The imf to stop playing with fire with the countrys debt issues. Yousef im yousef gamal eldin. Tracy im tracy alloway. This is Bloomberg Markets middle east. It was inat a week markets. We started off lacking direction. U. S. Markets in particular reacting strongly to headlines from the trump administration. Yousef absolutely. If you look at the comments from donald trump, the promise to overall business taxes really helping across the board. Record highs for a lot of these markets. Going all the way back to the 1990s. This is the chart to pull up the blue line where you have these synchronized new high, intraday high specifically. Its important to say that in the late 1990s we had these massive breaks, and then look at the number of bars right there. Stocks pushing new record highs. Important to note the vix is still at, what . A twoweek low . Its amazing the complacency in the market. We will talk about that with one of our guests coming up. Closelook at the u. S. Numbers. We had highs for the three major indices, the s p, the dow, and the nasdaq all hitting highs. The dow jones in particular boosted by strong reaction in financial stocks we saw off the cirillos surprise resignation from the fed. Use of, what is going on in the middle east . Fromf we are two hours the opening of the dubai markets. We had a very tumultuous day. Let me run you through. Hammereda and getting after that stock was down 8. 6 . Also reports from union properties, profit taking a major not. Abu dhabi, we have a good indication of how the company is faring, investors not reacting positively. Oil prices in saudi arabia helping sentiment. And just about the flat lie never very keep an eye on what is happening in kuwait. Around a is evolving court case in iraq. You, yousef. Lets check in once around the world. North korea test fired a missile according to the south Korean Defense ministry. They could not confirm whether it was a longrange ballistic of reaching the u. S. That pyongyang had threatened in recent weeks. This as donald trump met with the japanese Prime Minister shinzo abe in florida. The International Agency agencies said that opec has oned 90 yes, 90 its production cut. Saudi arabia has reduced its cut by even more. To rebalanceing the energy markets. They have a highly anticipated work on monday. Turkey will hold a referendum on whether to expand president erdogans powers. It would give the president the power to appoint ministers, dissolve parliament, and issue decrees. Claimed that they cannot get their views across with the opposition media largely silenced. Speech, Alexis Tsipras says that he is confident that there will be a solution over debt repayments. Reviewhas to complete a of the bailout terms before eu finance ministers meet again on the 30th. Tracy and the swiss will cast votes on a government plan to change the texas and for Big International companies. Polls ahead of the referendum show the electorate split on the reform. Says that the reform is needed for switzerland to stay attractive as a place to do business. Yousef lets get to our top story. There has been confusion at the white house on how they will tackle the Appeals Court ruling on president Donald Trumps travel ban order. Initially, the administration said it would not twothe Supreme Court reversed the decision, only to say was possible. Two discusses the in market ction our Global Markets to discuss this and the Market Reaction up our Global Markets reporter locale a. We have a couple things. We have trump getting shot down on his travel ban, but he is talking about this tax reform, which is what investors really wanted to see from his administration. During the campaign the resolve almost this meme about the last person to whisper something in trumps year, that is what he does. The same thing appears to be true of the markets. The last thing they hear our tax cuts. That is all he talked about in his victory speech. That caused markets to reverse. That is kind of the thing we saw leavingts and i think this tax plan, the sarge, it solidifies ideas this will be practical and able to get done by the end of the year. What about details on the promises of a phenomenal tax overhaul . Reminiscent of the promises of big infrastructure spending. Any meat to his promises at this stage . Luke right now there is little to speak of in the way of meat. More or less said hes not ruling anything out bordereans that that adjustment tax plan, something that would be fairly negative for retailers if it were enacted, and also im sure a lot u. S. Finers with a major presence would have something to say about that. But as far as we know, that is on the table. But you will note that retailers had a great week and it wasnt just nordstroms with the resistance to trump in terms of dropping his daughters clothing line, but retailers had a great week. We its almost like although dont have the details, markets are kind of saying the border tax does not look like in india or 2017 thing. That seems to be something getting pushed back if it will happen at all, in the minds of market participants. Wasy all right, luke how staying up late in new york for us. Thank you very much. Those are to this region, egypts annualized urban Price Inflation jumped the most in a decade. Prices soared after cairo abandoned its currency pegged to the dollar. Yousef, this is a story very close to your heart. Prettylation figures are astounding. We saw the Egyptian Central Bank basis points. Its painful for people on the ground. You have a more positive take. Its a i would not say necessarily positive take. Its just putting it in context. A lot of the people weve been speaking to of been putting this out. You compare the inflation rate month, anvious increase of 5 . Youve got people trade. Grain bread up 9 , milk, cheese, and eggs up 11. 5 . This is food and averages. Theoff the back of devaluation, this is part of the wider agreement to secure the 12 billion bailout or support program from the imf and so far it has played into the inflation figures. It will test to be central bank. How will they tackle this problem . Cut offnt want to any growth potential. It is a balance that a lot of Central Banks face every month. Tracy right, but what about the International Reaction . We are seeing Foreign Investors come back into the market. Again, it has been remarkable to see reaction after the devaluation. This is the chart that tells the story. Stocks are 41 cheaper in dollar terms in dollar terms, it is important to underscore so that purple line right there in the middle, that is when the devaluation six in. You see the net inflows in a egyptian equities. Also black rock improving. Egypt, we areding rewarded for the risk we take in our fund exposure, the Egyptian Central Bank clearing the backlog of investors seeking to repatriate funds. Another positive signal to easing liquiditys constraints in these markets. A story wenitely will be following in the months and potentially years to come. One new feature we like to bring to your attention is our interactive tv function. On can find it at tv the bloomberg. You can see interviews or any of the bloomberg functions we talk about on the show. You can become part of the conversation by sending us instant messages. This is for our bloomberg subscribers only. Yousef i was getting really excited because we can watch yourselves back and get all of the features. Tracy its a little disconcerting, isnt it . Yousef an amazing chart on the right panel. There is the screenshot. Plenty to play around with. Also plenty coming up on the program, including friends in high places. How has shinzo abe been . We will find out. They and we will discuss feds latest message on fiscal policy. This is bloomberg. Yousef welcome back. You are watching Bloomberg Markets middle east live from dubai. I am yousef gamal eldin. Tracy and im tracy alloway. The banking reforms that President Donald Trump wants to do yousef lets discuss more with the chief economist of an investment fund. Good to have you back on the show. Lets discuss the latest comments from the fed officials man the hindfed improving legislation, making banks say since the financial crisis of 2008 announcing his resignation. He is going to step down in april. A chance for donald trump to reshape the fed early on. Put this in context. The context is the context of high uncertainty. Nobody really knows what is going to happen when trump hisly starts thrashing out planks of economic policy. We dont know anything about the detailsucture plan, any on the facts plan tax plan. The fed is in wait and see mode. These statements from top officials are just a way to buy time. But i dont think they can signal anything of substance because they are waiting for events, like anybody else. Tracy but now we have three open spots that the fed that trump could fill relatively soon. Through his actions in congress he is interested in rolling back financial regulations. What do we know about his attitude toward monetary policy, and could he shakeup the fed in terms of that . Io he is definitely having the chance for three members of the fomc will get his chance to shape policies. Hands,s will play in his we dont know. Because candidate trump or President Trump is not been very policy, on monetary apart from, you know, vague references to bat Interest Rates. Tracy he criticizes the fed yousef this is wrp. In the course of one week we see a 72 chance of a hike by march. We will hear more from the fed chair, janet yellen, in terms of how they are going to tackle the Balance Sheet . Fabio i dont know. Its hard to predict. , iore trump came into office felt that the fed was behind the curve. We see the reflation process already taking place. With the election of trump, this reflation process will be accelerated if he makes good on his promises. So, the fed has been caught between a rock and a hard place, because they were trying to do , and now they dont know if they will be able to do it smoothly. Next point will definitely change the balance in one way or another and this might lead to even a battle in the senate for the confirmation of these. Tracy what about the battle that the fed faces significant uncertainty in that they do not know if trump will through fiscal stimulus, which would require some kind of monetary offset . The fiscal stimulus will have effects on the Government Bond rates, and therefore will push up the curve. Normally, this is three textbook reaction of markets to fiscal stimulus. The fed has already intervened heavily in the Government Bond purchasing huge amounts of paper. So, we are in a situation that is historically unprecedented. We will definitely also get in , the phasinge qe out of the accumulation in the Balance Sheet of the fed. So, essentially, it is a situation that no one can predict easily. Mean forhat does that your outlook in terms of rate hikes in 2017 . Are you sticking with your call for two . Or this is way too much to predict for me . Fabio predictions have [laughs] of variance around them. The volatility in this case is higher than a normal circumstance. I think the fed should move sooner rather than later, but thats my personal view. Whether they will be able to do it or they will feel comfortable doing it before having more clarity on fiscal policy is anybodys guest. Shift to the dollar. I know youre not a currency strategist. This plays into the rate picture. We did have comments from trump this week about the dollar and its valuation. We had external reports about his confused attitude towards the dollar. It seems that people are struggling to understand exactly what the implications are for the u. S. Greenback. You have a lot of parts moving. Be border adjustment tax. That will have an impact on the will alter theit trade patterns. You will have the fed policy that will be a key ingredients in the Currency Exchange rate. You have the fiscal stimulus. Hrough various feedback loops it is very hard to know what is going to happen. Thats only one side of the equation. Then you have the other side of the equation, china, japan, the ecb. Will the ecb stop quantitative easing sooner rather than later . The germans are already making noise that it is too much for too long. The chinese are under pressure have more coherence from the American Point of view currency policy. Japan, in terms of currency manipulation is like a target that since their big and still. So, it is yousef what does that mean in terms of the reflation trade . According to you is for the much way, way ahead of itself . Think so. Equity traders have displayed a positive attitude. Any announcement of a tax overhaul is, you know, welcome to wall street. We have seen one record high after another. At the end of the day we need to see the impact on the macro front before one can say, yes, this is a trait that can be sustained. Savio, you are staying with us. We have plenty to get through including what are we talking about . Tracy greece. This is the other big thing happening. Greece coming under pressure as cracks emerge in the relationship between greeces government and its creditors. Should investors be worried . This is bloomberg. Tracy welcome back. You are watching Bloomberg Live fromddle east, dubai. Im tracy alloway. Yousef i am yousef gamal eldin. Speaking ingarde is dubai, saying the fund must old resilience among global uncertainty. She says she does not see oil prices returning to pre2014 levels. That is a key line there. Lagarde is also saying the low oil prices are still affecting growth and government revenues. Sort of a reality check then, isnt it . Tracy interesting. A lot of people would argue the opposite, that low oil prices are good for economic growth. She is also saying that exporters need to lower taxes and diversify sources of revenue. This is a theme we are very familiar with here in the middle east. Lets expand our horizons a bit and go over to greece. There is, of course, pressure to meet a february 20 deadline to complete a review of its bailout terms. There is a chance they will miss it, setting the stage for potentially tough negotiations ahead. Still with us, the chief economist for the oman investment funds. It seems when we come to europe we have a laundry list of potential areas to worry about and some six years after this first became an issue, greece is so with us. How big a deal could this be . Economic terms, its not a huge deal. But this could definitely influence the results of elections in europe starting from the netherlands, then france, then germany. The greek crisis is handled will be a political minefield for everybody. Is essentially a clash between two visions. On the shorter this is their mission. It is in their dna. Rapid adjustment. They are not in for the long haul. Yousef speaking of the shorthaul, this tells the story of the rising tensions on the european mainland. The spread in terms of the yield, you look at that spike a last six months, incredible. Is this going to go a lot further . The market is clearly beginning to rice in more of the nationalism across europe off the back of these elections, in france and germany as well. The rise in the poll, the fallout from the scandal in illion was involved has changed to the outlook for the french elections. This is picked up by the markets. There is increased risk that Something Like the black swan can really start flying in europe. Will it . I doubt it. But there is uncertainty in france. The people have not figured out yet. Le pen, how many seats in parliament has currently. Yousef yes, i have to jump in there. The program, opec fell moment of truth. Successful supply cuts have been implemented. This is bloomberg. Yousef welcome back. Youre watching Bloomberg Markets middle east, live from dubai. I am yousef gamal eldin. Im tracy alloway. Lets check in windsor in the world. The white house is offered conflicting information about how it will deal with the Appeals Court ruling against president Donald Trumps travel ban order. Originally it said the administration would not as the Supreme Court to overturn the decision, only later to say was possible. Trump himself said he may issue an entirely new immigration order to revise the ban area yousef to revise the ban. Yousef the central bank is focusing on its mission admitted uncertainty. Officials have given no timing on the next hike. Investors are seeing a 28 chance as it stands. That may increase when the fomc onts next month march 20 march 20. President said that sabotage and attacks on Oil Installations lead to a loss of 60 of revenue. The government is trying to persuade communities in the niger delta to stop the attacks in exchange for yousef opec achieved 90 of complaints on initial production cuts. Bloombergs sam wilkin is here to help us dig through all of this. Sam, think you for being on the program. Aea is anie source. Ent if they say they cut 90 , they cut 90 and thats a lot more than a lot people were expecting for the first months of an opec agreement. Tracy sam, theres one thing i dont get though. We have two conflicting trends or factors in the oil market. One is the opec cuts. The other is the return of u. S. Shale production, which arguably has in faster and stronger than many people expected. Yet the market seems to look through the u. S. Story and focus entirely on the opec agreement. Why is that . Sam thats a very good question. I do think the shale factor is overlooked. We have a huge amount of drilling. A record for some time back now. Backction is a little way on the curve. The production is the highest since april. It is quite high at, it is quite high, but not enough to drop the market. Will it do so in the next year . It may do so, yes. Yousef we have an amazing overview of what is going on in the opec world. You can see the capacity. Thehave a nice pie chart of global output and then, of course, other small decorations as well. Me about the chances of a rollover here. Opec seems set aside with the progress. Says everything is ok. Theres still a chance they will extend this, isnt there . Sam thats the question. Are they going to extend . Are they going to bring the market into balance and halt the drawdowns in time . If not they will have to expend it. Then you are moving for a full year. Youre getting through seasonal differences and is a lot of commitment. Also we have to ask the question, is saudi arabia willing to stick by this for another six months . The reason that opec has reached doing 100 arabia is percent. They are doing more than anyone. It back is below 60 of its cuts. Is below, which is strange because they are always good at complying. It will be a question of political will if they can extended another six months in that sort of environment. Tracy sam, lets drill down into that because i think thats point. Rtant the market is excited. The young to be first months of this agreement being enforced, is there a consensus among oil traders and investors that the will is going to slowly add the and decrease as the year goes forward . Anyone i think dont know if there is a consensus on whether that will happen, but it certainly a question people are asking. There are disagreements between on a verynd traders point. No one expected this deal to happen in the first place. Its perhaps a fools game to predict what they will do. But certainly, it is a question we need to keep in mind. And a remarkable bump in brent crude prices we saw on friday. Sam, always good to have you on the program. Sam wilkin there. Lets look at other main stories around the world. Starting off with amazon. Has diebolds too rainy in business does that me a violated u. S. Sanctions. The company said in a regulatory filing it sold products to individuals with links to iran, but it report of the transactions to the u. S. Government. The worlds biggest ecommerce retailer warned it may be penalized after a regulatory review of those activities. And u. S. Cellular has reported a loss of 54 million. The wireless carrier blamed price cuts. It also set a shortage of banknotes made it harder for preparade prepaid users to recharge. Using other deals including free calls for life. Saturday, they were urging people to vote for muslim candidates in elections next week in indonesia. Beenps say they have denying hardline groups permission to march through the city. Kuwaits of agility for the most since december after it said it wrappeds government had confiscated 380 million in telecom investments. Here with more, our reporter philippi pacheco. Walk us through that stock reaction and what is happening. It was a big story and middle east equity markets this week. It was. It was, tracy. See theurprising to curve on friday. Investors reacted at the exact time they knew that the iraqi confiscatings investments. It was interesting to see that spread fell 6. 7 but it effect all over the market. Agility goes back over a decade. It has been a very complicated legal process. It has always been the achilles heel, arguably, ive agility. What do we look forward to and how our Foreign Investors likely to react . We should definitely see continuation in the markets today and this week, yousef. The company said it will not impact their finances. Of course, no one knows how far this can go and how bad the litigation from the Iraqi Government can develop. And also another company that operates in kuwait and iraq has been trading so well this year, was one of the best performers inhin the kuwaiti markets january and the markets were extremely penalized by the same situation. What we heard from investors after all of this happened on thursday, no one knows. Something similar could happen with other companies. Just of clarity. Yousef this is a big company. 15is in the top 10, top companies. They for coming on. Lets give you a preview of what is still to come on the show. Gold. Links after trump says attacks is imminent. We be bullish . What is the strategy. We will get more. This is bloomberg. Tracy welcome back. You are watching Bloomberg Live fromdle east dubai. Im tracy alloway. Yousef and im yousef gamal eldin from dubai. Is this plan enough to soften traders support . Joining us now jeff. I know you are a gold bug. A know you cheer for gold. The precious metal since donald trump was elected. We put this chart together. It shows the Precious Metals cents trump was elected, all the way through the beginning of november. Would think about a trump proof, it would not be gold, it would not be silver. It has barely moved to the downside. What will be the catalyst for chum Going Forward . When donald was elected, everyone thought that gold would go much higher. Itd the other thing. It will lower. The reality is we have a presidency where you dont know what is going to happen from week to week and thats creating uncertainty and volatility. Thats good for gold. Gold actually has been doing very well in 2017 so far. It started to creak a bit at the end of last week, and you already mentioned the fiscal package that is likely to come from donald is not likely to be good for gold, i must say. Good for the dollar, bad for gold. At i think we are looking for lower prices. Temporarily. But i do see that the stronger dollar is on the horizon. That will be bad for gold. The 1150 areak to and the nottoodistant future. Tracy yousef rightly mentioned that Industrial Metals like palladium and silver have fared better than gold. We saw Money Managers the most bullish on silver last week. How much further do the Industrial Metals have to go if trump does push through his Campaign Promises . Much higher, and anyone who is listen to me in recent history knows that i am a big fan of lady them. It does not make sense that it does not have four figures. A metal that is in a deficit to get we do not see palladium much higher. I think its only a matter of time before we see 1000plus for a lady him. Over, i think, look fantastic. Just at 18. They are probably in the mid 20s. Im really bullish. Gold, ispeaking about that the reaction that is way, way, way too low. No, no. Sometime this year, youre going to see gold at 1425. You are. But equally you could see it at 1100. Clearly you see a 300, 400 trading range for gold. It does not just sit at a number. Gold has a lot of room up and down. The Industrial Metals pressures silver, platinum, more so palladium have a fantastic time ahead of them for 2017. Does donald is going to rebuild america. And when you rebuild america, you need Industrial Metals. Tracy i like that you were on a fair first name basis with him. Jeff why not . Tracy what is going to push gold higher . The things it has going for it, low Interest Rates, safe haven demand, demand from consumers in india and china, it seems that the direction is not promising for those factors. Depends on real Interest Rates rather than normal Interest Rates. If we see them stay negative, thats good for gold. But what has gold got going for it . You dont know from week to week what is going to be said or tweeted and that is good for gold. But is a lot of this just noise . And the other pressure gold is going to get is going to be from fed hikes. Jeff definitely the fed is the elephant in the room, what the fed is going to do. If its going to be one increase from your, two increases from here, thats not going to impact the gold price. I really do believe what comes out of the white house over the next 12 months is more important than the fed because it will impact the psychology of markets. It will create volatility in that volatility is good for gold. I think the best play for investors in 2017 is definitely the white Precious Metals, not gold. , imugh i am a fan of gold a goldbug, i do fancy the other three much more. I am going to bother you and stick with the other three for a second. And stick with gold for a second. Jeff sure. Tracy how do investors feel being that volatile . Will it lead to a case of buyers remorse as one of our analysts put it . Jeff no, i dont think so. People look at gold being a safe haven. Where you have volatility, you will have an interesting gold. I do not think increased volatility will determine people from gold. It is the opposite. It will attract investment. Of volatility once you have certainty, once youre comfortable do world is looking good, that is bad for gold. If you combine that with fairly aggressive rate hikes by the fed, definitely gold is headed much lower. What about a supply and demand underpinning. Supply and demand underpinning . Jeff honestly, if you look at the supply of gold from the producer sector, it is a wash. Its definitely a wash. Price isr of the gold inflows and outflows. That is driven by fundamentals. Tracy all right one final question on palladium. How far does that chart have to go . Chart. 4 next palladium is a 40. A above that, 900. Then 1200. The potential for palladium is much, much higher than we are today. Upside you see a lot of for most of them. Who will be be weak link in this equation . It could well be gold actually, to be honest. If i look at the relative performances of gold against to be three white Precious Metals, i think gold probably will be the loser of that. That does not mean to say gold is going down. It is to say the others will do much better. They are going to benefit. Metals, the white Precious Metals are precious, but also industrial, and that industrial demand will drive the growth of the prices. Tracy all right, goldbug sit down, but not squashed. Jeff not down, not down. Just not going up very far. [laughter] us. Y thank you for joining once again we want to remind you about our newest tv function. Go onn find it at tv < the bloomberg. You cannot only watch us live, but you can see previous interviews and dive into the functions we are talking about. You can evens and does instant messages to you can even send us instant messages during the show. If you are a goldbug, you can make your voices heard. Yousef this is beautiful. We are making this more interactive. We are getting the voices of the clients. Tracy yes, but very disconcerting to see ourselves yousef no, it happens all the time. Look at the monitors all around us. Tracy ok. Whatstill to come assurances the israeli Prime Minister will be looking for. This is bloomberg. Tracy welcome back. You are watching Bloomberg Markets middle east. Im tracy alloway. Yousef i am yousef gamal eldin. Lets round up stories from around the emerald starting with north korea. They test fired a missile according to the south korean the defense ministry. They could not confirm whether was a long range Defense MissileBallistic Missile capable of reaching the united states. This happened as President Donald Trump met with japanese Prime Minister shinzo abe in florida. A referendum on increasing president erdogans powers. Argued that they cannot get their views across with the opposition media largely silenced. Switzerland will vote on a plan to change tax systems for Big International companies. The government says the reform is needed to allow switzerland to stay attractive and a place to do business. Israeli Prime Minister benjamin and yahoo is leaving for was moving d. C. Monday for meeting withicial President Trump on wednesday. For more on what to expect, we are joined by Michael Arnold from tel aviv. Lets start with that meeting. What do you think will be the most important items on the israeli Prime Ministers agenda . A i think there will be number of things. Forof the list, iran, which israel is an existential threat given its nuclear program. They will be looking to horse to enforce the agreement and trying to drive a wedge between. Ran and its proxy, hezbollah also the possibility that the u. S. Will move its them busy to jerusalem. Also trying to repair the relationship between israel and the u. S. Which suffered given the tensions between the u. S. The israel and the u. S. Under obama. It is interesting. There is a tension attention on the issue of the settlements. He is under investigation into criminal cases here. One related to gifts that he received over years from wealthy businessman abroad. Champagne and cigars. The second relating to a deal he allegedly discussed with a cutpaper publisher to legislation that would benefit the publisher in exchange for better coverage. Those are hanging over his head as he leaves for washington this week. Tracy michael, setting aside those political pressures for a second. Any sense of what netanyahu wants to achieve on the settlement issue specifically . Sure. We saw the Security Council passed a resolution criticizing settlements in late december and , just before the administration, there was the understanding that israel would have a blank check to build in East Jerusalem and we see comments from trump that that is not going to be the case. This was really a blow to the israeli right. What netanyahu will be looking for is some assurance that israel will be able to the old to build ande able keep the peace agreement. This was an understanding they had with the bush administration, which was voided by the obama administration. I think they will be looking for clarity. Foref michael, thank you that update. Thats Michael Arnold joining us from tel aviv. We are looking ahead to fourthquarter numbers. Its interesting how the analysts are position on this. Zero analysts recommending a buy. The expectation for fourthquarter revenue at it would be interesting to see how the business is faring in saudi arabia. Another big one to watch out for here is how they fared in the last rating. This is all we have for this edition of Bloomberg Markets middle east. Tracy we will be live from the region again at the same time tomorrow. The following is a paid program. Announcer the following is a paid advertisement for time lifes music collection. Mark its the attitude. Its all right now, baby, its all right now mark the killer guitars. American woman, stay away from me american woman, mama, let me be mark those unforgettable album covers