Morgan Stanley Buying Online Brokerage ETrade For $13 Billion; Goldman Sachs Warning On Stocks As More Firms Cite Coronavirus Risks; The Former New York Mayor Gets Pummeled On His Democratic Debate Debut.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange. I'm Julia Chatterley. This is FIRST MOVE and here is your need to know. Lucky 13: Morgan Stanley buying online brokerage ETrade for $13 billion. Correction risk. Goldman Sachs warning on stocks as more firms cite coronavirus risks. And Bloomberg terminal. The former New York Mayor gets pummeled on his Democratic debate debut. It's Thursday. Let's make a move. A warm welcome once again to our FIRST MOVErs around the world. Great to have you with us. We're recovering I can tell you from a feisty Democratic debate night in Las Vegas, but for now, at least what happens in Vegas stays in Vegas. Let's bring it back to Wall Street because stocks are softer premarket as you can see. Europe has also been gently in the red for most of the session, too. We're taking a pause, I think after hitting record highs on both sides of the Atlantic on Wednesday. And now of course, digesting what's been a whole slew of corporate warnings related to the coronavirus outbreak. Goldman Sachs analysts are now saying that investors may be under estimating the threat to earnings and that the market correction in the short term at least, is a real possibility. Remember, they initially played down the economic impact and we've been talking about that for a few days. Analysis on this in just a moment of time, but again the real action coming during the Asia trading hours. The Shanghai Composite rallying almost two percent in the session after China lower borrowing costs further. Stimulus hopes, of course from China and around the world helped boost global sentiment on Wednesday. Indonesia also following suit, the Central Bank cutting base rates today for the first time in four months. Now, in terms of U.S. Central Bank action, however, Minneapolis Fed president Neel Kashkari said he sees the Federal Reserve holding back on rates for now, though he did say he thinks the next move will be a cut rather than a hike. An insurance rate cut, anyone? Hmm. All right. Let's get to the drivers. We are betting big. The U.S. banking giant Morgan Stanley buying the online brokerage firm ETrade in a $13 billion all stock deal. Paul La Monica has been pouring over the details of this story for us. Paul, great to have you with us. That clears up some of the suggestions we were making a few weeks ago about whether or not they could stand alone in the face of consolidation in the sector, but an interesting move for Morgan Stanley, too. What do know here?</s>PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, yes. I think this is a very fascinating move for Morgan Stanley, Julia. This really makes the company an even bigger powerhouse with average retail investors. Morgan Stanley has done an admirable job over the past decade under James Gorman of really boosting its wealth management unit. A lot of that has to do though with more affluent customers. When you look at, you know, the typical Morgan Stanley client, you are, you know, talking about much wealthier people. Now, you add ETrade into the mix, you get younger, you have millennial investors, who are very tech savvy and this is something that I think is a good move for the future because I think the hope here is that these younger consumers that are setting up, you know, trading accounts on ETrade will eventually become wealthier people that will need more of Morgan Stanley's wealth management products.</s>CHATTERLEY: Yes, it's quite fascinating. One of the things that I read this morning on this deal, and it's seen as the crown jewel of ETrade, but we don't often talk about it. The number of accounts that they hold with corporates that then have stock that have been given two employees that they're holding. The hope, of course, is that the value of that stock will rise. And after this deal, Morgan Stanley will have 4,000 corporate customers holding $580 billion worth of stock. That could be a lot of future rich people's money to manage in the future. Is that what we're saying?</s>LA MONICA: Yes, exactly, and that is something that James Gorman touted on the conference call just a couple of minutes ago, talking about this deal. He said that this is a killer business. One of the things that attracted Morgan Stanley to buy ETrade in the first place. You do wind up, one, obviously it helps offset some of the pressure that ETrade was facing since all of the online brokers have now gone to zero commissions. You have this business where you have potentially wealthy consumers down the road, you know, managing their stock holdings through ETrade, and now by virtue of this deal, eventually through Morgan Stanley.</s>CHATTERLEY: Yes, I mean, we have to take a step back here as well and look at the broader banking sector. I think, this is the biggest deal in the U.S. banking sector since what -- 2008 -- when many of these companies were forced to acquire other businesses. It's also a testament to the turnaround that James Gorman has achieved with Morgan Stanley and shifting the business away from trading, boutique investment banking to, to your point, wealth management and smaller players here, smaller customers.</s>LA MONICA: Yes, and I think it was inevitable when everyone went to zero commissions last year. We already had another big broker deal with Charles Schwab buying TD Ameritrade. Clearly, this deal I think, forced ETrade into looking in the mirror and saying, hey, we're going to be an independent when two of our biggest rivals are getting together. And not to mention the fact that Robinhood has taken the financial world by storm as well, so Morgan Stanley, I think being savvy here, ETrade being opportunistic. The big question now, Julia, what does Goldman Sachs do, if anything? Goldman Sachs was another rumored possible takeover candidate to take over ETrade. Now that ETrade is out, does Goldman just try and boost Marcus -- that division -- even more to gain more average consumers or is there anyone left that they could go out and buy? I mean, could Goldman Sachs go after Robinhood for example? That would be insane. I don't think a lot of people think that will happen. But you know, just throwing out names. There aren't that many other companies left for Goldman to acquire to get some more scale in this business.</s>CHATTERLEY: Yes, that is such a great point. You may have heard it here first. Robinhood right now, rubbing their hands together. Paul La Monica, thank you so much for that. All right to China now, where the number of new coronavirus infections appears to be dropping. The reason for that development though, could be because Beijing has reverted to counting only lab tested cases. Two deaths have now been reported among passengers from the Diamond Princess docked in Japan's Yokohama, the 14-day quarantine of the cruise ship lifted on Wednesday. Meanwhile, fresh warnings from the airline industry. Air France KLM and Qantas say the outbreak could cost them hundreds of millions of dollars. Clare Sebastian joins us on this. Clare, I was looking at Qantas on what they were saying about the impact already. Their expectations actually is that this lifts as of April, some bold expectations here about this easing pretty quickly.</s>CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, both Air France KLM and Qantas basing their assumptions on the fact that the flights to China can resume in April. Obviously, that is very uncertain, but these companies have to try to model this in some way. Now, Qantas saying this could cause them a $100 million hit to profits in the first half of this calendar year, the second half of the fiscal year. They say though that is actually mitigated partly by the drop in fuel prices that we've seen. We've seen commodity prices come down as a result of this virus and the potential for reduced demand from China. So that is potentially one mitigating factor for this, but don't forget, Julia, these airlines, particularly the regional ones like Qantas are already facing headwinds. The protests in Hong Kong have dented traffic. They saw cargo come down as a result of the U.S.-China trade war, so the timing is not great here. But certainly in the case of Qantas, they say they are going to use staff annual leave to try and protect jobs. They're going to bring forward maintenance on the planes that have been grounded. Their stock is actually up today, because they announced the share buybacks. So they say they can weather this, but of course we don't know how long this is going to go on. When it comes to SARS, that cost the global airline industry $6 billion in terms of lost revenue, and it took nine months for traffic to come back. Analysts do say, this time, it could be worse.</s>CHATTERLEY: Yes. It's interesting. A lot of analysts, Goldman Sachs being one of them did a compare and contrast with SARS initially and said, actually, the impact here in the medium term isn't going to be so bad. There will be a V-shaped recovery. Those analysts coming out yesterday and saying, actually, we could see a short term stock correction. One of the quotes from this report, the Chinese economy six times bigger now than it was then. They also say that Chinese tourism accounts for 0.4 percent of global GDP. The number of missing work days in China will be roughly equivalent to the entire U.S. workforce taking an unplanned break for two months. Wow. Clare, what do we make of that?</s>SEBASTIAN: Well, this, I think, is critical, Julia, for understanding how this could play out. The world has changed almost unrecognizably since 2003. China was then about four percent of global output. It's now about 16 percent and that is why Goldman Sachs in the note say that comparisons with the SARS period may not be totally relevant. They say that because of the growth of the Chinese economy, global companies have now piled in. They are much more exposed, and this means that they believe the markets could be underestimating the overall impact of this. We've seen stock markets reaching record highs, despite this, despite the warnings that we're getting from global companies. But the trigger point for this, Julia, may have been Apple that we saw earlier in this week. That company, one of the most valuable in the U.S., if not the world, saying that they could miss revenue estimates for this quarter because of the drop in demand from China. They've had to close their stores because of the impact on the supply chain and that Goldman Sachs says, could bring down earnings estimates overall. So I think that is crucial here. Of course, we don't know how long this is going to go or know how long this will play out. But the equity markets, according to Goldman, could be under estimating this.</s>CHATTERLEY: Yes, fascinating. Clare Sebastian, great analysis. Thank you so much for that. All right. Let's move on to our next driver and it's a blooming disaster. Billionaire and former New York City Mayor Mike Bloomberg was bombarded with sharp attacks in his presidential debate debut on Wednesday night in Las Vegas.</s>SEN. ELIZABETH WARREN (D-MA), PRESIDENTIAL CANDIDATE: I like to talk about who were running against, a billionaire who calls women fat broads and horse faced lesbians. And no, I'm not talking about Donald Trump. I'm talking about Mayor Bloomberg.</s>SEN. BERNIE SANDERS (I-VT), PRESIDENTIAL CANDIDATE: Walmart, we have to subsidize Walmart's workers on Medicaid and food stamps because the wealthiest family in America pays starvation wages. That's socialism for the rich. I believe in Democratic socialism, for working people, not billionaires.</s>MICHAEL BLOOMBERG (D), PRESIDENTIAL CANDIDATE: What a wonderful country we have. The best known socialist in the country happens to be a millionaire with three houses. What did I miss here?</s>SEN. AMY KLOBUCHAR (D-MN), PRESIDENTIAL CANDIDATE: I think we need something different than Donald Trump. I don't think you look at Donald Trump and say we need someone richer in the White House.</s>CHATTERLEY: Arlette Saenz is live in Las Vegas for us. Arlette, even the jokes there from Mike Bloomberg seems to have fallen a little bit flat here and he was well and truly eviscerated by Elizabeth Warren. What's the tape in there of his debut performance?</s>ARLETTE SAENZ, CNN POLITICAL REPORTER: Well, Julia, this basically -- this debate basically turned into a Michael Bloomberg pile on. Each of the candidates came out ready to pounce and had their lines of criticism that they wanted to draw with Michael Bloomberg. And for the most part, Bloomberg appeared to be a bit flat footed during this debate. You know, his advisers has said that he had been preparing for quite some time. But as he faced questions or criticisms about his alleged treatment of women or his past record relating to things like stop and frisk and redlining, he didn't always have the most direct answer to provide back to those candidates. Now, one person that emerged largely unscathed from this debate was Bernie Sanders. He is now the front runner and these Democratic contenders decided to train their focus and train their fire on Michael Bloomberg, and they didn't really go after Bernie Sanders all that much. Now you heard Bloomberg landed a bit of a punch in that clip that we just played when he said that he didn't know that Democratic socialists were millionaires who owned three homes, referring to Bernie Sanders. That was one of the knocks against him. But you also in addition to this Bloomberg pile on, you saw a bit of a fight between Amy Klobuchar and Pete Buttigieg over experience. You could tell that Amy Klobuchar in particular was rattled a bit by Pete Buttigieg at one point. Now this debate is all playing out as we are just two days out from the Nevada caucuses. Michael Bloomberg isn't competing here or in South Carolina. But those other Democratic contenders are hoping for a strong showing in the state particularly Joe Biden, who really needs to get a good showing strong finish here in order to get -- propel him into states like South Carolina and more diverse states on Super Tuesday. Now this evening, CNN is going to have two Presidential Town Halls with Joe Biden and Elizabeth Warren, and all of the candidates remain in the state today except for Michael Bloomberg, as they're trying to make their pitch to Nevada voters.</s>CHATTERLEY: Yes, emphasizing the term leaving Las Vegas ASAP, I think in this case. Arlette Saenz, great to have you with us. Thank you so much for that. All right, let me bring you up to speed now with some of the stories making headlines around the world. More details have emerged about a deadly mass shooting in Germany. The gunman was found dead in his apartment after nine people were killed in two bars in the east of Frankfurt. Police are treating it as an act of terror. Let's bring in CNN's Melissa Bell on this story. Melissa, good to have you with us. What more do we know about the individual that carried out this attack? And what his motives perhaps were?</s>MELISSA BELL, CNN CORRESPONDENT: Clearly -- and this has been said over and over again by German authorities, a racist xenophobic far right motive. There was no words minced when it came to talking or trying to deal with what might have motivated the gunman who began his attack just behind me here in that bar, The Midnight Sisha Bar. It was at 10:00 p.m. last night here in the center of Hanau that he began his rampage, moving on then to another bar. In all, as you said, nine people killed and then he was found after a manhunt in his apartment. He had also murdered his mother.</s>BELL: Now, we are hearing just a little bit more from authorities. The German Interior Minister just visited the scene saying he was here to express his sympathies and vowing that all would be done to get to the bottom of this. We've also been hearing a moment ago from the German prosecutor who said that not only have nine people been killed, but also six people have been injured including one who is in a critical condition. But a great deal of shock in Germany today. You're going to see a lot of German politicians making their way through Hanau today, including, we expect the German President later today. Angela Merkel has been speaking to it, and clearly this is something that had been on the radar of German authorities for some time. The rise in the threat presented by far right people motivated by far right causes, far right motivations, and this is what has happened. Earlier, the Foreign Minister said it was the third far right attack in Germany this year.</s>CHATTERLEY: Yes. And that's exactly what I wanted to ask you, Melissa. What have the AFD, the far right party said about this attack, to your point about perhaps what's inciting some of this kind of violence?</s>BELL: Well, they came out very quickly with a statement that was very clear in its condemnation of the attack and in its support to the investigation that's now underway, saying that they had full faith in the investigation that it would get to the bottom of what went. Very clear in its condemnation, but interestingly, Julia, the statement did not talk about a terrorist act, as so many other politicians did. It talked about a terrible act and I think perhaps has the slight difference with some of the other statements that you've seen here today. But they did come out very quickly and make that condemnation as did all sorts of European politicians, European leaders vowing their support for Germany in this time. And I think what you've seen in what all of the politicians have said today is really a sense that this is a real problem in Germany and saying it is something they need to tackle and get their hands on in order to prevent this sort of atrocity from happening again -- Julia.</s>CHATTERLEY: Yes, a terrible act versus an act of terrorism. Slight difference, but a vitally important one. Melissa Bell, thank you so much for that. Now, at least two people a day and after a train derailment in Australia. It happened near a town around 50 kilometers north of Melbourne. The train was headed to Melbourne from Sydney. The cause of the derailment is not yet known, but if we get any further details, we will bring them to you. To Washington now, longtime adviser to President Trump, Roger Stone will be sentenced in the coming hours. He was convicted on charges of obstruction, lying to Congress and witness tampering. Stone has requested no prison time. All right, we're going to take a break here on FIRST MOVE, but still to come, the end of the Ermotti era. The Swiss bank, UBS getting a new boss. And the shipping forecast. The CEO of Denmark's Maersk talks coronavirus, trade wars and a global trade slow down. Stay with us. We're back after this.