This is Bloomberg Daybreak Asia for this Thursday, May twenty fifth in Hong Kong, Wednesday May twenty fourth in New York and coming up.
Today, US equities decline as negotiations over raising the debt ceiling remain at an impasse.
Fed Minute show officials who are divided in May over whether future rate hikes would be necessary.
And in Nvidia gives a bullish revenue forecast for the current quarter.
Ron desantus officially in presidential race. Microsoft blames China for state sponsored hacks to US systems. Debt ceiling sides again say they're optimistic, and then again far apart. I'm at Baxter with Global News.
That's all straight ahead on Bloomberg Daybreak Asia, the business news you need to start your day in just one fifteen minute podcast available on Apples, Spotify, the Bloomberg Business App, and everywhere you get your podcasts.
Good morning, I'm Doug Chrisner and I'm Brian Curtiz. Here are the stories we're following today. Nvidia is trading up right now twenty six point six percent in late trading. Nvidia is already by far the world's most valuable chip maker, and it gave a bullish revenue forecast for the current quarter. It said sales would be about eleven billion dollars that shattered estimates of seven point one eight billion by analysts. The outlook shows that Nvidia is benefiting from the booming
demand for artificial intelligence services. The company has positioned itself as the top provider of components for AI software, and that has helped in Vidia weather a broader slowdown in technology spending. Let's get more here from Bloomberg's men, Deep Sing.
I think what this company has showed is data center is now sixty percent off their revenue, clearly. I think they've found new applications where their technology and the chips can be used, and there is a software element, and the auto side is also new, which could be huge.
So we gave you the forecare asked on revenue, and Nvidia also reported revenue in the first quarter that beat analyst estimates by the widest margin in five years. And again, Nvidia shares up twenty six percent in late trading.
Well, the elephant in the room, so to speak, seems to be the debt ceiling. Today, Treasury Secretary Yellen said signs of market stress are now beginning to emerge as the federal government moves closer to running out of cash, and Yellen said, the Biden administration is focusing on completing a debt limit deal.
We are committed to not having mispayments and raising the debt ceiling, so that's not a situation we face. We're not involved in planning for what happens if there's a default.
That is Treasury Secretary Yellen there, who went on to emphasize the level of uncertainty about day to day government payments and receipts. She repeated Treasury may run out of cash to pay its bills as soon as June first. Now today, commisto for a JP Morgan Chase said there's roughly a one in four chance twenty five percent probability that the US will hit this state without a deal to raise the death limit, and the Bank said those odds are rising right well.
The Fed May minutes showed that officials were split on monetary policy going forward, not on the May move because that was unanimous, but looking ahead to June, some officials saw additional tightening as warranted to lower inflation. Several figured it may be time to stop hiking so as you might imagine, one of the first questions to our guest will be, what's more some or several. We'll get some views on that anyway. Many were focused on the need
to retain optionality. Many participants emphasized communicating a data dependent approach. Earlier in the day, FED Governor Chris Waller said it's premature to declare that the tightening cycle is over.
I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our two percent objective. Well, whether we should hike or skip at the JEW meeting will depend on how the data come in over the next three weeks.
Investors currently see the odds of a July rate cut in above seventy percent, according to pricing and futures contracts that officials have raised rates by five full percentage points five hundred basis points over the past fourteen months.
Federal prosecutors are reviewing stock trades buy some employees at First Republic Bank during the lenders collapse that story from Bloomberg's and Kates.
The Justice Department is looking at whether anyone working at First Republic used inside information as it was crumbling in the second biggest bank failure in American history. The probe is also scrutinizing the lenders' financial disclosures. Plus the Securities and Exchange Commission is investigating whether any First Republic senior
executives traded using insider information. The inquiry significantly adds to the legal scrutiny surrounding the demise of First Republic in Washington and Kates bloomberg Our Day Break Asia.
Well, the Bank of Korea is likely to hold its policy rate steady today for a third straight meeting. Bloomberg's David and Glace as the story from Hong Kong.
All economists surveyed think the central bank will keep its main rate at three and a half percent. Officials are thought to be concerned about growth. The BOKA will update its forecast for key economic indicators, including growth and inflation, at today's meeting. Policymakers already said in recent weeks that economic growth this year may be slower than expected. That's
as Korean exports weekend on slowing global demand. On inflation gains and consumer prices have eased over the past three months, but core inflation remains a concern.
In Hong Kong.
I'm David Ingless Bloomberg day Break Asia.
I'm Brian Curtis along with Rashad Salomat. He will join us in a few moments. Doug Krisner is with me now, So Doug, really, Nvidia' is a story of the morning.
I think it seems to even eclipse what's going on with the debt ceiling, at least in the market action post close rallying as much as it is the forward pe is sixty one that might have some investors chafing, but the average price target is only three hundred and five on the street and as mentioned, with this rally in after hours, stock would be up around three hundred and ninety bucks.
Yeah, you know, the CEO, Jensen Huang was saying that the installed global data center infrastructure is going to go through a period of transission, a move away from general purpose computing I think, to some type of accelerated computing
that is basically connected to artificial intelligence. And I was talking to Paul Sweeney about this and his view is right now, with a lot of the hype that we've been hearing around AI, this may be a part of that story as well, that maybe we are nearing some sort of peak in a lot of the enthusiasm as it relates to artificial intelligence.
Who knows.
Yeah, you would think that, but then you see earnings like this and you almost wonder whether or not that really jacks up a new round of positivity. China's going the other direction. I know you were talking about that a few moments ago. Seems like investors are losing faith in the recovery in China, and it's reflected in four to five different ways. If you look at the MMB well pass seven now on the weak side, the CSI three hundred giving up all of its gains this year
now negative on the year. Debt is weighing on the economy, and growth is under pressure, and geopolitics is kind of the icing on the cake. So that's five right there, and there are others.
Yeah, I want to add the regulatory framework which has been tweaked a little bit, and just maybe a lack of conference in the government's ability to guide growth.
Yeah, you wonder why they are being so cautious. But time and again we come back to the point. They don't want to repeat what Japan did back in the eighties, and they are extremely nervous about getting investors too excited and having too much liquidity and too much easing, and so they play it very much cautiously. It's an interesting path, and of course we'll be reporting on it here this morning, all throughout the morning. All right, it's time now for
Global News. Let's get to the nine to sixty newsroom in San Francisco. Ron Decentis is officially in the race for the presidency at Baxter has Global News ed.
Yeah, exactly right, Brian. He has filed papers with federal regulators, running a Twitter space session with Elon Musk. Also has released a video that we will have for you shortly. Signals are that he plans to run a non traditional campaign, built for social media error and centered around the culture war debates. Bloomberg contributor Lisa Camuso Miller says, the process here is unusual.
All of the elements of this don't make any sense to me. But maybe this is by design.
Maybe this is a way.
To get Donald Trump back to Twitter.
If you're Elon Musk.
Yeah, he becomes Donald Trump's strongest contender yet, but his polling numbers are not close at this point. The santas As will model himself as drama free, although Disney execs may disagree. Death ceiling talks have wrapped up for the day. It looks as if legislators have been allowed to go home for the long weekend. Speaker McCarthy's saying that he sees time to get something done, but.
To try to finish up the negotiations with the White House.
There's a number of places that we are still far apart.
Yeah, maybe the spending cap language has changed a bit, though. Listen, I've been very clear I will not put a bill on the floor.
This spends more money next year than this year.
Then this year, all right, so that's maybe last year cap, maybe this year CAP.
Now.
House Minority Leader Hakim Jeffreys' version is a bit more harsh, saying the GOP is doing one of two things.
To either extract deep, painful cuts that will hurt the health, the safety, or the well being of everyday Americans, or crash the economy the fault on our dead and trigger a painful recession.
So digging in a bit, what's really going on, Bloomberg's Kaylee.
Lines, it's not the fine tuning that is being hammered out in public. It is happening behind closed doors, so we don't really have a sense of the finer points of what the deal they're working on is. But they have to have that architecture in place, right If it's going to ultimately be turned into legislative text and be something that the House and Senate can vote on, it's going to have to get specifically maybe just start laying out all their cards in public here.
Yeah, so behind the scenes negotiations, a schedule to happen could be sent to the districts in the next few days, it come back the beginning of the week and vote. Meanwhile, the dance continues or doesn't. Microsoft says it's found malicious activity by a Chinese state sponsored hacking group that has stealthily gained access in a critical infrastructure organizations in Guam and elsewhere in the US. Says the likely aim was
disrupt critical communications in event of a crisis. Microsoft says a group named a Bold Typhoon has been active since mid twenty twenty one, targeting organizations that span manufacturing, construction, maritime, government, information technology education. Microsoft says it is directly notified targeted or compromised customers with moderate moderate confidence. Threats are mitigated. Global News powered by more than twenty seven hundred journalists
and analysts in over one hundred and twenty countries. In San Francisco, I'm Ad Baxter, and this is Bloomberg.
I'm Brian Curtis in Hong Kong, along with Rashad Salamat. Our guest is Andy kapraan partner and Cocio Regent Atlantic Private Wealth. So, Andy, I know we want to talk about the debt sealing debate and also about the FED, but I got to ask you about Nvidia. Right now, Nasdaq futures are up some two hundred and fourteen points, a gain of one point six percent, no doubt heavily influenced there by the big gain after hours in Nvidia.
Nvidia is really a beast of its own. I'm not sure that there's there's a lot of read through for everybody out there, but do you think that that stands a chance of kind of reducing up some of the megacaps which actually hadn't done all that well in the past three weeks or so.
I think I think this is really a very company specific story about a company that has a lead in a very important new technology lead that's very hard to catch. Up with and I think if you're looking at the market action uh this uh this evening, what you're seeing is benefits for for tech broadly, for certain semiconductors in particular.
But it's really but it really is about companies with some kind of a leading edge, whether it's whether it's in the design of these chips or in the manufacturing of them.
Well, absolutely, And you know it's always trying to get good, to try and get the sect lead, isn't that you know?
Is that what you do?
Is that what you look at andy when you already perhaps advising clients, so creating a poolfolio.
Sure, so when when I when I look at companies with the leading edge, there's a given a take on the leading edge of a really important change like AI or chips for mining bitcoin and cryptocurrencies. You tend to have an early leader. You tend to have to pay a lot for that early leader, and it's very hard to maintain that edge because you suddenly have a target on your back. I think with the semiconductions in particular, the lead times in developing new manufacturing techniques are so long.
It really creates a lot of cushion for those early leaders and I think that's what we're seeing today with stocks like Nvidia.
Yeah, to broaden it out though, I mean, it's one thing for Microsoft and Alphabet and Nvidia clearly as providers of artificial intelligence to the marketplace, But what about the recipients. I mean, the way to get a read through right across the markets is whether or not almost everybody benefits from this, and if so, how do you put that into the equation.
That's that's actually a really interesting point. I think one of the ways that we're going to have to see how AI really changes the world is how does it become a productivity enhancing tool as opposed to just a cool toy to write a customized novella of your very own.
All right, and we told Nvidia, let's talk a little bit about overall and what's going on market wise and what the biggest question apart from, of course, the FED is from the clients that you have.
Sure so, by far away, the most common question I am getting is what is going on with the debt ceiling and how can we protect ourselves against it. I think the challenge with the debt ceiling, and I think in this round of the debt ceiling in particular is we're having a moment in time when it's almost like the Boy the Cried Wolf. We've seen this movie too many times before. The market has been reluctant to respond
to it until just the past few days. And I think the reason why we're starting to see our response is we're cutting it to If you look at Janet Yellen's announcements about the Treasury running out of funds as soon as Junior first, which is barely a week away, is really sharp point that, no, we don't have a lot of time to get a deal done. We do have to get one done. And now investors are starting
to consider what does this actually mean? Will the will the Treasury default on a bond payment, will they announce ind social Security checks? It's starting to boggles people's minds, and it is the fear of the uncertain that that really prompts a lot of investor behavior. I think, I think this is only the beginning of a lot of volatility unless we get a deal very quickly.
You wonder about those people buying the one month you know, I'm proud to be getting seven percent seven percent. You know, if you don't get that as annuallyzed you have thirty days and to take on all that risk, I mean, all heck could break loose.
If you know, if they.
Default, you wouldn't be buying a one month t bill, would you?
So I say, you know, the one month's TBO presents a really interesting story. On the one hand, are really high annualized yield. On the other hand, you're really you're really diving for a very apparent risk. I think, how risky is it?
Truly?
When I think about the investments that are likely to perform the best in a debt ceiling scenario where there is a formal cap that, in my opinion, will be a profoundly deflationary move. We're talking about the federal government withdrawing a very substantial amount of funds from the economy, either payments that aren't getting made to contractors, payments that aren't getting made to welfare recipients or Social Security recimbients,
or payments that aren't getting made to bond funds. A profoundly deflationary move that should create a deflation or response in the market, which should which is ultimately really positive for bonds. I think that's also really unlikely. So investors that are buying that very short term tabill I don't think they're taking as much risk as it perhaps sounds, and that's why it's only a very high sounding yield when you anualize it, it's it's only a few basis points.
If you don't, yeah, it's actually fifty eight basis points. Actually a month, that seven percent if you're divided by twelve. Of course, now looking at this, and does that also mean you become defensive elsewhere? Do you have the most doubt portfolio possibly going as a consequence of the outside noise?
Sure?
So, you know in this environment where you almost expect that, then in the next few bix there is likely to be an uncommonly high level of volatility. You hunker down and you get close to your benchmark. I think the what investors are likely to do over the course the next few days, especially as the deal gets drawn out, especially if it seems less likely that a deal arrives in time, people will go back to safety, and people
are likely to go back to benchmark. In my opinion, where that's likely to manifest itself is particularly in people going back to the US dollar. I think there's been an uncommon out of farishness for US dollars, some of it rightfully.
So I just briefly, you've probably heard us talking about China, just some general thoughts, really quickly in thirty seconds.
Sure, China is a very important economy and a very important market. I think investors should be leery of avoiding it, particularly after a really balat ale a handful of years. As it recovers, as it comes back from COVID, it's likely to be an attractive market. I think the challenge is geopolitics, and the further we get away from some of the crises in the US, particularly on the debt ceiling, the closer we can get to more certainty about our relationship with China.
Andy, thank you so much for joining us here this morning. Appreciated. Andy caperan partner in Cocio Region Atlantic Private Wealth. This is Bloomberg Daybreak Asia, your morning brief on the stories making news from Hong Kong to Singapore and Wall Street.
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