tv Bloomberg Markets Middle East Bloomberg April 18, 2017 12:00am-1:01am EDT
strong and his secretary disagrees. >> oil slows its decline ahead a day of forecast. they are falling for a second week. yousef: it is 7:00 a.m. in easton pull -- istanbul. shery: i am in hong kong it has just gone midday. a little bit of a rainy picture when it comes to the markets as well. we did get positive sentiment out of wall street. that is faltering in asian trading. we are seeing the japanese yen falling back most of its losses. it was reported by treasury secretary mnuchin saying that a strong dollar is good in the long-term. that is not holding. the yen at 108 spot 93. on the dollar, 75 56. we got rba minutes, which are focused on a week aussie job market and a strong housing market -- housing market.
you are seeing rand continuing to decline falling for two consecutive sessions. composite isnghai also extending its biggest loss in four months. it is below now a 50 day moving average. that is something to keep an eye on. china home prices will be rising in more cities since october. a lot of risks in the markets out there. , andw you are in istanbul a rainy day. what about the markets there? before i get into the markets, just a quick line on some of the political developments. the referendum out come is still still beingcome is considered. there is contention on the ground. acrosse seen reaction from the european mainland. united states mainland department says it's concerns of the referendum -- the osce
points out the unlevel playing field. they call it international standards. the national security council, this is the second important are commendingey an extension of a state of emergency. this is something investors were watching carefully. markets have been taking all of this. the turkish lira has had in advance on those gains. you take a look at where that is now, far away from that. we are seeing some interesting calls from morgan stanley late yesterday saying, we are sticking to our call. lira against the u.s. dollar. schroeder saying their local bond, it is very cheap. the government here -- this is a bit of a more bullish take. they say it are on -- they say they have a take that will affect turkish assets. we are two hours away from the
opening of the markets in the middle east. dubai and abu dhabi start off. a lot of these earnings are still trickling in. you get the quite a bit of development on several fronts, specifically when it comes to thanks in saudi arabia. also in abu dhabi, abu dhabi bank leading those gains. abu dhabi is the best performer in the region. tell coal surging and saudi arabia. shery: let's get a check of the first word headlines from around the world. a 70 cities last month have rose. cities inp from 56 february on a month by month basis. when compared with march after, home prices in beijing and shanghai are up around 20%. policymakers are seeking to clear a glitch of unsold homes
while enforcing kurds in major centers to prevent a housing bubble. president trump will target i.t. outsourcing companies later with the h-1b see visa programs. administration official named and emphasis is examples of companies likely to have fewer visas approved under the changes. h-1b program channels thousands of foreign workers to the u.s. tech industry. a new survey suggests iranian president faces an uphill task to rent -- when a second term. term has notfirst improved the economy, or the standard of living for average iranians. or that one and a half thousand people have registered to run in the may 19 to vote. be candidates will now screened by credible authority. global news 24 hours a day
powered by more than 2600 analyst and analyst in more than 120 countries. this is bloomberg. shery: more troubling economic data a day after voters handed new power to the president. according to bloomberg data, turkey posted its biggest budget deficit for the month of march, while joblessness in january rose to the highest in seven years. yousef, this is some of the worst we have seen in years. it is remarkable. it shows you that this government has been pushing a more aggressive spending plan ahead of the referendum to keep the population relatively satisfied, and to inch forward a little bit in the referendum. the actual numbers, let's break this down. we put this on a chart and you can pull this up on your bloomberg. the budget deficit is the worst in years. since at least 2006. five point $3 billion, that is three times the shortfall from a year ago. take the general unemployment
figures that are up 13%. that is the highest in every of 2010. other elements feeding into the story, if you think about that failed coup attempt, that weighed in on the government. that is reflected in those numbers. we talked a lot about the data, but what will happen on the political front? that is the other big question. we spoke about the state of emergency. what about early elections, what about the way forward for this government? we sat down with the deputy prime minister and asked him some of those critical questions. take a listen. , nohere is a debate decision has been made. were talking about with come -- consulting with the prime minister on the position. no decision has been made. is made, theion
people will decide. -- let's not make decisions at this stage. , sort not been brought to of, agenda. whether or not parliament would approve it is a second issue. even if parliament approves it, whether or not people would approve it is a separate issue. and allowingurkey turkey to drift away, let's not overdo it. is, younal question have always maintained an independent policymaker, regulator. keeping that in mind, what was your initial reaction to expectations that there might be something in turkish policy immediately after the referendum now that some uncertainties are behind us?
not comment on molitor -- monetary policy. however, it is very clear that we have a bit of an inflation problem at time. price stability is a critical objective of my government. central bank has responded to rising inflation by tightening monetary policy significantly. they have made it clear that they will take further steps to tighten policy if needed. let's just be very clear that, my government believes in price stability. the reason why growth is higher is because we have had inflation of two single digits. admittedly and high single turkey had remember three to four decades of triple digit inflation experience.
dropped, that unstable economic backdrop was the main reason for poor macro performance. turkish economy is resilient to theecause, thanks economic policy, but also high stability, as well as instruction reform. and turkey will achieve stability and the administration. had 65 governments and 94 years. that is behind us. that is a deputy prime minister their speaking to bloomberg television. nextremember that the policy meeting for the central bank is coming up. that will be another key milestone as the country moves forward. shery: lots more to come on today's edition of "bloomberg markets: middle east."
you up tot's get speed with the two key companies listed on the dubai financial market's. starting off with arab tech, news that it will be halted from 11:00 a.m. onwards for the general assembly meeting. has beenlot of concern voiced by investors around the stock. o trading days ago was down almost 2%. we will be waiting for additional news as to how that meeting goes. dubaillwether of the market saying that he has
resigned from the board. we are not aware of why, but that is a key development here. shery: let's now turn our attention to the fed in the u.s. economy. federal reserve vice-chairman is saying he does not see a replay of the taper tantrum of 2013 as the bank prepares to review its balance sheet or take a listen. less likely to face market disturbances than we did in the case of a taper tantrum. learn asourse, as you you are in the imf, and you make any favorable prediction, we have to recognize complacency must be avoided. that is to say, as we continued to discuss and implement policies to reduce our balance sheet, we will have to continue to monitor market developments
and expectations. carefully. fisher'st's discuss remark and the potential market reaction from this. economist and shortages. thank you so much for joining us. future of seeing the a fed rate hike in june coming down from two weeks ago when it was over 60%. we are now seeing even odds. are you worried that we could see a taper tantrum again at the fed does not prepare the markets accordingly? marketar, a think the has seen a push that is preparing the market for any kind of event, especially normalization. i think that is what happened in march that has been a success with the fed, because it was clearly a reaction from the market. i think the taper tantrum remains at this stage for a set
of reasons. i think the fed is in full command of setting market .xpectations also because, i think inflation gives a maneuver for fed policymakers to remain in those stands. to the u.s.it comes dollar, there does not seem to be a lot of conviction that if tightening will leave the dollar higher. if you take a look at the bloomberg, you can see the bloomberg dollar index is reaching its moving average. that would be the redline over there. also a treasury yields just continuing to decline. i am not surprised, given the weaker u.s. inflation numbers for march are weaker than expected. what is your call when it comes to the dollar and treasury yields, in particular? dollar, it is a
long story, the u.s. dollar is coming to a net. we may expect it further because -- depending on what is going to happen to the u.s. economy and inending on the need to tie more or less -- tie and more or less quickly. for trump's president and it is a bit too strong at the state week as there is too much conviction ineffective the u.s. economic policy would be a discuss a success, that is an indication that there is no appetite to push it higher than it is right now. for the yields, i think the the fact that risk appetite will go back-and-forth. the yield will continue to be relatively stable. let me jump in on the
yield question. patrick is saying, the fact that the market is pushing those 10 year yields closer to the 2% mark will be better third strike. bond market has been right -- wrong twice in the last 18 months. we should be a little bit cautious. and the complacency fact that inflation is low and will continue to remain low. the fact that the fed will continue to keep a cautious dance. we should keep in mind that labor market conditions have significantly improved. at some point in time, i think that we should see strengthening in terms of wages. keen to normalize
military policy. the main order for the fed is inflation. i think that is clearly something that push down recently the yields on the november curve. what the fed does or does not do sends shockwaves around the world. if you look at what happened with the last taper tantrum, turkey was especially vulnerable. this economic structure of the country and how it depends on capital inflows. how vulnerable is turkey this time around? xavier: i think turkey remains quite formidable, when you look turkeycits, clearly remains one of the weak links among emerging markets. been beneficiary to turkey so far is the fact that the u.s. dollar has really been on the downside since the beginning of the year. also the fact that markert's --
the prospect of emerging markets -- they could really turn down, really feeley could the pain. not necessarily in the short-term, but with inflation running up around 10%. could bethat the bank in danger by some political attempt. cause some kind of pullback on turkish assets. shery: pain is already being felt in the lira which has given back gains, down to 10 sub 1% -- down to 10 sub 1%. stick around we want to talk europe. coming up, after brexit and trump shock, investors are
yousef: you are watching bloomberg. shery: i am shery ahn in hong kong. for a check of the latest business headlines. laying off hundreds of engineers in washington state and mail them in a more jobs laid later -- later. the latest cuts take of it -- take effect in june. a cause of more than 1800 workers who agreed to leave earlier this year. boeing is the largest u.s. exporter. the second biggest on the dow at 2%. united airline ceo is assuring wall street that the carrier will rebound from the
attention of a passenger. shares close to an sent up, snapping three days of losses. the ceo says it will be a watershed moment for the united and they are determined to put customers first. united's first quarter financial performance heat expectations. shery: china's domestically designed airline a remain a flight after completing a high-speed taxi. they are expected to announce approving a flight of the scene 919 . c 91 nine is built to challenge boeing's 747 box 320. flights have been delayed by production product -- production problem since 2014. catching youre breath from the results of the turkish referendum. we have the french presidential election just a week away. of course we are looking ahead and looking forward to that. there are several banks in
several resource houses that are coming out with research of how to train scenarios for that. me run youhs, let through those, they are recommending selling french debt in the two round election on sunday, and on may 7. let's discuss that tactic. he is still with us of course. what do you make of all of this. what is your base case for what is likely to be a nailbiting time. ? xavier: i think a base case would be, some kind of tightening. i think it is running at over 70 basis point. it seems high, and this is a little high. outcome we do think the should not be a big surprise for the market. the yields will
continue to come down. seeing his rising in the polls. the euro is doing fine, but there is another chart i want to go through that shows a different story. that would be the one-month euro-dollar volatility. it is actually spiking quite a bit, almost nearing that level after the brexit vote. what is this telling us? xavier: there is some edging investorshey can buy to euro assets. the risk iss why approaching a placebo decision that is increasing. u.s.happened on the dollar, this is why euro has remained relatively stable over
the past few months, despite the increase in despite of what could happen in the elections. shery: it is highly unlikely that we might see le pen. it is highly unlikely she will take france out of the euro. shall we be buying the debt going into the election? xavier: it is something that could be applied, for sure. it is always a risky bet when you try to build up your investment depending on the political outcome. what will happen, whatever the outcome of the president francen, the fact that will be part of the european union and will remain top. there are a list of political insist thatder to opinion. euros are on strong support. shery: thank you for joining us.
.> it 7:30 a.m. in istanbul these are the first word headlines from around the world. more troubleported economic data a day after president erdogan one and referendum giving him new powers. the finance ministry posted its biggest deficit from march since 2006. highest ino the seven years. the figures reflecting economic fallout from last year's failed coup and increased government spending ahead of the referendum. the former korean president has been formally charged for the bribery and abuse of power. she is also accused of colbert shannon and leaking state secrets in an investigation into
links between the presidency and big business. the chairman has also been charged with funneling more than $6 million. saudi arabia will develop 30 new wind wind -- solar and rodgers over the next 10 years. it is part of a $50 billion oilram to reduce consumption. the saudi energy minister says the kingdom will produce 10% of power from renewable by 2023. gains after hours despite force -- first quarter growth of just under 5 million. those numbers were hurt by the lack of a big drawing show, it quadrupled. netflix warned that shows in the second quarter may reverse that. the ceos of the potential market is still back. global news, 24 hours a day
powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg or it -- bloomberg. shery: we are seeing some markets in asia firmly in the green, but it is not enough to boost the regional green mark which is down 4/10 of 1%. it's get the detail of how the markets are trading. right, youhat is have seen some upside in it. investors are a little less cautious. the fact that you have big markets in australia, down by over 1% and hong kong down by over 1% is waiting on that overall picture. we have hong kong markets resuming trade after that long weekend. that three and a half percent fall you see coming through in iron and oil ways on the aussie -- market.t currency market, yen is not showed here but it is significantly stronger. --lly weighing weaker
lifting japanese stocks that are not being shown on the board at the moment. you are seeing a retreat coming through in the yen. this is about dollar strength or it weakness coming through from others. declining ass been well. a quick look at some of the stuff we have been watching in the region. china property prices coming through. they were better than what was expected and much better with 62 out of the 70 city seeing prices rise. in hong kong is up above two and a half percent. itrox is up. malaysia tech stocks is up. a lot of demand for some of former named. down under 6% on that ball that you have seen in the oil markets. in the iron or market. 42 coming through saying it remains -- fortescue coming through saying that it remains positive.
defensive players like health care and industrial is well supported. generally a little bit of a down day for this session. let's pick up on what you just said about commodities. if you take a look at oil prices, wdi was down as much as a buck a barrel. arer u.s. crude inventories forecasting the decline for a second week or it business traders are betting on opec extending that agreement. let's toss over to tracy alloway joins us out of abu dhabi. -- quite an impressive draw down here to impress the markets. acy: we have seen oil prices down at theange moment. the market is cop between tension and rise between the markets. production cuts will actually help rebalance the
market. one point of interest that people are talking about is this yes people position in data that came out on friday. that shows hedge funds building their long positions on wti for the second week. rarely a lot of optimism that opec will come through on extending the production cut. i the get is important to put that in november. there was a huge number of shorts in the market, they all got caught offside. to some extent, this could he a defensive positioning ahead of the opec meeting in may. just to give you a sense of the expectations going into that to what i want to talk michael cohen, the head of energy targets at barclays said yesterday. everyone believes they are going to roll over. any doubts around that by any of the opec ministers or the saudi's are the iranians could lead to it lower. it could be in the mid 40's or even into the low 40's given the extension in the link of the
market. -- length of the market. : clearly a lot of expectation centered on markets. we are seeing that come through in the positioning data. people are getting ready for that to actually happen. oily: let's step away from for a second. there is something else happening in the energy market. are we going to have to worry now about shale gas? tracy: if it is not crude oil, it is gas. we have seen animal spirits really picking up, especially around the permian basin. that is one of the most lucrative oil places. it is also a really lucrative gas play. we had blackstone an ounce it will buy a company called eagle midstream ventures for about 2 billion in cash. does isle stream operate a bunch of gas
pipelines, sort of harvesting the gas that is produced alongside shale oil. the gas story, i have to say, you worry about u.s. shale oil being relatively resilient, you should check out what has been happening with gas. we have had gas production in the permian basin rise to a record every month this year. pretty amazing stuff, shery. shery: tracy alloway joining us from abu dhabi. let's stay with oil in the region. managing director of front tear markets -- frontier market that bank of america. let's discuss some of the points that tracy brought up. especially when it comes to oil. if you take a look at the bloomberg, and basically what we are seeing is a u.s. oil rig in the white line are increasing. -- outputly out continues to decline. there are concerns that this will upset the efforts to cut global supply.
given this pressure on prices, why are you bullish for oil in the second quarter? , lookinger of factors into the end of the second quarter. the first quarter typically tends to be a week quarter for demand. pretty have read -- heavy refinery and maintenance, as well as other factors. we are now coming out of that approaching u.s. driving season. as a result we should start to see demands picking up and we are beginning to see inventories get drawn into the united states. the end of thes second quarter, we think that, on may 25 we will see a renewal of the opec cuts. how long is the big question. think it willwe
continue. since 2013 we have seen a need a 50% drop in capital expenditure and oil and gas. that will have an effect on the oil and decline rates on the production system. i think the focus on the united states, while to a certain degree is justified, we have to look elsewhere outside of the united states to see how the lack of investment could see a decline. we are expecting the markets to reach a balance. iae saying we are close. we expect oil prices to move up. u.s., moving outside the you mentioned that as the appreciation in the euro, which is actually pretty stable, it should in fact help oil prices. why is that? that we haveing seen in the past, and continued to see with an inverse relationship with u.s. dollar
strength and commodity strength. we have seen a number of factors, which are supported of -- supportive to stronger currency outside of the united states. the election coming, we saw stronger demand growth in china and the gdp numbers were ahead of expectations with upside risks there. went wectors we think, get the french elections out of the way and see that comfort in the european zone coming through , that in itself could encourage the eurozone to strengthen. ultimately leading to higher demand growth in europe, a slightly weaker dollar versus the euro. there is a number of factors that could ultimately drive oil prices higher. we think that oil could touch $70 by the end of june. yousef: i am going to jump in here. that is a perfect point to pick up on, in terms of the ramifications and what this
means for some of your equity calls. specifically what is happening in the united arab emirates. you feel sorry -- you phil strongly about the banks in the you e. on the basis -- of the eu. commercial and price earning, talk us through your thinking. this is a call we have been pushing since november of 2016. that is that some of the factors poor sentimentn and concerns around the market muchbeen eliminated for lower oil prices. looking into the second half of 2013 with higher oral prices -- oil prices coming through, we thought that it would liquidity increasing optimism and supporting economic activity and longer in the region. the banks were trading at very
affect of levels, and they still are. as a result, we really start to look at the banks. the reason is that the uae offer the best combination of dividends, returns and having some of the most stable balance sheets and capital adequacy ratios globally. we felt very comfortable pushing the uae bank. feell prices move up, we it will play out. in the second half we think we will see inflation in the banks and you need to get position in these names -- banks. you talk about oil prices rebounding. if that will be a reflation of what isd might happening in terms of geopolitics and the economics, what else are you keen on in this part of the world, in the middle east outside of uae banks. ? hootan: we have started to see
in the first quarter earnings season, we are not even halfway through. if we look at the region, the banks up in performing very well versus low expectations. outside of that, we would start pointing towards the petrochemical names in saudi arabia. we think there will be a key beneficiary and higher oil prices, especially given the advantage that a hat. we think there mark -- margins will continue to grow in surprise to the upside. read really think that there is some good value to be had there. we are pushing in particular names like yen sap are our top two picks in at -- at the moment. bank of america and merrill lynch, thank you for joining us today with your call. banks continue to release their first quarter numbers. we will speak with one of saudi as it beatsers
saudi arabia's fifth-largest bank has reported results. first quarter total income beating expectations at 1.0 one billion saadi riau. 421 million saudi riau. 450.8rket will put forth million. we are joined on the mind by the ceo and managing director. thank you for coming on the program. your thoughts, in terms of the quarter and the year ahead. starting off with the lending growth. for having meoo on the program. this is the highest in the history for the banks since its inception in 2008.
expectations. in terms of the lending growth here, how do you see the help of the saudi economy, and what will help you build on those numbers? as you know, saudi economic is with government spending. government spending coming from one source of the venue. is a challenge, there is good opportunities also. there will be a good opportunity for the projects. there is a plan about moving into renewable energy and that is where we are expecting opportunities for the finance industry. your force quarter operating expenses rose up 70% on in pearman. the -- on him permit. has beenme ratio
relatively high compared to the sector. how do you plan to bring costs down? are you planning had cost -- had cost counts? we have total provision exceeding one billion. the performance down 1%. it is the best one in the region compared to financial institutions. that it is the future. most of expenses coming to the general provision. we will continue building that too. position,look at your an analyst would agree that is a strong capital position.
one day you could grow your lending books, or you could boost dividends, which one would it be? abdul: we could do both. established -- we have investments, which are growing. we established subsidiaries. those will help with income. it is 89%, acquiring about 90%. definitely, that also is helping us in case of growing our income
from subsidiaries as well as introducing deposits. i have two questions here, they are fundamental to my growth story and to the saudi bank growth story. oil prices are improving, what is your base case for oil in your outlook for 2017? and when are we going to see the reforms of the saudi government take in? are you beginning to see some of that in the numbers and in demand for your product? abdul: yes we are seeing get, in fact. in fact. it, we have seen it since 2008. there is a growth in demand and we believe that will continue for 27 team -- 2017. for financialg institutions.
banks are trying to enhance qualities of assets. that will continue. some banks are making some provisioning. that is why you will see the results. sectorl find the whole as improving. closing question, the last time we spoke you were talking about how you were looking to grow your branch network. how much progress are you making and how many more branches will you be adding? are you considering new markets? abdul: yes. we grew by 15 branches. for 10 branches. we will leave it there. live, the ceo and
shery: time to take a look at what is coming up in europe today. live from london. with the french presidential elections, it is getting pretty heated. the election taking place, the first taking place next weekend. that means voters are focused on this. there is a high level of undecided in this campaign. a third of those votes seem to be up for grabs in the first round of the french election. uncertainty,he given what is upstate -- at stake.
today we see campaigning continue. turnout is also a big question. it is averaged around 80% in the past 50 years, but could it be lower than that at 68%? many investors are very cautious. you can buy, quite cheaply compared to before, one month option to buy the euro. andave seen goldman sachs deutsche bank already selling french debt as we head into the two rounds of elections. you are also looking at the u.k. banks having how the bank of england will navigate the brexit process? anna: one of the concerns is that while regulators try to plan for brexit, they may inadvertently encourage banks to take some of their assets away from the u.k. and take them to other locations.
we know the bank of england and the ecb is encouraging thinks around their brexit planning, but could they inadvertently encourage those to leave the u.k. shores? great story on the bloomberg today. delegate balance because regulators want to make sure the banks are prepared of a brexit exit from the u.k.. toy have a limited period prepare from brexit, that adds to the concerns. plenty to look forward to. that is all we have for this edition of "bloomberg markets: middle east." just before the umbrella starts collapsing from the amount of rain we are having. with that. luck we are done here with the middle east, but trading in asia continues. we are seeing a mixed picture. take -- keep an eye on the shanghai composite because it is below its 50 day moving average. the japanese yen continues to weaken.
anna: prepare to volatile till of the. one third of votes are up for grabs. the u.s. vice president is in japan after delivering stern warnings in seoul, mike pence says the u.s. is deeply committed to japan's security. anna: the dollar tug-of-war. the u.s. secretary tells ft that a strong greenback is a good trump talked it down. very warm welcome
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