US-China Talks Advance, Tough UK Migrant Rules, Traders Fuel Euro Rally
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This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Monday the 12th of May in London. I'm Caroline Hepke. And I'm Stephen Carroll. Coming up today, stock markets gain after Washington and Beijing offer positive signals on their weekend trade talks, with more details expected today. The UK's Labour government moves to rein in migration amid growing support for Reform UK. Plus, it's just the beginning. Traders bet the euro's ascent is a

tidal wave in the making. Let's start with a roundup of our top stories. Stock markets are rising after the US and China announced they had made headway in two days of trade talks in Switzerland. While neither side disclosed specifics, both agreed to establish a new framework for negotiations, led by US Treasury Secretary Scott Besant and Chinese Vice Premier He Li Feng. Speaking after Sunday's talks, Besant struck an optimistic tone.

I'm happy to report that we made substantial progress between the United States and China in these very important trade talks. First, I want to thank our Swiss hosts. The Swiss government has been very kind in providing us this wonderful venue. And I think that led to a great deal of the productivity we've seen.

We will be giving details tomorrow, but I can tell you that the talks were productive. Besant says the U.S. plans to share more details today while He Li Feng promised a joint statement. It comes after President Trump increased tariffs on Chinese imports to 145% and China responded with tariffs on U.S. goods of 125%.

The UK will make it harder for migrants to stay in the country in the latest attempt to shrink Britain's record levels of net migration. The Labour government plans to change visa rules, toughen up English language tests and tighten rules on overseas recruitment. Home Secretary Yvette Cooper says it'll help to bring the numbers down.

Those changes, the combination of just those low-skilled visa changes and also the care worker changes together, that is a reduction of probably in the region of up to 50,000 low-skilled worker visas, a reduction in the course of this year alone. The Home Secretary's new policy comes after years of debate around Britain's high migration levels.

Support for the government has fallen to a five-year low in opinion polls. YouGov's latest poll has the party at 22% and the anti-immigration reform UK party taking the lead with 29%. Vladimir Zelensky says he will be waiting for Vladimir Putin in Turkey on Thursday. The leaders of Russia and Ukraine are being pushed to begin peace talks by the United States and Europe. Ukraine's president says Kyiv is ready to end this war.

Ukraine, we have absolutely no problem engaging in negotiations. We are ready for any format. I will be in Turkey this Thursday, the 15th of May, and I expect Putin to come to Turkey as well. Zelensky's planned trip comes after US President Donald Trump insisted the two leaders meet despite Moscow's reluctance to agree to a 30-day ceasefire.

The UK and other European countries say they're reading a dramatic increase in sanctions on Russia should Putin not engage with negotiations. A ceasefire has been agreed between India and Pakistan after some of the worst fighting in more than half a century. US President Donald Trump is reported to have angered key Indian officials on Saturday by announcing the agreement on Truth Social before they could.

The way the ceasefire unfolded may have helped set the stage for even more intense fighting down the road. In Pakistan, news of the ceasefire was met with fireworks and celebrations. The head of India's foreign ministry, Vikram Misri, issued a statement over the weekend. It was agreed between them that both sides would stop all firing and military action on land and in the air and sea.

Instructions have been given on both sides to give effect to this understanding. The Director General of Military Operations will talk again on the 12th of May at 12:00 hours.

That was India's Foreign Secretary Vikram Mishri speaking there as both sides have reported drone attacks on their borders with Kashmir just hours after the announcement was made. The US and Iran have agreed to continue talks about the Islamic Republic's nuclear programme. The news comes after discussions over the weekend were described as encouraging by Washington and useful by Tehran. However, India's...

Excuse me, however, Iran's foreign minister reiterated that Iran's ability to enrich uranium, a key sticking point in negotiations, isn't up for discussion. Oman's foreign minister, who'd mediated the talks, says a fifth round of deliberations will take place after the delegations consult with their respective leadership.

President Trump is heading to the Middle East today, aiming to tap into billions of dollars in potential investment. The visit to Saudi Arabia, the United Arab Emirates and Qatar comes as ABC News has reported that the Trump administration is set to accept a luxury Boeing jet from Qatar's royal family. Reports suggest that the aircraft may be the most valuable gift ever received from a foreign government in the U.S.,

Speaking on Truth Social, President Trump suggested the 747 jet would be a gift, quote, to replace the 40-year-old Air Force One temporarily after delays prevented Boeing delivering two new versions that were ordered during President Trump's first term. Pharmaceutical stocks have dropped after President Trump announced plans to sign an executive order later aimed at significantly reducing U.S. prescription drug prices. With more, here's Bloomberg's Tiwa Adebayo.

While the details remain unclear, the president claims the order will require that Americans pay no more than the lowest price charged for the same medication in any other country. In a post on Truth Social, Trump said the move could lower U.S. drug prices by as much as 80%. Americans currently pay the highest prices in the world for prescription medications.

However, drug makers argue that such reforms would cut into their revenues and undermine the development of breakthrough therapies that could extend and improve lives. In London, Tiwa Adebayo, Bloomberg Radio.

stocks rising on this trade war de-escalation. We await further news, of course, today. But at the moment, S&P 500, E-mini futures are off to a flying start, up by 1.5%. NASDAQ futures up almost 2% this morning. US stock city futures also up 0.8%. Germany's sector down

index closed at a record high on Friday, recovering after a major slump in March. The dollar is also strengthening against traditional havens. So, the Bloomberg dollar spot index up a tenth of 1%. You've got global bonds in retreat. Ten-year U.S. yields up a couple of basis points. Gold has also tumbled. We're down 1.4% currently. Shares of Asian pharmaceutical companies have fallen on this idea that we'll perhaps

see President Trump trying to slash US prescription drug prices. And the India-Pakistan truce sees Pakistani stocks surging 9.2%. Overall, India's nifty 50 jumping 3%. Well, in a moment, we'll bring you more on what we learned from those US-China trade talks, plus why some traders are betting on the euro continuing to strengthen.

But first a word on another story that caught our eye this morning. It's that time of year where you're starting to think maybe about your summer holidays after some good recent good weather. This unfortunately falls into the category of articles that I cannot avoid reading and then feeling bad about all of my choices when it comes to travelling. This is travel hacks from what Bloomberg pursuits.

are dubbing a group the Distinguished Travel Hackers. Yeah, they're absolutely brilliant. So this is Damon John, who's one of the Shark Tank judges. And he does, I just can't believe how many miles he travels. 400,000 miles in the air every year. It's been something like 250 days a year travelling.

He says you always must carry a silk scarf on flights. I totally sympathise. Double book connections and just stay hungry, even if you feel jet lagged. I can't agree with that one. No, that's a step too far for me. Silk scarf, fine, but I have to eat. Right. You could read more on that at Bloomberg.com slash pursuits.

Well, let's bring you more on our top stories now. China and the US have both said that this weekend's trade talks produce substantial progress. It's the clearest sign that further escalations of the trade war may be avoided. They've promised more details to come today. Let's bring in our Greater China Executive Editor, John Liu, for more. John, great to talk to you. What then have we learned from these two days of meetings and what are we hoping for or expecting today?

Well, what we have so far is rhetoric, and the rhetoric that we've gotten has been very positive. We have Secretary Scott Pessin saying progress was made. We had Chinese Vice Premier He Lifeng actually complimenting the American delegation.

And so everything seems to be pointing to de-escalation, seems to be pointing to talks aimed at trying to resolve this trade war that we have on our hands. And we're just waiting for the details now.

Okay. How much are the markets, though, taken away from this? It's obviously risk on today. U.S. stocks are up. Chinese stocks are up. They're down a bit from their session highs. Gold is down. So I think people are feeling better about the situation. And I would say they see a light at the end of this tunnel.

A lot depends on what will be in the details. We have just gone through a month of great volatility in markets. Chinese stocks just recouped all of their losses since Liberation Day today. And so I think everybody's a bit on edge still. John, tariffs are already hitting U.S. businesses. There are risk of a stagflationary blow to the U.S. But how much is at stake for China's economy in these talks as well?

There's a lot at stake for Chinese companies who export well over 500 billion U.S. dollars to the United States. It's a huge market for Chinese goods. If these tariffs stay in place, there is not going to be any trade between the United States and China. And the threat of decoupling, I think, is...

would have massive implications, not only for China, but for the global economy. And, you know, the prospect of something less than 100% no trade, something less than what we have now, I think is very optimistic and is getting people feeling good about the future. And it will be good for the Chinese economy. The government is introducing lots of stimulus. If it can keep some of that trade with the U.S., that will help a lot.

Okay, very interesting. Thank you so much, John, for being with us this morning. Bloomberg's Greater China Executive Editor, John Liu.

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on Emirates.com. Fly Emirates. Fly better.

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plus taxes, fees and economic adjustment charge. Terms apply. For J.D. Power 2024 award information, visit jdpower.com slash awards. Well, as President Trump reconfigures global trade, the euro is riding its biggest rally in two decades. And traders, including Amundi and Templeton, say it's just the beginning. The common currency jumped by 14%, the three and a half year high last month. Joining us now for more are our FX and Rates reporter, Naomi Tajitsu. Naomi, good morning. So the tide could be turning in favour of the euro. What does this mean?

So the euro has been staging a massive comeback after it fell close to parity against the dollar earlier this year. It's been a really big beneficiary of the sell-off that we've been seeing in the dollar after Trump's tariff announcement. And investment houses like Amundi and also Deutsche, they believe that it stands to rise to around 120 by the end of the year. So then, I mean, obviously the trade war is ongoing and that

is perhaps one of the key drivers. But why do you think this is happening now? So if we look at the move that we've seen in the dollar, that's really key. For the past 15 years or so, European investors, they've been investing abroad. And a lot of this has been going into the U.S., like U.S. stocks and bonds.

because they believe that U.S. growth would outpace the rest of the world and that rates in the U.S. would be higher than in a lot of other countries. And that's been true for years. But over the past few months, we've seen Trump's policies and they've raised a lot of uncertainties and they've raised a lot of questions about

how secure US assets are. And this is a really big deal because US assets and especially US treasuries, they're considered to be among the safest assets in the world. And this is what's triggered a sell off in the dollar. And the euro has benefited from this. So where does the euro go from here then? We've seen this strengthening since, as you say, that low and near parity only a couple of months ago. Since then, the trajectory has been largely upward. Does that look likely to continue?

It has. Like, yeah, it's been upward. It could continue. It's trading around 1.12 at the moment, but a growing number of investors and banks believe that it could rise more. Like Deutsche, for example, is forecasting it to rise to 1.20 by the end of the year and then even more to 1.30 by 2027. And that's a huge jump from where we are now. A lot of people believe that this will be driven by...

diversification flows. So that means that in the coming years, as European investors, as they start to pare back their investments in the US, like even just a little bit, like whether it's by shifting funds out of the US or decreasing the amount of new investments into the US, this could push the euro even higher. Yeah, that's very positive, isn't it? In terms of

how the euro is being seen, what do you think the risks are to that sort of very optimistic scenario? Okay, so in terms of risks, if we see the US significantly dial down its tariffs on Europe and on other countries, or if Trump tones down his other aggressive policy positions, that could help to encourage the view that, yeah, like the US still is a secure place to keep investments. And

And then at the same time, you know, the euro has been benefiting on this view that like Germany and other European countries will increase fiscal spending. And if they're slow to do this and if their economies are slow to grow as a result of this, you know, it could have a negative impact on the region. And this could make people think that like maybe shifting money back to Europe isn't the right thing to do. And this could hold the euro back from gaining further.

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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