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Thailand Braces for Tropical Storm Pabuk; North Korea's Top Diplomat in Italy May Have Defected; Pope Says Church has Credibility Problem; Nancy Pelosi Reclaims Gavel as House Speaker; Trump's Allies Dismiss Witch Stories about President. Aired 1-2a ET

Aired January 4, 2019 - 01:00   ET



PAULA NEWTON, CNN NEWSROOM HOST: Hello everyone, and thanks for joining us. I'm Paula Newton, and you are watching CNN Newsroom. Ahead this hour, bad news at Apple leads to another rough day on Wall Street and triggers more fear about a possible global slow down. Plus a U.S. Congress like you've never seen before. The country's most diverse group of lawmakers is sworn into office ready to take on Donald Trump. And some of Thailand's most popular tourists resorts brace for what could be the strongest storm to hit there in decades.

OK, one bad day for Apple is spoiling a whole bunch of portfolios for investors right from New York to Tokyo. Now, the tech giant's warning about missing its sales targets drag down, of course, the U.S. markets right across the board. And in Asia now, look at that. The Nikkei took the biggest hit. As you can see there now down 2 and a bit percent. That is off of its lows. You can see some of the enthusiasm there in China. Those stocks coming back on both the Hand Seng and the Shanghai, and that is over some good news on trade, which we will get to in a moment, but we have to remind you about New York. The Dow lost 660 points. Apple shares were 10 percent lower - its worst day in six years. Analysts say it's a clear signal that U.S.-China trade war is starting to bite.

Journalist Kaori Enjoji is joining us now from Tokyo. You know, this was a rude awakening from the holidays for Japan. Obviously some of the suppliers to Apple falling, but this is really starting to send tremors through the Japanese economy as a whole. KAORI ENJOJI, JOURNALIST: Absolutely. I think this is the worst first day of trading in the new year we've seen in about three years, and the market has just closed here at the Tokyo Stock Exchange. We're looking at a loss of more than 2.5 percent, down more than 450 points at 19,561 on the Nikkei 225. It made up about half of the losses because at one point this morning it was down over 700 points, but still. This is a big selloff for the first trading day. We're seeing the Apple outlook cut not just for the suppliers to Apple but the whole China slowdown story starting to eat into confidence here in Japan as well. And as an indication of that, the central bank and the finance ministers and the regulators held an emergency meeting in Tokyo this afternoon. This is the third week in a row that they've done something like this, and they tend to do this when there's a sense of panic in the market. So you can tell that this has been a build up since the end of last year.

On top of the Apple news, on top of the slowdown worries for China and the U.S. you have the resurgence in the yen. People are calling it a flash selloff on Thursday when the Dalian basically tanked 104. Today's it's been fairly stable at around the 108 level for Dali Yen, but still when you have a repatriation in funds like this there's a lot of concern because if the yen strengthens, it could eat away at Japanese corporate profits as well. So that has been a big concern on top of everything else for Japanese investors.

And I think on top of that, you're also seeing a general caution about the sanctions, the trade war going on between China and the U.S. In a addition to the equity, I think what's also noteworthy today is the moment that we're seeing in government bond deals because bonds tend to be a safe haven in times of turmoil like this. The yield on the benchmark Japanese government bond - that's a 10-year bond - fell below zero. So that's minus - minus 0.05 percent at one point. So these are yields falling into negative territory, so that indicates a lot of the panic that we're seeing in the equity markets.

It is still a little bit thin, but because Japan is such a liquid market, when international investors want to make a so-called China play, they tend to use Japanese companies like construction companies, electronics companies as a proxy play to get into that China mood. And as investors are starting to question the viability of the overall China's economy and what impact it's going to have sort of a double whammy from the trade sanctions, a lot of these electronics companies and construction companies, even some of the consumer electronic companies are getting hit hard. So it's a very, very rude awakening for Tokyo stocks today with a selling pretty much across the board but also - but mostly in some of the tech space as well. The broader topics index also ending down by more than 22 points today at 1,471. So after a four-day new year holiday, a very big selloff here in Tokyo.

NEWTON: Yes, and Kaori, coming off of a 15 percent drop for 2018, even more difficult than it was on the Dow. Kaori, thanks for your technical analysis there. There was a lot at play in the Japanese market and a good place to start today. Appreciate it.

We now want to head to Los Angeles and Global Business Exectuive, Ryan Patel. I mean, look. These are fragile markets and I do have that feeling in the pit of my stomach. You know, there were two things there. There was the word panic and also flash anything, right?


The flash crash that unfortunately we're used to. Ryan, try and dissect this for us. There has been this whole debate about whether or not this is tech and Apple specific or whether people against data that says otherwise should stop worrying about a slowdown.

RYAN PATEL, GLOBAL BUSINESS EXECUTIVE: Well, it is Apple tech specific and it is China specific.

NEWTON: Good news, Ryan. Thanks. Great. PATEL: Yes. Well, you said something that hopefully makes you feel better. You said flash, right? And I think this flash piece could kind of easily go away once this kind of comes down with the between China and the U.S. Apple specific, as you mentioned, you know, they have - China is a big market for them, and obviously they see the data that they were selling less and they were losing market hare in China, and that's because during these trade wars, people are buying less of Apple products, and the second piece, as I mentioned to you, was their iPhone sales were going down on top of that. And that's because multiple things. Obviously their price point's a little bit higher. They're losing - less people are trying to upgrade. So the things that they haven't been successful at has now kind of all kind of compounded on top of this. So when you have those kind of things and then you have CEO - Mr. Cook comes out and has to cut out expectations, that gut feeling that you were feeling, think about this. Warren Buffet today, his firm lost $4 billion on the Apple shares just alone.


PATEL: So that's a pretty penny.

NEWTON: Fought into the Apple level where he thought things could just - were going to continue to get better. I know you've been following this today, have been many people, but I just want to remind our viewers of White House Council Economic Advisor Chairman, Kevin Hassett, telling CNN that this Apple thing, it's going to affect a lot of different companies. Take a listen.


KEVIN HASSETT, WHITE HOSUE COUNCIL ECONOMIC ADVISOR CHAIRMAN: The rest of the world is slowing and that is having an impact on earnings, and you know, and it's not going to be just Apple. I think that there are a heck of a lot of U.S companies that have a lot of sales in China that are -


HASSETT: - basically going to be watching their earnings be downgraded next year until, you know, we get a deal with China.


NEWTON: You know, what's so interesting here, Ryan, is that he then followed that up to say that this could mean that a trade deal may happen more easily and more quickly. What do you think?

PATEL: Well, that's - he's being optimistic, and he also said then that thing it was about IP and both parties wanted to - you know, both parties from Republicans to Democrats wanted to get an IP agreement, but what does that even mean? I don't even know there's an agreement, what that deal looks like. So, you know, yes, it may get China to come to the table, but it's not all roses on the U.S. side as well. It is hurting Apple, and I think he proved the point to China's point, well, other companies like Boeing, like Caterpillar that took a huge hit that has these kind of construction plays in China, you know, how long can this go? And we also know China's GDP is coming down. They've already kind of recognized that. And so, they're both going to be bleeding. There isn't really a winner in any kind of trade war, and in this case it's shocking to me that we - you know, both sides can be optimistic. I think it's time to get together. I think we have more days like this. I assure you companies, consumers are going to be out and vocal and saying get this thing done so we can move forward.

NEWTON: And it's interesting because when that kind of pressure, though, has come to the floor, sometimes it hasn't worked. I will note that one of the reasons that we saw the Chinese markets up was that talks are now scheduled on those trade talks January 7 and 8, so Monday and Tuesday. I want you to listen, though, to what some advisors have been saying to their - you know, these are people that are moving large amounts of money around. This is from Ian Shepherdson from the - Chief Economist at the Pantheon Macroeconomics in a letter to clients saying awful and worse to come. The story here is that the trade war coupled with China's underlying slow down is wreaking havoc in both countries. Ryan, I would argue and beyond. You know, we just heard from Kaori in Toyko. I am worried about the trade silos, and I'm wondering what you think when we talk about these trade skirmishes right now because that's what they are, but let's talk about trade in Europe, let's talk about trade in Japan, let's talk about trade in South Korea and say that countries are starting to retreat and for very specific political reasons not wanting to do the trade deals that we've seen for the last few decades.

PATEL: Yes, and I think throw the fundamentals out. Like we used to be at a place where you used to look (ph) fundamentals are (ph) looking at specific companies, and now we live in this day of age where these kind of days, even any kind of rhetoric, it changes the market today. People are scared. You talk about China and the U.S. Think about what to come to 2019. You've got Brexit. You've obvisouly got last year you saw Turkey and Italy got their own worries, and you've - you know, obviously you've got the Middle East. You've got the Qatar and the Saudi - the Saudi blockade on Qatar. This is - they may seem regional to you and I, but they're not.


They're all interconnected in this, and this is why, like you said, these specific trade deals between certain countries, certain regions become even more heightened to be able to get into this kind of deals. Like I said, this is - this is going to be a year where the market will see some extremes while we are seeing this volatility, and it may be just on somebody saying a tweet or a certain message just to kind of change it, and that may be the new norm for this year I hate to say it.

NEWTON: Now, as you said, the sickening feeling in my stomach, Ryan, is still there, but -

PATEL: I tried to get it out. Think long-term. Think long-term.

NEWTON: Yes, I think long-term and those bargains that some people can now pick up on the stock market. Ryan, really appreciate seeing you.

PATEL: (inaudible)

NEWTON: Now, Democrats are back in control of the U.S House of Representatives, but behind the smiles and all that good cheer was the reality of a partial government showdown - shutdown that is now already two weeks old with no end in sight. We get more now from CNN's Manu Raju on Capitol Hill.


KEVIN MCCARTHY, U.S. HOUSE REPUBLICAN: To the Speaker of the House, Nancy Pelosi, I extend to you this gavel.

MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: With that, Nancy Pelosi officially took over as House Speaker and the newly emboldened Democrats took charge in the House with plans to confront President Trump and his administration.

NANCY PELOSI, SPEAKER OF THE HOUSE: Two months ago the American people spoke and demanded a new dawn.

RAJU: Goal number one, reopen the government amid a bitter standoff with Trump who is demanding billions for his border wall despite the stiff opposition by the new House Speaker and her powerful majority. But Senate Republicans refuse to take up the bill because of Trump's opposition. Goal number two, conduct what could be the most aggressive and expansive investigation of a sitting president on a wide array of his controversies, and already Pelosi facing pressure from her caucus to move forward on impeachment proceedings, especially once Robert Mueller's investigation concludes.

On the first day of the new Congress, one Democrat introducing articles of impeachment against the president.

BRAD SHERMAN, U.S. HOUSE DEMOCRAT: The road to impeachment is a long road, many miles. The standard is high crimes and misdemeanors, and he has committed the felony of obstruction of justice.

RAJU: Some influential Democrats are not ruling it out.

ADAM SMITH, U.S. HOUSE DEMOCRAT: But it's something we are clearly going to have to investigate. There nod that (ph) is the best path forward.

RAJU: Pelosi for now wants to keep the focus elsewhere but telling NBC News she is not closing the door.

PELOSI: We shouldn't be impeaching for a political reason and we shouldn't avoid impeachment for a political reason. So we just have to see how it comes.

RAJU: Democrats have a laundry list of items they want to investigate. The Chairman of the House Oversight Committee tells CNN he wants to get to the bottom of the decision to put a controversial citizenship question on the U.S. Census suggesting Commerce Secretary, Wilbur Ross, mislead Congress.

ELIJAH CUMMINGS, U.S. HOUSE DEMOCRAT: He has to answer for something that he said that I don't think was accurate, and what we're going to do is be in search of the truth.

RAJU: Also, acting Attorney General, Matt Whittaker, could be forced to appear before the House Judiciary Committee this month to answer questions about his oversight of the Mueller investigation.

JERRY NADLER, U.S. HOUSE DEMOCRAT: They're trying to get a date, and they're dragging their feet on a date. We'll see what happens.

RAJU: You want to - will you send us a (inaudible) if he doesn't -

NADLER: We have to.

RAJU: For Pelosi, the challenge will be balancing demands from her base looking to take on the president and other eager for bipartisan accomplishments. On the floor today, 15 Democrats revolted and opposed Pelosi's ascension to Speaker thought she was elected with 220 votes, four more than she needed, and now she represent the most diverse House in American history with a record number of women and minorities sworn in.

In the Senate, the GOP added two more seats now with a 53-47 majority and the ability to protect the president against their democratic foes.

Now, the Republican leader, Mitch McConnell, made very clear that he is not going to move on the House Democratic bill to reopen the government for one reason and one reason only - it is opposed by President Trump. He does not want to put anything on the floor of the Senate that could pass, could land on the president's desk, force him to veto it even if there may be the votes to override a presidential veto. He said today that he has no role in ending the standoff. He said it's all about House Democrats and the president to negotiate a solution, and they plan to have a meeting on Friday to discuss this going forward at the White House. But the question is will any of this - can resolve only lead to more bickering. Maju Raju, CNN, Capitol Hill.


NEWTON: Jessica Levinson joins me now. She's a law professor at Loyola University in California. Quite a day. I think many people would say that it is about time in terms of Congress actually trying - at least trying to reflect the diversity in America.


JESSICA LEVINSON, PROFESSOR OF LAW & GOVERNANCE, LOYOLA LAW SCHOOL: It is, and what we've seen is a number of times where in America we've said it's the year of the woman. This is the year of the woman in the sense that we have over 100 members of Congress who are now women. 90 percent of those are Democrats, but we're still not anything near gender parity. We also have a more diverse House than we've ever seen. We have the two first Native American members of Congress. We have Muslim members of Congress. We have many more Hispanic members of Congress.

So is Congress starting to look more like America? Absolutely. Are we close? No, there's still a huge.

NEWTON: There is a huge gap and we'll take a pause here to at least celebrate how far the country has come, though, after these midterms. You know, a lot of questions about whether that diversity extends as well to the Republican party. We do want to take a breather here, though, Jessica, right? As I was saying, it's one of the more positive days that we've seen in Washington in quite some months. I want you to listen now to Ilhan Omar tell CNN exactly how she feels about being a refugee and now a congresswoman.


ILHAN OMAR, U.S. HOUSE DEMOCRAT: As we exited our place, we realized that him and I had not returned on that same airport since the day we first landed her as refugees. And so, you know, it is - it's very - really overwhelming and emotional time for us.


NEWTON: You know, and she's saying, Jessica, it's emotional. She has her father standing right there with her, and yet when we go to that leadership, when we go to the diversity, what will it actually mean considering right now the government is shutdown over what? A wall to keep migrants out.

LEVINSON: It's very ironic, and I have to say the congresswoman's tweet, I think, was one of the most powerful things we've seen in a long time where she bascialyl tweeted a picture of her father at that very airport and she said what she had just said which was we haven't been here for 23 years since we were refugees, and that really is when people think of the American dream and when they think of an American story. In 23 years being able to go from refugee status to an elected member of Congress is really enormous, and again, that's why that will be one of the biggest visuals that we take away from this new Congress, from the swearing in ceremony. As you've said, it's juxtaposed, though, against the fact that the government is shutdown because we're trying to keep people out, because President Trump has said, "I need funding for a wall." And what we see with this new Congress is I think that's just not likely to occur. I think that the president, frankly, had a much better chance with the Congress of last week and the Senate of last week. So this really is, in a way, an incredibly high stakes game of chicken to see who's going to blink first. You know, the past and current Speaker of the House now the most powerful elected - female elected official in America has said, "you're not getting the funding for that wall," and I take her for her word (ph).

NEWTON: And yet, Jessica, doesn't that bring us right back to square one in terms of where that leadership takes you? I mean, what good is the diversity in Congress if Americans are just going to see the same old reruns played over and over again? You know, before - I want you to listen to Nancy Pelosi talk about the significance of her, once again, taking on that gavel as Speaker.


PELOSI: I don't think of it as an accomplishment. I think of it as a responsibility in how we go forward. And what that means in terms of the lives of America's working families and that more this isn't breaking a glass ceiling. This is breaking a marble ceiling in the capital of the United States.


NEWTON: As poignant as those words are, Jessica, she said that before and not much has changed in terms of, again, those working families that she and her party want to represent.

LEVINGSON: Yes, this is such an important question. So I would say, one, we're entering an era of a divided government, and that means there's going to be gridlock. So does it matter that Congress is diverse? I mean, in that very kind of 30,000 foot view of will we continue to butt heads and fail to pass bipartisan legislation? Yes, we will, even with a more diverse Congress. But we know from study- after-study in social science and political science and psychology that more gender diversity, more racial diversity when it comes to people who are at the table making decisions can lead to different and better policy outcomes. So I still think that it is different, one, just for people to be able to look at their representatives and say, "they look more like us. They're at least fighting for things that we care about and they're more atuned with us," because that will get more people civically engaged. And I also think that it could bring a new approach.


Does that mean that we will have, you know, everybody's going to join hands and the President of the United States and Nancy Pelosi are going to accomplish, you know, amazing things together? Absolutely not, but I do still think it makes a difference for both symbolic and practical reason.

NEWTON: And Americans are counting on it, in fact, to be transformative this time around. Jessica, thanks so much. Appreciate you being with us.

LEVINSON: Thank you.

NEWTON: OK, next on CNN Newsroom, Russia detains an American in Moscow and says he's a spy, but a former CIA official says this case is all about getting leverage over the U.S. Plus, North Korea's top diplomat in Italy hasn't been seen in weeks. What his disappearance could imply.


A Russian news site says the American arrested in Moscow last week was caught with classified information on a flash drive. Now, CNN hasn't verified that report, but our Matthew Chance has spoken with the Russian lawyer assigned to ex-marine Paul Whelan. (BEGIN VIDEOTAPE)S

MATTHEW CHASE, CNN SENIOR INTERNATIONAL CORRESPONDENT: It's at this former KGB prison in a suburb of Moscow that Paul Whelan, now formally charged with espionage, is being held. His Russian defense lawyer told CNN his detention is unwarranted, but he says he has now been granted access to the former U.S. Marine whose mood he describes as cheerful with no depression. It's the first publican indication we've had of how Whelan is holding up behind bars.

"The only thing is a problem with hygiene items," the lawyer said, "such as a razor, shaving foam, toothbrush, toothpaste, underwear. Paul asked for these items and investigators will ask the prison administration to supply them." It was at this upscale hotel in Central Moscow, the five-star Metropol, where Whelan was staying when he was detained. There's still been no official explanation of the circumstances except that he was, quote, "caught spying by the FSB - Russia's main counterespionage agency." But now, one private Russian news agency, Rosbalt, quotes an intelligent source as saying Whelan was arrested in his room at the Metropol five minutes after he accepted a flash drive with a list of employees working at a classified security agency. The report also makes reference to Whelan's presence on Russian social media. Rosbalt's source says the security consultant sought out Russian Internet users, tracked and selected in advance by American intelligence. CNN can't independently verify the report and the unnamed intelligent source may have an incentive to build this narrative around the arrest. But if Whelan is convicted of this true or not, he faces up to 20 years in a Russian jail. That's plenty of time to be swapped for this woman - Maria Butina, a Russian gun activist now facing a prison sentence of her own in the United States after pleading guilty to conspiracy. Prosecutors accused her of infiltrating U.S. conservative groups on behalf of the Russian state. She's been cooperative with U.S. investigators. There are other possibilities for a prisoner swap, too, like Viktor Bout, notorious Russian arms trafficker dubbed the Merchant of Death currently currently languishing in a U.S. jail - or Konstantin Yaroshenko convicted in 2011 of conspiring to import cocaine to the United States. Russia's Foreign Ministry says Bout and Yaroshenko are hostages in Washington. Now Russia may have an American bargaining chip with which to trade. Matthew Chance, CNN, Moscow.


NEWTON: Joining me now is Steve Hall, CNN National Security Analyst and former Head of Russia Operations for the CIA. You know, Steve, you called it - you kind of assumed that this evidence would be in some way, shape, or form uncovered sooner or later. You also have been very pointed about saying that at this point in time Mr. Whelan is a hostage. Why?

STEVE HALL, CNN NATIONAL SECURITY ANALYST: Well, first of all, the reason he's a hostage is because there really is no rule of law in Russia, so all of this talk that you hear about, oh, there's - you know, there's been sentencing or there's been a conviction or there's been an indictment or there's been some legal proceeding, all of that is a thin veneer that is - that Putin and Kremlin lay out there so that those of us in the west like to draw some sort of comparison between either Maria Butina or any of the other Russians that actually have undergone, you know, a real rule of law type of situation here in the United States and the west. So you know, given that fact that there is no real rule of law in Russia, he has simply been singled out and grabbed and taken hostage. He's not an intelligence officer. It's not surprising that they've come up with a really, really good story because they're really, really good at doing that. That's kind of one of the things that they do.

NEWTON: They are in fact, and yet it was so predictable trite almost you and I could have put it together in a novel with them coming up with this thumbnail, but is it not, you have to admit Steve, shrewd of the Russians? Geopolitically, look, it doesn't do anything for them. But it's a pretty good poke when they've got Maria Butina, as you say, that they - you know, my eyebrows went up when the Foreign Ministry in Russia called Maria Butina a political prisoner, and should not that have been the first warning?

HALL: You know, the Russians are so good at this. They know that those of us in the United States and the west in general have this idea of fair play and everybody gets a shot and should be judged equally, and they take that to the bank every single time. So they will say things like, well, Maria Butina is a political prisoner. She's been tortured. She herself is a hostage because they know that the western mind will say, "well, hold on. Maybe there is some comparison here." And there simply isn't. There is - you know, when Vladimir Putin wants something done, it gets done. One of the things that caused my eyebrows to go up was when - was when Mr. Whelan's supposed lawyer said, you know, this could take six months or even longer in the Russian legal system. Interestingly, Maria Butina's longest sentence could be about six months. So in my mind, there is no doubt that they are playing for some sort of leverage to get Butina back as quickly as quickly as possible.

NEWTON: Yes, and he also talked as if he was already engaged and where I'm going to go next on this on some type of prisoner swap. I mean, as I said, it goes nowhere, but what is the message here from Putin to the Trump administration? And I point out this is not against the Trump administration. Maria Butina is basically caught up in an investigation that the president continually calls a witch hunt.

HALL: This is Vladimir Putin simply finding another way to kick around this particular administration. And it's not unique to this administration or even to the United States. And until the United States and its western allies figure out a way and then have the where with all morally to basically stand up to Putin and say, "look, this will not stand. You will pay a price that is much larger than sanctions. It is much more dangerous to Russia and to you, Putin, directly." He'll keep doing it because he can and he'll just keep pushing forward until he bangs into something that say, "OK, I better not do this anymore because I don't want to pay that price."

NEWTON: We certainly don't see that in the offing any time soon. I mean, Steve, I have to ask you it's not that the cases are connected in any way, shape, or form, but when you see that fact that even two Canadians right now are detained in China, I mean, China has been, in fact, pretty blunt about why and how they were detained. Do you see this as quite a permissive environment at this point for the so-called bad actors, countries that believe that, you know, the rule of law and so-called democracies is a sham and that what's good for goose is good for gander. You take one of ours, we'll take one of yours.

HALL: Those are some of the things that keep me up at night more than anything else. People do a lot of talking about, oh, well you know, what's the trade relationship with, you know, with China? What about Brexit? What all these things are sort of shorthand for is the dissolution and the divison of western democracies and things we value so much like the rule of law. And what that does, of course, is it empowers Russia. It empowers China. It empowers North Korea, you know, Venezuela, other authoritarian dictatorships to do pretty much whatever they want because when the west doesn't stand together for those values, basically western citizens everywhere can be subjected to this type of thing.

[01:29:52] I would not tell my family or my friends to travel to any of these places, but especially Russia right now because I don't care whether you have a paper route or whether you're a high-powered businessman, you can be picked up and framed really, really quickly and easily for Putin's geopolitical goals.

PAULA NEWTON, CNN ANCHOR: Yes, incredibly chilling you say there, Steve. And we should say that at this point for the family especially of Mr. Whelan right now, these are tense times.

Steve -- thanks again. Appreciate it.

HALL: Sure.

NEWTON: Strong wind pummels Thailand as the country prepare for a rare tropical storm. But that's not even the biggest concern.


NEWTON: You are watching CNN NEWSROOM. I'm Paula Newton.

The headlines this hour.

Stocks in Asia are mixed after another dismal day on Wall Street. Tokyo's Nikkei closed down 2.25 percent. Hong Kong and Shanghai though were higher after word of a new round of U.S.-China trade talks.

In New York meantime, the Dow sank 660 points Thursday after a warning from Apple that it won't meet sales targets.

Democrats officially retook control of the U.S. House of Representatives on Thursday and once again picked Pelosi to be house speaker. Now one of their first orders of business was to pass legislation to try and end two weeks of that partial government shutdown. The Republican-controlled Senate is not expected to take action because the White House threatened a veto. A Russian news site reports the American detained for spying in Moscow

was caught with a flash drive containing classified information. Now CNN has not verified these allegations against ex-Marine Paul Whelan. His Russian lawyer says he has appealed Whelan's detention and applied for bail.

Ok. Thailand is bracing for what could be the most devastating storm there to hit in years. Thailand's popular tourist islands are beginning to feel the effects of this tropical storm already. Thousands have been evacuated while wind and storm surge will be, of course, dangerous. The largest concern right now is for flooding and mudslides.

Meteorologist Derek Van Dam joins us now. And I have to say happy new year to you.

And unfortunately in Asia starting again with some very volatile weather. You know, I was surprised to learn that a tropical storm hadn't hit Thailand in so many years.

[01:34:57] DEREK VAN DAM, AMS METEOROLOGIST: Yes. Since 1962 actually. And this is a beautiful part of the world -- Paula.

We've got very popular tourist destinations like you're talking about -- Koh Tao, Koh Samui, Koh Phangan; we have Phuket and the Phi Islands within this area. Many of those locations have been evacuated and many of the tourists have been brought to the mainland and parts of Thailand.

Now here's the latest radar. We're noticing that the eye wall, the center of the storm, the strongest part of the tropical system just starting to enter into the coastal areas of southern Thailand. Here's Koh Samui and the major tourist islands off the east coast of Thailand.

The good news is that the eye wall, the strongest part of the storm is just to the south. But nonetheless over the next 12 hours they will be in the thick of it. Heavy rain and the potential for flooding and mudslides exist across this area.

This storm was the last tropical storm to form across the world in 2018. It carried into the new year and here it is in the Gulf of Thailand about to make landfall within the next five to six hours, again as the center of that storm finally crosses the east coast of Thailand -- 95-kilometer-per hour sustained winds with gusts over 120 kilometers per hour.

This is why I'm so concerned about this storm in particular. It has been a long time since the tropical storm or a typhoon has reached the shores of Thailand, in fact the tropical storm Harriet back in 1962 unfortunately killed over 900 people. But because it has been so long since this area has been impacted by a tropical system, they're not prepared. They're not really used to this type of severe weather.

So the potential for high surf, the mudslides and the flash flooding in the villages below is a real concern for this area as the tropical storm crosses over the Malay Peninsula over the next 24 hours.

And then there's that recurse towards the north and east later into the weekend and into early next week is the potential for this bringing another flooding rain event to parts of Myanmar.

Look at the rainfall totals so far in southern portions of Thailand. Almost 200 millimeters recorded across this area as the Phuket mountain range runs from north to south across the Malay Peninsula. Paula -- we have a potential for another 200 millimeters of flooding, our major concern here.

Back to you.

NEWTON: Yes. Derek I know you'll continue to keep an eye on it. And let's hope Thailand heeds the warnings of many other Asian nations unfortunately who have gone through this.

VAN DAM: Yes. Correct.

NEWTON: Appreciate it.

Now North Korea's top diplomat in Italy and his wife have been missing for weeks, raising suspicions they've defected. Jo Song-gil's term was set to expire November of last year. Anonymous sources told a prominent South Korean newspaper that in fact he's seeking asylum in the west. If true, Jo would be the highest ranking North Korean official to defect since 2016.

Our Alexandra Field has been following this story from Hong Kong. Good to see you -- Alexandra.

What is confusing to me about the story is why we have not had confirmation because some people have even speculated that could this couple, could this diplomat and his wife have actually already been taken back to North Korea. Do we know for sure that that did not happen? And that he and his wife may be now claiming asylum somewhere in the west?

ALEXANDRA FIELD, CNN CORRESPONDENT: Honestly, Paula -- we know nothing for certain at this point. This is a development that is absolutely shrouded in mystery. And you point out the most perplexing fact which is that this is really coming to light well after it happened.

We understand that Jo Song-gil and his wife both disappeared a few weeks before his diplomatic mission was set to end. It was supposed to come to an end at the end of November. He had been in Italy since 2015. What has happened in the intervening weeks and months, not at all clear.

If any officials know where he is, they are not saying. What we've heard from the Italian foreign ministry is that there has been no request for asylum from a North Korean diplomat.

South Korean officials obviously closely watching this as well. The national intelligence service in South Korea did brief lawmakers on the fact that this North Korean diplomat was missing. But they have not been able to confirm at least publicly whether or not they believe that he could have defected.

So lots of speculation here, given the fact that this is somebody who seems to have disappeared without any explanation. Italian officials simply being told that they were told that his work had come to an end back in November. He has since been replaced in his post.

And Paula -- I'll point out that this is somebody who had actually replaced the former North Korean ambassador to Italy who was expelled from the country back in 2017 because of mounting tensions with North Korea and particularly in the aftermath of that country's fifth nuclear test.

NEWTON: Yes. As you say, it continues to be quite a mystery. And it'll be interesting to see what we learn in the coming days or unfortunately maybe even weeks.

Alexandra -- thanks so much. Appreciate it.

Now the trial against 11 men accused of murdering journalist Jamal Khashoggi is under way in the Saudi capital. Now, prosecutors are pushing for the death penalty for some of the suspects but Turkey says it should be the one conducting this murder trial because that's where Khashoggi was killed.

[01:39:59] CNN's Gul Tuysuz explains.


GUL TUYSUZ, CNN PRODUCER: Three months ago Jamal Khashoggi walked into the Saudi consulate building behind me. And today was the first hearing in his murder case in Saudi Arabia.

We don't know a lot about how that process is going to be unfolding. But what we do know today, we have from the Saudi prosecutor's office saying that there are 11 suspects who are being tried in this case and they are going to be asking for the death penalty for five of those suspects.

We don't know the names of them but the Saudi prosecutor's office says that those five are ones who had direct involvement in the murder itself.

The other thing that we know at this point is that as the trial was unfolding, the suspects asked for copies of the indictment and asked for more time to prepare, a wish that was granted by the court.

The Saudi prosecutor's office also issued a statement saying that they had been asking, sending letters to their Turkish counterparts, asking for any evidence that Turkey had in relation to the murder. And they said that their requests have not been answered thus far.

We know that there has been a lot of diplomatic back and forth between Turkey and Saudi Arabia when it comes to the murder of Saudi journalist Jamal Khashoggi. Turkey saying that Saudi Arabia as opposed to collaborating is trying to figure out what evidence Turkey has and -- they're really asking that the case against those suspects involved in the murder of Jamal Khashoggi be tried here in Turkey. That issue has not been resolved.

But what does remain now is that for the loved ones of Jamal Khashoggi, there isn't a lot of peace because the whereabouts of his body still remain a mystery.

Gul Tuysuz, CNN -- Istanbul.


NEWTON: Pope Francis is blasting Catholic clergy over the handling of recent sex abuse cases. Now ahead, the scathing letter the Pontiff sent to U.S. bishops. And what he wants them to do now.


NEWTON: Pope Francis says the credibility of the Catholic Church has taken a hit after multiple sex abuse cases. Now in a letter to U.S. bishops this week, the Pope called for a renewed approach to fixing what he calls a culture of abuse within the church.

Our Barbie Nadeau has more from Rome.


[01:44:55] BARBIE NADEAU, CNN CONTRIBUTOR: Pope Francis did not mince words in a letter to U.S. Catholic bishops who are meeting at a spiritual retreat outside of Chicago this week. In the letter he called for them to be discerning and for conversion.

The United States is not the only country that has been subject to widespread clerical sex abuse in recent years. But it is by far one of the most problematic.

Over the summer the Pennsylvania grand jury issued a damning report that outlines decades of clerical sex abuse by hundreds of priests against thousands of children.

Several other states in America have followed suit with their own investigations. In his letter to the U.S. bishops he writes "In recent years the church of the United States has been shaken by various scandals that have gravely affected his credibility. These have been times of turbulence in the lives of all those victims who suffered in their flesh the abuse of power and conscience and sexual abuse on the part of ordained ministers, male and female religious and lay faithful. But times of turbulence and suffering also called for the families and for the entire people of god."

Pope Francis has called leaders of the church to meet in February in Rome to discuss the global clerical sex abuse crisis. Hopefully they'll be able to find solutions that will pacify the victims and will allow the faithful to continue to have faith in their church.

Barbie Latza Nadeau for CNN -- Rome. (END VIDEOTAPE)

NEWTON: Nancy Pelosi is back on familiar turf as she takes over as U.S. House Speaker in the new Congress. Now, it is the post she held, of course, from 2007 to 2011. She's also the first woman to ever become speaker, the only one I'll add.

On Thursday she easily prevailed over Republican rival Kevin McCarthy even as 15 Democrats voted against her. Now she reclaimed the speaker's gavel with an eye to history.


REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: We enter this new congress with a sense of great hope and confidence for the future and deep humility and prayerfulness in the face of challenges ahead.

Our nation is at a historic moment. Two months ago the American people spoke and demanded a new dawn.


NEWTON: Ok. Now becoming one of the most powerful women in American politics was not a straightforward path and it certainly wasn't easy.

CNN's Dana Bash spent some time with Speaker in Pelosi's hometown of Baltimore.




BASH (voice-over): To really know Nancy Pelosi, you go where it all started -- Little Italy in Baltimore, where she was born to Congressman Tommy D'Alesandro and Annunciata D'Alesandro. When she was six, her father became Baltimore's first Catholic mayor.

PELOSI: He leapfrogged over the Irish. That was a big deal. But it took a political organizing to do that.

BASH: Much has been made of Pelosi's father's influence on her. Less known is her mother's.

(on camera): Your mom actually patented a device, the first device to apply steam to the face.


BASH: Basically an at home facial.

PELOSI: That's right.

BASH: That's incredible.

PELOSI: That's incredible.

BASH (voice-over): Pelosi says her father and the time held her mother back in many ways but Annunciata D'Alesandro was a quiet force in politics.

PELOSI: My mother was very much a part of the organizing. My father was the orator, the public servant.

BASH (on camera): And your mother got stuff done.

PELOSI: Well, my brother called it her moccasin brigade, all of these women who would be part of getting the message out, being at events.

There are two things about what I bring with me from my family in this regard. One is to know how to count. That's very important -- count your votes to win the election. Count your votes to win a vote on the floor. But the other is, listen to the constituents.

BASH (voice-over): The D'Alesandro home was at the center of this Italian community. A vivid childhood memory helping new immigrants who knew where her father, the mayor and his family lived and would regularly knock on their door asking for help.

PELOSI: Since I was a little girl, I knew how to tell somebody to get a bed in city hospital. How to try to get housing in the projects -- because that's right here next to us. And because I heard my mother say it so many times.

BASH: After college, she wanted to go to law school. Instead, like many in her generation she got married, and started a family.

PELOSI: When I got married, and I had a baby and another one, five and six years, people are always were saying, oh, she knew when she was a little girl, she wanted to run for office. I never thought of that at all, ever, until I did.

BASH: The Pelosis moved back to husband Paul's hometown, San Francisco. She became more and more active in the Democratic Party. But it wasn't until her youngest daughter was a senior in high school that she ran for an open House seat.

PELOSI: I went to her and said, you're going to be a senior, mommy has a chance to run for Congress, I don't know even know if I'll win.

BASH (on camera): She said get a life.

PELOSI: She said get a life. And I did.

BASH (voice-over): When she first ran for House leadership 18 years ago, her male Democratic colleagues didn't get it.

[01:49:55] PELOSI: When people said oh, there are a lot of the women are supporting Nancy to run. And they said well why? Do the women have a list of things they want us to do? Why don't they just make a list and give us the list? This is the Democratic Party in the year 2000. BASH: She attributes her boundless energy to Italian genes. It's

certainly not a balanced diet. Dark chocolate and ice cream. Vaccaro's has been her favorite since she was a little girl.

PELOSI: The chocolate. Not the chocolate chip, the chocolate. I like my chocolate unadulterated.

BASH (on camera): How do you think that you wield your power as a woman differently than a man does?

PELOSI: Other people tell me if you're at a meeting or something, they'd say, do you understand how different that meeting would have been if a man were conducting it?

BASH: Do they explain how?

PELOSI: Well, you listen, you build consensus.

KEVIN MCCARTHY (R-CA), HOUSE MINORITY LEADER: I extend to you this gavel.

BASH: That's exactly what she did to get enough votes to be speaker again. She made compromises with Democratic doubters looking for someone new, not her.

PELOSI: None of us is indispensable. But some of us are just better at our jobs than others and I have a following in the country apart from anybody who has run for president.

BASH (on camera): For most women, frankly, you know, myself included, it is hard to say those words, "I am uniquely qualified. I deserve this. I earned this, I can do this better than anyone else." But you can say that.

PELOSI: You know why I do it? Dana -- I do it because I want women to see that you do not get pushed around. That you don't run away from the fight.

BASH: Dana Bash, CNN -- Baltimore.


NEWTON: Now an attempt to embarrass freshman Democratic Congresswoman Alexandro Ocasio Cortez looks like it has backfired badly. An anonymous Twitter user posted video of her in college dancing like Ally Sheedy in "The Breakfast Club". I'm not familiar with it. I don't know what that is but have a look at that video. The user called her a Commie-know-it-all.

But Twitter struck back. And got to her defense. One user wrote, "Wow, new footage appears to show Alexandria Ocasio Cortez being -- adorable? And they said Twitter got the last laugh there.

Next on CNN NEWSROOM, Dutch beaches littered with shoes and appliances -- how hundreds of household items washed up on shore, forcing tourists to help clean up the mess. (COMMERCIAL BREAK)

NEWTON: Ok. If you're millennial, video gamer or addicted to selfies, you could be just what the British army is looking for. New recruitment ad targets snowflakes who are with compassion. Selfie addicts who also have compassion. And phone zombies that have focus. Not that campaign comes after the army announced it has failed to meet recruitment quota. I thought those actually applied to all millennials. But I digress.

Now, several tourists in the Netherlands have spent part of their day trying to clean up beaches that are littered with hundreds of shoes, TVs and toys. Now the items washed ashore -- look at that video-- after more than 200 containers fell off a cargo ship off of a German island. The Dutch coast guard said 21 of those containers ended up on the beaches of a few Dutch islands and included furniture, appliances and even computer chips. But officials, of course, did try and warn people that the containers carried hazardous chemicals as well.

[01:54:56] Now U.S. President Donald Trump has frequently dismissed the special counsel's Russia investigation as quote, "a witch-hunt". But after reports that his comments upset supposed -- supposed real life witches the President's allies came to the defense saying the stories were nothing more than hocus-pocus.

Our Jeanne Moos explains.


JEANNE MOOS, CNN CORRESPONDENT: This is a witch story that continues to cast its spell. The other day we told you about self-proclaimed witched peeved at President Trump for always saying --

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: You know, I call it a witch-hunt. This is a witch-hunt like nobody's ever seen --

MOOS: We interviewed a couple of witches.

UNIDENTIFIED FEMALE: It does demonstrate his ignorance.

UNIDENTIFIED MALE: Really disgraceful.

MOOS: -- and thought we were done.

UNIDENTIFIED FEMALE: Now the witch is back.

MOOS: After all of our toiling over the subject.

UNIDENTIFIED FEMALE: Double, double, toil and trouble.

MOOS: The President's son took the trouble to retweet our story dismissively. The derangement is real folks. #TrumpDerangementSyndrome.

Maybe Don Jr. was unaware that Fox News had done at least two segments on the same story. JESSE WATTERS, FOX NEWS HOST: Now upsetting actual witches.

MARK STEYN, FOX NEWS CONTRIBUTOR: Some real life witches are angry at him.

MOOS: Talk about hocus-pocus. Fox News even aired part of my piece -- witches tend to side with liberals. CNN and Fox -- bewitched and bemused by the subject.

WATTERS: Joining me now, our go-to witch, Dakota Bracciale (ph).

MOOS: Next Rudy Giuliani jumped on to the broomstick with this seemingly earnest tweet. "There is no reason for the witches to be offended because witch-hunt derives from, for example, the Salem witch-hunts where people were executed unjustly.

The President's lawyer tweeting about witches raised eyebrows. Rudy, sir, just stop. Even Kellyanne Conway's husband George took a swipe. Remember this is the best lawyer who Donald Trump could persuade to represent him.

UNIDENTIFIED FEMALE: Fire burn and cauldron bubble.

MOOS: But this cauldron is bubbled enough since the "Daily Beast" first featured the story last month.

Time to break the spell and kill the story.

UNIDENTIFIED MALE: The wicked witch is dead.

MOOS: Jeanne Moos, CNN --


MOOS: -- New York.


NEWTON: Ok Jeanne, we got the message. Kill the story.

You are watching CNN NEWSROOM. I'm Paula Newton. The news continues though right here on CNN right after this.