Trump Talks Up Iran Diplomacy; Chip Rout Deepens on China Competition

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2:30Good morning. I'm Karen Moscow. And I'm Alexis Christophorus. Here are the stories we're following today. Alexis, we begin with the latest on the war in Iran. President Trump said the U.S. and Iran are holding talks to end their conflict, but warned military strikes will resume if negotiations fail. It follows the U.S. holding off attacks on Iran for three straight days. Meanwhile, Iran suspended retaliatory strikes on Gulf countries. Speaking to reporters on board Air Force One, the president claims talks are only happening because the U.S. has been hitting them very hard. They want to meet and we're meeting.

3:06We'll see what happens. There's a chance we can make a deal. Without what we did, they wouldn't even be talking to us. They requested a meeting through their surrogates and directly. And we're meeting and, you know, good things can happen, I guess. Despite President Trump's optimism, Iran's foreign ministry says messages may be passed through mediators, but that no formal talks with the U.S. are currently taking place. Meanwhile, sources tell Bloomberg that Oman and Iran are trying to reach an agreement to restart shipping through the Strait of Hormuz. And Karen, President Trump's comments come as Israeli Prime Minister Benjamin Netanyahu readies to visit the nation's capital today.

3:44Netanyahu spoke to reporters through an interpreter before his departure to the U.S. We will discuss all the issues on the agenda, foremost among them Iran. Of course, our goal is to preserve our security and also to expand the circle of peace around us. Israeli Prime Minister Benjamin Netanyahu will meet with President Trump at 11 a.m. Wall Street time, according to the White House schedule, and he plans to press the president to keep a, quote, constant watch on Iran's nuclear program. And Alexis, with the war extending into its fifth month and the midterm elections less than 100 days away, Democrats continue to hammer the president on the war in the Middle East.

4:21Democratic House Minority Leader Hakeem Jeffries told Bloomberg yesterday that the president has no exit strategy in Iran. Well, we're going to continue to aggressively push the effort to push back against this reckless war of choice. It's deeply unpopular with the American people, and we have to sustain the intensity. Donald Trump has unfortunately got us involved in this situation without any plan, any objective, any clear exit strategy. And now the American people are clearly paying the price. Democratic House Minority Leader Hakeem Jeffries speaking with our Joe Matthew on Bloomberg's balance of power.

5:00Get the full conversation on the Bloomberg Video Hub at Bloomberg.com and on the Bloomberg Business app. And elsewhere in politics, a special election today in Georgia will decide who replaces the late Democratic Representative David Scott in Georgia's 13th district. Bloomberg's Amy Morris reports from Washington. Six candidates are competing for the seat, and the winner will serve out the remaining few months of the late Senator David Scott's current term. That could have an immediate impact on the balance of power in the U.S. House, where Republicans have a thin majority. Under Georgia law, the four Democrats and two Republicans will appear on the same ballot, and any of them could secure the seat.

5:38But if no candidate wins a majority, there will be a special runoff election on August 25th with the top two vote-getters. In Washington, Amy Morris, Bloomberg Radio. All right, Amy, thank you. Well, South Dakota is also holding elections today. Republicans will decide in a primary runoff whether to nominate Governor Larry Rodin for a full term or to instead tap businessman Toby Dodin to represent the party on the ballot in November. The winner of the runoff will enter the general election against Democratic former state Senator Dan Ahlers with a significant advantage in the reliably Republican state that has not had a Democratic governor since the 1970s.

6:17Well, Karen, from politics to the chip sell-off, weighing down markets this morning, just as some of the Mag 7 are getting ready to report earnings, Bloomberg's John Tucker joins us now with the very latest. Good morning, John. And Alexis, you can pin the sell-off for now on competition from China. It looks like they're making progress on developing advanced chips. Now, skittish investors have dumped many of this year's biggest AI winners. Toss into the mix the fears over circular spending. NVIDIA,$750 billion in AI infrastructure deals. That has investors worrying about debt levels. For anybody thinking about buying the dip, a word of caution from Steve Sosnick at Interactive Brokers.

6:58Even though that strategy has worked more or less perfectly for the better part of several years, It doesn't always work, and it doesn't work in every stock every time. Asia's benchmark headed for a correction. Traders rotating into consumer stocks in other sectors. All this happening as we get earnings this week from Microsoft, Meta, Apple, and Amazon. In New York, I'm John Tucker, Bloomberg Radio. All right, John, thank you. Well, the sell-off comes with SK Hynix poised for a profit surge. It's expected to report a nearly seven-fold leap in operating income in the June quarter, helped by soaring demand and prices for its high-bandwidth memory chips used inside AI data centers.

7:38Still, the South Korean chipmaker will announce its results as questions persist around the massive spending and debt raised to build data centers across the globe to support AI services. The company joined Elon Musk's SpaceX in being among the year's largest U.S. offerings to trade below where shares were sold for the first time publicly. And Karen, in Taiwan, prosecutors have detained an NVIDIA employee as part of a probe into the alleged smuggling of AI chips into China. Local investigators searched the home and office of the staffer, and the courts granted prosecutors' request to detain the person on allegations of forgery and breach of trust.

8:15The case is one of at least eight probes into NVIDIA chips smuggling across four jurisdictions as officials crack down on a black market problem. Well, Alexis, the markets are also following a slew of central bank news this week. We get rate decisions late in the week from the Bank of England and the Bank of Japan. But before that, here in the U.S., we get the key decision from the Federal Reserve tomorrow. Stiefel chief economist Lindsay Piegsa told Bloomberg yesterday that if Chairman Kevin Warsh and the FOMC raise rates at the July meeting, it might not be their last move higher. If there's a lack of communication and the Fed simply comes out, makes that aggressive move higher without any guidance, any forward guidance for what we can expect going forward, I think the market would anticipate that the Fed has shifted their line of thinking to the prospect that inflation is rising, it's not under control.

9:06And if that's the case, it would be unlikely that one rate hike would quell that concern. Stiefel's Lindsay Pieza says that she expects policy to remain on hold for the next several meetings. Stay with Bloomberg for full coverage of the meeting and Chair Warsh's news conference on a special edition of Bloomberg Surveillance. The Fed decides that's tomorrow, 1.30 p.m. Wall Street time on Bloomberg Radio, Bloomberg Television and the Bloomberg Business app. And Karen, over in Europe, Barclays shares fell at the open despite reporting better than expected second quarter earnings. The British lenders' equities traders beat analysts' estimates, and the bank raised its full-year income outlook.

9:46The CEO told Bloomberg the bank is seeing strong performance across its businesses. Equities are now 30 % of Barclays, and remember, this was the house that fixed income built. And so the diversification we're seeing in the business, the strength we're seeing in our business, is something that we're truly happy about. The comments from Barclays' CEO, not enough to reassure investors. Markets appear to be looking for an even stronger performance from Barclays following blockbuster trading results from Wall Street banks earlier this month. And finally, in sports, Alexis, sources tell Bloomberg federal agencies the mobile phone and computer of Los Angeles Dodgers owner Mark Walter last September as part of a wide-ranging probe into the financial dealings of the billionaire's businesses.

10:27The FBI reportedly carried out a search warrant on board a private plane at a Chicago airport where Walter was traveling. The FBI's Chicago field office confirmed that it executed a court-authorized search for a mobile phone and laptop on an aircraft at Midway International Airport on September 18th last year, but declined to comment further. Bloomberg has reported that federal prosecutors in Manhattan have been investigating potential financial improprieties at two of Walters Insurance companies and at Guggenheim Partners, the financial firm that Walters leads.

11:03510 on Wall Street. Time now for a look at some of the other stories making news in New York and around the world. For that, we're joined by Bloomberg's Michael Barr. Good morning, Michael. Good morning, Alexis. A flood watch starts this morning for several parts of the Northeast, including New York and New Jersey. Bloomberg meteorologist Craig Allen has the latest. Yesterday, we had major flooding in a few areas across New Jersey again. Today, flash flooding is likely over a larger swath of the New York City tri-state region. And actually, showers and heavy thunderstorms are possible anywhere up and down I-95 from Washington to Boston.

11:36But I'm thinking the greatest threat and most challenging weather will run from about the Philadelphia-Wilmington area up past New York City and then over western sections of Connecticut and Massachusetts. In other words, mainly west of I-91 in the Connecticut River. Bloomberg meteorologist Craig Allen. Emotional opening statements began in the trial of a Massachusetts woman accused of killing her young children. Lindsay Clancy pleaded not guilty through an insanity defense. Her lawyer argues she was experiencing postpartum depression. Her husband, Patrick Clancy, took the stand Monday about his three children found dead in the basement of their Duxbury home in 2023.

12:16The children were aged five, three and eight months. It has been about six months since the mother of Savannah Guthrie was believed kidnapped from her Arizona home. The Today Show host released a new video pleading for information about her mother, 84-year-old Nancy Guthrie. I truly believe it is never too late to do the right thing. Help us bring this situation to an end. The Pima County Sheriff's Office said that the investigation remains active and ongoing. New York Mayor Zaron Mamdani says five city-owned grocery stores will provide a discount on produce, meat, bread, and milk. Once a month, our five city-owned grocery stores will set prices for this core set of goods at 30 % below typical retail prices.

13:00No exceptions, no gimmicks. The savings will last for the entire month. Speaking in Brooklyn Monday, Mayor Mamdani and the city's Economic Development Corporation say the move could save shoppers about$90 a month. But not everyone thinks Mamdani's plan is a good idea. Shark Tank star Kevin O 'Leary says it would guarantee that the stores will lose money on every sale and that taxpayers would ultimately bear the cost. Global News, 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg. Thanks, Michael. Time now for our Bloomberg Sports Update. And for that, we bring in John Stashauer.

13:39NFL training camps are opening up and the Indianapolis Colts proclaimed their starting quarterback Daniel Jones to be fully cleared from last year's Achilles injury. Same is true of Patrick Mahomes as he returns for the Chiefs from a torn ACL. Washington fired assistant coach Ben Steele after a recent DUI. University of North Carolina general manager Mike Lombardi, who has a long relationship with head coach Bill Belichick, put on paid leave after a human resources complaint the Cubs have released veteran pitcher Jamison Taillon. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this.

14:18Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined.

14:57An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market.

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16:24This is Bloomberg Daybreak. And good morning, I'm Karen Moscow alongside Alexis Christophorus. President Trump is saying The U.S. and Iran are engaged in diplomatic talks to end the Middle East conflict, but warn the two sides will return to fighting if negotiations did not yield a deal. And the president spoke in Detroit yesterday. We destroyed most of their drone manufacturing capability, their missile manufacturing capability, and right now they're talking to us about making a deal. But if we didn't do it tough, there would be no talk. Well, for the latest now on the war, We're joined now by Stuart Livingston-Wallace, head of Bloomberg's Middle East coverage.

17:01And Stuart, good morning again. So what do we know about these talks? Yeah, good morning, Karen. I mean, the short of it is we're not entirely sure what he's talking about. So it could be any one of a number of things. We know that there are some sort of established mediators that have been going back and forth, so specifically Pakistan and Qatar. And, of course, there are others as well because so many countries have been involved in this conflict. Or alternatively, he may be referring to at least one leg of these negotiations, which is over the control over Hormuz. So that is a series of talks that we know is going on between Iran and Oman, the two countries on either side of the strait.

17:37We're not quite sure what exactly is being discussed. You know, there are various permutations here. I think for it to be acceptable to a wider community, it has to hit two main points, which is, number one, Iran can't have sole control. In other words, it has to be either a joint authority with Oman or some sort of dual-track system of approvals. And secondly, that it can't be used as a means of extracting vast amounts of money from the shipping community. So maybe something a little closer to what we see in the Strait of Malacca or the Dardanelles and Mosseris in Turkey, where there are fees of sorts, but they're reasonably low and they're sort of tied to things like environmental maintenance, you know, pilotage, that kind of thing.

18:16So that's what seems to be happening at the moment. But again, most of this is taking place behind closed doors, and we don't have a great deal of visibility over the progress. And it's actually really interesting because there does seem to be a lot of focus on the Strait of Hormuz and those discussions. But we know that President Trump is meeting today with Israeli Prime Minister Benjamin Netanyahu, and he really reiterated the fact that Iran should never have the capability to build a nuclear weapon when speaking the other day. So what does this mean? What is at stake for their discussions today?

18:49And will he try to get a more focused discussion on this when it comes to the war with Iran? Yeah, I mean, again, we don't know exactly what's going to be discussed. We can make some presumptions, though, which, you know, again, it's not news to anyone that Israel, amongst others, is very concerned about Iran developing a nuclear weapon or having the capability to do so at relative short notice. I think that's been front and center of what certainly the Israeli prime minister has been saying publicly for many, many years. So you would imagine that would be part of it. You would also think, though, that there will be some sort of discussion around Iran's missile program, which again is perceived certainly by Israel and obviously now many other countries in the region as an ongoing threat to safety.

19:32And then finally, it's support for proxy forces, which, you know, you're seeing today disrupting traffic on the other side of the peninsula in Mbaba Mendo. And there I'm referring to the Houthis that do receive support in one form or another from Iran. But they're not the only ones. You have militias in Iraq. You have Asbola. You have Hamas and others. So you would imagine those will be sort of the main topic that they'll be discussing. But again, we'll see what comes out after those talks, as you said, later today. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond.

20:07Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify, or anywhere else you listen. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121. Plus, listen coast to coast on the Bloomberg Business app, now with Apple CarPlay and Android Auto interfaces. And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long.

20:46I'm Karen Moscow. And I'm Alexis Christophoris. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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