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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm deg Krisner. The

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Speaker 2: US equity market rose to record highs ahead of some

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Speaker 2: big tech earnings, and at the same time there appeared

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Speaker 2: to be some strong conviction on the FED cutting rates Wednesday,

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Speaker 2: but also telegraphing a lot more rate cuts in the future.

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Speaker 2: And all of this is happening while we have the

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Speaker 2: impending meeting between Presidents Trump and Chi on Thursday. For

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Speaker 2: a closer look at markets across the Asia Pacific, I'm

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Speaker 2: joined now by Bloomberg's Mark Cranfield. He is our M

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Speaker 2: Live strategist who joins from Singapore. Thanks for making time

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Speaker 2: to chat with me, Mark, I'm curious to get your

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Speaker 2: take on how you're reading the tape today and where

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Speaker 2: you're focused.

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Speaker 3: In several places. We start with Scott Bessant, who has

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Speaker 3: been joining Donald Trump on his Asian tour, and he

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Speaker 3: made some comments on social media today which are very

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Speaker 3: much directed towards the Bank of Japan and everything going

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Speaker 3: on to do with Japanese policy. So, although he was

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Speaker 3: trying to choose his words very carefully, talking about exchange

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Speaker 3: rates not being too volatile and essentially the Bank of

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Speaker 3: Japan being allowed to get on with its job. So

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Speaker 3: although he tried to avoid specifically saying that they should

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Speaker 3: hike interest rates, people know that from the past. Scott

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Speaker 3: Bessont has said that he thinks the Bank of Japan

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Speaker 3: is behind the curve in terms of raising interest rates.

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Speaker 3: So traders can read it pretty clearly. So the yen

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Speaker 3: is stronger, Japanese yields are higher. They see as clearly

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Speaker 3: trying to persuade Governor Uada that although an interest rate

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Speaker 3: change is not expected this week, there is a December

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Speaker 3: meeting to come, and people do think that it's an

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Speaker 3: opportunity when there's a press conference this week that Governor

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Speaker 3: Juada will use that time to prepare the markets that

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Speaker 3: interest rates are going to be raised before the end

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Speaker 3: of the year.

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Speaker 2: So do you find it curious that we've got the

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Speaker 2: en trading stronger against the dollar, We've got a one

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Speaker 2: fifty one handle right now, and yet Japanese equities are

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Speaker 2: extending into record territory.

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Speaker 3: There's a high concentration within the Japanese equities, and part

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Speaker 3: of it is the Nvidia AI story as well. So

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Speaker 3: we're getting a little bit like what you've seen in

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Speaker 3: the United States where a few very key mega tech

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Speaker 3: stocks are driving the Japanese market in a similar way

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Speaker 3: to what they are in the United States. So that

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Speaker 3: the breadth is not very good in the Nike right now,

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Speaker 3: and it's outperforming the Topics index by quite a way.

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Speaker 3: In some respects. That's not a healthy sign because it

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Speaker 3: could reverse quite quickly. But for the time being, nobody

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Speaker 3: wants to call the top in Japan for the same

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Speaker 3: kind of themes which are driving Korea, driving Taiwan, and

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Speaker 3: driving the US as well. People just love the AI story.

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Speaker 3: And when you have Nvidia going heading towards a five

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Speaker 3: trillion dollar market cap, then everybody else looks relatively cheap

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Speaker 3: in comparison.

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Speaker 2: Yeah. Right, So I'm wondering about whether or not we

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Speaker 2: really need to place BOJ policy in the context of

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Speaker 2: what's happening at the FED. I mean, we're expecting a

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Speaker 2: rate cut tomorrow Wednesday, US twenty five basis points. The

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Speaker 2: balance sheet may be a separate issue, but there is

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Speaker 2: the expectation that the FED is going to signal that

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Speaker 2: more rate cuts are on the way. So put that

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Speaker 2: kind of up against what the BOJ is dealing with.

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Speaker 3: Well, I think the balance sheet reduction one actually is

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Speaker 3: quite quite a big deal. If you get an interest

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Speaker 3: rate cut, you get relatively dubvish guidance. And at the

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Speaker 3: same time the Fed stopped or signals when it will

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Speaker 3: stop reducing its balance sheet, that's like an additional interest

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Speaker 3: rate cut. At the same time, if the BOJ this

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Speaker 3: week can sound a bit hawkish, those two together, it

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Speaker 3: would make sense to trade us to say, let's sell

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Speaker 3: dollars by yen, because that would be the clearest macro

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Speaker 3: trade to do. If you've got two central banks going

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Speaker 3: in opposite directions, it would play out most likely during

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Speaker 3: the foreign exchange rate. So by the end of this

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Speaker 3: week we could have the alarm bells ringing in the

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Speaker 3: foreign exchange market saying that Dolly yen clearly has downward momentum.

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Speaker 3: But we do need the Bank of Japan to fulfill

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Speaker 3: their part, and frequently they have disappointed. From that point

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Speaker 3: of view, Governor Wada has not always stepped up and

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Speaker 3: used an opportunity to prepare markets for an interest rate

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Speaker 3: hike when the door is wide open for him to

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Speaker 3: do so, and Scott Besson has given him a clear

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Speaker 3: opportunity here to prepare markets for a rate hike.

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Speaker 2: Let's turn our attention to this meeting of Presidents Trump

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Speaker 2: and she on Thursday. Earlier, the Wall Street Journal had

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Speaker 2: reported that the US would roll back some tariffs on

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Speaker 2: Chinese goods if Beijing were to crack down on the

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Speaker 2: export of chemicals that are involved in the production of fentanyl.

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Speaker 2: Is the market right now of the opinion that these

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Speaker 2: tariffs will be rolled back in the near term.

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Speaker 1: Yes.

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Speaker 3: I think people are going into it with a pretty

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Speaker 3: optimistic outlook. You can see that equity markets are doing well.

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Speaker 3: Currency markets are relatively benign. There's nothing much happening in

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Speaker 3: the US treasury market either. Everything is pointing towards the

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Speaker 3: fact that people assume this meeting will go through with

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Speaker 3: no major repercussions. There won't be a fallout. It will

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Speaker 3: generally be an agreement which people can see as taking

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Speaker 3: things a step forward. That's really the key from an

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Speaker 3: investor's point of view. It doesn't have to be dramatic.

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Speaker 3: There doesn't have to really be very big decisions made.

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Speaker 3: It just needs to move things slightly forward and not backwards.

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Speaker 3: The huge risk to financial markets globally is that somehow

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Speaker 3: presidents Trump and sea do not see eye to eye,

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Speaker 3: and they say that this meeting effectively was a waste

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Speaker 3: of time and we're going back to the drawing board.

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Speaker 3: Anything that any signaling to suggest that they can't agree

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Speaker 3: and they don't want to continue discussions. That will be

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Speaker 3: disastrous for financial markets because it is not priced in

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Speaker 3: at all. People have a blue sky scenario. They do

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Speaker 3: not see much downside.

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Speaker 2: Before I let you go, I want to talk about

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Speaker 2: inflation in Australia because we had a CPI print this

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Speaker 2: morning and next week it's the RBA decision. Where are

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Speaker 2: we right now in the inflation landscape there?

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Speaker 3: It came as a bit of a shock to people.

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Speaker 3: I think people were expecting a pretty much inline CPI number.

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Speaker 3: Came in much hotter than expected, particularly for the trimmed mean,

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Speaker 3: which is the one the Central Bank looks at the

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Speaker 3: most closely. There is zero chance of the RBA changing

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Speaker 3: interest rates next week, and the way things are going

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Speaker 3: it looks as they're going to be on hold for

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Speaker 3: a long way into the future. There was some expectation

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Speaker 3: that they could do one more interest rate cut. That's

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Speaker 3: really off the table now. This inflation data is way

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Speaker 3: too hot for the Central Bank to consider lowering interest

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Speaker 3: rates again.

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Speaker 2: Is it anomenally or is there a conviction in the

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Speaker 2: market maybe that this represents a new trend.

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Speaker 3: We had from the RBA speakers recently. They were warning

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Speaker 3: signs that they were a bit uncomfortable that some domestic

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Speaker 3: factors were pushing inflation a little bit higher. But even

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Speaker 3: for the RBA, this will probably be a slight surprise

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Speaker 3: how much higher it came in. So clearly whatever the

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Speaker 3: RBA was seeing in their private data, it's now coming

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Speaker 3: out into the public domain and people will be very

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Speaker 3: wary because this is a turning point. It's a very

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Speaker 3: good sign, of course for the Australian economy, but clearly

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Speaker 3: it means that if you're a bond trader, you've now

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Speaker 3: got to think much more hawkishly than you were before

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Speaker 3: today's numbers came out.

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Speaker 2: Mark will leave it there, Thank you so very much,

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Speaker 2: Mark Cranfield, Bloomberg's m Live strategists joining from Singapore here

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Speaker 2: on the Daybreak Asia podcast. Welcome back to the Debreak

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Speaker 2: Asia podcast. I'm Doug Prisner. So we had a rally

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Speaker 2: in the World's Big Text Talks in during the last

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Speaker 2: session and it sent the equity market to all time highs.

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Speaker 2: The cornerstone of this advance is the notion that AI

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Speaker 2: will keep driving earnings for this group the mag seven

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Speaker 2: Right today, we heard from Nvidia CEO Jensen Wong. He

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Speaker 2: said his company's latest chip, that would be the Blackwell processor,

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Speaker 2: is on track to generate a half trillion dollars in revenue.

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Speaker 4: Here'swong, we're going through a natural transition from an old

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Speaker 4: computing model based on general purpose computing to accelerated computing.

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Speaker 4: We also know that AI has now become good enough

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Speaker 4: because of reasoning capability, research capabilities, its ability to think.

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Speaker 4: It's now generating tokens and now generating intelligence that's worth

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Speaker 4: paying for.

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Speaker 2: In Vidia shares today we're up five percent, and if

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Speaker 2: you're wondering, this company now has a market cap of

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Speaker 2: more than four point eight trillion dollars. It shares, by

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Speaker 2: the way, our trading at forty four times forward earnings.

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Speaker 2: So Wednesday Thursday, this week in the States, we'll hear

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Speaker 2: from five big tech names, accounting for about twenty five

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Speaker 2: percent of the S and P five hundred we'll here

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Speaker 2: on Wednesday, from Microsoft, Alphabet Meta, Thursday, it's Apple and Amazon.

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Speaker 2: Let's take a closer look now at what we might learn.

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Speaker 2: Scott Ladner joins us. Scott is the chief investment officer

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Speaker 2: at Horizon. Scott's on the line from Charlotte, North Carolina.

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Speaker 2: Thank you, sir for making time to chat with me.

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Speaker 2: I think the big question here when it comes to

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Speaker 2: mega cap tech is whether the money that we have

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Speaker 2: seen spent on capex, and we're talking billions here, whether

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Speaker 2: it's really ultimately going to pay off?

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Speaker 1: What do you think, Yeah, Doug, and this sounds weird,

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Speaker 1: but the billions might not be the right number of

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Speaker 1: zeros to add onto this. So like we're probably talking

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Speaker 1: in the trillions here. Look like if you listen to Jensen,

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Speaker 1: his number is he thinks there's about a five trillion

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Speaker 1: dollar CAPEX spend to get AI really sort of operational

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Speaker 1: throughout the economy globally. And that's you know, like that

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Speaker 1: is as rare as a sounds, Doug, like, that's actually

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Speaker 1: maybe reasonable. And and so you know that that is

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Speaker 1: honestly driving like all sorts of you know, not only

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Speaker 1: kind of infrastructure plays inside the market, but it is

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Speaker 1: you know, it is driving earnings across a broad swat,

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Speaker 1: you know, not only in the AI companies and hyper

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Speaker 1: scalers and then the ship guys. But you know, you

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Speaker 1: know these things are going to have not con effects

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Speaker 1: to to other industries. You know, eventually, we're not We're

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Speaker 1: not there today. But but but this is its capex

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Speaker 1: cycle related to not only AI, but but sort of

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Speaker 1: you know, more and more broad is probably one of

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Speaker 1: the driving forces for the market. We think, not not

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Speaker 1: only for the rest of this year, but most of

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Speaker 1: point to my six as well.

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Speaker 2: So we spoke to Jensen on the sidelines for the

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Speaker 2: company's presentation today in Washington, d C. And one of

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Speaker 2: the questions that our reporter asked was, where are we

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Speaker 2: in an a I bubble? First of all, is that

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Speaker 2: a fair term to use? Can we talk about the

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Speaker 2: possibility that we're in a bubble?

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Speaker 1: Nope, We're not there. Look, I think I think we

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Speaker 1: can talk about the possibility and maybe even the probability

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Speaker 1: that this thing ends in a bubble. You know, like

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Speaker 1: you know, transformed of technol algy does tend to end

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Speaker 1: in manias. We've seen this over and over again, you know,

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Speaker 1: especially in the United States over the last hundred hundred

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Speaker 1: fifty years.

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Speaker 4: Uh.

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Speaker 1: But but but but to call is a bubble today,

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Speaker 1: I think is just as you know it does. You know,

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Speaker 1: it's not probably appreciative of how much money these guys

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Speaker 1: make and and and and sort of like what what

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Speaker 1: the valuations are on some of the companies that that

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Speaker 1: if you talk of my bubble, you have to start

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Speaker 1: talking about which companies are we are we speaking of?

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Speaker 1: And and and the ones really that that folks tend

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Speaker 1: to point to have multiples that are sort of reasonable

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Speaker 1: based on they're are just astronomical growth rates and and there,

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Speaker 1: and they're astronomical revenue projections and and then revenue project

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Speaker 1: not only projections but revenue uh sort of compounding that

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Speaker 1: they've been able to deliver over the last five years.

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Speaker 1: And so you know, I do think this thing probably

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Speaker 1: ends there. But but the call of that today is

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Speaker 1: probably you know, it's probably not a fair characterization.

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Speaker 2: So I mentioned a moment ago Scott that in video

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Speaker 2: right now is trading a forty four times forward earnings.

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Speaker 2: That doesn't concern you.

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Speaker 1: It's look, I'm not I'm not saying and I s

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Speaker 1: should I should probably preface this, Doug like I'm not

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Speaker 1: saying any any individual name I might not be in

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Speaker 1: bubble and Nvidia specifically is one that we should we

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Speaker 1: should probably worry about some because you know, their valuation

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Speaker 1: is based on the mote the mooteness of their of

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Speaker 1: their particularly AI chip and it and all it takes

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Speaker 1: is you know, look what we said we saw and

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Speaker 1: in deep Seek when that got announced, and you know,

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Speaker 1: like it didn't really react to the to the qualk

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Speaker 1: on news earlier this week, you know, wh where they're

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Speaker 1: saying maybe they have a chip that compete with with Nvidia,

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Speaker 1: but at some point somebody's going to figure out how

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Speaker 1: to how to make a ship that really really competes

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Speaker 1: with Nvidia. And then and then you know, we do

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Speaker 1: have valuations questions about in video specifically, but but the

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Speaker 1: group written large, I think there's there's still quite a

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Speaker 1: long way to go.

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Speaker 2: So let's change gears, move away from earnings, talk about

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Speaker 2: the FED because we have a decision on Wednesday afternoon

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Speaker 2: here in the States. What are your expectations? House view

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Speaker 2: is quarter point, right, yeah, house.

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Speaker 1: Fews quore point and and it's pretty look, that's that's

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Speaker 1: a pretty solid house view. I mean, it would be

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Speaker 1: absolutely shocking for them to do anything outside of that.

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Speaker 1: And because the we know the FED doesn't like to

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Speaker 1: surprise markets. Uh, they've been selling the markets up for

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Speaker 1: for the twenty five basis point cut and and probably

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Speaker 1: another one like as we come into December as well.

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Speaker 1: That's that's almost FATA completely, Like that's not really where

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Speaker 1: the interest lays in the meeting this week, Really, what

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Speaker 1: folks are gonna be looking for, Doug is going to

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Speaker 1: be more talk around you know, are we are we

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Speaker 1: doing QTS quantitative tightening program? Is that is this finally

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Speaker 1: has this finally come to an end? As you know,

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Speaker 1: we've got got the end of this cycle. But as

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Speaker 1: we think the answer that is likely yes, we think

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Speaker 1: that you know, the sort of just the risk rewards

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Speaker 1: framework that the that the FED tends to operate in

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Speaker 1: is sort of a risk minimizing framework, and we are

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Speaker 1: getting you know, towards levels in the repo market. Uh

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Speaker 1: that that's you know, that that should you're not concerning yet.

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Speaker 1: But but they don't want to They don't want to

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Speaker 1: fly too close to the to the sun again like

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Speaker 1: they did in twenty eighteen and risk sort of money

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Speaker 1: market troubles and sort of the function of the financial

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Speaker 1: system troubles. So it probably makes sense for us to

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Speaker 1: get to n QT. We think that's the announced that

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Speaker 1: that that's the announcement we're going to get. And even

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Speaker 1: though that should not really be bullish of risk assets

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Speaker 1: are or anything like that, we think the market actually

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Speaker 1: may react in a bullish way on the back of that.

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Speaker 2: So at the same time, we had recently a couple

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Speaker 2: of difficulties, let me put it politely, in the credit

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Speaker 2: market space, a couple of blow ups there. It's kind

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Speaker 2: of interesting that you get those types of situations in

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Speaker 2: an environment where interest rates are declining. What does that

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Speaker 2: say to you?

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Speaker 1: Well, I mean it says that people can still make

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Speaker 1: mistakes and it's and there are still going to be

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Speaker 1: like individual credits, individual companies that do things that are

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Speaker 1: someone into various or they lie or they you know,

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Speaker 1: the high debt I mean know these particular instances were

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Speaker 1: you know, look like companies just doing just bad actors,

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Speaker 1: like like guys doing bad stuff. You know what, it

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Speaker 1: does not seem like it is is endemic to any

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Speaker 1: sort of like systematic issue inside of markets. And look,

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Speaker 1: dugg it's it's really hard as you know, as you know,

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Speaker 1: you and all of our listeners know, it's really tough

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Speaker 1: to get a systematic credits event when the economy is

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Speaker 1: is bumping along at five or six percent nomenal GDP

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Speaker 1: growth without frankly a whole lot of private leverage in

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Speaker 1: the system. And so you know, we we we are

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Speaker 1: you know, look, we're paying attention to this stuff. We

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Speaker 1: think it could crop up. And you know, it's certainly

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Speaker 1: in some some some of the private markets. Uh, they

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Speaker 1: probably living with warriors in the public markets, but it's

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Speaker 1: not you know, this is not sort of any systematic

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Speaker 1: issues that we're really worried about because the underlying economy

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Speaker 1: is still prayde aren't strong.

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Speaker 2: Value is such a tricky term to use. Is there

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Speaker 2: any left in the market right now? Do you think defined?

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Speaker 1: Yeah, look, if if you get you know, I think yes,

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Speaker 1: as odds of sounds with you know, with valuations quote

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Speaker 1: unquote where the as expensive. We don't actually think valuations

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Speaker 1: are that expensive. We think valuations are fair where we

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Speaker 1: are now because we we think we are on the

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Speaker 1: cost of one of these productivity booms. And if we are,

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Speaker 1: then the sort of the natural rate of growth and

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Speaker 1: sort of the inherent rate of growth in the economy

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Speaker 1: is going to be boosted by hundred, one hundred and

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Speaker 1: fifty basis points over the next five to ten years.

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Speaker 1: And that, you know, and that changes everything because the

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Speaker 1: compounding effect of a of a you know, a meaningful

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Speaker 1: boost to growth inside this country and really globally probably

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Speaker 1: it means that you are going to get higher, high revenue,

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Speaker 1: higher sales, higher earnings than anybody who's really has in

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Speaker 1: their discounting models. That means that you know, what you

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Speaker 1: think is a twenty two D today may end up

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Speaker 1: being when we actually realize it ain being at fifteen

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Speaker 1: or sixteen. And but you know that is predicated upon

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Speaker 1: the idea that we are going to get faster than

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Speaker 1: typical growth based on productivity shifts emanating out of the

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Speaker 1: AI technology. But you know, so look there's a daily

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Speaker 1: chain of logic there that had to end up kind

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Speaker 1: of working through the system. But if that's right, you know,

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Speaker 1: this is not a this non expensive market. This is

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Speaker 1: a you know, a fairly value market.

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Speaker 2: So as we're speaking, I'm looking at gold just under

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Speaker 2: four grand I mean, we had record highs I think

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Speaker 2: last week, and I'm wondering how you're making sense of

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Speaker 2: volatility lately. But a high gold price like that four

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Speaker 2: thousand dollars announced has to tell you that people are

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Speaker 2: concerned about something. I mean, that's kind of what the

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Speaker 2: old school playbook would tell us, right, Is that not

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Speaker 2: the case? Our gold investors worried about something that we

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Speaker 2: need to kind of discuss a little.

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Speaker 1: Bit if we're going to do the read through on

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Speaker 1: gold prices to some sort of systematic risk of that,

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Speaker 1: like you you would want to see that come up

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Speaker 1: in other asset classes as well. Like so you know,

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Speaker 1: everybody's talking about you know, you know, gold and silver,

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Speaker 1: and you know, sort of the metals as being sort

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Speaker 1: of like the first step on it kind of kind

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Speaker 1: of like debasement trade or like you know, we don't

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Speaker 1: we don't trust and debasement trades. Let's base it are

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Speaker 1: just we don't trust government, you know, like we don't

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Speaker 1: trust you guys anymore. You know, we saw it in

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Speaker 1: the UK with the list trust experiments where they're you know,

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Speaker 1: both their bonds and their currency sell off simultaneously. That's

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Speaker 1: the kind of activity you would get in markets if

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Speaker 1: it is true the basement trade, where markets say I

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Speaker 1: don't believe you anymore, I don't trust you, I don't

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Speaker 1: want to have hold your stuff. I only trust something

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Speaker 1: like gold or silver or something like that. You know,

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Speaker 1: the fact that we didn't get a selloff in US traguri,

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Speaker 1: which is the biggest asset class in the world, associated

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Speaker 1: with the simultaneous rise in gold and silver prices, you know,

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Speaker 1: doesn't exactly lend credence to the debasement idea. We didn't

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Speaker 1: see a broad based sell off of the dollar that

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Speaker 1: also does not lead lend freezes to the bit to

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Speaker 1: the debasement idea. And we saw bitcoin actually sell off

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Speaker 1: a sort at the same time or at least go

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Speaker 1: sideways while gold was skyrocketing. And so I'm not sure

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Speaker 1: to read through from the from the kind of the

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Speaker 1: sky rocking gold price should be you were worried about

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Speaker 1: something in the macroconda or worried about debasement sort of

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Speaker 1: sort of activities. I think it may be as sort

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Speaker 1: of simple as you know, probably two things. You know, One,

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Speaker 1: there is definitely extra central bank demand for gold right now,

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Speaker 1: Like that is, you know, we can look we can

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Speaker 1: look at center bank balances and see that they are

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Speaker 1: there's a little bit of extra buying activity there. And

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Speaker 1: then just the momentum drake. So you know, we do

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Speaker 1: get retail investors. You do get sort of momentum. Trators

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Speaker 1: come in when you have such an explosive moved one

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Speaker 1: way or the other. And so we do think that

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Speaker 1: is you know, those two things are probably playing at hand.

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Speaker 1: Just don't think it was anything really that was sort

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Speaker 1: of evil lurking underneath the system. Uh, you know, we

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Speaker 1: don't think the goal price rises was telling us anything

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Speaker 1: about that really.

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Speaker 2: Okay, Scott, good stuff, Thanks so much. We'll leave it there.

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Speaker 2: Scott Ladner is chief investment Officer at Horizon, joining from Charlotte,

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Speaker 2: North Carolina here on the Daybreak as your podcast. Thanks

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Speaker 2: for listening to today's episode of the Bloomberg Daybreak Asia

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Speaker 2: Edition podcast. Each weekday, we look at the story shaping markets, finance,

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Speaker 2: and geopolitics in the Asia Pacific. You can find us

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Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 2: else you listen. Join us again tomorrow for insight on

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Speaker 2: the market moves from Hong Kong to Singapore and Australia.

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Speaker 2: I'm Doug Prisner, and this is Bloomberg