Airbus of the a3 80 questions the future of the jumbo pending helps of survival on the emirates. I am yousef gamal eldin. The u. S. Bond market coming back online. To asian equity session off a strong start, although a mixed action or. On thebal market bloomberg, the hang seng up 1. 3 , some weakness with the aussie stocks. A bhp ratingsnd cut weighing heavily. Broader session dominated by Consumer Staples and Technology Sectors offsetting a decline in materials. Fluctuating, the dollaryen one of the major moves in the key currency pairs. , down. 4 . E speak relative stability in the u. S. Dollar for the moment. ,t is hitting the base metals aluminum down 2. 2 . Also sink down. 8 . And i will the board show you what is happening with brent crude. Currently down. Wti stronger, a diverging richer on that front. The u. S. Tenure currently unchanged. We have the eurodollar story. We will get into that shortly. S p 500 futures higher. We do have citigroup expected to post fourthquarter results before the fourth quarter. Before the open. Qatari stocks plunged the most in seven months after the uae said the nations jets intercepted to commercial planes, claims doh says our ha says are doa completely untrue. This comes after a qatari royal said he was being held against his will. That claim was also flatly denied. Investigators are trying to learn why a mezzanine floor collapsed, injuring 72 people. A group of students was on the balcony when it came down. Police found no trace of explosives. Has gone through 70 for the first time in three years as hedge funds increase their bullish bets on oil. Rallies, theity view that opec and partners will and supply cuts early is multiple banks predicting a wind down starting from the middle of the year. Bloomberg sources say china is escalating its clamp down on crip though currency trading targeting platforms and mobile apps that offer exchangelike services. Authorities have recently noted an uptick in activity on alternative venues. A u. K. Lapse of Construction Company which employ 20,000 people is causing shockwaves. Billionunder with pounds in debt commitment. The eu looks set to remove south korea and the uae from a blacklist of tax havens later this month. A Committee Recommended moving the two countries into a great list for more monitoring along with other countries. The eu finance ministers must approve it at a meeting next week. The lead singer of an irish rock band the cranberries has died at the age of 46. The musician was pronounced dead at a hotel in london where she had traveled for a recording session. Police are treating the death as onyx remained. The band sold more than 40 million albums worldwide. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Yousef thanks. Lets go back to one of our top stories, u. S. Treasuries back online after the mlk holiday. They will be in focus this week. On tenyear yields touched a ninemonth high. The dollar has been stable lazing stabilizing after a sixweek slide. Seem tofocus, traders be excited about hawkish comments from the ecb that has given the euro a three u high against quite a few pairs as the governor said the central bank could hold net asset purchases after september if growth and inflation you fall line with projections. He said the ecb should i just policy guidance before the step 20 is the last not a big deal anymore. Lets talk about this with our guest who joins us live. Lets take off with the stabilizing u. S. Dollar in the last few hours. The u. S. Dollar bottoming out given the phenomenal moves in the u. S. To paper . Per . Twoyear seeing thatt correlation between the rates curve and the dollar right now. The robust cpi data and lack of followthrough by the dollar greenlighted the selling. If we look at the narrative as a was the primeo consensus trade going into 2018. A lot of of players are under positioned and looking to buy euro. This is why we have seen the sudden ramp up. Today they are taking a breather because new york is coming on line tonight and they are not sure whether new york traders will continue the dollar selling trend or reverse it. Did reverse it, it will be a shortterm move and that the dollar will continue to weaken this year. Writing thisam is a mirror image from 12 months ago. Bearishet is excitedly on the dollar without fundamental justification. But a major move overnight. We put up this chart in terms of the aggressive positioning. Longis the speculative positions climbing to a record. Ask you, two parts to this question. Do you getedibility to the scenario that we will see an earlier move from the ecb to address some of its Balance Sheets . And, where does eurodollar go from here . First, we will see the language shift in march towards a definite move to reducing the balance sheet. That will be the first time the easy he is willing to shift. The ecb is willing to shift. My view looking at the euro Going Forward and can pairing comparing the market economic data, 13 year highs on pmi data. Wherere so full behind the fed started raising rates, and the ecb move towards an Interest Rate path normalization, i think the euro plus,ccelerate to 1. 30 and we are holding that view solidly through 2018. Yousef your thoughts on what is happening with the yen . Concern that policy makers will start intervening more . Where does it go from here . That was the reaction this morning. We heard jawboning out of boj short traits to be pulled out of the market. For theominant view is market to sell dollars, and i would be surprised to not see dollaryen trading lower. In the back of traders mind, the boj will move off this. I think that tends to be filtering into the market. Some fading of this move as we move through the day today. Yousef stephen, you are sticking around. We still have plenty to get through. Lets get you a preview. Why m a momentum is likely to continue in 2018. At the, the yuan strongest level in years. China has the market guessing. This is bloomberg. Yousef this is Bloomberg Markets middle east. I am yousef gamal eldin then dubai. Throughto gauge risk is the currency forwards. We put this in a chart. The stocks can get influenced by other parties. It might not be the best way to get understanding of how investors are placed. This is bets on how it will trade 12 months from now. They are at low levels. The big spike in 2017 was when andgulf crisis kicked off you saw the forward trade over 500 points over the spot rate. This is critical to the story. Lets show you other asset classes. In doha. E a selloff this is the biggest move since the summer of 2017. Dubai down. 5 . Turkey also a selloff, different reasons. You have renewed tensions with syria, basically underperforming broader peers. Lets get you up to speed with business flash headlines. Airbus has questioned the future a380 if it fails to win in order from its main backer, emirates. It is the only one with enough capacity to take enough planes to keep the program alive. Can find ae we solution with emirates in the nottoodistant future, but we do need a strong base that only a big operator like emirates can provide. An end to nafta would put pressure on production. Official talks resume at the end of the month. The path is unclear. The white house wants to see negotiations succeed. Canadian officials see chances of a u. S. Pullout rising. Away, itta was to go would rise cost and put , souction capacity at risk we are advocating for the continuation of nafta, but we do agree it is 25 years old and there are many things that can gooddated and modernized, for consumers, workers, and the u. S. Economy. Yousef a former Credit Suisse banker taking many accounts to cover trading losses said stress from the financial crisis and growing losses took a great hole on his health. He said his experience at the bank started well, but became stressful in 2007 as he took on more assets. He faces up to 10 years in prison if convicted. Citigroup will publish the gap between what it pays men and women in the u. S. Coming u. K. , and germany. Will increaseit pay to close that gap. It is the first move of its kind by a major u. S. Bank. Lets get act to some key moves in asia, the strongest yuan level in more than two years has prompted speculation about possible steps to cool those moves to the upside, but an attempt to control the currency could hamper the administrations plans to take the currency global. Tom mackenzie joins us out of beijing. How much higher are they willing to let this thing go . Question, the key where is the line in the sand. Around today puts it 6. 43. The number yesterday was the highest we have seen the yuan trading since december 2015. We saw steps being taken to soften the currency and move that Counter Cyclical process out of the equation when it comes to renminbi the fix, and the renminbi did to drop on the back of that. Mizuho says the level to watch is 6. 4. That,go above policymakers could relax capital controls. Anz says it is more useful to look at the yuan traded against a basket of currencies. This is 6656. The yellow line shows the recent strength on the righthand side. The blue line yuan shows the versus the basket of currencies. It has cooled to some degree. The jury is still out on this. Time ande have heard time again from a lot of people about the upcoming end of the u. S. Dollar. It has been going on since i started covering financial markets. Now European Countries are adding the yuan to fx reserves. How could that affect the broader picture . It is a vote of confidence for the yuan. Reports sayingh the bank of france has been using some fx reserves to buy renminbi. The german bund us bank looking to do that as well. The context is that since the renminbi was included in the basket, that was seen as a step is six in thee world. Those capital controls have hampered the liberalization of the currency, but the moves i Central Banks in france and germany to use the yuan in fx reserves will be seen positive here in beijing. Back to thes get on some of the latest insights from tom mackenzie. I want to ask you what we can expect from chinese policymakers. Management, ors what else is in their toolbox . It is always difficult to figure out what the pboc has up their sleeve. Viewe a somewhat different on the removal of the countercyclical mechanism. I thought the pboc were happy with the structural way the andinbi complex was trading felt comfortable enough to remove it. That was designed to curb capital outflow. We dont see that picking up right now. We saw and that as a vote of confidence and were encouraged. U. S. E back of the stronger dollar, that is really driving the momentum right now. Where is the line in the sand for the pboc . Given the fact that they are in a happy spot right now with comments from central bank reserve places that these Central Banks are acquiring the yuan, i dont think they are ready to step in front of the party bus right now. I think the yuan bulls will be running wild in the china shop for the rest of the week and month. Yousef we understand according to people familiar with the matter, they are restricting some cryptocurrency trading further. Could we see more measures Going Forward . Like from last week when the korea came out with barrier fore, the success of crypto has increased tenfold. The markets have not recovered. This could be a wave of Regulatory Oversight globally is quite strong. The people who are banking on cryptocurrencies are retail and really unsophisticated traders, so a is of Regulatory Oversight needed and there is a fear a lot of people could prop a lot of money on this, and this is what the regulators are trying to hammer home right now. You thisood to see morning. Thank you for stopping by. Lets get you a snapshot of what is coming up. The qatar price is back as the uae accuses the nations fighter jets of intercepting two of its commercial planes. We will break down the story and what it means for you. This is bloomberg. Plungedstocks in doha the most since the start of the crisis after it accused the nation of intercepting to bring commercial planes. It says reports are untrue. Lets get more with our managing editor for International Government in europe and the middle east. It has been a busy 12 hours. Donald has been on the phone with the qataris and some Key Takeaways from that chat. It has been a bizarre week to say the least. Overnight we had this call between the him year of qatar and donald trump. There was a readout where he thanked the emeir for helping to fight extremism and terrorism. There was the mention of iran. This is one of the cases where the readout of the call was not exactly what was discussed. It would have been great to be a fly on the wall. , what iswas more like going on in the gcc and lets the escalated. We have had 34 events that have caused alarm. Investors are seeing reason to worry. The u. S. Is coming in to get both sides to settle down. Yousef what is the likelihood of a further escalation from what you are seeing . Guest were speculating there might be a resolution in 2018, but a Downside Risk has not been priced in. There are no talks taking place, and no informal talks or back channels currently open, so what do you base the resolution on other than optimism . We have had some weird incidents this week. There has not been an explanation, and the question is why now . Somebody is not telling the truth. Yousef it was relatively quiet over the last few months. Now the rhetoric is sharp and we have action in the air and on the ground. Could we see more of this titfortat . A formal not been response from the uae if the claim is accurate. We could definitely see it. The distance between the capital of bahrain and the capital of qatar is 90 miles. That is less than the length of long island. When you start throwing out accusations in the rhetoric heats up, and by the way qatar says the uae invaded its airspace twice, the potential for things to go wrong rises him up but clearly there is some sort of policy objective they are trying to achieve, and that is why we are seeing this and likely we will see more. Yousef thank you for coming on the program. Here is what is next. Chinas crypto crackdown, details for you next in full. This is Bloomberg Markets middle east. This is bloomberg. Yousef we are 90 minutes away from the market open in the emirates. The u. S. Dollar index in focus. Currently up, but giving away some gains. I want to talk about airbus and this part of the world. , now a gadflylier columnist putting things in airbus isho says playing chicken with one of its biggest customers. That airbus share price would increase, but the fundamental takeaway is both Companies Still believe there is a future. It is conceivable that air traffic can keep compounding 380 finding a bigger market. It is really who foots the bill to keep the program alive. Expect a highstakes blinking contest to continue. Airbus down in the last trading session. Lets now check in on business flash headlines. Investigators are trying to work out why a mezzanine stockof the Jakarta Exchange collapsed, injuring 72 people. Students on a field trip was on that balcony. Police say they found no trace of explosives. 70t crude has gone through for the first time in the three gears as hedge funds increased their bullish bets on oil to the highest in more than a decade. And its that opec partners will and the supply cuts early is spreading. Citigroup and other banks predicting a wind down will start from the middle of the year. Bloomberg sources china is escalating its cramped down clampdown on cryptocurrency trading that offer exchangelike services. Authorities banned exchanges last year, but have noted an uptick in activity on alternative venues. The euro hit a threeyear high after the ecb said it could halt asset purchases if growth and inflation if all in line with projections. German newspaper the ecb should adjust policy guidance before the summer and the last up to zero is not a big you anymore. A u. K. Construction company carillion collapse is causing shockwaves, going under with more than. 5 billion pounds of tension obligations. Banks including barclays, lloyds, and rbs are said to lose 835 billion pounds in loans they made to the company. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am debra mao. Lets move over to singapore where Juliette Saly has a look at the markets. Another day of gains on the regional benchmark index, holding and building on record highs. Have a look at the hang seng, up 1. 3 . It did close in the red yesterday, snapping that winning streak, but back in the black today, lifted by the likes of tencent. Most markets are in the black. And the nikkei up as we send yen weakness. Australia hurt by ratings cuts to bhp billiton and telstra. Not on the gm and come one of the biggest movers is the rally , hittings index multiple highs. It is trading 3. 2 times book value. Weakness down by a point 3 . The other major story is the movement in the chinese yuan, the highest level since december 2015. Analysts clamoring to define the line in the hand sand. Mizuho says they see the level at 6. 4 percent. We have seen brent impacting some of the airline players, particularly china. You have seen weakness in China Southern and air china a shares. This is the lunchtime price there. Betting on a further rally in crude prices as we continue to see the uptrend. The Overall Energy sector is coming underayers pressure and materials weaker, but generally an upward trend from regional equities. The regional index at a fresh record high, and volumes strong as well, with the exception of india and japan where volumes are lower than normal. Yousef thanks. Lets get back to the rising regional tensions and claims made that qatari jets intercepted two commercial planes. There is a Saudi Led Coalition to sever ties. Equities in the region were largely unaffected, so are investors underestimating the risk of an escalation . , thelked about the stoxx forwards, the currency forwards on the riyal still showing muted reaction as it were. In terms of positioning and putting this in context, having jets flight alongside commercial aircraft, that is a disturbing prospect. Have we develop too much fix skin and we are now no longer pricing it incorrectly . It in correctly . Pressure will remain on trading sentiments in general, but as long as it does not exacerbate into further political risks, i think the region given for current , especiallyevents iran and turkeys move to the kurdistan region, we have the political situation in other areas. I think the Investment Community on a domestic level has been used to that. The flows that we have seen since the beginning of the year the cloudsdown until are clear and the skies are back the normal process. There is contention that is already priced in. Yousef you are saying it is priced in. In saudi, cement production figures showing a year on year fall. We also have the earnings season. A lot of investors getting excited about the bank story in the kingdom off the back of the broader reform story. Where would you be telling clients to be putting money into companies in saudi . I would not specify. Toould rather push investors income Generating Companies in saudi and other markets like the uae, qatar, and elsewhere. However i would stick to the financial sensitive companies, also the insurance sectors. Sectors will have some stories all around the region, in saudi specific. Why . Andvaluation gaps are huge targets are identified by bigger players in those sectors. Next in the theme i would say from the beginning of the year to the end of q1, the banking stocks remained good caddis for high yields in saudi markets. Yousef hold that thought. We still want to get to some other calls. Up next, saudi arabia tries to reduce dependence on oil, but dubai says we have been there and done that. Why they are leaving middle east neighbors in the dust. That is next. This is bloomberg. Yousef some breaking lines hitting the bloomberg. Profit 8. 3 5 billion dirhams. There, 15 . H Net Interest Income improving by 7 . They are saying due to loan growth. Total billion dirhams income. Let me run you through how analysts have been feeling. Three holes. That shows you the disparity in positioning. Has been the biggest leader in market lending in dubai. About whats happening in the uae. While saudi arabia is seeking to diversify away from oil, that mission looks complete for their neighbor. Dubai is poised to be the growth leader in the gcc. Is despite crude production contribute less than 1 to gdp. You have had a few days to get your head around the very rapid progress and changes in dubai. Run me through your and prescience as you put it in context with what is happening around the world. You look out your window here and there is always something new to look at. That is the story of dubai. Is all about infrastructure and relentless commitment to infrastructure, but behind that is as you said a policy that goes back to the 1970s to diversify away from oil. The middle east is a map about oil exploration, production, and its boundaries. Or the uae and particular is taking a step away from that. It is a step into the 21st century. You can see that in one profound relationship, the relationship between oil and the stock market. Everywhere there is a correlation. Do you buy, it has vanished. , it has vanished. To grows said we want as much as we can away from oil with as much clean energy as possible. Yousef dubai there was some talk around dubai having lost there was some talk around dubai having lost its way. Saudi arabia has been so aggressive with reforms they have taken the limelight, but the underlying story in dubai is intact. What would you say are other highlights that give us more perspective on what to expect for the next few years . Has you said, dubai has a head start. It manifested in some things that is trulye international in scope and scale in emirates. If you think about the passengers coming in and out of dubai and where they are headed come this is a gateway to globalization, more than any place in the middle east. It has make them middle east a global center. That is one part of dubai. The other part is there are more ,han 200 nationalities in dubai so it is a very diverse place. That is a virtuous circle. Diversity,es greater and that diversity is good for business. Terms of the correlation, and we have put this up on the bloomberg to underscore the point that dependence on crude has shifted. This is for the dubai index. You wont find brand or wti brent or wti. This is a correlation finder based on the dubai index. I want to talk about the challenges. They are real. What are some of the other headwinds that you would say dubai has to deal with for the next few years, competition, geopolitics, and putting it in a global perspective . Every business loves unbridled growth. Anything that gets in the way of a Growth Strategy is going to be a problem. So what is this, particularly international business, has to contend with in the context of dubai is are the regulations going to be helpful or hurtful . Will they encourage Business Investment . That is what every business thinks about, will the regulations help me or hurt me Going Forward. Yousef matt, lovely to have you on the program this morning. To our guest and get a feel of how this affects your investment strategy. We heard about some key ideas and themes, how does that set the stage for you in 2018 . Will we see more moves from the government other than taxation with the introduction of vat . Look, nothing will change. The outlook is challenging for 2018. If we focus on the economic relationship between the uae and saudi, that is on the bright side. You have deficits being brought in by saudi arabia and uae with some sort of transfer payment strategies that we think is very smart. Main challenges that remain ahead are higher Interest Rates, cost of funding, and more pressure on the spending power. On strategy is still based the economic drivers and main events. Think highly Leveraged Companies might suffer and restructuring for Smaller Companies will continue to be eventdriven and create opportunities. Why . Come inook at 2016 total companies only generated 7 is due dirhams and that to the fact a few Companies Reported losses, and that takes us to another idea, the wave of mergers and acquisitions. Yousef you have the underlying reform theme still in tact, but you also have a story in 2017 of mergers and acquisitions, consolidations, synergies. With oil prices coming back, it is still affected by virtue of sentiment. At the oilors look price and make decisions on the back of that. Are we going to see a more positive focus on the dubai story with brent clinging onto 70 a barrel . I would say yes. Closer, itetting will get bigger and bigger. Lets look at the uae in general. Yesterday, we saw an announcement from an indian acquiring or ataining approval to acquire part of union cement. Andou look at the companies trade below book use, there are 55 companies. There is a reason behind them being traded below book value. Adding to the capacity of a company 4 billion tons of cement with an enterprise value of 3 million to 5 million, you are aying only 3. 4 to generate 14 increase in capacity. Yousef we had some earnings minutes ago. We had some news from Emaar Properties around dividends. Chips from a fundamental point of view could continue to perform well. Thanks in q1 might feel the heat of higher rates. Q4 was not the case. We have seen the banks in general report higher, and that is due to the reason that they to thepting International Accounting standards, and that is for looking when it comes to credit losses. In 2018, the government budgets will continue to expand the credit portfolios of the banks, but this will be pressure due to this greases in net interest margins. Yousef always exciting conversations and insights from you. You an indicator of what we will be talking about next. We are preparing for the middle east markets open. We have to get you in shape and ready to go and take a look at stocks. Not just the middle east, but prevents around the world. Make sure you stay tuned for that. This is bloomberg. Yousef we are two weeks in to the mifid ii era. One of the chief architects has told bloomberg that the introduction had a smooth start. He spoke with Stephen Engle at the asia financial forum. Some of the predictions before january was there would be barriers to trade because people would not have met certain requirements, and looking back on january 3, it was a smooth start. There is no indication that there will be less trading by traders outside the eu into products in the eu. Are you having to battle a perception issue . As a regulator there is always the need to emphasize the objectives and what we are trying to achieve. Rules and regulations and fly costs. It is important to see the benefits. In this case, it is about investor protection, ray transparency, and more standardization. I was bringing up the moodys story a sickly saying mifid ii basically saying mifid ii will be credit negative. How do you weigh the Downside Risks to these beefed up regulation . Iiit is clear that mifid with the Greater Transparency around costs and on the bundling is that it will make it more competitive. That is a preferred direction. Lower charges and improve performance of your products. That is not necessarily a negative from an investor perspective. Do you see Equity Research going the way of fond research where you have the Ratings AgencyBond Research where you have rating agencies basically sponsored research . Is that the way it is going . Under method, clients mifid ii, it is slightly more complex. Indeed, there is the possibility of direct payments by Asset Managers who can pay to the broker or to an independent research house, or build their own Research Capacities as an asset manager. Yousef we are counting down to the market open in the emirates and other areas as well. Updated thehave recommendation on emaar malls. Nbd, an important bluechip. A note from Morgan Stanley that believes the south African Market is pricing in a 20 chance of a 25 aces point cut, which they say is too low, that ad of a decision on thursday. Local currency bond yields at the lowest level in four months. The rand strengthening for a third day. Also some key earnings are expected to come out. Importantonal bank, as one of the biggest vendors in the region. Ofwill give us an idea liquidity and have they been coping with the gulf crisis. The wider picture, here is what we are looking at. Trying to figure out where things are with inflation, cpi for december for germany and italy. Ppi and cpi for december for the duke k for the u. K. Thats all we have for this edition of Bloomberg Markets middle east. A lot going on in these markets. We have all of the top stories from around the world next. This is bloomberg. Iette curtis around 70 crude is floating around 70. Jpmorgan says opec will probably end the curve by ing or if the market is balanced. Bank of america expects a widening deficit this year. China is escalating its clamp town clamp down on cryptocurrency. They recently noted in uptick in activity on alternative