June 29, 2025 • 18 mins
US equity-index futures edged higher as trade talks gathered pace ahead of a July 9 deadline and Senate negotiations continued over President Donald Trump's $4.5 trillion tax cut package. Contracts for the S&P 500 index and the Nasdaq 100 rose 0.3%. Major currencies were slightly higher against the dollar in early Asian trading, while stock futures showed gains in Japan, a decline in Hong Kong and little change in Australia. Crude oil fell 1% as traders wound back risk premium before OPEC+ meeting. We get some market perspective from Shams Afzal, Managing Director at the Carnegie Investment Counsel.
Plus - Monetary policymakers from five major economies will gather Tuesday at the European Central Bank's annual retreat in Sintra, Portugal. The summit comes as Trump-era trade turbulence and geopolitical instability weigh on global markets. Fed Chair Jerome Powell and ECB head Christine Lagarde are set to share a public stage for the first time in a year. For more on how tariffs are impacting economic outlooks, we heard from Louise Loo, Lead Economist at Oxford Economics. She speaks with the hosts of Bloomberg Television's The Asia Trade, Shery Ahn and Haidi Stroud-Watts.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Krisner. There
are just ten days left until President Trump's country specific
tariffs are set to take effect, and the impact of
these levees will be a key topic this week for
five of the world's leading central bankers. They will be
meeting at the ECB's annual retreat in Central Portugal, and
in a moment we'll get a preview from Luis lou
(00:34):
lead economist at Oxford Economics. But we begin with trade.
On Sunday in the States, President Trump said he does
not plan to extend the July ninth deadline for US
trading partners as of now. That is when they must
decide either to strike trade deals with the US or
face reciprocal tariffs of twenty five percent. Interestingly, Trump didn't
(00:56):
completely rule out an extension here he is speaking to
Fox News Sunday Morning Futures.
Speaker 3 (01:01):
I'm for doing it right now.
Speaker 4 (01:03):
We send letters out to all of the countries explaining
to them, we'll look at the deficit we have or
whatever it is with the country. We'll look at how
a country treats us. Are they good, are they not
so good. Some countries we don't care. Well, you know,
we'll just send an I number out. But we're going
to be sending letters out starting pretty soon.
Speaker 2 (01:21):
President Trump, speaking earlier to Fox News, joining me now
for a closer look at what's going on with the
tariff story is chams have solved. Managing director at the
Carnegie Investment Council Chums, is on the line from Toledo, Ohio.
Good of you to make time to chat with me
on this. What is your sense of the way in
which tariffs are impacting global economies right now?
Speaker 5 (01:42):
Well, I think you know the clip that you just
played basically insures that the second half uncertainty will be
no better than the first You know, as you and
I and know that there's probably at most about a
half a dozen deals that is potentially at a place
that can be announced and be called the success. But
(02:04):
those six will not quite come the nerves come July
ninth or beyond, where a lot more was expected ninety
days ago. So I assume that this this this you
know thread that started twenty twenty five will remain throughout
the end of the year, unfortunately, but the markets have
(02:25):
a different view of it. I you know, I go
forward as to say even that we're experiencing some form
of analgesia, which is the human body's response of sort
of shutting down pain points because it's experiencing stress somewhere
else to a larger degree. And I think April tewond
was the major stress event, and everything that has followed
(02:46):
seems to have been really dialed down, and you know,
tempered down to a point where the market has completely
ignored everything else that has happened since then. So I
feel that twenty five percent tariffs across the is probably
not a bad forecast to assume for the rest of
the year.
Speaker 2 (03:05):
How are you seeing tariff says a contributor to inflationary pressure?
Speaker 5 (03:10):
Well, interestingly, you know, after four some years of very
sticky areas of inflation, especially on the housing side, non
housing services side, it would have picked it. It could
not have picked a better year than twenty twenty five
to start to finally show some signs of easing. So,
(03:30):
given that one third of the inflation basket comes from
housing and housing related activities, the fact that we are
finally seeing some meaningful softening there is helping counteract a
lot of the goods related inflation that is no longer
deflationary in the basket, right, So two point three percent
may have ticked up a little bit compared to two
(03:51):
months ago, But I think the FED is going to
be quite comfortable in the second half if the worst
of the inflation news has already been digested and that
these are the numbers that we have dealt with so far.
So I'm going to go out and live and say
that I think two cuts is probably the minimum for
this year. I'm much more on the group side, where
(04:13):
we're expecting probably at least three.
Speaker 2 (04:15):
Is there still the risk of stagflation?
Speaker 5 (04:18):
There always is, right when you're dealing with one point
five percent sub GDP, it can very easily dip towards
the other side. Whether it is broad based enough where
the NBER actually deems that a classic recession or not
remains to be seen. But yes, I think GDP has
cooled down to a place where one small shock can
(04:41):
completely derail consumer spending to a level where you end
up getting a you know, back to back, you know,
sub zero GDP growth. But that's we don't think that's
going to be sort of the status quo, given that
we still think there is pent of demand. If the
AI picture was not playing out as robustly as it is,
(05:05):
then I think we would be talking about recession as
the baseline for twenty twenty five. But given the fact
that that remains the strength in the US economy, that
is enough to actually keep the economy at one plus
percent GDP for the second half. Certainly beyond that, of course,
but on balance between the first and the second half,
(05:26):
we're expecting at least one and a half to one
point six percent GDP, and that should be plenty to
sort of see through the high uncertainty that we have
been dealing with since April.
Speaker 2 (05:36):
Second, as you and I are speaking, the Senate here
in the US is debating President Trump's tax and spending bill,
and against that backdrop, today the Congressional Budget Office estimating
the Senate's version of the bill will add nearly three
point three trillion to US deficits over a decade. Without
getting into the particulars and to the politics of those specifics.
(05:59):
When you hear a figure like three point three trillion
being added to deficits over a ten year period, what
might happen in the bond market as a result of that, Well.
Speaker 5 (06:09):
That's where it's it's you know, why the market seem
to think that the bond market ultimately holds the cards
to how much of these tariffs actually get implemented. Right now,
we have been given bit of a relief for the
ten years, trading just under four point three, but you know,
anything can change, and especially if post July nine, if
(06:32):
you're seeing in the numbers that we saw from Vietnam
and Cambodia with forty four, forty six percent, thirty six
percent kinds of the tariffs being levied, the bond market
will have plenty to say. So my I guess our
view is that we don't think anywhere close to the
(06:53):
April second numbers will actually come to bear because the
bond market will just not allow it. And we still
have seven trillion dollars worth of refinancing we need to
do as a country over the next eleven to twelve months,
and we do need the ten year to behave and
it's not going to behave if the bill moves forward
(07:14):
without making some significant tough decisions. And I just don't
think any side anybody is looking to make those tough
decisions at this point.
Speaker 2 (07:22):
We get a key piece of economic news in the
US on Thursday because of the July fourth holiday. At
the end of the week that's normally when we get
non farm payrolls instead, it will happen this week on Thursday.
Our survey indicates that economists are looking for the addition
of around one hundred and thirteen thousand jobs, an unemployment
rate that may creep up to around four point three percent.
(07:46):
What's your assessment of the American labor market right now?
Speaker 5 (07:50):
Well, I think it's very much remained slow to hire
and slow to fire. I would say that the one
hundred thousand numbers seems to be where our thinking is.
Just given the weekly numbers from unemployment newly unemployed numbers
being about twenty to twenty five thousand higher per week,
(08:13):
that should pretty much put the one hundred and fifty
thousand plus number out of reach. Whether it's significantly closer
to one hundred thousand or somewhere in the middle remains
to be seen. We're finding that even though four point
two percent should not be one an unemployment number that
should cause any alarms. But when you look at the
(08:34):
household numbers, where you see the long term unemployed, which
is very much close to the one point nine million
at this point. That is giving. That should give the
Fed a lot of reasons for them to start considering
cuts as early as July, because the house the labor
(08:55):
market is not as balanced as the Fed seems to
be suggesting if you look at the disparities between the
long term unemployed, which is not something that happens in
a solid job market.
Speaker 2 (09:09):
So Monday is the final day of the second quarter.
We're just weeks away then from the earning season. Data
from Bloomberg Intelligence show that analysts are essentially looking at
profit growth year over year for the S and P
in Q two of around two point eight percent. That
would be the smallest increase in about two years. We
(09:30):
can talk about that in the context of an equity
market that is at record highs for the S and P,
the Nasdaq one hundred, and the NASDAK composite. How are
you feeling about the equity market these days?
Speaker 5 (09:42):
Well, at twenty two times earnings, you know you have
to exercise more discretion than ever. We continue to think
that there are parts of the market that remain fairly valued,
especially banking and other places, which will tend to benefit
from a steepening yield curve. But overall, you know, when
(10:06):
we think about the twenty two times, if you extract
the top ten tech names, the numbers are a little
bit more palatable, so I'm not quite worried about the
valuation at a higher level. I will also say that
one of the tailwinds that earning season will likely see
in the second quarter, which none of the guidance actually includes,
(10:28):
is the fact that the dollars weakness this year that
has persisted potentially adds between two to three percent and
EPs jump from what has been guided. So the two
and a half percent, I will not be surprised if
it actually ends up being between five and six percent,
which will keep it very much in track for the
year to deliver close to nine percent gains, which should
(10:50):
be substantially supportive of maybe another four to five percent
gains in the equity in the market. So I would
say that the dollar is probably going to who works
some wonders for our multinationals, and that's one of the
rare killwinds that we can look to into twenty twenty five.
Speaker 2 (11:06):
Schams will leave it there, Thank you so much. Shams Afzaal,
Managing Director at the Carnegie Investment Council. Joining from Toledo, Ohio.
Here on the Daybreak Asia podcast. Welcome back to the
Daybreak Asia podcast. I'm Doug Krisner. This week, five of
(11:27):
the world's leading central bankers will be speaking at the
ECB's annual retreat in Central Portugal. This is a public forum.
It will feature Fetcher J. Powell, along with ECB President
Christine Legard and their peers from Japan, South Korea and
the UK. Now they've been forced lately to navigate the
risk of both inflation and growth in the wake of
(11:48):
President Trump's tariff actions. On Sunday, the Bank for International
Settlements reported growth prospects have diminished, while risk have intensified
with regard to the stability and consumer prices, as well
as public finances and even the financial system. For more,
we heard from Louise Leu. She is the lead economist
at Oxford Economics. She spoke with Bloomberg, Sherry On, and
(12:10):
Heidi straud Watts some.
Speaker 6 (12:12):
Louise, I'm curious at this sort of in between stage
when it comes to not knowing too much about how
trade is going to play out for the rest of
the year.
Speaker 3 (12:20):
How are you, I.
Speaker 6 (12:21):
Guess baking tariffs into the economy the economic outlook not
just for the US, but certainly the potential for implications.
Speaker 3 (12:29):
Around the world.
Speaker 7 (12:31):
Well, so there are there are two There are two
channels by which we see this play out. One is
true the very direct export channels. So how much trade
gets strunk back on how much contraction we see in.
Speaker 3 (12:42):
Trade to a large extent.
Speaker 7 (12:44):
That's actually been supported by a lot of uploading activity,
and I think this week some of the trade data
we will get, we're expecting that frontloading our strength to
still persist for a little bit. The second way by
which we think the trade uncertainty would transmit to the
rest of economy is really true where we think private
investments would be, where we think businesses would respond to
(13:06):
some of these uncertainties that are looming in a very
near term.
Speaker 3 (13:10):
Our expectations is that across.
Speaker 7 (13:12):
Asia we would see a bit of a dampener on
private investments, which probably would set the conditions right for
public investments for the government to really step in to
do a bit of the heavy lifting at a time
when the economy seems to be quite moving along, quite
quite tepidly.
Speaker 6 (13:28):
It's one of the channels that we talk about is
sort of the embedded nature of towerffs, right, and potentially
how entrenched those expectations are. Is that a risk when
it comes to confidence levels investment from companies but also
from consumers and households too.
Speaker 3 (13:42):
Yeah, absolutely, And I think the well, there are two risks.
Speaker 7 (13:47):
One is that because of the volatility in trade negotiations,
the uncertainty that we saw in the last two or
three months, governments and maybe businesses now have the ability to, well,
at least they have the inclination to look true short
term noise, to really think about what the ultimate level
of tariffs might be. And I suspect that, you know,
(14:08):
that that implies that any of the short term news
or quality that we see coming coming up due in
July ninth, that might actually have less of an impact
than than what we saw at the pre at the
Liberation Day announcements. So that's one second is I think
also investments are going to be weight down heavily.
Speaker 3 (14:28):
But also what's.
Speaker 7 (14:28):
Happening by some of the second order effects, So you know,
if you have China slowly as a result of the
trade war, as a result of the trade trade tensions
with the US, then what's that gonna was gonna imply
for the rest of the Asia. So so I think
that the the the effects, the ripple on effects on
the rest of the country seem to be twofold, and
I think that we're perhaps right at the start of
(14:49):
that playing out, for for in the ecadiemic data.
Speaker 1 (14:53):
And how fast is the transmission mechanism of that ripple
ripple effect that you talk about, because already, given the
temporary truth that we've seen between China and the US,
we're supposed to expect June manufacturing PMI from China to
turn positive.
Speaker 7 (15:08):
No, Well, our house view is that we don't think
it was term positive. We think that we stay kind
of in the forty nine region. Obviously it's been at
a forty nine area for for a while now we're
talking about June PMIS for China here.
Speaker 3 (15:21):
So I think.
Speaker 7 (15:24):
When you talk about the speed of transmission, we think
that they will likely be quite immediate, as we've seen
in the last two or three months by going back up,
so recovering from that that's going to be quite sticky
because I think of the tremendous amount of uncertainty around that,
the fact that some of these trade deals don't really
seem to be the conventional trade views that people understand
them to be. So there is a little bit of
a disappointment around the details of that, and I think
(15:46):
that would weigh unsentiment for much longer.
Speaker 1 (15:50):
We have seen, for example, South Korea's industrial production coming
in in contraction territory and we're expecting actually a boost.
Speaker 3 (15:59):
Exactly.
Speaker 7 (16:00):
So I think going forward the risks that data would
supprise us the downside rather than the upside, just because
I think the strength that we solved in the last
few months could plausibly be temporary nature.
Speaker 3 (16:12):
Frontloading, rerouting trade, a lot.
Speaker 7 (16:14):
Of these, and suppose for a lot of the Asian exporters,
including Korea, the resilience in tech exports is also one
of the factors that we think will potentially normalize in
the second half of this year. So a lot of
a lot of the strength that we saw, a lot
of the optimists, a lot of the upside surprises to
data in the last one month or two has been
(16:34):
kind of the temporary factors. So there is no reason
to think that, you know, we're not kind of on
the way down from here on.
Speaker 6 (16:41):
And is that the case when it comes to China
as well, does that sort of temporary truth add any
upside potential for the payms, given that they're leading indicators anyway,
and then given there are structural issues that we know
of with the Chinese economy, even without looking at the
tower situation.
Speaker 7 (16:57):
Yeah, well, the for China, I think the peers are
notoriously noisy, so we want to we don't really want
to be too hung up on one data point. Having
said that, the situation with China's is a little bit different.
I think for China we are not really seeing substantial upside.
But on the other hand, because of the truth, because
(17:18):
of the fact that we think Beijing officials will continue
to leverage on its critical minerals are dominant, that would
remove a tail rist scenario. So you know, I think
at this stage, if we talk about macro growth, any
growth below four point five percent is probably quite impossible
for China. So I think growth will probably be relatively
(17:40):
stable and decent this year, but know any spectacular I think.
Speaker 1 (17:45):
Luis Zoo always good to have you with us, lead
economist add off for the economics.
Speaker 2 (17:52):
Thanks for listening to today's episode of the Bloomberg Daybreak
Asia Edition podcast. Each weekday, we look at the story
shape markets, finance, and geopolitics 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
(18:15):
and Australia. I'm Doug Prisner, and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Krisner. There
are just ten days left until President Trump's country specific
tariffs are set to take effect, and the impact of
these levees will be a key topic this week for
five of the world's leading central bankers. They will be
meeting at the ECB's annual retreat in Central Portugal, and
in a moment we'll get a preview from Luis lou
(00:34):
lead economist at Oxford Economics. But we begin with trade.
On Sunday in the States, President Trump said he does
not plan to extend the July ninth deadline for US
trading partners as of now. That is when they must
decide either to strike trade deals with the US or
face reciprocal tariffs of twenty five percent. Interestingly, Trump didn't
(00:56):
completely rule out an extension here he is speaking to
Fox News Sunday Morning Futures.
Speaker 3 (01:01):
I'm for doing it right now.
Speaker 4 (01:03):
We send letters out to all of the countries explaining
to them, we'll look at the deficit we have or
whatever it is with the country. We'll look at how
a country treats us. Are they good, are they not
so good. Some countries we don't care. Well, you know,
we'll just send an I number out. But we're going
to be sending letters out starting pretty soon.
Speaker 2 (01:21):
President Trump, speaking earlier to Fox News, joining me now
for a closer look at what's going on with the
tariff story is chams have solved. Managing director at the
Carnegie Investment Council Chums, is on the line from Toledo, Ohio.
Good of you to make time to chat with me
on this. What is your sense of the way in
which tariffs are impacting global economies right now?
Speaker 5 (01:42):
Well, I think you know the clip that you just
played basically insures that the second half uncertainty will be
no better than the first You know, as you and
I and know that there's probably at most about a
half a dozen deals that is potentially at a place
that can be announced and be called the success. But
(02:04):
those six will not quite come the nerves come July
ninth or beyond, where a lot more was expected ninety
days ago. So I assume that this this this you
know thread that started twenty twenty five will remain throughout
the end of the year, unfortunately, but the markets have
(02:25):
a different view of it. I you know, I go
forward as to say even that we're experiencing some form
of analgesia, which is the human body's response of sort
of shutting down pain points because it's experiencing stress somewhere
else to a larger degree. And I think April tewond
was the major stress event, and everything that has followed
(02:46):
seems to have been really dialed down, and you know,
tempered down to a point where the market has completely
ignored everything else that has happened since then. So I
feel that twenty five percent tariffs across the is probably
not a bad forecast to assume for the rest of
the year.
Speaker 2 (03:05):
How are you seeing tariff says a contributor to inflationary pressure?
Speaker 5 (03:10):
Well, interestingly, you know, after four some years of very
sticky areas of inflation, especially on the housing side, non
housing services side, it would have picked it. It could
not have picked a better year than twenty twenty five
to start to finally show some signs of easing. So,
(03:30):
given that one third of the inflation basket comes from
housing and housing related activities, the fact that we are
finally seeing some meaningful softening there is helping counteract a
lot of the goods related inflation that is no longer
deflationary in the basket, right, So two point three percent
may have ticked up a little bit compared to two
(03:51):
months ago, But I think the FED is going to
be quite comfortable in the second half if the worst
of the inflation news has already been digested and that
these are the numbers that we have dealt with so far.
So I'm going to go out and live and say
that I think two cuts is probably the minimum for
this year. I'm much more on the group side, where
(04:13):
we're expecting probably at least three.
Speaker 2 (04:15):
Is there still the risk of stagflation?
Speaker 5 (04:18):
There always is, right when you're dealing with one point
five percent sub GDP, it can very easily dip towards
the other side. Whether it is broad based enough where
the NBER actually deems that a classic recession or not
remains to be seen. But yes, I think GDP has
cooled down to a place where one small shock can
(04:41):
completely derail consumer spending to a level where you end
up getting a you know, back to back, you know,
sub zero GDP growth. But that's we don't think that's
going to be sort of the status quo, given that
we still think there is pent of demand. If the
AI picture was not playing out as robustly as it is,
(05:05):
then I think we would be talking about recession as
the baseline for twenty twenty five. But given the fact
that that remains the strength in the US economy, that
is enough to actually keep the economy at one plus
percent GDP for the second half. Certainly beyond that, of course,
but on balance between the first and the second half,
(05:26):
we're expecting at least one and a half to one
point six percent GDP, and that should be plenty to
sort of see through the high uncertainty that we have
been dealing with since April.
Speaker 2 (05:36):
Second, as you and I are speaking, the Senate here
in the US is debating President Trump's tax and spending bill,
and against that backdrop, today the Congressional Budget Office estimating
the Senate's version of the bill will add nearly three
point three trillion to US deficits over a decade. Without
getting into the particulars and to the politics of those specifics.
(05:59):
When you hear a figure like three point three trillion
being added to deficits over a ten year period, what
might happen in the bond market as a result of that, Well.
Speaker 5 (06:09):
That's where it's it's you know, why the market seem
to think that the bond market ultimately holds the cards
to how much of these tariffs actually get implemented. Right now,
we have been given bit of a relief for the
ten years, trading just under four point three, but you know,
anything can change, and especially if post July nine, if
(06:32):
you're seeing in the numbers that we saw from Vietnam
and Cambodia with forty four, forty six percent, thirty six
percent kinds of the tariffs being levied, the bond market
will have plenty to say. So my I guess our
view is that we don't think anywhere close to the
(06:53):
April second numbers will actually come to bear because the
bond market will just not allow it. And we still
have seven trillion dollars worth of refinancing we need to
do as a country over the next eleven to twelve months,
and we do need the ten year to behave and
it's not going to behave if the bill moves forward
(07:14):
without making some significant tough decisions. And I just don't
think any side anybody is looking to make those tough
decisions at this point.
Speaker 2 (07:22):
We get a key piece of economic news in the
US on Thursday because of the July fourth holiday. At
the end of the week that's normally when we get
non farm payrolls instead, it will happen this week on Thursday.
Our survey indicates that economists are looking for the addition
of around one hundred and thirteen thousand jobs, an unemployment
rate that may creep up to around four point three percent.
(07:46):
What's your assessment of the American labor market right now?
Speaker 5 (07:50):
Well, I think it's very much remained slow to hire
and slow to fire. I would say that the one
hundred thousand numbers seems to be where our thinking is.
Just given the weekly numbers from unemployment newly unemployed numbers
being about twenty to twenty five thousand higher per week,
(08:13):
that should pretty much put the one hundred and fifty
thousand plus number out of reach. Whether it's significantly closer
to one hundred thousand or somewhere in the middle remains
to be seen. We're finding that even though four point
two percent should not be one an unemployment number that
should cause any alarms. But when you look at the
(08:34):
household numbers, where you see the long term unemployed, which
is very much close to the one point nine million
at this point. That is giving. That should give the
Fed a lot of reasons for them to start considering
cuts as early as July, because the house the labor
(08:55):
market is not as balanced as the Fed seems to
be suggesting if you look at the disparities between the
long term unemployed, which is not something that happens in
a solid job market.
Speaker 2 (09:09):
So Monday is the final day of the second quarter.
We're just weeks away then from the earning season. Data
from Bloomberg Intelligence show that analysts are essentially looking at
profit growth year over year for the S and P
in Q two of around two point eight percent. That
would be the smallest increase in about two years. We
(09:30):
can talk about that in the context of an equity
market that is at record highs for the S and P,
the Nasdaq one hundred, and the NASDAK composite. How are
you feeling about the equity market these days?
Speaker 5 (09:42):
Well, at twenty two times earnings, you know you have
to exercise more discretion than ever. We continue to think
that there are parts of the market that remain fairly valued,
especially banking and other places, which will tend to benefit
from a steepening yield curve. But overall, you know, when
(10:06):
we think about the twenty two times, if you extract
the top ten tech names, the numbers are a little
bit more palatable, so I'm not quite worried about the
valuation at a higher level. I will also say that
one of the tailwinds that earning season will likely see
in the second quarter, which none of the guidance actually includes,
(10:28):
is the fact that the dollars weakness this year that
has persisted potentially adds between two to three percent and
EPs jump from what has been guided. So the two
and a half percent, I will not be surprised if
it actually ends up being between five and six percent,
which will keep it very much in track for the
year to deliver close to nine percent gains, which should
(10:50):
be substantially supportive of maybe another four to five percent
gains in the equity in the market. So I would
say that the dollar is probably going to who works
some wonders for our multinationals, and that's one of the
rare killwinds that we can look to into twenty twenty five.
Speaker 2 (11:06):
Schams will leave it there, Thank you so much. Shams Afzaal,
Managing Director at the Carnegie Investment Council. Joining from Toledo, Ohio.
Here on the Daybreak Asia podcast. Welcome back to the
Daybreak Asia podcast. I'm Doug Krisner. This week, five of
(11:27):
the world's leading central bankers will be speaking at the
ECB's annual retreat in Central Portugal. This is a public forum.
It will feature Fetcher J. Powell, along with ECB President
Christine Legard and their peers from Japan, South Korea and
the UK. Now they've been forced lately to navigate the
risk of both inflation and growth in the wake of
(11:48):
President Trump's tariff actions. On Sunday, the Bank for International
Settlements reported growth prospects have diminished, while risk have intensified
with regard to the stability and consumer prices, as well
as public finances and even the financial system. For more,
we heard from Louise Leu. She is the lead economist
at Oxford Economics. She spoke with Bloomberg, Sherry On, and
(12:10):
Heidi straud Watts some.
Speaker 6 (12:12):
Louise, I'm curious at this sort of in between stage
when it comes to not knowing too much about how
trade is going to play out for the rest of
the year.
Speaker 3 (12:20):
How are you, I.
Speaker 6 (12:21):
Guess baking tariffs into the economy the economic outlook not
just for the US, but certainly the potential for implications.
Speaker 3 (12:29):
Around the world.
Speaker 7 (12:31):
Well, so there are there are two There are two
channels by which we see this play out. One is
true the very direct export channels. So how much trade
gets strunk back on how much contraction we see in.
Speaker 3 (12:42):
Trade to a large extent.
Speaker 7 (12:44):
That's actually been supported by a lot of uploading activity,
and I think this week some of the trade data
we will get, we're expecting that frontloading our strength to
still persist for a little bit. The second way by
which we think the trade uncertainty would transmit to the
rest of economy is really true where we think private
investments would be, where we think businesses would respond to
(13:06):
some of these uncertainties that are looming in a very
near term.
Speaker 3 (13:10):
Our expectations is that across.
Speaker 7 (13:12):
Asia we would see a bit of a dampener on
private investments, which probably would set the conditions right for
public investments for the government to really step in to
do a bit of the heavy lifting at a time
when the economy seems to be quite moving along, quite
quite tepidly.
Speaker 6 (13:28):
It's one of the channels that we talk about is
sort of the embedded nature of towerffs, right, and potentially
how entrenched those expectations are. Is that a risk when
it comes to confidence levels investment from companies but also
from consumers and households too.
Speaker 3 (13:42):
Yeah, absolutely, And I think the well, there are two risks.
Speaker 7 (13:47):
One is that because of the volatility in trade negotiations,
the uncertainty that we saw in the last two or
three months, governments and maybe businesses now have the ability to, well,
at least they have the inclination to look true short
term noise, to really think about what the ultimate level
of tariffs might be. And I suspect that, you know,
(14:08):
that that implies that any of the short term news
or quality that we see coming coming up due in
July ninth, that might actually have less of an impact
than than what we saw at the pre at the
Liberation Day announcements. So that's one second is I think
also investments are going to be weight down heavily.
Speaker 3 (14:28):
But also what's.
Speaker 7 (14:28):
Happening by some of the second order effects, So you know,
if you have China slowly as a result of the
trade war, as a result of the trade trade tensions
with the US, then what's that gonna was gonna imply
for the rest of the Asia. So so I think
that the the the effects, the ripple on effects on
the rest of the country seem to be twofold, and
I think that we're perhaps right at the start of
(14:49):
that playing out, for for in the ecadiemic data.
Speaker 1 (14:53):
And how fast is the transmission mechanism of that ripple
ripple effect that you talk about, because already, given the
temporary truth that we've seen between China and the US,
we're supposed to expect June manufacturing PMI from China to
turn positive.
Speaker 7 (15:08):
No, Well, our house view is that we don't think
it was term positive. We think that we stay kind
of in the forty nine region. Obviously it's been at
a forty nine area for for a while now we're
talking about June PMIS for China here.
Speaker 3 (15:21):
So I think.
Speaker 7 (15:24):
When you talk about the speed of transmission, we think
that they will likely be quite immediate, as we've seen
in the last two or three months by going back up,
so recovering from that that's going to be quite sticky
because I think of the tremendous amount of uncertainty around that,
the fact that some of these trade deals don't really
seem to be the conventional trade views that people understand
them to be. So there is a little bit of
a disappointment around the details of that, and I think
(15:46):
that would weigh unsentiment for much longer.
Speaker 1 (15:50):
We have seen, for example, South Korea's industrial production coming
in in contraction territory and we're expecting actually a boost.
Speaker 3 (15:59):
Exactly.
Speaker 7 (16:00):
So I think going forward the risks that data would
supprise us the downside rather than the upside, just because
I think the strength that we solved in the last
few months could plausibly be temporary nature.
Speaker 3 (16:12):
Frontloading, rerouting trade, a lot.
Speaker 7 (16:14):
Of these, and suppose for a lot of the Asian exporters,
including Korea, the resilience in tech exports is also one
of the factors that we think will potentially normalize in
the second half of this year. So a lot of
a lot of the strength that we saw, a lot
of the optimists, a lot of the upside surprises to
data in the last one month or two has been
(16:34):
kind of the temporary factors. So there is no reason
to think that, you know, we're not kind of on
the way down from here on.
Speaker 6 (16:41):
And is that the case when it comes to China
as well, does that sort of temporary truth add any
upside potential for the payms, given that they're leading indicators anyway,
and then given there are structural issues that we know
of with the Chinese economy, even without looking at the
tower situation.
Speaker 7 (16:57):
Yeah, well, the for China, I think the peers are
notoriously noisy, so we want to we don't really want
to be too hung up on one data point. Having
said that, the situation with China's is a little bit different.
I think for China we are not really seeing substantial upside.
But on the other hand, because of the truth, because
(17:18):
of the fact that we think Beijing officials will continue
to leverage on its critical minerals are dominant, that would
remove a tail rist scenario. So you know, I think
at this stage, if we talk about macro growth, any
growth below four point five percent is probably quite impossible
for China. So I think growth will probably be relatively
(17:40):
stable and decent this year, but know any spectacular I think.
Speaker 1 (17:45):
Luis Zoo always good to have you with us, lead
economist add off for the economics.
Speaker 2 (17:52):
Thanks for listening to today's episode of the Bloomberg Daybreak
Asia Edition podcast. Each weekday, we look at the story
shape markets, finance, and geopolitics 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
(18:15):
and Australia. I'm Doug Prisner, and this is Bloomberg
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