Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner.
Speaker 2: It's the Easter Monday holiday in the Asia Pacific, so
Speaker 2: we have markets in Australia and Hong Kong closed. Now,
Speaker 2: this week's sentiment will likely remain at the mercy of
Speaker 2: evolving trade policies from the Trump administration. South Korea's top
Speaker 2: trade official will be in Washington this week to kickstar
Speaker 2: trade negotiations. Now, this will be the second Asian nation
Speaker 2: to sit down with the US to assess so called
Speaker 2: reciprocal tariffs. Japan was the first. For more, we heard
Speaker 2: from Naomi Fink, chief Global strategist at Nico Asset Management.
Speaker 2: She spoke with Bloomberg's Paul Allen and.
Speaker 1: Sherry On Naomi, great to have you with us, at
Speaker 1: least for now, we haven't seen too many trade negotiations
Speaker 1: back and forth over the weekend at least, But when
Speaker 1: it comes to the rest of the week, what will
Speaker 1: you be watching?
Speaker 3: Well, I think since given what we've seen so far,
Speaker 3: especially since the tariffs have been announced, it might be
Speaker 3: that we do not get a straight answer even when
Speaker 3: we reach the conclusion of these negotiations, the negotiation not
Speaker 3: only with Japan, but the negotiations may continue far longer
Speaker 3: than than we're we're really expecting right now.
Speaker 4: Even if we do.
Speaker 3: Get a an outcome, that outcome is probably liable to
Speaker 3: get renegotiated. We've seen a lot of changes, so I
Speaker 3: think right now what we can really only expect is
Speaker 3: that is that there are going to be several possible outcomes.
Speaker 3: One of those outcomes I think is probably at least
Speaker 3: more favorable in terms of risk assets than others, and
Speaker 3: may involve the US not falling into a year term recession.
Speaker 3: But at the same time, we cannot rule out that
Speaker 3: the possibility of near term recession. And I would emphasize
Speaker 3: that the whole idea of tariffs is probably going to
Speaker 3: be hardest on the US consumer. That's who it's going
Speaker 3: to be toughest for.
Speaker 1: And of course that potential recession could also come with
Speaker 1: just disinflation as the FED has wanted to see, or
Speaker 1: even just stackflation right because of continuing to prices rising
Speaker 1: because of the tariffs. What would the implications be for
Speaker 1: the markets depending on those two scenarios.
Speaker 3: Well, if we do see continued disinflation, then the FED
Speaker 3: probably can be more comfortable with rate cuts if we
Speaker 3: do see weaker growth and softer inflation. That's usually a
Speaker 3: typical environment in which a central bank would cut rates.
Speaker 3: But if we see weaker growth but the inflation does not.
Speaker 4: Come lower, then they will be a bit.
Speaker 3: Hobbled by that high inflation, so we won't be able
Speaker 3: to see relief from monetary policy.
Speaker 4: That's just how central banks work.
Speaker 5: When do you go for cover at a time like this,
Speaker 5: because some of those traditional plays, the US dollar was
Speaker 5: saying getting beaten up at the moment, US treasuries have
Speaker 5: been selling off. I mean, we've got gold to a record,
Speaker 5: But do you look to other bond markets elsewhere where
Speaker 5: are you finding safety?
Speaker 4: Well, I think it's probably hard to find certainty.
Speaker 3: Even if you just put cash under the mattress, which
Speaker 3: is what has happened in Japan for decades and which
Speaker 3: is now finally reversing, I think it's going to be
Speaker 3: very hard to find one asset that's just the magic bullet.
Speaker 3: So probably the best idea is to diversify, which means
Speaker 3: that you're not going to be completely.
Speaker 4: Insulated from market moves.
Speaker 3: You don't want to have zero allocation to risk assets
Speaker 3: because they also do rise.
Speaker 4: They don't only fall.
Speaker 3: So probably what you want to do is find some
Speaker 3: areas that will at least insulate you against the worst
Speaker 3: of the declines. One of the things that we have
Speaker 3: been looking at is the potential for domestic demand in
Speaker 3: some of these surplus economies, especially in Asia to a
Speaker 3: bit longer term come through, because what do you do
Speaker 3: when one of your largest trade partners says, well, we
Speaker 3: don't really want to buy many of your products anymore,
Speaker 3: while you see what you can do internally, and then
Speaker 3: a lot of these countries do have huge built up surpluses,
Speaker 3: so they can use it to stimulate domestic demands. There
Speaker 3: are other assets as gold, which are which is remaining
Speaker 3: supported probably because of this lack of other risk havens,
Speaker 3: and I would see that as part of a diversified
Speaker 3: portfolio as well, But I wouldn't be too hasty to.
Speaker 4: Dump any asset.
Speaker 3: I would look to to try and diversify well with
Speaker 3: some of these these indicators that they mentioned just now.
Speaker 5: Yeah, when you see selling like we've seen, the conversation
Speaker 5: inevitably turns to dip buying. There's certainly some boggains to
Speaker 5: be had. But what's the risk here? Are we still
Speaker 5: in catch the falling knife territory or is this the
Speaker 5: time to take a look at some purchases.
Speaker 3: Well, I think if we're if we are long term investors,
Speaker 3: then probably what we want to do is just calm
Speaker 3: down and maybe dollar cost average. So yeah, we'll be
Speaker 3: dip buying some of the time, some of the time
Speaker 3: we won't be. But what we're looking for is long
Speaker 3: term compounding.
Speaker 4: And if we do.
Speaker 3: Average at a rate where long term we can still
Speaker 3: benefit from economic growth over many years, then we should
Speaker 3: be Okay.
Speaker 4: What I would discourage is.
Speaker 3: Trading around these volatile markets, unless, of course, you are
Speaker 3: somebody who wants to benefit off of that. Long Term investors,
Speaker 3: though I find, typically aren't very successful at timing markets.
Speaker 3: So what you want to do is, yes, position, yes, diversify,
Speaker 3: but you don't really want to be timing a lot
Speaker 3: of these moves because you might lose some of that
Speaker 3: opportunity to long term compound.
Speaker 1: Would you invest for the long term in China because
Speaker 1: we have seen that they're not as trade dependent as
Speaker 1: they used to be, some saying that they could actually
Speaker 1: come out okay On the other side of this trade war.
Speaker 3: So I think China is too large an economy, too
Speaker 3: and too large a market and still long.
Speaker 4: Term growing to ignore. I don't think that.
Speaker 3: I know that some have called China uninvestable before. I
Speaker 3: don't think that's true. I think it is a risky market,
Speaker 3: but you know, we are investors who invest in risky markets.
Speaker 3: It's just the degree of risk and how we can diversify.
Speaker 3: So of course it definitely involves an understanding and a strategy,
Speaker 3: but I would definitely say that that China is part
Speaker 3: of a well diversified global portfolio.
Speaker 1: We continue to see the weakness in the US dollar
Speaker 1: on the other side of that trade. Of course, the
Speaker 1: strength of the Japanese yeen miso security is not talking
Speaker 1: about one thirties also being a level at this point
Speaker 1: by year end.
Speaker 3: What do you think, Well, we've certainly seen dollars yen
Speaker 3: at that level before. But what we want, I think,
Speaker 3: if we are going to have some sort of ability
Speaker 3: to avoid US recession, for example, is we want to
Speaker 3: have moves that are are not sudden and not kind
Speaker 3: of a flight to a flight to riskless assets. If
Speaker 3: those exist anymore, Maybe the yen is closer to the
Speaker 3: idea of a riskless asset. Now, if we do see
Speaker 3: a sudden strengthening in the end, that could upend a
Speaker 3: lot of corporates plans and it could probably cause a
Speaker 3: lot of disruption. But if we see gradual strengthening of
Speaker 3: the end, it allows the economy some time to adjust.
Speaker 3: Of course, it's not as good for exporters, but a
Speaker 3: lot of the exporters are large firms who can hedge,
Speaker 3: who can move their investments around, they can deal with it.
Speaker 3: A lot of the smaller players in Japan, though, are
Speaker 3: importers and they can benefit from a gradual strengthening of
Speaker 3: the end. So as long as the moves can remain
Speaker 3: relatively measured, then I think Japan can adapt pretty well.
Speaker 1: No, we think good to have you with us, Chief
Speaker 1: Global Strategies, a NICO Asset Management here.
Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: In the States. On Sunday, we heard from the head
Speaker 2: of the Chicago FED, Austin Goulsby, who warned against efforts
Speaker 2: to curtail the Fed's independence. Now, his remarks come just
Speaker 2: days after President Trump publicly expressed his displeasure with FED
Speaker 2: Shair J. Powell and said that Powell's termination couldn't come
Speaker 2: fast enough. Here's Goulesby speaking earlier to CBS Face the Nation.
Speaker 6: There's virtual unanimity among economists that monetary independence from political interference,
Speaker 6: that the FED or any central bank be able to
Speaker 6: do the job that it needs to do, is really important.
Speaker 6: And they came to that not as a theory, but
Speaker 6: just by looking around the world at places where they
Speaker 6: don't have monetary independence. And the fact is the inflation
Speaker 6: rate is high, higher, growth is slower, the job market
Speaker 6: is worse.
Speaker 2: Austin Goolsby there speaking to CBS Face the Nation for
Speaker 2: more on this story. We heard from Alicia Garcio Herrero,
Speaker 2: chief APAK economist for in the Texas, and she spoke
Speaker 2: to Bloomberg's Paul Allen in Sydney.
Speaker 5: Alicia, thanks for joining us. We have, of course seen
Speaker 5: President Trump in the first hundred days or so picking
Speaker 5: fights with friends foes, starting trade wars, and of course
Speaker 5: the FEDNA in his sites as well, saying on truth
Speaker 5: social pals termination can't come fast enough. Look, even if
Speaker 5: it is just rhetoric, is there more risk here? More
Speaker 5: volatility installed for markets? With this kind of talk.
Speaker 7: Absolutely and this is not only because of the FED
Speaker 7: independence as such, meaning the ability to cut or fight
Speaker 7: rips if needed, but also because at the end of
Speaker 7: the at the end of the day, the FED has
Speaker 7: been instrumental during Corvid and this could happen again in
Speaker 7: actually buying US treasures and basically through Q through quite
Speaker 7: that business.
Speaker 8: So Trump knows very well that the FED has.
Speaker 7: In store ability to lower long term rids, not only
Speaker 7: short term rates. So the FED is a very very
Speaker 7: Juesy opportunity for Trump if what he wants is really
Speaker 7: not only to lower the dollar, but also to lower
Speaker 7: the cost of funding for the massive debt so that
Speaker 7: the US has accumulated over time.
Speaker 5: All aside from defending its independence, the FED saying very
Speaker 5: much on message at the moment when it comes to
Speaker 5: price stability, getting inflation under control. But can you foresee
Speaker 5: a set of circumstances the way this year has been
Speaker 5: going so far where growth becomes a greater concern for
Speaker 5: the FED.
Speaker 7: Well, it is likely, isn't it, Because growth depends very
Speaker 7: much on investment. Investment depends on, if not certainty, at
Speaker 7: least some certainty, and here we are in a world
Speaker 7: of uncertainty. So the most obvious channel is really investment
Speaker 7: for Trump's policies to affect growth, and therefore I think
Speaker 7: it's quite easy to see that the other one obviously
Speaker 7: is the labor force, meaning if Trump continues to be
Speaker 7: so strict on immigration policies, because that that is needed
Speaker 7: for growth as well. Well.
Speaker 5: In terms of growth, we're going to get a new
Speaker 5: set of forecasts from the IMF on Tuesday. Crystallina Jeojava
Speaker 5: managing director, has already said, look, there's going to be
Speaker 5: a notable markdowns in those forecasts, but she doesn't see
Speaker 5: a recession. Where do you see the risk of recession
Speaker 5: not just in the US, but there are other other
Speaker 5: markets at risk as well.
Speaker 8: Well.
Speaker 7: We still don't know whether these tires are going to
Speaker 7: be permanent to start, I mean, they aren't really there
Speaker 7: except for China and some sectors we have exemptions even
Speaker 7: on icit and electronics. We didn't have to for semiconductors.
Speaker 7: We're still working waiting for pharmas. So we haven't really
Speaker 7: seen the full range of tariffs. So in that regard,
Speaker 7: I think, you know, the world might escape recession if
Speaker 7: Trump realizes that these tariffs are are very totly in
Speaker 7: a way, ironically, if the market, since we're bloombered, if
Speaker 7: the markets are wise enough to put a cost, a
Speaker 7: high cost on additional tariffs, which is what we've been seeing,
Speaker 7: especially you know during that terrible week of sell off
Speaker 7: in the US tructuring market. I think that is making
Speaker 7: it more expensive if you want for Trump to put
Speaker 7: the world into a recession. So I would say markets
Speaker 7: going down in a way, will we hopefully protect the
Speaker 7: world from this from these policies, does avoid a recession,
Speaker 7: a global recession.
Speaker 5: You mentioned that cellof that we saw in US treasure
Speaker 5: is do you feel like some uncomfortable questions are being
Speaker 5: asked around the haven status of of US bonds and
Speaker 5: do you see people going outsewhere for safety? Where might
Speaker 5: that be?
Speaker 8: Well, clearly so far the Euro, that's what we've seen.
Speaker 7: H And the reason is that Asian currencies are in
Speaker 7: a way reacting.
Speaker 8: With the exception of the game.
Speaker 7: But more will be more will be warranted from from
Speaker 7: best and I'm sure, but generally if you look at
Speaker 7: the if you look at the reaction of the R
Speaker 7: and B, then when the cell of happened, another.
Speaker 8: Asian currencies is all deprecisions.
Speaker 7: So there's very few that are actually standing out basically
Speaker 7: approceeding against a.
Speaker 8: Weakening and that was a euro big time.
Speaker 7: And I think there may be other currencies, you know
Speaker 7: that that will fulfill that role, maybe Swiss from maybe
Speaker 7: you know, British found maybe not the ously because the
Speaker 7: is kind of a proxy of of R and B
Speaker 7: or China's Chinese currency. But but other than that, I
Speaker 7: think you you you did have the euros as a
Speaker 7: big winner. I don't know whether that's a winning strategy
Speaker 7: for Europe review if you think in fact they s
Speaker 7: to be cut rat although it was expected, but a
Speaker 7: very very strong euro which takes all of this anxiety
Speaker 7: about the dollar, could bring the euro to one point
Speaker 7: thirty and that would kill the European economy. So nobody
Speaker 7: wants to do the next dollar. As far as strong
Speaker 7: apprecisions concerned. Let me tell you, nobody is ready because
Speaker 7: everybody is suffering from a worse economic environment.
Speaker 8: But most likely is the euro. Indeed.
Speaker 5: Yeah, And in terms of the tension between US and
Speaker 5: China on the trade front, at the moment, we have
Speaker 5: seen China not really willing to come to the negotiating table. Instead,
Speaker 5: it's added another seven rare earths to a texport control list.
Speaker 5: Who do you see blinking first in this dispute? Which
Speaker 5: economy is the best place to withstand the most pain?
Speaker 8: Well, the US is blinking first.
Speaker 7: You just have to listen to what Trump has to
Speaker 7: say about this. He's ready to negotiate, and basically, and
Speaker 7: I think he went too far. He basically said that,
Speaker 7: you know, he doesn't want to go further on retaliation
Speaker 7: with higher and higher times. Parents have already closed the market,
Speaker 7: so it doesn't really matter whether you go further. But
Speaker 7: that is a signal of willingness to negotiate. And it's
Speaker 7: not so much because China will not suffer. I think
Speaker 7: China will suffer from the trade war, but it's mostly
Speaker 7: about the resilience about that suffering. I think Chinese Chinese citizens,
Speaker 7: if you want to households, but even corporations, let's focus
Speaker 7: on households.
Speaker 8: They're ready for this. They've been they've been prepared.
Speaker 7: That this has to happen, that they need to withstand
Speaker 7: the shock. Americans have not been prepared because there have
Speaker 7: been Basically, the Trump administration is telling them that it's
Speaker 7: going to be wonderful. So so you know that that
Speaker 7: is why the use is going to blink first.
Speaker 5: In my view, do you feel that we might see
Speaker 5: some more stimulus coming from China, particularly support for consumers
Speaker 5: and households.
Speaker 8: Well, I think China knows that.
Speaker 7: Of course, I has some bullets, but it doesn't have
Speaker 7: all of the bullets that it used to have.
Speaker 8: Many reasons. We all know that you know, too much dead.
Speaker 7: But even on the on the Montrepolitan side, which is
Speaker 7: what we're going to see today with the long primary
Speaker 7: long prime rate, is that if they cut very quickly,
Speaker 7: the deprecision of the R and B will be faster.
Speaker 7: And I think that's not a very good negotiating tool
Speaker 7: that they can't have, that they let the currency go.
Speaker 7: And also it could prompt capital outflows. Not now, because
Speaker 7: you know, the US is not attractive in terms of
Speaker 7: stock market and so on, but it could happen all
Speaker 7: of a sudden if data, you know, gets worse for China.
Speaker 7: So I think they need to be careful with the bullets.
Speaker 7: They need to move them slowly and steadily. And I
Speaker 7: don't know whether today they will they will show that
Speaker 7: maybe maybe they're in a position of strength so far
Speaker 7: because they had quite good data for the first codor
Speaker 7: GDP and people.
Speaker 8: Are looking at Trump like you're blinking. You're blinking, so
Speaker 8: you know.
Speaker 7: Maybe the comfany is still there and they don't need
Speaker 7: to cut now, they may expare it for later.
Speaker 5: Well, we do have a lot of pmis coming out
Speaker 5: this week which should make interesting reading Australia, Japan, India
Speaker 5: among them, but also the US as well. And if
Speaker 5: we take a look at this chart, I'll describe it
Speaker 5: to you on the Bloomberg terminal. It's a look at
Speaker 5: the last set of pmis that we had out of
Speaker 5: the US. It shows a big lift to these services outlook,
Speaker 5: but manufacturing definitely seeing signs of pessimism here. Do you
Speaker 5: anticipate that there's more of this to come?
Speaker 7: Surely because those manufacturers now are confronted with humongous import tariffs,
Speaker 7: at least from China, but they also have you know,
Speaker 7: still central tarists, auto tariffs, still an aluminium which is
Speaker 7: an important intermediate good ten percent, you know, regular tariffs.
Speaker 7: So all of this is additional costs for manufacturer. So yes,
Speaker 7: I think that's going to happen. It's already quite impressive
Speaker 7: that the service sector is still doing well in the
Speaker 7: US in at least pmis.
Speaker 5: All right, I got Sia Herrero, Chief Asia Pacific Economists
Speaker 5: Athna Texas. Thanks, as always for joining us with your
Speaker 5: own sights.
Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak
Speaker 2: Asia Edition podcast. Each weekday, we look at the story
Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You
Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
Speaker 2: or anywhere else you listen. Join us again tomorrow for
Speaker 2: insight on the market moves from Hong Kong to Singapore
Speaker 2: and Australia. I'm Doug Prisoner and this is Bloomberg