Trump To Meet Xi, $38B AI Data Center Deal | Bloomberg The Pulse 10/24/2025

Key Concepts

Global Economy: The interconnectedness of national economies through trade, investment, and financial flows.
Inflation Data (CPI): Consumer Price Index, a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Crucial for central bank policy decisions.
US Government Shutdown: A situation where Congress fails to pass appropriations bills, leading to a lapse in federal funding and the suspension of non-essential government services.
Trade Tensions/Negotiations: Disputes and discussions between countries regarding tariffs, trade agreements, and market access.
Geopolitical Risk: The potential for political events and instability to impact financial markets and economic activity.
Earnings Season: A period when publicly traded companies release their financial results, providing insights into their performance and future outlook.
PMI (Purchasing Managers' Index): An economic indicator that provides a snapshot of the health of the manufacturing and services sectors. A reading above 50 indicates expansion.
ECB (European Central Bank): The central bank responsible for monetary policy in the Eurozone.
Fed (Federal Reserve): The central bank of the United States, responsible for monetary policy.
Interest Rate Cuts: A reduction in the benchmark interest rate by a central bank, intended to stimulate economic activity.
Core Goods/Services Inflation: Inflation excluding volatile food and energy prices.
Wage Growth: The increase in the average earnings of workers, a key driver of inflation.
Trade Uncertainty Index: A measure of the level of uncertainty surrounding international trade policies.
Alpha Generation: The ability to achieve investment returns that exceed a benchmark index.
Pro-Risk Stance: An investment strategy that favors assets with higher potential returns but also higher risk.
Decoupling: The process by which two economies become less interconnected.
Trade Deficit: The difference between a country's imports and exports when imports exceed exports.
SCOTUS (Supreme Court of the United States): The highest federal court in the US.
Tactical vs. Strategic Investing: Short-term trading strategies versus long-term investment approaches.
Earnings Expectations: Forecasts of a company's future profitability.
Magnificent Seven: A colloquial term for the seven largest technology companies in the US.
AI (Artificial Intelligence): The simulation of human intelligence processes by machines, especially computer systems.
CapEx (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.
Return on Invested Capital (ROIC): A profitability ratio that measures how effectively a company uses the capital invested in its operations.
Private Credit: Loans provided by non-bank financial institutions to companies.
Default Level: The rate at which borrowers fail to make their loan payments.
Credit Spreads: The difference in yield between a corporate bond and a government bond of similar maturity, reflecting the perceived credit risk.
Liquidity: The availability of cash or easily convertible assets.
Fiscal Stimulus: Government actions to increase spending or cut taxes to boost economic activity.
Differentiation and Dispersion: The degree to which different assets or sectors perform uniquely.
Payment-in-Kind (PIK): A type of debt where interest payments are made in the form of additional debt rather than cash.
Fondamentaux: Fundamental analysis, focusing on economic and financial factors.
Leverage: The use of borrowed money to finance investments.
USMCA (United States-Mexico-Canada Agreement): A free trade agreement between the three countries.
Prediction Markets: Markets where participants trade contracts whose payoffs depend on the outcome of future events.
Export Controls: Government restrictions on the export of certain goods or technologies.
Anti-Coercion Instrument: An EU trade tool designed to counter economic coercion by third countries.
Rare Earths: A group of 17 chemical elements with unique properties crucial for many modern technologies.
Frozen Russian Assets: Assets belonging to the Russian state or individuals that have been seized and immobilized by international authorities.
Euroclear: A financial services company that provides settlement and related services for a wide range of securities.
DIA App: Ukraine's government services mobile application.
Cybersecurity: The practice of protecting systems, networks, and programs from digital attacks.
Defense Tech: Technologies developed for military purposes.
Startup Ecosystem: The network of individuals, organizations, and resources that support the creation and growth of new businesses.
Systemic Risk: The risk that the failure of one financial institution or market could trigger a cascade of failures throughout the entire financial system.
High Yield Index: A benchmark that tracks the performance of high-risk, high-return corporate bonds.
Capital Markets Union: An initiative by the European Union to create a single, integrated market for capital across all member states.
IPO (Initial Public Offering): The process by which a private company becomes public by selling shares to investors for the first time.
CSR (Corporate Sustainability Reporting Directive): EU legislation requiring companies to report on their sustainability performance.
Debt Brake: A fiscal rule that limits government borrowing.
Bundesbank: The central bank of Germany.
House Governor: Refers to the governor of a central bank, in this context likely the Bank of England.
Xperia: A Dutch chip maker.
GDP (Gross Domestic Product): The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.

Main Topics and Key Points

Market Dynamics and Economic Outlook

Global Stock Performance: Tech shares are leading global stocks higher, with European stocks edging higher and US equity futures gaining. This positive sentiment is partly driven by easing trade tensions and positive earnings reports.
Inflation Data Focus: The US Consumer Price Index (CPI) data for September is a significant market driver, especially after a three-week delay due to the US government shutdown. The market is anticipating this data to influence future Federal Reserve decisions.
Eurozone PMI: The Eurozone October Composite PMI rose to 52.2, exceeding the forecast of 51.1. A reading above 50 signifies economic expansion, indicating a positive trend in the region.
Earnings Season: While overall earnings season was expected to be tough, US earnings expectations for 2025 have increased from 9% to 11%. Strength is broadening beyond the "Magnificent Seven" tech companies, with the rest of the market expected to deliver nearly 8% year-on-year growth in Q3. European earnings are not expected to grow significantly in 2025, making selective investment in sectors like industrials and financials important.
AI Investment: Artificial Intelligence (AI) continues to exceed expectations, but the build-out is becoming more capital-intensive. New entrants are tapping into private credit and joint ventures, raising questions about return on invested capital. Despite the costs, the early adoption phase and the race to stay competitive make it difficult to avoid these trades. The long-term winners and losers in the AI space remain a key question.
Credit Markets: The credit cycle has been less pronounced than expected, potentially due to easy liquidity and fiscal stimulus. Differentiation and dispersion are key in credit markets. Private credit is expected to play a larger role due to the blurring lines between public and private financing. While leverage is not excessively high and spreads are low, attention is being paid to different credit categories and potential increases in payment-in-kind arrangements.
US Government Shutdown: The US is facing a prolonged government shutdown with no clear catalyst for reopening. This shutdown is impacting data collection and could have deeper economic consequences, potentially shaving points off GDP if it extends significantly. The political comfort of both parties with their positions is prolonging the stalemate.

Trade Tensions and Geopolitics

US-Canada Trade Talks: President Trump announced the termination of all trade negotiations with Canada, citing "egregious" behavior. This is seen by some as a political maneuver rather than a disruption to the core trading relationship, potentially linked to upcoming Supreme Court decisions on tariffs.
US-China Relations: Plans for President Trump to meet with President Xi Jinping in South Korea are boosting market sentiment, suggesting an easing of trade tensions. However, the relationship remains complex, with a pattern of rhetoric escalation followed by de-escalation during meetings. The base case is an extension of the current truce, but export controls and tariffs remain potential threats.
EU-China Trade Policy: French President Emmanuel Macron has urged EU leaders to consider using the bloc's anti-coercion instrument against China, particularly in response to Beijing's planned export controls on critical raw materials. Europe's dependence on Chinese rare earths makes this a significant concern.
Russian Frozen Assets for Ukraine: A debate is ongoing within the EU regarding the use of frozen Russian central bank assets to aid Ukraine. Belgium, where most of these assets are held, has raised concerns, leading to a delay in a political decision until December. This delay could be problematic for Ukraine's financing needs.

Ukraine's Digital Transformation and Defense

DIA App: Ukraine has successfully implemented a government services app called DIA, allowing citizens to access digital documents, pay taxes, and interact with government services. Over 22 million people are using the app, covering a significant portion of the eligible population.
Cybersecurity and Infrastructure Resilience: Ukraine faces significant challenges due to ongoing Russian attacks on its energy infrastructure, leading to power outages. While contingency plans are in place, the constant bombardment makes protection difficult. Cybersecurity threats are also persistent, with daily incidents monitored. The nature of cyber warfare involves silent penetration over extended periods, leading to potential large incidents after long periods of quiet.
Ukraine Phoenix Tech Fund: This fund aims to attract partners and capital to support Ukraine's technology ecosystem, particularly in defense tech. It is crucial for developing solutions to counter Russian aggression and for supporting the startup ecosystem, especially given the challenges of operating during wartime.

Private Credit and Financial System Stability

Systemic Risk Concerns: Henry Kravis of KKR has pushed back against warnings of systemic risk in private credit, stating that recent bankruptcies did not involve private credit. He acknowledges concerns about firms entering the private credit market without adequate expertise but believes the sector itself is not inherently systemic.
Bank of America Perspective: Bertie Mensa of Bank of America shares the view that recent credit events are not systemic. He emphasizes the importance of risk management for firms in the credit business and notes that while some market segments feel "toppy," there are underlying fundamentals that support continued growth. Clients are actively trying to look through the noise and identify real economic trends.
European Capital Markets: There is optimism about Europe's potential for growth due to high savings rates, an educated workforce, and existing infrastructure. However, there's a concern that individual countries are moving faster than the EU bureaucracy in terms of deregulation and simplification. The development of a capital markets union is seen as crucial for Europe to compete globally and retain European savings.
IPO Market Trends: The London IPO market has seen a dismal year, with fundraising at 30-year lows. Companies are increasingly listing elsewhere, and the UK's exchange has lost appeal. This trend is attributed to a combination of factors undermining London's financial standing.
US Government Shutdown Impact: Libby Cantwell of PIMCO highlights the lack of a clear catalyst for reopening the US government, predicting a potential reopening in November or even by Christmas. The shutdown's duration will likely have deeper economic impacts, including impaired government services and data collection. President Trump is seen as a wildcard who could pivot on the issue of enhanced Obamacare subsidies.
US-China Relations and Market Expectations: The US-China presidential meeting is expected to yield a "detente" rather than a comprehensive deal. The relationship is fragile, with a tail risk of rapid deterioration through tariffs or export controls.

Important Examples, Case Studies, or Real-World Applications

Sanofi, NatWest, Holcim, Ssab: These companies are cited as examples of firms that saw gains after beating earnings expectations, illustrating positive pockets of strength in the market.
Oracle Data Centers: Banks are preparing to launch a record $38 billion debt offering to fund data centers tied to software giant Oracle, demonstrating significant investment in technology infrastructure.
Ukraine's DIA App: This is a concrete example of successful digital transformation in government, enabling citizens to access services efficiently.
Xperia Chip Maker Dispute: The dispute between the Dutch government and China over Xperia, a chip maker, highlights the critical role of chip supply chains for industries like automotive and the potential for geopolitical tensions to disrupt them.
London's IPO Market Decline: The significant drop in IPO fundraising in London serves as a case study of a major financial exchange losing its appeal and facing challenges in attracting listings.

Step-by-Step Processes, Methodologies, or Frameworks

BlackRock's "Immutable Law" Framework: BlackRock uses a framework based on "immutable laws" – things that cannot change too quickly. They are "pro-risk" because they believe major economic shifts like the decoupling of the two largest economies or the closing of the US trade deficit are unlikely in the short term. This framework guides their investment strategy against pricing in extreme short-term changes.
Investment Strategy Based on Trading vs. Investment: The discussion differentiates between tactical trading (fading extreme moves) and longer-term investment positioning, suggesting that different strategies can be employed based on market outlook and risk tolerance.
Assessing Credit Risk: The emphasis on "what am I risk" and "how am I protecting my investors" by Henry Kravis outlines a fundamental methodology for managing risk in the credit business. This involves careful consideration of potential downsides rather than solely focusing on maximizing returns.
Analyzing Market Sentiment: The approach to understanding market sentiment involves looking beyond day-to-day headlines to identify underlying trends and long-term support levels.

Key Arguments or Perspectives Presented, with Supporting Evidence

Argument: Inflation will remain a challenge beyond the medium term.
- Evidence: Core goods have been increasing after a 25-year deflationary period, and core services are unlikely to stay low due to persistent wage growth.
Argument: Markets may be pricing in too many interest rate cuts by the end of next year.
- Evidence: There is still room for tariffs to feed through to goods inflation, which could impact the Fed's ability to cut rates as aggressively as the market expects.
Argument: Generating alpha by following day-to-day trade headlines is difficult.
- Evidence: The back-and-forth nature of trade negotiations, with deals announced and then potentially reversed, makes it hard to profit from short-term news.
Argument: AI build-out is becoming more capital-intensive, raising questions about ROIC.
- Evidence: New entrants in AI are tapping into private credit and joint ventures, indicating a shift from the hyperscalers' self-funded CapEx.
Argument: Recent private credit issues are not systemic.
- Evidence: Henry Kravis points out that recent bankruptcies did not involve private credit, and the market hit all private credit firms indiscriminately before realizing the issues were isolated.
Argument: The US government shutdown lacks a clear catalyst for reopening.
- Evidence: Unlike the 2013 shutdown, which was linked to raising the debt ceiling, there is no such immediate trigger, leading to political comfort on both sides.
Argument: The US-China presidential meeting is likely to result in a detente, not a deal.
- Evidence: The complex dynamic and China's use of economic coercion tactics suggest a less comprehensive outcome than a full trade deal.

Notable Quotes or Significant Statements with Proper Attribution

"I think today inflation is the biggest market driver. But beyond today, I think earnings trade headlines are going to drive market volatility." - Wei Lee, Global Chief Investment Strategist at BlackRock
"The two biggest economies decoupling was in a short period of time unlikely a trade deficit to close despite the significant reliance on foreign funding From a US government perspective, unlikely." - Wei Lee, Global Chief Investment Strategist at BlackRock (Illustrating their "immutable law" framework)
"I think there's a difference between kind of the day to day blow by blow trade headlines and the longer term lending support." - Wei Lee, Global Chief Investment Strategist at BlackRock
"I think AI is entering a very interesting phase right now where the build out becomes more capital intensive." - Wei Lee, Global Chief Investment Strategist at BlackRock
"I do worry about one thing. I worry about those firms that don't have a driver's license that have decided they want to get into private credit, have no way to drive, haven't passed a test or anything." - Henry Kravis, Co-founder of KKR (On concerns about inexperienced firms in private credit)
"I am not worried about a systemic risk issue in private credit." - Henry Kravis, Co-founder of KKR
"There's no one thing that keeps me up, but I think that we should just be cautious, just given where market levels are." - Bertie Mensa, International President of Bank of America
"The best that financial markets can hope for from, you know, this potential meeting between President Xi and President Trump is really a detente and not a deal." - Libby Cantwell, Head of Public Policy at PIMCO
"It's a shocker, isn't it? Really is." - Unattributed speaker (Referring to the decline of London's IPO market)
"The issue here is Belgium. Most of these assets are located in Belgium at Euroclear the house. So as a result, Belgium is more on the hook than anyone else from this. If these assets are used." - Suzanne Lynch, Brussels Bureau Chief (Explaining the complexity of using frozen Russian assets)

Technical Terms, Concepts, or Specialized Vocabulary with Brief Explanations

CPI (Consumer Price Index): A measure of inflation.
PMI (Purchasing Managers' Index): An indicator of economic health in manufacturing and services.
ECB/Fed: Central banks responsible for monetary policy.
Interest Rate Cuts: Lowering borrowing costs to stimulate the economy.
CapEx (Capital Expenditure): Spending on long-term assets.
ROIC (Return on Invested Capital): A measure of how well a company uses its capital.
Private Credit: Loans from non-bank lenders.
Credit Spreads: The difference in yield between risky and safe bonds.
USMCA: A North American trade agreement.
Anti-Coercion Instrument: An EU trade tool against economic pressure.
Rare Earths: Critical elements for technology.
Frozen Russian Assets: Seized Russian financial holdings.
DIA App: Ukraine's digital government services platform.
Systemic Risk: The risk of widespread financial collapse.
IPO (Initial Public Offering): The process of a private company going public.
CSR Directive: EU rules on corporate sustainability reporting.
GDP (Gross Domestic Product): The total economic output of a country.

Logical Connections Between Different Sections and Ideas

The transcript flows logically by first presenting a broad overview of market movers and headlines, then delving into specific economic and geopolitical factors influencing these markets.

Market Overview to Specifics: The initial headlines about tech stocks, trade tensions, and earnings set the stage for the detailed discussions with market experts.
Economic Data and Policy: The focus on US CPI data and Eurozone PMIs directly connects to the subsequent analysis of Fed and ECB policy implications.
Trade Tensions and Geopolitics: The discussion on US-Canada and US-China trade tensions naturally leads to the EU's perspective on trade with China and the broader implications of geopolitical risk.
Ukraine's Situation: The segment on Ukraine's digital transformation and defense efforts is linked to the broader theme of geopolitical challenges and the need for resilience and technological advancement.
Financial System Stability: The conversation on private credit and systemic risk follows logically from the discussions on market dynamics and the potential impact of economic shocks.
Government Shutdown Impact: The detailed analysis of the US government shutdown connects back to the initial mention of data delays and its broader economic and political implications.
Expert Opinions: The insights from BlackRock, Bank of America, KKR, and PIMCO provide different perspectives on the same overarching themes, creating a comprehensive view.

Any Data, Research Findings, or Statistics Mentioned

Eurozone October Composite PMI: 52.2 (above forecast of 51.1)
US Earnings Expectations (2025): Increased from 9% to 11%
Q3 US Earnings (ex-Magnificent Seven): Shy of 8% year-on-year
USMCA Renegotiation Timeline: Middle of 2026
Prediction Markets (US Supreme Court): 60% chance of ruling against President Trump
EU Anti-Coercion Instrument: A trade tool
Frozen Russian Assets Location: Primarily in Belgium at Euroclear
Ukraine DIA App Users: 22 million people
KKR Private Credit Business: Significant
High Yield Index: Around 300 to 405 to 90 (near all-time highs)
London IPO Fundraising (2006 vs. 2024): $50 billion in 2006, significantly lower in 2024.
UK Listed Companies (since 2008): 40% fall in number.
First Half of 2025 IPOs: Worst since 1998.
London IPO Market Ranking: Falls out of top 20, fundraising slumped 69%.
US Government Shutdown Duration: Exceeding three weeks, potentially extending to November or Christmas.
2013 US Government Shutdown: 16 days.
GDP Impact of Shutdown: Potential to shave off points if it extends until November.
US-China Trade Talks: Fifth round.
EU Summit: Discussions on sanctions and Russian assets.
German Debt Brake: Mentioned in the context of fiscal policy.
European Savings Rate: Incredibly high.
Number of Public Companies (since 2004): Dropped significantly.
US IPO Market: Tremendous opportunity.
Singapore/Hong Kong/London/Europe: Potential growth centers for capital pools.
UK PMI (October): 51.1 (slightly better than expected 52.5)

Clear Section Headings for Different Topics

Market Dynamics and Economic Outlook
Trade Tensions and Geopolitical Landscape
Ukraine's Digital Transformation and Resilience
Private Credit and Financial System Stability
US Government Shutdown and Political Stalemate
Global Deal-Making and Capital Markets

A Brief Synthesis/Conclusion of the Main Takeaways

The global economy is navigating a complex landscape characterized by easing trade tensions between the US and China, juxtaposed with renewed friction between the US and Canada. Inflation remains a key focus, with upcoming US CPI data poised to influence central bank policy. While corporate earnings are showing resilience, particularly in the US, and AI investment continues to be a significant theme, the build-out is becoming more capital-intensive. The private credit market, despite recent jitters, is largely viewed as not posing a systemic risk, though caution is advised for inexperienced players. Geopolitical events, such as the ongoing conflict in Ukraine and the EU's response to China's trade practices, add layers of uncertainty. The prolonged US government shutdown presents a significant economic risk due to the lack of data and impaired services. Europe is striving to maintain relevance through initiatives like a capital markets union, but faces challenges in bureaucratic speed. Overall, investors and policymakers are focused on navigating volatility, identifying underlying economic trends, and managing risks in an increasingly multipolar and uncertain world.