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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 Doug Krisner. We

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Speaker 2: begin with Elon Musk. He's planning to merge SpaceX with

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Speaker 2: his artificial intelligence firm XAI, and we're being told the

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Speaker 2: combined company is expected to have a valuation of one

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Speaker 2: into quarter trillion dollars. Here is Bloomberg's Ryan Gould.

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Speaker 3: Elon's view is that we're going to have data centers

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Speaker 3: in space, and part of this is about, you know,

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Speaker 3: putting compute and the idea of space exploration and sort

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Speaker 3: of expression of the universe together. This is clearly part

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Speaker 3: of his vision. There is a very good quote that

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Speaker 3: kind of encapsulates a lot of this, which is what

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Speaker 3: you know he wrote, i think late last year, which

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Speaker 3: is that in some ways his company's history companies Tesla,

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Speaker 3: SpaceX and Xai are going to come together. They can

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Speaker 3: to converge and maybe this is kind of the first

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Speaker 3: leg of the store that we're now seeing.

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Speaker 2: That is Bloomberg's Ryan Gould. We're seeing a calmer mood

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Speaker 2: in equity markets across the Asia Pacific after some heavy

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Speaker 2: selling in the Monday session. As one example, South Korean

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Speaker 2: shares jump by more than three percent at the open.

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Speaker 2: That's after the costp tumbled five point three percent in

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Speaker 2: the Monday session. Joining me now is Bloomberg's Paul Dobson.

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Speaker 2: Paul is executive editor for Asia Markets and he joins

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Speaker 2: from our studios in Singapore. Thanks for being here. So

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Speaker 2: the Monday session, as we both know, is eye opening,

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Speaker 2: particularly when you look at precious metals. We did have

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Speaker 2: that cratering in both gold and silver prices in New

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Speaker 2: York on Friday, and some analysts were tracing that sell

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Speaker 2: off to the news on Kevin Worsh being selected as

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Speaker 2: President Trump's nominee to lead the FED. Do you consider

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Speaker 2: this to be the primary driver of the recent volatility.

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Speaker 4: I think that Marcus had just got an extremely stretched

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Speaker 4: and over leveraged in the metal space, but not just

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Speaker 4: there in a lot of the momentum trades as well,

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Speaker 4: and the CTAs were involved, the retail traders were involved,

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Speaker 4: and so it got very very top heavy, and so

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Speaker 4: when the correction came with the Wash announcement, the move

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Speaker 4: was pretty violent, and you know, right for that. So

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Speaker 4: although the correction of the sell off was really huge,

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Speaker 4: it still you know, didn't even wipe out pretty much

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Speaker 4: the games for this year, let alone the massive run

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Speaker 4: up for last year. So you'd only have been underwater

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Speaker 4: if you were very late to the party. So I

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Speaker 4: guess that that you know, help helped whip it up.

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Speaker 4: Always always leverage and people thinking that there's an easy

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Speaker 4: trade and no no end.

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Speaker 2: The other side of that story is the rally that

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Speaker 2: we had in the dollar during New York trading on Friday.

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Speaker 2: It seems like that may have provided the spark.

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Speaker 4: Yeah, so I think that, you know, dollar negativity, for

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Speaker 4: one thing, had gotten extremally overdone. Perhaps in January, that

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Speaker 4: idea of cel America, that idea of dedollarization, the quiet quitting,

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Speaker 4: all of those sort of themes had sort of fed

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Speaker 4: into this very negative dollar spiral, and above all else,

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Speaker 4: the idea the president was trying to influence the Fed

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Speaker 4: and its monetary policy. And I think the appointment of

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Speaker 4: Kevin Walsh really short circuited a lot of that for

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Speaker 4: a couple of reasons. One maybe because he's seen as

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Speaker 4: slightly more of a hawk relative to the other candidates,

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Speaker 4: and so, all things being equal, may not cut at

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Speaker 4: interest rates quite as much as others. But actually when

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Speaker 4: people dug into what he stands for a little bit more.

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Speaker 4: I think there's two other things. One is this idea

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Speaker 4: that he would like a much lower FED balance sheet,

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Speaker 4: and so that would shrink the amount of liquidity sloshing

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Speaker 4: around in the system, which may firm up the dollar

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Speaker 4: to a certain extent. But even more than that, that

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Speaker 4: just that he's seen as a credible candidate with a

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Speaker 4: bit of a plan and with a bit of a

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Speaker 4: you know, kind of backbone. And I think the idea

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Speaker 4: that he would actually stand for FED independence, and I

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Speaker 4: guess maybe working in concert a little bit with the

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Speaker 4: Final Ministry, with the Treasury Secretary, but at the same

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Speaker 4: time sticking with a kind of FED and government relationship

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Speaker 4: that stands the test of time, was enough to firm

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Speaker 4: people's convictions up a little bit on the dollar. And

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Speaker 4: so it took away some of the motivations and the

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Speaker 4: reasons for the de dollarization trade and be that against

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Speaker 4: other currencies or against the precious metals.

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Speaker 2: So I have to ask you about the US trade

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Speaker 2: deal with India. This is after Prime Minister Mody agreed

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Speaker 2: to stop buying Russian crude oil. What do you think

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Speaker 2: this means, Paul? For the Indian market going forward.

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Speaker 4: Sensibly, this is a really big moment of relief for India,

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Speaker 4: which had been underperforming Asia and emerging markets for quite

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Speaker 4: some time. It had its worst January since twenty sixteen

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Speaker 4: in the stock market. The rupee was at a record low,

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Speaker 4: so things were really starting to look rather crestfall and

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Speaker 4: for India because of the weight of the US tariffs,

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Speaker 4: So finding a way out of that at low last

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Speaker 4: is definitely seen first and foremost as a relief. We

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Speaker 4: saw that in the overnight trading of ETFs, which were

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Speaker 4: up around four percent i think, and the rupee in

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Speaker 4: the NDIF market up over one percent. But it's not

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Speaker 4: as simple as that. So some of the agreements, the

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Speaker 4: idea that India can very easily replace Russian oil with

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Speaker 4: Venezuela and oil has problems, problems to do with the

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Speaker 4: quality of the crude and also to do with the

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Speaker 4: price that would need to be paid, so that's not

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Speaker 4: perfect for India. And there are other agreements as well,

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Speaker 4: including how much it has to spend in theory on

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Speaker 4: buying US goods, that are also going to be a

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Speaker 4: little bit of a long term headache. So topline people

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Speaker 4: are very happy that the deal's done. Underneath that the

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Speaker 4: details may be a little bit less beautiful for India's

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Speaker 4: market in the long term.

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Speaker 2: Is there a sense of how Beijing feels about this?

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Speaker 2: Do we know the Chinese side of the story.

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Speaker 4: It feels late as far as the US and China

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Speaker 4: relations ship is concerned. At the moment, there's this idea

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Speaker 4: of just trying to not rock the boat too much.

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Speaker 3: So, you know, it.

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Speaker 4: Feels like the pressure from the Trump administration on China

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Speaker 4: has somewhat abated. Happy to see the trade just continue

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Speaker 4: to kind of flow through. So I'm not sure that

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Speaker 4: China will react one way or the other to the

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Speaker 4: India trade deal in a great manner. What it might

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Speaker 4: take some exception to is the announcement that we had

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Speaker 4: in the US day to day. The President Trump also

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Speaker 4: wants to build this stockpile for rare earth minerals and

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Speaker 4: associated products, which may you know, weigh on the sector

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Speaker 4: or indeed stoke demand for the sector, particularly outside of China.

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Speaker 4: But I think again, the idea that the US and

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Speaker 4: other economies that don't have great relationships with China will

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Speaker 4: that to source those materials from elsewhere is nothing particularly new.

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Speaker 2: We had the official Chinese PMI data over the weekend,

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Speaker 2: factory activity unexpectedly deteriorated, and then when you look at

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Speaker 2: the non manufacturing side, that PMI also contracted a bit.

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Speaker 2: I'm wondering about the level of concern here about what's

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Speaker 2: going on with the Chinese economy.

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Speaker 4: That was a negative surprise, no doubt about it. People

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Speaker 4: don't really know how those numbers looked quite so bad.

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Speaker 4: It's funny though, because just at the same time as that,

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Speaker 4: I think that there are glimmers of hope for the

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Speaker 4: other side of the Chinese economy, namely the sort of

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Speaker 4: consumer side of things. And what I'm looking at there

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Speaker 4: is sales of liquor actually up in China and recovering

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Speaker 4: which is usually assigned that people are in a good

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Speaker 4: mood preparing for the Lunar New Year celebrations. We've also

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Speaker 4: seen pick up in some other areas of consumption, and

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Speaker 4: anecdotally it sounds like over the Christmas period things were

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Speaker 4: a little bit busier as well. That said, car sales

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Speaker 4: have down quite a long way, bad reputed that so

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Speaker 4: it's still a mixed picture on the consumption side of it.

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Speaker 4: For the industrial production site, we'll have to see whether

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Speaker 4: this is part of a longer term trend or just

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Speaker 4: a blip.

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Speaker 2: So the BYD that you mentioned sales down in the

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Speaker 2: month of January by thirty percent to what extent is

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Speaker 2: that a reflection of just overall demand weakness or the government,

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Speaker 2: I understand, is kind of scaling back on some of

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Speaker 2: these subsidies that were designed to support the EV industry

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Speaker 2: in China, and as they go away, it's only logical

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Speaker 2: that maybe you see sales struggle a.

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Speaker 4: Bit, that's right. So the removal of subsidies is a

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Speaker 4: big deal that the evmakers are going to have to

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Speaker 4: come to terms with, but the size of the drop

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Speaker 4: is largely the way, and so the impact on those

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Speaker 4: companies is going to be negative and on the economy too.

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Speaker 4: China does have these other support measures in place where

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Speaker 4: they're sort of trade in goods, a little bit like

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Speaker 4: or trade in motivation for doing trade in it's a

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Speaker 4: little bit like the cash for conker scheme that the

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Speaker 4: US used to have, and it's continuing with that into

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Speaker 4: this year as well other incentives for the various purchases

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Speaker 4: across the consumer complex. But yes, and I think that

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Speaker 4: probably you know, if those businesses, the electric vehicle makers

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Speaker 4: are able to stand on their own feet without the subsidies,

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Speaker 4: then that's probably a good strong sign for the longer term.

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Speaker 4: And I think the other thing is they'll probably continue

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Speaker 4: to emphasize exports, particularly setting into Europe.

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Speaker 2: Of course, you mentioned the Lunar New Year holiday which

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Speaker 2: is fast approaching. Are analyst reasonably optimistic the Chinese consumers

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Speaker 2: will be spending a fair amount as we look to

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Speaker 2: that long holiday period.

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Speaker 4: I think relative to what we've seen in the last

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Speaker 4: few years since COVID, there are signs of green shoots

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Speaker 4: and a little bit more optimism, with certain caution and caveats.

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Speaker 4: It's certainly not all guns blazing. People are still very

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Speaker 4: worried about the employment situation, but it does seem that

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Speaker 4: there is a little bit more mentum just starting to

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Speaker 4: kindle at the moment. So as we get there, we'll

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Speaker 4: be watching holiday travel, holiday spending, where people are going.

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Speaker 4: Are they going to the movie theaters? What are they

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Speaker 4: spending on restaurants as well? And are they shopping? And

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Speaker 4: if we come through the outside of New Year with

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Speaker 4: a more complete picture on that, we'll be able to

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Speaker 4: determine a little bit more what that sentiment looks like

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Speaker 4: going into the rest of the year.

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Speaker 2: Is Beijing still urging Chinese travelers to avoid Japan. I

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Speaker 2: know we had the comments from Japanese Prime Minister Taki

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Speaker 2: Ichi concerning Taiwan and how leadership in Beijing took offense.

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Speaker 2: That's pretty much why we're in this situation right.

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Speaker 4: The dispute with Japan has not gone away as yet,

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Speaker 4: and so Chinese spending in Japanese duty three stores, for example,

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Speaker 4: is still down considerably year on year. So that's an

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Speaker 4: interesting friction that hasn't gone away yet and seems to

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Speaker 4: be just left to festa at the moment. We haven't

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Speaker 4: heard any more recently from Takeiichi in Japan or from

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Speaker 4: the Chinese administration on it. Maybe the plan will be

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Speaker 4: to stop talking about it and hope it goes away

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Speaker 4: over time, so that there's a bit of an off run,

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Speaker 4: which I think has been the trend in the past,

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Speaker 4: but it can take quite a long time for those

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Speaker 4: things to blow over and reset.

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Speaker 2: In the US, we had a pretty strong reading on

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Speaker 2: manufacturing for the month of January, the PMI data from

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Speaker 2: the ISM and I know Paul that we've had a

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Speaker 2: lot of PMI figures published for the APAC region recently.

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Speaker 2: Is there a way that you can make some generalizations?

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Speaker 2: Are you seeing slight expansion? Are things in contraction? How

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Speaker 2: would you describe the overall picture?

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Speaker 4: Coping coping with the tariff situation and kind of muddling

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Speaker 4: through a little bit mixed, But the market seem optimistic

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Speaker 4: about it in any case. I think if you take

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Speaker 4: away those last few days, so Thursday Monday, January was

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Speaker 4: an exceptionally good month for APAX, for emerging markets in

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Speaker 4: terms of performance, and I think that that reflects a

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Speaker 4: certain degree of optimism and the idea that the other

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Speaker 4: regions are going to outperform the US this year. So

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Speaker 4: I do think that it's interesting that actually we're seeing

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Speaker 4: those signs of strength in the US economy. The ism

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Speaker 4: manufacturing gauge really strong as well. I would say the

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Speaker 4: other thing that we'll need to focus on Doug will

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Speaker 4: be the payrolls report, but I understand that that's not

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Speaker 4: going to come this Friday, so I have to be

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Speaker 4: patient on that one. But one less thing to worry about,

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Speaker 4: I suppose before the weekend.

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Speaker 2: Yeah, that partial government shutdown has delayed the release of

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Speaker 2: the employment data, which was set for release on Friday.

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Speaker 2: Paul will leave it there. Thank you so very much.

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Speaker 2: Bloomberg's Paul Dobson. He is executive editor for Asia Markets.

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Speaker 2: Joining from our studios in Singapore here on the Daybreak

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Speaker 2: Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm

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Speaker 2: Doug Krisner. We mentioned a moment ago the US and

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Speaker 2: India were able to reach a trade deal to reduce

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Speaker 2: tariffs on Indian goods. That was after Prime Minister Narendra

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Speaker 2: Modi agreed to stop buying Russian crude oil. President Trump

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Speaker 2: said he would lower his twenty five percent tariff on

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Speaker 2: Indian goods to eighteen percent, and at the same time,

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Speaker 2: overall levees on many Indian goods will be reduced from

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Speaker 2: fifty percent down to eighteen percent, and of course that

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Speaker 2: represents a significant reduction. It'll affect things like textiles, machinery

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Speaker 2: and other goods. And that's where we begin our conversation

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Speaker 2: with Bassant Sungerra. He is managing principal at the Asia Group.

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Speaker 2: Bassant spoke with Bloomberg TV host Paul Allen and Sherry on.

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Speaker 5: We don't have a full text of what was agreed to,

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Speaker 5: but can you give us your initial reaction to this news.

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Speaker 6: Sure to thank you for having me, Paul. Real milestone

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Speaker 6: moment nearly eight decades of US India diplomatic ties. I

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Speaker 6: think the bulk of what was negotiated in the bilateral

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Speaker 6: trade agreement actually took place last year. There was a

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Speaker 6: moment in July when both sides are very close to announcement.

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Speaker 6: For a number of reasons geopolitical India, Pakistan, Russian oil.

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Speaker 6: That agreement wasn't announced then, but both sides have managed

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Speaker 6: to revive a lot of that work. I think in

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Speaker 6: key sectors industrial goods, spirits, not all agricultural goods, but

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Speaker 6: some items. You'll see wide relief for US exporters. The timelines,

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Speaker 6: I think still need to be sorted out, the legal texts.

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Speaker 6: Important to remember that this is a legally binding text.

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Speaker 6: That process to finalize that text is still ongoing. And

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Speaker 6: of course, a huge relief for Indian exporters to the

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Speaker 6: United States after facing that heavy fifty penalty tariff which

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Speaker 6: will now go down to eighteen percent.

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Speaker 5: Well, the US would still like India to further lower

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Speaker 5: trade barriers, but how realistic is that Because agriculture's off

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Speaker 5: limits in New Zealand and the European Union couldn't agree

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Speaker 5: access for dairy products, so why would the US expect

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Speaker 5: any different treatment.

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Speaker 6: Well, I think it's important to remember that of the

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Speaker 6: deals India has concluded with various partners, including a very

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Speaker 6: monumental EU, one, from our understanding is what it's offered

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Speaker 6: from to the US has been unprecedented and competitive compared

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Speaker 6: to what has offered other partners. Certain sectors, as you mentioned,

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Speaker 6: particularly dairy GMOs, those were non starters and I don't

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Speaker 6: think those will feature in this agreement. It's also important

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Speaker 6: to remember that this is the phase one. Portion of

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Speaker 6: this agreement is just going to cover reciprocal tariffs and

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Speaker 6: non tariff barriers such as quality controllers. There are going

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Speaker 6: to be sub sequent chapters total is nineteen, dealing with

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Speaker 6: things like digital trade, intellectual property, and most importantly economic security.

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Speaker 6: As you probably are tracking, the Indian Foreign Minister is

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Speaker 6: going to be in Washington this week for an important

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Speaker 6: meeting on critical minerals. How both sides can cooperate more

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Speaker 6: on economic security matters, including critical minerals. That's going to

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Speaker 6: be important part of the follow on agreement. So again,

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Speaker 6: this is just the first phase, an important one, but

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Speaker 6: the negotiations on those subsequent chapters. They will continue throughout

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Speaker 6: the remainder of the year.

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Speaker 1: And of course, in order to understand who got a

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Speaker 1: better deal here between the two sides, we still need

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Speaker 1: to see the details, as you're alluding to. But coming

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Speaker 1: into these negotiations, who needed this seal more President Trump

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Speaker 1: or Prime Minister Remote.

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Speaker 6: I think India was feeling confident, particularly given the monumental

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Speaker 6: deal they secured with the European Union last week. I think,

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Speaker 6: as I mentioned, the substance was actually agreed some months ago,

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Speaker 6: but both sides I think needed an opportune political moment,

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Speaker 6: and as the previous analyst noted, the Russian oil picture

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Speaker 6: also needed to get into a better place. So that

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Speaker 6: period of political stabilization allowed for both sides to come

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Speaker 6: together and do a leader level call to make this

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Speaker 6: deal possible.

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Speaker 1: At a time when a trade conversations and geopolitical conversations,

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Speaker 1: when the line seemed to be pretty blurred. You mentioned

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Speaker 1: the critical minerals conversations ongoing right now, how critical will

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Speaker 1: this trade deal be? And cementing a stronger relationship between

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Speaker 1: the two sides at a time when we kind of

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Speaker 1: thought perhaps America's indo specific strategy had wavered.

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Speaker 6: You're absolutely right. Geopoliticals are at the heart of this

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Speaker 6: in some ways last year, had the India Pakistan clashes

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Speaker 6: not taken place in April and May, you could have

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Speaker 6: gotten a trade deal last summer. That was one of

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Speaker 6: the chief obstacles. So it's always important to sort of

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Speaker 6: watch out for those geopolitical black swans that could create

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Speaker 6: frictions down the road. I think critical minerals is very

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Speaker 6: much at the heart of this. The unspoken factor here

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Speaker 6: is China. Both New Delhi and Washington have very real

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Speaker 6: concerns about Chinese dominance in areas like critical minerals and

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Speaker 6: rare earths, and with other like minded partners. The goal is,

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Speaker 6: now that this first phase is out of the way,

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Speaker 6: how can both sides sort of galvanize cooperation on supply

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Speaker 6: chain resiliency.

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Speaker 2: That was beyond Sun Herah, managing principle at the Asia Group,

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Speaker 2: speaking to Bloomberg TV host Paul Allen and Cherry on

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Speaker 2: bringing it to you here on the Daybreak Asia podcast.

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

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets finance and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg