Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. US
Speaker 2: trade policies will dominate the market's attention in the week ahead.
Speaker 2: You see the proposed tariffs on Canada and Mexico are
Speaker 2: set to go into effect on Tuesday, barring another last
Speaker 2: minute reprieve. And in a moment we'll check in with
Speaker 2: Todd Waalsh is the CEO and chief Technical Analyst at
Speaker 2: Alpha Cubed Investments. First, though, a different type of geopolitics
Speaker 2: in London over the weekend, European leaders pledge to increase
Speaker 2: defense spending and to assemble a coalition of the willing
Speaker 2: as a way of securing Ukraine. Let's bring in Bloomberg's
Speaker 2: Mark Cudmore from our Markets Live team for a closer look.
Speaker 2: Mark Joins is from the Lion City of Singapore. It's
Speaker 2: always a pleasure to have your perspective. I want to
Speaker 2: begin with the story on Europe because it's this move
Speaker 2: that we're seeing right now in the euro which seems
Speaker 2: to be a little counterintuitive, perhaps stronger against the greenback
Speaker 2: by around four tenths of one percent. What do you
Speaker 2: make of what's happening in the price action.
Speaker 3: I think this makes sense in the short term for
Speaker 3: a couple of reasons. One is, we saw a little
Speaker 3: bit of sell off into the clothes on Friday. You've
Speaker 3: got a member that currency markets will still open when
Speaker 3: they had the Oval Office incident between Trump and Zlenski,
Speaker 3: which was seen as negative for Europe, and so there's
Speaker 3: already priced in that initial reaction, and then over the
Speaker 3: weekend there's there's signs that Europe is kind of going
Speaker 3: to take the lead. And so this is offering the
Speaker 3: potential for a peace dividend for Europe, which would be positive.
Speaker 1: But there's a couple of other factors here.
Speaker 3: One is is that you know, this whole idea of
Speaker 3: peace dividend is reinforcing the idea that there's going to
Speaker 3: be greater defense spending across Europe, and that's seeing higher yields,
Speaker 3: and it's that yield support that is kind of providing
Speaker 3: extra support for the currency. In fact, if you look
Speaker 3: just at in straight differentials, your dollar should be a
Speaker 3: chunk higher and it's not. So it's actually lagging the
Speaker 3: instrate drived move of the last few months. And part
Speaker 3: of that is that the market is still very short
Speaker 3: the euro that they're very worried about the long term
Speaker 3: structural concerns are in Europe, and those long term structural
Speaker 3: concerns are valid on a growth point of view.
Speaker 1: But I think they miss two points, and I think
Speaker 1: they're worried that they're where.
Speaker 3: They could be squeezed can significantly further over the coming months.
Speaker 3: One is that fiscal stimulus in Europe has been a
Speaker 3: big part of the missing picture, and if we suddenly
Speaker 3: get that, whether it's under the guise of defense spending,
Speaker 3: it is still an extra amount of spending in Europe
Speaker 3: that will be.
Speaker 1: Positive to the region.
Speaker 3: And on the other hand, we've got a longer term
Speaker 3: dynamic where at the at the margin, uh Trump's policies
Speaker 3: are eroding the appeal of parking so much of your
Speaker 3: reserves in the dollar, and this is the dollar is
Speaker 3: going to remain the world's reserve currency.
Speaker 1: It's not being challenged.
Speaker 3: This is not about the end of the dollars deserve
Speaker 3: currency or anything like that. It just means that you
Speaker 3: might want to slightly lower share in the US. And
Speaker 3: they're part of the reason the US is going to
Speaker 3: remain the world's reserve currency. Of the US dollar is
Speaker 3: because there is a good alternative, but one of the
Speaker 3: best alternatives out there is Europe, and it's perceived as
Speaker 3: being a safe place to park your money, and that
Speaker 3: is only enhanced by the idea of fiscal spending. So
Speaker 3: I think you're a dollar short term, I don't have
Speaker 3: much conviction, but I understand why it's being helped by
Speaker 3: the news flow. I don't think it's counterintuitive medium term.
Speaker 3: Longer term, I think you're a dollar can go chunk
Speaker 3: high this year, and I think that's both from the
Speaker 3: squeeze of the euro shorts, but also because at this
Speaker 3: year I think will ultimately be negative for the dollar,
Speaker 3: but in choppy fashion.
Speaker 2: It's interesting that you make that point. I think it's
Speaker 2: fair to say that market expectations for FED raid cuts
Speaker 2: have intensified. That's only going to remove support for the greenback.
Speaker 3: Yeah, absolutely, I think you know, again, that's another widening
Speaker 3: of the rates differential. I think that the whole consensus
Speaker 3: narrative on what Trump's policies mean for markets have evolved
Speaker 3: significantly over the last couple of weeks. So I think
Speaker 3: a large part of people in markets kind of thought
Speaker 3: that ultimately to be pro growth and to be very
Speaker 3: pro dollar, and they'd be pro US stocks.
Speaker 2: You know.
Speaker 3: It was. It was a perpetuation of US exceptional in markets,
Speaker 3: and I think that's being undermined, and it's been undermined
Speaker 3: both from the market's point of view, but also.
Speaker 1: The economic point of view.
Speaker 3: I think there's a growing realization that the policies, whether
Speaker 3: wanted as some people believe by the administration or not,
Speaker 3: are going to be very much growth negative, at least
Speaker 3: initially now. They might ultimately longer term, in time for
Speaker 3: the midterms next year, be growth positive, but that's eighteen
Speaker 3: months away.
Speaker 1: You can't trade off that right now.
Speaker 3: Right now, the policy mix is definitely much more growth
Speaker 3: negative than people are anticipating, and we've yet to fully
Speaker 3: price that kind of change in consensus narrative.
Speaker 2: So I mentioned a moment ago, proposed terrorffs on Canada
Speaker 2: and Mexico are set to go in effect on Tuesday.
Speaker 2: China will likewise be charged in additional ten percent terre
Speaker 2: of beginning March fourth as well. What's the outlook for
Speaker 2: the Chinese currency offshore right now? Given the trade tensions
Speaker 2: between Beijing and Washington.
Speaker 3: Like kind of fine and boring, like ultimately you know,
Speaker 3: PBOC has the amor to control the currency as much
Speaker 3: as it wants. It's going for stability. You know, in
Speaker 3: a world where the dollar is appreciating, the yuan will
Speaker 3: always form other peers because it's controlled. In a world
Speaker 3: where the dollar depreciates, the yuan will underperform other peers
Speaker 3: because it's just been much more managed and kind of
Speaker 3: lower beat it to the move. I really find it
Speaker 3: hard to understand what the short term dynamic is around China.
Speaker 1: This week, you have the tarik coming in, which are
Speaker 1: obviously negative.
Speaker 3: But China can cope better with this new tariff world
Speaker 3: than a lot of other countries because it's already readjusted
Speaker 3: a lot of its supply chains away, It's already kind
Speaker 3: of focused on the rest of the world, and it's
Speaker 3: other countries that have to kind of change their policies
Speaker 3: to in fact be more pro China. So in many
Speaker 3: ways that the whole tariff mix is actually China positive
Speaker 3: in a way, which is why you've seen Chinese equities
Speaker 3: do so well. And I think the structural story is
Speaker 3: very very good for China. These are not Chinese stocks much,
Speaker 3: but Hong Kong stocks are still very discounted. Deep Seek
Speaker 3: is emphasizing that China will also get the benefits of
Speaker 3: the productivity boom from AI. It's not just for US stocks,
Speaker 3: and it meanwhile, they'd be discounted because they're perceived to
Speaker 3: be out of that kind of that benefit. But the
Speaker 3: short term dynamic is very much dominated not just by
Speaker 3: the tariffanies, but also you know, we have this very
Speaker 3: important Chinese Congress this week, and there's high expectations for stimulus.
Speaker 3: They've repeatedly disappointed when there's been high expectations before. So
Speaker 3: I'm a little bit wary of the short term price section.
Speaker 3: But I think the structural story is pretty good this year.
Speaker 2: Yes, indeed, it's the two sessions meetings that happened March
Speaker 2: fourth and fifth, and Premierly is expected to deliver a
Speaker 2: report on GDP that will probably include a growth target.
Speaker 2: Do you think it's going to come in anywhere near
Speaker 2: five percent?
Speaker 3: Probably will, but it doesn't really matter, Like you know,
Speaker 3: no one really believes the exactly what's achieved, and you know,
Speaker 3: we'll probably get a number. I'd be surprised if it
Speaker 3: is above five percent because I think that you know,
Speaker 3: it's it's a GDP number, which just trending down more
Speaker 3: towards four percent, four and a half percent, and that's
Speaker 3: still fine. That's still faster than most of the rest
Speaker 3: of the world. And you know, it's faster than the US,
Speaker 3: for example, faster than Europe, faster than most major peers.
Speaker 3: So I think even if it was a it was
Speaker 3: a GDP target of four percent, the markt would be
Speaker 3: massively disappo the short term and there'd be a real
Speaker 3: shakeout of kind of some recent bullishness. But ultimately I
Speaker 3: don't think that's too worrying a structural story if it's
Speaker 3: a sustainable four percent, and if it's a real four.
Speaker 1: Percent, which I think a lot of people do have
Speaker 1: suspicions about.
Speaker 2: Yeah, So the growth target plus the fiscal deficit obviously
Speaker 2: key focal points. Is it critical that Beijing step up
Speaker 2: and do more to support the economy or do you
Speaker 2: think leadership is content to have things move kind of
Speaker 2: sideways for the moment because there's so much uncertainty.
Speaker 3: I think they are kind of content with a little
Speaker 3: bit aside it.
Speaker 1: I don't know.
Speaker 3: It's very hard to anticipate the short term thinking of
Speaker 3: the Chinese government. I think longer term it's easily because
Speaker 3: they think in long term ways, and what's been happening
Speaker 3: in the last four or five years is they add
Speaker 3: this just humongous debt bubble based around the real estate market,
Speaker 3: and they've done a very very good job of deflating
Speaker 3: that and taking the pain to set the economy up
Speaker 3: for a much better place over the long term. Now
Speaker 3: they're not fully haven't fully taken all that pain yet,
Speaker 3: but there are long way through that process, and that's
Speaker 3: very impressive without seeing a class the economy. So I
Speaker 3: think that, you know, China, what they've done is they've
Speaker 3: gone they've premptively taken the pain over the last couple
Speaker 3: of years, probably another couple of years there to kind
Speaker 3: of make their economy on a more sustainable basis. And
Speaker 3: and some would argue in fact, actually that that's actually
Speaker 3: what Trump is trying to do in the US, is
Speaker 3: that his policies are about, you know, definancialization of the
Speaker 3: US economy to make it more sustainable and make it
Speaker 3: more private sector based. So I think China are ahead
Speaker 3: in that process. It doesn't mean that they've taken all
Speaker 3: the pain, and I think they are willing to overall
Speaker 3: move slowly now.
Speaker 1: The only reason I kind.
Speaker 3: Of didn't answer your question very clearly in the first place,
Speaker 3: but whether they know that they want to kind of
Speaker 3: boost markets in the short term or are they happy
Speaker 3: to go side of it, is because I do think
Speaker 3: right now at the moment, they wouldn't mind a bit
Speaker 3: of a boost in context of all these tariff headlines
Speaker 3: and fresh tariffsman to coming in China, and so maybe
Speaker 3: it would suit them, especially with the Congress meeting this week,
Speaker 3: to have stocks do pretty well. So I'd be surprised
Speaker 3: if they really disappoint this week. I just don't think
Speaker 3: they're gonna they're gonna excite the bulls.
Speaker 2: Before I let you go, Mark, I got to get
Speaker 2: your take on the Japanese end, because over the last
Speaker 2: couple of trading days we've seen a little bit of
Speaker 2: weakness begin to build in. We've got about a one
Speaker 2: to fifty handle now against the greenback. I thought the
Speaker 2: general expectation here was that we're going to get right
Speaker 2: tightening from the boj Is there something we need to
Speaker 2: explore as to why the en is weakening ever so slightly?
Speaker 1: I mean, really, it's just the dollar move.
Speaker 3: Dollar's seen a powerful bounce at the end of last week,
Speaker 3: so I think it's related to that. I mean, dollar
Speaker 3: yen is still a chunk lower than it was a month ago.
Speaker 3: We are still going to get rate tightening in Japan
Speaker 3: this year, but there is another dynamic. I mean, this
Speaker 3: whole new tariff world is quite negative for Japan, and
Speaker 3: so the policy mix that's been proposed isn't great for Japan.
Speaker 3: That said, you know, I think it's really important that
Speaker 3: the dollar is going to remain deeply volatile. The knee
Speaker 3: jerk reaction on tariff headlines will be dollar positive, and
Speaker 3: so we might get some of that this week. But
Speaker 3: I think ultimately the dollar will come lower over this year,
Speaker 3: and I think that as a result, dollar yen will
Speaker 3: also come lower. You know, people get very excited by
Speaker 3: the n side of the dynamic, and sometimes that is
Speaker 3: really relevant. I think this year, the overall direction will
Speaker 3: be more importantly decided by what happens to the dollar,
Speaker 3: and I think that's down is.
Speaker 2: The big data point that you're looking to this week,
Speaker 2: the employment report at the end of the week in
Speaker 2: the US.
Speaker 1: Do you know what, I.
Speaker 3: Haven't even got that far ahead in my own vision
Speaker 3: because it's so important what happens on tariffs, do they
Speaker 3: actually come through and in the reaction. So I think
Speaker 3: the tariff reaction and the Chinese Congress meeting are far
Speaker 3: more important. And in fact, actually the job's data this
Speaker 3: week is not as important as normal, and that's because
Speaker 3: the review period was too early to factor in the
Speaker 3: sudden jump in initial claims out of Washington. So we're
Speaker 3: gonna see real impact on the US jobs market over
Speaker 3: the coming months, but it won't show up and disreport
Speaker 3: and yet that's another month away. So in fact, I
Speaker 3: think people will look through this job support very quickly.
Speaker 1: If it's strong, they'll ignore it.
Speaker 3: If it's weak, people will panic because it's not meant
Speaker 3: to be weak just yet, it's meant to be week
Speaker 3: another month from now.
Speaker 2: We'll leave it there, Mark, It's always a pleasure, sure.
Speaker 2: Bloomberg's Mark Cudmore from our market's live team, joining us
Speaker 2: from Singapore here on the Daybreak Asia podcast. Welcome back
Speaker 2: to the Daybreak Asia Podcast. I'm Doug Chrisner. So in
Speaker 2: the week ahead, we'll get a better reading on the
Speaker 2: American economy. We have a couple of key data points, importantly,
Speaker 2: two series of PMI reports, and with those numbers, obviously
Speaker 2: reading zon sentiment. Plus on top of that durable goods orders,
Speaker 2: there's factory orders, construction spending is in there, and then
Speaker 2: at the end of the week it's that important employment report.
Speaker 2: This go round, we're looking at numbers for the month
Speaker 2: of February. Joining us now to take a look at
Speaker 2: all of these things. Todd Waals. She is the CEO
Speaker 2: also the chief technical analyst at Alpha Cubed Investments. Todd,
Speaker 2: it's always a pleasure. Thanks so much for joining us.
Speaker 2: I think we can agree that there have been signs
Speaker 2: of slowing in the US economy and at the same
Speaker 2: time the appearance that inflation is stubborn. One of the
Speaker 2: things that's been very interesting is that yields have been down,
Speaker 2: particularly at the long end. I think the tenuere is
Speaker 2: down about fifty bases points since the peak in January.
Speaker 2: What is the bond market telling us exactly?
Speaker 4: I think the bond market, and thanks for having me on, Doug,
Speaker 4: it's always great, But the bond market is a little
Speaker 4: proxy for what we've been seeing throughout the market, overreacting
Speaker 4: in one direction or another all year. We've gotten mixed data.
Speaker 4: Of course, as you mentioned, CPI has been running a
Speaker 4: little hot. PC has some hot components, but we've got
Speaker 4: consumer confidence cooling. We've got housing, you know, arguably in
Speaker 4: a deep freeze, and tariffs are not growth friendly. So
Speaker 4: the market is running to that side of the boat
Speaker 4: right now, and we've got the tenure coming down below
Speaker 4: that what we view as a yellow light area, that
Speaker 4: four point five percent level on the tenure. We're below
Speaker 4: that now and as long as we don't plummet aggressively
Speaker 4: below that in the short run, we think we're going
Speaker 4: to see, you know, pulling back of rates, but within
Speaker 4: a range.
Speaker 2: Is some of this do perhaps to a little bit
Speaker 2: of too much optimism about the FED becoming maybe a
Speaker 2: little bit more accommodative.
Speaker 4: I mean, remember a few weeks ago we were all
Speaker 4: worried that the tenure was going to go to five percent.
Speaker 4: And what we're seeing overall, Doug is market participants. Investors
Speaker 4: have just gotten off two years of pretty easy twenty
Speaker 4: five percent plus gains in the S and P five hundred,
Speaker 4: and they've moved into sort of a micro management strategy,
Speaker 4: running from one scary news boomerang to the next. We
Speaker 4: had the deep seek news right everything was coming along
Speaker 4: just fine until then, and then we re evaluate the
Speaker 4: entire AI ecosystem in one day based on you know,
Speaker 4: marginal information. At that point, then the CPI is a
Speaker 4: little sticky. Then Nvidia comes out with great earnings and
Speaker 4: the market doesn't know what to do with them. And
Speaker 4: I don't know if you've been paying attention to this,
Speaker 4: but there's been some geopolitical news lately as well, not
Speaker 4: to mention tariffs. And then on the of all that,
Speaker 4: we get a big bitcoin announcement from the administration today,
Speaker 4: and investors are hyper overreacting to all of this information,
Speaker 4: and we're really encouraging people to get about thirty thousand
Speaker 4: feet up and look at the major trends that are
Speaker 4: going to be ongoing through twenty twenty five and beyond.
Speaker 2: Well, you mentioned the tariffs there. The proposed tariffs on
Speaker 2: Canada and Mexico are set to go into effect Tuesday,
Speaker 2: and today Treasurer Secretary Bessett was saying they're unlikely to
Speaker 2: raise inflation. Would you agree with that.
Speaker 4: In the long run, Probably not. And you know, we
Speaker 4: could have quite a debate about whether tariffs are inflation
Speaker 4: area or not. We're leaning towards them being sort of
Speaker 4: a one time issue that the market can look through.
Speaker 4: But the tariff issue writ large is not just tariffs
Speaker 4: on Canada and Mexico and some marginal tariffs on China.
Speaker 4: This is a larger sort of administration policy that we're
Speaker 4: going to be dealing with throughout the year with other
Speaker 4: trading partners. And the most important component there, I think
Speaker 4: is no trading partner has significantly pushed back yet, and
Speaker 4: once that happens, we may see another catalyst for volatility.
Speaker 4: You know, when you have the market run up like
Speaker 4: it did for two years in a row, notwithstanding any
Speaker 4: extraneous news issues, it wouldn't be surprising to see some consolidation,
Speaker 4: some volatility when you throw all this instability into the mix,
Speaker 4: and you know, the market hades instability. We've got a
Speaker 4: great recipe for a sawtooth market and outsize volatility, especially
Speaker 4: on the sectors that have done so well the last
Speaker 4: two years, and we've already seen some of that so
Speaker 4: far here to date.
Speaker 2: You mentioned the cryptos space a moment ago. You're right,
Speaker 2: President Trump did spark a rally earlier and some of
Speaker 2: the digital currencies. A lot of those gains, though, have
Speaker 2: evaporated in a post Sunday, Trump said that his executive
Speaker 2: order really directed the Presidential Working Group to move forward
Speaker 2: on a crypto strategic reserve. What do you think this
Speaker 2: means at the end end of the day. Is it
Speaker 2: a good idea? On top of that, you know.
Speaker 4: I don't know. To be honest with you, I don't
Speaker 4: want to take a strong stance pro or against crypto
Speaker 4: at this time. If the administration does it, then it's
Speaker 4: great for crypto. If they do some measured approach, then
Speaker 4: maybe not. But the bottom line, the action in crypto
Speaker 4: today speaks to the hyper over analysis and over activity
Speaker 4: from investors across the board. We are encouraging investors to
Speaker 4: look at the two big themes so that their investment
Speaker 4: process doesn't get upended like a ferry with passengers running
Speaker 4: from one side to the other, which we've been seeing
Speaker 4: all year long. We're looking at consolidation in the AI
Speaker 4: ecosystem names. But remember we're going to be talking about
Speaker 4: the build out of AI for another decade and it's
Speaker 4: going to have fits and stars, consolidation, big moves. You
Speaker 4: want to use that volatility to build out some of
Speaker 4: the names maybe that you missed or you're underrepresented in
Speaker 4: and Underneath it all, the Federal Reserve, still within their
Speaker 4: dot plot, is expecting to lower rates, and it doesn't
Speaker 4: pay to fight the FED, as you know. And in
Speaker 4: addition to that, the Trump administration seems committed to bringing
Speaker 4: rates down, and we don't know when they're going to
Speaker 4: do it. You know, it looks pretty positive in the
Speaker 4: last couple of weeks, but you know that doesn't have
Speaker 4: to keep going in the same direction quickly. But overall,
Speaker 4: we think they're going to accomplish their goal over the
Speaker 4: next six months, twelve months, eighteen months, which brings the
Speaker 4: dividend value trade right to the foe and it's a
Speaker 4: great place to kind of hide out for part of
Speaker 4: your portfolio. Large dividends, lower volatility when you've got the
Speaker 4: FED and ostensibly the new administration on your team putting
Speaker 4: the wind at your back for that trade.
Speaker 2: So we're at the end of earning season. I think
Speaker 2: roughly four hundred and fifty companies in the S and
Speaker 2: P five hundred have reported so far. Seventy five percent
Speaker 2: have beaten expectations. We get some key data points in
Speaker 2: terms of earnings this week. Cost go I think on
Speaker 2: the list along with targets, so we're looking at the
Speaker 2: American retail space. Talk to me a little bit about
Speaker 2: your expectations and if you can kind of make the
Speaker 2: pivot into the American consumer, how well is the US
Speaker 2: consumer holding up.
Speaker 4: We're seeing consumer confidence come in a little bit, and
Speaker 4: the American consumer doesn't like instability and doesn't like fear.
Speaker 4: Fear causes people to contract, and I think that's going
Speaker 4: to be a little bit of a headwind as we
Speaker 4: see these retail earnings coming in this year. The hallmark
Speaker 4: as we look back on this year is going to
Speaker 4: be choppiness volatility. But if we expect volatility or a
Speaker 4: consolidating year after two big years, if logic is our copilot,
Speaker 4: that can really help us out as we build out
Speaker 4: our portfolios. We want to fade the high value consumer
Speaker 4: names a little bit. Don't be adding to them here.
Speaker 4: They have the price for perfection and it's going to
Speaker 4: be difficult to exceed that in a year. Frankly, anyone
Speaker 4: who has to move is in a tough position with
Speaker 4: housing and rights where they're at, So it's going to
Speaker 4: be a bumpy year. We're going to see it in
Speaker 4: the high value consumer names that I think we're going
Speaker 4: to see it in the data this.
Speaker 2: Week, Todd will leave it there. Thank you so much
Speaker 2: for joining us. Always appreciate your perspective. Todd Walsh there,
Speaker 2: he is the CEO also the chief technical analyst at
Speaker 2: Alpha Cubed Investments. Joining us here on the Daybreak Asia Podcast.
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 Chrisner, and this is Bloomberg