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First Move with Julia Chatterley

China Reporting Its Weakest Growth In Decades; Microsoft Promising To Become Carbon Negative; Democrats Getting A Series Of Revelations In The Impeachment Trial. Aired 9-9:30a ET

Aired January 17, 2020 - 09:00   ET

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

[09:00:11]

ZAIN ASHER, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Zain Asher, in for my colleague, Julia Chatterley, and here

is what you need to know.

Slowing economy. China reporting its weakest growth in decades.

And climate pledge. Microsoft promising to become carbon negative.

And new ammunition. Democrats getting a series of revelations in the impeachment trial.

It is Friday, my friends, and this is FIRST MOVE.

Welcome to FIRST MOVE. So good to have you with us, almost looking like to be another record breaking day here on Wall Street. All the major indices

are look set to hit fresh all-time highs at the open.

Tech stocks are on track for their strongest gains. The Dow rose almost one percent on Thursday. It begins today's session less than two and a half

percent away from hitting the milestone 30,000 so far this year, which is only 15 days.

The Dow and S&P 500 have risen more than two and a half percent. Tech has actually been the strongest gainer with the NASDAQ rallying over four and a

quarter percent.

The major markets in Europe are solidly higher as well this Friday. French and U.K. stocks are leading the pack of about one percent. Stocks rose in

Asia, too, but the gains were muted in China.

New numbers show the Chinese economy growing at 6.1 percent in 2019 -- that is its weakest performance in nearly three decades. The big question is

will the just completed Phase 1 U.S.-China trade deal help boost future growth.

We begin our driver with looking closer at the Chinese data that's just coming in. David Culver joins us live now from Beijing. So David, of

course, for any other country, these numbers, 6.1 percent would be stellar. But this isn't any country we're talking about. This is China. The numbers

came in at the lower end of its target range. Is the worst over?

DAVID CULVER, CNN CORRESPONDENT: And you're right, Zain. In the past, we've seen double digit growth here, percentage wise here. They say they're

within their target. Of course, there's even been questions as to the reliability of these numbers and the data that they've put out.

To your question as to if the worst is over yet? Well, if you listen to officials here, they're certainly putting out a narrative that would

suggest that there is going to be some stability going forward.

In fact, Liu He, the Vice Premier who is representing the Chinese delegation this week in Washington for the deal signing of Phase 1

suggested that 2020 would be positive and that things were looking upwards and he pointed mostly towards a lessening of the reliance on debt, as well

as a drive towards innovation.

The reality is, economic woes have been felt here. It's been felt in consumer confidence, even car sales have seen 18 straight months of decline

in China. It's been felt as well with unemployment. There's real concern over unemployment, particularly in some of the rural provinces.

And that's been something that the State Council even put out last month here in China, telling those local provincial leaders essentially to go at

all lengths to make sure that there are not massive layoffs.

So there is urgency to this, but at the same time, state media is also coming across to try to point out some of the positives as they see it.

They point out some of the numbers that came out today, towards retail for example, towards the back end of 2019, look to be trending upwards.

They say that is a big plus perhaps countering the negative consumer confidence that we've seen here thus far.

So going forward, the economic stability question from Phase 1 remains the mystery. Will it, in fact, stabilize things here and allow for China to see

a rebound? That's to be determined, really -- Zain.

ASHER: So, obviously, with the Phase 1 trade deal between the U.S. and China, that's a positive development for the Chinese economy. But the fact

is that there are many, many tariffs still in place. How badly does China need to progress to a Phase 2 trade deal between both countries?

CULVER: It is interesting to point that out. The fact that really the only rollback was on 7.5 percent on $120 billion worth of tariffs, but that 25

percent remains on $250 billion worth of Chinese goods.

So they seem to be wanting to see how this implementation process will go. It is also interesting to note the messaging here. They don't want to come

across too desperate towards the U.S. Of course, they want to move towards a Phase 2, but they're also mindful in how they come across publicly in

displaying that.

[09:05:00]

CULVER: In the U.S. side of things, President Trump has said that that could wait until after the 2020 election. But can the Chinese economy hold

on through that?

Leading up to Phase 1, they were releasing little details. In fact, all the details out of Phase 1 were coming from the Trump administration officials.

China was keeping tight lipped about it.

And it seemed that they wanted the ink to dry first before moving forward with any of the details, but even before they signed it, Zain, there were

publications coming out through op-eds and other editorials that were trying to portray that China had this strength underneath it, that it could

withstand even going without a Phase 1 deal if it had to, going forward.

So the messaging, the narrative versus reality, that seems to be to separate things.

ASHER: David Culver, live for us there. Thank you so much.

So our next drive, the T in Alphabet now stands for trillion. Google's parent company joined the exclusive Trillion Dollar Club after the share

price surged on Thursday. It is only the fourth -- the fourth -- American company that has ever hit that milestone.

Paul La Monica joins us live now. So Paul, this has really been a stellar sort of 15 years for Alphabet or back when it had its IPO, obviously, it

was Google.

The company launched its IPO with about -- worth about $23 billion, and now, it's a $1 trillion company. Part of this is to do with, really the

whole that it's had on the search market and also advertising revenue from the likes of YouTube.

PAUL LA MONICA, CNN BUSINESS REPORTER: Exactly. You know, Zain, Google- owner Alphabet has really dominated online search advertising along with Facebook for the past couple of years, and you've mentioned YouTube that is

another huge driver of revenue for the company.

They've obviously diversified into many other businesses like Life Sciences, which is a reason why they have the Alphabet umbrella for

everything, but Google now, at this trillion dollar market cap, there are only two other American companies currently worth more. That is Apple and

Microsoft.

And then you have Saudi Aramco, which, you know, went public late last year at almost about a $2 trillion market valuation. It's come back a little bit

since then, but those are the four companies right now.

And then lurking in the wings, Amazon, which had actually hit a trillion dollar market valuation in 2018, it has pulled back. It's crept a little

higher again. It's around $930 billion.

So we might be at a point not too long from now, where there are four American companies worth more than a trillion dollars.

ASHER: And just in terms of Alphabet moving higher, what's going to be the key for it, just in terms of its core advertising business, online

advertising, just in terms of innovating when it comes to advertising and also Cloud computing, which is hugely important as well.

LA MONICA: Yes, I think that Google Cloud is going to be an increasingly important part of the Alphabet growth story in addition to all the ads that

they run on the core search platform, as well as YouTube because we know, Zain that the Cloud is a big area of growth for Amazon.

Amazon Web Services generates gigantic profits from it. Microsoft and Azure, they've been doing really well. Those are the two big leaders in

Cloud right now, and I think Google is hoping to become as formidable a Cloud player as Amazon and Microsoft right now.

ASHER: All right, Paul La Monica, live for us there. Thank you so much.

Microsoft has pledged to go carbon negative by the end of this decade, by 2030. The tech giant wants to remove more carbon that it actually emits by

that year.

Anna Stewart joins us live now. So Anna, the timing of this announcement is quite interesting, because obviously we've got Davos next week and climate

change is going to be a big topic on the agenda. Just walk us through why Microsoft is making this change now, to go carbon negative, not just carbon

neutral, but actually carbon negative, and how do they actually plan to sustain this?

ANNA STEWART, CNN REPORTER: It's hugely ambitious, isn't it? Carbon negative by 2030, so take out more carbon than it produces, and by 2050,

Zain, it plans to remove all the carbon that is ever admitted directly, since it was founded in 1975.

So this is the most ambitious thought I think we've really seen from a big company here. Microsoft's President, Brad Smith said, "While the world

would need to reach net zero, those of us who can afford to move faster and go further, should do so."

Now, how do they plan to do this? First of all, by just reducing carbon emissions generally. By 2025, they plan to only use renewable energy, 100

percent. They're also planning to target sort of not having any vehicles that aren't electrical on their campuses and so on.

Then there's the removing the carbon from the atmosphere. They are planning to seed new forests. They are planning to work on technologies that put

carbon back into the ground, also carbon capture technology and to do all of that, they are also investing $1 billion. The new investment fund that

will accelerate all those technologies -- Zain.

ASHER: It's interesting because earlier this week, BlackRock actually announced that they are going to revolve some of their investment strategy

around climate change and sustainability, so overall, Anna, just in terms of the big picture, what is corporate America's role in helping and

sustaining the environment?

[09:10:15]

STEWART: We're certainly seeing a lot of corporations under pressure and I'd say from the tech sector particularly, a report from the AI Now

Institute estimates that tech companies, the tech sector will contribute three to 3.6 percent of all global greenhouse emissions this year. So that

is why they are particularly under pressure.

If we examine how they're all planning to do this, though, In2IT, a software maker also plans to be carbon negative by 2030, matching this new

pledge from Microsoft. But the other big tech giants kind of lag behind. We have Amazon, they're planning to be carbon neutral, not negative, and

that's by 2040, so 10 years later on.

Apple says it is reducing its carbon footprint. It has by some 35 percent since 2015, but there are no -- there are no dates, no deadlines to be

either carbon neutral or certainly carbon negative.

I think these companies will be under pressure. As you say, Davos kicks off next week, and this is one of the big themes of the World Economic Forum

this year. Satya Nadella, the Microsoft boss will surely have a spring in his step when he walks down the corridors now. He has really set the pace

of this brand new, very ambitious target.

And we could see a new sort of battle underway between these tech giants trying to match it, maybe the new goal will now not be carbon neutral, but

carbon negative -- Zain.

ASHER: All right, Anna Stewart live for us. Thank you so much. Okay, so these are the stories making headlines around the world.

The Senate stage is set. The jury is sworn in and now they must wait out a long holiday weekend before the impeachment trial of President Trump kicks

into high gear. You could call it a calm before the storm, but nothing is ever really calm in Washington.

Athena Jones joins us live now on Capitol Hill. So Athena, let's just talk about this Lev Parnas interview, this Rudy Giuliani associate for our

audience who might not be familiar with his name. This is the man who allegedly -- allegedly -- helped President Trump find dirt the Biden's in

Ukraine. How are Senate Republicans specifically reacting to the interviews that he's given?

ATHENA JONES, CNN NATIONAL CORRESPONDENT: Well, Zain, many of the Senate Republicans you talk to are being dismissive of what he has to say. They're

saying, look, he's under indictment. He is facing prison time, and he is trying to say anything that he can to anyone who will listen to maybe

reduce his prison time. That's also what we heard echoed from Vice President Pence's -- top aide to Vice President Pence, Mark Short.

And so there's not a lot of appetite, at least so far among several of the Republican -- members of the Republican Caucus to having new evidence

allowed.

People like Lindsey Graham, who questioned the legitimacy of the integrity of Lev Parnas as a witness, and also Tennessee Senator, Marsha Blackburn,

who said, look, it is -- it was the House's job to put together this case. It's not the Senate's job to help the House complete its work. They should

have done a more comprehensive job. They should have called these witnesses.

So you are going to see kind of the battle lines that are being drawn, but you do have other members of the Republican Party, a handful of moderates

and folks who are facing tough races that we're going to be keeping our eye on.

Several of those members -- moderate members of Republican Party -- have said that they are open to witnesses. So that's a question that's going to

be answered in the coming weeks. We know that on Tuesday when the Senate convenes to begin this trial in earnest. That is, when we will see them

vote on rules -- resolution setting up the rules of the trial. What will be the parameters that this trial is carried out under?

And we know that even folks who are open to witnesses, people like Susan Collins of Maine, even she says she doesn't want to discuss that at the

beginning, at the outset. She wants to wait until both sides, the House Impeachment Managers and the Trump defense team have been able to make

their arguments, make their cases and have the Senate -- senators ask questions, then, she wants to get to the point of discussing witnesses and

new evidence -- Zain.

ASHER: And Athena, given that the Senate is of course controlled by Republicans, and there's very little chance that Trump after all of this is

going to be removed from office. What are the political consequences, though, for the President going into 2020?

JONES: Well, certainly this could damage the President and so this is this is a high stakes moment and all of the eyes of the nation are going to be

focused on this and of course, even members of his own party, people who have been dodging the questions about whether it was appropriate for him to

have pressured Ukraine to announce these investigations into the Biden's et cetera.

They're now going to be forced to pay close attention, no distractions, no electronics, no smartphones, no reading material that is not relevant to

the case at hand.

They're going to be watching closely and so even though you may not get you 67 senators, at least the hope on the part of Democrats is that the case

against President Trump, the case against his wrongdoing will be spelled out for the American public and that a lot of the public will go along with

their argument that Republicans are trying to cover up the President's wrong doing even if they do as expected vote to acquit him -- Zain.

ASHER: All right, Athena Jones, live for us. Thank you.

[09:15:06]

ASHER: In Iran, a defiant Ayatollah Khamenei led Friday prayers for the first time in eight years. In a combative sermon, the Supreme Leader

blasted America welcoming last week's attack on the U.S. face and calling it "a slap in the face' for the country. The crowd responded with chants of

"Death to America."

In the meantime, a U.S. military official has told CNN that 11 service members -- 11 service members -- were injured in last Wednesday's strike on

the U.S. military base. The Pentagon had initially said there were no casualties at all.

Severe thunderstorms and heavy rain are bringing some relief to Australia's fire-ravaged East Coast. Authorities say the rain will not put out all the

fires, but will help contain the blazes.

After three years of drought, the wet weather brings with it new risks including flash flooding and falling trees as well.

All right, after the break here on FIRST MOVE, as the US celebrates low jobless numbers, a shrinking talent pool is causing concern for business

leaders as well and we'll also give you a check on the markets, too. See you soon.

(COMMERCIAL BREAK)

ASHER: Welcome back to FIRST MOVE, coming to you live from the New York Stock Exchange. We are gearing up for another day of records here on Wall

Street. All the major averages are set to hit fresh all-time highs in just a few minutes from now.

U.S. stocks, take a look here at Dow futures, they are up about almost a hundred points in terms of futures. U.S. stocks are rallying amid optimism

over the just completed Phase 1 U.S.-China trade deal and solid earnings from major U.S. banks as well.

Talk of new U.S. tax cuts are helping, too. The true test of this earnings season begins next week when a flood of results begins pouring in including

Netflix, IBM, Intel and many other major companies and big names set to report as well.

As the jobless number falls here in the U.S., a shrinking talent pool is a top concern for small and midsized business leaders and according to a

survey by JPMorgan Chase, businesses are responding to the lack of competition in the employment market. The bank's chief commercial analyst

told Julia Chatterley why it's such a big problem.

(BEGIN VIDEOTAPE)

JIM GLASSMAN, HEAD ECONOMIST, JPMORGAN CHASE COMMERCIAL BANKING: I think the problem is when you look at where all of these jobs, we can't find it.

It's all over the place. Every industry across the country, and I think that's confirming that really, what's going on here is the demographics is

really driving it.

So you have all -- you have a boatload of people who are moving towards retirement, the baby boomer generation. The same thing going on in Europe,

same thing going on in Japan, and 65 year olds are leaving, and there aren't as many people coming in to take those jobs.

So to me, this is a huge demographic story. Not a surprise because we've known about this since 1945, but we always thought -- in the developed

economies, we always thought, well, if we don't have the people, we'll get the immigration, and that's not been happening.

JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Well, that's something perhaps that's masked what we're seeing today, because this is heightened

sensitivity, not just in the United States, but around the world --

GLASSMAN: Everywhere.

CHATTERLEY: But far more here, I think that then perhaps anywhere else.

GLASSMAN: Japan knows this story really well, because their population isn't growing. But you know, the Europeans have seen this for a long time,

too. And now, America is sort of feeling it. And I think it's sad to me because it tells me that if we could find ways of getting people into those

jobs, we could produce so much more. The economy would grow faster. It's part of the fiscal challenge for the U.S.

CHATTERLEY: The challenge for companies is that they're going to have to pay more and what? Seven tenths of them in your survey said they are simply

going to have to pay more, give people better benefits in order to get the workers that they need.

GLASSMAN: Yes, and I don't fear that. I think we're in a good spot.

CHATTERLEY: Yes, good for consumers, too.

GLASSMAN: Anything that makes companies work hard to retain people, it's not just the pay. They're working harder to help -- once people get into a

job, they find out there may be more things available to them, and if you can get the training, companies are finding out that if you can train

people for those jobs, you might retain them, and that's the big challenge.

You can't grow people, but you can improve their skills and move them into the company and hold onto them longer. So it's good news, really.

(END VIDEOTAPE)

ASHER: Oh, all right, just a few minutes to go before the opening bell. Tony Crescenzi joins us live now. He is the Market Strategist and Portfolio

Manager at PIMCO.

Tony, thank you so much for being with us. Hi. So when you look at the market, we've gone from record highs to record high and then generally when

you see the stock market behaving like this, you anticipate that people are going to leave bonds and go straight to stocks. What is happening here when

you look at the yield on the 10-year being at 1.8 percent. What is that telling us?

TONY CRESCENZI, MARKET STRATEGIST AND PORTFOLIO MANAGER, PIMCO: Well, there's it tells you something about growth potential. The growth potential

United States, Japan, Europe is still seen as low. Most people still think the United States growth might be around two percent and growth such as

that is not likely to prompt the Central Bank, the Federal Reserve to raise its policy rate. In fact, is more likely to keep it low because it's been

under shooting on its inflation target.

And it's made it very clear, it won't raise interest rates until the inflation number starts to move up, and that's what the bond investor cares

about when he thinks about investing. He looks at yields versus inflation. But it also thinks about the safety element.

It's very important to an investor to try to avoid market timing, the diversification benefits of bonds and so they're not likely to leave bonds

for equities simply because bonds are not yielding much and equities are faring well.

It's like giving up on car insurance for a day or two because you think things will be fine. It's too risky to do that because you never know when

there could be an accident.

ASHER: Okay, so there's still some concern there. When you think about the Treasury, the Treasury just announced that they're going to be issuing a

brand new 20-year bond. Part of the reason for that is that the deficit is a major issue.

So just walk us through your thoughts on that. I think, they're going to be issuing it in the first half of 2020.

CRESCENZI: Well, the U.S. Treasury Department has had a practice since the 1970s called regular and predictable issuance. It likes to keep the

calendar the types of bonds that it issues monthly, fairly regular and predictable so that it doesn't -- it has no impact on interest rates

because if there was an irregular pattern, the bond investor might say, well, how much supply of bonds will there be next month for us to deal

with? So perhaps we should ask for more yield from the Treasury Department today.

But the large deficit, as you mentioned, Zain, about a trillion dollars per year requires and as far as the eye can see, at least in the next five

years requires that the Treasury get a little innovative with respect to issuance.

Now, the amount of 20-year bonds that will be issued next year, which by the way, is a very popular category for investors, probably about 150

billion, 140 billion or so.

To put it in perspective, that's about one percent of all treasuries outstanding, about 16 trillion outstanding. It is very small. So it's not

likely to have a meaningful impact on overall interest rate levels because global investors have a strong demand for high quality bonds and the fact

is, there is a shortage in the amount of high quality bonds with nations.

[09:25:09]

CRESCENZI: The final point is, nations as Italy and Spain, no longer considered highly rated as they used to be before the financial crisis. So

there isn't -- there isn't a large amount of high quality issuance out there.

ASHER: And then just in terms of this week, obviously, we had a slew of bank earnings. A lot of them coming in good, especially JPMorgan Chase.

Others, like Goldman Sachs and Wells Fargo have other issues that they're dealing with that caused problems for those banks.

But when you look at this low rate environment that we're in, obviously with banks, they have to diversify and perhaps charge higher fees in their

advisory and their investment banking divisions to make up for it. What is the strategy for banks in this kind of environment?

CRESCENZI: Well, what's clear is banks have gone back to what I've often called 3-6-3 model of banking. It is the more traditional model of banking.

3-6-3 old number, but it's this way that bankers would pay three percent on deposits, say zero -- charge six percent on loans and be at the golf course

by 3:00 p.m.

So they've gone back to sort of 3-6-3 model, as you could call it, or something else with different numbers. More traditional banking, earning

money on fees, earning the difference between the amount they charge on loans, and they pay on deposits, which we all know as depositors is very

low.

ASHER: Right.

CRESCENZI: So they're making money there. So PIMCO favors banking institutions, particularly in Europe and different parts of this so-called

capital structure, because of this soundness of banks, and one could simply go to the Federal Reserve website, or the European Central Bank website and

look at stress tests they've done and conducted on these banks to see that even under very severe conditions where the stock market declines almost 50

percent.

Home and commercial real estate prices fall 30 to 40 percent. Banks still have so-called capital levels that are above what regulators want them to

have, which is another way -- a long way of saying you're probably going to be a lot better shape than they were even during a financial crisis if

something severe were to happen.

ASHER: All right, Tony Crescenzi, live for us. Thank you so much. Appreciate it. You have a great weekend, by the way.

CRESCENZI: Thank you.

ASHER: All right that's it for the show. Thank you so much for watching FIRST MOVE. I'm Zain Asher.

(COMMERCIAL BREAK)

[09:30:00]

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