tv Bloomberg Markets Middle East Bloomberg August 7, 2016 12:00am-1:01am EDT
better than expected jobs data in the u.s. since the oil's higher and brings recovery to a screeching halt. the flight of capital out of china, the latest numbers show fx reserves stabilized in july. turkey is teetering on the edge of junk status as moody's ways on the impact of the political people. upheaval.
welcome to the program. impact reaches far beyond the u.s. borders. we put this on a charge for use so you can get a sense of how this has affected expectations. are looking at. the u.s. jobs payroll number came in higher for a straight second month. it beat all expectations i bloomberg. -- by bloomberg. even the impressive june figure was revised upward. traders now seeing a 49% chance of a hike by december, up from 36% before the report. you should be keeping an eye on data coming out from the index which shows u.s. producers have added for a sixth straight week.
-- we haveby color-coded this for you. likely to be the source of additional downside pressure for oil. let's get you up to speed with what happened on wall street. the dow and nasdaq are rising by around 1%. the nasdaq close was a record high. in the middle east, we are just under two hours away from the opening of the markets. dubai and abu dhabi. running you through these numbers. about 4500losing points. elsewhere in the region, egypt and tel aviv, egypt continuing .ts gains, up 1.86% the best-performing index in
this part of the world. 17.8% so far this year. tel aviv boasting 4/10 of 1% and gains. -- in gains. china's capital outflows appear to have eased off. $3.2 trillion for july. in june, the figure unexpectedly billion.lmost $13.5 today's data is more in line with estimates. is trying to close a $3 billion acquisition of e-commerce startup jet.com. founder to have the retailers division as part of the deal. it would challenge amazon by proprietary.jet's
thousands of brazil's beach volleyball supporters stood in lines of up to two kilometers while fans across the city were also left waiting in temperatures of 30 degrees celsius. at friday's opening ceremony, a shortage of security scanners annt weights -- waits over hour. dayal news 24 hours a powered by over 2600 journalists and analysts. this is bloomberg. yousef: oil is fluctuating after tumbling more than 20% into a bear market, closing below $40 a barrel last week. the decline as the dollar strengthened.
sam has been following this story. it has been a volatile week for oil. talk us through it. sam: monday and tuesday, we saw oil dropping saw into that bear market. on wednesday and thursday, came right back, made up for those losses. on friday, things leveled off a little bit. we have to see where things go with the dollar. yousef: u.s. producers are still adding to their space. production is able to derive quite quickly. the nature of the u.s. is as prices rise, it becomes profitable to produce more oil so production increases and it has a stabilizing effect on
prices. that will always be the case. -- we have seen that in the middle of the week. stockpiles in the u.s. and china being shown lover than we were expecting -- shown lower than we were expecting. yousef: is there more volatility around the corner? >> oil is finding a range. a lot of factors on the upside and the downside. another one is we got news last week that opec is not pushing to revive talks. there were some rumors of that. we have seen no evidence they are planning to do that. that would push prices higher. no evidence of that. all of these factors are at play in the markets. think prices will
go up and some think it will go down. yousef: great to have you on the program. political turmoil in turkey continuing to take its toll on the economy as the country faces possible junk status. some markets are pricing turkish debt below investment grade. we have been watching this. essentially, the feeling we got from moody's was a decision was imminent. it no longer looks like it. turkey werers in all waiting, staying late in their offices waiting for an answer from moody's. moody's said, you know what, we will take our time and come out with an announcement within 90 days. yousef: a lot at stake for turkey with this decision by
moody's and it goes beyond the credit rating. >> the main issue is that turkey, for some funds, they need two credit agencies to have it as an investment grade. junk, somegoes to funds may be forced to pull out their money from turkey at a time when turkey really needs more money to come in. they had some success at the beginning of the year. this is a threat to that. that is on top of the uncertainty that came with the coup yousef:. have we heard anything from the turkish authorities? furious with rating agencies. they are not happy with the rating agencies because s&p, for example, did downgrade. the turkish government reacted
furiously, calling it unfair and unethical. moody's saying, we will wait and see, may be more in keeping with what the turkish government is asking. wait and see until they have a chance to assess the measures the turkish government is taking to boost growth. yousef: what comes next for turkey? >> the government wants to institute a lot of measures, take a lot of steps to boost growth. the first step is to end uncertainty. every time people think they are dying off, there is another push saying they are purging all aspects of turkish society. they will take measures and rollout the turquoise carpet.
investors will be waiting to see what those measures are. hopefully, they can convince moody's and other agencies that this is enough to keep turkey stable and an attractive target for investors. yousef: you can get more on that and the rest of the day's news at our digital destination tailor-made for the middle east. market data from the region plus you can watch all the reports, interviews, and special content only available online. as u.s. jobs data defies expectations, we hear from the chief economic advisor about what it means for that all-important fed hike. we get the verdict and what he thinks the global impact will be. this is bloomberg. ♪
yousef: today's numbers are strong all-around. >> a very solid report. >> a solid report. >> this month showed some good gains and wages. >> we thought the number would be on and around expectations. >> the labor market recovery continues. is it a strong employment report, the equity market is showing good news as good news. >> enough for janet yellen in september, i do not think so. she is still focused on global conditions. she is still worried about a strong dollar relative to emerging markets. that theer probability
fed may hike rates. >> i think going in front of an election is pretty difficult. september, i think that is still low. those were some of the top voices we had commenting on the better than expected payroll on friday. joining us is our next guest. great to have you on the program. remarkable set of numbers out of the u.s. the probability of a hike up to .6% for the end of september .t goes up to 48% where do you stand? moste job report is the
for thet number american economy and for the world. even more than the gdp. when you have companies hiring, that is a very good sign. that is what economies want to see and investors want to see. beingn say the economy is -- gaining traction and therefore, it is a sign that goes beyond expectations. it has got the federal reserve by surprise and they are going to review their stance on monetary policy, i expect. september, december? think september, you
can argue about the wisdom of doing it sooner or later. the elections in the u.s., the fed does not want to move before the election in order not to be seen as influencing the electorate. argument inthe favor of a hike is getting stronger and the political consideration will take a backseat. yousef: as the u.s. economy appears to be gaining strength, we are seeing quite a rally in emerging assets. do you see that rally continuing and where are the pockets of opportunity? >> i see the rally continuing
because the search for yields is stronger. developed markets are at record highs. -- people areies going into more exotic areas. -- commodities are coming back. it can be -- it can take time, might be the right time to place a chip on the table. the countries -- among the countries doing well and have bright perspectives, india with its tax reforms passed by parliament that will streamline this incredibly complex tangle of local taxes.
one or two points of gdp might come from these reforms. i think something is moving in india and it is time to have a closer look at that huge subcontinent. yousef: what about the turkey story? as we await the moody's decision, would you put money back into turkey? brazil? >> i would prefer turkey to brazil. brazil is still marred in this , theical scandal impeachment. i do not see anything moving in a positive direction beforeear end. turkey, it is a political risk story. we all know what happened with the coup, the aftermath. turkey has not been hit very hard so far.
ratingsly a change of would affect, have an impact on capital inflows, which turkey relies on. overall, i do not see the turkey story going from bad to worse. i would say there will be a stabilization over coming months. if i were to choose between brazil and turkey, i would prefer turkey. is still a good call for us to get perspective. the other call i want you to make is a call on oil. how are you placed for oil? qatar national bank raised their forecast. bullish.ore i have been bullish and the real supplys when demand and
will get closer, what is the marginal cost of extracting the marginal barrel of oil? massive cancellation of programs, exploration and developing. to balance the oil market will take time. it will not be a smooth process. it will be a process with ups and downs. the trend is on the rise. there are a number of local libya,, security issues,
system that there seems to be more of a strain on liquidity. this chart shows the interest rate swaps and they are back up to levels we have not seen in several years. what is your read on the situation? fabio: it is hard to be clear transparency is not optimal. price having an impact in saudi arabia and you see these strains in various areas. you have news of workers stranded without pay. you see the banking system
displaying signs of stress. historicala is at an juncture. they have a new leadership and they are trying to devise a path of structural reform. they have to run an economy that has been under strain because of lower oil prices. if it is an issue of liquidity in the banking system, i do not think there will be a major problem. yousef: some of the people we have been speaking to say this could mean a reserve requirement ratio cut. fabio: exactly. they have policy tools they have haveeen using and that can an impact. measure liesterm
the challenge of long-term structural reforms. we have been hearing about the privatization, the setting up of wealth funds to boost development projects at home, reforms of the bureaucracy, health care system. a lot of things on the table and outthese reforms will play is the key to the future of saudi arabia rather than the occasional issues that might affect their banking system. yousef: what is most attractive from your perspective looking broadly across the region? is it egypt? investors are clearly bullish on egypt at the moment. it is the best performing stock market. spot. egypt is a sore
we cannot downplay the problems. it has gone from the arab spring military administration. the economy is not doing well. not feel that egypt is on the cusp of a turnaround? >> it is hard to say. we would like to see more issuing ament before verdict for the better. yousef: one bright spot in the region? apart from the uae? fabio: the bright spot in the --ion yousef: we will leave it there. that is hard -- that is how far
trillion for3.2 july working a drop of just over the previous month. line's data is more in with estimates. gameszers at the olympic have apologized to fans stuck in massive queues on the events opening weekend. thousands of beach volleyball supporters stood in lines of up to two kilometers while fans were left waiting in temperatures of 30 degrees celsius. the opening ceremony, a shortage of security scanners meant weights over an hour -- waits over an hour. expects the saudi budget deficit to narrow to just 10% of gdp in 2017.
a fiscal adjustment is underway. what is the significance of this? if you remember, not two years ago, the imf said that could exhaust its entire financial assets within five years. that had a very negative impact on the markets. when we met the crown prince, he told us the imf had got it wrong. afterwards, the imf saying the fiscal adjustment is underway and they see a credible plan and are happy with the progress. it is a reversal and that is significant. yousef: does that mean saudi arabia has fixed its finances? say, this 9.6%
projection is the most optimistic among most economists. it is a hefty deficit. when we asked whether the goal to ballot -- balance the budget by 2020 is doable, he said yes, but also hinges on oil price and boosting oil revenue. there are lots of very bulls that could derail this plan -- variables that could derail this plan. issef: what kind of impact fiscal consolidation likely to have on economic growth? >> they see the deficit going down under current projections. they say this is not enough to create an up jobs for entrance.
the public sector is bloated. the private sector has depended and relied on government spending. this is a catch 22. how do you continue on the path of consolidation and live with lower growth when that means less jobs? your private sector is suffering. this is the biggest challenge. you have to see how the authorities -- they keep saying 2020, 2030, they want the private sector to pick up the slack. yousef: always great to have you on the program. let's check in on the first word headlines. nations see little hope of all producers resurrecting a global agreement to freeze out
that. no plans to revive the agreement after talks were aborted in april. members are scheduled to meet in algiers next month. a former bond trader has won a lawsuit against the bank in which he claimed he would unfairly dismissed. he sued after he was sacked last year. he said bosses at the bank made him a skate graham -- a scapegoat. a spokesman from the bank said it is disappointed with the judgment. thailand is voting on a new constitution today. this is the country's first vote in more than two years. backers of the constitution said the referendum is needed to curb the influence of corrupted
politicians and move past a decade of political unrest. global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg. the dollar rose after the u.s. released a strong payrolls report on friday. 255,000 jobs were added in july. economists were expecting 180,000. the consumption side of the u.s. economy is holding up well. >> today's numbers are strong all-around and not only is it a strong employment report, the equity market is treating good news as good news and the rest of the markets are behaving as you would expect. >> the chart shows the diversions off to the right.
the yellow number being gdp and the white number being jobs growth. what is this telling us? what do they tell us about the state of the economy? >> the job numbers and last week's to dp number -- last week's gdp numbers show us consumption continues to grow. stronger job creation, higher wages. the consumption side is holding up. what is not holding up his business investment. this is about the corporate sector, about corporate risk-taking being down here and household risk-taking being up here. that is the main divergence i look at. >> you wonder what janet yellen thinks of this. let's talk about the reason we used to talk about good news
being bad news. we used to sit here and wonder what it would mean for the federal reserve. ask, whyion i would have they gone from -- to a market saying you will be lucky if you get another one? >> the global market is holding them back. at 22%, that is still too low. 45%.ld put it at if you put it at the way the yield curve is behaving, the front end has sold off more than the backend. the front end is controlled by the fed and today's numbers tell you there is a higher probability that the fed may hike rates. you are talking about the yield curve.
rally in stocks. what can't of washout -- what kind of washout can we see? what is the knock on effect? >> you will see it in the currency. a stronger dollar. a question mark of how the yen behaves. market people should expect a pickup in volatility. you will see the currency markets and fixed incomes in other segments. this notion that we are in a study state -- steady state of equilibrium in the economy. has dissipate in favor of the reality, more economic divergence. come, sovereign ratings in the united arab emirates. stay tuned.
yousef: welcome back. a quick round up of the main stories. bahrain telecommunications company has reported in 18% drop in first-half profit. the company said that is due to its investment in yemen. drop in second-quarter profits. aited nations has called for new peace talks in yemen as the army attempts to retake rebel occupied territories in the capital. after negotiations in kuwait ended without any progress last week, the special envoy urged them to resolve the dispute. more than six -- 6500 civilians
have been killed and 3 million have fled their homes in the last 18 months of fighting. moody's says it is continuing to monitor turkey's credit worthiness in the wake of last month's failed to. the country faces losing its investment grade rating. says it plans to complete the review by october. s&p global ratings affirmed its double-a long-term long-term credit rating on the emirates of abu dhabi and kept the outlook stable. globalector of s&p ratings. trevor, thank you for coming in. what is the key change in the way you see abu dhabi? >> in all honesty, there is not
any significant change. the fundamentals of the economy are very strong. in terms of the different aspects of the rating, in terms , economiccal position growth has helped, even stronger than we expected. we thought growth would slow down quite strongly but it accelerated based on oil production. production is up, and we do not expect that to increase going forward. the keystone is the government's fiscal position. yousef: despite of considerable headwinds both abroad and within the region. what is your baseline oil position and what would warrant any changes to your view of abu
dhabi? >> we have lowered the ratings of bahrain and saudi arabia this year. we have not change the ratings on kuwait and abu dhabi. is thethe key strengths sizable fiscal assets they have and the flow. in terms of the flow of the government's deficit, much smaller than the others. 12%.e it averaging about and abu dhabi, it could be about 5%. they are not running through their assets as quickly as the other sovereigns. yousef: what would make you change your outlook on abu dhabi? if oil drops under $30 a barrel for six months? global growth start struggling
further? what could derail the outlook? >> the main reason, it is real pressure on the abu dhabi economy and policymaking, the low level of your price. -- of the oil price. they are reacting to it really well. year and40 for this $45 next year and $50 a year after. any sharp declines could say pressure -- could put pressure on the rating. or if we were to see a very significant deterioration in the government's fiscal position. yousef: what about further consolidation? we have seen the state driven consolidation in the last couple of months. would you hope that continues in order for them to maintain the
strength they have? >> quite a lot of room for maneuver. they have been financing deficits. they issued a $5 billion bond earlier the share. -- this year. , as you know, suggested that maybe they have gone a little bit too far in terms of fiscal consolidation. it is not really our place to say. we just comment on the macro fundamentals. it looks like government policy has been supportive of this high rating level. tos: have you had a chance ponder about the impact of the federal debt law? how would that change how you rate or go about ratings for the different emirates? >> interesting question.
not sure it would have any impact on the ratings of abu dhabi. we would have to address a rating on the uae. we have not been asked to go through that exercise. yousef: what kind of impact have you seen from the global and systemic events? the at the u.s. dollar strength -- be it the u.s. dollar strength, the latest u.s. jobs numbers. >> we look at the uae as a whole, we rate different entities outside abu dhabi. we rank banks and corporate. we are based here in dubai. most clearly, the impacts of the strength of the dollar has been on dubai.
issue is inflows into dubai. you have seen the weakness in the russian ruble, the u.k. pound. those investors who came here to dubai are less likely to do so given the strength of the dollar. even dubai is performing relatively well. yousef: reading through your report, substantial shortcomings in the dissemination of macroeconomic data. disclosure related to governments external assets. you are struggling on that front in terms of access to those numbers? have sufficient information to rate abu dhabi.
mentioned the size of the government's assets, growth is still strong. the specifics of the government asset position, that data is not published. qatar andlar to kuwait. we think we have robust estimates. we do speak to the authorities. they are not publicly available as they would be for norway, for example. how would that way on the overall picture? -- weigh on the overall picture? revenues --ersified it would diversified revenues. the concentration of government revenues in relation to oil. any kind of diversification of
revenues would be positive. on the other side, there is a need to go back on expense -- cut back on expenditures. that adjustment needs to take place on the revenue side or expenditure side. yousef: what about brexit? the impact of this to be limited. could there be material damage that comes from brexit? >> i would not think so. there is not any clear direct linkages. they are relatively nimble, and they can change their export markets. impact woulddirect be the weakness of the u.k. pound, could potential he mean less inflows -- could potentially mean less inflows
yousef: the olympics kicked off on friday with a festival of song and dance. the ceremony came after a series of crises. beener key challenge has the spread of the zika virus. we look at how it is transmitted, symptoms, and why the virus is dangerous for pregnant women and bies. is the mosquito, the main mosquito that carries the
zika. developing a vaccine could take years. is to control mosquitoes. the zika virus was first identified in uganda in 1947 and was thought to cause only mild flulike symptoms. foldl had seen a 20 increase in babies born with abnormally small heads. some countries have taken the unusual step of telling women to put off plans for pregnancy. the spread has been rapid. in july, officials identified the first cases of zika transmission in the continental u.s. mosquitoes bite someone who has a virus and then biting another
human. mosquitoes it to ride on travelers or cargo. scientists have confirmed it can be transmitted through sexual contact. only about one in five people affected show symptoms. countries arected seeing rising cases oa nerve disorder that can cause paralysis. right now, the main way to stop zika is to use traditional methods to control mosquitoes. the brazilian government has expanded a pilot program that releases male mosquitoes that have been modified so that when they breed with wild females, the offspring die early. prince fear unknown consequences -- up prince fear unknown consequences. as more people travel, there is
a higher chance of mosquito borne diseases. authorities will need better weapons against bugs. yousef: you can get the latest on the olympics on our website. we will tell you who is leading the metals tally --medals tally. australia is followed by hungary and the united states. if you sort it by that metric, hungary still comes out on top. still early days, but let's see how that plays out. we will be live from the region again the same time on monday. we will see you then. ♪
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