Ukrainian Police Looking at a possibility that the former u. S. Ambassador came under illegal surveillance before being recalled from her post. Democratic lawmakers in the United States released a trove of documents that showed one person to munich hitting about the removal of the u. S. Ambassador to ukraine. In the philippines, officials are urging residents in 14 more towns and cities to evacuate following sundays eruption of a volcano near manila. Two people have died in more than 121,000 people have fled their homes. Visibilityay poor and slippery roads due to volcanic ash are hampering evacuation efforts. Global news, 24 hours a day on air and quictake by bloomberg powered by more than 2,700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Live from bloomberg World Headquarters in new york, im shery ahn. Amanda live in toronto, im amanda lange. Welcome to bloomberg markets. Here the top stories we are following from around the world. Tariffs are the new normal. Some 360 billion of chinese goods still in place, President Trump promising further negotiations very, very shortly. Putins next move, the russian president opposed major changes to the countrys constitution. And results are in for the big banks. Send stocks to record highs. It, the risk on rally today. The u. S. Equities at record highs and treasuries falling today. Retail Sales Numbers strengthening and december. The trade war pause. The most ining 4, about a week. Every sector on the s p 500 is in the green. Financials and semiconductors are leading the gains on the positive results for Morgan Stanley not to mention taiwans semiconductors. The nasdaq gaining, and small caps also at the highest level since september of last year. A little bit of caution when it comes to the commodities market. Take a look at corn futures down for a third consecutive sector. Soybeans down for a second consecutive session, despite the fact that china pledged to buy 32 billion of u. S. Farm goods annually over the next two years. Investors are skeptical of how that will be done. China signaling that the purchases will depend on demand. We know that they have been suffering from an outbreak of swine flu virus which is estimated there pork flocculation pork population, hitting demand of soybeans. The purchases for the year have already been committed to south america. A risk on rally but a little bit of caution as well. Amanda there has been caution about what it means to have the outlook for tariffs and but still in place. They are showing up in earnings. One thing that has protected businesses have been the trump tax cuts. We are talking big banks. This is the benefit to wall streets biggest banks of those tax cuts, and it is in the billions. As we talk about Morgan Stanley, its effective tax rate dropped to 18 from 20 . Pretrumpt average tax cut was 30 , so massive savings. A shortterm buffer for some larger corporations against the effect of tariffs. We have President Trump saying negotiations on the phase two deal will begin immediately, very, very shortly. Bloombergs trade reporter is all over this. With your story, tariffs the new normal, what do businesses need to adjust to in this era . There was a hope for a lot of businesses that with the phase one deal, they would see the reduction of that tariffs burden, and while it has not hit from the big banks, you do have manufacturers like cummings, the big Diesel Engine maker which has said in the past that in has, the cost of tariffs overwhelmed the savings it had on taxes as a result of the 2017 bill. The reality is that there is going to be no immediate tariff relief that follows this phase one and the chinese before christmas indicated that perhaps we would see some of that this year. President trump saying clearly yesterday he will keep the tariffs in place until he gets phase two. He argues this is the leverage he needs to get phase two which is going to tackle some tough issues like chinas industrial subsidy regime, cyber theft, all of the things that were too hard to get into phase one, despite the tariffs in place. That is great. If you are a businessman, you would like to see the phase two issues addressed, but a live trade experts look at that agenda and say there is no way that china is going to agree to ripping up its economic model and the way that donald trump is trying to get. At the same time, we do have the Senate Passing the u. S. M. C. A. Finally after that agreement was initially signed in november of 2018. How much of a difference with this maker, especially as we go toward the 2020 president ial election . Shawn this is a big political victory for donald trump. It has some new elements in there including addressing digital trade. There are new rules that would require north american content at cars made in north america, more wage rules for auto factories that could bring jobs back to the United States that is what the administration hopes it will do. The biggest thing about this is that it lifts the uncertainty about nafta and the future of this big freetrade block. Remember canada and mexico are the u. S. s number one and number two trading partners and together, they are even bigger than any other traded does with china. This deal finally is on the president s desk, and that means at the very least, you will not see the end of nafta and all of the uncertainty potential yet disruption that would come with it. Glamour,n obviously, we come down the list, but in terms of importance, especially for Small Businesses across this trade zone, this is massively important. Get back to business as usual. One thing this white house has focused on with some success has been changing the negotiating, the arbitrating, all of the dispute resolution mechanisms tilted in the u. S. Favor. Is that a Lasting Legacy that the trump card that was a bit the cardpeaking, but that they play is that they do own the arbitration process in a way they did not use to . Shawn yeah, and it certainly is a trump card. Donald trump came into this wearing his disdain for the wto, and it judges very clearly on his shoulder. So does Bob Lighthizer, who argues and has argued Bob Lighthizer being the u. S. Trade representative and the longtime trade lawyer in washington who argues that he would like to see Something Like a return to the life before the wto. Earlyo was set up in an 1990s because there was a real concern of the Major Economies that there were too many trade wars, and there was no neutral arbiter for all of these trade disputes. The Trump Administration worried that that neutral arbiter takes too long and does not come down on the side of the u. S. And enough, so it wants to take the power to be the judge, jury, executioner, and the complainant as well back into its own hands. Nan, thankwn don you for the latest. Lets move from china to russia. President Vladimir Putin uses annual state of the nation addressed to propose a constitutional shakeup. Putin replaces longtime Prime Minister and called for sweeping changes that will strengthen the power of the parliament, fueling speculation that the russian president is looking beyond his term limits. Are joinedsight, we now by the Deputy Director of the kanaan institute to the part of the Wilson Center in washington. Thank you so much for being with us today. What does this practically mean . Ken president can president putin lengthen his rule over russia with this new constitutional change . He has not announced his intention and how he perceives his role post 2024 when the second of his two consecutive terms at terms ends. He gave some hints in his speech yesterday especially in his decision to raise the power of the parliament. He has not answered the question as to what position or what approach he wants that he can still remain influential. Himdoes not see aspiring to the role of elder statesman, so he needs to find himself in with ever new and whatever new configuration. Amanda i was reading analysis today that whatever that role is, putin would like it to be on Foreign Policy rather than a domestic economic issue that he finds boring. Democracyf kind of and action in russia is nothing new. In terms of how this affects the rest of the world, what should we be watching. And somethingor that could affect the region in a new way . Will pomeranz i do not think he will i do not think that he is changing his foreignpolicy position. And the term of both the United States and of the United Kingdom for principles of sovereignty. If sovereignty is going to govern the global system, then you are immediately playing on putins playing field, and he has positioned himself well. I do not think he wants to deal with the daytoday management of the economy, i do not think he wants to be Prime Minister again where he has to focus on domestic affairs. I believe that he wants to put himself in position so he can enjoy all of the successes that i think he can have through 2024 and beyond. Been the focus on the finance minister, because he carried out tight budget policies. In thisure figures administration would matter for Global Markets . Will we still have to figure out who becomes a part of the cabinet, whether the current finance minister remains a part of the cabinet there are putins speech that he may be looking to increase the amount of domestic spending. Austerity policies in the aftermath of crimea and the andssion, but in his speech comments later, he has emphasized the notion of russia as a social state. Not simply a capitalist market onnomy, but an emphasis the social state and trying to meet the social demands of the russian possibility russian population. This potentially means he will loosen the purses of the russian state and spend more to mess tickly. Domestically. Amanda you mentioned crimea, post annexation, there was fear that that appetite would continue. Are we worried about that . Will i do not think we are looking at military expansion into the nearer broad. There is one other variable for putin just in case the constitutional reforms do not work. In other words, they do not allow him a significant position to govern the country Going Forward after 2020 four and those are the negotiations over a revival of the union treaty that was signed in the 1990s. If putin seeks a greater integration, he may actually create a new state, and that state would require a leader, and i think putin would be happy to assume the leadership of a revived russian state. I do not think he is poised for any military action in the brought,aod, but there are nearer broad but there are negotiations that will be useful. Amanda we appreciate your time. Will pomeranz of the Kennan Institute in washington. Coming up, we will take a look at u. S. Bank earnings this week with Morgan Stanley and goldmans searching. How much will the mental last . This is bloo this is bloomberg markets. I am shery ahn in york. Amanda im amanda lange and toronto. Morgan stanley has been surging today after posting its fourthquarter estimates, and met the highest bar. Lets check in with sonali, weve been talking all week about the banks. Is there anything in Morgan Stanley numbers that stand out as different from the other banks . Sonali it is the scale of how much they really rose in trading today. The jump in fixed income was pretty remarkable. They have had volatile activity billion, that3 compares to goldman at 1. 8 billion, so their ability to really hold strong in that business has been a significant thing. Shery how does their results compared to their biggest competitor goldman . Sonali they beaten all of their investment revenue banking also, and they had a that where they did not. There market cap right now is above Goldman Sachss and that is something for the last 18 to 24 months that we have really been watching here because there market value has really been battling. Inre have been questions the market of whether Morgan Stanley needs to have a gleick Goldman Sachs to have in the leg like Goldman Sachs has been doing. Amanda in terms of what is happening in the fixed income space here, a huge driver of success is quarter. What is underneath that and what are the fundamentals that are making the market so hot . Sonali volatility is back in credit markets so that is a great thing. The yield curve disparity has really been helping them through the end of last year, and the sustainability of results is a big deal. Goldman has told wall street that he believes on average, fixed income revenues could come in at more than 1 billion per quarter. Morgan stanley is making significant investments in electronic trading. That is what made them the number one stock trading firm on wall street, and lets see if they can pay off in fixed income there. Shery sonali basak, thank you. Coming up, no one makes money like the most feared man and the most aggressive realm in finance. This is bloomberg. Shery this is bloomberg markets. Amanda im amanda lange in toronto. Shery i am shery ahn in new york. Schwab plans to eliminate trading fees and pushed client assets to a record. They are now over 4 trillion. To 86 million in the Fourth Quarter after the company introduced zero commission trades. Today, Canadian Company issued they warning on fourthquarter results and also said i could pull out of the joint venture with another company. The value of the jetline is likely to be written down. The largest operator of the boeing 737 max is removing the rounded plane from its flight schedule through early june. Southwest airlines joining united and american who made similar announcements. The 737t certain when max will fly again. And that is your business flash update. Even for those who do not know apollo management, they probably have heard some of the companys targets. Claires jewelry stores, caesars casinos, and the man behind all of that, leon black is a key figure in finance, philanthropy, and private equity. His story is the cover of Bloomberg Businessweek magazine this week and are joined by the author, caleb. Interesting and really fascinating profile of the man but also a snapshot of how the money gets made here, so one of the things that becomes clear is, this is an Investment Strategy that skirts catastrophes of others i am roughly quoting come of it makes its money by going into distress situations. Who wins and all of that . Caleb [laughter] talk about howe leon black is a very adept at making sure when he goes into the distress situations, be they restructuring, bankruptcies, Just Companies going for a tough time, it is him and apollo who does, and there is any number of counterparties in situations, be they the companies themselves, the creditors, but this is one of the stardust and as we say on the cover of businessweek, one of the most ruthless guys in the private equity business. Shery i love how you put it, scathing on the edges of other peoples catastrophes. That is genius. Tell us a little bit about their investments. Tensions seem to make out there seem to makensions out there largest base and yet there seems to be a mismatch. Caleb exactly right. Tremendousturns are and that means that people who have to plug holes like Pension Funds for publicsector Sector Workers or other workers with pensions are very into apollo and firms like apollo. We talked to a few people about the story you are very unhappy with that strategy. They see what apollo does as a little bit more zerosum and not as advantageous or creative to labor, teachers, or workers more broadly as it interacts with the global economy. Amanda which is one of the questions that is so interesting with activist investment. If you are already an investor, if you are an existing investor, are you better off, you might want to hedge your bet by buying the stock of the Management Company in a hurry. Caleb [laughter] thats right. In the story, we say leon black always wins. This is a guy that in any type of situation, you would probably be wrong to bet against. Melby, thank you for that. You can find his story in the issue of Bloomberg Businessweek. Remember, bloomberg users, the charts showing you at gtv and browse recent charts featured on bloomberg tv and catch a funky analysis. This is bloomberg. Where life from bloomberg World Headquarters in york. This is bloomberg markets, the close. We begin with breaking news erie today is a historic day, the new phase in the impeachment process. We expect to see the chief justice of the Supreme Court john roberts arriving in the chamber any moment now. He will be escorted by senators into the chamber, where he will be sworn in by the Senate President pro tem in chuck grassley, the republican from iowa. The chief justice will then turn to the centaurs, a 100, to swear them in as jurors. And they will agree to an oath to administer impartial justice. This is aiously, strange trip we have been on. This started after the 2016 elections where to house members moved to impeach trump and introduced articles of impeachment in 2017. That was dismissed. By what was then republicancontrolled house of representatives. In 20, things changed. House Speaker Nancy Pelosi taking over the democrats in the house. Over the summer, we have what we now know where those