July 21, 2025 • 18 mins
The start of a busy week for Corporate America saw stocks giving up most of their gains, with traders looking for signs of resilience in earnings amid tariff risks. Treasury yields fell alongside the dollar. While the S&P 500 closed above 6,300 for the first time, the gauge rose just 0.1%. Energy shares joined a decline in oil. Chipmakers almost erased their advance as Nvidia Corp. slipped. Fellow megacaps Tesla Inc. and Alphabet Inc. will kick off the group's earnings season this week. The stakes will again be high as investors look for updates on artificial-intelligence spending. We break down the day's price action with Ed Butowsky, Managing Partner at Chapwood Investments.
Plus - shares in Tokyo gained 1% as trading resumed after a public holiday Monday. The MSCI regional stock gauge advanced 0.3% in early trading. Market participants are focused on the performance of Japanese markets as investors weigh policy uncertainty after the ruling Liberal Democratic Party's historic loss in Sunday's elections. For a closer look, we hear from Sean Darby, Managing Director at Mizuho Securities Asia. He speaks with Bloomberg's Shery Ahn and Paul Allen on The Asia Trade.
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
So the equity market finished at record highs today at
the start of what will be a very busy week
for earnings. We also have a watchful eye on the
tariff story. That's because trade negotiators from the European Union
and the US are heading into another week of talks
as they seek to close a deal by August first.
(00:32):
And in a moment we'll look at markets from the
APAC perspective. We'll hear from Sean Darby. He is managing
director at Misoho Securities Asia. But we begin here in
the States. Joining me now is at Butowski. He is
managing partner at Chapwood Investments. It is on the line
from just outside Dallas, Texas. Ed, thank you so much
for joining us. I'd like to begin with the earning story.
(00:55):
So far, more than eighty percent of the companies in
the S and P five hundred have bet estimates on
sales and earnings for Q two and I'm wondering whether
you put a lot of stock in that since we
know that expectations have been lowered a bit.
Speaker 3 (01:09):
Yeah, I do. I mean, you know, nowadays, with the
oversight by the SEC on the companies and what they're
able to say prior to earnings releases, they have to
be pretty exact, and if they're beating them, then they're
really doing.
Speaker 4 (01:23):
A great job.
Speaker 3 (01:23):
I think a lot of credit belongs to the CFOs
of most of these public companies because they're doing outstanding
job of bringing in really strong revenue numbers.
Speaker 2 (01:33):
So I mentioned a moment ago that we're at record
highs for not only S and P, but for the
Nasdaq comp as well. Is there anything that makes you
a little uneasy at this point?
Speaker 4 (01:43):
Well, not really.
Speaker 3 (01:45):
I looked at the Magnificent seven forward pees because I
was going to put out a video message to my
clients about how overpriced they were, and I could not
support that. I mean, if you look at Amazon, they're
selling at a forward pe of thirty six. I think
Amazon can hit that number. You know, Apple is the
only one out of the Magnificent seven that doesn't look
(02:05):
really strong. But Meta looks really strong. And you know,
just about every one of the Magnificent seven which are
leading the SMP look very strong, with the exception of Apple,
And there's really nothing that scares me at this point,
with the exception of some of the conversation going on
around Powell and where Powell and his relationship with trumpets.
Speaker 2 (02:26):
Well, it's interesting you make that point, because today the
White House was very clear that the President has no
plans to fire the FED chairman, but the rhetoric sometimes
has been a little hot. Obviously Trump would like to
see lower interest rates. Do you think there is a
chance that we could get a rate cut as soon
as this month's meeting.
Speaker 3 (02:46):
I don't think it's going to be this month, but
I think next month there's a really good chance. Because
you have to focus in on the GDP number. That's
where all the attention needs to go to forget about inflation.
That's not a problem anymore. The problem is a slow
and wea US economy, and the US economy is the
pipe hiper of the world economy. You know, as the
US economy goes, goes the rest of the world. And
(03:07):
I think that we need to really focus in on
the week GDP number that was printed last.
Speaker 2 (03:13):
Time, so we were talking about earnings a moment ago.
Alphabet will report results this week. I think the market's
going to be looking very closely at spending on artificial intelligence.
How are you playing the AI story right now?
Speaker 4 (03:25):
I'll tell you.
Speaker 3 (03:25):
I've I've been kind of a Nini on this, if
that's the appropriate word, because Nvidia has been, you know,
the only real play other than SoundHound, sou and are ways.
You know, I think that AI is going to be
sort of like nanotechnology. It's going to be infiltrated into companies,
(03:46):
but making money in those companies is going to be very,
very difficult. So I really believe that the AI play
is going to be you know, in Vidia or SoundHound
or Yeah, there's a couple of others. There's Gigacloud, which
is more of a tariff play at this point, but
could also get into the AI world.
Speaker 2 (04:05):
Speaking of tariffs, tomorrow morning, before the opening bell, we're
going to hear from General Motors. I mean, this company
could be very much exposed to the tariff story. I mean,
are there other industries that you're particularly sensitive to away
from autos, that you're maybe avoiding right now because of
the exposure to tariffs.
Speaker 3 (04:24):
Not really. I think that Trump is out there just
kind of, you know, whenever he wants to say he's
going after this country.
Speaker 4 (04:31):
Or that country.
Speaker 3 (04:32):
I think a lot of it has to do with negotiating,
and I don't think there's a lot of fear that
the tariffs are going to hold and be as strong
as they are. But I also believe that it's a
really smart move. It's a long term play. That's what
people have to realize is that the terriffs are very
long term play. They're not short term at all, and
that any kind of you know, disruption, disruption from the
(04:57):
tariffs is going to be short lived, but then also
very very long lived. So you know, getting these factories
into a situation where they're able to produce products like
they were able to do overseas, Like Nike is not
coming back to the United States. Nike is going to
remain doing a lot of business at Vietnam because of
(05:17):
the low cost and the tax structure that they're able
to get from Vietnam. So there's there's really a lot
of confusion about the tariffs, and I haven't made anything
more understandable I can tell.
Speaker 2 (05:31):
I think the view on the street is that we
could have an effective tariff right somewhere in the low teens.
Does that feel to you like it has the ability
to contribute something more to inflation beyond just a one
time bump.
Speaker 3 (05:44):
Yeah, but you have to remember that the tariffs are
paid for by the companies that import the goods, you know.
So if we're importing a washing machine from Mexico, Mexico
is not paying that tariff. Yes, rule who's paying that tariff? Right,
And a lot of people understand that, so they automatically
think that the Mexican government is writing a check to
(06:05):
the US government, and that's just not happening. The retrofitting
of factories is going to take quite a while. That's
why I said, in the short run, you're going to
have a bump, but in the long run, you're going
to have a lot of sensible trade going on that
should have been taking place over the last fifteen twenty years.
Speaker 4 (06:22):
I get that.
Speaker 2 (06:23):
But if I'm Whirlpool and I'm worried about my margins,
don't I want to pass some of that cost on
to the consumer if you can.
Speaker 3 (06:30):
Absolutely, you want to pass it on everywhere you can.
I just don't know if you're going to be able to.
And there was kind of an interesting story and Business
Insider where this one company decided to go forward and
produce their shower heads using all US sources versus Chinese sources,
(06:51):
and the US sources had the showerhead go up to
two hundred and thirty nine dollars and used in the
Chinese sources it was one hundred and forty dollars and
they sold about eight hundred and they were all sourced
from the Chinese government. So I don't think people are
that quick and that easy to give up the profitability
to be pro American. I think Trump has that wrong.
Speaker 2 (07:14):
Are you looking at opportunities offshore? Are you focused primarily
on opportunities in the US.
Speaker 3 (07:20):
I look at my favorite stock in the world is
Macartera Libre EMYLI. I think that Macarter Libre is the
Amazon of Latin America, and I believe that they have
figured it all out and they're going to do very
very well. They're you know, they have some e commerce business,
they have some bank business, but mainly they're the just
(07:41):
you know, order something just like Amazon and have a
deliberty your home. And I believe Macarter Libre is selling
it around twenty three hundred. I think it's going to
go up to about four thousand.
Speaker 4 (07:50):
Next year and a half.
Speaker 2 (07:51):
So for clients that you deal with, it may be
a little more inclined to be conservative. If you had
to look at the bond market right now, are you
finding opportunity and if so, at what part of the curve?
Speaker 3 (08:04):
Well, I'm looking at anything that is double B and
single B rated. I'm a little bit more of a
risk taker in terms of total return on bonds. But
I really like the BBC market, the business development company market,
and the senior rate floating note market. But my favorite
investments right now are utilities. I love utility stouts.
Speaker 2 (08:26):
ED will leave it there, Thank you so very much
for joining us. Ed Butowski is managing partner at Chapwood Investments.
He joined us on the line from just outside Dallas,
Texas here on the Daybreak Asia podcast. Welcome back to
the Daybreak Asia podcast, Time dig Chrisner. We're seeing small
(08:47):
gains in equity trading in both Seul and Sydney this morning,
and Japan is back online after that national holiday and
this week's election in the Upper House. Investors are also
keeping a close eye on any thing TARAF for related
ahead of that August first deadline imposed by President Trump.
For a closer look at market action, we heard from
Sean Darby. He is managing director at Misahouse Securities Asia.
(09:12):
Sean spoke with Bloomberg TV host Sherry On and Paul
Allen on the Asia trade.
Speaker 5 (09:18):
Sean, I want to start you off if I can,
with some of the reaction to what we're seeing in Japan.
I mean, we're back trading for the first time since
the election. How do you approach Japanese assets at the moment?
Speaker 4 (09:29):
You know, we've got.
Speaker 5 (09:30):
Uncharacteristic inflation, tariff uncertainty, and now political uncertainty as well.
What's your approach here?
Speaker 6 (09:37):
Well, I think for the whole of North Asia, they're
still under this cloud of not having yet agreed a
trade deal, so it's still very difficult really to sort
of see any sort of bright light rightlining for these
equity markets. I think for Japan in particular, I think
Ishibasan had wanted to get a trade deal with that
(09:58):
he could have gone to the public and recognize the
fact that a lot of the uncertainty had been removed,
and then you would been able to see the central
back go back and start to raise rates to quell
some of the inflation. So unfortunately they're still in this
sort of vicious cycle in which there's no trade deal,
inflation continues to rise, and that's making the population unhappy.
(10:20):
So I guess in the short term he's going to
have to make perhaps some concessions in terms of tax
relief to again provide some stimulus to the economy and
then hope that there's a trade deal in the background
that can be signed for him to perhaps go back
and seek a.
Speaker 4 (10:35):
Second second election.
Speaker 6 (10:36):
So he's still in that spiral in which the trade
deals really is the core issued in terms of being
able to go back to the public and hopefully get
a better election outcome than perhaps the one that's just happened.
Speaker 5 (10:49):
Well, Bloomberg, as you may have heard, has been speaking
to Kyle Bass of Fayman Capital and he's long head
views on Japan. He said some views on the yen
as well.
Speaker 4 (10:58):
Let's take a quick.
Speaker 7 (10:59):
Listen Japanese sovereign debt to GDPs north of two hundred
and sixty percent. It's kind of the world's most interesting
debt laboratory. I think they're in a precarious position, ie
they either have to let their currency go or their
bomb market go, and they'll never let their bomb market go.
So I would be aware of the en into the future.
Speaker 5 (11:19):
So Sean with that in mind, what's your view on
where the floor could.
Speaker 4 (11:23):
Be for the en?
Speaker 6 (11:24):
Well, I'm not necessarily the currency expert for Mizuho, but
I would slightly take issue with mister Bass's comments on
the instability of Japan's bomb market. I think you have
to look at the other side of the balance sheet,
and Japan has been running record current account surplaces. It's
saving surplaces are huge, and there's no difficulty in Japan
(11:47):
being able to finance its debt, so that I think
is not an issue for Japan, nor necessarily the yen. Yes,
Japan's got a large debt to GDP ratio, but it's
all that debt is in yen, and they're running very,
very large saving surblaces. I think at the end of
last year the current account was the largest in history
for Japan as well as for China. So I think
(12:08):
in the short term, I think markets are probably not
going to be that.
Speaker 4 (12:12):
Concerned with the level of debt.
Speaker 6 (12:15):
I think what really matters in Japan at the moment
is getting the inflation normalized and getting essentially the central
bank being able to start to use monetary policy again
to ecquell some of that inflation. So I'm less concerned
than mister Bass on the outcome for the en and
for Japan's debt markets.
Speaker 1 (12:35):
I think we have really been focusing on the debt
markets just because of the performance of previous auctions when
it comes to the ultra long here in Japan, right,
I mean, we have seen the vog perhaps pulling back
some of those reductions of purchases that we've seen. The
Finance Ministry has been talking about the auctions as well.
When it comes to these yields that continue to surge
(12:56):
in the long end to two decade highs at one
point become a problem for the stock market, that's a
good question.
Speaker 6 (13:04):
I think at the moment it's less has been less
of an issue for the Japanese equity market, principally because
real interest rates, both at the short end and to
some extent at the long end if you look at
inflation swaps have been negative. So with real rates negative,
you tend to find that equity markets tend to be
(13:25):
well supported. So the move in yields has not come
about with such a vicious force that it's created a
downward spiral in asset markets as you would have seen
perhaps in Europe in twenty eleven or in the UK
bomb markets a couple of years ago, so so fast,
you haven't had that spillover effect harming Japanese equities. You
(13:50):
also have to bear in mind that there's a lot
of companies or a lot of financials in Japan that
tend to benefit from a steepening of the yield curve.
And again, Japan has quite a large weighting of banks
in its in disease, which means that again it's not
adversely hit by by higher long term rates.
Speaker 4 (14:09):
So provided real rates remain.
Speaker 6 (14:11):
Relatively negative where we are at the moment, I'm not
so sure we're going to get the very bad spillover
effects harming Japanese equities or North Asian equities in the
same manner.
Speaker 1 (14:24):
Also, I yeaes Sean is a period of time right
now when we're seeing the stock markets look for any
excuse to continue its trajectory upwards. Right we do have
earning season in the mix. We are going to get
the lights of tech giants reporting alphabet this week as
well when it comes to that semiconductor cycle. When it
comes to that tech cycle here in Asia. How durable
has it been and can it continue to be this resilient.
Speaker 4 (14:47):
That's a really good question.
Speaker 6 (14:48):
I think the way I would look at it at
the moment is that ironically the over or One Big
Beautiful Bill Act that mister Trump got signed off a
couple of a week or so ago actually encouraged a
front loading of investment, particularly into data centers and also
into tech equipment. He's allowed purchases of equipment to write
(15:14):
that off within one year or depreciate it by one
hundred percent. That's an enormous as incentive to go out
and spend on tech equipment, everything from servers all the
way down.
Speaker 4 (15:25):
To PC peripherals.
Speaker 6 (15:26):
So ironically, for Asia, we're going to get an added
boost from those measures coming through. And as I said,
I think it's going to be still relatively good news
for the tech industry in Taiwan and career and certainly
when we've looked at the PMI for Taiwan for electronics,
it's remained in a expansion phase for the best part
(15:47):
of this year, and as well as backlog of orders
as well have.
Speaker 4 (15:51):
Also remained firm.
Speaker 6 (15:52):
So I don't think we're going to see any bad
earnings numbers necessarily from the US TECH or from Asia
TECH for the next or so.
Speaker 5 (16:01):
Sure, I just want to get your views on what
we're seeing in the commodity space as well. We've got
iron ore right now the most active traded contract, and
Singapore copper's hovering around a two year high, and silver
has been the quiet bolt of the year as well.
How sustainable for some of.
Speaker 6 (16:16):
These gains, that's also good question. I think the commodity
equity class has been very under owned.
Speaker 4 (16:25):
It's been a very.
Speaker 6 (16:25):
Big underperformer after the big booster from post COVID. From
my perspective, the whole electricity and grid electrification theme is
going to underwrite the copper and aluminium metal prices, and
certainly the evidence that we're seeing from the build out
of the dam in Tibet as well as also the
(16:47):
infrastructure that's going on in the United States for nuclear
power is going to be very very bullish for those
copper and aluminium metal prices. But overall, if you look
at the commodity indices should be actually doing a lot
better if it were not for the weakness in oil prices.
Food prices remain very elevated compared to where we've been
(17:08):
in history, and as I've alluded to in the metal markets,
the fiscal stimulus that's come through from the United States
and in China over the last twelve months is going
to be very bullish for fixed acid investment. So I
would expect with the week the week dollar and fiscal
expenditure that metal prices can hold their gains and probably
(17:30):
do pretty well for the rest of the year.
Speaker 7 (17:33):
Yeah.
Speaker 1 (17:33):
The Bloomberg Commandery Index up for three consecutive weeks. Alrighty,
Sean d Army. Always good to have you with us,
Managing Director at Mizuho Securities Asia.
Speaker 2 (17:44):
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
(18:06):
and Australia. I'm Doug Prisoner and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
So the equity market finished at record highs today at
the start of what will be a very busy week
for earnings. We also have a watchful eye on the
tariff story. That's because trade negotiators from the European Union
and the US are heading into another week of talks
as they seek to close a deal by August first.
(00:32):
And in a moment we'll look at markets from the
APAC perspective. We'll hear from Sean Darby. He is managing
director at Misoho Securities Asia. But we begin here in
the States. Joining me now is at Butowski. He is
managing partner at Chapwood Investments. It is on the line
from just outside Dallas, Texas. Ed, thank you so much
for joining us. I'd like to begin with the earning story.
(00:55):
So far, more than eighty percent of the companies in
the S and P five hundred have bet estimates on
sales and earnings for Q two and I'm wondering whether
you put a lot of stock in that since we
know that expectations have been lowered a bit.
Speaker 3 (01:09):
Yeah, I do. I mean, you know, nowadays, with the
oversight by the SEC on the companies and what they're
able to say prior to earnings releases, they have to
be pretty exact, and if they're beating them, then they're
really doing.
Speaker 4 (01:23):
A great job.
Speaker 3 (01:23):
I think a lot of credit belongs to the CFOs
of most of these public companies because they're doing outstanding
job of bringing in really strong revenue numbers.
Speaker 2 (01:33):
So I mentioned a moment ago that we're at record
highs for not only S and P, but for the
Nasdaq comp as well. Is there anything that makes you
a little uneasy at this point?
Speaker 4 (01:43):
Well, not really.
Speaker 3 (01:45):
I looked at the Magnificent seven forward pees because I
was going to put out a video message to my
clients about how overpriced they were, and I could not
support that. I mean, if you look at Amazon, they're
selling at a forward pe of thirty six. I think
Amazon can hit that number. You know, Apple is the
only one out of the Magnificent seven that doesn't look
(02:05):
really strong. But Meta looks really strong. And you know,
just about every one of the Magnificent seven which are
leading the SMP look very strong, with the exception of Apple,
And there's really nothing that scares me at this point,
with the exception of some of the conversation going on
around Powell and where Powell and his relationship with trumpets.
Speaker 2 (02:26):
Well, it's interesting you make that point, because today the
White House was very clear that the President has no
plans to fire the FED chairman, but the rhetoric sometimes
has been a little hot. Obviously Trump would like to
see lower interest rates. Do you think there is a
chance that we could get a rate cut as soon
as this month's meeting.
Speaker 3 (02:46):
I don't think it's going to be this month, but
I think next month there's a really good chance. Because
you have to focus in on the GDP number. That's
where all the attention needs to go to forget about inflation.
That's not a problem anymore. The problem is a slow
and wea US economy, and the US economy is the
pipe hiper of the world economy. You know, as the
US economy goes, goes the rest of the world. And
(03:07):
I think that we need to really focus in on
the week GDP number that was printed last.
Speaker 2 (03:13):
Time, so we were talking about earnings a moment ago.
Alphabet will report results this week. I think the market's
going to be looking very closely at spending on artificial intelligence.
How are you playing the AI story right now?
Speaker 4 (03:25):
I'll tell you.
Speaker 3 (03:25):
I've I've been kind of a Nini on this, if
that's the appropriate word, because Nvidia has been, you know,
the only real play other than SoundHound, sou and are ways.
You know, I think that AI is going to be
sort of like nanotechnology. It's going to be infiltrated into companies,
(03:46):
but making money in those companies is going to be very,
very difficult. So I really believe that the AI play
is going to be you know, in Vidia or SoundHound
or Yeah, there's a couple of others. There's Gigacloud, which
is more of a tariff play at this point, but
could also get into the AI world.
Speaker 2 (04:05):
Speaking of tariffs, tomorrow morning, before the opening bell, we're
going to hear from General Motors. I mean, this company
could be very much exposed to the tariff story. I mean,
are there other industries that you're particularly sensitive to away
from autos, that you're maybe avoiding right now because of
the exposure to tariffs.
Speaker 3 (04:24):
Not really. I think that Trump is out there just
kind of, you know, whenever he wants to say he's
going after this country.
Speaker 4 (04:31):
Or that country.
Speaker 3 (04:32):
I think a lot of it has to do with negotiating,
and I don't think there's a lot of fear that
the tariffs are going to hold and be as strong
as they are. But I also believe that it's a
really smart move. It's a long term play. That's what
people have to realize is that the terriffs are very
long term play. They're not short term at all, and
that any kind of you know, disruption, disruption from the
(04:57):
tariffs is going to be short lived, but then also
very very long lived. So you know, getting these factories
into a situation where they're able to produce products like
they were able to do overseas, Like Nike is not
coming back to the United States. Nike is going to
remain doing a lot of business at Vietnam because of
(05:17):
the low cost and the tax structure that they're able
to get from Vietnam. So there's there's really a lot
of confusion about the tariffs, and I haven't made anything
more understandable I can tell.
Speaker 2 (05:31):
I think the view on the street is that we
could have an effective tariff right somewhere in the low teens.
Does that feel to you like it has the ability
to contribute something more to inflation beyond just a one
time bump.
Speaker 3 (05:44):
Yeah, but you have to remember that the tariffs are
paid for by the companies that import the goods, you know.
So if we're importing a washing machine from Mexico, Mexico
is not paying that tariff. Yes, rule who's paying that tariff? Right,
And a lot of people understand that, so they automatically
think that the Mexican government is writing a check to
(06:05):
the US government, and that's just not happening. The retrofitting
of factories is going to take quite a while. That's
why I said, in the short run, you're going to
have a bump, but in the long run, you're going
to have a lot of sensible trade going on that
should have been taking place over the last fifteen twenty years.
Speaker 4 (06:22):
I get that.
Speaker 2 (06:23):
But if I'm Whirlpool and I'm worried about my margins,
don't I want to pass some of that cost on
to the consumer if you can.
Speaker 3 (06:30):
Absolutely, you want to pass it on everywhere you can.
I just don't know if you're going to be able to.
And there was kind of an interesting story and Business
Insider where this one company decided to go forward and
produce their shower heads using all US sources versus Chinese sources,
(06:51):
and the US sources had the showerhead go up to
two hundred and thirty nine dollars and used in the
Chinese sources it was one hundred and forty dollars and
they sold about eight hundred and they were all sourced
from the Chinese government. So I don't think people are
that quick and that easy to give up the profitability
to be pro American. I think Trump has that wrong.
Speaker 2 (07:14):
Are you looking at opportunities offshore? Are you focused primarily
on opportunities in the US.
Speaker 3 (07:20):
I look at my favorite stock in the world is
Macartera Libre EMYLI. I think that Macarter Libre is the
Amazon of Latin America, and I believe that they have
figured it all out and they're going to do very
very well. They're you know, they have some e commerce business,
they have some bank business, but mainly they're the just
(07:41):
you know, order something just like Amazon and have a
deliberty your home. And I believe Macarter Libre is selling
it around twenty three hundred. I think it's going to
go up to about four thousand.
Speaker 4 (07:50):
Next year and a half.
Speaker 2 (07:51):
So for clients that you deal with, it may be
a little more inclined to be conservative. If you had
to look at the bond market right now, are you
finding opportunity and if so, at what part of the curve?
Speaker 3 (08:04):
Well, I'm looking at anything that is double B and
single B rated. I'm a little bit more of a
risk taker in terms of total return on bonds. But
I really like the BBC market, the business development company market,
and the senior rate floating note market. But my favorite
investments right now are utilities. I love utility stouts.
Speaker 2 (08:26):
ED will leave it there, Thank you so very much
for joining us. Ed Butowski is managing partner at Chapwood Investments.
He joined us on the line from just outside Dallas,
Texas here on the Daybreak Asia podcast. Welcome back to
the Daybreak Asia podcast, Time dig Chrisner. We're seeing small
(08:47):
gains in equity trading in both Seul and Sydney this morning,
and Japan is back online after that national holiday and
this week's election in the Upper House. Investors are also
keeping a close eye on any thing TARAF for related
ahead of that August first deadline imposed by President Trump.
For a closer look at market action, we heard from
Sean Darby. He is managing director at Misahouse Securities Asia.
(09:12):
Sean spoke with Bloomberg TV host Sherry On and Paul
Allen on the Asia trade.
Speaker 5 (09:18):
Sean, I want to start you off if I can,
with some of the reaction to what we're seeing in Japan.
I mean, we're back trading for the first time since
the election. How do you approach Japanese assets at the moment?
Speaker 4 (09:29):
You know, we've got.
Speaker 5 (09:30):
Uncharacteristic inflation, tariff uncertainty, and now political uncertainty as well.
What's your approach here?
Speaker 6 (09:37):
Well, I think for the whole of North Asia, they're
still under this cloud of not having yet agreed a
trade deal, so it's still very difficult really to sort
of see any sort of bright light rightlining for these
equity markets. I think for Japan in particular, I think
Ishibasan had wanted to get a trade deal with that
(09:58):
he could have gone to the public and recognize the
fact that a lot of the uncertainty had been removed,
and then you would been able to see the central
back go back and start to raise rates to quell
some of the inflation. So unfortunately they're still in this
sort of vicious cycle in which there's no trade deal,
inflation continues to rise, and that's making the population unhappy.
(10:20):
So I guess in the short term he's going to
have to make perhaps some concessions in terms of tax
relief to again provide some stimulus to the economy and
then hope that there's a trade deal in the background
that can be signed for him to perhaps go back
and seek a.
Speaker 4 (10:35):
Second second election.
Speaker 6 (10:36):
So he's still in that spiral in which the trade
deals really is the core issued in terms of being
able to go back to the public and hopefully get
a better election outcome than perhaps the one that's just happened.
Speaker 5 (10:49):
Well, Bloomberg, as you may have heard, has been speaking
to Kyle Bass of Fayman Capital and he's long head
views on Japan. He said some views on the yen
as well.
Speaker 4 (10:58):
Let's take a quick.
Speaker 7 (10:59):
Listen Japanese sovereign debt to GDPs north of two hundred
and sixty percent. It's kind of the world's most interesting
debt laboratory. I think they're in a precarious position, ie
they either have to let their currency go or their
bomb market go, and they'll never let their bomb market go.
So I would be aware of the en into the future.
Speaker 5 (11:19):
So Sean with that in mind, what's your view on
where the floor could.
Speaker 4 (11:23):
Be for the en?
Speaker 6 (11:24):
Well, I'm not necessarily the currency expert for Mizuho, but
I would slightly take issue with mister Bass's comments on
the instability of Japan's bomb market. I think you have
to look at the other side of the balance sheet,
and Japan has been running record current account surplaces. It's
saving surplaces are huge, and there's no difficulty in Japan
(11:47):
being able to finance its debt, so that I think
is not an issue for Japan, nor necessarily the yen. Yes,
Japan's got a large debt to GDP ratio, but it's
all that debt is in yen, and they're running very,
very large saving surblaces. I think at the end of
last year the current account was the largest in history
for Japan as well as for China. So I think
(12:08):
in the short term, I think markets are probably not
going to be that.
Speaker 4 (12:12):
Concerned with the level of debt.
Speaker 6 (12:15):
I think what really matters in Japan at the moment
is getting the inflation normalized and getting essentially the central
bank being able to start to use monetary policy again
to ecquell some of that inflation. So I'm less concerned
than mister Bass on the outcome for the en and
for Japan's debt markets.
Speaker 1 (12:35):
I think we have really been focusing on the debt
markets just because of the performance of previous auctions when
it comes to the ultra long here in Japan, right,
I mean, we have seen the vog perhaps pulling back
some of those reductions of purchases that we've seen. The
Finance Ministry has been talking about the auctions as well.
When it comes to these yields that continue to surge
(12:56):
in the long end to two decade highs at one
point become a problem for the stock market, that's a
good question.
Speaker 6 (13:04):
I think at the moment it's less has been less
of an issue for the Japanese equity market, principally because
real interest rates, both at the short end and to
some extent at the long end if you look at
inflation swaps have been negative. So with real rates negative,
you tend to find that equity markets tend to be
(13:25):
well supported. So the move in yields has not come
about with such a vicious force that it's created a
downward spiral in asset markets as you would have seen
perhaps in Europe in twenty eleven or in the UK
bomb markets a couple of years ago, so so fast,
you haven't had that spillover effect harming Japanese equities. You
(13:50):
also have to bear in mind that there's a lot
of companies or a lot of financials in Japan that
tend to benefit from a steepening of the yield curve.
And again, Japan has quite a large weighting of banks
in its in disease, which means that again it's not
adversely hit by by higher long term rates.
Speaker 4 (14:09):
So provided real rates remain.
Speaker 6 (14:11):
Relatively negative where we are at the moment, I'm not
so sure we're going to get the very bad spillover
effects harming Japanese equities or North Asian equities in the
same manner.
Speaker 1 (14:24):
Also, I yeaes Sean is a period of time right
now when we're seeing the stock markets look for any
excuse to continue its trajectory upwards. Right we do have
earning season in the mix. We are going to get
the lights of tech giants reporting alphabet this week as
well when it comes to that semiconductor cycle. When it
comes to that tech cycle here in Asia. How durable
has it been and can it continue to be this resilient.
Speaker 4 (14:47):
That's a really good question.
Speaker 6 (14:48):
I think the way I would look at it at
the moment is that ironically the over or One Big
Beautiful Bill Act that mister Trump got signed off a
couple of a week or so ago actually encouraged a
front loading of investment, particularly into data centers and also
into tech equipment. He's allowed purchases of equipment to write
(15:14):
that off within one year or depreciate it by one
hundred percent. That's an enormous as incentive to go out
and spend on tech equipment, everything from servers all the
way down.
Speaker 4 (15:25):
To PC peripherals.
Speaker 6 (15:26):
So ironically, for Asia, we're going to get an added
boost from those measures coming through. And as I said,
I think it's going to be still relatively good news
for the tech industry in Taiwan and career and certainly
when we've looked at the PMI for Taiwan for electronics,
it's remained in a expansion phase for the best part
(15:47):
of this year, and as well as backlog of orders
as well have.
Speaker 4 (15:51):
Also remained firm.
Speaker 6 (15:52):
So I don't think we're going to see any bad
earnings numbers necessarily from the US TECH or from Asia
TECH for the next or so.
Speaker 5 (16:01):
Sure, I just want to get your views on what
we're seeing in the commodity space as well. We've got
iron ore right now the most active traded contract, and
Singapore copper's hovering around a two year high, and silver
has been the quiet bolt of the year as well.
How sustainable for some of.
Speaker 6 (16:16):
These gains, that's also good question. I think the commodity
equity class has been very under owned.
Speaker 4 (16:25):
It's been a very.
Speaker 6 (16:25):
Big underperformer after the big booster from post COVID. From
my perspective, the whole electricity and grid electrification theme is
going to underwrite the copper and aluminium metal prices, and
certainly the evidence that we're seeing from the build out
of the dam in Tibet as well as also the
(16:47):
infrastructure that's going on in the United States for nuclear
power is going to be very very bullish for those
copper and aluminium metal prices. But overall, if you look
at the commodity indices should be actually doing a lot
better if it were not for the weakness in oil prices.
Food prices remain very elevated compared to where we've been
(17:08):
in history, and as I've alluded to in the metal markets,
the fiscal stimulus that's come through from the United States
and in China over the last twelve months is going
to be very bullish for fixed acid investment. So I
would expect with the week the week dollar and fiscal
expenditure that metal prices can hold their gains and probably
(17:30):
do pretty well for the rest of the year.
Speaker 7 (17:33):
Yeah.
Speaker 1 (17:33):
The Bloomberg Commandery Index up for three consecutive weeks. Alrighty,
Sean d Army. Always good to have you with us,
Managing Director at Mizuho Securities Asia.
Speaker 2 (17:44):
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
(18:06):
and Australia. I'm Doug Prisoner and this is Bloomberg
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