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U.S. Expresses Grave Concern Over Intimidation Claim By Guaido; Defense Attorneys Present Their Closing Arguments in the Trial of El Chapo; MIT Engineers Develop Jenga-Playing Robot; Trump Optimistic on Deal with China By March 1st; Italy Dips Into Economic Recession for Second Half of 2018; EU Commission Looks to Post-Brexit World; EU Sets Up Mechanism to Enable Trade with Iran; Juan Guaido: We Must Stop Maduro Usurping Oil Money; Global Oil Sector Braces for Venezuela Sanctions; S&P 500 on Track for Best January Since 1987; Dow Set to Close Flat; Investors Await Amazon Earnings. Aired 3-4p

Aired January 31, 2019 - 15:00   ET


PAULA NEWTON, ANCHOR, CNN: All right, so it doesn't look like a great day, but you know what you don't see there, the tech rally. We will get to

that. There is a lot going on today and this is what's moving markets on Thursday, the 31st of January.

You thought scandals could hurt Facebook. Yeah, right. Their shares are soaring and profits have never been better. Not to be outdone, GE. Shares

are up even more after the company's signs of a turnaround there are finally under way. And we've got China, trade talks in the Oval Office any

minute now. Yes, I told you. A busy hour ahead. I'm Paula Newton and this is "Quest Means Business."

Good evening. Sandals? What scandals? We're in the final hour of trading on Wall Street, and even as new controversies emerge, I'm telling you just

in the last few minutes, Facebook shares are on pace for their best day in three years. Now the company which also owns Messenger, WhatApp and

Instagram booked a record profit of $6.9 billion in the fourth quarter of 2018. As you can see up better than 12%.

Facebook spent the fourth quarter fighting scandal after scandal. First, the crisis that kept on giving, Facebook slow response to the Russian

election interference and reports that Facebook executives advised against revealing publicly what they knew about that. Second, Facebook was too

slow to remove posts discussing the sale of a child bride in South Sudan. Third, that Facebook executives hired a PR firm to attack liberal

billionaire, George Soros.

Then, in December, two privacy scandals in quick succession. First, a bug which exposed photos from 6.8 million new users and then, of course, less

than one week later, another report that Facebook shared far more user data with companies like Microsoft and Yahoo than it had admitted.

Remember, these are just from the last three months of 2018, not in the history of the Facebook. Now, the rest of the year was as bad or worse.

So has any of this driven away any users? I bet you already know the answer to that. Facebook's Chief Financial Officer dealt with that on the

earnings call.


DEAVID WEHNER, CHIEF FINANCIAL OFFICER, FACEBOOK: I would just - you know, I'd probably just let the numbers stand for themselves. We saw, that you

know, we are growing in all regions.


NEWTON: You heard it. The numbers speak for themselves. Now that growth explains Facebook's stock surge today. Wall Street is betting 2.7 billion

users can't be wrong. Now, just in the last few minutes, new revelations. Facebook and Twitter say they have removed thousands of accounts that

engaged in coordinated, what they say is inauthentic action. Many of those accounts originated this time in Iran and targeted users right around the


Our Samuel Burke is in London with the latest. Samuel, I know were on the call getting the information on this, why today and how intrusive, how

serious is this?

SAMUEL BURKE, BUSINESS AND TECHNOLOGY CORRESPONDENT, CNN: Well, Paula, the contrast could not be more stunning. On the one hand you have a company

whose stock is roaring up nearly 12% as you just described and yet, on the very same day that the stock is surging, the company is making clear that

they do not have the reins, the control over their own social network.

In the past few minutes, Facebook announcing a huge campaign to bring down what they call inauthentic behavior, originating in Iran they say, though

they are careful to note that there is not a connection to the government that they can see right now.

I want to just put up on the screen exactly the scope of what we're seeing here according to Facebook starting with the removal of 783 pages, groups

and accounts, Paula, and it's not just Facebook. It's also on Instagram. About two million accounts, we're following at least one of these pages and

Facebook was taking money for them, nearly $30,000.00 in spending for ads.

Many of these pages and accounts were masquerading as news websites, Paula, doing the work of journalists or that's what they wanted the users to

believe, and Facebook is even sharing some of the posts that they say they have taken down already. Many of them are anti-Israel in tone. We have a

post just like this, printing them out right now, this is just coming off. "Jene reconnais absolument pas Israel." "I will absolutely not recognize



BURKE: We have other accounts with images like this, the stereotypical anti-Semitic images of somebody with the Star of David and the large nose.

Of course, these aren't from authentic accounts. These aren't people's actual political views or anti-Israel messages, they are inauthentic

accounts, coordinated accounts, and at the very same time, Paula, we see reports coming from "The Washington Post" that Twitter is also taking down

pages that they say originate in Iran, Russia and Venezuela.

Again, important to note that these companies aren't making links to the governments. They are saying that this activity just originates in those


NEWTON: Any insight into how they found this and exactly if they are getting any better at trying to take down some of these accounts more


BURKE: Well, they are saying they are working with outside parties to do analysis of this type of content, and the fact that there's another social

network doing it right now as well might say that this was part of a broader effort. Facebook saying that they've shared the information with

the U.S. government, but we have no sense whatsoever if they are getting better at this.

In fact, I might even argue that it looks like they might be getting worse. Now, you might be saying, "Well, why? If they are taking down the

accounts." Tucked into the earnings report was a line that said that the number of fake accounts, Paula, on Facebook has risen by 27% to an all-time

high of 116 million fake accounts on Facebook, and that's according to Facebook. What about the pages that they may not know about?

Incredible that Sheryl Sandberg said after the earnings report, "We have proved with this blockbuster report that we can both protect the platform

and at the same time have profitability." If have you a surge of 27%, 116 million fake accounts, have you really protected the platform?

NEWTON: They claim, yes, right? They say they are doing the best that they can, and that is the challenge that they are up against. Our Samuel

Burke, thanks so much for jumping on that very quickly. As you can see, more news from Facebook with the problems they are having on protecting the

authenticity really, of their own platform.

Now, as we were saying, Facebook shares don't seem to be alarmed in the slightest by the latest development. If you can see, they are up better

than 11%. I want now you to weigh in on this. Please go to I want to hear from you. Our question today is would you consider quitting

Facebook? I'm going to ask you again. Anybody here in the studio going to give me an answer on that? Look at this, a silence. I'm getting silence,

people. No Facebook login is required. We'll discuss the results in a moment.

And I want all of you on the record as well. Rana Foroohar is CNN's global economic analyst and columnist at "The Financial Times."


NEWTON: They are sick of me telling them I have never been on Facebook ever in my life.

FOROOHAR: Interesting.

NEWTON: I identified it as a security risk early on in my career.

FOROOHAR: Good for you.

NEWTON: Having said that, Rana, you identified 2018 as the tech lash. I'm going to read your editorial back to you. You said, "This is a company

that was so desperate to protect its top leadership and its business model that it hired a shadowy PR firm that used anti-Semitism as a political


FOROOHAR: Indeed, and here we are.

NEWTON: But here's what I say to you. It worked. Their user base continues to grow. They are a very large formidable platform now.

FOROOHAR: They are.

NEWTON: And they say they are doing their best.

FOROOHAR: They are. It's interesting. I mean, Sheryl Sandberg came out and said, look, this last quarter has proved not only can we add people to

combat some of the fake news issues, we can fight regulators and we can grow at the same time.

But I'll tell you something, I think this year is really going to be the turning point because at the same time that you have all of these good news

happening with the Facebook shares, you have Senator Mark Warner, for example, Democrat in the U.S. coming out and saying, he's crafting new

legislation to try to put and a price on data so that people know the value of what have they are giving away.

I think a lot of the fact that people still go to these platforms has to do with the fact that they have no idea the value of what they are giving up.

And I think that when that becomes more transparent and you might get more competitors if there are antitrust issue, we could see a change.

NEWTON: It's so trite and such a cliche, but obviously, an educated consumer is the best thing that could happen here especially when it even

comes to those accounts that Samuel did such a good job of highlighting, if you're looking at something like that to really try and to see its origin

and where it is coming from.

I mean, I know I gravitate on something like Twitter to verified accounts, right, just to see what's there.

FOROOHAR: Exactly.

NEWTON: Having said that, you know, it's kind of like even regulation, will it work? Remember, we all - I know a lot of people don't remember the

phone company, but we all used to be angry at the phone company, but we didn't rip the phone off the wall.


NEWTON: That's what's happening here, Rana.

FOROOHAR: You know, it's true, but again, I am going to go back to this idea of competition. A lot of people see the privacy issues posed by

Facebook and Google and the like and the competition issues in two separate baskets.

I actually see them as being together, and I think that as you get U.S. and E.U. regulators really boring down and probably bringing some antitrust

cases against these companies, it will be like if you remember 20 years ago when Microsoft was under fire. The U.S. went after Microsoft for antitrust

issues. That actually allowed space for Google to be born. I think that you're going to see new companies being born as these come under more



NEWTON: And that they will have some more competition even more.

FOROOHAR: I think they will, and I think even amongst the giants, you already see companies like Apple and IBM starting to compete on privacy and

using data protection and privacy as a competitive advantage, so I think that this issue is out there. I think you're going to see a lot of action

this year.

NEWTON: One of the things some people have pointed out though, and as you give Facebook the benefit of the doubt, they say they are trying their

best. They are leveraging everything that they have at this right now. You're skeptical?

FOROOHAR: Well, I'm skeptical because the fundamental business proposition is still tracking everything you do and monetizing it. It's surveillance

capitalism. I mean, this is a whole new area. And by the way, it's not just the platform tech companies that are in it. Almost every business

these days is trying to track what you do from say a Starbucks to a Johnson & Johnson. I mean, your sneakers have chips in them.

This is - data is the new oil, and so I think that all the things you're seeing right now that Facebook is coming under pressure for, you're going

to see broader number of companies facing these pressures.

NEWTON: And yet some people say that because of definitely deep pockets and them getting in on the ground floor of regulation, that it's actually

Facebook that's going to be the winner in any kind of regulatory fight.

FOROOHAR: You know, it's interesting. I mean, certainly in Europe, GDPR which is the new privacy regulation that rolled out this past year, it

favors the big players in a sense that they have the money to actually enforce these rules and to comply. Smaller players don't have that legal

muscle, but I think we're in the beginning stages of a war. This is the first battle. This is really going to be I think the new too big to fail

battle in some ways. It's going to be big tech versus regulators just as the way it was with the banks.

NEWTON: One difference, I have yet to see the consumer outrage. We have to go. But what do you think? Do you think we'll see it?

FOROOHAR: I think we're going to see an Exxon Valdez privacy probably around kids -- kids and games.

NEWTON: Good point. Rana, always so good to have you on here. Really appreciate it. Remember, she called it technological 2018. According to

those of you voting at, most of you say, you would consider quitting Facebook, about a quarter of you say no way. I wonder what the

age spread is on that.

It is the last hour of trading on the last day of the month. The Dow is down on the day, but all three major indices are way up for the month. And

as you can see there, the NASDAQ getting a nice rally. Now, earlier today, the chief market strategist at National Holdings, Art Hogan put the rally

into context for us.


ART HOGAN, CHIEF MARKET STRATEGIST, NATIONAL HOLDINGS: We are having the best January in 30 years. We had the worst December in 30 years, 80 years.

I'd say we're pairing off very nicely in the last two months.

I think we've gotten back to the midpoint where valuations are reasonable. We are trading about 15.5 times this year's earnings and I think that when

you look at where both the Dow and S&P are, it's basically where we started last year, so we've gone 12 months without doing much and at the same time,

multiples have come down because earnings are much better.

Now, in 2019, the S&P can earn $170.00, which is down from $182.00, that's about 6% earnings growth, then I think we can have a normal year where

things don't go crazy and we're going to be at 2,800 or 2,850 at the end of the year on the S&P.

The only thing that stops that is trade. If this is a long drawn out mutually destructive trade war --


NEWTON: And we will get to that trade - those trade negotiations later this hour. Now, it is a good month as we were saying for the markets and a

busy day for earnings. Here to discuss all of that is CNN's Paul La Monica and of course, CNN's Matt Egan. Thank you both. I hope you came armed

with opinions. There's a lot of insight to be had from a lot of numbers. Let's go first. General Electric, it's funny because it's a great day for

General Electric, but look where it had to come from?

MATT EGAN, LEAD WRITER, CNN BUSINESS: You're right. You know, I think that Wall Street is betting that the crisis at GE may finally be over. The

stock is up double digits. It's like 45 minutes away from the best day in almost a decade, and, you know, the actual numbers were pretty crummy.

Power was down again. GE wouldn't even say whether or not they will generate any positive free cash flow in 2019, but, you know, they did clean

up one of the sins from the past. They had a $1.5 billion settlement over WMC Mortgage.

Aviation was really good. They had a profit there. It was up 24%. There were orders for their engine. It was up a lot and so, you know, I do think

that investors are betting that GE may have finally turned a corner here.

NEWTON: Tesla, no one is agnostic over Tesla. People love to hate it or love to love it. In those latest results, certainly a lot of people were

talking about the production issues there, but cash seemed to be okay. Cash on --

PAUL LA MONICA, CORRESPONDENT, CNN: Yes, Tesla still has a decent amount of cash. I don't think that's the worry right now, Paula. The problem,

the biggest problem, I think, Elon Musk, you just have to scratch your head and wonder why he does the things he does in the way he does sometimes.

They wait until the very last moment of the conference call with analysts after their earnings to pull the reverse Steve Jobs one more thing moment.

They gave bad news that the CFO is leaving, and that just, I think, leaves a bad taste.

NEWTON: It was the last thing in the phone call.

LA MONICA: It was the last thing in the phone call. You look at the transcript.

NEWTON: Bury the headline.


LA MONICA: It's just bizarre that this is what happened, because it's not as if there's anything wrong with Tesla. That's probably the reason why

the CFO is leaving. He's actually done two stints as CFO. It's nice for him to be able to go off into the sunset at a time where ...

NEWTON: With that cash on hand.

LA MONICA: ... people do feel like they have a good amount of cash and Model 3 demand is there. So there are a lot of things to like about Tesla,

but Musk can't get out of his own way sometimes.

EGAN: It's just another reminder that it's just like the ultimate high wire act there at Tesla because it's all built on divisionary brilliance of

Elon Musk which sometimes will lead to some executives leaving, and there's also a lot of debt there, which is why we're talking about cash, and that

has continued to be a concern there at Tesla.

NEWTON: It has been a great month for stocks so far. We've got Amazon tomorrow. Is this just going to blow -- sorry, today after the bell. Is

that going to blow the roof off of this market?

LA MONICA: I think we have to wait and see. I think what people are really going to be focusing on with Amazon. We know that sales growth in

the core retail business is starting to slow. Hopefully they had a good holiday quarter, both at the online business as well as their own branded

brick and mortar stores, Whole Foods, et cetera, but the number I'm really going to be looking at, Paula, is the AWS Cloud figures because Amazon Web

Services is so insanely profitable that it helps to subsidize every other thing that Jeff Bezos wants to do at Amazon.

Sometimes that requires big investments that may lose money, but they can afford to do it because AWS is just a huge cash cow now.

NEWTON: We saw Microsoft as well earlier with those great Cloud numbers as well, although the stock didn't fare so well. A lot of it was okay. In

terms of where we're going in general with the market, gentlemen, I mean, I've heard both things about the earnings. Of course, it's company


January though was a great month because basically expectations have been lowered, right, and people blew out the expectations.

EGAN: I also think it was because December was so horrible, right.

NEWTON: It was horrible.

EGAN: It was the worst December that we've seen in quite a long time and I think it was about the fact that people feared an imminent recession in the

economy. They worried about the Federal Reserve being overly aggressive, and the U.S.-China trade war. Listen, January is better because all three

of those things have improved.

U.S. and China are talking instead of raising tariffs on each other. The idea of an imminent recession doesn't seem likely right now and we have the

Federal Reserve that went from unbelievably hawkish to really dovish in record time.

LA MONICA: You were at the NYC yesterday and I swore when I was waiting to talk to you on yesterday's "QMB Express Show" I think there was a trader

behind you whistling "Patience" you know, the Guns 'n Roses song. I might be making it up because I'm a Gen X'er and I remember Gun's 'n Roses from

the late '80s early '90s.

NEWTON: I don't think you're making it up.

LA MONICA: I think someone was actually whistling that because it's the word of the month. Patience is the reason why we're having this record-

setting or almost record-setting January.

NEWTON: We have to leave it there. But really, the Fed gets the credit. The fact that Donald Trump even got off of the Fed's back. We'll tell you

all you need to know about that Fed meeting yesterday.

Gentlemen, thank you both so much. You came armed with opinions. I love it. More of you two. Excellent. Coming up. He is marshalling the Brexit

debates in the British Parliament, and gaining worldwide attention. Speaker of the House of Commons, you'll want to hear this. He talks

exclusively to CNN.

And Italy's economic downturn becomes has a full-blown recession. Could its European neighbors soon follow?



NEWTON: Now in a rare an exclusive television, the Speaker of the British House of Commons tells CNN says his job is like being a football referee.

You know the kind of football I'm talking about here, right, it's what we call soccer.

John Bercow is gaining an ever higher profile, thanks to his role in Parliament's Brexit drama. You may know him from his greatest hits. Take

a listen.


JOHN BERCOW, SPEAKER, HOUSE OF COMMONS: Order. Order. Order. Resume your seat. Resume your seat. Don't tell me what the procedures of this

House are.

Order. I know what I'm doing.

It's utterly irresponsible chanting in the background.

The House must calm itself. Zen.

Laughing and chuckling away as if there's a great amusement.


NEWTON: Isn't that great? Bianca Nobilo is here. I can't think of a better person to exclusively interview, the Speaker. By the way, the

British media, some British media have dubbed him Speaker of the Devil. Bianca, please explain because some people have called him either the

greatest defender of democracy or someone who undermines it.

BIANCA NOBILO, CORRESPONDENT, CNN: Well, he certainly excites a lot of passions and is a very controversial and colorful figure and that's why it

was so great to speak to him, but by and large the MPs that I speak to, and I'm always talking to them every week, do have a lot of respect for him.

He has been embroiled in a couple of controversies, particularly over the management of some issues like bullying and sexual harassment in the House

of Commons, but by and large, he is well respected for his ability to champion not the government's agenda, but that of back benchers and rank

and file lawmakers, if you like.

And he has been successful of that. And Paula, that's part of the reason that the Brexit debate is so shaped by him because Theresa May doesn't have

a firm grip on Parliament because she has a minority government. It means that when the Speaker selects ideas and stances from other members of

Parliament, they take greater precedence.

So we now hear so many voices on the Brexit debate, and it's at a very confusing place, partly because of his championing of those backbenchers

and Members of Parliament who aren't in government.

NEWTON: Bianca, in terms of what he would say to defend himself, because some people have said that he's interfering in Brexit, and perhaps he's

showing his hand had a little bit, even though he is supposed to be impeccably even-handed about this and non-partisan.

NOBILO: So I spoke to him about how important it is for the Speaker to be an impartial figure, and I asked him was it difficult to transition from

being a Member of Parliament, which is obviously a political animal to the Speaker which has to be impartial? And he said no, because it's simply the

duty of the Speaker to do that.

He also said that if he was truly impartial, it would be picked up constantly on social media, and in terms of the claims and accusations that

are being made against him that he's being partial in the Brexit debate, he says, no, he's simply doing his job by representing the wider spectrum of


Also, when I spoke to him about how he decides what amendments to select and which way to move forward with the Brexit debate, he said he looks at

which suggestions have are the most support in Parliament and which suggestions are coming not just from one side of the House of Commons, but

from cross-parties.

So he has a mental check list, if you like, of considerations that he'll go through, and it was interesting because a lot of people will recognize the

Speaker from Prime Minister's Questions, the boisterous event which we see every Wednesday here in the U.K., and I asked him how hard it was to cope

with rowdy Members of Parliament, and he likened his job to something unexpected. Let's take a listen.


BERCOW: I'm a regular at my club with my son. I'm a season ticket holder at Arsenal. There are 60,000 people in the crowd, and there are virtually

60,000 people who think they know better than the referee. The referee has just got to do his job as he thinks fit, and in a sense ...


BERCOW: ... perhaps the Speaker is in a not all together dissimilar position.


NOBILO: Well, what was very clear to me, Paula, is that the speaker doesn't - isn't bothered by inconveniencing the government or, quote,

"moaning ministers." He sees his job is to champion democracy, and that was clear to me that he was hugely passionate about the role of Parliament

and trying to increase its authority, especially in such turbulent times.

NEWTON: Yes, it was funny to me, Bianca, that in trying to impugn his impartiality, they point to the fact that there was a bumper at his home

that says "Bollocks to Brexit." I can only assume, Bianca, that he is in favor of free speech at his own home the way he is in the House of

Parliament because he says the bumper sticker belongs to his wife.

Bianca, thanks so much for the interview. We'll await to hear more from that very exclusive interview with the Speaker. Appreciate it.

Now, stocks finished higher in London despite the Brexit uncertainty. Elsewhere though, it was a mixed picture. The Eurozone posted its flows,

growth in four years with the final quarter of last year, and in Milan, stocks were hit by news that Italy slipped into recession in 2018. The

economy contracting for two straight quarters. More on that later in this program.

Now with hundreds of billions of dollars of imports and exports on the line and time running out fast, Donald Trump calls for a top-level meeting with

China's Xi Jinping to end this trade war.


NEWTON: Hello. I'm Paula Newton, and there's more "Quest Means Business" in just a moment. First though, these are the headlines on CNN this hour.

Exclusive video obtained by CNN is giving us a dramatic look at the last battles to drive ISIS from Syria. Kurdish and Arab forces are fighting the

remnants of ISIS on the ground backed up by U.S.-led air power, but ISIS fighters aren't giving us easily, battling to hold on to the last villages

they control in Eastern Syria.

The U.S. is expressing grave concern over the accusation from Venezuela's self-declared acting President that his family is being intimidated by

embattled President Nicolas Maduro. Now, Juan Guaido says Mr. Maduro's special forces tried to enter the family's home.

In an interview with Christiane Amanpour, Guaido refused to rule out U.S. military intervention to end the escalating political unrest. Defense

attorneys present a closing argument in the trial of Mexican drug lord known as El Chapo.

Joaquin Guzman is facing drug trafficking and other charges in New York. Prosecutors presented more than 50 witnesses in the trial along with his

phone calls, texts and documents.

Engineers at MIT have developed a robot that can actually play Jenga. Now, the robot is able to see and feel individual blocks in a tower and has

learned to switch blocks if it starts to wobble. You may still have a chance to beat it though. The robot isn't yet smart enough to work out

which specific blocks would make your next turn impossible. Let me see if it can make dinner.

OK, Donald Trump says this week's trade talks with China are going well, and will hopefully lead to a deal by March 1st. Now, that's the last day

before the U.S. may increase tariffs on billions of dollars of Chinese goods. Mr. Trump is also making very clear, there will be no final deal

until he meets again with China's President Xi Jinping.

Now, the president laid out his terms on Twitter, he wants Beijing to open its markets to U.S. financial manufacturing and agricultural businesses

along with other sectors. Mr. Trump added, he wants these talks to leave, quote, "nothing unresolved."

Now, time is tight. Even tighter if you can believe it than those Brexit talks. Negotiators have until March 1st, just over four weeks away. Now,

if the deal can't be done by then, U.S. tariffs on $200 billion worth of Chinese goods will increase from 10 percent to 25 percent, and you bet they

are going to bite.

Carla Hills is a former U.S. trade representative, and she joins me now from Washington. Ambassador Hills, thanks so much for joining us. OK, the

person who is at the table right now is Robert Lighthizer. What do you think his main task is right now to get a deal with the Chinese or is it

going to be a tougher thing to get a deal that the Trump administration will accept?

CARLA HILLS, FORMER UNITED STATES TRADE REPRESENTATIVE: I suspect that the U.S. team will try to lay out exactly what the U.S. needs in order to move

forward. I don't anticipate that they will get a deal during this visit, and it's not because the president has said no deal until he meets with

President Xi.

It is that there are so many things on the agenda. I think they're going to have to meet again and perhaps a couple of times again and try to

understand what each side needs to do. What are the political limitations and the economic limitations?

NEWTON: What many people are looking for in the Trump administration at least, and I believe the U.S. trade representative as well is structural

reform. Do you think that's just too ambitious, and at the end this trade deal. If there is one, is going to look much different than that.

HILLS: You have to define what you mean by structural reform. I would ask the Chinese to remove the percentage caps on inward investment. When they

join the World Trade Organization in 2001, they committed to two basic norms, national treatment and non-discrimination, and they don't tell local

firms that they can only have 39 percent in a given sector.

They should not tell a U.S. firm that they cannot come in and have green- field investments in areas of their interests. And it is particularly important because in many instances, the joint ventures that have been

mandated have been the pathway to get a hold of intellectual property that the U.S. holds, so it really needs to be corrected.

NEWTON: And yet if it needs to be corrected, do you think that means that a deal can't be done? We just went through the deadline, it is very tight,

it is four weeks before those tariffs that are paid by the way by U.S. firms go up substantially.

HILLS: Well, President Trump could take some of the things that they accomplish, perhaps extend and give a little more time. I don't know how

they're going to handle the negotiations, neither one of us is in the negotiating room.

NEWTON: Your best guess though as someone who has been in this position before, and I lean on you because at a time when you were dealing with

these issues with China, completely different era I understand, but it was that same debate, right?

[15:35:00] Is China going to move to a more -- an economy that more mirrors capitalism in a way and privatization? Because a lot of people are

saying now that actually in the last five years, especially with the state sponsorship of its companies, that China has actually moved backwards on

these issues.

NEWTON: I agree that China has moved backwards. And we have a pre-eminent economist Nicholas Lardy who has just released a book called "The State

Strikes Back". And he, five years earlier, had written a book entitled "Market Over Mao".

And in 2014, when he wrote "The Market Over Mao", he was saying, look, the market is working. It's -- the restrictions are coming down because that's

where the profits are. The private sector is making a difference.

And what he has noted and profoundly spells out in detail with charts is how that has turned around, that the government is spending more money,

flowing more capital to state-owned enterprises that are not making a profit, whereas the private sector in China is making a profit.

We have a deal to make because what we're asking of China will actually be good for its economy.

NEWTON: But they don't believe perhaps that it will be good for them politically, which is another argument entirely. Ambassador Hills, before

I let you go, you know, we have this issue of this CFO, this Huawei executive who is out on bail in Vancouver.

A lot of people are saying still cloud the talks, but I point more not to the case of one executive or even the 23 charges that have been put against

Huawei and her and other executives. But the fact that you had the Intel chiefs in the United States say the other day on Capitol Hill that Huawei

poses an intelligence risk to the United States.

How do you see going forward with China, when basically, you have the intelligence community saying any kind of cooperation with this country on

that level, even from a private company in China is a risk?

HILLS: Well, as an old prosecutor, let me say, I don't have the facts of what the accusations are other than that, what has been in the press. But

if a case can be made whether it's against somebody from China or Brazil or England, that is for the prosecutors to make that case, and we should look

at it objectively.

There are facts in earlier instances where there have been I think actions where they've stepped across the line.

NEWTON: And we will see indeed how long it takes for that court -- that case to make its way through the courts. Ambassador Hills, thanks so much

for being with us, really appreciate it. Now, when we return --

HILLS: A pleasure --

NEWTON: Two men are claiming to be Venezuela's president, one of them speaks to Cnn about his plan for fixing the country's broken economy.


NEWTON: Now for the third time in a decade, yes, I said that, third time in a decade, Italy's economy has slipped into a recession. Economic growth

contracted for a second consecutive quarter in 2018, that's fueling fears that Italy's European neighbors could soon follow.

Lorenzo Codogno is the former chief economist and Director General at the Treasury Department of the Italian Ministry of Economy, and a visiting

professor now at the London School of Economics. He joins me now from London. OK, the current government in power for eight months says these

last two quarters are an absolute blip.

That there's no way that the Italian economy will grow. Are they right?


climate has changed, and if you look at the Eurozone growth, it is slowing fast.

And clearly, Italy is the weak spot, so I think this weakness will continue. Actually, leading indicators already suggest that probably the

first quarter of this year will be negative again.

The big issue here is whether at some point we see some stabilization during the course of this year and a modest recovery or whether this kind

of slowdown transforms into a deeper and prolonged recession. I think now it's not clear, but at least the first quarter will be negative, and I

think given the negative carryover, probably the whole 2019 will end up in negative territory.

NEWTON: The entire year of 2019 in a recession for Italy you think?

CODOGNO: Well, again, given two negative quarters and the likely negative quarter at the beginning of this year, basically the year is already

compromised to some extent, so unless you expect a sharp recovery in the second half, which I don't see at the moment, probably the overall outcome

for the year is going to be negative territory.

NEWTON: You know, it's a controversial question even to say it, but obviously the populist government here has a lot of policies out there that

they are -- that are trial balloons. Do you see anything in what they're proposing that could help the situation where the economy is concerned?

CODOGNO: I think the only positive here is that probably having a kind of anti-establishment protest parties in government basically prevents any,

you know, upheaval in the streets as we have seen in France. But other than that, I think there's a risk that the current government continues to

roll back reforms introduced by the previous government and continues to have an anti-business attitude which would actually affect investment

behavior by companies which I think is what is happening now.

NEWTON: Interesting point of view you have though, that regular rank and file feel as if they have a voice in government now and that may be what's

keeping them off the streets. Before I let you go, I have to ask you in terms of any kind of contagion throughout Europe, there has been discussion

about Germany also falling into a recession.

Mario Draghi has said, look, that there's reasons for the fact that he won't be -- that he will be continuing to stimulate those European

economies, is he prudent to do so?

CODOGNO: I think so because I don't think that the Eurozone will enter a recession. I think it's just a soft patch, but for Italy, it is definitely

a recession and for the whole area, it is certainly softening of demand which would probably deserve a longer period of accommodative monetary


So I think Mario Draghi and the ECB correct in slightly delaying the normalization of monetary conditions, so to speak.

NEWTON: Yes, and glad to hear that perhaps the rest of Europe may see some growth in 2019. Lorenzo, thanks so much, really appreciate it. Now the --

CODOGNO: Thank you --

NEWTON: Vice President of the European Commission says Europe needs a strong alliance between France and Germany to keep its economy moving.

Jyrki Katainen spoke to Richard in Davos last week and says it's the only way for Europe to move forward.


JYRKI KATAINEN, VICE PRESIDENT, EUROPEAN COMMISSION: Everybody should know that without a strong France-German access, Europe don't move forward --

Europe doesn't move forward. So if you need a strong ownership, you need a strong leadership, especially in big countries.


KATAINEN: It doesn't mean that smaller countries are put aside, but without strong France-German access, nothing moves on.

QUEST: But hang on. Should France and Germany be agreeing a treaty for closer economic cooperation, closer foreign policy cooperation, all the

things that are in this treaty, shouldn't this be done in the greater sphere of the EU?

[15:45:00] KATAINEN: Of course, I mean, even the two big countries cannot decide anything separately from the other. So the two countries are small

enough to get decisions done unless the others don't support. So we need overall more strong national ownership, ownership coming from the national

governments whether you're big or small country, but it's not sufficient to sit on the fence and just see that if somebody is leading Europe.


NEWTON: OK, after the break, Europe's largest economies are trying to dance around U.S. sanctions on Iran. You'll want these details up next.


NEWTON: So right now, the Chief Financial Officer of the Chinese tech company Huawei is in -- is out on bail in Canada accused of dodging U.S.

sanctions on Iran. Now, three of the world's largest economies are openly trying to bypass sanctions on the same country.

Germany, France and the U.K. are working on a payment mechanism to allow their businesses to continue trading with Iran in defiance of President

Trump's sanctions. Now, it's called INSTEX, and it's an Instrument in Support of Trade Exchanges.

Now, it's expected to operate like a barring platform or clearing house rather than relying on direct financial transactions, key, it won't be

using U.S. dollars. If Washington wants to punish those who use it, it would mean penalizing countries traditionally seen as its closest allies.

Now, Ramin Asgard is a former political adviser to the U.S. Central Command. He was also director of America's Iran Regional Presence Office

in Dubai. This is a controversial move by Europe, when they first proposed it, I actually didn't believe they'd go through with it.

It seems like they are no matter how honestly -- how modestly it begins. Do you think it will elicit a response from the Trump administration?

RAMIN ASGARD, FORMER POLITICAL ADVISER, U.S. CENTRAL COMMAND: Now, thank you very much. I think what the Europeans have done is, they're playing a

game of three-dimensional chess where they are a little bit caught between their responsibilities under the JCPOA and U.S. sanctions and not wanting

to trigger them.

What they've done here is frankly, they've taken the smallest step forward in trying to show a little bit of independence from U.S. sanctions policy,

and this INSTEX that has gone into effect today deals only at this point with humanitarian trade; food, medicine, medical equipment.

[15:50:00] And they're hoping the Europeans that it will be enough to keep Iran in the JCPOA and not too much so that the United States will have any

negative reaction to it.

NEWTON: And yet Iran has already shown some impatience with the time table, and with as you said so far the humanitarian parameters of that. As

I say, you know, Mike Pompeo has called this a disastrous policy, and some are waiting to see exactly what kind of enrapture it will cause between the

United States and these allies.

What is Europe trying to get at here?

ASGARD: I think what the Europeans are trying to do is they desperately want the JCPOA to stay into effect. They don't want Iran to break out

again into a race for nuclear technology. They think that could escalate very rapidly into a very serious conflict.

And so they want to play kind of an intermediate role with the United States. This is a harkening back to what was going on in the 2000s

basically where the EU three were doing their best to maintain Iran from going too rogue, and the United States was pretty much maintaining a strong

thrust of sanctions.

If the EU is now looking to really stand up for its banks and its businesses and really step out, it would require them to go beyond

humanitarian trade. Remember, humanitarian trade is legal for U.S. sanctions in this case. So, so far the EU is treading very carefully, but

is definitely watching the trend and seeing, do we want to step any further?

Perhaps they're waiting for reactions from the Trump White House, from the Iranians to see where exactly this might head. But they are maintaining at

least a positive momentum and delivering on a promise that they had mentioned several months ago that they would do.

So in that effect, they are showing a little bit of independence and a little bit of forward progress for standing up for the EU three's position.

NEWTON: Yes, it will be a very interesting story to watch in the coming months, so thank you for your insights on this, appreciate it. Now --

ASGARD: Thank you very much.

NEWTON: The self-declared president of Venezuela says he wants to reactivate the country's oil industry after the Trump administration placed

sanctions on the state oil company. Juan Guaido told Cnn that ordinary Venezuelans deserve those profits, not the embattled socialist President

Nicolas Maduro.


JUAN GUAIDO, PRESIDENT, NATIONAL ASSEMBLY OF VENEZUELA (through translator): What we're doing is trying to reactivate this industry so

there will be no usurping action by the way of Maduro and keeping this money and that the production of petroleum will be on behalf of Venezuela.


NEWTON: Now, the U.S. sanctions could have huge implications for the global oil industry. Our emerging markets editor John Defterios told me

the Trump administration is now playing hardball.


JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: The U.S. strategy seems very clear, starting first with the financial interests of PDVSA and directing

those revenues that went into the United States to the National Assembly.

Number two, chasing bank accounts of Maduro and his cadre, even gold sitting in Germany and London hasn't taken action yet on that front. And

finally, I thought this was going to bubble to the surface, and that is Citco; it's a large refinery in the United States, has 5,000 petrol

stations throughout the country, 30 states to be specific.

They could freeze the assets or again redirect those revenues somewhere else. This is playing the hardball. I think also we have to look at the

bigger picture. You know this very well, Russia and China have been playing in Venezuela for the better part of the decade, funneling nearly

$70 billion into the country.

I can't imagine they're going to pick up their sticks, walk away and let Donald Trump fill this void in Venezuela. But the U.S. is using all the

economic tools. You know the power of the Federal Reserve and the Treasury that shut down banking systems, particularly the dollar because of the

hyper inflation in Venezuela so vital to the economy, but they're doing it.

NEWTON: And they're doing it, and they've decided, as you said, a full- corps press, they're going to go all the way now. Secretary Mnuchin being very clear that he is in touch with oil companies and those refineries in

the Gulf that might be impacted.

In terms of Venezuela itself, I mean, John, the devastation and the production of oil in Venezuela has been staggering, which means it's only

really has left the very little oil that actually it produces right now, that it could get out right now and, of course, as you were pointing out,


DEFTERIOS: Yes, let's cover PDVSA, this is the biggest collapse of any state oil company in the history of the business, at least since World War

II. If it didn't face a conflict on its soil -- take a look at the numbers, Paula, we're looking now at production at the end of 2018

according to OPEC at 1.1 million barrels a day.

[15:55:00] If you rolled back the clock to 2008, it was 3.2 million barrels a day. PDVSA used to be a very well run state oil company, that's

not the case now, 20 years of Hugo Chavez and Maduro together, the last 10, the crunch, and you almost have a foreign direct investment freeze on the

company because there's no reinvestment, and they've been printing money and that's why you have the hyper inflation.

Citgo is a very valuable brand in the United States, as you well know. It will be really interesting to see how aggressive the U.S. Treasury, the

Federal Reserve and the Trump administration plan to be going forward with that asset.

Also, we can't, you know, shut out the fact the poor Venezuelans, a million percent inflation last year, the IMF is suggesting ten times that in 2019,

and I think you've seen the graph, poverty had shot up 40 percent in the last five years alone, Paula, to nearly 90 percent.

You've been on the ground there, it's absolutely painful and the number one asset, number one proven reserves in the world when it comes to oil is

heavy crude, but they're not extracting it now because nobody wants to invest.


NEWTON: Now, you are just a few minutes away until that closing bell and the close of trade for January. It's been a great January and we will be

right back to cap it all off for you.


NEWTON: We are heading into the last few minutes of trading on Wall Street, and as you can see there, even the Dow has turned positive today.

U.S. markets are set to finish -- all three markets are set to finish higher today, and it's been a really good month for all three major


The S&P 500 is having its best January since 1987! Lifted by some strong results, of course, they are better-than-expected at the ones we have been

talking about from yesterday. Facebook, even GE getting in on the action. A quick look now at that Dow as you can see there, most of those stocks in

positive territory, even companies like Cat that continue to rely on that U.S.-China showdown -- trade showdown.

Drug-maker Pfizer is the best performer of the day, up about 3 percent. Now, it is the busiest week of the quarter for earnings, Amazon report

right after the markets close in just a few minutes, investors will find out how the holiday shopping season went as well as Amazon integration with

Whole Foods and of course the all important growth on cloud services.

Chevron and Exxon close out the weeks, big earnings reports on Friday. And as we hear, the applause for the closing bell today.


That is QUEST MEANS BUSINESS, I am Paula Newton, "THE LEAD" with Jake Tapper is next.