This means an extension of something. Lebanons Prime Minister meets Emmanuel Macron after his twoweek stay in saudi and says he will discuss his resignation when he returns home on wednesday. Brexit talks hit another roadblock. The u. K. Is given weeks to give ground. Davis says it is time the e. U. Compromises. Our european workers finally set for a payday . Draghi says european wages will rise faster. It is 8 a. M. Across the emirates and 4 00 a. M. In london. s take a quick look at where u. S. Markets ended the week on friday. Ontowere unable to hold that relief rally we saw on thursday. Most of the action is now being driven by expectation of that allimportant tax reform in the United States. Companies was usually more exposed to taxes on friday. In the green. The big story was in the bond market. Take a look at the yields on 10 year u. S. Treasuries. This encapsulates everything we have been seeing in the bond market. Shortterm rates continue to edge higher. The curve is now at the flattest level in a decade. Sliding, implied by the bond curve. The first word headlines from around the world, here is destiny humphrey. Oftiny tens of thousands zimbabweans are celebrating the departure of president mugabe, the only leader they have known since independence since 1980. [cheers] his ownriggered downfall by firing his Vice President last week, prompting military to place him under house arrest. The ruling party this decision is likely to be ratified at a meeting of central executives. Ebabons Prime Minister says he is returning home this wednesday to explain his right nation resignation. Hariri said he would return home to attend independence of vents and hold talks with the lebanese president events and hold talks with the lebanese president. Chinas Property Market is showing signs of stabilizing after house prices dropped in october. Prices climbed in 50 of the 70 cities by the government. Success inving some curbing property speculation, without forcing sharp deceleration. Goldman sachs is fourth in rate hikes in 2018. The wall street firm says the u. S. Economy is heading into likely toin a way boost wages and inflation more broadly. Goldman has raised its u. S. Growth for 2018 to 2. 5 in floridas unEmployment Forecast and lowered its unEmployment Forecast to 3. 7 . Hammond told the sunday times is planning on pools and investment that will make it easier for Construction Companies to build wrote sites that are already planner approved. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Saudi arabias Energy Minister says opec and its allies should announced an extension when they gather at the end of the month. Foreignaid that investment in saudi arabia, including the plan shares in its state oil company, will be unaffected by the corruption crackdown in the kingdom. This will be unimportant milestone to announce . My preference is to give clarity to the market with what we are going to do. I remain respectful of the news of my colleagues and i think ultimately everyone is committed in aing the right thing, way that doesnt leave any of the member countries on the o utside path. I am committed to a full consensus process. What would you say is a fair balance for consumers and producers . We dont want to the spikes in price that shock the market. We dont want any price movements that are not healthy. We dont think we have seen any of that yet, but there is potential, especially for disruptions, in any major country. We are hoping this wont happen. The preference is that the market allen says gradually balances gradually. Demandply and calibration we are doing through the trimming of supply we have done over the last 11 months. We think we can do it for a bit longer, until we get to the levels we target, the fiveyear average. You have talked about opec not flooding the market again. Are you close to an exit strategy . It will be one of gradual adjustment. We have done the reduction in a gradual way. This year, it has worked beautifully so far. Of the be very mindful agreement, when it ends, we will come up with a gradual adjustment. Our expectation of demand so that we dont have access supply excess supply. Do you reclaim market share once the cuts are over . Market share is as healthy as it is today. We are still number one or number two in all of the major markets, japan, china, korea, u. S. , we havethe purposely trimmed supply because the United States is oversupplied. If someone is exporting 2 million barrels, of course, america, as a region, is also a major producer. To United States has access canadian, mexican, venezuelan, as well as the u. S. Gulf of mexico. Our reaction in the United States is unique to the country, curbs arehe supply lifted, we will be back in the United States to make sure our customers in the market receive saudi crude that it desires. Deal com, as the iran es up, there has been destruction with these arrests. How do you feel about Foreign Investment . Will does discourage Foreign Investment . This discourage Foreign Investment . Not at all. This is a very limited domestic affair. The government is cleaning house for something that is overdue. Have beenvestors doing business in saudi arabia. Many of them have been doing it for decades. They have not seen the corruption. The interactions with the saudi government. This is local and domestic. Ultimately, the total would be shared and the information will be shared, once this investigation are complete these investigations are completed. No impact onhas Foreign Investment or the kingdoms openness, capital flows, investment. This mean the ipo is on track for the Second Quarter of next year . Of course, the ipo is completely unimpacted by any of this crackdown that i talked ab out. More on that story with our middle east anthony middle east reporter. Also joining us is the head of Investment Management for a capital company. These are hedge funds, short positions in red. The red line is that short position, just beginning to tick up. My question is, are we seeing some investors taking profits on the back of that rally in oil . Or does this mean people are starting to doubt the strategy . We were seeing the bonds increasing last week. People are going to enter that balance their. There. Lance we saw them trying to manage expectations in a way they can avoid. Avoiding too Much Movement of money around in a way that would affect the foreign curbs. Opecw the secretarygeneral speaking with Money Managers in new york, having a big impact on the curve, as well as helping the show producers hedge. They have a big role in how that market under unfolds. The saudi minister is trying to manage those expectations. Lets bring in charles for an investor perspective. When you think about opec strategy, do you think it has paid off and will continue to pay off as they think about making those cuts . It took 11 months for opec and russia to clean up saudi oversupply. It is trailing close to a twoyear high. It is up almost 40 , since it drop in june. Dropped in june. The biggest shortterm for the lets say, the closing down of positions by the hedge funds. If you look at the latest reports on positioning from the toc, as we get closer november, there will be some discussions about extending production after the First Quarter of next year. You might see hedge funds taking some profits. Year, byhallenge this report, it was very bullish. The big question is on what will states asthe united the shell boom is over, do we have a cap on the price in the long run . Do you think that positioning , that there is the possibility of disappointment . There are other elements that recent years. They are all trading on supply and demand. Instability in saudi arabia stays, there will hellping helping to december prices. D descend prices. As much as we talk about the efficacy of opec production cuts, they havent solved the problem of it u. S. Production. People are hedging their pouring therefore in production. How much of a problem is that going to be . U. S. Production is going to be growing, this year and next year. It is growing, and that is something opec has to get its head around, to work with how they are going to be a competitor with the shell market. Market. Shale there is too much oil in the market right now, still the high inventories. Saudis arethe targeting that market in particular. Higher,rice goes up those companies are able to hedge. Cable lock and more production willhe future they lock in more production for the future. Opec will be taking into account that oil coming into the market, and they will have to phase soir exit from these cuts they dont flood the market again and recreate the same problem. Shell problems will continue for a long shale problems will continue for a long time. It makes you wonder about the exit strategy. Still ahead, we will be talking about the roadblock in brussels. Roundexit negotiations, two. The latest on the standoff. The release of minutes from the fed and ecbs recent meetings. Draghi says wage growth is on its way. This is Bloomberg Markets, middle east. We get minutes and accounts from the fed and the ecbs policy meetings next week. Held the line on Interest Rates, yet tainted they would raise borrowing costs in december. The ecb announced it will be borrowing bonds at a lower rate, but for a longer time. Euro redicted get get euro area workers will bigger pay increases, relieving pressure on the central blank central bank. The effects of past inflation should not be purpose low inflation should not be persistent. Should beginhip reasserting itself. We have to remain patient. Is the managing director and cio of almal capital. Draghisrt with comments i feel like it is presumptuous to assume that wage increases welcome back to europe, when we happened seen them return havent seen them return to the United States. They have been on the path to recovery for much longer than europe. We need to get perspective. The progress we have made over a year has been remarkable. Improving. Is we do see some inflation coming back, very low, but at least it is improving. Wage growth in the United States, is 3 , and it needs to be 4 , before we get into trouble. We are far away in europe. If we look at the central bank, you see the accommodative policies, just in numbers. The real Interest Rates rate 1. 5, veryus accommodative when you have synchronized recovery. And the Balance Sheets for the main central bank remain at almost 5,300. You have the United States, unwinding. We are going to see a decrease in the size of the fed Balance Sheets. Europe is slowing down the pace. And then, japan, still expanding the balance sheet. See centralews to bank Balance Sheets going up, but on the other hand, they need to be careful, with the way they implement that. If you have the one central bank the United States, and europe, which is not doing anything, you up cd dollars backing see the dollars backing up and putting at risk some markets. We have to leave it there. We will be talking about some more regional investments coming up. We have more on the lebanon his shockingr and resignation, and his plans to return to lebanon. The details,. Lebanons Prime Minister says he will discuss his shock resignation with the countrys president when he returns on wednesday to the country. He met with french president macron in paris yesterday, a visit that takes his time out of the country for more than two weeks. Editor for the middle east and africa joins us, along with am wal capitals managing director. Int is the next step and this ongoing resignation process . The president himself says, i am not accepting this resignation. It was just a press conference, nothing in writing. The president says, if you were going to resign, present your papers. We dont know if that is what he will do on wednesday. He is saying, i will discuss my resignation with the president on wednesday. What will come out of that meeting is anyones guess. This isnt a normal process. There is nothing for us to fall back on. What are we hearing in terms of saudi arabias role . Iriri hariri announcing his resignation when he was in riyadh. Riyadh, not inn read in riyadh, not in lebanon. This reflects the of usual tension within the process of government the unusual tension within the process of government. He is saying he is stressed and doesnt feel safe. The saudis are saying, they are not holding anyone. Feeds intoollah line what saudi arabia is pushing in the situation. Charles, from an investment perspective, when you see the geopolitical tensions rising in the gulf, does that make you nervous about the investment environment . We believe this is embedded in the market prices. There is probably some kind of longtermngterm we are expecting this will be positive for the markets. There will be cyclical saudi arabia is one of the few countries in the world that did not have a recession this year. There will be the opening of capital markets, which will involve reforms. Line toels like a tight walk. You are making investors nervous by announcing changes quickly, but you can argue the changes are very much required. Thank you to the executive capitalsd dto al mal charles. Talks hitrexit another roadblock, in which the u. K. Is given weeks to give ground. We will discuss, this is bloomberg. 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. It is 8 30 a. M. In dubai, 90 minutes away from the market open in the emirates. Lets get over to destiny humphrey for the first word headlines from around the world. Tens of thousands of zimbabweans are celebrating the departure of president godbey mugabe, the only leader they have known independence since 1980. [cheers] mugabe triggered his own downfall i firing his Vice President last week, prompting the military to place him under house west arrest. Committees have resolved to oust the 93yearold, likely to be ratified at executive meetings in the future. The Prime Minister of lebanon says he is returning wednesday to explain his resignation, cron ineeting with ma france of the weekend. Hariri says he will hold talks with the lebanese president. He has been away from lebanon since his shock resignation two weeks ago. Show signs ofs inbilizing after the drop october. Home prices rose. China is having some success in its bid to curb property speculation without forcing a sharp deceleration. Goldman sachs sees four rate hikes in 2018. Firm says thet u. S. Economy is heading into next year with strong momentum. Goldman has raised its u. S. Growth outlook for 2018 to 2. 5 . And its an Employment Forecast to 3. 7 unEmployment Forecast to 3. 7 . Times has been told that hammonds planning billions of pounds of investment and roles that will make it easier for Construction Companies to build on site. They are being promised the same ownership of opportunities as their parents. Day,l news, 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Foreign and European Affairs ministers gather in brussels to discuss brexit tomorrow. They will be led by the chief negotiator, coming amid a new standoff negotiation with the exit secretary, david davis, saying e. U. Leaders have been unwilling to compromise. We talked with a member of the executive board at the boone just bank and asked him where talks are headed next. It is not at all clear whether or not we will go to phase two in december. We have to wait for that. It is my impression negotiations are going slowly and will take some time. We have asked the banks to take precautionary measures, not knowing what the outcome is. I think we should prepare for a hard brexit, but that doesnt mean we are wishing for it. Your thoughtss on what is being considered at the moment, a number of american theitutions are considering exact opposite of what we have now. Would that be too far, from your point of view . It is not exactly my point of view. Question,king a broad i comment on individual banks. We have had very concrete discussions with some banks about their model, and we look at their application. We have to make sure, should funds be transferred to the clearent in europe, it is we will not accept empty shelves. We will have a real Bank Business here. We have the Money Laundering function, risk function, banks have to be able to operate outside of that vicinity. There will be deviations. Anyone can have a letterbox in germany, but you dont get a license for that. What the banks want. They have to apply. Ofjoining me now is the head d. Na research at emirates mb both sides are saying, we need more compromises than the other guys. When it comes to theresa may and the conservatives, how much is the political infighting intensifying, how much is that hindering their brexit negotiations . It is going to be putting them at a disadvantage. Sheesa may will rue the day decided to call the election earlier this year. She was in a far stronger position going into it, leading a much more united cabinet, or so it seemed. She is facing not just the European Union on one side, but her own cabinet and the infighting there. Two major resignations in the last fortnight. On other senior cabinet members that are still there, but who knows for how much longer . We have that big december e. U. Summit coming up. This chart shows one month and one week options volatility for cable. It picked up a little bit recently, but it comes back down. The pound has been relatively resilient in the face of all this uncertainty. What is going on . I am surprised the pound has been as stable as it has over the last two weeks. Extent, the economic state is supporting the pound. I am not sure this is a story so much of pound strength, but more broadbased. I dont know if that will be sustained. Ahead to 2018, the Interest Rate differentials between the u. S. And the u. K. Are going to widen. We are expecting another three potentially next year, and we are not expecting Much Movement, if any, in terms of u. K. Interest rate. The risk to the pound is on the downside. Seem like the u. K. Economy has picked up a little bit, thanks to the pound. If you look at Industrial Production data, that is very strong. People have been quite pessimistic about the u. K. Economy since brexit. It hasnt come through. The Manufacturing Sector has benefited from the weak sterling. Months,ook forward 12 it is hard to see where you will get further stability. Inflation is high, wage growth is not. The Employment Data we saw last week was 14,000 drop in employment for the month of september. We havent seen that drop in employment in a very long time. Havees suggest events that been pushing the u. K. Growth is starting to wane. Looking broadly at the european region, draghi said they will get that Wage Inflation they have been looking for. Do you buy it . The Employment Data in europe shows relatively high unemployment rates, on average. Markets,ok at specific in germany, it is much tighter. You probably will start to see wage growth coming through. It is easier to expect that in the United States, where we have seen low unemployment for a long time. In europe, it has been more of a recent phenomenon. If wednt be surprised didnt see much greater growth in the European Union in the next few months. It may be further down the line. You are staying with us. Will be talking about a Christmas Gift from u. S. Politicians. We hear from one billionaire investor who thinks President Trump first major policy when could come before the holidays when could come before the holidays. This is bloomberg. The billionaire and colony north star chairman says President Trump will have his first major legislative victory by christmas. I spoke with him about the tax reform agenda at the Global Investment forum in dubai. It will get done. The boys and girls have to learn to play more kindly in the sandbox with each other, but they all have the incentive to get this done. Both sides of the il in america are facing midterms. Aisle inn America America are facing midterms. The president has a great Economic Advisor and secretary of the treasury, and they are fully committed. I think it is a necessary ingredient, to provide a couple hundred dollars a month more to the average American Family in terms of the benefits they are reaping for this is intermediation in america, the proxy they need to continue to move forward. I think we will get it before meantmas, and it may 11 30, december 24. You are famously a trump supporter. Are you happy with the progress the administration has made . Is there anything you wish they would do differently . I am happy with the progress. Let me define happy and progress. This president comes out of a different mold. As aca has a democracy democracy is quite unique. To have the president of the United States come from a nonpolitical background is a dramatic step. The purpose of that was not necessarily to proliferate a continuing political agenda. It was to start shipping away action chipping away action entitled bureaucracy that was incapable of change. In the u. K. , with brexit. You see what happens in france, in zimbabwe. You see what is happening across asia, with president xi solidifying the one belt, one road theory. President is focused on disruption, disrupting the system of entitlement in bureaucracy that stopped the average american from feeling they had a say, from having an educational platform that worked. From having a military and Foreign Policy that was understandable. It happens in tiny inches over long periods of time, and is sometimes unrecognizable. I am pleased and happy with his bigger and courage, his relentless ability to suffer pain from the institutional ability to craft tapestries of relationships with other heads of state and foreign leaders. Avoiding the traditional system by avoiding the traditional system, which causes angst. To voteit is too early on what his progress might be, but i think he is doing exactly what he needs to do, and wakes up every morning saying, i will away at the system and that will make it better. Lets bring in the head of menote research for more on this story. Opinion. S of one the Goldman Sachs basket of high tax rate stocks, underperforming the Broader Market recently. It says the market still has some doubts about whether or not we will see the tax reform that was previously heralded. Probability of getting this done by the end of the year is not as high as mr. Barrack seems to suggest. We think it will get pushed into the First Quarter of next year. The senate still has to approve the bill, and the house bill is very different. Trying to get everyone on the same page, the house and the senate, in a couple more weeks is quite a big ask. In terms of how the markets have looked at this, i am not sure the movements in the s and p are really driven by progress with tax reform or not. Which is really benefit the most from tax reform are the energy sectors, and those stocks have not done well. Tech stocks, the ones that have done well, will be potentially penalized on the new bill with the money they keep paying offshore. What is driving equity markets is not tax reform, but other factors. Had significant tax reform the how significant wood tax reform be for the overall u. S. Economy would taxs reform be for the overall u. S. Economy . The people people who would benefit most are the higher earners, and those guys dont go out and spend what they arent paying in tax. Of anl not have as big impact on consumption added as it would skew to the rest of the income curve. That, it is hard to see if it will be sustained over a tenyear. Questionis a big hanging over the u. S. Economy, the yield curve. The spread between the 10 year and twoyear, is now at its narrowest in about a decade. What is your interpretation . No idea. Worldgles the mind, in a where you are expecting raise rates to rise dramatically next year, and the story of economic fundamentals is quite positive, the yield curve should show a much bigger spread that it is. Than it is. This suggests the market does not believe the economy as strong as what is being suggested. The yield curve suggests we are on the cusp of a slowdown, and into awe are heading recession in the u. S. , which doesnt tie into any of the Economic Data we are seeing or reading. Factors atto be other play in terms of what is driving the spread. We are getting minutes from the fomcs meeting. The fed is looking at the yield curve, and does that relentless fighting compensate their tightening flattening complicate their tightening . The communication over the last few months has been in favor of another rate hike and december, and another in 2018 in december, and another in 2018. When you look at how they describe the economy, the terms that have been used have become stronger. That tells us they need to start hiking more than they have. They entirely sure may feel the market is not believing them. Withhey need to continue what they indicated in order to build that credibility. Is there a risk if they push up shortterm rates above longerterm rates . Unlikely. The pace will be gradual. As long as Economic Data continues to support that, the longer and will shift. Shift. Er end will we will be talking about one of my favorite stories. Rules against the fight in islamic bond holders. This is bloomberg. Welcome back. A u. K. Court has made a decision, which dana gas will appeal after losing in london. It missed a payment on 700 million worth of islamic bonds. A judge says bush law contracts are enforceable. Our team lealder has been following beat her has been following the story quickly leader has been following this story. What has been the reaction to this decision . Dana they feel very vindicated and have said when you sign a contract, you have to honor it. That is what the court has said. They feel quite comfortable with this, they are very excited. They feel it at least encourages dana gas to go back to the negotiating table and try to come up with a solution. We have been focn focused one debt story. There is an equity component as well. Once the drama started in the summer, bond prices fell, and equity prices jumped. Results have been recovering somewhat. Thirdquarter profits jumped to 102 million. Dramaassume assume the was assigned to resolve quiddity issues, it seems to be working. Dana operations are quite good, it is a solid company. It is not paying bonds on time by the people it works with. But the Actual Company is a good one. What happens next in terms of the Legal Process . Appealed thes has decision in the u. K. The court will determine the actual contract is illegal by islamic standards. Standards. Islamic agree, the court does what does that mean for the purchase undertaking in the u. K. . We want to see more clarity about where this will go. Investors feel that maybe dana gas might say, it is time to negotiate. Emerging markets team leader. Thank you. A market preview for the region, in focus. We are keeping an eye on imar properties, which has managed to pull off the middle easts largest initial Share Offering this year after it was almost derailed by arrests in neighboring saudi arabia, where Authorities Say they are rooting out corruption. Shares are up just under 10 this year. This company has issued stock reratings. Aosie rough airways jazeer airways has been downgraded to reduce. Significantlyre weaker this year. We are watching saudi. For more news on its nationwide anticorruption strategy, the stock is down 4. 5 this year the index is down 4. 5 this year. Investors may come in to support that market. That is it for this edition of Bloomberg Markets middle east. We will be live from the region at the same time tomorrow. Here is a quick look at what we have seen from u. S. Action last week. Not able to hold onto that optimism we saw. We will be bringing you more on that story from the red later this week. This is bloomberg. Jonathan from new york city, i am jonathan ferro. This is bloomberg real yield. Jonathan coming up, republicans inch towards tax cuts. The plan to stimulate growth fails to fuel the reflation trade. The Treasury Curve gets even flatter. The difference between short and longterm yields is the narrowest in a decade. And it is a research at the end of the week for credit. A long correction, at least for now. We begin with the big issue. Is there a signal in the treasury market . The fed operating on the short end of