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Blueberg day Break You At podcast, available every morning on Apple, Spotify or wherever you listen. It's Monday, the thirty first of March in London. I'm Caroline Hepkin.
And I'm Stephen Carroll. Coming up today. Donald Trump says his plan for so called reciprocal tariffs will be universal.
Stocks drop and bond's rally as the prospect of a full blown trade war drives Goldman Sax to predict more rate cuts.
Plus fearing a liquidity mirage, foreign exchange markets worry as system wide crisis could be far more likely than many would like to believe.
Let's start with a roundup of our top stories.
President Donald Trump says no countries will be exempt from his so called reciprocal tariff's plan that are due to be announced on Wednesday. Earlier this month, AIDS and allies of the President had insisted the levies would be more targeted, with some nations receiving exclusions. However, speaking on board Air Force One on Sunday night, the President pushed back on the idea.
You'd start with all countries. So let's see what happened there. Are many countries. I haven't heard a rumor about fifteen countries, ten.
Or fifteen those countries.
Essentially all of the countries that we're talking about wouldn't be talking about all countries and not a cutoff.
President Trump has indicated that the plan will go beyond just looking at the levees other countries set for the US, to include things like domestic value added taxes and regulations the administration deems as being unfair. Research from Bloomberg Economics finds that if Trump were to drop this approach with America's fifteen largest trading partners, US tariffs could add up to twenty eight percentage points to average US tariff rights.
That would deliver an estimated hut of four percent to USGDP and lift prices in the United States by close two and a half percent.
Meanwhile, Trump's decision to double down on sweeping tariffs comes as he also insisted he doesn't care if the cost of imported cars rises. In a phone interview with NBC News, he said, I don't I couldn't care less if they raise prices because people are going to start buying American cars, and speaking to Fox News Sunday, Trump trade advisor Peter Navarro said the auto tariffs would raise significant revenue.
We're going to raise about one hundred billion dollars with the autochriff salon. What we're going to do is in the new tax bill that has to pass, it absolutely has to pass, we're going to provide tax benefits, tax credits to people who buy American cars. This is a genius thing that President Trump promised on the campaign trail.
Despite Navarro's upbeat assessment, auto prices are broadly expected to increase by thousands of dollars as a result of the levees. JP Morgan analysts estimate prices in the US will jump eleven percent on average.
UK's Prime Minister Urris Starmer spoke with Donald Trump as Britain tries to escape the looming global tariffs. A statement from Denning Street says the two leaders held quote productive discussions and that they will stay in touch in the coming days. Home Secretary of v Cooper was asked if the UK would retaliate if it didn't get a deal.
The Prime Minister has said that no option is off the table and we will continue to approach this in the UK national interest. That's the important thing.
The UK government has been working for months on strengthening trade relations with the White House and is considering cutting digital taxes to secure special treatment. So far, the UK has been hit by the same levees on steel and autos as the rest of the world.
Goldman sax economists are forecasting more interest rate cuts this year as President Trump's import levees threatened to impact global economic growth.
Bloomberg's t Adebayo.
More economists at Goldman Sachs now see the FED cutting in July, September, and November. That's compared to earlier bets on two cuts this year and one in twenty twenty six in Europe. A separate note said lower growth forecasts reinforce expectations that the ECB will lower rates in April and June, with a further quarter percentage point reduction now
seen for July. The news comes as researchers at the bank increase their tariff assumptions for the second time in less than a month, meaning they now expect the average levee to rise fifteen percentage points in twenty twenty five. Higher consumer prices and lower GDP growth in both the US and EU are also in the firm's forecasts in London, Tea were at a bio Bloomberg Radio.
Global stocks are selling off for a fourth day ahead of the expected announcements on tarifs, then again in Tokyo, fell as much as four percent to its lowest level and six months, while Taiwan's benchmark indexes on course for a correction, having dropped by nearly ten ten percent from its recent peak. US and US and European equity futures are also pointing to a lower open after a quarter where europe stock six hundred registered to record outperformance against
the S and P five hundred bonds are rallying. Meanwhile, with tenure treasury iel dropping by as much as five basis.
Points, President Trump has threatened to punish buyers of Russian oil if Vladimir Putin refuses a ceasfile with Ukraine. In comments reported by NBC News, Trump was quote very angry and peed off and threatened curves on all oil coming out of Russia. Speaking of the journalists on Air Force one, the US president was more moderate.
I was disappointed in a certain way, so with thanks, and we said over the last day or two having to do with Silinsky, because when he considered SOLISKI not credible. I was supposed to be making a deal with them, whether you like it, where you don't like him, So I wasn't happy with it.
The threats mark a significant change of tone for President Trump and reflect a growing frustration in the US administration. Russia is one of the world's three largest oil producers, meaning that any attempt to punish buyers could have a far reaching effect on both the oil market and inflation.
During his interview with NBC, Trump also refused to rule out running for a third term as president, despite the constitution barring him from doing so. He referred to quote methods that would allow him to run again. When asked about those comments on Air Force One yesterday, the President had this to say.
You want to talk about it, I'm just telling you I've had more people say please run again. I said, we have a long way to go before even think about that.
Twenty second Amendment to the US Constitution, and acted after Franklin D. Roosevelt was elected to a fourth term in nineteen forty four, prohibits US presidents from serving more than two terms.
Those are our top stories for you this morning. In terms of the market, is a deeply risk off sentiment. Continuing today, we're set up for a very difficult day. In terms of stock futures, we're down eight tenths of one percent for the U of SOX fifty future, six tents lower for the S and P five hundred. Remember that we did see the S and P five hundred dropping close to two percent on Friday. Treasuries and gold
are rallying. Yields a lower this morning by almost five basis points after Friday's eleven basis point rally her gold. In terms of the gains, they're eight tenths of one percent higher, trading now above thirty one hundred so three thy one hundred and nine dollars a troy out. The Japanese yen has a jumped sharply. In terms of Asian markets, they're following Wall streets to Friday slump. The NIK two
to five is now down three point nine percent. The Hang Saying Index is also significantly lower one and a half percent this morning, and mainland Chinese markets, though faring slightly better after solid PMI data out of China.
Those other markets.
In a moment to bring you more and how markets are gearing up for this week's tariff announcements, plus why there are liquidity fears creeping into the seven and a half trillion dollar foreign exchange market. But first, another story that caught her eye this morning. Our colleague Fmloomberg, Quiniy and Lara Williams have been writing about the future of champagne, a subject that I feel very invested in.
Carolyne.
Absolutely, you know that glass of bubbly, it's all changing because of climate change. It's an existential crisis for the region. And you know, for this wine enjoyed for you know centuries. Some summers are so hot now that the grapes are ripening a month early and the harvest is starting twenty days earlier than they were only thirty years ago. And so that means a major rethink, as Lara has been writing about, does it mean the return of sweet champagne which used to be popular years ago.
Look, part of what's fascinating about this is obviously it's a high value product, which means that these houses that produce champagne actually have the means to be able to adapt their production methods in a way that is environmentally sensitive but also can sustain the quality of the product as well. So actually in terms of innovation, and that's the detail of what Lara goes into because she visits several of the champagne producers and she talks them and
these are not always big houses as well. Some of them are quite small operations. So the idea that actually they're in some ways at the forefront of trying to come up with methods that allow them to sustain through either because high temperatures is one problem. The other one is frost and frost occurring at the wrong times of the year that can damage the crop too.
The beautiful photographs and Lara admits, you know in her piece that maybe looking at this sort of most frothy, most kind of delightful of products might not sort of spring to mind immediately when you think about the kind of devastation of extreme weather, but she says that it's kind of about the planet's culture, history, humanity, all in that bottle of champagne.
You can read the full thing Blueberg dot Com for its lash opinion. Well, let's turn to the markets after a quarter that have seen European shares and the stock six hundred out performing the SMP five hundred by seventeen percentage points.
In dollar terms.
That's of course on the back of concerns about tariffs, but also Germany's fiscal plans supercharging the euro and more. Let's bring in our fxs and rights reporter Alice led Hill for more on this. ALUs. First of all, let's reflect on the quarter that we're finishing today. Very unusual to see this out performance of you know, stocks, bonds and the euro. Talk us through what drove that.
As much of the last month or two European markets who've just gone on the major high. As you mentioned, it's all off the back of this German spending package. They're planning to unleash billions of euros of spending over the next decade or so to boost investment in defense and infrastructure. That's much over to you now that's seen
as a game changer for Europe as a whole. Of course, Germany is the biggest economy, and the ideas it's going to help the EU generate the growth it's crazed for years, and that's really what's kind of triggered the huge repricing in markets over the past quarter. So kind of just a few months ago, you had the euro kind of toying with parity against the dollar that once this package have been announced, it kind of bounced back to the highest in October kind of around one spot ten.
You know, we've had stocks surge.
I think they're on a historical performance of the US, and then I have on the flip side, you've seen been so German government bonds put in the sort of five next sell off, and that's a reflection of the higher bond supply that we were.
Going to be seeing over the next hadle slow fuel this growth.
But of course we're thinking about this major week ahead, the impact of more US tariffs this week.
Yeah, exactly.
So I think what's kind of interesting about Europe the structure is this kind of pivot from the euphoria. We've been seeing this much more sober backdrop, at least in the short term. And of course the fear is that Trump lapsed the block with tunitive tariffs. That knocks the sort of fragile, kind of nacent growth and sentiments. And I think the cold European assets have moved so much recently on the back of the shell and news that
probably makes them a bit more vulnerable now. So I think I think the idea is, you know, the long term outlet probably hasn't changed all too much, but we have kind of seen a cooling of these these animal spirits, And of course it all sort of depends on kind of the shape and size. It's what the final.
Tariffs look like.
What about the I suppose updates or the research that we've had and the likes of Goldman Sachs talking about this affecting the rate path going forward from here as well as we think about the impact of tariffs.
This is exactly and I think the immediate outlook is very unclear, and as I said, it kind of all sort of depends on kind of how punitive and how severe these tariffs are. I think, you know, if Trump goes in hard, I think we're going to see a continuation of recent moves, so kind of government bonds, which are you know, some of the safest assets are going to drump, but the euro will will drop further. Stocks will I think, cut all that that amazing rally they've
been having. Usually credit spreads widen, and I think in a worse case scenario, you might have to do the ECB set in and quite interest rates more than might otherwise have been the case this year. Of course, If hut Water's down the tariff on the I think we'll probably see a big bounced back in terms of risk efforts and the era as well.
Alice, thank you so much for being with us this morning. Bloomberg's FX and Rates reporter Alice gledhil So setting yourself for what could be a major week ahead.
Now to the giant foreign exchange market, where traders fear the global market may be less liquid than it appears. Currency heavyweights are warning the fragmented, tech driven modern market could be storing up trouble. We've got another member of our FX and rates teams, Alice Atkins, with us this morning for more on this. Alice, great to have you on as well. Talk to us first about why are people worried about FX liquidity?
Good morning, Stephen. We've got lots of alsis in the FX rates team at Bloomberg.
Well.
Effex is the largest financial market in the world, but it's also probably the most complicated. There's no central exchange, and trading activity is fragmented and scattered across lots and lots of different platforms and venues, and on an everyday basis, everything works fine. Electronic trading has increase the speed with which things turn over and crush the cost of trading. But during stress market conditions, players like XCX and City,
they're warning that liquidity is becoming increasingly fragile. And it's for a number of reasons. It's partly because regulation has meant that banks can't wearhouse risk in the same way that they used to. They've also moved to internalize a lot more of their flow. So these primary markets EBS and l segg formally refinitive, the volumes have fallen quite dramatically, so they're much less liquid than they used to be.
And this all means that when you get very directional market moves like last year when we saw yen carry trades flow up trades can cause very can cause oversized moves, and that's what they're saying that they're seeing happen more often.
And so has this got the attention of regulators then, so.
Effects is not as regulated as other asset classes, and that's partly because of this decentralized trading system and because it crosses time zones and lots of jurisdictions, but it is very closely monitored by the central banks in each nation and they help put together a set of best practice principles known as the FX Global Code, and lots of supervisors have been more closely tracking the increasingly complicated
system recently so. The New York FARED hosted its first ever conference on effects market structure just a few months ago, and they acknowledged that sudden pullbacks in liquidity may be becoming more frequent, and they said that they're particularly watching the growth of non bank players market and others like the Bank of England have been pushing for there to be a bit more transparency in the market for quite some time as well.
This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond.
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I'm Caroline Hepka and I'm Stephen Carroll. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak Europe