tv Bloomberg Markets Middle East Bloomberg December 13, 2016 11:00pm-12:01am EST
error of fossil feels. -- new era of fossil fuels. is midday. welcome to bloomberg markets middle east. it is all about the fed, 100 percent certainty. indicatingng futures that is where it is going to go. an indicationis of how long it has been since we have had an interesting interest rate cycle. we have not seen certainty for as long as i can remember. take a look at this tribe that i got for you. is the market implied odds of an interest rate at 100%.n they have been at 100% for a wild. two panels underneath the panel, is the see the blue line
bloomberg dollar index. it is going to be a big day for both bond markets and the dollar market. that will be of interest for everyone around the world about but bit certainly for markets in the middle east. many have dollar pegs. >> right here in hong kong the dollar peg. what does it mean to the region? that is the question in terms of guidance for 2017. let's do a quick check. we have mumbai. it remains a cyrus mystery. continuing to play out in the markets. positivity, topics paring back gains though. it is sidelined across the region as we wait and countdown to the fed. really feels like markets are in waiting mode at this point in time. in the middle east it is just
under two hours away from the opening of the emirates markets. let's take a look at how they did yesterday. a bit of a mixed picture. abu dhabi down. again people are in wait and see mode waiting from direction from the fed. before we get that decision let's check in on the first word headlines. here is sophie. a consortium including kkr, morgan stanley has made a $5.5 billion takeover bid. they will set up a bidding war which made a lower offer in october. they plan to sell or -- are a step closer
in japan after an upper house committee approved new legislation. the bill is expected to pass a final debate which begins anytime now. it could open the door to billions of investment. >> confidence among japan's manufacturer is improved for the first time since june last year as the weaker yen improved prospects. sentiments rose to 10 from six. the outlook as up to 8-6. a planned 5.5% increase in business investments was below estimates. shareholders approved him as chairman. he has a machine capable of trading 10 million cars a year. nissan bought a stake in october
after the fuel economy scandal threatened to hand mitsubishi its first annual loss in eight years. this is bloomberg. president-elect donald trump has signaled the beginning of a new pro-fossil fuel era with his choice of exxon tillerson. -- rex tillerson. how would that differ from some of the values projected from the obama administration? tillerson is a well respected ceo. he has been there for 40 years. ands a free-trade advocate energy security is something he believes in. those are two things he would
try to pursue if he is confirmed as secretary of state. he is and directed with world leaders during his time at exxon including vladimir putin, exxon 2001deals with russia in to draw on the arctic. he brings those relationships with road leaders to the table. he's an advocate for free trade. the one term that has been used may promotehim, he u.s. business promote u.s. business interests overseas. >> let's talk about some of donald trump's other cabinet picks, especially rick perry to head the energy department and scott pruitt at the epa. >> those are two advocates of fossil fuels. rick perry of texas has promoted oil and gas for a long time.
powero has a lot of wind that came to be in texas during his time. he's an advocate for fossil feels. the attorney general of oklahoma has fought against a lot of epa regulations. one thing you would see if they are confirmed is a reduction or decrease in regulations in the oil and gas. you would see production of oil and gas rise. there is probably going to play a more prominent role in the u.s. energy mixed going forward if this people are confirmed. that is what their values are and what they have pursued in their previous positions in state government. you so much. let's turn a bit closer to our region. cyrus grip on power has weakened further with the shareholders
the management could not give a satisfying reason. for decided it was a reason ousting the chairman. 93.11. >> what were the concerns raised by the shareholders? >> the shareholders were favoring the chairman. they were worried about -- they would want the issue to be settled. they were asking for mediation. holders --shell
shareholders said they should step into the issue. >> let's get the latest now from the markets. >> we are starting to see the nerves creep into the asian recession. we have had gains so far today. the australians holding up their own. we are starting to see this rotation into the unloved sectors in this trump trade. some of the badly sold off areas. tracking similar gains we saw in the u.s.. another record close. elsewhere we're seeing a mixed picture. some weakness coming through. analysts don't
expect the dollar index is likely to hold study going into the fed decision given how much certainty there is a we will get this rate hike. you can see volumes coming out a little bit. hong kong up by 6/10 of 1%. swingingi has been pretty wild today. the yen hanging onto that handle. we have this note from bank of america merrill lynch saying the number of global investors piling into japanese stocks jumped the most on record. 21%. what we're saying is a little bit of lackluster trading. not much of a reaction from what has been a positive starter. pretty steep losses in terms of new zealand stock. let's take a look at the
breakdown. this is going into those less popular sectors. telecom is up. utilities saying nice gains. financials have fallen into the red as has health care. gains of 7/10ing of 1%. oil and gas, have not seen much. energy are still holding what theicipation of oil supply cut will do to the markets. . quick look at currency been hanging on for a bit. if we see any volatility it will be when janet yellen begins her
let's get a check at the business headlines. palestinians are pessimistic about the two state solution with israel. the percentage of those who believe it is no longer viable due to jewish settlement sanctions has risen to 65%. have returned -- the world biggest refiners set to be considering a takeover bid for gulf keystone. we are told he has made an approach. $417have a market value of million. it may attract other suitors. madenal decision has been and talks may not lead to a deal.
neither company has made a comment. angie: worried about the falling lire, saying it would ease rules of the government signaled it would be willing to help companies manage a gap in liabilities and assets. ministers will not be indifferent to troubles facing businesses but may have to limit the amount of foreign-currency debt companies. tracy: a fed rate hike may be a foregone conclusion but there is another expectation for two next year. that is against lifting inflation monopoly in the u.s. but around the world. mohammed.ned by let me just pick up on that inflation point. i have a chart that shows what is happening around the world. inflation is picking up in china. those of the white bars.
we have the brent crude price. and of course we have the elusive u.s. wage growth finally coming through. when you look at that buildup of inflationary pressures do you think that is going to force the hand to active faster? >> i think so. i agree inflation is going to be coming the new game in town. most of the policies we see today are talking about expenditure and lower taxes. and the increasing of interest rates. there is going to be a stronger dollar. countries like china. that is going to be even faster. i think in terms of asia and are part of the world it will be an
issue especially with oil prices . especially if they meet the expectation of $65. tracy: you mention the dollar. that is an important thing for people in the region given the dollar peg. if we have a stronger dollar, a bond market selloff, that equates to a tightening of financial conditions which can be painful for many markets around the world. how do you see that? >> i agree and i think we see tightening already. are already -- it is already 1.3, 1.4. therefore the markets are tightening and priced in. providing it happens on a gradual basis. maybe one in december and in 2017.
i think we may see some shakeup. i think there will be some kind. if you look backward, we are talking 1.55. people are exiting from that. where will the cycle continue? i doubt that. i think it is the worry of inflation. a stronger dollar at the same time, with high oil prices would make this a more bumpy ride than people think. angie: in terms of strategy had he look at 2017 if you think we're going to get the pullback? >> this is a question i think a -- people havere said maybe u.s. equities could be good.
for the local regional middle east we see the bond market holding well. we don't see a drop in those yields compared to the u.s.. bonds are held by the local institutions. therefore they need to put that to work and that has worked for them. i worry that the fact that some of those bonds are going to individuals and maybe leveraging them. if there is any shakeup and that market it could be exasperated by the leverage. sevene first quarter of -- 2017i am comfortable. i would be reevaluating the strategies to make them more safer for the second quarter of the year. >> where does that leave the appetite for gold? gold, if you see
there is a strong dollar for 2017 gold is going to be very much muted. i'm not sure were going to see it break to $800 like pessimists are. once the new president comes to office and we start to see him in operation and we see his new team, businessmen used to say if i was running the country i would do this. our wish has come true. let's see how that happens. if those things happen, if it is positive, i think it could be positive for us. if we see those free actions, we should be concerned and worried. the strategy of the new administration looks like russia , where historically it was the enemy. now putting some increasing tensions with asia. i'm not comfortable i see that positive for us, leaving things
in a calm manner which would help investments. >> no doubt that was one of the selling points. that he was not a politician. but now that he is, the criticisms that we have, we are going to leave it there. mba dnaging director at securities. greasing the wheels. russia courts billions and deals. next. ♪
turning into a bonanza for some foreign companies. so, a large number of russian companies who were anti-iran -- in tehran, they establish nine deals worth $10 billion. in context it is not the biggest deal. is a fairly large deal by the standards of what has happened recently. all of these deals can take place. it shows how big the investment potential is. there has not been a big final deal yet our money has gone into the country. >> these are still just ious. how likely are they to be finalized?
signed by a been lot of companies from various different countries. i think it depends on a lot of the risk that is still there. a lot of investors are waiting to see what happens next year when donald trump takes the presidency. it could return a candidate who is less open to foreign investment. there is a lot of way and see. russian companies may be better placed because of the political relationship between iran and russia. banksso because russian may be more willing to go into western banks.
angie: joining me from japan, crossing the bloomberg, let's go to shery ahn. >> we are waiting for numbers out of japan. seen the industrial production numbers turn positive in august we are waiting for the final reading. still, after the surge that we saw in august, output has been declined. we are getting the final figure. 0% growth revised downward from
the preliminary figure of .1% growth. we are getting the number on air. the preliminary number was following 1.3%. the final number being revised itn, it is worth mentioning has been highly volatile and we are seeing some signs as that bykening yen is being felt exporters. >> the weaker yen was clearly felt and corporate sentiment in japan. what did the survey show? >> business sentiment has improved.
it was in line with estimates, getting a huge boost. still a different picture when it comes to non-manufactured. the number is then stalled. the outlook, not really improving that much. that has been the missing link in japan's monetary policies. corporate sentiment improving. not really being felt when it comes to businesses upping investment. companies on average plan to boost by 5.5% this fiscal year which is down from 6.3% in the previous time. this has been attributed to the not grownsales have
sufficiently to offset some of the other concerns. haveu get extra demand you capacity. there are lingering concerns over japan's demography. that is discouraging capital spending. as we have seen, now for october the final reading being revised down. the japanese economy still has some ways to go. angie: thank you. now for a look at the first word headlines from around the world. let's go to sophie. >> asian markets are subdued with investors holding. the same number of shares rose as fell.
he faces more shareholder meetings. retaken the city of aleppo, the biggest victory in a most six years. it is bombing aleppo in support of president assad. dayal news 24 hours a powered by journalists and analysts in 120 countries. >> one rate hike on wednesday and two at most next year. that is what the fed is expected to announce after its two-day meeting wraps up later today. could expectations of a trump spending boost to the economy change the timeline? kathleen hays has more from new york. >> 100% odds of a rate hike.
a rate hike is appropriate including fed chair janet yellen herself. let's jump into the bloomberg. one more look. it includes better consumer and trump boosting the economy next year. what is next for the fed? more gradualism. hikes will see if they update those forecasts. the majority looking for that rate hike until june. some been say the benefit is a too quick increase in inflation.
>> the labor force is out of extra workers. they are increased in payrolls a month. it is not going to continue on because we are running out of people. donald trumpbout cutting taxes and boost spending? will that speed up the pace of fed hikes. they can't make policy on what donald trump might be able to pass through congress. markets are not waiting to see if stocks have rallied in the u.s.. small businesses are betting on donald trump also. let's jump into the bloomberg
and see what supporting the biggest one-month gain in small business optimism since 2009. jumpg plans are setting to up. it is clear small businesses are betting on trump. will he be putting his bets on the fed? the tweeter in chief responded to the decision. follow along. kathleen hays, bloomberg, new york. >> that is beginning at 1 p.m. in new york and 2:00 a.m. in hong kong. first, saudi arabia is said to be taking a leak out of south korea's book as part of its economic transformation to turn a number of key companies into global household names.
>> it is -- they are trying to achieve that initially. basically they want to start with trying to boost profile hundred tatian allowing -- boost their profile. somevide them with financial incentives and help accessing funds and so on. they are trying to see how much they can boost the private sector and create jobs through that plan. tracy: give us some more color. saudi arabia has been trying to transform its economy to wean itself off its reliance on oil and some time.
>> they are in the beginning of this. we don't know the details and how they will accomplish this. you're looking at an economy that is only 40% private sector and tried to boost that. 70%.have a population of they need to provide jobs for that. they are trying to see how much they can converge those issues. to see whatking investors can offer. you may end up with that ability to draw a lot of financial from overseas to these companies.
>> investors are telling us this would be a good move for saudi arabia. be known for can investors. providing a benchmark of companies that are big and supported and helped by the government can help drive a lot of activity toward these companies. activitynd up with that is clustered around certain industries. >> coming up, douglas flint tells us what is keeping him awake when it comes to the chinese economy. this is bloomberg. ♪
>> china has defied the doomsayers thanks to robots, consumption and a revival of smokestack industries. and fresh concerns over debt and stimulus. tom mackenzie is taking a look into the issues. it is quite a turnaround given talk of a hard landing of the start of the year. >> absolutely. silenced atar is least for now. george soros said a hard landing was practically unavoidable. it hasn't come to pass yet. the numbers we got yesterday building on this industrial production up. we know exports have improved.
it is around 7%. that is all on a unsustainable position. it puts the government in a sweet spot temporarily to rain in some of the liquidity and the curves. let's put our cynical journalist caps on for a second. where could this come unstuck? >> a number of potential stumbling blocks. debt remains a key concern. 250% or there about. defaults are rising. starts on a geopolitical
risk. then we've got real estate investment. be 1%op 8% is expected to next year. then we've got auto sales that may be phased out. that will reduce sales that will feed into retail sales. we've got the concerns over capital flight. the pressure that is going to put on the yuan, it is the communist party congress. q2 that is maintaining economic stability. >> it is a laundry list of potential concerns. thank you so much. let's stick with politics for a
second. policiesdonald trump's towards china are a particular concern. $150ank is redeploying billion and hiring 4000 staff. that chinant told us made the decision. >> the issue in china, an economy of that size and expert economy, to a consumer driven technology savvy research and development economy smoothly. big steps have been taken.
the population is supporting the transition. that is reflected in political support. it is a massive undertaking. see the research side, the consumer side, it is going strongly. the chinese firms are beginning to invest in low were wage economies. myanmar,going into they are going into africa. you were a because something interrupts it. managedchina has successfully so far.
>> how many do you think chinese banks have? see they report many things. there may be other elements in the investment companies that are yet to be recognized. i think it is less relevant. china has not borrowed heavily from the world. manage in a wayth without causing disruption and unrest? and economic slump? so far they have done it. it is difficult to say that. they won't do it the same way as it begun in the u.s.. they know what they have to do to manage the recycling of
capital efficiently. >> markets worry about something . >> it depends on the way it could can generate. successful economic policy and if you have an economic event like the explosion of shale gas that disrupts a market more germany to move away from nuclear power have a disruption to ours in the future. if you don't have disruption asset value should be about what people expect them to be.
>> the reserves, the currency and the outflows. >> it clearly is a complex equation. exporter of a net capital which is important for the rest of the world. way want to manage in a that severe volatility in the currency that make people nervous about their ability to control things. i think we tend to extrapolate single month movements much more dramatically than they would in turn away. it is a challenge to manage all of these things. china is becoming one of the
major investors and i think that is a positive thing. good for them. angie: china's putting restrictions for pulling out of the country. is that impacting your growth strategy? or your ability to grow? it is not. we are hiring in china. >> how many? >> over the next several years we will be hiring a few thousand .eople to build out strategy the rate of development depends on the economy and the number of many factors. china, whether they are based in chance to there is a
press from its treatment of the orca's it has there. the middle east and abu dhabi is an obvious choice because they will pay to build a park. that always helps. they don't have to build their own capital. there is no animal-rights advocate in the middle east. they will have to discuss their treatment of its animals. so it will have a much smoother ride. tracy: ok. so we understand that from seaworld's point of view. what is abu dhabi want seaworld? >> they are desperate for diversification away from oil income. morale, to leave the development of theme parks, it is partnering with warner bros.
and for re: to create -- to places like orlando, florida. it is a cluster of developments in one place. ultimately the idea will be to provide one ticket. you will go to all of these different parks. build thising to special transport system where you can zip around to different parks. it is going to be integrated operation. trying to put them on the map. tracy: a draw for a lot of visitors no doubt. we are going to leave it there. thank you for that. that is it for us on this edition of bloomberg market middle east. >> we have all of the top stories from around the world. coming up next, plenty more on
>> it is 1:00 p.m. in hong kong. casinos are expected to move closer in japan today after a final debate. legislation is expected in the next year hours, opening the doors to potential billions of investments. legislation will still be needed and no casinos are likely before the 2020 tokyo election. including morgan stanley reported $9.5 billion in gaming companies. the proposal may spark a bidding war for cap corp.