Markets Edge Higher With US-China Trade Talks Set to Continue
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Thrivent, where money means more. Bloomberg Audio Studios. Podcasts, radio, news. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. So trade talks between the U.S. and China ended on Monday after more than six hours at Lancaster House in London. And we are told that those talks will continue on Tuesday. Bloomberg's Anne-Marie Hordern is there, and she says two issues are front and center. One,

critical minerals when it comes to the United States, those magnets, those rare earths. They say that the licensing is not quick enough. Kevin Hassett over the weekend, the NEC director, says they want to see a more advanced pace when it comes to those minerals coming into the United States. And then for China, they

want access to the semiconductors. And it's very obvious that export controls potentially was going to be on the table when it came to the second round of negotiations following the talks in Geneva just a month ago. That is Bloomberg's Anne-Marie Hordern. Now, in terms of removing those restrictions on tech,

Today, the director of the National Economic Council, Kevin Hassett, told CNBC the U.S. would stop short of including the most sophisticated AI chips made by NVIDIA.

Joining me now is Jim Worden. He is the chief investment officer at the Wealth Consulting Group, joining from Sacramento, California. Jim, thank you so much for taking time to chat with me. How optimistic are you that we're going to get a trade deal between the U.S. and China happening in the near term?

You know, I'm really optimistic. I think we've seen a little bit of a pattern with some of these tariffs. They start off really, really ugly and they look prettier as time goes on. Things get worked out. You know, we don't have all the information exactly how things will look. But, you know, I certainly believe with the rare earths,

there will be some good news there. So if you look at the S&P right now, we're just about 2% from that all-time high that we reached in February. Say we get a deal. What does that mean for the equity market?

So I think the equity markets continue grinding higher. Any good news that comes out of Washington, D.C. that is macro related is just a boon for the equity markets. I think we'll get all time highs, even if there is a little bit of sideways news on the tariffs. The AI boom is real. It's this fast moving train that you can slow it down.

but it's going to keep going. So any relief that we get, I believe is going to allow this to accelerate. And there's still a lot of stocks that we're looking at, a lot of stocks that are still far from where they were, the February highs. And so a lot of these are

have trends that are reversing. So we're looking at those. But there's also a number of stocks that are already hitting all-time highs. So we have a Fed meeting on the 18th. Officials right now are in a blackout period before that decision. Today, the New York Fed survey found that consumers are expecting lower inflation over the next year than they did a month ago when they were last surveyed.

And obviously this week we have a number of price reports, Wednesday at CPI, Thursday PPI. How are you feeling about the U.S. inflation story right now? We continue to feel pretty good about it. The trend has been that inflation is coming down. Now, we may see a little bit of bump back up with regard to concerns about tariffs.

But it's generally been pushing lower. I'm a little bit concerned with higher wages. That's not so much related to the tariffs as it is immigration. And so these are things that we're keeping an eye on. But I generally say that the trend for inflation has been it continues to be lower.

In terms of the politics in Washington, the Senate right now is dealing with President Trump's tax bill. And we were told that Republicans in the Senate are intending to propose some revisions.

Among them, maybe trying to extract some savings, not only from Medicaid, but maybe even Medicare. And obviously that would depart from the House version. How are you feeling about the future of this tax bill? Is that something that is going to be resolved, let's say, before the 4th of July? Or could this drag on for some time?

I'm not a political expert. I would say that it probably does get resolved. I don't think that we're going to have concessions with regard to Medicare or Medicaid. And if we do, I believe that there'll be light. I think that would be too much of an impact for too many people to try to do that. If we're talking about adding much more to the deficit, maybe as much as $2.4 trillion, that's the CBO estimate. What does that mean for the bond market?

Yes so we've gotten a little bit more cautious lately with bonds you know that that is partly due to the technicals of the bonds and just what's happening with the dollar what's happening overseas and you know kind of this flight away from U.S. dollar denominated assets. We think there's still going to be volatility with the bond market particularly the longer end of the yield curve so we've we've shortened duration

We continue to like higher quality credit. So we're a little bit more cautious on just the bond market in general than we are with equities. That's interesting. So the sell America theme you see impacting the bond market, impacting the dollar more than the stock market. Yeah, I think that's partly because we see a lot of these large companies that are within technology that

the fundamentals are still good the earnings growth is still good the profit margins there's still a lot of growth there um you know and i wish i could say that across the board every single sector uh but certainly with you know the mega cap technology companies and you know there's also some some trickle down uh thematic we thematically we're also liking some of the energy and utility companies that have a story with technology and those of all

been performing really well. There's kind of this mean reversion trade where they sold off a lot and they've come back. But yes, we do like equities more than bonds. How are you feeling about the American consumer, broadly speaking, and whether or not you would be encouraged to take positions either in consumer staples or consumer discretionary stocks?

Yeah, so we actually did own some consumer staples, you know, not that long ago. And we trimmed that position. We actually added to consumer discretionary, partly, you know, because some of those names were just really, really sold off. There is still some risk there. So this, you know, that was kind of a longer term thesis in terms of macro improvements. We thought that they sold off too much.

There's still certainly going to be sensitivity when you get names like Apple and Tesla and Amazon. There's still going to be some sensitivity here. But as we look at the big picture, the consumer still seems to be in pretty good shape. They're still spending. A lot of the spending is on services now.

But, you know, we're watching that closely to see kind of, you know, if that changes in terms of the trend and earnings. Are you monitoring situations offshore? Any opportunities there, whether it's in Asia or Europe or other jurisdictions?

Yeah, so we have added some individual names, some stocks that we like that are in Europe as well as Asia. You know, I would say from a bottom up standpoint, we're liking international a little bit more.

than we have before. And that is really just, you know, improving fundamentals as well as the trend and momentum getting better. And these are quality names from a macro standpoint. We're also, you know, looking at areas where we can add to international. Jim, we'll leave it there. Thank you so much for joining us. Jim Worden is the chief investment officer at the Wealth Consulting Group, joining from Sacramento, California, here on the Daybreak Asia podcast.

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. And as we have been discussing, trade talks between the U.S. and China are set to continue for a second day in London. The aim here is to ease tension over U.S. shipments of technology to China and shipments of Chinese rare earth elements to the U.S.,

For a closer look on what these talks may yield, we heard from Bloomberg's Jennifer Delohe in Washington. She joined Bloomberg's North Asia correspondent, Stephen Engel. Stephen and Jennifer spoke with Bloomberg's Sherry Ahn and Heidi Stroud-Watts. Jennifer, let me start with you. I mean, President Trump saying that China is not easy. I mean, what was he expecting? This is the second largest economy in the world. But what are we expecting in terms of any concrete breakthrough in London now that these talks continue for a second day?

Well, you know, I think the fact that, you know, the officials from the U.S. and China were able to meet face to face for more than six hours and that they're continuing tomorrow was obviously taken as a good sign. It's a development that, you know, signals possible progress in easing these trade tensions. And specifically what, you know, could come out of this is an easing of restrictions on the export of technology from the U.S., obviously rare earth materials from China also on the table and being discussed.

The U.S. has signaled very clearly it's willing to remove curbs on the export of jet engine parts, nuclear plant equipment, chemicals and other technology if it can secure assurances that China will ease its own limits on rare earth materials that are used in smartphones and fighter jets and other equipment.

So at this point, that seems to be the outlines of what's possible. Kevin Hassett, who heads Trump's National Economic Council, said earlier today that his expectation is an agreement in London that will ensure rare earths are released in volume from China.

Steve, we saw in the data, despite this fragile truce, exports from China to the US falling the most since 2020, other than, of course, a more sort of permanent pause to these tariffs, what does Beijing really want? And I guess, more importantly, what are they willing to give up, given how closely held the supply of rare earths and technology has been over the past decade or more?

Well, clearly Beijing is very suspicious of what the United States is trying to get out of these talks and of this trade war. They definitely want the reduction, if not elimination, of the tariffs because, again, the pause is only until August and then they resume. So they would like to see that taken away. They'd just like some clarity. And that's why having consistency in talks with the same people, be it Scott Besant,

and then Jameson Greer, the U.S. trade representative. And now, in addition, we have Howard Lutnick, the Commerce Secretary, which indicates that those export controls from the United States, including some of those that were added after that truce was reached in Geneva, which only added to the suspicion on the Chinese part. So that's why it's clear that export controls perhaps, as we just heard, could be a bargaining chip for the United States to reduce those that were added afterwards.

after that Geneva truce. So I think the Chinese side is trying to get a gauge of the intent and the end result that the White House is trying to get and not necessarily whether it's going to be just unilaterally beneficial to the United States. This is so far, let me just say, after day one of the talks, the Chinese have kept

really quiet. I scoured state media. There's hardly anything about the readout of the day one talks. He Li Feng, who's leading the Chinese delegation, walked right past the gaggle of reporters in London, did not say anything. The U.S. side said only a few words, like Howard Lutnick said they were fruitful. Scott Besant said good talks.

He Li Feng said absolutely nothing. Yesterday, the China Daily said pressure and coercion are not going to work against China, which is ready to resolutely counter any ill-intentioned move by the U.S. side. So that really indicates how suspicious the Chinese side is. They are willing to talk, as evidenced by the phone call last week between Trump and Xi, but they're very skeptical.

Steve, how much pressure are Chinese policymakers under right now, given the state of the Chinese economy? I mean, we have seen them trying to make good with other trading partners like the European Union recently.

Absolutely. And the EU is going to be a key one because EU leaders will be going to China at the end of next month for the EU-China summit. There are talks about possible huge Airbus deal. There's already negotiations that are, according to the Ministry of Commerce in China,

on the minimum price guarantees on EVs, possibly reaching a deal at some point this summer. So again, the Chinese are definitely engaging with the EU. They're also engaging throughout the rest of the world in Southeast Asia, as we saw in those export numbers yesterday, where exports to the United States

fell 34 percent imports fell nearly 18 in two-way trade with the united states but they absolutely boomed with else other parts of the world so china is diversifying its export destinations and its available markets but it's not enough right now to counter what has been

a lot of trade, obviously, across the Pacific to the United States. So, yes, it adds definitely to the pressure on the Chinese economy, as evidenced as well by the PPI, the factory gate deflation, extending its string of deflationary months to 32 yesterday, down more than 3 percent. So there is deflation definitely entrenched in China.

Jennifer, I'm wondering how much sort of domestic judicial pressure it is. Obviously, we had the sort of lower court ruling over the legality or the illegality of these tariffs. Do we know if the pause on allowing them to continue to play out might be sustained?

Yeah, we could know very, very soon. You know, a federal appeals court here could rule at any time on whether to continue pausing the vast majority of Trump's tariffs, basically all of those that are predicated on his assertion that U.S. trade imbalances constitute a national emergency, warranting those levies. And so...

you know, as we know, a separate court already ruled against these tariffs, tossed them out very swiftly. Another appeals court came in and put that whole order on pause. And the question before that court now is whether to extend its temporary pause. The Trump administration today went to the court and said,

please keep this going. Really, the lower court order, if you toss these tariffs out, it really interferes with our ability, the president's ability to conduct foreign policy. And so the administration is making the case that these need to be extended because the legal process

you know machinations over this will play out for months they could go all the way to the Supreme Court and in the meantime uh you know if the tariffs can't be collected it really impinges on the president's ability to do business so we could see a ruling at any time potentially as soon as tomorrow we'll make Jennifer Deloitte there and Stephen Engle as well with the latest on those US China trade talks

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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