Speaker 1: Bloomberg Audio Studios, podcasts, radio News.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. Equity
Speaker 2: markets in the Asia Pacific are trading higher following a
Speaker 2: record setting session in the US where we had the
Speaker 2: S and P five hundred and the Nasdaq one hundred
Speaker 2: finishing at all time highs. Seems there is hope for
Speaker 2: an extension of the ceasefire in the war with Iran.
Speaker 2: That initial truce, by the way, will expire next week.
Speaker 2: Mediators from both sides have been working tirelessly as tensions
Speaker 2: over the Strait of Hormus seem to be intensifying. Now
Speaker 2: we know the US is maintaining its naval blockade as
Speaker 2: a way of cutting off Iranian shipments. Ten vessels have
Speaker 2: been forced to turn around so far, and from the
Speaker 2: other side, Tehran is keeping the straight closed to most
Speaker 2: other traffic. Interestingly, crude oil prices ended the New York
Speaker 2: session little changed. Joining me now for a look at
Speaker 2: market action is Bloomberg's Paul Dobson. Paul as executive editor
Speaker 2: for Asia Markets, and he joins from our studios in Singapore.
Speaker 2: Thank you for making time. So much of what we've
Speaker 2: been seeing appears to be headline driven optimism. Where are
Speaker 2: the skeptics right now? I'm wondering if you get a
Speaker 2: sense of maybe a little bit of complacency creeping in.
Speaker 3: I think that you can't ignore the price action, Doug,
Speaker 3: and so a lot of our commentators are still saying, well,
Speaker 3: beware that physical crunch in the energy space, right you know,
Speaker 3: people in the physical market are paying even higher rates
Speaker 3: than you see in financial markets in order to actually
Speaker 3: secure cargoes of oil at the locations where they need them.
Speaker 3: But the market, you know, has moved on a little
Speaker 3: bit from that. It's optimistic that at some point there
Speaker 3: will be a deal between the US and around that
Speaker 3: will allow energy to flow out of the straight of
Speaker 3: Humis once again. They feel that this sort of maximum
Speaker 3: pressure that's been being applied by the US will do
Speaker 3: the trick, and are already pricing in a sort of
Speaker 3: recovery as a result from that. And although crude prices
Speaker 3: are higher now than they were at the start of
Speaker 3: the war, they have suddenly come down a long way
Speaker 3: from their peak, and that's allowing a lot of the
Speaker 3: rest of the financial world to sort of reset and
Speaker 3: get back to those levels that we were before the
Speaker 3: outbreak of the war.
Speaker 2: So we're seeing a little bit of weakness and oil
Speaker 2: prices now in the Asian session, and our colleague Mark Cranfield,
Speaker 2: the m Live strategist in Singapore, was pointing out that
Speaker 2: the White House may be urging CEOs of American oil
Speaker 2: and gas companies to boost drilling. That's according to a
Speaker 2: report in Politico. Apparently the Energy Secretary and the Interior
Speaker 2: Secretary intend to speak to these CEOs on a call Thursday.
Speaker 2: Even if the US were to add to production, is
Speaker 2: that going to make a difference where economies in Asia
Speaker 2: are concerned.
Speaker 3: It's hard to see that it could have an impact immediately.
Speaker 3: The US is already exploding much a maximum capacity, I believe,
Speaker 3: whatever energy products it can do, and the US itself
Speaker 3: has got a pretty healthy supply situation at the moment,
Speaker 3: So you know, it depends on what that export capacity
Speaker 3: looks like. But nonetheless, if you're contributing more to production
Speaker 3: kind of overall, then that is going to help the outlook. Remember,
Speaker 3: we have been drawing on strategic reserves in various parts
Speaker 3: of the world in order to ensure the security of
Speaker 3: supply in recent weeks. You know, and I think that
Speaker 3: that's probably part of the explanation in a way, Doug
Speaker 3: for why the market has been able to weather the
Speaker 3: storm to a certain extent is that it was very
Speaker 3: obvious immediately what the risk of a closure of the
Speaker 3: strait of horn Mows was, and so right from the
Speaker 3: start there was emergency action taking place. In some emerging
Speaker 3: market economies, they went to a four day week very quickly.
Speaker 3: There was a lot of demand destruction, by which I
Speaker 3: mean sort of energy or fuel switching from say gas
Speaker 3: to coal or to other alternative feedstocks, and those withdrawals
Speaker 3: from the strategic reserves went into effect pretty quickly. So
Speaker 3: everybody kind of came into the situation with their eyes
Speaker 3: open and maybe having that fore warning and also having
Speaker 3: plentiful amounts of sort of floating storage, so oil already
Speaker 3: on ships has enabled the walls of global sort of
Speaker 3: energy markets so far to carry through what I would say,
Speaker 3: you know, where there is that sort of like a
Speaker 3: whiff of complacency would be if there isn't some sort
Speaker 3: of resolution relatively quickly, then each day that we move
Speaker 3: on with no supply coming out of the straight ofform news,
Speaker 3: the situation does get tighter for global energy markets, and
Speaker 3: it may be that some of the poorer countries in
Speaker 3: particular will be the ones that would need to or
Speaker 3: would would have to suffer as sort of supplies run scarce.
Speaker 2: And to that point, there was an interesting piece on
Speaker 2: the Bloomberg terminal quoting analyst at Goldman Sacks pointing out
Speaker 2: that in terms of equity market relief rallies, we have
Speaker 2: seen North Asia, em Europe has participated, Latin America as well,
Speaker 2: and if you look at those heavy oil importing parts
Speaker 2: of Asion and India, they seem to have lagged, and
Speaker 2: I would imagine that you expect that differentiation to persist
Speaker 2: for a while longer.
Speaker 3: Right, that's right. So we have Indonesia, Philippines, India sort
Speaker 3: of the laggards in Asian markets, and those are the
Speaker 3: big importers in the sort of emerging market space. It's
Speaker 3: been okay somehow for South Korea and Taiwan, even though
Speaker 3: they are also big energy importers. You know, they have
Speaker 3: more pricing power basically because the demand for the products
Speaker 3: that's being made in those economies is so strong that
Speaker 3: they can pay over the odds in terms of ensuring
Speaker 3: that they receive the shipments and deliveries that they need,
Speaker 3: and you know, I guess if you think about it,
Speaker 3: like the tech side of equities markets has really been
Speaker 3: in the vanguard here, but there are sort of signs
Speaker 3: of froth in the speed of the rebound, sort of
Speaker 3: you know, longer than ten day winning streak for the
Speaker 3: NASDAC and we're at that stage where you know, you
Speaker 3: have a sneaker company rebranding itself as an AI company
Speaker 3: in the stock flying five hundred percent higher talking about
Speaker 3: all birds, which that happened overnight, and so there, you know,
Speaker 3: there are signs maybe I wouldn't say complacency, but a
Speaker 3: little bit of frothiness or a little bit of everybody
Speaker 3: trying to pile back in to the market at the
Speaker 3: same time, and maybe that causes some disequilibrium and we'll
Speaker 3: need a little bit of a calling off period at
Speaker 3: some point.
Speaker 2: I'm wondering whether a little bit of the price section
Speaker 2: that we had in the States was tied to maybe
Speaker 2: a short squeeze of sorts, because a lot of the
Speaker 2: software issues that had been badly beaten seemed to bounce back,
Speaker 2: and early yesterday, I think in Seoul it looked as
Speaker 2: though the Cosby might finish at a record high that
Speaker 2: didn't happen. Can you give me a little bit of
Speaker 2: insight as to why that rally faded a bit?
Speaker 4: Well?
Speaker 3: I think that again, it is that sort of like
Speaker 3: how far, how fast can you go kind of thing.
Speaker 3: I think probably a lot of the retail traders that
Speaker 3: timed it right would have been very happy with the
Speaker 3: rally up towards those levels and see it as a
Speaker 3: decent sort of take profit kind of place to be.
Speaker 3: I do think that we've seen very encouraging sort of
Speaker 3: figures from TSMC. Didn't have such beautiful numbers from ASML
Speaker 3: in Europe, and that might have checked things a little
Speaker 3: bit in the tech space. But it does feel like,
Speaker 3: you know, the lakes of Samsung, Skhnix and TSMC still
Speaker 3: have plenty of buyers behind them, plenty of momentum, so
Speaker 3: long as the data center narrative, which actually seems to
Speaker 3: have come back a little bit more robust, you know,
Speaker 3: some of those fears that we had about the ability
Speaker 3: to fund that build out and whether there would be demand.
Speaker 3: It seems like during the war actually the AI story
Speaker 3: is quietly, you know, kind of stabilized a little bit
Speaker 3: as well, and so that may be drawing in more
Speaker 3: enthusiastic buyers too.
Speaker 2: So as the rally and crude oil kind of confronts
Speaker 2: US with the dependency on hydrocarbons as a way of
Speaker 2: creating energy. Essentially, we're looking for alternative means. Writers had
Speaker 2: to report that China has held some initial talks with
Speaker 2: providers of equipment that makes solar panels. Apparently Beijing is
Speaker 2: considering limiting exports of some of the most advanced solar
Speaker 2: panel technology to the US. Can you give me a
Speaker 2: sense of what's happening here?
Speaker 3: I mean, there's a little sense that before the Trump
Speaker 3: she meeting both sides and just trying to set out
Speaker 3: their store a little bit on where they are. China
Speaker 3: obviously has a little bit and has shown a little
Speaker 3: bit of its sort of power in the rare earth
Speaker 3: material space. US has flexed its muscles in terms of
Speaker 3: the AI and chip technology space as well, And as
Speaker 3: we get closer to that meeting, maybe they're just sort
Speaker 3: of showing each other what they have and what's on
Speaker 3: offer and what could be you know, game for negotiation
Speaker 3: and that kind of thing. It's interesting though, because China
Speaker 3: is obviously the big exporder of solar panels by a
Speaker 3: long way almost. It has too many of them, right,
Speaker 3: and so they've been trying to curb production domestically so
Speaker 3: to reduce a glut, and so withholding exports doesn't seem
Speaker 3: like a really smart thing to do in that respect.
Speaker 3: But also the US, you know, Trump, as we said earlier,
Speaker 3: is pushing for more oil drilling. He's all in on
Speaker 3: the fossil fuels trade. Isn't really you know the world's
Speaker 3: biggest enthusiast for renewable energy in any case, So I
Speaker 3: don't know that that would be the thing that would
Speaker 3: really sort of rile him particularly. So, Yeah, it's an
Speaker 3: interesting one. But I think that, you know, as we
Speaker 3: do get closer to that meeting, assuming that it goes
Speaker 3: ahead and that the Aram war is all sort of
Speaker 3: over by then they're going to have a number of
Speaker 3: interesting talking points on the trade side as well as
Speaker 3: on the international sort of geopolitical security side too.
Speaker 2: So imagine that it's not and China is still in
Speaker 2: a situation where it's been cut off from a lot
Speaker 2: of Iranian crude oil. How is that going to complicate this?
Speaker 3: Mean? I think that China will be pretty pleased with
Speaker 3: the way that it's come through things so far. It
Speaker 3: had good storage and reserves of crude oil, It has
Speaker 3: a lot of alternative energy sources as well, and its
Speaker 3: markets and its currency have exhibited signs of strength. Its economy,
Speaker 3: you know, has held up reasonably, albeit with reduced experts
Speaker 3: in the most recent figures and still very poor sort
Speaker 3: of domestic borrowing and credit flowing through the economy. I
Speaker 3: think that it would get annoyed if it does start
Speaker 3: to see shipments that are supposed to be headed in
Speaker 3: its direction being curtailed. The ladies that we heard from
Speaker 3: Trump is that he had a conversation with she and
Speaker 3: that was sort of favorable in terms of the Iran
Speaker 3: situation with support. But I think the China will probably
Speaker 3: prefer for it to get done sorted and for everything
Speaker 3: to return to more normal sort of flow situations soon
Speaker 3: rather than later. But it's not just China. It's probably
Speaker 3: know Europe could say the same thing to Trump quite easily,
Speaker 3: you know, and all the other places around the world
Speaker 3: that are suffering well. Destraight upon these is closed.
Speaker 2: And in a very interesting way, higher oil prices has
Speaker 2: been largely responsible for arresting this deflationary trend that's been
Speaker 2: going on, particularly with wholesale level inflation in China.
Speaker 3: Right, I think that this is going to be a
Speaker 3: really interesting story to watch through the rest of the year.
Speaker 3: So if you remember, Japan managed to snap out of
Speaker 3: its deflationary cycle, not really because any of the domestic
Speaker 3: stimulus measures that it did finally started working, but more
Speaker 3: because of the impact of COVID on pricing and the
Speaker 3: need for companies to start raising their prices and actually
Speaker 3: that getting embraced by shareholders. And that's what we're starting
Speaker 3: to see a little bit in China now, not just
Speaker 3: sort of the energy related companies, but also we're seeing
Speaker 3: things like Maltai, which you know, makes by liquor, raising
Speaker 3: its prices and being embraced by stock investors for being
Speaker 3: able to do that. So demonstrating that it has a
Speaker 3: little bit of pricing power which we haven't really seen
Speaker 3: from retailer is a great deal off flight. So if
Speaker 3: that cements a little bit more that cycle and we
Speaker 3: start to see it feeding into wage growth and it
Speaker 3: gets the economy going again, then that would be a
Speaker 3: really interesting development and kickstart and probably you know, welcome
Speaker 3: by China. I think the economist would argue, well, you know,
Speaker 3: but people can't really afford higher prices, so it's just
Speaker 3: going to hurt demand even more in the economy. But maybe,
Speaker 3: you know, as we saw with Japan, it starts some
Speaker 3: sort of beneficial cycle that gets everything going again.
Speaker 2: We'll keep our eye on that. Paul. Always a pleasure,
Speaker 2: Thank you so very much. Bloomberg's. Paul Dobson is our
Speaker 2: executive editor for Asia Markets, joining from Singapore here on
Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
Speaker 2: I'm deg Krisner. So the US and Ron are considering
Speaker 2: a two week extension of their ceasefire. Now we're told
Speaker 2: the aim is to allow some more time to negotiate
Speaker 2: an overall piece deal. You know, the initial truth in
Speaker 2: that ceasefire expires next week. And that's where we begin
Speaker 2: our conversation with Linda Robinson. Linda is a senior Fellow
Speaker 2: at the Council on Foreign Relations and she spoke with
Speaker 2: Bloomberg TV host Paul Allen and Cherry on.
Speaker 5: Do you have any scenarios for how this plays out
Speaker 5: as we're hearing reports of a possible extension to the ceasefile?
Speaker 4: Yes, well, thank you, And the one bit of good
Speaker 4: news is there is still a tenuous ceasefire and there
Speaker 4: hasn't been a return to war. But I think the
Speaker 4: situation is very uncertain. Obviously a ceasefire is needed if
Speaker 4: a diplomatic resolution is going to come about, and it
Speaker 4: will probably need to be a prolonged cease fire because
Speaker 4: the parties are so far apart, and the hard work
Speaker 4: of diplomacy is really to start to identify the areas
Speaker 4: where you can move ahead and get some confidence building
Speaker 4: through reaching some early partial agreements. What we've seen to date,
Speaker 4: I think really is a lack of delving into the
Speaker 4: complex details in the nuclear file, in the missile file,
Speaker 4: in the proxy warfare file, and sweeping demands just aren't
Speaker 4: going to get the job done. And meanwhile, with a
Speaker 4: blockade in place, I think there are new risks, so
Speaker 4: we have to look at potential complications and escalation as
Speaker 4: a blockade if it does continue to be enforced.
Speaker 5: Let's talk a little bit more about the one of
Speaker 5: the key sticking points, which is of course around nuclear ambitions.
Speaker 5: The a whereabouts of its uranium currently unknown. But do
Speaker 5: you feel as if the events of the past few
Speaker 5: weeks have really underscored around desire to have an ekally
Speaker 5: a deterrent in the first place.
Speaker 4: Well, I think you look at it from their point
Speaker 4: of view, and they feel it's the ultimate safety guarantee
Speaker 4: for them, and that's certainly why I think they've been
Speaker 4: pursuing it for all of these years. But to get
Speaker 4: them off of that track, there has to, I think
Speaker 4: be some very hard bargaining to really understand what kind
Speaker 4: of security guarantees, especially following some of the statements made
Speaker 4: by the US President about wiping out their civilization. So
Speaker 4: I think it's really time to calm down and get
Speaker 4: to some of the brass tacks, which you mentioned the uranium.
Speaker 4: Of course, there is an estimated nine hundred and seventy pounds,
Speaker 4: Its locations are known, it's buried, but getting it out
Speaker 4: will be very difficult. And now I do not believe
Speaker 4: it's a militarily viable project without great risk and great casualties.
Speaker 4: So I think really people need to understand that's going
Speaker 4: to come about through a negotiated agreement and Iran having
Speaker 4: by some reports, Iran was really prepared to start talking
Speaker 4: about some of the specific details to get back to
Speaker 4: assigned agreement, and I think that is where as they
Speaker 4: said about Russia, trust but verify. There really need to
Speaker 4: be very detailed talks by experts who understand the technicalities
Speaker 4: and what's going to be required to have a verifiable agreement.
Speaker 4: So this is a very long road and I think
Speaker 4: a two week cease fire will not get you a deal.
Speaker 4: You have to really plan on months of negotiations. And meanwhile,
Speaker 4: the Straits should not be blocked, but they also a
Speaker 4: nable blockade will be very difficult to enforce.
Speaker 1: In my view, you follow the nucleation with Iran for
Speaker 1: years now, when you look at the details of what
Speaker 1: can potentially be agreed between all of these sides, in
Speaker 1: what form could there be an agreement in which is
Speaker 1: Washington hawks and Iran, with its amounts of security guarantees
Speaker 1: can actually come to the table and agree on something.
Speaker 4: Yes, well, I think that in the best of all
Speaker 4: possible worlds, Iran has a right to nuclear energy and
Speaker 4: there would be an agreement on that and how to
Speaker 4: feel facilitated and security assurances that would obviate the need
Speaker 4: for Iran to feel like it has to continue to
Speaker 4: pursue a nuclear weapon. And I do understand there are
Speaker 4: many people in Washington Israel and elsewhere. The simply don't
Speaker 4: believe this Iranian government will accept that outcome that it
Speaker 4: foregoes a nuclear weapon. But I think that is the
Speaker 4: goal that was certainly the aspiration of the Obama Accord,
Speaker 4: and by some accounts the talks in Oman were leading
Speaker 4: in a direction of an accord. So I think it's
Speaker 4: really important to get back to that table and try
Speaker 4: to understand what Iran is going to accept, but also
Speaker 4: some of their ten points I think the US and
Speaker 4: others will not accept. But it's a bargaining position. The
Speaker 4: point is to get into detailed negotiations.
Speaker 1: So is the only way to get something on nuclear
Speaker 1: that's agreeable to all regime change in Iran, something that
Speaker 1: President Trump is vacillated on. Sometimes it's said that regime
Speaker 1: change has already happened.
Speaker 4: Yes, well, by some accounts, you have a harder line
Speaker 4: regime in place now. But I think in my view,
Speaker 4: this president came was elected really on a commitment not
Speaker 4: to be in the regime change business. And as I
Speaker 4: said in a previous article, the unpredictability of what you'll
Speaker 4: get if you go for that could be anarchy or
Speaker 4: an even more intractable government I think the point now
Speaker 4: is to try to find a way to provide a
Speaker 4: path to security for both sides, and to resume and
Speaker 4: stop really the hemorrhaging of the economic costs globally for
Speaker 4: the region and for the US itself. Even if it
Speaker 4: says it's not dependent on energy from the region, plastics
Speaker 4: and many other products derivatives are very much part of
Speaker 4: the US economy. And I think that we're also courting
Speaker 4: some very high military risk if we get engaged in shipboarding.
Speaker 4: I was involved as a reporter in the shipboarding exercise
Speaker 4: at the beginning of Operation Iraqi feed Freedom with the
Speaker 4: US Navy Seals and the Polish Groum their special forces,
Speaker 4: and they were boarding ships and clearing them in the
Speaker 4: Alpha and the Upper Gulf. This is very dangerous, and
Speaker 4: you don't know who's on board, if they're armed, if
Speaker 4: they're going to resist. And as far as the US
Speaker 4: starting to shoot boats out of the water, as the
Speaker 4: President threatened, as was done in the Caribbean, that's going
Speaker 4: to get a lot of countries very exercised, very quickly.
Speaker 4: So he has a diplomatic crisis and a political crisis
Speaker 4: if he goes back to the military track.
Speaker 2: That was Linda Robinson, Senior Fellow at the Council on
Speaker 2: Foreign Relations, speaking with Bloomberg TV host Paul Allen and
Speaker 2: Cherry On bringing you their conversation here on the Daybreak
Speaker 2: Asia Podcast. Thanks for listening to today's episode of the
Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at
Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.
Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast
Speaker 2: YouTube channel, or anywhere else you listen. Join us again
Speaker 2: tomorrow for insight on the market moves from Hong Kong
Speaker 2: to Singapore and Australia. I'm Doug Chrisner, and this is
Speaker 2: Bloomberg
Speaker 4: Four