tv Bloomberg Markets Middle East Bloomberg November 30, 2016 11:00pm-12:01am EST
boca agrees to reduce output and more than one million or barrels per day. russia will also cut. the surprise deal gives markets a lift. energy stocks see their best date in nine years. officials factory gauge at its highest since 2014. is the old economy doing the heavy lifting? 5:00 a.m. in london and midday in hong kong. let's get you a quick check of the state of play of markets. generally an update across the
region. mumbai trading from 20 minutes. a rally of the first trading day of the week and the month, rather. seng index and topix those climbing. we are talking about how the major markets reached today, and how it will react to the opec deal. yesterday was a different day. there was a lot of momentum to the negative side of the story whether or not we will see a deal in saudi arabia. perhaps they knew something. 1.5% higher at the close. we will see how that opec deal affects the markets today. there is no trading in the united arab emirates markets, closed for martyr's day. i want to dive into this bloomberg charge.
-- bloomberg chart. that oil price as a result of that deal, we are seeing a shrinking oil. this is where investors spoil away the oil, thinking that in the future they will sell it for profit. to discuss between wti -- the discount between wti delivery has narrowed sense opec announced the first production cut in eight years. checking on first word headlines from around the world, here is heidi. heidi: china's official factory gauge height to the highest and 2014. rose infacturing pay november. is 60.9.n gauge below estimates.
risks from financial the red-hot housing market. donald trump's nominee for treasury says he will be -- there will be no absolute tax cut for what he calls the upper class. he tells cnbc that higher income tax reductions would be offset by fewer deductions. he criticized dodd-frank and said he will label china a currency manipulator not warranted. he says tax reform is its overriding priority. the fed's latest beige book based on anecdotal information connected between mid-october and the 18th of november shows expansion andomic retail, real estate, and business services. a rising collectively with little inflation. election related uncertainty in some states even after donald trump's fixturing.
s embattled president may have bought herself sometime after offering to resign. part of the ruling party says it will accept your impeachment at the end of april. it gave her nine days. a group of 40 lawmakers is seeking to hold the balance of power, due in parliament friday. global news 24 hours powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ♪ host: opec's surprise output deal has given energy stocks opposed. this is broader than many observers had expected from outside the cartel. there is of course not only airlines not happy, there are always the other side of the story. our energy reporter joins us from singapore. first, how did opec's big players bridge their
differences? meaning,g into this the real differences were between saudi arabia, iraq, and iran. iraq and iran at all. -- iran argued they should be exempt from any cuts. iran because it was still lifting production from its pre-sanction levels. iraq agreed to be part of the production cut because it had compared tolevel saudi arabia. that if some wiggle room for iran. instead of trying to push all of their oil production to the pre-sanction limits, will lift by another 90,000 or so. everybody gave a little and took a little. once those silver you were in line, they were able to bring everybody else behind this 1.2 million barrel a day production in oil output starting from the
first. -- the first six months. host: are sober times ahead? outside of opec, which is the markets he has winners and losers. the rising oil price lift lifts all times of boats. rig builders in singapore are seeing up left. energy giant in china are benefiting. airlines and refiners are having a rougher go. in the long run there are questions in the oil market about how this will play out. morgan stanley put out a note saying higher oil prices now means more investment in drilling from u.s. shale. that it add to supply to the second half of next year, leading to a person stability around this time next year.
we will have to see how everything shakes itself out over the next year. while opec was reaching the deal, indonesia suspended its membership in the group. i thought they just rejoined it a couple months ago? [laughter] dan: that is what we all thought. indonesia had been a member of opec for a long time. in 2008 it suspended its membership because it was no longer a net exporter of oil. it was a net importer. it did not think it's needs aligned with the groups. last year there rejoined the group. it was the group's only asian net importer. they talked how they would bridge the divide between producers and consumers in the world. this year, the cost comes along, and indonesia comes out and says cuts don't help, high oil prices are tough for us.
and that the cuts opec was asking them to make was more than they were willing to wake. now opec is back to a dozen members instead of a bigger's -- a baker's dozen. host: perhaps they are finding it hard to get a word in edgewise. our energy reporter live out of singapore. the latest from markets, here is david to talk about asia feeling that hill wins from that opec. david? david: at least for now. we were talking about equities and oil broken down in the west. a very interesting point that dan makes. a mechanism that keeps prices honest. asia, a blitzss
across equity markets. market.ts across equity very good set of numbers out of china. really providing a list toward assets. everything in the green. philippines reopening today, playing catch-up. japan is down with a weaker yen. india in reaction to the latest gdp numbers. the volumes are back as well. that is encouraging entering the last month of this year. given pmi numbers from china, metal prices getting a decent bid, despite the fact that you are seeing more signs of china cracking down on speculation. at least on their commodities markets. 2%, 2.5%.s up back to the opec story. what are we seeing as far as effects?
airlines and oil producers, very basic, plain, vanilla. chinese airlines down. southeast asia, east asia. airlines,oard, qantas so forth. i won't go through this, but fairly substantial gains through a lot of these regions. let's see how far this actually holds. these are extreme gains we are seeing in this space. host: let's explore this a little bit more with craig mcmahon, asia-pacific head of research at wood mackenzie, one of the biggest energy analyst firms. we get good insight into how the oil prices going back to their glory days. does this really mean? -- what does this really made? not the glory days, that is for sure. i think what it does mean is we are going to see the balancing
in doing oil markets between supply and demand really being accelerated. oil demand is forecasted next year at about 1.4 million barrels per day. local oil supply is forecasted to grow prior to yesterday's announcement by about 600 thousand barrels per day. demand is outstripping supply. the balance is coming, but it was taking time. opec's introduction into the story and desire and agreement to cut, we see that equilibrium being established much quicker in the market next year. host: where do you see oil going? right now oil prices are up 10%. we are notously surprised by the immediate response to the announcements. prior to beprices
about $53 per barrel next year. if the 1.2 million barrels is enacted and enforced, we expect to see prices challenge something like $60 per barrel the first half next year. $58 to be precise. there's a chance we might even see more than that. increased speculation says that non-opec will be part of this deal. all eyes really on russia, explicitly to see what happens there, and the upcoming metering in dover. host: it is curious that russia jumped in as a non-opec member and volunteered off of the table. why did they do that? craig: that is an interesting point. the message is coming out of moscow have been more focused on an oil production spree. the russians have been
incredibly successful at bolstered introduction in recent years. production from russia is up forecasted towas be up near year. the talk about a cut coming out of moscow, we are cutting from 2017, or are we cutting from the 11.6 million barrels per day. the devil will be in the details with regards to what the russians agreed to. host: craig, stick around for another couple minutes. that's something i want to pick up on for our audience. it is all about the devil looking at the details, and implementation. we continue our discussion after the break. ahead, china's economy shows stability with the latest economy manufacturing pmi.
host: welcome back to "bloomberg markets: middle east." opec has been the main topic of conversation after its surprise agreement to its first production cut in eight years. -- thunder of oil and gas insight and inspiration might have played a part. desperation might have played a part. >> the default leader of opec, ultimately it seems like the if not were very keen, desperate for this agreement.
i think they have managed to get major concessions out of iraq and iran, both of which were digging their heels until the last minute. i was just doing the math earlier this morning, and it seems if you compared with the ultimate optimistic scenario that iran and iraq were looking for, compared with that, they are both given up close to 500,000 barrels per day they would have otherwise wanted to produce. sachs, commodity had says the deal came as no supplies to him. he thinks the main thing driving it was not the price of crude. >> our view was we expected a deal. one of the key reasons was that the economics, not the politics, were incredibly compelling. they had a rebalanced market in the line of sight. what they had to do was cut production and pulled forward and already balanced market. why did they want to do that?
the main reason was inventory normalization, not price. host: prudential investment management ceo and chairman warns the deal will not bring the good times back for opec. >> for us who are long-term investors, we tend to look at the group of people who are gathering in vienna, and they are fighting against history. history has spoken, and that is in technology. the cost of producing crude, largely due to fracking, has dramatically changed the marginal economics of oil. it's not going back to where it was. host: let's pick back up with our breast craig mcmahon -- guest craig mcmaghon. you heard from prudential's when trillion dollar manager saying gone.halcyon days are he said we are looking at a $50
maybe $60 range. -- you said we are looking at maybe a $60 range. what is the review for oil? mentioned, the market coming back into balance, which could see a price around the $60 mark. from opec will be to accelerate that process. what is the cost to produce oil? at that stage, you immediately look to the u.s. as the marginal barrel supplier at the moment. they will revoke the license start to see investment grow again. production from the u.s. has fallen by 600,000 barrels per day. that was the supply response. many ceos suggest the magic number is $60 per barrel. we think a sustained number around $55 per barrel will be
sufficient to see the u.s. look to remove the last. -- u.s. look to re-mobilize. from the opec perspective, we don't think it is likely you could see significant entries from the u.s. probably until the end of 2017, more likely 2018, which gives them some wiggle room to make these cuts, then evaluate the market in may whether or not they will continue with the policy. host: saudi arabia and the rest of the cartel, you are saying they are banking on these u.s. producers not jumping on? what you call that 55 keller market reentry? if they wanted to get back in now, it would take a couple weeks, not months.
craig: we would disagree with that. we think that argument is slightly overplayed. a lot of pressure from oil companies. capx is not a lot of new invested until they are comfortable the prices stabilizing at a higher rate. the comfort would have, until you see the cuts come from opec. it does not come because of an itouncement made in march, is because of an investment made in action. once we see the next year, that will be significant. we think it will take longer to mobilize. the companies will have to contract rigs. they will need crews back and running. all of this takes time. we are seeing an increase in activity levels. oilee growth from onshore permeating, and that will take time. host: what is your sentiment on
the ground. what are you hearing in terms of trustworthiness of this production cap output? the thing is, they have not adhered to previous ones before. cautious optimism would be the immediate response. you are absolutely right it wouldn't be hard to find skeptics that would suggest getting this deal enacted and into practice will be a challenge. a a lot of people will wait and see what is released in late january, to see what has happened on the ground. i think that is a most inevitable. another thing i will say that is different this time is that we have seen a strategy change. ince the oil prices change 2014, it is been all about market share in the
asia-pacific. we have seen a softening of the policy. to some extent, it has not worked. the saudis have defended the position. we are seeing a new policy coming out of saudi arabia, a policy which is much more price sensitive. the minute we had that shift, the potential for a deal clearly grew. host: that is the great point, especially in the face of china. thank you for this greater insight onto the opec deal, asia-pacific head of research at wood mackenzie. the race for market share in the world as we find out who was leading next. this is bloomberg. ♪
market share as oil consumer. in the iraq and saudi arabia in suppliers to india in october. we have our oil and gas reporter joining us live from mumbai. why has iran become so important for india? iran has become a very important supplier for india in recent times. iran was the second-largest importer -- exporter to india before the sanctions were imposed. they lost market share when the sanctions were imposed. this year when sanctions are lifted, iran will be pushing oil aggressively. on the other hand, india's oil demand is growing at a significant paste. india wants to secure and abroad and its oil sources. building started
petroleum results across the country. oil month it bought iranian , which lifted the iran shipment ago, percent from month reading saudi arabia and iraq. host: how will opec's decision affect iran's position? opec's cruiser alignment is of huge significance for. it shows that they ran is emerging -- that iran is emerging as a key middle east player. edge over the its other saudi arabia and and iraqi players. the other thing is that iran is very approximate to india. host: gotcha.
host: 12:30 in hong kong, 5:30 a.m. in china -- we'll has a sort -- oil has soared after opec agrees on production cuts after eight years. two-year flirtation with pricing policies. opec will cut production by 1.2 million barrels per day, with saudi arabia alone-- november russia will change its stance. meeting when we were drawing the accord, we still had difficult administrative questions to solve, which are essentials.
the russian energy minister gave the information he would reduced by 3000 barrels per day. boostingdi arabia is the power of its sovereign wealth fund to accelerate you making endless and its dependence on oil. the public investment fund is getting a $27 billion injection from of shoals reserve, increasing its assets by about 17%. dealmaking has quickened as it increases its proportion of foreign investments from 5% to half by 2020. the dollar has had its best month against the yen in two years as rising treasury yields add. increasing bets that the federal reserve will raise interest rates in a couple weeks. the prospect of donald trump policies following inflation. the yen will keep weakening if u.s. bond yields keep rising.
investigators will look at if the plane that crashed in columbia may have run out of fuel. a leaked audiotape declares in a pilot talking about emergency and pleading to end immediately. the bolivia jet was added limits of range on the flight, 19 members of a brazilian pro soccer team are among the 71 victims. global news 24 hours a day powered by more than 2600 journalists in more than 120 country. this is bloomberg. ♪ >> more signs of strength in china with the essential factory gauge climbing to its highest since july 2014. in atcturing pmi came 51.7 against estimates of 51. we have the private survey showing growth, fractionally below forecast. what does all of this mean? we have our china correspondent tom mackenzie live in beijing.
what is the reaction today from china? tom: it is mixed. forecastsnumber beat quite strongly. it was a divergence between the official number and the permit manufacturing gauge, which came in slightly below forecast at 50.9 versus 51. overall the picture is one of expansion. if you break down the official number, new orders are up, export orders are up.those all-important factory great prices continue to rise. we had a long deflationary period. and unemployment continues to decrease, but decrease at a slower rate. the index that looks at smaller private firms shows expansion
continues at a slower rate. looking for non-manufacturing to you my number, 51.7, stronger than the previous month. construction as a subindex has decreased, continues to expand, but at a slower rate. services are in a green chute. we heard from hsbc on this, the data should give confidence the policymakers to hold a tight grip on proxy markets. possibly further curbs going forward on that front. there are concerns from others that we are not seeing enough leveraging and rebalancing. there is too much being propped up by the old sections of the economy. boc tonalysts expect the p gradually tighten as a result of this stronger data. angie: it has to get control of its external pressures, the strong u.s. dollar driving
capital outflows, i continues to be a concern for china. this has implications as well. what are the details? tom: it has been a record shopping spree for china and twice 16. around $234 billion worth of a deal emanating from china. it was almost three every single day. that has prompted policymakers with concern that this is exacerbating capital outflows. we have heard policymakers will now veto most deals over the $10 billion mark. they will also likely bar post properties deals. anything over the $1 billion mark is likely to be axed as well. this is when we see increasing opposition to these deals like the eu.
the economy minister says the european union should take a tougher stance on this, also the u.s. as well. a wait and see approach for companies looking to make acquisitions. we have the trump factor. many expecting that we aren't going to see the kind of record levels we have seen this year replicated in 2017. angie: it was a record year at that. thank you for that. let's look for investment opportunities. our next guest says they are particularly interesting in sectors that benefit from consumption growth. singapore,er to where our correspondent is standing by. >> a dramatic november for emerging markets, posing the biggest since january.
goldman says don't worry, there are still gains to be had. good to have you with us. emerging markets the likes of india. what is striving that optimism? >> when you think about emerging markets, you have to prepare for volatility. the reaction in november is related that people's terms of trade issues postelection, in general rising rates. we look for the new economies. how do people move into mobile banking? what do these new middle-class consumers do? when you look at china, where tourism is on the rise. that chinese nationals went from 4% to 12%. over at india, where performance or happening. we see reasons for hope. >> what do you say to those that
say emerging markets have been locked? there is reason to be concerned. >> there is absolutely reason to be concerned. we would say you have to be selective. one of the things people look at for em is index. they are mostly 100 stocks, state-owned enterprises, that is 25%. financials and energy those over 50%. that is a dominated index in the old economy. there are 6000 stocks in the emerging markets, not 800. many have domestic stories. those are resilient, even in the face of rising rates. >> you are also liking brazil. you have to take a longer perspective, and you must be able to stomach the volatility. volatility is a norm. >> you have to stomach volatility in the developed markets too. one of the many surprises this
year, i anyf thing comes out of it, people will look toward the stability of the political environment, looking at developed markets, brexit. looking at the u.s., will we see new fiscal policy? will we see tax repatriation? there is a lot of uncertainty. when we watch emerging markets, we watch reforms -- reforms are important. it reforms slowdown, we start to worry. we see this more stable. >> one concern for investors is the rising anti-globalization sentiment. haslett played out? >> i can't say that it has played out yet. it will be important to heed what the u.s. does in the first 100 days of the new administration. the moret sound like aggressive rhetoric on trade during the campaigns by both
parties. it seems there is a lot more priorities and other places like infrastructure, medical care. things that don't have as much of an impact on trade. surprise.ver put a i look at europe and wonder about trade as well. brexit seems to be taking a long time. changes in the u.s., pretty directly. the changes in europe are harder to predict. >> we talked about trump. people are saying the levels that we see in markets do not reflect the possible disappointment from trump. how bad can it look? what should you be pricing in? >> what people have looked at in the u.s., first of all, it is over. don't discount the relief of a process that actually finished. second, when you look at the moves suggested on infrastructure, those are quite
stimulative. what worries people? clients see the scenario of rising rates, which are coupled with growth. seeing some of the trade issues mentioned cropped up, log jams in europe, causing close to slowdown. rates continue to rise. that is one of the bad scenarios people are worrying about. >> how closely are you watching the data out of emerging markets? countries like india, turkey, youwith gdp numbers.are taking that into consideration in your investment? >> absolutely. at the macro level, look at the growth rates in general asia. even with china, it is the law of big numbers, but a huge economy. others out of emerging markets outside of asia.
global gdp has been driven by em. where does that growth come from? when you look at what it has produced, you have a real opportunity in china with resurgent and commodities. it has improved the debt ratios of heavily indebted companies. this is a great opportunity for four in that space while there is less pressure. we keep watching gdp growth. >> the biggest risk for emerging we keep watching gdpmarkets, wh? we have the rising fed, the trump presidency, the slowdown in asia and the rest of the world. >> the biggest optic concern is a lot of sabre rattling on trade out of the u.s.. a lot of uncertainty out of europe. if we continue to see brexit is the first steps in a lot of confidence towards more protectionist stances, that move
would be negative for emerging markets. at least optically it will make people cautious on that the export side of the equation is breaking down. that said, once you put your hat on and say there might be rhetoric, how much is real? you should be concerned if you see reform slowdown. people have been concerned about the pace in china. they would like to see reforms in places like india and brazil continue. >> we thank you for your assessment. em's has been having a bad day. we have to keep things in perspective. >> appreciate those ideas. drivesup, monetization can threaten india's status as the world's fastest-growing economy. we take you to mumbai next. this is bloomberg. ♪
company to reducing its near $30 billion in debt. gopro is swinging in the ax as it struggles for traction with new cameras and drones, cutting 15% of its workforce and shutting down its entertainment division. it seems a signal that the company is finally narrowing its focus. wall street has long been skeptical about gopro to build a long online video. gopro shares have gone down about half of their value this year. india grew less than expected in the third quarter, putting more pressure on the rpi to cut rates. the economy is set to get even further. we have the story from mumbai. how has the number been for the last quarter? 7.2% is what is anticipated.
the key number will be in the october in september quarter. that is one impact of the monetization will be felt. announcedster modi the ban of 1000 rupee notes. that is a crackdown on discrimination. we have seen this opposition and fraught with implementation hurdles. today is the first of december, payday, people trying to withdraw their cash. there is a not enough money, and atms are going dry. a a lot of the sections have been popular -- a lot of the population has been affected. the larger question is that the economic impact is still on assessed. the government claims that the economy will bounce back.
forecasts quebec to 7% of the next quarter. -- caught back to 7% of the next quarter. india gdp could swamp to 6.5%. harsha: the payday is coming up soon. how is modi's currency recall going to slow down the india growth story? mentioned, we still don't know the actual impact. we are only going by forecast. the official number of the gdp for the december quarter will be revealing. having said that, the government is expected this from day one. even since president modi announced this de-monetization, he asked citizens to bear with them for three days. the key question is how long this is going to take for the
economy to come back to normalcy. experts point out it might take thesext six months for banknotes to be replaced. that is the timeline we are looking at. angie: how our financial markets digesting all of this right now? harsha: november has not been a great month for the equity markets. december has been a relatively weak opening as well. there are a variety of global factors. we will see what india does on aecember when it meets for basis cut. moved with already its bank deficit. most importantly, a big change announcement in the gsc, it looks like the political fallout may delay the in plantation of
interactions with a former sac manager. tokyo electric is warning it is struggling to meet demands for heating as japan braces for unusually cool weather. it could be forced to buy power from other utilities or risk rolling blackouts if consumers don't conserve electricity. tokyo saw its first november snowfall in 15 years, doubling energy to its highest levels since april. china may have added new restrictions to contain the wave capital outflow. sources say beijing will request to cancel transfer cash abroad unless there is a valid business region. measures ahead of the expected rate hike in the united states. sure how many of us are riching tears, but china's
will have to take a little deeper to buy that new bentley or ferrari. they might have to get used to the old ones. the government is imposing a 10% luxury car tax to save energy. whyng our fishy says -- is china doing this? affect 100 and 89,000 u.s. dollars in this category. martins,see aston lamborghinis. these ultra luxury cars are a very tiny percentage of the market. it is someay perhaps strong setback to these luxury brands. if you are wealthy enough, a 10% levy may not be enough to put
you off. angie: so this is the ferrari gtc 4. oh this is a different model, sorry. [laughter] >> more crucially, the tax is to guide reasonable consumption. this is such a tiny percent of the market. you won't have a massive impact on omissions and energy by putting a 10% levy on this. considering an extension of the tax cut. perhaps emissions are not the thing at the top of your mind if you are purchasing these cars. angie: in this sector, price sensitivity is not a thing. but what is sensitive is this on conspicuousown spending in china. brands stillury managing to get those sales?
>> they are still trying to change of their lineups. suv'se seeing bigger cars, a classic example. we are seeing luxury brands put out suvs that we have not before. this is the first suv by bentley. suv sales in general in china have searched up 46% in the first 10 months. pretty close to sales in the u.s., at 38%. 3.9 8 million yuan. that is the basic model. it is a huge car, it is heavy. it has a spacious backseat. if you are rich enough to buy one of these, you are rich enough to have a driver. that is why they like a bigger,
>> it is 1:00 p.m. in hong kong. i'm angie lau with an update on your top stories. oil held its biggest gain in five months. crude producers rallied. the cartel will produce output by 1.2 million barrels a day, with saudi arabia alone cutting 486,000 barrels. russia credit stance just changed it sense and will also cut. chinese officials say crime is at the high-level level things to regret filled recovery of smokestack industries. the manufacturing pmi rose to 51.7 in november. estimates were calling for 51.
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