Previewing Tomorrow's Bank of Korea Decision, Nvidia Earnings
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Welcome to the Daybreak Asia podcast. I'm Doug Krisner. On today's episode, we'll preview the trading week ahead in the APAC region, as well as tomorrow's decision from the Bank of Korea. Plus, a very busy week stateside. At the end of the week, we'll get that PCE inflation data, obviously the Fed's preferred measure. And midweek, earnings from NVIDIA are due. Coming up in a moment or two, we'll be speaking with Chuck Camillo. He is the president and CEO of NVIDIA.

at Essex Financial Services, but let's begin in Sydney.

Joining me now is Garfield Reynolds. He leads Bloomberg's Markets Live team for the Asia-Pacific. Can we begin with the Bank of Korea? Obviously, that's the first major event that we have in the APEC region. And I'm wondering whether or not the BOK is going to be inclined to cut rates because of this threat of potential U.S. tariffs. And I'm thinking particularly of steel when it comes to South Korea. Is that a possibility?

Well, the tariffs are certainly something that's going to be very much on the Bank of Korea's mind. In general, the situation with the Korean economy is looking pretty grim, as well as some of the concerns around both direct impacts from tariffs and then the indirect impacts. Even though China...

itself is looking as though it can shrug off at least some of the tariff pain. The overall push, we had a US representative highlighting the idea that the metals tariffs are ultimately aimed at China. So, Korea is very China exposed as well. That doesn't help. And the political uncertainty created by what went on with the former president imposing martial law and then being impeached and then being removed. We've got

Poor consumer confidence, poor business confidence. There's a lot not to like about Korea's economy. So the expectation is that the Bank of Korea will downgrade its growth expectations and therefore feel obliged to cut, even at a time when it does have some concerns that cutting rates will weaken the currency further and add to the inflation risks. But the growth side of the equation is seen very much as driving them to cut rates.

So I mentioned steel. Obviously, semiconductors is the big export for the South Korean economy. And we know that the Trump administration has already threatened to place tariffs on chips. Is the chip industry in South Korea braced for any of this? I don't think it's such a huge concern for them. In particular, a lot of the heat when it comes to what's been going on with China with tariffs has been

You're on the AI side of the chip industry. And South Korea, to some extent, missed the boat a little bit there. That's part of why its equities market has lagged so far behind Taiwan's. So South Korea, you're more stuck making the chips that were

vital about five, 10 years ago, which in tech terms is a couple of centuries ago. Yeah, I think they still, in terms of AI, do participate in those high bandwidth memory chips for companies like Samsung and SK Hynix. Can we talk a little bit about inflation in your neck of the woods? I think we have consumer inflation data this week, right? And whether or not that's going to play into the thinking at the Reserve Bank of Australia. What say you?

The RBA will keep a very close eye on the data that comes out this week, which is the monthly CPI, which in Australia is still something of an innovation. The RBA traditionally pays a lot more attention to the quarterly releases. And we had one of those at the end of last month for the fourth quarter of 2024.

which that one came in relatively mild and so helped to back the RBA's decision to cut rates. However, the labor market data that came out last week was so strong that it also backed the RBA's extreme caution about the idea that it would be cutting rates again anytime soon. With that set up, I think there's some asymmetric risks here. If the

The monthly CPI reading comes in soft. I don't think the RBA will pay a lot of attention to that. They'll be of the mind that, well, we need more data to be sure, especially given what's been going on in the labor market. So what is that tight labor market in Australia reflecting right now? Which industries are doing well? Is it mining and materials? Is it stuff that is related to the services economy? What is driving the demand for labor?

Well, it's broad, but a lot of it is to do with – some of it's to do with the governments have been expanding what they're doing –

There's also very tight supply when it comes to tradespeople, plumbers, electricians. And that's sort of the area that's been really big on driving concerns about –

transmission of tight labor conditions towards higher prices. There's a lot of higher prices that are to do with supplies of materials when it comes to the building industry, but there's also concern that there's just not enough builders and building associated trades, not enough people

around to do those jobs, and that that's an underlying concern when it comes to inflation. Garfield, before I let you go, I have to ask about the inflation story in Japan. We get CPI data this week for the city of Tokyo, sometimes a leading indicator for what can happen in the broader economy in Japan. And the expectation in the market right now is that the Bank of Japan is on the verge of

tightening again. I don't know when that will be. There's a debate in that. I was talking to MLive strategist, your colleague, Mary Nicola in Singapore last week. The possibility exists maybe that we could get a rate hike in March. I'm looking at a much stronger currency right now on the strong side of 149 against the dollar. Where is Tokyo, the city of Tokyo in the inflation story right now?

Well, that Tokyo CPI indicator is often extremely important because it offers a very –

a very big guy to where the national one will come in, which will come in in some weeks afterwards. And in the current environment where we had a strong national CPI report recently, that helped drive that speculation you talked about when it comes to the BOJ. And we've got a strong yen on the back of it, partly because it's a self-reinforcing loop. The

about inflation and the potential for BOJ tightening has helped to drive bond yields higher. So that helps to drive the yen as well, along with that rate situation. So again, traders will be looking at the Tokyo CPI for any hints that that's going to increase the pressure on the BOJ. And to some extent, the BOJ have made things harder for themselves because they have had a tendency to think

not really gear up as far as how they're guiding the market until quite close to actual meetings. So last time around when they hiked, in the initial period

period for the first sort of half or so of the period between rate meetings, they were given the impression that, yes, we're going to hike eventually, but we're going to take our time about it, sort of poo-pooing the idea that they would really be so radical in their terms as to go in January. And then just a

about 10 days or so before the actual meeting was when there were a couple of appearances from officials that made it clear that this was on and then they did indeed hike. So even now, you're aware the, again, the pricing at the moment is mostly for May or June as the likely venues and March isn't seen as a major chance, but that can change very quickly if the BOJ, you

provides some signals to the market that March is a live meeting. So, that's helping to keep that speculation bubbling away. And unless, if Tokyo CPI comes in strongly, then we'll get an extra step up in that and an extra step or two up in the yen. Garfield, always a pleasure. Thank you so much. Garfield Reynolds, who leads Bloomberg's Markets Live team from Sydney, joining us here on the Daybreak Asia podcast.

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. Certainly will be a busy week stateside. We'll get earnings from NVIDIA on Wednesday, and then Friday, it's the Fed's preferred measure of inflation. That's when we get the core PCE. Joining me now for a closer look is Chuck Amello. He is the president, also the CEO at Essex Financial Services, joining us from South Central Connecticut.

on a Sunday night here in the States. Chuck, thanks for making time to chat with us. Can we begin with the inflation story? Because I think what may have been a little unnerving at the end of last week was the reading from the University of Michigan on inflation expectations, particularly that longer-term measure, which is now at the highest level in nearly three decades. That's not the information that the Fed would welcome, I would imagine.

How do you understand where we are right now in the inflation story? Yeah, well, thank you, Doug, so much for having me on tonight. And the other thing, that is the big one, right? Inflation, when we talk about it in the office among our team, you know, we took a poll and by far, both on the personal and professional level, professional in this setting being more important, it was the number one thing that our folks were worried about. And I have to tell you from from

many conversations and meetings we have with clients, it's the same on the client side. So look, if you look at the last inflation numbers that came in with CPI, it was certainly a little higher than expected with energy leading it, but even core exudant energy was higher than anticipated.

You know, inflation's been sticky. It has defied any significant move from where it sort of seems to be, you know, stuck at right now. You know, the Fed is in sort of a holding pattern. You know, they're really not doing anything with rates. I think, you know, maybe July you see something from them. But without any question, you know, even with the consumer confidence report that did come out, that is a little bit skewed politically, just depending upon how a person, you know, relates

reports their political affiliation. But I'm a big fan of what I call the Mark One eyeball and nothing in my life, no prices in my life have gone down. They've only gone up and everything is more expensive. And I think that has just been the case for a long time. And it's starting to become sort of the what the average person expects.

I think the key thing, Doug, is it really hasn't affected the overall economy yet. Retail sales in January were much lower than anticipated. So maybe that's a canary in the coal mine, although January usually is a very slow retail month. But I think we're going to find out more. But without any question, it's the number one thing we worry about and I think clients worry about.

Yeah, it's interesting because if you look at the way the market interpreted this Friday, I think yields were down across the curve in the case of the two and the 10, each off about seven basis points. Describe to me what you see in the way in which the bond market is kind of digesting all of this and what's really happening with bond traders right now, do you think?

Yeah, well, I think they're scratching their head a bit as well. I mean, there's so much uncertainty right now. And again, the market, above anything else, hates uncertainty. And let's not forget, Doug, too, the consumer confidence number came on the heels of Walmart's earnings on Thursday, right, where that tanked the market. And people were concerned that that was an indicator about the U.S. consumer, which drives two-thirds of the U.S. economy.

But I think from all the conversations and meetings we have with a lot of fixed income professionals, most people feel that given where we are with rates right now, I mean, five seems to be the upper level, where we are right now a little bit lower. But I think the bond market is trying to figure out with all these different cross currents and especially with the unknowns of tariffs and the impacts of

of a potentially reduced workforce as a result of deportations, of how that's going to portend. So I think a lot of people are just in this holding pattern to see what happens. But I mean, I think we're just going to be just, I don't want to call it flatlining, but I think we're just going to be in this sort of no man's land for a little while until we get a little bit more clarity. So I mentioned a moment ago that Wednesday we'll hear from NVIDIA. What are you expecting this company to let us know about the market for these

pieces of hardware that are very much central to this revolution in artificial intelligence. Yeah, well, I wish I was an expert on that for a lot of different reasons, but it certainly seems an awful lot is riding on this report from NVIDIA. And, you know, I think with the very sluggish performance of the Mag 7, you know, technology sort of writ large so far this year, and again, two months does not a year make,

But a lot is riding on this report from Nvidia. And again, you've seen both sides of it, right? One, that DeepSeek is more of a threat. The other side, and again, it could be Nvidia talking in their own book about how bullish it is for them in terms of the number of chips, Blackwell, et cetera, that they'll be required under either circumstance.

I think it's, from everything I've heard and seen from a lot of the very smart folks we talk about, it's still obviously an outstanding company, one you want to own. I think if you do get a sell-off in NVIDIA, it would be a long-term buying opportunity. One of the things that I think the DeepSeek story represents is a real bending of the cost curve. Could that have a negative impact on some of these companies, do you think?

Possibly, but I think there's still a lot we don't know about DeepSeek. And I think there are an awful lot of very smart people running these technology companies. NVIDIA's product is the best one out there. I think it causes a pause and a question in terms of if all of this money continues to be spent, and it turns out that you didn't and you could have done it for a lot cheaper, then

That's a big impact. And I think that has the ramifications to be a major disruptor in the market, if in fact that does come true. But I think we're way too early to try to make a guess on that. But I think if you look at the future of technology, the future of AI, there's no ifs, ands, or buts about it, no matter how you slice and dice it. NVIDIA is going to be on the forefront. I think it's just a matter of how these other companies

continue to invest in it. And right now, there seems to be no pause in that. They're investing like gangbusters. We heard from Berkshire Hathaway over the weekend. Warren Buffett's firm ended last year with more than $321 billion in cash and treasury bills. What does it say to you if Warren Buffett cannot find value in the equity market?

Yeah, well, he probably just hasn't found value enough, right? And sitting on that amount of cash at 4% in Treasury bills, right, you're making a pretty good return on it. But I think Warren and his team are very, very astute investors, to put it mildly. So I think they probably just haven't found the right thing yet. And if you get a big sell-off in the market, I bet some of that money gets put to work, as I'm sure they have some firms and companies identified that they'd love to be able to get at

their preferred price. And I just think it hasn't happened yet. So where is Chuck Camillo finding value these days? Oh, well, you know, boy, we always talk about sort of that that that next dollar of how to how to get it invested in. I think, you know, Doug, from from what you and I were chatting about earlier regarding the volatility last week, what we have most likely coming over this week is

um you know we're and personally a big proponent of picking and choosing your spots legging into this market um i've said it before i think if you i think you don't own tech at your own peril and i think there's different times to get into it and you know we might be coming up on one of those if we have this volatility um but the other thing i would certainly would say is you're starting to see a lot of more interest internationally um you've got the you know the uh ifa index um outperforming so far

A lot of U.S. investors are underweight that. You know, IFA year-to-date is up 8%. S&P is up 2% and change. Again, two months does not a year make. But you're definitely seeing some strength in some other areas. And honestly, for some clients, you know, Doug, the private markets, whether it's private equity, private credit, or other areas that we're looking at. So overall, the concern about the level of valuations is real. I think it's a very valid concern.

But at the same time, in all of these types of periods of time in the market over all of history, it's always giving you an opportunity for something. And it's our job to help our clients try to find out how to put some of that money to work, take advantage of that. But across the spectrum, I mean, just even look at RSP. RSP for the first time in a long time is actually outperforming the S&P 500, not by a lot, but still very,

That hasn't been the case in a very long time. And again, we'll see where we are at the end of 2025. But I think it's going to be very interesting and wild ride that will be full of excitement, both on the up and it's a panic on the down. But to go back to Buffett, I mean, does it make sense maybe to keep a little bit of dry powder around?

Oh, 100%. Listen, I think Doug-- so certainly for him-- and there's a lot more stuff going on there also as you read some of the things that perhaps they're keeping that amount of cash for, again, an eventual succession as Warren eventually retires or, God forbid, something happens to him.

But you're literally getting paid 4% to sit in cash, right? And right now, that's outperforming the market. So there's absolutely nothing wrong. We think it makes a lot of tactical sense to keep some powder dry, because I do think this market is going to give you days or weeks

where you pick the catalyst, Trump, tariffs, geopolitical rates, inflation, pick your poison, that's going to tank the market. And you're going to have an opportunity to put some of that money to work and buy some great companies or great ETFs or sectors as they drop. Again, as long as you've got the right time frame. I'm not talking about day trading. That's not what we do. But if your time frame is a couple of years out, two, three, four years or longer, the

those periods of market disruption are when you can truly put some money to work and get it at some pretty good prices. Chuck, always a pleasure. We'll leave it there. Thank you so much for spending time with us. Chuck Camillo, he is the president and CEO at Essex Financial Services, joining us here on the Daybreak Asia podcast.

Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the stories shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krisner, and this is Bloomberg.

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