WEBVTT - APAC Stocks Rise as US Inflation, Tech Spur Gains 0:00:00.040 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio News. 0:00:10.560 --> 0:00:13.520 Welcome to the Daybreak Asia Podcast. I'm Doug Krisner. The 0:00:13.560 --> 0:00:17.439 government of Japanese Prime Minister son of Ataki Ichi appears 0:00:17.480 --> 0:00:20.280 to be supportive of a near term rate hike from 0:00:20.320 --> 0:00:22.680 the Bank of Japan. We are told the next move 0:00:22.960 --> 0:00:27.160 is likely to be either in September or October. Now, 0:00:27.200 --> 0:00:30.680 the Bank of Japan's fears over yen weakness driving up 0:00:30.720 --> 0:00:34.000 prices further seems to be aligning with the government's desire 0:00:34.120 --> 0:00:39.760 to strengthen the impact of the recent US Japan currency intervention. Earlier, 0:00:39.800 --> 0:00:42.280 Bloomberg spoke with BlackRock's Rick Reader. 0:00:42.800 --> 0:00:44.879 Is the Bank of Japan going to be hawkish to 0:00:44.880 --> 0:00:48.400 support the currency? And heretofore they've been a bit deliberate 0:00:48.440 --> 0:00:51.000 in terms of moving it. This moving in September to 0:00:51.040 --> 0:00:54.160 sort of stabilize the currency is a big deal intervention. 0:00:54.680 --> 0:00:57.920 In our watched intervention happen over time. You need to 0:00:58.080 --> 0:01:01.200 really keep going with a lot of firepower. I would argue, 0:01:01.240 --> 0:01:03.400 it's not another most durable way to get there. 0:01:03.560 --> 0:01:04.360 That's Rick Reader. 0:01:04.440 --> 0:01:08.640 He is Global Fixed Income CIO at Blackrock. For a 0:01:08.680 --> 0:01:11.199 closer look at the end and the overall price action 0:01:11.360 --> 0:01:14.200 in the foreign exchange. I'm joined by Bloomberg FX and 0:01:14.319 --> 0:01:18.959 rate strategist David Finnerty. David joins from our studios in Singapore. 0:01:19.360 --> 0:01:21.440 Thank you for being here. Give me your sense of 0:01:21.480 --> 0:01:23.560 what we're seeing play out right now in terms of 0:01:23.600 --> 0:01:27.000 the yen and whether it's really incumbented at this point 0:01:27.080 --> 0:01:30.440 on the boj to move more aggressively otherwise we're going 0:01:30.480 --> 0:01:32.479 to be stuck here at at around one fifty nine 0:01:32.640 --> 0:01:35.120 fifty or one sixty against the greenback. 0:01:35.920 --> 0:01:38.520 Yes, so you've heard the classic case of the intervention, 0:01:38.720 --> 0:01:42.040 dolly in goes down and basically bounds quickly. I mean, honest, 0:01:42.080 --> 0:01:43.880 it seems to be bound quicker and quicker every time 0:01:43.920 --> 0:01:46.640 after the intervention I think now, So, so you're back 0:01:46.680 --> 0:01:49.800 up to round one fifty nine fifty around that area. 0:01:50.480 --> 0:01:53.240 The market at the moment is definitely a bit split 0:01:53.360 --> 0:01:55.960 on where it goes from here. Obviously, Mark's very aware 0:01:56.400 --> 0:01:59.560 of potential for the intervention if it went above one 0:01:59.640 --> 0:02:03.840 sixt so're there's not much enthusiasm to sort of buy 0:02:04.080 --> 0:02:07.080 at these levels. Having said that, there's people going why 0:02:07.120 --> 0:02:09.000 would I sell at these levels? Either of the Really 0:02:09.040 --> 0:02:12.919 the fundamental picture hasn't changed yes, the BOJ it looks 0:02:12.919 --> 0:02:16.839 like maybe hiking in September or October. But the market's going. 0:02:17.080 --> 0:02:19.640 But even before Bloomberg put up story yesterday, the market's 0:02:19.639 --> 0:02:22.360 going when I sort of thinking that anyway, So the 0:02:22.400 --> 0:02:25.200 market pricing changed a little bit, but the markets were 0:02:25.240 --> 0:02:27.919 quite there was quite heavily factored into markets already. Hence 0:02:27.919 --> 0:02:30.080 you didn't see a bit bit of a bump. So 0:02:30.120 --> 0:02:32.480 the point being is even the BOJ hikes, I think, 0:02:32.560 --> 0:02:34.760 let's say your hike now they hike another quarter, say 0:02:34.800 --> 0:02:37.320 in January, whatever the market's going, I've already factored that in. 0:02:37.600 --> 0:02:40.440 So for you the move, something else really has to happen. 0:02:40.840 --> 0:02:44.120 So I think BOJ policy is a factor, but it's 0:02:44.160 --> 0:02:46.639 not the only factor. And I think it comes more 0:02:46.680 --> 0:02:48.840 back to the dollar side of the equation. I think 0:02:49.000 --> 0:02:52.160 I think what's interesting is even last night you had 0:02:52.440 --> 0:02:55.200 well this week you've had you know, lower than expected 0:02:55.200 --> 0:02:59.280 straight CPI or tame CPI. PPI came alone and expected, 0:02:59.440 --> 0:03:02.840 and yet and so the market diarback expectations for federal 0:03:02.880 --> 0:03:07.040 reserve cuts. Still looking for basically hike this year, sorry hikes, 0:03:07.040 --> 0:03:09.519 not cuts. Still looking for hike basically this year. But 0:03:09.560 --> 0:03:12.359 it's not fully priced in now, and yet Dolly and 0:03:12.480 --> 0:03:15.160 can't go anywhere. You know, it doesn't, then they're very 0:03:15.160 --> 0:03:16.840 little sell off. So I think at the moment you 0:03:16.880 --> 0:03:20.400 are in this lull period, we say where people going, 0:03:21.000 --> 0:03:22.760 you know, do I want to buy it? 0:03:22.840 --> 0:03:22.880 No? 0:03:23.040 --> 0:03:25.440 Do I want to sell it? No? And therefore it's 0:03:25.440 --> 0:03:27.800 not really going anywhere. It's really going to be data 0:03:27.880 --> 0:03:31.200 driven I grind anywhere at best. But you'd have to 0:03:31.200 --> 0:03:35.280 think at the moment, given that it can't, it's struggling 0:03:35.280 --> 0:03:37.760 to go lower. Therefore you go, what doesn't it sort 0:03:37.760 --> 0:03:40.240 of go down, will go up by default at some point, 0:03:40.400 --> 0:03:43.520 So I'd say that risks are still skewed to the upside. 0:03:43.640 --> 0:03:46.280 But again, I just because no one's jumping on this 0:03:46.360 --> 0:03:47.960 bang wag, and I can't blame them to be fair. 0:03:48.400 --> 0:03:49.760 Then I think at the moment it's you know, a 0:03:49.800 --> 0:03:50.680 grind high at best. 0:03:50.880 --> 0:03:53.440 What is your sense of the role that the US 0:03:53.760 --> 0:03:56.560 is playing in this intervention? And I'm wondering whether or 0:03:56.640 --> 0:03:59.360 not you can give any credence to this idea that 0:03:59.440 --> 0:04:03.440 the bigger worry for the US Treasury is that Japan 0:04:03.560 --> 0:04:07.560 would essentially sell US treasury as a way of raising 0:04:07.600 --> 0:04:11.360 dollars to fund defense of the Japanese currency. 0:04:12.000 --> 0:04:16.160 I think, look, that's always been bantered around. Reality is 0:04:16.200 --> 0:04:18.280 I think, you know, and the inn of lats around 0:04:18.320 --> 0:04:20.440 holes quite a lot of treasury, so we have to 0:04:20.440 --> 0:04:22.479 put that in mind. So giving useld some of them, 0:04:22.760 --> 0:04:24.960 it could still be relatively a small dip in the pie, 0:04:25.040 --> 0:04:28.600 given how the liquidity in the treasury market. And then 0:04:28.600 --> 0:04:31.720 I think also Japan itself has be aware of it 0:04:31.760 --> 0:04:34.920 has a very good relationship with the US. So you go, 0:04:35.240 --> 0:04:37.120 you know, is that something you want to do? Obviously 0:04:37.160 --> 0:04:38.880 not saying you won't do it or can't do it, 0:04:39.080 --> 0:04:41.120 but I think at then day, is that really the 0:04:41.240 --> 0:04:43.640 last measure? And historically they really haven't done it, so 0:04:44.160 --> 0:04:46.599 why start it now? I think what's interesting is you've 0:04:46.600 --> 0:04:49.880 had the US come in and support the coordinate intervention, 0:04:50.040 --> 0:04:52.080 so you know that has happened a long long time, 0:04:52.440 --> 0:04:54.640 and I think that's interesting. I do think the interesting 0:04:54.680 --> 0:04:57.800 thing though we don't know, maybe only Scott's bestant knows this, 0:04:58.080 --> 0:05:00.280 but was it like because Scott doesn't has said that 0:05:00.680 --> 0:05:04.279 he'd like BEOJ to hike a bit faster historically, so 0:05:04.520 --> 0:05:07.119 was it a question for me? Becomes it is okay, 0:05:07.640 --> 0:05:09.560 what's like, we'll come and help you this time, but 0:05:09.880 --> 0:05:12.800 you've got to hike quicker as more. As a result 0:05:13.200 --> 0:05:15.839 of course, the catches even within an intervention, and even 0:05:15.960 --> 0:05:19.000 now with boj seems to be hiking at a faster pace. 0:05:19.160 --> 0:05:22.320 We save than once every six months, Dottie. And still 0:05:22.320 --> 0:05:24.479 one fifty on fifty. So you know, at the end 0:05:24.480 --> 0:05:26.799 of the day we can talk about leftar and center. 0:05:26.880 --> 0:05:29.039 But the market has spoken, he goes, we're still one 0:05:29.120 --> 0:05:32.800 fifty on fifty, So something different has to change for 0:05:32.920 --> 0:05:34.679 that dynamic therefore to change. 0:05:34.800 --> 0:05:37.120 What about the shape of the yield curve in Japan 0:05:37.240 --> 0:05:39.920 right now? Do you expect that to change much going forward? 0:05:40.480 --> 0:05:42.960 I think that there's certainly can be pressure on the 0:05:42.960 --> 0:05:45.800 long term part of the your curve. Obviously we're to 0:05:45.839 --> 0:05:50.680 see a bit more information on tackage spending plans, and 0:05:50.960 --> 0:05:54.880 we know tack etanomics. We know that you know that 0:05:54.960 --> 0:05:57.520 basically involves spending, and you know that's the case. She's 0:05:57.520 --> 0:05:59.560 going to you'll pay for growth down the line, and 0:05:59.560 --> 0:06:02.320 we'll see that the market's obviously more worried about Okay, well, 0:06:02.320 --> 0:06:05.120 how much more spending is gonna is it gonna net 0:06:05.200 --> 0:06:07.760 spending on in te because obviously, you know, very lowering 0:06:08.120 --> 0:06:10.080 if they are the consumption tax and they go, okay, 0:06:10.120 --> 0:06:14.080 it's less revenues, therefore you need the fund more. So 0:06:14.200 --> 0:06:18.280 I think that the pressure remains on the long end 0:06:18.360 --> 0:06:22.520 of the curve because of what the Prime minister is 0:06:22.520 --> 0:06:25.440 looking to do. You know, I think as we move forward, 0:06:25.960 --> 0:06:28.240 you know, these plans always evolve. You know, the budget 0:06:28.279 --> 0:06:31.640 plans keep tweaking. There's always sort of a supplemental budget. 0:06:32.000 --> 0:06:36.680 You know, if the expansory plans, if the funding plans build, 0:06:36.880 --> 0:06:38.560 then I think it will just remain. But I think 0:06:38.560 --> 0:06:41.159 from a long term perspective, you know, the pressure is 0:06:41.160 --> 0:06:43.279 going to remain on the on the long end of 0:06:43.279 --> 0:06:45.680 a curve, the short term end of the curve to 0:06:45.720 --> 0:06:48.880 some degree. But again, the market's already priced in the hike, 0:06:49.080 --> 0:06:52.599 so I don't see the boj going really really aggressive now. 0:06:53.480 --> 0:06:56.240 You know, they may do once or said once in September, October, 0:06:56.360 --> 0:06:59.200 months in January, but the market goes factor that in already. 0:06:59.320 --> 0:07:01.360 So if there's a little more slope to the curve 0:07:01.400 --> 0:07:05.080 in Japan, that's going to be a positive for Japanese financials, 0:07:05.080 --> 0:07:07.479 for the banks as well, right, it. 0:07:07.440 --> 0:07:10.800 Will be positive for them, and so you know, Nick 0:07:10.840 --> 0:07:14.160 guys obviously, like most stock inticses has been forming well. 0:07:14.280 --> 0:07:17.520 So say from a backstock perspective, they'll go. They'll certainly 0:07:17.560 --> 0:07:20.840 quite quite happy to take that. But yeah, in terms 0:07:20.880 --> 0:07:24.160 of overall in dollar yen, you know, I just think 0:07:24.160 --> 0:07:27.960 at the end they unless yields shoot I which again 0:07:28.000 --> 0:07:30.920 I don't think, you know, bankage vans always very wary 0:07:30.960 --> 0:07:34.160 about whenever long term yeals go a bit unruly, should 0:07:34.200 --> 0:07:36.440 we say, they try and rain those in a bit. 0:07:36.520 --> 0:07:39.200 So that's the last thing they want as well. So 0:07:39.440 --> 0:07:41.800 I think, you know, stepman of the YLK cleve or 0:07:41.880 --> 0:07:43.800 movement of the elk Cub's fine, but it will be in 0:07:43.800 --> 0:07:47.440 an orderly fashion, should we say, or I would expect 0:07:47.480 --> 0:07:48.080 it to be. So. 0:07:48.160 --> 0:07:50.440 You mentioned the price reports in the US this week 0:07:50.480 --> 0:07:53.720 we had both CPI PPI. The numbers came in on 0:07:53.800 --> 0:07:57.080 the cool side, and if you look at them together, 0:07:57.440 --> 0:08:02.440 I think the July price reports have essentially lowered the 0:08:02.760 --> 0:08:05.800 implied probability of a FED rate hike in September. I 0:08:05.800 --> 0:08:09.240 think we're below around forty percent put September aside for 0:08:09.280 --> 0:08:12.560 the moment, are you still expecting the FED to move? 0:08:12.680 --> 0:08:16.240 Maybe twenty five basis points worth of tightening between now 0:08:16.280 --> 0:08:17.040 and the end of the year. 0:08:17.760 --> 0:08:19.240 For me, I'm be honest, it's more of a coin 0:08:19.280 --> 0:08:23.080 to its the market's basically priced it in at the moment, 0:08:23.600 --> 0:08:26.280 it's a bit more of a coin toss. I mean again, 0:08:26.320 --> 0:08:28.840 there's a big variable of how long is it are 0:08:28.920 --> 0:08:32.959 more go on, how high does oil go, how long 0:08:33.040 --> 0:08:34.960 is it stay elevated, and even then how much does it 0:08:35.000 --> 0:08:38.200 feed through. It's fed through less into inflation data than 0:08:38.240 --> 0:08:40.599 the market is expected. Does that continue or do we 0:08:40.640 --> 0:08:43.120 actually start seeing the bump. So there is a lot 0:08:43.160 --> 0:08:47.120 of variables out there. I think the Fed's very split. 0:08:47.440 --> 0:08:49.440 I think we can safely say that there's sending some 0:08:49.480 --> 0:08:52.320 hawks for some people wait for more data. You start 0:08:52.360 --> 0:08:57.440 and see a little cracks in the labour side, nothing major, 0:08:57.520 --> 0:08:59.760 but I think they're cound be wary of that. So 0:09:00.440 --> 0:09:04.080 I think if let's say data kept coming in as is, 0:09:04.440 --> 0:09:07.319 I don't think they'll hid. But then I think, obviously 0:09:07.360 --> 0:09:10.360 the catch is that we know there's these inflation pressures 0:09:10.360 --> 0:09:12.160 about So for me, I think it's more of a 0:09:12.200 --> 0:09:15.720 coin to us at the moment. You know, and obviously, 0:09:15.760 --> 0:09:18.200 like everyone will, data dependent, but at the moment you 0:09:18.280 --> 0:09:20.680 go with data has come in on the south side, 0:09:21.200 --> 0:09:24.000 so you know, you go, the market's going, but it 0:09:24.040 --> 0:09:26.440 will change. But so far, you go, but it hasn't. 0:09:26.559 --> 0:09:30.760 We got pretty much strong economy, inflation not too bad, 0:09:31.000 --> 0:09:33.480 higher than you'd want. But I think it really we 0:09:33.520 --> 0:09:36.800 need to uptick or stay elevated for longer. Certainly it's 0:09:36.840 --> 0:09:40.760 not upticking, then I think the probabilities rise. But again, 0:09:40.840 --> 0:09:43.640 let's see what this month's in September stata comes in out. 0:09:43.800 --> 0:09:47.040 I think that's a good point because the real question 0:09:47.120 --> 0:09:48.599 I think for the market as wether or not this 0:09:48.760 --> 0:09:51.960 cooling is temporary. We had the head of the Cleveland Fed, 0:09:52.000 --> 0:09:55.880 Beth Hammock, saying on Thursday in the US, maybe the 0:09:55.920 --> 0:09:58.720 recent signs of a slow down in inflation will continue, 0:09:58.760 --> 0:10:01.280 but it's none of the less. She reiterated a call 0:10:01.360 --> 0:10:04.160 to raise rates now. So she seems to be of 0:10:04.200 --> 0:10:07.280 the opinion that you really got to nip this in 0:10:07.320 --> 0:10:11.240 the bud immediately rather than wait for that cooler data 0:10:11.480 --> 0:10:14.640 to continue to trickle in. And I'm wondering what she 0:10:14.840 --> 0:10:17.840 is looking at right now to justify an immediate move 0:10:18.120 --> 0:10:19.440 to raise rates. 0:10:19.920 --> 0:10:23.200 Well, she could go, look, inflation is still too high. Yeah, 0:10:24.240 --> 0:10:25.480 I mean, I mean you can thissually just go as 0:10:25.520 --> 0:10:27.959 simple as that. You go, look, how how long can 0:10:28.000 --> 0:10:30.200 we keep let inflation be a by target? And Kevin 0:10:30.240 --> 0:10:33.600 Walsh has repeated that himself in his press conferences, and 0:10:33.640 --> 0:10:35.840 of course we still quite don't know where he standing 0:10:35.840 --> 0:10:38.160 in this matter of you know, hike or no hike, 0:10:38.280 --> 0:10:40.880 but certainly the reality is that it's just gone to 0:10:41.520 --> 0:10:44.080 it's still elevated, it's be elevated for a long long time, 0:10:44.280 --> 0:10:48.600 and we have oil elevated and up ticking. Now we've 0:10:48.640 --> 0:10:50.960 all moved still closed. Then you go, look, the pressure 0:10:51.000 --> 0:10:53.199 is sort of just building. So again it's one of 0:10:53.240 --> 0:10:56.080 those things where you know, hindsight's a beautiful thing, but 0:10:56.160 --> 0:10:58.480 that's not what the FED or markus have. They only 0:10:58.480 --> 0:11:00.840 have all we have to look forward, and we use 0:11:00.880 --> 0:11:03.000 the data that we have to look forward and try 0:11:03.000 --> 0:11:06.560 and estimate what we think the data will be. And 0:11:06.600 --> 0:11:09.160 obviously that's half time long if we're honest. But at 0:11:09.200 --> 0:11:11.480 the moment, you know, she could simply she has grounds 0:11:11.480 --> 0:11:13.959 to say, look, inflation has been too high for too 0:11:14.000 --> 0:11:17.000 long and enough's enough. And I think that alone is 0:11:17.600 --> 0:11:21.200 fair to say, yeah, okay, that's good grounds, I like. 0:11:21.480 --> 0:11:23.720 All right, we'll leave it there. David, It's always a pleasure. 0:11:23.760 --> 0:11:25.600 Thank you so very much for making time for us. 0:11:25.679 --> 0:11:29.920 Bloomberg strategist David Finnerdy joining from Singapore. Coming up, we'll 0:11:29.960 --> 0:11:34.640 hear from Tim Waterer, chief market analyst at KCM Trade. 0:11:34.679 --> 0:11:43.880 That's ahead on the Daybreak Asia podcast. Welcome back to 0:11:43.920 --> 0:11:47.480 the Daybreak Asia Podcast time Doug Krisner. In the US session, 0:11:47.559 --> 0:11:50.640 the auction of thirty year US treasury sold at the 0:11:50.760 --> 0:11:53.680 highest interest rate in a quarter of a century. This 0:11:53.800 --> 0:11:56.960 twenty five billion dollars sale was awarded at a rate 0:11:57.000 --> 0:12:00.520 of five point two one six percent. Now that reflects 0:12:00.520 --> 0:12:03.880 the markets need to be compensated for financing the nation's 0:12:03.920 --> 0:12:08.200 growing deficit. Just yesterday, the government recorded the fourth largest 0:12:08.240 --> 0:12:11.440 monthly deficit in the history of the US. That's where 0:12:11.440 --> 0:12:15.280 we start our conversation with Tim water Tim is the 0:12:15.400 --> 0:12:19.000 chief market analyst at KCM Trade. He spoke with Bloomberg 0:12:19.040 --> 0:12:22.360 TV host Heidi Strald Watson Sherry on let's start off. 0:12:22.200 --> 0:12:24.760 With what's going on with treasuries at the moment. How 0:12:24.840 --> 0:12:26.880 much more pressure are we going to see, particularly when 0:12:26.920 --> 0:12:27.920 it comes to the long end. 0:12:28.480 --> 0:12:29.800 Good to be with you hardy, and I think he 0:12:29.880 --> 0:12:32.080 really mentioned it there, is that the market's really demanding 0:12:32.120 --> 0:12:35.199 an increased premium to absorb that government dead at the moment. 0:12:35.360 --> 0:12:38.000 So I think what's interesting to note is that the 0:12:38.080 --> 0:12:40.800 ten year yields pretty much where it was a week ago, 0:12:40.840 --> 0:12:44.080 and in that time we've had soft CPI, soft PPI 0:12:44.600 --> 0:12:48.000 and a dismal jobs report, So the fields aren't reacting 0:12:48.040 --> 0:12:50.400 to that economic picture at the moment. So I think 0:12:50.520 --> 0:12:53.160 what's that telling us is that maybe the bond market 0:12:53.200 --> 0:12:55.640 a little bit more worried about the US economy longer 0:12:55.720 --> 0:12:57.640 term than what the Fed is perhaps. 0:12:57.440 --> 0:13:00.640 In the shorter term, though there's obviously but this week's 0:13:00.720 --> 0:13:03.200 data gives a little bit more credibility to the doves 0:13:03.200 --> 0:13:05.160 that want to be patient. But not out of the 0:13:05.160 --> 0:13:07.120 woods yet for September, I would have thought. 0:13:07.600 --> 0:13:09.160 Not out of the woods. A lot can happen between 0:13:09.160 --> 0:13:11.360 now and then. Certainly with the oil prices, they're the 0:13:11.440 --> 0:13:13.600 rogue element for central banks at the moment, so that's 0:13:13.640 --> 0:13:16.680 a difficult one to predict, but certainly inflation figures heading 0:13:16.679 --> 0:13:18.240 in the right way. A bit of a less less 0:13:18.240 --> 0:13:20.280 for a headache now in terms of the jobs market, 0:13:20.320 --> 0:13:22.840 for the Fed now that there are more cracks appearing, 0:13:22.920 --> 0:13:26.600 So if there are some doves on the FED board 0:13:26.679 --> 0:13:29.719 maybe looking for rate cuts, that could get a few 0:13:29.720 --> 0:13:31.760 more dissenting votes on that side of the ledger may 0:13:31.760 --> 0:13:32.680 become September. 0:13:33.400 --> 0:13:37.760 In the meantime, broader equity markets, the AI exuberance continues 0:13:37.840 --> 0:13:40.480 to build. Obviously there's a bit more volatility be introduced, 0:13:40.480 --> 0:13:43.760 but I Erry mentioned volatility has frollen well down even 0:13:43.760 --> 0:13:45.080 when it comes to the Korean market. 0:13:45.720 --> 0:13:46.600 That's right, of course. 0:13:46.720 --> 0:13:48.959 July we had a number of episodes where you know, 0:13:49.120 --> 0:13:51.800 AI was shunned. But then I think what happens is 0:13:51.800 --> 0:13:54.760 once the dust settles, once I try to start searching 0:13:54.760 --> 0:13:56.920 for yield again, they tend to gravitate back towards that 0:13:57.520 --> 0:13:59.679 AI and tech picture, and I think that's what we're 0:13:59.720 --> 0:14:01.520 seeing at the moment. I think that the US earning 0:14:01.600 --> 0:14:04.560 season that went some way to dispelling some of the 0:14:04.640 --> 0:14:08.360 fears that we're building up about valuations and the sustainability 0:14:08.480 --> 0:14:11.600 of operating margins. They're still lingering to some degree, but 0:14:11.640 --> 0:14:13.800 like I said, it has been less and somewhat because 0:14:13.840 --> 0:14:16.120 of some of the bumper results we've seen from the 0:14:16.240 --> 0:14:19.160 likes of Microsoft and Amazon and the likes, so I 0:14:19.440 --> 0:14:21.200 trade looking a bit better now than it was, but 0:14:21.480 --> 0:14:24.320 still some lingering fears about sustainably lity moving forward. 0:14:24.400 --> 0:14:27.320 Well, the question is always going to be return on investment, right, 0:14:27.680 --> 0:14:30.200 Are we getting a better answer out of China on that? 0:14:30.280 --> 0:14:33.800 And then China ai names given the spend. 0:14:33.280 --> 0:14:34.960 Well, that's the big deal at the moment, isn't it 0:14:35.000 --> 0:14:37.680 sort of how China will compare to the US counterparts 0:14:37.680 --> 0:14:41.120 and that efficiency standpoint. I think the US earning season, 0:14:41.120 --> 0:14:42.480 I think that gave us a better idea of what 0:14:42.520 --> 0:14:45.480 the sweet spot is for CAPEX so in terms of, 0:14:45.480 --> 0:14:48.080 you know, CAPEX to revenue ratio, I think what we're 0:14:48.160 --> 0:14:50.680 learning is at the cloud companies, they're sort of the 0:14:50.720 --> 0:14:54.400 gold stand for CAPEX efficiency Microsoft and Amazon for example, 0:14:54.480 --> 0:14:57.320 So difficult to put a number on that ratio thirty 0:14:57.400 --> 0:15:01.120 five thirty percent. Perhaps side of that, when there's a 0:15:01.120 --> 0:15:03.440 bit more of a cloud over sort of punt intended 0:15:03.480 --> 0:15:05.840 about sort of what the window will be to get 0:15:05.840 --> 0:15:08.000 a return on that investment. I think that's when the 0:15:08.040 --> 0:15:11.120 market gets the anxiety levels up a notch and isn't 0:15:11.120 --> 0:15:13.120 willing to have the same patience that they have for 0:15:13.240 --> 0:15:15.240 the likes of Microsoft and Amazon. 0:15:14.960 --> 0:15:17.080 As it also when it comes to picks and shovels 0:15:17.080 --> 0:15:18.920 and across the supply chain, has it given you a 0:15:18.920 --> 0:15:21.840 better idea of where perhaps valuation entry points should be. 0:15:22.440 --> 0:15:24.280 Yes, I mean I think that on that front, I'm 0:15:24.320 --> 0:15:27.200 still quite bullish on the chip manufacturers themselves. I think 0:15:27.240 --> 0:15:30.720 the supply demand dynamics are still in their favor. I 0:15:30.720 --> 0:15:33.000 think when you have full order books moving forward, then 0:15:34.280 --> 0:15:36.480 you know that the risk to your revenue is not 0:15:36.520 --> 0:15:39.960 on the order book side, it's on the factory through put. 0:15:40.120 --> 0:15:41.720 So I think while that's looking healthy, I think at 0:15:41.760 --> 0:15:44.520 least through the end of twenty seven, I think they're 0:15:44.520 --> 0:15:46.400 still looking in fairly good stead at the moment, and 0:15:46.440 --> 0:15:50.160 pullbacks are probably buying opportunities longer term. Yes, there are 0:15:50.280 --> 0:15:55.360 questions about say Chinese competitors moving forward increasing supply and 0:15:55.440 --> 0:15:59.080 demand and supply matching more down the track, but markets 0:15:59.080 --> 0:16:00.960 are forward looking. But we know what Cain said about 0:16:01.000 --> 0:16:03.000 the longer term. So I think in the here and now, 0:16:03.320 --> 0:16:05.360 I think through twenty twenty seven, I think the chip 0:16:05.440 --> 0:16:06.640 names are still looking pretty good. 0:16:06.880 --> 0:16:09.320 Do you worry about the froth, you know, I guess 0:16:09.320 --> 0:16:11.120 it's a bit more of an existential question, but when 0:16:11.160 --> 0:16:15.960 you start having these circular funding scenarios, circular financing scenario 0:16:16.000 --> 0:16:18.560 is do you start to question whether things are getting 0:16:18.600 --> 0:16:20.080 a little bit concerning. 0:16:20.760 --> 0:16:22.480 Yeah, there is a bit of a concern on that front. 0:16:22.520 --> 0:16:24.160 I mean I think that the Nvidia one, I mean, 0:16:24.200 --> 0:16:26.000 they're certainly pulled in a number of big names on 0:16:26.080 --> 0:16:28.920 wall streets, so I think they're certainly selling the proposition well. 0:16:29.240 --> 0:16:30.200 So I think that come the. 0:16:30.120 --> 0:16:32.040 Market nerves a little bit once again when you're getting 0:16:32.080 --> 0:16:34.760 these names outside of the tech space itself, and that 0:16:35.000 --> 0:16:36.640 on the banker side of things, if they're putting their 0:16:36.640 --> 0:16:38.560 funds into it, I think that's a bit of a 0:16:38.640 --> 0:16:41.800 vote of confidence sentence. But look, let's see what happens 0:16:41.840 --> 0:16:44.720 when we have say IPOs moving forward and whether those 0:16:44.800 --> 0:16:48.400 valuations I'm sure they're probably eyewatering, but whether they're still 0:16:48.840 --> 0:16:51.040 capturing the tension of the market, say. 0:16:50.960 --> 0:16:52.680 As SpaceX did in this year. 0:16:52.800 --> 0:16:54.800 So let's see how that plays out, whether that appetite 0:16:54.840 --> 0:16:57.600 for AI, particularly on the IPO front, where that gets 0:16:57.600 --> 0:16:58.520 sustained moving forward. 0:16:58.600 --> 0:17:01.800 Yeah, what are you finding compelling outside of the AI story? 0:17:02.560 --> 0:17:05.560 Still bullish on gold structurally, so you mentioned that it 0:17:05.600 --> 0:17:09.040 has had certainly a better start of things to August 0:17:09.040 --> 0:17:12.240 compared to July. I think the intervention to boost the 0:17:12.280 --> 0:17:15.000 end gold was an indirect beneficiary of that because it 0:17:15.080 --> 0:17:16.879 dragged the US dollar lower. So I think that to 0:17:16.920 --> 0:17:19.720 move gold above its trading range it had been occupying 0:17:19.760 --> 0:17:22.159 between about thirty nine to fifty to forty two hundred, 0:17:22.480 --> 0:17:24.760 sort of break outside of that range. And I think that, 0:17:24.880 --> 0:17:29.080 combined with ongoing appetite from central banks to create some 0:17:29.119 --> 0:17:32.320 separation away from the dollar, that should underpin gold moving forwards. 0:17:32.280 --> 0:17:34.919 So that's the expectation is see more purchases from China. 0:17:34.680 --> 0:17:38.560 For example, China, Russia, Turkey as well for example. So 0:17:38.600 --> 0:17:41.080 I think that should provide a base of support for 0:17:41.200 --> 0:17:44.120 gold headwinds forward At the moment are still those elevated 0:17:44.119 --> 0:17:47.200 oil prices and a dollar which is hanging just under 0:17:47.240 --> 0:17:49.560 one hundred dollar mark in terms of the dollar index. 0:17:49.600 --> 0:17:52.320 So I think if we did get some reprieve on 0:17:52.359 --> 0:17:54.359 the oil and a dollar front, that could open the 0:17:54.400 --> 0:17:56.440 avenue high for gold above forty five. 0:17:56.359 --> 0:17:58.280 Hundred five thousand. Could be a bit of a stretch 0:17:58.359 --> 0:18:01.160 this year, but perhaps in Q one two twenty seven. 0:18:02.600 --> 0:18:04.840 Reprieve in so far as it came from the joint 0:18:04.840 --> 0:18:07.240 intervention that's probably going to continue to fade. 0:18:07.800 --> 0:18:10.600 That's right, an artificial impact on the market. 0:18:10.640 --> 0:18:12.520 But I think what it has done is brought some 0:18:12.640 --> 0:18:15.919 time for market dynamics to move in favor of the 0:18:16.160 --> 0:18:18.800 end and by extension, in favor of gold as well, 0:18:19.160 --> 0:18:22.280 if we did see a pullback in US yields and 0:18:22.400 --> 0:18:24.280 the dollar. So in terms of you know, what could 0:18:24.280 --> 0:18:28.560 those favorable dynamics be. It's been mentioned about a possible 0:18:28.960 --> 0:18:32.240 Bank of Japan hike next month. If that was combined 0:18:32.280 --> 0:18:34.880 with a US hold for example, that could shrink that 0:18:35.560 --> 0:18:40.960 JGB to treasury yield differential and maybe give the end 0:18:40.960 --> 0:18:43.400 a bit of breathing room, and by extension, help gold 0:18:43.400 --> 0:18:44.440 against the dollar as well. 0:18:44.520 --> 0:18:45.720 So let's see how that plays out. 0:18:45.760 --> 0:18:47.760 I mean, it's interesting that even the government, the Prime 0:18:47.760 --> 0:18:50.679 Minister is now supportive of a hike from the BOJ. Right, 0:18:52.119 --> 0:18:54.439 do you think the window has closed for kind of 0:18:54.600 --> 0:18:56.440 decisive and impactful action here. 0:18:57.400 --> 0:18:59.280 I think I think it'd be more of a measured action. 0:18:59.320 --> 0:19:02.320 I think there's certainly priming in the market for you know, 0:19:02.800 --> 0:19:05.800 I would say an increasing in rates to support the year. 0:19:05.920 --> 0:19:07.800 I mean, on the inflation front in Japan, it's not 0:19:07.840 --> 0:19:09.800 out of control at the moment. Projections are that it 0:19:09.840 --> 0:19:12.360 will move higher in the second half of this year, 0:19:12.720 --> 0:19:14.280 but I think they've got a bit of room to 0:19:14.280 --> 0:19:16.240 play there in terms of the inflation side of things. 0:19:16.240 --> 0:19:18.360