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17:55
PDT

Zhu Rongji's legacy in economic reform is significant.

Zhu Rongji Xi Jinping China World Trade Organization GDP WTO Because Zhu Rongji Chief North Asia Stephen Engle Hong Kong The China USDCNH

– Current leadership under Xi Jinping prioritizes loyalty over market reform.

– The ideological shift may impact future economic policies.

– Corruption remains a critical issue in China's governance.

– Investor sentiment may be influenced by these leadership dynamics.

Chinese economic reformleadership dynamicscorruption

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Zhu Rongji was a colorful, pragmatic, charismatic duo that led China's rise to the ascension to the World Trade Organization in 2001. We cannot underestimate the impact Zhu Rongji had on the reform of the Chinese economy and what it has become today. There has been an 11-fold increase in GDP since the ascension to the WTO. He infamously said that he'd order a hundred coffins, 99 for corrupt officials, one for himself. Obviously, that hatred of corruption is something he shares with Xi Jinping, but are there other commonalities? Well, I think it's a very valid question to ask. How would Zhu Rongji fit in today's Chinese hierarchy and leadership? Because Zhu Rongji was known for cutting bureaucracy and attacking corruption, which are hallmarks of the leadership of Xi Jinping. However, Zhu Rongji also believed that all cadres should speak up. I think today's Xi Jinping-led third term is more about loyalty and less about market reform, focusing more on ideology. So it's debatable still whether he would have an outsized role the same way these days. Chief North Asia correspondent Stephen Engle there. That is it for the Asia trade on markets coverage; we look ahead to the start of trading in Hong Kong, Shanghai, and Shenzhen. The China show is next.

Analysis

Zhu Rongji's significant impact on China's economic reform and his legacy of fighting corruption are highlighted, drawing parallels to Xi Jinping's current leadership style. The discussion raises questions about how Zhu would fit into today's political landscape, emphasizing a shift from market reform to ideological loyalty under Xi's regime.

Smart money should note the contrast between Zhu's emphasis on bureaucratic efficiency and the current focus on loyalty, which may hinder market reforms. This ideological shift could affect investor sentiment and the pace of economic reforms in China moving forward.

17:52
PDT

Chinese semiconductor exports are growing at high double-digit rates.

Tencent Alibaba Chinese semiconductor companies South Korea China European Union Zhu Hong-Zi JPM AI EU Strategic Allocation Active Von The Home USDCNH

– Concerns exist over the sustainability of recent earnings growth in the sector.

– Retail growth in China has slowed to near 0%, highlighting a shift in economic focus.

– New capital is flowing into Hong Kong from South Korea, seeking opportunities in AI.

– Short interest in Chinese stocks has decreased, indicating a potential technical rebound.

Chinese semiconductor growthAI market dynamicsHong Kong market trendsRetail consumption slowdown

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Anlegen und investiert bleiben. Mit einem aktiven Portfolio. Gecoached vom führenden Anbieter aktiver ETFs in Europa. Risikoprofil wählen und fertig. JPM Strategic Allocation Active ETFs. Von The Home of Active ETFs. Every modern economy depends on one invisible advantage: reliable power. Without it, there is no AI economy, no advanced manufacturing, no modern healthcare, no water security. Power isn't just another industry; it is the infrastructure behind us. Alle große Gründe sollen beginnen mit einer Frage: Woher wird die Kraft? Das ist die Geschäftsforschung. Wissen, wie die Regierungsplätze planen, und welche Ökonomien die Infrastruktur zu schämen. Mittel-East Energie, wo die Möglichkeit wird. Wir holen eine Dichtung zwischen der Rhetorik und der Aktion, um neue Marktverwaltungen und originales Rapport zu bringen. Das ist Lumberg-Servanen. Der former Chinese Premier Zhu Hong-Zi. Die Menschen sind in der 90er-Jahre geblieben. Die EU war ein key Architekt der China Economic Rise, der durch Landmark- und Landmark-Skeitssektoreformen die Werte für die Entschritte der Weltkommission in der Weltkommission geblieben. Aus einer weiteren Perspektive bringen wir unser Norddeutscher von der Asia Crossfonders David Engel in Hong Kong. Es ist sicherlich kein Überstatement, dass die EU ein...

Analysis

The discussion highlights the growing prominence of Chinese semiconductor companies, which are outperforming U.S. peers while maintaining lower costs. Despite recent strong earnings reports, concerns linger about the sustainability of this growth, particularly as reliance on overseas orders remains high.

Smart money should note the significant shift in consumption patterns within China, as retail growth has slowed dramatically, indicating a potential pivot in economic strategy. Additionally, the influx of new capital from risk-seeking traders, particularly from South Korea, into the Hong Kong market suggests a renewed interest in undervalued Chinese AI stocks.

17:50
PDT

Short interest in Chinese internet stocks has dropped recently.

Hao Hong Lotus Asset Management Hong Kong Korean market Chinese AI names Tencent Alibaba AI CIO EM US South Korea FEDFUNDS

– Hong Kong market has rebounded over 15% from its lows.

– New money is entering the market, particularly from South Korea.

– Chinese AI stocks are attracting renewed interest.

– Concerns remain about the sustainability of earnings growth.

AI investmentHong Kong market dynamicscapital flowsemerging markets

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Around the exuberance of artificial intelligence, of course, after all of that volatility in the whole market already. Does this meaningfully impact the structure of the Hong Kong market? Is there anything that we should be aware of? Not yet. I think the current traders are renowned for their risk-taking behavior and also very high appetite, ferocious appetite for risk. So I think as you can see, the rebound in Hong Kong in the recent two weeks has been quite phenomenal. I think Hansen takes up more than 15 percent from its bottom. One has to say that new money has come in. I'm hearing that some of the money is actually rotating from the Korean market and going into the Hong Kong market looking for opportunities. Given the cheap valuation here and also many of the Chinese AI names waiting to be discovered. So I think it's a new force in the market. And I think Hong Kong welcomes this new breed of traders who have the money and also have the appetite for risk. Welcome the ant traders of South Korea. How long good to have you with us, managing partner and CIO, Lotus Asset Management. We keep an eye on the EM assets as well, given of course the US inflation picture, which came in line with estimates for the July data sort of calming concerns that are the Federal Reserve hike. We have seen emerging markets gain ground on the back of those e-

Analysis

Short interest in Chinese internet stocks has decreased, reflecting a shift in sentiment as expectations rise for better-than-expected e-commerce results and advancements in AI that could lower costs. The Hong Kong market has seen a significant rebound, with new money flowing in, particularly from South Korea, as traders seek opportunities in undervalued Chinese AI stocks.

The current influx of risk-taking traders into the Hong Kong market indicates a potential shift in capital flows, which could lead to further price appreciation in the sector. However, the sustainability of earnings growth in Chinese tech remains in question, as reliance on overseas orders persists amidst a slowing domestic consumption growth rate.

17:48
PDT

Chinese retail growth has drastically slowed, indicating a shift in economic strategy.

China European Union USDCNH

– The urgency to boost domestic consumption is becoming more pronounced.

– Trade friction with Europe is on the rise, complicating export dynamics.

– Chinese manufacturers are facing increasing competition despite their current advantages.

– The reliance on exports for growth is becoming less sustainable.

domestic consumptiontrade tensions

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The urge to boost consumption is becoming more prominent in the Chinese economy. In a sense, consumption growth and retail sales growth are slowing down substantially. Ten years ago, we were talking about more than 10 percent high double-digit year-on-year growth in the retail space. Now we're closer to 1 percent and sometimes 0 percent. As a result, the urgency to boost consumption is very loud and clear, indicating that you can't just rely on export sectors to drive your growth. Right now, the percentage of Chinese exports in the global export sector has reached an all-time high, and many trading partners are finding it very difficult to compete with China. I think China is registering trade surpluses in almost all sectors, giving Chinese manufacturers an absolute advantage. Consequently, trade friction is increasing, especially with European counterparts, and we are hearing increasing concerns.

Analysis

China's retail consumption growth has slowed significantly, now nearing 1% year-on-year, prompting a clear urgency to boost consumption rather than relying solely on exports. The increasing trade friction with European counterparts highlights the challenges faced by Chinese manufacturers, who currently enjoy an absolute advantage in global exports.

17:46
PDT

Tencent's Work Buddy and Alibaba Cloud show strong earnings growth.

Tencent Alibaba Hao Hong Lotus Asset Management China AI Work Buddy Alibaba Cloud Business USDCNH

– AI business is still a small part of overall results for these companies.

– Recent stock price rallies are primarily technical rebounds.

– Short interest reduction may indicate a contrarian signal.

– Sustainability of earnings growth is uncertain due to reliance on overseas orders.

AI transformationChinese tech sectorinvestment sustainability

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A certain level of results. For example, Tencent's Work Buddy, which is a very popular AI tool here in China, is doing well. And also, the Alibaba Cloud Business is showing very strong earnings growth already. But then, we're still talking about this AI business being a relatively small contributor to the overall group results. So I think they're still on their way to transform themselves from traditional internet companies into a new sort of AI cloud computing companies; they're still a very long way to go. So I think as a result, recently we've seen the stock price of these companies rallying, but mostly it's a technical rebound. For example, just now the news headlines showed that short interest in many of these names has actually reduced from its peak, but normally it's a contrarian indicator. Basically, it is showing that the technical rebound has done much of the rally and also the easiest money has been made in this rally. So I think going into the second phase, we're going to be looking for a call.

Analysis

Chinese tech stocks are experiencing a technical rebound, driven by reduced short interest and strong earnings growth from AI tools like Tencent's Work Buddy and Alibaba's Cloud Business. However, the AI segment remains a small contributor to overall results, indicating that these companies are still in the early stages of transforming into AI cloud computing firms.

Smart money should note that while the recent rally has attracted attention, it may be largely technical, with the easiest gains already realized. The sustainability of earnings growth remains in question, particularly as reliance on overseas orders persists, suggesting caution in future investments.

17:44
PDT

Chinese semiconductor exports are growing at high double digits.

DeepSeq Kimi K3 Chinese semiconductor names Chinese markets Lotus Asset Management Hao Hong US The Deep The Chinese

– Some companies are raising capital successfully due to strong market interest.

– Concerns exist about the sustainability of earnings growth tied to overseas orders.

– Existing names in the market are showing progress in model development.

– Valuations have corrected, making some stocks more attractive.

semiconductor growthAI investmentvaluation correction

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The DeepSeq, the new pro-flash model, and also the Kimi K3, many of them are showing relative capability compared to US peers, but at a substantially lower cost. As a result, many of these names are coming to the market to raise money, and I think they will be well received. Additionally, some existing names demonstrating progress in their model development and token consumption will continue to gather interest. However, some names had a good quarter last quarter, showing probably a 1,000% earnings increase, but many are doubting that such strong earnings growth could be sustainable because they still rely on overseas orders to fill their capacity. The Chinese semiconductor names are now dominating the low to mid-end range. If you look at the most recent Chinese exports, semiconductor exports are still growing at very high double digits, 50% to 60% year-over-year. Many of the names could continue to perform well, but given the evaluation and the question of the sustainability of earnings growth, some concerns remain.

Analysis

Chinese semiconductor exports are experiencing significant growth, with increases of 50% to 60% year-over-year, indicating strong demand in the low to mid-end range. However, concerns remain regarding the sustainability of earnings growth for companies relying heavily on overseas orders, despite some reporting impressive quarterly earnings increases of up to 1,000%.

17:41
PDT

Short interest in Chinese internet stocks has declined, signaling improved sentiment.

Hao Hong Lotus Asset Management Chinese internet stocks Chinese AI names AI CIO

– E-commerce results are anticipated to exceed subdued forecasts.

– AI breakthroughs are expected to reduce costs and enhance services for internet platforms.

– Chinese tech stocks are now trading at more reasonable valuations post-correction.

– Foreign investors are showing renewed interest in Chinese AI names.

AI advancementsChinese tech sectorforeign investment

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Short interest in Chinese internet stocks has dropped in recent weeks. The retreat from bearish bets underscores expectations that the e-commerce results will beat subdued forecasts while AI breakthroughs cut internet platform costs and improve their services. Let's bring in our next guest who thinks Chinese markets are resilient with AI-related sectors doing well. Joining us now is Hao Hong, managing partner and CIO at Lotus Asset Management. It's always good to have you with us. Did you say that we saw that July correction helping perhaps some of these valuations in Chinese tech as well? What's giving you some more optimism for these markets? Yes, thanks for having me. I think after two months of correction, many of the names are back down to earth and many of the names are trading at a more reasonable valuation. So I think part of the overvaluation and also part of the extreme relative performance has been corrected. As a result, many investors are taking another look at the names. I'm also hearing that some foreign investors are taking a second look at the Chinese AI names as well. Have their criteria for taking a look at Chinese names changed? It was all about being just in the AI trade.

Analysis

Short interest in Chinese internet stocks has decreased recently, indicating a shift in sentiment as expectations rise for e-commerce results to surpass forecasts. This change is driven by AI advancements that are expected to lower costs and enhance services for internet platforms.

After a two-month correction, many Chinese tech stocks are now trading at more reasonable valuations, prompting renewed interest from both domestic and foreign investors. This suggests a potential re-evaluation of the AI sector, as investors are beginning to look beyond just the AI trade.

17:37
PDT

Honghai's operating profit increased by 68% in Q2.

Honghai NVIDIA ODIM makers AI ODM DXY

– Gross margin slightly declined, but overall margin management remains effective.

– ODM makers are shifting to a consignment model to improve margins.

– High component costs are impacting product pricing but not operational efficiency.

– The shift in business model may influence future revenue growth.

operational leveragemargin managementODM business model

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They do get a pretty constant margin dollar per unit, which is actually much higher than conventional servers, but because all the AI server components are actually quite expensive, and a lot of the component costs are basically passed through for them. So, they have a constant margin dollar, but because the whole product price becomes much higher now, the margin looks like it's squeezed. So that's the issue they have right now. But I think in Honghai's case, in Q2, we only see the gross margin slightly down. So they actually managed that pressure well. And if you look at the operating profit, the operating profit actually was up like 68%, meaning that the bigger sales scale actually offered them operating leverage. So they actually got a better operating margin now, which I think is a good thing for them. The other thing is that I think a lot of ODM makers are now shifting towards what they call a consignment model, which means that some of the expensive components won't be part of the ODM prices, which means that they may have some impact on revenue growth, but then the margin is going to be improved in terms of percentage. So I think there are a couple of ways for them to manage this margin issue.

Analysis

Honghai's Q2 results showed a slight decline in gross margin, but operating profit surged by 68%, indicating effective management of cost pressures. The shift towards a consignment model among ODM makers could enhance margins despite potential revenue growth impacts.

Smart money should note that while component costs are high, Honghai's operational leverage is improving, suggesting a resilient business model amidst rising expenses. The transition to a consignment model may provide a strategic advantage in margin management, which could attract investor interest.

17:35
PDT

Honghai's Q2 revenue grew by 41% and earnings by 35%.

Honghai Nvidia Vera Rubin AI GPU ASIC NVDA

– Strong demand for AI servers is driving revenue momentum.

– Shipments of Nvidia's Vera Rubin platform are expected to start in Q4.

– Future growth is anticipated to be bolstered by the Vera Rubin platform.

– The overall revenue momentum is expected to strengthen in the second half.

AI infrastructure demandNvidia partnershipRevenue growth

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Sivan, break down the results for us and whether or not you get any signals about underlying AI server demand at this point. Sivan, I think the Q2 result was pretty solid. Revenue of 41 percent and earnings of 35 percent. And then obviously all the AI racked shaman has been strong. We're not just talking about the GPU based server; increasingly we will see the server featuring custom ASIC and also some of the high-speed network switches are also one of the drivers. Honghai actually also reported their July number previously. It was more than 50 percent. So it looks like the whole revenue momentum is getting even stronger in the second half. For that future growth, how much can Honghai depend on Nvidia's Vera Rubin? According to management, they basically started manufacturing of this Vera Rubin platform and the shipment should start in Q4. There's a large inline where they are planning, and so that will become the gross driver for 2027. At the moment, I think the bagwell shim and still remain pretty solid. So we don't really spare any sort of air pockets during.

Analysis

Honghai reported strong Q2 results with a revenue increase of 41% and earnings growth of 35%, driven by robust demand for AI servers. The company is set to begin shipments of Nvidia's Vera Rubin platform in Q4, which is expected to be a significant growth driver for 2027.

Smart money should note that the momentum in revenue is expected to strengthen further in the second half of the year, indicating a solid demand for AI-related infrastructure. The successful launch of the Vera Rubin platform could position Honghai favorably in the competitive landscape, especially as they diversify their offerings beyond traditional GPU-based servers.

17:32
PDT

Tencent to double AI spending tied to returns.

Tencent WorkBuddy Huan Yuan Pai 3 Pai 4 K-Made K-3 Alibaba Quen AI The Tencent So Work USDCNH

– WorkBuddy gains traction as a leading desktop AI agent.

– Huan Yuan model is smaller than rivals' offerings.

– Future model, Pai 4, expected to launch later this year.

– Concerns over negative cash flow due to high AI investment.

AI investmentprofitability concernstech competition

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$50 billion. The Tencent executives were saying that any additional investment is going to be tied to any returns from their investment, but they are saying that they will double spending into AI products so far. And again, it really faces a test about profitability and whether that spending is going to be sustainable. Have we seen any sort of payoff, the fruits of what they might be reaping from all of this investment? We have seen some early successes from some of its products. So WorkBuddy is one of its desktop AI agents that just launched in March. But since then, just within a few months, has already zoomed to the top of being the most used list of AI agents out there or desktop AI agents outperforming some of its rivals. So this is a very positive development that has encouraged investors. It's also creating a positive feedback loop because it is powered by Tencent's own foundation of AI model. But that foundation of AI model known as Huan Yuan is now branded as Pai 3. It's still a very, very small model compared to some of the frontier models in China including K-Made K-3 or Alibaba's Quen. So the company is saying that they're going to develop a state-of-the-art model that will be much larger. Pai 4 will launch later this year. That's something to keep an eye on. It's also investing heavily in compute meaning.

Analysis

Tencent plans to double its investment in AI products, raising concerns about profitability and sustainability. Early successes, such as the desktop AI agent WorkBuddy, have shown promise, but Tencent's AI model, Huan Yuan, remains small compared to competitors like Alibaba's Quen.

17:30
PDT

China's largest company doubled its AI spending last quarter.

China Min Min Loi Bloomberg Michael McKee AI Francine Lacroix Bloomberg Television Bloomberg This Weekend Wall Street Michael Mc Min Min Loi Jones Hong Kong PRIVATE USDCNH

– Negative cash flow reported for the first time since 2021.

– Investor concerns are growing over high operational costs.

– The competitive landscape in AI is intensifying.

– Focus on long-term growth may overshadow short-term profitability.

AI investment riskcash flow managementtech sector volatility

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About how to lead in the age of AI. That requires a lot of confidence. And why great leaders embrace conflict. You need to amplify difference. So tune into the podcast version of Leaders with Francine Lacroix. Listen and watch on Bloomberg Television or wherever you get your podcasts. Welcome to Bloomberg This Weekend. Breaking news today from Wall Street to Washington. Burning season is underway. We're going to get some key reports. Everything you need to know before the markets open on Monday. Bloomberg This Weekend. Bringing a little Bloomberg into your weekend routine. Guys buckle up. Bringing you the most important news and financial information whenever and wherever it happens. I'm Michael McKee on the Mexican border and this is Bloomberg. Well, 10 cents 80 hours fell 5% after quarterly earnings met analyst estimates. China's biggest company more than doubled its spend on AI projects and computing last quarter, reflecting intensifying efforts to catch up with rivals. A child across one of Min Min Loi Jones is now from Hong Kong. So Min Min, take a look at, take us through, I should say, the key takeaways and is this sort of an investor concern really coming from the big AI spending? Yes, that big AI spending is definitely a concern because they're spending so much that they're seeing negative cash outflow for the first time since 2021 because they're spending more than they are taking in operational income.

Analysis

China's significant increase in AI spending is raising investor concerns as it leads to negative cash flow for the first time since 2021. This trend highlights the risks associated with aggressive investment strategies in technology amidst a competitive landscape.

The shift towards heavy AI investment may indicate a structural change in how companies prioritize growth over immediate profitability. Smart money should consider the implications of cash flow management in tech firms as they navigate this high-stakes environment.

17:28
PDT

Nasdaq 100 reaches one-month high driven by AI trade.

Nasdaq 100 AI Federal Reserve Tyler Kendall Bloomberg US CPI Wall Street FEDFUNDS PRIVATE DXY

– Softer CPI data gives Fed flexibility on rate hikes.

– Positive sentiment extends from US markets to Asia.

– Focus on AI hardware and infrastructure is increasing.

– Risk-on environment may attract more investments in tech.

AI investmentFed policyinflation trends

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US futures are setting up because we had the big AI trade sending the Nasdaq 100 to a one-month high. So, we're seeing AI hardware, infrastructure, all of those drivers of the equity space in the US helping and tracking those gains here in Asia. Now, to mention, softer CPI also giving the Fed time when it comes to those rate hikes really making for a risk-on day for not only Wall Street but Asia as well. This is Bloomberg. A fad to some, the future of money to others. We see cryptos trillion dollar swings. While others follow the noise, we follow the money. Bringing you up to the minute geopolitical news whenever and wherever it happens, I'm Tyler Kendall in Geneva, Switzerland and this is Bloomberg.

Analysis

US futures are buoyed by a strong AI trade, pushing the Nasdaq 100 to a one-month high, with positive sentiment spilling over into Asian markets. Softer CPI data is providing the Federal Reserve with leeway on rate hikes, contributing to a risk-on environment across global equities.

The significant gains in AI-related sectors highlight a shift in investor focus towards technology-driven growth, while the easing inflation signals may lead to sustained bullish sentiment. Smart money should note the potential for continued capital inflows into tech as the Fed's stance on interest rates remains accommodative.

17:26
PDT

Financial conditions in Australia are restrictive.

ANZ Reserve Bank of Australia Australia Japan South Korea U.S. dollar Ozi dollar Ozi yen RBA US The Ozi DXY

– ANZ reports a 15% fall in mortgage numbers.

– Tax changes are impacting property prices significantly.

– The Australian dollar is trading stronger against the yen.

– South Korea's tech market is reflecting recent U.S. trends.

housing market downturncurrency dynamicstech sector performancemonetary policy adjustments

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The assistant governor, speaking in Sydney, stated that the financial conditions at the moment are somewhat restrictive. Regarding these tax changes, he mentioned that they will likely contribute to the housing downturn, which is evident in ANZ's numbers showing a 15% fall in mortgage numbers, particularly impacting capital cities where property prices have seen steep declines following changes to the tax code after the budget. Currently, trading in Australia is down by three-tenths of one percent, with notable movements in earnings stories. Aussie bonds are edging higher as details of the RBA speech emerge. Japan's destiny is returning to the Ozi dollar, which is trading at just over seven-e US cents. The Ozi yen pair is being watched closely as expected weakness in the Japanese currency continues. Turning to South Korea, the tech rally from the overnight session is reflected in the Korean market, influenced by foreign selling against the U.S. dollar.

Analysis

The assistant governor in Sydney indicated that current financial conditions are somewhat restrictive, contributing to a downturn in the housing market, evidenced by a 15% fall in mortgage numbers reported by ANZ. This downturn is particularly pronounced in capital cities, following recent tax code changes that have impacted property prices significantly.

Smart money should note that the ongoing weakness in the Australian housing market could lead to broader economic implications, especially as the Reserve Bank of Australia (RBA) adjusts its monetary policy in response to these conditions. Additionally, the strength of the Australian dollar against the yen suggests potential shifts in currency dynamics that could affect trade balances and investment flows.

17:22
PDT

U.S. crude supply increased significantly, but global oil supply remains tight.

Nicholas Heidi China U.S.crude oil USDCNH CL=F

– China's reduced oil imports are influencing global oil prices.

– A shortfall of 1.8 million barrels indicates ongoing supply-demand imbalance.

– Inventories are expected to continue dropping despite U.S. supply increases.

– Energy security remains a priority for China, impacting global oil dynamics.

supply chain riskenergy security

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You're totally right, Heidi. I think one thing to flag also is how demand destruction, while that's gone up with higher fuel prices, that hasn't gone up to the level where supply and demand imbalance. So again, that 1.8 million barrels, that's a shortfall that's still exceeded. And so as a result, I think we're going to see inventories continue to drop. Like, look, let's say in some places, the pressures less real. Like, for instance, the U.S. data released overnight showed that the U.S. saw a record, a really big increase in crude supply, right? But that's still the exception. If we look at overall global balances, we're still tight and getting tighter. You talked about the demand destruction, which is quite interesting. It's been very fascinating to see how China has really cut its oil imports. Is that something that is a structural change, or will that continue to keep a lid on prices? You're totally right to bring up the China factor, and I think that's been a big moderator in why the impact of war hasn't been as great as it has been so far. Again, China's priority is always going to be energy security. You've seen how it's been.

Analysis

Global oil supply remains tight despite a significant increase in U.S. crude supply, with inventories expected to continue dropping. China's reduced oil imports are a key factor moderating the impact of geopolitical tensions on prices, highlighting a shift in energy security priorities.

The ongoing supply-demand imbalance, particularly with a shortfall of 1.8 million barrels, suggests that market pressures will persist. Smart money should note that while U.S. supply increases are notable, the overall global balance remains constrained, indicating potential upward price pressure in the future.

17:20
PDT

Iran is reorganizing its military strategy to extend its influence.

Iran Saudi Arabia Kuwait UAE Strait of Hormuz Red Sea Mediterranean John Herzkovitz Bloomberg Bloomberg East Asia Palestinian Authority West Bank CL=F PRIVATE

– Neighboring states are developing alternative oil transport routes.

– The Strait of Hormuz remains crucial but is facing competition from new infrastructure.

– Strategic planning is essential for mitigating risks in oil transport.

– Potential shifts in oil supply dynamics could affect global markets.

geopolitical riskoil supply dynamicsmilitary strategy

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Change the leadership and they find workarounds. And they really want, of course, in order to relieve that economic pressure, perhaps on tolls or fees coming from the Strait of Hormuz, where shipping has faded to a trickle at this point. Are there any sort of adjustments there in order to keep the oil flowing? Yeah, it's a really good point. And we're seeing the neighboring states looking at alternatives, pipeline development, storage facilities, and ways to get oil out of the region that don't depend on the Strait of Hormuz. The thing is, the Strait of Hormuz is still going to be an active waterway as the years go on. It's just too convenient, too efficient to bypass. But there are contingencies that have to be planned for. Saudi Arabia, Kuwait, and the UAE are looking at pipelines, looking at other alternatives to get oil away from the Strait of Hormuz to the Red Sea or other places, the Mediterranean as well, so they can de-risk the confrontation with Iran. John Herzkovitz, Bloomberg East Asia government editor, here with the latest on the ongoing war in Iran. As we continue to follow another geopolitical front as well, Israel now is heading toward elections in October, and the Palestinian Authority is saying that a change in leadership won't be enough to deliver peace. The foreign minister for the West Bank-based authority told us the key question is whether any new government is willing to rethink its policies in the occupied territories and its stance on Palestinian statehood.

Analysis

The geopolitical landscape is shifting as Iran prepares for a prolonged confrontation, focusing on enhancing its military capabilities and securing strategic waterways. Neighboring states are exploring alternatives to the Strait of Hormuz for oil transport, indicating a proactive approach to mitigate risks associated with Iranian aggression.

Smart money should note that while the Strait of Hormuz remains vital, the development of alternative pipelines and storage facilities could alter regional oil dynamics. This shift may lead to increased investment in infrastructure projects that bypass traditional chokepoints, impacting oil supply chains and pricing strategies.

17:17
PDT

Iran is preparing for a prolonged confrontation with the U.S.

Iran U.S.Trump Islamic Revolutionary Guard Corps Gulf states TV East Asia Edrachan Herskovitz

– The focus is shifting from defense to offensive military capabilities.

– Iran aims to enhance its missile production capabilities.

– Control of the Strait of Hormuz is a key strategic goal for Iran.

– U.S. military responses may be more measured in light of Iran's actions.

geopolitical tensionsmilitary strategyoil supply risks

▸ Full transcript

General, in the Islamic Revolutionary Guard Corps, has told state TV his forces are being reorganized to take the fight into what he calls enemy territory. East Asia government, Edrachan Herskovitz, Jozme here in the studio with the leaders. What is Tehran trying to achieve? Yeah, I think that what we're seeing is that Iran is preparing for a much longer period of confrontation. The diplomacy is still on track. They're looking at that. But by taking the fight to the enemy, they've seen that the levers of power extend for them by going after other states in the Gulf that host U.S. military bases. So this is one of the things they're doing. They're also looking at producing more ballistic missiles. I think Iran is betting that it can produce more missiles. It can produce missiles faster than the U.S. can produce interceptors. So we have missiles, we have drones. And we have this going on with the change in the security apparatus for Iran. So we're seeing a shift, it's beyond defending the homeland, to taking the fight to the enemy, and also at the key, one of the keys is keeping control of the Strait of Hormuz along the lines that Iran wants it to be controlled. So long-term, short-term, all going on, this is strategic thinking for Iran. Does this mean that Washington will also be more patient? Yeah, we had Trump saying that he's low-key, low-keying it now. I think that we're in a lot of U.S. military strikes. Trump is going...

Analysis

Iran is reorganizing its military forces to extend its influence into enemy territory, particularly targeting U.S. military bases in the Gulf. This strategic shift indicates Iran's intent to produce more ballistic missiles and drones, suggesting a long-term confrontation with the U.S. and its allies.

Smart money should note that Iran's focus on missile production could outpace U.S. defensive capabilities, potentially altering the balance of power in the region. The control of the Strait of Hormuz remains a critical objective for Iran, which could have significant implications for global oil supply and geopolitical stability.

17:15
PDT

AI equities are experiencing a rotation phase focused on single stock performance.

JP Morgan Pictay Asset Management ASX Origin Energy Treasury Wine Meta Microsoft Amazon JP Morgan Equity Premium Income The Home Starten Sie Ihre Suche

– Hyperscalers need to balance CAPEX with market demands for monetization.

– Traditional sector definitions may not capture current investment opportunities.

– The distinction between value and growth investing is being reassessed.

AI sector rotationstock dispersionTreasury market dynamicssector definition evolution

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Analysis

Equities are at an all-time high due to a rotation within the AI space, moving into a phase where single stock differentiation is crucial. The hyperscalers must balance CAPEX with monetization evidence, leading to increased dispersion among stocks in the sector.

The traditional sector definitions are becoming less relevant, as opportunities span multiple sectors. The importance of distinguishing between value and growth is also being re-evaluated, suggesting a shift in investment strategies that could benefit those who adapt quickly.

17:13
PDT

ASX boss operator's net income missed estimates but stock up 8%.

ASX Origin Energy Treasury Wine Zed Aaron Sy Pictay Asset Management CBN US CEO And Zed Sam Fisher PRIVATE

– Treasury Wine's earnings down 36% amid global alcohol downturn.

– Origin Energy beats profit estimates and is trading positively.

– Zed's profit rises despite a drop in mortgage applications.

– Treasury Wine CEO to discuss earnings and industry outlook.

earnings performancesector rotationmortgage market trends

▸ Full transcript

Alright, always great to chat with you, Aaron Sy, who's the senior multi-asset strategist at Pictay Asset Management. Let's take a look at some of the moves that we're watching in the first 10 minutes or so of trade. We do have the boss operator ASX, a full-year net income missing estimates there. We're seeing upside though of almost 8% there. And Zed, we're continuing to watch after the CBN numbers previously, the profit rising on the back of deposits, mortgage applications dropping roughly 15% since the May budget, so we're watching that part of the business closely but some upside there. Origin Energy is also trading quite well today with the underlying profit beating estimates and the disposal of the battery unit there as well in focus. Treasury Wine is one we'll be talking a little bit about that is bucking the broader trend, 1.6% lower there, earnings dropping 36% on the global alcohol downturn. We're also looking at their plans for the capacity issues in the US market as well. Treasury Wine CEO Sam Fisher is joining us exclusively later today to talk earnings and the global industry outlook that's coming up with insight, the times on your screen. More ahead on the Asia trade, this is Bloomberg.

Analysis

The ASX's boss operator reported a full-year net income that missed estimates, yet the stock is seeing an upside of nearly 8%. Meanwhile, Treasury Wine is facing a downturn with earnings dropping 36% due to the global alcohol market slump, highlighting significant capacity issues in the US market.

Smart money should note the divergence in performance among companies, particularly the resilience of Origin Energy, which is trading well after beating profit estimates. The broader implications for the alcohol sector, especially for Treasury Wine, suggest potential challenges ahead as consumer preferences shift and market dynamics evolve.

17:11
PDT

Traditional sector definitions may limit investment opportunities.

Amazon Meta Microsoft MSCI AMZN META MSFT

– Hyperscalers need a diversified approach across sectors.

– Value versus growth distinction is becoming less relevant.

– Market evolution requires adaptive investment strategies.

– Investors should focus on nuanced stock selection.

sector flexibilityinvestment strategyhyperscalersvalue vs growth

▸ Full transcript

You talked about outdated notions of sector and styles. How does that play into how you're investing at the moment? Can you give us an example? Right. So coming back to the hyperscalers, I mean, if you think of the traditional definition of how benchmarks like MSCI look at it, you have Amazon, for instance, in consumer discretionary. You have Meta in communication services. You have Microsoft in software and information technology. So if you're following a strictly top-down approach of selecting asset allocation first, and then regions, and then sectors, what you often do is go into buckets that don't very well capture the opportunity set. So if you want to be constructive on hyperscalers, and if you want a diversified basket, you need the ability to invest across a few different sectors. The world has moved on; markets have moved on in terms of these definitions, and these labels are not really fit for purpose anymore, but we are still catching up in terms of how the nomenclature works. So that's why it's important not to be straightjacketed by some of these definitions. And as another kind of point there is the importance of value versus growth, which we think is overestimated today. I mean, in the past, this used to be the single differentiator.

Analysis

The discussion highlights the need for a more flexible investment approach that transcends traditional sector classifications, particularly for hyperscalers like Amazon, Meta, and Microsoft. This shift reflects a broader market evolution where rigid definitions may hinder capturing diverse investment opportunities.

Smart money should recognize that the importance of value versus growth is being overestimated, suggesting a potential mispricing in the market. As the investment landscape evolves, the ability to navigate across sectors could yield significant advantages in portfolio construction.

17:09
PDT

Soft labor and CPI prints reduce pressure on bond yields.

US Treasury CPI AI banks emerging markets

– Bond managers are adjusting to a new pricing framework.

– Increased uncertainty may lead to volatility in long-duration bonds.

– Selective investment in tech and banks is favored.

– The AI ecosystem is expected to broaden.

bond market dynamicssector selectionAI ecosystem growth

▸ Full transcript

In the US, for instance, it's not really regional diversification but more about being in the right sector. We still selectively construct to tech. We think that the AI ecosystem broadens out from here. But we're also constructive on banks, both across emerging markets and the US. Finally, we like areas of industries as well. I wanted to also ask about what we're seeing with Treasury markets. We've got that 30-year auction coming up soon. Where do you see yields? You've talked about the potential for becoming unanchored from here. Right. Thankfully, we've got a couple of soft prints. We had a soft labor market print and we had a pretty benign CPI print. So that kind of takes the heat off what was the central debate in the bond market, which was the sudden withdrawal of forward guidance. Essentially, this means that bond managers now have to continue doing their job with one less tool in their toolkit, something they relied on for pricing bonds. Especially if you think of the long duration, they are demanding, and I think rightfully so, an additional uncertainty premium given that it's not obvious what the new framework is going to be or even what the new right data series is going to be in terms of inflation for them to look at. So I think in a way we were...

Analysis

The bond market is reacting to recent soft labor and CPI prints, which have eased concerns about forward guidance withdrawal. This shift is prompting bond managers to demand an additional uncertainty premium due to the lack of clarity in the new framework for pricing bonds.

Smart money should note that the current environment may lead to increased volatility in long-duration bonds as managers adjust their strategies without the usual guidance. The focus on sector selection, particularly in tech and banks, suggests a nuanced approach to investment amidst these changes.

17:04
PDT

Equities are at all-time highs despite momentum trade unwinds.

Korea Japan Taiwan NVIDIA Tencent NIO Kobe Venebrius Bloomberg International Energy Agency Bank of Japan US

– The AI trade is in a nuanced phase focusing on single stock performance.

– Companies must balance CAPEX with monetization evidence.

– Not all firms will perform equally in the current AI environment.

– Selective investment in AI stocks is crucial.

AI investment strategyCAPEX trendsstock performance dispersion

▸ Full transcript

In these AI-heavy spaces like Korea, by extension also a bit in Japan and Taiwan, for example. The good thing is that we have managed to digest a historical unwind in the momentum trade. Part of the reason why we have equities back at an all-time high despite that is there is an element of a rotation within the AI space. If you look at the AI trade, we think we're already in the third phase of the trade. The first phase was the rising tide that lifted all AI boats; anything with an AI in the ticker went up, the more CAPEX, the better. That then transitioned into a phase where we saw rotations between hyperscalers and CAPEX beneficiaries, and that has played out for pretty much the last year. Where we are today, we think is going to be a more nuanced phase where single stock differentiation and dispersion matters. We think if you take the hyperscalers, for instance, they're going to trade a very fine balance between keeping CAPEX up, but still because they're now relying on the market for additional CAPEX spending, they would have to continue to provide evidence for monetization. So it's a fine balance, and we don't think all companies can pull that off equally well. That's why we are kind of seeing the dispersion between names at a single stock level, and we think that would continue.

Analysis

The AI trade is entering a nuanced phase characterized by single stock differentiation, as equities reach all-time highs despite historical unwinds in momentum trading. Companies must balance CAPEX spending with evidence of monetization, leading to varied performance across the sector.

Smart money should note that the current environment favors selective investment in AI stocks, as not all companies will manage to sustain growth equally well. This dispersion in performance highlights the importance of careful stock selection in the evolving AI landscape.

17:02
PDT

Korean won faces FX pressures and foreign selling.

Korean won Brent crude International Energy Agency U.S. Treasury AI sector FX AI CL=F

– AI-driven rally in Korea shows a 20% rise from July 30 low.

– Brent crude prices are slightly down after five days of gains.

– U.S. crude stockpiles are increasing, indicating potential supply issues.

– International Energy Agency reports a daily shortfall of 1.8 million barrels.

FX pressuresoil market dynamicsAI sector growth

▸ Full transcript

At the 14-15 level, it's been interesting because the Korean won, the FX pressures continue. We do have really concerns around higher oil prices, not to mention the foreign selling in this economy continues. On the Treasuries front, it's been quite interesting. We had a pretty steady reaction to the inflation meeting expectations there. We did have the 10-year debt being sold at the highest yield since the financial crisis. We have a pretty interesting 30-year debt coming up as well. We're also noting at the moment when it comes to trading Korea, the cost is rising now 20% from that July 30th low, so really just showing how much that volatility has continued to play out, the highs and lows when it comes to this Korea AI-driven rally. We're now seeing that 20% rise from that July 30th low, so we'll continue to watch on that to see whether we can hold that until the close of trading, of course, going to be key. We've talked about treasuries a bit. Take a look at oil. We're now holding those Brent crude off by about seven-tenths of one percent there. We had previously been kind of holding on to gains for about five days, a little bit of a pullback there. Still, not a great deal of development when it comes to the reopening of the Strait of Hormuz to go by, still waiting for more signs of progress. In the meantime, we have the global market report from the International Energy Agency saying that there's a shortfall, a daily shortfall of 1.8 million barrels. So we may see some of that demand-supply dynamic being played out there. Crude stockpiles in the U.S. are swelling 17.

Analysis

The Korean won is under pressure amid concerns over rising oil prices and continued foreign selling, while the AI-driven rally in Korea has seen a 20% rise from its July 30th low. Meanwhile, Brent crude prices are experiencing a slight pullback despite a reported daily shortfall of 1.8 million barrels, indicating ongoing supply-demand dynamics in the oil market.

Smart money should note the significant volatility in the Korean market, which could present both risks and opportunities as the AI sector continues to drive investor interest. Additionally, the swelling U.S. crude stockpiles may signal a shift in market dynamics that could impact oil prices in the near term.

17:00
PDT

Wall Street nearing record highs boosts sentiment in Asia.

Japan US Bank of Japan Nikkei AI semiconductors Wall Street FEDFUNDS DXY

– July US inflation matched expectations, easing Fed hike concerns.

– Japanese yen remains under pressure at 159 against the dollar.

– Markets anticipate a 60% chance of a BoJ rate hike in September.

– Nikkei gains for a second consecutive session, driven by tech stocks.

Fed policycurrency pressureAI tech trade

▸ Full transcript

This is the Asia trade war counting down to Asia's major market opens after we saw Wall Street approaching record highs and the asset 100 at a one-month high already. We're really pricing in that AI tech trade with chip makers rounding, but also July US inflation matching expectations, sort of easing concerns about a Fed hike. Yes, it is that easing of the concerns, right? At least giving those Fed members that are willing to be patient a little bit more to work with going into that September decision. The question for Japan is though how sustainable is the sort of lack of pressure on the yen going to be because we really still don't see much of a meaningful difference when it comes to these differentials that are driving that weakness in the yen. Especially when you have the US dollar higher, given that we actually were down and then we gained ground despite the fact that we did get that softer than expected inflation numbers from the US. So the Japanese yen at the moment holding at that 159 level against the US dollar, as you mentioned, Heidi, it will be about rate differentials right now. Markets pricing in a 60% chance of a September rate hike by the Bank of Japan. But of course, there are other issues playing this market. Take a look at the Nikkei right now gaining for a second consecutive session. We're watching those tech stocks, anything related to semiconductors, the AI trade. But the issues around the fiscal landscape are big in this country. So we had the five-year yield here in J.

Analysis

Asia's markets are gearing up for a strong opening as Wall Street approaches record highs, driven by the AI tech trade and easing inflation concerns. The Japanese yen remains under pressure, holding at 159 against the US dollar, with markets pricing in a 60% chance of a September rate hike by the Bank of Japan.

Smart money should note that while the yen's weakness persists, the lack of significant pressure may not be sustainable given the ongoing rate differentials. Additionally, the fiscal landscape in Japan poses risks that could impact tech stocks, particularly those linked to semiconductors and AI.

16:58
PDT

Airlines are innovating with passenger comfort features like the 'relax row'.

Air New Zealand Bloomberg Tom Mackenzie AI Bloomberg Surveillance Watch Bloomberg Tech Europe PRIVATE

– Air New Zealand is recognized as a leader in this initiative.

– Consumer expectations for travel experiences are rising.

– Technology integration is crucial for competitive differentiation.

– Airline competition may intensify as companies seek to enhance customer experience.

airline innovationcustomer experiencetravel market recovery

▸ Full transcript

In case you missed it, on Bloomberg Surveillance. The relax row, which is in economy, is I think one of the coolest things we've done in a long time. A blocked middle seat in coach is just another example. Scott, have you had that idea for a long time? In fairness, Air New Zealand is one that came up with it, and I've wanted to do it ever since they did it. Of all the stuff we've done, I personally think it is one of the coolest things we've done. I love the idea of the relax row. When I was a teenager, young in my 20s flying, when I saw an empty row of three seats and the plane taking off, I'd never been more excited. As soon as you got up to about 35,000 feet, I was on it trying to lie down and move the armrest to make this work. I spent a number of trips when I was young and non-revving doing the same thing. When you're the same, you spot those three seats, that's mine, and you see someone else get up, it's not a chance. Yeah, it actually happened with my younger son. Don't miss Bloomberg Surveillance live every weekday. Tech is integrated into every aspect of our lives. From finance to defense, AI to entertainment, and from the road to the stars. Bloomberg brings you the latest stories from the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets. I'm Tom Mackenzie in London. Watch Bloomberg Tech Europe.

Analysis

The introduction of a 'relax row' in economy class by airlines is gaining attention, with Air New Zealand being a pioneer. This innovation reflects a growing trend in enhancing passenger comfort, which could influence airline competition and pricing strategies.

Smart money should note that the integration of technology in travel experiences is becoming a key differentiator for airlines. As consumer expectations evolve, companies that innovate in customer comfort and experience may gain a competitive edge in a recovering travel market.

16:55
PDT

Korean tech rally supported by analyst optimism on memory demand.

Korea Tencent Nvidia Anthony Stevens CAPEX NIO AI The Chinese Plume Market NVDA PRIVATE

– Foreign selling persists, indicating potential volatility.

– Tencent's continued investment reflects confidence in AI demand.

– Nvidia earnings could impact market sentiment significantly.

– Overall conviction in AI demand remains strong among major players.

AI demandKorean tech recoveryCAPEX investment

▸ Full transcript

Now it's on a 50 handle. That is a much safer playing ground for the Korean rally to kind of reassess. We did see the analyst community come out to support the Koreans, both domestic and foreign analysts sticking with the call for very high memory demand and pretty sticky prices from those long-term agreements. In terms of the fundamentals, they get a chance to reassert themselves since the kind of volatility and liquidity pressure on the market has reduced somewhat. Mind foreigners are still sellers in Korea, so that really needs to turn. I mean, we still have Nvidia earnings to go, but what are some of the catalysts that you're watching for the Asian tech rally next? You've got to continue to see this kind of conviction on CAPEX, right? So it was very important for markets like Korea and Taiwan to see Tencent adding to that conviction. The Chinese ecosystem continues to spend as well, even though Tencent's shareholders are not very happy about it. They seem to want to stay the course. We heard the same from the U.S., NIO Clouds, Kobe, Venebrius. They want to stay the course. So it will be interesting to see as this results season winds to a close how much conviction there is. It seems pretty unanimous that there is conviction that demand for AI is going to continue. Plume Market's reporter Anthony Stevens there as we look ahead to the market opens in Sydney, Seoul, and Tokyo next. This is Bloomberg.

Analysis

The Korean tech market is showing signs of recovery, with analysts supporting a bullish outlook on memory demand and stable pricing. Despite foreign selling pressure, there is a consensus that AI demand will continue to drive investment in the sector.

Smart money should note the importance of CAPEX conviction from major players like Tencent, as this could signal sustained growth in the Asian tech ecosystem. The upcoming Nvidia earnings will be a critical catalyst to watch, as they may influence market sentiment and investment strategies in the region.

16:53
PDT

The yen is undervalued, prompting calls for policy changes from the BOJ.

Japan Bank of Japan Korea US CPI Anthony Stevens BOJ FX Big Mac Asia Stock Trader DXY

– Recent interventions have not sustained gains in the yen's value.

– Asia's stock markets are reacting positively to US inflation data.

– Korea's market is experiencing a strong rally, up 3%.

– Tech earnings are influencing market sentiment.

foreign exchangeAsian marketstech earnings

▸ Full transcript

The yen per dollar, which means that the yen is very much undervalued. That's not the argument that is controversial, right, in terms of just the encouragement for policy change. Both indexes are calling for a lower yen, the Katsu indexing the yen at 62.18 versus the dollar, the Big Mac indexing the yen at 80.30. This requires an enormous amount of policy change. We've been seeing that call for a more activist BOJ from a number of different voices, including even internally. This remains a fixation for the global FX market. Even with the most dramatic intervention that we've seen from Japan and the US in 15 years, we've now surrendered half of those intervention-driven gains. This is still very good news if you're a tourist or someone who wants to partake in the Katsukari, among other things. In the meantime, Asia Stock Trader is seeing strong leads from a muted US CPI print. The latest big tech earnings are, of course, in the fray. Let's get some more when it comes to the setup for the Thursday session. I'm Mark, it's reporter Anthony Stevens. So let's start off with Korea. Are we seeing this rally really return? Yeah, pretty strong session yesterday and we have some very strong leads today, 3% higher. One of the reasons for that is a combination of events overnight.

Analysis

The Japanese yen remains significantly undervalued, with calls for a more activist Bank of Japan (BOJ) to address this issue. Despite recent interventions from Japan and the US, the yen's value has not improved, indicating ongoing challenges in the foreign exchange market.

Asia's stock markets are responding positively to a muted US CPI print, with Korea's market seeing a strong rally. This suggests that investors are optimistic about the potential for continued economic recovery, driven by favorable earnings reports from major tech companies.

16:49
PDT

Earnings momentum is driving U.S. stock market gains.

Euddea Dini S&P 500 South African Rand South Korean Won Indonesian Rupiah Tata Power Praveer Shishin Ha Mohit Bargava Bloomberg AI CEO Sunitha Rathore PRIVATE AAPL META DXY

– Euddea Dini has raised the S&P 500 target to 8400.

– Emerging markets are rebounding, particularly the South African Rand.

– Weaker currencies include the South Korean Won and Indonesian Rupiah.

– Concerns about AI's impact on blue-collar jobs persist.

earnings momentumemerging marketsAI impact on labor

▸ Full transcript

Into the AI boom, but it is at this point. There are concerns about exploitation. A lot of these workers are literally training machines that are supposed to take their jobs. So there is a risk for them. They are getting paid a little bit more money where the lead anecdotes that we've got is this woman, Sunitha Rathore, who's a mother of four, and she's making some extra money from this to be able to help send her kids to school. Peter Elstrom, Bloomberg's executive editor for global technology there. Take a look at how emerging assets are trading at the moment. We had seen, of course, a lot of volatility in the dollar as well. We ended the session a little bit higher on Wall Street against the U.S.—a little bit higher in the U.S. session, despite the fact that we got softer inflation prices. In the emerging markets Universe, we're seeing a little bit of a rebound given the precious metal prices. The South African Rand is up. We do have a little bit more support for other currencies that have been battered, although among the weakest performers have been such as South Korean Won and Indonesian Rupiah, for example. Our Friday episode on Bloomberg's emerging podcast series, Manaka Doshi, explores one of the biggest challenges facing developing economies, finding enough power to fuel growth. She speaks with Tata Power CEO Praveer Shishin Ha and energy expert Mohit Bargava about rising electricity demand, energy security, and the transition to cleaner power available Friday on YouTube, Apple and Podcasts and Spotify as well.

Analysis

The U.S. stock market is experiencing upward momentum driven by strong earnings, with Euddea Dini raising the S&P 500 target to 8400. Meanwhile, emerging markets are showing signs of recovery, particularly in currencies like the South African Rand, despite ongoing volatility in the dollar and weaker performers like the South Korean Won and Indonesian Rupiah.

Investors should note the potential for continued earnings growth as the economy remains resilient, which could further support stock prices. Additionally, the rebound in emerging market currencies may signal a shift in investor sentiment towards riskier assets, presenting opportunities in undervalued markets.

16:46
PDT

AI is now targeting blue-collar jobs for training purposes.

OpenAI Anthropic Peter Elstrom Bloomberg AI

– Workers can earn between $7 to $30 per hour for video data collection.

– The demand for egocentric video data is rapidly increasing.

– Robotics companies are actively seeking this new type of training data.

– This trend may reshape labor markets and job roles.

AI integration in labordata monetizationblue-collar job transformation

▸ Full transcript

seen this development is in India, where a lot of workers do many, many different things with their hands. So you're exactly right. They're going after some of these blue-collar jobs that you never thought were really going to be part of the AI boom. So they're taking videos of welding, putting the soles on shoes, assembling furniture, even going out into this scrappy to pick up pieces of plastic. They want to collect this video. It's called egocentric video because it's first-person video of people doing these tasks. And then they want to use that video to be able to train AI models. And the boom for these kinds of videos is really incredible right now. They pay workers a little bit of extra money to be able to record what they're doing. And then they can sell that. They sell the video for $7 an hour if it's unannotated. But if you add annotations, it can go up to $30 an hour. And you're seeing robotics companies scooping this stuff up because they need to be able to train their models. Just remember, when OpenAI and Anthropic were building their models, they had tons of information to choose from. They went out onto the internet, they used all the data on the internet, they used a lot of data from media companies also, which is a bit controversial. But this kind of data for robots for doing physical things in the real world doesn't exist. Nobody ever needed it before until now. So now they're collecting that data and then trying to use it to train these AI services for robots of the future. Peter, we've been talking a lot about how when it comes to frontier AI research, has been closing the gap, right? But when it comes to the...

Analysis

The AI boom is extending into blue-collar jobs, with companies collecting egocentric videos of workers performing tasks to train AI models. This trend highlights a growing demand for data that has not been previously needed, as robotics firms seek to enhance their capabilities in physical tasks.

Smart money should note that the monetization of video data collection is creating new income streams for workers, with pay rates varying significantly based on the level of detail in the recordings. This shift could indicate a broader transformation in labor markets as AI technologies evolve and integrate into various sectors.

16:42
PDT

CPI data brings some relief to Fed tightening expectations.

Molly Brooks TD Securities Federal Reserve Euddea Dini S&P 500 Yardani Research Bloomberg Alphabet Amazon SpaceX Bank of Japan AI PRIVATE

– Market is closely monitoring upcoming economic data points.

– Earnings momentum is driving stock market performance.

– Investors are showing fatigue with AI-related stocks.

– Long end of the Treasury curve may see decreased supply.

Fed policyearnings momentumAI impactTreasury market

▸ Full transcript

The earnings are driven by the economy. The resilience of the economy and the strength of the economy have been demonstrated in the earnings, which are driving the stock market higher. Regarding your point on the Impressive 493, you have the Magnificent 7 that did very well for quite some time, and now they've significantly outperformed the Impressive 493 this year. I think it's because people have AI fatigue; they can't really figure this out anymore. These stocks go up 20 bucks, down 20 bucks, and people are just taking an index approach to AI, not knowing exactly which stock to buy.

Analysis

The market is reacting to the recent CPI data, with September hike odds for the Federal Reserve dropping to around 40%. This shift indicates a potential easing of restrictive policy, although concerns about inflationary pressures from AI and memory chip shortages remain.

16:40
PDT

Euddea Dini introduces the term FEMO to describe current market dynamics.

Euddea Dini S&P 500 Alphabet Amazon SpaceX US FEMO FOMO The Bank The Wall Street Fabulous Earnings Momentum Missing Out S&P 500 GOOGL AMZN

– S&P 500 target raised to 8400 based on earnings momentum.

– Earnings growth projected at 25% for Q2 and Q3.

– Valuation multiples remain around 20, indicating moderate valuation.

– Caution advised as market sentiment mirrors past speculative behaviors.

earnings growthmarket sentimentvaluation multiples

▸ Full transcript

The Bank of Japan. The other thing we're obviously watching is that fiscal situation as well between the US and Japan and whether that's going to play into that as well. The Wall Street veteran, Euddea Dini, says markets at the moment are broadly being driven by what he describes as FEMO. This is short for Fabulous Earnings Momentum. He told us why he is bullish on US stocks after raising his year-end target for the S&P 500 to 8400. I think the market's going higher, and I think it's going higher on earnings. As a matter of fact, I felt the need to coin a new acronym, which is FEMO, Fabulous Earnings Momentum. We all know about FOMO, which is kind of, it's nice while it works. FOMO's Fear of Missing Out. We saw that in the 1999 melt-up situation, where it was 'don't bother me with earnings; I just have to be in this internet concept.' And this time around, the valuation multiples kind of stuck around 20. That's not low, but it's not terribly high as long as the economy's growing. But it's earnings that have really been phenomenal. Some of that has been marked by market capital gains and SpaceX for Alphabet and Amazon. But take that out, and you basically have a 25% increase in earnings in the second quarter and about the same in the third and fourth quarters. So yeah, I've been bullish on earnings, but not bullish enough. And that seems to be the end of it.

Analysis

The market is currently driven by what Euddea Dini calls Fabulous Earnings Momentum (FEMO), with a bullish outlook for US stocks and an increased S&P 500 target of 8400. Earnings growth has been significant, with a 25% increase expected in the second and third quarters, indicating strong underlying performance despite valuation multiples remaining around 20.

Smart money should note that while the current earnings momentum is impressive, it is crucial to differentiate between genuine growth and speculative trends. The reference to past market behaviors, such as FOMO during the 1999 melt-up, suggests a cautious approach is warranted as the market navigates these high valuations amidst economic growth.

16:37
PDT

CPI data lowers September Fed hike odds to 40%.

Federal Reserve AI Treasury Molly Brooks TD Securities CPI FEDFUNDS

– Inflationary pressures from AI and memory shortages are being monitored.

– Market reaction indicates cautious optimism regarding Fed policy.

– Retail sales print on Friday could impact future Fed decisions.

– Long-end Treasury supply may decrease, supporting bond prices.

Fed policyinflation trendsAI impact

▸ Full transcript

So that should kind of play along with what we've seen in terms of the CPI and the payrolls print at this point, supporting kind of a Fed hold at this point. We should see some amount of hikes priced out on Friday when we do get that retail sales print. What was interesting about the CPI number at this time around too, was trying to figure out what the memory shortage is doing when it comes to those inflationary pressures. Is it anything that you're watching that could potentially give us a trajectory of where prices go from here? Yeah, the AI story, I would say, is definitely a key one that the Fed is watching and seeing how that plays out in the data. Some of the impacts of AI in terms of the Fed mandates does seem longer out, like on the labor market. But we are seeing some of this kind of pass through in terms of inflation. And that is certainly something that the Fed officials are watching going forward. If we see any contributing strengths that's coming from that part of inflation, that also keeps the Fed on their toes. And that's one of the concerns that's leading a lot of Fed officials towards this hawkish shift, where they're kind of ready to potentially hike in September. Three were ready to hike in July. So it doesn't take that much in order to shift enough over the edge in order to actually deliver a hike in the near.

Analysis

Recent CPI data suggests a lower likelihood of a Federal Reserve rate hike in September, with market expectations shifting to a 40% probability from 50%. The interplay between inflation data and labor market conditions indicates that the Fed remains cautious, particularly with ongoing inflationary pressures linked to AI and memory shortages.

Smart money should note that while the Fed may hold off on immediate hikes, the potential for future tightening remains if inflationary pressures persist, especially from sectors influenced by AI. The upcoming retail sales print could further influence market sentiment and Fed policy outlook.

16:35
PDT

Long end of the yield curve is experiencing upward pressure.

Federal Reserve Treasury PPI CPI PCE FEDFUNDS

– Hints of decreased supply in long-term Treasuries could support prices.

– 30-year Treasury auction is critical for gauging market demand.

– Recent CPI and PPI data are influencing Fed rate hike expectations.

– Investor sentiment appears cautious despite attractive current levels.

Fed policyTreasury supplyinflation data

▸ Full transcript

Of a Fed hike priced in, especially if we are having less forward guidance coming out of the Fed in terms of their reaction function. So we will still be seeing some amount of hikes priced in, which has pushed up, as you said, the long end of the curve. We did get the Treasury refunding last week as well. And there were hints that we might actually see the supply in the long end actually decrease. We don't think it will happen anytime soon, but there were hints that we may see supply on the long end actually decrease rather than increase going forward. So that should help to support the long end to some extent. How closely are you watching the 30-year sale on Thursday, especially given that we're coming off the 10-year auction as well? Yep. The 30-year would definitely be important tomorrow in figuring out demand for the long end. We will get PPI as well before that, and that will be key in terms of determining what is the pass-through of the July CPI and PPI prints in the core PCE. So I think it'll depend on kind of what we're seeing going into the auction tomorrow, but we'll see how markets decide to take this down. At current levels, they seem pretty attractive given how high they are, but some investors seem to not want to take the risk.

Analysis

The market is adjusting its expectations for a Federal Reserve rate hike, with the long end of the yield curve seeing upward pressure due to hints of reduced supply. The upcoming 30-year Treasury auction will be crucial for assessing demand, especially in light of the recent CPI and PPI data.

16:33
PDT

September rate hike odds fall to 40%.

Federal Reserve Molly Brooks TD Securities AI TD CPI FEDFUNDS

– CPI data provides some relief for the Fed.

– Market remains cautious about future rate hikes.

– Weak labor numbers contribute to Fed's decision-making.

– Investors are closely monitoring incoming economic data.

Fed policyinflation datalabor market

▸ Full transcript

As well. Not surprising given that we continue to talk about the AI trade and the memory chip shortage. September hike odds for the Federal Reserve tumbling to roughly 40 percent from around 50 percent pre-data, but not necessarily completely eliminating the possibility of that tightening. Joining us now is Molly Brooks, U.S. rate strategist at TD Securities. Molly, first of all, give us your reaction to the CPI numbers and how much relief this can actually bring the Federal Reserve. Thanks so much for having me. It definitely does bring some relief in terms of whether the Fed needs to provide more restrictive policy at this point. But as you saw in the market reaction, we just priced out a bit in September, kind of a bit out of the cycle. I don't think we're out of the woods by any means at this point. The bar for the Fed to deliver a hike at some point has certainly lowered. However, this report has been supportive of a Fed hold, at least in the near term. I think that goes along with the payrolls report that we saw last week. So we keep seeing this data come in and markets are kind of on their toes here at each incoming data point just to see if anything will come in that will be enough to tip the Fed towards hiking. At least when it comes to the combination with the weak labor numbers that we got recently, does that help?

Analysis

The odds for a Federal Reserve rate hike in September have dropped to approximately 40% following the latest CPI data, indicating a potential easing of monetary policy. However, analysts caution that the Fed is not out of the woods yet, as the combination of weak labor numbers and inflation data keeps markets on edge regarding future rate decisions.

Smart money should note that while the immediate pressure for a rate hike has diminished, the Fed's ability to maintain a hold may be contingent on upcoming economic data. The interplay between inflation trends and labor market performance will be critical in shaping the Fed's policy trajectory in the coming months.

16:31
PDT

CPI data suggests persistent inflation pressures.

U.S.Iran Federal Reserve CPI K225 FEDFUNDS

– Service sector inflation has rebounded.

– Fed's September decision remains uncertain.

– Geopolitical tensions may impact domestic inflation.

– Energy shocks continue to influence market dynamics.

Fed policyinflation dynamics

▸ Full transcript

Tech and climate. More than what you need to know, it's what you need to think about. Today's CPI print puts the bar for a Fed hike much higher than the bar for a hold. I don't think this really resolves a lot. You know, I think Arlene is still that the Fed remains on hold in September. It was comforting just that it was flat, but I think the most important issue out there is that the service sector inflation bounced back a bit. We've essentially got Teflon inflation in America. It won't stick, and it won't stick because you can't get a price-wage spiral going if the wages won't react. Some of our guests are reacting to the latest U.S. inflation data that had been hotly anticipated, how it potentially impacts Fed policy going forward. And it's interesting, we're having this conversation earlier about how the Fed's not necessarily out of the woods just yet, even when it comes to that September decision, right? But it certainly gives a bit more ability for those that want to remain patient to be able to argue that case when it comes to that underlying inflation reading, matching the slowest pace since March 2021. That's going to help sort of that narrative there as well. But of course, even as we see that energy shock continue to play out as a fade, we still don't know what's going on when it comes to the U.S. and Iran and the reopening of the Shreddalf for Moose and whether the global energy shock is going to continue playing into the domestic numbers either. Still, it is a reasonable setup. We're seeing the K225 features up one and a quarter percent. We saw a rally in the.

Analysis

Today's CPI print raises the bar for a Fed hike, indicating that inflation remains persistent despite a flat reading. The service sector inflation has bounced back, suggesting that the U.S. economy is experiencing Teflon inflation, where price increases are not leading to wage growth.

Smart money should note that while the Fed may remain on hold for now, the underlying inflation dynamics could shift quickly, especially with ongoing energy shocks and geopolitical tensions affecting the market. The interplay between U.S. inflation data and international developments, particularly with Iran, could create volatility in domestic economic indicators.

16:28
PDT

Hullhires' Q2 profit exceeded estimates, driven by AI infrastructure.

Hullhires NVIDIA Apple China Iran U.S.Trump administration Lotus Asset Management Haohong CBA ANZ Origin PRIVATE USDCNH

– China's tech sector is being closely monitored for earnings sustainability.

– Oil prices are affected by geopolitical tensions, particularly regarding Iran.

– The U.S. is focusing on economic sanctions rather than military action in Iran.

– The Trump administration is investing in AI to strengthen supply chains.

AI infrastructuregeopolitical riskenergy supplyChina tech sector

▸ Full transcript

Even for his tough reform-minded approach, he played a major role in shaping modern China's economy. State media says that Jiu died in Beijing on Wednesday following a new illness. We have more ahead. This is Bloomberg. Every modern economy depends on one invisible advantage, reliable power. Without it, there is no AI economy, no advanced manufacturing, no modern healthcare, no water security. Power isn't just another industry. With the infrastructure behind it, every major growth story should begin with one question: Where will the power come from? That's the business of power, knowing how governments should plan and which economies have the infrastructure to scale. Middle East energy, where possibility becomes power.

Analysis

China's tech sector is under scrutiny as competition in AI intensifies, with Hullhires reporting a significant profit increase driven by AI infrastructure spending. Meanwhile, geopolitical tensions and energy supply concerns are influencing market dynamics, particularly in the oil sector, as the U.S. administration navigates its strategy regarding Iran.

16:26
PDT

Trump administration invests $50 million in AI trade program.

Trump administration Panama Iran China India U.S.Caroline Lovett AI Washington Deputy Bureau Chief Laura Davidson The Trump The State Department USDCNH PRIVATE CL=F

– AI platform in Panama aims to streamline semiconductor shipments.

– Iran's military strategy may affect U.S. allies and oil prices.

– Political pressure may lead to a shift in U.S. strategy on Iran.

– Geopolitical tensions continue to influence market dynamics.

geopolitical riskAI investmentsupply chain resilience

▸ Full transcript

and sort of letting things sit and boil and wait, is that there's also collateral damage potentially in the region, you know, from some U.S. allies or at least, you know, U.S. frenemies, you know, that being China, India, as well as Gulf allies are also affected, you know, as Iran continues to face some of these consequences. So this is not a victimless, you know, sort of, you know, strategy here, and there's a lot, you know, of riding on this. Of course, Trump really faces this roughly three-month clock until the U.S. midterms. That could really be a telling point for how he might change his strategy here when the political pressure is off to make sure that oil prices don't fluctuate too much. We could, you know, see a significant strategy shift here come this later this fall. Bloomberg's Washington Deputy Bureau Chief Laura Davidson there with the latest on Iran. Other global headlines are we're following at the moment. The Trump administration has launched a new program to fast-track AI-related trade with allies. The State Department says it's investing $50 million in an AI-powered platform in Panama to help track and process shipments of semiconductors and critical minerals more efficiently. This marks the latest U.S. move to strengthen its critical mineral supply chains and reduce reliance on China. House Press Secretary Caroline Lovett will step aside from the role leader this month, President.

Analysis

The Trump administration is fast-tracking AI-related trade with allies, investing $50 million in an AI-powered platform in Panama to enhance semiconductor and critical mineral supply chains. This move aims to reduce reliance on China amidst ongoing geopolitical tensions, particularly with Iran's military posture affecting U.S. allies in the region.

Smart money should note that the U.S. is strategically positioning itself to strengthen its supply chains while navigating complex international relations. The potential shift in U.S. strategy regarding Iran could impact oil prices and market stability as midterm elections approach, creating volatility in energy markets.

16:24
PDT

Oil supply increased by 17.4 million barrels, the largest rise since January 2023.

Iran U.S.Trump IEA Washington Deputy Bureau Chief Laura Davison CL=F

– Negotiations between the U.S. and Iran are stalled, with both sides taking hardline stances.

– Iran is preparing for a longer-term military engagement, while the U.S. focuses on economic sanctions.

– The IEA report indicates a significant supply shortfall due to geopolitical tensions.

– Market volatility in energy sectors is likely as tensions persist.

geopolitical riskoil supply dynamics

▸ Full transcript

An additional 17.4 million barrels were added last week, marking the biggest increase since January 2023. The IEA report cites disruptions from the Iran conflict as deepening the global oil squeeze and being responsible for the supply shortfall. That 1.8 million barrels is more than double previous forecasts. Let's get the latest on where these talks are at with Vogue's Washington Deputy Bureau Chief, Laura Davison. So, Laura, have we seen any movement on each side? We really haven't. There have been positive signs from Pakistani mediators that a deal could be coming together, using some strong language. Some sort of arrangement could be emerging. However, both the Iranian side and the U.S. side seem to be digging in. From the Iranian side, we’ve heard they are planning to change their military posture, preparing for a longer-term, more offensive military engagement. On the U.S. side, almost the exact opposite is true. Trump has indicated he wants to, quote, 'low-key it,' focusing more on economic sanctions and other economic pressures rather than a military campaign. This is partly due to shortages of U.S. weaponry, missiles, and other resources. However, it does not seem like there is any deal coming to a conclusion anytime soon, and it appears the administration is maintaining its position.

Analysis

Oil supply has surged by 17.4 million barrels, the largest increase since January 2023, driven by disruptions from the Iran conflict. However, negotiations between the U.S. and Iran remain stagnant, with both sides entrenched in their positions, indicating a prolonged period of uncertainty ahead.

The lack of progress in U.S.-Iran negotiations suggests that geopolitical tensions may continue to impact oil prices and supply dynamics. Investors should be cautious as the potential for further military engagement could exacerbate supply constraints, leading to volatility in energy markets.

16:19
PDT

Tencent's ADRs dropped 5% post-earnings.

Tencent Alibaba NVIDIA Huanyuan Hi3 CBA ANZ Origin Lotus Asset Management Haohong Hullhires AI NVDA USDCNH AAPL

– The company reported a 170% year-on-year increase in capex for AI.

– Analysts doubt immediate earnings benefits from AI investments.

– Tencent's gaming revenue rose 17%, aided by AI.

– Competition in AI is intensifying among Chinese tech firms.

AI investmentChinese tech competitionearnings growth

▸ Full transcript

Services like Anthropics' Claude Code. The Chinese startup also says it's upgraded its flagship V4 Pro model with enhanced agent capabilities. The push counts as competition intensifies and the race to build AI systems that can automate professional work. Hullhires' second quarter profit beat estimates reflecting the surge in AI infrastructure spending. July revenue jumped 54 percent and the company says it remains on track to begin mass production of NVIDIA's next generation Vera Rubin platform this quarter. The main assembler of Apple iPhones also getting a boost from robust demand from consumer electronics. We'll be taking a closer look at China's tech sector in the next hour with Lotus Asset Management's managing partner and CIO, Haohong, as investors look for signs that earnings can keep that AI driven rally in China going, that conversation happening at the times on your screen. In the meantime, let's take a look at some of the stocks that we're watching when trade opens in Australia in the next hour, watching some of these earnings-related names. Of course, the BOS operator ASX just reporting full-year net income that missed average analyst estimates. We're also watching the energy space with Origin reporting of profit beat. Four-year results lowered its CAPEX forecast for the next year, winding down its battery development program. We are also watching the financials, of course, after we saw CBA results out earlier this week. We're now watching ANZ, higher profits on consumer deposits offsetting a drop in mortgage applications as we see that continued slowdown of the property sector since that.

Analysis

Tencent's ADRs fell 5% after quarterly earnings that met analysts' estimates, despite a significant increase in AI spending. The company is ramping up capital expenditures, but analysts believe these investments may not translate into immediate earnings gains this year.

Smart money should note that while Tencent is increasing its AI investments, it still lags behind competitors like Alibaba in terms of model size and capabilities. The ongoing competition in the AI space could pressure Tencent's stock further if earnings do not catch up with its ambitious spending plans.

16:17
PDT

Tencent's gaming and marketing revenues show strong growth.

Tencent Alibaba Huanyuan Hi3 Kimi K3 Bloomberg Intelligence AI So Bloomberg Intelligence PRIVATE

– AI investments are substantial but may not yield short-term earnings.

– Workbody AI agent has gained significant traction.

– Tencent's foundational AI model is smaller than competitors'.

– Long-term AI strategy is crucial for Tencent's market competitiveness.

AI investment strategyTech competitionMarket positioning

▸ Full transcript

by its bread and butter business, which is the gaming revenue, as well as its marketing and ad sales, right? So gaming was up 17%, marketing was up 22%, and it's thanks to AI, the company says, that it allowed clients to better target users there. So Bloomberg Intelligence doesn't think that AI investments in Tencent will actually translate into earnings, at least for this year. Have you seen any signs that investments could start paying off at some point? The investments are huge and there are long-term projects. Let's talk about some of the different AI products Tencent has invested into. Workbody, which is a desktop AI agent that has been very successful just a few months after its launch since March. It's already zoomed to the top of the most used list, outperforming some of its rivals. This creates a very positive feedback loop because it's powered by Tencent's own Huanyuan foundational model. But speaking of that foundational model, Tencent is still seen as a laggard when it comes to its AI models, right? Huanyuan, which is now rebranded as Hi3, is a very, very small model, just a fraction of the size of Kimi K3 or Alibaba's Quinn. So the company says it's aiming to build a state-of-the-art AI model by the end of this year, which will be launched.

Analysis

Tencent's gaming revenue rose 17% and marketing increased by 22%, attributed to AI enhancements that improved user targeting. However, Bloomberg Intelligence suggests that Tencent's significant AI investments may not yield earnings this year, indicating a long-term play rather than immediate returns.

The rapid growth of Tencent's AI products, particularly the successful Workbody desktop AI agent, highlights a competitive edge in user engagement. Yet, the company still lags in foundational AI model size compared to rivals like Alibaba, which could impact its market positioning unless it accelerates its AI development efforts.

16:15
PDT

Tencent's capex increased over 170% year-on-year in Q2.

Tencent Alibaba Mi Min-le China AI Mi Min Hong Kong PRIVATE USDCNH DXY

– The company is doubling its investments in AI products this year.

– Alibaba's commitment of $50 billion over three years sets a competitive benchmark.

– Market sentiment may be cautious due to Tencent's lack of multi-year investment guidance.

– The shift in focus to capital-intensive AI projects could impact profitability in the short term.

AI investment strategyTech sector competition

▸ Full transcript

Tencent ADRs fell 5% after quarterly earnings that met analysts' estimates. China's biggest company more than doubled spending on AI projects and computing last quarter, reflecting intensifying efforts to catch up with rivals. China correspondent Mi Min-le joins us now from Hong Kong. Mi Min, it looks like China's big tech AI race is moving from the development of AI models into a high capital-intensive phase. That's right, that has been the key trend especially for Tencent, which has been lagging behind in capital expenditures since late 2025, but this year is starting to ramp up capex intensively. We're talking about a 170% increase year-on-year in capex in the second quarter, exceeding even the estimates for Alibaba's spending. Now, Alibaba had pledged about $50 billion of investments over three years. Tencent, however, has not given us any multi-year guideline; it simply said that it is doubling investments in AI products this year, and any additional future investment is going to be determined later.

Analysis

Tencent ADRs fell 5% after quarterly earnings that met analysts' estimates, as the company significantly ramped up its capital expenditures on AI projects. This shift indicates a transition from AI model development to a capital-intensive phase, highlighting Tencent's efforts to catch up with rivals like Alibaba, which has pledged substantial investments in AI.

16:10
PDT

Bank of Japan may consider back-to-back rate hikes.

Bank of Japan Takahashi administration U.S.Japan BOJ

– Current government policies favor easy monetary conditions.

– Intervention alone is insufficient without aligned monetary policy.

– Potential friction between Japan and U.S. economic interests.

– Higher yields on U.S. treasuries could result from Japan's actions.

monetary policycurrency interventionU.S.-Japan relations

▸ Full transcript

The central bank will have an ideal opportunity. If they really want to get the market to feel that the yen is going to change direction, that they're going to backstop the yen, that you've seen the worst for the currency this year, they would need to suggest they're not only going to hike in September, but follow it with October as well. Back-to-back rate hikes are probably the minimum that will jolt the market out of this idea that the yen is a carry trade forever. So if they really want the market to get on their side, if they want traders to get behind buying the yen, it's really down to the Bank of Japan. Intervention in itself, we've seen, is effective in very short bursts. It is not going to change the overall picture for the currency unless monetary policy and intervention are aligned together. And by now, monetary policy is by far the biggest factor for the yen. I'm really interested to see how Washington will view the comprehensive policy here in Japan, because as you mentioned, they have helped with the intervention and supporting of the yen. At the same time, we have a government here, the Takahashi administration, who wants more easy policy. We're talking about potential consumption tax cuts when it comes to food and beverage. We're talking also about not wanting the BOJ to continue hiking rates. I wonder if this will cause friction between the two economies, and what that means also. Japan continues to intervene in the markets, which could also pressure treasuries and sales yields higher.

Analysis

The Bank of Japan's potential back-to-back rate hikes in September and October could signal a shift in the yen's trajectory, moving away from its status as a carry trade. However, the alignment of monetary policy and intervention is crucial, as current government policies favor easy monetary conditions, which may create friction with U.S. economic interests.

Smart money should note that while intervention has provided temporary relief for the yen, it is the monetary policy stance that will ultimately dictate its direction. The ongoing discussions around consumption tax cuts and the BOJ's reluctance to hike rates could lead to increased pressure on U.S. treasuries and higher yields, impacting global markets.

16:08
PDT

30-year Treasury bonds dipped despite benign CPI data.

U.S. government Asian bonds Japanese bonds CFTC CPI DXY

– Investor concerns about U.S. government spending are rising.

– Asian bonds may be negatively impacted by U.S. auction results.

– Dollar-yen rebound shows initial intervention effectiveness.

– Traders significantly reduced short positions in the yen.

U.S. fiscal policybond market volatilitycurrency intervention

▸ Full transcript

This is not a good omen for the 30-year bonds coming today. We saw that even though we had a benign CPI number, actually 30 years dipped, and then they went straight back up again. So there was no improvement in the long end of the Treasury market despite the CPI numbers coming in line. You can see investors are very wary about the mismatch between how much the U.S. government is spending and where they need to raise those funds in the future. That's going to weigh on the long end of Asian bonds as well today. You'll probably see it play out in the Japanese bonds market as well today. So that is a little bit more off the radar, but it is something that as the day progresses, investors will probably be talking more and more about the fear that we have a weak auction tonight in the U.S. That disrupts the U.S. equity market. But at least to start with, we're probably going to see some green when Asia markets get going today. Mark, I do wonder how much longevity do you expect when it comes to the pressure being taken off the yen a bit? Not too much, I don't think. If you look at the rebound for the dollar-yen, it looks as though what we saw in the initial rounds of intervention were effective, knocking the dollar-yen down quite a long way, but you're gradually seeing it tick up. Positioning got wiped out. You can see that in the CFTC data; there were huge short positions by traders, aggressive traders in the yen. Those were slashed, the biggest change in those on record, actually. So those numbers were...

Analysis

The 30-year Treasury bonds showed volatility despite a benign CPI report, indicating investor wariness about U.S. government spending and future funding needs. This sentiment is likely to impact Asian bonds as well, with concerns about a weak auction in the U.S. potentially disrupting equity markets.

The rebound in the dollar-yen exchange rate suggests that initial interventions were effective but may not provide lasting relief for the yen. The significant reduction in short positions among traders indicates a shift in market sentiment that could lead to increased volatility in currency trading.

16:06
PDT

Kevin Warsh's lack of communication is causing concern among investors.

Kevin Warsh Fed Hong Kong Asia From Kevin Warsh Jackson Hole Christopher Condon FEDFUNDS

– Asian markets may face short-term pressure but have a generally positive outlook.

– Upcoming economic data will be crucial for Fed policy direction.

– The long end of the trade remains a significant concern.

Fed policyAsian market outlook

▸ Full transcript

From Kevin Warsh. That's what he's not been giving them. And it's beginning to feel to many Fed watchers that he's failing to provide leadership of that committee. But there is plenty of time for him to right that ship. And I'm assuming that he will address that opportunity when he gets to Jackson Hole. Christopher Condon, who leads our Fed coverage, of course, with his views on, of course, the investors across Asia today? From that point of view, everything is looking pretty rosy. There will be concerns about them getting slammed overnight, so that may weigh on the Hong Kong market. But in the bigger picture, we'll probably see Asia do okay. The bigger concerns really are to do with the long end of the trade.

Analysis

Kevin Warsh's leadership at the Fed is under scrutiny as he has not provided clear guidance, raising concerns among Fed watchers. Despite some market pressures, particularly in Hong Kong, the broader outlook for Asia remains optimistic.

16:04
PDT

PCE report on the 26th is critical for inflation outlook.

Kevin Warsh Federal Reserve PCE CPI producer price index Jackson Hole Fed Chairman FEDFUNDS

– Producer price index and August CPI will precede the Fed meeting.

– Kevin Warsh's communication style may impact market expectations.

– Investors are concerned about potential inflationary pressures.

– Market reactions may hinge on upcoming economic data.

inflation outlookFed communication strategy

▸ Full transcript

To see PCE come out on the 26th. In fact, well before that, we'll see a producer price index tomorrow, and then before the September meeting, we'll also get CPI for August. So I think it's a little bit early to think about this as a determinative report. A lot of data yet to come, and we'll see. Nato mentioned that before September, you also have Jackson Hole in August. How important will it be for the Fed Chairman to sort of fine-tune his message here, whether it's inflation or the labor market? Well, I think this is a massively important platform for Kevin Warsh. You'll remember, of course, that he caused a big stir in the press conference following the July meeting, not because the Fed declined to hike rates, but because he declined to offer an explanation which was readily available for why they did not hike rates. And he also made no effort to signal that if things worsened on the inflation front, that he would be prepared to even consider an interest rate hike. Now, he didn't really offer much in the way of his analysis of the economy. So I'm not saying that he came on and said he would not consider ever raising money.

Analysis

The upcoming PCE report on the 26th, along with the producer price index and CPI for August, will be crucial for assessing inflation trends ahead of the September Fed meeting. Fed Chairman Kevin Warsh's communication strategy will be under scrutiny, especially after his previous lack of clarity regarding interest rate hikes.

16:02
PDT

U.S. core inflation data is less concerning than anticipated.

U.S.Federal Reserve Iran Japan Christopher Condon Alfaid CPI Iran War Alfaid Coverage FEDFUNDS DXY

– Market sentiment has shifted positively following the inflation report.

– The dollar-yen exchange rate is at a critical level for potential intervention.

– Investors were initially bracing for a hotter inflation report.

– The geopolitical situation, particularly regarding the Iran War, continues to influence market dynamics.

U.S. inflationcurrency interventiongeopolitical risk

▸ Full transcript

Look at the center for trading across Asia today as we see something of a sigh of relief when it comes to that hotly anticipated U.S. core inflation print. The core inflation coming in subdued takes some of the pressure, as Sherry mentioned, off the Fed. So the July reading is likely easing pressure on the Federal Reserve to raise interest rates. If you take a look at those numbers, it certainly suggests that the impact of the price shock from energy due to the Iran War continues to fade, despite the ongoing uncertainty over where this next potential ceasefire and the reopening of the Strait of Hormuz might take us. But take a look at the implications, of course, because we've been watching the other side of this, which has been the dollar-yen trade. The yen is trading at that 160 level; we're still around the points where we're sort of looking for intervention, but that 159.38 is where we're at. So, a little bit of a breather for the yen. We'll have to wait to see how much these differentials will be able to be sustained. But let's get some more on this inflation print. Christopher Condon, who leads Alfaid Coverage, joins us now. So, Chris, if you take a look at the CPI data, the core numbers, what are the implications for at least the September meeting and going into the rest of the year? Well, I think you're right, Heidi, and first of all, pointing out that this is not bad news. Some investors were worried about a slightly hotter report. I think investors' outlook was slightly more negative than what economists had been anticipating. So then you saw the reaction in markets.

Analysis

Asian markets are reacting positively to the subdued U.S. core inflation print, easing pressure on the Federal Reserve to raise interest rates. The dollar-yen trade remains under scrutiny as the yen stabilizes around the 160 level, indicating potential intervention points.

16:00
PDT

Asian stocks poised for gains.

Bloomberg Christina Rafiti Wall Street Washington Asia US Federal Reserve Bloomberg This Weekend Asia Train PRIVATE

– US inflation report eases Fed rate hike fears.

– Increased competition expected in markets.

– Key political reports coming next week.

– Potential shift in investment strategies.

market liquidityinflation impactpolitical developments

▸ Full transcript

The future officer only on Bloomberg. I'm Christina Rafiti. We're tracking breaking news today from Wall Street to Washington. Let's start overseas. The sector is really propelling the deal forward. Yeah, the hope is this will open up new markets and provide some additional liquidity. Of course, now they're going to have competitors. We've got a big week coming up in politics. Burning season is underway. We're going to get some key reports. Everything you need to know before the markets open on Monday. Bloomberg This Weekend. Bringing a little Bloomberg into your weekend routine. Guys, buckle up. This is Asia Train. I'm Shavriani in Tokyo. The top story is this hour. Asian stocks set for gains as a US inflation report eases concerns of a Fed hike, an auction of 10-year trade...

Analysis

Asian stocks are set for gains as a recent US inflation report alleviates concerns over a Federal Reserve interest rate hike. This development is expected to open new markets and provide additional liquidity, although increased competition is anticipated.

Smart money should note that the easing inflation signals could lead to a more favorable environment for risk assets, potentially boosting market sentiment ahead of key political reports next week. The focus on liquidity and market expansion may also indicate a shift in investment strategies as firms adapt to changing economic conditions.

15:56
PDT

AI safety is a primary concern, akin to airline safety.

Daniela Glypto

– There is a significant focus on reducing failure probabilities in technology.

– Personal well-being strategies are important for leaders in high-stress environments.

– The tech industry is grappling with anxiety over the implications of AI.

– Balancing innovation with safety is a critical theme.

AI safetypersonal well-beingtechnology regulation

▸ Full transcript

It's safer than all the other airline companies, but if someone comes and asks you, like, can you guarantee that your airplane will never crash? I mean, how could you? How could you possibly? But if there was a 25% chance of an airplane crashing, you wouldn't get on that plane. That's right. 25% is too high. We're trying to make that probability much, much lower. How do you find your zen? How do you relax? You know, honestly, a lot of it's just exposure to it. You know, sometimes I'll just take a weekend and I'll play some video games sometimes with Daniela, my wife. We go to Italy sometimes. We have a horse there, so I'll just sit there next to her horse and I'll be like, you know, Glypto, who's her horse? Like, you know, she doesn't know about any of this. Like, she's just a happy horse.

Analysis

The discussion highlights the ongoing efforts to reduce the risk of AI technology, comparing it to airline safety and emphasizing the need for lower probabilities of failure. The speaker reflects on personal relaxation methods, indicating a balance between high-stress responsibilities and personal life, which may resonate with others in high-stakes industries.

Smart money should note the underlying anxiety surrounding AI technology and its implications for safety and regulation. The personal anecdotes suggest that even leaders in tech are seeking ways to cope with the pressures of innovation, hinting at a broader industry sentiment of uncertainty and the need for stability.

15:51
PDT

Anthropic is focused on proactive measures to mitigate risks in AI development.

Anthropic President Trump President Biden David Sacks National Security Administration Pentagon AI

– There is a growing societal anxiety regarding the implications of AI technology.

– Calls for regulation and oversight in AI are becoming more pronounced.

– The balance between optimism and caution in AI could influence investment strategies.

– Potential for significant impacts on job markets and work dynamics due to AI advancements.

AI regulationsocial responsibilitytechnological impact

▸ Full transcript

That is yes, I don't know. If we sort of project some of the challenges that the social media companies have faced around child welfare, mental health, election integrity, all of these topics, we're really lucky that we're second. We view it as our job to try and proactively think about all of the things that could go wrong because if we don't, who's going to? You know, I don't know if they actually set out to do the right thing or make the world a better place. And so I don't think if they were going back, they would even knowing what they do and they certainly should do things differently. I don't know if they actually will, but we can't. This is why we're trying to get this right the first time. Instead of waiting for things to go wrong, then scrambling to justify why it's all okay. The main way I could see AI being, you know, banned or blocked is if something really went wrong. And if something really went wrong, then maybe it deserves to be. You have technologists saying, it's gonna be amazing. And others saying, it could be awful. Where are you on that spectrum? I hope the best, but plan for the worst. For me, this is the most important work I've ever done. For some people, it feels like this is the last job, because this is sort of the, it could mean the end of work. And I think for other people, it's, you know, like maybe it's not the last job, but it's existential to get this right. And so there's just this kind of burden. If the impacts could be as significant as we're talking as significant as Anthropic has warned about. What responsibility do you think Anthropic has to...

Analysis

Anthropic emphasizes the importance of proactive measures in AI development to avoid potential pitfalls seen in social media, highlighting their commitment to getting it right from the start. The tension between optimism and caution in AI's future reflects a broader societal anxiety about its implications, suggesting that the stakes are higher than ever for responsible innovation.

Smart money should note that the discourse around AI regulation is intensifying, with calls for pre-release testing and oversight gaining traction. This could lead to increased scrutiny and potential barriers for AI companies, impacting their operational strategies and market valuations.

15:49
PDT

Public sentiment is increasingly negative towards AI, with protests indicating rising anxiety.

Sam Altman Anthropic National Security Administration Pentagon President Trump President Biden David Sacks

– Developers express uncertainty about the future impact of AI technologies.

– The potential for regulatory changes is heightened due to public backlash.

– Concerns about safety and ethics may slow down AI innovation.

– Investors should prepare for a more cautious approach from AI companies.

AI regulationpublic sentimenttechnological responsibility

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But there have also been protests right outside their office. There's a lot of anxiety, a lot of confusion. There's some real anger right now about what's happening, and it actually feels like it's escalating. Artificial intelligence is the next industrial revolution. If you look at the data, people are more concerned than excited about what's going on. They think the risks outweigh the benefits. The truth is, if you talk to the people who are building this, even they will tell you they don't fully know how it's all going to play out. How do you think about the weight of this moment? I worry that something will go wrong. You know, are we doing literally everything we can? We're certainly trying our best. We're certainly trying very hard. What I want is to create a situation where if this set of people can't do it, it couldn't be done. You can't guarantee success, but maybe you can guarantee that. It's getting personal. Sam Altman's home down the street has been attacked. How is that affecting you? It was really scary to read that. I mean, we were obviously extremely relieved that he and his family were okay. In general, I think this is a time, you know, technologically, politically, where unfortunately, there's just a lot more rhetoric and words that I think can lead to bad outcomes and bad things happening. I hope that this is a topic we can all just debate.

Analysis

Protests and rising anxiety surrounding artificial intelligence signal a growing public concern that the risks of AI may outweigh its benefits. The sentiment among developers reflects uncertainty about the future implications of their creations, highlighting the weight of responsibility they bear during this pivotal moment in technological advancement.

Smart money should note that the escalating public backlash against AI could lead to increased regulatory scrutiny and potential disruptions in the sector. The fear of negative outcomes may drive companies to adopt more cautious approaches, impacting innovation timelines and investment strategies in AI-related ventures.

15:47
PDT

Reliable power is essential for the AI economy and modern infrastructure.

Middle East Gisec AI Quantum Gisec Global DXY

– A balanced regulatory approach to AI is necessary to foster innovation while managing risks.

– The Middle East is positioned as a key player in energy and AI development.

– Cybersecurity will be increasingly important as technology evolves.

– Investment in energy infrastructure is crucial for economic growth.

energy infrastructureAI regulationcybersecurity

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Completely communist, the government should grab it all. We need a more sensible, moderate approach. That's the one we've been favoring all along because we've understood the power of this technology. We're not panicking. We're not denying it. We see the smooth exponential and we're responding to it appropriately. Every modern economy depends on one invisible advantage: reliable power. Without it, there is no AI economy, no advanced manufacturing, no modern healthcare, no water security. Power isn't just another industry; it's the infrastructure behind it. Every major growth story should begin with one question: Where will the power come from? That's the business of power, knowing how governments should plan and which economies have the infrastructure to scale. Middle East energy, where possibility becomes power. A new digital order isn't defined by technology alone. Sovereign AI reshapes digital independence as genetic AI transforms decisions, and Quantum unlocks new possibilities. Every breakthrough demands a cyber-first mindset. That's why the future meets at Gisec Global, the Middle East and Africa's largest cybersecurity event. We shape policy and power innovation. We protect the digital order, a fad to some, the future of money to others. We see cryptos' trillion-dollar swings while others follow the noise.

Analysis

The discussion emphasizes the critical role of reliable power in supporting modern economies, particularly in AI, advanced manufacturing, and healthcare. The need for a balanced approach to AI regulation is highlighted, as excessive control could stifle innovation while insufficient oversight may lead to risks associated with powerful technologies.

Smart money should note that the intersection of energy infrastructure and AI development is pivotal for future growth. The mention of a 'cyber-first mindset' indicates that cybersecurity will be a key area of investment as digital independence and technological advancements reshape economies.

15:45
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Mythos raises significant national security concerns.

Anthropic Mythos President Trump President Biden David Sacks White House GPS AI Zar David Sacks Silicon Valley

– There is a call for pre-release testing and auditing of AI models.

– The White House is reconsidering its hands-off approach to AI regulation.

– The balance of power between private companies and government in AI is unstable.

– Excessive regulation could stifle innovation in the AI sector.

AI regulationnational securitytechnology oversight

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The government should outright take us over. Every previous powerful technology we've seen in history was either built by the government or originated with the government. So nuclear weapons, obviously, initially built by the government. The internet, GPS, cell phones. AI is the first technology that's been built in the private sector, and where government has not really had a serious role and is coming in late to the game. I think that's actually a dangerous and unstable situation. It is not the situation I would have chosen. This technology, I'm scared of companies having it, but I'm also scared of government having it. And then, you know, we need basic regulation of the technology, you know? More and more, as I've seen what we've seen with Mythos, you know, I think we need to start doing pre-release testing, required pre-release testing, testing and auditing of the models. This was an approach the White House rejected initially. On his first day back in office, President Trump, with the help of former AI and CryptoZar David Sacks, dismantled President Biden's AI executive order seeking guardrails, instead favoring a hands-off, let Silicon Valley do its thing approach. We believe that excessive regulation of the AI sector could kill a transformative industry just as it's taking off. But with Mythos and its national security implications proving hard to ignore, the White House now seems to want to gatekeep the world's most powerful AI. It's very funny to...

Analysis

The discussion highlights the precarious balance between private sector innovation in AI and the need for government regulation, particularly in light of the powerful new AI model, Mythos. The sentiment reflects a growing concern that without proper oversight, both corporate and governmental control of AI could lead to dangerous outcomes.

Smart money should note that the current administration's shift towards regulation, especially regarding national security implications of AI, could impact the competitive landscape for tech companies. The tension between innovation and regulation may create volatility in AI-related stocks as the market reacts to policy changes.

15:42
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Mythos is perceived as a highly powerful AI model, with some calling it a 'super weapon.'

Anthropic National Security Administration Pentagon Project Glasswing FEDFUNDS

– Anthropic is selectively granting access to Mythos based on cybersecurity concerns.

– The company faces criticism for its concentration of power in deciding who can use its technology.

– There is a growing tension between ethical considerations and the demand for advanced AI capabilities.

– The situation highlights the ongoing challenges in AI governance and regulation.

AI governancecybersecurityethical technology

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It was a particularly large jump. Some of the early companies that we gave this to said things like, 'this is a super weapon. You should have to own a gun license to use it. Please don't release this.' In an initiative called Project Glasswing, Anthropic gave select organizations access to Mythos. Even federal agencies like the National Security Administration clamored to use it, despite Anthropic's blacklisting by the Pentagon. I think the future is this kind of cat and mouse game, where we need to make sure that the good guys have the tools that they need to defend. And then at some point, the bad guys will have a tool, and at that point, we have to make sure the good guys have an even better model so they can be ready for this. Is it possible to stay ahead of the bad guys? Really though? That's what we hope. The criticism is you're effectively deciding who gets access and who doesn't. Why should anyone be comfortable with that kind of concentration of power? It wasn't like, 'oh, it's so powerful. And let's decide who gets the power.' It was a very specific concern around cybersecurity. And so the way that we decided who to give the model to was grounded in that specific fear. There's obviously nuance to decide, like, where do you draw that circle? I think that's really complicated. I think we've tried to be as publicly open as possible to say, 'we're trying our best to make this decision well.' But we might not do it perfectly. What about the folks who say this was just good marketing? You know, we have suffered enormously.

Analysis

Anthropic's new AI model, Mythos, has been described by early users as a 'super weapon,' raising concerns about its potential misuse. The company is navigating a complex landscape of cybersecurity and ethical considerations while selectively granting access to this powerful technology, even amidst its blacklisting by the Pentagon.

Smart money should note that Anthropic's approach to controlling access to Mythos reflects a broader trend in tech companies grappling with the implications of their innovations. The ongoing 'cat and mouse' dynamic between good and bad actors in AI development could lead to increased regulatory scrutiny and impact market valuations in the tech sector.

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