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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 Doug Krisner.

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Speaker 2: Big cap tech shares. We're up today, sending the Nasdaq

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Speaker 2: one hundred to a record high. A lot of optimism

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Speaker 2: still over artificial intelligence that's been a key driver shares,

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Speaker 2: and in video We're up more than four percent to

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Speaker 2: finish at a record high now in the process, and

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Speaker 2: Video cemented its position as one of the most valuable

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Speaker 2: companies in the world. We also heard from Micron Technology

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Speaker 2: after the bell and an upbeat forecast for the current quarter.

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Speaker 2: Micron has been benefiting from demand for those high bandwidth

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Speaker 2: memory chips used in artificial intelligence. Joining me now for

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Speaker 2: a closer look at market action is Katie Kaminski, the

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Speaker 2: chief research strategist at Alpha Simplex. Katie, thank you so

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Speaker 2: much for making time to chat with me. What did

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Speaker 2: you make of today's price action, particularly the AI trade.

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Speaker 3: Well, I'd have to say that it's quite remarkable to see,

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Speaker 3: you know, even though we had some rally today, but

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Speaker 3: it was very narrow. It was really focused on those

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Speaker 3: tech companies, and you're really seeing that optimism is still

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Speaker 3: there and that people are really seeing that opportunity as

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Speaker 3: one of the few on a day like today.

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Speaker 2: So I mentioned the fact that the Nasdaq one hundred

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Speaker 2: closed at a record. We're trading it around thirty one

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Speaker 2: times earnings for the Nasdaq one hundred. Is that a concern?

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Speaker 3: I mean, I think it's definitely a concern that we've

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Speaker 3: been voicing for quite some time. And I think if

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Speaker 3: that's sustainable, then you know, it's pretty impressive.

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Speaker 4: So I think there is going to be that continued.

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Speaker 3: Concern that how long can this type of growth be possible.

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Speaker 3: So far, as of today, it seems to be still

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Speaker 3: in line, but you're right, the skepticism is likely to.

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Speaker 2: Come back, given that we had commentary today from Fed

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Speaker 2: jer J. Powell. He was testifying to the Senate Banking Committee.

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Speaker 2: Apparently the FED is still struggling to get its arms

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Speaker 2: around the impact of tariff policy on inflation. How do

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Speaker 2: you understand the tariff story as it relates to inflation.

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Speaker 3: Well, I think the challenge is that there's a lot

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Speaker 3: of lag in data, and I think part of the

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Speaker 3: reason you see that sentiment is things are still pretty

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Speaker 3: good in terms of unemployment and other parts of their mandate.

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Speaker 4: We do see.

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Speaker 3: You know, if you look at signals on the technical side,

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Speaker 3: people are still concerned about long term bonds and.

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Speaker 4: Maybe that's part of it. So I think until you have.

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Speaker 3: More concrete data, they're willing to wait if things are

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Speaker 3: not necessary to necessarily cut rates.

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Speaker 4: So that's why you're kind of seeing that weight and

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Speaker 4: see policy.

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Speaker 2: And yet we've heard from two FED governors recently about

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Speaker 2: the possibility of rate cuts or a rate cut as

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Speaker 2: soon as the July meeting. How does that sit with you?

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Speaker 3: Well, what we've seen is there's definitely been some of

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Speaker 3: that price action that's consistent with that story. It does

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Speaker 3: make you start to scratch your head a little bit, though,

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Speaker 3: because you can start thinking, I mean, you see that

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Speaker 3: today in price movements, you saw yields up, then you

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Speaker 3: saw yields down, and I think the market is leaning

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Speaker 3: towards the hope that there's going to be a bigger

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Speaker 3: pivot and actually get some rate cuts at some point.

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Speaker 2: Does that make you a little bit more inclined to

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Speaker 2: look for opportunities in the bond market Right now? We

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Speaker 2: were talking about high valuations and technologies and if we

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Speaker 2: can kind of accept the notion that rates are headed

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Speaker 2: lower we just don't know when that move happens, that

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Speaker 2: maybe there are opportunities in the bond market right now.

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Speaker 3: Well, I definitely think that the market looks a little

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Speaker 3: bit like that, and you've started to see a pivot

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Speaker 3: this month towards more bond buying, and I think with

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Speaker 3: the skepticism earlier, you know, there's definitely that potential that

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Speaker 3: this might be a good entry point. You might just

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Speaker 3: have to wait for some period of time to see the.

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Speaker 4: Value of that.

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Speaker 2: What are you advising clients to do in the current

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Speaker 2: environment in terms of deploying cash right now? Are you

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Speaker 2: advising them to wait and see anticipating maybe a pullback

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Speaker 2: in the equity market, or do you want to be

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Speaker 2: fully invested right now no matter.

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Speaker 3: What, Well, I'd say, you know, we tend to look

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Speaker 3: at more technical signals, and what we've seen is that

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Speaker 3: equity signals have strengthened some. So there is some indication

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Speaker 3: that equity equity positioning isn't as weak as it was

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Speaker 3: before there was less concern. But of course, you know,

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Speaker 3: it is a very volatile time and you have seen

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Speaker 3: a lot of big moves, particularly outside of the equity market,

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Speaker 3: So you know, if there were some real events, you

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Speaker 3: could actually see a much bigger move in equities, but

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Speaker 3: so far it's been relatively calm.

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Speaker 2: Surprisingly, I'm curious as to how you're understanding geopolitical risk

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Speaker 2: as a part of the story in markets. We've heard

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Speaker 2: from President Trump saying the US will hold a meeting

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Speaker 2: with Iran next week. He is doubtful that there is

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Speaker 2: any need for a diplomatic agreement on the nuclear program

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Speaker 2: in Iran, citing the damage that some of that American

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Speaker 2: bombing has done to key sites. This is up for debate.

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Speaker 2: We still don't have a lot of sharp visibility into

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Speaker 2: this situation. For the moment, it seems like the risk

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Speaker 2: has diminished, the oil market has calmed down quite a bit.

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Speaker 2: But I'm curious to get your take on geopolitics as

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Speaker 2: a factor in market's behavior lately.

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Speaker 4: Well, it's been.

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Speaker 3: Actually quite surprising to me that you didn't see the

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Speaker 3: type of movements in the equity markets that I would

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Speaker 3: have expected, given the strength of how extreme the headlines

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Speaker 3: were and how concerned people were. I think the only

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Speaker 3: place you've seen that is in the energy markets.

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Speaker 4: Where you've seen sort of moves that were exceptional.

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Speaker 3: Equity markets have remained relatively strong and relatively calm if

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Speaker 3: you take those in comparison with energies. So I think

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Speaker 3: the equity market is sort of looking past this right now,

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Speaker 3: and people, instead of acting on this, are kind of

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Speaker 3: waiting to see if we have a little bit more clarity,

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Speaker 3: which I actually found somewhat surprising. But you did see

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Speaker 3: those moves in places like commodities, so that could be

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Speaker 3: a foreshadowing of volatility that we could have if we

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Speaker 3: had more clarity on how a potential escalation.

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Speaker 4: In the future.

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Speaker 2: I want to ask you next about the financials, because

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Speaker 2: we heard from the FED today policymakers unveiled a plan

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Speaker 2: to roll back an important rule on capital for the

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Speaker 2: big banks. Talk to me a little bit about how

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Speaker 2: you understand the tweak to the enhanced supplementary leverage ratio,

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Speaker 2: what it means for big institutions like Bank of America

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Speaker 2: or JP Morgan Chase Well in.

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Speaker 3: Some sense having less restrictions in lending, and also could

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Speaker 3: mean that there's a little.

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Speaker 4: More freedom in the space.

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Speaker 3: But what's interesting in terms of the commentary that I've

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Speaker 3: seen is that the market didn't really move much on

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Speaker 3: those adjustments, which to me suggest that whatever decisions were

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Speaker 3: made with this, some of the price action is already

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Speaker 3: baked in in these banks, so I think for me

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Speaker 3: that was surprising in some sense. And I know some

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Speaker 3: reports were noting that despite a relatively large decision, that

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Speaker 3: you didn't see a lot of price action regarding this

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Speaker 3: particular decision.

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Speaker 2: How are you viewing markets offshore these days?

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Speaker 3: Well, it's interesting to ask that because honestly, the focus

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Speaker 3: has been so much on the current Middle East conflict

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Speaker 3: that there's been a little bit less focus on places

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Speaker 3: like China, Japan, Australia. And I think that you know,

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Speaker 3: you've seen Japan has definitely been in a slightly different

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Speaker 3: trend than the US, So you've seen a weaker young

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Speaker 3: You've seen some questioning about whether or not there's going

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Speaker 3: to be a hike at some point. So I'd say

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Speaker 3: that it's been relatively quiet outside of what's been going

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Speaker 3: on geopolitically more recently.

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Speaker 2: So, staying with geopolitics for the moment, the president is

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Speaker 2: returning from the NATO summit a bold commitment from all

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Speaker 2: thirty two members to raise military spending to five percent

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Speaker 2: of GDP. So does this compel you to look more

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Speaker 2: closely at what's going on in the European equity market.

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Speaker 3: It definitely does in the sense that there is sort

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Speaker 3: of a glimmer for some growth and.

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Speaker 4: Also opportunities in that space.

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Speaker 3: It just really indicates a change and shift in policy

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Speaker 3: which will definitely be somewhat growth oriented for European countries.

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Speaker 3: So I think people are looking more closely at European

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Speaker 3: equities and they have really outpaced this year as well.

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Speaker 3: So I think that's something that's going to be a

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Speaker 3: more common theme as we see how this unravels in

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Speaker 3: terms of actual spending.

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Speaker 2: And where Katie will leave it there. Thank you so

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Speaker 2: very much. Katie Kaminski there, chief re search strategist at

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Speaker 2: Alpha Simplex, joining us here on the Daybreak Asia podcast.

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

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Speaker 2: Hong Kong's de facto central bank defended the local currency

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Speaker 2: against its peg to the US dollar. The monetary authority

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Speaker 2: bought nine point four to two billion dollars in Hong

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Speaker 2: Kong dollars. This is after the exchange rate touched the

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Speaker 2: weak side of the permitted trading ban of seven seventy

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Speaker 2: five to seven eighty five against the greenback. For more,

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Speaker 2: we heard from Garfield Reynolds in Sydney. He is our

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Speaker 2: Asia team lead for Bloomberg Markets Live. Garfield spoke with

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Speaker 2: Bloomberg's April Hong and Heidi Stroud Watts.

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Speaker 1: A bit of uncertainty when it comes to where that

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Speaker 1: dollar trajectory is headed. Oh well, I mean, the broader

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Speaker 1: dollar trajectory is very much for dollar weakness, but it

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Speaker 1: is interesting to watch the Hong Kong dollar instead. Instead,

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Speaker 1: instead it's falling against the US dollar and risking you're

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Speaker 1: falling out of its out of its peg. Hence the

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Speaker 1: need for Hong Kong to buy its own dollar. That

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Speaker 1: is a tension that's been brewing for some time because

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Speaker 1: in particular, as the Chinese government, the main government highlights

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Speaker 1: its desire to have the yuan be playing a greater

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Speaker 1: role globally, it comes to look at stranger and stranger

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Speaker 1: for the Hong Kong dollar to be pegged to the

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Speaker 1: US dollar and pegged so tightly the yuan does have.

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Speaker 1: You know, there are controls on where it goes against

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Speaker 1: the US dollar, but those controls allow it to gradually

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Speaker 1: move one way or the other, and it's gradually, in fact,

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Speaker 1: been strengthening but part of the setup is that the

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Speaker 1: Hong Kong dollar is stuck where it is between seven

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Speaker 1: seventy five and seven eighty five, and the other things

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Speaker 1: the PBOC are doing are helping to down benchmark borrowing

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Speaker 1: costs on the short end, in particular in Hong Kong.

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Speaker 1: So that's setting up the arbitrage opportunity that is pushing

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Speaker 1: down the Hong Kong dollar against the US dollar, even

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Speaker 1: if in a lot of ways you might think it

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Speaker 1: should gravitate more towards the seven point under seven point

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Speaker 1: two per dollar level that the yuan is at. So

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Speaker 1: that's a long term tension that they're going to face

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Speaker 1: more and more often as things developed towards a weaker

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Speaker 1: US dollar and a yuan that is playing a greater

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Speaker 1: role on capital market. So might not be the first,

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Speaker 1: might not be the last time in the coming months

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Speaker 1: when Hong Kong needs to intervene in this fashion.

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Speaker 5: Yeah, go after your point about the dollar weakness, we're

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Speaker 5: seeing a losing ground. As you spoke against the backdrop

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Speaker 5: of Wall Street Journal reporting that Trump might name the

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Speaker 5: fet chair successor to Powerell earlier. I mean, what'sn't clear

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Speaker 5: here because markets are already sort of been betting for this.

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Speaker 1: Yeah. Well, the play here is that it's another blow

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Speaker 1: to the credibility of the US dollar because the Fed's

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Speaker 1: independence from politics has been a key part of why. Well,

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Speaker 1: it's a key dynamic for investors and for traders. You know,

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Speaker 1: why are you willing to go to the US dollar

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Speaker 1: before anything else. Well, it's got the deepest bond market.

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Speaker 1: That helps. It's also got the credibility of its institutions

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Speaker 1: and the idea that power will get shunted out and

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Speaker 1: replaced by somebody more open to Trump's call for lower

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Speaker 1: interest rates just in order to save the US government

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Speaker 1: money on its borrowing costs. That's the kind of thing

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Speaker 1: that's going to have traders saying, well, we might want

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Speaker 1: to avoid the US dollar, or if we're going to

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Speaker 1: buy US dollars, we're not willing to pay extra to

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Speaker 1: do so. So you get at the very least movement

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Speaker 1: down in the price of the dollar against other currencies.

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Speaker 1: You're notable that this Wall Street Journal report comes after

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Speaker 1: a US Republican senator was you're very pointed in his

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Speaker 1: criticism of Powell at the testimony, or a US representative

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Speaker 1: saying Trump was voted in by millions. You were voted

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Speaker 1: in by one person, Donald Trump, and you don't want

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Speaker 1: and he doesn't want you to go on doing what

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Speaker 1: you've been doing. So what's your justification.

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Speaker 3: The other visit News's course of relaxation of capital rules.

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Speaker 2: Did you expect that to have more of an impact?

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Speaker 1: Well, the impact was mostly priced in, it looks like,

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Speaker 1: and I think it was noticeable that earlier on a

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Speaker 1: few days ago, we had some comments from the Fed,

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Speaker 1: I think after the FOMC meeting in fact, that they

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Speaker 1: were moving more strongly towards the SLR changes. That didn't

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Speaker 1: have a huge impact, and it highlights that just because

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Speaker 1: banks will be able to buy more treasuries doesn't necessarily

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Speaker 1: mean they will, especially when we are going into what's

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Speaker 1: going to be a very fraud couple of weeks. We

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Speaker 1: have the reciprocal tariff deadline coming at about July nine,

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Speaker 1: and then before that, we have the July four deadline

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Speaker 1: for whether or not the Trump's spending and taxation bill

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Speaker 1: gets past, and how much that's likely to increase the deficit.

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Speaker 1: That's another uncertainty. We also have the uncertainty of we

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Speaker 1: get payrolls July three. This time around on Thursday, ahead

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Speaker 1: of the July for US holiday, So it's going to

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Speaker 1: be a very choppy week next week. Not too much

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Speaker 1: of a surprise that banks and others aren't going to

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Speaker 1: rush into treasuries absent a clear signal that, for example,

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Speaker 1: right cuts the coming.

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Speaker 2: Garfield Reynolds in Sydney. He is our Asia team lead

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Speaker 2: for Bloomberg Markets Live. Thanks for listening to today's episode

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Speaker 2: of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we

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Speaker 2: look at the story shaping markets, finance, and geopolitics in

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Speaker 2: the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 2: Join us again tomorrow for insight on the market moves

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Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Prisner,

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Speaker 2: and this is Bloomberg