Biden to Quadruple China EV Tariffs, Putin Reshuffle | Bloomberg The Pulse 05/13/24

Summary

In this comprehensive economic discussion, Bloomberg's Francine Lacqua addresses key issues at the Qatar Economic Forum. The conversation encompasses President Biden's plan to intensify the trade war with China by quadrupling tariffs on electric vehicles and increasing levies on other industries. The forum also explores the implications of Russia's President Putin replacing his defense minister, a strategic move that suggests a focus on economic growth amidst the ongoing conflict with Ukraine. Meanwhile, France's President Macron is set to reveal significant investments from tech giants like Microsoft and Amazon, aiming to establish France as a post-Brexit financial hub. The program highlights the importance of the upcoming US consumer price index, which is expected to influence the Federal Reserve's monetary policy. The discussion also touches on the potential impact of geopolitical tensions on the global economy, the role of Qatar as a mediator in the Middle East, and the strategies of the Gulf states as they transition towards economies less reliant on oil.

Takeaways

• 📈 The US is planning to quadruple tariffs on Chinese electric vehicles (EVs) and increase levies on other key industries, escalating the trade battle with Beijing.
• 🌍 Russian President Vladimir Putin has replaced his long-serving defense minister, signaling a potential shift in focus towards economic growth amidst the ongoing conflict in Ukraine.
• 🇫🇷 French President Emmanuel Macron is set to choose France in an event aimed at industrializing France and establishing it as a financial hub post-Brexit.
• 💼 Major tech companies like Microsoft and Amazon are unveiling significant investments, possibly as part of France's efforts to attract foreign investment.
• 📊 US consumer price numbers are due on Wednesday, with data potentially impacting the Federal Reserve's monetary policy and interest rates.
• 🚗 Despite the tariff increase, Chinese EVs have not significantly penetrated the US market, suggesting that the new tariffs are more symbolic and politically motivated.
• 💹 European markets are experiencing a breather as investors await key data that may influence the outlook for interest rates.
• 🏦 The first quarter GDP and unemployment data for the euro region are also due, which could have significant implications for economic policies.
• 🔍 China's announcement to sell ultra-long special bonds has boosted sentiment following weak data from the country.
• 🤝 President Macron's exclusive conversation with Bloomberg TV may provide insights into France's economic strategies and international relations.
• 📉 There is a mixed outlook for global economies, with central banks potentially on hold until a clearer economic picture emerges.

Q & A

What is the main focus of the Qatar Economic Forum?

The Qatar Economic Forum is focused on exploring the issues driving global boardroom conversations and highlighting the rising prominence of the region, particularly in terms of its sovereign wealth funds and their global investment portfolios.

Why is President Biden planning to increase tariffs on Chinese electric vehicles (EVs)?

President Biden's plan to increase tariffs on Chinese EVs is seen as a political move to demonstrate a tough stance on China, especially in key industries like the automotive sector, and to support domestic manufacturers.

What is the significance of Vladimir Putin replacing his long-serving defense minister?

The replacement of the defense minister by Vladimir Putin indicates a potential shift in focus towards economic considerations within the military and a desire to improve efficiency in spending, possibly due to the ongoing war efforts in Ukraine.

How does the Biden administration's approach to China differ from that of the Trump administration?

The Biden administration aims to be strong on China but in a more measured and targeted way, focusing on areas like climate cooperation and using tariffs to enhance American competitiveness, particularly in the green transformation sector.

What is the current state of the U.S. economy in relation to inflation?

The U.S. economy is experiencing stubborn inflation despite signs of slowing growth. The Federal Reserve is closely monitoring consumer price numbers to gauge the outlook for interest rates and potential economic adjustments.

Why is the U.S. Secretary of State, Antony Blinken, expressing concerns about Israel's actions in Gaza?

Blinken's concerns stem from the potential for Israel's actions to further fuel Hamas insurgency in post-war Gaza, indicating a steady escalation of U.S. concern about Israel's conduct in its conflicts with Hamas.

What is the role of Qatar in mediating conflicts in the Middle East?

Qatar has been mediating between various parties in the Middle East, including Hamas and Israel, and has been involved in negotiations due to its influence and soft power in the region.

How are the Gulf states, including Qatar, diversifying their economies?

Gulf states are diversifying their economies by targeting sectors such as tourism, financial centers, logistics, high tech, and air industries. They are also investing in sports technology and A.I. through their sovereign wealth funds.

What are the potential challenges faced by the Gulf states as they diversify their economies?

The Gulf states face challenges such as crowding out within the region due to targeting similar sectors and the need to differentiate their approaches to avoid competition in the same economic activities.

What is the current focus of European telecom companies?

European telecom companies are focusing on cash flow growth, dealing with high input costs and wage pressures, and some are in the process of strategic turnarounds, such as BT.

How is the upcoming U.S. inflation data expected to impact the Federal Reserve's monetary policy?

The U.S. inflation data is critical as it may influence the Federal Reserve's decision on interest rates. If inflation is higher than expected, it could deter the Fed from cutting rates, whereas lower inflation could provide room for rate cuts.

Outlines

00:00

📈 Economic Forum and Trade Tensions

Francine Lacqua opens the discussion from Doha, Qatar, at the Qatar Economic Forum, highlighting the upcoming topics which include President Biden's plan to increase tariffs on Chinese electric vehicles (EVs), the replacement of Russia's defense minister by President Putin, and France's position in the market with Emmanuel Macron's involvement. The focus then shifts to European markets and the anticipation of key data that could influence interest rates on both sides of the Atlantic. The discussion also touches on the Biden administration's symbolic stance on tariffs and the potential impact on Chinese EVs entering the U.S. market.

05:00

💼 Corporate Investments and Market Analysis

The segment delves into the significance of the U.S. consumer price numbers, the euro region's first quarter GDP and unemployment data, and the potential influence of China's sale of ultra-long special bonds on market sentiment. It also features insights from Craig Trudell, Bloomberg's global autos editor, on the political motivations behind the increased tariffs on Chinese EVs. The conversation then moves to the broader economic context, with discussions on inflation, tariffs, and the potential impact on the Federal Reserve's monetary policy, featuring contributions from Trevor Greetham of Royal London Asset Management and Justine Ali of Bloomberg.

10:02

🌐 Global Economic Insights and Conflicts

This part of the script addresses the complexities of global economic trends, including the potential for rate cuts by the Federal Reserve and geopolitical factors such as the U.S.-Israel relationship and the conflict in Gaza. It also discusses the U.S.'s stance on China, with an emphasis on the Biden administration's approach to tariffs and climate policy. The role of Qatar in global negotiations and its economic strategies are also explored, along with the challenges and opportunities faced by the Gulf states as they diversify their economies away from oil.

15:02

📊 Inflation Data and Telecom Earnings

The focus here is on the anticipation of U.S. inflation data and its potential impact on the Federal Reserve's decision-making process. The discussion includes an analysis of the University of Michigan's economic numbers and the possible lagging effects of rising interest rates on the economy. Additionally, the script touches on the upcoming earnings reports from major European telecom companies and the importance of cash flow as a guiding metric for these companies.

Keywords

💡Tariffs

Tariffs are taxes or duties imposed on goods being imported or exported. In the context of the video, President Biden is set to increase tariffs on Chinese electric vehicles (EVs) and other key industries, which is a significant aspect of the ongoing U.S.-China trade tensions. The script mentions that the tariffs on Chinese EVs could rise from just over 27% to more than 100%, indicating a substantial increase that could impact trade dynamics.

💡Inflation

Inflation refers to the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The video discusses 'Inflation Week' in the context of expecting key data that may influence interest rates on both sides of the Atlantic. It is a critical economic indicator that affects financial markets, investment strategies, and central bank policies.

💡Electric Vehicles (EVs)

Electric vehicles are vehicles that use electric motors for propulsion, instead of, or in addition to, internal combustion engines. The script highlights that the Biden administration is considering quadrupling tariffs on Chinese EVs, which could potentially limit the entry of Chinese EVs into the U.S. market and is part of broader discussions on trade, environmental policy, and economic competition.

💡Quantitative Easing

Quantitative easing is a monetary policy in which a central bank creates new money to buy government bonds or other financial assets to inject liquidity into the economy. The video mentions the Bank of Japan's actions in the context of managing its economy, suggesting that even unconventional monetary policies like quantitative easing are being considered or utilized by central banks to address economic challenges.

💡Soft Power

Soft power is the ability to influence the behavior of other countries through appeal and attraction, as opposed to using force or coercion (hard power). The video discusses how Qatar is using its soft power to mediate between global powers and regional conflicts, highlighting its influence beyond its size or military strength.

💡Sovereign Wealth Funds

Sovereign wealth funds are state-owned investment funds that invest in real and financial assets both domestically and abroad. The video talks about the role of sovereign wealth funds from the Middle East, emphasizing their efforts to diversify their economies beyond oil and gas, and their pursuit of both economic returns and soft power through their investments.

💡Defense Minister

A defense minister is a government cabinet position responsible for the implementation of defense policy and the armed forces. The video discusses the unexpected replacement of Russia's long-serving defense minister by President Vladimir Putin, which may signal a shift in focus towards economic aspects of the war effort and efficiency in military spending.

💡Economic Forum

An economic forum is a conference or meeting where economic issues are discussed, often involving leaders from business, finance, and government. The video script mentions the upcoming Qatar Economic Forum, which is a platform to explore global economic issues and the region's economic prominence.

💡Interest Rates

Interest rates are the percentage at which interest is charged on loans or earned on deposits. The video discusses the anticipation around U.S. consumer price numbers, which could influence interest rates set by central banks. The theme of the video involves how economic data might lead to changes in monetary policy, affecting interest rates.

💡GDP

GDP stands for Gross Domestic Product, which is the total value of goods produced and services provided in a country during one year. The video mentions first quarter GDP data for the euro region, indicating its importance as a key economic indicator that reflects the health and size of an economy.

💡Unemployment Data

Unemployment data provides information about the number of people in a country who are able to work, are available for work, and have actively sought work but are currently without a job. The video discusses the unemployment data for the euro region, which is a significant economic indicator that can influence decisions about monetary policy and fiscal measures.

💡Investments

Investments refer to the commitment of money or capital with the expectation of generating profit or income. The video mentions major investments by companies like Microsoft and Amazon in France, which is part of a broader narrative about globalization and the strategic allocation of financial resources by corporations to expand their reach and influence.

Highlights

President Biden is set to quadruple tariffs on Chinese electric vehicles (EVs) and increase levies on other key industries, escalating the trade battle with Beijing.

Russian President Vladimir Putin replaces his long-serving defense minister, signaling a potential shift in focus towards economic growth amidst the ongoing conflict in Ukraine.

French President Emmanuel Macron's 'Choose France' event is set to take place, with major investments expected to be announced.

Tech giants Microsoft and Amazon, along with other companies, are preparing to unveil significant investments in France.

European markets are experiencing a pause as investors await key data that may influence interest rates on both sides of the Atlantic.

The U.S. consumer price index (CPI) is a focal point for the week, following data indicating a slowing economy with persistent inflation.

Sterling is affected by the economic data, showing a weak performance.

China announces the sale of ultra-long special bonds, which boosts market sentiment after weak data from the country.

Bloomberg's global autos editor, Craig Trudell, discusses the symbolic nature of the U.S. tariff increases on Chinese EVs and the political motivations behind them.

U.S. tariffs on Chinese EVs are expected to rise from just over 27% to more than 100%, significantly impacting the market dynamics.

The potential exemption of some components, like panels, from the tariff increase indicates complexity in the trade measures.

Donald Trump's reaction to the tariff news suggests he believes more should have been done in previous years, highlighting political posturing around the issue.

Discussions around the possibility of Chinese manufacturers using Mexico as a 'backdoor' to the U.S. market are met with skepticism due to the lack of actual plants.

Treasury yields are being closely watched by traders positioning ahead of significant economic data releases.

The first quarter GDP and unemployment data for the euro region are due, adding to the紧张情绪 (tension/anxiety) around economic indicators.

SoftBank reports a second straight quarter of profitability, benefiting from an investment boom in AI and tech sectors.

The Qatar Economic Forum is set to explore how Gulf states are broadening their economic influence and self-sufficiency on a global scale.

Transcripts

Newsmakers and Market movers. This is the pulse with Francine Lacqua.

Well, good morning, everyone, and welcome to the pulse. I am Francine Lacqua

here in Doha, Qatar. We're here for the Qatar Economic Forum,

which kicks off tomorrow. Now, here's what's coming up on today's

program. President Biden is set to quadruple

tariffs on Chinese EVs and sharply increase levies on other key industries

as Washington's trade battle with Beijing actually intensifies.

The Russian president, Vladimir Putin, replaces his long serving defense

minister. An unexpected changing of the guard more

than two years into Moscow's invasion of Ukraine.

And Emmanuel Macron choose France. Event is taking place today.

Microsoft, Amazon and others are set to unveil major investments.

The French president will also join Bloomberg TV for an exclusive

conversation a little bit later on today.

Now, first thing is first, we have a lot of news to cover, but let's take a look

at the European markets map now. I came in this morning.

The first thing I read was actually a brilliant John Authers piece saying

Welcome to Inflation Week, because today if you look at Europe, but also across

the board, stocks are taking a little bit of a breather as investors are

really waiting some key data this week that may cast light on the outlook for

interest rates on both sides of the Atlantic.

But the main focus will, of course, be on the US consumer price numbers on

Wednesday after data last week pointed to an economy that is slowing amid some

stubborn inflation. So let's do cross assets.

We're always looking at Treasuries to have a look at how some of these traders

are positioning ahead of a big week when it comes to data.

Look, first quarter GDP and unemployment data for the euro region are also due

out on Wednesday. So it's going to be a big week on

Wednesday. You can see Sterling on the back of the

A, we lost week of 1.2522. And then a couple of other things I'd

watch out for is we also had news from China that the country will sell ultra

long special bonds and that's boosting sentiment after weak data from of course

China over the weekend. So the Biden administration set to

quadruple tariffs on Chinese electric vehicles and sharply increase levies for

other key industries. Now, Bloomberg understands that if

tariffs will rise from just over 27% to more than 100%.

Now, for more on all of this, we're joined by Craig Trudell, Bloomberg's

global autos editor. Craig, thank you for joining us.

I mean, this seems political theater, you know, theater is this trying to get

votes in the U.S.? What does it actually mean in terms of

Chinese EVs getting into the U.S.? Yeah.

This is a case of of mostly symbolism of the fact that that, you know, EVs we

have not seen a whole lot of of Chinese electric vehicles make it into the U.S..

Because for that matter, the fact that the Trump administration, as you

mentioned, had already increased tariffs on vehicles from China to 27 and a half

percent. So, I mean, that was really enough

already to make a significant sort of send a significant message that your

vehicles are not welcome here. I do think that there was by, by some

measures, an ability to import into the U.S.

and still be able to sort of, you know, take take that hit.

We now see, you know, that you know, that that small gap are completely

closing. I think the level of of sort of unity in

Washington, if the one thing that sort of unifying both parties is, is, you

know, really taking a tough stance on China, particularly with important

industries like the car industry. Craig It feels like we had news that

some may actually be exempt. I don't know if those are panels or

anything like that. It was just too soon to say.

But how did Donald Trump react to the news over the weekend?

Would he do more tariffs against TVs he was mocking?

He said, you know, isn't this nice? And and referred to this idea of

actually, you know, this this view that Biden should have done this years ago.

I think that's interesting in light of the fact that, you know, Biden kept in

place Trump era tariffs. I do think also he's been really hitting

this idea of a possibility of Chinese manufacturers building in Mexico and

sort of using Mexico as a sort of backdoor.

And we've seen indications in recent months that while there was some

interest among companies to do that, you know, that essentially Mexico has kind

of, you know, shut out Chinese manufacturers to some degree.

So while he's talked about, you know, you know, taking Biden's 100% roughly

rate and saying I'm going to put 200% on cars coming in from Mexico, that's

extremely theoretical. There's there's not any actual Chinese

electric vehicle plants going up in Mexico and trying to to import into the

U.S. So this is very much, you know,

political theater. And in keeping with with this

announcement from the Biden administration being largely symbolic

and sort of carving out, you know, a tough stance.

But Craig, because overall, if you look at the supply of some of the EVs, but

also aluminium, steel and some of the other things that that administration

has put tariffs on, it's it's very small.

So it's not really about crushing the segment, right.

It's about is it about delaying the entry into the US market?

Yeah, I don't think that we're going to see Chinese cars just making it into the

US. Generally, I think, you know, even with

respect to, you know, if you were able to overcome

a tariff rate as high as where Biden wants to take it, which you know, is

quite difficult to do. So I think, you know, there's even, you

know, moves to try and kind of turn this into a national security issue.

And the fact that, you know, electric vehicles tend to have, you know, cameras

for crash avoidance systems and sort of on those grounds blocking electric

vehicles. So I think we're going to see, you know,

this become, you know, an example of the ways in which the world is very much

bifurcating, as, you know, China versus the rest of the world and what's

acceptable to to various markets. Craig, as always, thank you so much.

Craig Trudell there of Bloomberg's global autos editor.

Now, we'll have some really good interviews a little bit later on.

We'll also hear more about the state of the US-China relations and China's

overcapacity issues from the US Treasury Secretary Janet Yellen's exclusive

interview with Bloomberg TV and radio is coming up a little bit later.

Now let's go to the markets with again a big week.

It's inflation week. We also have tariffs and the like.

We're joined by Trevor Greetham, Royal London Asset Management's head of

Multi-Asset and Bloomberg's Justine Ali. So thank you both for joining us.

Trevor, let's start with you. It's Inflation Week.

Happy Inflation Week. How important are all of those numbers

coming from the US to try and give us a glimpse of what happens to two Fed's

monetary policy? Absolutely critical.

At the moment, you've got the markets facing a bit of a summer tightrope where

normally in the summer the markets get more volatile as thin trading people get

very sort of anxious. And with inflation where it is right now

with the Fed, where it is right now, if you've got really strong economic

activity over the summer, people would worry about rate hikes.

And if you got weaker economic activity, people would worry about earnings.

So what you really need to square the circle there is inflation to come in

lower than expected so the Fed can cut rates even if growth holds up.

You don't want to say, you know, good news, the Fed's cutting bad news.

The stock market's falling. So what does that tell us, Justin, about

what the markets are looking for again? We know these sort of numbers are

extremely important, especially the nuances that we've seen and dangers

about the U.S. economy overheating.

But are we going to see positioning in treasuries but even something like gold

ahead of the Wednesday CPI? Yeah, I think those are some really

important questions here, because if we look at what's been going on in the

Treasury market, I mean, yields have fallen quite a bit with markets

generally relieved that it doesn't seem like we're going to get another rate

hike. But I think these numbers are really

critical in the sense that, I mean, economists are expecting CPI to be

generally like a tad kind of lower. But at the same time, we've kind of seen

these contradictory signals. You know, on one hand, the labor market

has seemingly been slowing. But at the same time, I mean, if you

look at the inflationary indicators, I mean, those don't seem to be cooling at

all. I mean, so how do we kind of reconcile

that? Or could it be that a lot of the factors

weighing inflation right now are just no longer related to the labor market?

And Trevor, I think you're maybe one of the lonely voices putting out there.

I think Larry Summers is saying that we could see a rate hike.

Why has that been largely discounted? I mean, the mood of the markets is very

clearly towards optimism that inflation has been tame.

So I don't know whether it's because the Fed overpromised in December and there's

still the overhang of that or whether the markets will get a different set of

numbers. Well, I mean, if you look at the US

economy's posted solid growth really throughout the last three or four years

and against expectations people were expecting after the pandemic the

interest rate shock to see a recession. It hasn't happened because we've had a

kind of rolling series of sectoral recessions, first of all, services and

then production and housing. What you're seeing at the moment is

services are still strong and production looks like it's recovering and that

could result in stronger activity. Sticky inflation and and Fed rate hikes.

I mean, certainly certainly I would not rule that out.

I do think the Fed wants to squeeze in a rate cut if they can.

And don't expect a big series of rate cuts there unless you get a lot more

weakness in the economy. If you look at the US unemployment rate

is starting to trend higher. You have to squint your eyes a little

bit, but it's still a very low unemployment rate and that does create

inflation risks in the labour market. And you've got a whole range of other,

what we call spike and shocks out there, things like geopolitics, net zero D,

globalisation, all of these things can result in one off shocks to the price

level and that's what could, could bring inflation back.

So I think the Fed doesn't want to kind of ease too soon and find themselves

having to hike aggressively later, and that does limit the scope for rate cuts.

We've been overweight stocks, underweight government bonds all year.

We haven't changed that position. And I think the real sort of tight rope,

as I referred to earlier, is that the way to get the Fed definitively to cut

rates is unemployment rates to rise, and can the stock market weather that

without wobbling? Yeah.

And there's a number of problems right in all of this because it's a set of

data that doesn't always match what we've seen.

And this could be because of where we are in the cycle or just the fact that

this is a different cycle. But we also need to factor the fact

that, you know, the rising interest rates could have a lagging effect and

could start impacting the economy. We know that the Fed certainly Jay

Powell likes the University of Michigan numbers.

And if you look at expectations and assessment of current conditions,

they're both dropping a little bit. Trevor.

So what do you do with that number? It's very mixed data, both on the

inflation side where you would expect inflation to to start to kind of ease

and then it might be sticky on the way down, but you would expect inflation to

drop. I see more scope for that at the moment

in Europe than in the US. On the other hand, the growth picture is

a bit mixed as well. You've got some contradictory signals

from things like consumer confidence and the bit of the cycle.

It looked like it was accelerating two or three months ago, which was

production. The more recent data from the Purchasing

Managers surveys suggests that maybe that's actually petering out as well.

So it's a really tricky one right now. And I think what it says is central

banks are on hold and when things become clearer, they'll be hiking or they'll be

cutting. But hikes are definitely possible if the

economy's just stabilised from here and production picks up.

I think rate hikes are possible. Justine.

I mean, to Trevor's point, I mean, it does seem like we're in a fine balance.

Almost like a fine balance like we haven't had in the past.

Is that fair? And what does it mean for money moving

around right now? Yeah.

I mean, you raised a great point, which is obviously the question everyone's

always asking is, are we going to see kind of a lagging effect with monetary

policy and that we're just going to be shocked kind of one day and seeing the

effects fade through? You know, for instance, one factor in

inflation that a lot of people are talking about is those high rents in the

US, which just seem so sticky. But of course that kind of tends to

react a bit more slowly in that it doesn't really move until, you know,

people kind of move around or they renegotiate their leases.

And so that's sort of in the camp of, you know, maybe inflation looks like

you're right now, but it should be coming down.

And I think that kind of will have a lot of implications.

You know, for currencies, for instance, we've seen the strong dollar for quite a

while now and also for equities, which kind of have been surfing this like

Goldilocks environment. Okay.

Thank you both for joining us. Just finally, of course, from Bloomberg

and Trevor Greetham from Royal London Asset Management stays with us.

Now, coming up, we'll have plenty more from Qatar, Doha.

Much more. This is Bloomberg.

Welcome back, everyone. Now let's return to our discussion with

probably them from Royal London Asset Management.

Trevor, thank you so much for sticking around.

Now, we were talking before about, I guess the dispersion or the fact that

you have different kind of data points and it's quite difficult to put them all

as one. There's also extreme division in

politics, especially in the US. Does does it make it harder to

understand whether what kind of economy you're dealing with, does it seep

through economists expectations? I think it will do.

If you think about some of the polarised debates like the Brexit debate in the

U.K., for example, one side looks for every bit of data to prove that Brexit's

disastrous, the other side ticks every bit of data to say everything's fine and

economics isn't a perfect science. So you will get people interpreting the

data in the US in the run up to November election the way they want to see it.

But I'm just struck by the fact you remember the inauguration speech from

Trump when he when he became president was all about, you know, the wasteland

of the American economy. And people were looking at each other

going, which American economy? Because at that time the data was

actually quite strong. So I think for Trump specifically, it

won't matter. He'll just say everything's a disaster

even if it isn't. But the data's enough.

There's enough mixed data out there to give some credence to that view.

There are a number of questions. Also, once the Fed if the Fed starts

cutting the same for the Bank of England.

In previous cycles, we've always had, you know, you start with a cut and then

you continue cutting, even if you're very tentative.

This feels different. Do we have a blueprint or a manuscript

for what could happen in terms of you cut once and then you wait?

It does feel different. You mentioned the likes of monetary

policy earlier on and there is a refinance wall out there which could

mean that you get, you know, financial sector problems piling up and therefore

one rate cut becomes five rate cuts. But it feels like this is such a

different business cycle because of COVID and the the sectoral recessions

which didn't overlap. It feels like the economy's actually got

some robustness to it. So I'm in the camp at the moment that

says probably will get the Fed to cut rates If the data on Wednesday is soft,

maybe they'll cut rates sometime this year.

But I don't see it as the beginning of like eight rate cuts.

I think it's more of steadying the tiller and then it will move back in the

same position we were before, which is trying to read the data.

What's happening with inflation? Where is it basing and are there any

more shocks coming down the pike, which means inflation goes back up again.

What the Fed really doesn't want to do is get caught in the early 1980s

situation where they cut rates aggressively and they'd have to hit them

again. You get a double dip recession.

They don't want to do that. And the other really interesting central

bank is, of course, the DOJ. We had news today that there were, you

know, cutting some of the bond buying. This is an irregular operation, but also

yet again, weaker. What can they do?

They can't do a lot, really, because everyone knows the inflation picture in

Japan isn't isn't that hot? It's very hard for them to suddenly come

out and say this is the first of a series of rate hikes or we really mean

it. So I think they're kind of in the lap of

the gods, really. If the US economy is stronger than

expected, the Fed doesn't cut very much or even starts hiking rates.

Then the yield spreads between the US and Japan will widen again and the yen

will weaken again. Intervention doesn't really cut the

mustard unless you have a policy shift going along with it.

And everyone knows Japan can't hike rates aggressively at the moment.

They don't need to. So I think the the risk is that if you

do get a stronger than expected us, the dollar strengthens as the yen weakens

again, which is why Japanese equities for us are like an anti bond play.

If you're worried about treasuries, you think interest rates could go higher.

Japanese equities are doing well in that environment because the exporters are

benefiting from the weak yen. You do have to be careful about the yen

exposure. So if you're buying a futures contract,

you don't get the currency, but you can buy an exchange traded fund, for

example, that's hedging the yen. But if you can get that exposure, it's

like it's like an anti bond. And in the scenario where the Fed's

hiking, it should do well. Interesting.

Trevor, as always, thank you so much for joining us.

It was Trevor Greetham from Royal London Asset Management.

Now coming up, we'll have plenty more on corporate SoftBank reporting a second

straight quarter of profitability. We'll have more on the AI boom that has

buoyed assets, including chip designer arm.

This is Bloomberg.

Welcome back, everyone. Amazon, Microsoft, Pfizer and Morgan

Stanley are among the companies poised to boost their presence in France.

Now, a flurry of new foreign investments will be unveiled today, amounting to

almost €15 billion. Now, President Emmanuel Macron is

hosting 180 chief executives this week in a push to industrialize France and

make it a financial hub for the post-Brexit EU.

Well, President Macron will speak exclusively to Bloomberg from the Choose

France. Some of that interview with our very own

John Micklethwait, our editor in chief. And that's at 6 p.m.

UK time. You don't want to miss it.

The Goldman Sachs chief executive David Solomon will also join us for an

exclusive interview as he takes part in the Choose France Summit.

That conversation starts at 3:30 p.m. UK time.

Now on to SoftBank and it's reported a second straight quarter of

profitability. The Japanese tech giant has benefited

from an investment boom which has buoyed assets like ARM.

Let's bring in Bloomberg's Alex Webb. Alex, what's your main takeaway from

this? So.

Is it software earnings or the fact that now they're sitting on so much cash that

we're just wondering what they'll do with it next?

Well, I think it shows you actually how dependent they are.

An arm, even though ARM has now been listed in the US, it remains

consolidated within SoftBank's earnings. They still own because they re more than

50% of the equity. The question now, and this is the thing

they're trying to play up is how they benefit from this AI boom.

AAM actually did pretty well at the end of the quarter at the end of March but

actually since then they had slightly soft earnings and the share price has

suffered as a consequence. People are sort of realising with ALM

that is not quite the play that they would have you believe the Nikkei

reported yesterday in fact that aam is trying to have an AI product in the new

year but it's still very early stages in that and there's a lot more they can do.

So how will their investments change, Alex?

I know they've also wound down some of their investments.

Do we have any? How are they going to take advantage of

this change? Yeah.

I mean, it's really about trying to increase their exposure to.

Interesting. You know, it's an interesting time to do

it because we're very presumably very much at the top of the cycle.

The valuations in the air space are pretty punchy.

So how they get value there is interesting the graph core deal which

has been reported that they're in talks to acquire Graph Core.

Now that is a company that designs chips specifically for AI.

If they can make that happen and not dumb price and the tech is good, that's

good on ramp. Alex, thanks so much.

Alex Webb there from Bloomberg Originals.

Coming up, we have a full roundup of news from the Middle East.

This is Bloomberg.

President Biden is said to quadruple tariffs on Chinese EVs and sharply

increase levies on other key industries as Washington's trade battle with

Beijing intensifies. Russian President Vladimir Putin

replaces his long serving defense minister on an unexpected changing of

the guard more than two years into Moscow's invasion of Ukraine and

Emmanuel Macron's. Choose France event taking place today.

Microsoft, Amazon and others are set to unveil major investments.

A French president will join Bloomberg TV for an exclusive conversation later

today. Well, good morning, everyone, and

welcome to the pulse and Francine Lacqua here in Doha for a Qatar economic forum.

Now, the Russian president, Vladimir Putin, has replaced his long serving

defense minister with his former economy aide.

Now, the surprise cabinet reshuffle signals a focus on growing the Russian

economy more than two years after the invasion of Ukraine.

Well, for more on all of this, let's go straight to Sylvia Westfall, Bloomberg's

managing editor for economy and government.

Sylvia, thank you so much for joining us.

Now, this comes a couple of days after President Putin was sworn in again.

What does it tell us of how the economy and, of course, the war efforts will

shift? Sure.

I mean, I think the reshuffle and the choices perhaps signal some displeasure

from Putin about how the war has gone on.

If you remember back to the start of the invasion of Ukraine, Russia boasted it

would be over quite quickly. And obviously, we hear things are still

grinding on on the ground. And Russia's had to completely

recalibrate its economy in response to the need for funding the war and also to

adapt to these sweeping sanctions. And in some ways, that's actually

Russia's managed to do that quite effectively.

If you look at now his pick of this close aide and trained economist in this

role, it does signal that there is sort of a focus now on how to keep this war

economy going, how to make spending and other elements more efficient and able

to have a kind of more sustainable front line as Russia pushes onwards in its in

its invasion now in Ukraine. So, Sophia, what do we actually know

about Andre Bello's office? New defense minister?

As you're saying, he's an economist by training.

Is this more the purse guy, the money guy in the war efforts?

And is it going to be less strategic than the previous defense minister?

Well, he's definitely not a military man.

It's clear that, you know, the military analysis and the way in which it's being

formulated is very much being directed from the top with other other

individuals in Russia. He's seen more as someone that's

bringing kind of efficiency to the spending and the ways in which things

operate. You know, he I think perhaps this was a

surprise. It perhaps wasn't a surprise that Putin

shook things up and that he replaced his former defense minister Shoigu, who had

been kind of under pressure over the war.

But what's quite interesting is this pick here, and we'll be finding out more

about him. I think, you know, it does signal this

sense that the economy is very much coming into focus, and that's also

important in the lead up to Putin's trip to China, where he's obviously going to

meet one of his most important allies in sustaining that war economy and the

importance of trade with China. This kept Russia afloat in many ways.

Sylvia, thank you so much as always. Sylvia West, although Bloomberg's

managing editor for the economy and government.

Now, the US Secretary of State, Antony Blinken, says Israel risks fueling Hamas

insurgency in postwar Gaza. It's the latest warning in a steady

escalation of U.S. concern about Israel's conduct in its

fights against Hamas. Well, for more on all of this, we're

joined by Leslie Van de Murray, director of the US and Americas Program at

Chatham House. Leslie, as always, thank you so much for

joining us. It's unclear where this conflict ends

and how many more loss of life there will be like.

How do you see the next couple of months evolving?

Well, right now, we're at a moment of urgency for those over 1 million

Palestinians in Rafah. And the problem, as you rightly

signaled, is that it's very difficult to think about the day after the plan for

governance in Gaza when when the world is facing such a critical moment and

we're seeing the U.S. begin to, at least at the level of the

words that are chosen, put slightly more leverage on Israel, still demanding that

the hostages be returned, that Hamas return those hostages and trying quietly

to continue those talks. But it seems to be at a standstill with

Netanyahu continuing to tell Palestinians to evacuate.

And as we all know from an area where there's really nowhere to go, where

humanitarian assistance has been blocked.

And so it is a crisis moment. And, you know, Blinken and Biden are

both getting it are getting it from all sides.

Many people seeing the the pressure on Israel to being very insignificant at

best, having little, if any, impact. And, you know, to the extent to which

those military weapons will really be held back is unclear.

Some people think the report that came out was too.

I didn't really draw a hard enough line and chose its words too carefully.

And others think that the right thing to do right now is to be quiet, to exercise

quiet diplomacy, quiet pressure on Israel, because these overt words are

simply playing into the hands of Hamas and other partners and other adversaries

in the region. These are really complex decisions to

make. I think the U.S.

is trying to put pressure on all sides, but the reality is that those people on

the ground, this is potentially a humanitarian crisis, a loss of life,

unlike we have seen in in many years in the Middle East.

And it is truly ordinary in the scale. Are you surprised?

I mean, the tone in which the US is now talking about the conflict and warning

Israel about what will happen if they really, you know, do the incursion into

Rafah. I mean, it's a change of tone.

Were you expecting to this to come quicker or can they go even harder?

Or as you seem to be intimating, this actually makes no difference and could

be counterproductive? Well, it is a change of tone.

I think it's a change of tone that many people have wanted to see for a long

time. We know that President Biden has been

pursuing a strategy of holding Israel close.

He believes in the state of Israel, and it's in its rightful, its right to

provide for its own security to get the hostages back to defeat the threat that

Hamas presents. But there's been a feeling and the

signal from the administration that that pressure on Israel has been quiet.

It's been private. So the shift now is that it's in the

public domain, but it's really for for many people, given the scale of the

threat to the loss of life of Palestinians, that that is presented

right now, it's simply too little. And and many people are concerned that

it could be too late. But again, the job of the US right now,

in part, is to put leverage and pressure on all sides, on Hamas and on Israel and

on other parties that have an ability to influence either of those two sides.

And so it's a tricky it's a it's a tricky position.

And as we know, Biden is facing pressure from all sides domestically in an

election year where the Republican Party is, quite frankly, outraged at the words

that Secretary Blinken and President Biden have chosen in recent days.

And where we've seen what's happening across college campuses, where younger

generations are really taking a different stand on Israel, wanting the

U.S. administration to put more pressure on

Israel to exercise restraint. But again, that the real crisis is

potentially and is in Gaza. And the administration also right now, I

think is trying. But but many people feel and probably

not hard enough, as we can see, to get humanitarian supplies.

That really is the urgency of the moment.

The strategy and the need for a strategic resolution to the conflict

really feels very far off right now. Leslie also wanted to talk to you about

these extra tariffs that President Biden is looking to impose on China.

How much of this is symbolic and actually all about politics?

Because a lot of these sectors, these targeted sectors don't really rely on

U.S. consumers.

So they haven't really penetrated the U.S.

market. That's right.

The U.S. is not importing electric vehicles at

this point in time and not so that is symbolic.

But there is an effort, I think, also to affect prices beyond America's border.

The administration has been, as I understand it, preparing these for a

very long time. It's trying to be very targeted and very

careful in the way that it exercises them.

It's clearly demonstrating that it will be tough on China and that it will focus

very much on trying to give advantage to that part of the economy, especially the

climate and renewable sector that the president has been trying to invest in

through his climate plan, the Inflation Reduction Act.

And the and of course, the fact that this is an election year really matters.

But we will we expect to see an announcement of these tomorrow.

Many of them are symbolic. But again, symbolism is important at a

time like this. But there is a global market in which

these tariffs are also being exercised. So, Leslie, we're six months away from

the election. I mean, is it about being different to

President Trump, but at the same time making sure that actually, you know, he

that Trump cannot go after Biden on China?

So what do they deliver? Like, what are the main differentiating

point that we'll hear from, you know, both candidates over and over?

I think the Biden administration, yes, clearly believes in and wishes to be

strong on China, but in a more measured and targeted way, saying, you know, and

we've just seen. Right.

John Podesta has been negotiating and in talks with his Chinese counterpart to

try and drive forward a positive agenda on cooperating on reducing emissions on

the climate agenda, more specifically in the run up to the next COP.

So the administration at some level is doing what it always said it would do,

which is to try and compete and cooperate with China.

But it's doing in a tougher way. And the timing of this announcement

clearly important for signaling not only at the national level, generally to

Americans that the Biden administration will take a tough stand on China, but

also to domestic manufacturers that are seeking to invest in a targeted way in

those areas that the administration is trying to create incentives as part of

that green transformation. And this is really the area that

differentiates the Biden administration from a potential second term Trump

administration, which is that focus on climate, both the positive agenda and

the use of tariffs to try and move the needle on America's competitiveness,

something that, you know, has a long way to go.

And I think this administration is very aware of that.

Leslie, thank you so much as always. Leslie Van de Murray, the director of

the U.S. and Americas Program at Chatham House.

Now coming up, we'll have plenty more from the Middle East and from Doha ahead

of the Qatar Economic Forum on Tuesday. We'll look at how the Gulf state is

trying to broaden its economic and self power across the globe.

This is Bloomberg.

Well, the Guitar Economic Forum powered by Bloomberg kicks off tomorrow here in

Doha. The event will explore the issues

driving global boardroom conversations and spotlight the rising prominence.

Now four of the world's top ten sovereign wealth funds are from the

region. Their global investment portfolios now

include American tech companies, English football clubs and African mines as they

look to diversify beyond oil and gas to accumulate both hard and soft power.

Now let's bring our chief emerging markets economist at Bloomberg

Economics, Ziad Daoud. Ziad, thank you so much for joining us.

First of all, if you look at dough on Qatar, I mean, geopolitically, there was

a bit of a heavyweight, as they do quite a lot of the negotiation between Israel,

Hamas and the West. How have they brokered this part?

Well, the diffused the beast. I mean, basically Qatar is an example

that shows you don't need to be large as an economy or have a large population to

have an influence and soft power. And yes, currently they are basically

mediating between Hamas and Israel. The previously mediated between Taliban

and the U.S. should have maybe at some point it also

be in talks with with Iran and so on. But that didn't start with negotiations

and mediation. I mean, back in the 1990, before Qatar

was extremely rich, they started a Jazeera TV channel, which is extremely

influential in the Arab world and still is, especially at times of war, like the

ones we bring in now. Qatar also hosted the World Cup in 2022,

and that's another way to project soft power.

So, yes, it's currently using its wealth to punch above its weight and to mediate

between global powers and regional conflicts.

But that process has started or started a while ago, certainly in the mid 1990s

when it became more ambitious economically and politically.

So economically, again, this region is very oil rich.

And part of their story is basically, you know, the transition here in Qatar.

It's also going into LNG. But what they invest for in the future,

I know it's some of a lot of the conversations that we'll have here at

the Qatar Economic Forum. You have a flight a short while from now

from joining us. What's the one question that you're

trying to figure out for the region as a transition into an oil less economy?

Well, I think there's a couple of things here.

The first thing is that diversification away from oil becomes less urgent when

oil prices are high and oil prices have been high.

After the pandemic, they average $99. 2022 and the currently around $83 today,

which has been a read through the history, is relatively high.

So I see less of an urgency to diversify in the region.

And definitely you see that in Qatar, which now plans to expand its LNG

production by 85% by 2030. And I think the second question that is

important here is as the six JCC countries are trying to diversify away

from oil and gas, they're essentially targeting the same sectors.

So they're all targeting tourism, financial centers and logistics

and and basically high tech and air in it.

And you wonder if the region needs so many tourism centers and so many

financial centers and so many mega airports and megaport.

So this crowding out within the region, the fact that they're targeting similar

sectors, given the similar economic structure, is another question I'd love

to ask And and whether that different countries can, you know, approach this

differently rather than all hitting the same basically economic activities.

And what's also interesting is that because there are so many sovereign

wealth funds with a lot of money, it's basically trying to figure out what

they're putting their money in. And so that's sports technology and

A.I., which will also try and figure out here.

Yes, that's right. I mean, I think in general, if you look

at the G, C, C investments and they've been bust and they obviously with high

oil prices, but accumulating a lot more. I think basically what they try to do is

they try to do three things. They try to invest money in order to get

an economic return that would replace oil revenues when they drop one day.

So there's sort of the economic aspect to it.

There is a soft power aspect to it, which is basically investing in the

World Cup, investing in sports, investing and even rebranding.

And we're seeing that in the case of Saudi Arabia, which is trying to move

away from its old brand of a conservative country to a more open one.

And the third aspect of it, you see the money also deployed towards political

targets and that that's not new. You know, there was the 1973 oil embargo

that was used, an economic power to achieve political targets.

There was the bankrolling of the Iran-Iraq war in the 1980s with the GCC

funded Iraq agendas using the wealth to achieve economic or political goals.

And most recently, we've seen the example of the UAE big investments in

Egypt, which, yes, it has a commercial side, but it's also probably likely have

a political dimension to it as well. Ziad, thank you so much for a terrific

briefing, as always. Here down there, chief emerging markets

economist at Bloomberg Economics on his way to Doha, Qatar.

Now we'll have a host of big interviews coming here from the Qatar Economic

Forum, including the Qatari prime minister, of course, the Saudi finance

minister, and the HSBC chief executive, Noel Quinn.

Coming up, we'll also look at earnings. We take a look at some of the earnings

due this week, including major European telecom shares.

Our previous next and this is Bloomberg.

Now costs and capital spending cuts will be in focus when major European telecoms

report this week. Now, analysts will also be watching

luxury results after Burberry's profit warning back in January.

So let's get more from all of this with Chloe Miller from Bloomberg.

So, Chloe, what will investors key focus in telecom earnings?

So the guiding metric here really is, is cash flow.

Most of Europe's telecom companies have guided for a fairly optimistic baseline

for cash flow growth for this year. So we'll see how that stacks up against

what they actually report this week. They have been dealing with quite high

input costs and wage pressures, so that might limit those cash flow goals.

If we look specifically at some individual companies, BT is in the

middle of a turnaround. It's trying to convince shareholders

that it's worth expanding into consumer electronics, home security and gaming.

So we'll see what the reaction is from the market in terms of any update to

strategy. It is.

It is set to report a return to annual revenue growth after six years of

decline. So it's fairly positive for Deutsche

Telekom and Vodafone. The focus is on shareholder return.

So Deutsche Telekom is said to have particularly strong cash flow despite

wage increase demands from unions and for Vodafone its exited operations in

Italy and Spain. So it has about €4 billion set aside for

buybacks. Thank you so much for the great round up

on telecoms Chloe melee there of course on some of the companies reporting later

this week. Now investors closely watching U.S.

inflation data due on Wednesday. Bond traders on edge as always, frankly,

ahead of the highly anticipated CPI reading.

Let's bring in Bloomberg's Van Ram. Van, thank you for joining us.

I say, as always, but actually it feels like this week is really crunch time,

like welcome to Inflation Week. What are you expecting?

Morning, Francine. I think that the markets are expecting

that the headline in print will come around 3.4%.

Now, even if the headline print comes around there, the question is what kind

of confidence is it going to inspire among the Fed committee?

Because obviously that's not 2% that's far away from the 2% that they had

penciled in now in December and in March.

So the Fed things that the CPI, Fed CPI, UPC inflation called PCE inflation, I

beg your pardon, is going to come in at 2.6% this year.

So far this year, it's been bobbing around 3% more like it.

So is it going to give the Fed enough confidence to cut rates?

No. We heard from Michele Bachmann on Friday

saying that they need a series of prints to convince them that inflation is on

the mend. And unless we get that at a rally in

treasuries is going to be elusive. Then really quickly, are you worried?

We had University of Michigan numbers. They weren't that great.

Is there you know, is it possible that actually the rate hikes are catching up?

Well, I think that the policy works with the with the lag.

And there's definitely some inkling in the economy that, you know, things are

cooling. Momentum is we are fast losing momentum.

But where is the point where that will which will be the inflection point for

the Fed is the question. And at this point, you know, the economy

is doing fine. It's not doing as as much as it was

doing earlier last year, but it's not sufficient yet for the Fed to be

decreasing rates. And that inflection point in terms of

the economy will come when the jobless numbers start going above 4%.

And we are nowhere near those levels yet.

Van, thank you so much as always. Been there from Bloomberg and live in

Dubai. Coming up, our interview of the week,

Emmanuel Macron, the president of France.

That's coming up, of course, later this evening.

This is Bloomberg.