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First Move with Julia Chatterley
Retail Sales Soar and U.S. Banking Earnings Boom; Coinbase is Valued at $86 Billion in its NASDAQ Debut; Sotheby's Enters the NFT Frame with a $17 Million Haul. Aired 9-10a ET
Aired April 15, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:27]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here is your need to know.
Roaring recovery. Retail sales soar and U.S. banking earnings boom.
Crypto craze. Coinbase is valued at $86 billion in its NASDAQ debut.
And a rather pricey pixel, Sotheby's enters the NFT frame with a $17 million haul. We've got the CEO.
It's Thursday. Let's make a move.
Welcome to FIRST MOVE. Fantastic to have you with us for another jam-packed show. Coming up this hour, the latest on crypto's come out moment with
Coinbase's explosive gains on its first day of trade.
As I mentioned, its valuation now dwarfing the valuation of the NASDAQ exchange that it trades on. We'll discuss shortly.
Plus, more bank blowout. Citigroup and Bank of America announcing stellar Q1 results. Citi's new CEO, Jane Fraser hitting the ground running, too,
announcing a massive global consumer banking retrenchment. All this, amid a strong battered U.S. economic data, too.
Retail sales spiking near 10 percent in March fueled by the arrival of those $1,400.00 stimulus checks and perhaps more importantly, the lowest
reading since the pandemic began for U.S. jobless claims, still rising, let's be clear, by some 576,000 claims last week, but a clear sign perhaps
that the economy is beginning that process of healing overall.
U.S. futures reacting positively to this explosion of information and data. Europe also higher as you can see. The German DAX hitting fresh records
this session. We are well and truly bringing it back to fundamentals this Thursday and banking on a more positive post pandemic outlook, fingers
crossed.
Let's get to the drivers. Paul La Monica joins me now. Paul, walk us through some of these banking earnings, very much tied to what we are
seeing in terms of the economic data flump. We've got loan reserve releases which are helping here, but strong performance in investment banking once
again.
PAUL LA MONICA, CNN BUSINESS REPORTER: Exactly. I mean, we talked about this yesterday with JPMorgan Chase and Goldman Sachs. Obviously, the
trading arms particularly for Bank of America really helping fuel some of these strong numbers.
But also, Bank of America and Citi releasing those loan reserves just like JPMorgan Chase and Wells yesterday, a reflection that the worst-case fears
that these banks had about what COVID-19 would do to the American economy and the American consumer and those loans, they did not come to pass.
So that's why you're seeing banks releasing those loan reserves that's helping to boost profits and as you pointed out, I mean, Citi's CEO, Jane
Fraser, a nice start for her in her first official earnings release as the chief of this company.
CHATTERLEY: Yes. Talk about what's going on there because this is a whopping retrenchment. This is her moment to kitchen sink if she wants to
and it does look like what we are seeing is a pull back on the some of their operations in Asia and also Europe, too.
LA MONICA: Exactly. I mean, I think when you look at Citigroup over the years, this has been a bank that is known in the U.S. as being one that has
the most global tentacles, if you will, and I think they're starting to chop some of those off.
Fraser realizing that maybe the company only needs to be in some areas where you have affluent consumers. As she put it in the earnings release,
they are doubling down on wealth. So while they are pulling back in many markets, they are not going to do so in places like London and Hong Kong
and the UAE global wealth centers, so I think that's going to be fascinating to watch as Citi evolves going forward.
I think they're really going to focus a lot on the U.S. core franchise. They're not going to give up on the affluent parts of the world, but they
are pulling back in many other markets where, you know, they might not be able to really sell as many investment products to those consumers.
CHATTERLEY: And very quickly on these guys, what about the lending outlook, because that was what came through from JPMorgan as well, some
cautiousness over just what kind of pickup we see, whether it's commercial lending or personal consumer lending. What do these guys have to say on
that?
LA MONICA: Yes, lending is obviously still a bit of a concern because you had that pickup in rates in the first quarter. But most of the bank
executives at Citi and B of A, again stressing the fact that rates still remain low historically, and you have all of these stimulus coming in, a
better U.S. economy that should increase demand for loans even if those loans are slightly more expensive than they were during the darkest days of
the COVID-19 recession.
[09:05:25]
CHATTERLEY: Yes. Paul La Monica, thank you for your analysis this morning.
Let's move on, Coinbase enjoying a wild debut on the NASDAQ Wednesday. The crypto exchange had an initial valuation of nearly $100 billion, just to be
clear, that's more than the oil giant BP. But it did pull back a bit to close with a mere valuation of around $86 billion. Clare Sebastian joins me
now.
I'm sneakily smiling as I'm using those words. That is 10 times the last valuation that it got in the private market when it was raising money,
Clare. I mean, these are monster numbers and the crypto community I think is smiling with glee this morning.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, it was a glittering debut, Julia, by any estimation. It came out of the gate very hot at
$381.00. That was a 30 percent premium on the reference price of $250.00 that we got from the NASDAQ.
At one point, it reached almost $430.00, an enormous amount of range within the trading as well yesterday. But as you say, it fell back to around
$328.00 at the close giving it a valuation of almost $86 billion. Up again, I will say about six percent premarket this morning, so the exuberance is
not fading.
But one thing I wanted to look at, Julia, is did we see any kind of halo effect around other crypto exposed stocks? We have seen a lot of adoption
of course in the last 12 months. The likes of Square, PayPal, Tesla, MicroStrategy which is the intelligence software company that owns a lot of
Bitcoin. There was no halo effect. Those stocks pulled back fairly significantly in some cases, perhaps because they have seen a big run-up.
Perhaps because Bitcoin also pulled back a little bit yesterday as did Ethereum.
But I think from that, you can see there is still a lot of volatility in this space, a lot of linkage between the price of these stocks and the
price of Bitcoin and that is certainly something to watch going forward when it comes to Coinbase.
CHATTERLEY: That is interesting. The MicroStrategy one is interesting, I think, mostly because if you were buying into MicroStrategy because it was
a way to get crypto exposure via stocks, then Coinbase arguably provides diversification potential here, so perhaps, that is what is going on there.
Just for now, direct listings though, the key here is that there is no lock up period either, so I wonder how this performs going forward, Clare. A lot
of exuberance on the day, perhaps calmer heads prevail particularly given it is tied to crypto, so what happens in digital assets, the likes of
Bitcoin, Ether will also at least in the short to medium term, also drive the share price surely, too.
SEBASTIAN: I think that's going to remain the key to how to understand this stock, Julia. I've been looking at some of the price targets. We have
got one at $500.00 over the next 12 months, one at $600.00, so there is still a lot of upside, but I think the big question comes around what
happens after that?
We are clearly still in a bit of a Bitcoin and crypto bull run, and that will continue to drive Coinbase and other crypto exposed stocks. But is
this a cyclical sort of cycle that we're in with these cryptocurrencies? Could we see another 2019, perhaps, next year where they pull back and that
will then pull down some of these stocks?
I think when you invest in something like Coinbase, it really depends how long you want to be in there. If you take a long term view in the future of
cryptocurrency, you might want to stick it out for a few years, but I think looking at today and looking at what we see in those other crypto exposed
stocks, it is still going to take a bit of a strong stomach.
CHATTERLEY: Yes, I know what the crypto community thinks, you will have inflamed them with that 2019 comment. Wait until this hits social media.
Clare Sebastian, thank you so much for that.
All right, let's move on. Escalating tensions between the United States and Russia. The Biden administration imposing sanctions on Moscow in response
to the alleged SolarWinds hack and election interference.
Nic Robertson joins us with the details. Nic, great to have you with us, and actually, the Biden administration tackling that front on in this
announcement. Just talk us through the announcement today and what it means in terms of sanctions and restrictions.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Yes. I think one of the things that it means -- and I'm leading with this first before I get to
that detail, it is what we have just heard from the Russian Foreign Ministry saying that undoubtedly, there will be a response from Russia.
Essentially sanctions will be met by sanctions.
So what are we looking at here? Well, the Treasury has issued a directive that is going to prohibit U.S. financial institutions from being involved
in ruble to non-ruble bonds in essence and you'll understand this much better than me.
This is going to make it much harder for Russia to do business in dollars and get their hands on dollars, I guess, is the shortest way of explaining
it. When it comes to what's being done beyond that, 10 Russian officials from the Embassy in Washington, they are being expelled. We are told some
of those were Intelligence officials.
[09:10:10]
ROBERTSON: Six tech companies are being sanctioned for their involvement in cyber hacking in SolarWinds, 16 individuals and 16 entities are being
sanctioned for their involvement in trying to influence the 2020 elections.
The U.S. government has come out now and formally said that the -- essentially, that these entities and individuals are part of a Russian
government operation saying that it was the, SVR, Russia's Foreign Intelligence Service, sort of through its proxies, APT-29 which is known as
Cozy Bear and the Dukes were actually the ones responsible for trying to influence the U.S. elections.
There's also been sanctions put on five individuals and three entities for the annexation of Crimea, including abuses inside of Crimea. So, this is a
quite an extensive list by the Biden administration.
We've heard from Antony Blinken today saying that this is to show Russian administration that we will hold them accountable which was something that
Biden had said that he would do during his election campaign.
As I say, from the Russian Foreign Ministry, a spokeswoman there is saying there will be -- and do expect -- a response from this from the Russian
side.
CHATTERLEY: Yes. And we have literally just had it, Nic, as you have been speaking, from the Russian Foreign Ministry, they held a media briefing in
reaction to these U.S. sanctions. The message here, Washington, will pay the price for the degradation of relations. That's the message.
Nic, what do you make of that? Perhaps no surprise.
ROBERTSON: No surprise. Look, the fact that President Biden called President Putin before this. Clearly, Biden knew this was coming and
clearly, he is developing a line of communication, a direct communication to President Putin that would have essentially underscored the message that
we are responding to what you have done, but this is not the end of the road for -- in terms of sort of dialogue and cooperation, that we can get
beyond this.
You know, it was interesting when you read the tweet from a senior Russian diplomat at the U.N. overnight saying essentially at the end of that tweet
that by pushing forward with these sanctions, the United States is sort of missing an opportunity to avoid a superpower confrontation.
But it was his last words, not our choice, that really strike home. Because in essence, it is saying, we're the victim, whereas the message to Moscow
is in fact, you have done this. You have been warned not to interfere in the presidential elections, you did it in 2016. You went ahead again and
did it in 2020.
The SolarWinds hack got into nine Federal institutions in the United States, close to a hundred business entities were affected. Russia was on
notice not to do this, and this is the response that was essentially predictable and Biden said that he would do and this is the consistent
message that Biden wants to send to President Putin, step out of line and we're going to respond.
Don't think about how we'll respond or if we'll respond or what we'll do or what we'll say, there will be a response, and this is it.
CHATTERLEY: Nic Robertson, great to have your context. Thank you for that.
All right, let me bring you up to speed now with some of the other stories making headlines around the world.
The U.S. Secretary of State has made an unannounced visit to Afghanistan less than a day after President Joe Biden said he will withdraw troops from
the country.
A few moments ago, he reiterated the President's statement that the U.S. will remain committed to Afghanistan.
(BEGIN VIDEO CLIP)
ANTONY BLINKEN, U.S. SECRETARY OF STATE: All of us has been on a long journey to this moment. There is a great deal of work and planning to do in
the months ahead to ensure that the withdrawal is responsible, deliberate and safe.
But that work is going to be matched by our enduring support for Afghanistan, economically, diplomatically, politically.
(END VIDEO CLIP)
CHATTERLEY: The European Medicines Agency is expected to issue a statement on the Johnson & Johnson vaccine next week. But for now, regulators say the
benefits outweigh the risks.
Sweden and Spain have both received the vaccine, but are not administering it yet, however, France says it is.
Melissa Bell joins us now on this. Melissa, once again, unilateral action from the individual nations taking a stance. This time, it is the Johnson &
Johnson vaccine. Before, of course, it was concerns over AstraZeneca and blood clot risk. And I note yesterday, as well, Denmark coming out and
saying they no longer are going to be using that vaccine. It's a real mess.
MELISSA BELL, CNN CORRESPONDENT: It pretty much is, Julia. Countries really going it alone in the face of these doubts. First of all, over the
AstraZeneca, now scotched by the European Medicines Agent, but as you say, Denmark saying look, we simply don't need it for the rollout of our
vaccination program.
[09:15:05]
BELL: They are the European country that has fared best in terms of getting their population vaccinated with eight percent fully vaccinated now
in Denmark. They are simply putting it aside.
Here in France, those 200,000 doses of the Johnson & Johnson, one of those rare European countries saying, look, we're going to go ahead and
administer them along the same lines as we're already administering the AstraZeneca. That is to people who are over the age of 55 because of those
fears of the very rare cases of blood clots in people who are younger.
All eyes very much though, Julia, on what the European Medicines Agency has to announce next week, because the Johnson & Johnson is such a crucial part
going forward in these coming weeks of the Europeans overall vaccination strategy now.
We've heard in the meantime, from the President of the European Commission, Ursula von der Leyen who has essentially said and reconfirmed, reaffirmed
today by spokesman of the European Commission, that with those doubts over AstraZeneca and the Johnson & Johnson for the time being, the European
Commission is very much going to focus on trying to find new contracts with Pfizer.
This is as the European Commission have called it the backbone of the European vaccination strategy, and they are looking at a third contract
with the company because its rollout has gone so well, so far. Also, because Pfizer have come up with the goods, delivering an extra 50 million
doses of the vaccine for April, exactly when Europeans need it the most.
So, the European Commission really focusing on that, on those vaccines, where contracts have already been successfully signed, where deliveries
have been ensured and where there are no doubts about safety at all -- Julia.
CHATTERLEY: It's okay if you're a nation that has alternative options and turning to Pfizer, but as we've talked about many times before, for the
emerging markets, for poorer nations, AstraZeneca, Johnson & Johnson given the handling of these vaccines, and in the Johnson & Johnson case, the fact
that it is a one shot vaccine, it's critical not to damage confidence in these vaccines without material evidence of real concern.
And when you look at the numbers that we have, so far, the handling of this, it feels has been poor. The communication on this has been poor.
BELL: Communication, which was all the more important, Julia, and a part of the world that is famous for being vaccine hesitant here in Europe, it
had been a concern, even as these first vaccines became available. And of course, what we've seen is the changes, the contradictory advice, the
changing advice on the AstraZeneca hasn't helped.
And now, of course, these concerns over the Johnson & Johnson that may well be fixed by next week if the European Medicines Agency decides as it did
with the AstraZeneca that the benefits outweigh the risks, and that it can be delivered safely to Europeans.
But in the meantime, there is the problem of vaccine hesitancy, and perhaps even more fundamentally, there is the problem of vaccine supplies. There
were 360 million doses of vaccine expected here in Europe for the second quarter, crucial vaccines given how slow the vaccination rollouts have been
so far, and given how difficult the COVID-19 figures continue to be in so many European countries.
Of those 360 million, 200 million were of the Johnson & Johnson. Europe needed these vaccines. A pause in the rollout is catastrophic, not just for
vaccine hesitancy, Julia, but actually physically for the supplies that are at the disposal of Europeans already.
CHATTERLEY: Such a great point. Melissa Bell, thank you so much for your insights there.
Let's move on, India reported a record single day rise in COVID-19 cases on Thursday. The 200,000 new cases are more than double the number reported in
Brazil. Millions of Hindus are gathering for a month long religious festival where they will bathe in the River Ganges and attend prayers as
Vedika Sud reports.
(BEGIN VIDEOTAPE)
VEDIKA SUD, CNN REPORTER: India crossed two grim milestones, Thursday. The country surpassed 14 million confirmed total cases of COVID-19. It also
crossed 200,000 new daily cases for the first time since the pandemic began.
The Health Ministry has also reported over a thousand fatalities for the second consecutive day, the highest this year.
Due to a continuing surge in cases and shortage of beds in hospitals, India's National Capital Region, Delhi and financial capital, Mumbai are
now converting hotels into makeshift hospitals.
A day after Delhi reported a record daily high, the Chief Minister, Arvind Kejriwal has announced weaken curfews. Over the last week, several other
states announced partial lockdowns. India has the second highest confirmed total cases of COVID-19 after the U.S. according to data from the Johns
Hopkins University.
Vedika Sud, CNN, New Delhi.
(END VIDEOTAPE)
CHATTERLEY: Okay, still to come on FIRST MOVE, can the United States and China find common ground on climate action despite clashes over tech, trade
and Taiwan? We'll have the latest on the Shanghai Summit.
And NFT fever. Blockchain is on the block as Sotheby's sells its first NFT art work. We will speak to the CEO. Stay with us.
(COMMERCIAL BREAK)
[09:22:46]
CHATTERLEY: Welcome back to FIRST MOVE and what a busy day it has been so far. Strong corporate earnings, strong U.S. economic data, all of that
leading to strong futures. Tech set to bounce back by some up -- what -- one percent here after a one percent pullback yesterday, markets boosted by
better than expected read on U.S. retail sales and the lowest rise in U.S. jobless claims since the beginning of the pandemic.
From the banks as well, Citigroup and Bank of America on track for early session gains after reporting earnings, with Citi outperforming, up some
2.8 percent.
Citigroup CEO, Jean Fraser announcing a global consumer banking overhaul to help boost future profitability. Bank of America, meanwhile, announcing a
$25 billion stock buyback program and releasing more than two and a half billion dollars set aside for bad loans helping earnings more than double
in the quarter.
Joining us now Brian Belski, the Managing Director and Chief Investment Strategist at BMO Capital Markets. Brian, great to have you with us. Let's
talk macro and then we can talk some micro.
The backdrop here in terms of recovery strength in the U.S. economy seems to be accelerating.
BRIAN BELSKI, MANAGING DIRECTOR AND CHIEF INVESTMENT STRATEGIST, BMO CAPITAL MARKETS: It really is, Julia, and thank you so much for having us.
We'd like to go back and remind investors that really the formula for investing stocks, lead earnings, which lead the economy. We had
unprecedented moves in prices with respect to the stock market around the world in 2020 in both directions, Julia that was followed, obviously with a
very sharp move in both directions in bond prices.'
Now, we're seeing unprecedented earnings rebounds to the tune of 25 to 30 percent on a quarter over quarter basis with respect to the U.S. stock
market, and then we think that's going to translate onto the last part of the equation, an unprecedented move in the economy.
And we're starting to see incremental data on a weekly, monthly and quarterly basis that is following suit with that. And I do believe that
also, it just adds credence to what Chairman Powell from the Federal Reserve is saying in terms of his interest rate strategy going forward.
And I know a lot has been talked about in terms of no interest rate increases in 2021, but we continue to believe that it is not going to be
until 2023 until the Fed starts to become more aggressive with respect to its change in tone in terms of interest rates.
[09:25:04]
CHATTERLEY: Is that still the worry though? The biggest worry that you hear from investors is what happens if the Fed starts to single it or
perhaps that they're going to move on rate. So even that we see these sort of jerky rises in interest rates from investors, no matter what the Fed is
saying.
BELSKI: That jerky rise comment, I think that's a technical term, but you're actually right. I think investors are reacting too much to the
quote-unquote, "jerky rise" in interest rates. And a little higher interest rate means a little inflation, a little inflation means pricing power.
I think the problem, Julia, is that so many investors are too deep in the books in terms of academics and quantitative measures that they may be
learned in business school that inflation is bad, because they go back and look at the 70s and 80s.
For all intents and purposes, inflation was squashed in 1982. And aside from some jerky moves in inflation in the last 40 plus -- almost 40 years,
we haven't had sustainable inflation for a while and I think that's going to continue, especially with capitalization rates and how we become
excessively efficient and that's where technology comes in.
And that's why technology as a sector is one of our three favorite sectors over the next three to five years, the other two being communication
services and consumer discretionary.
CHATTERLEY: That jerky by the way, comes from the Julia technical textbook which clearly needs some dusting off and adjusting of language, but it
works.
Talk to me about what it means? Because I know you have done the data analytics of what those movement high means for stocks when you're looking
at interest rates, and also what the performances for the second year of a bull market run when you've had one year that's been so incredibly strong,
and the stock market investors that are willing to buy and hold, it is positive news.
BELSKI: It is positive news, and I'll go back and review with your viewers that we've been on record by saying U.S. stocks entered a 20-year bull
market in 2009, and the re-set of the bull market happened in March of 2020. And so the second half of the bull market is upon us. It looks much
different than the first half.
And so what the second half looks like is much more stock picking and much more fundamental. And what we've learned in our research going back at
several other secular bull markets in the past, the second year following a big first year, which obviously last year was can be quite positive.
And I think too many investors right now are too set on trying to build out their framework in terms of being too short term with respect to calling
the end of the bull market or deep correction. No one should ever try to time the market, they should be an investor.
And I think that's why U.S. stocks and Canadian stocks, by the way are close second in terms of the best assets in the world from an equity
perspective. So investors should be compiling their assets and diversifying their assets on pullbacks in maintaining core positions with respect to
U.S. stocks, we believe for the next three to five years, we're going to continue to lead.
CHATTERLEY: And what do you make of the Coinbase IPO? Some are calling it a come-up moment for crypto that this is defining it now as an asset class
of its own. Brian, what do you think?
BELSKI: I'm not quite sure crypto is an asset class quite yet. I think it's an instrument. I'm a little worried from the momentum side of things,
just because of how markets have run.
And so I think we can take a look at Bitcoin or crypto in general, Tesla, maybe some other names that have clearly been more -- GameStop -- been more
momentum than fundamentally driven.
Remember, if you go back to 2017 to 2018, when supply dried up -- and demand, I'm sorry, dried up significantly in crypto, prices fell. So we
need to kind of endure a deeper correction, we think in crypto, before we kind of believe that it's a standalone asset class. I think it's too soon
to say that is an asset class.
CHATTERLEY: Interesting. Brian, great to have you with us. As always, Brian Belski, Managing Director and Chief Investment Strategist of BMO
capital markets.
The market opens next. Stay with us.
(COMMERCIAL BREAK)
[09:32:05]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are as expected on the rise in early trade, boosted by a second round of strong earnings from the
U.S. banking sector, as well as a fresh round of encouraging U.S. economic data.
U.S. retail sales spiking by a greater than expected 9.8 percent for the month of March and U.S. jobless claims rising by 576,000 people last week.
It's a bad number, let's be clear, but it is the lowest reading for those jobless claims since the U.S. lockdowns began.
Now Coinbase is also higher in early trade after rallying more than 30 percent on its NASDAQ debut yesterday. Bitcoin is slightly higher, as you
can see just for a comparison point.
Now America's climate envoy is in Shanghai for high level talks on global warming amid rising tensions with Beijing. Earlier, John Kerry met with his
Chinese counterpart to find common ground between the world's two biggest carbon emitters.
It is taking place as an unofficial U.S. delegation is meeting with Taiwan's President to discuss China's military activities.
CNN's David Culver is in Shanghai for us. David, great to have you with us. The backdrop doesn't get more complex. I think Taiwan, perhaps the biggest
catalyst or tension point between these two nations, but without them on board with climate change, progress is going to be tough. What can be
achieved here?
DAVID CULVER, CNN CORRESPONDENT: Julia, this really is a diplomatic dance that's playing out right now, and perhaps this is what could be the matter
that distinguishes the Biden administration from its predecessor, the Trump administration, in that you have so many different issues, as you and I
have talked about on many occasions. There are rising tensions on so many different fronts.
This might be the one issue, talking about combating climate change that could actually be where the two countries agree and that could benefit the
rest of the world.
(BEGIN VIDEOTAPE)
CULVER (voice over): Two sets of American diplomats, one group to Shanghai on the Chinese Mainland, the other to the self-governed island of Taiwan,
both visiting the same country, China's government would say; for the United States, it's more complicated than that.
BONNIE GLASER, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES: The U.S.- China relationship is quite fraught, but no issue is more dangerous than that of Taiwan, because it is the one issue that the two countries could go
to war over.
CULVER (voice over): In Shanghai, Thursday, John Kerry President Joe Biden's climate envoy, engaging with China on what Washington insists is a
quote, "free standing issue."
The fate of our planet not linked to the White House says to the fate of Taiwan. That's where an unofficial delegation including former U.S. Senator
Chris Dodd arrived Wednesday.
CHRISTOPHER DODD, FORMER U.S. SENATOR: We are here today at the request of my long standing friend, President Joe Biden to reaffirm the U.S.
commitment to this partnership.
CULVER (voice over): Thursday's meetings come just one month after high level talks between Beijing and Washington broke down in Alaska. Observers
fear that the U.S.-China relations are at an all-time low. That's partly over Taiwan now facing increased Chinese pressure, militarily, economically
and diplomatically, all designed by Beijing to nudge Taiwan and its people towards reunification and to prevent independence.
[09:35:21]
TSAI ING-WEN, PRESIDENT OF TAIWAN (through translator): We would also like to take this opportunity to thank the Biden administration for reiterating
on numerous occasions the importance of peace and stability across the Taiwan Strait.
CULVER (voice over): Like much of U.S.-Taiwan relations, this trip is considered unofficial. It's been carefully staged to appear that way,
underneath, an unequivocal message of support.
DODD: This administration will help you expand your international space and support your investments in self-defense. The Biden administration will
also seek further deepening of our already robust economic ties.
CULVER (voice over): That help could make it harder to get Beijing to back Biden's climate agenda.
ZHAO LIJIAN, CHINESE MINISTRY OF AFFAIRS (through translator): China has already made stern representations to the U.S. side over its sending of
personnel to Taiwan.
CULVER (voice over): On climate, China is the world's largest producer of greenhouse gases by a long way. The U.S. is second, making the two
countries crucial partners in any effort aimed at reducing emissions around the world.
KEVIN RUDD, FORMER AUSTRALIAN PRIME MINISTER: The challenge for both John Kerry and his Chinese counterpart, Xie Zhenhua, is to create this special
climate change collaboration lane in the midst of a highway, which frankly, all the rest of the traffic is blocked or engaged in collision.
CULVER (voice over): Whether he will be able to keep climate separate from sticking points like Taiwan remains to be seen.
(END VIDEOTAPE)
CULVER (on camera): These high level talks between John Kerry and his counterpart here in China, Xie Zhenhua, are playing out ahead of the Biden
administration's planned Climate Summit. It's going to be a virtual one. It's happening on Earth Day and going to continue for two days, and some 40
world leaders, Julia, have been invited to attend including China's leader, but it's not yet clear if President Xi Jinping will join.
Meantime, Chinese state media is coming out with a strong message here. They are suggesting that this was an invite to the U.S. on China's behalf
to bring John Kerry here to start these talks, and that it shows China's willingness to engage in how to combat climate change.
And they're also pointing out, Julia, that China will not be forced, particularly by the U.S. into any certain direction here that it's going to
be based on cooperation, collaboration and the two countries working together.
CHATTERLEY: As diplomatic dances go, David, a quick step for sure. David Culver there in Shanghai, thank you.
All right, coming up after the break, digital art, would you pay $1.4 million for this? Well, someone did.
The CEO of Sotheby's will explain the magic of monochrome after the break.
(COMMERCIAL BREAK)
[09:41:08]
CHATTERLEY: Proving Sotheby's can think outside of the box, it raised around $17 million in a three-day sale for a mystery digital artist called
Pak called the Fungible Collection. This was Sotheby's debut in the world of non-fungible tokens or NFTs.
Interestingly, Sotheby's chose the online auction site Nifty Gateway rather than selling in-house. Buyers snapped up nearly 24,000 of these called
simply "Cube" for a combined value of $14 million. These are the switch and the pixel which sold for $2.8 million combined.
We don't know much about Pak, but the artist did thank everyone afterwards.
Charles Stewart is the CEO of Sotheby's and he joins us now. Charles, fantastic to have you on the show. I have to admit, there will be people
watching this going, what on earth? Will you please just explain why Sotheby's is embracing this technology and this market?
CHARLES STEWART, CEO, SOTHEBY'S: Absolutely. And thank you for having me on the show. NFTs really burst on to the mainstream consciousness over the
last few months, and I think there's a lot of people who are from outside the digital and crypto worlds who are struggling to understand what this --
what this all means.
But we moved into it because we believe that there is long term implications and opportunity and one of the most exciting things is that we
are accessing an entirely new audience and group of artists as well and that was very much on display in our sale over the last three days.
CHATTERLEY: I mean, the big difference, I think, just in terms of the technicalities between what we've seen Christie's do, what we're watching
Phillips do, of course, two of the other big auction houses is that they did this in-house. You decided to go to the online auction, Nifty Gateway
and there were some technical challenges. Why did you do that?
STEWART: We decided to partner with Nifty because they are really a leader in this emerging space. They have all the tools to Mint, the wallet and
payment features and you know, and they're well established. So it was a natural partnership from our standpoint.
I think because of the scale of interest, I mean, this was groundbreaking in lots of ways for them as well as for us. You know, we did see some
challenges. But really, I think overall, it was an enormous, enormous success and kind of a breakthrough in many ways.
CHATTERLEY: Who is buying the art, Charles? You said, you're opening up a new market. Who is buying? Because even when I look at some of the art and
the sales that were made, the Pixel, the impact it created, it was sort of two buyers, really, and I've heard from the industry, people saying this is
just a group of somewhere between eight and 10 individuals that are snapping all this NFT art.
Is this the sort of democratization of access to this form of art and this form of market? Or is it just, you know, to those crypto community people
that are involved in this just, I don't know, creating some kind of bubble around the sector.
STEWART: There's definitely -- there's definitely a strong connection with crypto and the crypto community. But I would tell you across our three days
of sales with these Pak objects, we had over 3,000 participants in the sale.
And of course, when you're talking about the two one of one works that sold for the higher values, ultimately like most -- you get down to a couple of
determined bidders who are trying to win it. That was the case here as well.
But actually, the overall level of engagement was enormous, you know, and with thousands of thousands of people paying close attention.
CHATTERLEY: Do you expect there to be a secondary market here where people sell this art on? Because that's one of the things we talked about with
NFT, is this idea that you've enshrined ownership and you can sell this on and then the artist itself gets a cut of the proceeds when it is sold on.
Do you expect there to be a secondary market?
[09:45:01]
STEWART: There absolutely will be a secondary market for the units. We sold nearly 24,000 of these units and so, in the coming days they will
trade in the secondary market.
I think the Smart Contract and blockchain technology is one of the most compelling and interesting aspects of innovation in this space, and that's
got implications for how creators connect with their audiences. And obviously, the idea of creator co-economics is a really powerful element to
the whole digital art and blockchain, you know, platform and experience.
CHATTERLEY: Where do you think it goes? Because the traditional art market, and I speak to those who are part of that, they look at this and
they go, I don't understand this. I don't know what it means.
What is art? If you can't hang it on your wall or appreciate it? They are sort of mind boggled by what we're seeing here? And Charles, how do you
explain it to those people, to those more traditional artists, to traditional buyers of art?
STEWART: Sure, well, first of all, you know, our business is, you know, almost entirely in the physical art community and that will continue to be
the case for the foreseeable future.
But I will say that we believe this new audience and community who are large -- it's a large community. They are passionate, they're engaged.
That's been really interesting to see spring up.
I mean, there are analogies you can make to the rise of street art in the 70s and 80s, digital art in 2021, you know, maybe to 2021, what street art
was to the 1970s.
CHATTERLEY: I think for the crypto community, it's a validation of the technology to your point that you were saying about Smart Contracts. For
artists, perhaps it's a validation of their craft. So it's, in some way resetting the economics. Do you think, going forward the answer, perhaps
for the Damien Hirst, for the cause out there to do physical art and to digitize that art and sell them together and just say, look, we're catering
to whatever you want, you get both.
STEWART: You definitely will see some of that exploration and crossover. But I don't think you have to see that convergence, in order for this to be
irrelevant platform and community and growth opportunity.
I will say that, you know, the blockchain and digital art has been around for years. It's only come on to our consciousness right now because of the
inflow of money and attention. And I think that's why there is so much attention being paid right now.
You know, I don't really have necessarily a view on the value side of it, but just as it as an artistic statement, and, you know, these are passion
objects in a passion category, just like physical art is, and I was interested that, you know, one of the collectors in our Pak auction over
the last few days said something along the lines of, you know, for -- Pak is my Picasso.
And so I think that, you know, there is -- this does speak to people in the same way that physical art speaks to, as you know, has always and will
continue to speak to audiences as well.
CHATTERLEY: How big might this market get? Fast forward five years? Where is the NFT art market?
STEWART: I think it's very, very early and the market clearly is volatile. It's linked to the value of crypto. If you tell me where you think the
value of crypto is going, then maybe I could give you a more informed view on that, because for the time being, they are linked.
But what I think is really more interesting and pervasive and powerful and here to stay is the idea of the blockchain ownership and authentication.
This potentially has implications for physical art as well as digital art. And I definitely think that irrespective of the ups and downs of the
primary and secondary markets in a monetary sense, that this category will continue to grow and develop over the years ahead.
CHATTERLEY: How much of this art and I'm going to put you on the spot -- what percent of the art that's selling today, do you think it will be worth
more than it was paid for today in five years' time? And that's a contemporary art of question, too.
STEWART: I don't want know the answer to that. I think -- you know, we really focus on collectors who buy things because the object speaks to
them, because they love it. Whether they ultimately own it, you know, for one year or 50 years or a hundred years and whether the value goes up and
down.
I think you know, the real power of art is unlocked when you start with that, you know that first connection that a collector has with the work of
art. That's true in every art category, physical, digital.
And so again, I don't really -- I don't really know. I'm sure, there are plenty of people who are speculating just because of all the focus in
thinking about it, you know, in more financial terms, but hopefully the people who buy and own these things, believe in them, love them want to own
them for a long time.
You know, we'll see if that ends up meeting that they have more value in the future.
[09:50:22]
CHATTERLEY: Someone needs to create a digital art museum, I think, to display these things, and then we'll really get a sense of it.
Charles Stewart, great to have you with us. Thank you. The CEO of Sotheby's there.
STEWART: Thank you, Julia.
CHATTERLEY: All right, coming up. Will the Tokyo Olympics be canceled? A top Japanese official dropping a bomb on a hot button issue. That story
next.
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CHATTERLEY: Fresh controversy over the prospects for the Tokyo Olympics after a high ranking Japanese official refused to rule out the possibility
that games will be canceled.
Selina Wang joins us live from Tokyo. Selina, great to have you with us. As we were discussing yesterday, kind of impossible to rule out the risk of
cancellation here. But now, this official walking back or clarifying, let's call it, those comments.
SELINA WANG, CNN CORRESPONDENT: Julia, that's right. I mean, first of all, it is extremely rare to have a Japanese government official publicly
addressing the topic of canceling the Olympics. This is very much seen as a taboo topic that officials have been avoiding.
And so Toshihiro Nikai, he is a very influential member of the Japanese government. He is the Secretary General of the ruling party and he was
asked in a local TV interview if it was a possibility that the Olympics could be canceled. And he said, of course, it's a possibility, even adding
that quote, "What would be the point of an Olympics if it spreads the infection?"
And Julia, as we've been discussing, this is the very question that many people in Japan are asking. These games are extremely unfavorable among the
Japanese public here, as COVID continues to worsen in Japan. The country is struggling to contain this fourth wave, which many experts say are driven
by new COVID variants.
And as we talked about yesterday, less than half a percent of the Japanese population is fully vaccinated. Now, you did have Nikai later watering down
his comments, not totally walking them back, saying that he is still hopeful that the games go off successfully.
But nonetheless, his comments did release a firestorm on social media. You had cancellation of the Olympics trending on Twitter after his comments
came out -- Julia.
CHATTERLEY: Yes, I mean, it's really tough. It's tragic. All that work that's gone into it. But you have to be safe and secure. And that's the
bottom line.
Selina, if that was trending on social media, what are people saying about the likelihood that the games do in fact have to be canceled, given the
situation there and do we have any sense of when that decision might ultimately be made?
WANG: Well, Julia, nobody has any idea in terms of when this final decision could be made. Many were expecting that in March, we would figure
out, if the final decision would be made, but we still have some basic details such as how many spectators will be allowed in the venue that will
be allowed which yet to be announced.
[09:55:13]
WANG: But at this moment, what is clear though is that these comments from Nikai show that the situation here in Japan is snowballing. What he said is
in contrast to the official statements we have been hearing from the Prime Minister of the Japanese government, from the International Olympic
Committee who thus far have only expressed complete confidence that these games are going to go ahead this summer.
In fact, in response to these comments from Nikai, the Tokyo 2020 organizing committee said that they are still fully focused on planning
these games.
And you'll remember that very recently, the IOC said that there is no Plan B when it comes to the Olympics.
Now it's definitely a rock and a hard place for the Tokyo Olympic team. They have -- Japan has spent billions of dollars on this. Sponsors have
spent billions of dollars on this.
Japan does not want to lose face, so we still have to wait and see -- Julia.
CHATTERLEY: Yes, it is a tragedy for whoever was dealing with this and it just happens to be the Japanese.
Selina Wang, thank you so much for that.
Okay, that's it for the show. Thank you for watching.
Stay safe. "Connect the World" with Becky Anderson is next.
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