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Speaker 1: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. The U.S. equity market rallied on Wednesday. That was after President Trump said he would accept the results of the midterm elections. Those remarks seem to offer a degree of certainty. And at the same time, some analysts were saying the outcome will now lead to a forced moderation on the build-out of data centers. And that view, in turn, helped to reduce some concern around the swelling CapEx spending that we have seen on the part of many of these hyperscalers. The market also benefited from the notion that U.S. economic growth will remain intact. One example, today's shares in Amazon, Apple, and Microsoft were each up by more than 5%. For a closer look at what we're seeing in markets across the APAC region, let's bring in Bloomberg's Paul Dobson. Paul is executive editor for Asia Markets, and he joins from our studios in Singapore. Thank you for being here. Before we get into some of the details, give me your sense of what you're hearing among people that you've been speaking with, either in the Bureau or some of the contacts within the industry across the APAC region. How are they viewing this U.S. midterm election?
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Speaker 3: Yeah, good morning, Doug. I think that there's still a great deal of caution around what it's actually going to mean, uh, going forwards and how the US president is going to react from here. So we certainly saw a good deal of positivity yesterday from his comments about, uh, sort of accepting, um, the result and being prepared to work with the Democrats, uh, and congratulating them on, um, their performance as well. Um, so that was taken as, as a relatively positive signal that, um, you know, maybe rather than being at loggerheads, there would still be hope for some sort of policy progress. And I think that the region was also warmed by, you know, the comments from J.D. Vance, where he's talking about the Iran war being a big reason for the performance of the Republicans in the elections and therefore the conclusion that maybe that points to the idea that the US administration will be in a hurry to come to some sort of an agreement or a truce in the Middle East, which of course had a big impact on oil prices and that should give buyers of oil and energy products across Asia a cause for a little bit more optimism as well. But, you know, pushed into a corner, the US president could go harder on, you know, using his executive authority to push unpopular things through. We've seen that already in the past. And so the market won't be completely convinced. And I don't think that Asia as a whole will be completely convinced that everything is going to be smooth and plain sailing from here.
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Speaker 1: So away from the congressional races, we had a number of gubernatorial victories in states that are exposed to this AI trade, and I'm thinking of Texas in particular. And we're seeing a lot of weakness, or we did in the U.S. session, in semiconductor shares, and I'm imagining that's going to be the case when we go to a market like South Korea today. Is there a great deal of concern that we may see a meaningful pullback in the growth rate of AI data center build-out in the states?
00:03:39
Speaker 3: Yeah, so I think that this is a really interesting sort of two-edged sword because the market is seeing it as a cause for optimism, at least among the hyperscalers. The idea being if they are slowed down kind of across the board in terms of their build-out, actually that's positive because they won't take on so much debt and they'll be able to grow at a more moderate pace. But of course, for the providers of the picks and shovels of the data center boom, which are many companies in our region, That's less good news because it means that there'll be reduced demand for their products going forwards. And so for South Korea, which you rightly identify, that's the sort of laggard in the early trading in Asia. SK Hynix and Samsung under some pressure because, you know, there's a concern that there won't be quite such strong demand for their products. That would otherwise be the case. I'm not sure, you know, that argument will definitely hold up in six months' time because I do think that the competition... To build out the data centers locally in the US, but globally as well, there's still going to be extremely strong and demand therefore for those products, which, you know, we know are already sold out for the next 18 months, more or less. um, isn't, isn't going to immediately disappear or evaporate overnight. So we'll see, we'll see how long that trade has legs. What we do know though, is that, um, you know, over this earning season already, there hasn't been a great deal of support, um, for, uh, those sorts of companies. And, and there has been that continuing sort of concern about, um, the, the Neo cloud developers in particular.
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Speaker 1: Heavily indebted. Um, You mentioned the pullback in oil prices on the notion that we could see some sort of quick resolution to conflict with Iran. President Trump saying that he has no immediate plans for further strikes. I think we need to maybe put a question mark around that. Anything is possible, as we know. But I'm wondering about how this relates to the inflation story, because treasury yields came in quite a bit today. You also could make the case that this blue wave that we've been talking about may limit the president's ability to add to the deficit, which would obviously be encouraging to the bond market. But I'm wondering whether or not we can begin to talk about a meaningful reduction in the level of inflation or whether that's simply premature.
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Speaker 3: Probably premature to talk about it until we see a little bit more progress in the Middle East. The oil price has been extremely volatile and, you know, crude oil isn't really the main concern. It's still the refined products at the end of the supply chain. You know, the prices for gas in the US, the prices for diesel in Europe. That's the most cause for concern. I think, you know, the bonds market already made its move on the election results before we got that big lurch lower in the crude oil price. And so, In that respect, at least, it's more that idea that you were talking about of gridlock slowing down US borrowing that was the thing that seemed to be most helpful initially, at least for treasuries. Let's be clear, though. I think what the global markets want, what the world really wants, is a little bit of relief from those very high energy prices. That really has been the thing that's caused the most. sort of pressures across global markets. This year, it's been very uncomfortable for a lot of buyers in Asia. We've seen a lot of pressure on currencies across our region as a result, and on economies and countries having to sort of take all kinds of emergency measures or sourcing supplies from all kinds of unusual places just in order to, you know, keep all the, not exactly keep the lights on, but keep everything running as it normally would be.
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Speaker 1: So after the U.S. closed, Paul, we heard from both Qualcomm and the British chip designer Arm Holdings. Both of these companies, as you well know, are exposed to the smartphone market. And there's been a bit of a struggle there as the result of higher memory prices. Handsets have gone up in price. And both Arm and Qualcomm have been looking to diversify themselves away from smartphone chips and into chips that may be used for data center computing. Talk to me a little bit about what's going on right now from your point of view in the smartphone market. Are you seeing some of these on the demand side, some of these numbers coming in a little bit across the region?
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Speaker 3: Yeah, well, so we talked about energy impacts on inflation, Doug. And I think the other thing that's, you know, a little bit underappreciated is this chipflation phenomenon. So all of the... large manufacturers. I think it started kind of with Sony and Nintendo talking about it. And then we heard from Apple very recently talking about the cost of memory chips. And so these other designers as well, you know, talking about how that is really driving up costs and forcing them to put up prices for the end products is in turn reducing customer demand for new electronic devices. I think smartphones, we've seen it. We've seen it in some of the other electronic goods as well that are reliant on it. We saw one of the, I guess, Intel in Intel's earnings. They were worried about a slowdown in sales of personal computers as well, right? So yeah, so I think that that's a genuine phenomenon and it sort of does have blowback to other people in the same supply chain because if the costs are going up because of other parts in the devices, then you're not going to have so much demand for your, your, your products either. So I think that that, that that's not going to go away. Those prices are high. Those prices are continuing to rise or, or be it, you know, with, um, the proviso that, uh, there's, there's alternatives to the main manufacturers of some of the, the, the chips for those, um, products. And so maybe we'll start to see more profusion of, um, uh, Other smaller companies trying to get in on the act there.
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Speaker 1: So, Paul, before I let you go, I have to ask about the dollar. We had a bit of weakness in New York trading. A lot of what we've been talking about over the last 24 hours seems to be perceived as dollar negative. Do you think that's sustainable? And if so, do currencies across the APAC, are they necessarily the beneficiaries?
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Speaker 3: If the oil price keeps on going down, that should be supportive for Asian currencies and should be a negative for the dollar vis-a-vis the rest of the world. The US being a net energy producer after all and an exporter. And therefore, it's less impacted by higher energy prices than other parts of the world. So that's one factor there. I think that the lower bond yields would help to put some pressure on the US dollar as well. And if we do get a peace dividend and we do get an opportunity for stronger global growth, then that might also play in favor of emerging Asia in particular. But there's a lot of ifs in that chain, Doug. It's been a pretty decent nine months for the US. The exceptionalism trade has been there again because the US stock market has been strong, and held up a little bit, you know, when the bubble started to burst somewhat in some of the Asia tech names that have been so exciting in the first half of the year as well. I think that the other thing to watch out for is whether the carry trade comes back if markets do go into more of a kind of docile or, what's the right word, pacified state after the recent volatility. We saw Citigroup talking about that as a possibility already today. I was quite interested. I was watching the yen against the Mexican peso through yesterday, which started off with the Mexican peso, the weakest currency and the yen, the strongest currency. And by the end of the day, that more or less reversed. So That talks to the idea of more carry demand and people moving back into higher yielding currencies once the event risk is out. So, you know, all of those things could argue for not necessarily a weaker dollar because it's falling on its own, but some outperformance by other currencies within its orbit and beyond.
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Speaker 1: Interesting insights, Paul. Thank you so very much. Bloomberg's Paul Dobson. He is executive editor for Asia Markets, joining from our studio in Singapore here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. So Democrats will now control both houses of Congress after the U.S. midterm elections and the defeat being felt by the Republican Party has led to some finger pointing over what went wrong. Vice President J.D. Vance blamed his party's losses on the war in Iran, as well as the cost of living and the U.S. relationship with Israel. That's where we begin our conversation with Heidi Crabo-Redeker. Heidi is a senior fellow at the Council on Foreign Relations, and she spoke with Bloomberg TV host Heidi Stroud-Watson, Paul Allen.
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Speaker 4: And I was just reading through sort of your initial reaction notes. And as you point out, a number of these seats that were flipped one by one, deep, deep red seats, right, that many strategists said that it would be decades before that sort of calcification of Republican strongholds would be able to break. How did we see that in the last 24 hours?
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Speaker 5: So, I mean, as you rightly point out, I think this was, I mean, pick your cataclysmic natural event, whether it's an earthquake or a tsunami. You've heard this all day. I never thought many of these red states would ever turn blue in my lifetime, and they did last night. So I think, you know, Texas would probably be the biggest one to stand out, both economically You know, it was really the biggest win. And you saw very deep red farming states like Kansas and Iowa. I mean, very deep red states. But they had been hit by Hormuz-related fertilizer costs going up, diesel costs going up, gas prices. Because, you know, these are huge states. People have to drive and fill up their trucks, and it's a long way. It's a lot of money to do that. And they also had very aggressive immigration crackdowns hitting their labor and the backlash from Trump trade policy hitting their key export markets. So I think it's not a surprise necessarily for the rationale, but it was a big surprise for all the politicians out there.
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Speaker 4: What's going to be interesting is there's a lot of debate as to whether this was a vote that spoke to the anti-Trump or the pro-Democrat, right? And if you take that at least a significant part of this was a protest against the latter, how then policy-wise do the Democrats sort of cohesively come together, particularly if you look at this as a kick-off into presidential race 2028? Do you think that there are sort of common grounds when it comes to how they would approach the situation in the Middle East? Yeah. for example, the broader sort of economic policies and everything to do with AI as well?
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Speaker 5: So if they're smart, and then this is a very, you know, this is a very broad spectrum of Democrats that won last night, they will come together and realize that this was not necessarily a full endorsement of their policies. This was in, you know, in large part a backlash against both the policies executive branch, Trump policies, and also the Republican lack of pushing back. We like checks and balances in the United States. And I think we really haven't seen that in the past year and a half. And so that was, you know, if the Democrats are smart, then they will realize that this is a mandate to serve the people that voted for them who were Republican or very much, you know, Trump voters in the past and for their natural base.
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Speaker 2: Heidi, there appears to be a belief on oil markets, if we were to read the numbers correctly, that a potential end to the U.S.-Iran war just moved closer in the past 24 hours. What role, though, can Congress and Senate realistically play in advancing that?
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Speaker 5: So it's a great question. I mean, the president and the executive branch have a huge amount of leverage and power in foreign policy. And so there's sort of that one side where I do think that President Trump will move forward on his foreign policy agenda. with or without pushback from Congress. At the same time, there has to be a recognition in the Trump administration that the Middle East war and the attack on Iran and the continued attacks, they're one in the same with the affordability challenge, with the fertilizer, with the diesel, with the gas, with the prices at the grocery stand, with anything that goes on a ship or a train or a boat or whatever to get transported. And so that is, it's one in the same with this war. And he also lost some of the MAGA votes who really counted on his campaign promise of no new wars and not getting enmeshed in new wars, particularly in the Middle East. So I think this is a... I think that this is probably going to be the mark of the beginning of the end of Trump's war with Iran. So even if he orders another major strike before winding down the campaign, I think that the Democrats taking control of Congress was a wake-up call. And even his vice president, Vice President J.D. Vance, put himself at distance with the president this morning on the war in Iran. So I think he has— Less room as a president to keep an open-ended war. And I think the fact that the market saw that there was such an overwhelming majority of Democrats, both in the House and the Senate, even though we haven't finished counting all the votes, that there's going to be a more tempered response. It's not going to be as much of a knee-jerk, far-left response because you have enough members of Congress who can actually come together and have much more of a rational policy response to the extent that they have one in Congress.
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Speaker 2: Could we potentially extrapolate those same arguments up to the other war, the Ukraine-Russia war as well? Could we perhaps be moving closer to a resolution to that in 2027?
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Speaker 5: So I certainly hope so, but I think that there's just a general— the vast majority of Democrats and Republicans in Congress support Ukraine, and the vast majority of Americans support Ukraine. It's really not an issue. And I think that there's a large, unbelievable concern that you have Trump— has this great love for Vladimir Putin, and it's disturbing. So I think that there will be investigations, subpoenas of Trump friends and family on doing business deals in Russia. I think a lot of people find that appalling. The fact that Trump reversed sanctions will face a big congressional test. And Congress was already pushing back ahead of the midterms putting pressure on companies and banks to not finance or accept the sanctioned diesel. So they were making it very clear that anybody, any company or financing institution would be investigated and prosecuted if they were participating in the acceptance, U.S. acceptance of the sanctioned diesel.
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Speaker 4: Heidi, when it comes to US-China, it's been quite interesting, right? It's taken quite a lot of effort and certainly not the smoothest road to get President Xi and Trump to this point where they have even a degree of warmth in this working relationship. What are the implications now, do you think, particularly as we have another leaders meeting on the sidelines of AIPAC expected before the end of the year? Do you think some of those hard fought for detente are now potentially at risk?
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Speaker 5: I tend to think that there will be stability in this relationship as long as both leaders decide they want stability in this relationship. So the message that we just heard that your previous guest had on wanting to continue stability in the relationship is important. And I think that that will be reflected in the APEC summit and at the G20 at the end of the year at Doral in Florida. So the one thing I would say on the China relationship is that there are certain areas where there is— where Republicans and Democrats are in very close to almost universal agreement that advanced semiconductor exports to China should be restricted. And I think that runs counter to Trump's more accommodating posture. So I think there is a there is a potential that you see legislation that would restrict the sale of advanced chips and manufacturing equipment to China, because there is just so much there's already legislation out there and there's a lot of support for it.
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Speaker 1: That was Heidi Crabo-Redeker, senior fellow at the Council on Foreign Relations, speaking with Bloomberg TV host Heidi Stroud-Watts and Paul Allen. bringing you their conversation 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 Krizner, and this is Bloomberg.
Speaker 1: Bloomberg Audio Studios.
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Speaker 1: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. The U.S. equity market rallied on Wednesday. That was after President Trump said he would accept the results of the midterm elections. Those remarks seem to offer a degree of certainty. And at the same time, some analysts were saying the outcome will now lead to a forced moderation on the build-out of data centers. And that view, in turn, helped to reduce some concern around the swelling CapEx spending that we have seen on the part of many of these hyperscalers. The market also benefited from the notion that U.S. economic growth will remain intact. One example, today's shares in Amazon, Apple, and Microsoft were each up by more than 5%. For a closer look at what we're seeing in markets across the APAC region, let's bring in Bloomberg's Paul Dobson. Paul is executive editor for Asia Markets, and he joins from our studios in Singapore. Thank you for being here. Before we get into some of the details, give me your sense of what you're hearing among people that you've been speaking with, either in the Bureau or some of the contacts within the industry across the APAC region. How are they viewing this U.S. midterm election?
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Speaker 3: Yeah, good morning, Doug. I think that there's still a great deal of caution around what it's actually going to mean, uh, going forwards and how the US president is going to react from here. So we certainly saw a good deal of positivity yesterday from his comments about, uh, sort of accepting, um, the result and being prepared to work with the Democrats, uh, and congratulating them on, um, their performance as well. Um, so that was taken as, as a relatively positive signal that, um, you know, maybe rather than being at loggerheads, there would still be hope for some sort of policy progress. And I think that the region was also warmed by, you know, the comments from J.D. Vance, where he's talking about the Iran war being a big reason for the performance of the Republicans in the elections and therefore the conclusion that maybe that points to the idea that the US administration will be in a hurry to come to some sort of an agreement or a truce in the Middle East, which of course had a big impact on oil prices and that should give buyers of oil and energy products across Asia a cause for a little bit more optimism as well. But, you know, pushed into a corner, the US president could go harder on, you know, using his executive authority to push unpopular things through. We've seen that already in the past. And so the market won't be completely convinced. And I don't think that Asia as a whole will be completely convinced that everything is going to be smooth and plain sailing from here.
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Speaker 1: So away from the congressional races, we had a number of gubernatorial victories in states that are exposed to this AI trade, and I'm thinking of Texas in particular. And we're seeing a lot of weakness, or we did in the U.S. session, in semiconductor shares, and I'm imagining that's going to be the case when we go to a market like South Korea today. Is there a great deal of concern that we may see a meaningful pullback in the growth rate of AI data center build-out in the states?
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Speaker 3: Yeah, so I think that this is a really interesting sort of two-edged sword because the market is seeing it as a cause for optimism, at least among the hyperscalers. The idea being if they are slowed down kind of across the board in terms of their build-out, actually that's positive because they won't take on so much debt and they'll be able to grow at a more moderate pace. But of course, for the providers of the picks and shovels of the data center boom, which are many companies in our region, That's less good news because it means that there'll be reduced demand for their products going forwards. And so for South Korea, which you rightly identify, that's the sort of laggard in the early trading in Asia. SK Hynix and Samsung under some pressure because, you know, there's a concern that there won't be quite such strong demand for their products. That would otherwise be the case. I'm not sure, you know, that argument will definitely hold up in six months' time because I do think that the competition... To build out the data centers locally in the US, but globally as well, there's still going to be extremely strong and demand therefore for those products, which, you know, we know are already sold out for the next 18 months, more or less. um, isn't, isn't going to immediately disappear or evaporate overnight. So we'll see, we'll see how long that trade has legs. What we do know though, is that, um, you know, over this earning season already, there hasn't been a great deal of support, um, for, uh, those sorts of companies. And, and there has been that continuing sort of concern about, um, the, the Neo cloud developers in particular.
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Speaker 1: Heavily indebted. Um, You mentioned the pullback in oil prices on the notion that we could see some sort of quick resolution to conflict with Iran. President Trump saying that he has no immediate plans for further strikes. I think we need to maybe put a question mark around that. Anything is possible, as we know. But I'm wondering about how this relates to the inflation story, because treasury yields came in quite a bit today. You also could make the case that this blue wave that we've been talking about may limit the president's ability to add to the deficit, which would obviously be encouraging to the bond market. But I'm wondering whether or not we can begin to talk about a meaningful reduction in the level of inflation or whether that's simply premature.
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Speaker 3: Probably premature to talk about it until we see a little bit more progress in the Middle East. The oil price has been extremely volatile and, you know, crude oil isn't really the main concern. It's still the refined products at the end of the supply chain. You know, the prices for gas in the US, the prices for diesel in Europe. That's the most cause for concern. I think, you know, the bonds market already made its move on the election results before we got that big lurch lower in the crude oil price. And so, In that respect, at least, it's more that idea that you were talking about of gridlock slowing down US borrowing that was the thing that seemed to be most helpful initially, at least for treasuries. Let's be clear, though. I think what the global markets want, what the world really wants, is a little bit of relief from those very high energy prices. That really has been the thing that's caused the most. sort of pressures across global markets. This year, it's been very uncomfortable for a lot of buyers in Asia. We've seen a lot of pressure on currencies across our region as a result, and on economies and countries having to sort of take all kinds of emergency measures or sourcing supplies from all kinds of unusual places just in order to, you know, keep all the, not exactly keep the lights on, but keep everything running as it normally would be.
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Speaker 1: So after the U.S. closed, Paul, we heard from both Qualcomm and the British chip designer Arm Holdings. Both of these companies, as you well know, are exposed to the smartphone market. And there's been a bit of a struggle there as the result of higher memory prices. Handsets have gone up in price. And both Arm and Qualcomm have been looking to diversify themselves away from smartphone chips and into chips that may be used for data center computing. Talk to me a little bit about what's going on right now from your point of view in the smartphone market. Are you seeing some of these on the demand side, some of these numbers coming in a little bit across the region?
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Speaker 3: Yeah, well, so we talked about energy impacts on inflation, Doug. And I think the other thing that's, you know, a little bit underappreciated is this chipflation phenomenon. So all of the... large manufacturers. I think it started kind of with Sony and Nintendo talking about it. And then we heard from Apple very recently talking about the cost of memory chips. And so these other designers as well, you know, talking about how that is really driving up costs and forcing them to put up prices for the end products is in turn reducing customer demand for new electronic devices. I think smartphones, we've seen it. We've seen it in some of the other electronic goods as well that are reliant on it. We saw one of the, I guess, Intel in Intel's earnings. They were worried about a slowdown in sales of personal computers as well, right? So yeah, so I think that that's a genuine phenomenon and it sort of does have blowback to other people in the same supply chain because if the costs are going up because of other parts in the devices, then you're not going to have so much demand for your, your, your products either. So I think that that, that that's not going to go away. Those prices are high. Those prices are continuing to rise or, or be it, you know, with, um, the proviso that, uh, there's, there's alternatives to the main manufacturers of some of the, the, the chips for those, um, products. And so maybe we'll start to see more profusion of, um, uh, Other smaller companies trying to get in on the act there.
00:09:57
Speaker 1: So, Paul, before I let you go, I have to ask about the dollar. We had a bit of weakness in New York trading. A lot of what we've been talking about over the last 24 hours seems to be perceived as dollar negative. Do you think that's sustainable? And if so, do currencies across the APAC, are they necessarily the beneficiaries?
00:10:19
Speaker 3: If the oil price keeps on going down, that should be supportive for Asian currencies and should be a negative for the dollar vis-a-vis the rest of the world. The US being a net energy producer after all and an exporter. And therefore, it's less impacted by higher energy prices than other parts of the world. So that's one factor there. I think that the lower bond yields would help to put some pressure on the US dollar as well. And if we do get a peace dividend and we do get an opportunity for stronger global growth, then that might also play in favor of emerging Asia in particular. But there's a lot of ifs in that chain, Doug. It's been a pretty decent nine months for the US. The exceptionalism trade has been there again because the US stock market has been strong, and held up a little bit, you know, when the bubble started to burst somewhat in some of the Asia tech names that have been so exciting in the first half of the year as well. I think that the other thing to watch out for is whether the carry trade comes back if markets do go into more of a kind of docile or, what's the right word, pacified state after the recent volatility. We saw Citigroup talking about that as a possibility already today. I was quite interested. I was watching the yen against the Mexican peso through yesterday, which started off with the Mexican peso, the weakest currency and the yen, the strongest currency. And by the end of the day, that more or less reversed. So That talks to the idea of more carry demand and people moving back into higher yielding currencies once the event risk is out. So, you know, all of those things could argue for not necessarily a weaker dollar because it's falling on its own, but some outperformance by other currencies within its orbit and beyond.
00:12:19
Speaker 1: Interesting insights, Paul. Thank you so very much. Bloomberg's Paul Dobson. He is executive editor for Asia Markets, joining from our studio in Singapore here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. So Democrats will now control both houses of Congress after the U.S. midterm elections and the defeat being felt by the Republican Party has led to some finger pointing over what went wrong. Vice President J.D. Vance blamed his party's losses on the war in Iran, as well as the cost of living and the U.S. relationship with Israel. That's where we begin our conversation with Heidi Crabo-Redeker. Heidi is a senior fellow at the Council on Foreign Relations, and she spoke with Bloomberg TV host Heidi Stroud-Watson, Paul Allen.
00:13:11
Speaker 4: And I was just reading through sort of your initial reaction notes. And as you point out, a number of these seats that were flipped one by one, deep, deep red seats, right, that many strategists said that it would be decades before that sort of calcification of Republican strongholds would be able to break. How did we see that in the last 24 hours?
00:13:32
Speaker 5: So, I mean, as you rightly point out, I think this was, I mean, pick your cataclysmic natural event, whether it's an earthquake or a tsunami. You've heard this all day. I never thought many of these red states would ever turn blue in my lifetime, and they did last night. So I think, you know, Texas would probably be the biggest one to stand out, both economically You know, it was really the biggest win. And you saw very deep red farming states like Kansas and Iowa. I mean, very deep red states. But they had been hit by Hormuz-related fertilizer costs going up, diesel costs going up, gas prices. Because, you know, these are huge states. People have to drive and fill up their trucks, and it's a long way. It's a lot of money to do that. And they also had very aggressive immigration crackdowns hitting their labor and the backlash from Trump trade policy hitting their key export markets. So I think it's not a surprise necessarily for the rationale, but it was a big surprise for all the politicians out there.
00:14:36
Speaker 4: What's going to be interesting is there's a lot of debate as to whether this was a vote that spoke to the anti-Trump or the pro-Democrat, right? And if you take that at least a significant part of this was a protest against the latter, how then policy-wise do the Democrats sort of cohesively come together, particularly if you look at this as a kick-off into presidential race 2028? Do you think that there are sort of common grounds when it comes to how they would approach the situation in the Middle East? Yeah. for example, the broader sort of economic policies and everything to do with AI as well?
00:15:13
Speaker 5: So if they're smart, and then this is a very, you know, this is a very broad spectrum of Democrats that won last night, they will come together and realize that this was not necessarily a full endorsement of their policies. This was in, you know, in large part a backlash against both the policies executive branch, Trump policies, and also the Republican lack of pushing back. We like checks and balances in the United States. And I think we really haven't seen that in the past year and a half. And so that was, you know, if the Democrats are smart, then they will realize that this is a mandate to serve the people that voted for them who were Republican or very much, you know, Trump voters in the past and for their natural base.
00:16:04
Speaker 2: Heidi, there appears to be a belief on oil markets, if we were to read the numbers correctly, that a potential end to the U.S.-Iran war just moved closer in the past 24 hours. What role, though, can Congress and Senate realistically play in advancing that?
00:16:20
Speaker 5: So it's a great question. I mean, the president and the executive branch have a huge amount of leverage and power in foreign policy. And so there's sort of that one side where I do think that President Trump will move forward on his foreign policy agenda. with or without pushback from Congress. At the same time, there has to be a recognition in the Trump administration that the Middle East war and the attack on Iran and the continued attacks, they're one in the same with the affordability challenge, with the fertilizer, with the diesel, with the gas, with the prices at the grocery stand, with anything that goes on a ship or a train or a boat or whatever to get transported. And so that is, it's one in the same with this war. And he also lost some of the MAGA votes who really counted on his campaign promise of no new wars and not getting enmeshed in new wars, particularly in the Middle East. So I think this is a... I think that this is probably going to be the mark of the beginning of the end of Trump's war with Iran. So even if he orders another major strike before winding down the campaign, I think that the Democrats taking control of Congress was a wake-up call. And even his vice president, Vice President J.D. Vance, put himself at distance with the president this morning on the war in Iran. So I think he has— Less room as a president to keep an open-ended war. And I think the fact that the market saw that there was such an overwhelming majority of Democrats, both in the House and the Senate, even though we haven't finished counting all the votes, that there's going to be a more tempered response. It's not going to be as much of a knee-jerk, far-left response because you have enough members of Congress who can actually come together and have much more of a rational policy response to the extent that they have one in Congress.
00:18:23
Speaker 2: Could we potentially extrapolate those same arguments up to the other war, the Ukraine-Russia war as well? Could we perhaps be moving closer to a resolution to that in 2027?
00:18:35
Speaker 5: So I certainly hope so, but I think that there's just a general— the vast majority of Democrats and Republicans in Congress support Ukraine, and the vast majority of Americans support Ukraine. It's really not an issue. And I think that there's a large, unbelievable concern that you have Trump— has this great love for Vladimir Putin, and it's disturbing. So I think that there will be investigations, subpoenas of Trump friends and family on doing business deals in Russia. I think a lot of people find that appalling. The fact that Trump reversed sanctions will face a big congressional test. And Congress was already pushing back ahead of the midterms putting pressure on companies and banks to not finance or accept the sanctioned diesel. So they were making it very clear that anybody, any company or financing institution would be investigated and prosecuted if they were participating in the acceptance, U.S. acceptance of the sanctioned diesel.
00:19:47
Speaker 4: Heidi, when it comes to US-China, it's been quite interesting, right? It's taken quite a lot of effort and certainly not the smoothest road to get President Xi and Trump to this point where they have even a degree of warmth in this working relationship. What are the implications now, do you think, particularly as we have another leaders meeting on the sidelines of AIPAC expected before the end of the year? Do you think some of those hard fought for detente are now potentially at risk?
00:20:15
Speaker 5: I tend to think that there will be stability in this relationship as long as both leaders decide they want stability in this relationship. So the message that we just heard that your previous guest had on wanting to continue stability in the relationship is important. And I think that that will be reflected in the APEC summit and at the G20 at the end of the year at Doral in Florida. So the one thing I would say on the China relationship is that there are certain areas where there is— where Republicans and Democrats are in very close to almost universal agreement that advanced semiconductor exports to China should be restricted. And I think that runs counter to Trump's more accommodating posture. So I think there is a there is a potential that you see legislation that would restrict the sale of advanced chips and manufacturing equipment to China, because there is just so much there's already legislation out there and there's a lot of support for it.
00:21:22
Speaker 1: That was Heidi Crabo-Redeker, senior fellow at the Council on Foreign Relations, speaking with Bloomberg TV host Heidi Stroud-Watts and Paul Allen. bringing you their conversation 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 Krizner, and this is Bloomberg.
