April 17, 2025 • 19 mins
(1) US investors could be forced to offload around $800 billion of Chinese equities “in an extreme scenario” of financial decoupling between the world’s two largest economies, Goldman Sachs Group Inc. estimates.
(2) The Trump administration is preparing to pressure nations to curb trade with China in negotiations over US tariffs, according to people familiar with the matter.
(3) Federal Reserve Chair Jerome Powell again stressed the central bank must ensure tariffs don’t trigger a more persistent rise in inflation. Powell said policymakers would balance their dual responsibilities of fostering maximum employment and stable prices.
(4) Economic data just confirmed what anecdotal evidence had suggested: Consumers are rushing to make major purchases of cars, electronics and appliances in an attempt to get ahead of tariffs that could raise prices.
(5) Gold hit another all-time high as warnings from Federal Reserve Chief Jerome Powell about the impact of the trade war fueled volatility on Wall Street, leading to sharp declines in stocks and the dollar.
(6) Vladimir Putin has ordered his government to draw up a new legal framework for companies seeking to invest in Russia. It’s the most concrete sign yet that Moscow is preparing for a day when it believes sanctions will be lifted and some investment welcomed back. But, said one Kremlin official, “nobody is knocking on the door yet” underlining the tentative nature of the approaches taken by companies — some of whom never fully left — to restoring their operations in the country, as US President Donald Trump pushes for a deal to end Russia’s war in Ukraine.
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Day ba QR podcast, available every morning on Apple, Spotify
or wherever you listen. It's Thursday, the seventeenth of April
in London. I'm Caroline Hepki.
Speaker 2 (00:18):
And I'm Stephen Carroll. Coming up today, Goldman Sachs warns
that US investors may be forced to dump eight hundred
billion dollars of Chinese stocks in a full financial decoupling.
Speaker 1 (00:29):
Stock markets full as Jerown Powell signals the Fed is
in no rush to cut interest.
Speaker 2 (00:35):
Rates, plus no rush to Russia. Companies remain wary of
returning to the radically changed market amid talk of a
warming of relations between Washington and Moscow.
Speaker 1 (00:46):
Let's start with a roundup of our top stories.
Speaker 2 (00:48):
Goldman Sachs says US investors could be forced to offload
up to eight hundred billion dollars in Chinese stocks in
a worst case financial decoupling with China. The Bank joins
others brace for deeper US China tensions as the White
House looks to rally allies against Beijing's manufacturing dominance, potentially
offering tariff relief in exchange for support in a move
(01:11):
scene as an effort to encircle Beijing, but Carlisle Group
CEO Harvey Schwartz says that global economic growth relies on
the two countries finding a way to work together.
Speaker 3 (01:22):
I don't think it's a good outcome if the number
one and two largest economies in the world haven't found
an equilibrium around cooperation. It's really critical for the global
economy and for trade that we and China find a
place of cooperation and equilibrium, and I think the faster
that can happen, the better it is for all business
(01:43):
activity globwid, especially in the United States.
Speaker 2 (01:46):
Schwartz was speaking to Shnali Bassic for Bloomberg Original's upcoming
series Bullish. Meanwhile, China's President Hijingping, touring Southeast Asia, called
for unity around what he called an Asian family.
Speaker 1 (01:58):
And President Donald Trump says that there was big progress
in talks with the Japanese trade delegation on Wednesday. Tokyo
is working to avoid a snapback to higher rates of
US tariffs, which are currently paused for ninety days. Isabel
Reynolds is Bloomberg's Tokyo bureau chief from.
Speaker 4 (02:16):
The Japanese side. Obviously, the ask is very obviously they
want all these tariffs removed, the subject at the moment
to the minimum ten percent tariff. Also, the vital car
industry is subject to twenty five percent tariffs already, and
of course they want to get away from the prospect
of having twenty four percent tariffs across the board.
Speaker 1 (02:32):
Isabel Reynolds says that the US Japan talks are being
closely watched as a test case for other nations uncertain
over what concessions President Trump will seek to extract.
Speaker 2 (02:44):
Jerome Power is doubling down on his message that the
Central Bank must ensure tariffs don't trigger a more persistent
rise in inflation. Speaking at the Economic Club of Chicago,
the Federal Reserve Chair made clear that the White Houses
sweeping levees on foreign imports are front of mind for policymakers.
Speaker 5 (03:02):
Trade now is the focus, and the effects of that
are likely to move us away from our goals. So
unemployment is likely to go up as the economy slows
in all likelihood, and inflation is likely to go up
as tariffs find their way and some part of those
tariffs come to the come to be paid by the public.
Speaker 2 (03:21):
Pal's comments deepened to set off in US stocks Yesterday,
The S and P five hundred index closed down two
point two percent, while the Nasdaq one hundred plunge by
three percent. Treasuries, however, rallied for a third day on
Wednesday as investors refocus on the asset as a hedge
against risk.
Speaker 1 (03:39):
US consumers are rushing to make big ticket purchases before
tariffs feed into prices. Retail sales jumped by one point
four percent in March, the largest move in more than
two years. Professor of Public Policy and Economics Betsy Stephenson
says that it will be a short lived boost.
Speaker 6 (03:57):
It's always surprising to me how many business just are like, Wow,
this is great. We got this big bump up in sales,
like this is going to be going on forever. It's not.
It's actually pulling sales forward. People do expect prices to
jump up, and then we're going to see, you know,
sort of a exaggerated or magnified slowdown that comes because
(04:18):
people tried to get ahead of those price increases.
Speaker 1 (04:20):
The University of Michigan's Betsy Stephenson speaking, their cars were
a key driver of the sales increased, despite brands like
Volkswagen promising to keep prices flat until May as a
way of reassuring US buyers. Data suggests a buying frenzy,
but consumer sentiment is near its lowest reading on record
(04:42):
in data going back to the nineteen fifties.
Speaker 2 (04:44):
Well, let's bring another perspective on the tariff story now
from one of our key conversations on Bloomberg Radio, the
question of how far and for how long Donald Trump's
trade war will go on as on many investors' minds,
here's the view of janat Henry, Global Chief Economists at
HSBC is talking to us about the potential lasting effect
of these trade announcements.
Speaker 7 (05:05):
The intention of the US president is to relocate manufacturing
to the US, but manufacturing only accounts for less than
ten percent of US employment. It's the damage that will
be caused on the other ninety percent of employment from
that much weaker spending. But also he really does want
to significantly reduce the relationship between the US and China,
(05:25):
and that's where there will be knock on impacts within
the rest of the world. And I think it is
longer term.
Speaker 2 (05:31):
Heysbc's Janet Henry speaking to us on Bloomberg Radio, her
point being underlined by the pressure now from the Trump
administration on their partners to squeeze out China.
Speaker 1 (05:43):
Well, Gold hit another all time high as well. Latility
on Wall Street drove investors to once again pile into
the safe haven asset. Billion rose as much as a
zero point four percent to bring the yellow metal close
to three three hundred and sixty dollars an ounce. Before
pairing those gains, gold has climbed almost twenty eight percent
(06:04):
this year. That is outpacing the twenty seven percent gain
that it managed to not shop in twenty twenty four.
As the escalating trade will creates anxiety over a possible
global recession.
Speaker 2 (06:15):
The European Central Bank is expected to cut interest rates
today amid US tarif related growth concerns, according to an
almost unanimous Bloomberg survey of analysts, but our borrowing costs
will be lowered to two hundred quarter percent from two
and a half percent later today. The unveiling of US
trade levees earlier this month has quashed talk the today's
ECB meeting could bring a pause and monetary easing beyond today.
(06:40):
Investors are pricing in at least two more rate cuts
by the end of the year as a stronger euro
helps to contain price pressures, and those.
Speaker 1 (06:49):
Are our top stories for you this morning. Let's run
you through the markets then. MSCI Asia Pacific indexes up
six tents of one percent this morning. You've also got
stock futures for the S and P five one hundred
gaining seven tenths and as that stop futures up eight
tenths of one percent. US SOX fifty futures, though are
down in the red two tenths of one percent. A
few threads to think about your own power signaling that
(07:11):
wait and see approach to tariffs. It was risk off
in the equity markets yesterday. The bond markets took it
much better, though the ECB is expected to cut interest
rates today again because of the warrior around tariffs and
that hitting economic growth in Europe and also around the world.
The Japanese yend this morning is down by half of
one percent, although Japan's Akazawa was saying that currencies weren't
(07:34):
discussed in those US Japan tariff discussions yesterday. You've also
seen a lift to Japanese equities because of those discussions.
The euro this morning is edging down three tens of
one percent against the US dollar and that gold spot
price down a tenth this morning, training at three thousand,
three hundred and thirty nine, with the ten year US
(07:55):
treasury yield now at four twenty nine, up almost two
basis points. There's the markets.
Speaker 2 (08:00):
In a moment, we'll bring you more on the latest
warning about potential consequences of the US China trade war.
Plus are reporting on how Western companies are thinking about
the potential for sanctions on Russia being lifted.
Speaker 1 (08:12):
Before that, though, another story caught my eye. It's kind
of terrif related, kind of trunk related, but also not
at all so US politicians maybe eyeing up Greenland for
its strategic location for all of those natural resources. But
the island is also has got its own kind of
specific story around try and just attempt tourists to come
(08:33):
to visit. There is a newly expanded airport in the
capital city. Apparently they're going to be flights starting in
June twice a week into New Jersey to Newark in
New Jersey.
Speaker 2 (08:42):
Early connections to obviously plenty of flights to Denmark, Iceland, France,
for example. I was looking at new care Fort website
this morning.
Speaker 1 (08:48):
You maybe it's your holiday destination. Well, obviously we know
that it's very sparsely populated, only fifty seven thousand people
on the island. They get lots of tourists, but apparently
any kind of date tourists because often you go on
a boat on a kind of cruise or something. Now
they want more high value tourists to come to stay
overnight to sort of enjoy the island.
Speaker 2 (09:08):
Yeah, it's this idea of opening up the accessibility of
the island, but doing so and sort of a carefully
thought out way where they're not bringing in huge numbers,
but as you say, bringing in people who are going
to spend quality time and crucially quality money in the
place as well. That's going to be able to suppose
expand some of the economics involved. And I mean the
ashes of people that our colleague spoke to in Greenland
(09:32):
as well is very much that that it should be.
You know, people who are kind of coming and interesting
in learning, but people already have a good quality of
life in Greenland that don't need to be making massive
amounts of money from tourism.
Speaker 1 (09:41):
Well, I learned also a new word from our reporter
Jackie Caradonio, and that is salt box house. Didn't realize
that the homes in Nuke that have that long kind
of slanted roof, apparently that's called a salt box house.
Speaker 8 (09:56):
I didn't know that.
Speaker 2 (09:57):
It's a Friday fact for you. You can read more
blue com and on the terminal. Let's bring you more
on our top story. Now, though, the escalation of the
trade or between US and China could see US investors
forced to offload eight hundred billion dollars worth of Chinese equities,
according to estimates from Goldman Sachs. Let's bring in our
aga of stocks, as are Katherine and I for more. Catherine,
great to have you with us. Talk us through what
(10:19):
Goldman is saying, under what conditions would they see this
sort divide flow happening.
Speaker 8 (10:23):
Goldman is putting out quite a forecast here. So they're
looking at sort of the entire universe of holdings by
US institutional investors, and they're doing all the math in
terms of how much they own of US listed Chinese
stocks as well as in usual holdings of Hong Kong
and Chinese stocks listed in their respective locales, and doing
(10:44):
that math, they've come up to eight hundred billion. And
this would be you know, only in this extreme scenario
of financial and coupling if the US administration does move
forward and kicks out all of these Chinese companies from
US exchanges and you know, puts in this kind of
length at banners, so to speak, of not allowing these
US institutions to buy Chinese equities.
Speaker 1 (11:06):
Yeah, they also did the flip side calculations of what
would mean from the Chinese side of things with the US.
What would this mean though for Chinese companies. You know,
this whole idea of decoupling, I.
Speaker 8 (11:19):
Mean, this is the nuclear option, right, I mean, this
is you know, this has been a long sort of
like at risk kind of thing, and we saw it,
you know, even back in twenty twenty one, twenty twenty two,
when there was this risk of possibly you know, being
kicked off of US exchange. I mean, these are the
two you know, two economic superpowers to markets here. I
mean this would obviously hurt Chinese China's market and buy
(11:41):
relation Hong Kong's equity markets, but obviously would you know,
also have huge ramifications on the US equity market. I mean,
this is these are really key companies here, you know,
the likes of these giants like Ali Baba, right, like
JD dot Com, like Baidu. But also you know, we're
also talking about companies that are just listed, you know
in the US, like like PDD that owns Tamu, and
(12:06):
some of.
Speaker 2 (12:06):
Those names of course quite familiar internationally as well, but
kind of broadly, how important are these financial ties between
the US and China and how have they been affected
already by the trade war?
Speaker 8 (12:19):
So, I mean, like we many other countries. Obviously there's
been gyrations in you know, the equities market here in
Hong Kong and in China. You know, the market has tanked,
and I think that you know, Hong Kong in particular,
where a lot of these companies are listed, all these
Chinese companies are listed, we went, you know, we went
from being the best equities market in the world too.
(12:40):
I wouldn't say one of the worst, but you know,
losing a lot of those gains, this would be I
mean catastrophic. I mean this, you know, since what happened
in twenty twenty two, a lot of investors have already
started if they were able to switching, you know, their shares,
like in Ali Baba moving their US shares into Hong Kong.
But a lot of these companies, they just liquidity is
not quite you know the same as you know in
(13:02):
Hong Kong's in the US, so this would be quite detrimental.
I mean, this would be the biggest blow of massive
abortions that we've seen. And so I mean there's just
a lot of worry. And I think that you know,
Goldman along with we saw earlier this week with Morgan
Stanley and Jeffries and Ubs. I mean, these're they're saying
this is an extreme scenario, right. I don't think that
there's a lot of people who are really betting that
(13:22):
this is going to happen. But I mean we heard
from from from Scott Bessen. I mean, that is a
risk and who knew. I mean I didn't have this
in my twenty twenty five bingo card. But this is
back on the table now and and lots of worries
and the market hasn't quite responded to it. I mean,
the NaSTA Golden Dragon is still outperforming the S and
(13:43):
P this year. So it's not like people are saying,
you know, this is that people aren't actually trading this yet,
but it's something that industors are you know, keeping their
eye on because any noise here could cause major jitters.
Speaker 1 (13:53):
Yeah, absolutely, and I think just worth citing. You know what,
Goldman uses the words that they have in their assessment, uncertainty,
extraordinary volatility, concerns about global recession and decoupling. You know,
I think kind of reflecting some of the things maybe
that the markets are thinking about in terms of scenarios
at least. Katherine, thank you so much for your time.
(14:15):
Bloombig's Asia Stocks Edison, Catherine.
Speaker 2 (14:17):
Ny Donald Trump's efforts to securencies far in Ukraine have
so far fallen short of their stay to Dame, but
that hasn't stopped an increase in chatter around what happens
when Russia eventually opens up again to Western companies. Bloomberg's
Russia Economy and Government editor Greg Sullivan joins us Now
for more on this story. Greg, what do we know
about what a post sanctions return for Russia might look like?
Speaker 9 (14:43):
For one, right now, it's still very early in this process.
But what's interesting to note is that Russian President Vladimir
Putin has actually tasked his government with coming up with
a framework for what that kind of return could look like.
Now in Russia, among officials and companies, there's concern about
potential return of Western companies because there's been a whole
bunch of new, homegrown companies that took advantage of the
(15:05):
space after these Western companies exited post invasion, and they're
worried about the competition that might come from a return.
So as part of that framework, one of the proposals
is that some of these Russian businesses might actually get
a say on who gets to return to certain sectors.
Some other early proposals that we've seen include asking companies
(15:26):
to localize some production or even agree to technology transfers.
One of the interesting things we've heard, and we've heard
it quite consistently from officials and even Vladimir Putin himself,
is that they don't want these companies that sold at
fire sale prices. Hyundai, for instance, sold their subsidiary at
a nominal value of one hundred and eleven dollars. They
don't want them to come back in and reclaim them cheaply.
(15:48):
They've been pretty adamant that these companies will have to
reclaim them at market value. Nonetheless, there are signs of
interest Putin's economic envoy, Creel Dimitriev. He's been in the
news a lot lately. He said that he met with
a hundred fifty American firms that are still working in
Russia at a meeting this month. So there is still
some interest in a return to this market.
Speaker 1 (16:06):
Okay, what is the perspective of Western companies then, looking
at this in terms of a potential opportunity? I mean,
how realistic is it really for firms to return now
or at some point in the future.
Speaker 9 (16:18):
Well, at the moment, it's not very realistic at all.
A lot of companies are actually worried about potentially returning
and having to leave again. If we zoom out a
little bit. On the geopolitical frontors there hasn't been much
apparent progress and the peace talks attacks have still continued.
The war is very much ongoing, and you know, one
Kremlin official we spoke to is very explicit. He said
(16:40):
that nobody has been knocking on the door yet. I
would note, however, that there are still companies that never
fully left. Pepsiko, for instance, is still a player in
the dairy and milk market in Russia. Some foreign lenders
are still present. But even for companies that are still there,
they're still wondering what will return to full operations. Potentially
look like or even being able to sell and finally
(17:03):
exit again, as some of them have not been able
to in the current market situations. So for now, what
we see is companies doing a lot of due diligence
but not planning an immine return. It's very clear that
risk reward calculations have changed from the nineties and the
two thousands.
Speaker 2 (17:17):
What about the buyback options that some companies had when
they sold their assets in Russia.
Speaker 9 (17:22):
Well, there these were really interesting. Some of the big
Western companies when they were exiting and selling their assets,
they included these buyback clauses, these options to be the
first buyer or potentially the right of first refusal. One
such company was actually McDonald's, but McDonald's has had a
very successful successor. The franchisee who bought it. He started Vakusna,
(17:48):
and it's actually seemingly done quite well, at least on paper.
Last year they doubled their revenue in ruble terms from
pre war levels. So you know, even with these buy
back clauses that some of these companies have included, it's
not entirely clear those will even standard work. A lot
of these from one companies, they have a say, in
who gets to return, that might put up obstacles to
(18:11):
the bad back clauses, or they might impose onerous conditions
on the returns. So even with them, it's unclear how
they will work, but definitely interesting that many of these
companies took that percussion.
Speaker 2 (18:20):
Report editor, This is Bloomberg Daybreak Europe, your morning brief
on the stories making news from London to Wall Street
and beyond.
Speaker 1 (18:28):
Look for us on your podcast feed every morning on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 2 (18:34):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 1 (18:40):
Our flagship New York station is also available on your
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Speaker 2 (18:47):
I'm Caroline Hepka and I'm Stephen Carroll. Join us again
tomorrow morning for all the news you need to start
your day right here on Bloomberg day Break Europe
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Day ba QR podcast, available every morning on Apple, Spotify
or wherever you listen. It's Thursday, the seventeenth of April
in London. I'm Caroline Hepki.
Speaker 2 (00:18):
And I'm Stephen Carroll. Coming up today, Goldman Sachs warns
that US investors may be forced to dump eight hundred
billion dollars of Chinese stocks in a full financial decoupling.
Speaker 1 (00:29):
Stock markets full as Jerown Powell signals the Fed is
in no rush to cut interest.
Speaker 2 (00:35):
Rates, plus no rush to Russia. Companies remain wary of
returning to the radically changed market amid talk of a
warming of relations between Washington and Moscow.
Speaker 1 (00:46):
Let's start with a roundup of our top stories.
Speaker 2 (00:48):
Goldman Sachs says US investors could be forced to offload
up to eight hundred billion dollars in Chinese stocks in
a worst case financial decoupling with China. The Bank joins
others brace for deeper US China tensions as the White
House looks to rally allies against Beijing's manufacturing dominance, potentially
offering tariff relief in exchange for support in a move
(01:11):
scene as an effort to encircle Beijing, but Carlisle Group
CEO Harvey Schwartz says that global economic growth relies on
the two countries finding a way to work together.
Speaker 3 (01:22):
I don't think it's a good outcome if the number
one and two largest economies in the world haven't found
an equilibrium around cooperation. It's really critical for the global
economy and for trade that we and China find a
place of cooperation and equilibrium, and I think the faster
that can happen, the better it is for all business
(01:43):
activity globwid, especially in the United States.
Speaker 2 (01:46):
Schwartz was speaking to Shnali Bassic for Bloomberg Original's upcoming
series Bullish. Meanwhile, China's President Hijingping, touring Southeast Asia, called
for unity around what he called an Asian family.
Speaker 1 (01:58):
And President Donald Trump says that there was big progress
in talks with the Japanese trade delegation on Wednesday. Tokyo
is working to avoid a snapback to higher rates of
US tariffs, which are currently paused for ninety days. Isabel
Reynolds is Bloomberg's Tokyo bureau chief from.
Speaker 4 (02:16):
The Japanese side. Obviously, the ask is very obviously they
want all these tariffs removed, the subject at the moment
to the minimum ten percent tariff. Also, the vital car
industry is subject to twenty five percent tariffs already, and
of course they want to get away from the prospect
of having twenty four percent tariffs across the board.
Speaker 1 (02:32):
Isabel Reynolds says that the US Japan talks are being
closely watched as a test case for other nations uncertain
over what concessions President Trump will seek to extract.
Speaker 2 (02:44):
Jerome Power is doubling down on his message that the
Central Bank must ensure tariffs don't trigger a more persistent
rise in inflation. Speaking at the Economic Club of Chicago,
the Federal Reserve Chair made clear that the White Houses
sweeping levees on foreign imports are front of mind for policymakers.
Speaker 5 (03:02):
Trade now is the focus, and the effects of that
are likely to move us away from our goals. So
unemployment is likely to go up as the economy slows
in all likelihood, and inflation is likely to go up
as tariffs find their way and some part of those
tariffs come to the come to be paid by the public.
Speaker 2 (03:21):
Pal's comments deepened to set off in US stocks Yesterday,
The S and P five hundred index closed down two
point two percent, while the Nasdaq one hundred plunge by
three percent. Treasuries, however, rallied for a third day on
Wednesday as investors refocus on the asset as a hedge
against risk.
Speaker 1 (03:39):
US consumers are rushing to make big ticket purchases before
tariffs feed into prices. Retail sales jumped by one point
four percent in March, the largest move in more than
two years. Professor of Public Policy and Economics Betsy Stephenson
says that it will be a short lived boost.
Speaker 6 (03:57):
It's always surprising to me how many business just are like, Wow,
this is great. We got this big bump up in sales,
like this is going to be going on forever. It's not.
It's actually pulling sales forward. People do expect prices to
jump up, and then we're going to see, you know,
sort of a exaggerated or magnified slowdown that comes because
(04:18):
people tried to get ahead of those price increases.
Speaker 1 (04:20):
The University of Michigan's Betsy Stephenson speaking, their cars were
a key driver of the sales increased, despite brands like
Volkswagen promising to keep prices flat until May as a
way of reassuring US buyers. Data suggests a buying frenzy,
but consumer sentiment is near its lowest reading on record
(04:42):
in data going back to the nineteen fifties.
Speaker 2 (04:44):
Well, let's bring another perspective on the tariff story now
from one of our key conversations on Bloomberg Radio, the
question of how far and for how long Donald Trump's
trade war will go on as on many investors' minds,
here's the view of janat Henry, Global Chief Economists at
HSBC is talking to us about the potential lasting effect
of these trade announcements.
Speaker 7 (05:05):
The intention of the US president is to relocate manufacturing
to the US, but manufacturing only accounts for less than
ten percent of US employment. It's the damage that will
be caused on the other ninety percent of employment from
that much weaker spending. But also he really does want
to significantly reduce the relationship between the US and China,
(05:25):
and that's where there will be knock on impacts within
the rest of the world. And I think it is
longer term.
Speaker 2 (05:31):
Heysbc's Janet Henry speaking to us on Bloomberg Radio, her
point being underlined by the pressure now from the Trump
administration on their partners to squeeze out China.
Speaker 1 (05:43):
Well, Gold hit another all time high as well. Latility
on Wall Street drove investors to once again pile into
the safe haven asset. Billion rose as much as a
zero point four percent to bring the yellow metal close
to three three hundred and sixty dollars an ounce. Before
pairing those gains, gold has climbed almost twenty eight percent
(06:04):
this year. That is outpacing the twenty seven percent gain
that it managed to not shop in twenty twenty four.
As the escalating trade will creates anxiety over a possible
global recession.
Speaker 2 (06:15):
The European Central Bank is expected to cut interest rates
today amid US tarif related growth concerns, according to an
almost unanimous Bloomberg survey of analysts, but our borrowing costs
will be lowered to two hundred quarter percent from two
and a half percent later today. The unveiling of US
trade levees earlier this month has quashed talk the today's
ECB meeting could bring a pause and monetary easing beyond today.
(06:40):
Investors are pricing in at least two more rate cuts
by the end of the year as a stronger euro
helps to contain price pressures, and those.
Speaker 1 (06:49):
Are our top stories for you this morning. Let's run
you through the markets then. MSCI Asia Pacific indexes up
six tents of one percent this morning. You've also got
stock futures for the S and P five one hundred
gaining seven tenths and as that stop futures up eight
tenths of one percent. US SOX fifty futures, though are
down in the red two tenths of one percent. A
few threads to think about your own power signaling that
(07:11):
wait and see approach to tariffs. It was risk off
in the equity markets yesterday. The bond markets took it
much better, though the ECB is expected to cut interest
rates today again because of the warrior around tariffs and
that hitting economic growth in Europe and also around the world.
The Japanese yend this morning is down by half of
one percent, although Japan's Akazawa was saying that currencies weren't
(07:34):
discussed in those US Japan tariff discussions yesterday. You've also
seen a lift to Japanese equities because of those discussions.
The euro this morning is edging down three tens of
one percent against the US dollar and that gold spot
price down a tenth this morning, training at three thousand,
three hundred and thirty nine, with the ten year US
(07:55):
treasury yield now at four twenty nine, up almost two
basis points. There's the markets.
Speaker 2 (08:00):
In a moment, we'll bring you more on the latest
warning about potential consequences of the US China trade war.
Plus are reporting on how Western companies are thinking about
the potential for sanctions on Russia being lifted.
Speaker 1 (08:12):
Before that, though, another story caught my eye. It's kind
of terrif related, kind of trunk related, but also not
at all so US politicians maybe eyeing up Greenland for
its strategic location for all of those natural resources. But
the island is also has got its own kind of
specific story around try and just attempt tourists to come
(08:33):
to visit. There is a newly expanded airport in the
capital city. Apparently they're going to be flights starting in
June twice a week into New Jersey to Newark in
New Jersey.
Speaker 2 (08:42):
Early connections to obviously plenty of flights to Denmark, Iceland, France,
for example. I was looking at new care Fort website
this morning.
Speaker 1 (08:48):
You maybe it's your holiday destination. Well, obviously we know
that it's very sparsely populated, only fifty seven thousand people
on the island. They get lots of tourists, but apparently
any kind of date tourists because often you go on
a boat on a kind of cruise or something. Now
they want more high value tourists to come to stay
overnight to sort of enjoy the island.
Speaker 2 (09:08):
Yeah, it's this idea of opening up the accessibility of
the island, but doing so and sort of a carefully
thought out way where they're not bringing in huge numbers,
but as you say, bringing in people who are going
to spend quality time and crucially quality money in the
place as well. That's going to be able to suppose
expand some of the economics involved. And I mean the
ashes of people that our colleague spoke to in Greenland
(09:32):
as well is very much that that it should be.
You know, people who are kind of coming and interesting
in learning, but people already have a good quality of
life in Greenland that don't need to be making massive
amounts of money from tourism.
Speaker 1 (09:41):
Well, I learned also a new word from our reporter
Jackie Caradonio, and that is salt box house. Didn't realize
that the homes in Nuke that have that long kind
of slanted roof, apparently that's called a salt box house.
Speaker 8 (09:56):
I didn't know that.
Speaker 2 (09:57):
It's a Friday fact for you. You can read more
blue com and on the terminal. Let's bring you more
on our top story. Now, though, the escalation of the
trade or between US and China could see US investors
forced to offload eight hundred billion dollars worth of Chinese equities,
according to estimates from Goldman Sachs. Let's bring in our
aga of stocks, as are Katherine and I for more. Catherine,
great to have you with us. Talk us through what
(10:19):
Goldman is saying, under what conditions would they see this
sort divide flow happening.
Speaker 8 (10:23):
Goldman is putting out quite a forecast here. So they're
looking at sort of the entire universe of holdings by
US institutional investors, and they're doing all the math in
terms of how much they own of US listed Chinese
stocks as well as in usual holdings of Hong Kong
and Chinese stocks listed in their respective locales, and doing
(10:44):
that math, they've come up to eight hundred billion. And
this would be you know, only in this extreme scenario
of financial and coupling if the US administration does move
forward and kicks out all of these Chinese companies from
US exchanges and you know, puts in this kind of
length at banners, so to speak, of not allowing these
US institutions to buy Chinese equities.
Speaker 1 (11:06):
Yeah, they also did the flip side calculations of what
would mean from the Chinese side of things with the US.
What would this mean though for Chinese companies. You know,
this whole idea of decoupling, I.
Speaker 8 (11:19):
Mean, this is the nuclear option, right, I mean, this
is you know, this has been a long sort of
like at risk kind of thing, and we saw it,
you know, even back in twenty twenty one, twenty twenty two,
when there was this risk of possibly you know, being
kicked off of US exchange. I mean, these are the
two you know, two economic superpowers to markets here. I
mean this would obviously hurt Chinese China's market and buy
(11:41):
relation Hong Kong's equity markets, but obviously would you know,
also have huge ramifications on the US equity market. I mean,
this is these are really key companies here, you know,
the likes of these giants like Ali Baba, right, like
JD dot Com, like Baidu. But also you know, we're
also talking about companies that are just listed, you know
in the US, like like PDD that owns Tamu, and
(12:06):
some of.
Speaker 2 (12:06):
Those names of course quite familiar internationally as well, but
kind of broadly, how important are these financial ties between
the US and China and how have they been affected
already by the trade war?
Speaker 8 (12:19):
So, I mean, like we many other countries. Obviously there's
been gyrations in you know, the equities market here in
Hong Kong and in China. You know, the market has tanked,
and I think that you know, Hong Kong in particular,
where a lot of these companies are listed, all these
Chinese companies are listed, we went, you know, we went
from being the best equities market in the world too.
(12:40):
I wouldn't say one of the worst, but you know,
losing a lot of those gains, this would be I
mean catastrophic. I mean this, you know, since what happened
in twenty twenty two, a lot of investors have already
started if they were able to switching, you know, their shares,
like in Ali Baba moving their US shares into Hong Kong.
But a lot of these companies, they just liquidity is
not quite you know the same as you know in
(13:02):
Hong Kong's in the US, so this would be quite detrimental.
I mean, this would be the biggest blow of massive
abortions that we've seen. And so I mean there's just
a lot of worry. And I think that you know,
Goldman along with we saw earlier this week with Morgan
Stanley and Jeffries and Ubs. I mean, these're they're saying
this is an extreme scenario, right. I don't think that
there's a lot of people who are really betting that
(13:22):
this is going to happen. But I mean we heard
from from from Scott Bessen. I mean, that is a
risk and who knew. I mean I didn't have this
in my twenty twenty five bingo card. But this is
back on the table now and and lots of worries
and the market hasn't quite responded to it. I mean,
the NaSTA Golden Dragon is still outperforming the S and
(13:43):
P this year. So it's not like people are saying,
you know, this is that people aren't actually trading this yet,
but it's something that industors are you know, keeping their
eye on because any noise here could cause major jitters.
Speaker 1 (13:53):
Yeah, absolutely, and I think just worth citing. You know what,
Goldman uses the words that they have in their assessment, uncertainty,
extraordinary volatility, concerns about global recession and decoupling. You know,
I think kind of reflecting some of the things maybe
that the markets are thinking about in terms of scenarios
at least. Katherine, thank you so much for your time.
(14:15):
Bloombig's Asia Stocks Edison, Catherine.
Speaker 2 (14:17):
Ny Donald Trump's efforts to securencies far in Ukraine have
so far fallen short of their stay to Dame, but
that hasn't stopped an increase in chatter around what happens
when Russia eventually opens up again to Western companies. Bloomberg's
Russia Economy and Government editor Greg Sullivan joins us Now
for more on this story. Greg, what do we know
about what a post sanctions return for Russia might look like?
Speaker 9 (14:43):
For one, right now, it's still very early in this process.
But what's interesting to note is that Russian President Vladimir
Putin has actually tasked his government with coming up with
a framework for what that kind of return could look like.
Now in Russia, among officials and companies, there's concern about
potential return of Western companies because there's been a whole
bunch of new, homegrown companies that took advantage of the
(15:05):
space after these Western companies exited post invasion, and they're
worried about the competition that might come from a return.
So as part of that framework, one of the proposals
is that some of these Russian businesses might actually get
a say on who gets to return to certain sectors.
Some other early proposals that we've seen include asking companies
(15:26):
to localize some production or even agree to technology transfers.
One of the interesting things we've heard, and we've heard
it quite consistently from officials and even Vladimir Putin himself,
is that they don't want these companies that sold at
fire sale prices. Hyundai, for instance, sold their subsidiary at
a nominal value of one hundred and eleven dollars. They
don't want them to come back in and reclaim them cheaply.
(15:48):
They've been pretty adamant that these companies will have to
reclaim them at market value. Nonetheless, there are signs of
interest Putin's economic envoy, Creel Dimitriev. He's been in the
news a lot lately. He said that he met with
a hundred fifty American firms that are still working in
Russia at a meeting this month. So there is still
some interest in a return to this market.
Speaker 1 (16:06):
Okay, what is the perspective of Western companies then, looking
at this in terms of a potential opportunity? I mean,
how realistic is it really for firms to return now
or at some point in the future.
Speaker 9 (16:18):
Well, at the moment, it's not very realistic at all.
A lot of companies are actually worried about potentially returning
and having to leave again. If we zoom out a
little bit. On the geopolitical frontors there hasn't been much
apparent progress and the peace talks attacks have still continued.
The war is very much ongoing, and you know, one
Kremlin official we spoke to is very explicit. He said
(16:40):
that nobody has been knocking on the door yet. I
would note, however, that there are still companies that never
fully left. Pepsiko, for instance, is still a player in
the dairy and milk market in Russia. Some foreign lenders
are still present. But even for companies that are still there,
they're still wondering what will return to full operations. Potentially
look like or even being able to sell and finally
(17:03):
exit again, as some of them have not been able
to in the current market situations. So for now, what
we see is companies doing a lot of due diligence
but not planning an immine return. It's very clear that
risk reward calculations have changed from the nineties and the
two thousands.
Speaker 2 (17:17):
What about the buyback options that some companies had when
they sold their assets in Russia.
Speaker 9 (17:22):
Well, there these were really interesting. Some of the big
Western companies when they were exiting and selling their assets,
they included these buyback clauses, these options to be the
first buyer or potentially the right of first refusal. One
such company was actually McDonald's, but McDonald's has had a
very successful successor. The franchisee who bought it. He started Vakusna,
(17:48):
and it's actually seemingly done quite well, at least on paper.
Last year they doubled their revenue in ruble terms from
pre war levels. So you know, even with these buy
back clauses that some of these companies have included, it's
not entirely clear those will even standard work. A lot
of these from one companies, they have a say, in
who gets to return, that might put up obstacles to
(18:11):
the bad back clauses, or they might impose onerous conditions
on the returns. So even with them, it's unclear how
they will work, but definitely interesting that many of these
companies took that percussion.
Speaker 2 (18:20):
Report editor, This is Bloomberg Daybreak Europe, your morning brief
on the stories making news from London to Wall Street
and beyond.
Speaker 1 (18:28):
Look for us on your podcast feed every morning on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 2 (18:34):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 1 (18:40):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
Speaker 2 (18:47):
I'm Caroline Hepka and I'm Stephen Carroll. Join us again
tomorrow morning for all the news you need to start
your day right here on Bloomberg day Break Europe
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