April 18, 2025 • 39 mins
Bloomberg Daybreak Weekend with Tom Busby takes a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to home sales data and Tesla earnings.
- In the UK – a look ahead to how companies across Europe and beyond are preparing to share their latest financial performances with the market.
- In Asia – a look ahead to how some Chinese companies are looking to skirt U.S President Donald Trump’s tariffs.
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world. Straight Ahead, on the program,
we look at corporate earnings from eb maker Tesla. I'm
Tom Busby in New York.
Speaker 3 (00:21):
I'm Carolyn Hepge here in London, where we're asking what's
next for European equities as some of the continent's biggest
names prepared to deliver their results.
Speaker 4 (00:30):
I'm Greg Krissner with a new way Chinese retail suppliers
are looking to circumvent US tariffs.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirias XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business app.
Speaker 2 (01:02):
Good day to you. We begin today's program with a
look at the US housing market and what could happen
if the President's tariff policies drive inflation and mortgage rates higher.
Home sales data for March out this week could give
us an early look at the impact of those tariffs
on mortgage rates and home sales during this critical time
for the industry. For more, we're joined by Erica Adelberg,
(01:22):
Bloomberg Intelligence, Chief Mortgage backed Securities Strategists. Well, Erica, thank
you so much.
Speaker 5 (01:28):
For being here, Thank you for having me.
Speaker 2 (01:30):
We are in the heart of the spring home buying season.
Just last week, average long term mortgage rates, though rose,
first time we've seen that in six weeks, six point
eight one percent, according to the Mortgage Bankers Association. How
big a factor are mortgage rates in housing right now?
Speaker 5 (01:45):
Hi, Yeah, it's interesting. We actually wrote a note just
this week that talked about the different factors that enter
into a home buyer's decision, and we started with everything
you know, the equity market was taking. That's actually what
drove our inquiry. We're like, hey, is the wealth effect gonna,
you know, make people shy away from the housing market.
The number one important thing for people's home buying decisions
(02:07):
right now, historically and currently is mortgage rates.
Speaker 2 (02:11):
Even more so than the sticker price on that.
Speaker 5 (02:13):
Home, even more so than the sticker price on their home.
Because of the leverage involved in mortgage rates, that even
a small shift in mortgage rates is going to shift
your monthly payment a lot more than you know, ten
thousand dollars more for a home.
Speaker 2 (02:27):
And there are a lot of factors, I know, yes,
but if that's number.
Speaker 5 (02:30):
One, and affordability does matter, don't get me wrong. And
so home price is factor into that. And I think
in this era where people are stretching as far as
they can get to buy something, you know, with debt
to incomes for new homes, you know, above forty percent
for most borrowers, that's one of the reasons that mortgage
rates matters so much. But as I say that, it's
just it's it's math, you know, just a small tweak
(02:52):
up in mortgage rates and all of a sudden, you know,
the mortgage payment goes up a lot, and.
Speaker 2 (02:56):
Wait till they learn about property taxes.
Speaker 6 (02:58):
And insurance right right.
Speaker 2 (03:00):
Well. In the latest University of Michigan Consumer Sentiments Survey,
expectations for inflation where the highest since Ronald Reagan was president.
How could tariff driven inflation even if it's three or
four percent, not six percent, like people are afraid of,
affect mortgage rates in housing.
Speaker 5 (03:17):
Our concern in terms of mortgage driven inflation, of tariff
driven inflation is that it will paralyze the FED. And
while the FED doesn't control mortgage rates, you know, it
might keep the FED on hold for longer. And even
if the Fed does find room to ease a little bit,
long term inflation expectations are likely to keep the longer
(03:40):
end of the treasury rate curve and therefore mortgage rates higher,
So the mortgage borrowers are looking for, you know, some
relief from Fed easing if you know, if rates are
able to come down a little bit and short and
may not see that at all in the longer end
of the treasury curve and therefore may not see it
at all in their mortgage rates.
Speaker 2 (03:58):
And the FED have made no indication that they're willing
to step in before their next meeting, which is only
two weeks away, but they still waiting to see what happens. Well.
Speaker 5 (04:07):
The other interesting element to this is, you know, in
after the two thousand and eight crisis and even in
the twenty twenty pandemic crisis, the FED stepped in and
bought mortgages themselves, so they actually did have a direct
lever to affect mortgage rates to some degree. They have
shown no indication they're interested in doing that again. I
(04:27):
can't tell you how many times they've said they want
the portfolio to run off, to be more of a
treasury only holding that they're holding. So, you know, can
it never happen again?
Speaker 6 (04:37):
Could?
Speaker 5 (04:37):
Is it likely to happen? They will try very hard
I think, not to add mortgages to their to buy
mortgages outright again.
Speaker 2 (04:44):
Wow, well, it already looks like there's some fear that
may have hit sales in March. We have expectations for
home sales and newly built homes one third what they
were in February, and existing home sales rose more than
four percent in February, forecasted decline three percent in March.
I mean, is this tied back to mortgage rates and
(05:05):
the fear of inflation going even higher?
Speaker 5 (05:08):
I think this is tied back to mortgage rates.
Speaker 1 (05:11):
You know.
Speaker 5 (05:11):
On the positive side, we have seen the NBA Purchase Index,
which is a good indication of people who are looking
to take out loans to buy homes, has actually gone
now up above twenty twenty three levels for the first time.
It had already broken above twenty twenty four, about a
month ago. But yeah, we are seeing signs that and
(05:32):
I think you know, existing home sales had begun to improve.
It was finally improving on a year over year basis,
you know, until I think last month, just because there
were more homes that are coming on the market, availability
a lot of people were sitting on these very low
coupon mortgages and didn't want to sell their homes, which
really tanked existing home sales even as new home sales
(05:52):
were growing, that is home sales of new construction.
Speaker 6 (05:57):
But you know, at the.
Speaker 5 (05:58):
Same time, what we've found is that inventory is rising
may have limits because pending home sales were down seven
percent year every year in March and could continue down
as mortgage rates go up.
Speaker 2 (06:12):
Now, speaking of new homes, home builder sentiment we got
just last week was that expected to go a little higher.
Kind of surprised me.
Speaker 5 (06:20):
It's still well below fifty, which is where there's more
pessimists than optimists. That's a diffusion index, and fifty means
there as many pessimists as optimists. But it was expected
to tick down slightly, and it's that it ticked up slightly,
expected to kind of go to a long term low
of thirty eight, and it went up to forty s.
Speaker 2 (06:38):
I think, what do you think they see?
Speaker 5 (06:40):
What it seems like they're seeing, you know, from what
I've read, having not talked to them directly, is it
seems like they're seeing an increased in current traffic and
again that that might be as much of a reflection
of rates having dipped down a little bit at the
end of March and in March, but forward looking, they're
very concerned about tear increasing their prices. I think the
(07:02):
estimate is they think on a per home basis, they
think tariffs are going to increase the price of their
new construction by an average of eleven thousand.
Speaker 2 (07:09):
New home sales for March out on Wednesday, existing home
sales for that same month out on Thursday. Our thanks
to Erica Adelberg, Bloomberg Intelligence Chief mortgage backed security Strategists,
we move next to earnings and one of the most
highly anticipated first quarter releases from the ev giant Tesla
that's out on Tuesday. How did the thread of tariffs
(07:29):
and the backlash against CEO Elon Musk for its DOGE
task force and politicking in Europe impact sales well? For
more we're joined by Craig Trudell, Bloomberg Global Autos Editor. Well, Craig,
thank you for joining us. Now, so far, we know
that the first three months of this year have been
tough for Tesla, delivering three hundred and thirty seven thousand autos.
(07:50):
That's thirteen percent fewer than a year ago and a
lot fewer than Wall Street was hoping to see. Shares
down forty percent so far this year. About now, what
are the factors behind that?
Speaker 7 (08:03):
Well, so you mentioned off the top, I mean the
decline in vehicle deliveries in the first quarter. I think
everybody was braced for that number to be weak, and
yet it was much weaker even than I think expectations
were going into the company reporting that at the beginning
of the month. And I think, you know, what's really
(08:24):
remarkable is just how much the expectations for these earnings
have declined over the last you know, say, just a
couple of years. In the beginning of twenty twenty three, analysts,
on average, we're expecting this company to earn about two
dollars per share. The average espent now is below fifty cents.
And it's a similar story when you look at revenue
(08:46):
at the top line. So the expectation back then was
more than forty billion dollars that's now fallen to below
twenty two billion. So what we have here is a
company that for a long time was viewed as a
growth stock that is no longer growing and that's really
spelled trouble for a stock that is, you know, it
(09:08):
is priced for that growth.
Speaker 2 (09:10):
Now, how much of a factor is Elon Musk himself
and there we could go on and on talking about
the fourteen children and the doge, but how much of
that is him?
Speaker 7 (09:22):
Yeah, I mean I think, you know, there's obviously a
lot of attention on what he's doing in Washington, and
there's been a lot of blowback over that, and that
was absolutely something that came into play in the first quarter.
But I think this is also you know about Musk
in the sense that you know, he was he was
sort of making decisions making changes to Tesla's plans long
(09:44):
before he was you know, becoming you know, part of Maga,
if you will. Tesla you know, was going to bring
to market a much cheaper electric vehicle that would be
priced below the Model three, and in early twenty twenty three,
the company decided that it wasn't going to do that anymore.
This has been a company that's priced for growth, and
(10:06):
Musk made a fateful decision early last year where the
company was going to bring this cheaper electric vehicle to market.
It was going to be priced below the Model three,
which is the most affordable car you can buy from Tesla.
He made the decision to scrap that car because, in
his eyes, Tesla was on the verge of being able
to deliver fully autonomous vehicles. That's something that he's been
(10:28):
promising for many years but not actually been able to deliver.
And that was a really big risk and it's a
risk that Tesla is now paying for because the plan
was to bring that to market roughly around this time,
and without that, Tesla doesn't have, you know, the cheaper
car that more consumers can afford. That would have given
(10:49):
you know, the company a shot at sort of a
next leg of growth.
Speaker 2 (10:52):
I want to talk to you about tariffs. Now. Every Tesla,
including the cyber trug sold here in the US, is
mostly from parts in the US. A couple of chips,
maybe a couple of electronics, right, So, how do you
think and we know that these Trump tariffs can change
and do change day to day, hour to hour, it seems.
But how do you think tariffs are impacting the company?
Speaker 7 (11:14):
Yeah, I think, you know, in general, there's been a
view that because Tesla, it has its final assembly of
the vehicles that it sells in the US, you know,
carried out in the US, that they would be relatively insulated.
But I think what we've learned is also that there's
not going to be a winner in these trade wars
that that Trump is waging. There's going to be sort
(11:35):
of relative losers. And even Tesla, while it has a
supply chain close to where it assembles, even Tesla relies
on suppliers for an awful lot of parts, and a
lot of those parts come from places like Canada and Mexico.
Even you know, in the past, the industry reviewed the
US's neighbors as you know local and that is changing
(11:58):
in really dramatic fashion really this year. And so even
Tesla is at risk here. And Musk himself has acknowledged
that where you know, he's talked on on X formerly
Twitter about the fact that they too will will feel
the pain. And also you know, some some real concern
about you know, how much sort of low cost components
maybe would be coming over from China. We know that
(12:20):
the amount of uh, you know, tariff, the level of
tariff that Trump is putting on China is really dramatic.
And we know that the you know, ev battery supply
chain is so relyant on China. So that is absolutely
going to be something that analysts are going to be
listening for closely. When Musk talks on the earnings call, oh.
Speaker 2 (12:40):
Well, a lot to look forward to, teslak you one
earnings out this Tuesday after Wall Street's closing. Bell our
thanks to Craig Trudell, Bloomberg Global Autos Editor. Coming up
on Bloomberg day Break weekend, what's next for European equities
as some of the continent's biggest names prepare to post
their latest earnings results. I'm Tom Busby and this is Bloomberg.
(13:12):
This is Bloomberg day Break Weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Tom Busby in New York. Up later in our program,
we'll look at how some Chinese companies are trying to
navigate President Donald Trump's tariffs. But first, as investors around
the world try to make sense of the always involving tariffs.
Companies across Europe and beyond are preparing to share their
(13:32):
latest financial performances with the market. How will equities fare
against a backdrop with such uncertainty and how will the
prospect of a global trade war affect twenty twenty five's outlook.
Let's go to London and bring in Bloomberg day Break
Europe anchor Caroline hepgar.
Speaker 3 (13:47):
Tom European stocks have seen a hugely tumultuous period as
a trade war sparked by President Trump's tariffs has threatened
to up end global trade and supply chains well. In
the coming day, companies will report first quarter earnings, and
attention will focus on what they reveal about the impact
of tariffs on businesses, decision making, demand and logistics. Now,
(14:12):
those first out of the gates to report earnings have
faced mixed fortunes, namely LVMH, which faced a steep share
price drop on the news of slowing demand both in
China and in the United States amid the threat of
an escalating trade wark. Will the other European names due
to share their latest balance sheets in the days ahead
(14:34):
face a similar fortune? While Canadian Imperial Bank of Commerce
Chief International Strategists Jeremy Stretch doesn't think so, hit Ol Bloomberg,
the continents prospects are on the rise again with the
backdrop of US uncertainty.
Speaker 8 (14:50):
Well, I think if we scroll back to the first
quarter meeting, but go back to pre Liberation Day on
April two, and we looked at what we've seen in
the equity space during the first quarter of the year,
a massive rotation out of the US and into the Eurozone.
And I think that's a recognition that the US economic exceptionalism,
which of course has been the driving factor of US
asset performance over the course of the last three or
(15:11):
four years, is no longer was no longer quite so irrelevant.
And of course then we're overlaying that with the uncertainty
that is now being written large by the tariff narrative,
And so we're getting investors saying, well, if the US
is no longer quite the reliable trade partner or no
longer the reliable defense partner, obviously, in the context of
the NATI considerations as well, it makes sense to gradually
(15:31):
or progressively consider those asset flows to the same sort
of magnetude going into US asset, So do.
Speaker 3 (15:37):
You see more dollar weakness ahead?
Speaker 8 (15:39):
I think what we've seen we've seen a substantive move
in a very short space of time. So I think
what we've seen is a significant positioning digression over the
course of the last few sessions, in fact, even the
last few weeks in a sense, so obviously we've seen
euro long positions moving up quite significantly. So I think
it may be the case if we get a slight
dialing down or at least less tariff negativity, at least
(15:59):
for a few sessions. Now, of course, in the context
of what we've seen over the course of the last
week or two, a few sessions seems like an awfully
long time. But if we can actually get through the
Sterpia without a further acceleration in tariff negativity, then we
might just see a little bit of a consolidation of
the dollar. We might just find the dollar finding a
little bit of residual value. But I think there is
a solid appetite to try and buy by the sort
(16:22):
of extreme. So if we do see the dollar rallying,
then I think we will find all the euro dollar
dipping down sort of maybe one twelve and a half.
There will be appetite to try and buy that dip,
So I think that's the sort of mentality it is.
Selling dollar rallies or buying eurodips. I think is probably
going to be the mentality that's going to prevail in.
Speaker 9 (16:39):
The uncertainty that you mentioned. I wonder how do you
see the market perception of what uncertainty is now versus
I mean only a couple of weeks ago, where, of
course the world was a very different place. I mean,
is the volatility now just going to be part of
our sort of immediate and perhaps medium term future.
Speaker 8 (16:57):
Well, I think quite clearly the world has somewhat changed.
So in a sense, if we went back to the
middle of March and said, well, the world, the global
environment is going to see at minimum of a ten
percent tariff, most people have said that would have been
hugely detrimental to the global growth rejectory, and we would
have seen risk being priced accordingly. Now we're in a
scenario where we've seen a much worse set of parameters
(17:19):
potentially being laid out, and then theoretically ten percent or
some degree of derivation of that if there can be
further trade negotiations are seen as a better case. Scenario.
So I think we've certainly moved the parameters. The goalposts
have shifted quite significantly as to what is the base
case and what is the extreme risk off for risk
dynamic scenario. So I think that's the reality that investors
(17:40):
are going to have to shift in this new global
world order, and that is this fundamental factor that is
driving investor sentiment.
Speaker 3 (17:48):
That was Jeremy Stretch from Canadian Imperial Bank of Commerce
there speaking to Billiomberg, Stephen Carroll, and Valerie Titel. So
what is in store as biggest corporates to update the market?
I asked Bloomberg's earning specialist Chloe Malay.
Speaker 10 (18:05):
We had some big names reporting so far that I've
kind of given us a flavor of what to expect
for this arning season. Let's start with maybe the less impressive,
the more disappointing reports. We had lvmtrix sales coming in
weaker than expected, which is not the best start to
the luxury reporting season and really signals a weakening of
(18:26):
demand that is concerning for the rest of the year
for avment, but also for the rest of the sector.
We also had ASML with also lower than expected orders,
and that comes amid kind of the context of over
slow down in AI demand.
Speaker 6 (18:40):
For one kind of.
Speaker 10 (18:41):
Positive update we had ericson with the first quarter beat.
Quite good print because operators are really kind of ramping
up spending on five D equipment, so that could be
that could kind of bird well for the rest of
the telecom sector for this earning season. But of course
the key theme across all of this was, of course,
the impact of trade uncertainty are on the outlook for
(19:02):
all of those companies.
Speaker 3 (19:03):
Yeah, the results won't take into account the tariffs on
the second announced on the second of April. How much
underperformance can you put down to pre tariff anxiety weighing
on these businesses.
Speaker 10 (19:17):
Yes, so of course tariff announcements came at the very
beginning of the second quarter, but the chatter around tariffs
and the uncertainty that it brought really started much earlier,
So there's no way really to quantify how much those
pre teriftag just mattered.
Speaker 6 (19:31):
But of course there may have been a contributing factor.
Speaker 10 (19:33):
You know, if we look at ALVMH for instance, there
was continued weakness in China, but also new weakness in
the US with shopers really raining in spending on things
like Konyak beauty products, etc. Which is something that would
occur within the period of kind of economic uncertainty.
Speaker 3 (19:49):
Talk us through other major headwinds then that firms faced
in the first three months of the year.
Speaker 10 (19:54):
If we look at the kind of biggest EPs and
expishare decline that we're expecting for the first quarter, we
have three main sectors that are going to be leading
that decline, so materials, car makers, and energy. So for materials,
they were already weak at the previous earning season, but
what affected them throughout the first three months were really
weak end markets and including very soft construction activity in China.
(20:16):
They also faced supply chain issues and they faced high
energy costs. If we look at the autoind car making sector,
they've been struggling with weak demand in China as well
because consumers are opting for local brands instead. So we
had Porsche, for example, cutting estimates in March due to
slump in cells in the country, and that was all
of that as likely kind of been happening over the
(20:38):
first quarter, and we'll hear about that over the coming weeks.
The weakness in the car making sector, of course, also
impacts other sectors. Semiconductor companies, for example, that specialize in
that end market as well. For the energy sector, the
oil prices fell over the course of the first quarter,
which would have also pressured earning.
Speaker 6 (20:58):
So those are the kind of key edwins for those sectors.
Speaker 3 (21:01):
How big a factor, then, do you think geopolitics has been?
Speaker 6 (21:05):
What kind of tariffs?
Speaker 10 (21:06):
And obviously the shape and the extent and the scope
of them really dominated the conversation from the very beginning
of the year, so that that was and there will
continue to be the main talking point.
Speaker 3 (21:15):
Really, what do you expect to hear from companies in
the outlook of the results that they're going to present
more kind of expect the unexpected. Do you think there'll
be lots of euphemisms for tariffs, lots of cost cutting exercises.
Speaker 10 (21:30):
Yeah, so we're expecting a fair amount of warning, some
of them kind of explicitly addressing addressing tariffs, of them
addressing euphemisms, you know, like macroeconomic and certainty, et cetera.
But obviously that refers to the same thing we're expecting.
Guidance being cut, guidance being pulled. We've already seen that
with a couple of companies. We had Page Group in
the UKA, Carmacks in the US. The global uncertainty is
(21:52):
making it kind of very difficult for companies to see
into the future and to make predictions about what's going
to happen for their for their business. Were also maybe
expecting some companies to cancel capital expenditure plans, to hold
off on hiring plans. Perhaps if you kind of look
at what recruitment companies have been saying. They have mentioned
that all of this uncertainty is making people kind of
hold back on on more hiring. We might also see
(22:14):
a pause in buybacks. So we saw that with Bunzl,
and though that was not directly related to Tariff's there
may be something else that we see, which, of course
investors would not really react very kindly to. On the
other hand, some companies might also decide not to speak
about tariffs at all. You know, JD Sports did it
on the recent call, and then they might do that
until it all becomes clearer.
Speaker 3 (22:33):
In terms of clarity, let's dive into one sector in particular.
You mentioned LVMH their difficulties carring group reports in the
days ahead.
Speaker 10 (22:42):
What are we expecting so caring already started from a
weaker position, really than what LVMAGE started with. You know,
they had a tough twenty twenty four overall because the
flagship brand Gucci is kind of undergoing this whole turnaround,
which makes it quite difficult.
Speaker 6 (22:58):
The report from the IRVMAGE doesn't bode.
Speaker 10 (23:00):
Well for Caring because it really highlighted that aspirational fashion
isn't really doing well in a period of economic uncertainty. Obviously,
you know, kind of more high in luxury like AMS
is more resilient because consumers at that level are less
price sensitive. But the problem for Caring is that it's
much more kind of entry level aspirational fashion than LVMTRO
(23:21):
on the whole, which means it's much more exposed to
this pullback in discretionary spending. If we look at esthimas
for Caring, you know, we were looking for an organic
revenue decline of about twelve percent, which would be on
a similar level as the fourth quarter and doesn't indicate
any kind of recovery.
Speaker 3 (23:37):
And yet there's been such renewed interest in European assets
from the euro to individual stocks and bonds, which equity
sectors to expect to actually perform strongly. I mean, you've
got to think about defense surely yes.
Speaker 10 (23:51):
So defense should definitely still kind of be riding that
high of all the defense spending you know, announced in Europe,
though that may not have fully materialized into earnings yet,
so we'll have to see that in the coming weeks.
Banks as well should have a fairly resilient quarter, even
though the one major drag will be kind of on
the outlook for higher provisions, perhaps for lown losses because
(24:12):
of the economic environment deteriorating, and of course net interest
income also kind of falling as rates are cut further
and further, but they should be overall doing quite well
for the first quarter. Within the tech sector, even though
we had ASML semiconductors and kind of software and services
sectors are expected expected to have an earnings pushare rise
(24:34):
as well compared to flat growth in the fourth quarter.
And also communication services, so things like telecoms, as I
mentioned with Ericson, should be relatively resilient as well.
Speaker 6 (24:45):
So there are some pockets of optimism.
Speaker 3 (24:47):
Kloe. The next a few days and weeks, they're really
going to test your metal, your analytical skills, your speed
of writing. Just tell us what other big European names
you're going to be watching out.
Speaker 10 (24:58):
For so in the coming day we have some major
companies of NAX season is really ramping up. We have
a few consumer names like Nesler, unilevera Dan on the
focus there will be really on the on their ability
to boost volumes while trying to keep prices affordable. We've
got BNP also opening the ball for the European banks
(25:19):
and there the focus will be on you know, deal activity,
on on on a net interest income and also on
loan loss provisions. And then we also have some key
names and sectors that might be involved in the tier
of conversation as well, which you know we have Farmer
with Sanafie and Roche and also Involver and Reno on
the kind of vehicle carmaking side.
Speaker 6 (25:40):
So loads of things to look out for.
Speaker 3 (25:42):
My thanks to Chloe Malay, will be right across all
the biggest corporate stories for you in the coming days.
Right here on Bloomberg. I'm Caroline Hedge in London. You
can catch us every weekday morning for BLUEMBERG Daybreak you
at beginning at six am in London. That's one am
on Wall Street.
Speaker 6 (25:57):
Tom.
Speaker 2 (25:58):
Thanks Caroline and come up on Bloomberg day Break weekend
we'll look at how some Chinese companies are dealing with
President Trump's tariffs. I'm Tom Busby, and this is Bloomberg.
(26:19):
This is Bloomberg day Break weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Tom Busby in New York. With President Trump's ever
increasing tariffs on imports from China, some Chinese companies are
looking to creatively skirt those tariffs. For a look at
how that could happen, let's get to the host of
the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (26:38):
Tom, not a day goes by when we're not talking
about the US China trade war and the fallout from
those higher tariffs. So, if you're a Chinese manufacturer facing
these new levies, what are you feeling right now? Is
there a way for you to react, some way to
circumvent these tariffs and move products to US consumers without
that additional cost. Well, TikTok influencers in China apparently have
(27:02):
found a way. They are showing videos to users in
the US encouraging them to buy directly from Chinese factories
bypassing not just the tariffs, but US brands as well.
Speaker 11 (27:13):
Who are the suppliers to Hi Lulu Lama. Some of
their Hugo wears are actually from Young Lung Clothing and
Haunti Shop Clothing. And guess what full factories locating eu here.
And these two factories also supplight clothing for Fila and
an Arma. I guess most of you know the price
of Lulu Lamas or other big brands. They sell you
a lagging pans for one hundred dollars and guess what
(27:34):
here in these two factories you can get them for
around five to six bus.
Speaker 4 (27:39):
For more on the story, I'm joined by Colin Murphy,
China Eco GUV reporter for Bloomberg News. Column joins us
from our studios in Beijing. Thank you so much for
making the time to chat with us. Can we begin
column by having you break down the process? How is
this actually happening?
Speaker 6 (27:54):
Okay?
Speaker 12 (27:54):
So basically, the first thing is that TikTok itself is
not available in China. Domestic app here called doing so
in order for the Chinese influencers to get their messages
on TikTok, which is already quite surprising. We are suspecting
that there's some element of collaboration here, some sort of
(28:17):
planning so basically what they're doing is they are making,
you know, short videos to describe some of the reasons
why the US customer and the US buyer has to
pay so much money for products that are available in
China at knockdown prices. And these messages are basically trying
(28:41):
to suggest or encourage not necessarily ways to avoid the tariffs,
but to let's say, minimize the impact of the tariff.
But the deeper meaning I think is to show and
to illustrate that China is pushing back against these tariffs,
to show that you know, this is kind of mocking
(29:03):
in a way, and to undermine the Trump tariffs and saying, hey, look,
we have come up with these innovative ways to showcase
and to tell you about our products, and we're going
to swamp TikTok in order to do that.
Speaker 4 (29:19):
So it seems maybe to be less about selling goods
to you as consumers and more about creating outrage among
the American consumer right, and how tariffs are impacting the
prices of the Chinese made products that they are accustomed to.
Speaker 12 (29:33):
Definitely, I think, you know there is this, as I say,
broader push by this campaign, which you know has picked
up strength and exploded. Basically over the weekend, we've had
these types of videos from merchants in China saying, you know,
we produce this product and you should buy from us.
(29:53):
I mean, they've been around for a while, but what
we're talking about in this particular instance is, first of all,
the volume of such sort of videos and messaging has
has gone through the roof. A lot of them display
very similar characteristics. They're very polished, most are speaking in
very sort of sophisticated use of language, and in English,
(30:17):
of course, and it's all happening over this short period
of time. So it's hard not to conclude that this
is definitely an effort to, if not at the very least,
sort of mock the US efforts on tariffs, but probably
to you know, undermine in a way the Trump tariff
(30:37):
regime and call the attention of the ordinary American citizen
to like how the tariffs will and can impact their
bottom line.
Speaker 4 (30:48):
And it's a little ironic in the platform right during
his first term, Trump wanted a band TikTok in the
US or force some type of change in ownership. That
position later became reflected in US law, but I believe
it was March twenty twenty four, when President Trump reversed
his position and began advocating against banning the app on
(31:08):
the grounds that, okay, we needed it.
Speaker 2 (31:11):
But this seems to.
Speaker 4 (31:11):
Be to the point of maybe there's a national security
issue involved here. Is that saying too much?
Speaker 12 (31:17):
Well, I would just say it does show that there
has been a marked increase in the ability of the
Chinese message to get to ordinary citizens in the US
and on the whole, these messages have been pro China. So,
for example, we have this latest incident, which it is
ironic because right now TikTok is still under close scrutiny
(31:41):
with the talk of a ban or sale. So for
this to be happening on this platform right now is
somewhat curious. But you know, it does also remind us
of something that happened a couple of months ago, which
was when the Chinese app Shao Hongshu or Red Note
suddenly became hugely popular when the so called TikTok refugees
(32:05):
were fleeing to that app when the threat of the
ban was imminent. And so this was also the first
time when we saw a real sort of outpouring and
outreach from Chinese citizens to their American counterparts, exchanging information.
We saw lots of Americans saying, as a result, oh,
(32:25):
what they've been telling us about China is wrong all along.
It's very developed, it's very sophisticated, and so on and
so forth. So you did have some element of influence
and changing of perceptions. And this again, this particular campaign,
shall we say, looks like hitting similar points, and that
(32:45):
we do have reaction from Americans on the ground who
are saying, I never realized that this was the reality.
And maybe it's not anger, but it's definitely, you know,
increasing awareness and in some cases for stration at some
of the narratives that they seem to sort of feel
have have been thrown on them by their own government
(33:09):
in DC.
Speaker 4 (33:10):
So the packages with merchandise shipped from China with a
value at less than eight hundred dollars have enjoyed the
deminimous exemption from these added duties, and we have seen
the impact that has had on online Chinese retailers like
Timu and Chien to sell super cheap items to American consumers. Now,
(33:30):
the President has kind of taken executive action here to
end that loophole, and I think that begins on May
the second. So I'm wondering, just on the commerce side,
whether this let's call it a workaround, is facing extinction.
Speaker 12 (33:44):
Yes, I think, you know, I mean, whether this would
actually yield to a spike in sales for the Chinese merchants.
I would doubt that at this point for various reasons,
including that, you know, a lot of these are not
the equivalent in terms, so they don't come with the
brand that they have, So you know, I mean, how
many people are going to turn around and start buying
(34:07):
more because of this campaign. It's a big question mark.
And also, as you mentioned, the Deminimus rule needs to
be clarified and whether that's going to stay or not.
But I do think another point here is like, yes,
this is mocking of the US system. But at the
same time, there's also something that we need to reflect
from the China side, and that is there are a
lot of people here who are dependent on exports, dependent
(34:29):
on selling goods to the US, and you know, in
another way, we could interpret this as being a sign
of desperation. Also on the Chinese side, we have these
vendors who are looking at possible bankruptcy or possible you know,
difficulties commercially, and this could also be interpreted as an
(34:50):
effort by them to try to change their situation. So
while on the one hand, it is definitely you know,
poking fun and mocking a little bit the US and
the tariffs that have been introduced and stopped and paused
and reintroduced by Trump, but there's also a message for
the Chinese as well. Probably not intentionally, but it does
(35:13):
remind us that there's a lot of people here who
do stand to suffer if the tariff regime goes into
full effect and remain so for an extended period of time.
Speaker 4 (35:25):
Is it too much to say that the government may
be involved in this? Is there any evidence that that
may be happening.
Speaker 12 (35:31):
Well, that's always super difficult to pinpoint right, nobody's going
to come out and say we are allowing this to happen.
But you know, I mean, there is the element that
typically in China, like if there's something online that the
government doesn't like, it will get shut down pretty quickly.
And then of course there are some sort of legal
(35:51):
implications here. For example, many of these brands that are
being exposed would have non disclosure agreements in place with
their supplyers, and also obviously trading and counterfeit goods is
not a legal activity. So the fact that these sort
of videos are allowed to stay online, even if it's
just for a short period of time, does sort of
(36:14):
suggest some sort of tacit approval at least, or perhaps,
you know, if we want to be generous, maybe it
hasn't filtered to the right authorities yet and there will
be a crackdown. It is very early to say definitively
what are the factors at play. We don't have a
comment as of now from the company from TikTok explaining
(36:35):
what's happening, So in the absence of all that, I
think we have to hold back judgment for a little while.
But coming at this time and in the volume and
the quality of the videos, I can help but be
quite suspicious that this is some sort of collaboration or
concerted effort to send a message.
Speaker 4 (36:57):
So we know that the Trump administration was working towards
negotiating some type of sale of the US operations of
TikTok to a group of private investors. When the terrafor began,
those talks seemed to be scuttled. I can only imagine
that This illustrates some of the downside that may exist
(37:18):
if you're in the administration wondering about what co ownership
may look like. Let's say, if Beijing were to have
a fifty percent stake in TikTok still even after the
US divestiture, what type of problems may exist down the road.
This could be a prime example.
Speaker 2 (37:34):
Of that, right right.
Speaker 12 (37:36):
And you know, some experts on disinformation that I spoke
to do say that this underscores the importance of a
ban or a sale. That of course would be their
point of view at this point, because that's what they're supporting.
Speaker 6 (37:51):
It does raise the question.
Speaker 2 (37:53):
It also, you.
Speaker 12 (37:54):
Know, brings up the point whether a deal will happen
at all, because you know, the Chinese have now, as
you said, made quite clear that the TikTok issue is
dependent on clearing the tireff issue first, and you know,
it's sort of a grand bargain where everything is thrown
(38:15):
into one bag and includes TikTok, includes tariffs. We've seen
in recent days that the chances of that happening are
declining constantly, so I wouldn't hold out too much hope
for that in the immediate term. But yes, it does
illustrate some of the concerns that were raised by lawmakers
(38:37):
and other advocates calling for a ban or a sale
of TikTok, and it's curious that this would be allowed
to happen at this very sensitive time.
Speaker 4 (38:47):
Column. Thank you so much. That is Colin Murphy, China
Eco GUV reporter for Bloomberg News, joining us from Beijing,
and I'm Doug Krisner. You can catch us weekdays here
for the Daybreak Asia podcast. It's available where you get
your podcast.
Speaker 2 (39:01):
Tom. Thank you Doug. And that does it for this
edition of Bloomberg day Break Weekend. Join us again Monday
morning at five am Wall Street Time for the latest
on markets overseas and the news you need to start
your day. I'm Tom Buzzby. Stay with us. Top stories
and global business headlines are coming up right now.
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world. Straight Ahead, on the program,
we look at corporate earnings from eb maker Tesla. I'm
Tom Busby in New York.
Speaker 3 (00:21):
I'm Carolyn Hepge here in London, where we're asking what's
next for European equities as some of the continent's biggest
names prepared to deliver their results.
Speaker 4 (00:30):
I'm Greg Krissner with a new way Chinese retail suppliers
are looking to circumvent US tariffs.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirias XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business app.
Speaker 2 (01:02):
Good day to you. We begin today's program with a
look at the US housing market and what could happen
if the President's tariff policies drive inflation and mortgage rates higher.
Home sales data for March out this week could give
us an early look at the impact of those tariffs
on mortgage rates and home sales during this critical time
for the industry. For more, we're joined by Erica Adelberg,
(01:22):
Bloomberg Intelligence, Chief Mortgage backed Securities Strategists. Well, Erica, thank
you so much.
Speaker 5 (01:28):
For being here, Thank you for having me.
Speaker 2 (01:30):
We are in the heart of the spring home buying season.
Just last week, average long term mortgage rates, though rose,
first time we've seen that in six weeks, six point
eight one percent, according to the Mortgage Bankers Association. How
big a factor are mortgage rates in housing right now?
Speaker 5 (01:45):
Hi, Yeah, it's interesting. We actually wrote a note just
this week that talked about the different factors that enter
into a home buyer's decision, and we started with everything
you know, the equity market was taking. That's actually what
drove our inquiry. We're like, hey, is the wealth effect gonna,
you know, make people shy away from the housing market.
The number one important thing for people's home buying decisions
(02:07):
right now, historically and currently is mortgage rates.
Speaker 2 (02:11):
Even more so than the sticker price on that.
Speaker 5 (02:13):
Home, even more so than the sticker price on their home.
Because of the leverage involved in mortgage rates, that even
a small shift in mortgage rates is going to shift
your monthly payment a lot more than you know, ten
thousand dollars more for a home.
Speaker 2 (02:27):
And there are a lot of factors, I know, yes,
but if that's number.
Speaker 5 (02:30):
One, and affordability does matter, don't get me wrong. And
so home price is factor into that. And I think
in this era where people are stretching as far as
they can get to buy something, you know, with debt
to incomes for new homes, you know, above forty percent
for most borrowers, that's one of the reasons that mortgage
rates matters so much. But as I say that, it's
just it's it's math, you know, just a small tweak
(02:52):
up in mortgage rates and all of a sudden, you know,
the mortgage payment goes up a lot, and.
Speaker 2 (02:56):
Wait till they learn about property taxes.
Speaker 6 (02:58):
And insurance right right.
Speaker 2 (03:00):
Well. In the latest University of Michigan Consumer Sentiments Survey,
expectations for inflation where the highest since Ronald Reagan was president.
How could tariff driven inflation even if it's three or
four percent, not six percent, like people are afraid of,
affect mortgage rates in housing.
Speaker 5 (03:17):
Our concern in terms of mortgage driven inflation, of tariff
driven inflation is that it will paralyze the FED. And
while the FED doesn't control mortgage rates, you know, it
might keep the FED on hold for longer. And even
if the Fed does find room to ease a little bit,
long term inflation expectations are likely to keep the longer
(03:40):
end of the treasury rate curve and therefore mortgage rates higher,
So the mortgage borrowers are looking for, you know, some
relief from Fed easing if you know, if rates are
able to come down a little bit and short and
may not see that at all in the longer end
of the treasury curve and therefore may not see it
at all in their mortgage rates.
Speaker 2 (03:58):
And the FED have made no indication that they're willing
to step in before their next meeting, which is only
two weeks away, but they still waiting to see what happens. Well.
Speaker 5 (04:07):
The other interesting element to this is, you know, in
after the two thousand and eight crisis and even in
the twenty twenty pandemic crisis, the FED stepped in and
bought mortgages themselves, so they actually did have a direct
lever to affect mortgage rates to some degree. They have
shown no indication they're interested in doing that again. I
(04:27):
can't tell you how many times they've said they want
the portfolio to run off, to be more of a
treasury only holding that they're holding. So, you know, can
it never happen again?
Speaker 6 (04:37):
Could?
Speaker 5 (04:37):
Is it likely to happen? They will try very hard
I think, not to add mortgages to their to buy
mortgages outright again.
Speaker 2 (04:44):
Wow, well, it already looks like there's some fear that
may have hit sales in March. We have expectations for
home sales and newly built homes one third what they
were in February, and existing home sales rose more than
four percent in February, forecasted decline three percent in March.
I mean, is this tied back to mortgage rates and
(05:05):
the fear of inflation going even higher?
Speaker 5 (05:08):
I think this is tied back to mortgage rates.
Speaker 1 (05:11):
You know.
Speaker 5 (05:11):
On the positive side, we have seen the NBA Purchase Index,
which is a good indication of people who are looking
to take out loans to buy homes, has actually gone
now up above twenty twenty three levels for the first time.
It had already broken above twenty twenty four, about a
month ago. But yeah, we are seeing signs that and
(05:32):
I think you know, existing home sales had begun to improve.
It was finally improving on a year over year basis,
you know, until I think last month, just because there
were more homes that are coming on the market, availability
a lot of people were sitting on these very low
coupon mortgages and didn't want to sell their homes, which
really tanked existing home sales even as new home sales
(05:52):
were growing, that is home sales of new construction.
Speaker 6 (05:57):
But you know, at the.
Speaker 5 (05:58):
Same time, what we've found is that inventory is rising
may have limits because pending home sales were down seven
percent year every year in March and could continue down
as mortgage rates go up.
Speaker 2 (06:12):
Now, speaking of new homes, home builder sentiment we got
just last week was that expected to go a little higher.
Kind of surprised me.
Speaker 5 (06:20):
It's still well below fifty, which is where there's more
pessimists than optimists. That's a diffusion index, and fifty means
there as many pessimists as optimists. But it was expected
to tick down slightly, and it's that it ticked up slightly,
expected to kind of go to a long term low
of thirty eight, and it went up to forty s.
Speaker 2 (06:38):
I think, what do you think they see?
Speaker 5 (06:40):
What it seems like they're seeing, you know, from what
I've read, having not talked to them directly, is it
seems like they're seeing an increased in current traffic and
again that that might be as much of a reflection
of rates having dipped down a little bit at the
end of March and in March, but forward looking, they're
very concerned about tear increasing their prices. I think the
(07:02):
estimate is they think on a per home basis, they
think tariffs are going to increase the price of their
new construction by an average of eleven thousand.
Speaker 2 (07:09):
New home sales for March out on Wednesday, existing home
sales for that same month out on Thursday. Our thanks
to Erica Adelberg, Bloomberg Intelligence Chief mortgage backed security Strategists,
we move next to earnings and one of the most
highly anticipated first quarter releases from the ev giant Tesla
that's out on Tuesday. How did the thread of tariffs
(07:29):
and the backlash against CEO Elon Musk for its DOGE
task force and politicking in Europe impact sales well? For
more we're joined by Craig Trudell, Bloomberg Global Autos Editor. Well, Craig,
thank you for joining us. Now, so far, we know
that the first three months of this year have been
tough for Tesla, delivering three hundred and thirty seven thousand autos.
(07:50):
That's thirteen percent fewer than a year ago and a
lot fewer than Wall Street was hoping to see. Shares
down forty percent so far this year. About now, what
are the factors behind that?
Speaker 7 (08:03):
Well, so you mentioned off the top, I mean the
decline in vehicle deliveries in the first quarter. I think
everybody was braced for that number to be weak, and
yet it was much weaker even than I think expectations
were going into the company reporting that at the beginning
of the month. And I think, you know, what's really
(08:24):
remarkable is just how much the expectations for these earnings
have declined over the last you know, say, just a
couple of years. In the beginning of twenty twenty three, analysts,
on average, we're expecting this company to earn about two
dollars per share. The average espent now is below fifty cents.
And it's a similar story when you look at revenue
(08:46):
at the top line. So the expectation back then was
more than forty billion dollars that's now fallen to below
twenty two billion. So what we have here is a
company that for a long time was viewed as a
growth stock that is no longer growing and that's really
spelled trouble for a stock that is, you know, it
(09:08):
is priced for that growth.
Speaker 2 (09:10):
Now, how much of a factor is Elon Musk himself
and there we could go on and on talking about
the fourteen children and the doge, but how much of
that is him?
Speaker 7 (09:22):
Yeah, I mean I think, you know, there's obviously a
lot of attention on what he's doing in Washington, and
there's been a lot of blowback over that, and that
was absolutely something that came into play in the first quarter.
But I think this is also you know about Musk
in the sense that you know, he was he was
sort of making decisions making changes to Tesla's plans long
(09:44):
before he was you know, becoming you know, part of Maga,
if you will. Tesla you know, was going to bring
to market a much cheaper electric vehicle that would be
priced below the Model three, and in early twenty twenty three,
the company decided that it wasn't going to do that anymore.
This has been a company that's priced for growth, and
(10:06):
Musk made a fateful decision early last year where the
company was going to bring this cheaper electric vehicle to market.
It was going to be priced below the Model three,
which is the most affordable car you can buy from Tesla.
He made the decision to scrap that car because, in
his eyes, Tesla was on the verge of being able
to deliver fully autonomous vehicles. That's something that he's been
(10:28):
promising for many years but not actually been able to deliver.
And that was a really big risk and it's a
risk that Tesla is now paying for because the plan
was to bring that to market roughly around this time,
and without that, Tesla doesn't have, you know, the cheaper
car that more consumers can afford. That would have given
(10:49):
you know, the company a shot at sort of a
next leg of growth.
Speaker 2 (10:52):
I want to talk to you about tariffs. Now. Every Tesla,
including the cyber trug sold here in the US, is
mostly from parts in the US. A couple of chips,
maybe a couple of electronics, right, So, how do you
think and we know that these Trump tariffs can change
and do change day to day, hour to hour, it seems.
But how do you think tariffs are impacting the company?
Speaker 7 (11:14):
Yeah, I think, you know, in general, there's been a
view that because Tesla, it has its final assembly of
the vehicles that it sells in the US, you know,
carried out in the US, that they would be relatively insulated.
But I think what we've learned is also that there's
not going to be a winner in these trade wars
that that Trump is waging. There's going to be sort
(11:35):
of relative losers. And even Tesla, while it has a
supply chain close to where it assembles, even Tesla relies
on suppliers for an awful lot of parts, and a
lot of those parts come from places like Canada and Mexico.
Even you know, in the past, the industry reviewed the
US's neighbors as you know local and that is changing
(11:58):
in really dramatic fashion really this year. And so even
Tesla is at risk here. And Musk himself has acknowledged
that where you know, he's talked on on X formerly
Twitter about the fact that they too will will feel
the pain. And also you know, some some real concern
about you know, how much sort of low cost components
maybe would be coming over from China. We know that
(12:20):
the amount of uh, you know, tariff, the level of
tariff that Trump is putting on China is really dramatic.
And we know that the you know, ev battery supply
chain is so relyant on China. So that is absolutely
going to be something that analysts are going to be
listening for closely. When Musk talks on the earnings call, oh.
Speaker 2 (12:40):
Well, a lot to look forward to, teslak you one
earnings out this Tuesday after Wall Street's closing. Bell our
thanks to Craig Trudell, Bloomberg Global Autos Editor. Coming up
on Bloomberg day Break weekend, what's next for European equities
as some of the continent's biggest names prepare to post
their latest earnings results. I'm Tom Busby and this is Bloomberg.
(13:12):
This is Bloomberg day Break Weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Tom Busby in New York. Up later in our program,
we'll look at how some Chinese companies are trying to
navigate President Donald Trump's tariffs. But first, as investors around
the world try to make sense of the always involving tariffs.
Companies across Europe and beyond are preparing to share their
(13:32):
latest financial performances with the market. How will equities fare
against a backdrop with such uncertainty and how will the
prospect of a global trade war affect twenty twenty five's outlook.
Let's go to London and bring in Bloomberg day Break
Europe anchor Caroline hepgar.
Speaker 3 (13:47):
Tom European stocks have seen a hugely tumultuous period as
a trade war sparked by President Trump's tariffs has threatened
to up end global trade and supply chains well. In
the coming day, companies will report first quarter earnings, and
attention will focus on what they reveal about the impact
of tariffs on businesses, decision making, demand and logistics. Now,
(14:12):
those first out of the gates to report earnings have
faced mixed fortunes, namely LVMH, which faced a steep share
price drop on the news of slowing demand both in
China and in the United States amid the threat of
an escalating trade wark. Will the other European names due
to share their latest balance sheets in the days ahead
(14:34):
face a similar fortune? While Canadian Imperial Bank of Commerce
Chief International Strategists Jeremy Stretch doesn't think so, hit Ol Bloomberg,
the continents prospects are on the rise again with the
backdrop of US uncertainty.
Speaker 8 (14:50):
Well, I think if we scroll back to the first
quarter meeting, but go back to pre Liberation Day on
April two, and we looked at what we've seen in
the equity space during the first quarter of the year,
a massive rotation out of the US and into the Eurozone.
And I think that's a recognition that the US economic exceptionalism,
which of course has been the driving factor of US
asset performance over the course of the last three or
(15:11):
four years, is no longer was no longer quite so irrelevant.
And of course then we're overlaying that with the uncertainty
that is now being written large by the tariff narrative,
And so we're getting investors saying, well, if the US
is no longer quite the reliable trade partner or no
longer the reliable defense partner, obviously, in the context of
the NATI considerations as well, it makes sense to gradually
(15:31):
or progressively consider those asset flows to the same sort
of magnetude going into US asset, So do.
Speaker 3 (15:37):
You see more dollar weakness ahead?
Speaker 8 (15:39):
I think what we've seen we've seen a substantive move
in a very short space of time. So I think
what we've seen is a significant positioning digression over the
course of the last few sessions, in fact, even the
last few weeks in a sense, so obviously we've seen
euro long positions moving up quite significantly. So I think
it may be the case if we get a slight
dialing down or at least less tariff negativity, at least
(15:59):
for a few sessions. Now, of course, in the context
of what we've seen over the course of the last
week or two, a few sessions seems like an awfully
long time. But if we can actually get through the
Sterpia without a further acceleration in tariff negativity, then we
might just see a little bit of a consolidation of
the dollar. We might just find the dollar finding a
little bit of residual value. But I think there is
a solid appetite to try and buy by the sort
(16:22):
of extreme. So if we do see the dollar rallying,
then I think we will find all the euro dollar
dipping down sort of maybe one twelve and a half.
There will be appetite to try and buy that dip,
So I think that's the sort of mentality it is.
Selling dollar rallies or buying eurodips. I think is probably
going to be the mentality that's going to prevail in.
Speaker 9 (16:39):
The uncertainty that you mentioned. I wonder how do you
see the market perception of what uncertainty is now versus
I mean only a couple of weeks ago, where, of
course the world was a very different place. I mean,
is the volatility now just going to be part of
our sort of immediate and perhaps medium term future.
Speaker 8 (16:57):
Well, I think quite clearly the world has somewhat changed.
So in a sense, if we went back to the
middle of March and said, well, the world, the global
environment is going to see at minimum of a ten
percent tariff, most people have said that would have been
hugely detrimental to the global growth rejectory, and we would
have seen risk being priced accordingly. Now we're in a
scenario where we've seen a much worse set of parameters
(17:19):
potentially being laid out, and then theoretically ten percent or
some degree of derivation of that if there can be
further trade negotiations are seen as a better case. Scenario.
So I think we've certainly moved the parameters. The goalposts
have shifted quite significantly as to what is the base
case and what is the extreme risk off for risk
dynamic scenario. So I think that's the reality that investors
(17:40):
are going to have to shift in this new global
world order, and that is this fundamental factor that is
driving investor sentiment.
Speaker 3 (17:48):
That was Jeremy Stretch from Canadian Imperial Bank of Commerce
there speaking to Billiomberg, Stephen Carroll, and Valerie Titel. So
what is in store as biggest corporates to update the market?
I asked Bloomberg's earning specialist Chloe Malay.
Speaker 10 (18:05):
We had some big names reporting so far that I've
kind of given us a flavor of what to expect
for this arning season. Let's start with maybe the less impressive,
the more disappointing reports. We had lvmtrix sales coming in
weaker than expected, which is not the best start to
the luxury reporting season and really signals a weakening of
(18:26):
demand that is concerning for the rest of the year
for avment, but also for the rest of the sector.
We also had ASML with also lower than expected orders,
and that comes amid kind of the context of over
slow down in AI demand.
Speaker 6 (18:40):
For one kind of.
Speaker 10 (18:41):
Positive update we had ericson with the first quarter beat.
Quite good print because operators are really kind of ramping
up spending on five D equipment, so that could be
that could kind of bird well for the rest of
the telecom sector for this earning season. But of course
the key theme across all of this was, of course,
the impact of trade uncertainty are on the outlook for
(19:02):
all of those companies.
Speaker 3 (19:03):
Yeah, the results won't take into account the tariffs on
the second announced on the second of April. How much
underperformance can you put down to pre tariff anxiety weighing
on these businesses.
Speaker 10 (19:17):
Yes, so of course tariff announcements came at the very
beginning of the second quarter, but the chatter around tariffs
and the uncertainty that it brought really started much earlier,
So there's no way really to quantify how much those
pre teriftag just mattered.
Speaker 6 (19:31):
But of course there may have been a contributing factor.
Speaker 10 (19:33):
You know, if we look at ALVMH for instance, there
was continued weakness in China, but also new weakness in
the US with shopers really raining in spending on things
like Konyak beauty products, etc. Which is something that would
occur within the period of kind of economic uncertainty.
Speaker 3 (19:49):
Talk us through other major headwinds then that firms faced
in the first three months of the year.
Speaker 10 (19:54):
If we look at the kind of biggest EPs and
expishare decline that we're expecting for the first quarter, we
have three main sectors that are going to be leading
that decline, so materials, car makers, and energy. So for materials,
they were already weak at the previous earning season, but
what affected them throughout the first three months were really
weak end markets and including very soft construction activity in China.
(20:16):
They also faced supply chain issues and they faced high
energy costs. If we look at the autoind car making sector,
they've been struggling with weak demand in China as well
because consumers are opting for local brands instead. So we
had Porsche, for example, cutting estimates in March due to
slump in cells in the country, and that was all
of that as likely kind of been happening over the
(20:38):
first quarter, and we'll hear about that over the coming weeks.
The weakness in the car making sector, of course, also
impacts other sectors. Semiconductor companies, for example, that specialize in
that end market as well. For the energy sector, the
oil prices fell over the course of the first quarter,
which would have also pressured earning.
Speaker 6 (20:58):
So those are the kind of key edwins for those sectors.
Speaker 3 (21:01):
How big a factor, then, do you think geopolitics has been?
Speaker 6 (21:05):
What kind of tariffs?
Speaker 10 (21:06):
And obviously the shape and the extent and the scope
of them really dominated the conversation from the very beginning
of the year, so that that was and there will
continue to be the main talking point.
Speaker 3 (21:15):
Really, what do you expect to hear from companies in
the outlook of the results that they're going to present
more kind of expect the unexpected. Do you think there'll
be lots of euphemisms for tariffs, lots of cost cutting exercises.
Speaker 10 (21:30):
Yeah, so we're expecting a fair amount of warning, some
of them kind of explicitly addressing addressing tariffs, of them
addressing euphemisms, you know, like macroeconomic and certainty, et cetera.
But obviously that refers to the same thing we're expecting.
Guidance being cut, guidance being pulled. We've already seen that
with a couple of companies. We had Page Group in
the UKA, Carmacks in the US. The global uncertainty is
(21:52):
making it kind of very difficult for companies to see
into the future and to make predictions about what's going
to happen for their for their business. Were also maybe
expecting some companies to cancel capital expenditure plans, to hold
off on hiring plans. Perhaps if you kind of look
at what recruitment companies have been saying. They have mentioned
that all of this uncertainty is making people kind of
hold back on on more hiring. We might also see
(22:14):
a pause in buybacks. So we saw that with Bunzl,
and though that was not directly related to Tariff's there
may be something else that we see, which, of course
investors would not really react very kindly to. On the
other hand, some companies might also decide not to speak
about tariffs at all. You know, JD Sports did it
on the recent call, and then they might do that
until it all becomes clearer.
Speaker 3 (22:33):
In terms of clarity, let's dive into one sector in particular.
You mentioned LVMH their difficulties carring group reports in the
days ahead.
Speaker 10 (22:42):
What are we expecting so caring already started from a
weaker position, really than what LVMAGE started with. You know,
they had a tough twenty twenty four overall because the
flagship brand Gucci is kind of undergoing this whole turnaround,
which makes it quite difficult.
Speaker 6 (22:58):
The report from the IRVMAGE doesn't bode.
Speaker 10 (23:00):
Well for Caring because it really highlighted that aspirational fashion
isn't really doing well in a period of economic uncertainty. Obviously,
you know, kind of more high in luxury like AMS
is more resilient because consumers at that level are less
price sensitive. But the problem for Caring is that it's
much more kind of entry level aspirational fashion than LVMTRO
(23:21):
on the whole, which means it's much more exposed to
this pullback in discretionary spending. If we look at esthimas
for Caring, you know, we were looking for an organic
revenue decline of about twelve percent, which would be on
a similar level as the fourth quarter and doesn't indicate
any kind of recovery.
Speaker 3 (23:37):
And yet there's been such renewed interest in European assets
from the euro to individual stocks and bonds, which equity
sectors to expect to actually perform strongly. I mean, you've
got to think about defense surely yes.
Speaker 10 (23:51):
So defense should definitely still kind of be riding that
high of all the defense spending you know, announced in Europe,
though that may not have fully materialized into earnings yet,
so we'll have to see that in the coming weeks.
Banks as well should have a fairly resilient quarter, even
though the one major drag will be kind of on
the outlook for higher provisions, perhaps for lown losses because
(24:12):
of the economic environment deteriorating, and of course net interest
income also kind of falling as rates are cut further
and further, but they should be overall doing quite well
for the first quarter. Within the tech sector, even though
we had ASML semiconductors and kind of software and services
sectors are expected expected to have an earnings pushare rise
(24:34):
as well compared to flat growth in the fourth quarter.
And also communication services, so things like telecoms, as I
mentioned with Ericson, should be relatively resilient as well.
Speaker 6 (24:45):
So there are some pockets of optimism.
Speaker 3 (24:47):
Kloe. The next a few days and weeks, they're really
going to test your metal, your analytical skills, your speed
of writing. Just tell us what other big European names
you're going to be watching out.
Speaker 10 (24:58):
For so in the coming day we have some major
companies of NAX season is really ramping up. We have
a few consumer names like Nesler, unilevera Dan on the
focus there will be really on the on their ability
to boost volumes while trying to keep prices affordable. We've
got BNP also opening the ball for the European banks
(25:19):
and there the focus will be on you know, deal activity,
on on on a net interest income and also on
loan loss provisions. And then we also have some key
names and sectors that might be involved in the tier
of conversation as well, which you know we have Farmer
with Sanafie and Roche and also Involver and Reno on
the kind of vehicle carmaking side.
Speaker 6 (25:40):
So loads of things to look out for.
Speaker 3 (25:42):
My thanks to Chloe Malay, will be right across all
the biggest corporate stories for you in the coming days.
Right here on Bloomberg. I'm Caroline Hedge in London. You
can catch us every weekday morning for BLUEMBERG Daybreak you
at beginning at six am in London. That's one am
on Wall Street.
Speaker 6 (25:57):
Tom.
Speaker 2 (25:58):
Thanks Caroline and come up on Bloomberg day Break weekend
we'll look at how some Chinese companies are dealing with
President Trump's tariffs. I'm Tom Busby, and this is Bloomberg.
(26:19):
This is Bloomberg day Break weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Tom Busby in New York. With President Trump's ever
increasing tariffs on imports from China, some Chinese companies are
looking to creatively skirt those tariffs. For a look at
how that could happen, let's get to the host of
the Daybreak Asia podcast, Doug Krisner.
Speaker 4 (26:38):
Tom, not a day goes by when we're not talking
about the US China trade war and the fallout from
those higher tariffs. So, if you're a Chinese manufacturer facing
these new levies, what are you feeling right now? Is
there a way for you to react, some way to
circumvent these tariffs and move products to US consumers without
that additional cost. Well, TikTok influencers in China apparently have
(27:02):
found a way. They are showing videos to users in
the US encouraging them to buy directly from Chinese factories
bypassing not just the tariffs, but US brands as well.
Speaker 11 (27:13):
Who are the suppliers to Hi Lulu Lama. Some of
their Hugo wears are actually from Young Lung Clothing and
Haunti Shop Clothing. And guess what full factories locating eu here.
And these two factories also supplight clothing for Fila and
an Arma. I guess most of you know the price
of Lulu Lamas or other big brands. They sell you
a lagging pans for one hundred dollars and guess what
(27:34):
here in these two factories you can get them for
around five to six bus.
Speaker 4 (27:39):
For more on the story, I'm joined by Colin Murphy,
China Eco GUV reporter for Bloomberg News. Column joins us
from our studios in Beijing. Thank you so much for
making the time to chat with us. Can we begin
column by having you break down the process? How is
this actually happening?
Speaker 6 (27:54):
Okay?
Speaker 12 (27:54):
So basically, the first thing is that TikTok itself is
not available in China. Domestic app here called doing so
in order for the Chinese influencers to get their messages
on TikTok, which is already quite surprising. We are suspecting
that there's some element of collaboration here, some sort of
(28:17):
planning so basically what they're doing is they are making,
you know, short videos to describe some of the reasons
why the US customer and the US buyer has to
pay so much money for products that are available in
China at knockdown prices. And these messages are basically trying
(28:41):
to suggest or encourage not necessarily ways to avoid the tariffs,
but to let's say, minimize the impact of the tariff.
But the deeper meaning I think is to show and
to illustrate that China is pushing back against these tariffs,
to show that you know, this is kind of mocking
(29:03):
in a way, and to undermine the Trump tariffs and saying, hey, look,
we have come up with these innovative ways to showcase
and to tell you about our products, and we're going
to swamp TikTok in order to do that.
Speaker 4 (29:19):
So it seems maybe to be less about selling goods
to you as consumers and more about creating outrage among
the American consumer right, and how tariffs are impacting the
prices of the Chinese made products that they are accustomed to.
Speaker 12 (29:33):
Definitely, I think, you know there is this, as I say,
broader push by this campaign, which you know has picked
up strength and exploded. Basically over the weekend, we've had
these types of videos from merchants in China saying, you know,
we produce this product and you should buy from us.
(29:53):
I mean, they've been around for a while, but what
we're talking about in this particular instance is, first of all,
the volume of such sort of videos and messaging has
has gone through the roof. A lot of them display
very similar characteristics. They're very polished, most are speaking in
very sort of sophisticated use of language, and in English,
(30:17):
of course, and it's all happening over this short period
of time. So it's hard not to conclude that this
is definitely an effort to, if not at the very least,
sort of mock the US efforts on tariffs, but probably
to you know, undermine in a way the Trump tariff
(30:37):
regime and call the attention of the ordinary American citizen
to like how the tariffs will and can impact their
bottom line.
Speaker 4 (30:48):
And it's a little ironic in the platform right during
his first term, Trump wanted a band TikTok in the
US or force some type of change in ownership. That
position later became reflected in US law, but I believe
it was March twenty twenty four, when President Trump reversed
his position and began advocating against banning the app on
(31:08):
the grounds that, okay, we needed it.
Speaker 2 (31:11):
But this seems to.
Speaker 4 (31:11):
Be to the point of maybe there's a national security
issue involved here. Is that saying too much?
Speaker 12 (31:17):
Well, I would just say it does show that there
has been a marked increase in the ability of the
Chinese message to get to ordinary citizens in the US
and on the whole, these messages have been pro China. So,
for example, we have this latest incident, which it is
ironic because right now TikTok is still under close scrutiny
(31:41):
with the talk of a ban or sale. So for
this to be happening on this platform right now is
somewhat curious. But you know, it does also remind us
of something that happened a couple of months ago, which
was when the Chinese app Shao Hongshu or Red Note
suddenly became hugely popular when the so called TikTok refugees
(32:05):
were fleeing to that app when the threat of the
ban was imminent. And so this was also the first
time when we saw a real sort of outpouring and
outreach from Chinese citizens to their American counterparts, exchanging information.
We saw lots of Americans saying, as a result, oh,
(32:25):
what they've been telling us about China is wrong all along.
It's very developed, it's very sophisticated, and so on and
so forth. So you did have some element of influence
and changing of perceptions. And this again, this particular campaign,
shall we say, looks like hitting similar points, and that
(32:45):
we do have reaction from Americans on the ground who
are saying, I never realized that this was the reality.
And maybe it's not anger, but it's definitely, you know,
increasing awareness and in some cases for stration at some
of the narratives that they seem to sort of feel
have have been thrown on them by their own government
(33:09):
in DC.
Speaker 4 (33:10):
So the packages with merchandise shipped from China with a
value at less than eight hundred dollars have enjoyed the
deminimous exemption from these added duties, and we have seen
the impact that has had on online Chinese retailers like
Timu and Chien to sell super cheap items to American consumers. Now,
(33:30):
the President has kind of taken executive action here to
end that loophole, and I think that begins on May
the second. So I'm wondering, just on the commerce side,
whether this let's call it a workaround, is facing extinction.
Speaker 12 (33:44):
Yes, I think, you know, I mean, whether this would
actually yield to a spike in sales for the Chinese merchants.
I would doubt that at this point for various reasons,
including that, you know, a lot of these are not
the equivalent in terms, so they don't come with the
brand that they have, So you know, I mean, how
many people are going to turn around and start buying
(34:07):
more because of this campaign. It's a big question mark.
And also, as you mentioned, the Deminimus rule needs to
be clarified and whether that's going to stay or not.
But I do think another point here is like, yes,
this is mocking of the US system. But at the
same time, there's also something that we need to reflect
from the China side, and that is there are a
lot of people here who are dependent on exports, dependent
(34:29):
on selling goods to the US, and you know, in
another way, we could interpret this as being a sign
of desperation. Also on the Chinese side, we have these
vendors who are looking at possible bankruptcy or possible you know,
difficulties commercially, and this could also be interpreted as an
(34:50):
effort by them to try to change their situation. So
while on the one hand, it is definitely you know,
poking fun and mocking a little bit the US and
the tariffs that have been introduced and stopped and paused
and reintroduced by Trump, but there's also a message for
the Chinese as well. Probably not intentionally, but it does
(35:13):
remind us that there's a lot of people here who
do stand to suffer if the tariff regime goes into
full effect and remain so for an extended period of time.
Speaker 4 (35:25):
Is it too much to say that the government may
be involved in this? Is there any evidence that that
may be happening.
Speaker 12 (35:31):
Well, that's always super difficult to pinpoint right, nobody's going
to come out and say we are allowing this to happen.
But you know, I mean, there is the element that
typically in China, like if there's something online that the
government doesn't like, it will get shut down pretty quickly.
And then of course there are some sort of legal
(35:51):
implications here. For example, many of these brands that are
being exposed would have non disclosure agreements in place with
their supplyers, and also obviously trading and counterfeit goods is
not a legal activity. So the fact that these sort
of videos are allowed to stay online, even if it's
just for a short period of time, does sort of
(36:14):
suggest some sort of tacit approval at least, or perhaps,
you know, if we want to be generous, maybe it
hasn't filtered to the right authorities yet and there will
be a crackdown. It is very early to say definitively
what are the factors at play. We don't have a
comment as of now from the company from TikTok explaining
(36:35):
what's happening, So in the absence of all that, I
think we have to hold back judgment for a little while.
But coming at this time and in the volume and
the quality of the videos, I can help but be
quite suspicious that this is some sort of collaboration or
concerted effort to send a message.
Speaker 4 (36:57):
So we know that the Trump administration was working towards
negotiating some type of sale of the US operations of
TikTok to a group of private investors. When the terrafor began,
those talks seemed to be scuttled. I can only imagine
that This illustrates some of the downside that may exist
(37:18):
if you're in the administration wondering about what co ownership
may look like. Let's say, if Beijing were to have
a fifty percent stake in TikTok still even after the
US divestiture, what type of problems may exist down the road.
This could be a prime example.
Speaker 2 (37:34):
Of that, right right.
Speaker 12 (37:36):
And you know, some experts on disinformation that I spoke
to do say that this underscores the importance of a
ban or a sale. That of course would be their
point of view at this point, because that's what they're supporting.
Speaker 6 (37:51):
It does raise the question.
Speaker 2 (37:53):
It also, you.
Speaker 12 (37:54):
Know, brings up the point whether a deal will happen
at all, because you know, the Chinese have now, as
you said, made quite clear that the TikTok issue is
dependent on clearing the tireff issue first, and you know,
it's sort of a grand bargain where everything is thrown
(38:15):
into one bag and includes TikTok, includes tariffs. We've seen
in recent days that the chances of that happening are
declining constantly, so I wouldn't hold out too much hope
for that in the immediate term. But yes, it does
illustrate some of the concerns that were raised by lawmakers
(38:37):
and other advocates calling for a ban or a sale
of TikTok, and it's curious that this would be allowed
to happen at this very sensitive time.
Speaker 4 (38:47):
Column. Thank you so much. That is Colin Murphy, China
Eco GUV reporter for Bloomberg News, joining us from Beijing,
and I'm Doug Krisner. You can catch us weekdays here
for the Daybreak Asia podcast. It's available where you get
your podcast.
Speaker 2 (39:01):
Tom. Thank you Doug. And that does it for this
edition of Bloomberg day Break Weekend. Join us again Monday
morning at five am Wall Street Time for the latest
on markets overseas and the news you need to start
your day. I'm Tom Buzzby. Stay with us. Top stories
and global business headlines are coming up right now.
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