Apple insists that it pays every dollar it owes after the Paradise Papers. Yousef it is 8 00 a. M. In dubai. I am yousef gamal eldin. I am david ingles in hong kong. You are still on the ground. The talkingugh points and how the narrative has changed in the last 24 hours. Yousef we started with shock and awe, now commentary from President Trump saying the Saudi Administration knows what they are doing. From thecement attorney general saying there could be more to come. There is a lot of rhetoric around tensions with iran. Let me show you the currency forwards. This is 5114 on the bloomberg. The 12 month forwards come look at that spike above 200 points over spot, the highest it has been since summer. We will get more Market Reaction later in the program. What are you looking at . David this time yesterday we did get an update following what is happening. In a share, you look at this rally. Up with wordscome to describe how stretch to these markets are getting. And you look at earnings good macro data, it does underscore the need for this to go higher. 171. 56,. 5 short of an alltime record. Decision 30n rba minutes back, no surprise, keeping it at 1. 5 percent, no big move in the aussie dollar. The bloomberg dollar index basically unchanged across g10 and emerging markets, and brent crude paring back a little bit. Interesting. Donald trump is in town and we will be live out of south korea later on. Absolutely. Lets check in on first word headlines. Juliette President Trump has arrived in south korea after a japan visit that delivered no concrete results on fixing what he calls unfair trade. Despite a warm relationship, no concessions on the trade deficit. The two leaders did agree on a hardline approach to north korea. U. S. Commerce secretary Wilbur Ross Ross says he will probably not keep his stake in a shipping company with ties to the kremlin. Ross disclose the investment worth 10 million, but several reports claim he did not reveal that it works with the company linked to president putins soninlaw and a russian businessman under u. S. Sanctions. There was nothing improper either in the way we have handled meetings or in the investment itself. Where you keep the stake . Probably not. , have been selling it anyway but that isnt because of this. Nafta negotiators plan to start their next meeting in mexico city two days ahead of schedule according to two people familiar with the plan who say the fifth round of talks will novemberthe 15th two 21. The move comes after officials abandon december target to revamp, saying they need and tell the end of march to clinch a new deal. Apple insists it pays every tax dollar it owes after reports saidthe Paradise Papers the tech giant moved most of its untaxed offshore cash reserves to the channel eisen jersey and 2013 following a crackdown on its irish tax practices. Apple says it did not reduce its tax payments in any country. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Yousef we talked a little bit about the endorsement of President Trump on what the saudis are doing. Terms of the comments from the secretary general of saudi arabia has two what will happen to those who have been arrested, there will be open trials and phase one,is is only so perhaps more arrests coming down the line. They will freeze the Bank Accounts of those owe implicate. The Bloomberg Team has collated some of the data. Youre looking at 33 billion of personal wealth that is at risk with some of the most powerful men said to be held at the riyadh ritzcarlton, not a bad placed to be arrested on corruption. There looking at some of top businessmen. That really raises the question about where the Market Reaction goes from here. We had a selloff outside of saudi arabia. The saudisaid benchmark Stock Exchange would not be the best indicator for investor perception. There is a lot of government activity and a lot of these stocks. Around the region, we had a significant selloff in a lot of companies that have exposure to the story. It also comes across in the fixed income space where a lot of the international ons in the gulf traded lower significantly, layers we have not seen in some time. Levels we have not seen in some time. The question becomes does this pave the way for an accelerated approach to some of these reforms . Or is it time to raise the flag and say you have to slow down a little debt and provide more clarity, because clearly there is a lack of communication from this government . , there are a number of moving parts at the moment. , we havest two years seen areas previously seen as difficult progress, whether subsidy reforms or women being able to drive, they are all being tackled. This is another unprecedented move we have seen. What is critical is how do balance these moving parts . Especially when growth is weak and there is a need for Foreign Investment to come in and increase private sector investment. At the moment it is adding a lot of uncertainty, and these latest developments, but we do need more clarity as time develops. Ausef im looking at Bloomberg Intelligence note the came out minutes ago. The sauding directly, economy needs to implement reforms and do it fast. Ticking. Is there needs to be an effort to remove distortions from the market. Maybe the reforms can be implemented even faster. We have seen quite a fast pace of Reform Program already, but again, and these are areas that will have to be variable and move with international and domestic developments. For example, we had deep fiscal reforms in 2016, however the pace of showed signs of slowing down this year with weak Economic Growth and the ability to progress being difficult, so we have seen a focus on the growth side and a lot of comments on investment projects and investment programs, so that is where it seems it is going. This does seem part of the wider Reform Program. Ultimately when there is more clarity, a move towards positive Business Environment will be something that will be supportive of investment, but at the moment we are in the midst of these developments, so there is a lot of uncertainty and we still have to see how developments progress. Thatf this is a region was trying to bring capital and, then we had the gulf crisis and capital started asking questions about whether it was worth investing in this part of the world or there would need to be a bigger risk premium for doing that. Now you have the story out of saudi arabia. How does that damage the attempts to lock in longerterm money here . For the region, it is a broad area and different dynamics in different countries. , we are further in the Reform Program. We have seen pickup and economic activity, which when you have such large macro developments in the region, that is the area of focus, especially saudi arabia given the challenges and the transformation plan, that is where much of the focus is. I think it is early at this point to see how the developments will continue and what the result will be. Tos will be a mediumterm longterm development process, but what we are seeing for the first time is unprecedented moves and a number of areas happening simultaneously. I dont think anyone would have expected this pace of so while we wait to see how things progress in the mediumterm, it is adding a lot of uncertainty. Yousef you are sticking around. David . Meantime, lets get caught up with some other business flash headlines. Teva, the Ratings Agency has cut the companys Credit Rating to junk. The company is struggling with high debt and declining prices for generics. Teva is facing significant operational stress at a time when it needs to reduce deaths from the 40 billion acquisition last year. Thatberg has been told disney held talks about buying 21st century fox, although the discussions are now dead. A person familiar with the talks says they included Cable Networks such as fox, national geographic. Fox news was not on the table. New york listed chairs jumped on the initial reports of those previous discussions. Sold 7 billion in stock buybacks and dividends despite tax laws that may leave it awash in cash it could have previously used. Taxanies with pay 12 compared with the current level of 35 . Apple has been the most active u. S. Nonfinancial ensure of this year after at t. The Worlds Largest cinema operator they sell a stake to raise millions of dollars. Amc entertainment is controlled by a chinese billionaire and is weighing selling 25 to 30 of its european arm. Its acquisition spree derailed by weaker box office in the United States and the crackdown in china on overseas spending. That is a wrapup your Bloomberg Business flash. President trump has arrived in south korea for the second leg of his five nation trip. Stephen engle is live in seoul, korea. North korea i would imagine casting a long shadow over this trip. Absolutely. When you are within artillery range of north korea, the people seoul, korea take this seriously and want reassurances from donald trump that his rhetoric is not going to get them in trouble. Donald trump talked about fire fireury, well if there is and fury, guess what will happen to south korea . They have been in the firing rarelyr some time, but have they seen this kind of rhetoric from the u. S. President. They won a stabilizing factor in the region, not one that will cause instability. That will be front and center of the people here. We will be hearing protests on the streets. We had some protests around the corner from here at the blue house, the government offices of south korea. The people are a little tense with donald trump showing up here, a little bit more at stake than what we saw the last couple of days with donald trump meeting with shinzo abe in the japanese people. Set thehow does this stage for the deliberations later on with china . Believes it holds a key role in exerting pressure and influence on north korea to abandon its missile and nuclear programs. Said it was incumbent on beijing to exert its pressure on north korea, so we are not sure how much effort will xi jinping apply, but what donald trump is showing unified force with shinzo abe abe, now here in south korea. A unifiedo show trifecta of the United States, south korea, and japan against north korea and take that to beijing in two days time and see what they should and can do. So right now donald trump said to be having lunch with 28,000 soldiers based in south korea, in addition to the 50,000 in likelyso he will be offering some bellicose rhetoric as he did in japan, but a rallying the troops saying he is 100 behind them. David absolutely. Thank you. Lets bring in our next guest, Michael Price is the executive director of klein investment at taurus wealth advisement. Out one was pointing trumps trip to asia, everyone is excited about him being there, but is there anything to be excited over with him coming to town . I think it is more a question of volatility. Of things are priced for protection, and the room for error is rising, so maybe now is time to look at portfolio construction and how you price risks. The room for ever could rise. It is not just north korea. It is also saudi arabia for that matter. I know you are saying investors are wrongly position because everyone is overweight assets at the moment. What would you suggest we start reducing exposure to . Questionthis is a good that his client and portfolio specific, but now is potentially the time to do the opposite of what is working. Investmentnt pass it strategies work very well. Have grossly underperformed in some cases. The time tois rebalance and embrace Investment Strategies that are active and can hold some cash. I suppose when youre investing in etfs, you are hugging the benchmark. This market is about Downside Risks. Tell me what are your top recommendations when it comes to Asset Allocation in asia . We have been rebalancing, selling into strength, on the credit side as well, reducing exposure to high yield bonds. Were looking at lower duration and increased credit quality. Now is potentially the time to sell into strength and except a much lower yields for potentially more safety. The oil moves and the issues and saudi arabia have shown as that intentionally we could see some dislocation and price pressures coming. Ofoil prices because geopolitical tensions, then may be banks are behind the curve and bonds are potentially mispriced. There is a lot of complacency in the bond market partly due to qe, but now is perhaps the time to do opposite strategies. Few minutes, we will ask you what i should be doing and how in your mind and ideal portfolio should be looking, especially when everyone is overweight high beta. Up next, the future of the fed. Bill dudley announced his retirement, but says he thinks the transition from janet yellen to Jerome Powell will be a smooth one. We will discuss that next. This is bloomberg. Later on, the ecb will be holding a forum on banking supervision. Mario draghi has won the backing of his predecessor, who says policymakers are doing the right thing at the right time by planning to taper the banks bond buying program. The danger of deflation is over. It seems to me that all the indicators were justifying fully that they start tapering next year. , bill dudleyile has announced he will be retiring next year, but is confident the smooth transition from janet yellen to jerome will take place. Is of Current Committee the same mind, so there is not a lot of discord going into the transition. I think it will be a smooth transition. I think this will be evolutionary. David still with us from singapore is the executive director of client investment at taurus wealth advisors. You are recommending essentially that we reduce exposure, but can it be argued and light of the fed and ecb that we still have at least a year of this party left . This good macro backdrop will show up in earnings next year. Apart from the fed, everyone will be staying put, so why dont we just carry on . That is true. Complacency may not be the right strategy. Geopolitical risks potentially could become an issue again. Saudi arabia is a good example of that and oil prices are surging. What if the Central Banks are behind the curve and we have created inflation and the bond market is mispriced . A lot of assets will have to reprice. Thinks why we investors should consider active strategies and reduce passive strategies. You often outsourced judgment in passive strategies, so maybe now is time to take money off the table and think about judgment and potential Downside Risks. Momentum works until it doesnt. Yousef and there has been a lot of focus on the position of the fed chair. Now the resignation of bill dudley is key. As we go into next year, quite of few seats are empty, currently three vacancies on the fed board, which will rise to four when Janet Yellens term expires. Much anxiety is there from that, the fact that there are so many vacancies that will come up outside the resignation of William Dudley . This could lead to potential centralbank policy errors, people making mistakes because they are new and not well coordinated. That is the risk that is potentially not priced in. We could potentially see more political influence on the fed. The market has not made up its mind on these issues. We could see a shifting in Investor Sentiment towards the role of the fed here it it is the fed. Cryptocurrencies are showing us that some investors are becoming more concerned about fiat too much debt and to low interest rates, and that is the debate, whether rates will rise further and whether policy mistakes at the fed could be an issue yousef . You keep talking about fed policy mistakes, where are they most vulnerable . Hiking when they should not be, regulating when they should not . Divided, but some argue may be the fed should have hiked much earlier. The incremental rate hikes could potentially mean we see some dislocation because the economy and 2018 could come in weaker than many especially if Oil Prices Rise significantly. So i think increasingly the fed is in a difficult position. I would basically be cautious at these levels. David michael, we have to leave it there. We are out of time. At these levels, caution is merited. Thank you for joining us out of singapore. There is a lot coming up on bloomberg television. , the vice chair joins us for an exclusive interview 8 00 a. M. Out of london. , and ecbtioned come meeting in frankfurt. Calls up Jeremy Corbyn for a second brexit referendum. Our one on one with the u. K. Opposition leader is next. There is a lot to talk about given that the boe and the dovish hike and remarks around sterling. More coming up next. This is bloomberg. Yousef we are 90 minutes away from the market open in the emirates. Quite a few stocks in this part of the world hit hard by the ongoing uncertainty from what is going on in saudi arabia. Anybody who thought this was going to be a slap on the wrist, that is definitely not likely because the secretary general making clear there will be open trials and they are freezing Bank Accounts of those implicated. There is likely to be another phase, so plenty to look out for on that front. President trump has backed saudi arabias crackdown on corruption, tweeting he has confidence in the leadership. Local banks are said to have frozen the assets of those implicated. That includes the 50th richest man. The crackdown has snared 33 billion. Meanwhile, President Trump arrives in south korea after a japan visit that delivered no concrete results on unfair trade. Relationship, trump won no concessions from tokyo on the 69 billion trade deficit here it the two leaders did agree on a hardline approach to north korea. U. S. Commerce secretary wilbur ross says he will probably not keep his stake in a shipping company that has ties to the kremlin. He disclose the investment worth 10 million, but several reports claim he did not reveal that the Company Works with an Energy Company which is linked to president putins soninlaw and a russian businessman under u. S. Sanctions. , there was nothing improper either in the way we handled meetings or in the investment itself. Will you keep the stake . Probably not. I have been actually selling it anyway, but that isnt because of this. Negotiators plan to start the next meeting in mexico city two days ahead of schedule according to two people familiar with the plans who say the fifth round of talks will run from november 1521. Move comes after officials abandoned a december target to revamp the pact, saying they need until march to clinch it the deal. Apple insisted pays every tax dollar it goes after Paradise Papers said the tech giant moved reserves in cached 2013 following a crackdown on its irish tax practices. Move did notthe reduce its tax payment in any country. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Lets get a check on markets in asia. It has been a rally. It is hard to keep coming up with hyperbole to describe what we are seeing, but have a look , thee nikkei, up 1. 5 highest level since 1992. The asx hundred up 1 . That is the first time we have seen that index above 6000 cents january 2008. January 2008. Large cap in china doing well as well. Mixed when you look at the currency picture. Some weakness in the yen. Aluminum coming off highs last week. No surprise you are seeing gold switched out because everyone is piling back into equities today. I mentioned tencent, a lot of those tech players rallying. Energy on the back of saudi arabia, but every sector is firmly in the black today. Msci asiapacific Index Holding at decade highs. A lot of Corporate News as well. There has been a huge runup in the philippines with san miguel and pure foods up 18 . After its Parent Company said it will sell shares in the cure foods unit after consolidating its beer and liquor ventures in a stock swap valued at 9 billion. Let number Asset Management rising to the highest level in a year. Then of course we have been watching softbank after it came through with Second Quarter numbers, operating income at the highend of estimates. We also heard about the news about the sprint and tmobile inl, but the run continuing Global Equities and rallying into asia. A number of indices at multidecade highs. Yeah, unbelievable. Unbelievable. It makes you think theres something wrong with the world. Leaders have set out competing visions for the nations future at a conference in london. One season industrial strategy to drive growth. On the other hand, Jeremy Corbyn is pushing for a complete overhaul of the economic model. He said the changes are needed and called for a second brexit referendum. We have not considered a second referendum. What we want to do this process through. We dont know when the next general election will be. What i would want his parliament to be able to hold the government to account, challenge the bill as a goes through, and this bill i have to say is everything i disagree with in the way parliament should be run. Parliament should hold government to account. This bill has enormous powers over the secretary of state which he can override. When we see the deal on the table we are not contemplating a second referendum. Do you see a transition as something that can be achieved now by the government, or something that takes time to negotiate . I think it is important to get that down now that there will be a transition, because than ase we are less year and a half away from leaving the european union. If there is no transition agreed until march 2019, which business will be investing in a planter machine that relies on Market Access to europe or the other way around, there will be enormous uncertainty and they danger of the cliff edge, and we should set that out now. We made that clear during are many meetings in brussels with others on the negotiating team. Would say yese eu now to the transition . The feeling i get is that they recognize the sense of having that because britain is a big economy, one of the biggest in europe, therefore there has to be a good trade relationship. I dont think anybody was to see ourselves in the direction of some massive trade competition between britain and the eu in the future, which is why we want this tarifffree trade access. Yousef Jeremy Corbyn speaking about uncertainty. Bloomberg conducted 15 after Prime Minister theresa mays speech, and they were unimpressed to say the least. Lets bring in our guest on the show back. Are there any good options for businesses as they prepare for brexit . Certainty andise delivering not make much difference to the ceos. The theme of the day is uncertainty. Earlier talks suggested more compromise from the european side and u. K. Side, but we are we stand at the moment is no closer to finding out what exactly this brexit will look like. We are very far away from that. Until we get clarity on how this will look and work, it is going people in a vacuum, businesses in a vacuum, and in a wait and see mode has we stand right now. David the boe well telegraphed when they raised rates last week. They have also come out with revised forecast a little bit lower than previous ones. Do those make sense, or do expect them to cut further given the fluid situation . See some Downside Risks to the growth forecast compared to the outlook by the boe, but what was important from the boe was a very conservative message that effectively said we have had one rate rise, but inflation in the shortterm could rise higher in response to that, but basically they ,ighlighted the uncertainties Brexit Developments will be key, and they also feel that there will be softness out of that uncertainty, so markets have reacted to that with expectations that the will be no further rate hikes next year. Where does that leave the ecb given they have to consider what the other Central Banks are doing . Youre seeing a lot of optimism and possible rises in inflation down the line. Or dohey stay on course, you expect them to recalibrate as the data comes in . I think they will recalibrate has the data comes in, but the message is still a gradual approach from the ecb. The message from their last meeting, an important meeting where there was the new easing, the asset purchases for 2018 announced, or the first nine months, and the message there was lower for longer. The inflationary outlook does not show any signs of picking up. If signs of do come up, we but thehe ecb to react, message is a very gradual approach. With inflation where it stands at the moment, we believe that is the correct approach. With no expected changes from the boe and a gradual approach from the fed, we think that would be overall positive for the eurozone, whereas they are looking for a weaker currency to boost competitiveness and support the Building Momentum in the growth outlook. David when we talk about policy seemgence in 2018, does it the fed will be on one side of the fence and everybody else will keep at it on the other . As things stand at the moment, i think it will be a continuation of what we have seen here, so a gradual approach from the fed, the markets absorbing that and taking that well, even though we saw three rate hikes this year, so as long as we see a steady pace and markets remain buoyant and inflation contained, we expect to see that. If there are any unforeseen events, then the whole scenario changes. Still monica, you are staying with us on the program. Lets get a preview of what is to come. We are just getting warmed up. We talk about the United States, the budget deficit, could that disrupt trumps tax plan . Next. Ak to Larry Summers this is bloomberg. David lets get you caught up on the latest business flash headlines. Fitch has cut the Credit Rating pharma to junk as the Company Struggles with the debt. Is facing teva significant operational stress as it needs to reduce debt from the 40 billion acquisition last year. Bloomberg has been told that about buyingalks 21st century foxs movie studio and other assets, although the discussions are now dead. A person familiar said they anduded the Cable Networks sky. Fox news was not on the table. The new york listed shares of fox jumped on initial reports of those discussions. That is a look at your Bloomberg Business flash. Lets pick up the conversation with the chief economist at how the dobb abu di commercial bank. Two competing narratives. On the one hand, the idea this is a consolidation of power, stability of the government, stability and policy when it comes to the oil market when it comes to an extension of the opecnonopec agreement. The other sign is this is a power grab or tensions within the royal family and more instability to come, i ran. Which of the two is driving oil at the moment . There are a lot of factors you mentioned there. I will take different aspects. Saudi arabia being one of the Largest Global producers important, and as soon as you see uncertainties , you see support for oil prices, but there has been support, tightening in the currentexpectations the opecnonopec production cuts will continue. That weour core review, will see an extension of this and what ever is happening in saudi arabia, that this is an area that will not the touched along with fx policy. Also, global demand, especially at of asia remains strong, so there are a number of factors on that side. Scenarios,to the two it is not easy to divide it into clearcuts. Since the move weekend have a number of aspects. Clearly there is a large move to root out corruption, but also we have seen a change in how saudi arabia works, and there has been the poweration in base as well, so there are a number of elements that are continuing at the same time. At the moment, as i mentioned, the developments happening, trying to balance these areas out, this is where the uncertainty will come out of and it will take time to see how these impact of the economic dynamics. Move up in oil been enough to alter inflation expectations, your outlook, and wind do you expect this to show up in Inflation Numbers . I think it is very early days as of yet. What will be critical next year is the increase in production expected out of shale producers and nonopec members not involved in the deal as well. Area thatt risk, the has the greatest uncertainty, is geopolitical developments, so we have to see how much the developments of the last two days, the comments coming out of saudi arabia, visavis the wider region, how these continue to develop. And if theres going to be uncertainty, it is going to come from the geopolitical side. Yousef lovely having you on the program this morning. The chief economist at abu dhabi commercial bank. The unitedstories, states, ongoing deliberations around a tax package. The u. S. Budget deficit could put a roadblock to calls for tax reform as the house ways and Means Committee begins consideration around the legislation. It could tax revenues and increase the federal debt. Supporters say it eliminates special interest. Tvry summers told bloomberg he does not see much new investment coming in if the bill is made law. Not very much for two reasons. One, we already have record low costs of capital. Companies are sitting with large amounts of cash invested in treasury bills where they are earning 1 , so if they have attractive investments, they can make them at low costs right now. That is the first problem. The second is the bill does include an element that is constructive, which is expensing of investment for equipment, make andhen i equipment investment, i can write it off in the first year. Think about what that means, david. If you make a one dollar investment, you get a deduction equal to the Corporate Tax rate, then you share all the profits. Share a fraction equal to the Corporate Tax rate with respect to the government, so the government is paying for the same fraction of the investment that it is claiming later in benefits. As long as that is true, a Corporate Tax rate should not have an effect on the incentive to make the investment. What the Corporate Tax rate does do is tax monopoly profits and rents that are derived from some sort of competitive advantage. Is tax thes do profits earned on capital that has 30 been put in place, but in the presence of expensing it is an elementary economic principle that the Corporate Tax rate should not affect the level of investment, and indeed because of interest to deductibility it may even be a higher Corporate Tax rate would encourage investment. There are some more complicated aspects involving the choice of a Global Location for investment, but if you just taken the simplest view of it all, the principle that the administration is pushing his. Ocalled territorial taxation what that means is that instead of taxing the Global Income of u. S. Companies, they will try to tax only the u. S. Income of u. S. Companies. What could be a more straightforward incentive to invest more abroad than that . It is more complicated because they are having a global minimum tax and a variety of complexities, but at root the taxes being cut on old capital and the taxes being cut on income earned abroad, and i would have thought the right focus for a tax reform would be cutting the tax on the new investments made to employ new ,orkers in the United States and so that is where it seems to me that the tax bill is more the specialo interests than it is to the economic interests of american families. Summers,at was larry the former u. S. Treasury secretary. Coming up, a roundup of what stocks we are watching in the region as the middle east markets prepare for the open. That is next. This is bloomberg. We are just over one hour away from the open of markets in the middle east. Take us through what is important to follow today. Yousef before week it into key calls, two factors fundamental to the thinking of investors. One will be the comments from President Trump saying the saudis know what they are doing. Number two bank, comments from the attorney general saying real an open a trial, a seizure of the accounts as well. That will be at the forefront. We have dubai investments, a company that offers joint capital. They are seeking approval to reduce shareholders of uae nationals. That stock is up 9 this year. Youre also looking at qatar to sell its 60 stake in the asia finance bank, the affiliate in malaysia. The bank says the process is to be completed in six months. B shares are down 8 this year. Upgradedgypt has been and the target price has been raised. Quite a dramatic increase. The stock is up 7 so far this year. Teva, the largest maker of generic drugs, they have been cut to junk by fitch as it faces significant difficulties after the 40 billiondollar businessof the generic from allergan last year. David that cut from fitch might put pressure on the stock. , a lift across asia. One of the best todays of the year. With and addressing the south korean parliament. Back the ying you mohammed saying they know what they are doing it were told the