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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the.

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Speaker 3: Blueberg day Break You At podcast, available every morning on Apple,

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Speaker 3: Spotify or wherever you listen. It's Monday, the thirty first

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Speaker 3: of March in London. I'm Caroline Hepkin.

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Speaker 4: And I'm Stephen Carroll. Coming up today. Donald Trump says

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Speaker 4: his plan for so called reciprocal tariffs will be universal.

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Speaker 3: Stocks drop and bond's rally as the prospect of a

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Speaker 3: full blown trade war drives Goldman Sax to predict more

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Speaker 3: rate cuts.

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Speaker 4: Plus fearing a liquidity mirage, foreign exchange markets worry as

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Speaker 4: system wide crisis could be far more likely than many

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Speaker 4: would like to believe.

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Speaker 5: Let's start with a roundup of our top stories.

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Speaker 4: President Donald Trump says no countries will be exempt from

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Speaker 4: his so called reciprocal tariff's plan that are due to

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Speaker 4: be announced on Wednesday. Earlier this month, AIDS and allies

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Speaker 4: of the President had insisted the levies would be more targeted,

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Speaker 4: with some nations receiving exclusions. However, speaking on board Air

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Speaker 4: Force One on Sunday night, the President pushed back on

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Speaker 4: the idea.

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Speaker 6: You'd start with all countries. So let's see what happened there.

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Speaker 6: Are many countries. I haven't heard a rumor about fifteen countries, ten.

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Speaker 5: Or fifteen those countries.

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Speaker 6: Essentially all of the countries that we're talking about wouldn't

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Speaker 6: be talking about all countries and not a cutoff.

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Speaker 4: President Trump has indicated that the plan will go beyond

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Speaker 4: just looking at the levees other countries set for the US,

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Speaker 4: to include things like domestic value added taxes and regulations

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Speaker 4: the administration deems as being unfair. Research from Bloomberg Economics

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Speaker 4: finds that if Trump were to drop this approach with

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Speaker 4: America's fifteen largest trading partners, US tariffs could add up

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Speaker 4: to twenty eight percentage points to average US tariff rights.

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Speaker 4: That would deliver an estimated hut of four percent to

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Speaker 4: USGDP and lift prices in the United States by close

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Speaker 4: two and a half percent.

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Speaker 3: Meanwhile, Trump's decision to double down on sweeping tariffs comes

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Speaker 3: as he also insisted he doesn't care if the cost

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Speaker 3: of imported cars rises. In a phone interview with NBC News,

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Speaker 3: he said, I don't I couldn't care less if they

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Speaker 3: raise prices because people are going to start buying American cars,

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Speaker 3: and speaking to Fox News Sunday, Trump trade advisor Peter

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Speaker 3: Navarro said the auto tariffs would raise significant revenue.

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Speaker 7: We're going to raise about one hundred billion dollars with

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Speaker 7: the autochriff salon. What we're going to do is in

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Speaker 7: the new tax bill that has to pass, it absolutely

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Speaker 7: has to pass, we're going to provide tax benefits, tax

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Speaker 7: credits to people who buy American cars. This is a

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Speaker 7: genius thing that President Trump promised on the campaign trail.

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Speaker 3: Despite Navarro's upbeat assessment, auto prices are broadly expected to

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Speaker 3: increase by thousands of dollars as a result of the levees.

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Speaker 3: JP Morgan analysts estimate prices in the US will jump

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Speaker 3: eleven percent on average.

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Speaker 4: UK's Prime Minister Urris Starmer spoke with Donald Trump as

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Speaker 4: Britain tries to escape the looming global tariffs. A statement

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Speaker 4: from Denning Street says the two leaders held quote productive

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Speaker 4: discussions and that they will stay in touch in the

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Speaker 4: coming days. Home Secretary of v Cooper was asked if

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Speaker 4: the UK would retaliate if it didn't get a deal.

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Speaker 1: The Prime Minister has said that no option is off

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Speaker 1: the table and we will continue to approach this in

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Speaker 1: the UK national interest. That's the important thing.

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Speaker 4: The UK government has been working for months on strengthening

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Speaker 4: trade relations with the White House and is considering cutting

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Speaker 4: digital taxes to secure special treatment. So far, the UK

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Speaker 4: has been hit by the same levees on steel and

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Speaker 4: autos as the rest of the world.

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Speaker 3: Goldman sax economists are forecasting more interest rate cuts this

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Speaker 3: year as President Trump's import levees threatened to impact global

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Speaker 3: economic growth.

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Speaker 5: Bloomberg's t Adebayo.

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Speaker 2: More economists at Goldman Sachs now see the FED cutting

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Speaker 2: in July, September, and November. That's compared to earlier bets

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Speaker 2: on two cuts this year and one in twenty twenty

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Speaker 2: six in Europe. A separate note said lower growth forecasts

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Speaker 2: reinforce expectations that the ECB will lower rates in April

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Speaker 2: and June, with a further quarter percentage point reduction now

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Speaker 2: seen for July. The news comes as researchers at the

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Speaker 2: bank increase their tariff assumptions for the second time in

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Speaker 2: less than a month, meaning they now expect the average

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Speaker 2: levee to rise fifteen percentage points in twenty twenty five.

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Speaker 2: Higher consumer prices and lower GDP growth in both the

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Speaker 2: US and EU are also in the firm's forecasts in London,

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Speaker 2: Tea were at a bio Bloomberg Radio.

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Speaker 4: Global stocks are selling off for a fourth day ahead

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Speaker 4: of the expected announcements on tarifs, then again in Tokyo,

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Speaker 4: fell as much as four percent to its lowest level

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Speaker 4: and six months, while Taiwan's benchmark indexes on course for

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Speaker 4: a correction, having dropped by nearly ten ten percent from

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Speaker 4: its recent peak. US and US and European equity futures

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Speaker 4: are also pointing to a lower open after a quarter

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Speaker 4: where europe stock six hundred registered to record outperformance against

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Speaker 4: the S and P five hundred bonds are rallying. Meanwhile,

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Speaker 4: with tenure treasury iel dropping by as much as five basis.

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Speaker 3: Points, President Trump has threatened to punish buyers of Russian

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Speaker 3: oil if Vladimir Putin refuses a ceasfile with Ukraine. In

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Speaker 3: comments reported by NBC News, Trump was quote very angry

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Speaker 3: and peed off and threatened curves on all oil coming

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Speaker 3: out of Russia. Speaking of the journalists on Air Force one,

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Speaker 3: the US president was more moderate.

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Speaker 6: I was disappointed in a certain way, so with thanks,

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Speaker 6: and we said over the last day or two having

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Speaker 6: to do with Silinsky, because when he considered SOLISKI not credible.

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Speaker 6: I was supposed to be making a deal with them,

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Speaker 6: whether you like it, where you don't like him, So

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Speaker 6: I wasn't happy with it.

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Speaker 3: The threats mark a significant change of tone for President

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Speaker 3: Trump and reflect a growing frustration in the US administration.

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Speaker 3: Russia is one of the world's three largest oil producers,

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Speaker 3: meaning that any attempt to punish buyers could have a

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Speaker 3: far reaching effect on both the oil market and inflation.

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Speaker 4: During his interview with NBC, Trump also refused to rule

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Speaker 4: out running for a third term as president, despite the

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Speaker 4: constitution barring him from doing so. He referred to quote

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Speaker 4: methods that would allow him to run again. When asked

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Speaker 4: about those comments on Air Force One yesterday, the President

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Speaker 4: had this to say.

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Speaker 6: You want to talk about it, I'm just telling you

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Speaker 6: I've had more people say please run again. I said,

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Speaker 6: we have a long way to go before even think

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Speaker 6: about that.

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Speaker 4: Twenty second Amendment to the US Constitution, and acted after

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Speaker 4: Franklin D. Roosevelt was elected to a fourth term in

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Speaker 4: nineteen forty four, prohibits US presidents from serving more than

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Speaker 4: two terms.

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Speaker 3: Those are our top stories for you this morning. In

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Speaker 3: terms of the market, is a deeply risk off sentiment.

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Speaker 3: Continuing today, we're set up for a very difficult day.

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Speaker 3: In terms of stock futures, we're down eight tenths of

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Speaker 3: one percent for the U of SOX fifty future, six

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Speaker 3: tents lower for the S and P five hundred. Remember

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Speaker 3: that we did see the S and P five hundred

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Speaker 3: dropping close to two percent on Friday. Treasuries and gold

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Speaker 3: are rallying. Yields a lower this morning by almost five

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Speaker 3: basis points after Friday's eleven basis point rally her gold.

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Speaker 3: In terms of the gains, they're eight tenths of one

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Speaker 3: percent higher, trading now above thirty one hundred so three

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Speaker 3: thy one hundred and nine dollars a troy out. The

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Speaker 3: Japanese yen has a jumped sharply. In terms of Asian markets,

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Speaker 3: they're following Wall streets to Friday slump. The NIK two

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Speaker 3: to five is now down three point nine percent. The

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Speaker 3: Hang Saying Index is also significantly lower one and a

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Speaker 3: half percent this morning, and mainland Chinese markets, though faring

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Speaker 3: slightly better after solid PMI data out of China.

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Speaker 5: Those other markets.

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Speaker 4: In a moment to bring you more and how markets

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Speaker 4: are gearing up for this week's tariff announcements, plus why

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Speaker 4: there are liquidity fears creeping into the seven and a

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Speaker 4: half trillion dollar foreign exchange market. But first, another story

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Speaker 4: that caught her eye this morning. Our colleague Fmloomberg, Quiniy

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Speaker 4: and Lara Williams have been writing about the future of champagne,

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Speaker 4: a subject that I feel very invested in.

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Speaker 5: Carolyne.

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Speaker 3: Absolutely, you know that glass of bubbly, it's all changing

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Speaker 3: because of climate change. It's an existential crisis for the region.

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Speaker 3: And you know, for this wine enjoyed for you know centuries.

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Speaker 3: Some summers are so hot now that the grapes are

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Speaker 3: ripening a month early and the harvest is starting twenty

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Speaker 3: days earlier than they were only thirty years ago. And

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Speaker 3: so that means a major rethink, as Lara has been

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Speaker 3: writing about, does it mean the return of sweet champagne

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Speaker 3: which used to be popular years ago.

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Speaker 4: Look, part of what's fascinating about this is obviously it's

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Speaker 4: a high value product, which means that these houses that

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Speaker 4: produce champagne actually have the means to be able to

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Speaker 4: adapt their production methods in a way that is environmentally

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Speaker 4: sensitive but also can sustain the quality of the product

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Speaker 4: as well. So actually in terms of innovation, and that's

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Speaker 4: the detail of what Lara goes into because she visits

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Speaker 4: several of the champagne producers and she talks them and

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Speaker 4: these are not always big houses as well. Some of

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Speaker 4: them are quite small operations. So the idea that actually

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Speaker 4: they're in some ways at the forefront of trying to

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Speaker 4: come up with methods that allow them to sustain through

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Speaker 4: either because high temperatures is one problem. The other one

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Speaker 4: is frost and frost occurring at the wrong times of

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Speaker 4: the year that can damage the crop too.

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Speaker 3: The beautiful photographs and Lara admits, you know in her

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Speaker 3: piece that maybe looking at this sort of most frothy,

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Speaker 3: most kind of delightful of products might not sort of

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Speaker 3: spring to mind immediately when you think about the kind

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Speaker 3: of devastation of extreme weather, but she says that it's

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Speaker 3: kind of about the planet's culture, history, humanity, all in

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Speaker 3: that bottle of champagne.

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Speaker 4: You can read the full thing Blueberg dot Com for

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Speaker 4: its lash opinion. Well, let's turn to the markets after

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Speaker 4: a quarter that have seen European shares and the stock

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Speaker 4: six hundred out performing the SMP five hundred by seventeen

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Speaker 4: percentage points.

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Speaker 5: In dollar terms.

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Speaker 4: That's of course on the back of concerns about tariffs,

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Speaker 4: but also Germany's fiscal plans supercharging the euro and more.

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Speaker 4: Let's bring in our fxs and rights reporter Alice led

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Speaker 4: Hill for more on this. ALUs. First of all, let's

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Speaker 4: reflect on the quarter that we're finishing today. Very unusual

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Speaker 4: to see this out performance of you know, stocks, bonds

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Speaker 4: and the euro. Talk us through what drove that.

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Speaker 1: As much of the last month or two European markets

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Speaker 1: who've just gone on the major high. As you mentioned,

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Speaker 1: it's all off the back of this German spending package.

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Speaker 1: They're planning to unleash billions of euros of spending over

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Speaker 1: the next decade or so to boost investment in defense

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Speaker 1: and infrastructure. That's much over to you now that's seen

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Speaker 1: as a game changer for Europe as a whole. Of course,

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Speaker 1: Germany is the biggest economy, and the ideas it's going

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Speaker 1: to help the EU generate the growth it's crazed for years,

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Speaker 1: and that's really what's kind of triggered the huge repricing

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Speaker 1: in markets over the past quarter. So kind of just

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Speaker 1: a few months ago, you had the euro kind of

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Speaker 1: toying with parity against the dollar that once this package

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Speaker 1: have been announced, it kind of bounced back to the

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Speaker 1: highest in October kind of around one spot ten.

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Speaker 5: You know, we've had stocks surge.

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Speaker 1: I think they're on a historical performance of the US,

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Speaker 1: and then I have on the flip side, you've seen

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Speaker 1: been so German government bonds put in the sort of

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Speaker 1: five next sell off, and that's a reflection of the

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Speaker 1: higher bond supply that we were.

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Speaker 5: Going to be seeing over the next hadle slow fuel

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Speaker 5: this growth.

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Speaker 3: But of course we're thinking about this major week ahead,

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Speaker 3: the impact of more US tariffs this week.

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Speaker 5: Yeah, exactly.

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Speaker 1: So I think what's kind of interesting about Europe the

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Speaker 1: structure is this kind of pivot from the euphoria. We've

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Speaker 1: been seeing this much more sober backdrop, at least in

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Speaker 1: the short term. And of course the fear is that

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Speaker 1: Trump lapsed the block with tunitive tariffs. That knocks the

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Speaker 1: sort of fragile, kind of nacent growth and sentiments. And

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Speaker 1: I think the cold European assets have moved so much

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Speaker 1: recently on the back of the shell and news that

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Speaker 1: probably makes them a bit more vulnerable now. So I

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Speaker 1: think I think the idea is, you know, the long

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Speaker 1: term outlet probably hasn't changed all too much, but we

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Speaker 1: have kind of seen a cooling of these these animal spirits,

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Speaker 1: And of course it all sort of depends on kind

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Speaker 1: of the shape and size. It's what the final.

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Speaker 5: Tariffs look like.

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Speaker 4: What about the I suppose updates or the research that

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Speaker 4: we've had and the likes of Goldman Sachs talking about

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Speaker 4: this affecting the rate path going forward from here as

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Speaker 4: well as we think about the impact of tariffs.

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Speaker 1: This is exactly and I think the immediate outlook is

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Speaker 1: very unclear, and as I said, it kind of all

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Speaker 1: sort of depends on kind of how punitive and how

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Speaker 1: severe these tariffs are. I think, you know, if Trump

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Speaker 1: goes in hard, I think we're going to see a

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Speaker 1: continuation of recent moves, so kind of government bonds, which

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Speaker 1: are you know, some of the safest assets are going

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Speaker 1: to drump, but the euro will will drop further. Stocks

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Speaker 1: will I think, cut all that that amazing rally they've

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Speaker 1: been having. Usually credit spreads widen, and I think in

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Speaker 1: a worse case scenario, you might have to do the

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Speaker 1: ECB set in and quite interest rates more than might

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Speaker 1: otherwise have been the case this year. Of course, If

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Speaker 1: hut Water's down the tariff on the I think we'll

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Speaker 1: probably see a big bounced back in terms of risk

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Speaker 1: efforts and the era as well.

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Speaker 3: Alice, thank you so much for being with us this morning.

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Speaker 3: Bloomberg's FX and Rates reporter Alice gledhil So setting yourself

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Speaker 3: for what could be a major week ahead.

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Speaker 4: Now to the giant foreign exchange market, where traders fear

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Speaker 4: the global market may be less liquid than it appears.

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Speaker 4: Currency heavyweights are warning the fragmented, tech driven modern market

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Speaker 4: could be storing up trouble. We've got another member of

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Speaker 4: our FX and rates teams, Alice Atkins, with us this

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Speaker 4: morning for more on this. Alice, great to have you

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Speaker 4: on as well. Talk to us first about why are

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Speaker 4: people worried about FX liquidity?

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Speaker 8: Good morning, Stephen. We've got lots of alsis in the

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Speaker 8: FX rates team at Bloomberg.

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Speaker 4: Well.

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Speaker 8: Effex is the largest financial market in the world, but

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Speaker 8: it's also probably the most complicated. There's no central exchange,

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Speaker 8: and trading activity is fragmented and scattered across lots and

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Speaker 8: lots of different platforms and venues, and on an everyday basis,

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Speaker 8: everything works fine. Electronic trading has increase the speed with

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Speaker 8: which things turn over and crush the cost of trading.

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Speaker 8: But during stress market conditions, players like XCX and City,

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Speaker 8: they're warning that liquidity is becoming increasingly fragile. And it's

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Speaker 8: for a number of reasons. It's partly because regulation has

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Speaker 8: meant that banks can't wearhouse risk in the same way

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Speaker 8: that they used to. They've also moved to internalize a

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Speaker 8: lot more of their flow. So these primary markets EBS

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Speaker 8: and l segg formally refinitive, the volumes have fallen quite dramatically,

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Speaker 8: so they're much less liquid than they used to be.

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Speaker 8: And this all means that when you get very directional

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Speaker 8: market moves like last year when we saw yen carry

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Speaker 8: trades flow up trades can cause very can cause oversized moves,

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Speaker 8: and that's what they're saying that they're seeing happen more often.

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Speaker 5: And so has this got the attention of regulators then, so.

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Speaker 8: Effects is not as regulated as other asset classes, and

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Speaker 8: that's partly because of this decentralized trading system and because

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Speaker 8: it crosses time zones and lots of jurisdictions, but it

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Speaker 8: is very closely monitored by the central banks in each

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Speaker 8: nation and they help put together a set of best

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Speaker 8: practice principles known as the FX Global Code, and lots

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Speaker 8: of supervisors have been more closely tracking the increasingly complicated

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Speaker 8: system recently so. The New York FARED hosted its first

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Speaker 8: ever conference on effects market structure just a few months ago,

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Speaker 8: and they acknowledged that sudden pullbacks in liquidity may be

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Speaker 8: becoming more frequent, and they said that they're particularly watching

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Speaker 8: the growth of non bank players market and others like

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Speaker 8: the Bank of England have been pushing for there to

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Speaker 8: be a bit more transparency in the market for quite

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Speaker 8: some time as well.

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Speaker 4: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 4: stories making news from London to Wall Street and beyond.

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