US Treasury Rebound Pulls Yields Off Multi-Decade Highs

♪ >> THIS IS "THE ASIAN TRADE." THE TOP STORIES THIS HOUR, A REBOUND IN TREASURIES FOR STOCK GAINS EVEN AS OIL PRICES RISE ON SIGNS OF LOOMING ESCALATION IN THE IRAN WAR. MORE FED OFFICIALS SIGNALING A LIKELY INTEREST RATE PAUSE THIS MONTH. BLOOMBERG LEARNS THAT ANTHROPIC IS SEEKING TO GO PUBLIC AS SOON AS MID-NOVEMBER WITH TRADING BEGINNING BEFORE THE THANKSGIVING HOLIDAY. AND NIKE TUMBLES AS QUARTERLY SALES MISSED ESTIMATES. TAKE A LOOK AT THE SET UP ACROSS ASIA AS WE HEADED TO THIS FRIDAY SESSION HERE IN THE REGION. LOTS OF FACTORS TO WATCH OUT FOR, NOT LEAST OF WHICH IS WHEN IT COMES TO THE GEOPOLITICAL FRONT AND THAT IS PLAYING INTO THE OIL STORY. U.S. STOCKS ABOUT 2/10 OF 1%. THERE IS A LOT GOING ON WHEN IT COMES TO SOME OF THE SWELLING THAT TICKETS TREASURIES AS WELL, EVEN AS WE SAW THAT REBOUND IN THE OVERNIGHT SESSION HOLDING THE 10 YEAR YIELD BACK FROM THE CUSP OF THAT 24 YEAR HIGH, BUT REALLY THE FUNDAMENTALS ARE STILL AT PLAY WHEN IT COMES TO WHAT WE COULD FURTHER EXPECT FROM YIELDS GOING FORWARD. THAT SORT OF DROP ACROSS THE SHORT-TERM PART OF THE CURVE PICKING UP AFTER THAT SOFTER THAN EXPECTED MANUFACTURING POINT IS TO SOME COOLING AND PARTS OF THE U.S. ECONOMY. IT IS ALSO THE OIL STORY, EXTENDING THE GAME AS IT DOES LOOK LIKE WE COULD POTENTIALLY SEE THAT ESCALATION OF THE MIDDLE EAST CONFLICT. >> PLENTY TO DISCUSS WITH OUR TEAM. BLOOMBERG'S CHIEF U.S. ECONOMIST JOINS US FROM WASHINGTON. OUR CHIEF CORRESPONDENT RUTH CARSON IS IN SINGAPORE. AND FROM HONG KONG, ANTHONY STEPHENS. LET ME START WITH YOU BECAUSE WHAT MOVED MARKET EARLY ON WITH STOCKS TAKING A HIT BECAUSE OF FACTORY DATA. GIVE US THE LANDSCAPE RIGHT NOW OF HOW THE ECONOMY STANDS IN THE U.S.. ANNA: YOU CAN SEE THE PRICE INDEX SURGING AND TYPICALLY THAT REFLECTS COMMODITY PRICES AND IT TENDS TO BE VERY SENSITIVE TO THINGS LIKE ALUMINUM, COPPER AND OIL PRICES. I THINK WE ARE SEEING IS A REFLECTIVE OF THE RE-ESCALATION OF THE WAR IN THE MIDDLE EAST OVER THE SUMMER SPILLING OVER INTO ISM MANUFACTURING PRICE INDEX. AS FAST AS THAT INDEX REFLECTS THE PRICE INCREASE, IT ALSO COMES DOWN RELATIVELY QUICKLY WHERE THERE TO BE A RETREAT IN THE WAR. IN TERMS OF THE OTHER PARTS OF THE ECONOMY, WE ARE EXPECTING LABOR MARKET TO BE IN LOW HIRING MODE TOMORROW, EXPECTING PAYROLL GAINS OF 55,000. HAIDI: LET ME TURN TO YOU, RUTH, BECAUSE WE SAW STOCKMARKETS IN THE U.S. RECOVER AFTER WE GOT SOME RELIEF FROM THE TREASURY SIDE OF THINGS BUT THAT WASN'T NECESSARILY BECAUSE OF U.S. ECONOMIC FUNDAMENTALS. RUTH: YEAH, ABSOLUTELY. I THINK THAT IS KEY. THIS IS DEFINITELY NOT A MOVE THAT IS UNDERPINNED BY A SOFTENING ECONOMY OR FUNDAMENTALS AS A WHOLE. THIS IS A RUSH FOR SAFETY. WE SAW EARLIER IN THE SESSION YESTERDAY FRENCH BONES COME UNDER PRESSURE, GILTS UNDER PRESSURE WITH 30 YEAR YIELD TO THE HIGHEST LEVEL SINCE 1998. ALL THIS MEANT THAT BONDS AS WE KNOW ARE NO LONGER A HAVEN BUT PERHAPS TREASURIES ARE. THAT IS WHY WE SAW THAT LED BY THE FRONT ENERGY PART OF THE CURVE. THAT IS EASY TO DIGEST, THAT IS LESS SENSITIVE TO LONG-TERM FISCAL RISKS AND ALL THAT. SO AS A RESULT, INVESTORS DID BUY TREASURIES BECAUSE THEY HAVE BEEN SOLD OFF HAPPILY AND THEY THOUGHT YOU KNOW WHAT, PERHAPS IT IS JUST TIME TO GET A BIT OF A NIBBLE INTO TREASURIES JUST FOR THAT BUFFER. HAIDI: ANTHONY, WHAT DOES THIS ALL MEANS WHEN IT COMES TO THE SET UP EQUITIES INVESTORS? STILL A LOT OF UNCERTAINTY AND WE HAVEN'T EVEN GOTTEN TO THE POTENTIAL ESCALATION IN THE MIDDLE EAST YET. ANTHONY: FOR EQUITIES IT IS A SIMPLE FORMULA. IN TECH, TECHNICALLY OUTPERFORM YESTERDAY. THAT FOLLOWS ON FROM THE STRONG SESSION IN ASIA, AND WE SEE MORE OF THE SCENE COMING INTO THE ASIAN SESSION. IT IS REALLY ASTONISHING HOW MUCH LEADERSHIP OVER ASIAN EQUITIES. BANKING AND CONSUMER NAMES ARE MUCH MORE EXPOSED THIS, ESPECIALLY IN CHINA AND INDIA BUT INCREASINGLY IN AUSTRALIA AS WELL, AND WE SAW THAT SPACE SHARPLY LOWER IN EUROPE,. FISCAL CONCERNS ARE IN FRANCE AND SITTING EUROPEAN BANKS EXTREMELY HARD. AND WE WILL TAKE SOME OF THAT LEAD INTO ASIA FROM THE LIKES OF HSBC AS WELL AS THE JAPAN BANKS AND AUSTRALIAN BANKS WHICH HAD A PRETTY ATROCIOUS SESSION YESTERDAY. ALSO CONSUMER NAMES IN THE U.S. ARE QUITE WEAK, SO THERE WILL BE QUITE OF YOUTH SPLIT -- AN OBVIOUS SPLIT. HAIDI: WE'VE SEEN THE PUSHBACK IN THE STOCKMARKETS ALSO BECAUSE OF RISING YIELD AS WE HAVE BEEN TALKING ABOUT, BUT ANNA, WE'VE HEARD SOME FED SPEAK THIS WEEK ESPECIALLY OVERNIGHT FROM TWO VICE CHAIRS THAT POTENTIALLY THERE ARE MORE PEOPLE AT THE FOMC PUSHING BACK AGAINST THE IMMEDIATE RATE HIKE. ANNA: THE FACT THAT WE HEARD FROM TWO VICE CHAIRS WHICH ARE THE CLOSEST TWO PEOPLE TO THE FED MEANS THAT THE FED CHAIR HIMSELF PROBABLY HAS BLESSED THIS MESSAGE COMING FROM JEFFERSON AND JOHN WILLIAMS. I THINK ALSO THE DATA HAVE BEEN CORROBORATED FOR THE FED TO NOT MOVE IN OCTOBER. YESTERDAY WE SAW THAT THE CORE PCE INFLATION GAUGE WAS REVISED DOWN BY 36 BASIS POINTS, SO NOW INSTEAD OF LOOKING TO BE AT 3.3%, CORE PCE INFLATION IS REALLY AT 3.0%. AND ON A THREE-MONTH ANNUALIZED BASIS, CORE PCE WAS ACTUALLY RUNNING AT 2.0%, AND THAT IS THE GAUGE SO THAT CHRIS WALLER HAS OFTEN MENTIONED AS WHAT HE IS LOOKING AT. I THINK BEFORE WE KNOW IT, MAYBE CHRIS WALLER WILL BE COMING TO JOIN THE CHORUS OF JEFFERSON AND WILLIAMS ON TALKING ABOUT POTENTIAL HOLDS IN OCTOBER. HAIDI: WHAT ARE THE IMPLICATIONS WHEN IT COMES TO TREASURIES, PARTICULARLY THE 10 YEAR? RUTH: INVESTORS ARE NOT JUST LOOKING AT THE DATA, THEY ARE LAYING A MYRIAD OF FACTORS, AND IT IS FEEDING INTO THE FORECASTS. JUST BASED ON THE CONVERSATIONS THAT I'M HAVING THE PEOPLE, THE NODES THAT ARE COMING THROUGH, T. ROWE PRICE SEES 6% AS A POSSIBILITY IN THE COMING YEAR AND AGAIN THAT IS HIGHER THAN WHERE WE ARE AT THE MOMENT. YOU'VE ALSO GOT HOUSES SUGGESTING 8%. LET ME STICK WITH THAT FOR A MOMENT, 8% IN THE COMING YEARS. THIS SHOWS YOU THE SHEER AMOUNT OF PRESSURE BONES ARE UNDER, IN THE BEARISHNESS ISN'T GOING AWAY ANY TIME SOON BUT THEY WILL HAVE SOME REALLY LIKE AN END TO THE U.S.-IRAN WAR OR TAKING ECONOMIC DATA. HAIDI: THE ISSUE WITH THE BOND SPACE THESE DAYS HAS BEEN IT IS NOT NECESSARILY ENERGY-RELATED BECAUSE OF INFLATION WITH IRAN. GOVERNMENT BONDS NOW COMPETING WITH CORPORATE DEBT AS WELL. WE HAD A BIT MORE INFORMATION WHEN IT COMES TO THE UPCOMING IPO? ANTHONY: THEY ARE PREPARING FOR A LITTLE BIT OF A THANKSGIVING CELEBRATION. THAT'S VERY INTERESTING GIVEN THAT IS NORMALLY A QUIET PERIOD. ESPECIALLY AFTER THE KIND OF YEAR THAT WE'VE HAD. SO IT INTERESTING THAT THEY ARE COMING TO THAT WINDOW. I THINK IT SPEAKS TO SOME OF THAT AROUND THE IPO, AROUND THE SUPPLY CHAIN WHERE THE CASH IS COMING IN. ALSO, WE DID SEE SOME AROUND THE PARAMOUNT DEBT, WE SEE THAT INVESTORS HAVE INVESTED. THAT INTERPLAY BETWEEN THE CORPORATE BOND SPACE, THE EQUITY FUNDRAISING SPACE IS VERY DEPENDENT ON WHAT SECTOR YOU ARE IN. IF YOU ARE INTACT TECH, THIS IS THROUGH FLOODED -- THERE SEEMS TO BE PLENTY AROUND. WE CONTINUE TO SEE FUNDRAISING IN THE CHINESE TECH SPACE AS WELL. BUT YOU LOOK AT WHAT GETS CANCELED AND IS NOT THE AI SPACE. FOR EXAMPLE, YOU HAVE AURA, YOU HAVE IPO SLOWING IN HONG KONG. THAT BIFURCATION EXTENDS NOW INTO THE PRIMARY MARKET WHICH IS A VERY INTERESTING DEVELOPMENT. HAIDI: WE ARE ALSO GETTING THE JOBS NUMBERS, THE PAYROLLS NUMBERS. THERE IS NOTHING IN EXPECTATIONS THAT WOULD REALLY BUILD INTO CONVICTION FOR A MORE HAWKISH FED, IS THERE? >> I THINK THAT THE RISKS -- SO I MEAN, THE CONSENSUS IS THAT 88,004 SOMEWHERE AROUND THERE. IF THE NUMBERS COME IN AT NUMBER, I THINK THE FED WILL CONTINUE ON THIS PATH OF HOLDING IN OCTOBER. HOWEVER, I DO THINK THAT THE RISKS ARE TILTING TOWARD THE DOWNSIDE ON THIS JOBS NUMBER BECAUSE IN THE U.S., TYPICALLY IN SEPTEMBER, THAT IS WHEN SCHOOLS ARE HIRING AND THIS YEAR WE ARE SEEING ALL SCHOOLS AROUND THE COUNTRY NOT HIRING AS MUCH IN THAT COULD POTENTIALLY CREATE A PRETTY BIG DOWNSIDE RISK TO THE JOBS NUMBER. HAIDI: AND RUTH, THE JOBS NUMBERS COULD ALSO PRESENT A DOWNSIDE RISK WHEN IT COMES TO THE JAPANESE YEN. THE MOVEMENTS IN THE JAPANESE CURRENCY ARE VERY MUCH TO DO WITH WHERE THE BOJ IS GOING AND WHERE THE FED IS GOING. >> ABSOLUTELY. THE RIGHT DIFFERENTIALS MATTER MORE THAN EVER WHEN IT COMES TO PLAYING JAPANESE MARKETS. BEAT ON THE YEN SIDE, BEAT ON THE JGB SIDE, BUT ABSOLUTELY THE TRADERS IN TOKYO WILL BE SQUARING SOME POSITIONS, THEY WILL BE PREPARING FOR THE JOBS NUMBERS TONIGHT. IF WE GET ANY FORM OF UPSIDE SURPRISE, OBVIOUSLY THAT WILL ADD TO THE DOLLAR STRENGTH AND THEN THE YEN WEAKNESS BY DEFAULT. WE'VE ALREADY SEEN IN THE PAST HOW VOLATILE THE YEN TRADING HAS BEEN, AND ABSOLUTELY SOME OF IT IS AT THE MERCY OF GEOPOLITICAL TENSIONS THROUGH THE U.S. DATA, BUT ALSO DOMESTIC AS WELL. ABSOLUTELY, INVESTORS REMAIN ON POTENTIAL INTERVENTION RISK IF THERE IS A BLOWOUT. HAIDI: ANTHONY, I WANTED TO GET A FINAL WORD FROM YOU WHEN IT COMES TO THE RISK ACROSS THE BANKING SECTOR. OBVIOUSLY IN A LOT OF WAYS THIS IS THE CONVERSE SIDE OVER THE EXUBERANCE OF THE AI TRADE. WHAT ARE THE RISKS FOR ASIA, FOR EXAMPLE? >> YESTERDAY MARKED A REALLY BIG CHANGE IN THAT DYNAMIC WHERE WE STAND TECH AND BANKS WORK TOGETHER ON THEIR WAY UP IN ASIA, ESPECIALLY IN JAPAN, BUT ALSO IN THE U.S., AND NOW THAT IS STARTING TO CRACK AS BASICALLY THEY FEED INTO SERIOUS MARKETS IN EUROPE AND A VERY BIG WAY. EVEN THE FRENCH BONDS RETRACE SOME OF THE PANIC, MOST NOTABLY, BANKING STOCKS STATE DOWN. THEY DID NOT RECOVER. SO THERE IS CLEARLY SOME CONCERN INTO BANKS. TRADING FIXED INCOME IS GETTING MUCH HARDER, MORTGAGE RATES ARE HIGHER. AND WE WILL TAKE SOME OF THOSE CONCERNS INTO ASIA. BEAR IN MIND THAT ASIA IS IN A MUCH BETTER PLACE FROM A FISCAL AND GROWTH PERSPECTIVE. YOU DO HAVE HIGHER BOND YIELDS IN THE LIKES OF KOREA AND JAPAN, BUT GROWTH IS PICKING UP, SO THERE IS A LITTLE BIT OF A DIFFERENCE, THE BANKING SECTOR IS SUDDENLY UNDER A LOT OF STRESS AFTER ALMOST AN ENTIRE YEAR OF BOOMING CAPITAL MARKETS. IN THAT IS A POTENTIALLY BIG CHANGE IN MARKET DYNAMICS. HAIDI: ANTHONY STEPHENS, ANNA WONG AND RUTH CARSON JOINING US FROM SINGAPORE HONG KONG AND THE U.S. AS WELL. TAKE A LOOK AT SOME BREAKING NEWS WE ARE GETTING OUT OF SOUTH KOREA. WE HAVE THE CONSUMER PRICE INFLATION FOR THE MONTH OF SEPTEMBER, AND CPI YEAR ON YEAR HAS A GROWTH OF TWO POINT 9%, A SLIGHT DECELERATION FROM THE PREVIOUS MONTH. WHEN IT COMES TO THE MONTH ON MONTH FIGURES GROWTH OF 0.3% AND ON A MONTHLY BASIS, WE HAVE ACCELERATED FROM THE PREVIOUS MONTH. BOTH NUMBERS SHORT OF IN LINE WITH EXPECTATIONS THAT THE ONE WE ARE WATCHING IS THE CORE CPI AND YOU CAN GET A GROWTH OF 2.8% WHICH IS A SLIGHT DECELERATION FROM THE PREVIOUS MONTH. BUT OF COURSE THIS IS A DIFFICULT PATH FOR SOUTH KOREA WHICH STILL HAS ELEVATED FUEL PRICES, FOOD PRICES THAT BOTH OF REMAIN HIGH IN THE HOLIDAYS AND SOUTH KOREA. BUT OF COURSE, STILL KEEPING THE BANK OF KOREA ON THAT TIGHTENING PAT AFTER THIS RATE HIKES IN LYON AUGUST. THIS IS BLOOMBERG -- IN JULY AND AUGUST. HAIDI: THE U.S. IS SAID TO BE PREPARING A MAJOR MILITARY BUILDOUT IN THE MIDDLE EAST WITH AN OFFICIAL TELLING BLOOMBERG THAT IT MAY DEPLOY A THIRD AIRCRAFT CARRIER GROUP WITH 10,000 SAILORS AND MARINES. AND BREAKING NEWS, BRIAN, THIS ISN'T NECESSARILY A SIGN OF ESCALATION, BUT IT WOULD CERTAINLY GIVE THEM THE READINESS, THE PREPAREDNESS OF THE DECISION WAS MADE TO ESCALATE. >> THAT'S EXACTLY RIGHT. IT'S THE OPPORTUNITY TO ESCALATE IF THEY WOULD CHOOSE TO DO SO. PRESIDENT TRUMP HAS BEEN TALKING A LOT LATELY ABOUT FRAMING THE IRAN WAR AS THIS BIG DECISION THAT HE HAS TO MAKE. HE'S BASICALLY FRAMING IT AS HE COULD CHOOSE TO PURSUE A DEAL WITH IRAN OR HE COULD CHOOSE WHAT HE HAS FRAMED AS VARYING LEVELS OF MILITARY DESTRUCTION, AND HE HAS FRAMED IT AS A CHOICE THAT IRAN HAS TO MAKE WHETHER THEY ARE GOING TO ACCEPT THE DEAL OR GO THE MILITARY ROUTE. SO WITH THIS ADDITIONAL CARRIER THAT IS REPORTED TO POSSIBLY BE HEADING TO THE MIDDLE EAST, IT'S GETTING TRUMP THAT OPPORTUNITY AS HE HAS THREATENED THAT IRAN'S STRIPES COULD RESUME SOMETIME AFTER THE MIDTERMS, WHICH ARE JUST ABOUT A MONTH AWAY. HAIDI: WHAT DOES THIS MEAN PARTICULARLY FROM THE NAVAL POINT OF VIEW FOR NAVAL READINESS? WE'VE SEEN INDICATIONS OF THIS BEING QUITE STRETCHED, RIGHT? BRYAN: YES. OF COURSE YOU HAD THAT CARRIER THAT WAS DEPLOYED FOR MONTHS AND THERE WERE REPORTS OF BURNOUT AND MENTAL HEALTH ISSUES ON THAT BOAT. THEY HAD THAT PORT OF CALL IN THAILAND AND THEN IT WAS ON ITS WAY HOME. WHAT IS HAPPENING IS THAT IT IS TRUMP WANTING TO MAKE SURE THAT HE DOESN'T GET CAUGHT FLAT-FOOTED, PERHAPS, AND JUST MAKING SURE THAT HE HAS ALL THE RESOURCES AVAILABLE, SHOULD HE CHOOSE TO PURSUE MORE STRIKES ON IRAN. WE ARE CURRENTLY, THE U.S. AND IRAN ARE NOT REALLY TECHNICALLY AT A CEASE-FIRE, ALTHOUGH THE STRAKES HAVE OBVIOUSLY NOT BEEN AS FREQUENT AS THEY HAD BEEN IN WEEKS PAST. HAIDI: THERE HAD BEEN A MENTION OF POTENTIALLY STRIKING IRAN AGAIN FOLLOWING THE MIDTERMS. WHAT IS A DOMESTIC APPETITE? THIS HAS BEEN AN UNPOPULAR WAR BOTH WITHIN THE GOP AND IN TERMS OF THE VOTERS AND THE BROADER POPULATION, GIVEN THE IMPACT ON GAS PRICES. BRYAN: YOU'RE RIGHT, THE WAR IS EXTREMELY UNPOPULAR HERE IN THE U.S. AND TRUMP JUST TONIGHT WAS SPEAKING IN TEXAS AND HE IS ON HIS WAY TO GO SPEAK IN OKLAHOMA, AND WHEN HE'S TALKING TO VOTERS, HE'S REALLY TRYING TO PLAY DOWN THE IRAN WAR AND SHIFT BLAME AND KIND OF TAMP DOWN CONCERNS ABOUT RISING OIL PRICES SAYING AS SOON AS THE WAR IS OVER, WHICH HE SAYS WILL BE SOON, OIL PRICES WILL GO DOWN AND WITH IT, GASOLINE PRICES, COST OF LIVING, INFLATION. REALLY PINNING THE INFLATION CONCERNS ON OIL WHICH IS UP DUE TO THE WAR, WHICH IS QUITE UNPOPULAR. SO THAT'S WHAT HE IS TELLING VOTERS BUT AS THE WALL STREET JOURNAL REPORTED TODAY, IS ALSO TELLING HIS AIDES THAT HE THINKS BOMBING AGAINST IRAN COULD RESUME BY THE END OF NOVEMBER. HAIDI: AND WE DO HAVE MORE WHEN IT COMES TO THE FALLOUT FROM THE IRAN WAR AND EUROPEAN NATIONS HAVE HELD EMERGENCY TALKS ON HOW TO RESPOND TO U.S. PRESSURE TO RELEASE STRATEGIC FUEL RESERVES. ACCORDING TO A MEMO SEE BY BLOOMBERG, WASHINGTON IS ASKED AT LEAST ONE YOU MEMBER TO RELEASE DIESEL INVENTORIES TO AVOID AN EXPORT BAN. SCOTT BESSENT HAS ALSO POSTED THAT AMERICA IS DOING ITS PART AND ALLIES MUST MATCH THEIR COMMITMENTS WITH ACTION. SOUTH KOREA HAS PUSHED BACK ON THE TRUMP ADMINISTRATION'S ANNOUNCEMENT THAT IT IS INVESTING $54 BILLION IN THE LIQUEFIED NATURAL GAS PROJECT IN ALASKA. KOREA'S INDUSTRY MINISTER SAYS IT HAS AGREED TO DO SO ONLY IF A LONG-STALL VENTURE PROVES ECONOMICALLY FEASIBLE. SOUTH KOREA SAYS IT EXPRESSES REGRET FOR THE U.S. BUT PRESIDENT TRUMP'S ANNOUNCEMENT THIS WEEK WENT BEYOND WHAT HAS BEEN AGREED. ISRAEL SAYS THE FLY DUBAI PILOT WHO TRIED TO CRASH A BOEING CARRYING 174 PASSENGERS WAS FROM OMAN. BENJAMIN NETANYAHU SAYS THE ATTACKER HAD UNDERGONE RADICAL ISLAMIST INDOCTRINATION. ISRAEL HAS NO DIPLOMATIC RELATIONS WITH OMAN, RAISING QUESTIONS ABOUT HOW THE PILOT ENDED UP ON THE FLIGHT TO TEL AVIV. NEITHER THE AIRLINE NOR THE UAE GOVERNMENT HAVE CONFIRMED THE PIRATES NATIONALITY IDENTITY. WE HAVE MORE AHEAD ON "THE ASIA TRADE." YOU'RE WATCHING BLOOMBERG. HAIDI: NIKE SHARES HAVE PLUNGED AFTER THE SNEAKER GIANT REPORTED WEAKER THAN EXPECTED RESULTS AND ISSUED A CAUTIOUS OUTLOOK. THE COMPANY ALSO AIMED AT DELIVERING $2.5 BILLION IN SAVINGS OVER THE NEXT FIVE YEARS. WITH BRING IN A SENIOR ANALYST FOR E-COMMERCE AND LEISURE. I THOUGHT NIKE'S TURNAROUND WAS SUPPOSED TO BE GAINING TRACTION. WHAT HAPPENED? >> IT'S GAINING TRACTION IN ONLY ONE AREA, PERFORMANCE. THE REST OF THE BUSINESS IS GETTING WORSE. SO THAT IS THE ISSUE. THE GUIDANCE THAT THEY GAVE FOR FISCAL 2027 FOR SALES TO BE IN THE HIGH SINGLE DIGITS WAS NOT EXPECTED. IT MEANS THAT THE TURNAROUND IS RIGHT NOW OUT OF SIGHT UNTIL WE HAVE MORE INFORMATION ON HOW THEY ARE GOING TO FIX SPORTSWEAR, CHINA, AND THE JORDAN BRAND. HAIDI: TELL US A LITTLE BIT MORE ABOUT CHINA. HOW BIG A PROBLEM IS IT FOR NIKE, AND WHY ARE THE CHALLENGES THEY ARE SO PERSISTENT? POONAM: CHINA IS A VERY IMPORTANT BUSINESS FOR NIKE. IT'S NOT THE LARGEST REGION, NORTH AMERICA IS, BUT IT IS THE MOST PROFITABLE REGION IN THE WORLD FOR THEM. DOWN 26% SALES IN THE CURRENT FISCAL QUARTER WAS WEAKER THAN ANY OF US COULD HAVE EXPECTED, AND IT'S ONLY GOING TO GET WORSE. THE ISSUE IS NOT JUST LET THE INVENTORY ISN'T RIGHT, IS INVENTORY, IT IS DISTRIBUTION, IT IS THE PERCEPTION OF THE BRAND AND IT IS ALSO JUST HOW THE BRAND IS ESSENTIALLY BROUGHT TO THE CHINESE CUSTOMER. IT HAS TO FIX EVERYTHING IN CHINA AND THAT IS NOT GOING TO HAPPEN OVERNIGHT. IT MAY EVEN GO INTO 2028, AND THERE'S JUST A LOT OF WORK TO BE DONE. EXECUTION IS GOING TO BE KEY, AND IT IS TOO EARLY TO TELL IF NIKE CAN MAKE THIS RECOVERY IN THE NEXT EVEN 24 MONTHS. I THINK WE NEED TO HEAR MORE AT THEIR MEETING ON NOVEMBER 16. WHAT IS THE PLAN TO TURN CHINA AROUND, AND HOW ARE THEY GOING TO GET THERE? WE NEED TO SEE SOME SMALL MILESTONES ALONG THE WAY TO SEE THAT A TURNAROUND COULD ACTUALLY HAPPEN AT THIS POINT? HAIDI: SO WHAT ARE WE SEEING IN TERMS OF WHERE THE BIGGEST SAVINGS COULD POTENTIALLY COME FROM? >> YOU PROBABLY HEARD ON THE CALL EARLIER THAT THEY LAUNCH THIS NEW COST SAVINGS PROGRAM CALLED PACE. IT CALLS FOR $2.5 BILLION IN COST SAVINGS THROUGH FISCAL 2030 WITH THE BULK OF THEM COMING IN THE LATTER PART. NOW, THE BULK OF IT IS STILL LATER ON, WHICH MEANS GROSS MARGINS AND MARGINS CAN BE A LITTLE HEALTHIER. THAT SAID, THINGS ARE GOING TO GET BAD BEFORE THEY GET BETTER BECAUSE THEY ARE MARKING DOWN INVENTORY VERY AGGRESSIVELY. IN CHINA, ACROSS SPORTSWEAR AND IN JORDAN. SO EVEN THOUGH THEY GET THE BENEFIT FROM THESE COST SAVINGS, MARGINS WILL NOT BE UP AS MUCH AS YOU WOULD HAVE EXPECTED SHOULD THEY NOT HAVE HAD THE MARKDOWNS. HAIDI: POONAM. ANOTHER STORY WE ARE FOLLOWING, MATTEL SHARES SURGED AFTER THE WALL STREET JOURNAL REPORTED TAKEOVER INTEREST. AUTHENTIC HAS DISCUSSED A POTENTIAL OFFER VALUING MATTEL AT MORE THAN $20 A SHARE. A DEAL THAT ADDED TO A PORTFOLIO THAT ALREADY INCLUDES REEBOK, CARE BEARS AND SPORTS ILLUSTRATED AS THEY REPORTED THE WAY IPO NEXT YEAR. MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. SHERY: BREAKING NEWS IN JAPAN. WE ARE GETTING THE LATEST TOKYO CPI NUMBERS. YEAR ON YEAR GROWTH IS 2.7%. ACCELERATING IN SEPTEMBER FROM THE PREVIOUS MONTH. YEAR ON YEAR, EXCLUDING FRESH FOOD, CORE CPI FOR TOKYO, THE ACCELERATION IS 2.7%. AGAIN ACCELERATING FROM THE PREVIOUS MONTH. EXCLUDE ENERGY AS WELL AND YOU GET GROWTH OF 3% FOR THE MONTH OF SEPTEMBER. WE HAVE A FEW IDIOSYNCRATIC EVENTS IN JAPAN THAT ARE PROPELLING THE COSTS HIGHER, LIKE POLICY RELATED BASED EFFECTS. LAST YEAR WE HAD GOVERNMENT FEE WAIVER THAT CREATED A LOW BASE, SO THAT COULD LOOK LIKE INFLATION IS ACCELERATING MUCH FASTER THIS MONTH THAN SEPTEMBER. AND WE HAVE A CONSISTENT COST PRESSURES. WE HAVE THE JOBLESS RATE AT 2.5%. MORE SLACK IN THE LABOR MARKET FOR AUGUST. JOB TO APPLICANT RATIO 118, SAME AS THE MONTH BEFORE. HAIDI: YOU MENTIONED INFLATION. THIS IS ONE FOR GLOBAL CENTRAL BANKS INCLUDING THE FED. WE ARE HEARING FROM A DALLAS FED EVENT. THESE PREPARED MARKS TALKING ABOUT HOW INFLATION IS FALLING BUT MORE HIKES ARE NEEDED. BUT THE MOVES WE SEE AND BOND MARKETS COULD REDUCE THE NEEDS TO TIGHTEN MONETARY POLICY WITH THESE HIGHER TERM PREMIUMS. MAKING COMMENTS ABOUT THE INFLATION FROM ENERGY PRICES ARE A BIGGER WORRY THAN GROWTH AT THIS POINT. THIS IS AS WE SEE A POTENTIAL RISK OF ESCALATION IN THE MIDDLE EAST AND THAT WILL NOT HELP ENERGY PRICES WITH THE STRAIT OF HORMUZ STILL CLOSED. SHE ALSO SPEAKS ABOUT THE IMPACT OF ARTIFICIAL INTELLIGENCE. HIGHLY OPTIMISTIC THAT WILL BOOST LABOR PRODUCTIVITY. THAT IS PART OF THE DEBATE WITH AI IMPLICATIONS FOR THE LABOR MARKET AND BROADER INFLATION PRESSURES. WE HEARD FROM A NUMBER OF OTHER FED SPEAKERS. >> THIS IS THE BIGGEST GAP BETWEEN THE ACTUAL TWO YEAR YIELD AND IMPLIED YIELD. >> WE'VE SEEN INCREASES OVER TIME. I THINK IT IS A COMBINATION OF FACTORS. I DO NOT ATTRIBUTE THEM TO ANYONE. >> YIELDS ACROSS THE TERM STRUCTURE HAVE INCREASED FURTHER. A SIGN THAT INVESTORS ARE REASSESSING THE EVOLVING MACROECONOMIC LANDSCAPE. >> I THINK WE COULD RUN A MORE EFFECTIVE BANK AND MOVE CREDIT IF YOU HAD A MORE TRADITIONAL SLOPED YIELD CURVE. IT IS ALL RELATIVE. >> MARKETS ARE PRETTY GOOD. WHEN THEY WANT TO SEND THE SIGNAL, THEY WILL SEND A SIGNAL REGARDLESS OF WHAT THE FED IS TELLING THEM. >> OUR NEXT GUEST SAYS GOVERNMENT BONDS ARE DOING THEIR JOB AGAIN FOR THE FIRST TIME IN YEARS, OFFERING SERIOUS INCOME AND REAL UPSIDE IF GROWTH STUMBLES. HOW BIG IS THIS OPPORTUNITY? WE HAVE TALKED ABOUT THIS BEING THE BEST OPPORTUNITY WHEN IT COMES TO BONDS THIS DECADE. KELLIE: FOR US, AND BOND INVESTORS OVER THE LAST YEARS HAVE HAD A PRETTY TOUGH TIME. THE RETURNS ON BONDS HAVE BEEN PRETTY NEGATIVE. NOW WE ARE SEEING THIS HUGE RESTORING OF EVALUATIONS. WE ARE LEANING INTO THAT, ADDING DURATION AND INTEREST RATE RISK BACK INTO OUR PORTFOLIOS, REALLY TO PROVIDE THE INCOME. BUT BONDS BECOME A BETTER DIVERSIFIER OF EQUITY RISK. WE HAVE YIELDS ON AVERAGE ACROSS THE TERM STRUCTURE AND MOST OF THE DEVELOPED WORLD FROM 5% TO 6%. HAIDI: WHAT ARE THE POLICY RISKS? DO YOU THINK WE ARE WADING INTO A SITUATION THAT WE COULD SEE A STUMBLE FROM MAJOR CENTRAL BANKS? KELLIE: I THINK THIS IS THE REAL CHALLENGE. THERE IS A POTENTIAL FOR POLICY MISTAKE. IF YOU LOOK AT WHAT IS GOING ON IN MARKETS, WE HAVE SEEN INTEREST RATES MOVE UP SUBSTANTIALLY BECAUSE OF THE OIL PRICE. NORMALLY CENTRAL BANKS LOOK THROUGH THIS TYPE OF VOLATILITY. IT IS INFLATIONARY AND TERMS OF HEADLINE INFLATION, BUT THE REAL RISK IS DOWNSIDE RISK TO GROWTH. WE HAVE 100 BASIS POINTS AROUND THE WORLD, AND A CENTRAL BANKS DELIVER, WE WILL SEE GROWTH SLOW. THE MARKET IS FULLY PRICED FOR THIS INFLATION SHOCK. SOME INSURANCE HIKES TO GO BACK INTO THE MARKET. THE ULTIMATELY AN OIL PRICE SHOCK IS INFLATIONARY BUT ALSO SENDS GROWTH LOWER. WE ARE LOOKING TO LEAN INTO THIS RESTORING OF VALUATIONS IN MARKETS. HAIDI: WHERE DO YOU THINK IS THE OPPORTUNITY PARTICULARLY IN AUSTRALIAN BONDS? KELLIE: FOR US, WE WANT TO BE BUYING INTO THOSE COUNTRIES WHERE GROWTH DOES LOOK VULNERABLE. COUNTRIES LIKE AUSTRALIA AND EUROPE AND THE U.K., IF YOU THINK OF THE STARTING POINT OF GROWTH IN THOSE ECONOMIES IT IS MUCH WEAKER THAN THE U.S.. WE SEE BETTER VALUATIONS IN AUSTRALIAN BONDS, AUSSIE BONDS CAN START OUTPERFORMING SUBSTANTIALLY WITH THE RBA HAVING BEEN THE FIRST CENTRAL BANK TO TAKE CASH RATES HIGHER INTO RESTRICTED LEVELS. WE WILL BE LEANING INTO THAT, AND TO THOSE ECONOMIES WHERE GROWTH COULD POTENTIALLY WEAKEN SUBSTANTIALLY INTO 2027. THEIR MARKETS LIKE AUSSIE, EURO PE AND THE U.K. HAIDI: IT WAS INTERESTING THAT MICHELLE BULLOCK ACKNOWLEDGED IF NOT THE IMPACT OF THE HOUSING MARKET AND IT THE DECISION THEY MADE, THE PAUSE IT ALMOST GAVE HER. DO YOU THINK WHAT HAPPENS WITH THE PROPERTY CYCLE WILL BE MORE MEANINGFUL WHEN IT COMES TO CENTRAL BANK POLICY SETTING FROM HERE ON FORWARDS? KELLIE: IT IS INTERESTING BECAUSE MICHELLE BULLOCK DISMISSED THE HOUSING MARKET SLOWDOWN WE ARE SEEING. BUT IN THE LAST STATEMENT AND PRESS STATEMENT, THERE WAS A BIT MORE AND GOING TOWARD A SLOWDOWN IN HOUSING. LIKE ON A CITY BASED LEVEL OVER THE PAST YEAR WE HAVE SEEN IN THE LAST MONTH I 7% DECLINE. THAT STARTS TO PASS THROUGH IN TERMS OF THE WEALTH EFFECT FROM THE AUSTRALIAN CONSUMER. A LOT OF MODELING IS SUGGESTING THE RBA CYCLE HAS PEAKED. OUR MODELS WERE SUGGESTING A PEAK RATE OF 4.75%. NOW WE ARE SEEING BROAD-BASED WEAKNESS IN HOUSING, THE CONSUMER AND BUSINESSES. WE ARE SEEING A RISE IN THE UNEMPLOYMENT RATE. ALL THOSE INDICATORS ARE STARTING TO SHIFT TOWARD THE DOWNSIDE IN GROWTH RATHER THAN THE UPSIDE RISK IN INFLATION THAT WE BELIEVE PEAKED IN JUNE. THERE HAS BEEN A BIT MORE BALANCE, AND TORI -- MORE BALANCE COMMENTARY FROM THE RBA. THEY WILL TRY AND DELIVER THAT NARROW PATH AND NOT CRUSH THE ECONOMY. WE BELIEVE THE RBA IS DONE HERE. WE LOOK TO CONTINUE ANY OUTPERFORMANCE TO BUY INTO THE FRONT END OF AUSSIE BONDS. HAIDI: IT IS TRUSTING LOOKING AT THE IMPACT OF RISING YIELDS, HOW QUICKLY THEY ARE RISING. ARE WE YET TO SEE THE FULL IMPACT OF THIS DEBT ISSUANCE BINGE? PERHAPS SOME INVESTOR FATIGUE SETTING IN AS WELL. THIS IS THE IDEA THAT SOMETHING IS SHAPING UP TO BREAK HERE. KELLIE: THAT IS A REAL CONCERN FOR U.S. TREASURIES BECAUSE THE SELLOFF IN TREASURIES, EVEN IN OPTIONS HAVE NOT BEEN TOO SUCCESSFUL. INVESTORS ARE STEPPING BACK, SAYING THERE IS NO LEVEL OF U.S. TREASURIES I AM WILLING TO LEND THE U.S. GOVERNMENT MONEY, SO THE REAL RISK AT TREASURY LEVELS AND U.S. DEBT AT $40 TRILLION IS GROWTH. I THINK WHAT WE MOVE INTO 2027 WHERE GROWTH RATES START TO MODERATE BELOW THAT RATE OF INTEREST, THEN DEBT AT THESE LEVELS ARE NOT SUSTAINABLE. FOR THE U.S. GOVERNMENT AND THE FED, THEY NEED TO CONTINUE TO DELIVER ON THIS HIGH-PRESSURE ECONOMY BECAUSE IF THEY DON'T, THEN DEBT WILL NOT BE SUSTAINABLE AND WE ARE LOOKING AT A U.S. DEBT CRISIS JUST GIVEN THE LEVEL OF DEBT. HAIDI: KELLIE WOOD, HEAD OF FIXED INCOME AT SCHRODERS. THE HISTORICALLY HIGH SPREAD BETWEEN TO YOUR TREASURY YIELDS AND SHORTER INTEREST RATES MAY BE A SIGNAL FOR MARKETS. KASHKARI SPOKE TO BLOOMBERG AS THE FED TRIES TO ADDRESS INFLATION CONCERNS. >> WE WILL DO WHAT WE NEED TO DO TO GET INFLATION BACK DOWN TO OUR TARGET. THE QUESTION IS HOW HIGH? HOW HIGH DO RATES HAVE TO GO? I DON'T KNOW THE ANSWER TO THAT. YOU WERE BOTH JUST TALKING ABOUT MASSIVE DEMAND FOR INVESTMENT CAPITAL. I THINK OF THAT IN THE CONTEXT IN WHAT IT DOES TO THE NEUTRAL RATE. IF THERE IS MASSIVE DEMAND FOR INVESTMENT CAPITAL, THAT HAS TO COME FROM SAVINGS. ULTIMATELY THAT HAS A HIGHER CLEARING PRICE FOR THAT CAPITAL AND THAT MEANS RATES GO HIGHER. >> ONE OF THE QUESTIONS THAT ARISES IS WHAT TIMELINE ARE YOU LOOKING AT FOR NEUTRAL? WE HAVE THIS IN NORMA'S SPEND ON -- ENORMOUS SPEND ON AI WHICH IS BOOSTING THE NEUTRAL RATE. HOW LONG DOES THAT LAST, AND GET YOURSELF OUTSIDE? >> A THEORETICAL INTEREST RATE BALANCES ALL OF THIS OUT WHEN ALL OF THE SHOCKS HAVE PASSED THE ECONOMY. IT IS LIKE THIS NIRVANA STATE WE WILL NEVER EXPERIENCE SOMETIME IN THE FUTURE. I ALSO HAVE A CONCEPT OF A NEAR-TERM NEUTRAL. THEN THE QUESTION IS HOW LONG DOES THIS AI BOOM CONTINUE? ARE THE RETURNS TO THIS INVESTMENT -- DO THEY MATERIALIZE IN THE WAY INVESTORS EXPECT? IF AI PROVES TO BE AS PRODUCTIVE AS PEOPLE HOPE, DENNIS INVESTMENT CYCLE CAN GO ON FOR A LONG TIME. IF IT ENDS UP NOT AS PRODUCTIVE AS THE INVESTORS ARE HOPING, MAYBE IT WON'T GO ON FOR AS LONG. I DON'T KNOW THE ANSWER TO THAT RIGHT NOW. >> FOR A LONG TIME THE FED WAS DRIVING WITH THE YIELD CURVE LOOKED LIKE BECAUSE WE WERE BUYING BONDS. ARE YOU GETTING THE KIND OF CLEANER SIGNAL KEVIN WARSH SAYS HE WANTS IN TERMS OF WHAT THE MARKET THINKS PRICES SHOULD BE? >> A PLACE WHERE I AM FOCUSING, THE LONG AND IS GETTING A LOT OF ATTENTION. THERE IS A BIG GAP BETWEEN THE TWO-YEAR AND SHORT RATES. MY STAFF AND I COMPUTED AN IMPLIED TWO YEAR YIELD FROM THE SCP DOT. THIS IS THE BIGGEST GAP BETWEEN THE ACTUAL TWO YEAR YIELD AND IMPLIED TWO YEAR YIELD. THE ACTUAL TWO YEAR IS AROUND 490. MY IMPLIED IS AROUND 400. THAT IS A LARGE GAP. THERE HAVE BEEN TIMES WHERE THERE WERE GAPS BEFORE. MARKETS ARE PRETTY GOOD WHEN THEY WANT TO SEND A SIGNAL. THEY WILL SEND A SIGNAL REGARDLESS OF WHAT THE FED IS TELLING THEM. POST THE FINANCIAL CRISIS, THE FED THROUGH THE DOT PLOT KEPT THEY WOULD RAISE RATES IN THE MARKET SAID YOU ARE WRONG. TURNED OUT THE MARKETS WERE MORE RIGHT DOWN THE FED WAS. THERE IS A BIT OF LOOKING IN THE MIRROR. I ALSO HAVE A LOT OF CONFIDENCE WHEN MARKETS HAVE A VIEW, THEY ARE NOT SHY ABOUT EXPRESSING THOSE VIEWS. HAIDI: THE MINNEAPOLIS FED PRESIDENT SPEAKING TO BLOOMBERG'S MICHAEL MCKEE. MORE AHEAD ON "THE ASIA TRADE." HAIDI: JAPANESE PRECISION MOTOR MAKER LAID OUT A RECOVERY PLAN TO RESTORE INVESTOR TRUST AFTER REVEALING ALMOST $7 BILLION IN WRITE-DOWNS AND CHARGES LINKED TO AN ACCOUNTING SCANDAL. LET'S GET MORE WITH BREAKING NEWS EDITOR GARETH ALLEN. WE STILL DON'T HAVE THE AUDITOR SIGN OFF. GARETH: YESTERDAY THERE WAS A PRESS BRIEFING AND THE NEW CEO MADE HIS FIRST PUBLIC APPEARANCE. IT WAS INTERESTING BECAUSE WHILE THEY DON'T HAVE THE AUDITOR SIGN OFF, THE AUDITOR WAS SITTING DOWN WITH THE PRESIDENT AS HE SPOKE YESTERDAY. THEY GAVE A PRETTY POSITIVE IMPRESSION THAT THEY WERE WORKING WITH THE COMPANY TO GET THE SIGNOFF. HE SAID QUITE CLEARLY HE WANTS TO GET IT DONE AND THEY ARE TRYING TO GET IT DONE THIS MONTH. THAT IS WITH THE MARKETS BIGGEST CONCERNS ARE. IT HAS BEEN SEEN IN THE BRONZE SPREADS AND SHARE PRICE YESTERDAY. IT CLOSED LIKE 11% DOWN. THE MARKET IS STILL VERY JITTERY. UNTIL THEY CAN GET THAT AUDIT TO SIGN OFF, THE MARKET WILL BE WARY ABOUT THE FUTURE OF NIDEC. SHERY: MORE THAN ¥1 TRILLION OF WRITE-DOWNS AND CHARGES. THEY ARE TRYING TO STRUCTURE THE BUSINESS, THE SALE OF THE COMPONENT UNIT. >> THEY ARE TRYING TO SHORE UP THEIR FINANCES, TO CARLISLE IT IS 103 BILLION YEN OF CASH FLOW. THEY TALKED ABOUT SELLING OFF SOME OF THEIR OTHER LESS PROFITABLE BUSINESSES AND TRYING TO FOCUS ON THE CORE. THE PREVIOUS NIDEC, WE WILL BUY EVERYTHING AND EXPAND M&A EVERYWHERE, NOW THEY ARE TRYING TO GO INTO A CONSOLIDATION PHASE. TALKING ABOUT FORMULATING A NEW MIDTERM PLAN, THAT WILL COME TO. ARE THEY GOING TO GET DELISTED OR BE ABLE TO GET THE ORDER TO SIGN OFF? THE OTHER DAY WHEN THEY GAVE RESULTS, THEY SURPRISINGLY GAVE FORECASTS FOR THE YEAR. THEY SAID THEY ARE LOOKING AT OPERATING PROFIT OF ¥200 BILLION. THEY ARE IN SOME WAYS TRYING TO SAY IT IS BUSINESS AS USUAL, BUT IN OTHERS THERE ARE BIG PROBLEMS OVERHANGING. SHERY: YOU ALLUDED TO THIS ABOUT AS THE FORMER HEAD OF NIDEC TRYING TO BUY EVERYTHING. TELL US ABOUT THE CORPORATE CULTURE AND GOVERNANCE SHE'S. -- AND GOVERNANCE ISSUES. GARETH: AS CENSORSHIP PRICE DROPS, THE MORE ATTRACTIVE IT BECOMES TO THE ACTIVIST INVESTORS LOOMING AROUND THE COMPANY. THEY WILL WANT TO PREVENT THAT FROM HAPPENING AND GET THINGS BACK ON TRACK AS SOON AS POSSIBLE. THERE ARE MANY OUTSTANDING THINGS. THEY SPOKE IN THE RESULTS ON WEDNESDAY AND IN THE PRESS CONFERENCE YESTERDAY ABOUT TRYING TO REMOVE THE FORMER CULTURE AND LOOK AT A NEW CULTURE. I NOTICED ON THE STATEMENT THEY PUT OUT ON WEDNESDAY THAT THEY REMOVED THE SLOGAN THEY USED TO HAVE. IT WAS CONSPICUOUSLY NOT ON A STATEMENT ANYMORE. LITTLE THINGS LIKE THAT, TAKING DOWN POSTERS AND SLOGANS THROUGH THE OFFICE, THEY ARE TRYING TO MOVE AWAY FROM THEIR OLD WAY OF DOING THINGS AND AT LEAST OUTWARDLY MAKE IT LOOK LIKE THEY ARE TRYING TO DO NEW THINGS AT THE COMPANY. SHERY: THE LATEST ON NIDEC. WE WILL WATCH THE STOCK WHEN IT OPENS IN 50 MINUTES TIME. WE ARE WATCHING SOFTBANK. WE GOT THOSE GAINS IN THE LAST COUPLE SESSIONS. INVESTORS, AT LEAST IN EQUITIES -- THEY APPEAR TO BE SHRUGGING OFF WORRIES ABOUT THE COMPANY'S HIGHER BORROWING COSTS. THEY ARE FOCUSING INSTEAD ON POTENTIAL DETERRENCE FROM THEIR BETS ON AI. THE SHARES, TWO SESSIONS OF GAINS. THEY POSTED THEIR FIRST MONTHLY GAIN IN SEPTEMBER IN FOUR MONTHS. OUR JAPAN STOCKS REPORTER JOINS ME WITH THE LATEST. SHARES RALLYING DESPITE THE FACT THAT WE STILL HAVE CONCERNS ABOUT FINANCE AND THE EXPOSURE TO OPENAI, WHEN WE DON'T KNOW WHEN THEY WILL IPO. >> EXACTLY. THIS IS AN INTERESTING EXAMPLE WHERE EQUITIES INVESTORS THINK IN DIFFERENT WAYS. SHARES WENT UP 24% IN SEPTEMBER, THE FIRST MONTHLY RALLY THAT SOFTBANK SAW IN FOUR MONTHS. THE THING WE SAW IN SEPTEMBER, THE BIGGEST ONE FOR SOFTBANK WAS OPENAI'S NEWEST MODEL ASTRA. WHEN USERS -- ASTRA WAS WELL RECEIVED BY USERS. IT BOOSTED INVESTORS CONFIDENCE, A 65 BILLION COMMITMENT TO OPENAI. ON THE HOLDINGS OF SOFTBANK, ARM SHARES, HAD A BIT OF A RECOVERY. IT CREATED THE CONFIDENCE TOO THAT SOFTBANK WILL BE ABLE TO FINANCE THIS MASSIVE PROJECT. SHERY: THE EXPOSURE TO THE AI TRADE IS SPECIFICALLY THROUGH OPENAI. WE TALK ABOUT BILLIONS OF DOLLARS OF INVESTMENT COMMITMENTS. HOW VULNERABLE IS SOFTBANK FROM THAT END? MOMOKA: GREAT QUESTION GIVEN THIS IS THE $65 MILLION WE ARE TALKING ABOUT. WHEN YOU LOOK INTO THEIR PORTFOLIO, THE SOFTBANK STRATEGY IS QUITE DIVERSIFIED. IT GOES MUCH BEYOND THE PURE BETS ON AI DEVELOPERS. ARM SHARES IS THE LOWEST PORTION OF SOFTBANK'S ASSET VALUE RIGHT NOW. ARM DESIGNS CPU, WHICH WILL BE USED ACROSS THE AI SUPPLY CHAIN. THEN AT THE SAME TIME SOFTBANK INVESTS IN ENERGY FIELDS AND PHYSICAL AI. SO WHEN YOU LOOK AT IT, AS LONG AS YOU BELIEVE IN THIS AI GROWTH, SOFTBANK IS WELL-POSITIONED, AT LEAST FROM AN EQUITIES PERSPECTIVE, THAT THEY WOULD GET A CERTAIN LEVEL OF BENEFITS REGARDLESS OF WHO WINS THE RACE. SHERY: THAT IS THE KEY WORD, BELIEF. A LOT OF THESE INVESTMENTS WILL TAKE YEARS TO GENERATE ANY RETURNS. WHAT SHOULD INVESTORS BE WATCHING FOR AS CATALYSTS FOR SOFTBANK? MOMOKA: ALTHOUGH SHARES WENT UP 24% AT SEPTEMBER, IT IS QUITE FAR AWAY FROM ITS PEAK IN JUNE. THE DISCUSSION AROUND OPENAI'S IPO AND HOW MUCH IT IS GOING TO GET VALUE WILL BE THE KEY FOR INVESTORS. INVESTORS AND ANALYSTS I SPEAK TO SEE THE DELAYED IPO OF OPENAI HAS ALREADY BEEN PRICED IN. SO THAT ANY SCHEDULING OF OPENAI WILL BE KEY. WE MIGHT SEE SOME SENSE OF GAUGE FROM ITS COMPETITOR. BLOOMBERG JUST REPORTED THAT IPO COULD COME BEFORE THANKSGIVING AND AN EVALUATION OF DEMAND ANTHROPIC MIGHT SEE MIGHT SET THE SENTIMENT FOR OPENAI AND SOFTBANK. SHERY: BLOOMBERG JAPAN STOCKS REPORTER, GOOD TO HAVE YOU WITH US AS WE FOLLOW THE LATEST FROM THE CORPORATE FRONT. ONE SECTOR WE WILL BE WATCHING, BANKING. BLOOMBERG LEARNED THREE REGIONAL BANKS IN NORTHERN JAPAN ARE SET TO BEGIN MERGER TALKS. SOURCES SAY THEY ARE CONSIDERING A TIE UP AMID GROWING COMPETITION FOR DEPOSITS. THE THREE LENDERS ARE BASED IN AREAS THAT HAVE SOME OF THE STEEPEST POPULATION DECLINES IN JAPAN. APOLLO IS SET TO PROVIDE FINANCING FOR 5 BILLION AI INFRASTRUCTURE PROJECT IN JAPAN'S CHIBA PREFECTURE. IT WOULD ACCELERATE THE PUSH INTO THE ARTIFICIAL INTELLIGENCE SPACE. OPERATIONS ARE SLATED TO START AROUND 2028, REQUIRING AS MUCH AS 400 MEGAWATTS OF ELECTRICITY WITH HELP FROM A NEARBY THERMAL POWER STATION. WE WILL BE TALKING WITH THEIR GLOBAL CEO IN THE NEXT HOUR, SO DO STICK AROUND. THIS IS BLOOMBERG. HAIDI: TAKE A LOOK AT THE ENERGY COMPLEX AS WE CONTINUE TO MONITOR THE NEWS THAT THE U.S. IS MULLING SENDING IT ANOTHER AIRCRAFT CARRIER GROUP TO THE U.S., AS WELL AS FURTHER NAVY AND MARINE TROOPS. 10,000 IN TOTAL TO THE PERSIAN GULF. OIL CLIMBING FOR A THIRD DAY. A BIT OF SOFTNESS IN NAT GAS. SHERY: THIS IS "THE ASIA TRADE." WE ARE COUNTING DOWN TO ASIA'S MAJOR MARKET OPENS. WE SEE ELEVATED OIL PRICES ON RISKS OF ESCALATION IN THE IRAN WAR. WE SAW TREASURIES REBOUND IN THE OVERNIGHT SESSION. A LOT OF HAVEN BUYING, ESPECIALLY AS WE ARE COMING TOWARDS THE U.S. PAYROLLS NUMBER WHICH WILL HAVE BIG IMPLICATIONS FOR ASIAN MARKETS TOO. HAIDI: IF, THAT WEAKNESS CONTINUES THAT CERTAINLY WON'T BE ADDING FURTHER EVIDENCE THE FED NEEDS TO GET MORE HAWKISH. HAVING SAID THAT, HE SPOKE ABOUT THE BIGGEST RISK IS THE ESCALATION WHEN IT COMES TO THE IRAN-U.S. WAR AND ENERGY PRICES. WE HEARD FROM A DALLAS FED EVENT IN THE PAST HOUR, TALKING ABOUT HOW THE NEED TO FIGHT AGAINST INFLATION AND FURTHER RATE HIKES NEEDS TO CONTINUE AT THE FED. SHERY: THAT IS SO IMPORTANT BECAUSE THE RATE DIFFERENTIALS ISSUE WITH JAPAN, WHICH IS WHY I POINTED TO THE U.S. PAYROLLS FOR SEPTEMBER, BECAUSE THAT WILL HAVE IMPLICATIONS FOR THE JAPANESE YEN. AT THE MOMENT WE SAW A BIT OF STRENGTH AGAINST THE GREENBACK AS WE GOT THE TOKYO CPI NUMBERS. WE SAW ACCELERATION OF 2.7% GROWTH YEAR ON YEAR FOR CPI, BUT THAT WAS A LOT TO DO WITH BASE EFFECTS. WE HAVE COST PRESSURES COMING FROM THE IRAN WAR, OIL IMPORTS AND SO ON. A WEAK JAPANESE YEN EXACERBATING THAT. THE NIKKEI LOSING .9%. KEEP AN EYE ON JGB'S BECAUSE WE SAW THE SELLOFF GOING TOGETHER WITH THE GLOBAL DEBT SELLOFF. THE 10 YEAR YIELD AT THE 1990'S HIGH OF 3%. SINCE I MENTIONED THE TREASURY REBOUND, WE WILL CONTINUE TO WATCH THIS SPACE. PRETTY SOLID AUCTIONS IN JAPAN FOR THIS WEEK. LOOK AT SOUTH KOREA. WE GOT INFLATION NUMBERS AS WELL. WE SAW A BIT OF DECELERATION, GROWTH OF 2.8% YEAR ON YEAR. STILL STICKY. WE HAVE THE BANK OF KOREA LOOKING AT THOSE NUMBERS. THEY ALREADY HIKED IN JULY AND. AUGUST PRESSURE ON THE KOSPI DOWN .5%. WE HAVE SEEN FOR AN EQUITIES SELLING CONTINUE IN THIS MARKET. THAT HAS BEEN AN ISSUE FOR SOUTH KOREA. THE KOREAN WON, WEAKNESS AGAINST THE GREENBACK, AND WE ARE LOOKING AT SEMI CONDUCTOR NAMES FOR THE AI TRADE. HAIDI: WE ARE WATCHING -- HE SPOKE ABOUT THE RATE DIVERGENCE WITH TREASURIES AND JGB'S. SAME DYNAMIC WITH US TRILLION AND TREASURY BONDS. -- WITH AUSTRALIAN AND TREASURY BONDS. WE ARE SEEING THIS DIVERGENCE OF MONETARY POLICY EXPECTATIONS FOR THESE TWO ECONOMIES START TO PART. SIMILAR MATURITIES NARROWING. SOME ECONOMISTS EXPECT THAT TO CONVERGE IN THE COMING MONTHS. WE HAVE SEEN THIS BUILDOUT WITH THE ALLURE OF US TRILLION BONDS AFTER WE HAD INFLATION COOL IN AUGUST. THE RBA GOVERNOR EXPERTS AND HOPE THAT FOUR HIKES THIS YEAR WILL BE SUFFICIENT TO PUSH DOWN SOME OF THESE STUBBORN PRICE PRESSURES. WE ARE WATCHING OIL AS THE POTENTIAL THREAT TO THE BROADER GLOBAL INFLATION STORY. OIL PRICES EXTEND GAINS INTO A THIRD STRAIGHT SESSION. 10,000 MORE TROOPS TO THE PERSIAN GULF. NOT A SIGN OF ESCALATION NECESSARILY, BUT A SIGN THAT THEY NEED TO HAVE THAT PREPAREDNESS AND READINESS IN CASE A DECISION IS MADE TO ESCALATE. WE ARE WATCHING DIESEL PRICES WITH THE U.S. INCREASING ITS PRESSURE TO TAP EMERGENCY STOCKPILES. LET'S BRING IN THE HEAD OF ASIAN EQUITY RESEARCH AT UBP. AS THERE IS THIS CONFLUENCE OF BROADER MACRO EVENTS AND YOU POLITICAL RISKS, WE SEE INVESTORS FIRMLY PY FOCUSED ON PUSHING THE CHIP AND TECH TRADE HIGHER. >> YEAH, GOOD MORNING. WE ALSO LIKE THE TECH TRADE. AI, PARTICULARLY THE INFRASTRUCTURE BUILDOUT STAGE WHERE WE ARE NOT AT THE BEGINNING, BUT WE ARE WELL INTO THAT NEW PARADIGM. WE SEE CAPEX FROM THE BIG HYPERSCALERS UP THIS YEAR. THAT WILL STILL GROW INTO NEXT YEAR. WE THINK ON ANY WEAKNESS POTENTIALLY INTO THE MIDTERMS IN NOVEMBER THAT WE WOULD BE ADDING TO THAT EXPOSURE TO THAT TRADE. HAIDI: IT IS STILL ACROSS THE QUINTESSENTIAL TECH MARKETS IN ASIA, KOREA, JAPAN, TAIWAN. DO YOU HAVE A PREFERENCE OUT OF THOSE? KIERAN: FOR US, WE ARE GETTING MORE INTERESTED IN JAPAN, ONE AREA -- WE FOCUS MORE ON THE BIG SEMI, MEMORY NAMES IN TSMC, BUT A LARGER PART OF THE ECOSYSTEM IS IN JAPAN. WE HAVE BEEN EDGING UP THERE A BIT IN TERMS OF OUR GLOBAL EXPOSURE. ALSO IN JAPAN WE STILL LIKE THE BANK STORY WHERE OBVIOUSLY THE MOST DIRECT BENEFICIARIES OF RISING INTEREST RATES, AS SPREADS RISE AND THEY ARE ABLE TO EARN INCOME ON THAT. ALSO THE BANKS IN JAPAN HAVE LONG BEEN LEADERS IN CORPORATE GOVERNANCE, LONG BEFORE THE JPX WAS PUSHING THAT. OF COURSE THERE IS THE FACT THAT THERE IS A LOT OF REGIONAL BANKS IN JAPAN, WHERE IT HAS BEEN A POTENTIAL STORY FOR A LONG TIME. POSSIBLY WE HAVE SOME CONSOLIDATION. YOU HAVE THE NEW BANK TRYING TO ENCOURAGE SOME OF THIS. HAIDI: THE BANK STRESS STORY IS INTERESTING. YOU EXPECT THAT THE PASS-THROUGH TO ASIAN BANKS GIVEN THE DYNAMIC IN EUROPE? KIERAN: I THINK THE BANKS IN ASIA, PARTICULARLY JAPAN -- IT IS A STRAIGHT OUT INTEREST-RATE STORY. THE DERATING WE HAVE SEEN IN TERMS OF U.S. BANKS, WHERE WE ARE A COUPLE WEEKS AHEAD OF EARNINGS, WHICH WILL BE POSITIVE. MANAGEMENTS WILL INCREASE GUIDANCE FOR NET INTEREST INCOME. WE HAVE AN EARLY READ INTO IB FEES AND TRADING REVENUE, WHICH WILL BE STRONG AS WELL. I GUESS THE POSITIVE RE-RATING WE SAW OVER THE SUMMER HAS BEEN ABOUT HALF UNDONE OVER THE LAST MONTH. WE THINK THAT IS SETTING UP FOR A SHORT-TERM OPPORTUNITY. DOES IT FEED THROUGH INTO THE ASIA BANKS? WE TALKED ABOUT THE JAPANESE BANKS. THE SINGAPORE BANKS IS ANOTHER AREA WE ARE FOCUSED ON. THEY ARE BY FAR THE BIGGEST BENEFICIARY OF EFFORTS TO IMPROVE MARKET LIQUIDITY AS THE BIGGEST PLAYERS. THEY ARE HELPING THEMSELVES AS WELL WITH A BIG FOCUS ON WEALTH MANAGEMENT. HAIDI: WE TALKED A BIT ABOUT THE BANKS AND OBVIOUSLY THE OPPORTUNITIES. YOU SAID BY THE MIDTERMS. CAN YOU EXPAND IN TERMS OF WHERE YOU SEE THE UPSIDE OR THE POTENTIAL RISK OF THE T DOWNSIDE? KIERAN: I HAVE DONE A BIT OF WORK ON ALL THE MIDTERM ELECTIONS SINCE 1950. EVERY SINGLE TIME MARKETS HAVE BEEN HIGHER SIX MONTHS LATER BY A MEDIAN OF 15%. WE HAVE A POSITIVE VIEW DESPITE WHAT HAPPENS. IN ALL THOSE INSTANCES SINCE 1950 THERE HAS BEEN UNIQUE CONDITIONS, JUST LIKE AT THE MOMENT, BUT IT SUGGESTS WE SHOULD BE CONSTRUCTIVE INTO THAT EVENT. THERE CAN BE VOLATILITY AHEAD, AND WE WOULD BE LOOKING TO BUY THAT VOLATILITY RATHER THAN SELL INTO IT. OUR PREFERENCE IS WITHIN THE U.S. WE LIKE TECH BECAUSE OF THE EARNINGS GROWTH, OVER 30% THIS YEAR. MORE THAN DOUBLE WHAT THE MARKET EXPECTED AT THE BEGINNING OF THE YEAR. WE THINK THAT IS A GOOD SET UP. THAT IS WHY WE SAY BY THE MIDTERMS. HAIDI: THE HEAD OF ASIAN EQUITY RESEARCH AT UBP. MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. ♪ SHERY: THE U.S. IS SENT TO BE PREPARING A MAJOR MILITARY BUILDUP IN THE MIDDLE EAST, WITH AN OFFICIAL TELLING BLOOMBERG IT MAY DEPLOY A THIRD AIRCRAFT CARRIER GROUP WITH 10,000 SAILORS AND MARINES. OUR BLOOMBERG EDITOR JOINS US IN THE STUDIO. WE COULD SEE AN ESCALATION. >> LOOKS LIKE WE WILL HAVE THE THIRD CARRIER GROUP. THE U.S. HAS ABOUT 50,000 TROOPS IN THE REGION NOW, TOW AIRCRAFT CARRIER STRIKE GROUPS. THE IDEA BEHIND THIS IS TO GIVE THE U.S. MORE OPTIONS IF DIPLOMACY FAILS. IF YOU LOOK AT THE TIMING, I THINK WE SEE THE U.S. STRATEGY OF KEEPING THE ECONOMIC PRESSURE ON IRAN, TRYING TO AVOID RENEWED STRIKES WHICH WOULD INCREASE MILITARY TENSIONS AHEAD OF THE NOVEMBER MIDTERMS AND PERHAPS SEEING THE MILITARY OPTION COMING AFTER THE NOVEMBER TERMS -- NOVEMBER MIDTERMS. SHERY: THE KEY ISSUES HAVE NOT BEEN RESOLVED. WE TALK ABOUT HORMUZ, BUT THE NUCLEAR ISSUE HAS BEEN KEY FOR DECADES. ANY INDICATION RIGHT NOW IF WE COULD SEE ANY PROGRESS? JON: WE HAVE SEEN INDICATION THAT IRAN'S FOREIGN MINISTER HAS SAID PERHAPS THE COUNTRY COULD LET NUCLEAR INSPECTORS BACK INTO THE COUNTRY. FOR THE JUNE MEMORANDUM OF UNDERSTANDING, THIS WAS A POINT OF CONTENTION. THE U.S. SAID IRAN HAD AGREED, IRAN SAID IT HADN'T. FOR IRAN, THIS WOULD BE A WAY TO GET THE ECONOMIC PRESSURE OFF. THEY HAVE THE BLOCKADE GOING ON. THE U.S. DEMANDED SOME CONCESSIONS ON THE NUCLEAR ISSUE. IRAN MADE THE PROPOSAL FOR THE SEVEN-DAY OPENING OF THE STRAIT OF HORMUZ. THE U.S. WANTED MORE IN TERMS OF NUCLEAR. PERHAPS THIS COULD BE A BARGAINING POINT THAT COULD MOVE THE NEGOTIATIONS FORWARD. SHERY: WAS THE ECONOMIC SITUATION IN IRAN RIGHT NOW? JON: IT IS DIRE. INFLATION IS AT 90%. THE ECONOMY IS UNDER ENORMOUS STRAIN, BUT THIS IS A REGIME THAT CRUSHES DISSENT OF PEOPLE THAT WERE PROTESTING ABOUT THE ECONOMIC SITUATION. IT IMPRISONS DISSENTERS. IT'S SHOT PROTESTERS. THE ECONOMIC TOLL IS THERE, BUT THE REGIME CAN STAND A LOT OF STRAIN. SHERY: AN ECONOMIC TOLL IN THE U.S. AS WELL TOWARD THE MIDTERMS, AND YOU HAVE INFLATION, THE COST OF LIVING RISING. HOW DOES THIS FACTOR INTO THE U.S. ELECTIONS? JON: HAVING THIS COME LATER ON, PERHAPS MILITARY STRIKES AFTER, NOVEMBER IT DECREASES SOME OF THE PRESSURES ON SUPPLIES IN THE MIDDLE EAST. IF THERE ARE RENEWED MILITARY TENSIONS, IRAN STRIKES AT U.S. MILITARY ALLIES IN THE REGION, HITTING INFRASTRUCTURE IN PLACES LIKE SAUDI ARABIA, UAE, WHICH DRIVES OF ENERGY PRICES. DRIVING UP ENERGY PRICES AHEAD OF THE U.S. MIDTERM IS NOT SOMETHING TRUMP AND REPUBLICANS WANT TO SEE ONE AFFORDABILITY IS SUCH AN ISSUE IN NOVEMBER. HAIDI: LET'S LOOK AT THE OTHER TOP GLOBAL HEADLINES WE ARE FOLLOWING. ISRAEL SAYS THE FLIGHT DUBAI PILOT WHO TRIED TO CRASH A BOEING CARRYING 174 PASSENGERS WAS FROM OMAN. PRIME MINISTER NETANYAHU SAID THE ATTACK HAD UNDERGONE RADICAL ISLAMIST INDOCTRINATION. ISRAEL HAS NO DIPLOMATIC RELATIONS WITH OMAN, RAISING QUESTIONS ABOUT HOW AN OMANI MONEY PILOT ENDED UP ON A FLIGHT TO TEL AVIV. SOUTH KOREA HAS PUSHED BACK ON THE TRUMP ADMINISTRATION'S ANNOUNCEMENT THAT IT IS INVESTING $54 MILLION IN A LIQUEFIED NATURAL GAS PROJECT IN ALASKA. KOREA'S ENERGY MINISTER SAID ONLY IF IT IS ECONOMICALLY FEASIBLE. EUROPEAN NATIONS HAVE HELD EMERGENCY TALKS ON HOW TO RESPOND TO U.S. PRESSURE TO RELEASE STRATEGIC FUEL RESERVES. ACCORDING TO A MEMO, WASHINGTON HAS ASKED AT LEAST ONE EU MEMBER TO RELEASE DIESEL INVENTORIES TO AVOID AN EXPORT BAN. TREASURY SECRETARY SCOTT BESSENT POSTED THAT AMERICA IS DOING ITS PART AND ALLIES MUST MATCH THEIR COMMITMENTS WITH ACTION. U.S. TRADE REPRESENTATIVE JAMIESON GREER IS AMONG TRUMP ADMINISTRATION OFFICIALS PRESSURING THE EU TO RELEASE DIESEL FUEL OBSERVES -- FUEL RESERVES. AS HE HOSTS G20 TRADE MINISTERS, GREER TOLD US THE U.S. DEAL WITH THE BLOC IS PRODUCING RESULTS. >> ON THE ONE HAND WE HAVE AN AGREEMENT WE CONCLUDED LAST SUMMER WITH THE EUROPEAN UNION, AND THE EUROPEANS EXECUTED ON A KEY PART OF THAT. THEY HAVE GIVEN US DUTY FREE QUOTAS FOR IMPORTANT AG PRODUCTS. OUR TRADE DEFICIT WITH THE EU HAS CUT DOWN OVER THE PAST YEAR. THIS IS ONE OF THE ECONOMIES THAT HAS BEEN HIT BY EXCESS CAPACITY AND PRODUCTION IN OTHER COUNTRIES, BUT AT THE SAME TIME THEY HAVE NOT TAKEN SUFFICIENT MEASURES TO MANAGE IN THIS. WHETHER THEY HAVE EMPTY FACTORIES BECAUSE OF THEIR OWN POLICY DECISIONS, ALL I KNOW IS IT AFFECTS US. EMPTY FACTORIES REDUCES INCENTIVE TO INJECT MORE INVESTMENT INTO THE SYSTEM. THERE. IS A FINITE AMOUNT OF DEMAND AS LONG AS EUROPE IS SLUGGISH, WHETHER BECAUSE OF THEIR OWN POLICY CHOICES OR BECAUSE THEY ARE SUFFERING FROM A FLOOD OF CHINESE IMPORTS, THAT'S ANOTHER PROBLEM. IF THEY DON'T ACT, WE WILL. >> HAS THE DIESEL EXPORT BAN COME UP WITH THESE COUNTERPARTS YOU ARE MEETING WITH IN MILWAUKEE? >> IT COMES UP ON A BIBLE LATERAL BASIS. IT IS NOT A TOPIC AND THE PLENARY SESSIONS. WE HAVE A NUMBER OF COUNTRIES WHO TALKED ABOUT THE DIESEL ISSUE. THE PRICES ON DIESEL ARE HIGH. IS THIS A ONE-TIME SPIKE OR SOMETHING LONGER? OUR SENSE IS THIS IS A ONE-TIME SPIKE. OUR SENSE WOULD BE THE EUROPEANS SHOULD RELEASE SOME OF THESE FUEL RESERVES IF THEY FEEL THEY ARE HAVING A SPIKE. THE PRICE IS HIGHER IN EUROPE. >> THERE IS A REUTERS REPORT THAT U.S. OFFICIALS TOLD GERMANY AND FRANCE THEY NEED TO DO THIS. HAVE YOU DISCUSSED THAT WITH YOUR COUNTERPART? >> I HAVE. I SPOKE WITH MY FRENCH COUNTERPART YESTERDAY. NEITHER HERE NOR I ARE THE ENERGY MINISTERS, BUT WE ARE TRADE MINISTERS. I LET HIM KNOW WE WOULD LOVE TO HAVE A COLLABORATIVE RESPONSE TO THIS. I WILL MEET WITH MY EUROPEAN UNION OFFICIALS TODAY AND CARRY THE SAME MESSAGE. >> U.S. TRADE REPRESENTATIVE JAMIESON GREER SPEAKING WITH BLOOMBERG'S ANNMARIE HORDERN. THE START OF TRADING THIS FRIDAY SESSION IN EUROPE, WE DID SEE EUROPEAN BANKS COMING UNDER STRESS, SUGGESTING WE COULD SEE THE OTHER SIDE OF THIS AI TRADE PLAY OUT. POTENTIALLY THAT HAS IMPLICATIONS FOR THE SAME SECTOR IN ASIA. EURO STOXX 50 FUTURES LOOKING NEGATIVE AT THIS POINT. WE ARE WATCHING THE ENERGY COMPLEX WHEN IT COMES TO NET GAS AND DIESEL PRICES GIVEN THE PRESSURE THAT APPARENTLY WE ARE HEARING FROM THE U.S. IN TERMS OF STRATEGIC STOCKPILES. SHERY: IT IS A TIGHT GLOBAL DIESEL MARKET. WE ARE HEARING THOSE REPORTS FROM THE U.S. ON EUROPE. IT LOOKS LIKE WHEN IT COMES TO ASIA, ASIAN REFINERS COULD BE WEATHERING THIS DIESEL MARKET CRISIS A BIT BETTER THAN EUROPE. WE ARE LOOKING AT KOREAN REFINERS. OIL RETRACING SOME OF THESE HAVE HER PERCENT LOSSES IN THE PREVIOUS SESSION. SK INNOVATION GAINING GROUND. REFINERS ACROSS ASIA HAVE BEEN ABLE TO SECURE MUCH OF THEIR CRUDE OIL FEEDSTOCK ACCORDING TO ANALYSTS. FOR THE COMING MONTHS THEY ARE EXPECTED TO KEEP MAKING FUELS EVEN WITH THESE CONTINUED DISRUPTIONS IN ENERGY MARKETS. SK INNOVATION RAISED TO NEUTRAL THIS WEEK AT CITI. WE HAVE MORE AHEAD. THIS IS BLOOMBERG. SHERY: TAKE A LOOK AT TREASURIES EARLY IN THE ASIAN SESSION. WE ARE SEEING PERHAPS A BIT OF A DIP, BROADLY UNCHANGED. THIS AFTER WE SAW THE TREASURY SPACE REBOUND IN THE OVERNIGHT SESSION. HAVEN BUYING WAS THE WORD. 10 YEAR YIELDS PULLING BACK FROM 24 YEAR HIGHS, NOT NECESSARILY A LOT TO DO WITH THE U.S. FUNDAMENTALS. . IT WAS MOSTLY EUROPEAN DEBT STRESS THE U.K. 30 YEAR YIELD TOPPING 6% FOR THE FIRST TIME SINCE 199 8. WE HAVE FISCAL POLITICAL CONCERNS IN FRANCE, NOT TO MENTION LESS HAWKISH FED COMMENTARY. THE FED OCTOBER HIKE ON COLLAPSED FROM 70% EARLIER THIS WEEK TO AROUND 20%. WE HAD ALREADY HEARD FROM THE LIKES OF JOHN WILLIAMS. NOW WE ARE HEARING FROM THE TWO VICE CHAIRS PUSHING BACK AGAINST AN IMMEDIATE RATE HIKE. WE ALSO HEARD FROM NEEL KASHKARI, WHO SEEMED TO REMAIN HAWKISH. THE MINNEAPOLIS FED PRESIDENT SAYING THE HISTORICALLY HIGH SPREAD BETWEEN TWO YEAR TREASURY YIELDS AND SHORTER INTEREST RATES COULD BE A SINGLE FOR MARKETS. TRADERS LOOK FOR CLUES ABOUT THE FED'S PLAN TO ADDRESS INFLATION CONCERNS. >> WE WILL DO WHAT WE NEED TO GET INFLATION BACK DOWN TO OUR TARGET. THE QUESTION IS HOW HIGH DO RATES HAVE TO GO? I DON'T KNOW THE ANSWER. YOU WERE BOTH TALKING ABOUT MASSIVE DEMAND FOR INVESTMENT CAPITAL. I THINK ABOUT THAT IN CONTEXT OF WHAT IT DOES TO THE NEUTRAL RATE. IF THERE IS MASSIVE DEMAND FOR INVESTMENT CAPITAL, THAT HAS TO COME FROM SAVINGS. ULTIMATELY THAT HAS A HIGHER CLEARING PRICE FOR THAT CAPITAL AND THAT MEANS RATES GO HIGHER. >> ONE OF THE QUESTIONS THAT ARISES IS WHAT TIMEFRAME ARE YOU LOOKING AT FOR NEUTRAL? WE HAVE THIS ENORMOUS SPEND ON AI WHICH IS BOOSTING THE NEUTRAL RATE. HOW LONG DOES NOT LAST? CAN YOU GET YOURSELF OFF SIDE BY MOVING TOO MUCH? >> THE SCP HAS THIS LONG RUN DOT WHICH IS THEORETICAL, A THEORETICAL INTEREST RATE WHICH BALANCES THIS OUT WHEN THE SHOCKS HAVE PASSED THE ECONOMY. IT IS LIKE THIS NIRVANA STATE WE WILL NEVER EXPERIENCE SOMETIME IN THE FUTURE. I HAVE A CONCEPT OF A NEAR-TERM NEUTRAL. THE QUESTION IS HOW LONG DOES THIS AI BOOM CONTINUE? ARE THE RETURNS TO THIS INVESTMENT -- DO THEY MATERIALIZE THE WAY INVESTORS EXPECT? IF AI PROVES TO BE AS PRODUCTIVE AS PEOPLE HOPE, THIS INVESTMENT CYCLE COULD GO ON FOR A LONG TIME. IF IT ENDS UP NOT AS PRODUCTIVE AS THE INVESTORS ARE HOPING, MAYBE IT WON'T GO ON FOR AS LONG. >> FOR A LONG TIME THE FED WAS DRIVING WHAT THE YIELD CURVE LOOKED LIKE BECAUSE WE WERE BUYING BONDS. ARE YOU GETTING THE KIND OF CLEANER SIGNAL THAT KEVIN WARSH SAYS HE WANTS IN TERMS OF WHAT THE MARKET THINKS PRICES SHOULD BE? >> A PLACE WHERE I AM FOCUSING, THERE'S A BIG GAP BETWEEN THE TWO-YEAR AND SHORT RATES. MY STAFF AND I COMPUTED AN IMPLIED TWO YEAR YIELD FROM THE SCP DOT. THIS IS THE BIGGEST GAP BETWEEN THE ACTUAL TWO YEAR YIELD AN IMPLIED TWO YEAR YIELD FROM THE SCP. ACTUAL TWO YEAR IS AROUND 490. MY IMPLIED TWO YEAR YIELD IS AROUND 400. THAT IS A VERY LARGE GAP. THERE HAVE BEEN OTHER TIMES WHERE THERE WERE GAPS BEFORE. MARKETS ARE PRETTY GOOD WHEN THEY WANT TO SEND THE SIGNAL. THEY WILL SEND A SIGNAL REGARDLESS OF WHAT THE FED IS TELLING THEM. IF YOU GO BACK AND POST THE FINANCIAL CRISIS, THE FED AND DOT PLOT KEPT FORECASTING THEY WOULD RAISE RATES IN THE MARKETS SAID YOU ARE WRONG. TURNED OUT THE MARKETS WERE MORE RIGHT THAN THE FED WAS. THE MARKETS ARE LOOKING AT US, WE ARE LOOKING AT THE MARKETS. I HAVE CONFIDENCE THAT MARKETS ARE NOT SHY ABOUT EXPRESSING THOSE VIEWS. HAIDI: THE MINNEAPOLIS FED PRESIDENT SPEAKING TO BLOOMBERG'S MICHAEL MCKEE. LET'S GET YOU CAUGHT UP WITH THE TOP CORPORATE STORIES. BLOOMBERG LEARNED ANTHROPIC IS SEEKING TO GO PUBLIC AS SOON AS MID-NOVEMBER. MARKETING FOR ITS IPO KICKED OFF IN THE COMING WEEKS. THAT WOULD PUT IT IN LINE TO TRADE BEFORE THE THANKSGIVING HOLIDAY. SOURCES SAY INVESTORS BELIEVE IT IS A FAIR VALUATION IN THE .8 TRILLION TO $2 TRILLION RANGE. BLOOMBERG LEARNED THREE REGIONAL BANKS IN WITH ARE JAPAN ARE SET TO BECOME MERGER TALKS. SOURCES SAY THEY ARE CONSIDERING A TIE UP AMID GROWING COMPETITION FOR DEPOSITS. THE THREE LENDERS ARE BASED IN AREAS THAT HAVE SOME OF THE STEEPEST POPULATION DECLINES IN JAPAN. MATTEL CHAIRS SURGED AFTER THE WALL STREET JOURNAL REPORTED TAKEOVER INTERESTS. THE JOURNALS SAYS AUTHENTIC DISCUSSED THE POTENTIAL OF HER VALUING MATTEL AT MORE THAN $20 A SHARE. AUTHENTIC REPORTEDLY WEIGHS AN IPO NEXT YEAR. MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. ♪ SHERY: BRENT STILL ABOVE THE 02 A BARREL LEVEL. WE CONTINUE TO WATCH WASHINGTON AND TEHRAN FAILING TO MAKE HEADWAY INTO LONG LASTING PEACE AGREEMENT. WE ARE GETTING REPORTS THAT POTENTIALLY WE COULD SEE THE U.S. BUILDING THEIR MILITARY AROUND THE MIDDLE EAST AGAIN. THE PR THEOBLEM HAS BEEN DIESEL. THE BIGGER MACRO INFLATION RISK, TIGHT MARKETS, TENSION IN EUROPE. U.S. RETAIL DIESEL AT NEW HIGHS. NATURAL GAS FUTURES AT THE MOMENT, YOU SEE THAT DOWNSIDE. WE CONTINUE TO SEE THE TIGHT MARKET. LET'S GET INTO THE ENERGY SECTOR. JAPAN'S LARGEST -- A 5 BILLION AI INFRA STRUCTURE PROJECT IN JAPAN. THE INITIATIVE AIMS TO STRENGTHEN THE COUNTRY'S DOMESTIC AI CAPABILITIES WITH APOLLO GLOBAL MANAGEMENT SET TO PROVIDE FINANCING. JOINING US TO DISCUSS IS JERA'S GLOBAL CEO. GOOD TO SEE YOU AGAIN. CONGRATULATIONS ON THIS PROJECT IN CHIBA, AND WITH POWER CAPACITY OF UP TO 400 MEGAWATTS. TELL US WHAT STANDS OUT IN THIS DEAL. >> FIRST OF ALL, NICE TO MEET YOU AGAIN, SHERY. THANK YOU FOR HAVING ME. YESTERDAY WE ANNOUNCED A CORRELATION PACKAGE. WHY THIS IS SO IMPORTANT? THREE MONTHS AGO I FIRST MET WITH MICHAEL DELL AND THEN CEO OF RHAELM, AGREEING ON A COUPLE THINGS. FIRST IS LET'S STANDARDIZE THE AI DATA CENTER FROM ENGINEERING AND COMMERCIAL ARRANGEMENT. SECOND IS IF YOU WANT TO DO AN AI DATA CENTER, YOU NEED LNG FOR QUICK SOLUTIONS. AI DATA CENTER VALUE CHAIN IS VERY LONG. NOT ONLY A IDENT A CENTER BUT POWER STATION, LNG RECEIVING TERMINALS, LNG SHIPPING ARRANGEMENT, AND GLOBAL ENERGY PROCUREMENT. SOMEBODY NEEDS TO INTEGRATE THE WHOLE PROCESS AND STANDARDIZE AND RUN IT. THREE COMPANIES WILL COVER A WHOLE SPECTRUM OF THE VALUE CHAIN. SHERY: THIS STARTS IN CHIBA AND YOU ARE HOPING TO EXPAND THIS OVERSEAS. YUKIO: THE CONCEPT IS GREAT. ONCE WE CAN STANDARDIZE, WE CAN REPEAT THE PROJECT SCALE, THE DATA CENTER, IN A QUICK MANNER. IF WE DON'T HAVE A CONCRETE PROJECT TO REALIZE THE CONCEPT, IT IS JUST TALK AND TALK. JERA DECIDED TO PROVIDE THE BEST LOCATION IN TOKYO, WHICH IS CHIBA. THERE IS LAND TO BUILD THE DATA CENTER. THE GREAT CONNECTION IS ALREADY THERE. WHOLE INFRASTRUCTURE IS THERE. THE KEY IS SPEED TO POWER. THE HYPERSCALERS WANT TO HAVE POWER WITHIN ONE OR TWO YEARS. SHERY: WHAT DOES IT MEAN FOR JERA? DOES THAT CHANGE THE TYPE OF BUSINESS YOU ARE IF YOU ARE NOT JUST A POWER PROVIDER BUT AN ACTUAL AI INFRASTRUCTURE PLAYERS YOURSELF? YUKIO: THAT IS A GOOD QUESTION. WE ARE SITTING ON A POWER SUPPLY SIDE AND LNG VALUE SIDE. WORKING WITH A DATA CENTER PLAYER LIKE A DELL TECHNOLOGIES AND RHAELM, WE SIT TOGETHER. EXCHANGE THE WHOLE INFORMATION TO CONNECT THE DATA CENTER SITE AND LNG VALUES NIGHT. IT SHOWED. WE ARE SITTING ON THE POWER SUPPLY SIDE. SHERY: THE FACT THAT YOU ARE PUTTING SO MUCH ENERGY INTO THE AI INFRASTRUCTURE PLAY RIGHT NOW, IS THAT COMING FROM THE CONFIDENCE THAT AI DEMAND WILL BE SUSTAINABLE AND DURABLE IN JAPAN AND THE REST OF THE WORLD? RIGHT NOW THERE IS A LOT OF SKEPTICISM ABOUT WHETHER THESE WILL LEAD TO REAL RETURNS SOON ENOUGH. YUKIO: IF YOU LOOK AROUND THE WORLD WE ALL KNOW THE U.S. AND CHINA ARE THE EPICENTER OF GROWING DATA CENTER DEMAND. THE REST OF THE WORLD IS JUST BEGINNING. SAME IN ASIA. DEMAND WILL PICK UP FROM NOW. IN ASIA, OUTSIDE CHINA, JAPAN MAY BE THE BIGGEST DATA CENTER POTENTIAL DEMAND CENTER. IF YOU SEE JAPAN, GREATER TOKYO IS A 70% OF THE POTENTIAL DATA CENTER DEMAND. AND FROM NOW UNTIL THE NEXT 10 YEARS IT MAY REACH 10 GIGAWATTS. SHERY: OUTSIDE OF JAPAN, WHERE IS THE BIGGEST POTENTIAL FOR JERA? WHICH MARKETS? YUKIO: OUTSIDE JAPAN? SOUTH KOREA, MALAYSIA, AND MANY OTHERS TRYING TO BUILD. SHERY: WHEN WE TALK ABOUT THE TIMELINE OF THIS CHIBA PROJECT, WHEN DO YOU EXPECT TO REPLICATE IT SOMEWHERE ELSE? YUKIO: OUR TARGET FOR FIRST PROJECT, CHIBA, 400 MEGAWATT, IT COSTS $50 BILLION. THIS IS THE BIGGEST ASIAN SINGLE DATA CENTER PROJECT NOW. WE TRIED TO START OUR POWER SUPPLY FROM 2028. IT IS VERY QUICK. WITHIN TWO YEARS TIME. IN TOKYO BAY WE HAVE MORE THAN 10 THERMAL POWER PLANTS HAVING SOME SPACE TO REPEAT THE SAME THING. WE CAN GROW QUICKLY TOWARD THREE OR FOUR GIGAWATT EASILY. ONE GIGAWATT REQUIRES $40 BILLION INVESTMENT. FOUR GIGAWATT IS A 50 BILLION INVESTMENT. SHERY: TELL US ABOUT THE FINANCING SITE BECAUSE APOLLO IS INVOLVED AS WELL. WOULD FUTURE PROJECTS INVOLVE THESE PE COMPANIES COMING IN AS WELL? YUKIO: WE PROVIDE LNG VALUE CHAIN SIDE. DELL PROVIDE DATA CENTER FACILITIES SIDE. RHAELM IS THE LEADING DATA CENTER BUILDER AND OPERATOR. BUT IT IS A HUGE CAPITAL INVESTMENT. WE NEED MONEY. WE NEED TO SOMEBODY TO SUPPORT OUR CAPITAL INVESTMENT. APOLLO IS BACKING RHAELM'S DATA CENTER CONSTRUCTION. WE ARE HAPPY TO SEE MORE OF THOSE BIG CAPITAL INVESTORS COMING INTO OUR TEAM. SHERY: AT WHAT POINT WILL YOU KNOW THE BET IS PAYING OFF? YUKIO: OUR SIDE IS PROVIDING POWER. SHERY: 2028? YUKIO: YEAH, 24/7 POWER SUPPLY. THAT ONE IS ALMOST THE SAME FOR POWER SUPPLY TO IPP PROJECTS AROUND THE WORLD. USUALLY IT TAKES SIX, SEVEN YEARS TO PAY OFF. THE DATA CENTER ONE IS SOMETHING WE DON'T KNOW STILL. IT DEPENDS ON THE CUSTOMERS, THAT DEPENDS ON THE CONSCIENCE OF ITS CUSTOMERS. THOSE NEGOTIATIONS ARE RHAELM'S RESPONSE ABILITY. HAVING SAID THAT, MANY HYPERSCALERS ARE TRYING TO FIND THE BEST PROJECT IN THE GREATER TOKYO AREA. WE ARE VERY CONFIDENT THAT DELL TECHNOLOGY, RHAELM, AND JERA, HAVING VALUE CHAIN INTEGRATION BACKED BY APOLLO, I THINK WE ARE CONFIDENT WE CAN FIND GOOD CUSTOMERS. SHERY: BEFORE I LET YOU GO, THE GLOBAL ENERGY SITUATION RIGHT NOW, I MENTIONED ELEVATED OIL PRICES, TIGHTNESS IN THE DIESEL SPACE AS WELL. THE TENSION APPARENTLY BETWEEN THE U.S. AND EUROPE WHEN IT COMES TO DIESEL SUPPLIES. WE HAVE BEEN TALKING ABOUT OIL AND IRAN, BUT NOW WE SEE IT ON THE PRODUCT SIDE OF THINGS. YOU ARE AN INDUSTRY VETERAN. WHERE DO YOU SEE THE BIGGEST VULNERABILITY AND WHERE DO YOU EXPECT TO SEE IT IN THE MONTHS TO COME? YUKIO: TODAY WE ARE ON THE LNG SIDE AND GAS BUSINESS AROUND THE WORLD. TODAY'S JKN IS 26. TTF IS AROUND $25. ONE YEAR AGO IT WAS 0, SO MORE THAN DOUBLE. VERY EXPENSIVE. THE MARKET PARTICIPANTS WORRY ABOUT THIS COMING WINTER. BEFORE WINTER THE PRICE IS ALREADY GOING TO 25. A COUPLE THINGS. HORMUZ STRAIT SITUATION LIKELY CONTINUES, SO WE DON'T EXPECT QATAR LNG COMING BACK TO THE MARKET SOON. THEN WE ARE ENTERING THE WINTER. IN EUROPE, GAS STORAGE IS HISTORICALLY LOW. WE DON'T KNOW WHAT WOULD HAPPEN ABOUT BANNING THE GAS IMPORT FROM RUSSIA FROM JANUARY 1 NEXT YEAR. THOSE ELEMENTS SUGGEST THAT THE STOCK PRICE WILL GO UP FURTHER. SHERY: DO YOU HAVE A PEEK GIVEN THE UNCERTAINTY AROUND HORMUZ? YUKIO: IN THE UKRAINE SITUATION THREE OR FOUR YEARS AGO, WE SEE THE SPOT PRICE GOING TO 45 AND PEEKING 70. IN ASIAN LNG DEMAND JUST DISAPPEARED. THAT IS AN ADJUSTMENT MECHANISM. BUT EUROPE, IF THEY HAVE A WINTER, THEY HAVE TO PROVIDE LNG TO PROVIDE HEATING ENERGY FOR PEOPLE. EUROPE MAY BE IN A DIFFICULT SITUATION. HAIDI: ALWAYS INTERESTING TO HAVE THESE CONVERSATIONS. GLOBAL CEO AND CHAIR AT JERA JOINING US IN THE TOKYO STUDIO. PLENTY MORE AHEAD. YOU ARE WATCHING BLOOMBERG. SHERY: NIKE SHARES FELL IN LATE TRADE AFTER WEAKER THAN EXPECTED RESULTS, AND A WARNING IF SALES SLUMP IT IS SET TO GET WORSE. REVENUE AND EARNINGS BOTH MISSED ESTIMATES WITH A SHARP DROP IN GREATER CHINA SALES. HOW SERIOUS OF A DRAG IS THE CHINA SITUATION RIGHT NOW? >> I THINK IT HAS BECOME ABUNDANTLY CLEAR CHINA IS THE REAL PROBLEM CHILD FOR NIKE. THIS IS THE GEOGRAPHIC AREA THAT THE COMPANY WILL HAVE TO WORK ON FIXING THE MOST. ITS REVENUES IN THE MOST RECENT QUARTER WERE DOWN 26%. THAT'S QUITE A BIT WORSE THAN IT WAS IN THE PREVIOUS QUARTER. WHAT HAS HAPPENED SINCE ELLICOTT HILL WAS BROUGHT BACK AS CEO WAS HE FOCUSED A LOT OF ATTENTION ON THE NORTH AMERICAN BUSINESS, GETTING NEW LINEUPS INTO STORES, AND ON THE WHOLE THAT EFFORT HAS WORKED. EVEN THOUGH YOU ARE NOT SEEING MASSIVE GROWTH IN NORTH AMERICA, THAT SITUATION HAS ESSENTIALLY STABILIZED. DESPITE SIMILAR EFFORTS IN CHINA THAT HAVE PICKED UP AND SPEED THE LAST YEAR OR SO, WE ARE NOT SEEING THAT SAME FOLLOW-UP. I WOULD SAY THE REAL CLEANUP IN CHINA WILL TAKE A MINIMUM AT LEAST ANOTHER YEAR. THE NEW CFO FLAGGED THAT AS SUCH IN THE CALL. SHERY: DO THEY HAVE A YEAR TO SPARE FOR THE CHINA BUSINESS TO TURN AROUND? LOOKING AT THE BROADER NIKE BUSINESS, WE WERE EXPECTING THIS RESTRUCTURING TO START GAINING TRACTION, TO SEE MORE COST SAVINGS. HOW LONG COULD THE BROADER BUSINESS TAKE TO GET BACK ON ITS FOOT? JULIANA: I THINK YOU SEE INVESTORS ALREADY RESPONDING. THAT IS WHY IT'S SHARES ARE AT THE LOWEST LEVEL IN MORE THAN 10 YEARS. A LOT OF THIS IS REFLECTING THE WEAKNESS IN CHINA. IN THE CALL THEY TALK A LOT AGAIN ABOUT ITS MOST CONTROVERSIAL MOVE IT MADE IN THE CHINA MARKET IT ANNOUNCED IN, JULY WHICH IS IN THE NEW CALENDAR YEAR ITS WHOLESALE PARTNERS WILL NO LONGER BE ABLE TO SELL NIKE PRODUCTS ONLINE. NIKE IS TAKING BACK THE DIGITAL SIDE, THE FAST-GROWING SIDE OF THE BUSINESS. WE HAVE SEEN A LOT OF DISCOUNTING IN CHINA, TO THE POINT WHERE A LOT OF LONG TIME NIKE WATCHERS SAY NIKE IS PERCEIVED IN CHINA AS A DISCOUNT BRAND INSTEAD OF THE PREMIUM BRAND IT SHOULD BE. DISCOUNTING IS ONLY THE SYMPTOM OF THE PROBLEM. THE REAL PROBLEM IS IT DOES NOT HAVE THE ASSETS IT NEEDS TO GROW IN CHINA. IT HAS GOT SOME BUZZY PRODUCTS TO PLAY WITH. CAITLIN CLARK'S NEW COLLECTION RELEASED IN CHINA BEFORE OTHER REGIONS. KIM KARDASHIAN AND HER FAMILY WERE IN SHANGHAI TO RELEASE NIKE SKINS. THOSE WERE HELPFUL, BUT WHAT THEY NEED IS LOCALIZED PRODUCTS. ACCORDING TO KATHY SPARKS, SHE TOLD THE WALL STREET JOURNAL ITS FIRST COLLECTION WILL BE DROPPING THIS MONTH, BUT WE DON'T HAVE DETAILS OF THAT. A LOT OF THIS WILL DEPEND ON THE CHINA SPECIFIC PRODUCTS THEY HAVE PROMISED TO LAUNCH. SHERY: WHEN IT COMES TO THE ASIA SESSION, PARTICULARLY INTO THE START OF TRADING FOR THESE MARKETS THAT WILL COME ONLINE IN THE NEXT HOUR, WE WILL WATCH FOR THOSE NIKE SUPPLIERS. THIS IS THE PICTURE AS WE TAKE A LOOK AT HONG KONG TECH FUTURES, LARGELY UNCHANGED. NOT A GREAT DEAL OF MOVEMENT WHEN IT COMES TO BROADER HONG KONG FUTURES. TAIWAN SEEING A BIT OF DOWNSIDE IN TODAY'S TRADING. THE REOPENING FOR HONG KONG AFTER THE NATIONAL DAY HOLIDAY, QUITE WEAK LEAD FROM HSBC SHARES IN PARTICULAR. TRADERS WILL WATCH THE REACTION WHEN IT COMES TO CONSUMER AND PROPERTY NAMES TO HIGHER YIELDS. ANTHONY STEPHENS IS BACK WITH MORE SET UP FOR THE HONG KONG SESSION. CHINA DOES NOT HAVE THE SAME PROBLEM WHEN IT COMES TO YIELDS, BUT THE CONSUMERS ARE CONTINUING TO STRUGGLE. WHAT IS THE NARRATIVE WE ARE LOOKING AT? >> WE CONTINUE TO SEE CHINESE CONSUMERS DELEVERAGE. EVEN THOUGH YIELDS ARE LOWER, THERE'S NOT MUCH DEMAND FOR INCREMENTAL CREDIT, ESPECIALLY TO SPEND. THAT IS EXTENDING STRUCTURALLY ACROSS THE SPECTRUM OF CHINESE CONSUMPTION. THERE IS AN ASTONISHING RANGE OF CHINESE CONSUMER STOCKS THAT ARE DOWN DOUBLE DIGITS FOR THE YEAR. IT IS SIMILAR IN INDIA, BUT IN CHINA THAT DOWNTURN HAS BEEN GOING ON FOR LONGER AND HAS B EEN BECOMING A DOWN TREND. WE ALSO SEE MORGAN STANLEY AND OTHERS TALKING ABOUT HOW LONG IT IS GOING TO TAKE FOR THAT TO RECOVER. THAT SETS UP THIS BIFURCATION WHERE MORE ARE MORE POSITIVE ON TECH AND LESS ON THE CONSUMER. AZTEC NARROWS IN CHINA, THAT IS LESS OF A FACTOR. IT IS LESS INTERESTING COMING INTO TODAY HOW WEAK THE LEADS ARE. WE HAVE HSBC STRUGGLING IN EUROPE AS WELL, AND THAT POINTS TO SOME UPCOMING STRESS IN THE HONG KONG DOMESTIC ECONOMY. EVEN THOUGH HONG KONG HAS BEEN IN A FITTING FROM AN ABSOLUTE BULL MARKET IN TERMS OF PRIMARY ISSUANCEIN IPOS AND SHARE PLACEMENTS, THE KIND OF ECONOMIC GROWTH OUTSIDE THE FINANCIAL SECTOR LOOKS LIKE IT WILL BE CONSTRAINED BY THE HIGHER YIELDS COMING OUR WAY FROM THE U.S.. ALL IN ALL, A MIXED PICTURE SKEWED TO THE DOWNSIDE AS HONG KONG LOOKS TO REOPEN. HAIDI: BLOOMBERG MARKETS REPORTER ANTHONY STEPHENS. WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. SHERY: NVIDIA'S AI CHIPS KEEP MAKING THEIR WAY TO CHINA DESPITE U.S. CARBS. BLOOMBERG LOOKS AT WHY GOVERNMENT OFFICIALS AND INDUSTRY EXPERTS ARE INCREASINGLY POINTING TO GAPS WHEN IT COMES TO NVIDIA'S DUE DILIGENCE. THIS IS A FANTASTIC STORY. IT GOES TO THE CORE OF THE QUESTION OF HOW IS THIS STILL HAPPENING AND WHAT POTENTIALLY COULD WE SEE IN TERMS OF CHANGES TO TRY AND CLOSE THESE GAPS? EDWIN: THANK YOU. OUR REPORTERS SPENT MONTHS WORKING ON THIS, AND IN MANY WAYS IT IS A CULMINATION OF REPORTING THAT BEGAN IN 2025. I THINK TO YOUR QUESTION, WHY IS THIS STILL HAPPENING? THE FUNDAMENTAL REASON IS THERE IS FAR TOO MUCH DEMAND, LIKE WAY MORE DEMAND FROM CHINESE AI DEVELOPERS AND CHINESE DATA CENTERS THAN DOMESTIC CHIPMAKERS CAN SUPPLY. I THINK CHINESE AI LABS AS WELL AS THE BIG HYPERSCALERS, THE LOCAL HYPERSCALERS ARE DESPERATE FOR COMPUTING. WE KNOW ABOUT COMPUTING RESTRAINTS GLOBALLY AND HOW THERE IS A RUSH TO BUILD DATA CENTERS IN CHINA. IT IS ARGUABLY FAR MORE INTENSE, PRECISELY BECAUSE OF U.S. SANCTIONS THAT TRIED TO KEEP THESE TOP END ACCELERATORS OUT OF CHINESE HANDS. YOU, ARE LOOKING AT ALIBABA TENCENT, DEEPSEEK, MOONSHOT AND SO ON, TRYING TO PUSH THE FRONTIER WITH WHAT THEY HAVE, TRAINING THEIR MODELS ON NVIDIA CHIPS. A LOT OF THEM ARE BEING TRAINED ABROAD. WHAT THE STORY POINTS TO IS A LOT OF TRAINING TAKES PLACE WITHIN CHINA'S BORDERS AS WELL. HAIDI: THIS ISN'T AN ACCUSATION OF EXPORTING == OF VIOLATING EXPORT CONTROLS, BUT DOES THIS POTENTIALLY CAST A CLOUD OVER THE CLOSE RELATIONSHIP NVIDIA HAS WITH THE GOVERNMENT, THAT JENSEN HUANG HAS WITH THE PRESIDENT? EDWIN: I THINK IN THIS STORY, MCKENZIE'S REPOINTING POINTS TO SEVERAL FACTORS. YOU JUST MENTIONED NVIDIA HAS A CLOSE RELATIONSHIP WITH TRUMP. THAT IS PLAIN FOR ALL TO SEE. HE GOT THE PRESIDENT ON HIS CELL PHONE AND I THINK A WEEK AGO TO TALK ABOUT ESSENTIALLY AI SAFETY FEARS. THE OTHER THING IS THE SUPPLY CHAIN IS VAST AND THERE ARE SHORTCOMINGS AND SHORTFALLS IN TERMS OF BOTH STAFFING IN WASHINGTON AND NVIDIA. YOU ARE TALKING ABOUT HUNDREDS OF SUPPLIERS THAT MAKE UP THIS REALLY INTRICATE WEB OF SERVER MAKERS AND INTERMEDIARIES AND TRADING FIRMS, AND THE BUYERS AND REPRESENTATIVES AND SO ON. IT IS COMPLEX, BUT I THINK THERE IS A GROWING RECOGNITION THAT NVIDIA IS THE WORLD'S MOST VALUABLE COMPANY AND THE LINCHPIN SITTING IN THE MIDDLE OF ONE OF THE MOST REVOLUTIONARY ELEGIES OF OUR TIMES, CAN AND SHOULD DO MORE TO POLICE NOT JUST THE SUPPLY CHAIN BUT IT'S PARTNERS, BUYERS AND SO ON. SHERY: BLOOMBERG MANAGING EDITOR. TAKE A LOOK AT WHAT IS MOVING IN THE MARKETS EARLY IN THE ASIA SESSION. WE ARE SEEING A MIXED PICTURE. WHEN IT COMES TO THE JAPANESE NIKKEI, DOWNSIDE OF 0.7% LED BY COMMUNICATION SERVICES, HEALTH CARE AND REAL ESTATE. THE ONLY SECTORS THAT ARE UP, ENERGY. NOT SURPRISING GIVEN WE HAVE A BIT OF CONCERN AROUND THE IRAN WAR ESCALATION ON THAT FRONT. OIL PRICES BACK ABOVE THE 00 A BARREL LEVEL FOR BRENT. THE KOSPI GAINING SLIGHTLY .2%. THIS MARKET HAS BEEN HIT BY EQUITIES SELLING BY FOREIGNERS. ASX 200 SLIGHTLY UP. COMMODITIES IMPORTANT FOR THE AUSTRALIAN MARKET. LET'S TALK ABOUT OIL PRICES AND INFLATION CONCERNS. THIS IS WHAT IS WREAKING HAVOC AROUND THE SOVEREIGN DEBT SPACE. IN THE OVERNIGHT SESSION WE SAW TREASURIES REBOUND A BIT DESPITE ELEVATED OIL PRICES. A LOT OF HAVEN BUYING ON THIS SIDE OF THINGS. THE EUROPEAN DEBT STRESS CONCERNS WERE BEING FELT ACROSS THE U.S., PERHAPS LESS HAWKISH FED COMMENTARY. WE ARE SEEING THAT UPSIDE AND REBOUND WHEN IT COMES TO THE ASIAN SOVEREIGN DEBT SPACE. THE TWO YEAR YIELD IN JAPAN BELOW THE 2% LEVEL. YOU CAN SEE BRENT CRUDE PRICES ABOVE 02 A BARREL. THAT IS IT FROM "THE ASIA TRADE ." "THE CHINA SHOW" IS NEXT. YOU ARE WATCHING BLOOMBERG. ♪