, I think one of the biggest misperceptions about human trafficking is it is always
transnational. It's not the case. Every individual and every individual country must confront this challenge on its own sovereign territory.
Because in reality traffickers exploit an estimated 77 percent of victims in their own home country.
Human trafficking is a local and a global problem. Shockingly, many victims never leave their hometowns. I think the focus of this report
appropriately reflects that challenge.
National governments must empower local communities to identify and address trafficking in specific forms prevalent in the areas in which they live.
The report identifies a few success stories too, like Senegal, where the government identified a growing problem of child begging rings, ran
campaigns to raise awareness among the public, convicted perpetrators, and provided care to many, many victims.
The report commends those countries that have taken action, nations like Senegal, as well as Mongolia, the Philippines, Tajikistan, and others. But
we also call out those nations that aren't doing enough.
Tier 3 designations -- the lowest possible designation -- were given once again to China, Iran, North Korea, Russia, Syria, and Venezuela, among
others. A few countries were added to the Tier 3 list, including Cuba.
Some of these governments allow human traffickers to run rampant, and other governments are human traffickers themselves.
In North Korea, the government subjects its own citizens to forced labor both at home and abroad and then uses proceeds to fund nefarious
activities.
In China, authorities have detained more than a million members of ethnically Muslim minority groups in internment camps. Many are forced to
produce garments, carpets, cleaning supplies, and other goods for domestic sale.
[09:15:05] POMPEO: These designations -- Tier 1, 2, 3 -- aren't just words on paper. They carry consequences. Last year, President Trump restricted
certain types of assistance to 22 countries that were ranked for Tier 3 in our 2018 TIP Report.
That action and the messages that flows with it is very clear: If you don't stand up to trafficking, America will stand up to you.
President Trump has proven this. And he has mobilized our Federal government to make human trafficking a true top priority for the United
States. This is highly appropriate.
Last October, the President hosted -- and I chaired -- a meeting of the Interagency Task Force to Monitor and Combat Trafficking in Persons.
It was the first time that a President had attended a meeting of that task force in its 19 years of existence.
The President that day vowed that we would not rest, quote, "until we have stamped out the menace of human trafficking once and for all," and he
instructed every agency to take on that action.
Here at State, we're doing our best to answer that call. We engage in year-round activity with our partners in more than 80 countries to support
anti-trafficking programs all across the world.
Last fall, the Department -- with important input from survivors -- worked to produce a video about the risks of human trafficking and inform visa
applicant of their rights. It's on display in the waiting rooms at most of our embassies and consulates all across the world.
And one of our greatest contributions to the anti-trafficking movement is the report we're launching today for the 19th year in a row.
I want to thank Ambassador Richmond and his team for leading the efforts to produce this year's report and all the dedication that his team has shown.
They spent many long hours making sure that it lives up to its reputation.
And now that they've completed their work, it's up to the rest of us to ensure that it doesn't just sit on a dust - on a shelf and collect dust.
We must remain steadfast in our twin goals of freedom for every victim and justice for every trafficker.
I now have the pleasure of introducing someone who shares an unwavering commitment to those two goals. She has valiantly made this issue a
priority for the administration, including by attending this event three years running.
NEWTON: And you are listening to Secretary of State Mike Pompeo here in the State Department where we are. He is releasing the 2019 TIP Report.
He obviously pointed out that they continue to try and protect victims of human trafficking around the world and also encouraged governments to
prosecute them.
What is contentious here is the tiering. There's a Tier 1, Tier 2, Tier 2 Watch List and a Tier 3 and most interesting here, Secretary of State Mike
Pompeo in indicating who was downgraded from a Tier 2 watch list to Tier 3 indicated that Cuba was, but did not say that Saudi Arabia was as well.
Again, this is a contentious document, both within these walls of the State Department but also outside and why is that that Tier 3 ranking does end up
having teeth in terms of what kind of assistance the U.S. government may give to these countries and of course, becomes a contentious issue going
forward with the United States allies and ally like Saudi Arabia.
Our Atika Shubert joins us now who has also been following this report. You know, Atika, CNN had reporting, reporting that was originally reported
by Reuters that in fact, Secretary of State Pompeo fought to keep Saudi Arabia off a list of countries that recruit child soldiers that is directly
related to the conflict in Yemen and that was also reported by our sources, and Michelle Kaczynski sources here at the State Department.
You know, this is a political document at the end of the day, and he chose to omit the fact that Saudi Arabia on human trafficking has now been
downgraded to that Tier 3 level.
ATIKA SHUBERT, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, and the reality is that Saudi Arabia has been on the Tier 2 watch list for the last
four years running. And it's only because of a waiver, really that it hadn't slipped under - to Tier 3 in the previous years.
Saudi Arabia has had a long running problem not only in connection to the conflict in Yemen, but also with forced labor, for example, with labor that
is brought over from many parts of South Asia and Africa. They have a system they're called the Kafala system, which of course, which allows for
employers not only to take control of passports of workers brought over, but that they would actually need to seek the permission of their employers
to leave the country.
So it's created a system that is ripe for abuse, essentially, and the State Department has been really looking for signs that Saudi Arabia - the Saudi
Arabian government, in particular, is trying to improve conditions. Is it providing care for victims of trafficking? Is it prosecuting those
traffickers? And you know, last year in the 2018 report, it said only four cases had been prosecuted in Saudi Arabia. It does seem that this year,
Saudi Arabia has finally fallen into that Tier 3. You're right. Secretary Pompeo did not explicitly call out Saudi Arabia just now.
[09:20:10] SHUBERT: But it is clear that this is a very contentious political issue to see it fall into that last tier.
NEWTON: Yes, and it will now fall on the desk of President Trump and what he decides he's going to do this. And, of course, Atika, all of this
coming with the news from the United Nations yesterday that the murder of Jamal Khashoggi was very - that they have the evidence, they believe that
it was state sponsored, and that the Crown Prince Mohammad Bin Salman was likely involved in some way.
You know, before I let you go, Atika, and we parse this report, it may come as a shock to some people that countries like Poland, Italy, and Germany
have fallen from Tier 1 to Tier 2, you know, these are robust judicial systems and policing systems where you think they would be able to have
some progress over the years.
Given the fact that you're usually based in Germany, you know, what was interesting, and I'm sure you found this in your reporting of the Freedom
Project, as I have is that prosecution is an issue. So in Germany, Atika, they pointed out that only 36 percent -- 36 percent of convicted sex
traffickers actually ended up with jail time, and that is one of the issues.
And speaking to prosecutors myself over the years, it does tend to be the issue that sometimes they try and apprehend these people, and perhaps
sometimes do not even charge them with trafficking because they just want to get a conviction and want to make sure that there is some modicum of
justice.
Do you think these European countries like Italy, like Poland, like Germany will now be paying close attention, having been now downgraded from Tier 1
to Tier 2?
SHUBERT: I think they will be. And I think this is clearly a warning from the U.S. that it is watching these countries. I'm sure there will be a lot
of political discussion over this from countries like Denmark, Germany and Italy.
But the reality is, is as you point out, those are some shocking numbers, you know, to see to see so few prosecutions and ultimate jail time for
traffickers. And it's something that those countries, the U.S. State Department clearly feels they need to work on them. They need to show that
there are improvements. And then they could be moved into that Tier 1 category. But I think there are certainly political repercussions in those
European countries.
NEWTON: Yes, and we will see if we will have any reaction to that today. Atika, I know you will continue to follow that. You continue to watch here
at CNN as we continue to follow the release of this report.
We will have the United States Ambassador on human trafficking issues live exclusively, just about a little bit less than an hour from now, and we
will have more news right here on CNN.
KOSIK: All right, Paula Newton, thanks so much. You're watching FIRST MOVE, we'll have more right after this short break.
(COMMERCIAL BREAK)
[09:25:49] KOSIK: Welcome back to FIRST MOVE live from the New York Stock Exchange. I'm Alison Kosik and let's check the futures once again, it is
still looking like a very strong start to the trading day here on Wall Street.
The S&P 500 could hit record highs for the first since early last month. Stocks are rallying on hopes for new global economic stimulus. The Fed has
signaled that it is ready to cut rates. The Bank of Japan and the ECB also say they could provide further support, too.
Okay, here are some stories making headlines around the world. Iranian forces have shot down a U.S. military drone that looks like this one saying
it violated their airspace. But the U.S. says the drone was in international airspace. The incident will further heighten tensions
between the two countries.
Last week, the U.S. accused Iran of attacking two oil tankers. We are going to have a live report from Tehran later in the show.
China's President Xi Jinping is on his first day visit to North Korea. The first in 14 years by the country's head of state. According to Chinese
media, Xi Jinping was welcomed in Pyongyang by 10,000 people waving flowers and chanting slogans, even a 21-gun salute. The visit comes a week before
Xi is due to meet with U.S. President Trump at the G-20.
Baseless allegations, that's what Saudi Arabia is calling an independent report on the murder of journalist, Jamal Khashoggi. The United Nations
official concluded that Khashoggi was the victim of a deliberate, premeditated execution. She said there was credible evidence to suggest
Saudi Arabia's Crown Prince, Mohammad Bin Salman was responsible.
In the U.K., Sajid Javid has been eliminated from the Conservative Party leadership race. Michael Gove came in second place, just ahead of Foreign
Secretary Jeremy Hunt. Boris Johnson is far ahead with 157 votes. Another poll later today will eliminate the weakest candidate. The remaining two
will go forward to the final round that will decide the next Prime Minister in July.
Okay, we are just seconds before -- or minutes before the opening bell. We are going to see how stocks begin. It looks like a strong start for the
Dow. The Dow could open as much as 200 points higher. We will be right back.
(COMMERCIAL BREAK)
[09:30:17] KOSIK: Welcome back to FIRST MOVE. I'm Alison Kosik live from the New York Stock Exchange and there you go, you're seeing it there.
Ringing the opening bell today, executives from workplace communications firm, Slack that is going public under the ticker symbol, WORK, work. So
no time to slack off here for traders on Wall Street. We've got a busy start to the trading day with all the major averages, beginning solidly
higher.
The Fed's dovish policy statement Wednesday certainly opens the door to a future rate cut that remains a big driver of investor sentiment today. The
S&P 500 begins its session in record territory for the first time in over a month.
Okay, let's take a look at the global movers. Shares of Carnival Cruises are lower. The company posted better than expected second quarter results,
but it lowered its guidance for the rest of the year citing a number of factors including the U.S. move to ban cruises to Cuba.
Shares of Darden Restaurants are falling as well. The parent company of the Olive Garden also reporting better than expected earnings. But sales
came up short and its forward guidance was weak.
Tesla is also trading lower. Goldman Sachs cut its price target on Tesla today. It says quote, "The downward path for shares will continue."
Goldman says there's too much uncertainty over future demand for Tesla's cars.
You're seeing shares of Oracle higher. The software giant sales and revenues beating expectations in its most recent quarter. Its outlook for
future quarters also coming in investor friendly.
We're keeping an eye on oil prices as well. They are rallying after Iran shot down a U.S. military drone today. It's just the latest of a series of
incidents that have ratcheted up the tension between the two countries.
Taking a look at oil prices at the moment, both Brent and U.S. crude are up sharply. U.S. crude is up now over four percent. We've got Fred Pleitgen
live from Tehran. Thanks for hanging out there. I mean, you've been there for days. We had, first the attacks on the two tankers, and now this
attack on a drone. But this drone attack, I would say there's nothing subtle about this message coming from Tehran.
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, there certainly isn't anything subtle. I think, Alison that the Iranians are
leaning for it to be exactly that. The head of the Revolutionary Guard Corps, which is the unit that was behind shooting down this American drone
that was responsible for it, he came out earlier today and he said this is a clear message to the United States that Iran is not going to tolerate
anybody violating its airspace, and that the Iranians will respond very quickly.
The Iranians also saying and this probably is also something that potentially will be of interest to the markets as well. The Iranians are
saying they don't want an escalation. They don't want a war to happen, but they also unequivocally said that they are absolutely ready for a war to
happen and prepared.
Now, of course, this incident like really a lot of other incidents that have taken place over the past couple of days, the past couple of weeks,
very much in dispute. Iranians are saying that this drone, an American high altitude surveillance drone, violated their airspace and was then shot
down by its anti-aircraft systems in the south of Iran over Iranian airspace.
And now the Americans have a very different take on all this. They say that the drone was shot down over the Strait of Hormuz in international
airspace, and that this was therefore an unprovoked attack. So as you can see, both sides still very much at odds with one another, and of course,
all of this coming in that setting that you had just described, where the U.S. and Iran or the U.S. blaming Iran for those tanker attacks that took
place in the Gulf of Oman last week, the Iranian saying that it wasn't them.
And then you had a lot of other little attacks taking place where no one really knows who was behind. There was a rocket attack yesterday in Basra
also hitting a compound that for instance, Exxon is in. So right now you can feel that in the greater Middle Eastern Region, especially in that oil
heavy -- important for the oil region of the Persian Gulf that there is a lot of uncertainty going on there right now - Alison.
KOSIK: Yes, and you're talking about -- this is a very important region as far as oil transport goes. What could be the U.S. response to a shoot down
of one of its biggest drones, because we're not seeing a huge reaction in oil? But my thinking is if we're going to see this reciprocal action
potentially, what can we see happen with oil prices?
PLEITGEN: Well, it's been very interesting to see over the last couple of days that so far, there's been very little in the face or in the way of
U.S. reactions to some of the things that have been happening. They've been blaming the Iranians.
The biggest reaction that we've seen from the United States was a couple of days ago, when they announced that they would send a thousand extra
additional troops here to this region. Now the U.S. says that that is completely defensive in nature.
[09:35:10] PLEITGEN: But one of the things that we also have to keep in mind is that even if right now, it doesn't escalate, the fundamental
situation (CONNECTION ISSUES).
KOSIK: Okay, we've lost Fred Pleitgen, but we thank him very much for his reporting there on this drone attack. Let's move on. Middle East
tensions, as you can see, are rattling the commodities markets. But stocks remain on the upswing on rate cut hopes.
The S&P 500 is now trading in record territory for the first time in over a month. Art Hogan joins me now live. He is the Managing Director and Chief
Strategist at National Securities Corporation. Great timing to have you on right after the Fed, dropping the big hints that we could see at least one
rate cut this year, it could be next month. What do you say to that?
ART HOGAN, MANAGING DIRECTOR AND CHIEF STRATEGIST, NATIONAL SECURITIES CORPORATION: You know, it's interesting. So the marketplace has really
built up a great deal of expectation that the Fed needs to cut rates. And I think that's the wrong way to look at this.
Now the Fed has gone from being on autopilot, and hawkish in December to pivoting into January to being patient. And now we're not patient anymore.
Now we're leaning towards being dovish. And I think if you look at what drives monetary policy, it should be economic data, how things look in the
economy in the here and now and inflation.
So half of that looks pretty good right now. So we've got unemployment rate that is at a 50-year low. We certainly have jobs numbers that
continue to look better. We saw the weekly jobs this time this week, much better than expected. So as we look at the prevailing economy, things
aren't at a point where we should be using what's a very depleted tool kit of monetary policy to ward off a lack of inflation.
I think what's happening though, is the Fed is saying the longer this trade war goes on with China, the more damage to the economy we're going to see,
so I think what the Fed is saying is, listen, we don't believe in the trade policy we have. The Fed in large part doesn't believe in tariffs.
But the longer this trade war lasts, the more damage will be done to the economy. So they are going to stand at the ready to do this.
KOSIK: So let me get this. You don't feel like the Fed is justified to cut rates at this point?
HOGAN: Not right now. You've got an employment rate at 50-year low, retail sales just came out, and they look spectacular, much better than
expected. We're not in contraction in manufacturing. We're certainly not in contraction in services. The economy data doesn't point to a cut and a
raise.
Now, with that said, if the G-20 is a flop and we escalate with China and put a 25 percent tariff on the remaining $300 billion with the Chinese
exports, that will cause a global recession by the end of this year, so the Fed will have to get out in front of that. We're just not there yet. I
don't think we're there in July. We will know a lot more come the July meeting because we'll have the G20 would have come and gone. We will know
when we are on the path of negotiations. We will have another GDP number. We will have another jobs number. So we'll get a better feeling about the
economy, but I just don't think it's time.
KOSIK: Markets expecting more than one cut. How dangerous can that be?
HOGAN: Well, the more you price in -- think about it three ways. But first and foremost, the market always gets ahead of itself. Both on cuts
and raises. We're never right on and the dot plot don't really help us with that. The second thing is the market is celebrating the fact that we
need monetary policy is very counterintuitive. For the market, that's like saying the ambulance got to our house really quickly. Oh, wait a minute.
We need an ambulance. That's not good.
So celebrating monetary policy in the marketplace doesn't last very long. And it's not very intuitive. The third thing is what the Fed says and what
the Fed does over the last 10 years has been two completely different things. The dot plots have never been right. They're probably going to go
away at some point in time. I would listen to more about what action they take in this July meeting is not a hundred percent locked.
KOSIK: Okay, not a hundred percent. Art Hogan, thanks so much for your perspective. We will be watching along with you.
HOGAN:
KOSIK: Hey, picking up the slack. The firm behind the messaging tool is making its Wall Street debut. We speak to the NYSE Vice Chairman on how
the exchange is attracting firms that are rushing to the market.
(COMMERCIAL BREAK)
[09:42:08] KOSIK: Welcome back. It's the messaging app that's popular with big business, and right now Slack is hoping to be a hit with
investors. Here, we're taking a look at live pictures of the trading floor here at the New York Stock Exchange. The firm is listing its stock
directly on the floor on the New York Stock Exchange and that is where founders, early investors and employees are allowed to sell their shares
directly to the public instead of the company raising money by selling shares through the stock market in a traditional IPO.
Clare Sebastian is here to walk us through this story. This is an unconventional way to make a public debut, right Clare?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, absolutely, Alison. This is definitely not your traditional IPO. This is not a fundraising
exercise just like them. They're not raising any new money. They're simply allowing people who already own shares in the company, be it early
investors or employees to cash out. So what you're seeing that on the floor is the designated market maker essentially gathering all the buyer
and seller information. And eventually he'll set an opening price that could take a couple of hours.
Spotify, which did the same thing took until about quarter to one in the afternoon to actually start trading. So we could be in for a bit of a long
journey here. But this is a company if you're not one of the more than 10 million people who use it on a daily basis that really is starting to gain
a lot of traction. It's in 65 Fortune 500 companies. So take a look now at exactly what Slack is all about.
(BEGIN VIDEOTAPE)
SEBASTIAN (voice over): Slack is on a mission to change the way we communicate at work.
NEWTON: And do away completely with office e-mail.
(BEGIN VIDEO CLIP)
STEWART BUTTERFIELD, COFOUNDER AND CEO, SLACK: You have your family e- mailing you, former co-workers, friends, people you work with today. It becomes just totally overwhelming.
SEBASTIAN (on camera): Here at CNN we take bulging inboxes to a whole new level, not to mention the constant meeting makers.
NEWTON: It is communication overload which makes us a prime target for the people at Slack.
(END VIDEO CLIP)
SEBASTIAN (voice over): Slack isn't just about messaging. Everything you do at work -- chats, spreadsheets, social media -- can be found in one
place and compiled by topic.
NEWTON (voice over): A fancy word for it, Information Management.
(BEGIN VIDEO CLIP)
BUTTERFIELD: Some people's first reaction to switching to Slack is, "Oh my God, another -- there's yet another thing that I have to take care of and
respond to and pay attention to." But in the ideal case, we consolidate and replace a lot of those other systems. They don't feel quite as
overloaded.
(END VIDEO CLIP)
SEBASTIAN (voice over); Slack says more than 600,000 organizations use its product but only 88,000 are paying customers.
(BEGIN VIDEO CLIP)
SEBASTIAN (on camera): It's not just e-mail, Slack is also trying to bring your video conference needs into its ecosystem. Let's see if I can call
Paula.
NEWTON (on camera): Hi, Clare.
SEBASTIAN: Hey Paula. So your 9:00 a.m. works. Let's have a quick chat about the show.
(END VIDEO CLIP)
SEBASTIAN (voice over): Video conferencing lets you share your screen, draw on slides and integrate useful apps like Outlook, Twitter, and Google
Drive.
NEWTON (voice over): The company is going public in a direct listing meaning that it won't be raising extra cash. There's just one problem.
(BEGIN VIDEO CLIP)
RETT WALLACE, CEO, TRITON RESEARCH: They lose money. Unlike Dropbox and DocuSign, they still lose money.
[09:45:07] SEBASTIAN (voice over): Slack urgently needs to add more paying customers and it is facing mounting competition from the likes of Google
Hangouts, Microsoft Teams app and Facebook's Workplace.
(BEGIN VIDEO CLIP)
WALLACE: If you look at the growth characteristics of it, it's really actually pretty impressive. Anything that cuts your e-mail box down to a
place where it becomes manageable, I think people will find useful and ultimately will pay for it. Is that a huge business? Who's to say?
(END VIDEO CLIP)
SEBASTIAN (voice over): Slack says it's a tool for collaboration so its product works best when everyone in the office uses it.
NEWTON (on camera): But sometimes there's no substitute for in-person communication. Clare, stop Slacking. You're live in five minutes.
(END VIDEOTAPE)
SEBASTIAN: So it's not just about productivity, it is pretty addictive. Now the New York Stock Exchange has set a $26.00 reference price for Slack
that is not a guaranteed opening price, but it does give the company evaluation of almost $16 billion. So Alison, we'll have to see exactly
where the market sets the price today.
KOSIK: All right, Clare Sebastian, thanks so much for that great report. All right, let's talk about the growing trend of direct listing with John
Tuttle. He is the Vice Chairman and Chief Commercial Officer of the New York Stock Exchange. I'm so happy to have you on to walk us through this
because this really is a new concept for investors going public, but in a fashion that is going direct and not going through the underwriter and et
cetera. Walk us through how this came about. And is this something that is specific only to the New York Stock Exchange?
JOHN TUTTLE, VICE CHAIRMAN AND CHIEF COMMERCIAL OFFICER, NEW YORK STOCK EXCHANGE: Well, it's very exciting morning welcoming Slack as the second
direct listing of this size and caliber to come to market. The first one was obviously Spotify last year and while the direct listing is not going
to displace the traditional IPO, it's an interesting new path to the marketplace for companies that need the profile of Spotify or Slack where
they don't necessarily need capital on the day of their listing. But they want the other benefits of being a publicly traded company. And we do it
in a very unique, transparent way right behind us here on the floor of the New York Stock Exchange.
So it may take a while for the stock to open for the very first time, maybe up to two to three hours. But what we want to focus on making sure they
have a smooth and orderly entrance to the market.
KOSIK: Do this idea of not having the traditional IPO, but direct listing instead, does that idea come from a conversation between companies and the
NYSE or did the NYSE come up with this, quote "new product" to sell.
TUTTLE: Well, we've always we've always had varieties of the direct listings, whether it be an existing company spinning off a new publicly
traded entity, a company emerging from the over-the-counter markets to the main markets, but a company of this caliber in this profile, this is the
second time.
The first one was Spotify and that's who really pioneered this process along with the exchange.
KOSIK: What are the benefits for companies to make their public debut this way? I understand it's less pricey and et cetera. Go through -- walk us
through some of that.
TUTTLE: There are numerous benefits and it really depends on what the objective of the company going public is. But generally speaking, because
you're not selling shares to the marketplace, broader market conditions matter a little bit less than they would in a normal IPO. And the
correlation between valid market volatility and IPO activity is about negative one. So being able to eliminate that risk from the marketplace
allows these companies to come to market on their own timing.
KOSIK: But what challenges are there for companies going public this way?
TUTTLE: Well, there are a lot of challenges. Number one is making sure that you have distribution of the shares that you have liquidity on day one
of your listing. In a traditional IPO, you have underwriters that are placing or allocating shares with a lot of investors. Here you have no
underwriters, no stabilization agent, it's a different type of listing.
KOSIK: Right, so it's more open to volatility.
TUTTLE: In theory, it could be.
KOSIK: Walk with me about competition. Look, the NYSE and the NASDAQ. They compete to get listings. And if you look at the numbers, the NASDAQ
has done pretty well year-to-date, 78 percent win rate with these IPOs with 83 IPOs year-to-date, the NYSE, 23 IPOs year-to-date. Is this way this
direct listing has begun here at the NYSE to attract companies to offer something different that the NASDAQ doesn't offer?
TUTTLE: Well, the greatest companies in the world select the New York Stock Exchange, in fact, if you look back over the past five years alone,
75 percent of the technology IPO proceeds, so the money raised by technology IPOs have been raised on the New York Stock Exchange. And if we
look at the 25 largest IPOs in history, the ones that really have an impact on the way we live, those companies, they have an impact on the way we live
and work 24 out of 25 have selected the NYSE, so we're confident in our model and in what we offer our clients.
KOSIK: I know that you said that this isn't going to replace the traditional IPO method. But this could be something that really attracts
companies. Do you see maybe this even being a growing trend, especially with tech companies?
TUTTLE: Well, we've had a number of inbound inquiries about the direct listing and so from some -- from companies that would fit the profile of a
company that would qualify for a direct listing, but it's also from others, intermediaries like venture capital firms, law firms who just want to get
smarter on the process.
KOSIK: Okay, John Tuttle, great talking with you. Congratulations. We await the moment of that public debut for Slack. Great having you here.
TUTTLE: Thank you so much. It's going to be an exciting morning.
KOSIK: It will be. Okay, still to come. We get Bank of America CEO's Brian Moynihan's take on fears of a recession. Our exclusive interview
with him just ahead.
(COMMERCIAL BREAK)
[09:52:08] KOSIK: Here's today's "Boardroom Brief." The wife of former Nissan and Renault Chairman Carlos Ghosn is speaking out. Carole Ghosn
tell CNN she believes her husband cannot get a fair trial in Japan. She also says French authorities threw him under the bus in pursuit of a merger
between Renault and Nissan.
(BEGIN VIDEO CLIP)
CAROLE GHOSN, WIFE OF CARLOS GHOSN: My husband was a victim of a corporate coup by a few Nissan executives, and they have conspired with the METI, the
Ministry of Economy, Trade and Industry in Japan in order to stop the merger. They thought the best way to do it was to arrest my husband.
(END VIDEO CLIP)
KOSIK: CNN has asked the Japanese Justice Ministry for a response to Mrs. Ghosn's claim. Officials there said this, "We would like to refrain from
making comment on a specific case." And you can watch the full interview with Carole Ghosn on "Quest Means Business." That's coming up at 3:00 p.m.
in New York, 8:00 p.m. London time.
Renault and Nissan are considering teaming up with Apple's Waymo to develop self-driving vehicles. The agreement would be limited to France and Japan
but could be expanded into other markets.
YouTube is considering changes to the way it deals with children's contents. The company has come under fire for its handling of videos
targeting children amid concerns that its software could lead young viewers from safe content to violence or disturbing material.
Some reassuring words coming from the Bank of America CEO Brian Moynihan, he says the soft patch in the U.S. economy is unlikely to turn into a full
blown recession. That's what he told our Matt Egan when he sat down with the Chief Executive. Listen to this.
(BEGIN VIDEO CLIP)
MATT EGAN, CNN BUSINESS LEAD WRITER: Do you see the likelihood of a recession by the end of 2020 higher than you did a year ago?
BRIAN MOYNIHAN, CEO, BANK OF AMERICA: I think the uncertainty around that question is more what's causing the debate than it is the finality that
people see it. So what we see, we have the backup, we know what we see so far. So year-to-date through last Friday, the Bank of America consumer
base spent $1.3 trillion that's at 5.5 percent versus last year, which is up 8.5 percent from the year before. So that's a tall order to keep the
growth going.
EGAN: So it's decelerating.
MOYNIHAN: It's decelerating, but it's consistent more with where it was in 16 and 17 before the benefits of tax cuts the consumers got and more
spending took place. It's back to the levels that is consistent with two and two and a half percent growth.
So if you think about it, the idea is slowing down. That's what predicted -- the question is, is it going to slow down and level off? Or is it going
to slow down and keep going? We don't see anything that says it's not going to slow down and keep it level off. But we'll find out as we move
through the quarters.
EGAN: So you said the economy is expected to slow down. Has the chance of a 2020 recession in your mind gone up?
[09:25:02] MOYNIHAN: Not really because you know, we are not seeing the kind of activity that would give rise to an actual negative quarters of
growth. People talk about recession. They've confused it with slowing down. The economy was predicted by everybody last year to slow down.
There was nobody saying that 19 was going to be bigger than 18, including ourselves. That's coming true.
The reality is that we feel good about the economy. What we see any activity? Are there uncertainties out there? Sure. Are the trade issues
-- Brexit -- what will happen to Europe? Will Europe slow down more? It's slowed down a little bit more with the uncertainties around. Those are all
real, but they're all against positive numbers becoming less positive numbers. Nobody is predicting real slow downs at this point.
(END VIDEO CLIP)
KOSIK: Okay, as we get ready to end the show, I want to keep an eye on the markets. We are watching us stocks rally. The Dow up more than 200 points
as the market reacts to the Fed dropping a big hint that a rate cut could come sometime this year.
We're also keeping a close eye on the Slack trading posts. Slack expected to go public, make its public debut within the next few hours not using the
traditional approach, but in a direct listing.
That's it for the show. Thanks for watching. I'm Alison Kosik. IDesk with Robyn Curnow starts after this short break.
(COMMERCIAL BREAK)
[10:00:00]
END
