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First Move with Julia Chatterley

Report Suggests China Have Doubts About A Longer Term Trade Deal; Twitter's CEO Jack Dorsey Says It Will No Longer Accept Political Ads; Sweet Earnings From Apple. Aired 9-10a ET

Aired October 31, 2019 - 09:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[09:00:15]

JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange. I'm Julia Chatterley. This is FIRST MOVE and here is

your need to know.

Market is spooked. Report suggests China have doubts about a longer term trade deal.

Twitter's Trick or Treat: CEO Jack Dorsey says it will no longer accept political ads.

And a candy Apple. Sweet earnings from the smartphone maker.

It is Thursday, it's also Halloween. Let's make a move.

Welcome once again to FIRST MOVE. Great to be back here in New York. Happy Halloween, as I mentioned and I can tell you my cauldron is literally

overflowing with news during the show today, so I'll get started including some spine tingling earnings.

Take a look at what we're seeing right now though for U.S. futures. I mentioned it a touch spooked by reports that China doubts that a wider long

term trade deal with the United States is possible. If you've been watching FIRST MOVE, I'm not sure you or I expected anyone anyway at least

a long term one.

Also keep an eye on autos today. Peugeot-Fiat Chrysler officially announcing terms of that whopping $48 billion merger deal. But the big

story overnight, of course, was the Federal Reserve, Jay Powell did not petrify. The Fed Chair said he's ready for a rate cut pause, say he won't

raise rates until the Fed's preferred measure of inflation looks -- let's call it scary -- once again. We'll call this message a mix therefore of

tricks and treats.

Pounds' potion though tasted good to investors. The S&P 500 finishing at record highs yesterday. Interesting that Deutsche Bank still thinks the Fed

could cut once again in December due to trade related weakness and a softening jobs market, too. So glowing eyes on the Federal Reserve and the

non-farm payroll report in Friday's session.

So tomorrow cast those glowing eyes on the Asia session as well. New numbers out today showing Chinese factory activity falling for its sixth

months in a row and Hong Kong, too, now formally in recession. No tricks there for sure.

Let's get to the treat though, and Apple to be precise and some sweet earnings numbers. Clare Sebastian joins me now. Clare, sweet earnings

numbers maybe or also some sweet guidance and expectation management here coming into these numbers. Talk us through the details and then we'll dig

around into them a bit more.

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, so this is being seen as a stellar quarter from Apple. As you mentioned, not only in the

numbers themselves, but also the guidance going into the crucial holiday season.

The iPhone is where we should start because this was actually the fourth consecutive quarter of declining iPhone sales. That was down nine percent.

If we can pull up some of the segments here -- but offset by some other areas, crucially services, things like Apple Pay, iCloud, Apple Music.

The company particularly focusing on Apple Pay as a bright spot, as they say revenues more than doubled year-on-year in September. Apparently,

Apple Pay had more transactions than PayPal; and wearables, another crucial element, Julia. The revenues in wearables were up 54 percent year-on-year.

That's things like the Apple Watch and the new Air Pods including the older Air Pods, as well.

Of course we've seen lines outside some stores when the new app was launched this week. And wearables as well, really interesting here because

this is not about replacement like it is with iPhones there.

Tim Cook said that about 75 percent of Apple Watch buyers were new ones. So this is still in a growth phase for the company and I think that is what

investors are looking at today.

CHATTERLEY: Yes, there was so much in that call as well. Their services business now, a $50 billion business. It's like a Fortune 100 company all

on its own here.

And Tim Cook's point as well about three quarters of the people buying watches here are buying them for the first time. They're fresh buyers. So

that was an interesting one for me.

What about China here though, Clare? Because when we're talking about the risks of ability to reach a broader term trade deal here, Apple is the

bellwether, I feel for tensions between the two nations.

SEBASTIAN: Right, and very optimistic by the sounds of it, Julia. They said that Tim Cook said on the call that he feels that the tone has

shifted. He thinks that there is now momentum towards the deal.

He has apparently factored that into his guidance going into the holiday quarter. In terms of tariffs, Apple are already paying, some that came in

in September on some of their accessories. Of course, the big shoe yet to drop is those December 15th tariffs that would include the iPhone, which is

of course more than 50 percent of Apple's revenues. They seem to think that that maybe avoided, factoring that into their guidance.

But of course, we don't know what's going to happen in the trade war and I think possibly the macro environment and the worries about that that trade

deal today could be one of the reasons the stock isn't up more. So it's still a factor. But the company says they are able to navigate it.

[09:05:14]

CHATTERLEY: Yes, it still would have a dampening effect on the stock for all the gains that we've seen over the last three months. Clare Sebastian,

thank you so much for joining us on that.

Now forget Twitter and Facebook earnings last night, it was all about political ads. Let me walk you through this.

The Twitter CEO, Jack Dorsey says no to political ads on his platform. He tweeted, "We believe political message reach should be earned and not

bought." Then on the other side, Facebook on their earnings call, CEO Mark Zuckerberg explained why he thinks that would be a bad idea. He said

quote, "In a democracy, I don't think it is right for private companies to senor politicians or the news."

Hadas Gold joins us on this story. It's interesting, Hadas, because I listened to that, and I thought maybe the messenger is wrong right now

given the focus, but he has a fair point. What's the response been to the decisions from both of these companies?

HADAS GOLD, CNN BUSINESS REPORTER: Well, Julia, it was pretty cheeky of Twitter to announce this right as Facebook was about to start its earnings

call. And it's clear sort of a message being sent between these two social media rivals.

But Twitter's move was clearly a shot. It got them some good PR, but political advertisements, I have to say are not a huge part of Twitter's

revenue. It's in the single digit millions, the amount of money that they actually make for it.

And also, if you look at the reach in terms of Twitter versus Facebook, and the impact it would have, Twitter's daily active users are about 145

million. When you compare that to Facebook, they have 1.62 billion active users, just to get you a sense of where people are.

The average person despite the fact that all of us journalists seem to spend all of our days on Twitter, the average person is spending more time

on Facebook, but Twitter's move was welcomed by a lot of people, especially Democrats in the U.S., people like Joe Biden, Mark Warner, Alexandria

Ocasio-Cortez were praising Twitter for this move.

Other conservatives like Donald Trump's campaign manager, Brad Parscale, said that it would just silence people. But when you're looking again at

the ad buys on Twitter, for example, in the U.K. 2017 election, Twitter spend for ads was 55,000 pounds and on Facebook, it was three million

pounds.

Now Jack Dorsey in part of his tweet, did make a point that a lot of people are making about Facebook. He said, and I'll pull this up in part of this

long thread that he had yesterday announcing this was. "For instance, it would not be credible for us to say: We're working hard to stop people from

gaming our systems to spread misleading information. But if someone pays us to target and force people to see their political ad, well, they can say

whatever they want."

And this is the issue for Facebook right now. They have this very specific policy where if you are a politician, they will not remove an ad if it's

deemed false, it would still be allowed to air. But for everybody else, those rules would apply. And I'm not sure how tenable that is for

Facebook, especially they're facing some important test.

Here in the United Kingdom, in just a few weeks, we will have a general election, this will be the first time I think that this policy will be

tested in a major English speaking election. It'll be fascinating to see how long and whether they will hold on to this policy.

CHATTERLEY: Yes, it's such a great point, Hadas, because the lines are so blurred here. There needs to be some kind of benchmark of what a political

ad is, to what degree do they fact check. And also, what you're talking about here is Facebook, basically saying we want to be treated like a

broadcaster, and not be required to make any changes, but at the same time not be regulated like a broadcaster.

So that's my big argument here. What do we think? Because to your point, Facebook earnings look pretty great.

GOLD: Yes, I mean, listen, as much as the political fire might be being aimed at Facebook right now, it is clear that in a business sense, they're

still doing very, very well. They beat expectations on the earnings. They're getting increase of daily active users, as much as we hear this

fury around them. It's obviously not affecting them business-wise.

But it clearly is something that they're worrying about when it comes to politics because they see the regulation coming down the line. They see

the political fury and it's never a good thing to have this sort of PR around you, but Facebook is digging in. This is now week three or four

that we have this controversy. Mark Zuckerberg on the call directly addressed it.

And it's clear that they don't plan to change and they see themselves like the broadcasters in the United States where according to the broadcaster

rules in the U.S., by law that this only applies to stations like ABC, CBS, NBC, by law, they're not allowed to touch those political ads. They cannot

change the content of them. That's clearly the way that Facebook sees themselves as well.

CHATTERLEY: Yes, I was digging around to the 1934 Communications Act last night as well. Wow. Hadas Gold. Great job. Thank you for that. Every

time we talk about the problems, I convince myself to buy Facebook.

Moving on to our next driver, Hong Kong in a recession. We've also can show you live pictures right now of protesters gathering for a further

Halloween protest, and that ties directly to the economic impact that we're now talking about here.

[09:05:12]

CHATTERLEY: GDP growth falling 3.2 percent in the third quarter versus the second, significantly worse than expected. Sherisse Pham is in Hong Kong

for us. So Sherisse, and these pictures, these live pictures just illustrating the problems that the economy is faced with, reduced tourism,

with reduce spending, too, and it's playing out in the numbers.

SHERISSE PHAM, CNN BUSINESS REPORTER: The protesters that we're seeing on the streets right, now they have been out in force for five months

straight, and they have really contributed to what we are seeing which is the worst economic decline since the 2009 global financial crisis and this

is going to the heart of Hong Kong's status as a financial hub.

The period of July through September, those three months, let's not forget that was a time where we saw riot police, constant violent clashes between

protesters and police. That was also a time when protests spread throughout the city and hit major tourist destinations, major shopping

destinations. And also that was the period when protesters managed to shut down the airport for a couple days.

And all of that played out in the numbers that we heard from the government today. Now, these are preliminary GDP figures, but they don't move around

too much between preliminary and revised figures, which will come out in a couple weeks here.

And you know, yes, Hong Kong was already being hurt by the U.S.-China trade war and the slowing global economy. But one economist I talked to today

said that it was this political crisis and these protests that we're seeing on your screen right now that was what tipped the city into a recession.

CHATTERLEY: Yes. Sherisse Pham, great to have you with us on that. Thank you so much.

All right, let me bring you up to speed now with some of the other stories that we are following around the world.

In the next hour, the U.S. House of Representatives is expected to vote on a resolution to formalize the Impeachment Inquiry. Suzanne Malveaux

reports on what's promising to be a pretty busy day for lawmakers in D.C.

(BEGIN VIDEOTAPE)

SUZANNE MALVEAUX, CNN U.S. CORRESPONDENT (voice over): Another key witness testifies on Capitol Hill and the House will vote on the rules for the

Impeachment Inquiry.

Tim Morrison, the top Russia and Europe adviser on President Trump's National Security Council, will be the second White House official who

listened in on Trump's phone call with Ukraine's leader to testify.

Sources tell CNN that he is also expected to corroborate key elements of top U.S. diplomat to Ukraine, Bill Taylor's testimony last week, including

President Trump repeatedly pressuring Ukraine to publicly announce investigations into former Vice President Joe Biden and his son and using

military aid as leverage.

Trump has denied that the two were explicitly linked.

On the eve of the hearing, Morrison has told colleagues that he is planning to leave the Trump administration soon. House Democrats have now summoned

former National Security adviser, John Bolton to a closed-door session.

(BEGIN VIDEO CLIP)

REP. MIKE QUIGLEY (D-IL): I'm hoping that he really wants to testify, to show the courage that the others have so far.

(END VIDEO CLIP)

MALVEAUX (voice over): But Bolton's attorney says he won't appear without a subpoena.

Multiple administration officials have testified Bolton was concerned about Trump's personal attorney, Rudy Giuliani, pushing Ukraine for political

favors, including Lieutenant Colonel Alexander Vindman, who according to two sources at his deposition Tuesday, said Bolton told him to prepare a

memo to the President by August 15th, saying military aid needed to be released to Ukraine as soon as possible.

But Vindman testified the President refused to give up the money, even after meeting with Bolton and other Cabinet officials.

(BEGIN VIDEO CLIP)

REP. RAJA KRISHNAMOORTHI (D-IL): We're going to continue to learn more about what Mister -- Colonel Vindman said, for instance, from Mr. Morrison.

Everything I've seen has been consistent with the whistleblower's allegations.

(END VIDEO CLIP)

MALVEAUX (voice over): Today's impeachment vote will formalize the next steps, including permission for public impeachment hearings and the release

of deposition transcripts. Democrats also giving Republicans the ability to subpoena witnesses, only if the Democratic Chairman agrees, or a

majority of the committee approves.

(BEGIN VIDEO CLIP)

REP. JIM MCGOVERN (D-MA): No one runs for Congress to impeach a President. But we are here today, because the facts compel us to be.

(END VIDEO CLIP)

MALVEAUX (voice over): House Republicans are still not satisfied.

(BEGIN VIDEO CLIP)

REP. MATT GAETZ (R-FL): It is shameful. And they will be punished for this by Americans in the next election.

REP. KEVIN MCCARTHY (R-CA): We will continue to fight every step of the way.

(END VIDEOTAPE)

CHATTERLEY: Suzanne Malveaux reporting there. Right now, you're looking at live pictures of the U.S. House of Representatives over in Washington.

They will hold the first vote related to the Impeachment Inquiry into President Trump at around 10:30 a.m. Eastern Time this morning. We will

have special coverage on that. So stay with CNN.

[09:15:07]

CHATTERLEY: In the meantime, South Korea says its military is on alert after North Korea launched two projectiles into the waters between the

Korean Peninsula and Japan.

The U.S. Defense Department says it appears to be a missile launch. If confirmed, this would be North Korea's 12th missile tests since May.

To California now, firefighters are racing to contain multiple major wildfires fueled by hurricane force winds and dry conditions. Some of the

flames are nine meters high.

Official say at least 20 different wildfires broke out in Southern California on Wednesday alone. Tens of thousands of people have had to

flee their homes.

All right. We're going to take a quick break here on FIRST MOVE, but still to come, sealing the deal. Sealing the deal. Fiat-Chrysler and Peugeot

announcing details of their mega merger. All that to come stay with us. You're with CNN.

(COMMERCIAL BREAK)

CHATTERLEY: Welcome back to FIRST MOVE, live from the New York Stock Exchange where we're looking like a modestly lower open for stocks this

morning. The S&P 500 falling from record highs hit during the session yesterday. A report on yes, you guessed it, U.S.-China trade giving the

markets a little bit of a fright this Halloween, it says, China doubts that it can sign a comprehensive long term trade deal with the Trump

administration.

That said talks on a limited Phase 1 deal do still appear to be on track. We're a touch higher actually for futures earlier after the Fed cut rates

for the third time this year. Fed Chair Jay Powell says the Central Bank won't hike rates until inflation perks up.

Joining me now is that Kevin O'Leary better known as Mr. Wonderful from the U.S. hit show "Shark Tank." He is also chairman of O'Shares ETFs. Great

to have you with us.

KEVIN O'LEARY, CHAIRMAN, O'SHARES ETF: Thank you, Julia. Great to be here.

CHATTERLEY: You were saying back in September that you didn't think that the Fed needed to cut, they cut, and now they've cut again.

O'LEARY: I think the Fed is now saying it's not business as usual, that they're concerned about slowdowns as a result of uncertainty of the trade

war as you just detailed. And there's evidence of the slowdown coming with the reduction in CapEx with most U.S. corporations waiting to see how this

plays out.

[09:20:12]

O'LEARY: During that period, though, China printed growth less than six percent. So they also are feeling the pain, incentivizing them, I think,

to get a deal done.

CHATTERLEY: How closely are you watching the back and forth? We reported every single day on whether a deal is on or off or on, you know, how much

focus are you giving that? Because there is a huge difference between a Phase 1 deal and a more comprehensive deal that includes intellectual

property theft, patent protection and I don't think anyone really believes that's possible right now.

O'LEARY: Probably not a really comprehensive one during this early stage, but Phase 1 is helpful. It was signed on the 17th. But the way you can

really determine what the market is thinking is just watch how most stocks are near their all-time highs right now because the potential of resolving

trade issues with China has so much positive impact of S&P earnings over the long run that the market is discounting ultimately something will be

resolved.

And the two things that have to happen, because I'm living this with my companies is I need IP rights in China so I can litigate when my IP is

stolen just like they can when theirs is stolen in the United States, and access to their growing middle class market, which is getting to be the

size of the U.S. domestic consumer in terms of growth.

So I'm interested in both. This is the first administration that has been driving that direction this way, and that's why the market is so excited,

you know, we talk about the concern, the back and forth and the rhetoric, the market is telling me, Julia that the upside is so big.

CHATTERLEY: What is the upside for China? Because right now, they've been so protectionist about their market because they want to promote the growth

of their own companies. What's the incentive for them to open up other than the threat of further tariffs or pain?

O'LEARY: If China were today wave a magic wand and have a normalized agreement as U.S. has with let's say, Canada or Mexico in the new trade

agreement, which should be right ratified in the next few months, I would immediately as an investor, deploy more capital into China, because I want

access to that market and everybody else would, too, and the Chinese know that also.

I've got pent up demand to deploy capital into China just waiting. So at some point, they've got to grow up and say, look, we want those billions of

dollars. I'm just one of millions of investors that want to deploy capital there. The upside is huge for them to.

This will get resolved, and probably in the second administration, in the next three years.

CHATTERLEY: Interesting. Speaking of politics, because I know you're a holder of the Facebook stock right now.

O'LEARY: Yes, yes.

CHATTERLEY: What do you make of the decision by Twitter overnight to ban political ads, and Facebook's decision not to?

O'LEARY: Twitter is not that big a platform actually compared to all the other digital platforms, so they're making a statement, but does it matter?

No.

Political ad deployment will just move on to all the other platforms that are available to it. The concern that I have about Facebook, frankly, is

that when you listen to this political rhetoric, people have forgotten, and I'm going to explain why this is so important.

I've got investments in 52 private companies. Their number one spend is on Facebook, whether it be Instagram or whether it's on the core platform --

CHATTERLEY: Advertising.

O'LEARY: They have created thousands of jobs. The engine of growth of entrepreneurship in America is the Facebook platform. It is the digital

platforms.

I don't need a politician telling Facebook how to design its feature sets. I don't want that. I want the market to do that. The reason that Facebook

is relevant today is because it's done a great job in becoming a useful tool for me to acquire customers. I don't need a politician doing that for

me. They don't know how to do that. So they should stay away from the platforms.

I'm one of the investors out there now saying, I'd like to push back. I don't want politicians getting their hands dirty and breaking up technology

companies.

The reason I don't use French book is there isn't one. There's nothing in Europe because they regulated themselves out of business there.

CHATTERLEY: Okay, but these are two separate things. The idea that they're supporting job creation, I couldn't agree more with you. But it's

also being used as a weapon for the proliferation of social media. There's concerns about interference in democracy. They can't have it all ways.

What about this splitting up of perhaps some of these tools to allow Facebook to regulate themselves if you don't want a government to do it

better?

O'LEARY: They don't even have to do it. The market will regulate Facebook. Let me give you an example which we can, you know, look at. Go

back to the mid-80s. IBM largest market cap company. The number one technology company. The rhetoric against IBM at the time is identical to

what you're hearing in Congress today.

Just go back a few decades. Where's IBM today? Nowhere. It's a company that the market destroyed because they didn't stay competitive. The market

is very, very shrewd.

CHATTERLEY: Microsoft?

O'LEARY: Microsoft was also, you know, in a situation just a decade ago where it was a dinosaur. Today, it is a leader because it adapted itself

competitively in the market.

What I'm trying to point out is you don't have to regulate tech companies. The market does it for you if you let it do its work. The minute Facebook

makes a mistake, the market punishes it. You don't have to do it with a politician. If they're not relevant -- each quarter, I look at my span

across all my companies.

[09:25:14]

CHATTERLEY: But you're expecting the market to regulate privacy concerns as far as Facebook is concerned?

O'LEARY: Absolutely.

CHATTERLEY: And democracy and elections?

O'LEARY: Yes.

CHATTERLEY: Really?

O'LEARY: Yes, if you didn't want or you were concerned that you, Julia were being some --

CHATTERLEY: That's different.

O'LEARY: No, it isn't.

CHATTERLEY: People aren't concerned enough about their own privacy.

O'LEARY: And that's why the market is being the market. I don't know a lot of people that say themselves, oh, my goodness, I'm worried the Russian

elections or the U.S. elections are going to be rigged by Russians. I'm not going to advertise on Facebook. That's ludicrous. It doesn't.

People make their decisions every single day by the millisecond. If you were really concerned about privacy, you wouldn't be on Facebook. You are

on Facebook.

CHATTERLEY: I am. I don't use it, but I am.

O'LEARY: You don't want privacy, you want your brand to be spread everywhere.

CHATTERLEY: The utility.

O'LEARY: So my point is, I really am tired of listening to the rhetoric of an individual politician trying to make noise about, oh my goodness, my

constituents are concerned about all these issues, we have to break up Facebook. That's total BS.

The market is making the decision every single day about Facebook and if it doesn't like what it sees, it goes to another platform, as I do. I look at

how much it costs me to acquire customer with Facebook each quarter. If they they're doing that job, I move on.

CHATTERLEY: Every time I talk about this, I convince myself to buy. We have about 30 seconds.

O'LEARY: Yes.

CHATTERLEY: If a Democrat wins the next election, do we see the breakup of big tech?

O'LEARY: It is the rhetoric they are espousing.

CHATTERLEY: Yes.

O'LEARY: I think -- here's the thing you should have to know. Go back in the history of modern times. When any President of either party has had

unemployment under four percent, they've never lost their mandate.

CHATTERLEY: Yes.

O'LEARY: So I'm not really worried about that. I'm not a supporter of any politician or party.

CHATTERLEY: But do you think Trump wins?

O'LEARY: I'm a history buff. I think Trump gets another mandate because of -- the economy is on fire. We're in the epicenter right here. We've

got all-time highs in the stock market. Nobody is going to be trying to change that.

CHATTERLEY: Kevin O'Leary, Mr. Wonderful there. You heard it. FIRST MOVE is back after this with the market open.

(COMMERCIAL BREAK)

[09:30:08]

CHATTERLEY: Welcome back to FIRST MOVE. That was the opening bell here at the stock exchange. Thursday's morning session and we are losing a bit of

ground as anticipated here for U.S. markets amid reports and we've talked about it throughout the show. China, not necessarily looking at a

comprehensive trade deal here after Phase 1 is completed. That offsetting some of the optimism that we saw after the Fed cut rates for the third time

this year.

The Fed is also providing some relatively market friendly forward guidance here. New numbers also out today supporting the economy showing consumers

still helping to drive the expansion here with spending rising two-tenths of a percent in September in line with expectations.

Spending also revised higher in August. The mighty U.S. consumer, the GDP numbers out yesterday showed the U.S. economy growing at a quicker pace

than expected. Once again, thanks to that consumer spending that we're seeing.

What about the Global Movers here in the show today? Well, shares of Starbucks are trading higher. The beverage chain reporting better than

expected revenues. China sales rising a strong five percent despite increased competition from the Luckin chain over there.

What about Apple, too? The shares near record highs again after the earnings beat. The company posting record revenues for its fiscal fourth

quarter. Its wearables offset weakness in iPhone sales. Apple says 60 percent of sales now come from outside the United States.

Shares of Peugeot falling some 13 percent. Shares of Fiat-Chrysler up eight percent in the European trading session after the two firms announced

terms of their $48 billion merger, the deal creating the world's fourth largest automaker.

Anna Stewart joins us on this. She has been looking at the details. Interesting now that we've got the details of just what this tie up

involves here, Anna. The share price of the two stocks, they're telling, I think the bigger picture in the story here.

ANNA STEWART, CNN REPORTER: Yes, a marriage of equals, a 50/50 share, but it does look, if you look at their share prices, like one party is going to

be bringing much more to the marriage, at least short term.

Now, if you look at the devil in the detail, you see why you'd have to adjust for their market caps, their dividend payouts, but also you've got

to consider this, Julia. The Fiat shareholders will be getting a $6 billion payout plus the proceeds of selling one of their robot making

units.

Peugeot shareholders on the other hand do not get a cash payout. They will get proceeds from another divestment. But essentially, analysts at

Jefferies see that Peugeot shareholders are effectively paying a 32 percent premium for Fiat here. So there is a difference in the price.

CHATTERLEY: Wow. Thirty two percent premium here. You know, it is interesting when I look at the two CEOs that are involved in putting this

together, them being able to create a tie up here and making the fourth largest automaker in the world in a way that Carlos Ghosn of course, Sergio

Marchionne didn't manage to do. What does this say perhaps about the characters involved here?

STEWART: Well, it suggests that really, A, it is becoming more of a necessity for them both to bulk up and consolidate and two, you're right, I

think it's to do with the personalities.

There was always a fear that Carlos Ghosn wasn't entirely on board with a Fiat tie up, although post Carlos Ghosn after his arrest, we did of course,

see the Renault-Fiat deal, it looked like it was getting through early this year, only in June to break up and Fiat said at the time that was due to

the French government political conditions weren't right.

Now that is likely to be part of the story here. Will the French government be on board? They do own a 12 percent stake in Peugeot. Surely

they want Peugeot to succeed. I think everyone would agree that consolidation is key here.

I think what we're going to see is the French government asking for protection of jobs, protection of plants, but this is going to be a French-

Italian-American company. So you can only imagine that there will be demands from all sides here. I think we could see a lot of pre-marriage

counseling before either side says I do at the altar -- Julia.

CHATTERLEY: Yes, it is complicated, I think is the word we're looking for here. But to your point, and it is a very important one where governments

are involved and government stakes are involved. What I read was that there are going to be no plant closures. That's going to be quite a mean

feat that for these two companies to pull together surely.

STEWART: So there's already rumors I'm hearing in the U.K. that some plants could be at risk. For instance, the Vauxhall plant in Ellesmere

Port in the U.K.

CHATTERLEY: Right.

STEWART: So perhaps plants that are not within France, Italy, America, perhaps that's where the cuts will fall even if they are efficient

factories, but this is going to be all part of this very complicated tie- up, it is how do you get those synergies because there has to be, you know, a profit and a point to all of this --Julia.

CHATTERLEY: Yes, it's such a great point. All right. Anna Stewart, thank you very much for that. More to come from FIRST MOVE. Stay with us.

(COMMERCIAL BREAK)

[09:38:11]

CHATTERLEY: Welcome back to FIRST MOVE and back to one of our top stories. The results from Apple overnight beating expectations on the top and the

bottom line and a nice look at guidance as well, too. Gene Munster is a Managing Partner at Loup Ventures and joins us now. Great to have you with

us, Gene. You say the road to recovery continues particularly excited by the wearables and the services performance in this quarter. Talk us

through it.

GENE MUNSTER, MANAGING PARTNER, LOUP VENTURES: So Julia, before we get to that, I want to put some background high level here. It is that the iPhone

was down nine percent in the most recent quarter. It was down 20 percent a few quarters ago. So it's improving. But the piece that's filling the

gap, as you said is services and wearables.

Services is a segment that Apple reports that reached an all-time high as a percentage of revenue, that was 20 percent and grew at 18 percent of the

quarter, which is a two percent acceleration. So that's impressive.

But the wearables piece is shrouded in this other category. Fortunately, we spent a lot of time analyzing that piece and we have a good sense about

what's going on with wearables. That business is now eight percent of Apple's overall. This would be basically Air Pods and the Apple Watch.

So if you put that collectively with services, you have close to 30 percent of their business, which grew at almost 30 percent. It was 29 percent last

night.

So this is a much faster growth rate, versus the overall business at two percent, and the simple reason why this is so important relative to the

Apple story is -- what we're seeing is that even though the iPhone can struggle at times, they have these other businesses that play off of the

iPhone install base, almost a billion people now that can drive their overall revenue growth higher. So a very important quarter for Apple.

CHATTERLEY: So a really important point here. Don't continue to fixate on slowing iPhone growth, talk about some of the other services and how fast

they're growing here.

One of the interesting things that Tim Cook said yesterday was that around 75 percent of people that are buying iWatches now have never bought one

before. So they are encouraging new customers to look at this as an option here. Talk to me about penetration of smart watches and to what extent and

what growth you think we could see here, given what? We've got more than 900 million people using iPhone products around the world right now?

MUNSTER: So I'll start with what we know -- what Apple reports is that the wearables category grew at 55 percent versus 50 percent the previous two

quarters, so that's a slight step up. The actual units that they've sold since the Apple Watch came out, they don't disclose that, but we can back

into that.

And there are effectively 65 -- six five -- million Apple Watches -- active Apple Watches and that compares to about 915 active iPhones in the world.

And what that means is essentially we have a seven or eight percent penetration. That really is the addressable market -- it is the iPhones

out there. Of course, you need an iPhone to have an Apple Watch.

And so I think that when you look at those growth rates of wearables in the most recent quarter, and that acceleration, sometimes it's hard to imagine

that that can continue at those rates. But when you step back and look at the addressable market and the install base, it's still a small business,

Apple Watch. And I think that this could continue to grow for many years to come.

Tim Cook reiterated that Apple's greatest contribution is going to be around health and wellness. Now, that could be saving one person's life,

you could argue that they've made that contribution. But if you think about that as a central theme, the watch and wearables are going to be

foundational to that future. So you're going to hear a lot more about Apple Watch in the years to come.

CHATTERLEY: Yes, I've spoken to a number of people now about the heart rate monitor in the latest watches and just the security blanket that that

provides. It is going to be fascinating to see.

I want to move on and talk about China hereto. Stable on what we saw last quarter despite all the concerns and the rhetoric. It does feel like Apple

is a bellwether for trade deal prospects here. Are you comforted by what you've seen from Apple in China specifically hereto?

MUNSTER: It was another positive point from last night's results. Overall, China accounted for 17 percent of revenue that was unchanged from

the previous quarter.

And of course, there's been a lot of navigation related to tariffs, especially around Apple's brand. This is something that we monitor. When

you look at the social media and online kind of consciousness of China that is, of course curated by the government and that tends to be neutral to

slightly positive to Apple, which I think bodes for these results. That is to me representative of the masterful job that the company has done to stay

in good standing with the Chinese government.

And I suspect that, you know, it's going to take longer than we think to get to a trade deal even despite Tim Cook's comments last night on the call

thinking that we're getting close. I think it's going to take a lot of time, but it's encouraging for Apple investors to know that even with a

trade dispute that is ongoing that they can still be successful in China.

CHATTERLEY: Yes, no surprise that Tim Cook is the eternal optimist on this one. I'm just looking at the share price performance. It's up like 15 to

16 percent in the last few months. Why aren't investors more excited or buying into the sort of ecosystem story here at this moment?

I feel like we've gone through a period where we've said, look, what's the next big growth engine? You're kind of saying look at what they're doing

elsewhere and the quiet growth that we're seeing in all of these businesses. What does it take here for investors to go, okay, we really

believe the broader story here.

MUNSTER: So there's going to be two camps, the majority of Apple investors are in this camp. That this is a hardware company and you have cycles.

And the next cycle of course is going to be 5G, which starts in the fall of next year and that may go for a couple years.

So that is probably what is central to moving the stock higher more recently as investors' optimism even though it's a year away from now, that

this could have a profound, probably the biggest upgrade that Apple have in five years. So that's camp one.

I think that camp of the product cycle Apple investor is going to diminish over time. There'll be a new view of Apple investing. And that's going to

be more as this Apple as a consumer staple company. Think of Procter & Gamble, Coca-Cola, these stocks trade at a much higher multiple, 30 times

plus versus Apples multiple at 20 times.

If you believe that the world is ready for a consumer staple company that can really bring together all of tech, I think that that ultimately will be

the prevailing view.

I see this stock being $350.00 or greater over the year plus a much, much more optimistic view that most analysts have because I do believe that this

view will take hold that ultimately this is a consumer staples type of a company.

[09:45:10]

CHATTERLEY: Wow. $350.00 over the next 12 months. We shall watch that closely. Gene, great to have you with us. Gene Munster of Loup Ventures.

MUNSTER: Thank you, Julia.

CHATTERLEY: Thank you so much. Great to have you with us. All right, let's change topics now to the European Central Bank because its bidding

bon voyage to President Mario Draghi. Former IMF boss, Christine Lagarde formally takes the reins today. Well, here to help us dig into his legacy

and his successor is Jean-Claude Trichet who preceded Draghi at the European Central Bank.

Great to have you with us, Sir Jean-Claude, thank you so much for joining us on the show. I do want to talk about policy. But first, I wanted to

ask you, what this day feels like when the job is not over, you've been in this role and recognize that more still needs to be done, but you have to

hand over to someone else. What does it feel like? Is it frustrating?

JEAN-CLAUDE TRICHET, FORMER EUROPEAN CENTRAL BANK PRESIDENT: Well, it is a very moving moment because you have to quit a job, which is incredibly

exciting, if I may, very high level of responsibility. And it's over. It's over overnight, but it's normal.

I mean, it's a long mandate, a term of eight years to guarantee absolute stability, and also independence. So you feel very moved. But you don't

think about anything at the beginning. You reflect and you know that you will do something totally different.

CHATTERLEY: Yes, and there have been many challenges, and we continue to reflect. You've written an op-ed defending both the provisions of stimulus

that you provided, but also Mario Draghi. And I think your primary point was, imagine if we hadn't done it, and where the Eurozone economy would be

at this point. Do you think we're at the stage now, where the benefits of negative rates, of stimulus are being outweighed by the costs particularly

to savers?

TRICHET: Well, of course, you have positives and negatives associated with any decision that any Central Bank would take. And this is true for all

the non-conventional measures that have been taken, not only the negative rates, but also QE. Also the forward guidance which plays also an

important role now and other measures that are also of importance.

I would say, at the present moment, it seems to me that there is an economists' consensus according to which the negatives are not over and

above the positives. But that being said, of course, the Central Banks and the ECB in particular is obliged to take decisions that are rather

extraordinary because in my opinion, the other elements of the policy mix, the fiscal policy and the structural reforms and also the domestic demand

in many countries is not contributing as it should.

So the burden is very much on the shoulder of the ECB. That is true also, by the way, for the other Central Banks of the advanced economies in the

world, so they cannot be the only game in town. It is about time for the other partners to step in, I would say, in Europe as well as in the rest of

the world.

CHATTERLEY: It is interesting. You lost two members of the ECB when you were presiding over the Central Bank, two Germans, in fact. Mario Draghi

also losing a German here. Do you think Christine Lagarde might surprise us? She is expected to be a dove, but yesterday she deliberately pointed

at Germany. She deliberately pointed at the Netherlands and said guys, you need to do more in terms of fiscal stimulus. Do you think she can get them

to provide more where perhaps you and Mario Draghi couldn't?

TRICHET: Well, we will see, in any case, I would say continuity is very important within the Central Bank, and there has been a lot of continuity

since the very beginning. Otherwise we would not produce the result that we have. And let me only mention that we delivered price stability and it

was the mandate of the treaty.

We resisted a terrible crisis and resilience has proved quite remarkable. And also, of course, we are backed, I mean, the ECB and the Euro are backed

by the people of Europe, with a 76 percent popular backing.

So all this comes out, in my opinion of continuity. I expect, of course Christine to continue the course of action that had been the course of

action of the ECB and of the Governing Council, but also being pragmatic, very pragmatic, and take all decisions with her colleagues that are overdue

taking into account data and circumstances, including of course, global economy and global trade.

[09:50:10]

TRICHET: Because don't forget, the European economy is highly depending on global trade much more than the US economy itself.

CHATTERLEY: Jean-Claude Trichet, sir, thank you so much for joining us on the show today. The former President of the European Central Bank there.

Great to have you with us, sir.

TRICHET: Great pleasure, Julia. Great pleasure.

CHATTERLEY: Thank you. All right. We're going to take a quick break here on FIRST MOVE, but up next, new issues with Boeing 737 emerge just a day

after its CEO was challenged on Capitol Hill for taking compensation worth millions of dollars. Stay with us for details, next.

(COMMERCIAL BREAK)

[09:52:48]

CHATTERLEY: Welcome back to FIRST MOVE with a look at today's "Boardroom Brief." Nintendo reported operating profit that more than doubled

bolstered by strong demand for its switch console. This includes the handheld switch light version launched by Nintendo to widen its appeal

beyond dedicated gamers.

Halloween is a huge hit in the U.S., but Americans are actually spending less this year on costumes, candy and pumpkins, not me clearly. This

spooky season is predicted to be worth about $8.8 billion. That's down slightly from last year according to the National Retail Federation. It's

another sign that spending slowdown could drive the economy into a dead zone, much like this lot you might catch tonight at the annual New York

Halloween parade. Wow.

And finally on this Halloween, we want to bring you some of the stocks that have given us both tricks and treats this month. There's lots of

interesting treats including music streaming service, Spotify, nothing scary on Spotify's playlist. Shares are up 22 percent this month.

Get out the Elon Musk Iron Man costumes, too because Tesla shares are up some 31 percent. Ouch for the bears and the Crocs come back continues.

Shares have soared 31 percent this month, too.

Now there have been some tricks as well. McDonald's rough 2019 continues with shares down some eight percent. Investors were worried about

increased competition. Ghoulish results, meanwhile sunk Tupperware shares. They are down 35 percent.

And there were goblins at Grubhub, too. Shares are down almost 40 percent on some scary results this month, too. Wow. There you go.

Let me give you a look at what we're seeing at our markets this morning. Under a bit of pressure this morning, but we did hit fresh record highs for

the S&P 500 in the session yesterday; under a bit of pressure, but not much. Plenty and a busy session to go so watch this space.

For now though. That's it for the show. I'm Julia Chatterley. You can listen to our podcast at cnn.com/podcast. You've been watching a FIRST

MOVE. Time to go make yours.

[09:55:00]

CHATTERLEY: Happy Halloween from us and our special coverage of the impeachment vote continues right after this. Stay with us.

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[10:00:00]

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