Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
Speaker 2: Big cap tech shares. We're up today, sending the Nasdaq
Speaker 2: one hundred to a record high. A lot of optimism
Speaker 2: still over artificial intelligence that's been a key driver shares,
Speaker 2: and in video We're up more than four percent to
Speaker 2: finish at a record high now in the process, and
Speaker 2: Video cemented its position as one of the most valuable
Speaker 2: companies in the world. We also heard from Micron Technology
Speaker 2: after the bell and an upbeat forecast for the current quarter.
Speaker 2: Micron has been benefiting from demand for those high bandwidth
Speaker 2: memory chips used in artificial intelligence. Joining me now for
Speaker 2: a closer look at market action is Katie Kaminski, the
Speaker 2: chief research strategist at Alpha Simplex. Katie, thank you so
Speaker 2: much for making time to chat with me. What did
Speaker 2: you make of today's price action, particularly the AI trade.
Speaker 3: Well, I'd have to say that it's quite remarkable to see,
Speaker 3: you know, even though we had some rally today, but
Speaker 3: it was very narrow. It was really focused on those
Speaker 3: tech companies, and you're really seeing that optimism is still
Speaker 3: there and that people are really seeing that opportunity as
Speaker 3: one of the few on a day like today.
Speaker 2: So I mentioned the fact that the Nasdaq one hundred
Speaker 2: closed at a record. We're trading it around thirty one
Speaker 2: times earnings for the Nasdaq one hundred. Is that a concern?
Speaker 3: I mean, I think it's definitely a concern that we've
Speaker 3: been voicing for quite some time. And I think if
Speaker 3: that's sustainable, then you know, it's pretty impressive.
Speaker 4: So I think there is going to be that continued.
Speaker 3: Concern that how long can this type of growth be possible.
Speaker 3: So far, as of today, it seems to be still
Speaker 3: in line, but you're right, the skepticism is likely to.
Speaker 2: Come back, given that we had commentary today from Fed
Speaker 2: jer J. Powell. He was testifying to the Senate Banking Committee.
Speaker 2: Apparently the FED is still struggling to get its arms
Speaker 2: around the impact of tariff policy on inflation. How do
Speaker 2: you understand the tariff story as it relates to inflation.
Speaker 3: Well, I think the challenge is that there's a lot
Speaker 3: of lag in data, and I think part of the
Speaker 3: reason you see that sentiment is things are still pretty
Speaker 3: good in terms of unemployment and other parts of their mandate.
Speaker 4: We do see.
Speaker 3: You know, if you look at signals on the technical side,
Speaker 3: people are still concerned about long term bonds and.
Speaker 4: Maybe that's part of it. So I think until you have.
Speaker 3: More concrete data, they're willing to wait if things are
Speaker 3: not necessary to necessarily cut rates.
Speaker 4: So that's why you're kind of seeing that weight and
Speaker 4: see policy.
Speaker 2: And yet we've heard from two FED governors recently about
Speaker 2: the possibility of rate cuts or a rate cut as
Speaker 2: soon as the July meeting. How does that sit with you?
Speaker 3: Well, what we've seen is there's definitely been some of
Speaker 3: that price action that's consistent with that story. It does
Speaker 3: make you start to scratch your head a little bit, though,
Speaker 3: because you can start thinking, I mean, you see that
Speaker 3: today in price movements, you saw yields up, then you
Speaker 3: saw yields down, and I think the market is leaning
Speaker 3: towards the hope that there's going to be a bigger
Speaker 3: pivot and actually get some rate cuts at some point.
Speaker 2: Does that make you a little bit more inclined to
Speaker 2: look for opportunities in the bond market Right now? We
Speaker 2: were talking about high valuations and technologies and if we
Speaker 2: can kind of accept the notion that rates are headed
Speaker 2: lower we just don't know when that move happens, that
Speaker 2: maybe there are opportunities in the bond market right now.
Speaker 3: Well, I definitely think that the market looks a little
Speaker 3: bit like that, and you've started to see a pivot
Speaker 3: this month towards more bond buying, and I think with
Speaker 3: the skepticism earlier, you know, there's definitely that potential that
Speaker 3: this might be a good entry point. You might just
Speaker 3: have to wait for some period of time to see the.
Speaker 4: Value of that.
Speaker 2: What are you advising clients to do in the current
Speaker 2: environment in terms of deploying cash right now? Are you
Speaker 2: advising them to wait and see anticipating maybe a pullback
Speaker 2: in the equity market, or do you want to be
Speaker 2: fully invested right now no matter.
Speaker 3: What, Well, I'd say, you know, we tend to look
Speaker 3: at more technical signals, and what we've seen is that
Speaker 3: equity signals have strengthened some. So there is some indication
Speaker 3: that equity equity positioning isn't as weak as it was
Speaker 3: before there was less concern. But of course, you know,
Speaker 3: it is a very volatile time and you have seen
Speaker 3: a lot of big moves, particularly outside of the equity market,
Speaker 3: So you know, if there were some real events, you
Speaker 3: could actually see a much bigger move in equities, but
Speaker 3: so far it's been relatively calm.
Speaker 2: Surprisingly, I'm curious as to how you're understanding geopolitical risk
Speaker 2: as a part of the story in markets. We've heard
Speaker 2: from President Trump saying the US will hold a meeting
Speaker 2: with Iran next week. He is doubtful that there is
Speaker 2: any need for a diplomatic agreement on the nuclear program
Speaker 2: in Iran, citing the damage that some of that American
Speaker 2: bombing has done to key sites. This is up for debate.
Speaker 2: We still don't have a lot of sharp visibility into
Speaker 2: this situation. For the moment, it seems like the risk
Speaker 2: has diminished, the oil market has calmed down quite a bit.
Speaker 2: But I'm curious to get your take on geopolitics as
Speaker 2: a factor in market's behavior lately.
Speaker 4: Well, it's been.
Speaker 3: Actually quite surprising to me that you didn't see the
Speaker 3: type of movements in the equity markets that I would
Speaker 3: have expected, given the strength of how extreme the headlines
Speaker 3: were and how concerned people were. I think the only
Speaker 3: place you've seen that is in the energy markets.
Speaker 4: Where you've seen sort of moves that were exceptional.
Speaker 3: Equity markets have remained relatively strong and relatively calm if
Speaker 3: you take those in comparison with energies. So I think
Speaker 3: the equity market is sort of looking past this right now,
Speaker 3: and people, instead of acting on this, are kind of
Speaker 3: waiting to see if we have a little bit more clarity,
Speaker 3: which I actually found somewhat surprising. But you did see
Speaker 3: those moves in places like commodities, so that could be
Speaker 3: a foreshadowing of volatility that we could have if we
Speaker 3: had more clarity on how a potential escalation.
Speaker 4: In the future.
Speaker 2: I want to ask you next about the financials, because
Speaker 2: we heard from the FED today policymakers unveiled a plan
Speaker 2: to roll back an important rule on capital for the
Speaker 2: big banks. Talk to me a little bit about how
Speaker 2: you understand the tweak to the enhanced supplementary leverage ratio,
Speaker 2: what it means for big institutions like Bank of America
Speaker 2: or JP Morgan Chase Well in.
Speaker 3: Some sense having less restrictions in lending, and also could
Speaker 3: mean that there's a little.
Speaker 4: More freedom in the space.
Speaker 3: But what's interesting in terms of the commentary that I've
Speaker 3: seen is that the market didn't really move much on
Speaker 3: those adjustments, which to me suggest that whatever decisions were
Speaker 3: made with this, some of the price action is already
Speaker 3: baked in in these banks, so I think for me
Speaker 3: that was surprising in some sense. And I know some
Speaker 3: reports were noting that despite a relatively large decision, that
Speaker 3: you didn't see a lot of price action regarding this
Speaker 3: particular decision.
Speaker 2: How are you viewing markets offshore these days?
Speaker 3: Well, it's interesting to ask that because honestly, the focus
Speaker 3: has been so much on the current Middle East conflict
Speaker 3: that there's been a little bit less focus on places
Speaker 3: like China, Japan, Australia. And I think that you know,
Speaker 3: you've seen Japan has definitely been in a slightly different
Speaker 3: trend than the US, So you've seen a weaker young
Speaker 3: You've seen some questioning about whether or not there's going
Speaker 3: to be a hike at some point. So I'd say
Speaker 3: that it's been relatively quiet outside of what's been going
Speaker 3: on geopolitically more recently.
Speaker 2: So, staying with geopolitics for the moment, the president is
Speaker 2: returning from the NATO summit a bold commitment from all
Speaker 2: thirty two members to raise military spending to five percent
Speaker 2: of GDP. So does this compel you to look more
Speaker 2: closely at what's going on in the European equity market.
Speaker 3: It definitely does in the sense that there is sort
Speaker 3: of a glimmer for some growth and.
Speaker 4: Also opportunities in that space.
Speaker 3: It just really indicates a change and shift in policy
Speaker 3: which will definitely be somewhat growth oriented for European countries.
Speaker 3: So I think people are looking more closely at European
Speaker 3: equities and they have really outpaced this year as well.
Speaker 3: So I think that's something that's going to be a
Speaker 3: more common theme as we see how this unravels in
Speaker 3: terms of actual spending.
Speaker 2: And where Katie will leave it there. Thank you so
Speaker 2: very much. Katie Kaminski there, chief re search strategist at
Speaker 2: Alpha Simplex, joining us here on the Daybreak Asia podcast.
Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.
Speaker 2: Hong Kong's de facto central bank defended the local currency
Speaker 2: against its peg to the US dollar. The monetary authority
Speaker 2: bought nine point four to two billion dollars in Hong
Speaker 2: Kong dollars. This is after the exchange rate touched the
Speaker 2: weak side of the permitted trading ban of seven seventy
Speaker 2: five to seven eighty five against the greenback. For more,
Speaker 2: we heard from Garfield Reynolds in Sydney. He is our
Speaker 2: Asia team lead for Bloomberg Markets Live. Garfield spoke with
Speaker 2: Bloomberg's April Hong and Heidi Stroud Watts.
Speaker 1: A bit of uncertainty when it comes to where that
Speaker 1: dollar trajectory is headed. Oh well, I mean, the broader
Speaker 1: dollar trajectory is very much for dollar weakness, but it
Speaker 1: is interesting to watch the Hong Kong dollar instead. Instead,
Speaker 1: instead it's falling against the US dollar and risking you're
Speaker 1: falling out of its out of its peg. Hence the
Speaker 1: need for Hong Kong to buy its own dollar. That
Speaker 1: is a tension that's been brewing for some time because
Speaker 1: in particular, as the Chinese government, the main government highlights
Speaker 1: its desire to have the yuan be playing a greater
Speaker 1: role globally, it comes to look at stranger and stranger
Speaker 1: for the Hong Kong dollar to be pegged to the
Speaker 1: US dollar and pegged so tightly the yuan does have.
Speaker 1: You know, there are controls on where it goes against
Speaker 1: the US dollar, but those controls allow it to gradually
Speaker 1: move one way or the other, and it's gradually, in fact,
Speaker 1: been strengthening but part of the setup is that the
Speaker 1: Hong Kong dollar is stuck where it is between seven
Speaker 1: seventy five and seven eighty five, and the other things
Speaker 1: the PBOC are doing are helping to down benchmark borrowing
Speaker 1: costs on the short end, in particular in Hong Kong.
Speaker 1: So that's setting up the arbitrage opportunity that is pushing
Speaker 1: down the Hong Kong dollar against the US dollar, even
Speaker 1: if in a lot of ways you might think it
Speaker 1: should gravitate more towards the seven point under seven point
Speaker 1: two per dollar level that the yuan is at. So
Speaker 1: that's a long term tension that they're going to face
Speaker 1: more and more often as things developed towards a weaker
Speaker 1: US dollar and a yuan that is playing a greater
Speaker 1: role on capital market. So might not be the first,
Speaker 1: might not be the last time in the coming months
Speaker 1: when Hong Kong needs to intervene in this fashion.
Speaker 5: Yeah, go after your point about the dollar weakness, we're
Speaker 5: seeing a losing ground. As you spoke against the backdrop
Speaker 5: of Wall Street Journal reporting that Trump might name the
Speaker 5: fet chair successor to Powerell earlier. I mean, what'sn't clear
Speaker 5: here because markets are already sort of been betting for this.
Speaker 1: Yeah. Well, the play here is that it's another blow
Speaker 1: to the credibility of the US dollar because the Fed's
Speaker 1: independence from politics has been a key part of why. Well,
Speaker 1: it's a key dynamic for investors and for traders. You know,
Speaker 1: why are you willing to go to the US dollar
Speaker 1: before anything else. Well, it's got the deepest bond market.
Speaker 1: That helps. It's also got the credibility of its institutions
Speaker 1: and the idea that power will get shunted out and
Speaker 1: replaced by somebody more open to Trump's call for lower
Speaker 1: interest rates just in order to save the US government
Speaker 1: money on its borrowing costs. That's the kind of thing
Speaker 1: that's going to have traders saying, well, we might want
Speaker 1: to avoid the US dollar, or if we're going to
Speaker 1: buy US dollars, we're not willing to pay extra to
Speaker 1: do so. So you get at the very least movement
Speaker 1: down in the price of the dollar against other currencies.
Speaker 1: You're notable that this Wall Street Journal report comes after
Speaker 1: a US Republican senator was you're very pointed in his
Speaker 1: criticism of Powell at the testimony, or a US representative
Speaker 1: saying Trump was voted in by millions. You were voted
Speaker 1: in by one person, Donald Trump, and you don't want
Speaker 1: and he doesn't want you to go on doing what
Speaker 1: you've been doing. So what's your justification.
Speaker 3: The other visit News's course of relaxation of capital rules.
Speaker 2: Did you expect that to have more of an impact?
Speaker 1: Well, the impact was mostly priced in, it looks like,
Speaker 1: and I think it was noticeable that earlier on a
Speaker 1: few days ago, we had some comments from the Fed,
Speaker 1: I think after the FOMC meeting in fact, that they
Speaker 1: were moving more strongly towards the SLR changes. That didn't
Speaker 1: have a huge impact, and it highlights that just because
Speaker 1: banks will be able to buy more treasuries doesn't necessarily
Speaker 1: mean they will, especially when we are going into what's
Speaker 1: going to be a very fraud couple of weeks. We
Speaker 1: have the reciprocal tariff deadline coming at about July nine,
Speaker 1: and then before that, we have the July four deadline
Speaker 1: for whether or not the Trump's spending and taxation bill
Speaker 1: gets past, and how much that's likely to increase the deficit.
Speaker 1: That's another uncertainty. We also have the uncertainty of we
Speaker 1: get payrolls July three. This time around on Thursday, ahead
Speaker 1: of the July for US holiday, So it's going to
Speaker 1: be a very choppy week next week. Not too much
Speaker 1: of a surprise that banks and others aren't going to
Speaker 1: rush into treasuries absent a clear signal that, for example,
Speaker 1: right cuts the coming.
Speaker 2: Garfield Reynolds in Sydney. He is our Asia team lead
Speaker 2: for Bloomberg Markets Live. Thanks for listening to today's episode
Speaker 2: of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we
Speaker 2: look at the story shaping markets, finance, and geopolitics in
Speaker 2: the Asia Pacific. You can find us on Apple, Spotify,
Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Speaker 2: Join us again tomorrow for insight on the market moves
Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Prisner,
Speaker 2: and this is Bloomberg