April 11, 2025 • 24 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Less than 24 hours after President Donald Trump backtracked on his once-in-a-century trade war to prevent a meltdown in financial markets, frantic selloffs hit US stocks, bonds and the dollar yet again as fears of a worldwide recession engulfed Wall Street.
(2) The dollar extended losses after its biggest plunge in three years, with the cost of hedging against further slides climbing to the highest since the Covid pandemic shuttered cities in early 2020.
(3) President Donald Trump said his tariffs may cause “transition problems” but expressed confidence in his plan, after the White House clarified US tariffs on China rose to 145%.
(4) Top European Union officials are making plans to visit China for a meeting with President Xi Jinping, the South China Morning Post reported — a sign Brussels may be keen to develop better ties with Beijing amid the Trump administration’s tariff onslaught.
(5) Federal Reserve Bank of Chicago President Austan Goolsbee said tariffs are a “stagflationary shock” and they pit the central bank’s goals of price stability and full employment against one another.
(6) A sightseeing helicopter crashed into the Hudson River, killing all six people on board, including three children from Spain and the pilot.
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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 Bloomberg Daybreak Europe podcast, available every morning
on Apple, Spotify or wherever you listen. It's Friday, the
eleventh of April in London. I'm Stephen Carroll coming up today,
questioning safe haven status. Treasuries trade like a risk asset
as the dollar plunges in a worrying sign for US
market credibility. Donald Trump concedes his decision to impose one
(00:32):
hundred and forty five percent levies on China could cause
transition problems, but says it will be worth it. Plus,
we'll have the latest on a helicopter crash in New
York that's left six people dead, including three children. Let's
start with a round up of our top stories. The
dollar has weakened to a six month low as an
escalating trade war raises further fears over the US economy.
(00:55):
The green backsod's biggest plunge in three years yesterday and
is falling further today. The euro to its highest since
twenty twenty two. The sell off in treasuries is continuing too,
with day yields on long dated US debt rising as
investors question it's safe haven status. Speaking to Bloomberg Bridgewater
Associates founder Ray Dalio, once the tariff turmoil is damaging
(01:18):
America's credibility.
Speaker 3 (01:20):
I'm not the politician, I'm not the negotiator. I'm not
the person to say whether that style of handling it
was better or worse. I would say that it dramatically
affected psychology and attitude about the United States's reliability.
Speaker 2 (01:39):
Dahlia went on to say that this was a moment
to question if bonds are an effective store of wealth.
Thirty year treasury yields served by thirteen basis points on
Thursday and a rising further today close to four point
nine percent. The sell off in the dollar in treasuries
was echoed in the stock market. The S and P
five hundred ended the day down three and a half
(02:00):
half percent. The Masciish specific index is on track for
its third consecutive week of losses as market relief turns
to angst after the White House clarified the totally US
tariffs on China are in fact rising to one hundred
and forty five percent. Founder and CIO of Hayman Capital
Kyle Bass, we must.
Speaker 4 (02:19):
Reset our trade relationships for the rest of the world.
We also must narrow our fiscal deficit in the United States,
and both of those things might be slightly recessionary, and
if that's true, we might have to go through a
brief recession in order to rebuild our foundation.
Speaker 2 (02:36):
Kyle Bass says, in the end, America will be stronger. However,
many investors are continuing to seek haven's and non US alternatives,
the euroclimbing to a three year high, while the yen
and gold have also gained as the market sell off
once again gather steam. President Trump has conceded that his
approach to tariffs will cause some issues. Even after the
(02:58):
pause on higher levies for many trees, Boomberg Economics says
average import taxes for the US will be twenty four percent.
Speaking at a televised cabinet meeting, Trump conceded this will
have an impact on American There'll.
Speaker 5 (03:12):
Be a transition cost and transition problems, but in the end,
it's going to be It's going to be a beautiful thing.
Speaker 2 (03:22):
Trump says he believes the first tariff deals are very close,
while also voicing optimism that China will eventually come to
the table. He also indicated willingness to be flexible on
exemptions for companies or countries from the tariff regime, including
the ten percent floor he's established for all trading partners.
(03:43):
Top European officials are planning to visit China to discuss
trade with President Cheating Ping in late July. According to
a report in the South China Morning Post, European Commission
President Ursula Vanderlyn and European Council President Antonio Costa have
reportedly agreed to the summit in Beijing. Despite President Trump's
ninety day levy reprieve, global leaders are still unsure. Germany's
(04:06):
Chancellor in waiting, Friedrich Martz, referred to the maximum uncertainty
in America while voicing hope that the US and the
EU can negotiate the abolishment.
Speaker 6 (04:17):
Of tariffs on both sides.
Speaker 2 (04:20):
Chicago Fed President Austin Goolsby says the tariffs are a
stagflationary shock for the Central Bank. Speaking at the Economic
Club of New York, he went on to argue that
the levees hit the goals of price stability and full
employment against each other.
Speaker 7 (04:34):
A tariff is like a negative supply shock, which is
to say, it makes both sides of the Fed's dual
mandate worse. At the same time, prices are going up
while jobs are being lost and growth is coming down,
and there is not a generic playbook for how the
central bank should respond to a stagflationary shock.
Speaker 2 (04:58):
The Fed's Austin Goolsby. There he went onto note growing
business anxiety, which he says can lead to lower investment.
According to goules Be, the sooner the uncertainty dissipates, the
sooner the FED can lower borrowing costs. He believes that
interest rates will be lower in the next twelve to
eighteen months, but added that the FED is currently in
eight weight and c mode. Tariffs will not only hit
(05:22):
UK growth, they might also weaken the pounds. That's the
warning from the Bank of England's Deputy Governor Sarah Breeden.
She says the currency may lose out if the trade
war escalates. And A helicopter has crashed into New York's
Hudson River, killing the three adults and three children on board.
The aircraft broke apart in mid air while taking a
Zeman's executive and his family on a sightseeing trip. New
(05:45):
York City Mayor Eric Adams updated the press on the incident.
Speaker 8 (05:49):
All six victims have been removed from the water and sally.
All six victims have been pronounced to see.
Speaker 2 (06:02):
The helicopter was operated by New York Helicopters, and US
aviation authorities are investigating the crash. Those are your top
stories on the markets. The Mscirish Pacific Index eight tenths
lower this morning, the Nicke and Tokyo down by four
point four percent after the slide that we saw on
Wall Street yesterday when the Nasdaq finished down four point
two percent. European stock features are pointing higher, though, up
(06:23):
a quarter of one percent for eurostocks, fifty two tents
higher for forty one hundred features at the moment. The
Bloomberg Dollar Spot index further weakening today. The euro's nine
tenth stronger at one thirteen against the dollar. The Japanese
yen is nine ten stronger as well, at one hundred
and forty three eighteen. The thirty year treasure yield and
the ten year treasure yield both rising this morning, the
ten years up two basis points to four point four
(06:45):
five percent. Well today we will be digging into Donald
Trump's attempt to reorder global trade, causing more trouble on markets.
Considering what's next for US China relations, plus what all
this means for Wall Street Banks, which you do to
start reporting earnings later today. But just a word first
(07:06):
on another story that caught my eye this morning about
how talking about Trump's policies is getting more difficult even
for some of Wall Street's top names. Michael Simbolest, who's
chairman of the Market Investment and Strategy for JP Morgan
Asset Management, added a caveat to a client presentation that
he made earlier this week, saying he'd withheld certain comments
with his firm and colleagues in mind. Now he called
(07:28):
the president's tariff plan a sledgehammer brute force approach, but
he produced a report last week that actually had several
blacked out passages from it, and in the colleague said
it was the first time ever he'd had to think
about what he was saying beyond how they reflected the
bank's views on markets and economics and smblists went on
to say that people are being held accountable for their
views and the things they say in ways they probably
(07:50):
shouldn't be, and went on to say, so I've said
most of what I wanted to.
Speaker 6 (07:54):
Say on this call, but not all of it.
Speaker 2 (07:58):
His comments are an illustration of the dilemma that's been
described by the former president of the American Civil Liberties
Union as a climate of anticipatory obedience. So people are
self censoring for fear of being targeted by the Trump administration,
and Adan Strawson says that's not unique to this White House,
but it is something that's worrying and it's yet another
minefield apart from the market turmoil that Corporate America is
(08:20):
having to navigate. You can read more in our reporting
on the subject on Bloomberg dot Com and on the Terminal. Well,
let's get into the latest developments on the tariff story
that's rocked markets. Donald Trump acknowledging transition problems as he
presses ahead with tariff's on China, which the White House
now says reach one hundred and forty five percent. Bimber
Compinion columnist to Karrishma Vasani is with me now for more, Korishima,
(08:42):
great to talk to you. The US upping the ante
in the trade war with China again. This one hundred
and forty five percent is the one hundred and twenty
five percent the President's announced on top of a twenty
percent Levey already in place from earlier this year. How
much further should we expect China to go and its response.
Speaker 9 (08:59):
We've already seen the tariffaction from China, and we've heard
very strong rhetoric from Beijing in terms of how they're
not going to give up without a fight. They will
see this fight to the end, and that kind of
nationalist rhetoric is something I think that you will consistently
see from the Chinese in terms of policy measures. There's
already evidence that some of that is taking place. There
(09:21):
was a meeting convened reportedly yesterday to discuss further stimulus
for the Chinese economy, and I think what will happen
in the days and weeks ahead is that you will
see more support domestically from the Chinese state to help
boost the economy, which no doubt will be taking a
huge hit from these tariffs. But I don't think that
(09:42):
means you will see capitulation from the Chinese, and I
think the main reason for that, as I've argued in
the column today, is that Si Jinping is in a
much better position both politically to and economically because of
the political system in China to withstand the pain that
these tariffs will bring. I think he will use this
opportunity to remind people in China that this is another
(10:04):
example of the US under the Trump administration trying to
keep China down.
Speaker 2 (10:11):
Are there any signs though, that Beijing could be willing
to negotiate with Donald Trump on this well.
Speaker 9 (10:18):
I thought it was interesting that Donald Trump, as he
went about increasing tariffs on China, he also appeared to
extend what I imagine they think is an olive branch,
but this idea that the Chinese will call him, that
there's going to be a phone call very soon words
to that effect. And you know, I do wonder what
the advice is that he's getting, because Sigin Ping isn't
(10:39):
going to show up at a meeting that isn't going
to benefit Siegin Ping. I mean, one Chinese academic was
saying to me yesterday that what China wants in all
of this is a little bit of respect. It's the
world's second largest economy, and it has huge relationships in
Asia and in Europe and is an integral part of
the US system. And for you know, the likes of
(11:03):
the Vice President have made comments about Chinese peasants. All
of that you know, doesn't win hearts and minds, does it?
Steven back in Beijing, and I think it will be
very difficult for the Chinese to agree to any sort
of meeting with Donald Trump without Beijing also setting the
terms and conditions of that meeting.
Speaker 2 (11:21):
What about the damage to the economy though in the meantime, Christma,
how much could be done beyond what we already know about?
Speaker 9 (11:29):
Well, it's hard to say at this point because it's
such a fast moving beast. But what we do know
from some of the analysis that our own teams have
done at Bloomberg Economics, that is as much as three
percent of GDP could be affected, and that you know
doesn't take into account on the Chinese side, I should say,
the increase in tariffs that we've seen just in the
(11:50):
last twenty four hours or so. On the American side,
you know, they're not spared either. You have a situation
where prices are no doubt going to rise, that's going
to feed into inflation expectations. That's going to be a
problem for the US FED at a time when you know,
there's already some data to suggest that Trump's approval ratings
may be affected by these higher prices. It is the
(12:12):
thing that he talked about during his campaign that you know,
he was going to be the person that was going
to make America great again and bring back manufacturing to
the United States. But the Chinese aren't losing the opportunity.
As again, I've discussed this in the column today to
poke fun at this idea. In fact, on Chinese social
media there have been memes circulating of Trump and JD.
(12:36):
Vance hunched over sewing machines in what appear to be
factories presumably making the shoes and garments that you know
have been so integral to the American consumption story, And
of course it evokes a laugh and a giggle. But
certainly the bigger message in all of this is it's
not going to be an easy ride for you, America
because you have depended on Chinese, cheap Chinese goods for decades.
Speaker 2 (13:00):
What about the international diplomatic strategy that cheating Ping is
adopting looking at other countries as well, He's visiting Southeast
Asia next week, said Schina Morning Post, talking about him
hosting EU leaders in July as well.
Speaker 9 (13:14):
Yeah, I think this is really interesting and really key,
and you know, if you think back to the First
Trade War in twenty eighteen, which I covered as well.
What really struck me at that point was the Chinese
were going out onto the global stage, Cajon Ping at
Davos talking about how China was the responsible global player.
China wants to keep the world rules based order intact,
(13:36):
and it's that again. I think that is the messaging
from the Chinese and these attempts at building these relationships
or strengthening them, I should say, you know, don't forget
that Southeastage is major trading partner is China. I think
this is an opportunity for Shijinping to say that, look,
we still want to do business. We're not going to
(13:56):
be unpredictable. We're not going to you know, tear up
the international rules based order the way Donald Trump has,
and I think that can be quite appealing, notwithstanding the caveat,
of course, that China uses international trade rules or any
rules to be fair, to sort of remake the world
to its advantage. But when you're faced with two superpowers steven,
(14:17):
both of them who are behaving badly, perhaps the one
that's not, you know, setting fire to the Glover economy
might be a better bet.
Speaker 2 (14:26):
Okay, Krishmavasani, Bloomberg opinion columnist, Thank you very much for
joining us. You can read Christma's latest piece at China
Won't Blink First and Fight with the US at Bloomberg
dot Com Forward Slash Opinion. Well, the dollars emerged as
the latest victim of this week's market turmoil, Bloomberg Dollar
Spot Index tumbling to a six month low as part
of a broader exodus from US assets. Let's bring in
(14:47):
our market support of Valerie Titel for more on this. Valerie,
can you just talk us through, first of all, the
scale of the moves that we've seen in the dollar,
because it's big.
Speaker 5 (14:56):
Well, I think yesterday really was some unprecedented damage to
US assets reputation, and to me, what's happening is that
every dollar asset, whether it's the dollar or treasuries, is
having some sort of risk premium now priced into that,
and that is going to cause a big reordering of
the global financial system. Quite frankly, Stephen, what happened yesterday
(15:19):
is that alongside an equity market tumble, we had a
crash in the US dollar. Dollar Swiss moved four percent
as people were fleeing the dollar going to other safe havens,
whether that was swissy, whether that was the euro or
the Japanese yen. The dollar did not catch a bid
with this risk off move, And if we look even
further under the hood, there is not a scramble into
(15:42):
dollar assets, which is what we historically have always seen
at times of high volatility, times of high uncertainty, we
see a move into the safe haven dollar dollar assets
or treasuries. That's really do linked this week, and I
think this week is going to go down in history
as the first week we really saw evidence in the
market of people questioning dollar assets and their safe haven status.
Speaker 2 (16:05):
Does this go beyond taking fright or or short term
moves based on these announcements, or could they signify what
should we be looking forward to think about if this
is a fundamental shift.
Speaker 5 (16:18):
Look, Frankly, I would also have my eye on the
treasury market. This is a fundamental shift in the demand
for dollar assets. So not only are we having foreign
buyers who are historically in the last few years have
been very over allocated dollar assets, we're seeing that normalize.
That's one thing, But the other thing that we're seeing
is the fact that Trump is ripping up global trade
(16:41):
is really posing questions over is there going to be
a long term structural demand for dollars like there has
been before the dollar's been the world's reserve currency. Alongside
that has also come the fact that all global trade
is denominated in dollars. So you attach those two things together,
less global trade, less for dollar assets, and the US
(17:02):
is going to lose its ability to fund its deficits easily.
Speaker 1 (17:05):
And essentially that.
Speaker 5 (17:06):
Means every month that goes by, every year that goes by,
it needs another incremental buyer of its assets in order
to fund the amount of treasuries that it's issuing to
the market. And right now, if you think that trade
between the US and China is coming to a standstill,
so is China's recycling of those dollars into treasury assets.
And with that could mean that structurally yields in the
(17:28):
US have to be a lot higher, and the US
in some way is going to act like the UK.
They have to rely on the foreign investment flows which
are no longer guaranteed, you know, relying on the kindness
of strangers. As I know they've put it in the
guilt market. But there is now going to be a
baked in premium for dollar assets because the bedrock of
(17:50):
the US dollar is now starting to be questioned.
Speaker 2 (17:52):
You mentioned the strengthening and the euro that's continuing in
trading today as well. What's the other read across that
we should be looking for in terms of the US
European markets today? If dollars, if investors are fleeing dollar assets,
does that mean that they're coming to Europe?
Speaker 5 (18:08):
I mean, that could be the effect. But this is
going to be you know, this is not just today.
This is something that's going to be impacted for the
next five years.
Speaker 1 (18:16):
Let's say it.
Speaker 5 (18:16):
We did necessarily see yesterday a big move into the
Swiss franc and let's be frank pun those Let's be frank.
Not every country wants to be the safe haven because
what comes to that is a stronger currency.
Speaker 6 (18:31):
We've seen the problems that's posed with the Swiss National
Bank in the past.
Speaker 5 (18:33):
Exactly right. But the thing is is, if this reputation
of dollar assets has been seriously damaged, it has to
go somewhere, whether that's the euro, whether that's the end,
but that could also pose big problems for these economies
who maybe not necessarily want that enormous flow of funds
coming into their economy.
Speaker 2 (18:50):
Balery Titel, our market supporter, thank you very much for
joining us with another dramatic day on markets. We're looking
at European stock futures pointing higher ahead of today's session. Now,
investors will be scaring company reports during this earning season
for clues as to how they're thinking about the trade war.
JP Morgan and Morgan Stanley kickoff Wall Street's earning season today,
as banks another major companies struggle to navigate Donald Trump's
(19:13):
policy shift. Bloomberg's Charlie Wells is here to help us
look ahead to that. Charlie, let's start with the banks, then,
I mean, is there anything in this report apart from
forward guidance that analysts are going to be looking at?
Speaker 1 (19:24):
Steven. It's all going to be about the future.
Speaker 10 (19:26):
And I think it's really telling that banks kickoff earning
season because you know, they're not in the direct.
Speaker 1 (19:32):
Line of fire of tariffs, but they're sort of in.
Speaker 10 (19:34):
The back of every other line of fire for every
industry and the economy just because they lend to so
many sectors, they lend to the consumer, and so the
read throughs are going to be enormous.
Speaker 1 (19:45):
As it starts.
Speaker 10 (19:46):
So you know, JP Morgan's CEO, Jamie Diamond, has kind
of been telegraphing this week, I think a lot of
the sentiment that we're likely to hear from other CEOs
in the industry, so, you know, in his annual letter
and in an interview on television midweek, he talked about
how you know, if this tariff chaos continues and these
statements were made before the tariff pause, you know, there
(20:06):
could be a recession. He talked about how you know,
on the consumer front, he doesn't see loan defaults, but
those could be likely.
Speaker 1 (20:14):
And so the picture that we're.
Speaker 10 (20:16):
Likely to see that in just a few hours is
one that's probably darker. But they have to really kind of,
you know, dance delicately here for a lot of reasons
market wise and increasingly politically.
Speaker 2 (20:28):
Yeah, indeed, we were talking a little bit earlier about
Michael Sambas's comments and that a client call earlier this
week as well aside from the trade war, though, what
else could surprise us.
Speaker 6 (20:38):
In these earnings?
Speaker 10 (20:39):
So traders are expected to have had and that's a
past construction, a really good quarter, you know, record revenue
from trading and a lot of the biggest banks. I
think they're slated to bring in the most that they
brought in and I think like seven years because there
was a lot of volatility, and we know that when
there's a lot of volatility that there's a.
Speaker 1 (20:58):
Lot of trading.
Speaker 10 (20:59):
But some common terry to look out on that front today,
I think is this issue that one Goldman analyst brought out,
which was have we reached peak trading?
Speaker 3 (21:07):
Right?
Speaker 10 (21:08):
Because if you get to a point where there's too
much volatility, participants start sitting on the sideline. So volatility
is good up to a point. We know also that
you know, we may see looking back to the prior
quarter some optics at some of the banks and capital
markets activity, and I think if there are significant beats
there that could provide a little bit of optimism. But
(21:29):
volatility is not good for dealmaking.
Speaker 6 (21:31):
Okay, So that's something else to watch out for as well.
Speaker 2 (21:34):
Bigger picture, Charlie, you've been reporting on this all week
as well about how corporate America is trying to navigate
all of these policy changes, as you say, both politically
and financially as well. I mean, how are these companies behaving,
acting making decisions at such an uncertain time. We know
that business confidence has been hit consumer confidence two in
(21:55):
the US. How are companies approaching this Stephen there's.
Speaker 10 (21:57):
A great big take out today in Bloe Lumberg about
this very dilemma that companies face because on the one hand,
they don't want to provide too much information in forward
guidance and then have to retract it. And we've seen
some moves similar to that in the past few days,
just because trade policy has been changing so rapidly. But
(22:18):
on the other hand, they don't want to provide too
little information to be too vague because in a lot
of ways that could leave a company vulnerable to the
whins of the market. They need to provide enough information
that analysts can act appropriately. So this is a real challenge.
And you know, I think a more skeptical take here
as well is that some of this ignorance on you know,
(22:39):
how trade could potentially be playing out for these firms,
some of that may be a little bit of a
cop out. Some analysts have been saying that because you know,
CEOs know what could happen to their companies, you know,
at least in the biggest of picture, and so they
may be kind of dodging some questions here, and so
I think I just said the word questions. I think
in these calls that we're going to hear not just
(22:59):
to day, but over the next few weeks, we should
be honing in on that point in the presentations when
analysts and journalists get to start asking questions. And I
think that part of these presentations is going to be
even more important because they can be really trenchant and
probably get to some topics that others that that CEOs
just couldn't.
Speaker 6 (23:19):
Well on that point.
Speaker 2 (23:20):
I mean, what Michael Samblist was saying in his note,
this idea that you know, he wasn't saying everything that
he wanted to, is that the sort of reticence we
should be expecting from corporate.
Speaker 1 (23:32):
Leaders, Stephen.
Speaker 10 (23:33):
I think we should, and I think that there is
a real fear that executives get called out. You know,
CEOs of banks, certain firms as well have been called
out by the administration, and there is this fear that
kind of saying the wrong thing, presenting the wrong information
could you know, could could upset the administration. And that
(23:54):
is something that analysts Somemblists in particular, focused on this.
Speaker 1 (23:57):
Past week is something that they're not used to.
Speaker 2 (24:01):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 11 (24:07):
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Speaker 6 (24:27):
I'm Caroline Hepka and I'm Stephen Carroll.
Speaker 2 (24:29):
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Break Europe
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
This is the Bloomberg Daybreak Europe podcast, available every morning
on Apple, Spotify or wherever you listen. It's Friday, the
eleventh of April in London. I'm Stephen Carroll coming up today,
questioning safe haven status. Treasuries trade like a risk asset
as the dollar plunges in a worrying sign for US
market credibility. Donald Trump concedes his decision to impose one
(00:32):
hundred and forty five percent levies on China could cause
transition problems, but says it will be worth it. Plus,
we'll have the latest on a helicopter crash in New
York that's left six people dead, including three children. Let's
start with a round up of our top stories. The
dollar has weakened to a six month low as an
escalating trade war raises further fears over the US economy.
(00:55):
The green backsod's biggest plunge in three years yesterday and
is falling further today. The euro to its highest since
twenty twenty two. The sell off in treasuries is continuing too,
with day yields on long dated US debt rising as
investors question it's safe haven status. Speaking to Bloomberg Bridgewater
Associates founder Ray Dalio, once the tariff turmoil is damaging
(01:18):
America's credibility.
Speaker 3 (01:20):
I'm not the politician, I'm not the negotiator. I'm not
the person to say whether that style of handling it
was better or worse. I would say that it dramatically
affected psychology and attitude about the United States's reliability.
Speaker 2 (01:39):
Dahlia went on to say that this was a moment
to question if bonds are an effective store of wealth.
Thirty year treasury yields served by thirteen basis points on
Thursday and a rising further today close to four point
nine percent. The sell off in the dollar in treasuries
was echoed in the stock market. The S and P
five hundred ended the day down three and a half
(02:00):
half percent. The Masciish specific index is on track for
its third consecutive week of losses as market relief turns
to angst after the White House clarified the totally US
tariffs on China are in fact rising to one hundred
and forty five percent. Founder and CIO of Hayman Capital
Kyle Bass, we must.
Speaker 4 (02:19):
Reset our trade relationships for the rest of the world.
We also must narrow our fiscal deficit in the United States,
and both of those things might be slightly recessionary, and
if that's true, we might have to go through a
brief recession in order to rebuild our foundation.
Speaker 2 (02:36):
Kyle Bass says, in the end, America will be stronger. However,
many investors are continuing to seek haven's and non US alternatives,
the euroclimbing to a three year high, while the yen
and gold have also gained as the market sell off
once again gather steam. President Trump has conceded that his
approach to tariffs will cause some issues. Even after the
(02:58):
pause on higher levies for many trees, Boomberg Economics says
average import taxes for the US will be twenty four percent.
Speaking at a televised cabinet meeting, Trump conceded this will
have an impact on American There'll.
Speaker 5 (03:12):
Be a transition cost and transition problems, but in the end,
it's going to be It's going to be a beautiful thing.
Speaker 2 (03:22):
Trump says he believes the first tariff deals are very close,
while also voicing optimism that China will eventually come to
the table. He also indicated willingness to be flexible on
exemptions for companies or countries from the tariff regime, including
the ten percent floor he's established for all trading partners.
(03:43):
Top European officials are planning to visit China to discuss
trade with President Cheating Ping in late July. According to
a report in the South China Morning Post, European Commission
President Ursula Vanderlyn and European Council President Antonio Costa have
reportedly agreed to the summit in Beijing. Despite President Trump's
ninety day levy reprieve, global leaders are still unsure. Germany's
(04:06):
Chancellor in waiting, Friedrich Martz, referred to the maximum uncertainty
in America while voicing hope that the US and the
EU can negotiate the abolishment.
Speaker 6 (04:17):
Of tariffs on both sides.
Speaker 2 (04:20):
Chicago Fed President Austin Goolsby says the tariffs are a
stagflationary shock for the Central Bank. Speaking at the Economic
Club of New York, he went on to argue that
the levees hit the goals of price stability and full
employment against each other.
Speaker 7 (04:34):
A tariff is like a negative supply shock, which is
to say, it makes both sides of the Fed's dual
mandate worse. At the same time, prices are going up
while jobs are being lost and growth is coming down,
and there is not a generic playbook for how the
central bank should respond to a stagflationary shock.
Speaker 2 (04:58):
The Fed's Austin Goolsby. There he went onto note growing
business anxiety, which he says can lead to lower investment.
According to goules Be, the sooner the uncertainty dissipates, the
sooner the FED can lower borrowing costs. He believes that
interest rates will be lower in the next twelve to
eighteen months, but added that the FED is currently in
eight weight and c mode. Tariffs will not only hit
(05:22):
UK growth, they might also weaken the pounds. That's the
warning from the Bank of England's Deputy Governor Sarah Breeden.
She says the currency may lose out if the trade
war escalates. And A helicopter has crashed into New York's
Hudson River, killing the three adults and three children on board.
The aircraft broke apart in mid air while taking a
Zeman's executive and his family on a sightseeing trip. New
(05:45):
York City Mayor Eric Adams updated the press on the incident.
Speaker 8 (05:49):
All six victims have been removed from the water and sally.
All six victims have been pronounced to see.
Speaker 2 (06:02):
The helicopter was operated by New York Helicopters, and US
aviation authorities are investigating the crash. Those are your top
stories on the markets. The Mscirish Pacific Index eight tenths
lower this morning, the Nicke and Tokyo down by four
point four percent after the slide that we saw on
Wall Street yesterday when the Nasdaq finished down four point
two percent. European stock features are pointing higher, though, up
(06:23):
a quarter of one percent for eurostocks, fifty two tents
higher for forty one hundred features at the moment. The
Bloomberg Dollar Spot index further weakening today. The euro's nine
tenth stronger at one thirteen against the dollar. The Japanese
yen is nine ten stronger as well, at one hundred
and forty three eighteen. The thirty year treasure yield and
the ten year treasure yield both rising this morning, the
ten years up two basis points to four point four
(06:45):
five percent. Well today we will be digging into Donald
Trump's attempt to reorder global trade, causing more trouble on markets.
Considering what's next for US China relations, plus what all
this means for Wall Street Banks, which you do to
start reporting earnings later today. But just a word first
(07:06):
on another story that caught my eye this morning about
how talking about Trump's policies is getting more difficult even
for some of Wall Street's top names. Michael Simbolest, who's
chairman of the Market Investment and Strategy for JP Morgan
Asset Management, added a caveat to a client presentation that
he made earlier this week, saying he'd withheld certain comments
with his firm and colleagues in mind. Now he called
(07:28):
the president's tariff plan a sledgehammer brute force approach, but
he produced a report last week that actually had several
blacked out passages from it, and in the colleague said
it was the first time ever he'd had to think
about what he was saying beyond how they reflected the
bank's views on markets and economics and smblists went on
to say that people are being held accountable for their
views and the things they say in ways they probably
(07:50):
shouldn't be, and went on to say, so I've said
most of what I wanted to.
Speaker 6 (07:54):
Say on this call, but not all of it.
Speaker 2 (07:58):
His comments are an illustration of the dilemma that's been
described by the former president of the American Civil Liberties
Union as a climate of anticipatory obedience. So people are
self censoring for fear of being targeted by the Trump administration,
and Adan Strawson says that's not unique to this White House,
but it is something that's worrying and it's yet another
minefield apart from the market turmoil that Corporate America is
(08:20):
having to navigate. You can read more in our reporting
on the subject on Bloomberg dot Com and on the Terminal. Well,
let's get into the latest developments on the tariff story
that's rocked markets. Donald Trump acknowledging transition problems as he
presses ahead with tariff's on China, which the White House
now says reach one hundred and forty five percent. Bimber
Compinion columnist to Karrishma Vasani is with me now for more, Korishima,
(08:42):
great to talk to you. The US upping the ante
in the trade war with China again. This one hundred
and forty five percent is the one hundred and twenty
five percent the President's announced on top of a twenty
percent Levey already in place from earlier this year. How
much further should we expect China to go and its response.
Speaker 9 (08:59):
We've already seen the tariffaction from China, and we've heard
very strong rhetoric from Beijing in terms of how they're
not going to give up without a fight. They will
see this fight to the end, and that kind of
nationalist rhetoric is something I think that you will consistently
see from the Chinese in terms of policy measures. There's
already evidence that some of that is taking place. There
(09:21):
was a meeting convened reportedly yesterday to discuss further stimulus
for the Chinese economy, and I think what will happen
in the days and weeks ahead is that you will
see more support domestically from the Chinese state to help
boost the economy, which no doubt will be taking a
huge hit from these tariffs. But I don't think that
(09:42):
means you will see capitulation from the Chinese, and I
think the main reason for that, as I've argued in
the column today, is that Si Jinping is in a
much better position both politically to and economically because of
the political system in China to withstand the pain that
these tariffs will bring. I think he will use this
opportunity to remind people in China that this is another
(10:04):
example of the US under the Trump administration trying to
keep China down.
Speaker 2 (10:11):
Are there any signs though, that Beijing could be willing
to negotiate with Donald Trump on this well.
Speaker 9 (10:18):
I thought it was interesting that Donald Trump, as he
went about increasing tariffs on China, he also appeared to
extend what I imagine they think is an olive branch,
but this idea that the Chinese will call him, that
there's going to be a phone call very soon words
to that effect. And you know, I do wonder what
the advice is that he's getting, because Sigin Ping isn't
(10:39):
going to show up at a meeting that isn't going
to benefit Siegin Ping. I mean, one Chinese academic was
saying to me yesterday that what China wants in all
of this is a little bit of respect. It's the
world's second largest economy, and it has huge relationships in
Asia and in Europe and is an integral part of
the US system. And for you know, the likes of
(11:03):
the Vice President have made comments about Chinese peasants. All
of that you know, doesn't win hearts and minds, does it?
Steven back in Beijing, and I think it will be
very difficult for the Chinese to agree to any sort
of meeting with Donald Trump without Beijing also setting the
terms and conditions of that meeting.
Speaker 2 (11:21):
What about the damage to the economy though in the meantime, Christma,
how much could be done beyond what we already know about?
Speaker 9 (11:29):
Well, it's hard to say at this point because it's
such a fast moving beast. But what we do know
from some of the analysis that our own teams have
done at Bloomberg Economics, that is as much as three
percent of GDP could be affected, and that you know
doesn't take into account on the Chinese side, I should say,
the increase in tariffs that we've seen just in the
(11:50):
last twenty four hours or so. On the American side,
you know, they're not spared either. You have a situation
where prices are no doubt going to rise, that's going
to feed into inflation expectations. That's going to be a
problem for the US FED at a time when you know,
there's already some data to suggest that Trump's approval ratings
may be affected by these higher prices. It is the
(12:12):
thing that he talked about during his campaign that you know,
he was going to be the person that was going
to make America great again and bring back manufacturing to
the United States. But the Chinese aren't losing the opportunity.
As again, I've discussed this in the column today to
poke fun at this idea. In fact, on Chinese social
media there have been memes circulating of Trump and JD.
(12:36):
Vance hunched over sewing machines in what appear to be
factories presumably making the shoes and garments that you know
have been so integral to the American consumption story, And
of course it evokes a laugh and a giggle. But
certainly the bigger message in all of this is it's
not going to be an easy ride for you, America
because you have depended on Chinese, cheap Chinese goods for decades.
Speaker 2 (13:00):
What about the international diplomatic strategy that cheating Ping is
adopting looking at other countries as well, He's visiting Southeast
Asia next week, said Schina Morning Post, talking about him
hosting EU leaders in July as well.
Speaker 9 (13:14):
Yeah, I think this is really interesting and really key,
and you know, if you think back to the First
Trade War in twenty eighteen, which I covered as well.
What really struck me at that point was the Chinese
were going out onto the global stage, Cajon Ping at
Davos talking about how China was the responsible global player.
China wants to keep the world rules based order intact,
(13:36):
and it's that again. I think that is the messaging
from the Chinese and these attempts at building these relationships
or strengthening them, I should say, you know, don't forget
that Southeastage is major trading partner is China. I think
this is an opportunity for Shijinping to say that, look,
we still want to do business. We're not going to
(13:56):
be unpredictable. We're not going to you know, tear up
the international rules based order the way Donald Trump has,
and I think that can be quite appealing, notwithstanding the caveat,
of course, that China uses international trade rules or any
rules to be fair, to sort of remake the world
to its advantage. But when you're faced with two superpowers steven,
(14:17):
both of them who are behaving badly, perhaps the one
that's not, you know, setting fire to the Glover economy
might be a better bet.
Speaker 2 (14:26):
Okay, Krishmavasani, Bloomberg opinion columnist, Thank you very much for
joining us. You can read Christma's latest piece at China
Won't Blink First and Fight with the US at Bloomberg
dot Com Forward Slash Opinion. Well, the dollars emerged as
the latest victim of this week's market turmoil, Bloomberg Dollar
Spot Index tumbling to a six month low as part
of a broader exodus from US assets. Let's bring in
(14:47):
our market support of Valerie Titel for more on this. Valerie,
can you just talk us through, first of all, the
scale of the moves that we've seen in the dollar,
because it's big.
Speaker 5 (14:56):
Well, I think yesterday really was some unprecedented damage to
US assets reputation, and to me, what's happening is that
every dollar asset, whether it's the dollar or treasuries, is
having some sort of risk premium now priced into that,
and that is going to cause a big reordering of
the global financial system. Quite frankly, Stephen, what happened yesterday
(15:19):
is that alongside an equity market tumble, we had a
crash in the US dollar. Dollar Swiss moved four percent
as people were fleeing the dollar going to other safe havens,
whether that was swissy, whether that was the euro or
the Japanese yen. The dollar did not catch a bid
with this risk off move, And if we look even
further under the hood, there is not a scramble into
(15:42):
dollar assets, which is what we historically have always seen
at times of high volatility, times of high uncertainty, we
see a move into the safe haven dollar dollar assets
or treasuries. That's really do linked this week, and I
think this week is going to go down in history
as the first week we really saw evidence in the
market of people questioning dollar assets and their safe haven status.
Speaker 2 (16:05):
Does this go beyond taking fright or or short term
moves based on these announcements, or could they signify what
should we be looking forward to think about if this
is a fundamental shift.
Speaker 5 (16:18):
Look, Frankly, I would also have my eye on the
treasury market. This is a fundamental shift in the demand
for dollar assets. So not only are we having foreign
buyers who are historically in the last few years have
been very over allocated dollar assets, we're seeing that normalize.
That's one thing, But the other thing that we're seeing
is the fact that Trump is ripping up global trade
(16:41):
is really posing questions over is there going to be
a long term structural demand for dollars like there has
been before the dollar's been the world's reserve currency. Alongside
that has also come the fact that all global trade
is denominated in dollars. So you attach those two things together,
less global trade, less for dollar assets, and the US
(17:02):
is going to lose its ability to fund its deficits easily.
Speaker 1 (17:05):
And essentially that.
Speaker 5 (17:06):
Means every month that goes by, every year that goes by,
it needs another incremental buyer of its assets in order
to fund the amount of treasuries that it's issuing to
the market. And right now, if you think that trade
between the US and China is coming to a standstill,
so is China's recycling of those dollars into treasury assets.
And with that could mean that structurally yields in the
(17:28):
US have to be a lot higher, and the US
in some way is going to act like the UK.
They have to rely on the foreign investment flows which
are no longer guaranteed, you know, relying on the kindness
of strangers. As I know they've put it in the
guilt market. But there is now going to be a
baked in premium for dollar assets because the bedrock of
(17:50):
the US dollar is now starting to be questioned.
Speaker 2 (17:52):
You mentioned the strengthening and the euro that's continuing in
trading today as well. What's the other read across that
we should be looking for in terms of the US
European markets today? If dollars, if investors are fleeing dollar assets,
does that mean that they're coming to Europe?
Speaker 5 (18:08):
I mean, that could be the effect. But this is
going to be you know, this is not just today.
This is something that's going to be impacted for the
next five years.
Speaker 1 (18:16):
Let's say it.
Speaker 5 (18:16):
We did necessarily see yesterday a big move into the
Swiss franc and let's be frank pun those Let's be frank.
Not every country wants to be the safe haven because
what comes to that is a stronger currency.
Speaker 6 (18:31):
We've seen the problems that's posed with the Swiss National
Bank in the past.
Speaker 5 (18:33):
Exactly right. But the thing is is, if this reputation
of dollar assets has been seriously damaged, it has to
go somewhere, whether that's the euro, whether that's the end,
but that could also pose big problems for these economies
who maybe not necessarily want that enormous flow of funds
coming into their economy.
Speaker 2 (18:50):
Balery Titel, our market supporter, thank you very much for
joining us with another dramatic day on markets. We're looking
at European stock futures pointing higher ahead of today's session. Now,
investors will be scaring company reports during this earning season
for clues as to how they're thinking about the trade war.
JP Morgan and Morgan Stanley kickoff Wall Street's earning season today,
as banks another major companies struggle to navigate Donald Trump's
(19:13):
policy shift. Bloomberg's Charlie Wells is here to help us
look ahead to that. Charlie, let's start with the banks, then,
I mean, is there anything in this report apart from
forward guidance that analysts are going to be looking at?
Speaker 1 (19:24):
Steven. It's all going to be about the future.
Speaker 10 (19:26):
And I think it's really telling that banks kickoff earning
season because you know, they're not in the direct.
Speaker 1 (19:32):
Line of fire of tariffs, but they're sort of in.
Speaker 10 (19:34):
The back of every other line of fire for every
industry and the economy just because they lend to so
many sectors, they lend to the consumer, and so the
read throughs are going to be enormous.
Speaker 1 (19:45):
As it starts.
Speaker 10 (19:46):
So you know, JP Morgan's CEO, Jamie Diamond, has kind
of been telegraphing this week, I think a lot of
the sentiment that we're likely to hear from other CEOs
in the industry, so, you know, in his annual letter
and in an interview on television midweek, he talked about
how you know, if this tariff chaos continues and these
statements were made before the tariff pause, you know, there
(20:06):
could be a recession. He talked about how you know,
on the consumer front, he doesn't see loan defaults, but
those could be likely.
Speaker 1 (20:14):
And so the picture that we're.
Speaker 10 (20:16):
Likely to see that in just a few hours is
one that's probably darker. But they have to really kind of,
you know, dance delicately here for a lot of reasons
market wise and increasingly politically.
Speaker 2 (20:28):
Yeah, indeed, we were talking a little bit earlier about
Michael Sambas's comments and that a client call earlier this
week as well aside from the trade war, though, what
else could surprise us.
Speaker 6 (20:38):
In these earnings?
Speaker 10 (20:39):
So traders are expected to have had and that's a
past construction, a really good quarter, you know, record revenue
from trading and a lot of the biggest banks. I
think they're slated to bring in the most that they
brought in and I think like seven years because there
was a lot of volatility, and we know that when
there's a lot of volatility that there's a.
Speaker 1 (20:58):
Lot of trading.
Speaker 10 (20:59):
But some common terry to look out on that front today,
I think is this issue that one Goldman analyst brought out,
which was have we reached peak trading?
Speaker 3 (21:07):
Right?
Speaker 10 (21:08):
Because if you get to a point where there's too
much volatility, participants start sitting on the sideline. So volatility
is good up to a point. We know also that
you know, we may see looking back to the prior
quarter some optics at some of the banks and capital
markets activity, and I think if there are significant beats
there that could provide a little bit of optimism. But
(21:29):
volatility is not good for dealmaking.
Speaker 6 (21:31):
Okay, So that's something else to watch out for as well.
Speaker 2 (21:34):
Bigger picture, Charlie, you've been reporting on this all week
as well about how corporate America is trying to navigate
all of these policy changes, as you say, both politically
and financially as well. I mean, how are these companies behaving,
acting making decisions at such an uncertain time. We know
that business confidence has been hit consumer confidence two in
(21:55):
the US. How are companies approaching this Stephen there's.
Speaker 10 (21:57):
A great big take out today in Bloe Lumberg about
this very dilemma that companies face because on the one hand,
they don't want to provide too much information in forward
guidance and then have to retract it. And we've seen
some moves similar to that in the past few days,
just because trade policy has been changing so rapidly. But
(22:18):
on the other hand, they don't want to provide too
little information to be too vague because in a lot
of ways that could leave a company vulnerable to the
whins of the market. They need to provide enough information
that analysts can act appropriately. So this is a real challenge.
And you know, I think a more skeptical take here
as well is that some of this ignorance on you know,
(22:39):
how trade could potentially be playing out for these firms,
some of that may be a little bit of a
cop out. Some analysts have been saying that because you know,
CEOs know what could happen to their companies, you know,
at least in the biggest of picture, and so they
may be kind of dodging some questions here, and so
I think I just said the word questions. I think
in these calls that we're going to hear not just
(22:59):
to day, but over the next few weeks, we should
be honing in on that point in the presentations when
analysts and journalists get to start asking questions. And I
think that part of these presentations is going to be
even more important because they can be really trenchant and
probably get to some topics that others that that CEOs
just couldn't.
Speaker 6 (23:19):
Well on that point.
Speaker 2 (23:20):
I mean, what Michael Samblist was saying in his note,
this idea that you know, he wasn't saying everything that
he wanted to, is that the sort of reticence we
should be expecting from corporate.
Speaker 1 (23:32):
Leaders, Stephen.
Speaker 10 (23:33):
I think we should, and I think that there is
a real fear that executives get called out. You know,
CEOs of banks, certain firms as well have been called
out by the administration, and there is this fear that
kind of saying the wrong thing, presenting the wrong information
could you know, could could upset the administration. And that
(23:54):
is something that analysts Somemblists in particular, focused on this.
Speaker 1 (23:57):
Past week is something that they're not used to.
Speaker 2 (24:01):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 11 (24:07):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 2 (24:13):
You can also listen live each morning on London Dab Radio,
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Speaker 11 (24:19):
Our flagship New York station, is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
Speaker 6 (24:27):
I'm Caroline Hepka and I'm Stephen Carroll.
Speaker 2 (24:29):
Join us again tomorrow morning for all the news you
need to start your day right here on Bloomberg day
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