April 28, 2025 • 18 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Foreign investors who bought US stocks and dollars are facing significant losses due to the decline in the S&P 500 and the dollar's value.
(2) President Donald Trump’s tariff onslaught has roiled Washington and Wall Street for nearly a month. If the trade war persists, the next upheaval will hit much closer to home.
(3) The UK economy will grow half as quickly as previously expected in 2026 as Donald Trump’s sweeping tariffs hit business investment, according to EY Item Club.
(4) Canada’s next prime minister is set to inherit a half-year of flat economic growth, economists predict, as people take to the polls on election day.
(5) Eleven people were killed in Vancouver and dozens were injured after a driver plowed into a large crowd at a street festival on Saturday evening, according to police.
(6) Private equity firms are scouring for investment opportunities in European defense - chasing a sector that was once seen as toxic, driven by a historic shift toward increased military spending.
Podcast conversation: Did We Finally Find Life on Another Planet?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is the Bloomberg Daybreak You podcast, available every morning
on Apple, Spotify, or wherever you listen. It's Monday, the
twenty eighth of April in London. I'm Caroline HIPKIF.
Speaker 3 (00:18):
And I'm Stephen Carroll. Coming up today, Investors rush to
protect themselves from more pain after a double hit from
dollar and US equity weakness.
Speaker 2 (00:27):
Cargo shipments from China to the US plummet, as America
confronts a looming supply shock.
Speaker 3 (00:33):
Pluses Europe ree arms. Private equity firms are scouring for
investment opportunities in a defense sector they once shunned.
Speaker 2 (00:41):
Let's start with a roundup of our top stories.
Speaker 3 (00:44):
Investors around the world who bought dollars to invest in
US stocks are facing significant glasses as both the S
and P five hundred and the dollar decline simultaneously. They're
now rushing to protect themselves from further declines with more.
Here's Bloomberg'schris Pitt for you.
Speaker 4 (01:00):
It was the money minting trade for investors in London,
Paris and Tokyo. Buy dollars and pour the proceeds into
the SMP five hundred and Nasdaq. That trade unraveled quickly though,
after President Donald Trump launched his global trade war, sending
shockwaves across markets. A six percent drop in the SMP
five hundred this year has ballooned into a fourteen percent
(01:24):
loss for investors measuring returns in euros and yen. The
losses have left investors scrambling to hedge their American equity
portfolios against further dollar weakness. Meanwhile, Bank of America strategists
estimate that are returned to pre pandemic hedging levels could
mean an additional five trillion dollars in foreign US equity
(01:47):
exposure being covered in London. Chris Pitt Bloomberg Radio.
Speaker 2 (01:52):
The number of ships heading to the US from China
has plunged by about forty percent since the United States
raised tariffs to triple digits in early April. Ship tracking
data compiled by Bloomberg shows those vessels are carrying roughly
three hundred and twenty thousand containers. That's about a third
few eth and immediately after President Chump announced plans to
(02:16):
hike tariffs on nearly all Chinese goods to one hundred
and forty five percent. Deborah Elms is head of trade
policy at the Hindrich Foundation.
Speaker 5 (02:26):
You're already seeing shortages happening. We've already seen a number
of ship sailings that have been canceled. Ports on the
West coast of the United States that are traditionally receiving
a lot of goods out of China in particular, now
no longer receiving goods or shortly to be emptied essentially,
and you know that is going to have an impact
(02:47):
on consumers already in the United States. That's just going
to escalate.
Speaker 2 (02:51):
Deborah Elms, speaking there as forecast is surveyed by Bloomberg
expect imports to fall at a seven percent annual rate
in the second corps to which would be the biggest
drop since the onset of the COVID nineteen pandemic.
Speaker 3 (03:05):
As the US confronts the growing prospect of a China
supply chock, the Trump administration is signaling that Asian countries
such as South Korea, Japan, and India are leading the
way in tariff negotiations. Speaking to ABC's This Week program,
US Trategury Secretary Scott bes And said nations in the
region are preparing to make significant concessions to secure a deal.
Speaker 6 (03:26):
We've had several of these Asian countries that come in
and said, oh, well, we'll stop doing this, this and this.
And I look at these lists and I think, how
did we get here? How do we get here? Because
this trading system has been so unfair, And as President
Trump says, I don't blame the countries, I blame the
previous administration, so that let them get away with it.
Speaker 3 (03:46):
Scott Bessant also told ABC's This Week that there are
eighteen important US trading partners, including China, which is undergoing
a special negotiation, adding that some of these are moving
along very well, especially with the Asian countries.
Speaker 2 (04:01):
UK economic growth is likely to be derailed by the
global trade war. That's according to the ey Item Club,
which has downgraded its GDP forecasts, saying that it will
now expect the UK to grow by zero point nine
percent next year. That's nearly half what it had previously forecast.
The shift comes after the UK government said that it
(04:23):
held positive and upbeat talks with US Treasury Secretary Scott
Bessent about a possible trade deal.
Speaker 3 (04:30):
Canadians are going to the polls today in an election
that's been overshadowed by Donald Trump. The incumbent Liberal Party
had faced near certain defeat before Trump's threats to annex
the country supercharged their polling performance. Leader Mark Karney has
vowed to fight back against the US President.
Speaker 7 (04:48):
Trump's trade war has literally ruptured the global economy and
and he has betrayed Canada. Amer BEA's neighbor, America's closest
friend and most steadfast.
Speaker 3 (05:04):
Ally a former central banker, Carnea has a narrow lead
in opinion polls over the favorite. A few months ago,
the Conservative Pierre Polievre paralieva Is built his campaign on
attacking the government's economic management and the cost of leven crisis.
Whoever wins, economists project Canada's next prime minister is set
to inherit a stagnant economy facing tariffs, it's closest trading partner.
Speaker 2 (05:25):
Saying with Canada. Vancouver Police say that a fatal car
attack that took place on the weekend was not terrorism.
The statement comes after eleven people were killed in dozens
injured after a driver plowed into a crowd at a
street festival on Saturday. The suspect, a lone thirty year
old man, was arrested at the scene. Acting Police Chief
(05:48):
Steve Rye says the incident is one of the most
serious in Vancouver's history.
Speaker 8 (05:53):
This is a tragedy the likes of which the city
has never experienced before. Eleven people have now died. Their
ages range from five to sixty five. Dozens more are injured,
some critically and some have not yet been identified.
Speaker 2 (06:09):
Vancouver's police officer Steve Riye speaking there. According to his department,
the investigation will continue, but there is no ongoing danger
to the public.
Speaker 3 (06:19):
And In sports news, Liverpool have won the English Premier
League Championship, earning a record equaling twentieth top flight title.
They confirmed the victory with a five to one win
over Tottenham Hotspurt and Field yesterday, matching the achievement of
rivals Manchester United. Speaking after the match, Liverpool manager Ernest
Slott praise to the clubs ethos.
Speaker 9 (06:37):
The quality the players have was I think obvious for everyone,
but the culture of hard work, the culture of not
only from the players but also from the staff members
have been incredible and that is one of the reasons
why we could achieve what we've achieved this season.
Speaker 3 (06:52):
Liverpool's Ernestlott there, who was now the first Dutch manager
to win a Premier League championship. They say is the
club's secondly victory in five years, after capturing the title
in twenty twenty without any stadium spectators amidst the coronavirus pandemic.
Speaker 2 (07:08):
Those are our top stories for you this morning. Let's
get to the markets. Ectian bond market volatility seems to
be easing at least at the start of this week.
But we've got a raft of earnings both of the
US and Europe plus USGDP. The forecast for the first
quarter GDP i've really been slashed, the expectation zero point
four percent quarter on quarter growth. In terms of Asian
(07:31):
equities modestly high. You got the Topics up almost one percent.
South Korean shares this morning on the COSP are also
rising about a tenth of one percent. Scott Bessett was
talking about Asian countries are moving along very well in
terms of the trade discussions. We had four days of
gains for the S and P five hundred last week.
Futures though are down half of one percent this morning.
(07:51):
Europeans stop futures gaining two tenths. The dollar and treasuries
are steady this morning. Gold is down six tenths of
one percent ten year US yields this morning, trading up
for twenty five upper basis point Stephen.
Speaker 3 (08:03):
In a moment, we'll bring you more why stock investors
are bracing for more dollar pain plus by private Equity
now has defense firms firmly in their targets. But first
on another story that caught her eye this morning, something
literally out of this world to start your Monday morning.
Astronomers have discovered a planet that may have signs of life,
with the possible ocean and atmosphere containing water, vapor, and
(08:26):
rain clouds. Now, the signs are still tentative. Some say
it's too soon to tell, but there's certainly a lot
of excitement about this planet, which is called K two
eighteen by it is look is absolutely fascinating. So I
had to go off and actually watch one of the
videos to one of the scientists who made this space
with you, ca Yeah, just to try to learn something
about it is listen is pretty complicated, and our Bloomberg
(08:47):
Opinion science columnists fd Flamm has been writing about this
discovery too.
Speaker 2 (08:51):
Basically she makes it easy for someone. I mean, did
we finally find life on another planet? The Cambridge scientists
in the video says no, yes.
Speaker 3 (09:02):
But I mean, look, it's a story too about scientific cooperation,
which is very interesting because there are different elements of
this which have allowed them to at least, you know,
point to the potential that this could be the case
thanks to research for using both the Hubble telescope but
also the James Webspace telescopes as well, and this is
sort of collaboration is perhaps the key to the next
big advancements in this area as well, if they does
(09:24):
have a note of caution the piece as well though
on to your point Caroline saying that you know, this
is awesothing that's going to need new investment, particularly from
the likes of NASA to be able to try and
advance these theories as well, and of course questions over
NASA's budget and focus too, so perhaps some of these
developments may not come as fast as someone the scientific
community would like to be able to see.
Speaker 2 (09:41):
And if you want to learn a little bit more
about astrophysics and this discovery, of course, we'll put Helik
in the show notes when you download our podcast.
Speaker 3 (09:50):
The market turmoil that's followed Donald Trump lodging as global
trade wars caused double pain for a common trade US
by investors outside of the United States to buy dollars
and invest in US stocks. Now traders are trying to
guess what happens next. RFX and Rights reporter Alice Gladhill
joins US now for more. Alice, good morning, talk us
through first of all, how this trade worked and how
popular it was.
Speaker 1 (10:10):
So imagine you're an investor in Paris or Tokyo and
you wanted a piece of the action in the red
hot US stock market, so you buy some dollars to
invest in some US shares. And he had to remember,
in the post pandemic period, the US was very much
the place to be, so the economy was more resilient.
Growth kept coming and the labor market stayed strong, and
(10:31):
there was a little reason to think that this would
break anytime soon. And that was still the case when
Trump's elected president, given his pro growth America First policies,
and that was expected to reduce that sort of US
exceptionalism trade as it was called even more Now. For
that reason, many of those foreign investors chose not to hedge.
That basically means the hedges basically buy insurance against dollar declines.
(10:55):
So the thinking went. US stock's going to keep going up,
the dollar will keep going up, and that's going to
boost my returns even more. So we don't know exactly
how many investors were in this position that we can
make some educated guesses. So, according to State Street, which
is a large custodian, just under a quarter of non
US investors holdings and US equities were hedged against dollar declines.
(11:18):
Now that comparedson nearly fifty percent in twenty twenty during
the pandemic. Now, we also know from Federal Reserve data
that overseas investors had about eighteen trillion of US equities
as of December last year. Now, Bank of America does
some number crunching and they reckon that if investors were
to increase hedge ratios to the average level scene before
(11:39):
the pandemic, there'd be about five trillions worth of actually
exposure which would need hedges to be put on.
Speaker 2 (11:46):
So that sounds pretty painful. Then, in terms of what
investors are expecting to happen next, then if they, you know,
fewer have perhaps hedged, are they betting on the dollar
remaining weaker? Do they have clarity?
Speaker 1 (12:02):
It has been pretty painful, So I think, you know,
someone mentioned earlier, six percent decline in the S and
P five hundred this year is mean to fourteen percent
wipeout for sorry, fourteen percent wipe out for investors who
measure their returns in euros in yen. So in terms
of what's going to happen next, I think it's a mix.
There's lots of signs that some investors are starting to
(12:23):
build hedges against further weakness in the dollar. That's based
on anecdotal evidence from FX traders at banks like Morgan Stanley.
You can also look at FX options markets which show
demand hedges creeping up this year. But we also spoke
to some investors who are holding out. So they say
they've never liked hedging because of the cost associated with
that and because it's so hard to predict the twists
(12:44):
and turns the dollars they're going to Why pay up
for that insurance when you just don't know if it's
going to pay off? And they're sticking with their US
stocks because they like the investment case or the story
around that company. There's also a decent size, a decent
sized group of market watches think the dollar is now
over sold and it has bounced off of sixteen month
low that we saw last week, although it's still around
(13:06):
the lust levels we've seen over the last couple of years,
and a lot of people do think this is only
the start of a major structural decline in the dollar.
And then we know that plenty of people are divesting
from the US altogether, which I think has been one
of the key drivers of the collapse.
Speaker 3 (13:21):
NASA presses okay a sclad LARFX and Rates reporter, thank
you very much for joining US.
Speaker 2 (13:27):
Private equity firms, meanwhile, are scouring for investment opportunities in
European defense, chasing a sector that was once seen as toxic,
driven by a historic shift towards increased military spending. Joining
us now to discuss this story is Bloomberg's Deals Reporter.
Sweet to go open aasth good morning, Sweeter. Look much
has changed with President Donald Trump in the White House,
(13:50):
who is looking for these defense industry deals. Then in Europe,
good morning.
Speaker 10 (13:58):
We really have firms across sort of the private capital
spectrum now looking at the defense sector and now that
it's seen as investable once again, as you were saying,
you have the likes of KKR looking for new investment
opportunities advent monetizing defense assets they all de own. European
fund is raising a dedicated eight hundred million euro aerospace
(14:20):
and defense fund. CBC last year put together a team
for aviation, defense and space deals, so really it's firms
across the spectrum here.
Speaker 3 (14:31):
The sector, though, has been unpopular with investors, and not
just for ethical reasons. Are the kind of the barriers
too investing in this area just disappearing.
Speaker 10 (14:43):
Those barriers are definitely beginning to fall away, even if
they haven't entirely disappeared yet. Fund managers have sort of
rewritten their internal mandates, mainly because they don't want to
miss out and potentially lucrative defense bets, and regulators in
the UK and and in Europe as well have signaled
they'll remove any blockages to capital flows to the sector.
(15:05):
They don't want anything that prevents new capital formation in
the defense sector.
Speaker 2 (15:10):
And so when the Europeans think about this, I mean
Europe in and of itself as amart all of these
billions of dollars of euros for rearmament, even though the
plans aren't yet entirely clear from governments. What we do
know though, is that it will probably need private capital
and partnerships. What is on the cards then when we
(15:31):
think about M and A, because some of the m
and A has already happened in some as you've been
writing about, is still very much to come.
Speaker 10 (15:39):
Yeah, we certainly think there's lots more to comment speaking
to people in the sector, and the expectation is that
MINA activity here will ramp up, mainly because the defense
supply chain in Europe is very much fragmented, so people
see room for consolidation. And besides that, as we've been writing,
any p firm that already owns defense assets basically sees
(15:59):
this as the moment to monetize those holdings, given the
this heightened investor demand for the sector, and most so
because valuations in the sector really rising. So we've had Advent,
which we mentioned before. They just sold cobboms dot com,
which sort of provides antenna systems for ships and soldiers.
It's also now looking to sell Ultra Precision Control Systems,
(16:22):
which makes these systems that help with missile launchers. And
we have Searchlight Capital looking to sell a business that
makes safety gear for F thirty five fighter pilots. And
it's not just sort of exits and monetizations. We also
have pre firms looking to make new investments, which will
lead to more MNA. We wrote last week about Bain
(16:44):
and KPS being interested in a Veco's defense unit, for example,
So there's lots more MNA for sure.
Speaker 3 (16:50):
How confident are these investors that they say is going
to be a permanent shift towards a greater ramp up
in European defense pending that perhaps you know after this
presidential term that things couldn't just go in the other direction.
Speaker 10 (17:04):
I guess there's always the risk of that, and private
cap reforms are certainly I guess, adept at making the
best of the micro climate. So for now, at least
for the foreseeable future, it looks like Europe will continue
to invest in the sector, so they want to make
the most of this moment.
Speaker 3 (17:23):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 2 (17:30):
Look for us on your podcast feed every morning on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 3 (17:36):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 2 (17:41):
Our flagship new York Station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
Speaker 3 (17:49):
I'm Caroline Hepca and I'm Stephen Carroll. 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 Bloomberg Daybreak You podcast, available every morning
on Apple, Spotify, or wherever you listen. It's Monday, the
twenty eighth of April in London. I'm Caroline HIPKIF.
Speaker 3 (00:18):
And I'm Stephen Carroll. Coming up today, Investors rush to
protect themselves from more pain after a double hit from
dollar and US equity weakness.
Speaker 2 (00:27):
Cargo shipments from China to the US plummet, as America
confronts a looming supply shock.
Speaker 3 (00:33):
Pluses Europe ree arms. Private equity firms are scouring for
investment opportunities in a defense sector they once shunned.
Speaker 2 (00:41):
Let's start with a roundup of our top stories.
Speaker 3 (00:44):
Investors around the world who bought dollars to invest in
US stocks are facing significant glasses as both the S
and P five hundred and the dollar decline simultaneously. They're
now rushing to protect themselves from further declines with more.
Here's Bloomberg'schris Pitt for you.
Speaker 4 (01:00):
It was the money minting trade for investors in London,
Paris and Tokyo. Buy dollars and pour the proceeds into
the SMP five hundred and Nasdaq. That trade unraveled quickly though,
after President Donald Trump launched his global trade war, sending
shockwaves across markets. A six percent drop in the SMP
five hundred this year has ballooned into a fourteen percent
(01:24):
loss for investors measuring returns in euros and yen. The
losses have left investors scrambling to hedge their American equity
portfolios against further dollar weakness. Meanwhile, Bank of America strategists
estimate that are returned to pre pandemic hedging levels could
mean an additional five trillion dollars in foreign US equity
(01:47):
exposure being covered in London. Chris Pitt Bloomberg Radio.
Speaker 2 (01:52):
The number of ships heading to the US from China
has plunged by about forty percent since the United States
raised tariffs to triple digits in early April. Ship tracking
data compiled by Bloomberg shows those vessels are carrying roughly
three hundred and twenty thousand containers. That's about a third
few eth and immediately after President Chump announced plans to
(02:16):
hike tariffs on nearly all Chinese goods to one hundred
and forty five percent. Deborah Elms is head of trade
policy at the Hindrich Foundation.
Speaker 5 (02:26):
You're already seeing shortages happening. We've already seen a number
of ship sailings that have been canceled. Ports on the
West coast of the United States that are traditionally receiving
a lot of goods out of China in particular, now
no longer receiving goods or shortly to be emptied essentially,
and you know that is going to have an impact
(02:47):
on consumers already in the United States. That's just going
to escalate.
Speaker 2 (02:51):
Deborah Elms, speaking there as forecast is surveyed by Bloomberg
expect imports to fall at a seven percent annual rate
in the second corps to which would be the biggest
drop since the onset of the COVID nineteen pandemic.
Speaker 3 (03:05):
As the US confronts the growing prospect of a China
supply chock, the Trump administration is signaling that Asian countries
such as South Korea, Japan, and India are leading the
way in tariff negotiations. Speaking to ABC's This Week program,
US Trategury Secretary Scott bes And said nations in the
region are preparing to make significant concessions to secure a deal.
Speaker 6 (03:26):
We've had several of these Asian countries that come in
and said, oh, well, we'll stop doing this, this and this.
And I look at these lists and I think, how
did we get here? How do we get here? Because
this trading system has been so unfair, And as President
Trump says, I don't blame the countries, I blame the
previous administration, so that let them get away with it.
Speaker 3 (03:46):
Scott Bessant also told ABC's This Week that there are
eighteen important US trading partners, including China, which is undergoing
a special negotiation, adding that some of these are moving
along very well, especially with the Asian countries.
Speaker 2 (04:01):
UK economic growth is likely to be derailed by the
global trade war. That's according to the ey Item Club,
which has downgraded its GDP forecasts, saying that it will
now expect the UK to grow by zero point nine
percent next year. That's nearly half what it had previously forecast.
The shift comes after the UK government said that it
(04:23):
held positive and upbeat talks with US Treasury Secretary Scott
Bessent about a possible trade deal.
Speaker 3 (04:30):
Canadians are going to the polls today in an election
that's been overshadowed by Donald Trump. The incumbent Liberal Party
had faced near certain defeat before Trump's threats to annex
the country supercharged their polling performance. Leader Mark Karney has
vowed to fight back against the US President.
Speaker 7 (04:48):
Trump's trade war has literally ruptured the global economy and
and he has betrayed Canada. Amer BEA's neighbor, America's closest
friend and most steadfast.
Speaker 3 (05:04):
Ally a former central banker, Carnea has a narrow lead
in opinion polls over the favorite. A few months ago,
the Conservative Pierre Polievre paralieva Is built his campaign on
attacking the government's economic management and the cost of leven crisis.
Whoever wins, economists project Canada's next prime minister is set
to inherit a stagnant economy facing tariffs, it's closest trading partner.
Speaker 2 (05:25):
Saying with Canada. Vancouver Police say that a fatal car
attack that took place on the weekend was not terrorism.
The statement comes after eleven people were killed in dozens
injured after a driver plowed into a crowd at a
street festival on Saturday. The suspect, a lone thirty year
old man, was arrested at the scene. Acting Police Chief
(05:48):
Steve Rye says the incident is one of the most
serious in Vancouver's history.
Speaker 8 (05:53):
This is a tragedy the likes of which the city
has never experienced before. Eleven people have now died. Their
ages range from five to sixty five. Dozens more are injured,
some critically and some have not yet been identified.
Speaker 2 (06:09):
Vancouver's police officer Steve Riye speaking there. According to his department,
the investigation will continue, but there is no ongoing danger
to the public.
Speaker 3 (06:19):
And In sports news, Liverpool have won the English Premier
League Championship, earning a record equaling twentieth top flight title.
They confirmed the victory with a five to one win
over Tottenham Hotspurt and Field yesterday, matching the achievement of
rivals Manchester United. Speaking after the match, Liverpool manager Ernest
Slott praise to the clubs ethos.
Speaker 9 (06:37):
The quality the players have was I think obvious for everyone,
but the culture of hard work, the culture of not
only from the players but also from the staff members
have been incredible and that is one of the reasons
why we could achieve what we've achieved this season.
Speaker 3 (06:52):
Liverpool's Ernestlott there, who was now the first Dutch manager
to win a Premier League championship. They say is the
club's secondly victory in five years, after capturing the title
in twenty twenty without any stadium spectators amidst the coronavirus pandemic.
Speaker 2 (07:08):
Those are our top stories for you this morning. Let's
get to the markets. Ectian bond market volatility seems to
be easing at least at the start of this week.
But we've got a raft of earnings both of the
US and Europe plus USGDP. The forecast for the first
quarter GDP i've really been slashed, the expectation zero point
four percent quarter on quarter growth. In terms of Asian
(07:31):
equities modestly high. You got the Topics up almost one percent.
South Korean shares this morning on the COSP are also
rising about a tenth of one percent. Scott Bessett was
talking about Asian countries are moving along very well in
terms of the trade discussions. We had four days of
gains for the S and P five hundred last week.
Futures though are down half of one percent this morning.
(07:51):
Europeans stop futures gaining two tenths. The dollar and treasuries
are steady this morning. Gold is down six tenths of
one percent ten year US yields this morning, trading up
for twenty five upper basis point Stephen.
Speaker 3 (08:03):
In a moment, we'll bring you more why stock investors
are bracing for more dollar pain plus by private Equity
now has defense firms firmly in their targets. But first
on another story that caught her eye this morning, something
literally out of this world to start your Monday morning.
Astronomers have discovered a planet that may have signs of life,
with the possible ocean and atmosphere containing water, vapor, and
(08:26):
rain clouds. Now, the signs are still tentative. Some say
it's too soon to tell, but there's certainly a lot
of excitement about this planet, which is called K two
eighteen by it is look is absolutely fascinating. So I
had to go off and actually watch one of the
videos to one of the scientists who made this space
with you, ca Yeah, just to try to learn something
about it is listen is pretty complicated, and our Bloomberg
(08:47):
Opinion science columnists fd Flamm has been writing about this
discovery too.
Speaker 2 (08:51):
Basically she makes it easy for someone. I mean, did
we finally find life on another planet? The Cambridge scientists
in the video says no, yes.
Speaker 3 (09:02):
But I mean, look, it's a story too about scientific cooperation,
which is very interesting because there are different elements of
this which have allowed them to at least, you know,
point to the potential that this could be the case
thanks to research for using both the Hubble telescope but
also the James Webspace telescopes as well, and this is
sort of collaboration is perhaps the key to the next
big advancements in this area as well, if they does
(09:24):
have a note of caution the piece as well though
on to your point Caroline saying that you know, this
is awesothing that's going to need new investment, particularly from
the likes of NASA to be able to try and
advance these theories as well, and of course questions over
NASA's budget and focus too, so perhaps some of these
developments may not come as fast as someone the scientific
community would like to be able to see.
Speaker 2 (09:41):
And if you want to learn a little bit more
about astrophysics and this discovery, of course, we'll put Helik
in the show notes when you download our podcast.
Speaker 3 (09:50):
The market turmoil that's followed Donald Trump lodging as global
trade wars caused double pain for a common trade US
by investors outside of the United States to buy dollars
and invest in US stocks. Now traders are trying to
guess what happens next. RFX and Rights reporter Alice Gladhill
joins US now for more. Alice, good morning, talk us
through first of all, how this trade worked and how
popular it was.
Speaker 1 (10:10):
So imagine you're an investor in Paris or Tokyo and
you wanted a piece of the action in the red
hot US stock market, so you buy some dollars to
invest in some US shares. And he had to remember,
in the post pandemic period, the US was very much
the place to be, so the economy was more resilient.
Growth kept coming and the labor market stayed strong, and
(10:31):
there was a little reason to think that this would
break anytime soon. And that was still the case when
Trump's elected president, given his pro growth America First policies,
and that was expected to reduce that sort of US
exceptionalism trade as it was called even more Now. For
that reason, many of those foreign investors chose not to hedge.
That basically means the hedges basically buy insurance against dollar declines.
(10:55):
So the thinking went. US stock's going to keep going up,
the dollar will keep going up, and that's going to
boost my returns even more. So we don't know exactly
how many investors were in this position that we can
make some educated guesses. So, according to State Street, which
is a large custodian, just under a quarter of non
US investors holdings and US equities were hedged against dollar declines.
(11:18):
Now that comparedson nearly fifty percent in twenty twenty during
the pandemic. Now, we also know from Federal Reserve data
that overseas investors had about eighteen trillion of US equities
as of December last year. Now, Bank of America does
some number crunching and they reckon that if investors were
to increase hedge ratios to the average level scene before
(11:39):
the pandemic, there'd be about five trillions worth of actually
exposure which would need hedges to be put on.
Speaker 2 (11:46):
So that sounds pretty painful. Then, in terms of what
investors are expecting to happen next, then if they, you know,
fewer have perhaps hedged, are they betting on the dollar
remaining weaker? Do they have clarity?
Speaker 1 (12:02):
It has been pretty painful, So I think, you know,
someone mentioned earlier, six percent decline in the S and
P five hundred this year is mean to fourteen percent
wipeout for sorry, fourteen percent wipe out for investors who
measure their returns in euros in yen. So in terms
of what's going to happen next, I think it's a mix.
There's lots of signs that some investors are starting to
(12:23):
build hedges against further weakness in the dollar. That's based
on anecdotal evidence from FX traders at banks like Morgan Stanley.
You can also look at FX options markets which show
demand hedges creeping up this year. But we also spoke
to some investors who are holding out. So they say
they've never liked hedging because of the cost associated with
that and because it's so hard to predict the twists
(12:44):
and turns the dollars they're going to Why pay up
for that insurance when you just don't know if it's
going to pay off? And they're sticking with their US
stocks because they like the investment case or the story
around that company. There's also a decent size, a decent
sized group of market watches think the dollar is now
over sold and it has bounced off of sixteen month
low that we saw last week, although it's still around
(13:06):
the lust levels we've seen over the last couple of years,
and a lot of people do think this is only
the start of a major structural decline in the dollar.
And then we know that plenty of people are divesting
from the US altogether, which I think has been one
of the key drivers of the collapse.
Speaker 3 (13:21):
NASA presses okay a sclad LARFX and Rates reporter, thank
you very much for joining US.
Speaker 2 (13:27):
Private equity firms, meanwhile, are scouring for investment opportunities in
European defense, chasing a sector that was once seen as toxic,
driven by a historic shift towards increased military spending. Joining
us now to discuss this story is Bloomberg's Deals Reporter.
Sweet to go open aasth good morning, Sweeter. Look much
has changed with President Donald Trump in the White House,
(13:50):
who is looking for these defense industry deals. Then in Europe,
good morning.
Speaker 10 (13:58):
We really have firms across sort of the private capital
spectrum now looking at the defense sector and now that
it's seen as investable once again, as you were saying,
you have the likes of KKR looking for new investment
opportunities advent monetizing defense assets they all de own. European
fund is raising a dedicated eight hundred million euro aerospace
(14:20):
and defense fund. CBC last year put together a team
for aviation, defense and space deals, so really it's firms
across the spectrum here.
Speaker 3 (14:31):
The sector, though, has been unpopular with investors, and not
just for ethical reasons. Are the kind of the barriers
too investing in this area just disappearing.
Speaker 10 (14:43):
Those barriers are definitely beginning to fall away, even if
they haven't entirely disappeared yet. Fund managers have sort of
rewritten their internal mandates, mainly because they don't want to
miss out and potentially lucrative defense bets, and regulators in
the UK and and in Europe as well have signaled
they'll remove any blockages to capital flows to the sector.
(15:05):
They don't want anything that prevents new capital formation in
the defense sector.
Speaker 2 (15:10):
And so when the Europeans think about this, I mean
Europe in and of itself as amart all of these
billions of dollars of euros for rearmament, even though the
plans aren't yet entirely clear from governments. What we do
know though, is that it will probably need private capital
and partnerships. What is on the cards then when we
(15:31):
think about M and A, because some of the m
and A has already happened in some as you've been
writing about, is still very much to come.
Speaker 10 (15:39):
Yeah, we certainly think there's lots more to comment speaking
to people in the sector, and the expectation is that
MINA activity here will ramp up, mainly because the defense
supply chain in Europe is very much fragmented, so people
see room for consolidation. And besides that, as we've been writing,
any p firm that already owns defense assets basically sees
(15:59):
this as the moment to monetize those holdings, given the
this heightened investor demand for the sector, and most so
because valuations in the sector really rising. So we've had Advent,
which we mentioned before. They just sold cobboms dot com,
which sort of provides antenna systems for ships and soldiers.
It's also now looking to sell Ultra Precision Control Systems,
(16:22):
which makes these systems that help with missile launchers. And
we have Searchlight Capital looking to sell a business that
makes safety gear for F thirty five fighter pilots. And
it's not just sort of exits and monetizations. We also
have pre firms looking to make new investments, which will
lead to more MNA. We wrote last week about Bain
(16:44):
and KPS being interested in a Veco's defense unit, for example,
So there's lots more MNA for sure.
Speaker 3 (16:50):
How confident are these investors that they say is going
to be a permanent shift towards a greater ramp up
in European defense pending that perhaps you know after this
presidential term that things couldn't just go in the other direction.
Speaker 10 (17:04):
I guess there's always the risk of that, and private
cap reforms are certainly I guess, adept at making the
best of the micro climate. So for now, at least
for the foreseeable future, it looks like Europe will continue
to invest in the sector, so they want to make
the most of this moment.
Speaker 3 (17:23):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 2 (17:30):
Look for us on your podcast feed every morning on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 3 (17:36):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 2 (17:41):
Our flagship new York Station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
Speaker 3 (17:49):
I'm Caroline Hepca and I'm Stephen Carroll. 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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