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Huawei Finance Chief Meng Wanzhou Arrested In Canada; Investcorp CEO On Global Real Estate Markets; China To Immediately Apply Measures Agreed

December 7, 2018



<Date: December 6, 2018>

<Time: 08:00:00>

<Tran: 120603cb.231>

<Type: SHOW>

<Head: Huawei Finance Chief Meng Wanzhou Arrested In Canada; Investcorp CEO

On Global Real Estate Markets; China To Immediately Apply Measures Agreed

In Trade Truce With U.S.; Texas Funeral For President George H.W. Bush

Begins, Burial To Be Next To Wife And Daughter - Part 1>

<Sect: News; Financial>

<Byline: Maria Bartiromo, Robert Wolf, James Freeman, Dagen McDowell, Blake

Burman, Robert Wolf, Stuart Varney, Hillary Vaughn, Connell McShane>

<Guest: Stephen Harper, Rishi Kapoor, Mark Avallone, Sara Greenstein>

<Spec: Huawei; Qualcomm; Microsoft; Google; IBM; Oracle; OPEC; General

Motors; Right Here, Right Now; Air Force One; USMCA; Netflix; Amazon;

YouTube; Investcorp; Boeing; Caterpillar; Apple; UnitedHealth; G20; Brexit;

Twitter; Andrew Carnegie; Meng Wanzhou; Union Pacific Railroad; Lion Air>

MARIA BARTIROMO, FOX BUSINESS NETWORK ANCHOR: -- points, 1-2/3 percent. S&P 500 down 41, 1-1/2 percent. And the NASDAQ now with a decline of 129 points, that’s down almost two percent right now. At these levels the Dow and the S&P 500 are falling back into negative territory for the year so far.

Now investors were rattled by the arrest of the chief financial officer of Huawei, the Chinese company. She was arrested in Canada. The news is sparking fears about the fight between U.S. and China worsening. We’re going to tell you all about the Huawei situation. All this coming after Tuesday’s big rout. Remember, the markets were down sharply on Tuesday, before they were closed yesterday.

All the major averages down better than three percent on the session. Markets were closed yesterday for the funeral of President George H.W. Bush. So this is the first time investors in the U.S. are reacting to that big he sell-off on Tuesday down 800 points at the close on the Dow, down 283 points on the NASDAQ. Looks like the selling continues this morning at least at the open.

Global are down as well. FT-100 down 2-1/3 percent. CAC Quarante down 2- 1/3 percent. DAX Index in Germany down 2-1/2 percent. In Asia overnight, declines across the board. Worst performer Hong Kong, Hang Seng Index down 2-1/2 percent. It is also decision day for OPEC. We’re watching the price of oil down as well, look at that move, oil prices sliding amid uncertainty over a possible production cut out of OPEC.

Crude oil right now down 3-3/4 percent or $2.00 lower as you can see. Technology descending on the White House. CEOs from some of the biggest companies in the industry set to discuss regulations and innovation. White House having the meeting with those tech CEOs as you can see all there. Qualcomm, Microsoft, Google, IBM, Oracle all coming to Washington.

Meanwhile, it is round two for G.M. CEO Mary Barra, she’s headed back to Capitol Hill after explaining the recent job cut announcements to lawmakers.


MARY BARRA, CHIEF EXECUTIVE OFFICER, GENERAL MOTORS: We’re trying to make sure that General Motors is strong and that we’re in a leadership position in the technologies like electrification, like autonomous vehicles, like connectivity because that’s what customers want, that’s what where industry is going.


BARTIROMO: We are taking a look at the fallout for the automaker and we will have more of Edward Lawrence’s exclusive interview with Mary Barra coming up. The stock is down 1-1/2 percent right now.

All those stories coming up this Thursday morning. And joining me to break it all down, Fox Business Network’s Dagen McDowell, the Wall Street Journal’s assistant editorial page editor James Freeman and 32 Advisors CEO, former economic adviser to President Obama, Robert Wolf. Busy morning this morning. Good to see you.

ROBERT WOLF, FOX NEWS CONTRIBUTOR: Crazy morning. I was not expecting to have a down open after yesterday. So this -- I think this Huawei thing and everything between China U.S. is taking and feels like a turn for the worse.

BARTIROMO: Now, the Journal wrote about this, James, in terms of the arrest of the CFO of Huawei as it relates to what Huawei has done in terms of Iran. And going against the sanctions that the U.S. put on Iran but there is more to this story than just Iran sanctions.

JAMES FREEMAN, FOX NEWS CONTRIBUTOR: I think our colleagues on the news side of our paper have done a good job kind of laying out this long-term issue with both Huawei and ZTE, the other big China telecom manufacture, both parties for long time have seen a threat here not just violating sanctions around the world against rogue regimes like Iran and ZTE’s case, North Korea as well but really being a threat to spy on the United States if their equipment becomes a part of our telephone system.

So this is -- this is not necessarily a Trump move here, this may be exactly what would be appropriate and she deserves her day in court like anyone else but there is a history here of concern from both parties on this issue.


DAGEN MCDOWELL, FOX BUSINESS NETWORK ANCHOR: And our allies have linked arms with us on this with Australia banning Huawei from its 5G networks. New Zealand blocking one major wireless carrier from using Huawei technology.

BARTIROMO: And Britain.

MCDOWELL: And Britain B.T. and Britain just yesterday starting to remove Huawei equipment from its networks.

WOLF: But I think the question we’re going to have to ask ourselves and we don’t know yet is will this kind of put a pause in the trade truce? What does it mean for the 90 days kind of cease and the whole tariff situation?

BARTIROMO: Which is why that uncertainty has the market down another 400 points right now. Our top story this hour, it is that trade tension. It is mounting. The chief financial officer of Chinese technology giant Huawei was arrested on Saturday at the request of United States. A move likely to escalate tensions between the two countries. This arrest is sending shockwaves to our global markets.

It took place on the same night as the high stakes dinner between President Trump and Chinese President Xi Jinping where the two leaders established that 90-day trade truce. Joining me right now is former Canadian Prime Minister, author of the book, Right Here, Right Now Stephen Harper. Mr. Prime Minister it’s great to see you again. Thanks very much for joining me this morning.


BARTIROMO: Now the CFO of Huawei was arrested in Canada. Give your thoughts of this relationship between the U.S. and China or even China and the rest of the world including Canada because this is -- there is more to this story than just Iran sanctions. This is about espionage and about the potential for the Chinese government to use Huawei, use Z.T. as an enabler to spy on political enemies or even friends like the U.S.

HARPER: Look, just a couple thoughts. I’m not going to speculate on the arrest. Obviously, it’s a criminal matter that’s going to be before courts and I don’t know the specifics. What I do know is that when I was in government, we were increasingly concerned about the penetration of Huawei and ZTE into western Democratic telecommunications networks. These are organizations ultimately tightly tied to Chinese security apparatus.

And we think there are some real serious issues there. I obviously note that the United States is encouraging western allies to essentially push Huawei out of the emerging 5G network and my person view is that that is something that western countries should be doing in terms of our long-term security issues. You know, as long as people have to remember China is not simply an economic competitor and a major challenger, I think that bothers us less than the fact that China this is in fact a geopolitical rival that has made no secret of the desire to spread an alternative to western Democratic norms and I think that’s something that should concern us.

BARTIROMO: So, what should be done then, Mr. Prime Minister? Because, you know, we can’t look at this story in isolation as if this just happened this year or this just happened last year, I mean, when you were in charge and running Canada, you too, looked at these companies as the potential -- as the potential threat. What should be done in terms of getting China to change its behavior in terms of spying on the rest of the world, stealing trade secrets, and then coming up with companies that compete with them and beating us at our own game?

HARPER: Well, there’s many things have to be done. As I say, one of them is obviously dealing with the particular problem of the penetration of these telecommunications agencies into the west. I think that’s a concern in and of itself. Obviously, pressure has to be brought on China to change its behavior in terms of rule-breaking. But I -- as you know I go farther in my book, Maria, and I argue that the rules themselves have to be changed.

We have a situation where the Chinese have wide-ranging access to our markets, our access to their markets is extremely limited, it has caused the loss of millions of jobs in North America. And frankly the trade deficits keep growing as China gets more wealthy and the opposite should be happening. Essentially, I think the United States has under long-term policy, been essentially paying for the rise of an alternative rival.

And this is simply unwise and look I know that markets get rattled by the administration trying to take on this problem but if we don’t take on this problem now and the long term this is going to get worse and frankly we’ll get to the point in long term where China cannot be taken on, where it is determining the rules of the global system and arbitrary ways that simply suit its own interests.

So, you know, I -- well, I don’t know if I agree with every aspect of the administration’s policy, taking on this issue of Chinese rule-breaking and rules that frankly allow China to exploit a trade relationship this has to be done.

BARTIROMO: Yes. You make a really, really important point there. Let me ask you about other issues on trade because the President is threatening to terminate the NAFTA agreement if Congress does not approve the USMCA pact. Now, the last time you and I spoke, you felt good I think about the changes in the USMCA. But I want to get your take on this because Secretary Steven Mnuchin was on with me this week and he talked about this trilateral agreement. Listen to what he said.


STEVEN MNUCHIN, UNITED STATES SECRETARY OF TREASURY: The deal was signed by the U.S., Canada and Mexico. And I think this is going to be an agreement that President Trump expects is going to be taken to Congress and passed. And as he said on Air Force One, if it’s not passed, he is going to terminate the existing agreement.


BARTIROMO: What about that? The consequences of President Trump terminating the existing agreement and the consequences of this USMCA not being ratified in short order when the new Congress starts next month.

HARPER: I’m not surprised the President would make that threat. You know, I’ve always kind of figured that would be his fallback to get the new deal through. Obviously, you know, my view that NAFTA itself and the existing trade relationship between United States and Canada in particular has been a balanced one that is in the interest and to benefit of both parties. So I think, you know, canceling the agreement as part of a bargain ploy with Congress would be ultimately a bad decision.

But, you know, given that the three countries have agreed on a new deal, let’s hope that the Congress acts widely -- wisely and adapts it.

BARTIROMO: Yes. But I mean, one of the issues as I had one of the Congressman on the Democratic side this weekend on “SUNDAY MORNING FUTURES” and he said, look, this is not just about the auto sector, we need all industries to have a fair shake when it comes to manufacturing. So, do you want to see USMCA expanded? Do you want to see any changes from your standpoint in terms this deal between Canada and Mexico and the U.S.?

HARPER: I don’t speak for the government of Canada but h I don’t believe that Canada is looking for anything more. This is a comprehensive deal, Maria, and as with any trade agreement it is very big and very complicated and not everyone is going to like everything in it. But as I say, I think the President is presenting Congress with a pretty clear option. Here is a deal. And the alternative may be no deal at all and no special trade pact in the North America trade year.

I don’t think that would be in anybody’s interest. And I certainly think the USMCA is better than having no trade pact at all.

BARTIROMO: Mr. Prime Minister, let me get your take on oil because we have breaking news right now, OPEC is just announcing right now that they are agreeing to cut output, oil prices are down this morning by three percent on expectations of production cuts ahead of the OPEC meeting following this mandated reduction in Canadian supply. It comes amid growing discourse within OPEC following Qatar’s withdrawals. So now we’re going to see an output cut from OPEC.

I don’t think they’re going to stick to it or if they’re going to be honest and really cut production. What’s your take on this?

HARPER: OPEC has less market power than -- and has had less market power than people think for a long time. But at the same time, if the major powers, the major producers like Saudi Arabia and Russia if they are serious about some production reduction, they can get it. I mean, the truth is that we are -- we’re seeing oil prices come down for many reasons but one of them is that we have had a slackening in global demand recently.

And, you know, I think that should alarm us somewhat. I think there is very little doubt that outside in my travels. I have very little doubt that outside North America you are seeing the economy beginning to slow. It’s particularly outside the United States.

BARTIROMO: Mr. Prime Minister, it’s good to see you this morning. Hope you come back soon. Thanks so much for your insights on all the above.

HARPER: Yes. Good morning, Maria.

BARTIROMO: Stephen Harper joining us there. Former Prime Minister of Canada. We’re going to take a short break and then we got the ADP number right after this. Stay with us.


BARTIROMO: We have breaking news right now. The ADP numbers is a miss. It is just hitting them wires to just for the month of November. And it is 179,000 jobs created for the month that miss the consensus expectation which calls for jobs of 195,000.

Markets are basically where they were. Maybe a little better, down 390 points on the Dow Jones Industrial Average. But this miss basically, shows you that we’ve got growth in the economy, but it is certainly not gangbusters with growth of jobs of 179,000 lower than the estimate of 195,000.

Of course, we get the job’s numbers from Labor Department out on Friday. And typically speaking, this usually indicates -- this is we could see something along the lines, of this number.

Joining me right now to talk more about the economic growth, and how to invest right now is the co-CEO of Investcorp, Rishi Kapoor. Rishi, it’s good to see you this morning. Thanks very much for joining us.


BARTIROMO: So we had a -- we had a number that was looks not too hot, not too cold on the job’s numbers, you invest a quarter of a percent of your assets under management in private equity. You have a good vision in terms of what’s going on with the economic growth out there. How do you see things?

KAPOOR: Yes, I mean, our starting point frankly is obviously everything starts with the top-down assessment. And what we had prevailing in the global economy over the last several years was a very benign backdrop. Stemming from an ultra-loose monetary policy, a very low volatility regime, and a fairly stable geopolitical backdrop -- a facilitating growth in global trade.

Today, in 2018, towards the end of 2018 and looking forward, much of that is not really something that we can take for granted. And much of that is falling away.

So, as a consequence, you know, our stance from an investment perspective is what I would describe as being cautiously vigilant. We do believe that the U.S. economy in particular, and the global economy generally is going to continue to grow, albeit perhaps, not as fast as we have seen it in recent times.

And positioning ourselves well for that means, focusing on businesses that are less at risk from two major exogenous risk factors. One, relating to the trade disputes that we are having to face up to today and the second is technology-led disruption risk.

So, we are focusing a lot on business services, we are focusing a lot on people-based businesses that are less susceptible to such secular forces, disrupting them. We’ve acquired a talent agency that was our most recent investment in the U.S.

You know, but the -- but the onslaught of content ownership, the likes of Netflix, Amazon, et cetera coming over the top. You know, YouTube, social media influencers, et cetera. Talent management is we think ideally poised as a people business enabled by technology to grow well into the people.

BARTIROMO: So, talent agency is one the most recent but business services, other areas that you are finding growth in an economy that is expected to slow down.

KAPOOR: Yes. So, you know, for instance, some of the other areas we focused on are either high-end value-added businesses, people-based businesses like consulting firms, like strategic communication firms, we’ve invested in both.

And also, down the value chain, essential services. You know, we’ve invested in a business that provides maintenance services to HVAC Plumbing Services et cetera. It’s grown like a weed, you know, so --


BARTIROMO: Wow. Let me ask you about real estate because Investcorp has a range of investments around the world in terms of real estate, as well as private equity. You just invested $300 million in the multi-family properties in the United States. Do you see a change happening to real estate as interest rates move up?

KAPOOR: So, bid real estate much like as is the case with private equity. Our assessment starts from the top down perspective, right. And in real estate for us, in particular, the main secular trend we are looking to bank is this adoption of e-commerce and in particular, the significant expansion of data storage requirements with the advent of big data, et cetera.


KAPOOR: And playing on both of those, we feel that the real near-term opportunity actually I shouldn’t even say, the near-term, it’s really more like medium to long-term, opportunity in real estate is all around the periphery. The last mile fulfillment, the distribution centers, the data centers, the logistics, whereas this -- either serving regional hubs or the last mile -- you know, into major urban centers.

And so, that, as you mentioned earlier, Maria, one of our biggest investments lately, has been a large portfolio of industrial warehousing assets across the United States. We see a good opportunity in student housing, as well. Yes, rising rates would have had an impact, but you know, it’s been fairly muted.

BARTIROMO: Is there anything about this most recent market upset that would cause you to pull back? I mean, look, market was down 800 points, Tuesday. Today, we’re seeing another sell-off, worries about global growth. Do you pull back in terms of putting that into work on all?

KAPOOR: Yes. So, I think the shift in our thinking is we are not backing the data anymore, we are backing the Alpha. No macro bets, it’s really the micro bets. We are looking at the company first, the property first. Where is it located? What does the company do? What is the management do?


BARTIROMO: That makes a lot of sense. That makes a lot. Rishi, it’s great to have you on the program.

KAPOOR: It was absolutely fantastic being here.

BARTIROMO: Thank you so much, Rishi Kapoor. We’ll be right back.


BARTIROMO: Welcome back. Markets are lower this morning. As we’ve been telling you, it is going to be a rough opening on the heels of a sharp sell-off, Tuesday. Dow Industrials set to be down about 400 points.

We’re off of the lows right here, but this is still 1-1/2 percent lower. S&P 500 is now 1-1/3 percent, and the Nasdaq is down 117 points, that is 1- 3/4 percent lower.

Meanwhile, technology companies are headed to Washington today. The CEOs of those companies, the White House is hosting a roundtable discussion with a number of top tech CEOs to talk about innovation. Blake Burman is live at the White House this morning. He has the very latest. Blake.

BLAKE BURMAN, FOX BUSINESS NETWORK WASHINGTON CORRESPONDENT: Maria, good morning to you. Artificial intelligence, Quantum Computing, 5G Technology, those just some of the topics that will be under discussion here at the White House later today. Involving some of the biggest tech heavyweights. The leaders, for example, from the company’s Oracle, Qualcomm, Microsoft, and Google, will be a part of the discussions.

One source involved with the gathering telling me, the focus will be on ensuring innovation and growth continue to happen in the U.S. Now, it will be a much more contentious setting later today up on Capitol Hill, as the General Motors CEO Mary Barra will return for a second day to talk with lawmakers about GM’s decision to slash jobs and shutter plants.

Barra telling our Edward Lorenz yesterday that G.M. needs to keep up with the times.


MARRY BARRA, CHAIRWOMAN, GENERAL MOTORS COMPANY: The industry is transforming and we need to make sure that General Motors is around for the next several decades. We have responsibilities to many of our stakeholders, our employees, our folks who have retired from the company, our investors.

And so, we’re trying to make sure that we have a strong General Motors.


BURMAN: Maria, Barra was pressed by reporters about that massive taxpayer- funded bailout that G.M. received just a little less than a decade ago. Her response was that G.M. has invested $22 billion in the U.S. since then. Maria.

BARTIROMO: All right. Blake, thank you. Blake Burman at the White House. Coming up, investors are watching economic data, international trade, weekly jobless claims.

After the break, we just got the ADP number. The number was below expectations. Jobs in America is our focus. We’re going to break down the expectations ahead of the November jobs report which happens on Friday.

Not a major reaction should the ADP number, which showed jobs came -- coming in at below the estimate at 179 jobs created in the month of November. Back in a moment


BARTIROMO: Welcome back to Thursday morning, everybody. Thanks so much for joining us. I’m Maria Bartiromo and it is Thursday, December 6th. Your top stories right now just about 8:30 a.m. on the East Coast. Breaking news, we are moments away from the weekly jobless numbers coming out. Expectations there 225,000 jobless claims for the last week. Markets this morning are under selling pressure once again. Take a look at where we stand. We’re off of the lows but certainly it is expected to be a tough opening at the start of trading, extending the losses of earlier in the week.

The Dow Jones Industrial average right now down 363 points, 1-1/2 percent. S&P 500 down 35 points, that’s 1-1/4 percent. And the NASDAQ is 111 points, that’s 1-2/3 percent lower. European Indices are down across the board as well. Take a look. FT-100 right now down 2-1/4 percent, 155 points lower. CAC Quarante down 115, down 2-1/3 percent lower in Paris. And the Dax Index in Germany down 2-1/2 percent, 273 points lower.

Asian markets lower across the board overnight. Worst performer Hong Kong, Hang Seng Index down 2-1/2 percent. Oil is also down on breaking news, although it was down before we got this news. OPEC has agreed on a deal to cut oil output. No final figure has been determined in terms of what kind of capacity is going away but the price of oil is off its lows. It is down $1.43 a barrel, that’s 2.7 percent.

Jobless claims missed expectations after the ADP report also missed expectations. Dow Industrials down 373 points, no change after the economic data out this morning. Let’s take it with Gerri Willis, she’s on the floor of the New York Stock Exchange watching this market. It’s going to be a loser at the start, Gerri.

GERRI WILLIS, FOX BUSINESS NETWORK ANCHOR: That’s right. You got that right, Maria. A little anxiety down here already this morning as we see the futures pointing to a lower open. Let’s take a look at those stocks there, well, it didn’t do so great on Tuesday. The last day the market was open starting with Boeing, that stock is poised to open down three percent, and why in part because Lion Air CEO is examining of cancelling his Boeing orders that after we found out Tuesday that Boeing’s automated flight control system was omitted from the plane’s operations manual.

So lots of trouble for Boeing. Apple also poised open lower here by 2.2 percent. Price target cuts from an analyst this morning to 165. Caterpillar poised to open down as well and here you’re seeing the impact of all this news about trade this morning. The concerns, the worries that we will not get a deal with China and that two sides may be moving further apart rather than together.

But interesting UnitedHealth on this list the worst Dow performers on Tuesday and that is a distinctly domestic company. 3M also an international player here poised to open down 1.4 percent. We’re going to be watching this all morning but I got to tell you, a little bit of anxiety down here, Maria, we’ll be watching.

BARTIROMO: All right, Gerri. Thanks very much. And joining us right now to weigh in on all of that is the president and founder of Potomac Wealth Advisories, Mark Avallone. Mark, good to see you. Thank you so much for being here this morning. Your reaction to this nervousness in the market. You’ve got to make investment decisions every day. When you see a market down as much as it has been on these worries about slowing growth and higher interest rates, how do you -- how do you invest?

MARK AVALLONE, PRESIDENT AND FOUNDER, POTOMAC WEALTH ADVISORS: Well, the slowing growth is mostly overseas. We see hint of that here with ADP number. The real trouble today in the market is the news that you’ve been covering all day. When you have a shocking event like that you’re going to see a reaction and that’s when it’s important to look at the underlying economic strength that the U.S. economy still has.

We’re still in a bull market. U.S. economy is still strong. The problems are mostly overseas there with the Fed and China. The good news about the jobs number that you reported earlier, is that numbers like that which show that growth may have peaked, that could suppress the Fed’s zeal to continue to be aggressive and longer term that’s a positive for the market.

BARTIROMO: So you want it still but then the buying stocks is what you’re saying.

AVALLONE: Yes. I think I would be cautious here. I would go in he slowly. I wouldn’t back up the truck right now because there’s just too much exogenous news. But look, ever since 1946, the year after midterm election has been positive, the GDP is over three percent, unemployment is 3.7 percent. None of that spells recession, none of that says this is a bad time to be in stocks but I would go in slowly until some if these news noise calms down.

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