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US-Japan Trade Talks Matter Globally: 3-Minute MLIV

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Bloomberg Apr 16 09:37 · 15.7k Views

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  • 00:00 Mark, all roads seem to lead to weak technology risk appetite.
  • 00:04 This morning we've got ASML giving us the negative headlines around bookings and unable to quantify the impact of tariffs.
  • 00:11 We've got NVIDIA talking about it right down it it's value and NASDAQ futures off 1.9% at this moment.
  • 00:17 As a result.
  • 00:19 This is taking the tariff story and the decoupling
  • 00:22 US, China story on another step, I suppose.
  • 00:27 Absolutely.
  • 00:28 And I think you've, you've cited the kind of main reasons there.
  • 00:30 We, you know, the China, U.S.
  • 00:32 trade war is back at the forefront, NVIDIA negativity, ASML negativity.
  • 00:36 But you know, we've got to remember that these moves are quite small compared to what we've seen most days this month.
  • 00:41 This is not too dramatic.
  • 00:42 The the backdrop here remains very negative and we're expecting more losses for U.S.
  • 00:46 stocks
  • 00:47 in the months ahead.
  • 00:48 I think what we're really set up for is I do think the trade talks between Best and Japan are very important today.
  • 00:54 They're very important globally.
  • 00:55 Not just a Japan story, though, very much Japan story as well because
  • 00:59 Japan is one of the countries with one of the largest trade surpluses with us.
  • 01:02 It's a major trade partner.
  • 01:04 It's been perceived as a very strong
  • 01:06 ally previous to this administration.
  • 01:09 So how will those negotiations go?
  • 01:11 I think people, there'll be a strong read across from how they go.
  • 01:14 If it seems like there's a perception that negotiations go relatively easily, Japan could strike a deal with mild concessions perhaps, or at least that's the sounds that come out of the meetings.
  • 01:24 Well, then people will be very optimistic that, hey, these threats from the Trump administration are mainly threats or mainly negotiations, and it's easy to move beyond them.
  • 01:32 However, if it looks like, you know, the US administration is going to play hardball in negotiations,
  • 01:36 it'll be very worrying to people given that Japan is such have been such a staunch ally.
  • 01:40 If they're going to treat Japan harshly, what's going to happen to other nations out there?
  • 01:44 So I think that's the real big risk.
  • 01:45 And part of the negativity we're seeing in stocks at the moment is people want to lower their risk going into the long weekend in the US.
  • 01:51 Sure.
  • 01:52 How symmetrical is that risk?
  • 01:54 If Japan looks like you can get a deal, what kind of a bounce do we get in terms of risk assets?
  • 01:59 If it doesn't,
  • 02:00 what does the opposite look like?
  • 02:02 And again, what is the symmetry between those two?
  • 02:07 Great question.
  • 02:07 I think short term the asymmetric risk is actually for relief.
  • 02:12 I think this is a market that is very nervous
  • 02:14 and and I think that they'll trade a positive story much more aggressively because people have got out of the market recently at least short term players.
  • 02:21 So I think short term the asymmetric risk is higher.
  • 02:24 I actually think that longer term people won't, you know, trade as a longer term story and the longer term negativity will be there even if there's relief in the short term, which means if there's a negative story today, that'll be really, really drastic in the long, longer term because people already want to be long term bearish.
  • 02:39 So short term asymmetric risk, higher long term asymmetric risk, lower
  • 02:45 mark very quickly.
  • 02:46 Is the dollar a risk asset now?
  • 02:51 Great question.
  • 02:51 Pretty is where you going to ask me this?
  • 02:52 I think the dollar bounces after the Japan
  • 02:55 US talks because there won't be a currency deal that's separate from the success of the talks overall, which means dollar, yen will bounce and raise the Bloomberg Dollar index.
  • 03:03 Is that good or bad for stocks?
  • 03:04 I'm not really sure.
  • 03:05 I think stocks are moving dollar rather than dollar driving stocks or risk sentiment.