May 28, 2025 • 20 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) For decades, Asia’s export powerhouses had a simple financial strategy: Sell goods to the US, then invest the proceeds in American assets.
(2) Investors are on tenterhooks Wednesday for an auction of 40-year Japanese government bonds as volatility in the nation’s yields continues to rumble through global debt markets.
(3) President Donald Trump warned in a social media post Tuesday that Russian leader Vladimir Putin was “playing with fire”, as the US weighs whether to target Moscow with additional sanctions over its long-range missile and drone barrage against Ukraine.
(4) US Homeland Security Secretary Kristi Noem urged Poles to vote for the nationalist opposition candidate in Sunday’s presidential election, wading into a tightly-contested campaign that threatens to derail efforts to rebuild the country’s democratic institutions.
(5) SpaceX’s colossal Starship rocket suffered a leak, tumbled out of control in space and disintegrated as it hurtled back to Earth during a test flight on Tuesday, in a third setback in a row for the Elon Musk-led company.
(6) The UK government said it would cut back planning hurdles faced by smaller housebuilders, as Prime Minister Keir Starmer seeks to deliver on his target of building 1.5 million new homes.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is the.
Speaker 3 (00:09):
Blueberg DAYBAQ podcast, available every morning on Apple, Spotify or
wherever you listen. It's Wednesday, the twenty eighth of May
in London. I'm Caroline Hepca. Asia faces its Cell America moment,
as some of the world's largest money managers tell us
and unwind is just getting started. SpaceX starship Rocket disintegrates
(00:30):
during a test flight in the latest setback for Elon
Musk's Mars ambitions. Plus a special report on the Italian
billionaire tycoon trying to block a tie up between Generally
and the French asset manager Natixis. Let's start with a
roundup of our top stories. Asian investors have told Bloomberg
(00:50):
that they are rethinking their previously bullish approach to US assets.
The move has been driven by concerns over the US
budget deficits political polarization, and the impact of President Trump's
policies on the US dollar. The moves could lead to
a significant unwinding of Asia's seven and a half trillion
(01:11):
dollars worth of investments. Money managers have told our rates
reporter Ruth Carson that this is a big change.
Speaker 4 (01:20):
So almost unanimously. Talking to people across markets. The message
is that Donald Trump's trade war two point zero is
only accelerating the process of de dollarization, which in a
way is dragon for people turning away from the dollar
and finding alternatives.
Speaker 3 (01:40):
Ruth Carson speaking there. It follows a sell off in
the dollar that has already seen Tywanese insurers, for example,
reporting a six hundred and twenty million dollar loss in
April alone. Rajieve Demelo, a portfolio manager at Gamma, summed
up the view of many people who spoke to Bloomberg, saying, quote,
mark kits are at an inflection point, witnessing the birth
(02:03):
pains of a new regime in finance. And you can
read today's report our Big Take report on Asia's Cell
America moment right now via the terminal or at Bloomberg
dot com. And in related news, Japan's latest auction of
forty year government bonds has seen its weekest demand in
almost a year, driving the yield on the country's thirty
(02:27):
year bonds up by ten basis points. The outcome risks,
fueling further volatility in global debt markets amid concerns that
rising government spending could push deficits into dangerous territory. Japan's
debt sale followed aggressive upward pressure on global borrowing costs
last week, which drove up yields on long maturity debt
(02:47):
from the US to Germany and elsewhere. Bloomberg has learned
that Citadel Securities has a reported record profit and trading
revenue in the first three months of the year, boyd
by recent market volatility. Bloomberg's Ewan Potts has the details.
Speaker 5 (03:03):
Now the uncertainty emanating from the White House has been
a boon for banks and trading desks in the first quarter.
We understand market making giants. Citadel has posted three point
four billion dollars in net trading revenue in the first quarter,
again a roughly forty five percent on the same period
last year. Net income rose seventy percent on those increased
volumes as investors looked to rebalance their portfolios. The bumber
(03:26):
quarter means Citadel's trading turnover top that of some long
established banks, including Barklay's and UBS in London. I'm youwing
pots Bloomberg Radio.
Speaker 3 (03:36):
President Trump has warned that Vladimir Putin is quote playing
with fire, as the US president weighs imposing sanctions on Moscow.
Speaking on his Truth social platform, Trump also stated that
he had already prevented bad things from happening to Russia.
Evelyn Farcas's executive director at Arizona State University's McCain Institute.
(03:57):
She says the White House may have missed calculated the
Russian leader's intentions.
Speaker 6 (04:03):
Clearly, Donald Trump thought that Vladimir Putin was a guy
who was willing to make a deal. Putin will make
a deal, but only on his terms. And I think
what we're going to find out, We're going to see
our president realize that Putin doesn't want an end to
this war.
Speaker 3 (04:18):
Ste McCain institutes Evelyn Farcas speaking there. The news comes
as the Kremlin has escalated its aerial attacks against Ukraine
in recent days, despite the White House urging a cease
far in talks mediated by the Vatican. So far, President
Trump has resisted efforts led by Senate Republicans and European
leaders to intensify measures against Russia, despite saying over the
(04:41):
weekend that he would absolutely consider new sanctions. The US
Homeland Security Secretary is backing a nationalist opposition candidate to
win Poland's upcoming election. Addressing a conservative gathering in southeastern Poland,
yes Christy Nomes said that a victory for Karol Navrotsky
(05:04):
of the Law and Justice Party would ensure close ties
with the United States.
Speaker 7 (05:10):
You will continue to have a US presence here, a
military presence fort Trump, that we can work together for
the security of both of our nations. That is what
we need Poland to do now. We need you to
elect the right leader.
Speaker 3 (05:26):
US Homeland Security Sector Christie Nomes, speaking there, she went
on to criticize Nevrotsky's opponent, the former Warsaw mayor Rafael Tchafskovsky,
calling him an absolute train wreck of a leader. Her
intervention is the latest in a round of consistent efforts
to sway European elections in favor of nationalists and right
(05:48):
wing candidates by the Trump administration. Poland's elections are set
to take place on the first of June. Recent opinion
polls show both candidates on equal footing. SpaceX is the
latest starship rocket suffered a leak during a launch and
disintegrated in space. First the booster rocket exploded, Then here
(06:11):
is the moment on the SpaceX feed that the rocket
attempted to re enter the atmosphere.
Speaker 2 (06:17):
And it's going to make an uncontrolled re entry. Important
to note this is a contingency that is in essentially
a tumble. We had lost that attitude control, so Starlink
when it's able to connect able to feed this down.
We are at the phase where we would expect entry
to start within the next minute or so, so we
are entering uncontrolled.
Speaker 3 (06:39):
The Starship rocket then fell to pieces into the Indian Ocean.
It is the third setback in a row for Elon Musk.
Musk has recently declared SpaceX will send a Starship rocket
to Mars carrying robots as soon as next year, which
experts say is an incredibly ambitious timeline. Now to some
(06:59):
news in the UK, the government says that it will
cut the planning hurdles faced by small home builders. The
move to reduce bureaucracy comes as Deputy Prime Minister Angela
Rayner said that the official target of building one point
five million new homes by the government was a stretch.
Here is Billy Bogs James Walcock.
Speaker 8 (07:19):
Now, building one point five million homes in five years
was always an ambitious target for the Labor government. The
UK hasn't built houses at that rate since the nineteen sixties,
but since Labour came to power last year, UK building
activity has contracted at the sharpest rates since the coronavirus pandemic.
That's driven by higher interest rates and a shortage of
(07:41):
planning resources. The government now wants to slim down the
rules for small builders, but the sector is still questioning
how the government reversed a sixty year decline without additional
investment incentives or major deregulation and planning reform In London,
James Worcock, Bloomberg Radio, and.
Speaker 3 (07:59):
Those are our top stories for you this morning. Let's
have a look at the markets. US and Europeans stock
futures edging lower concerns about the fiscal health of the
US economy. We also had a disappointing forty year bond
auction out of Japan. The sale had been seen as
quite a key test for long maturity bonds. Of course,
we've seen big moves in the bond markets about worrying
(08:21):
developments when it comes to increased government borrowing in places
like the US and elsewhere. Looking at JGB yields this morning,
two ninety three for that thirty year long bond up
six and a half basis points. US yields up more
modestly two and a half basis points, So again the
long bond in the US trading under five percent four
ninety seven. As for Asian markets, actually they remain a
(08:45):
little bit resilient. Nicket two two five up by a
quarter of one percent. The cost we's up one point
two percent this morning. We do have Nvidia earnings which
will be closely watched after markets close here in Europe tonight.
We'll have more on that in just a moment. Those
are the markets. In a moment, I'm going to bring
you the latest on a move away from US assets,
(09:06):
major story that we're covering for you today, plus also
the story of an Italian billionaire who wants to revive
generally by preventing a big deal. But before we get
into those road trip anyone, chances are you'll be behind
the wheel at least a few times this summer, surely
to visit some friends, escape the city, maybe get over
to the continent or even further afield a big open
(09:29):
road trip across America. All sounds great, well, Hannah Elliott
has the best advice for you from the car nerds.
Of course, she says, think about your passengers who you're
traveling with, Choose the scenic route, sort your playlist, use
a paper road map. Of course, she says it's good
for your cognitive health. She's got a whole piece that
is packed full of really great advice. She's also got
(09:52):
lots of different apps that she recommends if you're going
on the road, breaking it down. It's a beginning, middle,
and end, and then picking maybe a fantastic met to
have at the finish. Yes, it was inspiration for maybe
one of my road trips over the summer.
Speaker 9 (10:04):
She said.
Speaker 3 (10:05):
It could be a picnic oysters think about the view.
The route is as important as the destination. Anyway, I'll
leave you with those thoughts this morning from Hannah Elliott,
and I'll add a note to where you can find
that piece in our show notes today. But it was
a lovely story about what delights maybe in stare for
us over the summer holidays. Perhaps now let's think about
(10:26):
another major story today. It could be the start of
a massive global shift. Asian investors are rethinking their strategy
on investing in US assets. Joining me now to discuss
is Bloomberg's Asia wealth. Reported Diana Lee on today's Big
Take story. Diana, good morning. Firstly, I'd like to sort
of rewrap and think about how we actually got to
(10:49):
this point in the first place.
Speaker 10 (10:52):
Yeah, good morning, Caroline. So absolutely, for many years, Asia's
big exporting nations had a pretty straightforward stone with the US.
So they would sell a massive amount of products to
American consumers and businesses, and then with all these US
dollars they earned, they would typically reinvest a lot of
that money back into American financial assets, you know, typically
(11:16):
US government bonds and company stocks. This whole thing really
got going after the nineteen ninety seven Asian financial crisis,
and that was a huge shock. It really taught these
Asian economies they needed a strong cushion of foreign money,
especially the US dollars, to protect themselves. So back then,
earning the dollars from the exports and then parking them
(11:37):
into what they saw as a safe US assets became
the key. And this flow of money was at its
highest in twenty oh four, back then, when about three
hundred and fifty four billion US dollars from Asia went
into US assets in just that year. And at that point,
it seemed like almost every dollar earned from US sales
(11:58):
went straight back to American markets, which eventually led to
the Asian investors holding about seven point five trillion US
dollars in US investments.
Speaker 3 (12:08):
I mean, it's such a huge sum, isn't it. It's
the mind boggles. But we have started to see this
massive trend really beginning to unwind and some pain already.
Speaker 10 (12:19):
Yeah. Absolutely, we're definitely seeing some clearing science, especially even
before the latest trade discussions. The amount of the Asian
money flowing into the US has already slowed down from
its peak. By twenty twenty four, only about eleven percent
of the money Asia earned from its trade surplus with
the US was being reinvested there, which is a big drop.
(12:42):
And we see that big players are also making moves.
You know, Japan's largest life insurance Nippon Life, is looking
for alternatives to US bonds, and a major Australian pension
fund also said that US investments have already probably picked
and China has been steadily cutting its holdings of US treasuries,
(13:03):
so the impact could be a lot of financial pain.
For example, when the US dollar dropped after the tariff
were announced, we see Taiwanese insurers lost about six hundred
and twenty million US dollars in just one month, and
then we see the sudden search in the Taiwan dollar
threaten billions more losses for the unhatched US investments. And
(13:24):
we also see the yen carry trade on wind where
investors boring cheap yen to invest in the US assets
they got squeezed when the yen settling strengthened. And that's
the report effect we see through the global financial markets.
Speaker 4 (13:39):
Yeah.
Speaker 3 (13:39):
The thing is, though, part of this online is about
whether Asia can pivot to more domestic consumption, and this
goes to the idea about whether this trend is actually
here to stay.
Speaker 10 (13:52):
Yeah, So if this trend really picks up steam, we
could be talking about a huge amount of money moving around,
and some analysts assume it's about two point five trillion
US dollars we're talking about in terms of where.
Speaker 9 (14:05):
Could it go.
Speaker 10 (14:07):
Emergent market currencies could get a boost, and we might
see some investing flowing into the stocks in places like
Europe or Japan, and we see countries like Australia and
Canada could also see more interest in their debt markets,
and Japan, for instance, is already seeing record foreign money
coming in, and for Asian countries themselves, a big long
(14:29):
term change would be to get their own populations to
spend more. China, for example, for so long they've been
focused on saving and exporting, and if China can boost
its home domestic consumption, they would be less reliant on
any single export market and better able to handle these
kinds of global financial shifts.
Speaker 3 (14:49):
Yeah, and it does seem to be perhaps we are
in the foothills of a major change. Diana, thank you
so much for being with me this morning. Bluebags, Asia
Welf reported Diana Lee, Now let's go to Europe. There
is a bordering battle going on for Italy's largest insurer
and Europe's third biggest, with an Italian construction tycoon weighing
in against a partnership between a Generali and the French
(15:14):
asset manager Natixis and joining me to explain this is
Blomberg's Alessandra Migliaccio, Alexandra Comorni. Good to have you with me. Now,
who exactly is this Italian billionaire? I'll have a go
at saying his name. Francesco Guetano caltagirone. Is that it?
Speaker 9 (15:31):
Yes, it's calta Girone, and he's quite a character, is
eighty two first of all, so he's still very very
much involved in Italian politics, in Italian banking and in
his family business. He built an empire starting with construction
back in the sixties and in Rome, for example, they
(15:52):
call him the eighth King of Rome because it said
that anyone who doesn't live in the center probably lives
in a Girona built house. But it's no longer or
just construction. It's also a media empire. He owns Rome's
biggest newspaper. He has influence over a lot of people.
And it's also you know, banking and finance at this point,
because he become an investor with all the money that
he's built in these years. So now Tata Girone is,
(16:15):
you know, someone to be reckoned with, and he's a
figure that's starting to upsset equilibrium in northern Italy, which
is more known for its involvement in banking. He's kind
of a new center of power in Italy right now.
Speaker 3 (16:27):
M that's interesting. So why this deal in particular, why
is he challenging it and what does he envisage instead?
Speaker 9 (16:35):
So being eighty two, Kata Girona tells us in the
interview that he's not really interested in low level politics
or small time stuff. He has a bigger vision, and
his vision is one that's linked to a certain type
of Italian capitalism, which is a kind of a national capitalism.
So it goes hand in hand with the state. It
(16:57):
goes hand in hand, particularly with this government, which is
also has a national view, nationalistic view of finance. And
what he says is basically that he believes Itali, Italy
is biggest insure, one of Europe's key insurers, needs to
remain Italian. He doesn't want it or pieces of it
to fall into the hands of foreigners, even if those
(17:18):
foreigners are merely our French friends, allies and you know,
common co Europeans in the European Union. He is concerned
because Genidali has a huge pile of Italian sovereign bonds
thirty six billion, and he'd rather those stay firmly in
Italian hands in case of financial issues. Now this is
an ongoing issue in Europe. We know that the Germans
(17:40):
don't want, for example, Italian Bank, you need credit to
take over Commerce Bank. It's not just the Italians, but
it's a certain vision of capitalism, and not everyone has
that vision. Of course, even within Italy some people say
why would that be a problem. In the end, insurers
do what's good for the shareholders, they do what's good
for business. For example, French BNP Pariba owns Italy BNL Bank,
(18:04):
which also contains government bonds, and there's never been a
problem with that. They haven't sold the Italian bonds unreasonably.
You know, everyone just takes care of business. So there
are these two visions of capitalism, and his vision is
a national Italian.
Speaker 3 (18:18):
One, yeah, which in some senses is very much the
opposite of what people see is the benefits coming from
the European Union and all of these countries binding together
and having a much more open and free kind of
financial markets, breaking down those barriers. So I wonder where
you think this story is going to go next, Alexandra.
Speaker 9 (18:39):
It's interesting because, as you say, if there's a broader
picture and part of the story, which is what is
the European Union, you know where is it going. If
the Germans don't want only credit to take commerce, the
Italians don't want the French involved in their insurance business,
et cetera. So that's very important and as far as
you know what happens next, we sort of have to
(18:59):
see what's going to happen in general in Italy's MNA scene,
because there is a lot going on right now. I
mentioned Unique Credit. They're bidding for BPM, which is another
Italian bank. We have Monte Pasci Diicna, an Italian bank
in which Cata Gerona has a stake. So I encourage
you to look at our story. We have a huge
graph that explains all this, and it's bidding from Mediobanca,
(19:22):
which is Italy's most important investment bank. And why is
that important. It's important because they in turn own a
stake in Genitali, so it all goes back to Genitali.
I know it sounds a bit contorted, but it's actually
once you look at it, it's actually reasonable. And what
we need to see is where all these pieces, you know,
fall into place in the coming months, and then we'll
(19:44):
be able to see, you know, who has the upper
hand and whether Francisca gion It can actually get his
way and keep everything Italian.
Speaker 1 (19:52):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 3 (19:58):
Look for us on your podcast fe every morning on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 1 (20:04):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 3 (20:10):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa Play Bloomberg eleven thirty.
I'm Caroline Hepka and.
Speaker 1 (20:19):
I'm Stephen Carol. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg Daybreak Europe
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is the.
Speaker 3 (00:09):
Blueberg DAYBAQ podcast, available every morning on Apple, Spotify or
wherever you listen. It's Wednesday, the twenty eighth of May
in London. I'm Caroline Hepca. Asia faces its Cell America moment,
as some of the world's largest money managers tell us
and unwind is just getting started. SpaceX starship Rocket disintegrates
(00:30):
during a test flight in the latest setback for Elon
Musk's Mars ambitions. Plus a special report on the Italian
billionaire tycoon trying to block a tie up between Generally
and the French asset manager Natixis. Let's start with a
roundup of our top stories. Asian investors have told Bloomberg
(00:50):
that they are rethinking their previously bullish approach to US assets.
The move has been driven by concerns over the US
budget deficits political polarization, and the impact of President Trump's
policies on the US dollar. The moves could lead to
a significant unwinding of Asia's seven and a half trillion
(01:11):
dollars worth of investments. Money managers have told our rates
reporter Ruth Carson that this is a big change.
Speaker 4 (01:20):
So almost unanimously. Talking to people across markets. The message
is that Donald Trump's trade war two point zero is
only accelerating the process of de dollarization, which in a
way is dragon for people turning away from the dollar
and finding alternatives.
Speaker 3 (01:40):
Ruth Carson speaking there. It follows a sell off in
the dollar that has already seen Tywanese insurers, for example,
reporting a six hundred and twenty million dollar loss in
April alone. Rajieve Demelo, a portfolio manager at Gamma, summed
up the view of many people who spoke to Bloomberg, saying, quote,
mark kits are at an inflection point, witnessing the birth
(02:03):
pains of a new regime in finance. And you can
read today's report our Big Take report on Asia's Cell
America moment right now via the terminal or at Bloomberg
dot com. And in related news, Japan's latest auction of
forty year government bonds has seen its weekest demand in
almost a year, driving the yield on the country's thirty
(02:27):
year bonds up by ten basis points. The outcome risks,
fueling further volatility in global debt markets amid concerns that
rising government spending could push deficits into dangerous territory. Japan's
debt sale followed aggressive upward pressure on global borrowing costs
last week, which drove up yields on long maturity debt
(02:47):
from the US to Germany and elsewhere. Bloomberg has learned
that Citadel Securities has a reported record profit and trading
revenue in the first three months of the year, boyd
by recent market volatility. Bloomberg's Ewan Potts has the details.
Speaker 5 (03:03):
Now the uncertainty emanating from the White House has been
a boon for banks and trading desks in the first quarter.
We understand market making giants. Citadel has posted three point
four billion dollars in net trading revenue in the first quarter,
again a roughly forty five percent on the same period
last year. Net income rose seventy percent on those increased
volumes as investors looked to rebalance their portfolios. The bumber
(03:26):
quarter means Citadel's trading turnover top that of some long
established banks, including Barklay's and UBS in London. I'm youwing
pots Bloomberg Radio.
Speaker 3 (03:36):
President Trump has warned that Vladimir Putin is quote playing
with fire, as the US president weighs imposing sanctions on Moscow.
Speaking on his Truth social platform, Trump also stated that
he had already prevented bad things from happening to Russia.
Evelyn Farcas's executive director at Arizona State University's McCain Institute.
(03:57):
She says the White House may have missed calculated the
Russian leader's intentions.
Speaker 6 (04:03):
Clearly, Donald Trump thought that Vladimir Putin was a guy
who was willing to make a deal. Putin will make
a deal, but only on his terms. And I think
what we're going to find out, We're going to see
our president realize that Putin doesn't want an end to
this war.
Speaker 3 (04:18):
Ste McCain institutes Evelyn Farcas speaking there. The news comes
as the Kremlin has escalated its aerial attacks against Ukraine
in recent days, despite the White House urging a cease
far in talks mediated by the Vatican. So far, President
Trump has resisted efforts led by Senate Republicans and European
leaders to intensify measures against Russia, despite saying over the
(04:41):
weekend that he would absolutely consider new sanctions. The US
Homeland Security Secretary is backing a nationalist opposition candidate to
win Poland's upcoming election. Addressing a conservative gathering in southeastern Poland,
yes Christy Nomes said that a victory for Karol Navrotsky
(05:04):
of the Law and Justice Party would ensure close ties
with the United States.
Speaker 7 (05:10):
You will continue to have a US presence here, a
military presence fort Trump, that we can work together for
the security of both of our nations. That is what
we need Poland to do now. We need you to
elect the right leader.
Speaker 3 (05:26):
US Homeland Security Sector Christie Nomes, speaking there, she went
on to criticize Nevrotsky's opponent, the former Warsaw mayor Rafael Tchafskovsky,
calling him an absolute train wreck of a leader. Her
intervention is the latest in a round of consistent efforts
to sway European elections in favor of nationalists and right
(05:48):
wing candidates by the Trump administration. Poland's elections are set
to take place on the first of June. Recent opinion
polls show both candidates on equal footing. SpaceX is the
latest starship rocket suffered a leak during a launch and
disintegrated in space. First the booster rocket exploded, Then here
(06:11):
is the moment on the SpaceX feed that the rocket
attempted to re enter the atmosphere.
Speaker 2 (06:17):
And it's going to make an uncontrolled re entry. Important
to note this is a contingency that is in essentially
a tumble. We had lost that attitude control, so Starlink
when it's able to connect able to feed this down.
We are at the phase where we would expect entry
to start within the next minute or so, so we
are entering uncontrolled.
Speaker 3 (06:39):
The Starship rocket then fell to pieces into the Indian Ocean.
It is the third setback in a row for Elon Musk.
Musk has recently declared SpaceX will send a Starship rocket
to Mars carrying robots as soon as next year, which
experts say is an incredibly ambitious timeline. Now to some
(06:59):
news in the UK, the government says that it will
cut the planning hurdles faced by small home builders. The
move to reduce bureaucracy comes as Deputy Prime Minister Angela
Rayner said that the official target of building one point
five million new homes by the government was a stretch.
Here is Billy Bogs James Walcock.
Speaker 8 (07:19):
Now, building one point five million homes in five years
was always an ambitious target for the Labor government. The
UK hasn't built houses at that rate since the nineteen sixties,
but since Labour came to power last year, UK building
activity has contracted at the sharpest rates since the coronavirus pandemic.
That's driven by higher interest rates and a shortage of
(07:41):
planning resources. The government now wants to slim down the
rules for small builders, but the sector is still questioning
how the government reversed a sixty year decline without additional
investment incentives or major deregulation and planning reform In London,
James Worcock, Bloomberg Radio, and.
Speaker 3 (07:59):
Those are our top stories for you this morning. Let's
have a look at the markets. US and Europeans stock
futures edging lower concerns about the fiscal health of the
US economy. We also had a disappointing forty year bond
auction out of Japan. The sale had been seen as
quite a key test for long maturity bonds. Of course,
we've seen big moves in the bond markets about worrying
(08:21):
developments when it comes to increased government borrowing in places
like the US and elsewhere. Looking at JGB yields this morning,
two ninety three for that thirty year long bond up
six and a half basis points. US yields up more
modestly two and a half basis points, So again the
long bond in the US trading under five percent four
ninety seven. As for Asian markets, actually they remain a
(08:45):
little bit resilient. Nicket two two five up by a
quarter of one percent. The cost we's up one point
two percent this morning. We do have Nvidia earnings which
will be closely watched after markets close here in Europe tonight.
We'll have more on that in just a moment. Those
are the markets. In a moment, I'm going to bring
you the latest on a move away from US assets,
(09:06):
major story that we're covering for you today, plus also
the story of an Italian billionaire who wants to revive
generally by preventing a big deal. But before we get
into those road trip anyone, chances are you'll be behind
the wheel at least a few times this summer, surely
to visit some friends, escape the city, maybe get over
to the continent or even further afield a big open
(09:29):
road trip across America. All sounds great, well, Hannah Elliott
has the best advice for you from the car nerds.
Of course, she says, think about your passengers who you're
traveling with, Choose the scenic route, sort your playlist, use
a paper road map. Of course, she says it's good
for your cognitive health. She's got a whole piece that
is packed full of really great advice. She's also got
(09:52):
lots of different apps that she recommends if you're going
on the road, breaking it down. It's a beginning, middle,
and end, and then picking maybe a fantastic met to
have at the finish. Yes, it was inspiration for maybe
one of my road trips over the summer.
Speaker 9 (10:04):
She said.
Speaker 3 (10:05):
It could be a picnic oysters think about the view.
The route is as important as the destination. Anyway, I'll
leave you with those thoughts this morning from Hannah Elliott,
and I'll add a note to where you can find
that piece in our show notes today. But it was
a lovely story about what delights maybe in stare for
us over the summer holidays. Perhaps now let's think about
(10:26):
another major story today. It could be the start of
a massive global shift. Asian investors are rethinking their strategy
on investing in US assets. Joining me now to discuss
is Bloomberg's Asia wealth. Reported Diana Lee on today's Big
Take story. Diana, good morning. Firstly, I'd like to sort
of rewrap and think about how we actually got to
(10:49):
this point in the first place.
Speaker 10 (10:52):
Yeah, good morning, Caroline. So absolutely, for many years, Asia's
big exporting nations had a pretty straightforward stone with the US.
So they would sell a massive amount of products to
American consumers and businesses, and then with all these US
dollars they earned, they would typically reinvest a lot of
that money back into American financial assets, you know, typically
(11:16):
US government bonds and company stocks. This whole thing really
got going after the nineteen ninety seven Asian financial crisis,
and that was a huge shock. It really taught these
Asian economies they needed a strong cushion of foreign money,
especially the US dollars, to protect themselves. So back then,
earning the dollars from the exports and then parking them
(11:37):
into what they saw as a safe US assets became
the key. And this flow of money was at its
highest in twenty oh four, back then, when about three
hundred and fifty four billion US dollars from Asia went
into US assets in just that year. And at that point,
it seemed like almost every dollar earned from US sales
(11:58):
went straight back to American markets, which eventually led to
the Asian investors holding about seven point five trillion US
dollars in US investments.
Speaker 3 (12:08):
I mean, it's such a huge sum, isn't it. It's
the mind boggles. But we have started to see this
massive trend really beginning to unwind and some pain already.
Speaker 10 (12:19):
Yeah. Absolutely, we're definitely seeing some clearing science, especially even
before the latest trade discussions. The amount of the Asian
money flowing into the US has already slowed down from
its peak. By twenty twenty four, only about eleven percent
of the money Asia earned from its trade surplus with
the US was being reinvested there, which is a big drop.
(12:42):
And we see that big players are also making moves.
You know, Japan's largest life insurance Nippon Life, is looking
for alternatives to US bonds, and a major Australian pension
fund also said that US investments have already probably picked
and China has been steadily cutting its holdings of US treasuries,
(13:03):
so the impact could be a lot of financial pain.
For example, when the US dollar dropped after the tariff
were announced, we see Taiwanese insurers lost about six hundred
and twenty million US dollars in just one month, and
then we see the sudden search in the Taiwan dollar
threaten billions more losses for the unhatched US investments. And
(13:24):
we also see the yen carry trade on wind where
investors boring cheap yen to invest in the US assets
they got squeezed when the yen settling strengthened. And that's
the report effect we see through the global financial markets.
Speaker 4 (13:39):
Yeah.
Speaker 3 (13:39):
The thing is, though, part of this online is about
whether Asia can pivot to more domestic consumption, and this
goes to the idea about whether this trend is actually
here to stay.
Speaker 10 (13:52):
Yeah, So if this trend really picks up steam, we
could be talking about a huge amount of money moving around,
and some analysts assume it's about two point five trillion
US dollars we're talking about in terms of where.
Speaker 9 (14:05):
Could it go.
Speaker 10 (14:07):
Emergent market currencies could get a boost, and we might
see some investing flowing into the stocks in places like
Europe or Japan, and we see countries like Australia and
Canada could also see more interest in their debt markets,
and Japan, for instance, is already seeing record foreign money
coming in, and for Asian countries themselves, a big long
(14:29):
term change would be to get their own populations to
spend more. China, for example, for so long they've been
focused on saving and exporting, and if China can boost
its home domestic consumption, they would be less reliant on
any single export market and better able to handle these
kinds of global financial shifts.
Speaker 3 (14:49):
Yeah, and it does seem to be perhaps we are
in the foothills of a major change. Diana, thank you
so much for being with me this morning. Bluebags, Asia
Welf reported Diana Lee, Now let's go to Europe. There
is a bordering battle going on for Italy's largest insurer
and Europe's third biggest, with an Italian construction tycoon weighing
in against a partnership between a Generali and the French
(15:14):
asset manager Natixis and joining me to explain this is
Blomberg's Alessandra Migliaccio, Alexandra Comorni. Good to have you with me. Now,
who exactly is this Italian billionaire? I'll have a go
at saying his name. Francesco Guetano caltagirone. Is that it?
Speaker 9 (15:31):
Yes, it's calta Girone, and he's quite a character, is
eighty two first of all, so he's still very very
much involved in Italian politics, in Italian banking and in
his family business. He built an empire starting with construction
back in the sixties and in Rome, for example, they
(15:52):
call him the eighth King of Rome because it said
that anyone who doesn't live in the center probably lives
in a Girona built house. But it's no longer or
just construction. It's also a media empire. He owns Rome's
biggest newspaper. He has influence over a lot of people.
And it's also you know, banking and finance at this point,
because he become an investor with all the money that
he's built in these years. So now Tata Girone is,
(16:15):
you know, someone to be reckoned with, and he's a
figure that's starting to upsset equilibrium in northern Italy, which
is more known for its involvement in banking. He's kind
of a new center of power in Italy right now.
Speaker 3 (16:27):
M that's interesting. So why this deal in particular, why
is he challenging it and what does he envisage instead?
Speaker 9 (16:35):
So being eighty two, Kata Girona tells us in the
interview that he's not really interested in low level politics
or small time stuff. He has a bigger vision, and
his vision is one that's linked to a certain type
of Italian capitalism, which is a kind of a national capitalism.
So it goes hand in hand with the state. It
(16:57):
goes hand in hand, particularly with this government, which is
also has a national view, nationalistic view of finance. And
what he says is basically that he believes Itali, Italy
is biggest insure, one of Europe's key insurers, needs to
remain Italian. He doesn't want it or pieces of it
to fall into the hands of foreigners, even if those
(17:18):
foreigners are merely our French friends, allies and you know,
common co Europeans in the European Union. He is concerned
because Genidali has a huge pile of Italian sovereign bonds
thirty six billion, and he'd rather those stay firmly in
Italian hands in case of financial issues. Now this is
an ongoing issue in Europe. We know that the Germans
(17:40):
don't want, for example, Italian Bank, you need credit to
take over Commerce Bank. It's not just the Italians, but
it's a certain vision of capitalism, and not everyone has
that vision. Of course, even within Italy some people say
why would that be a problem. In the end, insurers
do what's good for the shareholders, they do what's good
for business. For example, French BNP Pariba owns Italy BNL Bank,
(18:04):
which also contains government bonds, and there's never been a
problem with that. They haven't sold the Italian bonds unreasonably.
You know, everyone just takes care of business. So there
are these two visions of capitalism, and his vision is
a national Italian.
Speaker 3 (18:18):
One, yeah, which in some senses is very much the
opposite of what people see is the benefits coming from
the European Union and all of these countries binding together
and having a much more open and free kind of
financial markets, breaking down those barriers. So I wonder where
you think this story is going to go next, Alexandra.
Speaker 9 (18:39):
It's interesting because, as you say, if there's a broader
picture and part of the story, which is what is
the European Union, you know where is it going. If
the Germans don't want only credit to take commerce, the
Italians don't want the French involved in their insurance business,
et cetera. So that's very important and as far as
you know what happens next, we sort of have to
(18:59):
see what's going to happen in general in Italy's MNA scene,
because there is a lot going on right now. I
mentioned Unique Credit. They're bidding for BPM, which is another
Italian bank. We have Monte Pasci Diicna, an Italian bank
in which Cata Gerona has a stake. So I encourage
you to look at our story. We have a huge
graph that explains all this, and it's bidding from Mediobanca,
(19:22):
which is Italy's most important investment bank. And why is
that important. It's important because they in turn own a
stake in Genitali, so it all goes back to Genitali.
I know it sounds a bit contorted, but it's actually
once you look at it, it's actually reasonable. And what
we need to see is where all these pieces, you know,
fall into place in the coming months, and then we'll
(19:44):
be able to see, you know, who has the upper
hand and whether Francisca gion It can actually get his
way and keep everything Italian.
Speaker 1 (19:52):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 3 (19:58):
Look for us on your podcast fe every morning on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 1 (20:04):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 3 (20:10):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa Play Bloomberg eleven thirty.
I'm Caroline Hepka and.
Speaker 1 (20:19):
I'm Stephen Carol. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg Daybreak Europe
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