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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Day ba QR podcast, available every morning on Apple, Spotify

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Speaker 1: or wherever you listen. It's Thursday, the seventeenth of April

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Speaker 1: in London. I'm Caroline Hepki.

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Speaker 2: And I'm Stephen Carroll. Coming up today, Goldman Sachs warns

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Speaker 2: that US investors may be forced to dump eight hundred

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Speaker 2: billion dollars of Chinese stocks in a full financial decoupling.

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Speaker 1: Stock markets full as Jerown Powell signals the Fed is

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Speaker 1: in no rush to cut interest.

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Speaker 2: Rates, plus no rush to Russia. Companies remain wary of

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Speaker 2: returning to the radically changed market amid talk of a

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Speaker 2: warming of relations between Washington and Moscow.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: Goldman Sachs says US investors could be forced to offload

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Speaker 2: up to eight hundred billion dollars in Chinese stocks in

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Speaker 2: a worst case financial decoupling with China. The Bank joins

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Speaker 2: others brace for deeper US China tensions as the White

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Speaker 2: House looks to rally allies against Beijing's manufacturing dominance, potentially

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Speaker 2: offering tariff relief in exchange for support in a move

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Speaker 2: scene as an effort to encircle Beijing, but Carlisle Group

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Speaker 2: CEO Harvey Schwartz says that global economic growth relies on

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Speaker 2: the two countries finding a way to work together.

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Speaker 3: I don't think it's a good outcome if the number

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Speaker 3: one and two largest economies in the world haven't found

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Speaker 3: an equilibrium around cooperation. It's really critical for the global

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Speaker 3: economy and for trade that we and China find a

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Speaker 3: place of cooperation and equilibrium, and I think the faster

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Speaker 3: that can happen, the better it is for all business

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Speaker 3: activity globwid, especially in the United States.

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Speaker 2: Schwartz was speaking to Shnali Bassic for Bloomberg Original's upcoming

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Speaker 2: series Bullish. Meanwhile, China's President Hijingping, touring Southeast Asia, called

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Speaker 2: for unity around what he called an Asian family.

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Speaker 1: And President Donald Trump says that there was big progress

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Speaker 1: in talks with the Japanese trade delegation on Wednesday. Tokyo

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Speaker 1: is working to avoid a snapback to higher rates of

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Speaker 1: US tariffs, which are currently paused for ninety days. Isabel

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Speaker 1: Reynolds is Bloomberg's Tokyo bureau chief from.

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Speaker 4: The Japanese side. Obviously, the ask is very obviously they

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Speaker 4: want all these tariffs removed, the subject at the moment

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Speaker 4: to the minimum ten percent tariff. Also, the vital car

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Speaker 4: industry is subject to twenty five percent tariffs already, and

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Speaker 4: of course they want to get away from the prospect

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Speaker 4: of having twenty four percent tariffs across the board.

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Speaker 1: Isabel Reynolds says that the US Japan talks are being

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Speaker 1: closely watched as a test case for other nations uncertain

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Speaker 1: over what concessions President Trump will seek to extract.

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Speaker 2: Jerome Power is doubling down on his message that the

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Speaker 2: Central Bank must ensure tariffs don't trigger a more persistent

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Speaker 2: rise in inflation. Speaking at the Economic Club of Chicago,

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Speaker 2: the Federal Reserve Chair made clear that the White Houses

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Speaker 2: sweeping levees on foreign imports are front of mind for policymakers.

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Speaker 5: Trade now is the focus, and the effects of that

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Speaker 5: are likely to move us away from our goals. So

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Speaker 5: unemployment is likely to go up as the economy slows

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Speaker 5: in all likelihood, and inflation is likely to go up

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Speaker 5: as tariffs find their way and some part of those

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Speaker 5: tariffs come to the come to be paid by the public.

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Speaker 2: Pal's comments deepened to set off in US stocks Yesterday,

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Speaker 2: The S and P five hundred index closed down two

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Speaker 2: point two percent, while the Nasdaq one hundred plunge by

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Speaker 2: three percent. Treasuries, however, rallied for a third day on

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Speaker 2: Wednesday as investors refocus on the asset as a hedge

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Speaker 2: against risk.

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Speaker 1: US consumers are rushing to make big ticket purchases before

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Speaker 1: tariffs feed into prices. Retail sales jumped by one point

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Speaker 1: four percent in March, the largest move in more than

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Speaker 1: two years. Professor of Public Policy and Economics Betsy Stephenson

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Speaker 1: says that it will be a short lived boost.

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Speaker 6: It's always surprising to me how many business just are like, Wow,

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Speaker 6: this is great. We got this big bump up in sales,

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Speaker 6: like this is going to be going on forever. It's not.

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Speaker 6: It's actually pulling sales forward. People do expect prices to

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Speaker 6: jump up, and then we're going to see, you know,

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Speaker 6: sort of a exaggerated or magnified slowdown that comes because

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Speaker 6: people tried to get ahead of those price increases.

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Speaker 1: The University of Michigan's Betsy Stephenson speaking, their cars were

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Speaker 1: a key driver of the sales increased, despite brands like

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Speaker 1: Volkswagen promising to keep prices flat until May as a

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Speaker 1: way of reassuring US buyers. Data suggests a buying frenzy,

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Speaker 1: but consumer sentiment is near its lowest reading on record

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Speaker 1: in data going back to the nineteen fifties.

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Speaker 2: Well, let's bring another perspective on the tariff story now

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Speaker 2: from one of our key conversations on Bloomberg Radio, the

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Speaker 2: question of how far and for how long Donald Trump's

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Speaker 2: trade war will go on as on many investors' minds,

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Speaker 2: here's the view of janat Henry, Global Chief Economists at

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Speaker 2: HSBC is talking to us about the potential lasting effect

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Speaker 2: of these trade announcements.

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Speaker 7: The intention of the US president is to relocate manufacturing

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Speaker 7: to the US, but manufacturing only accounts for less than

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Speaker 7: ten percent of US employment. It's the damage that will

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Speaker 7: be caused on the other ninety percent of employment from

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Speaker 7: that much weaker spending. But also he really does want

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Speaker 7: to significantly reduce the relationship between the US and China,

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Speaker 7: and that's where there will be knock on impacts within

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Speaker 7: the rest of the world. And I think it is

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Speaker 7: longer term.

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Speaker 2: Heysbc's Janet Henry speaking to us on Bloomberg Radio, her

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Speaker 2: point being underlined by the pressure now from the Trump

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Speaker 2: administration on their partners to squeeze out China.

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Speaker 1: Well, Gold hit another all time high as well. Latility

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Speaker 1: on Wall Street drove investors to once again pile into

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Speaker 1: the safe haven asset. Billion rose as much as a

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Speaker 1: zero point four percent to bring the yellow metal close

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Speaker 1: to three three hundred and sixty dollars an ounce. Before

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Speaker 1: pairing those gains, gold has climbed almost twenty eight percent

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Speaker 1: this year. That is outpacing the twenty seven percent gain

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Speaker 1: that it managed to not shop in twenty twenty four.

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Speaker 1: As the escalating trade will creates anxiety over a possible

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Speaker 1: global recession.

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Speaker 2: The European Central Bank is expected to cut interest rates

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Speaker 2: today amid US tarif related growth concerns, according to an

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Speaker 2: almost unanimous Bloomberg survey of analysts, but our borrowing costs

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Speaker 2: will be lowered to two hundred quarter percent from two

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Speaker 2: and a half percent later today. The unveiling of US

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Speaker 2: trade levees earlier this month has quashed talk the today's

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Speaker 2: ECB meeting could bring a pause and monetary easing beyond today.

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Speaker 2: Investors are pricing in at least two more rate cuts

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Speaker 2: by the end of the year as a stronger euro

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Speaker 2: helps to contain price pressures, and those.

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Speaker 1: Are our top stories for you this morning. Let's run

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Speaker 1: you through the markets then. MSCI Asia Pacific indexes up

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Speaker 1: six tents of one percent this morning. You've also got

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Speaker 1: stock futures for the S and P five one hundred

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Speaker 1: gaining seven tenths and as that stop futures up eight

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Speaker 1: tenths of one percent. US SOX fifty futures, though are

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Speaker 1: down in the red two tenths of one percent. A

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Speaker 1: few threads to think about your own power signaling that

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Speaker 1: wait and see approach to tariffs. It was risk off

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Speaker 1: in the equity markets yesterday. The bond markets took it

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Speaker 1: much better, though the ECB is expected to cut interest

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Speaker 1: rates today again because of the warrior around tariffs and

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Speaker 1: that hitting economic growth in Europe and also around the world.

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Speaker 1: The Japanese yend this morning is down by half of

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Speaker 1: one percent, although Japan's Akazawa was saying that currencies weren't

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Speaker 1: discussed in those US Japan tariff discussions yesterday. You've also

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Speaker 1: seen a lift to Japanese equities because of those discussions.

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Speaker 1: The euro this morning is edging down three tens of

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Speaker 1: one percent against the US dollar and that gold spot

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Speaker 1: price down a tenth this morning, training at three thousand,

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Speaker 1: three hundred and thirty nine, with the ten year US

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Speaker 1: treasury yield now at four twenty nine, up almost two

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Speaker 1: basis points. There's the markets.

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Speaker 2: In a moment, we'll bring you more on the latest

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Speaker 2: warning about potential consequences of the US China trade war.

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Speaker 2: Plus are reporting on how Western companies are thinking about

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Speaker 2: the potential for sanctions on Russia being lifted.

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Speaker 1: Before that, though, another story caught my eye. It's kind

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Speaker 1: of terrif related, kind of trunk related, but also not

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Speaker 1: at all so US politicians maybe eyeing up Greenland for

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Speaker 1: its strategic location for all of those natural resources. But

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Speaker 1: the island is also has got its own kind of

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Speaker 1: specific story around try and just attempt tourists to come

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Speaker 1: to visit. There is a newly expanded airport in the

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Speaker 1: capital city. Apparently they're going to be flights starting in

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Speaker 1: June twice a week into New Jersey to Newark in

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Speaker 1: New Jersey.

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Speaker 2: Early connections to obviously plenty of flights to Denmark, Iceland, France,

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Speaker 2: for example. I was looking at new care Fort website

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Speaker 2: this morning.

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Speaker 1: You maybe it's your holiday destination. Well, obviously we know

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Speaker 1: that it's very sparsely populated, only fifty seven thousand people

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Speaker 1: on the island. They get lots of tourists, but apparently

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Speaker 1: any kind of date tourists because often you go on

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Speaker 1: a boat on a kind of cruise or something. Now

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Speaker 1: they want more high value tourists to come to stay

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Speaker 1: overnight to sort of enjoy the island.

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Speaker 2: Yeah, it's this idea of opening up the accessibility of

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Speaker 2: the island, but doing so and sort of a carefully

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Speaker 2: thought out way where they're not bringing in huge numbers,

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Speaker 2: but as you say, bringing in people who are going

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Speaker 2: to spend quality time and crucially quality money in the

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Speaker 2: place as well. That's going to be able to suppose

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Speaker 2: expand some of the economics involved. And I mean the

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Speaker 2: ashes of people that our colleague spoke to in Greenland

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Speaker 2: as well is very much that that it should be.

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Speaker 2: You know, people who are kind of coming and interesting

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Speaker 2: in learning, but people already have a good quality of

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Speaker 2: life in Greenland that don't need to be making massive

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Speaker 2: amounts of money from tourism.

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Speaker 1: Well, I learned also a new word from our reporter

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Speaker 1: Jackie Caradonio, and that is salt box house. Didn't realize

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Speaker 1: that the homes in Nuke that have that long kind

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Speaker 1: of slanted roof, apparently that's called a salt box house.

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Speaker 8: I didn't know that.

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Speaker 2: It's a Friday fact for you. You can read more

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Speaker 2: blue com and on the terminal. Let's bring you more

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Speaker 2: on our top story. Now, though, the escalation of the

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Speaker 2: trade or between US and China could see US investors

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Speaker 2: forced to offload eight hundred billion dollars worth of Chinese equities,

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Speaker 2: according to estimates from Goldman Sachs. Let's bring in our

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Speaker 2: aga of stocks, as are Katherine and I for more. Catherine,

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Speaker 2: great to have you with us. Talk us through what

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Speaker 2: Goldman is saying, under what conditions would they see this

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Speaker 2: sort divide flow happening.

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Speaker 8: Goldman is putting out quite a forecast here. So they're

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Speaker 8: looking at sort of the entire universe of holdings by

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Speaker 8: US institutional investors, and they're doing all the math in

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Speaker 8: terms of how much they own of US listed Chinese

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Speaker 8: stocks as well as in usual holdings of Hong Kong

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Speaker 8: and Chinese stocks listed in their respective locales, and doing

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Speaker 8: that math, they've come up to eight hundred billion. And

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Speaker 8: this would be you know, only in this extreme scenario

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Speaker 8: of financial and coupling if the US administration does move

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Speaker 8: forward and kicks out all of these Chinese companies from

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Speaker 8: US exchanges and you know, puts in this kind of

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Speaker 8: length at banners, so to speak, of not allowing these

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Speaker 8: US institutions to buy Chinese equities.

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Speaker 1: Yeah, they also did the flip side calculations of what

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Speaker 1: would mean from the Chinese side of things with the US.

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Speaker 1: What would this mean though for Chinese companies. You know,

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Speaker 1: this whole idea of decoupling, I.

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Speaker 8: Mean, this is the nuclear option, right, I mean, this

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Speaker 8: is you know, this has been a long sort of

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Speaker 8: like at risk kind of thing, and we saw it,

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Speaker 8: you know, even back in twenty twenty one, twenty twenty two,

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Speaker 8: when there was this risk of possibly you know, being

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Speaker 8: kicked off of US exchange. I mean, these are the

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Speaker 8: two you know, two economic superpowers to markets here. I

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Speaker 8: mean this would obviously hurt Chinese China's market and buy

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Speaker 8: relation Hong Kong's equity markets, but obviously would you know,

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Speaker 8: also have huge ramifications on the US equity market. I mean,

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Speaker 8: this is these are really key companies here, you know,

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Speaker 8: the likes of these giants like Ali Baba, right, like

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Speaker 8: JD dot Com, like Baidu. But also you know, we're

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Speaker 8: also talking about companies that are just listed, you know

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Speaker 8: in the US, like like PDD that owns Tamu, and

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Speaker 8: some of.

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Speaker 2: Those names of course quite familiar internationally as well, but

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Speaker 2: kind of broadly, how important are these financial ties between

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Speaker 2: the US and China and how have they been affected

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Speaker 2: already by the trade war?

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Speaker 8: So, I mean, like we many other countries. Obviously there's

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Speaker 8: been gyrations in you know, the equities market here in

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Speaker 8: Hong Kong and in China. You know, the market has tanked,

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Speaker 8: and I think that you know, Hong Kong in particular,

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Speaker 8: where a lot of these companies are listed, all these

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Speaker 8: Chinese companies are listed, we went, you know, we went

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Speaker 8: from being the best equities market in the world too.

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Speaker 8: I wouldn't say one of the worst, but you know,

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Speaker 8: losing a lot of those gains, this would be I

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Speaker 8: mean catastrophic. I mean this, you know, since what happened

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Speaker 8: in twenty twenty two, a lot of investors have already

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Speaker 8: started if they were able to switching, you know, their shares,

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Speaker 8: like in Ali Baba moving their US shares into Hong Kong.

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Speaker 8: But a lot of these companies, they just liquidity is

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Speaker 8: not quite you know the same as you know in

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Speaker 8: Hong Kong's in the US, so this would be quite detrimental.

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Speaker 8: I mean, this would be the biggest blow of massive

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Speaker 8: abortions that we've seen. And so I mean there's just

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Speaker 8: a lot of worry. And I think that you know,

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Speaker 8: Goldman along with we saw earlier this week with Morgan

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Speaker 8: Stanley and Jeffries and Ubs. I mean, these're they're saying

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Speaker 8: this is an extreme scenario, right. I don't think that

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Speaker 8: there's a lot of people who are really betting that

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Speaker 8: this is going to happen. But I mean we heard

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Speaker 8: from from from Scott Bessen. I mean, that is a

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Speaker 8: risk and who knew. I mean I didn't have this

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Speaker 8: in my twenty twenty five bingo card. But this is

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Speaker 8: back on the table now and and lots of worries

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Speaker 8: and the market hasn't quite responded to it. I mean,

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Speaker 8: the NaSTA Golden Dragon is still outperforming the S and

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Speaker 8: P this year. So it's not like people are saying,

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Speaker 8: you know, this is that people aren't actually trading this yet,

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Speaker 8: but it's something that industors are you know, keeping their

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Speaker 8: eye on because any noise here could cause major jitters.

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Speaker 1: Yeah, absolutely, and I think just worth citing. You know what,

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Speaker 1: Goldman uses the words that they have in their assessment, uncertainty,

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Speaker 1: extraordinary volatility, concerns about global recession and decoupling. You know,

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Speaker 1: I think kind of reflecting some of the things maybe

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Speaker 1: that the markets are thinking about in terms of scenarios

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Speaker 1: at least. Katherine, thank you so much for your time.

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Speaker 1: Bloombig's Asia Stocks Edison, Catherine.

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Speaker 2: Ny Donald Trump's efforts to securencies far in Ukraine have

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Speaker 2: so far fallen short of their stay to Dame, but

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Speaker 2: that hasn't stopped an increase in chatter around what happens

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Speaker 2: when Russia eventually opens up again to Western companies. Bloomberg's

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Speaker 2: Russia Economy and Government editor Greg Sullivan joins us Now

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Speaker 2: for more on this story. Greg, what do we know

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Speaker 2: about what a post sanctions return for Russia might look like?

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Speaker 9: For one, right now, it's still very early in this process.

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Speaker 9: But what's interesting to note is that Russian President Vladimir

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Speaker 9: Putin has actually tasked his government with coming up with

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Speaker 9: a framework for what that kind of return could look like.

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Speaker 9: Now in Russia, among officials and companies, there's concern about

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Speaker 9: potential return of Western companies because there's been a whole

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Speaker 9: bunch of new, homegrown companies that took advantage of the

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Speaker 9: space after these Western companies exited post invasion, and they're

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Speaker 9: worried about the competition that might come from a return.

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Speaker 9: So as part of that framework, one of the proposals

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Speaker 9: is that some of these Russian businesses might actually get

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Speaker 9: a say on who gets to return to certain sectors.

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Speaker 9: Some other early proposals that we've seen include asking companies

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Speaker 9: to localize some production or even agree to technology transfers.

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Speaker 9: One of the interesting things we've heard, and we've heard

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Speaker 9: it quite consistently from officials and even Vladimir Putin himself,

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Speaker 9: is that they don't want these companies that sold at

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Speaker 9: fire sale prices. Hyundai, for instance, sold their subsidiary at

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Speaker 9: a nominal value of one hundred and eleven dollars. They

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Speaker 9: don't want them to come back in and reclaim them cheaply.

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Speaker 9: They've been pretty adamant that these companies will have to

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Speaker 9: reclaim them at market value. Nonetheless, there are signs of

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Speaker 9: interest Putin's economic envoy, Creel Dimitriev. He's been in the

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Speaker 9: news a lot lately. He said that he met with

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Speaker 9: a hundred fifty American firms that are still working in

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Speaker 9: Russia at a meeting this month. So there is still

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Speaker 9: some interest in a return to this market.

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Speaker 1: Okay, what is the perspective of Western companies then, looking

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Speaker 1: at this in terms of a potential opportunity? I mean,

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Speaker 1: how realistic is it really for firms to return now

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Speaker 1: or at some point in the future.

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Speaker 9: Well, at the moment, it's not very realistic at all.

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Speaker 9: A lot of companies are actually worried about potentially returning

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Speaker 9: and having to leave again. If we zoom out a

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Speaker 9: little bit. On the geopolitical frontors there hasn't been much

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Speaker 9: apparent progress and the peace talks attacks have still continued.

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Speaker 9: The war is very much ongoing, and you know, one

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Speaker 9: Kremlin official we spoke to is very explicit. He said

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Speaker 9: that nobody has been knocking on the door yet. I

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Speaker 9: would note, however, that there are still companies that never

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Speaker 9: fully left. Pepsiko, for instance, is still a player in

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Speaker 9: the dairy and milk market in Russia. Some foreign lenders

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Speaker 9: are still present. But even for companies that are still there,

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Speaker 9: they're still wondering what will return to full operations. Potentially

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Speaker 9: look like or even being able to sell and finally

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Speaker 9: exit again, as some of them have not been able

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Speaker 9: to in the current market situations. So for now, what

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Speaker 9: we see is companies doing a lot of due diligence

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Speaker 9: but not planning an immine return. It's very clear that

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Speaker 9: risk reward calculations have changed from the nineties and the

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Speaker 9: two thousands.

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Speaker 2: What about the buyback options that some companies had when

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Speaker 2: they sold their assets in Russia.

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Speaker 9: Well, there these were really interesting. Some of the big

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Speaker 9: Western companies when they were exiting and selling their assets,

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Speaker 9: they included these buyback clauses, these options to be the

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Speaker 9: first buyer or potentially the right of first refusal. One

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Speaker 9: such company was actually McDonald's, but McDonald's has had a

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Speaker 9: very successful successor. The franchisee who bought it. He started Vakusna,

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Speaker 9: and it's actually seemingly done quite well, at least on paper.

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Speaker 9: Last year they doubled their revenue in ruble terms from

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Speaker 9: pre war levels. So you know, even with these buy

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Speaker 9: back clauses that some of these companies have included, it's

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Speaker 9: not entirely clear those will even standard work. A lot

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Speaker 9: of these from one companies, they have a say, in

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Speaker 9: who gets to return, that might put up obstacles to

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Speaker 9: the bad back clauses, or they might impose onerous conditions

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Speaker 9: on the returns. So even with them, it's unclear how

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Speaker 9: they will work, but definitely interesting that many of these

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Speaker 9: companies took that percussion.

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