tv Bloomberg Markets Middle East Bloomberg August 24, 2016 12:00am-1:01am EDT
♪ yousef: oil falls again after new data shows an expansion of u.s. stockpiles. rates cut for a sixth continuing and easing cycle but started in march. signs point to more cuts to come. formspt races for tougher as the president says officials have waited too long to act over the pound. and qantas profit takes off
with a turnaround program on the final approach. it's 8:00 a.m. across the emirates, 5:00 a.m. in london. angie: in hong kong, it is just past noon. welcome to "bloomberg markets: you areast." yousef, watching u.s. markets ahead of the jackson hole meeting on friday with janet yellen. what are you watching specifically? we got some remarkable numbers out of the u.s. in the last 12 hours or so. let me show you what is coming out of u.s. new wholesales specifically. this chart shows the unexpected 12.4 increase that did occur. bloomberg has forecasted deceleration for july, what did materialize was an increase of 654 thousand homes. that is the highest level since
october of 2007, most of it driven by the south will stop -- the south. builders appear to be turning their sites to entry-level buyers, so clearly signals of a strengthening u.s. economy, although some of that went is on the backreduced of the softer manufacturing numbers that we got, but in any case, the highest level in nine years. certainly when so many percent of the economy is consumer-driven, a recovering house market is very good. let's do a check with david in the markets. mumbai has been trading from us 20 minutes now, and you are seeing gains, but hong kong one of the biggest laggards right now. more sell orders than by, but it buy in japan right now on the weaker yen, that is really driving exporters. we are just two hours away from
the openings of the emirates markets, 10:00 a.m. local time. take a look at power boot. b, dubai, and qatar all closed. abu dhabi, dubai, and cutter all closed. closinges of stocks are . checking in on first word headlines from around the world, let's take you to shery ahn. traders say china's central bank plans to inject cash using 14 day reversals of purchase agreements for the first time since february. they say the pboc will auction off $40 billion worth of the contract in open market operations on wednesday. there's speculation, policymakers want to limit the use of shorter-term bargaining. -- shorter-term borrowing. qantas announced an annual record profit.
the airline will pay out seven australian cents a share and will buy back as much as $279 million of stock. the ceo told bloomberg television he hopes to exercise options for 45 more boeing dreamliner's, but does not see a-380's.or anymore his story a may be closer to a planned ipo. investment bank also the proposals by the end of the week. the listing may include their domestic licensing operation. activehas been the most overseas dealmaker among chinese insurers. and tesla is adding a more powerful battery to the model s and model x, saying it makes the s the fastest reduction car in the world. to car's range is increased
about 500 kilometers. tesla is trying to appeal to sports car enthusiasts and has been operating at power units for several years. news tok tweeted he has announce, but later fell back. >> for an electric carrara, -- an electric car, one which has cointreau doors -- four doors, a tont truck, and a rear trunk be the fastest car in production of any kind, i think this is really going to send a message to the public. shery: global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. angie. yousef: to the markets, here's david inglis. about we are just
entering the day in hong kong. to be honest, nothing very exciting about markets today. things have picked up. it took a while for us to get here. to the 10 compared day average is a little but of a high base, 7/10 of 1%, so it is clear that this recent rally we have seen across hong kong has taken a break. we hit closer to 23,000, if not above it, and since then we have meandered down on the index. arebig decliners here coming from a lot of these .roperty shares nothing off the cliff, though. australia, we are looking at banks keeping the index of float. a little bit of a weaker yen. in the news today, the company that operates the past fashion
uniqulo chain. the dollar rally continues right now, on the back of the south korean won. asia,f emerging currencies are taking a backseat to the dollar strength. you look at how some of these currencies are on the back burner here, it does give you an indication that perhaps either dollar,re short on the or they are getting positioned for perhaps a more hawkish bit. if you look at where we are for u.s. 10 year yields, yes, we know they have become lower and lower. have a look at the past 10 years or so. it is stuck in a very tight range 20 1.48 and 1.4 9 -- range 1.49.8 and
we have not closed above 1.6% in the past month. can we get this chart ups so our viewers can see this? there is not much of an incentive to take on big banks right now. people are trying to figure out what the fed is going to do next , because we have heard they are trying to manage expectations that they can do it, which is why i think friday is very important. it is also why volumes are quite light across the asia-pacific. angie: thanks for that. turkey's central bank has lowered the overnight lending rate for six consecutive months, and rising inflation is fueling expectations that it will continue to cut. joining us from his temple -- istanbul, what kind of reaction are you seeing? yesterday, we added another five basis point cut in the central bank overnight rate.
day, we saw that the currency depreciated against the dollar and closed today down 0.4%. we also saw a man rally in the 10 year yields which fell by eight business points, showing of the rate cut. as i said, it was pretty much expected. yousef: where does this leave us in terms of the road ahead? the bank is striking a very dovish tone. how many rate cuts can we expect going forward, and how does inflation factor into these considerations? the central bank is citing that there is a meaningful decline in core
inflation, and it is expecting a correction in further inflation, which has been high throughout the year. all these are dovish comments. furthermore, it also emphasizes the growth side of the economy and says domestic demand has slowed down a bit, which implies last month's failed coup, i guess. all in all, you've got the growth issue on one side, you've got the inflation outlook. both of these feed into expectations for rate cuts. yousef: we will leave it there. let's continue that conversation with the chief economist at abu dhabi commercial bank. she is now with us. what do you make of the latest move by the central bank, perhaps more importantly of the latest notes from the central what's ahead?
john: i did -- guest: i think the message is that the cuts stand the road. the key factor that we think will allow the central bank to continue to cut is if the external front remains supportive, and that was highlighted by the central bank. you have seen the turkish lira recoup a lot of the losses that is saw following the attempted coup. you have seen capital flows coming back in. sentiments of emerging markets remain very strong. these factors are continuing to support the rate cuts, despite the fact that inflation remains high, even core inflation. that will need to continue. we have seen risks on the forent account, and data the current account following the attempted coup has not come out. we think capital flows will need to increase going forward. we believe that will be a critical point.
yousef: that is likely to weigh in on these, instead of the central bank. we will keep terms tight in terms of the amount of rate cuts they can do. what about the rating agencies, decision?f the that's the one we are awaiting. the more important one is the moody's won. how do you expect them to decide, and how will that affect the external risk? guest: that's going to be very important, indeed. that's a key factor. you need to have the capital flows. if you do see a drug raid -- do see a downgrade by the rating agencies down the road, then i could be a significant factor for the ability of the central bank to continue to cut. we have seen that the central bank has been cutting by a smaller amount, 25 basis points from the last two meetings, versus 15 before the mid july
developments. we can see already some recognition that they can't have the same pace of cuts. we believe external factors are central to that, so they will be critical in our view. the chief economist of abreu dhabi commercial bank stays with us. still plenty to get through, including south africa's currency. the nation's finance minister has been summoned by police. we will have the details later. les, iran has signs that opec may freeze its production to bolster the oil price. we will talk more about that next. this is "bloomberg." ♪
posting a profit of 250 thousand dollars, compared to a loss of more than $30 million a year ago. the carrier says prospects remained positive, and booking trends are encouraging. the parent company air asia is also down. upplier welspun survivor > is plunging, after accusations of fabricating textiles. target severed their dealings, while macy's said it is watching the developments. has lost half its value in three days. uber is the dominant layer in -- ridesharing
provider in 100 countries. norththe most used in america, africa, europe, and south america. uber has retreated from china and trails in india. to theiran has added speculation that opec may freeze out production to bolster the oil price. toronto has sent positive signals about joint action. ran has sent positive signals about joint action. saudi arabia and iraq are the big guys in the room. what are they saying? reporter: they are continuing to pump crude at a rapid rate, but it is important that iran has sent a signal that it is going to attend this meeting, the last meeting in april. the last time we were talking about it, the irani administered did not even attend this meeting.
it is positive for the market that they are going to attend, but the meeting is a month away. the prices have begun to which soar on every increment. angie: anything could happen, and more speculation grows by the day. what's next? where do you see the volatility? reporter: at the moment, the volatility is going to be in every little comment about who is going to do what. it is still going to be speculation. the market at the moment is looking at the fundamental situation. we had the industry data overnight, and that showed -- [indiscernible] there is overhang which is going prices fluctuating between the $45 and $55 barrel mark. expect more volatility ahead, i think. angie: we shall.
that. for still with us is monica, chief economist at abu dhabi commercial bank. we have seen what that oil price action has done to middle east markets over the past year. what is next here? do you see the kind of volatility others are seeing? guest: absolutely. the fundamentals are still very weak. this meeting will really depend on the results. the talks of a freeze have belowed a price floor $40, but it really depends on what is next. what level will opec countries freeze production? currently, there are about one million barrels a day higher than january. the production levels are still very high if they free -- very high. if they freeze at current levels, we still believe supply will continue to outstrip
demand. if there is a pullback in , it brings an additional challenge, because you will see shale producers perhaps coming back under the market. we still think that the upside from these levels are going to be limited. been incredible, this reversal of bear market into bull market territory right now. at the beginning of the year, there was a lot of speculation that we could hit $60 a barrel. do you still see that? do you still see bullishness? guest: i think it will be difficult to hit the $60 mark. is the wealthseen in the u.s. has actually increased in the previous few weeks. you have seen u.s. production starting to stabilize. you do see prices go up much further, i think you will have additional production coming back in. the key factor with opec is that there is so much production
outside. it is not just russia, but the u.s. is a major producer. that will be critical to the equation going forward. yousef: monica, i'm looking at this chart here in terms of other big stories drawing markets. -- driving markets. what we are looking at here is the bloomberg economic surprise .ndex you are seeing wage growth, a growth in personal consumption expenditures. you are seeing unemployment down. overall, in the timeframe of storyhart, this tells a of a healthier u.s. economy. ironically, we are no closer to raising rates substantially than a year ago. what is your outlook for rate hikes by the end of the year, and what you expect from janet yellen? i think there will be a further rate hike this year of
25 basis points. we expect the timing will be december. we think data should improve over the next quarter. it will give enough confidence for this rate hike. what we are really looking for from janet yellen is a clear direction. there have been quite mixed messages over the last week. if we look at the minutes of the july fomc meeting, that shows no motivation for the fed to move, and inflation has been a central factor in that. however, all the speeches and discussions by key fomc members over the last few weeks indicate that the u.s. economy is close to the point where a rate hike is warranted, and critical to that has been the improvement in the labor market. there is a lot of on how we are close to the point of full employment in the economy, which will boost wage growth in the upcoming period. our view is that inflation should start picking up as the drive from oil prices moderates
into the fourth quarter, and that should be positive for one for the rate hike in december, in our view. yousef: all right. we will see how that plays out. chief economist at abu dhabi commercial bank joining us live. still to come on the program, a beijing-based bank is closer to the world's biggest share sale this year. we will have all the details next. stay tuned. ♪
according to people familiar with the matter. 8 billion u.s. dollars. it would be the biggest ipo in the world this year, and the biggest chinese ipo since october 2014. 8 billion dollars. it is reportedly going to be seeking approval from the hong kong boards as early as tomorrow , and to list by as early as september. jpmorgan, morgan stanley, cic see all: rangers. this is a big company. it is not the biggest, but the number of branches, this one's got beat. .ook at the chart 40,000 branches, or thereabouts. unders way down the list, 20,000. fargo,s bring up wells because in my hometown there is
so many of them everywhere. it's like starbucks. there is more than four times as many postal savings bank of china branches as wells fargo. angie: the number of outlets is one thing. what about appetite? fornecessarily screaming ipo and financial stocks for the hong kong market right now. stephen: if you look at the past history, the first half of this , as opposed to when the market was going bank -- going gangbusters, there were about 20,000 ideas in hong kong. it has cooled off a bit. in billion dollars raised 2016. two stocks in particular i want to pull up. they both listed march 30. both are down. a lot will be dependent on pricing of these offerings.
angie: dexter for watching that. coming up, egypt is preparing to roll out tough reforms ahead of a currency crunch. a currency crunch. hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business. you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business.
peaks summer demand reaches an end in the world's biggest market. crude jumped on thursday, of a possibles freeze when opec meets in algiers next month. yousef: emerging markets stocks and currencies have fallen on will that janet yellen adopt a hawkish tone when she speaks on friday at jackson hole. an index of emerging markets shares is down the most in three weeks. hong kong shares fell the most in three weeks on property and banks. turkish bonds advanced for the first time in five days after the central bank cut arming costs -- cut borrowing costs. turkish markets rebounded after last year's -- last month's failed coup, and the promise of higher+++
investors back into the nation's assets. it is 12: 30 in hong kong. i'm angie lau. yousef: i'm yousef give the disease. -- i'm yousef. >> good to see you, angie and yusuf. let's talk about some of the earnings. we will focus on the mining sector. we will get numbers from glencore. the switzerland-based company has been in the midst of a big turnaround plan for dealing with the company upon's -- the company's woes. first to roll out a rescue strategy that included scrapping the dividends, disposing of assets, and slashing spending. they have been doing a lot, and they have been rewarded in terms of the share price reaction. they have made progress with his plan. we will be looking for commentary.
will be to dividends possible next year, so we will see what they say about their overall debt levels and where the country goes from here, and put it in the context of the sector. rio has reported their earnings, and it has highlighted what a dire period it has been for some of these companies. other big earnings reports are you looking at? angie: -- only about mining, but advertising sector. the founder of this business has been complaining about the challenges that a brexit would bring to the u.k. complex,about it being costly, and taking longer than expected.
after he has been saying that, we might see brexit benefiting the first numbers. the world's largest advertising company. the u.k. voted to leave the european union. the weaker plant -- weaker pound could mean a slash is the numbers when the foreign profits are translated back in the pounds. we have seen client caution in the u.k. and the run-up to the brexit vote, but perhaps that will be offset by the weakness in the pound and also by the 2016 football tournament, which promises some companies will spend a little more. be looking for any comments about the global economy and the u.s. elections. look out for specifically organic revenue growth numbers. coming our way on "countdown." stories, qantas shares
are higher after the airline announced a record for your profit in the first dividend in seven years. let's go to paul allen in sydney. is a turnaround well underway echo -- well underway? is looking good. underlying profit down 50%. profit qantas' best ever . i don't think it could get any better than that. believe it or not, the market was expecting more, but still a strong result from qantas. they have had tail winds across the week oil price. much of it has been du to the so-called transformation strategye that the ceo has been running. all their aircraft have been retired. lost their jobs. some older planes got rid of -- were rid of. they have saved 1.6 billion dollars. the ceo was in a very good mood
today, as you might understand. here is what he had to say. >> i am excited about the future for the qantas group, because there is so much opportunity in ,he pipeline, with the 787's big growth in japan, planned in vietnam, plant jets in australia , and the loyalty program. looking forward to it, and nothing has changed on that. yousef: you heard him mention the 78 seven's, the altar of boeing dreamliner. qantas has anoth more on order. angie: what about that dividend here? seven cents per share. it's been a long time coming. reporter: it's not huge, but the length of time between dividends
was back in august 2009. qantas shareholders have a dividend. was looking for ways to return money to shareholders. the first dividend in seven years. want is also announcing a market buyback of $279 million. the stock has tripled in the past three years. if we take a look at it today, also looking good, up 2.2% right now. angie: paul allen, thanks for that. let's check in on first word headlines from around the world. let's go to shery ahn. shery: cathay pacific has applied to raise two point billion -- $2 billion of debt over the next 12 months. being arranged by hsbc and should take effect today. such debt programs are available to institutional investors and gave insurers and flexibility to access foreign markets if
needed. cathay has ordered $10 billion worth of new planes. south korea and japan have strongly condemned the north for firing a ballistic missile from a submarine today. seoul saidicials in the rockets flew about 500 kilometers before coming down in the city of japan. after wargames with u.s. forces involving 75,000 troops. the olympic flag has arrived in tokyo after formally being handed over at the end of the olympic games. tokyo is counting down to hosting the 20 20th and. it will be the second time the city has hosted, after 1964. bidding for 2024 is underway, with contenders including paris and los angeles. powered by more than 2600
journalists in more than 120 countries. i'm shery ahn. this is bloomberg. will endgypt says it installer exchange problem within months. in an interview with state-run saysapers, the president officials had waited too long to act. for most economists, it is a question of if, not when the pound will be devalued. let's get perspective with samuel potter. what is the background to all this? havel: egypt's problems been building for a wild, ever since roughly the popular revolt in 2011, in fact. we have seen an exit is in foreign investment from the country. we have seen a widening budget deficit. struggling, tourism and therefore overall we have a shortage of hard currency in the country. at a time when the central bank has been trying to maintain a pegged to the dollar,
unfortunately egypt's reserves are now running low. the pressure is on them to act. chart on pulled up the the bloomberg which shows the disparity between the spot rate of the egyptian pound and the 12 month forward. that spread is the one in focus. what options does the central bank have in terms of bringing these two lines closer together? >> the black market is another place we are seeing extreme difference. in terms of options, i think we can agree that doing nothing is no longer an option. sooner or later, they are going to run out of reserves and the currency will weaken. therefore, we are looking at devaluation. some of the options, we could see shock therapy, a sharp drop like they tried in march to attract investment in. did not quite work out. it has to be taken with other measures such as interest rate policy. we could see the move to a float
as well, which is what nigeria has since done a couple of months ago. in some respects, nigeria paving the way. angie: this is not the first major currency devaluation in africa this year. what lessons can egypt learn from nigeria? guest: nigeria -- reporter: nigeria has had a tough time, that's for sure. since they took the decision to float in june, immediately there was a 30% evaluation. it has since devalued another 10%. that said, we are now seeing a bit of a turnaround. companies such as standard bank burnout telling -- are now telling their clients to get back into nigeria. they say that evaluation has made assets cheap, so we could see the return of foreign investments. while nigeria has experienced
short-term pain, it may have helped resolve some of their issues. for egypt, i would say an encouraging example very recently. angie: sam potter, thanks for that. up, we will take a look at the g 10 currencies and ask which one is most sensitive to janet yellen's jackson hole speech? clue, there you go. you guessed it. this is bloomberg. ♪
yousef: welcome back. you are watching bloomberg. angie: let's do a quick check of the latest headlines. qatar's sovereign wealth fund has bought new shares in new york's empire state building. qatar investment authorities say purchased a it stake in empire state realty, which would give it voting interest.
surged by holdings the most on record in a sample l onn is dan bull -- istanbu tuesday. one of its units signed a pre-protocol in qatar. a 34will be building kilometer expressway expected to be completed in three years. and iraqi forces have entered is southil town that of mosul. it is seen as an important victory for the government to regain control of the countries's north from the so-called islamic state. mosul fell to the militants two years ago. the cairo airfield could be a transport hub for the armies of coming advance. now for a look at currencies, we are joined by
chief executive officer of intermarket strategy. thanks for coming on the show. let's start with the big event from the u.s., where we are waiting to hear from janet yellen on friday. what's your read as to what can be expected? towe think she is not going be in a hurry to signal any rate hikes. have the vicell chairman say that there is a strong possibility for a rate hike in 2016. it is probably not going to close the door on september hikes. she is going to want to give the benefit of the doubt probably the following friday, the release of the job report. but i think she will keep the door open for a december rate hike. a lot of people are split. i don't think they are going to take it. but we are really seeing a similar scenario to this same week or same month last year. so how much of that is
priced into the u.s. dollar? some of the analysts we have spoken to feel that a very dovish view is already reflected in the u.s. dollar. guest: yes, it is reflected it is fair -- reflected. it is very interesting, we saw some pulldown in the u.s. dollar. the recent cpi figures and the core pce, which ,s the fed's inflation goal around 1.6. it is still way away from 2.7. i think the dollar is very much where it is right now, and it has not done much against most other currencies. yen, down 20% against the but it is down 5% against the euro. think it will stay where it is
until the real story begins ahead of the december fed meeting. angie: we have been talking to a lot of analysts who say it is not necessarily what she says, but how she says it. howtone from janet yellen, do you think, if it's not going to be the u.s. dollar, which of the g10 fx currencies will be most sensitive? she is notong as going to be in a hurry to signal a rate hike, i think the currency known as the anti-dollar of the euro. seean see one -- we can 114.50. the reason is because mr. groggy is not in a hurry. he wants to lay low and pay less attention. they already extended the duration of the qe, then they diversified, which wants to buy. draghi wants to remove the onus
on him. clear in action -- inaction by the ecb, we think that could probably push the dollar lower against the eurozone's 114.50. but the yen, i think it will continue to gain him a because the reason that the bank of japan -- again, because the reason -- it will continue to gain, because the reason the bank of japan does not by the ecb's is because there are not enough japanese bonds out there. it is a similar problem fa ced by the boe. angie: but that's good for equity markets, right? guest: yes. so why does buying so , why is ituities
less successful than buying the yen? because the market is much bigger, and when you are going into the market, the monetization of the currency is much more effective, and increase of the supply of the yen is much more than the etf will stop -- more than the etf. there are also not enough firms that are going to work with companies that can participate and have their equities taken. the figures are not the same. even if there is going to be one more rate cut, and there is going to be more qe equity, it i going to work. we should still see 97 or 96 in the u.s. dollar versus the yen. yousef: what is your top trade in this market? how do we make money? in the fx markets right now, i think the market is getting overcrowded. i do think that probably there
once we see the deep there, ial issues out stood -- i believe there will still be a downside. the euro versus the yen and the australian dollar versus the yen, i think this will be the two big gainers. i think that once the rbnz comes rated does at least two cuts in the next six to seven months, i think the new zealand dollar versus the yen will weaken further, and we do think that the australian dollar versus the yen -- also, i prefer the australian dollar versus the kiwi. the aussie kiwi, right now
around 105, i believe there is a good upside potential for the australian dollar to push higher against the kiwi. very briefly, what is the top risk that can derail that outlook? guest: that could derail the kiwi? yousef: for emerging-market currencies generally? guest: i think a renewed decline in oil prices resurfacing in happening towards the end of the fourth quarter, we think that could definitely be bad. yousef: we will leave it there. program,come on the the south african currency fell to its lowest in three weeks after the finance minister has
yousef: south africa's currency fell to its weakest in three weeks after reports that the finance minister had been summoned by police. what's get more on this story from our emerging markets. -- our emerging markets managing editor. what is the backdrop of this story? thatter: this is a socket has been continuing for months. this has been hanging over south africa for a while. wind the finance minister was in charge of the tax revenue collection agency, the allegation was that he set up a rogue unit to start looking into the president's affairs. we are now seeing this come to a head. we have possible arrests. he has been summoned to the
police and is taking legal advice. this is shaking up the investors. yousef: i'm looking at the bloomberg, which shows what has been happening with the south african rand. the amount of volatility on that front. important to point out as well that the position of the finance minister is one that appears to be continuously at risk? guest: that is correct. thes largely a function of perception that investors half of the way gordon -- gortham's managing affairs. he was able to see her off a credit rating that was spooking investors to some degree. we see the rand as one of the best performers, and that is helping bonds do well. returns are practically double in dollar terms on rand-dominated --
rand-denominated arms, and now we are getting this. we are seeing the rand recover a little bit this morning. it is up about half of 1% after yesterday's 3% decline, so there might be a little bit of sobriety coming back into the investment community. angie: quickly, how sustainable is that, and what are the events to look out for going forward? there are a few key events coming up the moment. is the midyear budget statement that comes up in october. whether gordon will be around for that or not remains to be seen, but what is key right now is whether the government can continue on what has been a fairly good austerity driver, largely as a result of what gordon has been doing. hasourse, since the anc
markete fearsd, emerging stocks and currencies drop on the announcement that janet yellen will strike a hawkish tone. cash's central bank inject to cool the bond market rally. and lift off, paying the first dividend since 2009 after reporting a record annual profit. next on the earnings front is company ishe mining reining in spending. ♪ anna: