China Stocks Jump On Economic Stimulus… And A Real Estate Boom On The Horizon 9/24/24

0:02Live from the Nasdaq markets, in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. Beijing's big shot. China trying to jolt their ailing economy and markets by cutting rates and announcing a broad set of stimulus measures. Will this truly jumpstart a Chinese stocks and potentially juice the rally here at home? We'll debate that. Plus, bashed by Bernie, Senator Sanders hammering the CEO of Novo Nordisk, telling him to, quote unquote, stop ripping us off when it comes to the price of obesity drugs. Was this just the usual Capitol Hill grandstanding or a hearing that could hurt the drugmaker's bottom lines?

0:34We'll have a live report. And later, the details on why the Justice Department is suing Visa, Spotify surging as TikTok says no mask to music streaming, and the options action on Micron ahead of earnings. I'm Melissa Lee, coming to you live from Studio B at the Nasdaq. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. And we start off with two big stories dominating the markets today. Novo Nordic CEO getting grilled on Capitol Hill over the high cost of its weight loss and diabetes drugs, and China's moves to stimulate the country's struggling economy. We start, though, with China, the large cap China ETF soaring nearly 10 percent today, its best day in over two and a half years.

1:10Names like JD.com, Pinduoduo, Alibaba, Tencent, and Baidu all jumping today. That after the PBOC, People's Bank of China, announced a slate of measures from cutting the amount of cash banks need to keep on hand to reducing lending rates to get consumers spending again. But it wasn't just China-based companies on the move. Casino stocks, luxury retailers and commodity names, all of which get a significant portion of their revenue overseas, getting a pop as well. So was this the all clear to go all in on the emerging market? Tim, what's your take on this? Well, China has a lot of structural issues and this doesn't change them.

1:45And in fact, when you have a debt called a cancer of sorts, it really needs to take some time to clear through it, also to kind of cut it out. It's a dynamic where if you listen to the PBOC, they also talked about this needs to be supported with significant fiscal policy, which I think is still not really a question. It's also just interesting when you do, you know, loans for shares, which is something that often you hear about in emerging markets. You used to hear about this in Russia back in the day when they gave away essentially their most valuable companies. They're lending money to the banks and whatnot to buy stakes in the market.

2:16Now, it just seems to me a lot of what has gone wrong in the market are things that the government themselves could have fixed. And it's not about incenting people to buy shares. Why don't you incent investors globally to want to invest in China? So I'll get off the soapbox for a little bit, but it really was a bonanza. And they shot from four or five different angles that I think are all important, both to support real estate, to support bank lending, to obviously support the underlying market. What we've said about, think about the conversations over the last three weeks to a month. It's been around commodities, especially around oil, the downgrade of the IEA of the oil sector.

2:48Copper has been a roller coaster ride. All of these things are well bid. You have the casinos, which to me traded one third of the value that they did pre-COVID, all because of Macau, all because of those dynamics. So there's a lot here. Emerging markets are effectively two and a half year highs with central banks around the world cutting and China now stimulating. That's a pretty good sign for that trade. It's interesting. We talked about FXI in February. I remember it. We said, you know what? It just traded down to levels where it held in October of 2022, double bottomed trade against on the long side.

3:17That, by the way, was against a cascade of people saying that China was uninvestable. That's proven to be correct. Alibaba is one of these names that, yeah, it's had four years of extraordinarily disappointing stock action. But along the way, at least seven or eight times, it's had 35 to 50 percent peak, basically trough to peak rallies. And I think we're on the verge of that again. And I think Alibaba is still a buy here. And I'll just add this. I think one of the main reasons gold had a day that it had today is on the back of everything just Tim said. So I don't know what it means for our equity markets here, but specific sectors and commodities, it makes a lot of sense.

3:52I don't know what to make of it either, because I think about TARP. Remember TARP? Yeah. And the reaction to TARP, which was the market continued to go down for a while. Then on the other hand, if you look at what happened during the pandemic, when the Fed came out with the bazooka and we will buy everything, we'll buy anything, we'll buy ETFs, we'll buy debt, junk, whatever it is. And they actually didn't even need to buy anything, the market sort of started to correct itself. So I don't know which of these could potentially be the course that Chinese equities are on. But I do think, I agree with Guy, that it could have more legs than this.

4:29I know it's been happening already for a couple of months. These stocks seem to have bottom out a couple of months ago. But I think there was a lot of money on the sidelines. I've not been invested in China for a while and probably not going to jump in here. I mean, just recently you had a number of banks, Goldman Sachs, UBS, cutting their growth forecast for China. And a lot of banks also saying that China is not the place you want to be equity wise. But I think that the distinction that you made between TARP and what happened during the pandemic is a very interesting one and very applicable here because it is not a direct handout.

4:58So the transmission mechanism of the stimulus to the consumer is more roundabout. It's not a direct check. China can't afford to create a welfare state by handing out a check to every citizen. That's just not feasible. So what are they doing? All these other measures. So the question is, can this actually be transmitted to the consumer in a very effective way so that they will actually go and spend, which is what all these stocks are moving on, that notion that this will actually get consumers to spend. But the property issue is the problem here, and that's not necessarily fixed at this moment.

5:27Whoa. I mean, shut it down. Yeah, I think it's interesting that the outperformance came from consumer names, if you think about it, right? So if you just look at JD, you look at BABA, you look at PDD, Pindadda. I mean, so they've been so unloved, right? People have this narrative about the Chinese consumer. We know it's property-based in a lot of ways. But we also know that these companies, when the Chinese government came after them in 2021 and 2022, it was kind of like a self-own for all intents and purposes, right? And so I do think the outperformance is interesting. At the end of the day, we've seen lots of fits and starts, to Guy's point about Alibaba.

6:05I mean, this might be more of a market dynamic than it is an economic dynamic. One of the first thing when I was reading these headlines, you know, early in the morning, it really felt like these were things to kind of support the markets. They know there's very little they can do right now that's going to help the economy. Right. It's just, you know, there's so many countries have worked or moved away from them from a manufacturing standpoint and the like. We know that they're high end consumers really weak or it's not even their high end consumer. It was that aspirational middle market consumer.

6:33And we've had example after example over the last six to nine months or so. So to me, I just think that, yeah, you know, have a ball right here. It just seems like this got a squeeze going. It might have, to Tim's point, gotten some investors outside of China. Like it might have said, OK, well, you know, we've forgotten about this trade altogether. But again, I'd be surprised if it has crazy legs right here. Well, if you're a commodity investor, you love this news because, again, you know, I think commodity markets over the last two months have said recession everywhere, especially in China. So, you know, you actually want to see higher PPI coming out of China for sure.

7:05If you have a dynamic and you look at some of the material stocks today. So, again, we're talking about Caterpillar. We're talking about Southern Copper. We're talking about John Deere. And I think that's part of the trade. Back to what does this mean for, say, an Ulta? What does this mean for an Estee Lauder? What does this mean for Diageo? Estee Lauder, which is also the E in Blysep. Had a really nice day today. There's a lot to talk about. And obviously the B in Blysep is Alibaba. So there's a lot going on there. It was an EM heavy trade. And I think, but back to these. You're smiling there.

7:38Well, occasionally, you know. I mean, it was before I actually saw the performance of that acronym. But it's a case where the consumer dynamic we've talked about, especially the aspirational buyer of high-end spirits, high-end handbags. I mean, these are things that we've heard from companies. I don't think this changes anything about the Apple China story. I know this is kind of obvious, but let's be clear about what it doesn't do. It doesn't necessarily change the story for Nike in China. It doesn't necessarily change the story for those companies, even a Starbucks in China. I still think there are dynamics there that aren't going to change.

8:07Can you stay in this trade if you own Alibaba? Get back to it. Look, I think Alibaba is a name that you want to own for many years. Whether you want to trade this around, it's been proven you should trade it. I think you can sit back and look at more than a third of the market cap in cash. You can look at the international growth, which is north of 40%. This isn't really even an economic story, but I think it is one that obviously benefits. If they're sending a message, buy our stocks, buy their best stocks. Buy Tencent. Buy Baba. By the way, Baba is also the bean dam zebra trade. Is that right?

8:36I failed to mention that. Yeah, that's not nice. Nice job, Dan. Good for you. Zebra. Good for you. Guy. Freeport Mac, we're going to throw up a chart there. I mean, there's a reason why the stock went up$3.50 today, and that will probably continue. The copper trade, which was all the rage earlier this year, then obviously fell on difficult times, I think will start to reaccelerate and win, which you mentioned. I mean, that is a textbook, I think, bearish to bullish reversal in terms of what we've seen over the last few months. So, yeah, this has legs to it. But again, it goes back to sort of central banks run amok once again.

9:10And what wins to that? Absolutely gold does. And again, it's just one more reason to be bullish of gold in this environment. All right. Now let's get to Novo Nordis, the CEO testifying on Capitol Hill today, getting grilled by senators over the price of Ozempic and Wegovy amid soaring demand for the blockbuster obesity drugs. It's not closing more than a percent higher, though. Angelica Peebles is here with a blow-by-blow from the hearing. Angelica. Hey, Melissa. Yeah, Novo Nordisk CEO Lars Fjordgaard-Jorgensen dodging questions about why Wegovy and Ozempic cost more in the U.S. than abroad. Senator Bernie Sanders at one point getting frustrated that he couldn't get a straight answer on why Wegovy's list price is over$1 ,000 more in the U.S.

9:50than in the U.K. Jorgensen repeatedly saying you can't compare across countries and that the real U.S. price of Wigobi and Ozempic are much lower since Novo pays so many rebates to PBMs. Senators agreeing with the fact that Novo, agreeing with Novo that PBMs are just part of the problem. But Sanders revealing today that the three largest PBMs in the U.S. have told him that significantly lowering the list price of Ozempic and Wigobi would lead to more coverage of GLP-1s. Sanders asking Jorgensen if he's prepared to lower the list price in that case. When I hear statements that PBMs would accept a low list price product, it needs to go all the way to patients.

10:30So it means that they talk about insurance companies being their clients. It's actually their owners. So it needs to get to insurance schemes and it needs to get to the patients. So we'll see if they can reach an agreement here. Melissa. All right. Angelica, thank you. Angelica Peebles in Washington. Let's get more of the Mizuho healthcare strategist, Jared Holes. Jared, great to have you with us. Does Jorgensen have a point? I mean, if the PBMs agreed to do that, would the problem be solved? Melissa, thanks for having me. I don't really think so. I mean, this is a problem that we see across healthcare, across pharmaceuticals, where we've got higher prices in the U.S., much lower prices internationally.

11:13There are so many reasons for it. Obviously, the investment that the company has put in has been massive. The health care systems in Europe and otherwise are extremely different. And the complexities around what we're facing with the PBMs and the supply chain and all these different payer systems makes it untenable, I think, to do something very simplistic that I think Senator Sanders and others want. So I think to be determined, but I think it's pretty complicated. Why do you think Lilly was not called to the Hill? Well, I would be kind of surprised if they were not called at some point. When you just look at the numbers, you know, Wegovi and Ozempic are already annualizing at$25 billion.

12:02And Wegovi's been on the market for a little bit longer than ZepBound has if we just compare the obesity medication. So if this is just a numbers game and Sanders and others are looking at the dollars that have been generated, Novo, I guess, has more of a target on it than Lilly. But it's probably an eventual situation for Lilly to come here, too. Jared, we've seen a little some of these stocks, Lilly and Novo, sort of roll over for other reasons over the last couple of weeks. I think it's a function of competition, maybe valuation. but there's some other plays sort of, I don't know, under the radar screen plays that are out there that we've talked about.

12:42Is M &A going to be a theme here? We've talked about it a number of different times. Names like Viking. We've talked to people at Summit, all different names. Does that make sense in this environment? I think so. I mean, it just comes down to the future investment that you would need to make as a pharmaceutical company, not already in obesity or without an obesity pipeline. I mean, to miss out on this market opportunity, I think, is nearly unforgivable. We're talking about the biggest therapeutic category in all of pharma and biotech within a couple of years from now. So I think eventually you'll see it.

13:20I mean, pharma may want to wait for all these different data sets to come out and for the kind of competitive landscape to play out. I mean, how many times are we going to go through data sets that move stocks by 20, 30 percent. Even the large cap names have moved extremely in extreme volatile ways on the back of data. So it might just be a wait and see, see how all the data sets play out and then make a move. My sense is it's just a little bit too early on one hand. And then just the constant investment needed for manufacturing is the second big consideration here. Jared, tough weekend for your brownies.

13:59I'm sorry. I tell you, what does this circus in Washington do for your analysts and you as you look at either the valuation of these stocks? I just want to understand whether this is an opportunity for investors, because, again, the reality is these prices are not going to change here anytime soon for the hottest drugs in the market. Yeah, I agree. I mean, we've been through this so many different times with various Senate committees looking at the industry, whether it's insurance companies, PBMs, pharma pricing. You know, I part of me thought that with the IRA and the government going after pharma and negotiating price for drugs that you get at the at the pharmacy chains or that need to be administered in a doctor's office, this would kind of start to go away.

14:47And for whatever reason, it's not. I just think it's a perennial headache that we as a health care investor base or community have to deal with. And I don't think it's going to anything's going to change over the near term, at least. And now with the election coming up, you know, various new implementations or strategies that we're not really privy to. It's kind of just like what we have to, you know, manage through on a yearly basis. And with respect to the Browns, it's been, you know, the saddest I can remember. Jared, it's Karen. Thanks for being on despite the weekend for you. Can you I really don't understand when or how the mechanism of the government being able to negotiate for these drugs would happen.

15:31Do you foresee that in the intermediate term? Well, I doubt anything happens soon. And with respect to Novo Nordisk, they're already on record by saying that they think Ozempic or semaglutide, the main ingredient in these drugs, is going to be on the next list of drug prices that we get in the first quarter of next year. So we're already assuming a pretty big price cut for these products in 2027, which is not that far away. So can the government implement some sort of, you know, negotiation between now and then? They only have 24 months to do it. So I think the odds are very, very low. And we're looking at a 2027 into 2028 price negotiation where, you know, the the economics of the drug are going to change a lot anyway.

16:23So I would doubt it. But that's why I'm kind of surprised at the whole notion of this hearing anyway, because by the time we get to some sort of accord, this is going to be negotiated by way of the IRA anyhow. Congress is not really known for efficiency. Jared, great to see you. Thank you. Thank you. Jared Holes of Mizuho. So Novo Nordisk is down about 9 percent this month. So is this an opportunity, do you think? Well, what I thought was really interesting, when you listen about the PBMs and the transmission mechanism from the makers to the consumers, like three of these names, I think it's Expressship, CVS Caremark, and OptumRx, they have like 80 % of the market.

17:05So when you think about it, I think that the way these drugs get passed on to consumers in Europe is just very different. So these guys are taking a huge vig here. So roll those guys up to the hill. That's vigorous, by the way, Melms, in case you were concerned. Vigorous, like rhymes with ligorous. Sort of. Sort of. 123 and Novo to answer the Novo question. We talked about it last night with Katie. That's just sort of lying in the sand, which, you know what? I mean, it gives you something to trade against. I don't think they report until early November. I don't know if that's a catalyst or not.

17:33But that's the level I would trade from the long side against an NVO. And Lilly at the end of October here. Yeah, I tell you, I mean, Lilly's outperformed Novo, too. So in some sense, and maybe that's their Alzheimer's portfolio. Maybe it is, again, the diversity. I still think these are names that are going to trade ahead of the pack. As much as I also own some of the, call it the second, they're not even second tier. They're the laggards, whether it's J &J, whether it's Pfizer, whether it's Bristol-Myers. I still think that rotation is happening and will continue to happen. Coming up, pain in the payment space as the Justice Department takes aim at Visa.

18:05What regulators are accusing the company of and what it can mean for the shares. That's next. And the clock striking midnight for TikTok music. The social media giant pulling the plug on one of its features. And the news is some competitors up and grooving. More on that when Fast Money returns.

18:23This is Fast Money with Melissa Lee, right here on CNBC.

18:37Welcome back to Fast Money. Shares of Visa under pressure today on news that the Department of Justice is suing the financial services giant. The DOJ claiming the company is monopolizing the debit card market and charging excessive fees. Let's bring in our own Eamon Javers for the very latest on this. Eamon. Hey there, Melissa. Arguing that Visa's alleged illegal conduct affects not just the price of one thing, but the price of nearly everything, Attorney General Merrick Garland explained why the Justice Department has filed this civil antitrust lawsuit earlier today. VISA is a monopolist in the debit transaction markets that is violating federal antitrust law and inflicting often hidden but significant harm on American consumers and businesses.

19:19Now, the complaint alleges that VISA maintains its monopoly position by blocking the growth of existing competitors and preventing other firms from innovating new solutions. The government says that more than 60 percent of debit transactions in the U.S. run on VISA's network, which allows the company to charge more than$7 billion in processing fees every year. Visa's General Counsel Julie Rottenberg reacting this afternoon with a statement saying in part, when businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide.

19:52We are proud of the payments network we have built, the innovation we advance, and the economic opportunity we enable. This lawsuit is meritless and we will defend ourselves vigorously. Now, Garland declined to speculate today about possible remedies or the fixes for this alleged illegal behavior. That question really won't be resolved until a much later stage of this lawsuit. So back over to you. All right. Eamon, thank you. Eamon Javers. Karen, what do you make of this? Well, this has been the way it's been for a long, long time. And I feel like they've sort of gone after them multiple times over the years.

20:29and then there was some change there. I was sort of wondering, what does this do for the Capital One Discover deal? I mean, I think of them as more credit than debit cards, but I think to have a very viable competitor would be, I don't know why that would be counter to functioning markets. So that's sort of interesting to me. But I feel like, oh, these guys are so entrenched. It's really going to be very, very difficult to do it. giant change. Yeah, I mean, I can't imagine what the remedy would be. Why do you say that? When you think about a debit card, right? So we haven't used a debit card, probably any of us in a very long time.

21:06You think of the people who use debit cards, they don't have credit, right? So it's a disproportionate of lower income Americans. So why do they have all these crap fees on them? You know, I think this is like, we've been critical of a lot of DOJ, FTC stuff coming after different things that have been going on for a long time. You know, the big tech stuff, they're just not going to be able to break it up. But this is the sort of stuff that I think, you know, should make sense to do this. And it is a duopoly. And these guys have disproportionate amount of the shares. They can do whatever they want.

21:34And it's really affecting lower income Americans. Fair. You know, you want to go after? I mean, what did the Federal Reserve just lower interest rates last week? 50 basis points. 5-0, right? 5-0. You know what the average rate on a credit card in the United States is? 23-6. I mean, that seems somewhat usurious, right? I mean, I mentioned vigorous before, I mean, that's a little excessive. So maybe they should start focusing on that. I hear what Dan's saying. I get it. But real problem is the rates these banks are charging, number one. Number two, in terms of the stocks, throw up a Visa chart real quick.

22:05I mean, it's problematic that we just traded right back up to a prior all-time high and are now selling off. And now people will start to look, I think, a little more closely at valuation. These are still amazing companies, but now they're in the crosshairs. Although the credit card companies charging 20 plus percent are going to say we need to charge that to offset the potential losses to offer credit to those people who, right, otherwise have no credit. It does make you think of a firm, though, who is sort of looking to do something right in the no fees, no fees. Yeah, exactly. Well, and more broadly, it's it was an interesting day for anyone that had exposure to consumer credit.

22:40And I don't think it was necessarily attached to this headline. But I do think it's it was a day where we were reminded that longer rates have actually gone higher every day since the Fed cut rates. And it's a dynamic also where we're reminded of what that consumer credit overhang is. Back to the stocks. I don't think this does anything. And I think this just comes out, apparently the origination of this particular action was from their attempt to acquire Plaid. And ultimately that showed that they were going to really take out all of their competition, which I don't think Plaid really was all of their competition.