April 27, 2025 • 19 mins
Asian shares gained in a cautious start to the week as investors await progress in US trade negotiations with the region and signs of further stimulus from China. The dollar was steady against major peers and US equity-index futures edged lower in early trading Monday. Contracts in Japan signal a gain when cash markets reopen after the yen weakened on Friday, while those in Australia and Hong Kong were little changed. We talk FX and currencies with Peter McGuire, CEO at Trading.com Australia.
Plus - US stocks notched their longest advance in three months on Friday, while bonds and the dollar climbed amid increasing expectations the Federal Reserve could ease policy again in the first half of this year as the US economy softens. Worries about the economic fallout from tariffs drove US consumer sentiment to one of its lowest readings on record while long-term inflation expectations climbed to the highest since 1991. Investors will focus on key economic data this week - including the US jobs report and gross domestic product data - to see if the the recent steadiness in markets will continue as tariff tensions tamp down. We preview the week's eco data with Lawrence Werther, Chief US Economist at Daiwa Capital Markets.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
Daybreak Asia podcast. I'm Doug Chrisner. So we'll get a
flurry of economic data this week, and these numbers, along
with the developments on trade and tariffs, will ultimately shape
(00:22):
a lot of this week's narrative. And for the data,
I think the big question is whether we will begin
to see the impact of the trade war. In a
moment or two, we'll be speaking with Lawrence Worther. He
is the chief US economist at Diwalk Capital Markets. But
we begin this morning in the Asia Pacific and friend
of the show, Peter MacGuire, who is the CEO of
(00:42):
Trading dot Com Australia, on the line from Sydney. Peter,
it's always a pleasure, and I want to begin with
the currency market because I know that's your specialty and
i'd like to get your take on what we've been
seeing in the dollar and the degree to which a
lot of the weakening, especially since the beginning of the
month when these tariffs were announced. I'm curious to get
your reaction to the speed the rate of change here
(01:05):
and whether or not that's been a big surprise for you.
Speaker 2 (01:08):
Well, Good morning, Doug, greetings from Sydney and thanks for
you know, sharing this Monday morning. I'll tell you what,
as you said, from the start of the month, we're
nearly at that one oh five hand or US dollar
index had created to about a ninety seven eight ninety
seven point seventy five, and it's about certainly it's at
ninety nine and three quarters at the moment, but I
think the velocity of it, Doug, really hit everyone by
(01:31):
between the eyes and the selloff was immense. That's been
very much enjoyed from a trading perspective, with a euro
that ratcheted up to one fifteen nearly yet at one forty,
you know, at the peak, and we had an Aussie
dollar that was created at six at fifty eight, it's
back that's sixty.
Speaker 3 (01:46):
Four sort of handle at the moment.
Speaker 2 (01:48):
But it's just been, I think, in summarized it in
one word, mind blowing since the start of the month.
Speaker 1 (01:55):
So I'm wondering whether what we've seen an end to
maybe is a little like fizz I dollars you plow
the proceeds into the S and P five hundred into
the Nasdaq stocks, has that completely blown up that trade.
Speaker 3 (02:07):
No, not really. I mean, you know it's certainly been that.
Speaker 2 (02:10):
If you're looking as far as you know the equity markets,
they were certainly hammered to the downside. One can't say
that they haven't been. That's just been a dramatic fall.
But they've certainly bounced in the last week or say,
to the upside and that's been positive. So that's a
good sign. Again, probably over sold and then maybe a
little bit of momentum to the upside. Let's see how
this week goes. You've got some big data drops this
(02:32):
week and that market sentiment and so on. But you know, again,
huge volatility across that equity market complex, and you know,
you had a fix that ratcheted up, went crazy and
it's certainly given out a lot of that hot air now.
But we keep a very close eye on that. But
you've got a VIX under twenty five now and you
were running close to that fifty plus.
Speaker 3 (02:51):
So all of.
Speaker 2 (02:52):
Those components dug a really dynamic for trading. And all
I'll say is this, it's yeah, it's not for the
faint hearted. But if you if you're brave to win
of the markets and you use your logic, I think
they're being very kind over the month of April.
Speaker 1 (03:07):
So, as I mentioned, we're going to get a lot
of key data in the week ahead, and I think
the key question here is whether these numbers will support
the case for the Fed to begin lowering interest rates.
I'd like to get your expectations here, not only from
the macro, let's say, but how quickly the Fed may
respond to signs of economic weakness.
Speaker 3 (03:25):
Well, I don't think they're going to do anything in May.
I'll say that one.
Speaker 2 (03:29):
I'll start it with that press, you know, but there
is a very big chance you could see something in
June opposed to July.
Speaker 3 (03:34):
For a twenty five basis point cut.
Speaker 2 (03:37):
If and the two points that are going to really
I think drive that one home as would be a
disappointing n FP print on Friday if it came in
sub you know, one thirty one twenty thousand, considering that,
you know, the previous month was at two twenty eight thousand.
Speaker 3 (03:52):
So there's the first point.
Speaker 2 (03:53):
And then if you had soft cool PCE reading, that
could bolster expectations. So again, we've got those numbers coming out,
We've just got to see how they are mapped through.
And then you know what the Fed's prepared to do.
But I think that it's about an even spin of
the dice. At the moment, we'll flick of the coin,
I should say, for a June versus July twenty five
(04:15):
basis point cut.
Speaker 1 (04:16):
Over the weekend, Bill Ackman from Pershing Square was saying
that China really needs to strike a trade deal quickly
with the US because it can't win a drawn out
trade war. So if China is put in a difficult
position here, are we likely to see much more weakening
of the currency. Do you think authorities in Beijing would
try to hold the line on the yuan so as
(04:38):
not to raise the risk of capital flight.
Speaker 2 (04:42):
Yeah, I mean that's a difficult one for them. They
understand the position from the property sector, They understand the
positioning now with tariffs, and you know, I'm not suggesting
it's the first one blinks losers, but the Chinese of
they know the situation. I think President Trump, there's a
very big chance you did have a probably a high
ball expectation what he pushed out there as far as
(05:06):
from a tariff perspective. You know a number, and he's
willing to lower it. So I think that If you
see that deal within the next couple of weeks, that's
going to be a plus for China. But if you
don't and it drags on, then that really could cause
a lot of internal friction. And I don't think that's
a happy place where they want to be.
Speaker 1 (05:25):
So would you be short? Do you want right now offshore?
Speaker 3 (05:29):
A little bit?
Speaker 2 (05:29):
I think, you know, traders will certainly look at it,
but it's conscious as far as it's a day by
day proposition.
Speaker 3 (05:36):
There could be a surprise.
Speaker 2 (05:37):
We could hear something within the next week or so,
and I won't say no, but I think there's just
been other markets that have offered far more opportunity than
possibly you know, from a yuan perspective.
Speaker 3 (05:49):
But hey, that could change very much.
Speaker 2 (05:51):
Within the next week or so, depended upon the two
parties coming to an agreement or not.
Speaker 1 (05:57):
So are those opportunities related to kind of even safety
I'm thinking maybe even the euro but certainly Japanese en?
Speaker 3 (06:04):
Oh yeah, yen. Have a look at what's happened.
Speaker 2 (06:06):
Of course, is one of the greatest trades has been
Swiss frank Aussie. But yeah, yen's been dynamic, you know,
that's been a great trade and you know Euro of course,
so those two have been the standard or those three
have been the standouts. And you know against that again
also cross rates against the Aussie because they've got hammered
so incredibly that you know, traders were all over that
(06:30):
from a from a currency pair perspective.
Speaker 1 (06:32):
So we mentioned a FED move being maybe on the
horizon at some point here in the near term. What
about the Bank at Japan.
Speaker 2 (06:40):
Absolutely, you know, you've got inflation at three point two
percent year on year in March, and you know you've
got that core measure coming out. I feel as though,
you know, the downside risk of growth have increased markedly
since February with the you know, when President Trump unleashed
the first wave of you know, the tariffs, and Japan
hasn't been spared. They've got a universal ten percent levy
(07:00):
nor the sectoral tariffs on steel and autos. But you know,
I'm expecting possibly lower its growth forecast the BOJ for
this quarter and that's the latest quarterly outlook. And then
how it moves from there, you might see some move
some Yeah, you may see something.
Speaker 3 (07:20):
I mean, I'll be waiting to probably inhale it, Doug.
Speaker 2 (07:23):
You know, it's everything is just very dynamic at the moment,
but we wouldn't be surprised to see some sort of
movement from them.
Speaker 1 (07:28):
Are you betting on much weaker growth globally right now?
Speaker 3 (07:32):
Yeah?
Speaker 2 (07:32):
In some ways, yes, you know, there's a there's a
you know, you hear some some nations are performing relatively well.
Speaker 3 (07:40):
But the overall theme, you.
Speaker 2 (07:42):
Know, yes, softer and that's going to be an issue
rolling certainly into Q two, Q two and Q three
that how that looks by Q four If you do
see softer growth, then you know, how does central banks
play that? And naturally, you know from a consumption standpoint,
the overall and things moving forward for equity markets.
Speaker 3 (08:02):
And so on.
Speaker 1 (08:03):
So as that becomes a little clearer, do we expect
less volatility in markets when we understand what the terrain
looks like?
Speaker 2 (08:11):
I don't know about that. You know when you say that,
you would you would hope so, Doug. But the other
side of it is you've still got an unknown in
the sense of where do the tariffs end, who is
coming to the table, who is negotiated, and President Trump
is saying and scot percent, you get in early and
you cut a deal, and then it's then you move
forward from there. But if countries are prepared to sit
(08:33):
on the sidelines, and that I think is going to
force their hand, and that in turn will create I think,
you know, additional volatility moving forward.
Speaker 1 (08:41):
But I'm imagining that if you get much weaker growth,
governments are going to sense greater urgency to get these
trade deals done.
Speaker 2 (08:48):
Absolutely, I think that's going to be you know, the
old Clint East would make my day sort of thing.
You'll be just sitting there and they'll they'll be forced,
their hand will be forced.
Speaker 3 (08:57):
Dug And that's the other side of it.
Speaker 1 (08:59):
I'd say, So, what is your favorite trade to put
on right now? The easiest, most cost effective way of
making money in the foreign exchange.
Speaker 2 (09:08):
I think one's got to be really mindful where that
US dollar index trades over the next week or so
with those numbers coming out, because it's had the big
sell off and it's bounced from the low from ninety
seven to.
Speaker 3 (09:19):
Seven to back ninety nine to sixty.
Speaker 2 (09:21):
So keep a very close eye on euro US dollar
and yen US dollar. So I think that that's where
the general focus is at the moment.
Speaker 1 (09:30):
Peter will leave it there always a pleasure I hope
you have a productive week. Peter maguire, CEO of Trading
dot Com Australia, joining us from Sydney here on the
Debreak Asia podcast. Welcome back to the Debreak Asia Podcast.
I'm Doug Prisner. Economic forecasters in the US are now
(09:53):
expecting the trade war to hit growth this year and
next as companies pass on the cost of tariffs and
higher commodity prices. In fact, the Bloomberg Survey is showing
that economists say the American economy is set to expand
by only one point four percent this year and one
point five percent in twenty twenty six. Now, that is
down from last month's survey. Obviously, the tariff story is
(10:16):
driving this narrative. Let's take a closer look now. Joining
me is Lawrence Worther. He is the chief US economist
at Diewalk Capital Markets. He's on the line from here
in New York City. Larry, I'm glad you could make
time to chat with us here. Let me begin with
the macro and the extent to which we're going to
see a lot of weakness in the economic numbers. Does
that necessarily mean that recession is a higher probability event
(10:39):
right now.
Speaker 4 (10:40):
Sure. Well, Doug, first off, thanks so much for having
me this evening. I'm pleased to be with you to
help you unpack the challenging period for the US. So
you're right. I think the trade war and the reverberations
that it's had on sentiment for businesses and consumers does
unfortunately mean slow or growth in the near term. Although
(11:02):
recession is not my baseline at least right now.
Speaker 1 (11:06):
One of the things that we've been looking for is
labor market weakness. And yes, I know these figures tend
to lag at this point, though the figures haven't been
particularly worrisome. Yeah, maybe a little bit of softness, but
I don't think it's anything that the FED would sound
the alarm over right now. I'm wondering whether you think
that could change on Friday when we get the non
farm payrolls data.
Speaker 4 (11:27):
You know, Doug, as I think about it, you know
it's a good question. But I wouldn't necessarily look for
weakness at least for another say, two to three payroll reports.
I penciled in a number that's right around consensus. I'm
looking for one hundred and twenty five thousand for nonfarm
payrolls on Friday. But as I said, I don't think
(11:48):
you've seen the layoff activity, you know, that would align
with a full blown trade ward at this point. And certainly,
as I said, the lag could be several months before
we really get a good sense of that if it
does in fact materialize.
Speaker 1 (12:01):
But I'm wondering whether that reading that we had last
Friday on consumer sentiment week, as it was one of
the lowest on record, could be kind of indicating that
we should expect weakness in the labor market in the
near term.
Speaker 4 (12:13):
No, Doug, it's tough. If you recall, consumer sentiment has
been pretty lousy for the entirety of this expansion, you know,
and just last quarter, the closing quarter of last year,
consumer spending grew to four percent clip. I think this
time the signal that we would derived from the data
is a little bit worse, you know. But I would say,
(12:36):
to date, I think firms, after experiencing labor shortages coming
out of the pandemic, aren't quite ready to pull the
trigger on layoffs just yet.
Speaker 1 (12:45):
What about the level of inflation expectations that consumers are expecting.
I think an annual rate of four point four percent
if you're sitting at the FED. That's got to be worrisome.
Speaker 4 (12:56):
Sure, you know, I think it could be, in a fact,
a bit worrisome, But I would emphasize two things. First,
FED officials are looking at a broad array of indicators
of inflation expectations, and moreover, they're focused on the long term.
So I think it's a bit difficult right now to
unpack signal from noise, specifically with respect to the Michigan survey,
(13:21):
but I would say concurrently, one should be watching the
New York FED survey of inflation expectations for consumers. Moves
there are upward, but they're a bit more benign. Moreover,
inflation break evens have been relatively favorable. At your five year,
five year forward, and ten year ahead. I think they're
still in the vicinity of two hundred and twenty five
basis points. So I think FED officials are vigilant, but
(13:44):
they're going to stay on message two weeks from now
that longer term inflation expectations remain anchored, at least for
right now.
Speaker 1 (13:51):
So what's your base case for the American economy?
Speaker 4 (13:54):
Sure base case is expansion this year. I'm not particularly
optimatetick about the first quarter I think you'll see sub
one percent growth, almost certainly on account of wild trade data.
I'm thinking Q four to Q four, somewhere in the
vicinity of fifty basis points eighty basis points of growth.
I think we'll do better in twenty six when the
(14:16):
smoke clears. But I'm hoping that sanity prevails with respect
to trade deals and tariffs and we can start focusing
on the positives tailwind from domestic investment, tailwind from tax
cuts in the like. But it just remains to be
seen how long the Trump administration drags out these tariff
negotiations or threats as they were, depending on how one
(14:39):
characterizes them.
Speaker 1 (14:40):
So what about total magnitude of FED easing.
Speaker 4 (14:44):
I'm not in the camp currently that we're going to
see a cut at the June meeting, although it's heavily
priced in the market. I'm thinking two cuts this year
and then additional cuts early in twenty twenty six, and
I'm thinking September and decemb or. My thought there is
that ultimately the pass through from tariffs to inflation that
(15:06):
we'll see will be lighter than many are penciling in
right now. You know, it's it's pretty risky to put
a number on inflation, but I'm thinking of three handle
on core, something in the low threes, substantially less than
some estimates around four. And I think there's some favorable
underlying dynamics with rents and wages coming down. So I
(15:28):
think the Fed remains patient until they get a better
pulse on tariffs and it's knock on effects, and I
think the labor market at least right now will give
them some cover to do so to be patient.
Speaker 1 (15:40):
So if there is a question mark over inflation, and
we can agree that growth is quite a bit weaker,
now do we have to bring into the conversation this
idea of stagflation or is that kind of an extreme position?
Is that a little hyperbole?
Speaker 4 (15:55):
Say, there's a little bit of hyperbole there, but you know,
at the same time, it's a fair question. I mean,
I think President Trump, in choosing the tariff battle to
be his first fight in you know, the first one
hundred days, has forced the market, has forced forecasters to
think about tail risk, and his chair pal is said,
(16:16):
you know, the tails right now on the distribution of
outcomes for both growth and inflation are pretty fat. So
I'm not necessarily thinking stagflation. I think the economy rebounds
when we get some clarity, and I think inflation won't
necessarily be as bad as some are thinking, but it's
certainly a risk that one has to consider. Doug.
Speaker 1 (16:35):
So, if you look at where a lot of the
market volatility has been coming from, yes, the tariff story
a major part of that. But we've also heard a
lot of criticism about the FED coming from the White House,
and it seems as though those two factors have kind
of converged and come together. Are you confident that cooler
heads will prevail as time goes by and will hear
(16:57):
less criticism of the FED and ultimately on the terror side. Yes,
perhaps they've been an effective tool to begin negotiations, but
ultimately they're really not going to deliver what Trump is after,
which is to bring manufacturing back to the United States.
Speaker 4 (17:11):
Sure, you know there's a lot to unpack in that question. First,
you know, I would emphasize off the bat that that
you know, I think FED has a tricky job. I
think they're navigating rough waters. But I remain confident that
the that the FED is an independent body and they
will push back zealously against President Trump. I mean you've
(17:34):
seen as much from Powell and his colleagues. I think
fed independences is really at the heart of our dollar
policy and our ability to you know, fight inflation and
the like. And I think Shair Pale has done a
good job, you know, not backing down on that front.
So I remain fairly optimistic, you know, with respect to
(17:56):
on shoring of manufacturing and supply chains. You know, Doug again,
you're I think a critical issue. President Biden previously and
President Trump, both at their hearts, are are industrialists, both
realized vulnerabilities of the US economy coming out of COVID
with supply chain disruptions and the like. I don't know
about the wisdom necessarily of Trump's policy, but I am
(18:17):
optimistic that you at least will see some onshoring of
domestic production. You've seen it in the semiconductor space. You've
seen it a little bit with pharmaceuticals. I think a
lot of CEOs are coming to the table. Businesses are
attempting to act preemptively because any new domestic investment and
getting a factory online has a pretty long lead time.
(18:38):
So I think you're seeing some movement in that direction.
Although I wish President Trump would have deployed the carrict,
perhaps more so than the stick initially, but he may
achieve his goals yet, and it would benefit the US.
Speaker 1 (18:52):
I would add, Larry will leave it there. Thank you
always a pleasure. Lawrence Worth are their chief US economist
at Diewalk Capital Markets. Joining from here in New York
City on the Daybreak Asia Podcast. Thanks for listening to
today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,
we look at the story shaping markets, finance, and geopolitics
(19:15):
in the Asia Pacific. You can find us on Apple, Spotify,
the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Join us again tomorrow for insight on the market moves
from Hong Kong to Singapore and Australia. I'm Doug Prisoner
and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
Daybreak Asia podcast. I'm Doug Chrisner. So we'll get a
flurry of economic data this week, and these numbers, along
with the developments on trade and tariffs, will ultimately shape
(00:22):
a lot of this week's narrative. And for the data,
I think the big question is whether we will begin
to see the impact of the trade war. In a
moment or two, we'll be speaking with Lawrence Worther. He
is the chief US economist at Diwalk Capital Markets. But
we begin this morning in the Asia Pacific and friend
of the show, Peter MacGuire, who is the CEO of
(00:42):
Trading dot Com Australia, on the line from Sydney. Peter,
it's always a pleasure, and I want to begin with
the currency market because I know that's your specialty and
i'd like to get your take on what we've been
seeing in the dollar and the degree to which a
lot of the weakening, especially since the beginning of the
month when these tariffs were announced. I'm curious to get
your reaction to the speed the rate of change here
(01:05):
and whether or not that's been a big surprise for you.
Speaker 2 (01:08):
Well, Good morning, Doug, greetings from Sydney and thanks for
you know, sharing this Monday morning. I'll tell you what,
as you said, from the start of the month, we're
nearly at that one oh five hand or US dollar
index had created to about a ninety seven eight ninety
seven point seventy five, and it's about certainly it's at
ninety nine and three quarters at the moment, but I
think the velocity of it, Doug, really hit everyone by
(01:31):
between the eyes and the selloff was immense. That's been
very much enjoyed from a trading perspective, with a euro
that ratcheted up to one fifteen nearly yet at one forty,
you know, at the peak, and we had an Aussie
dollar that was created at six at fifty eight, it's
back that's sixty.
Speaker 3 (01:46):
Four sort of handle at the moment.
Speaker 2 (01:48):
But it's just been, I think, in summarized it in
one word, mind blowing since the start of the month.
Speaker 1 (01:55):
So I'm wondering whether what we've seen an end to
maybe is a little like fizz I dollars you plow
the proceeds into the S and P five hundred into
the Nasdaq stocks, has that completely blown up that trade.
Speaker 3 (02:07):
No, not really. I mean, you know it's certainly been that.
Speaker 2 (02:10):
If you're looking as far as you know the equity markets,
they were certainly hammered to the downside. One can't say
that they haven't been. That's just been a dramatic fall.
But they've certainly bounced in the last week or say,
to the upside and that's been positive. So that's a
good sign. Again, probably over sold and then maybe a
little bit of momentum to the upside. Let's see how
this week goes. You've got some big data drops this
(02:32):
week and that market sentiment and so on. But you know, again,
huge volatility across that equity market complex, and you know,
you had a fix that ratcheted up, went crazy and
it's certainly given out a lot of that hot air now.
But we keep a very close eye on that. But
you've got a VIX under twenty five now and you
were running close to that fifty plus.
Speaker 3 (02:51):
So all of.
Speaker 2 (02:52):
Those components dug a really dynamic for trading. And all
I'll say is this, it's yeah, it's not for the
faint hearted. But if you if you're brave to win
of the markets and you use your logic, I think
they're being very kind over the month of April.
Speaker 1 (03:07):
So, as I mentioned, we're going to get a lot
of key data in the week ahead, and I think
the key question here is whether these numbers will support
the case for the Fed to begin lowering interest rates.
I'd like to get your expectations here, not only from
the macro, let's say, but how quickly the Fed may
respond to signs of economic weakness.
Speaker 3 (03:25):
Well, I don't think they're going to do anything in May.
I'll say that one.
Speaker 2 (03:29):
I'll start it with that press, you know, but there
is a very big chance you could see something in
June opposed to July.
Speaker 3 (03:34):
For a twenty five basis point cut.
Speaker 2 (03:37):
If and the two points that are going to really
I think drive that one home as would be a
disappointing n FP print on Friday if it came in
sub you know, one thirty one twenty thousand, considering that,
you know, the previous month was at two twenty eight thousand.
Speaker 3 (03:52):
So there's the first point.
Speaker 2 (03:53):
And then if you had soft cool PCE reading, that
could bolster expectations. So again, we've got those numbers coming out,
We've just got to see how they are mapped through.
And then you know what the Fed's prepared to do.
But I think that it's about an even spin of
the dice. At the moment, we'll flick of the coin,
I should say, for a June versus July twenty five
(04:15):
basis point cut.
Speaker 1 (04:16):
Over the weekend, Bill Ackman from Pershing Square was saying
that China really needs to strike a trade deal quickly
with the US because it can't win a drawn out
trade war. So if China is put in a difficult
position here, are we likely to see much more weakening
of the currency. Do you think authorities in Beijing would
try to hold the line on the yuan so as
(04:38):
not to raise the risk of capital flight.
Speaker 2 (04:42):
Yeah, I mean that's a difficult one for them. They
understand the position from the property sector, They understand the
positioning now with tariffs, and you know, I'm not suggesting
it's the first one blinks losers, but the Chinese of
they know the situation. I think President Trump, there's a
very big chance you did have a probably a high
ball expectation what he pushed out there as far as
(05:06):
from a tariff perspective. You know a number, and he's
willing to lower it. So I think that If you
see that deal within the next couple of weeks, that's
going to be a plus for China. But if you
don't and it drags on, then that really could cause
a lot of internal friction. And I don't think that's
a happy place where they want to be.
Speaker 1 (05:25):
So would you be short? Do you want right now offshore?
Speaker 3 (05:29):
A little bit?
Speaker 2 (05:29):
I think, you know, traders will certainly look at it,
but it's conscious as far as it's a day by
day proposition.
Speaker 3 (05:36):
There could be a surprise.
Speaker 2 (05:37):
We could hear something within the next week or so,
and I won't say no, but I think there's just
been other markets that have offered far more opportunity than
possibly you know, from a yuan perspective.
Speaker 3 (05:49):
But hey, that could change very much.
Speaker 2 (05:51):
Within the next week or so, depended upon the two
parties coming to an agreement or not.
Speaker 1 (05:57):
So are those opportunities related to kind of even safety
I'm thinking maybe even the euro but certainly Japanese en?
Speaker 3 (06:04):
Oh yeah, yen. Have a look at what's happened.
Speaker 2 (06:06):
Of course, is one of the greatest trades has been
Swiss frank Aussie. But yeah, yen's been dynamic, you know,
that's been a great trade and you know Euro of course,
so those two have been the standard or those three
have been the standouts. And you know against that again
also cross rates against the Aussie because they've got hammered
so incredibly that you know, traders were all over that
(06:30):
from a from a currency pair perspective.
Speaker 1 (06:32):
So we mentioned a FED move being maybe on the
horizon at some point here in the near term. What
about the Bank at Japan.
Speaker 2 (06:40):
Absolutely, you know, you've got inflation at three point two
percent year on year in March, and you know you've
got that core measure coming out. I feel as though,
you know, the downside risk of growth have increased markedly
since February with the you know, when President Trump unleashed
the first wave of you know, the tariffs, and Japan
hasn't been spared. They've got a universal ten percent levy
(07:00):
nor the sectoral tariffs on steel and autos. But you know,
I'm expecting possibly lower its growth forecast the BOJ for
this quarter and that's the latest quarterly outlook. And then
how it moves from there, you might see some move
some Yeah, you may see something.
Speaker 3 (07:20):
I mean, I'll be waiting to probably inhale it, Doug.
Speaker 2 (07:23):
You know, it's everything is just very dynamic at the moment,
but we wouldn't be surprised to see some sort of
movement from them.
Speaker 1 (07:28):
Are you betting on much weaker growth globally right now?
Speaker 3 (07:32):
Yeah?
Speaker 2 (07:32):
In some ways, yes, you know, there's a there's a
you know, you hear some some nations are performing relatively well.
Speaker 3 (07:40):
But the overall theme, you.
Speaker 2 (07:42):
Know, yes, softer and that's going to be an issue
rolling certainly into Q two, Q two and Q three
that how that looks by Q four If you do
see softer growth, then you know, how does central banks
play that? And naturally, you know from a consumption standpoint,
the overall and things moving forward for equity markets.
Speaker 3 (08:02):
And so on.
Speaker 1 (08:03):
So as that becomes a little clearer, do we expect
less volatility in markets when we understand what the terrain
looks like?
Speaker 2 (08:11):
I don't know about that. You know when you say that,
you would you would hope so, Doug. But the other
side of it is you've still got an unknown in
the sense of where do the tariffs end, who is
coming to the table, who is negotiated, and President Trump
is saying and scot percent, you get in early and
you cut a deal, and then it's then you move
forward from there. But if countries are prepared to sit
(08:33):
on the sidelines, and that I think is going to
force their hand, and that in turn will create I think,
you know, additional volatility moving forward.
Speaker 1 (08:41):
But I'm imagining that if you get much weaker growth,
governments are going to sense greater urgency to get these
trade deals done.
Speaker 2 (08:48):
Absolutely, I think that's going to be you know, the
old Clint East would make my day sort of thing.
You'll be just sitting there and they'll they'll be forced,
their hand will be forced.
Speaker 3 (08:57):
Dug And that's the other side of it.
Speaker 1 (08:59):
I'd say, So, what is your favorite trade to put
on right now? The easiest, most cost effective way of
making money in the foreign exchange.
Speaker 2 (09:08):
I think one's got to be really mindful where that
US dollar index trades over the next week or so
with those numbers coming out, because it's had the big
sell off and it's bounced from the low from ninety
seven to.
Speaker 3 (09:19):
Seven to back ninety nine to sixty.
Speaker 2 (09:21):
So keep a very close eye on euro US dollar
and yen US dollar. So I think that that's where
the general focus is at the moment.
Speaker 1 (09:30):
Peter will leave it there always a pleasure I hope
you have a productive week. Peter maguire, CEO of Trading
dot Com Australia, joining us from Sydney here on the
Debreak Asia podcast. Welcome back to the Debreak Asia Podcast.
I'm Doug Prisner. Economic forecasters in the US are now
(09:53):
expecting the trade war to hit growth this year and
next as companies pass on the cost of tariffs and
higher commodity prices. In fact, the Bloomberg Survey is showing
that economists say the American economy is set to expand
by only one point four percent this year and one
point five percent in twenty twenty six. Now, that is
down from last month's survey. Obviously, the tariff story is
(10:16):
driving this narrative. Let's take a closer look now. Joining
me is Lawrence Worther. He is the chief US economist
at Diewalk Capital Markets. He's on the line from here
in New York City. Larry, I'm glad you could make
time to chat with us here. Let me begin with
the macro and the extent to which we're going to
see a lot of weakness in the economic numbers. Does
that necessarily mean that recession is a higher probability event
(10:39):
right now.
Speaker 4 (10:40):
Sure. Well, Doug, first off, thanks so much for having
me this evening. I'm pleased to be with you to
help you unpack the challenging period for the US. So
you're right. I think the trade war and the reverberations
that it's had on sentiment for businesses and consumers does
unfortunately mean slow or growth in the near term. Although
(11:02):
recession is not my baseline at least right now.
Speaker 1 (11:06):
One of the things that we've been looking for is
labor market weakness. And yes, I know these figures tend
to lag at this point, though the figures haven't been
particularly worrisome. Yeah, maybe a little bit of softness, but
I don't think it's anything that the FED would sound
the alarm over right now. I'm wondering whether you think
that could change on Friday when we get the non
farm payrolls data.
Speaker 4 (11:27):
You know, Doug, as I think about it, you know
it's a good question. But I wouldn't necessarily look for
weakness at least for another say, two to three payroll reports.
I penciled in a number that's right around consensus. I'm
looking for one hundred and twenty five thousand for nonfarm
payrolls on Friday. But as I said, I don't think
(11:48):
you've seen the layoff activity, you know, that would align
with a full blown trade ward at this point. And certainly,
as I said, the lag could be several months before
we really get a good sense of that if it
does in fact materialize.
Speaker 1 (12:01):
But I'm wondering whether that reading that we had last
Friday on consumer sentiment week, as it was one of
the lowest on record, could be kind of indicating that
we should expect weakness in the labor market in the
near term.
Speaker 4 (12:13):
No, Doug, it's tough. If you recall, consumer sentiment has
been pretty lousy for the entirety of this expansion, you know,
and just last quarter, the closing quarter of last year,
consumer spending grew to four percent clip. I think this
time the signal that we would derived from the data
is a little bit worse, you know. But I would say,
(12:36):
to date, I think firms, after experiencing labor shortages coming
out of the pandemic, aren't quite ready to pull the
trigger on layoffs just yet.
Speaker 1 (12:45):
What about the level of inflation expectations that consumers are expecting.
I think an annual rate of four point four percent
if you're sitting at the FED. That's got to be worrisome.
Speaker 4 (12:56):
Sure, you know, I think it could be, in a fact,
a bit worrisome, But I would emphasize two things. First,
FED officials are looking at a broad array of indicators
of inflation expectations, and moreover, they're focused on the long term.
So I think it's a bit difficult right now to
unpack signal from noise, specifically with respect to the Michigan survey,
(13:21):
but I would say concurrently, one should be watching the
New York FED survey of inflation expectations for consumers. Moves
there are upward, but they're a bit more benign. Moreover,
inflation break evens have been relatively favorable. At your five year,
five year forward, and ten year ahead. I think they're
still in the vicinity of two hundred and twenty five
basis points. So I think FED officials are vigilant, but
(13:44):
they're going to stay on message two weeks from now
that longer term inflation expectations remain anchored, at least for
right now.
Speaker 1 (13:51):
So what's your base case for the American economy?
Speaker 4 (13:54):
Sure base case is expansion this year. I'm not particularly
optimatetick about the first quarter I think you'll see sub
one percent growth, almost certainly on account of wild trade data.
I'm thinking Q four to Q four, somewhere in the
vicinity of fifty basis points eighty basis points of growth.
I think we'll do better in twenty six when the
(14:16):
smoke clears. But I'm hoping that sanity prevails with respect
to trade deals and tariffs and we can start focusing
on the positives tailwind from domestic investment, tailwind from tax
cuts in the like. But it just remains to be
seen how long the Trump administration drags out these tariff
negotiations or threats as they were, depending on how one
(14:39):
characterizes them.
Speaker 1 (14:40):
So what about total magnitude of FED easing.
Speaker 4 (14:44):
I'm not in the camp currently that we're going to
see a cut at the June meeting, although it's heavily
priced in the market. I'm thinking two cuts this year
and then additional cuts early in twenty twenty six, and
I'm thinking September and decemb or. My thought there is
that ultimately the pass through from tariffs to inflation that
(15:06):
we'll see will be lighter than many are penciling in
right now. You know, it's it's pretty risky to put
a number on inflation, but I'm thinking of three handle
on core, something in the low threes, substantially less than
some estimates around four. And I think there's some favorable
underlying dynamics with rents and wages coming down. So I
(15:28):
think the Fed remains patient until they get a better
pulse on tariffs and it's knock on effects, and I
think the labor market at least right now will give
them some cover to do so to be patient.
Speaker 1 (15:40):
So if there is a question mark over inflation, and
we can agree that growth is quite a bit weaker,
now do we have to bring into the conversation this
idea of stagflation or is that kind of an extreme position?
Is that a little hyperbole?
Speaker 4 (15:55):
Say, there's a little bit of hyperbole there, but you know,
at the same time, it's a fair question. I mean,
I think President Trump, in choosing the tariff battle to
be his first fight in you know, the first one
hundred days, has forced the market, has forced forecasters to
think about tail risk, and his chair pal is said,
(16:16):
you know, the tails right now on the distribution of
outcomes for both growth and inflation are pretty fat. So
I'm not necessarily thinking stagflation. I think the economy rebounds
when we get some clarity, and I think inflation won't
necessarily be as bad as some are thinking, but it's
certainly a risk that one has to consider. Doug.
Speaker 1 (16:35):
So, if you look at where a lot of the
market volatility has been coming from, yes, the tariff story
a major part of that. But we've also heard a
lot of criticism about the FED coming from the White House,
and it seems as though those two factors have kind
of converged and come together. Are you confident that cooler
heads will prevail as time goes by and will hear
(16:57):
less criticism of the FED and ultimately on the terror side. Yes,
perhaps they've been an effective tool to begin negotiations, but
ultimately they're really not going to deliver what Trump is after,
which is to bring manufacturing back to the United States.
Speaker 4 (17:11):
Sure, you know there's a lot to unpack in that question. First,
you know, I would emphasize off the bat that that
you know, I think FED has a tricky job. I
think they're navigating rough waters. But I remain confident that
the that the FED is an independent body and they
will push back zealously against President Trump. I mean you've
(17:34):
seen as much from Powell and his colleagues. I think
fed independences is really at the heart of our dollar
policy and our ability to you know, fight inflation and
the like. And I think Shair Pale has done a
good job, you know, not backing down on that front.
So I remain fairly optimistic, you know, with respect to
(17:56):
on shoring of manufacturing and supply chains. You know, Doug again,
you're I think a critical issue. President Biden previously and
President Trump, both at their hearts, are are industrialists, both
realized vulnerabilities of the US economy coming out of COVID
with supply chain disruptions and the like. I don't know
about the wisdom necessarily of Trump's policy, but I am
(18:17):
optimistic that you at least will see some onshoring of
domestic production. You've seen it in the semiconductor space. You've
seen it a little bit with pharmaceuticals. I think a
lot of CEOs are coming to the table. Businesses are
attempting to act preemptively because any new domestic investment and
getting a factory online has a pretty long lead time.
(18:38):
So I think you're seeing some movement in that direction.
Although I wish President Trump would have deployed the carrict,
perhaps more so than the stick initially, but he may
achieve his goals yet, and it would benefit the US.
Speaker 1 (18:52):
I would add, Larry will leave it there. Thank you
always a pleasure. Lawrence Worth are their chief US economist
at Diewalk Capital Markets. Joining from here in New York
City on the Daybreak Asia Podcast. Thanks for listening to
today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,
we look at the story shaping markets, finance, and geopolitics
(19:15):
in the Asia Pacific. You can find us on Apple, Spotify,
the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Join us again tomorrow for insight on the market moves
from Hong Kong to Singapore and Australia. I'm Doug Prisoner
and this is Bloomberg
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