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