00:00I mean, Europe yesterday a bit more resilient in the face of the latest AI tantrum than the U.S.
00:05Asia certainly more resilient this morning, not everywhere, but in a lot of places.
00:10But I suppose the argument can't be that hardware is going to do great out of AI and everything else
00:16is going to lose.
00:17I mean, there's got to be other winners too, I suppose.
00:19So what do you make of the latest sort of U.S. versus the rest of the world trade here?
00:24I think for the U.S., I think, you know, ultimately we are kind of seeing this AI displacement effect
00:29pronounced most prominently there.
00:31And that's very much outweighing the AI benefits.
00:34And I think the thing at the moment is more like the news flow that we're seeing.
00:37Basically, every day we're seeing software at the eye of the storm and we're seeing something peripheral or adjacent to
00:43it being taken out.
00:44And we saw American Express down over 6% yesterday.
00:47And I just think as these tape bombs, these new reports, these new angles keep coming into the market,
00:52it's just very difficult to navigate if you're a U.S. investor.
00:55And I think the best part of it is to kind of look elsewhere.
00:58And as you mentioned, yes, you know, some of these kind of shovel and pick APEC stocks, you know,
01:03if you look at the South Korean Kospi, they're benefiting.
01:05And I think they will continue to benefit because people just have this broader risk aversion to the U.S.
01:11at the moment.
01:11And at a time when global growth is relatively strong, I think that trade does make sense.
01:16So is yesterday a sign of things to come through 2026 that you fade the tariff noise and focus on
01:21the A.I. scare trade?
01:23I'm, you know, not as kind of, you know, shrugging at the tariff story as some people are.
01:28I think, you know, I think the tariff story is a concern.
01:31Yes, we may get to the point where the effective tariff rate may be relatively unchanged from what it is
01:37now.
01:37But what we're kind of seeing is we don't really know what the composition of those tariff effects are.
01:42And, you know, we saw the weekend one minute Trump was 10 percent, then it's 15 percent, and now today
01:47it's 10 percent.
01:47And this basically just kind of plays into the point that there's just so much policy uncertainty from the U
01:53.S.
01:53And concerningly, yesterday we saw the equal weight S&P close lower.
01:58We saw the Russell close heavily lower.
01:59And I think that's a particular concern for the U.S. stock market because some of those areas have actually
02:04been propping up things.
02:05So I think if you have the twin effects of A.I. displacement hitting some of these software stocks and
02:10then you also see, you know, some of the tariff anxiety creep into the U.S., yes, we may have
02:15the taco trade.
02:16But the noise and the uncertainty on the way is just another factor for traders to have to factor in.
02:21Certainly a lot of noise and a lot of uncertainty.
02:23Let's go to Japan and what's happening there.
02:25We've actually seen the yen and JGB markets responding to some reports from other media in Japan suggesting that the
02:31prime minister there has voiced apprehension about further rate hikes from the BOJ.
02:35How seriously do we take that kind of commentary?
02:38I think you should take it relatively seriously.
02:40I mean, I was always, you know, apprehensive myself about the rally that we saw in the yen post the
02:44election.
02:44It was kind of built on this narrative that Japan was going to be, you know, fiscally responsible.
02:49You know, we're going to see too much in the way of bonditions ramping up.
02:52But, you know, reports were suggesting the complete opposite.
02:54We saw soft Japanese GDP at the end of Q4 suggesting that more stimulus may have been needed.
03:00So I didn't really buy into this, you know, kind of pivot that we saw in the narrative post-election.
03:06And, you know, the interest rate channel was one of the positives people were citing.
03:10But if we do see this begin to waver, that really does, you know, undermine the yen.
03:14And you can also combine that with some of the geopolitical headlines, you know, Japan and China clashing.
03:18Then I think, you know, we could potentially see a bit more of a material move higher in dollar yen.
03:23And people may now need to think about 160 possibly again in dollar yen.
03:27OK, well, we're at 156 per dollar right now.
03:30Weaker nearly 1% the yen against the dollar.
03:32Adam, thank you.
03:33That's Adam Linton from our Markets Live team.
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