tv Bloomberg Markets Middle East Bloomberg April 30, 2017 12:00am-1:01am EDT
♪ chinese factory wheels turn slower than expected in april, a sign that the world's second-largest economy could be losing momentum. the eu stands united and talks tough on brexit. they admit the world ahead will be tough and confrontational -- road ahead will be tough and confrontational. and as president trump reaches mark, i run asks the
eu to ignore the u.s. and continue on with the nuclear deal. let's look at how the u.s. market post on friday. we at first quarter gdp figures that took the wind out of equities sales. they are down almost 1/5 of the theent, -- .20%, as well as dow industrial average. strong following earnings from amazon and alphabet. here at bloomberg, we are marking donald trumps first 100 days, and donald trump has done anything for equities, i have to say he has done a return of dispersion for stock market, a much-needed dispersion. take a look at this chart i have prepared for you. the s&p 500 is up almost 12% since trump's election, however, this dispersion to pay big, big jump in the aftermath of the presidential win. this was much-needed by investment professionals, who
had been suffering under low volatility and low correlations for some time to come. what trump especially did -- essentially did was spur repricing as the market sought to adjust to his policies. we will discuss whether or not those policies have actually come to pass throughout this show, but here in the middle east we are just under two hours away from the opening of the markets into by and i would doubt me. dhabi -- andn abu abu dhabi. they are down a little bit over 1%. a little dragged down bit, and nigeria is in talks to restructure alone. 4.2%ou can see we are up -- .42% for the ted owl -- tadawal.
the saudi british bank down of it, which tells you something about the structure of the merger. let's check in with the headlines around the world now. >> thank you, tracy. china's official factory gauge drop to this month, falling from a near five-year high in march. the manufacturing pmi fell as well, dimming the outlook for recent growth. indicatebove 50 improving conditions. analysts upgraded their forecast for china for the third quarter gdp, unexpectedly rising to two point -- 6.9%. president trump says he "will -- be happy" if nukes korea if north korea conducts a nuclear test, but reserved judgment on response that scenario. ifmp says he does not know
checking pyongyang will mean taking more military action. meanwhile, the president warned of a major military conflict being possible if automatic solutions failed. north korea conducted another missile test on saturday, further raising tensions. iran's minister has asked the eu minister to ignore the u.s. and continue with the nuclear deal. ambassador to germany says iran is in talks with the financial action task force to get off the high recent terror list. the organization says that this is anti-money-laundering and counterterrorist financing. day,l news, 24 hours a powered by more than 2600 journalists and analysts than 120 countries this is bloomberg. tracy? tracy: let's have over to
europe, because eu governments have thrown down the gauntlet to the u.k. ahead of acid -- brexit talks. they are urging theresa may to be more realistic and her expectations. we are in brussels, and walk as the challenges that the eu is issuing to prime minister may? >> as you said, it is certainly an unwavering and unified eu 27, and they feel very much they are winning the brexit argument. they are in control of the negotiations. there was a long list of demands, but they want to extensive guarantees to about 3 million citizens living in the u.k.. and the premise or luxembourg told the ee -- told bloomberg yesterday that -- i spoke with swedish prime minister, and
he said the eu must pay that, as a part of the membership. but the biggest counter blow was the trade talks between the eu and u.k. will not start until there is a case of substantial evidence of that happening. this is what german chancellor angela merkel has a after the meeting. thatat is important is this is all about separation and different places have to be negotiated. we have to be differentiated from each other very clearly. in phase one, there is separation. phase two, the transition to future relations. that has to be a clear line between the two of them. appeared to have -- ed: the eu appeared to have leverage into areas. also gives the eu leverage by saying the eu could discuss financial services as part of a trade deal, but only if the u.k. is willing to give the eu
regulation area oversight over banking. the ideat odds with that the referendum was about taking back control from brussels, and it would be a major concession for theresa may. when it comes to trade, when it -- it comes to costs. they said they will not talk about trade until you give evidence that you're going to meet the commitments on system -- citizens rights and pay the bill. we know that negotiations will not start until after the election. the deadline is march 2019. but the policy really throws into doubt whether a trade deal can be reached within two years. morgan's emily says there is a 15% chance that the u.k. will euft out -- crash out of the without a free-trade agreement and have to put up some money to pay for damaging these trade barriers. aacy: it seems like we have pretty packed agenda for eu officials in brussels. some of those officials actually had some strong words for turkey after the government in that country decided to block access on wikipedia.
i think that was just yesterday. what exactly are eu officials saying about that? at: that was the news that we got yesterday. the relationship with turkey is certainly straining since that referendum. he was pretty unequivocal about his approach to turkey. >> we have to bring our relations to turkey into order. access --believe that but nevertheless, we strongly -- for the idea to pay place, which should take for economic and security issues. ed: it is a difficult situation, because turkey is important to the eu. is the fourth-largest export it is far andys away the largest export-import partner to the eu. it was back in december that the european commission proposed
upgrading the customs union relationship. but the leaders are concerned about how turkey deals with its internal and external affairs. language that merkel used with how turkey deals with its disagreement. a lot of the principles the country demonstrates are at odds with core european union principles. this comes at a time when the eu agenda is countering the rise in --ular rhythm that populism populism in french and german elections. we'll have to see how that factors in relationships alongside exit. -- brexit. tracy: nothing short of information to discuss there. thank you, ed. coming up next, we will take a look at markets and the arab gulf and find out how this market has done since the start of donald trump present the. .p -- presidency up next, another take on the
tracy: you are watching bloomberg markets, mr. least -- middle east, live from dubai. u.s. president donald trump plans to shakeup washington, super charge the u.s. economy, and put "america first." how much has he achieved his first 100 days? >> i think it is a combination of positives, but my two words andd be economic symbolism foreign policy symbolism. i think the president is rejecting the power of the united states around the world, which i think is reinforcing to our allies and also putting a bit of pain into our adversaries. as economic symbolism, he is done a lot of things with executive orders that are letting will note that he wants economy to grow. to the combination of those two things. >> turbulent?
difficult, as the first days always are, but a lot of promise, especially for economic policy and job creation in the united states. they have done a lot of extraordinary things in the first 100 days to create an environment in which businesses now invest,e can create jobs in a much better fashion then we would have expected six months ago. tracy: joining us now to talk more about trump's first 100 days is the head of research and chief economist at emirates nbd. tim, it is nice to see you again. let me start with one of my favorite, favorite charts at the moment. this is the difference, the gap between hard economic data in the u.s. versus soft economic data. soft economic data would be a news like sentiment surveys, small business optimism, and you need that the gap has really
ride and -- widened since trump runs the election. that's won the election. i think this means a lot of people have pinned their hopes and dreams on the trump administration, and we've not seen those come to reality yet. tim: that is right. the survey data has been pretty constructive. optimism has carried over to the be part q1, and it will of april as well, q2. that has not lived up to the economic data. i think we saw the gdp tickers on friday for q1, and they were quite off. they were disappointing for the annual growth rate. seasonally, i think it could be factors at play there that do serve to depress that first-quarter figure and subsequently, you often see it bounce back in activity. i suspect that may also play out this year. that gap between sentiment and optimism and the hard data will
start to narrow again and the economic, the real data will play some catch up with the sentiment. tracy: if you think the real data will play catch-up with sentiment, does that mean you are positive on the trump trade? the idea that he will be a will to create fiscal stimulus but eventually start some inflation? tim: there will be some fiscal stimulus, but it is a question of how much and where will take lace. we have seen some announcements -- take place. you seen some announcements, the tax form plans are not seeming to get a lot of support in the near future. so you need to look at that between debtor for easy traction between the white house in terms of getting fiscal reform together. but there will be stimulus via taxes. that will hopefully make an impact in 2018 rather than 2017. but where you will not see much in the way of stimulus is the other area that donald trump
hopes, infrastructure spending. it seems unlikely you will get a big wholesale spending bill that will galvanize a lot of activity. i think it will be split on how his physical problems will play out. tracy: do differentiate on the trump trade versus a bridal, global reflation trade that was underway before trump won the election? -- broader, global reflation trade before trump won the election? tim: it does appear to have been strengthening separately to what is ever going on with the united states in respect to the global economy. some extent, that is reassuring markets that even if the u.s. slows a bit, we will counter with stamina. we have seen eurozone growth picking up quite constructively, asian growth also doing quite well, and japan doing better than expected. i can say the world will probably live with a slightly
less strong u.s. economy wall they are pulling their weight. tracy: there is a fantastic bloomberg article on friday, which said trump's biggest a compliment could have been what he has undone. undid sign, 13 of them previous acts by the obama administration -- acts signed, 13 of them undid previous act are the obama administration. what will that have in terms of an impact on the business environment? tpp, transpacific partnership, we pulled out of that and it will still be seen how that works through in the u.s. economy. i think several organizations looking notably about that. -- will think negatively about that. but that is one of the factors which underpins the trump reflation trade that you talked about, and the idea that financial markets are going to have a bit more room to
maneuver. banks will be a bit more able to adapt in certain chances, and i think these are all things that christmas markets that should -- that markets would respond pretty well too. tracy: earlier, i was talking about stock version. -- dispersion. people did position for certain industries are companies they thought would benefit when trump got elected. when we enter his next 100 days, what is your top trade idea? a new trump trade idea? tim? isoming out -- i think it artificially thinking in terms of those kinds of contracts -- constructs, but going onward, you can imagine there will be more emphasis on the tax reform. maybe, if he is lucky he will be able to get a house bill through that was not able to be passed last week. there is suggestion that it may
be in the house next week. i think there is progress on those things. that is where he probably wants to get some attention. those areas are the ones we should be focusing on. tracy: the market reaction to the tax plan has been interesting, because we did the the administration's eight meant on wednesday. it met with a kind of muted reaction in most market, and in the week or so before, and like the rates market was basically pricing in the death of the plan completely. why do we have that discrepancy between bonds and stocks right now? tim: i expect the plan itself with a disappointed -- was a disappointment because there was no detail in it. so the objective of the administration will be jumbled around the bones of that one page plan. i think if there is some optimism that we can glean from any details, you'll probably see more of that growth area that is
probably why you see stuff, little bit of a reversal in bond yields. picture, the u.s., if it makes any difference at all on the fiscal side, will only add to that. but the -- tracy: but the bear argument is that you have congress and the way, and they might not want to see the deficit balloon. how do you counter that? jim: i'm not sure they will allow the deficit to balloon. i think the plan will be more cautious than the one i was originally cast last week. when it comes down to it, the stimulus will be much less. about cutting tax rates for corporations and businesses may be reduced. there will still be some stimulus. so i think to the extent that that happens, that is very positive. tracy: you are the chief
for emirates nbd, so i would like to ask you before trump won the election, we all talked about the idea of secular stagnation, the idea that there might be on thing actually holding back -- something holding back potential for developed market economic growth. learn not talking about that anymore. just talked about trump and his potential to stipulate the wider -- stimulate the wider economy and his potential. why is that? tim: it is about how trump will impact that michael area i am also thinking about this in longer term. it is a concentration -- impact that area. i'm also thinking about this in longer term. thistrying to think about on a day-to-day basis rather than long-term trends. what we saw the other day was investments starting to pick up when the house has been holding back potential growth in the past.
that is the star we are -- start of a term we are starting to see that could raise the potential growth rate, and we could see the idea of secular being a biterhaps of an argument if it starts to pick up. i do not know if we can pin a lot of hopes on that yet, but i think it is the beginnings of some optimism on that. iscy: i guess the good news if investment is coming back, it should not take long to start showing up in the hard data. thank you so much for joining us today. the eu to iran asks turn a blind eye to the u.s. when it comes to their new year deal. next, we are going to be talking with bloomberg's alice shaheen about the revolving -- evolving relationship between washington and around under president. this is bloomberg.
bloomberg markets, middle, live from dubai. i'm tracy alloway. let's turn to a run, because the country says the u.s. is failing to fill some of the commitments and their nuclear agreement. foreign minister -- the foreign minister claimed that legally speaking, relations between the two countries have returned to pre-sanctions levels. bloomberg's alice shaheen joins us for more. we are marking the first 100 days of the trump administration, and it seems that if we take away anything has that 100 days, this grown more complicated. >> that's right. and you have seen the tension -- enrich respect, from the deals perspective as the foreign minister would say, it is not what actually happened. it is not the sections related to the deal, but the threat of
the sanctions still remain from before the nuclear agreement, which is like preventing european banks, for example, or making european banks anxious about financing investments in a because of u.s. treasury sanctions. theyis why -- rightly, have not seen the benefits of foreign investment coming in. tracy: let me pick up on that point, because we did have a on friday forte the iranian presidential election, and it was supposed to be about social issues and instead, the economy donna made it -- dominated. where people so focused on the ? alaa: in a ron, -- iran there are a few factors. everything -- the previous of ministration staked everything on the nuclear deal, and the promise as far as how everything would change in a and now things are
not changing quite as quickly. these things happen. you see a significant improvement in the oil sector because of the exports. no oil growth is still very moderate. this is essentially were jobs are created. so normal growth is around 1% or below that, in some instances. that will create a lot of jobs. so the us is coming in massive criticism, and indeed the economy is, and jobs in particular are the issue number one in the minds of the voters. as we saw the other day, all the other conservative candidates took time to attack him on that. he has been defending his record of the past few weeks, which shows that he is a bit on the defensive in this area. to leave itll have there. i'm sure we will continue to talk about the iranian presidential election and the u.s. relationship with the country as well. coming up, if tms gives us it
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is 8:30 in dubai. union governments have thrown down the gauntlet to the u.k. ahead of brexit talks at a meeting in brussels. they listed demands which theresa may must satisfy before they will discuss the trade deal she wants. they also want her to be more realistic with expectations. i want to underline the outstanding unity of all the 37 leaders on the guidelines for our negotiations with the u.k.
they were adopted immediately after we started the summit, which bodes well for the negotiations. theow have support from all member states, and to the eu giving out a strong political mandate for these negotiations. >> the turkish government locked access to wikipedia without giving a specific reason. according to the government agency responsible, the band comes after technical analysis and legal considerations without citing any violation of law. the wikipedia ban is drawing the parties.position the austrian chancellor said the decision to block access is a worrying. a delegation from the international is in cairo today to start reviewing the process for releasing $1.25 billion in loans. this is part of the $12 million
agreement. the team will follow up on progress ahead of sanctioning the payment. the finance minister says he expects to receive the money by june. pope francis celebrated mass in cairo with thousands of egyptians. a after and came at francis urged muslim leaders to unite against religious extremism. visitss ended the pope's to the arab world's most populous nation. he is only the second pontiff to visit egypt. global news, powered by more than 2600 journalists and analysts. tracy: thank you. emerging-market stocks and currencies have seen their best annual start in more than 11 years as they appear to be an
haven from global risk. let's get more. in em hasin the -- been stunning, especially when you consider em was supposed to be the big loser in the trump administration. >> emerging markets are in a good place. we are seeing the growth differentials with developed markets, in a positive place. we are seeing emerging markets de out the-- ri declines in commodity prices. despite some idiosyncratic risks and some of these countries such as south africa, turkey for example, i suppose if you look to the rally where it is -- and you are hearing a few more voices same everywhere to point where you should take some of saying maybe we are at a
point where you should take some loose money off the table. we saw the gdp numbers which means lower u.s. interest rates for longer and that is good for e.m. carry trade. tracy: you mentioned idiosyncratic risks and one of the risks has to be north korea. how could that knock risk at the appetite? the north korean situation has been there for a long time. in some sense, investors are used to the north korean issue. it does feel perhaps we are in a slightly more serious phase right now. people are wary of where he met beheaded with south korea -- where we might be headed with south korea.
people don'ttor talk about is what this could mean for china and chinese markets. that is really an unknown. tracy: the china market has been fascinating. let me ask you about one other fascinating question. that is the discrepancy between emerging markets and the oil price. we have seen oil prices struggle to move significantly above $50 per barrel or so. does that mean inflation risks em? reducing in normally you would think of lower commodity prices as bad for export driven countries. >> it is a double edged sword. yes, it is bad for saudi arabia, venezuela, russia, which depend heavily on high oil prices. at the same time, there are many countries that that if it from
from oil prices. it is a two edged sword. we are not at the stage where we'll prices are going to give a meaningful strike to inflation for global inflation. i guess it gets back to the chestnut we should differentiate in emerging markets. there is huge differentiation. some people think we should not even call it an asset class. right now, we have a guest who is the equity strategist. let me get your thoughts on what we were just discussing with justin. emerging markets to some extent were supposed to be the big losers out of the trump administration. instead, they have done really well. what is your take on what is going on? >> we think what is going on is
an interesting break in the relationship between dollar and oil. seeing your to date, both dollar and oil are lower. meantoil prices usually higher dollar and vice versa. i think emerging markets are benefiting from that. this is one of the reasons why tohas outperformed contrary our expectations. we don't think it is done yet. president trump is discussing tax reforms. if he manages to get that through, the stronger dollar lower oil trade is back. a lot of the correlated markets will do badly. uncorrelated markets will do well. tracy: how has that dollar oil discovery actually laid out in the middle east or gulf markets? ? , >> it has meant markets like egypt have done really well. that has been out of
the radar for a lot of investors like weight has done well year to date. if you look at the major markets, they are actually down 3%. i think what is important for these markets is going to be more on the oil side. a stronger dollar will mean these markets will form other e.m.'s in dollar terms. tracy: stronger dollar not necessarily bad despite eating pegged to the greenback. >> it is not necessarily bad. it means investors looking for safe dollar returns will look at these markets, especially when are yieldinghe uae 6% or 7% in dollar terms. expectations for u.s. trades are lower for longer. we will see how the dollar dynamics change. re-think a stronger dollar will mean that yen rally might -- the
em rally might posit a little bit. the dollar, than what impact has the trump administration had on the gulf region? >> one of the stories that was widely spread, the ban of laptops on airlines, the expectation was this would impact the uae somehow. theyu look at the numbers, are actually quite strong. they grew 10%. that is because the uae allowed russian entries to get visas on arrivals. i think growth is high, double-digit growth for both citizenship and the first quarter. that is substantial. ubai airports to post 10% growth, that is impressive. there are some ways gulf economies can counteract any policy that might impact some of the sectors. tracy: without foreign policy?
-- what about foreign policy? saudi arabia, it seemed like trump would be an improvement for u.s. saudi relations. then we had trump state and it interview he thought saudi arabia was not treating the u.s. fairly and the u.s. was losing a lot of money when it comes to defending the kingdom. how do you see that playing out? >> to be honest, we don't come up a lot on political stuff. is still important for business. >> it is definitely important. there are a lot of u.s. businesses that are coming to saudi arabia. the group just got their banking license. i wouldn't play out that story that much. i think saudi will still be important for the u.s. comes toen it challenges posed by the trump administration the what do you
the major issue? >> the major issues for the gulf region i think are focusing on the domestic stories. not so much what is happening globally. what president trump does on tax reform, what happens on the output is going to be important, are key.l reforms on saudi arabia, the focus should be on the saudi vision 2030 and what the government plans to do to diversify the economy. we saw a rollback of government employee allowances which raises questions about the pace of the vision 2030. . our expectations are they will be cuts for low income households. this is what we are watching to see, what will be done to counter lower oil prices. tracy: you are staying with us
gradual recovery is easing the pain of shrinking output at china's big energy companies. sinopec net income doubled even as output fell slightly. china is now ahead of the u.s. as the world's top oil buyer. and oil rose in new york, trimming a monthly decline as opec nations maintain commitment to out put curbs. said he isd satisfied with the compliance of all nations ahead of next month's crucial meeting to decide on extending the cuts. engaged in all participating countries. consensuse we have a
ahead of our conference on the 25th of may. muhammad it still with us to talk all things oil. i'ms sunday so that means going to start with the same chart i always start with. it is u.s. crude production and the u.s. oil rig count. as of friday when we got the new , we have oil rigs rising again korea production continues to rise. how many more sundays are we going to talk about this? we can't get out of the dynamic where opec tries to push up prices and then there is a rebounded production. >> the dynamic will continue to play for some time. opec maintaining its promise to extend output cuts. i don't know they would announce further cuts. that would be one thing that could it drive prices higher, but it will not be for
long. our view is average will be $55 a barrel. one important element will be demand. asyou see demand growing, part of the global economy, but to thet see prices going $60 level. our expectation is $55 a barrel. one other thing to keep an eye on is market shares, for example saudi arabia wants to preserve its market share, what does that do to the discount they are selling at? you have the opec basket. i think the discount is still around three dollars a barrel. is also pressure on the market share preservation as well. tracy: what are the chances opec many years to surprise to the upside? is there a possibility they
could a new countries into the agreement? without help sentiment? >> -- would that help sentiment? >> if they extended the scope of the agreement to include non-opec producers, that could be positive for sentiment. it would show wider quatrain -- collaboration between producers. you mentioned oil was up friday. tracy: there is one more thing i want to ask. you mentioned demand. we did see u.s. oil demand posting its largest year on year drop since 2012. would you make of that? you have to start worrying about demand as well as supply? >> you just mentioned china is the largest buyer of oil ahead of the u.s.. i think demand will come from emerging markets, not necessarily developed markets. tracy: we have to leave it there. thank you so much for joining
us. bringing us the latest on gulf markets and oil. one of the features we would like to bring your attention to is our brand-new interactive tv function. go. can find it at tv cncluding that ope basket. messagesend us instant during or after. you can check it out at tv . theng up, we gambled -- gamble on european airlines is proving costly. how it could salvage its investment in air berlin. this is bloomberg. ♪
"bloombergching markets: middle east." etihad plans to stand by its partner. largest carrier is shrinking its fleet i have to transform itself into a network airline. by have to transform itself into a network airline. supportingan to keep air berlin happens as air tell italia flies towards bankruptcy. eastern for middle airlines has become more difficult as president trump office.
let's start with the obvious question. hasn't hadke etihad that much success with its your in partners, judging by what is happening with air berlin. >> what has happened, over the years, etihad has made opportunistic investments. the european ones are air italia and air berlin. they were not in the best of situations when etihad made those investments. tracy: one of the things that struck me was when we had the italian transport union officials come out. as part of his statement he said arabized air italia had failed. for many, that is the main
reason they are still operating. the problem has been the management change. a lot of the management used to work for etihad. controllings etihad the operation. that has been the negative sentiment. tracy: are these company specific issues or does it say something broader about etihad's s strategy to build bridge head? equity investments when you do not have full control are reasonable. there isse of etihad, only so much the airline can do when you have labor unions and very strong existing culture and a company like alitalia. been saying,h have we are marking the first hundred days of the trump presidency.
trump does seem to have had a direct impact on gulf aviation in particular. how has that played out? >> i believe the main reason why trump is considered a president that is for the u.s. aviation market is protectionism. he will be used by the u.s. carriers in the ongoing debate on u.s. open skies. tracy: there was speculation the laptop the van in particular for some flights was essentially a backdoor measure aimed at attacking the gulf hub model. do you share that view? >> i do not believe that is the case. many countries like the u.k. have followed. i don't think the main reason has been the u.s. open skies. it is a security issue first and foremost. setting aside the laptop fan, you did have the
travel restrictions. that has directly affected the gulf carriers. etihad has cut back on flights to the u.s.. >> correct. the problem might now is when it comes to both carriers come you do not have a common policy. cooperation. the way those companies represent themselves in global space. etihad has cut down. qatari airways is increasing their flights. you don't have the same approach from the different carriers. they: what are the chances carriers put the open skies issue behind them? it will be difficult, especially with the trump administration. they will have to bring in more allies. some are the u.s. travel agencies that benefit from traffic from the gulf. it has to be joint cooperation. the carriers have to work together. quickly, looking ahead,
we do have the unknown quantity that is donald trump. essentially higher oil prices. potential u.s. dollar strength. how do you see the general outlook for the aviation industry? >> it is not looking great. i think etihad will have to revise down some profit estimates. is dependent on a number of factors not an airline's hands. you mentioned fuel, the u.s. dollar, uncertainty. potential war. tracy: thank you very much. there will be more to discuss on the gulf aviation industry in the near future. that is it for this edition. we will be live from the region at the same time tomorrow. ♪