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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.

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Speaker 2: So trade talks between the US and China, and it

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Speaker 2: on Monday after more than six hours at Lancaster House

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Speaker 2: in London, and we are told that those talks will

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Speaker 2: continue on Tuesday. Bloomberg's and Marie hor Dern is there

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Speaker 2: and she says two issues are front and center.

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Speaker 3: One critical minerals when it comes to the United States,

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Speaker 3: those magnets, those rare earths, they say that the licensing

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Speaker 3: is not quick enough. Kevin Hassett over the weekend that

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Speaker 3: a HEC director says they want to see a more

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Speaker 3: advanced pace when it comes to those minerals coming into

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Speaker 3: the United States. And then for China, they want access

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Speaker 3: to the semiconductors. And it's very obvious that export controls

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Speaker 3: potentially was going to be on the table when it

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Speaker 3: came to the second round of negotiations following the talks

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Speaker 3: in Geneva just a month ago.

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Speaker 2: That is Bloomberg's and Marie hor Dern. Now in terms

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Speaker 2: of moving those restrictions on tech today, the director of

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Speaker 2: the National Economic Council, Kevin Hassett told CNBC the US

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Speaker 2: would stop short of including the most sophisticated AI chips

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Speaker 2: made by in Nvidia. Joining me now is Jim Warden.

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Speaker 2: He is the chief investment officer at the Wealth Consulting Group,

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Speaker 2: joining from Sacramento, California. Jim, thank you so much for

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Speaker 2: taking time to chat with me. How optimistic are you

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Speaker 2: that we're going to get a trade deal between the

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Speaker 2: US and China happening in the near term?

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Speaker 4: You know, I'm really optimistic. I think we've seen a

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Speaker 4: little bit of a pattern with some of these tariffs.

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Speaker 4: They start off really, really ugly, and they look prettier

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Speaker 4: as time goes on, things get worked out. You know,

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Speaker 4: we don't have all the information exactly how things will look,

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Speaker 4: but you know, I certainly believe with the rare earth

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Speaker 4: there will be some good news.

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Speaker 2: So if you look at the S and P right now,

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Speaker 2: we're just about two percent from that all time high

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Speaker 2: that we reached in February. Say we get a deal,

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Speaker 2: what does that mean for the equity market?

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Speaker 4: So I think the equity markets continue grinding higher. Any

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Speaker 4: good news that comes out of Washington, d C that

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Speaker 4: is macro related is just a it's just a boon

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Speaker 4: for the equity markets. I think we I think we'll

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Speaker 4: get all time highs, even if there is a little

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Speaker 4: bit of sideways news on the tariffs.

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Speaker 5: The AI boom is real. It's it's this fast.

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Speaker 4: Moving train that you can slow it down, but it's

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Speaker 4: it's going to keep going. So any relief that we get,

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Speaker 4: I believe is going to allow us to accelerate. And

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Speaker 4: you know, there's still a lot of stocks that we're

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Speaker 4: looking at, a lot of stocks that are still far

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Speaker 4: from where they were the February highs, and so a

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Speaker 4: lot of these are have trends that are reverse, so

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Speaker 4: we're looking at those. But there's also a number of

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Speaker 4: stocks that are already hitting all time highs.

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Speaker 2: So we have a FED meeting on the eighteenth officials

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Speaker 2: right now, we're in a blackout period before that decision. Today,

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Speaker 2: the New York Fed survey found that consumers are expecting

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Speaker 2: lower inflation over the next year than I did a

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Speaker 2: month ago when they were last surveyed. And obviously this

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Speaker 2: week we have a number of price reports Wednesday at CPI, Thursday, PPI.

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Speaker 2: How are you feeling about the US inflation story right now?

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Speaker 4: We continue to feel pretty good about it. The trend

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Speaker 4: has been that inflation's coming down. Now we may see

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Speaker 4: a little bit of bump back up with regard to

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Speaker 4: concerns about tariffs, but it's generally been pushing lower. I'm

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Speaker 4: a little bit concerned with higher wages. That's not so

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Speaker 4: much related to the tariffs as it is immigration, and

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Speaker 4: so these are things that we're keeping an eye on.

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Speaker 4: But I would generally say that the trend for inflation

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Speaker 4: has been continues to be lower.

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Speaker 2: In terms of the politics in Washington, the Senate right

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Speaker 2: now is dealing with a President Trump's tax bill, and

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Speaker 2: we are told that Republicans in the Senate are intending

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Speaker 2: to propose some revisions, among them, maybe trying to extract

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Speaker 2: some savings not only from Medicaid, but maybe even Medicare,

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Speaker 2: and obviously that would depart from the House version. How

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Speaker 2: are you feeling about the future of this tax bill.

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Speaker 2: Is that something that is going to be resolved let's

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Speaker 2: say before the fourth of July, or could this drag

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Speaker 2: on for some time.

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Speaker 4: That's I'm not a political expert. I would say that

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Speaker 4: it probably does get resolved. I don't think that we're

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Speaker 4: going to have concessions with regard to Medicare or Medicaid,

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Speaker 4: and if we do, I believe that there'll be light

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Speaker 4: I think that that would be too much of an

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Speaker 4: impact for too many people to try to do that.

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Speaker 2: If we're talking about adding much more to the deficit,

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Speaker 2: maybe as much as two point four trillion, that's the

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Speaker 2: CBO estimate. What does that mean for the bond market?

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Speaker 4: Yeah, so we've gotten a little bit more cautious lately

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Speaker 4: with bonds. You know that that is partly due to

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Speaker 4: the technicals of the bonds and just what's happening with

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Speaker 4: the dollar, what's happening overseas, and you know, kind of

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Speaker 4: this flight away from US dollar denominated assets. We think

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Speaker 4: there's still going to be volatility with the bond market,

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Speaker 4: particularly the longer end of the yield curve. So we're

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Speaker 4: we've we've shortened duration. We continue to like higher quality credit,

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Speaker 4: so we're a little bit more cautious on just you know,

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Speaker 4: the bond market in general than we are with equities.

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Speaker 2: That's interesting. So the sell America theme you see impacting

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Speaker 2: the bond market impacting the dollar more than the stock market.

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Speaker 4: Yeah, I think that's that's partly because we we we

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Speaker 4: see you know a lot of these large companies that

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Speaker 4: are within technology that the fundamentals are still good, the

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Speaker 4: earnings growth is still good, the profit margins, there's still

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Speaker 4: a lot of growth there, you know, And I wish

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Speaker 4: I could say that across the board every single sector,

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Speaker 4: but certainly with you know, the megacap technology companies, and

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Speaker 4: you know, there's also some some trickle down thematic we thematically,

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Speaker 4: we're also liking some of the energy and utility companies

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Speaker 4: that have a story with technology, and those have all

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Speaker 4: been performing really well. There's kind of this mean reversion

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Speaker 4: trade where they sold off a lot and they've come back.

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Speaker 5: But yes, we do like equities more than bonds.

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Speaker 2: How are you feeling about the American consumer broadly speaking,

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Speaker 2: and whether or not you would be encouraged to take

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Speaker 2: positions either in consumer staples or consumer discretionary stocks.

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Speaker 4: Yeah, so we actually did own some consumer staples, you know,

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Speaker 4: not that long ago.

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Speaker 5: Oh and we trim that position.

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Speaker 4: We at we actually added to consumer discretionary partly, you know,

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Speaker 4: because some of those names were just really really sold off.

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Speaker 5: There is still some risk there.

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Speaker 4: So this is you know, that was kind of a

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Speaker 4: longer term thesis in terms of macro improvements.

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Speaker 5: We we thought that they sold off too much.

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Speaker 4: There's still certainly going to be sensitivity when you when

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Speaker 4: you get names like Apple and uh Tesla and you

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Speaker 4: know Amazon. There, there's still going to be some some

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Speaker 4: sensitivity here. But as we look at the big picture,

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Speaker 4: you know, the consumer still seems to be in pretty

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Speaker 4: good shape.

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Speaker 5: Uh there, They're still spending.

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Speaker 4: You know, a lot of the spending is on services,

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Speaker 4: but you know, we're we're watching that closely to see

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Speaker 4: kind of, you know, if if that changes in terms

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Speaker 4: of the trend and earnings.

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Speaker 2: Are you monitoring situations offshore, any opportunities there, whether it's

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Speaker 2: in Asia or Europe or other jurisdictions.

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Speaker 4: Yeah, So we have added some individual names, some stocks

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Speaker 4: that we like that are in Europe as well as Asia.

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Speaker 4: You know, I would say from a bottom up standpoint,

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Speaker 4: we're liking international a little bit more than we have before,

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Speaker 4: and that is really just you know, improving fundamentals as

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Speaker 4: well as the trend and momentum getting.

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Speaker 5: Better and these are quality names.

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Speaker 4: From a macro standpoint, we're also you know, looking at

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Speaker 4: areas where we can add to International.

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Speaker 2: Jim will leave it there. Thank you so much for

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Speaker 2: joining us. Jim Warden is the chief investment officer at

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Speaker 2: the Wealth Consulting Group. Joining from Sacramento, California. Here on

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Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.

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Speaker 2: I'm Doug Christner, and as we have been discussing, trade

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Speaker 2: talks between the US and China are set to continue

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Speaker 2: for a second day in London. The aim here is

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Speaker 2: to ease tension over US shipments of technology to China

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Speaker 2: and shipments of Chinese rare earth elements to the US.

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Speaker 2: For a closer look on what these talks may yield,

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Speaker 2: we heard from Bloomberg's Jennifer de Loki in Washington. She

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Speaker 2: joined Bloomberg's North Asia correspondent Stephen Engel. Stephen and Jennifer

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Speaker 2: spoke with Bloomberg's Sherry On and Heidi Stroud Watts.

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Speaker 6: Jennifer, let me start with you. I mean President Trump

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Speaker 6: saying that China is not easy. I mean, what was

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Speaker 6: he expecting? This is the second largest economy in the world.

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Speaker 6: But what are we expecting in terms of any concrete

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Speaker 6: breakthrough in London now that these talks continue for a

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Speaker 6: second day.

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Speaker 7: Well, you know, I think the fact that you know,

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Speaker 7: the officials from the US and China were able to

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Speaker 7: meet face to face for more than six hours, and

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Speaker 7: that they're continuing tomorrow was obviously taken.

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Speaker 5: As a good sign.

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Speaker 7: It's a development that you know, signals possible progress and

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Speaker 7: easing these trade tensions, and specifically what you know could

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Speaker 7: come out of this is an easing of restrictions on

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Speaker 7: the export of technology from the US. Obviously rare earth

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Speaker 7: materials from China also on the table and being discussed.

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Speaker 7: The US has signaled very clearly it's willing to remove

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Speaker 7: curbs on the export of jet engine parts, nuclear plant equipment, chemicals,

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Speaker 7: and other technology if it can secure assurances that China

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Speaker 7: will ease its own limits on rare earth materials that

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Speaker 7: are used in smartphones and fighter jets and other equipment.

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Speaker 7: So at this point that seems to be, you know,

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Speaker 7: the outlines of what's possible. Kevin Hassett, who HUDs Trump's

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Speaker 7: National Economic Council, said earlier today that you know, his

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Speaker 7: expectation is an agreement in London that will ensure rare

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Speaker 7: earths are released in volume from China.

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Speaker 1: And Steve we saw in the data right despite this

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Speaker 1: fragile truth, exports from China to the US falling the

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Speaker 1: motions twenty twenty. Other than, of course, a more sort

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Speaker 1: of permanent pause to these tars What does Beijing really want?

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Speaker 1: And I guess more importantly, what are they willing to

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Speaker 1: give up? Given how closely held the supply of rarest

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Speaker 1: earth and technology has been over the past decade or more.

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Speaker 8: Well, clearly Beijing is very suspicious of what the United

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Speaker 8: States is trying to get out of these talks and

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Speaker 8: of this trade war. They definitely want the reduction, if

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Speaker 8: not elimination of the tariffs, because again the pause is

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Speaker 8: only until August and then they resume, so they would

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Speaker 8: like to see that taken away. They just like some clarity,

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Speaker 8: and that's why having consistency and talks with the same people,

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Speaker 8: beit Scott Bessant and then Jamison Greer, the US Trade Representative,

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Speaker 8: and now in addition we have Howard Lutnik, the Commerce Secretary,

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Speaker 8: which indicates that those export controls from the United States,

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Speaker 8: including some of those that were added after that truce

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Speaker 8: was reached in Geneva, which only added to the suspicion

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Speaker 8: on the Chinese part. So that's why it's clear that

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Speaker 8: export controls, perhaps as we just heard, could be a

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Speaker 8: bargaining chip for the United States to reduce those that

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Speaker 8: were added after that Geneva truth. So I think the

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Speaker 8: Chinese side is trying to get a gauge of the

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Speaker 8: intent and the end result that the White House is

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Speaker 8: trying to get, and not necessarily whether it's going to

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Speaker 8: be just unilaterally beneficial to the United States. This is

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Speaker 8: so far. Let me just say after day one of

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Speaker 8: the talks, the Chinese have kept really quiet. I scoured

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Speaker 8: state media. There's hardly anything about the readout of the

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Speaker 8: day one talks. Holy Funk, who's leading the Chinese delegation,

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Speaker 8: walked right past the gaggle of reporters in London, did

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Speaker 8: not say anything. The US side said only a few

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Speaker 8: words like Howard Ludnox said they were fruitful, Scott Besson

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Speaker 8: said good talks. Hollyfunk said absolutely nothing. Yesterday the China

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Speaker 8: Daily said pressure and coercion are not going to work

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Speaker 8: against China, which is ready to resolutely counter any ill

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Speaker 8: intention to move by the US side. So that really

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Speaker 8: indicates how suspicious the Chinese side is. They are willing

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Speaker 8: to talk, as evidence by the phone call last week

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Speaker 8: between Trump and She, but they're very skeptical.

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Speaker 6: Steve, how much pressure are Chinese policymakers on their right

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Speaker 6: now given the state of the Chinese economy. I mean,

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Speaker 6: we have seen them trying to make good with other

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Speaker 6: training partners like the European Union recently.

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Speaker 8: Absolutely, and EU is going to be a key one

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Speaker 8: because EU leaders will be going to China at the

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Speaker 8: end of next month for the EU China Summit. There

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Speaker 8: are talks about possible huge air bus deal. There's already

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Speaker 8: negotiations that are according to the Ministry of Commerce in

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Speaker 8: China on the minimum price guarantees on evs, possibly reaching

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Speaker 8: a deal at some point this summer. So again, the

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Speaker 8: Chinese are definitely engaging with the EU. They're also engaging

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Speaker 8: throughout the rest of the world in Southeast Asia, as

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Speaker 8: we saw in those export numbers yesterday, were exports to

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Speaker 8: the United States fell thirty four percent, Imports fell nearly

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Speaker 8: eighteen percent in two way trade with the United States,

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Speaker 8: but they absolutely boomed with else other parts of the world.

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Speaker 8: So China is diversifying its export destinations and its available markets.

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Speaker 8: But it's not enough right now to counter what has

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Speaker 8: been a lot of trade obviously across the Pacific to

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Speaker 8: the United states. So yes, it adds definitely to the

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Speaker 8: pressure on the Chinese economy, as evidence as well by

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Speaker 8: the PPI the factory gate deflation extending its string of

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Speaker 8: deflationary months to thirty two yesterday down more than three percent.

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Speaker 8: So there is deflation definitely entrenched in China.

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Speaker 1: Jennifer, I'm wondering how much sort of domestic judicial pressure

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Speaker 1: it is. Obviously we had the sort of lower court

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Speaker 1: ruling over.

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Speaker 5: The legality or the illegality of these tariffs.

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Speaker 1: Do we know if the polls on allowing them to

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Speaker 1: continue to play out might be sustained?

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Speaker 7: Yeah, we could know very very soon. You know, a

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Speaker 7: federal appeals court here could rule at any time on

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Speaker 7: whether to continue pausing the vast majority of Trump's tariffs,

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Speaker 7: basically all of those that are predicated on his assertion

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Speaker 7: that US trade and balances constitute a national emergency warranting

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Speaker 7: those love levies. And so you know, as we know

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Speaker 7: as sure, a separate court already ruled against these tariffs

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Speaker 7: toss them out very swiftly, another appeals court came in

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Speaker 7: and put that whole order on pause. And the question

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Speaker 7: before that court now is whether to extend its temporary

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Speaker 7: pause the Trump administration today went to the court and said,

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Speaker 7: please keep this going. Really the lower court order, if

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Speaker 7: you toss these terraffs out, it really interferes with our ability,

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Speaker 7: the president's ability to conduct foreign policy. And so the

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Speaker 7: administration is making the case that these need to be

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Speaker 7: extended because the legal you know, machinations over this will

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Speaker 7: for months. They could go all the way to the

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Speaker 7: Supreme Court, and in the meantime, you know, if the

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Speaker 7: tariffs can't be collected, it really impinges on the President's

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Speaker 7: ability to do business. So we could see a ruling

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Speaker 7: at any time, potentially as soon as tomorrow.

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Speaker 1: We'll make ten of Adela there and Steven Angel as

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Speaker 1: well with the latest on those US China trade talks.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Prisner and this is Bloomberg,