A new chapter in global growth is being written, and much of it is happening in Africa. Africans need to invest. There are deals to be done and business to be won. I'm Jennifer Zabasaja. Every week on the Next Africa podcast, we track capital flows and political shifts shaping the continent's future. The digitalization of Africa is going to power its growth. Riding the world of something like HIV is possible. Population growth is so enormous in Africa. Listen to Next Africa on Apple, Spotify, or wherever you get your podcasts. Bloomberg Audio Studios, podcasts, radio, news. Welcome to the Daybreak Asia podcast. I'm Doug Krizner. So the U.S. is now going to pause the effort to help stranded ships exit the Strait of Hormuz. Tuesday night in the States, President Trump said he's making this move for a short period to see if an agreement with Iran to end the war can be finalized. Now, crude oil prices are in retreat in the Asian session, as was the case during U.S. trading. And at the same time, we had the U.S. equity market rising to fresh records. And the improved appetite for risk did help to send U.S. Treasury yields lower right across the curve. For a look at some of this price action, I'm joined by Bloomberg strategist David Finnerty. David joins from our studios in Singapore. There's been so much volatility in this market. It's really tough to figure out what's driving the price action. Is it all about crude oil right now, do you think, David? I think certainly if you're in the FX and rates space, that is the main determinant. We are obviously at the mercy of headlines. As you're seeing today, there's these moves because of the headlines you just mentioned. So we are at the mercy of those. But I think at the end of the day, oil is the still driver. I mean, you look at oil still, it's moved. It's come up slightly, but Brent crude still, let's say, ballpark $108. Still very elevated to where it was. Yes, it's not $120 or something, but it's certainly not $70. So, yes, Treasuries did come. We saw Treasury yields come down yesterday, but they're still elevated again because at the end of the day, we don't know. The glass is always half empty for the markets, certainly for the equity markets. And there's hope, but hope doesn't mean reality. I mean, this war was supposed to only last, what, over three to four weeks, and here we are with the third month. So I think the question is, yes, there's positive signs, but at the end of the day, Hormuz is still blocked. At the end of the day, we still have an oil problem. Until that is resolved, I don't think we'll see any meaningful moves in the FX rates market because at the moment you've got pressure on inflation while oil remains at these levels. Well, in the equity space, I think we can agree that the chip makers are undoubtedly the star performers here. in the New York session, we had word that Apple is considering using both Intel and Samsung to build the main processors for Apple devices in the US. Intel shares jumped 13% in New York trading. And we had the ADRs in Samsung during the London session up by more than 8%. Right now, Samsung in Seoul is up by more than 13%. We had the news from AMD after the bell with a forecast for revenue that was much above the forecast. AMD shares jumped 15% in late trading. It seems like this chip trade is just on fire and it will not stop. Yes, certainly. I mean, in trading, they say the trend is your friend and the trend is definitely one way here. And so, yes, it goes higher. Now, I think the catch also is at the moment is any market at some point, there's some sort of pullback. It's quite standard. But at the moment, you're going, And you don't want to, if you don't get involved in the trade, then you're just missing out on these huge returns, which you've said, which are one day returns. So I think at the moment, the sentiment is just, you know, let's just go for it. The upside is, you know, the results come in overall very well. So the upside is growing and growing and growing. So I think at the moment, it's just like, the sentiment seems to be, you have to be on that train. I said, at some point, it's a mini, I'm not going to say a correction, but a mini pullback. But then I think a lot of people will say that I'll just use that as an opportunity to actually buy again. So I think the trend at the moment is definitely, as you said, for anything AI related or chip stocks related, it's certainly, you know, that's where people are happy to put them on. So let's talk about your specialty, which is rates for an exchange. We had the RBA meeting yesterday and obviously an increase in the policy rate. I think that was the third consecutive move to the upside here. The governor of the RBA, Bullock, was signaling that she would now pause to assess the next step. Give me your sense of what central banks right now are struggling with. If you can put the RBA aside for the moment, that seems to be a bit of an anomaly, given some of the other forces at play right now right Yes and no I mean yes RBA hiked and I think it was the third consecutive hike But I think in the press comments she did allude to the problem that I think all the central banks have, and that's the reason why she's seeking the pause, which is, okay, we really have, yes, we know it's inflation pressures, but we do know that there is signs of an impact on growth now as well. Now, not every central bank has a dual mandate, but certainly many of them do. And if you do, you're going, And I'm in this problem of, yes, inflation is picking up. And we can see that already. The knock-on effect on growth and employment is showing signs of seeping through, but hasn't fully seeped through. But they are cognizant that those cracks could develop more, shall we say. So I think every central bank, and certainly you mentioned, if you look at the Fed, that was a classic example. They're aware of the two-sided risks here. so I think that's a problem for every central bank now it's like okay look yes it's got a more inflation but if I just hike hike hike hike then you know you've got a near-term problem in terms of in terms of employment and growth and so where do you find that balancing act you know there's always a price to pay but you don't want to go too far one way or not go far enough and it's a fine line and of course the catch is we don't know how long this will go or how long oil will stay elevated. We just don't know. And of course, the longer it stays elevated, the bigger the impact on both those factors. So that's the big intangible that I think every central bank has. For the moment, would you say that the Australian dollar then is on firm footing and we could see a lot more in the way of strengthening? Yeah, I think, well, the Aussie dollar, I think the trend, again, trend is your friend, Aussie dollar has certainly been a strong performer. I think any weakness in it has been an opportunity to buy. That has been the sentiment towards it, A, because of the hiking path that RBA has been on. The growth has been relatively OK. And also what's interesting, it's obviously been a risk barometer. It's normally a risk barometer in terms of, you know, risk on, you know, Aussie rallies, which we're seeing today. But even what's interesting, in risk off moments, it sort of didn't sell off as much as you would normally anticipate. So it sort of detached itself from half of the risk equation. So overall, there's many good reasons to go. If I've got to pick a currency, which I like, which is a strong performance, strong fundamentals with it, the Aussie is certainly one of them that would come to the front of mind. I'm seeing a little bit of dollar weakness right now. So if we can agree that crude oil is really what we're looking at here in terms of trying to understand what the market feels about the trajectory of the war and maybe some level of stasis or at least pullback in the level of tension. Do you necessarily think that the dollar's path right now is to the weak side? If there is a, yes, if this trend of good news, we say, keeps coming, certainly if there's a resolution to the war and all false, then yes, I think the sentiment is definitely dollar weakness in the near term. I don't know how many traders speak to just an awful lot but and they've all pretty much across the board say the market the hedge funds everyone is biased towards selling the dollar now having said that i'm not saying that the dollar will collapse i think that's another category because at the end of the day you know how dovish can the fed be in this scenario and even with kevin walsh taking over um you may get one cut this year you may get none the market's looking for none at the moment and the other factor is US growth is overall performed quite well. So, you know, if you look at the dollar index or the Bloomberg dollar index, the big carries that weight against it is certainly like the euro and the yen. And though the euro has its problems and with elevated oil prices, we know the yen has its problems and those haven't gone away. You're seeing dollar yen back up towards 157, you know, 158. So I do think, yes, the sentiment would be sell the dollar. There'll be near term downside. But again, whether that's just a dollar period, just tumbled over, I don't think quite goes to those levels. So we mentioned the strength that we're seeing in some of the chip makers, particularly SK Hynek, Samsung today. And I'm seeing a bit of strength in the Korean won against the greenback. Do you want to be long the won at this point, given everything that we're talking about as it relates to chips? Yeah, look, I think the won's an interesting one because you said from the AI sector, the chip sector, So the one and Taiwan dollar are obvious sort of plays, if you like that. I think the catch is, again, though, they're both big net oil importers and said oil is still very elevated. So that hasn't solved that problem. Once, I think you'll get a bigger bang for your buck in terms, if you like, the one when the oil is taken out of the equation. Until that happens, you're sort of at the mercy. And if you look at the one behavior it trying to rally but it just it struggling It up today but then your wrong headline comes out and it weaker again so i think it got certainly a lot of upside potential but you really for me personally i'd like the oil side to come out and that have some resolution to that oil you know 108 i don't think it's good i certainly would like oil under 100 to to see the one really getting extended all right david good stuff we'll leave it there thank you so much david finnerty bloomberg strategist joining from Singapore here on the Daybreak Asia podcast. Hello, I'm Michelle Hussain. And for more than 20 years, I was at the BBC. Military withdrawal from Afghanistan. But all the time I was delivering the headlines, I wanted to go further than the news of the day, to spend more time with the people shaping our world. And that's what I'm doing here on this podcast. Speaking to people from Nigel Farage, to tech journalist Kara Swisher. And the tech industry is running wild. You know, they've gotten what they wanted and they've seen a huge run up in their stock prices. This will be a place where every weekend you can count on one essential conversation to help make sense of the world. So please join me, listen and subscribe to the Michelle Hussain Show from Bloomberg Weekend, wherever you get your podcasts. You certainly ask interesting questions. Welcome back to the Daybreak Asia podcast. I'm Doug Krizner. And as I mentioned earlier, the US is pausing its effort to help stranded ships exit the Strait of Hormuz. Tuesday night, President Trump said he is waiting to see whether or not an agreement with Iran can be finalized and signed. Trump also said the U.S. blockade of ships transiting to and from Iranian ports would remain in full force and effect. And that's where we begin our conversation with Kirsten Fontenrose, strategic advisor at Systems Planning and Analysis. Kirsten spoke with Bloomberg TV host Sherry Ahn and Heidi Stroud-Watts. We're trying to understand what's actually changed in the 10 weeks since the start of the war, because you're telling me that the offensive action from the U.S. is paused at the moment. The naval blockade actually continues. So what's been done so far in terms of any progress on ending this war? the main instrument you're looking at now the economic fury could not have happened without the military operations that preceded it because if you tried to apply this kind of naval blockade that blocks iran's trade to squeeze them economically they would simply have responded with military action on that blockade on the ships using air to or ground to air missiles against the helicopters and drones and like so you had to have those military operations to take a lot of that arsenal off the battlefield in order to have this blockade now squeeze them economically. So it's a two-prong approach, but you couldn't have had them the other way around, and you couldn't have had one without the other. President Trump continues to urge allies to help in the Strait of Four moves. Why should allies help when before this war, the Strait was perfectly open and the U.S. did not necessarily consult to any of the other partners around the world? Three reasons. First, Iran has the opportunity to close the Strait of Hormuz at any point. So the fact that they did this now is not unique. They could have chosen to do this after, let's say, there was a scenario when Russia was successful in Ukraine and it decided to roll over Europe. It could then have closed the Strait, and Europe would have been in a much more difficult position. So this is a lesson for Europe, which is why the U.S. is asking for that support. Two, the U.S. does not rely on the Strait. You've heard this a million times as much as Europe and some nations in Asia do for their trade, for their energy. So it's the U.S. now addressing a problem set that is theirs. And three, the U.S. laughs a little bit, honestly, when Europe makes the argument that they didn't ask for this war because we think about World War I and II, where we were not consulted and we did not support going to war. And yet we did. And in both cases, we came to Europe's defense and frankly saved them. So the question here is, will Europe sort of return that favor when it's in their economic interest more than anyone else's? We are headed towards the President Trump and President Xi Jinping summit. Is President Trump going into that meeting in a weakened state, given that there's no resolution so far to the war? Not a weakened state, because remember, one of the things we're expecting to be discussed at this summit by both parties, though they won't put it on the table beforehand, is whether or not China will now start buying oil and energy from the U.S. It's going to be one of the largest producers. It's going to it might be a bit more expensive But if Iran oil is either off the market or going to non markets and if the Gulf is at risk then China may wish to extend this as a goodwill gesture to the U The U may wish to keep this as an offer to China Look, you're suffering economically without it, but we will allow you to buy our oil. It could be a win-win, but I think you'll watch both sides maybe save it as their own little trump card in those deals. And both will present this as something that's good for their own people, but it would wind up being a boon for both. It's interesting. Trump says that presidency has been respectful when it comes to Iran. He's sort of downplayed reports of sort of strains and obviously a disagreement on how this war has played out and the way that the ceasefire negotiations have gone. How do you, I guess, rate the relationship at the moment? Because clearly so much of that focus has shifted away from the bilateral competition between China and the U.S. while this war has been ongoing. I think both China and the U.S. are hoping for a trade deal to come out of this summit. And so they don't want this Iran conflict to do more than strengthen their own position. And they're both posturing to make sure that it can. We do know that China is using this laboratory. They're watching the way U.S. military operations pan out. They're watching the way equipment performs. They're providing Iran, we believe, with some, whether it's technology or insight imagery the way that Russia has. So they are definitely using this to size up the U.S. military machine. And the U.S. is using this as well to show China how quickly this kind of military operation can be spun up and how much power the U.S. can bring to bear to a war that is predominantly focused on naval operations at this point. So both of them are using this war in a way that they hope will strengthen their position, both in their own negotiations and in any future confrontation between the two of them. This is a $25 billion war so far. This is by the Pentagon's own estimates, right? And there's a lot of questions over those numbers, not to mention, in addition, how much further spending will need to be incurred by things like repairing damaged U.S. military bases. Do you think this has put the sort of defense industrial base when it comes to the U.S. on a weaker footing, particularly as we go into this meeting between the Chinese and U.S. leaders? It's dual-sided because, yes, it means that the U.S. industrial base is a little bit depleted, but it also sparks innovation, and it's really sparking that kind of the government spending that you mentioned that will then spin up production of new iterations of these kinds of weapons and defenses. So a lot of them that are being expended now will be replaced with newer models. It's also giving the U.S. military a lot of practice. So China would come into a confrontation with almost no practical battlefield practice. And the U.S. is having that with their own equipment, with potential partners equipment. They're looking at integration. They're looking at new domains like space. And cyber is not new, but the integration of all these domains is something China has never practiced in real world. So while the industrial base is going to have to play some catch up, there are still benefits to it, to what is, you know, what is what is taking place. That is Kirsten Fontenrose, Strategic Advisor at Systems Planning and Analysis, speaking with Bloomberg TV hosts Sherry Onn and Heidi Stroud-Watts, 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 Krizner and this is Bloomberg. We're the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday, keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts
