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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: Trade negotiators from Washington and Beijing met for over seven

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Speaker 2: hours in Stockholm on Monday with a name of extending

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Speaker 2: a tear offf truce. More talks are set for Tuesday.

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Speaker 2: US Treasury Secretary Scott Besson said an extension to the

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Speaker 2: current pause is likely, but there are some key sticking

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Speaker 2: points that do remain, and they include fentanyl related levies

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Speaker 2: as well as export controls on semiconductors. We got reaction

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Speaker 2: from Andrew Bishop, Global head of Policy research at Signum

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Speaker 2: Global Advisors.

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Speaker 3: I think the saraf truth is absolutely going to be extended.

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Speaker 3: But the main reason for that is not so much

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Speaker 3: because I think there's great progress being made on the

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Speaker 3: substance of these talks. Rather, I think President Trump essentially

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Speaker 3: realized back in April May that high tariffs on China

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Speaker 3: just work because the impact on the US economy is

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Speaker 3: too great and China has too much leverage in the

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Speaker 3: form of its control over rare earths.

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Speaker 2: That's Andrew Bishop of Signum Global Advisors, speaking earlier to

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Speaker 2: Bloomberg meantime, the dollar jumped today by the most since

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Speaker 2: early May, putting the greenback on track for its first

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Speaker 2: monthly gain this year. Now, the trade agreement between the

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Speaker 2: US and the European Union is stoking concern over the

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Speaker 2: negative impact of tariffs on global growth. You know, the

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Speaker 2: next few days will be pivotal for markets. It's the

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Speaker 2: busiest week of the earning season and it features big

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Speaker 2: cap tech. We've got the FED meeting on Wednesday, and

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Speaker 2: on Friday the US jobs report. In a moment, we'll

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Speaker 2: get some perspective from the Asia Pacific side. We'll hear

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Speaker 2: from Mark Franklin at Menu Life Investment Management, but we

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Speaker 2: begin here in the States. Joining me now is Vance Howard.

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Speaker 2: He is the CEO also the portfolio manager at Howard

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Speaker 2: Capital Management. Vance, thank you so much for making time

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Speaker 2: to chat with me. So we've got the big earnings

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Speaker 2: this week, Microsoft, Amazon, Apple. How are you feeling about

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Speaker 2: big cap tech right now?

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Speaker 4: I'm feeling very very good about big cap tech, Doug.

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Speaker 4: I mean, you look at eighty three percent of reported

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Speaker 4: so far, and I know we haven't have that many

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Speaker 4: that have reported, but so far the beat has been

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Speaker 4: quite quite amazing. They're beaten by quite a bit. Earnings

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Speaker 4: are looking really really strong, and as you know, as

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Speaker 4: you well know, earnings are what fuels a bull market.

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Speaker 2: A lot of the centers on artificial intelligence, and a

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Speaker 2: lot of the analysts that I've been speaking with have

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Speaker 2: pointed to the issue of capex spending as being critical

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Speaker 2: to try to get a little bit more of a

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Speaker 2: sense of the confidence that these companies have in terms

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Speaker 2: of further spending in this AI revolution. Is that an

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Speaker 2: important metric for you, cap X.

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Speaker 4: I think it's great. I think cap Tex is looking

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Speaker 4: very very strong. It looks like they're going to make

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Speaker 4: a lot of investment in that area. And I know

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Speaker 4: and Trump was in DC either yesterday the day before

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Speaker 4: and he signed a number of executive orders pushing AI

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Speaker 4: and really get behind AAI over here. So you know,

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Speaker 4: there's a lot of thrust with they have moving forward.

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Speaker 4: So I mean, can't mean anything but bullish about it.

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Speaker 4: And you know, if you want to go deeper into AI. Unfortunately,

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Speaker 4: I think that we're going to see some jobs that

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Speaker 4: are going to go away, but I think you're going

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Speaker 4: to see corporate earnings go up because I think you're

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Speaker 4: going to see an additional efficiency that's created through AI.

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Speaker 2: There's been this cloud that's been hanging over markets for

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Speaker 2: some time related to the trade war and a lot

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Speaker 2: of these tariffs. Do you think we're a significant turning

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Speaker 2: point right now as we approach that deadline of August first?

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Speaker 4: You know, I think this thing with EU was critical.

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Speaker 4: You know, the fifteen percent tariff on the European Union,

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Speaker 4: I think was a good deal for us. Actually, I

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Speaker 4: think it's a pretty decent deal for them too. But

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Speaker 4: you know, let's talk about terraces for a minute, Doug.

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Speaker 4: Did you know that in June blast month that we

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Speaker 4: had a twenty seven billion dollar surplus mainly due to terrists.

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Speaker 4: That's the first surplus that we've had since twenty seventeen.

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Speaker 2: One of the things I want to talk about is

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Speaker 2: the energy space here there in Texas, and I know

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Speaker 2: that oil and gas typically is close to the heart

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Speaker 2: of investors in Texas. And I'm getting indications now that

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Speaker 2: the oil and gas equipment a supplier, Baker Hughes, is

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Speaker 2: reportedly nearing a deal to buy Chart Industries. That's according

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Speaker 2: to the ft and they cite a source saying that

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Speaker 2: this would be a cash transaction worth something around thirteen

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Speaker 2: point six billion. How are you feeling these days about

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Speaker 2: the energy complex?

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Speaker 4: I think the energy complex is very, very stable. I

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Speaker 4: know in Euston, Texas, We've got an office down there,

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Speaker 4: and I know that the friends of mine that are

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Speaker 4: in the energy industry are pretty happy with the way

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Speaker 4: things are going. I think been more stable than it

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Speaker 4: has bollatile, which I think is actually creates a more

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Speaker 4: secure environment for the energy dependent industry. And when you

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Speaker 4: talk about thirteen billion dollars for a check from a

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Speaker 4: Baker US, that's a pretty good sized check.

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Speaker 2: How are you feeling about this week's FED meeting? There

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Speaker 2: has been some speculation that maybe a Powell and Company

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Speaker 2: would feel the pressure to cut interest rates, but the

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Speaker 2: market doesn't seem to be convinced to that fact. How

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Speaker 2: are you understanding what the Fed may do this week?

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Speaker 4: This has been the most hated the recovery I think

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Speaker 4: I've ever seen. I mean, it's just nobody's really buying

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Speaker 4: into it, even though it keeps just slowly melting up.

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Speaker 4: And I think it's going to continue to melt up.

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Speaker 4: But when you look at the Fed and you look

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Speaker 4: at what's going on, did you know that they had

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Speaker 4: three of the governors that descended last time. So that's

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Speaker 4: one of the few times ever that we've had that

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Speaker 4: many governors on the FED board that had descended. So

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Speaker 4: I think he's going to be under a lot of

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Speaker 4: pressure to start to drop rates. To be quite candid, Doug,

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Speaker 4: I think he needs to start dropping rates. If he's

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Speaker 4: truly data dependent, then he should start dropping rates here

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Speaker 4: here in the near term.

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Speaker 2: Okay, So if we can accept maybe the notion that

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Speaker 2: we'll get two rate cuts before the end of the year,

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Speaker 2: don't you believe that's been fully discounted right now by

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Speaker 2: markets at this point.

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Speaker 4: I don't, and I don't because I think that there's

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Speaker 4: still a lot of speculation. Know, the FED keeps saying

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Speaker 4: this word which really bothers me a lot, which is

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Speaker 4: that there's no security, there's no surety out there. Well,

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Speaker 4: there's never any surity out We don't even know if

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Speaker 4: we're going to get up and live tomorrow. So to

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Speaker 4: sit there and bank upon the insecurity of what's going

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Speaker 4: to happen next week or next year. The FED keeps

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Speaker 4: saying that their data dependent, well, their data dependent, they

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Speaker 4: should start to drop rates because things are pointing in

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Speaker 4: that direction. I mean, we have a good economy, we

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Speaker 4: have low ue employment. Things are working very well, corporate

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Speaker 4: earnings are going up, but you know rates need to

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Speaker 4: start to come down.

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Speaker 2: Okay, So does that mean that there are opportunities in

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Speaker 2: the bond market right now?

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Speaker 4: I think there's a lot of opportunities, Especially if you

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Speaker 4: look at the ten, twenty, and thirty year treasuries. I

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Speaker 4: think there's opportunities there. I would be very cautious in

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Speaker 4: trading them because they are incredibly volatile. You look at

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Speaker 4: the ten year, the thirty year treasury dug and there's

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Speaker 4: volatile as s and p if not more so so

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Speaker 4: trading you know, the treasuries can be a little bit tricky.

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Speaker 4: But you know what a lot of people overlook and

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Speaker 4: we don't. We've invested in quite a bit is convertible bonds.

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Speaker 4: I think convertible bonds are really a nice investment alternative

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Speaker 4: to some of the other bond areas that you can

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Speaker 4: invest in, and we've done really well with the convertibles.

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Speaker 2: Help me understand the labor market right now, just anecdotally

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Speaker 2: from where you sit in in Texas. I know we

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Speaker 2: get the jobs numbers on Friday, Well, you know from Texas.

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Speaker 4: The economy here's doing very very well. I mean, we've

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Speaker 4: set ourselves up for growth. We've deregulated quite a bit.

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Speaker 5: You know.

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Speaker 4: Governor Rabbit, I think's done a pretty darn good job

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Speaker 4: with managing our state and managing our money. And you know,

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Speaker 4: we just got out of session with the our state

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Speaker 4: senators and reps, and I think that they come up

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Speaker 4: with a pretty good budget that's going to do very

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Speaker 4: very well for Texans. So I'd be very optimistic if

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Speaker 4: I was an employee in this great state of Texas.

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Speaker 2: Okay, we'll leave it there. Vance, it's always a pleasure.

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Speaker 2: Thank you so much for joining us. He is Vance Howard,

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Speaker 2: the CEO also portfolio manager at Howard Capital Management. Joining

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Speaker 2: us here on the Daybreak Asia podcast. Welcome back to

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Speaker 2: the Daybreak Asia Podcast. I'm Doug Chrisner. Equities across the

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Speaker 2: APAC region are a little weaker off the opening bell

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Speaker 2: after a flat session here in New York. The MSCI

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Speaker 2: Asia Pacific gauge down about six tens of one percent

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Speaker 2: for its third consecutive day of weakness. This buoyant move

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Speaker 2: from tariff deals seems to be running out of steam

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Speaker 2: as investors turn their focused to a raft of key

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Speaker 2: data here in the US. We'll get numbers on key

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Speaker 2: inflation that the FED watches as well as employment. And

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Speaker 2: let's not forget the FED meeting midweek. Let's get more

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Speaker 2: on market action from the Asia perspective from Mark Franklin.

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Speaker 2: He is Deputy head of Asset Allocation Asia for Manual

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Speaker 2: Life Investment Management. He spoke earlier with Bloomberg TV host

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Speaker 2: Sherry On and Avril Hon on the Asia trade mark.

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Speaker 5: Is a busy week, we got the Fed, among the

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Speaker 5: central banks, we got earnings. But just one of your

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Speaker 5: thoughts first, what we're seeing on the dollar in the

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Speaker 5: past day against the backdrop of these trade deals. Do

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Speaker 5: you think this is short lived? Because some of our

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Speaker 5: analysts think so.

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Speaker 6: That's a great question. Good morning. We've seen quite an

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Speaker 6: underweight position built up in US dollars in the market

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Speaker 6: by investors, and so there's a bit of an asymmetry

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Speaker 6: now which could partially unwind in the short term, particularly

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Speaker 6: if the FED remains on hold. That the trade deal

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Speaker 6: that the US and the EU have purportedly signed suggest

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Speaker 6: that the US comes out of it much stronger and

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Speaker 6: the ear a little bit weaker, and so that's created

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Speaker 6: a bit of selling pressure on Euro assets, but the

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Speaker 6: trend over the medium term still looks intact visa the

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Speaker 6: weakening dollar cyclically, and if you zoom out, it's really

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Speaker 6: effectively a reversal of the US dollar appreciation that we

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Speaker 6: saw under the previous four or five years.

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Speaker 5: What about the feds path, What do you think is

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Speaker 5: realistic to expect in terms of cuts?

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Speaker 6: The market's pricing at present is not unreasonable. I think

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Speaker 6: we've got about one and a half cuts priced in

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Speaker 6: between now and the end of this year, although next

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Speaker 6: year's rate cut pricing about four to five times suggests

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Speaker 6: there's a building sense of optimism that the terminal rate

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Speaker 6: is meaningfully below where it is now. Clearly the Feder's

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Speaker 6: move towards an approach of data dependency, and so we're

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Speaker 6: really moving from one data points to the next. And

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Speaker 6: let's focus on the non farm pay rolls that are

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Speaker 6: coming up. Surely that could be quite decisive for short

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Speaker 6: term policy decision making.

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Speaker 1: Mike, how much is the trajectory of the Fed and

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Speaker 1: expectations about what the central back will do affect the

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Speaker 1: broader markets, because it seems risk sentiment is pretty strong

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Speaker 1: in the United States, especially with profits coming up surprising

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Speaker 1: to the upside.

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Speaker 6: The short onto is the market is not overly focused

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Speaker 6: on the FED these days. Ironically, we're moving into more

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Speaker 6: of a fiscal world, a world of fiscal dominance, and

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Speaker 6: really it's about government spending and tax policy, which is

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Speaker 6: the marginal driver of financial conditions.

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Speaker 1: What about when it comes to the rest of Asia,

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Speaker 1: because we are now seeing earning season again and with

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Speaker 1: some of these trade deals out of the way, what

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Speaker 1: will move markets like Japan.

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Speaker 6: Japan's an interesting one because the earning season is likely

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Speaker 6: to reflect a headwind from currency appreciation over the last

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Speaker 6: few months, and at the same time as well, the

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Speaker 6: domestic economic picture in Japan is one of anemic growth

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Speaker 6: and somewhat inflationary pressures on costs, and so we're not

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Speaker 6: overly positive on this immediate earth season for the Japan

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Speaker 6: equities market. But clearly, if we move into a more

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Speaker 6: persistent weakening of the end against it, even if it's cyclical,

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Speaker 6: that should help to arrest that momentum. The next time around.

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Speaker 1: We'll see momentum for South Korean assets. I mean, we

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Speaker 1: had big influence from overseas. When it comes to the

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Speaker 1: cost be now we're headed towards a potential trade deal.

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Speaker 1: How much more will this help.

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Speaker 6: The election was also a major positive catalyst, with the

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Speaker 6: starting point being that most foreign investors were pretty cautious

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Speaker 6: towards career given the previous one or two years of

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Speaker 6: political experience, So we saw a big rally post election.

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Speaker 6: I think we're in a situation now where those gains

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Speaker 6: are being consolidated, maybe some recycling of ownership of the market.

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Speaker 6: What we probably need to see from here is evidence

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Speaker 6: of the government is genuinely focused on corporate governance, reform

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Speaker 6: and supply side growth, alongside the prospects for progress on

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Speaker 6: a trade deal as well.

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Speaker 5: Mark, help me get my head around this, because we

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Speaker 5: are seeing terror levels lower than what was first feared,

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Speaker 5: but they are still higher than prior to liberation. The

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Speaker 5: markets are looking past is when do you think that

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Speaker 5: tariff impair comes to bear and when does that kind

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Speaker 5: of become a breaking point of sorts for markets?

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Speaker 6: Two points on this one. It's not so much about tariffs.

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Speaker 6: It's the degree of uncertainty that market participants observe. And

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Speaker 6: what we've seen is we saw a major spike in

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Speaker 6: policy uncertainty in and around March and April given the

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Speaker 6: Liberation Day shock events, and since then, policy uncertainty has

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Speaker 6: actually come down and that's generally constructive for risk appetites.

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Speaker 6: So even though tariff levels are settling in at a

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Speaker 6: level that's meaningfully higher than where they were before, it's

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Speaker 6: the uncertainty index that really drives. And then the second

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Speaker 6: point i'd highlight is there's still pretty mixed evidence over

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Speaker 6: the extent to which tariffs are inflationary. We've still got

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Speaker 6: disinflationary pressures on the services side in the US economy,

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Speaker 6: and then on the good side, it's really set to

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Speaker 6: specific particularly those sectors where they're running more shorter inventory cycles.

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Speaker 6: In the absence of that, there's still a limited amount

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Speaker 6: of evidence that the tariff increases that have been announced

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Speaker 6: so far have meaningfully changed the medium term inflation trajectory,

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Speaker 6: and that's important for risk appetite as well.

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Speaker 5: That's interesting. So the jury is still out on tariff

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Speaker 5: impact on inflation. But what are you seeing in terms

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Speaker 5: of how it's potentially going to eat into earnings Because

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Speaker 5: that's a bit one to watch as well.

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Speaker 6: If you look at the US perspective, actually earning season

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Speaker 6: is tracking reads me well we have got a major

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Speaker 6: set of announcements coming up in the next few days.

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Speaker 6: But again going back to the point about currency, US

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Speaker 6: dollar weakness has served as a nice tailwind for large

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Speaker 6: cap US companies given the offshore earnings exposure. The second

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Speaker 6: factor as well is that the uncertainty that I mentioned

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Speaker 6: earlier from tariff policy that will eventually start to crimp

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Speaker 6: investment decisions by corporates in the US. But the investment

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Speaker 6: decisions that are being committed now really were already made

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Speaker 6: a few months ago before the tariff story became central

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Speaker 6: to market development. So it's probably going to be a

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Speaker 6: deferred reaction to the downside in that sense.

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Speaker 5: Now we'll have to keep watching.

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Speaker 4: Mark.

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Speaker 5: Thank you for your analysis. Good to chat. Mark Franklin

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Speaker 5: is MD and senior portfolio manager, Asset Allocation Asia and

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Speaker 5: Manual Life Investment Management.

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

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

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

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

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

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

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