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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. Big cap tech shares. We're up today, sending the Nasdaq one hundred to a record high. A lot of optimism still over artificial intelligence that's been a key driver shares, and in video We're up more than four percent to finish at a record high now in the process, and Video cemented its position as one of the most valuable
companies in the world. We also heard from Micron Technology after the bell and an upbeat forecast for the current quarter. Micron has been benefiting from demand for those high bandwidth memory chips used in artificial intelligence. Joining me now for a closer look at market action is Katie Kaminski, the chief research strategist at Alpha Simplex. Katie, thank you so much for making time to chat with me. What did you make of today's price action, particularly the AI trade.
Well, I'd have to say that it's quite remarkable to see, you know, even though we had some rally today, but it was very narrow. It was really focused on those tech companies, and you're really seeing that optimism is still there and that people are really seeing that opportunity as one of the few on a day like today.
So I mentioned the fact that the Nasdaq one hundred closed at a record. We're trading it around thirty one times earnings for the Nasdaq one hundred. Is that a concern?
I mean, I think it's definitely a concern that we've been voicing for quite some time. And I think if that's sustainable, then you know, it's pretty impressive.
So I think there is going to be that continued.
Concern that how long can this type of growth be possible. So far, as of today, it seems to be still in line, but you're right, the skepticism is likely to.
Come back, given that we had commentary today from Fed jer J. Powell. He was testifying to the Senate Banking Committee. Apparently the FED is still struggling to get its arms around the impact of tariff policy on inflation. How do you understand the tariff story as it relates to inflation.
Well, I think the challenge is that there's a lot of lag in data, and I think part of the reason you see that sentiment is things are still pretty good in terms of unemployment and other parts of their mandate.
We do see.
You know, if you look at signals on the technical side, people are still concerned about long term bonds and.
Maybe that's part of it. So I think until you have.
More concrete data, they're willing to wait if things are not necessary to necessarily cut rates.
So that's why you're kind of seeing that weight and see policy.
And yet we've heard from two FED governors recently about the possibility of rate cuts or a rate cut as soon as the July meeting. How does that sit with you?
Well, what we've seen is there's definitely been some of that price action that's consistent with that story. It does make you start to scratch your head a little bit, though, because you can start thinking, I mean, you see that today in price movements, you saw yields up, then you saw yields down, and I think the market is leaning towards the hope that there's going to be a bigger pivot and actually get some rate cuts at some point.
Does that make you a little bit more inclined to look for opportunities in the bond market Right now? We were talking about high valuations and technologies and if we can kind of accept the notion that rates are headed lower we just don't know when that move happens, that maybe there are opportunities in the bond market right now.
Well, I definitely think that the market looks a little bit like that, and you've started to see a pivot this month towards more bond buying, and I think with the skepticism earlier, you know, there's definitely that potential that this might be a good entry point. You might just have to wait for some period of time to see the.
Value of that.
What are you advising clients to do in the current environment in terms of deploying cash right now? Are you advising them to wait and see anticipating maybe a pullback in the equity market, or do you want to be fully invested right now no matter.
What, Well, I'd say, you know, we tend to look at more technical signals, and what we've seen is that equity signals have strengthened some. So there is some indication that equity equity positioning isn't as weak as it was
before there was less concern. But of course, you know, it is a very volatile time and you have seen a lot of big moves, particularly outside of the equity market, So you know, if there were some real events, you could actually see a much bigger move in equities, but so far it's been relatively calm.
Surprisingly, I'm curious as to how you're understanding geopolitical risk as a part of the story in markets. We've heard from President Trump saying the US will hold a meeting with Iran next week. He is doubtful that there is any need for a diplomatic agreement on the nuclear program in Iran, citing the damage that some of that American bombing has done to key sites. This is up for debate. We still don't have a lot of sharp visibility into
this situation. For the moment, it seems like the risk has diminished, the oil market has calmed down quite a bit. But I'm curious to get your take on geopolitics as a factor in market's behavior lately.
Well, it's been.
Actually quite surprising to me that you didn't see the type of movements in the equity markets that I would have expected, given the strength of how extreme the headlines were and how concerned people were. I think the only place you've seen that is in the energy markets.
Where you've seen sort of moves that were exceptional.
Equity markets have remained relatively strong and relatively calm if you take those in comparison with energies. So I think the equity market is sort of looking past this right now, and people, instead of acting on this, are kind of waiting to see if we have a little bit more clarity,
which I actually found somewhat surprising. But you did see those moves in places like commodities, so that could be a foreshadowing of volatility that we could have if we had more clarity on how a potential escalation.
In the future.
I want to ask you next about the financials, because we heard from the FED today policymakers unveiled a plan to roll back an important rule on capital for the big banks. Talk to me a little bit about how you understand the tweak to the enhanced supplementary leverage ratio, what it means for big institutions like Bank of America or JP Morgan Chase Well in.
Some sense having less restrictions in lending, and also could mean that there's a little.
More freedom in the space.
But what's interesting in terms of the commentary that I've seen is that the market didn't really move much on those adjustments, which to me suggest that whatever decisions were made with this, some of the price action is already baked in in these banks, so I think for me that was surprising in some sense. And I know some reports were noting that despite a relatively large decision, that you didn't see a lot of price action regarding this particular decision.
How are you viewing markets offshore these days?
Well, it's interesting to ask that because honestly, the focus has been so much on the current Middle East conflict that there's been a little bit less focus on places like China, Japan, Australia. And I think that you know, you've seen Japan has definitely been in a slightly different trend than the US, So you've seen a weaker young You've seen some questioning about whether or not there's going
to be a hike at some point. So I'd say that it's been relatively quiet outside of what's been going on geopolitically more recently.
So, staying with geopolitics for the moment, the president is returning from the NATO summit a bold commitment from all thirty two members to raise military spending to five percent of GDP. So does this compel you to look more closely at what's going on in the European equity market.
It definitely does in the sense that there is sort of a glimmer for some growth and.
Also opportunities in that space.
It just really indicates a change and shift in policy which will definitely be somewhat growth oriented for European countries. So I think people are looking more closely at European equities and they have really outpaced this year as well. So I think that's something that's going to be a more common theme as we see how this unravels in terms of actual spending.
And where Katie will leave it there. Thank you so very much. Katie Kaminski there, chief re search strategist at Alpha Simplex, joining us here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner. Hong Kong's de facto central bank defended the local currency against its peg to the US dollar. The monetary authority bought nine point four to two billion dollars in Hong
Kong dollars. This is after the exchange rate touched the weak side of the permitted trading ban of seven seventy five to seven eighty five against the greenback. For more, we heard from Garfield Reynolds in Sydney. He is our Asia team lead for Bloomberg Markets Live. Garfield spoke with Bloomberg's April Hong and Heidi Stroud Watts.
A bit of uncertainty when it comes to where that dollar trajectory is headed. Oh well, I mean, the broader dollar trajectory is very much for dollar weakness, but it is interesting to watch the Hong Kong dollar instead. Instead, instead it's falling against the US dollar and risking you're falling out of its out of its peg. Hence the
need for Hong Kong to buy its own dollar. That is a tension that's been brewing for some time because in particular, as the Chinese government, the main government highlights its desire to have the yuan be playing a greater role globally, it comes to look at stranger and stranger for the Hong Kong dollar to be pegged to the US dollar and pegged so tightly the yuan does have.
You know, there are controls on where it goes against the US dollar, but those controls allow it to gradually move one way or the other, and it's gradually, in fact, been strengthening but part of the setup is that the Hong Kong dollar is stuck where it is between seven seventy five and seven eighty five, and the other things the PBOC are doing are helping to down benchmark borrowing costs on the short end, in particular in Hong Kong.
So that's setting up the arbitrage opportunity that is pushing down the Hong Kong dollar against the US dollar, even if in a lot of ways you might think it should gravitate more towards the seven point under seven point two per dollar level that the yuan is at. So that's a long term tension that they're going to face more and more often as things developed towards a weaker US dollar and a yuan that is playing a greater
role on capital market. So might not be the first, might not be the last time in the coming months when Hong Kong needs to intervene in this fashion.
Yeah, go after your point about the dollar weakness, we're seeing a losing ground. As you spoke against the backdrop of Wall Street Journal reporting that Trump might name the fet chair successor to Powerell earlier. I mean, what'sn't clear here because markets are already sort of been betting for this.
Yeah. Well, the play here is that it's another blow to the credibility of the US dollar because the Fed's independence from politics has been a key part of why. Well, it's a key dynamic for investors and for traders. You know, why are you willing to go to the US dollar before anything else. Well, it's got the deepest bond market.
That helps. It's also got the credibility of its institutions and the idea that power will get shunted out and replaced by somebody more open to Trump's call for lower interest rates just in order to save the US government money on its borrowing costs. That's the kind of thing that's going to have traders saying, well, we might want to avoid the US dollar, or if we're going to buy US dollars, we're not willing to pay extra to
do so. So you get at the very least movement down in the price of the dollar against other currencies. You're notable that this Wall Street Journal report comes after a US Republican senator was you're very pointed in his criticism of Powell at the testimony, or a US representative saying Trump was voted in by millions. You were voted in by one person, Donald Trump, and you don't want and he doesn't want you to go on doing what you've been doing. So what's your justification.
The other visit News's course of relaxation of capital rules.
Did you expect that to have more of an impact?
Well, the impact was mostly priced in, it looks like, and I think it was noticeable that earlier on a few days ago, we had some comments from the Fed, I think after the FOMC meeting in fact, that they were moving more strongly towards the SLR changes. That didn't have a huge impact, and it highlights that just because banks will be able to buy more treasuries doesn't necessarily mean they will, especially when we are going into what's
going to be a very fraud couple of weeks. We have the reciprocal tariff deadline coming at about July nine, and then before that, we have the July four deadline for whether or not the Trump's spending and taxation bill gets past, and how much that's likely to increase the deficit. That's another uncertainty. We also have the uncertainty of we get payrolls July three. This time around on Thursday, ahead of the July for US holiday, So it's going to
be a very choppy week next week. Not too much of a surprise that banks and others aren't going to rush into treasuries absent a clear signal that, for example, right cuts the coming.
Garfield Reynolds in Sydney. He is our Asia team lead for Bloomberg Markets Live. 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 Prisner, and this is Bloomberg