Oil Drops as Middle East Tensions Ease; Fed Decision, Tech Earnings Ahead — Bloomberg Brief 07/27/26

[00:00:01] Bonnie Quinn: A.M. in New York City and 10 A.M. in London. Good morning. I am Bonnie Quinn with your Bloomberg Brief. Let's get you set up for the day. Stocks and bonds gaining oil dropping off. This has investors look ahead to a busy week with a Fed decision and lots of tech earnings. And NVIDIA is said to be in talks to guarantee financial help for open AI to lease compute from a $500 billion data center. Let's get a Monday check now on markets around the world. We will start with Winnie Sue in Hong Kong for the latest from Asia. [00:00:48] Winnie Sue: Good morning Bonnie. Happy Monday. We are seeing a very nice rebound in Asian stocks today after that sell-off on Friday with oil pressure continues to ease. And now when you look below up lower down it actually shows how investors remain quite cautious when it comes to the big earnings that we are waiting for when it comes to the U.S. tech earnings. And that is why for Japanese stocks you are actually seeing gaming stocks leading the games today with chip makers continue to fall as investors look for opportunities away from these chip stocks. And similarly when you look at the Cosby index South Korean's benchmark it is up just slightly less than a percent after having fluctuated throughout the day. However the key focus today really is that impressive debut from CXMT. As you flip the board and see how this Chinese memory giant jumping 466% today on its trading day in Shanghai. Now the company is in fact right now the biggest and most valuable company onshore in onshore China. And as the fourth biggest DRAM company we will see how it takes on this competition against its rivals including Samsung [00:01:58] Bonnie Quinn: electronics as K Hynix and Micron. And phenomenal retail interest as well. Winnie thank you so much. That's Winnie Sue there in Hong Kong. All right let's get over to Europe now a lot happening. Justina Lee give us the summary. Good morning Bonnie. Now we're seeing a lot of the similar moves in Europe as we've seen in the U.S. [00:02:16] Justina Lee: Thanks to that drop in oil you know for instance the stocks Europe 600 is up 0.7 percent left by a lot of those retail and travel and leisure names. Now of course we're also seeing big moves in the bond market with the short end UK bond yields dropping nearly six basis points ahead of that BOE decision coming up later this week. And also a pretty big move in German 10 year bond yields. Even though we did have an ECB kind of governing council member coming out and saying that a small pause in this conflict is not going to change the need for tighter policy settings. And we've flipped the board here another big sigh of relief seen in the natural gas market. And now this is also being affected affected by the conflict in the Middle East. And we can see a pretty big move overnight. The biggest in more than a month as kind of the pause in the conflict possibly allowing more movement through the straight of a lot of those LNG vessels. But you can see year to date it's still a pretty big move up. And I think that's fueling a lot of the inflation concerns especially ahead of winter Bonnie. [00:03:22] Bonnie Quinn: Absolutely. And a bank of England decision this week as well Justina. That's Justina Lee in London. Well she mentioned that the big drop in oil apparently a couple of days of a pause between the U.S. and Iran in terms of strikes is worth more than $10 on prompt month futures for Brent. So we're back below $90 a barrel having top 100 just at the end of last week. For WTI we're around $83 a barrel. And as Justina said down more than 7% on European gas futures. So I will say at almost 59 euros per megawatt hour that is still extraordinarily elevated. That's the backdrop for a week of massive earnings. Let's take a look at futures. Thursday is the biggest day. More than $10 trillion in earnings and many of them tech earnings. Reporting on that particular day we are starting off the week nicely after that chip sell off at the end of last week. Nasdaq 100 futures pointing to a gain of more than 1.5%. Should note a couple of things from some strategists this morning. RBC's Laurie Calvasina saying that profits are holding up despite a difficult macro backdrop. We also have a note out from Mike Wilson's team at Morgan Stanley suggesting that if the war is protracted or if the Fed hikes this week there could actually be some kind of consolidation or even a correction. To that end let's look at yields because we are off our highs of last week but we are still elevated. So we are just below 430 on the 2 year yield. We are well above 460 still on the 10 year and we are well above 510 on the 30 year yield. So again still quite elevated but at least at the front end really only pricing in about not even a half an interest rate hike for this week. Let's get to some individual market movers now pre-markets with Chloe Mellet in London. [00:05:01] Chloe Mellet: Good morning Bonnie. We are seeing 40 biosciences up very strongly this morning after the Belgian biotech Arjanx decided to buy it for 2.2 billion dollars to expand its immunology portfolio and we are seeing a huge jump there almost 40%. Moving on but staying within the pharmaceutical space and we are here in London with AstraZeneca which is a reported higher than expected profit thanks to very strong demand for its cancer medicines. And so this is an area that Astra has really focused on and it seems to be paying off and we're up about 1% this morning. And finally trip.com is in focus as well this morning after getting fined almost 800 million dollars by China in an antitrust probe. But analysts are saying that this now removes a really big overhang on the stock that was really weighing on the shares. And so this explains this move up this morning for trip.com almost 4%. [00:05:52] Bonnie Quinn: Chloe thank you so much. Chloe Mellet will be back later in the hour. Also coming up this hour we're going to catch up with Callum Pickering of P.L. Hunt on a cloudy Fed outlook amid geopolitical uncertainties. Let's start right there. The Fed facing more pressure to hike rates as risks tied to the Middle East tariffs and AI overshadowed the June CPI report. Joining us now is Bloomberg's Jill Deesis. Jill there's going to be some repricing either way whether the Fed holds or hikes at this point right. [00:06:22] Speaker 5: Yes Bonnie I mean look I think that at this point you know you're paying attention to some of these price pressures. I know that oil in particular has fallen back below 90 dollars per barrel. But still I mean you know take into account the facts that you have seen those escalating tensions between the U.S. and Iran particularly over the last you know couple of weeks. And there's still some uncertainty about where that may go from here. So that does seem to be weighing into the calculus a little bit more here. I mean you know back when we had that pretty cool June inflation print you saw bets for a rate hike dropped to as low as 10 percent. Now I think as of last week we were back up to about a 35 percent chance for a rate hike that we're pricing in at this point. So it does seem like even if you get a continued hold from the Fed this week there might be some descents that make [00:07:10] Bonnie Quinn: this a really interesting picture this time. You know at the end of last week it looks like we were going to see a much more protracted war than we had thought. Suddenly with oil down so much this week things look a little bit rosier. Jill how is the Fed supposed to read war risk. I mean how is anyone supposed to read war risk. I think that you know [00:07:31] Speaker 5: when you're looking at the previous several months here we've seen a lot of twists and turns in this conflict. We've seen you know some pretty rapid escalation followed by a de-escalation. Maybe we're in a period now where we've got a couple of days where things that do seem like they've simmered down a bit. Maybe you see peace talks pick back up. But I think you know if you're the Fed you are sort of weighing in you know not just the fact that you've got these price pressures of impacting energy but also you know a lot of other issues related to AI demand. I mean I think that you know you're going to have to kind of weigh whether or not there's at any point this year you need to raise rates. I think for the Fed in particular when you're looking you know later into later this year that becomes a question of whether you raise rates now or you potentially look at something that's maybe even butting up a little bit against the U.S. midterms which might be a little bit more political than you know kind of worse. She's still pretty new in the position once ultimately go here. So I think there's a lot of factors at play. And again really difficult to kind of build in that risk around uncertainty with the Iran war. Again we're in a we're in a bit of a cool down period now but it's really difficult to say where things are ultimately going to go you know even just a week or two from now. Yeah exactly. [00:08:41] Bonnie Quinn: And also a little bit of relief on the employment front of the moment as well. And that could provide cover should the Fed actually do something. Jill thank you so much. Bloomberg's Jill Deesis there. In China chipmaker CXMT soaring after a blockbuster IPO. Shares closing 466 higher becoming the nation's largest onshore listed company. Bloomberg's Peter Elstrom joins us now for more. Peter this is a phenomenal story. We've all been watching the China AI story but percolating in the background has been that chip story and CXMT is now the fourth largest DRAM maker in the world. How long before China is completely [00:09:15] Speaker 6: self-sufficient in chips. Oh that's a big question of Vonnie in terms of the debut today. Yeah it was it was a very strong IPO for CXMT. As mentioned they were up 466 percent. The company is now worth the equivalent of 488 billion dollars making it the most valuable onshore. And it's pretty close to the most valuable Chinese company out there. Tencent is just a bit ahead at just over 500 514 billion dollars. So there's a small gap there. And with the prices of memory chips going the direction they are it would not be surprising if you've got another investor push to go ahead and get very close to Tencent. In terms of the broader question about their chip self-sufficiency they do need chips from a number of different places. Obviously they want to be able to buy the most advanced chips in areas like AI. Huawei is trying to make the equivalent of Nvidia's accelerator chips but they're quite a bit behind. CXMT is a very strong memory chip player. That's one of the reasons that Apple is trying to get their chips in addition to the memory chips that it gets from the big three players Samsung SK Hynix and Micron outside of China. But it's a strong player. It's making a lot of progress at this point. And certainly it's getting a lot of government support too because Beijing does have this goal of trying to build their own technology self-sufficiency and semiconductors is sort of the foundation of that to being able to build services on top of it like AI and other products. [00:10:42] Bonnie Quinn: Phenomenally the retail order book apparently was about ten times the size of the SpaceX retail order book. Can I move to Nvidia because it's in talks to provide a financing guarantee now to help open AI lease compute from a five hundred billion dollar data center that SoftBank controls. So really just a great story for everybody on the surface feeder but it does bring up the circular financing [00:11:03] Speaker 6: question again. It does. It does. Nvidia took some heat especially last year for these kinds of circular deals where it would provide financial support to a company that would then in turn buy chips from from Nvidia. We don't know the exact details of this so far but certainly it has some echoes of that because open AI is an enormous purchaser of Nvidia chips. Open AI has been trying to figure out how they can build out compute in the United States. This is one of the bigger projects on the books right now. SoftBank is taking over this Ohio state. State. This is where Masayoshi Son announced with Donald Trump that there were ambitious plans to be able to build out this enormous data center. Open AI wants to be able to use that data center compute capacity if it can. And one of the helpful supports is if Nvidia is going to backstop two hundred fifty billion dollars worth of the money needed for that project. It would make it easier for SoftBank to proceed with it, build it out and then provide that to open AI. There are a couple other components to this too though. Nvidia is considering whether it should help open AI buy chips that it would use on that site to be able to run the data centers too. So there are some echoes of the data. The circular financing that we saw last year in the AI industry. Certainly this is going to raise those concerns again. Nvidia said we need to build this compute capacity out so quickly that we need to find new ways of financing these sorts of things. So they believe this is a good positive thing for the industry overall. We have to see how it plays out. [00:12:33] Bonnie Quinn: Yeah. And the amount for those chip purchases that you mentioned as well as a separate 350 billion dollars. So we're talking huge sums of money. Peter. Thank you so much. That is Bloomberg's Peter Elstrom. In the Middle East tensions easing as the strikes between the U.S. and Iran pause after almost two weeks. Talks do seem to be at a standstill though with Iran's foreign ministry spokesman saying earlier in a press conference. It's possible that mediators share messages from the U.S. side about current developments. But at the moment we have no negotiations with the United States. Joining us now from Dubai is Bloomberg's Abir Abu Omar. Abir, I also saw earlier that Iran was basically saying the U.S. doesn't get to decide when peace comes or when war happens. What is the stance of Iran at the moment? [00:13:17] Speaker 7: Good morning, Vaani. Well, you pretty much said it. A repetition of patterns we've been seeing over the past 48 hours or so really now. This follows Vaani a halting in the U.S. attacking Iran over on Friday. We don't have a reason for that. We don't understand why President Trump has stopped hitting Iran. But that follows 13 consecutive days of attacks against Iran, not just military targets, but also infrastructure, including bridges, for example, in Iran. Now, The New York Times did report earlier that this could be due to diminishing munition from the U.S. side. President Trump and Mike Walz later on saying that, no, the U.S. has plenty of munition. But nonetheless, Iran has suspended attacks in return of this on Sunday, saying that it will not attack as long as the U.S. does not attack. And, Vaani, just meanwhile, this is all happening. We don't have negotiations on the table, as you have just mentioned. The deadline for the MOUs that was reached in June in Switzerland is fast approaching. We're looking at August 16th. And all those 14 concessions that we've spoken about multiple times over the past couple of months or so are not being discussed. That includes President Trump's main goal of Iran's nuclear power. That includes the oil sanctions against Iran, the frozen assets and the Strait of Hormuz. But for one thing, the Strait of Hormuz is the only thing that is being discussed. We understand that an Iranian delegation had visited Oman over the weekend where the deputy foreign ministers of both countries had discussed the Strait of Hormuz and the movement or the lack thereof in the Strait of Hormuz pretty much paralyzed at the moment, Vaani. So, what we're seeing is, again, this back and forth for the time being, a sense of calmness. You're seeing Brent crude prices now actually below $90 on the barrel. Last week, it had it had accelerated to above $100 on the barrel. So, at least some positive news. But just one thing to keep in mind is that this hasn't ended, right? This could all unravel. There's a lot of uncertainty still around the situation and whether those negotiations are set to [00:15:26] Bonnie Quinn: continue. Pricing can happen very quickly. Abir, thank you so much. That's Bloomberg's Abir Abu Omar. Now, to all the top stories trending on the terminal this morning. The CME is set to launch single stock futures today. This will allow investors to hedge or speculate on more than 50 of the largest U.S. companies. The contracts will be cash settled on the closing price of the stocks they're tied to. Trading will be open 23 hours a day, five days a week. Softbank's $40 billion bridge loan for its stake in OpenAI has attracted a new group of 21 lenders. Bloomberg sources say the group has been allocated around $7 billion of the facility. Standard Chartered, First Abu Dhabi Bank, and Singapore's sovereign wealth fund, GIC, have taken a nearly $1 billion share. Central bank governor unexpectedly resigns citing personal reasons. The country's currency, stocks and bonds all fell after the news. The senior deputy governor will take over as acting governor. Coming up, we'll bring you part of our exclusive list of stock market. That is Jensen Huang next. This is Bloomberg. This is Bloomberg Brief. I'm Bonnie Quinn in New York. Investors bracing for the busiest week for S&E 500 earnings with Microsoft, Meta, Apple and Amazon all set to report. With the firm's AI spending plans at top of mind, Bloomberg's Ed Lodlow spoke with NVIDIA CEO Jensen Huang in an exclusive interview. Have a listen. [00:17:05] Speaker 8: The semiconductor industry has really changed. And the reason for that because we used to build computers for people to use and we're going to still continue to build incredible computers. These are now processing AIs for humans to collaborate with. But in the future, we also have AI agents and robots and they're going to be using computers. So instead of just a billion people using computers, we're going to have a hundred billion agents and billions of robots all using computers. The computer industry that's built on top of the chip industry surely is not big enough. And so this is one of the realizations of the semiconductor industry that now computers are built not just for people to use, but computers are being built for computers to use. My guess is that the semiconductor industry is probably going to have to be ten times larger than it is today over the next decade or so. And so working with our partners in Korea and around the world to scale up the supply chain of semiconductors so that we're prepared for this AI future is really important. This is the golden ages for Korea, as you know. Their semiconductor business is booming. Their industrial business is booming. You know, this is a country that has the ability to help the world build out the AI infrastructure. They're incredibly adept at adopting new technologies. And it's a really technologically forward-laning society. And they love using AI. AI has really diffused throughout their society and their industry. And so this is a great time for them. We're announcing several things. We announce a big partnership with SK Group, where our companies are going to enter into a business partnership where we do over $500 billion of business with each other, whether it's consumption and purchasing of memories or selling supercomputers to them as they scale out 2 gigawatts of AI factories. There's a whole bunch of other announcements. We're investing a billion dollars in Naver to help. They're the Korea's leading AI cloud. They're going to scale up in Korea. They're going to scale up 200 megawatts, I think it is. And they're going to expand across the world. In the case of China, they're producing more AI researchers than probably all of the world has in any given year. And so they're producing -- manufacturing intelligence is important. They manufacture the most important version of it, which is the researchers. So this is an area, a country that's going to produce excellent AI technology. We ought to keep -- continue to learn from them, work with them. As you know, you're here in Silicon Valley, right here in San Francisco. The number of AI researchers here that came from China that are Chinese is really quite significant. And so, you know, we're really fortunate to have them here. And, you know, we just got to keep on racing. [00:20:04] Bonnie Quinn: NVIDIA CEO Jensen Huang speaking exclusively to Bloomberg's Ed Ludlow. This is Bloomberg. NVIDIA CEO Jensen Huang speaking exclusively to the United States. Time now for your front page news. And first up, the BBC reporting French President Emmanuel Macron has called a crisis cabinet meeting as wildfires close in on the southwestern city of Bordeaux. It's also known that thousands of thousands have been evacuated. Next up, the New York Times reporting on the Berlin Pride event in which a woman was killed and another 29 people were injured. German authorities said police shot and killed the man suspected of the attack after he charged at officers with a weapon. And finally, the Financial Times reporting America's leading AI company spent records lobbying Washington in recent months as they try to limit unfriendly regulation and shape U.S. rules around data centers. Coming up, Callum Pickering of Peel Hunt joins as price pressures mounts ahead of the Fed's rate decision. This is Bloomberg. It's 5:30 a.m. in New York City, 10:30 a.m. in London. Good morning. I'm Bonnie Quinn with your Bloomberg Brief. Let's get you set up for the day. Stocks and bonds gaining oil drops as Washington and Tehran pause attacks on each other for a third straight night. This as investors look ahead to a busy week with a Fed decision and lots of tech earnings. And the video is set to be in talks to guarantee financial aid for open AI to lease compute from a $500 billion data center controlled by Southbank. All right. Let's take a look at these markets. And wow, that is a drop for oil. We're now below $89 a barrel on Brent. We just continue to plummet. That's a shift of more than $13 a barrel just between Friday and Monday alone. We're down almost 9% now on that front month contract. We see that WTI is below $83 a barrel. Still pretty elevated for European gas futures above 58 euros per megawatt hour. But that is still down 8% from where it was at the end of last week. That is providing a backdrop, which could be positive for some asset classes, including equities and bonds. Let's take a look at futures because we're also going to see a huge amount of earnings this week. And as Lori Calvacina of RBC put it, companies have been defending their profits against what is a difficult macro backdrop. And we may be seeing weaker revenue beats. But nonetheless, they are seeming to beat the lingering pressure beneath the surface. As you can see, Nasdaq 100 futures looking to bounce back after Friday's sell-off of more than 1.5%. And then yield-wise, we are, of course, waiting on the FOMC this week. We're down about three basis points on the two-year. Well, across the curve, really, the middle point of the curve down more than that. But still, the 10-year yield at 4.63 in that two-year just below 4.30. The 30-year yield elevated still at 5.12 and change. All right, let's get to some individual movers now. We'll go to London and Chloe Mellie. [00:23:24] Chloe Mellet: Good morning, Bonnie. This drop in oil prices that you were just mentioning is triggering this big relief rally across those tech stocks and AI-related stocks over here in America. And we have got quite strong moves this morning, including Qualcomm, Meta, Microsoft, Amazon, all in the green this morning as this drop in oil prices gives some relief to those markets. Moving on to 40 Biosciences, which is jumping this morning in pre-market trading as it is getting bought by the Belgian biotech, Arjanx, for $2.2 billion. And so that will expand the immunology portfolio for that company and we're up very strongly there. And finally, let's end with a London company. We've got AstraZeneca also moving higher in London trading this morning. After reporting higher than expected profit, it has really benefited from strong performance of its cancer medicines, which is an area that it has been trying to really expand in. This seems to be really paying off. And so we're up about 1.6%, 1.7% for AstraZeneca in London this morning. [00:24:27] Bonnie Quinn: Chloe, thank you so much. Chloe Mellie there in London. Price pressure is creeping back up amid geopolitical uncertainties. Markets now pricing in about a 30% chance of a Fed hike Wednesday with nearly a full hike priced in by the September meeting. Of course, pricing is constantly changing. Joining us now is Callum Pickering, Chief Economist at PL Hunt. Callum, if the Fed was at all inclined to hike this week and there was a significant non-zero possibility of that happening, does this massive drop today in oil prices change that decision-making even at the margin? [00:24:58] Speaker 9: It probably does. If I'm at the Fed, I'm inclined to just hang off and just slightly hope that things resolve. For me, I actually don't see a very good argument for any central banks to do anything over the next few weeks. There are just two larger two-way risks. I think from the Fed's perspective and for other central banks, I think it's important to let markets entertain the idea that central banks could raise interest rates while holding out the hope that in the end you don't have to do all that much. Why let markets entertain the idea? First, you don't want to push back against that. Remember, they all made a mistake in 2022. That would look very bad indeed if they then had to go aggressive. But second, by allowing markets to entertain the prospect of hikes, you just get to a point where you introduce enough tightening into the system just to keep some price pressures under control a little. [00:25:54] Bonnie Quinn: Are we making it too complicated, though, Callum? If you think about it, the labour market is doing just fine, according to the data, and we have to go off the data that we have. And inflation is still well above the Fed's targets and only coming down ever so slightly. I think the last report was really the first time we've really felt relief in some time. So why not hike? [00:26:17] Speaker 9: I think we're always making it a little bit too complicated. I think that's a great point, especially economists like myself. I think there is an element to that. For me, we're in the business of guessing what the Fed will do rather than what it should do. In a way, you're right. Consider the scenario. The Fed says exactly as you mentioned, look, we have a dual mandate. The economy seems to be doing quite well. The labour market is tight. We're above. So just to provide some insurance, we're going to go 25, 50 basis points over the next couple of meetings, and then we'll be done. My sense is the Fed is inclined to do as little as possible in order to not disturb what has been a very healthy economic upswing in the U.S., which, remember, importantly, has involved this big productivity and technology story. The last thing I think the Fed would want to do is put the economy to sleep, and so they're willing to tolerate a bit more inflation than they ordinarily ought to. The other thing to remember is, keep in mind, prices are signals. So those high price pressures that we see in the U.S., that pricing power for firms is also the incentive to hire more workers to build on the land that's free, to extract the commodities, to produce the energy, to build out the tech. And so a little inflation, I think, is [00:27:31] Bonnie Quinn: probably tolerable here. Yeah. How concerning is that, though, on the other hand, because AI spending is obviously supporting growth right now, and not just in the United States, but in China, Taiwan, Singapore, I mean, Korea, obviously. If there is a pullback in AI or some kind of a beginning of confidence drifting from the AI story, does that impact not just U.S. [00:27:53] Speaker 9: growth, but global growth? Okay, so I think there are two things here, and I would distinguish them. The one is, what happens if the positive reinforcing cycle in the U.S. of elevated stock prices, which is coming through on the tech side, which is pushing up household net wealth, the fact that households in the U.S. are spending every dollar they earn virtually, and this growth that's coming from it is allowing the U.S. to finance a 7% federal deficit. What if that suddenly is undermined? That's, of course, a big problem, not just for the U.S. and the global economy. There's a separate story, which for me is a benign one, which is what happens now as the world realizes that we're not in the innovation phase anymore of this technology, but we're in the diffusion phase. So if what we see is over time, the gradual, gradual narrowing of the valuation gap between the U.S. and other markets as the global capital market does its job, and it sends money to the sectors, the industries outside of the U.S. that can use this technology, and so you get a rebalancing. If this bubble diffuses and doesn't pop, I think that's absolutely fine. I'm still in the second camp. What I think is quite interesting, though, is the muscle memory in markets, which is every time we worry about the war, and we just had a recent one, which, of course, has de-escalated in the last couple of days. There's a sudden scramble for dollars because commodities are priced in dollars, and the market goes back to this A.I. trade. So my point here is if we get continued good news on the Middle East, I actually wouldn't be surprised if some of these tech companies come under pressure. The dollar weakens as the market then focuses on non-U.S. companies' economies that can benefit from technology. [00:29:33] Bonnie Quinn: The dollar weakens. What more do you want to know about Kevin Walsh and how he's thinking at this next news conference? We know there is going to be one. We also know what we think we know about Kevin Walsh, but will there [00:29:45] Speaker 9: be anything that we can learn? OK. I think we are going to find out over the next couple of meetings if he's really, really disciplined in his mindset that he doesn't want to provide forward guidance for markets. And I think I said this actually on not your show, but on Bloomberg a month ago. I think that Walsh is going to be a Fed chair that economists like, but that markets don't like so much. Powell, his predecessors, Yellen like to give markets clear forward guidance. In other words, steering interest rates. Walsh is happy to let the economic data speak for itself and then for the Fed to decide what it wants to do. And so this meeting, if we don't get much information, if he stays quiet, I think we're now in for a structural change in the way that markets have to think about the Fed. And so I expect to see lots of interesting notes about how economists interpret the data and how the Fed might react to it. So we're hoping for some signal this week. We might not get one. Well, the other thing is that we've [00:30:46] Bonnie Quinn: seen a couple of options that have been weak. They definitely haven't failed, but they've definitely been weak. And that's the longer end. We know that the short end is going to react to whatever the Fed does. But Kevin Walsh is likely to be looking at that, you know, beyond 5% 30-year yields for its, what is it, 28, 29 days now this year. And wondering what can be done about that, right, given the amount of debt that this country has. Is there going to be a plan for that at some point or at least an effort at having that be in the transmission mechanism somehow too? Well, look, that was my nervous laugh. [00:31:20] Speaker 9: We have far too much public debt across the advanced world. No incumbent government or any challenger is taking this seriously. Of course, the U.S. gets the exorbitant privilege from the dollar. So I think it can sustain these these deficits for a while. We're in a state of the world now where the relationship between the front end of the curve and the long end of the curve is abnormal. Typically, central banks raise interest rates at the front. They go up at the long. They cut them at the front. They go down at the long. But once you are starting to run into questions of inflation credibility commitment, fiscal credibility commitment, they can move in opposite directions. And so in a strange way, if Walsh were really committed to pushing down the long end of the curve, he would want to tighten at the front end to drive down inflation expectations. The risk, of course, is if you do that too much, you then start to undermine the U.S. economy and then growth worries start to compound into these fiscal worries. What I would say is I don't think the overall borrowing level matters for the U.S. or other advanced economies nearly as much as inflation. And so I think there's actually quite a lot of headroom here that if central banks really started, including the Fed, wanted to be committed to drive down the long end, they would tighten at the front end, cure the inflation problem, and then we would see the curve flatten considerably. [00:32:37] Bonnie Quinn: All right. It's quite conceivable that that's what we'll see. Callum, thank you so much. Callum Pickering there of Peel Hunt this Fed week. Now to other top stories trending on the terminal this morning. The CME is set to launch single-stop futures today. This will allow investors hedge or speculate on more than 50 of the largest U.S. companies. The contracts will be cash settled on the closing price of the stocks they're tied to. Trading will be open 23 hours a day, five days a week. SoftBank's $40 billion bridge loan for its stake in OpenAI has attracted a new group of 21 lenders. Bloomberg sources say the group has been allocated around $7 billion of the facility. Standard Chartered, First Abu Dhabi Bank, and Singapore's sovereign wealth fund, GIC, have taken a nearly $1 billion share. The companies declined to comment. A heat dome is gripping central U.S. pushing temperatures and power demand higher across the Great Plains, Midwest, and Mississippi River Valley. The heat and humidity will make temperatures feel as hot as 112 degrees Fahrenheit or 44 degrees Celsius. The heat dome should shift to the west by the weekend. Coming up, Middle East tensions ease. President Trump said to be giving some space to talks with Iran. We'll discuss next. This is [00:33:54] Speaker 10: important. The president is keeping all options on the table. I've spoken with the negotiators. I've spoken with Secretary Hegsteth. What the president is doing right now, as we've seen all along, is giving some talks some space. Talks are ongoing. They're happening at every level, from the more technical aspect of it, all the way to the highest levels, of course. Tensions at least on pause in the [00:34:32] Bonnie Quinn: Middle East as the U.S. and Iran hold off strikes after almost two weeks of attacks, dragging crude prices lower. The Iranian foreign ministry saying earlier there's currently no negotiations ongoing with Washington. Bloomberg's Kasia Klimashinska joins us now. So as usual, a little bit of conflicting views on either side. Kasia, what are we supposed to make of the U.S. just halting strikes on this New York Times report that maybe it's because of diminishing munitions? The good [00:35:00] Speaker 11: news is that we are starting the week with no attacks. Oil is down and stocks and bonds are up. And that's because U.S. and Iran haven't been attacking each other for three consecutive days. Some members of the Trump administration are saying that there are talks ongoing. We haven't seen any details of those talks. And last time President Trump spoke, that was last week on Friday, he said that the U.S. is locked and loaded and perhaps ready to enact a massive attack that hasn't come. And that's again, for example, why the oil prices are sliding. But the main area of conflict, the Strait of Hormuz, is still there. And there is very little traffic going through, which is not what the U.S. likes. And then tomorrow we have Israeli Prime Minister Benjamin Netanyahu coming to the U.S. He will definitely bring the focus back on Iran. He has already told Fox News on Sunday that he will want President Trump to stay focused on Iran's nuclear program. Yes, tell us what we should expect from this visit, [00:36:02] Bonnie Quinn: why it's happening now and if there are any other messages Netanyahu is going to be bringing. [00:36:07] Speaker 11: It's very interesting because, in fact, President Trump and Prime Minister Benjamin Netanyahu didn't meet in person since this attack on Iran started in late February. The contact was, of course, over the phone and definitely there were exchanging messages. But we know that the view of the two leaders on this war is different in large part because perhaps President Trump is facing midterm elections in November and Americans here at home don't want to pay more for gasoline. They don't want to pay more for groceries. So this affordability, the impact of this war is very much on President Trump's mind. But he will talk to Benjamin Netanyahu tomorrow. He will also meet other leaders. They are here in town for the funeral of Senator Lindsay Graham. So, for example, President Trump will also meet with Ukrainian leader Volodymyr [00:36:58] Bonnie Quinn: Zelensky. On the domestic front, we have now a replacement for Graham Plattner. Troy Jackson is the pick in Maine. Does he have a chance of beating Susan Collins for that seat? Very interesting race over in Maine where Democrats are [00:37:15] Speaker 11: looking to pick up a Senate seat, which they really need if they want to take control of Senate in November. So they have a new candidate, Troy Jackson, a really interesting person. He used to be a Republican, but he turned progressive. Now his policies are expanding their health care and also increasing taxes on the wealthy. He is facing Susan Collins, a very experienced Republican who managed to defend her seat even as no Republican candidate for president won in Maine for 40 years. So we'll see what happens. Of course, there is still a lot of time between now and November. But Democrats have a new strong candidate, Troy Jackson there, as you [00:37:57] Bonnie Quinn: mentioned. Yes, that was a bit of a saga. Kasia, thank you so much. Bloomberg's Kasia Klimashinska. Back into the Middle East now, where transits of key choke points are still well below normal. Traffic sparse in the Strait of Hormuz with mostly smaller product tankers and bulk carriers crossing, according to data. Let's bring in Bloomberg's Alex Longley for more. The situation has been changing on a daily basis for shippers. Alex, what do we know exactly about who is getting through, whether they can go through with their radars on, if there's any secret crossings or what exactly the situation is? [00:38:29] Speaker 12: Well, it's still a very clouded picture. And as you say, there's a lot of factors driving whether or not ships are deciding to cross Hormuz at the moment and really talking to ship owners doing those voyages. It's something that changes hour by hour and day by day. Some days owners may feel comfortable transiting, other days they won't. And also the shipping fleet is now split between a sort of a cadre of ship owners who are kind of happy to take that risk as and when they see it appropriate and others who simply won't go anywhere near Hormuz because of the risk of both attacks kicking off again, but also of mines in the waterway. So it's a very, it's a very muddy situation at the moment. Traffic is clearly much lower than normal levels. But it really goes in fits and starts from day to day depending on the security situation on the ground. And when we get kind of pauses as we've seen over the last few days, you tend to see a bit of a pickup in traffic. But the wider picture is one of much lower volumes through Hormuz. [00:39:23] Bonnie Quinn: Alex, what about the Red Sea and the Babamandab Straits? Is traffic, quote unquote, normal through there given the Houthis threats before the weekend? [00:39:32] Speaker 12: No, I don't think it is normal. I think we're seeing a normal volume of oil leaving the sea, but not necessarily on the normal route. So we're seeing some ships diverting north and traveling through the Suez Canal in a bid to kind of avoid any potential attack from the Houthis. Remember last week, the Yemeni militant group sent an email to ship owners saying if you call it a Saudi port, we will consider you to be within our targeting range. And then later in the week, we kind of heard from Yemeni officials or from Houthi officials that that might not be the case. So again, there's a kind of a mixed picture there. But ship owners, some ship owners erring on the side of caution, others again switching off going through dark and appearing on the other side days later. So again, I think we're seeing a mixed bag here. But there sort of the volumes of commodities being exported are normal. Some of them just might be taking a much longer route to get to market than they normally would. But it's a slightly different picture to the Strait of Hormuz where commodity exports are clearly clearly far reduced versus versus pre-war levels. All right, Alex, thank you so much for the context. [00:40:35] Bonnie Quinn: That's Bloomberg's Alex Longley. Turning to tech. Bloomberg learning that NVIDIA is in talks to provide a financing guarantee to help open AI lease compute from a $500 billion U.S. data center controlled by SoftBank. Sources say early stages of negotiations signal NVIDIA could guarantee as much as $250 billion. Also chips for $350 billion. So there's just money flying all over the place. Let's get the take now from Bloomberg's Neil Campling. Is this wise? Who benefits most from this, Neil? [00:41:06] Speaker 13: Great question, Bonnie. I mean, this is just the latest example of NVIDIA investing in its own ecosystem to a degree. It's great for open AI because they probably haven't got a huge amount of cash available right now. But this will raise questions around the potential of circular financing again, because NVIDIA has got strategic deals and then some other kind of more problematic vendor financing deals perhaps in terms of their whole ecosystem. You know, deals that they've got in terms of financing or stakes, open AI, CoreWeave, Anthropic, XAI, Lambda, Mistral. I mean, the list goes on and on. [00:41:44] Bonnie Quinn: So, you know, it's going to raise as many questions as it answers. I think we'll see how the market reacts when the U.S. session opens later. I want to ask you a little bit briefly about CXMT jumping more than 500%. Should we expect Chinese chips in the U.S. markets to overtake some of the U.S. chip makers briefly, Neil? [00:42:03] Speaker 13: It helps them in terms of raising cash. Obviously, it's great. It's great for their balance sheet and they can spend more on the CapEx. I will just caution one thing here. As far as the technology is concerned, they're still about three years behind the technology capability of the likes of Micron and SK Hynix. You can't just buy away to closing that gap. So, you know, let's just be cautious here in terms of the type of chips that can come into the U.S. market. They won't be leading edge. There won't be those HBM4 chips, for example. All right, Neil. Thank you so much. [00:42:33] Bonnie Quinn: Neil, camping there with a big week ahead for tech. This has been Brig. Now a look at what's ahead this week. We have Treasury Auctions on deck today for $69 billion worth of two-year notes, $70 billion worth of five-year notes. Then a marathon of rate decisions with the Fed Wednesday within the Bank of England on Thursday, followed by the Bank of Japan on Friday. And it's the busiest week for S&P 500 earnings, including Meta and Microsoft on Wednesday, Apple and Amazon on Thursday, Amazon on Friday. Here's your macro picture. Looks like we're going to bounce for the NASDAQ 100 after the chip sell-off last week. Brent crude trading now above, below $88 a barrel. That's it for Bloomberg Brief. We'll be right back. [00:43:28] Speaker ?: We'll be right back.