SpaceX Plans Mega IPO; Broadcom Weighs on Tech — The Asia Trade 6/4/2026

[00:00:00] Speaker 1: This is the Asia Trade. I'm Shevriani in Tokyo. The top stories this hour. Asian stocks set to extend Wall Street declines as oil and bond yields rise. Hostilities between the U.S. and Iran flaring up with Kuwait and Bahrain caught in the crossfire. SpaceX officially files for the biggest IPO of all time with Elon Musk to control 84 percent of voting power as he moves closer to becoming the world's first trillionaire. And with mega IPOs in focus, Bloomberg learns how the Anthropic has lined up Morgan Stanley and Goldman Sachs to lead its offering. We do have breaking [00:00:52] Speaker 2: news when it comes to this ever developing situation between the U.S. and Iran. We're saying hearing now the U.S. saying that Israel and Lebanon have agreed to implement a ceasefire. The U.S. State Department announcing in a statement that as a result of U.S.-led negotiations, Israel and Lebanon agreeing to the implementation of a ceasefire that's contingent on a complete cessation of Hezbollah fire and the evacuation of all Hezbollah operatives from the South Latani sector, according to the statement. This announcement coming after a fourth high-level trilateral meeting between Israeli and Lebanese representatives that took place on June 2nd and third in the U.S. And we know that really it is this activity and the tensions when it comes to what's going on in Lebanon with Hezbollah and between Israel that has really been at the core of the difficulties and challenges in being able to get that broader ceasefire between the U.S. and Iran going as well, given that there's been a lot of contest in terms of whether Lebanon and Hezbollah is part of that ceasefire at all. We have seen in the meantime the U.S. and Iran also clashing overnight, Kuwait and Bahrain as Sherry mentioned getting caught in that conflict in the most serious flare-up that we've seen since that first ceasefire went into effect in early April. We are still waiting to see whether that extension can be done, but the U.S. military saying that it came under missile and drone attack. We're watching oil at the moment as we saw overnight really crude holding that three-day gain as these clashes continue to lower the deal prospects. But we should see a bit more optimism. And now that that key issue perhaps between Israel and Lebanon may be seeing some sort of compromise, at least in the near term. Sherry, of course, so much going on. And Mark is really very much distracted by this huge pipeline of megatech IPOs. [00:02:34] Speaker 1: Yeah, this is really another story that's topping our agenda. This, as you said, and Heidi, could be the largest listing ever. SpaceX has officially filed for its IPO, aiming to raise $75 billion. The share sales set for June 11th should open the door to more mega IPOs and propels CEO Elon Musk closer to becoming the world's first trillionaire. Let's get more with Bloomberg U.S. deals editor Michael Haitha and senior editor for Markets John Authertz. Mike, let me start with you because JP Morgan CEO Jamie Dimon himself personally pitching this IPO to ultra-wealthy clients nationally. How unprecedented is this? [00:03:14] Speaker 3: Very. And they're going to need a lot of ultra-wealthy investors to get the $75 billion. You know, today's filing confirmed a lot of what has already been reported in terms of some of the basics, but it locks it in. It's $75 billion is the goal for the raise. That's going to have to come from a lot of different investors, including retail investors. And it will be the largest ever, period. It also puts the company at a $1.8 trillion valuation, which is bigger than all but six of the companies in the S&P 500 right now. And that includes Tesla as well, by the way. [00:03:52] Speaker 2: John, it's a big test for the market, isn't it? Even within the concentration of tech, because we've seen this urgency of first to market. Is this going to be a challenge of the depth and the ability of liquidity and market conditions at the moment? And what does it mean for the other IPOs, but also the non-tech parts of the market, which haven't already been keeping up? [00:04:13] Speaker 4: Well, personally, if anybody wants to put any money into this company when 84% of it is going to stay in the somewhat erratic hands of Elon Musk, that amazes me. I mean, the kind of marketing that is going on already has to be done with a hand tied behind the back that the governance of this company is extraordinary. It's just a remarkable step of confidence to ask people for that kind of money while really giving them no control, no say in how the company is being run in return. So if they do succeed in doing this, which I imagine they will, then that is a landmark in more ways than just the scale of the money raised. But the fact that people are prepared to accept entering into an IPO on these terms, I think in terms of the structure of the market, we had another fascinating landmark today, which is that Vanguard's VOO ETF has become the world's first of a trillion dollar ETF. So Elon Musk might become the first trillion dollar man out of this, but we already have the world's first trillion dollar ETF. The scale of index funds is obviously enormous. That's where the liquidity is. That's where the money is. And they are unable to make a call on whether the price is wrong. They have to accept the price. This will be a very interesting test of confidence in index funds should something go wrong. If you get index funds feeling obliged to buy in at bulk at the opening, if the indexes alter their rubric so that, you know, normally, in the case of the S&P 500, you actually have to make a profit before you can join the index, which SpaceX hasn't done yet. Assuming that they are allowed in the index swiftly, then index funds will have no choice but to put a lot of money in there. If something goes wrong, that could dent the confidence in index funds, which are, you know, like Elon Musk himself, one of the great wonders, one of the great phenomena of the age. [00:06:34] Speaker 1: John, but to what you said, I mean, the keyword seems to be there normally. This doesn't seem like a normal of times. When it comes to a question that Heidi alluded to earlier, given this raft of IPOs that we might get from the likes of Anthropi, open AI with all of this artificial intelligence exuberance, is there any point in history that we could look back to and see where this could lead us? [00:07:01] Speaker 4: Frankly, OK, no. If you want some things that give us some kind of a hint, some kind of a hint. Blackstone went to market in the summer of 2007, knew more about the credit market than more or less anybody else. And the credit market peaked about two weeks after it went public. Glencore, the great mining company, the mining commodities trading conglomerate that was built by Mark Rich, knew more about the metals market than anybody else, went public in 2011, almost the day when the metals bull market ended and went into a slide that lasted for years. So generally, when a lot of companies decide they're going to go public or when big companies decide who that have done well, the staying privates decide it's time to go public, that's generally a bad sign. When insiders are selling, it's generally a bad sign. So I suppose I should temper that because I can get too cynical and too jaded about this. The evidence is that the initial float will be very small and there is plenty of other reasons why people are demanding equity while people are buying demand. There was a very interesting paper that I wrote about from Goldman. The amount of extra equity that tends to come into the market over the ensuing, you know, 12, 24 months after an IPO is some multiples of the amount that actually is put on offer at flotation. And that could be the problem. I don't I don't think amusing, though, it would be or from a cynic's point of view, amusing, though, it would be if if this actually called a top. I do suspect that the weight of this of these shares that are coming onto the market probably will bring a top sometime next year. The peak of dot com IPOs was 1999. The peak was in 2000, largely when the founders had got through their lockups and were starting to try to to turn some of their money into into cash. [00:09:21] Speaker 2: Mike, some of that cynicism from naysayers might be because of these big A.I. ambitions for SpaceX and Elon Musk as well. Right. Do you think the exuberance is this a bet on on on the rocket and satellite business? Or is this really 100 percent about what it wants to do in the A.I. space? [00:09:41] Speaker 3: I wouldn't say cynicism by John. I'd say a realistic assessment in a lot of ways. I mean, I think you have to keep in mind that that SpaceX as if rocket launching wasn't an interesting business enough. I mean, A.I. is a huge component of it. Starlink satellites, which have an enormous role in world events right now, as well as they're a growing business. And people forget that that X, formerly known as Twitter, is part of this as well, too. It was folded into X.A.I. But SpaceX is including, you know, visions of data centers in space is a lot about A.I. And A.I. is the craze, you know, going through the market right now. John and I were both around for the dot com bubble, I suspect. And there are certain parallels. Of course, the actual sums involved are much greater, actually. And some of the technology is even more transformational. But, you know, the market moves in cycles. And the only thing surprising is that people keep on being surprised by cycles repeating themselves. [00:10:46] Speaker 1: And Mike, to John's other perhaps realistic point in this story has been the governance issue. Right. I mean, Bloomberg has learned that Trump officials actually hold interest in SpaceX or also X.A.I. What do we know at this point on this matter? [00:11:05] Speaker 3: OK, that goes back to, you know, certainly there's reporting on who owns what and the Trump administration is in there. Obviously, Elon Musk's association with Donald Trump go beyond mere investment as well. Keep in mind, there was something called Doge not too long ago, which was with all of the news here in terms of actually running the government partly. So in terms of Musk's control, he's going to control the company. That's how it's going to work. He owns almost 94% of the Class B shares, which have 10 votes per share. He's going to have that 84% plus voting power. You know, there's not going to be a board member that can really take him on or anything of that sort. So, you know, Musk, I think it's important to remember that Musk, he has many detractors, of course, but he also has a lot of fans, too. And he has done something remarkable and put in together this company. And as there's an implicit trust in his leadership by anybody who buys the shares in the company. [00:12:08] Speaker 2: Bloomberg has learned that DeepSeek is nearing a $7.4 billion fundraising deal backed by investors including Tencent and CATL in one of China's largest startup financings. Sources say founder Liang Wenfeng has personally contributed almost $3 billion with outside investors adding the remaining $4.4 billion. DeepSeek says it will prioritize breakthrough AI research with the goal of achieving artificial general intelligence, Sherry. [00:12:39] Speaker 1: Right, Heidi, and still to come on the Asia trade. U.S. crude prices slip as the State Department says Israel and Lebanon have agreed to implement a ceasefire. The negotiation itself has gone very well, actually, very well. [00:13:02] Speaker 5: Mr. President, it could happen. I mean, if it happens, and it might not happen, you know, who knows. But if it happens, it could happen, like, over the weekend. [00:13:26] Speaker 2: President Trump saying negotiations with Iran are positive. And a deal could happen this weekend. And, of course, we do have that latest development when it comes to the announcement by the U.S. State Department of a ceasefire being agreed upon when it comes to Israel and Lebanon to implement that ceasefire. As we've had these tensions with Hezbollah and the conflict in that part of the Middle East as being really a troublesome hurdle to achieving that broader ceasefire extension. And we have seen that sigh of relief when it comes to crude prices because after a three-day gain mostly being held in the overnight session, we're now seeing WTI down by seven-tenths of one percent there. The announcement saying that the ceasefire is being contingent on a complete cessation of Hezbollah fire, amongst other critical elements as well. Chicago and Nikko futures looking like this as we head into the open in about 45 minutes' time, and S&P futures falling a little bit behind, too. Joining us now is our Bloomberg Politics Editor, Remy Varghese. And Remy, tell us about the latest developments. We know that this was sort of one of the core, at least short-term issues, preventing a broader agreement between the U.S. and Iran. [00:14:35] Speaker 6: Yes, absolutely. But I should caution that there is a major party that has yet to say anything about this deal or agreement that was announced by the State Department, and that's Iran. So, of course, this would be good news. Iran did not want this widening strikes from Israel on Lebanon, the widening ground invasion of Lebanon. But again, as with anything with Iran, we have to wait and see what Iran has to say about this deal that was announced by the U.S. State Department. You know, it's unclear what provisions disagreement will have for Iran to adhere to. But yes, it has been a sticking point. Israel had stepped up these attacks in Lebanon. So this could theoretically be a good move, but we'll have to wait and see what the Iran leadership has to say about this. [00:15:28] Speaker 2: In the meantime, we're seeing domestic pressure really continuing to compound on President Trump, right, with the Republican-led House voting to stop the Iran war. So there's not much support there [00:15:43] Speaker 6: when he's looking internally. Yes. To be clear, the House vote today was pretty important, but it didn't end the military action in Iran. And of course, the Senate would have to vote on this measure. And then the President could theoretically veto this measure. But as a symbolic move, it's really a powerful one. Here you have members of Trump's own party crossing the aisle, risking his anger to vote with Democrats. This is the first time Democrats got enough Republican votes to vote against the war. And it shows that Republicans are getting increasingly worried about the prospect of they're holding on to congressional control in the midterm elections. I mean, the war is increasingly unpopular. You see polls showing that Americans are saying we shouldn't have gone to war with Iran. And Republicans are feeling the heat from their constituents. [00:16:38] Speaker 2: But when it comes to the potential reopening of the Strait of Hormuz, we haven't seen much progress, right? Are we getting indications that the White House has any sort of alternative plan to be able to get [00:16:53] Speaker 6: vessels through? Yes. Our colleagues have actually reported that U.S. forces are quietly helping tankers navigate the strait by having them turn off their transponders and sticking close to the southern shore. And this is in contrast to this idea of, you know, openly challenging Iran, right? It's more of a quiet coordination. But still, you know, they are taking self-defense strikes. They are still retaliating when fired upon. And we are not seeing traffic through the strait as it were, you know, before the war. I mean, they are quietly helping some of these tankers. But, you know, for this critical waterway, traffic is nowhere near where it could have been or should be. [00:17:43] Speaker 2: Bloomberg politics editor Amiva Geyser in Sacramento with the latest more ahead on the Asia trade. This is Bloomberg. [00:18:05] Speaker 1: Time for morning calls ahead of the Asia trading day. Bank of America CEO Brian Monihan says AI and tech spending is paying for itself. Monihan says a massive amount of capacity building in anticipation of demand is stimulating the economy. Monihan spoke to us exclusively about how markets are digesting the surge in AI spending. [00:18:28] Speaker 7: Well, it's absorbed it smoothly so far. And the debate will be whether at some point the revenue and the earnings multiples and the cash flow multiples all have to come in sync. And right now you're in that phase where there's a mass amount of capacity building anticipated of demand. And so when you look at it, one of the ways that we think about is we are a buyer of these services and a big buyer, 13 billion dollars in technology a year. It was 300, 250 million this year in 26 on AI related spending. And so the question is, what's the affordability that [00:19:00] Speaker 1: Double line portfolio manager Robert Cohen says AI debt will almost certainly reach bubble levels eventually. Cohen told the Bloomberg Global Credit Forum the chances are high given the history of heavy investments in areas like railroads and the internet. He says money managers should focus on companies with strong balance sheets and investments with strong projections. [00:19:21] Speaker 8: Credit bubble would be credits that are unable to pay back the debt. And it seems pretty obvious at issuance. So we saw that in energy where there were bonds that just you knew they couldn't pay them back and they defaulted right away. So credit instruments that have require a lot of growth, I wouldn't call a bubble. But I think that credit that basically is doomed is a sign of a bubble. We're not there yet. [00:19:49] Speaker 1: Right as the Iran war drags on, but AI optimism grows. There are some big winners and losers in markets. For more, let's bring in Bloomberg's Anthony Stevens for the setup into Asian trading. And Anthony, I can see in your notes this morning the Iran war is a hammer forcing markets apart. Technological path dependency is a chisel for a note at 6:00 a.m. in the morning sounds rather poetic. So explain to us your rationale here. [00:20:19] Speaker 9: Look, we have a lot of macro tension here. The US, the tariff was just the latest part of this geopolitical narrative, you know, that keeps pressing on globalization. Right. And that is pressuring EM markets into winners and losers. So the people that have tech are doing really well. And the people that don't have tech in a very deep tech semiconductor kind of way are struggling. And we saw more of that overnight. Amidst the downturn in the S&P and the NASDAQ, you saw the semiconductor index was still up. Now that gets a bit challenged now that Broadcom has reported and is trading down. What was interesting in the Broadcom numbers, though, is people expect these companies to not only beat but guide very strongly. So Broadcom beat. But, you know, its guidance was a little bit more sedate than what you've been hearing out of Jensen Huang at Computex and the stock is trading lower. So you see how much pressure is on the technology narrative to keep equity markets stronger. Now, the FX markets and fixed income markets have been a little bit more rational. For example, in the FX markets, you're seeing emerging market effects struggling quite a bit aside from the commodity exporters. So this winners and losers kind of dichotomy is coming into Asia today. As Korea comes back, it'll be very interesting to see how Korea trades the Broadcom results. Chinext and Taiwan were very strong yesterday. So let's see whether they can keep that momentum going. But we saw a lot of weakness in India and Indonesia. These kind of markets, we really have to keep an eye on people for selling. [00:21:45] Speaker 2: - You talk about the bifurcation being in some of these markets almost to the point of being nonsensical, right? Do we expect the trends to continue? [00:21:55] Speaker 9: - Look, I think it's really dependent on the war being done, right? Like there is a big unwind that can happen on the underperforming markets if the war conclusively finishes. But as you guys cover relentlessly day in, day out, there is a lot of back and forth without any resolution. And the longer it drags on, the more the pressure grows on these emerging market economies that don't have semiconductors. So for example, India have made a massive concession to foreign investment yesterday, talking about cutting taxes on bond investments. These are the kind of concessions markets in Asia will have to make to keep foreign inflow if they don't have semiconductors. So for now, those trends seem to be mega trends until this war is conclusively concluded. [00:22:38] Speaker 2: - Bloomberg's market reporter Anthony Stephens there with the latest more ahead here on the Asia Trade. This is Bloomberg. [00:22:54] Speaker ?: Thank you. [00:23:24] Speaker 1: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. [00:24:06] Speaker ?: Thank you. [00:24:06] Speaker 1: Thank you. Thank you. Thank you. Thank you. [00:24:14] Speaker ?: Thank you. [00:24:14] Speaker 1: Thank you. Thank you. Thank you. [00:24:20] Speaker ?: Thank you. [00:24:20] Speaker 1: Thank you. [00:24:22] Speaker ?: Thank you. [00:24:22] Speaker 1: Thank you. [00:24:24] Speaker ?: Thank you. [00:24:24] Speaker 1: Thank you. Thank you. So, Heidi, this is definitely one to watch and especially when it comes to the sequencing of more IPOs to come, potentially anthropic and open AI as well in this era where artificial intelligence, FOMO is just at its peak. [00:24:44] Speaker 2: And SpaceX is actually a good example of that FOMO, right? This is a company as it builds excitement for this offering is positioning itself as an AI company, as an AI bet, never mind its rocket launches, never mind its satellite business, [00:24:59] Speaker ?: right? [00:24:59] Speaker 2: This is all about AI being front and center. As we continue to see the excitement being built for the likes of anthropic, open AI, Google's fundraise as well, right? But you're talking about the fact that this is really unprecedented. This decision to offer shares at that fixed price ahead of order taking is almost unheard of for sizable US IPOs, unlike what we see perhaps in Europe and Asia as well. So for many reasons, as you point out, SpaceX is looking to really make this sort of unprecedented splash in these markets. There are also these wider questions as to how much of this is going to be really a test for broader markets, already so bifurcated, already so concentrated in these AI chip and tech related names. What does it mean for the sort of laggards and the depth of liquidity and investor confidence that we see in these markets? On the other side of the coin, we also have the continuing geopolitical developments, right? We're looking at that softening and crude prices, the US announcing that Israel-Lebanon ceasefire. Our reporter earlier pointed out a very good missing factor here, which is, of course, what Iran thinks about this. We know that that's a key point of contention in these broader ceasefire talks between the US and Iran. Let's bring in for the market view Sylvia Jablonski, CIO at Defiance ETF. Sylvia, really great to have you with us at such a hectic time for market participants. Let's start off with the mega IPOs with SpaceX. How do you view this offering for all of its ways that is quite unconventional, I should say, coming at a time where the valuations for a lot of these companies are just so hefty? [00:26:36] Speaker 10: So first, thank you for having me here. I think that the SpaceX IPO is going to be one of the most exciting IPOs in history. There are so many investors that are just kind of chomping at the bit to get exposure and access to the shares and trying to figure out how they're going to do it, whether it's going to be through an ETF wrapper, whether it's going to be buying the stock itself once it IPOs. And I just think that the interest is massive. The SpaceX IPO is interesting on a lot of levels. I think first it shows that there is this huge focus on the future of AI and that will be kind of space connectivity AI, space compute, different ways to have connectivity outside of what we have here on Earth, essentially. So, you know, lower latency, lower energies, things like this. It could be a potential AI company, as you said in your intro there. And I think the second thing is just, you know, how much excitement there is about some of the IPOs lately, like Quantinium is another exciting one. It's 12 billion, you know, kind of is much smaller than SpaceX, but investors are very much investing in the next generation of computing. And I think, you know, these quantum companies, these space companies are just what that brings. [00:27:48] Speaker 2: Are there enough pieces of the pie for everyone at this point? Or are you going to see this kind of desperation to be first to market suck up a lot of the oxygen? [00:28:00] Speaker 10: I think, you know, I think both. I think there'll be a lot of competition and a lot of, you know, who's getting first to market. But I think the opportunities are also vast, right? AI just started with this ChatGPT moment and, you know, a year or so ago, that's what AI was to everyone. And, you know, then it kind of brought it out to chatbots. And now it's a much different thing, right? We're talking now about defense AI. We're talking about the power and infrastructure of AI, the cooling, the photonics aspect of it, you know, memory. I just think that the moat of AI is so massive right now that investors have so many different angles by which they can play this trade and get exposure to it. [00:28:40] Speaker 1: Sylvia, but at the end of the day, despite the FOMO and the exuberance around artificial intelligence, we're talking about a huge flood of stock supply coming to market. What will be the broader repercussions for market levels, especially when you take it from the passive investor side of things and take a look at these big ETFs and how some very few companies are dominating the broader market? [00:29:04] Speaker 10: Right. Well, you know, I do think that you'll have this bifurcation of stocks in the market if that happens and if you do get this congestion problem. But again, I just think that some of the companies that are IPO-ing and coming to the market offer something a little bit different than the others that we're already familiar with. You know, there are a lot of newer names in AI. For example, you know, I could I could name like POEL or IRON, which used to be a bit mining company. They're involved in AI infrastructure. There's so many, you know, kind of small cap companies that are actually starting to generate revenues and have come to market and gain investor attention. And they're actually doing quite well. So I do think that the runway for some of these stocks continues to be there, potentially there anyway, as AI grows. [00:29:48] Speaker 1: Do you have to be more concerned about diversifying in this environment and how would you do that? [00:29:54] Speaker 10: Yeah, I mean, I think it's always smart to to diversify. Right. We always say that, you know, you kind of want to have different alternatives in your portfolio. And I think that there are ways of doing that. So if investors feel that they're starting to get very heavily allocated to, you know, specific AI companies, for example, or just tech stocks, they could look at things like X mag and, you know, kind of take out the exposure of the mag seven and get the broader diversity of the S&P 500. So there are certainly ways to diversify that. I think, you know, investors are going to start looking at companies that will actually benefit from AI. So, you know, this type of concept, right? And I, you know, I do think that there are ways to diversify by seeing where AI will play out in different and broader sectors that are not necessarily technology based. [00:30:39] Speaker 2: And you point out, this is not just a software story for AI anymore, or even a chip story. It's an energy supply story. Is that one of the biggest risks, do you think? [00:30:51] Speaker 10: Yeah, I do. I think that's, I think that's a big bottleneck. And I think it's why you're seeing some of these other companies, you know, doing very well. A lot of the top energy companies, for example, the photonics companies, the laser, you know, the Lumentums Coherence, the, the poets of the universe are doing quite well. Because I think there's this thought that, you know, as we continue to consume energy and we're trying to build out these big AI data centers and workloads, you know, some of the smaller companies that are doing it and moving data in different ways will benefit from that. [00:31:15] Speaker 2: Sylvia, always great to chat with you, Sylvia Jablonski, CIO at Defiance ETFs. The latest from the corporate front now and Bill Ackman is looking to sell his stake in Universal Music Group just days after the world's largest music label rejected his takeover bid. The sale would raise around $1.7 billion for Pershing Square at the top of a marketed range. A source says Ackman is expecting a profit on the transaction of more than $600 million. Broadcom shares fell in extended trade after the company delivered a disappointing forecast for AI chip revenue. It sees third quarter AI sales of $16 billion, where analysts had expected $17 billion on average. The four-year forecast of $56 billion was also shy of estimates. Broadcom says it's making progress with AI customers, including Alphabet, Anthropic and Meta. More to come here on the Asia Trade. This is Bloomberg. [00:32:15] Speaker 1: Bank of Japan Governor Kazoo Oeda signaling a strong chance of a rate hike this month if inflation risks outweigh the potential economic hit from the Middle East crisis. For more, let's bring in Tokyo economy and government reporter Erika Yokoyama. Erika, so are we finally on June 16th going to get that much anticipated BOJ move? [00:32:54] Speaker 11: Yeah, correct. So Ueda's speech yesterday has a lot of implications. It was, first of all, more hawkish than many had expected. And that, you know, like market has already largely placed in the June rate hike. So his speech yesterday just strengthened that expectation. I mean, throughout throughout throughout the 45-minute speech and Q&A session followed up, Ueda dropped lots of hints suggesting the preference for raising rates. Most notably, as you said, he suggested that even if Middle East situation remains uncertain, the board member needs to discuss a pro and con of rate hike if inflation risks are bigger than the downside risk to growth. And then he said that even said that inflation remains the bigger concerns for now. So taken together, that sounds very much like the central banks preparing the ground for the rate hike about in about two weeks. [00:33:49] Speaker 1: So very hawkish comments coming from the BOJ governor and yet the Japanese yen, just a hair away from 160. 159.94 is the level. Does a BOJ rate hike at this point matter at all for the currency trend? [00:34:06] Speaker 11: Yeah, it's a tricky questions. But, you know, for yesterday's speech on the market, as I said, already largely placed in the rate hike in that sense with a just prevented or a negative surprise, you know, like if he had shown even a slight hesitation about raising interest rates in June, the yen could have weakened past 161 or 62 against the dollar level. So he didn't have that, which was kind of good things. But at the same time, you know, it's also highlighted the reality that a single BOJ rate hike is probably not enough to send the yen to safer zone. And that means UEDA may have to continue delivering even more hawkish guidance if policymaker wants monetary policy to provide support for the currency. Otherwise, you know, like pressure could once again go back to the government after it spent the record over 11 trillion yen on market intervention in the past months. [00:35:04] Speaker 1: And already at this time, we saw the 19 billion dollar supplementary budget being approved by the government. Very important that this whole idea of fiscal responsibility when it comes to the JGB markets as well. [00:35:19] Speaker 11: Yeah, correct. But luckily, the market reaction was pretty carmy yesterday because, you know, the government had enough telegraph the package well in advance. And, you know, at the same time, investors seem to be reassured by Takaichi's preach not to add the bond on a current basis. But, you know, like still, this doesn't really, Takaichi doesn't really, hasn't really escaped from the physical scrutiny by the market yet. But we are expecting a series of sensitive debates soon, including consumption tax cut, defense spending, or Honebuto no Hoshin. It's an economic policy blueprint for the next year. So each of those events can have potential implication for the finance and physical market. Bond markets will keep testing the credibility and sustainability of Takaichi's fiscal strategy. So, yeah, right, Takaichi may have passed the first test, but the real challenge is soon to come. [00:36:23] Speaker 1: Yeah, Erika Yokoyama there, our Tokyo economy and government reporter. Let's actually delve a little bit deeper into Japanese markets because we were talking about the yen trading at around that 160 level against the U.S. dollar, despite, of course, those hawkish comments coming from Governor Ueda. For more, let's bring in our chief correspondent for FX and rates in Asia, Ruth Carson. Ruth, so the yen is still very close to that whole, what we consider or what traders consider intervention zone, 160 level. Why are we seeing so much yen selling at a time when we're also getting a hawkish rhetoric coming from the governor? [00:37:03] Speaker 12: Absolutely. And it does show that there is judgment on the yen there by the macro traders. We have seen the yen actually pierce through the 160 level against the dollar in the New York trading session. We are, as you pointed out, firmly in intervention risk territory here. And if you look at, for example, options markets, they're signaling, they're signaling more weakness ahead. Now, a big part of this does come down to factors beyond Japan's control. Iran, the Iran conflict is still raging. We know that oil prices, even though they've sort of tapered down a bit, they have been rising all week on those headlines. And we know that Japan is a big oil importer, energy importing nation. With all those pressures there, the BOJ still seen behind the curve by many traders out there. Yes, the yen has squarely returned to being a favorite short. [00:37:58] Speaker 2: What are options traders then signaling when it comes to what's next for the yen, right? Is there a view that the weakness has gone too far? Are they willing to push the short selling even further? [00:38:11] Speaker 12: Yeah, so we have a very good terminal function called FXFM Go on the terminal. And it actually shows you where investors, options investors and traders see a particular currency heading. And they are assigning a more than 30% chance of dollar-yen trading at 163 by the end of June. So we are talking about further upside in dollar-yen, further yen weakness, until we see some resolution of some sort. And yes, the BOJ would have to hike. [00:38:47] Speaker 1: Ruth, every time I speak to any government official, they refuse to talk about any specific Japanese yen levels. Not 150, not 160, not 160, anything. And yet, when it comes to traders, we do look at the 160 threshold very, very carefully. What can we expect in terms of potentially authorities stepping back into the markets? [00:39:11] Speaker 12: I think it's important to remember that markets do love big round numbers. And it wasn't that long ago in late April when we saw dollar-yen hit 160 and when interventions started happening. So for a lot of investors and traders out there who are already short on the yen, they are looking at those levels, probably putting on some hedges in the options space and derivatives space. But absolutely, 160 was the line in the sand. Now, people can debate whether it is still there. It could be 162. But definitely, as soon as dollar-yen crosses that 160 mark, everyone is on alert. [00:39:47] Speaker 2: Our chief correspondent for FX rates in Asia, Ruth Carson, we shall remain on alert then. Still ahead on the Asia trade, South Korea markets are set to reopen after local elections. Trade is continuing to navigate fears of an AI bubble. We'll get a preview next. This is Bloomberg. We'll be right back. [00:40:33] Speaker 1: South Korea markets will reopen in a few minutes after a holiday for local elections. This comes as investors mull the risks of an AI bubble after the KOSPI scorching run of gains. And also, overnight, Broadcom's disappointing outlook. Let's bring in our Asia equities reporter, Yoo Kyung Lee. Yoo Kyung, of course, we had a little bit of a stalling when it comes to Wall Street, including with software stocks underperforming. What can we expect at the reopening in Korea today? Sure. [00:41:05] Speaker 13: Good morning. So, South Korean market reopened after a local governor election yesterday. We are expecting investors to pay closer attention to the Broadcom's earnings result, which reported weaker than expected revenue forecast. So, that's definitely going to be at play with the AI trades within South Korean market. We saw some weakness during the pre-trading with Samsung and SK Hynice. But because during the past three sessions, South Korea's KOSPI has been gaining, today might be a good day to take a breather and see where things go, especially given that the Broadcom has projected weaker than expected revenue. That's one thing that investors are watching. Another is that the biggest event later this week will be the Korea visit by the NVIDIA CEO, Jensen Huang. And when NVIDIA CEO, Jensen Huang visited last year, there were quite a lot of impact on the local stock market from the meme stock related to what Jensen Huang had for the dinner and all the local executive that he had met in South Korea during his visit. So, this time his visit is expected to be longer than last time when he was here in October. So, during the upcoming four-day visit, we are expecting some reactions in the South Korean stock market as NVIDIA CEO, Jensen Huang, meets with local executive and startup investors. [00:42:34] Speaker 2: We were talking yesterday about the rotation out of Korean equities, especially when it comes to overseas buyers, right, selling and then rotating into Japan instead. We have a story talking about today the opportunity for Korean companies to perhaps exceed Japanese companies when it comes to their profit forecast. So, is there a view in terms of which of these markets is going to win out more when it comes to the AI trade? [00:43:00] Speaker 13: Yeah, that's a really interesting question. Yes, definitely foreign investors have been piling into Japan while they were selling some of the Korean stocks. But remember that most of the selling by the foreign investors in Korean stock have been focused on the Samsung NSK Hynix. And that's because they've probably been hitting the fund's limit on the single stock. So, they've been reducing their position on the Samsung NSK Hynix in their portfolio while piling into Japan. And interestingly, South Korean corporates are expected to report bigger earnings than Japanese counterpart for the first time since 2008. Now, a lot of investors, at least in Seoul, believe that this could mean that further re-rating could be possible for the Korean equity market because compared to the earnings, South Korean stocks still remain pretty cheap. And this comes while the earnings momentum among the Japanese automakers has been waning, whereas the AI stocks, the AI companies such as Samsung and SK Hynix have been seeing the growing earnings forecast, especially this year and next year. So, given the valuation gap, there could be more room for South Korean equity market to re-rate compared to Japan. [00:44:16] Speaker 1: Yoo Kyung, what about the local elections yesterday in South Korea? Are there any broader implications for markets given that we might see more support for President Lee Jae-byung at a time that already it seems inflation is running rampant, we could see a shift from the BOK as well? [00:44:36] Speaker 13: So, this was not the bigger parliamentary or national level election. This was a local governor election. And it looks like the ruling party is going to have a landslide win victory in most of the regions. So, we're not expecting a huge change in the market-related or financial reform-related policy from the current administration. So, investors would probably be expecting the continued support in the corporate governance reform front and other market-friendly policies that the current administration is having. So, we're not really expecting a huge change after this local governor election. [00:45:15] Speaker 2: Bloomberg Asia Equities reporter Yoo Kyung Lee there. Let's get you a look at, we are, what, just about six minutes away from the side of cash trading here in Australia. Also, the cost could be coming back online after being closed from trading in yesterday's session. So, a bit of catch-up when it comes to the news flow, particularly pertaining to the slide in Broadcom, but, of course, the exuberance over SpaceX's pricing as well, seeking that $75 billion in the record IPO to try and fund those AI as well as space launch ambitions. We are seeing broad downside, though, clouded really by some of these factors, including the uncertainty over the Middle East continues despite the announcement of a ceasefire between Israel and Lebanon. We are seeing Sydney futures off by about six-tenths of one percent. Sherry, broadly, quite a muted session that we're expecting despite, of course, a lot going on in the tech space. [00:46:10] Speaker 1: Yeah, we continue to watch, of course, futures trading at the moment, still pointing to some downside, given, of course, all of the headlines around Iran. And in the overnight session, we also had seen the Fed Beige Book pointing to inflation pressures across most districts. Market opens in Sydney, Seoul and Tokyo are next. This is Bloomberg. This is the Asia Trade. We're counting down to Asia's major market opens with oil a little bit lower. Heidi, given that we just heard from the U.S. that Israel and Lebanon have agreed to a ceasefire. But it's really about these two narratives in the markets, right? I mean, it's all about the Iran war at the same time as we're seeing this exuberance around artificial intelligence and the flurry of IPOs that we can expect starting with SpaceX. [00:47:12] Speaker 2: The absolute excitement, exuberance, if you will, when it comes to SpaceX, the sort of unusual qualities of this offering as well. At the same time, we've got, as you say, the Google Fundraise, Anthropic, OpenAI. We've got news when it comes to DeepSeek as well. At the same time, some concerns stemming from the Broadcom story that we saw overnight. A lot for investors to be grappling with. [00:47:34] Speaker 1: Yeah, we saw those software stocks also underperforming in the overnight session. So we'll see what the repercussions are here in the Asian session. But, of course, we're following everything around the tech sector, also around anything related to energy. We are seeing a little bit of downside early in the Asia session here in Japan with the Nikkei dropping 0.8% of 1% after gaining ground in the previous session. The Japanese yen still very close to that 160 level against the dollar. And this is what we're watching, right, because we had perhaps the clearest sign yet of a June rate hike to come from the Bank of Japan Governor Ueda, saying that inflation risks right now appear larger than growth risks related to the crisis in the Middle East. And yet, the Japanese yen, very close to what a lot of traders have considered intervention zone. The risk could be there as we approach that threshold of 160. Now, we've been watching JGBs very closely as well, because yields have been at multi-year highs. And we have been watching anything related to fiscal accountability here in Japan. And we have now seen Japan approve a $19 billion supplementary budget. So this narrative will continue across markets as well. Take a look at how South Korea is coming online. We had them closed for local elections yesterday. It seems that President Xi is going to get more support and a boost from the election's outcome. That could perhaps mean his policies could continue for the next two years. So anything related to governance, reforms in the markets, we should continue to watch, especially when it comes to tamping down on that huge rise in property prices. That's always an issue in South Korea. The KOSPI right now trading down 1.8%. You can see also weakness in the Korean one. A little bit of strength today. But when we're talking about the $1,500 level against the U.S. dollar, I mean, we're watching this level very closely as those tech plays are under pressure today, Heidi. [00:49:27] Speaker 2: And then the other side of the coin is still that ongoing concern over the inflation and the growth question, right? Because, yes, we do have a little bit more progress, which is better than no progress, which is kind of that stalemate we've been sitting at when it comes to the U.S. and Iran. We can see that being played out when it comes to oil prices in particular, right? As we see that decline in WTI after three days of gains slipping, after we heard the U.S. saying Israel and Lebanon agreeing to a ceasefire. We haven't heard Iran's take on this yet at all, which, you know, if there is a cohesive agreement, that removes a pretty big sticking point in terms of these ongoing talks for a broader ceasefire between Tehran and Washington, which we've seen no progress on over the past few days. President Trump's still saying that we could see a deal potentially by this weekend. So we continue to watch that as one factor, particularly when it comes to that broader inflation outlook. For Australia, we are seeing downside of seven-tenths of 1%, really another session of losses. We had these rate-sensitive sectors, banking, property shares, rating the most in the last few trading sessions, particularly when we have an RBA board member warning about the longer-term inflation expectations having edged higher. We're also hearing from RBA Governor Bullock later today when she appears at a Senate committee hearing. Sherry. [00:50:37] Speaker 1: Heidi, let's bring in Jung In-Yoon to discuss all of this. He's the CEO of Fibonacci Asset Management. Really good to have you back. So, I mean, these two narratives around any headline concerning the Iran war and, of course, the exuberance around artificial intelligence. What's more important right now at a time when we're also seeing this massive fundraising, IPOs to come as well? What could be more impactful for market training in the next few weeks? [00:51:07] Speaker 14: I think in terms of the SpaceX IPO, because of the pure size of the deal, it will have some ripple effects. When we have a mega IPO like this, we usually see some liquidity get thrown down and focus on these IPO names. So, overall, the index level will be sustained or go up. However, if you look at the individual stocks for the sectors that's closely related to this stock, we might see some profit-taking happening before the IPO. [00:51:43] Speaker 1: Yeah, so how important is it that you're very selective now when it comes to the AI boat at a time when it's not just SpaceX, but we might get a flurry of Anthropic OpenAI as well listing? [00:51:59] Speaker 14: Yeah, I mean, I think we passed the phase where making money from the AI theme was easy when you just buy and order major names. However, going forward, we have to be more careful when it comes to stock selection because the investor will start to demand to see some earnings. And obviously, without the power of the cash flow coming in, without the earnings keep beating the expectation, the exuberance can quickly evaporate. So, we will see some wide dispersion among the winners and losers in the AI theme. That means stock selection becomes more important from now. [00:52:39] Speaker 2: So, where do you find those opportunities that haven't been picked from the category of being lower-hanging fruit? [00:52:49] Speaker 14: So, if you look at South Korea stock, some of the AI-related stocks, like Samsung Electromechanics, their P-Ratio is over 100. And some suppliers, their P-Ratio is over 200, which does not seem so sustainable. However, for the past few months, investors didn't really care because as long as they saw the momentum, as long as they saw the prospect, the narrative drove the prices. However, going forward, it's not going to be able to sell itself. But the companies will have to show that the forward earnings will be there and they will have to continue to meet the expectation, which is growing higher and higher. Right now, the single most important risk factor is the expectation is too high. [00:53:41] Speaker 2: Are expectations right-sized when it comes to physical AI? Because you've talked about perhaps the next part of this opportunity are sectors like robotics. [00:53:53] Speaker 14: Yes. So robotics is where, it is a bridge where AI becomes more interactive with the daily lives. And right now, if you look at the actions of Jansun Wang, he's obviously visiting Taiwan and Korea and he's meeting some interesting companies like LG Electronics or Naver. I think what he is looking for is that he also believes that the next wave of AI is robotics, not the semiconductor. I mean, of course, we have continued rally for the semiconductor. However, I think overall, we'll be looking at how robotics start to infiltrate our daily life. And it's not just having humanoids in every household. It's also about automation of every factories in the world. And that's going to create a meaningful cash flow in the future. [00:54:45] Speaker 1: Changin, it's interesting these days when we talk about everything that's happening with artificial intelligence and the exuberance there, that we're talking less and less, it seems, about monetary policy in the Federal Reserve. Overnight, we have pretty strong data, right? I mean, ISM services, activity accelerating. We saw new orders improving. We saw the strongest private payroll gain since 2025 January. What are, right now, the implications of a potentially more hawkish Fed, given now that we're thinking more of rate hikes to come instead of rate cuts? What's the significance for Asian markets? [00:55:27] Speaker 14: So, if you look at the ISM data, it's promising. However, the narrative in the Fed is primarily driven by the inflation. And, Feds are not in rush. And any central bank in the world is not in the rush right now because the inflation is there and is very apparent in the CPI. and there's a wide expectation that even if we have a U.S.-Iran peace deal today, the oil price will probably stay at an elevated level for quite some time. However, I think there will be a deal eventually. And when the deal happens, we will start to see the energy prices come down. And that will put the rate cut back into the table in the fourth quarter. So, right now, we are concerned that a BOJ or a Fed might hike the rate instead of cut it. However, I think going forward in the second half toward the end of the year, the narrative will reverse. We'll be talking about more gradual rate cut instead of the hike. And that's my expectation. And I think we should be prepared for the rate coming down gradually rather than being worried about rate hike right now. [00:56:46] Speaker 1: Mm-hmm. Jungin, you're really good to have you with us. CEO at Fibonacci Asset Management. And of course, we're still talking about artificial intelligence again because if we check the markets right now and what's moving across South Korea, it's all to do with the tech sector, right? I mean, we have been watching SK Hynix because earlier this week we heard that they plan to double their memory chip capacity over the coming half decade in order to help ease a global shortage of this component of this AI boom. At the same time, in the overnight session, we had downside pressure. So we're seeing a little bit of that repercussion there with SK Hynix and Samsung Electronics down more than 2.5%. For example, Broadcom falling after issuing guidance that failed to satisfy investors. And we know that LG Electronics, Korea Circuit, of course, are suppliers of Broadcom. So we're following these stocks in today's session. More ahead on the Asia trade. This is Bloomberg. The Barn. SpaceX has officially filed for its IPO aiming to raise $75 billion in the biggest listing ever. The share sale set for June 11th should open the door to more mega IPOs and propel CEO Elon Musk closer to becoming the world's first trillionaire. Let's get more with Bloomberg's U.S. deals editor Michael Haitha really breaking a lot of historic metrics at this point. What were the key takeaways from the filing? [00:58:35] Speaker 3: Well, sure. It's a big week for big IPOs. That's for sure. The key takeaway, I think, is the filing, which is SpaceX actually launching the marketing of its shares, confirms a lot of what's been previously reported. The key numbers are just impressive. They have to be repeated. A total raise of $75 billion. That's more than twice as big as any other IPO previously, period. And only four other IPOs have ever topped more than $20 billion worldwide. So this is a big deal. That puts SpaceX at a valuation of $1.8 trillion. And back to superlatives, that's bigger than all but six of the companies in the S&P 500 now. And that includes Tesla, Musk other company at this point, right? And one really interesting point of the filing is that it confirms this notion that breaking from tradition on Wall Street, SpaceX is doing something almost unheard of for a large IPO. They are setting a fixed price for the listing so that you're going to buy a share. It's going to be $135 per share. There's none of this setting of a range to test the market and see who wants to buy how many shares for what amount. That's the kind of thing that's done with really small IPOs sometimes. and things like SPACs, the special purpose acquisition companies that are, you know, $10 a share and that's it. So this is going to be interesting. The marketing of it is going to be interesting as well and to see how it plays out. [01:00:11] Speaker 2: So many aspects of this is fascinating and unprecedented, right? Will Elon Musk still be controlling the company? [01:00:18] Speaker 3: Oh, you betcha. 100, not 100%, but 84% plus. He will have, yes, he will have 84.4% of the voting power, the shareholder voting power, which means that comes from his ownership of, you know, I think it's 94% of the Class B shares in the company, which carry 10 votes apiece. So anyone buying shares in SpaceX is going to have to be pretty comfortable with all the decisions made by Elon Musk and his leadership. He will not be able to have any sort of, like, shareholder rebellion of any sort because he's the one in control. And obviously, some people, he has as many fans as detractors. So, you know, but buying into the IPO is going to be buying into a trust in Elon. [01:01:11] Speaker 1: That in itself really raises eyebrows, right? I mean, this whole issue of governance, this whole issue of how dependent it is, codependent with the U.S. government as well, at a time when there's so much exuberance that you're seeing the likes of Jamie Dimon pitching it to clients himself. [01:01:27] Speaker 3: Oh, yes. I don't think Jamie does a whole lot of retail pitching on anything. He's sort of the, you know, the C-suite guy, right? The C-suite guy. So, he's having this meeting tomorrow as we've reported. It's going to be simulcast to some, you know, 90 JP Morgan locations throughout the United States in which he will be talking to their wealthy clients and pitching SpaceX to them directly and answering questions. It's with some other executives at JP Morgan. You know, JP Morgan is one of the five banks on the top line of the IPO. So, they're very much involved and Jamie is going to test his sales skills. [01:02:13] Speaker 2: Like I said, unprecedented times in so many ways. Bloomberg's U.S. Deals editor, Michael Haitha, there with us. Meanwhile, DeepSeq is close to finalizing a deal to raise about $7.4 billion from investors, including Tencent, its own founder as well is pitching in quite a bit. It's a milestone for Chinese AI financing. Anthony's back with more on DeepSeq, the setup for China markets. Let's not forget about China's AI ambitions, right, with all of the exuberance over what's going on in the U.S. IPO market. We're seeing significant raises being done in China too. [01:02:46] Speaker 9: Right, it's the parallel AI ecosystem, right, and while it is smaller and less exuberant from a valuation perspective, capital raising continues to be another theme there. So DeepSeq, they're raising $7.4 billion, valuation of $59, something like this, and of the $50 billion yuan, the founder is putting in $20 billion yuan. So that's quite a big statement of, you know, intent on that front. What's also interesting about the capital raise is they remain very focused on general AI. This is a founding theme of this company and they are pushing monetization further down the line. It's interesting also to me that Tencent has joined this capital race coming so shortly after WeChat included AI within its offering. So it's a very interesting little, you know, little tussle there. It comes also on the back of Minimax and Zipu filing for Starboard IPOs. So this space is rushing to raise capital while it still can and while the Chinese kind of AI platforms carve out a lower cost space than the U.S. platforms. [01:03:50] Speaker 1: I mean, is there only raising $7 billion? Not that the likes of you and me will ever see even a billion dollars in our lifetimes, but I mean, compared to the incredible $100 billion valuations of all of these other companies, SpaceX, Anthropic, OpenAI, for example, this seems pretty restrained. [01:04:10] Speaker 9: Right. And it comes back to this monetization angle, right? So if you see OpenRouter's rankings of market share, DeepSeq is right up there, right? They have three or four of the top 10 models by market share, people using these models. But on the pricing side, even though token pricing has been up around 85% by the token index this year, most of those gains have been driven by American AI models. So to give you just a quick stat, right, DeepSeq's most advanced model charges about 18 US cents per million tokens. The equivalent number for Claude is $4. So that's a vast difference in pricing power and also a vast difference in pricing ambition. China's AI ambition is around adoption, not profitability. It's a very different business model and the cash flow is pushed out way down the line. And last thing is obviously the technological advancement of the two models are very different. So if you see DeepSeq's rankings on AI intelligence index, it's about 10 points lower than Claude. So China is carving a niche out in the more cost-effective side of AI, but that demands a much lower valuation premium. [01:05:22] Speaker 2: That's such an interesting comparison in terms of profitability versus more wide-scale adoption, right? The Western market or the Western ecosystem, given we have this huge pipeline of mega-IPOs, given that we have such a bifurcation as you've drawn attention to in broader markets, are we setting ourselves up for that inevitability of the way down? [01:05:44] Speaker 9: Yeah, look, I think it's very interesting and it really depends on the Chinese consumer market turning the corner, right? The way the Chinese have invested in AI is basically to supercharge their consumer economy and create a new range of service economy plays. So like, you know, this one-person company trend that is kicking off in Shenzhen. If those trends kick off, China's strategy will pay off. On the other hand, the strength of the U.S. capital market, as you know, your guest alluded to before, that is the counterpoint. America can raise so much more money to throw into technological development. So China will need its consumer to turn the tables to play catch up. [01:06:27] Speaker 1: Anthony Stevens there, our Bloomberg Markets reporter with the latest on Deep Seek and the capital markets in China. More ahead on the Asia trade, this is Bloomberg. [01:06:35] Speaker 5: The negotiation itself has gone very well, actually. Very well. Mr. President, it could have, I mean, if it happens, and it might not happen, you know, who knows. But if it happens, it could happen, like, over the weekend. Well, [01:07:02] Speaker 2: President Trump saying negotiations with Iran are positive. A deal could happen this weekend. In the meantime, we have seen a little bit of relief across energy markets. This really on account of the U.S., the State Department's announcement that Israel and Lebanon have agreed to implement a ceasefire contingent on the complete cessation of Hezbollah fire. Crude, Brent crude at the moment, off by about six tenths of one percent. We are seeing that broad sort of lack of conviction across Asia today. Some of the Broadcom, that slide in the overnight session on the AI chip outlook is disappointing investors. A little bit of risk aversion in this part of the world with U.S. futures also pointed lower. Well, let's talk more about the agreement between Israel and Lebanon to implement that ceasefire if Hezbollah also stops hostilities. It comes days after a tense call between President Trump and Benjamin Netanyahu as Washington pushes to keep truce talks with Iran on track. Jonny is now as Bloomberg editor Michael Heath. The president, in fact, did confirm that he did indeed swear at Netanyahu and he was, quote, a little bit perturbed at the whole situation. This is clearly a positive step. We haven't heard from Iran and we know that this is a real key sticking point. [01:08:11] Speaker 15: Yeah, I mean, Iran had basically said that it would suspend talks if this conflict continued and that we had the foreign minister speak as well all reported by Iranian state news agency saying that it was sort of a deal breaker almost. So this is good news. The difficulty is that obviously Lebanon doesn't control its own territory. I mean, we're talking about Hezbollah here which is one of the biggest non-state actors in the world, very, very significant and with a lot of firepower. So the question is, I mean, President Trump also said that he'd spoken to some senior Hezbollah officials so the question is if Hezbollah, you know, whether they do keep firing or not, if they don't, then presumably this does go ahead because, you know, there are Lebanese officials obviously who will go betweens with Hezbollah and as long as they can keep Hezbollah quiet then Israel is likely to back off as well. But if, you know, if the shooting continues then all bets are off again. So we really just have to see, you know, what happens on the ground. It's, I mean, it's a step in the right direction but there's just so many little incremental things going on at the moment. [01:09:15] Speaker 2: And we saw with the House vote as well, clearly there's not much popularity for going further with this war domestically within the US and within the Republican Party. [01:09:25] Speaker 15: Yeah, I mean, it seems like some Republicans, I guess, are beginning to break. I mean, to, you know, to sort of put on the record that they don't want anything, you know, this going any further or to, I guess, express, you know, symbolically their opposition to this going on as well as we head towards those elections and it's probably only going to grow. I mean, this will drag out. It's not a popular war in the US as well and it also, I guess, gives a bit of a sense of the administration's sort of growing isolation there compared to some of its allies. But President Trump is so powerful within the Republican Party, I'm not sure how significant really it is at the end of the day but symbolically it does highlight the unpopularity of the war. [01:10:06] Speaker 2: There is a view that, well, there's a view that Trump is a lame duck president anyway given where he is in his tenure but also coming so close to the midterms. He's obviously contending with a lot of domestic political pressures both with voters and within his own party. There is that view that maybe Iran is quite okay to just kind of drag things on. [01:10:26] Speaker 15: Well, I mean, on one hand, he's a lot about, I mean, he's obviously got quite a considerable ego so he'd love to, you know, to sort of put a, draw a line under this whole issue of Iran and the nuclear weapon, etc. And he has, you know, he has the capacity to dig himself out of it probably rhetorically but, you know, if he does actually want to be remembered as the man who sort of put an end to this risk of Iran having a nuclear weapon, it is going to take time, it is going to take effort and patience, they're not really his stronger suits. But it also is going to take a bit of will and it may be that they just do have to sit this one out for a bit longer and take some pain. So whether that's his thinking, I mean, he sort of indicated that might be the case, we'll just have to see. [01:11:08] Speaker 2: Bloomberg added to Michael Heath there with the latest. More ahead on the Asia trade, this is Bloomberg. [01:11:23] Speaker 1: We're seeing broad downside across markets in Asia with the Kospi and the Nikkei down more than a percent. You can see the ASX 200 also losing as much. Of course, we have lower oil prices as we just heard from the U.S. that Israel and Lebanon have agreed to a ceasefire. But it's really the broader artificial intelligence narrative that's really fueling markets across Asia, right? Especially when it comes to Japan, to South Korea. In fact, we're now seeing analysis that Kospi companies are forecast to generate about $450 billion of combined net income this fiscal year, which in fact could be slightly higher than for Japanese companies on the topics at around $440 billion of combined net income. A lot to do, of course, with the surge in artificial intelligence build-out. We're talking about exports from the likes of Samsung, SK Hynix. On the other hand, you have lots of car makers here in Japan and we know that the automotive industry, Heidi, has been stalling recently and lagging behind. So you can see, of course, that discrepancy across markets now filtering through and the haves and have-nots, really that narrative continuing to be emphasized even among economies across Northeast Asia like Japan and South Korea. [01:12:55] Speaker 2: We've seen these haves and have-nots when it comes to the broader commodities and metal space as well, right? Quite an interesting session that we're seeing for oil at the moment given these recent developments, the announcements from the US that agreed upon ceasefire between Lebanon and Israel pulling that oil price given that we've seen about three days of gains there. Gold is up about three-tenths of one percent after a previous drop and we're seeing copper coming off the three-week high amid these sort of pessimism and uncertainty over what goes on with the war. Let's bring in Daniel Hines now who's a senior commodity strategist at ANSED. You know it's a busy time on the headlines when you come in and you're like, I'm just drained. There's a lot going on. [01:13:38] Speaker 16: Yeah, and it's making it difficult for any sort of clear consensus to form around what this means. So that's obviously why you're seeing the markets jump around headline-driven sort of volatility at the moment. But I mean, there are signs I think, you know, from our perspective where we can see broader trends developing and I think when the conflict enters a more stabilised sort of phase I think those things will start to emerge and we'll start to see clearer trends but at the moment it's still difficult to really decipher what is fundamentally driven and what is I suppose financially or sentiment driven [01:14:24] Speaker 2: how nuanced is the outlook for oil because is it in a sense is it binary it either Hormuz either remains shut or is open it could be open but told or it could be open with free passage so, you know, what are those kind of models? [01:14:41] Speaker 16: I don't think it's completely binary I mean, there'll be certain sort of aspects of whether, you know, it's open or not you know, in terms of open will Iran maintain some sort of control over it will it manage the transits of vessels through which countries get, you know, priority access I suppose will go a long way to determining how the oil market recovers from this I suspect you know, there'll be I mean, our view is that you know, Iran will I mean, the management of the strait has fundamentally changed I suspect and their presence will hover over the market for some time to come and that's going to constrain I suppose the strait as a key waterway for oil before I suppose those alternate sources are developed more and we've heard about you know, Saudi Arabia and the UAE and the like developing you know, the pipeline network to get around that but in the meantime it's going to be a constraining factor and I think that's probably you know, where we are looking in terms of that medium term outlook that it's going to be difficult to get back to where we were before the conflict started. [01:15:52] Speaker 2: What does the transmission look like right now in terms of time? Like at what point do we see renewed pressure on domestic oil prices for example prices for a lot of the economies that have already come under pressure in Asia and on the flip side how quickly does that recover? [01:16:07] Speaker 16: Yeah, I mean the buffers that we're seeing in the market at the moment you know are certainly differing depending on the regions we get. I mean certainly Asia has benefited I think from China reducing its imports quite significantly. Now we don't know how they're buffering that domestically but certainly you know the lack of pull from them has alleviated the shortages in the Asian region and clearly the inventory drawdowns in the US have also benefited from that. But our best guess still is that sort of through August and into September will see that buffer virtually eliminated if all things remain the same as they are at the moment. So we're getting closer but it's sort of going to be like a sudden appearance you know of this rather than a rather than a sort of a gradual sort of evolution even though that's happening in the background. I think markets until then will put up a brave face and say you know things are holding up relatively well until they aren't and then all hell will break loose. [01:17:16] Speaker 2: And I assume it's seasonality too right? We've got to get through the summer before we can take a look at what the shortages look like for oil and for LNG. [01:17:22] Speaker 16: Yeah no that's really critical I think in the US I mean the US driver consumes 10% of the world's oil and we're obviously into the summer driving season there now. The metrics still look like you know their demand's holding up relatively well despite $5 a gallon there you know they're continuing to drive so I suspect we'd need much higher prices to really force the demand destruction that we need but initially that'll emerge through reduced US crude oil exports and obviously some of the fuel products that they've been providing to countries like Australia as well. [01:18:00] Speaker 2: Metals have been really interesting right? Are we obviously we're seeing a bit of a pullback at the moment but how much of a squeeze are we expecting for copper and aluminium to continue structurally? [01:18:09] Speaker 16: Yeah I mean it's not just the supply side issues but clearly they've gained in sort of attention just recently I mean on top of obviously the underlying issues that they've been experiencing particularly copper we're seeing obviously the sulfuric acid situation really place pressure on countries like South America and Africa but it's the combination with a brighter outlook and I think equity markets have been really driven by this renewed sort of optimism around AI and the boom that that brings on infrastructure and you know metals are I suppose being reborn in a little sense you know there was some pressure on them because of the potential impact on the global economy from this conflict but now I think you know they're seeing through that and the benefits that the AI boom and the data centre build out will bring them you know is coming to the fore now so you know that sort of anti sort of macro sort of view is being negated by you know improving demand outlook [01:19:16] Speaker 2: does that make it a true super cycle or are we still trying to work out what the supply [01:19:22] Speaker 16: I think it does I think it does I mean you know there's really no sign at the moment that there's a long term structural uptick in supply that can meet this outlook for demand so yeah I do think we'll eventually get there I mean it's going to be a bit of a windy bumpy road initially the next 18 months will be quite interesting I mean there's still debate about you know the economic outlook more broadly so you know that could provide some headwinds but I think overall it is really developing into a broader structural trend higher for a lot of these middle markets [01:20:02] Speaker 2: is a correlation with the China old economy starting to really fade now [01:20:07] Speaker 16: yeah I think so I mean we've had you know several years now five or six years of weak sort of housing driven sort of numbers out of China in particular and China and copper's really buffeted those recently and I think you know the continued sort of focus on that new technology or new energy technology sectors in that country are offsetting all that weakness so we're seeing reasonably good levels of growth coming through from China [01:20:39] Speaker 2: Dan always great to have you with us Daniel Hines who's in your commodity strategist at ANZ Sherry [01:20:44] Speaker 1: and take a look Heidi how other assets are trading at the moment of course all to do with inflation concerns as you've been discussing there with Dan when it comes to the Iran war headlines and commodities but you can see right now the dollar holding steady we have seen its best day since mid-May we had some upside surprises in US data overnight including the ISM services activity showing that it accelerated in May we had new orders improving consumer demand really staying resilient we also had the strongest private payroll gains in January of 2025 so we had seen treasury yields climbing in the overnight session the 10 year right now holding at that 448 level we're seeing a little bit of downside pressure continuing on US futures of course we had seen that halt of that incredible rally that we've seen around the exuberance of our artificial intelligence but we're seeing a little bit of that soften in today's trading with software for example in the overnight session underperforming but it's really to do with what markets are pricing in right now whether it's what's going to happen to the Iran war but also around inflationary risks around energy prices we have already seen the Fed Beige book for example showing inflation pressures accelerated across most districts now breaking news on the Bloomberg as well the USCA now confirming the first deadly screw worm in US cattle so this confirmation of this new disease in US cattle since 2016 could trigger potential restrictions around supply chains what will that do to food inflation will be another key question more ahead this is Bloomberg take a look at how currencies are trading at the moment with the dollar holding steady after we saw its best day since around mid May of course we have Fed rate hike expectations we had also positive surprises from US eco data in the overnight session not to mention of course more geopolitical tensions around the Iran war although we have heard from the US that Israel and Lebanon have agreed on a ceasefire we've also been following Bitcoin prices take a look at that below 65,000 for the first time since March and just remember what was it only seven months ago we were at that $120,000 level we of course have seen the accelerated pressure on selling after the sale from strategy of the 32 bitcoins so we'll be watching for further developments in this space which definitely not trading like a safe haven asset in recent days although that was of course one of the narratives around crypto before and of course we've been following the Japanese yen as well trading around that 160 level against the US dollar despite the fact that we have heard more hawkish rhetoric coming from the BOJ governor let's bring in our chief correspondent for FX and rates in Asia Ruth Carson Ruth so we have heard now governor talking about how inflation risks loom larger than potential growth risks from the middle east crisis and yet yen selling seems to continue what's happening [01:23:58] Speaker 12: traders are signaling that words versus action action matters more will the BOJ hike rates in June and deliver more hikes that is the question now that is on investors minds which is why we're seeing dollar yen and around 160 we have heard you know commentary from governor we have heard commentary from authorities in Japan who are all signaling signaling look hawkish signals here but look investors are going oil is still expensive Japan still an energy importing nation inflation is a problem in Japan and at these levels you still sell the yen options markets are certainly signaling more yen weakness as well so all eyes on the BOJ and the upcoming meeting in June markets are pricing around a more than 80% chance of a rate height the question is how much more is coming what are [01:24:55] Speaker 2: the options traders signaling when it comes to what's next right has the weakness gone too far is there more to push [01:25:00] Speaker 12: absolutely if we look to say the end of the second quarter the end of June traders in the options space are signaling around a 33% chance that dollar yen will trade at around 163 now that's three yen from when we are today and that's after that's after obviously awareness commentary as well hawkish commentary so absolutely options traders are going we we are assigning more yen weakness ahead until something changes it could be BOJ hikes bigger hikes than expected for example it could be a resolution to the crisis in the middle east but until something truly breaks yen weakness is likely here to stay [01:25:44] Speaker 1: and of course we're watching potentially authorities stepping into the markets right I mean every time I talk to ministry officials they deny that they look at a specific yen level and yet the 160 very important [01:26:00] Speaker 12: absolutely markets love the big round numbers 160 is also a figure that a lot of investors are fixated on because it was just over a month ago that we saw the authorities did step in to bolster the yen at around 160 so for many whether you're in New York you're in Tokyo you're in Singapore here 160 is the line in descent where people go I'm going to be on high alert let me start hedging some of my positions people are still selling the yen will there be more yen weakness ahead absolutely but let's perhaps take some profit here and prepare some firepower to reload in case in case authorities do wait in at 160 [01:26:41] Speaker 2: the current one has not benefited from the AI exuberance in the country's equity markets at all right in fact dropping at the open lowest since March 31st authorities coming out saying that they'll take action if the one-sided movement is seen what are the fundamentals when it comes to this selling that we're seeing in the currency [01:27:01] Speaker 12: yeah absolutely and it is actually a conundrum that is weighing on a lot of strategists and investors minds as well you've got the Cosby going gangbusters in theory even though it's sort of under pressure a little bit in recent sessions but the currency is so weak it is the weakest in Asia today in fact after reopening from a holiday and authorities are coming out to say look we're watching we're watching the one as well it's not just the yen that is being watched now a lot of it has come down to sentiment Korean the Korean currency is often seen as a barometer for risk appetite it is very much a tech FX as well and if there's any hint of pressure in the tech space on the AI space for example then the one will suffer the one will definitely be in the selling crosshairs and we're seeing that play out today now also remember that foreign investors have sold Korean stocks for 18 straight sessions that would definitely have been piling pressure on the one as well [01:28:01] Speaker 1: our chief correspondent for FX rates in Asia Ruth Carson there with the latest of course on the markets as we continue to follow not only the Korean one but the broader emerging market space because we have seen the downside pressure when it comes to EM currencies especially around all of the geopolitical tensions we have seen oil prices rising although in today's session a little bit of downside this and President Trump's latest tariff plans of at least 10% on imports from 60 trading countries has not helped the narrative around EMs especially in Indonesia the rupiah really near those 18,000 record low levels so markets now pretty much on guard for any potential intervention from authorities we have more ahead on the Asia trade this is Bloomberg the top [01:29:01] Speaker 2: corporate stories that we're tracking Phil Ackman is looking to sell his stake in Universal Music Group just days after the world's largest music label rejected his takeover bid the sale would raise around $1.7 billion for Ackman's Pershing Square at the top of a marketed range a source says Ackman is expecting a profit on the transaction of more than $600 million Broadcom shares fell in an extended trade after the company delivered a disappointing forecast for AI chip revenue it seized third quarter AI sales of $16 billion where analysts had expected $17 billion on average the full year forecast of $56 billion was also shy of estimates Broadcom says it's making progress with AI customers including Alphabet Anthropic and Meta Cherry [01:29:43] Speaker 1: and Heidi let's get some market calls that we're following today Double Line Portfolio Manager Robert Cohen says AI debt will almost certainly reach bubble levels eventually Cohen told the Bloomberg Global Credit Forum the chances are high given the history of heavy investments in areas like railroads and the internet he says money managers should focus on companies with strong balance sheets and investments with strong protections [01:30:09] Speaker 8: Credit bubble would be credits that are unable to pay back the debt and it seems pretty obvious at issuance so we saw that in energy where there were bonds that you knew they couldn't pay them back and they defaulted right away so credit instruments that require a lot of growth I wouldn't call a bubble but I think that credit that basically is doomed is a sign of a bubble we're not there yet [01:30:37] Speaker 1: Bank of America CEO Brian Monahan says AI and tech spending is paying for itself Monahan says the massive amount of capacity building in anticipation of demand is stimulating the economy Monahan spoke to us exclusively about how markets are digesting the surge in AI spending [01:30:58] Speaker 7: at some point the revenue and the earnings multiples and the cash flow multiples all have to come in sync and right now you're in that phase where there's a mass amount of capacity building anticipated of demand and so when you look at it one of the ways that we think about is we are a buyer of these services and a big buyer $13 billion in technology a year $250 million this year in 26 on AI related spending and so the question is what's the affordability that will be the interesting question how all this comes together but right now it's a heck of a stimulus in the economy that going on but the other part of the economy that we see is the small and medium sized businesses and it's interesting as you think about them over the last year last year we had Liberation Day and that was confusing for people and then we had the tax law finally got done that subtle confusion and had trading then you had immigration policy that confused people the deregulation they look for that as you watched in the fall they're pretty sanguine they said look I can see how this all plays out and then a lot of it got put back on the table and so I think what you see in the small medium sized businesses there's a lot of uncorked potential there they can borrow on the lines of credit they're borrowing a little bit more the loan growth solid mid double digits and things like that which is good loan growth but they have so much capacity if they just have a little more certainty and that's why they really want the war to end so their input prices will come back down because we see the gas pump what really happens longer term is the products made with petroleum products come so they're kind of like at the gates [01:32:22] Speaker 10: ready to go once they open [01:32:24] Speaker 7: they're ready to go and they just want certainty because if you're a big company of cars with 200,000 people you have lots of people who pay attention to all this and tell you what's going on our research team the best in the world if you're you and I owned a business and we were doing something you have to do all that work yourself and the easier to do that work the more time we can spend on creating the revenue so there's I think there's a little bit of a pop left out there beyond the AI which is an unbelievable amount of spending and etc there's another pop when general business gets more confident about the future path [01:32:51] Speaker 2: Bank of America Chairman and CEO Brian Moynihan there speaking exclusively with Bloomberg's Danny Berger let's take a look at how we're setting up when it comes to the start of trading across greater China pretty muted picture as we see the markets are online at the moment there's a fair degree of concern as to these cross currents of both some progress being made on the geopolitical front the Broadcon story is clearly worrying investors have seen these valuations for AI related and chip related stocks just go up so much right but take a look at the picture we are expected Hong Kong tech to continue a little bit of weakness there seven tenths of one percent Taiwan of course the biggest beneficiary other than South Korea in this part of the world from the AI story off by about one percent and FTSE A50 China futures are muted four tenths of one percent but of course we also had that separate AI related fundraising story for China with Deepseek set to raise over seven billion dollars with up to a 59 billion dollar valuation according to reports there as well that is it for the Asia trade our markets coverage continues with the start of trading in Hong Kong Shanghai and Shenzhen the China show is next