Transcripts For BLOOMBERG Bloomberg Markets Asia 20171030

Expectations opec will extend output curbs. China Energy Giants report later. Haidi apple fans counting down to the iphone x. Apple asking chipmakers to double capacity. Right, we have Energy Companies in china reporting. I want to bring up a chart, 80 to 96. This is petrochina. This is the biggest destruction of shareholder value in history, and it could take more to convince analysts the stock has hit autumn. Peaked on the first day of trading 10 years ago. Check it out. It has lost 800 billion in market value, i enough to buy italy,isted company in or circle the earth 31 times with 100 bills. Many analysts think the pain may not be over either. In terms of a broader picture, we are looking at a event risks. We had that positive gdp print out of the u. S. On friday. This week, fed leadership and the fomc meeting, boj, boe, china pmi and Inflation Numbers to paint the picture of whether we are getting sustained Global Growth. All of this for Bond Investors to contend with. Lets get over to sophie, generally an upside in asia . Sophie we have asian stocks climbing for a second day. Climbing the taiex over 1 . The Global Growth story intact. It looks like juice from earnings season could lead to Companies Ramping up capex. A pickup in Business Investment is like the fountain of youth. The taiwanese collar dollar gaining ground. The kiwi under pressure amid chatter of the rbnz mandate. The aussie dollar facing losses, but a pickup in the aussie bond market. Auctionst 10 year bond times whats of 6. 5 was on offer, so perhaps investors shrugging off domestic politics. Treasury yields picking up, the 10year above 2. 4 during a critical week for bond traders. The oil patch in focus with brent above 60 for the first time in 2015, and new york crude trading above 54 a barrel. A quick check on taiwanese tech shares after iphone x preorders sold out in minutes. Has asked the suppliers to double capacity. About ald allay fears lack of demand. Printed Circuit Board makers climbing, now in talks with apple or next year supply. They have been the backbone for the taiex ascendance. J. P. Morgan cautioning that taiwans equity universe is looking increasingly unappealing. Today the taiex getting 1. 1 . Rishaad nice one there. It does not have the epithet of russia gate, but could. Lets get the rest of first word news with paul allen. Paul President Trump has unleashed a flurry of tweets attacking Hillary Clinton and the democrats has reports they a grand jury has approved the first charges in the rush inquiry. The indictments are sealed and it is not clear who is implicated, but it is reported the first arrests could come monday. The president tweeted against what he called phony collusion and accuse the democrats of a witchhunt. The United Nations atomic watchdog says iran is complying with the nuclear deal and calling on all parties to abide by the obligations under the 2015 accord. President trump refuse to recertify the deal two weeks ago and washington has impose new sanctions on tehran. Theident rouhani rejected chance of talks last month on the sidelines of the United Nations general assembly. Theippine president says u. S. Should stop threatening north korea and reassure kim jongun that there are no plans to force him out. He says the u. S. , japan, and south korea should tone down the military rhetoric and try to talk to the north about its nuclear program. The president flies to tokyo today for talks with Prime Ministers shinzo abe, north korea and trade on the agenda. Gathered demonstrators in barcelona as separate as lawmakers rejected madrids proclamation of control. The Prime Minister has dissolved the Catalan Parliament and put the administration into the hands of his deputy and called elections on december 21. The next test comes monday when Catalan Government workers decide whether to heed calls to strike in favor of independence. Indiast lifting market. The carrier is talking to a about orderingy 100 amphibious kodiak planes. We are told the deal would be worth 400 million. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. Rishaad the race to be the next fed chair is coming into the home stretch after President Trump put out a video saying he will announce his decision this week. Kathleen hays is in tokyo with the latest. What did donald trump say here . It is not just what he said. It is also how this was presented. If you go to our bloomberg website or your bloomberg terminal, find the story about donald trump and there is a link to the video done on instagram, very well produced, tweeted out to 41 Million Dollars tsonga decision is coming in the week ahead. Lets listen. I will be announcing it sometime next week. It will be a person who hopefully will do a fantastic job. And i have somebody very specific in mind. I think everybody will be very impressed. Have course we pretty much this down to three people, especially after our Bloomberg News team in washington over the weekend spoke with people familiar with the matter. They say right now trump is leaning towards Jerome Powell, current fed governor. He has not made up his mind yet. There are two others who might have a chance. Spent many years in banking and worked under republican administrations. He is the man in the middle of your screen. Is janetr left, that yellen. She is the current fed chair, who according to our bloomberg reporting structure trump has very polished in their meeting a week and a half ago. John taylor, author of the morer rule, who is perhaps hawkish, but wellrespected in monetary circles is also on trumps list and impressing the president. One thing you should not expect is that Stephen Mnuchin told reporters over the weekend that it will be the fed chair decision alone. Dont expect the vice chair nomination as well. A fedu know there is meeting this week that wraps up on wednesday. There is a 0 chance of a rate hike right now. We will watch the policy statement to see if it gives us clues that the fed is leaning towards that and getting ready for a rate hike in december. Thirdquarter gdp friday 3 beat the forecast of 2. 6 despite the hurricanes. Unfortunately when monday rolls around and you get the personal income and spending report, you may see the key inflation gauge stuck at 1. 3 , far from the 2 target, so the fed is probably hoping the friday payrolls report will be strong, validating expectations that growing jobs will boost wages, and that will boost inflation. Are in tokyo this week covering the boj. Are we expecting any policy tweaks . That is the best way to put it because inflation is so far from target. They cant do much in terms of real policy change, not yet. They can look at their inflation forecast for 2017. This is btv 7942. The white line in this chart is the core cpi that takes out fresh food. That is the boj key inflation gauge. That horizontal line is 2 . Of can see the actual rate inflation is so far from target that there is some expectation that the boj will dial back on its 2017 core cpi forecast. Who knows where, but probably lower. Not much time to get there. Obilephone prices are falling that helped to drag down inflation in the u. S. That is happening in japan. Tighter labor market, weaker yen. That will probably justify faith that inflation will head to target. Along with that retail sales report today, 2. 2 year over year. Fromt revised to 1. 9 1. 5 . Consumers are spending, labor markets are tight. This is why the boj is confident that sooner or later they will meet their target. This is what people will be listening for in that press conference after that decision. Election win by shinzo abe, governor kuroda is probably more confident. Haidi he is likely to keep his job for a while. Thank you for that. Still ahead, oil prices hitting a twoyear high. We will look at whether there is any headroom left. Rishaad volatility at record lows and stocks at record highs, what are the biggest risks in the market . We will get socgens take right after this break. This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. West pack will contest challenges of rate rating. The hearing will start tuesday. The settlement will be felt and its 2017 results. They will pay the regulators 20 million and donate 20 main dollars to a Consumer Protection fund. Subaru has apologized for allowing uncertified inspectors to conduct quality checks on cars for decades. The company will submit a report to the government later monday. It is expected to recall 250,000 vehicles across the entire lineup. Month nissan recalled one million domestically made cars because of a similar failure of certification. The inspection has been complicated, but it is true unauthorized authorized inspectors were involved in the quality process for more than 30 years. What is most important is we never questioned our system for three decades. It is now time to rethink what is most appropriate and clarify our future inspection policy. Rishaad cobre steals bond risk at a twoweek low after the company said 80 of customers have confirmed the safety of its products. Kobe steels bond risk at a twoweek low after the company said 80 of customers have confirmed the safety of its products. Asiapacific markets are generally nudging higher. That on the back of robust earnings and that gdp print out of the u. S. On friday. Today, results from hsbc on chinas big four banks, sinopec, petrochina, nintendo in japan, the big tech names. On top of that, speculation about the next fed chair. Donald trump will announce that this week. Boj also meeting this week. Socgens head of Global Markets australia to talk about all this. Feel on have a strong who should be the next fed at the head head of the fed . I think it is more theater than reality. Is thes like powell favorite for the Trump Administration to a point, which would be a continuity selection in the market would take it quite nicely. Selected, slightly more hawkish, republican, which could lead to a view that rates could go higher quicker in the u. S. Which would have an impact on the dollar. At this stage, at looks like powell is the favorite. Haidi how do you feel about this narrative of the synchronized Global Growth story . We have pmi from china and this week that should give us a better picture and neshek, but do you think it is a coherent recovery we are seeing . Boring might be the word to use about markets. The World Economy is going pretty well. At 3 , probably 2. 8 next year, fairly solid across sectors. Europe, we have always been fairly positive on europe going forward, 2. 2 this year, similar next year. , managing stable itself extremely well, 6. 5 . Japan, shinzo abe elected, boj hard toation, so it is see negatives rounds coordinator Global Growth strategy. Rishaad Global Growth and on top of that a stock market on fire. The msci asia index up 4 so far this month. Is that sustainable . The expression a rational is very littlere to suggest that the market is about to fall. Having said that, those who would beluation suggesting the market is well and truly overbought and hard to justify an acquisition of shares at current levels. Without to much on the horizon in the negative sense, it is hard to see it slow down. Rishaad absolutely. It needs to be fed the whole time by good news. We have a lot of it coming out this week, not just emi surveys out of china, earnings and Earnings Growth one of the key elements which has built this momentum up, so there is a lot of food for us to digest. The trouble is twoweek it indigestion . I think indigestion and a word would the death defined as complacency. The market is extremely complacent with regard to risk at the moment. The is reflected in volatility index at record lows, stocks at record highs. The market is not ready for a major shock against what it would expect. Where will that shock come from . Geopolitical . I guess there are some risk there. Muellerswith robert indictment of people around the russian hacking of the u. S. Election may trigger it. North korea is always on the horizon, but there is nothing in terms of macroeconomics to suggest this thing is about to end in tears. Haidi catalonia, you think this not creatend will systemic shocks or blur the outlook when it comes to the future . Escalates to violence on the streets in barcelona, yes, a different story, but at this stage, the decisions made by the spanish government, the calling of elections in december, fairly normal. It depends on whether it escalates on the street between those who are prounification and those who are proindependence. Haidi in terms of Monetary Policy globally, the fed likely to go in december, data dependent. The boj doing its thing. The boe is expected to move this week. I they getting ahead of themselves . Forhe market is pricing them to go, so it would be a surprise if they didnt. In terms of where the economy is, it is probably reasonable to see the first tightening coming out of the boe. They willdicated taper off and try to keep rates lower for longer. The fed is set for december, three hikes next year. I guess all the risk is about all that being wrong and sing higher rates quicker. Haidi closer to home, do see any real i think the opposition is making as much as they can about the disruption caused by this constitutional matter. In the end, i dont see any major influence. Haidi always a pleasure. Thank you so much for that. Coming up, hsbc revenue resilience will be the focus later. We will see how things look in the premarket session. We will look at the big china banks that rallied in the friday session. All that they names coming up this week. This is bloomberg. All the big names coming up this week. This is bloomberg. This is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong as we count you down to the start of the trading day. The premarket session looking like this, a move to the upside, some decent tailwinds. Session. Ad an ok flyerp was on an absolute in the friday session. Expected gdp figures helping things along nicely when it comes to american markets. One company we are watching is hsbc. Analysts looking for strong numbers, loan growth in particular. Those results come out noon hong kong time, 4 00 a. M. In the u. S. This is what it looks like in the premarket come a moving to the upside ahead of those numbers,. 1 . Howfocus should be on Interest Rates will boost income and plans to return excess capital. Will they maintain their dividend as well . Adjusted pretax profits of 5. 4 billion expected there. That is what we are looking at a few hours to go, under three hours now. Haidi we will be live at the hong kong headquarters. Net interest margins also in focus for the big chinese banks. Hard in the quite friday session on the back of some positive results out of. Hina Construction Bank , thehas been the theme regulatory crackdown may be behind them, better Economic Growth will sustain interest margins and boost asset quality with that bad loan situation easing as well. And the Agricultural Bank of china as well coming out today. They have done well. , pricetobookd ratio at the highest level in two years thanks to that performance this year. Coming up, trump seeing red over the russian collusion inquiry. Taking a look at the latest twitter tirade. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. The high seas see their the center ofn hong kong. Lots to look forward to this trading week. We could get a new u. S. Fed head. We look at the fomc and Interest Rates as well. Boe expected to raise rates. Boj holding a policy meeting as well. This is all food for investors out there. This will perhaps decide whether we have enough momentum to go forward. The job report at the end of the week. Earnings center stage in the u. S. And china as well. Three out of four big banks reporting. Sinopec and petrochina out. Hsbc as well. There is a lot going on. Haidi so much to get through. Some of these big earnings in the u. S. As well, apple, airbus, a lot will dictate where this market goes given low volatility and questions over where this market goes from here. If you are a treasury investor, a pretty nervous session. Lets get it over to sophie with shanghai and hong kong markets opening. Gainingthe hang seng. 5 , rising for a second session. Chinese large caps looking flat. This week we are waiting on for october. Med is expected to moderate. Investors remain optimistic when it comes to the economic outlook. It is a heavy earnings day. Hsbc, sinopec, petrochina on the radar. Chinas big banks expected to report after the market close. Take a look at hong kong. I. T. Stocks gaining 1. 6 . Behind, butoo far property stocks on the back foot. The worlds biggest aluminum maker resumed trading, reporting improving revenue for 2016 come up it post a 55 drop on assets impairment. Shanghai snapping a sixday rise. Consumer staples the biggest drag. Materials also on the back foot. Keep an eye on chinese aluminum stocks after the u. S. Imposed antidumping duties on chinese aluminum. This comes ahead of trumps visit to beijing in november. He will have 40 Company Representatives in toto to inc. Multibilliondollar deals. Real estateing stocks after a pboc advisor said property controls wont be relaxed in the shortterm. The biggest risk in the Property Market is developers funding. Today, real estate sliding in shanghai. Rishaad lets take a look at what else is going on. It is a week where we could see a new central bank head. For the rest of the first word news, heres paul allen. President trump has stoked the fire of speculation by tweeting a video saying his decision will come within days. Sources tell bloomberg to president his leading towards a Jerome Powell to secede succeed janet yellen. John taylor remains in the race. President trump said he will make his preference known before he leaves for asia on friday. A new poll for nbc news in the wall street journal puts President Trumps approval aiding a 38 , the lowest in modern times. The survey shows support among republicans at 81 and democrats at just 7 . Trump scored highs for his handling of the hurricanes in texas and florida and on the economy, and lowest for the iran nuclear deal, health care, and puerto rico. Japanese retail sales stretched for an 11th straight month in september as consumer show a growing willingness to spend. Sales rose 2. 2 from a year earlier, just short of estimates and grew. 8 from the previous month. Supermarkettore and sales rising almost 2 on the year. Reports from the middle east saying the heat is being turned up on qatar. Bahrain one still has membership in the gcc to be frozen. It comes more than four months into the crisis which has seen links to its neighbor sealed off. Secretary state Rex Tillerson has attempted to mediate, but said one cap force negotiations on people who are not prepared to talk. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad President Trump took to twitter to attack Hillary Clinton and democrats before the first charges in the Russian Investigation it may be announced. He wrote the following. Well, lets have a look at all this and where it stands now. Exactly is the president accusing clinton of hear exactly . Well, you know, President Trump and Hillary Clinton have had a pretty long running feud, or maybe the feud has been on President Trumps side. She is the convenient excuse that he often returns to when he wants to distract or pull attention away from something else. Her handling of emails when she was secretary of state, the handling of the iranian deal with russia uranium deal with russias several years ago. It is unclear what he is accusing her of, but she is always at the top of his mind really. Under a bit of fire under reports that the first charges have been leaked to the media. What is happening here . Certainly there have been thereor reports that could be charges or will be charges early monday morning of one or more individuals in the be that Robert Miller mueller has been running since may on possible collusion with russia during the 2016 election campaign. A lot of reports have centered for several months on paul manafort, who was briefly President Trump Campaign Manager in 2016, and also on michael flynn, who was his First National security adviser. We dont know, i dont know the white house even knows them at whether those two men will be involved in activities on monday, if they will be charged. So we are just waiting to see, but certainly they have been discussed for a long time as key focal points of the investigation. It is a big week for the president , more details on tax to his trip on asia. Ae we expecting more of reaction on the russia Issue Administration . Is that likely to be a distraction from Everything Else he needs to get done . It could be a distraction. To some extent i think President Trump may be advised to really hold the fire on this. He did tweet today, as you said, but some of the intelligence we are getting out of the white house is that there may be very little response to anything that happens tomorrow in terms of charges being made. Trump has a big week heading to asia on friday. Chair announcement, which i think he really wanted this week to be more about the new Celebrity Apprentice than americas most wanted, so definitely a distraction, but it has been interesting to see a lot of republican lawmakers going on the sunday talk shows and supporting the president. That includes some reliables you would expect to be on his side, chris christie, trey gowdy of the house intelligence committee, but also senator susan collins, who is a moderate. She came out strongly for trump. In a way he may be getting his Republican Coalition to rally around him a bit on this. Haidi he needed that solidarity. Does that mean tax reform could be done by the end of the year or earlier . Officials are suggesting that could be possible. They have an aggressive timetable and we are expecting the house tax writers to release their plan on wednesday, which should include many details we have not seen thus far. The senate plan which is being developed separately could still be a couple of weeks away, but in both chambers lawmakers really want to push forward with an aggressive schedule. There will be a a lot of lobbying. There are already some groups such as the Home Builders are very angry at what they think will be contained in the house plan about mortgage interest reduction and other treasured deductions that people can file on their personal income taxes. I think the lobbying will be fast and furious. Whether they can slow down the momentum or change the direction of the legislation, i dont really know. Fori big week ahead President Trump. The agenda. We are expecting to find out about that fed nominee before he kicks off that 11 day asian to ur. , with the oil price hitting a twoyear high, we look at how far the price recovery could be set to go. This is bloomberg. This is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. Extending twoyear highs, expectations opec will extend its output curbs into next year. Recovering oil prices providing a boost earnings. Chinese oil majors as well. Sinopec and petrochina out later monday. Petrochina primed to show outsized earnings . That is the question. With petrochina, we will see them follow exxon, chevron, in total. These companies have been cutting costs seriously after prices collapsed. Now that prices are easing higher, we are starting to see some sort of rise in their net income. Petrochina does have a wildcard at the moment. The government has been pushing them and other producers to increase gas output. They want to shift away from towards gas. It is also importing more gas from central asia, lng from , and it isnd qatar pretty expensive and they usually show a loss from imports. We are coming up to the 10th anniversary of its listing in shanghai. It is a company that has pushed its valuation to 1 trillion or thereabouts. It is the biggest instruction of shareholder value i think in history. I want to bring up a chart to 8296, just showing how petrochina has lost 800 billion. Debuted, it shot up to 1 trillion. There were a lot of things going has power to that this collapse lower. There was an equity bubble in china. There was the Global Financial crisis right around the corner. Since then, china has been trying to take the steam out of these rallies. Oil prices have collapsed twice since then. Now china is pushing further away from this industrialdriven growth. That was the biggest loss of value in history. Than everyis more enlisted italian company. Rishaad we have this amazing times around the earth with 100 bills. Haidi that is staggering. About this move away from the traditional growth in china. Is that is what is going on for chinese coal . The coal miners are part of this move away from growth, cutting overcapacity at some of enterprises. Ed part of that last year was forcing Coal Production lower, which shot Prices Higher than anyone expected. We have seen the profits of some of the biggest coal miners surge. Since then though, after that price surge, regulators have been trying to urge higher output and reversed course. They came out last week saying prices were too high and will start investigating potential collusion or according and looking to drive prices lower. We see analysts thinking the party might be ending and this run of gains. We might see coal edge lower and profits come down as well. So much for you that. Setting up the conversation about commodities. The executive director of commodities and fx at ubs Wealth Management is joining us now from singapore. Happy monday. Do you see further upside, and what will be driving it . Is it expectations that opec can do more or is it the risk of supplyside disruption . I think there are a bunch of factors. The first point i would like to make is that ubs has been bullish oil since it fell below 40 a barrel. In a longrst time time we have actually turned sideways on oil over the weekend. The reason for that and we are recommending to clients not to chase the oil rally. We think potentially the upside could be around 65 a barrel. Some of the factors which have pushed it here are some geopolitical risks entering the frame again, particularly the u. S. And iran, but the biggest theme that has pushed oil prices to where it is today is the Production Discipline we have seen in opec as well as slowing growth of shale production over the last couple of months in the u. S. There, wef numbers started the year with Oil Inventories in the oecd about 10 above the longerterm average. Now we have cut that to around 4 below the longerterm average, and we expected to fall further into the end of the year. It is a fundamental story, but risks whichme other could push brent oil if they were to materialize quite a bit higher. Haidi how much to go in the shale rebound . Look, i think shale is an interesting case where the shale corporates are adopting a strategy much is the same as materials and mining over the last year and a half. Think, and not only is funding starting to rise in cost, but we also dont think shale producers are simply going to ramp up production at some level a roundabout costs, or in the last 18 months, below costs. We think there is some more discipline here on the shale oil side. We think these guys are going to for cash. Y run the reinvestment story is always there for shale. You have to keep putting in to get out, but we do think they will increase the amount of cash they are holding on the balance sheets, and that will come at a cost of production, so we do think that growth in shale production is going to continue to remain pretty benign for the oil market over the next 612 months at least. Rishaad i want to move to gold and have a look. , isoon as we saw this story the price of gold going to be 1300 . It has not done much. Why . I guess cold is stuck. Stuck in version g old is stuck. We have seen some traction on tax reform. We have seen from the u. S. Administration, and that has been pushing up on treasury yields. Inflation still remains pretty benign in the u. S. , so real rates are pretty much range bound, and that is why we see 1300 afterlow those initial geopolitical risks and the very weak tenyear treasury in particular yields started to form a base, and in the treasury yields scenario has started to come up again on these expectations for tax reform. Has been weaker on that side, but the real rates, which is what drives gold in the longerterm, has been pretty much range bound. Not only that, but we have seen etfs continue to buy into gold largely because people see the cycle has run for a considerable time. We are still positive on equities has an example. We still think equities over the next six months will provide some upside potential. , and soe is very mature people are looking to what comes after this. Just getting your views of bit more on this golsd story. Demand for the physical stuff must be high because it is in the middle of the indian wedding season now. The best indicator of that physical demand is what we just spoke about with regard to etfs. We are continuing to see etfs hedge higher, but what is dragging on the other side of thed speculators unwinding net long positions from a few months earlier. We are starting to see pickup in not just india, but also china. India has been weaker than we would have expected, largely because of some policy uncertainty, that we are starting to see some pickup in inction from owning gold china as an alternative asset. A the physical side is still bit of good stuffbad stuff. Drive goldmanwill tier of a higher is the u. S. Treasury topping out at 2. 5 , which is our forecast at ubs, then we expect real rates to remain range bound over the next 12 months or so. Gold can hold up for those reasons. Rishaad good stuff. Wayne gordon, executive director for commodities and fx at ubs Wealth Management. Watch that to interview, use our interactive function tv. You can watch us live and dive into securities or bloomberg functions we talk about. Join the conversation as well. Do send us instant messages while we are on hair. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. A quick check of the business flash headlines. Japans two Biggest Airlines announcing First Half Results with operating profit at ana topping 1 billion. The report says profit had rival Japan Airlines will be 880 million in the same period. The nikkei says both airlines expected to raise their fullyear forecasts. Rishaad apple is pricing the new iphone x, extra 100 at best buy. Customers putting in preorders being charge 1099 for the base model and 1249 for the high end. The higher cost is due to the multiple iphone x purchasing options available on its website according to best buy. Haidi we will be talking more automakers and Japanese Corporate governance. Subaru is planning to file for a recall next week. This is presumably to do with these uncertified inspections, safety inspections conducted on subaru cars. The company saying they submitted a report to the transport ministry today. Also affecting other automakers. Not just automakers, but the kobe steel scandal as well. Rishaad indeed we will have more on this. We will ask how japan can recover from this wave of corporate scandals. That in a little over 10 minutes time from tokyo. This is bloomberg. It is 10 00 p. M. In new york. Markets. Bloomberg asiapacifics markets edge up on increasing about the global economy. Close to the highest since 2007. Rishaad ship makers are being asked to double capacity ahead of the iphone x. President trump tweeting that he will name his choice in the coming days. Rishaad corporate scandals are making depressingly frequent headlines. We will assess the damage cause and that made to japan brand. Tucking about the reputational damage, whether this government situation can be improved for the japanese economy. Big week for global investors. Lets take a look at what we will be watching out for per na pma, nonmanufacturing starting with what we are getting. This is what we are seeing as the broader picture. We are expecting that number to have slipped in the previous month, from october to september. From september to october. Much better to expected than expected. We are getting pmi at 52. 1. That would be a little lower from 52. 4 in september. The other piece of good news is that earlier gauges of the satellite data we tracked when it comes to confidence that Smaller Companies in china that is tracked by satellite, they are looking more confident and providing a boost and doing better. More confident in what the real economy is delivering. Post congress expecting stability and more boldness when it comes to reforms. Course, big earnings for china. Three out of the four big banks out with the numbers. We have also got hsbc. That, the two big Energy Giants are both out with their figures. That pmi figure as well. Lots of food for thought. Things a lot of those you and heidi discussed are playing out in the markets. Take outcks looking to gains led high by energy and i. T. Shares. The i. T. Industry has been delivering Solid Earnings from ship makers, software and services players. Looksime around i underpinned by actual profit. Alibaba and apple are the big earnings to look out for this week. Energy shares up 1. 3 . Rise inupported by the crude prices. Brent climbing above 60 on friday since the First Time Since 2015. 93 could see that on g btv 69. Opec will extend its cuts beyond mark. Beyond march. Crude fluctuating around 50 a buck. Markets are watching to see of they could push it to a higher trading range. Take a look at the gmm function. Chinese a large caps now halting a five day rise. You have miners and consumer stocks dragging shares. Best for a 10th of a percent, led higher by suppliers. In that currency stake you have the dollar losing some ground. Speculation of who the fed chair chief might be. That has lifted asian currency. The one rising half a percent. Yieldve the fiveyear you rising 5. 6 basis points, trading at the highest level since october 2015, rising for a sixth session. 10 year yield is nudging toward 3 nudging towards 3. 9 . Rishaad what have we got ahead . I want to focus onto the few movers today. Pulling up the board to show you air china that has arisen to a july high and hong kong after the Third Quarters results. Shares were raised to buy at highsecurity. Komatsu and tokyo at the highest level. A weaker yen and sales in china and indonesia helping the up the mythmaker. Byd is falling for a third day in hong kong. They reported a drop in ninemonth profit. New energy sales Vehicle Energy sales are expected to grow. It is it all depends on what the electric vehicle might mean for car makers. Rishaad lets get you up to speed with some of the first word News Headlines that we have. Trump has stoked the fire of speculation about the fed chair by tweeting a video saying his decision will come within days. Sources say the president is leading leaning towards Jerome Powell. Stanford universitys john taylor remains in the race. The president said he will make his preference known before he leaves for asia on friday. The uns atomic watchdogs complying with the nuclear deal and calling on all parties to abide by their obligations under the 2015 accord. President trump refuse to recertify the deal. Washington has imposed new sanctions on tehran. The president reject it did chance of talks last month on the sidelines of the you and general assembly. Pros spain demonstrators gathered in barcelona as lawmakers rejected the proclamation of control. The Prime Minister has dissolved the Catalonian Parliament and put the administration and the and called elections. The next test comes on monday when government workers decides whether they have to strike in favor of independence. They are planning to lift indias Aviation Market by pushing to the millions who have never flown because i cannot afford to or do not live near an airport. Isriers talking to japan talking about ordering and phoebes planes that can land on water, dirt roads or open fields. The deal will be worth 400 million. Global news, 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad we have been talking about earnings. It is just under two hours from now with analysts lurking whether u. S. Biggest banks has its Third Straight quarter revenue. He is outside hsbc asia headquarters. What are we looking at. . We are looking at that they had a couple of quarters. I expect 7 billion u. S. Dollars revenue forecast. That would be pretty much in line, maybe slightly above or below depending on your estimates. Maintaining that momentum will be key. Of course, john will be the incoming ceo. We have a new chairman recently at hsbc, that is mark tucker. Both of them have pledged to accelerate the pace of change at the bank. There has been a number of scandals. There has been restructuring. They say they will accelerate that pace of change. We look forward to comments. And if the organization is coming to a completion. Haidi what are we expecting and if the organization is coming to a completion. Stem by standby stephen with increased Net Interest Income by 11. 6 . We will be looking at that. We had ibex announced in the Second Quarter. They are saying how hsbc plans to give back excess capital. Perhaps in another share of buybacks. A think they would wait to the end of the year. Fourth Quarter Results to announce more buybacks. At this current thirdquarter they will not announce that. Haidi thank you for that preview. Stephen in front of the hsbc headquarters in hong kong. We will bring you hsbcs results live here on bloomberg. Also speaking to the companys finance director for a reaction. That is on a special edition of Bloomberg Markets middle east. Tries to holdhina its means. How in infection in the economy could see the rest of the world catching a cold. Japan rebuilding trust. A look at the recent scandals. This is bloomberg. Rishaad this is Bloomberg Markets. A quick check of your latest business headlines this hour. It will contest allegations of rate rigging after two other banks at use by australias security regulator settled their cases. The hearing will begin on tuesday. The impact of the settlement will be felt in its 2017 results. It agreed to a 10 million aussie fine. Will pay the regulations and donate for the 20 million for the Consumer Protection fund. Is stillsubaru said it planning to file for a recall next week after handing a report about conducting quality checks on cars for decades. They are recalling more than a quarter of a million vehicles across its entire lineup. Than one million domestically made calls because of similar faulty tests. The inspection has been it is true that unauthorized inspectors were involved in a quality process for more than 30 years. What is most important is that we never questioned our system for three decades. It is now time for us to rethink what is most appropriate and clarify our future inspection policy. To be they are said withdrawing its fouryear outlook as it struggles to deal with its quality scandal. The nikkei said it is because the company cannot indicate how it may affect earnings. On derisk is at a two week low after it said 80 of its customers have concerned the safety of its products. That pushes it below the level of toshiba, which is dealing with the corporate scandal of its own. It is these corporate scandals we are talking about at the moment because they are making headlines in japan did and abroad. It is at a depressing frequency. Our next guest says the government is improving. He is head of Japan Research at jefferies in tokyo. Lets start off with that point. Is it because of that we are getting more transparency so scandals are emerging and being put into the spotlight . Or is it because things have gotten so bad . I think it is really partly because of abenomics. If you look at most of the scandals, those practices have been continuing for years, if not, decades. This is not new behavior on the part of companies, it is just coming to light now. Bloomberg markets. Rishaad it should make a difference, should it not . Zuhair i think it really should. There are three big changes that have happened because of the Corporate Governance code. The first is a large increase in the number of outside independent directors on corporate boards. Four years ago there was five independent directors on average, now it is up to three. The second is the use of committees on corporate boards, which puts real power in the hands of these outside independent directors. These would be your nominations compensation and audit committees. The third thing that we are seeing is a big increase in the use of stock compensation lands for Japanese Companies. Findf the key things we and our research is that Share Ownership by Board Members is very tightly correlated to corporate performance. The lack of board ownership is very tightly correlated to these scandals. The majorities of not every Single Companies i have had a scandal ranks very low in our scoring system for shareholder alignment. The Board Members do not have an incentive to care about the stock price. Rishaad why are we getting so scams . Wrongre something really deep in the heart of corporate japan . Mean, if you i look at i think we should separate two different types of scandals that are going on. One is, where you have some of these data falsification issues. Part of the problem there is, in corporate japan there is having a respect of a lot of items. Ask for high specs on certain products. That is not necessary for that safety on certain products. The supplier just cannot seea yes, then later on they have to fake the data. That is one cultural issue that is there. The other issue, which is the real scandals where there are , which have been hit in. Those are starting to come out idden. Cause hi those are starting to come out of traditions. Younger cultures have grown up after the bubble burst. They do not believe the corporate practices of japan the traditional corporate practices are the best practices. I think they are looking for a change in the way Japanese Companies are managed. That is probably why you are seeing bees things come out. The Corporate Governance reform, which is putting a lot more emphasis on having oversight and proper governance. I think that general awareness of the need for oversight in governance is much higher in japan today than it was three or four years ago before the governance code was instituted. Haidi i suppose that plays into the part that is being played by the whistleblower protection. Do you think that is encouraging . As you say, some of these people that do want it affect change, come forward . Is having annk it effect. When i talk to younger japanese. When i say younger i mean people under the age of 50. Across the board i have found support for better governance. Where there is a lot of frustration about older management practices, very entrenched older management Board Members, directors, the and japan, advisers who level noed executives clear responsibility, but are they are continuing to affect the way corporate japan is managed or two in effect preventive from changing. There is a lot of frustration from japanese under 50. That is leading to part of the change. Haidi what are the other ofuments that gets one the other arguments is competition. You have Japanese Companies desperate to keep up with chinese, sometimes south korean competitive competitors, so they are faking data and trying to take the shortcut. Is that true to you . Zuhair when i look at companies , it have the big scandals find a very clear pattern. But of what you are saying is incorporated within that pattern. The companies that tend to have these big scandals, the Board Members do not own shares so those shareholder alignment is very low. They tend to behave like salary men rather than owners, which means they will try to brush problems under the carpet until they retire and somebody else can deal with them. That is the first problem. The second thing is that these companies tend to have very entrenched, often, iconic managers that nobody can question. Problems and issues are not necessarily brought up to them. They tend to have low margins for an extended period of time. There is that desperation to sort of fake the numbers. That is the third criteria. I think the first two are really much more bigger issues. Rishaad very quickly, this is a big subject. How badly is the made in japan brand equity been hurt or tarnished by all this . I think it is very unfortunate that the made in japan brand is really being tarnished. The companies with bad governance actually are a minority of Japanese Companies. 20 30 rch shows that of Japanese Companies are in sharp give in terms of not wanting to include their governance. The other 70 80 are open to or proactively trying to include governance. I think it is very unfortunate lets say a minority of companies is really tarnishing the brand. Rishaad have a good one. Us fromfries joining tokyo. Australia saga taking a new twist. They will fight allegations. We have the details on the way. This is bloomberg. Rishaad you are back with Bloomberg Markets. I am in hong kong. Westpac has decided to fight allegations that rigged the benchmark aussie Interest Rate after two other banks involved in the hearings settled. Lets get more with emily, who covers the Banking Sector here in australia. What is different . Down to acomes management position about whether you want to fight cases or prepared to settle. Westpac is facing a number of allegations. It is facing 16 allegations, that compares to 50 and 43 respectively for the other two banks. It feels as a stronger case. Haidi high risk. Emily it is not just high risk because of the risk of losing. What they are now facing, well,ng everything goes is a lengthy, long drawn out and costly court process. If they were to lose, that means the court will follow on litigations and is much stronger. To win, it is an indication of the reputation. Haidi the benefit is winning. Toentially youre opening up some of these unflattering details. The regulators case is pretty much entirely based mainly based on internal evidence in the communication systems. Instant messages, emails, transcripts, telephone calls. They are not particularly pretty. It is a fair amount of profane language. There is some unflattering description for the trading floor. Going to court, win or lose will mean that some of these extracts are played over and over again. Picture isat sort of being painted of the australian industry as a result of the settlements, and what are the main takeaways . , when things to note is that it has not really cut through to the public in the same way other scandals are. As technical. For the average person on the what it means to your mortgage or credit card Interest Rate is not exactly clear. Scandals hasin the been confined to the financial press. That said, it is more ammunition for the Banking Sector critics who really want to establish a full ranging independent inquiry. Take away for the Banking Sectors, not great news. Something more behind it. There is still a lot of pressure ahead. Coming cap, beijings dealer could put a dent in chinese growth. We will take a look at what it could mean for the global economy. We have chinese pmi coming up. Also looking at some of the implications when it comes to the property sector, as well as fromhis transformation quantity growth to quality growth was highlighted in the communist Party Congress over the past two weeks. How that will look. This is bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. It is 1 29 in sydney. I am paul allen with first word headlines. President puts trumps Approval Rating at 38 , the lowest in modern times for the stage of an administration. Support among republicans at 81 and democrats 7 . Highest for his handling of hurricanes in texas and florida and the economy, and lowest for the iran nuclear deal, health care, and puerto rico. President trump attacking Hillary Clinton and democrats as reports say a grand jury has approved the first charges in the russian inquiry. It is not clear who is implicated. It is reported the first arrests could come monday. The president tweeted against what he called a witchhunt. The recovery in japanese retail an 11th monthto as consumers show a willingness to spend. Sales rose 2. 2 and grew. 8 from the previous month. Department store and supermarket sales beat expectations, rising almost 2 . The heat is being turned up on qatar. Wants dohas membership to be frozen. The secretary of state Rex Tillerson has attempted to mediate and said one cant force negotiations on people who are not prepared to talk. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. Haidi thank you for that. A lot to look forward to this week. Thise excitement of Celebrity Apprenticetype environment we have come to know as the choice for the next fed head. We have almost forgotten there is an fomc meeting this week. Setting up potentially for that move in december. Boe, boj out with their Monetary Policy decision, as well as earnings, starting with hsbc. Rishaad going to be looking at that one. Dont forget china as well. Pmi numbers come out tomorrow. Lets get to the market action. China is showing drag out there. Sophie check out chinese large caps falling 1 as the bonds selloff continues. Fiveyear and 10 year yields at threeyear highs. Bondholders about to get hit by daggers falling from the sky as deleveraging continues after the Party Congress. Corporate debt in the line of fire as a 30s target higher risk investment. Taking a look at shanghai yields, stocks lower by materials falling 2 . Consumer stocks under pressure. In the mining space, the top steelmaker in china falling despite a doubling of net income for the Third Quarter. What is leading the drag in tokyo, health care and consumer staples, down. 2 at the morning close. The nikkei two to five has slipped below 22,000, but ubs sees 23000 and site with boj support. We will see what the boj has on tuesday. Financials on the decline when you look at the taiex. Japanese shares looking to halt a two day rise. A quick check on some borrow and kobe steel. , the company will withdraw its fullyear net outlook with its Earnings Release today, but gaining 1 . We did have a report last week that it may recall 250,000 vehicles. Expansion of the Corporate Governance covering japan inc. At the moment. Dollar investors as well as treasury investors watching this piece of news. An announcement expected before president kos to asia, the race to be the next fed chair. President trump putting out a video saying he will it out his decision this week. Tokyo where over to Kathleen Hays his covering the boj decision. First to trump, what did he say in this video . To 41tagram video tweeted million followers, well produced. This was not offthecuff. This was something the white house put together to make it clear not only the decision coming this week, but that it is a big deal. Lets listen to this piece. High will be announcing some time next week. Whoill be a person hopefully will do a fantastic job, and i have somebody very specific in mind. I think everybody will be very impressed. Our White House Team reporting as well after speaking to three people familiar with this process, he continues to lean towards governor Jerome Powell. There are three people lined up. You know their names well. Jerome powell in the middle has governorse board of since 2012 and is a specialist in banking. Worked at many positions in government under two republican president s, including at treasury. Janet yellen the current fed chair. Trump found her polished in their meeting. ,ohn taylor on the far right Stanford University economics professor highly respected in the monetary economics profession and the author of the taylor rule also impressed the president. Said dontchin expect a fed vice chairman nominee being announced along with the fed chair. You mentioned the fed meeting, donald trump and this question of that meeting, and you want to know in the policy statement that they will not do anything. A six piece to see if there is a stronger view of the economy. Last a strong gdp report week on friday, 3 versus the forecast of 2. 6 . Best two quarters back to back in gdp since early 2015. This is something that will give us some confidence when friday payrolls come in. Not so close will be later today when thes. , possibly income and spending report comes out. That contains the feds key inflation gauge, expected to stay at 1. 3 . The fed target is 2 . The labor market is strong. And wagesys inflation will follow, so we will see if anything in that policy statement contradicts that. Otherwise looking ahead to december now. You are there to cover the boj policy meeting. What are we looking at . Low inflation, and the question is will the boj modify its 2017 fiscal year outlook. This is chart 7942, a green line horizontal is the 2 target. Are. 7 e line is you year over year. The outlook for 2017 is 1. 1 , so perhaps a long ways to go. Governor kuroda keeping the faith on inflation because if you have a tight labor market and wages are starting to rise, it will get to your inflation target eventually. Retail sales out earlier today, after 1. 9 september in august. Jobsmer spending, jobs, are out there. We will watch that outlook and see if they adjusted a little bit. Course were governor kuroda says at his press conference after the meeting. Rishaad thank you very much indeed. Thatdd phrase used to be when america sneezed it was the world the caught a cold. Could a sickly china pose even a bigger threat . That could have knock on effects for the global economy, or could it . Enda curran is with me. This clampdown on credit could be systemic . You remember when xi jinping fadeout a vision for the World Economy and chinas place in it. It stirred debate to achieve that, china has to get its domestic house in order. One of the problems is debt. Reach 320 byld 2021. Obvious areas are the housing sector and inefficient stateowned companies. The Housing Market is critical. It is a multiplier for Economic Growth, but they have to avoid the crash we have seen in japan. That is a critical nearterm task. They have to get used to pulling away the drift for politically connected stateowned companies and the ramifications the go with that. They are not there yet. It is a gradual process of allowing defaults. It is a medicine they will have to swallow. It is a long road ahead by all accounts. If deleveraging happens and there is the appetite to follow through and it works, how would it be felt . It would be felt the mystically. There are two ways. Done right, you could have a hard landing in the property sector and disruption in stateowned companies. Will resulterly, it in a gradual slowing down of credit growth, and that will have a gradual impact on the economy. China is transitioning away from some of these sectors and promoting the consumption side of things. It would lead to Slower Growth for china. China isorld come if not cranking busters, it wont be importing commodities and other Raw Materials that it needs for its supply chain the way it has in the past. It has global implications. The more slower the path of growth, the better for the world. This comes at a time when we are seeing Global Growth indicators looking pretty supportive. One is capex. China is part of the story. Profitss are cached up, going nicely, share prices up, but they dont to spend on wages or investment. That might be changing. We are seeing some of the worlds bestknown companies with plans to spend more money, and china is part of that mix. Tesla is talking about opening a plan in shanghai for carmaking. China wants to be at the center of electric vehicles, and that is seen as the potential boom for the Global Supply chain. China imports components from japan, south korea come in germany and generates investment and Companies Hire new workers. There is a feeling that the capex boom may be coming on tap, but it is fairly cautious. Haidi we have been watching that for some time now. Thank you so much for that. Unpredictableh an road ahead, bond traders may have their work cut out for them this week here at we get the view from blackrock next. This is bloomberg. The week ahead for bond traders globally bracing for market moving events this week here at the fed pick, fomc anding, u. S. And jobs data the possibility of more details on a strategy when it comes to u. S. Tax reform. Lets look at the path forward with the black rock singapore head of asian credit. Looking through these risk of vince, what is most critical . Overall in the near term from a catalyst perspective, the fed chair choice will be the most impactful for u. S. And the trickledown impact for the rest of the world. Fomc i would say dont expect to see a change in policy, but little change in terms of the language. We had a significant distortion in the last data and could see some repayment this month. Seent think he was meaningful acceleration in average Hourly Earnings to make an impact. Clearly the fed chair decision is impactful. Haidi are we at a crucial juncture when it comes to u. S. Treasurys . Overall if we look back last two weeks, we have started to drift higher. I still think in the mediumterm that the risk of a drift higher significant move, but more of a drift in treasuries. We are seeing the bottom and the risk off recession completely priced out, and to some extent the fed chair will have an impact in a medium horizon because taylor getting the fed chair job coming you will see a decisive drift higher in treasuries move but i do think given the strong data and some bottoming of the inflation data in the u. S. , you will see higher treasuries from here. To take a look at the corporate space when it comes to china. The dust has settled after the congress. There are warnings coming potentially we will see daggers falling from the sky. This chart on your bloomberg, Corporate Bonds with the premium over the sovereign, rising to the highest since early june. If you get rising inflation and monetary tightening from the pboc and a proper acceleration of the deleveraging campaign, is there going to be a glynis in that Corporate Bond space in china . In a base case, no. I dont think you will see a significant shift on the policy side of china. I expect the policy to stay neutral. I dont think we are moving towards tightening. The focus on deleveraging was for much engineered by the pboc through pushing the yields higher. Tightening spread for the corporate sector, but donttal policy view, i think we are at the point where we see a significant shift. Is on reformscus and deleveraging, but will we see a disruptive situation in the markets . I dont think so. Rishaad this part of our program is called real yield. Where can i get the best yield . Think you can still find value in parts of emerging markets. If i look at asia, some markets like india, indonesia still look attractive. Get a little more backup and the Government Bond yields. I dont see monetary tightening necessarily. You do have value, but you have to be selective. Positionrought our down in asia, but still remain constructive in the medium horizon. Rishaad absolutely. What do you go for if youre looking to get the maximum return you possibly can and dont want to be too risky . Marketn the emerging space do you look, softened, highyield, corporate . , and we we see value still like the investmentgrade dollar credit in asia. We like some of the select local markets like india and indonesia. On highyield we are neutral, but you do have pockets of value come a so you have to be more selective than 612 months ago. Rishaad the spanish bond market as an example, we have seen the yields go up to the catalan tensions. Tos this represent a time get in because when the dust settles it will go back to normal . That is a tricky one. To some extent you are trying to make a call on when the dust settles. Backup in thea spanish yields, but right now im not sure if we were close to a full resolution, so this tension can escalate them at which means it might be early to jump in. From a longterm perspective, there will potentially be value. Rishaad it is good talking to you. Coming up, the wait is over . Not quite. The iphone x selling out in minutes forcing an extension of delivery dates. The details on the way. That is next. This is bloomberg. I am haidi lun in sydney. This is Bloomberg Markets asia. Inhaad i am Rishaad Salamat hong kong. Apple says the demand for the iphone x is off the charts. Peter hellstrom is with us now. He joins us in the hong kong studio. A sense of what the appetite is like from the supply chain. Thats right. Apple began taking preorders for the iphone x last week on friday. He quickly saw the phones sellout in many places. The waiting times went from , and the quickest people are able to get there phones, but the waiting times extended to six weeks in many markets, including the u. S. In hong kong they sold out altogether. We dont know if that is a sign of overwhelming demand more underwhelming supply. Apple has said the demand has been off the charts, but there have been challenges because of its high tech specs. Rishaad the iphone 8 has not been a bestseller, but it is very important for apple that this phone be a success, and the big success. This is unusual for apple to introduce two different versions of the iphone. The iphone 8 was available sooner and did not have all the hightech features the iphone x has. There are strong signals of demand for the iphone x at this point, and consumers seem to be waiting for that rather than the iphone eight at this point. Haidi what do we know about these reported production delays . We have reported they have had challenges in two different areas of the supply chain. It has been the 3d sensors the company is using. Unlock the phone, it recognizes that it is you and opens the phone. There are high Technical Specifications for that that have been a challenge for the supply chain. Also it is introducing in this version oled screens from samsung. Those are also in short supply. They are beginning to loosen at this point, but they need to meet this high demand. Onhaad we get the numbers friday, apple. How much will we know how they are doing with this phone in the set of figures . Which Tech Companies the season will stand out . Apple does this consistently. They want a signal they are short supply. Apple ships more than 200 million phones and yet they have this exclusivity. They create this sense that there is so short supply for the latest phone and create this frenzy trying to beat the person who has the newest iphone. Want to doing what they do and creating this sense of exclusivity with the phone. Rishaad i suppose it will be revealed. Great to have you here. Ahead on Bloomberg Markets, the updates on the big stories of the day. Morgan be joined by jp with a look ahead to all the centralbank action this week. That is coming up in a little over 20 minutes time. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Yvonne welcome to Bloomberg Markets asia. Yvonne a bumpy start to the trading week, chinese stocks fall the most in two months, breaking the calm that surrounded the Party Congress. President trump tweeting his fed preference will be known in the coming days. The worlds first one tree and Dollar Company lost more worth than the combined wealth of the 12 richest people on earth. That is petrochina. A little tease from the president as well leading to this fed chair decision. Who will it be . The latest episode of Celebrity Apprentice. Well get the latest with sophie kamaruddin. Earnings and Central Banks all in the mix. Sophie asian stocks looking mixed. Hastumble in chinese stocks the bond selloff continues. Fiveyear yields climbing 11 basis points, 4 amid expectation of tighter Financial Regulation in china. Indonesian to your bond slumping while stocks in jakarta on the way up, gaining. 5 . Gdp growth may surprise to the upside if investment picks up. Currencies and the dollar falters, but the kiwi dollar moving the most in the g10 space. The rbnz new finance chiefs said reforms to the Monetary Policy mandate results in lower Interest Rates. We are thick and earnings season. Some movers this morning. Shares falling after its profit miss. Analysts show recovery in the fourth quarter. Komatsus climbing to a decade earningsokyo after its beat. Yahoo japan falling after earnings lower than forecast. A few of the highlights today komatsu following the caterpillar train. Thank you. The big four banks that report this week. Lets get first word news with paul allen. Paul President Trump has unleashed tweets attacking Hillary Clinton and the democrats has reports say a grand jury has approved the first charges in the rush inquiry. The indictments are sealed and not clear who is implicated. The first arrests could come monday. The president tweeted against what he called phony conclusion collusion and accuse the democrats of a witchhunt third a new poll puts President Trump Approval Rating at 38 , the lowest in modern times for the stage of an administration. The survey shows support among republicans 81 of democrats 7 . Trump scored highs for his handling of the hurricanes and on the economy, and lowest on the iran nuclear deal, health care, and puerto rico. Apple said to have asked asian suppliers to double capacity for stronger than expected demand for the iphone x. The device went on preorder friday. The available stock sold out in six minutes. Hon ai parrot parent increased 1. 82 . Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Yvonne speculation over who inl be the next fed chair january started as soon as President Trump was selected. A year later, the president himself made those remarks official. A big decision coming this week. Bring in Kathleen Hays live from tokyo ahead of the boj decision, but talking first about the fed. Out oneo he put instagram and twitter seemed like a commercial ortiz are ahead of that big reveal. What did he say exactly. You look at it, our bloomberg story on bloomberg. Com, your terminal, link to the video, it is so well done. It is like an advertisement, like someone who knows how to get your attention. This whole task of choosing the next fed chair has occupied a lot of President Trumps attention. Will be announcing it sometime next week. It will be a person who hopefully will do a fantastic job. I have somebody very specific in mind. I think everybody will be very impressed. Arehe three people who any one ofe running, them could do a very good job. Our team in washington learning over the weekend that these are the three left. Jerome powell, current fed governor, banking executive, help many positions in washington, including at treasury. He is the one donald trump is leaning towards. However donald trump is not completely made up his mind. Janet yellen is the current fed chair that our team learned came off very polished when she set down with President Trump. John taylor, highly respected author of the taylor rule also impressing president. Steven mnuchin saying of the expect have the fed vice chairman and chair announced at the same time. That will not happen. In fact, expect have something l happen this week is a fed meeting if donald trump has not announced the fed chair by wednesday, i think that is the spotlight. The fed meeting is taking a backseat until then. Amid all the suspense the president is building of course. There is no press conference for this fed meeting, but can they say anything to set up for december . More i think about this, the more i am feeling nostalgic. There is a consensus that the fed that it is time to raise normalize, probably to a rate hike in december even if inflation is below target. What we make it is a policy statement that gives us kaluz on how they address the labor market and inflation. We know there is no chance of a rate hike at this meeting. It is all on december. Gdp 3 despite the hurricanes. The best backtoback road since 2015. He question is core cpe monday its supposed to stay at 1. 3 , far away from the feds 2 target. Are supposed to show a nice bounce back to 300,000. It is that strong labor market and confidence that the labor market is Strong Enough to start boosting wages, helping to feed inflation that has the fed on this track. That is what people go be looking for. Yvonne the jobs report on friday as well. Stay with us. Lets bring in j. P. Morgan six second of director in Global Market strategist live from singapore this morning. Good to see you. Jerome powell is more of the status quo of janet yellen come a given the fact that he sees favorable the easing of bank regulations, could Jerome Powell pr market friendly fed chair . Especially with another appointment that could be an interesting catalyst for the Banking Sector. That could have an impact on the deregulation, which does not require an act of congress, but could stem from the fed in terms of easing Capital Requirements. That could be an interesting development. Easing Capital Requirements is one of the last butgs people expect come up it is also hard to say what is expected now. Inwill get a meeting december, but there will be so many new faces if donald trump his able to fill the fed chair, the vice chair, but the open seats on the board of governors. Can determine the outcome, but the weight can shift. How are you factoring that into your outlook for 2018 . That is a very good point. We are factoring that in. One thing that we do know is that there is a rotation that happens in the committee. To rotates scheduled out will be replaced by others that we think will be incrementally more hawkish. Even without knowing the fed chair or appointees, we are expecting a more hawkish fed composition. That goes back to the disconnect between the fed in the markets. The fed is continuing to guide towards three rate increases in 2018, but the market only forecasting one, so the more hawkish composition could spur that gap begin to close in favor of those fed dots. As wee to think of that are positioning client assets for fixed income in 2018. Yvonne we have a chart real quick. To see a market doubting potential rate hikes passed the one in december. No matter how you slice that yield curve, we are seeing a flattening despite the aspect of higher rates, even if it is a john taylor or Jerome Powell. Without inflation, we will not see an aggressive fed. Could this flatten more in terms of the yield curves . It depends. Of all, if we do see continued firming in inflation, which i expect in 2018, and that will give the fed to license the rate raise and that should boost the front of their yield curve. The potential success and breakthrough on tax form would lift growth expectations, and that is what could boosted the rates in the longer end of the curve, especially if the tax reform package we get his going to be a nonbudget neutral one, meaning additional treasury issuance will have to be out there while the fed spying last, so i dont think it is a foregone conclusion the yield curve will continue to flatten in 2018. ,hose two monetary policies that is what is at stake here. I know you shifted your stance on the dollar to become bullish. If you are bullish on the dollar, are you less bullish on the yen . Something the boj would like to see. You are keen on japanese industrials. What is your view for japans economy and the boj . Thats right. We are not expecting much action on the boj, just continuing with the yield curve control, but that in itself is action terms of what the fed is poised to do. This Monetary Policy to verge ands will be a theme for investors as we go through this year into 2018. Yes, i do expect the dollar to strengthen versus the yen, and that should help the japanese industrial complex. Japanese industrials have done very well even though the yen did not weekend this year. The reason for that is the strength of Global Growth. If you can get continued Global Growth with a weaker currency, the yen, that could be a good combination for the japanese market and especially the japanese industrials. Yvonne that yield differential seems to be well intact when compared with the u. S. Treasury. Pickup in 28 teen. Has this a time to be increasing duration 10 . Duration then . I dont think it is the time to increase duration, but has we get further and further into the business cycle, some client should consider adding to duration, but you will see a further increase in treasury reform, the back of tax so i would not be extending duration at this point, but would be looking to buy treasuries if we do get those spikes in yields. Of two pointg, up 4 , we heard some loud voices warned we could be at the beginning of more air markets in bull market, but people have been betting on a bear market in bonds for a long time and it has not come true. The thing that is happening right now is even though we have had a major backup up in u. S. Rates from 2 to now two point 4 , the development globally, there are still these lawns controlled by Central Banks. The European Central bank will continue to incrementally had to their supply of sovereigns there , and all of that exerts downward pressure on yields there and globally, so this is why even though we backed up somewhat here, i dont expect to see a tremendous selloff unless you have a further catalyst. There are a couple of things i can think of. Reform to the tax potential, but also the dissipation of the forces that are holding down growth in the United States and globally. Both of those are questions at this point. They are not givens. That is why it is too early to call for a major spike in longterm rates. Yvonne stick with us. We will talk more about oil and your contrary and calls in the next segment. Still ahead this hour, hsbcs earnings in just under an hour. We will have a preview from Stephen Engle coming up soon. Next, the opec trade back in and thed saudi arabia driver seat and the implications for investors with j. P. Morgan. This is bloomberg. This is Bloomberg Markets asia. Brent crude maintaining a twoyear high on expect tatian opec will extend its production curbs. We are back with j. P. Morgan, a contrarian view when it comes to oil here it you are overweight on it so far. Should you continue to chase this oil rally . I would stick to hit. The oil market his rebalancing. You are seeing that in u. S. And global inventory numbers. The combination of opec cuts with slower Production Growth in 2018 will continue to work and improve balances for the oil market, so i see support for prices here. It comes to oil producers, we were speaking with s p this morning, we have seen this disconnect in oil price and the stock itself. Many times the companies are hedged so they dont move exactly what the volatility of oil. What happens if the management is smart on the downside they never fall as much as oil itself, but they also dont rise as much as oil itself, so the companies have not risen in the sector has equities as the oil hands. She was mentioning there seems to be a longterm trend in this relationship with equities and underlying commodities. What could reverse that . The hedging programs very quite drastically between oil. Roducers for example, small producers in the u. S. Do hedge production, but not universally and also not to 100 percent of overall production. Some of the larger producers are not big players in the hedging space, so there could be further upside to oil prices. I would say generally that is important to bring up come up with the impact varies quite dramatically industry. Industry player. Shale, with the u. S. When there is a pickup in prices, we see shale producers pumping once again. We are starting to see how put grow again, yet net longs continue to rise. Think that is displaced . I dont think so. In the u. S. Oil markets this year, we have had a tremendous rig count. 20 17, ane we exit additional 1. 1 Million Barrels a day in u. S. Oil production. That is what has hurt the oil markets this year. The bar to exceed that next year is very high and i dont think we will see the same level of growth as this year. ,f you look at the rig counts they have started to taper off. Also the productivity per rig ,as started to flatten has well so the estimates for u. S. Production growth in 2018 will continue to come down, and that is part of the thesis for why we will see a more stable and upward trend in oil markets. Range . What is the. E see this discount right now do expect that to widen or narrow . 50 to 60 is a range, and 55 and 65 is a conservative estimate on brent crude. I could see the spread between the two nearterm continued to be as wide as six dollars. The brentason is crude markets are a function of. Il opec production cuts at the same time, this is a seasonally weak period for u. S. Inventories as they are backing up, therefore delaying the wti crisisnto somewhat, but looking towards march i would expect that differential to narrow to two dollars to three dollars. Yvonne thank you very much. Great to see you. Check out our interactive function, tv. Not only can you watch us live but check out the security some bloomberg functions we talk about. You can become part of the conversation and send us an instant message during our shows. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. They check of the business flash headlines. The recovery in japanese retail sales strengthened for an 11th straight month as consumers show willingness to spend. , and. 8 from the previous month. Anddepartment store supermarket sales rising 2 on the year. After filing a recall uncertified inspectors were allowed to conduct quality checks for decades. Recall 250,000to vehicles across the lineup. Earlier this month, nissan recalled one million cars because of similar faulty tests. The inspection has been it is true, but unauthorized inspectors were involved in the quality process for more than 30 years. What is more important is we never question our system for three decades. It is now time to rethink what is appropriate and clarify our future inspection policy. Yvonne japans big banks mulling loans to kobe steel. Risk hit as bond twoweek low after it said 80 of customers have confirmed the safety of its product. Ondit default swaps dropped friday to the lowest since october 12. That is after rising earlier at one point this month. We are looking to the afternoons business in tokyo, the latest on japans reopening and about three minutes. A bit of as when it comes to this equity rally am a but muchneeded. More to come. This is bloomberg. It is 11 29 in hong kong. I am paul allen with first word news. Has stoked the fire of speculation about the next fed chair why tweeting a video saying his decision will come in days. Sources say the president is leaning towards Jerome Powell, although john taylor remains in the race. Make his said he will preference known before he leaves on friday. Westpac will contest allegations of rate freaking after two other banks accused by australias security regulators settled of their cases. The hearing will start tuesday. The impact will be felt and its 2017 results and agreed to a 10 million Australian Dollar fine and donate 20 million to a Consumer Protection fund. Pros spain them as has lawmakers rejected madrids proclamation of control. The Prime Minister has to solve and put thent administration in the hands of his deputy and called for elections on december 21. The next step comes when Catalan Government workers decide whether to strike in favor of independence. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. Markets. Check on the late in the morning session with the tumble in chinese stocks sparked by liquidity concerns sending bond yields surging. The drop in the hang seng has eased, back on course for a second day of gains. Energy stocks offsetting property and discretionary shares. , but sinopecling and petrochina due to report. Higher. Ei 225 1 consumer stocks among the worst performers despite retail sales improving. And stocks for the taiex kospi, suppliers rising over reports of demand. The won could be a winner with one rate hike priced in. The dollar also gaining ground attached. Keep an eye on that. Oil prices are now under pressure. Brent slipping slightly, but holding above 60 a barrel. That is a look at the market midday in hong kong. This is bloomberg. Yvonne our big story has been the fed and who President Trump will nominate to lead the bank. The president is leaning towards Jerome Powell to succeed janet yellen. Chris weston sees columnists in the bond market. In the bond market. Jerome powell would have influence, but he is still one vote. The fed is data dependent. If youre looking to position yourself, youre looking at the influence and the data to drive Interest Rate expectations. There is still a certain calmness around the appointment. Yvonne Standard Chartered leader, said he does not see the difference. The markets would not distinguish too much between choices such as taylor and powell given that they Work Together and seem to share views on how policymaking should be done, rulesbased, not as much data dependency, at least shortterm, but deregulation also. That will be the big difference. The Peterson Institute of economics says choosing janet yellen would be good for the stock market. We will get an idea about how close the Trump Administration is to the stock market. If he surprises people in real points janet yellen, and that will probably be the most market friendly pick because it will mean there is no uncertainty about where Monetary Policy is going, so that should be good for stocks. Powell is theome closest of the alternatives to janet yellen. Lets talk about that race to be the next fed chair and put it means for markets. Market cudmore joining us live from singapore. Good to see you. To digest,e plenty not just this pic for the fed chair. Board to put up the show what is in store this week. Not just the fed decision, but also with the fomc, the house committee, the treasury also going to unveil debt plans, and to wrap up their week we have the u. S. Jobs report. Where do i start . Main takeaway is that of all these catalysts, the main set toe most likely send 10 year treasury yields lower. The nominee is unlikely to drive yields higher. ,f it is janet yellen or powell that is a dovish choice in the curve will come lower. Hawkish,r may be more but that means the curve will flatten. That means 10 year yields might fall further. Optimism that, we have around the tax bill. That is supporting yields. It is probably set for disappointment if the plan might be stumbled to be delivered by year end. Overall we have a negative skew. The rate hike for december is mostly price. Priced. Its only going to be disappointment. All the major catalysts are more likely to send treasury yields slumping rather than rising from here. There has been talk of this package deal. If not john taylor, he might take the vice chair position. Jerome powelljohn taylor mean for the fed . Nuances will be important about how it is deliver to equity markets. Investors will like those combo packages, balance and even this, so if it is powelltaylor or yellentaylor, the market will take it better. All these things are positive to equities, but it is hard get yields to surge higher. It is likely to be supportive are equities this week, but is the same reason it is likely to send yields lower. Yvonne so we dont get tax reform by the year end, what could happen to yields in the dollar . Is the one thing that can get sustainable higher yields, but it needs to be a reform,kage proper tax not just superficial tax cuts that creates nervousness about the budget deficit over all. It looks like we might get some tax cuts. I think investor optimism is high we will get something deliver, but how stimulative this will be next year is much more difficult. Be clear from to this week which way it will go. Given the optimism, it is more likely lower we will get tax reform at the end of the year. Again, that is the one risk that could go either way, put more likely to lead to lower yields than higher yields. Yvonne what is the range when it comes to the 10 year on treasuries . Is 2. 4 justifiable . There as a lot excitement about this level. It is quite arbitrated arbitrary. You spent most of decembermarch above that level. No technician come but the fundamental catalysts suggest this is not particularly important and there has not been this massive and i can the market that we thought, so while we got excited by this level, it is not a game changer. Bondn have the 30 year bull market be over and not suddenly switch into a longterm care market. Right now we seem to be stuck in a range, somewhere below 2 towards the high 2 . two. 8 , fine i wont quibble, but i dont think 2. 4 is particularly relevant. Yvonne thank you. You can follow the story on our markets live log. On yourto mliv bloomberg. Down, one click come all the commentary and analysis from our bloomberg editors affecting your investments right now. We do have Apple Earnings this week. We are talking about the preorders, demand for the new. Phone x off the charts an extension and delivery dates for those who werent at the front of the queue. Bring in peter else from in hong kong. Talk about leader else from preordersegan taking at 12 01 in the morning california time around the world. Orders quickly extended in the u. S. , europe, and asia, four weeks, six weeks. It is currently unavailable in hong kong where it is sold out. This is a signal of Strong Demand or whether it was a sign of overwhelming demand at this point or underwhelming supply. Offe said demand has been the charts for the phone, but we also know they have had keyuction problems with components that has limited supply as they move into this sales period. Yvonne there have been reports locally that they are telling suppliers to double down on production to meet that demand. How critical is it the iphone x beats expectations . It is a high bar. With the iphone the iphone x at the same time. Met lukewarmght demand, but demand for the iphone x has been strong so far, so apple wants to carry that into next year. Apple sells more than 200 million phones he year, and yet they maintain this or of exclusivity because people scramble to get the latest phone when it comes out. The fun begins at 999 and goes up from there, so they want to show they have the latest and greatest from apple. Yvonne it is always this buzz and demand they try to create, lines and everything, but what do we know about the suppliers . We have heard about the next before. . Is it different this time around . It is. Thesedoes not manufacture phones itself. It relies on this extensive supply chain across asia. There are challenges into different areas. 3d sensor the phone uses to unlock the device itself. Oled screen his part of it. It is only supplied by samsung. Sensor reach her face and make sure it is you before it opens the phone. The Key Companies a similar were having challenges early on. They said on a Conference Call last week that they are reaching higher violence and are coming is a challengeit and they said it is the hardest assembly job that have ever had. Yvonne we will hear more about leading up to the iphone x. Petrochina has explaining to do. It has lost 800 billion dollars of market value since its debut. Analysts are saying the slump will continue. We will have details next. This is bloomberg. Yvonne this is Bloomberg Markets asia. They busy week of earnings. Here are the highlights. Japans two Biggest Airlines announcing First Half Results with operating profit at ana topping 1 billion. Profit at Japan Airlines will be 880 million in the same period, up 6 on year earlier. Both airlines are expected to race there for your forecasts. Three big chinese banks due to report with a pricetobook ratios at the highest in two years. Investors expecting robust numbers after Construction Bank made a move last week. 4 4. 1 in thirdquarter net income thursday. Returns on monday. Investors looking for resilience in revenue after Share Buyback led positive sentiment. Bloomberg intelligence set cost synergies should reach the banks 5 billion goal. We will talk more about hsbc earnings in a moment. First, a look at that does he week ahead for oil companies. Exxon and chevron fell friday. Chinas oil majors reporting today. Lets get the latest with Ramy Inocencio from new york. It is interesting exxon mobil did rise friday and chevron fell 4 . Both company saw production dropped. It is the magnitude of that drop that has investors shrugging it off for exxon, but pulling away from chevron and friday trade. Lets go into the bloomberg terminal, 4624. The magnitude is not all that much. For exxon, they only missed by 30,000 barrels, but that was less than half of the this is for chevron, about 60,000 barrels. 2 ,as 1 versus a missive so we saw that fall and chevron. Were seeing both companies trying to conserve cash. At 4is trying to keep it billion. Especially as we saw brent fall from 90 and 2014 to 40 and 2016 and climbing to 60 here. Looking ahead to the chinese oil majors, this is the Financial Analysis function for petrochina. Petrochina and sinopec at the closed today. Look at the yellow lines. This is the exploration and production for petrochina. We can see the fortunes rise and fall with brent. We are seeing that push back up to 2017. Bloomberg intelligence does expect a rise in terms of profit because of what is happening and theis rebound, return of brent crude up 13 over the quarter. Breakeven that petrochina needs to have. We have been seeing that above 50, so potentially a rise in profit. It is a 60 breakeven when it again, thegn a pact. White line here for rent four brent. Bloomberg intelligence is expecting a loss for the ep unit. With that said, lets look at how things are going globally with petrochina and how it stacks up in market cap relative to u. S. Competitors. Petrochina is in white. It is just above 200 billion. Exxon far and away has been number one over the past few years, 355 billion. In yellow, shell. In purple, chevron. And is where they stack up, it is not very good right now. A recent article just came out saying this is one of the biggest losses for petrochina since 2007 and could get worse moving ahead. Get to we will petrochina end of dead. Lines crossing the bloomberg on hsbc, Third Quarter earnings earlier than expected, adjusted pretax profit for the third 5. 44r they beat of billion, slightly higher than company estimated. The revenue side, the expectation was the resilience and the top line. We are seeing that come up 13 billion adjusted revenue for the Third Quarter, which is higher than the company estimate of 12. 7 billion dollars. Pretax profit at 4. 62 billion. The tier one common ratio, coming in at 14. 6 , slightly ater than the Second Quarter 14. 7 , but when it comes to revenue and profit side of things, it has beaten the company compiled estimates. We will get a breakdown on what armsmeans, also equity which were expected to remain solid. Back to petrochina, a fascinating subject, the firstever 1 trillion company, and yet has lost more money than the value of the italian stock market or the combined wealth of the 12 bridges people in the world. It has plummeted since listing in shanghai 10 years ago. There is no end in sight it seems. Lets get to our asian stock reporter here in our studio. What happened . Several factors. Global factors, the drop in Oil Prices Trading at one point above 100 a barrel. The Global Financial crisis, but there was chinas shift away from commodity intensive development and the effort to clamp down on speculative trading. Is also worth noting that a lot of the shares and petrochina his held by the chinese government, so the impact on minority shareholders might not be as big as the market value loss would suggest. And what are investors and analysts saying . Could it could worse . For shanghai listed shares, 16 percent downside, which is unusual because mainland analysts are usually bullish for largecap companies. As one investor points out, china has made it clear it is moving to electric vehicles and will move away from heavy industry, so there is no structural story to justify 63ing a Company Trading at times forward earnings. Yvonne it has been interesting. It remains higher than the likes of chevron, exxon, and bp. Thank you. To recap the lines from hsbc, pretax profit for the First Quarter 5. 44 billion, a slight beat from what the company compiled estimates of 5. 41 billion. Saying growth and loans as well as advances led to higher adjusted revenue. We were looking for that solid resilience when it came to the revenue numbers. That was coming in at 13 billion, also higher than the company compiled estimate of 12. 7 billion. More analysis coming up. This is bloomberg. Bitne lets get a little more color on hsbc earnings. Stephen engles live outside hsbc asia headquarters with more. Number for the Third Quarter. Coming in at adjusted pretext profit at 5. 44 billion. The consensus estimate compiled was 5. 41 billion. Also adjusted revenue beat forecasts as well coming in at 13 billion. We were expecting 12. 7 billion, so a beat on the top line and adjusted bottom line for hsbc. They are siding with the Earnings Statement that they sought sizable loan growth in asia. That helped beat on the top line at 13 billion. This first read is good news for , mark tucker,an who came over from aia. The incoming ceo will be john flint when he takes over from Stuart Gulliver in february. 56 yearse have had of restructuring and downsizing and getting out a bunch of businesses over the last few years after a string of scandals good they have exited some 100 businesses and 18 countries have faye have restructured. Retrenchment, downsizing, restructuring, could that be over . Those of the questions we have on the Conference Call. They went inside for the new ceo john flint, and this is a good start i guess for him. He is coming over from the retail side of the business, Retail Banking and Wealth Management. We saw several years of declines of they started restructuring, but keep in mind the first half of this year that Retail Business and Wealth Management saw a jump in the bottom line, so this perhaps is translating over to these Third Quarter numbers. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Guy earnings things forecasts. Chinese stocks, the Government Bond extends. Guy President Trump has investors on it. Speculation on his choice for the fed. Courts saudi arabia desperately need tire oil prices to the kingdom is