tv Bloomberg Markets Middle East Bloomberg March 14, 2017 12:00am-1:01am EDT
♪ >> more bond sales throughout budget. kuwait becomes the latest gulf nation to its investors. it could bring in a billion dollars you anchor: brexit could be launched this month. another vote on independence. china factor activity remains strong. a potential partnership and led to attract japanese
companies into the kingdom. welcome to "bloomberg markets. david: china closer now. have a look at this chart. talk has been reflation trice -- reflect-- reflation priced in. your candidates to bring the u.s. yields, the top panel of the s&p 500. japan, thel is second most obvious candidate because of the implications of higher yield and dollar-10. -- guest: dollar-yen
it does not necessarily benefit global equities equally. yet the thing i want to point out before is that the relation has started to come down for the u.s. and japan. it is starting to come back in. >> investors have been waiting for correlation to start coming down. that stick a look at what is happening in the middle east where it is two hours away from the opening of the emirates market in dubai and other debbie. -- other debbie. -- 1.22%.oint sent dubai closed up, up .58%. led by a bunch of movers. sent --er three points
3%. the markets in the uae are a life with the sound of acquisition talk. a lot of movers off the back of that. the fun there. guest: toshiba has concerned it will miss another deadline and delaying its report until the 11th of april. it says losses at the westinghouse nuclear unit, plunging again and against -- confirming it shows the delay. it will have a day to be refiled or face at risk of being delisted. relations between turkey and the netherlands have sunk even further with the dutch ambassador banned from reentering the country. meetings and flight permissions have been canceled for dutch diplomats. demanding an apology from the netherlands after kevin numbers
were blocked from speaking at public rallies. >> it was decided that until the netherlands somehow compensate for what it has done, put on hold and postpone for a while. kuwait police to sell -- the government is offering $3.5 billion and 4.5 billion and 10 years. at a premium to u.s. treasuries. investors, areign deficit that is forecast to be $32 billion this year. shareholder is considering a share sale for some of its assets. says he mayire offer shares in one or more of his companies through an ipo. financing, more than 40
countries that companies across middle east. more than $10 billion based on the equity holdings. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, we have the world business covered here on bloomberg. twoy: let's turn to stories. the u.k. is another step closer to quitting the european union as parliament gives the prime minister permission to launch the process. in the u.s., closer to a first rate hike of 2017 as policymakers prepare to meet a snowy washington, d.c.. our policy editor has more. reporter: a much-needed brexit victory. that is what theresa may achieved as parliament passed legislation allowing the 50,rnment to invoke article a step toward actually leaving
the european union. this occurred as the house of common under current -- -- that would have restricted her movement in the european union. forcing her to consult lawmakers may once again -- may has once again the time to negotiate brexit at her choosing. the queen it gives her royal assent. the green light for a major a preparingrigger to do in the last week of march. seemin the u.s. it may that janet yellen is going to move the fed it the first rate hike of 2017. the fed meets in washington on wednesday. here's what a chair said about this. >> certainly wants to keep the good times rolling. too fast. there's not much danger of that and i think the primary motivation is to get back in the
normal range so if things go badly they can cut. it can't be genuinely very worried about inflation at the moment. reporter: benefiting from other positive factor. wall street expectations aligned with the direction the fed is signaling it is heading now. a survey of 45 economists shows that the estimate is for three quarter-point rate hikes in 2017 in march, june, december. that is up from the two hikes predicted as early as february and matches the median number that policymakers forecast in a december of last year. what could really surprised the market is if it gets more aggressive and points to for interest rates increases in 2017. many economists say the fed is not ready to go yes. -- yet. david: so much to consider out there.
underpricing political risk in the eurozone. , senior investment strategist he joins us live out of singapore. we talk about the euro in just a moment. i want your thoughts because one thing that stood out is your call on the mexican peso. the reason i'm bringing that up is because spring break season is coming up. a lots of these young college kids in the u.s. are about to into mexico for a few weeks of quiet reflection. them out here. what is the outlook? should they change their dollars for peso or wait a few more days? >> they should do is now. absolutely. the thing is, everybody is focused on the concerns over the trade tensions between the u.s. and mexico. had that pretty much over the past year the mexican central bank has doubled
benchmark interest rates from three in a quarter to six and a quarter. our view is with the inflation and mexico, we are looking at another 50 basis point hike. on the 30th of march. coming up for the mexican peso, it is basically able to offset the fed rate hike. tracy: david clearly has for a break from the eurozone date. a potential second referendum gets we have not seen the pound move significantly. what is going on here? complacently in the market? is it that they have been priced in?
>> i there are two different things happening here. on the pound, if your member since last june it has fallen a lot. we think the pound has the worst case scenario and if you get the much more efficient and clear brexit part from here on, perhaps the pound will recover. the biggest selloff has pushed up u.k. inflation. that makes it a little more comfortable. the euro is completely different picture altogether. new riskaunched a barometer. within the eurozone, basically markets, equity markets, perhaps a slightly
underpricing in the upcoming political risk. we think the euro should traded down a going forward. as you well noted this range has been quite significant for the aussie dollar. we are right smack in the middle of that range at the moment. would you recommend looking look at theou aussie you buy in it gets? what level do we buy into? the thing is interesting. if you superimpose the aussie charts with iron or, it is asserted to diverge six months ago when iron or prices more than doubled. if you agree that the aussie was still benefit from higher
, eventually the aussie should traded higher. potentially much higher u.s. interest rates coming from the u.s.. if you thinke say you have a much longer horizon towards the end of the year, after the market has digested the upcoming federate hikes perhaps the aussie's beyond it. perhaps a good level to wait for to the lower end of the trading range at 72 or 73. that be a very good level to go along. when the rba has signaled a cold from here on. we do have the fed
meeting today and tomorrow. what reaction are you expecting from the dollar? fit fed willl that hike 25 business points. we see, including tomorrow's hike, three hikes in total. tothere is anything whatsoever that the peso will be quicker to its fall, that's will keep the dollar stronger. else perhaps a little and take in the dollar. very good for the eventual trajectory. t think you very much for joining us. coming up in the show, countdown to decision day. more on why the fed will almost certainly asked the markets to take a hike.
tracy: welcome back to bloomberg tv. i am tracy alloway. in hong am david ingles kong. talking about the china important data. hopefully showing signs of improvement if you look at the underlying there. retail sales also seeing a bit of a rise. joining us right now to talk through the data. let's talk with -- let's talk. offrom the turnaround deflation, factory gate. rising prices. flowing through. note isimportant to
what is happening on the private side of the investments picture, starting to see a pick up there and taking the government to boost growth. even though the group will -- global trade story, we can see the better -- better in china among private investors. >> we have known this story. this reflation isn't just based on commodity prices or demand to excess capacity. we are early in that fight. it is going to take a few more months. tracy here in hong kong. let's look at retail sales for a second. we had them rising 9.5% in the first two months of the year. shifting toward more consumption driven economy. can they declare success on that
front based on today's data? >> there is no doubt about it. not least the removal of a sales. and also -- also if you look through, cosmetic, electronic goods, can just furniture, construction materials, online sales soared quite strongly. don't forget that people -- softer consumer inflation over a two-month. . it is a soft headline number, no doubt about it. it doesn't quite suggest just yet that it has come off the rails. watch the numbers ahead. tracy: more work to do. thank you so much. let's turn to news closer to this region. we have saudi errico and the
tokyo stock exchange looking at setting up a study group for the sale of shares in the state owned energy giants. tokyo is one of several exchanges around the world competing for what is potentially the world's biggest ipo. the agreement to establish the study group was among 43 potential joint products during the visits to japan. obviousart with the one. it looks like we have a bit of a scrum developing. what does the tokyo stock exchange have to offer? obviously everyone wants to try to get a piece of what could be the largest ipo.
there may be a study group formed between japan and saudi arabia. i don't think we can look too much of this. the king is visiting. there are agreements announced last night. i don't think we can read too much into this other than the fact that japan is interested in being in a place where they were . it is interesting to note that saudi aramco said it in january on bloomberg that the company was considering listing in cities including new york, london, and hong kong. what they are looking for is liquidity and access to investors. they're going to have to judge tokyo against those other cities. david: you alluded that there is much more going on here. not just in japan. thisondering, apart from
one which takes the headlines, are there any other deals signed or eventually -- potentially signed? >> a couple of big things announced over the last few days. saudi aramco is going to make a $7 billion investment in the refinery in malaysia. $16 billion in another facility in indonesia. it helps saudi aramco luck in future demand. that is something that investors will look for. especially in the global market where you have a oversupply of oil. this has been a part of the strategy for a long time. they are intensifying that effort to demand with these deals. i think it looks like they're
successful in malaysia and indonesia. it is looking quite important and shows saudi arabia's visibility to lock in future demand. david: hollowed potential -- solid potential. we are talking intel. on self driving cars, the biggest offer for an australian company. we will look at that one next. this is bloomberg.
this deal, you are right. they were going to go and move our autonomous driving resources to raise real to -- to israel. there is are the overlapping, and that will bring those synergies to the $175 million overtime. works a lot of options trading in it days before the deal was announced. near record levels for mobile. nothing like this. this concerns you. >> we have been working on this deal for a while. if you take a look, pretty quiet
from what we have seen. keep the deal under until the 12-24 hours. i look at what we were doing in the markets. it seems alike everything was pretty ok. tracy: set to decide on a turnaround plan. on the brink of bankruptcy three airways ageit had of hundred $65 million for in majority states. louche --mike redmond walk us through what they are doing and its relationship at the moment because they do have that stick but there is a lots about whether they will continue to do so. the company is intending --
actually investors have asked them a couple of months ago to come up with a plan to come back --profits and cuts that cutback cost story of really holding on what we believe at this age. they are holding on to their state area -- stake. that might increase their investment flight 300 -- 300 million euros. of themthe result wanting to bear the fruits of their investment. there for us in abu dhabi, thank you so much. coming up in the show, federal reserve rate hikes. what else? but are all but certain
tracy: you are watching bloomberg. i am tracy alloway. i'm david ankle us where we are looking at the markets. a big day for the fed. we know what is going to happy there. -- happen there. jules: a strong upside from the south korean. the frontrunner. on this tear since friday since the court upheld the impeachment of the president. pretty flat on the singapore ftse. that is the first time we have
seen the nikkei and the tropics actually retreat in four sessions. pretty flat on the asf 400. we are seeing dividend payout in that market and the hang seng going into lunch break as well. china market on its break. the aussie dollar is one to watch. 75.61. down .1% against the dollar. reacting to the fall and business confidence and conditions out of australia today. we had retail sales coming through, in terms of commodities iron or is surging up 3.5%. mixed movement in terms of bond yield in the asian region. some of the stocks, toshiba a big one. falling by almost 7% in the japanese afternoon session. april 11 announcing it learnings. got -- samsungs
propping up the south korean market of 1.7%. is this reporting that samsung is continuing its review into shifting to a holding compass he -- company reports from a may. movers in the section on what has been a lackluster day. tracy: we are getting a headline saying that toshiba has gotten approval to extend the earnings deadline to april 11 area definitely more to watch for on that front. anchor: hey. the uk's ever closer to triggering brexit. theresa may winning the parliament approval to invoke article 50 of the lisbon treaty. a result from her own conservative party to have
common sense. thess the board as well and approval will become law. theresa may will begin the process of leaving the european union under this month. kuwait has become the first opec numbers to suggest extending off but beyond june. according to a report with the official news agency, it blames the surgeon u.s. industries for falling prices and suggests that more time is needed to balance the markets. opec and other producers agree to two/productions, spurring a 20% rise jump in december. prices have declined 9.5% so far this year. dell 13% since the beginning of this month, clashes between rival groups for the closer of the biggest export terminals. about 600,000 barrels a day. third, a fight broke out.
2600 journalists and analysts in more than 120 countries. you are watching bloomberg television. almost decision time for the federal reserve. we are all very excited. fully expected to raise rates this week. david is going to take us through some of the charts that make an interest rate hike a near certainty. david: numbers don't lie. step away from speculation. have a look at some of the graphics we have here. keep talking about the federal funds, a dramatic shift the past week or so. a blue line, that is basically it. all of these hawkish comments coming out of it fair leaders.
now, when you look at the market has been doing, some fed watchers have been pointing out ,hat if you look at the stocks pushing the central back to -- make it smooth. the fastest rate in five years. talking about the surprise index now. driven mostly by sentiment driven indicators. when it looks at improvement figures, helping to push closer to the dual mandate. full employment and 2% inflation. the jobs report, how is it have a look at the graphic. that is where we are.
2.8%. that is your level rights now. very interesting, all of these moves we have seen across the markets here. do we get that? 12 hours time, the most important thing. it gives you some guidance. where we go after what is virtually being priced in at 100% chance of a fed rate hike. very interesting. eachrepresents where official thanks rates will be over the course of the next few years. do we get a revision? do we get the yield curve moving up or steepening as a result of that? starting here at 1:00 hong kong. roughly speaking 12 hours from now. tracy: are you excited?
i am pretty excited. here is the reason i am so excited. i know a hike is almost a certainty. you walked us through it. we do have the past of future interest rate rises in the air. to begin three or four? that has the potential to be of significant interest to investors. we also have an overriding question about inflation. and we just see a peak inflation come and go? talke middle east we continuously about oil prices as now we have had the oil price line slide. is that something the fed is going to take into account? it will be interesting. david: absolutely. one of the bigger market moves we have seen over the past four that headlineow inflation is what you want to watch out for is for inflation. we talkng said, when
about monetary policy. a lot of the people we talked to, there is a lag. 12-18 months download. that's momentum hopefully will carry through in the economy. it is almost as if you are in astrophysicists. the like you actually see is the star four years ago. if we are talking about else in tory. i am digressing. very interesting in how this plays out in far as inflation. i am sure we could talk about the fed and astrophysics for some time more but let's bring in someone else who could talk about it with us. we, theve timid do professor of economics at the university of oregon. one of my favorite fed watchers, he is on the phone from us. tim, let's start with the basics.
i mentioned inflation for instance. we have had the slide in commodity prices are recently. you think the fed is hiking rates at exactly the time when inflation may be peaking? i am not terribly confident of that. i tend to think they are hiking rates on the expectation that core inflation is going to be rising. think thatthat i do some of the peak of the energy cost inflation is coming through the system. i anticipate we will have more inflation as the year progresses. let's step back. one family to ask is about the feds messaging. we had this week where the speakers suddenly seem to turn into hawks and managed to push up the market implied chances of an interest rate hike in march from below 50% to almost 100%. what was the catalyst there?
tim: the federal reserve thinks we will not getting the message. i am not sure -- there was a significant change in the balance of risks. it became fairly clear that the fed was paying much more attention and the rest of us were two issues like improving the external balance, internal data that suggests better outcomes later this year. david: i want to get your thoughts on how the dollar plays into what comes next from the
fed. markets tends to get ahead of themselves. is there a point, when you look at the dollar index when it comes to the u.s. greenback, do we get to a point that it basically takes anyone even to rate hikes off the table? sure. yes. that is completely possible. looking forward into this year, including one factor we could expect is a higher value of the dollar. .artially expected we should see some mix of higher core prices, a higher dollar. higher interest rates. the federal reserve decided to pull back on rate hikes. david: what would you say the
goldilocks level of sustained wages that keeps both the -- the american chopper savvy and the fed comfortable? tim: not too much further higher than here. right now we are running 2.8%. if i add in the 30 basis points which make higher inflation, that gets translated into wage growth. a little low 3% and i think that that is something -- total implement in the current environment. i don't think we want to see higher wages unless we have higher productivity growth to a company that. david: thank you so much for joining us. breaking news.
toshiba, itdo with is weighing the majority sale the consolidation of the westinghouse units. we are looking at the target for year 19. 2019, the fiscal year operating profit of ¥210 billion. they do aim to retain the sustainable growth from that here on. when it comes to changes we get as management, we were talking earlier about the problem being not just this one. do we see a change in corporate governance? of board members, majority will be coming from outside the company. a counterbalance there. sets to be cut, how many board members are about to go. the top line is that toshiba is
waiting. they are considering. not a done deal. the majority sale of the westinghouse unit which has caused the company a lot of problems. shares as you can see, have reacted quite positively. tracy: pretty amazing corporate story unfolding. we are turning to the dead markets because kuwait has made its debut on international bond markets. raising $8 billion. we're going to discuss whether that issuance is enough to help the country stem its deficit. this is bloomberg.
dubai. kuwait is set to raise $8 billion, actually it has raised eight ilion dollars in its first ever international bond offering. that makes its the latest in the string of countries resulting to foreign investors to bridge deficits caused by low oil prices. is the bloomberg economy and government editor for the middle east. to start off with the pricing. we had a guest on yesterday. as of the doubt these, instead it is tighter. where's all the demand coming from? >> the first time it is not a chunk of change. it is a significant amount. it was more than three times over described. $29 billion in bids.
that allows kuwait to tighten the price. tracy: it has been a record year for golf government bond issuance including saudi arabia's mega 17.5 billion issuance. do you reckon is there is more to come? yes.ter: it is safe to assume that. hundreds of billions of dollars of combined deficits in the years to come. we had a talk with the debit the prime minister. to -- they'reg are not going to basically flooded the market with more. the said that this raised
bulk of their financing from a international markets. david: you guys were talking about pricing. treasury, one trench of course of that deal. i was wondering what demand is ofe you given the sort pricing we have seen, what are you hearing just in case we get more? not just from kuwait, but were looking at a massive deficits. is there room in the market to absorb all this debt and all future debt that comes through? athor: you have to look where oil price is and where obviously the fed global rates are. saudi arabia is already looking whetherternational --
or not they're going to spend, another matter. the land has sold 5 billion. other countries buying have a deficit. pacess they will themselves. couple of days before that decision, the demand was significant. $29 billion. there is appetite. david: absolutely. thank you for joining us. let's turn our attention to nigeria, jump starting the economy and kicking off proposed sale of oil. joining us now from south africa is paul. how is the plan taking shape? has an average of
55%. chevron, that, accounts for 90% of production. it is looking to sell down some of those. obviously the militant attacks have reduced production to almost three decade lows. having a buyer approach at this point, they are really going to have to know what they are doing. the plan is to put the share of these for sale over the next three years. likely do youow think they are to succeed in their efforts? paul: nigeria does not have a great track record.
they have not gone off exactly as planned. these sales could take a long time because nigeria really likes to hold on to these assets. that does seem to be changing because the budget have been hurt from last year's attacks. to do something and this is what they are putting out there. burkarthat was paul from johannesburg. thanks so much. the biggest shareholders look to list. going to take a look at the family from saudi arabia next. this is bloomberg.
looking to sell shares in a local ipo. controls more than 40 companies in the middle east. joining us now is bloomberg's matthew martin. matthew, let's start with the basics here. what do you think might actually be up for listing? i am personally very interested in the burger king ties. they have a huge wave of assets from international property, stakes and banks. a whole host of local businesses which cover everything from steel and pipes to food franchises. said they ares exploring the idea of taking one or two of the operating companies to the market. what we're hearing from sources is that the plans are grander than that. a lot of the saudi companies into this vehicle and selling shares in that as a diversified
conglomerate across various sectors. matthew, sorry i thought david was going to come in. i know burger king is up personal interest to him as well. i know this is the year it seems that saudi arabia is opening to investors and international capital markets. we also have saudi aramco looking to mix area how does this tie in? >> we are going to see aramco come into the market next year. group is also saying that the target is probably going to be next year. a very, very busy time for the stock markets, also the stock exchange itself will be closing next year. this all ties in with part of the big theme of what the government is trying to do. wring more foreign direct investment into diversify the exchange and open another stock exchange. we are going to see a lot of
assets to bring foreign investors in. that point.p on we have seen significant invested interest in income. we just saw that bond of sale. do we expect the same thing to happen when it comes to these sorts of things? >> a huge question of course paying over these sales. none of these things have been done before. a flood of money has not, as quickly the saudi's have hoped. trying to change the rules to make the equity story more attractive. tracy: thanks so much. that is it for this edition of "bloomberg markets.
>> toshiba says it will have a second earnings report deadline, given approval to delay until april 11. it says it needs more time to assess losses for its nuclear unit. toshiba slumped on news of the delay, shares now recovering down 1.5%. china's economy continues to hold momentum, where the old growth engine is still firing. investor production fell more than expected in january and february. meanwhile, sales rose 9.5%, missing estimates, driven down by lower car s