17:55
PDT
Spain defeats France 2-0 to reach World Cup final.
– Chip stocks continue to rally in Asian markets.
– IT software stocks face pressure post-IBM results.
– China's upcoming data release could impact market dynamics.
– Investors are cautious ahead of potential IPO developments.
World CupAsian marketsIPO developmentschip stocks
▸ Full transcript
We also have some World Cup news for you. Spain are into their first FIFA World Cup final since winning the tournament in 2010, after a comfortable 2-0 victory over France. Miguel Oriol Dabal opened the scoring with a first-half penalty before Pedro Porro sealed the win just before the hour mark. It was a disappointing performance from favorites France, whose attacking line-up managed just three shots on target. Spain will now meet either England or Argentina in Sunday's final. Quick look at how the setup is looking for Chinese markets as well on a day where you look at Japan and South Korea, there is that follow-through on the chip stock rally. But maybe some of these IT software stocks remain under pressure following what we got out of IBM. We're counting down as well to the data dump out of China that's out the top of the 10 hour. We're also watching out for potential reaction when it comes to developments related to maybe we see a deep-seek IPO at some point. That's it from the Asia trade. Our markets coverage continues as we look ahead to the star of trade in Hong Kong, Shanghai, and Shenzhen. The China show is naced. This is Bloomberg. for the presence of over 35 countries.
Analysis
Spain has advanced to their first FIFA World Cup final since 2010 after defeating France 2-0, with Miguel Oriol Dabal scoring a penalty and Pedro Porro securing the win. This disappointing performance from France, who managed only three shots on target, sets the stage for Spain to face either England or Argentina in the final.
In the Asian markets, there is a notable follow-through on the chip stock rally, while IT software stocks are under pressure following IBM's recent performance. Investors should be cautious as they await significant data from China and potential developments regarding IPOs, which could influence market sentiment.
17:53
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Rural development is hindered by lack of infrastructure and investment.
– Affordable aviation solutions could facilitate economic growth in underserved areas.
– Regulatory challenges pose significant risks to innovative transportation projects.
– The speaker has low confidence in the project's success, indicating high risk.
– A focus on hyper-dense flight networks reflects a trend towards localized economic strategies.
rural developmentaviation innovation
▸ Full transcript
Our rural areas don't grow as much because nobody wants to set up factories there because it is so hard for CEOs to go there. De-congest the cities is what I really want to do and sort of distribute wealth and work more across the country so that all of it develops at the same pace as the cities are doing. So that's what I want to do. What would it take for that to be a reality? Not just about putting $200 million or $5 million into that project, what else needs to be in place for that to be a reality? I mean, for that to happen, my idea of the answer is that we need short takeoff and landing planes, eight seaters, running at super cheap costs. They don't need to be as—super cheap is? I mean, as good as trains or maybe twice of trains. Like that much, that is the amount of ticket price of these planes. Like, and you should be able to create very small airstops in so many different cities, like in towns and villages. Like, so a hyper-dense flight network is just, I mean, it's like almost quick commerce principles applied to aviation. So that's what we would want to build. It's a very hard project. I have like 0.1% expectation that it'll work. Oh yeah, it's very hard because... I mean we can get the engineering done, even that's hard, it's very very hard. But then the regulation.
Analysis
The discussion highlights the challenges of developing rural areas in the face of urban congestion, emphasizing the need for affordable short takeoff and landing planes to create a hyper-dense flight network. The speaker expresses skepticism about the feasibility of this project, citing regulatory hurdles and engineering difficulties as significant barriers.
Smart money should note the potential for innovative transportation solutions to address regional economic disparities, but the high level of uncertainty and low probability of success may deter investment. The emphasis on creating small airstops in towns and villages suggests a shift towards localized economic development strategies that could reshape regional markets.
17:51
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Deepinder Goyal plans to launch a health tracking device in 6 to 12 months.
– The device will include peer-reviewed studies and features for potential medical device status.
– Goyal has a history of successful tech ventures, indicating potential market interest.
– Delays in product launches are common in tech, which could affect investor sentiment.
– The focus on regulatory approval suggests a serious approach to health tech.
health tech innovationproduct development timelines
▸ Full transcript
A free smart speaker designed to be a new type of home computer for the AI era. It'll help control smart home appliances, play media, answer questions, and tap into the range of capabilities offered by ChatGPT. One of India's most successful tech entrepreneurs is planning to launch a new health tracking device after stepping back from the empire he led for 18 years. Deepinder Goyal made his fortune with delivery apps including Zomato and Blinkit. Bloomberg's Haslinda Armin spoke to him exclusively for an upcoming episode of Latitude. We'll launch it as a wellness device with peer-reviewed studies and everything. And we have features coming up which will need it to become a medical device. So those features, whenever we have them, we will go through the regulatory approvals and then launch those features. Is there a timeframe you think it would be ready for the market? We're not working on a timeline to be very honest. So, temple... 24 months, 36 months. Oh, it's not that long. I mean, I don't have that much patience. So... 12 months. Maybe 6 to 12 months. Maybe 6 to 12 months. But I've been saying that for the last 18 months. So I don't know, right? So every time I say it's like 6 to 12 months, but the deadline keeps getting pushed because we discover something new, we discover something richer inside the signal and then we just want to make it perfect before we launch. Also now you have LAT aerospace. What is that about?
Analysis
A new health tracking device is set to launch in the next 6 to 12 months by Indian entrepreneur Deepinder Goyal, who previously led successful delivery apps like Zomato and Blinkit. The device aims to incorporate peer-reviewed studies and features that may require regulatory approval to transition into a medical device.
Investors should note the potential for delays in product launches as Goyal emphasizes the importance of perfecting the device before its release. This highlights a common challenge in tech development where innovation can lead to extended timelines, impacting market expectations and investment strategies.
17:46
PDT
Chinese hardware stocks are pulling back ahead of a major IPO.
– Investors expect over-subscription for the memory chipmaker's debut.
– Foreign investors are seeking proxies due to access delays to mainland IPOs.
– Sponsor banks and supply chain stocks are rallying in anticipation.
– Caution prevails as profit-taking occurs after a strong rally.
IPO excitementforeign investor accessmarket volatilitysupply chain dynamics
▸ Full transcript
Threats and also MetaX having their prospectus update. Until the debut, we actually saw shares falling because of some profit-taking after such a strong rally into the news. Most likely this time around, we're also seeing a similar pattern because Star 50, you just mentioned, has really rallied in the past three months on expectation for this IPO and the listing. Right now, there is a bit of caution before the real debut actually happens. What else are we seeing in investors' positioning ahead of the IPO? When I spoke to investors at East Spring today, they seem to be expecting the over-subscription and over-allotment driven by the excitement for this mega-memory chipmaker. Interestingly, the problem here is that foreign investors don't really have access to these mainland IPOs until a few months later when they have access on the stock connect. What we're hearing right now is that they are seeking proxies. For example, the likes of banks, which are sponsors and investors of these IPOs, such as CICC and CSC, have seen their stocks rallying because of such expectations. We are also hearing that investors are expecting supply chain benefits.
Analysis
Chinese hardware stocks are experiencing a pullback ahead of a significant IPO, with investors showing caution following a strong rally. The excitement surrounding the mega-memory chipmaker's debut is leading to expectations of over-subscription, but foreign investors face access delays to mainland IPOs, prompting them to seek proxies in related stocks.
Smart money should note that while the IPO excitement is palpable, the limited access for foreign investors could create temporary inefficiencies in the market. The rally in sponsor banks and supply chain stocks indicates a strategic positioning ahead of the IPO, which could lead to volatility in the broader market as the debut approaches.
17:44
PDT
China's AI hardware stocks are facing a temporary pullback.
– Recent IPO disruptions are influencing market liquidity.
– Long-term R&D investment in AI is prioritized over short-term gains.
– Analysts expect a recovery in the sector post-IPO disruptions.
– The competitive landscape in memory chips is intensifying.
IPO activityAI hardware marketR&D investmentmemory chip competition
▸ Full transcript
A private market financing round just coming weeks after it was in June or mid-June thereabouts that we had that $7 billion financing round from the likes of Tencent and CATL. So again, this is a company that needs to spend; they feel they need to spend a lot on R&D, and they've said that senior management last month or a couple of months ago were talking about, or around the time of that last financing round in early June, the need for research and development and AI compute far exceeds right now at least the immediate short-term commercialization. But at the same time, that is a theme globally we've heard. When are these large language models like DeepSeq, which was part of, of course, the namesake, the eponymous DeepSeq moment, when are they going to start making money for its investors? Steve, thanks for keeping tabs on all this for us, chief Asia correspondent Stephen Engel. It will be interesting to see, given all these listings, the impact it might have on the broader markets in terms of liquidity at the time, where if you look at the Star 50, it's pulled back from those June highs. Meantime, analysts are saying that a recent sell-off in Chinese AI hardware stocks is a likely temporary setback tied to IPO disruptions rather than a lasting sector rotation. For more, let's bring in Bloomberg Asia Equity's reporter, Winnie Su. So, Winnie, we're seeing a bit of a pullback in Chinese hardware stocks recently. This is part of rotation or maybe caution ahead of the...
Analysis
China's AI hardware stocks have experienced a recent pullback, attributed to IPO disruptions rather than a fundamental sector rotation. Analysts suggest this sell-off is likely temporary, indicating potential for recovery as the market stabilizes.
The ongoing need for significant R&D investment in AI compute suggests that companies are prioritizing long-term growth over immediate commercialization. This could create opportunities for investors willing to navigate the current volatility in the Chinese tech sector.
17:42
PDT
China's IPO could reach $9.8 billion, the largest since 2010.
– This offering is a test of China's semiconductor ambitions.
– The IPO aims to challenge the triopoly of Samsung, SK Hynex, and Micron.
– Increased AI spending is driving demand for memory chips.
– Market dynamics may shift as China pushes for tech self-reliance.
IPO activitysemiconductor self-relianceAI spending impact
▸ Full transcript
Last Friday when I was talking about this, we were discussing an IPO upwards of $4.3 billion. Now, based on the pricing and the size of the offering, and whether they exercise the over-allotment option, we could be talking about an IPO upwards of $9.8 billion. That would be China's biggest IPO dating back to Agbank in 2010; it would also be Asia's second biggest IPO following LG Energy Solutions in 2022, which raised upwards of $10.8 billion. This is going to be a pretty big offering when it hits that starboard in Shanghai, $9.8 billion. Again, this is going to be a big market test for Beijing as it really is pushing companies like this one to challenge the triopoly, if you want to call it, of course, in the memory space with Samsung Electronics and SK Hynex. They had the big ADR debut recently, and then, of course, there's Micron Technology. This is the world's fourth biggest memory chip maker and would probably be the biggest market test for China's ambitions to become self-reliant in semiconductors in particular, chips, and eventually high bandwidth memory that these memory chip players are capitalizing on with a boom in AI spending.
Analysis
China is set to launch an IPO potentially worth $9.8 billion, marking its largest since 2010 and Asia's second largest ever. This offering represents a significant market test for Beijing's ambitions to challenge the dominance of major players in the memory chip sector, particularly as AI spending surges.
The IPO's scale underscores the urgency for China to enhance its semiconductor self-reliance amidst rising global competition. Smart money should note that this could catalyze further investments in domestic tech firms, particularly in the memory space, as the government seeks to bolster its technological independence.
17:37
PDT
China's EV exports are likely to maintain growth despite trade frictions.
– Geopolitical tensions, particularly in the Strait of Hormuz, pose risks to China's economic outlook.
– Demand destruction in the refinery sector may impact inventory levels.
– China's competitiveness in the industrial sector is under scrutiny.
– The resilience shown earlier this year may not be sustainable.
trade tensionsEV market dynamicsgeopolitical risks
▸ Full transcript
But with a lot more trade frictions with the DM economies because of the rising export similarity, the rising competitiveness of China. So we are not really optimistic per se about the upcoming relationship between China-Europe, China-Japan or just broadly with the competitive industrial pack. But I think that having been said, China's exports of EV is probably going to continue to push through to a wider market. And I think the demand is there, of course, with some frictions from the DM, but the third market competition, China is probably going to still sail through with some resilience going forward. Talking about sailing, the latest flare-up in the street, how bad does it look for China? Because it was also interesting how resilient it was even during the worst of times in the conflict. Yeah, here comes the messy part of the resolution. In our base case, we always think that the straits of hormone situation is going to be a massive resolution. It's never a straight line. And now we see some flare-ups, and we are worried about that as well. Earlier this year, we did see China showing some resilience, which is basically a combination of some demand destruction, softer demand, especially in the refinery sector, as well as its buffers and inventory that has built up. But inventory is not infinite. We do think that the risk is accumulating as we move forward.
Analysis
China's exports of electric vehicles (EVs) are expected to continue growing despite increasing trade frictions with developed markets, indicating resilience in demand. However, the situation in the Strait of Hormuz raises concerns about potential risks accumulating as inventory buffers diminish, which could impact China's economic stability moving forward.
Smart money should note that while China's EV sector shows strength, the broader geopolitical tensions and trade relationships with Europe and Japan may hinder overall export competitiveness. The interplay between demand destruction in the refinery sector and inventory levels could signal a need for cautious positioning in related markets.
17:35
PDT
South Korean equities are heavily influenced by Hynix and Samsung.
– The Korean won is gaining due to fund repatriation and potential rate hikes.
– China's AI and green tech sectors are outperforming despite global economic risks.
– Retail sales in China are expected to show weakness, prompting possible stimulus.
– The K-shaped recovery in China highlights disparities in economic performance.
K-shaped recoveryAI investmentretail sector weaknessstimulus measures
▸ Full transcript
To allow consumption and domestic consumption at large to be the backbone of the economy, to support the products or the yield dividends from tech and innovation-driven growth. We've been talking a lot about what some people are calling the bottom half of the K. What about the AI-driven part? I mean, we had the trade numbers yesterday. Do you get the sense that even that could be vulnerable to the global CAPEX cycle and to what AI-related investments look like in the next couple of years? There are definitely some secretive elements of that, but I would like to dissect yesterday's trade data into three broader perspectives to look at China's external outperformance in a broader view. Firstly, the AI part, we did see exponential growth in AI both in POTS and in XPOTS. And that just reflects how deeply entrenched that AI phenomenon has been affecting China, and China is also deeply integrated in that supply chain. Given any cyclical elements of that, you know, coming into next quarters, if there is any risk to that, I'm sure China will be affected as well. But that is not the big picture. We also saw another aspect of China's outperformance, which mainly comes from, I would say the competitiveness of its supply chain with regard to green tech and transportation. So if we saw EV exports, which is also continuously outperforming, and that to me.
Analysis
South Korean stocks are experiencing volatility, primarily driven by Hynix and Samsung, which dominate the market. The Korean won is seeing demand due to repatriation of funds and potential interest rate hikes, suggesting a shift towards a more stable dynamic between the currency and equities.
China's trade data indicates strong performance in AI and green tech sectors, particularly in EV exports, but there are concerns about the impact of global CAPEX cycles on these growth areas. The dual nature of China's economy, with a strong export sector and a struggling retail sector, may prompt targeted stimulus measures to support domestic consumption.
17:33
PDT
China's economy is experiencing uneven growth, with tech and exports outperforming retail.
– Retail sales growth is projected at a modest 3.7% nominal over the next few years.
– Policymakers may introduce targeted stimulus to support weaker sectors.
– The current economic transition in China is complex and requires careful monitoring.
– Market sentiment may shift based on upcoming retail sales data.
K-shaped recoverytargeted stimulusretail sector performance
▸ Full transcript
Quality growth. Looking at the shape of China's growth, it's currently running under two speeds. We know K-shaped growth is everywhere, but K in China looks slightly different. It represents the characteristics of China's transition. We see high-speed growth in the export sector, as well as the tech manufacturing sector, that's been running at a higher speed. This perhaps stops or makes policymakers hesitate to roll out any form of broad stimulus. However, that doesn't mean China doesn't need help, as we have another side of the K, or the lower gear of the economy, which is under transition. We did see some slowdown, especially within retail sales, and we are expecting some weak numbers today again, mainly driven by the slowdown of goods consumption as stimulus has subsided earlier this year. With that in mind, if there is a resurgence of slowdown in the retail sector, we expect more efforts to inject some sort of targeted stimulus to support the weaker side of the economy. There also seem to be some rumblings about a consumption support plan. How much weight are you putting on something like that? Exactly. We did hear some follow-ups from the five-year plan in terms of implementation. The key headline number suggests that we're probably going to see about 3.7% nominal retail sales growth planned for the next few years, and that's not ambitious in my view.
Analysis
China's economy is exhibiting K-shaped growth, with strong performance in the export and tech manufacturing sectors, while retail sales are expected to show weakness due to earlier stimulus withdrawal. Policymakers may hesitate to implement broad stimulus measures, but targeted support could emerge if retail sector slowdowns persist.
17:30
PDT
South Korean stocks are heavily influenced by Hynix and Samsung.
– The volatility in the Korean market is significant despite overall gains.
– US CPI data has positively impacted global risk sentiment.
– China's upcoming GDP data could signal economic weakness.
– Tariff headlines are expected to dominate the news cycle leading up to midterm elections.
market volatilityUS economic indicatorsChina economic outlook
▸ Full transcript
When news breaks, a redhead across the Bloomberg terminal, Bloomberg has you covered. Trump's global tariffs are struck down by the US Supreme Court. For all the context and clarity you need, there are going to be now tons of tariff headlines until midterm elections here at first on Bloomberg. Bring you the latest geopolitical news whenever and wherever it happens. I'm David Gerrard. So Lardia, Unia, and Bolivia, and this. Let's take a look at how the benchmarks are faring half an hour into the trading day. Of course, we already saw the cost be surging by upwards of 7%. A lot of volatility there, driven by these leverage ETFs, of course, options out of the US as well as we've learned, began trading this week. Take a look at how the improved risk appetite, given the US CPI numbers, is perhaps also helping the macro backdrop overall. So you do see a bit of that tech rebound in the Japanese Gauge. Australia's ASX 200 also sitting in the green on a day where the dollar is coming under further pressure. Now we're also watching out for China data. It will release its latest economic activity data later today. Second quarter GDP growth expected to have weakened to 4.5%, according to the media forecast in a Bloomberg survey. Discussed the broader outlook for the Chinese economy.
Analysis
The South Korean equity market surged by over 7%, driven by volatility from leverage ETFs and improved risk appetite following favorable US CPI numbers. Meanwhile, the dollar is under pressure, and China is set to release economic activity data, with second-quarter GDP growth expected to weaken to 4.5%.
17:26
PDT
career that may actually help to remove some of the structural setup that was driving at least some of that massive repatriation. We've also…
▸ Full transcript
career that may actually help to remove some of the structural setup that was driving at least some of that massive repatriation. We've also of course had a big climb down in the shares which means it's a cleaner positioning setup. So that means we could return towards a more normal dynamic where you can have the one gaining at the same time as South Korean shares are gaining, whereas for much of this year, those were going in opposite directions. Okay, and very quickly Garfield, before we let you go, I mean this whole pension buying speculation, talking about repatriation of funds, that's a big story here in Japan. Oh, a very big story. I mean, it's also part of what's going on is also not just the sort of direct repatriation but efforts to encourage retail investors and also institutions to be more biased to buy, you know, with their existing inflows. So it's a kind of a stealth repatriation, as it were. The allocations to Japanese government bonds are being, were biased towards growing anyway with yields higher. Now the government is acting to reinforce that, so that could lead to a flatter curve as those high, longer-end Japanese yields.
17:24
PDT
South Korean equities are heavily influenced by Hynix and Samsung.
– Volatility in the market is currently outweighing overall strength.
– Increased demand for the Korean won is linked to repatriation of funds.
– Potential interest rate hikes may support the local currency.
– Market dynamics are sensitive to the performance of a few key players.
market volatilitycurrency dynamics
▸ Full transcript
There's incredible strength when it comes to the South Korean market but also a lot of volatility. The volatility sort of outweighs the strength at least for now; even with what's going on this morning, the cost remains well below the highs that we saw earlier this year. Of course, it is very strongly up over the course of the year. So that again highlights the volatility and it also demonstrates how, at the moment, South Korean stocks are essentially one and a half companies, as it were. It's Hynix and then to a lesser extent Samsung that are really meaning just about everything for South Korean equities. That's part of the volatility and that's a big part of what's leading to gains today. What about what this means for the Korean won? Because there's a sense of maybe there's a repatriation of funds leading to demand for the local currency. That's one of the things that's gone on that's been helping with the Korean won. There's also the likelihood that they'll be okay with a rate hike, as was flagged earlier. There's a broader bit of the picture.
Analysis
South Korean stocks are experiencing volatility, primarily driven by the performance of Hynix and Samsung, which dominate the market. The Korean won is seeing increased demand due to repatriation of funds and potential interest rate hikes, indicating a complex interplay between local currency strength and equity performance.
Smart money should note that the reliance on just a couple of companies for market strength can lead to heightened risk, especially in volatile conditions. Additionally, the anticipated interest rate hikes could further influence currency dynamics, impacting foreign investment flows into South Korea.
17:22
PDT
Korean equities are experiencing significant gains, particularly in tech and energy sectors.
– Brent crude prices are above $85, influenced by U.S.-Iran tensions.
– SK Hynix stocks are trading at a premium, indicating strong market interest.
– Geopolitical factors are increasingly impacting tech sector valuations.
– Investor sentiment is shifting amidst volatility in both energy and tech markets.
geopolitical riskenergy pricestech sector volatility
▸ Full transcript
I interact a lot with Americans and Chinese players, and we see Trump fighting for their companies all the time. We see the Chinese fighting for their companies all the time here in Europe. I feel I'm fighting against the European regulators, not that they are fighting for us. They are fighting against us. It's a big mistake because we need to have really big global tech leaders in Europe. Don't mistake Europe; live every weekday. It's a multi-trillion dollar industry. We'll show you what's happening in ETFs like no one else. We're seeing Korean equity surging in today's session, the best day in about a month for the Kospi, with the likes of tech, the energy sector, and industrials also gaining ground. Not surprising, energy sector companies, given that we are seeing Brent prices above $85 a barrel again on the ongoing conflict between Iran and the U.S. But it's really to do with the volatility that we're seeing around the tech sector, especially when it comes to SK Hynix stocks. I mean, the ADR is now with a premium of more than 50%.
Analysis
Korean equities surged today, marking the best performance in about a month, driven by gains in the tech, energy, and industrial sectors as Brent prices rise above $85 per barrel amid ongoing U.S.-Iran tensions. The volatility in the tech sector, particularly with SK Hynix stocks trading at a premium, indicates a potential shift in investor sentiment towards technology amidst geopolitical uncertainties.
Smart money should note that while energy stocks benefit from rising oil prices, the tech sector's performance is increasingly tied to geopolitical developments, suggesting a complex interplay between traditional energy investments and tech valuations. The widening premium on SK Hynix ADRs signals strong demand, but also highlights the risks associated with supply chain disruptions and regulatory challenges in Europe.
17:18
PDT
Iran's tracking of tankers may deter shipping activity.
– U.S. crude is being considered as an alternative supply source.
– Current market bids for U.S. crude are wide, indicating uncertainty.
– Geopolitical tensions are influencing energy supply discussions.
– Asian buyers are exploring options due to rising Middle Eastern prices.
geopolitical riskenergy supply dynamics
▸ Full transcript
Reporting has shown that these tankers are actually traveling dark through the Strait of Hormuz. This means that companies like AdNoc and Kuwait are moving tankers through dark routes, which was the main way by which crude was getting out to global markets. If Iran is able to signal that they know what these tankers are doing and can hit them if they wanted to, this will add a lot of caution. Ship owners and captains will think twice before continuing to move the energy the world is starved of through this trade. We also get a sense of how Asian buyers are getting supply from the U.S. How much of that is helping to offset the supply crunch? That's a really good question, Avril. What's interesting is that those discussions are actually more in the conversation stage right now. After the discussion about the 20% fee on homeless transits that Trump was talking about, there were open conversations about whether, if this makes crude coming out of the Middle East too pricey, what other alternatives do we have to look at? One thing our reporting showed was that while these conversations are still very initial, it's clear that the bids and offers are very wide. No one has really reached the point where they are ready to buy U.S. crude at the moment. However, U.S. crude has served as the supply of last resort when Middle Eastern flows were completely cut, so I don't think that's off the table. I could see many turning to the U.S., potentially making it the big winner if things go south again in the trade.
Analysis
Iran's ability to track tankers moving through the Strait of Hormuz is raising caution among ship owners, potentially impacting global crude supply. Discussions are ongoing regarding alternatives to Middle Eastern crude, with U.S. crude being considered as a last resort amid rising prices from the region.
The current wide bids and offers indicate that while interest in U.S. crude exists, no firm commitments have been made yet. Smart money should note that geopolitical tensions could shift supply dynamics, making U.S. crude a more attractive option if Middle Eastern flows are disrupted.
17:16
PDT
U.S. military tensions with Iran are escalating.
– Naval blockade reimposed, increasing risks to energy supplies.
– Trump's policy changes could impact political landscape ahead of midterms.
– Gas prices are expected to remain elevated.
– Uncertainty in U.S. foreign policy may affect investor confidence.
geopolitical riskenergy supply volatilitypolitical uncertainty
▸ Full transcript
We've seen the economic pressure escalate. So the naval blockade is back in place. We had the removal of the waivers on Iranian oil a week or so ago. We're probably going to see an escalation on the military front from the U.S. and probably Iran as well. We don't know how that's going to play out, but the risks are increasing. The shipping risks are going up. The risk to energy supplies is going up. And we just don't see a way out of this. Yes, we continue to see those casualties and even deaths in the Strait of Hormuz. What do we know about the potential political ramifications for President Trump? I mean, coming into this conversation, I called it the tackle trade, which is what markets are doing at this point. Yeah. I mean, for Trump, the risks just keep going up. We have the November midterm election. His Republican Party is facing a serious challenge. And the way things are going now, gas prices are set to be elevated at that time. The war is set to be going on at that time. He actually may have to go back to Congress to see about the War Powers Act. He's trying to reset the clock for that. So the political ramifications at home are going up, and then there are the international ramifications. Allies weren't on board with this, and these abrupt changes from the 20% fee to dropping it. How do you keep allies on board when they don't know what the policy is going to be day to day? John, thank you so much. Bloomberg East Asia.
Analysis
The U.S. has reimposed a naval blockade on Iran, escalating military tensions amid rising risks to energy supplies. President Trump's abrupt policy changes, including the removal of a 20% fee on shipments, could have significant political ramifications as gas prices rise ahead of the November midterm elections.
Smart money should note that the ongoing military escalation and fluctuating U.S. policies may lead to increased volatility in energy markets. The uncertainty surrounding U.S. foreign policy could impact investor confidence and complicate alliances, potentially affecting global oil supply dynamics.
17:14
PDT
Trump plans to escalate military strikes on Iran, targeting energy infrastructure.
– Gulf states have promised to offset revenue losses with direct investments.
– The credibility of Gulf states' commitments is in question.
– Increased military actions may lead to volatility in energy markets.
– Investors should monitor geopolitical developments closely.
geopolitical riskenergy market volatility
▸ Full transcript
to invest more money in the United States at record amounts. And that would be very acceptable. And this way, there's no fee. President Trump discussing his decision to draw plans for fees on shipments through the Strait of Hormuz, saying Gulf states have promised to make up their revenue with direct investments. Meanwhile, U.S. forces have reimposed a naval blockade and launched a new wave of strikes on Iran. Trump is also threatening further attacks in coming days unless Tehran comes to the negotiating table. You anticipate that the strikes were seen this week against Iran? Will expand? Are you considering hitting energy targets or other locations inside of Iran? I'll save the energy targets for last, but ultimately we'll hit energy targets. But we're going to hit them very hard tonight. We're going to hit them very hard tomorrow night. We're going to hit them very hard the night after. And then next week it gets really bad for them because next week comes the power plants, next week comes the bridges. Let's bring in our East Asia government editor, John Herskovitz. John, I mean the dropping of the 20% fee, that was fast. No wonder the taco trade is back in the markets. What exactly happened? Yeah, I mean, Trump said that he heard from representatives of Gulf states and they agreed to this investment as something else for raising money. of the Gulf States is questioning whether this has actually happened. But the thing is...
Analysis
President Trump announced plans to hit energy targets in Iran, escalating military actions with a naval blockade and airstrikes. Gulf states have reportedly agreed to compensate for revenue losses through direct investments, raising questions about the credibility of these commitments.
The rapid shift in U.S. military strategy and the potential for increased energy market volatility should alert investors. The reliance on Gulf states for financial backing may indicate a fragile geopolitical landscape, which could impact oil prices and regional stability.
17:11
PDT
SK Hynix ADRs show a significant premium over Seoul shares.
– Geopolitical tensions are influencing market sentiment and inflation expectations.
– Profit-taking is observed in the tech sector, particularly in healthcare.
– Strong fundamentals remain, but volatility is expected as the market adjusts.
– Foreign investors are cautious, selling into strength despite favorable conditions.
geopolitical riskinflation expectationsforeign investmentcurrency dynamics
▸ Full transcript
The South Korean economy is seeing SK Hynix's ADRs trading at a premium over Seoul shares, now topping 50 percent compared to just 3 percent last week. This premium reflects the geopolitical risk premium amid resurfacing tensions between the U.S. and Iran. The interior ministry of Bahrain has advised citizens to remain calm and head to safe places as the conflict impacts oil prices, with Brent trading above the 85 handle. Investors are also weighing comments from Kevin Warsh following the U.S. CPI print. Mark Franklin, head of Asia Multi-Asset at Manulife Investment Management, notes that the outlook is complex, with inflation expectations potentially hardening due to the renewed conflict in the Middle East. Recent inflation data showed signs of disinflation, and while the tech sector has cooled off, there may be a reversion back to year-to-date winners if earnings exceed expectations. The fundamentals remain strong, but markets often price in ahead of cycle inflection points, leading to volatility in equity performance. The scrutiny of South Korea's market has increased due to aggressive margin financing by retail investors. Companies may benefit from diversified currency exposure, but repatriation of cash balances into Korean won is not guaranteed. Foreign investors have been selling into strength, and while South Korea's fiscal backdrop is conducive to corporate earnings, valuation multiples are at the upper end of historical ranges. The focus on Japanese assets and potential fund repatriation could impact currency stability, as the yen continues to weaken against the dollar.
Analysis
SK Hynix's ADRs are now trading at a premium of over 50% compared to Seoul shares, a significant increase from just 3% last week, highlighting growing geopolitical risk amid tensions between the U.S. and Iran. The market is experiencing volatility, particularly in the tech sector, as profit-taking occurs and inflation expectations are being reassessed in light of recent geopolitical developments.
17:08
PDT
Japanese corporate earnings revisions remain strong against global markets.
– Valuation multiples are high, limiting upside potential.
– Foreign investor interest is contingent on ongoing earnings performance.
– Currency interventions have had limited lasting impact on the yen.
– Corporate governance reforms are enhancing shareholder returns.
Japanese corporate earningscurrency interventionforeign investmentcorporate governance
▸ Full transcript
Yeah, I mean, it's had a great run in terms of both relative and absolute performance. Valuation multiples are by no means cheap; they're probably at the upper end of historical trading ranges. But for some good reason, obviously, you've got a fiscal backdrop, which is generally very conducive towards reflationary policy and good for the corporate earnings backdrop. The currency is very competitive. That really helps the exporters. In addition to that as well, you've got bottom-up catalysts via corporate governance reforms improving shareholder return policies. But again, some of that is to some extent baked in the price. As long as Japanese corporate earnings revisions are faring well against broader global equity markets, there will be a bid from foreign investors. But I would say that the low-hanging fruit in terms of that evaluation multiple re-rating has by and large played out. And now it's all about fundamentals driving future returns. What about the comments we've kind of heard from Katayama in the past week, right? The idea that maybe they'll focus more with these Japanese assets. Maybe that means repatriation of funds as well. I mean, does that move the needle then? Well, they've attempted to obviously directly intervene in currency markets a few times in the last few months. And whilst they've had an initial impact, the trends have subsequently reestablished themselves and the yen has resumed its weakening path, particularly against the dollar. So what they're looking to do is attempt some more creative approaches to try to stabilize the currency because they recognize that it has an impact in terms of real wage growth, inflationary pressures, perception around purchasing power.
Analysis
Japanese corporate earnings are showing resilience, supported by a favorable fiscal backdrop and competitive currency, but valuation multiples are at the upper end of historical ranges. The recent comments from Finance Minister Katayama suggest potential repatriation of funds, yet the yen continues to weaken, indicating challenges in stabilizing the currency despite intervention efforts.
17:06
PDT
Memory makers may repatriate funds to South Korea.
– Corporate incentives favor retaining cash in US dollars.
– Foreign investors are selling into market strength.
– Ongoing weakness of the Korean won affects inflation.
– Political pressure may arise for repatriation of funds.
currency exposureforeign investmentinflation dynamics
▸ Full transcript
Memory makers may be repatriating some of their funds back to South Korea. Does that give you a sense of how the Korean won could benefit, especially if we see the dollar slipping in such a manner? Well, there's definitely a benefit in having a diversified currency exposure on the balance sheet for these companies. Obviously, a lot of their revenues are denominated in US dollars anyway, so they're obviously repatriating those if they're generated on short-run prices priced in US dollars. So, it's not a given that they will be automatically repatriating those cash balances back into Korean won unless there is pressure from the government to do so. Because, of course, corporate earnings are a big driver of foreign currency flows, and up until recently, the Korean won has seen quite a pervasive degree of weakness, which has fed through into domestic inflation. So, you might see a bit of political pressure to repatriate, but from a purely corporate incentivization perspective, there are benefits to retaining some of your cash balances in dollars, particularly if a lot of your cost base is in Korean won. For South Korea, what was interesting amid the rally was how foreigners were sitting out. And then at some points last week, it looked like the selling among foreigners eased off a little bit. How are foreign investors viewing South Korea now? What are you advising? Yeah, I mean, the observation was that many foreign investors that were latching onto this thing relatively early were selling into the strength. So it wasn't to say that they were sitting it out, but what they were doing was as the position sizes in their portfolios.
Analysis
The South Korean economy may benefit from a diversified currency exposure as memory makers consider repatriating funds back to South Korea. However, corporate incentives may lead to retaining cash balances in US dollars due to ongoing domestic inflation pressures and the weakness of the Korean won.
Foreign investors have been selling into market strength, indicating a cautious approach despite recent rallies. This behavior suggests that while there may be opportunities in South Korea, the sentiment among foreign investors remains mixed, potentially impacting future capital flows.
17:04
PDT
Profit-taking observed in tech and healthcare sectors.
– Earnings season expectations are high, influencing market momentum.
– Strong fundamentals persist despite cooling in speculative investments.
– Supply constraints expected to last until 2028.
– Volatility in equity markets remains a concern.
market volatilityearnings expectationssupply constraints
▸ Full transcript
The steam was let out of the tech sector to some extent. But then you've actually started to see some profit-taking in some of these moves. You look at health care in the last few days; it's starting to cool off a bit. So you might actually see a bit of a reversion back towards the year-to-date winners, particularly if they're catalyzed by above expectations in the earnings season, but the bar is quite high. So maybe the momentum and maybe for memory that still can be sustained. There's a chance that they regain their vigor that we saw in the first half. How intact do the fundamentals look to you? The fundamentals look very strong, but markets tend to price in ahead of inflection points in the cycle. And what you're seeing is definitely a strong cooling off, particularly in the memory names. There was a lot of speculative froth that built up, a lot of retail investors chasing the moves. That's cooling off a little bit, some margin calls kicking in there. The earnings outlook still looks very robust indeed. Many of these companies are highlighting that the supply crunch will extend well into 2028. But at some point, the market will attempt to call the peak in the cycle in terms of that delta-pacer growth. But for the time being, we think that's not here just yet. But that doesn't mean you're not going to see any more volatility in equity market performance, because indeed a lot of run-up, a lot of fraud got built in. That volatility also is drawing scrutiny, at least for the likes of South Korea. How much of that are you accounting as a risk for that market? I think that the scrutiny has come after the horse has bolted, unfortunately, because it was pretty evident that there was a very aggressive build-up in margin financing by retail investors and it's only when.
Analysis
The tech sector has experienced some profit-taking after a strong run, particularly in healthcare, indicating a potential reversion to year-to-date winners if earnings exceed expectations. Despite a cooling off in speculative froth, the fundamentals remain robust, with companies indicating that supply constraints will persist into 2028, suggesting that volatility in equity markets is likely to continue.
17:02
PDT
SK Hynix ADRs premium over Seoul shares exceeds 50%.
– Geopolitical tensions are resurfacing, impacting oil prices.
– Brent crude is trading above $85.
– Inflation expectations may harden due to Middle East conflict.
– Signs of disinflation were noted in recent inflation data.
geopolitical riskinflation expectationsenergy markets
▸ Full transcript
The South Korean economy is experiencing significant volatility, with SK Hynix really, when it comes to those ADRs, now seeing the premium over Seoul shares topping 50 percent, compared to just 3 percent last week. This is influenced by geopolitical risk, particularly the resurfacing tensions between the U.S. and Iran. The interior ministry of Bahrain has advised citizens to remain calm and head to the nearest safe place. As we watch the conflict and its impact on oil prices, Brent is sitting above the 85 handle in early Asia session. Investors are weighing comments from Kevin Warsh regarding inflation expectations. Mark Franklin, head of Asia Multi-Asset at Manu Life Investment Management, notes that the outlook is complex, with renewed hardening of inflation expectations possible due to the conflict in the Middle East. Recent inflation data showed signs of disinflation, which could influence market dynamics.
Analysis
The South Korean economy is experiencing significant volatility, with SK Hynix's ADRs now trading at a premium of over 50% compared to Seoul shares, a stark increase from just 3% last week. This surge is influenced by geopolitical tensions, particularly the resurfacing conflict between the U.S. and Iran, which is also impacting oil prices, with Brent crude trading above $85.
Investors should note the potential for renewed inflation expectations due to the Middle East conflict, despite some signs of disinflation in recent data. The complex interplay of geopolitical risks and inflation dynamics could lead to increased market volatility, particularly in energy and related sectors.
16:59
PDT
Oil prices are rising amid geopolitical tensions.
– US CPI shows signs of cooling, but inflation concerns persist.
– Japanese yen hits a 40-year low against the US dollar.
– Nikkei and JGB prices are rising, indicating a potential repatriation trade.
– Warsh's testimony suggests the Fed remains committed to fighting inflation.
inflation concernscurrency pressuregeopolitical riskscapital flows
▸ Full transcript
This week for stories of capitalism from business, markets, economics, tech, and climate. More than what you need to know, it's what you need to think about. This is Asia Trade War, counting down to Asia's major market opens, with oil prices continuing to edge higher. Of course, in April, we have the US-Iran conflict ongoing, at least when it comes to the inflation front, some relief coming from cooler US CPI. Which is also interesting given Warsh's testimony on the Hill. He sounded really determined about fighting inflation, how they're not mission accomplished yet. So maybe that reflected in the skepticism, the pairing back of that rebound that we saw in Treasuries to some extent, Cherry. Yeah, also saw the U.S. dollar and of course that pressure on all Asian currencies at the moment. Not surprising given of course that we have seen the Japanese yen, for example, already trading at that 40-year low against the greenback. We have seen that upside a little bit more broadly with Nikkei stock rising, also JGB rising in the previous session, because we're now back again focused on the great repatriation trade here in Japan. Finance Minister Katayama coming out and talking about potentially adding JGBs into...
Analysis
Oil prices are continuing to edge higher amid ongoing US-Iran conflict, while the US CPI shows signs of cooling, reflecting a complex inflation landscape. Warsh's determined stance on inflation suggests that the market may be underestimating the Fed's commitment to price stability, impacting Treasury yields and Asian currencies.
The Japanese yen is trading at a 40-year low against the US dollar, indicating significant pressure on Asian currencies. The focus on the repatriation trade in Japan, alongside rising Nikkei and JGB prices, highlights a potential shift in investor sentiment that could influence capital flows in the region.
16:55
PDT
U.S. dollar weakened post-CPI print.
– Japanese yen at a 40-year low against the dollar.
– Emerging market currencies declined after Fed's hawkish tone.
– Australian and New Zealand debt markets show stability.
– Offshore yuan remains steady at 677.
currency volatilityFed policyemerging markets
▸ Full transcript
Inflation, not mission accomplished yet. Take a look at how that is affecting the front-end and developed market debt markets. You're looking at the three-year yield nudging lower in Australia and New Zealand as well, so maybe a bit of stability that's coming off the back of this US CPI print that is showing that readjustment in the market. We saw in the U.S. dollar as well because of those numbers, right? The dollar falling. It did pair losses a little bit after Chairman Warsh reiterated the Fed's price stability vow. But we'll continue to watch the other side of that trade because the Japanese yen is still holding at that 40-year low against the U.S. dollar. While the offshore yuan is also holding steady at that 677 level, but the euro has also been hammered by the strength of the U.S. dollar in recent weeks. We're watching emerging market currencies as well, which took a plunge after we saw that more hawkish tone coming from the Fed chairman. The market opens in Sydney, Seoul, and Tokyo next. This is Bloomberg.
Analysis
The U.S. dollar has weakened following the latest CPI print, while the Japanese yen remains at a 40-year low against the dollar. Emerging market currencies have also declined due to a hawkish tone from the Fed chairman, indicating potential volatility ahead.
Investors should note the stability in Australian and New Zealand debt markets, which may signal a shift in sentiment despite the overall dollar strength. The offshore yuan's steadiness at 677 suggests resilience in the face of broader currency pressures, highlighting selective strength in certain markets.
16:53
PDT
Japan's corporate sector contracted 12.4% in May, worse than expected.
– IBM's market cap decline reflects a shift in customer spending towards chips.
– SK Hynex ADRs show a significant premium, indicating strong investor interest.
– Investors are favoring memory stocks over traditional software names.
– Potential for a shift in market dynamics favoring AI hardware.
economic contractionAI hardware demandmemory tradeinvestor sentiment
▸ Full transcript
A contraction of 12.4% when it comes to the latest in Japan. We're talking about more than a 12% contraction for the month of May. This is actually a bigger contraction than the 4% that we had seen economists expecting. Also, it's a contraction from gains in the previous month. When it comes to the year-on-year numbers, a contraction of 1.9 percent, which is also a contraction after expansion in the previous month and expectations that it would actually grow in the double digits. So, Avera, we are seeing, of course, a little bit more of that sentiment dampening when it comes to the corporate sector. Which is interesting when you put this together with what IBM showed us overnight, right? In terms of its market cap really being erased and how it saw customers diverting spending towards chips and servers. How does that set some of the spending that comes typically for IBM's hardware? So we're also watching the session today, some of these IT-related stocks, software stocks as well. How does that also offset some of the recovery we might be seeing for the memory trade following on from yesterday already, what we saw on the rebound in South Korea, which extended into the SK Hynex ADRs? Look at that massive, massive premium that we saw.
Analysis
Japan's corporate sector is experiencing a significant contraction of 12.4% in May, exceeding economists' expectations of a 4% decline. This downturn aligns with IBM's report of customers shifting spending towards chips and servers, impacting traditional hardware sales.
The substantial premium on SK Hynex ADRs indicates strong investor interest, despite recent volatility. This suggests a potential shift in market dynamics, where AI hardware demand may overshadow traditional software spending, creating opportunities for savvy investors to capitalize on the memory trade rebound.
16:48
PDT
Increased interest in SK Hynex ADRs indicates strong demand for memory stocks.
– Samsung may explore ADR listings following SK Hynex's success.
– Investors are shifting focus to underperforming sectors like Chinese internet and Indian banks.
– Deepseek is preparing for an IPO, highlighting ongoing interest in AI investments.
– Market dynamics suggest potential value opportunities in tech.
memory demandAI investmentsADR listingssector rotation
▸ Full transcript
Samsung and SK Hynex, which have really rallied a lot, including Japan's Kyokushia as well. We are seeing more appetite turning towards the underperformers, the likes of Chinese Internet names, India's banks, and also some of these Southeast Asian countries as well. For now, they are actually looking for more value to come. But interestingly, when we just go back to what's going on in the South Korea market, we talked about how investors are more interested in the ADR listing in SK Hynex. But just yesterday, we've also heard that there is potentially some early discussion between Samsung and the banks to potentially also consider a listing of their ADRs. Now it is still at the very early stage and they are considering that also because of the successful ADR listing by SK Hynex. But this morning, we did hear that the company said that they are actually not reviewing that possibility just yet. But it really goes to show how overall the appetite for the memory space and also that AI demand still remain quite intact. Bloomberg's Asia Accordus reporter, Wini Su, there. Let's actually stay on these tech stories because Chinese AI startup Deepseek is now set to be laying the groundwork for an IPO as well with a filing possible as soon as the seer sources say the company is working with accounting firms on its financials and its target.
Analysis
Samsung and SK Hynex are experiencing increased investor interest, particularly in their ADR listings, as appetite shifts towards underperforming sectors like Chinese internet stocks and Indian banks. The potential for Samsung to consider an ADR listing, following SK Hynex's success, indicates a strong ongoing demand for memory and AI-related investments.
Smart money should note that the early discussions around Samsung's ADR listing reflect a broader trend of capitalizing on successful market entries, which could signal a shift in investor focus towards value opportunities in the tech sector. Additionally, the groundwork being laid by Chinese AI startup Deepseek for an IPO suggests that the AI space remains a hotbed for investment despite market fluctuations.
16:47
PDT
Barclays expects a narrowing valuation gap with Micron.
– Memory shortage anticipated to continue.
– Strong investor appetite for SK Hynix ADRs noted.
– Hedge funds are engaging in pair trades between Hynix and Micron.
– Market sentiment may support SK Hynix further.
semiconductor market dynamicsinvestor sentimentpair trading strategies
▸ Full transcript
We are also hearing some target price upgrades from the likes of Barclays, for example, citing that they are expecting that valuation gap to narrow with Micron and that the memory shortage to continue further. Another potential factor is just how overall investors' appetite for the ADRs is very strong, especially in the U.S. with the high liquidity and the flexibility. They are seeing a bit more buying opportunities after how these ADRs have slumped 9% the day before and that some hedge funds are also liking these pair trades too long, for example, Hynix and too short Micron. So we are seeing those playing out as the different factors. So into today's session, we will likely see if that overall sentiment is likely going to support SK Hynix further or if we're still going to see that dynamic between retail investors and foreign investors.
Analysis
Barclays has upgraded target prices, anticipating a narrowing valuation gap with Micron and a continuation of the memory shortage. Investor appetite for ADRs remains strong, particularly in the U.S., as hedge funds engage in pair trades between SK Hynix and Micron.
The strong demand for SK Hynix ADRs, despite recent volatility, suggests a potential shift in market dynamics favoring memory chip producers. This could indicate a broader trend where investors are increasingly willing to capitalize on perceived mispricings in the semiconductor sector, particularly in the context of AI hardware demand.
16:44
PDT
IBM's market cap decreased by $69 billion following disappointing sales.
– Concerns arise over reduced software spending due to increased AI hardware purchases.
– SK Hynix ADRs experienced significant volatility, with premiums surpassing 50%.
– The tech sector is facing anxiety over shifting customer priorities.
– Market dynamics may indicate mispricing in tech stocks.
AI hardware spendingtech sector volatilitySouth Korean economy
▸ Full transcript
IBM is getting deprioritized because customers are now buying more AI hardware. Right? And so we saw a lot of software names go down today because the fear is that, well, maybe you're not going to buy as much, you know, Salesforce licenses or Microsoft Office seats if you're going out and trying to procure a bunch of memory chips. That's what the anxiety is. It's unclear, though, to what extent this is an IBM story or is this a sector-wide story? Our tech reporter Brodie Ford there joining us with the latest on IBM. Of course, we'll be watching their tech peers here in the Asian session as well, especially when it comes to the cost being which again ground in the previous session. We had seen a little bit of strength for the Korean won as well. This, of course, as we're getting those expectations of more inflows to come into the South Korean economy from SK Hynix ADRs. We have seen the volatility on SK Hynix for the last few days. We're talking about a jump of 27 percent on ADRs on Tuesday just falling 9 percent on Monday, but the ADR premiums from SK Hynix ADRs to what we're seeing in South Korea's Seoul shares has now surpassed 50 percent, so that's an enormous gap from what we saw before at around 3 percent. Discuss what's happening in the Asian equity space, especially what we can expect in today's trade.
Analysis
IBM shares fell significantly, marking the largest drop since January 1968, as the company reported second-quarter sales that fell short of expectations, attributing the miss to customer spending shifts towards AI hardware. This has raised concerns across the tech sector, with fears that software purchases may decline as companies prioritize procurement of memory chips and servers instead.
The volatility in SK Hynix's ADRs, which saw a dramatic 27% jump followed by a 9% drop, highlights a growing disparity between ADR premiums and local shares, now exceeding 50%. This gap suggests potential mispricing in the market, indicating that smart money should closely monitor inflows into South Korea's economy and the broader implications for tech spending trends.
16:41
PDT
IBM shares dropped significantly, losing $69 billion in market cap.
– Second-quarter sales missed expectations due to customer spending shifts.
– AI-related shortages in chips and servers impacted IBM's performance.
– The tech sector may face ongoing adjustments in investment strategies.
– Long-term implications for tech valuations as firms adapt to supply chain issues.
AI supply chain issuestech sector volatility
▸ Full transcript
Starten Sie Ihre Suche nach JPEE ETF. Anlegen und investiert bleiben. Mit einem aktiven Portfolio. Gekoatscht vom führenden Anbieter aktiver ETFs in Europa. Risikoprofil wählen und fertig. JPM Strategic Allocation Active ETFs. Von The Home of Active ETFs. IBM shares fell the most since at least January 1968, wiping out $69 billion of market cap. After our preliminary second quarter sales fell short of expectations. The company blames the miss on customer shifting spending amid AI fuel shortages. Let's bring in tech reporter Brody Ford for us now. So Brody, the firm blamed this on the customer spending on chips and servers instead. Walk us through what it's saying and are there any...
Analysis
IBM shares fell significantly, marking the largest drop since January 1968, resulting in a $69 billion loss in market capitalization due to second-quarter sales that fell short of expectations. The company attributed this miss to customers shifting their spending amid AI-related shortages in chips and servers.
Smart money should note that the shift in customer spending reflects broader trends in technology investment, particularly as firms navigate supply chain constraints and prioritize AI capabilities. This could signal a longer-term impact on tech sector valuations as companies adjust their strategies in response to these challenges.
16:37
PDT
Soft PPI expected, contributing to disinflation.
– AI advancements exert upward pressure on some inflation components.
– Chair Warsh emphasizes future productivity gains.
– Current layoffs in tech and finance are significant.
– Fed may remain cautious if oil prices rise.
disinflationAI impact on inflationFed policy
▸ Full transcript
That we're going to get a soft PPI number as well. Even if we got one that's in line with the consensus or even a little bit above, we're still looking at a PCE that's going to come down from where it was in the prior month and be another brick in that disinflationary wall that we are expecting. When it comes to artificial intelligence and the technological advances that we're seeing right now, do they have any inflationary effects right now without just looking at the long term that could add to the overheating trend of an economy? Yeah, that is the big paradox that is facing the Fed right now. And Chair Warsh was very vocal about the fact that productivity gains in the future will allow prices to eventually come down. And that was when he was still a candidate to be the Fed chair, that was one of the things that he harped on the most. The problem is, in the here and now, it is putting upward pressure on certain components of inflation. But I don't think it's enough to trump the other components where we are seeing disinflation overall. We're seeing also thousands of layoffs both in the tech sector and the financial sector being attributed to changes because of artificial intelligence. Do you take that into the net account as well? I do. I do think that's more of a micro story than it is.
Analysis
The market is anticipating a soft PPI number, which could contribute to a disinflationary trend, despite some upward pressure from technological advances. Chair Warsh's comments suggest that while productivity gains may help lower prices in the future, current inflationary pressures from AI-related layoffs are notable but not dominant in the overall disinflation narrative.
Smart money should recognize that the interplay between technological advancements and inflation is complex, with current layoffs in tech and finance potentially signaling a shift in labor dynamics that could influence future inflation trends. The Fed's focus on disinflation may lead to a cautious approach in policy adjustments, especially if oil prices rise again amidst geopolitical tensions.
16:35
PDT
Fed needs multiple lower inflation prints to shift from hawkish to neutral.
– Governor Walder indicates no more excuses for inflation.
– Rising oil prices could complicate Fed's inflation targets.
– Current oil price increases are not yet at critical levels.
– Pass-through from energy prices to core inflation remains muted.
Fed policyinflation trendsoil prices
▸ Full transcript
Proof on multiple consecutive prints being lower, that's a function of not being a target inflation in over five years. I was in attendance when Governor Walder spoke yesterday, and he essentially said that the Fed's out of excuses for inflation, that whether it comes from exogenous factors or endogenous factors, it's time for the price level to come back down to where it was before to the Fed's 2% target. So again, the Fed's going to still have to see multiple prints before it changes its tune from hawkish to neutral. And at what point can we expect potentially higher oil prices, especially given that we have no resolution to the U.S.-Iran war, to reverse its inflationary trend and actually contribute again to price boost? Yeah, that is the major question right now, right? So even the oil price increases that we've seen in the past 48 hours or so, it hasn't gone back up to levels that we've seen in March and April, but that risk is still out there. So I do think that if we start seeing oil prices drift back up to $85, $90, $100 a barrel, that is going to make the Fed pause. I will say that the pass-through from higher energy prices to core inflation, that was fairly muted as well. So I think over the longer term, it's not going to be much of an issue, but it will cause the Fed to lose its balance.
Analysis
The Fed is under pressure to demonstrate progress on inflation, with Governor Walder stating that the central bank has run out of excuses. The potential for rising oil prices due to ongoing geopolitical tensions could complicate the Fed's path to achieving its 2% inflation target.
Smart money should note that while recent oil price increases have not yet reached earlier highs, any significant rise could prompt the Fed to reconsider its current stance. The muted pass-through effect of energy prices on core inflation suggests that the Fed may not react immediately, but the risk remains that higher oil prices could disrupt their plans.
16:33
PDT
June CPI data indicates potential disinflation.
– Core goods show negative readings for two consecutive months.
– The burden of proof for sustained disinflation is on future data.
– Energy prices negatively impacted the headline inflation.
– Market participants should remain cautious about inflation trends.
disinflationinflation trendsmonetary policy
▸ Full transcript
The cooler number out of the June inflation data did not necessarily see Fed Chairman Kevin Warsh at his congressional testimony change the more hawkish tone that he has adopted lately. Let's discuss what's happening in the broader U.S. economy. Joining us now is Chris Hodges, chief U.S. economist at Natixis. Chris, it's really good to have you with us. If the burden of proof for Kevin Warsh was just lower inflation in order to perhaps avoid a rate hike, are we starting to see that with the June CPI numbers? Absolutely. This is the first brick in the disinflationary wall, but you're going to have to have a few of these. As you mentioned, I think quite rightly that the burden of proof is on disinflation from here on out. Now, we are cautiously optimistic that this is the first of several prints that we're going to see. It's hard for me to see where the inflationary impulse is going to come from. Where did it come from in June and could that remain for the rest of the year? Well, I mean, it was noticeably absent. If you look across components, the negative reading for energy in the headline was to be expected given the move in oil prices. But if you look at core goods, that was negative for the second consecutive month, indicating the tariff pass-through.
Analysis
The June inflation data showed a cooler number, indicating a potential shift towards disinflation, which could influence the Federal Reserve's rate hike decisions. However, the burden of proof remains on demonstrating sustained disinflation, as the core goods sector continues to show negative readings.
Smart money should note that the absence of inflationary impulses in June, particularly in energy and core goods, may signal a longer-term trend that could impact monetary policy. Analysts should remain cautious, as the path to sustained disinflation requires several consecutive positive prints.
16:31
PDT
U.S.-Iran tensions have impacted oil prices and bond markets.
– Two-year Treasury yields fell by nearly 13 basis points.
– Softer-than-expected inflation data contributed to bond repricing.
– Market skepticism persists despite positive inflation signals.
– Trump's threats may escalate geopolitical risks.
geopolitical riskbond market volatilityinflation data impact
▸ Full transcript
Right here on Bloomberg. Context changes everything. This is what futures are pointing to in a week where, when we came in on Monday, there were a number of overhangs for markets. You think about how the U.S.-Iran conflict had resurfaced to the extent which it propped up oil prices and caused massive repricing in bonds. And now it seems like some of that overhang has been removed. A bit of that risk coming on from the US CPI or coming off from what we saw on the inflation data, softer than expected, so that massive repricing came on the front end of treasuries. We saw almost a 13 basis point move lower in the two-year yield, the policy-sensitive part of the curve, futures on the 10-year also pointing to maybe a bit further gain. So, as our colleague Mark Cranfield had been highlighting earlier, there is a bit of skepticism out there still, especially when you consider these tensions still between the U.S. and Iran. Trump is now talking about threatening strikes on civilian infrastructure in Iran next week. We've been talking about as well, maybe this is part of the strategy to escalate then de-escalate to get what he wants as far as the conflict is concerned.
Analysis
Oil prices have been propped up by resurfacing U.S.-Iran conflict tensions, leading to significant repricing in bonds, particularly a notable drop in the two-year yield. Recent inflation data has shown softer than expected results, which has contributed to a decline in yields and a more constructive outlook for the bond market.
Smart money should note the skepticism surrounding the U.S.-Iran situation, as Trump's threats of strikes on civilian infrastructure could lead to further volatility. The market's reaction to the inflation data suggests a cautious optimism, but underlying geopolitical risks remain a critical factor influencing investor sentiment.
16:27
PDT
JPMorgan and Bank of America expect higher net interest income due to prolonged interest rates.
– Strong demand in commercial lending is supporting bank performance.
– Warren Buffett plans to divest from Berkshire Hathaway over eight years.
– Buffett pauses donations to the Gates Foundation amid scrutiny.
– South Korea's jobless rate falls to 2.7%, supported by government jobs.
banking sector performancephilanthropic strategyinterest rate environmentemployment trends
▸ Full transcript
Longer interest rate backdrop is supporting net interest income and net interest margin expectations for the banks. JPMorgan and Bank of America both flipped the net interest income expectations for the full year, some of which is driven by the higher-for-longer backdrop. The other factor driving that is balance sheet growth, particularly in deposits and lending. In the U.S., there's really strong demand activity, particularly in commercial lending, and deposits have really held in there, especially for the money center banks like JP Morgan and B of A, where they're seeing strong deposit activity from their wholesale clients and their consumer franchises. Bloomberg Intelligence US banking and financial senior analyst Herman Chan is here, and of course, another story that we're following right now is Warren Buffett pledging to completely dispose of his roughly $140 billion stake in Berkshire Hathaway over the next eight years. He's announced a new round of donations to charities tied to his family but paused donations for the Gates Foundation for the first time in nearly two decades after the release of documents renewing scrutiny of Bill Gates' ties to the late sex offender Jeffrey Epstein. We had some breaking news earlier today when it came to the jobless rate in South Korea falling to 2.7 percent, really propped up by those government support jobs, but at the same time...
Analysis
JPMorgan and Bank of America have revised their net interest income expectations upward due to a prolonged interest rate environment and strong demand in commercial lending. Warren Buffett plans to divest his $140 billion stake in Berkshire Hathaway over the next eight years while pausing donations to the Gates Foundation amid scrutiny of Bill Gates' ties to Jeffrey Epstein.
The sustained demand for deposits and lending, particularly among money center banks, indicates a robust banking sector despite potential headwinds. Buffett's shift in donation strategy could signal a broader reevaluation of philanthropic commitments in light of reputational risks, which may influence investor sentiment towards Berkshire Hathaway.
16:24
PDT
U.S. banks reported robust trading results in Q2.
– High prices and volumes are currently benefiting the market.
– Sustainability of these results is in question due to reliance on unique events.
– Citi's underperformance suggests volatility in trading results.
– Analysts remain cautiously optimistic about equity trading in H2.
trading performancemarket volatilitybanking sector outlook
▸ Full transcript
Opportunity to take actions on the offense which are recreated to shareholders and support our path to our medium-term targets. I just think we're in a very healthy, active, exuberant market with very high prices and very high volumes. We benefit from that. We just don't know how long it will continue. Could it get a lot better than this? It could get better. But you know, how much better I don't know. The chiefs are some of the biggest U.S. banks on record second quarter results from their stock trading divisions. For more on this, bring in Bloomberg Intelligence, U.S. banking and financial senior analyst, Herman Chan. Herman, how sustainable is all this, these strong trading results for the back half of the year? Yeah, that's right. That was the key question after we saw the really robust trading results in the second quarter. And that was a key question that the analyst community really robed in on. That being said, there was a lot of output performance in the second quarter related to events like the SpaceX IPO, AI-driven trading. Some of that could be unsustainable, but there is still a fairly constructive trading backdrop that should sustain results, particularly in equity trading for the back half of the year. Yeah, we saw Citi lagging a little bit when he came into its stock reaction as well. What drove the relative underperformance when he came to their earnings beat? Yeah, that's right.
Analysis
U.S. banks reported strong second-quarter trading results, driven by high prices and volumes, but sustainability remains uncertain. Analysts noted that while some performance was linked to unique events like the SpaceX IPO and AI-driven trading, a constructive trading backdrop could support equity trading results in the latter half of the year.
The mixed performance among banks, particularly Citi's relative underperformance despite an earnings beat, highlights the volatility in trading results. Smart money should consider the potential for unsustainable gains tied to specific events, indicating a need for cautious optimism in the trading outlook.
16:22
PDT
US Supreme Court strikes down Trump's global tariffs.
– Expect increased tariff-related headlines leading up to midterm elections.
– Potential volatility in trade-sensitive sectors.
– Market participants may reassess import/export strategies.
– Implications for sectors reliant on global supply chains.
trade policytariff volatility
▸ Full transcript
Finance person, but keeping your ears open is super important as well, and I think that all of that is what kind of builds out being a successful CFO. What's Chief Future Officer only on Bloomberg? When news breaks, a red head across the Bloomberg terminal. Bloomberg has you covered. Trump's global tariffs are struck down by the US Supreme Court. For all the context and clarity you need, there are going to be now tons of tariff headlines until the term elections. Here at first on Bloomberg.
Analysis
Trump's global tariffs have been struck down by the US Supreme Court, leading to an influx of tariff-related headlines as the midterm elections approach. This decision signals a potential shift in trade policy that could impact various sectors reliant on imports and exports.
Smart money should note that the Supreme Court's ruling may lead to increased volatility in trade-sensitive stocks and commodities, as market participants reassess the implications of tariff changes on their operations and profitability.
16:20
PDT
U.S. and Iran tensions expected to persist into autumn.
– Iran's control over the Strait of Hormuz remains a critical issue.
– Potential for low-intensity conflict affecting shipping.
– Longstanding ideological differences complicate negotiations.
– Market volatility in energy sectors likely.
geopolitical riskenergy market volatility
▸ Full transcript
That there's going to be a perfect deal perfectly arrived at and implemented anytime soon. I think we're going to be in a period of instability in terms of shipping through the Strait, a low-intensity conflict between the United States and Iran, major disagreement on the future of the Strait. I see this going into the autumn. And if this is a surprise to you based on how it's all unfolded? It's not. I must say I was the first Iran nuclear negotiator for President George W. Bush, Condi Rice, 20 years ago, a long time ago. But you took the measure of them then. They haven't changed. Former U.S. Ambassador to China, Nicholas Burns speaking with Bloomberg's David Gour. We have more head on the Asia trade. This is Bloomberg.
Analysis
The U.S. is entering a period of instability regarding shipping through the Strait of Hormuz, with a low-intensity conflict anticipated between the U.S. and Iran. Former U.S. Ambassador Nicholas Burns indicates that the longstanding ideological differences between the two nations will likely prolong tensions into the autumn.
Smart money should note that the U.S. may struggle to maintain a strong negotiating position as Iran continues to assert control over the Strait, potentially impacting global oil supply and shipping costs. The situation suggests a cat-and-mouse dynamic that could lead to increased volatility in energy markets and related sectors.
16:18
PDT
Ceasefire agreement between U.S. and Iran has fallen apart.
– Iran claims control over the Strait of Hormuz, challenging global shipping norms.
– President Trump is unlikely to concede to Iran's demands.
– Expect a prolonged period of tension and potential conflict.
– The ideological nature of Iranian leadership complicates negotiations.
geopolitical riskoil supply disruption
▸ Full transcript
I think it's crystal clear right now that this ceasefire agreement has fallen apart, that it's not being honored by the government of Iran, that there are substantial differences between the United States and Iran on what that ceasefire agreement said. The Iranians believe, I think erroneously, that they get to run the Gulf, the Strait of Hormuz. They get to be the toll-keeper, exact fees, and establish a fee structure. There's not a government in the world that agrees with that. And I don't see any way that President Trump can ever agree to that. That would mean Iran emerges from this long war of four and a half months stronger in that respect than when the war began. It would be injurious to the global economy, to insurance companies, to shippers, and to the companies that depend on the free flow of commercial traffic. So I think that the president cannot, and I believe will not give in on that issue. I don't think the Iranians are going to give in. So where does that leave us? I think a cat and mouse game is likely over the next couple of weeks or months leading into the autumn where there's a back and forth. They agree to a ceasefire, the ceasefire is honored, then not honored, and they go back to an exchange of fire. And I think that's where we are, because these are hard-bitten, highly ideological leaders in Iran. They think they can play us for time. And so they're testing us. It's very important that President Trump stands up to them in that respect and not give in on issues like the Iranians becoming the Tony Soprano of the Strait of Hormuz, you know, exacting tribute.
Analysis
The ceasefire agreement between the U.S. and Iran has collapsed, with Iran asserting control over the Strait of Hormuz, which poses risks to global trade and the economy. President Trump is unlikely to concede to Iran's demands, leading to a prolonged period of tension and potential conflict in the region.
Smart money should note that the ideological rigidity of Iranian leadership may prolong this standoff, impacting oil supply routes and global markets. The situation underscores the fragility of geopolitical agreements and the potential for increased volatility in energy markets as tensions escalate.
16:15
PDT
Trump backs down on 20% fee for Strait of Hormuz.
– Iran maintains control over critical shipping lanes.
– U.S. policy appears reactive and impulsive.
– Geopolitical tensions may escalate further.
– Oil prices could be affected by regional instability.
geopolitical riskoil market volatility
▸ Full transcript
Let's bring in Bloomberg politics editor Romy Varghese. Romy, the president backing down on that 20% fee through the Strait of Hormuz moves really quickly. What happened? Well, when Trump first proposed this 20% fee idea yesterday, there were no details. There were no indications that he spoke to allies about it. And so today, yes, Taco Tuesday, he said there would be no fee after all. And, you know, this back and forth really shows us two things. Number one, this is the latest example of Trump. Whenever he gets frustrated, he makes a snap decision and that either gets implemented in an ad hoc fashion or gets reversed in some way. And two, the fact that Trump backtrack shows what a difficult position the United States really is in because Iran has shown through this conflict that it has effectively controlled the Strait of Hormuz, that it's controlling this critical waterway where about a fifth of the world's oil supplies goes through. And they're not going to very quickly give up this leverage. In the meantime, we continue to see casualties, even deaths, when it comes to these vessels that are transiting the Strait of Hormuz. How difficult is the situation there?
Analysis
President Trump has reversed his decision to impose a 20% fee on shipments through the Strait of Hormuz, highlighting the precarious position of the U.S. in the region. This backtrack underscores Iran's control over this critical waterway, which is vital for global oil supplies, and reflects Trump's tendency for impulsive decision-making under frustration.
Smart money should note that the volatility in U.S. policy regarding the Strait of Hormuz may lead to increased geopolitical risk, particularly for oil prices. The ongoing tensions and casualties in the region suggest that any future U.S. actions could provoke further instability, impacting energy markets significantly.
16:13
PDT
Gulf states are ready to invest in the U.S. to compensate for potential revenue losses.
– U.S. military actions against Iran have intensified, raising the risk of further escalation.
– Energy prices may be affected by the geopolitical situation in the Strait of Hormuz.
– Market stability could be influenced by Gulf investments amid military tensions.
– The situation remains fluid, warranting close monitoring.
geopolitical riskenergy market volatility
▸ Full transcript
The countdown is on. Everything you need to get the edge at the end of the market day. Get ahead of tomorrow's trading with the close. Weekdays on Bloomberg. Context changes everything. You have Saudi Arabia, UAE, Qatar, Bahrain, and Kuwait, primarily, and then others. I spoke to all of them, and they would love to invest more money in the United States at record amounts, and that would be very acceptable. And this way, there's no fear. President Trump discussing his decision to draw plans for fees on shipments through the Strait of Hormuz, saying Gulf states have promised to make up the revenue with direct investments. Meanwhile, U.S. forces have reimposed a naval blockade and launched a new wave of strikes on Iran. Trump is also threatening further attacks in coming days unless Tehran comes to the negotiating table. You anticipate that the strikes were seen this week against Iran will expand? Are you considering hitting energy targets or other locations?
Analysis
President Trump has indicated that Gulf states are willing to invest significantly in the U.S. to offset potential revenue losses from fees on shipments through the Strait of Hormuz. Meanwhile, U.S. forces have intensified military actions against Iran, raising concerns about further escalation in the region.
Smart money should note that the willingness of Gulf states to invest in the U.S. could stabilize markets amid geopolitical tensions, but the ongoing military actions may lead to volatility in energy prices. The situation remains fluid, and any significant military escalation could disrupt oil supply chains, impacting global markets.
16:09
PDT
Asian markets are reacting positively to U.S. CPI data.
– Fed Chairman Warsh maintains a hawkish stance despite cooling inflation.
– Oil prices are firm but not yet at alarming levels.
– Increased volatility in the bond market is expected due to reduced forward guidance.
– The Philadelphia Semiconductor Index shows signs of recovery.
Fed policyoil price volatilitymarket sentiment
▸ Full transcript
I think that was the steepest move since August last year. Is this a sign of things to come? The less information that you provide to markets, the more volatility you're going to get. I mean, as lots of people have done calculations, Bloomberg has written about it themselves, is that a lot of forward guidance over the last decade or so has helped to reduce volatility in the Treasury bond market. You take that away, you go back to the days of Alan Greenspan when he hardly gave anything away. In fact, Kevin Warsh had a very good impression of Alan Greenspan last night. If you go back to those kinds of days, you are going to get more short-term volatility in the bond market. It's inevitable. So that appears to be where we're heading. But at least for Asia and risk assets, the U.S. CPI can clear something out of the way. But then you put that along with oil prices. I mean, net-net, where are we? Well, oil prices are firmer. We haven't yet got to the kind of levels that will really scare people. If we get to $100 a barrel on Brent, we're still $10 or so away from that. If we get to that kind of level, people will be pretty shocked to be very concerned. We haven't done that yet, although they've picked up from the recent low levels. The socks index, Philadelphia socks index rose again last night. So people are beginning to shake off some of these concerns. Cost of futures had a very good night. So things are starting to get back to some kind of normalization. There's a lot of bluster and noise coming out about the Strait of Hormuz, but underneath it all, so far I think people are reading it as being...
Analysis
Asian stocks are poised for gains as U.S. inflation data alleviates rate hike fears, despite Fed Chairman Kevin Warsh emphasizing the need for continued efforts to control inflation. Oil prices remain elevated amid renewed tensions in the Strait of Hormuz, which could impact market stability if they reach critical levels.
16:07
PDT
Asian stocks expected to rise due to easing U.S. inflation concerns.
– Fed Chairman Warsh maintains a hawkish stance despite cooler CPI data.
– Geopolitical tensions in Iran could affect energy prices.
– Market skepticism remains regarding the sustainability of the CPI drop.
– Pressure from the White House for lower interest rates complicates Fed policy.
Fed policyinflation controlgeopolitical riskmarket sentiment
▸ Full transcript
He made it quite clear that he doesn't necessarily believe in telling markets too much. Yeah, absolutely. It's a great point. He has spoken in recent days and again today he reiterated this idea that the Fed will not be issuing as much forward guidance as it has in the past, that they will call quote unquote balls and strikes in a way that he feels was not done in more recent times. We'll hear again from him tomorrow on Capitol Hill and moving forward we'll see sort of where things land. I think that he is sensitive to a certain extent although he obviously defended the independence of the Federal Reserve today in congressional testimony but President Trump is interested in lower interest rates he's made no secret of that and so there is some pressure from the White House that Chairman Warsh will have to contend with. As Treasury reporter Daniel Flatley, thank you. So Mark, it seems like the markets reacted more to the U.S. CPI because Warsh was maybe, you know, stuff had already been priced in. So what are we expecting for Asia and the Treasury's rebound? Is it sustainable? Well, yields started to come back up again before the end of the business last night. I think traders are pretty skeptical about one CPI print. There seems to have been a big adjustment related to some domestic fuel changes, which account for quite a lot of the drop in the CPI data. So, although Treasury yields came off at first, some of them were starting to go back up, particularly...
Analysis
Asian stocks are poised for gains following cooler U.S. inflation data, which has eased concerns about imminent rate hikes. However, Fed Chairman Kevin Warsh emphasized that the central bank still has significant work to do to control inflation, indicating a cautious approach moving forward.
Smart money should note that while the CPI data showed a decline, Warsh's commitment to tackling inflation suggests that market expectations for rate cuts may be premature. The geopolitical tensions in the Middle East, particularly around Iran, could also impact energy prices and inflation dynamics, warranting close monitoring.
16:05
PDT
Chairman Warsh maintains a hawkish tone despite cooler inflation data.
– Geopolitical tensions in Iran are resuming, impacting energy prices.
– The Trump administration is focused on stabilizing the economy ahead of midterms.
– Energy costs have recently contributed to a cooler inflation print.
– Market volatility may increase due to ongoing conflicts in the Middle East.
inflation concernsgeopolitical riskenergy pricesFed policy
▸ Full transcript
The question of persistent inflation, and as you mentioned, we did get a little bit of a cooler print today, but in Chair Warsh's words, it's not mission accomplished. So we'll have to see where things go from here. Daniel, any indication at what Chairman Warsh is actually watching here in order to perhaps say that inflation has turned the corner? It's interesting. I mean, we have a very noisy environment, as you mentioned earlier. We do have the resumption of fighting in the region around Iran and the Strait of Hormuz. One of the reasons that economists have cited for the cooler print today was energy costs coming off a little bit as a result of the ceasefire that we saw in recent weeks; of course, that appears to be over. We don't know how long the fighting will continue. President Trump has indicated that he is still willing to talk to leaders in Iran. Certainly, we know heading into the midterms, the Trump administration broadly wants to get the economy in a good place, and having elevated oil prices and fighting in the Middle East is not something that they want to see in a prolonged state of affairs. So I think that that's one of the things that Chair Warsh and...
Analysis
Chairman Warsh emphasized that despite a cooler inflation print, the fight against persistent inflation is far from over, indicating a continued hawkish stance. The resumption of conflict in the region around Iran is a key factor influencing energy prices, which could impact inflation trends moving forward.
Smart money should note that the geopolitical tensions in the Middle East, particularly around oil supply, could lead to volatility in energy prices, affecting broader market stability. Additionally, the Trump administration's economic strategy ahead of the midterms may prioritize stabilizing oil prices, which could influence Fed policy decisions.
16:03
PDT
U.S. banking stocks are experiencing a rally due to positive earnings.
– Chip stocks, especially SK Hynix, are recovering and trading at a premium.
– Fed Chairman Warsh maintains a hawkish stance despite a drop in CPI.
– There is a strong commitment from the Fed to ensure price stability.
– Market participants should remain cautious about inflation trends.
banking sector performanceinflation managementchip stock recovery
▸ Full transcript
In the U.S. overnight, banking stocks also rallied on earnings. Aside from that, we already saw chip stocks recover in Seoul yesterday. SK Hynix also jumped, now at a premium, these ADRs to the Korean share. So we'll take a look at that as well on the show. But Sherry, the focus is on the U.S. data and on Warsh as well. Yeah, Fed Chairman Warsh, as you mentioned, is doubling down on that commitment to tackle inflation. Speaking before House lawmakers, he repeated a promise to tame price growth even after U.S. CPI fell in June for the first time in six years. 'I get policy right, and I can assure you we will. The inflation surge of the last five years will be a thing of the past. The members of our committee have no tolerance for persistently elevated inflation, and we share a resolute commitment to ensure price stability.' For more, let's bring in our U.S. Treasury reporter, Daniel Flatley, in Washington. Bloomberg and Life Strategies, Mark Cranfield, also joining us from Singapore. But Dan, let me start with you, because we want to break down the June CPI numbers at the same time. Try to understand why Chairman Warsh didn't necessarily back off from his hawkish tone. Yeah, you know it's a great question and I think we got certainly the first substantive comments from Chair Warsh since he's been...
Analysis
U.S. banking stocks rallied on earnings, while chip stocks in Seoul showed recovery, particularly SK Hynix, which is now trading at a premium. Fed Chairman Kevin Warsh reiterated a strong commitment to tackling inflation, emphasizing that the recent CPI decline does not signal a shift in policy direction.
16:01
PDT
Asian stocks expected to rise due to easing inflation concerns.
– Fed Chairman Warsh emphasizes ongoing inflation control efforts.
– IBM experiences significant stock decline due to sales miss.
– U.S. resumes blockades on Iranian shipping, affecting energy prices.
– New York crude oil prices nearing the $80 handle.
inflation concernsenergy pricestech sector performance
▸ Full transcript
This is the Asia trade. I'm Shia Rian in Tokyo. The top story is this hour. Asian stocks set for gains as cool U.S. inflation data eases concerns about imminent rate hikes, but Fed Chairman Kevin Warsh tells lawmakers the central bank has more work to do to tame prices. There might be some that look at this morning's data and say, 'Oh, mission accomplished. Everything is swell.' That is not my view. Holding near one-month high as President Trump drops planned cargo fees in the Strait of Hormuz while the U.S. resumes its blockade of Iranian shipping. And IBM plunges the most since at least 1968 on a quarterly sales miss blamed on the AI fuel to chip shortages. I'm Averal Hong in Singapore. Here's the setup for trading across Asia. Of course, we have focused on how energy prices remain elevated with these strikes resuming on Iran. And as the U.S. has told us, those blockades on Iranian ports are also resumed. We're looking at troubles for threatening civilian infrastructure next week in Iran. Take a look at where New York crude is pointing, nudging closer to the $80 handle.
Analysis
Asian stocks are poised for gains following cool U.S. inflation data, which alleviates concerns about imminent rate hikes. However, Fed Chairman Kevin Warsh indicates that the central bank still has significant work ahead to control prices.
The market's reaction to the inflation data may be overly optimistic, as Warsh's comments suggest a more cautious approach is warranted. Additionally, the resumption of U.S. blockades on Iranian shipping could further elevate energy prices, impacting market dynamics in the near term.
15:54
PDT
SMRs create radioactive waste with no long-term storage solution.
– Compact SMR designs may produce more waste per electricity unit than larger reactors.
– Future nuclear power generation depends on competition with gas technologies.
– Relearning nuclear skills in Europe and the US is essential for overcoming challenges.
– Private capital may play a crucial role in financing nuclear projects.
nuclear waste managementenergy transitionSMR technology
▸ Full transcript
SMRs create radioactive material when their fuel becomes depleted. More SMRs deployed globally means more nuclear waste piling up in temporary storage around the world. Currently, there's no long-term solution for where to put the waste. If you go to any nuclear power plant, you will see giant steel and concrete casks. Inside them are the spent fuel rods, which are deadly and will remain so for 1,000 years. Some SMR developers claim their reactors will eventually recycle up to 96% of their spent fuel. However, even a little bit of nuclear waste exposure could cause irreparable harm to the ecosystem, water supply, food chain, and long-term health effects. Ironically, many SMRs, due to their compact designs, could produce more nuclear waste per unit of electricity than their larger reactor counterparts. In Europe and the US, there is a need to relearn skills that have been atrophying over the past decades, but there is no reason they cannot overcome this challenge. Whether nuclear power will increase from 20% of generation in the US to 30% or 40% in the future largely depends on other technologies and whether gas frackers are willing to forego market share.
Analysis
The deployment of Small Modular Reactors (SMRs) raises concerns about the accumulation of nuclear waste, with no long-term storage solutions currently available. Despite claims of recycling spent fuel, the compact designs of many SMRs may lead to greater waste production per unit of electricity compared to larger reactors.
Smart money should note that the future of nuclear power generation in the US hinges on the competitive landscape with other energy technologies, particularly natural gas. The willingness of gas frackers to maintain market share will significantly influence whether nuclear's contribution to energy generation increases from 20% to potentially 30% or 40% in the coming years.
15:52
PDT
Regulatory costs may impact SMR economics.
– Diverse SMR designs could lead to market consolidation.
– TerraPower has secured $2 billion from the US DOE and $1.4 billion in private capital.
– New HALU supply from ASP could alleviate fuel shortages.
– Private capital may change funding dynamics in nuclear energy.
nuclear energyprivate capital fundingSMR developmentHALU supply chain
▸ Full transcript
There's going to be more nuclear reactors at more sites, which means more regulation, more people to operate them. Those are all things that raise the cost of SMRs potentially. Another hurdle with SMRs is there are a lot of different design ideas, but they won't all survive nuclear selection. The amount of SMR designs has grown to about 127 today from just about 80 a few years ago. Natrium was initially slated to go online in 2028. However, the company was delayed two years due to a lack of HALU, but they found a solution. That new source for the first core load is going to be a company called ASP in South Africa. It's a U.S. NASDAQ-listed company, but the enrichment operations will occur in South Africa. So far, TerraPower says it has received $2 billion from the US DOE and raised another $1.4 billion in private capital. I grew up in New Hampshire where Seabrook Nuclear Station was being built when I was growing up and my parents who lived paycheck to paycheck, on their electric bill they had something called the Seabrook surcharge. So the ratepayers were literally paying for the capex of that first nuclear plant. That's not going to work in the US today. So rather than ratepayers subsidizing utilities' reactors, a new shift could see private capital footing that massive bill, including the influx...
Analysis
The growth of small modular reactors (SMRs) is facing challenges due to increased regulation and diverse design ideas, with the number of SMR designs rising to 127. TerraPower's Natrium project has been delayed by two years over HALU supply issues, but a new source has been secured from a South African company, ASP, indicating a shift towards private capital funding for nuclear projects instead of relying on ratepayers.
15:50
PDT
Nuclear reactor technology is evolving from Gen 3 to Gen 4 designs.
– HALU is becoming a focal point for future nuclear fuel supply.
– Safety and efficiency improvements are central to new reactor designs.
– The geopolitical landscape is shifting with reliance on HALU production.
– Investment in advanced nuclear technology is gaining momentum.
nuclear technology evolutionenergy supply dynamicsgeopolitical energy risks
▸ Full transcript
Salt storage tank, otherwise known as energy island, which sort of acts like a thermal battery. Each generation of reactor is built on the lessons of the past. Reactors from the 1950s and 1960s are often called Gen 1 reactors. Many were small, unreliable, and had a number of design flaws, like inadequate or non-existing containment structures, inefficient fuel management, and a heavy dependence on manual control. Next came Gen 2 reactors, built between the 1970s and the 1990s. They were more efficient and built for commercial scale and global deployment. Gen 2 featured safety upgrades like automated emergency shutdown mechanisms, but equipment failure and human error led to accidents at Three Mile Island in Pennsylvania and Chernobyl in the USSR. Reactors from the 1990s and beyond are called Gen 3 and feature simplified designs, better fuel efficiency, and improved safety systems. The next generation of nuclear power plants, there's gonna be Gen 3 Plus. And what that is, is pretty much a smaller version of what we got now. After Gen 3 Plus is gonna come Gen 4. Those are different. There's a lot of different designs people are working with. There's different cooling materials. They use different fuels like HALU. But Gen 3 Plus and Gen 4, they're all generally will.
Analysis
The evolution of nuclear reactors is progressing towards Gen 3 Plus and Gen 4 designs, which promise improved efficiency and safety features. The integration of high-assay low-enriched uranium (HALU) is a significant development, as it could reshape fuel supply dynamics and reactor technology in the coming years.
Smart money should note that the transition to advanced reactor designs and HALU production is not just a technological upgrade but a strategic pivot that could influence global energy markets and geopolitical dynamics, especially with current supply chain dependencies on Russia and China.
15:48
PDT
TerraPower's Nitrium SMR is under construction in Wyoming.
– First operational SMR in the U.S. could set a precedent for future projects.
– Advanced computing is being utilized in reactor design.
– Bill Gates' involvement highlights significant backing for nuclear innovation.
– CEO Chris Levec brings 30 years of industry experience.
nuclear technologyenergy productioninvestment opportunities
▸ Full transcript
Decentralized Finance. Bloomberg is covering all things crypto, the people, the transactions, and the technology. Bloomberg Crypto, Tuesdays only on Bloomberg. Bringing you up to the minute, automotive news, whenever and wherever it happens, I'm Matt Miller in Detroit, and this is Bloomberg. TerraPower is a nuclear technology company founded by Bill Gates in 2008. Their first SMR, called Nitrium, is currently under construction in Cameroa, Wyoming. If all goes to plan, it could be the first SMR to go online in the U.S. If you looked at the 90-plus reactors that are operating in the U.S. today, or the 400 around the world, they were born and designed in slide rule space and in the space of paper drawings. Our reactors started their development in an advanced computing environment. The CEO of TerraPower, Chris Levec, has spent 30 years in the nuclear industry, beginning his career as an officer in the nuclear navy.
Analysis
TerraPower is advancing its first small modular reactor (SMR), Nitrium, in Wyoming, potentially becoming the first operational SMR in the U.S. This development signifies a shift towards modern reactor designs, leveraging advanced computing in their construction.
Smart money should note that the nuclear sector is evolving with new technologies like SMRs, which could reshape energy production and investment opportunities. The involvement of established figures like Bill Gates and experienced industry leaders like CEO Chris Levec indicates strong backing and expertise, which may enhance project viability and investor confidence.
15:44
PDT
Centrus awarded $900 million for HALU production.
– U.S. aims to reduce reliance on Russian and Chinese HALU.
– Full capacity plant expected in 6-7 years.
– HALU is crucial for next-gen reactors like SMRs.
– Strategic shift in U.S. nuclear energy policy underway.
nuclear energy expansionenergy independencegeopolitical risks
▸ Full transcript
Standard nuclear fuel is called low-enriched uranium, or LEU, and has a U-235 enrichment concentration of 3 to 5%. HALU is more potent; it's about 20%. Three tablespoons of HALU is enough to supply a typical person's entire use of electricity for their entire lifetime. Now, only Russia and China are making HALU at commercial scale. So if we were to expand our operations with those 11,000 machines, that's enough to meet the demand left by the Russian sanctions. The U.S. Department of Energy awarded Centrus, along with two other fuel makers, $900 million. But the centrifuge forests won't grow overnight. With appropriate funding, we expect our full capacity plant to be built within the next six to seven years. How long does it take to enrich the uranium? I can't go into that. Because centrifuges can also make weapons-grade fuel, many topics around the technology are classified. I can't really comment. I can't answer that. I can't talk about that. I can't really comment. So let me try to get into this next part without revealing any national security secrets. Betting on HALU also means betting on the next generation reactors that plan to use it, like many SMRs, small modular reactors that can be built in factories.
Analysis
The U.S. is moving towards expanding its low-enriched uranium (LEU) production capabilities, with a focus on high-assay low-enriched uranium (HALU) to meet energy demands. Centrus has received $900 million from the Department of Energy to enhance its centrifuge capacity, which is expected to take six to seven years to fully operationalize.
Smart money should note that the U.S. is currently reliant on Russia and China for HALU production, creating a strategic vulnerability. The push for domestic HALU production aligns with the growing interest in small modular reactors (SMRs), which could reshape the nuclear energy landscape and reduce dependence on foreign sources.
15:41
PDT
Arrow deposit to supply 20-25% of global uranium once operational.
– Production timeline exceeds 20 years due to capital and regulatory challenges.
– NextGen is negotiating utility contracts in the US, Europe, Asia, and the Middle East.
– Strong demand for uranium is anticipated as nuclear energy gains traction.
– Investment in uranium mining is becoming increasingly strategic.
uranium supplynuclear energy investmentregulatory challenges
▸ Full transcript
The Arrow deposit is the world's largest highest-grade uranium mining project and will be producing approximately 20 to 25% of the world's mine supply. It hasn't begun production yet, but if you want to check out the site, Lee Currier, the founder and CEO of NextGen, is happy to give you directions. It's 700 kilometers north-northwest of Saskatoon, 155 kilometers north of the nearest municipal and reservation of La Loche and the Clearwater River DNA Nation. Even if you're lucky enough to find an underground treasure trove of uranium ore, you can't just grab a shovel and start digging it up. First, you need to raise a lot of capital. Rook 1, for example, costs around $1.5 billion. And then there's the paperwork, like licenses and permits and sign-offs from surrounding indigenous communities, which make up around 13% of Athabasca County. You're looking basically from discovery of Arrow to likely first pound of production, 20-plus years. But even before entering the construction phase, NextGen is already negotiating deals with utilities in the US, Europe, Asia, and the Middle East. Hulling uranium from the earth is no small feat or small expense. But the real challenge begins when you try to separate those pesky U-2300.
Analysis
The Arrow deposit is set to become the world's largest and highest-grade uranium mining project, projected to supply approximately 20-25% of global mine output once production begins. However, the lengthy timeline of over 20 years from discovery to production highlights significant barriers to entry, including capital requirements and regulatory hurdles.
Smart money should note that NextGen is already negotiating utility contracts across multiple regions, indicating strong demand for uranium despite the long lead time. This proactive approach may position them favorably in a market that is increasingly recognizing the importance of nuclear energy in the transition to cleaner power sources.