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- [00:00]
Microsoft Representative
Okay, before we get into it, little side note for the IT leaders listening in, I was reading up on a Microsoft Commission survey the other day and learned that teams using Windows 11 Pro PCs report 62% fewer security incidents compared to Windows 10 PCs, including three times fewer firmware attacks. Pretty significant. With security built in, you'll have AI ready it. That sets you up for operational efficiency as well as long term resilience. Upgrade to Windows 11 Pro at Windows means business.com
- [00:36]
Bloomberg Announcer
Bloomberg Audio Studios podcasts Radio news. You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube
- [00:59]
Bloomberg Host (Joe)
on this Tuesday, which of course marks week of the cease fire between the US And Iran and the second day of the US Naval blockade of the Strait of Hormuz. We heard earlier today from U.S. central Command that there are 10,000 U.S. sailors, Marines and airmen on the various vessels that are enacting this blockade. During the first 24 hours, according to Centcom, no ships made it through and six turned around on the instruction of the US Navy Merchant Vessels that were sent back to an Iranian part in the Gulf of Oman. So the Strait of Hormuz still clearly is still in contention and it is still a question as we think, about the prospect of some kind of negotiated agreement between the US And Iran taking shape. It's not just about the Strait, of course, but also about Iran's nuclear program. All that said President Trump, at least when speaking to reporters yesterday, seemed more optimistic on the prospect that something could be coming together.
- [01:53]
Donald Trump
We've been called this morning by the right people, the appropriate people, and they want to work a deal. They would like to work a deal. There's no fighting right now. We have a blockade. They're doing no business. This I didn't like seeing boats come out if they were doing business with Iran, but if they weren't, no boats came out. So now they're doing Iran is doing absolutely no business and we're going to keep it that way very easily.
- [02:18]
Bloomberg Host (Kelly)
And as we just heard from Charlie Pellet, the market reaction here has been quite positive the last couple of days. Kelly we're looking at crude oil in the low 90s, at least for WTI$92 a barrel. And the whole point of the optimism is over a potential next round of talks. We all know that J.D. vance, Jared Kushner, Steve Witkoff left with no agreement when they took off from Islamabad over the weekend. But there could be another. Bloomberg News is reporting that the administration is sticking to the objective of holding fresh discussions before this two week truce, or ceasefire, whatever we want to call it, expires. And as you just mentioned, that's a week from today. So could we see J.D. vance on an airplane before the end of this week is the question. And that's where we start with Bloomberg's Washington correspondent Tyler Kendall, who joins us now live from the White House. Tyler, are we hearing anything about another round of negotiations from the administration?
- [03:11]
Tyler Kendall
Well, Joe, at this point it does seem like diplomacy is a viable option, as Bloomberg News reported earlier today that Iran is considering a temporary halt on shipments and maritime activity that could violate the U.S. blockade. Our reporting indicates that this reflects a desire by Iran to avoid a immediate escalation at what is considered to be a highly sensitive time as there's this bid to push the talks forward. Now we should say sources have cautioned that the decision does remain fluid, but it does pair with the comments that we heard from President Trump, for example, that Iran has reached out to the U.S. but still the president maintains that the same timetable is in place for a deal to be reached. Now there's been various reporting here on how quickly we could see these talks happen. Reuters had reported earlier that we could even see the talks emerge within the next two days. In Pakistan, though, there had been speculation that perhaps Geneva could be a place for the next round of negotiations after Switzerland said earlier today that they were prepared to assist in the diplomatic effort. As you both know, of course, this White House is maintaining that the reason that we didn't see talks over the weekend to yield a resolution comes down to Iran's nuclear ambitions amid reporting here that the US has actually shifted, perhaps its ask, from a permanent ban on Iran's nuclear program to a 20 year moratorium, according to an array of outlets reporting after those Pakistan talks yesterday.
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Bloomberg Host (Joe)
All right, Bloomberg's Tyler Kendall live at the White House for us here on Bloomberg TV and Radio. Thank you so much. Now back here in our Washington, D.C. studios, I'm pleased to say Joe and I are joined by a very important guest, the former senator from West Virginia, first a Democrat, then an independent. Joe Manchin is here with us on balance of Power. He of course, also is author of Dead center in Defense of Common Sense. Thank you so much, Senator, for having
- [05:04]
Senator Joe Manchin
your time with both of you.
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Bloomberg Host (Joe)
And we do want to get into the politics of today and your dead center thesis here. But if we could begin with Iran, the conflict that the President pursued and that Congress frankly to this point has played very little role in. I wonder if you're looking at your former colleagues who had no say in the start of this war, have had no say in the conduct of this war to this point, but some are suggesting should have a say in how it ends if this is to end in some kind of formalized treaty.
- [05:34]
Senator Joe Manchin
Well, first of all, in any of these conflicts, if you look back through history, even if they did not go the way we intended them to go, there was always knowledge of what was going to happen. And if you had a chance, you could agree or you could agree to disagree. This had no input whatsoever or any knowledge of what was going to, or the end game was going to happen. And I think it's been hard to dissect what was our main purpose. Everyone was concerned about them having nuclear arsenals and if they did, in their prolific terrorism support around the world. It was something we all should be concerned, the free world should be concerned about that. And you could have brought more people along. If we could have proven that they were at this enrichment, that we had to do something at that time, we could have had a multi, multi nation of okay, how do we keep the straits open? How do we secure free shipping? How do we make sure they do not have access to nuclear weapons that can do harm to everybody? And we're not going to basically force a regime change because we've never been good at that. It's an ideology, it's not just a position. So with that being said, could we have neutralized them so they could not add that reach that they've had? So with the Houthis and Hamas and all their different, Hezbollah and all their different sanctions, if you will, as far as around that part of the world and also making sure that the Gulf states, you know, I've said this, it's not going to be a gentile country, a Jewish country. It can go into Muslim world and govern it. It can't do it. What they can do is help prepare the basis for a Muslim basically regime that's more, more agreeable with the world order. So we've got to hope now how do we get out of this? But they can't return right now unless, you know, you've stopped the main intent of having nuclear weapons. And that means where is the, you know, I don't, I hope it's not another Iraq when we had wars of mass destruction, weapons of mass destruction and we couldn't find them.
- [07:25]
Bloomberg Host (Kelly)
That's right.
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Senator Joe Manchin
So we're hoping that's not the case. And I don't, they've just, I mean, we thought we've neutered them, if you will, but my goodness, they keep firing and they keep having missiles. And I'm understanding China has really come in strong in help in defense of Iran. That's not a good sign.
- [07:42]
Bloomberg Host (Kelly)
Well, to the extent you think Congress has abdicated its duties so far, there will be another inflection point coming when we reach the 60 day mark of this conflict. That'll be on April 29th. And we've heard from a number of members in said, look, you know, the president's got some bandwidth here. Does the debate change at that point in the parlance of war powers, when we're 60 days into this and there might not be an end in sight?
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Senator Joe Manchin
Well, it should. You know, we've up until Iraq and Afghanistan wars. We paid for every war. It was dedicated funds that paid for the wars that we had. So we didn't incur any more indebtedness. We saw what the Afghanistan Iraq war did to us as far as accumulating more debt. And now we're at 39 pushing $40 trillion. A civilized country cannot survive that because sooner or later it's going to be such a burden on the people, the citizens that they will reject what's going on. And when that happens, you just get total dysfunction. We're close to that and we're an inflection point now to where, okay, no one's talking about the debt we've raised. We've increased the debt more in the last five months faster than any time in history. As I'm understanding. It's over $1 trillion. This is whenever the debt exceeds the cost of defending your country. So we're $1 trillion. We've passed the 1 trillion mark. That's greater than what we have as far as what we pay to defend the country. I know the president wants to increase that to $1.5 trillion. That's going to be a very, very heavy lift. The power of the purse is still in the House. Okay. And it has to have agreement with the Senate. So that's the balance you have. The Senate has the filibuster, the 60 vote threshold, which is a wonderful thing for our country up until now. The only time it's not wonderful is if you're in power. If you're in the majority, you want total absolute power. So the Democrats wanted to get rid of the filibuster when they had last in 2020 with Joe Biden. I would not do it under any circumstances. And Kirsten Sinema did not do it. So without us two, or without even one of us, they could not get rid of the filibuster. Now the president wants the Republicans to get rid of it because they want a voting and both of them want to get rid of it because of a voting, of a voting law that they both wanted to push.
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Bloomberg Host (Joe)
The Save America Act.
- [09:46]
Senator Joe Manchin
Yeah. So with that being on, I said, wait a minute. The bottom line is you're going to be flip flopping back like most European parliaments do if you do that. We have stable government. When we pass legislation, it's going to be there for quite some time. It's harder to get rid of it, too. And what happens is that we won't be that superpower with the predictability and stability that the world has looked towards. And right now I'm concerned about that.
- [10:12]
Bloomberg Host (Joe)
Well, and your defense of the filibuster has been well documented to this point. The Senate Majority leader, John Thune, has also tried his best to defend it, refused the talking filibuster that President Trump asked for, for example. But I wonder what you make of the notion that to get around the filibuster, we're just doing a bunch of budget reconciliation packages. Obviously, you were a critical vote for Democrats in the Biden administration in a reconciliation package. We've seen Republicans, Republicans already successfully pursue one this Congress. They're talking now about 2.0 and 3.0. Is this just the way we're going to do things?
- [10:42]
Senator Joe Manchin
Well, this is exactly what the Democrats try to do. And I told Chuck Schumer, I said, chuck, this, the establishment of the Senate is the most liberal body in the world, okay? It was not designed to run on simple majority 51. It was designed to run on more of a consensus. And that means that the minority would always have input. As a senator, it didn't really make that much difference to those of us who might not be the majority leader or in leadership because we still had input, we could talk, our voice was important and our vote was very important. So you always were needed to sit down and negotiate and work through things. Now they're getting to the point where they say, well, just disregard that. And I told President Biden, I said, Mr. President, what you're doing here and allowing this to go into reconciliation, coming in with American Rescue plan ARP is wrong. I said, you're the one on the stage, as I recall, running for president that said, I know how it works. I've worked with these people. I know how to bring people together. And now you're throwing a nuclear option, what we call the nuclear option just coming out of the gate. And I believe they would have ran the 117th Congress, which is 2021 through 20 January 2023, with four reconciliation bills, two in 2021 and two in 22. And I said, I'm not going to die. You need my vote and you're going to get it. It's not going to happen. And I killed the big bill back better because it was basically throwing so much. It had been a 10 trillion dollar bill, we'd have thrown the world, I believe, into a recession, if not a depression. It was awful. You cannot digest that much money in the system. When they did the when American rescue plan was paid was, was passed in January of 2021. That means within one year we put $5.1 trillion of government spending into the end of the system. We run the government about five and a half trillion dollars. During that period of time, we doubled the amount of money. We couldn't digest it. You talk about fraud, abuse and waste. That's how it happens. And you see what's happening.
- [12:41]
Bloomberg Host (Kelly)
We were all chasing you around every day up there trying to get a number from you. And I mean you really held the cards at that point. Senator, who's the Joe Manchin now? Because they're talking about 2.0 and 3.0. The president's already backed one of these plans. They're talking about save America maybe being in the next one. And everyone wants to know how many limbs we can get on this Christmas tree. Is there a mansion or a Senate?
- [13:01]
Senator Joe Manchin
Well, I would like to. I think there is. I truly believe in my heart of hearts there is what they have to come to realization. What's your purpose? Is it about your country or about your party? So once you get that in your mind, who do I serve? I said, I told Harry Reid one time, I said, harry, I can't vote for that. He got upset and I said, harry, listen, you didn't hire me and you can't fire me. And I said, I don't work for you. I don't work for the President, I don't work for anyone here except my oath to the Constitution to protect and defend it. I took that oath and the people back home in West Virginia and if I can't go home and explain it, I'm not voting for it. I was never afraid of getting defeated or gone because I had to live with myself. And I know there's enough Good Republicans and enough good Democrats that feel the same way. They seem to have the courage. This might be my last hurrah. But if I'm going to go out, I'm going out on my terms and do what's right for your country. But you know, you can be respectfully. The president has a temper. I know him pretty well. But you can work with him. Just be respectful and say, Mr. President, if he gets mad and calls you dumb, stupid and ugly and everything else you say, oh, he doesn't really mean that. He's my friend. He'll get over it. Okay, but do it respectfully because I think he would respect that more. Knowing that you feel very strongly about your position, the biggest thing in the political arena today. It's easy to be against something. Tell me what you would be for if we could change it. Help me before you. I'm against it. Have you thought about this? Would you try this? I think it might work better. I've done what you're going to do right now and I've made that mistake that I'm asking you not to repeat it. Be, you know, be positive, don't be negative. Don't call people names, don't say it's all the Democrats fault or it's all the Republicans fault. It's all of our fault for allowing the Democrats and Republicans to mess the system up this bad.
- [14:48]
Bloomberg Host (Joe)
Well, it gets back to your dead center book in our final moment here. Senator, can a dead center candidate survive the primary system to have a successful run at the presidency? Would you try, sir?
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Senator Joe Manchin
I would have loved to been able to be on the stage, to be able to talk what was normal and common sense to people, how they live their lives, what's important to them and how we treat people around the world and how we have people that want the same quality of life, the same economies that we have here in the US that's what you prosper. To be a superpower of the world takes more than being just a super military or a super economy. You have to have super compassion for those least fortunate. And if you don't show that, people won't follow you. We've got to change and the system, the process, whether it's a third candidate change the process of how we elect. Open up your primaries. Let more people. Don't let the Democratic Republican Party control everything because they're screwing it up.
- [15:36]
Bloomberg Host (Kelly)
You got to love that. Kaylee's still asking you whether you're going to run, right? That's the point. They're still asking Joe Manchester. That's live in Washington. Thank you son.
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Senator Joe Manchin
Thank you, Joe. Good to be with you.
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Bloomberg Host (Kelly)
Only here.
- [15:45]
Senator Joe Manchin
Thank you.
- [15:46]
Bloomberg Host (Kelly)
Stay with us On Balance of Power. We'll have much more coming up after this as markets move and headlines break. What matters most is context. A Bloomberg subscription gives you unmatched reporting, sharp analysis, and powerful tools that help you connect the dots. Visit Bloomberg.com podcast offer to learn more.
- [16:08]
Bloomberg Announcer
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business Apple. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30.
- [16:27]
Bloomberg Host (Joe)
We'll bring you the latest headlines here On Balance of Power as they're crossing the Bloomberg Terminal. We just got a headline crossing from the New York Times that Pakistan is pushing for another round of talks between the US And Iran this week, remembering it was just days ago, in fact Saturday, that 21 hours of talks in Pakistan and Islamabad ended without a deal. Now the New York Times is reporting this, citing three Pakistani officials who are pushing for these talks. But we've also heard something similar, frankly, coming from the White House, as President Trump told the New York Post today that talks with Iran could happen over the next two days. So it does seem that there is some impetus building behind another round of conversations getting going here. Perhaps that is the optimism the market is seizing onto right now, as Charlie was just running us through. My question though is if these talks are to happen, will JD Vance be leading the charge again for the United States? The Vice President, of course, didn't sound too pleased in his post hocs press conference this past weekend. But here was the flavor of how the Vice President was describing things in an interview on Fox last night.
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Vice President (possibly Mike Pence)
The Iranians, I think, did make some progress. They moved in our direction, which is why I think we would say that we had some good signs, but they didn't move far enough. The ball really is in their course for we've made clear where we're willing again to be accommodating, and we've made clear where we absolutely need to see the nuclear material come out of the country of Iran.
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Bloomberg Host (Kelly)
Let's play it to the panel. Bloomberg Politics contributors Jeannie Shan Zaino and Rick Davis are with us with the prospect of another round of talks before this cease fire expires in one week. Bloomberg Politics contributor Rick Davis, Republican strategist and partner at Stone Court Capital Genius Our Democratic analyst and visiting fellow democracy visiting fellow at Harvard Kennedy School's Ash Center. Rick, you spoke yesterday about the lack of symmetry with JD Vance sitting at a table that did not include his counterpart from the other country. Would you send him back overseas as far as Islamabad for the prospect of a deal without knowing that it was there?
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Rick Davis
Well, I would think that the administration has learned its lesson that you don't put a senior ranking official, a constitutional officer of the United States, across the table from a bunch of terrorists who have made no upfront commitment to an outcome. Used to be negotiations like this were preordained. Staffs would work for years to accommodate everyone's interest to come out with a deal that then a vice president or president would attend, do whatever kind of symbolic negotiation need to occur, and out comes the deal. You know, everyone has to be reminded that the JPOA took two years to negotiate. We're two weeks in. So what do you do if it fails around the vice president? Do you send the president the next time? I mean, there are very few options that are going to present themselves to the White House if they continue to throw this kind of heavyweight political effort toward a negotiation that arguably is important but lacks the, I would say, basis for a deal.
- [19:37]
Bloomberg Host (Joe)
Well, I guess one person you could send would maybe be the head diplomat of the United States, the Secretary of State, Marco Rubio, who of course didn't attend the talks in Islamabad, as he was instead at a UFC fight with President Trump in Miami at the very same time he today, though, is overseeing talks, acting as a mediator at the State Department in direct talks for the first time in decades between Israel and Lebanon. They're the ambassadors of those two countries meeting as we continue to see this front being fought in the north between Israel and Hezbollah. Jeannie, we haven't really talked about that much, but is that actually one of the most potentially significant develops developments pertaining to this wider conflict in the Middle east today?
- [20:18]
Jeannie Shan Zaino
It's certainly significant that Israel and Lebanon are talking and Marco Rubio is, is overseeing those talks. The problem is, of course, they are widely, widely apart, just as widely apart as the US And Iran, Ukraine and Russia. Israel has every intent and by all extent of what they have said interest in continuing its invasion of Lebanon. Lebanon is a weak government. It doesn't have control over those proxies. Those proxies are controlled or at least funded by Iran. So Israel really should have been the third party at those talks in Islamabad. But of course, Pakistan is a country that doesn't recognize Israel. So I think talking always good, but we haven't seen where there would be any room or willingness on either Israel and Israel's side to move. Nor have we seen Iran interested in doing what the United States has talked about, which is to stop funding these proxies. And when you were talking to Senator Manchin, he mentioned this. You know, you've got Hamas, you've got the Houthis, you've got Hezbollah. Those are all the proxies that Iran is funding and they have no incentive to stop that funding.
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Bloomberg Host (Kelly)
Right now I'd like to get into the congressional side of all of this following our conversation with Senator Joe Manchin. Rick, I know you were listening along and there's a big question about whether the tone of the debate might shift at all here in Washington when we get past the 60 day mark in this conflict. That'd be the end of the month, April 29th. Will Congress have a say, Rick, in the way this war ends or will Donald Trump tell Congress how it ends?
- [22:00]
Rick Davis
Yeah, I doubt Congress is going to stick their nose in this. Obviously you had some pushback early in the process by Congress saying, hey, we're a party to this. We're the reasons that you can deploy these troops. We have a say constitutionally in going to war. But they quickly retreated once the fighting really began. And, and I would say that this is really a war and a peace completely owned by Donald Trump. I mean, he's made it his own. You know, there are a lot of presidents who will spread the risk a little bit, you know, in case it doesn't go quite so well. And that is not the case with Donald Trump. So I would, I would say if there is a peace agreement, it's highly likely that Congress would rush to ratify whatever that form it comes in as a treaty. Negotiation would be required. But they would not second guess Donald Trump. Obviously, the United Democratic Opposition will do everything they could to make it look bad, but the last thing they want is, is breaking up a peace agreement if, if you absolutely can actually get one, which, you know, right now I would say still remains a big question.
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Bloomberg Host (Joe)
Well, and when we consider what that agreement may look like. There was reporting yesterday from various outlets, Jeannie, that the US had suggested to Iran a 20 year moratorium on the development or enrichment of uranium. Iran wanted a shorter period of five years, which we understood to be the offer previously in talks prior to this conflict even beginning. The President has consistently maintained, though, at various points that either he needs full absolute surrender from Iran and that Iran can never have a nuclear weapon. A 20 year moratorium isn't exactly never, Jeannie. And If, I wonder if you think for that reason if we were to see a moratorium rather than something more absolute, it might have some difficulty getting through a Senate vote.
- [24:00]
Jeannie Shan Zaino
It absolutely could. Because of course, it has been President Trump, it has been Republicans, it has been the MAGA base which have criticized so strongly for over a decade now, the JCPOA that Rick just mentioned a few minutes ago, part of their criticism of that had to do with the fact that it was not an absolute removal of the option of nuclear enrichment in Iran. That was, you know, one of the big sticking points. That was why or one of the reasons why Donald Trump got out of the jcpoa. So the irony is now they are discussing another time frame and another moratorium. And, you know, when you just expand out and think about Congress and Kelly, you mentioned the Senate. Let's not forget these people are just getting back from a two week recess. And there has been reporting, including from Mike Lawler, who's a friend of yours and a friend of this show, I should say, who comes on. He had a very, very tough constituent meeting, I think it was over the weekend, this Sunday in which you had, obviously this is a purple district. He's trying to go up for reelection at the swing district in the Hudson Valley. He had some very tough questions from constituents. And he is somebody who has said, you know, there's a 60, 90 day window here. But once that is up, perhaps people like Mike Lawler and others begin to say Congress needs to get in in a more concerted way because they are getting pushed from their constituents in many cases.
- [25:31]
Valdis Dombrovskis
Mm.
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Bloomberg Host (Kelly)
Rick, I'd like to ask you about what we're hearing today from the imf because it runs counter to what we have heard so far from the administration. The president and others in the White House continue to say that energy prices will fall precipitously. We'll go right back to where we were effectively before this conflict began. And Wall street seems to be believing that markets are very optimistic right now. The S&P 500 is back to where it was before this all began. But as IMF World bank meetings begin here in Washington, there is a forecast, a warning of the slowest global growth since COVID 2.5%, the weakest since 2020, with inflation soaring to almost 5 and a half percent. And this is based on the idea of crude oil hovering around $100 a barrel for the rest of the year. This may be a worst case scenario. But what would it mean for Republicans in the midterms if this in fact was the reality even after a peace deal were struck.
- [26:30]
Rick Davis
Yeah, Joe, there's a lot of who are you going to believe in this whole narrative around what happens if and when we actually get a peace treaty or peace agreement? And so I don't want to get ahead of that. That's still a long shot in my view. But that being said, oil traders on this program and throughout the country have been warning that it's going to take a long time for the market to rationalize itself. You know, one, because of the dislocation of the supply chain, two, because the destruction of certain key resources in the Gulf due to the war, it just doesn't turn on automatically overnight. And that being said, you point out the critical time nature of this is we have an election and people start voting in September, they don't start voting in November. And so what happens if you still have a high oil price, a high gasoline price and inflation continuing to creep up? Well, that's going to take a bunch of consumers and voters who are already super grumpy about kitchen table issues over the edge, and they will vote their attitude and it won't be very pretty for a Republican reelection.
- [27:46]
Bloomberg Host (Joe)
All right, Rick Davis and Jeannie Shan Zaino, Bloomberg Politics contributors and our political panel today, thank you so much. And it's of course, as we consider those higher prices and how they're going to factor in the midterms. I think that was the point of the impromptu press conference with the DoorDash and McDonald's that the president held yesterday, supposed to highlight no tax on tips, the idea that there's more money in the pockets of those who earn tipped wages. Of course, it turned into kind of completely different conversation, but maybe he'll get it back on track as he travels to Las Vegas to talk about this later.
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Bloomberg Host (Kelly)
Sean o' Brien is there today from the Teamsters. I guess they're talking about no tax
- [28:22]
Bloomberg Host (Joe)
on overtime yet, their Social Security as well.
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Bloomberg Host (Kelly)
Indeed, to the big day tomorrow. So while the president wants to talk taxes, we will continue our focus here on Iran. Stay with us on Balance of Power. We'll have much more coming up after this.
- [28:40]
Bloomberg Announcer
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 1130, running
- [28:59]
Bloomberg Host (Joe)
us through the equity market rally. We are seeing one again today as we've been having for weeks now, a conversation of an equity market that seems like it was largely headline driven, centered around headlines specifically regarding the conflict in the Middle East. And there was a question as to what would happen when earnings season begins. We really get back to fundamentals looking at the market today. It might be more headline driven once again and optimism around the US And Iran war potentially finding an off ramp if there are to be more talks in conversations than it is about fundamentals. Because we've gotten a series of big banks or reports that weren't necessarily stellar, at least by the judgment of this market. Wells Fargo perhaps a good example of that today with those shares down about four and a half percent. So let's get more into this now as we turn to Norma Linda, markets correspondent for us here on Bloomberg TV and Radio. So Nora, obviously Wells is one story. You have the likes of JP Morgan and Citi to just walk us through it.
- [29:51]
Norma Linda
Well, these were some pretty decent prints. But of course for investors, what's really in focus right now is quality and the outlook. Those are the two main levers that are up to for debate here. You mentioned Wells Fargo, of course, this is a name. Seeing it in the red right now, people really looking for a turnaround story from this company. The Stock is down about 11% so far this year. And we did see the stock earlier tumbling for its worst day in a year. Of course, we do know this is after the company missed on net interest. It also didn't really live up to expectations as it comes to non interest income. But then you do have some bright spots here, of course. J.P. morgan, we of course know that they did have a strong beat. They reported diverse diversified revenue. So you are seeing them being rewarded to an extent. The stock now though, going a little bit lower, down about 6, 10 of a percent. A lot of the focus still here, Kelly, is on private credit. We know that all eyes are on how much exposure these companies have. We do know that JP Morgan's Jamie Dimon said that this isn't necessarily a concern for him when we think about the private credit landscape. But we do know that the company still did have about $50 billion in investments when we think about the private credit landscape. So you are seeing a bit of a mix right now. We know that we do have a great story on the Bloomberg terminal talking about how Wall street banks reported at least.00 billion of exposure in private credit. So that is an area that people are still a bit apprehensive about as they think about where these companies go moving forward.
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Bloomberg Host (Kelly)
Well, even as we push into earnings season here, Nora, I'm Just curious what you're hearing from traders, what you're hearing from analysts when it comes to the war premium. The Strait of Hormuz still closed. Centcom just said a couple of hours ago that we turned six ships away. Yet we're seeing crude oil WTI down in the low 90s here. And that seems to be all that matters on Wall Street.
- [31:35]
Norma Linda
Yeah, I mean we really are keeping an eye to see what this means moving forward. I'm taking a look at the VIX right now, hanging around that 18 handle. A lot of people really focus on what this means for the long term. If you take a look at how The S&P 500 is doing year to date, we did see it swinging into to the green yesterday, really punching through from being lower. So you are still seeing spurts of optimism in the market. I mean, and we've got green on the screen, communication services, consumer discretionary being the best performing sectors in the market right now. When you take a look at the S&P 500. So investors really trying to figure out where they want to be in this market. And of course all the geopolitical tension still remain at the forefront. But as we've been mentioning regarding earnings and everything else in the background, economic data still in focus. So a lot for traders to weigh right now in this period.
- [32:22]
Bloomberg Host (Kelly)
Nora, thank you so much. Norma. Linda is live for us at world headquarters in New York. And this is the backdrop of the whole conversation that's taking place right now in Washington with the IMF World bank spring meetings getting underway. And they come with a fresh warning from the IMF today that the global economy is at risk of its slowest growth since the COVID pandemic. If oil prices hang near $100 a barrel, consider 2 1/2% growth weakest since 2020 5.4% inflation under an adverse scenario in which indeed petroleum spot prices hold near triple digits. As we just established, though with Nora, they are a bit lower today. Christine Lagarde, ECB President, was in our bureau here in Washington this morning speaking about this baseline where we are now with prices and how damaging this could be.
- [33:17]
Christine Lagarde
Listen, you have to look at the price of the barrier, the price of the various categories of fuel, the price of futures, and all of that applied to gas as well to determine where we are exactly relative to these two. But we are somewhere, I think, in between the baseline and the and the
- [33:37]
Bloomberg Host (Kelly)
adverse scenario, which is where we find Valdis Dumbrovskas, European Commissioner for Economy and Productivity, also Commissioner for Implementation and Simplification Joining us now live from the IMF World bank meetings here in Washington. It's great to have you back with us on Bloomberg TV and radio. How concerned are you about this persistent increase in oil prices, even if there is a peace accord and the prospect of physical shortages in Europe?
- [34:10]
Valdis Dombrovskis
Good afternoon. Obviously, we are concerned on the economic implications of this Iran war. So we help run certain simulations on potential impacts on the EU economy. And we see that depending on on different scenarios, how protracted the conflict is, how big the oil price shock is as a negative effect on EU economy, somewhere between 0.2 and 0.6 percentage points simultaneously with increased inflation, which in some scenarios can increase by more than 1 percentage point. So essentially what we are seeing, we are facing stagflationary shock for the European economy. To compare, prior to the war, our economic forecast for EU economic growth was one and a half percent. Boss this year and next. We are currently not seeing physical shortages of oil and gas supplies, but something we continue to monitor, notably in a sector of jet fuel. And obviously we are engaged in diplomatic efforts to put an end of this war to ensure freedom of navigation in Hormuz Strait, also to ease the current supply limitations we are facing.
- [35:37]
Bloomberg Host (Joe)
Well, and when we consider those supply challenges, knowing that not much can be done about that. Commissioner, absent a riot opening fully of the Strait of Hormuz, how much room is there within Europe for some kind of fiscal policy response? Do you see the need for that at this time?
- [35:58]
Valdis Dombrovskis
Yes, obviously there is immediate response in the area of energy markets, including we are working with International Energy Agency on coordinated release on oil reserves. We are looking also at certain aspects of the design of EU energy market in terms of fiscal policy response. What we are emphasizing is that it's important that it remains temporary and targeted. Also does not create incentives for increased demand for oil and gas at the time when we actually need to decrease this demand.
- [36:36]
Bloomberg Host (Kelly)
Of course, you were the Prime Minister of Latvia, so your viewpoint is unique. When it comes to Russia. It's clear that Vladimir Putin is making a lot of money here, that this war with Iran is actually enriching Russia and helping to pay for its war with Ukraine. If this continues, what will it mean for the people of Ukraine?
- [36:58]
Valdis Dombrovskis
Well, indeed, Russia, unfortunately is emerging as a winner from this Iran war because this additional oil and gas revenue helps to fuel Russia's war machine. So that's why our message from European Union is very clear. We need to continue to provide all necessary support to Ukraine. And currently at the EU level, we are working on a new financing package of 90 billion euros for this year, year and next. And we need to continue to put pressure on aggressor Russia with a G7 oil price cap with sanctions which are being applied against Russia. So now it's not a time to ease pressure against Russia. We need to put up this pressure to make sure that Russia gets serious also about peace negotiations and stopping its aggression in Ukraine and stopping in more general its kind of aggressive expansionist policy.
- [38:01]
Bloomberg Host (Joe)
Well, as you reference that financing package for Ukraine, obviously the path to that approval has gotten much easier given that there is going to be a power change in Hungary with the defeat of Prime Minister Viktor Orban in the elections over the weekend. As the new prime Minister, as I'm sure you're well aware, Commissioner says he wants to be more a part of Europe. What kind of rebuke did that deliver to Vladimir Putin in the Kremlin?
- [38:27]
Valdis Dombrovskis
Well, clearly that's welcome news because indeed the potential Prime Minister Maghreb has confirmed that he is willing to stick with the agreement we reach as European Union in December last year in providing, providing this support for Ukraine, 90 billion euros. So we hope that new Hungarian government will unblock it. We hope also for unlocking the 20th sanctions package. So correspondingly, we will be able to speak as European Union in one voice and to provide a more forceful message both of support of Ukraine and also of pressure against Russia and Vladimir Putin.
- [39:14]
Bloomberg Host (Kelly)
Commissioner, there has been talk, and I'm sure you've heard some of these conversations and have been part of them, about creating a standing army for the EU thanks to Russia's aggression. Now this war with Iran. Does this moment in time hasten that conversation?
- [39:34]
Valdis Dombrovskis
Well, I think we are still some steps and time away from European army, but it's clear that European Union must and is doing much more for security and defence. Strengthening our defence capabilities, strengthening our defence industrial base, also streamlining our defence industries, ensuring interoperability, ensuring complementarity. So all of this is underway because the threat of Russia is there not only in a context of aggression against Ukraine, but Russia is openly talking about invading other European countries. So therefore, we need to be very serious about our defense capabilities and also about strong deterrence against Russia.
- [40:27]
Bloomberg Host (Joe)
And Commissioner, I am sure all of these conversations are happening at the meetings here in D.C. this week. I also wonder to what extent you're engaged in conversations around the economic threat or benefit posed by artificial intelligence. Obviously, productivity is part of your purview and artificial intelligence is seen as something that would increase productivity, but it also could potentially pose a threat in terms of replacing existence existing jobs. How are you thinking about it at this time?
- [40:58]
Valdis Dombrovskis
Well, from the EU side, we are very much focused on being able to derive the benefits from artificial intelligence. So we have developed what we call a continent action plan where we are looking at both supplies side of artificial intelligence, on AI gigafactories and initiatives like this, and also on demand side, facilitating companies and institutions uptake of AI. At the same time, it's clear that we also need to mitigate risks. So that's why we are focusing on what we call human centric artificial intelligence. So we have strong, we see strong potential for productivity gains, for boost for economy, but we need obviously to properly use those opportunities.
- [41:55]
Bloomberg Host (Joe)
All right, Commissioner, thank you so much for joining us live from the IMF World bank meetings happening this week here in Washington, Valdosta Broski, European Commissioner for Economy and Productivity. We appreciate it. And the Commissioner, Joe, echoing what we've heard repeatedly from European officials and others when it comes to the economic impact of the conflict between the US And Iran, a lot simply depends on duration. And that is very much a question, as the White House is signaling that and Pakistan is signaling as well. They would like to see a resumption of talks between the two sides to try to reach an end to this conflict.
- [42:26]
Bloomberg Host (Kelly)
Potentially. We'll see negotiations resume before the end of this week, although as we keep hearing from the analysis at Bloomberg Economics, even if the war ended tomorrow or today, Kelly could take months for the energy market to rationalize itself. We'll pick up this conversation on the late edition of Balance of Power here on Bloomberg TV and Radio. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already, Apple, Spotify or wherever you get your podcasts. And you can find us live every Weekday from Washington, D.C. at Noontime Eastern@Bloomberg.com.