August 18, 2025 • 20 mins
US President Donald Trump called Vladimir Putin and urged the Russian leader to begin making plans for a summit with Volodymyr Zelenskiy, after meeting the Ukrainian president and European leaders at the White House on Monday. The proposal — which Trump pitched as a one-on-one summit between Ukraine and Russia's leaders that would be followed by a trilateral gathering involving all three — represented the latest turn in the US president's push to broker an end to a conflict that has lasted over three years. We get the latest from Michelle Jamrisko, Bloomberg News White House Editor in Washington.
Oil markets were in focus following Trump and Zelenskiy's meeting in Washington, as traders weighed the potential implications for regional stability and energy flows. Crude oil held steady after Monday's gain. Meantime, Asian stocks may struggle for direction at the open after the S&P 500 closed little changed. We get market perspective from Mark Matthews, Head of Asia Research at Julius Baer. He speaks with Bloomberg's Shery Ahn and Avril Hong on The Asia Trade.
Plus - a big week is coming up as the Federal Reserve's annual Economic Policy Symposium kicks off Thursday in Jackson Hole, Wyoming. The event in the Grand Teton mountains has been used by Fed chairs as a venue for making crucial policy announcements. Jerome Powell is expected on Friday to unveil the Fed's new policy framework — the strategy it'll use to achieve its inflation and employment goals. He may also drop some hints about the Fed's thinking ahead of its September policy meeting. We look at the potential impact of Powell's remarks later this week with Michele Martin, President at Prosperity, the wealth management arm of EisnerAmper.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia podcast time Krisner. A
short while ago, President Trump outlined plans for a bilateral
meeting between Russian President Vladimir Putin and Ukrainian President Vladimir Zelenski.
Trump said this will be followed by a trilateral summit
involving Putin, Zelenski, and President Trump. Trump went on to
(00:31):
say the US would coordinate with Europe on Ukraine security.
We heard earlier from Ukrainian President Zelenski.
Speaker 3 (00:39):
All of us want to finish this war, stop Sopprssian
this war. We spoke about it, and we will speak
more about security guarantees. This is very important that United
States gives such strong signal now.
Speaker 2 (00:52):
Zelenski went on to welcome US backing for those guarantees,
and he stressed that any territorial issues would only be
discussed US directly with Vladimir Putin for a closer look. Now,
I'm joined by Michelle jam Risco, white House editor for
Bloomberg News. She is on the line from the nation's capital.
Good of you to make time to chat with me.
I'm sure it's been a busy day for you. So
(01:13):
we know it today's meeting. It wasn't just Zelensky who
was in attendance, leaders from Europe as well. What do
we know about how the meeting unfolded.
Speaker 4 (01:22):
It's actually remarkable. I mean, you know when a colleague
was joking that it's hard to bring together the G seven,
but this was most of the G seven. Usually it's
a year of planning to get them all together. They came,
some of them off vacations to the White House today
to really show a sign of support for Ukrainian President
Zelenski at what was expected to be a pretty pitoft
(01:44):
meeting as they try to convince President Trump to stay
engaged with the Ukraine issue and not give away too
much as they had feared would come out of the
Trump Putin summit on Friday, but also to get further
on the security guarantees. As you mentioned, that was a
key I think of all the European leaders, and you
heard it from them at the top of their meeting
with President Trump that they really wanted to kind of
(02:06):
hash out how this would be coordinated, to how this
signal would be sent to Russian President Putin, that this
is an important guarantee in any sort of peace agreement.
Speaker 2 (02:16):
I'm imagining that the territorial issue is super sensitive, especially
for Zelenski haing having to surrender certain areas of Ukrainian
land in the eastern part of the country. What do
we know about that?
Speaker 4 (02:30):
Well, this is where it all comes down to what
might be hashed out between Putin and Valenski of anything.
I mean, as Zelenski has asserted that he will not
under any condition give up territory that he's constitutionally prevented
from doing so, and yet this seems to be the
only thing that will keep Putin at the negotiating table.
As the prospect for just doing a landswap, we have
(02:52):
heard from President Trump at different times, including over the
past week, that land swaps have to be part of
any deal. That he recognizes that, you know, Putin's absence
on this has not changed, So that's going to be
the next step. But I think what you saw today
was you know, finally notching some sort of outline of
a security guarantee that also might run into problems with
(03:16):
President Putin, who, as I understand it, is none too pleased,
and his Foreign ministry said so today. With the thought
of having any sort of Western or presence of troops
in Ukraine for the long term.
Speaker 2 (03:27):
It sounds almost like it's going to be a NATO
style force, right, Yeah.
Speaker 4 (03:32):
I mean that's what's being talked about. But this is
really gotten to be an interesting conversation, especially with we
had US Special Envoy Steve Witkoff on CNN on Sunday saying, yes,
there is a sort of Article five like understanding, and
he used the term of referring back to the NATO
article that says, you know, if one member is attacked,
all members are attacked. So to grant this to Ukraine,
(03:56):
which is not a NATO member and as Trump has said,
will not be a NATO me that is kind of
de facto running against what Putin has said he will
not accept is any sort of that presence or that
security guarantee. So we'll have to see, you know, how
this plays out when they get to the next meeting, which,
as you say, is supposed to be Putin and Zelenski
(04:17):
themselves before the trilateral that includes Trump.
Speaker 2 (04:20):
So a couple of issues come to mind as I'm
listening to. One is the notion of a cease fire.
Where do we stand in that regard the other would
be Russia looking for some sanctions relief. Do we have
any sense of that?
Speaker 4 (04:32):
Well, on both of those, I mean, those were the
two that I was thinking of that were clear losers
today for Zelenski, you know, amid all the niceties, they
had a really good rapport both in the Oval Office
Trump and Vlunsky and then later with the European leaders,
a lot of happy talk. There was a demonstrable change
in tone, especially from the February Oval Office meeting between
(04:53):
Trump and Zelunsky. But two things that he seems to
have lost out on. Trump is still insisting no no
ceasefire needed. He points to you know, he's kind.
Speaker 5 (05:03):
Of campaigning about his self being the President of peace,
as he's self branded, and talking about all these other
deals that he's made and all these other conflicts he's
resolved in the recent months.
Speaker 4 (05:14):
Not needing a ceasefire. He says, we can go straight
to the negotiating table and hash out a peace agreement.
So now he has kind of dropped that, Whereas a
week or so ago he was pushing for Putin to
stop the fighting immediately and then we talk. Now it
seems to be we can talk and you can continue fighting,
you know, fact, so allow you to keep going as
(05:36):
they have been with Russian strikes on Ukrainian cities happening daily.
Speaker 2 (05:41):
That's Michelle jem Risco, Bloomberg News White House Editor. Meantime,
traders on both sides of the Pacific are looking ahead
to remarks from FED shared Jay Powell on Friday. He
will address the fed's Jackson holl Symposium. In a moment
or two, we'll hear from Michelle Martin, president at Prosperity,
that's the wealth management arm at eisen Or Amper. We
also got some perspective out of the Asia Pacific from
(06:04):
Mark Matthews. He is head of Asia research at Julius Bear.
Mark spoke with Bloomberg TV host Sherry On and April
Hong on the Asia trade.
Speaker 6 (06:12):
So, Mark, there is a lot going on in the background,
Jeoe politically, but investors seems to be quite focused on
the FED rate poth What is your read on the
balancing we saw in the dollar this week and whether
this would hold because I think you still think it's
a dollar weakness story.
Speaker 7 (06:32):
Yes, Sapril, we do, and I can understand where there
would be a bounce because there's an incredible amount of
negativity around the dollar, and if you look at positioning
in various surveys in the futures market, I can understand
why we are getting a bounce, but longer term. First
and foremost, they're running a very wide budget deficit, which
(06:56):
I think will probably settle it about somewhere between five
to seven percent, and countries that run that kind of
deficit have weak currencies. I mean, if you just look
prior to COVID, the US ran a budget deficit of
about two or three percent, So now we're at about
seven and Egypt has a seven percent budget deficit and
(07:19):
they have a B rating which is fourteen notches below
the United States. So number one budget deficit. Number two,
we're looking for substantial rate cuts, so we're looking for
four rate cuts between now and March of next year. Normally,
when central banks cut rates a lot, the currency goes down.
I think it's fair to say there's a lot of
unpredictability in US policy across the board, and am I
(07:45):
missing anything? I guess yeah, That's that's the reason why
we're looking for the dollar to be weaker over the
next twelve months.
Speaker 6 (07:51):
Okay, what about US stock still because they've bounced as well.
We've seen from these tech earnings the KAPEC span related
to AI. Is that fuel for US stocks? And what's
your sense of whether this can broaden out because it's
also about the consumer and the retail earnings that we're
getting this week.
Speaker 7 (08:11):
Yes, well, forty percent of S and P five hundred
revenues come from overseas, so when the dollar goes down,
it's good for them. And for the big technology stocks
that's actually over sixty percent of their revenues excuse me,
that come from overseas. With the big spending that the
Magnificent Seven are doing on AI, clearly the market is
(08:34):
giving them the benefit of the doubt now because all
of these data centers and AI chips and cloud systems
have yet to be put to use, but they will
be plugged in and running next year, and next year
the market will want to see returns. And to your point,
they've just spent a tremendous amount of money on AI.
I saw a statistic which was five hundred and sixty
(08:57):
billion dollars for the mag seven combined that they've spent
on AI over the last eighteen months.
Speaker 1 (09:02):
Given how narrow and potentially fragile this rally is wants
the risk of the FED disappointing this week at Jackson Hole,
with really traders pricing in the twenty five basis point
cut in September and the rally being derailed.
Speaker 7 (09:19):
I think, yes, absolutely, there would be some disappointment if
the FED doesn't cut rates in September, and we are
expecting it on the back of the very week nonfarm
payrolls that were announced in July, the July payrolls, but
also the revisions for May and June. Yeah, there would
be some disappointment there. But I think that it's fairly
(09:41):
inevitable that we will enter a rate cut cycle, if
not in September, then in October. And the reason for
that is simply that more and more of the FED
officials are coming out and saying they think that rates
should be cut, and we are starting to see some
oftness in some data. FED likes to be ahead of
(10:04):
the curve, not behind it.
Speaker 1 (10:06):
We have thee insolvements in economic data also coming from China,
and really more speculation that we potentially could see some stimulus.
Chinese mainland stock seem to be getting a boost from that.
Do you expect this to continue?
Speaker 7 (10:22):
I don't think the breakout in the Chinese market is
based on stimulus. I don't think people anticipate much stimulus
in China, but certainly more policies that are conducive to
economic growth in terms of being friendlier to the private sector,
and that's been a trend for over a year now.
(10:42):
But to my mind, this is a retail rally that
is now expanding into large stocks. So if you look
at the performance of the CNI one thousand, the thousand
largest stocks in China so far this year, they're up
fourteen percent, But the CNI two thousand, which is the
(11:04):
next two thousand largest stocks in China, that's up thirty
eight percent. And retail investors like the stories in these
smaller stocks, be it ai or robotics or aerospace, and
they've liked the fact that institutions don't own these because
they're worried if the market goes up that institutions will
sell their holdings that they bought years ago. But now
(11:27):
we've had this pretty substantial breakout in the Shanghai composite yesterday,
breaking above it's high of March of twenty twenty two.
I think we're actually at the cusp of a very
powerful rally in China, not so much predicated on impending stimulus,
but I think momentum. Really it's a good old fashioned
(11:47):
retail market. And the margin debt in China today is
two point three percent of market cap. Back in twenty
fifteen it got up to four point eight percent, so
I believe there's more to go.
Speaker 6 (12:00):
Yeah, I was just gonna ask you, I mean the
importance of the retail investor. How much confidence is there
on the mainland. We've seen turnover continuing to pick up.
They're sort of sitting on household savings as well. How
important is that as a factor?
Speaker 7 (12:16):
Very important China mainland. China is a retail market and
the Hong Kong is an institutional market. But there's a
lot of money in China, much of it is sitting
idle and bank accounts. To your point, also, we should
recall that interest rates are low. The ten year government
bond yield is one point eight percent. And insurance companies
(12:38):
in April just saw a major reduction in the cap
that they are there equity investment caps, so they're now
allowed to sorry I should say, yeah, reduction, so they're
now allowed to invest a lot more in equities, and
there are a lot of high yielding equities in China,
(12:59):
which and I think you're also seeing that's another sort
of important reason to explain why the market can keep
going up.
Speaker 2 (13:09):
That is Mark Matthews, head of Asia Research at Julius Bear,
speaking with Bloomberg TV host Cherry On and Avril Hong
here on the Daybreak Asia podcast. Welcome back to the
Daybreak Asia Podcast. I'm Doug Prisner. It was a quiet
start to a busy week from markets. The high point
(13:31):
will come Friday. That's when we'll hear from fedshare Jay Powell.
He'll speak at the Jackson Hole Symposium and unveil a
new policy framework for the FED. He may also draw
hints about the Fed's thinking when it comes to whether
or not we get a rate cut at the September
policy meeting. Now, before Powell speaks, we'll have the benefit
of the minutes of the last FED meeting. Joining me
(13:52):
now for a look at what we may expect is
Michelle Martin. She is president at Prosperity. It's the wealth
management arm of Eisner Amper. Thanks for making time to
chat with me. What do you think we're going to
hear from.
Speaker 8 (14:04):
Powell, Well, Doug, I think it's going to be really interesting.
He's really balancing a couple of different things here. One is,
some week we're starting to see some signs of weaker
growth and potentially a little bit higher inflation mark. So
the question is what is the priority here, and wondering
(14:25):
also what is the tariff impact really going to look
like it's had a pretty gradual impact. We're just starting
to see the signs of maybe a bit of inflation
seep through, so he's under pressure. We anticipate a rate cut,
probably in September, but as I always think, the market
tends to think that rate cuts are going to come
(14:45):
more quickly, So depending on what the Fed minutes looked
like and just really what we're going to see from him,
I would say that we would likely see a rate
cut in September, but I'm wondering if it might be
more muted than what the market is looking.
Speaker 2 (15:00):
For, So possibly one for the remainder of the year,
and that's it. Is that a possibility.
Speaker 8 (15:07):
If I were to take a bet on that, I
would say that would not be out of the question. Again,
it's going to really depend on the perfect landing here.
We're seeing so many things come through with the markets
that will continue to see some rate cuts, but I'm
not sure they're going to come as quickly, so I
would say maybe one this year and then again in
(15:28):
early twenty twenty six.
Speaker 2 (15:31):
So we're going to get some insight on the American consumer.
This week we'll have quarterly numbers from Walmart and Target
Home Depot is in there as well, I believe, And
I think it's fair to say that this earning season
has kind of trounced expectations when it comes to the
S and P five hundred companies. And I thought it
interesting today that strategist over at Goldman Sachs were saying
(15:52):
that companies essentially found ways to blunt the impact of tariffs,
and they also were able if you're on multinational firm,
to benefit from a weeker dollar. And if you look
at what analysts are doing now, they seem to be
ratcheting up expectations for the current quarter at a very
very brisk pace. How are you feeling about the equity
market and the earning season.
Speaker 8 (16:14):
Well, the earning season, as you said, Doug, has been
a wonderful surprise in many ways to see some headwinds
and companies really be able to perform the way they have.
There's a fair amount of cash that is on the
balance sheets right now just due to some certainty in
what we're seeing with the new tax law. That's a
(16:36):
bit of a break for companies, and just having that
certainty and knowing what cash flow looks like is also
another contributor to what we're seeing with company buybacks and
some of the reports that we're seeing.
Speaker 2 (16:48):
In terms of geopolitical risk, we were talking earlier about
the situation with peace in Ukraine. Is that a big
factor for you right now in your decision making when
you look at some of the geopolitical risks that are
out there.
Speaker 8 (17:01):
Well, it's interesting, Doug. I think that sometimes the geopolitical
risk gets magnified by us as consumers or investors in
the market, and oftentimes that we don't see the impact
as strongly. But I do think that it has done
a couple things. One is that it has unified Europe.
We're seeing that we're seeing a much stronger presence. I
(17:21):
think that what we're seeing along with that is a
commitment and this all just contributes to the commitment of
the European leadership to invest in infrastructure, invest in defense.
We're seeing some monetary easing and just a general deregulation,
which is all leading to a much stronger market abroad
(17:45):
than what we're seeing even here in the US. So
that really does play into some of our tactical shifts
that we're looking at and just seeing the momentum in Europe.
Speaker 2 (17:52):
You mentioned teruf a moment ago. Maybe we can talk
a little bit about industrial policy from the Trump administration.
One of the things that Bloomberg News has learned is
that the Trump administration is considering taking a ten percent
stake in Intel. That would follow similar moves from the administration,
such as the Golden Chair that the administration took in
(18:14):
US Deal, and then there's that perverted equity stake in
MP Materials. Give me your sense of what you're getting
from the administration in terms of industrial policy. I know
there's been a lot of emphasis on trying to bolster
certain areas of American manufacturing to reshore production facilities. How
would you evaluate the story right now?
Speaker 8 (18:34):
Oh, I think it's I think it's just stunning. I
think that there's some continued protectionism here and really a
play to a defensive play against China, particularly in the
chip market, and just a retrenchment of investment in US
manufacturing in general, particularly as we're in this AI segment
(18:57):
where everything is moving so quickly. I was just on
a call last week and we were just talking about
how chip manufacturing AI in general has gone from almost
a startup type concept to really being implemented across companies globally,
(19:19):
but particularly in the US. We're seeing day to day
practices where that's actually happening. So I think that I
think that the administration is actually investing and really getting
in front of this AI race with China.
Speaker 2 (19:36):
Okay, we'll leave it there, Michelle, Thank you so much.
Michelle Martin. She is president at Prosperity, the wealth management
arm of Eisner Amper. Joining us here 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 in the Asia Pacific.
(20:00):
If 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.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia podcast time Krisner. A
short while ago, President Trump outlined plans for a bilateral
meeting between Russian President Vladimir Putin and Ukrainian President Vladimir Zelenski.
Trump said this will be followed by a trilateral summit
involving Putin, Zelenski, and President Trump. Trump went on to
(00:31):
say the US would coordinate with Europe on Ukraine security.
We heard earlier from Ukrainian President Zelenski.
Speaker 3 (00:39):
All of us want to finish this war, stop Sopprssian
this war. We spoke about it, and we will speak
more about security guarantees. This is very important that United
States gives such strong signal now.
Speaker 2 (00:52):
Zelenski went on to welcome US backing for those guarantees,
and he stressed that any territorial issues would only be
discussed US directly with Vladimir Putin for a closer look. Now,
I'm joined by Michelle jam Risco, white House editor for
Bloomberg News. She is on the line from the nation's capital.
Good of you to make time to chat with me.
I'm sure it's been a busy day for you. So
(01:13):
we know it today's meeting. It wasn't just Zelensky who
was in attendance, leaders from Europe as well. What do
we know about how the meeting unfolded.
Speaker 4 (01:22):
It's actually remarkable. I mean, you know when a colleague
was joking that it's hard to bring together the G seven,
but this was most of the G seven. Usually it's
a year of planning to get them all together. They came,
some of them off vacations to the White House today
to really show a sign of support for Ukrainian President
Zelenski at what was expected to be a pretty pitoft
(01:44):
meeting as they try to convince President Trump to stay
engaged with the Ukraine issue and not give away too
much as they had feared would come out of the
Trump Putin summit on Friday, but also to get further
on the security guarantees. As you mentioned, that was a
key I think of all the European leaders, and you
heard it from them at the top of their meeting
with President Trump that they really wanted to kind of
(02:06):
hash out how this would be coordinated, to how this
signal would be sent to Russian President Putin, that this
is an important guarantee in any sort of peace agreement.
Speaker 2 (02:16):
I'm imagining that the territorial issue is super sensitive, especially
for Zelenski haing having to surrender certain areas of Ukrainian
land in the eastern part of the country. What do
we know about that?
Speaker 4 (02:30):
Well, this is where it all comes down to what
might be hashed out between Putin and Valenski of anything.
I mean, as Zelenski has asserted that he will not
under any condition give up territory that he's constitutionally prevented
from doing so, and yet this seems to be the
only thing that will keep Putin at the negotiating table.
As the prospect for just doing a landswap, we have
(02:52):
heard from President Trump at different times, including over the
past week, that land swaps have to be part of
any deal. That he recognizes that, you know, Putin's absence
on this has not changed, So that's going to be
the next step. But I think what you saw today
was you know, finally notching some sort of outline of
a security guarantee that also might run into problems with
(03:16):
President Putin, who, as I understand it, is none too pleased,
and his Foreign ministry said so today. With the thought
of having any sort of Western or presence of troops
in Ukraine for the long term.
Speaker 2 (03:27):
It sounds almost like it's going to be a NATO
style force, right, Yeah.
Speaker 4 (03:32):
I mean that's what's being talked about. But this is
really gotten to be an interesting conversation, especially with we
had US Special Envoy Steve Witkoff on CNN on Sunday saying, yes,
there is a sort of Article five like understanding, and
he used the term of referring back to the NATO
article that says, you know, if one member is attacked,
all members are attacked. So to grant this to Ukraine,
(03:56):
which is not a NATO member and as Trump has said,
will not be a NATO me that is kind of
de facto running against what Putin has said he will
not accept is any sort of that presence or that
security guarantee. So we'll have to see, you know, how
this plays out when they get to the next meeting, which,
as you say, is supposed to be Putin and Zelenski
(04:17):
themselves before the trilateral that includes Trump.
Speaker 2 (04:20):
So a couple of issues come to mind as I'm
listening to. One is the notion of a cease fire.
Where do we stand in that regard the other would
be Russia looking for some sanctions relief. Do we have
any sense of that?
Speaker 4 (04:32):
Well, on both of those, I mean, those were the
two that I was thinking of that were clear losers
today for Zelenski, you know, amid all the niceties, they
had a really good rapport both in the Oval Office
Trump and Vlunsky and then later with the European leaders,
a lot of happy talk. There was a demonstrable change
in tone, especially from the February Oval Office meeting between
(04:53):
Trump and Zelunsky. But two things that he seems to
have lost out on. Trump is still insisting no no
ceasefire needed. He points to you know, he's kind.
Speaker 5 (05:03):
Of campaigning about his self being the President of peace,
as he's self branded, and talking about all these other
deals that he's made and all these other conflicts he's
resolved in the recent months.
Speaker 4 (05:14):
Not needing a ceasefire. He says, we can go straight
to the negotiating table and hash out a peace agreement.
So now he has kind of dropped that, Whereas a
week or so ago he was pushing for Putin to
stop the fighting immediately and then we talk. Now it
seems to be we can talk and you can continue fighting,
you know, fact, so allow you to keep going as
(05:36):
they have been with Russian strikes on Ukrainian cities happening daily.
Speaker 2 (05:41):
That's Michelle jem Risco, Bloomberg News White House Editor. Meantime,
traders on both sides of the Pacific are looking ahead
to remarks from FED shared Jay Powell on Friday. He
will address the fed's Jackson holl Symposium. In a moment
or two, we'll hear from Michelle Martin, president at Prosperity,
that's the wealth management arm at eisen Or Amper. We
also got some perspective out of the Asia Pacific from
(06:04):
Mark Matthews. He is head of Asia research at Julius Bear.
Mark spoke with Bloomberg TV host Sherry On and April
Hong on the Asia trade.
Speaker 6 (06:12):
So, Mark, there is a lot going on in the background,
Jeoe politically, but investors seems to be quite focused on
the FED rate poth What is your read on the
balancing we saw in the dollar this week and whether
this would hold because I think you still think it's
a dollar weakness story.
Speaker 7 (06:32):
Yes, Sapril, we do, and I can understand where there
would be a bounce because there's an incredible amount of
negativity around the dollar, and if you look at positioning
in various surveys in the futures market, I can understand
why we are getting a bounce, but longer term. First
and foremost, they're running a very wide budget deficit, which
(06:56):
I think will probably settle it about somewhere between five
to seven percent, and countries that run that kind of
deficit have weak currencies. I mean, if you just look
prior to COVID, the US ran a budget deficit of
about two or three percent, So now we're at about
seven and Egypt has a seven percent budget deficit and
(07:19):
they have a B rating which is fourteen notches below
the United States. So number one budget deficit. Number two,
we're looking for substantial rate cuts, so we're looking for
four rate cuts between now and March of next year. Normally,
when central banks cut rates a lot, the currency goes down.
I think it's fair to say there's a lot of
unpredictability in US policy across the board, and am I
(07:45):
missing anything? I guess yeah, That's that's the reason why
we're looking for the dollar to be weaker over the
next twelve months.
Speaker 6 (07:51):
Okay, what about US stock still because they've bounced as well.
We've seen from these tech earnings the KAPEC span related
to AI. Is that fuel for US stocks? And what's
your sense of whether this can broaden out because it's
also about the consumer and the retail earnings that we're
getting this week.
Speaker 7 (08:11):
Yes, well, forty percent of S and P five hundred
revenues come from overseas, so when the dollar goes down,
it's good for them. And for the big technology stocks
that's actually over sixty percent of their revenues excuse me,
that come from overseas. With the big spending that the
Magnificent Seven are doing on AI, clearly the market is
(08:34):
giving them the benefit of the doubt now because all
of these data centers and AI chips and cloud systems
have yet to be put to use, but they will
be plugged in and running next year, and next year
the market will want to see returns. And to your point,
they've just spent a tremendous amount of money on AI.
I saw a statistic which was five hundred and sixty
(08:57):
billion dollars for the mag seven combined that they've spent
on AI over the last eighteen months.
Speaker 1 (09:02):
Given how narrow and potentially fragile this rally is wants
the risk of the FED disappointing this week at Jackson Hole,
with really traders pricing in the twenty five basis point
cut in September and the rally being derailed.
Speaker 7 (09:19):
I think, yes, absolutely, there would be some disappointment if
the FED doesn't cut rates in September, and we are
expecting it on the back of the very week nonfarm
payrolls that were announced in July, the July payrolls, but
also the revisions for May and June. Yeah, there would
be some disappointment there. But I think that it's fairly
(09:41):
inevitable that we will enter a rate cut cycle, if
not in September, then in October. And the reason for
that is simply that more and more of the FED
officials are coming out and saying they think that rates
should be cut, and we are starting to see some
oftness in some data. FED likes to be ahead of
(10:04):
the curve, not behind it.
Speaker 1 (10:06):
We have thee insolvements in economic data also coming from China,
and really more speculation that we potentially could see some stimulus.
Chinese mainland stock seem to be getting a boost from that.
Do you expect this to continue?
Speaker 7 (10:22):
I don't think the breakout in the Chinese market is
based on stimulus. I don't think people anticipate much stimulus
in China, but certainly more policies that are conducive to
economic growth in terms of being friendlier to the private sector,
and that's been a trend for over a year now.
(10:42):
But to my mind, this is a retail rally that
is now expanding into large stocks. So if you look
at the performance of the CNI one thousand, the thousand
largest stocks in China so far this year, they're up
fourteen percent, But the CNI two thousand, which is the
(11:04):
next two thousand largest stocks in China, that's up thirty
eight percent. And retail investors like the stories in these
smaller stocks, be it ai or robotics or aerospace, and
they've liked the fact that institutions don't own these because
they're worried if the market goes up that institutions will
sell their holdings that they bought years ago. But now
(11:27):
we've had this pretty substantial breakout in the Shanghai composite yesterday,
breaking above it's high of March of twenty twenty two.
I think we're actually at the cusp of a very
powerful rally in China, not so much predicated on impending stimulus,
but I think momentum. Really it's a good old fashioned
(11:47):
retail market. And the margin debt in China today is
two point three percent of market cap. Back in twenty
fifteen it got up to four point eight percent, so
I believe there's more to go.
Speaker 6 (12:00):
Yeah, I was just gonna ask you, I mean the
importance of the retail investor. How much confidence is there
on the mainland. We've seen turnover continuing to pick up.
They're sort of sitting on household savings as well. How
important is that as a factor?
Speaker 7 (12:16):
Very important China mainland. China is a retail market and
the Hong Kong is an institutional market. But there's a
lot of money in China, much of it is sitting
idle and bank accounts. To your point, also, we should
recall that interest rates are low. The ten year government
bond yield is one point eight percent. And insurance companies
(12:38):
in April just saw a major reduction in the cap
that they are there equity investment caps, so they're now
allowed to sorry I should say, yeah, reduction, so they're
now allowed to invest a lot more in equities, and
there are a lot of high yielding equities in China,
(12:59):
which and I think you're also seeing that's another sort
of important reason to explain why the market can keep
going up.
Speaker 2 (13:09):
That is Mark Matthews, head of Asia Research at Julius Bear,
speaking with Bloomberg TV host Cherry On and Avril Hong
here on the Daybreak Asia podcast. Welcome back to the
Daybreak Asia Podcast. I'm Doug Prisner. It was a quiet
start to a busy week from markets. The high point
(13:31):
will come Friday. That's when we'll hear from fedshare Jay Powell.
He'll speak at the Jackson Hole Symposium and unveil a
new policy framework for the FED. He may also draw
hints about the Fed's thinking when it comes to whether
or not we get a rate cut at the September
policy meeting. Now, before Powell speaks, we'll have the benefit
of the minutes of the last FED meeting. Joining me
(13:52):
now for a look at what we may expect is
Michelle Martin. She is president at Prosperity. It's the wealth
management arm of Eisner Amper. Thanks for making time to
chat with me. What do you think we're going to
hear from.
Speaker 8 (14:04):
Powell, Well, Doug, I think it's going to be really interesting.
He's really balancing a couple of different things here. One is,
some week we're starting to see some signs of weaker
growth and potentially a little bit higher inflation mark. So
the question is what is the priority here, and wondering
(14:25):
also what is the tariff impact really going to look
like it's had a pretty gradual impact. We're just starting
to see the signs of maybe a bit of inflation
seep through, so he's under pressure. We anticipate a rate cut,
probably in September, but as I always think, the market
tends to think that rate cuts are going to come
(14:45):
more quickly, So depending on what the Fed minutes looked
like and just really what we're going to see from him,
I would say that we would likely see a rate
cut in September, but I'm wondering if it might be
more muted than what the market is looking.
Speaker 2 (15:00):
For, So possibly one for the remainder of the year,
and that's it. Is that a possibility.
Speaker 8 (15:07):
If I were to take a bet on that, I
would say that would not be out of the question. Again,
it's going to really depend on the perfect landing here.
We're seeing so many things come through with the markets
that will continue to see some rate cuts, but I'm
not sure they're going to come as quickly, so I
would say maybe one this year and then again in
(15:28):
early twenty twenty six.
Speaker 2 (15:31):
So we're going to get some insight on the American consumer.
This week we'll have quarterly numbers from Walmart and Target
Home Depot is in there as well, I believe, And
I think it's fair to say that this earning season
has kind of trounced expectations when it comes to the
S and P five hundred companies. And I thought it
interesting today that strategist over at Goldman Sachs were saying
(15:52):
that companies essentially found ways to blunt the impact of tariffs,
and they also were able if you're on multinational firm,
to benefit from a weeker dollar. And if you look
at what analysts are doing now, they seem to be
ratcheting up expectations for the current quarter at a very
very brisk pace. How are you feeling about the equity
market and the earning season.
Speaker 8 (16:14):
Well, the earning season, as you said, Doug, has been
a wonderful surprise in many ways to see some headwinds
and companies really be able to perform the way they have.
There's a fair amount of cash that is on the
balance sheets right now just due to some certainty in
what we're seeing with the new tax law. That's a
(16:36):
bit of a break for companies, and just having that
certainty and knowing what cash flow looks like is also
another contributor to what we're seeing with company buybacks and
some of the reports that we're seeing.
Speaker 2 (16:48):
In terms of geopolitical risk, we were talking earlier about
the situation with peace in Ukraine. Is that a big
factor for you right now in your decision making when
you look at some of the geopolitical risks that are
out there.
Speaker 8 (17:01):
Well, it's interesting, Doug. I think that sometimes the geopolitical
risk gets magnified by us as consumers or investors in
the market, and oftentimes that we don't see the impact
as strongly. But I do think that it has done
a couple things. One is that it has unified Europe.
We're seeing that we're seeing a much stronger presence. I
(17:21):
think that what we're seeing along with that is a
commitment and this all just contributes to the commitment of
the European leadership to invest in infrastructure, invest in defense.
We're seeing some monetary easing and just a general deregulation,
which is all leading to a much stronger market abroad
(17:45):
than what we're seeing even here in the US. So
that really does play into some of our tactical shifts
that we're looking at and just seeing the momentum in Europe.
Speaker 2 (17:52):
You mentioned teruf a moment ago. Maybe we can talk
a little bit about industrial policy from the Trump administration.
One of the things that Bloomberg News has learned is
that the Trump administration is considering taking a ten percent
stake in Intel. That would follow similar moves from the administration,
such as the Golden Chair that the administration took in
(18:14):
US Deal, and then there's that perverted equity stake in
MP Materials. Give me your sense of what you're getting
from the administration in terms of industrial policy. I know
there's been a lot of emphasis on trying to bolster
certain areas of American manufacturing to reshore production facilities. How
would you evaluate the story right now?
Speaker 8 (18:34):
Oh, I think it's I think it's just stunning. I
think that there's some continued protectionism here and really a
play to a defensive play against China, particularly in the
chip market, and just a retrenchment of investment in US
manufacturing in general, particularly as we're in this AI segment
(18:57):
where everything is moving so quickly. I was just on
a call last week and we were just talking about
how chip manufacturing AI in general has gone from almost
a startup type concept to really being implemented across companies globally,
(19:19):
but particularly in the US. We're seeing day to day
practices where that's actually happening. So I think that I
think that the administration is actually investing and really getting
in front of this AI race with China.
Speaker 2 (19:36):
Okay, we'll leave it there, Michelle, Thank you so much.
Michelle Martin. She is president at Prosperity, the wealth management
arm of Eisner Amper. Joining us here 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 in the Asia Pacific.
(20:00):
If 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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