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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Bloomberg

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Speaker 1: Daybreak Asia Podcast. I'm Doug Chrisner. There was a burst

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Speaker 1: of relief in the equity market state side on reports

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Speaker 1: that President Trump would sign an executive order to ease

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Speaker 1: tariffs for the auto industry, and this morning the tone

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Speaker 1: in the Asia Pacific seems to be mildly positive. In

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Speaker 1: a moment, we'll look at the market action with our

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Speaker 1: friend Mary Nicola, Bloomberg Market Live strategist in Singapore, and

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Speaker 1: a bit later we'll preview tomorrow's mag seven earnings with

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Speaker 1: David Nicholson. He is the chief research officer at Futurum Group.

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Speaker 1: But we begin this morning in the US state of Michigan.

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Speaker 1: President Trump spoke at a rally late Tuesday to mark

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Speaker 1: his first one hundred days in office for his second term.

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Speaker 2: They're coming from India, They're coming from France, They're coming

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Speaker 2: from Spain. Yeah, they're coming from China to Yeah, they're

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Speaker 2: coming from China. They're coming from all over the world

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Speaker 2: to see you. President. They want to make a deal.

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Speaker 2: They want to make a deal, and you know, we'll

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Speaker 2: make deals, but we don't have to. We are the

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Speaker 2: ones that have the product. We are the ones at

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Speaker 2: the United States. They want a piece of our product,

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Speaker 2: we can just set the price. But I want to

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Speaker 2: be respectful and I want to be nice.

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Speaker 1: For a little bit of analysis, let's bring in Joe Matthew.

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Speaker 1: He is co host of Bloomberg's Balance of Power. Joe's

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Speaker 1: on the line from Washington, DC. Thank you so much

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Speaker 1: for making time. I'm sure it's been a busy day.

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Speaker 1: Can you summarize what we heard this evening from the

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Speaker 1: President and try to make sense of this?

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Speaker 3: Well, I'll tell you what. I don't know if I

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Speaker 3: can do both of those for you, Doug, but I'll try.

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Speaker 3: The White House frame this as an achievement speech, one

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Speaker 3: hundred days of greatness, read the signs. But I have

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Speaker 3: to tell you we heard a lot about the same

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Speaker 3: issues that we did on the campaign, Trill. This was

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Speaker 3: largely a campaign style rally, as he did refer to

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Speaker 3: Democrats cheating on the election, which is an allegation we

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Speaker 3: cannot support. He talked about it, even set the border,

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Speaker 3: and he did get into inflation in prices, got into

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Speaker 3: tariffs and trade. Doug spoke about j Powell and said

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Speaker 3: about the Fed Shore you're not supposed to criticize him.

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Speaker 3: Let him do his own thing. But I know much

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Speaker 3: more than he does about interest rates. It sounds like

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Speaker 3: an emboldened Donald Trump who really missed being on the

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Speaker 3: trail stop.

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Speaker 1: I'm going to go out on a limb here and

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Speaker 1: say that underneath a lot of the words that we

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Speaker 1: heard from the president this sense that he is painfully aware,

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Speaker 1: well aware of the level of disapproval on some of

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Speaker 1: his economic policy. And I think center stage is obviously

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Speaker 1: the story on tariffs. Is that a fair statement?

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Speaker 3: Sure? Although he did address the polling, he said it's

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Speaker 3: the result of bad polling by crooked people who interview

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Speaker 3: more Democrats than Republicans. We of course see the sampling

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Speaker 3: that these pollsters use, and they don't call more Democrats

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Speaker 3: than Republicans, and frequently even put a curve on numbers

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Speaker 3: to make up for bias when it comes to political standing.

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Speaker 3: So this is a White House and a president's very

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Speaker 3: familiar with the approval ratings. They don't always believe what

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Speaker 3: they are saying, but they do believe that in the

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Speaker 3: second half of this year, with trade policies in place,

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Speaker 3: trade deals in place, that we could see growth that

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Speaker 3: we're not enjoying right now, Doug. The juries out on that,

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Speaker 3: with the front loading that we've been seeing in the

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Speaker 3: front running ahead of tariffs, we could be well talking

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Speaker 3: about a GDP contraction tomorrow morning and continued declines as

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Speaker 3: we work our way through the year.

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Speaker 1: It's very interesting you mentioned the commentary around the Fed chairman,

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Speaker 1: but very little in the way of discussions about the

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Speaker 1: volatility in the stock market.

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Speaker 3: Isn't that true? And something tells me that if we

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Speaker 3: were at all time highs, we would be hearing about that.

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Speaker 3: It's an issue that the president, of course obsessed over

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Speaker 3: the markets in his first term and has really turned

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Speaker 3: away from. He said recently in Washington, Doug almost like

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Speaker 3: it was a different person that he's more concerned about

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Speaker 3: Main Street than Wall Street. Whether or not he believes

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Speaker 3: that is another question. We certainly did not hear about

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Speaker 3: stocks and bonds tonight.

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Speaker 1: So obviously, for the mission and economy, it's very much

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Speaker 1: tied to the auto industry. And earlier in the day

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Speaker 1: the President did sign some directives aimed and easing the

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Speaker 1: impact of these tariffs. Did he talk a lot about manufacturing?

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Speaker 3: Look, it was one of many issues that he brought up.

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Speaker 3: He didn't dwell on anything, and he was really doing

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Speaker 3: the so called weave. He would talk about something for

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Speaker 3: maybe a minute or two and go on to something else,

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Speaker 3: but did speak to the auto sector. He said that

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Speaker 3: the industry would be slaughtered if he did not reshore manufacturing,

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Speaker 3: which of course he's trying to do. And he was

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Speaker 3: there to promote this new idea of getting relief to

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Speaker 3: the Big three by not stacking multiple tariffs on top

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Speaker 3: of one another. He had a lot of automakers in

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Speaker 3: that room, Doug, the hard hats. They loved the idea

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Speaker 3: of tariffs. Not the same as you would hear in

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Speaker 3: the C suites when you talk to Jim Farley or

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Speaker 3: Mary Bara, as we have on Bloomberg. They are deeply

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Speaker 3: concerned about what this will mean for their business.

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Speaker 1: Before I let you go very quickly, Joe, does this

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Speaker 1: kind of segue into the tax bill at any rate

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Speaker 1: here in the near.

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Speaker 3: Term, Oh, big time, Doug. You're putting your finger on

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Speaker 3: the real news here. We're not going to get announcements

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Speaker 3: on trade deals anytime soon. So what starts tomorrow There

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Speaker 3: is the process of marking up the legislation on the

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Speaker 3: committee level, that will fulfill that reconciliation build. I need

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Speaker 3: to get the budget component done here, tax cuts, and

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Speaker 3: then try to put them all together for a vote.

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Speaker 3: They say that will take place by the fourth of July.

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Speaker 1: Joe, thank you so much. It's always a pleasure. That's

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Speaker 1: Joe Matthew, co host of Bloomberg's Balance of Power. So

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Speaker 1: let's get to the market action in the Asia Pacific.

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Speaker 1: Joining me now is Mary Nicola, Bloomberg Markets Live strategist,

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Speaker 1: Mary joining from our radio studio in Singapore. I'm sure

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Speaker 1: it's been a busy day for you. It certainly has

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Speaker 1: been here in New York. And one of the things

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Speaker 1: that I've been sifting through a lot of the corporate

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Speaker 1: results that we have been getting, many companies have withdrawn

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Speaker 1: their outlooks given a lot of the uncertainty that you

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Speaker 1: and I have spoken about, given the impact of the

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Speaker 1: trade war. Is this something that's also kind of happening

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Speaker 1: across the Asia Pacific? Just there is so much uncertainty

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Speaker 1: right now, it's difficult to formulate an outlook.

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Speaker 4: Yeah.

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Speaker 5: Absolutely. I think right now the pressure on these companies

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Speaker 5: is greater than ever because if we look at some

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Speaker 5: of the trade deals that are coming through, obviously, they're

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Speaker 5: going to take time. So even US Treasury Secretary Scott

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Speaker 5: Bissent had mentioned that, you know, you could see trade

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Speaker 5: deals and some agreements of understanding as soon as this

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Speaker 5: week with the likes of Korea Japan. But the reality

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Speaker 5: is that these trade deals do take time, and if

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Speaker 5: we look at some of the FTA negotiations over the years,

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Speaker 5: they take several years to really come through. So looking

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Speaker 5: for a quick win is not something that these companies

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Speaker 5: really expect. So as a result, you're going to have

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Speaker 5: a lot of uncertainty tensions that are ratcheting up between

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Speaker 5: the US and China, and that's not abating anytime soon.

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Speaker 5: So of course, yes, you're seeing good earnings results, but

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Speaker 5: the fact that the outlooks are just completely murky just

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Speaker 5: lays a very thick cloud over a sustainable equity rally.

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Speaker 1: Well, you're kind of suggesting that there are some negotiations

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Speaker 1: happening at least a conversation going on between Washington and

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Speaker 1: many other countries right now, but absent is a conversation

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Speaker 1: between Washington and Beijing. It was an interesting story, and

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Speaker 1: I'm sure you saw it on the Bloomberg terminal talking

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Speaker 1: about this new nationalism that is building in China where

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Speaker 1: it seems as though people are supporting President she and

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Speaker 1: digging in their heels and fighting back against President Trump.

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Speaker 4: Yeah.

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Speaker 5: Absolutely, some of the story that you were talking about.

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Speaker 5: The suggestion was that if they give in, that they're

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Speaker 5: going to want a little bit too much and how

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Speaker 5: far could it potentially go. So as a result, China's

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Speaker 5: going to hold its ground because at the end of

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Speaker 5: the day, these two are the two largest economies in

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Speaker 5: the world, so obviously they both have leverage over each other.

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Speaker 5: It's not like one is in a much weaker position

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Speaker 5: than the other. Let's say, for a lot of smaller

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Speaker 5: open economies in the region, for the likes of Korea,

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Speaker 5: for example, the US probably has the up hand as

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Speaker 5: a result of its larger market. But if you look

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Speaker 5: at China, China is in just as a strong position

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Speaker 5: as the US, So it is being a little bit

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Speaker 5: stronger in its words against the US, and of course

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Speaker 5: it's ready to dip in its toolbox if necessary to

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Speaker 5: keep growth going. And you can tell how they're how

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Speaker 5: they're going about in terms of their their stimulus. I

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Speaker 5: think investors will get eventually frustrated if you start seeing

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Speaker 5: the numbers not coming through, and then the stimulus is

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Speaker 5: not happening, and I think you'll see a cautious, a

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Speaker 5: more cautious weary tone, especially from foreign investors on how

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Speaker 5: far the China stocks will will rally. But at the

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Speaker 5: end of the day, it's that tensions between the two

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Speaker 5: nations that's going to really weigh on sentiments.

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Speaker 1: So talk to me about the Chinese markets right now

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Speaker 1: as we walk up to it. I think is a

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Speaker 1: three day holiday, right it's the Labor Day holiday.

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Speaker 5: Yes, so markets are closed Saursday, Friday, and then also

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Speaker 5: on Monday. And what you're likely to see is just

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Speaker 5: more tepid, muted price action, largely because of the fact

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Speaker 5: that there are so many headwinds along the way. So

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Speaker 5: you've got your tech earnings from the US coming through,

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Speaker 5: you have the US labor market report as well, but

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Speaker 5: also all these headlines coming out, you still have headline risks.

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Speaker 5: So no matter what is going on in terms of

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Speaker 5: on the data front, you always have headline risk looming.

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Speaker 5: And that's sort of the new era that we're now in.

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Speaker 5: So as a result, I think a lot of investors

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Speaker 5: are going to be pairing back squaring their positions not

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Speaker 5: really getting ahead of their themselves, and conviction out there

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Speaker 5: is a little bit wary. Sure, positive headlines are great

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Speaker 5: in terms of fueling the equity rally, but it's more

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Speaker 5: about a sustainable, more convincing rally that really hasn't come

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Speaker 5: through and is unlikely to come through given the amount

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Speaker 5: of headwinds that we have in the upcoming days.

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Speaker 1: So in the next week, I know we have the

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Speaker 1: Chinese inflation data, the official readings. What type of data

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Speaker 1: points have you been looking at for the Chinese economy

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Speaker 1: right now that may help us understand what's going on

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Speaker 1: in the macro.

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Speaker 5: Yeah, So the pmis today, I think are absolutely critical,

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Speaker 5: and we have both the I believe we have both

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Speaker 5: the official pmis and the Kaishin pmis, and those are

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Speaker 5: really setting the stage of how businesses are thinking, how

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Speaker 5: businesses are reacting to the trade, because we know in

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Speaker 5: Q one we had strong numbers because there was a

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Speaker 5: lot of front loading. Now you're looking at Okay, now

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Speaker 5: front loading isn't happening. We've seen the impact of the

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Speaker 5: tariffs are now coming through now that the tariffs have

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Speaker 5: been have been imposed, and of course we've seen container

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Speaker 5: and freight traffic collapse to the United States, and that's

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Speaker 5: been indicative of where things are going in terms of

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Speaker 5: between trade between the US and China. So I think

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Speaker 5: PMIS will be absolutely critical in terms of how sentiment

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Speaker 5: is moving. But of course CPI in the sense of

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Speaker 5: we've seen a inflation deflation coming through in the economy

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Speaker 5: and how how much worse does it get?

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Speaker 1: Mary, is it your sense that when you look at

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Speaker 1: the way that the US is going about negotiating these

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Speaker 1: trade deals with other countries in the APAC, that the

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Speaker 1: Trump team is really trying to create a unified front

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Speaker 1: against China and box China in a little bit. And

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Speaker 1: maybe that's one of the reasons why Beijing is fighting

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Speaker 1: so fiercely against this type of control.

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Speaker 5: I mean, that's the headlines and that's what they're suggesting.

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Speaker 5: So some of the comments from Scott Descent has been

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Speaker 5: exactly that, in terms of they want Asian nations to

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Speaker 5: work together so that they can box in China and

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Speaker 5: isolate China. But meanwhile you've got China going on a

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Speaker 5: charm offensive. So I think it was last week or

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Speaker 5: the week before where President Jijinping was traveling through Southeast

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Speaker 5: Asia and on the charm offense of saying that we

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Speaker 5: need to work together. So they're coming out and saying

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Speaker 5: that we still need to work within the rule B

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Speaker 5: system and the system that everyone knows, rather than taking

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Speaker 5: on a very different approach. I think either way, it

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Speaker 5: just puts these economies in a huge predicament because of

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Speaker 5: the fact that for a lot of them, it's China

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Speaker 5: that's the main trading partner, especially with the likes of

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Speaker 5: let's say Malaysia and the region and other countries, so

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Speaker 5: it's really hard for them to choose sides at this point.

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Speaker 1: Mary, thank you so much. Enjoy the weekend. If I

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Speaker 1: don't talk to you beforehand, Mary Nicola. There Bloomberg Markets

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Speaker 1: Live Strategists joining from Singapore here on the Daybreak Asia podcast.

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Speaker 1: Welcome back to the Daybreak Asia Podcast. I'm Doug Krisner.

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Speaker 1: So we are gearing up for earnings from four of

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Speaker 1: the Max seven companies over the next forty eight hours,

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Speaker 1: and if you add Broadcom to the mix, you have

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Speaker 1: the collective that future on group calls the eight aces.

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Speaker 1: Joining me now for a preview of these numbers is

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Speaker 1: David Nicholson. He is chief re search Officer at future. David,

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Speaker 1: thank you for making time to chat with us. So

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Speaker 1: much of the conversation in markets these days has been

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Speaker 1: around the impact of tariffs. We get that. Is it

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Speaker 1: likely to show up in anything that we're going to

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Speaker 1: hear from any of the mag seven members this week?

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Speaker 4: I think so. I think it's based it's sort of

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Speaker 4: baked in implicitly though, and it's based on the unknown

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Speaker 4: and the chaos that is before us. So I would say,

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Speaker 4: minus tariffs, everyone would be reporting better guidance, likely better results.

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Speaker 4: So I think all of the chaos associated with tariffs

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Speaker 4: is a headwind. It's just nearly impossible to figure out

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Speaker 4: exactly how much that will impact each of these companies.

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Speaker 1: So is it really a lack of confidence in the

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Speaker 1: c suite and very little in the way of visibility

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Speaker 1: that can drive the outlook.

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Speaker 4: One hundred percent? Look take a step back. Seventy percent

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Speaker 4: of the US economy is driven by consumer spending. The

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Speaker 4: number one driver of consumer spending is consumer sentiment, and

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Speaker 4: we're seeing declining consumer sentiment numbers because people don't like chaos.

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Speaker 4: People don't like being concerned about losing their jobs, people

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Speaker 4: don't like people don't like not knowing what things are

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Speaker 4: going to cost in the future. Do you race out

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Speaker 4: and buy that new iPhone today for fear that something

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Speaker 4: will change. Chaos is not good and we're essentially watching

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Speaker 4: economic sausage being made and it's a bloody affair. It's

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Speaker 4: not good for anyone, not for consumers, not for the

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Speaker 4: C suite.

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Speaker 1: So to what extent are we going to hear from

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Speaker 1: these companies increases in cap X spending that are really

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Speaker 1: aimed at satisfying demands from the Trump administration that corporations,

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Speaker 1: big corporations in particular invest more in the American economy.

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Speaker 4: I think we'll continue to see those moves. We'll hear

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Speaker 4: those things. A bit of it will be for show.

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Speaker 4: There are instances way where investments in data center infrastructure

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Speaker 4: and the like have already been planned. But whenever you

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Speaker 4: can get credit for investing in the US, you will.

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Speaker 4: I think it's impossible to deny that we are in

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Speaker 4: a global economy. There's nothing that we can do to

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Speaker 4: reverse that. And really the whole tariff question I think

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Speaker 4: will be settled in the next three to six months,

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Speaker 4: where I hope we can get to a reasonable insane

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Speaker 4: trade policy.

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Speaker 1: So we heard from super Micro computer After the closing

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Speaker 1: build a company reported preliminary adjusted earnings for the latest

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Speaker 1: quarter well below expectations, and super Micro was saying that

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Speaker 1: some customers have delayed their decisions. Is this something that's

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Speaker 1: going to be a part of the narrative that the

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Speaker 1: customers that these companies serve that we'll hear from this

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Speaker 1: week still have a customer base that's pretty fragile.

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Speaker 4: I believe that there is, I wouldn't really call it fragility,

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Speaker 4: and frankly, frankly, I think that tariffs will be used

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Speaker 4: as a bit of an excuse for a lot of

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Speaker 4: these companies, when the real reason is that the answer

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Speaker 4: to the question AI r O I WTF question Mark

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Speaker 4: just haven't gotten there yet. And I think that we're

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Speaker 4: that there is a pent up demand for show me

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Speaker 4: how I can make money with AI. There's been a

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Speaker 4: lot of frontloaded investment, a lot of expectations that AI

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Speaker 4: will deliver us from all of our prior monetary sins

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Speaker 4: as an example, and those things will come over time.

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Speaker 4: But there, you know, we sense a rising level of

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Speaker 4: anxiety around this idea of the value of AI needing

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Speaker 4: to be proven at the street level. And I think

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Speaker 4: tariffs will be used as sort of an excuse to

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Speaker 4: mask that larger fear. That's that's a subcurrent.

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Speaker 1: So we also heard from Snap now the company beat

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Speaker 1: estimates for the revenue side in the first quarter, but

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Speaker 1: in terms of the outlook they decline to issue a

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Speaker 1: sales forecast for the current period because of macroeconomic headwinds

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Speaker 1: affecting the company's AD business. Now, for a company like

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Speaker 1: Meta that we will hear from this week, also looking

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Speaker 1: to the ad business as a primary revenue driver, does

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Speaker 1: that same thing? Could that same thing hold true macroeconomic

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Speaker 1: uncertainty or macroeconomic headwinds.

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Speaker 4: Frankly, I think that's a fair thing to hang your

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Speaker 4: hat on to say, hey, look, it would be disingenuous

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Speaker 4: to make to tight a prediction in the face of

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Speaker 4: such uncertainty. However, I'm not sure that I don't think

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Speaker 4: Meda can get away with it. The good news for

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Speaker 4: Meta is, at least based on what we've recently seen

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Speaker 4: from Alphabet, from Google Ads, the impact that this has

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Speaker 4: all had on AD revenues has it been as bad

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Speaker 4: as maybe we would have expected. So I don't think

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Speaker 4: medic can get away with the same idea of Hey,

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Speaker 4: We're not going to issue guidance based on chaos, but

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Speaker 4: I think actually that's a reasonable thing to assert as

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Speaker 4: the stage of the game.

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Speaker 1: So I want to get your reaction to news that

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Speaker 1: we had today from Meta Platforms, the release of a

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Speaker 1: news standalone AI app, Meta Ai. This is aimed at

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Speaker 1: competing with a chatbot like open AI's chat gpt. Is

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Speaker 1: this something that the company potentially has the ability to

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Speaker 1: really put out in force. Given the fact that Meta's

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Speaker 1: tentacles seem to cover so much of the social media landscape,

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Speaker 1: do they have an inherent competitive advantage?

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Speaker 4: I think they're starting from a position of strength. I

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Speaker 4: still think that Apple has the greatest inherent advantage in

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Speaker 4: this space. And if the game is And by the way,

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Speaker 4: what Meta is doing right now with their Lama con

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Speaker 4: having a developer's conference to foster unity and community in

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Speaker 4: this space, to create an eco system, to create a

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Speaker 4: platform that will that people will gravitate to. That's something

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Speaker 4: that Microsoft is doing. It's something that Aws and Amazon

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Speaker 4: are doing, It's something that Apple is doing. So the

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Speaker 4: sort of clash of the titans there is it remains

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Speaker 4: to be seen who will be successful. I would I

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Speaker 4: would put Meta at middle of the pack in that race.

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Speaker 4: I would say that that arguably Google slash Alphabet is

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Speaker 4: a bit more well positioned withy Gemini two point five.

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Speaker 4: And I think that Apple will be the quiet dark

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Speaker 4: horse that will get a lot of criticism over the

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Speaker 4: next year or so, but I think that they will

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Speaker 4: emerge looking very very well in the future.

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Speaker 1: So how do you understand regulatory risk in the current environment,

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Speaker 1: the possible breakup or of a company like Alphabet or

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Speaker 1: even Meta where certain assets have to be spun off.

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Speaker 1: Is that something that you're considering or do you feel

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Speaker 1: as though these companies will will avoid that type of outcome.

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Speaker 4: It's very very real. It's something to be taken seriously.

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Speaker 4: But that is a bit of a nuclear option. You know,

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Speaker 4: we historically we've seen things with and if you go

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Speaker 4: back to the to AT and T and the Baby

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Speaker 4: Bells and IBM, you know, attempts to go after IBM

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Speaker 4: and Microsoft. It never ends well if if something has

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Speaker 4: to be done legislatively punitively. So I think that in

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Speaker 4: both cases there will be satisfactory outcomes that will include

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Speaker 4: the injection of AI into this mix to sort of

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Speaker 4: take the pressure off both ADS and search as monopolies,

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Speaker 4: so there is volatility there that people have to consider

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Speaker 4: when consider owning each of those stocks. But I think

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Speaker 4: we will get through this and both companies will be

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Speaker 4: stronger coming out of whatever the resolution is.

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Speaker 1: David, we'll leave it there. Thank you so much for

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Speaker 1: joining us. David Nicholson, he is the chief research officer

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Speaker 1: at the Futuum Group. Joining us here on the Daybreak

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Speaker 1: Asia Podcast. Thanks for listening to today's episode of the

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Speaker 1: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at

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Speaker 1: the story shaping markets, finance, and geopolitics in the Asia Pacific.

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Speaker 1: You can find us on Apple, Spotify, the Bloomberg Podcast

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Speaker 1: YouTube channel, or anywhere else you listen. Join us again

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Speaker 1: tomorrow for insight on the market moves from Hong Kong

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Speaker 1: to Singapore and Australia. I'm Doug Chrisner, and this is

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Speaker 1: Bloomberg