BN Daybreak: Hormuz deal contradictions; US rate hikes; SA political & farming crises

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[00:00:00]Daybreak on Business News is proudly brought to you by Bonitas, the medical aid for South Africa.

[00:00:10]>> [music] >> Good morning and welcome to the Business News Daybreak. Today is Thursday the 28th of May. I'm Terry Lanigan.

[00:00:21]Up first, let's get the latest overnight world news from our partners at Bloomberg.

[00:00:26]>> There were mixed signals today on the prospects for a US-Iran deal to end the war and revive energy flows through the Strait of Hormuz. The US denied an Iranian media report on a draft interim deal to return traffic through Hormuz to normal levels within a month of it coming into effect. The report also claimed the US is ending its naval blockade of Iran while at the same time withdrawing naval forces from the waters surrounding Iran. President Trump said no one nation would control the strait.

[00:00:58]>> The strait's going to be open to everybody.

[00:01:00]>> It's uh >> And who would control it?

[00:01:01]>> It's international waters. Nobody's going to control it. We're going to watch over it. We'll watch over it, but nobody's going to control it. This part of the negotiation that we have >> At the same time, the president downplayed the possibility of Iranian sanctions relief.

[00:01:15]>> We're not talking about any easing of sanctions or giving money. No sanctions, no money, no nothing.

[00:01:21]Uh We have control of money that they claim is theirs.

[00:01:27]Uh we'll keep control of that money. And when they behave properly and when they do what's right, we'll let them have their money.

[00:01:33]>> Hours later, American forces carried out air strikes on an Iranian military site, striking down Iranian attack drones and an Iranian drone launching unit in Bandar Abbas. A US official said the attacks were defensive and the US intends to maintain its existing ceasefire.

[00:01:52]The Israeli military told residents across southern Lebanon to leave as the IDF expanded its operations there. The Israeli military said it will work with extreme force against Lebanon's militant group Hezbollah. Now, Iran has insisted any ceasefire with the US would include Lebanon. And Bloomberg's Israel bureau chief Ethan Bronner says Israel will not do anything to harm the deal between Iran and the US.

[00:02:18]>> There's a clear understanding that Israel is not going to do anything that would really lengthen this thing in any way short toward Iran. For example, it would not move without American agreement.

[00:02:31]>> Bloomberg's Ethan Bronner.

[00:02:33]After the bell, Snowflake gave a stronger than expected outlook for annual product sales. And the company also said it's expanding its collaboration with Amazon Web Services to accelerate the adoption of enterprise and genetic AI. Shares in Snowflake are up 35% in late US trading. Here is Bloomberg analyst Mandeep Singh on why the partnership with Amazon is fueling the surge in Snowflake stock price.

[00:02:59]>> In this case, we know Amazon has just signed a pact with OpenAI and they've added, you know, pretty much every LLM provider now on AWS. And look, for a company like Snowflake that has lot of big enterprise customers to be able to use the Amazon distribution and the LLM integrations they [clears throat] have and integrate Snowflake's data for agentic functionality. That is how you make sure you don't get disintermediated and I think that's why you see the positive reaction in terms of the stocks.

[00:03:36]>> Also after the bell, Salesforce issued a lukewarm outlook. That story from Bloomberg's Charlie Pellett.

[00:03:42]>> The report unnerved investors already concerned about the possibility that AI will disrupt the software business. Gil Luria, head of technology research at DA Davidson.

[00:03:53]>> So, Salesforce expectations were very low. They're trading at 10 times cash flow. Nobody expected anything and yet it especially in terms of their guidance for the next quarter, that looks like to be a disappointment.

[00:04:08]>> Salesforce is the leading maker of customer management software and it's under pressure to show it can thrive in the era of AI.

[00:04:16]>> Shares in Salesforce were down 4/10 of 1% in late US trading.

[00:04:21]Fed Governor Lisa Cook says inflation is headed in the wrong direction and she said she would be prepared to raise interest rates if that persist. Here is Cook speaking at Stanford University.

[00:04:32]>> After 5 years of above target inflation, I am particularly attuned to the risk that elevated inflation will become embedded in price and wage setting behavior. As such, I am prepared to raise rates if the expected disinflation does not appear in a timely manner.

[00:04:49]>> For now, Cook favors holding interest rates steady and she is expecting price growth to cool again in the coming months.

[00:04:56]>> Back in South Africa, political commentator Solly Moeng weighs in on the growing impeachment pressure facing Cyril Ramaphosa and what it could mean for the ANC, coalition politics and the DA.

[00:05:10]You can listen to the full interview on biznews.com.

[00:05:13]>> I'm sure you've had a good look at the composition of the impeachment committee. What do you think?

[00:05:20]>> It's very diverse. It's very very much a country the ANC is not in a line of position to just steamroll decisions on the basis of its majority in parliament.

[00:05:29]I think it's a good thing. South Africa is learning and we are having to learn the hard way of you know, the the need to work across political parties. Of course, in the composition of 31 members, there will be there are people who will defend Ramaphosa and it's fine.

[00:05:44]That's their choice and there are others who are very fast that he must must be removed. But it is not always on the basis of of ethical leadership or principle. It's a There are There's a lot of political, you know, staking, if you want there are people who want him to be removed because maybe it'll advance their chances towards power through coalitions. There are others who don't want him to remove to be removed because what he did is wrong because what he did is wrong.

[00:06:14]>> Do you think that the their decision will ultimately be taken on a political basis or on the basis of merit?

[00:06:22]>> It'll be a combination of that. There are people who have been who are looking for a for a or for an excuse to remove Ramaphosa with reason. I'm looking at maybe he's been a very weak president, there's no doubt about it.

[00:06:34]And they want him to go at whatever cost. And there are others who will be working on principle, but they're all politicians. Politicians would always have a bit of principle that they can use for political leverage. And this is how it is.

[00:06:47]>> Meanwhile, he's fighting back with a court bid to try and stop that inquiry.

[00:06:53]>> Yeah, it's going to be interesting because what is really actually trying to do, especially after the Constitutional Court spoke, he is trying to use the courts, the legislature, sorry, the courts now, the judiciary to to protect him from the legislature. But as a as a president, as executive, he's supposed to be accountable to the legislature. So I wouldn't know how that's going to play out. I think obviously he's he's kicking the the ball down the the road. He's trying to buy more time.

[00:07:21]Maybe it's a good thing, maybe it's a bad thing, but you know.

[00:07:24]I think Ramaphosa has always benefited from this whole thing that he's the last hope for South Africa. I have lost many friends here. Back in 20 20 leading to the 2019 election, people would say, "Yeah, but this is the last hope for South Africa. Vote for him." I said, "No, don't vote. It's not true. This man is a representative of the ANC. He's a smiling face of the ANC. So, saying vote for Ramaphosa you're actually saying vote for the ANC.

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[00:08:04]>> Staying in South Africa, Business Day news journalist Chris Steyn interviewed SA Agri Initiative CEO Francois Rousseau, who says farmers could pursue massive damages claims against Agriculture Minister John Steenhuisen after a High Court ruling over livestock vaccines.

[00:08:22]>> Now, this has come too late for many farmers who have seen their herds devastated.

[00:08:28]Um, does this judgment open the door to sue the minister for damages?

[00:08:34]>> Yes, well, I hope for the farmers themselves absolutely investigate this.

[00:08:38]And we've already begun looking into it, but there are some challenges with this.

[00:08:43]Um, unfortunately, you know, there are certain elements to to um issuing summons for damages, and I think the biggest one will be causality.

[00:08:52]Um, but I know of farmers who have already done it and and for large amounts. And I I I really do hope that um you know they succeed because this was an absolute abuse of power. This is someone who had no expertise whatsoever appointed people with expertise on his different um uh advisory committees, but he just used them to legitimize his actions. Every time people asked, "What about the private industry? Why are you not listening to experts?" And he would say, "Look, here are my experts. On my right I have all the best um veterinarians, and on my left I have all the private organizations representing farmers.

[00:09:34]Look, what what are you talking about that I'm not talking to private industry? But he never listened to them.

[00:09:39]He never attended the meetings um and he used all these rubbish excuses of bioterrorism and Woah. Um none of those excuses was used in court. But he used them in the media and he lied himself out of one um predicament uh to the next and um now we're sitting with this crisis uh almost 8 to 12 months later um because of him. So I do think that there was um there was malice in in what he did. I do think there was subterfuge. I do think um uh he he lied intentionally on a number of occasions um and for that um farmers should hold him accountable.

[00:10:19]>> And finally, from Bloomberg, market strategist Edward Yardeni explains why investors hoping for easy dip buying opportunities may need to think again.

[00:10:29]>> Ed Yardeni of Yardeni Research writing, this year has been all about FEMO, fabulous earnings momentum. We are not in the bubble camp. FOMO is based on hope and hype. FEMO is based on fundamentals. Ed joins us now for more.

[00:10:43]Ed, let's get into it. Next are in the finals. The IPOs are coming. It's got a 99 type feel for it. Why is it different this time, Ed?

[00:10:51]>> Well, I think that the the big difference is earnings. You know, that's that's the whole concept of of FEMO, fabulous earnings momentum is all about the fundamentals have been phenomenal for uh earnings. We've seen earnings not only continuing to go up but go up at a faster pace and that's what's driving the market up. The forward PE is actually stayed relatively stable of late around 20 to 22.

[00:11:20]And I think some people view that as being too high but not if you believe that the economy is resilient and is not going to have a recession over the next few years.

[00:11:29]>> Ed, how stretched are the technicals and does it matter?

[00:11:33]>> Well, I look I I think the it does feel a bit like a melt-up, even though I believe it's a earnings-led melt-up.

[00:11:43]As long as the earnings that turn out to be realistic, and there's no reason not to expect that to be the case, then I'm not too worried about the technicals. I mean, some people will say, of course, that you look at some of these charts like Micron and the other semis, it goes straight up. And I've been doing it for a while. We've all been all of us who've been doing it for a while know that when something goes straight up, there's a good chance that it goes straight down.

[00:12:09]Look, we are in a in a sort of melt-up, and we could have some correction along the way.

[00:12:15]But I think that some of that is is wishful thinking. I mean, you only get so many opportunities to buy on the dip per year. Last year we had one, this year we had one in March. I don't know that we're going to get another one between now and the end of the year. It's possible, but I think the basic thrust of the market is to go higher. You know, we've been talking about the roaring 2020s. And in that scenario, we get to 10,000 on the S&P 500 by the end of the decade.

[00:12:42]>> That's it for today's Biz News Daybreak.

[00:12:44]>> [music] >> I'm Kerry Lanigan. Thanks for listening.

[00:12:47]>> Daybreak on Biz News is proudly brought to you by Bonitas, the medical aid for South Africa.