tv Bloomberg Markets Middle East Bloomberg December 12, 2016 11:00pm-12:01am EST
alix: china factory output and retail sales show further strengthen the economy, but the reasons are about to change. and opec nations boosted production last month despite agreeing to historic cuts. no one wants to lose market share. goldman'smp nominates president as economic advisor. he's also delaying his business plan while in the white house. and turkey gets a $140 billion boost to the economy, will
thanks to a new way of accounting. 8:00 a.m. across the emirates. i'm tracy alloway in dubai. e: welcome to bloomberg markets middle east. the oil surprise that saudi -- it looksistered like maybe we are now near overbought territory. tracy: that's exactly right. i thought they would bring a little pessimism entire tuesday show this morning, a little bit of a reality check and some technical analysis. take a look at this chart. this shows the price of oil, the white line, but more interesting for our purposes is the white line on the bottom half of the screen. that is the relative value index, a technical indicator that looks like the speed and degree of movement of particular asset price. you can see it is now above 70. when that reaches about 70,
traditionally it is viewed as an overbought indicator. it suggests to some that the rally in crude may have gone too far, too fast. fast: well, too far, too looks like it may be more sideline action right now across the asia-pacific trade seen. let's get you a quick check the state of play. mumbai trading for 20 minutes, right now it is flat. there is a very interesting move --terms of the toughes shareholders are being asked to pick sides. hang seng shrugging off the positive data out of china, and we are seeing fluctuations in the japanese benchmark, near the year highs. it's really about the fomc this week, it appears. tracy: all fomc, all the time.
here in the middle east it is just under two hours away from the open of the emirates markets at 10:00 a.m. local time. let's take a look at how they did yesterday. you can see the dubai market was up almost a percent yesterday, led by more than 4% in gain on the back of the idea that the rally in oil will feed into business optimism. but you can see saudi arabia and stocks are actually down yesterday, perhaps a bit of profit off the back of the big move they had on sunday. we will have to see whether they recover later in the week. before we do that, however, let's check in on the first were headlines from around the world with sophie. sophie: thanks. the associated press and "new donaldmes" says trump has chosen the exxon mobil ceo as secretary of state. tillerson's close ties to russia
could complicate his confirmation. trump is also postponing giving details on how he will handle his business operations while in the white house. his team says he is too busy filling administration positions. the european union is looking at how to work out with the u.k. leaders will work without british prime minister theresa may to discuss the strategy once she triggers article 50. a statement found by bloomberg says they will be excluded from all meetings with the 27 remaining eu members. imf chief christine lagarde has told the paris court that an imaginary plot has led to a trial of negligence charges. she says she acted in the public interest, and did not try to block of $300 million public payout. in the trialed it
and she will return to court on tuesday. parliament short seller muddy waters has targeted a japanese firm for the first time with a negative report of a motor maker. consistently miss sales and profit targets and use highly aggressive accounting to boost profit reports. investors questioned the accounting. >> when we look into the financial statements of smc, we find that inventory level and operating margins in domestic market is quite dubious when compared to the competitors. those are the main points that we made in the report. sophie: global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. i'm sophie, rooted. this is bloomberg. tracy: thanks.
trump,tick with donald because the names of his team are coming in second test. he wants former texas governor as energy secretary has chosen yet another goldman sachs executive, gary cohen, as economic policy adviser. our country editor joins us now on the line from new york. bill, we saw another goldman veteran, stimulation, picked as treasury secretary. now we have gary cohen taking on one of the most important economic positions available at the white house. like a remake of these takes? what is the lower, and -- the allure, and what hole does it leave at goldman? >> as far as donald trump is concerned, hiring people from goldman sachs affirms him immediately in the wall street/capital markets. in his public affirmation for donald trump, that you have
people from goldman sachs who bet theirg to careers on his presidency, and this is a man that goldman sachs would never do business with. it is ironic that he is now turning to goldman sachs to give him credibility with the public market. as far as goldman sachs is concerned, we all know it's a bit of a cliche, but they have a very deep bench. they have a lot of talent, and this is very healthy for goldman sachs, because a lot of firms, people would never leave and the with get discouraged and feel like they never had a chance to move up. now at the space of a few months, michael sherwood, mark swartz, gary cohn with, who put0 years waiting for lloyd white pine to move on. now it looks like gary is moving on before him. that's a as a surprise. but in termsench,
of the pecking order, can someone -- not a banker or a traitor -- take these leadership roles? coo, ceo? would know, look -- i never say never. it's always impossible to know exactly what the calculus is inside of goldman sachs. i've only written a book about them and i am not sure i understand them better than many people who work there. but it is clear that they have never turned to anyone other than a banker or traitor in the past. we are ino me that the period of time where banking is in the ascendancy. that would make somebody like david solomon, who is a very smart and very good guy, be in a strong position. to negative of david solomon is
the he came from davi -- last time they did that was in the 1920's with a guy who nobody upembers anymore, who ended almost causing the firm to go into bankruptcy in 1929 because he was the architect of the so-called goldman sachs trading corporation. although hebe that, has been a goldman-s since 1999, he may not be considered a true outsider, but he wasn't born there, and a lot of the other people who were ceos were born there. blankfein was inherited through an acquisition, but he is in a sense trained there. much: bill thank you so for joining us on the line. we want to confirm that breaking news for you, bloomberg has
confirmed that exxon mobil ceo rex tillerson has been named as president-elect donald trump's choice for secretary of state. of exxon mobil, so apparently the pecking order there will have a vacancy, and just like goldman sachs, they will have to find somebody to fill the slot. china's economy continues to show strength in november, which should give policymakers more room to rein in and tackle financial threats. we have our china correspondent, tom mackenzie, who has been through the numbers. these numbers look pretty good. >> yes, china's economic, engine chugging along nicely at least on the surface. numbersales up 10%, the flattened by a big pickup and auto sales because there was a
tax incentive that might come to an end in december. industrial production is roughly in line with estimates and fixed asset investment that came in line with estimates. interestingly, there is still a lot of fixed asset investments coming from the state and a marginal pickup in private investment. these are building on the strong numbers in terms of manufacturing, exports, and inflation causing a pause -- painting a positive picture. there are plenty of headwinds for 2017. tracy: let's try to feed the bears. what are the threats that are facing china next year? >> let's give them something. trump is top of the list, as is a reigning in of credit and continued curbs on the housing market. we have some insight from the chief china economist at barclays -- take a listen what she had to say earlier. >> i think the economy does see
some headwinds down the road. number one, i think we have certain trade policies coming then there isd that china has been tightening on the housing market, which could lead to a key downside risk in 2017. >> jian chang, from barclays. policymakers have been quietly rating in fundamental liquidity in the money market to rein in this credit. we have heard from bloomberg intelligence -- they say this economic data we have had gives policymakers continued space to do more of the, that the space is closing. there was a sweet spot, but for how long is the question. tracy: ok. our china correspondent, tom mackenzie, live in beijing. later in the show, the middle
angie: this is bloomberg markets middle east, live on bloomberg television and radio. i' angie laum. tracy: i'm tracy alloway. breaking news -- the emirates economy tracker is just out with a fresh reading of 55.24 november, up from 58 in october. joining us to discuss is the head of nina research for emirates nbd. i suppose we should start with the obvious question -- what is driving this economy? >> in november it was strong for travel and tourism.
they actually reached a serious high in terms of pmi rating. that certainly signals a very strong rate of growth in the tourism sector. tracy: so if travel and tourism -- if they are the best-performing sectors, is that a vindication of dubai's economic transformation, or are there short-term factors at play? one of the factors which may have had an impact on the november numbers is the introduction of these on arrival for chinese visitors, announced in september, but only coming into effect late october to early november. i think that may have contributed somewhat to the exceptionally high reading for travel and tourism. it has been adjusting really well to the fact that they have had competitiveness eroded because of the strong currency. hotels had reduced their revenue per room, trying to maintain high occupancy levels. at this time of year it is
normally a high season for the hospitality sector. i think travel tourism will be one of the big drivers got growth going forward. tracy: let's turn to the weak spots, because we did, for instance, see construction down a bit. >> it was far from october's reading, but it is quite a low index number. under 52 showing a little bit of expansion, but not nearly as much as some would like to see. i think optimism in the sector is quite high. the survey says to check for 12 months and that remains about 70. that's very strong optimistic. i think a lot of that is driven by expectations about spending and projects related to expo, i will probably start kicking off in earnest next year. we are hoping to see some improvement in the construction sector indicators from the beginning of next year. tracy: how you gauge the currency volatility and fluctuation as a result of the stronger u.s. dollar, as a
result of all things being fomc tightening? >> we where expecting the strong dollar going forward, because we are expecting the fed to continue with its tightening program next year. we are looking for to rate hikes in 2017, and obviously with the currencies, that is automatically going to have an impact on this region and on dubai's services sector. we think firms have adjusted to that, to a large extent. we have seen consistent price discounting is one of the strategies employed to try and maintain volume growth, even in the face of stronger currency. angie: that is definitely going to have to be the case when we move forward, an expectation of the continued weakness in the yuan, and for chinese tourists, that is going to be a really important factor when they decide where they are going to go. absolutely.
i do think it is easier for chinese visitors to come to do by then to travel to western europe or other areas where they need to get visas in advance. we have also seen a lot of firms in the half italian sector targeting the chinese market specifically, with offices and incentives trying to track visitors and grow the market where we are seeing slower growth for tourism. tracy: correct me if i am wrong, but i believe this particular tracker doesn't take into account what is happening with energy firms in the region. with your head of research hat on, please give us some insight into what's going on with the other side of the picture. >> you are right. the tracker just looks at nonoil sector activity. what we have seen when we look at the overall pmi's, even though they are nonoil surveys, manufacturing in the region is very heavily oil related.
to the fact that a pmi continues to show expansion, even though oil prices at the beginning of the year fell to $35 per barrel and have been significantly weaker than 2015, we continue to see growth in the manufacturing sector. i think that reflects a stronger output growth. looking in a 2017 with the opec agreement to cut output, i think that will weigh on the pmi readings in some aspects, particularly related to the manufacturing sector. what we are hoping is that we start to see an acceleration of growth, in construction, infrastructure, especially in the uae, which and help offset slowing. tracy: a slyly longer-term question -- would you expect a big rally in oil prices if it continues to dent some of the attempt at diversification in terms of the economy that has been made? >> it's a good question. i think a lot of the changes that have already been implemented, that cuts and
subsidies and attempts to open up markets for investment from foreign capital, i don't think those are going to be reversed. even if we see oil prices sustained, rally up to $65, $80 a barrel, i don't think governments are going to suddenly come back in and say we will reintroduce energy subsidies. i think those sorts of things, the damage has been done. consumers are going to have to continue to adjust to those high energy prices. that in itself is going to provide another factor, which means we take into account -- when we look at consumption and demand, if we see a sustained price, that is going to feed through to inflation in the transport sector. that is something that we haven't really seen in this region before, and we will have to see how it plays out. tracy: it's all changing. thank you so much for joining us today. accountinghow new methods have catapulted turkey's
angie: a quick check of the headlines. apple is discussing investing in the $100 billion tax fund as softbank ends to launch -- aims to launch next year. there is a contribution of about $1 billion to gain access. apple has invested in didi, its biggest outright investment since beats in 2014. sinopec is selling a 50% stake in a pipeline unit for $3.3 billion, sinking funds to extend its natural gas business. china will pay 2.9% billion dollars for 40% of the project.
aa division will take the remaining 6%. angie: korea's newspaper says shipping is likely to be liquidated. the accounting firm in charge of due diligence says hanjin will recommend the option. their value after liquidation is estimated around $1.5 billion. where reforms and a series of rate cuts failed, new accounting methods have succeeded in delivering a $140 billion boost to the turkish economy. bob finkel joins us from istanbul. walk us through what exactly turkey has done, here. iswell, what turkey has done nt a dramatically revised picture of its economy. it has gone back and revised its gdp accounting, and that has figures in growth
improving. whereas last year the economy was supposed to have contracted in dollar terms -- we thought we had a $720 billion -- it turns out the economy grew. theyless people really has take count. tracy: how are people reacting over there? >> well, with some confusion. thing is not the newly released third-quarter figure, which shows the economy shrunk 1.8% year-over-year in the third quarter, which is everything you might expect from an economy dealing with the fallout of a failed coup, with slowing investment. but the strange thing is the upward trajectory of these other figures -- which sits very
strangely with other, more high-frequency measures of the economy, industrial output, 3% year on year growth, it turns out it grew 6.1% higher than previously thought. the gap between these sets of figures is having people pore over the statistics closely. angie: absolutely. but in terms of concrete things that the actual government is doing, are they doing anything concrete to improve the economy over there? >> well, it seems like the government is the only one doing anything. if you look at the most recent contraction, 1.8 almost all sectors except for government consumption, which increased 24%. it is definitely government led. how healthy that is is subject to some debate. angie: all right. we will leave it there. isobel think of, thank you.
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angie: 12:30 in hong kong, 11:30 in new york. these are the first word headlines from around the world. sources have confirmed that donald trump has chosen exxon mobil ceo rex tillerson as secretary of state. a for the announcement is due on tuesday morning. to russia are likely to come under question during his senate confirmation. the president-elect also picked a third goldman sachs executive for his team. gary cohn will have a national economic council. china's stabilization held in november, with industrial production climbing 6.2% from a year earlier, above estimates. retail sales were up 10.8% last
month, while fixed asset investment increased 8.3%. it gives policymakers more room to switch from stimulus toward financial threats. pharma has been criticized by the fda over some inadequately designed testing programs, with potential contamination. a t recent visito sun pharm says reports were not submitted within the 30 day timeframe. impact violations have prevented new products from being launched in the u.s. south korea, japan, and the united states have met to talk new sanctions on north korea. they discussed security council resolution 2321, adopted last month. had hopes the measure would leave north korea with "no choice" but to denuclearize. will engageate it with the north if it gives up its nuclear program. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries.
this is bloomberg. the fed is widely expected to announce a rate hike on wednesday, that bond traders are already pushing appeals. kathleen hays has more. >> the global bond market selloff. it started with some upside surprises on the u.s. economy the past few months, and really picked up steam when donald trump was elected resident, promising to stimulate the economy, create jobs, and more. on monday, the run up in oil prices to a 17 month high port more fuel on the bond market selloff fire. let's get a g-chart. on the far right, you can see the 10-year note traded as high as 2.5%. compare that to july, when it hit a record low. that's the little red circle, 1.32%. that is a doubling of yields in six months, quite a run.
go to the far left of your screen, upper left corner. you can see the yields were at 5.29% in 2007 just before the u.s. went into recession. so what is next? where is the fed taking us? after doubting the fed would raise key rates four times in .on6 and proving to be right, traders are starting to shift their views. they are also getting on board with the fed doing more. let's look at this -- you have to watch this in the next couple days. that yellow dot shows clusters for the fed forecasts of rate hikes. what they see for 2016 through 2019 -- if you look at the green two, one rate hike in 2016, in 2017, three in 2018. the redline across the bottom is what traders were forecasting in september. not many rate hikes at all. but look at the purple line, moving up now.
derivative traders are betting it will get closer to what the fed is looking for. expectations of donald trump boosting the economy, does that mean the fed will necessarily boost the number of rate hikes it sees? many fed officials have made it clear, they can't change their views of the economy until they see what donald trump can do, not let he is planning at hoping to do. . fisher's former executive vice president of the federal reserve york says it may be time for chair yellen to signal less of a role. >> york the hardest thing is tht they don't know where they are going to be a year or two from now. they don't know how much this recovery will come through. they don't know how much on top of that the trump administration will put. what i am looking for is what can we get about this? she has got to pull back from forward guidance. fromill have to pull back pretending she knows a point estimate for 12 months from now, which she really doesn't know.
>> on wednesday, the rate hike is important. but for the market, it may be all about the dot. angie: we are going to be discussing more on the bond market selloff in just a few minutes, but first, let's get the latest from markets with haidi lun. we're looking like a pretty fluctuated market, next as we head into the last few hours before the fed decision day. a lot of uncertainty about what the fed will do, but uncertainty about how this wil trump trade l play out for asian markets. let's take a look at these -- the nikkei 225, higher gains for much of the morning session, and we are up bya lot of uncertaintt .5%.ed will the yen fluctuating, weighing on sentiment. we had some nice buying early on, giving up all the games as we head into the afternoon. elsewhere, the biggest story of
the day has been that china data dump. it was pretty decent, acceleration was a really nice being on expectation. as you can see, that hasn't played out for the greater china market. liquidity issues came to the breaking through that 55 day moving average for the first time since mid-october. we have seen that support bridge, saying it's an outstanding indicator of what we will see in the longer term, potentially not voting very well for chinese equities. we have also seen shenzhen breaking through, copper breaking through the day moving average. .5%. not doing terribly well in the session. some weakness coming through from jakarta, down by .8%. indian stocks are up by about .2%. also taking a look at the fx space, this is where we are
going to see some movement. two days of dollar weakness is helping push up the strength when it comes to the japanese currency. you can see it playing out when it comes to equities. the aussie dollar has been stuck, 75 resistance level. we are hoping with that stronger-than-expected data, we could see it going towards 76, but the aussie dollar has been pretty much unmoved. what we are seeing is a little bit of a breather when it comes to the weakness, coming off these asian currencies. you will have to see how the dollar index goes from there, but certainly that weakness has been taking the pressure off a little bit. tracy: thanks so much. let's take a turn toward fixed with the head of asian fixed income match rotor investment management. i want to start with the sharp that i think sums up all we have been seeing in the bond market. yesterday, we had a treasury auction of 10 year, some 20
billion sold yesterday. the yield on those notes was at 2.48%, the highest since september 2014. the selloff continues, especially in the market, for new treasury issues. howestion is essentially much further, how much higher could we see u.s. bond yields go from here? well, that is the question bond investors are asking ourselves after this significant increase in yield over the last six months, practically double since the yiel u.s. election. well we have priced in some fed rate hikes for next year and some for the year after, there is probably still more to go for the selloff. investors have to really get used to this new paradigm. and inflationh
numbers are going up even before the u.s. election, and now with the potentially new policies to be implemented in the course of the next year, those should be further stimulative an environment where the u.s. growth is already at potential and would lead to higher bond yields. this is a change in paradigm from something we have seen and gotten used to, lower bond yields. angie: you are mentioning a change in paradigm. i want to bring a bond market volatility. one piece of research that really caught my eye recently was hsbc warning that we could see the 10 year yield at 2.5% around the first quarter of 2017, but then it will tumble to 1.35% by the end of the year. that is a huge change for a market that has been really used to yields grinding lower. >> absolutely. 2.5%, so i think
we can probably go higher. really see the way bond yields would tumble in the second half of the year, unless something out of the blue happened. i would think heels would tend to drift higher, and go closer to the 3% by next year. it's quite different for investors who are used to lower yields and capital gains coming from lower yields. this is an environment where growth is picking up, expectations are reversing themselves. you talked about higher oil prices earlier in the program. they will contribute to high inflation as well. those are factors which are quite different from what we have seen in the last couple years. angie: yet, let's talk about emerging markets for fx. how do you select the winners in the losers here, and where do you see it sitting in the global story?
is it all fixed to a global supply chain factor? story ispart of the fx linked to the dollar. what higher rates and various tax incentives which would be favorable for u.s. corporate -- i would think that would lead to a stronger dollar. so that would be one part of the story. the other part is the differential of interest rates. the fed probably hikes rates next year after hiking this week, and that continues into 2018. hereal banks in the region are less likely to follow if they can avoid that, and that should lead to stronger dollars as well. the other component is, of course, on the trade side. protectionism and protectionist talk in the u.s. is not good for global trade and not good for the exporters of products who should compete with those made
in the u.s. more advanced economies in asia will probably be hit by that type of protectionist measure. weaken, ie expect to would expect some currencies to weaken as well. whereas some other countries where it is more commodity exporting, unless the competition to the u.s. is less effective. those typical commodity producing countries in asia -- malaysia, indonesia -- by themselves, they would have less impact from the protectionist measures. angie: but it really sounds like when it comes to emerging markets, all eyes are on the united states, on the fomc, whether or not that tightening will continue, the frequency in the path of that in this outlook for 2017. but i thinkgree, the big difference we have had in the past every
fomc meeting was extremely important because of monetary policy was leading the way for markets, for currencies. i think that has changed now. i think people are going to look at the markets and what fiscal policy governments are going to do, then how monetary policy will react. they are probably now little bit behind. thisportant as evening is going to be for markets, it is slightly less important in that it has been in is past, because the fed also going to want to see what the new administration does, and they don't know, either. angie: [laughter] it's all speculative at the moment. you are absolutely right. thank you so much for joining us. coming up, a hack attack on saudi arabia central-bank. the middle east cyber security details next. this is bloomberg. ♪
tracy: i'm tracy alloway, you are watching bloomberg. angie:i'm angie lau. let's get you a quick check of the airlines. qatar airways is seeking to renegotiate a $7.8 billion order and could switch to planes powered by alternative engines under a revised agreement. the carrier refused delivery of the first aircraft because of glitches in the turbines. it is holding parallel talks with alliance, ge, and saffron. tracy: we are told that banks are seeking higher pricing on a dubailion loan that t is using to raise for expo 2020. sources say they want a margin of 220, to 222 basis points while hsbc proposed 180, plus 14
in fees. alone includes a $2 billion conventiona trench and a $1 billion like facility. dramatic fire has destroyed much of an apartment block on dubai's island. sayreports from the scene the fire they have been put out in a penthouse atop the 14 story tower before reigniting later. it spread rapidly in strong wind, engulfing much of the building, which is part of the oceana palm flight authority. authorities say it was evacuated quickly and no one was injured. tracy: let's stick with the region. a hack against saudi arabia central-bank, transportation ministry, and the agency which runs the airports has highlighted flaws in middle east cyber security. now --ave bush joins us let's start with the most recent attack. what do we know about it?
walk us through it. will, this -- well, this happened a couple weeks ago and targeted a few thousand computers at the minister of transport, the central bank, and the authority that runs airports. we don't know much about the attack, but what we do know is that it hit a few thousand computers, that data was damaged. luckily, the ministries were able to restore some of the lost data. comesttack, in a way, just four years after another attack, which carried a similar name. aramco and hitdi 35,000 computers. you are talking about an the fact that left laptop prices up for a quarter because aramco officials scrambled to buy
laptops to bring operations back to work. tracy: that's an amazing statistic. i know it is early days, but do we have any clues as to who might be behind this latest round of attacks? nobody has claimed responsibility, but during the first attack in aramco, fingers were pointed at iran. -- this is a much bigger issue than a state actor targeting another state, government ministry, for state owned company. this is what experts are saying is a much bigger threat that could come from individuals, that could come from criminal gangs. one of the other companies said that six months ago, they
noticed an attack that targeted several banks in the region. i know that just a few years ago one of the local banks in the million whent 40 attackers targeted credit cards, stealing people's money. we're talking about different kinds of threat sources that affect everyone from individuals to governments to government-owned companies. it's an extremely dangerous threat, especially if we are talking about a region that is home to about 40% -- sorry, about half of the oil reserves in the world. imagine if this hits and oil facility and disrupts oil production. tracy: that's the thing, isn't it? it really seems to be of increasing frequency, which leads to the question that a lot of people were asking. why is the region becoming a
target for cyber attackers? is it a matter of lack of investment that holds everyone at this very vulnerable state? >> well, there was a survey that showed the region is among the world's 10 most countries that invest in cyber security solutions. clearly, it's not a purely matter of investment. even though you will have cyber security companies telling you to spend more. the same poll that they conducted shows that the region lags behind the world in terms of education and training of their staff for cyber security attacks. what is the point of buying all that advanced equipment if you can choose it?
tracy: i'm tracy alloway. angie: i'm angie lau. chinese airlines are flooding the world with some of the lowest long-haul fares ever seen and delivering a hammer blow to foreign carriers just trying to keep up. joining us now is angus whitley. angus, this is a very interesting. it's an all-out price for. what is emerging as a result? >> good afternoon, angie.
you're right, it's a price war. what we are seeing is a new generation of discounters, chinese airlines, china, china willing, china eastern, to undercut legacy carriers around the world by as much as 50%. typically about 33%. est just asian routes, rout around established capitals of asia and it to china, but across the world. london, northern u.k., and across the pacific and the u.s. it's having a dramatic effect on capacity on these routes, and consequently squeezing key metrics and airlines from korean air, asia, right across to delta and american airlines in the u.s. price wars tended to be good news if you are going on
holiday, but i imagine there are a lot of airlines out there who aren't big fans of what some of their chinese competitors are doing right now, particularly airlines here in the region who has made quite a successful business based off of long-haul flights. >> that's exactly right. if you are a holidaymaker, it's too difficult news. -- it's terrific news. if you are willing to take a layover in china, you can get around the region, you can get over from the u.s. to asia, to europe for probably as low a price as ever. but you are right, it is hitting these legacy carriers that have long dominated these routes the hardest. cafe-half profit of dropped more than 80%, and they are undertaking a critical review of the business. if you look over in the u.s., the competition reaching delta
and american airlines, across the pacific, there is more capacity than demand. that is seeping into united airlines routes across the pacific, into tokyo -- tracy: can you tell us that the future might look like? >> yeah. they could go either way. the chinese, for instance, are forecast to be the top of the u.s. there was a flood of chinese visitors going out of china, and there's a lopsided flow of traffic. in one respect, you could argue that this inundation is not going to end anytime soon. but if you look at the price of fuel, which is to a large degree driving this flow of traffic, it is on the rise. the key question is, are chinese airlines going to be able to sustain these low prices? tracy: that was our aerospace
>> ivan update of your top stories. donaldrg sources say trump has chosen rex tillerson at the secretary of state. a formal announcement is expected later on tuesday. president-elect has picked a third goldman sachs member of his team. gary cohn will have the national council. in november, that's projection -- industrial projections going above estimates. in advance 10.8% while it increased 8.3% in the first 11 months of the year.