Good morning. This is Horizons Middle East and Africa. Global chip stocks rally as the new personal AI agent fueled optimism over demand. Calls for industry leaders to slow down the pace of AI development. The U.S. and China discuss AI, investment, and trade ahead of the Trump-Xi summit. Jamison Greer warns divisions remain over extending the tariff truce. Supply fears ease. Oil steadies after four days of losses as flows through the Strait of Hormuz picked up.
Looking for signs of a break in the U.S.-Iran conflict. Let's give you a quick check of what markets are doing. We saw the S&P 500 yesterday gain 1.5%. The gauge for memory chips about 3% higher at the close yesterday, and this is because of, as I mentioned in the headlines, news that Meta's AI agent is being treated really well on the Google Play Store. The AI agent of Meta doing pretty well in the rankings, also when it comes to Apple rankings. We're seeing a pretty good performance. Meta being one of them that surged 11% yesterday. That was the best intraday performance since early 2025, so over a year of good performance. That good performance is seeping into the Asia session. The MSCI up 5%. The Nikkei is still closed for a public holiday. Winnie will talk about the strong performances there. Crude snapping after four days in the red. Still steady performance, although we're seeing energy prices pivot above $100 a barrel. But a lot happening on the diplomatic push. We're still waiting to see if the Iranian president would meet with President Trump, and of course, some other meetings that we're monitoring that will prove to be pivotal for the U.S.-Iran war. Of course, on this side, we're watching the flows of crude through the Strait of Hormuz and looking at the performance of Bitcoin. It is moderating this morning, but yesterday gained over 7% as investors returned to risk assets. They have longed and shorted positions. $1 billion over the last 24 hours, the highest since late August. A positive performance on Bitcoin above the $80,000 benchmark. Winnie, good morning. What are you looking at?
The tech rally really driving Asian stocks today. MSCI up for a fifth day. That is all about the optimism around Meta's new AI agent because the expectation is, given how compute-intensive it is, it is going to likely mean more demand for the AI supply chain here in Asia. That's why you can see the tech-heavy gauge in South Korea up. The Taiwanese benchmark inching to a record earlier today. We're headed for a record close. Flip the board. We take a look at some of the names driving the rally. MediaTek jumping almost 5%. You can see other hardware names, a PC name jumping by the daily limit. Some of these Chinese names, they are seeing some additional tailwinds as well. When it comes to Tencent, they are drawing parallels between Tencent and Meta. They can enjoy a similar opportunity given their chat ecosystem. Similarly, when it comes to Alibaba, unveiling what it called China's most powerful AI chip to compete with Nvidia, you can see shares here up about 3% or so. Back to you.
Thank you. As always for those market updates. Now, let's focus on the AI picture. Global AI stocks are rallying as the early success of Meta's new personal AI agent reserves optimism around demand for chips and computing power. Investors from some of the biggest names slowing the pace of AI development. Joining us is the head of capital. How do you balance that between what we're seeing in the rally this morning and also the calls to slow down the pace of development?
It is very interesting times actually. The macro backdrop is becoming tougher and tougher as we speak. 10-year close to 5%. What is driving this is earnings. That is doing heavy lifting. Investors have not been disappointed. You can still have a strong assumption of consumption. Investors are looking through challenging macro. My major concern here is the lag. 5%. Eventually, that being said, the AI story would be less impacted given that possibility and earnings expectations which have been very robust.
I want to go back to the oil story. It is so important. Focusing in on AI, do you think, going forward, and you mentioned CapEx, do you think AI CapEx would be a single factor keeping yields elevated in the United States?
Elevated for a lot more reasons, but of course AI capital is one reason. The current reasons we're seeing the 10-year elevate is inflation. Supply and AI CapEx spending. That definitely contributes to where inflation is. It is not easy to get inflation back to 2%. It is extremely hard. They are operating in a very difficult environment.
Going back to oil, I was taking a look at your notes earlier. You mentioned this is becoming a fundamental issue with supply that oil is above $100 now. Do you think markets need to start factoring in if oil remains above $100, or is this factored in as a temporary surge that will cause short-term inflationary surges?
I don't think oil is anymore a Strait of Hormuz story. The physical market is becoming way more tighter. CapEx, the pre-conflict levels. Limited capacity compared to the last three to four weeks. The big stress is showing up on refined products. I personally think the risk to oil price is not. There is going to be a lot more volatility, and it is going to be higher than we're at today. The physical market is something which not many of us are looking through. I think that is something that will start playing.
A lot of analysts are suggesting oil price could see further upside. $140, $150 on the barrel. Given this environment, how do you allocate with this being a physical issue now?
Asset allocation is so difficult. Equities, obviously we favor the AI things. Ability to monetize AI investments. The duration, something we are avoiding. 5% to 10% is great. Likely to be higher for longer. Meaning that even if you were to assume oil prices would fall back to $80, even then, 10-years could be at 4.25. A lot more things acting on it. Money market is something we're looking into. Given it is to be higher for longer, it is becoming an active allocation at the moment.
Okay, R.T., we have to leave it there today. Public markets head. Chinese and U.S. officials continue to invest in negotiations ahead of the summit between President Trump and Xi Jinping. Early meetings have remained upbeat. U.S. Trade Representative Jamison Greer said divisions remain on extending the tariff truce.
We will continue to have discussions about that. We still have some time before it happens, so my expectations, we'll continue talking. I think a lot of it is because China has created this uncertainty. They have limited rare earth exports. They have controlled them. We monitor them. Just saying we have full trust and confidence in each other at this point is a little naive. We have a good relationship. President Trump and President Xi have a good relationship. We need to make sure these things go incrementally.
Steven Engel has updates. Good to have you with us for a second day in a row. The updates on this summit. What do we know about the state of those trade talks?
Yeah, so they have a second round of talks in New York. We just alluded to. That propelled from Sunday's meeting from the top negotiators like Scott Bessent. They talked about AI and trade. You just heard Jamison Greer, the U.S. Trade Representative, talking about incremental increases for this trade truce. It expires November 10. There is almost two more months that there can be some gamesmanship and jockeying and using leverage to get what each side wants. The United States, Jamison Greer saying he would be in favor of the trade truce by three months at a time or maybe six months. The Chinese would prefer one if not two-year extension. There is going to be some compromises. There is going to be some negotiation on that front. Jamison Greer mentioned the important point from their data and the data we see as far as export license approvals that the Chinese have given to rare earth, magnets and the like, are critical for the high-tech supply chain, down 21% from August from the month before. That's what he was claiming. That's why he is more in favor if they are going to find consensus on extending this truce, smaller increments will benefit the United States. Lots more to be discussed. They will no doubt come to a conclusion on before that summit on Thursday.
What remains as a sticking point? You mentioned some of the timelines and the prospects of this being extended. What are some of the sticking points in terms of topics the two countries are talking about? Is it AI? Is it something else at this point?
Sure. They agreed to have sort of a notification mechanism on AI, but we don't know the nuts and bolts and the details of that. We know they are going to create this AI dialogue. U.S.-China AI dialogue. We don't know what that is going to constitute. Is that going to be about bigger picture and the pace of AI development or allegations that the United States has had, including Scott Bessent, of AI theft of America's frontier models. Again, there is still a lot to be discussed. It is something Jamison Greer has talked about, the trust deficit between the two countries. Every time they meet they try to bridge that a little bit more and more. That's why expectations for the summit are low other than reaffirming their commitment to meet at a high level. If this is going to be an extension, it will probably not happen Thursday. I can always be surprised. It might be announced, but I think maybe at APEC in Southern China, the November 18-19 might fit the timeline better for Jamison Greer's liking and also a time when Donald Trump wants to meet Xi Jinping at least a third and fourth time this year. The other one maybe being in December at G20 in Florida.
We might have to wait until November. For now, thank you as always for your insights. Now coming up, oil steadies as traders weigh Middle East supply risks against a fresh diplomatic push to end the U.S.-Iran war. Details coming up. This is Bloomberg.
Oil price inched higher after dropping towards $100 a barrel as Saudi Arabia increased exports through the Strait of Hormuz and at the same time talks between the U.S. and Iran eased fears of supply disruptions. We're joined by Stuart Livingston Wallace. What do we know about the flows through the Strait of Hormuz from Saudi Arabia's side or increased flows?
The satellite images come sporadically. It appears they are ramping up at least the number of ships coming in to load at a pretty high pace. Based on what we can see, we think it is the greatest volume that is going to come out of those ports since June. I think that speaks to the pivot we have seen over the past couple of weeks with Saudi Arabia having to shut that pipeline. We know they are working to go around the damage. They are going to try and get a balance between the two. But as far as the market is concerned, there is an anticipation you're going to get greater volume out of the Strait of Hormuz on the Saudi side.
The U.K. is giving Saudi Arabia some defensive power to counter the Houthi threat that has been increasing. What do we know about that side of the story?
It is quite limited. That will be taken as a positive by the Saudis, but it is a far cry from what we saw in 2004-2005 when the U.K. was directly engaged in attacks on Houthi positions for many months. I think it is a strong signal from the U.K. They want to remain engaged, but again, nothing like the scale of engagement we saw a couple of years ago. It is hard to see where exactly it goes next. Does it fundamentally change the equation? Probably not in the short-term.
Probably not, and we're monitoring developments. Bloomberg's Executive Editor for the Middle East and North Africa. Coming up, 11 African central banks delivered key rate decisions. We kick off with Nigeria. We will tell you what to expect next. This is Bloomberg.
African central banks are poised to keep interest rates higher for longer to shield economies from shocks and support their currencies. Of the 11 central banks due to deliver interest rate decisions over the next two weeks, seven are expected to hold, three hike, and one cut. For more on these decisions, let's get to Jennifer Zabasajja. Good to have you with us. What is keeping the central banks from lowering the cost of borrowing at this time?
There is quite a variation of what we're seeing in the central banks. The Middle East, it has created a bit of caution amongst most of the central banks because of a number of imported inflation fears and concerns they are dealing with, especially as we continue to see Brent crude above $100 a barrel. There is that factor and some of the uncertainty coming with the events playing out in the Middle East. Also, what we're seeing from the U.S., a bit more of a higher and more restrictive U.S. central bank that potentially could lead to depreciation from some of these African currencies. We see central banks weighing that as they make their own decisions and potentially wanting to avoid any sort of imported inflation, higher imported inflation than expected, and especially if we continue to see higher for longer right now with the U.S. central bank. There is part of that and also the aspect of creating buffers that we're seeing. A number of African central banks and countries talking about this over the past few years, watching have that just in case there is a day where they are going to need to tap into this. A bit more caution that we're expecting to see over the next few days.
Yeah. January starting off in Nigeria. What do we expect from the rate decision? What can we expect from that?
We start with Nigeria and Morocco. Nigeria is one of those countries we're expecting to cut. Bloomberg Economics is anticipating a 450 basis point cut to be delivered. Let's keep in mind what we have been seeing over the past few months with Nigeria. We have seen rates unchanged all the way dating back to a few days before the Middle East conflict erupted. We have seen a bit limited of a pass-through from some of the oil shock compared to other African countries. We have seen the refinery and some more local production being able to help stem any of those effects on the currency and on the inflation situation there and a bit more stable. Perhaps that is what the central bank is factoring in when they come out with that decision later today. That's the first of many.
Okay. Bloomberg's Chief Africa Correspondent Jennifer Zabasajja with updates. Coming up, we'll talk to Luke from Goldman Sachs. That conversation up next. This is Bloomberg.
Good morning. Our top stories this morning: AI trade wars back. Global chip stocks rally as Meta's new personal AI agent fuels optimism over demand. Three follows a rough patch as investors weigh calls from industry leaders to slow the pace of AI development. The U.S. and China discuss AI, investment, and trade ahead of the Trump-Xi summit, but Jamison Greer warns divisions remain over extending the tariff truce. And supply fears ease. Oil steadies as flows into the Strait of Hormuz pick up and traders watching renewed diplomatic efforts for signs of a breakthrough. It is 8:30 a.m. across the Emirates. Let's give you a glimpse of what risk assets are doing. The S&P 500 did close in the green. The Nasdaq 100 about 3% higher. The gauge that tracks memory chips, the big names, more than 4% higher at the close yesterday. That positive performance led by Meta's new AI agent, Muse. Meta gained about 11%, the best intraday performance in about a year. That positive performance is seeping into the Asia session. Japan is still closed. Trading on the yen is quite muted, but it is still steadier this morning. Winnie will talk to us about the underlying strength. Oil prices getting by the second, over 1% higher, snapping four days of losses. Still above $100 a barrel. We continue to monitor the physical movement of shipments, but also the diplomatic push set for the sidelines of the U.N. meeting in New York. Bitcoin, $85,000. It had gained over 7% yesterday as investors returned to risk assets. Now for another look at what's happening in the Asian session, Winnie Hsu is standing in Hong Kong for us again. Hi, what are you looking at?
