tv Bloomberg Markets European Open Bloomberg April 4, 2018 2:30am-4:00am EDT
guy: you are watching "bloomberg markets: europe open." i am guy johnson in our london headquarters on site at miller. castrated less than 30 minutes away -- cash trade less than 30 minutes away. ♪ escalating trade tensions, washington proposes 25% tariffs on $50 billion worth of mainly high-tech chinese goods. beijing has scheduled a news conference for 9:30 london time to deliver its response.
asian stocks are mixed ahead of the expected retaliation. europe is called down sharply over a percent. wait and see how the fair values press. race toed company submit their gender pay get data ahead of tonight's deadline. should investors be paying more attention to these numbers? matt? matt: take a look at the missed ,eatures trade or the percent she showing that we could have a lower opening on the ftse. maybe higher open on the cac. on cac, dax action or euro stoxx 50. it does look like the ftse could open to the downside. take a look at treasuries. yields started to climb during yesterday's session, the three-day chart i sure you. -- i showed you. we are dead even, 2.77. little change in 10 year treasury yields.
doesn't give you a lot in terms of the direction investors may take. guy: the fair values on the ftse, on the bloomberg, they are quite negative. the rest of europe doesn't look that way. i'll to focus on the s&p, on the jim and. -- on the gmm. we saw the markets pushing up 20 close. just pushing up toward the close. we did see buying into the close. something to play attention to. we are focusing on what is happening with china right now. we await the details and the response to the tariffs. that will play a part today. inflation coming up a little later on and we continue to watch what happens with amazon. let's get an update with juliette saly. juliette: guy, u.s. president
donald trump has says he lands to deploy the military to guard the border with mexico. he would abandon the north american free trade agreement without assurance of help on security -- on securing the boundary. he suggested he could use money allocated to the military to construct the border wall,'s for which he has been able to secure congressional funding. in washington, the white house insiders say there are no discussions about turning the power of the trump administration against amazon, despite the president's twitter attacks on the company and jeff bezos. according to five people familiar, they are aware of any ongoing discussion about turning trump's tweets into action against amazon. the president of the san francisco federal reserve is heading to the big apple. john williams has been named the
new loss of the new york fed. he will succeed william dudley. in the u.k. today marks the deadline for companies with at least 250 employees to report their gender pay gap. --tain's prime minister theresa may says the issue is one of the "burning in justices in gender equality and progress remains far too slow." in california, the woman who police say went on a shooting rampage at the youtube headquarters was a video creator who criticized the company for policies she claims limited her audience. police have identified the suspect who shot and injured at least three people before killing herself. the local abc news affiliate links or to a website that criticized google video unit.
global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt: thank you very much. asian stocks are masks as -- are mixed as investors await china's response. trade tensions escalate about the world. we have gotten the initial repost with china making a number of comments about the moves by the trump administration, including the fact that the measures are a gross violation of wto rules. that the u.s. is guilty of a willful distortion of facts. i am quoting the chinese wto. let's get over to mark cudmore and get a response here. what do you think about china's comments?
how quickly do you think this could escalate? that comments are quite hardline. this could still escalate. most traders are taking a fairly sanguine approach like this is not too bad yet. every thing is still pretty measured. this is just a verbal rhetoric. kind of take a hard line but not necessarily follow through. of course the press conference in beijing in an hour and a half will really decide things. that will be important to watch. may prove that it is all rhetoric and there will not be for measures. so far, this is continue to escalate at a faster pace than many thought a month ago. guy: that is true, mark. you are starting to get a sense that the market is getting weary of the story. they cannot figure out how to read it rapidly or understand it. maybe you kind of step away from it.
market response and the half-life of the story don't seem to be on the same page. mark: i think that is completely fair. the shock factor is gone. is notea of a trade war new news. there is another part. ultimately, most investors want --believe that both sides most people want to believe that they are just going to negotiate. be aply, there's going to compromise -- ultimately, there's going to be compromise. there is a worry that he keeps unsurprising slightly worse than they expect. there is this element that trump seems to be playing to his political base than worrying about the stock market. they provide the element that this will be worse than both sides think. matt: trump did not seem to be
worried about the stock market at all last year. the stock market continued to climb regardless of how much he played to his political base. this year, it seems different. our markets responding more to moves that the u.s. president makes perceived by some in markets as erratic? mark: i am not sure they're reacting more. last year, trump harrowed the stock market as an approval rating. cohen's resignation was the big turning point. that was a message to the market that he was prioritizing making political wins rather than the stock market. up to that point, everyone thought that he might be on twitter.
ultimately the stock market we went out. comments the parts are sent a justin: wins the parts are sent a different message -- colons maybe he will-- prioritizing hartline on china. not focusing enough on the data as it is being produced? we've got pmi's coming out of the united states later on. mark: the euro inflation that is going to be trouble for europe. the dollar is going to change things but overall it is all incremental and long-range. more interesting, the u.s. data. it suggests that u.s. rates are overpriced at the moment. guy: thank you, mark. you can follow mark on your bloomberg.
matt: welcome back to "bloomberg markets: europe open." 17 minutes to go until the start of cash trading. i want to get the bloomberg business flash out to singapore to juliette saly. juliette: the bpp has said it is looking to allegations of personal misconduct by martin sorrell involving possible misuse of company assets. the government says the amount involved are immaterial. he rejected the allegations while recognizing the company has to investigate. cbs has cemented its bid to acquire viacom, the owner of mtv and comedy central. that is according to their purple -- a person with knowledge. cbs is offering a below market value provide comes shares. -- for viacom's shares. swiss recess something is likely to change at stake in 10% or less as it seeks to gain a foothold in the reinsurance
industry. this are based company says negotiations are ongoing and remain at an early stage. masayoshi son is reshaping the japanese mobile phone carrier into a technology investor through its fund and sees areas of potential cooperation with swiss re. that is your bloomberg business flash. guy: the u.s. has stepped up its rhetoric with china with its tariffs on high-tech items. china has condemned the move and said it will respond on equal scale. where waiting for a press conference -- we are waiting for press conference. let's bring in kathleen hunter. the political risks are substantial, critically with the midterms approaching. kathleen: we poke into looking to hang on to the house and senate. what they are going to be looking at is how china didn't
tell you. if china does retaliate by putting tariffs on u.s. products that are made in world areas, whiskey, a pork and lot of those areas are represented by republicans and so republicans are going to be going to the polls to defend these tariffs which could be causing some have a desk causing some have it to people living in the districts. matt: does it factor into the nafta negotiations? definitely. anytime you have this question of whether or not the u.s. is going to be escalating trade tensions with a country like china, it does become a factor, specifically we saw that the u.s. is very interested in getting some kind of a nafta deal together in the next coming days before a summit in peru next week. we're having this escalated trade tension in the asian
sphere. guy: tell me what you said about nafta and midterms. is this pick tariff news? thisek tariff news? is part of an escalation the go somewhere? ?r is it about signaling i am interested in what the theory is. kathleen: maybe someone in the white house knows but i don't think we have a good sense of that. that is the key question. if you're republican in congress, this is why we saw paul ryan come out strongly in opposition to trump on this tariffs. if you're a republican, you don't want to see a whole lot more of this. you want this to be the apex and then died down six months before the midterms.
isthe main story every night out of the slapping tariffs and people start to feel that in their pocketbooks, before november, that is going to be a problem for recap -- for republicans at the polls. thingsne of the other that is a focus is the amazon issue. shop has had problems with jeff bezos for a couple of years. he is focused in on the post office is ability to post massive losses especially when something like amazon would make you think all the delivery business could be profitable. what is the story? what is trump saying he is going to do? ishleen: what is interesting there's this big gap between trump's rhetoric, amazon, people service has been one of the main things he is treated about.
there is a gap between that and what the policy prescriptions are in the white house. we had a policy -- there is not a plan to do anything policy wise when it comes to regulating amazon or changing policy toward amazon promoting it or anything. even changing the way that amazon deals with the postal service. one of the interesting aspects of the store is to the degree which there was a graph about how trump some last summer and explained that the post office entity.dependent it is fully funded through stamps and put the fees. it seems like shop is complaining -- like trump is complaining about things and how they work. this is about taking the washington post to task when it comes to his base than it is about policy toward amazon. guy: the markets are trying to forget what is the noise and what is the signal? it is really
hard. the markets are incredibly confused. kathleen: when it comes to trump rattling over tariffs, that turned into policy. when you have something like amazon, that looks like it will not turn into policy. it is hard to parse that. where it stands now, looks like the amazon pieces is more bluster. guy: who knows? thank you very much indeed. kathleen hunter. minutes away from market open. going to take a look at the stoxx we need to be watching, including swiss re with softbank's investment is unlikely to proceed 10%. -- exceed 10%. this is bloomberg. ♪
guy: on for, he cannot hear, matt. swiss re, not taking as big mistake as anticipated. joe: it was suggested they would be taking a 25% stake and now we're expecting the company doesn't expected to be more than 10%. confirmed.r the evidence it with the reason is but a big company like that coming in and looking to take a stake so the shares are expected to decline today. me, joe,you can hear just not your head. let's talk about some martin sorrell. he's got issues -- wpp have some issues with him. what is the story? joe: it was reported that martin sorrell is being investigated for misuse of company assets.
the company says it is not a material amount and so denies the reports. also said they understand why there needs to be a probe. looks like they are complying with the investigation. consumer is: u.k. an area we are focusing on to understand what is happening with the housing market. to get information surrounding this, we looked at where money is being spent. if you're doing any kind of innovation in your house, chances are you are going to end up like this. what are they telling us but the state of u.k. consumer? joe: they said something that the retailers have said, there has been a big slowdown in sales . it comes down to consumer confidence. after brexit there was a big slowdown in consumer spending. that the poor weather
and the early easter might have impacted their trading. guy: the poor weather, i don't understand. raining, you are less likely to do that shopping. matt: when it is raining, tiling is something i am more likely to do. otherwise i am outside. in any case, the truth is i am very unlikely to tile. i'm fairly unlikely to watch soccer. it is interesting to follow the soccer or football companies that are listed. joe: shares fell when they were against madrid. they lost three to nil to looks very unlikely they will progress.
under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver.
until cashte to go trading. when it comes to equities, euro-dollar beginning to fade a little bit. 10:00 this morning we get the ecb prime metric inflation data out of the eurozone. oil is coming down a little bit. .7.88 this rally that we saw at the back end of the session in the united states yesterday, the real question is, has the trade story put a halt to that? it was a decent rally at the end of the session. i think it was driven by amazon.
i am slightly quizzical about some numbers posted here on my screen. little bit is a better. i have the ftse down sharply. that top number has been skewed by a number that i think is going to open down by 2%. i think we will be down a little bit in europe as we await the press conference from china. let's look at the numbers. ibex out of the gate positive. we thought we might see negative numbers, but probably more flat numbers is what we will see this morning. the ftse is struggling to make headway. we will see which elements of the day ahead dominate. will it be the chinese press conference? u.s. surveyot of data coming out later in the session. i think we will probably see how the day progresses. at the moment, as anticipated, we are trading down by around 0.2%.
we are not down by very much. matt, what you have with individual names? matt: i have a split here. if you look at the move screen, you see 200 stocks up, 190 down -- or sorry, 190 up, 200 down to read it does not matter, dead even. here you see the winners. silla -- - what wartsila, up. are up, but not huge. as far as the losers, vestas is down 4%. otherwise, you do not see stocks down more than 1%. if even close to that. we do not see a lot of big moves in the individual names. you do not see a big skew as far
as winners and losers, and that is probably why. you do not see a lot of movement in the indexes. ftse is pretty flat. dax is down a little bit. is flat at the moment. that is what we are seeing in europe. we are waiting to see how this chinese press conference develops. the u.s. plan to levy tariffs of 25% on import tariffs on high-tech goods, the total value of around 50 billion. china has condemned the move, saying it will respond on an equal scale. how does the market read this? does the market understand what is happening? can it make smart investment decisions? do you understand what is happening here? take the signal
and the noise and split them apart. it is difficult. >> the best way to understand it, the market is reacting asymmetrically. noise, and no one knows where this is heading. i think there is a predisposition to sell first and then do the deep dive later. i think there is a lot of that going on. this could go either way. you are seeing official blasts from both sides of the pacific. we know there are talks going on behind the scenes. audiences,omestic politicians. guy: that is the knee-jerk reaction. what are the opportunities? geoffrey: it generates
opportunities. when you see a disconnect where the market is valued versus the fundamentals, we try to stay on the fundamentals and see how the season progresses. at this point, growth is solid. you have not seen revisions in the growth forecasts. europe, underpriced for growth. all of that put together points to opportunities. the risk is in the sentiment delves into something else. i a corporate front, they say do not know what is going on and i do not want to take chances, and protect their initiatives. stocks are discounting mechanisms for future earnings. come downen the pe's pretty hard. they are down to about 16, which is getting to the lower level of .he historical norm
what earnings growth do you expect this year? earningscorporate growth slowed down in 2018 and 2019? if you look at this there was the tax element which had been priced into markets last year. if you strip that off, we are looking at high single digits. back your point about discounting, what kind of discount has been factored in? is it trade disputes, corporate's do not see any to tariffs being raised globally, or is it genuinely growth slowdown? we push back heavily against the latter view. the tax story got priced in
in the last quarter. what are we getting this quarter to keep the show on the road? geoffrey: we have to look at the top line and what the consumer is doing. acta the u.s. and europe, the earnings story and wage story is going to start to be factored into markets. we need that repricing in markets. that is the side of the equation, and central banks connect accordingly as well. we have not seen element in demand that corporate's can react by increasing investment risk. we are not seeing sign of demented buybacks. -- we are not seeing a sign of demand to buybacks. matt: how must of the fundamental negative news from tech on cash flow to privacy amazons at facebook, to issues with the white house, it
goes on and on. how much do those issues affect the tech earnings? i have to guess they are a big part of the s&p average. geoffrey: absolutely. if you look at a balanced portfolio, the u.s. equity holdings -- i do not think we can the conflict idiot syncretic i do not think we can conflict that idiosyncratic story. secular, it was called growth on sale. people need to take a step back. we believe in the secular growth story. underpriced for strong ?ecular growth five years ago, it is no longer the case. that positioning element which that sort of snowballed. the secular trend is intact. guy: stick around.
. .ore to come from geoffrey yu china's foreign ministry speaking the last few minutes at everything that is starting. you can follow all of these events on your bloomberg. there is a top life surrounding the straight issue. you can access the chart functionality on the program. gtv go. this is what you will land at. it features all of the key charts we use, and analysis surrounding it on bloomberg television. there is fantastic work being done here. on your bloomberg. ♪
♪ we are a 11 minutes into the market session here in europe. we are getting headlines in terms of china's response to the trade story that has developed out of washington overnight. china is hoping that differences tween united states and china can be resolved through negotiations. they hope they can united states will keep a level head when it comes to dealing with these issues. we are expecting a press conference and more details to emerge around 9:30. ubs to talk back to
more about this. , by theese are trying sounds of things, play this down. they are not escalating the language that is being used. we will wait for the press conference. thee talking about using wto for these purposes. for these purposes. where is the line for china that will be crossed, at which point the chinese will respond? it is picking up already. geoffrey: there is a difference between the political line and economic line. the political line, it could be tit-for-tat. in china is trying to tell the u.s. with a rational actors are, you are not being rational. a china responds purely on political basis than economic basis, the trade war, a
full-blown one would be inactive self harm from china's point of view. if they have an economic redline and say beyond this there is a way around it, we will not act politically which is irrationally, but economically by negotiating new trade agreements with the rest of the world. put your money where your mouth is. show the multinational framework works. that would be a more appropriate response. for they have sympathy united states's views on and tariffs but have it resolved through negotiations and a multinational framework. that is an appropriate response. diverge,ey begin to china has to choose the right road. wto ambassador came out and said, tariffs from the u.s. are intentional and in
gross violation of the wto's principles of nondiscrimination and down tariffs. he said this puts the wto in unprecedented danger. at the same time, he says china will retaliate against u.s. products equipment in scale and agreed to the u.s. measures. on the one hand, he is saying it is unfair for them to take unilateral action, that if they do it, we will take unilateral action as well. one is for the international multinational crowd, and the other for domestic consumption. you can see that divergence. they need to take the right path. if they want to portray itself as one with rationality, the one going by the rulebooks, and they should stay there. , which will tariffs generate headlines, but may not mean much. inflictly, trade wars
self harm on all parties involved. beijing would do well to stay clear. it is an emerging market. china can afford a trade war any more than the u.s. can. guy: we are not down by a great deal, but we are down about 0.5%. european markets are now falling. geoffrey yu will stick with us. here is nejra cehic. stake isftbank unlikely to exceed 10%. the companies aren't talk about cooperation, this is the first time swiss re has commented on any size of the deal. we are seeing it move lower, 2%. on is moving lower allegations of misconduct of martin sorrell using company assets.
vestas is accelerating losses, down 4.6%. matt: thank you very much next, the italian president will meet party leaders today to try to form the country's next government after an inconclusive election last month. will he be successful? an important and fascinating story from europe. this is bloomberg. ♪
♪ matt: welcome back to "bloomberg markets: european open." we are 19 minutes into the session. we opened up next but are turning up lower as we get increasingly negative rhetoric out of china in response to the u.s. tariffs. we will hear imminently from more of a detailed list of retaliation that they have are concerned the u.s. is breaching the rules of the wto, and putting that in a multilateral framework in danger. we see u.s. futures pointing lower. we see u.s. stocks falling on
that. let me give you a list of other things you could be watching china other than that press conference that will come shortly. at 10:00 a.m. u.k. time we will get an unemployment reading and in inflation reading for the eurozone. you definitely want to keep a look at the headline and core numbers. that will help you better understand what the ecb is going to do, if it will stay on course or need to possibly consider putting the easing line back in the statement. it is present -- italy's president, sergio mattarella, talks about forming a government. that is a fascinating story that you want to keep apprised of. u.k. companies with 250 employees have until midnight tonight london time to report their gender pay gap. this is something the prime minister has been serious about, and we will see how well or poorly u.k. companies are doing
in terms of gender pay gap's. still with us is geoffrey yu, head of u.k. investment office, ubs wealth management. we are starting to see markets react more negatively to this tariff issue. we talked about trade with you in general. how do you think europe is positioned right now when it comes to the trade issues? it seems to be an issue between the u.s. and china, but trade in a global world involves everyone. geoffrey: and the core european economies that are dependent on trade. the risk in europe, we have been talking about cycles for a while. the trade war can cut a cycle short. there is a difference between the natural progression where markets can reprice growth and to suddenlyrterly being cut in its tracks. this is derailing growth. that is the bigger risk.
that is where europe is most exposed. europe is affected more than the u.s. on that note because the u.s. is more of a closed economy. keep asking this question, it strikes me as a problem, it is coming, if the cycle is cut short, and the u.s. had into recession next year, when will the ecb exiting policy ? that generates real issues. geoffrey: the u.s. heading into to headn puts no bank into that divergence. rates ando be hiking normalizing in that environment? the ecb is not close to the door.
what does it do? does it continue qe forever? hypothetically, if the u.s. goes back to recession, the discussion is not whether the ecb stays as it is. if we talk about adding stimulus, then we may have an issue given the parameters right now. politically, will that be feasible? that is a scenario where u.s. -- we are not there yet. matt: i want to recap. of china,dlines out this time from the foreign ministry saying countermeasures will come very soon. this is an imminent announcement. we will bring you the headlines as they break. i can only recommend going to
first on your bloomberg. says threats and intimidation will not succeed against it. it is something you would expect them to say. brewinga story that is as china accuses the u.s. of breaking wto rules, and it will come with retaliations very soon. suspect,s something i the u.s. markets rallied to close yesterday. asia was a little more mixed. europe is beginning to soften up a little bit. italy is an interesting issue. is it an interesting issue for the markets? willdent sergio mattarella meet with leaders to find out if a working majority can be found in the parliament elected last month. according to senior officials he is unlikely to designate a .remier
he starts with the smaller parties today and deals with the major parties tomorrow. it's go to rome now. john, how difficult it of the process is this? when will we see a result? difficult process. president sergio mattarella, there is a deadlock. there is always a veto. there are even parties saying it would be open to a government with the ruling democratic party or with the anti-migrant league, but it does not want berlusconi's party to have any role whatsoever. of the results, what do we end up with? the market baseline story is that we end up with the government that is reasonably benign because of the divergence that exists. is that the most likely outcome?
the markets have been betting on an establishment force acting as a moderator if the populace get into power. the nightmares and reo for the market -- the nightmare scenario , the league is part of a centralized block. it overtook berlusconi's party in the election to become the biggest party alliance. that seemed to shelve any possibility of creating some for the alliance, perhaps a german style coalition. guy: thank you very much. you get yu, do questions about this ever? geoffrey: very really. rarely. reallyis feels
♪ matt: we are 30 minutes into the trading day. escalating trade tensions. the u.s. unveiled its china tariff list which targets tech. beijing has scheduled a news conference for 9:30 london time .o deliver its response it has slowly been letting out a few headlines, among them accusing the u.s. of violating wto rules. europe opened mixed, but the session turned lower as the chinese headlines trickle out. we get some from the foreign ministry, some from the wto ambassador. every time it hits stocks harder. u.k. based companies release
.heir pay gap data should investors be paying more attention to the numbers? we do not know how much attention they are paying now area we will figure it out throughout the day. good morning, and welcome to "bloomberg markets: european open." i am matt miller alongside guy johnson at our european headquarters in london. down.he german market is it tells you a little bit about where the focus is this morning with what is happening with the trade narrative. we are keeping an eye on that. these are the upside stocks. like adair -- the downside is quite interesting. is going onou what
on the bottom end of the market. vestas has gone ex dividend. elsewhere, you are seeing interesting moves. swiss re, the softbank story. softbank, i do not know what its motivations are, but swiss re is down. 2.7% this morning. interesting stories when it comes to what is happening with the stocks. let's get to the first word update. focus onw levy's semiconductors and lithium batteries. before al be a review
final decision is made. china will respond on an equal scale. china's finance minister has a joint briefing at 9:30 u.k. time. president trump plans to deploy the military to the border with mexico. he has told mexican leaders he would abandon the north american free-trade agreement. trump suggested he could use money allocated to the u.s. military to construct the border wall which he has been unable to secure congressional funding. white house insiders say there despite thessions president's attacks on amazon. ongoingnot aware of any discussions about action against the retailer.
the president of the san francisco federal reserve is heading to the big apple. john williams has been named to the new york fed. chairman powell's leadership team. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you. the tech space has been at the center of market volatility. with the vix stubbornly above 20, hedges on equities are in demand. digging into volatility measures shows that investors may be caught offguard if things do turn south. joining us now, our reporter dani burger. we are still with geoffrey yu, head of u.k. investment office, ubs wealth management. there are other ways to look at volatility then skew, and they may show a different picture. index,ou mentioned this
aich is one that looks at different section of what the vix is tracking. the vix, if you think of volatility in cabell curve, the vix is going to track that curve. when you look at you, it is looking at the tail risk. these are options that will protect you if we get a bigger rise in volatility than what is normal. i brought the chart with me. this is the skew index. as the vix has been rising, the skew index, it is back down where it was before. that is a lower reading them we usually get. look at it over the past year. that red dotwhat means is investors are not protecting themselves. they are not buying a lot of protection if we should see some tail event. some of the is taking money off the table after we did get a
tail event these past few weeks. still, we are not seeing hedging occurring, which is surprising when you think about all that is going on which rate, still some tensions in tech. investors are stubborn even though the vix is above 20. tail risks are not being protected. guy: the average of the vix over the long-term is 19. what is the vix telling us? look atother way to this, the vix gets a lot of flack for not being the best way to measure volatility. we look at the vix curve, these .re options on the vix here i have, the closer you are to the left, the sooner those are going to pay off. that green line was in february. look how prices shot up during
that february turmoil. that greenthat indicates a veryl selling going on, inside he, need to buy options. under is the orange line, that is currently. the blue line is january. we are in a different regime. it is pretty flat. that indicates that what we saw last week, what we may see today is the selling continues is not emotional. it is adjusting to maybe a new normal in volatility. matt: i wonder what you think about this, geoff? do we not have enough hedges on? maybe investors should be hedged a little bit more. judging by the vix it does not look bad. these other measures show the market could still be caught flat-footed. can debate the
other risk is good or bad, or an implicit view certainly if things turn sour the fed -- guy: do you believe that? geoffrey: powell has not shown his hand at this point. the tariffs in the short-term candy inflationary. dialing back policy when you are getting a supply that is inflationary. talk to me about realize volatility in what we are seeing? dani: i sometimes get in trouble because i say it is a function of them volatility but they say it is about options. they track each other well. if you look at the measures, and i brought the charts of realized volatility on s&p 500 and the vix, they do look similar.
white is historical volatility. blue is the vix. 80% of the time the vix is higher. it is going to be higher, but recently we have seen realized historical volatility remain .levated as the vix is trading you might expect if we get the rivers into the historical norm that we will see the vix pick up . it is a bit of an ominous sign. the other option is that realized volatility comes down as well. there are so many things right now that investors seem concerned about. you may expect the vix to be the one that matches realized versus the other way around. volatilityxpect continue to pick up this year? for a while there was a lull. now they can't. do we expected to continue at this level or higher? geoffrey: relative to last year and previous years, volatility
gauges are going to be higher. are we going to see an escalation? i think that will be a stretch at this point. up dayshan expecting which seems to be the case, that is no longer in play. wider swings on a daily basis is something we are preparing our clients four. guy: if you look at the moving averages, they are moving up. factor when you look at risk. what is the feedback? as volatility creeps back up, it is higher than it was recently. what does that mean in terms of liquidity? what are the implications? geoffrey: i think this is something the fed would welcome. that is implicit tightening. extent, the fed
will introduce volatility into the market. they have tightened a lot. if there is going to be convergence, the risk is going to far. guy: if i'm looking at my risk profile, do i need to be paying attention to this? be more curtailed in my operations as volatility rises? geoffrey: i don't think so. cash ratios are still high. that is the other former protection. thank you very much. dani burger, our reporter joining us as well. matt and i will join you on radio. geoffrey yu, head of u.k. investment office, ubs wealth management, will be joining us
on radio. radio, we are of hearing from chinese radio that the country plans reciprocal tariffs on 106 u.s. products, and china will add tariffs according to ctv to another 106. they have already put tariffs on 128 u.s. tax. were tariffs on $3 billion worth of goods in response to the steel tariffs. this, i would gather in response to the new trump $50 billion worth of goods tariffs. we will hear about this imminently from china. i want to go to our markets editor in beijing. this is a quickly developing story. cap comments out from the wto ambassador saying the u.s. is violating the rules and endangering the organization. we have comments from the foreign ministry, and now we are hearing it will be 106 products.
it does look like china is set to respond in kind. >> it does. we haven't hearing they have been preparing a response to this tariffs plan for a number of days. they are getting it out of the drawer, and we will hear more details in the next hour. that vice finance minister and comments -- commerce minister answering questions and giving more of an explanation about why they picked the particular tariff lines that they did. where they might go, given we don't know what the hundred six will hit. agriculture is a key one. that is hitting donald trump's voting base in the u.s. there is a new -- there is a lot of talk about the $16 billion per year soybean and sorghum,
that is imported from the u.s.. and other products as well, aircrafts, we need to wait for that list to see where they will be pressuring the u.s. china plans a 25% tax on soybeans is what we are getting. >> wow, that is the nuclear. that really is the nuclear option. going to be interesting to see how this is taken in the united states. and whether it will be followed up with the currency stories following all of this. is this a political reaction we are getting from the chinese or an economic reaction? >> it is hard to say. i think it is a little bit of both. there has been a lot said about hitting on soybeans hurts china itself. they are reliant on u.s. soybean
imports to feed the pork industry here. it is a key source of feed for pigs here in china. it is a little bit like cutting off their nose to spite their face, a lot of analysts have said. this does show they are not mucking around, to go straight in on the second round of sell those on soybeans is very interesting. they are going on chemicals as well. and u.s. vehicles. they picked that 25% number, matching the amount that trump is leading on their own imports. you think wese do could see hit hard? you mention the 25% is the nuclear option on soybeans. what are the other extremes you are hearing beijing is considering? talk about a lot of sorghum.
also things they could do that ,re not in the trade tariff box cracking down on u.s. company activities here. we have companies like apple and intel that have big manufacturing operations here. they could make life difficult for them. there is a big education trade. the sending of chinese students into the u.s. there could be curbs on that. we could see china react that way on terms of travel and people exchanges, with south korea for example. there has been mentioned by the rival states, that boeing purchases could be exchanged from airbus, so aircraft could be part of this tit for tat. the response earlier on was focusing on the multilateral, that this was a breach of wto
rules. as we step into the more politically sensitive arena of products such as those made by boeing and agricultural products that come out of iowa, are we stepping away from that now? the chinese talking multilateralism, by the sounds of things, how do i calibrate the response? this certainly does seem on the face of it, we have to look into this, but it does on the face of it look as though donalde trying to head trump off at the pass, and bring all guns blazing, and cause a de-escalation. up until now, people has seen this as something escalating. this could be a game changer, and maybe it is what turns the andes on this whole thing,
see things de-escalate. up until now, they have tried to take the higher ground. they have pushed that rhetoric that they want dialogue. it was interesting that they did point out earlier today that the u.s. did not respond to visitations on talks on steel and aluminum tariffs. they are trying to show that they have put out to all of branch. they have put out the welcome met in terms of dialogue, but now they are forced into this, whether the reality is that, it is probably a lot more muddy. it seems like it is just getting started. i have the screen up that is good to look at in situations like this because it shows you assets that are moving in the order of degree here.
if you move over and come to commodities, you can see that soybeans are down about three standard deviations from their 90 day score. you see corn dropping considerably. iron ore and aluminum are interesting, the below that you see the gold spot, that is starting to pick up and rise. on the gmm function, click into the tiles for more information. insee a lot of price action lean hogs because a soybean is used to feed these pigs. we have big current see swings in a safe haven bid for gold, we are starting to see more of. that is the kind of thing that could pick upwe have if you getf this trade rhetoric. you are seeing u.s. futures pointing down. i know they were up before the china headline started hitting.
value kickeda fair out of there, as you say, look at the top of the screen up here, the dow jones, this prize is down now 1.2%. the s&p down by 0.7. we are seeing a softening in u.s. futures. the last 90 minutes of the u.s. session was reasonably active. volume was ok, and mainly on the amazon story. we are now turning tail as we will see a slightly more aggressive response from the chinese coming through. we are also getting some details coming through relating to what is happening with u.s. aircraft. we have been watching carefully to see if boeing would be caught up in this. with airbus standing toulouse.
lose.h airbus standing to matt: we are seeing a reciprocal tariff out of china on the size of 25%. comingbig teeth tariffs through, this is a like for like, tit-for-tat call. 25% on u.s. aircraft. we are starting to really see this pick up. they're planning reciprocal goods, on $50 billion of like for like tariffs, the same numbers we saw the u.s. put tariffs on chinese goods. ,t looks like they will stay not getting overly aggressive to what the u.s. has done, but they will try to hold at the same levels the u.s. has done. tariffs on $50 billion goods at least 25% on soybeans, 25% on
aircrafts. we see it on soybean futures and u.s. futures. a stock like boeing is going to be affected. i want to look at airbus as well. we will get more and more details on corn and cotton. they are to commodities that will be hit by these tariffs. we are getting more detail on china. they want to have a press conference at 9:30, but we are starting to see these things come through ahead of that time. these trade sanctions, we are getting more details playing through in the markets. airbus is rallying a little bit. i am watching its price now. it has gone from negative to flat. we will see whether or not this comes through. emma, when you look at airbus that has a plant in china, a has a relationship with china, how will this impact europe more broadly?
bmw and daimler sell cars to china. they also sell a lot of cars in the united states. german has an open and exposed economy. it is try to understand how it this story.o we sell the happened in 2007 when global trade slowed rapidly. how does this work from a european perspective? of it, i guessce it would appear this might be an opening for european companies, for european carmakers. if you have china and the u.s. going at it, and using cars as a bargaining chip. you hinted at it there, this tit ,or tat, what we are hearing what it really does is hit the global trading environment, and does not improve things will provide openings for anybody. it's sort of leads to a deterioration in trade overall.
it gives license for other countries to act the same way. see trump initially come out with global tariffs. there is no suggestion he will confine this to china. he has spoken to other countries, south korea for example that he has an issue with in terms of trade surpluses. this could be extended, and the general idea is that this is not good for the global trading environment overall. matt: we are starting to see more commodities come through. you mentioned sort them, we are seeing tariffs on week. some u.s. products, the back of products will see tariffs out of the u.s. into china. beef products will see tariffs from the u.s. into china. we are seeing tariffs on corn, on cotton, we mentioned soybean,
automobiles, 25% on set -- on soybeans and automobiles. twice 5% on u.s. aircraft. we are seeing a solid list on commodities and products that will get hit, as well as what size the tariffs will be. if you look at tariffs on $50 billion of goods, if we see the number 25%, hang around that level, that means actual tariffs ,ill be about $12.5 billion which is what the u.s. did. we use these big headline numbers, but the percentages are smaller, so the actual tariffs would bring in less money, and less if those exports slowdown. yes, that is right. there are a lot of details. here, theteresting optics, the fact that they chose
that 25% number, the fact they after theday 12 hours u.s. release their own list, we saw that delay after the first round of steel and aluminum that donald trump announced. there was a delay of a number of days, a week until china responded quite conservatively area of this does suggest a shift in the way this whole trade war is being played. it suggests they are coming to the table. they are wanting to show they can play this game too. they can hit agricultural products, which are politically important to donald trump. those midwestern states that delivered him his victory last year. emma, thank you very much. let's reiterate.
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guy: beijing retaliates though levieslion in tariffs, on goods from cars to soybeans. s&p futures sink. president trump continues his twitter tirade. white house insiders say it is not a target for regulation. stocks falling, nearly $50 billion over the last six days. race toed companies submit their gender data ahead of the timeline as the prime minister vows to tackle the issue. ♪