tv Bloomberg Markets Middle East Bloomberg February 1, 2017 11:00pm-12:01am EST
♪ >> the fed notes rising confidence in the u.s. economy but leaves rates on hold for now. >> market attention turns to friday's payroll numbers after janet yellen offers few rate hike ends - hike hints. >> bigger u.s. stockpiles counter other cuts elsewhere. >> in washington hits at iran for its latest missile launch. president trump is back on
twitter. >>. class i am across the emirates, 4:00 a.m. in london -- 8:00 a.m. across the emirates. >> welcome to "bloomberg markets: middle east." claim seeing the regional index gaining slightly. a mixed picture. investors trying to gauge a response after the fed left its key benchmark rate unchanged. lacking clear direction at the moment. yousef: a pause for reflection in many of these asset classes. f1c offering little surprised in its statement. of this chart gives you better expected -- these markets getting a lot twitchier. i pulled some strings to get you this number. 3 key indices.
fcx isity in global high, in white. look how low that is compared to other indices. the bond index volatility. keep an eye on these spreads with the rising political risk in the mainland continent. >> we are seeing volatility with the dollar index. although volatility has been subdued after the fed rate. this chart will give you some clue to the direction of the dollar. another explanation for the shoddy performance of the u.s. dollar is that shorter treasury yields, the five-year inflation index treasury has been more subdued than longer data. which one do you follow is the big question. followaying you have to
with whatever suits your portfolio. check of theet a asian markets. all of this volatility being felt across asian markets. 7/1re seeing nikkei down 1%0th of. of 1%.th the housing index is down 6/10th of 1%. regional benchmark in the green, gaining 0.1%. under two hours away from opening of trading in the middle east. yousef: two hours away, dubai and abu dhabi 10:00 a.m. local time. let me show you the moves that mattered in the last trading day. s o 1%f.s up 3/10th
important to point out some of these financials putting pressures on the abu dhabi index, specifically the national bank of abu dhabi losing 5% after those results. putting pressure on banks and energy stocks. utilities offering strength in terms of positive sentiment. egypt extending losses. quite a downturn, down 7/10 of 1%. with the turkish lira, we got a factorst the underlying faced geopolitical risks and rising global interest rates very much in place. all of this with turkish shares at a 20 month high. let's check with the first word headlines from around.
>> the white house says it is putting everyone on notice for posting ballistic missiles. michael flynn says tehran's actions were in defiance of the security council resolution passed after the 20 team deal. -- the 2013 deal. that is disputed by the eu witnessedtrump has the swearing in of former exxon ceo rex tillerson as secretary of state. vote saul centers split among -- saw lawmakers split among party lines. some saying that tillerson's business connections allow him to make decisions abroad. president, id as served their interest and will always represent the interest of
all of the american people at all times. >> the bill to take the u.k. out of the european union has passed its first test in parliament with lawmakers agree to allow the prime minister to start negotiations by the end of march. ut pro-eutheresa may, b lawmakers want that should not be -- warned that should not be mistaken for unconditional support. global news 24 hours at powered by 2600 analysts in more than 120 countries. this is bloomberg. >> the federal reserve gave a nod to the rising confidence generated by president trump at its first meeting of the year, but offered few hints about rate hikes. policy baton passes to the bank of england. the bloomberg school of economics' kathleen hays has
been watching what the fed is saying. >> the fed made one small sentence to indicate it is watching what has happened since donald trump was elected. one of the most obvious signs to businesses and consumers, his intentions to cut taxes and spending. he moved quickly on trying to. let's remind everybody that the key rate is unchanged. increased until the end of this summer. the fed can send signals if it wants to. "measures of consumer and business sentiment have improved of late." on consumer confidence. the middle line is the main index. of top line, expectations
the future leading the pack. donald trump is having an impact. bloomberg intelligence wraps this up, saying the fed chose not to rock the boat. they don't want to send any premature signals of any change. they are getting ready to hike later in the year. yousef: with a slave that strategy aside for the moment. le tus leave that strategy aside for the moment. we haven't heard more on the u.s. dollar strength. you are explicitly something that donald trump wants, a strong economy but a weak dollar. let's look at the isf manufacturing index. funds were strong, there was a
bit of a selloff. purchasing managers climbed to 56. the market pmi is also climbing. we see this steady improvement in manufacturing. the dollar may take some time to bite. the u.s. is not an export dependent economy. import helps with a check on inflation. watchers saying expect economic surprises could lead the fed to hike its key rate in march. many are not thinking about that at all, but waiting for june. we got an update on adp employment. 246,000, up from the estimate of 160,000. that is the kind of thing that will make bond investors nervous and cheer on equity investors.
>> great to have you on the program. let's dig into the raw numbers. bloomberg intelligence forecasting the next rate hike at the f1c meeting. where do you stand now that you have had time to digest this is just statement? >> we are similar. we think the next rate hike is june. i think the risk is rising that it could be march. similar,ment very although as you just noted, consumers stressed that consumer business confidence is rising. there is a disconnect with business sentiment is outstripping the kind of court
activity data. -- of core activity data. activity data catches up, the fed will have to change. small business confidence is strong. they are large players in the economy. certainly we are forecasting 200-5000 jobs to be createda t n omura. another thing that could add to the move is if the dollar keeps weakening. that would keep further pressure on prices. sheri: you talk about this improved sentiment. sentiment can be very fleeting. will this translate into tangible consumer spending by people and businesses? >> sure.
i think that is the big question economists are waiting to see. it is not just in the u.s.. seeings well, which are confidence rising. hand, fiscal stimulus in the u.s.. the fish on the other hand, it could hold business sentiment longer. think this child report friday will be a big litmus test. if it is on the strong side, the market will start to say hey, this optimism is starting to feed through into real spending. shery: i want to talk to you about the upcoming boe policy decision. do stick around. coming up later in the show, we speak to a national investor
shery: welcome back to "bloomberg markets: middle east" live on bloomberg radio and television. yousef: let's jump straight back into the sea. in terms of market action, juliet has the better view. >> that such a great view. -- not such a great view. we are still awaiting the u.s. drops report, and the bank of england meeting today. we have seen the dollar weakness drive sentiment. cba in australia saying the dollar is on the offensive. hong kong playing catch-up to the global selloff when it was
closed for the lunar new year. china closed for the remainder of the week. the nikkei pushed down 7/10 of 1%. not a lot of conviction in equity markets. a lot of weakness in commodity players. australia is down. singapore is also a player. india has turned negative. commodityuick look at and dollar spot index. crude coming under pressure in the futures market after a 2% rally during wednesday's session. dollar under pressure. gold snapping the recent downward trend, resuming a rally. thatis one of the points we are seeing safe havens back in play. let's continue our
conversation with the chief economist for asia x japan at nomura. one of the biggest movers is the korean yuan. we saw south korea's inflation levels of the highest in more than four years. how does this complicate matters for the bank of korea? the economy there is not doing great. rob: that is very true. inflation surprised me on the upside. i would add that the main driver is commodity prices, which is more cost-push inflation. it is not because the economy is growing strongly. domestic demand is very weak. for korea, outside mexico, it is one of the most exposed emerging markets to trump's america first policies. there are also domestic
politics. it is certainly not the case that the bank of korea should think about raising rates at this moment. if anything later this year, we could see a rate cut. shery: rob, you mention in your notes that india is vulnerable to president trump's economic policies. explained to us why. rob: all of asia is exposed. through exposed more the immigration tightening restrictions, which could affect its services sector. israll, within asia, india one of the ones least affected. was impressed with the budget that came out overnight. an important state
election coming up. thee were concerns that government might go for a populist budget because of the demonetization of the economy. yet they stuck to a pretty prudent budget. it shows they are in for the long haul. they want to avoid boom-bust cycles. they want higher sustainable growth. i was encouraged by policy in india. yousef: let me pick up on what he said about donald trump. the ecpr function, just to run you through the obvious contenders in terms of trade growth -- china, canada, mexico, your trump 3. -- your top 3. then you get strong asian representation. isolating mexico in this conversation is perhaps missing the bigger picture, is that asia will be a lot more exposed and
more vulnerable. yousef.olutely to takee house has yet aim at asia. the reality is if you want to reduce the u.s. trade deficit, the bigger fish to fry are in asia. the u.s. trade deficit with china is almost six times bigger than that with mexico. the other critical thing in asia is the supply chain. so much of china's exports to the u.s. have high value-added content from japan, korea, taiwan, singapore, malaysia -- there will be ricocheted effects. asia is very exposed to any trade protectionism. asking, client survey is there a link between trade protectionism and foreign policy in terms of
negotiation? 46% of respondents said definitely yes, 41% said probably yes. there could be an intersection between geopolitical risks and straight protectionism in asia. yousef: if we think about this in a zero sum way, whenever there is a loser, there is going to be a winner. who stands to gain from all of this in asia? move toward america first policies -- overall in asia, not that much gain. overall, the only economy we thought could gain is russia. em's will lose.
in their peak, by a resurgence in breast-feeding in china and elsewhere. shery: japan's biggest pharmaceutical company beat quarter estimates. it's all revenue of $4.1 billion in the three month end of december, as it got a boost of gastroenterology drugs. it raised its forecast to $403 million. yousef: volkswagen has agreed to pay $1.2 billion to resolve u.s. consumer claims of cheating emissions tests. the proposed settlement is with the federal trade commission and drivers of about 78,000 diesels. a spokesman -- buybacks liked to more than $23 billion. crude oil buying spree
is contribute in to that shakeup of supply flows around the world. oil.e talking about china what makes middle east crude purchases so unusual? oil's recentina buying on the window is quite unusual. a chinese trader would usually procure crude on the spot market. in the month of january, we noticed they went on to this crude pricing platform. they are bidding for dubai on the window. that has led to dubai prices going up. these prices would then funnel into oil benchmarks that are used to price crude all over the world. yousef: give us more context in terms of the movement into this
prices across the different regions. have significant where they? they? significant were >> this is a significant move by chinaoil. when they purchase middle eastern cargoes, the price of dubai right is compared to other benchmarks in the world. -- rises compared to other benchmarks in the world. dubai prices would rise against these benchmarks. that makes middle eastern oil more expensive than oil that comes from the atlantic basin into asia. yousef: i found fascinating in these numbers is that it tells a bigger story in terms of shifting trade funds -- trade flows of oil around the world. >> when we see the dubai price it princenst wti,
andy: is 12:30 in hong kong these are the first word headlines from around the world. two down, one to go with fed decisions. attention turns to the bank of england. mark carney is not raising rates until 2019, but slowing inflation is prompting increasing bets that he may move next year. mexico has begun a 90 day consultation with the business community before talks to caps off. -- to nasa. talks will begin in may, and
witho will seek tpp deals singapore and malaysia. it will discuss the effects of nafta over the past decade. oil halted its gain is the biggest expansion of u.s. stockpiles counter output russian. inventory increased by 6.5 million barrels to the highest levels since august, more than double analyst estimates. oil fluctuated above $50 a barrel. russia joined opec to cut supply. australia's prime minister has suspended his country's relationship with its biggest ally after reports he was raided by president trump over a refugee resettlement deal. on the void comments weekend phone call, but called the relationship strong. trump has tweeted he will study
deal" onalls "a dumb refugees struck by the obama administration. 2600 journalists in more than 120 countries. this is bloomberg. we have been talking about the feds latest policy statement. a very important decision, and gauge for new ones. it is proper that the fed is waiting for how president trump's policies play out. >> there is a lot of focus on gdp growth that will come from fiscal stimulus, and less so the fed raising rate hikes. it is in line with that expectation that the fed will raise interest rates to 2017. the focus has shifted toward fiscal stimulus.
yousef: no surprise janet yellen is taking a soft approach to the new administration. >> i guess she doesn't want to get involved in a political debate. she says ok, whatever he does delete to fiscal stimulus, we will see it in the data. but please don't speak out on the guy that probably won't to fire you. you.nts to fire she is naturally a dove-ish person. shery: something that trump's policies could raise the deficit to three or 4% of gdp. >> in terms of fiscal policy, it means an increasing deficit, perhaps three to 4% of gdp depending on the corporate tax rate. liquidity stock market
has eased off its 2017 high after a world beating rally since the start of the year. an ongoing story. let's welcome our next guest, senior vp of management at the national investor. thanks for coming on the program. for context, this chart tells the story. our clients can pull it up on bloomberg. take a look at that -- that is the rally in a matter of less than 60 days. at the bottom you can see the capital inflows. those are the volumes at the bottom panel here. tell me why anyone in their sane mind should be putting money into a market with rsi about 70. 70.bove gc has arontier or better picture/ from a microeconomic perspective
deficitpected budget around 10%. , oil prices at $53. this is getting a boost for the country. in addition, the bank has been very conservative. ,hey have been pushing banks which has been affecting the profitability of the banks. many investors have not looked at kuwait. the sudden surge in volumes is a big question. expectation ofhe frontier markets. we are expecting kuwait to search. what isto cross over to
the engine of this part of the world, saudi arabia, the biggest stock market. this ea function is amazing. out of out of 168 companies tht have reported. you will notice the many shades of red. the earnings site has been on the downside in the fourth quarter. what is your take on how the quarter has passed? ali: the results of the saudis were a bit lower than expectations overall. you have seen a huge rally in withast quarter with 70 -- saudis. on an expensive side at this point in time. -- expensive scientists point in time. expansiveupgrading
marketo the emerging status, we will see huge outflows based on our expectations, one of the biggest upgrades of the past decades in the emerging market space. we have breaking news out of japan. mitsubishi losing 5%. we got there earnings results third-quarter operating profit at ¥30.1 billion. net 7.1 billion. falling as much as 4.1% after the earnings were out. that is the latest from japan. let me continue on the stocks.tion about gulf it's not just in saudi arabia.
this infrastructure spending continues. does that mean contractors are expected to gain? contractors have been facing huge problems in the audis especially with the s and uae. they have seen slowdown in payments toward them. the infrastructure projects are still there. you have the saudis, bacon for on projects such as the metro and other airports. year, the since last government has been very proactive. the fact that we have seen a big surge in infrastructure, that has been a driver in the market, especially from a long growth perspective. uae, the government has
always been spending in the white. the focus is on tourism. many projects are delivered toward that side. uae was the best-performing market in the gulf last year. tourism, but hospitality and trade finance continuing to grow. what are the sectors that you like there? ali: from a stock market perspective, that the market is divided into its biggest components -- banking sector, real estate, and other smaller components. at this point in time i believe real estate is poised to be the to the end of 2017.
in addition, i guess the banking sector this year there should be some kind of consolidation phase. yousef: that is key. the numbers we got, clearly the market not convinced. the market is seeing weakness. these statements we got from this company, even pointing out at the deceleration off of the back of lower oil prices is having an effect. see next year we should made to single-digit long growth. from our perspective, it is. -- it is normal. banks have been facing some problems in the cost of provisioning due to the fact of the exposure of medium prices last year.
you have mergers happening in of brutality. we believe this here is more of a conciliation phase. especially in abu dhabi, we haven't seen long growth. yousef: we have seen a lot of impairments. thank you. a national senior adviser for investment. coming up on bloomberg markets: middle east, donald trump's policy garners dissent from a middle east ally. this is bloomberg. ♪
treasury bills have slowed, over nude trust in the currency has first billions of dollars into banks. foreign holders -- the new agency reported citing central bank data, but more than 10 times the amount of foreign holdings reported in october. saying it has no intention of expanding destinations to the united states. american carriers lobbied the obama administration to limit - collecting $42 billion in subsidies and other unfair investments. >> we're comfortable with our network. we just work through these issues. shery: saudi arabia building new
solar and wind projects in september. with the cost of power forecast to be the lowest in the world. opec's biggest oil producer hopes to build 300 megawatts and 400 megawatts of wind projects. requests to qualify for bidding will be issued february 20 with an option in april. the white house says it is putting a ran on notice for testing missiles. it has confirmed the launch at the weekend, saying it has not reached a nuclear deal struck with nuclear powers. for more perspective on the story, what do you make of president donald trump's latest comments? >> if you would like to look at the statements made over the past few days, what you see is features of trump's middle east policy emerging.
the main feature is focusing and favoring traditional u.s. allies, so reread media -- saudi arabia and the uae while turning the heat up on iran. we expect to see more of this heated rhetoric from the u.s. and israel against iran. somehow, butnding the responsive have been measured so far. the u.s. is applying the heat on a ran. -- on iran. what other matters can washington apply? >> you see two distinctive approaches from the u.s. president trump said during the campaign that he wants to rip up the nuclear deal. we are seeing a different tone on that. they are going to monitor closely and act with the first
sign of a deal breach. the second advocated by prime minister netanyahu is restrictions on iran's ballistic missile program. meetingl be on trump's next month in washington to see where things are going. yousef: what has been the position of the united arab emirates? it would be false to say they are coming to the defense of donald trump. they are trying to keep the bigger picture in mind. call with thea abu dhabi crown prince. the ban did not come up. they discussed ria -- he said this ban did not target muslims. with foreign policy in the region and general, when you look at who got the visas from
those seven countries, and nearly 50% of the visas went to iranian nationals. as far as these countries are concerned, this ban puts more pressure on iran, and that is good policy for them. shery: thank you for the latest on trump policies and how they are affecting gulf countries. general electric is one country, which rose to the top on the wave of globalization. of ceo says that in the age -- says that the age of unbridled unrestrained trade is over, and warns about donald trump's immigration ban and protectionist approach. >> we have a lot of people that live outside of the united states and they are afraid of what is going on. we speak out to say -- we
understand that safety is important. we also want to be able to work with those that work for ge, and allow them to travel in and out of the united states. >> you oppose the ban? >> we understand the context, safety, but we think there are better ways to do that. we are not opposed to speaking out on that. yesterday the president set out an executive order that says 2 regulations have to be canceled for every new one. we are not standing back -- there are some directions that will be very good for business. >> underneath, is that a threat to all of the advantages that ge has built up? you have specialized in talent irrespective of nationality. 62% of your workforce comes from outside.
standpoint,business we are learning to play the president has outlined. we are a huge exporter and small importer. the things the president talks about are more talking to people that are importing lots of products and exporting nothing. our play fits the play that the president wants to run. it is up to me to speak about how important it is that the u.s. has good relations with our potential customers around the world. ground people on the that are iraqis, saudis, or italians. they can help us with our local customers, providing that local face. >> anything in terms of building walls with mexico? does any of that help
manufacturing? i think philosophically, we believe in trade and the free flow of goods. inherently we don't i think phis like balls are good. -- walls are good. that is maybe the macro answer. there is nothing with president trump wanting to add manufacturing jobs in the united states. the president of mexico wants to add manufacturing jobs. i think his-- how do we help exporters -- i think that is a good thing. >> what about the relationship with china? do the prospects of any trade relationship where you? -- worry you? >> is no case to be made about
the two biggest countries on earth being in a trade war. this talk about a bilateral relationship between the u.s. and china is significant. for the whole world. that is what i would be strong on. yousef: the ceo of general electric. let us give you a preview. we have an exclusive interview saudi telecom. the company's reported earnings are on january 19. meeting estimates, but much bolder and bigger ambitions. this is bloomberg. ♪
estimates and the company is on a shopping spree. thanks for having us on the program. you have been creative as a business in terms of how you deploy free cash flow. what investment are you looking at for 2017, beyond the ones you have made? >> the first of all, good morning to you. strategy has been focusing on the core, especially in the last few years where consumption of data required the company to invest heavily in infrastructure or fixed and mobile. to account for changes in the economy, and that the
country is focused on digitizing its economy, we are shifting divestment. the core,esting in but we are venturing into data centers and other different digital platforms like iot and separate security that will allow the digitization of the economy. alsong that aside, we clearly want to convert into a digital enterprise a few years from now. therefore, you will see us investing more into digital players. we have increased investment. shery: you also signed an agreement to purchase a number of towers. ard as recently as july
that you are planning to sell some of these towers. how does that impact your business? khaled: it is not a change. our discussions on creating a tower company is continuing. deal is part of a complete bouquet of services. it has nothing to do with a change of strategy. yousef: any news in terms of increasing its stake in oj telecom? khaled: nothing i can tell you right now. we are a minority in oj telecom. i would prefer that --