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First Move with Julia Chatterley
The Fed Chief Says Any Inflation is Temporary, Investors are Unsure; China Unveils a Cautious Six Percent GDP Target for 2021; Crude Climbs with OPEC Extending their Supply Capacity. Aired 9-10a ET
Aired March 05, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:26]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: This is FIRST MOVE, and here is your need to know.
House predicament. The Fed Chief says any inflation is temporary, investors are unsure.
Beijing's bounce. China unveils a cautious six percent GDP target for 2021.
And crude climbs with OPEC extending their supply caps.
It is Friday. Let's make a move.
Welcome once again to FIRST MOVE. We've got another buys show ahead before we ease our way into the weekend.
I'll tell you, there's nothing easy about market volatility that we are seeing, and Jay Powell's jobs jolt, so stock markets ended the day lower.
It couldn't be clearer, jobs, employment remain the primary focus for the Federal Reserve.
It is our focus, too, speaking of job jolts with the latest U.S. payrolls numbers. A much stronger than expected 379,000 jobs added in February.
There is a caveat though, there was a significant downward revision to December's numbers, too. Context is key, too.
Remember, the U.S. is still down some 10 million jobs since start of the pandemic, and that's going to remain a key driver of Fed policy. Call him,
if you will, proletarian Powell -- nice words.
The Fed Chair insisting growth will be stronger, but the economy won't overheat, but inflation will rise, but it won't be permanent, and that of
course is why they can afford to wait before reducing support.
But investors are clearly concerned about overheating. They sold longer dated bonds, pushing 10-year bond yields to fresh one-year highs. Yields
once again pushing higher once again today, touching the 1.6 percent levels hit last week.
Investors sold tech stocks which are highly sensitive to rising yields. The NASDAQ coming ever closer to that 10 percent correction territory and
wiping out gains in fact for the year in yesterday's trading session.
Tech futures are volatile premarket, but they are, as you can see currently higher.
Crude prices also green, but it is a flashing of red on the investor inflation dashboard. Brent and U.S. crude both soar into fresh one-year
highs, too, after OPEC maintained their supply restrictions, further raising inflationary fears, and that is Powell's predicament and where we
begin our drivers.
Paul La Monica joins me. Paul, I have to tell you, for every single one of those people that gained a job in the past month, they are not worried
about economic overheating. This is well and truly a reopening, a recovery jobs report, it seems.
PAUL LA MONICA, CNN BUSINESS REPORTER: Definitely, Julia. When you look further into the numbers this morning, the clear reason for that upside,
the huge beat that we had on the nonfarm payrolls number, we had about 355,000 or so jobs being added back to the leisure and hospitality sector,
and that is the big bulk of the job gains.
So, clearly with the reopening of America, a lot of people are going back to work as you start to see restaurants and retailers having more normal
hours, and letting people in. You know, obviously we're not back to pre- pandemic levels just yet, and we probably won't get there anytime soon, but this is a welcome report, I think, you know, particularly for people in the
service industry when they see that, you know, jobs are coming back by now.
CHATTERLEY: Yes. It is a welcome report. Any job gains remain welcome as you say, and we've still have a long way to go.
The irony here is for investors. They are already jumping ahead and worrying, and I say it inverted commas, about overheating. We have of
course got more stimulus on the way as well from the government, a lot of stimulus, and they are worried about inflationary pressures, too.
I mean, when Jay Powell says, as he did yesterday, look, any inflation rise is going to be temporary. The economy is not going to overheat. We are
going to stick with the easy policy that we've got. You kind of understand when investors go, hang on a second. We're not sure about this, and you see
bond yields rise.
LA MONICA: Yes.
CHATTERLEY: Bond yields are rising because growth expectations are rising.
LA MONICA: Exactly, and bond yields were perking up again this morning after the jobs report. At last check before coming on air, it looked like
stocks are firmly in green futures for the time being.
It was you know, a bit volatile after the numbers first came out. Hopefully, Wall Street will come to its senses and this will be treated as
a good news is good news sort of jobs report because you had the unemployment rate tick down, wage growth is still ticking up a little bit.
But the wage growth number didn't seem to be so high to spark even more inflation fears, so I think that could be a good thing, but again, bottom
line, Julia, Jerome Powell is giving the market what it wants. That the irony with yesterday's selloff.
[09:05:30]
LA MONICA: He really made it clear that the Fed is not going to jump the gun and cut back on stimulus, because it is not going to worry too much
about rising bond yields and inflation pressures, because that's a sign of an improving healthy economy, but the market seems to be worried that maybe
the Fed is going to be caught flatfooted, inflation is going to run rampant, and then the Fed is going to have to raise rates aggressively and
you know, really cut back on all of those other stimulus programs, I think that's the big concern right now.
Will the Fed be asleep at the wheel when inflation comes back and have to raise rates quickly and very dramatically more than what the market would
like.
CHATTERLEY: Yes. There is nothing more ironic than good news, like today being bad news, but it does feels like after that initial knee jerk
reaction, the market came to its senses.
But Paul, I couldn't agree more with everything that you are saying here and Jay Powell is trying to say it, look, there are weaknesses in this
economy that the headline numbers do not show, and we are going to try and help fix this, and we will hold steady until it is better. Paul La Monica,
thank you for that.
As the jobs report shows a rebound in hiring in the United States, China setting its GDP growth target of more than six percent for this year.
That's actually lower than most economists expected. It was announced at the National People's Congress today, the country's biggest annual
political gathering, and David Culver is in Beijing and has been watching this closely for us.
David, it was a conservative number I think, and it is not often that we call Chinese growth targets conservative quite frankly. What might be
driving some of the caution here do you think?
DAVID CULVER, CNN CORRESPONDENT: Conservative, cautious, not even an exact number, Julia, as you pointed out. Somewhere around six percent, greater
than six percent as put by the Premier here.
It is certainly a number that analysts say is under the seven or eight percent, really by a couple of points where they thought it would be given
where China has rebounded to.
I mean, what we saw this time last year was obviously a crippled economy, one that ended up going up the end of the year because conditions really
returned to near normal as though it was prior to COVID, but you've got to remember going back to this time last year, Wuhan was in lock lockdown, the
76-day lockdown in which everything was sealed off, businesses were completely shuttered.
And even after they reopened, many of those businesses by our estimates, having been there, more than half weren't coming back online.
A very different situation now, but it does seems that there is a lot of caution coming from the officials in that they don't want to be a little
bit overeager in projecting here in putting their target out there.
That said, it is likely they will go well beyond that six percent, and also, interesting to point out where some of the other focus was today as
they came together for that rubber stamp parliament defense spending at some 6.8 percent increase there.
Also you have research and development, a big focus on R&D, Julia, and this is obviously pointed towards creating more innovation, but also lessening
the reliance on countries namely like the United States.
CHATTERLEY: Yes, a natural defense mechanism to the pressures we are seeing, and we can expect that to continue, too.
Something else that caught my eye, David, particularly in light of the landmark court hearing that we saw yesterday with Hong Kong pro-democracy
activists charged under the national security law, and of course, many of them not being bailed following that hearing, Li Keqiang, the Chinese
Premier's comments, I am going to quote it. "We will stay true to the letter and spirit of the principle of one country, two systems under which
the people of Hong Kong administer Hong Kong and the people of Macao administer Macao. Both with high degree of autonomy."
David, what do we make of that?
CULVER: It is interesting that this caught your attention, because this is what got the most attention here, and it seems strange because here we are
still, dealing with the rest of the world, the ravaging pandemic, and yet their focus is on something that lingers from two years ago, from 2019, the
pro-democracy protests in Hong Kong.
But it is still top of mind here, and last year, for the two sessions, which is what the rubber stamp parliament gathering is called, they passed
the national security law. We know that was incredibly controversial.
This year, they are going to step further. So what they are doing is the pro-Beijing Election Committee that selects the Chief Executive in Hong
Kong, that's going to stay in place, but it is going to go a step further, Julia. They're now going to nominate and essentially choose those who are
going to be part of the legislature.
This solidifies what has been a tightening grip from Beijing over Hong Kong and really sends a strong message to the territory, Julia.
[09:10:10]
CHATTERLEY: Yes, and then we know there will be critics will be looking at this, and those that see the behaviors and the actions in Hong Kong and say
that one country, two systems particularly for Hong Kong is entirely broken here and how can they stand and say this with any seriousness.
CULVER: And I think what we're going to see is a strong stance, certainly coming from western democracies. It will be interesting to see how the
Biden administration in particular is going to react to this, because the he announcement even came from an official who himself has been sanctioned
by the United States, so more actions could come here.
CHATTERLEY: We'll see. David Culver, great to have you with us, as always. Thank you for your context.
All right, let me bring you up to speed now with some of the other stories making headlines around the world.
Pope Francis kicking off his historic visit to Iraq by calling for an end to violence, extremism, and intolerance, saying he comes as a, quote,
"pilgrim of peace." The Leader of the World's Roman Catholics just gave a public address at the presidential palace in Baghdad. He is now visiting a
Catholic Cathedral.
The Pope is meeting with top political and military officials, as well as members of Iraq's tiny Christian community during his four-day trip.
New violence in Myanmar just before the U.N. Security Council is due to meet on the escalating crisis. Reuters reports police opened fire on
protesters in Mandalay today killing one.
The Red Cross is now joining calls for Myanmar's military rulers to end the crackdown on anti-coup demonstrations.
Britain's Prince Philip has been transferred back to a private hospital after undergoing what Buckingham Palace calls a quote, "successful heart
procedure." It says, Queen Elizabeth's 99-year-old husband will continue to receive treatment for a number of days. Good news there.
Okay, still to come on FIRST MOVE, as today races ahead with an extremely rapid vaccine rollout, we have the President of the nation.
And as cinemas reopen in New York City and elsewhere, would you go back and what's left to watch?
All that coming up, stay with FIRST MOVE.
(COMMERCIAL BREAK)
[09:15:11]
CHATTERLEY: Welcome back to FIRST MOVE live from New York where we've seen some pretty choppy swings in U.S. futures as a better than expected U.S.
jobs report pushes bond yields to fresh one-year highs. That's 10-year bond yields.
Nice job gains reported in manufacturing as well as some of the hardest-hit sectors like bars and restaurants as more parts of the U.S. economy open
up.
As I said, it is a reopening report. We are now sitting firmly in the green. The reflation trade alive and well in the oil sector, too.
OPEC's decision not to turn on the spigot gives the majors the open road to produce more as prices rise, Marathon Oil, Occidental and ConocoPhillips
all higher premarket.
It's those oil gains as well that are lifting these stocks after big upward moves yesterday, too.
Now, amid a surge of COVID-19, with hospitals on the brink of collapse, Brazil's President Bolsonaro continues to downplay the crisis saying that
if it were up to him, Brazil would have never had any lockdown. Shasta Darlington is in San Paulo and has the latest.
(BEGIN VIDEOTAPE)
SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT: The COVID-19 pandemic is ravaging Brazil yet again. On Thursday, 1,699 people died just shy of
the record number of deaths registered the day before. The health ministry also reported more than 75,000 new cases, the second highest number since
the pandemic began a year ago.
The new wave of infections fueled by people flaunting social isolation measures and by a dangerous new variant has overwhelmed hospitals.
The healthcare systems in almost three quarters of Brazilian states are on the verge of collapse, with ICU occupancy over 80 percent. Several cities
and states declared a lockdown, forcing all but essential services to close.
But Brazilian President, Jair Bolsonaro has continued to criticize the restrictions. On Wednesday, he said that if it were up to him, there would
never be a lockdown.
At an official event Thursday, he declared, quote, "We have to face our problems. Stop being sissies," he said, "Enough whining. How long are they
going to keep crying?"
Brazil has the second highest number of COVID-related deaths and third highest number of confirmed cases, but has vaccinated less than four
percent of the population.
Shasta Darlington, CNN, Sao Paulo.
(END VIDEO CLIP)
CHATTERLEY: And we are going to be back in Latin America later with the President of Chile to get their take on vaccine rollouts.
But first, I just want to give you a look of what we are seeing in the crude oil market because crude prices and oil soaring now at 13-month highs
after OPEC-Plus extended its supply cuts. Saudi Arabia's Energy Minister explained why saying it was too early to bet on a recovery.
(BEGIN VIDEO CLIP)
ABDULAZIZ BIN SALMAN, SAUDI ENERGY MINISTER: The jury is still out. There are those who believe in this, and there are those who -- when you have
this unpredictability and uncertainty, I think there are choices you could make.
I belong to the school of being conservative and taking things in a more precautionary way, and I will believe it when I see it.
(END VIDEO CLIP)
CHATTERLEY: And John Defterios joins us now. John, great to have you with us. I loved his comments actually after the meeting, we are not fast, we
are not furious, we are cautious and he won the day. They hold steady at least for now until we have greater clarity, it seems.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Yes. Talk about a mismatch of expectations, right, Julia. Some in the market were expecting
1.5 million barrels a day, and the Saudis were down here, and a paltry offer of 150,000 barrels.
It had Goldman Sachs already change its target for the third quarter to $85.00 a barrel, and they said, this new strategy to be more nimble with
OPEC is actually keeping the market guessing, which is not such a bad thing, right?
Let's take stock of where we are today after that measly cut. It is 6.85 million barrels a day for the collective group of OPEC 23, OPEC-Plus, and
then Saudi Arabia made it very clear, we are going to keep our million until end of April.
So, what changed at the meeting from what I can see here is that there is a lot more trust in the data they are seeing and particularly with the Saudi
strategy. And he was the only one that chaired the press conference, as well.
If you go back to March, 2020, Julia, the Saudis wanted to cut deeper because they said the pandemic will knock the legs from underneath the oil
market.
Russia didn't agree and a lot of the other players didn't agree to go that quickly deeply and they turned out to be right. So the consensus is there
right now, so what does that tell us going forward?
It was interesting, I said to the Minister during the press conference afterwards, Abdulaziz Bin Salman, why don't you trust what you're seeing
right now? The stimulus that is in the system, the inflation numbers going up, the growth that's just around the corner.
And then he pointed to me and said look, you should understand us now after a decade in the region, we are Bedouins, we are wary, we are cautious. We
don't see a reason to rush. We want to see whites in the eyes of our opponents right now.
[09:20:12]
DEFTERIOS: And as I suggested to you before, Julia, they like to keep people guessing and pay the price for what you're going to do, if you're
going to take the position that's not aligned with OPEC-Plus.
CHATTERLEY: Yes, well, I mean, I think everybody is scarred by the price wars, quite frankly. But when those sleeping shale bears wake, the Saudis
will respond.
John, we have to leave it there, but we will reconvene this on conversation very soon, I am sure.
John Defterios, thank you so much for that.
All right, now, as I mentioned earlier, onto one of the world's most rapid vaccine rollouts, Chile has vaccinated nearly one-fifth of its population
against COVID-19, that's a higher rate than any country except Israel, the UAE, the United States, and the U.K.
The government acted fast to secure vaccine supplies, contracts with Pfizer, J&J and AstraZeneca and Sinovac, more than covers its needs. By
June, Chile wants to have vaccinated 15 million people out of a population of more than 18.
And I am pleased to say, joining us now is Sebastian Pinera, he is the President of Chile. Mr. President, fantastic to have you on the show.
Congratulations on your vaccine rollout. I think the key here, and I mentioned it, was simply securing supplies very early on, including with
your largest trading partner, China.
SEBASTIAN PINERA, CHILEAN PRESIDENT: Good morning, Julia. Thank you very much for your congratulations. Well, that's true. We started negotiating
the acquisition of vaccines in April, May, and by now, we have secured more than 36 million doses and that is enough to cover our whole population.
Our target is very simple: to vaccinate the risky population, which is basically five million people before the end of this month and to vaccinate
the whole population, the whole objective population, around 15 million by the end of this semester.
CHATTERLEY: It is a fantastic speed and results. The primary vaccine that you're using at this moment is, as I mentioned there, Sinovac, from China.
Just a handful of European nations, clearly not the United States are using this vaccine. How are you managing concerns about efficacy, data, and the
safety of this vaccine as you give it to your population?
PINERA: Well, right now, we are vaccinating with Pfizer and Sinovac. Sinovac has been approved by very prestigious international health
institutions equivalent to the F.D.A. and also, it has been approved by our own public health institute.
And therefore, we have made sure that it is safe and efficient. We sent our own people to China to confirm that it was safe and secure and therefore
we're very confident. And we will also use J&J, Sinopharm and AstraZeneca vaccines.
CHATTERLEY: And how confident are you that you can get and meet your targets, assuming the supplies are there, because it is an incredibly fast
rollout. Are you seeing any resistance from people saying they are afraid to take the vaccine? Because it is voluntary and of course, it is free in
your country, too.
PINERA: Well, the process of our vaccination is first of all, it is voluntary, and it is absolutely free. We have faced very little opposition
because we put together a very strong information campaign to convince people that it was necessary, useful, safe, and efficient to get
vaccinated.
But basically, one of the key aspects that have made our case successful, first of all, that we started to negotiate the acquisition of this vaccine
very, very early, April and May.
And at that time, we were able to sign contracts or reach agreements that can guarantee us that we will have 36 million doses of the vaccine.
And second, because our health, our immunization problem is a very sound and solid one. Julia, it has always had a very sound health -- public
health system, and therefore, we have vaccines and we have the capacity to distribute those vaccines all over the country to every corner of the
country.
That's why we are vaccinating -- yesterday, we vaccinated more than 300,000 people in one day, and that's why we are really pushing this process
because we want to vaccinate our population as soon as possible.
CHATTERLEY: You are moving far quicker than many -- most other nations around the world, but specifically in Latin America, too.
Once you have herd immunity, we hope by the middle of the year in your country, are you going to apply perhaps, restrictions on other nations? Is
it going to mean restrictions or immunity passports for example for your people going elsewhere in case you bring the virus back into the country?
How is it going to work? What are you telling citizens?
[09:25:16]
PINERA: We are working very hard to get that herd immunity, and we hope that we will have it by midyear before the end of June.
We are following very closely the experience of other countries, either the U.K., the U.S., Israel, and of course, we want to keep our country safe.
That's why we are putting many restrictions to avoid new viruses to get into the country.
But you know, this is something that the whole world is fighting against. We were extremely and very hardly hit by this pandemic, but I think that we
were able to strengthen our health system to avoid the last dilemma, and we were able to acquire the vaccines in order to protect our population.
Our main concern is to protect the health and the life of our people, and we are working on that every day, 24 hours a day.
CHATTERLEY: But you are open to border restrictions if necessary to protect your people?
PINERA: We have border restrictions. For instance, nobody can come -- yes, nobody can come to Chile without a PCR taken in the origin point with at
least, not more than 72 hours' time, and in some cases, when they get here, they have to take another PCR test.
We, of course, we are protecting our borders because that's something that you have to do, and we are trying to work together with all of the Latin
American countries to coordinate our work.
For instance, this is something different, but we are very interested, and we are promoting a new international treaty because the world is not
prepared and we have -- there has been proof with this pandemic to face this kind of pandemic, and the ones that will come in the future.
We need a Pandemic Treaty and we need to strengthen the World Health Organization, and we are working on that with the European Union. We are
working with that because that's something that we need, and we need it urgently.
CHATTERLEY: We certainly all need to work in a more coordinated fashion if we face this ever again.
President Pinera, your challenges coming into the crisis, I want to talk about recovery. Your challenge coming into the crisis, you were seeing
protests in the country over things like inequality, despite the rise in wealth that the nation has seen over a number of decades now.
Obviously, every nation, I think around the world has seen an acceleration in inequality as a result of the economic damage faced. What now? Has it
left Chile in a worse position, and how do you address this from here on out?
PINERA: One minor point, but an important point. This pandemic has shown that with the two super powers, and I am talking about China and the U.S.,
instead of collaborating to face this pandemic, they face each other. It doesn't work. We need more collaboration. We need better institutions. We
need a Pandemic Treaty.
With respect to your question, of course, we faced tough times in late 1918. Despite that, the last three decades, our country, has been a
successful and a fruitful story. We were able to increase our GDP per capita by five times, we've reduced poverty for more than 50 percent to
less than 10 percent, but people want more, and that's right.
That's why we heard the message of the people, and that's why we are working in a new Constitution within our legal framework, peacefully and in
a participative way.
We have strengthened our social protection layer and at the same time, we have put together a very strong package to help people, to bring relief and
help to people that are suffering because of the pandemic and the economic recession.
But the economy, the Chilean economy and the Chilean society have shown to be very sound. I am really proud of the way that the Chilean people have
faced both the pandemic and the international economic recession.
And that's why, I hope that this year, we will recover all the losses that we had to face last year. For instance, last year, our GDP went down by six
percent, we hope that we will recover that six percent this year.
And at the same time, we are facing the pandemic and we have put together a social protection safety net that today is protecting, helping, and giving
relief to more than 14 million people. Three out of four of every Chilean are being protected and helped by this social protective social net.
[09:30:10]
CHATTERLEY: President Pinera, I have to wrap up the interview there. Please come back and talk to us when you get to the point of having
vaccinated 15 million by the summer, and we will talk more about plans for recovery as well.
The President of Chile there. Sebastian Pinera. Sir, thank you for joining us on the show today.
All right, the market opens next. Thank you.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Wall Street is open for trading this Friday and what a day it has been already and we are only a few
minutes into the session.
We have a higher open for stocks on news of a big jump in U.S. job gains last month, a much better than expected 379,000 jobs added to the U.S.
economy in the month of February.
The first full month of jobs data, of course, for the Biden presidency, too, an astounding 355,000 jobs were added back to the hard hit leisure and
hospitality sector in particular.
Stocks are higher now, but investors clearly still nervous, eye on the action in the U.S. bond market where yields are testing in the 10-year bond
1.6 percent levels hit last week.
Jay Powell said he is not perturbed, but some talk in the markets today that yields might soon hit that two percent level.
Joining us, Torsten Slok, Chief Economist at Apollo Global Management. Torsten, always great to have you on the show. Let's start with the jobs,
just put that number into perspective.
I called it a recovery report, but we're still down many millions of jobs in the U.S. economy.
TORSTEN SLOK, CHIEF ECONOMIST, APOLLO GLOBAL MANAGEMENT: Absolutely, Julia, and that's very important context for this discussion.
Today's number was good, but if you compare this where we were in total employment in the U.S. economy in February of 2020, we're still 9.5 million
jobs behind, and this is what Jay Powell was talking about earlier this week. We still have a long, long way to go before we get back to the level
of employment that we had in February.
So, it is a good start, and it certainly is moving things in the right direction, and the direction of travel as Pinera has been saying from Chile
is going the right way, but broadly speaking, we still have a long road ahead.
CHATTERLEY: Markets are nervous, investors are nervous. Jay Powell is holding the line and saying to your exact point there, there are underlying
weaknesses in this jobs market. People that still need to be brought back from the sidelines that perhaps aren't reflected whether we are looking at
the unemployment data or the monthly job data in particular.
Torsten, is Jay Powell getting it right in your mind?
[09:35:36]
SLOK: I think he is hundred percent right, but what the market is beginning to price is the three relatively strong tailwinds that we have in
the economy.
First of all, the pandemic is ending in the next few months. I mean, this is what Dr. Fauci has been talking about. This is what you have been
covering so well on the show.
I mean, we do see things getting better. We can discuss the exact timing of that, but that should mean that people should begin to go more to
restaurants, to fly, their hotels -- all of these things will be good for the economy.
We have a big fiscal stimulus package also coming along, potentially very soon, and finally, we have a significant amount of savings, that also
should be helpful for consumers.
So broadly speaking, we do have some tailwinds that markets are beginning to price in and in that sense, it makes Chair Jay Powell say we are still
nine and a half, 10 million jobs behind, but the market is saying, yes, we know that, but let's see over the next few quarters where we are looking at
some stronger growth and then we can start thinking about what the Fed might be doing.
But for now, the Fed is, in my view, a hundred percent correct in the messaging that they are sending in to the market.
CHATTERLEY: It is a wall of money, a tsunami of money. If we are talking about $1.9 trillion worth of stimulus, you have got a great chance as well
and we have that showing how much savings are out there.
We are talking about $1.8 trillion since March. How much of that might get spent, Torsten, because when you're concerned about inflation, and
sometimes it can be described as too much money chasing too few goods, there's a lot of money going to be chasing something perhaps this year.
SLOK: Absolutely, Julia, and this is at the core of the discussion, of course, not only bond markets, but this is also at the core of the
discussion in the stock market, which sectors in the S&P 500 would be benefitting from this wall of money potentially getting unleashed.
As you say, what we have of course seen during the pandemic is that actual consumption started going down because it wasn't possible to go to
restaurants, it wasn't possible to go to sporting events or concerts, or stay at hotels, or fly and travel.
So for that reason, we did see consumer spending decline, and at the same time, we saw incomes go up. So, if consumption goes down and incomes go up,
incomes went because there were more government stimulus coming, both with $1,200.00 stimulus checks first, and now, we had another set of $600.00
stimulus checks, and now we may get another round of $1,400.00 further stimulus checks.
All of that add up to a fairly significant amount of savings that I should say is almost around $2 trillion. And as you are exactly alluding to here,
the question becomes how much of that will be spent? And we don't really know.
So the Fed probably says we don't really know exactly how much of that will be spent. If you're very optimistic, people will say, a lot of that will be
spent. Others would argue, well, households are flush with cash. So if you send another $1,400.00 check, you might not spend that because you already
have a lot of cash, so there is a very significant debate about how much will be spent.
But I do think that we should expect to see acceleration in consumer spending growth across the board, in particular, consumer discretionary,
but also in CapEx spending, and that should be lifting GDP growth.
So, this is a wall of money as you are mentioning that I think is potentially a huge up side risk to the outlook where we are standing at the
moment.
CHATTERLEY: Janet Yellen's words come to mind when she said err on the side of doing too much rather than doing too little.
If we look at what's going on in the bond markets, then we can tie it back perhaps to the broader sentiment that we are seeing in this strange
phenomenon, where we had it briefly this morning, good news was bad news for the stock market.
At the peak of the crisis, the Federal Reserve was buying what -- $75 billion worth of bonds every month, they are now buying less than that.
But with all of that stimulus money, financial aid money comes a lot of borrowing, too. What's the net result of the buying that the Fed does and
then all the borrowing now that the Treasury is going to be doing going forward, because that also has an effect on where bond yields should be,
never mind where they are?
SLOK: Hundred percent, this is extremely important because in bond markets, it is all about what is the supply of Treasuries relative to what
is the demand for Treasuries.
And supply of Treasuries, if you have a lot of fiscal packages, which make complete sense given the crisis that we have been through and of course,
that has required a lot more Treasury issuance, that means that the supply of government bonds goes up and at the same time, demand in particular in
the beginning of the COVID crisis came from Federal Reserve, exactly as you said, the Federal Reserve was very aggressively buying U.S. Treasuries to
try to keep long-term interest rates from going up and keep them very, very low.
So, now, we are in a situation where the Fed is no longer buying that much in Treasuries, and at the same time we still have more fiscal packages, so
the supply is still very elevated.
So now, we have come to a situation where supply has crossed through demand from the Fed and this is now beginning to of course, become an issue in
government bond markets in the long end, where the question becomes can the baton be handed from the Federal Reserve buying a lot of Treasuries to
private investors, is it through foreigners? Is it through pension funds? Is it in investment companies in the U.S.? Is it abroad?
Where is it that the demand is going to come from now that the Fed is no longer buying as much in Treasuries as they did in the beginning of the
crisis?
[09:40:33]
SLOK: So, the bottom line in this picture here is that, yes, the demand from Fed in Treasuries is going down and the supply of Treasuries because
the fiscal package has been going up, so with that backdrop, it is not really a surprise that we also have this more, call it technical supply and
demand imbalance in financial markets that's also putting some upward pressure on long term government bond yields at the moment.
CHATTERLEY: We will call it digestion issues and it has nothing to do with our breakfast. A lot of what we're seeing makes sense, I think for all of
these reasons, and that is also the bottom line here.
Torsten Slok, great to get your perspective, as always, Chief Economist at Apollo Global Management there. Thank you.
All right, after the break, take your seats, and no talking please. Cinemark is coming back from the brink.
(BEGIN VIDEO CLIP)
ADAM ARON, CEO, AMC: We shut almost a thousand theaters in 15 countries, on three continents. It has been a long, tough road.
(END VIDEO CLIP)
CHATTERLEY: As screens reopen here in New York and elsewhere, what are the rules? And what's left to see? That's next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE.
Over the last year, COVID-19 brought Hollywood to its knees taking with it cinemas large and small. For those still in business, the drip feed of
vaccine brings hopes of a rebound. Listen to the tone of the Chief Executive of AMC.
(BEGIN VIDEO CLIP)
ARON: I was on the phone two days ago with Albert Bourla, the CEO of Pfizer, and I told him that he was the most important man in the movie
theater business, because if it weren't for Pfizer and Moderna and the other vaccine makers, we might have had a very unhappy ending to this
story.
(END VIDEO CLIP)
[09:45:18]
CHATTERLEY: The National Association of Theatre Owners represents at least 68,000 screens in 101 different countries from the big chains to
independent operators.
It is celebrating today's reopening of some screens in New York City at one quarter capacity. John Fithian, is the Association's President and CEO and
joins us now.
John, great to have you with us. There will be people around the world, going, hey, you know, there's many countries and nations and cities with
cinemas that are struggling. But just explain to us the importance of the Big Apple's cinemas for the industry, for culture, for critiques, as well
of the movies that come to market.
JOHN FITHIAN, PRESIDENT, NATIONAL ASSOCIATION OF THEATRE OWNERS: Well, thank you for having me on, Julia. All of those things are correct.
New York City is very important to the movie industry for a lot of reasons. It is a very significant market, of course, but its symbolism weighs much
bigger than just the market itself, and that is that the movie studios who give us our movies have been waiting for New York to open before they could
schedule the type of movies that really bring people out of their homes and into the cinemas.
So New York opening is a sign the movie business is coming back, and that means it is coming back all around the world and we are very excited about
today.
CHATTERLEY: Vaccines are a game changer. But they have also been a double- edged sword for the movie industry because I think in terms of timing, the movie makers, the studios have looked at it and gone, look, we're not going
to bring our big ones back to the cinemas. We are going to stream them in the interim or delay them, worse, until we have more and more people with
vaccines.
That's been a problem. I look at time out, and everything that I could see in the cinema in New York, I've either watched or could watch and stream.
FITHIAN: Well, certainly during the pandemic, the movie studios have carefully guarded their properties, their biggest movies they have invested
hundreds of millions of dollars to make.
But we see light at the end of the tunnel, and the tunnel of course is accelerating because of the vaccines, and as they roll out, we see movie
studios solidify their schedule. So May and June and July have some really big movies scheduled now.
And just as President Biden was suggesting that all adults in the United States get the vaccine by end of May, we started to see movies pop up on
the schedule in May and June.
So we are excited that the light is at the end of the tunnel. As we begin to open cinemas, we are opening them up safely. We have a set of protocols
called CinemaSafe that were designed by epidemiologists.
We are very proud that not a single case of COVID transmission has happened at a movie theater anywhere in the world.
And so people know that they can come out safely and with these big movies coming back, they can come out and see some really great shows.
CHATTERLEY: You are arguing that cinemas are safer than restaurants, gyms, bars, even if we raise capacity from the 25 percent in New York.
FITHIAN: That is correct. And the science behind it is that when you go to watch a movie, you're all sitting in the same -- facing the same direction.
We have new good ventilation systems to take care of the air and you're a passive audience, you're watching a show, as opposed to a restaurant or a
religious institution or a gym where you're an active participant, talking, and facing each other.
And so cinemas are actually quite safe. We do start off with very limited capacity, in New York, it is 25 percent, and in some other places, it is 50
percent now.
And so when you buy your tickets, your group can sit together, but the social distancing is enforced by our algorithms so there is spacing between
you and the other parties in the cinema.
And as the vaccines continue to roll out, and as the virus goes down, those capacities will be increased as we get into the busy movie season.
CHATTERLEY: Are you in favor of vaccine requirement to allow people into cinemas?
FITHIAN: No, I don't think we want to have a requirement, but we do strongly encourage people to get the vaccine. It's just safer for everyone
if everyone gets the vaccine.
And as we approach the right number of people getting vaccinated, and get to herd immunity, then life will really indeed come back to normal. But we
don't think it is the cinema's responsibility or appropriate role to tell people they have to be vaccinated, but we do strongly encourage people to
get a vaccine.
CHATTERLEY: John, China's recovery and the New Year spending in cinemas was astonishing, in fact, bigger than a year ago. Do you think we could see
the same kind of recovery post the summer to your point in the United States specifically for recovery? Maybe in other nations like the U.K. as
well that are moving quickly with vaccines?
FITHIAN: We really do. And China has been the bellwether throughout, right, that's where the pandemic started, it spread from China. Theaters
closed down first in China back in January of last year.
And as the pandemic spread around the world, of course, theaters closed around the world.
[09:50:04]
FITHIAN: But then, as China got the pandemic under control, people flooded back to their cinemas. In fact, recently, a Chinese movie opened to a
bigger opening than any Hollywood movie has ever had.
And so what we're seeing, the people are really anxious and interested to get out of their homes, get off their couches, come back out with their
family and friends, and see a great movie on the big screen, and China is now where we believe will be in the western world in a few months when get
the virus under control and the vaccines get out there. When the movies come back, we are going to see people storming back to cinemas because they
are just so tired of watching their entertainment at home.
CHATTERLEY: John, you can't see me, but I have everything crossed. I'll cross my arms as well. Thank you.
FITHIAN: Excellent. Thank you.
CHATTERLEY: Great to have you on and great to get some optimism as well. John Fithian, President and CEO of the National Association of Theatre
Operators. Great to chat with you.
We are back after this. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Fancy a Michael Jackson-style moon walk? Well, a Japanese billionaire is inviting eight people to join him on a SpaceX mission around
the moon and it is free of charge.
Selina Wang has all the details.
(BEGIN VIDEOTAPE)
SELINA WANG, CNN CORRESPONDENT: Japanese billionaire, Yusaku Maezawa is looking for eight members of the public to join him on a six-day trip
around the moon. The trip is slated to take off in 2023 on SpaceX's Starship rocket. Anyone can apply from now until March 14th, and the trip
will be free.
Billionaire, Maezawa made his fortune by starting the online e-commerce fashion company, Zozotown. He says he is paying for the entirety of the
trip.
SpaceX founder, Elon Musk said this trip could venture further than any human has gone before from Earth, perhaps even further than the distance
traveled by the Apollo missions.
ELON MUSK, FOUNDER, SPACEX: It will be the first private space flight, first commercial space flight with humans beyond Earth orbit. So this has
never occurred before, and expect, it is -- we are going to go past the moon.
WANG: Maezawa made headlines in 2018 when SpaceX announced that he would be their first private customer for a trip around the moon. At the time, he
said he would invite artists to come with him. Later, he said he was searching for his, quote, "life partner" to come on the trip with him.
Now, he is opening this to the general public. He says, there are two main criteria they are looking for, for selection. One is that the applicants
should be seeking to push the envelope in their field of work by going to space. The second is that, they should be willing to support their fellow
crew members during their journey.
Now, the Starship, which is SpaceX's next generation reusable spacecraft is what will be used for the trip. Anyone applying is going to need a healthy
appetite for risk because the SpaceX starship rocket is still in early stages of development. Only early prototypes have been tested so far, and
recent test flights have ended in explosion.
Elon Musk says he is confident that a safe rocket will be ready by 2023.
[09:55:03]
MUSK: I am highly confident that we will have reached orbit many times with Starship before 2023, and that it will be safe enough for human
transport by 2023.
WANG: In a video, Maezawa said he is a scared, but he is more curious.
Selina Wang, CNN, Tokyo.
(END VIDEOTAPE)
CHATTERLEY: And from the moon to the markets, and a little bump. U.S. stocks now mixed in early trading after today's stronger than expected U.S.
jobs report. Plenty of volatility in the tech sector.
Look, we have done a one percentage point about turn as investors weigh an encouraging employment picture on the one hand with higher bond yields as
we have discussed on the other.
Energy far and away the best sector gainer today as OPEC-Plus holds the line on increased production. Financials, also strong gains. All of those
leverage to stronger rates and recovery improving. A mixed picture.
We'll see how the session progresses, but that is it for the show.
If you missed any of our interviews today, they will be on my Twitter and Instagram pages in the coming hours. Search for @jchatterleyCNN.
And for now, that's it for me. Have a very safe weekend. "Connect the World" with Becky Anderson is next.
(COMMERCIAL BREAK)
[10:00:00]
END
