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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 time Krisner. A

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Speaker 2: short while ago, President Trump outlined plans for a bilateral

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Speaker 2: meeting between Russian President Vladimir Putin and Ukrainian President Vladimir Zelenski.

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Speaker 2: Trump said this will be followed by a trilateral summit

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Speaker 2: involving Putin, Zelenski, and President Trump. Trump went on to

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Speaker 2: say the US would coordinate with Europe on Ukraine security.

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Speaker 2: We heard earlier from Ukrainian President Zelenski.

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Speaker 3: All of us want to finish this war, stop Sopprssian

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Speaker 3: this war. We spoke about it, and we will speak

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Speaker 3: more about security guarantees. This is very important that United

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Speaker 3: States gives such strong signal now.

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Speaker 2: Zelenski went on to welcome US backing for those guarantees,

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Speaker 2: and he stressed that any territorial issues would only be

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Speaker 2: discussed US directly with Vladimir Putin for a closer look. Now,

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Speaker 2: I'm joined by Michelle jam Risco, white House editor for

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Speaker 2: Bloomberg News. She is on the line from the nation's capital.

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Speaker 2: Good of you to make time to chat with me.

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Speaker 2: I'm sure it's been a busy day for you. So

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Speaker 2: we know it today's meeting. It wasn't just Zelensky who

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Speaker 2: was in attendance, leaders from Europe as well. What do

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Speaker 2: we know about how the meeting unfolded.

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Speaker 4: It's actually remarkable. I mean, you know when a colleague

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Speaker 4: was joking that it's hard to bring together the G seven,

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Speaker 4: but this was most of the G seven. Usually it's

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Speaker 4: a year of planning to get them all together. They came,

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Speaker 4: some of them off vacations to the White House today

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Speaker 4: to really show a sign of support for Ukrainian President

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Speaker 4: Zelenski at what was expected to be a pretty pitoft

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Speaker 4: meeting as they try to convince President Trump to stay

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Speaker 4: engaged with the Ukraine issue and not give away too

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Speaker 4: much as they had feared would come out of the

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Speaker 4: Trump Putin summit on Friday, but also to get further

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Speaker 4: on the security guarantees. As you mentioned, that was a

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Speaker 4: key I think of all the European leaders, and you

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Speaker 4: heard it from them at the top of their meeting

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Speaker 4: with President Trump that they really wanted to kind of

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Speaker 4: hash out how this would be coordinated, to how this

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Speaker 4: signal would be sent to Russian President Putin, that this

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Speaker 4: is an important guarantee in any sort of peace agreement.

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Speaker 2: I'm imagining that the territorial issue is super sensitive, especially

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Speaker 2: for Zelenski haing having to surrender certain areas of Ukrainian

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Speaker 2: land in the eastern part of the country. What do

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Speaker 2: we know about that?

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Speaker 4: Well, this is where it all comes down to what

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Speaker 4: might be hashed out between Putin and Valenski of anything.

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Speaker 4: I mean, as Zelenski has asserted that he will not

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Speaker 4: under any condition give up territory that he's constitutionally prevented

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Speaker 4: from doing so, and yet this seems to be the

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Speaker 4: only thing that will keep Putin at the negotiating table.

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Speaker 4: As the prospect for just doing a landswap, we have

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Speaker 4: heard from President Trump at different times, including over the

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Speaker 4: past week, that land swaps have to be part of

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Speaker 4: any deal. That he recognizes that, you know, Putin's absence

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Speaker 4: on this has not changed, So that's going to be

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Speaker 4: the next step. But I think what you saw today

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Speaker 4: was you know, finally notching some sort of outline of

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Speaker 4: a security guarantee that also might run into problems with

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Speaker 4: President Putin, who, as I understand it, is none too pleased,

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Speaker 4: and his Foreign ministry said so today. With the thought

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Speaker 4: of having any sort of Western or presence of troops

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Speaker 4: in Ukraine for the long term.

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Speaker 2: It sounds almost like it's going to be a NATO

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Speaker 2: style force, right, Yeah.

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Speaker 4: I mean that's what's being talked about. But this is

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Speaker 4: really gotten to be an interesting conversation, especially with we

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Speaker 4: had US Special Envoy Steve Witkoff on CNN on Sunday saying, yes,

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Speaker 4: there is a sort of Article five like understanding, and

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Speaker 4: he used the term of referring back to the NATO

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Speaker 4: article that says, you know, if one member is attacked,

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Speaker 4: all members are attacked. So to grant this to Ukraine,

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Speaker 4: which is not a NATO member and as Trump has said,

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Speaker 4: will not be a NATO me that is kind of

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Speaker 4: de facto running against what Putin has said he will

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Speaker 4: not accept is any sort of that presence or that

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Speaker 4: security guarantee. So we'll have to see, you know, how

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Speaker 4: this plays out when they get to the next meeting, which,

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Speaker 4: as you say, is supposed to be Putin and Zelenski

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Speaker 4: themselves before the trilateral that includes Trump.

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Speaker 2: So a couple of issues come to mind as I'm

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Speaker 2: listening to. One is the notion of a cease fire.

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Speaker 2: Where do we stand in that regard the other would

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Speaker 2: be Russia looking for some sanctions relief. Do we have

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Speaker 2: any sense of that?

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Speaker 4: Well, on both of those, I mean, those were the

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Speaker 4: two that I was thinking of that were clear losers

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Speaker 4: today for Zelenski, you know, amid all the niceties, they

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Speaker 4: had a really good rapport both in the Oval Office

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Speaker 4: Trump and Vlunsky and then later with the European leaders,

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Speaker 4: a lot of happy talk. There was a demonstrable change

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Speaker 4: in tone, especially from the February Oval Office meeting between

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Speaker 4: Trump and Zelunsky. But two things that he seems to

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Speaker 4: have lost out on. Trump is still insisting no no

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Speaker 4: ceasefire needed. He points to you know, he's kind.

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Speaker 5: Of campaigning about his self being the President of peace,

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Speaker 5: as he's self branded, and talking about all these other

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Speaker 5: deals that he's made and all these other conflicts he's

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Speaker 5: resolved in the recent months.

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Speaker 4: Not needing a ceasefire. He says, we can go straight

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Speaker 4: to the negotiating table and hash out a peace agreement.

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Speaker 4: So now he has kind of dropped that, Whereas a

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Speaker 4: week or so ago he was pushing for Putin to

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Speaker 4: stop the fighting immediately and then we talk. Now it

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Speaker 4: seems to be we can talk and you can continue fighting,

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Speaker 4: you know, fact, so allow you to keep going as

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Speaker 4: they have been with Russian strikes on Ukrainian cities happening daily.

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Speaker 2: That's Michelle jem Risco, Bloomberg News White House Editor. Meantime,

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Speaker 2: traders on both sides of the Pacific are looking ahead

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Speaker 2: to remarks from FED shared Jay Powell on Friday. He

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Speaker 2: will address the fed's Jackson holl Symposium. In a moment

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Speaker 2: or two, we'll hear from Michelle Martin, president at Prosperity,

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Speaker 2: that's the wealth management arm at eisen Or Amper. We

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Speaker 2: also got some perspective out of the Asia Pacific from

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Speaker 2: Mark Matthews. He is head of Asia research at Julius Bear.

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Speaker 2: Mark spoke with Bloomberg TV host Sherry On and April

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Speaker 2: Hong on the Asia trade.

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Speaker 6: So, Mark, there is a lot going on in the background,

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Speaker 6: Jeoe politically, but investors seems to be quite focused on

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Speaker 6: the FED rate poth What is your read on the

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Speaker 6: balancing we saw in the dollar this week and whether

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Speaker 6: this would hold because I think you still think it's

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Speaker 6: a dollar weakness story.

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Speaker 7: Yes, Sapril, we do, and I can understand where there

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Speaker 7: would be a bounce because there's an incredible amount of

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Speaker 7: negativity around the dollar, and if you look at positioning

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Speaker 7: in various surveys in the futures market, I can understand

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Speaker 7: why we are getting a bounce, but longer term. First

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Speaker 7: and foremost, they're running a very wide budget deficit, which

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Speaker 7: I think will probably settle it about somewhere between five

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Speaker 7: to seven percent, and countries that run that kind of

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Speaker 7: deficit have weak currencies. I mean, if you just look

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Speaker 7: prior to COVID, the US ran a budget deficit of

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Speaker 7: about two or three percent, So now we're at about

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Speaker 7: seven and Egypt has a seven percent budget deficit and

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Speaker 7: they have a B rating which is fourteen notches below

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Speaker 7: the United States. So number one budget deficit. Number two,

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Speaker 7: we're looking for substantial rate cuts, so we're looking for

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Speaker 7: four rate cuts between now and March of next year. Normally,

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Speaker 7: when central banks cut rates a lot, the currency goes down.

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Speaker 7: I think it's fair to say there's a lot of

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Speaker 7: unpredictability in US policy across the board, and am I

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Speaker 7: missing anything? I guess yeah, That's that's the reason why

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Speaker 7: we're looking for the dollar to be weaker over the

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Speaker 7: next twelve months.

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Speaker 6: Okay, what about US stock still because they've bounced as well.

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Speaker 6: We've seen from these tech earnings the KAPEC span related

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Speaker 6: to AI. Is that fuel for US stocks? And what's

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Speaker 6: your sense of whether this can broaden out because it's

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Speaker 6: also about the consumer and the retail earnings that we're

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Speaker 6: getting this week.

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Speaker 7: Yes, well, forty percent of S and P five hundred

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Speaker 7: revenues come from overseas, so when the dollar goes down,

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Speaker 7: it's good for them. And for the big technology stocks

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Speaker 7: that's actually over sixty percent of their revenues excuse me,

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Speaker 7: that come from overseas. With the big spending that the

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Speaker 7: Magnificent Seven are doing on AI, clearly the market is

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Speaker 7: giving them the benefit of the doubt now because all

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Speaker 7: of these data centers and AI chips and cloud systems

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Speaker 7: have yet to be put to use, but they will

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Speaker 7: be plugged in and running next year, and next year

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Speaker 7: the market will want to see returns. And to your point,

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Speaker 7: they've just spent a tremendous amount of money on AI.

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Speaker 7: I saw a statistic which was five hundred and sixty

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Speaker 7: billion dollars for the mag seven combined that they've spent

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Speaker 7: on AI over the last eighteen months.

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Speaker 1: Given how narrow and potentially fragile this rally is wants

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Speaker 1: the risk of the FED disappointing this week at Jackson Hole,

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Speaker 1: with really traders pricing in the twenty five basis point

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Speaker 1: cut in September and the rally being derailed.

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Speaker 7: I think, yes, absolutely, there would be some disappointment if

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Speaker 7: the FED doesn't cut rates in September, and we are

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Speaker 7: expecting it on the back of the very week nonfarm

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Speaker 7: payrolls that were announced in July, the July payrolls, but

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Speaker 7: also the revisions for May and June. Yeah, there would

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Speaker 7: be some disappointment there. But I think that it's fairly

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Speaker 7: inevitable that we will enter a rate cut cycle, if

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Speaker 7: not in September, then in October. And the reason for

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Speaker 7: that is simply that more and more of the FED

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Speaker 7: officials are coming out and saying they think that rates

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Speaker 7: should be cut, and we are starting to see some

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Speaker 7: oftness in some data. FED likes to be ahead of

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Speaker 7: the curve, not behind it.

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Speaker 1: We have thee insolvements in economic data also coming from China,

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Speaker 1: and really more speculation that we potentially could see some stimulus.

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Speaker 1: Chinese mainland stock seem to be getting a boost from that.

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Speaker 1: Do you expect this to continue?

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Speaker 7: I don't think the breakout in the Chinese market is

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Speaker 7: based on stimulus. I don't think people anticipate much stimulus

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Speaker 7: in China, but certainly more policies that are conducive to

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Speaker 7: economic growth in terms of being friendlier to the private sector,

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Speaker 7: and that's been a trend for over a year now.

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Speaker 7: But to my mind, this is a retail rally that

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Speaker 7: is now expanding into large stocks. So if you look

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Speaker 7: at the performance of the CNI one thousand, the thousand

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Speaker 7: largest stocks in China so far this year, they're up

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Speaker 7: fourteen percent, But the CNI two thousand, which is the

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Speaker 7: next two thousand largest stocks in China, that's up thirty

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Speaker 7: eight percent. And retail investors like the stories in these

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Speaker 7: smaller stocks, be it ai or robotics or aerospace, and

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Speaker 7: they've liked the fact that institutions don't own these because

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Speaker 7: they're worried if the market goes up that institutions will

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Speaker 7: sell their holdings that they bought years ago. But now

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Speaker 7: we've had this pretty substantial breakout in the Shanghai composite yesterday,

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Speaker 7: breaking above it's high of March of twenty twenty two.

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Speaker 7: I think we're actually at the cusp of a very

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Speaker 7: powerful rally in China, not so much predicated on impending stimulus,

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Speaker 7: but I think momentum. Really it's a good old fashioned

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Speaker 7: retail market. And the margin debt in China today is

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Speaker 7: two point three percent of market cap. Back in twenty

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Speaker 7: fifteen it got up to four point eight percent, so

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Speaker 7: I believe there's more to go.

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Speaker 6: Yeah, I was just gonna ask you, I mean the

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Speaker 6: importance of the retail investor. How much confidence is there

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Speaker 6: on the mainland. We've seen turnover continuing to pick up.

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Speaker 6: They're sort of sitting on household savings as well. How

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Speaker 6: important is that as a factor?

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Speaker 7: Very important China mainland. China is a retail market and

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Speaker 7: the Hong Kong is an institutional market. But there's a

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Speaker 7: lot of money in China, much of it is sitting

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Speaker 7: idle and bank accounts. To your point, also, we should

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Speaker 7: recall that interest rates are low. The ten year government

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Speaker 7: bond yield is one point eight percent. And insurance companies

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Speaker 7: in April just saw a major reduction in the cap

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Speaker 7: that they are there equity investment caps, so they're now

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Speaker 7: allowed to sorry I should say, yeah, reduction, so they're

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Speaker 7: now allowed to invest a lot more in equities, and

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Speaker 7: there are a lot of high yielding equities in China,

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Speaker 7: which and I think you're also seeing that's another sort

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Speaker 7: of important reason to explain why the market can keep

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Speaker 7: going up.

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Speaker 2: That is Mark Matthews, head of Asia Research at Julius Bear,

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Speaker 2: speaking with Bloomberg TV host Cherry On and Avril Hong

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Speaker 2: here on the Daybreak Asia podcast. Welcome back to the

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Speaker 2: Daybreak Asia Podcast. I'm Doug Prisner. It was a quiet

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Speaker 2: start to a busy week from markets. The high point

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Speaker 2: will come Friday. That's when we'll hear from fedshare Jay Powell.

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Speaker 2: He'll speak at the Jackson Hole Symposium and unveil a

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Speaker 2: new policy framework for the FED. He may also draw

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Speaker 2: hints about the Fed's thinking when it comes to whether

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Speaker 2: or not we get a rate cut at the September

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Speaker 2: policy meeting. Now, before Powell speaks, we'll have the benefit

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Speaker 2: of the minutes of the last FED meeting. Joining me

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Speaker 2: now for a look at what we may expect is

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Speaker 2: Michelle Martin. She is president at Prosperity. It's the wealth

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Speaker 2: management arm of Eisner Amper. Thanks for making time to

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Speaker 2: chat with me. What do you think we're going to

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Speaker 2: hear from.

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Speaker 8: Powell, Well, Doug, I think it's going to be really interesting.

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Speaker 8: He's really balancing a couple of different things here. One is,

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Speaker 8: some week we're starting to see some signs of weaker

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Speaker 8: growth and potentially a little bit higher inflation mark. So

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Speaker 8: the question is what is the priority here, and wondering

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Speaker 8: also what is the tariff impact really going to look

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Speaker 8: like it's had a pretty gradual impact. We're just starting

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Speaker 8: to see the signs of maybe a bit of inflation

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Speaker 8: seep through, so he's under pressure. We anticipate a rate cut,

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Speaker 8: probably in September, but as I always think, the market

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Speaker 8: tends to think that rate cuts are going to come

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Speaker 8: more quickly, So depending on what the Fed minutes looked

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Speaker 8: like and just really what we're going to see from him,

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Speaker 8: I would say that we would likely see a rate

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Speaker 8: cut in September, but I'm wondering if it might be

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Speaker 8: more muted than what the market is looking.

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Speaker 2: For, So possibly one for the remainder of the year,

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Speaker 2: and that's it. Is that a possibility.

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Speaker 8: If I were to take a bet on that, I

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Speaker 8: would say that would not be out of the question. Again,

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Speaker 8: it's going to really depend on the perfect landing here.

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Speaker 8: We're seeing so many things come through with the markets

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Speaker 8: that will continue to see some rate cuts, but I'm

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Speaker 8: not sure they're going to come as quickly, so I

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Speaker 8: would say maybe one this year and then again in

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Speaker 8: early twenty twenty six.

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Speaker 2: So we're going to get some insight on the American consumer.

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Speaker 2: This week we'll have quarterly numbers from Walmart and Target

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Speaker 2: Home Depot is in there as well, I believe, And

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Speaker 2: I think it's fair to say that this earning season

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Speaker 2: has kind of trounced expectations when it comes to the

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Speaker 2: S and P five hundred companies. And I thought it

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Speaker 2: interesting today that strategist over at Goldman Sachs were saying

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Speaker 2: that companies essentially found ways to blunt the impact of tariffs,

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Speaker 2: and they also were able if you're on multinational firm,

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Speaker 2: to benefit from a weeker dollar. And if you look

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Speaker 2: at what analysts are doing now, they seem to be

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Speaker 2: ratcheting up expectations for the current quarter at a very

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Speaker 2: very brisk pace. How are you feeling about the equity

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Speaker 2: market and the earning season.

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Speaker 8: Well, the earning season, as you said, Doug, has been

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Speaker 8: a wonderful surprise in many ways to see some headwinds

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Speaker 8: and companies really be able to perform the way they have.

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Speaker 8: There's a fair amount of cash that is on the

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Speaker 8: balance sheets right now just due to some certainty in

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Speaker 8: what we're seeing with the new tax law. That's a

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Speaker 8: bit of a break for companies, and just having that

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Speaker 8: certainty and knowing what cash flow looks like is also

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Speaker 8: another contributor to what we're seeing with company buybacks and

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Speaker 8: some of the reports that we're seeing.

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Speaker 2: In terms of geopolitical risk, we were talking earlier about

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Speaker 2: the situation with peace in Ukraine. Is that a big

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Speaker 2: factor for you right now in your decision making when

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Speaker 2: you look at some of the geopolitical risks that are

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Speaker 2: out there.

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Speaker 8: Well, it's interesting, Doug. I think that sometimes the geopolitical

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Speaker 8: risk gets magnified by us as consumers or investors in

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Speaker 8: the market, and oftentimes that we don't see the impact

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Speaker 8: as strongly. But I do think that it has done

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Speaker 8: a couple things. One is that it has unified Europe.

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Speaker 8: We're seeing that we're seeing a much stronger presence. I

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Speaker 8: think that what we're seeing along with that is a

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Speaker 8: commitment and this all just contributes to the commitment of

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Speaker 8: the European leadership to invest in infrastructure, invest in defense.

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Speaker 8: We're seeing some monetary easing and just a general deregulation,

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Speaker 8: which is all leading to a much stronger market abroad

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Speaker 8: than what we're seeing even here in the US. So

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Speaker 8: that really does play into some of our tactical shifts

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Speaker 8: that we're looking at and just seeing the momentum in Europe.

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Speaker 2: You mentioned teruf a moment ago. Maybe we can talk

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Speaker 2: a little bit about industrial policy from the Trump administration.

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Speaker 2: One of the things that Bloomberg News has learned is

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Speaker 2: that the Trump administration is considering taking a ten percent

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Speaker 2: stake in Intel. That would follow similar moves from the administration,

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Speaker 2: such as the Golden Chair that the administration took in

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Speaker 2: US Deal, and then there's that perverted equity stake in

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Speaker 2: MP Materials. Give me your sense of what you're getting

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Speaker 2: from the administration in terms of industrial policy. I know

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Speaker 2: there's been a lot of emphasis on trying to bolster

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Speaker 2: certain areas of American manufacturing to reshore production facilities. How

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Speaker 2: would you evaluate the story right now?

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Speaker 8: Oh, I think it's I think it's just stunning. I

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Speaker 8: think that there's some continued protectionism here and really a

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Speaker 8: play to a defensive play against China, particularly in the

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Speaker 8: chip market, and just a retrenchment of investment in US

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Speaker 8: manufacturing in general, particularly as we're in this AI segment

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Speaker 8: where everything is moving so quickly. I was just on

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Speaker 8: a call last week and we were just talking about

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Speaker 8: how chip manufacturing AI in general has gone from almost

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Speaker 8: a startup type concept to really being implemented across companies globally,

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Speaker 8: but particularly in the US. We're seeing day to day

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Speaker 8: practices where that's actually happening. So I think that I

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Speaker 8: think that the administration is actually investing and really getting

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Speaker 8: in front of this AI race with China.

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Speaker 2: Okay, we'll leave it there, Michelle, Thank you so much.

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Speaker 2: Michelle Martin. She is president at Prosperity, the wealth management

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Speaker 2: arm of Eisner Amper. Joining us here on the Daybreak

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Speaker 2: Asia podcast. Thanks for listening to today's episode of the

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Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at

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

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Speaker 2: If you can find us on Apple, Spotify, the Bloomberg

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Speaker 2: Podcast YouTube channel, or anywhere else you listen, join us

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Speaker 2: again tomorrow for insight on the market moves from Hong

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Speaker 2: Kong to Singapore. And Australia. I'm Doug Prisoner and this

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Speaker 2: is Bloomberg