WEBVTT - US Trade Negotiations Continue This Week

0:00:02.520 --> 0:00:07.040
<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

0:00:10.720 --> 0:00:14.200
<v Speaker 2>Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner.

0:00:14.520 --> 0:00:17.520
<v Speaker 2>It's the Easter Monday holiday in the Asia Pacific, so

0:00:17.600 --> 0:00:21.120
<v Speaker 2>we have markets in Australia and Hong Kong closed. Now,

0:00:21.160 --> 0:00:23.920
<v Speaker 2>this week's sentiment will likely remain at the mercy of

0:00:24.239 --> 0:00:28.160
<v Speaker 2>evolving trade policies from the Trump administration. South Korea's top

0:00:28.200 --> 0:00:31.400
<v Speaker 2>trade official will be in Washington this week to kickstar

0:00:31.520 --> 0:00:35.080
<v Speaker 2>trade negotiations. Now, this will be the second Asian nation

0:00:35.240 --> 0:00:37.960
<v Speaker 2>to sit down with the US to assess so called

0:00:38.080 --> 0:00:42.200
<v Speaker 2>reciprocal tariffs. Japan was the first. For more, we heard

0:00:42.200 --> 0:00:46.159
<v Speaker 2>from Naomi Fink, chief Global strategist at Nico Asset Management.

0:00:46.400 --> 0:00:48.600
<v Speaker 2>She spoke with Bloomberg's Paul Allen and.

0:00:48.520 --> 0:00:51.360
<v Speaker 1>Sherry On Naomi, great to have you with us, at

0:00:51.440 --> 0:00:55.279
<v Speaker 1>least for now, we haven't seen too many trade negotiations

0:00:55.280 --> 0:00:57.680
<v Speaker 1>back and forth over the weekend at least, But when

0:00:57.680 --> 0:00:59.240
<v Speaker 1>it comes to the rest of the week, what will

0:00:59.280 --> 0:00:59.920
<v Speaker 1>you be watching?

0:01:00.920 --> 0:01:04.920
<v Speaker 3>Well, I think since given what we've seen so far,

0:01:05.240 --> 0:01:09.120
<v Speaker 3>especially since the tariffs have been announced, it might be

0:01:09.680 --> 0:01:13.119
<v Speaker 3>that we do not get a straight answer even when

0:01:13.200 --> 0:01:19.280
<v Speaker 3>we reach the conclusion of these negotiations, the negotiation not

0:01:19.400 --> 0:01:23.920
<v Speaker 3>only with Japan, but the negotiations may continue far longer

0:01:24.600 --> 0:01:28.000
<v Speaker 3>than than we're we're really expecting right now.

0:01:28.520 --> 0:01:29.520
<v Speaker 4>Even if we do.

0:01:29.440 --> 0:01:34.120
<v Speaker 3>Get a an outcome, that outcome is probably liable to

0:01:34.120 --> 0:01:37.760
<v Speaker 3>get renegotiated. We've seen a lot of changes, so I

0:01:37.800 --> 0:01:41.080
<v Speaker 3>think right now what we can really only expect is

0:01:41.160 --> 0:01:45.440
<v Speaker 3>that is that there are going to be several possible outcomes.

0:01:45.880 --> 0:01:49.840
<v Speaker 3>One of those outcomes I think is probably at least

0:01:49.880 --> 0:01:53.160
<v Speaker 3>more favorable in terms of risk assets than others, and

0:01:53.240 --> 0:01:56.960
<v Speaker 3>may involve the US not falling into a year term recession.

0:01:57.160 --> 0:02:00.960
<v Speaker 3>But at the same time, we cannot rule out that

0:02:01.040 --> 0:02:05.040
<v Speaker 3>the possibility of near term recession. And I would emphasize

0:02:05.080 --> 0:02:07.640
<v Speaker 3>that the whole idea of tariffs is probably going to

0:02:07.680 --> 0:02:10.720
<v Speaker 3>be hardest on the US consumer. That's who it's going

0:02:10.760 --> 0:02:11.720
<v Speaker 3>to be toughest for.

0:02:12.120 --> 0:02:15.239
<v Speaker 1>And of course that potential recession could also come with

0:02:15.440 --> 0:02:18.280
<v Speaker 1>just disinflation as the FED has wanted to see, or

0:02:18.320 --> 0:02:23.640
<v Speaker 1>even just stackflation right because of continuing to prices rising

0:02:23.720 --> 0:02:26.840
<v Speaker 1>because of the tariffs. What would the implications be for

0:02:26.880 --> 0:02:28.840
<v Speaker 1>the markets depending on those two scenarios.

0:02:29.320 --> 0:02:33.280
<v Speaker 3>Well, if we do see continued disinflation, then the FED

0:02:33.480 --> 0:02:37.960
<v Speaker 3>probably can be more comfortable with rate cuts if we

0:02:38.040 --> 0:02:41.960
<v Speaker 3>do see weaker growth and softer inflation. That's usually a

0:02:42.000 --> 0:02:44.760
<v Speaker 3>typical environment in which a central bank would cut rates.

0:02:44.960 --> 0:02:47.840
<v Speaker 3>But if we see weaker growth but the inflation does not.

0:02:48.000 --> 0:02:51.520
<v Speaker 4>Come lower, then they will be a bit.

0:02:51.440 --> 0:02:54.919
<v Speaker 3>Hobbled by that high inflation, so we won't be able

0:02:54.960 --> 0:02:57.160
<v Speaker 3>to see relief from monetary policy.

0:02:57.240 --> 0:02:59.360
<v Speaker 4>That's just how central banks work.

0:03:00.960 --> 0:03:03.280
<v Speaker 5>When do you go for cover at a time like this,

0:03:03.400 --> 0:03:06.120
<v Speaker 5>because some of those traditional plays, the US dollar was

0:03:06.160 --> 0:03:09.200
<v Speaker 5>saying getting beaten up at the moment, US treasuries have

0:03:09.240 --> 0:03:11.760
<v Speaker 5>been selling off. I mean, we've got gold to a record,

0:03:11.840 --> 0:03:15.839
<v Speaker 5>But do you look to other bond markets elsewhere where

0:03:15.840 --> 0:03:17.440
<v Speaker 5>are you finding safety?

0:03:17.919 --> 0:03:22.320
<v Speaker 4>Well, I think it's probably hard to find certainty.

0:03:23.280 --> 0:03:25.720
<v Speaker 3>Even if you just put cash under the mattress, which

0:03:25.760 --> 0:03:28.440
<v Speaker 3>is what has happened in Japan for decades and which

0:03:28.480 --> 0:03:32.320
<v Speaker 3>is now finally reversing, I think it's going to be

0:03:32.480 --> 0:03:36.080
<v Speaker 3>very hard to find one asset that's just the magic bullet.

0:03:36.160 --> 0:03:39.520
<v Speaker 3>So probably the best idea is to diversify, which means

0:03:39.520 --> 0:03:42.240
<v Speaker 3>that you're not going to be completely.

0:03:41.600 --> 0:03:43.200
<v Speaker 4>Insulated from market moves.

0:03:43.240 --> 0:03:47.280
<v Speaker 3>You don't want to have zero allocation to risk assets

0:03:47.320 --> 0:03:49.160
<v Speaker 3>because they also do rise.

0:03:48.920 --> 0:03:49.840
<v Speaker 4>They don't only fall.

0:03:49.920 --> 0:03:52.840
<v Speaker 3>So probably what you want to do is find some

0:03:52.920 --> 0:03:56.200
<v Speaker 3>areas that will at least insulate you against the worst

0:03:56.240 --> 0:03:58.880
<v Speaker 3>of the declines. One of the things that we have

0:03:58.960 --> 0:04:01.880
<v Speaker 3>been looking at is the potential for domestic demand in

0:04:01.920 --> 0:04:05.800
<v Speaker 3>some of these surplus economies, especially in Asia to a

0:04:05.800 --> 0:04:08.640
<v Speaker 3>bit longer term come through, because what do you do

0:04:08.760 --> 0:04:12.320
<v Speaker 3>when one of your largest trade partners says, well, we

0:04:12.360 --> 0:04:14.760
<v Speaker 3>don't really want to buy many of your products anymore,

0:04:14.880 --> 0:04:16.960
<v Speaker 3>while you see what you can do internally, and then

0:04:17.040 --> 0:04:20.000
<v Speaker 3>a lot of these countries do have huge built up surpluses,

0:04:20.080 --> 0:04:24.560
<v Speaker 3>so they can use it to stimulate domestic demands. There

0:04:24.600 --> 0:04:27.640
<v Speaker 3>are other assets as gold, which are which is remaining

0:04:27.680 --> 0:04:32.159
<v Speaker 3>supported probably because of this lack of other risk havens,

0:04:33.800 --> 0:04:36.960
<v Speaker 3>and I would see that as part of a diversified

0:04:37.000 --> 0:04:40.200
<v Speaker 3>portfolio as well, But I wouldn't be too hasty to.

0:04:40.360 --> 0:04:41.400
<v Speaker 4>Dump any asset.

0:04:41.480 --> 0:04:44.440
<v Speaker 3>I would look to to try and diversify well with

0:04:44.600 --> 0:04:48.000
<v Speaker 3>some of these these indicators that they mentioned just now.

0:04:48.360 --> 0:04:50.799
<v Speaker 5>Yeah, when you see selling like we've seen, the conversation

0:04:50.839 --> 0:04:54.320
<v Speaker 5>inevitably turns to dip buying. There's certainly some boggains to

0:04:54.360 --> 0:04:57.160
<v Speaker 5>be had. But what's the risk here? Are we still

0:04:57.200 --> 0:04:59.760
<v Speaker 5>in catch the falling knife territory or is this the

0:04:59.800 --> 0:05:02.200
<v Speaker 5>time to take a look at some purchases.

0:05:03.600 --> 0:05:07.720
<v Speaker 3>Well, I think if we're if we are long term investors,

0:05:07.839 --> 0:05:11.920
<v Speaker 3>then probably what we want to do is just calm

0:05:11.960 --> 0:05:15.159
<v Speaker 3>down and maybe dollar cost average. So yeah, we'll be

0:05:15.160 --> 0:05:17.000
<v Speaker 3>dip buying some of the time, some of the time

0:05:17.040 --> 0:05:19.799
<v Speaker 3>we won't be. But what we're looking for is long

0:05:19.880 --> 0:05:21.000
<v Speaker 3>term compounding.

0:05:21.440 --> 0:05:22.680
<v Speaker 4>And if we do.

0:05:22.600 --> 0:05:25.080
<v Speaker 3>Average at a rate where long term we can still

0:05:25.120 --> 0:05:29.679
<v Speaker 3>benefit from economic growth over many years, then we should

0:05:29.680 --> 0:05:30.239
<v Speaker 3>be Okay.

0:05:30.720 --> 0:05:32.520
<v Speaker 4>What I would discourage is.

0:05:33.240 --> 0:05:36.440
<v Speaker 3>Trading around these volatile markets, unless, of course, you are

0:05:37.440 --> 0:05:41.279
<v Speaker 3>somebody who wants to benefit off of that. Long Term investors,

0:05:41.279 --> 0:05:44.600
<v Speaker 3>though I find, typically aren't very successful at timing markets.

0:05:44.640 --> 0:05:48.680
<v Speaker 3>So what you want to do is, yes, position, yes, diversify,

0:05:49.080 --> 0:05:51.600
<v Speaker 3>but you don't really want to be timing a lot

0:05:51.640 --> 0:05:54.560
<v Speaker 3>of these moves because you might lose some of that

0:05:54.600 --> 0:05:56.400
<v Speaker 3>opportunity to long term compound.

0:05:57.400 --> 0:05:59.920
<v Speaker 1>Would you invest for the long term in China because

0:06:00.360 --> 0:06:02.640
<v Speaker 1>we have seen that they're not as trade dependent as

0:06:02.640 --> 0:06:04.600
<v Speaker 1>they used to be, some saying that they could actually

0:06:04.600 --> 0:06:07.159
<v Speaker 1>come out okay On the other side of this trade war.

0:06:07.560 --> 0:06:11.040
<v Speaker 3>So I think China is too large an economy, too

0:06:11.080 --> 0:06:13.800
<v Speaker 3>and too large a market and still long.

0:06:13.720 --> 0:06:16.960
<v Speaker 4>Term growing to ignore. I don't think that.

0:06:17.960 --> 0:06:20.560
<v Speaker 3>I know that some have called China uninvestable before. I

0:06:20.560 --> 0:06:23.000
<v Speaker 3>don't think that's true. I think it is a risky market,

0:06:23.120 --> 0:06:26.320
<v Speaker 3>but you know, we are investors who invest in risky markets.

0:06:26.360 --> 0:06:29.760
<v Speaker 3>It's just the degree of risk and how we can diversify.

0:06:29.839 --> 0:06:33.120
<v Speaker 3>So of course it definitely involves an understanding and a strategy,

0:06:33.400 --> 0:06:37.239
<v Speaker 3>but I would definitely say that that China is part

0:06:37.360 --> 0:06:40.560
<v Speaker 3>of a well diversified global portfolio.

0:06:41.040 --> 0:06:43.359
<v Speaker 1>We continue to see the weakness in the US dollar

0:06:43.440 --> 0:06:45.080
<v Speaker 1>on the other side of that trade. Of course, the

0:06:45.120 --> 0:06:47.680
<v Speaker 1>strength of the Japanese yeen miso security is not talking

0:06:47.720 --> 0:06:50.080
<v Speaker 1>about one thirties also being a level at this point

0:06:50.360 --> 0:06:51.200
<v Speaker 1>by year end.

0:06:51.240 --> 0:06:53.880
<v Speaker 3>What do you think, Well, we've certainly seen dollars yen

0:06:54.000 --> 0:06:56.599
<v Speaker 3>at that level before. But what we want, I think,

0:06:56.680 --> 0:07:01.400
<v Speaker 3>if we are going to have some sort of ability

0:07:01.440 --> 0:07:04.720
<v Speaker 3>to avoid US recession, for example, is we want to

0:07:04.760 --> 0:07:08.280
<v Speaker 3>have moves that are are not sudden and not kind

0:07:08.320 --> 0:07:14.120
<v Speaker 3>of a flight to a flight to riskless assets. If

0:07:14.120 --> 0:07:18.760
<v Speaker 3>those exist anymore, Maybe the yen is closer to the

0:07:18.760 --> 0:07:22.800
<v Speaker 3>idea of a riskless asset. Now, if we do see

0:07:22.800 --> 0:07:25.440
<v Speaker 3>a sudden strengthening in the end, that could upend a

0:07:25.440 --> 0:07:29.360
<v Speaker 3>lot of corporates plans and it could probably cause a

0:07:29.400 --> 0:07:32.720
<v Speaker 3>lot of disruption. But if we see gradual strengthening of

0:07:32.760 --> 0:07:35.600
<v Speaker 3>the end, it allows the economy some time to adjust.

0:07:35.840 --> 0:07:39.040
<v Speaker 3>Of course, it's not as good for exporters, but a

0:07:39.080 --> 0:07:41.679
<v Speaker 3>lot of the exporters are large firms who can hedge,

0:07:41.680 --> 0:07:44.240
<v Speaker 3>who can move their investments around, they can deal with it.

0:07:44.600 --> 0:07:46.760
<v Speaker 3>A lot of the smaller players in Japan, though, are

0:07:46.800 --> 0:07:50.560
<v Speaker 3>importers and they can benefit from a gradual strengthening of

0:07:50.600 --> 0:07:53.400
<v Speaker 3>the end. So as long as the moves can remain

0:07:53.480 --> 0:07:56.760
<v Speaker 3>relatively measured, then I think Japan can adapt pretty well.

0:07:57.280 --> 0:07:59.160
<v Speaker 1>No, we think good to have you with us, Chief

0:07:59.160 --> 0:08:01.760
<v Speaker 1>Global Strategies, a NICO Asset Management here.

0:08:10.840 --> 0:08:14.320
<v Speaker 2>Welcome back to the Daybreak Asia podcast. I'm Doug Chrisner.

0:08:14.680 --> 0:08:16.760
<v Speaker 2>In the States. On Sunday, we heard from the head

0:08:16.800 --> 0:08:20.400
<v Speaker 2>of the Chicago FED, Austin Goulsby, who warned against efforts

0:08:20.400 --> 0:08:24.840
<v Speaker 2>to curtail the Fed's independence. Now, his remarks come just

0:08:25.000 --> 0:08:29.080
<v Speaker 2>days after President Trump publicly expressed his displeasure with FED

0:08:29.120 --> 0:08:32.680
<v Speaker 2>Shair J. Powell and said that Powell's termination couldn't come

0:08:32.800 --> 0:08:36.760
<v Speaker 2>fast enough. Here's Goulesby speaking earlier to CBS Face the Nation.

0:08:37.200 --> 0:08:43.960
<v Speaker 6>There's virtual unanimity among economists that monetary independence from political interference,

0:08:44.240 --> 0:08:46.760
<v Speaker 6>that the FED or any central bank be able to

0:08:46.840 --> 0:08:50.000
<v Speaker 6>do the job that it needs to do, is really important.

0:08:50.240 --> 0:08:52.800
<v Speaker 6>And they came to that not as a theory, but

0:08:53.000 --> 0:08:55.760
<v Speaker 6>just by looking around the world at places where they

0:08:55.800 --> 0:08:59.440
<v Speaker 6>don't have monetary independence. And the fact is the inflation

0:08:59.559 --> 0:09:02.720
<v Speaker 6>rate is high, higher, growth is slower, the job market

0:09:02.760 --> 0:09:03.120
<v Speaker 6>is worse.

0:09:03.160 --> 0:09:06.560
<v Speaker 2>Austin Goolsby there speaking to CBS Face the Nation for

0:09:06.640 --> 0:09:09.920
<v Speaker 2>more on this story. We heard from Alicia Garcio Herrero,

0:09:10.080 --> 0:09:13.360
<v Speaker 2>chief APAK economist for in the Texas, and she spoke

0:09:13.440 --> 0:09:15.480
<v Speaker 2>to Bloomberg's Paul Allen in Sydney.

0:09:15.880 --> 0:09:18.520
<v Speaker 5>Alicia, thanks for joining us. We have, of course seen

0:09:18.559 --> 0:09:21.559
<v Speaker 5>President Trump in the first hundred days or so picking

0:09:21.600 --> 0:09:24.800
<v Speaker 5>fights with friends foes, starting trade wars, and of course

0:09:24.800 --> 0:09:27.400
<v Speaker 5>the FEDNA in his sites as well, saying on truth

0:09:27.480 --> 0:09:32.640
<v Speaker 5>social pals termination can't come fast enough. Look, even if

0:09:32.640 --> 0:09:35.520
<v Speaker 5>it is just rhetoric, is there more risk here? More

0:09:35.600 --> 0:09:38.160
<v Speaker 5>volatility installed for markets? With this kind of talk.

0:09:38.840 --> 0:09:42.839
<v Speaker 7>Absolutely and this is not only because of the FED

0:09:42.840 --> 0:09:46.880
<v Speaker 7>independence as such, meaning the ability to cut or fight

0:09:47.080 --> 0:09:49.920
<v Speaker 7>rips if needed, but also because at the end of

0:09:50.080 --> 0:09:52.280
<v Speaker 7>the at the end of the day, the FED has

0:09:52.360 --> 0:09:57.800
<v Speaker 7>been instrumental during Corvid and this could happen again in

0:09:57.920 --> 0:10:02.200
<v Speaker 7>actually buying US treasures and basically through Q through quite

0:10:02.320 --> 0:10:02.960
<v Speaker 7>that business.

0:10:03.040 --> 0:10:06.920
<v Speaker 8>So Trump knows very well that the FED has.

0:10:08.440 --> 0:10:13.160
<v Speaker 7>In store ability to lower long term rids, not only

0:10:13.720 --> 0:10:15.920
<v Speaker 7>short term rates. So the FED is a very very

0:10:16.040 --> 0:10:20.040
<v Speaker 7>Juesy opportunity for Trump if what he wants is really

0:10:20.320 --> 0:10:22.559
<v Speaker 7>not only to lower the dollar, but also to lower

0:10:22.880 --> 0:10:25.800
<v Speaker 7>the cost of funding for the massive debt so that

0:10:26.160 --> 0:10:27.839
<v Speaker 7>the US has accumulated over time.

0:10:28.760 --> 0:10:32.560
<v Speaker 5>All aside from defending its independence, the FED saying very

0:10:32.640 --> 0:10:34.520
<v Speaker 5>much on message at the moment when it comes to

0:10:35.160 --> 0:10:39.240
<v Speaker 5>price stability, getting inflation under control. But can you foresee

0:10:39.520 --> 0:10:42.000
<v Speaker 5>a set of circumstances the way this year has been

0:10:42.040 --> 0:10:45.400
<v Speaker 5>going so far where growth becomes a greater concern for

0:10:45.440 --> 0:10:45.800
<v Speaker 5>the FED.

0:10:46.640 --> 0:10:51.880
<v Speaker 7>Well, it is likely, isn't it, Because growth depends very

0:10:51.920 --> 0:10:56.280
<v Speaker 7>much on investment. Investment depends on, if not certainty, at

0:10:56.360 --> 0:10:59.120
<v Speaker 7>least some certainty, and here we are in a world

0:10:59.160 --> 0:11:04.640
<v Speaker 7>of uncertainty. So the most obvious channel is really investment

0:11:04.840 --> 0:11:10.680
<v Speaker 7>for Trump's policies to affect growth, and therefore I think

0:11:10.840 --> 0:11:13.600
<v Speaker 7>it's quite easy to see that the other one obviously

0:11:13.840 --> 0:11:19.120
<v Speaker 7>is the labor force, meaning if Trump continues to be

0:11:19.720 --> 0:11:24.080
<v Speaker 7>so strict on immigration policies, because that that is needed

0:11:24.120 --> 0:11:25.640
<v Speaker 7>for growth as well. Well.

0:11:25.640 --> 0:11:27.520
<v Speaker 5>In terms of growth, we're going to get a new

0:11:27.520 --> 0:11:32.160
<v Speaker 5>set of forecasts from the IMF on Tuesday. Crystallina Jeojava

0:11:32.400 --> 0:11:34.560
<v Speaker 5>managing director, has already said, look, there's going to be

0:11:34.800 --> 0:11:38.840
<v Speaker 5>a notable markdowns in those forecasts, but she doesn't see

0:11:38.840 --> 0:11:41.720
<v Speaker 5>a recession. Where do you see the risk of recession

0:11:42.040 --> 0:11:43.839
<v Speaker 5>not just in the US, but there are other other

0:11:43.920 --> 0:11:45.120
<v Speaker 5>markets at risk as well.

0:11:45.800 --> 0:11:46.000
<v Speaker 8>Well.

0:11:46.000 --> 0:11:48.440
<v Speaker 7>We still don't know whether these tires are going to

0:11:48.440 --> 0:11:52.040
<v Speaker 7>be permanent to start, I mean, they aren't really there

0:11:52.240 --> 0:11:56.480
<v Speaker 7>except for China and some sectors we have exemptions even

0:11:56.559 --> 0:12:01.240
<v Speaker 7>on icit and electronics. We didn't have to for semiconductors.

0:12:01.280 --> 0:12:05.000
<v Speaker 7>We're still working waiting for pharmas. So we haven't really

0:12:05.080 --> 0:12:08.760
<v Speaker 7>seen the full range of tariffs. So in that regard,

0:12:08.800 --> 0:12:13.320
<v Speaker 7>I think, you know, the world might escape recession if

0:12:13.320 --> 0:12:17.040
<v Speaker 7>Trump realizes that these tariffs are are very totly in

0:12:17.080 --> 0:12:20.640
<v Speaker 7>a way, ironically, if the market, since we're bloombered, if

0:12:20.640 --> 0:12:23.680
<v Speaker 7>the markets are wise enough to put a cost, a

0:12:23.760 --> 0:12:27.680
<v Speaker 7>high cost on additional tariffs, which is what we've been seeing,

0:12:28.120 --> 0:12:31.040
<v Speaker 7>especially you know during that terrible week of sell off

0:12:31.080 --> 0:12:34.360
<v Speaker 7>in the US tructuring market. I think that is making

0:12:35.080 --> 0:12:39.920
<v Speaker 7>it more expensive if you want for Trump to put

0:12:39.920 --> 0:12:43.280
<v Speaker 7>the world into a recession. So I would say markets

0:12:43.320 --> 0:12:47.400
<v Speaker 7>going down in a way, will we hopefully protect the

0:12:47.480 --> 0:12:51.319
<v Speaker 7>world from this from these policies, does avoid a recession,

0:12:51.480 --> 0:12:52.600
<v Speaker 7>a global recession.

0:12:53.320 --> 0:12:56.319
<v Speaker 5>You mentioned that cellof that we saw in US treasure

0:12:56.440 --> 0:12:59.320
<v Speaker 5>is do you feel like some uncomfortable questions are being

0:12:59.360 --> 0:13:03.440
<v Speaker 5>asked around the haven status of of US bonds and

0:13:03.720 --> 0:13:06.920
<v Speaker 5>do you see people going outsewhere for safety? Where might

0:13:06.960 --> 0:13:07.240
<v Speaker 5>that be?

0:13:07.880 --> 0:13:10.400
<v Speaker 8>Well, clearly so far the Euro, that's what we've seen.

0:13:10.720 --> 0:13:14.880
<v Speaker 7>H And the reason is that Asian currencies are in

0:13:14.920 --> 0:13:16.400
<v Speaker 7>a way reacting.

0:13:17.920 --> 0:13:19.040
<v Speaker 8>With the exception of the game.

0:13:19.080 --> 0:13:22.560
<v Speaker 7>But more will be more will be warranted from from

0:13:22.600 --> 0:13:25.800
<v Speaker 7>best and I'm sure, but generally if you look at

0:13:25.840 --> 0:13:27.480
<v Speaker 7>the if you look at the reaction of the R

0:13:27.520 --> 0:13:30.760
<v Speaker 7>and B, then when the cell of happened, another.

0:13:30.480 --> 0:13:32.160
<v Speaker 8>Asian currencies is all deprecisions.

0:13:32.200 --> 0:13:35.760
<v Speaker 7>So there's very few that are actually standing out basically

0:13:35.800 --> 0:13:37.040
<v Speaker 7>approceeding against a.

0:13:37.040 --> 0:13:40.160
<v Speaker 8>Weakening and that was a euro big time.

0:13:40.559 --> 0:13:42.560
<v Speaker 7>And I think there may be other currencies, you know

0:13:42.640 --> 0:13:45.880
<v Speaker 7>that that will fulfill that role, maybe Swiss from maybe

0:13:45.920 --> 0:13:49.439
<v Speaker 7>you know, British found maybe not the ously because the

0:13:50.280 --> 0:13:52.400
<v Speaker 7>is kind of a proxy of of R and B

0:13:52.600 --> 0:13:56.640
<v Speaker 7>or China's Chinese currency. But but other than that, I

0:13:56.679 --> 0:13:59.320
<v Speaker 7>think you you you did have the euros as a

0:13:59.360 --> 0:14:02.719
<v Speaker 7>big winner. I don't know whether that's a winning strategy

0:14:02.760 --> 0:14:04.760
<v Speaker 7>for Europe review if you think in fact they s

0:14:04.800 --> 0:14:07.240
<v Speaker 7>to be cut rat although it was expected, but a

0:14:07.360 --> 0:14:11.439
<v Speaker 7>very very strong euro which takes all of this anxiety

0:14:11.520 --> 0:14:13.760
<v Speaker 7>about the dollar, could bring the euro to one point

0:14:13.760 --> 0:14:16.920
<v Speaker 7>thirty and that would kill the European economy. So nobody

0:14:16.960 --> 0:14:19.800
<v Speaker 7>wants to do the next dollar. As far as strong

0:14:19.880 --> 0:14:22.520
<v Speaker 7>apprecisions concerned. Let me tell you, nobody is ready because

0:14:22.560 --> 0:14:25.760
<v Speaker 7>everybody is suffering from a worse economic environment.

0:14:25.760 --> 0:14:27.600
<v Speaker 8>But most likely is the euro. Indeed.

0:14:28.760 --> 0:14:31.880
<v Speaker 5>Yeah, And in terms of the tension between US and

0:14:31.960 --> 0:14:34.000
<v Speaker 5>China on the trade front, at the moment, we have

0:14:34.080 --> 0:14:37.560
<v Speaker 5>seen China not really willing to come to the negotiating table. Instead,

0:14:37.560 --> 0:14:41.960
<v Speaker 5>it's added another seven rare earths to a texport control list.

0:14:42.480 --> 0:14:46.440
<v Speaker 5>Who do you see blinking first in this dispute? Which

0:14:46.480 --> 0:14:49.200
<v Speaker 5>economy is the best place to withstand the most pain?

0:14:49.920 --> 0:14:51.760
<v Speaker 8>Well, the US is blinking first.

0:14:51.800 --> 0:14:54.000
<v Speaker 7>You just have to listen to what Trump has to

0:14:54.040 --> 0:14:57.080
<v Speaker 7>say about this. He's ready to negotiate, and basically, and

0:14:57.120 --> 0:15:00.360
<v Speaker 7>I think he went too far. He basically said that,

0:15:00.400 --> 0:15:03.200
<v Speaker 7>you know, he doesn't want to go further on retaliation

0:15:03.360 --> 0:15:06.440
<v Speaker 7>with higher and higher times. Parents have already closed the market,

0:15:06.520 --> 0:15:08.560
<v Speaker 7>so it doesn't really matter whether you go further. But

0:15:08.840 --> 0:15:12.960
<v Speaker 7>that is a signal of willingness to negotiate. And it's

0:15:13.080 --> 0:15:16.120
<v Speaker 7>not so much because China will not suffer. I think

0:15:16.280 --> 0:15:19.440
<v Speaker 7>China will suffer from the trade war, but it's mostly

0:15:19.480 --> 0:15:27.720
<v Speaker 7>about the resilience about that suffering. I think Chinese Chinese citizens,

0:15:27.760 --> 0:15:32.160
<v Speaker 7>if you want to households, but even corporations, let's focus

0:15:32.200 --> 0:15:32.800
<v Speaker 7>on households.

0:15:32.840 --> 0:15:36.480
<v Speaker 8>They're ready for this. They've been they've been prepared.

0:15:36.440 --> 0:15:39.680
<v Speaker 7>That this has to happen, that they need to withstand

0:15:39.680 --> 0:15:42.720
<v Speaker 7>the shock. Americans have not been prepared because there have

0:15:42.760 --> 0:15:45.920
<v Speaker 7>been Basically, the Trump administration is telling them that it's

0:15:45.960 --> 0:15:48.240
<v Speaker 7>going to be wonderful. So so you know that that

0:15:48.360 --> 0:15:51.040
<v Speaker 7>is why the use is going to blink first.

0:15:51.040 --> 0:15:54.680
<v Speaker 5>In my view, do you feel that we might see

0:15:54.720 --> 0:15:58.320
<v Speaker 5>some more stimulus coming from China, particularly support for consumers

0:15:58.320 --> 0:15:59.040
<v Speaker 5>and households.

0:15:59.520 --> 0:16:03.600
<v Speaker 8>Well, I think China knows that.

0:16:05.360 --> 0:16:07.480
<v Speaker 7>Of course, I has some bullets, but it doesn't have

0:16:07.640 --> 0:16:09.640
<v Speaker 7>all of the bullets that it used to have.

0:16:09.840 --> 0:16:12.440
<v Speaker 8>Many reasons. We all know that you know, too much dead.

0:16:13.080 --> 0:16:16.880
<v Speaker 7>But even on the on the Montrepolitan side, which is

0:16:16.880 --> 0:16:20.520
<v Speaker 7>what we're going to see today with the long primary

0:16:21.400 --> 0:16:25.000
<v Speaker 7>long prime rate, is that if they cut very quickly,

0:16:25.360 --> 0:16:28.800
<v Speaker 7>the deprecision of the R and B will be faster.

0:16:29.000 --> 0:16:31.440
<v Speaker 7>And I think that's not a very good negotiating tool

0:16:31.480 --> 0:16:35.000
<v Speaker 7>that they can't have, that they let the currency go.

0:16:35.240 --> 0:16:38.880
<v Speaker 7>And also it could prompt capital outflows. Not now, because

0:16:38.880 --> 0:16:41.120
<v Speaker 7>you know, the US is not attractive in terms of

0:16:41.240 --> 0:16:43.880
<v Speaker 7>stock market and so on, but it could happen all

0:16:43.920 --> 0:16:47.080
<v Speaker 7>of a sudden if data, you know, gets worse for China.

0:16:47.520 --> 0:16:49.960
<v Speaker 7>So I think they need to be careful with the bullets.

0:16:50.000 --> 0:16:53.520
<v Speaker 7>They need to move them slowly and steadily. And I

0:16:54.000 --> 0:16:57.080
<v Speaker 7>don't know whether today they will they will show that

0:16:57.200 --> 0:16:59.680
<v Speaker 7>maybe maybe they're in a position of strength so far

0:16:59.720 --> 0:17:02.880
<v Speaker 7>because they had quite good data for the first codor

0:17:02.920 --> 0:17:05.000
<v Speaker 7>GDP and people.

0:17:04.760 --> 0:17:07.720
<v Speaker 8>Are looking at Trump like you're blinking. You're blinking, so

0:17:07.800 --> 0:17:08.040
<v Speaker 8>you know.

0:17:08.040 --> 0:17:10.199
<v Speaker 7>Maybe the comfany is still there and they don't need

0:17:10.240 --> 0:17:12.720
<v Speaker 7>to cut now, they may expare it for later.

0:17:13.320 --> 0:17:16.040
<v Speaker 5>Well, we do have a lot of pmis coming out

0:17:16.040 --> 0:17:19.520
<v Speaker 5>this week which should make interesting reading Australia, Japan, India

0:17:19.560 --> 0:17:22.200
<v Speaker 5>among them, but also the US as well. And if

0:17:22.200 --> 0:17:24.040
<v Speaker 5>we take a look at this chart, I'll describe it

0:17:24.040 --> 0:17:26.560
<v Speaker 5>to you on the Bloomberg terminal. It's a look at

0:17:26.600 --> 0:17:28.720
<v Speaker 5>the last set of pmis that we had out of

0:17:28.760 --> 0:17:32.479
<v Speaker 5>the US. It shows a big lift to these services outlook,

0:17:32.520 --> 0:17:36.760
<v Speaker 5>but manufacturing definitely seeing signs of pessimism here. Do you

0:17:36.800 --> 0:17:38.480
<v Speaker 5>anticipate that there's more of this to come?

0:17:39.440 --> 0:17:44.639
<v Speaker 7>Surely because those manufacturers now are confronted with humongous import tariffs,

0:17:44.640 --> 0:17:47.159
<v Speaker 7>at least from China, but they also have you know,

0:17:47.600 --> 0:17:53.040
<v Speaker 7>still central tarists, auto tariffs, still an aluminium which is

0:17:53.080 --> 0:17:59.560
<v Speaker 7>an important intermediate good ten percent, you know, regular tariffs.

0:17:59.600 --> 0:18:02.840
<v Speaker 7>So all of this is additional costs for manufacturer. So yes,

0:18:03.119 --> 0:18:06.640
<v Speaker 7>I think that's going to happen. It's already quite impressive

0:18:06.680 --> 0:18:09.639
<v Speaker 7>that the service sector is still doing well in the

0:18:09.720 --> 0:18:13.120
<v Speaker 7>US in at least pmis.

0:18:12.600 --> 0:18:16.159
<v Speaker 5>All right, I got Sia Herrero, Chief Asia Pacific Economists

0:18:16.200 --> 0:18:18.600
<v Speaker 5>Athna Texas. Thanks, as always for joining us with your

0:18:18.600 --> 0:18:19.080
<v Speaker 5>own sights.

0:18:21.040 --> 0:18:24.400
<v Speaker 2>Thanks for listening to today's episode of the Bloomberg Daybreak

0:18:24.560 --> 0:18:27.960
<v Speaker 2>Asia Edition podcast. Each weekday, we look at the story

0:18:28.000 --> 0:18:32.359
<v Speaker 2>shaping markets, finance, and geopolitics in the Asia Pacific. You

0:18:32.400 --> 0:18:36.480
<v Speaker 2>can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

0:18:36.600 --> 0:18:39.639
<v Speaker 2>or anywhere else you listen. Join us again tomorrow for

0:18:39.760 --> 0:18:43.240
<v Speaker 2>insight on the market moves from Hong Kong to Singapore

0:18:43.640 --> 0:18:47.440
<v Speaker 2>and Australia. I'm Doug Prisoner and this is Bloomberg