Transcript: Markets brace for Trump-era volatility
This is an audio transcript of the FT News Briefing podcast episode: ‘Markets brace for Trump-era volatility’
Sonja Hutson
Good morning from the Financial Times. Today is Wednesday, January 22nd. And this is your FT News Briefing. Netflix just broke a subscriber record. And Wall Street investors are bracing for a new period of volatility. Plus, China says its economy grew by 5 per cent last year, but people on the ground aren’t feeling it.
Joe Leahy
One person in a state-owned bank said that his lending portfolio is 20 per cent smaller this year than in the past.
Sonja Hutson
I’m Sonja Hutson, and here’s the news you need to start your day.
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More people are binging Netflix than ever before. That’s according to the company’s earnings report yesterday. The streaming giant gained a record 19mn new subscribers during the last quarter, ultimately topping 300mn in total. That’s its biggest audience yet. Pivoting to live sports helped fuel the surge. Viewers flocked to watch a boxing match between Mike Tyson and Jake Paul. Shares surged more than 10 per cent in after-hours trading.
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US stocks rose while Mexican and Canadian currencies were on a bit of a rollercoaster yesterday. Investors have been digesting a ton of policy announcements from US President Donald Trump. He took office on Monday. Here to explain these market moves is the FT’s George Steer. Hi, George.
George Steer
Hello.
Sonja Hutson
So people are feeling optimistic about US equities in the first few days of this second Trump administration. Why is that?
George Steer
I think there’s a general sense that Trump is good for growth, good for US growth in particular. So that kind of idea has boosted stocks almost across the board on Tuesday, which suggests that, you know, there’s a kind of a relief rally. Investors are glad that Trump hasn’t yet said anything about China, and has promised to put America first, which is pretty good for the US economy, which is already doing very well relative to economies in Europe and China. He wants to bring manufacturing jobs home. The fact that he positioned a lot of the big tech executives on the front very prominently at his inauguration just speaks to the idea that he is going to provide a further boost to US stocks, which are already very close to record highs.
Sonja Hutson
You mentioned that there is a sense of relief among investors that Trump hasn’t really said anything about China yet. Could you tell me a little bit more about what’s going on there?
George Steer
During his campaign, Trump threatened obviously, to put big, big tariffs on Chinese imports. And while he has said a lot in the last two days about putting tariffs on Canada and Mexico, he has yet to say anything on China. And he said on Friday that he had a constructive conversation with Xi Jinping. Markets responded positively to that.
Sonja Hutson
OK, so that’s tariffs. Now, what have we been seeing in the valuation of currencies?
George Steer
So initially the Mexican peso fell and the Canadian dollar fell against the US dollar. By Tuesday at midday, those moves had been almost entirely reversed. The dollar index, which tracks the greenback against a basket of six other big currencies, was down 1.2 per cent. And I think that speaks to a sense of relief among investors that Trump hasn’t imposed tariffs on day one. He’s threatened to do so, but nothing concrete has yet emerged.
Sonja Hutson
So we’ve seen price swings in both equities and in currencies. What does that tell us about what we can expect from markets throughout the Trump administration?
George Steer
I think what most people expect is volatility almost every day. Currencies swung quite dramatically on Monday following the Wall Street Journal report on Trump perhaps not imposing tariffs on Canada and Mexico. Then currencies swung the other way when Trump came out and said the exact opposite that he was considering imposing tariffs sometime in the next few weeks. Equities . . . Trump has inherited a bull market. Stocks are up, thanks in part to the fact that he has not said anything on China. But expect dramatic swings. Trump says one thing in the morning and then will say something entirely different in the afternoon. And you don’t really know how much of what he’s saying is actually going to be enacted. So there’s a lot of speculation on the part of investors.
Sonja Hutson
So investors are getting a little more creative?
George Steer
I think so. And they have to hedge against the volatility that we were just speaking about, too.
Sonja Hutson
George Steer is a markets reporter for the FT. Thanks, George.
George Steer
Thank you.
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Sonja Hutson
TikTok’s owner ByteDance is doubling its investment in artificial intelligence. The Beijing-based company plans to spend more than $12bn on chips this year. About half of that will go to domestic suppliers like Huawei, and the rest will be spent overseas on Nvidia chips. ByteDance wants to use all those semiconductors to beef up its computing capacity for training AI models. The company is looking for new revenue streams, and this focus on diversification is happening while ByteDance is fighting a ban on TikTok in the US.
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Official data released last week showed that China’s economy grew about 5 per cent in 2024, but a lot of Chinese citizens are unconvinced. There’s always been some doubt about the accuracy of figures released by the Chinese Communist party, and now the gap between the data and public perceptions seems to be getting wider. Joe Leahy is the FT’s Beijing bureau chief and he joins me now to explain. Hi, Joe.
Joe Leahy
Hi.
Sonja Hutson
So unpack that 5 per cent growth in GDP for me. How important of a target is that?
Joe Leahy
Yeah. The 5 per cent growth figure, that’s a really important sort of metric for the party. It was seen as very ambitious when it was set by the government around March. And during the year, economic growth actually fell quite sharply and seemed it looked like, for a while, that, you know, China might actually miss that target. And then towards the end of the year, China put in a really strong fourth quarter and then hit the target spot on, like right on 5 per cent. And a lot of sort of ordinary people that we spoke to, they don’t really feel this 5 per cent growth.
Sonja Hutson
Yeah. So what are everyday people in China telling you about how they feel about the economy?
Joe Leahy
Yeah. We spoke to ride-hailing drivers and we spoke to people working in state-owned banks. One person in a state-owned bank said that his lending portfolio is 20 per cent smaller this year than in the past. And he said his clients are paying down their loans because it’s better to pay down your loan than to invest. So clearly there’s some sort of disjuncture with the official numbers.
Sonja Hutson
And what do economists say? Do they agree that the reported 5 per cent is maybe too good to be true?
Joe Leahy
I would say mainstream economists know that there’s a lot of problems with the numbers. One of the sort of most blunt, if you like, reports in recent times is from the Rhodium Group in the US. And they said that they believe that last year’s growth was probably about half of the official figure. And they say that the figures exaggerate things like fixed-asset investment or government consumption and individual consumption. And they point to the fact that there’s a huge property slowdown going on in China. And that sort of backs up what we’re seeing here. We’re seeing a lot of people holding back on spending. We’re seeing deflation, at least at the factory level and very low consumer price growth. At the same time, we’re seeing a lot of government spending on infrastructure and things like this — and also exports. So that’s the sort of side of the economy that’s probably still holding up growth. Whereas on the domestic side, we’re seeing people feeling pretty gloomy.
Sonja Hutson
Right. So this gap between reported growth and what’s actually happening on the ground, it sounds like it’s pretty noticeable. What kind of position does that leave the government in?
Joe Leahy
The challenge for the party, I think, is how do you sort of resolve this contradiction? And we’ve seen that in the west, you know, perhaps even in the US, where, you know, the Biden administration was presiding over an economy with, you know, low unemployment, pretty high growth, etc, and they still lost the election. You know, in a country like China, which is not a democracy, the government has to carefully monitor, you know, social tension. And some people feel that it’s only once these social tensions begin to grow a bit more, that the government may respond and try to do more sort of spending, more spending on households and consumption to try to lift the sort of feeling of prosperity of the average person on the street here.
Sonja Hutson
Joe Leahy is the FT’s Beijing bureau chief. Thanks, Joe.
Joe Leahy
Thanks very much.
Sonja Hutson
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