Asia’s ‘Sell USA’ Moment, SpaceX Starship Destroyed, Rome’s 'Eighth King'
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Bloomberg Audio Studios. Podcasts. Radio. News. This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Wednesday, the 28th of May in London. I'm Caroline Hepker. Asia faces its sell America moment as some of the world's largest money managers tell us an unwind is just getting started.

SpaceX Starship rocket disintegrates during a test flight in the latest setback for Elon Musk's Mars ambitions. Plus, a special report on the Italian billionaire tycoon trying to block a tie-up between Generali and the French asset manager, Nautixis.

Let's start with a roundup of our top stories. Asian investors have told Bloomberg that they are rethinking their previously bullish approach to US assets. The move has been driven by concerns over the US budget deficit, political polarisation and the impact of President Trump's policies on the US dollar. The moves could lead to a significant unwinding of

Asia's $7.5 trillion worth of investments. Money managers have told our rates reporter, Ruth Carson, that this is a big change. So almost unanimously talking to people across markets, the message is that Donald Trump's trade war, 2.0, is only accelerating the process of de-dollarisation and

which in a way is jargon for people turning away from the dollar and finding alternatives. Ruth Carson speaking there. It follows a sell-off in the dollar that has already seen a tyrannies insurers, for example, reporting a $620 million loss in April alone.

Rajiv De Mello, a portfolio manager at Gamma, summed up the view of many people who spoke to Bloomberg, saying, quote, markets are at an inflection point, witnessing the birth pains of a new regime in finance. And you can read today's report, our big take report on Asia's sell America moment right now via the terminal or at Bloomberg.com.

And in related news, Japan's latest auction of 40-year government bonds has seen its weakest demand in almost a year, driving the yield on the country's 30-year bonds up by 10 basis points. The outcome risks fueling further volatility in global debt markets amid concerns that rising government spending could push deficits into dangerous territory. Japan's debt sale followed aggressive upward pressure on global borrowing costs last week,

which drove up yields on long-maturity debt from the US to Germany and elsewhere. Bloomberg has learned that Citadel Securities has a reported record profit and trading revenue in the first three months of the year, buoyed by recent market volatility. Bloomberg's Ewan Potts has the details now.

The uncertainty emanating from the White House has been a boon for banks and trading desks in the first quarter. We understand market-making giant Citadel has posted $3.4 billion in net trading revenue in the first quarter, a gain of roughly 45% on the same period last year.

Net income rose 70% on those increased volumes as investors look to rebalance their portfolios. The bumper quarter means Citadel's trading turnover topped that of some long-established banks, including Barclays and UBS. In London, I'm Ewan Potts, Bloomberg Radio.

President Trump has warned that Vladimir Putin is, quote, playing with fire as the US president weighs imposing sanctions on Moscow. Speaking on his Truth Social platform, Trump also stated that he had already prevented bad things from happening to Russia. Evelyn Farkas is executive director at Arizona State University's McCain Institute. She says the White House may have miscalculated the Russian leader's intentions.

Clearly, Donald Trump thought that Vladimir Putin was a guy who was willing to make a deal. Putin will make a deal, but only on his terms. And I think what we're going to find out, we're going to see our president realize that Putin doesn't want an end to this war.

The McCain Institute's Evelyn Farkas speaking there. The news comes as the Kremlin has escalated its aerial attacks against Ukraine in recent days, despite the White House urging a ceasefire in talks mediated by the Vatican. So far, President Trump has resisted efforts led by Senate Republicans and European leaders to intensify measures against Russia, despite saying over the weekend that he would absolutely consider new sanctions.

The U.S. Homeland Security Secretary is backing a nationalist opposition candidate to win Poland's upcoming election. Addressing a conservative gathering in southeastern Poland yesterday, Kristi Noem said that a victory for Karol Nawrocki of the Law and Justice Party would ensure close ties with the United States. You will continue to have a U.S. presence here.

a military presence, Fort Trump, that we can work together for the security of both of our nations. That is what we need Poland to do now. We need you to elect the right leader.

US Homeland Security Secretary Kristi Noem speaking there. She went on to criticise Navrotsky's opponent, the former Warsaw mayor, Rafal Czaskowski, calling him an absolute train wreck of a leader. Her intervention is the latest in a round of consistent efforts...

to sway European elections in favour of nationalist and right-wing candidates by the Trump administration. Poland's elections are set to take place on the 1st of June. Recent opinion polls show both candidates on equal footing.

SpaceX's latest Starship rocket suffered a leak during a launch and disintegrated in space. First, the booster rocket exploded. Then, here is the moment on the SpaceX feed that the rocket attempted to re-enter the atmosphere.

and it's going to make an uncontrolled reentry. Important to note, this is a contingency that is in essentially a tumble. We have lost that attitude control. So Starlink, when it's able to connect, able to feed this down, we are at the phase where we would expect entry to start within the next minute or so. So we are entering uncontrolled.

The Starship rocket then fell to pieces into the Indian Ocean. It is the third setback in a row for Elon Musk. Musk has recently declared SpaceX will send a Starship rocket to Mars carrying robots as soon as next year, which experts say is an incredibly ambitious timeline.

Now to some news here in the UK. The government says that it will cut the planning hurdles faced by small home builders. The move to reduce bureaucracy comes as Deputy Prime Minister Angela Rayner said that the official target of building 1.5 million new homes by the government was a stretch. Here is Bloomberg's James Walcock now.

Building 1.5 million homes in five years was always an ambitious target for the Labour government. The UK hasn't built houses at that rate since the 1960s. But since Labour came to power last year, UK building activity has contracted at the sharpest rate since the coronavirus pandemic.

That's driven by higher interest rates and a shortage of planning resources. The government now wants to slim down the rules for small builders, but the sector is still questioning how the government will reverse a 60-year decline without additional investment, incentives or major deregulation and planning reform. In London, James Wilcock, Bloomberg Radio.

And those are our top stories for you this morning. Let's have a look at the markets. U.S. and European stock futures edging lower. Concerns about the fiscal health of the U.S. economy. We also had a disappointing 40-year bond auction out of Japan. The sale had been seen as quite a key test for long maturity bonds. Of course, we've seen big moves in the bond markets about 1%.

developments when it comes to increased government borrowing in places like the U.S. and elsewhere. Looking at JGB yields this morning, 293 for that 30-year long bond, up 6.5 basis points. U.S. yields up more modestly, 2.5 basis points. So, again, the long bond in the U.S. trading under 5%, 497. As for Asian markets, actually, they remain

A little bit resilient. Nikkei 225 up by a quarter of 1%. The Kospi is up 1.2% this morning. We do have Nvidia earnings, which will be closely watched after markets close here in Europe tonight. We'll have more on that in just a moment. So those are the markets. In a moment, I'm going to bring you the latest on a move away from U.S. assets. Major story that we're covering for you today. Plus also the story of an Italian business.

billionaire who wants to revive Generali by preventing a big deal. But before we get into those, road trip anyone? Chances are you'll be behind the wheel at least a few times this summer, surely to visit some friends, escape the city, maybe get over to the continent or even further afield. A big open road trip across America. Sounds great. Well, Hannah Elliott's

has the best advice for you from the car nerds, of course. She says, think about your passengers, who you're travelling with, choose the scenic route, sort your playlist, use a paper roadmap, of course. She says it's good for your cognitive health. She's got a whole piece that is packed full of really great advice. She's also got lots of different apps that she recommends if you're going on the road.

Breaking it down into beginning, middle and end and then picking maybe a fantastic meal to have at the finish. Yes, it was inspiration for maybe one of my road trips over the summer. She said it could be a picnic, oysters. Think about the view. The route is as important as the destination. Anyway, I'll leave you with those thoughts this morning from Hannah Elliott. And I'll add a note to where you can find that piece in our show notes today. But it was a lovely story about what makes

Delights may be in store for us over the summer holidays, perhaps. Now, let's think about another major story today. It could be the start of a massive global shift. Asian investors are rethinking their strategy on investing in U.S. assets. Joining me now to discuss is Bloomberg's Asia Wealth Reporter, Diana Lee, on today's Big Take story.

Diana, good morning. Firstly, I'd like to sort of re-rack and think about how we actually got to this point in the first place.

Yeah, good morning, Caroline. So absolutely, for many years, Asia's big exporting nations had a pretty straightforward system with the U.S. So they would sell a massive amount of products to American consumers and businesses. And then with all these U.S. dollars they earned, they would typically reinvest a lot of that money back into American financial assets, you know, typically U.S. government bonds and company stocks.

And this whole thing really got going after the 1997 Asian financial crisis. And that was a huge shock. It really taught these Asian economies they needed a strong cushion of foreign money, especially the US dollars, to protect themselves.

So back then, earning the dollars from the exports and then parking them into what they saw as a safe U.S. assets became the key. And this flow of money was at its highest in 2004, back then when about $354 billion U.S. dollars from Asia went into U.S. assets in just that year. And at that point, it seemed like

Almost every dollar earned from U.S. sales went straight back to American markets, which eventually led to the Asian investors holding about $7.5 trillion U.S. dollars in U.S. investments. I mean, it's such a huge sum, isn't it? The mind boggles. But we have started to see this massive trend really beginning to unwind and some pain already.

Yeah, absolutely. We're definitely seeing some clearing signs, especially even before the latest trade discussions. The amount of the Asian money flowing into the U.S. has already slowed down from its peak. By 2024, only about 11% of the money Asia earned from its trade surplus with the U.S. was being reinvested there, which is a big drop. And we see that big players are also making moves.

You know, Japan's largest life insurer, Nippon Life, is looking for alternatives to U.S. bonds. And a major Australian pension fund also said that U.S. investments have already probably peaked. And China has been steadily cutting its holdings of U.S. treasuries.

So the impact could be a lot of financial pain. For example, when the U.S. dollar dropped after the tariffs were announced, we see Taiwanese insurers lost about $620 million in just one month. And then we see this sudden surge in the Taiwan dollar, threatening billions more losses for the unhedged U.S. investments.

And we also see the yen carry trade unwind, where investors borrowing cheap yen to invest in the U.S. assets, they got squeezed when the yen suddenly strengthened. And that's the ripple effect we see through the global financial markets. Yeah. The thing is, though, part of this unwind is about whether Asia can pivot to more domestic consumption. And this goes to the idea about whether this trend is actually here to stay. Yeah.

Yeah, so if this trend really picks up steam, we could be talking about a huge amount of money moving around. And some analysts assume it's about 2.5 trillion US dollars we're talking about. In terms of where could it go, emerging market currencies could get a boost. And we might see some investing flowing into the stocks in places like Europe or Japan. And we see countries like Australia and Canada could also see more interest in their debt markets.

And Japan, for instance, is already seeing record foreign money coming in. And for Asian countries themselves, a big long-term change would be to get their own populations to spend more. China, for example, for so long they've been focused on saving and exporting. And if China can boost its home domestic consumption, they would be less reliant on any single export market and better able to handle these kinds of global financial shifts.

Yeah, and it does seem to be perhaps we are in the foothills of a major change. Diana, thank you so much for being with me this morning. Bloomberg's Asia Wealth Reporter, Diana Lee.

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Now let's go to Europe. There is a boardroom battle going on for Italy's largest insurer and Europe's third biggest with an Italian construction tycoon weighing in against a partnership between Asicurazione Generale and the French asset manager Natixis. And joining me to explain this is Bloomberg's Alessandra Migliaccio. Alessandra, good morning. Good to have you with me. Now, who

exactly is this Italian billionaire? I'll have a go at saying his name. Francesco Gaetano Caltagirone, is that it? Yes, it's Caltagirone, and he's quite a character. Caltagirone is 82, first of all, so he's still very, very much involved in Italian politics, in Italian banking, and in his family business. He built an empire starting with construction in

back in the 60s. And in Rome, for example, they call him the eighth king of Rome because it's said that anyone who doesn't live in the center probably lives in a house. But it's no longer just construction. It's also a media empire. He owns Rome's biggest newspaper. He has influence over a lot of people. And it's also, you know, banking and

finance at this point because he'd become an investor with all the money that he's built in these years. So now Caltagirone is someone to be reckoned with, and he's a figure that's starting to upset equilibrium in northern Italy, which is more known for its involvement in banking. He's kind of a new center of power in Italy right now.

Hmm, that's interesting. So why this deal in particular? Why is he challenging it? And what does he envisage instead? So being 82, Castagirone tells us in the interview that he's not really interested in

low-level politics or small-time stuff. He has a bigger vision, and his vision is one that's linked to a certain type of Italian capitalism, which is kind of a national capitalism. So it goes hand-in-hand with the state, it goes hand-in-hand particularly with this government, which also has a nationalistic view of finance. And what he says is basically that he believes that the Siciliani Generali, Italy's biggest insurer, one of Europe's

key insurers, needs to remain Italian. He doesn't want it or pieces of it to fall into the hands of foreigners, even if those foreigners are merely our friends, allies, and common co-Europeans in the European Union. He is concerned because Generali has a huge pile of Italian sovereign bonds

36 billion, and he'd rather those stay firmly in Italian hands in case of financial issues. Now, this is an ongoing issue in Europe. We know that the Germans don't want, for example, Italian bank Unicredit to take over Commerzbank. It's not just the Italians, but it's a certain vision of capitalism. And not everyone has that vision. Of course, even within Italy, some people

People say, why would that be a problem? In the end, insurers do what's good for the shareholders. They do what's good for business. For example, French BNP Paribas owns Italy's BNL Bank, which also contains government bonds. And there's never been a problem with that. They haven't sold Italian bonds unreasonably. Everyone just takes care of business. So there are these two visions of capitalism, and his vision is a national Italian one. Yeah.

Yeah, which in some senses is very much the opposite of what people see as the benefits coming from the European Union and all of these countries binding together and having a much more open and free kind of financial markets breaking down those barriers. So,

I wonder where you think this story is going to go next, Alexandra. It's interesting because, as you say, there's a broader picture and part of the story, which is what is the European Union, you know, where is it going if the Germans don't want only credit to take Commerzbank, the Italians don't want the French credit,

involved in their insurance business, et cetera. So that's very important. And as far as what happens next, we sort of have to see what's going to happen in general in Italy's M&A scene, because there is a lot going on right now. I mentioned Unicredit. They're bidding for BPM, which is another Italian bank. We have Montepaschi di Siena, an Italian bank,

in which Caltegrino has a stake. So I encourage you to look at our story. We have a huge graph that explains all this. And it's bidding for Mediobanca, which is Italy's most important investment bank. And why is that important? It's important because they, in turn, own a stake in Generali. So it all goes back...

to Generali. I know it sounds a bit contorted, but it's actually, once you look at it, it's actually reasonable. And what we need to see is where all these pieces fall into place in the coming months. And then we'll be able to see who has the upper hand and whether Francesco Gaetano Calcagironi can actually get his way and keep everything Italian.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com.

Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa, play Bloomberg 1130. I'm Caroline Hepke. And I'm Stephen Carroll. Join us again tomorrow morning for all the news you need to start your day, right here on Bloomberg Daybreak Europe.

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