Yen Falls To 40-Year Low, Trump Imposes Pharma Tariffs | The Asia Trade 7/22/2026

This is the age to train them. Shery Ahn in Tokyo. The top stories this hour. Asian equities set for gains after a dip by years for a comeback on Wall Street. Chipmakers rallying ahead of reporting season for tech mega caps China mounting one of its broadest efforts in years to steady stock market traders, seeing signs of state backed inflows as a key tech edge jumps the most since 2024, and the yen slide is looking hard to stop as it tops 163 to the dollar for the first time in four decades. I'm Hattie Stroud, what's in Sydney? Take a look at the set up for trading across Asia. As Shari mentioned, we are looking like we're going to cook up some gains here in the Asian sessions, really largely on account of that rebounding ship makes offsetting broader concerns that we continue to see across the geopolitics space. President Trump playing down prospects of talks with Iran amid now this threat in the Red sea. The two sides exchanging strikes. Dalhousie militants in Yemen now threatening shipping in the Red sea area as well. So we are waiting to see the further response from Washington. Uh, President Trump has vowed to execute that response if the Iran backed Houthis will disrupt that waterway in the Red sea, but hasn't provided any specifics of what that retaliation might look like. In the meantime, though, we are seeing that tech they really driving heavily into the start of trading here in Asia, the Nasdaq 100. This is how we are looking at the last trade close to 2% higher. And that's going to pass through very well to, uh, trading in South Korea in particular, Japan also, perhaps to a lesser extent. But take a look at Seoul Crosby Futures. That's a 4.4% higher when it comes to that last traded picture. Uh, Sherry mentioned the yen. And that's going to be at play, particularly as we continue to watch that 163 handle really quite easily, slotting past that 163 level to mark a fresh four decade low against the dollar. Looking like that trajectory, the momentum will be pretty difficult to stop at this point as we see that dollar strength rising along with Treasury yields. On the backdrop of this renewed geopolitical tension, with the U.S. and Iran pushing up oil prices as well. Speaking of which, let's take a look at crude, as we do see crude prices broadly edging higher. That sort of downplaying of the prospect of any kind of near-term resolution or detente with Iran from President Trump, the threat of further strike. This is all playing out, as you see New York traded buy just almost half a percent at this point. But let's take a look at the broader set up with the trading day. Again, it should come down to the chip stocks as a major theme with that Wall Street. Let it come back. Bloomberg strategist Mark Cranfield joins us now from Singapore. So we seem to be in a position where we're able to put aside some of the the war risk for now. Yeah. I think what would have concerned the investors would be a sudden jump in oil prices if we'd have gone up to $100 a barrel this week in a couple of days trading, that would have really unnerved the markets. What we're seeing is a very gradual rise for Brent and for WTI prices. I think investors can cope with that reasonably well. They've seen that scenario before, and we are approaching the key parts of the of the U.S. earnings season. And optimism is pretty high. We've got alphabet this week. We've got the other big tech companies to come. And the noises that we are seeing with even some of the medium sized companies is pretty good. People are expecting a very solid earnings season. That will reinforce the view that the underlying economy is doing very well. There's still very big demand for AI products and even that even the Chinese story feeds into that as well. Because these companies are disruptors on one level, they also need an enormous amount of computing power as well. So they need to buy more chips. So that story is continuing to be refilled. And you seen a very big change in positioning this month. There's been huge volatility across the world in equity markets, which has also helped to clean out short term positioning. So traders are in a better place to be able to get back into the market as this earnings season develops. And that's exactly what you've seen happen in the past couple of days, and helps to explain why Nasdaq has such a strong finish yesterday. Mark. So we have been contending with the whole tech narrative, not to mention, of course, the Iran war. Now we're getting the latest headlines just minutes ago from President Trump that he's now setting 100% tariffs on generic drugs from August 2028. They will eventually be raised to 200%. We have been sort of putting the trade war tensions in the back burner. Now they come to the forefront again. What does that mean for the markets when you have to digest so many different variables at this point. Yeah. Trump is also talking about, um, slapping 10% tariffs on everybody by the end of this week as well when some of the others roll off. I think investors are taking it with a pinch of salt, because they've seen so many times that these tariffs are proposed, and then they're taken off at the last minute. They seem to be a point of negotiation. It's an invitation for other countries to come forward and discuss ways around it and ways to to mollify what the president really wants. So traders are not very impressed any more about these sound bites, these sudden noises. You can see the market reaction is extremely small. There may be other surprises that President Trump has in store, but for the time being, the whole idea that tariffs are a really big deal for financial markets, that's really last year's story. For now, the narrative is about I. How much money can we make from it? What are the positive consequences for markets on whether or not companies are going to produce the stellar results which we've been seeing all year. If you look at some of the export data coming out of Korea, again, massive exports out of Korea. Taiwanese GDP is running at levels we haven't seen since the 1980s. This is very encouraging for the global story, and people are much more interested in that rather than concerns about tariffs that may or may not happen. And we've got to talk about the yen, right. This is sort of just an acceleration of the same story we've been talking about for the last few months. But I guess two angles. How much benefit are equities traders going to get, particularly when it comes to looking at exporters at this point? And also is intervention even at this point going to make a difference, or is it just really an opportunity perhaps to kind of get those shorts lined up again? Well, the Japanese authorities keep on talking about tough measures that they are ready to do whatever it takes at any time. And yet the action is relatively small, so traders don't really seem to fear intervention anymore. From the Japanese point of view, is obviously the biggest stick that they have is the pension fund, the government pension fund known as GPF. If they can persuade them to move money back onshore, a lot of money, they have a couple of trillion dollars equivalent in overseas assets. If they can move a decent chunk of that back to Japan, it would encourage other pension funds to move money back. That would have to come through the foreign exchange. The yen would surely strengthen if that money flows back. But so far there's been a lot of talk about it. We haven't seen any clear action that they're ready to change their policy on that. So traders are a little bit skeptical that it can even happen. In the meantime, we've seen several rounds of intervention. And yet dollar yen continues to climb higher because the carry trade is very favorable. Holding US dollars at the moment is a relatively easy decision for investors because yields in the short term are well above 4%, and they comfortably make up for any short term volatility, although there isn't even much of that because it's a gradual move so far. And we know the Bank of Japan is well behind the curve and they are in no rush to change policy. Everything is very skewed towards the yen remaining a weak currency, and unless they can persuade the Japanese pension funds to move large amounts of money back home. The yen will stay undervalued and it will be something that traders don't fear. They don't fear intervention because the only knocks down by a couple of big figures, and we're well away from the 155 line. The Japanese authorities look back and they probably think they made a mistake. They could have pushed dollar yen below 155 early this year. They didn't. They stepped back. And now traders can see that their downside is relatively limited. They can just all they can see is upside. And if you look back at the 1980s dollar yen started from around 200. So if we're repeating the 1980s, there's a very long way to go. Olympic strategist Mark Granville there with China in the meantime, mounting one of its broadest efforts in the years to study its stock market after a brutal trove of Chinese AI and chip stocks lower. Let's bring our chief North Asia correspondent, Stephen Engle, in Hong Kong. We haven't talked about this for quite some time. How coordinated was this move? And are we expecting a return to that old playbook? Well, we'll see how sentiment holds up, right? I mean, the big reason for this suspected national team move in a coordinated effort between, of course, not only state backed investors and regulators, but also insurers and asset managers and the like, whether it's state owned enterprises pledging buybacks or actually direct intervention and buying of ETFs that we did see, uh, they want to put a Floor. On the sinking confidence that we saw last week. No doubt a global selloff in chips that did finally leak into China where we saw chip makers and of course I players getting absolutely beaten up and the essentially the authorities. I don't want to see a lack of overall confidence in the broader market at a time when they want to see their AI players the up and coming ones. You know, whether it's like moonshot with its Kimmy K3 latest model that really shook some of the or, you know, instigated some concern in the U.S. about the high priced models in the United States from anthropic and open AI that these lower priced models in China are matching or coming pretty close to the capabilities. They don't want to see these companies lose their ability to raise capital at a time of intense competition with the United States for AI supremacy. So what we did see, well, we're going to talk about Scott Besson in just a minute. I want to bring up the the charts that we saw yesterday as indicative of just the sheer scale of a fund flows into something like the China AMC star 50 ETF. We saw levels not seen in a long time. Uh, the tracking fund of the chip heavy index star 50 attracted a record ¥13.8 billion. That's 2 billion USD of inflows. So that obviously indicates there was some coordinated state backed capital was at play. The star 50 index, uh, gaining as you can see, that's the third one on that chart, up about 11% after tumbling 17%, uh, last week. Uh, also insurers uh, came to play here as a coordinated effort pledging to boost investment. So a lot of moves at play on both Monday and Tuesday. I don't have my crystal ball. Whether it will happen again today and through the rest of this week. But they're determined, no doubt, to put some confidence back into this market, a heavily retail market, the Asia market in China. Yeah. And Steve, you rightly mentioned this, uh, geopolitical US-China element to it as well. Right? We're hearing from the US Treasury Secretary, Scott Benson, that Washington will investigate allegations that Chinese AI models may be stealing AI intellectual property from the U.S. this ahead of the the talks that we're expecting to, um, before the September visit between the two leaders. What do we know? Yeah, these are accusations that the big models in the United States, like anthropic and OpenAI, have accused these Chinese lower cost models, open source models, potentially of doing what's called artificial distillation. Uh, it's in very layman's terms where open source, lower cost models, uh, essentially learn from the larger models, uh, and that potentially could be an avenue, uh, for the, you know, the open source, lower cost models in China. Two. Uh, essentially in layman's terms, uh, steal intellectual property. And that's something that Scott Besson, speaking of Fox News, says this administration supports open source models. What we do not support is IP theft. So again, that is going to be a, you know, a contentious issue in talks leading up to that summit on September 24th in Washington, D.C., at least Marco Rubio, the Secretary of state, has confirmed that that is still on track for Xi Jinping and Donald Trump to meet in Washington, D.C.. Reuters is also reporting that the two nations ahead of those talks in September will have some form of talks on I, Ryan Stephen Engle, our chief North Asia correspondent there. And coming up, oil hitting early June highs as President Trump dismisses prospects of immediate talks with Iran, even as mediators work to revive an interim peace agreement. The details next. This is Boone Bach. Take a look at what we're watching when it comes to broader commodity markets, in particular oil. Of course, that story continuing to edge higher. President Trump playing down the prospect of near-term talks with Iran while also threatening further strikes. Also dealing with the potential threat by the Iran backed hotel in the Red sea waterway as well. So we also see New York traded crude ticking high about 4/10 of 1%. We've also seen that rally in oil, as well as what's going on with Treasury yields pushing up the US dollar as well. That grind higher pretty flat at the moment when it comes to the Bloomberg Dollar Index. But we know the implications for the yen in particular. Try to get that fresh four decade against the greenback. US futures at the moment just modestly lower. But the president is playing down the prospects of immediate talks with Iran, both sides exchanging strikes. Concerns are also growing over threats to shipping in the Red sea and the Strait of Hormuz. Bloomberg senior editor Derek Bank joins us now for more. It's interesting, Derek, the markets are kind of for now, trading this as a lower level of tension, almost background noise to sort of the other broader tech themes. But there's certainly no improvement that we can see. No, there's certainly no improvement that we've seen so far. You're talking at nearly two consecutive weeks of nightly strikes that the US has launched on Iran, as well as Iranian responses to U.S. positions across, uh, the Gulf. And so there's not really a very clear way out of this at this minute, uh, critical issues still remains. Uh, among other things, I think really the Strait of Hormuz, whether or not that is going to be able to be fully opened, whether or not that's going to be something that will be, uh, going back to the situation it was in before the hostilities started, that being a toll free international waterway. And I think that's one of the keys to unlocking, you know, a lot of the, the, uh, other things that are at stake here. You know, one of the things that we've seen, you know, we saw oil prices going down and down and down, they've come up about 20%, uh, since, uh, hostilities reignited. And now we have this whole question about what might happen on the other side. Now, look, you got to remember, Saudi, uh, geography is pretty simple. On one side, uh, you've you've got this waterway that we've got in question here that it also shares with Kuwait, with Qatar, with the United Arab Emirates, etc.. Uh, that that has so much of that energy flow, you know, sort of all the way through. And that's what we've been really dealing with. When you come across to the other side. That's the Red sea. So not only is that the escape route, if you couldn't send something out via the Strait of Hormuz to either take that out toward India, in Asia, or through the Suez, out to Europe and beyond, right. Not only is that the other way for energy, but now you're talking about containers, now you're talking about the other sort of, uh, global shipping risk. And if that gets, uh, disrupted either openly in the sea or is through a choke point that's between Yemen on one side and, uh, Djibouti and Eritrea on the other side. And so another sort of small global choke point, if that gets to be a problem and you can't actually send things through there, then you're talking about all of that European to Asia trade having to go round the end of Africa. That adds cost, that adds delays. And so this is not just another potential escalatory situation that is developing. You are talking about potentially a contamination into other things that have been so far mostly unaffected because they're using a different waterway and talking about trade. I mean, we could see even more disruptions in supply chains given these new tariffs by President Trump just today announcing them on generic drugs. What do we know at this point? Well, we just saw a social media post, uh, from the president. Uh, we just put a story out, uh, that, that I wrote that basically says what we know at this point, which is that Donald Trump has said that in two years time, he's going to put a 100% tariff on generic drugs imported into the United States a year later, uh, in 2029, that would rise to a 200% tariff. The idea there is to onshore generic drug production. That is being half that is happening in other countries. Now, what we've seen with this president so far in terms of tariffs, everything else is unsaid. Let me let me be very clear. But what we've seen so far from this president when we're talking about brand names, is that he has been willing to do deals with producers when he's talking about building things into the United States, having investments into the United States. And you have seen a whole lot of brand name drug makers from Europe and elsewhere be able to cut deals with this white House for relief in exchange for on shoring, for plans to onshore foreign investments to come on. Any time that I see Donald Trump doing something that has a very late start date, uh, even as quick as one month from now, but this is really two years from now. You can think of it as an opening for negotiations. And so this is a threat. And then the negotiations sort of come after it is really now in his second term, Donald Trump's classic Art of the deal. Derek, is this also the case when it comes to these new proposed tariffs of at least 10% on what, some 60 trading partners that we're all expecting by the end of this week as well. And does this kind of play into, I guess, the urgency to push some of his, his, you know, landmark policies before the midterms. Those are a little bit different because those are kind of wrapped up in this idea that when the Supreme Court got rid of Donald Trump's original Liberation Day tariffs, the white House said that it was going to try and get those levels back by other means. And they've gone through different means. And so we're expecting some of that to come up, uh, imminently. But I do think that you can kind of put this all into this basket of what Trump has said he wants out of this, out of this trading sort of situation. He wants tariffs on goods coming into the United States. He he wants that is a core foreign economic policy that he has. Now, when you're talking about some other things that have been threatened, the the tariffs on Canada, for example, that could be a negotiating point, albeit that one's got a 30 day ticker going on it. Um, the sort of section two, 30 twos that are coming up that are, that are under another legal idea. The, the whole framework of that is really around the idea that those are a little bit more of a legally defensible, uh, tariff structure, that there may be a little bit more insulated from court challenges. Of course, they probably will be challenged anyway. Um, but that's kind of the thinking over there. Overall, I think overarching Trump has shown that he's willing to try and do deals, but he's also shown that there's not a situation in which he's willing to have a zero tariff environment, kind of as a global overall. That's just that's just entirely contrary to his economic thinking and to, uh, candidly, some of the revenues that, that that raises. Now, you asked about the midterm elections. I think it goes absolutely without saying, but we should say it anyway, that to the degree any of this is disruptive to U.S. equities, to the extent that Donald Trump can't point to Americans retirement accounts, say, look, they're going up, doesn't that mean the the economy is good? If that starts to weigh on the economy, you have seen this president, uh, be willing to pull back in those circumstances. He is certainly somebody who is watching and responsive to equity markets as well as especially to bond markets. Right. I mean, he spoke so much about four one case during his first term, the brick wall back. Really good to have you with us. Bloomberg senior editor there. We have more ahead on the Asia trade. This is Bloomberg. Take a look at the latest from the copper front, and Intel shares rallied after the chipmaker confirmed a new round of job cuts to reduce costs as part of its turnaround effort. The layoffs would target Intel's data center business, which has been helping drive a recovery in revenue amid strong demand for AI infrastructure. The company did not specify how many jobs will be affected. Intel has cut more than 40,000 jobs from its 2022 peak headcount. Bloomberg has learned that Apple is partnering with shopping and payments platform Klarna to launch a new leasing program. The service will work on the subscription model, allowing customers to pay monthly for iPhones, marks, iPads and Apple Watches. Users would get options to upgrade early, keep the device or return it at the end of the term. Sherry and Heidi take a look at live pictures from New York. Flash flood warning stretching from Midtown Manhattan to Queens, the Bronx, new Jersey, and Connecticut. We have already seen heavy rain, more than four inches of rain already falling across, even in areas like LaGuardia airport, which has instituted this ground stop at least until this evening. So, uh, do be careful if you are up out there. I mean, we're expecting heavy rain. We even had a tornado watch issued this afternoon for parts of Connecticut, Delaware, new Jersey, Pennsylvania as well. We have more ahead on the train. This is Bloomberg. We're watching Asian stocks open today Heidi. And really, the focus is very much on what's happening with the chip sector. Right. Because we saw this rebound again on the Philadelphia Semiconductor Index. I mean, there's been a lot of volatility, to be fair, Heidi. But the thing is that we haven't really seen those gains throughout the month. I mean, we're still down on the month, but the Philadelphia Semiconductor Index, this sees biggest gain in the month. So oh what happens to all of those appears around here in Asia. And you can see right there on the futures for Samsung in this case. And things are pointing higher. We have also seen some news from local media in South Korea that SK Hynix is in talks to buy Intel's Ohio chip campus, but then Intel coming out and saying that they're committed to investing in that campus. So we'll be watching for more details. The fact is that there's a lot of news flow in this sector, right? I mean, we're talking about chip makers. We have hyperscalers reporting. We have to watch alphabet. There's so much around the eye trade. And that's before we've even gotten to these eye talks that we're expecting between the U.S. and China as well. Right. This with the U.S. Treasury secretary really talking about this need to kind of scrutinize and investigate what this means for US intellectual property, and whether we're seeing that in these open source models with China. But all of this ahead of that latest meeting expected in September. But take a look at what we're watching when it comes to these broader markets that Shari mentioned. This is very much kind of pushing aside some of the concerns about the U.S. and Iran, despite, of course, President Trump really being, uh, quite non-committal when it comes to where talks are at, if they're having sort of plans for talks at all with Iran and increasing threats of strikes and increasing tensions now in the Red sea as well as the Strait of Hormuz. So we are seeing crude elevated, although not moving terribly much at the moment, 4/10 of 1%. Uh, Japan will be an interesting one because of course, we do have all of the moves on the yen. We'll get more on that in just a moment. US future share at the moment. Uh, modestly lower. Yeah, but to your point, Heidi, I mean, we do want to talk about the yen right now, trading about that 163 to the dollar level. I mean, when do we get here? This is a first time since 1986. Speculators piling onto the currency's weakness. Markets reporter Anthony Stevens will walk us through what's happening right now. Because, Anthony, as I was saying, I mean, I never it 163 coming so fast. But at the same time, a lot of people saying, well, there's no choice at this point. What can authorities do? And really, speculators even help buy volatility or at least low volatility. Yes. So turn to the one way direction of the fundamentals is helping to suppress volatility. Also we have a lack of this shock intervention. You know that the the Japanese had promised there hasn't been much in the way of 1% 2% kind of moves. So as a result volatility keeps dragging lower. Volatility is historically quite low even though volatility in the one near market starts to pick up. So what are the fundamentals. The fundamentals are that Japan has moved from being an export powerhouse even though it has a record current account surplus into being an FDI income generator. So basically, Japanese companies invest a lot abroad. They make a bunch of money abroad, and then they reinvest those gains again back abroad. That is why the return of capital to Japan from Japanese companies has kind of halted. That is one structural factor. The other one is obviously the oil crisis and Japan being an export, energy import and exports more or less flatten out against that oil bill. So on a structural basis, Japan has a flaw, uh, kind of, um, problem going against it versus this kind of trade that is now building every other currency that exports oil is starting to trade a lot better than the yen. I mean, tell you, my characters remember what happened in 2024 when that carried trade on. The yen just exploded and we saw that sharp spike on the yen. Tell us a little bit more about how that trade is making money, uh, for investors, even in other currencies right now. Yeah. So this time around, we do have this kind of commodity boom pushing some of these carrier currencies. So the so the Brazilian rail, the Aussie dollar, the Colombian peso, these are a Mexican peso. These are kind of currencies that benefit from an export boom in commodities. And the low volatility in the yen allows people to stay in these trades. As a result, people are piling into these trades to the extent that which carry trades are returning just on a per spot basis as much as the S&P 500. That's forgetting about the carrier altogether. This is a risk reward profile that is very attractive. So again volatility is multiple times less than SMP volatility. So if you're going to get the same reward for a fraction of the risk you can see why investors are so uh rushing into this trade. On the other hand from the pure BOJ fundamentals nothing is expected in terms of rates for the next two meetings. So there is a window here of complete complacency on the market to pile in on onion shorts, especially if you're getting paid in carry unless Japan does something on intervention. Where does the Korean wan stand in all of this? Because I'm surprised that we're actually stronger than that 1500 level. And I mean, that shouldn't come as a surprise. How do we get to 1500 in the first place? Right. But right now we're around like 1480 or something. Yeah. So one of the big drivers of that, as you said, surprising weakness, was the fact that foreigners had to trim so much Korean equity as the market got so big. Now that dynamic has retraced somewhat as the Korean market has come off a little bit. So foreigners have turned, if not big net buyers, at least they've stopped selling. And that's allowing the fundamentals of the Korean one to shine through. Also, the block has become a little bit more strident that they are going to be embarking on a rate hike cycle and the street is starting to line up behind that. We also had commentary from the government that people should be expecting a stronger one. So in Korea, the internal dynamics are such that they want to kind of tamp down on inflation. And there's a lot more standard messaging around future one strength. Then in Japan where Japan is caught in two minds whether they want yen weakness or not. So in Korea, the message is a little bit more simple. Even though it is a net energy importer, it looks like the chip export boom is offsetting that. And it really does set up some Korean one strength in Korean one uh, versus Yen cross has gone up to the top end of its range, and it looks like it might break up. Bloomberg mocha Report Anthony Stevens And that is despite the backdrop of expectations of just a dollar grinding higher at along with Treasury yields and the push higher in oil. This is a picture with oil. As we're getting more confirmation of these hostilities between the U.S. and Iran. The U.S. Central Command posting on the platform saying that strikes, uh, that have begun against Iran at 7 p.m. eastern time today, that they're designed to degrade Iran's Strait of Hormuz ability. Their air defenses have been activated in Tehran, according to separate reporting, and blasts have been heard in northwestern Iran as well, according to some of the other reporting that we're following. We're seeing oil option positions ballooning to a record as we see this war risk continue to flare back up. And President Trump really playing down prospects of bilateral talks for hedge on the Asia trade. This is Bloomberg. Will. Take a look at how U.S. futures are trading at the moment after we had the Nasdaq 100. Best thing in three weeks. What was interesting about that dynamic overnight was that we saw chipmakers surging. We're talking about the Philadelphia semiconductor indexing its biggest day in a month. At the same time, we had the Magnificent Seven, for example. Pretty flat alphabet Amazon, meta, Microsoft the actually lower. I we're thinking investors really anxious about whether all of this spending is actually paying off. Right. And we'll see some indications of that when we actually get those tech earnings to come. We're going to get alphabet tests, some IBM Intel all of them this week. Let's get more on what to watch around the tech sector. Joining us now is Scott Kessler global sector lead for TMT at Third Bridge. Scott great to have you with us. How important will it be for these tech giants to prove that all of these AI CapEx is actually paying off? And what are the metrics that you'll be watching? Yeah, I mean, I think this is going to be a pretty critical week or two. Um, a couple things to keep in mind. Uh, I think what we've seen is that investors are very focused, as you alluded to, um, on CapEx spending and the growth we indicated and expected growth in CapEx, and frankly, looking to see how that's translated into other financial metrics, notably revenue performance and growth. And I think investors have at this point been satisfied if stronger CapEx spending has translated into stronger revenue growth. But we'll see if that kind of, um, alignment continues. And for alphabet, it's kind of a tricky situation, right? You have the search business that could be affected by generative AI, but at the same time you have the other side of their business like Gemini also cloud. So how do you see that dynamic playing out for alphabet? Yeah. You know, it's funny. We we speak to experts all the time, um, about these companies and about Alphabet and Google in particular. Um, and I think one of the themes that emerges pretty regularly is that as much as people, um, are increasingly using, um, LMS for a variety of tasks. Um, it's not at this point, um, disrupting or displacing Google. That might not happen for another couple of years. And if you look frankly at the performance of the company and the stock, it seems like there's some type of agreement that this is something off into the future. The question is when when does that start influencing, uh, the performance and prospects of Alphabet and Google? But it seems like Not yet. And as you alluded to, it's not just about whether folks are using, um, LMS. They might be using Gemini or they might be using alternatives, but those alternatives aren't monetizing with advertising. So it's really about the dichotomy between users and usage and advertisers and advertising. So it's going to take, you know, a number of quarters at this point from what we've been told. And I think that's reasonable to consider, especially going into earnings coming up. Scott is interesting. The Wall Street seems to be decisively more bearish when it comes to the software sector. We're talking about Morgan Stanley just downgrading the likes of Adobe Salesforce as well. Why is that? Do you see the impact significantly different here? You know, I don't really know what the catalyst was for kind of a revised outlook on some of the highlighted names. Um Adobe? Intuit? Salesforce. Um, look, I think a lot has been going on at and around those companies. I think it's fair to say that they're dealing with a lot of challenges, whether it's AI, whether it's changes in leadership. And you could probably put workday in that category as well. Um, but the reality is that not all software companies are the same. And one of the things we've learned in terms of doing our work is that, look, if you're a software company serving enterprise customers and you are providing not a nice to have solution, but a need to have solution with an emphasis on data, long term relationships and trust. And on top of that, you're investing a lot of money in your own AI solutions. Um, we think those companies are probably better positioned to kind of navigate the treacherous waters, um, that AI has kind of put before them. And I think we need to kind of think about software not as a monolith, but as, you know, a number of different companies with a number of different sets of circumstances. Just look at application software versus, say, cybersecurity software. It's been a very, very different picture for those companies, just frankly, in 2026. The we get sort of an indication of where customers are going from the IBM are preliminary reports that we got, I mean, in the sense of what they're shifting towards from software to hardware. I mean, it's fascinating, right? Because, um, IBM, the stock is down over, uh, 25% year to date. That's entirely due to the pre announcement that they made recently indicating exactly what you said, that uh, customers at the end of the quarter shifted their spending, um, from software, presumably infrastructure oriented software to more I and II oriented hardware. We'll see kind of what the numbers bear out. But in saying that, they also highlighted, um, demand for, uh, cybersecurity software. So we'll see if this is more of an IBM specific set of circumstances or if this is going to play out, um, across not only software but hardware as well. Hardware has been, um, dare I say, a pretty hot area over the last couple of months because we think that it's been kind of, uh, I don't know, a catch up when people have been focusing, um, on semiconductors, and then they think, okay, well, what's the derivative, um, of increasing kind of spending when it comes to AI? Yes, you're spending on semiconductors, but you're also spending on hardware capacity and servers and the like. So we'll see if that continues. But, um, I think it's fair to say that not all software companies, uh, should be painted with the same broad brush when it comes to, okay, the current and intermediate term impact of AI. Scott Kessler, really great to get your thoughts. Global Sector lead for TMT third Bridge. As we get big tech earnings this week. And also do join us on Friday for the latest developments in Asia's tech sector. In this week's edition of Bloomberg Tech Asia digs into the push to revive nuclear power to meet AI energy demands, says live a 30 a m in Hong Kong, 8:30 p.m. Thursday in New York. Sherry Japan's Nikkei is reporting that TSMC has held discussions with clients about raising chip making prices in 2027 by as much as 10%. Let's bring our Asia equities reporter, Winnie Souza. Uh, what are we hearing? Yeah. Morning Heidi. So as you just mentioned, we've learned, um, from the local report from Nikkei that, um, TSMC, in fact, has been in talks with, uh, its client to, um, consider that base price hike. And they've also just finalized that this month. Um, a raise about a raise about, um, 5 to 10% across different products from the more advanced semiconductors to the mature ones. And that will take effect, as you mentioned, in 2027. Now we see this pretty much as a good news because, um, in fact, we did see ADR is rising overnight. And our analysts from Bloomberg Intelligence say that this will help TSMC to have a better upside when it comes to margins, and also provide an additional source of revenue when it comes to capturing this whole I demand volatility. So overall, it seems to be, um, really good news for TSMC as it continues to navigate the increased cost when it comes to manufacturing. We're also getting an update, uh, on this story about SK Hynix, the acquisition of Intel's Ohio chip campus. It doesn't sound like it's, uh, it's going ahead. Yeah. So in fact, um, we did learn from local media that, um, SK Hynix was considering to acquire the Ohio campus, um, of Intel, but we've also just heard from High Index that they have just denied, uh, this acquisition. Now, this would have actually been good for SK sky next, because the Ohio campus is in fact one of the newest campus of Intel, that they have been postponing the, um, postponing the operations of it in the past few years because Intel has struggled to acquire the clients, and it would serve SK Hynix in the way that it, um, how it has been facing the pressure from the US to expand its operation locally in the U.S. and also with higher demand when it comes to its supplies. So this will help meet the the expectation to expand capacity and also its goal to be able to manufacture, um, these um, memory chips in the U.S. within the next five years. So we'll keep it closer eye to, um, how it potentially has other plans to expand further in the U.S. as well. Yes. These two, they're our Bloomberg Asia Equities reporter We have breaking news out of Japan. We are getting the latest trade numbers. June exports rising 19.3% year on year, which is larger than economists had expected when it comes to the imports number 25.4% growth in the month of June, also higher than economists had expected. Also, an acceleration of growth from the previous month. Perhaps not surprising given that we're getting inflated import numbers on a cheaper yen, which is now training on a 40 year low against the US dollar. That leaves us a trade deficit of ¥406.9 billion, which is much bigger than economists had expected, also larger than the previous month. So you have an export still rising a strong 19.3% year on year. But those import numbers very much inflated because of a cheaper yen. This is Bloomberg. Oh. Well, SpaceX shares closed more than 3% higher in New York, snapping seven days of declines. And it comes as the company prepares to unlock as much as $116 billion worth of stock next month for the first time. I guess deals editor MacArthur joins us now from San Francisco. So what do we make of this recovery, and what are the implications of what's about to happen next with the unlocking of these shares? Yeah. Um, it's gives me an enormous amount of shares hitting the market all at once for, of course, the highest profile IPO of the year, um, 116, um, billion in shares worth of shares. And that's going to have an effect on the stock. One thing that's interesting is that about 30% of the shares, as we reported today, um, are already on the outstanding shares are already being shorted. So this is going to create a situation in which, you know, could go in many different directions. This is an opportunity for, for some of these insiders, early backers to finally be able to cash out. Oh, absolutely. It's um. And in the price of space X of course, is is now below its IPO price. But for somebody who's in their early, um, employee who's got however many million worth of shares and they're only going to get, say, 5 million instead of 6 million or 7 million for their shares. That's a good selling opportunity. And I'm sure that those folks really do want to get some cash out of their efforts at this point, and that this is the first opportunity for them to do so as insiders. The first unlock in August. We going to see more gradually. And obviously there are other sort of levels at which need to be met for these unlocks to, to take place. But, uh, these opportunities for the bears to kind of pile on. Given the unique structure of the way that this has been done, it's a difficult to kind of make sense of the broader outlook here. That there will as you know, there is this bracketed, um, release of shares that are eligible to be sold. And it really, um, hits the peak in December at about, I think 5.5 billion or so shares. And that's going to just be the, the, the final measure at a few. Well, and of course Elon Musk shares are still locked up I believe for another year or so, another year total. And um, it does create depending on what's happening with the stock. As, as you noted, there are a lot of short sellers already in it. Um, the shares have fallen from their post IPO high. And that's going to be a very interesting thing to watch as we go forward obviously. Michael hi. Thought good to have you with us. Bloomberg US deals that are there with the latest on space. As we watch those Asian futures. We are headed towards a market opens. We're seeing some upside, perhaps not surprising given those big gains on Wall Street, especially on the semiconductor side of things. The market opens in Sydney, so then Tokyo or next. This is Bloomberg. Will. Sign. This is the Asia trade we're counting down to. Asia's major market opens in what could potentially turn out to be a risk on day. Heidi. Of course, we had the big rally in chipmakers overnight. And even with the headlines around the run war in tariffs. We still saw the Nasdaq 100 seeing its best day in about a month. This is it, isn't it. It's again that classic case of investors just pushing aside some of these longer term issues. The tariff campaign, the resumption of potentially these trade tensions. Also, we're now into a 10th, 11th day of strikes when it comes to the U.S. and Iran, which has had earlier confirmation of another round of operations there, with really President Trump not really saying much when it comes to the prospect of more talks. But cherry, it's all about the yen we are at. Yeah, the Japanese yen right now being pressure on all sides. We're talking about topping that 163 level against the U.S. dollar. I mean, Heidi was talking about the Iran war ongoing that sent oil prices higher. Japan, the heavily dependent economy on Middle Eastern oil. That's not helping the picture. And obviously, we have this whole idea by investors and traders that perhaps a Bank of Japan is behind the curve. And then you bring in the other idea that you have to be a little bit more careful about the fiscal constraints in Japan. And you have the currency at a 40 year low against the US dollar. We haven't seen these level since 1986. But when it comes to the stock market, we're seeing that upside 4/10 of 1% for the Nikkei. Given of course the semiconductor news we have over not we're in big tech earnings season. We're going to watch alphabet Tesla others that could be affected. The hearing the Asian session because of that supply dynamic with the U.S. do watch how of course that chipmakers assembly Philadelphia semiconductor index jumping more than 5% overnight. We also do have a 40 year JGB auction today that SMBC Nikko says okay, the size is relatively small. Plus, we had seen some strong demand on the 20 year JGB auction recently, so we could see a little bit of a boost there. Um, also, before I forget, the June export numbers out of Japan actually pretty positive in the export side, gaining 19% year on year, but also the trade deficit. Pretty big because of the weekend. Take a look at how South Korea's coming online. We've been watching the Korean War and actually seeing a little bit more strength and below that 1500 level against the U.S. dollar. This, of course, as we have that 24 hour training session. Right. So, uh, after that, we have seen perhaps more of a trend of investors seeing the liberalisation of the Korean currency space. So we're seeing volumes also gaining about 16% above the normal course, be up 5%. Watch SK Hynix, because we have local media in South Korea talking about, uh, them trying to buy an Ohio chip plan from Intel, Intel coming out and saying that they're investing in that plan. So, Heidi, plenty of news in the South Korean market to watch as well. Yeah. And it's interesting you were talking about the one and how we're focusing on at the moment. We're hearing from the vice minister in Korea, saying the imbalances in the market at ease. They've got ample capacity to stabilize that market, but also encouraging exporters to repatriate more overseas funds as well to, uh, stabilize that supply demand balance in the second half. So we're watching currencies. We're watching. Of course, the dollar is that continues to push higher along with Treasury yields along with the price of oil along with these inflation expectations. Uh, you kind of get my drift, particularly as we continue to see really no easing up when it comes to these hostilities between the US and Iran. This is what we're watching when it comes to Treasury rules at the moment. At one point, hitting that two month high as that inflation risk continues to be, uh, reignited really, and expectations building that the fed will have to raise rates as a result of this, uh, futures at the moment, 20% chance being priced in for traders at the fed will hike at the meeting next week. But we are also watching in terms of an outlier for equities trading. We're also seeing some upside, uh, in Aussie markets, about a 10th of 1% higher than it doesn't usually sort of rise in tandem with some of the tech heavy markets given the limited exposure to AI driven volatility. But for that very reason, that sort of emerged as something of a haven at a time when we continuously see that sort of up down cycle for South Korea, Japan, the Taiwanese markets as well. Let's bring in for more. Colorado has a senior market analyst at capital Akamai joins us from London. We appreciate you coming to us so late. Your time. What's more compelling to you? Investors are really led to sort of try and ignore the geopolitics of the situation. But does that come into play when these expectations really start to change? I think so. I mean, it's a matter of urgency and right of change when it comes to rights. I think this energy story, I think the underlying inflation pressures are still strong and that, you know, the combination of fairly loose fiscal settings as well as this investment firm and the sort of pressure that's putting on physical resources right around the global economy is going to mean that underlying inflation pressures are going to persist, and that the fed will eventually have to tweak rights somewhere down the line, probably more calibration hikes. But like I said, this situation in the Middle East and the rapid rise we've seen once again in oil suggests that there are going to be those supply side factors coming through from a higher energy. Um, energy prices across the globe, which will sort of create that urgency for the fed to tweak a little bit sooner rather than later. Um, and of course, this comes with a high degree of uncertainty. So because we are obviously well aware that with the push of a truce, uh, you know, social post, you know, the oil price could conceivably go back down to sort of $70 in the in the space of, you know, fairly quick succession, uh, or, uh, you know, in the space of a few weeks, um, you know, whereas if things escalate, things could get much worse. And again, that kind of rate volatility will pick up even further. So, you know, effectively, like I said, you know this this is kind of mirroring the markets. Obviously it hasn't manifested too much in equity volatility. Uh recently. Um but if things continue to grind higher here for oil, the story for the fed will be that it will have to hike interest rates sooner rather than later. And that won't be obviously a positive thing for equities. The volatility is is firmly in the eye chip maker space right. Is this just the way it is going forward. Because even if we are kind of set for a high day today, those gains have not been so readily translated over the last few weeks. I think everyone's waiting for earnings season and basically tech earnings, which we're going to start to get. And I think, you know, maybe the rally that we've seen in the last 24 hours or so on Wall Street has been very much the market's front running, that I do see a lot of similarities to where we were at this point in the last quarter, which is to say that we were sort of marred by geopolitical risk and interest rate uncertainty. But then it was these extraordinary profits from the hyperscalers in particular, that really fed this narrative that monetization was happening, that the investment boom would continue because it would be sort of right of free cash flow to sort of pump back into capital expenditure. And we saw everything rise from, you know, semis, because obviously that expectation that floated into sort of cheap demand, just as amongst other things as well. Uh, along with, of course, you know, those hyperscalers, those who were sort of at the front line of benefiting from the the artificial intelligence technology themselves. So my view is that, you know, we're likely to see another earnings period where we're going to get some solid results, um, from the tech giants that what we've seen in the semi's and what we've seen in the tech space for is just a little bit of consolidation and a little bit of churn. Um, but, you know, obviously what will be critical will be actually reacting to the results. My bias is that those results be solid and, you know, set this sort of, um, trend higher once again. Um, but, you know, we'll just sort of have to wait and say, fortunately, you know, we've got that sort of data now, um, doing stated that the markets have been looking for over the last few weeks, which has meant that, you know, essentially, we've been waiting for that, that catalyst to push higher or move lower, if you know, earnings having to to disappoint, especially given the more than 90% of S&P 500 companies have beaten profits so far. Right. But the same time that the ones that missed actually were heavily punished. What are the ramifications and implications for the Asian markets when we're seeing already so much volatility right now? The Korea Exchange activating the sidecar to halt the Cosby program buying I mean it's been up and down, up and down for this market. Yeah. I mean, you know, clearly there's been some knock on effects, I think, from some of the interventions that policymakers in South Korea have made to try and control what has been pretty much a wild and unruly market in South Korea. And, of course, you know, a part of that is, you know, to do with chip demand and the kind of choppiness that we've seen played through from Wall Street, tried with some, you know, semiconductor stocks to basically sort of pulled back and blown off some froth. Um, and that's, you know, hit sky high and that's it, Samsung and all those sort of big names. You know, the other side of this though, was obviously South Korea's. It's just such a heavily retail driven market. Now policy makers are realizing the systemic risk associated with having such a highly leveraged, highly retail dominated market, not just to, um, its equity markets and financial system, but also obviously financial markets around the world, because they were sort of, you know, potentially dictating even some for selling in some other, um, in assets in other markets to obviously cover losses in the, in the, in the, in the stocks that were sustaining losses in the South Korean market. So I think if anything, what we can say about the Asian region, if we do get some of these solar, if we do get solid results from some of these tech companies that are boost that I narrative once again and starts taking that fear away of basically, you know, taking the eye investment and sort of monetization peak profits is it will take some of the pressure off policymakers to take some pressure off the market and ease some of those technical pressures as well, so that, you know, things could basically break at once. Again, um, you know, stability can return to obviously, that very volatile pocket of global markets. I call at least some relief. Could be the fact that pharma stocks are really not doing much, despite the fact that this morning we got President Trump talking about generic drugs and taxing them, while 100% or so from August 2028, um, it seems that the markets have already priced in any trade volatility, right? I mean, we'll continue to get these headlines around new tariffs, but at the same time, what are the implications if we actually do get supply chain disruptions because of these tariffs. And there are implications with higher oil from the Iran war for the Federal Reserve. I think there is the possibility that the markets have taken their eyes off the ball, because there's only so much, at least from a narrative point of view, that, uh, traders can focus on at any given point in time. And I think there has been instances over the last couple of years where, you know, it might be true, might be on the other foot. We've been sort of dominated by, you know, trade uncertainty and fears about tariffs and things of that nature and then being blindsided by geopolitical risk or vice versa. What we're seeing now, where, you know, there is clearly still the intention from the Trump administration to try and push forward with its trade agenda, even though obviously pretty much, you know, President Trump's whole second term now is being dominated or or I should say, the last six months of Trump's second term now is basically been dominated by foreign policy, in particular this war that's been started in the Middle East. So I think, in fact, the markets aren't discounting this fully, that, you know, perhaps the Trump administration will try and, you know, more or less, you know, uh, fight a war on two fronts, uh, a trade war and a hot war. Um, and, you know, when it comes to the former. Uh, that could mean higher tariffs, more trade uncertainty, um, another sort of miniature supply shock which has been characteristic of Trump's, you know, um, economic philosophy for a long time, certainly is his second term and could be something that is, you know, maybe a bit of a grace one for the markets. So something definitely to watch out for because, again, I don't think the markets are really paying much attention to it perhaps. I could again argue a little bit complacent when it comes to trade. Yeah. US trade policy call when it comes to China markets. Uh, national team is back, it seems. Given the view on China stocks was becoming more constructive in recent weeks and months anyway. Does this just add to that support? I think it does. I mean, and it shows you, you know, two things that we're in an era of huge economic competition because of what's going on with artificial intelligence, when there's the commercial imperatives to try and make sure that, you know, every entity and every, every business is moving forward to try and find ways to monetize this particular technology and grow in that is a interest aligned for business interests as well as political interests and pretty much every economy around the world. But the flip side of it is the strategic interests, obviously, in trying to protect these industries and make sure that effectively, uh, financial markets and financial conditions and asset prices are well enough supported to make sure that firms do remain in a position where they can sort of, you know, try and achieve their economic objectives again because they more or less align with those sort of strategic imperatives of trying to make sure that you don't get left behind in these artificial intelligence arms. Right. So the fact that, you know, we've had over the last couple of days, Chinese authorities stepping in to try and support asset prices more broadly, financial conditions as a way of pushing sentiment, um, you know, boosting economic activity, you know, boosting, you know, the asset values of some of these companies that are going to be important to, you know, um, the, uh, Chinese economy in the future. Um, as well as, you know, obviously, the sort of Kimi breakthrough is a sort of deep seated moment means that I think there's the potential. We could see this sort of valuation gap that has been pretty persistent for a little while in US markets, compared to certainly Chinese markets and those sensitive to China close up a little bit. So I think it's a fairly positive signal, uh, signal, especially considering, you know, valuations in China, again, relative to US peers have been so depressed. Conrado, great to have you with us again, senior market analyst@capital.com. We have more ahead on the Asia trade. This is Bloomberg. Live from U.N. headquarters, a special town hall with candidates seeking to become the next U.N. secretary general, discussing their priorities as the United Nations confronts mounting global challenges organized by the office of the president of the General Assembly, with the support of Bloomberg. Firm. Take a look at how pharma are trading in the Asia session. We have brought downside a little bit of a mixed picture, but perhaps not necessarily a huge impact from what we heard from President Trump, that he'll be setting 100% tariffs on generic drugs from August of 2028. Those will eventually go up. Remember, we're also expecting, according to sources, that we might get a list of other tariffs on dozens of other countries as well. We had already heard what happened to Canada with a 50% tariff on some Canadian goods, which will take effect in about 30 days. Let's discuss all of this and bring in senior white House reporter. Make us older. Mika. So first of all, let's start with the generic drugs. I mean, President Trump has never been happy with the price of pharmaceuticals in the U.S.. What are we expecting? Yeah, I mean, we saw the surprise announcement tonight from the president essentially declaring another major push in his most favored nations drug pricing policy. That's been a major, uh, issue for the administration that they're really trying to advocate for. Uh, the president, uh, is arguing, of course, that this is in line with trying to make prescription drugs, um, and drug prices in the US comparable to other, uh, nations with high cost drugs. So essentially, he's seeing this as a way to level the playing field when it comes to imposing tariffs not only on branded drugs, as he has done previously in the past, and has declared an executive order on an April, but now expanding it to generic drugs, which is about more than 90% of drugs here in the US. And we're potentially expecting more tariffs on other countries and just different lists of products as well this week. Yeah. Uh, it's very it's very possible we do see some expectations on that. The white House has been very bullish on this. We saw what the president had announced with, uh, Canada in terms of uh, imposing tariffs further there. Um, tariffs is of course a cornerstone of the White House's trade policy, and the president has continued to make his push on that despite some of the legal challenges he faced with the Supreme Court striking down some of his efforts to impose tariffs globally. Um, it's a very sensitive issue for the president, I would argue. Um, so, yeah, we can expect to see more on this front. And this is also one of these issues that can really remain in place even without, uh, the control of Congress next year, potentially, if Republicans lose a one chamber or both. And beyond Trump as he leaves office. Uh, so this is one way that he can kind of make some permanent impact. So, Mika, let's talk a little bit about the upcoming midterm elections in November. How are we setting up and how would these new tariffs actually play into whatever narrative the president is trying to craft right now? Yeah, I mean, look, the white House has really struggled with crafting a strong affordability message when it comes to cost of living for Americans. Uh, the Trump administration has really tried to foster their most favored nation's drug pricing policy as a major win for them when it comes to this issue. I think the president is viewing tariffs as one way that he believes that he is putting U.S. on a fair, uh, playing field compared to other nations that offer lower cost of drugs. And, uh, look, the president has already introduced things like Trump, which has offered drug pricing options for Americans through a government sponsored website. That's one thing that they're touting as an affordability win for voters and saying that, you know, this is a one way that they are trying to make health care affordable as well. So I think we'll continue to see this push. We're seeing the president on the campaign trail. He'll be out tomorrow in Georgia. We're seeing an administration officials continue to tout this, so there'll be a lot before November. Senior white House reporter. Make us all another one. In the meantime, the cost of the U.S. war on Iran is continuing to climb. Defense Secretary Pete Hegseth, telling lawmakers that the bill has topped $37 billion. The Pentagon is seeking an additional $67 billion in funding to replenish weapons, replace damaged equipment and invest in future military capabilities. It's a current activity, which we have been told about the exchange of our back and forth in Iran, an indication that that number is going to go up in the months ahead. Some of that number captures additional on mill pay and other that would be anticipated through the fiscal year. So some of that anticipates what costs would be going out in the future as well. So the new number you've given me is what, 37.5 billion sign that represents the cost of the war through what period of time through now for certain aspects of it? Uh, but also mill pay O&M other anticipated costs through September 30th. Bloomberg editor Michael Hayes joins us now for more. And undoubtedly, the sell for more money for this war is becoming a difficult one in Congress, but also with the American public as well. At the same time, President Trump, after we're now seeing an 11th night of strikes, he doesn't seem to be very hurried. No, I mean, he's made it clear that he said if they walked away now, that would have been very successful. But they're not going to be doing that. And I think that, you know, that's sort of the logical approach. So we've got this contest of wills at the moment. Um, you know, now that the memorandum of understanding has sort of unravelled over the, over the Strait of Hormuz, really and, and, um, who's sort of who's whose version of, of the MoU will come to pass in a way, because Iran assumed that he would have control of it even if they weren't going to be any tolls. Uh, the US assumed that it would be free movement until, you know, the 60 days had passed and, uh, until, you know, one side because I guess where this is, it's just going to be, you know, an escalation, but not not back to as bad as where we were. So it looks like it's going to persist for some time yet. In the meantime, the proxies have now come back into play. Yeah, well, I mean, we've got the Hutus who. Who, um, have caused trouble for shipping in the past as well. And they're targeting Saudi Arabia. Um, which is obviously it's made leading a coalition in Yemen as well. Uh, saying that and Bloomberg same some reporting that, um, that any ship that basically goes to a shell, a Saudi port is going to be targeted now that they've made threats in the past and not followed through on them, but then they have to follow through in some cases. So it's certainly going to increase nervousness, particularly for the Saudis, because they've been moving some of their oil through that, that side of the sea with the Strait of Hormuz in such trouble. So yes, it look it seems to be widening. It seems to be getting more and more difficult when they get it to muckle heat there. As we continue to watch that tick higher when it comes to oil prices, more head on the Asia trade. This is Bloomberg. For. The South China Seas back in focus as a Southeast Asian, Chinese and Western diplomats gather in the Philippines. Chinese Foreign Minister Wang Yi told the Asean Secretary-General that disputes in the waterway should not become a stumbling block for regional ties. I was trying to correspond to meet me know is at the meetings in Manila. So, I mean, it's not just the South China Sea, though, right? I mean, the meetings are taking place under the shadow of the Iran war as well. What's on the agenda? Yeah, there is a lot of on the agenda. And South China Sea is one of the issues that has overshadowed the talks here because of the incident that happened just ahead of this meeting by both China and the Philippines, trading accusations at each other, uh, accusing each other of being the provocateur, the provocateur in the South China Sea. And this comes as yesterday China has summoned the Philippine ambassador. And guess what? President Marcos also summoned the Chinese ambassador. Both sides lodging complaints against each other in the South China Sea. And one of the things, the fast things the foreign minister, Wang Yi, said when he arrived and spoke to the secretary general is that the South China Sea must not be a stumbling block. And Chinese state media has been publishing plenty of editorials saying that this is a familiar playbook from the Philippines, where they look for an opportune moment where there is going to be international spotlight. They would create an incident in a South China Sea and then get the scrutiny from world leaders and then try to play the victim to draw international attention. And Wang Yi is saying that Asian nations must be vigilant against external interference. And Wang Yi also, of course, saying that China is willing to work with Asean nations when it comes to removing disruptive forces and also to work towards concluding, uh, negotiation, continuing negotiation on the code of conduct on the South China Sea. But mind you, that negotiation has been ongoing for 20 years. So very low bar in terms of expectations about whether or not there will be any breakthroughs. As also, of course, the ongoing U.S. around war. And there is some concern, of course, given that we've seen Asian economies really suffering that outsized impact from the energy crisis. That's right. This is one of the things that all the Asian countries agreed on. They released a statement really urging all parties of the Iran war to exercise restraint and to avoid aggravating things even further. And why? Because Southeast Asian nations are price takers and energy importers. They buy a lot of energy from the Middle East. And the impact is very, very clearly here. Why here? You in the Philippines, back in March, there were protests happening and President Marcos had to call for a national energy emergency to ensure sufficient fuel, food and basic products to prevent profiteering and hoarding. So this is a key issue for many of these Southeast Asian nations, not just because of fuel prices, but of course, the other key issue is with the Middle East war dragging on, it's moving U.S. military assets from Asia to the Middle East. And this is coming amid the tensions in the South China Sea, amid the tensions in Taiwan and the East China Sea. And, of course, tensions in the Pacific, as well as China, recently launched those long range ballistic missiles in the Pacific Ocean in response to Australia signing this piece of ocean alliance with Fiji. So there is a lot of security issues in the Indo-Pacific that will be a focus here as well. One back China correspondent women low there. More ahead on the Asia trade. This is Bloomberg. Take a look at where we're at when it comes to these markets that are trading half an hour to the start of trading for Korea and Japan, at the moment, we are seeing the sort of gangbusters trading when it comes to that Korean story again on this rotation back into favor for chipmakers. It is such a volatile trade, the one that's actually sort of waiting for that next catalyst to give any kind of sustained theme. Regardless of that, investors are just pushing us thought the broader geopolitical risk. Of course, in an 11th day of operations of strikes between the U.S. and Iran at the moment, with that conflict also broadening into the Red sea with the involvement of the Iran backed Hutus as well. But broadly it is an update. The Nikkei 225 also seen gains of just about 2%, with the yen continuing that slide past that 163 market mark for a fresh four decade low against the dollar, which of course continues to climb on the back of higher Treasury yields on the back of that rise in oil as well. So we continue to watch that because intervention at this point doesn't seem to be impactful if if sort of much point to it at all. Right. In terms of what we've heard of the tools that are being available to policymakers that haven't yet been exercised, exercised, but we are watching a lot of these chip maker names at the moment very, very resoundingly in the green. The China AI story is getting quite interesting as well, because Bloomberg's been told that the Chinese AI startup moonshot is preparing to begin discussions on a final round of fundraising before listing in Hong Kong. Sources say it wants to use the buzz around its latest model to raise capital at a valuation of up to $50 billion. It's give me a 3D model has surprised developers and investors with performance approaching the latest frontier models from OpenAI and anthropic. Let's bring in General Fehr, who's the chief strategist and head of research at BMC international. Really great to have you with us. Does this how much? I guess extra support and impetus and excitement does this generate for that broader AI and chip related trade with Chinese and onshore and offshore stocks? Yeah, I think that's, uh, that's a major driver, uh, not only for China, but also for the US. Uh, you know, for China, I think I is a major driver to surpass the middle income trap. And for the US, it's a major engine for, uh, check back the, the manufacturing as well as, uh, assimilate back into the U.S.. So that's a driver for both sides. And I would say the, uh, the, uh, the policy makers, the they don't want the, the engine to to to to to to stop her. Uh, no. So I will say that's will be the major investment focus. Uh, as you just mentioned, about the Kimmy, uh, hyperbole stays. I still remember in the early 2000, the 25 where we have the deep seek moments that, um, make the market very volatile and, uh, some GPUs or western Western GPU, uh, producer stock price goes back, goes down. So I would say at that moment, it actually provides a very good opportunity to buy into the sector because, oh, that, uh, means I development is pretty good, that what drives more demands instead of for slowing the demands. So more, um, demands will generate much more demand for the GPU, for the, uh, infrastructure for for the whole sector. And now we've got the national team seemingly back in force. Right. Does this generate further support? Because it does kind of underwrite Almost a guarantee that for a matter of government policy, they want these companies to be profitable. I think we should understand this in two ways. The first is about, uh, you know, when it's just we use a metaphor. It's just like throwing a stone into the into a pond. Right? And then in the middle, you will go down the most. It's just like the superstars nowadays in the, in the eye sector. But what we need is we need the, the ripple to spread out. So that's a whole coverage, not only just a few superstar names, but all the second tier. So the tier infrastructure, all of that will bring a large percentage of the GDP, uh, bring more kind of wealth and income with that to, to, to fuel the whole economy. So that, I mean, the, the government money or the that will do some kind of the fine to use because, uh, even the superstars, I will say, uh, maybe some of the names is real with solid fundamentals, but the always will be. Have some, uh um um, uh, some names. The fundamentals might not be that solid. Okay. If the fundamental is not that solid, maybe the stock price correction will be b b b b b large. So in that sense I would think the government money may uh I will not say the government the money will always be the most of smart money. But, but uh, that, that in some times they may guide in the direction a little bit to help the ripple to spread out to real some, uh, more fundamental solid the names. So, uh, nowadays, if you look at the, the eye sectors in China, you will see, um, some, uh, tech names, some eye names. They have, uh, ten pe like, uh, 100 times, which implies that they need the earnings growth to, to double or triple or even more than that. So the robustness of that kind of earning growth will be not that, uh, that's safe. But at the same time, we will see a lot of I maybe not, uh, the superstars in these days, but it's it's very. I related that the fundamentals is solid. Earning girls is more visible, and the pay level is only like 20 or 30 times. So that gun range is still cheap. So when we look at the, uh, the fundamentals, we need to understand the earning girls is coming from, um, price hypers or from the very girls. So it seems to us if this goes to the volume girls, that's more healthy, uh, if it goes to the price hypers, then we we will. We need to be more, uh, cautious. And especially if the, if it's coming from, like inventory buy in the in the, in the in the in the in the chaff in this sale. It's a higher price that my, uh, makes us feel some more, uh, cautious about it. Susceptibility. Tell us about this East Riding West resilience theme. Because obviously that in itself speaks to the value that you can find in Chinese AI and chip related stocks, right? How do you sort of break that apart in terms of how we expect, uh, the kind of the companies in the East to potentially scale up and develop from here. The first of all, we do not think this eye, um, uh, trend is, uh, is uh, is a zero sum game. It's not it's definitely not a zero sum game. It's some some something like you, uh, you wing eye wing more or less this kind of game. And, uh, it's not only on the supply chain, it's on almost everything. Even like the innovation, uh, when we talk about Deep Six innovation on cutting cost, the innovation on the long past. Oh, that is actually, uh, an open source model that is actually helps each other to to makes, uh, the environment, uh, better. And, uh, let's say, uh, we look at the global economy. Um, I would say maybe now the US and China's total population combined is less than 20% of the whole global population, and the global growth rate, as has long been below the US potential. A grocery so I would say it's a it's a it's a not, uh, zero sum game. And uh, for uh, more even put that aside. When we see the markets reactions, I will see the value issue anchor the liquidity. Oh bounce together. I mean, I mean, even now the the Korean market or the Japan market, I mean, the whole the whole world is linked to each other, uh, both on the technology development side as well as on the value anchor and the liquidity side. Before we let you go, I wanted to get your views on how the broader economy is going. And I guess from a perspective of whether the eye economy is going to be kind of the driver, that finally brings the broader, uh, economic growth out of the malaise that we've seen over the past few years. Right. Do you also see some of the other opportunities within other sectors now? Uh, yes and no. The first of all is we believe the shape of the divergence is actually pretty good. You know, it's good because we need the resources to be re-allocated. So, I mean, in that in that sense, the shape will sustain. And we at the same time, we do expect the, the the rotation, the as I said, the ripple spread out to happen a little bit. First of all, we, uh, believe the the eye sectors cannot just benefit uh, a small bench of the names, as I said, the the superstars, the characters, the characteristics that by like hundreds times a PE training PE and expect the earning girls to double triple even like ten folds. Uh, in the next three years. We need more names. We need, uh, um, a current evaluation, uh, 20, 30 times. And I'll have like 30, 40% sustainable growth of these names. So first of all we think this spread out well happens within these sectors. Not goes to something like consumer retail not to to to such sectors, but in the longer term. In the longer term, we do expect that the wealth effect uh, expected uh, the, the, the income effect to have this transmission set a mechanism to pursue the other sectors. So if that happened, I would say that may takes time. That may may take some, um, that will help the whole economy, uh, to as a whole to, to, to improve other bit. But now I would say we still need to focus, to spend the resources onto the eco related sectors, just not to, uh, only to the superstars, but where we spread out a little bit to the second tier, third tier that account for a big percentage of the whole GDP already. And this year we do expect that that related sectors will have earning gross more than 20, Maybe even close to 30% of the wildlife. Gross. So that is already a big part of that. For the other things, we because of the analogy that for the other, oh, the economy related sectors, consumer relief sectors, even now, I would say their value change is still low. The multiplier effect is still limited. So put the money into the new things is better is most while then putting money into the into the uh, traditional ones and be patient really and allow the bullet to fly for a while. That's the most important part of, uh, of that response. Be patient. Really great to have you with us. Chen Health, who is the chief strategist at BRC International Moorhead here in the ag trade. This is Bloomberg. I got you, uh, on your intervention. Watch again. Slotting past 163 per dollar for the first time since 1986. That weakness in the testing authority's resolve to intervene. Let's bring up with Reynolds, who leads our markets live Asia coverage. And I think we keep hearing they have tools at their disposal. I guess the question is, at these levels, if we do get intervention, is it wasted? Are the bears just going to be kind of repositioning their shorts? Pretty much. So I mean, the tools that they have at their disposal right now are just going to put a few scratches, uh, on the G. But the car is going to keep on rolling when it comes to I can stretch my metaphors. If we can come to what's going on with the dollar. Yeah. And, uh, you know, there is, uh, an understandable, you know, period of dollar strength with crude back on the rise, your Brent is sustainably above and, quote, substantially above $90 a barrel and looking like it's going to stay there. Uh, despite some apparent anticipation that at some stage Donald Trump will once more pivot towards peace. For now, he's not sounding like he's particularly in a rush to do that. Uh, he's more focused on tariff announcements, it would seem, right now than then when you also have you've got the fed coming up, uh, next week expected to stay on hold. But this climb in, uh, crude prices is going to make it awfully hard for them to do much to tone down the recent hawkish rhetoric. So that's a set up which leaves the yen facing, you know, sustained declines. About all they can do is try and slow it down, uh, try and keep the declines measured and avoid a two rapid shift. As you said, it's a push higher for the dollar as a push higher for you. This was going with oil prices. Also tech stocks as well. Does this start to change expectations again for the fed. Well I think it starts to cement expectations for the fed. You know, if you if you look, uh, at some of what some of the, the data, there have been like a few apprehensions about what's going on with the U.S. economy, but in general, it still looks very strong. Uh, you've had these concerns about the eye trade, which so far have mostly looked like they've wiped out some of the overleveraged, overextended, uh, trades from retail investors and from some other investors who are willing to risk a lot in order to tap what looked like some extraordinary gains. Now that you've had that position clear out, in a lot of ways, we're reasonably set up for further further gains in tech shares for a realization that the eye boom is going to boost US economic output and probably economic output elsewhere in that environment. It's very hard to see how the fed doesn't stick with a relatively hawkish stance. We talk about the intervention risks, broader intervention risks. Isn't that the PSA might be getting a bit uncomfortable with how quickly the yuan has strengthened. There might still be more volatility yet for the one which is trading hard. Yeah. Well I mean I think the yuan is the is the bigger risk there. Uh, you know, there is actually some chatter that, you know, Japan is quite happy to see the yen decline, both because of how that helps US exporters in general, but in particular how it helps competitiveness against China. And the Chinese eye complex, which is starting to become something of a threat to, you know, tech names that have been important to Japan. So for China, uh, you know, if it lets the yuan keep on gradually appreciating against the dollar and the yen keeps on depreciating against the dollar, that's a worry. So I think you could see some pushback from the PBoC for Korea. Korea is actually quite happy, I think, to see the, the one, uh, leave the days of wretched declines behind it. Right. Garfield Reynolds, who leads our Bloomberg and live Asia coverage there with the latest on the markets as we continue to keep our eyes on the Japanese yen. Other assets, of course, we're talking about the yen, about 163 level against the U.S. dollar, 40 year low against the greenback. But you're watching the Nikkei right now, gaining more than 1.5% that we're seeing more stocks gaining ground today on the Nikkei 140 of them versus 83. A lot of those gains coming from the semiconductor side of things. We're talking about the technology sector. We're talking about industrials also the energy sector. And not surprising given the Iran headlines and the price of oil gaining ground. A little bit of a mixed picture when it comes to automakers. We're seeing the likes of Nissan gaining but Toyota Honda losing ground the Bloomberg Intelligence survey, now showing the hybrids remain the vehicle of choice for Japanese consumers. While concern over affordability, charging infrastructure and trust continue to weigh on EV adoption. Bloomberg Intelligence associate analyst Marie-Christine Yokohama joins us now with more on this. And Maria, I'm not surprised, given that if you're in the urban setting, I mean, hybrids do sound like a good choice. So what are you seeing in terms of Japan, where we're seeing a little bit of a hurdle for more people to adopt of these cars? So in Japan, Japan remains a hybrid first legacy LED auto market, and we see little signs of a near-term Bev inflection. Our latest survey on Japanese consumers car buying behavior shows that hybrids still remain the dominant choice. Um, their favorite by 41% of prospective, um, car buyers. And that compares to just 7%, um, for battery electric vehicles. This places Japan among the least enthusiastic markets in our, um, in our watch markets. Um, there's two main reasons. One is affordability and the other is charging infrastructure. Um, so on affordability, although we find that Bev, um, economics can improve over the ownership period and in some cases lifetime costs can be lower than, say, a comparable Ise or a hybrid vehicle. Japanese consumers are very much, um, price sensitive, and they place a lot of weight on the more visible upfront costs. And I mean, with a cheap Japanese yen right now, I have to assume that potentially domestic carmakers are better than foreigners at this point. Um, yes. So Japan, the Japanese auto market remains overwhelmingly dominated by domestic brands that make up, um, close to 90% of new car sales. Um, and in our survey also, um, there's clear buyer preference for domestic brands. Toyota remains the number one popular brand in our brand rankings. This is followed by Honda and Suzuki by quite a wide margin. We really good to have you with us. With everything on the Japanese EV and Bev market. Marie-Christine Yokohama, Bloomberg Intelligence, Japan auto associate. We have more to come. This is Bloomberg. Counting down to the start of trading in China. Of course, lots of crosscurrents going on, including that vibrant AI story that's emerging there. But we're also watching property stocks. So the focus on Hong Kong's housing market, Bloomberg Intelligence thinks that it's ready now for a sustainable rebound. It sees secondary home prices jumping 19% over this year. Next let's bring in Hong Kong head Patrick Wong. So Patrick tell us about the outlook and why do we see or what do you see I should say. The green shoots for a sustainable rebound. Now. Yes, we see the opportunities here for the housing market in Hong Kong. The drive is driven by several things. One is about the rental growth is sustainable here. We see over the past few years, every year the growth is about 5%. And then this year again, we also observe the opportunity that, um, the property is driven by population info again and driven by several things. One is about more students coming Hong Kong. They study in the universities. I think this important driver and then the working visa we want is every year allow is over 100,000 visas granted too, like driving more population coming to Hong Kong. So and the investment demand still strong. I think this is also important. We see the like there's several factors to be pricing here with our data scientists to that gather. We want our model. And then we come up with the ideas that several major factors are also driving the Hong Kong price of home prices to 11% this year. And then so far every year to date is also up about 7%. And then going into the second half of this year up another 4%. So we start building a strong momentum. There are concerns about the impact of Chinese government, uh, capital outflow controls being tightened on the Hong Kong property market. How does that play into the outlook? Yes. Very good question. Because honestly, I think the concern um, recently we see this slowed down a little bit in terms of the Chinese system. Why them? Because of overall situation. I think there is also a bit tricky that, um, some um, buyers, they also become we see update of prices going up a lot. Um, yeah. Today. Having said that, I think the key driver right now is again, the fundamental demand is pretty strong. So the ride is going up. And then he's also driving the investment demand at some point. So although I think we are still positive that the situation could actually improve, especially summertime, the rental is going up again. So that is also important things to, um, increase the um, the outlooks of the home prices and rents. The office market trend, uh, is looking a little bit more positive as well, particularly in central. What's the view there. We're going to see further improvement. It's a good question. I think overall we have 5% growth forecast for 2 to 6 and 2 to 7 all together for the overall market. But um central um district is um the key driver. The growth could be much stronger. And based on the fact that the, um, the IPO pipeline is very strong in Hong Kong, trying to find also a business demand. So that is also a very important driver to to see. We also have data scientists will come up with some forecasts. Although I still have positive. Impact real Estate senior analyst and head of Bloomberg Intelligence Hong Kong, Patrick Wong. And of course, you are looking ahead to the market opens in China. And we have seen speculation of state support with a star 50 seeing its best day in nearly two years. So we'll be watching those stocks. Last week the star, 50, fell about 17%, the fastest pace since the 20 1516 crash. So I will be watching the volatility in the Chinese market. Also futures pointing to some upside after we saw that chip rally overnight. We have now seen media reports of TSMC plans of 5 to 10% price increase for some chip making services in 2027, so we'll be following the latest developments around semiconductors as well. The China show is next. This is Bloomberg.