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

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Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Charlie Pellet.

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Speaker 2: Doug Prisoners off this week Asian stocks opening higher following

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Speaker 2: a new record for the S and P five hundred index.

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Speaker 2: On Thursday, market watchers will be shifting their focus to

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Speaker 2: the August US jobs report to at eight thirty am

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Speaker 2: Wall Street Time. Coming up, we'll get the views of

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Speaker 2: David Chow, global market strategist for the APAC at Invesco. Meantime,

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Speaker 2: President Trump has signed an executive order formalizing a long

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Speaker 2: awaited trade deal with Japan. The agreement caps tariffs on

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Speaker 2: most Japanese goods, including cars and auto parts, at fifteen percent,

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Speaker 2: and it comes after Japan's top trade negotiator, rio Seyakazawa

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Speaker 2: reportedly met with President Trump in Washington. For more, we

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Speaker 2: heard from bl Bloomberg News Desk editor Bilange Pens, who

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Speaker 2: spoke with Bloomberg's Paul Allen and April hon on the

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Speaker 2: Asia trade.

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Speaker 3: So Blanche looking at this EEO markets, sharing it on

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Speaker 3: what do we know about how the trade agreement is

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Speaker 3: going to be implemented?

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Speaker 1: Good morning, Gabriel. Japan has been a bit of a

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Speaker 1: model student when it came to these trade negotiations. They

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Speaker 1: were one of the first countries to strike a deal,

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Speaker 1: they got one of the most favorable terry freights, and

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Speaker 1: they were the country that pioneered this whole framework where

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Speaker 1: the deals include a large investment agreement.

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Speaker 4: So what this does.

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Speaker 1: Now is it solidifies the implementation of that deal, which

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Speaker 1: is something that Japan has been pushing for ever since

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Speaker 1: that initial agreement came together back in July, and crucially,

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Speaker 1: it prevents the stacking of those terras. If you remember

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Speaker 1: back a few months ago, there was a little bit

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Speaker 1: of sort of parallel talk between the US and Japan

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Speaker 1: about whether those terrists might be or might not be stacked.

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Speaker 1: They won't be stacked, so that's a huge relief for

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Speaker 1: especially the japan Japanese automotive industry. So we now know

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Speaker 1: that the implementation can start in a few days and

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Speaker 1: that it will apply to those very very crucial companies.

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Speaker 1: Some questions still remain, especially around that investment pledge, but

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Speaker 1: this is certainly good news for Japanese equities.

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Speaker 5: Well.

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Speaker 6: Japan's top trade negotiator, Rossi Akazawa, is in the US

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Speaker 6: at the moment as well, is there still some work

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Speaker 6: to be done? Here is the potential for further announcements.

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Speaker 1: Yes, Azawa had some very high profile meetings. He met

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Speaker 1: with Secretary of lot Niki, met with President Trump yesterday,

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Speaker 1: and it does seem like his presidence in DC helped

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Speaker 1: push along disagreement. But the big question is how that

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Speaker 1: five hundred and fifty billion dollar investment pledge is going

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Speaker 1: to work. There was a lot of disagreement between the

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Speaker 1: two sides about what that might entail. There seems to

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Speaker 1: be a lot of question about what form that investment

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Speaker 1: might take, who will be in charge of it, what

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Speaker 1: will happen to with the proceeds. So there is some

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Speaker 1: work still to be done, but certainly Japan is ahead

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Speaker 1: of a lot of other countries when it comes to

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Speaker 1: their trade agreement.

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Speaker 3: We're also hearing how Akazawa says these terrorfs damage Japan's

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Speaker 3: domestic industries. What would you say, can we count this

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Speaker 3: as a sort of good outcome already for Japan at

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Speaker 3: the moment?

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Speaker 1: Well define good right, Tariffs are not a great not

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Speaker 1: a great thing for any exporting country live Japan is,

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Speaker 1: and certainly whenever you have to contend with those tears,

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Speaker 1: those higher input costs. That makes it more difficult for

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Speaker 1: them to compete on a very important market like the US.

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Speaker 1: On the other hand, we do see that Japan was

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Speaker 1: able to achieve a lot more favorable terms than a

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Speaker 1: lot of otheres, a lot of their competitors, especially thinking

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Speaker 1: about countries like India, like Brazil, like South Africa. There

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Speaker 1: are a lot of countries around the world which have

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Speaker 1: to contend with much higher tariffs. So it might be

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Speaker 1: a bit of a win, but eternally, whenever there are

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Speaker 1: tariffs imposed on a large exporting nation, that will be

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Speaker 1: difficult for the economy.

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Speaker 7: All right, Bloomberg can News disk editor Billage pens there,

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Speaker 7: Welcome back to the Daybreak Asia podcast.

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Speaker 2: I'm Charlie tallet in for Doug Chrismer. This morning, treasuries

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Speaker 2: rallied across the curve. In the Thursday session on Wall Street,

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Speaker 2: the polise sensitive US two year yield fell three basis

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Speaker 2: points to the lowest in around a year. Thursday money

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Speaker 2: markets almost fully priced in a FED reduction this month

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Speaker 2: and see at least two my year end. Friday's US

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Speaker 2: jobs report is expected to extend the weakest stretch of

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Speaker 2: job growth since the COVID pandemic. And for more, we

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Speaker 2: heard from David Chow, global market strategist for the APEC

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Speaker 2: at Invesco. He spoke with Bloomberg's Paul Allen and April

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Speaker 2: Hong on the Asia trade.

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Speaker 4: Good to see you, David.

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Speaker 3: So we're seeing maybe some incremental positive news on Japan.

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Speaker 3: How much of that do you think is already priced

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Speaker 3: in bymarkets?

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Speaker 5: Well, I think that we continue to be in an

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Speaker 5: environment where there are lots of developments for trade, for geopolitics.

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Speaker 5: If you look at some of the trade tariff related indexes,

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Speaker 5: the uncertainty level still remains high. So I think that

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Speaker 5: even if we have some positive developments here with Japan,

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Speaker 5: it could very much be punctuated in a few days

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Speaker 5: with some perhaps negative developments for tariffs. Remember, we still

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Speaker 5: haven't had the sector related terriffs to things like pharmaceuticals,

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Speaker 5: I mean, can doctors that are likely to come down

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Speaker 5: the pipe. So when all of a said and done,

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Speaker 5: there still is a bit of uncertainty when it comes

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Speaker 5: to trade and tariff developments. But I think Japan, Japanese markets,

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Speaker 5: there's still some upwards trajectory. We really like the Japanese

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Speaker 5: gen We think that maybe a rate hike could come

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Speaker 5: sooner rather than later, and this is certainly going to

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Speaker 5: be a boost for the Japanese gen. We think it'll

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Speaker 5: be the best performing currency in the next twelve months.

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Speaker 3: You talk about the uncertainty, We did get Trump though,

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Speaker 3: signing the executive order to implement that trade agreement with Japan.

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Speaker 3: We're hearing from the trade negotiator in Japan himself saying

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Speaker 3: that they welcome this executive order as a firm implementation

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Speaker 3: of the deal. Also seeing in market reaction Toyota shares

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Speaker 3: rising about three percent after Trump signed this order on

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Speaker 3: the tariff deal. How do you position, as you say,

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Speaker 3: amid this uncertainty, Well, I.

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Speaker 5: Think that Asian economies have done much better when it

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Speaker 5: comes to tariff negotiations with the US, especially Northeast Asian

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Speaker 5: countries compared to say Southeast Asian countries. Now overall the

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Speaker 5: A Pac region, I think the risks related to tariffs

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Speaker 5: so far have been more mitigated than originally anticipated in

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Speaker 5: the April kind of liberation day, So I prefer I

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Speaker 5: like the APAC market more than other places like Europe

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Speaker 5: or the US. I think growth is starting to firm

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Speaker 5: up a bit. Pmis from China to other parts in

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Speaker 5: Asia have started to turn up. That's a positive leading indicator.

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Speaker 5: Asian central banks are likely to cut rates more and

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Speaker 5: more quickly than the FED, and so I think that

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Speaker 5: there are more positive catalysts for Asian markets for the

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Speaker 5: remainder of the year.

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Speaker 6: I do want to get your view on the FED

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Speaker 6: as well, because you know we've got the as and

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Speaker 6: p at a record on expectations that we're going to

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Speaker 6: see some easy this month. But you would all concerned

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Speaker 6: about these questions around FED independence. The market's not really

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Speaker 6: reacting to that at the moment.

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Speaker 1: What are your thoughts?

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Speaker 4: That's right.

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Speaker 5: I agree that we're going to get a cut in

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Speaker 5: September from the FED, and I also think that markets

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Speaker 5: are underpricing the risk of the FED independence or the

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Speaker 5: lack thereof, and it is quite worrying, I think, especially

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Speaker 5: since the FED has been an independent institution being able

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Speaker 5: to think and govern and wig growth and inflation risks,

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Speaker 5: and so I think that investors should be watching this

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Speaker 5: very closely. We have a court case going through right

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Speaker 5: now with FED official Lisa Cook, and so I will

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Speaker 5: be watching very closely and how that plays out.

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Speaker 6: You were mentioning you're quite upbeats on Asia Pacific stocks,

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Speaker 6: Japan as well particularly. But how about China, because we've

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Speaker 6: seen some very strong buying of Chinese equities and indeed

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Speaker 6: requial borrowing to fuel some of these purchases, to the

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Speaker 6: point that regulators not considering curves. How sustainable does the

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Speaker 6: rally in China look to you?

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Speaker 5: Well, I think that the momentum that we've recently seen

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Speaker 5: in China has very much been driven.

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Speaker 4: By domestic buyers.

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Speaker 5: We haven't really seen foreign capital flow back into China,

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Speaker 5: and there's certainly lots of interest many of the clients

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Speaker 5: that we speak to in Europe and South America and

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Speaker 5: then even in the US A Tarkey starting to look

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Speaker 5: at Chinese equities in Chinese markets.

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Speaker 4: The liquidity that we've seen.

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Speaker 5: Boost Chinese equities has really been through monetary easing and

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Speaker 5: cuts to interest rates in China over the past six months,

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Speaker 5: and that's starting to take a greater effect. Also, lower

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Speaker 5: interest rates in China have also bolstered you know, Chinese

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Speaker 5: retail investors who look at high you're yielding investments and

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Speaker 5: we're seeing that flow into Chinese markets. But overall, I

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Speaker 5: think that the momentum can be sustained because Chinese equity valuations,

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Speaker 5: you know, while there.

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Speaker 4: Are above perhaps historical levels.

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Speaker 5: I don't think that they're training at any kind of

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Speaker 5: worrying or expensive valuation levels.

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Speaker 3: What about evaluations for the US I mean you touched

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Speaker 3: on some of this earlier. Given how concentrated it all

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Speaker 3: is in tech, how much of a risk is there

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Speaker 3: that we see a poolback.

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Speaker 5: Well, September has historically been the worst month for US

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Speaker 5: stocks because of training, illiquidity, and also lack of catalysts.

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Speaker 4: So I do want to.

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Speaker 5: Caution investors as we head into the rest of this

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Speaker 5: month that there could be market volatility more than usual,

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Speaker 5: and if that happens, I think it could be a

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Speaker 5: buying opportunity, especially if they sell off is unexpected.

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Speaker 4: But in general I like to be a little more.

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Speaker 5: Defensively positioned now for US stocks. Defensive stocks are trading

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Speaker 5: at a much more palatable valuation level, you know, healthcare, utilities,

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Speaker 5: consumer staple stocks. These are more attractive than I think

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Speaker 5: the growth and tech stocks that have really served recently.

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Speaker 3: I wonder if you could ran also on what expected

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Speaker 3: from the jobs report, because we have seen recently that

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Speaker 3: among the sectors that have supported the labor market, the

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Speaker 3: acyclical pots that seems to potentially be cooling off or

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Speaker 3: easing off a little. Is that a concern for you

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Speaker 3: when you look at the broader picture in the US.

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Speaker 4: I am concerned about the labor market in the US.

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Speaker 5: It seems like we've had a slow down, a cool

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Speaker 5: down over the past few months, and.

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Speaker 4: Even for the entire year.

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Speaker 5: The revised estimates for the jobs number has always been

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Speaker 5: lower than what was reported. And so as we as

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Speaker 5: we look at the upcoming jobs before, I don't think

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Speaker 5: that it will surpass expectations. And that's why I think

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Speaker 5: that the FED is likely to lower rates because the

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Speaker 5: labor market is starting to show cracks.

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Speaker 3: All right, David, thanks for coming in. Nice to see you.

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Speaker 3: David Child, Global market strategist at Invesco.

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Speaker 8: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 8: Asia Edition podcast. Each weekday, we look at the story

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Speaker 8: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 8: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 8: or anywhere else you listen. Join us again tomorrow for

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Speaker 8: insight on the market moves from Hong Kong to Singapore.

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Speaker 8: And Australia. I'm Doug Chrisner, and this is Bloomberg