Nvidia, Nasdaq 100 Hit New All-Time Highs
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Bloomberg Audio Studios. Podcasts. Radio. News. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. Big cap tech shares were up today, sending the Nasdaq 100 to a record high. A lot of optimism still over artificial intelligence. That's been a key driver. Shares in NVIDIA were up more than 4% to finish at a record high. NVIDIA's

Now, in the process, NVIDIA cemented its position as one of the most valuable companies in the world. We also heard from Micron Technology after the bell and an upbeat forecast for the current quarter. Micron has been benefiting from demand for those high bandwidth memory chips used in artificial intelligence.

Joining me now for a closer look at market action is Katie Kaminski, the chief research strategist at Alpha Simplex. Katie, thank you so much for making time to chat with me. What did you make of today's price action, particularly the AI trade?

Well, I'd have to say that it's quite remarkable to see, you know, even though we had some rally today, but it was very narrow. It was really focused on those tech companies. And you're really seeing that optimism is still there and that people are really seeing that opportunity as one of the few on a day like today. So I mentioned the fact that the NASDAQ 100 closed at a record. We're trading at around 31 times earnings for the NASDAQ 100. Is that a concern?

I mean, I think it's definitely a concern that we've been voicing for quite some time. And I think if that's sustainable, then, you know, it's pretty impressive. So I think there is going to be that continued concern that how long can this type of growth be possible? So so far as of today, it seems to be still in line. But you're right. The skepticism is like likely to come back given that.

We had commentary today from Fed Chair Jay Powell. He was testifying to the Senate Banking Committee. Apparently, the Fed is still struggling to get its arms around the impact of tariff policy on inflation. How do you understand the tariff story as it relates to inflation?

Well, I think the challenge is that there's a lot of lag in data. And I think part of the reason you see that sentiment is things are still pretty good in terms of unemployment and other parts of their mandate. We do see, if you look at signals on the technical side, people are still concerned about long-term bonds and maybe that's part of it. So I think until you have more concrete data,

they're willing to wait if things are not necessary to necessarily cut rates. So that's why you're kind of seeing that wait and see policy. And yet we've heard from two Fed governors recently about the possibility of rate cuts or a rate cut as soon as the July meeting. How does that sit with you?

Well, what we've seen is there's definitely been some of that price action that's consistent with that story. It does make you start to scratch your head a little bit, though, because you start thinking, I mean, you see that today in price movements. You saw yields up, then you saw yields down.

And I think the market is leaning towards the hope that there's going to be a bigger pivot and actually get some rate cuts at some point. Does that make you a little bit more inclined to look for opportunities in the bond market right now? We were talking about high valuations and technologies. And if we can kind of accept the notion that rates are headed lower, we just don't know when that move happens, that maybe there are opportunities in the bond market right now.

Well, I definitely think that the market looks a little bit like that. And you've started to see a pivot this month towards more bond buying. And I think with the skepticism earlier, you know, there's definitely that potential that this might be a good entry point. You might just have to wait for some period of time to see the value of that.

What are you advising clients to do in the current environment in terms of deploying cash right now? Are you advising them to wait and see, anticipating maybe a pullback in the equity market? Or do you want to be fully invested right now no matter what? Well, I'd say, you know, we tend to look at more technical signals. And what we've seen is that equity signals have strengthened some. So there is some indication that equity signals

equity positioning isn't as weak as it was before. There was less concern. But of course, you know, it is a very volatile time and you have seen a lot of big moves, particularly outside of the equity market. So, you know, if there were some real events, you could actually see a much bigger move in equities. But so far, it's been relatively calm, surprisingly. I'm

I'm curious as to how you're understanding geopolitical risk as a part of the story in markets. We've heard from President Trump saying the U.S. will hold a meeting with Iran next week.

He is doubtful that there is any need for a diplomatic agreement on the nuclear program in Iran, citing the damage that some of that American bombing has done to key sites. This is up for debate. We still don't have a lot of sharp visibility into this situation. For the moment, it seems like the risk has diminished. The oil market has calmed down quite a bit. But I'm curious to get your take on geopolitics as a factor in markets behavior lately.

Well, it's been actually quite surprising to me that you didn't see the type of movements in the equity markets that I would have expected given the strength of how extreme the headlines were and how concerned people were. I think the only place you've seen that is in the energy markets where you've seen sort of moves that were exceptional.

equity markets have remained relatively strong and relatively calm if you take those in comparison with energies. So I think the equity market is sort of looking past this right now and people instead of acting on this are kind of waiting to see if we have a little bit more clarity, which I actually found somewhat surprising.

But you did see those moves in places like commodities. So that could be a foreshadowing of volatility that we could have if we had more clarity on how, you know, a potential escalation in the future. I want to ask you next about the financials, because we heard from the Fed today policymakers unveiled a plan to roll back an important rule on capital for the big banks.

Talk to me a little bit about how you understand the tweak to the enhanced supplementary leverage ratio, what it means for big institutions like Bank of America or JPMorgan Chase. Well, in some sense, having less restrictions in lending and also could mean that there's a little more freedom in the space. But what's interesting in terms of the commentary that I've seen is that the market didn't really move much on those adjustments.

which to me suggests that whatever decisions were made with this, some of the price action is already baked in in these banks. So I think for me, that was surprising in some sense. And I know some reports were noting that despite a relatively large decision, that you didn't see a lot of price action regarding this particular decision. How are you viewing markets offshore these days? Well, it's interesting you ask that because, again,

Honestly, the focus has been so much on the current Middle East conflict that there's been a little bit less focus on places like China, Japan, Australia. And I think that, you know, you've seen Japan has definitely been in a slightly different trend than the U.S. So you've seen a weaker yen. You've seen some questioning about whether or not there's going to be a hike at some point. So I'd say that it's been relatively quiet.

outside of what's been going on geopolitically more recently. So staying with geopolitics for the moment, the president is returning from the NATO summit, a bold commitment from all 32 members to raise military spending to 5% of GDP. So does this compel you to look more closely at what's going on in the European equity market?

It definitely does in the sense that there is sort of a glimmer for some growth and also opportunities in that space. It just really indicates a change and shift in policy, which will definitely be

somewhat growth oriented for european countries so i think people are looking more closely at european equities and they have really outpaced this year as well so i think that's something that's going to be a more common theme as we see how this unravels in terms of actual spending and and where katie we'll leave it there thank you so very much katie kaminsky their chief research strategist at alpha simplex joining us here on the daybreak asia podcast

A warming planet, complex geopolitics, and fierce competition means business operations are under more scrutiny than ever before. Returning to Singapore this July, the Bloomberg Sustainable Business Summit is uniting leaders and investors to explore how sustainability efforts can bolster resilience and mitigate risk. Learn more at bloomberglive.com slash sbs-singapore. That's bloomberglive.com slash sbs-singapore.

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. Hong Kong's de facto central bank defended the local currency against its peg to the U.S. dollar. The monetary authority bought $9.42 billion in Hong Kong dollars. This is after the exchange rate touched the weak side of the permitted trading ban of $7.75 to $7.85 a

against the greenback. For more, we heard from Garfield Reynolds in Sydney. He is our Asia team lead for Bloomberg Markets Live. Garfield spoke with Bloomberg's Averill Hong and Heidi Stroud-Watts. A bit of uncertainty when it comes to where that dollar trajectory is headed. Oh, well, I mean, the broader dollar trajectory is very much for dollar weakness, but it is interesting to watch the Hong Kong dollar instead. Instead, you've

Instead, it's falling against the U.S. dollar and risking falling out of its peg, hence the need for Hong Kong to buy its own dollar. That is a tension that's been brewing for some time because, in particular, as the Chinese government, the main government,

highlights its desire to have the yuan be playing a greater role globally. It comes to look at stranger and stranger for the Hong Kong dollar to be pegged to the US dollar and pegged so tightly. The yuan does have, there are controls on where it goes against the US dollar, but those controls allow it to gradually move one way or the other. It's gradually, in fact, been strengthening

But part of the setup is that the Hong Kong dollar is stuck where it is between 775 and 785. And the other things the PBOC are doing are helping to drive down

borrowing costs on the short end in particular in Hong Kong. So that's setting up the arbitrage opportunity that is pushing down the Hong Kong dollar against the U S dollar. Even if in a lot of ways you might think it should gravitate more towards the seven point, you know, under 7.2 per dollar level that the Yuan is at. Uh,

So that's a long-term tension that they're going to face more and more often as things develop towards a weaker US dollar and a yuan that is playing a greater role on capital markets. So it might not be the last time in the coming months when Hong Kong needs to intervene in this fashion.

Yeah, Gav, to your point about the dollar weakness, we're seeing it losing ground, as you spoke, against the backdrop of Wall Street Journal reporting that Trump might name the Fed chair successor to Powell earlier. I mean, what's at play here? Because markets have already sort of been betting for this. Yeah, well, the play here is that it's another blow to the credibility of the U.S. dollar business.

because the Fed's independence from politics has been a key part of why... It's a key dynamic for investors and for traders. Why are you willing to go to the US dollar before anything else? Well, it's got the deepest bond market. That helps. It's also got the credibility of its institutions and the idea that power will get...

shunted out and replaced by somebody more open to Trump's call for lower interest rates

Just in order to save the U.S. government money on its borrowing costs, that's the kind of thing that's going to have traders saying, well, we might want to avoid the U.S. dollar. Or if we're going to buy U.S. dollars, we're not willing to pay extra to do so. So you get at the very least a movement down in the price of the dollar against U.S. dollars.

currencies. Notable that this Wall Street Journal report comes after a U.S. Republican senator was very pointed in his criticism of Powell at the

testimony or a US representative saying Trump was voted in by millions you were voted in by one person i.e. Donald Trump and you don't want and he doesn't want you to go on doing what you've been doing so what's your justification?

The other piece of news is, of course, the relaxation of capital rules. Did you expect that to have more of an impact? Well, the impact was mostly priced in, it looks like. And I think it was noticeable that earlier on, a few days ago, we had some comments from the Fed, I think after the FOMC meeting, in fact, that they were moving more strongly towards the SLR changes.

That didn't have a huge impact. And it highlights that just because banks will be able to buy more treasuries doesn't necessarily mean they will, especially when we are going into what's going to be a very fraught couple of weeks. We have the reciprocal tariff deadline coming in about July 9. And then before that, we have...

the July 4 deadline for whether or not the Trump's spending and taxation bill gets passed and how much that's likely to increase the deficit. That's another uncertainty. We also have the uncertainty of we get payrolls July 3 this time around on Thursday ahead of the July 4 U.S. holiday. So it's going to be a very choppy week next week.

not too much of a surprise that banks and others aren't going to rush into treasuries absent a clear signal that, for example, rate cuts are coming. Garfield Reynolds in Sydney. He is our Asia team lead for Bloomberg Markets Live.

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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