Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner.
Speaker 2: So markets in Asia are wrapping up what certainly has
Speaker 2: been a very rough week and obviously the key driver
Speaker 2: President Trump's latest tariff measures. Here in the States, we
Speaker 2: had a meltdown in risk assets. The S and P
Speaker 2: five hundred tumbled more than four point eight percent. We
Speaker 2: closed very near session lows. It was the worst single
Speaker 2: day drop for the S and P since twenty twenty,
Speaker 2: and in the process this selloff wiped out about two
Speaker 2: trillion dollars in market value. We also saw a great
Speaker 2: deal of dollar weakness, with the Bloomberg Dollar Spot Index
Speaker 2: down one and a half percent in New York. Trading
Speaker 2: oil joined in on a selloff in commodities, with WTI
Speaker 2: falling six point six percent in New York. And in
Speaker 2: a moment we'll be hearing from Steve Brice. He is
Speaker 2: the c IO at Standard Chartered Wealth Solutions Group. But
Speaker 2: we begin this morning in Sydney. Joining me now is
Speaker 2: Garfield Reynolds, who leads Bloomberg's Markets live coverage for the
Speaker 2: Asia Pacific. Garfield joining from our studios in Sydney. Talk
Speaker 2: to me a little bit about what you witnessed yesterday, Garfield,
Speaker 2: with the price action across the Asia Pacific and what
Speaker 2: we're seeing now in early trading.
Speaker 1: Yeah, the price action in Asia yesterday was extraordinary, but
Speaker 1: it was fed by an announcement that was confusing, in
Speaker 1: a paque, in the presentation, in the methodology, which ultimately
Speaker 1: ended up being based on a very simplistic and not
Speaker 1: really credible on an economic basis formula. So you just
Speaker 1: sort of had waves of reaction every time you thought
Speaker 1: maybe the market'spite consolidated, either fresh investors came in as
Speaker 1: the time zones changed, or right a realization came through
Speaker 1: just how potentially damaging this is. And you were saying
Speaker 1: that the sell off for US stocks was the biggest
Speaker 1: since the pandemic, as it should have been, given that
Speaker 1: this is the biggest shock to the global economy since
Speaker 1: the pandemic.
Speaker 2: And the question now is whether or not it precipitates
Speaker 2: a recession. Was it very interesting today that President Trump
Speaker 2: said he's open to reducing these tariffs if other nations
Speaker 2: were willing to offer something. And I think the word
Speaker 2: he used here was phenomenal, that says to me that
Speaker 2: there is the room to negotiate, but we may have
Speaker 2: to accept the fact that in that process that could
Speaker 2: be quite lengthy, tariffs may be in place for a while.
Speaker 3: Is that fair?
Speaker 1: Yeah, that's fair, And it actually adds to there's an
Speaker 1: argument to be made if you wanted to raise the
Speaker 1: average tariff rate in the US to something like twenty
Speaker 1: five to thirty percent, then just do it and and
Speaker 1: move on. And you know, that's the the avowed aims
Speaker 1: of the Trump administration to increase revenue from tariffs and
Speaker 1: also to push foreigners to bring manufacturing back to the
Speaker 1: US because otherwise they will be priced out of the
Speaker 1: US market. If you think that's the way to go,
Speaker 1: then you do big tariffs and you stick with them
Speaker 1: for at least a while. Maybe you give a timetable,
Speaker 1: you say these are going to be in for a year.
Speaker 1: But instead we have a situation where nobody knows how
Speaker 1: long these tariffs will be in for what they will
Speaker 1: actually entail. So for businesses, you've got a lot of
Speaker 1: pain but also a lot of clarity. You know, do
Speaker 1: you And for most companies it'll be okay, I'm going
Speaker 1: to punt my business plans for what six months a
Speaker 1: year until I can be sure what I'm dealing with.
Speaker 2: So the selloff that we had here in the US
Speaker 2: makes for an unusual setup for what is really the
Speaker 2: most closely watch data point of the month at being
Speaker 2: the government's report on employment. So in addition to that,
Speaker 2: tomorrow we're going to be hearing from FED share J. Powell.
Speaker 2: Obviously the story on tariff's will make the Fed's job
Speaker 2: a lot more complicated. It seems a case of either
Speaker 2: the Fed lower's interest rates to support the economy or
Speaker 2: it keeps them elevated to contain inflation. Where do you
Speaker 2: see the greater risk right now economic weakness or stubborn
Speaker 2: inflation or are they kind of evenly balanced.
Speaker 1: Well, I think economic weakness is the greater risk. But
Speaker 1: part of the risks there are precisely that the FED
Speaker 1: has the potential to sit where it is while it
Speaker 1: wastes to see what happens. There's definitely an increase in
Speaker 1: inflation expectations. They were already concerned that there were signs
Speaker 1: that this inflationary trend was stalling out. They had been
Speaker 1: talking about the idea that interest rates now are in
Speaker 1: a good place, and they don't see any reason to
Speaker 1: rush to change them. And when you've got this, as
Speaker 1: I said, very confusing introduction of tariffs that could have
Speaker 1: major impacts on the US economy, you're going to have
Speaker 1: a lot of volatility about the data coming in and
Speaker 1: uncertainty about all sorts of data and what the long
Speaker 1: term impacts are actually going to be.
Speaker 2: In terms of retaliation. What do we know about what
Speaker 2: we're hearing from governments in Asian I'm particularly curious about
Speaker 2: the Chinese response.
Speaker 1: Well, China's response has also been pretty opaque. It's not
Speaker 1: a little clear exactly what they are going to do.
Speaker 1: They do have a track record of actually waiting until
Speaker 1: the tariffs are imposed before they announced their response. Now
Speaker 1: that means we could be waiting till April nine, because
Speaker 1: the ten percent on everybody comes in April five, and
Speaker 1: then the addition tariffs come in on top of that
Speaker 1: on April nine. So does China renounce some stuff April
Speaker 1: five and then more on April nine, or just everything
Speaker 1: on April nine. We've also got no real clarity on
Speaker 1: whether a TikTok deal will actually happen. A lot of
Speaker 1: talk from the US side that one is coming and
Speaker 1: that that could lead to tariff relief. If that a curse,
Speaker 1: then that would take China retaliation off the table, you
Speaker 1: would think. But there's no clarity as to where this.
Speaker 1: We don't really have much of a clue as to
Speaker 1: whether China is really interested in letting TikTok essentially slip
Speaker 1: out of its hands.
Speaker 2: Yeah, I think that TikTok deadline is this weekend here
Speaker 2: in the US. Garfield, thank you so much for taking
Speaker 2: the time to chat with us. Garfield Reynolds there. He
Speaker 2: leads Bloomberg's markets live coverage for the Asia Pacific and
Speaker 2: Garfield joining today from our studios in Sydney here on
Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
Speaker 2: I'm Doug Prisner. We're seeing further downside from markets in
Speaker 2: the Asia Pacific. This is after US equities and the
Speaker 2: dollar suffered their worst day in years. Shares in Australia
Speaker 2: and Japan fell right at the open. For some market perspective,
Speaker 2: we heard earlier from Steve Brice. He is the CIO
Speaker 2: at Standard Chartered Wealth Solutions Group. He spoke with Bloomberg's
Speaker 2: Paul Allen and Heidi Stroud Watts.
Speaker 1: So it doesn't feel like we're going to see the
Speaker 1: volatility abate anytime soon.
Speaker 2: How do you sort of progress from here? What's your
Speaker 2: take on how to navigate these markets?
Speaker 4: Yes, I guess everybody's now just adjusting to these peak
Speaker 4: tariffs that we've been seeing implemented in the US and
Speaker 4: just trying to figure out what the next steps are,
Speaker 4: whether it's going to be retaliatory or whether we're going
Speaker 4: to see some sort of negotiations taking place. The likely is,
Speaker 4: of course, it's going to be a bit of both,
Speaker 4: and then the openness or willingness of the US administration
Speaker 4: to renegotiate these tariffs lower. So I guess everybody realizes
Speaker 4: this is bad for growth and good for it and
Speaker 4: picks up inflation. So the question everybody needs to ask is,
Speaker 4: you know, what are the scenarios from here from a
Speaker 4: growth perspective? Is President Trump? Is he an idiot or
Speaker 4: is he being is he unconstrained? I don't believe he's
Speaker 4: either of those things. So you know, he's clearly using
Speaker 4: this or most likely using this as a negotiating tool
Speaker 4: to try and get a better trade agreements with different
Speaker 4: different counterparties. And we're also seeing in Congress the Republicans
Speaker 4: have a voice again, so it's certainly not a majority
Speaker 4: questioning his leadership, but certain people now started asking the
Speaker 4: question as to whether this is the appropriate thing, and
Speaker 4: that leads to the point of do we still have
Speaker 4: a Trump put And we believe the answer to that
Speaker 4: is yet it is yes. The question is when does
Speaker 4: that kick in? So for individual investors, you know, with
Speaker 4: a long term time horizon, this is where you make
Speaker 4: your money. You buy on weakness, whether we'll see further downside.
Speaker 4: We still think we might see something further downside in
Speaker 4: the short term, but these are the great opportunities when
Speaker 4: markets go on sale for people to build long term wealth.
Speaker 1: Where are you buying the dip then if you were
Speaker 1: in that scenario.
Speaker 4: So for the S and P five hundred, we're actually
Speaker 4: challenging one of the key supports that we highlighted yesterday,
Speaker 4: so five four hundred, so we just marginally below that
Speaker 4: at the close last night. Next one is around five
Speaker 4: to one twenty, so obviously that's a decent way away.
Speaker 4: So the way we would suggest this is saying, look,
Speaker 4: you know, we should be diversified across different asset classes,
Speaker 4: across geographers in the world as well. But you know,
Speaker 4: if you look at the US on a standalone basis,
Speaker 4: you know, averaging to you know, from now down to
Speaker 4: those sort of levels probably make sense. Assuming we're right
Speaker 4: that that Trump put is still there.
Speaker 3: I want to take a look at the Magnificent seven,
Speaker 3: although in this chat on the Bloomberg terminal we're now
Speaker 3: referring it to it as the Lag seven. But there's
Speaker 3: some really quality names here in bear market territory. Now,
Speaker 3: if you're willing to take a long term view, is
Speaker 3: this the moment to get.
Speaker 4: In so certainly. I mean, you know, obviously we've seen
Speaker 4: valuations come off quite dramatically, so that was always the
Speaker 4: concern with these names was that valuations are are a
Speaker 4: big challenge, and now that's becoming less of a concern.
Speaker 4: They still have very strong fundamentals by and large. I think,
Speaker 4: you know, names affiliated with Elon Musk obviously have different
Speaker 4: headwinds potentially than some of the other companies. So that's
Speaker 4: you know, that's something that you have to factor into
Speaker 4: your decision making process. But from our perspective, we are
Speaker 4: overweight tech looking to buy the dip in the tech
Speaker 4: set in the US tech sector as well, so that
Speaker 4: would fit into this mag seven rebound at some point.
Speaker 3: You're also overweight China. Now the market there is closed today,
Speaker 3: but we saw some pretty modest declines yesterday compared to
Speaker 3: what we saw in the US. What's your outbook for
Speaker 3: China stocks?
Speaker 4: So, I mean, we do feel that China will probably
Speaker 4: weaken a little bit in the in the near term.
Speaker 4: Obviously the tariff effect. You know, they ha been pretty resilient. Obviously,
Speaker 4: the market's done very well so far this year, so
Speaker 4: you know, but we would be buying on dips there
Speaker 4: as well. You know, we believe that the technology sector
Speaker 4: in particular is an area of key interest for US.
Speaker 4: You know, obviously the deep Seek revelation still feeding into
Speaker 4: a more bullish environment for tech sector. Valuations in the
Speaker 4: in China are pretty cheap still, so from that perspective,
Speaker 4: we like their hang sending in decks, you know, buying
Speaker 4: down you know, maybe three five percent there than we
Speaker 4: are today, and the same on the tech sector as
Speaker 4: well for the Hang Seng.
Speaker 3: Southeast Asia, Emerging Asia obviously as part of that channel
Speaker 3: plus one strategy, some of the hardest.
Speaker 2: Hits in these tariffs. Do you still see opportunities to
Speaker 2: use when it comes to in this region.
Speaker 4: So we're underweight Asian, so from you know, so we're
Speaker 4: overweight China, underweight Assien at the moment, and I think
Speaker 4: that's one of one of the reasons was we felt
Speaker 4: that the China was probably better prepared for the tariffs
Speaker 4: than maybe Asian. Obviously that China plus one strategy was
Speaker 4: a huge boon to the region, but I think that's
Speaker 4: something that's in the cross hairs of US policy now.
Speaker 4: So and you know, obviously the formula being used by
Speaker 4: the by the US to determine what tariff should be,
Speaker 4: it's sort of symptomatic of that, and that's why Asian
Speaker 4: is probably facing significant headwinds at the moment. So yeah,
Speaker 4: it's it's it's not an area of focus for US. Obviously,
Speaker 4: value will be created through this in our opinion if
Speaker 4: we think that tariffs are going to be transitory or
Speaker 4: at least not at these levels or so we were
Speaker 4: at peak tariff's, But for us, our focus is elsewhere.
Speaker 2: That was Steve Bryce, chief investment officer at Standard Chartered
Speaker 2: Wealth Management, speaking earlier with Bloomberg's Paul Allen and Heidi
Speaker 2: Stroud Watts here on the Daybreak Asia podcast. Thanks for
Speaker 2: listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Speaker 2: Each weekday, we look at the story shaping markets, finance,
Speaker 2: and geopolitics in the Asia Pacific. You can find us
Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
Speaker 2: else you listen. Join us again tomorrow for insight on
Speaker 2: the market moves from Hong Kong to Singapore and Australia.
Speaker 2: I'm Doug Chrisner, and this is Bloomberg