Asian Equities Rise Most in Almost a Month on Nvidia, Tech Rally | Bloomberg: The Asia Trade 9/12/24
This is the Asia trade, I'm sure, Brianna in Tokyo. I'm Heidi Stroud, Watson, Sydney. The top stories this hour. Asian stocks are headed for early gains after a rally in big tech lifts. Wall Street bond traders unite behind bets that the Fed will only cut rates by 25 basis points next week. And video CEO Jensen Huang says they're facing tensions with customers over shortages as demand for their chips remains strong. And we'll be hearing from the founder and CEO of Oasis Management for their take on investing in Japan.
Plus, talking business strategy with Apollo as a firm looks towards Asia, take a look at how we're setting up for the Asian session. We're seeing a little bit of upside when it comes to futures. We'll see if that's the sustain, especially with Japanese stocks having lost ground for seven consecutive sessions. Of course, a big function was a strength of the Japanese yen that we are talking about, really leading towards that 140 level. But we've pared back from some of that strength against the US dollar where the round at 142 level now and a lot to do with what's happening in the US, right.
I mean we got those core CPI numbers. Take a look at how U.S. futures are setting up because really we saw that Treasury market slumping, the two year yield rising about ten basis points. At one point we have the dollar steadying on the back of that. But really to do with perhaps those bets of an outsized 50 basis point rate cut by the Federal Reserve going out the window, the core CPI number seeing its biggest increase in about four months and shelter really leading to those gains. So we had in the New York session gains across the board, especially with a tech rally that set the Nasdaq 100 and up more than 2%. We're seeing a little bit of downside pressure in the Asian session for futures, Heidi.
While, of course, the Fed is on the cusp of its first rate cut since 2020, however, Bloomberg opinion columnist John Ortiz thinks that the weight placed on consumers by costly credit will take a while to unwind. He joins us now to discuss this. And John, in your view, how big a risk is this to the outlook, the way to off of consumer credit to quite considerable, because as we know, monetary policy operates with a lag and the lag seems to be much longer than usual. So there's plainly risk. That's the big argument in favor of favor of the Fed cutting aggressively. It presents that that they're not going to that that we haven't really even seen the effects of the of the the great hiking campaign thus far. And we are going to start feeling that.
So that that would be the great reason why the market is betting this confidently as it is that we have very significant rate cuts coming. We've got 1010 rate cuts of 25 basis points at least over the next two years if you believe Fed funds futures. Now, that's the kind of cut that wouldn't normally be justified by the kind of inflation and unemployment numbers we have it we have at present, it implies that people think things are going to get a lot worse. And certainly the health of the consumer, which is a status very surprisingly strong for for a long time since the pandemic would be a part of that. A big part of that argument. And John, you cited it.
I mean, there are so many bets right now of aggressive Fed easing. At the same time when you have so many other uncertainties like the election, we have the Trump trade being unwound as well overnight. And let's not forget, we have an ECB rate decision also coming up. So what are we expecting in terms of market reaction to all of these factors? Well, I mean, I think what you saw today was that the reaction more or less cancelled itself, cancelled itself out. You saw the dollar weaken quite
considerably during the debate itself. I think a Trump to point out is seen as plainly dollar positive. If he's really going to go through with tax cuts and hiking tariffs, that's going to mean a stronger dollar.
Therefore, I don't really disagree with anyone. You know, the degree consensus of people who think that Kamala Harris that the better off that debate that would be a reason for the dollar to go to go down. When it comes to the way the inflation numbers came through, it's it's quite startling how it almost perfectly cancelled out the fall in the dollar that had come with the that it come with the debate. What's intriguing in the last few hours is the way the the tech sector it decided that it could happily ignore everything that was going on with monetary policy and politics, that people decided that there was a buying opportunity here in Nvidia and the other big tech names and and adjust accordingly that that's interesting that there is that degree of embedded optimism when there is so much embedded. Pessimism about the economy.
John. You know, we were talking a little bit earlier about obviously the sort of gripping nature of the 90 plus minutes of this debate and sort of entertainment. And fascinating. Fascinating as it was.
Do you think it sort of moved the needle when it comes to policy risk or market risk meaningfully at all? And do you think market perceptions at this point are sort of right sized on what we get in November? Yeah, I think it I think it does move the needle in the sense that the risks were asymmetric coming in. Anybody who hasn't worked out what their opinion of Donald Trump is by now, I would seriously worry for after nine years in the public eye. But that's not true of Kamala Harris. And it was obvious entering the debate that those risks for her were were were were weighted towards the downside. It would be very difficult for her to prove in 190 minute session that she really was the next Roosevelt or Kennedy or whatever, but that it was quite easy to imagine her having a bad debate, losing their train of thought, making a few gaffes and getting a lot of people to make up their minds against her. That didn't happen cleanly. That doesn't mean she's bound to win. But there was a big chance last night that that Trump would establish himself once more as the absolutely clear, overwhelming frontrunner. And that hasn't happened.
So that does in terms of how well we can gauge what will happen over the next two months, I do think that changes things. What surprises me is that if you talk to people about what they expect from either candidate, both of them think we're going to get irresponsible fiscal policy for different reasons. Too much spending from Paris, too many tax cuts and tariffs from from Donald Trump and all other things equal. That means that the Fed can't cut very much because it will be inflationary. And I know very few people who don't subscribe to their concerns about fiscal policy. And yet you can the weight of money in
the bond markets is what it is that that is a discrepancy. I can't really explain and it is concerning. Bloomberg opinion columnist John Authors. And let's get some more views now from Seattle, who's a financial adviser and managing director at UBS and joins us now. Really great to have you with us. And I did want to pick up on that sort of discrepancy or that maybe the tension between these concerns over the fiscal spending potentially or the tax cuts, depending on who wins the election come November and what the implications are for the Fed.
Do you think that markets at the moment are making space for that risk right now when it comes to Fed easing expectations? Yes, I think the market is on the right track at this point. I mean, the general concern is still with the, you know, near-term election uncertainty as well as some of the political and geopolitical risks. But I think the market is focused on the Kernen A.I. trend, the current tech growth in the U.S. So as you can see today, I mean, there's just a huge bounce back and a correction from the reason lows in tech. And with all the noise around the elections, I think investors are still focused on the long term growth in the technology sector in the U.S.. Yeah, that's interesting, right?
Because there have been a lot of sort of existential questions being asked about, you know, when we're going to see this return and an enormous amount of investment. Do you think even with the rebound, we should be bracing for more bouts of volatility and more of the sort of sell off, followed by a rebound, particularly when it comes to big tech? Absolutely. I mean, I think in the longer term, tech is still going to take the lead in growth. But in the near term, with the election uncertainty, we are certainly a lot more cautious. And it's actually not it's it is kind of a little predictable, especially knowing that the Fed is going to cut rates. One of our key key concerns and what we're seeing in investors, it's really just trying to get in excess cash on the side still from the build up earlier this year or to to get that invested, you know, because yields are coming down. So
especially with the growth in technology and focusing less on the results of the elections or just the polling predictions, we're still seeing a lot of investments going into the market, especially taking advantage of recent volatility and possible continue to volatility leading up to the elections. But could that cut the other way as well? I mean, how you were listening to John Authers as well and he was talking about whoever wins the November elections, there seems to be a perception excuse me that there will be irresponsible spending and fiscal policies that could be inflationary. Is that a concern to you that the Fed may not be able to cut as much as they want? Absolutely. I mean, we are expecting another 180
basis points of cuts across five meetings all the way until mid of next year. But if it doesn't happen, you know, the market could certainly pull back on that news because a lot of economists are that has been priced into the market. So it's definitely a concern. And what we're advising investors is just to stay, stay invested, state balanced, not to focus on any any particular areas of the market, you know, and also definitely to invest excess cash, especially with investment grade bonds right now to to put some of that cash to work, locking in some of the yields and and just, you know, provide hedges against the portfolio, you know, and that could be through buying more gold, more Swiss franc. So you know so some currencies are more stable. So, you know, just protect protecting your portfolio and be invested for all scenarios. But we do feel the fundamentals of the
US economy is strong, earnings are strong. And regardless of, you know, the results of the elections, you know, this economy will probably continue to move forward, especially leading with the current tech and A.I. trends. Interesting, though, when you talked about some of those safer hedges and you talked about currencies, you mentioned the Swiss franc, but not necessarily the Japanese yen. Are you considering the Japanese yen as one of those safe currencies or is just the volatility that we're seeing in these days? Not something that you would want investors to touch at this point? Yeah, that's a great point.
On the Japanese yen, I mean, we feel the Japanese yen. We do definitely expect lower U.S. dollar Japanese yen. So it's not a currency that we would say would be a good hedge at this point. We still like to focus more on the Swiss franc or our gold.
And plus the Japanese economy especially. You know, they're probably going to keep rates as where it is right now and probably delayed cuts due to the curve. You know, the economy is still pretty fragile in Japan at this point. So we still have all the currencies for
hedging. We still like the Swiss franc a lot better. I wanted to get your thoughts on our live blog Question of the Day, which is sort of, I guess, alluding to the point of how much of at least 25 basis points worth of cuts from the Fed is already priced in. Right. How far will stocks rally on that 25 basis point cut? And, you know, with that quarter point cut, we potentially going to see almost a bit of disappointment given how far expectations have run.
Yeah, I mean, expectations is definitely the 25 basis point cut or maybe even more is are built into the market right now. But I think especially with other kind of uncertainty stocks in the market, I mean, anything could cause a pullback in the market. But still, what's in the driver's seat is going to be the economy indicators and also is going to be against the Fed cuts. So we are just preparing for all scenarios, but still we're focusing on the longer term that the Fed rate cuts are going to happen, whether it's $0.25 or 50 bips or what's going to happen to it all the way until next year. The economy is in the right direction with, you know, inflections where it needs to be.
Right now, earnings are growing. So, you know, regardless of what type of cut we're going to get, it rates are going to come down. And it's overall a very strong point for the economy. John, good to have you with us. Financial advisor and managing director at UBS. And coming up on the Asia Trade Oasis Management joins us to discuss the growing intensity of activist campaigns in Japan. We'll hear from BlackRock Investment
Institute as well on why they think the jobs data show. Market expectations for Fed rate cuts are overdone. Plus, we'll talk business strategy with Apollo as the firm sets its sights on Asia. But up next and video CEO Jensen Huang says the relations with customers are tense as the chipmaker struggles to meet demand. Details coming up. If this Bloomberg.
Delivery of our components and our technology and our infrastructure and software is really emotional for people because it directly affects our revenues, it directly affects their competitiveness. And so we probably have more emotional customers today and deservedly so. And if we can fulfill everybody's need, then the emotion will go away.
But it's very emotional. It's really tense. We've got a lot of responsibility on our shoulder and we're trying to do the best we can. And Vedere CEO Jensen Huang, speaking at Goldman Sachs Technology Conference in San Francisco. Let's get more on those comments now and bring in a reporter, Annabelle Jewelers in Hong Kong. And Bethany was talking about more emotional customers these days. What exactly are you talking about?
Well, emotional customers, of course, just refers to that intense amount of competition we've seen around AI and and who can really claim victory in that space. Of course, if you really need those chips to satisfy that need or that quest, you are going to be a little bit emotional perhaps. But what was really important to investors going into this was to get more details around the chip world system and that rollout. And we actually did get that because one
of the reasons we've seen such selling pressure and NVIDIA, one of the reasons was that concern that perhaps there could be delays or snags in the production. But Huang said that the black well is on its way. A demand from customers has been strong and that TSMC, which is of course is is manufacturing these chips, is the best in its field. So they were just some of the key
takeaways from what Wang said. In aggregate that seems to have been enough to impress investors because last week, for instance, a Bank of America was saying that details of the readiness of black wall shipments would be crucial to the recovery of invidious stock. And again, if you take a look at how Nvidia performed intraday, it was the best session we've seen going back to early August. So about six weeks and off the back of it we as well. So other chip stocks like AMD, Broadcom rising in turn. We've also done some exclusive reporting
when it comes to fund raising at Openai. That's right. Yes. So Openai, of course, is the is the creator or the company behind chat GPT. What we're hearing about here is possible fundraising. So sources are telling us that Openai is looking to raise about $6.5 billion from investors. What's really important here is the valuation it seeking to do that at because we're hearing it's $150 billion now, 150 billion.
That does not include the money that's being raised significantly higher than what we reported going back to February, because at that point we were talking about a tender offer being completed. The valuation was $86 billion, so 150 billion. Again, it really emphasizes or cements. Openai Openai is one of the most valuable startups in the world. At the same time, we're also hearing that the company is looking to raise a further $5 billion from banks that would be in the form of credit, revolving versatility or revolving credit facility, rather.
But what's important to note is that we have seen other tech companies doing that before establishing those better banking relationships. Is this sort of the precursor to a possible IPO? Perhaps, Perhaps not, but certainly something to think about. I will. Jewelers there in Hong Kong. Time now for morning calls ahead of the Asia trading day. And Morgan Stanley's Mike Wilson says the stock market needs a new catalyst to resume its rally. Wilson says investors who bid up on
equities on the high potential in the short term were premature. He reiterated his preference for quality defensive stocks, recommending areas such as utilities, consumer staples and health care. We just got overcooked and the whole AI theme doesn't mean it's over. We've written about this extensively. We're not believers that this is going to change productivity materially in the short term.
It's a long term story. Blackstone is cautiously optimistic about a soft landing in the US. CFO Michael Trainor says the alternative asset managers own measure of inflation pegs it at 1.7%. She adds that data suggests labor markets have been softening and the firm expects wage growth to moderate in the coming year. Coming up, Germany joined Spain in calling for the EU to drop its plan for extra tariffs on Chinese electric vehicles.
We'll have the latest on that story next. This is Bloomberg. Germany is joining Spain in calling for the European Union to drop its plan to impose extra tariffs on Chinese made EVs.
China correspondent Matt Miller is with us now. So what are we hearing in terms of this pushback? Yeah, this is quite a surprising move. It came after the Spanish prime Minister Sanchez visited a visit, visited China for four days, and at the end of the trip, he had called on the EU to reconsider these tariffs.
And soon after that, you have a German government official, a spokesperson welcoming the Spanish move. And it is surprising because Spain, we know, is one of those countries that had came out in favor of those tariffs, along with Italy and France. Not so surprising for Germany, because we know that Germany has so far been quite opposed to those tariff. They had abstained from that EU vote, along with several other countries. But Spain is a country that rarely clashes with the EU. And in fact, before the Prime Minister's trip to China, he had said that while Spain wants to build that bridge with China to avoid a trade war, he says Spain will always be aligned with a broader EU position.
So in this case we know that after the tariffs, the provisional tariffs had been announced, China had retaliated by opening up probes into EU brandy dairy products and pork products. And Spain just so happens to be the biggest pork product exporter from the EU. They sold $1.5 billion worth of pork to China last year and $50 million worth of dairy products to China last year. So and also Spain is the second largest car producer in the EU, and they have been looking for investments from China to grow its own. The industry in Spain, that was part of the reason why Sanchez was visiting China.
So all of these factors could have played into the consideration of whether or not to walk back those tariffs. And the prospect now is increasing for China to maybe convince more EU countries to support the rolling back of these tariffs on Chinese EVs. And then given, though, the rising geopolitical tensions around China, we are seeing major car makers like Honda shifting their whole broad strategy in that market. Yes, Honda is cutting jobs in China. It has also a compensation package for
over 2000 workers in its joint venture with a state owned company, Dongfeng Motors. There you see the shares. Stock prices going down on the news. And this comes as Honda's revenue in China sales was down over 20% in the first half. Is it comes as this shift that we see in the entire car sector in China. As you know, the sales of the traditional internal combustion engine vehicles are down by about 15% in the first eight months of this year. And on the other hand, you see the demand for EVs and hybrids going up.
So the company said in a statement that this move is really to ensure sustainable operations and to help them speed up their transition towards electrification of vehicles. And at the same time, there is this intense competition in the Chinese market as well that has been highlighting earnings of foreign competitors, the likes of those from America, Germany and Japan as well. Longer. China correspondent live with the latest on those geopolitical tensions around China and of course, the EV market, which will continue to watch in the Asian trading session. But this is how we're looking in the currency space because the Chinese yuan is holding steady at the moment about 712 level, but it's the Japanese yen that has now resumed its losses against the US dollar after incredible strength yesterday when we saw it head towards that 140 level. But of course the US CPI numbers seem to have changed the dynamic. Is this boom by. Take a look at what we're seeing when it comes to the so-called Trump trade.
And we are hearing sort of some analysts post the first presidential debate that we are seeing sort of that potential start of the unwind of the Trump trade, a combination of a weaker dollar, falling treasury yields, that drop in U.S. equity futures that we saw yesterday going into the session, which ultimately, of course, saw that more of a tech led rebound. We could see kind of that unwind according to the likes of Brown Brothers Harriman there. So a lot of questions do remain when it comes to what we got out of that debate, that sort of conversation, really not to seem to have a little bit too much when it comes to moving the needle on policy risk and opportunities. Of course, lots of concerns from some parts of the market about potential fiscal spending and tax cuts from depending on which candidate you're talking about. But ultimately, potentially, both of
those outcomes could lead to more pressure on the Fed and more pressure on inflation and therefore unwinding some of those expectations when it comes to the jumbo sized Fed rate cuts. We also saw them push back when it comes to Bitcoin as well on broader crypto assets. Well, Donald Trump says he's not completely ruled out another debate with his Democratic rival, Kamala Harris, after saying that he wasn't so inclined to a repeat of Tuesday's forum. I am not inclined to do it because I won
the debate by a lot, but I think we let it settle in and let's see what happens. Bloomberg opinion columnist Erica Smith says the vice president has knocked the former president off his game. She joins us now from Los Angeles. So give us your assessment of Kamala Harris's performance. And I guess the point is what was
managed to be achieved by that, particularly in the minds of undecided or swing voters? Yes. So Kamala Harris, I mean, she really had two jobs going into the debate. The first one was to really kind of attack Donald Trump, which I think we've all seen that she did. And the second one really was to introduce herself to voters and, you know, talk about her policies, talk about who she is, talk about who she's running for, you know, why she's running for president. And I really do think she managed to do
both. But I think the what's making the most headlines, of course, is the way that she was able to put Trump on the defensive in a way that, you know, few people have been able to do in his political career. She needles him about his crowd size as she talked to him about, you know, what foreign leaders say about him. I think she used the word disgraced, disgraced several times a week, several times also. She was really able to get under his skin and rattle him. And so he really wasn't able to make a lot of the points that I think his advisers and he wanted to make going into that debate. So I think she came out victorious in
that way. Erica. And yet, despite the fact that we had that historic June debate between Trump and President Biden, most debates don't necessarily change the course of presidential elections in the United States. So what's next for Kamala Harris in order to be able to clinch the presidency? Yeah, going into this debate, I mean, she really wanted to capitalize on the momentum that her campaign has already had. I mean, we've seen huge rallies here in the States. We've seen a huge number of people coming up to volunteer, even in states that are historically Republican.
We've seen just a lot of excitement around the campaign. And so the goal going into this debate was to kind of maintain that momentum and going forward from the debate. I think she wants to continue to do that. Her and her running mate, Minnesota Governor Tim Walz, are planning a bus tour that starts, I believe, this week.
There are several of their surrogates that are on the ground campaigning, governors from from around the U.S. And so I think the whole idea is to continue to kind of beat that drum and continue this momentum over the next couple of months. I mean, and we have to remember, too, that, you know, early ballots go out very soon. The election while Election Day, maybe early November, people start voting in a matter of weeks. And so this is going to be happening in real time and we're going to have an election before we know it. And I think Kamala Harris really wants to continue to kind of push this forward and to capitalize on the momentum she's seen so far.
And immediately after the debate, of course, we had the endorsement from, you know, arguably the world's most famous childless cat lady. Do you think that makes a difference, particularly when it comes to turnout and mobilization, or do you think. Kamala Harris You know, if she really wants to extend, perhaps only that we're seeing voters are going to want to see more from her in terms of policy specific specifics in her policy agenda. Yeah, I think it both matters. I mean, I'm not going to be the one to underrate as to underestimate Taylor Swift.
I think that would be a bad move. But we've already seen, I think, reports today of a number of people that have I think I think the number I saw was around 300,000 people have registered to vote based on the link that she gave on Instagram. So, you know, that's no small number. I mean, we are very polarized as a nation in terms of, you know, who we're going to vote for. But there's still those swing state voters out there and a number of undecided folks. And there's a lot of people who've never voted before or who don't vote regularly. And so if, you know, Taylor Swift can
endorse Kamala Harris and, you know, 300,000 people decide to go vote, that's going to make a difference in this election. But I do also think that for the people that maybe have voted in the past who really do have more instincts or experience with politics, they want to hear the policies. Right. And I think, you know, Kamala Harris is coming out.
This is the very abbreviated campaign. She's just now rolling out a lot of her policy positions. And so I think people really also want to hear what she's going to do while in office. I think she made a stab at that during the debate. But I think that there's still much more to be said.
And I hope that during the campaign and out when she's out and about touring the country, that we'll hear more of that going forward. One big opinion columnist, Erica Smith, there. And we do have breaking news at the moment. On the Bloomberg we're now hearing about, former Peruvian President Alberto Fujimori has died from cancer. We had heard a few years ago that he was
suffering from tumors on his lung and also on his tongue. He's a very controversial figure, of course, in Peruvian and world politics. He was convicted for his role in death squad killings before being pardoned last year. But this year he was making a comeback into Peruvian politics, saying that he would lead, he would become a member of the political party that's actually being led by his daughter, Keiko Fujimori, who has herself run unsuccessfully for the presidency three times. And these are some of the other stories that we're following at the moment. The U.S. and the U.K. are signaling they're open to Ukraine's
request to use Western provided weapons to strike deeper into Russia. Washington has so far opposed such moves, citing concerns it might deepen the conflict. President Biden is expected to discuss the matter with his British counterpart, Keir Starmer, when both men meet in Washington this week. Japanese Foreign Minister Yokohama Kawa has declared her bid to become the country's first female prime minister.
She's promising to strengthen price relief measures and boost real wages. Chemical waste. The ninth lawmaker and the second female candidate to make a formal run for the ruling Liberal Democratic Party. September 27 Leadership Vote. With campaigning set to start today. Take a look at all watching when it comes to some of the down side that has really been dragging across the broader commodities complex. Right. So much of this has been down to the
downside sentiment in oil. We're seeing kind of a steadying picture there when it comes to crude markets at the moment. You occurred looking pretty flat. The biggest gain in more than two weeks was secured early. A hurricane fronts in hitting key crude producing regions in the Gulf of Mexico. So at the moment, we're seeing kind of
little change when it comes to New York. Traded crude at the moment after the hurricane made landfall in Louisiana on Wednesday night. It was potentially threatening a path that would hit four refineries.
According to Bloomberg calculations, we're still sort of significantly lower in terms of crude pricing year to date. A lot of these concerns when it comes to top importer China at play here as well. And clearly those are the same concerns weighing on iron ore. Pretty flat picture there as we are
looking ahead to the August activity data as well. That's not expected to come out of China with any great sense of robust recovery. And in fact, we're expected to see that recovery losing yet more speed to their copper, though seeing upside of about 7/10 of a percent. More ahead on the Asia trade. This is Bloomberg. As technologies help propel automation growth. Bloomberg Intelligence sees Asia in the lead, with sales almost tripling to $217 billion by 2035. Senior industrials analyst Takeshi
Cathode joins us now for more on the market outlook. And I guess you I mean I'm not surprised given the demographics, the aging population, shrinking populations. So I guess it's no surprise that Asia is leading in this market. So one of the factors, I think, is also
China as well as Japan. Also, Europe will see population continue to decline and this is a working age population. So that generally translates to if you want to continue to grow businesses, you need to automate processes. So Asia, we expect to see about 11% growth and a large part of that is coming from China as well as other Asia, including India, which doesn't have a population issue but has a lot of drive to grow. So when we're talking about automation, though, we're talking about physical products, are we talking about software? So automation and in this case, discrete automation.
This basically means how do you automate the processes in the factories? And this is through capital investment. So robots is the easiest to imagine. Yeah, I mean, robots such a thing across Japan, right? Yeah. So even seeing some of this automation going into restaurants, for example, these are one of the areas newly as well. What do you see sort of the real shift when it comes to a competitive landscape? So I think I in general, for example, will change the dynamics quite a bit. I think robotics, for example, has been primarily entered the automotive industry first and other industries not so much. And part of that was the limitation of robots. You need to reprogram every time there
is a different production sort of system. And now with A.I., you can be more flexible in actually implementing these automation and with less sort of reworking of the programs as well. Bloomberg Intelligence senior industrial analyst Takeshi Kato, rather.
Let's get you some of the corporate headlines that we're tracking. Nippon Steel is mounting a last ditch push to muster support for its $14 billion takeover of U.S. steel. The Japanese steelmaker sent its senior executive Ducat here Mori to Washington for meetings this week as the deal risks being blocked by President Biden.
While Biden, Vice President Kamala Harris and the former President Donald Trump have all spoken out opposing the deal, the view has been mixed among some lawmakers and steel union members. China has opened a criminal investigation into high wooden wealth management for its alleged involvement in illegal fundraising. Shanghai police say they've taken what they call coercive measures against multiple suspects at the firm, but did not specify further. Talk on delayed payments on investment
offerings distributed by high wind surfaced in December last year. My head on the Asia trade. This is Bloomberg. I think it's it's more noise than news in the fact that the core number was slightly higher than expected. I think at the end of the day, it was a
disappointing reading. We were expecting a slightly lower print last month. And, you know, we've had point to pause now for several months. So jumping back up to 8.3 is certainly disappointing. I think the inflation today at the margin is tilting investors towards 25 basis points in September. The Fed should be moving people's expectations back from these large rate cut discussions into a much more gradual, steady approach of getting back to neutral and really begin the debate over what is neutral.
Overall, it looks very well controlled to me. It looks like we're not seeing deflation. We just see a gradual disinflation. The inflation is gradually coming out of the system. Bloomberg TV guests on the latest inflation numbers out of the US, which of course really reversed some of those gains that we saw in the Japanese yen yesterday.
We were heading towards at 140 level, but actually after the core CPI numbers and perhaps the expectation that that outsized 50 basis point rate cut by the Fed was thrown out the window, we actually saw some of those gains reversing. We're seeing the Japanese yen, about 142 level Nikkei futures pointing to the upside after seven sessions of losses Here in Japan, activist campaigns are increasing. Bloomberg intelligence says there's been 77 activist proposals by the end of August, and that's compared to a total of 81 last year. And several of the proposals have been led by OASIS management. Joining us now in studio is founder and CEO Seth Fisher.
Seth, great to have you. Thanks for having me. And thanks for coming in early because I know you just landed from Hong Kong. No, I mean, you must be really busy. Are you taking any new stakes in companies and in your projects? We're extraordinarily busy, extremely busy in our engagement, in our current engagement, and, yes, in some new stakes, but primarily in working with companies and trying to improve their right in value. Anything new that you like to disclose
and take the opportunity to do so today? You know, in every one of our approaches we want, we strive to work with management first. We work with management privately, working them to try to improve value for all stakeholders. If that works great, and if not, then we'll bring it to other shareholders and and yes, to everybody else. I said no, nothing to discuss today. I think we're seeing so much interest in Japanese companies. Is it the corporate governance?
Is it the weak yen? I mean, seven And I really it's so much in focus right now. Are you interested? Seven. Eight is extraordinarily interesting. I think that Couche-tard has put forward a very serious proposal to the company, and I'm a little bit disappointed with the with the companies reaction in response to Couche-tard. I think Couche-tard came back with a very strong response that they're willing to work with 79, both in terms of national security concerns around any around keeping convenience convenience stores open and certainly about the important role that convenience has play in Japan in all times. And I think that now the ball is back in seven days court to respond and actually to open up a real discussion with Couche-tard in terms of how and if there's a transaction go. But you said this deal is interesting, interesting enough for you to get involved is my question. And I as, as, as as I stated it, in all
cases, we strive to first discuss, discuss our positions and our investments with the companies and our thoughts and their governance and how they're approached privately with them. We have been a shareholder of seven nine for a very long period of time. So you do have a stake in seven. And I do you plan to sort of be able to use that in terms of how you view view these negotiations and how this process could be move forward? Yes, we do have thoughts I'd like I prefer to share them with seven I privately four we before we discuss it anywhere, I do think that this whole boom and this whole kind of continued amount of M&A is extraordinary and seeing I think it's all a very strong result of the government continuing, pushing open IT boards, being open to consolidation, of course, across industries in general. I think there's a lot of pent up demand in industries for consolidation. I think that will unleash and improve margins dramatically and improve profitability for companies, which results in profit and it results in better results for all stakeholders.
So yes, I think that there's a lot to be done, and that's a lot of that's due to both the family rules as well as the corporate takeover rules, as well as independent directors acting there and, you know, acting and fulfilling their duties. The sort of tenor of the engagement so far suggests that this is about a shareholder value side of the concern. But of course, there's also the argument that's been made that this is a business that should be designated as having national priority as a matter of national security. Do you think that is the right narrative
to apply? Do you think there is a broader kind of issue with a potential merger of these two companies? I think national security is extraordinarily important. And as mentioned, I do think today that convenience stores in Japan are are important in national emergencies. The reality of life is in terms of seven eyes, 20,000 convenience store network in Japan, the far majority of them are within 500 meters of other convenience stores.
Couche-tard has said they're prepared to work with a divestiture of of an appropriate number of 70 stores if and when, if and when if the company will work with them so that we protect national security. I agree that they form an extraordinary important function in a national crisis, and that function should remain. Maybe that means that some of those stores should be sold to domestic directly to a domestic owner and a result of of a of a merger or a purchase. And I think there's plenty of buyers for those for those toys. But that's a minority of the 70 stores across Japan.
As I said, you continue to emphasize that you need to have those conversations with the companies privately forthright. What can you disclose on the conversations about, say, the IOC, because you're the second major stakeholder there, Right. I mean, they want to sell that Kawamura Art museum. Have you been. No, I want to. But they're going to close it very soon, so I better hurry up.
What do you make of that? We continue being engaging with the IOC, invite them, continue improving their business, continue with the governance, continue to make sure that the assets work for the company and for stakeholders in the company. And so, yes, there's a lot more there's a lot more to be done there when it comes to selling all of that art. There's been a lot of criticism around that. How do you respond to that? I this committee has looked at this very carefully. I think that there is continue to be there is at this stage. This is like an example of a lot of other companies within Japan where the result is enormous.
There is enormous amount of assets that are not working properly for all stakeholders. You know, by the fact that you haven't been in the museum is is is a sign in that just arrived to be fair veneer it is inside of itself unfortunately it's it's it's it's far away and it's not it's not it's not well trafficked and it's people don't go there. So it's actually unfortunately, you know, there's more security guards most days than actually than people are looking at at the art society. Put the pressure on Cherie That's how we
can plans now. But you know, I do wonder in terms of a broader framing of of what we're seeing in Japan, what role do you see being played by activist investors like yourself in terms of driving the momentum of M&A action? Right. Do you expect to see more of these deals and proposals to happen as a result of activism? Well, I think we're just one piece of the entire of all stakeholders to go ahead and, yes, improve corporate margins and go ahead and have consolidation, some of the activists and up being vocal pieces of that. But I think that the conversations we're having with senior management and they're even much more active, much more aggressive and much more dynamic in trying to try to have that consolidation. They see the margin improvements potential. They see the they see the need of it, quite frankly, within both the demographics of Japan as well as just take the fact that we've haven't had a lot of this M&A for 30 and 40 years and the pent up demand to have that M&A that would just unleash a lot of value. So I think we're just one piece of a lot
of other participants there, a lot of other participants, including private equity firms. Right. I mean, KKR, Bain, what do you make of that offer for Fuji soft? Look, I actually think that competition is fantastic. And I think competition for the companies is fantastic. Fantastic. I think what we've seen is very much higher premiums in everyone and everyone.
These transactions that are truly third party market bids and actually in competition. So I encourage them more be more competition for this for a for all assets. See I said you know Fuji I think is is a very good results and I implore the corporate directors in general when they're looking at these way, when they're looking at M&A to think about time value money, which sometimes they not think about the surety of actually transaction, they think about adhering themselves to the M&A rules, majority of minority and engaging with stakeholders about those transactions. But yes, they need to be open and in
many cases open themselves to to NDAs and of themselves to due diligence so that they can be more competition for those assets. Seth Fisher, good to have you with us in studio. Please be back. Very interesting conversations with the
founder and CEO at Oasis Management. And we do have breaking news here in Japan as well. We're following producer price numbers. The API index year on year growth of 2.5%, which is missing to the downside on expectations of 2.8% for the month of August.
It's also slowing down from 3%. But of course, we continue to follow the producer price index. Because, of course, this has to do with where the Bank of Japan goes from here and how it translates to that inflation pressure in Japan. And month on month, it's a contraction of 0.2% for the month of August. We do have the BOJ policy decision next
week. The expectation is for no rate hike, especially given that BOJ members continue to talk about having to watch financial volatility in the markets. Sydney, Seoul and Tokyo opens next. This is Bloomberg.
This is your train. We're counting down to Asia's major market opens. And really the reaction, Heidi, when it comes to that faster than expected acceleration of core CPI numbers in the U.S. and how that impacts Asian assets today.
Yeah, really, that half point expectation from the Fed is sort of thrown out the window if you take a look at bond market expectations. Right. There's also the political overlay because post presidential debate, still a lot of questions as to, you know, what each candidate's policies fiscally could mean for the fight against inflation and for the path of easing for the Fed. Yes. So we'll be watching specific sectors like crypto related assets, not to mention energy related assets, of course, but it was really the US CPI numbers overnight with the Treasury market slumping as well.
That had an impact on the Japanese yen as well because before those numbers we had seen really those gains against the US dollar off about. We went towards 140 at one point, but that reversed after the US CPI numbers and right now we're seeing really those losses accelerating for the Japanese yen against the US dollar. We're seeing it above that 142 level and especially given that when it came to producer price inflation here in Japan just minutes ago, we saw supplies to the downside really on a month on month basis, a contraction as well for the month of August. So how that sets up the Bank of Japan next week, of course, is a key question. We had been hearing that they didn't really want to move.
If we continue to see volatility in the financial markets, the Nikkei finally seeing some rebound of more than one and a half percent right now. Japanese stocks have been losing ground for seven consecutive sessions. But take a look at how South Korea is also coming online, because we have seen the cost be A levels that we haven't seen since the August 5th meltdown. We're seeing a little bit more positivity up 1.3% and the Korean one
holding at that 1340 level. Of course, especially, Heidi, after that rally that we saw in U.S. stocks overnight. Yeah, And we are just sort of waiting to see whether that sort of passes through to some of these other markets across the region, including the sort of staggered trade here in Australia. We're seeing the ASX 200 pretty flat in those first few minutes of this gradual session coming on line there. The Aussie dollar, though, pretty resilient, 66, 75, despite of course the weakness that we've had through some of those commodities linked assets and some of the weakness that we continue to expect from China ahead of domestic activity data to be released from China as well.
Watching bonds, we've seen that sort of carry through when it comes to Australian bonds, opening the session lower, following treasuries, of course, which saw that fall after the CPI data you mentioned, all but really snuffed out the chance of that 50 basis point Fed rate cut next week. We've seen that three year yield here in Australia come about five basis points, about the same amount when it comes to the rise in ten year notes as well. The Aussie dollar just extending the gain of about 3/10 of a percent that we saw in the middle of the week there. And also watching some of the energy markets. Of course, oil is pretty steady at the moment. Some of those concerns perhaps put aside
from from the hurricane front and the risk to some of those Gulf of Mexico refineries. Our next guest is cautious with anything more than a 25 basis point cut from the Fed. Ben Powell, chief Middle East and AP investment strategist of BlackRock Investment Institute, joins us now. And Ben, great to have you with us.
I mean, have market expectations gone too far? I mean, that 50 basis points expectation seems to be out the window. But at the same time, what's the risk of more volatility given that we are expecting the Fed and also the be to come out next week? Yeah, it's an interesting time in financial markets, that's for sure. And yes, we at the BlackRock Investment Institute, we do think market's pricing for the Fed easing cycle has gone too far.
So the market is implying something like 250 basis points of cuts between now and the end of next year. We think that's too much. And the reason for that is sadly, we think the inflation fight is not over. That's been our view for a long time and we've got a bit of a reminder of that yesterday with the CPI data coming in a little bit hotter. So we absolutely think they will cut next week 25 basis points. So we'll begin. Of course, that's interesting and important, but perhaps the bigger question is how much they can do over the cycle. And yes, we think the market is
overpriced a little bit more than two fifty's where the market is. We think that's too much given inflation, sadly, is still a problem. And yet with yields rising, with this whole reaction that we saw in the broader markets, tech managed to rally a lot of people thinking, okay, this perhaps is a good time to buy. Is this still a sector that can lure
investors? Absolutely. So I'll second off Outlook. Our main theme or our first theme, I guess, is called Getting Real. This is the idea that we should be spending relatively less time thinking about central bank as a monetary policy. Of course, that's still super important, but the era of kind of super low interest rates and central bankers being able to kind of write in like superheroes and save the day for us is less obvious now, given inflation continues to be a problem. Central bankers are, in our assessment,
still a little bit constrained. So that means we need to focus on the real aspects of the economy, those sectors and companies which can continue to generate sustainable free cash flow and all of that. So tech at the moment continues to be front and center in that the Megaforce continues. We're fully on board with that. I would say a little bit of nuance is probably useful. We are getting more excited, I guess, about the broader air ecosystem. So the energy requirements, so utilities, materials that that broad ecosystem, because the silicon brain just like us as a carbon brain, needs that energy architecture to kind of feed itself.
So I enthusiasm absolutely we're on board. A bit of nuance, but the broader point is we as investors need to be focusing more on getting real, focusing on those company sectors and so forth that can actually make money even in what we think is going to be a higher rate environment for for years to come. The right environment, though. And I suppose the nuance of whether it's going to be a quarter point or a half point or maybe there's another jumper. So it's got to come this is sort of the Question of the day from my blog, which is how much, I guess, further gas is in the tank when it comes to the potential for this broader rally on August 20th.
Just on I say just 25 basis points. Do you think that's pretty fully priced in No time? Yeah, I think so. So as you've observed earlier, the expectations for 50 pips have been raised and we always thought that was unlikely. So we're at the BlackRock Investment Institute. Think they'll do just a couple meaning or two cuts this year because in our assessment, again, the inflation battle is not over.
I think over the last few weeks the market's been a little bit complacent and totally focused on the job growth side. Of course, that's important, but it's called a dual mandate for a reason and inflation is not at target wage. Inflation continues to be a rather high and perhaps not consistent with getting back to 2%.
So we think they will begin the cutting cycle next week. Obviously that's super important, but they are not going to be able to do as much in our judgment, as the market is implying. And what's more important when we think about the equity view is the relative performance of different sectors, companies, business models. So old fashioned investment rather than so much focus on central bank is still very important, but marginally more attention we think, should be being paid to the actual companies themselves rather than the macro interest rate environment from here. Is there much that's compelling to you in terms of opportunities in Asia? I see you're constructive on Japan.
Equities, underweight on Japanese bonds and pretty much neutral on everything else. Yeah, we're really quite constructive on Japan Equities, by the way, at the margin, I guess the Fed going a bit slower is useful. So we've got this kind of very careful interest rate normalization from the Japan side. So what you should see over time is interest rates differentiation narrow a little bit between the US and Japan. So the yen one might think should appreciate, that's fine, but we don't want too much too quickly, right? We don't want to volatile to move in the effects which can kind of confuse and muddy the waters as to what the BOJ is going to do and what we as investors should be thinking. So actually a Fed moving a bit slower is somewhat useful for the Japan call. Now, having said that, again, my whole
sort of frame is we should be focusing on getting real and focusing on what's going on at the corporate level. And I think that's the real story in Japan. This nominal GDP boom is a strong word, but relative to 20 years of flat nominal GDP in yen terms, up until the rise is different and quite positive, we would suggest.
So that's still kind of very significant and obviously a much better environment for companies to be operating. And more recently you've seen real wages. So this is wages adjusted for inflation turned positive for the first time in a couple of years. So I think what you're going to see over the next few months is a little bit of a feel good factor flow into the Japanese consumers. Some signs of that in some of the surveys, still very early days, but I think that's going to continue. So overweight Japan, a kind of benevolent macro backdrop, the BOJ, even though normalizing, of course, still very expansionary policy. But the real story is Japan itself,
where we're seeing this GDP reflation story really catch hold, we think. And we're seeing a little bit of bargain hunting in today's session as well, because we're seeing the Nikkei now gain more than 3%, but really not enough to retrace some of those losses that we saw in the Japanese market over the past seven sessions of declines. But I have to wonder, though, I mean, we're speaking to an earlier guest about these hurdles against some of those M&A. For example, seven in I and potentially the company seeking government protections. And of course, we just have more technological protectionism not only in Japan but in other countries. Will this sort of dampen the mood or make it more cautious for investors when they're looking at all of this positivity over corporate governance and shareholder value here in Japan? As a brief aside, we would be long Japanese equities unhedged. Just by the way, we think this is a
Japan meaning Japan story. So we belong to the equity space on an unhedged basis. So you're actually benefiting from that stronger yen tailwinds to your actual question. The corporate governance reform I think is still a very exciting story. You know, over the last 18 months, we've seen really historically amazing changes from the Tokyo Stock Exchange, strongly encouraging, really, really strongly encouraging Japanese companies to treat shareholders better and more fairly.
I think that's real. It's ongoing, but it's not perfect. So there's still a lot more to go. It won't be a story without some steps backward as well as steps forward. But don't miss the points, at least for us from the BlackRock Investment Institute. Nominal GDP reflation story multiplied by a corporate governance story which we think is real and ongoing for us equals overweight Japanese equities on that basis to benefit from both the Japan and a story plus potentially a yen strengthening over the next period of time.
Ben, always great to have you with us. Ben Power, chief, Middle East and APAC investment strategist at BlackRock Investment Institute. Take a look at some of the movers that we're watching in Asian ship Monkeys. I certainly am. Among some of the biggest movers to the upside there, the likes of this go higher next up by over 6% after the jump that we saw in video, really that rally in the U.S. was really boosted by the moves in big tech and video soaring more than 8%.
That's another $216 billion added in market cap. We heard from the CEO, Jensen Horn, highlighting the limited supply situation, strong demand for its latest generation of chips, really talking about that customer relations are tense and perhaps emotional due to some of the stock shortages that are going on at the moment. So we're seeing that reaction. We also had some news when it comes to open air as well, the funding set to potentially propel the value of the value of the site up to $150 billion with that discussion being reported by Bloomberg. Of that six and a half billion dollars in equity financing. More ahead on the Asia trade. This is Bloomberg.
Delivery of our components and our technology in our infrastructure and software is really emotional for people because it directly affects our revenues, it directly affects our competitiveness. And so we probably have more emotional customers today and deservedly so. And if we could fulfill everybo
2024-09-14 03:45
