Stocks Advance as Trump Walks Back Intent to Fire Fed's Powell
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Bloomberg Audio Studios. Podcasts, radio, news. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. So we saw stock index futures jump and the dollar strengthen. That was after President Trump said he had no intention of firing Fed Chair Jay Powell. I would like to see him...

be a little more active in terms of his idea to lower interest rates. It's a perfect time to lower interest rates. If he doesn't, is it the end? No, it's not. But it would be good timing. It could have taken place earlier.

Coming up, we'll discuss the latest on Powell with Tom Bruce. He is macro investment strategist at Tanglewood Total Wealth Management. But we begin this morning in the Asia-Pacific. Joining me now is Ekaterina Bigos, CIO for Asia X Japan Core Investments at AXA Investment Managers. Ekaterina joins us from our radio studios in Hong Kong.

Ekaterina, thank you so much. There has been so much happening in markets these days. Obviously, I think a lot of what we're seeing is tied to President Trump, both in word and deed, just driving so much of the price action. We know the tariff policy has been extremely disruptive, to say the least, and until today, concerns over Fed independence.

In the time that you have been in the market, have you ever seen a level of uncertainty this high? It's fair to say that it's quite unprecedented. I mean, if you look at just even the magnitude of the tariffs that were implemented, obviously, on the 2nd of April, this has been of a scale that is unprecedented, that has led to an escalation of uncertainty from corporate sphere, but also that continues today.

because we have this 90-day period. I would say the peak of that probably uncertainty is somewhat past us. And again, the resolution, the quicker we have a positive resolution from some of the trading partners or key trading partners around the tariff negotiations, I think will be positive for the markets. But at the moment, we're still in this period of unknown. We hear some

positive vibes around negotiations with Japan, potential Korea, Vietnam, but we haven't seen a conclusive deal yet. So I think markets seeing a deal that is positive and also that indicates of how that administration will negotiate

with partners, I think will give some at least direction to the markets or at least hopefully a positive outcome, a reaction from that. But the bigger problem has got to be China. And we recently heard from Beijing kind of a warning here against striking trade deals with the U.S. that could hurt the interest of Beijing.

Give me your sense of where this is going to go in terms of Washington and Beijing and what you are beginning to price in or discount, as it were. Ultimately, I think what the ramification of that is, is for ASEAN. I think the ASEAN story is starting to be more complex because, again, the ASEAN have benefited from China FDI flows, redirection of some trade.

And certainly, it's the largest partner. If you look at the 10 top partners of trade for U.S., seven are sitting in Asia, right? So, them negotiating a deal that satisfies both countries, I think, is very complex.

And ultimately, that is more complex for those countries rather than, say, for U.S. and China, which, again, they're adversaries. But ultimately, it does pose more complexes for those regions. So markets seem to be questioning America's standing as the preeminent destination for global capital. Have we kind of reached a critical juncture here? Has there been a level of disruption that may be challenging to reestablish, or is that saying too much?

It is probably too early to say so-called U.S. exceptionalism is done. I mean, ultimately, you have to look at where the biggest companies are, where is the biggest capital markets, where the most liquid security is. Again, the challenge at the moment is policies and administration, which...

has put a lot of uncertainty around directing the capital into the U.S., but ultimately the fundamentals of that market have not changed in terms of the solidity of it. And ultimately when you say for investors, U.S. steel is the largest part of an asset allocation for a lot of the investors. So you do have to look at U.S. Again, some appetite shifts

are likely and again the higher the uncertainty, the more likely that we're going to see some reallocations away from U.S. But to say that this is again the story of U.S. being still a leading economy and

leading companies of course of the world, I think is still very much plausible and still very much present. One of the interesting developments recently has been the weakness of the dollar. And ironically, it's going to help the U.S. strengthen its position in some of the trade negotiations and make life, on the other hand, difficult for some of the trading partners in Asia. Will that not happen?

Well, I mean, that was the intention. Again, this is probably unintended consequence of some of the measures that the administration has put in place. But they always wanted a weaker dollar to, again, spur some competitiveness of the U.S. manufacturers. So, again, some dollar weakness is not a negative for the U.S. economy, particularly for the exporters.

A destabilization, again, which is, again, not a central scenario of the dollar. I think this is probably more a bigger risk where you can see a floating of dollar assets. But again, we're not yet in that scenario. Some weakness, as you said, it does bring competitiveness to the U.S. trade, particularly that the ambition is for the administration to bring some more manufacturing back into U.S. So maybe we can agree that the tariff situation has the potential to damage the Chinese economy, maybe at least in the short term.

It's unclear, though, whether or not the equity market in China would react accordingly. And I'm wondering whether you get a sense that Chinese equities are somewhat isolated from tariff exposure.

Yeah, I think I'll break it down in two. And I would say I'll probably refrain to say that the tariffs will damage the U.S., the Chinese economy. It does complicate the Chinese economy. But if you look at the state of Chinese economy coming into this type of conflict that we're seeing at the moment, escalation,

The structural and the macro problems were there and they're still there. Ultimately, what China needs to do before this escalation of tariffs, they had to do, and now it's becoming even more an urgency, is to redirect its economy to become a lot more consumption. So Chinese needs to consume more. And that is already been the sphere of focus for the policymakers. Now,

That continuation, how successful they achieve that, will be key in how they're going to succeed through this period of uncertainty. And we've seen already various measures being put in place, or at least expectations for those measures to be put in place. When you look at the coupling for the equity market, and this is again coming down to the themes, or I say what drives at the moment the sentiment, but also the outcomes,

of investment is, of course, tariff and tariff uncertainty. Policy is one of them. So policy. And the third is tech innovation. And when you look at China and how the market has performed, at the beginning of the year, the excitement around China has been driven by tech. So the AI innovation that we've seen in China, which has scope to provide productivity growth longer term, but also immediately, I think, has scope to bring some efficiencies, particularly in places like consumer markets.

online sales and so on and so forth. When it comes to, and that's one sphere that has suddenly provided that rally, which has been very narrow, but of course supported the market. Then the other one is policy expectations. And again, I want to say expectations because

policy has been framed or the policy direction has been framed by the U.S., but the expectations are that because of these tariffs, they'll be a lot more forceful, they'll be a bit larger, and they'll be quicker. And I think the expectations of that policy coming in is driving some of that resilience in the equity markets for China. So quite a decoupling in terms of where that's coming from. It's interesting that you mentioned technology. There was a tremendous amount of positivity going into kind of the situation with the tariff from the China side.

AI has been a big part of that story. I get that. Here in the States, there's a question mark around artificial intelligence lately. Wells Fargo had a note the other day talking about Amazon pausing some of its data center leases. And we've had a story a while back about Microsoft reassessing the money that it's allocating to the AI spend, particularly cloud-related infrastructure build-out. Is there a risk now that we're going to see, even in China's case,

that maybe there was a little bit too much overspending and that we need to see a recalibration? Well, I think that it's not conclusive as of yet, but certainly the deep-seek innovation in China has led to questions around the capex that some of this magnificent seven has deployed in

into into I development ultimately if you look at the stage we are in terms of that development it's still very much at the stage one where I'll a lot of focus is still on training the models so which still requires a lot of data and it still requires a lot of intensity now what energy intensive in intensity train those models

in terms of why the deep-seek has questioned that is that the inference or the way the model respond to certain question is deemed to be a lot more effective, that uses, it's less intensive in terms of using the cloud, intensive use of energy. And I think that still poses a question in terms of

how much is needed for that development of AI. Ultimately, the stage, a longer-term benefit of AI doesn't sit into stage one. We do expect the stage two and three. It's about applications. And I think that's where the market is going to pay a lot of attention, is how do you monetize

Other applications started to emerge and we see them some again emerging in China. We see some of them in the US, but modernization and indications that those are starting to emerge in a much more broad way across the consumer, across the different sectors. I think that will be a positive thing.

catalyst to the story. So we're talking here about software, but let's imagine it from the different side of the coin, which is the hardware side, and which is one of China's vulnerabilities, particularly when you consider semiconductors. Is China got the ability right now to innovate in a way that could put it on a level playing field with a company like NVIDIA?

I mean, look, I think the momentum they've had and the innovation they had so far, it gets them probably to a certain level. And I think it has sufficient momentum at the moment to work at the level and at the stage, as I said, where we are at the moment. So we haven't seen a broadening of the application cycle. We haven't seen a lot of

of usage yet being put in place. Again, we see in the periphery, we see an announcement, particularly, as I said, in China, in consumer companies, where what they're doing is they have AI models to create much more products

and efficient consumer experience, right? So, and I think that could lead to increased consumption, increased sales, and has a positive impact. The broadening of that, I think, has, again, the scope for AI is to broaden into a sphere like healthcare, biotech, you know, even industries. That has not happened yet. And I think probably that stage when the broadening is happening, China might face challenges. But I think at the moment, at the stage we're in, I think,

and where they're looking to direct the economy, I think it's still having a positive impact. Ekaterina, thank you so much for joining us. That is Ekaterina Bigo, CIO for Asia X Japan Core Investments at AXA Investment Managers, joining us from Hong Kong here on the Daybreak Asia podcast. Want to understand trends shaping the global investment landscape?

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where money means more. Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. Joining me now is Tom Bruce. He is macro investment strategist at Tanglewood Total Wealth Management. Tom is on the line from Houston, Texas. Tom, thank you so much. It's always a pleasure. It seems like President Trump has really softened his tone when it comes to this idea of replacing the Fed chairman for being too slow to cut interest rates.

And there seems to be a bit of relief right now if you look at the price action that we're seeing in late trading. Do you really think that the president has or his advisors have their thumbs on the market as a way of gauging sentiment right now? Absolutely. I think so. I think some advisors more than others, Scott Besson, clearly, and President Trump, I believe, is taking a clear pulse of the market. And, you know, the type of news that we've seen this evening is

is exactly what we want to see for the markets. We want to see more assurance that the Fed chair is secure in his position. It's something that we wouldn't have questioned until recently. And secondly, that we have some resolution to China because that's such a big part of this tariff equation. No doubt about that. Today, Bloomberg News reported some closed-door comments from Treasury Secretary Scott Besant

And he was quoted as saying the standoff with China is unsustainable and he's expecting the situation to de-escalate. That seems to be kind of a calming message. Do you think that we're embarking on some type of resolution here in the near term? Or do you think this trade war, if we can call it that, has the potential to drag on for a while?

Unfortunately, my expectation would be for this to drag on for a while. A week or two ago, the Chinese communicated that they were willing to come to the table if they were being treated with respect. And I think that's what we've seen from the administration today between Scott Bess's comments and Donald Trump later in the day commenting that he expected things to go well with China and a 140% tariff wasn't going to stay in place. So that was very encouraging.

So we had a lot of positivity in the equity market today. Volume, though, was a little on the light side. Do we make too much of this when you look at price action where volume is light? I know things can become a little exaggerated. Do you want to kind of hang your hat on the S&P kind of turning the corner maybe and picking up two and a half percent today today?

Is today's price action a big deal or does it kind of just fit into this puzzle that we've seen recently where, you know, there's been so much volatility up one day, big down, big the next day. It 100% hinges on tariffs, right? So we can go up or down quite a bit, but, uh,

The low we put in a couple weeks ago, that looked pretty solid from a technical standpoint. But if we don't have progress, if we don't have some trade deals announced, it's not going to hold. So we needed to continue to see progress. I think the information we got today from the administration was very constructive, but we need to see follow-through with some real deals coming through in the next week or so.

I don't know whether you can comment on a specific stock, but I want to talk briefly about Tesla because tonight the company came out with earnings a little disappointing. But then on the call with analyst Elon Musk said he's going to be stepping back from his role at Doge next month. And there seems to be a lot of relief right now in the way in which the stock is behaving. It's up more than 5%.

in the late U.S. session, and it's helping to give a big boost to the E-mini futures contracts. Talk to me a little bit about the role that Musk has been playing in policy and the extent to which you view this, maybe you don't, as a distraction for Tesla shareholders and the stock.

Well, we tend to not focus on individual stocks, but from my perspective, it is very welcome to see more of a focus on Tesla. Elon Musk is a very busy man. He has multiple businesses, and now he's an administration at Doge. It makes you wonder how he's covered at any time for Tesla. I know he has to some degree, but

seeing a renewed focus on it is certainly welcome from a shareholder perspective. And despite the numbers being bad today, I think there's still plenty of encouraging catalysts on Tesla's, the horizon for Tesla. If you look at what they're doing in robotics and full self-drive, there's a lot of different things that are

that you can be excited about that aren't necessarily showing up in the balance sheet today. So I think we can agree that the level of uncertainty in markets right now has been extreme. How are you navigating this terrain right now, Tom? Are you able to discover opportunity or is the risk too great right now that you're more inclined to kind of step aside and let some of this dust settle, at least in the near term? You're certainly right that it's a time of extreme uncertainty. However,

This happens. It's the financial markets. When we were going through 2008 and many other times, we didn't know how it was going to end up then either. So from that perspective, it's a new problem the market's dealing with now, but it's a recurring theme over the years is that we have a lot of volatility. And I think you have to

have to be optimistic at the end of the day and believe that eventually innovation and the free markets will win out and the markets will go higher. And at the end of the day,

investors were rewarded. You were talking a moment ago about being laser-focused on the tariff story. That may put a big question mark over the equity market. Is there more opportunity right now in fixed income, do you think, than on the equity side? That's a distinct possibility. This sell America trade that we've seen where U.S. Treasuries and U.S. Dollar have not been a safe haven as of late, that's certainly a new development that I would like to see reversed.

We'd like to see that on a bad day in the markets, as risk off, the treasuries are being purchased and people feel confident in the US government.

And from what I've seen over the past three weeks, including in the last few days, it's still not quite the case. So we really need to see that relationship change and in a meaningful way. Once that's restored, we could see treasury yields come back down quite a bit. So to what extent are you forecasting a recession? Maybe that's not even in your outlook right now. But I'm wondering, because of the conversation around weaker growth,

And the question over prolonged kind of tariff policy that may hold back a lot of revenue, I'm wondering whether or not you're seeing a distinct possibility that we could see contraction in the American economy. I don't think there's much uncertainty about it. If we don't have trade deals, there's going to be a recession. I assume we're at the beginning of it now. But

As far as the trade deal is being worked out and avoiding a recession, that's really hard to say. Enough damage may have been done at this juncture to where we're in a recession anyhow. And I think a lot of other market participants are, you know, we have our eyes glued on hard data because all the survey data we've seen lately has been terrible. So, you know, particularly the labor market, if we started seeing jobless games rise,

That's going to be certainly a red flag for us entering a recession. What about opportunities offshore? Given everything that we've been discussing, potential challenges for the American markets, do you want to be exposed more to what's going on in Asia right now or to Europe? Or is that something that you're completely ignoring because there are also risks in those jurisdictions?

Well, there are. I still feel like the U.S. is probably the best place long term because we really lead the world in terms of innovation. However, over the medium run, you can see places like Europe and Germany in particular that are

or unveiling fiscal stimulus combined with monetary stimulus, that's a pretty potent combination. So you could see select economies in Europe do exceptionally well. I also feel like Southeast Asia has perhaps a unique opportunity here if at the end of the day, after all this has worked out, tariffs on Southeast Asia are somewhat

less severe than they are in China, then on a relative basis, they may really stand to benefit from this with trading in the U.S. going forward. Tom, we'll leave it there. Thank you so much for joining us. He's Tom Bruce, macro investment strategist at Tanglewood Total Wealth Management, joining us from Houston, Texas, here on the Daybreak Asia podcast.

Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the stories shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krisner, and this is Bloomberg.

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