US-Iran Deal Hope Grows; SpaceX Sinks After AI Splurge — The Asia Trade 8/5/2026

[00:00:00] Speaker 1: This is the Asia Trade. I'm Sherry An in Tokyo. The top stories this hour. Asian stocks set to follow Wall Street higher after U.S. chip makers saw their best four-day rally since 2020. The S&P 500 also climbing to an all-time high. SpaceX sinks in late trade despite its revenue blowing past estimates in its earnings debut. It logged higher than expected spending in its AI unit. Oil drops below $80 a barrel for the first time in over three weeks as prospects of an interim deal focused on the straight-up for moves gain traction. I'm Hattie Sparrowatts in Sydney. Take a look at the [00:00:54] Speaker 2: setup for trading across Asia. As Sherry mentioned some optimism particularly when it comes to this highly volatile AI chip related space that we're watching today. We did have a bit of a dabner through those SpaceX numbers but more to do with the numbers when it comes to spending and the impact it had on that investor reaction there. We saw that stock falling after the company disclosed higher than expected spending when it comes to the AI business. So that quarterly report that broadly otherwise surpassed Wall Street expectations. So we're watching for that. But taking a look at how we're setting up quite a bit of optimism coming through from Cosby futures there. We're looking like Chicago and Nikkei futures also seeing upside there. The big story though and in fact really the one that's been sort of driving this optimism across border markets has been these encouraging signs or perceived signs of progress being made between the U.S. and Iran. Namely at that we would see a deal that would reopen a vessel passage through the Strait of Hormuz. So we are seeing that Brent crude last traded lower by over five percent. You're seeing New York traded crude still holding those losses holding that two day drop on the potential reopening of the Strait of Hormuz. Sherry. Let's discuss the broader markets. Heidi and bring in [00:02:01] Speaker 1: Bloomberg M Live strategist Mark Cranfield. Mark, we're talking about lower oil, strong earnings, not to mention renewed AI enthusiasm. Are we going to see a risk on day today across Asia? Yeah, I think we can expect a pretty decent [00:02:17] Speaker 3: start in Asia. You've got this feed through effects. So as oil prices come down, Treasury yields will get a bit lower. People are a bit less concerned that the Federal Reserve needs to hike interest rates quickly. So that's very positive feeds into the U.S. markets. We saw a record high on S&P 500. Also the story is that the hyperscalers still seem to be spending very aggressively on their build out for AI products that sent the Philadelphia Sox index up again, a very good run it's having there. That's obviously going to help chip makers in Asia as well. So we've got a self-fulfilling cycle at the moment, which seems to be very positive across the board. And at the bottom of all of that, of course, is the hopes that the U.S. and Iran will find a deal to completely open the Strait of Hormuz. So for the moment, optimism is definitely the way that people are looking at this. And that should feed through to a good start in Korea, especially you see the Cosby futures had a very good night. Nikkei futures also doing pretty well. So certainly we will be expecting a pretty decent start. Investors also are coming off the back of a very bad month in July. Positioning would have been cleaned out. They should be much more ready to to take new fresh exposure to the market as we get into the early part of August. So all in all, you would think that and also foreign exchange markets have settled down after that intervention with the yen we saw at the end of last week. So all in all conditions look pretty good for the equity markets in Asia today. [00:03:45] Speaker 1: And Asian assets will be following, of course, U.S. yields as well. I mean, you mentioned the Japanese yen, but on the other side of that trade, we have the dollar as well. We saw a rally in treasuries, but a little bit limited given everything that's happening around, say, Fed credibility, not to mention, of course, supply risk coming up. [00:04:04] Speaker 3: Yeah, we also got the inflation situation as well. So just a week ago, traders were very concerned about the steep yields in America. We had the 30 year way above five and a quarter percent. That was the highest for several decades. And we've got this very big CPI report coming up next week. Now, even though yields have come down a little bit the past two days, we still have to get past that. Core inflation in America is still running above the two percent target for the Federal Reserve. At the moment, the estimates for next week is it will continue to be higher than that. That's going to be a concern. Traders are still pricing for one hike by the end of the year from the Federal Reserve. They've been trying to push back a little bit against that, but the market still wants to see more evidence that inflation is heading down towards that two percent level. If it hasn't been doing so, people will be worried. If they see a hot inflation print next week, Treasury yields will be back up. Markets will be worried again. It's going to be a pretty nervous period between now and when we get that CPI report coming out. But in the meantime, as long as the market stays relatively stable, that's good from the equity point of view. But all the time, people will be looking for headlines to make sure that the U.S. and Iran is on the same page and there's no derailing from that situation, that a deal is coming. Otherwise, oil prices will be back up. Treasury yields will be back up and everybody will be nervous all over again. [00:05:28] Speaker 1: Which will be very consequential for Japan, of course. It's been interesting to see all of these rumblings about intervention on Monday. It seems Bloomberg calculations don't actually see that that happened after the two episodes last week. We got some more explaining from Secretary Besant on why the U.S. and Japan have been cooperating. What do you make of the fact that he's making it into a more regional stability focused effort and how this could actually affect competitive devaluations in the region? [00:06:01] Speaker 3: Well, that's the nightmare scenario for the United States is that you get other countries following what they they see as Japan. If Japan is having benign neglect on its currency and just allowing it to get weaker and weaker, that obviously is an incentive to others in Asia. But especially the big the big one here is China. The United States will be very concerned if the Chinese authorities responded to what they see in Japan by allowing the renminbi to get weaker. If that's the case, then it's you could have a situation across emerging markets where it just gets out of control. Recently, the Chinese authorities have been keeping the yuan on the strong side. They've been doing a very good job through the daily fixing, gradually lowering that dollar CMY rate. And that's been giving a steady anchor really across Asia, especially, but across the emerging market world also should they reverse that for any reason that would create great volatility across the foreign exchange landscape. There's no indication that they're prepared to do that for now. But clearly that's on Scott Besson's mind. He's very concerned that should the yuan start to weaken, that would be disruptive across financial markets globally. We've seen it before in periods when the dollar yuan rate is going up quickly that destabilizes all kinds of markets, including the American stock market as well. So that would be a signal to the PBOC. In fact, we would expect that today's fixing would actually be a little bit lower. The Chinese authorities will probably give a small concession to Besson because he did also say he sees the yuan as being undervalued. [00:07:42] Speaker 2: Bloomberg MLive Australia's Mark Ramfield there and turning to our other top story in the tech space and SpaceX's shares are down in late trade. Despite its revenue exceeding estimates in the company's first earnings report after its IPO in June, came in at seven point eight billion dollars for the last quarter. The cap ex jumped to about 18.4 billion. Let's bring in both global space reporter Sana Panchakar with us for the details. And Sana, it's not a good time, I guess, at the moment to be a tech company that's spending big on A.I. investment. Does this come as a surprise, though, to investors, given that we know Elon sees SpaceX as an A.I. company? [00:08:20] Speaker 4: Yeah. I mean, you know, as you mentioned, Musk and SpaceX have really pitched themselves as an A.I. company, you know, in their prospectus, when they filed for their IPO. You know, they said that their total addressable market, more than 90 percent of that would come from A.I. So I don't think this should be very surprising to investors. But as you mentioned, you know, we're seeing this broader A.I. sell off. And that seems like it's impacting how investors are looking at SpaceX as well. [00:08:50] Speaker 2: What did we hear in terms of expectations going forward? [00:08:55] Speaker 4: Yeah. So what they said was that they expect CapEx to kind of remain steady throughout the rest of the year, you know, which is significant because their capital expenditure was 18.4 billion and the vast majority of that was on A.I. So I think that investors kind of need to buckle up and be patient going forward because it seems like they will, you know, continue these spending trends and and spending big on A.I. and potentially not seeing the revenue really make up for that, [00:09:25] Speaker 2: at least in the short term. We did also hear some of their ambitions in terms of how they plan to compete with the biggest carriers, the telecom carriers in the U.S. Yeah, totally. [00:09:38] Speaker 4: So SpaceX through its Starlink network can beam Internet and cell coverage to mobile phones. But in this earnings call, SpaceX president Gwen Shotwell said that they intend to, you know, build out a land based component. So terrestrial cell towers to compete directly with mobile network operators like Verizon, AT&T and T-Mobile. And the company and Musk has have hinted at this before. But, you know, this was really the clearest sign that they want to compete toe to toe with those traditional mobile network operators and build out their own wireless network service. [00:10:17] Speaker 2: Bloomberg Global Space reporter Sana Pashanka there. Coming up, we'll have more on SpaceX and the broader A.I. landscape, technology, research. President Bobo Dommel will be along with us. Well, still to come, the prospects of a possible deal over the Strait of Hormuz gaining traction now. Both U.S. and Iranian officials are sounding hopeful. We're getting more on that in just a few minutes. This is Bloomberg. [00:10:58] Speaker 1: Here are the latest developments that we're tracking in the A.I. space. A.I. models from OpenAI and Anthropic have been involved in previously unreported cyber security incidents. The U.K.'s AI Security Institute says during an evaluation, Mythos 5 and GPT 5.6 sole models engaged in what it called sustained, potentially harmful activity against people and organizations. OpenAI and Anthropic are now working with the Institute to investigate the incidents. Blackstone is said to be exploring a second mega debt package to finance Anthropic's use of Google A.I. chips. Sources say one initial proposal was for at least $36 billion of debt. If finalized, the deal would exceed the $35 billion of debt lined up by Apollo and Blackstone some two months ago to fund Anthropic's lease of Google's custom chips. Bloomberg has learned that Anthropic has struck a $10 billion deal for computing capacity from NVIDIA backed startup Volta Infra. Volta earlier said it secured the deal with an unnamed A.I. lab and the agreement will run for six years. This is Anthropic's latest effort to secure the computing power needed to meet growing demand for its A.I. products. [00:12:15] Speaker 2: Sheree, take a look at how SpaceX is tracking. We did see that investor disappointment despite broad-based beats when it comes to expectations. That worry though is really the amount of money being spent on its A.I. business. The quarterly report otherwise surpassed Wall Street forecasts of most metrics there. $7.8 billion was a reported revenue more than a $6.81 billion analysts had been expecting there. Let's bring in Bob O'Donnell who's a president and chief analyst at Technology Research. Bob, really great to have you with us as always. You know, we were talking about this earlier. Investors probably shouldn't be concerned about the massive amount of A.I. spend given that this is how how Elon characterizes this company. [00:12:58] Speaker 5: Well, exactly, Heidi, and look, these kind of investments we're going to be seeing from all the major model providers and all the big A.I. companies over the next several years, frankly. And people just need to know that that's going to happen. You know, what's interesting about what SpaceX is doing is, frankly, a lot of their infrastructure costs, they're actually leasing out to other people. So in some ways, they're becoming as much of a neocloud company as they are an A.I. company because their revenues from the pure A.I. side of selling their own models of Grok haven't been as big, of course, as we've seen from open A.I. and Anthropics. So and yet they've got all this capacity they built. And right now, it's compute capacity that's really in sharp demand. Now, the question longer term, to be fair, around SpaceX is, hey, is that really the kind of business you want to be in? Because obviously they have a lot of other things going on. And at what point will they need to bring back some of that capacity to run their own models? So there are a lot of questions there. But, yes, there's a lot of money being spent on this sort of stuff right now. [00:14:03] Speaker 2: There's a lot of existential questions in this space, right? We've long been talking about the insatiable need for capacity. There's now concerns about overcapacity. There's concerns about rising costs, the numerous risks, how long this is going to take for these ambitions for Elon Musk to take, you know, come to fruition. Do you think the thesis is a little less stable now than it was even just a few months ago? [00:14:28] Speaker 5: Well, I do think there are challenges you have to be aware of. You know, all the money within SpaceX is coming from Starlink, right? I mean, all the profit, pardon me. And right now, Starlink pretty much has that world of satellite-based communications to itself. However, we are going to see competition. Amazon has already talked about their Kuiper satellites. Likely there will be some other companies as well. So that's going to be an issue. And, you know, the U.S. carriers are not going to take this potential challenge to them that you guys were just talking about sitting down. They're clearly focused on trying to address this. And the important thing to remember about satellite-based services is the vast majority of satellites come, or excuse me, of cell service comes from land-based networks. The satellites are sort of the gravy on top. So Musk is coming at it from a different way, which is, hey, we have all this great stuff in the areas where there's not a lot of people. But in the main areas where people live and work all the time, that satellite service doesn't really work as well. So it's extraordinarily expensive to build out those networks. So that's going to be an interesting challenge. So I do think there are a number of interesting concerns that aren't really being thought through a lot when it comes to SpaceX. And there's a lot more kind of, oh, this is a great vision, let's buy into the vision kind of a thing. But it's a long way off. [00:15:46] Speaker 2: Yeah, it's a vision that, you know, I think if you take a step back, is largely unproven too, right? The idea of having data centers in space, how that's going to be powered and how the data is going to be transmitted too. But I also do wonder what sort of, I guess, consolidation are you expecting from this broader group of companies? We've heard some of the rumors that have been refuted regarding their China businesses on Tesla. Do you expect a bit more of a coming together and perhaps shedding of non-core business interests? [00:16:19] Speaker 5: You know, look, when it comes to Musk and his plans, any of those things are possible, let's be honest. Yeah, I mean, he could end up pulling all the pieces that he wants together, all the ones that are making money and then getting rid of the ones he doesn't see as having opportunities longer term. It does become a question of, you know, a conglomerate of things that you try to build a story around, but ultimately don't make that much sense. I mean, already there are a lot of people who are saying that about SpaceX because data centers in space, there are enormous technical challenges to make that happen. Let's not forget someone has to fix these things occasionally. You can't do that. I mean, there's just so many issues there. So, you know, I wouldn't be surprised to see a lot of these things. The problem is they're just not predictable. You know, he's not a predictable personality, so it's just hard to bet on that and hard to know exactly what's going to happen. Some people buy into the Musk vision and some people don't. And that becomes ultimately the guiding factor when people are thinking about this. [00:17:14] Speaker 2: Yeah, his fans would say that the lack of predictability is just part of the genius, right? But Bob, in terms of the broader landscape, and obviously we've seen a lot of rotation, a lot of volatility in the AI space over the past few weeks, even into the last few days. But a big part of this has been the gains made by China, right? And I'm just going to throw up a quick sort of capture of what we're seeing, the different models and the different types of ability that we're seeing from each of the different models. And a lot of these Chinese models are quite clearly closing the gap when it comes to cost efficiency, the economics, but also the broader efficiency of getting things done as well. Is this kind of the disruptive force that should be most worrisome to the U.S. players at the moment? [00:18:03] Speaker 5: Well, look, I do think it's a big issue. I happen to be in Beijing this week visiting with Lenovo and hearing a lot more about some of these Chinese open models and the things that they're doing and the opportunity to have some of these models run locally within companies to reduce the costs. Because right now, of course, companies are spending hundreds of millions of dollars on tokens into the cloud for ChatGPT, for Claude from Anthropic and all these other companies. These open source models dramatically change that. Now, there are challenges here in China because they're not really making any money. They're not charging yet. And eventually they're going to have to do that. So there's a lot of question marks out there, but there's no question, I believe, that open source models, open weight models, pardon me, are really going to have a dramatic impact. I don't think that means frontier models go away. I just think we're going to see an interesting mixture of things, and that's going to have a lot of impacts overall. Fundamentally, companies do need AI compute. If they're going to need some in the cloud, I think you're going to see them use more, in the data center, AMD earnings just came out, and they were talking about Helios, which is coming to bring more data center capabilities to some organizations. And then on client devices, on PCs, on smartphones. And so we're going to see this hybrid AI mixture of all of these different elements. And how exactly those play out is still something that we're all watching closely. And frankly, it's changing on a monthly basis, in part because of all the evolution of these big models. [00:19:35] Speaker 2: This is why we keep talking to you. Bob, really great to have you on with us. Bob O'Donnell, who's the president and chief analyst at Technology Research there. More ahead here in the Asia trade. This is Bloomberg. [00:19:45] Speaker 1: We're keeping tabs on risk assets after President Trump and Qatar's Emir discussed efforts to ease U.S.-Iran tensions in the call. Officials are signaling growing progress toward the deal to reopen the Strait of Hormuz. Bloomberg's managing editor for U.S. economy and government, Mario Parker, joins us now with more from Washington. Mario, so we are now hearing that Qatar has drafted a proposal already. I do wonder, though, how different will it be from a previous interim deal that did not hold? [00:20:31] Speaker 6: Well, I think that's the major caveat, the fact that the last ceasefire agreement between the U.S. and Iran lasted short of one month before things fell apart. That being said, over the last three weeks, this has been the most optimistic tone that we've heard in recent days, at least over the last 24 hours or so. So you mentioned that the president, President Trump spoke to Qatari, Amir, earlier today. We had Secretary of State Marco Rubio making optimistic comments about some sort of deal to reopen passage through the Strait of Hormuz as the Treasury Secretary, Scott Besson, as well. And then against that backdrop, you also have, according to our reporting, European diplomats signaling that there could be some consideration on the part of Iran to allow for European nations to demine the Strait of Hormuz. That's not a done deal, but the fact that that's under consideration is also optimistic. [00:21:33] Speaker 1: Tehran has repeatedly contradicted statements from President Trump. What is Iran saying now? [00:21:40] Speaker 6: Well, this is, they have, to your point, in terms of contradicting President Trump. But we have got, we know that the Iranians right now are striking, again, a more optimistic tone that something else can be, that something can be done as well. And again, as I mentioned, the fact that behind the scenes, there are talks about demining the Strait. That's some progress there. That's, in some ways, a climb down from some of the stance that Iran had before. Now, some of the sticking points, again, we want to make sure that this is centered on the Strait of Hormuz and passage through the Strait. That has nothing to do with nuclear denuclearization that President Trump has sought with Tehran. But also, there continues to be the sticking point as to whether or not Tehran, Iran, will have imposed some type of fees along the Strait. [00:22:41] Speaker 1: Mario, just quickly, what are we seeing in terms of proxy fights, the likes of Houthi militants, for example? [00:22:49] Speaker 6: Yeah, well, you're saying against this backdrop, against the proxies, you're saying the Saudis, for example, trying to strike a, excuse me, a more diplomatic pathway with the Houthis, again, to prevent some of the attacks or escalation on energy infrastructure. So, the Saudis, the Saudis have used the Red Sea ports while the Strait has been closed as well. So, trying to ensure some of the passageway of crude oil through those Red Sea ports as well. But, again, after some attacks between the Saudis and the Houthis, you're saying the Saudis explore, excuse me, the Saudis explore some diplomatic passageways. [00:23:32] Speaker 2: Bloomberg Managing Editor for U.S. Economy and Government, Mario Parker, there in Washington for us. Let's take a look at what we're watching across commodities. Obviously, the lead story is going to be oil, with most of those losses being held as this optimism continues over a reopening of the Strait of Hormuz. But we're also watching copper topping $14,000. U.S. stockpiles continuing to swell before a decision on tariffs. And we're looking at a rise for Asia copper stocks today. So, we are seeing, Sherry, this renewed optimism rise, or at least some calm being restored to markets, on this idea that potentially, if we don't even get the sort of existential bigger issues like nuclear, for example, done, or Iranian sanctions done with these talks, that at least we can get really the strategic goal of getting the Strait of Hormuz reopened. That's why we're seeing these declines being held in oil prices. But, Sherry, as you were having your conversation a little bit earlier on with Mario, this idea of a deal being struck that is somehow different to what we saw just a few weeks ago, the ceasefire deal that was pretty quickly unraveled, what is going to be new about these conversations? And I guess what's changed other than potentially even more of a trust deficit between the parties and how sort of resilient is this deal going to be? But at the moment, the markets are running with it, oil markets at least. We're seeing those losses being extended now in New York trading. WTI down by eight-tenths of one percent. We saw Brent down by a significant amount in the previous session. We are seeing that follow-through to broader equities as well. We'll be watching some of these commodities names. We spoke about copper a little bit earlier as well. Those copper names in Asia should see a nice bump up in the session too. [00:25:18] Speaker 1: Yeah. I mean, follow the lower oil prices and the sentiment coming from there, plus the renewed AI enthusiasm, not to mention strong earnings from the U.S. as well. And you have that optimism into the Asia session, right? SpaceX, a little bit of a different story. It's interesting because it did report stronger than expected revenue after the close, but we're seeing right there, you can see the downside in the after-hours session. Revenue came in at $7.8 billion, but then at the same time, CAPEX surged to $18.4 billion from $10 billion in the first quarter. So you have strong top-line demand, but at the same time, you have the markets focusing on how much capital is really required to fund all of these projects, orbital computing, Starlink expansion, and Starship as well. So far, we have seen the broader semiconductor space, though, gain ground in the Wall Street session. Chip makers posting their best four-day rally since 2020. Even picks and shovels, industrial stocks, have already gained 20-plus percent this year. So you can see the upside when it comes to some of those Asian names, including Samsung, for example, where we're hearing that potentially we could get new chips from the company that could be 10 times the memory density using advanced wave for bonding. So we're seeing strong Asian futures into the lead. We have seen a little bit of divergence when it came to SpaceX. Also, AMD failed to inspire that much confidence. Let's get more on the setup to Asia with our markets reporter, Anthony Stevens. Anthony, so it seems to be a broadly risk on day, but at the same time, you have these idiosyncratic news and really high expectations, a high bar that these companies have to top. [00:26:59] Speaker 7: Yeah, and it balances out to a pretty strong, like, happy hump day for Asia, right? So on the macro side, you have the pressure from high oil kind of dissipating a little bit. And the details of the American earning season are pretty strong and pretty kind of unanimously bullish for Asia. You have SpaceX talking about massive CapEx. You have AMD talking about massive compute markets. And then you have these technology developments from Samsung and Hynix. And it's important to note on these two companies that they've come out back-to-back days with technology improvements. So Hynix on NAND and now Samsung on stacking HBM chips. So these two incumbents are not staying in place. They continue to innovate to hold down their market share. And now we have the kind of tech press talking about the fact that HBM is booked out into 2027. So a lot of strong leads on memory specifically coming into the Korean session. Micron was very strong. And this may be, at a top line, kind of suppresses the volatility of Korea. You need a more sustainable, slow bull market rather than the crazy choppiness we've seen. So that will be very interesting to play for in Korea. Now, coming into Japan, you know, Japan's earning season also has been quite strong on the AI picks and shovels trade. You know, Renesas, Keyence, these kind of names. So whether that kicks on, and it looks like it's kicking on from the indications in Nikkei, will be very important. But more broadly, the fact that the U.S. has broken out to the upside, the stocks trade has kind of stabilized, is a very important indicator for Asian risk capital. But bear in mind, July has some pretty awful hedge fund performance numbers, and people will be looking to get some better pricing into the second half of the year. [00:28:37] Speaker 2: The trickle down trade from AI or the broadening out to some of the non-tech stocks, the broader old economy stocks, is that happening? [00:28:47] Speaker 7: And speaking of volatility, right, that trade has been actually a much better sharp adjusted ratio trade. We saw, you know, U.S. PMI, U.S. ISM, PMI beating quite handily yesterday. And that kind of industrial read-through from the U.S. kind of manufacturing renaissance of the last couple of years is getting supercharged by the AI build-out, right? There's a lot of ground to be broken. A lot of factories need to be constructed. A lot of blue-collar jobs generated. And that's generally showing up in the industrial sector. So the S&P Industrials Index has, you know, been on just a steady climb in line with the S&P without any of the volatility, the crazy volatility of the chip space. So it definitely seems to be this kind of second-order impact of AI seems to be a trade that is slowly chugging in the background. [00:29:32] Speaker 1: Bloomberg Markets reporter Anthony Stevens there with the latest on markets. And, of course, we have seen the volatility in the Japanese market as well. Perhaps not as much as in the Korean market, but we are talking about Nikkei moves of around 5%, about four times this year already. What's interesting, though, is that you can see the steady uptrend of that line in yellow. Now, those are domestic-exposed companies on the Nikkei 225, companies that have more exposure and play in the domestic market, as opposed to the blue line, which are companies that are more globally exposed. Perhaps not surprising, given that we have seen a resilient Japanese economy. We have seen strength in wage growth. We have seen exports also continuing to gain ground, but at the same time, a weaker Japanese yen. And geopolitical uncertainty coming from supply chain disruptions in the global stage. Markets is one part where we have seen a little bit of upside because of a weaker yen, helping with some of the other external factors, such as rising costs from tariffs, not to mention supply disruptions. Toyota now unveiling a $6.3 billion buyback and raising its profit outlook. That's as a resilient hybrid demand and a weak yen, help make up for those rising costs. Bloomberg Intelligence senior auto analyst Tatsuo Yoshida is here with us. Tatsuo, there was a lot of concern that perhaps we could see, what, a fifth decline of profits, fifth annual decline of profits for this company. What was the result? [00:31:04] Speaker 8: Actually, the first quarter results are basically in line with the expectation. And then profit-wise, it was a small dip, but we are not seeing it as a negative. And they upgraded the freer guidance. It's mainly boosted by the GPM, but Toyota's fundamental is so strong, they are able to cushion all the negatives, such as higher input costs and supply disruption, whatever. So based on the strong fundamentals, they are able to take full advantage of the GPM. [00:31:42] Speaker 1: And the buyback announcement will also not hurt. [00:31:46] Speaker 8: Actually, that signal of the market, Toyota, the company sees their stock is undervalued. I think that's the message to the market, I think. [00:31:56] Speaker 1: Of course, we have Honda later today as well. [00:31:58] Speaker 8: Oh, yes. Honda, a little bit different story, though. First quarter results should be very strong. But we are expecting the upgrade of the freer guidance, but given the earthquake in Kumamoto and then the plan to close the factory, auto factory, nearly three, close to the three weeks, probably the guidance upgrade may not be the case anymore. [00:32:23] Speaker 1: I mean, we have seen a lot of these Japanese companies, whether it's Honda or Nissan, trying to really achieve that turnaround. What are you seeing in the broader industry with the latest numbers? [00:32:32] Speaker 8: Actually, the Nissan and the Honda are quite different. Nissan is fundamentally struggling. But Honda, it's more like a one-off issue, like a significant change in the battery electric vehicle plan. That caused them to book the significant loss. But that's one-off. And on top of that, they are experiencing the disruption due to the earthquake. So unfortunate, I think. [00:33:01] Speaker 1: And what about the Chinese market? I mean, we have seen tepid results from the auto sector there. Is there hope for recovery? And what does the outlook look like, especially for Japanese companies doing business there? [00:33:14] Speaker 8: I have to say, the near-term turnaround in China is unlikely. Because the fast pace of the electric vehicle expansion, Japanese are trying to keep up with the pace, but not yet there. [00:33:29] Speaker 1: Right, Tatsuo Yoshida, really good to get your insights. Bloomberg Intelligence Senior Auto Analyst with, of course, a review of Toyota and Honda earnings to come later today. And in fact, in the next hour of the Asia Trade, Macquarie Capital's Head of Asia Energy Transition and Commodities, James Hong, will be joining us here to tell us more about Japan's auto sector. The Japanese pharmaceutical manufacturer Shionogi is considering expanding its U.S. manufacturing capacity over the next few years as it looks to diversify its production base. CEO and President Isao Te Shirogi also told Bloomberg Exclusively that Shionogi is pursuing a series of M&A deals. [00:34:10] Speaker 9: We are looking for a lot of opportunities. Actually, we're actively pursuing minimum three deals today. And, of course, we're not able to guarantee you we're going to go all those three. But this is something that we continuously will do. And, of course, the Japanese market is very important. And the U.S. market is very important, too. And we are going to keep growing the European market as well. So those are the three major geographies we're looking into. [00:34:51] Speaker 10: Chinese competition, obviously, going back to this, it's a hot topic globally. Some pharmaceutical companies have mentioned they're being more cautious about disclosing certain clinical trial results early because of Chinese pharma abilities to kind of replicate the results or make very similar drugs in a short amount of time. Is this something that is on your radar and that Shionogi is similarly cautious about? [00:35:13] Speaker 9: I think a small molecule area, even historically, was exposed to the things you described. So when we're submitting the intellectual property, we have been very cautious. And we have been, you know, aiming to us the thoroughly as possible to create a good IP. So, yes, we recognize. But I don't think it's only unique for China. The pharmaceutical companies are so competitive. And everybody is holding a lot of radar screens for the innovation. So it's a competition. We admit that. So having said that how we maintain our strength, the only thing is we keep running into the top-notch science in terms of how we're going to differentiate ourselves from the other companies. [00:36:15] Speaker 10: Okay. So the strategy around it hasn't really changed because it's always been quite competitive when it comes to small molecules. Well, I think, I believe you became CEO and president of Shionogi in 2008. So you've been running the company now for almost two decades. How are you thinking about kind of the next generation of leadership at the company? [00:36:32] Speaker 9: Well, this is one of the most important things for our board. Again, in my company's board members are almost outside members. So they have the course to be concerned for the future leadership team of Shionogi. So we are creating the team, both the outside board members. And we picked up the four or five, the younger generation, who they believe can be a possibility of my successor. So since last year, we're very active in the, you know, training all those folks. But at the same time, we acquired the, you know, U.S. company. The relationship with VIV is getting stronger and stronger. So that takes time to heritage what we have been doing to new leadership team. So it takes probably three to four years to almost create the good candidate team to succeed in the current Shionogi, you know, the business model. We just nominated the Dr. John Keller, the first non-Japanese board member. So John and I are almost teaming up to take care of various things, including the relationship with the VIV, GSK, U.S. companies. So we try to convey all those experiences and networks to a younger generation in the next three to four years. [00:38:10] Speaker 10: There is a lot of rhetoric now globally, I mean, around the world about geopolitical tension, trade barriers. Just last month, U.S. President Trump also had mentioned that he intends to put a big tariff on generics going into the U.S. I understand Shionogi doesn't have a big focus on generics, but you guys are also are very, you know, focused on your message about access to health care and medicine. I'm just curious how what you think about this type of kind of tense rhetoric and how it might impact the future of the pharmaceutical industry globally. [00:38:43] Speaker 9: Well, good question. The pharmaceutical manufacturing, as you know, is heavily regulated by the each country's the health authority, FDA, EMA, PMDA, MHLW. So it's not easy to move the manufacturing site from country A to country B or place A to place B. Having said that, the probably five to ten years landscape, our company's way of thinking is that we really want to almost diversify the manufacturing capabilities, Japan, U.S. and part of Europe. [00:39:28] Speaker 1: Shionogi CEO and President Issao Teshirogi speaking exclusively with Bloomberg's Lisa Du. And we have the latest data here in Japan on labor cash earnings. When it comes to the key number headline is growth of euro near 3.4 percent for the month of June. This number has accelerated from the previous month and it's coming in line with expectations. What I'm paying attention to is real wages because strip out the effect of inflation and prices have depressed a lot of households here in Japan. Real wages gaining 1.7 percent. This is a sixth straight month of gains and it's also the longest streak since 2021. We continue to have a tight labor market in Japan here. That helps the case for another Bank of Japan interest rate hike. The latest decision was for no change. But of course, we're watching whether or not tightening will happen, especially given the ongoing pressure that we're seeing on the Japanese yen. [00:40:25] Speaker 2: The latest from the corporate front and AMD shares dropped in late trade after the chipmunker gave an underwhelming sales outlook. Its third quarter revenue will come in at around 13 billion dollars, missing some of the most bullish estimates. CEO Lisa Su told analysts that the company expects its data center revenue to more than double in 2027, with growth that could come in at over 100 percent. Paramount posted a surprise surge in second quarter profits as cost cuts tied to its Skydance merger continued to pay off. Adjusted, the EBITDA rose 27 percent to 1.1 billion dollars. Streaming profits jumped and Paramount Plus subscriber growth topped estimates. The company said it still expects its proposed $110 billion acquisition of Warner Brothers Discovery to close despite mounting legal challenges. [00:41:24] Speaker 11: We remain highly confident that this transaction will close and we're preparing for basically a successful combination once it does. If you take a step back and just look at exactly where we are today, we received approvals from basically, you know, 65 regulators representing 65 countries around the world. You know, including the United States federal government, Canada, European Union, China and many more. [00:41:51] Speaker 2: HSBC has announced a fresh stock buyback as of as much as $1 billion and raised its cost cutting target. CEO Georges Algeré spoke exclusively with Bloomberg after reporting second quarter earnings that beat estimates despite China's crackdown on cross border wealth flows. [00:42:08] Speaker 12: We're pleased to have resumed buyback this quarter, three quarters after we announced Hang Sain. We said at that time that our priority would be to rebuild capital post privatization. We estimated three quarters to be about the time to build that. Three quarters on, we're able to return excess capital to shareholders. Remember, our priority use of capital first is the dividend payout ratio. Second is supporting the organic growth of the business, organic growth within our risk appetite, at the right returns, within our strategic priorities. We're very pleased our loan books have grown. I mean, UK has seen consistent growth and we've been able to lean in. We're very pleased to see Hong Kong finally resume to loan growth. So those will be the priority. Of course, excess capital, priority distribution mechanism as share buybacks, hence the $1 billion. [00:43:01] Speaker 13: Your head of corporate investment bank said you could actually become a $300 billion capitalization bank shortly. I mean, you're, or I think by 2030 is what he said, you're $30 billion away from that. Do you think you can become $300 billion in terms of size in the next six to 12 months? [00:43:20] Speaker 12: Well, look, I mean, we're certainly very pleased with the share price reaction to the delivery of our strategy, where this will go as a matter for our shareholders to judge. What I'm really focused on is delivering for the business, focused on all the growth opportunities that we're driving for the business, delivering the strategy and the simplification at pace. And, you know, the upgrades we have shown in our capability to do so and the speed at which we are able to do it safely are a good testament of the capacity we're creating to invest even further in the business. [00:43:54] Speaker 13: George, you've also said that Hong Kong would overtake Switzerland as the world's largest cross-border wealth center by the end of the decade. Actually, it's done so already. What does that mean for wealth creation in Asia and your story in it? [00:44:07] Speaker 12: Well, yeah, I'm very pleased to see, you know, Hong Kong again becoming this world leader for cross-border wealth management. I mean, Hong Kong is a home market for us. We are the leader in wealth management across Asia. We've grown our wealth balances in Hong Kong by 10%. We're at half a trillion dollars wealth. We continue adding clients in Hong Kong, 640,000 new clients across our two brands, the two iconic brands we hold in Hong Kong, HSBC and Hang Seng Bank. So we're very pleased with the momentum that Hong Kong and the sophistication that Hong Kong as a platform is creating to be the cross-border leader in the world. Remember, also, Hong Kong is a technology hub. We're seeing a lot of investment in Hong Kong, in AI. We will be launching very soon, the next couple of months, a stable coin in Hong Kong, you know, as their leading center for bank-issued stable coins within a very good regulatory framework. So all good developments given our presence in Hong Kong. [00:45:09] Speaker 13: I mean, for Hang Seng, how many more synergies are you expecting to come from that? [00:45:13] Speaker 12: Yeah, I mean, Hang Seng synergies, you know, we're executing more than 80% of all the synergy work streams. So this is going on as per plan. We've already announced leadership across most of the infrastructure areas, the back office areas, the technology areas, the manufacturing areas. This will allow us to, you know, create the alignment and the synergies that we want to achieve. I'll give you one example, very telling example. In Q2, Hang Seng, as of May, started to use some of the digital onboarding capabilities, customer acquisition capabilities that HSBC built. They were able in Q2 to double the number of clients they onboarded. 60,000 clients onboarded in Q2 compared to 30,000 in Q1. Immediate visible benefit of those synergies. [00:46:00] Speaker 2: HSBC CEO Georges Alderoy, they're speaking exclusively with Bloomberg's Francine Lacqua. More ahead here on the Asia trade, this is Bloomberg. Take a look at what we're watching, particularly with some of these commodities adjacent names that we'll carry through to equities trading today here in Asia. Oil, we are continuing to see that cautious optimism that we could perhaps get a deal, not on the broader issues, but that 2.j drop being sustained on this hope that a deal can be reached at least to reopen the Strait of Hormuz, therefore freeing up supply trapped in the Persian Gulf. We heard from Qatar that an interim proposal had been drafted, both Iran and the U.S. signalling progress there as well. But we are also watching copper with a tariff announcement being weighted. We're seeing copper topping $14,000 with a record high possible for Australian stocks. [00:47:04] Speaker 1: This is the Asia trade. We're counting down to Asia's major market opens after record highs on Wall Street. And Heidi, not surprising given lower oil prices right now, solid earnings, not to mention renewed enthusiasm over artificial intelligence. [00:47:34] Speaker 2: Yeah, renewed enthusiasm, not for SpaceX's spending, though. That was an interesting reaction, right? There's been so much volatility when it comes to this stock. And certainly it shouldn't come as any surprise to investors how much money is being poured into the AI development side of things by Elon Musk on SpaceX, given that he characterizes this as an AI company. [00:47:53] Speaker 1: Yeah, we'll be watching some of those tech names across Asia because we did have results from AMD as well. And of course, we will be reacting to some of that optimism in the overnight session with those chip makers also seeing some of the best days in about a few months or so. Take a look at how the Nikkei and the topics are coming online. We're seeing some upside in this sector, but of course, we've been following the Japanese yen very closely after the best of four days in about two years. Of course, this after the first U.S.-Japan joint yen buying since 1998. Now, we saw a rally of around 5 percent or so, but you can see right there that we're now headed towards back to that 158 level against the U.S. dollar. Very consequential when it comes to the Japanese yen, especially how the U.S. is portraying their support for the Japanese currency. Secretary Besson coming out, interestingly talking about how the risk is now of competitive devaluations across Asia, trying to frame that U.S. support as needed for regional financial stability. That really stood out to me as we continue to follow the latest developments around the Bank of Japan as well and what it will do to the currency. Because Secretary Besson was also expressing confidence that Governor Ueda will do what is needed when it comes to the monetary path. Perhaps not everybody feels that way because we saw the downside pressure on JGBs, especially with that 10-year JGB auction that we got the weakest demand since May of last year. And, of course, it's not just skepticism about the BOJ's tightening path. It's also about the fiscal credibility of this administration with some of those expansionary plans coming from the Takaichi administration. But take a look at how the KOSPI and the Korean markets are also opening today. Of course, we continue to watch some of those suppliers when it comes to tech, semiconductors. We are seeing now that upside of 4%. We have seen a little bit more stability in the Korean market this week. We saw some small gains in the previous session. We continue to see some more dollar selling when it comes to Korean corporates. So we're seeing a little bit more of that support for the Korean one. But we're right now holding at that 1430 level against the U.S. dollar. We continue to follow Samsung SK Hynix. We have heard from Samsung potentially new advanced chips also to come. And, of course, this will be very consequential for the rest of the supply chain across Asia as well, Heidi. [00:50:21] Speaker 2: As you mentioned, Sherry, earlier, a big part of that optimism today is being driven by the decline in the oil prices being held. The suggestion that we could get that deal to reopen the Strait of Hormuz, freeing up supply and putting, at least for now, to bed these revived concerns over broader inflation pressures as a result of another energy crisis. We are seeing Treasuries on the rise amidst these signs of progress towards the diplomatic resolution there. We've heard that an interim proposal had been drafted, according to Qatar. Both Washington and Tehran signalling progress has been made in talks on the Strait of Hormuz. We're also hearing that Iran is considering allowing European nations to remove mines from the Strait, according to some diplomatic sources that we've heard from there. So Brent Groot holding on to most of those losses, falling for a third day as we see that optimism continue to play out. We've also seen that build up a little bit when it comes to U.S. stockpiles as well. The picture for Australia is looking quite optimistic as well, with the ASX on the cusp of another record high. I think the last one was back in March, but we're within sort of around that half a percent level to striking that record high in today's session, Sherry. [00:51:32] Speaker 1: Right, Heidi, let's bring in Noriko Chen to discuss all of the latest moves across markets. She's the equity portfolio manager at Capital Group and joins me today in the Tokyo studio. Great to have you here. Thank you so much for coming in. Thank you for having me. I find it interesting that you're finding Asia a little bit more constructive these days, especially focused around Korea and Japan. Some of the volatility that I just mentioned, especially around Korea, around Taiwan, perhaps, and the heavy reliance on these few company names. Is that at all a concern? [00:52:02] Speaker 14: Yeah, you know, the markets have become very concentrated, a lot of the indices. And if you look at the United States, the S&P is about top 10 companies account for about 40 percent of the S&P, but tech accounts for about, you know, close to 50 to 55 percent. And Asia markets are even higher. So, you know, you just mentioned Samsung and Hynix, but they account for close to 74 percent of Korea and then 88 percent in Taiwan is due to tech. Fifty five percent of that is TSMC. So the markets, you know, some of the markets are very concentrated in tech. And we've seen this kind of momentum trade in AI because these are the companies that are really growing the fastest. But we find a lot of other opportunities outside of technology. And we believe that as active investors, you know, the market has kind of not, you know, has not been diversified, very concentrated. But we think that as the market kind of incorporates some of this fast growth from tech, we'll start seeing other other areas start to grow. [00:52:58] Speaker 1: I mean, for example, the U.S., we have seen these picks and shovels, industrials, for example, grow more than 20 percent. Right. Even in markets like Australia right now, I'm getting the latest hot headline for you guys to follow on the Bloomberg, the ASX 200 rising 0.6 percent to an intraday record high. So we're seeing a little bit of more broadening out when it comes to those gains, whether it's energy, whether it's picks and shovels. Right. Can you see that in the northeast Asian market, though? [00:53:27] Speaker 14: Yes, we can. So I think one of the reasons why I'm in Japan for two months is because we see a lot of investment opportunities here. You know, in the Japanese market is only 20 percent tech. So there's a lot of non-tech. And, you know, on top of that, you also see a lot of revenue growth. So growth is coming from, you know, the government's priorities in terms of investing in sovereign AI and a lot of infrastructure. You know, so you've got more growth. You also are starting to see some pricing power come back into the market as the market kind of, you know, the Japanese economy starts to normalize and stabilize. And then you've got restructuring. So the government is very focused on corporate restructuring and they've set out a framework for the companies. And that's really kind of helping to drive higher profitability for companies here. [00:54:12] Speaker 1: Does that all upset some of the uncertainty coming from the Iran war, higher oil prices in a very heavily dependent oil importer like Japan? Not to mention, of course, we have the volatility with the yen. [00:54:23] Speaker 14: Yes. You know, so I think that the I used to be an energy analyst and, you know, I believe that this current conflict is very is much more short term. If we don't have a production issue, it's really a supply issue and a transportation issue through the Strait of Hormuz. I think that, you know, the Asian economies that are more reliant on energy are very proactively thinking about how to diversify away from the Strait and also probably, you know, how to kind of fast track, you know, renewables and other energy transition. But so it's a short term kind of, you know, headwind to growth, but I think manageable. I think, you know, the government is clearly trying to navigate, you know, raising rates while also and kind of the inflation issue with with trying to kind of solidly see growth come through for the, you know, for the Japanese economy. [00:55:14] Speaker 1: When you have the U.S. stepping up their support for Japan, this seems pretty historic in a way that they're now framing this as a regional financial stability issue. Right. Because obviously they don't want these competitive devaluations where you have potentially not named but out there China's yuan and anything that they could potentially really risk for Washington. Does this complicate sort of the macroeconomic forecast for Japan when we're not sure what's going to happen to the Japanese yen? [00:55:47] Speaker 14: You know, I think that it's more of a, you know, I think push pull. I think that, you know, eventually as the economy starts to recover, like we're starting to see rising wages, you know, kind of flow through, which is good for consumers. Obviously, we're starting to see some pricing power. I think we'll start to see some growth. And then again, on top of that, if you have this corporate restructuring, you know, as the companies get healthier, as the economy gets more stable, then I think then the yen will, you know, continue, will start to rise because you'll see kind of rates come up. And then the rate differential will be less between, you know, Japan and other countries, which is one of the reasons why, you know, funds flow out of Japan when, you know, rates look, you know, much more attractive in other countries. [00:56:31] Speaker 1: The thing about Northeast Asia also, not just Japan, but also Korea, because of their reliance on exports is we always thought a weaker currency would actually help the broader markets. Right. Does that still hold? [00:56:42] Speaker 14: You know, at the end of the day, most of these exporters are actually almost neutral on currency because many of them have already localized, you know, they have localized production in Europe and also in the United States. So it doesn't help them. I mean, it helps them on the margin, you know, still some of the big exporters like the automation companies, but not as much as before. So what really matters more for the government is that these companies are stronger, that they're globally competitive, that they operate, that they're better capital allocators, you know, and I think that's really what, you know, I'm sure the government and the company management are more focused on now. [00:57:21] Speaker 1: Going back to the AI trade, it's been interesting that there's been a lot of optimism about certain sectors of the Chinese AI market, some select names, even more than, say, the traditional e-commerce stocks. Does that still apply when what you're telling us is the government does care about the strength of the economy and the strength of corporates, when overall for the past few years, we've seen how Chinese demand within domestically that potentially has not changed some of the fundamental issues with that economy. [00:57:50] Speaker 14: Right. Well, I think what we see in markets and companies is different from what's happening within the economy. Right. And basically what happens with markets is that the, you know, share prices go up for the companies that are growing fastest, you know, and that's kind of what's happened with the AI trade, that's kind of what's happening with some of these AI models that are coming out of China because they're going from a very low base to, you know, higher base in terms of revenue growth, although potentially not earnings growth yet. But I think what's important about the Chinese economy is that the government is there, is very focused on, especially in the last five-year plan, investing in technology, you know, having the manufacturers kind of value up, invest in R&D, create better, you know, products, which then results in stronger companies that can, you know, export better, better products. And they're much more strategic. They're building supply chains or building, you know, maintenance operations outside of China. And so I think what we're going to see are kind of along, you know, what's happened with the EV sector, many Chinese companies becoming much more globally competitive over time. [00:58:59] Speaker 1: Always a concern when it comes to the AI trade has also been about these cheaper, more efficient models out of China. Do you go into detail to see sort of what the implications would be for some of these semiconductor makers, for these big names, hyperscalers that are building out this huge and investing massively in AI infrastructure? [00:59:19] Speaker 14: Yeah, no, great question. So, you know, at Capital, we have teams and we spend a lot of time in China and also in the U.S. talking to all of the players. And, you know, in fact, we just saw one of the Chinese model companies in Tokyo. They were here in Tokyo talking to investors. And I think, you know, what's happened is they've done a lot with very little. So they've been able to kind of produce these very, you know, good models, mainly through an open source way, you know, through simulation. But to go from here to the next step in terms of frontier models, they will really have to invest more. So, you know, they'll have to invest more. And then, you know, you might have some questions about, you know, when can they become profitable. And so I think we'll start seeing a bifurcation. I think we're already starting to see it with these companies, a bifurcation between who can do these frontier models and who can't. And I would say that with some of the, you know, other companies, the kind of historic, you know, e-commerce companies, they're not e-commerce companies anymore. They're actually more platforms. And if you look at, you know, some of the big companies, they're growing through cloud, they're growing through their own models. And I think that eventually the companies that have platforms that can do multiple different things are probably going to be kind of longer term winners. [01:00:33] Speaker 1: Noriko Chen, really good to have you here in Tokyo with us in the studio. She's the equity portfolio manager at Capital Group. Heidi, as we continue to watch some of these broader moves earlier in the Asia session, especially the commodity space. [01:00:47] Speaker 2: Yeah, the price action is really interesting here in Australia because we already mentioned earlier we were set for potentially a record high, building on that last record high that was last week back in March. And we have hit that intraday high level, as you mentioned. But it's a real interesting mix of where we're seeing kind of the most gains, right? Yes, we are also seeing some of those IT and tech stocks as the second highest leadership. But this is really being driven by the material sector. You can see some of the big gainers there. But even if you strip it down even further, it is really the copper miners that's seen gains by as much as over 5 percent. Copper miners in Australia are by over 3 percent and driving the bulk of those gains. This is after we saw copper advancing to the highest level since mid-May, topping that 14,000 level in London. Traders are monitoring those volumes being held in the U.S. ahead of what we're expecting to be a tariff, an import tariff decision by President Trump and that announcement to come. So, inventories when it comes to LME, warehousing network dropping to a five-month low. Shipments to China are being cited to relieve a copper shortage. So, we're watching that price action play out through to the copper miners today. More ahead on the Asia trade. This is Bloomberg. [01:01:55] Speaker 15: It's jobs day and Bloomberg has the report under surveillance. The labor market backdrop, still pretty decent. [01:02:23] Speaker 13: When you take a look at wages, when you take a look at the jolts data today and the quits rate, that's going to matter. [01:02:28] Speaker 15: This Friday, Jonathan, Lisa, Anne-Marie and Mike will bring you crucial data and expert analysis at terminal speed. The labor market seems okay. [01:02:37] Speaker 16: We don't see any wage pressures in the economy. [01:02:40] Speaker 15: We're all building up to one thing. The July jobs report, Friday on Bloomberg. [01:02:54] Speaker 2: Well, SpaceX's shares are down in late trade despite the revenue exceeding estimates in the company's first earnings report after its mega IPO in June. That came in at $7.8 billion for the last quarter. CapEx jumped to about $18.4 billion. Bloomberg's Danny Lee joins us now for more. And, Danny, really, this was really due to investor alarm over how much spending is going into the AI side of the business. Unsurprising, though, given how Elon Musk's been viewing this company. [01:03:23] Speaker 17: Yeah, well, SpaceX has always positioned itself before the IPO and now continually as an AI company. And so there's this very heavy levels of spending that the company is having to push through just to fulfill its ambitions and also some of the kind of clients it has as well. So, yeah, for investors, that puts the shares under more selling pressure after having fallen over 50% at least from its peak only a couple of months ago. So, yeah, again, more pressure. But when you do, as you said, look at the earnings, you know, it did much better than expected on the revenue and on sales. And just ultimately the business units are all performing better. We still only have the Starlink business, the connectivity side, which is the cash cow and profitable making money. But interestingly, even on that kind of business, subscribers fell light. But there's just that focus on the capex number of $18.4 billion, $18.4 billion. That really is just ways on the company. [01:04:27] Speaker 2: And that focus is likely to continue, right? That scrutiny, because so much of these ambitions of data centers in space are largely unproven. [01:04:38] Speaker 17: Yeah, I mean, SpaceX does have a lot of ambitions, for example, putting data centers in space. But, yeah, even when you come to the likes of capex, the fact that that level of spending is going to continue for another couple of quarters. But still, as they look to improve other sides of the business, even for Starlink, they're looking at ground-based infrastructure to complement satellite businesses. And even then, the fact that it is selling compute capacity to other major tech players, that is providing genuinely good revenue. That will flow through the business and help the finances and economics of the business going forward. So, yeah, at least investors did get to see a little bit more from this company than it previously has done. [01:05:18] Speaker 1: Bloomberg's Danny Lee there with the latest on SpaceX. The Trump administration is reportedly planning to ban some Chinese-made data center networking equipment. According to a Reuters report, this comes as a House committee linked U.S. telecom networks to Chinese equipment that allegedly exposed them to cyber attacks. Let's bring in our China correspondent, Mimin Lo, for more on this. Mimin, what do we know at this point? [01:05:45] Speaker 18: Yeah, so the U.S. government is looking to draft laws that will ban components, including these optical transceivers. Now, these are the things that allow data to be transferred at the speed of light through optical cables in data centers. And China has been a major supplier of these transceivers. And these companies have a huge part of their revenue from overseas and particularly the U.S. So, if this ban comes through, it will be a hit to these companies. But when it comes to the downstream, the clients, these are the cloud providers like Amazon, like Google, Alphabet. They could face higher costs if they have to shift to local suppliers like Lumentum, for example. These are the alternative providers who will likely benefit from this ban. And the reason for this ban is because these transceivers could be entry points to install malware that could disrupt these data center services and steal American data. [01:06:52] Speaker 1: What do we understand could be some of the reason behind this ban? I mean, I understand the salt typhoon hacking campaign from several years ago could potentially be related. [01:07:06] Speaker 18: That's right. We understand from sources that a House panel committee is about to release a report concluding an investigation into that salt typhoon hacking attack that happened in 2024. If you recall, the U.S. intelligence officials were accusing Chinese actors of hacking into the phones of a select number of high profile politicians, including then presidential candidate Donald Trump. And the report is expected to show that these U.S. telcos were vulnerable because they were connected to equipment and data centers that has some ties to Chinese components. Now, remember, a few years ago, Huawei was at the center of sanctions and U.S. telcos were no longer allowed to use Chinese equipment, right? That's why billions of dollars were spent to rip out Huawei components from U.S. telcos. But the telcos' relationship to data centers were not so regulated. So that revealed some of the vulnerabilities. And that's why the government is now drafting a law to prevent the usage of these Chinese components even in data centers. [01:08:11] Speaker 1: Bloomberg's China correspondent meaning low there. We have more ahead on the Asia trade. This is Bloomberg. [01:08:16] Speaker 2: We've got some of this optimism towards a potential reopening of the trade of Hormuz. Well, that's the hope anyway that's driving these markets. As you can see, there we are seeing WTR holding on to those losses. In fact, oil is down for a third day. Brent crude also off by half a percent there. We also saw a slight sort of backing away when it comes to European gas prices as well. That retreat on the renewed hopes that a U.S.-Iran deal could reopen the Hormuz Strait and ease disruptions to Middle East energy exports. Let's get more on these prospects of a deal. Bloomberg editor Michael Heath is with us now. So we're hearing again the right mood music, if you will, at least according to Qatar. What do we know? [01:09:11] Speaker 19: Yeah, I mean, it is interesting, Heidi. And there's, you know, this classic situation of what's said publicly and what's said privately. I mean, Bloomberg's reported that European nations have been talking with Iran about activating demining activities, which is fairly interesting because that requires, Europe's made it really clear that they want, they need security guarantees. So there'll be no more attacks, et cetera, to do that. Iran publicly has sort of kept up its pose. And this would probably only be short term, presumably, while the other negotiations go on with the U.S. But I think just that factor that Europe's sort of being brought into it, that there are these behind the scenes talks going on. And even we had Marco Rubio and the Treasury Secretary Besant talking about a deal being imminent. It does look reasonably, reasonably positive there. And if that can be sort of moved off the agenda, then, you know, you already sort of have the structure of what could happen next from the MOU they signed a while earlier. [01:10:06] Speaker 2: Yeah, and some of the other issues then potentially come back into play to nuclear ambitions. What happens when it comes to these financial overtures that were made to Iran? [01:10:16] Speaker 19: Yeah, I mean, look, presumably Iran's argument would be that we've got all that sort of set out in the MOU. Now, whether the U.S. wants more guarantees in terms of getting faster to the nuclear issue and a lot of the, you know, the Gulf states around, which were presumably expected to contribute to the reconstruction fund for Iran, aren't very happy about that because, you know, they've obviously been attacked with missiles and drones by Iran. It's like, why are we paying for that? So that remains a question. There's also within Iran, obviously, there's still these factions that, or what seems to be the case with the IRGC perhaps not being quite so keen on the deal over the strait as well. So there's still a lot to play out. But the mood music, as you said, it does look more positive, sound more positive. [01:11:00] Speaker 2: Yeah, although I guess detractors or sceptics would say, well, it didn't take very long for the first deal to unravel. And what's been achieved during this period other than perhaps a further deficit of trust? [01:11:13] Speaker 19: It's a, I mean, it's, look, it's a really, really good point. And how many times we've heard that we're at talks and things are going well, et cetera, and it's collapsed. But nonetheless, because it is just Iran and Amman sort of talking there and it is just sort of focused on the strait and a temporary deal, it perhaps at least clears that hurdle to talk about something more. But, you know, until we see ships going through and energy supplies resuming, you wouldn't sort of bet on anything at this stage. [01:11:37] Speaker 2: Bloomberg editor Michael here, Thera. We do have more to come here on the Asia Trade. This is Bloomberg. [01:11:43] Speaker ?: We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. We do have more to come here on the Asia Trade. [01:12:02] Speaker 1: Take a look at how automakers are trading across Japan. A little bit of a mixed picture with Toyota losing ground. Despite the fact that they unveiled a $6.3 billion buyback, they also raised the outlook. They've seen strong gains despite the fact, of course, that we have had supply chain disruptions, not to mention rising costs. A weaker Japanese yen has helped some of these automakers. Still, some of Toyota's biggest suppliers are still suffering with logistical disruptions, not to mention ballooning costs. You can see the gains for Yamaha as well, 15 percent right there. They, in fact, they boosted their operating income forecast and then they have beat estimates. Today, we are expecting the results out of Honda. The expectation is for some strong sales of gas electric hybrids in the U.S., also here domestically in Japan as well. Let's bring in James Hong, head of Asia Energy Transition and Commodities at Macquarie Capital. Great to have you with us. You can see right there that Nissan is gaining ground. Nissan, we already got the results. We already got the results from Mitsubishi Motors as well. First of all, give us your reaction to the earnings season that we're seeing across the auto sector here in Japan. [01:13:26] Speaker 20: All right. So a lot of automaker actually has reported quite solid earnings, obviously benefited from the weaker yen, as that has been worked as the biggest tailwind for these exporters. But also some company actually benefited from the tariff refunds such as Nissan. So overall, the 1Q print wasn't that bad as a concern. But when you look at the actual fundamentals and the sales performance-wise, clearly the total sales volume in the 1Q actually were soft, mainly due to the competition with the Chinese competitors in the market like ASEAN and European market. So that remains our biggest concern for the Japanese automakers in general, while some companies, very selective company, might continue to deliver quite solid earnings, which is Toyota in that case. Well, I mean, they've been growing quite strongly in China in the last decade or so, but then when you look at the company like Honda, they're heavily dependent on China and U.S. And same for Nissan, so with the exception of Toyota, who's more balanced in the different geographies, I would say the Honda and Nissan are heavily dependent on the Chinese market, which is similar for European peers that we've been seeing. Obviously, the earnings of the European has been much uglier than what we are hearing from Japanese, with the less exposure to U.S. market where they continue to generate decent profitability. So China was very important for all global automakers, the magnitude that differs, but at the end of the day, China is basically the backbone of their global scale and global operation. Thus, the weakening sales in China is a big fundamental threat to some of these global automakers in our view. [01:15:28] Speaker 1: When do you expect that market to recover and is it a problem of perhaps lack of subsidies from the government? Is there a problem of just local demand as well? [01:15:41] Speaker 20: Well, I mean, if you're asking whether the issue is a cyclical or from the structural, I'll say it's a more structural issues. One is that we blame the subsidy from the both local and central government, but at the same time, when you look at the consumer side, the price tag is not the only choice, not the only selection criteria for the Chinese consumers. I mean, software and the other features, in-vehicle, technological features are the bigger drivers of growing Chinese share within the Chinese market. So that actually means that with the international brands who are a bit late in terms of adopting this software capability or in-vehicle features, will continue to lose market share, especially to those younger generation in Chinese market. And given that Chinese companies are adding more capacity, scale being growing, I do believe that the current market share losses of the international brand will continue to be the case and eventually hurt a lot of many global automakers who are heavily dependent on China at the moment. [01:16:58] Speaker 1: James, more specifically on Toyota, what's happening to the stock now? We're seeing the downside pressure, despite the fact that the management announced a 1 trillion yen buyback. [01:17:08] Speaker 20: Yeah. Well, I guess there has been growing expectation, especially from the buy side, for the bigger than 1 trillion buyback. Given one, share has been trading below one-time book, which is a sort of benchmark for many Japanese companies. Two, the management has a strong commitment toward the long-term ROE generation of 20%, which will be delivered with the combination of earnings change in earnings structure as well as the capital structure. And three, the company management actually mentioned that Toyota is currently sitting on the excessive capital reaching around 8 trillion. Right. So the 15 trillion net cash they have and the balance sheet with the 7 trillion needed to run the business for the next six, seven months. So compared to that number, I think one trillion seems to be slightly weak or at least to make investors get excited about these changes. [01:18:17] Speaker 1: James, what about the logistical problems that some of Toyota's largest suppliers are talking about, especially when it comes to shortages of aluminum, resins, other basic supplies? Is this mostly to do with the supply chain disruptions from the Iran war and how consequential is this for the rest of the broader auto sector as well? [01:18:39] Speaker 20: So this is not a Toyota-specific issue. It's a broad industry issue. Obviously, the company with the broader supply chain, broader lengthen the value chain will definitely be better positioned. In that case, Toyota seems to be far better positioned than the other companies and clearly the higher raw material costs such as aluminum or the steels or even memory, which has a little to do with the Iran, but are actually hitting the supply chain. And we're seeing the pain being hit the auto parts suppliers first before we pass on to the automaker with some time lag. But when it comes to Toyota, clearly the FX has been one of factor that has offset successfully the impact of Middle East during the 1Q. And going forward, the product mix and the ASP hike will be another factor that keeps the company or that keeps the automakers differentiated in terms of earning stability. So with the Toyota strong in hybrids and also the tight in terms of inventory level, we believe that Toyota has one of the highest potential to raise the prices and pass on those cost burden to the consumers. Because at the end of the day, your ability to pass on the price cost high depends on your loyalty to the brand and the strength of the brand value. And we think that Toyota is relatively well positioned compared to other Japanese automakers or other global automakers. [01:20:10] Speaker 1: Good points. James Hong, good to have you with us, the head of Asia Energy Transition and Commodities at Macquarie Capital. We have plenty more ahead on the Asia trade. This is Bloomberg. [01:20:22] Speaker 2: Take a look at what we're watching when it comes to trading in Asia markets. It's a pretty volatile session, actually. You do have quite a significant upside when it comes to trading. The cost will be up by 4.6%. We did see that activation of the buy side sidecar mechanism again becoming sort of less of a surprise. We get it in just about every session, it feels like, given the amount of volatility, the Nik825 seeing upside of over 3%. They're a pretty good sort of lead in from Wall Street when it comes to these tech stocks, despite some disappointing investor reaction over the SpaceX numbers and also over AMD as well specifically. Here in Australia, we are now trading flat slightly to the downside. We hit an intraday level which suggested we were going to get that record high, the first record high since March this year that would pull back somewhat. But some of those miners, materials in particular copper miners, are doing quite well with the rise in copper prices. China, though, in for a volatile day despite very strong tech performance from the rest of the region. These U.S. curbs on server components are looking likely to dent the China index and Hong Kong futures are lagging at the moment. Let's get a bit more on the setup when it comes to the start of trading in greater China. Bloomberg Markets reporter Anthony Stevens. So the geopolitics start to step in here in terms of what could potentially suppress the gains that we've seen in mainland China. [01:21:48] Speaker 7: Yeah, it's kind of atrocious timing because yesterday the China X was up, you know, 5% on optimism around participating in the optical setup for Nvidia chips. And then you had this kind of media reporting that opticals will be in the focus of U.S. curbs. You saw the U.S. names in that space trade up very strongly on anticipation of less Chinese competition. These names make up around 20% of the China X index, the top three optical names. So that's going to be a space that is going to come under some very severe short term pressure, especially given the gains yesterday. This space also has materially retraced from the highs. And China's margin balance, margin trading balance has been concentrated in these names aside from other tech names. And so China's margin balance has also been under pressure as investors take margin losses on this space. So how retail trades this space today will be very important. Will they double down on their conviction that this is a very important focus of the A.I. trade? Or will they have to get stopped out as the U.S. market becomes closed to China? This space is also very pivotal given China's technological innovation on the LLM side. So China is trying to connect more chips together, given that they suffer from a chip shortage at the very high end. As a result, optical the optical space is very important to China. So it'll be interesting to see how this plays out. [01:23:09] Speaker 2: What about the setup when it comes to the tech heavy Taiwan market? [01:23:15] Speaker 7: Yeah, life is much easier in Taiwan. I mean, index is indicating up three. There were some extremely strong leads on A.I. CapEx from SpaceX and AMD. And then overnight, the price action was almost unanimous. There's double digit gains in almost everything that, you know, procures from Taiwan. Intel, Broadcom, you know, a whole raft of Sox names were up 10 to 15 percent. So very strong leads into Taiwan. What will be very interesting is the go forward spending plans of the likes of AMD and NVIDIA from the SpaceX kind of from the SpaceX CapEx ramp up and what they will spend on. So it'll be interesting to see how many of these Taiwanese names can hold on to the gains. They've recently recovered quite sharply. There have been a couple of back to back kind of limit up names in the in the weeds in Taiwan. TSMC premium went back up to the top end of the range around 17 percent. So things are looking quite rosy for Taiwan. One exception is the currency that continues to weaken despite all these equity inflows. [01:24:19] Speaker 1: Bloomberg Markets reporter Anthony Stevens there with the latest on the markets and talking about financing artificial intelligence deals. Blackstone is set to be exploring a second mega debt package to finance Anthropics use of Google AI chips. Sources say one initial proposal was for at least 36 billion dollars of debt. If finalized, the deal would exceed the 35 billion of debt lined up by Apollo and Blackstone some two months ago to fund Anthropics lease of Google's custom chips. Samsung Electronics has unveiled a new generation of AI memory technology in a bid to overtake rivals SK Hynix and Micron. The new system known as ZHBM integrates high bandwidth memory directly with AI chips and claims to deliver about eight times the performance of even the next generation HBM5. The movie is part of Samsung's efforts to position itself as an end-to-end provider of infrastructure for the AI era. Apple sales in India have topped 10 billion dollars for the first time highlighting growing demand for the company's devices in one of its fastest growing markets. Revenue grew at a double digit pace in the year through March with iPhones accounting for the bulk of sales. The milestone highlights India's growing importance to Apple as the company looks beyond the U.S. and China for growth. [01:25:45] Speaker 2: Asheri, the Reserve Bank of India is widely expected to keep rates on hold today as policymakers weigh rising inflation risks from higher oil prices. Asheri, the President, who leads South Asia's economy and government coverage, joins us now with more. So what are the potential conflicting interests in today's decision? [01:26:05] Speaker 16: Look, for the Reserve Bank of India, the inflation rate is within its tolerance band of two to six percent. But it has been rising. And it was the first time in 17 months that it crossed the midpoint of that tolerance band four percent. So it is a bit of a worry. We have weak monsoons in India, which is affecting sowing season. And that would have an impact on food inflation. And the war in Iran is still ongoing. India is a huge importer of crude oil, and that will have an effect on inflation as well. So the RBI is on a wait and watch mode. It does not want to respond to temporary what it calls temporary supply shock. But that is it's an inflation targeting central bank and inflation is looking a little bit of a worry at the moment. [01:26:59] Speaker 2: There's of course, weather risks going forward as well. But in terms of the forward guidance that we're looking for, what's going to be interesting for you? [01:27:07] Speaker 16: Look, the RBI has maintained a neutral stance. So we are going to be keenly watching out for whether it maintains that stance or it changes it. There is not a lot of clarity around how Sanjay Malhotra, the governor, would phrase that. So they won't if they if they do change the stance, it won't be like we are moving from neutral to a hawkish stance. So the wording around that is going to be interesting or whether they retain the phrasing from the previous meeting around being data dependent, being on a wait and watch mode and saying in so many words that we are on neutral stance. So I think that that wording around what happens next will be will be quite good. [01:27:53] Speaker 2: Other than fuel prices, how's the rest of the economy shaping up? [01:27:56] Speaker 16: Look, the economy is proving quite resilient. And as we saw for Apple as well, the iPhone market is quite strong. India is one of its biggest markets. So we are seeing household spending being reasonably strong as well. Last the last GDP data that we had showed the economy grew at close to eight percent rate. So it remains one of the fastest growing major economies in the world. We'll get the next GDP data in at the end of this month. But the high frequency numbers are pointing to resilience in the economy. [01:28:35] Speaker 2: Bloomberg's Swati Pandey there who leads South Asia's economy and government coverage. More ahead here on the Asia trade. This is Bloomberg. [01:28:43] Speaker 1: Take a look at how Japanese assets are trading at the moment on the Nikkei. We're seeing gains of almost three percent being led higher by communication services and information tech. Not surprising when it comes to the tech sector. Of course, we saw those record highs in the U.S. session. Not to mention that chip makers also had the four day rally that was the best since 2020. So we're seeing some upside together with some of those supply chain names, given that we got AMD's results in the overnight session as well. We're following the Japanese yen very closely still holding at that mid 157 level against the U.S. dollar. Of course, we have heard more from Secretary Besant in the U.S. framing the U.S. support when it comes to supporting the Japanese currency as a regional stability issue when it comes to currencies. We've been following JGB's as well. The 10 year yield holding at that 283 level. A little bit of a bounce back from the previous session when we saw the downside pressure on JGB's because we saw the weakest auction for 10 year JGB since May of 2025. Of course, a lot of skepticism about the BOG's normalization process, not to mention the expansionary policy of the Takaichi government. We have also had some more data this morning showing solid real wage growth, a sixth straight month of growth, even adjusted for inflation, which is the longest since 2021. One sector that we're following in the Japanese market is pharmaceuticals and manufacturer Shionogi is considering expanding its U.S. manufacturing capacity over the next few years. It's looking to diversify its production base. CEO and President Isao Teshirogi also told Bloomberg's Lisa do exclusively that Shionogi is pursuing a series of M&A deals. [01:30:45] Speaker 9: We are looking for a lot of opportunities. Actually, we're actively pursuing minimum three deals today. And of course, we're not able to guarantee you we're going to go although three, but this is something that we continuously will do. And of course, the Japanese market is very important and U.S. market is very important, too. And we are going to keep growing the European market as well. So those are the three major geographies we're looking into. [01:31:26] Speaker 10: Chinese competition, obviously, going back to this, it's a hot topic globally. Some pharmaceutical companies have mentioned they're being more cautious about disclosing certain clinical trial results early because of Chinese pharma abilities to kind of replicate the results or make very similar drugs in a short amount of time. Is this something that is on your radar and that Shionogi is similarly cautious about? [01:31:49] Speaker 9: I think a small molecule area, even historically, you know, was exposed to the, you know, the things you described. So when we're submitting the intellectual property, we have been very cautious and we have been, you know, aiming to us the thoroughly as possible to create a good IP. So, yes, we recognize, but I don't think it's only unique for China. The pharmaceutical companies are so competitive and everybody is holding a lot of radar screens for the innovation. So it's a competition. We admit that. So having said that how we maintain our strength, the only thing is we keep running into the top notch science in terms of the how we're going to differentiate ourselves from the other companies. [01:32:50] Speaker 10: There is a lot of rhetoric now globally, I mean, around the world about geopolitical tension, trade barriers. Just last month, U.S. President Trump also had mentioned that he intends to put a big tariff on generics going into the U.S. I understand Shionogi doesn't have a big focus on generics, but you guys are also are very, you know, focused on your message about access to health care and medicine. I'm just curious how what you think about this type of kind of tense rhetoric and how it might impact the future of the pharmaceutical industry globally. [01:33:22] Speaker 9: Well, good question. The pharmaceutical manufacturing, as you know, is heavily regulated by the each country's health authority. FDA, EMA, PMDA, MHLW. So it's not easy to move the manufacturing site from country A to country B or place A to place B. Having said that, the probably five to ten years landscape, our company's way of thinking is the we really want to almost diversify the manufacturing capabilities, Japan, U.S. and part of Europe. [01:34:06] Speaker 2: Shionogi CEO and President Issa Tesharogi. They're speaking exclusively with Bloomberg. Take a look at how we're setting up could be quite a difficult trade, particularly when it comes to greater China with some of these geopolitical pressures on the desire, really an intention to contain some of these Chinese made components for data centers, potentially exposed to U.S. carriers to risk. We've heard from the latest on the House panel as well. But this could certainly be the case. The House panel as well. But this could certainly play out when it comes to some of these tech and A.I. related names across China and trading in Hong Kong. A lot of uplift has, of course, come through with the closing of the gap between the U.S. and China on the A.I. models this week alone. We had another release from Alibaba that added to that narrative. Taiwan futures looking pretty healthy there. You're seeing Hong Kong tech futures up by just about half a percent, a broadly higher session for the rest of Asia. The China Show is next.