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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. US

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Speaker 2: trade policies will dominate the market's attention in the week ahead.

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Speaker 2: You see the proposed tariffs on Canada and Mexico are

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Speaker 2: set to go into effect on Tuesday, barring another last

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Speaker 2: minute reprieve. And in a moment we'll check in with

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Speaker 2: Todd Waalsh is the CEO and chief Technical Analyst at

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Speaker 2: Alpha Cubed Investments. First, though, a different type of geopolitics

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Speaker 2: in London over the weekend, European leaders pledge to increase

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Speaker 2: defense spending and to assemble a coalition of the willing

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Speaker 2: as a way of securing Ukraine. Let's bring in Bloomberg's

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Speaker 2: Mark Cudmore from our Markets Live team for a closer look.

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Speaker 2: Mark Joins is from the Lion City of Singapore. It's

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Speaker 2: always a pleasure to have your perspective. I want to

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Speaker 2: begin with the story on Europe because it's this move

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Speaker 2: that we're seeing right now in the euro which seems

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Speaker 2: to be a little counterintuitive, perhaps stronger against the greenback

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Speaker 2: by around four tenths of one percent. What do you

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Speaker 2: make of what's happening in the price action.

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Speaker 3: I think this makes sense in the short term for

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Speaker 3: a couple of reasons. One is, we saw a little

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Speaker 3: bit of sell off into the clothes on Friday. You've

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Speaker 3: got a member that currency markets will still open when

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Speaker 3: they had the Oval Office incident between Trump and Zlenski,

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Speaker 3: which was seen as negative for Europe, and so there's

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Speaker 3: already priced in that initial reaction, and then over the

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Speaker 3: weekend there's there's signs that Europe is kind of going

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Speaker 3: to take the lead. And so this is offering the

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Speaker 3: potential for a peace dividend for Europe, which would be positive.

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Speaker 1: But there's a couple of other factors here.

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Speaker 3: One is is that you know, this whole idea of

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Speaker 3: peace dividend is reinforcing the idea that there's going to

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Speaker 3: be greater defense spending across Europe, and that's seeing higher yields,

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Speaker 3: and it's that yield support that is kind of providing

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Speaker 3: extra support for the currency. In fact, if you look

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Speaker 3: just at in straight differentials, your dollar should be a

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Speaker 3: chunk higher and it's not. So it's actually lagging the

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Speaker 3: instrate drived move of the last few months. And part

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Speaker 3: of that is that the market is still very short

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Speaker 3: the euro that they're very worried about the long term

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Speaker 3: structural concerns are in Europe, and those long term structural

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Speaker 3: concerns are valid on a growth point of view.

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Speaker 1: But I think they miss two points, and I think

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Speaker 1: they're worried that they're where.

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Speaker 3: They could be squeezed can significantly further over the coming months.

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Speaker 3: One is that fiscal stimulus in Europe has been a

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Speaker 3: big part of the missing picture, and if we suddenly

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Speaker 3: get that, whether it's under the guise of defense spending,

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Speaker 3: it is still an extra amount of spending in Europe

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Speaker 3: that will be.

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Speaker 1: Positive to the region.

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Speaker 3: And on the other hand, we've got a longer term

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Speaker 3: dynamic where at the at the margin, uh Trump's policies

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Speaker 3: are eroding the appeal of parking so much of your

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Speaker 3: reserves in the dollar, and this is the dollar is

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Speaker 3: going to remain the world's reserve currency.

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Speaker 1: It's not being challenged.

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Speaker 3: This is not about the end of the dollars deserve

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Speaker 3: currency or anything like that. It just means that you

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Speaker 3: might want to slightly lower share in the US. And

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Speaker 3: they're part of the reason the US is going to

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Speaker 3: remain the world's reserve currency. Of the US dollar is

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Speaker 3: because there is a good alternative, but one of the

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Speaker 3: best alternatives out there is Europe, and it's perceived as

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Speaker 3: being a safe place to park your money, and that

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Speaker 3: is only enhanced by the idea of fiscal spending. So

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Speaker 3: I think you're a dollar short term, I don't have

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Speaker 3: much conviction, but I understand why it's being helped by

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Speaker 3: the news flow. I don't think it's counterintuitive medium term.

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Speaker 3: Longer term, I think you're a dollar can go chunk

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Speaker 3: high this year, and I think that's both from the

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Speaker 3: squeeze of the euro shorts, but also because at this

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Speaker 3: year I think will ultimately be negative for the dollar,

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Speaker 3: but in choppy fashion.

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Speaker 2: It's interesting that you make that point. I think it's

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Speaker 2: fair to say that market expectations for FED raid cuts

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Speaker 2: have intensified. That's only going to remove support for the greenback.

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Speaker 3: Yeah, absolutely, I think you know, again, that's another widening

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Speaker 3: of the rates differential. I think that the whole consensus

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Speaker 3: narrative on what Trump's policies mean for markets have evolved

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Speaker 3: significantly over the last couple of weeks. So I think

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Speaker 3: a large part of people in markets kind of thought

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Speaker 3: that ultimately to be pro growth and to be very

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Speaker 3: pro dollar, and they'd be pro US stocks.

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Speaker 2: You know.

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Speaker 3: It was. It was a perpetuation of US exceptional in markets,

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Speaker 3: and I think that's being undermined, and it's been undermined

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Speaker 3: both from the market's point of view, but also.

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Speaker 1: The economic point of view.

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Speaker 3: I think there's a growing realization that the policies, whether

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Speaker 3: wanted as some people believe by the administration or not,

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Speaker 3: are going to be very much growth negative, at least

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Speaker 3: initially now. They might ultimately longer term, in time for

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Speaker 3: the midterms next year, be growth positive, but that's eighteen

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Speaker 3: months away.

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Speaker 1: You can't trade off that right now.

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Speaker 3: Right now, the policy mix is definitely much more growth

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Speaker 3: negative than people are anticipating, and we've yet to fully

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Speaker 3: price that kind of change in consensus narrative.

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Speaker 2: So I mentioned a moment ago, proposed terrorffs on Canada

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Speaker 2: and Mexico are set to go in effect on Tuesday.

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Speaker 2: China will likewise be charged in additional ten percent terre

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Speaker 2: of beginning March fourth as well. What's the outlook for

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Speaker 2: the Chinese currency offshore right now? Given the trade tensions

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Speaker 2: between Beijing and Washington.

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Speaker 3: Like kind of fine and boring, like ultimately you know,

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Speaker 3: PBOC has the amor to control the currency as much

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Speaker 3: as it wants. It's going for stability. You know, in

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Speaker 3: a world where the dollar is appreciating, the yuan will

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Speaker 3: always form other peers because it's controlled. In a world

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Speaker 3: where the dollar depreciates, the yuan will underperform other peers

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Speaker 3: because it's just been much more managed and kind of

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Speaker 3: lower beat it to the move. I really find it

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Speaker 3: hard to understand what the short term dynamic is around China.

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Speaker 1: This week, you have the tarik coming in, which are

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Speaker 1: obviously negative.

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Speaker 3: But China can cope better with this new tariff world

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Speaker 3: than a lot of other countries because it's already readjusted

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Speaker 3: a lot of its supply chains away, It's already kind

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Speaker 3: of focused on the rest of the world, and it's

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Speaker 3: other countries that have to kind of change their policies

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Speaker 3: to in fact be more pro China. So in many

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Speaker 3: ways that the whole tariff mix is actually China positive

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Speaker 3: in a way, which is why you've seen Chinese equities

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Speaker 3: do so well. And I think the structural story is

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Speaker 3: very very good for China. These are not Chinese stocks much,

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Speaker 3: but Hong Kong stocks are still very discounted. Deep Seek

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Speaker 3: is emphasizing that China will also get the benefits of

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Speaker 3: the productivity boom from AI. It's not just for US stocks,

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Speaker 3: and it meanwhile, they'd be discounted because they're perceived to

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Speaker 3: be out of that kind of that benefit. But the

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Speaker 3: short term dynamic is very much dominated not just by

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Speaker 3: the tariffanies, but also you know, we have this very

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Speaker 3: important Chinese Congress this week, and there's high expectations for stimulus.

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Speaker 3: They've repeatedly disappointed when there's been high expectations before. So

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Speaker 3: I'm a little bit wary of the short term price section.

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Speaker 3: But I think the structural story is pretty good this year.

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Speaker 2: Yes, indeed, it's the two sessions meetings that happened March

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Speaker 2: fourth and fifth, and Premierly is expected to deliver a

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Speaker 2: report on GDP that will probably include a growth target.

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Speaker 2: Do you think it's going to come in anywhere near

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Speaker 2: five percent?

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Speaker 3: Probably will, but it doesn't really matter, Like you know,

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Speaker 3: no one really believes the exactly what's achieved, and you know,

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Speaker 3: we'll probably get a number. I'd be surprised if it

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Speaker 3: is above five percent because I think that you know,

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Speaker 3: it's it's a GDP number, which just trending down more

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Speaker 3: towards four percent, four and a half percent, and that's

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Speaker 3: still fine. That's still faster than most of the rest

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Speaker 3: of the world. And you know, it's faster than the US,

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Speaker 3: for example, faster than Europe, faster than most major peers.

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Speaker 3: So I think even if it was a it was

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Speaker 3: a GDP target of four percent, the markt would be

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Speaker 3: massively disappo the short term and there'd be a real

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Speaker 3: shakeout of kind of some recent bullishness. But ultimately I

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Speaker 3: don't think that's too worrying a structural story if it's

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Speaker 3: a sustainable four percent, and if it's a real four.

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Speaker 1: Percent, which I think a lot of people do have

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Speaker 1: suspicions about.

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Speaker 2: Yeah, So the growth target plus the fiscal deficit obviously

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Speaker 2: key focal points. Is it critical that Beijing step up

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Speaker 2: and do more to support the economy or do you

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Speaker 2: think leadership is content to have things move kind of

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Speaker 2: sideways for the moment because there's so much uncertainty.

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Speaker 3: I think they are kind of content with a little

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Speaker 3: bit aside it.

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Speaker 1: I don't know.

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Speaker 3: It's very hard to anticipate the short term thinking of

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Speaker 3: the Chinese government. I think longer term it's easily because

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Speaker 3: they think in long term ways, and what's been happening

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Speaker 3: in the last four or five years is they add

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Speaker 3: this just humongous debt bubble based around the real estate market,

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Speaker 3: and they've done a very very good job of deflating

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Speaker 3: that and taking the pain to set the economy up

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Speaker 3: for a much better place over the long term. Now

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Speaker 3: they're not fully haven't fully taken all that pain yet,

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Speaker 3: but there are long way through that process, and that's

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Speaker 3: very impressive without seeing a class the economy. So I

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Speaker 3: think that, you know, China, what they've done is they've

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Speaker 3: gone they've premptively taken the pain over the last couple

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Speaker 3: of years, probably another couple of years there to kind

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Speaker 3: of make their economy on a more sustainable basis. And

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Speaker 3: and some would argue in fact, actually that that's actually

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Speaker 3: what Trump is trying to do in the US, is

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Speaker 3: that his policies are about, you know, definancialization of the

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Speaker 3: US economy to make it more sustainable and make it

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Speaker 3: more private sector based. So I think China are ahead

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Speaker 3: in that process. It doesn't mean that they've taken all

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Speaker 3: the pain, and I think they are willing to overall

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Speaker 3: move slowly now.

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Speaker 1: The only reason I kind.

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Speaker 3: Of didn't answer your question very clearly in the first place,

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Speaker 3: but whether they know that they want to kind of

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Speaker 3: boost markets in the short term or are they happy

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Speaker 3: to go side of it, is because I do think

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Speaker 3: right now at the moment, they wouldn't mind a bit

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Speaker 3: of a boost in context of all these tariff headlines

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Speaker 3: and fresh tariffsman to coming in China, and so maybe

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Speaker 3: it would suit them, especially with the Congress meeting this week,

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Speaker 3: to have stocks do pretty well. So I'd be surprised

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Speaker 3: if they really disappoint this week. I just don't think

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Speaker 3: they're gonna they're gonna excite the bulls.

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Speaker 2: Before I let you go, Mark, I got to get

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Speaker 2: your take on the Japanese end, because over the last

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Speaker 2: couple of trading days we've seen a little bit of

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Speaker 2: weakness begin to build in. We've got about a one

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Speaker 2: to fifty handle now against the greenback. I thought the

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Speaker 2: general expectation here was that we're going to get right

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Speaker 2: tightening from the boj Is there something we need to

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Speaker 2: explore as to why the en is weakening ever so slightly?

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Speaker 1: I mean, really, it's just the dollar move.

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Speaker 3: Dollar's seen a powerful bounce at the end of last week,

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Speaker 3: so I think it's related to that. I mean, dollar

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Speaker 3: yen is still a chunk lower than it was a month ago.

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Speaker 3: We are still going to get rate tightening in Japan

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Speaker 3: this year, but there is another dynamic. I mean, this

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Speaker 3: whole new tariff world is quite negative for Japan, and

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Speaker 3: so the policy mix that's been proposed isn't great for Japan.

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Speaker 3: That said, you know, I think it's really important that

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Speaker 3: the dollar is going to remain deeply volatile. The knee

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Speaker 3: jerk reaction on tariff headlines will be dollar positive, and

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Speaker 3: so we might get some of that this week. But

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Speaker 3: I think ultimately the dollar will come lower over this year,

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Speaker 3: and I think that as a result, dollar yen will

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Speaker 3: also come lower. You know, people get very excited by

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Speaker 3: the n side of the dynamic, and sometimes that is

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Speaker 3: really relevant. I think this year, the overall direction will

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Speaker 3: be more importantly decided by what happens to the dollar,

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Speaker 3: and I think that's down is.

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Speaker 2: The big data point that you're looking to this week,

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Speaker 2: the employment report at the end of the week in

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Speaker 2: the US.

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Speaker 1: Do you know what, I.

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Speaker 3: Haven't even got that far ahead in my own vision

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Speaker 3: because it's so important what happens on tariffs, do they

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Speaker 3: actually come through and in the reaction. So I think

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Speaker 3: the tariff reaction and the Chinese Congress meeting are far

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Speaker 3: more important. And in fact, actually the job's data this

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Speaker 3: week is not as important as normal, and that's because

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Speaker 3: the review period was too early to factor in the

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Speaker 3: sudden jump in initial claims out of Washington. So we're

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Speaker 3: gonna see real impact on the US jobs market over

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Speaker 3: the coming months, but it won't show up and disreport

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Speaker 3: and yet that's another month away. So in fact, I

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Speaker 3: think people will look through this job support very quickly.

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Speaker 1: If it's strong, they'll ignore it.

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Speaker 3: If it's weak, people will panic because it's not meant

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Speaker 3: to be weak just yet, it's meant to be week

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Speaker 3: another month from now.

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Speaker 2: We'll leave it there, Mark, It's always a pleasure, sure.

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Speaker 2: Bloomberg's Mark Cudmore from our market's live team, joining us

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

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Speaker 2: to the Daybreak Asia Podcast. I'm Doug Chrisner. So in

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Speaker 2: the week ahead, we'll get a better reading on the

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Speaker 2: American economy. We have a couple of key data points, importantly,

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Speaker 2: two series of PMI reports, and with those numbers, obviously

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Speaker 2: reading zon sentiment. Plus on top of that durable goods orders,

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Speaker 2: there's factory orders, construction spending is in there, and then

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Speaker 2: at the end of the week it's that important employment report.

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Speaker 2: This go round, we're looking at numbers for the month

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Speaker 2: of February. Joining us now to take a look at

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Speaker 2: all of these things. Todd Waals. She is the CEO

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Speaker 2: also the chief technical analyst at Alpha Cubed Investments. Todd,

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Speaker 2: it's always a pleasure. Thanks so much for joining us.

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Speaker 2: I think we can agree that there have been signs

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Speaker 2: of slowing in the US economy and at the same

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Speaker 2: time the appearance that inflation is stubborn. One of the

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Speaker 2: things that's been very interesting is that yields have been down,

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Speaker 2: particularly at the long end. I think the tenuere is

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Speaker 2: down about fifty bases points since the peak in January.

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Speaker 2: What is the bond market telling us exactly?

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Speaker 4: I think the bond market, and thanks for having me on, Doug,

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Speaker 4: it's always great, But the bond market is a little

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Speaker 4: proxy for what we've been seeing throughout the market, overreacting

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Speaker 4: in one direction or another all year. We've gotten mixed data.

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Speaker 4: Of course, as you mentioned, CPI has been running a

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Speaker 4: little hot. PC has some hot components, but we've got

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Speaker 4: consumer confidence cooling. We've got housing, you know, arguably in

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Speaker 4: a deep freeze, and tariffs are not growth friendly. So

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Speaker 4: the market is running to that side of the boat

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Speaker 4: right now, and we've got the tenure coming down below

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Speaker 4: that what we view as a yellow light area, that

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Speaker 4: four point five percent level on the tenure. We're below

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Speaker 4: that now and as long as we don't plummet aggressively

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Speaker 4: below that in the short run, we think we're going

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Speaker 4: to see, you know, pulling back of rates, but within

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Speaker 4: a range.

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Speaker 2: Is some of this do perhaps to a little bit

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Speaker 2: of too much optimism about the FED becoming maybe a

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Speaker 2: little bit more accommodative.

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Speaker 4: I mean, remember a few weeks ago we were all

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Speaker 4: worried that the tenure was going to go to five percent.

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Speaker 4: And what we're seeing overall, Doug is market participants. Investors

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Speaker 4: have just gotten off two years of pretty easy twenty

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Speaker 4: five percent plus gains in the S and P five hundred,

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Speaker 4: and they've moved into sort of a micro management strategy,

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Speaker 4: running from one scary news boomerang to the next. We

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Speaker 4: had the deep seek news right everything was coming along

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Speaker 4: just fine until then, and then we re evaluate the

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Speaker 4: entire AI ecosystem in one day based on you know,

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Speaker 4: marginal information. At that point, then the CPI is a

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Speaker 4: little sticky. Then Nvidia comes out with great earnings and

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Speaker 4: the market doesn't know what to do with them. And

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Speaker 4: I don't know if you've been paying attention to this,

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Speaker 4: but there's been some geopolitical news lately as well, not

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Speaker 4: to mention tariffs. And then on the of all that,

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Speaker 4: we get a big bitcoin announcement from the administration today,

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Speaker 4: and investors are hyper overreacting to all of this information,

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Speaker 4: and we're really encouraging people to get about thirty thousand

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Speaker 4: feet up and look at the major trends that are

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Speaker 4: going to be ongoing through twenty twenty five and beyond.

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Speaker 2: Well, you mentioned the tariffs there. The proposed tariffs on

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Speaker 2: Canada and Mexico are set to go into effect Tuesday,

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Speaker 2: and today Treasurer Secretary Bessett was saying they're unlikely to

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Speaker 2: raise inflation. Would you agree with that.

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Speaker 4: In the long run, Probably not. And you know, we

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Speaker 4: could have quite a debate about whether tariffs are inflation

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Speaker 4: area or not. We're leaning towards them being sort of

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Speaker 4: a one time issue that the market can look through.

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Speaker 4: But the tariff issue writ large is not just tariffs

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Speaker 4: on Canada and Mexico and some marginal tariffs on China.

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Speaker 4: This is a larger sort of administration policy that we're

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Speaker 4: going to be dealing with throughout the year with other

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Speaker 4: trading partners. And the most important component there, I think

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Speaker 4: is no trading partner has significantly pushed back yet, and

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Speaker 4: once that happens, we may see another catalyst for volatility.

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Speaker 4: You know, when you have the market run up like

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Speaker 4: it did for two years in a row, notwithstanding any

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Speaker 4: extraneous news issues, it wouldn't be surprising to see some consolidation,

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Speaker 4: some volatility when you throw all this instability into the mix,

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Speaker 4: and you know, the market hades instability. We've got a

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Speaker 4: great recipe for a sawtooth market and outsize volatility, especially

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Speaker 4: on the sectors that have done so well the last

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Speaker 4: two years, and we've already seen some of that so

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Speaker 4: far here to date.

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Speaker 2: You mentioned the cryptos space a moment ago. You're right,

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Speaker 2: President Trump did spark a rally earlier and some of

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Speaker 2: the digital currencies. A lot of those gains, though, have

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Speaker 2: evaporated in a post Sunday, Trump said that his executive

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Speaker 2: order really directed the Presidential Working Group to move forward

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Speaker 2: on a crypto strategic reserve. What do you think this

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Speaker 2: means at the end end of the day. Is it

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Speaker 2: a good idea? On top of that, you know.

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Speaker 4: I don't know. To be honest with you, I don't

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Speaker 4: want to take a strong stance pro or against crypto

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Speaker 4: at this time. If the administration does it, then it's

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Speaker 4: great for crypto. If they do some measured approach, then

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Speaker 4: maybe not. But the bottom line, the action in crypto

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Speaker 4: today speaks to the hyper over analysis and over activity

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Speaker 4: from investors across the board. We are encouraging investors to

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Speaker 4: look at the two big themes so that their investment

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Speaker 4: process doesn't get upended like a ferry with passengers running

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Speaker 4: from one side to the other, which we've been seeing

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Speaker 4: all year long. We're looking at consolidation in the AI

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Speaker 4: ecosystem names. But remember we're going to be talking about

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Speaker 4: the build out of AI for another decade and it's

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Speaker 4: going to have fits and stars, consolidation, big moves. You

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Speaker 4: want to use that volatility to build out some of

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Speaker 4: the names maybe that you missed or you're underrepresented in

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Speaker 4: and Underneath it all, the Federal Reserve, still within their

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Speaker 4: dot plot, is expecting to lower rates, and it doesn't

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Speaker 4: pay to fight the FED, as you know. And in

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Speaker 4: addition to that, the Trump administration seems committed to bringing

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Speaker 4: rates down, and we don't know when they're going to

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Speaker 4: do it. You know, it looks pretty positive in the

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Speaker 4: last couple of weeks, but you know that doesn't have

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Speaker 4: to keep going in the same direction quickly. But overall,

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Speaker 4: we think they're going to accomplish their goal over the

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Speaker 4: next six months, twelve months, eighteen months, which brings the

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Speaker 4: dividend value trade right to the foe and it's a

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Speaker 4: great place to kind of hide out for part of

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Speaker 4: your portfolio. Large dividends, lower volatility when you've got the

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Speaker 4: FED and ostensibly the new administration on your team putting

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Speaker 4: the wind at your back for that trade.

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Speaker 2: So we're at the end of earning season. I think

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Speaker 2: roughly four hundred and fifty companies in the S and

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Speaker 2: P five hundred have reported so far. Seventy five percent

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Speaker 2: have beaten expectations. We get some key data points in

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Speaker 2: terms of earnings this week. Cost go I think on

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Speaker 2: the list along with targets, so we're looking at the

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Speaker 2: American retail space. Talk to me a little bit about

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Speaker 2: your expectations and if you can kind of make the

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Speaker 2: pivot into the American consumer, how well is the US

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Speaker 2: consumer holding up.

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Speaker 4: We're seeing consumer confidence come in a little bit, and

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Speaker 4: the American consumer doesn't like instability and doesn't like fear.

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Speaker 4: Fear causes people to contract, and I think that's going

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Speaker 4: to be a little bit of a headwind as we

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Speaker 4: see these retail earnings coming in this year. The hallmark

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Speaker 4: as we look back on this year is going to

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Speaker 4: be choppiness volatility. But if we expect volatility or a

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Speaker 4: consolidating year after two big years, if logic is our copilot,

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Speaker 4: that can really help us out as we build out

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Speaker 4: our portfolios. We want to fade the high value consumer

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Speaker 4: names a little bit. Don't be adding to them here.

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Speaker 4: They have the price for perfection and it's going to

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Speaker 4: be difficult to exceed that in a year. Frankly, anyone

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Speaker 4: who has to move is in a tough position with

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Speaker 4: housing and rights where they're at, So it's going to

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Speaker 4: be a bumpy year. We're going to see it in

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Speaker 4: the high value consumer names that I think we're going

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Speaker 4: to see it in the data this.

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Speaker 2: Week, Todd will leave it there. Thank you so much

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Speaker 2: for joining us. Always appreciate your perspective. Todd Walsh there,

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Speaker 2: he is the CEO also the chief technical analyst at

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Speaker 2: Alpha Cubed Investments. Joining us here on the Daybreak Asia Podcast.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg