Yen Currency Intervention 'Futile', Says WisdomTree's Gupta | The Pulse with Francine Lacqua 04/29

Summary

The transcript from Bloomberg's 'The Pulse' features a dynamic discussion on various economic and geopolitical matters. Key highlights include the yen's significant fluctuation, raising suspicions of potential intervention by authorities, and U.S. Secretary of State Antony Blinken's efforts to negotiate a truce in Gaza amidst ongoing tensions. The program also touches on Elon Musk's strategic visit to China, which yields positive results for Tesla as they overcome obstacles to introduce their driving system in the Chinese market. Additionally, there is a focus on the Federal Reserve's upcoming meeting and its implications for interest rates and inflation, the potential for BHP to improve its proposal for Anglo American following the rejection of their initial offer, and the impact of geopolitical events on oil prices and the broader market. The conversation provides a comprehensive overview of current economic indicators, market sentiments, and the interplay between global events and financial markets.

Takeaways

• 📉 The Japanese yen hit its lowest level against the dollar in 34 years, prompting speculation of possible intervention by Japanese authorities.
• 🤝 U.S. Secretary of State Antony Blinken is in the Middle East working to secure a truce in Gaza amid ongoing tensions.
• 🚗 Elon Musk's visit to China resulted in Tesla overcoming two significant hurdles, paving the way for the introduction of its driver assistance system in the Chinese market.
• 💸 There is potential market movement surrounding BHP's possible improved proposal for Anglo American after its initial $39 billion offer was rejected.
• 📈 Despite various global challenges, many sectors are reporting better-than-expected earnings, indicating underlying economic resilience.
• 🏦 Banks are a key focus as there's anticipation around net interest margins, which are down year on year but better than feared.
• 🛑 There's ongoing discussion about the potential delisting of Total Energies from France and a possible shift to list in New York, highlighting a broader trend among energy companies.
• 💭 Central banks are watching currency markets closely, with the Japanese central bank's potential intervention in the yen raising questions about the effectiveness of such moves.
• 🌍 Geopolitical risks are influencing markets, with a focus on developments in the Middle East and the potential for conflict escalation.
• 📊 Commodity prices, particularly oil and metals, are being influenced by supply constraints and demand concerns, reflecting broader economic trends.
• 🏢 Earnings season has been solid so far, with many companies in the S&P 500 exceeding expectations, which is notable at this point in the economic cycle.

Q & A

What is the significance of the yen's recent fluctuation to its weakest in 34 years?

The yen's drop to its weakest level in 34 years has raised speculation that authorities may have intervened, which could impact financial markets and investor sentiment.

Why is the U.S. Secretary of State, Antony Blinken, stepping up efforts to secure a truce in Gaza?

Antony Blinken is increasing efforts to secure a truce in Gaza due to the ongoing conflict between Israeli forces and Hamas, aiming to prevent further escalation and potential civilian casualties.

How is Elon Musk's visit to China benefiting Tesla?

Elon Musk's visit to China has resulted in Tesla clearing two key hurdles, which will allow the company to introduce its driving system to the world's largest auto market, potentially boosting its revenue.

What is the potential impact of the Fed's upcoming meeting on the yen?

The Fed's upcoming meeting could influence the yen's value, as any indication of higher U.S. interest rates could widen the interest rate differential between the U.S. and Japan, potentially putting further pressure on the yen.

Why is the Bank of Japan hesitant to intervene in the currency market?

The Bank of Japan is hesitant to intervene due to the strength of U.S. yields and the potential short-lived impact of any intervention, given the current economic fundamentals and market conditions.

What are the implications of the U.S. election on geopolitical relations?

The U.S. election could significantly impact geopolitical relations, as a change in leadership might alter the U.S.'s approach to international conflicts, trade, and alliances, affecting global stability and economic policies.

How might the potential listing of Total Energy in New York affect the company?

Listing in New York could expose Total Energy to a larger pool of investors who may be more receptive to investing in oil and gas companies, potentially leading to a higher valuation compared to its current status as a European-listed company.

What is the current market sentiment towards the potential BHP offer for Anglo American?

The market anticipates that BHP may need to pay more for Anglo American following the rejection of its initial $39 billion offer, and there is speculation about the future of Anglo American's diamond business, De Beers.

What factors are contributing to the strong earnings season for S&P 500 companies?

Factors contributing to the strong earnings season include better-than-expected volume and pricing in various sectors, cost-cutting measures, and resilience in the face of economic challenges such as rising interest rates and geopolitical tensions.

What is the potential impact of geopolitical tensions on the global economy?

Geopolitical tensions can lead to instability in financial markets, disrupt trade, and affect economic growth. High-stakes political discussions and conflicts can influence investor confidence and lead to fluctuations in currency values and commodity prices.

How might the outcome of the Israeli-Hamas conflict affect the Middle East?

The outcome of the Israeli-Hamas conflict could have significant implications for regional stability in the Middle East. A resolution could lead to a de-escalation of tensions, while a failure to reach a truce might result in further military actions and humanitarian concerns.

Outlines

00:00

📉 Yen's Wild Fluctuations and Speculations of Intervention

The discussion opens with the yen's significant drop to its lowest value against the dollar in 34 years, followed by a strong rebound. This has led to widespread speculation that authorities may have intervened in the market. The U.S. Secretary of State, Antony Blinken, is set to increase efforts to broker a truce in Gaza amidst ongoing tensions. Elon Musk's recent visit to China has yielded positive results for Tesla, as the company overcomes obstacles to introduce its driving system in China's substantial auto market. The focus then shifts to the broader economic implications, including a potential bid from BHP and the upcoming Federal Reserve meeting.

05:01

🌐 Global Economic Concerns and Central Bank Dilemmas

The conversation delves into the concerns raised by the Japanese Finance Minister to the U.S. Treasury Secretary, Janet Yellen, regarding the yen's decline. It is anticipated that the Federal Reserve's commentary will not be beneficial for the yen, given the Fed's likely stance on maintaining higher interest rates for an extended period. The Bank of Japan's hesitation to intervene in the currency market is discussed, along with the impact of U.S. interest rates on the yen's value. The potential for a rate hike by the Fed instead of a cut is debated, with arguments focusing on inflation expectations and economic indicators.

10:02

🛑 Yen Volatility and Central Banks' Strategic Moves

The dialogue explores the volatility of the yen and the potential for market intervention by the Japanese authorities. The unpredictability of today's actions and the impact of Japan's holiday on market liquidity are considered. The discussion also touches on the significance of geopolitical events on commodities, the role of central banks in economic stability, and the structural trends in the stock market that are less tied to the business cycle. The focus then moves to the commodities market, including metals and their supply constraints, and the demand for gold, particularly from China.

15:04

🚗 Tesla's Strategic Advancements and Geopolitical Updates

The narrative shifts to Tesla's efforts to introduce its driver assistance system in China, following Elon Musk's unannounced visit. The need for Tesla to collaborate with Chinese companies like Baidu for mapping services is highlighted. The program also provides updates on geopolitical matters, including U.S. Secretary of State Antony Blinken's meetings in the Middle East to secure a truce in Gaza and the preparations by Israeli forces for a potential attack on Rafah.

20:04

🤝 High-Stakes Diplomacy and Corporate Earnings Insights

The focus is on the high-stakes political discussions taking place at the World Economic Forum meeting in Riyadh, with emphasis on the U.S.'s role in pushing for a truce in Gaza. The potential implications of the International Court of Justice's involvement in the Israel-Palestine conflict are considered. The conversation also covers the managed decline of the U.S.-China relationship and the impact of the U.S. election on global politics. The program concludes with a look at the busy week for corporate earnings, highlighting strong performances across various sectors.

25:07

📈 Corporate Earnings Season and BHP's Strategic Business Moves

The summary highlights the critical earnings period, with markets near record highs and interest rates rising. It discusses the performance of various sectors, including consumer staples, chemicals, and banking, noting that many companies have reported better-than-expected organic growth. The potential business strategies of BHP and Anglo American are explored, including BHP's possible improved proposal for Anglo American and the future of De Beers under either company. The news of Total Energy's CEO considering delisting from France and potentially listing in New York is also mentioned, emphasizing the appeal of the U.S. market for energy companies.

Keywords

💡Yen

The yen is the official currency of Japan. In the context of the video, it is discussed as having experienced significant fluctuations in value, dropping to its weakest level in 34 years. This has led to speculation about possible interventions by authorities to stabilize the currency, which is a major concern for the Japanese economy and global markets.

💡Intervention

Intervention in the financial context refers to actions taken by a country's government or central bank to influence the exchange rate of its currency. In the video, there is a discussion about whether authorities may have intervened in the foreign exchange market to affect the value of the yen, with some suggesting signs of such activity due to the yen's volatile swings.

💡U.S. Secretary of State Antony Blinken

Antony Blinken is the U.S. Secretary of State, responsible for international diplomacy and relations. The video mentions his efforts to secure a truce in Gaza during his meetings in the Middle East, highlighting the role of U.S. diplomacy in conflict resolution and the importance of geopolitical stability for global peace.

💡Tesla

Tesla is an American electric vehicle and clean energy company. Elon Musk's visit to China is mentioned in the video as having immediate positive outcomes for Tesla, as the company clears regulatory hurdles to introduce its driving system in China, the world's largest auto market. This signifies Tesla's global expansion and the importance of international markets for the company's growth.

💡Fed Meeting

The Fed Meeting refers to a gathering of the Federal Open Market Committee (FOMC), which is responsible for making key decisions about interest rates and monetary policy in the United States. The video discusses expectations for the Fed's decision on interest rates, which can influence financial markets, economic growth, and inflation, both domestically and internationally.

💡Geopolitics

Geopolitics is the study of the effects of geography and global politics on international relations. The video emphasizes the dominance of geopolitical issues, such as the conflict in Gaza and the U.S.'s role in the Middle East, in shaping economic and market conditions. Geopolitical risks and stability are critical factors for businesses and investors worldwide.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. In the video, inflation is a key concern as it affects central bank policies, currency values, and economic stability. The discussion around the yen's weakness and its potential impact on inflation illustrates the complex relationship between currency valuation and economic indicators.

💡Earnings Season

Earnings season is a period during which publicly traded companies release their financial performance reports to the public. The video refers to the ongoing earnings season, noting that it has been solid despite market uncertainties. Earnings reports are important as they can significantly influence stock prices, investor confidence, and market sentiment.

💡BHP

BHP, or BHP Group, is a multinational mining, metals, and petroleum company. The video mentions a potential improved proposal by BHP for Anglo American, indicating ongoing mergers and acquisitions activity in the mining sector. Such corporate activities are significant as they can reshape industry dynamics, create value for shareholders, and affect commodity markets.

💡Copper

Copper is a base metal widely used in electrical wiring and plumbing due to its high conductivity. The video discusses the price of copper, which is a key indicator of economic health and industrial demand. The mention of copper's price reaching $10,000 reflects the commodity's importance in the global economy and its role as a bellwether for market trends.

💡EV Market

EV Market refers to the market for electric vehicles, which is growing rapidly due to increasing concerns about climate change and the need for sustainable transportation. The video highlights Tesla's efforts to introduce its driver assistance system in China, emphasizing the strategic importance of the EV market for automakers and the potential for technological innovation in the sector.

Highlights

The Japanese yen hit its weakest level in 34 years, prompting speculation of possible intervention by authorities.

U.S. Secretary of State Antony Blinken is working to secure a truce in Gaza during Middle East meetings.

Elon Musk's visit to China resulted in Tesla overcoming two major hurdles to introduce its driving system in the world's largest auto market.

The focus on the yen's value fluctuations, with the currency experiencing significant swings, raising questions about market liquidity and intervention.

Discussions on the potential for a Sweden offer from BHP and the upcoming Federal Reserve meeting's impact on the market.

Analysis of the yen's drop since 1990 and the impact of local public holidays on currency liquidity and market swings.

Expert opinions on whether the Japanese central bank's 'no comment' stance indicates potential intervention in the currency market.

The Fed's expected approach towards interest rates and inflation, with implications for the yen's future performance.

The potential impact of the Fed's decisions on Wednesday on bearish bets and the broader currency market.

Annika Gupta's insights on the April meeting with the governor and market expectations of intervention due to the yen's weakness.

Discussion on the difficulty for the Bank of Japan in managing interest rate differentials and the stability of the yen.

The importance of monitoring financial conditions and the Bank of Japan's warnings against rapid depreciation of the yen.

Speculation on the Bank of Japan's tolerance level for yen depreciation and the speed at which it occurs.

The potential influence of the Fed's comments on the yen and the challenge of intervention in the face of strong U.S. yields.

The unpredictability of the yen's value and the difficulty in determining a bottom level for the currency.

The significance of geopolitical events on commodities, particularly oil, and the potential effects on inflation.

The performance of European banks, car manufacturers, and pharmaceuticals in the current earnings season.

Transcripts

Newsmakers and Market movers. This is the pulse with friends who like.

Well, good morning, everyone, and welcome to the Pulse and Francine Lacqua

here in London with the conversations that matter.

And here's what's coming up on today's program.

Well, Ian punches through 160 per dollar to its weakest in 34 years before

rebounding strongly and raising speculation that authorities may have

intervened. The U.S.

Secretary of State, Antony Blinken, will step up efforts today to secure a truce

in Gaza. During meetings in the Middle East, as

Israel, Israeli forces continue to prepare for a possible attack on Russia

and Elon Musk's quick visit to China is paying immediate dividends, with Tesla

clearing two key hurdles to introduce its driving system to the world's

biggest auto market. Now, good morning, everyone.

A lot going on. Certainly a lot of the focus, of course,

is on the yen. But overall, the bigger picture is that

we have a possible Sweden offered from BHP.

There is the Fed of course on Wednesday. So a lot also.

Of course on data analysis and some of the things that we need to keep an eye

on. But it is really all about the yen.

The gyrating after a drop to the weakest since 1990.

Again, I guess the focus is, of course, as Japan takes the day off.

The currency came roaring back late in the Asian Day to reverse an earlier

collapse that sent it past $160 to breach yet another psychological

milestone. I would just keep in mind that the local

public holidays or liquidity probably also acted to amplify some of the swings

in the currency. So for more on all of this, let's get

straight to Anika Gupta, director of macroeconomic research at WisdomTree.

And with me here in the studio, Justine Allee of Bloomberg.

So thank you both for joining us. It just gives you a headache just

looking at yen and kind of what it's doing.

Yeah. Have we seen intervention?

Yeah, I think that's really is the big question here because I mean, I feel bad

for Japanese traders because it's actually a holiday there today.

And what that usually means for markets is of course, that liquidity is thinner

to begin with. And so there are some voices in the

markets saying that it could just be a result of that exacerbating maybe, you

know, kind of some short covering or things like that.

But at the same time, I mean, it is a big question because we know that the

Japanese central bank is watching the yen.

And when a top currency official there got asked about this question, I mean,

he said, you know, no comment for now, which is sort of the most frustrating

question. And I think, you know, anyhow, it would

be a big dilemma for the central bank, given that you don't want the yen to

weaken too much. But when it's the result of

fundamentals, it's very hard to just solve with like, you know, one move or

two. Yes, I think I mean, you know, the other

feeling is that actually this could be bearish bets that have been put in place

also ahead of the Fed on Wednesday. How do you look at this huge yen move?

Yeah, absolutely. A very good morning to you.

You know, we at the April meeting with governor, we the markets were really

looking forward to any sign of intervention.

And it was surprising that he actually mentioned

that the yen the weakness of the yen isn't really having an impact on

inflation. The markets perceive that is extremely

surprising because we were expecting to see some intervention given the yen

moving into free fall, especially this morning.

I think any attempt of ethics and venting intervention is going to be

quite futile given the fact we have the Fed meeting.

U.S. youths are going higher.

We're seeing interest rate differentials widen even more versus the yen.

And I think it's going to be hard for the Bank of Japan to keep a lid on

yields for JGBs alongside keeping the yen stable.

Thank you. Just, you know, the Bank of Japan last

week indicated, of course, that these financial conditions also will remain

easy. Policy policymakers have also repeatedly

warned that depreciation will not be tolerated if it goes too far, too fast.

Are they targeting a level or is it really how quickly you know it falls?

Yeah, I think one thing that they did point out is they are kind of looking at

whether it's excessive weakening and whether it's kind of happening too

quickly, too fast. And that's potentially something that

they saw happen today. And I think if you look at a lot of

fundamental currency measures, right, you know, all the metrics that

economists look at to compare currency movements with fundamentals, it is

indeed the case that in terms of fundamentals, the yen does seem to have

kind of weakened excessively. But of course, if you look at where

yields are going, I mean, with the Fed meeting coming up this week and then

potentially having to address U.S. inflation, so being stronger than

expected, then it's kind of hard to see why this kind of trend of yen weakening

can be easily reversed. And when you look at, you know, some of

the pictures that are kind of engrained in our memory, it was only earlier this

month that the finance minister of Japan flagged these concerns over the, you

know, the yen's decline to the US Treasury Secretary, Janet Yellen.

What are you expecting from the Fed this week and will that be unhelpful for the

yen further? I very much seen the comments coming in

from the Fed on Wednesday are going to be very unhelpful for the yen.

I think the Fed, you know, given comments over the past week, he has been

reiterating that they haven't, you know, got enough confidence that inflation has

come down comfortably towards the 2% mark.

And I think that's going to give them good enough reason to keep rates higher

for longer. And that's you know, that's why I think

the Bank of Japan has hesitated so much before actually intervening, because

they know that any attempt to actually intervene is going to be very short

lived. And given the strength of US yields that

we are beginning to see, that's going to put further pressure on the yen over as

we as the week plays out. Yeah.

And just you know, this is a concern, right?

Is and actually intervention alone cannot really alter the the wide gulf in

interest rates that's in part driving this.

Right. Exactly.

And it's not just Japan. I think we see some of that, you know,

concern, for instance, like in China, too, where I mean, the green has

stabilized a bit. But I think the worry everywhere is

that, you know, you don't want your currency to weaken too much because

that, I mean, logically is supposed to have some effects on domestic inflation.

But at the same time, I mean, you know, that's kind of where the the different

trends in economic growth is pointing to just, you know, what are you expecting

again, from the Fed? And we heard from Janet Yellen.

I think she was also flanked by the finance minister of Korea in kind of

saying, look, intervention won't really be frowned upon.

Yeah, I mean, I think it's sort of a big question now with kind of the US sort of

having very different trends from every well, where else.

And I think this week people are really looking to kind of how the Fed is going

to address the inflation numbers that we have gotten kind of over the past couple

of months. We're not getting an update on the dot

plot this week, but then it's going to be a really big question here, because

the last time we looked at that, it does seem like the Fed on the margin was so

kind of expecting maybe two rate cuts this year.

Now, even traders are not really expecting to rate cuts this year any

more. And so based on everything we've heard

from Fed officials so far, they're really kind of pushing back on kind of

those cuts as well. And it I mean, I guess the question and

I know there's one, you know, for the moment, one lonely voice saying that the

next move could be up for the Fed. But is there a chance that we see a hike

instead of a cut? I don't think so, Francine.

You know, I don't think a lot has changed fundamentally from that

disinflation narrative. You know, there are a number of reasons

to downplay that acceleration that we've seen in core BCE.

You know, there have been a number of one off factors being the Jan effect.

There's also still very, very strong reasons to expect slowdown in rent

owners, equivalent rent as well. You know, we've been looking at this and

we've been noting it many times if the official numbers continue to lag behind

reality. I also believe the rebalancing in the

labour market is still underway. You know, we've we've already seen a

continued downtrend in job openings in quits.

We've also seen a downturn in wage measures and inflation expectations

remaining. And, you know, that should keep

inflation expectations remaining anchored with a return to a 2% inflation

level. So I do believe, you know, we have

plenty of data coming in between now and the next meeting.

I don't you know, I think July seems a bit unlikely, but we still there is

still a possibility, even though the markets are pricing in next to no rate

cuts until November. I think the September meeting is still

open. Okay.

And again, Justin, I will stay with us. Let's also go to then round from

Bloomberg's I.M.F. team for more on the yen's volatility.

And when we were having a great discussion, actually, you know how the

Fed would view this this yen volatility. But first of all, just on yen levels, is

it impossible to call it bottom? Is it like catching a falling knife?

No, I would think that we are closer to a bottom, Francine, because, you know,

the kind of sharp moves that we have seen in the end, whether it's

intervention or whether it's just market driven jitters, it kind of shows that

the markets are kind of thinking like, look, the dollar yen cross has gotten

too toppy for comfort and there are jitters that the authorities will come

in at these levels. And as long as those jitters prevail, I

don't see the dollar and pushing above one 6017, which was the top that we saw

earlier this morning. You know, we we have seen as

a very wide second range in the dollar yen crossed this morning and that is

extremely unusual. And we have seen it only a handful of

times, in fact, in since since the pandemic.

So these are not normal times. And that shows the heightened jitters

that we see in the markets and that will put a floor on the yen going forward.

How do you see intervention then? Well, I mean, it's, you know, masato

control. The top Japanese official was asked

about intervention. He refused to comment.

But look, I mean, it's hard to tell from just today's action whether they were.

They have been in the markets. I mean, for one, Japan is closed today.

So it could just be algo driven moves and there's already thin volatility.

So there's a lot going on in that market.

So it's just hard to call whether or not they have been in the markets.

But, you know, we will get to know from them on figures later by the end of the

month whether they've been in the markets and if they have been.

And I think it's about time because, you know, the dollar and it's trading like a

frontier market currency with these kind of sharp moves in today.

It's very, very uncharacteristic of a G10 currency and it's about time the the

officials intervened in the markets to restore some order.

Van. Thanks so much.

Van Ram there from Bloomberg's live team now.

We'll get back, of course, to macroeconomics and talk a little bit

more about some central banks move back to corporates.

And Philip shares soaring in Amsterdam after the company set aside $1.1 billion

to help settle U.S. claims linked to a recall of sleep apnea

medical devices much lower than what analysts had actually expected.

We can see Philips shares have an incredible move in today's trading

session, getting some 34 or actually 35%.

Coming up, traders look to Wednesday's Fed decision and Jay Powell comments for

any clues on rate cuts. We take a closer look next.

And this is Bloomberg.

Now let's return to our discussion with Annika Gupta, director of Macroeconomics

research at WisdomTree and Bloomberg's Justin Hartley.

So thank you both for sticking around. Annika, there's a lot going on, of

course, with commodities and geopolitics.

We understand that Anthony Blinken is in the Middle East to try and get a truce.

We haven't really seen it play out that much on oil.

What's your take on on the price of oil and what that means also for inflation

going forward? Well, we're seeing some easing of

geopolitical risks after it, you know, reached an all time peak the week before

last. However, if you look at the physically

in the physical market, we are seeing signs of tightening.

That's quite evident with the prompt time spreads.

And that's just showing that, you know, the strength in the spreads is very

aligned with our oil balance, which continues to show a deep deficit over

the second quarter of the year. And that should, you know, help provide

further the tailwinds for oil prices as we move into the second half of the

year. I mean, there are so many just, you

know, unknowns, not only the price of oil, but there is gold.

I mean, we look at these macro events and and kind of try and make sense of

the market moves afterwards. Yeah.

I mean, gold is kind of interesting because, I mean, so I mean, we are kind

of seeing a bit of a retreat right now because of kind of rate cut,

expectations being pushed back. But of course, all year long we've seen

this rally despite that. And part of that has to do with a lot

of, you know, maybe not macro reasons, maybe about kind of like central banks

accumulating purchases. But, you know, I think you make a great

point, which is that on one hand, we are very concerned about the macro economy,

but on the other hand, in the stock market, for instance, a lot of people

are looking at more structural trends that in a way are sort of like

untethered from the business cycle as more about, you know, are we all going

to be investing in AI and in cloud services regardless of where the economy

goes? And again, you also look at some of you

know, you look at gold in detail. And I know there's speculation that

there could have been a big buyer or maybe a central bank or that nothing of

this is confirmed. But if you look at silver, copper, also

at 10,000, when you look at the commodities complex going forward, is

that really a demand concern or is it just that we don't have enough supply?

Well, on the metals front, Francine, we are seeing signs of, you know, less

supply coming into the market. We have seen a number of mining projects

being mothballed, be it in Australia, being in parts of Chile.

You know, we have seen signs in China of smelters, the amount that that the mine

is actually being paid dropping to a trickle.

So even, you know, prior to the run up of metal prices, we were seeing the

market physically tightening. I think on the precious metals side, you

know, I think what will wear the most of the strength has been coming from has

been gold, silver, palladium, platinum have really been playing catch up to

gold prices. And in the case of demand for gold,

clearly there's been a lot of strength coming in from the, you know, the

speculative market on the futures market.

But we're also seeing strength on the physical market from central banks.

And surprisingly, China in particular, not only is the PBOC see, you know,

ramping up its purchases of gold, but we're also seeing retail investors, you

know, they're moving away from property markets, but looking at gold as a better

sign of, you know, sort of strength and more of a safe haven asset in these

times of uncertainty, whether in China. Thank you.

Annika, when you look at some of the earnings, just know.

I mean, I know we saw, for example, some of the banks, for example, helping Italy

and Spain overall have a better earnings season.

But it's unclear if you're a winner. You've done okay.

But there's also a lot of cost cutting there.

Right. Exactly.

And I think what we're seeing in markets is that there has been some really

strong positive reactions to really great bets.

You know, as we saw in Microsoft and Alphabet's case last week.

But the same time, there also have been some really strong negative reactions.

And I think that speaks to the fact that in the US the market has already run up

a lot. And so to kind of really surprise

markets, I mean, the bar is pretty high out there, but overall it's actually

still been a pretty solid earnings season.

I mean, in the US, about 45% of S&P 500 stocks have reported and 80% have beat

so far. And so it's pretty incredible that at

this point in the cycle, we're still seeing those numbers.

And at the same time, if you kind of look at what corporate executives are

saying, I mean, their comments are not that negative just yet.

Yeah. So interesting.

Thank you so much, Justine, Anika and Gupta there from WisdomTree and

Bloomberg's Justine Elite. Now coming up, Elon Musk's makes a

surprise trip to China to see driver assistance software.

But is that enough to help Tesla's revenue?

We'll have plenty more on that story next.

And this is Bloomberg.

It's good to see electric vehicles making progress.

Live images there from Riyadh where the U.S.

secretary of state, Antony Blinken, is currently meeting with the Saudi foreign

minister on the sidelines of the World Economic Forum summit.

Now, Blinken is in Saudi Arabia, where he's expected to step up efforts to

secure a truce in Gaza in what could be a final chance to persuade Israel to

call off an attack on Rafah. Now, Elon Musk's unannounced trip to

China seems to have paid off, with Tesla clearing two key hurdles to introduce

its driver assistance system in the world's biggest EV market.

Now let's get more on the story with Bloomberg's global global autos editor,

Craig Trudeau. Craig, I mean, this is an amazing story.

I know you haven't had a free weekend because the US just kind of does things

when he wants to and doesn't announce it in advance.

But what was the reason for him going to China all of a sudden?

He he needed this. I mean, he needs a revenue boost.

And I think, you know, Tesla's weak first quarter sales really caught

everybody off guard. I think there was some concern about a

real growth slowdown given Tesla's own forecast.

But this wasn't just a growth slowdown. This was a contraction.

Right. And so so revenue was in decline and

sales dropped despite the fact that this company has been cutting prices left and

right for more than a year now. So this driving assistance system is a

way for them to get incremental revenue out of each car they sell.

And it's something that they've been offering in the U.S.

for some time but have not been able to put to market elsewhere in the world.

So this is a sales pitch. He shows up to China.

So we know that he met with the premier, but who does he show the software to?

And is it has he had the stamp of approval or is he waiting for it?

The stamp of approval is still not a sure thing.

It certainly seems, as we mention off the top, that there's serious progress

toward them getting the okay. But this is something that's been in the

works for a while. Actually going back to when Musk last

visited China, this was something that was on the agenda that he was looking

for. And it's it is sort of the way that the

industry is competing now in the sense that, you know, if you can automate

certain driving functions, make cars safer, you really can sort of, you know,

have a leg up over the competition. But China is kind of viewing that as the

new frontier beyond just, you know, trying to electrify the industry.

They also want to automate more to more of the driving that's that's on the

road. And, you know, in order to do that in

China, you're going to need to work with China.

So in this case, Tesla needed to do a deal with Baidu for mapping and some of

the services that they provide to support these sorts of systems is that

it's not strange. It's something that we need to look into

a little bit deeper. Is it surprising?

What surprises me is not necessarily that they had to do this because this is

very sort of par for the course in China.

When the EV market was in its infancy, if you wanted to sell EVs, you had to

procure batteries from Chinese suppliers.

What surprises me is that Musk in the past has talked about the idea that

mapping systems to support these sorts of driver assistance features is not the

way to do it, that it renders them brittle.

If you have to rely on maps, your cars are not going to be able to handle, you

know, what, what comes. And so it is a little bit surprising

that his his line that, you know, Teslas don't meet need mapping kind of goes out

the window when China says no you have to to do this wonderful analysis.

Craig, thank you so much. Craig Trudeau There are auto czar coming

up, but we're live in Saudi Arabia for the World Economic forum.

This is Bloomberg.

Well, the yen swings after earlier falling to its weakest level in 34

years, raising speculation that authorities may have intervened.

U.S. Secretary of State Antony Blinken will

step up efforts today to secure a truce in Gaza during meetings in the Middle

East. Israeli forces continue to prepare for a

possible attack on Rafah. And Elon Musk's visit to China is paying

immediate dividends, with Tesla clearing two key hurdles to introduce its driving

system to the world's biggest auto market.

Well, good morning, everyone, and welcome to the Pulse on Francine Lacqua

here in London. So the US Secretary of State, Antony

Blinken, is meeting with Saudi Arabia's foreign minister in Riyadh ahead of

Gaza. Truce talks as Israeli forces continue

to prepare for a potential Rafah attack. Well, let's get more from our Middle

East anchor, Jamal Roberts, who's at Saudi's first World Economic Forum

meeting, where geopolitics is, of course, in the Middle East dominating

the agenda. Great to have you on the air and welcome

to Bloomberg. So what's the mood at this West special

meeting in Riyadh given the conflict in the region?

Good to see you, friend. And good morning from Riyadh.

Well, as you said, the US secretary of State, Antony Blinken, landed here just

a couple of hours ago as we speak. He is having a bilateral conversation

with the Saudi foreign minister, Prince Feisal.

He's also expected to have conversations with other leaders here.

We've got the Jordanian prime minister, Egyptian prime minister.

Other representatives, too. Also notable, the leader of the

Palestinian Authority, Mahmoud Abbas, is also here at the sidelines of West.

And crucially, the backdrop to this is the future of Gaza.

Discussions are taking place to find a truce between Israel and Hamas leaders

and agreements on the exchange of hostages.

Of course, details to be worked out. And then very important from the

Palestinian perspective, for the US to exercise some sort of influence or

control in Israel so that they don't go ahead for this widely anticipated

offense attack on Arafat. So a lot of issues at stake here.

But I would say from seeing a geopolitics have been dominating the

World Economic Forum summits. I know you've been to many of them

yourself. And typically you talk about growth,

energy, transition. Today, it is all about the geopolitics.

And I had the chance to moderate the panel with the managing director of the

IMF, Kristalina Georgieva, yesterday alongside the Saudi finance minister,

Mr. His Excellency Emma Chandra Zidan.

And he said that the biggest risk to the region right now is geopolitics.

It is very, very unfortunate to see loss of lives, whatever that is.

Civilian lives are important, whether it is in Ukraine or in Palestine or

elsewhere. You need to make sure that you actually

de-escalate and do everything we can in Saudi Arabia.

I can tell you for the last several years, we made it a very clear strategic

objective that we de-escalate in the region.

The region needs stability. I think the messaging is quite clear

from the Saudi perspective now, and I would think that those are the types of

discussions that are taking place between the foreign Minister and

Secretary of State Antony Blinken, and that they want a de-escalation,

de-escalate, de-escalate, to escalate. That has been the messaging from the

Saudis. But of course, alongside other Arab

states here, they want to see an end to this war.

They want to work out the details and talk about the future of Gaza.

So lots of high stakes political discussions happening here, Francine,

alongside some of the key economic issues at play as well.

I want to thank so much of Bloomberg's Middle East anchor there, jomana

Versace. Now we'll have lots more from we had

this morning, including an interview with Saudi Arabia's minister for economy

and planning. So stay with us for that.

Now let's get more on Blinken's trip to Saudi Arabia with us and Mathison,

Bloomberg's news director and Lindsay Neumann, practice head of global macro

geopolitics at Eurasia Group. Thank you both for joining us.

Let me start off with you. The U.S.

is pushing for, you know, this truce in Gaza.

They're also pushing for the release, of course, of hostages as Anthony Blinken

is in in the Middle East. Will he do any headway?

Well, this is what his seventh trip to the region in recent months.

And obviously, again, the US and other countries are pushing hard for a

breakthrough in those talks for a ceasefire.

And that's important because without a ceasefire, without an agreement to have

these hostages exchanged, the Palestinian prisoners and a truce in the

fighting, that Israel's made clear it still intends to go into Rafah with a

ceasefire, of course, that the Rafah offensive gets pushed off indefinitely,

if not permanently. So that's the imperative to get this

done once and for all. We do know that there are, again, talks

going on. There are small signs of progress in

that. But the problem that the Qataris who are

helping mediate say again, there's not any goodwill on either side, so they

both need to meet each other somewhere in the middle.

But no one really wants to sort of make the most ground to get there.

And so you've still got fundamental differences that have to be dealt with.

Some of it is just around, again, the status of the hostages, where they are,

who they are, how can they find them, even that kind of basic information and

the requirement for how long would that ceasefire go for?

Where do Israeli troops go during all of that?

So there's still big questions around it, but certainly a sense of time

pressure involved when it comes to the the talks that are going on and the

involvement of the US. Lindsey, are you optimistic about

something meaningful happening this week?

Thanks, Francine. Of course.

Until just this weekend, optimism had really receded.

It was high during February and March. We have got President Biden saying that

he expected a ceasefire imminently. That did not happen.

So we've we've seen this storyline before.

And, you know, before this weekend, we were expecting that the signs out of

Israel were that a Rafa offensive was imminent.

So we have to be cautious. But there are indicators that Israel has

potentially softened its. You changed his view on some of the key

points that Hamas have been asking for, including around the ability of

Palestinians to return to the north, around the number of hostages that would

need to be exchanged for a cease fire. And very importantly, if true, around

the duration of any cease fire. There's been reporting that it could be

perhaps more persistent than all prior proposals had allowed for, which of

course, is a key sticking point for Hamas.

So very cautious. It's too it's very too, too soon to

tell. But Israeli officials have said that

should a ceasefire be reached, they would at least temporarily abstain from

that rough invasion. The signals are mixed, though.

Lindsay what's your baseline view actually on a possible Rafale offensive?

Our view had continued to be of a quite significant 55% likelihood of a regional

security crisis where the conflict continues to be contained in and around

the Gaza Theatre and around the Rafah offensive.

At the moment we've seen over this weekend again further trading of

activity in the northern border. That could be a pressure point.

That's playing at playing at heart right now for Israel in terms of its decision

and position around the ceasefire arrangement.

But until this weekend, we continue to see

the Rafah offensive as imminent. It seems as though it is still likely,

but it could be delayed. And Roz, I mean, we talked or we heard

this weekend about, you know, the possible warrants from the International

Court of Justice. I mean, does that change the viewpoint

or the standing of what the prime minister of Israel is thinking?

Well, it's interesting because, of course, we have the separate ICJ issue,

which is South Africa accusing Israel of genocide.

The ICC is the court that can actually have the ability to get leaders arrested

in the most famous arrest warrant in recent years is Vladimir Putin for his

war in Ukraine. So if this does happen, it's a big if,

because we don't know exactly where those investigations are or how fast

they're proceeding. There's no imminent sign that they're

going to issue arrest warrants or charges for anyone, Hamas or Israel, for

the war in Gaza. But if they do, especially if it's

Benjamin Netanyahu, that's a hugely symbolic moment and a big blow for

Israel, again, shows that hardening of the global view around this conflict.

And so if it does happen, it's a big deal.

And Israel, of course, will view it as a as a fundamental attack on Israel.

So, again, you just getting that bifurcation that that would show around

the world and Russia is there this Russian Iran military alliance and how

concerned should that be for Israel? Well, we've we've seen signs of that in

various ways, is obviously seeing Iran supporting Russia militarily with its

war in Ukraine, sending a lot of equipment to Russia to use, including

drones and so on. And we've seen a long standing

relationship between Russia and Iran. And that's been a real concern not just

for Israel but for the US and others. How solid is that relationship?

How tangible is that? And does it also involve China at some

point? Because that's the real concern.

Russia, Iran, China supplying each other in different ways with weapons, doing

economic activity with each other, trading with each other, using energy

potentially in that as as a weapon. And so you've got that concern that

they're working more and more closely together.

Beyond Israel, it's a real concern for the US.

Lindsay China seems very critical and crucial in all of this, where of course

in the US election year. I want to ask, you know, your thoughts

on that. But we're seeing a lot of China bashing

from the US. Antony Blinken also asking questions

What role does China play in the stabilization?

Yeah, of course. We had a Blinken's visit just over the

weekend to China, the first visit in ten months, and it followed on from an

earlier virtual call between President Biden and presidency.

The expectations were not particularly high around that visit, and those

expectations were met. As you say, we have to contextualize

this within the broader recent engagements.

This is a relationship that is in a managed decline.

Both sides are looking to focus domestically in 2020 for the US because

of the election. China, because of various factors

include including its its economic outlook and its growth forecasts.

But this is a relationship that is in a managed decline and we're going to

continue to see both sides sort of testing those boundaries.

We do know that over the weekend that Blinken did raise around Middle East

security with his Chinese counterpart. And of course, the US is very clearly

hoping not to see the conflict in Israel, conflict in the Middle East

escalate further. And also we know that it has been

putting pressure on China vis a vis its relationship with Russia.

Treasury Secretary Yellen said recently that all options remain on the table,

but no action is imminent. How does the U.S.

election actually play in the mind of these world leaders?

So how different would it be if Donald Trump were in the White House come

November or come January? Well, there's no doubt that the November

election is one of the key risks to watch for the year ahead is, as you as

Du Monde said at the start, the Saudi finance minister said geopolitics is

perhaps the biggest risk facing the global economy, and that's on

everybody's mind. And the U.S.

is. The U.S.

election in November is is at the heart of that, really.

We've done quite a bit of thinking about what a Biden one point to one point to

point versus a Trump to point out would look like there's a great deal anxiety

about another change in U.S. leadership in the fall and then

increasingly, especially around a change in leadership that involves a Trump 2.0.

There's variations in policy depending on the topic that you're talking about.

In China, you know, we're going to continue to see those tech restrictions,

export controls under either administration.

But we would. But President Trump excuse me, candidate

Trump is discussing the possibility of a 60% tariff on China.

We think that is just rhetoric, but we expect that a Trump 2.0 would look

pretty much across the board to pursue transactional relationships with China

and elsewhere. We've already seen this in the security

space with rhetoric around what could be the U.S.

European relationship in the narrow alliance.

And Ross at the same time. So we're expecting in 20 minutes

probably a press conference from Spanish prime minister to see whether he'd

resign or that he said, I think last Thursday that he was thinking about

resigning. And then there's also a lot of rumours

about the Scottish first minister quitting today.

Well, that's right. We're watching a bunch of leaders today

for potential news. I mean, Pedro Sanchez, as you say, he

said some days ago he was thinking about resigning.

We're all waiting. He said five days.

I'll let you know. We're going to hear that shortly.

And if he does step down, this is because of news of an investigation into

his wife's business affairs. If he does step down, that, of course,

causes chaos in Spanish politics, although arguably it's been chaotic for

a while. There's no clear path then for what

would happen in terms of a successor. Does that trigger an election?

There's so many parties involved. Getting everyone to coalesce around a

replacement is very difficult. If he does stay on, he does need to do

something then to really assert his hold on power.

So is that a confidence vote? Does he survive that?

Does he need to again call an election? Perhaps he'll call an election from the

end of May onwards. But either way, we're headed for a

pretty chaotic period in Spanish politics.

Yeah. And then we're also, of course, watching

who would replace the Scottish first minister if indeed he steps down.

As always, thank you so much, both of you, for joining us.

Bloomberg's Roslyn Matheson and Lindsay Neumann from the Eurasia Group.

Now, coming up, it's a busy week also for earnings.

We'll discuss some of the key drivers behind these results.

That's next. And this is Bloomberg.

So it's been a busy week or it's a busy week for earnings.

Last week was very, very busy. But this week we have European banks,

car manufacturers and pharmaceuticals all reporting.

So. For more on this, let's bring in Tim

Craighead. He's director of research for Bloomberg

Intelligence. Tim, there is so much going on.

And actually, if you look at a breakdown, if you look at the various

sectors, it feels like the ones that are particularly strong have been doing very

well indeed. Yeah, I mean, there's no doubt and I

have to say this has been a particularly critical earnings period from our

perspective. If you think about it, markets are at

near record highs. Interest rates have been rising.

We've had two earnings results period behind us that were predominantly

disappointments. And what we've seen so far this time

with about 40% of the market having reported, is almost 50% or beating about

35% are missing bets. That's exactly the opposite of what

we've seen the last couple of periods. And about two thirds of companies are

reporting better organic growth than what was expected.

So it's a good turn. And is this on a strong economy or is it

internally? They've actually done things such as

cost cutting to be more nimble? Yeah, I think there are a number of

important drivers behind this. One is volume and pricing.

Look at consumer staples companies like Danone or Unilever, chemical companies

like BASF. Order backlogs for industrial companies

have been better and B Schneider Electric.

And those are those are notable. Banks are critical where there is a lot

of expectation about net interest margins having peaked.

They are down year on year but about 300 basis points better than what was

feared. So it's across the board.

I mean, is it surprising that a lot of these sectors have performed as they

have given the interest rate environment?

Yeah, there's no doubt. I think if you look back from last year

into this year, huge rise in interest rates.

We had a second war. We have China-U.S.

trade issues, we've got the China property

meltdown. All of that's negative.

But what we've seen across the board is more resiliency across the economy, us,

Europe than what was anticipated. And that's starting to play through.

You know, we have seen six months of negative earnings revisions in Europe,

and that's now starting to turn. If you look at forward estimates, you

know, we think that's pretty important as we look into the second half of the

year. Tim, thank you so much.

Tim Craighead there with the very latest on some of these earnings.

And also, Bloomberg understands that BHP is considering making an improved

proposal for Anglo American out for its $39 billion initial offer was rejected.

Now this comes as Anglo shareholder Elliott increases its stake in the

mining group. So let's get more on this with Will

Kennedy, Bloomberg senior executive editor for energy and Commodities.

There's so much going on, copper at 10,000 and actually they'll just they

may have to pay more if they really want this asset.

I think most people expect that they will have to pay more, that it was an

opening gambit. Obviously, Angela came back and said the

bid seriously undervalued the company. So I think that's the expectation in the

market. It may take time for BHP to decide what

it wants to do next. I don't think we need necessarily

respect and expect anything in the next couple of days, but there is this

deadline of May 22nd where BHP has to make a formal offer or walk away.

So all eyes on that. And then on the Anglo side, they too

will be needing to think about how they explain to shareholders why they should

reject BHP advanced advances and what the future shape of Anglo American

should be. What happens to De Beers?

So this is, you know, I guess a high end luxury.

So does it even fit in Anglo American there.

That's welcome that that's one asset where one part where I think the future

is uncertain in both scenarios. If BHP were to win Anglo American, it

said that it would put the diamond business up for strategic review that I

think they would stress that wouldn't necessarily mean a firesale, but it

doesn't automatically fit into the reasons why they're doing this deal,

which is principally copper. Then the Anglo side, I think there's

been a. An idea among some shareholders and some

people in the company that this isn't the perfect fit for a big mining

company. It has a very different profile, as you

say. But diamond prices have been weak and

it's not clear, you know, how strong the market would be for the business.

But I think, yes, under any scenario, it's something that people will be

asking questions about. Well, there's a Bloomberg scoop that's

really doing the rounds of all the media, especially in France, because

your team had an interview with Patrick Pouyanne, the chief executive of Total

Energy, and he said actually he's looking at possibly delisting from

France and looking at New York. I mean, he's still doing homework, but

that was pretty punchy. It's quite a surprising thing to hear

from a French CEO. I think that he would contemplate going

to New York, obviously, and I should say that it was having a blast.

He first reported the story, to be fair to have here.

So it was his scoop. But it's very interesting right now

because we heard similar noises from Shell a couple of weeks ago.

And I think there's no doubt for those people running energy companies in

Europe, they see some limitations in being listed in Europe, principally

because there is a smaller pool of investors who are willing to invest in

oil and gas. Those ESG qualms are much fewer in the

states. So US oil companies Exxon and Chevron

are getting much higher valuations from Shell and Total.

And I think for Patrick and while so it shell the question is how do you close

that gap. If you're if you're if you stay in

Europe now, will they actually do it? There are many reasons for total to be

in France. It is in its very essence, the French

company, we should point out, there's no suggestion that headquarters is going to

leave Paris. But still, it's fascinating that it is.

I'm sure he'll get a call from the president.

I don't know if you will, but I'm pretty sure I could bet my house on that.

Will Kennedy will also join me on a podcast on this very subject.

Coming up, we go back to talking Yemen effects.

This is Bloomberg and.

Well, sharp swings in the yen have spurred speculation that authorities may

have intervened. Let's bring in Paul Dobson, Bloomberg's

executive editor for Asia Markets. Paul, was it intervention?

Would we even know? Aha.

Yeah. Two good questions.

It's not entirely clear. The Finance ministry in Japan is

certainly staying schtum on the matter. For now at least, there are some people

in the market who say that the moves bear all the hallmarks of an

intervention pointing to the size of the move, the pace of the move as well, and

saying that the timing would be appropriate given that there was limited

liquidity because it's a holiday in Japan today, therefore there would be

the possibility of moving the market much further.

Getting more bang for your buck, so to speak.

But some of the traders that we've spoken to in the market aren't

completely convinced that it was Japanese intervention.

They say more likely Algo is doing their trading things and pushing the market

through some key barriers on the on the upside for dollar yen through 160 and

then all the way down through that 155 level on the flip side.

So the jury is out. What we do know is that we can do some

sort of forensic accounting over the next few days to try to figure out

whether that shows up in the Japanese accounts, whether there's a jump there

that would point to the idea that intervention was done.

And then eventually, in a month or two time, we will get proper numbers that

will give us more of a determination on whether that was or wasn't.

But nonetheless, I think that the feedback or the fallout for markets is

certainly a chance to lick the wounds after some pretty wild swings in the

market today. Thank you so much.

We love a bit of forensic analysis here on Bloomberg.

Paul Dobson, Bloomberg's executive editor for Asia markets up next to

Bloomberg brief with daniel manus. This is Bloomberg.