Equity Optimism on Shutdown Talks; US Tightens Russia Sanctions
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Good morning, I'm Stephen Carroll. And I'm Karen Moscow. Here are the stories we're following today. Karen, the rise in futures comes in part on signs the US will avoid a government shutdown. That's because Senate Democratic leader Chuck Schumer has opted not to block a Republican spending bill. The decision was made despite a growing number of Democrats wanting to use their limited leverage to restrain Elon Musk's cost-cutting efforts. Addressing the Senate, Schumer explained why he decided to walk back the threat of a shutdown.

A shutdown would give Donald Trump and Elon Musk carte blanche to destroy vital government services at a significantly faster rate than they can right now. Republicans likely need seven other Democrats to join Schumer who wouldn't say if there were now enough votes within his party to overcome a filibuster.

Well, Stephen, the lift in the markets this morning comes after the S&P 500 slipped into correction territory. The index is down 10 percent from its all-time high. The tech-heavy Nasdaq 100 index is also in a correction, and the Dow Jones Industrial Average is 9.3 percent below its last record in December. Lauren Goodwin, the chief market strategist at New York Life, says tariff worries are rattling Wall Street.

"There is no doubt that the volatility that we've seen in the market over the last couple of weeks is about policy uncertainty. It's not about economic fundamentals. And what's so interesting about that is typically when we see drawdowns of this size, it's the other way around. There's a concern implicit in the economy about growth or employment, etc. This time it's uncertainty causing the concerns about growth and employment."

New York Live's Lauren Goodwin believes markets will remain volatile until some of the policy uncertainty clears. Investors are the most bullish on treasuries relative to stocks for at least three years. That's the findings of the latest Bloomberg Markets Live Pulse survey. U.S. bonds are expected to deliver a better volatility-adjusted return over the next month than equities, according to a survey of more than 500 market participants conducted this week.

And it's not even close with 77% backing treasuries. That's the highest level ever in the survey data going back to 2022. Well, Stephen, former Treasury Secretary Stephen Mnuchin advised investors not to overreact to the current sell-off inequities and discounts risks of a U.S. recession. In an interview with Bloomberg, Mnuchin attributes the market correction to a natural correction in the market fueled by massive tech spending. We came in with the market being fully priced.

So I think a 5% to 10% correction on the S&P or the NASDAQ actually makes sense. The market's been really fueled by massive amounts of tech spending, particularly around AI. So some of this is a natural correction in the market, and some of this is the market worrying about tariffs and the impact on tariffs.

Former Treasury Secretary Steven Mnuchin also discounted risks of a U.S. recession. To hear the full conversation, get the Bloomberg Talks podcast or watch it live on the Bloomberg podcast page on YouTube.

Karen, as for the global trade war, President Trump is threatening a 200% tariff on European wine, champagne and other alcoholic beverages. Trump says he'll impose the tariffs if the European Union does not immediately remove its countermeasures against his 25% tariffs on steel and aluminum. In an interview heard right here on Bloomberg Radio, Commerce Secretary Howard Lutnick says the EU duties are disrespectful. The President has...

made it crystal clear that he finds this tit-for-tat really abusive and aggravating, right? His objective is steel and aluminum tariffs. Let him build his steel and aluminum business in America because that's important.

Commerce Secretary Howard Lutnick added he's thankful the UK and Mexico refrained from engaging in tit-for-tat tariff hikes and warned trading partners that upset President Donald Trump opened themselves to severe reaction. Well, Stephen, the president of the European Central Bank is warning of severe global fallout from a trade war with the US. Here's what Christine Lagarde told the BBC. If we were to go to a real trade war,

where trade would be dampened significantly, that would have severe consequences. It would not be cause for concern. It would be severe consequences for growth around the world and for prices around the world, but particularly in the United States. But also in Europe. It would push Europe into recession, wouldn't it? You know what it's doing at the moment?

Stirring European energy. It's a big wake-up call for Europe. Maybe this is a European moment yet again. And the Guard also told the BBC that Brussels had no choice but to retaliate against the U.S. following its decision to implement 25% tariffs on global steel and aluminum imports.

Karen, if investors think the Fed will step in if tariffs damage the economy, they may be wrong. That's according to former New York Fed President William Dudley. I think the problem is that tariffs are bad for growth and bad for inflation, which puts the Fed in a bind. Basically, they're missing by more on both sides of their mandate. So I think in the near term, the Fed's going to basically be on hold, waiting for more information.

Bill Dudley, now a Bloomberg Opinion columnist, says the Fed could be in a bind if tariffs lead to slower growth and higher inflation expectations. Read more in his latest column at Bloomberg.com slash opinion or OPINGO on the Bloomberg terminal. Well, now, Stephen, we have the latest on the war in Ukraine. Russian President Vladimir Putin says he wants to discuss a proposed ceasefire in Ukraine with President Trump. However, Putin said any truce should lead to a long-term resolution of the war.

Trump says he hopes that Russia agrees to the ceasefire deal. We're talking about humanity. We're not talking about the money. But then you add the money to it, and, you know, hundreds of billions of dollars is being spent and really wasted so unnecessarily it should have never happened. Meanwhile, the U.S. has tightened sanctions on Russia by restricting payments for energy, even as it pursues peace negotiations with Putin.

Time now for a look at some of the other stories making news in New York and around the world. For that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. An American Airlines passenger jet diverted to Denver after reporting engine vibrations last evening. The plane landed safely, but while taxiing to the gate...

An engine caught fire. Passengers were evacuated using the aircraft's slides, including this woman. It was just a bunch of panicky people around me, and the gentleman right next to me was a fireman, so he was trying to calm everybody down.

BFAA says an investigation is underway. Columbia University says it has expelled or suspended some students who took over a campus building during pro-Palestinian protests last spring and temporarily revoked the diploma diplomas of some students who have since graduated.

The university said in a campus-wide email that its judicial board brought a range of sanctions against dozens of students who occupy Hamilton Hall based on its evaluation of the severity of behaviors.

Meanwhile, New York City police arrested almost 100 protesters after demonstrators from a Jewish group filled the lobby of Trump Tower on Fifth Avenue in Manhattan. They are protesting the ICE arrest of Columbia grad student Mahmoud Khalil. He organized a pro-Palestinian demonstration against Israel at Columbia last year. The demonstrators from Jewish Voice for Peace wore red shirts reading, Jews Say Stop Arming Israel, NYPD Chief John Schell.

Within two hours, the NYPD with our Secret Service partners and Trump security had this situation cleared up.

With no issues. Audio courtesy of News 4. There were tense exchanges when Republican Congressman Chuck Edwards returned to his North Carolina district for a town hall with constituents. Many presidents say they are not happy with Republicans and President Trump with how they are running the country. We've got a lot to be proud of in this country. I happen to agree with a lot of the things that's going on in Washington, D.C. right now. I know many of you are not.

Congressman Edwards faced questions from people, including possible cuts to Social Security, federal layoffs, and Elon Musk's Department of Government Efficiency. Global News 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg, Karen. All right, Michael Barr, thank you.

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And it's time now for the Bloomberg Sports Update brought to you by Tri-State Audi. Here's John Stashower. Good Friday morning, John. Good morning, Karen. March Madness on display at several conference tournaments at the ACC Louisville. Avoided an upset by scoring at the buzzer to beat Stanford by two at the SEC. Kentucky scored with a half second on the clock for a one-point win over Oklahoma. That came after a

Texas' double overtime upset of Texas A&M. There was double overtime at the Big East. Creighton trailed most of the night at one point by 17, but got by DePaul. St. John's began the day. Easy win over Butler, 78-57. Red Storm bring their 28-4 record, 19-0 at home to a semifinal game tonight at the Garden against Marquette. Six days ago in Milwaukee, the Johnnies won on a basket at the buzzer of overtime. Speaking of OT, that's where the Rangers were in Minnesota.

Jack Jones moves up with it. Drops it back. Panarin picks it up. Panarin leaves it for Miller. Back to Panarin. In deep. Drops it back. Snyder makes a move. Back to Henry.

On MSG, Braden Schneider wins it 3-2 after earlier goals by Vincent Trocek and Johnny Brzezinski. And the Rangers end their four-game losing streak. They also got good news when Columbus lost. The Rangers and Blue Jackets tied for the last playoff spot in the East. The Rangers have played one more game. Devils beat Edmonton 3-2. Bruins lost in Ottawa 6-3. The Nets lost in Chicago 116-110. Three-way tie for the lead after the opening round of the Players' Championship. Americans Lucas Glover and J.J. Spahn both shot six unders. So did Camilo Villegas.

Rory McIlroy shot four under. Scottie Sheffler's minus three. The Tampa Bay Rays, who have long sought a new stadium, finally had plans to build one for $1.3 billion, but then came Hurricane Milton. It damaged the current home Tropicana Field. It's the reason Rays owner Stu Sternberg says they couldn't come up with a $700 million payment that was due. The Rays have now scrapped plans for the new stadium. John Staschauer, Bloomberg Sports, Karen and Stephen.

Coast to coast on Bloomberg Radio. Nationwide on Sirius XM. And around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak.

5.12 on Wall Street. Those futures pointing higher as Senate Democrats have pulled back on their threat of a government shutdown. Chuck Schumer ultimately choosing not to block the Republican-written stopgap funding bill. Let's discuss now with Terry Haynes, founder of Pangea Policy. Terry, great to talk to you. Do you see the risk of a shutdown completely gone now?

Stephen, good morning. And no, not completely. I'll usually give you 5% for lightning striking. And there's always a possibility that enough Democrats vote here to block temporarily. But Schumer's abdication on this is a very positive sign. And kudos to him, by the way. If you've got a bad hand, the best thing to do is fold, and he certainly did.

But look, is there a question of leverage being lost here? That was part of the reasoning that some Democrats did want to get involved in blocking this. Is there something the Democrats have lost in making this call?

You know, a lot of the Democratic interest groups will say that they've lost things, but I'm not so sure about that. You can't win and revive your party without a strong message and without unity. And right now the Democrats don't have either. So much smarter political play for the Democratic leader to live to fight another day here, I think.

Does this project the image of unity that Chuck Schumer wanted, though, if there's going to be those on the sidelines who are going to complain about this decision?

No, it doesn't really project a unity message at all. It projects quite the opposite, that they're split on it. You have just kind of the thin end of the wedge here is Senator Fetterman of Pennsylvania, who already was going to vote with the Republicans on this. And there's easily half the caucus who thought that there were –

It was better to continue to be on the side of keeping the government open, even with results that they didn't particularly like. So this news giving futures a bit of optimism ahead of today's trading session. But of course, the trade tension still playing in the background as well. What's your view on the question of escalation from here? It seems to be all going in one direction. In what sense?

Well, but we're talking about Trump adding, you know, threatening 200% tariffs on European wine and champagne. You know, are we going to see further fight back from the EU on this?

Well, I think you're going to see continued tit-for-tat, sure. There's two kinds of tariffs here. One is what I will think of as the geopolitical tariffs. Canada and Mexico negotiations underway for better border security and drugs and that sort of thing. The other is the tit-for-tat reciprocals that are probably coming in April. But the ultimate goal

goal here, and I know markets aren't convinced by this, but the ultimate goal here, both Besant and Blutnick talked about this yesterday, are frankly to have tariffs go away. The idea is to remove tariff barriers. And, you know, of course, that benefits the United States probably more than it benefits other countries. But that's where the administration is going, and that's what they seek to do.

Are there winners being created from this as well? I mean, Kaya Kalas, the EU's top diplomat, telling Bloomberg that China's laughing at these escalations of tensions between the US and the EU. I'm always interested, you know, and I have great respect for Ms. Kalas. And at the same time, I know very well the...

She's looking right into the teeth of the bear, so to speak, in Estonia. And at the same time, I think there probably needs to be more of an acknowledgement from the European Union about the geopolitical strategy that's implicit in

uh... in the economic strategy the big reason why trump is going after this with such alacrity uh... really is he's trying to turbo charge the united states economy frankly to uh... to build uh... geopolitically the strongest economy and uh... then

frankly, fill holes in the United States' ability to defend itself, manufacturing and other things. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed at 6 a.m. Eastern each morning on Apple, Spotify, and anywhere else you get your podcasts. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington,

Bloomberg 92.9 in Boston and nationwide on Sirius XM channel 121. Plus, listen coast to coast on the Bloomberg Business app, now with Apple CarPlay and Android Auto interfaces. Our flagship New York station is also available on your Amazon Alexa devices.

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