September 23, 2025 • 18 mins
A record-breaking rally in US equities came to a halt on Tuesday as interest-rate sensitive technology stocks extended an early decline after Federal Reserve Chair Jerome Powell gave no signs he would support a cut at the central bank’s October meeting. Micron Technology, the largest US maker of computer memory chips, gave an upbeat forecast for the current quarter after the market closed, which could offer fresh support to tech stocks when traders return. For more, we spoke to Rob Haworth, Senior Investment Strategy Director, U.S. Bank Asset Management Group.
In Asia, stocks retreated after a drop in big tech halted the S&P 500’s three-day rally, while mixed signals from Federal Reserve policymakers clouded the path for interest-rate cuts. We heard from John Authers, Senior Editor for Markets and Bloomberg Opinion columnist. He speaks with Bloomberg’s Avril Hong on the Asia Trade.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. Today
we'll begin with the FED and FED Shair J. Powell
saying today that policymakers will likely have a difficult road
ahead as they weigh further cuts to interest rates. Here
is Powell speaking earlier to the Greater Providence Chamber of
Commerce in Rhode Island.
Speaker 3 (00:28):
Near term risks to inflation are tilted to the upside
and risks to employment are tilted to the downside, a
challenging situation. Two sided risks mean that there is no
risk free path.
Speaker 2 (00:42):
Powell offered no hints on whether he might support a
rate cut at the Fed's next meeting in October. Momentarily,
we'll have some reaction from the Asia Pacific. First, we'll
check in Stateside with Rob Hayworth. He is senior portfolio
manager at US Bank Wealth Management. Rob, thank you so
much for making time to chat with me. Let's begin
with the Powell story here. I wouldn't call it a
(01:02):
pivot necessarily, but can we agree that it's a bit
of a recalibration toward balance.
Speaker 1 (01:08):
Yeah, Doug, great to be with you. I agree it
is more of a recalibration. When we left the press
conference last week, I think the market certainly felt that
we were on a path for more rate cuts, and
the chair pals speech today certainly gave some indication that
there's a little more equivocation around do we really need
(01:29):
another cut if he sees inflation being more of a
problem than employment. I think, and we saw that today
in the reaction in small companies relative to large where
they'd had a good run early in the day and
ended up selling off quite a bit. So I think
the market is a little concern that chairpell may be
equivocating a little more on that October rate cut.
Speaker 2 (01:50):
So how do you feel about the inflation story as
it relates to tariff. I guess the longer end of
the curve has been pretty well behaved, so at this
point the market doesn't appear to be alarmed at all.
Speaker 1 (02:01):
No, I don't think the market is alarmed yet about inflation,
but it is something we're watching and if we look right,
we'll certainly get more updates with PCE at the end
of the week. But inflation has been notching high, or
if we look at year every year rates of inflation
we've seen a couple of ticks higher, and looking back,
say a quarter ago, we're definitely above the rates we
(02:21):
were seeing a quarter ago. So that's something that could continue.
It doesn't seem persistent at this point, but it is elevated,
and that has to be concerning for the Federal Reserve
with that inflation mandate that they have.
Speaker 2 (02:32):
So in today's price section, the AI trade seemed to
take a bit of a breather. I think there were
some concerns about maybe tech being overbought, some worries as
well about margin risk. How do you see the trade
around artificial intelligence.
Speaker 1 (02:48):
Well, certainly it's been a great run all of a
sudden this year. I think if we were having this
conversation a few months ago, Doug, we would have been
talking about how challenging it was in artificial intelligence in
April and May, and we turn around and all of
a sudden, technology communication services are at the top of
the heap again, with artificial intelligence leading the way. I
(03:10):
think as we look at it, we're worried about elevated valuations,
but when we look at the fundamentals, we see strong
underpinnings here. We're seeing actual earnings, we're seeing revenue growth,
and we're seeing in innovation that while it may take
time to develop as to where everyone uses it and
where we use it every day, and how does that monetize,
(03:33):
the investment that has to happen today is real and
large and is going to spill over into many other
sectors besides just say the hyperscalers. We're trying to package
that data and those models together.
Speaker 2 (03:45):
We heard from Micron Technology after the bell, and the
company gave a very positive forecast for revenue in the
current quarter. Micron, as we know, is a big maker
of those high bandwidth memory chips that are used in
artificial intelligence computing. But I'm wondering if perhaps in the
near term, we were to get some indication of a
misstep a company linked to the AI space that provided
(04:09):
maybe a slight indication that the mark is being missed.
I'm curious to get your take on the vulnerability of
some of these names to any slight disappointment.
Speaker 1 (04:20):
Yeah, I think we're certainly valuations are elevated. There is
room for a reset here in terms of valuation, particularly
because it seems like we're priced to that perfection.
Speaker 4 (04:31):
Now.
Speaker 1 (04:32):
Companies have been delivering right the revenues have been coming through,
the orders have been coming through, but if we do
miss out on that perfection, we may see a reset
like we've seen earlier this year. Probably not the same magnitude,
but there could be that reset until we find the
level at which maybe orders are hitting. And that's kind
(04:55):
of the challenge. When we look at Nvidio earnings and
other earnings, the orders are clearly there, maybe it's not
hitting every It could maybe not hit every segment of
the market, and that may bring in a little more
question as to the forward path.
Speaker 2 (05:08):
When we talk about the AI trade frequently we bring
in the energy story as a part of the conversation.
How are you feeling about some of the big energy names.
Are they potentially a little stretched as well?
Speaker 1 (05:21):
We don't think they're stretched at this point. Data is
at the heart of this of artificial intelligence, and that
includes data centers and electricity to power those data centers
just so we can run those large language models. That's
an element of the market that is probably not run
quite as far, quite as fast as some of the
more well known names, and that's investment that has to
(05:41):
happen through time. So we would look to utilities, particularly
those with mixed power generation as one way to participate
in this rally as they look to build out that
capacity to support data centers in this AI endeavor through time.
Speaker 2 (05:57):
Are you putting on hedges right now to protect again
and still a little bit of downside.
Speaker 1 (06:02):
No, we're actually in a glass half full environment in
our view where we're still overweight equity. If we have
any hedge, we'd be watching inflation, and so we'd add
inflation sensitive assets to portfolios as well. For us, the
primary measures there would be treasury inflation protected securities relative
to owning just investment grade bonds. And then on the
(06:23):
equity side of the ledger, we would blend in some
global infrastructure which offers that diversification in terms of utilities,
midstream energy, trade and trans some trade and transportation. But
you get to participate in kind of higher inflation through
earnings growth in those companies, and we think that provides
a little inflation protection in your portfolio which you could need.
Speaker 2 (06:45):
So are there foreign jurisdictions where you're primarily focused? Is
it Europe? Is it more Asia? Right now, we're more.
Speaker 1 (06:53):
Globally diversified at this point. We're looking across the spectrum
we we're certainly seeing an uptick in earnings growth around
the world. It's not quite as strong as US earnings growth,
but it is an improvement from where it's been, so
we would look actually broadly across the developed and emerging markets.
Speaker 2 (07:10):
So I'm also wondering about where geopolitical risk enters your thinking.
We've got the UN General Assembly here in New York
this week. A lot certainly has been made of this gathering,
many things to talk about, not the least of which
war in Ukraine. How are you feeling about geopolitics as
a part of approaching markets these days?
Speaker 1 (07:30):
Well, I think the good news for us it's been
horrible news for those impacted. I mean, our hearts certainly
go out to those in Russia and Ukraine impacted by
these conflicts in Gaza as well. But the good news
is the market's been somewhat insulated from this because we've
been able to work around it. I think getting the
resolution will be generally constructive for the markets, and the
(07:54):
markets can put it behind them. If there's some contagion
or spread to them at risk we could have a
near term hiccup, but doesn't seem like that's the case
for now, but that's something we have to watch and
be aware of, but not a base case and not
a core of our strategy.
Speaker 2 (08:10):
At this point. So you mentioned the PCE, which we
will get on Friday. We'll also have data in terms
of personal income and spending. And I'm wondering before we
let you go here, how you're viewing the American consumer.
Speaker 1 (08:25):
Yeah. I think the good news here is the American
consumer has really been quite solid. We're along with Terror Powell,
we're watching what's going on with the labor market. That
softening is something that has us concerned about not taking
action at this point, but incomes are up. We're not
really seeing layoffs right, Jobless claims remain low, and consumers
(08:46):
are spending. The Johnson Redbook weekly year over year of
retail sales at five point seven percent. Retail sales for
the month of August came in fairly solid. So this
looks like a reasonably healthy concernsumer that is holding up
this economy to some great extent. And as long as
they remain employed and their incomes continue to grow even modestly,
(09:11):
I think we're on solid footing and that gives us
that glass half full perspective. On the economy of markets
at this point.
Speaker 2 (09:18):
So is the FED though a little bit behind the curve,
do you think?
Speaker 1 (09:22):
I think it's not really for us to say at
this point. I don't think that they've damaged the labor
market just yet, but we know labors can be such
a lagging indicator. But they're certainly tighter than they perhaps
need to be. That there's room for them to get
back to neutral, and I think that's certainly something we've
(09:43):
seen the market cheer and we'd look forward to as well. Right,
there's room for them to get back into that three
three and a half percent neutral rate for themselves, and
that would be actually helpful to the economy as well.
Speaker 2 (09:56):
Rob will leave it there, Thank you so very much.
Rob Hayworth, as senior portfolio man. You're at the US
Bank Wealth Management, joining us on the line on the
Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast
time Doug Krisner. Markets across the Asia Pacific are reacting
(10:18):
to comments earlier from fedsher Jay Powell. He said the
FED will likely have a difficult road ahead as it
weighs further cuts and interest rates. We got the views
of John Authur's senior editor for Markets, and he's a
Bloomberg opinion columnist. John spoke in Tokyo with Bloomberg TV
host Avril Ham.
Speaker 4 (10:37):
Let's talk about the FED. I mean, when you look
at what Powell said overnight, he's not seeing anything materially new.
He's flagging rices on both sides, inflation and labor market weakness.
I mean, what do you make of the messaging.
Speaker 5 (10:51):
Well, in the context of the FED, the messaging continues
to matter. He could have started making much more of
a us about unemployments and he's not doing that, and
he is still seeing the situation as being balanced. We've
had various Powell pivots, as they tend to get known,
in his eight years in charge. If he was very
(11:13):
clearly convinced that he was going to need to keep
cutting from here, he would be saying So. It looks
to me as though he is somewhat more confident than
he was a week ago. There's obviously immense amounts of
politics flowing around the FED at the moment. There's going
to be an almighty battle over exactly how independent it's
(11:34):
allowed to be once he stands down. But I think
he feels that he's more or less back in control
of the situation, or he wouldn't have been that open minded.
Speaker 4 (11:47):
Do you think they should cut in October?
Speaker 5 (11:51):
Probably? But I don't regard it as a completely done deal. Again,
they say they're data dependent and should be. I imagine
the data are going to move such that you do
want to cut again, But I can the tariff input
is in there in the inflation data. It's only very minor.
(12:13):
If you see that begin to pick up very significantly,
then you do probably have a picture. Well, a very
serious problem for the FED when you've got stagflation, and
they probably do have to arrest the decline there. And
then the other.
Speaker 4 (12:29):
Thing about terrorists and inflation is how China seems to
be flooding, you know, markets with their goods. Yes, are
we already seeing these signs of this China shop two
point or three point zero and house of view? Might
that be for Asian economies and perhaps markets?
Speaker 5 (12:47):
Well, this is only my third day here in Tokyo.
I have heard about that from more or less everybody
I've spoken to, so you can certainly see that that
is that, this is something that's happening. It's something that
was predictable. A lot of countries in this region have
a pretty strong need to stay friendly with China, and
they're unlikely to push back unless they really have to.
(13:11):
You do ultimately have the possibility of very serious negative
outcomes for the US eventually out of this. For the
time being, the critical factor which more or less ensures
that the US isn't going to do anything, isn't going
to change its posture, is that it's making a lot
of money out of it. If you look at the
(13:32):
revenues they've derived from tariffs, it's very impressive. It's getting
on for a quarter of what they get from personal
income tax already. That is difficult to forsake. It does
make all the physical problems in the US that much
easier to deal with. Of course, it means if you're
(13:52):
taking that much revenue, it means you haven't had the
desired effect of actually choking off imports, of protecting the
businesses that are but you are still making money. So
I suspect the US is locked into this path for
a while, and everybody else is going to do led
obviously by China by far the most powerful economy outside
(14:13):
of the US. Everybody else is going to do exactly
what you think they would do, which is find somebody
other than the US, the Celtic.
Speaker 4 (14:18):
When it comes to revenues, it's tariffs, maybe also chip
revenues for the US, maybe each one the visas as
well to some extent. How much does all this help
to allay the concerns on the long end of the curve.
Speaker 5 (14:33):
That's an interesting one. I guess it does help a little. Well,
you just need to look at the performance of the
long end of the curve in the last month or two.
The risk of a big jump beyond beyond five percent is,
you know, definitely looks much lower for the time being. Again,
(14:55):
a lot depends on exactly how companies and the economy
accommodates the tariffs. If you do see a renewed pick
up in inflation, that's going to make people very concerned.
If you see a successful push for much lower rates,
(15:18):
i e. If you see the treasury the government forcing
people to lend them at low rates, obviously they really
can have some degree of impact over the short short end,
and you would therefore expect the long end derise. So
in itself, yes, it definitely does alleviate the pressure on
(15:40):
the long end. And this is one of the big things.
You have to say, the Trump administration wanted a weaker dollar,
lower long bond yields, and cheaper oil, and it's getting
all of them, which for the time being, certainly explained
to the degree of confidence you have in the US
that they can continue doing what they're doing.
Speaker 4 (16:00):
Thinking some of the boxers, So the Trump administration was
in terms of market reaction. What about when it comes
to investment pledges. I mean, we're here in Japan. Yes,
you know, hundreds of billion dollars worth from both Japan
and South Korea that are being askedful but light on details.
We had the immigration rates in the US and South
(16:22):
Korean factories. I mean, how realistic are you expecting these
pledges to come in?
Speaker 5 (16:28):
I'm not really. I mean, this is the thing about
any trade deal like this, they you know, the World
Trade Organization deals with you know, they had two year
cycles between the major WTO meetings because that's how long
it takes to thresh out the details of a of
a real trade deal with all the definitions that are involved.
(16:53):
I think the last I heard in video still don't
know the details of exactly what revenue they're going to
be coughing over to the s for example, and that's
the biggest, most powerful company in the US doesn't still
doesn't know exactly what the deal is with its own government.
The Japanese and Korean governments don't need my advice. I wouldn't.
(17:14):
I wouldn't be reckoning on I wouldn't be relying on
any deal like that, and I would definitely be continuing
if I were then with plan B of working out
a way of surviving without doing so much business with
the US. You mentioned H one BBS again it's early
days in the response, but my impression at the moment
is that if you're really going to have to pay
(17:34):
one hundred thousand dollars to bring somebody over to do
skilled work in the States, that will work from the
point of view of helping US workers. It won't raise
them any revenue. It just means that a lot of
people are going to have to find ways to deploy
themselves in their home countries.
Speaker 4 (17:53):
Companies and workers are going to be doing that cost
benefit analysis as we go as well.
Speaker 5 (17:57):
I mean, it could be perversely good for the likes
of India and China, but it's certainly a mess in
the in the in the foreseeable future.
Speaker 4 (18:05):
John has been really great to chat with you. Thanks
so much for insights. I've senior editor for Markets and
Bloomberg Opinion columnist John Osis.
Speaker 2 (18:15):
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
(18:37):
and Australia. I'm Doug Prisner, and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. Today
we'll begin with the FED and FED Shair J. Powell
saying today that policymakers will likely have a difficult road
ahead as they weigh further cuts to interest rates. Here
is Powell speaking earlier to the Greater Providence Chamber of
Commerce in Rhode Island.
Speaker 3 (00:28):
Near term risks to inflation are tilted to the upside
and risks to employment are tilted to the downside, a
challenging situation. Two sided risks mean that there is no
risk free path.
Speaker 2 (00:42):
Powell offered no hints on whether he might support a
rate cut at the Fed's next meeting in October. Momentarily,
we'll have some reaction from the Asia Pacific. First, we'll
check in Stateside with Rob Hayworth. He is senior portfolio
manager at US Bank Wealth Management. Rob, thank you so
much for making time to chat with me. Let's begin
with the Powell story here. I wouldn't call it a
(01:02):
pivot necessarily, but can we agree that it's a bit
of a recalibration toward balance.
Speaker 1 (01:08):
Yeah, Doug, great to be with you. I agree it
is more of a recalibration. When we left the press
conference last week, I think the market certainly felt that
we were on a path for more rate cuts, and
the chair pals speech today certainly gave some indication that
there's a little more equivocation around do we really need
(01:29):
another cut if he sees inflation being more of a
problem than employment. I think, and we saw that today
in the reaction in small companies relative to large where
they'd had a good run early in the day and
ended up selling off quite a bit. So I think
the market is a little concern that chairpell may be
equivocating a little more on that October rate cut.
Speaker 2 (01:50):
So how do you feel about the inflation story as
it relates to tariff. I guess the longer end of
the curve has been pretty well behaved, so at this
point the market doesn't appear to be alarmed at all.
Speaker 1 (02:01):
No, I don't think the market is alarmed yet about inflation,
but it is something we're watching and if we look right,
we'll certainly get more updates with PCE at the end
of the week. But inflation has been notching high, or
if we look at year every year rates of inflation
we've seen a couple of ticks higher, and looking back,
say a quarter ago, we're definitely above the rates we
(02:21):
were seeing a quarter ago. So that's something that could continue.
It doesn't seem persistent at this point, but it is elevated,
and that has to be concerning for the Federal Reserve
with that inflation mandate that they have.
Speaker 2 (02:32):
So in today's price section, the AI trade seemed to
take a bit of a breather. I think there were
some concerns about maybe tech being overbought, some worries as
well about margin risk. How do you see the trade
around artificial intelligence.
Speaker 1 (02:48):
Well, certainly it's been a great run all of a
sudden this year. I think if we were having this
conversation a few months ago, Doug, we would have been
talking about how challenging it was in artificial intelligence in
April and May, and we turn around and all of
a sudden, technology communication services are at the top of
the heap again, with artificial intelligence leading the way. I
(03:10):
think as we look at it, we're worried about elevated valuations,
but when we look at the fundamentals, we see strong
underpinnings here. We're seeing actual earnings, we're seeing revenue growth,
and we're seeing in innovation that while it may take
time to develop as to where everyone uses it and
where we use it every day, and how does that monetize,
(03:33):
the investment that has to happen today is real and
large and is going to spill over into many other
sectors besides just say the hyperscalers. We're trying to package
that data and those models together.
Speaker 2 (03:45):
We heard from Micron Technology after the bell, and the
company gave a very positive forecast for revenue in the
current quarter. Micron, as we know, is a big maker
of those high bandwidth memory chips that are used in
artificial intelligence computing. But I'm wondering if perhaps in the
near term, we were to get some indication of a
misstep a company linked to the AI space that provided
(04:09):
maybe a slight indication that the mark is being missed.
I'm curious to get your take on the vulnerability of
some of these names to any slight disappointment.
Speaker 1 (04:20):
Yeah, I think we're certainly valuations are elevated. There is
room for a reset here in terms of valuation, particularly
because it seems like we're priced to that perfection.
Speaker 4 (04:31):
Now.
Speaker 1 (04:32):
Companies have been delivering right the revenues have been coming through,
the orders have been coming through, but if we do
miss out on that perfection, we may see a reset
like we've seen earlier this year. Probably not the same magnitude,
but there could be that reset until we find the
level at which maybe orders are hitting. And that's kind
(04:55):
of the challenge. When we look at Nvidio earnings and
other earnings, the orders are clearly there, maybe it's not
hitting every It could maybe not hit every segment of
the market, and that may bring in a little more
question as to the forward path.
Speaker 2 (05:08):
When we talk about the AI trade frequently we bring
in the energy story as a part of the conversation.
How are you feeling about some of the big energy names.
Are they potentially a little stretched as well?
Speaker 1 (05:21):
We don't think they're stretched at this point. Data is
at the heart of this of artificial intelligence, and that
includes data centers and electricity to power those data centers
just so we can run those large language models. That's
an element of the market that is probably not run
quite as far, quite as fast as some of the
more well known names, and that's investment that has to
(05:41):
happen through time. So we would look to utilities, particularly
those with mixed power generation as one way to participate
in this rally as they look to build out that
capacity to support data centers in this AI endeavor through time.
Speaker 2 (05:57):
Are you putting on hedges right now to protect again
and still a little bit of downside.
Speaker 1 (06:02):
No, we're actually in a glass half full environment in
our view where we're still overweight equity. If we have
any hedge, we'd be watching inflation, and so we'd add
inflation sensitive assets to portfolios as well. For us, the
primary measures there would be treasury inflation protected securities relative
to owning just investment grade bonds. And then on the
(06:23):
equity side of the ledger, we would blend in some
global infrastructure which offers that diversification in terms of utilities,
midstream energy, trade and trans some trade and transportation. But
you get to participate in kind of higher inflation through
earnings growth in those companies, and we think that provides
a little inflation protection in your portfolio which you could need.
Speaker 2 (06:45):
So are there foreign jurisdictions where you're primarily focused? Is
it Europe? Is it more Asia? Right now, we're more.
Speaker 1 (06:53):
Globally diversified at this point. We're looking across the spectrum
we we're certainly seeing an uptick in earnings growth around
the world. It's not quite as strong as US earnings growth,
but it is an improvement from where it's been, so
we would look actually broadly across the developed and emerging markets.
Speaker 2 (07:10):
So I'm also wondering about where geopolitical risk enters your thinking.
We've got the UN General Assembly here in New York
this week. A lot certainly has been made of this gathering,
many things to talk about, not the least of which
war in Ukraine. How are you feeling about geopolitics as
a part of approaching markets these days?
Speaker 1 (07:30):
Well, I think the good news for us it's been
horrible news for those impacted. I mean, our hearts certainly
go out to those in Russia and Ukraine impacted by
these conflicts in Gaza as well. But the good news
is the market's been somewhat insulated from this because we've
been able to work around it. I think getting the
resolution will be generally constructive for the markets, and the
(07:54):
markets can put it behind them. If there's some contagion
or spread to them at risk we could have a
near term hiccup, but doesn't seem like that's the case
for now, but that's something we have to watch and
be aware of, but not a base case and not
a core of our strategy.
Speaker 2 (08:10):
At this point. So you mentioned the PCE, which we
will get on Friday. We'll also have data in terms
of personal income and spending. And I'm wondering before we
let you go here, how you're viewing the American consumer.
Speaker 1 (08:25):
Yeah. I think the good news here is the American
consumer has really been quite solid. We're along with Terror Powell,
we're watching what's going on with the labor market. That
softening is something that has us concerned about not taking
action at this point, but incomes are up. We're not
really seeing layoffs right, Jobless claims remain low, and consumers
(08:46):
are spending. The Johnson Redbook weekly year over year of
retail sales at five point seven percent. Retail sales for
the month of August came in fairly solid. So this
looks like a reasonably healthy concernsumer that is holding up
this economy to some great extent. And as long as
they remain employed and their incomes continue to grow even modestly,
(09:11):
I think we're on solid footing and that gives us
that glass half full perspective. On the economy of markets
at this point.
Speaker 2 (09:18):
So is the FED though a little bit behind the curve,
do you think?
Speaker 1 (09:22):
I think it's not really for us to say at
this point. I don't think that they've damaged the labor
market just yet, but we know labors can be such
a lagging indicator. But they're certainly tighter than they perhaps
need to be. That there's room for them to get
back to neutral, and I think that's certainly something we've
(09:43):
seen the market cheer and we'd look forward to as well. Right,
there's room for them to get back into that three
three and a half percent neutral rate for themselves, and
that would be actually helpful to the economy as well.
Speaker 2 (09:56):
Rob will leave it there, Thank you so very much.
Rob Hayworth, as senior portfolio man. You're at the US
Bank Wealth Management, joining us on the line on the
Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast
time Doug Krisner. Markets across the Asia Pacific are reacting
(10:18):
to comments earlier from fedsher Jay Powell. He said the
FED will likely have a difficult road ahead as it
weighs further cuts and interest rates. We got the views
of John Authur's senior editor for Markets, and he's a
Bloomberg opinion columnist. John spoke in Tokyo with Bloomberg TV
host Avril Ham.
Speaker 4 (10:37):
Let's talk about the FED. I mean, when you look
at what Powell said overnight, he's not seeing anything materially new.
He's flagging rices on both sides, inflation and labor market weakness.
I mean, what do you make of the messaging.
Speaker 5 (10:51):
Well, in the context of the FED, the messaging continues
to matter. He could have started making much more of
a us about unemployments and he's not doing that, and
he is still seeing the situation as being balanced. We've
had various Powell pivots, as they tend to get known,
in his eight years in charge. If he was very
(11:13):
clearly convinced that he was going to need to keep
cutting from here, he would be saying So. It looks
to me as though he is somewhat more confident than
he was a week ago. There's obviously immense amounts of
politics flowing around the FED at the moment. There's going
to be an almighty battle over exactly how independent it's
(11:34):
allowed to be once he stands down. But I think
he feels that he's more or less back in control
of the situation, or he wouldn't have been that open minded.
Speaker 4 (11:47):
Do you think they should cut in October?
Speaker 5 (11:51):
Probably? But I don't regard it as a completely done deal. Again,
they say they're data dependent and should be. I imagine
the data are going to move such that you do
want to cut again, But I can the tariff input
is in there in the inflation data. It's only very minor.
(12:13):
If you see that begin to pick up very significantly,
then you do probably have a picture. Well, a very
serious problem for the FED when you've got stagflation, and
they probably do have to arrest the decline there. And
then the other.
Speaker 4 (12:29):
Thing about terrorists and inflation is how China seems to
be flooding, you know, markets with their goods. Yes, are
we already seeing these signs of this China shop two
point or three point zero and house of view? Might
that be for Asian economies and perhaps markets?
Speaker 5 (12:47):
Well, this is only my third day here in Tokyo.
I have heard about that from more or less everybody
I've spoken to, so you can certainly see that that
is that, this is something that's happening. It's something that
was predictable. A lot of countries in this region have
a pretty strong need to stay friendly with China, and
they're unlikely to push back unless they really have to.
(13:11):
You do ultimately have the possibility of very serious negative
outcomes for the US eventually out of this. For the
time being, the critical factor which more or less ensures
that the US isn't going to do anything, isn't going
to change its posture, is that it's making a lot
of money out of it. If you look at the
(13:32):
revenues they've derived from tariffs, it's very impressive. It's getting
on for a quarter of what they get from personal
income tax already. That is difficult to forsake. It does
make all the physical problems in the US that much
easier to deal with. Of course, it means if you're
(13:52):
taking that much revenue, it means you haven't had the
desired effect of actually choking off imports, of protecting the
businesses that are but you are still making money. So
I suspect the US is locked into this path for
a while, and everybody else is going to do led
obviously by China by far the most powerful economy outside
(14:13):
of the US. Everybody else is going to do exactly
what you think they would do, which is find somebody
other than the US, the Celtic.
Speaker 4 (14:18):
When it comes to revenues, it's tariffs, maybe also chip
revenues for the US, maybe each one the visas as
well to some extent. How much does all this help
to allay the concerns on the long end of the curve.
Speaker 5 (14:33):
That's an interesting one. I guess it does help a little. Well,
you just need to look at the performance of the
long end of the curve in the last month or two.
The risk of a big jump beyond beyond five percent is,
you know, definitely looks much lower for the time being. Again,
(14:55):
a lot depends on exactly how companies and the economy
accommodates the tariffs. If you do see a renewed pick
up in inflation, that's going to make people very concerned.
If you see a successful push for much lower rates,
(15:18):
i e. If you see the treasury the government forcing
people to lend them at low rates, obviously they really
can have some degree of impact over the short short end,
and you would therefore expect the long end derise. So
in itself, yes, it definitely does alleviate the pressure on
(15:40):
the long end. And this is one of the big things.
You have to say, the Trump administration wanted a weaker dollar,
lower long bond yields, and cheaper oil, and it's getting
all of them, which for the time being, certainly explained
to the degree of confidence you have in the US
that they can continue doing what they're doing.
Speaker 4 (16:00):
Thinking some of the boxers, So the Trump administration was
in terms of market reaction. What about when it comes
to investment pledges. I mean, we're here in Japan. Yes,
you know, hundreds of billion dollars worth from both Japan
and South Korea that are being askedful but light on details.
We had the immigration rates in the US and South
(16:22):
Korean factories. I mean, how realistic are you expecting these
pledges to come in?
Speaker 5 (16:28):
I'm not really. I mean, this is the thing about
any trade deal like this, they you know, the World
Trade Organization deals with you know, they had two year
cycles between the major WTO meetings because that's how long
it takes to thresh out the details of a of
a real trade deal with all the definitions that are involved.
(16:53):
I think the last I heard in video still don't
know the details of exactly what revenue they're going to
be coughing over to the s for example, and that's
the biggest, most powerful company in the US doesn't still
doesn't know exactly what the deal is with its own government.
The Japanese and Korean governments don't need my advice. I wouldn't.
(17:14):
I wouldn't be reckoning on I wouldn't be relying on
any deal like that, and I would definitely be continuing
if I were then with plan B of working out
a way of surviving without doing so much business with
the US. You mentioned H one BBS again it's early
days in the response, but my impression at the moment
is that if you're really going to have to pay
(17:34):
one hundred thousand dollars to bring somebody over to do
skilled work in the States, that will work from the
point of view of helping US workers. It won't raise
them any revenue. It just means that a lot of
people are going to have to find ways to deploy
themselves in their home countries.
Speaker 4 (17:53):
Companies and workers are going to be doing that cost
benefit analysis as we go as well.
Speaker 5 (17:57):
I mean, it could be perversely good for the likes
of India and China, but it's certainly a mess in
the in the in the foreseeable future.
Speaker 4 (18:05):
John has been really great to chat with you. Thanks
so much for insights. I've senior editor for Markets and
Bloomberg Opinion columnist John Osis.
Speaker 2 (18:15):
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
(18:37):
and Australia. I'm Doug Prisner, and this is Bloomberg
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