April 22, 2025 • 21 mins
Stocks jumped and the dollar rose after President Donald Trump said he had no intention of firing Federal Reserve Chair Jerome Powell while optimism grew that trade tensions may be easing. Trump's comments on the Fed chief late Tuesday in Washington walk back opinions expressed earlier in the week that sparked concerns about the US central bank's independence. Progress in various trade talks also helped improve market sentiment after investors had broadly retreated from US assets this month following the announcement of century-high levies. We break down the themes driving volatility with Ecaterina Bigos, CIO for Asia ex-Japan Core Investments at AXA Investment Managers.
Plus - US Treasury Secretary Scott Bessent told a closed-door investor summit Tuesday that the tariff standoff with China cannot be sustained by both sides and that the world's two largest economies will have to find ways to de-escalate. That de-escalation will come in the very near future, Bessent said during an event hosted by JPMorgan Chase & Co. in Washington, which wasn't open to the public or media. He characterized the current situation as essentially a trade embargo, according to people who attended the session. We talk tariffs and trade policy with Tom Bruce, Macro Investment Strategist at Tanglewood Total Wealth Management.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
Daybreak Asia Podcast. I'm Doug Chrisner. So we saw stock
index futures jump and the dollar strengthen. That was after
President Trump said he had no intention of firing fed
Share J. Powell.
Speaker 2 (00:23):
I would like to see him be a little more
active in terms of his idea to lower interest rates.
Just a perfect time to lower interest rates if he
doesn't is at the end, No, it's not, but it
would be good timing. It would be which could have
taken place earlier.
Speaker 1 (00:40):
Coming up, we'll discuss the latest on Powell with Tom Bruce.
He is macro investment strategist at Tangle with Total Wealth Management.
But we begin this morning in the Asia Pacific. Joining
me now is Ekaterina Bigos, cio for Asia Ex Japan
Core Investments at AXA Investment Managers. E. Katerina joins us
from our radio studios in Hong Kong. Ekaterina, thank you
(01:04):
so much. There has been so much happening in markets
these days. Obviously, I think a lot of what we're
seeing is tied to President Trump, both in word and deed,
just driving so much of the price action we know
the tariff policy has been extremely disruptive, to say the least,
and until today concerns over fed independence. In the time
(01:27):
that you have been in the market, have you ever
seen a level of uncertainty this high.
Speaker 3 (01:34):
It's fair that to say that it's quite unprecedented. I mean,
if you look at just even the magnitude of the
tariffs that were implemented obviously on the second of April,
this has been of a scale that is unprecedented. That
has led to an escalation of uncertainty from corporate sphere,
but also that continues because we have this ninety day period.
I would say the peak of that probably uncertainty is
(01:55):
somewhat past us. And again the resolution of the quickie.
You have a positive resolution from some of the trading
partners or key trading partners around the tired negotiations. I
think it will be positive for the markets. But at
the moment we still in this period of unknown. We
hear some positive vibes around negotiative of Japan, potential career Vietnam,
(02:16):
but we haven't seen a conclusive deal yet. So I
think markets seeing a deal that is positive and also
that indicates of how that administration will negotiate with partners
I think will give some at least direction to the market,
so at least hopefully positive outcome reaction from that.
Speaker 1 (02:35):
But the bigger problem is got to be China, and
we recently heard from Beijing kind of a warning here
against striking trade deals with the US that could hurt
the interest of Beijing. Give me your sense of where
this is going to go in terms of Washington and
Beijing and what you are beginning to price in or
discount as it were.
Speaker 3 (02:56):
Ultimately, I think what the ramification of that is is
for for IZI, and I think the Asian story is
started to being more complex because again the ASI and
have benefited from China, have di flows the redirection of
some trade, and certainly it's the largest partner. If you
look at the ten top quarts of trade for US,
(03:17):
seven are sitting in Asia, right, So them negotiating a
deal that satisfies both countries I think is very complex,
and ultimately that is more complex for those countries rather
than say for US and China, which again the adversaries,
but ultimately does pose a more complexes for those regions.
Speaker 1 (03:37):
So markets seem to be questioning America's standing as the
pre emited destination for global capital. Have we kind of
reached a critical juncture here? Has there been a level
of disruption that may be challenging to re establish or
is that saying too much?
Speaker 3 (03:53):
It is probably too early to say so call the
US exceptionalism is done. I mean, ultimately you have to
where the biggest companies are, Where is the biggest capital markets,
where the most liquid security is. Again, the challenge at
the moment is policies and administration, which has put a
lot of uncertainty around directing the capital into the US.
(04:15):
But ultimately the fundamentals of that market have not changed
in terms of the solidity of it. And ultimately, when
you say for investors, US still is the largest part
of an asset location for a lot of the investors.
So you do have to look at US again, some
appetite shifts are likely and gain the high uncertainty the
likely the more likely that we're going to see some
(04:37):
reallocations away from US. But to say that this is
again the story of US being still leading economy and
leading companies of course of the world, I think is
still very much plausible and still very much present.
Speaker 1 (04:51):
In one of the interesting developments recently has been the
weakness of the dollar, and ironically it's going to help
the US strengthen its position in some the trade negotiations
and make life on the other hand difficult for some
of the trading partners in Asia. Will that not happen, well, I.
Speaker 3 (05:08):
Mean that was the intention. Again, this is probably unintended
consequence of some of the measures that minister has put
in place, but they always wanted a week a dollar
to against spur some competitiveness of the US manufacturers. So
again some dollar weakness is not a negative for the
US economy, particularly for the exporters. A destabilization again, which
(05:29):
is again not a central scenario of the dollar. I
think this is probably more bigger risk where you can
see a floading of dollar assets, but again we're not
yet in that scenario. Some weakness, as you said, it
does bring competitiveness to the US trade, particularly that the
ambition is for the administration to bring some more manufacturing
back into US.
Speaker 1 (05:47):
So maybe we can agree that the TERRFF situation has
the potential to damage the Chinese economy, maybe at least
in the short term. It's unclear though whether or not
the equity market in China would reacting, and I'm wondering
whether you get a sense that Chinese equities are somewhat
isolated from terriff exposure.
Speaker 3 (06:06):
Yeah, I think I'll break it down in two and
I would say I'll probably refrain to say that the
tires will damage the Chinese economy. It does complicate the
Chinese economy, but if you look at the state of
Chinese economy coming into this time of conflict that we're
seeing at the moment of escalation, the structural and the
(06:26):
macro problems were there and they're still there. Ultimately, what
China needs to do before this escalation tiers they had
to do and now it's becoming even more an urgency
is to redirect its economy to become a lot more consumption.
So Chinese needs to consume more and that has already
been the sphere of focus for the policy makers. Now
(06:49):
that continuation has successful, they achieved that will be key
in how they're going to succeed through the spirit of uncertainty.
And we've seen already various measures being put in place,
or at least expectations for those measures to be put
in place. When you look at the coupling for the
equity market. And this is again coming down to the
themes or say, what drives at the moment the sentiment
(07:10):
but also the outcomes of investment. Is of course tariff
and tariff uncertainty. Policy is one of them, so policy,
and the third is tech innovation. And when you look
at China and how the market has performed at the
beginning of the year, the excitement around China has been
driven by tech or the AI innovation that we've seen
in China, which has scoped to bright productively growth longer term,
(07:33):
but also immediately I think has scoped to bring some efficiencies,
particularly in places like consumer companies, online sales and so
on and so forth. When it comes to and that's
one sphere that has suddenly provided that rally which has
been very narrow but of course supported the market. Then
the other one is policy expectations. And again I want
to say expectations because policy has been been framed or
(07:57):
the policy direction has been framed by the ustations at
because of this tires, they'll be a lot more forceful,
they'll be a bit larger, and they'll be quicker. And
I think the expectations that policy coming in is driving
some that resilience in the equity Marcus for China, so
quite quite a coupling in terms of where that's coming from.
Speaker 1 (08:15):
It's interesting that you mentioned technology. There was a tremendous
amount of positivity going into the kind of the situation
with the tear from the China side. AI has been
a big part of that story. I get that here
in the States there's a question mark around artificial intelligence lately.
Wells Fargo had a note the other day talking about
(08:35):
Amazon pausing some of its data center leases, and we've
had a story a while back about Microsoft reassessing the
money that it's allocating to the AI spend, particularly cloud
related infrastructure build out. Is there a risk now that
we're going to see, even in China's case, that maybe
there was a little bit too much overspending and that
(08:56):
we need to see a recalibration.
Speaker 3 (08:58):
Well, I think that's it's not conclusive as of yet,
but certainly the deep seak innovation in China has led
to questions around the kapex that some of the magnificence
seven has deployed into a development. Ultimately, if you look
at the stage we are in terms of that development,
it's still very much at the stage one, where a
(09:19):
lot of focus is still on training the models, so
which still requires a lot of data, and it still
requires a lot of intensity. Now what energy in intensity
to train those models? In terms of why the deep
Sick has questioned that is that the inference or the
way the model respond to a certain question is deemed
(09:42):
to be a lot more effective that uses It's less
intensive in terms of using the cloud, in terms of
using the energy, and I think that still pauses a
question in terms of how much is needed for that
development and of AIS. Ultimately, the stage a longer term
benefit of AI doesn't sit into stage one. We do
(10:04):
expect the stage two and three. It's about applications, and
I think that's where the market is going to pay
a lot of attention, is how do you monetize Other
applications started to emerge, and we see them some again
emerging in China, we see some of them in the US.
But modernization and indications that those are starting to emerge
in a much more broad way across the consumer, across
(10:25):
the different sectors. I think that will be a positive
catalyst to the story.
Speaker 1 (10:32):
So we're talking here about software, but let's imagine it
from the different side of the coin, which is the
hardware side, and which is one of China's vulnerabilities, particularly
when you consider semiconductors. Is China got the ability right
now to innovate in a way that could put it
on a level playing field with a company like in Video.
Speaker 3 (10:53):
I mean, look, I think the momentum they've had and
the innovation they had so far, it gets them probably
to a certain level. And I think it has sufficient
momentum at the moment to work at the level under
the stage. As I said, we are where we are
at the moment, right so we haven't seen a broadening
of the application cycle. We haven't seen a lot of
(11:15):
usage yet being put in place. Again, we see in
a peripher we've seen announcement particular as I said in
China in consumer companies where what they're doing is they
have a eye models to create a much more effective
and efficient consumer experience, right so, and I think that
could lead to increased consumption, increase sales and has a
(11:36):
positive impact. The broadening of that I think has again
the scope for AID is to broaden into sphere like healthcare, biotech.
You know, even in industries that has not happened yet,
and I think probably that stage when the broadening is
happening China my face challenges. But I think at the moment,
at the stage where in and where they're looking to
(11:58):
direct the economy, I think it's still having a positive impact.
Speaker 1 (12:02):
E Katerina, thank you so much for joining us. That
is E Katerina Bigo Cio for Asia ex Japan Core
Investments at Axa Investment Managers joining us from Hong Kong
here on the Daybreak Asia podcast. Welcome back to the
(12:22):
Daybreak Asia Podcast. I'm Doug Krisner. Joining me now is
Tom Bruce. He is macro investment strategist to tangle with
Total Wealth Management. Tom is on the line from Houston, Texas. Tom,
thank you so much. It's always a pleasure. It seems
like President Trump has really softened his tone when it
comes to this idea of replacing the Fed chairman for
being too slow to cut interest rates. And there seems
(12:45):
to be a bit of relief right now if you
look at the price action that we're seeing in late trading,
do you really think that the president has or his
advisors have their thumbs on the market as a way
of gauging sentiment right now?
Speaker 4 (12:59):
Absolutely, I think so. I think some of oursers more
than others. Scott Bessett clearly and personally trompably. It is
a clearer pulse of the market, and the tope of
news that we've seen this evening is exactly what we
want to see for the markets. We want to see
more assurance that the Fed chair is secure in his position,
(13:21):
that it's something that we went and have questioned until recently.
And secondly, that we have some resolution to China, because
that's such a big part of this terrifor.
Speaker 1 (13:30):
Quation, no doubt about that. Today Bloomberg News reported some
closed door comments from Treasury Secretary Scott Bessant, and he
was quoted as saying the standoff with China is unsustainable
and he's expecting the situation to de escalate. That seems
to be kind of a calming message. Do you think
that we're embarking on some type of resolution here in
(13:52):
the near term, or do you think this trade war,
if we can call it, that has the potential to
drag on for a while.
Speaker 4 (14:00):
Unfortunately, my expectation would be for this to drag on
for a while. You know, a week or two ago,
the Chinese communicated that they were willing to come to
the table if they were being tripped with respect. And
I think that's what we've seen from the administration today,
between Scott business comments and Donald Trump later in the
day commenting that he expected things to go well to
(14:21):
China and one hundred and four ven percent tariff wasn't
going to stay in place. So that was very encouraging.
Speaker 1 (14:27):
So we had a lot of positivity in the equity
market today. A volume, though, was a little on the
light side. Do we make too much of this one?
When you look at price action where volume is light,
I know, things can become a little exaggerated. Do you
want to kind of hang your hat on the s
and P kind of turning the corner maybe and picking
up two and a half percent today? Was today's price
(14:47):
action a big deal? Or does it kind of just
fit into this puzzle that we've seen recently where you know,
there's been so much volatility up one day, big, down
big the next day one.
Speaker 4 (14:58):
Hundred percent hinges on tariffs, so we can go up
or down quite a debt. But the low we put
in a couple weeks ago that looked pretty solid from
a technical standpoint, but if we don't have progress, we
don't have some trade deals announced, it's not going to hold.
So we needed to continue to see progress. I think
the information we got today from the administration was very constructive,
(15:18):
but we need to see followed for with some real
deals coming through in the next week or so.
Speaker 1 (15:24):
I don't know whether you can comment on a specific stock,
but I want to talk briefly about Tesla because tonight
the company came out with earnings a little disappointing, but
then on the call with analyst, Elon Musk said he's
going to be stepping back from his role at DOGE
next month, and there seems to be a lot of
relief right now in the way in which the stock
(15:44):
is behaving. It's up more than five percent in the
late US session, and it's helping to give a big
boost to the many futures contracts. Talk to me a
little bit about the role that Musk has been playing
in policy and the extent to which you view this.
Maybe you don't as a distraction for Tesla's shareholders and
the stock.
Speaker 4 (16:03):
Well, we did not focus on individual stocks, but you know,
from my perspective, it is very welcome to see more
of a focus on Tesla. You know, Elon Musk is
a very busy man. He's he has, you know, multiple
businesses and now as admistration Endoge. It makes you wonder
how he's part at any time for Tesla. I know
he has to some degree, but seeing a renewed focus
(16:26):
on it is certainly welcome from from a shareholder perspective.
And despite the numbers being bad today, I think there's
still plain of encouraging, encouraging catalysts on Tesla's the horizon
for Tesla. If you look at what they're doing in
robotics and you know full self drives, there's a lot
of different things that are that you can be excited
(16:47):
about that aren't necessarily showing up in the balance sheet today.
Speaker 1 (16:51):
So I think we can agree that the level of
uncertainty in markets right now has been extreme. How are
you navigating this to terrain right now? Tom? Are you
you able to discover opportunity or is the risk too
great right now that you're more inclined to kind of
step aside and let some of this dust settle and
at least in the near term.
Speaker 4 (17:10):
You're certainly right that it's a time of extreme uncertainty.
However this happens, you know, it's the financial markets. When
we were going through two thousand and eight and many
other times, we didn't know how it was going to
end up then either. So from this, from that perspective,
it's it's a new problem of the markets are dealing
with now. But you know this, it's a recurring theme
(17:32):
over the years, is that we have a lot of volatility,
and I think you have to have to be optimistic
at the end of the day and believe that you know,
eventually innovation and the free markets will went out and
the markets will go higher, and you know, at the
end of the day, you know investors were we rewarded.
Speaker 1 (17:50):
You were talking a moment ago about being laser focused
on the tariff story. That may put a big question
mark over the equity market. Is there more opportunity right
now in fixed income? Do you think then on the
equity side.
Speaker 4 (18:03):
That's a distinct possibility. This Sole America trade that we've
seen where the US treasuries and the US dollar have
not been a safe even as of late, that's certainly
a new development that I would like to see reversed.
We like to see that on a bad day in
the markets has risk off. The treasuries are being purchased
in people feel confident in the US government, and from
(18:26):
what I've seen in the past three weeks, including in
the last few days, it's still not quite the case.
So we really need to see that relationship change in
a meaningful way. Once that's restored, we could see treasury
yields come back down quite a bit.
Speaker 1 (18:40):
So to what extent are you forecasting a recession? Maybe
that's not even in your outlook right now, but I'm wondering,
because of the conversation around weaker growth and the question
over prolonged kind of tariff policy that may hold back
a lot of revenue, I'm wondering whether or not you're
seeing a distinct possibility that we could see contraction in
(19:01):
the American economy.
Speaker 4 (19:02):
I don't think there's much uncertainty about it. If we
don't have trade deals, so it's going to be a recession.
I assume we're at the beginning of it now, But
as far as the trade deal is being worked out
and avoiding a recession, that's really hard to say. Enough
damage may have been done at this juncture to where
we inner recession anyhow, And I and I think a
lot of other market participants are. You know, we have
(19:24):
our eyes glued on hard data because all the Soviet
data we've seen lately has been terrible. So, you know,
particularly the labor market, if we started seeing job list
game's rise, that's going to be you know, certainly a
red flag for a centering O recession.
Speaker 1 (19:39):
What about opportunities offshore? Given everything that we've been discussing
potential challenges for the American markets, do you want to
be exposed more to what's going on in Asia right
now or to Europe? Or is that something that you're
completely ignoring because there are also risks in those jurisdictions.
Speaker 4 (19:58):
Well, there are. I still feel like the the US
is probably the best place long term. Is we really
lead the world in terms of innovation. However, over the
medium run, you can see places like Europe, in Germany particular,
they are unveiling your fiscal stimulus combined with monetary simulus.
That's a pretty potent combination, so you could see select
(20:20):
economies in Europe do exceptionally well. I also feel like
Southeast Asia has perhaps the unique opportunity here if at
the end of the day, after all this has worked out,
tariffs on Southeast Asia are somewhat less severe than they
are in China, then on a relative basis, they may
really stand a benefit from this with trading of the
(20:42):
US going forward.
Speaker 1 (20:43):
Tom will leave it there. Thank you so much for
joining us. He's Tom Bruce, macro investment strategist at Tangle
with Total Wealth Management, joining us from Houston, Texas. 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
(21:06):
in the Asia Pacific. You can find us on Apple, Spotify,
the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Join us again tomorrow for insight on the market moves
from Hong Kong to Singapore and Australia. I'm Doug Chrisner,
and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
Daybreak Asia Podcast. I'm Doug Chrisner. So we saw stock
index futures jump and the dollar strengthen. That was after
President Trump said he had no intention of firing fed
Share J. Powell.
Speaker 2 (00:23):
I would like to see him be a little more
active in terms of his idea to lower interest rates.
Just a perfect time to lower interest rates if he
doesn't is at the end, No, it's not, but it
would be good timing. It would be which could have
taken place earlier.
Speaker 1 (00:40):
Coming up, we'll discuss the latest on Powell with Tom Bruce.
He is macro investment strategist at Tangle with Total Wealth Management.
But we begin this morning in the Asia Pacific. Joining
me now is Ekaterina Bigos, cio for Asia Ex Japan
Core Investments at AXA Investment Managers. E. Katerina joins us
from our radio studios in Hong Kong. Ekaterina, thank you
(01:04):
so much. There has been so much happening in markets
these days. Obviously, I think a lot of what we're
seeing is tied to President Trump, both in word and deed,
just driving so much of the price action we know
the tariff policy has been extremely disruptive, to say the least,
and until today concerns over fed independence. In the time
(01:27):
that you have been in the market, have you ever
seen a level of uncertainty this high.
Speaker 3 (01:34):
It's fair that to say that it's quite unprecedented. I mean,
if you look at just even the magnitude of the
tariffs that were implemented obviously on the second of April,
this has been of a scale that is unprecedented. That
has led to an escalation of uncertainty from corporate sphere,
but also that continues because we have this ninety day period.
I would say the peak of that probably uncertainty is
(01:55):
somewhat past us. And again the resolution of the quickie.
You have a positive resolution from some of the trading
partners or key trading partners around the tired negotiations. I
think it will be positive for the markets. But at
the moment we still in this period of unknown. We
hear some positive vibes around negotiative of Japan, potential career Vietnam,
(02:16):
but we haven't seen a conclusive deal yet. So I
think markets seeing a deal that is positive and also
that indicates of how that administration will negotiate with partners
I think will give some at least direction to the market,
so at least hopefully positive outcome reaction from that.
Speaker 1 (02:35):
But the bigger problem is got to be China, and
we recently heard from Beijing kind of a warning here
against striking trade deals with the US that could hurt
the interest of Beijing. Give me your sense of where
this is going to go in terms of Washington and
Beijing and what you are beginning to price in or
discount as it were.
Speaker 3 (02:56):
Ultimately, I think what the ramification of that is is
for for IZI, and I think the Asian story is
started to being more complex because again the ASI and
have benefited from China, have di flows the redirection of
some trade, and certainly it's the largest partner. If you
look at the ten top quarts of trade for US,
(03:17):
seven are sitting in Asia, right, So them negotiating a
deal that satisfies both countries I think is very complex,
and ultimately that is more complex for those countries rather
than say for US and China, which again the adversaries,
but ultimately does pose a more complexes for those regions.
Speaker 1 (03:37):
So markets seem to be questioning America's standing as the
pre emited destination for global capital. Have we kind of
reached a critical juncture here? Has there been a level
of disruption that may be challenging to re establish or
is that saying too much?
Speaker 3 (03:53):
It is probably too early to say so call the
US exceptionalism is done. I mean, ultimately you have to
where the biggest companies are, Where is the biggest capital markets,
where the most liquid security is. Again, the challenge at
the moment is policies and administration, which has put a
lot of uncertainty around directing the capital into the US.
(04:15):
But ultimately the fundamentals of that market have not changed
in terms of the solidity of it. And ultimately, when
you say for investors, US still is the largest part
of an asset location for a lot of the investors.
So you do have to look at US again, some
appetite shifts are likely and gain the high uncertainty the
likely the more likely that we're going to see some
(04:37):
reallocations away from US. But to say that this is
again the story of US being still leading economy and
leading companies of course of the world, I think is
still very much plausible and still very much present.
Speaker 1 (04:51):
In one of the interesting developments recently has been the
weakness of the dollar, and ironically it's going to help
the US strengthen its position in some the trade negotiations
and make life on the other hand difficult for some
of the trading partners in Asia. Will that not happen, well, I.
Speaker 3 (05:08):
Mean that was the intention. Again, this is probably unintended
consequence of some of the measures that minister has put
in place, but they always wanted a week a dollar
to against spur some competitiveness of the US manufacturers. So
again some dollar weakness is not a negative for the
US economy, particularly for the exporters. A destabilization again, which
(05:29):
is again not a central scenario of the dollar. I
think this is probably more bigger risk where you can
see a floading of dollar assets, but again we're not
yet in that scenario. Some weakness, as you said, it
does bring competitiveness to the US trade, particularly that the
ambition is for the administration to bring some more manufacturing
back into US.
Speaker 1 (05:47):
So maybe we can agree that the TERRFF situation has
the potential to damage the Chinese economy, maybe at least
in the short term. It's unclear though whether or not
the equity market in China would reacting, and I'm wondering
whether you get a sense that Chinese equities are somewhat
isolated from terriff exposure.
Speaker 3 (06:06):
Yeah, I think I'll break it down in two and
I would say I'll probably refrain to say that the
tires will damage the Chinese economy. It does complicate the
Chinese economy, but if you look at the state of
Chinese economy coming into this time of conflict that we're
seeing at the moment of escalation, the structural and the
(06:26):
macro problems were there and they're still there. Ultimately, what
China needs to do before this escalation tiers they had
to do and now it's becoming even more an urgency
is to redirect its economy to become a lot more consumption.
So Chinese needs to consume more and that has already
been the sphere of focus for the policy makers. Now
(06:49):
that continuation has successful, they achieved that will be key
in how they're going to succeed through the spirit of uncertainty.
And we've seen already various measures being put in place,
or at least expectations for those measures to be put
in place. When you look at the coupling for the
equity market. And this is again coming down to the
themes or say, what drives at the moment the sentiment
(07:10):
but also the outcomes of investment. Is of course tariff
and tariff uncertainty. Policy is one of them, so policy,
and the third is tech innovation. And when you look
at China and how the market has performed at the
beginning of the year, the excitement around China has been
driven by tech or the AI innovation that we've seen
in China, which has scoped to bright productively growth longer term,
(07:33):
but also immediately I think has scoped to bring some efficiencies,
particularly in places like consumer companies, online sales and so
on and so forth. When it comes to and that's
one sphere that has suddenly provided that rally which has
been very narrow but of course supported the market. Then
the other one is policy expectations. And again I want
to say expectations because policy has been been framed or
(07:57):
the policy direction has been framed by the ustations at
because of this tires, they'll be a lot more forceful,
they'll be a bit larger, and they'll be quicker. And
I think the expectations that policy coming in is driving
some that resilience in the equity Marcus for China, so
quite quite a coupling in terms of where that's coming from.
Speaker 1 (08:15):
It's interesting that you mentioned technology. There was a tremendous
amount of positivity going into the kind of the situation
with the tear from the China side. AI has been
a big part of that story. I get that here
in the States there's a question mark around artificial intelligence lately.
Wells Fargo had a note the other day talking about
(08:35):
Amazon pausing some of its data center leases, and we've
had a story a while back about Microsoft reassessing the
money that it's allocating to the AI spend, particularly cloud
related infrastructure build out. Is there a risk now that
we're going to see, even in China's case, that maybe
there was a little bit too much overspending and that
(08:56):
we need to see a recalibration.
Speaker 3 (08:58):
Well, I think that's it's not conclusive as of yet,
but certainly the deep seak innovation in China has led
to questions around the kapex that some of the magnificence
seven has deployed into a development. Ultimately, if you look
at the stage we are in terms of that development,
it's still very much at the stage one, where a
(09:19):
lot of focus is still on training the models, so
which still requires a lot of data, and it still
requires a lot of intensity. Now what energy in intensity
to train those models? In terms of why the deep
Sick has questioned that is that the inference or the
way the model respond to a certain question is deemed
(09:42):
to be a lot more effective that uses It's less
intensive in terms of using the cloud, in terms of
using the energy, and I think that still pauses a
question in terms of how much is needed for that
development and of AIS. Ultimately, the stage a longer term
benefit of AI doesn't sit into stage one. We do
(10:04):
expect the stage two and three. It's about applications, and
I think that's where the market is going to pay
a lot of attention, is how do you monetize Other
applications started to emerge, and we see them some again
emerging in China, we see some of them in the US.
But modernization and indications that those are starting to emerge
in a much more broad way across the consumer, across
(10:25):
the different sectors. I think that will be a positive
catalyst to the story.
Speaker 1 (10:32):
So we're talking here about software, but let's imagine it
from the different side of the coin, which is the
hardware side, and which is one of China's vulnerabilities, particularly
when you consider semiconductors. Is China got the ability right
now to innovate in a way that could put it
on a level playing field with a company like in Video.
Speaker 3 (10:53):
I mean, look, I think the momentum they've had and
the innovation they had so far, it gets them probably
to a certain level. And I think it has sufficient
momentum at the moment to work at the level under
the stage. As I said, we are where we are
at the moment, right so we haven't seen a broadening
of the application cycle. We haven't seen a lot of
(11:15):
usage yet being put in place. Again, we see in
a peripher we've seen announcement particular as I said in
China in consumer companies where what they're doing is they
have a eye models to create a much more effective
and efficient consumer experience, right so, and I think that
could lead to increased consumption, increase sales and has a
(11:36):
positive impact. The broadening of that I think has again
the scope for AID is to broaden into sphere like healthcare, biotech.
You know, even in industries that has not happened yet,
and I think probably that stage when the broadening is
happening China my face challenges. But I think at the moment,
at the stage where in and where they're looking to
(11:58):
direct the economy, I think it's still having a positive impact.
Speaker 1 (12:02):
E Katerina, thank you so much for joining us. That
is E Katerina Bigo Cio for Asia ex Japan Core
Investments at Axa Investment Managers joining us from Hong Kong
here on the Daybreak Asia podcast. Welcome back to the
(12:22):
Daybreak Asia Podcast. I'm Doug Krisner. Joining me now is
Tom Bruce. He is macro investment strategist to tangle with
Total Wealth Management. Tom is on the line from Houston, Texas. Tom,
thank you so much. It's always a pleasure. It seems
like President Trump has really softened his tone when it
comes to this idea of replacing the Fed chairman for
being too slow to cut interest rates. And there seems
(12:45):
to be a bit of relief right now if you
look at the price action that we're seeing in late trading,
do you really think that the president has or his
advisors have their thumbs on the market as a way
of gauging sentiment right now?
Speaker 4 (12:59):
Absolutely, I think so. I think some of oursers more
than others. Scott Bessett clearly and personally trompably. It is
a clearer pulse of the market, and the tope of
news that we've seen this evening is exactly what we
want to see for the markets. We want to see
more assurance that the Fed chair is secure in his position,
(13:21):
that it's something that we went and have questioned until recently.
And secondly, that we have some resolution to China, because
that's such a big part of this terrifor.
Speaker 1 (13:30):
Quation, no doubt about that. Today Bloomberg News reported some
closed door comments from Treasury Secretary Scott Bessant, and he
was quoted as saying the standoff with China is unsustainable
and he's expecting the situation to de escalate. That seems
to be kind of a calming message. Do you think
that we're embarking on some type of resolution here in
(13:52):
the near term, or do you think this trade war,
if we can call it, that has the potential to
drag on for a while.
Speaker 4 (14:00):
Unfortunately, my expectation would be for this to drag on
for a while. You know, a week or two ago,
the Chinese communicated that they were willing to come to
the table if they were being tripped with respect. And
I think that's what we've seen from the administration today,
between Scott business comments and Donald Trump later in the
day commenting that he expected things to go well to
(14:21):
China and one hundred and four ven percent tariff wasn't
going to stay in place. So that was very encouraging.
Speaker 1 (14:27):
So we had a lot of positivity in the equity
market today. A volume, though, was a little on the
light side. Do we make too much of this one?
When you look at price action where volume is light,
I know, things can become a little exaggerated. Do you
want to kind of hang your hat on the s
and P kind of turning the corner maybe and picking
up two and a half percent today? Was today's price
(14:47):
action a big deal? Or does it kind of just
fit into this puzzle that we've seen recently where you know,
there's been so much volatility up one day, big, down
big the next day one.
Speaker 4 (14:58):
Hundred percent hinges on tariffs, so we can go up
or down quite a debt. But the low we put
in a couple weeks ago that looked pretty solid from
a technical standpoint, but if we don't have progress, we
don't have some trade deals announced, it's not going to hold.
So we needed to continue to see progress. I think
the information we got today from the administration was very constructive,
(15:18):
but we need to see followed for with some real
deals coming through in the next week or so.
Speaker 1 (15:24):
I don't know whether you can comment on a specific stock,
but I want to talk briefly about Tesla because tonight
the company came out with earnings a little disappointing, but
then on the call with analyst, Elon Musk said he's
going to be stepping back from his role at DOGE
next month, and there seems to be a lot of
relief right now in the way in which the stock
(15:44):
is behaving. It's up more than five percent in the
late US session, and it's helping to give a big
boost to the many futures contracts. Talk to me a
little bit about the role that Musk has been playing
in policy and the extent to which you view this.
Maybe you don't as a distraction for Tesla's shareholders and
the stock.
Speaker 4 (16:03):
Well, we did not focus on individual stocks, but you know,
from my perspective, it is very welcome to see more
of a focus on Tesla. You know, Elon Musk is
a very busy man. He's he has, you know, multiple
businesses and now as admistration Endoge. It makes you wonder
how he's part at any time for Tesla. I know
he has to some degree, but seeing a renewed focus
(16:26):
on it is certainly welcome from from a shareholder perspective.
And despite the numbers being bad today, I think there's
still plain of encouraging, encouraging catalysts on Tesla's the horizon
for Tesla. If you look at what they're doing in
robotics and you know full self drives, there's a lot
of different things that are that you can be excited
(16:47):
about that aren't necessarily showing up in the balance sheet today.
Speaker 1 (16:51):
So I think we can agree that the level of
uncertainty in markets right now has been extreme. How are
you navigating this to terrain right now? Tom? Are you
you able to discover opportunity or is the risk too
great right now that you're more inclined to kind of
step aside and let some of this dust settle and
at least in the near term.
Speaker 4 (17:10):
You're certainly right that it's a time of extreme uncertainty.
However this happens, you know, it's the financial markets. When
we were going through two thousand and eight and many
other times, we didn't know how it was going to
end up then either. So from this, from that perspective,
it's it's a new problem of the markets are dealing
with now. But you know this, it's a recurring theme
(17:32):
over the years, is that we have a lot of volatility,
and I think you have to have to be optimistic
at the end of the day and believe that you know,
eventually innovation and the free markets will went out and
the markets will go higher, and you know, at the
end of the day, you know investors were we rewarded.
Speaker 1 (17:50):
You were talking a moment ago about being laser focused
on the tariff story. That may put a big question
mark over the equity market. Is there more opportunity right
now in fixed income? Do you think then on the
equity side.
Speaker 4 (18:03):
That's a distinct possibility. This Sole America trade that we've
seen where the US treasuries and the US dollar have
not been a safe even as of late, that's certainly
a new development that I would like to see reversed.
We like to see that on a bad day in
the markets has risk off. The treasuries are being purchased
in people feel confident in the US government, and from
(18:26):
what I've seen in the past three weeks, including in
the last few days, it's still not quite the case.
So we really need to see that relationship change in
a meaningful way. Once that's restored, we could see treasury
yields come back down quite a bit.
Speaker 1 (18:40):
So to what extent are you forecasting a recession? Maybe
that's not even in your outlook right now, but I'm wondering,
because of the conversation around weaker growth and the question
over prolonged kind of tariff policy that may hold back
a lot of revenue, I'm wondering whether or not you're
seeing a distinct possibility that we could see contraction in
(19:01):
the American economy.
Speaker 4 (19:02):
I don't think there's much uncertainty about it. If we
don't have trade deals, so it's going to be a recession.
I assume we're at the beginning of it now, But
as far as the trade deal is being worked out
and avoiding a recession, that's really hard to say. Enough
damage may have been done at this juncture to where
we inner recession anyhow, And I and I think a
lot of other market participants are. You know, we have
(19:24):
our eyes glued on hard data because all the Soviet
data we've seen lately has been terrible. So, you know,
particularly the labor market, if we started seeing job list
game's rise, that's going to be you know, certainly a
red flag for a centering O recession.
Speaker 1 (19:39):
What about opportunities offshore? Given everything that we've been discussing
potential challenges for the American markets, do you want to
be exposed more to what's going on in Asia right
now or to Europe? Or is that something that you're
completely ignoring because there are also risks in those jurisdictions.
Speaker 4 (19:58):
Well, there are. I still feel like the the US
is probably the best place long term. Is we really
lead the world in terms of innovation. However, over the
medium run, you can see places like Europe, in Germany particular,
they are unveiling your fiscal stimulus combined with monetary simulus.
That's a pretty potent combination, so you could see select
(20:20):
economies in Europe do exceptionally well. I also feel like
Southeast Asia has perhaps the unique opportunity here if at
the end of the day, after all this has worked out,
tariffs on Southeast Asia are somewhat less severe than they
are in China, then on a relative basis, they may
really stand a benefit from this with trading of the
(20:42):
US going forward.
Speaker 1 (20:43):
Tom will leave it there. Thank you so much for
joining us. He's Tom Bruce, macro investment strategist at Tangle
with Total Wealth Management, joining us from Houston, Texas. 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
(21:06):
in the Asia Pacific. You can find us on Apple, Spotify,
the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Join us again tomorrow for insight on the market moves
from Hong Kong to Singapore and Australia. I'm Doug Chrisner,
and this is Bloomberg
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!