Treasuries Selloff Stabilizes As Oil Surges

SHERY: THIS IS THE ASIA TRADE. THE TOP STORIES THIS HOUR. ASIAN BONDS SENT TO TRACK U.S. TREASURIES LOWER AS THE U.S. IRAN STANDOFF KEEPS OIL PRICES ELEVATED, ADDING TO CONCERNS ABOUT INFLATION AND RATE HIKES. AUSTRALIA'S RESERVE BANK LOOKS TO RESPOND TO PRICE PRESSURES WITH A RATE RISE, TAKING THE COUNTRY'S BORROWING COSTS TO A 15 YEAR HIGH. OPENAI REPORTEDLY SCRAPS THE RELEASE OF A NEW MODEL OVER SAFETY CONCERNS. NVIDIA DEBUTS A SYSTEM MEANT TO STOP AI AGENTS GOING ROGUE. HAIDI: TAKE A LOOK AT THE SET UP FOR TRADING ACROSS ASIA. THE HIGHLIGHT AND THE FOCUS REMAINS ON THESE PRESSURES WHEN IT COMES TO GLOBAL BOND MARKETS. IT IS A STORY THAT IS SPREADING BEYOND TREASURIES. ASIAN BONDS SET TO TRACK TREASURIES LOWER. OIL IS ELEVATED, COMPOUNDING INFLATION CONCERNS AND ADDING TO BETS ON FED RATE HIKES THE RBA IS EXPECTED TO GO AGAIN IN TODAY'S MEETING. STICKINESS HAS BEEN THE ISSUE BUT ELEVATED ENERGY PRICES ARE OUT OF THE RBA'S CONTROL. WE ARE BROADLY SEEING QUITE A BIT OF PRESSURE WHEN IT COMES TO RISK SENTIMENT FOR EQUITIES. U.S. STOCKS BY -- OFF BY 0.8 PERCENT, CHICAGO NIKKEI FUTURES TO THE DOWNSIDE AS WE HEAR FROM A FORMER BOJ OFFICIAL SAYING A RATE HIKE IN OCTOBER IS POSSIBLE. THE RATE HIKE BETS CONTINUE TO COALESCE. TAKING A LOOK AT THE DRIVERS OF WHAT WE ARE SEEING IN BOND MARKETS, THE ENERGY STORY, EXTENDING GAINS ON BRENT CRUDE AND NEW YORK TRADED CRUDE. THE UNCERTAINTY WHEN IT COMES TO THE BILATERAL NEGOTIATIONS AND LACK OF PROGRESS WEIGHING AGAINST SIGNS OF STRONG DEMAND AND THE RESUMPTION OF LOWS FROM THE KEY SAUDI PIPELINE. SHERY: MORE INSIGHTS ON THE MARKETS, LET'S BRING IN MARK CRANFIELD. THE PRESSURE FOR THE EQUITY SPACE GIVEN THE UNCERTAINTY AROUND OIL INFLATION RISK AND THE FACT THAT YIELDS ARE SURGING, TREASURIES AND THE SELLOFF, EVERY MAJOR MATURITY ACCESS THE TWO-YEAR -- EXCEPT THE TWO YEAR YIELD IS OFF BY 5%. MARK: A CHANCE FOR MACRO TRADERS TO RELAX. -- NO CHANCE FOR MACRO TRADERS TO RELAX. THE RBA DECISION IS EXPECTED TO BE AN INTEREST RATE HIKE. IT MIGHT BE A HAWKISH OUTLOOK AS WELL BECAUSE THE RBA SEEMS TO BE LOSING PATIENCE WITH THE INFLATION STORY IN AUSTRALIA AND GLOBALLY. BOND TRADERS COULD GET A DOUBLE WHAMMY FROM JAPAN AND AUSTRALIA. THAT WOULD FEED INTO G10 BONDS AND MAKE THE SITUATION MORE VOLATILE THAN IT HAS BEEN ALREADY. WE ARE INTO THE REALM WHERE IT IS IMPACTING EQUITY MARKETS BECAUSE YOU HAVE 5% YIELDS PRETTY MUCH ACROSS THE TREASURY CURVE. THAT IS COMPETITIVE AGAINST THE RETURNS YOU CAN GET FROM EQUITIES. IF YOU CAN GET A GUARANTEED 5% IN THE U.S. BOND MARKET, THE MOST LIQUID IN THE WORLD, THAT MAKES THE DECISION FOR CROSS ASSET PEOPLE EASIER. HAVING TO JUSTIFY WHY THEY ARE IN CERTAIN PARTS OF THE EQUITY SPACE. ON TOP OF THAT, GETTING CLOSE TO THE 5.25 LEVEL IN THE 10 YEAR. OUR COLLEAGUE IN LONDON LAST WEEK PUT OUT A DETAILED PIECE SAYING WHY FIVE AND A QUARTER IS A TIPPING POINT IN TERMS OF WHAT IT MEANS ACROSS ASSET CLASSES. ONCE YOU GET INTO THAT THRESHOLD IT IS NEGATIVE FOR ALL KINDS OF ASSETS. IT DOESN'T EVEN GUARANTEE THAT PEOPLE WILL COME BACK INTO THE LONG END OF THE TREASURY CURVE BECAUSE YOU HAVE COMPLEXITY RISK, WHICH FEEDS INTO THE MORTGAGE MARKET. IF WE GO ABOVE 5.25, WHICH IS NOT FAR AWAY, THINGS COULD GET MORE TURBULENT THAN THEY HAVE BEEN. SHERY: WHAT ABOUT IN JAPAN? WE ARE GETTING THE TWO-YEAR JGB YIELD A HAIR AWAY FROM THE 2% LEVEL. NOW PRICING IN FASTER BOJ RATE HIKES ON THE FRONT END BUT YOU HAVE THE YEN STUBBORNLY WEEK DESPITE THESE VERBAL INTERVENTIONS AND ACTIONS FROM GOVERNMENT OFFICIALS. MARK: I THINK WE ARE BEGINNING TO SEE THE START OF THE TURN IN THE YEN. IT IS WEAK, BUT IT IS STARTING TO IMPROVE ON CROSS RATES AGAINST THE EURO, THE POUND AND THE SWISS FRANC. THE MOST SIGNIFICANT THING IS THE CHANGE BY THE PRIME MINISTER. SHE IS REPORTED TO SAY THAT SHE IS NOW CONCERNED ABOUT THE IMPACT OF A WEEK YEN. THAT IS A CHANGE. PEOPLE WERE USED TO THE IDEA THAT IN THE BACKGROUND, THE PRIME MINISTER WASN'T KEEN ON SEEING HIGHER JAPANESE YIELDS, HIGHER RATE AT CONCERNS ABOUT KEEPING THE YEN RELATIVELY WEAK TO HELP JAPANESE EXPORT COMPANIES. IF TAKAICHI HERSELF IS BEGINNING TO CHANGE, THAT IS A DRAMATIC SHIFT. DOESN'T MEAN THE YEN WILL STRENGTHEN DRAMATICALLY STRAIGHTAWAY, BUT IT MAKES THE BANK OF JAPAN'S JOB EASIER. WE HAVE THE REPORT ON BLOOMBERG SUGGESTING OCTOBER IS LIVE FOR AN INTEREST RATE HIKE. THAT MIGHT BE PREMATURE, BUT CERTAINLY DECEMBER IS LOOKING LIKELY FOR THE BANK OF JAPAN TO RAISE INTEREST RATES. THAT IS A FASTER PACE OF RATE HIKES THAN PEOPLE WERE USED TO. PEOPLE WERE GETTING INTO THINKING SIX MONTHS WOULD BE THE TIME WHEN WE GET THE INTEREST RATE HIKE. IF WE GET THEM EVERY THREE MONTHS, THAT IS A BIG CHANGE IN JAPAN. THAT IS POSITIVE FOR THE CURRENCY, FOR THE YEN. IT HELPS TO FLATTEN THE YIELD CURVE AS WELL. THERE IS A LOT RESTING ON WHAT HAPPENS. BEFORE WE GET THERE, THERE IS A TWO YEAR ACTION -- AUCTION TOMORROW. THAT WILL NOT BE EASY UNLESS YIELDS ARE ABOVE 2% BY THE TIME THE SALE COMES ALONG. HAIDI: MARK CRANFIELD THERE. A LOT OF RISK AS WE HEAD INTO THE TUESDAY SESSION, INCLUDING CENTRAL BANK UNCERTAINTY. IN A FEW MINUTES, SALLY AULD WILL JOIN US TO TALK ABOUT BACK-TO-BACK HIKES NOT BEING ON THE CARDS. IRANIAN OFFICIALS ARE PESSIMISTIC ABOUT A DEAL TO END HOSTILITIES WITH THE U.S. AND REOPEN THE STRAIT OF HORMUZ BEFORE THE MIDTERM ELECTIONS IN NOVEMBER. OUR SOURCES SAY TEHRAN BELIEVES THERE IS A HIGH CHANCE OF U.S. ESCALATION AFTER THE BOUT. OUR WASHINGTON AND WHITE HOUSE CORRESPONDENT JOINS US NOW. WE HEARD FROM PRESIDENT TRUMP, USING THE TIMELINE OF THE MIDTERMS AS SORT OF BEFORE OR AFTER WHEN SOMETHING MIGHT HAPPEN. WHAT ARE WE HEARING IN TERMS OF THE EXPECTATIONS FROM THE OTHER SIDE? JEFF: WELL, I THINK TO BE CLEAR ON WHAT THE PRESIDENT HAS SAID, HE HAS CHANGED TIMELINES REPEATEDLY DURING THE COURSE OF THE CONFLICT, STARTING FROM THE BEGINNING WHEN HE SAID HE EXPECTED IT TO LAST 4-6 WEEKS, UP TO TODAY WHERE HE SAID HE THOUGHT AS YOU REFERENCED THAT THERE WOULD BE A CHANCE OF A DEAL AFTER THE MIDTERMS. I BELIEVE SHE -- HE SAID THAT TODAY. HE HAS SAID THAT WITHIN THE LAST WEEK OR SO. AGAIN, THAT NEEDS TO BE TAKEN WITH THE CONTEXT THAT HE HAS SAID MULTIPLE TIMES BEFORE, OR LAID OUT MULTIPLE TIMELINES THAT HAVEN'T ENDED UP BECOMING TRUE. AND HAVEN'T BEEN WHAT HE COULD MAKE HAPPEN. YOU ALSO ASKED ABOUT THE OTHER SIDE. BLOOMBERG IS REPORTING, OUR COLLEAGUES ARE REPORTING IRANIAN OFFICIALS ARE CASTING DOUBT ON THE CHANCES OF A BREAKTHROUGH AT THE, AFTER THE MIDTERM ELECTIONS ARE OVER. THAT WOULD BE BASED ON THE FACT THAT THEY HAVE HAD TALKS WITH THE U.S. OFFICIALS WITHIN THE LAST WEEK IN NEW YORK, AND THE IRANIAN FOREIGN MINISTER APPARENTLY STAYED IN THE U.S. FOR CONTINUED TALKS. HAIDI: MUCH DOMESTIC PRESSURE IS THERE FOR PRESIDENT TRUMP? I SUPPOSE TO THE DEGREE WE KNOW IN TERMS OF HOW THINGS ARE IN IRAN, I WONDER WHO IS UNDER MORE PRESSURE. THE IRANIANS HAVE BEEN HISTORICALLY GOOD AT DRYING OUT THESE CONFLICTS OF ATTRITION. JEFF: THERE IS A GREAT DEAL OF DOMESTIC PRESSURE, MANIFESTED PRIMARILY IN FUEL PRICES. THE PRESIDENT IS HEADING INTO THE MIDTERMS WITH THE WEAKNESS THAT FUEL PRICES ARE SO HIGH, AND VOTERS PRIMARILY CAN DRAW A DIRECT LINE BETWEEN THOSE HIGH GAS PRICES AND DIESEL PRICES, TO THE IRAN WAR THAT PRESIDENT TRUMP AND PRIME MINISTER NETANYAHU LAUNCHED. SO IT'S ABSOLUTELY PUTTING HIS REPUBLICAN PARTY INTO A DIFFICULT POSITION AT A TIME WHEN THEY WOULD LIKE TO MAINTAIN CONTROL OF BOTH HOUSES OF CONGRESS. POLLS SHOW THE DEMOCRATS HAVE A GOOD CHANCE OF TAKING THE HOUSE AND POSSIBLY THE SENATE. BUT THE QUESTION ABOUT DOMESTIC PRESSURE IS GOOD, BUT THE PRESIDENT HAS LARGELY DISMISSED THAT PRESSURE, AND HAS SAID SO, SAYING HE IS FOCUSED ON MAKING SURE IRAN DOESN'T GET A NUCLEAR WEAPON, AND THEREFORE ISN'T PAYING CLOSE ATTENTION OR DOESN'T CARE A LOT ABOUT THE FACT THAT PRICES HAVE COME UP AS A RESULT OF THE WAR. HAIDI: WE ARE STILL PASSING THROUGH THE AFTERMATH OF THE TRUMP-XI MEETING LAST WEEK. ONE THING THAT WE HEARD FROM DAVID ON FOX NEWS SUGGEST THE PRESIDENT AT ONE POINT PERHAPS TONGUE-IN-CHEEK, ASKED PRESIDENT XI IF YOU WANTED TO BUY AMERICAN ARMAMENTS. HAS THERE BEEN A RESPONSE FROM THE PRESIDENT CLARIFYING THAT? JEFF: HE WAS ASKED ABOUT THAT AND SEEMED TO NOT BE AWARE OF THE AMBASSADOR'S COMMENTS AND FOLLOWED UP WITH A REPORTER WHO ASKED ABOUT IT, SAYING DID YOU MEAN TAIWAN? THERE IS A QUESTION OVER WHEN AND WHETHER THE PRESIDENT WILL GIVE THE GREEN LIGHT TO A SHIPMENT OF U.S. ARMS TO TAIWAN. ACCORDING TO THE AMBASSADOR, HE ASKED THE SAME THING, HE ASKED PRESIDENT XI IF THAT WAS SOMETHING THEY WOULD BE INTERESTED IN, BUYING U.S. ARMAMENT. THE PRESIDENT SEEMED TO NOT BE AWARE OF THAT AND ENGAGED A LITTLE AND SAID MAYBE THAT WOULD BE A GOOD IDEA BUT NO, WE DIDN'T DISCUSS THAT. HAIDI: JEFF THERE, OUR WHITE HOUSE CORRESPONDENT WITH THE LATEST. LET'S GET CAUGHT UP WITH GLOBAL HEADLINES. SAUDI ARABIA HAS RESTORED ABOUT HALF OF THE FLOWS THROUGH THE CROSS COUNTRY WILL PIPELINE, BYPASSING THE STRAIT OF HORMUZ. THE PIPELINE CARRIED ABOUT 3.5 MILLION BARRELS PER DAY OF THE END OF LAST WEEK. DRONE STRIKES HALTED THE EXPORT ROUTE THIS MONTH. CHINA IS SAID TO HAVE EXPANDED OVERSEAS TRAVEL RESTRICTIONS FOR AI PROFESSIONALS TO INCLUDE THE FAMILIES OF KEY PERSONNEL. GOVERNMENT AGENCIES HAVE BEGUN SHARING RESTRICTIONS FOR PEOPLE LIKE AI AND CHIP EXECUTIVES. THEIR SPOUSES AND CHILDREN NEED APPROVAL FROM BEIJING TO GO ABROAD EVEN FOR SHORT TRIPS. SHERY: NVIDIA BOOSTS THE SIZE OF A BUYBACK PLAN BY A RECORD $150 BILLION, REFLECTING JENSEN HUANG'S CONFIDENCE IN THE AI BOOM. THE DETAILS, NEXT. THIS IS BLOOMBERG. SHERY: NVIDIA GAINED ON THE WALL STREET SESSION, RISING AFTER IT INCREASED THE SIZE OF A SHARE BUYBACK PLAN BY $150 BILLION. YOU CAN SEE MARGINAL GAINS OF 1.5% FOR A SECOND CONSECUTIVE DAY AFTER TWO WEEKS OF GAINS. THE BUYBACK, TAKING THE TOTAL REMAINING AUTHORIZED AMOUNT TO $235 BILLION, SHOWING THE CONFIDENCE BY JENSEN HUANG WHEN IT COMES TO THE LONG-TERM AI CASH GENERATION OF THE COMPANY. THE SHARE BUYBACK COMES AS THEY PARTNER WITH ANTHROPIC ON A NEW PLATFORM DESIGNED TO MAKE AI AGENTS SAFER FOR BUSINESSES. THE SOFTWARE GIVES COMPANIES MORE CONTROL OVER WHAT THE AGENTS CAN ACCESS, CN DO. WE ARE JOINED BY OUR EDITOR. THIS IS A WAY THAT YOU CAN QUARANTINE SUSPICIOUS ACTIVITY. EXPLAIN HOW IT WORKS. LYNN: IT IS MORE THAN JUST QUARANTINING THEM. IN THE CASE OF THE HUGGING FACE INCIDENT AND THE INCIDENT OPENAI DISCLOSED FRIDAY, THESE WERE MODELS THAT WERE BEING TESTED IN SECURED, OR IF THOUGHT THEY WERE, ENVIRONMENTS CALLED SANDBOXES. THESE ARE COMMON FOR AI AGENTS TO BE TESTED AND EVALUATED IN. NVIDIA IS OFFERING ENVIRONMENTS THAT ARE SECURED LIKE THAT TO ENSURE AI AGENTS ARE NOT ACCESSING SYSTEMS THEY AREN'T SUPPOSED TO, AND SPOTTING WHEN AI AGENTS ARE NOT ACTING THE WAY THEY ARE SUPPOSED TO OR CARRYING OUT TASKS THEY ARE NOT EXPLICITLY AUTHORIZED TO DO, AND QUARANTINING THOSE THAT AREN'T BEHAVING PROPERLY. SHERY: HOW DOES THIS EVENTUALLY HELP NVIDIA IN THE LONG TERM, GIVEN THAT WE HAD SEEN FEARS AROUND THE SAFETY OF ARTIFICIAL INTELLIGENCE? IT MAKES NVIDIA AN ACTIVE PLAYER IN THE DEBATE. LYNN: THERE IS A THEME. NVIDIA TENDS TO BECOME AN ACTIVE PLAYER ON ANYTHING THAT MIGHT THREATEN ITS BUSINESS CASE AND THIS IS ONE WERE A LOT OF PEOPLE HAVE QUESTIONED IS A POTENTIAL SIGNAL FOR NVIDIA. I WOULDN'T CALL IT A COINCIDENCE THAT NVIDIA ANNOUNCED THE BUYBACK WHEN PEOPLE LIKE ANTHROPIC AND OPENAI'S CEO ARE TALKING ABOUT A SLOWDOWN OF DEVELOPMENTS OF AI SYSTEM. SO THIS IS JENSEN HUANG STEPPING IN AND SAYING, THERE IS NO NEED FOR AN AI SLOWDOWN. THERE IS NEED FOR GREATER SECURITY MEASURES, AND HERE WE ARE TO HELP WITH THAT. SHERY: AND YET THERE ARE REPORTS OPENAI PERHAPS IS SLOWING DOWN ITS RELEASES WHEN IT COMES TO ITS LATEST AI MODEL? LYNN: YES, THAT'S RIGHT. THERE IS A REPORT ABOUT THE LATEST MODEL BEING POTENTIALLY SHELVED ALTOGETHER AS A RESULT OF THE LATEST EVALUATIONS THAT IT HAS BEEN THROUGH. WE REPORTED ON FRIDAY THAT THERE WAS ANOTHER INCIDENT WHERE A MODEL THAT WAS BEING TESTED AND TRAINED HAD AGAIN ESCAPED THE SANDBOX AND REACHED THE INTERNET. IT IS NOT HACK A SYSTEM -- DID NOT HACK A SYSTEM BUT IT MADE CONTACT WITH AN EXTERNAL CHATBOT AND WAS ABLE TO ASK IT QUESTIONS LIKE WHAT IS THE CAPITAL OF FRANCE? THESE ARE ALARMING SITUATIONS. OPENAI IS TRYING TO TAKE THEM SERIOUSLY. SHERY: LIT JOINING US -- LYNN JOINING US WITH THE LATEST. AMD'S CEO ANNOUNCED THEY ARE PAYING $8.2 BILLION TO BUY WORLD LABS, THE STARTUP. THE CEOS SPOKE EXCLUSIVELY TO BLOOMBERG ABOUT THE SIGNIFICANCE OF THE DEAL AND THEIR SHARED VISION FOR THE NEXT PHASE OF AI. >> TODAY IS AN EXCITING DAY. I CAN TELL YOU THAT WE ARE SUPER EXCITED TO BE ACQUIRING WORLD LABS. I HAVE KNOWN FOR FAITH FOR A LONG TIME. I HAVE RESPECT FOR HER AS A VISIONARY. WHEN YOU THINK ABOUT WHERE AI IS TODAY, I HAVE OFTEN SAID THAT WE ARE STILL IN THE EARLY INNINGS AND I TRULY BELIEVE THAT. WHAT IS BECOMING MORE AND MORE CLEAR IS THAT THE INTERACTION BETWEEN THE HARDWARE, THE SOFTWARE, THE SYSTEMS IN THE MODEL LAYER ARE SUCH THAT THE MORE YOU UNDERSTAND AND TO END, THE BETTER SYSTEM YOU WILL BUILD. THAT IS WHY WE ARE ACQUIRING WORLD LABS, TO HAVE ACCESS TO THE WORLD-CLASS TALENT THEY HAVE BROUGHT TOGETHER AND BRING IT TOGETHER WITH AMD'S COMPLETE CAPABILITIES AROUND HARDWARE, SOFTWARE AND SYSTEMS, AND BUILD THE FUTURE OF AI. >> WE SHOULD GET TO THE BACK STORY WITH BOTH OF YOU BUT YOU TALK A LITTLE ABOUT HOW IT CAME ABOUT? THE CATALYST FOR DOING ACTUAL TRANSACTION? >> I HAVE HAD TREMENDOUS RESPECT FOR HER. EVERYBODY KNOWS HOW MUCH SHE CONTRIBUTED TO AI OVER THE LAST COUPLE DECADES. WE HAVE ALWAYS HAD THAT MUTUAL RESPECT AND TRUST. WHAT WE SAW IS, AMD WAS AN EARLY INVESTOR IN WORLD LABS. WE SAW THEM BUILD WHEN THERE WERE JUST A FEW RESEARCHERS, BUILDING TO THE TEAM, NOW WITH THE RELEASE OF ATLAS. WHAT WE SEE IS A TREMENDOUS NUCLEUS OF CAPABILITY THAT WOULD BE A HUGE ADDITION TO ALREADY OUR VERY TALENTED AMD WORKFORCE. SO I WAS THRILLED THAT THE FOUNDERS WERE EXCITED ABOUT JOINING AMD. >> REFLECT ON THAT. WE HAVE SPOKEN RECENTLY, THIS DIDN'T COME UP BUT A GOOD STARTING POINT OTHER THAN HOW THIS CAME TOGETHER IS WHAT OPPORTUNITY DID YOU SEE FOR YOUR WORK AND THE TEAM AT WORLD LABS TO BE PART OF AMD? >> JUST TO ECHO LISA, THE RELATIONSHIP HAS BEEN GOING FOR MANY YEARS. IT STARTED WITH MUTUAL RESPECT AND GENUINE FRIENDSHIP AT THE PERSONAL AND PROFESSIONAL LEVEL. WE ARE VERY GRATEFUL WHEN AMD WAS AN EARLY BELIEVER AND SUPPORTER OF WORLD LABS. BUT REALLY, WHAT IS MOST IMPORTANT AND EXCITING ABOUT THE MERGER IS THE SHARED VISION FOR THE FUTURE OF AI. WORLD LABS HAS BEEN A FRONTIER MODEL BUILDING COMPANY. WE HAVE BEEN RUNNING AS FAST AS WE CAN TO BUILD THE NEXT GENERATION MULTIMODAL OMNI MODEL FOR SPATIAL AND PHYSICAL INTELLIGENCE, AND AS THE COMPANY GROWS, SO DOES OUR AMBITION AND OUR NEED FOR COMPUTE. AT THIS POINT, IF WE CAN JOIN FORCES WITH AMD, WE ARE GIVING OURSELVES AND AMD AND THE ECOSYSTEM AND OPPORTUNITY TO ACTIVATE THE FLYWHEEL BETWEEN HARDWARE AND SOFTWARE DEVELOPMENT, WOULD IT -- WHICH IS CRITICAL. HAIDI: SPEAKING EXCLUSIVELY WITH THEIR BLOOMBERG TECH ANCHOR ED LUDLOW. LET'S GET CAUGHT UP WITH THE LATEST ON THE CORPORATE FRONT. META-HIRED THE HEAD OF MONGO DB TO NEED -- TO LEAD A NEW PLATFORM. HE WILL LEAD WHAT MARK ZUCKERBERG CALLS THE NATE'S -- THE NEXT GREAT PILLAR. MONGO DB SHARES PLUNGED 21%. META STOCK FELL 4% AFTER THE ANNOUNCEMENT. SPACEX'S STARSHIP ROCKET REACHED ORBIT FOR THE FIRST TIME, DEPLOYING 26 UPGRADED STARLINK SATELLITES BUT THE MISSION WAS CUT SHORT AFTER AN ENGINE FAILURE. THE SPACECRAFT SPLASHED DOWN NEAR HAWAII THREE HOURS AFTER LAUNCH. THIS MARKS THE FIRST SATELLITE DELIVERY AND A MAJOR STEP TOWARDS ROUTINE LAUNCH IS TO EXPAND THE STARLINK NETWORK. SHEIN'S PROFIT PLUNGED AFTER DEBUTED. THE RETAILER REPORTED A NEAR 53% DROP IN OPERATING INCOME FROM LAST YEAR HIT BY RISING COSTS AND WEAKENING DEMAND. IT WARNED OF SECOND-HALF UNCERTAINTY WITH TARIFF HEADWINDS AND LOGISTICS COST VOLATILITY TO PERSIST. MORE AHEAD ON THE ASIAN TRADE. THIS IS BLOOMBERG. ♪ SHERY: GETTING SOME INSIGHT WHEN IT COMES TO THE EXPECTED IPO BY ANTHROPIC. NOW HEARING FROM A PROSPECTIVE THAT ANTHROPIC LOST $42 BILLION LAST YEAR. ANTHROPIC APPARENTLY PLANS TO SPEND $518 BILLION ON LOUD COMPUTING AND INFRASTRUCTURE OBLIGATIONS IN THE COMING YEAR ACCORDING TO THE PROSPECTUS, BUT THE REVENUE ON THE OTHERS THINGS HAS BEEN HUGE. EXPONENTIAL GROWTH, 12 FOLD JUST LAST YEAR, REALLY GIVEN THE GROWTH OF THIS COMPANY. HAIDI: IT IS INTERESTING BECAUSE THIS IS THE FIRST TIME WITH THE PROSPECTUS AND THE DETAILS, WHERE ALL OF THESE DETAILS ON THE SPENDING AND THE CONTRACTS HAVE COALESCED IN ONE PLACE. THAT FIGURE IS QUITE STAGGERING, AS WE SEE SOME ELEMENTS OF THIS REPORTED WHEN IT COMES TO JUST A FEW DAYS AGO, $11.6 BILLION DEAL WITH A CYBERSECURITY AND CLOUD COMPANY. SOME OF THESE MASSIVE NUMBERS WHEN IT COMES TO THE AI SPENDING THROUGH TO CLOUD PROVIDERS AND NEO-CLOUD PROVIDERS AND OPERATORS HAS BEEN IN THE DOMAIN AS WELL. WE HEARD NVIDIA SAID THERE IS MORE THAN $180 BILLION OF CONTRACTED VALUE ACROSS THOSE OPERATORS. ALL OF THIS, BRINGING TOGETHER TOPLINE NUMBERS WE ARE EXPECTING. THE NET LOSS OF 42 BILLION DOLLARS IN 2025 AND THE SPEND OF $518 BILLION ACROSS INFRASTRUCTURE OBLIGATIONS AND CLOUD ACCORDING TO THE PROSPECTUS. THIS IS BLOOMBERG. ♪ SHERY: WE ARE SEEING TRADERS LOSING FAITH WHEN IT COMES TO DIPLOMATIC CHANNELS AROUND THE IRAN WAR. A LOT OF VOLATILITY IN THE MARKETS, OVERNIGHT WTI GAINED ROUNDABOUT 4%, JUST TO GIVE UP MOST OF THE GAINS BY THE END OF THE SESSION, AROUND $93 PER BARREL. WE ARE GETTING ELEVATED LEVELS, BRENT SURPASSING $100 PER BARREL, LEADING TO INFLATION CONCERNS. YOU CAN SEE IT IN THE TREASURY SPACE. WE TALKED ABOUT THIS THROUGHOUT THE DAY YESTERDAY AND THIS WEEK. WHEN WE ARE SEEING ALMOST THE ENTIRETY OF THE TREASURY CURVE ABOVE THE 5% LEVEL. YOU HAVE INVESTORS, AND POLICE SEEING SOME VALUE AT 5%. BULLISH ON TREASURIES FOR THE FIRST TIME IN SIX YEARS. HAIDI: WE CAN SEE INTERESTING PRICE ACTION WHEN IT COMES TO AUSTRALIA'S MILITARY BECAUSE WE ARE EXPECTING THE ARMY I -- THE RBA TO GO AGAIN TODAY. WHEN IT COMES TO LACK OF SUPPORT FOR THE AUSSIE DOLLAR, THERE MAY BE MORE CYCLING WHEN IT COMES TO WHAT COMES AFTER THIS. GOLDMAN IS THINKING WE COULD SEE RELIEF WHEN IT COMES TO AUSSIE BONDS AFTER THIS BECAUSE THEIR VIEW IS THAT THAT MARKET SET UP AT THE MOMENT IS PERHAPS OVERSHOOTING. THE AUSSIE DOLLAR HIM A ON THE BACK FOOT BUT ABOUT $.70 U.S. AND WE SHOULD SEE ENERGY NAMES TRACKING HIGHER IN THE EQUITY SESSION GIVEN THAT OIL PRICES ARE ELEVATED. SALLY IS ECONOMIST AT NATIONAL AUSTRALIA BANK. DO YOU THINK THE MARKET PRICES ARE OVERDONE, UNDERDONE OR JUST RIGHT? SALLY: IT IS STARTING TO DIFFERENTIATE BETWEEN THE RBA WHERE THEY HIKE THREE TIMES AND THE BANKS DESCRIBE POLICY AS RESTRICTIVE, AND THE DATA SUGGESTS THEY ECONOMY CONTINUES TO SLOW AND THE UNEMPLOYMENT RATE IS DRIFTING HIGHER RELATIVE TO OTHER PARTS OF THE WORLD LIKE THE U.S. WHERE GROWTH IS CLEARLY RESILIENT, PROBABLY STRONGER THAN ANTICIPATED. MAYBE POLICY ISN'T QUITE RIGHT. SO THE MARKET THERE IS ANTICIPATING THE POSSIBILITY OF NOT JUST ONE OR TWO HIKES BUT THREE OR FOUR. IN AUSTRALIA THE MARKETS ARE A LITTLE RETICENT TO PRICE AND A CASH RATE BEYOND 5% GIVEN HOW FAR WE HAVE COME. HAIDI: INFLATION HAS BEEN OUT OF RANGE AND STICKY FOR THE RBA FOR SOME TIME. IS THIS ENERGY AND EXTERNAL SHOCK ISSUE WE ARE LOOKING AT AT THE MOMENT? INTEREST RATES ARE A BLUNT TOOL. ARE THERE BETTER TOOLS? THERE IS DISCUSSION ABOUT TARGETED TAX CHANGES THAT MIGHT BE MORE BENEFICIAL. SALLY: WE HAVE TO BE CAREFUL WHEN IT COMES TO OTHER TOOLS. IT IS A BLUNT TOOL, IT IS THE ONLY ONE OF THE RBA HAS BUT WE MUST REMEMBER WHY WE HAVE AN INDEPENDENT CENTRAL BANK. IT IS SET UP BY AN ACT OF PARLIAMENT AND HAS A MANDATE THAT IT IS MEANT TO ACHIEVE, WHICH IS TO GET INFLATION TO THE TARGET BAND IN A REASONABLE PERIOD AND HOPEFULLY KEEP IT THERE. SOMETIMES THAT REQUIRES UNPOPULAR DECISIONS, WHICH IS WHY WE OUTSOURCED THAT TO AN INDEPENDENT BODY. THE WORRY IS THAT WITH THE THREE YEAR ELECTORAL CYCLE, IF YOU LET POLITICIANS BE THE ULTIMATE ARBITERS OF THE RIGHT THING TO DO FOR THE ECONOMY, YOU COULD GET SOME CONFLICT BETWEEN WHAT THE RIGHT ACADEMIC OUTCOMES ARE AND THE DESIRED POLITICAL OUTCOMES. THAT IS WHY WE HAVE AN INDEPENDENT CENTRAL BANK. I THINK WE AGREE IT IS NOT PERFECT BUT IT'S THE BEST WE HAVE HAD. WE HAVE DECADES OF HISTORY WHERE I THINK WE HAVE UNDERSTOOD THAT HAVING THAT SYSTEM, HAVING AN INDEPENDENT CENTRAL BANK WITH AN INFLATION TARGET OVER THE LONG RUN IS THE RIGHT WAY TO SET UP ECONOMIC POLICYMAKING. HAIDI: AND THAT SCENARIO, WE SEE THAT HAPPENING IN OTHER CARE -- ECONOMIES AND JURISDICTIONS. DOES THERE NEED TO BE PHYSICAL HEAVY LIFTING? IS THERE A ROLE FOR TAX HIKES THAT WOULD BE EFFECTIVE? SALLY: WE NEED TO LOOK AT OVERALL SETTINGS OF MONETARY AND FISCAL POLICY. IT IS A TRICKY SITUATION. WE HAVE A BIT OF A SPEED CAP ON THE ECONOMY AT THE MOMENT. WE CAN'T GROW MORE THAN 2% WITHOUT PUTTING UPWARD PRESSURE ON INFLATION. SO THAT BASICALLY MEANS WE HAVE TO THINK OF ALL PARTS OF AGGREGATE DEMAND, NOT JUST WITH THE PRIVATE SECTOR IS DOING BUT WITH THE PUBLIC SECTOR IS DOING. WE WANT AN ECONOMY THAT IS IN LARGE PART DRIVEN BY PRIVATE-SECTOR GROWTH. THAT IS WHAT WE WANT. DEMOCRATIC, CAPITALIST SOCIETY. AND I THINK AT A TIME WHERE IT DOESN'T TAKE MUCH FOR THE ECONOMY TO PUSH UP AGAINST CAPACITY CONSTRAINTS, WE NEED TO THINK MORE CAREFULLY ABOUT FISCAL POLICY AND THE ROLE THAT PLAYS IN AUSTRALIA. IT IS NOT ALL THAT UNUSUAL TO HAVE FISCAL AND MONETARY POLICY WORKING ACROSS PURPOSES. BUT WHEN THE ISSUE IS VERY MUCH AROUND INFLATION, WE NEED TO REMEMBER THERE IS OFTEN ONLY ONE WINNER IN THE BATTLE AND THAT IS MONETARY POLICY BECAUSE THEY ARE THE ONES WITH THE LEGISLATIVE TARGET. HAIDI: EVERYONE WATCHES THE IMPACT, AND THE PROPERTY DOWNTURN. DO YOU LOOK AT THAT MORE OR DO YOU LOOK AT THE BUSINESS SPENDING SIDE? WITH BUSINESS SPENDING, IS THERE A RISK WE WILL SEE STAGFLATION OR THE RISK OF RECESSION? SALLY: WHAT WE ARE FORECASTING IS THAT WE WILL HAVE AN ADJUSTMENT IN THE ECONOMY SO WE WILL HAVE A PERIOD WERE GROWTH SLOWS WELL INTO THE LOW LEVELS AND BELOW TREND GROWTH FOR THREE YEARS PRETTY MUCH IN AUSTRALIA. WE THINK THAT WILL BE ENOUGH TO GET INFLATION BACK TO THE TARGET BAND THAT WILL PUSH UP THE UNEMPLOYMENT RATE FOR THE HIGH FOUR, 5% BUT NOT BEYOND THAT. WE ARE NOT LOOKING FOR A RECESSION. THE PROPERTY MARKET IS IMPACTED BY MANY FACTORS SO IT WAS STARTING TO SOFTEN AHEAD OF THE FEDERAL BUDGET. THEN THE FEDERAL BUDGET, THERE WERE SIGNIFICANT CHANGES TO TAX ARRANGEMENTS FOR INVESTORS IN PROPERTY THAT WE HAVE SEEN AND A QUARTER OF A CENTURY. AS THE MARKET AND INVESTORS ARE WORKING THE IMPLICATIONS OF THOSE REFORMS, AND THEY WERE SIGNIFICANT, THAT IS PUTTING DOWNWARD PRESSURE ON NOT JUST HOUSE PRICES THAT ACTIVITY AS WELL. THE RESERVE BANK IS SAYING THAT IS NOT THE NUMBER ONE PRIORITY FOR THEM. INFLATION IS THE PREDOMINANT POLICY CONCERN, SO IF WE TAKE THEM AT THEIR WORD, THEY ARE WORRIED ABOUT UPSIDE RISK TO INFLATION AND THEY FEEL LIKE THOSE RISKS MATERIALIZED AND HAVE BEEN CLEAR ABOUT SAYING SHOULD THAT HAPPEN, THEY WILL LIFT RATES. IT IS LIKELY WE COULD GET THROUGH THIS WITHOUT A RECESSION BUT I THINK IT IS INTERESTING THAT BANK OFFICIALS HAVE STARTED TO TALK MORE EXPLICITLY ABOUT A MORE NEGATIVE TRADE-OFF BETWEEN INFLATION OBJECTIVES AND EMPLOYMENT OBJECTIVES AS WELL. HAIDI: IF THE WAR ENDED TOMORROW AND OIL PRICES COME DOWN AND STAY THERE, DO YOU THINK THE RBA WOULD HOLD? ARE THERE MORE DOMESTIC FACTORS FOR INFLATION AT PLAY? SALLY: WHEN WE TALKED ABOUT UPSIDE RISK TO THE INFLATION OUTLOOK, THERE ARE THREE THINGS. MIDDLE EAST CONFLICT AND THE OUTWARD PRESSURE ON ENERGY PRICES. THE ARTIFICIAL INTELLIGENCE INFRASTRUCTURE BUILDOUT AND SOME OF THE PRESSURES THAT MIGHT PUT ON CERTAIN PARTS OF THE LABOR MARKET AND ALSO MATERIALS AND THEY ALSO TALKED ABOUT THE SUPPLY SIDE CAPACITY CONSTRAINED ECONOMY. WHILE PRICES AND THE MIDDLE EAST CONFLICT MATTER, BUT THEY AREN'T THE WHOLE STORY. IF WE KNEW THE CONFLICT WAS GOING TO AND FOR GOOD AND OIL PRICES WOULD GO BACK TO $60 PER BARREL, I DON'T KNOW IF THAT WOULD BE ENOUGH TO DETER THE RBA FROM DELIVERING A HIKE. HAIDI: I'M GLAD YOU BROUGHT UP AI BECAUSE I WANTED YOUR VIEW ON THE DATACENTER ROLLOUT. IS IT THE NEW MINING BOOM? AND THEN BROADER IMPACT ON PRODUCTIVITY. DO YOU SEE IT IS A FALSE HOPE? WILL IT BE THE THING THAT POTENTIALLY ALLEVIATES THE PRESSURES OF THE DEMOGRAPHICS FOR AUSTRALIA, THE CLAMPDOWN ON MIGRATION AND ALL OF THAT? SALLY: DEPENDS ON WHAT TIME PERIOD YOU ARE TALKING ABOUT. MOST PEOPLE ARE COMING AROUND TO THE VIEW THAT MAYBE THERE IS A J CURVE AROUND PRODUCTIVITY. SO THE BENEFITS MIGHT TAKE A WHILE LONGER THAN PEOPLE THOUGHT TO CRYSTALLIZE AND BE REALIZED. MOST ECONOMISTS, WHEN THEY LOOK AT THE POSSIBLE IMPACTS OF ARTIFICIAL INTELLIGENCE ON PRODUCTIVITY GROWTH, ARE SAYING SOMEWHERE MAY BE BETWEEN 0.5 PERCENT-1% ON PRODUCTIVITY PER YEAR, AND THEY SOUND LIKE REASONABLE ESTIMATES BUT I DON'T THINK THAT IS SOMETHING WE ARE FACING RIGHT NOW. THAT IS A STORY FOR LATER. THE NEAR TERM STORY IS PROBABLY ONE THAT IS MORE INFLATIONARY RATHER THAN DISINFLATIONARY AND THAT IS BECAUSE AS YOU SAID, THIS IS A SOURCE OF DEMAND FOR LABOR AND MATERIALS AND LAND AND RESOURCES THAT WASN'T THERE A COUPLE YEARS AGO. IN A CAPACITY CONSTRAINED ECONOMY LIKE AUSTRALIA WITH THE POTENTIAL TO REALLY MATTER FOR THE INFLATION OUTLOOK, THAT IS WHY THEY ARE LISTED AS ONE OF THE UPSIDE RISKS. HAIDI: SALLY AULD IS THE CHIEF ECONOMIST. LET'S TAKE A LOOK AT ONE OF THE CONTRIBUTORS TO THE INFLATIONARY A LOOK AT AUSTRALIA, ELEVATED OIL PRICES. WE CONTINUE TO SEE UPSIDE PRESSURE AS WE HEAR FROM THE IRANIANS EXPRESSING UNCERTAINTY ON THE PEACE NEGOTIATIONS. WE HAVE HEARD VARIOUS SCENARIOS FOR -- FROM PRESIDENT TRUMP, LISTENING AROUND THE MIDTERMS BUT OIL RISING ON THE UNCERTAINTY AS WELL AS FOR IN SPITE OF THE KEY PIPELINE WHEN IT COMES TO SAUDI ARABIA BEING REOPENED AS WELL. THE PROSPECTS OF THE BROADER REOPENING OF THE STRAIT OF HORMUZ, SEEMINGLY FADING BEFORE THE U.S. MIDTERMS IN THE NOVEMBER. OTHER STORIES, GOLD AT THE MOMENT SEEING IT UPSIDE OF 0.3% BUT WITH THE PROSPECTS OF HIGHER RATES AND A QUICKENING OF THE RATE CYCLE, GOLD IS LOSING SOME OF APPEAL. COPPER WE ARE WATCHING, THE COPPER CRUNCH ACCORDING TO DEUTSCHE BANK, SAYING WE WILL SEE THE METAL GOING TO $22,050. IN AUSTRALIA, COPPER PRODUCERS LEADING THE RALLY, AI BUILDOUT DRIVING DEMAND. OUR REPORTER JOINS US FOR MORE. WE SAW EXUBERANCE IN THE EARNINGS SEASON WITH THE BIG MINORS. THE BROADER MARKET PERFORMANCE, ANYONE WITH COPPER PERFORMANCE -- EXPOSURE IS A STANDOUT. >> THE MAIN THING DRIVING THE DYNAMIC WHERE WE ARE SEEING MINERS FIND THEIR MOJO IS THE SHIFT FROM IRON ORE TO COPPER. SALLY AULD TALKED ABOUT DATA CENTERS, COPPER BEING A KEY INGREDIENT IN ELECTRIFICATION AMID THE SURGING DEMAND FOR THAT. IF YOU LOOK AT IRON ORE, A LOT OF MINERS HAVE USED IRON ORE TO DRIVE RETURNS OVER THE LAST FEW DECADES IN CORRELATION WITH CHINA'S PROPERTY BOOM. CHINA'S PROPERTY SLUMP, THE PROPERTY MARKET STRUGGLED TO EXIT THE SLUMP AS POLICYMAKERS HAVE BEEN LOOKING FOR STIMULATE THE MARKET A BIT. SO THAT IS WHERE WE HAVE SEEN A LOT OF STRATEGIC SHIFT FROM THE BIGGEST MINERS, RIO TINTO AND BHP STARTING TO LOOK TOWARDS ACQUISITIONS AND JOINT VENTURES IN THE COPPER SPACE. A LOT OF THAT HAS BEEN REWARDED IN THE EARNINGS. FORTESCUE, A MINER THAT IS CORRELATED WITH IRON ORE, THEIR EARNINGS ARE STARTING TO LAG THE REST OF THE MARKETS OF THAT IS THE SHIFT THAT HAS BEEN DRIVING THE RALLY. HAIDI: SOME OF THE NAMES THAT DID WELL, COPPER WAS A PART OF THE GROWTH STORY BUT THE CONCERN IS THAT A LOT OF THESE PLAYERS ARE OPERATING AGING MINDS AND ASSETS. IS THAT A RISK IN TERMS OF MAKING SURE THE GROWTH STORY CONTINUES? >> I THINK IT IS A RISK IN TERMS OF LOOKING AT THE MINING SECTOR HERE. ANOTHER THING WE SHOULD PAY ATTENTION TO IS INFLATION. WE STILL HAVE THE MIDDLE EAST WAR GOING ON AND EXPECTATIONS FOR A NEAR TERM DEAL TO REOPEN THE STRAIT OF HORMUZ, SORT OF SLIPPING AWAY. ALWAYS IN DOUBT. AND AS WE GET HIGHER OIL PRICES, THAT WILL CONTINUE TO WEIGH ON THE OPERATIONAL COSTS. THAT IS ANOTHER RISK TO BE LOOKING FOR IN ADDITION TO AGING INFRASTRUCTURE AND OPERATIONS THAT WE ARE SEEING. HAIDI: MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. SHERY: LOOKING AT TECH STOCKS IN THE ASIAN SESSION AFTER WE SAW THE LOSSES IN THE OVERNIGHT SESSION AND THE NASDAQ 100 LOSING MORE THAN 1% OVER ON WALL STREET. FOLLOWING THE LATEST ON ANTHROPIC, WE GOT THE IPO PROSPECTUS SEEN BY REUTERS, REPORTING A NET LOSS OF POTENTIALLY $42 BILLION LAST YEAR. REUTERS REPORTING ANTHROPIC PLANS TO SPEND $518 BILLION ON CLOUD COMPUTING AND INFRASTRUCTURE OBLIGATIONS. OUR TEAM THINKS THIS COULD GIVE A BIT OF A BOOST WHEN IT COMES TO THE SEMICONDUCTOR SIDE OF THINGS IN TODAY'S SESSION. WE HAVE THE BROAD PRESSURE COMING FROM THE OVERNIGHT SESSION BUT ASIANS DOCS COULD FALL BECAUSE OF THE CYBER SECURITY CONCERNS PLAGUING THE AI INFRASTRUCTURE TRADE. KOREAN FUTURES, INDICATING POTENTIALLY FURTHER LOSSES, AND CHANGED YOU SEE IN THE FUTURES SPACE AFTER SEMICONDUCTOR NAMES FELL IN THE U.S. TRADING. FOR MORE, LET'S BRING IN ANTHONY IN HONG KONG. IT DOESN'T HELP THAT YIELDS ARE SURGING. ANTHONY: WE HAVE SEEN THE SEMICONDUCTOR SPACE POWER THROUGH HIGHER YIELDS ALL YEAR, ONLY TO PAUSE ON THE CYBER SECURITY CONCERNS. THAT IS BECAUSE CYBER SECURITY CONCERNS ARE COMING AT THE FRONT OF AI DEVELOPMENT. THEY IMPACT THE GO FORWARD BUILDOUT OF DATA CENTERS. THEY IMPACT THE EDGE CASES AROUND DATA CENTERS THAT BUOY HIGHER MARGIN COMPONENTS. YOU HAVE THE CONCEPT OF MARGIN COMPRESSION IF THE FRONTIER IS SLOWED WHICH IS WHY NVIDIA IS RUSHING INTO THE BREACH TO INITIATE AN INDUSTRYWIDE CYBERSECURITY INITIATIVE. THE PROGRESS WILL BE INTERESTING TO WATCH. ALSO WANT OPENAI SAYS ON ITS DEVELOPMENT DAY-TO-DAY WILL BE INTERESTING TO WATCH AND THE BREAKDOWN OF THE U.S. STOCK MARKET YESTERDAY SHOWS THE CENTRALITY OF CYBERSECURITY TO THIS THEME. CYBERSECURITY MATERIALLY OUTPERFORMED ALONGSIDE NVIDIA. NVIDIA'S HUGE BUYBACK IS IMPORTANT. TAIWAN COMES BACK TO TRADING TODAY AND IT WILL BE INTERESTING TO SEE HOW TAIWAN TREADS THE SLOWDOWN IN SEMICONDUCTORS. KOREA HAD A SHARP DOWNDRAFT YESTERDAY, THE KOSPI DOWN 2.7 SO LOOKING FOR STABILITY EARLY ON. THE FUTURES AND ETF'S WERE NEITHER HERE NOR THERE OVERNIGHT . IT WAS UP TO THE LOCALS TO PICK UP THE SLACK TODAY. IT WILL BE INTERESTING AROUND THAT IS, MICRON FELL OFF YESTERDAY AND IS GOING INTO EARNINGS TOMORROW SO THERE IS A LOT OF CALENDAR RISK AROUND THE TECH TRADE COMING INTO AN IMPORTANT MACRO WEEK. SHERY: ESPECIALLY MACRO WHEN IT COMES TO AUSTRALIA, THE RESERVE BANK EXPECTED TO HIKE RATES BY 75 BASIS POINTS. THAT MARKET HAS BEEN PRETTY FLAT ON THE YEAR. ANTHONY: THAT MARKET IN AUSTRALIA HAS BEEN BAILED OUT BY THE COMMODITY BOOM, AS YOU HEARD. BUT ON THE DOMESTIC MACRO SIDE, THINGS ARE TURNING QUITE HARD. THAT IS A FUNCTION OF THE YIELDS AND THE HOUSING MARKET THAT WAS CREAKING ANYWAY. IT IS A FUNCTION OF EXPENSIVE BANKS FINALLY GETTING RE-RATED LOWER. WHAT THE RV I SAYS AT THE MEETING WILL BE INTERESTING IN TERMS OF THEIR CONVICTION OF CRUSHING INFLATION. AUSTRALIA HAS BEEN AHEAD OF THE CURVE ON INFLATION FIGHTING. THERE IS A HIKING CYCLE FIRMLY PRICED INTO INTEREST RATE SWAPS. HOW AGGRESSIVELY WILL THEY LEAN INTO THAT MESSAGING WILL BE THE KEY DETERMINANT OF HOW THE AUSSIE STOCK MARKET AND THE AUSSIE DOLLAR TRADES. THE AUSSIE DOLLAR HAS BEEN WEAKENING IN LINE WITH FALLING GOLD AND COPPER PRICES, SEVERAL WILL BE INTERESTING, THE RBA MEETING TODAY. SHERY: ANTHONY STEPHENS THERE. WE HAVE MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. SHERY: JAPANESE SUSHI GIANT SUSHI TO IS ABOUT TO TAKE ITS MASS-MARKET MODEL TO NEW YORK. IT IS ENTERING A CROWDED MARKET, WORTH $22 BILLION PER YEAR, BUT THE COMPANY SAYS IT SEES AN OPPORTUNITY BETWEEN HIGH AND FINE DINING AND SUPERMARKET TAKE OUT. WITH ALMOST 800 STORES IN JAPAN AND OVER A HUNDRED OVERSEAS, CONVEYOR SUSHI GIANT SUSHIRO IS A FORCE IN AFFORDABLE CASUAL DINING. >> I SAW IT ON INSTAGRAM AND YOUTUBE SO WE TRIED IT, AND IT WAS REALLY GREAT. SHERY: STORES IN JAPAN OFTEN FEATURE DIGITAL ORDERING, PORTABLE DISHES AND US UP BY CHAIN AIMED AT CURBING COSTS WHILE MAINTAINING HIGH QUALITY. EXECUTIVES MEET REGULARLY TO TASTE THE DISHES. MR. YAMAMOTO IS THE CEO OF THE PARENT COMPANY. >> WE STILL HAVE THIS PHRASE AS OUR MISSION, SUSHI THAT FILLS YOU UP, SUSHI THAT FILLS YOUR HEART. IF IT IS NOT DELICIOUS PEOPLE WILL NOT EAT A LOT AND IF IT DOESN'T REASONABLY PRICED, PEOPLE WILL NOT EAT A LOT. SHERY: THE CHAIN MADE A SPLASH IN ASIA, ESPECIALLY CHINA. A VIRAL TREND ON CHINA'S VERSION OF TIKTOK SHOWS CUSTOMERS BOASTING HOW MUCH SUSHI THEY HAVE HAD BY STACKING UP TO 80 PLATES IN ONE MEAL. IT IS TURNING TO THE POTENTIAL OF THE UNITED STATES, WHERE REPORTS SAY THE SUSHI INDUSTRY IS WORTH $22 BILLION PER YEAR. >> I THINK SUSHI HAS BECOME A GLOBAL FOOD. AROUND THE WORLD PEOPLE HAVE ACCESS TO DELICIOUS SUSHI. JAPANESE CONSUMERS HAVE A HIGH STANDARD AND BELIEVE BALANCING QUALITY AND COSTS WILL SURPRISE PEOPLE. SHERY: A NEW YORK STORE IS EXPECTED TO OPEN IN OCTOBER ACROSS THREE FLOORS. DISHES WILL COST AROUND FIVE DOLLARS OR SIX DOLLARS WITH PREMIUM PLATES UP TO $10. DINERS WILL BE ENCOURAGED NOT TO TIP TO KEEP THE EXPERIENCE AFFORDABLE AND WILL HAVE ACCESS TO PRIVATE ROOMS FOR AN EXPERIENCE NOT AVAILABLE IN JAPAN. HEADWINDS ABOUND, INCLUDING A WEEKEND DRIVING UP COSTS. -- A WEEK YEN DRIVING UP COSTS. >> WHEN THE YEN IS WEEKLY FACE ISSUES. IF COST RISE SO MUCH THAT THE ECONOMICS DON'T WORK, WE MAY HAVE TO RAISE THE PRICE SLIGHTLY. BUT THERE ARE ITEMS WHERE WE CAN LOWER THE PRICE. SO WE BALANCE THOSE THINGS USING WHAT WE CALL THE MENU MIX. WE TRY TO LIMIT THE BURDEN ON CUSTOMERS AS MUCH AS POSSIBLE. SHERY: SUSHIRO JOINS A CROWDED FIELD. FROM STORE-BOUGHT RULES TO HIGH AND NIGIRI. >> THERE IS HIGH-PRICED SUSHI AND REASONABLY PRICED SUSHI CENTERED AROUND TAKE OUT. OUR SENSE IS THAT THERE IS A LARGE MARKET IN BETWEEN. SHERY: SUSHIRO IS LOOKING TO CONQUER THE U.S. MARKET ONE PLATE AT A TIME. HAIDI: I WE ARE SETTING UP INTO THE START OF TUESDAY ACROSS MAJOR MARKETS, SET TO OPEN IN ABOUT SIX MINUTES. U.S. FUTURES, NASDAQ FUTURES LOOKING LIKE THIS. UNCERTAINTY AS WE CONTEND WITH AI SAFETY CONCERNS AS WELL AS THE BROADER PRESSURE ACROSS BOND MARKETS. IN AUSTRALIA, BONDS DIPPING AS OIL CONTINUES TO PUSH ABOVE THE $107 PER BARREL, AROUND THAT LEVEL. OOPS A VIDEO REOPENING THE STRAIT OF HORMUZ AND PEACE TALKS, STARTING TO FADE. THE RV I DECISION COULD GIVE SHORT-TERM SUPPORT FOR THE AUSSIE DOLLAR. LONG-TERM SUPPORT MAY DEPEND ON WHETHER WE GET SIGNALING FROM THE RBA AS TO THE PATH FORWARD. IS IT ONE MORE MOVE OR POTENTIALLY BACK TO BACK HIKES? THERE MAY BE OTHER TOOLS TO ADDRESS THE EXTERNAL ENERGY PRICE SHOCK, LIKE TAX HIKES OR TAKING SHAPE HERE. LOOKING AT A MODEST UPSIDE AS WE GET INTO THE START OF TRADING. NIKKEI FUTURES UP ABOUT 1%. SHERY: THE IRAN GRIDLOCK LEADING TO INFLATION EXPECTATIONS AROUND ELEVATED OIL PRICES. YOU ARE PERHAPS PRICING IN A MORE HAWKISH RBA AND HAWKISH FED. YOU HAVE THE SELLOFF ON GOING AROUND TREASURIES. OVERNIGHT, THE 10 YEAR YIELD RISING TO A 19 YEAR HIGH. 30 YEAR YIELD HIGHEST SINCE 2004. MAJOR MATURITIES ACROSS TREASURIES EXCEPT FOR THE TWO YEAR YIELD TRADING ABOVE 5%. 2% NEARING JGB'S IN THE FRONT END AS WELL. THE 10 YEAR JGB AT AROUND 1996 HIGHS. AND A TOUGH TWO YEAR JGB AUCTION TOMORROW. PLENTY TO WATCH FOR MARKETS. THE OPEN IS NEXT. THIS IS BLOOMBERG. ♪ SHERY: THIS IS THE ASIA TRADE, COUNTING DOWN TO ASIA'S MAJOR MARKET OPENS AS WE SEE VOLATILITY AROUND OIL PRICES, THE DIPLOMATIC CHANNELS WITH SKEPTICISM AROUND WHAT IS HAPPENING WITH THE IRAN WAR. THAT IS LEADING TO INFLATION CONCERNS AND REPRICING OF RATES AT THE MOMENT AS WE ARE PERCEIVING A HAWKISH CENTRAL BANK IN THE U.S. AND AROUND THE WORLD. THE TREASURY SELLOFF IS ONGOING. HAIDI: THE IMPACT WHEN IT COMES TO AUSTRALIA, OF THOSE HIGHER ENERGY PRICES, THERE ARE DOMESTIC INFLATION PRESSURES AS WELL AND IT ISN'T JUST THE WAR IN THE MIDDLE EAST BUT THAT IS A HUGE PART OF THE REASON WHY MARKETS ARE EXPECTING THE RBA NOT TO JUST GO AGAIN BUT LOOKING FOR COMMUNICATION AS TO HOW LONG THE CYCLE WILL CONTINUE FOR. SHERY: THAT IS WHAT WE ARE WATCHING AROUND JAPANESE EQUITIES. WE ARE AHEAD OF THE BOJ SURVEY NUMBERS LATER IN THE WEEK WHICH WILL GIVE US AN INDICATION OF HOW BUSINESSES FEEL AND WHERE THE BOJ IS HEADED. THEY NIKKEI LOSING GROUND WITH THE TOPICS LOSING MORE THAN 1%. THEY YEN IS AROUND THE MID 157 LEVEL. GETTING LOUDER WARNINGS FROM JAPANESE OFFICIALS, THE CHIEF CURRENCY OFFICIAL WARNING U.S. AND JAPANESE OFFICIALS HAVE SENT CLEAR MESSAGES TO THE MARKETS ABOUT A WEEK YEN. STRENGTH TOWARDS 156 BUT WE REVERSED THE GAINS. THE JGB'S ARE IMPORTANT. TREASURY SELLOFF CONTINUES OVERNIGHT, THE 10 YEAR YIELD AT THE HIGHEST LEVELS IN 19 YEARS. THE 10 YEAR YIELD IN JAPAN, HIGHEST LEVEL SINCE 1996. 3.10 IS THE LEVEL RIGHT NOW. YOU HAVE TO WATCH THE TWO YEAR YIELD IN JAPAN BECAUSE THAT IS CLOSE TO THE 2% LEVEL. AND WHAT THAT MEANS IS IF INVESTORS ARE WILLING TO PAY THE JGB AUCTION TWO YEAR YIELD AUCTION COMING UP TOMORROW, WE HAVE A TOUGH 40 YEAR AUCTION TODAY. TOMORROW, ARE THEY WILLING TO PAY 2% FOR THE BOJ RATE RISK? SOUTH KOREA IS OPENING, BENCHMARK THREE YEAR YIELD TOUCHED THE HIGHEST LEVEL SINCE 2022. SOVEREIGN DEBT SELLOFF IS GLOBAL. THE KOSPI LOSING 0.6%. WATCH TECH STOCKS BECAUSE WE GOT NEWS FROM ANTHROPIC, REPORTED IPO PROSPECTUS THAT THEY COULD SPEND HUNDREDS OF BILLIONS OR MORE. WHAT COULD THAT MEAN FOR TECH NAMES? SEMICONDUCTOR SUPPLIERS IN ASIA. HAIDI: WHAT DOES THAT MEAN FOR INFLATION AS WELL? WE ARE SEEING RELENTLESS PRESSURE ON YIELDS, NOT JUST TREASURIES BUT ASIAN BONDS, THAT WE ARE WATCHING. CERTAINLY FOR TREASURIES, YOU SPOKE ABOUT THE DEEPENING OF THE TREASURY SELLOFF AFTER WE HEARD FROM PRESIDENT TRUMP HE REJECTED IRAN'S PROPOSAL TO OPEN THE STRAIT OF HORMUZ. OIL PRICES PUSHING HIGHER, THE 10 YEAR BENCHMARK TO A FRESH 19 YEAR HIGH. THAT PLACE THROUGH IN ASIA. NOT A LOT OF PRICE ACTION WITH AUSTRALIAN BONDS. KIWI BONDS ON THE MOVE, BUT THE SIDELINED ACTION FOR AUSSIE ASSETS AHEAD OF THE RBA DECISION. EQUITIES ARE FLAT AT THE MOMENT. WE EXPECT ENERGY NAMES TO GET OF -- A BIT OF A BOOST. BRENT CRUDE 0.6%, EXTENDING FOR ANOTHER DAY. IRANIAN WE HEARD FROMIRANIAN OFFICIALS EXPRESSING PESSIMISM ABOUT REACHING A DEAL. WE KNOW PRESIDENT TRUMP SHIFTED THE GOALPOSTS. SO A GREAT DEAL OF UNCERTAINTY AT PLAY. A BIT OF UPSIDE IN ASIA SESSION FOR GOLD, BUT THAT IS COMING OFF A SEVEN-WEEK LOW. A TOUGH MARKET FOR PRECIOUS METALS. SHERY: LET'S DELVE INTO THE MARKETS AND BRING IN A SERIES -- A SENIOR MARKET ANALYST. WE ARE TALKING INFLATION RISKS AROUND OIL AND THE AI BUILDOUT. WHEN WE HAVE OIL SURGING, HOW DOES THE AI TRADE SUPPORTED BY EARNINGS MOMENTUM ACROSS ASIA GET PRESSURED BECAUSE OF THESE VALUATION CONCERNS? >> WE START TO SEE A TURN WHEN THE EARNINGS GROWTH STARTS TO TURN. GROWTH EXPECTATIONS WITH AI SENSITIVE PARTS OF THE MARKET ARE MOVING IN LINE WITH BOND YIELDS BECAUSE THEY ARE A FUNCTION OF THE SAME THING, STRONG GROWTH EXPECTATIONS AND DEFLATIONARY RISKS. INVESTORS HAVE BEEN ABLE TO STOMACH SOME OF THE INCREASING YIELDS, WHICH IS A MULTIFACETED STORY BECAUSE THERE WAS THE EXPECTATION THAT EARNINGS GROWTH WILL REMAIN STRONG OVER THE LAST COUPLE QUARTERS. IN THE UNITED STATES AND THE MAGNIFICENT 7, IT HAS BEEN STRONG SO THEY ARE WILLING TO PAY OVER'S TO CAPTURE RETURNS ON THE VIEW THAT EARNINGS GROWTH WILL BE BETTER THAN THE 5.5% AT THE LONG AND CURRENTLY OFFERED. COMPANY PROFITS, SUPPORTING THE MARKET THROUGH THE HEADWINDS AT THE MOMENT, COMPANY PROFIT GROWTH EXPECTATIONS START TO TURN AND WE WILL START TO SEE THE MARKETS MORE WORRIED ABOUT DOWNSIDE RISKS TO EQUITY PRICES. SHERY: YEAR YIELDS IN SOUTH -- WHEN WE HAVE HIGHER YIELDS AND SOUTH KOREA, JAPAN AND AUSTRALIA, DO YOU SEE OPPORTUNITIES IN THOSE MARKETS? KYLE: I THINK IT IS A SHORT-TERM VERSUS LONG-TERM STORY. THIS IS WHERE THINGS BECOME IMPORTANT. BY MY FRAMING, YOU'VE GOT THREE FACTORS DRIVING THE MARKET. A MAJOR TAILWIND, WHICH IS COMPANY EARNINGS GROWTH IN SOME CONCENTRATED PART BUT HEAVY WEIGHTED PARTS OF THE MARKET. AND THE HEADWINDS RELATE TO A GEOPOLITICAL RISK AND INTEREST RATE UNCERTAINTY. IT IS THE UNDERSTANDING THAT THE YIELDS STORY IS BEING DRIVEN BY MONETARY POLICY EXPECTATIONS, SUPPLY SHOCKS, OIL PRICES AND FISCAL SETTINGS AND IF WE SEE SOME OF THE INTEREST RATE UNCERTAINTY DIMINISH, THAT IS BECAUSE INFLATION DATA IMPROVES, PERHAPS GEOPOLITICAL RISKS IMPROVE BECAUSE WE GET A CEASEFIRE BETWEEN THE U.S. AND IRAN AND WE WILL SEE RISK APPETITE RETURN AND THE STRONG FUNDAMENTAL TAILWIND BE THE KEY DRIVER AND EMBRY OPPORTUNITY FOR TAKING ON GREATER RISK. UNTIL YOU SEE THOSE OTHER FACTORS DIMINISHING, THE TAILWINDS ARE STRONG AND YOU WILL SEE CYCLICAL VOLATILITY COMING THROUGH IN PRECIOUS METALS AND UPSIDE EQUITIES. FURTHER UPSIDE RISK IN YIELDS AS WELL. THAT IS MORE FRAMING THAN AN ANSWER, BUT I THINK THAT IS HOW YOU HAVE TO APPROACH THE MARKETS TO FIND OPPORTUNITIES. YOU ARE DEALING WITH CROSSCURRENTS THAT ARE DYNAMIC AND CAN PROVIDE ADDITIONAL, THAT RISK AND VOLATILITY TO ENTER TRADES WHEN YOU CAN SEE THE NARRATIVE IS TURNING ON ONE OF THOSE FACTORS. SHERY: YOU HAVE A POSITIVE LONG-TERM OUTLOOK FOR GOLD. WE SAW THE HUGE PLUNGE OVERNIGHT. WE ARE AT A SEVEN-WEEK LOW. WHEN DOES THE TIDE TURN? KYLE: JUST METALS BROADLY, EVEN SILVER IS A BETTER PLAY BECAUSE OF THE AI STORY AND THE FACT THAT WE WILL PROBABLY SEE STRONG INDUSTRIAL DEMAND. BUT THIS GOES BACK TO THE SECULAR VERSUS THE CYCLICAL. PRECIOUS METALS WILL REMAIN A DERIVATIVE OF INTEREST RATE VOLATILITY, WHICH GEOPOLITICAL RISKS FEED INTO. AS LONG AS THERE IS UPWARD PRESSURE ON OIL PRICES BECAUSE OF THE WAR IN THE MIDDLE EAST AND UNCERTAINTY ABOUT THE PATH FORWARD FOR GLOBAL INTEREST RATES, THAT IS GOING TO WEIGH ON GOLD AND SILVER. WE HAVE TO DO DOLLARIZATION THEME, WE HAVE CENTRAL BANKS DEMANDING OLD. GOLD IS A DIVERSIFIER REMAINS IMPORTANT, WITH THE PRECIOUS METAL COMPLEX MORE BROADLY YOU HAVE THE TAILWINDS FOR SILVER, INDUSTRIAL APPLICATIONS AS WELL. WHEN YOU LOOK AT $4000 FOR GOLD, $5,700 FOR SILVER, IF IT IS BELOW THAT YOU QUESTION THE THESIS BUT IF YOU LOOK AT SHORT-TERM VOLATILITY, ENTRY POINTS MAY BE BROUGHT OUT BY SHORT-TERM VOLATILITY. THE SECULAR DRIVERS FOR PRECIOUS METALS REMAIN STRONG. SHERY: WHAT IS HAPPENING IN JAPAN, IS AT SHORT-TERM VOLATILITY OR A FUNDAMENTAL SHIFT NOW THAT TWO YEAR YIELDS ARE NEAR 2%, HIGHEST SINCE 1995? BUT NOT NECESSARILY SEEING SUPPORT FOR THE JAPANESE YEN. KYLE: IT IS A STORY OF THE BOJ BEING BEHIND THE CURVE, NOT THE ONLY CENTRAL BANK THAT IS BEHIND THE CURVE BUT PROBABLY THE MOST APPARENT G10 CENTRAL BANK THAT IS BEHIND THE CURVE. THE POLITICAL NOISE WE SAW LAST MONTH BETWEEN THE JAPANESE AND THE AMERICANS, AND WHAT SEEMS TO BE THE KIND OF JOB OWNING THE U.S. TRIED TO DO TO GET JAPANESE POLICYMAKERS TO COOL THE STIMULATORY POLICY MEASURES, THAT INDICATES THAT WE HAVE AN ECONOMY DEALING WITH A VERY STRONG FISCAL IMPULSE, AND LOOSE MONETARY POLICY SETTINGS. WE ARE STILL SEEING THE YEN DEPRECIATES DESPITE RISING YIELDS. THAT SUGGESTS THE BOJ NEEDS TO HIKE INTEREST RATES TO BRING RATES BACK TO LEVELS CONSISTENT WITH LONG-TERM STABLE INFLATION. THAT IS FUNDAMENTALLY THE STORY FOR JAPAN. THE BOJ ARE TAPPING THEIR FOOT ON THE BRAKES AND WE WILL SEE THIS DYNAMIC CONTINUE. SHERY: KYLE, GOOD TO HAVE YOU WITH US. WE HAVE MORE AHEAD. YOU ARE WATCHING THE ASIA TRADE. ♪ HAIDI: IRANIAN OFFICIALS ARE SAID TO BE PESSIMISTIC ABOUT A DEAL WITH THE U.S. TO REOPEN THE STRAIT OF HORMUZ BEFORE THE MIDTERMS IN NOVEMBER. SOURCES SAY TEHRAN BELIEVES THERE IS A HIGH CHANCE OF U.S. ESCALATION AFTER THE VOTE. ARE MANAGING EDITOR JOINS US WITH MORE. AFTER THE PROPOSAL WAS REJECTED BY TRUMP, IT DOESN'T SOUND LIKE THERE IS A LOT OF PROSPECT FOR AGREEMENT AS WE GET CLOSER TO THE MIDTERMS. >> THAT IS RIGHT. WHAT WE ARE HEARING FROM PEOPLE FAMILIAR IS THAT THE CONVERSATIONS HAPPENING ON THE SIDELINES OF THE UNITED NATIONS GENERAL ASSEMBLY DID NOT RESULT IN A TON OF MATERIAL PROGRESS. PERHAPS THIS IS NOT SURPRISING, BUT THERE ARE LOTS OF WAYS IN WHICH THE TWO SIDES ARE FAR APART ON THESE ISSUES. THE IRANIANS DON'T TRUST THE AMERICANS VERY MUCH, BELIEVING THE TRUMP ADMINISTRATION, DONALD TRUMP HIMSELF WOULD NOT HOLD TO THE TERM OF ANY AGREEMENT REACHED BETWEEN THE TWO PARTIES. ON THE U.S. SIDE, OFFICIALS BELIEVE THAT FOR ANY NEGOTIATIONS TO TAKE PLACE, THEY WOULD HAVE TO DISCUSS AND CONSIDER ASPECTS OF NUCLEAR PROGRAMS. THE IRANIANS HAVE SET ON MULTIPLE OCCASIONS THAT THEY WANT TO PRESERVE SOME OPPORTUNITIES THERE. SO YOU HAVE A LOT OF ASPECTS IN WHICH THE TWO SIDES, IT IS DIFFICULT FOR THEM TO COME TO THE TABLE. THE LATEST LINES WE ARE REPORTING SUGGEST THERE IS CONCERN THAT THE CONFLICT COULD ESCALATE. IT FEELS LIKE WE HAVE BEEN GOING BACK AND FORTH FOR THE BETTER PART OF NINE MONTHS AT THIS POINT. WILL WE SEE PROGRESS? THAT IS TOUGH TO SAY. HAIDI: I WAS GOING TO SAY. BACK TO THE SITUATION WHERE THE MOST LIKELY SCENARIO IS ELONGATED WAR OF ATTRITION. IS PRESIDENT TRUMP I GUESS OK TO DEAL WITH THE DOMESTIC PRESSURES WHEN IT COMES TO THESE HIGHER ENERGY PRICES? JILL: THAT REMAINS A VALID QUESTION. WHAT YOU HEARD FROM THE PRESIDENT IS THAT HE CONTINUES TO PUBLICLY PROJECT THE IDEA HE BELIEVES THE U.S. IS GOING TO COME OUT ON TOP, BUT THIS HAS BEEN SIGNIFICANT PRESSURE ON TRUMP AND HIS REPUBLICAN ADMINISTRATION FOR THE BETTER PART OF SEVERAL MONTHS. . FUEL PRESSURES REMAIN HIGH. A LOT OF DOMESTIC CONCERNS ABOUT HOW THIS MIGHT IMPACT THE MIDTERMS. YOU MAY NOT HAVE SOMETHING THAT IS RESOLVED BEFORE NOVEMBER, AND THAT INCREASES THE PRESSURE. DONALD TRUMP HAS SUGGESTED HE BELIEVES THE GOP WILL PREVAIL IN MANY SIGNIFICANT RACES, BUT IT REMAINS A SIGNIFICANT POINT OF TENSION. SHERY: JILL DISIS THERE. WHITE HOUSE NATIONAL ECONOMIC COUNCIL DIRECTOR KEVIN ASSETS AT OUTSIDE FACTORS COULD GET IN THE WAY OF THE TRUMP ADMINISTRATION HOPES FOR A 3% ECONOMIC EXPANSION RATE, AS HE SEES A STRONGER BASE CASE FOR GROWTH. >> THE WAY TO DO GROWTH ACCOUNTING LOOKING FORWARD IS I THINK RIGHT NOW, OUR ESTIMATE FOR PRODUCTIVITY GROWTH IS ABOUT 2.5 AND OUR ESTIMATE FOR WHAT WE ARE GETTING OUT OF CAPITAL DEEPENING IS 0.7 OR 0.8. LABOR SUPPLY MAY BE ABOUT THE SAME, SO THAT MEANS THE BASE CASE, NO DISRUPTIONS FROM THE OUTSIDE WORLD AND WE WILL TALK ABOUT THOSE, YOU SHOULD BE CRUISING AROUND FOUR INSTEAD OF THREE. SHERY: HE SPOKE TO US ABOUT THE RECENT JUMP IN BOND YIELDS AND TOLD US WHY HE INKS IT HAS COME TO SOME EXTENT, A REFLECTION OF A MORE ATTRACTIVE INVESTMENT ENVIRONMENT. >> IF YOU LOOK AT THE LIABILITY FOR FUTURE GENERATIONS, IT IS SMALLER THAN YOU MIGHT THINK WHEN LOOKING AT U.S. NET NUMBERS BECAUSE IT IS A LOT OF DEBT IS DEBT WE OWE OURSELVES SO EXTERNAL DEBT IS AROUND $15 TRILLION. IT IS QUITE A BIT SMALLER. BUT THE HOUSEHOLD NET WORTH HAS GONE UP BY SOMETHING LIKE $90 TRILLION OVER THE NEXT -- THE LAST DECADE. SO AMERICA'S FISCAL POLICY, WHILE WE HAVE CHALLENGES AND WE HAVE TO BALANCE THINGS, AND HIGHER INTEREST RATES MAKE THAT MORE DIFFICULT, HOUSEHOLD NET WORTH IS SKYROCKETING, EVEN IF YOU WOULD JUST FOR WHAT HAS BEEN GOING ON WITH THE DEFICIT. AS ECONOMISTS, WHEN WE THINK ABOUT WHAT FEDERAL GOVERNMENT POLICIES DO FOR ORDINARY FOLKS IN FUTURE AMERICA, YOU HAVE TO THINK ABOUT, DID WE RUN UP A BIG DEFICIT AND MAILED CHECKS TO PEOPLE AND THEY CONSUMED IT? DID WE SET UP A BUNCH OF POLICIES THAT GAVE PEOPLE MORE CAPITAL IN THE FUTURE? I LOVE DOING THIS WHEN I'M LECTURING UNDERGRADUATES. I WILL SAY SUPPOSE YOU WANT HIGHER CONSUMPTION IN THE TEACHER. HOW DO YOU DO THAT? THE ANSWER IS YOU INVEST IN HUMAN CAPITAL. YOU WILL HAVE HIGHER WAGES. YOU DON'T GO TO A RESTAURANT THIS YEAR AND PUT THE MONEY IN THE BANK AND THEN YOU HAVE CAPITAL WHICH YOU CAN DRAW ON IN THE FUTURE. IF YOU DON'T HAVE MORE CAPITAL IN THE TEACHER, YOU HAVE TO HAVE HIGHER CONSUMPTION AND WE HAVE BEEN HITTING THE CAPITAL OF THE FUTURE OUT OF THE PARK. THIS GRAND SLAM HOMERUN OUT OF THE PARK. . SOME OF THE BEST NUMBERS WE HAVE EVER SEEN. YOU HAVE TO KEEP THAT IN MIND AS THE ABILITY TO PAY, SO WE HAVE GROWTH, CAPITAL FORMATION, PEOPLE NEED TO HAVE FUTURE CONSUMPTION. THEY HAVE TRUMP ACCOUNTS AND WE NEED TO GET THE GOVERNMENT UNDER CONTROL IN TERMS OF GOVERNMENT SPENDING. >> FROM YOUR CHAIR IN THE WHITE HOUSE, WHY ARE YIELDS MOVING UP SO MUCH? IT'S NOT JUST THE U.S., IT IS THROUGHOUT THE WESTERN WORLD. THERE HAS BEEN A DRAMATIC MOVE UP IN LONG-TERM BOND YIELDS. >> IT'S THE JOB OF THE DIRECTORY -- TREASURY SECRETARY TALK ABOUT INTEREST RATES. >> I'M NOT TALKING ABOUT INTEREST RATES. . I'M TALKING ABOUT THE YIELD ON BONDS. >> I'M GOING TO ABSTRACT SLIGHTLY AND SAY THAT IN A MODEL, THAT WAS ONE OF THE PROGRAMMERS FOR THE MODEL BACK IN THE DAY, THE DYNAMIC MODEL WHERE YOU HAVE INTEREST RATES AND EVERYTHING ELSE LINING UP, AND IT IS CLEAR IN EQUILIBRIUM, AND THAT KIND OF MODEL, THE REAL RETURN ON CAPITAL IS AN ATTRACTOR, NOT 100% FOR THE REAL INTEREST RATE. SO IF YOU HAVE LOW RETURN ON CAPITAL, YOU WILL HAVE A LOW INTEREST RATE. IF YOU HAVE A HIGH RETURN ON CAPITAL YOU WILL HAVE A HIGHER INTEREST RATE. SUPPOSE YOU COULD BORROW RIGHT NOW AT 6%, AND BY A DATA MAKE 20%. YOU SHOULD DO THAT AS MUCH AS YOU CAN. WHEN YOU DO THAT, THE SIX GOES UP IN THE 20 GOES DOWN. THAT EFFECT IN GENERAL EQUILIBRIUM IS SOMETHING THAT IS VISIBLE. IF YOU LOOK AT THE 30 YEAR RIGHT NOW, THE 30 YEAR TIP HAS A REAL YIELD THAT IS BASICALLY ZERO A FEW YEARS AGO AND RIGHT NOW IT IS VERY -- IT IS THREE. THE INFLATION IN THE 30 YEAR TIP IS 2.1, RIGHT? DID I GET IT RIGHT? SO THE 30 YEAR TREASURY MARKET TELLS ME THE REAL RETURN ON CAPITAL IS HIGHER THAN IT USED TO BE. SHERY: WHITE HOUSE NATIONAL ECONOMIC DIRECTOR KEVIN HASSETT AT THE ECONOMIC CLUB OF NEW YORK. WE HAVE MORE AHEAD. THIS IS BLOOMBERG. ♪ SHERY: MIXED PICTURE WHEN IT COMES TO TECH ACROSS ASIA. NVIDIA SUPPLIERS AND SELF MARIA GAINING GROUND. WE HAD SEEN NVIDIA RISING OVERNIGHT AFTER IT INCREASED THE SIZE OF THE SHARE BUYBACK PLAN BY A RECORD $150 BILLION. ON THE OTHER HAND WE HAVE SOFTBANK LOSING ABOUT 3%. THEY ARE HEAVILY INVESTED IN OPENAI. OPENAI IS CANCELING THE LAUNCH OF A NEW AI MODEL BECAUSE OF SAFETY RISKS. WHEN IT COMES TO THE SUPPORT WE COULD SEE, REUTERS REPORTS ANTHROPIC PLANS TO SPEND HALF A TRILLION DOLLARS IN CLOUD AND COMPUTING IN THE COMING YEARS. IT IS CITING THE IPO PROSPECTUS FOR THE FIGURE, AS WELL AS A 42 BILLION DOLLARS NET LOSS IN 2025 ON REVENUE, FOR .6 BILLION DOLLARS. THE GLOBAL HEAD OF TECHNOLOGY RESEARCH JOINS US NOW. REACT TO THE NUMBERS BECAUSE IT IS EXPONENTIAL GROWTH IN REVENUE BUT AT THE SAME TIME HUGE LOSSES AND WHAT IT COULD MEAN FOR THE UNDERLYING ECONOMICS OF FRONTIER AI. >> THERE IS NO DOUBT SOFTWARE IS INCREMENTAL MARGINS THAT ARE MUCH HIGHER IN TERMS OF THE COSTS, AND ALSO, WHAT IT MEANS FOR A COMPANY LIKE ANTHROPIC, WHICH HAS THE BEST MODELS BUT IT ALSO NEEDS THE MOST COMPUTE TO RUN THOSE MODELS. FROM THAT PERSPECTIVE, IT DOES NOT SURPRISE ME THAT THEY ARE TALKING ABOUT THIS KIND OF NUMBER, $500 BILLION PLUS. AT THE END OF THE DAY, WE HAVE SEEN COMPANIES LIKE GOOGLE CLOUD, THEIR REVENUE ACCELERATED TO 82% IN THE LATEST QUARTER. IT IS BECAUSE OF THE SPEND FROM COMPANIES LIKE ANTHROPIC, AND THE SAME HOLDS TRUE FOR MICROSOFT AND AMAZON, WHICH WERE GROWING 20-25% WHEN CLOUD WAS GROWING STEADILY. NOW THE GROWTH RATES HAVE ACCELERATED FOR THOSE COMPANIES, SIMPLY BECAUSE OF WHAT THE MODEL PROVIDERS ARE SPENDING IN TERMS OF COMPUTE. SHERY: HOW MUCH OF THE CAPEX WILL BE ON THE SAFETY SIDE OF CONCERNS WE HAVE? WE HAVE SEEN ANTHROPIC COORDINATING WITH NVIDIA TO BUILD UP THE SAFETY SYSTEMS. OPENAI POTENTIALLY HAVING PULLED A NEW AI MODEL AS WELL. MANDEEP: I THINK THEY ARE HINTING AT PROBABLY NOT SPENDING AS MUCH ON TRAINING AT -- GOING FORWARD. SAFETY HAS BECOME A BIG CONCERN SO TO ME, IT HAS THE OPPOSITE EFFECT OF THE HIGHER SPEND, WHICH IS THEY WILL CURTAIL SPENDING ON TRAINING GOING FORWARD, BUT THEY WILL USE A LOT OF THE COMPUTE ON INFERENCING BECAUSE INFERENCING IS WHAT THEY CAN MONETIZE BETTER. THAT IS THE MARGINS. IF YOU LOOK AT THESE COMPANIES IN AGGREGATE, ANTHROPIC WILL PROBABLY HAVE NEGATIVE MARGINS. IT IS BURNING CASH BECAUSE THEY ARE SPENDING 40% OF THEIR OVERALL COMPUTE ON TRAINING. BECAUSE OF SAFETY, THE TRAINING SPEND GOES DOWN TO 10%, THEN THE MARGIN PROFILE GETS A LOT BETTER BECAUSE ALL THAT INFERENCING COMPUTE IS MONETIZED IN THE FORM OF REVENUE. I THINK THEY ARE GETTING READY TO BE PUBLIC COMPANIES. AND YOU DON'T WANT NEGATIVE GROWTH MARGINS OR BE BURNING A LOT OF CASH. THE SAFETY FOCUS ALLOWS THEM TO CURTAIL THEIR SPENDING ON TRAINING. SHERY: NVIDIA SEEMS TO BE CONFIDENT ON THE AI CASH GENERATION MACHINE. THE RECORD BUYBACK PLANS, VERY MUCH BEING PROACTIVE IN THE ECOSYSTEM AROUND SAFETY AS WELL. MANDEEP: FOR NVIDIA, THEY SEEM TO BE FUNGIBLE WHEN IT COMES TO SUPPLY AND COMPUTE YOUR TRAINING VERSUS INFERENCING. TRADITIONALLY, INFERENCE -- NVIDIA BENEFITED MORE FROM TRAINING. THEY ALMOST HAD A MONOPOLY. THEY WEREN'T REALLY USED FOR TRAINING IN A BIG WAY FOR MICROSOFT AND GOOGLE BUT NVIDIA SEEMS TO BE ON THE RIGHT SIDE OF SAFETY. AND MAKING SURE THEY ARE WORKING CLOSELY WITH FRONTIER LABS, WHETHER THEY HAVE TO SUPPLY SHIPS FOR INFERENCING, I THINK THEY DON'T MIND. SO THE SHIFT FROM CURTAILING TRAINING SPEND TOWARDS INFERENCING IS BEING ENDORSED BY PRETTY MUCH EVERYONE IN THE ECOSYSTEM. SHERY: GETTING THE LATEST FROM REUTERS THAT ANTHROPIC IS WARNING OF AI POSING AN EXISTENTIAL RISK TO HUMANITY. YOUR REACTION ON META GETTING INTO AUDIT -- ENTERPRISE AUTOMATION? MANDEEP: I THINK IT WILL BE CHALLENGING FOR THEM. IT TOOK GOOGLE MANY YEARS TO GET AN ENTERPRISE SCALE BUSINESS. EVEN IF META HAS A BETTER MODEL NOW, IT WILL BE CHALLENGING TO SELL TO ENTER RISES. SHERY: MANDEEP SINGH, JOINING US FROM HONG KONG. GREAT TO HAVE YOU IN THE REGION. WE HAVE MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. ♪ SHERY: WE ARE LOOKING AHEAD TO THE CHINESE MARKET OPEN. YOU COULD BE LOOKING TO CONSOLIDATE WITH THE STATE COUNCIL SAYING IT'S STUDYING NEW POLICIES TO STABILIZE THE PROPERTY SECTOR, PROMOTE EMPLOYMENT AND BOOST DOMESTIC DEMAND. IN HONG KONG, IT'S A BUSY DAY FOR IPO AND TECH NAMES. BACK WITH MORE WITH ANTHONY. WE HAD CHINESE STOCKS FALLING TO ONE YEAR LOW ON U.S. SANCTIONS CONCERNS, DESPITE THE FANFARE AROUND THE TRUMP-XI SUMMIT. HOW MUCH COULD BEIJING SUPPORT DOMESTIC DEMAND TODAY? REPORTER: WE HAVE SEEN CHINESE STOCKS PRETTY MUCH BEING SUPPORTED BY THE TECH SECTOR AND IRONICALLY THE TECH SECTOR FELL OFF AFTER THE TRUMP-XI SUMMIT. IT CAUSED A BIT OF A PANIC REACTION IN THE ONSHORE HARDWARE SPACE. WE SAW THE TRAIN NEXT DOWN 4%. CHIPMAKERS DOWN 4% TO 5% HANDSOME CHIPMAKERS DOWN 10%. A BIG DRAW DOWN DAY. THE CALENDAR DOES NOT HELP AS WELL, CHINA GOES INTO A VERY LONG HOLIDAY SO INVESTORS HAVE TO BE CAREFUL ABOUT THE INCREMENTAL BETS HERE. WE HAVE SEEN MARGIN FINANCING IN CHINA, VERY SHARPLY AS INVESTORS TAKE MONEY OFF THE TABLE IN FRONT OF THE HOLIDAY. THE CHINESE GOVERNMENT HAS BEEN TALKING A LOT BUT NOT DOING TOO MUCH IN TERMS OF ACTUALLY PUTTING MONEY TO WORK ON DOING NEW THINGS AROUND CONSUMPTION, IN TERMS OF BOOSTING CONSUMPTION. THE CONSUMPTION LED IS SUFFERING. IF YOU LOOK AT 52-WEEK LOW STOCKS IN CHINA, IT'S ALMOST ENTIRELY ACROSS THE CONSUMPTION SPACE WHETHER YOU ARE TALKING ABOUT AUTOS, AIRLINES, PROPERTY, BEER. AS A RESULT, THAT ROTATION HAS TO HAPPEN FOR THIS MARKET TO CATCH A BID. ON THE POSITIVE SIDE YOU DO HAVE THE BANKS HOLDING THE LINE AND THAT IS DRIVING A SIGNIFICANT OF PERFORMANCE OF THE HANG SENG INDEX. WORSE IS THE ONSHORE CHINESE INDEXES. THE CHINESE BANKING SECTOR HAS HEALED BUT THE GOVERNMENT NEEDS TO COME TO THE RESCUE OF EVERYTHING ELSE. SHERY: HOW ARE WE LOOKING IN TAIWAN RIGHT NOW? WE HAVE SEEN MASSIVE RALLIES UP YEAR TO DATE MORE THAN 60%. CAN THEY BE SUSTAINED? REPORTER: THAT'S BEEN REALLY INTERESTING TO WATCH THE TSMC ADR. WE HAVE SEEN THE SEMICONDUCTOR VOLATILITY AROUND IT. TSMC HAS BEEN THE ANCHOR AROUND WHICH THE MSCI ASIA STOCK GAINS HAVE BEEN PLACED. IT HAS GONE SIDEWAYS. SUPER RESILIENT AND THE PREMIUM IS BACK UP AT 16%. IT WAS DOWN AROUND 9% TO 10% EARLIER. THERE IS A BIT IN TSMC AND A WHOLE BUNCH OF LOCAL HEADLINES OVER THE BREAK AS WELL ABOUT THE EXPANDING CAPACITY AND SPENDING MORE MONEY ON ADVANCED PACKAGING. THAT SPEAKS TO THE DIVERSIFICATION OF TAIWAN. TSMC SPENDING ALL THIS MONEY DOWNSTREAM AND ITS ENDING UP IN THE HANDS OF THE OTHERS STOCKS BELOW TSMC IT. IS A REALLY HEALTHY INDEX DYNAMIC. LASTLY, THE FACT THAT NVIDIA IS SO BULLISH AROUND SPENDING AND BUYBACK DOES HELP TAIWAN. TAIWAN HAS FIVE OUT OF THE TOP 10 TSMC'S PLAYERS BY COST AND IT WILL BE LOOKING TO THAT STRENGTH FROM THE BIGGEST NAME IN AI TO CONTINUE TO SUPPORT THE FUNDAMENTALS. OF COURSE WE ALL NEED TO WATCH THE AI SAFETY AND CYBER SECURITY CONCERNS AND ITS IMPACT ON SLOWING THE FRONT. TAIWANESE IN PARTICULAR WILL BE WATCHING THAT DEVELOPMENT VERY CLOSELY. HAIDI: BLOOMBERG MARKETS REPORTER ANTHONY STEPHENS IN HONG KONG. LOOKING TO RAISE RATES TO AN 11 YEAR HIGH. LET'S BRING IN JAMES MCINTYRE FOR MORE. THE QUESTION IS ABOUT WHAT THEY DO TODAY BUT IS IT GOING TO BE BACK TO BACK? >> I THINK THE REAL QUESTION IS NOT SO MUCH TODAY BUT WILL THEY BE RETURNING IN NOVEMBER? MY VIEW IS THERE IS A VERY STRONG CHANCE THEY DO BUT IS IT REALLY GOING TO BE DATA-DEPENDENT, OR MAYBE DIESEL DEPENDENT DECISION ON WHETHER THEY HIKE AGAIN IN NOVEMBER. HAIDI: THERE IS A ROBUST CONVERSATION ABOUT THE BLACKNESS OF THE TOOL THAT IS MONETARY POLICY AND INTEREST RATES. DO YOU THINK THE TAX POLICY IS BETTER SERVED GIVING HIM A LOT OF THE INFLATION OUTLOOK IS DRIVEN BY WHAT'S HAPPENING IN THE MIDDLE EAST? >> WHEN WE HAD THE FIRST SHOCK, WE HAD PART OF THE SHOCK ABSORBED IN THE FEDERAL GOVERNMENT'S BALANCE SHEET. THERE WAS THE REDUCTION IN FUEL EXCISE TAXES AND THEY GOT ADDITIONAL CONCESSIONS FROM THE STATE AS WELL AND THAT HIP -- HELPS TO TAKE THE TOP OFF OF THE SHOCK. IT WAS A BIT UNCOMFORTABLE BUT FIRMS WERE ABLE TO OR WERE WILLING TO ABSORB A BIT OF THAT HIT FROM THE FIRST TIME AROUND. THIS TIME WE'VE GOT NOTHING FROM THE FEDERAL GOVERNMENT IN TERMS OF OFFSETTING SUPPORT SO THE CAUTION AND BUFFERING FROM THE FEDERAL BALANCE SHEET IS NOT THERE, WHICH MEANS IT IS GOING STRAIGHT THROUGH INTO THE ECONOMY. THE RBA IS REFLECTING WHAT EVERYONE IS SAYING, AND BUSINESSES ARE SAYING WE HAVE REACHED A POINT WHERE WE HAVE TO PASS THIS THROUGH. THE EXPECTATION OF WE ARE RAISING PRICES, EVERYONE WILL BE , IT'S TIME TO RAISE PRICES GIVEN THE DIESEL SHOCK, THAT IS DRIVING THE RBA INTO THIS. HAIDI: THERE IS A PERIOD OF EXPECTED SOFTNESS BUT DO YOU THINK THEIR RISK OF DIPPING INTO REFLATION LONG STAGFLATION? >> STAGFLATION IS INTERESTING BECAUSE IT IMPLIES LOW GROWTH. THIS TRILLION DOLLAR AI CAPEX WILL BE SOMEWHAT IMPERVIOUS TO INTEREST RATES, WHETHER IT'S BOND YIELDS AND CAPITAL MARKETS OR THE SHORT END ON MONETARY POLICY. WHAT THEY RBA IS DOING, WE HAD THE RBA TALKING WITH PHILIP LOWE AND THEN UNDER GOVERNOR BULLOCK KEEPING ABOUT -- THE ECONOMY ON A NARROW PATH OF PRESERVING GAINS IN THE LABOR MARKET WHILST FIGHTING INFLATION AND TRYING TO DELICATELY BALANCE THOSE THINGS, IT DOES LOOK LIKE WITH THE AI BOOM AND THE INFLATION SHOCK THAT THE CASUALTY IS GOING TO BE THE LABOR MARKET AND FURTHER INCREASE IN THE UNEMPLOYMENT RATE FROM WHAT WE HAVE SEEN SO FAR. HAIDI: WHEN IT COMES TO THE PROPERTY DOWNTURN, THIS IS JUST GOING TO BE ONE OF THE ELEMENTS OF WHAT GOES ON THE IN THE MIDDLE EAST. TWO OUT OF THOSE THREE THINGS NEED TO BE SORTED BEFORE WE SEE THE DOWNTURN IMPROVE. DOES THAT MEAN THE CYCLE GETS ELONGATED? >> IT WILL EXTEND THE DOWNTURN IN THE PROPERTY MARKET. ALSO CONTINUING ESPECIALLY WITH HIGHER INTEREST RATES AT THE BOND RATES, WHOLESALE MARKET INTEREST RATES, THE COMMERCIAL PROPERTY SITE IS ALSO GOING TO BE TAKING ON A BIT OF WATER WHEN IT COMES TO INTEREST RATES BEING HIGH. FOR THE RESIDENTIAL PROPERTY MARKET, THE THINGS YOU NEED TO STABILIZE OR STOP THE DOWNTURN IS CONFIDENCE THAT RATES ARE NOT GOING TO BE RISING ANY FURTHER. THE RBA IS NOT GOING TO DELIVER THAT TODAY. WE WILL HAVE TO WAIT A COUPLE MONTHS THROUGH TO NOVEMBER SO IT IS ME THE CYCLE OF DOWNTURN AND THE LACK OF CONFIDENCE IN THE PROPERTY MARKET IS GOING TO CONTINUE. IT WILL BE USEFUL IF THERE IS A RESOLUTION IN THE MIDDLE EAST THAT DOES SEE ENERGY MARKETS CALM DOWN AND THE DIESEL AND PETROL PRICE OF INFLATION PRESSURE STOPPING. THAT IS STEP ONE STEP TWO IS SEEING THAT RBA IS NOT RAISING -- NOT IGNORING THAT. THAT'S WHEN WE CAN BEGIN TO FIND A FLOOR. HAIDI: AUSTRALIA AND NEW ZEALAND, HERE AT BLOOMBERG, JAMES MCINTYRE. OF COURSE WE HAVE MORE ON AUSTRALIA COMING UP. WE WILL LOOK AT THE GROWING COMMUNITY RESISTANCE TO THE SURGING NUMBER OF AI DATA CENTERS PLANNED ACROSS THE NATION. THE UNIVERSITY OF MELBOURNE CENTER FOR AI AND DIGITAL ETHICS IS HERE. THIS IS BLOOMBERG. ♪ >> THE AI INVESTMENT ROLLOUT AND DATACENTER ROLLOUT IS REAL. WE THINK IT WILL BE A SOURCE OF GROWTH IN THE NEXT COUPLE YEARS, BUT IT IS NOTHING LIKE THE MINING BOOM. IT IS NOT THE MINING BOOM 2.0. THERE IS NOT A TRADE OR NATIONAL INCOME BOOM ASSOCIATED THE LEVEL OF RELATIVE GP IS NOT BIG. HAIDI: THE BLOOMBERG'S HEAD OF AUSTRALIAN PORTFOLIO MANAGEMENT SPEAKING ABOUT THE PROSPECTS FOR AUSTRALIA'S DATA CENTER AND THE AI ROLLOUT AND THE IMPACT ON THE ECONOMY. WHILE ECONOMISTS CONTINUE TO WHERE THE RISKS, DEVELOPMENTS -- GOODMAN GROUP PULLED A PLAN AFTER FACING SIGNIFICANT COMMUNITY RESISTANCE. A CENTER IN VICTORIA HAS BANNED THEM IN RESIDENTIAL CENTER. THAT DEBATE OF COURSE ALSO BEING AMPLIFIED BY AI SECURITY CONCERNS. PRIME MINISTER ANTHONY ALBANESE HAS CALLED FOR STRONGER AI SAFEGUARDS AFTER AN OPENAI MODEL HACKED A GOVERNMENT WEBSITE. JOINING US IS JEANNIE PATERSON WHO IS A CODIRECTOR AT THE CENTER FOR AI AND DIGITAL ETHICS AT THE UNIVERSITY OF MELBOURNE. AS WE SPEAK, WE ARE LEARNING FROM ANTHROPIC, PLANNING TO WARN ITS POTENTIAL IPO INVESTORS THAT ADVANCED AI COULD CAUSE CATASTROPHIC OR EXISTENTIAL RISKS TO HUMANITY. EXTRAORDINARILY STRONG LANGUAGE FROM ONE OF THE BIGGEST PLAYERS WITHIN AI. WHAT DO YOU MAKE OF THESE RISKS AND OUR POLICYMAKERS WELL AND TRULY BEHIND THE CURVE IN BEING ABLE TO REGULATE OR EVEN COME UP WITH APPROPRIATE GUARDRAILS HERE? >> WELL, THE CLAIMS ARE EXTRAORDINARY FOR A COMPANY THAT'S ABOUT TO HAVE AN IPO. IT MAY FACE GREATER SCRUTINY IN TERMS OF CORPORATE GOVERNANCE QUITE FRANKLY. BUT IN THE SHORT TERM BEFORE THAT HAPPENS, IT IS INTERESTING TO THINK ABOUT THE REGULATION. THERE ARE ACTUALLY EXISTING LAWS AGAINST HACKING AND ACCESSING DATA SETS OR WEBSITES IN AN UNAUTHORIZED WAY BOTH IN THE U.S. AND HERE. WHAT WE HAVE NOT SEEN IS AN EFFORT YET TO ENFORCE THOSE LAWS OR EQUIVALENT CIVIL LAW PENALTIES AND I THINK THERE WILL BE A LOT OF DISCUSSION ABOUT THAT. TO THE EXTENT THAT ANTHROPIC ISN'T OPERATING IN AUSTRALIA AT THE MOMENT OR AT LEAST IS NOT TRAINING MODELS IN AUSTRALIA, IT IS HARD FOR AUSTRALIAN LAW TO REACH THE COMPANY. THAT WOULD CHANGE IF WE GET THE PREDICTED INVESTMENT BY ANTHROPIC IN AUSTRALIA TO DATA CENTERS TO TRAIN MODELS. HAIDI: YOU MENTIONED A REALLY INTERESTING POINT BECAUSE JURISDICTION ISSUES ARE JUST ONE OF THE COMPLEXITIES OF THIS EMERGING AREA. DO YOU THINK THAT WOULD BE HELPED BY HAVING MORE CONSENSUS OR STRONGER FRAMEWORKS THAT ARE MULTILATERAL BETWEEN DIFFERENT GOVERNMENTS? >> ABSOLUTELY. WE HAVE SEEN OVER THE WEEKEND CALLS FOR COUNTRIES TO BAND TOGETHER AND AGREE ON BASELINE STANDARDS FOR THEY ARE SOMETIMES CALLED RED LINES FOR AI DEVELOPMENT. THAT'S CLEARLY GOING TO BE HELPFUL. BUT I'M ALSO AT THE POINT THAT MUCH OF THE CONDUCT WE HAVE SEEN IS ALREADY VERY CLOSE TO UNLAWFUL, IF NOT UNLAWFUL AND REALLY I SUSPECT THAT GEOPOLITICS ABOUT WHO IS BUILDING THE MODELS AND CONCERNS ABOUT CHINA'S MODELS THAT ARE STOPPING A CLEAR EYED VIEW ON HOW WE ACTUALLY ENFORCE WHAT INCREASINGLY ARE LOOKING LIKE EITHER RECKLESS CONDUCT OR INTENTIONALLY CRIMINAL CONDUCT. HAIDI: IT'S INTERESTING IN THE PROSPECTUS FROM ANTHROPIC, WE ARE HEARING MORE DETAILS HIGHLIGHTING THE RISKS ASSOCIATED WITH THEIR OWN AI MODELS, AND THEY INCLUDE SELF PRESERVING BEHAVIORS, ATTEMPTS TO RESIST SHUTDOWN OR TO CONCEAL AND MANIPULATE, AND BEHAVIOR THAT RESEMBLES BLACK MALE. -- BLACKMAIL. >> AI WORKS WITH MORE AUTONOMY AND WORKS FASTER, AND THEREFORE THE EFFECTS OF UNREGULATED AI CAN BE CATASTROPHIC MORE QUICKLY THAN WE HAVE PERHAPS EXPERIENCED WITH OTHER TECHNOLOGIES. BUT THAT SAID, WE DO KNOW HOW TO DO SAFETY REGULATION. WE KNOW HOW TO PUT IN PLACE RULES AND HAVE REPORTING. MOREOVER IN THE CASE OF VERY DANGEROUS INJURIES -- INDUSTRIES, WE SEND IN INSPECTORS TO ACTUALLY INSPECT ON HOW SAFETY RAILS ARE BEING IMPOSED ON SAY THE ATOMIC INDUSTRY. SAM ALTMAN HAS EVEN RAISED THE POSSIBILITY OF EXTERNAL INSPECTORS. I THINK WE MUST BE COMING CLOSE TO THAT SORT OF SITUATION. I WOULD ALSO MAKE THE POINT THAT TORT AND CRIMINAL LIABILITY TO THE COMPANY OR THE DIRECTORS PROVIDES A REALLY GOOD INCENTIVE TO SAY FOR BEHAVIOR. WHEN WE TALK ABOUT AI MODELS BEHAVING IN UNEXPECTED WAYS OR ENGAGING IN SNEAKY OR DISHONEST BEHAVIOR, THOSE MODELS ARE STILL MODELS THAT ARE DEVELOPED BY THE COMPANY AND ARE IN A SENSE LET LOOSE BY THE COMPANY. WE HEAR A LOT ABOUT SANDBOXES. CLEARLY, THE SANDBOXES ARE NOT SECURE ENOUGH AND PERHAPS WE NEED STANDARDS FOR HOW TO SECURE AND DEVELOP THE MODEL SPIRIT BUT ALSO THINK ABOUT LIABILITY FOR THESE EMERGING HARMS. HAIDI: IT'S INTERESTING YOU BRING UP THE IDEA OF IT BEING A TORT RATHER THAN A CRIMINAL ELEMENT. HACKING USUALLY REQUIRES CRIMINAL INTENT. DOES THAT MEAN A MORE EFFECTIVE FRAMEWORK WHEN IT COMES TO PENALTIES AND THE BROADER ISSUE OF CORPORATE GOVERNANCE IS TO MAKE SURE THAT THERE ARE TORTIOUS ELEMENTS TO THIS? OUR CIVIL FRAMEWORKS MORE USEFUL HERE? >> CIVIL FRAMEWORKS ARE OFTEN MORE AGILE FOR PRECISELY THE REASONS YOU MENTIONED. CRIMINAL RELIES ON INTENT AND THAT CAN BE QUITE HARD TO SHOW, PARTICULARLY WITH A CORPORATE ENTITY. IT'S POSSIBLE BUT HEARD OR TRADUCED. TYPICALLY INCORPORATE REGULATION, WE USED CIVIL LAW PENALTIES AND TORT OR TORT LIKE ACTIONS WHICH ARE PREMISED ON EITHER THE WRONG BEING DONE, SO THE TORT OF TRESPASS IS DEPENDENT ON THE WRONGFUL USE OF SOMEONE ELSE'S PROPERTY, OR NEGLIGENCE WHICH IS PREMISED ON HARM CAUSED BY CARELESS CONDUCT. THOSE ARE THE DEVICES WE OFTEN USE TO EXERCISE CONTROL OVER CORPORATE MISCONDUCT. WE MAY SAY, WELL, THOSE COMPANIES ARE SO BIG THAT IT DOESN'T MATTER, THEY MAY BE SLAPPED WITH OTHER DAMAGES OR CIVIL PENALTIES. BUT DAMAGES AND CIVIL TO -- PENALTIES DO MATTER WHEN YOU HAVE AN IPO. SHAREHOLDERS CARE ABOUT THOSE THINGS. THERE'S ALSO PERSONAL LIABILITY OF THE DIRECTORS OF THE COMPANIES WHO ENGAGE IN THESE SORTS OF ACTIONS AND PERSONAL LIABILITY TENDS TO FOCUS THE ATTENTION OF DIRECTORS ON MANAGING THE COMPANY IN SAFE AND LAWFUL WAYS. HAIDI: I'M CURIOUS ABOUT THIS IDEA OF THE CHAIN OF RESPONSIBILITY. HIS CAUSATION A DIFFICULT FACTOR TO TALK ABOUT AT THE MOMENT PARTICULARLY IF YOU LOOK AT VARIOUS EXAMPLES OF INDIVIDUALS OR BUSINESSES, ENTIRE STATES RELYING ON THESE TECHNOLOGIES OR SERVICES AND WHAT HAPPENS WHEN THINGS GO WRONG? WHERE DOES THE CHAIN OF CAUSATION END THEN? >> SUCH A GOOD QUESTION. CAUSATION IS OFTEN A HURDLE TO CIVIL LITIGATION. WE SAY THIS -- SEE THIS IN THE ACTIONS BEING BROUGHT AGAINST SOCIAL MEDIA COMPANIES CURRENTLY. BUT IN THE CORPORATE SENSE, OFTEN THE LIABILITY IS IN FAILING TO HAVE ADEQUATE SYSTEMS AND PROCESSES FOR MANAGING EMERGENT RISKS WHICH I THINK WE DON'T NECESSARILY NEED A CONSCIOUS MIND GOING LET'S GO OUT AND HACK AUSTRALIA OR GOVERNMENT WEBSITES. WHAT WE NEED IS TO GUARD AGAINST FORESEEABLE RISKS OF HARM FROM THE DEVELOPMENT OF SO-CALLED SWARMS OF AUTONOMOUS AGENTS. THIS IS CUTTING EDGE TECHNOLOGY. IT IS NEW TECHNOLOGY AND HARMS ARE STILL EMERGING BUT IT IS POSSIBLE TO UNDERSTAND THAT IF YOU ARE DEVELOPING STATE-OF-THE-ART AI MODELS AND SETTING GOALS FOR AI AGENTS, THAT THERE IS A RISK OF UNAUTHORIZED ACCESS TO OTHER DATA SETS OR WEBSITES AND THEREFORE PRECAUTIONS SHOULD BE PUT IN PLACE FOR THOSE SYSTEMS, OR DON'T DEVELOP THEM. THAT'S THE BOTTOM LINE. IF YOU THINK OF OTHER DANGEROUS INDUSTRIES LIKE THE PHARMACEUTICAL INDUSTRY, ENERGY INDUSTRY, ATOMIC ENERGY, WE DON'T SAY, KEEP GOING INTO WORRY ABOUT IT. SAFEGUARDS ARE PART OF THE PROCESS AND THE COMPANY IN CHARGE IS RESPONSIBLE FOR GUARANTEEING SAFE OUTCOMES AND HAVING SYSTEMS AND PROCESSES AND NEITHER OF THOSE REQUIRE A GRANULAR OR FORENSIC ACCOUNTING OF WHAT WENT WRONG WHERE, BECAUSE THEY ARE OUTCOMES-BASED. HAIDI: I SUSPECT THIS IS NOT THE LAST CONVERSATION WE WILL HAVE ABOUT THIS, BUT WE APPRECIATE YOUR TIME. JEANNIE PATERSON, THE CODIRECTOR FOR THE CENTER FOR AI AND DIGITAL ETHICS AT THE UNIVERSITY OF MELBOURNE. MORE ON AUSTRALIA EVERY TUESDAY AT 10:40 A.M. IN SYDNEY, 8:40 A.M. YOU CAN TUNE INTO THE BLOOMBERG AUSTRALIA PODCAST. FIND THAT ON APPLE, SPOTIFY OR BLOOMBERG.COM. MORE AHEAD HERE ON THE ASIA TRADE. THIS IS BLOOMBERG. ♪ SHERY: SHEEHAN FIRST-HALF OPERATING PROFITS PLUNGED IN REVENUE GROWTH WAS NEARLY FLAT IN THE WEAK PERFORMANCE OF DEBUTING AS A PUBLIC COMPANY. IT'S ALSO WARNING OF SECOND-HALF VOLATILITY TO PERSIST. CATHERINE LIM JOINS US WITH THE LATEST. WE WERE SORT OF EXPECTING THIS ARE THE RESULT. DISAPPOINTMENT FOR THE FIRST PUBLIC RESULTS. BUT ANYTHING THAT STOOD OUT TO YOU IN PARTICULAR? REPORTER: RIGHT. IT WASN'T GOING TO LOOK GOOD BUT I HAVE TO ADMIT THE 65% DROP IN OPERATING PROFITS FOR THE SECOND QUARTER, THAT WAS STEEPER THAN WHAT I WAS EXPECTING. AS YOU MENTIONED, ON TOP OF THAT WE ACTUALLY HAVE A SOMEWHAT WARNING FROM THE COMPANY ABOUT UNCERTAINTIES AHEAD. THEY HAD SPECIFIED IN THE INTERIM REPORT WHICH WAS RELEASED LAST NIGHT ITSELF THAT THEY ARE LOOKING TO ACTUALLY ABSORB SOME OF THE HIGHER COSTS SO AS TO PROTECT THEIR COMPETITIVE POSITION AMIDST A VERY VOLATILE ENVIRONMENT. IF WE ACTUALLY PUT THAT TRAJECTORY INTO THE SECOND HALF OF THE YEAR AND INTO 2027, THERE IS STILL A LOT OF UNCERTAINTY FOR SHEIN IN TERMS OF WHETHER THEY CAN EXECUTE ON THE REBOUND IN 2027. SHERY: A LOT OF IT WILL ALSO DEPEND ON THE MACRO ENVIRONMENT. BUT HOW MUCH IS IT? IS IT MORE OF A CYCLICAL PRESSURE THAT SHEIN IS FEELING, OR ARE THERE MORE COMPANY SPECIFIC ISSUES THAT NEED TO BE IMPROVED? REPORTER: OBVIOUSLY I THINK WHEN WE LOOK AT SHEIN, WE ALWAYS THINK ABOUT THE COMPARISON WITH TEMU, OR EVEN ALIEXPRESS. BUT FOR SHEIN, THEY DO HAVE A DIRECT SOURCING MODEL THAT WORKS MORE CLOSELY LIKE H&M WHEN IT COMES TO FAST FASHION. THAT IS WHERE WE WILL SEE A LOT OF DISTORTION IN THE NEXT COUPLE OF MONTHS OR QUARTERS TO COME THAT WILL AFFECT YOUR QUESTION ITSELF. THERE ARE THIRD-PARTY SELLERS AND THAT WILL AGAIN DISTORT THE COMPARISON. SHERY: CATHERINE LIM, BLOOMBERG INTELLIGENCE SENIOR CONSUMER AND TECHNOLOGY ANALYST. LOOKING AT OTHER STOCKS, THE DOWNSIDE FROM THE OVERNIGHT SESSION. WE ARE ALSO REACTING TO THE LATEST AND ANTHROPIC REPORTED TO BE SPENDING MORE THAN $500 BILLION ON CLOUD AND COMPUTING AND CLARIFYING THAT THIS IS IN THE COMING YEARS. WE ARE SEEING A LOT OF MOVEMENT IN THE TECH SECTOR TODAY BUT A LOT OF DOWNSIDE IN TAIEX FUTURES POINTING DOWN 4/10 OF 1%. THIS IS BLOOMBERG.