April 7, 2025 • 26 mins
On today's podcast:
1) The carnage in financial markets unleashed by President Donald Trump’s tariffs is continuing unabated as equities get pummeled and US stock futures show that last week’s $5 trillion wipeout isn’t over.
2) President Donald Trump and his economic team dismissed investors’ fears of inflation and recession, offering no apologies for the market turmoil sparked by sweeping global tariffs and defiantly insisting a boom is on the horizon.
3) Traders expect the Federal Reserve to slash interest rates another five times this year as the US administration’s trade tariffs ignite fears of a global recession.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg, Audio Studios, Podcasts, radio news.
Speaker 2 (00:10):
Good morning, I'm Nathan Hager and I'm Karen Moscow. Here
are the stories we're following today, Karen.
Speaker 3 (00:15):
Markets around the world are headed for a third day
of deep selling after President Donald Trump's tariff announcement on Wednesday,
but the President and his team appear undeterred by the
investor reaction. Trump says his trade policies are already paying
off because of the tariffs.
Speaker 4 (00:32):
We have seven trillion dollars already committed to be invested
in the United States, building auto plants, building chip companies,
and all sorts of companies are coming into our country
in levels that we've never seen before.
Speaker 3 (00:46):
President Trump spoke a board Air Force one last night,
as heard here on Bloomberg, and his economic team fanned
out across the Sunday political shows to defend tariffs. Treasury
Secretary Scott Besson said he's not worried about the selloff.
Speaker 5 (01:00):
Record volume on Friday, and everything is working very smoothly,
so the American people they can be very.
Speaker 6 (01:10):
Take great comfort in that.
Speaker 3 (01:12):
Treasury Secretary Scott Bessen appeared on NBC's Beat the Press.
Speaker 2 (01:17):
Well Nathan on ABC's This Week National Economic Council Director
Kevin Hasset acknowledge that tariffs could boost inflation in the
short term.
Speaker 7 (01:25):
Well, there might be some increase in prices, but the
fact is that if there were going to be a
heavy burden on the US consumer, then this trade deficit
that for thirty years we've seen, really since China entered
the WTO would be something that would have gone down.
Speaker 2 (01:38):
And on CBS has faced the nation. Commerce Secretary Howard
Lutnik said the so called reciprocal tariffs on some sixty
nations will arrive on schedule this Wednesday.
Speaker 8 (01:47):
The United States of America is going to protect the
people who invest in America. This is the economy of
the world. We are the consumer of the world, and
companies need to build it here and we will protect
them from building it here.
Speaker 2 (02:02):
And you can hear face the Nation this week and
meet the Press every Sunday on Bloomberg Radio.
Speaker 3 (02:07):
And Karen As the White House continues that defiant tone
markets continue the sell off, and several experts are weighing in.
This morning, Bloomberg's John Tucker begins our global team coverage
in New York.
Speaker 9 (02:18):
John, good morning, and good morning, Nathan Limmy Cantrell of
PIMCO says tariffs aren't going away. As she puts it.
They are high and they will be high for a while.
Speaker 2 (02:28):
There's going to be stickiness to these tariffs, and even
if there are some negotiations and some concessions along the way,
I think the direction of travel here is very clear.
Speaker 9 (02:38):
Mohammad l Arian, president of Queen's College, Cambridge, says uncertainty
dominates the markets. The hardest thing for the markets right
now is not only to try to evaluate what the
destination is, but how Bumpyle the joining edge fund billionaire
Stanley Drunken Miller and Bill Ackman are slamming the tariffs.
Ackman of Pershing Square, a vocal Trump supporter, says bluntly,
(03:00):
the new trade regime is a mistake. He added, this
is not what we voted for. Karen George's, an equity
fund manager at Echovi, says it may feel like COVID again,
but this sell off is man made. A strategist at
Morgan Stanley say investors should be prepared for the S
and P five hundred to drop a further seven to
eight percent. If the S and P five hundred falls
(03:21):
another five percent today, this will mark the worst stretch
since the market meltdown of nineteen eighty seven, and futures
do indicate last week's five trillion dollars wipeout isn't over,
you knoww York. I'm John Tucker, Bloomberg Radio.
Speaker 2 (03:33):
All right, John, thank you. Checking some of the stocks
on the decline this morning. Shares A Tesla down about
seven percent, in Video off by four and a half percent,
and shares A Microsoft, Meta, Amazon, and Alphabet down roughly
four percent.
Speaker 3 (03:46):
And Karen Betts are increasing on Wall Street that the
Federal Reserve will need to take action and cut rates.
Sploomberg's Lisa Matteo continues our team coverage.
Speaker 6 (03:54):
Lisa Hi, Good morning, Nathan.
Speaker 10 (03:56):
So, traders now expect policymakers to slash and just rates
another five times this year. According to overnight interest rate swaps,
markets pricing in one hundred and twenty five basis points
of easing by year end, which is equal to five
quarter point moves now. Bob Michael, global head of fixed
income at JP Morgan Asset Management, says the Fed can't
sit on the sidelines. He also added that they may
(04:18):
have to cut interest rates before the next meeting in May.
Speaker 5 (04:21):
We already know that businesses in the lower rated end
of the quality spectrum have been struggling. When you look
at private credit and look at the percentage of amend
and extends, it's very high. What happens when their cost
of funding just ratcheted up another couple percent and they're
going to see top flying growth come down as well
(04:42):
as their input costs go up. I think this is
a serious moment now.
Speaker 10 (04:46):
TD Securities also pulled forward its policy easing expectations. In
a note, strategist Oscar Munos wrote that the brokerage is
advancing its forecast for the rate cut to June from
July and now expects the committee will ease rates at
each meeting through May twenty six. But at all experts
feel the same way you have. In a post on
X Double Line Capital's Jeffrey Gunlock, he said he does
(05:07):
not see a single cut anytime soon unless the losses
and risk assets greatly increase. Lisa Miteo Bloomberg.
Speaker 2 (05:15):
Radio, all right, Lisa, thank you. Both stocks are selling
off around the world. The hardest hit this morning is
in Asia, where stocks in Hong Kong plunged and stocks
in Japan fell into a bear market. Let's get the
very latest and check out with the Bloomberg steal thesis.
Who continues our global team coverage in Hong Kong and
Jill please give us an update on the carnage.
Speaker 11 (05:34):
Good morning, Karen and Nathan. Yes, it's been an absolute
bloodbath in Asia this morning, throughout the entire day, really
the NIKA two two five stock average and Japan slid
into a market. As you mentioned that blue chip indecks
closing down seven point eight percent, experiencing its first bear
market since August. That's back when the Bank of Japan
unexpectedly hiked rates. We're also seeing quite a lot of
(05:57):
fallout in China. That's where closely watched gage Chinese shares
in Hong Kong A tumbled nearly fourteen percent. That was
also entering a bear market. We've seen some similar stories
in Taipei where TSMC really led losses. India has also experienced,
you know, some fallout today. I mean, really, what investors
here in Asia are experiencing. What they're trying to gauge
(06:18):
here is not just the impact from these tariffs, the
Donald Trump tariffs, but also what kind of reaction we're
really seeing in region it's really China. I think that's
really kind of you know, led this region here. Just
a couple of days ago, launched a bunch of retaliatory efforts,
including measures to introduce a thirty four percent tariff on
all American goods starting April tenth. That sort of led
to fears that this trade war is really just going
(06:41):
to escalate. Donald Trump has really sort of hit back
against that, you know, ended up sort of calling off
what he said was a deal to reach a sale
for TikTok. So you're really seeing a lot that's developing there.
We'll have to see whether this continues to spread out
through the rest of the week. We're still waiting to
see how other governments in Asia are ultimately going to
respond here, Hong Kong, Jill Esis, Bloomberg News.
Speaker 3 (07:01):
Jill, thank you. Stacks in Europe are feeling the pain
as well. This morning, Bloomberg's U and Pods continues our
global team coverage from London.
Speaker 6 (07:10):
You and good morning. What's the latest there, Nathan and Karen.
Speaker 12 (07:13):
European investors will have had a heads up from trading
in Asia that today was not going to be a
good start to the week. Stop markets around the region
opened in the reds and the stampede from global equities
gather momentum. The stocks the ten hundred currently down five
point nine percent in the next now less than three
percentage points away from a bear market. Surveying the damage
around the region, the Dacks in Germany off six point
(07:34):
four percent, the CAC in France down six point three percent,
and the foots are here in London down four point
eight percent. All twenty industry groups trading lower. Defensive sectors
not proving a place to hide out this morning. Worst
hits as things stand, energy, industrial goods, and technology stocks.
If any trader who can take their eyes off their
plummeting investments this morning worth watching for. Headlines today coming
(07:56):
from Luxembourg. European Union trade ministers are meeting there to
discuss us their response to President Trump's tariffs, Spain's economy
minister telling Bloomberg today that the EU needs to be
open to all potential means of retaliation.
Speaker 6 (08:09):
In London, I'm youw in pots.
Speaker 2 (08:10):
Bloomberg Radio, all right you and thank you. But we're
also seeing some big moves in the commodities markets this morning,
and checking oil right now, and I'm exscurute oils down
three point eight percent. It's at fifty nine dollars sixty
cents a barrel. Goldman this morning cut its oil forecast
for the second time in less than a week, as
the escalating trade war raises recessionary risks. It's been a
very volatile morning for copper. At one point, the metal
(08:32):
was heading for its worst three day routes since the
Great Financial Crisis. It was down more than eight percent.
It has since trim those declines, and we're seeing more
stability in the gold market. Right now, gold or Comax
gold is up a third of up percent. It's at
three forty six dollars twenty cents an ounce. Time now
(08:53):
for a look at some of the other stories making
news in New York and around the world, and for
that we're joined by Bloomberg's Michael Barr Michael, Good Morning,
Good morning.
Speaker 13 (08:59):
Care and rivers rose and flooding worsen across the South
and Midwest, threatening communities already water log and badly damaged
by days of heavy rain and storms that killed at
least eighteen people from Texas to Ohio. Utilities scrambled to
shut off power and gas, while cities deployed sandbags to
protect homes and businesses. Forecasters warned that flooding could persist
(09:24):
for days, especially in Kentucky, Tennessee, and Alabama. De Wi
West is the public information officer for Bowling Green, Kentucky.
Speaker 14 (09:32):
This is yet another heartbreaking weather event for the city
of Bowling Green and Warren County. While we have had
no loss of life reported, loss of property is expected
to be substantial.
Speaker 13 (09:43):
Some rivers that innundated towns rose to near record levels
and were expected to cress today. Israeli Prime Minister Benjamin
at Yahoo will visit the White House today to meet
with President Trump. They are expected to talk about Gaza,
tariffs and other issues. Bloomberg will bring you comments to
reporters with Trump and det and Yahoo starting at two
(10:03):
thirty pm Wall Street Time. Among the more than two
hundred people the Trump administration deported to an Il Salvador
prison last month is Kilmar Abrego Garcia of Maryland. Trump
officials admit he was deported due to an administrative error,
but have signaled they may not comply with a separate
judges order to return Garcia to the US by eleven
(10:25):
to fifty nine pm tonight. Arguing the judge does not
have jurisdiction, and the President says Garcia is a gang member,
just not with TDA.
Speaker 4 (10:34):
They say, oh, we made a mistake because he's not
with them, He's with MS thirty.
Speaker 6 (10:39):
Bring him back, Bring them back. Ms RT's a very
bad group.
Speaker 13 (10:44):
Garcia's family says he is not with any gang. Health
Secretary Robert F. Kennedy Junior now throwing his support behind
the vaccine. It comes after he attended the funeral over
the weekend of a child who died from the measles.
The US has now seen more than six hundre it
confirmed measles cases across twenty one states. Global news twenty
(11:04):
four hours a day and whenever you want it with
the Bloomberg News. Now. I'm Michael Barr, and this is
Bloomberg Kron.
Speaker 2 (11:10):
All right, Michael Barr, thank you all. Coming up, We're
gonna have more on the market sell off. We are
speaking with Morgan Stanley's Andrew Sheets. But first it's time
for the Bloomberg Sports Update with John Stashauer.
Speaker 6 (11:26):
John, Good morning, Good morning, Karon.
Speaker 15 (11:27):
They call kennetick it they capital of college basketball. Why
not eighteen national championships for the last thirty years. The
Yukon men won the NCAAs the last two seasons. The
women at one them since twenty sixteen, but they would
dominant this tournament, six wins by an average of thirty
three points, final four wins by thirty four and twenty
three points in Tampa. They did throned in South Carolina.
(11:49):
It's the twelfth title for their legendary coach, Gino Orima.
Speaker 16 (11:52):
Stan Anthony and I went for a walk right, and
as I'm walking outside the hotel, at one point, I said,
you know, hey, dear God, you know like I don't
need one of these damn my players do man? Can
you can do it for them?
Speaker 15 (12:09):
The men's title game tonight in San Antonio, Florida against Houston.
Who comes off that remarkable rally against Duke at Ubs
Arena Hockey history.
Speaker 6 (12:18):
Oh that skin has any stares.
Speaker 8 (12:21):
He stares Alex So that's kid Store Saint ninety five.
Speaker 15 (12:27):
There's a goal scoring champion w JFK. Move over, Wayne Gretzky,
who was there to see actually the Capitol's only goal.
They lost to the Island. It was four to one
at the Garden. Welcome back Jalen Brunson missed fifteen games
at injurn ankle.
Speaker 6 (12:41):
The next win nine and six.
Speaker 15 (12:42):
With the captain back, they beat Phoenix one twelve ninety eight,
their fiftieth win. The Nets lost it Toronto. The Celtics
blew out Washington late last night big baseball news, it
was believed that Vladivier Guerrero Junior would be the next
winter's big free agent. He's staying with the Blue Jays
a fourteen year deal for half a billion. The Mets
finished the sweep of Toronto two one at Cityfield.
Speaker 6 (13:02):
The Yankees in Pittsburgh rallied.
Speaker 15 (13:04):
With two outs of Nineteenning scored three months to tie
the game, but the Pirates won five to four and eleven.
The Nationals won the Red Sox at doubleheader sweep of
the Cardinals first and tennans and then last night eighteen
to seven. The Socks had went five in.
Speaker 1 (13:16):
A row coast to coast on Bloomberg Radio, nationwide on
Sirius XM, and around the world on Bloomberg dot Com
and the Bloomberg Business app. This is Bloomberg Daybreak.
Speaker 6 (13:29):
Good morning, I'm Nathan Hager.
Speaker 3 (13:30):
The global stock sell off that is greeted President Trump's
Tarff announcement is reviving Black Monday memories from any on
Wall Street, But the President is rejecting market concerns that
his trade barrage will send the US into a recession.
Speaker 6 (13:43):
What's gonna happen with the market.
Speaker 4 (13:45):
I can't tell you. What I can tell you our
country has gotten a lot stronger, and eventually it'll be
a country like no other. It'll be the most dominant
country economically in the world.
Speaker 3 (13:57):
And that was the President speaking of Board Air Force
one last night. This morning, we were joined by Bloomberg
Markets reporter Valerie Titel as we watch the selloff extend
into a third trading session following the rose Guard announcement. Valerie,
the President says he might not be able to predict
what the market's doing, but the market seems to be
sending a pretty loud message to the President this morning.
Speaker 17 (14:18):
Oh yeah, and I want to echo the flashbacks to
Black Monday. If this move in the S and P
five hundred futures holds into the clothes, we are looking
at the worst three days for the US equity market
since nineteen eighty seven, when it dropped twenty four point
six in a matter of two days, So keep an
eye on those kind of superlatives. That just really puts
(14:39):
it into perspective. Black Monday, GFC, COVID, that is what
people are comparing the last market drop to. And Nathan,
the one thing that's in stark contrast to what's going
on now versus those other instances in the past is
during those other instances you had the monetary easing floodgates open,
the fiscal easing floodgates open after Black Monday, during the
(15:01):
Great Financial Crisis, and during COVID. But what stands now
is a start contrast, so that we have a FED
who says that they are going to be patient and
wait for further clarity. Mike Wilson over at Morgan Stanley
noting that the S and P five hundred could drop
another seven to eight percent if the FED remains on
hold and these tariffs continue in the market.
Speaker 3 (15:22):
But while we're seeing these selling continuing here on Wall Street,
it looks, at least at this point this morning, like
the sell off is even worse overseas.
Speaker 6 (15:32):
Valerie, Yeah, that's right.
Speaker 17 (15:33):
And the European open, Nathan, was quite shaky. We had
the dacks drop ten percent at the open that's its
third biggest gap lower in history. We're also seeing credit
spreads widen across a high yield and investment grade in Europe,
and that's leading to a very punishing session for European banks.
SX SEVNY is down six point seven percent and over
(15:54):
the last three days, Nathan, it's nearing a near twenty
percent slide in European banks in the last three sessions.
Speaker 6 (16:01):
It's hard not to notice Valerie.
Speaker 3 (16:03):
This more than thirteen percent close for the Hangsang in
Hong Kong. The Asian session has been absolutely brutal. As
China sounds like it's not willing to back down either.
Speaker 17 (16:14):
Yeah, it was a bloodbath that HSI index, the Hangksang
in Hong Kong dropping thirteen percent, Nathan. That's its worst
one day drop since the Asian Financial Crisis of nineteen
ninety seven. The Broader Asia Index, the MSCI Asia Pacific
had its worst one day drop since October two thousand
and eight. We had the Nicky entering into bear market territory,
(16:35):
and the eight shares that trade in Hong Kong also
down more than twenty percent from peak. The one thing though,
that may be a solace for those em Asian nations
is the fact that we are not seeing a rip
roaring rally in the dollar, and that could be you know,
one aspect of perhaps positivity for these nations who in
(16:55):
normal times of economic instability they have to deal with
capital flight and their currencies depreciating strongly versus the dollar.
We at least are not seeing that as yet.
Speaker 3 (17:06):
Bloomberg Marketers reporter Valerie Titel, thank you for this as
we continue to watch the global market sell off. Where
you're joined now by Andrew Sheets, chief cross assets strategist
at Morgan Stanley. Andrew, thank you so much for joining
us this morning. And Valerie mentioned the call from your
colleague at Morgan Stanley, Mike Wilson, the chief US equity strategist,
saying stocks could fall another seven to eight percent if
(17:29):
the tariff risk doesn't subside in the FED stays on hold.
Speaker 6 (17:33):
Is that your call as well? Good morning, Yeah, good morning.
Speaker 18 (17:35):
So I think, unfortunately you do have the confluence of
a number of quite negative factors where it is hard
to see enough offsets you had before the tariff announcement.
I think already a deteriorating earnings picture in the US
with negative revisions, You had deterioration and leading economic indicators
(17:57):
like consumer confidence, and then you also had signs of
inflation rising. You know, recalled that the last three prints
for core PC, the Fed's preferred measure, have increased for
three straight months. So we walked into this tarif announcement,
I think, with a quite challenging macro backdrop. And then
the tariffs that we got were much larger than expected.
(18:20):
They were, you know, I think, much more severe than
our forecast than many forecasters has penciled in. And so
that creates additional downside risk to growth, additional upside risk
to inflation, and also this challenging dynamic where it's not
clear that either valuations or a policy change is right
(18:41):
there for support. So I thought, your colleague, you know
what they just mentioned about. You know, previously under some
of this weakness, you had fiscal stimulus or you had easing.
We think that's going to be much more more difficult.
The FED is missing much more on their inflation mandate
than they're missing on the jobs part of their mandate. Right,
we had actually a pretty good payroll number on Friday,
(19:03):
whereas core PCE is two point eight percent in the
US we think that makes it quite difficult for the
FED to cut. We think that the FED will cut
far less than the market is expecting this year at
Morgan Stanley, and valuations still remain elevated. The S and
P is still at nineteen times. So I think you
put all that together, and while it's always difficult to
(19:23):
be too precise, that still means that there's potential for downside.
Speaker 3 (19:27):
So then, Andrew, what do you make of the move
that we're seeing in the money markets. The money markets
pricing in fully five FED rate cuts this year and
even some calls now for an emergency cut before the
next meeting next month.
Speaker 18 (19:40):
Yeah, we disagreed with that. We do think markets are
looking at the equity weakness. As you mentioned, this is historic.
It's one of the largest three day drawdowns that we've
seen in a very long period of time, and you know,
I think markets are understandably saying, well, a drawdown of
that measure would naturally invite a response, But our view
is that that will be much more difficult that inflations
(20:03):
in a more difficult place. And because it's I think
it's also not clear that FED rate cuts would necessarily
address the issue. The uncertainty from tariffs. The costs of
tariffs are not easily offset by say, you know, an
emergency twenty five or fifty basis point rate cut. The
issues go deeper. So you know, we think that the
(20:24):
Fed will will need to and ultimately stay more focused
on its mandate unless we see more seizure or tightness
in say credit issuance markets, which we just haven't seen yet.
Speaker 3 (20:36):
Well, what do you make of the widening and credit
spreads that we've started to see now in Asia and
in Europe.
Speaker 18 (20:43):
Yeah, So, I think what's fascinating is that I think
credit has a reputation, I like to think, a well
earned reputation of usually being an early indicator. But in
this cycle that has not been the case. Credit has
been quite slow to catch up to weakness that has
been in the equity market for some time. And I
think that speaks to a credit cycle that is entering
(21:07):
this downturn in a better place. You know, companies were
somewhat more cautious and less aggressive coming into this m
and A was low. Balance sheet leverage has been stable,
so I do think credit remains a follower here. I
don't think that we should necessarily see credit as a
leading indicator. I think it's following the broader uncertainty around
(21:27):
the growth and policy that's coming from the administration and
these questions around the Fed. But I think what we're
seeing from credit should be seen as a catching up.
You know, even after the moves this morning, we're really
kind of just back to average levels of spreads. We
think that's kind of very reasonable given the risks that
are surrounding the market.
Speaker 3 (21:46):
We're speaking with andrews Sheets, chief cross assets strategist at
Morgan Stanley as we continue to monitor this global stock
sell off and flight, particularly this morning into treasuries, we're
seeing gains across the curve in the treasuries market.
Speaker 6 (22:01):
Andrew, where do you reallocate?
Speaker 3 (22:03):
How do you advise clients to make moves in this environment?
Speaker 18 (22:07):
Well, so, we do think that move in interest rates
is correct that if the odds of a recession are rising,
and I think that, unfortunately, is what is happening, given
these risks to growth, and also the potential that the
Fed cannot react as quickly to those growth risks because
inflation is persistent, you know, we think the market will
(22:30):
will respond to that by lowering interest rates, especially you know,
kind of somewhat further further out the curve. So you know,
we do think yields will will fall here further in
the US and in the UK and in Germany.
Speaker 15 (22:43):
And you know, I.
Speaker 18 (22:44):
Think that's also something that if we look back to
say twenty eighteen, you know, in the fourth quarter of
twenty eighteen, you also had a large draw down. You know,
that was also somewhat related to tariff uncertainty, it was
related to the FED the administration not shift policy as
quickly as the market was hoping they would. You know,
real interest rates in the US, real interest rates on
(23:07):
ten year government bonds are still much higher, you know,
more attractive than they were during that episode at the
worst part of that episode. While you know, equity valuations
in the US today are still much more expensive than
at the worst part of that episode. So you know,
I still think that if if investors are worried about
growth picking up, then you know, we still think bonds
(23:29):
offer kind of reasonable value here, and we think that
that's the direction that reallocation will continue in.
Speaker 3 (23:34):
If we do continue to see stocks and bond yields fall,
what does that mean for financial conditions?
Speaker 6 (23:40):
What could it mean for the FED and then that regard.
Speaker 18 (23:43):
So, you know, financial conditions are tightening obviously, you know,
you have some push and pull here with with with
equities going down, you know, but also rates coming down.
But I think that the challenge for the FED is
it's not clear that those financial conditions are excessively tight.
You know it, spreads today are kind of near the
long run average. That's that's fine. You know, the S
(24:05):
and P has still roughly nineteen times forward earnings that
that does not seem like an excessive level of equity
risk premium. That would suggest some sort of market breakage. So,
you know, and I think you still have credit markets
where you know, you have credit markets have been open,
it's been possible to issue. You know, the latest Senior
(24:26):
Loan Officer survey suggested that credit standards were loosening a
bit in the US rather than tightening. So I think
it's kind of hard to look at that full spread
of financial conditions and say that there's something here that
invites a really large shift. Again, we could get it,
(24:46):
but I don't think you've seen it yet, And especially
for a FED that is is also dealing with inflation
that's above its target, is dealing with inflation expectations that
have been going up significantly. You know, we think that
that is going to provide a level of caution that
prevents this This larger intervention.
Speaker 2 (25:02):
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Speaker 3 (25:11):
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Speaker 6 (25:50):
And I'm Nathan Hager.
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Join us again tomorrow morning for all the news you
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Speaker 2 (00:10):
Good morning, I'm Nathan Hager and I'm Karen Moscow. Here
are the stories we're following today, Karen.
Speaker 3 (00:15):
Markets around the world are headed for a third day
of deep selling after President Donald Trump's tariff announcement on Wednesday,
but the President and his team appear undeterred by the
investor reaction. Trump says his trade policies are already paying
off because of the tariffs.
Speaker 4 (00:32):
We have seven trillion dollars already committed to be invested
in the United States, building auto plants, building chip companies,
and all sorts of companies are coming into our country
in levels that we've never seen before.
Speaker 3 (00:46):
President Trump spoke a board Air Force one last night,
as heard here on Bloomberg, and his economic team fanned
out across the Sunday political shows to defend tariffs. Treasury
Secretary Scott Besson said he's not worried about the selloff.
Speaker 5 (01:00):
Record volume on Friday, and everything is working very smoothly,
so the American people they can be very.
Speaker 6 (01:10):
Take great comfort in that.
Speaker 3 (01:12):
Treasury Secretary Scott Bessen appeared on NBC's Beat the Press.
Speaker 2 (01:17):
Well Nathan on ABC's This Week National Economic Council Director
Kevin Hasset acknowledge that tariffs could boost inflation in the
short term.
Speaker 7 (01:25):
Well, there might be some increase in prices, but the
fact is that if there were going to be a
heavy burden on the US consumer, then this trade deficit
that for thirty years we've seen, really since China entered
the WTO would be something that would have gone down.
Speaker 2 (01:38):
And on CBS has faced the nation. Commerce Secretary Howard
Lutnik said the so called reciprocal tariffs on some sixty
nations will arrive on schedule this Wednesday.
Speaker 8 (01:47):
The United States of America is going to protect the
people who invest in America. This is the economy of
the world. We are the consumer of the world, and
companies need to build it here and we will protect
them from building it here.
Speaker 2 (02:02):
And you can hear face the Nation this week and
meet the Press every Sunday on Bloomberg Radio.
Speaker 3 (02:07):
And Karen As the White House continues that defiant tone
markets continue the sell off, and several experts are weighing in.
This morning, Bloomberg's John Tucker begins our global team coverage
in New York.
Speaker 9 (02:18):
John, good morning, and good morning, Nathan Limmy Cantrell of
PIMCO says tariffs aren't going away. As she puts it.
They are high and they will be high for a while.
Speaker 2 (02:28):
There's going to be stickiness to these tariffs, and even
if there are some negotiations and some concessions along the way,
I think the direction of travel here is very clear.
Speaker 9 (02:38):
Mohammad l Arian, president of Queen's College, Cambridge, says uncertainty
dominates the markets. The hardest thing for the markets right
now is not only to try to evaluate what the
destination is, but how Bumpyle the joining edge fund billionaire
Stanley Drunken Miller and Bill Ackman are slamming the tariffs.
Ackman of Pershing Square, a vocal Trump supporter, says bluntly,
(03:00):
the new trade regime is a mistake. He added, this
is not what we voted for. Karen George's, an equity
fund manager at Echovi, says it may feel like COVID again,
but this sell off is man made. A strategist at
Morgan Stanley say investors should be prepared for the S
and P five hundred to drop a further seven to
eight percent. If the S and P five hundred falls
(03:21):
another five percent today, this will mark the worst stretch
since the market meltdown of nineteen eighty seven, and futures
do indicate last week's five trillion dollars wipeout isn't over,
you knoww York. I'm John Tucker, Bloomberg Radio.
Speaker 2 (03:33):
All right, John, thank you. Checking some of the stocks
on the decline this morning. Shares A Tesla down about
seven percent, in Video off by four and a half percent,
and shares A Microsoft, Meta, Amazon, and Alphabet down roughly
four percent.
Speaker 3 (03:46):
And Karen Betts are increasing on Wall Street that the
Federal Reserve will need to take action and cut rates.
Sploomberg's Lisa Matteo continues our team coverage.
Speaker 6 (03:54):
Lisa Hi, Good morning, Nathan.
Speaker 10 (03:56):
So, traders now expect policymakers to slash and just rates
another five times this year. According to overnight interest rate swaps,
markets pricing in one hundred and twenty five basis points
of easing by year end, which is equal to five
quarter point moves now. Bob Michael, global head of fixed
income at JP Morgan Asset Management, says the Fed can't
sit on the sidelines. He also added that they may
(04:18):
have to cut interest rates before the next meeting in May.
Speaker 5 (04:21):
We already know that businesses in the lower rated end
of the quality spectrum have been struggling. When you look
at private credit and look at the percentage of amend
and extends, it's very high. What happens when their cost
of funding just ratcheted up another couple percent and they're
going to see top flying growth come down as well
(04:42):
as their input costs go up. I think this is
a serious moment now.
Speaker 10 (04:46):
TD Securities also pulled forward its policy easing expectations. In
a note, strategist Oscar Munos wrote that the brokerage is
advancing its forecast for the rate cut to June from
July and now expects the committee will ease rates at
each meeting through May twenty six. But at all experts
feel the same way you have. In a post on
X Double Line Capital's Jeffrey Gunlock, he said he does
(05:07):
not see a single cut anytime soon unless the losses
and risk assets greatly increase. Lisa Miteo Bloomberg.
Speaker 2 (05:15):
Radio, all right, Lisa, thank you. Both stocks are selling
off around the world. The hardest hit this morning is
in Asia, where stocks in Hong Kong plunged and stocks
in Japan fell into a bear market. Let's get the
very latest and check out with the Bloomberg steal thesis.
Who continues our global team coverage in Hong Kong and
Jill please give us an update on the carnage.
Speaker 11 (05:34):
Good morning, Karen and Nathan. Yes, it's been an absolute
bloodbath in Asia this morning, throughout the entire day, really
the NIKA two two five stock average and Japan slid
into a market. As you mentioned that blue chip indecks
closing down seven point eight percent, experiencing its first bear
market since August. That's back when the Bank of Japan
unexpectedly hiked rates. We're also seeing quite a lot of
(05:57):
fallout in China. That's where closely watched gage Chinese shares
in Hong Kong A tumbled nearly fourteen percent. That was
also entering a bear market. We've seen some similar stories
in Taipei where TSMC really led losses. India has also experienced,
you know, some fallout today. I mean, really, what investors
here in Asia are experiencing. What they're trying to gauge
(06:18):
here is not just the impact from these tariffs, the
Donald Trump tariffs, but also what kind of reaction we're
really seeing in region it's really China. I think that's
really kind of you know, led this region here. Just
a couple of days ago, launched a bunch of retaliatory efforts,
including measures to introduce a thirty four percent tariff on
all American goods starting April tenth. That sort of led
to fears that this trade war is really just going
(06:41):
to escalate. Donald Trump has really sort of hit back
against that, you know, ended up sort of calling off
what he said was a deal to reach a sale
for TikTok. So you're really seeing a lot that's developing there.
We'll have to see whether this continues to spread out
through the rest of the week. We're still waiting to
see how other governments in Asia are ultimately going to
respond here, Hong Kong, Jill Esis, Bloomberg News.
Speaker 3 (07:01):
Jill, thank you. Stacks in Europe are feeling the pain
as well. This morning, Bloomberg's U and Pods continues our
global team coverage from London.
Speaker 6 (07:10):
You and good morning. What's the latest there, Nathan and Karen.
Speaker 12 (07:13):
European investors will have had a heads up from trading
in Asia that today was not going to be a
good start to the week. Stop markets around the region
opened in the reds and the stampede from global equities
gather momentum. The stocks the ten hundred currently down five
point nine percent in the next now less than three
percentage points away from a bear market. Surveying the damage
around the region, the Dacks in Germany off six point
(07:34):
four percent, the CAC in France down six point three percent,
and the foots are here in London down four point
eight percent. All twenty industry groups trading lower. Defensive sectors
not proving a place to hide out this morning. Worst
hits as things stand, energy, industrial goods, and technology stocks.
If any trader who can take their eyes off their
plummeting investments this morning worth watching for. Headlines today coming
(07:56):
from Luxembourg. European Union trade ministers are meeting there to
discuss us their response to President Trump's tariffs, Spain's economy
minister telling Bloomberg today that the EU needs to be
open to all potential means of retaliation.
Speaker 6 (08:09):
In London, I'm youw in pots.
Speaker 2 (08:10):
Bloomberg Radio, all right you and thank you. But we're
also seeing some big moves in the commodities markets this morning,
and checking oil right now, and I'm exscurute oils down
three point eight percent. It's at fifty nine dollars sixty
cents a barrel. Goldman this morning cut its oil forecast
for the second time in less than a week, as
the escalating trade war raises recessionary risks. It's been a
very volatile morning for copper. At one point, the metal
(08:32):
was heading for its worst three day routes since the
Great Financial Crisis. It was down more than eight percent.
It has since trim those declines, and we're seeing more
stability in the gold market. Right now, gold or Comax
gold is up a third of up percent. It's at
three forty six dollars twenty cents an ounce. Time now
(08:53):
for a look at some of the other stories making
news in New York and around the world, and for
that we're joined by Bloomberg's Michael Barr Michael, Good Morning,
Good morning.
Speaker 13 (08:59):
Care and rivers rose and flooding worsen across the South
and Midwest, threatening communities already water log and badly damaged
by days of heavy rain and storms that killed at
least eighteen people from Texas to Ohio. Utilities scrambled to
shut off power and gas, while cities deployed sandbags to
protect homes and businesses. Forecasters warned that flooding could persist
(09:24):
for days, especially in Kentucky, Tennessee, and Alabama. De Wi
West is the public information officer for Bowling Green, Kentucky.
Speaker 14 (09:32):
This is yet another heartbreaking weather event for the city
of Bowling Green and Warren County. While we have had
no loss of life reported, loss of property is expected
to be substantial.
Speaker 13 (09:43):
Some rivers that innundated towns rose to near record levels
and were expected to cress today. Israeli Prime Minister Benjamin
at Yahoo will visit the White House today to meet
with President Trump. They are expected to talk about Gaza,
tariffs and other issues. Bloomberg will bring you comments to
reporters with Trump and det and Yahoo starting at two
(10:03):
thirty pm Wall Street Time. Among the more than two
hundred people the Trump administration deported to an Il Salvador
prison last month is Kilmar Abrego Garcia of Maryland. Trump
officials admit he was deported due to an administrative error,
but have signaled they may not comply with a separate
judges order to return Garcia to the US by eleven
(10:25):
to fifty nine pm tonight. Arguing the judge does not
have jurisdiction, and the President says Garcia is a gang member,
just not with TDA.
Speaker 4 (10:34):
They say, oh, we made a mistake because he's not
with them, He's with MS thirty.
Speaker 6 (10:39):
Bring him back, Bring them back. Ms RT's a very
bad group.
Speaker 13 (10:44):
Garcia's family says he is not with any gang. Health
Secretary Robert F. Kennedy Junior now throwing his support behind
the vaccine. It comes after he attended the funeral over
the weekend of a child who died from the measles.
The US has now seen more than six hundre it
confirmed measles cases across twenty one states. Global news twenty
(11:04):
four hours a day and whenever you want it with
the Bloomberg News. Now. I'm Michael Barr, and this is
Bloomberg Kron.
Speaker 2 (11:10):
All right, Michael Barr, thank you all. Coming up, We're
gonna have more on the market sell off. We are
speaking with Morgan Stanley's Andrew Sheets. But first it's time
for the Bloomberg Sports Update with John Stashauer.
Speaker 6 (11:26):
John, Good morning, Good morning, Karon.
Speaker 15 (11:27):
They call kennetick it they capital of college basketball. Why
not eighteen national championships for the last thirty years. The
Yukon men won the NCAAs the last two seasons. The
women at one them since twenty sixteen, but they would
dominant this tournament, six wins by an average of thirty
three points, final four wins by thirty four and twenty
three points in Tampa. They did throned in South Carolina.
(11:49):
It's the twelfth title for their legendary coach, Gino Orima.
Speaker 16 (11:52):
Stan Anthony and I went for a walk right, and
as I'm walking outside the hotel, at one point, I said,
you know, hey, dear God, you know like I don't
need one of these damn my players do man? Can
you can do it for them?
Speaker 15 (12:09):
The men's title game tonight in San Antonio, Florida against Houston.
Who comes off that remarkable rally against Duke at Ubs
Arena Hockey history.
Speaker 6 (12:18):
Oh that skin has any stares.
Speaker 8 (12:21):
He stares Alex So that's kid Store Saint ninety five.
Speaker 15 (12:27):
There's a goal scoring champion w JFK. Move over, Wayne Gretzky,
who was there to see actually the Capitol's only goal.
They lost to the Island. It was four to one
at the Garden. Welcome back Jalen Brunson missed fifteen games
at injurn ankle.
Speaker 6 (12:41):
The next win nine and six.
Speaker 15 (12:42):
With the captain back, they beat Phoenix one twelve ninety eight,
their fiftieth win. The Nets lost it Toronto. The Celtics
blew out Washington late last night big baseball news, it
was believed that Vladivier Guerrero Junior would be the next
winter's big free agent. He's staying with the Blue Jays
a fourteen year deal for half a billion. The Mets
finished the sweep of Toronto two one at Cityfield.
Speaker 6 (13:02):
The Yankees in Pittsburgh rallied.
Speaker 15 (13:04):
With two outs of Nineteenning scored three months to tie
the game, but the Pirates won five to four and eleven.
The Nationals won the Red Sox at doubleheader sweep of
the Cardinals first and tennans and then last night eighteen
to seven. The Socks had went five in.
Speaker 1 (13:16):
A row coast to coast on Bloomberg Radio, nationwide on
Sirius XM, and around the world on Bloomberg dot Com
and the Bloomberg Business app. This is Bloomberg Daybreak.
Speaker 6 (13:29):
Good morning, I'm Nathan Hager.
Speaker 3 (13:30):
The global stock sell off that is greeted President Trump's
Tarff announcement is reviving Black Monday memories from any on
Wall Street, But the President is rejecting market concerns that
his trade barrage will send the US into a recession.
Speaker 6 (13:43):
What's gonna happen with the market.
Speaker 4 (13:45):
I can't tell you. What I can tell you our
country has gotten a lot stronger, and eventually it'll be
a country like no other. It'll be the most dominant
country economically in the world.
Speaker 3 (13:57):
And that was the President speaking of Board Air Force
one last night. This morning, we were joined by Bloomberg
Markets reporter Valerie Titel as we watch the selloff extend
into a third trading session following the rose Guard announcement. Valerie,
the President says he might not be able to predict
what the market's doing, but the market seems to be
sending a pretty loud message to the President this morning.
Speaker 17 (14:18):
Oh yeah, and I want to echo the flashbacks to
Black Monday. If this move in the S and P
five hundred futures holds into the clothes, we are looking
at the worst three days for the US equity market
since nineteen eighty seven, when it dropped twenty four point
six in a matter of two days, So keep an
eye on those kind of superlatives. That just really puts
(14:39):
it into perspective. Black Monday, GFC, COVID, that is what
people are comparing the last market drop to. And Nathan,
the one thing that's in stark contrast to what's going
on now versus those other instances in the past is
during those other instances you had the monetary easing floodgates open,
the fiscal easing floodgates open after Black Monday, during the
(15:01):
Great Financial Crisis, and during COVID. But what stands now
is a start contrast, so that we have a FED
who says that they are going to be patient and
wait for further clarity. Mike Wilson over at Morgan Stanley
noting that the S and P five hundred could drop
another seven to eight percent if the FED remains on
hold and these tariffs continue in the market.
Speaker 3 (15:22):
But while we're seeing these selling continuing here on Wall Street,
it looks, at least at this point this morning, like
the sell off is even worse overseas.
Speaker 6 (15:32):
Valerie, Yeah, that's right.
Speaker 17 (15:33):
And the European open, Nathan, was quite shaky. We had
the dacks drop ten percent at the open that's its
third biggest gap lower in history. We're also seeing credit
spreads widen across a high yield and investment grade in Europe,
and that's leading to a very punishing session for European banks.
SX SEVNY is down six point seven percent and over
(15:54):
the last three days, Nathan, it's nearing a near twenty
percent slide in European banks in the last three sessions.
Speaker 6 (16:01):
It's hard not to notice Valerie.
Speaker 3 (16:03):
This more than thirteen percent close for the Hangsang in
Hong Kong. The Asian session has been absolutely brutal. As
China sounds like it's not willing to back down either.
Speaker 17 (16:14):
Yeah, it was a bloodbath that HSI index, the Hangksang
in Hong Kong dropping thirteen percent, Nathan. That's its worst
one day drop since the Asian Financial Crisis of nineteen
ninety seven. The Broader Asia Index, the MSCI Asia Pacific
had its worst one day drop since October two thousand
and eight. We had the Nicky entering into bear market territory,
(16:35):
and the eight shares that trade in Hong Kong also
down more than twenty percent from peak. The one thing though,
that may be a solace for those em Asian nations
is the fact that we are not seeing a rip
roaring rally in the dollar, and that could be you know,
one aspect of perhaps positivity for these nations who in
(16:55):
normal times of economic instability they have to deal with
capital flight and their currencies depreciating strongly versus the dollar.
We at least are not seeing that as yet.
Speaker 3 (17:06):
Bloomberg Marketers reporter Valerie Titel, thank you for this as
we continue to watch the global market sell off. Where
you're joined now by Andrew Sheets, chief cross assets strategist
at Morgan Stanley. Andrew, thank you so much for joining
us this morning. And Valerie mentioned the call from your
colleague at Morgan Stanley, Mike Wilson, the chief US equity strategist,
saying stocks could fall another seven to eight percent if
(17:29):
the tariff risk doesn't subside in the FED stays on hold.
Speaker 6 (17:33):
Is that your call as well? Good morning, Yeah, good morning.
Speaker 18 (17:35):
So I think, unfortunately you do have the confluence of
a number of quite negative factors where it is hard
to see enough offsets you had before the tariff announcement.
I think already a deteriorating earnings picture in the US
with negative revisions, You had deterioration and leading economic indicators
(17:57):
like consumer confidence, and then you also had signs of
inflation rising. You know, recalled that the last three prints
for core PC, the Fed's preferred measure, have increased for
three straight months. So we walked into this tarif announcement,
I think, with a quite challenging macro backdrop. And then
the tariffs that we got were much larger than expected.
(18:20):
They were, you know, I think, much more severe than
our forecast than many forecasters has penciled in. And so
that creates additional downside risk to growth, additional upside risk
to inflation, and also this challenging dynamic where it's not
clear that either valuations or a policy change is right
(18:41):
there for support. So I thought, your colleague, you know
what they just mentioned about. You know, previously under some
of this weakness, you had fiscal stimulus or you had easing.
We think that's going to be much more more difficult.
The FED is missing much more on their inflation mandate
than they're missing on the jobs part of their mandate. Right,
we had actually a pretty good payroll number on Friday,
(19:03):
whereas core PCE is two point eight percent in the
US we think that makes it quite difficult for the
FED to cut. We think that the FED will cut
far less than the market is expecting this year at
Morgan Stanley, and valuations still remain elevated. The S and
P is still at nineteen times. So I think you
put all that together, and while it's always difficult to
(19:23):
be too precise, that still means that there's potential for downside.
Speaker 3 (19:27):
So then, Andrew, what do you make of the move
that we're seeing in the money markets. The money markets
pricing in fully five FED rate cuts this year and
even some calls now for an emergency cut before the
next meeting next month.
Speaker 18 (19:40):
Yeah, we disagreed with that. We do think markets are
looking at the equity weakness. As you mentioned, this is historic.
It's one of the largest three day drawdowns that we've
seen in a very long period of time, and you know,
I think markets are understandably saying, well, a drawdown of
that measure would naturally invite a response, But our view
is that that will be much more difficult that inflations
(20:03):
in a more difficult place. And because it's I think
it's also not clear that FED rate cuts would necessarily
address the issue. The uncertainty from tariffs. The costs of
tariffs are not easily offset by say, you know, an
emergency twenty five or fifty basis point rate cut. The
issues go deeper. So you know, we think that the
(20:24):
Fed will will need to and ultimately stay more focused
on its mandate unless we see more seizure or tightness
in say credit issuance markets, which we just haven't seen yet.
Speaker 3 (20:36):
Well, what do you make of the widening and credit
spreads that we've started to see now in Asia and
in Europe.
Speaker 18 (20:43):
Yeah, So, I think what's fascinating is that I think
credit has a reputation, I like to think, a well
earned reputation of usually being an early indicator. But in
this cycle that has not been the case. Credit has
been quite slow to catch up to weakness that has
been in the equity market for some time. And I
think that speaks to a credit cycle that is entering
(21:07):
this downturn in a better place. You know, companies were
somewhat more cautious and less aggressive coming into this m
and A was low. Balance sheet leverage has been stable,
so I do think credit remains a follower here. I
don't think that we should necessarily see credit as a
leading indicator. I think it's following the broader uncertainty around
(21:27):
the growth and policy that's coming from the administration and
these questions around the Fed. But I think what we're
seeing from credit should be seen as a catching up.
You know, even after the moves this morning, we're really
kind of just back to average levels of spreads. We
think that's kind of very reasonable given the risks that
are surrounding the market.
Speaker 3 (21:46):
We're speaking with andrews Sheets, chief cross assets strategist at
Morgan Stanley as we continue to monitor this global stock
sell off and flight, particularly this morning into treasuries, we're
seeing gains across the curve in the treasuries market.
Speaker 6 (22:01):
Andrew, where do you reallocate?
Speaker 3 (22:03):
How do you advise clients to make moves in this environment?
Speaker 18 (22:07):
Well, so, we do think that move in interest rates
is correct that if the odds of a recession are rising,
and I think that, unfortunately, is what is happening, given
these risks to growth, and also the potential that the
Fed cannot react as quickly to those growth risks because
inflation is persistent, you know, we think the market will
(22:30):
will respond to that by lowering interest rates, especially you know,
kind of somewhat further further out the curve. So you know,
we do think yields will will fall here further in
the US and in the UK and in Germany.
Speaker 15 (22:43):
And you know, I.
Speaker 18 (22:44):
Think that's also something that if we look back to
say twenty eighteen, you know, in the fourth quarter of
twenty eighteen, you also had a large draw down. You know,
that was also somewhat related to tariff uncertainty, it was
related to the FED the administration not shift policy as
quickly as the market was hoping they would. You know,
real interest rates in the US, real interest rates on
(23:07):
ten year government bonds are still much higher, you know,
more attractive than they were during that episode at the
worst part of that episode. While you know, equity valuations
in the US today are still much more expensive than
at the worst part of that episode. So you know,
I still think that if if investors are worried about
growth picking up, then you know, we still think bonds
(23:29):
offer kind of reasonable value here, and we think that
that's the direction that reallocation will continue in.
Speaker 3 (23:34):
If we do continue to see stocks and bond yields fall,
what does that mean for financial conditions?
Speaker 6 (23:40):
What could it mean for the FED and then that regard.
Speaker 18 (23:43):
So, you know, financial conditions are tightening obviously, you know,
you have some push and pull here with with with
equities going down, you know, but also rates coming down.
But I think that the challenge for the FED is
it's not clear that those financial conditions are excessively tight.
You know it, spreads today are kind of near the
long run average. That's that's fine. You know, the S
(24:05):
and P has still roughly nineteen times forward earnings that
that does not seem like an excessive level of equity
risk premium. That would suggest some sort of market breakage. So,
you know, and I think you still have credit markets
where you know, you have credit markets have been open,
it's been possible to issue. You know, the latest Senior
(24:26):
Loan Officer survey suggested that credit standards were loosening a
bit in the US rather than tightening. So I think
it's kind of hard to look at that full spread
of financial conditions and say that there's something here that
invites a really large shift. Again, we could get it,
(24:46):
but I don't think you've seen it yet, And especially
for a FED that is is also dealing with inflation
that's above its target, is dealing with inflation expectations that
have been going up significantly. You know, we think that
that is going to provide a level of caution that
prevents this This larger intervention.
Speaker 2 (25:02):
Might otherwise cat This is Bloomberg Daybreak, your morning podcast
on the stories making news from Wall Street to Washington
and beyond.
Speaker 3 (25:11):
Look for us on your podcast feed by six am
Eastern each morning, on Apple, Spotify, or anywhere else you listen.
Speaker 2 (25:17):
You can also listen live each morning starting at five
am Wall Street Time on Bloomberg eleven three to zero
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Speaker 3 (25:31):
Plus listen coast to coast on the Bloomberg Business app
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Speaker 2 (25:37):
And don't forget to subscribe to Bloomberg News Now. It's
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platform to stay informed all day long. I'm Karen Moscow.
Speaker 6 (25:50):
And I'm Nathan Hager.
Speaker 3 (25:51):
Join us again tomorrow morning for all the news you
need to start your day right here on Bloomberg Daybreak
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