These annual letters are going to be Agenda Setting for wall street. Earnings season kicks off with the biggest banks in the spotlight. Numbers we saw this morning in fixed income are staggering. Top executives from health care and Drug Companies spot key issues facing their industry. Biosimilars are an important part of the health care system. Technology is an enabler of innovation, accelerator of innovation. We are trying to bring down outofpocket costs for consumers. Even as equities climb to alltime highs, howard marks thinks it is not a great moment to be in the market. The odds are not, in my opinion, in the investors favor. It is all straight ahead on bloomberg best. Hello and welcome. I am juliette saly. This is bloomberg best, your weekly review of the most important Business News and interviews from Bloomberg Television around the world. Lets start with a day by day look at the top headlines. As the week began, tensions remained high in the middle east with irans government feeling the heat from the u. S. And its allies, and its own citizens, as well. Antigovernment protesters rallied in iran for a second night after tehran admitted its military shot down a ukrainian jetliner after days of denying it had anything to do with the incident that killed 176 people. Manus we now have internal insurrection in iran. This is a feeble situation domestically. Definitely. It comes on the back of demonstrations in iran a few months back, as well, which were put down violently. To show the pressure iran is under and this unhappiness with the way the government initially lied about what caused the crash of the airliner. It is kind of hard to tell how big these demonstrations are and how the regime will manage in cracking down as it did previously. The u. S. Is lifting its designation of china as a currency manipulator. The treasury, saying beijing has made enforceable commitments not to devalue the yuan and it removes another obstacle of the signing of the phase one trade deal. In a lot of respects, this seems to be the righting of a wrong, given there was criticism designating them last year was a political move. I think that is right. There was also opposition within the Trump Administration to the president making that move. That move came at a time when the rmb went through seven to the dollar. That is a symbolic level, but things have changed since then in the currency and now, we have this phase one deal which includes a currency chapter. That is clearly a big, symbolic move. Wall streets biggest banks are reporting the latest round of earnings and it was an especially big quarter for jp morgan, as profit jumped 21 , fueled by a rebound in fixedincome trading. Earnings of 36. 4 billion, the largest of any bank in u. S. History. The fixedincome trading revenue was a standout. It was a billion dollars above what analysts expected and citigroup was not far behind. About 600 million above what analysts expected, but they were able to shake off a lot of the worries about net fixed income. I want to caveat that by saying the cfo of citigroup had mentioned they will take some sort of hit maybe this year. We dont know what that will look like really, but right now, it is not something investors are overly concerned about by any means. Existing tariffs on billions of dollars of chinese goods into the u. S. Are likely to stay in place until after the november president ial election. Any move to reduce them would hinge on beijings compliance with the terms of a phase one trade deal. I think it took a lot of people by surprise to see the headline the day before we get this thing signed maybe. Maybe. And that did take the steam out of the stock, but we are drifting toward new highs. These tariffs will stay in place until there is a phase two. If the president gets a phase two soon, releasing tariffs as part of phase two and if not, there will be no relief. It has nothing to do with the election or anything else. Bank of america joins wall streets trading come back with revenue climbing 30 in q4. Goldman sachs performance was marred by a 100 million legal charge for Goldman Sachs over it settle over the 1mdb scandal. Does it begin to get cleaner from here on out . That would be the hope for investors, right . The big news was the big charge. They took a 1. 1 billion charge related to 1mdb. Obviously, it is difficult because they cant necessarily say where they are versus the total potential cost. We have to basically have to wait for the final settlement to know what the final costs are. For bank of america, the disappointment today is clearly they are guiding to flat expenses, and perhaps less optimism on the revenue side. It is tough to say at this point who is being conservative or not, but bank of america less optimism than other banks. Historic day. We are 30 minutes away from the signing of the phase one trade deal between the u. S. And china. It will leave significant tariffs in place, but it will punish beijing if it fails to deliver on key pledges. Pres. Trump china has made substantial and enforceable commitments regarding the protection of american ideas, trade secrets, patents, and trademarks. It provides a baseline of a better world economy, and i think you are seeing in the markets the Business Community globally telling you things are better now in terms of prospects than they were before this agreement was entered into. It did outline the specific purchases china is going to make, this 200 billion of american exports it has agreed to, things like manufactured goods, and that is over a twoyear period. How it is going to happen is the big question right now. It is hard to imagine china forcing its companies or its importers to buy American Goods and how that system will take place. That still raises a big question. Everyone agrees this deal reduces tensions between the two countries but doesnt achieve a lot of what the Trump Administration set out to do, which would do from the beginning, which is crackdown on ip theft and forced technology transfers. Even if the deal goes smoothly, be it after the election, i dont think anyone is expecting any nearterm breakthrough there because that is where you are getting into issues that go to the core of chinas own economic and industrial strategy and ambitions, further owned national champions, state ownership, and their ambitions to develop china into a leading worldclass Technology Driven economy. All those issues, all those matters pose redlines that will be tougher for the u. S. And china to reach a deal on. Shares of morgan stanley, opening with the biggest rally in three years after the rivals boosted profit target for the next two years. They are saying institutional securities revenue is the best it has been in a decade, so the numbers we saw this morning in fixed income were staggering. At 1. 3 billion, they are right behind goldman at 1. 8 billion and they have risen at a higher pace. Business last year at the same time, they had the worst performance on wall street, so the street is asking whether the performance is sustainable. They are investing in that business and Overall Investment banking figures beat estimates. It has been a massive week for trade in washington. Yesterday, it was the phase one china deal. Today, usmca. The bill is passed. Clearing the senate, it will replace nafta. This was an overwhelming support in the senate. A bipartisan vote in the senate, much like the house. A big bipartisan vote to pass it. It was a Major Campaign promise for President Trump. It is not a radical departure from nafta. There are a few things are tweaked, but he promised it would do some things and now he can say he has done it. Chinas economy last quarter after slowing to the weakest pace in almost three decades. Fourthquarter gdp rose 6 from a year earlier, matching estimates. Meanwhile, industrial output retail sales and fixed Asset Investment figures all beat estimates. Key takeaways . The data was better than expected. What we really care about here is Industrial Production and fixed Asset Investment, this number will keep slowing down. Every six months, every year, we are going slowest since the 1990s. Who cares . The last time the u. S. Saw growth like this was 30 years ago. This is a high level of growth for an economy that is exceptionally large and sends a message the pboc is doing a good job of managing the growth slowdown. It is a very slow slowdown in terms of the rate of deceleration very moderate and overall this is a positive story for risk assets. [bell] ending the week on a high note here. The dow, s p, and nasdaq at record highs. The dow firmly above that 29,000 mark. Now a five day winning streak for the dow. Still ahead as we review the week on bloomberg best, conversations from the Jpmorgan Health care conference. Plus, an exclusive interview with dallas fed president Robert Kaplan. He thinks the central bank should rein in its asset purchases. Growth in the Balance Sheet is not free. There is a cost to it. Juliette next, more of the weeks top headlines. U. K. Inflation data at a threeyear low in december. Juliette this is bloomberg. Juliette this is bloomberg best. Im juliette saly. Lets continue our global tour of the top stories. Taiwan reelected their proindependence president in a landslide. Taiwans president has won a landslide victory to clinch a second term. The win is being seen as extending the Fourth Quarter market rally we have been witnessing. What most have been saying over the weekend is this is pretty much a referendum against what they saw as chinese interference in the election, or attempts to interview in that interfere in this election as well as a rebuke for the desire for more closer ties with the mainland. Those strategies pretty much backfired, so the kmt did pick up a sevenseat gain in the legislative, but the party keeps the majority in the legislature. The pound dropped, following another member of the Pboc Monetary Policy Committee citing a potential vote for an Interest Rate cuts this year. What should we expect when the boe meets . When we get to mark carneys last meeting at the end of this month, it had been considered previously a pretty dead meeting, but now we have various policy makers coming out. We already had two of the nine voting for rate cuts. Now weve had two more saying if the data doesnt improve, they will vote for a rate cut. One as soon as this month potentially and we had mark carney himself saying they have the space to cut if they need to and he hears that argument. This morning, we heard gdp data which was unexpectedly worse than any of us expected. It was a contraction in november. There will be a lot to look at before we get to the january 30 meeting. U. K. Inflation data slowed to a threeyear low in december, clearing the path for a potential bank of england Interest Rate cut at the end of the month. Inflation came at 1. 3 , well below analyst forecasts of 1. 5 and below the boes 2 target. Today, we heard from michael saunders, the leader in charge for lowering and he says the bank needs aggressive stimulus to take the cut have the risk inconsistently lowinflation. In the last few minutes, gdp data from germany confirmed the extent of 2019s slowdown. Gdp grew at 0. 6 last year, the weakest in six years. Despite the sluggish data, the governor says the risk can almost be ruled out. There is no doubt that the German Economy had a horrific year last year. It is heavily dependent on exports, especially manufacturing, cars. Exports have grown only slightly. On the other hand, we are seeing quite robust demand domestically. Both private and government consumption has grown. Also, we are seeing construction growing, so it all speaks about domestic economy still going strong. The inflation rate hitting a fiveyear high in december, far above the rbis target and prompting expectations of a further pause, even as the economy loses momentum. What is driving prices up . The prime reason for that is of course vegetable prices and within the vegetable prices, onion prices. 60 jump in vegetable prices if you look at the cpi index. That will take time to ease. Economists, which means we are in to april and we will see the cpi headline inflation easing, and that doesnt end there because youve got volatile oil prices feeding in. The Telecom Price hike we saw in december will also play out in the next few months, so what you are seeing is a very sticky headline inflation and gives very little room for the bank reserve of india to cut rates because unless it falls below the 4 mark, the target, there is not much they can do about Interest Rates. The ecb, releasing accounts of its meeting with Christine Lagarde at the helm. Seeing initial signs of are we seeing initial signs of stabilization through the slowdown . Are we seeing any subtle signs of pushback from the governing council about where Monetary Policy setting is now . What stood out was this point made on vigilance. It seems several members are arguing you need to monitor the potential negative side effects that could come from this current policy stance, even though they have agreed to keep it what it is at the moment. Going forward, there might be more reluctance to take Interest Rates lower than where they currently are. In a way, what it also shows is the ecb will be taking its soulsearching mission in the context of its proposed strategy review very seriously. The Trump Administration is planning to change how Economic Data is released in a move that could affect access to figures such as the monthly jobs report. The Trump Administration is looking at changes to the way it releases Economic Data out of the Labor Department, including taking away computers that reporters for decades have used to get the data on embargo ahead of the release, digest it, make sure it is accurate in terms of what they are releasing and report it out. We dont know yet what their plans are for how they would release it. Would it go straight out to the internet at a prescribed time when everyone can get it at the same time . That opens up other questions as to whether there could be a logjam with the servers at the Labor Department being hit at the same time at once when things like the jobs report released on the first friday of every month. Treasuries are going to start issuing a 20 year bonds for the first half of 2020, looking at different ways to fund the ballooning deficit. Steve mnuchin said the government will look into other products that finance debt at the lowest cost over time. It is going to be interesting to see who steps up to buy these 20year bonds. Typically, when you look at the 30 year treasury, your pension funds, your insurance companies, so it will be interesting to see if those are the natural buyers of 20year debt. With that said, europe and japan have 20year bonds, so it makes sense the treasury went within the existing Market Structure and we could see domestic funds really interested in these bonds, as well. Could Vladimir Putins grip on power continue beyond 2024 . The russian president has replaced his Prime Minister and called for sweeping constitutional changes which could reign in his successor. Putin is due to step down in just over four years, but the shakeup could see him take another powerful post to ensure his influence. How much of a political earthquake was that . It was completely unexpected. Putin was giving his annual address and there were no signs of the changes until the end of the speech when he outlined constitutional changes, which he said at the time were very important. It was only after that the bombshell news arrived of Dmitry Medvedevs departure and putins decision to have a new government. It is very rapid, very swift. The incoming Prime Ministers appointment was pretty much a formality. The impeachment trial of President Trump kicks off in the senate next week. The most controversial issues will be tackled behind closed doors. Chief Justice John Roberts will preside over the proceedings. What do we expect . I spoke with Top Republicans about a timetable for how long it will last. They are saying anything from a couple of weeks, so the anticipation, at least from the white houses perspective, is they will be able to get the trial completed before the president s state of the Union Address on february 4. Meanwhile, democrats doubling down, trying to push for there to be what they say more transparency. They would also like to see some key witnesses. However, if you look at the math in the senate and im not sure the democrats are going to be successful based upon my reporting in their efforts. Juliette you are watching bloomberg best. At its meeting in early december, the fomc signaled it does not expect to raise rates in 2020. Since the announcement, the s p 500 has gained 5 . This week, dallas fed president Robert Kaplan spoke exclusively with bloombergs michael mckee. Kaplan says he worries the feds position is helping push cap asset prices. I do, and i think there are three aspects. Rates are lower and we lowered rates last year, and i was a supporter of those rate reductions because i was worried about weakness in the economy. Then there is a perception that the bar is higher for future rate increases. I dont know if i completely agree with that, but thats part of our comm