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First Move with Julia Chatterley
Johnson & Johnson Found Guilty In A Landmark Opioid Crisis Ruling; Iran's President Rouhani Says He Will Not Negotiate Until The Country Receives Sanctions Relief; Brazil's President Contradicts His Own Office, Saying He Didn't Reject The G7's Offer Of Aid To Help Fight Fires In The Amazon. Aired 9-10a ET
Aired August 27, 2019 - 09:00 ET
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JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange I'm Julia Chatterley. This is first move. And here's
your needs to know. A Public Nuisance: Johnson & Johnson found guilty in a landmark opioid crisis ruling. Talk doesn't come cheap. Iran's President
Rouhani says he will not negotiate until the country receives sanctions relief. And did I say that? Brazil's President contradicts his own office,
saying he didn't reject the G7's offer of aid to help fight fires in the Amazon. It's Tuesday. Let's make a move.
Welcome once again to FIRST MOVE. Great to have you with us. G7 leaders now have bolted from Biarritz. We've got President Trump back at the White
House, all quiet from Beijing, too. Shhh. Take a look at the markets because right now, calm has been restored there right now.
It follows Monday's bounce back, of course, too. We saw stocks up one percent or more, taking back half of Friday's slide in fact, all the more
impressive when you consider that we were set to lose around three percent for the U.S. majors.
Yesterday, before the President came out at the G7 and saw that tone shift on trade amid his optimism about a future trade deal. I don't really see
any change in either Beijing or Washington's stance right now. But perhaps one reason for optimism here might lie in the currency markets.
China's Central Bank pegging the yuan at a stronger level than expected today, though admittedly still weaker versus the U.S. dollar. It's being
read, though, as a potential sign that they want to slow the decline in the currency that we've seen over the past weeks, an olive branch perhaps, or
just wishful thinking.
I'll tell you what? These next few days are going to be crucial. New U.S. and Chinese tariffs are set to take effect on Sunday, this weekend. Will
one side blink or could there even be a coordinated tariff truce of some kind? I'll tell you what -- communication is going to be required in that
case, and there's still no confirmation of the phone calls that the President said that China had made while he was at the G7 have even taken
place.
Now, something else that was raised, of course at the G7 was a U.S.-Iran meeting at some point in the near future, though, I have to say 24 hours
later, hopes fading fast on that front, too.
Let's get to the drivers because there's lots to discuss and up first. Shares in drug maker Johnson & Johnson higher premarket today. The firm
was found guilty, as I mentioned, of fueling the opioid crisis in a landmark trial in Oklahoma. Compensation payments, though, are far smaller
than fair. The devil in the detail here. Alex Field joins us once again on this story.
Alex, great to have you with us. You and I discussed yesterday what would happen if Johnson & Johnson were found guilty in this case, though,
obviously, the compensation payment here far smaller than the $17 billion that the Attorney General was looking for here, though, just for one year
when we have to make that clarification here. Talk us through the details and what this guilty verdict now means.
ALEXANDRA FIELD, CNN CORRESPONDENT: Yes, they didn't get the $17 billion that they saw, more like $572 million. But to be very clear, the State is
taking this as a major victory. The judge when he gave the ruling affirmed that the State had made its case that Johnson & Johnson created needed a
public nuisance through misleading marketing practices.
Essentially, the State had argued that the pharmaceutical company was pushing these drugs into the market, while minimizing the risks. The judge
reflected a lot on the opioid crisis that he says has ravaged this State through death and addiction. And in the end, again, he did find that the
State had made their case.
Now the $17 billion versus the $572 million. Well, the judge essentially said that he was using that monetary award for one year of abatement
services in the State of Oklahoma, treatment prevention, and things like that.
The State had argued that some 20 or 30 years of abatement is actually needed to end the crisis here. But the judge said that the length of time
was just not made clear enough. There wasn't enough supporting evidence from the State's case to that end.
But on the principal argument, very clear that the judge is with Johnson & Johnson here -- excuse me -- with the State here -- Julia.
CHATTERLEY: Yes, I mean, there's so many questions that I've got here, and of course, Johnson & Johnson have said that they'll fight this.
[09:05:02] CHATTERLEY: When you're looking at what? Two thousand other similar lawsuits around the country, the fact that this public nuisance
laws obviously differs as well between states, but also the fact that you compare that the settlements, the early settlements, the likes of Purdue
Pharma made and they didn't have to admit culpability in this case. Does this perhaps argue that those that are also potentially in question here,
are better off settling rather than taking this to court, as we've seen with Johnson & Johnson?
FIELD: This has certainly sent a warning to pharmaceutical companies, you know, they're going to be thinking now about whether or not to pay that
money and to settle instead of to be found at fault, instead of being found responsible. It is not clear how these cases will go, but absolutely, this
public nuisance playbook that was used here in Oklahoma, will be looked at in other states.
This is a fascinating case because you were talking about a legal prescription drug that was being given out. The ultimate finding, though
is that people weren't aware of the risks associated with it. That's really the problem that the judge and the State focused on.
So it's certainly something that other states could look to use as they go after pharmaceutical companies as well.
CHATTERLEY: Yes, one of the quotes there, "False misleading and dangerous marketing campaigns," that had quote "Caused exponentially increasing rates
of addiction, overdose deaths and babies born exposed to opioids." It's a horrifying case, and we will continue to watch it closely. Alex, great to
have you with us. Thank you so much for that. Alex Field there.
All right, let's move on to our next driver. Iran's President Rouhani saying no to talks with the United States without sanctions relief. It
follows the French efforts, of course, at the G7 to promote a meeting at some point in the near future. Those comments were made by Rouhani on
state TV.
(BEGIN VIDEO CLIP)
HASSAN ROUHANI, IRANIAN PRESIDENT (through translator): Lift the sanctions, all the sanctions against the Iranian nation, which are illegal,
cruel and wrong, should be lifted. If you lift all these sanctions, and if you bow your head and respect the nation of Iran, well, then the situation
would be different.
(END VIDEO CLIP)
CHATTERLEY: John Defterios joins us now. John, great to have you with us. What we've seen in the last few weeks is a softening of the U.S. stance
here to say, "Look, okay, we'll negotiate or at least we'll talk here without preconditions." The Iranians saying, "We've got preconditions of
our own and we're not talking without sanctions relief." Where do go from here?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: What a 24 hours, huh? Yes, what a 24 hours, Julia is what I have to say. Right? We had
the kind of the euphoria around President Macron's maneuver in France at the G7 that a big bucket of cold water dumped on that diplomacy here, as
you suggested speaking before State TV, which we have to keep in mind because there's a domestic audience there.
Rouhani said this is more than a photo op that's going to take place, perhaps at the United Nations General Assembly, at least around it. It
would be a big breakthrough if they got it done. But he said it is all about the sanctions, and we're talking about a huge list, about a thousand
items here.
Foreign Minister Javad Zarif went even further saying it's unimaginable to see that the U.S. would give up any ground before they sit down, so they
had to lower expectations.
I brought up the domestic concerns, and I'll tell you why. Hassan Rouhani had to justify why Javad Zarif even went to Biarritz to initiate the talks.
It was seen as a sign of weakness by the hardliners in Iran.
So in that context, it is very difficult to see how Rouhani could take an invitation from the United States, if there's not a gesture from Donald
Trump. So I would suggest at this stage, there's a huge, wide gap between what the expectations are from the United States, the expectations from
Tehran at this stage, and what President Macron and tried to do here now that he has stepped over the edge, tried to pull this together and get them
back at the table. Can he pull this off? It seems like a difficult steep climb from here.
CHATTERLEY: You make such a great point, John, we need to acknowledge perhaps the olive branch that was thrown here by the Iranians, the
difficulty of even seeing the Foreign Minister appearing at the G7 here and what that suggests back home. It's a great point.
The leverage that they arguably hold here is that they need to see some kind of sanctions relief. Otherwise, they give up everything that they
have here versus what's going on with the Nuclear Accord and they're no longer adhering to certain elements of it. Talk to us about the impact of
the sanctions are having. Why is it so important to see sanctions relief here beyond the optics?
DEFTERIOS: Well, you bring up a good point about the Nuclear Agreement, it took years to pull together, so in a span of three to four weeks, difficult
to see that they could find an outline to how to amend the 2015 Agreement that was poured over line by line and hundreds of pages, of course.
The sanctions relief, they call it economic terrorism, the Iranians. That's not resonating within the G7. So not a lot of sympathy, but the
pain is palatable, let's put it that way. Foremost -- first and foremost, the exports for Iran's crude going from 2.8 million barrels a day just on
exports under that Nuclear Accord, down to less than a half a million.
[09:10:12] DEFTERIOS: The Iranians are not reporting the official figures to OPEC. So these are just analyst estimates on there, but loss revenue is
about $50 billion a year, a rial, Julia, trading to over 100,000 to the dollar peaking either around 150,000 to the dollar, triggering
hyperinflation.
The latest figure on a monthly basis was running at 50 percent unemployment rising -- youth unemployment has skyrocketed at this stage. So you have to
wonder, can they get the relief? And this is what Rouhani needs to get for the Iranians because of the situation; and the Europeans, they haven't been
able to put forward this special purpose vehicle or any credit lines. So despite the diplomacy, the hard evidence is not there from the European
Union.
CHATTERLEY: Yes, the United States is in the driving seat here. The question is, "What next?" John Defterios, thank you so much for that.
All right, so let's move on to our next driver. In the last few moments, the Brazilian President saying he is not ruling out accepting an offer of
$20 million in aid from the G7 to fight the fires in the Amazon, but Jair Bolsonaro says, it is conditional on French President Emmanuel Macron
withdrawing supposed insults he made against the Brazilian President. Mr. Bolsonaro's office said earlier the offer of aid would be declined.
Shasta Darlington joins us now from Sao Paulo with more. Shasta, great to have you with us. So we got confirmation at CNN that the offer will be
rejected from the President's Office. He has come out and said, "Look, those were not my words." What's going on here?
SHASTA DARLINGTON, JOURNALIST: Well, Julia, we're seeing this really very petty war of words. As you point out, one minute, the President's Office
says he'll reject the $20 million offer in aid; the next minute he comes out and says "Did I say that? I'll only talk about it after Macron
withdraws the insults." Macron did call him a liar during the negotiations of a trade deal. And then there's been other back and forth.
But I think what's interesting here is behind the scenes, while all of this is going on, Brazilian businesses, and especially the agriculture industry
are really bracing for the worst. I mean, there's a lot at stake here. Brazil, is the world's biggest exporter of both beef and soybeans, a lot of
that is produced in the Amazon region.
But what we're seeing is all of these traditional pro-agriculture voices coming out and saying Bolsonaro just needs to be quiet and get to work
putting out the fires. They say, they really want to distance the established big scale producers from the devastation in the Amazon.
Some of them have pointed the finger at small scale and family farmers and ranchers for setting the fires. But they want to be able to sell their
beef and their soybeans and their other products on international markets without it coming under scrutiny or question, you know, if devastation and
deforestation is involved.
And so what we're seeing now is countries threatening to boycott these goods. And one of the biggest issues at stake is this massive multibillion
dollar trade deal between the European Union and Mercosur, which joins together poor South American nations.
It was agreed on in June after 20 years of negotiations, and now Ireland and France are saying, we might block it if Brazil can't protect the
Amazon.
And to be fair, it does play into their hands. France and Ireland were already worried about how this deal would affect their own beef producers.
But Bolsonaro is certainly making it easy for them, and he is not dialing back this rhetoric.
So ironically, you have these -- you know, a former Agricultural Minister known as the Chainsaw King, Blairo Maggi coming out and saying Bolsonaro is
ruining our reputation, really, just jarring the whole support base for Bolsonaro.
We've seen his approval rating plummet to 29 percent from 40 percent in part because of this issue over the Amazon -- Julia.
CHATTERLEY: You see, this is a fascinating point that you make. I mean, there's fears of Brazilian products being boycotted over environmental
concerns. What does it mean for the broader trade deal hereto? But are the domestic Brazilians understanding this? You're saying, yes, actually,
as far as the handling of the economy is concerned and the handling of this specific issue in the Amazon. His popularity is being dented here. What's
the likelihood that he adjusts as a result of that?
DARLINGTON: I think it's an open question, Julia. It's a very good question. But the he is a -- Bolsonaro is a very combative personality.
He's not good at dialing back the rhetoric. And while -- clearly, once this became an international -- the Amazon fires became an international
issue, he actually started sending in the Army. He held -- he addressed the nation on national TV, whereas before he'd been blaming NGOs for
setting the fires to make him look bad.
So he's certainly taking this more seriously. But it's not clear that he'll really start towing the line, shall we say -- Julia.
[09:15:17] CHATTERLEY: Yes, we need a global dialing down of the rhetoric, I think somehow. Shasta, great to have you with us. Thank you so much for
that. Shasta Darlington with us there from Sao Paulo.
All right. Let me bring you up to speed now with some of the other stories that we're following around the world. Turkish President Erdogan is set to
hold a news conference with Vladimir Putin during his official visit to Russia. The war in Syria will dominate talks between the two men. Mr.
Erdogan says Turkish troops will soon enter a planned safe zone in Northern Syria after the opening of a joint operation center with the United States
over the weekend.
Italy's Five Star Movement has canceled talks with the opposition Democratic Party aimed at forming a coalition government. That's according
to media reports. It raises the chances of a snap election. Italy's President had given the parties until Wednesday to form a stable coalition
following the collapse of his Giuseppe Conte's coalition government last week.
All right, we're going to take a quick break here on FIRST MOVE, but coming up, the bitter divorce. The E.U. tells Boris Johnson, "Pay up, deal or no
deal."
And healing relationships, Beijing says it is ready to talk trade, but only if Washington creates the right conditions. That's coming up. Stay with
CNN.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE this morning where we are looking at a solidly higher open for U.S. stocks following the momentum and a
handover, I think that we got from the Europe and the Asia session, and of course building on Monday's gains as well.
But we do see the safe haven, yen, solidly higher, too. There's some interesting messages going on. Let's talk about what we're seeing and
thinking right now.
Joining us is Steven Englander. He is the Global Head of FX Research and Head of North America Macro Strategy at Standard Chartered Bank. Fantastic
to have you on the show as always.
[09:20:08] CHATTERLEY: What are you thinking right now?
STEVEN ENGLANDER, GLOBAL HEAD OF FX RESEARCH, STANDARD CHARTERED BANK: Look, there are two big consensus trades in the market.
CHATTERLEY: Yes.
ENGLANDER: It's long bonds and long gold. Basically, the idea that the world is slowing down, Asia may be close to a recession, Europe not far
away, U.S. not close to a recession necessarily, but slowing down. Rates are going down. And given the political tensions and the lower rates, you
know, people are buying gold as a safe haven.
CHATTERLEY: Yes, that's a pretty bleak message, quite frankly. And the bond trade is an overcrowded one as well, as more and more people are
piling in and the United States looks attractive, particularly relative to everywhere else. What message is the bond market sending as a result?
Because you point out the difference between those that fear recessionary signals coming from the bond markets, and perhaps something I'd argue is
worse than Japanification of the bond market. Explain what you mean.
ENGLANDER: Indeed, if you look at the structure of rates, if you're expecting a recession, what you'd expect to see is a very sharp drop in
short term rates and a gradual recovery.
Instead, what you're seeing is kind of a drop over the next year, and no recovery, sort of like, you know, a hockey stick but with the long end
stretching out towards the middle of the 2020s, which suggests that the market isn't seeing an acute issue, but they're just saying, "Look, this is
an economy that's not going anywhere." Not necessarily falling apart, but nothing excellent.
CHATTERLEY: So we're just talking low growth, low interest rates, for the foreseeable future. That's the message, it's just sluggish.
ENGLANDER: Sluggish indeed, and not necessarily high unemployment economy, because like in Japan, you know, everybody has got a job. But the
enthusiasm with which people sort of look at the economy and assess the prospects for growth are very dampened.
CHATTERLEY: And it's a struggle to get out of that. I mean, that's the problem. And we are seeing that in Europe as well. Everyone thought the
United States could escape that. The recovery after the financial crisis was stronger, and we're fearful of slipping back into a similar thing.
ENGLANDER: Where there's a consensus that you have to take a deep breath and say fiscal ultimately, but there are political issues, you know,
obviously, in the U.S.; political issues in Europe, and for whatever reason, Japan wants to do fiscal contraction, not expansion. So people are
looking at that configuration and sort of saying, "Why not buy bonds?"
CHATTERLEY: Something has to give. Yes. What about a weaker dollar here? A U.S. dollar? Because it's clearly something that the President of the
United States has talked about. He has come under some fire as a result.
But you know, following the G7, and the meetings that we saw at Jackson Hole as well, the suggestion is actually kind of consensus for the relative
strength of the dollar here. And perhaps it's not the best thing.
ENGLANDER: Well, there's actually a lot of convergence between President Trump and the Jackson Hole participants.
CHATTERLEY: Yes.
ENGLANDER: He wants lower rates and a weaker dollar. And if you looked at the papers, and you know, Carney's speech was well-reported, but several
other papers, basically blamed the problems that emerging markets had on too high interest rates, and too strong a dollar.
There's no mechanism that's obvious, by which we go from that intellectual consensus to a weaker dollar. But it's happened in the past that when
something seems to be the right thing to happen, it does happen.
CHATTERLEY: Because people just put the trades on. They put the trades on that suggests a weaker dollar and stronger something else. The question
is, what do you buy at this moment relative to the U.S. dollar?
ENGLANDER: Well, I think that's the tough question. I mean, the only thing that people are buying are the yen. That's another safe haven play.
CHATTERLEY: Absolutely.
ENGLANDER: I think if you saw Europe get serious about fiscal policy, the backend of the European rates curve would, you know, steepen and we'd see
much more interest in Europe than we see right now. But that's part of it. Right? If you want the dollar weaker, you need the Euro stronger. It's
not something that appeals to the ECB right now. But if you could get some growth via fiscal, their tolerance for a stronger euro might pick up.
CHATTERLEY: Come on, Germany. It's really up to you. Steve Englander there. Thank you for joining me.
ENGLANDER: Always a pleasure.
CHATTERLEY: Great to have you with us today. The Global Head of FX Research, and Head of North American Macro Strategy there at Standard
Chartered.
All right. Let's move on because I wanted to talk about the U.K. now in light of the G7 press con that we got yesterday. Britain has to pay up,
deal or no deal. That's the message from the E.U. after the U.K. Prime Minister Boris Johnson suggested the U.K. wouldn't have to pay all of its
$47 billion divorce bill in the event of a no deal Brexit.
Anna Stewart joins us now. Anna, you have to clear this up for me because I'm very confused about this divorce bill, what it represents and how much
money in the event of a no deal will be around because Boris Johnson was splashing the cash at that press conference yesterday and the E.U. was
saying, "Absolutely not."
[09:25:10] ANNA STEWART, CNN REPORTER: It's one of the many things that they don't yet really agree on, the $47 billion, but let's really look at
this number because this is the calculation that was made if U.K. left the E.U. at the end of March. This was the number agreed under Theresa May,
and the number has been calculated to include all sorts of payments that the U.K. had already committed to spend as part of E.U. funded projects,
for pensions for civil servants, but this was at the end of March.
By the time that the U.K. leaves the E.U., assuming it does at the end of November, half a year will have passed and that number is completely out of
date. It will be billions of dollars less.
I think it's very interesting, although they don't agree, and there's lots of sparring of words, both sides are holding onto the $47 billion figure.
One can imagine or speculate so that the U.K. could save face or hail a victory when that number is reduced, which in reality, it has been --Julia.
CHATTERLEY: So basically, what we're saying is that there's less than $47 billion to hand over in the event of a deal and leaving the E.U., but
there's less money potentially to splash around, if any at all.
STEWART: I think you're just about right there, Julia. There's just less money on the bill.
CHATTERLEY: And if the U.K. never leaves, then there's no money at all.
STEWART: Well, if the U.K. never leaves, we will continue to pay the money. It is paying every month to the E.U. because it is still a member
for now.
And of course as I'm sure you want to talk about, Boris Johnson has returned from the G7 Summit with not much of a welcome.
CHATTERLEY: Yes, I am very sure and we will come back to that no doubt in the future. Anna Stewart, great to have you with us. Thank you so much
for that. The market open is next. Stay with FIRST MOVE.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE and the opening bell in Tuesday's morning session. We have a higher open for stocks. No news is
good news, I think on the trade front this morning, which is helping us with a little bit of a lift here as well.
We're pretty data light here in the United States as well, I think which also helps. It would be interesting to see how stocks and broader assets
perform.
We've got the 10-year yield still near the lows of 2019, however, down to 1.5 percent. The two-year yield higher than the 10-year yet again. We
were just talking about that of course before the break.
We've also had an interesting note coming out from Norway today. The country's massive $1 trillion sovereign wealth fund proposing a
diversification away from European stocks and sharply increasing its holding in North American stocks. Interesting signal there coming from a
giant pension fund, of course, the oil wealth of Norway there.
All right. Let's look at some of the individual stock movers in the session. Johnson & Johnson well and truly and focus after the firm was
found guilty of fueling the opioid crisis. They were ordered to pay some $572 million, as we discussed earlier on in the show, less than was
expected.
If you remember we mentioned that $17 billion sum that the Attorney General was asking for over the course of some 20 years. Johnson & Johnson say it
will appeal. Also other pharma firms have also been given a lift here, too.
Endo International and Mallinckrodt also in focus, both up after the ruling. They are drug makers that manufacture opioids, too.
Now, the Johnson & Johnson case has made history as a model for the litigation of a crisis, which to use, the judge's words in this case have
ravaged the State of Oklahoma and cost countless lives across the country.
It is estimated that 130 people die of an opioid overdose every single day in the United States. CNN spoke to the lawyers on both sides about the
landmark ruling. We began with the attorney for Johnson & Johnson.
(BEGIN VIDEO CLIP)
SABRINA STRONG, ATTORNEY FOR JOHNSON & JOHNSON: It is up to the doctor with their patients to make decisions about who is appropriate for these
medications, and that's what the evidence at the trial showed is that the company was extremely responsible in the way it manufactured and marketed
these medicines in compliance with the FDA and DEA regulations.
Not one doctor in Oklahoma was called to the stand to testify that he or she was misled by anything that the company said or did, and not one
patient or family member testified about any abuse or misuse associated with the company's medications.
The company manufactured two pain medications for patients who suffer from long term debilitating pain, and the evidence is that those medications
were rarely diverted, rarely abused, and amounted to less than one percent of all the opioid medications prescribed in Oklahoma. That's true
throughout the country as well.
BRAD BECKWORTH, LEAD OUTSIDE COUNSEL IN OKLAHOMA OPIOID LAWSUIT: So if you went to the doctor and said, "Hey, Doctor, I've got very bad lower back
pain. And I've heard a lot about these opioids. And so what I want to know is if I take them, am I at risk of becoming an addict? Is that
something that could happen to me?"
What your doctor should tell you, if Johnson & Johnson had told the doctor the truth was, "Look, these companies are claiming they're not addictive
drugs. But we never did the research. We never did studies, despite what our own advisers told us to do. And so we don't know whether you have a
one in 10 percent chance of being addicted or a hundred percent." But that's not what they did.
They went to every doctor and said, "Look, there is a less than one percent chance of becoming addicted if you use our drugs every day." So that was
just a lie.
(END VIDEO CLIP)
CHATTERLEY: That was lawyer, Brad Beckworth. He was part of the team litigating against Johnson & Johnson and before that, you heard from
Johnson & Johnson's attorney, Sabrina Strong.
All right, let's move on. The world's biggest wealth manager turning bearish on stocks on fears of a worsening trade war. UBS Wealth
Management, which manages more than $2.4 trillion has now underweight equities. There are other bearish signs of stocks out there as well.
New numbers show corporate insiders selling stocks at the fastest pace since just before the last recession. Matt Egan joins us now on this story
and has been pouring over the data. Matt, this is a fascinating report. Talk us through the details here of what you found.
MATT EGAN, CNN BUSINESS LEAD WRITER: Julia, insiders are cashing in their chips like it is 2007, $600 million per day of stock is being sold in
August by insiders.
[09:35:10] EGAN: That's according to TrimTabs, and August is on track to be more than $10 billion of insider selling. That is the fifth month of
the year for insider selling topping $10 billion. That hasn't happened since the Great Recession.
Now insider buying and selling is often viewed as a signal of confidence, right? Because these executives, directors and leading shareholders, they
presumably have more information than you and I do about a given company's financials and so they wouldn't be heading for the exits if they felt
really confident about the stock going straight up.
Now, last week alone, we saw that there was insider selling by top executives at Salesforce, Visa, Home Depot, and Slack. Now, it's worth
mentioning that this $10 billion figure, it might not mean as much as it did in 2006 and 2007 the last time we saw this, because the stock market
was a lot bigger then.
And also we don't really know why the insiders are selling, they could be selling because they're trying to raise money to pay taxes. They could be
trying to preempt some shortfall in compensation caused by slowdowns in earnings, or maybe they just enjoy filling out those SEC forms.
But it's clear that insiders are selling today more than they have been at any other time during the bull market. And if you couple this with the
inverted yield curve and the earnings recession, Julia, it does look like another yellow flag for the longest bull market in American history.
CHATTERLEY: Yes, it's an interesting one. I guess you could also sell to raise money for tax purposes as well, which is another thing we could throw
in here, too. But it makes sense if your career is leveraged to your job, a lot of your asset wealth is in stocks of the company that you work for, a
bit of diversification or better diversification, perhaps makes sense.
Compare and contrast the buy backs here though, for the companies themselves. We keep talking about how much stock they're buying back, just
through this angle in as well for me, please?
EGAN: Okay, so buybacks are often also looked at as a signal of management confidence. And buybacks have also slowed down. Companies announced that
$2 billion of buybacks per day during the most recent earnings season, well, that is a lot of money. TrimTabs says that is actually a two-year
low completed buybacks. They were also down 13 percent during the second quarter at S&P 500 companies, but they remain above the 2017 levels, which
are the last year before the tax cuts took effect.
So I do think that buybacks are a little bit more of a mixed signal. When you look at insider selling, I think that isn't something that we need to
keep an eye on. Because you know, we have to listen to what executives say about the health of their companies and whether or not there's going to be
recession, but sometimes it may make more sense to actually look at what they do with their own money.
CHATTERLEY: Yes, absolutely. Fantastic work on this and no doubt we will continue to watch this, too. Matt Egan, thank you so much for joining us.
All right. We're back in a couple of minutes' time. Stay with FIRST MOVE. More to come.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. "Sorry, it's the way I negotiate." That's how U.S. President Donald Trump defended days of pretty
mixed messages on China at the G7 Summit in Biarritz.
Meanwhile, China's Foreign Ministry said, it didn't know of any phone calls leaders had made to the United States and said that it hoped Washington
will create the right conditions for trade talks. What does that actually mean? Well, for more on prospects for further negotiations, Nicholas
Consonery is joining us now. He is Director of Global Market Research at Eurasia Group. Fantastic to have you with us.
NICHOLAS CONSONERY, DIRECTOR OF GLOBAL MARKET RESEARCH, EURASIA GROUP: Thanks for having me.
CHATTERLEY: It is always a pleasure. What do you make of what's going on? I feel like we kind of went nowhere fast. But Friday was an escalation on
both sides as far as tariff rates are concerned.
CONSONERY: Yes, no, I think that Friday was a little bit more indicative than the Monday. I just don't think a lot has changed here. I mean, Trump
made some positive statements around the G7, and I think he a little bit over interpreted any change in China's posture in terms of their
willingness to negotiate.
And I think fundamentally, the U.S. is asking for China to pursue some very difficult reforms that they don't want to do. So I don't see that much has
changed.
CHATTERLEY: They don't want to do -- will they not-- I mean, just looking at some of the commentary from the Chinese people daily, overnight. Anyone
who wants to use maximum pressure to force China to accept unreasonable demands is doomed to fail.
CONSONERY: Right, right. Yes, exactly. And I think that, you know, the Chinese position all along has been basically, "Look, we're willing to put
some of these agenda items that the U.S. is tabling under consideration," like deficit reduction, market access for U.S. companies. But when we get
into these deeper, more structural issues about how China's economic system operates, I just don't think the Xi administration is really that
interested in pursuing the kind of fundamental change the Trump administration wants to see.
CHATTERLEY: And that's a huge problem if the President of the United States wants to continue to push this. One of the things that he said at
the G7, which did catch my attention was the three million job losses in China and he repeats, it was two million a couple of weeks ago, now, it's
three million.
CONSONERY: Right.
CHATTERLEY: I know, it's tough for us to gauge. My initial response was, there are 1.6 billion people in China. They could perhaps go a long time
losing those kind of jobs without a real problem. But can you compare and contrast to anything that we've seen in the past?
CONSONERY: Well, look, I covered China during the financial crisis in 2008 and I remember at that time, it was very difficult. You know, China's
unemployment numbers never showed that there was meaningful slowdown in employment or a fall off unemployment or factory closures. But it still
was very difficult for the Chinese government to mask what was really going on, on the ground, right.
You had protest movements, you had factories shutting down. And that stuff was picked up on social media and in the international coverage, and we
just don't see that today.
CHATTERLEY: I mean, social media is far more prevalent today than it was back then, too. Is the government's ability to suppress it, also more
powerful?
CONSONERY: Absolutely, yes.
CHATTERLEY: Or would we still hear the level of discontent, if --
CONSONERY: You know, well, I think, look, I think both can be true. I think clearly, Beijing has more capability to control the domestic
narrative now than they ever have. But you know -- but I also think that we take a step back more structurally. You know, Trump is not wrong. We
don't maybe don't see the sharp slowdown that we saw in the past in China right now, but his basic conclusion that China's economy is on a fragile
footing is not fundamentally wrong.
So that -- and that feeds the U.S. strategy that, you know, the Trump administration thinks they can hold the line here for a while longer.
CHATTERLEY: I mean, I made the point yesterday that neither side wants to appear like they need a deal.
CONSONERY: Right, exactly.
CHATTERLEY: They can want a deal or not, but they can't need a deal. Are we approaching break point though? If we look at some of the other
signals, the weakening of the Chinese yuan for example. The vulnerabilities that we often talk about in the financial sector, bailouts
of banks in China in particular. Recession fears here in the United States. Are we approaching the point where both go, whatever deal this
looks like, we need to make even a nominal one?
[09:45:18] CONSONERY: Yes, I would say we're getting closer to it. But we're probably not there yet. You know, I think the chance for -- look, I
think the chance for a comprehensive breakthrough deal is very small, probably before, and all the way up to the U.S. election next year.
But there is a scenario where we get kind of a ceasefire, kind of hiatus here, and that would be driven by these fundamental forces, predominantly
economic forces coming to bear on both governments. So that would be the break point.
I think, clearly, we're getting a little bit closer to that in both places, and we need to watch that in terms of how it may influence Trump's
willingness to negotiate. But I don't think we're there yet.
CHATTERLEY: Only one of these leaders has to win an election in 2020, and President Trump was accused Xi Jinping, or at least the Chinese of trying
to wait him out in a sense on this.
CONSONERY: Right. Yes.
CHATTERLEY: Is there a higher probability, do you think here than China agreeing to some, again, nominal deal, that's to your point and we've gone
full circle here. They're not willing to fundamentally change on the things that ultimately President Trump is trying to tackle here rightly in
many cases.
CONSONERY: You know, I think one of the common misinterpretations about China's domestic politics is this idea that, you know, the Chinese have
this long term strategy. They can kind of do whatever they want. There's no political pressure on Xi.
CHATTERLEY: Huge.
CONSONERY: I think the right way to understand it is that there's huge political pressure on Xi to, you know, ultimately try to get to a deal, not
least because of the economic pressures that he is facing.
So, yes, look, it's very hard to read where Trump's going to come down on this. I think my own sense is, he is not going to be willing to really
walk away from some of these fundamental demands anytime soon.
CHATTERLEY: We shall see. Nick, it's going to be interesting. We'll no doubt get you back. Nick Consonery there. Thank you so much.
All right. The trade war isn't scaring away one big American retailer, though Costco opened its first physical store in China on Tuesday. The
store in Shanghai proved so popular, it had to shut early due to overcrowding.
Costco is the latest foreign retailers to try its luck in China following in the footsteps of Germany's Audi. Wow, look at those queues. Many
people see an electric future though, when it comes to getting around in Amsterdam. They are talking about a transport revolution to cut pollution.
Their goal, zero emissions in just over 10 years. John Defterios has more.
(BEGIN VIDEOTAPE)
TEXT: The Global Energy Challenge.
DEFTERIOS: On this edition of "The Global Energy Challenge," we focus in on the ambitious targets the Dutch have put in place to reduce carbon
pollution. The magic year is 2030.
DEFTERIOS (voice over): Amsterdam, the city of bicycles and canals is on a journey to become a clean transport city. For the Mayoral Office, phase
one starts now.
(BEGIN VIDEO CLIP)
SHARON DIJKSMA, DEPUTY MAYOR OF AMSTERDAM: At this moment, we have nine places in our city not even qualifying for the European regulation on air
quality. This means a revolution in the way which we organize our mobility.
(END VIDEO CLIP)
DEFTERIOS (voice over): The future is electric. Clean energy business, Vattenfall is playing a key infrastructure role.
(BEGIN VIDEO CLIP)
PIETER VON OMMEREN, HEAD OF E-MOBILITY, VATTENFALL: Imagine a hundred thousand of electric cars in the city, and they all want to charge at the
same time, then everything will break down. That's what we want to prevent from happening. So that's why we invented the Flexpower Project.
So if there's a high demand for energy in a certain area on a certain Street, we reduce the charging speed of the charging ports in that specific
area.
If there is a surplus of renewable energy, like it's a very sunny day, then we can increase the charging speed. We are the first actually in the world
are rolling out this on a large scale.
(END VIDEO CLIP)
DEFTERIOS (voice over): Many taxi and chauffeur services have gone electric, but at a starting price of $25,000.00, most private car owners
cannot afford to make the switch. One family has the solution, car share between households.
(BEGIN VIDEO CLIP)
ALISSA GRIFFIOEN, OOSTERDOK RESIDENT, CAR SHARER: So I think it was my dad who came up with the idea. We do everything by bike and we only use the
car for like once or twice a month.
(END VIDEO CLIP)
DEFTERIOS (voice over): Overall the plan to reduce emissions to zero by 2030 hinges on a further shift in the auto industry. Affordability, tech
advancements and development of a second hand market in electric vehicles are important to the next phase.
More FIRST MOVE just ahead.
ANNOUNCER: The Global Energy Challenge, in association with BP.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
[09:51:36] CHATTERLEY: Welcome back to FIRST MOVE and some breaking news, Philip Morris International has announced it is in discussions with Altria
about an all-stock merger. Paul La Monica joins us now.
Paul, more than a decade since they split. What do we know about reuniting?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, exactly. 2008 was when Altria split from Philip Morris. Then Philip Morris announcing just a few minutes
ago confirming some of the reports that they are in talks with Altria about recombining. It will be a merger of equals if a deal actually goes
through.
Interesting, just that CBS and Viacom reunite in the media sector, another big breakup and those two companies getting back together, but with Altria,
what's interesting and Philip Morris, these are both companies that have been hurt by the shift away from traditional tobacco cigarettes as we all
know about the huge health risks and both of these companies are investing heavily in vaping type of products.
And when you look at Altria in particular, they've got a huge stake now in jewel as well as the Canadian cannabis company, Kronos. So, if they were
to reunite, I think they would look a lot different than the old Altria- Philip Morris did when it was the days of the Marlboro Man.
CHATTERLEY: Geographically very different as well. I mean, Altria has continued to focus on the U.S. market, whereas obviously the alternative
here, far more international, there's a benefit in that too.
LA MONICA: Yes, I think obviously, Philip Morris has benefited from the fact that the consumers in some foreign markets have been slower to shift
away from traditional nicotine products and tobacco cigarettes. That being said, this is a global phenomenon.
I think a combined company clearly would be investing more in smoke-free products in order to try and prove to consumers that they are selling
something that's still considered a vise, but may not be as unhealthy if they are to shift more to cannabis and vaping.
CHATTERLEY: Yes, relatively cleaner vice. We'll see. Paul La Monica, we'll watch this space. Thank you so much for that. All right, let's move
on.
Uber and Lyft. Drivers are putting the pedal to the metal in protest of their working conditions. Hundreds of them are expected to join a caravan
of cars on the move across California to back a bill that would change state law.
Proposition AB5 would force companies like Uber and Lyft to classify their drivers as employees rather than self-employed contractors.
Today, the caravan reaches San Francisco where Ahiza Garcia joins us now. Ahiza, what are we expecting today and just take us through what this law
change would mean because it would mean surely far more benefits and consideration for some of these workers and a real break for the business
model for players like Lyft and Uber.
AHIZA GARCIA, CNN BUSINESS TECH WRITER: So it still remains to be seen how many caravan drivers will actually come through San Francisco, but
organizers are projecting it early at about 75 cars with about 200 different drivers that will be traveling from Los Angeles to Sacramento,
the State Capital, kind of mirroring a previous labor movement with the United Farm Workers were farm workers were kind of lobbying for similar
rights.
So these drivers are essentially looking to be classified as employees which would give them certain benefits that they're not getting as
independent contractors. The legislation is still kind of winding its way through California's kind of legislature, but it is expected to, you know,
have huge ramifications for gig and for the gig economy and independent contract workers, if it is in fact approved.
[09:55:16] CHATTERLEY: Yes, it is going to be fascinating to see. Ahiza Garcia, thank you so much for joining us on that story.
All right, let's take a look at what we're seeing right now for U.S. majors adding to the gains that we made in yesterday's trading session, as you can
see right now, the NASDAQ up some six tenths of one percent. No news is good news, as I said earlier on in the show, I think as far as trade and
the trade war is concerned between the United States and China. Little on the data front as well.
So the question is, can we maintain the green that we're seeing across the board as we push it throughout the session. Still watching the bond
markets very closely, of course, the inversion. That two-year 10-year remains a key focus.
We will be back in a couple of hours' time with "The Express," but for now, that's it for the show. I'm Julia Chatterley, you can also listen to our
podcast, cnn.com.com/podcast, but for now you've been watching FIRST MOVE, time to go make yours, and a coffee for me I think. See you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
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