tv Bloomberg Markets Middle East Bloomberg November 6, 2016 12:00am-1:01am EDT
>> secret service agents rush donald trump offstage as the race for the white house gets tighter, with just three days to the. -- to go. >> interest rate hike for the fed possible next month, but it could possibly change. >> an unprecedented decision for the eu to float its currency as public worries about making ends meet. >> oil sees its biggest weekly lost as homes fade that -- hopes
fade that opec can find a deal to cut production. >> it has gone at 8:00 a.m. in dubai.b 0 8:00 a.m. in >> this is "bloomberg markets: middle east." the days are kicking down to the election. you are going to see everything that you need. this is the personification of risk trading. this is the volatility index, lasted 25 on brexit day. up nine days in a row, 73%. if really wanted to understand brexit. what captures my eye, look at brexit morning. could we have a rerun in the ?ost dire hours tracy: we talked about investors
being under compared for -- underprepared for volatility giving all the uncertainty we have in the market. manus: this story copy on the s&p 500. down 1.9% last week. the longest losing streak since the 1980's, just before reagan took power. what really rings alarm bells to up warren buffett is piling the cash. $84.4 billion at the end of september. when warren goes, that is good enough for me. tracy: the wizard of omaha. we will all be following him. this is a big story in the middle east following the egyptian pound story that we saw last week. if you look at this chart you can see the spot rate of the egyptian pound. that has gone up. manus: there we go. tracy: there it is. and we have the unofficial rate. these are undeliverable forwards. you can see the spot rates
converging with the unofficial rate very quickly over the past week. a shock for quite a few currency traders. it's just a question of where we go from here. manus: there are a couple stories here. do do you look at russia? do you look at argentina? where do you look for the roadmap in terms of the market? the stocks have rallied, up over 80%. the best performing over stock market -- up 8%. the bond market however nearly dropping half a percent. what happens next? we will have that conversation. tracy: lots to talk about. manus: we have a u.s. closes. s&p, the dire, and nasdaq. this is the longest losing streak since the 1980's. 1%.ec down one quarter of -- nasdaq down one quarter of
1%. you have dubai, abu dhabi, and qatar closing. that is heavy finished on thursday. will they pick up the trumpet attention and clinton -- the crash?ension and clinton tracy: that is impressive alliteration for a sunday morning. a the u.k., the chancellor is the center of a row with nations barristers. a public statement supporting a judicial ruling that the prime minister needs parliament's permission to start brexit negotiations. the judges have been attacked by the press and social media following the ruling. the ruling will be examined by the supreme court in december. manus: u.k. prime minister will head to india. theresa may will be joined by 30 business leaders, including the
heads of standard chartered as she seeks to cement ties with new delhi. the u.k. can't tie negotiations over formal training, but has started formal proceedings to exit the eu. we explored what post-brexit relationship might actually look like. tracy: and the latest setback for samsung, recalling almost 3 million washing machines in the u.s. following reports that the top of that she can become detached -- top of the machine it can become detached during use. it discussing safety issues with u.s. consumer officials. this comes after some some ended production of its galaxy note 7 smartphone, costing the company more than $6 billion. manus: south korean protesters have taken to this streets, demanding the president step down. the political scandal demonstrated the theory of demonstrators asking her to face impeachment.
aides were detained over allegations they pressured businesses into giving $70 million to foundations join controlled. donald trump was rushed off stage at the event in nevada. this comes as most he and hillary clinton took the drum to support with just a few days left before the election. liecy: bloomberg news' ju joins us with the latest. what happened to trump, and what reaction can we expect when u.s. markets open on monday? turmp wasapparently at a campaign rally and was removed from secret service. it was unclear at first what happened. it looks like there was a man rushing towards the podium and someone shouting "gun!"
so instantly someone from the secret service jumped on stage. nothing ended up happening, but it sets the stage for how crazy of an election cycle this has been. it is hard to say exactly what markets are going to do. the next 48 hours before people head to the polls, that is what they are going to get. manus: we are looking at these images right now of those moments in the auditorium where trump is rushed away. we have this map up. the swing states -- florida, tracy and i were channeling al gore, jeb bush -- this is what election 2016 will be followed over, a few key swing states and electro college with. -- electoral college votes. julie: this is why everything is
so uncertain. a lot of swing states going one way or the other, now they are a lot closer. people have been phasing in this clinton victory for quite a while. -- mayot be the case not be the base case. markets may react differently if trump were to win. tracy: i know that you follow analyst research quickly. what are we saying two or three days ahead of the election? what are the big banks saying? banks still-- all have clinton as their bank scenario. have said that turmp -- none have said that trump is the base case. but if clinton is president and republicans hold on to congress, so it is still divided congress,
a lesion - a continuation of the same old. banks are trying to price the markets. some would say there would be a knee-jerk reaction if trump were to win. some said you could see as much as a 13% drop in the s&p 500. others, a 5% drop, but a drop nonetheless. we have an article on bloomberg showing what to expect. and most of the time, what the markets do afterwards is just that. a knee-jerk reaction, then they come back. manus: let's hope that history repeats itself. here in the middle east, egypt's government is defending its decision to float the currency, even worries about managing cost. the prime minister said he doesn't have the luxury to postpone these decisions, and
can't take painkiller decisions. for more middle east economics editor joins tracy and i. the fx markets, the non-deliverable forwards. the fx market get ready for -- what does that mean? what is going to happen? >> today thanks start trading the pound, the freely voting currency in the interbank market. there has been no liquidity, and the central banks said, okay, you control it. we know that the commercial banks hold together in cairo on friday, trying to come up with guidelines of trade and how to deal with pound, and sure those guidelines with the central bank. we don't know what those guidelines are yet. we will see today. very few expectations. even the central bank was
expecting initial volatility until it can find its footing. it is new for everybody -- for us, for the next, for investors. we will see. tracy: we have the new currency regime in place, whether by choice or because it was essentially forced through economic conditions. is egypt going to get its imf loan now? alaa: there are three main steps for the imf loan. we think they have gathered the financing already with the latest china swap deal. second was to move on the fx. third was to cut subsidies. they did that also on thursday. thomas there is some wrinkle that we don't know about -- unless there is some wrinkle that we don't know about, in the next few days they will go to the imf. look at that -- that is called drastic data egypt. [laughter] if you want a lesson on what not word thusmphasize the
kh devalued their currency, argentina devalued the peso. manus: from investors that we talked to on this, if you interfere and say he will freely put the currency by intervention, then investors will start dumping your commitment. that is exactly when the black market comes back. a week later, it strengthened the pound. people would say, it goes up, down? that is the key test, if you will. people would be paying close attention to whether the central banks intervene, or decided by market factors. tracy: thank you so much, our economics editor for the mideast. you can get more on that on the rest of the day's news on our
digital destination tailored for the middle east, with reports and market data from the region, plus all of her reports, interviews, and special content all available online. later in the show, more doubt on whether opec ministers will push ahead with a promise to cut output. the implications on energy markets. manus: next up on "bloomberg markets: middle east," the presidential u.s. candidates enter the final days of voting. what are the expectations? this is bloomberg. ♪
for trade relations. one of the oldest families and glovers in the region. -- family conglomerates in the region. thanks very much for joining us. we talk about this question day in and day out. if trump gets into the white house, what does it mean for a major conglomerate like yours? >> immediately there will be no effect. power will be of in january. but this will affect many in this part of the world. what happens to the stock market? if the stock market goes up, fantastic for us. eventually if it goes down, that will happen -- it will come to affect us. aacy: you are worried about general hit to risk appetite. are there any steps you are taking to protect yourself from that hit?
>> there really isn't unless you are going to take a defensive position. wait, see what happens. kind of like what happens with brexit. tracy: have you done that? manus: in terms of that cash, let's talk about it. you are going to cash. unfold, see the world where would you be tempted to put that cash? would you redeploy when value shows up in the u.s., or u.k.? mishal: we are not traders or short-term players. we look at the risk value in my product and industry, and we like to focus on that. for us, it is a long-term game. whether it is a year or two or t en, it doesn't matter, it's depends on the company we are buying. we will have a short-term pain, possibly. but eventually this will straighten itself out.
tracy: you studied in the u.s. you have joint ventures in the u.s. and in europe. how concerned about you are the general rise in anti-free-trade, anti-globalization sentiment? mishal: from my past experience watching things unfold throughout the world, it seems every time people are in a position, they are idealists, and when they are in power, they are pragmatists. that rhetoric has been used by many of these candidates. i don't think it will come to fruition. you have too many bodies whose job is to protect the rest of the world from their idealism. manus: there was idea that trump would move toward the center in this election. both hillaryok at and trump, they are both banging this anti-global drum.
tracy: they are tapping into the populist sentiment. manus: they are. the consequences for that have --there are consequences for the rest of the world. the imf has a big impact on the rest of the world. are you feeling any of this anti-globalization discussion going on? mishal: what happens pre-or post election are two different things. president obama for example said quite clearly, i am going to close guantanamo. and he hasn't eight years later. in the u.s. will not allow him to do that. they are talking about what their constituents expect them to say. post-that, they are going to have a problem. i am not worried. we survived george w. bush. i think this should not be too
much of a problem. [laughter] tracy: one of your business is has to do with freight and shipping. one place where we have seen a bit of a retreat in terms of trade is in the shipping business. have you seen that? and if so, what do you attribute that to? mishal: for us in dubai, we sit as a hub between east and west. for example emerging markets in europe or those in south korea, either -- if they hurt, we all hurt with them. i don't think anyone forecasted engine going what they are currently going through. fortunately enough, that was to push conglomerates to take over their bases -- yes, i see a small dip. a small hurt in terms of the shipping industry. but in the long-term, i don't see this as a major issue. manus: we will talk a little bit
manus: welcome back. you are watching "bloomberg markets: middle east." tracy: we were just talking to chairman of. our focus has been on populist political risk. there has been activity in europe as a sweep of nationalist party. what impact would that have on your business? mishal: a lot more worrying than what happens in the states because that is closer to home, and a lot of her industries are directly based in europe. 2017, you have the french
elections, which will be fun. they usually don't vote for someone, a vote against someone. [laughter] i am hoping it won't be a repeat. this month has been a disaster. then again, as you mentioned, with the rise of the right, you see it in holland, france, and talk about it in germany -- it doesn't bode well from a political point of view. but from a national point of view, i hope it won't have much of an effect. manus: something we focus on day, weng -- on every focus on the billionaires, what they have lost. you are in there somewhere. does it create opportunities for you? do you say to yourself, $50, the world resulting around $50?
what are the opportunities from the oil environment around $50? mishal: the price of oil does not affect us in terms of what we are going to buy. we buy companies that we can have a long-term value in them. something along those lines. yes, we are going to look at opportunities. click as low as the price of oil is, more people are willing to sell. that next easier for us rather than when things are going up. people tend to think it will go higher, and are more inclined to sell. manus: are you talking about asset sales? mishal: no, we focus on our region. is centralorget, oil to this region. why should we go outside when i have everything here? tracy: one of the reasons we like having you on the show is
because you have this wide-ranging business, from machinery, oil, freight. give us your outlook for the middle east in the next year. are things going to improve? mishal: from a political point of view, i can't answer. hopefully everything stays as it is. from the economics of it, again, because we were in the middle of east and west. europe more than the states for us. if they start to pick up, we will pick up with them, as we are a court order for it. -- are corridor for it. what people seem to forget is, i think it was in the beginning of this year, the price of oil was $26? we are up 100%. we forget that. to $60, herehere
to $70, here to $50. it is not going to get oil up higher, but it is good for business. manus: looking at the structure of the company, i a did saym that it work gets better, would you look at any of these businesses and try your business? no ipos? any asset sales to come? mishal: more likely acquisitions than asset sales. manus: mishal kanoo. thank you for joining us. a great perspective. let's see how you are waking up during the week. tracy: it cut all have changed -- it could all have changed by then. traders going west optimistic on -- growing less optimistic on the price of oil being cut. this is bloomberg. ♪
>> checking in on first word headlines around the world. donald trump and hillary clinton in the final rush of campaigning for the election. both started in florida. according to some polls, trump has edged ahead of clinton in must win states including north carolina and ohio, but the latest abc -- washington post poll shows clinton with a four-point lead among likely voters. tobusinesses expected improve over the next four the fallout from
brexit is expected to hit. .anufacturing has benefited they see consumption weakening's year over concern over the negotiations to leave the eu. >> and credit sweeties -- credit sse -- dan admitted that the hidesed bank helped him money from the irs. he says he deeply regrets what he did and accepts responsibility for his conduct. bank of chinal has slammed with a $215 million fine for hiding transactions. new york's banking regulator says the lindor of skewered deals by middle eastern, russian, and chinese clients and try to silence a compliance
officer who raised questions about it. this after the bank was ordered to overhaul its money laundering protections. >> ok. oil is never far from our minds here in the middle east, and crude has capped its biggest weekly loss in three months. cap has faded opec will production. for more, we have our middle east editor. we had a lot of noise is related to opec. what does it say about the cohesiveness of opec that we cannot even get positive chatter at this stage in the game? chatter has been positive in the sense that they made that deal in algiers. difficulty,ing that's correct, maintaining that and getting from that initial positive talk of making a cut to getting to the final deal. that is where the pickups are in
the is will always be the biggest hurdles in terms of making a deal, getting people to agree on what the specific cuts will be. that is the real negative aspects coming out of this, that they have not been able to assign individual quotas and the negative comments we have heard, people wanting exemptions like a and iran, which will have big impacts on production. gathering have the and then we are on the road after that and off to another destination areas in terms of the majors and the cuts they are making to -- are they reinvesting? makescisions that exxon -- are we inching closer to a rebalancing? anthony: the common consensus is we are moving closer to a
rebalancing. that comes from opec and the producers in the market. there is a since we are moving to a rebalancing. what people are not so clear about, when is that happening? intoems like it will move next year. that's not enough of an impetus to get people investing yet. $3 billion, $4 billion of cuts. says that they do not expect more cuts. would mac is saying they see those cuts continuing on and when you conduct -- when you include projects to bring oil is going to take out of the market spending that would have taken place through 2020. ed morse is citigroup, we spoke to them on thursday, he said there will be a shortage of production when those projects seest come on, but he
stimulus for pricing to be enough but there will be some sort of increase next year. the potential is there if companies see a three-to six-month stability of pricing. towards the second half of the -- that would >> come november 30 when we have the big meeting in vienna, so we have a deal agreed on, will be shale focus shift back to as the swing producer on u.s. stockpiles, cuts to investment, as you mentioned? market people we talked to, but from the analyst in the company side, say there is balancing without an opec
cut. they are imagining what opec would do if things stay as they are. if that opec cut does happen that will speed up a rise in the price. how quickly shale comes back -- we talked about the offshore production that has also been very costly there it higher price or is -- higher prices on a sustained basis -- may see investec bring more of that in those people are saying the stockpiles will put a cap on prices. they are not seeing that aggressive ramp up into the market and that is something that opec will be trying to look at. >> let's find out where the magic number is. if they do follow -- anthony
dipaolo, we will be joined at the hip. number, 161,000. will there be evidence for the fed to raise rates next month? we are asked to the dallas fed president robert kaplan. robert caps on: i think the 3, 6-month averages of job growth are in the 170's. they are very consistent. i think this is steady progress to moving labor market slack. inyou have a strong gain wages. have we absorbed enough labor slack to generate inflation? historically when
you had this kind of growth, it would find its way into prices. a secular trend is technology disruption, meaning it is a harder for businesses to pass on cost increases in the form of pricing. businesses have less pricing power. i will be interested to see how much of this wage increase finds its way into pricing. i think it will be more muted than we are historically accustomed to. mike: you did not put an explicit hint in like you did last year, but is there any reason to think that is not going to happen. robert kaplan: you know from talking to me, i don't like to speculate -- mike: but i want you to. robert kaplan: we should be able to remove some amount of accommodation. i think this is a very gradual, shallow path. much more gradual and shallow than we have historically
experienced. but i think we should be removing some accommodation. but the path after that will be gradual and we can afford, i believe, to be patient. mike: are you saying the market reaction is enough priced in you will not get a tapered tantrum? robert kaplan: that is always hard to judge. i watch the market probabilities. if we were to move, the market seems to have some significant expectation of that. i think we need to be driven by , and that is the basis on which i believe we should remove some amount of accommodation. plot put together at the last meeting suggest the consensus for the fed will be to increases.- two you will be a voter.
where is your dot? robert kaplan: i do not comment on number of increases or timing specifically, but i think the dot plot was very consistent with what i think is appropriate, which is a very gradual, patient path of rate i am sayingd what is the future rate increases will be very gradual. just but still to come in the egyptians feely the pain of the decision to float its currency to read more on the country fell unprecedented move later in the show. this is bloomberg. ♪
live from dubai, i am tracy alloway. >> let's get you up to speed with headlines. egypt all governments with an unprecedented decision to float its currency and raise fuel prices. the prime ministers of the country does not have the luxury to postpone these decisions. meanwhile, the world bank applauded the move, calling these ambitious reforms that would create jobs and boost in corms. tracy: and industry giant paper companiesng the receiving subpoenas. dozenobe now spends two companies in two dozen drugs. the first charges could emerge by the end of the year. manus: a turkish court has sharply escalated president ertl
dogan's --ident er they were the first members to be detained on raids on friday. erdogan accuses the party of close links to the separatist ppk rebels. it enabled them to be charged with terrorism related offenses. improvements in the labor market, emerging markets fell for a second week. for much more, here is our emerging markets managing editor, justin kerrigan. a record low -- how much further is the mirror going to go. justin: if you look at the it isst for the lira,
even further and the forward markets is even more burress -- bearish. 10-yearook at the yield, the stocks are at a three month low. the does seem now to be a consensus that turkey is -- we have seen a lot of what has been going on, obviously, since the attempted coup in july. there now seems to be this consensus it is beginning to unravel in a very negative way. is this implosion -- the stock market job to, the worst-performing stock market -- is it too strong to suggest implosion. i am reading reports about the liability of the relationship between turkey and europe, and that is critical to europe as well. voices inu hear europe, saying this is a country destroying its democratic
institutions. it's about momentum here. if you look at south africa and brazil where there seems to be a certain amount of working it out said on -- in turkey, as i a moment ago, the unraveling seems to be happening and if it starts to impact economic policy, investors are simply going to head for the doors. at that seems to be what we are seeing the beginning of at the moment. let's talk about emerging markets in general. we saw a little bit of risk appetite reduce. isn't all about the u.s. presidential election? or are other things affecting turkey forjustin: example. in every country there are domestic factors to consider. as an asset class, it's mostly the u.s. election. we saw the improvement in u.s. labor statistics on friday,
which raises the prospect of a fed rates increase, which is good for the dollar, bad for e.m., but yes, it's mostly about the prospects of trump. let's be frank about this -- and the uncertainty of what a trump presidency good look like. you see investors headed into the safety assets -- gold, precious metals, silver. treasuries, the yen -- not the dollar. what cells often that environment? investments, the emerging markets. manus: everyone is getting very skittish. justin kerrigan there. bankg up, the world applauds these moves to free up international funds. more on those measures. this is bloomberg. ♪
tracy: welcome back. bloombergtching markets middle east. live from dubai, i'm tracy alloway. manus: and i manus cranny. theing us now, we have capital of dubai ceo. thank you. we were waiting, waiting, waiting for devaluation. don't worry 5%. down the sky captain. where do we go next? is there more to come from the 45% devaluation? >> it is a float. it is how much the central bank will interfere in this. i expected to overshoot in the short-term. you look at the evaluation, everyone is looking between the 11 and the 13, and that is why they started at the 13 level,
but it overshoots the 16. is it going to overshoot to the 16? the government or the central bank are trying to get their liquidity from a black market. that is going to take time and there will be a lot of speculation there. and since you have a lot of demand and very little supply, you have rates still going on. i think you're going to be quite unstable. this gives to my question. we have seen previous devaluation attempts by the central bank. what makes this time different? ahmed: because it was a managed reallyand that never works, especially with a country that imports everything. this is a pure float. it really depends how much the central bank is going to interfere. if they really let it float, it
will all be about supply and demand. it will be different if it is a free flood. so far, it is. manus: there is history to go by. a drastic debut. egypt, the accolades it has been awarded -- it is the worst. you call it free float. i call it devaluation. its performance on day one, a rather solitary affair. let's talk about your positioning for egypt. you were underweight. talk to me about whether you are prepared to shift gears, and more importantly, what way is the market weighted toward egypt? it's a very interesting question. investors are positioned in egypt. when you look at africa funds, you're already positioned in egypt. i do not expect much more liquidity. egypt has become much more attractive.
there is a pool of money that can go into egypt, but it depends on how attractive the valuations are. , if you look of the market, it has priced in some of that and that is why we have been saying egypt is up from the .anuary lows you can value the devaluation or float, whatever we want to call it has been priced in. how much? we don't know. but how much is it going to go from there. i think we will see the market -- -- if i was going to ask you are an investor and you want to get money out or take advantage of the enthusiasm around the devaluation, at what cost are you going to do that, and what will it cost to ahmed: that?
liquidity and --repatriate that? let's think practically. in the an investor, short-term i will take money out until i am comfortable enough ncb valuations are attractive enough and confident enough that if i put my money in, i will come back. i think short-term we will see a bit of a selloff. they havewill hear done everything -- they hike to the gasoline tax, the cooking oil tax. accessing is in play to the funds from the imf. what does that mean in terms of growth? what is the counter side to all of this, which is inflation? some people are saying to me 20%. where is inflation going? what are the ramifications of opening up the access to funds? ahmed: inflation -- i have
always argued that everything in egypt has been priced into the black market rate. that is where the liquidity is. if we're talking 20%, 25% inflation, that has already been there. obviously you will see a drop in prices and prices will go up. but on the ground it is about 25%. tracy: we were chatting before you came on and you were in cairo -- what is the mood on the ground right now? ahmed: people are confused. if you looked at the media the day before the devaluation, they were trying to push people and push the story that rates are going to go down. which helps them start from the 13 level. tracy: interesting. ahmed: psychologically, it helped people. but they expected a bounce and
it didn't. it overshot. there's a lot of confusion. that is not going to stabilize before the funds moved from the into the economy, which is essentially the banking sector. manus: it's a huge transition. tracy: it's a new regime. manus: it's a completely new regime. ahmed: and they have to shift to the egyptian pounds. the mostat is probably of who aspect. on that, thank you for making thank you formed, making the trip. tracy and i have a couple of charts for you. have a look at this. the best run -- this is last week -- trump gives the white house, europe could fall apart, court -- we have a high in the united kingdom which, i
was reading theresa may needs to parliament to discuss the supreme court. the best week since 2009. what are you looking at? tracy: i looking at -- let's see. i have actually forgotten. manus: the vix? tracy: here we go. rising steadily over the past -- i think it was nine days. manus: was that a record? tracy: we were talking about a regime change. you had subdued volatility. people get used to it and it's finally popping a little bit. it could pop a lot more come wednesday. nervous whenys get they say the longest on record. i grabbed my notes. it is. i've mocked my brow. the longest streak since the 1980's -- tracy: all changed. tracy, listen, that is this additional bloomberg markets released. i'm going to a dobby.
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