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First Move with Julia Chatterley
Coronavirus Spreading Has Now Overtaken SARS With More Than 6,000 Infected In China; Apple's Earnings Beat With Bumper Phone Sales And Services Numbers; The New CEO Of Boeing Says The MAX Crisis Will Cost Over $18 Billion. Aired 9-10a ET
Aired January 29, 2020 - 09:00 ET
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[09:00:14]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the City of London, I'm Julia Chatterley. This is FIRST MOVE and here is your need to know.
Coronavirus spreading. It is now overtaken SARS with more than 6,000 infected in China.
An iPhone smash. Apple's earnings beat with bumper phone sales and services numbers.
And losses mount at Boeing. The new CEO saying the MAX crisis will cost over $18 billion.
It's Wednesday. Let's make a move.
And also a warm welcome to you all, I have to say, but I'm warm of course and we are coming to you live from the City of London. We are on the
countdown to the U.K.'s exit from the E.U. on Friday when everything changes and yet nothing changes.
We will be discussing throughout the show, but there's so much else to talk about as well. Take a look at what we're seeing for global markets.
Ex-Asia, they've got a firmer tone once again today following the sharp sell off earlier this week of course on coronavirus fears. Asia itself, a
pretty mixed bags as we saw the Hang Seng reopening following the Lunar New Year holiday. More on the details of that shortly.
But elsewhere in the world, European shares also up for a second day. U.S. futures are green meanwhile. What we're seeing right now is stocks
steadying supported by some pretty solid U.S. corporate earnings. Let me give you a sense of it in terms of the numbers here.
More than 65 percent of U.S. companies have beaten expectations so far though, of course the challenge now is what they say about the outlook
particularly in light of the uncertainty created by the spread of the coronavirus.
Starbucks and Apple have already warned about a possible hit to the current quarter based on stores or their supply chains. The risks from this health
emergency remain incredibly tough to gauge. Let's get to the drivers on that story and bring you the latest.
The number of confirmed cases of the coronavirus in China has overtaken the numbers infected during the 2003 SARS outbreak. More than 6,000 people have
been impacted at this stage and 30 have died.
Japan and the U.S. are evacuating their citizens. British Airways is the latest airline to suspend flights to the mainland.
David Culver is in Beijing for us. David just give us the latest and what you're hearing there.
DAVID CULVER, CNN CORRESPONDENT: Hi there, Julia. Well, the latest comes out of the health world, and really, we know that the leader of the World
Health Organization has met with President Xi Jinping, and together they have agreed to bring in international scientists so that they could work
collectively on research and work to really figure out how exactly this coronavirus transmits from one person to another.
The reason that's so important is because it could then lead to figuring out what exactly the quarantine period should be, should it really be the
two weeks that they're suggesting, and they can understand a little bit more about the containment efforts and how effective they can be going
forward.
There's also some private money going into this Julia, we've learned that the billionaire founder of Alibaba, Jack Ma is donating roughly $14.4
million in hopes of finding the vaccine, so he is contributing to the research.
But we're also in the midst of what's seeming to be an elongated Lunar New Year holiday. It's been extended until February 2nd. The reason for that is
quite obvious. During the return to businesses and the end of the holiday, you've got the mass migration continuing, right? You've got hundreds of
millions of people that will then be coming back together and going back into the cities, cities like where we are here in Beijing.
And so for now, they're delaying that hoping that that congregating of the masses won't be happening on whether it be the rails, the skies or really
in the cars.
So they're hoping to keep people apart, so that then that is part of the containment effort. But there is certainly an economic part of this that
we're seeing. You have not only the transportation shut down within cities, certainly within the lockdown zones, some 15 cities and 60 million people
impacted by that.
But also, as you mentioned, several of the airlines either cutting back or cutting their flights altogether to and from Mainland China. Not to
mention, it seems like Mainland Chinese tourists aren't really as welcomed right now in the midst of all of this.
In fact, several different countries have put up restrictions to people who have either traveled to or from Hubei Province, the epicenter of all of
this, or even in some cases have come to Mainland China altogether.
They're putting in that quarantine period, and asking folks essentially to stay away for that two-week duration -- Julia.
[09:05:13]
CHATTERLEY: David, I just to ask you very briefly here, you know, I made the point that now, we've got greater cases than SARS, but when this first
began, we were suggesting here that we simply didn't get the truth from the Chinese authorities during that SARS outbreak, to what extent are people
perhaps appreciating the greater communication? Perhaps a greater degree of honesty here? Or is that the fact that we've now seen more cases of
infections in Mainland China than we saw in SARS frightening people here? Just what are people saying?
CULVER: You need to go -- yes, go back, I would suggest a week and a half and this was described Julie as preventable and controllable by one of the
health officials, then fast forward to where we are today.
And in the past couple of days, we've seen President Xi Jinping come out and say that he personally is taking control of the deployment and
coordination efforts here and that is significant. He is putting himself in the leading role and that also suggests that he is putting increased
pressure on the local governments -- governments, that some argue, really are behind the mess that is this outbreak.
They feel like in many cases, there was not enough transparency early on in this and that there was some cover up and under reporting even. That's the
allegation, and that's the finger that's been pointed at even people like the Mayor of Wuhan, for example.
Now, he has suggested in his interviews with state media in particular, that he had, perhaps not done things in a timely fashion as it was
characterized, but also said that he needed approval from higher ups, that he had to go through the State Council, for example.
And he seemed to suggest that he didn't get that, so there's a lot of as of now, kind of, I would say passive blame game that's going on right now.
There's not as overt as one, but it's something that you need to be watching because I think it will play out going forward and it would be
interesting to see how the central government versus the local government dynamics move on.
CHATTERLEY: Yes, David Culver there in Beijing, great to have you with us. Thank you for that.
The stocks in Hong Kong fell almost three percent on their first day of trading since the Lunar New Year holiday. Of course, the Hang Seng falling
to seven-week lows, all of this as multinationals tried to get a handle on how the coronavirus will impact operations.
Anna Stewart joins me now. Anna, I'd have to argue that some of this is catch up from the weakness that we saw elsewhere in the world earlier on
this week. But there's a real tale of two halves, some significant losers, those attached to tourism, for example, and then some winners in the
biotech industry.
Just walk us through this.
ANNA STEWART, CNN REPORTER: Yes, it is more bad news than good news for equities in Hong Kong. And as you said, it's that catch up that the index
is really playing. It's been closed for a holiday. It's having to catch up on all the broader selloff we saw early in the week.
So Monday, European equities were down, so were U.S. equities and of course, elsewhere in Asia. If you look at the indices in Asia from the
trading session, you'll see that both Japan's Nikkei and the South Korean KOSKI both actually made some recoveries, but the Hang Seng nearly down
three percent.
And the stocks that were really hit very hard, unsurprisingly, travel, particularly the airlines due to all the containment measures, they are
certainly under pressure.
Cathay Pacific nearly down three percent, Air China down over four percent. Macau gambling, the casino stocks also really under pressure, and that's
not surprising.
We actually had some stats out on tourism down some 75 percent just for the Lunar New Year, the last few days compared to 2019 significantly down. So
those casino stocks very much under pressure.
But you did mention there was some bright spots and there certainly is one that is stellar and skyrocketing, Venture Pharma Laboratories, a little
known biotech firm up 285 percent today.
It is working with a research firm on vaccines, of course, that could take a long time, but clearly investors putting their money somewhere -- Julia.
CHATTERLEY: Wow, what a rally on hopes it seems of a vaccine here. Anna, I want to talk to you as well about, one, the reaction that we saw from
investors. They tend to get straight involved on a story like this and react instantly.
But we are starting to see corporate strategies being formed here and executed, particularly as far as the airlines are concerned just in the
last 12 or so hours.
STEWART: Yes, we're getting a slew of announcements. You're right. Earlier in the week, we actually had almost more share price reaction that we are
getting; now the companies are reporting what they plan to do in terms of travel restrictions and so forth.
Investors fear the worst. Corporate strategy kind of follows on later. So British Airways today said they are canceling all their flights to and from
China. That's actually only two direct flights a day.
A bigger story really was United Airlines yesterday because they're canceling 24 direct flights to China. That's sort of a third of their total
flights into the country. FinAir cancelled all of theirs, that's around five a week.
Now some of this is because governments are suggesting that you know, non- essential travel should be banned, but also frankly the sentiment, plenty of passengers simply won't want to travel. There's a load factor considered
there as well.
[09:10:17]
STEWART: Elsewhere in corporates, we have Facebook, Goldman Sachs, Ford, Johnson & Johnson, all sorts of corporates saying they are either banning
or restricting non-essential travel for employees, and of course all of those companies are closing up shops in certain areas like Starbucks,
McDonald's and now IKEA is the latest one to announce some store closures in China.
CHATTERLEY: Anna Stewart, great to have you with us. Thank you so much for that.
All right, let's move on to our next driver, stocks of Apple jumping pre- market -- in their premarket trading after the tech giant reported the second best quarter in history for iPhone sales, well and truly smashing
expectations.
Apple says its quarterly revenues increased nine percent from a year ago to a cool $92 billion. The number was also boosted by strong sales of AirPods
and Apple watches, as well as subscription services.
Christine Romans is live in New York with all the details for us. Christine, great to have you with us. I saw some comments from the chief
executive saying if you add in what we've got for watches, AirPods and Beats, $10 billion worth of revenue, it's a Fortune 150 company all by
itself. This was a blowout quarter.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Right. Right. It really was. I mean the shine back on the Apple to use a terrible Apple
pun, but it really was here and $92 billion, a record for sales overall, mean just think of what this company is producing and selling here.
Let me break it down for you by category. You still have the iPhone, it is still half of the sales of this company and it was a resurgence in the
iPhone. That really is a big factor here as well.
Overall sales, almost 92 billion; iPhone sales, up eight percent there to 56 billion. Services, you're absolutely right there. The credit card, the
Apple TV -- these new things that they're introducing to get you to use and love your iPhone more and spend more money.
Services up 17 percent and wearables. Those new AirPods among those really doing well here.
Look, Tim Cook, the CEO said that the China factor here was favorable for the company as well. You know, I think we saw something like 15 percent of
its Apple's overall revenue comes from China and something about the iPhone 11, the cost, the features, the camera, those were a hit in China.
Now, we've been talking about the coronavirus of course that did introduce a new uncertainty into the mix for the company this year because it is so
exposed to China, the coronavirus, we just don't know how that is going to factor out. He didn't mention it as one of the risks or at least a factor
in the mix for this year, but sounded overly overall pretty optimistic -- Julia.
CHATTERLEY: Yes, tough to find anything to complain about here and what a difference a year makes. Christine Romans, thank you so much for that.
All right, next driver. Boeing has reported its first annual loss in more than 20 years. The plane maker posting a net loss of $636 million in 2019
as the cost of the 737 MAX crisis continues to climb.
Clare Sebastian joins us on this. Clare, I have to say when I looked at the details here, the forecast for the overall potential losses attached to
this crisis, what? We're talking more than $18 billion.
This is a new CEO taking the worst case scenario, kitchen sinking here, and we'll try and then move on.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, 16 days into the job, Julia, David Calhoun is -- this is his first earnings report, and this is
Boeing's first annual loss since 1997. To put that in context, before 1997, they hadn't made an annual loss since 1959.
So this is not a company that posts these kinds of losses, so a serious problem for the company, but as you say there, disclosing more costs when
it comes to the 737 MAX.
Let's take a look at some of those. Among them $2.6 billion in new concessions to airlines. This is crucial as this crisis drags on. Another
$2.6 billion in terms of increased production costs for last year, and they are forecasting another $4 billion rise in production costs in 2020.
That is, of course, impacted by the pause in production for the 737 MAX and the cost associated with that.
So that pretty much doubles what we already had, nine plus nine, and now $18 billion is the projected cost of this and that could still go up,
Julia, if you talk to analysts. They say that airlines are going to continue to demand more concessions.
We've had that, for example, from Southwest as they reported earnings last week, but the CEO, David Calhoun, he is committed to transparency. He has
already been on television this morning, and he was asked about the future of the 737 MAX, should it continue to be called that or is that name
tainted? Take a listen.
(BEGIN VIDEO CLIP)
DAVID CALHOUN, CEO, BOEING: I'm not going to market my way out of this, right? So, I love Steve. I was with him a couple of days ago, and he's
right in the sense that the Max has something attached to it today.
[09:15:10]
CALHOUN: But again, we believe this airplane is safer than the safest airplane flying today. Every next airplane has to be that way. It has to be
that way for Boeing. It has to be went that way for our competitors.
So what we call it, trying to relabel it, trying to merchandise that, no. This plane will recover with the flying public when airplane pilots step on
it, fly it, like it and by the way based on all the test flights we've had to date which are many, they do. So as all of those pilots return, so will
passengers.
(END VIDEO CLIP)
SEBASTIAN: Well, that remains to be seen, Julia. How the confidence of passengers returns, but as for the markets there, the stock is up premarket
now, some 2.7 percent, so a bit of a relief rally, perhaps a sell the rumor buy the news scenario this morning.
CHATTERLEY: Yes, I mean, it's down 25 percent that stock since March 10th, of course that the first tragedy last year. It remains to be seen, to your
point. Clare Sebastian, thank you for that.
Let me bring you up to speed now with some of the other stories making headlines around the world. In the coming hours, the impeachment trial of
U.S. President Donald Trump moves into a new phase.
House managers and President Trump's defense lawyers will spend two days answering questions submitted by both Republican and Democratic senators.
It comes at a critical time. CNN has learned that Senate Majority Leader Mitch McConnell has admitted he does not currently have the votes to block
witness testimony.
Over to Brussels now, and the European Parliament is due to formally approve Britain's Brexit deal. The special session in a few hours' time
will also mark the last day of work for the Parliament's 73 British lawmakers including the Brexit Party's Nigel Farage.
Meanwhile, in the British Parliament, the Prime Minister has defended the decision to use Huawei technology in its 5G rollout. The U.S. has raised
the alarm about the Chinese tech giant, meanwhile, Boris Johnson is set to meet with the Secretary of State Mike Pompeo on Thursday.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH PRIME MINISTER: I want to assure the House and indeed the country that I think it is absolutely vital that people in this
country do have access to the best technology available.
But we also do absolutely nothing to imperil our relationship with the United States, to do anything to compromise our critical national security
infrastructure, or to do anything to imperil are extremely valuable cooperation with Five Eyes security partners.
(END VIDEO CLIP)
CHATTERLEY: Plenty more to come here on FIRST MOVE live from London. We are on the countdown to Friday's official Brexit. We'll take a closer look
at the upcoming separation as Britain's departure from the E.U. fast approaches. Stay with us. We're back after this.
(COMMERCIAL BREAK)
[09:21:03]
CHATTERLEY: Welcome back to FIRST MOVE. We are live in London counting down to Friday's Brexit, of course, but also keeping a close eye on what's
going on back home with the markets.
Us futures still on track for a solidly higher open as you can see following Tuesday's bounce back rally. Plenty to discuss. We're joined by
Tina Fordham. She has recently joined the political advisory and law firm, Avonhurst as a partner and Head of Global Political Strategy.
Congratulations.
TINA FORDHAM, PARTNER AND HEAD, GLOBAL POLITICAL STRATEGY, AVONHURST: Thank you very much.
CHATTERLEY: It's great to be with you. We'll talk about that in a second, but I do just want to get your assessment clearly, focus right now front
and center coronavirus, and the risk impact. What are your thoughts?
FORDHAM: Well, we've sort of been here before with SARS and H1N1. It's early days in terms of understanding the transmission of the virus, but
you've already seen financial markets have a bit of a wobble. What do we need to watch for next? Very unfortunately, death toll. And also really,
this is a test of the Chinese authorities' policy response, right?
The quarantine of 35 million people isn't going to be so easy to enforce. Certain sectors are more sensitive to this, whether it's airlines, miners,
et cetera. But I think that we've definitely seen a return to the idea of a global virus moving up the chain of worries for investors.
CHATTERLEY: You know, it's interesting, we were just mentioning earlier on the show, we've now got more people infected with coronavirus in China than
we saw infected during the SARS virus in 2003, and yet the predictions that I've seen coming from analysts of the hit to Chinese growth right now, I
think ING Bank came out with a 0.3 percent dent.
FORDHAM: Very modest.
CHATTERLEY: It's incredibly modest.
FORDHAM: Yes. And let's remember, again, and you know, on the epidemiology front, flus kill thousands of people in developed countries every year,
even tens of thousands in larger cases.
So understanding whether this is a sort of a two-month phenomenon that Chinese authorities can contain or a year-long phenomenon is really what's
going to move the needle for investors about whether this virus is potentially more disruptive than U.S.-China trade, and that was tough for
markets.
But also, it equally didn't have a massive impact on the growth outlook, remember?
CHATTERLEY: Yes, I mean, these are factors that investors are going to have to gauge and think about this year. Where do you hide or you don't?
You just continue to watch the news because to your point, and I've made the point at the top of the show, you just can't gauge right now. There's
too many uncertainties and the comparison with 2003 is that we didn't get all the facts in 2003.
Perhaps the numbers are so different because we are now actually understanding --
FORDHAM: Well, and we don't know what the transmission mechanism is as well. The idea that a man in Japan who was nowhere near Wuhan has come down
with a virus will be the kind of thing that will send the market jitters.
CHATTERLEY: Just expect more of that.
FORDHAM: Yes.
CHATTERLEY: Speaking of jitters or not, so this week, I feel like this is a culmination of a moment that we've spent years now discussing.
FORDHAM: Yes. Out in the cold. Yes.
CHATTERLEY: I said again, everything changes, but actually nothing changes because we're going into this transition mechanism. What do you think
coming into Friday?
FORDHAM: Speaking as someone based in the U.K., as we've traded places, I think the most striking thing is just how anti-climactic this impending
Brexit date feels.
I've seen a few analyses looking at the extent to which the sort of the current withdrawal plan would be a hit to the U.K. economy and how
different it might have been compared to exiting with no deal.
And again, we just don't know. I doubt we're going to see much market response at all after January 31st. So apart from blue passports and a
shiny new 50P coin, there isn't going to be a discernible effect.
I think if there's a question now, though, it's about what we can get done in 11 months, and the almost, you know, certain fact that we will be
looking at a two to I don't know, maybe three-year transition period.
For investors, that's probably not a terrible outcome, because now the clarity that was sought, Brexit is now happening, status quo prevails. We
can go so far as to say it's a non-event, but it's not perhaps a market event in the traditional sense of being an event risk, more of a process.
CHATTERLEY: Event risk this year. It feels like it's culminating on 2020. We're very focused on what's going on in D.C. right now, whether that will
impact the election. What are you saying to clients about 2020 and the potential shifts that we can see? I've seen headlines with Mike Bloomberg
as well.
FORDHAM: Mike Bloomberg's candidacy, I think is over anticipated by our colleagues in New York on Wall Street.
CHATTERLEY: Is it?
FORDHAM: Of course, I would say at this point, most investors are expecting a second Trump term. But we don't have a Democratic nominee yet.
So Super Tuesday in March will be huge. For sure, any candidate, any outcome other than Trump winning a second term would be perceived
negatively by equity markets.
But I'm not sure investors really understand what they should be looking forward to a second Trump term because one of the things and this might tie
into the points about Avonhurst, and why I've moved to a law firm is will the United States be a country that stands up for rule of law? Or will it
continue its ambivalence or move away from international institutions like the W.T.O.
CHATTERLEY: We'll come back to that and congratulations again on your company because we'll talk in depth about the shift when we get you back.
Tina Fordham, partner and Head of Global Political Strategy at Avonhurst.
We're counting down at to the market open at this Wednesday morning. It is expected to be a strong one. Stay with us. Back for more after this.
(COMMERCIAL BREAK)
[09:30:16]
CHATTERLEY: Welcome back to FIRST MOVE and you're looking at clapping and smiling faces back at the New York Stock Exchange where U.S. stocks are
rising for a second straight session regaining much of what was lost during Monday's selloff.
I think we should expect investors to remain sensitive to those coronavirus headlines as Tina Fordham was just mentioning there, and I said Dutch bank,
ING has said the impact of the virus could knock 0.3 percent from Chinese GDP in 2020 bringing it down to 5.6 percent. That would clearly be a
disappointment for those who were hoping China would provide an extra kick to global growth in 2020.
Also keep an ear open for headlines from the Federal Reserve later today when it provides the first policy statement of 2020, if indeed they say
something about the potential risks here.
Let me walk you through today's Global Movers. In the meantime, Starbucks trading lower. The company reporting better than expected Q4 profits, but
it warned that the coronavirus will hurt results going forward. Starbucks has been forced to temporarily close half of its Chinese stores.
Microsoft meanwhile, trading flat, the fastfood giant McDonald's I apologize not Microsoft reporting better than expected profits. Revenues
coming in line with expectations. Investors may be focusing on the coronavirus risks hereto. McDonald's closing locations in a number of
Chinese cities, too.
What about GE? Well, they are higher by eight and a half percent. The company's Q4 results beating estimates. It is also raising its cash flow
forecast for the year. GE shares have risen 36 percent in the past year on turn around hopes.
And as we've been reporting, Boeing shares are higher by some two and a half percent. They reported their first annual loss in 22 years, but new
CEO, David Calhoun says he is confident regulators will allow the 737 MAX to fly again by midyear.
What about Apple shares? They are higher in the session, this, after the company delivered record quarterly revenues. Apple raked in nearly $92
billion in just three months following soaring sales of iPhones and performance across the business.
Let's be clear. Scott Galloway joins us now. He is Professor of Marketing at the NYU Stern School of Business.
Scott, fantastic to have you with us. Thoughts on Apple here?
SCOTT GALLOWAY, PROFESSOR OF MARKETING, NYU STERN SCHOOL OF BUSINESS: Good to be with you, Julia. Yes, the largest or the most valuable company in the
world has a blowout quarter; iPhone sales look to be slowing and that's no longer the case. They've renewed their growth. Services revenue up 18
percent. The wearables business, that is the AirPods and the iWatch or the Apple Watch, excuse me, are now on their own, a Fortune 150 company up a
staggering 38 percent.
So, on any dimension, you'd have to call this, not only a blowout quarter, but a very strong indicator of how the globally affluent are doing because
Apple sales to a certain extent are somewhat of a proxy or an indicator for how the world's one and a half billion wealthiest people are doing and you
know, they're just all indications of a very strong green light here.
CHATTERLEY: In your 2020 predictions, and I love this, you talk about Apple forming a relationship with the 100 million wealthiest people in the
planet and that's what generates across all platforms and their offerings a further 30 percent rise in the share price. Talk me through how we go from
that to where we are today.
GALLOWAY: Well, since I made that prediction, I think the stocks are up 12 to 15 percent, so we're halfway there. But if you look at Microsoft -- if
you look at Microsoft, it was the most valuable company in the world a month ago or Amazon who has added the most shareholder value in the last
five years of any company, maybe with the exception of Apple.
What they have that Apple doesn't have is a recurring revenue bundle, and that is Microsoft has a recurring revenue relationship with the global
corporate world in the form of Microsoft Office. Apple has a recurring revenue relationship with 72 percent of U.S. households in the form of
Prime and I believe, Apple is putting in place between Apple TV Plus, between Apple News, Apple Music, the opportunity to offer people a monthly
fee, where maybe you get your AirPods, your Mac, your music, your TV all for one monthly fee, and enter into this if you will, monogamous
relationship with the consumer.
And as a result, even without earnings growth, the stock will go up because the market loves these recurring revenue businesses. That's why software
and cable companies and syndicated research companies traded a multiple of revenues versus transactional companies like retail, traded a multiple of
profit.
So I think Apple is putting in place all of the pieces to move to a recurring revenue bundle, which they'll announce in 2020 and I think that
stocks can accelerate just on the change of business model.
[09:35:18]
CHATTERLEY: What about privacy here? Because this is something that Apple and Tim Cook have, first and foremost, as part of the brand of Apple's
business here, but we have seen them wrestling to some degree with the F.B.I. over encrypted data.
We know in thousands, hundreds of thousands of cases, they have done their best to help enforcement officers over the last seven years or so where
these kinds of issues have raised, but they've never given access to encrypted data. Is this a drag potentially or does this help them because
they continue to fly the flag of privacy first?
GALLOWAY: I think on a business level, it's probably a smart move in the sense that basically the compact that these companies have with consumers
globally, is if you're wealthy and you can afford on iPhone, we're only going to pull 80 to 100 data points a day.
But if you don't have as much money, and you want a phone for a better value phone that is just typically powered by Android, we're going to pull
somewhere between 1,000 and 1,500 data points a day.
I would argue that when we live in a society where we've decided to fetishize the phone, and make it different than your home, or your car
under the auspices of a search warrant from a judge, we can get in.
When we've decided that the iPhone is so sacred that nobody can get in including our national security agencies or the police then we've entered a
dangerous area where we've decided to ignore the balance we've struck between law enforcement and our national security agencies and consumer
privacy.
So I think this is a bigger societal issue, but from a pure brand positioning issue to say to people we are the one safe place, the iPhone is
your one lock box that you can trust, it is always going to be private is a great brand positioning and they have held to that brand positioning.
It'll be a bigger social or bigger political issue than a business issue. But from a brand standpoint, like everything Apple does, in my opinion,
it's a great move.
CHATTERLEY: It's also a perfect segue to talk about Facebook at this moment and we've got Facebook earnings after the close today, we can talk
about the numbers here, but again in your 2020 outlook, you well and truly lay into Sheryl Sandberg.
I mean, I can quote, "She wins a silver medal second to Zuck for making the most money while doing the most damage to the world." Does that matter
ultimately to investors and to those that use a whole array of Facebook products here? We don't care enough about our privacy.
GALLOWAY: It doesn't appear. You know, I'm looking at these numbers and I believe the numbers are probably going to -- Facebook is probably going to
offer another blow out of 25 percent increase in top line.
The reality is if you didn't know what was going on with the weaponization of our elections, with the link between social media and teen depression,
you wouldn't know that this is happening if you just looked at the numbers because Instagram continues to accelerate. Facebook continues to be the
most used social media app in the world.
The company controls two thirds of the market for social media, two and a half billion users. But the reality is, as we have a gentleman in his 30s
that hasn't shown a great deal of regard for the Commonwealth who now oversees the algorithms that decide the content that a population the size
of the Southern Hemisphere plus India controls.
We have kind of lost the script in terms of any checks and balances. And also this is an individual who could be with us for another seven years and
can't be removed from office.
So I would argue that their inability to protect us from the weaponization of our elections, the refusal to acknowledge the link between social media
and teen depression makes these individuals, the winners of the individuals who have made the most money while doing the most damage to the
Commonwealth.
I think there's -- I think Facebook is a very controversial company, and I trust and hope our elected officials will get the backbone and the domain
expertise to regulate this company just as we've regulated every other media company.
CHATTERLEY: Yes, and if they break them up, the parts could be worth more than the whole. It's going to be fascinating to look back on this. Scott,
fantastic to have you with us, too.
Scott Galloway, Professor of Marketing at the NYU Stern School of Business. Thank you again.
GALLOWAY: Thanks, Julia.
CHATTERLEY: All right, we're going to take a quick break here on the FIRST MOVE, but up next, learning the lessons of Brexit with just days to go
until Britain formally leaves the E.U.
My next guest says remainers could learn a few things from the Brexit Party's, Nigel Farage. I speak to the former leader of the U.K.'s Liberal
Democrats. That's up next.
(COMMERCIAL BREAK)
[09:42:53]
CHATTERLEY: Welcome back to FIRST MOVE live from London. Hours from now, Europe's Parliament will approve the U.K.'s Brexit deal and bid farewell to
its 73 British members. One of them though, could not be happier to say goodbye.
(BEGIN VIDEO CLIP)
NIGEL FARAGE, BREXIT PARTY LEADER: I mean, attempting to lose my job for almost 21 years, I'm the turkey that voted on Christmas, finally it is
happening.
Many of my British colleagues, of course, are very, very unhappy about this because this is the best job they're ever going to have in their lives,
most of them. So I have to say, there was a certain frothiness in the breakfast room at my hotel this morning, with a large Liberal Democrat
delegation having breakfast next to me.
(END VIDEO CLIP)
CHATTERLEY: As barrage transitions into a new career, my next guest says remainers could learn a thing or two from the Brexit Party Leader. Joining
me now is Vince Cable, former British Business Secretary and former Liberal Democrats leader. Great to have you with us.
VINCE CABLE, FORMER BRITISH BUSINESS SECRETARY: Thank you.
CHATTERLEY: I feel like we've talked at numerous points throughout the last two and a half, three years. What does this moment feel like?
CABLE: Well, actually, it's a bit anticlimactic.
CHATTERLEY: Yes. We've had that a lot on this show.
CABLE: I mean, you know, the issues resolved politically almost two months ago once the general election was called. Nothing is going to happen very
much for several months.
I mean, there are some big decisions coming up around specific things like fisheries, but we will -- you know, that may be, we get to difficult points
in the late summer, when the government has to decide whether it's going to settle for some counter agreements or follow the so-called W.T.O. route,
but nothing is going to happen immediately.
CHATTERLEY: What about lessons learned? What did you mean when you said that people could learn something from Nigel Farage when he was saying
today, earlier in Brussels, that comment there that I'm the turkey that voted for Christmas. He has been there battling to leave and it began as
something that it was a slight possibility and now it's happened.
CABLE: Well, he is a very formidable politician. I mean, he has never been in Parliament, but you know, he has achieved -- in his term, it is a great
deal.
[09:45:08]
CABLE: And I think one of the lessons is patience and consistency and plugging away. I don't think there will be a great clamor to rejoin the
European Union in the next few years. But if it turns out badly, Brexit, as I think it may, we don't know, but it may, then the momentum will start
together and the arguments will start to be deployed.
I suspect that within five to 10 years, we could be back there again, in some form.
CHATTERLEY: Really?
CABLE: I don't know, but --
CHATTERLEY: Just in terms of a closer relationship?
CABLE: But I think they've got to keep their option open and people who have seen the benefits of membership of the European Union like myself, I
think we've got to continue to make the case in a modest way.
I mean, there's no point shrieking and trying to pretend that Brexit hasn't happened when it has, but nothing as the evidence mounts up, I think we can
them make the case.
CHATTERLEY: What evidence? Because there are people watching their television now banging their hands against their head saying, actually, we
need to make the best of this situation now, a bit of Dunkirk spirit by British galvanize confidence in the economy and confidence in the country
to go it alone here and determine our own futures. What's the risk here?
Because you did write in "The Independent" that the risk, you said, a very loose deal with the E.U. gets done. We give ground to the United States.
You're really worried about what the next 11 months brings.
CABLE: Yes, so I mean, I never believed in catastrophe. I mean, I think that what we're looking at potentially is a kind of slow puncture.
When you know, actually it's going to be economically costly, particularly if we opt out of so-called alignment, the single market and it will
gradually deflate the British economy. There will therefore be less government revenue and people will gradually feel this in years to come,
but not catastrophic.
I mean the big challenge for the British government in the next few months is that they have to get real, and realize that actually their bargaining
power is very limited. I mean, they have some, but it's not vast and our bargaining power with the Americans is even less.
Because for them, it's not essential to have an agreement with the U.K. and Trump may or may not win. Congress may or may not go along with what he has
negotiated. So it's quite a tough position, not from remainers' point of view where they are just observing, but from the government point of view.
CHATTERLEY: Do you regret and when we look back now, what we saw was that the remain, the parties that represented remain were so different. There
was disunity, Jo Swinson of course, making the decision or at least at the forefront of the decision to talk about revoking Article 50 in a unilateral
revoking --do you wish you'd stayed as the leader of the party and led a more united inclusive message?
CABLE: No, I don't regret leaving. I mean, it was time to go. I planned a succession. It worked out the way it did, but there's no point you know,
going --
CHATTERLEY: Hashing over old grounds.
CABLE: The fact is, it's happened and we've got to be realistic. But I do regret the fact that the issue of Brexit wasn't resolved through a
referendum. It may well have gone for Brexit in which case, that would have been the end of the matter.
But I think the way it has evolved is, I mean, we knew we lost heavily because of the Corbyn factor, and there were kind of other issues that got
involved in this. So it wasn't a clean resolve and that's partly why this issue is going to linger.
CHATTERLEY: Friday, 11:00 p.m. endgame. Vince Cable, good to have you with us.
CABLE: Thank you.
CHATTERLEY: Thank you. Vince Cable there, former Business Secretary and former Liberal Democratic Leader.
All right, the World Economic Forum in Davos known for attracting the global business elite and policy makers every year. We're just back of
course from last week, but it's also a chance for charities and NGOs to get a big platform to pitch their causes.
In today's "Innovate Africa," we introduce Malaika, it's a nonprofit helping girls in the Democratic Republic of Congo. Listen in.
(BEGIN VIDEOTAPE)
CHATTERLEY (voice over): Seven days before the start of this year's WEF meeting and the founder of the Malaika Foundation, Noella Coursaris is in
London making final preparations.
(BEGIN VIDEO CLIP)
NOELLA COURSARIS, FOUNDER MALAIKA FOUNDATION: It is very important to highlight to the world what Malaika has been doing over the last 13 years,
how we've created a model community driven to enhance quality education and healthcare programs.
(END VIDEO CLIP)
CHATTERLEY (voice over): For years, the model turned activist has been trying to get the world to take notice of the Democratic Republic of Congo
and in particular, the challenges young people face.
Her foundation aims to empower young girls through education.
Noella was born in the DRC, but left aged five after her father died in Europe. She had a successful career in modeling, but her true passion was
trying to help young girls in Africa.
[09:50:04]
(BEGIN VIDEO CLIP)
COURSARIS: Africa is the future. Africa is now. So we need to have absolutely more African women being on the global stage, speaking about all
the issues, and I believe investing in the youth is going to be the transformation for Africa.
(END VIDEO CLIP)
CHATTERLEY (voice over): Noella is of course not the only person trying to promote Africa. Mamadou Toure setup Africa 2.0 in 2010. His vision of the
future.
(BEGIN VIDEO CLIP)
MAMADOU TOURE, FOUNDER, AFRICA 2.0: The way I would summarize it, it's a connected Africa. It's an ambitious Africa. And it's an Africa that doesn't
have any complex.
You know, I think, you know, there's been the post-independence generation that still had a bit of that stigma. I think the younger generation, you
know, they think they're as good as anyone else, and they can do anything that anyone else can do.
People have the feeling that they can do it. Therefore impossible is not Africa.
COURSARIS: I never imagined that when I left Congo at five years old that I will be speaking to all of these global audience, but, it is not for me,
it is really something deep down for my continent and I take that very seriously how I choose very carefully where I speak and move, which
audience I'm speaking. And I really want to try to represent in a very diplomatic and authentic way. That's what Africa needs.
(END VIDEOTAPE)
CHATTERLEY: Meeting these innovators is one of the best parts of Davos and you can watch our "Innovate Africa" series this Saturday. It airs at 1:30
p.m. in London, 8:30 a.m. in New York, right here on CNN. We'll be right back.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to the show with a look at today's Boardroom Brief.
Chipotle is agreeing to pay a $1.3 million fine for child labor violations at its Massachusetts restaurants. The State Attorney General's Office says
the company hired teenagers under 18 without proper work permits, and also kept them on the job for too many hours per day.
Chipotle released a statement saying it will ensure that its restaurants "are in full compliance with all laws and regulations."
Alibaba founder Jack Ma is donating more than $14 million in the battle against coronavirus. His foundation says some of the money will go to two
Chinese research organizations to help find a vaccine. The rest will be used to support treatment and prevention.
Alibaba has already set up a $144 million fund to buy medical supplies for Wuhan and Hubei Province.
Purell put on notice. The Food and Drug Administration tells the company to stop claiming its hand sanitizers can prevent diseases like Ebola. It comes
as the U.S. copes with flu season and as the coronavirus outbreak spreads in Asia.
Gojo Industries, Purell's parent company has since removed some claims from its Web site.
[09:55:09]
CHATTERLEY: All right, let's take a last look at U.S. market. Stocks remain on the comeback trail this Wednesday. U.S. majors are a bit off the
session highs, but up more than three tenths of one percent.
Plus, the NASDAQ gaining pretty much everything back that it lost on Monday's sharp selloff. The coronavirus fear has not gone away by any means
though.
Markets also focusing on some strong corporate results today, too. Apple as we've been discussing opening in record territory after reporting strong Q1
profits, record revenues and positive guidance.
Also, watch out for the Fed later today. The Federal Reserve releasing its first policy statement of 2020.
And that just about wraps it up for the show. I'm Julia Chatterley. You can also listen to our podcast on cnn.com/podcast.
But for now, from London, you've been watching FIRST MOVE, time to go make yours. We'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
