WEBVTT - Tariffs On ‘All Countries’, Stock Slump Deepens & FX Turmoil Fears

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>This is the.

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<v Speaker 3>Blueberg day Break You At podcast, available every morning on Apple,

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

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<v Speaker 3>of March in London. I'm Caroline Hepkin.

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<v Speaker 4>And I'm Stephen Carroll. Coming up today. Donald Trump says

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<v Speaker 4>his plan for so called reciprocal tariffs will be universal.

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<v Speaker 3>Stocks drop and bond's rally as the prospect of a

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<v Speaker 3>full blown trade war drives Goldman Sax to predict more

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<v Speaker 3>rate cuts.

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<v Speaker 4>Plus fearing a liquidity mirage, foreign exchange markets worry as

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<v Speaker 4>system wide crisis could be far more likely than many

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<v Speaker 4>would like to believe.

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<v Speaker 5>Let's start with a roundup of our top stories.

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<v Speaker 4>President Donald Trump says no countries will be exempt from

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<v Speaker 4>his so called reciprocal tariff's plan that are due to

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<v Speaker 4>be announced on Wednesday. Earlier this month, AIDS and allies

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<v Speaker 4>of the President had insisted the levies would be more targeted,

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<v Speaker 4>with some nations receiving exclusions. However, speaking on board Air

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<v Speaker 4>Force One on Sunday night, the President pushed back on

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<v Speaker 4>the idea.

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

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

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<v Speaker 5>Or fifteen those countries.

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<v Speaker 6>Essentially all of the countries that we're talking about wouldn't

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<v Speaker 6>be talking about all countries and not a cutoff.

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<v Speaker 4>President Trump has indicated that the plan will go beyond

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<v Speaker 4>just looking at the levees other countries set for the US,

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<v Speaker 4>to include things like domestic value added taxes and regulations

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<v Speaker 4>the administration deems as being unfair. Research from Bloomberg Economics

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<v Speaker 4>finds that if Trump were to drop this approach with

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<v Speaker 4>America's fifteen largest trading partners, US tariffs could add up

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<v Speaker 4>to twenty eight percentage points to average US tariff rights.

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<v Speaker 4>That would deliver an estimated hut of four percent to

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<v Speaker 4>USGDP and lift prices in the United States by close

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<v Speaker 4>two and a half percent.

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<v Speaker 3>Meanwhile, Trump's decision to double down on sweeping tariffs comes

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<v Speaker 3>as he also insisted he doesn't care if the cost

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<v Speaker 3>of imported cars rises. In a phone interview with NBC News,

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<v Speaker 3>he said, I don't I couldn't care less if they

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<v Speaker 3>raise prices because people are going to start buying American cars,

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<v Speaker 3>and speaking to Fox News Sunday, Trump trade advisor Peter

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<v Speaker 3>Navarro said the auto tariffs would raise significant revenue.

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<v Speaker 7>We're going to raise about one hundred billion dollars with

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<v Speaker 7>the autochriff salon. What we're going to do is in

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<v Speaker 7>the new tax bill that has to pass, it absolutely

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<v Speaker 7>has to pass, we're going to provide tax benefits, tax

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<v Speaker 7>credits to people who buy American cars. This is a

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<v Speaker 7>genius thing that President Trump promised on the campaign trail.

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<v Speaker 3>Despite Navarro's upbeat assessment, auto prices are broadly expected to

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<v Speaker 3>increase by thousands of dollars as a result of the levees.

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<v Speaker 3>JP Morgan analysts estimate prices in the US will jump

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<v Speaker 3>eleven percent on average.

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<v Speaker 4>UK's Prime Minister Urris Starmer spoke with Donald Trump as

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<v Speaker 4>Britain tries to escape the looming global tariffs. A statement

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<v Speaker 4>from Denning Street says the two leaders held quote productive

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<v Speaker 4>discussions and that they will stay in touch in the

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

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<v Speaker 4>the UK would retaliate if it didn't get a deal.

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<v Speaker 1>The Prime Minister has said that no option is off

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<v Speaker 1>the table and we will continue to approach this in

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<v Speaker 1>the UK national interest. That's the important thing.

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<v Speaker 4>The UK government has been working for months on strengthening

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<v Speaker 4>trade relations with the White House and is considering cutting

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<v Speaker 4>digital taxes to secure special treatment. So far, the UK

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<v Speaker 4>has been hit by the same levees on steel and

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<v Speaker 4>autos as the rest of the world.

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<v Speaker 3>Goldman sax economists are forecasting more interest rate cuts this

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<v Speaker 3>year as President Trump's import levees threatened to impact global

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<v Speaker 3>economic growth.

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<v Speaker 5>Bloomberg's t Adebayo.

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<v Speaker 2>More economists at Goldman Sachs now see the FED cutting

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

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<v Speaker 2>on two cuts this year and one in twenty twenty

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<v Speaker 2>six in Europe. A separate note said lower growth forecasts

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<v Speaker 2>reinforce expectations that the ECB will lower rates in April

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<v Speaker 2>and June, with a further quarter percentage point reduction now

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<v Speaker 2>seen for July. The news comes as researchers at the

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<v Speaker 2>bank increase their tariff assumptions for the second time in

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<v Speaker 2>less than a month, meaning they now expect the average

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<v Speaker 2>levee to rise fifteen percentage points in twenty twenty five.

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<v Speaker 2>Higher consumer prices and lower GDP growth in both the

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<v Speaker 2>US and EU are also in the firm's forecasts in London,

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<v Speaker 2>Tea were at a bio Bloomberg Radio.

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<v Speaker 4>Global stocks are selling off for a fourth day ahead

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<v Speaker 4>of the expected announcements on tarifs, then again in Tokyo,

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<v Speaker 4>fell as much as four percent to its lowest level

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<v Speaker 4>and six months, while Taiwan's benchmark indexes on course for

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<v Speaker 4>a correction, having dropped by nearly ten ten percent from

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<v Speaker 4>its recent peak. US and US and European equity futures

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<v Speaker 4>are also pointing to a lower open after a quarter

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<v Speaker 4>where europe stock six hundred registered to record outperformance against

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<v Speaker 4>the S and P five hundred bonds are rallying. Meanwhile,

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<v Speaker 4>with tenure treasury iel dropping by as much as five basis.

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<v Speaker 3>Points, President Trump has threatened to punish buyers of Russian

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<v Speaker 3>oil if Vladimir Putin refuses a ceasfile with Ukraine. In

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<v Speaker 3>comments reported by NBC News, Trump was quote very angry

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<v Speaker 3>and peed off and threatened curves on all oil coming

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<v Speaker 3>out of Russia. Speaking of the journalists on Air Force one,

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<v Speaker 3>the US president was more moderate.

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<v Speaker 6>I was disappointed in a certain way, so with thanks,

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<v Speaker 6>and we said over the last day or two having

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<v Speaker 6>to do with Silinsky, because when he considered SOLISKI not credible.

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<v Speaker 6>I was supposed to be making a deal with them,

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<v Speaker 6>whether you like it, where you don't like him, So

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<v Speaker 6>I wasn't happy with it.

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<v Speaker 3>The threats mark a significant change of tone for President

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<v Speaker 3>Trump and reflect a growing frustration in the US administration.

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<v Speaker 3>Russia is one of the world's three largest oil producers,

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<v Speaker 3>meaning that any attempt to punish buyers could have a

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<v Speaker 3>far reaching effect on both the oil market and inflation.

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<v Speaker 4>During his interview with NBC, Trump also refused to rule

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<v Speaker 4>out running for a third term as president, despite the

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<v Speaker 4>constitution barring him from doing so. He referred to quote

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<v Speaker 4>methods that would allow him to run again. When asked

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<v Speaker 4>about those comments on Air Force One yesterday, the President

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<v Speaker 4>had this to say.

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<v Speaker 6>You want to talk about it, I'm just telling you

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<v Speaker 6>I've had more people say please run again. I said,

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<v Speaker 6>we have a long way to go before even think

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<v Speaker 6>about that.

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<v Speaker 4>Twenty second Amendment to the US Constitution, and acted after

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<v Speaker 4>Franklin D. Roosevelt was elected to a fourth term in

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<v Speaker 4>nineteen forty four, prohibits US presidents from serving more than

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<v Speaker 4>two terms.

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<v Speaker 3>Those are our top stories for you this morning. In

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<v Speaker 3>terms of the market, is a deeply risk off sentiment.

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

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<v Speaker 3>In terms of stock futures, we're down eight tenths of

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<v Speaker 3>one percent for the U of SOX fifty future, six

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<v Speaker 3>tents lower for the S and P five hundred. Remember

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<v Speaker 3>that we did see the S and P five hundred

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<v Speaker 3>dropping close to two percent on Friday. Treasuries and gold

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<v Speaker 3>are rallying. Yields a lower this morning by almost five

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<v Speaker 3>basis points after Friday's eleven basis point rally her gold.

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<v Speaker 3>In terms of the gains, they're eight tenths of one

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<v Speaker 3>percent higher, trading now above thirty one hundred so three

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<v Speaker 3>thy one hundred and nine dollars a troy out. The

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<v Speaker 3>Japanese yen has a jumped sharply. In terms of Asian markets,

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<v Speaker 3>they're following Wall streets to Friday slump. The NIK two

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<v Speaker 3>to five is now down three point nine percent. The

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<v Speaker 3>Hang Saying Index is also significantly lower one and a

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<v Speaker 3>half percent this morning, and mainland Chinese markets, though faring

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<v Speaker 3>slightly better after solid PMI data out of China.

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<v Speaker 5>Those other markets.

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<v Speaker 4>In a moment to bring you more and how markets

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<v Speaker 4>are gearing up for this week's tariff announcements, plus why

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<v Speaker 4>there are liquidity fears creeping into the seven and a

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<v Speaker 4>half trillion dollar foreign exchange market. But first, another story

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<v Speaker 4>that caught her eye this morning. Our colleague Fmloomberg, Quiniy

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<v Speaker 4>and Lara Williams have been writing about the future of champagne,

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<v Speaker 4>a subject that I feel very invested in.

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<v Speaker 5>Carolyne.

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<v Speaker 3>Absolutely, you know that glass of bubbly, it's all changing

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

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<v Speaker 3>And you know, for this wine enjoyed for you know centuries.

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<v Speaker 3>Some summers are so hot now that the grapes are

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<v Speaker 3>ripening a month early and the harvest is starting twenty

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<v Speaker 3>days earlier than they were only thirty years ago. And

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<v Speaker 3>so that means a major rethink, as Lara has been

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<v Speaker 3>writing about, does it mean the return of sweet champagne

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<v Speaker 3>which used to be popular years ago.

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<v Speaker 4>Look, part of what's fascinating about this is obviously it's

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<v Speaker 4>a high value product, which means that these houses that

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<v Speaker 4>produce champagne actually have the means to be able to

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<v Speaker 4>adapt their production methods in a way that is environmentally

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<v Speaker 4>sensitive but also can sustain the quality of the product

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

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<v Speaker 4>the detail of what Lara goes into because she visits

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<v Speaker 4>several of the champagne producers and she talks them and

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<v Speaker 4>these are not always big houses as well. Some of

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<v Speaker 4>them are quite small operations. So the idea that actually

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<v Speaker 4>they're in some ways at the forefront of trying to

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<v Speaker 4>come up with methods that allow them to sustain through

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<v Speaker 4>either because high temperatures is one problem. The other one

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<v Speaker 4>is frost and frost occurring at the wrong times of

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<v Speaker 4>the year that can damage the crop too.

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<v Speaker 3>The beautiful photographs and Lara admits, you know in her

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<v Speaker 3>piece that maybe looking at this sort of most frothy,

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<v Speaker 3>most kind of delightful of products might not sort of

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<v Speaker 3>spring to mind immediately when you think about the kind

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<v Speaker 3>of devastation of extreme weather, but she says that it's

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<v Speaker 3>kind of about the planet's culture, history, humanity, all in

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<v Speaker 3>that bottle of champagne.

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<v Speaker 4>You can read the full thing Blueberg dot Com for

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

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<v Speaker 4>a quarter that have seen European shares and the stock

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<v Speaker 4>six hundred out performing the SMP five hundred by seventeen

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<v Speaker 4>percentage points.

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<v Speaker 5>In dollar terms.

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<v Speaker 4>That's of course on the back of concerns about tariffs,

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<v Speaker 4>but also Germany's fiscal plans supercharging the euro and more.

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<v Speaker 4>Let's bring in our fxs and rights reporter Alice led

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

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<v Speaker 4>reflect on the quarter that we're finishing today. Very unusual

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<v Speaker 4>to see this out performance of you know, stocks, bonds

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<v Speaker 4>and the euro. Talk us through what drove that.

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<v Speaker 1>As much of the last month or two European markets

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

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<v Speaker 1>it's all off the back of this German spending package.

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<v Speaker 1>They're planning to unleash billions of euros of spending over

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<v Speaker 1>the next decade or so to boost investment in defense

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<v Speaker 1>and infrastructure. That's much over to you now that's seen

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<v Speaker 1>as a game changer for Europe as a whole. Of course,

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<v Speaker 1>Germany is the biggest economy, and the ideas it's going

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<v Speaker 1>to help the EU generate the growth it's crazed for years,

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<v Speaker 1>and that's really what's kind of triggered the huge repricing

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<v Speaker 1>in markets over the past quarter. So kind of just

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<v Speaker 1>a few months ago, you had the euro kind of

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<v Speaker 1>toying with parity against the dollar that once this package

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<v Speaker 1>have been announced, it kind of bounced back to the

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<v Speaker 1>highest in October kind of around one spot ten.

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<v Speaker 5>You know, we've had stocks surge.

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<v Speaker 1>I think they're on a historical performance of the US,

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<v Speaker 1>and then I have on the flip side, you've seen

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<v Speaker 1>been so German government bonds put in the sort of

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<v Speaker 1>five next sell off, and that's a reflection of the

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<v Speaker 1>higher bond supply that we were.

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<v Speaker 5>Going to be seeing over the next hadle slow fuel

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<v Speaker 5>this growth.

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<v Speaker 3>But of course we're thinking about this major week ahead,

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<v Speaker 3>the impact of more US tariffs this week.

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<v Speaker 5>Yeah, exactly.

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<v Speaker 1>So I think what's kind of interesting about Europe the

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<v Speaker 1>structure is this kind of pivot from the euphoria. We've

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<v Speaker 1>been seeing this much more sober backdrop, at least in

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<v Speaker 1>the short term. And of course the fear is that

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<v Speaker 1>Trump lapsed the block with tunitive tariffs. That knocks the

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<v Speaker 1>sort of fragile, kind of nacent growth and sentiments. And

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<v Speaker 1>I think the cold European assets have moved so much

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<v Speaker 1>recently on the back of the shell and news that

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<v Speaker 1>probably makes them a bit more vulnerable now. So I

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<v Speaker 1>think I think the idea is, you know, the long

0:12:14.559 --> 0:12:17.160
<v Speaker 1>term outlet probably hasn't changed all too much, but we

0:12:17.200 --> 0:12:19.840
<v Speaker 1>have kind of seen a cooling of these these animal spirits,

0:12:19.840 --> 0:12:21.439
<v Speaker 1>And of course it all sort of depends on kind

0:12:21.480 --> 0:12:23.880
<v Speaker 1>of the shape and size. It's what the final.

0:12:23.600 --> 0:12:24.360
<v Speaker 5>Tariffs look like.

0:12:24.520 --> 0:12:27.839
<v Speaker 4>What about the I suppose updates or the research that

0:12:27.880 --> 0:12:30.040
<v Speaker 4>we've had and the likes of Goldman Sachs talking about

0:12:30.040 --> 0:12:32.880
<v Speaker 4>this affecting the rate path going forward from here as

0:12:32.880 --> 0:12:34.960
<v Speaker 4>well as we think about the impact of tariffs.

0:12:35.240 --> 0:12:38.760
<v Speaker 1>This is exactly and I think the immediate outlook is

0:12:39.160 --> 0:12:41.280
<v Speaker 1>very unclear, and as I said, it kind of all

0:12:41.320 --> 0:12:43.439
<v Speaker 1>sort of depends on kind of how punitive and how

0:12:43.480 --> 0:12:46.600
<v Speaker 1>severe these tariffs are. I think, you know, if Trump

0:12:46.640 --> 0:12:48.400
<v Speaker 1>goes in hard, I think we're going to see a

0:12:48.400 --> 0:12:51.800
<v Speaker 1>continuation of recent moves, so kind of government bonds, which

0:12:51.800 --> 0:12:53.520
<v Speaker 1>are you know, some of the safest assets are going

0:12:53.520 --> 0:12:56.880
<v Speaker 1>to drump, but the euro will will drop further. Stocks

0:12:56.880 --> 0:12:59.320
<v Speaker 1>will I think, cut all that that amazing rally they've

0:12:59.320 --> 0:13:02.440
<v Speaker 1>been having. Usually credit spreads widen, and I think in

0:13:02.440 --> 0:13:05.000
<v Speaker 1>a worse case scenario, you might have to do the

0:13:05.000 --> 0:13:08.240
<v Speaker 1>ECB set in and quite interest rates more than might

0:13:08.280 --> 0:13:11.320
<v Speaker 1>otherwise have been the case this year. Of course, If

0:13:11.400 --> 0:13:14.240
<v Speaker 1>hut Water's down the tariff on the I think we'll

0:13:14.240 --> 0:13:16.440
<v Speaker 1>probably see a big bounced back in terms of risk

0:13:16.480 --> 0:13:18.160
<v Speaker 1>efforts and the era as well.

0:13:18.320 --> 0:13:20.400
<v Speaker 3>Alice, thank you so much for being with us this morning.

0:13:20.440 --> 0:13:24.480
<v Speaker 3>Bloomberg's FX and Rates reporter Alice gledhil So setting yourself

0:13:24.480 --> 0:13:26.040
<v Speaker 3>for what could be a major week ahead.

0:13:26.400 --> 0:13:28.840
<v Speaker 4>Now to the giant foreign exchange market, where traders fear

0:13:28.880 --> 0:13:31.920
<v Speaker 4>the global market may be less liquid than it appears.

0:13:32.040 --> 0:13:35.880
<v Speaker 4>Currency heavyweights are warning the fragmented, tech driven modern market

0:13:35.920 --> 0:13:38.839
<v Speaker 4>could be storing up trouble. We've got another member of

0:13:38.880 --> 0:13:41.320
<v Speaker 4>our FX and rates teams, Alice Atkins, with us this

0:13:41.400 --> 0:13:44.360
<v Speaker 4>morning for more on this. Alice, great to have you

0:13:44.440 --> 0:13:47.360
<v Speaker 4>on as well. Talk to us first about why are

0:13:47.400 --> 0:13:49.439
<v Speaker 4>people worried about FX liquidity?

0:13:49.800 --> 0:13:52.679
<v Speaker 8>Good morning, Stephen. We've got lots of alsis in the

0:13:52.800 --> 0:13:54.439
<v Speaker 8>FX rates team at Bloomberg.

0:13:55.000 --> 0:13:55.280
<v Speaker 4>Well.

0:13:55.400 --> 0:13:58.320
<v Speaker 8>Effex is the largest financial market in the world, but

0:13:58.520 --> 0:14:02.959
<v Speaker 8>it's also probably the most complicated. There's no central exchange,

0:14:03.000 --> 0:14:06.600
<v Speaker 8>and trading activity is fragmented and scattered across lots and

0:14:06.640 --> 0:14:10.880
<v Speaker 8>lots of different platforms and venues, and on an everyday basis,

0:14:11.280 --> 0:14:14.840
<v Speaker 8>everything works fine. Electronic trading has increase the speed with

0:14:14.840 --> 0:14:18.120
<v Speaker 8>which things turn over and crush the cost of trading.

0:14:18.480 --> 0:14:22.680
<v Speaker 8>But during stress market conditions, players like XCX and City,

0:14:23.880 --> 0:14:27.920
<v Speaker 8>they're warning that liquidity is becoming increasingly fragile. And it's

0:14:27.920 --> 0:14:31.760
<v Speaker 8>for a number of reasons. It's partly because regulation has

0:14:31.800 --> 0:14:34.680
<v Speaker 8>meant that banks can't wearhouse risk in the same way

0:14:34.720 --> 0:14:38.000
<v Speaker 8>that they used to. They've also moved to internalize a

0:14:38.000 --> 0:14:42.680
<v Speaker 8>lot more of their flow. So these primary markets EBS

0:14:42.720 --> 0:14:48.280
<v Speaker 8>and l segg formally refinitive, the volumes have fallen quite dramatically,

0:14:48.360 --> 0:14:50.200
<v Speaker 8>so they're much less liquid than they used to be.

0:14:51.000 --> 0:14:54.040
<v Speaker 8>And this all means that when you get very directional

0:14:54.080 --> 0:14:57.520
<v Speaker 8>market moves like last year when we saw yen carry

0:14:57.560 --> 0:15:03.760
<v Speaker 8>trades flow up trades can cause very can cause oversized moves,

0:15:04.400 --> 0:15:07.880
<v Speaker 8>and that's what they're saying that they're seeing happen more often.

0:15:08.640 --> 0:15:12.160
<v Speaker 5>And so has this got the attention of regulators then, so.

0:15:12.200 --> 0:15:16.320
<v Speaker 8>Effects is not as regulated as other asset classes, and

0:15:16.360 --> 0:15:21.640
<v Speaker 8>that's partly because of this decentralized trading system and because

0:15:21.680 --> 0:15:26.360
<v Speaker 8>it crosses time zones and lots of jurisdictions, but it

0:15:26.440 --> 0:15:29.400
<v Speaker 8>is very closely monitored by the central banks in each

0:15:29.560 --> 0:15:33.440
<v Speaker 8>nation and they help put together a set of best

0:15:33.440 --> 0:15:37.480
<v Speaker 8>practice principles known as the FX Global Code, and lots

0:15:37.520 --> 0:15:42.960
<v Speaker 8>of supervisors have been more closely tracking the increasingly complicated

0:15:43.040 --> 0:15:46.400
<v Speaker 8>system recently so. The New York FARED hosted its first

0:15:46.440 --> 0:15:50.440
<v Speaker 8>ever conference on effects market structure just a few months ago,

0:15:51.480 --> 0:15:55.080
<v Speaker 8>and they acknowledged that sudden pullbacks in liquidity may be

0:15:55.080 --> 0:15:58.240
<v Speaker 8>becoming more frequent, and they said that they're particularly watching

0:15:58.480 --> 0:16:02.320
<v Speaker 8>the growth of non bank players market and others like

0:16:02.360 --> 0:16:04.640
<v Speaker 8>the Bank of England have been pushing for there to

0:16:04.680 --> 0:16:08.040
<v Speaker 8>be a bit more transparency in the market for quite

0:16:08.040 --> 0:16:10.800
<v Speaker 8>some time as well.

0:16:10.960 --> 0:16:13.680
<v Speaker 4>This is Bloomberg Daybreak Europe, your morning brief on the

0:16:13.760 --> 0:16:16.800
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0:16:17.080 --> 0:16:20.280
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0:16:23.160 --> 0:16:26.200
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0:16:28.960 --> 0:16:31.720
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0:16:39.400 --> 0:16:42.000
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