tv Bloomberg Markets Middle East Bloomberg November 12, 2016 11:00pm-12:01am EST
h egypt secures a $12 billion imf deal to rescue a battered economy, the region's biggest ever bailout. clarityhe market awaits on donald trump policies. a key adviser says expect the unexpected. >> opec members pump up the volume. >> and not only crude on the side. gold leads a retreat in metals traders await term's plans.
>> it is 5 a.m. in london, midday in hong kong. good morning. i manus cranny. and i'm tracy alloway. welcome to bloomberg markets middle east. we have a couple things for you. bonds, the rush in global stocks out at $1.3 billion, wants also a billion dollars, this is the one week return of the s&p 500, up nearly 4%. the one thing that it sounds like to me, 16 billion dollars of fresh cash went into equities, the biggest inflows in 14 months. it depends who your rate. citigroup says get used to the trump rotation and their strategists have gone from overweight to underweight equities. thebondholders -- tracy:
bondholders finally vindicated, right? if you believe in trump's america first policies, this is one way it is playing out in the market. if you look at the many futures versus theures equivalent contract in the s&p 500, you can see the diverges. emerging market futures cannot quite catch a bid. if you believe donald trump is going to put america first, this is how it plays out in markets. thing that struck we over the weekend, you have brazil, you have india, nuances of intervention. at what point could you see a g-20 reaction? happy ofese are quite the moment. but these emerging markets central banks, they are not all created equal. we will be talking about that
through this sunday morning bloomberg market middle east. we have about two hours to start the trading in the region. thatdobby still has euphoria, the aphelion sobbing market. have gone back into a bull market. the banks were on the rally there. 4.52%.p by four point -- day of gains. 206 million pounds worth of stocks and the foreigners, they have 453 million pounds worth of stock. tracy: let's look at the markets where we have fireworks toward the end of last week to put it mildly. take a look at the dow jones. it was up to a record on friday. down a little bit on
the back of truck. the story is one of exuberance. manus: is trump such a protectionist? should tech the see a worried? on the other side, is it in inflation trade or a trade? or is it both. tracy: generally when you see stocks up, markets are getting really excited about the tax cuts, the infrastructure spending, and the idea that inflation will come back to the u.s. manus: those are things we will touch on in the show. let's get ours check on the first word headlines. the trump economic advisor and has warned that the resident may not stick to traditional republican eric -- republican budgetary discipline or promises from his campaign. he said that he is not dogmatic, but instead sets bold targets from which to negotiate. tracy: these sky bridge capital
founder is an executive of trump's transition team. the rnc chair reince priebus, three of the resident elects children, and his son-in-law are on his team. and hillary clinton believes that revelations about stopped herse campaign momentum before the election. during a conference call with donors, she said she was leading into battleground states before james comey revealed the revised e-mail investigation. she also told donors she is heartbroken over the results. tracy: hundreds of thousands of people rallied in the south , calling for the resignation of the president. organizers say that the protest drew 100,000 people. the scale of the weekend
rallies have been growing after she said she consulted allies about documents after taking office. olombia's government says it has reached an agreement with farc rebels. manus: the accord tries to address concerns raised by opponents of the original plans to and 52 years of war between marxistrnment and rebels. the imf has approved the largest loan of its kind right here in the region, $12 billion. that is the program. revive itsp egypt battered economy. joining us on the phone, a vice president of microstrategy. let's start with the basic facts puthere will this money be
to work most expediently that we will see result? -- >> good morning. i think the key thing is funding the budget deficits. you are funding the deficit around 18% to 20%. a third of the total budget spending. you're going to fund this was you are trying to work with lower funding costs initially. >> we know that this has come through very painful moves by egypt. how would that impact the authorities there? how are they dealing with it? mohamed: i think the move on the
--eign exchange was actually as much as it is inflation generating, it has already been happening for a while. i think it is more of a relief forhe business community the functioning market. i think we have seen a decent close in the banking sector. those businesses are starting to deal with the banks again. i think to an extent, it is a big relief for the economy and we are starting to see foreign money flowing in in just the first week. yeah, it is a big relief. are tryinghorities to improve the system.
manus: let's just touch on one of the themes he raised there. you have the finance minister saying we expect foreign investments to be around $8 billion to $10 billion over the two months. is that achievable? how important is it that the bond sale goes well? this is veryously, important. it is a key component of the government funding plan. hasally, the government authority from the cabinet to issue $5 billion of bonds. the dollar is obviously needed. it will help the government diversify the sources of funding the budget, and so far the
indicators we have seen are quite promising on that note. what is next for egypt's markets? we have the imf loan, devaluation. things we were waiting for for a long time. what are you watching for in the week ahead? mohamed: the key thing is the contained improvement in the foreign exchange flows, which has been showing is a very good indicators in the first week. the key thing here is these reforms start to pay off in terms of the pickup in the long growth and it dominates activity across the board. --s really looking forward all of these reforms are helping the state grow. manus: the risk to egypt is, of course hyperinflation -- and we
are looking at core cpi. nearly 16%. what does that mean for the central bank? the egyptianisk central bank needs to raise rates again, more so on the inflation side than on the currency side? mohamed: 600 basis points -- actually markets have gone up from that. it has increased rates of further from that point. theres the key point is has to be proper tightening market policy, which from a rates prospective head of been already -- respective had been invested. the central bank says it has --
loss, you look at the they have been indeed so. so, you need to see your money supply being controlled. what you're seeing now is a one-off inflation. all of these measures have been in stated in a very short time. the key thing is, you need to see growth coming up and being controlled. all right, thank you, all the way from cairo, joining us this morning. , commodities fall the most in four months as traders assess plans. we will discuss the fx later in the show. does come fromat victory mean for the global economy? will he keep his promises entrée? this is bloomberg. ♪
tracy: welcome back. you are watching bloomberg markets middle east. life in dubai, i'm tracy alloway. manus cranny. never far from our agenda. his economic advisers saying that he may not stick to the public in orthodoxy or positions from his campaign. what is emerging over the weekend and his actual position versus those a great hyperbole in the run-up to his victory? >> as we kind of expected this will be an unpredictable presidential administration. i think trump is showing he is beholden to nobody in washington, probably the first president who can find that. i think congressional republicans probably should be as worried as kratz about what this president may do.
have we seen any indication as to who may have influence over trump at this time? >> i think it is clear his family is the most influential source in his life, his daughter , may be ofar, ivanka particular moderating influence on him, particularly when it comes to health care and women's issues such as the funding planned parenthood which is been a republican goal for some time now. manus: obviously we saw the media fest, trump arriving at the white house, spending time. i watched that call. i watched a lot of body language experts talk about that. what is six for obama. i suppose so much of his history -- what is next for obama? as opposed to much of his
history is going to be undone. the europeans are meeting next week. they do not know really what to discuss, do they? >> yeah, obama leaves next week , and now he will be spending a lot of some explaining to his peers in europe and asia just what happened in the united states and what we are up to over here. just asign leaders are curious about trump's agenda as americans are. all right, thanks to alex wayne speaking to us from washington, d.c. >> thank you. us, nasser cedi. there is no shortage of things to talk about at this time. how would you describe the events over the past week in terms of their influence on markets? this is going to be a very
choppy time for markets. you have policy uncertainty in europe. you have policy uncertainty in europe. elections are coming up in ma, france, italy as well. policyill go into uncertainty. we do not know the policy of the trump presidency. we are in transition, very much discussion, but remember, this is populism and populism is very opportunistic and also very pragmatic. so don't expect any erudite looks to be written about trump's political philosophy. -- books to be written about trump's political plus three. it will be reactions to events as opposed to a well laid out policy. manus: when i read the op-ed from anthony scott emoji in "the he talks about,"
the revegetation for taxes, corporate tax coming down from 35% to 15% -- i think we are dealing with a great many, many unknowns, but from an economic point of view, they are talking about doubling u.s. growth. is that her per release reality and what are the inflationary consequences? could: the leasing or you get some boost in growth would be infrastructure. let's remember obama in his first term proposed infrastructure then and even to set up an infrastructure bank. the advantage trump has is he is both the house and the senate, he is a strong republican president. he could get it done. if you do that, you get a short-term first two economic growth, maybe 1% if you accelerate that. the thing you need to remember is infrastructure is not just federal. it's also state and local. it has to be agreed at the state and local level.
the big issue is what you going to do to increase activity growth? that is what is important. if you start imposing restrictions on trade, immigration, you're not going to get that long-term growth boost. tracy: i want to pick up on manus' inflation point. we have seen the bond selloff to read how is it that donald trump before he is even in office has managed to do what janet yellen, the boe, the ecb could not? nasser: because what he is talking about is a real increase in deficit spending. if you talk about the pronouncements, you're talking increase inrillion the next four or five years. that could really raise inflation. that is what the markets are reacting to. let's talk about that.
plot, potentially where the fed could go. next year, let's run it through. --goes for an inflation fiscal spending next year, what sort of rate increases could we see next year? could it be much more accelerated? let's remember that real rates are zero or negative. when they talk about increases in interest rates, we are about relatively small amounts. if you treat it as a large deficit increase, you could have a half percent increase your. the fed is still going to hold on to its policy. to discuss.more di, our economist in the hot seat. what is the impact of
tracy: welcome back. you are watching bloomberg markets middle east. live from dubai, i am tracy alloway. manus: i manus cranny. joining us, nasser saidi. thee trying to understand market impact of trump exceeding the power in january. he has talked a great game in terms of what he wants to do for oil independence. what did that mean from your perspective? i think that is the key thing to expect from a trump. oil,ll give more to shale, and gas, probably go for more independence, which means he will add supply, so the
prospects for oil, i think, will be bearish. we have the subsidies, the introduction of taxation. tracy: let's talk about the dollar. it has declined as results were coming in. it has rebounded. what does a stronger dollar mean for economies in the middle east which have a pegged currency? nasser: the problem is the impact on the non-oil economy. tourism, services, other things you are trying to develop are less competitive than they are. we have already seen that over the last few years. astead of dealing through
depreciated exchange rate, we have had relatively strong currencies. chess the other global piece, if you want to think of it that way is china. if i look at the trade relationships, and we had a view piece.erg it fits china quite nicely. thisonsequences of anti-trade rhetoric, how damaging could that be? we have not heard the detail yet. true, but it could extend also to europe. protectionism is increasing for europe. surcharges on chinese steel. it could take you into a global trade decline. china, i don't think, is very
much concerned. china is developing its asia markets and integrating asia, africa, latin america. besident xi is going to signing a whole bunch of agreements. so, retrenchment, i think, within europe and the united states is going to play in china's favor and the only other thing we should note, if there is political stability, it happens to be in china and president xi. manus: i think that is the best line i have call morning. nasser: it tells a lot because you are entering into a time of uncertainty. look at brexit. as a betting man, i would invest in china. look at what alibaba did two days ago with single day. manus: if you ever wanted a personification of the chinese consumer, that is it. thank you for joining us.
tracy: all right, let's take a onk at the top stories bloomberg markets middle east. a trump economic adviser is worn the next u.s. president may not stick to traditional republican budgetary discipline or positions taken in his campaign. if they scare emoji said -- anthony scare emoji said that he is not dogmatic, but looks more strong positions from with to negotiate. team along with rnc priebus, three of
the present electoral children, and his son-in-law. manus: rallies for a fourth day on saturday against donald election victory. he marches were set in big cities such as new york and chicago, s well as -- as well as smaller cities. saturday's rallies were mostly peaceful. warren buffett is once again the second richest person in the world and he may have donald trump to thank. buffett, who supported it clinton, added $6.2 billion to his fortune last week, after wells fargo jumped in the two days after the election on bets that the jump administration will reduce banking regulation. --it's berkshire hathaway
buffett's berkshire hathaway has a 10% stake in the lender. is it's economy battered political turmoil -- 2.25 gets payments of billion dollars on a bet that it will reduce currency inflows. tracy: all right, oil has tumbledwill to an eight-week lo. fell on friday with britt for january delivery below $45 a barrel. with anthonyupdate to paulo anthony, it seems like run enjoyed a pretty good up on prices on the back of a talk about a deal, but those price gains seem like they are starting to run out of ski -- out of steam.
it's opec's consensus falling apart? >> yes, it would seem to be what the market is looking at as a risk now. lots of details remained uncertain, who was going to cut what? now we have seen continued rises in production. it run, one of the countries that would be exempted -- iran, one of the countries that would be exempt it, they are coming back from sanctions and trying to ramp up. iraqi is still disputing secondary sources. has the potential for opec to continue growing, and that is showing potentially we have a lot of supply in the market and even if opec does cut, they have a long way to go down and the
market is scratching its had going, where is this going to come from? drop are these going to back? the market is seeing that as increasing risk that they will in out to implement that geez -- algiers. is a lotu said there of head scratching. why are the opec members so aggressive? are they based on an average in that average is a higher average? what is it in terms of this move? onhony: the good money is the fact that they are trained to get themselves to eight high point, they are going from a high level, so these countries, the opec individual members are at a level that brings in foreign currency. of course, we don't know what the opec terms are yet, whether
they are going to take an average, take a specific month, and this is something that opec does not determine for itself. they held a meeting last month that was meant to work out some of those problems. they are going to meet later month. decide who to cut and at what levels and where we're going to get in the in -- in the end. manus: anthony, thank you for joining us. -- it sawn oil prices its biggest drop since july as traders assess the possibility of a donald trump presidency. white house in january. welcome to the show. what does donald trump mean for the emirates team in terms of
oil and americans supply? perspective? market is not really sure how much he has talked about in his campaign will be implemented. if we look at what he was talking about, he was trying to portray himself as being more pro-oil, making it easier for them to drill. pipelines easier to get authorized. a lot of the things that trump has been talking about would increase the supply of oil in the united states, not decrease it, and really what oil prices need is higher prices, not more supply. tracy: i am old enough to remember that geopolitical
uncertainty used to mean that will supply went -- oil supply went up. >> the fundamentals before the election and after the election are absolutely a same. mr. trump has little ability to affect oil prices. longer-term, if there is, let's say a withdrawal or less u.s. interest in regions prone to political instability, you can premium.of a risk we just had that saidi,sation with nasser and his key point was you have much more political risk, not least with iran. that is a downside to oil, which
makes taxation and i suppose fiscal aggression in the region much higher. where is your base case for opec? opec do to solidify prices above -- what? 55? ed: considering the levels of production for opec, they are setting the bar that much higher. they need to be talking about much more sizable production cuts. now, considering that they are over 34 million barrels a day -- they need to be talking about a an effectcould have on the economy that, in our view, is out of the question. tracy: they reaffirm they are cut.ng about the same
they are not raising it. what impact can we expect if it does come through? it does come through, prices could respond positively. theould also raise question, would they cut production further going into 2017? ultimately, opec has been in his position several times were they of talked about a cut, said an hours away. nothing has materialized. it also raises the question, what adherence to the deal will be implemented? maybe they have saudi arabia, the burden, but on a net basis, you have to make ise that opec as a bloc reducing production rather than having a few countries increasing at the sidelines. hold thatbell,
thought. we will be talking more about the fascinating situation would opec in a few minutes. but first, we will check in on the first word headlines around the world. china fell slowly economy did not seem to dampen spirits for the biggest online shopping day. a record $17.8 billion was splurged on alibaba's annual singles they shop upon -- shpa opathon. it drove to black friday and cyber monday combined and is part of the transition to a consumer let economy. china says it is highly eucerned about what it calls trade protectionism and iron and steel. on its website, the commerce ministry says it hopes the eu will strictly follow wto rules. if i'll is a european commission
decision to provide provisional dumping duties on imports from .hina the commission began an investigation back in february in three categories. tracy: a group of 84 british a's reportedly wants to force vote on the u.k. departure from the eu -backedudes 20 labour ventures. the move comes as theresa may appeals against a high court ruling that she must get parliament approval before treating -- triggering brexit under article 15. the state bank of india took more than $7 billion in cash deposits, customers queued for hours to exchange the bad 500 and 1000 rupee notes.
diminish. i expect visit volatility will be reduced. -- this volatility will be reduced. and with trump trump presidency hot on the heels of brexit boats, we have a professor at harvard university and says there could be mutual benefits. >> christmas came early for theresa may this week. up until this point, it looked as though breaks it was going to be the longest and most expensive divorce in history -- brexit was going to be the longest and most excessive divorce in history. then donald trump announces that he loves the u.k. who knows? by monday, we may hear of a north american free trade agreement to replace the european one in which case brexit is saved. the foreignays
minister will crackdown on currency manipulation. chest but he also commented on currency manipulation with our partners.ade while he believes in free trade, he finds it to be unfair if countries deliberately to base their currency. manus: let's continue the conversation with ed bell, the analyst joining us this morning. the peso is getting smacked. the pound -- who would have sterling could get a bit off the back of trump in the white house? let's talk about your home game, which is the commodity market. the biggest month, the biggest rally in seven months -- that is where we have record volume and trade. what is going on? the dollar is up 3% on the week as well. square the week for me.
we were down 1.57% on the commodity index off friday's close. traders and market analysts are scribbling to find some rationale for the price of copper. the chart, it is a hugely elevated levels. when you try to infer what a trump presidency would mean for the u.s., he is talking about all of these things -- it should be broadly supportive for u.s. growth, and generally those would be supportive for industrial metals like copper itself. when we look at it from a more fundamental ask her, the copper market is still in a pretty sight surplus position. the gains in the copper market are just waiting to be undone. turn to another -- all right, let's talk to gold. . do not mean to sound flippant
but trump has long been associated with gold. if he goes into the white house, is there automatically a new bid for gold question mark is he going to paint the white house gold? outfit is toilets -- manus: oh, whoa! if you look at gold demand over the last year, perhaps a more ostentatious white house could be some beneficiary there. if you look at the price reaction, on the day of the election, gold prices shot up on the shock value. as thereally come off reaction in equity markets has been very strong. you have the possibility of .igher rates these to get things will be pretty negative for gold short-term. , what as going to ask
about inflation? is gold no longer in inflation hedge? why aren't we seeing the pickup in gold? you have to remember the kind of price gains are nowhere near that kind of inflation. even with the kind of spending plan we might get from a trump presidency, there is a long way to go before we get a concern of it being too high. the bonds ofith they are talking about the bond yields up at 2.5%. let's talk about the dollar. although it took until the end of the week, it was up 3% at the end of the week -- let's say we go into inflation, the dollar is bid. cap that cap, fundamentally
this swell in commodities? it can do, but i would stress the relationship between commodities and the dollar is not always linear. they can move in opposite directions. not always. it's almost a time when the .arket means something else overwhelmingly in the current conditions, it is fundamentals. whether it is gold, industrial metals, agriculture. those of the drivers. not so much the market side of things. manus: you are going to be a busy, busy analysts. as bell they are joining tracy alloway myself. coming up on the show, we will go back to egypt. it is the biggest alone ever in the middle east. will it reversed the country's
welcome back. you are watching bloomberg markets middle east. live from dubai, i am tracy alloway. andi'm manus cranny. i'm manus into -- and ni' cranny. down 370rkey has shut groups including children's and groups.ghts they say that half have links to the group that they blame for the july coup. manus: donald trump says he wants to pull off what he calls peaceltimate deal" -- between israel and the palestinians.
says as aent dealmaker he would like to do the deal that "can't be made." and do it for humanity's sake. trump made contradictory statements on the middle east during his campaign, but repeatedly said he wanted to reduce american involvement in the region. tracy: the ocean lng says it will deliver natural gas to brazil. power projector a in east brazil. qatar owns 70% of the joint venture. anus: the imf has approved $12 million -- $12 billion package to revive it egypt fell better economy. do you want to, on this show and
you get a promotion. >> yes, can we talk about the u.n. now? manus: you are not gracious. you get the promotion and you are not gracious. this is an historic moment. we have a bond sale coming. give me the risk and reward? >> we may get a bond sale -- manus: ok, i'm the optimist. i am glass half-full. >> they said now the euro bonds may be delayed a bit, but the markets are optimistic. you see the stock markets, the pound strengthen a bit. success issure of attractcan the banks those dollars from depositors, from investors. do i as a depositor, as an investor, do i trust i can go to dollars and exchange my
or by those from the bank? that is what we see gradually happening. we see companies starting to get financing, opening up letters of credit. black market trade in the official rates are about the same. that is how the process will work. ok? the bond terms of sale, is a question of striking now while the iron is hot? or do you wait a little and give investors be added insurance that everything is going to plan? >> now that they did this to billion-dollar deal, which was out of the blue, i guess what is on their mind is, do we need, do absolutely need to go raise more ?oney and then i think will we get a
rating upgrade? then we have a better deal from the markets? manus: i'm going to grab it. the ratings -- what possibilities are there? should the rating agencies want to see a little bit more on the table? manus: yes, revise the outlook from negative to stable. you can spend some time after that -- maybe, but it is still early days. the process is still in early days, and mind you, the real economy, a significant pressure now is in an exchange rate flotation. it is early days. manus: thank you. our middle east -- tracy: global editor. don't worry.worry, our middle east economy and government editor, thank you. that's it from tracy and i the sunday morning of the mark
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