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First Move with Julia Chatterley
As Ships Head Through the Suez Canal Again, Global Trade Could Take Weeks to Recover; Banks Lose Billions on Hedge Fund Failure, but Wider Market Chaos Averted; The World Health Organization Says COVID-19 Came from Animals, Not a Lab. Aired 9-10a ET
Aired March 30, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:17]
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Live from New York. I'm Alison Kosik in for Julia Chatterley. This is FIRST MOVE and here is your need to
know.
On the move. As ships head through the Suez Canal again, global trade could take weeks to recover.
Crisis contained. Banks lose billions on hedge fund failure, but wider market chaos averted.
Virus verdict. The World Health Organization says COVID-19 came from animals, not a lab.
It's Tuesday. Let's make a move.
Welcome again to FIRST MOVE. Great to have you with us. Let's begin with a check of the markets. U.S. stocks are on track for a lower open with rate
sensitive tech stuff leading the decline as bond yields rise again. Benchmark 10-year U.S. Treasury yields which had been holding steady over
the past week, they rose to fresh 14-month highs earlier today on hopes for economic reopenings. Yields are higher in Europe and Asia, too.
Investors meantime, still on guard for any wider fallout after the failure of New York based investment fund Archegos Capital. The losses to global
financial firms are still being tallied up, but the feeling right now is that damage has been contained. Two of the funds biggest holdings ViacomCBS
and Discovery are higher premarket after another day of selling pressure on Monday.
Relief that the Archegos saga hasn't turned into anything more significant helped boost Asian stocks today. Europe is mostly higher, too with the
German DAX hitting fresh records.
Let's get on this in our drivers. Clare Sebastian joins me now. Clare, great to see you. It was interesting to see how all this played out
yesterday, apparently not anything wider as far as those broader implications for the market.
But lots of questions still, how was this able to happen? Do we know how Archegos bypassed regulations in the U.S.?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Alison, still a lot of questions. I think, short term, major fallout might have been averted. But
as you say, bigger questions and one of them is what will this mean for the sort of prime broker credit desks at the banks. Are they're going to be
feeling a little less generous towards hedge funds? And what will that mean for the markets going forward if these firms can't rack up the kind of
leverage that we saw at Archegos Capital?
I will say that we've heard for the first time from that company. We have a statement from them this morning, they say, via a spokesperson, "This is a
challenging time for the family office of Archegos Capital Management, our partners, and employees. All plans are being discussed as Mr. Hwang (who is
the founder and head of that family office) and the team determine the best path forward."
They are not saying a lot, but interesting that they are breaking their silence at this moment, because of course, it took a little while for Wall
Street and all the experts to uncover who actually was behind this major fire sale of stocks on Friday, and I think that's part of what you're
alluding to there, the questions around how they were able to rack up these kinds of holding -- significant holdings -- in certain companies without
anyone really knowing about it.
KOSIK: Yet another burning question is, is Bill Hwang himself, who in 2012 pleaded guilty to using insider information to trade Chinese bank stocks
with another with another company, how is it that investment banks didn't blacklist him? How was it that he was able to just jump into another firm
and trade again?
SEBASTIAN: Well, we know that he was briefly sort of off the books at Goldman Sachs, but then apparently they allowed him back and we're lending
to him.
You know, it's really not clear, it's very murky at this point, Alison. That was, you know, a fairly significant set of charges back in 2012. The
fine was in the region of $44 million, and you know, relatively not that long ago, within the past decade.
But, you know, under a new firm family office, he was able to use what's called total return swaps complex financial instruments to leverage these
holdings that he had in the market, and I think this will spark further questions going forward, especially as we continue to be in this this sort
of rock bottom interest rate environment where lending is so easy.
KOSIK: Yes, plenty of risk takers in this environment. Clare Sebastian, thanks very much.
And we are waiting for the official report from the World Health Organization on the origin of COVID-19. This, as E.U. leaders discuss a
possible treaty for future pandemics, saying no one country can defeat them alone. Salma Abdelaziz is on the story and joins me live. Hi, Salma.
[09:05:00]
SALMA ABDELAZIZ, CNN REPORTER: Hi, Alison. So this joint op-ed written by Prime Minister Boris Johnson, French President Emmanuel Macron, the German
Chancellor and 21 other world leaders, it was published in multiple newspapers around the world, multiple languages, and in it, they call for
an international treaty for global pandemic preparedness.
They draw parallels between what's happening now in the post-World War II world and they say this is the time to prepare for the next global health
crisis. No one country can deal with it alone, that there needs to be a treaty that is underpinned by the World Health Organization and by other
international organizations that can help prepare the world for when this happens if this happens next time.
They say, this is a time for global leaders to be inclusive, fair, equitable, but also a lot of people will say this is ironic coming at a
time when the U.K. and the E.U. are involved in what some have described as a tit-for-tat vaccine war with the E.U. accusing the U.K. of vaccine
nationalism; the U.K. accusing the E.U. of trying to cut off supplies, of course, of vital immunizations.
Beyond that, of course, you look at this article, at this op-ed and the United States is not in it. How do you have a treaty without the United
States? And crucially, China is not in it. A lot of accusations from Western leaders against China, blaming them for the pandemic. So how do you
have a global treaty without China?
And I'm just talking about the wealthiest, most powerful nations in the world here. We haven't even begun to speak about developing nations where
vaccine rates are nowhere near what they are in the West.
Of course, you have countries like India and South Africa, leading the charge to call for a patent, the patents around these immunizations to be
lifted so that they could manufacture these vaccines for their own population. But the E.U., the U.K., the United States have so far stood
against those calls to lift, waive those patents temporarily, allow those countries to develop these vaccines for their own countries.
So this is all well and good, sounds flowery and persuasive in writing, but to many people, this looks like just words, just rhetoric -- Alison.
KOSIK: Yes, there's a lot of skepticism, obviously, for this proposed treaty. Any talk of how to actually, you know, focus on coordination,
especially with supplies if there is another pandemic?
ABDELAZIZ: Well, in this newspaper article, they're talking about using existing systems, so working through the World Health Organization, working
through the United Nations, but we have seen that this multilateral approach has fallen apart very quickly over the last few months.
I mean, just take the example of what's happening between the U.K. and the E.U. right now, a very bitter public dispute playing out over vaccine
supplies, threats of blockading from the E.U., blockading vaccine supplies, that dispute is still being worked out. Of course, both sides have said
they want to find cooperation.
And again, look at developing countries. India, South Africa, 60 other countries pleading with the wealthiest nations in the world, begging for a
waiver, a patent waiver, so they can begin to immunize their own populations. That hasn't happened so far.
So yes, there are these global structures, these international systems play, but they're not being used right now, Alison, and it's up to these
leaders, up to these global leaders to live up to those words of equity, fairness, equality, that's what they ended their article on. We haven't
seen that yet, and I think it's going to be about putting your money where your mouth is.
KOSIK: Okay, Salma Abdelaziz, thanks so much.
And stay with us on FIRST MOVE as the World Health Organization's report on the origins of COVID-19 is officially going to be released this hour and
we'll get reaction from our international security editor, Nick Paton Walsh.
Traffic through the Suez Canal has restarted after being paralyzed for almost a week by a stranded ship. Authorities say, the backlog of vessels
could take days to clear.
John Defterios joins me live now. So yes, we've got this big backlog to deal with in the Suez Canal and very differing views on how fast it can be
cleared up.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Yes, indeed, Alison. We had 422 vessels in this parking lot of the canal there backed up as you
were suggesting, but you know what, the Egyptians are stepping on it in a very big way. They've set very high targets for themselves.
And the Suez Canal Authority suggesting they've already moved 113. They plan to add 90 before the night is over. So they'd be halfway there and
their target to Friday is three and a half days is the completion time. And those in the international community think that might be a little bit too
aggressive.
Maersk, for example, the largest shipper was suggesting not quite, probably five, six, seven days for this to happen. Lloyd's List was suggesting the
same, but I have to remind those players that Egypt when they decided to widen the canal and expand the Ports of Said and Suez in the north in the
south, it was a three-year project and President el-Sisi wanted it done in a year and they did deliver upon it.
Now, there's question marks of course, about the supply chain if we can bring up the graphic here, here are some of the worrying sectors if you
will.
[09:10:09]
DEFTERIOS: Toilet paper. It sounds familiar, right? Because it happened during COVID-19, the hoarding that took place. This is different. This is a
supply of paper to the manufacturers. Coffee, you can understand this. Latin America, Ethiopia, Africa, Southeast Asia coming into the big markets
of Europe and the United States, would I say, it's a crisis? I don't think so.
Furniture, I don't think anybody is going to panic if they don't have the latest models in IKEA. IKEA was complaining about the bottlenecks right
now.
And finally here, gas. Price is going up. I don't get it to be honest with you because OPEC is going to meet on Thursday. They're likely to leave
production where it is. We had about 10 percent of the overall tankers there held up, about 40 on the top side, but they are released right now,
Alison, I don't see a bottleneck there as well.
Where this will hit is shipping rates. I spoke to a couple of CEOs in this sector in the last 48 hours. In some cases, it's doubled. Same thing for
the LNG tankers as well.
So this could be fed through over time. But now that we've been unlocked, as the Egyptian said, can you imagine trying to unload the Ever Given when
it was in the water and trying to get rid of the container so it could float. That's not the case anymore. That boat is under investigation. We
don't know when it's going to be released.
But right now, we know the free trade is starting to open up, perhaps not as fast as the international players were worried about. And it could be
solved by Monday of next week at the latest, it seems.
KOSIK: By the way, that unloading of the cargo would have been interesting to watch, over 10,000 pieces of cargo.
DEFTERIOS: Yes.
KOSIK: One more question for you. The Suez Canal is vital to Egypt on the revenue side and to feed products into its ports. I'm curious how has Egypt
fared during this crisis?
DEFTERIOS: Well, I have to say, they've been quick to respond. They didn't have all the equipment and that's not too surprising as a developing
economy, but a very large one of 90 million people, by the way, which has been growing in the last year out of the pandemic, so pretty high growth at
the same time.
But they had to bring in the two super tugs to join the other 10 and that helped unlock the Ever Given, of course, and the dredging operations that
took place that brought in the international players.
Now there's some question mark about whether they need to revisit the southern half of the canal and to expand it yet again, President el-Sisi
had a press conference in the Suez today with the Chairman of the Suez Canal Authority, and he was asked that question. He says, perhaps we need
to revisit. They put in $8 billion between 15 and 16. Can they afford to do so again?
By the way some of the Gulf states like here in the UAE, particularly Abu Dhabi helped in that project. So if they want to expand, they probably have
to knock on the door of other partners around the world.
But it is a credibility issue for Egypt. It has moved quickly, for example, to get the ships out. Are the safety precautions in place? Can they
guarantee smooth trade in the future? And or do we have to change the just- in-time model? That's the question the manufacturers are asking right now. Particularly, Alison, with a very important artery like this in the Suez.
It was put to the test here with the super tankers that we're using today, the super container carriers and it's raising a lot of question marks also
for Egypt to batten down the hatches to make sure it's secure.
KOSIK: Absolutely. Okay, John Defterios, thanks so much. And John, we are going to hear from you later in the show when we are going to be talking
about oil. We'll see in a bit.
And these are the stories making headlines around the world. The Derek Chauvin murder trial in Minneapolis is set to resume next hour after a
dramatic opening day.
Prosecutors -- excuse me -- played the full video of Chauvin pinning George Floyd to the ground as he was gasping for air, which went on for more than
nine minutes.
As CNN's Omar Jimenez reports, the trial comes 10 months after Floyd's killing set off nationwide protests.
(BEGIN VIDEOTAPE)
JERRY BLACKWELL, PROSECUTING ATTORNEY: The most important numbers you were hearing this trial are nine two nine. What happened in those nine minutes
and 29 seconds --
OMAR JIMENEZ, CNN NATIONAL CORRESPONDENT (voice over): Nine minutes and 29 seconds. That's the corrected length of time prosecutors say Derek Chauvin
knelt on George Floyd's neck.
GEORGE FLOYD, VICTIM: I can't breathe.
JIMENEZ (voice over): During day one of opening statements, prosecutor, Jerry Blackwell played a bystander's video in full for the jury.
BLACKWELL: Mr. Derek Chauvin betrayed his badge when he used excessive and unreasonable force upon the body of Mr. George Floyd.
JIMENEZ (voice over): Chauvin faces three counts, second and third degree murder and second degree manslaughter. The defense argues that Floyd died
of previous health conditions and his methamphetamine and fentanyl use.
An autopsy said drug use was a significant condition, but it listed his cause of death as heart failure during restraint.
ERIC NELSON, DEFENSE ATTORNEY: Derek Chauvin did exactly what he had been trained to do over the course of his 19-year career. The use of force is
not attractive, but it is a necessary component of policing.
[09:15:07]
JIMENEZ (voice over): Chauvin's attorney also argues the crowd that formed at the scene distracted the officers.
NELSON: They're screaming at them, causing the officers to divert their attention from the care of Mr. Floyd to the threat that was growing in
front of them.
JIMENEZ (voice over): The jury heard testimony from three witnesses including the 911 dispatcher, who called the police sergeant while watching
surveillance video of the scene.
At one point she said, even thinking the real time video froze, given how long the officers were on top of Floyd.
JENA SCURRY, 911 DISPATCHER: My instincts were telling me that something is wrong.
JIMENEZ (voice over): The jury also heard from Donald Williams, a mixed martial arts instructor who was at the scene. He is trained in the use of
chokeholds and says he yelled to Chauvin of the blood choke he had Floyd in.
DONALD WILLIAMS, MIXED MARTIAL ARTS INSTRUCTOR: Every time his shoulder is moving, he is pushing that pressure down on his neck.
JIMENEZ (voice over): The nation has been waiting 10 months for this trial. Demonstrators flooded the surrounding streets outside the courthouse
in Minneapolis.
Floyd's brother was in the courtroom, Monday. He says this trial is a test for the justice system.
PHILONISE FLOYD, GEORGE FLOYD'S BROTHER: America is on trial right now. Minneapolis, Minnesota, they will have to get this right. We're tired of
people being killed and slaughtered. But if you can't get justice for this as a black man in America, what can you get justice for?
(END VIDEOTAPE)
KOSIK: Stay with CNN for a complete and continuing coverage of the Derek Chauvin murder trial beginning next hour.
Thailand is denying reports that it forced refugees from Myanmar to return home. Activists say more than 2,000 people were turned back after fleeing
airstrikes in southern Myanmar and are now hiding in the jungle.
Myanmar's military carried out bombing raids Sunday on villages controlled by an armed ethnic group.
Portugal is sending 60 troops to assist Special Forces in Mozambique after a terror attack left dozens of people dead. Fighters affiliated with ISIS
overran the northern town of Palma, Wednesday near a multibillion dollar gas project.
The coordinated assault lasted four days. Witnesses say some victims were beheaded.
Still to come on FIRST MOVE, the U.S. Secretary of State describe relations with Beijing as increasingly adversarial. We'll take a look at the
escalating tensions.
And United Arab Emirates launches a new benchmark for oil. Can it change the way oil is bought and sold in the Mideast?
(COMMERCIAL BREAK)
KOSIK: Welcome back to FIRST MOVE. I'm Alison Kosik live from New York where we remain on track for a lower Wall Street open.
Tech is set to fall for a second straight session pressured by higher bond yields. The Dow is set to fall from record highs it hit yesterday. Goldman
Sachs and Morgan Stanley, two companies that did business with failed Archegos Capital are holding steady in the premarket as fears of a wider
contagion fade.
All this as markets brace for a busy financial news cycle with the U.S. jobs report coming out Friday and first quarter earnings season just around
the corner.
U.S. President Joe Biden announces details of his new multitrillion dollar spending proposal tomorrow. Rising yields could reflect the need for fresh
borrowing if his plan is passed, as well as the higher growth it could trigger.
Kristina Hooper joins me now. She is the Chief Global Market Strategist at Invesco. Great to see you.
KRISTINA HOOPER, CHIEF GLOBAL MARKET STRATEGIST, INVESCO: Good to be on. Thanks for having me.
KOSIK: All right, let's start with Archegos and the impact of its massive margin call over the past couple of days. You know, it seems to be limited
so far to a handful of stocks. I want to hear from you, what does -- you know, what does this tell you about the excessive risk taking happening in
not just the broader market, you know with hedge funds and SPACs, but you know, in digital assets, too?
HOOPER: Well, I think the takeaway is that there is always no matter what kind of market environment we're in, there's always risk taking going on,
and we have to recognize that some of the greatest risks are ones we don't even realize, those black swans.
This is no different than some of the other events that have occurred in the recent past that have shaken investor confidence temporarily and
created volatility, such as the Reddit GameStop stock debacle that occurred just a few months ago.
KOSIK: Let's talk about higher yields, because that's certainly a factor that's been driving where stocks have been going. Specifically, the pace of
the yield is really, I think, what is making investors unnerved on the 10- year Treasury. How high do you think it's going to go over the next 12 to 18 months?
HOOPER: I think the 10-year yield, even in just the next few months could get to that two percent level. When we look out at the next 12 to 18
months, it could certainly go higher than that, getting closer to that three percent level, although I would expect it to come down somewhat,
right, because this is about expectations around a strong rebound in economic growth tied to the reopening of the economy, and that isn't likely
to last a very long time, but it should be a powerful burst when it happens.
KOSIK: Love it or hate it, Wall Street watches the Fed for, you know, for cues. Jay Powell has pretty much acknowledged that the Fed is going to be
behind the curve where inflation is concerned and he seems to be okay with that.
But do you think that's the right strategy to act only after we see those yields go up, and you know, the Fed just sits on the sidelines.
HOOPER: I think it is the right strategy just given that we have a multi- decade history of being in a very low inflation environment and that's really what the Fed is counting on, that longer term trends hold, like
demographics, like innovation. And that all suggests that if we do see an increase in inflation, it will truly be transitory and therefore, the Fed
won't have to act.
So that's the strategy and it seems like a pretty sound strategy right now, even though investors aren't necessarily trusting the Fed on this one.
KOSIK: Okay, but rising interest rates have certainly spooked tech investors. We've seen tech stocks really take it on the chin. Do you think
the FAANG trade is over?
HOOPER: I don't think the FAANG trade is over, over the longer term, right? I don't think tech, I don't think innovation is over, over the long
run either. But they are higher valuation names in general, and so they need to adjust to higher rate levels.
And so every time we see an increase in the 10-year yield, especially when it's on the faster side, as we've seen recently that creates a period of
digestion primarily for those higher valuation names like technology.
However, for a long term investor, it does represent a tactical buying opportunity.
[09:25:13]
KOSIK: Okay, we are right around the corner from a new quarterly earnings season. I want to hear what you're expecting to hear from companies as far
as pressures on their revenue and profit.
HOOPER: So I would actually expect to see improved confidence in the outlook. So we may not great get great earnings reports, I think companies
have been very good at having learned to manage earnings expectations well, so I think we'll see the majority of companies, as we've seen in past
quarters, meet or beat expectations.
But what I'm particularly interested in is their outlook for the rest of the year. We're seeing business confidence growing. Anecdotally, what we're
hearing is companies very excited about this reopening, expecting it to be very powerful. And so I would expect that to filter into comments, into
projections about earnings later this year.
And I think in general, what we'll see is quite positive sentiment.
KOSIK: Very quickly, do you expect the bond market to react to the legislative push for a sweeping infrastructure plan here in the U.S.?
HOOPER: I do think we will see some reaction, but we have to recognize that the bond market reacts to a variety of different factors, including
growth expectations and inflation expectations.
And I would argue that it is more being driven right now by growth expectations, as opposed to inflation expectations, but they're all wrapped
into any kind of stimulus packages that we're talking about.
KOSIK: All right, Kristina Hooper, thanks so much. Chief Global Market Strategist at Invesco, great talking with you.
And the opening bell is next.
(COMMERCIAL BREAK)
[09:30:03]
KOSIK: Welcome back to FIRST MOVE. I'm Alison Kosik. That was the opening bell on Wall Street, and as expected, it's a mostly lower open for U.S.
stocks. Tech leading the declines as bond yields rise.
Bitcoin is on the rise. It was closing in on $60,000.00 earlier today as both Visa and PayPal make new moves to support the cryptocurrency.
Meantime, Volkswagen means business in the race for electric car supremacy. The company briefly posting on its media site yesterday that it will change
its name to Volts. V-O-L-T-S -- Voltswagen in the U.S. Get it?
The announcement was removed soon after it raised the question that it was an April fool's joke. But Volkswagen posted the official release today.
It's the investigation world has waited months for and it's being released right now. The World Health Organization is issuing its final report on the
origins of COVID-19, and it says animals not a lab were the likely -- were the most likely cause. Nick Paton Walsh joins us live now with the details.
Nick, great to see you. You know, the first question that comes to mind obviously, besides where the origins of the virus came from, is how
credible is this report knowing that the team arrived a year after the pandemic began and only received restricted access and that China kept a
close eye on them as well.
NICK PATON WALSH, CNN INTERNATIONAL SECURITY EDITOR: Yes, you have to treat all the findings with the knowledge that yes, they were late getting
to the source. A lot of the information that this W.H.O. panel of 17 international experts working with 70 Chinese experts, a lot of what they
got had essentially not been vetted, but certainly provided by the Chinese government.
So yes, a lot of the numbers they got weren't necessarily raw data scraped from the surface, if you like, of quite what they were trying to analyze.
But if you look at this 123 pages worth of analysis, it's a pretty muscular body of work. It delves into a lot of areas, frankly, that would make the
Chinese government to some degree uncomfortable. Certainly, it looks at a rise in influenza-like illnesses in December. We've reported on that past,
using leaked documents from the Chinese government and that would suggest possibly a completely unrelated influenza outbreak that may have made it
harder to spot the beginnings of coronavirus, or maybe the beginnings of coronavirus earlier than it previously been thought.
Then there are other suggestions, too in this report about the number of different variations of the disease that occurred early on genetically, and
also possibly, too, the role that wet markets all around the City of Wuhan, not just the one we talked about, Huanan, they may have played, too, in the
role of this outbreak spreading initially.
So it's not entirely what I think the Chinese government would like to see. There's no smoking gun there of Chinese lack of transparency, certainly,
but it does provide a lot of information which will in the future, lead other studies to come to different findings. We will also ask I'm sure now
the Chinese government to give more information to insist or assist further investigation.
And you mentioned, too, the lab league theory there as well, popular with Trump-era U.S. officials, lacking in any real evidence at all. This report
deals with that as being the least likely of four possibilities that are sort of being bandied around, so to speak globally, saying that the Wuhan
Institute of Virology themselves had their staff tested, that all came out negative after they moved to facility near to the Huanan Seafood market in
early December.
The evidence there, sort of circumstantial, frankly, yes, the testing done by Chinese officials. But again, no evidence behind the lab leak theory. So
park that.
The real conclusion from this is they simply don't know precisely and that's how science and nature works. But the real theory has all along been
and is espoused by this report, as well as being that it probably originated in a bat then went through what's called an intermediary animal
that could be a mink or a cat, if you read this report. Suspicion pointed in that direction, and then possibly in the wildlife trade ended up
infecting humans.
A vital thing to realize here, Alison. I know this is all very technical and complicated, but it gets to the heart, essentially, of how this can be
stopped from happening again. If we don't know how it happened this time, how can we possibly make the changes we need to prevent future pandemics
particularly as mankind pushes more and more into natural areas where it wasn't a presence a century ago -- Alison.
KOSIK: But is there any indication that changes would be made? So let's say it did originate in bats. Would the changes needed to keep a virus from
transferring like that, would those kinds of changes actually happen? You know, is this being acknowledged in China?
PATON WALSH: Well, look, I mean, obviously if we don't get to the truth of what happened, then it is extremely hard for public moves to be made by any
government responsible for that to prevent it from happening again.
Yes, there is a very acute awareness amongst Chinese science and its virologists that the viruses in bats can be deadly to humans and because of
the metabolism of bats when they flap their wings, they have a high body temperature at times which means the viruses inside their anatomy are
actually able to survive when they get into humans when you and I get a temperature, it is to kill off a virus, normally, and these viruses are
used to high temperatures so often survive.
[09:35:27]
PATON WALSH: So that's the role bats play. China is very aware of that. It seems to have been studying that for some time. They have closed some of
the wildlife markets, some of the wet markets in China after the outbreak initially.
And so, they're obviously acutely aware of what could have happened. The point is, is there going to be a global consensus down the line years from
now about how this did happen and that's what's not clear in this report right now -- Alison.
KOSIK: Okay, Nick Paton Walsh, great context. Thanks very much.
Up next, the W.H.O. report comes amid rising tensions between China and the west over human rights, Hong Kong and trade. We discuss with a former US
Ambassador to China.
(COMMERCIAL BREAK)
KOSIK: As you heard earlier, the W.H.O. investigation to COVID-19 increased tensions between China and the West. It is one of several issues
testing the relationship.
This morning, Beijing tightened its grip on Hong Kong by overhauling the electoral system. The U.K. says that breaches international law.
Meanwhile, China has warned western companies raising human rights issues to stay out of politics.
Joining me is Max Baucus. He is the former U.S. Ambassador to China under President Barack Obama and joins me live. Great to see you.
MAX BAUCUS, FORMER U.S. AMBASSADOR TO CHINA: How are you? Thank you.
KOSIK: Doing well, thank you. I want to ask you first your thoughts about the W.H.O. report on the origins of COVID that just came out. How credible
do you think this report is? You know, there are a lot of questions of how much influence China has over the W.H.O., and thus the outcome of this
report.
[09:40:08]
BAUCUS: I think, it is probably in the ballpark. I think, the report basically says what the weight of world scientific opinion thinks about the
origin of the virus. And how it was handled mainly probably originated maybe November, not in January or February, as some commonly think, and
probably came from animals, probably bats, probably not from cold, frozen food, and probably not escaped from the laboratory.
So I think it's fairly accurate. The slight problem, obviously, is that when the United States pulled out of the W.H.O., they started to lower the
credibility of the W.H.O., and China saw a disadvantage there for China, so China started to send more people and more personnel with the W.H.O. and
probably influenced the W.H.O. a little bit.
So really, bottom line is, I think the report is probably pretty close to merge, I think, the W.H.O. now has to restore its credibility. And I think
China probably wants to help the W.H.O. to restore its credibility, as does the United States since we're not members.
KOSIK: Okay, switching gears here. Many companies like Nike, Burberry, H&M, they depend on China for a big chunk of revenue, and now, they are
targets for Chinese officials and consumers who are waging a campaign against these companies to put to boycott them over Xinjiang cotton.
What kind of long term impact do you think could happen on Western companies that depend on China to make or buy their products? You know,
that a huge -- once again, a huge chunk of their revenue comes from China.
BAUCUS: Well, unfortunately, we're in this toxic brew of sanctions and boycotts and frankly, it is not very productive. It's a little silly, it
kind of reminds me a little bit of the kids in kindergarten that are calling each other names.
It started first with the sanctions by American government and the U.K. and some others against China for alleged human rights violations in Xinjiang,
add to that some companies, American companies that maybe stopped to buy cotton from Xinjiang and it just bothered the Chinese government.
The Chinese government now started to sanction Americans and U.K. personnel over this spat. I think, frankly, it's not that -- the sanctions issue is
going to last a little longer, I think, than will the boycott issue.
I know the Chinese government is trying to encourage Chinese citizens to boycott, say Nike, and that really hurts Nike because most of Nikes profits
are in China. I think it'll last a little while, but not for a long while.
I don't think it's nearly as enduring or last as long as the Chinese national boycott against South Korean goods a year or two ago. But it's a
concern.
But it really takes cool heads if the United States -- and both countries, frankly, be less public in their criticism of the other. When they're
public and sanctions are very public, that tends to cause more problems themselves.
KOSIK: Of course, another issue that I mentioned at the top, Beijing becoming more entrenched in Hong Kong's political system. Is there anything
that U.S. can do to influence what's happening there?
BAUCUS: I think that Hong Kong is one of China's core issues. President Xi has said that many times, just don't mess with us with Hong Kong, it is a
core issue. It is ours and so forth.
I remember when I was at the Summit between President Obama and President Xi, I was very struck with a single issue that seemed to get under
President Xi' skin the most, and that was Hong Kong.
He accused Americans are fomenting unrest in Hong Kong. That really bothered him. And he looks at the prior history. It was once China's
territory a long time ago. He is looking at 2047 when Hong Kong will revert to China.
The answer to your question is, there is probably not a lot we can directly do. We can do what we can to attract world opinion against the Chinese, but
to be honest, I don't think it's going to make much difference. That is not going to change -- that is not going to change Xi Jinping's attitude toward
Hong Kong.
KOSIK: Let me switch gears very quickly, Binance hired you to provide guidance and advice for them. That's the crypto exchange. You're going to
be working to get information for them about regulation. Do you think coordinated regulation is on the way for digital assets? And what would
something like that actually look like?
BAUCUS: Oh, yes, it has to come. It has to. And I think coin miners as well as exchanges want it, because that'll give it credibility, and my job
is to just to help the industry, in this case, simply help Binance understand what needs to be done to build up its reputation, to be trusted.
And for a company -- any company to be trusted, it has to stay not only within that letter of the law, but also the spirit of the law, and Binance
is a company that's going to do that.
I've talked to them daily. They're doing -- it is a very fast moving industry and a lot of people just don't understand it. And I think it's
important for regulators to be careful at the same time that it is moved to start to regulate it.
At the same time, I think there should be congressional hearings on cryptocurrencies in America because with the Congressional hearings, more
facts comes out, it tends to allow regulators and others to know what to do.
[09:45:29]
KOSIK: Yes, but would any of the lawmakers understand what's going on if they had hearings? That's the question, right?
BAUCUS: That's right. I think they should have hearings because that will help them begin to understand something that's quite complicated and an
industry that's coming. There is no doubt in my mind that crypto coins will be very much in our lives not too far down the road.
KOSIK: Okay, Max Baucus, former U.S. Ambassador to China under President Obama, thank you so much. Great to talk with you.
BAUCUS: You bet, thank you.
KOSIK: Coming up on FIRST MOVE, the UAE's Murban Crude is going global. Details on the new oil benchmark, next.
(COMMERCIAL BREAK)
[09:48:07]
KOSIK: Welcome back. I'm Alison Kosik and the bitterness about Brexit goes on between the U.K. and the E.U. The latest flare up is about border checks
on goods coming from the U.K. into Northern Ireland, which is still inside the E.U. Customs Union. CNN's Nic Robertson has the details.
(BEGIN VIDEOTAPE)
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR (voice over): New writing on Northern Ireland's walls is a chill blast from the province's
violent past. Anger is rising over Brexit customs checks, known as the Northern Ireland Protocols.
The messages threaten Northern Ireland's Good Friday Peace Agreement, a red line for U.S. President Joe Biden. In pro-British unionists communities
where frustrations are strongest, fears of violence are growing.
UNIDENTIFIED FEMALE: And you see a lot of writing on the wall. It's scary. It's scary, and I really wouldn't want to go back. I mean, I grew up in
troubles and I really wouldn't want to go back. Not again.
ROBERTSON (on camera): Murals of gunman on the streets here are nothing new. But this is something else. The name of Ireland's Deputy Prime
Minister and his address written on the wall now quickly painted out. That tells you tensions here are rising.
ROBERTSON (voice over): The lightning rod for discontent is customs checks on trucks like these crossing the Irish Sea from Mainland U.K.
Northern Ireland is inside the E.U. single market for goods, different to the rest of the U.K. So goods now require checks. Truckers face costly new
delays.
NIGEL MOORE, BUSINESS DIRECTOR, MCBURNEY TRANSPORT: We've had to employ 10 people to do customs clearance to make sure we can do traces, to make sure
that all the paperwork is correct.
ROBERTSON (voice over): Everyone is impacted. New soil controls mean plants previously sourced from Mainland U.K. are now easier to get from the
E.U.
[09:50:03]
BETH LUNNEY, OWNER, SAINTFIELD NURSERY CENTRE: I feel we have been let down. Yes, I feel that maybe there wasn't enough investigation as to what
the rules were going to be.
ROBERTSON (on camera): A shared soil is at the very essence of identity politics here, any erosion of that unfettered bond with Mainland U.K. is
for some unionists an existential threat.
ROBERTSON (voice over): Tempers are fraying.
SAMMY WILSON, DEMOCRATIC UNIONIST PARTY MP: Where somebody is saying to them, tear up the agreement, which breaks up the United Kingdom. Tear up
the agreement which breaks up all the promises you've made to the people of Northern Ireland that you would have unfettered access to your biggest
market in GB.
ROBERTSON (voice over): Ominously, loyalist paramilitaries, still dangerous in some pro-British communities have withdrawn support from the
Good Friday Peace Agreement according to their representatives.
DAVID CAMPBELL, CHAIRMAN, LOYALIST COMMUNITIES COUNCIL: It's very easy for monitors to spiral out of control. But for the COVID restrictions, there
would already have been street demonstrations. I have no doubt the ports would have been blockaded.
ROBERTSON (voice over): Pressure is mounting on Boris Johnson, and not just from pro-British unionists. He angered the E.U. drawing a lawsuit from
them by unilaterally extending the customs changes transition period from three to nine months. It faces trade deal difficulties with the U.S. if
Northern Ireland's peace breaks down and has lost the confidence of non- unionist politicians here, too.
CLAIRE HANNA, SOCIAL DEMOCRATIC AND LABOUR PARTY MP: I don't think Boris Johnson truly understands what he's dealing with here. He just thinks it's
something that can be managed and kept on a low rolling boil.
ROBERTSON (voice over): Finding compromise will be hard. Johnson's relations with the E.U. are worsening, not for the first time.
The United States could find itself brokering Northern Ireland out of trouble.
Nic Robertson, CNN, Belfast, Northern Ireland.
(END VIDEOTAPE)
KOSIK: The Middle East launching a new oil benchmark. The UAE is now trading futures contracts for its Murban Crude in a bid to take on Brent
and WTI on global markets.
John Defterios is live in Abu Dhabi with the details. Hi, John.
DEFTERIOS: Hi, Alison, yes, this is interesting. The two incumbents have never really faced a challenge, Brent and WTI. In fact, Brent, this is an
interesting number, it controls about 80 percent of international futures trade when it comes to oil right now, but the actual production of Brent
has been declining to just one million barrels a day.
Murban here in Abu Dhabi has two times that in terms of capacity, a lot of demand coming from Asia, particularly China, Japan and South Korea, and
ADNOC, the state oil giant is bringing the number of partners to the table with weight, BP, Total, and Vitol, the giant trader and others. So it
thinks, it has a fighting chance here if you will, to get some market share. Let's take a look.
(BEGIN VIDEOTAPE)
DEFTERIOS (voice over): Deep in the heart of the Arabian Desert, you'll find Abu Dhabi's most prolific oilfield making up half of the UAE's daily
production capacity of nearly four million barrels.
Oil was discovered here back in 1953 with the first exports coming to a decade later. The UAE is now OPEC's third largest producer.
DEFTERIOS (on camera): This is the oil, Murban, a light crude with 60 customers in 30 countries with heavy demand coming from China, Japan and
South Korea.
From this day forward, it's out to make a bigger name for itself.
DEFTERIOS (voice over): Sultan Al Jaber, the Group Chief Executive of the Abu Dhabi National Oil Company, or ADNOC has led the drive to take it to
the global futures market where over a billion barrels of contracts are traded daily.
SULTAN AL JABER, GROUP CHIEF EXECUTIVE, ABU DHABI NATIONAL OIL COMPANY: This new contract represents a great value proposition and a win-win for
everyone involved.
Customers will be able to better manage market risks, while more value will be created for producers.
DEFTERIOS (voice over): This means that Murban Crude out of the UAE will take a seat alongside two global benchmarks: North Sea Brent and West Texas
Intermediate, the first major shakeup in the oil futures market in over three decades.
In a region that provides about a fifth of daily supplies and half of the proven oil reserves, strategists say it's high time to recognize the energy
links between the Middle East and Asia.
ROBIN MILLS, CEO, QAMAR ENERGY: That always has been an anomaly that the Middle East is the world's major oil exporting region. Asia is the world's
major oil importing region and yet that crude has been priced off benchmarks traded in Europe. And this launch should address either normally
if is it's widely adopted.
DEFTERIOS (voice over): The Murban Crude is shipped via pipeline to the UAE's Fujairah Port in the east, which sits just south of the Strait of
Hormuz, bypassing security risk at the choke point.
DEFTERIOS (on camera): A futures contracts such as Murban cannot be large scale overnight strategists say, but ADNOC is coming to the fore with nine
international oil companies and traders, which it hopes will build momentum.
[09:55:03]
DEFTERIOS (voice over): The international exchange known as I.C.E. is partnering with the UAE for trading on I.C.E. futures Abu Dhabi, breaking
with regional tradition like in Saudi Arabia which sets a fixed price each month as the world's number one exporter, Murban will trade on the open
market with the global benchmark, Brent.
STUART WILLIAMS, PRESIDENT, I.C.E. FUTURES EUROPE: The strategic move that ADNOC is now spearheading to have barrels freely traded and really form
part of that kind of free flow of crude around the world has been a key inflection point.
AL JABER: This represents a significant milestone for ADNOC, for I.C.E., for our customers and of course for all our partners.
DEFTERIOS (voice over): Meaning the name, Murban, from this field is out to become a brand far beyond those who import it today.
(END VIDEOTAPE)
DEFTERIOS (on camera): Let's take a look at Murban price, if you will, Alison. It is trading just about $63.00 a barrel. That will be determined
over the week here what OPEC Plus does on Thursday at the full meeting.
By the way, there's a billion barrels of oil traded that's why ADNOC is interested in getting in on this right now. Back to you.
KOSIK: Okay, John Defterios, thank you.
And thanks for watching, I'm Alison Kosik. See you soon.
(COMMERCIAL BREAK)
[10:00:00]
END
