US CPI Data Fuels Fed Rate Cut Bets & Bitcoin's Rise | Bloomberg Daybreak Asia

US CPI Data and Market Reaction

• 📈 The US equity market closed at record highs following an in-line US inflation reading, boosting speculation of a Federal Reserve rate cut in September.
• 💡 The core Consumer Price Index (CPI) rose 0.3% month-on-month, with services prices increasing more than goods, which were impacted by tariffs.
• 😌 Investors found relief, as the inflation data was not worse than expected, mitigating fears of tariffs significantly impacting broader price pressures.
• 📉 Charles Lieberman noted that while the trend in goods prices is upward, the overall CPI was on the soft side, contributing to the market rally.

Federal Reserve Policy and Economic Outlook

• 🏦 The CPI data may free the Fed to implement a 25 basis point rate cut, and potentially even 50 basis points, depending on their desire to appease the President.
• ⚠️ The Fed may feel compelled to make up for misjudging the economy, especially after a surprisingly weak employment report, suggesting a recent soft patch due to tariff concerns.
• 📊 Upcoming economic data will be crucial in determining the Fed's next move, with a focus on whether tariffs are being absorbed by producers or squeezing profit margins.
• 🌍 Tariffs have led to a rerouting of trade flows, with a decline in Chinese exports to the US and an increase from other Asian countries, though this is subject to change.
• 🏭 Reshoring of American manufacturing is expected to take years, with limitations on increasing production from existing facilities.

AI Trade and Market Valuations

• ☁️ Companies like Coreweave are investing heavily in data center capacity to meet demand from AI developers, despite steeper-than-expected losses.
• 💰 The market is pricing in significant growth for AI and related sectors, making valuations for some chip and AI-related stocks appear expensive.
• 💡 Utilities supplying energy to data centers and the construction of these facilities are areas of interest, but the market has largely anticipated this growth.
• 📉 Lieberman expressed discomfort with current high valuations, suggesting that significant growth must materialize to justify them.
• 🎯 He advocates for investing in the