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tv   Bloomberg Markets Middle East  Bloomberg  August 2, 2016 12:00am-1:01am EDT

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♪ >> oil slides into a bear market. renewed fears of persistent oversupply. crude is trading at levels last seen in april. rishaad: japan's latest plan to revive the slumbering economy. the new plans for stimulus. yousef: lenders are discounted loans to ease liquidity problems. rishaad:
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are expecting 21 new superjumbo is by next march. yousef: is 5:00 in london. rishaad: it is midday here in hong kong. the problems is a goes down in that part of the world. it has an effect on all matters of industries. we are talking about the illiquidity of the saudi markets. it goes much wider than that. yousef: we'll get into the saudi banking issues later on the program. let me take it off with what is happening with oil. it is down 22% since its high in june. this is what is happening with wti and three different moving averages.
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it broke through all three of them. the last time this happened was in november of 2015. you can see what happened after that. it would slide all the way to the lows we saw in january. it is around $26 a barrel. they are adding to the u.s. fleet on the other side of the world. the miggyt is feeding these other charts as well. the biggest etf attracts oil prices what investors have been doing here is they have filed it last week the biggest info since february. that is on the far right. when $26 million. there's plenty to talk about.
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let's go across to one of the stories that is driving the supply side. oil prices are falling on factors that are related to that. iran is stepping up its presence in the market. they approved a new model for oil contracts. bloomberg energy and commodities soorter said wilkins is here why is around bringing these contracts online? >> the government in iran wants to grow the economy very aggressively. it is the biggest sector of the economy that is way behind in development. it is time to bring the investors in. they're trying to lure the big oil companies into iran.
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iran is a very risky place to do business. investors are concerned about anti-bribery and corruption issues. we need to look for is whether or not this contract offers them enough rewards to offset those risks. iran says it wants really big international oil companies that have the ability to bring in billions of dollars and world-class technology and excellent management. their only handful of companies that can do that. says it is aiming mostly european companies and asian companies that are going to very interested. american companies are not going to be able to take part because of the u.s. trade embargo that is still in effect. we just have a few comments on a couple of days ago about the oil trader that said he fears the industryf iran's oil
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that it is exaggerated in the reality has proven far less grim. what does it mean for the supply picture? >> that comment is certainly valid. we have to wait and see whether these contracts can bring in the investors. it is a significant timeframe here. if iran does manage to bring in the big investors that will increase its share of the market. it wants to add six or 700,000 barrels. most of that will be exported into the market. with saudi arabia cutting its sales prices that dynamic of competition is fighting for market share. that is definitely a dynamic that is still in play. we do have the moment is a storm force eight warning in effect in
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hong kong. it is after noon. theo have the moment trading suspended on the hong kong exchange due to the weather. it has been weakened to just a mere tropical storm. they haven't actually downgraded from that. that is what we have the moment. there no trading this afternoon. due to this tropical storm that is coming in. let's check on some of the first world headlines coming in. iran's supreme leader says that the relations with the u.s. and the rest of the world and there has been no benefit from the landmark deal with iran.
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they said it was almost no positive impact on the use of said iran will not engage in further talks with russia because of what he calls u.s. effects of the field. months have passed since the nuclear deal was passed. but no tangible benefit has been seen in our lives. the deal was supposed to lift sanctions was in it. cheap oil has prompted it to drop in bahrain. its currency ratings has been dropped with saying lower prices is causing a severe generation in bahrain position. the number to rise. it also sees a wider budget deficit. the eu has rejected turkey's warning that it may scrap a
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refugee agreement. ministersh foreign says it will end the deal to accommodate syrian refugees. a spokeswoman for the european commission says progress depends upon turkey conforming with the eu regulations. russia has suffered its biggest loss of life since it began military operations in syria. all five people aboard died when the helicopter came under fire and crashed. over the next few hours that will bring us news about the
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stimulus package in japan. by plan will be announced the prime minister later today. this drip feed information on the days leading up to it. do we know anything tangible about? we have had policy makers meeting all morning. every once in a while we get some details. shaping what the stimulus package looks like. we did get some lines coming through from the junior coalition party. this is a very well-traveled path for japan. we've had 26 stimulus packages
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since 1990. the question is is is the one that will do what it takes to get the economy back on track. we have had several reports coming through from nhk about the size of it will be cash payments to low income earners. a great deal that will be dedicated to infrastructure and investment. building up a new train network. nomura securities said the public spending make it a temporary boost its economic activity in the short term but in the long-term it is really structural reforms that we need to have a japan.
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productivity and deregulating the labor market. the deflationary state of mind that has proved to be very stubborn. it is very interesting the timing of this. we usually do get these extra budgets. we've had one every night since then. how the japanese economy views its government right now. yousef: some breaking news. developer had the second quarter net coming in at 67 million. versus an estimate. that is a clear beat of the analysts predictions. a clear beat for the developer on the second quarter earnings.
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it is one of the key stocks to watch. let's look at the perspective from the asian markets. the next few minutes could see the news coming out of japan and also the rate cuts. a lot of the stocks are in a holding pattern. mind we were up for six straight days. a lot of these averages are at multiyear highs. especially the emerging markets in southeast asia. getting sold off with valuations at seven to eight year highs. emerging markets at six year highs. the price-earnings ratios of around 15 or so. just to recap some of the news that we saw. the trading is now canceled in hong kong due to the weather. you guys are off the hook.
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when you look at currencies were talking about oil earlier. that is part of the reason we declines across the emerging markets. that is leading the declines across emerging markets. have a look at the end. any announcement he could come today. the asian effect is really moving in a little bit lower. very quickly before i go i just want to mention that this has a 10 year japanese government bond yields about 20 minutes back we had an auction results that was fairly disappointing. a huge move on that yields. thank you david. iser the show, saudi arabia taking unprecedented steps to reform its economy. details are still ahead.
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plus a possible rate hike in the next policy meeting. we'll talk about the applications for the middle east markets. this is bloomberg. ♪
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that was less than most analysts were anticipating. he goes down to the strength of the yen. biggest cigarette maker seeing net income for 2016 of about $4 billion. tobacco revenue came from overseas. less than 50% in 2011. volkswagen has problems. than $16en fined more billion.
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that's a drop in the ocean compared with the billions already in put aside for cheating the pollution tests in the u.s.. india may be a step closer to having one of its biggest economic reforms. the main opposition party will support the proposed national sales tax. the bill had been blocked in the upper house. the premise relax a majority in that chamber. bycould boost india's growth as much as 2%. it will be presented to lawmakers on wednesday. oil has fallen into bear market territory. will now take a closer look at what that means and how it plays out in the gulf. oil is dipping below $40 a barrel. does that change how you approach the region from an investment perspective. >> we have seen the region and
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oil is being from a revenue perspective a little volatile. at the end of the data driver of oil prices is the macro situation of global growth. we are going to see global demand which is the other side of the deflation on some live. that will be getting tighter. the thought it would take a little bit of time for slow growth to take effect. we don't think that it is a new issue. we think it is the same one that is playing out. we will find new bottoms on the way up. that is part of the journey back to the safer level. of playing they paradigm shift story that is playing out in saudi arabia? now in kuwait with the subsidy changes. you could craft a strategy around. you could let for us as a firm we look at it on emerging
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markets basis. is it isrn around it all political risk. it is all policy movement. orundamental money manager that we are. we don't want to get caught up on the wrong side of a policy decision. we will play a little bit more cautiously and let it play out. before betting on that. we're just getting your u.s. what happens next. do the budgets of these gulf nations really have to be adjusted in the longest term. it may be just looking ahead. is that not really a ceiling policy ready at 60 given all the shale producers and a lot of them can come back at those levels. we talk about macro issues in the economy.
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would all be happy of global demand looked a lot more stable. we'll be in a much better place. i don't think that 60 or 70 is going to be a problem. if demand rises, there will be enough room to be a take on board all those shale supplies. she'll came online at the same time that global demand was starting to tail off. so was a double whammy. we have a nice confidence boost in global demand. i think the $60 barrel level is sustainable. does the gcc have to rebalance its budget? they've been doing a lot in that area already. it's going to take a long time to turn the economy around. but they are moving quickly on reforms. sometimes we expect them to go too far too fast.
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they are moving pretty quickly already. we have to balance that out. how do you engender and create more liquidity. i think it does continue. don't forget that the debt to gdp levels in these countries are pretty low. they have government to do that. there's also a good time to borrowing you don't think you need the money. here with 2020 hindsight and say what we could of done. starting to read that liquidity profile is not a bad thing. cutting costs is a good thing. it is all going into the same equation.
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they still have significant in that fundamentally were put in place for a rainy day. this is the rainy day. we have central bankers that are meeting and talking about possibly exploring a new currency system. i think political risk is completely overshadowing the economic fundamentals. you want to take a trade in the u.s.. would go to donald trump or hillary clinton? there are a number of political
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issues that are still clouding the horizon. fromnies may be kept capital investment. it's not a fund mental demands change. people don't know what it means yet. we have to leave it there. come, the emirates may need to borrow billions to pay for new superjumbo is. we will have the details for you next. ♪
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the world's biggest airline by international passenger traffic is set to take delivery of these airbus planes in this fiscal year. about how any details
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they're going to take out that alone? they are taking a short-term loan. it is an 18 month bridge facility. it is going to convert to a more long-term loan. that will be a 12 year alone. we're still waiting on some money from the european credit agencies. delayedeen slightly that will replace the bridge facility. it has been a busy 24 hours for the gulf. are seeing what is happening with qatar airways. notice close to 20%. they saw a great opportunity and they jumped on it. the iag stock price went down 24%. that was largely due to the brexit vote in june. stockair saw that the
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price and become more attractive than cheaper. they saw that opportunity to increase their stake. the ceo has said that he has no plans to increase at stake at this time. we need to know whether i can be any possibility of them taking a seat on the board. we will keep an eye out for that. any further acquisitions at bay. come, markets and economists expect australia's central bank to cut rates. we will break down that decision for you live in a moment. this is bloomberg. ♪
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they have cut much is expected to the australian rate. now one of the half percent. he felt that governor glenn stevens will be keenly focused on inflation. it is the weakest in australia in 17 years. they have moved on the rate that is down one half percent. appreciating currency could
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happen to others. the reserve bank is deciding to make that move. the cash rate at 1.5%. we did have some disappointing trade data earlier. we had some approval numbers. thinkch influence do you that brought upon the royal bank of australia. i'm sure had some impact. leave the rate cut a done deal. they are losing momentum. for june. the market had been expecting arise.
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it was one of the great hopes for the economy during the transition away from that. cutting that cash rate to 1.5%. let's look at how the markets are digesting this news. thet out of 10 times that bank makes a decision we see a significant move on the australian dollar. we knew the dollar was going to move in australia either way. 7521 here on the australian dollar. still moving in that tight range.
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it was unchanged against the euro earlier. let's have a look at what is happening in the equity markets there. roughly unchanged. one half of 1%. should emphasize before and after the other way. consumer discretionary. that is much is 1.2%. the second one is the most important. it does tend to benefit the banks. it comes down to macro credentials. looking at property prices. when you have rates this low, 1.5%.
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we doing on yields? 1.83%. that is unchanged. that is the reaction to that. rate down to a record low. let's bring you the other top stories on bloomberg markets middle east. french crude is trading around $42 a barrel. west texas holding steady above $40 a barrel. oil fell into a bear market on concerns the global glut will persist. u.s. oil and gasoline inventories are set to decline but they will remain at their highest level in terms of seasonality in at least two decades. said to be planning an 18 month bridge loan of at least $2.5 billion to help fund its purchase of the new superjumbo
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aircraft. that would then be converted into a 12 year alone to fund the purchase of 10 of the planes. it will take delivery of those 21 planes in march. stocks fell as we await details on the prime minister's stimulus package. could include $130 billion. those are the headlines for this hour. let's cross over to london. anna: we going to be focusing on the european earnings story. we got a host of german corporations reporting. volkswagen is one of those.
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this is the luxury carmaker big focus on their new suv. to what extent will bmw have a tight grip on costs. airbags is one of the factors. both of those beating expectations with their earnings. they lost their leading position in the world's luxury car market. they find themselves in a comparatively weaker point. iht also get numbers from which is the owner of holiday and and crown plaza brands. comingntinental hotels back.
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the events in turkey are having an effect on the markets. profits fell by 4% partly due to weakness in the french business. all those intercontinental hotels. that is what we're looking at in terms of the agenda. we look at the headlines from around the world. from hong kong and singapore.
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hillary clinton has again enlisted warren buffett to burnish her credentials with the business community ahead of the november election. she is campaigning in nebraska a solid republican state. froms seeking support voters that are uncomfortable with donald trump. to raise funds for hillary but has yet to make a major contribution to his campaign. buffett: article two describes the qualifications for the president of the united states. male pronouns were used to 20 times. it is still in the constitution 227 years later. no feminine pronouns. 20, we're going to elect the best president we've ever had and summit is to change those pronouns. tunisia's president has nominated a former minister to lead a new government after the
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failed economic reforms. the new prime minister has been nominated. singapore's prime minister joined in the elite group today of the summit hosted by president obama at the white house. they welcome bilateral relations. the president has hosted in his time in office. the transpacific partnership will be on the menu. global news 24 hours a day. relations between nato colleagues turkey and the united states are increasingly strange. ankara is stepping up calls for the extradition of that cleric
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after the failed coup. let's get more on that story from the at least averaging editor. what is behind the story? parties, thee three major parties going to the united states to try to convince the united states to extradite this man. turkey of being behind the code. visitors because the u.s. refused to extradite him. he has strongly denied any involvement in the coup. that raises the question of let's assume the american to refuse turkish requests. how would that way on relations. i think both sides are making noise on this.
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while there is a lot of rhetoric, i think fundamentally it remains a strong relationship. maybe going through troubled waters at the moment. it is still fairly stable. now it is just going to the u.s. dollar. the focus is on the u.s. side. they're going to pursue a downgrade. politically what is happening with that purchase. we keep getting bits and pieces every day. people are wondering how deeply that can go. what happens last week is that you have seen the people in business analysts have been involved now.
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they have a lot of company. there are a lot of people who have links to that group. they are investigated. there's some concerns that it might lead to a slowdown in economic growth. the city ready that growth would slow from the expected level down toward 2%. thank you for coming on the show. saudi arabia may be taking steps to fight a cash squeeze at its banks. we talk more about the implications of that for the economy. ♪
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rishaad: there's it to be exploring the sale of their british engineering unit. private equity business owned by the alliance has bank of america crediting the business could fetch at least $2.2 billion. closing down to be after restructuring some $2 billion in debt. us -- resume oil shipments. they have made triple production the000 barrels a day but oil fields that supply the ports. it is twin bill debt to 2011 uprising in libya. morgan stanley is reshuffling its management and saudi arabia. its ceo leaves after three years in the job.
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the chairman will step down and continue in an advisory capacity. yusuf: saudi arabia is seen as taking steps to avoid a cash squeeze. lenders are said to of been offered billions of dollars. we can find out more from our emerging markets editor. ease challenges that the saudi banks are clearly facing. >> this was an immediate measure. saudi banking issue was a drop in the ocean. and it shows ait lot about the banking sector. government deposits have been under strain in that region. the government has been removing deposits. it is a very good sign that
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we're seeing from someone. iphoto chart for viewers to see. where does the interbank rate stand? 69 basis points. what have a sense as to impact the latest injection has had on those rate and on easing the numbers? >> this is not been massive. it has been going a suggestion came in the rates fell two days a row. you have to understand that this came at a time when oil prices were falling. this really says something. we do know for sure that
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happened in the 1990's. that was a time when oil prices sank below $10 a barrel. that was 1998. we don't know how much money actually came in. it shows that banks really could use the cash. let's get more on this story. what to the stress levels indicate with the saudi banks? >> liquidity is very stretched at the moment. while this is an immediate measure we expect to see further measures coming along. we expect to see changes. there is an increased feeling of
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the loan situation. that was done in siberia. the banks are already closer reaching that target. some of the have reached it already. the banks will be on continue to lend. they can take further measures to shore up capital. that could mean a reduction in those rates. have to keep a certain amount of capital of the central bank. >> i am looking at where oil is trading right now. it is just above $40 a barrel. is there additional pressured on the road for the gcc and for the big economies like saudi arabia and particular? monica: a lot of the liquidity crunch we've seen in the region comes from the lower oil prices and the widely differing stance on the region.
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the government has yet use of various forms of funding. that brings out the effects reserve. in the course of saudi arabia they have issuing reform proposals for the private sector. the government deposits in the banking sector are now down 15% year-over-year. with oil looking to be lower for longer, this could be an immediate issue for saudi arabia. the could be a sharp pullback in government spending. we expect the saudi fiscal deficit to be around there around 40% of gdp. rishaad: how damaging what a sovereign downgrade be? how damaging could be for them.
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you've seen a lot of demand for get from this region. saudi arabia is looking to enter the debt market and increase liquidity. we believe demand will be on the rise. see short-termto to median term momentum, that would be good sign. if we repeat the earlier bond issuance say it has been oversubscribed that interest but thesesurvive factors are also supporting the definition of this. rishaad: you these deals attractive. does that concern you. monica: i think it is a medium-term story. governments especially in saudi arabia they can't keep
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these domestic deposits. we've seen the tightening of liquidity. the international debt capital markets are very important. the longer we see these deficits we will see the cost coming up. all of these factors are making it attractive to raise rates. can issue bonds at this time. international currencies. rishaad: there is not going to be any trading in the hong kong exchange. the storm has now been downgraded to a number three days warning. there is some activity in the afternoon. we will have more for monica
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after this break. ♪
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welcome back. let's take it the story slightly beyond the saudi arabia. what other economic risks are you watching very carefully right now. as we wind down the summer. monica: i think the global uncertainty is high. there are number of areas of concern. there's the whole brexit development. especially with the weaker gdp. how that might affect tourism in the region. global a lot of uncertainty around oil. they are watching the u.s. interest-rate hikes.
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they are watching for signs that the u.s. economy is not in a rush to need a higher interest rate. gcc, it takes the u.s. dollar so that is very relevant. given the heightened liquidity conditions and higher insight into rates. we ever be seen them. yousef: you mentioned that some of the risks that the uae is facing. how concerned are you about this exposure? monica: within the region we think that the uae is working on the best situation. they are working on reserves in the region. you have a very small population to the price of the oil reserve. also there factors of oil prices in a week. is global demand environment showing weakness. the combination of a more diverse economy and the stronger
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reserves, we believe that the uae is in a strong position. especially compared to the investment program. continuously broadening of the economic base and the economic capacity. so we at a number of areas to support as well. yousef: does that change your outlook for economic growth? monica: we are seeing the impact of the lower oil prices on the global demand. following the brexit vote, we did lower our growth forecast due to the weaker gdp numbers. the importance of british tourists to the region. yousef: thank you very much.
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rishaad: it for this edition of bloomberg markets middle east. e
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anna: wti stabilize, falling to $40 over concerned the global supply glut will exist. to counter disinflation and the picture. japan's government is set to announce the details of a $273 billion stimulus package. the hong kong exchange canceled trading as a storm lashes the city with rain and wind. ♪


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