The latest from beijing. In the emirates. I am Tracy Alloway in dubai. I in shery ahn in hong kong where it has just gone midday. The boards here have been a hike from the fed. It is affecting markets across the board here in asia. We are seeing equity markets rallying to to the highest level since 2015. The japanese market saw that downward market. The south korean won is losing a asian currency. Optimism the funds will keep flowing into the region after that hike from the fed. Take a look at the offshore renminbis. It is shrink fitting 3 10 of 1 . When it comes to the onshore, they strengthen it by. 37 , the most since january 18. All about sovereign bonds data this morning. Australias Unemployment Rate on gaining rounds as well. Tracy you mentioned the end gaining. The u. S. Dollar doing something on in reaction to the fed decision, it is weakening. It is still weaker today. That is feeding into commodities. Take a look at how oil and gold is reacting. Gold is the big mover. It was up, it had its biggest in vance advanced in six months. T about a thousand 205 oil is finally catching a bid after that yet a said u. S. Stockpiles had finally falling for the first time this year. Above 52 a barrel. Speaking of the fed rate rise, we do have a bunch of Central Banks in the gulf following suit. They have dollar peg so they tend to do this. We have seen five country so far all raising rates in one way or another, including saudi arabia. Maintaining their commitment to the dollar peg. We do have breaking news from Washington Crossing the bloomberg. Details are being released of President Trumps budget, which will be for release admitted to congress on thursday. Rosalind chin has been details. Rosalind this is donalds first budget. It is a shortened budgets of what will come in may. There will be a full budget request in may. This is just a request to be the proposal that trump will make that congress will look at. Cuts acrosstoric government to fund defense. This is something we already knew. He said on his campaign that he wanted to increase spending for the military. This is one of the areas that we will see an increase in spending under trumps proposal. We are also seeing president. Rumps 18 budget request it is something that will hurt a lot of government departments. We are looking at proposed increases for the pentagon, in increase of 52. 3 billion dollars, that is 10 . The department of home and security, 7 . The Environmental Protection agency and also agriculture and energy areas as well. Do we have any idea about how these proposals are going to affect the u. S. Deficit . Rosalind the cuts across domestic departments say that we will not see a lot of impact on the deficits. That is if these proposals actually get put through. We see that congress has a lot of power. Donald trump has made these proposals that will be looked at, some will be changed. A lot depends on what happens in the coming weeks one feet puts all of these proposals coming weeks once he puts all of these proposals forward. May, we will get the biggest budget. We wont see any details on trumps tax reform proposal, and the forecast for economic growth. Those are yet to come. We are seeing a big shakeup in the government priorities. They are laid out here in what he is proposing for his first budget. It still looks like it is more of a political statement, instead of a very detailed plan for spending and taxation. What does this kind of tell you about where the Trump Administration is headed . Rosalind he is going to try and follow through on what he promised on his campaign. The white house budget director told reporters trump is trying to shrink the role of government, and follow through on his campaign promises. He said if you set it on the campaign, it is in the budget. That is where he is going. Politically, translating what his political promises were. Rushed in for us there in hong kong, giving us details on trumps skinny budget. Lets check in on the first word headlines. Minister seen as an easy winner in the dutch election. Please concerns about the rise of rightwing nationalism in europe. Headed to their biggest advance against the dollar since june, after the earlier fed decision to raise Interest Rates. Think of japan keeping its unprecedented manager unchanged after the dow did raise their key rate there. Increase between the two central bank sprint with the economy slowly improving, the boj is in a position that holds steady. Economist are looking for signs that may have to raise its targets, particularly if inflation begins to strengthen. He willt trump saying take his travel ban all the way to the Supreme Court after the order was blocked by a judge in hawaii. The president slander says it makes america look weak and accuses the court of going beyond its mandate. This new order was tailored to the dictates of the ninth circuits in my opinion, flawed ruling. [cheering] President Trump this is the opinion of many. An unprecedented judicial overreach. Shaad those were your first word headlines. More on that travel ban ruling or it this is the second time the defeat of what was one of his prominent campaign platforms. Our reporter is on the line from honolulu. It is a good thing we dont have a judge challenging this out of iowa. Lets start with the obvious question here. This was supposed to be a revamp travel ban. Trump and he would get legal criticism on this. What did he fail to do here . One thing that nobody can a race at this point is the rhetoric from the trump campaign. The duration of about 18 months starting in mid july, when the candidate trump declared the need for a muslim p. M. In the United States. That coupled with claims for a filledregistry incomplete that were filed across the United States in the last few weeks. The feelings that embark today that work for, that was the core principle that attorneys were focusing on. While the four corners of this document may not include any religious references, it is clearly religious discrimination. Expecting we are we an appeal and when is the administration expected to argue . Personally i am watching the docket every few minutes. Any secondcould come now. It could come after it while. If you recall, the president said that a second version of the travel ban would be filed theyt immediately after struck it down, but it did not happen. They took their time. Lawyer to the filing. Perhaps they will take a little bit more time. When,still out on exactly and what the ninth circuit will do. The same panel that heard the question. Al, it is a members of that court today issued in writing their support in opposition to the hawaii courts ruling. It will be interesting to see how it will end. Shery we will be following that very closely. Us fromu for joining honolulu. Later we go live to beijing for the saudi kings visit and ask why the relationship has become very important for the gulf economy. Plus, the fed is on the hiking trail, but what could break the stride. . We get a perspective, next. Here is the former bond being telling us why he hates treasuries. This is bloomberg. Bonds, but ike dont think equities will implode because of the potential trump policies and the market always maintaining some kind of hope. Bonds are not my favorite vehicle. Treasury,e 10 year two years forward, puts them at 3 . That is close to a 4 loss, which illuminates almost all of your income. Todays decision reflects our view that waiting too long to scale back some accommodation could potentially require us to raise rates rapidly sometime down the road. Which in turn could risk disrupting Financial Markets and pushing the economy into recession. Tracy you are watching Bloomberg Markets middle east. That was fed chair janet yelling warning that waiting too long to hike would lead to a faster pace in rate hikes. Here is what some commentators have to say about future rate hikes. If the data continue to say the economy is coming back, that they maintain their confidence, it is certainly on the table. I think we could see four hikes this year. It just depends on how strong the economy shows up. I think we will see wages accelerate more rapidly by the end of the year. We are numerically set up for it. In the ceo ofring new more Asset Management middle east. Thank you for joining us. I want to start with a question that continues to mystify me. What was the rush year . Here . What changed and what encourage the fed to hike . Statement oft the Economic Projections, not much changed. I think to things happen. Unemployment continues to decline. They will numbers have been strong in the last two or three months. Secondly, not really being considered too much by the markets, the inflation rates. We have had a 2. 7 prints yesterday. The highest in five years. Foodu exclude the oil and component, 2. 2 is still above the feds 2 target. There is a danger, especially as we go into the year and start to see wages rising, we will overshoot on the inflation rate. By historic standards, the fed may already be behind the curve. Tracy what does this mean for the reflation trade . Crack see that began to yesterday. It seemed like some investors were caught offside by the dovishness of this hike. Beenat yellen fed has dovish, and the market has been expecting that. The flipside is that the dangers they all they will have to hike faster and more aggressively further down the line. Decision came fed with one dissent from the many appellees fed president or it i wonder what will happen with future rate hikes. The nine dots are lined in the median, one in a quarter and won and a half percent range. Will this tight clustering hold in the future . As you have mentioned, there has been a dissent in yesterdays decision. It has been a dovish dissent. My guess is that we will continue to see the dot plot tight into the upside, rather than to the downside. I mentioned that the risks are given where policy has been the last few years. I think this is only the word fed hike and about 11 years. Inare still very, very low terms of the absolute level of Interest Rates. I think until we get to 2 , it is difficult to see how Interest Rates can remain so low. Earlier,u mentioned wage inflation. Some people argue that there are so many people who can rejoin the labor force, that there will be no inflationary wage pressures. What is your take on those comments and how do you expect that to affect the rate hike pace now . Subject thats a has been discussed widely. I them not sure that anyone has a precise answer. The wage of the labor produces Participation Rate remains low. There may be structural reasons for that. It is maybe to do with the baby boomers leaving the workforce. They be to do with the nature of the online commerce that is going on. The point is we have 200,000 jobs being created every month. Clearly at that piece, it is of pressure on the labor force. Ultimately, it has to have an impact on rising rise rising wages. I am in the camp that given what we are and where we think fiscal policy will be down the line, that all of these pressures will build towards higher wages and ultimately higher Interest Rates. Setting aside the economics, i want to do into the market reaction. We did get this hike and we saw markets rally and saw the dollar weakened. It is not always what you might expect. I want to bring up this chart. It shows that, at least in the euro dollars market, we have this tightening priced in. When it comes to financial conditions, they are still fairly low. If we have markets rallying today, it seems like an issue for the fed. They are tightening, but not really. Tarek on the other side of the accretion you have massive ballots equation, you have massive ballot rates. They are all converging around 4 trillion in sums of their Balance Sheets on holding. They have bought in at cnet amount of bonds over the last few years. That accounts for this particular aspect. Tracy do you get nervous about valuations . We know that the boj will be running down their Balance Sheets. Supposed to sell off things. How will that impact the market . Tarek this is a conundrum that has yet to be decided. As that paper comes back into the market, it pentacles immense pressure on asset evaluations. You can contribute to excessive prices to the fact that, there is this unnatural buyer of assets. The euro just jumped to a onemonth high after we got the asset. The dutch elections. It is now pairing. What is the certain shortterm future of the euro, given the political risks of elections coming up . We saw a weakness in the euro in the last few weeks, and had of what are critical elections in europe. Not only in holland, but also in france, and in germany later. I think the consensus is, and we have seen this already overnight, the traditional parties will retain power in all of these elections. That may give the euro a little lift. I think the market will shift back towards economics. That does not bode well for the euro. We do have Many Central Bank decisions coming up, including the euclid u. K. Centralbank. Not to mention a few. In asia and switzerland. Is there anyone you are watching closely . Them we think some of know. The bank of england is not any position to raise anytime soon. Indicates that it will stay accommodative for the time being. Overnight, we had the gcc Central Banks raise Interest Rates. Clearly, the trajectory of the u. S. Monetary policy has brought impact on a number of Central Banks. Interest rates this year will be going higher globally. I am glad you brought up the gcc rates raising banks. A lot of people view this as a commitment to the dollar paid. D. C. That staying . Tarek yes, it for this year and peg is secure. For the time being, lessons were the learned last year by the speculators that the peg is a politically sensitive topic and the Central Banks are backing it. Tracy thank you so much to the nomura Asset Management middle east ceo. Be taking a to closer look at what is moving asian markets after the fed and pboc hike rates while the boj stood by. This is bloomberg. Welcome back, you are watching bloomberg. Shery i am shery ahn in hong kong. Are havingcross asia a lot of suggest about the fed rate hike. In the green. E lets get the details from juliet. Are seeing the regional index up by half of 1 holding at may 2015 highs. Thank you janet yellen, we have seen me Energy Players rebound after that big game coming back through in the crude price. A by one and a half percent the Regional Energy payors players. Only a downside coming through from some of the consumerist apel stocks in the region down by a quarter of 1 . Certainly not just the doj. Raising those borrowing costs in line with the fed. We also saw that surprise upside in unemployment in australia, to 5. 9 . Lets have a look at oil. We talked about how we had seen oil recover from that 2. 7 drop we saw on tuesday. Yesterdays game, the first in seven sessions. We are higher in the asian session. This on the back of that surprise fall in u. S. Crude. Seeing it iai oversupply in the market. A good boost for Energy Players in the region. The bond market is the other when you want to watch today. We saw that huge surge coming yields falling. That is going through into the asian session. If you have a look at australia, yields down 11 basis points there. We are seeing been new zealand yields off by 10 basis points. Have a look at japan. Very much innds favor. Oil and gold are well bid. He says, the world is improving. Thank you juliet. We want to bring your attention to our brandnew interactive tv function. You can find it at tv. If you use it you can watch us live and see previous interviews and dive into any securities or bloomberg functions, or beautiful charts that we create for the show. You can also become part of the conversation with us by sending a a message while we are on air. For instant, if you have strong opinions about the feds decision yesterday. Have details and insightful thoughts about the summary of Economic Projections that you would like to share, you can definitely send them our way. We will endeavor to respond to them and to ask our guest about them as well. This is our brandnew function on tv. Out what, we will find is on the agenda as king solomon is given the right carpet treatment in china. Red carpet treatment in china. This is bloomberg. Is 12 30 here in hong kong, these are your first word headlines. President trump proposing his spending cuts in his budget, which will go before congress. He touched on most every federal and wanted to boost defense and security spending. Some of the deepest cuts would hasareas that president derided, including the state department and Environmental Protection agency. Iraq sends it plans to boost oil. Even as it reaffirms its commitment to the reduction cuts. It wants to raise up to 5 Million Barrels a day by 2017. Proposes ae challenge, but it is still committed to opecs agreement. Egypt is a step closer to a taxon trading. The cabinet there gave the ok on gradually increasing duty stocks. Expected to bring in more than 54 million a year. If it is approved by egypts parliament, the tax would start at 1 8 of a percent before rising in the second in 30 years. News each day, every day, 26 hundred journalists and analysts in more than 120 countries. We have the got we have got the world of business covered here on bloomberg. Saudi arabia and china has signed more than a dozen deals and sectors ranging from energy to errol our china correspondent joins us. What do we know about these deals . Om the king solomon is in beijing, they had a welcoming ceremony at the great hall of the people. They have penned a number of deals, around 14 is what we are hearing. Froming sectors ranging energy, nuclear, even education. And have signed a trade investment treaty. Also a memorandum of understanding that covers 35 different projects in both countries. The chinese say it is valued at 65 billion u. S. Dollars. China is saudi arabias largest trading partner. That comes from oil. Saudi arabia is facing increased competition, because russia took the number one spot last year. It is the biggest supplier of oil to the chinese. The Saudi Arabians want to gain back some of that market share and build up their alliances with china, particularly considering what is happening in washington and the clouds ofrshadowing the reaction trump towards the middle east and that uncertainty. Saudi arabia wants to build on times is doing that through trade. Economics is part of this diversification of the saudi economy. They want to use some of chinas infrastructure skills on the ground. The king will be here until the weekend. That saudi aramco ceo is part of that delegation. What is he hoping to get out of the visit . Strongere is a 1500 allegation that is accompanying the saudi team. Part of this is about trying to sell at market the likely ipo next year. Around this 5 stake in the energy giant. There is interest from chinese banks who want a role in this. There are some very strong interest from the hong kong stock exchange, they would like to be one of the two exchanges out of saudi arabia that may be taking part in this. We know he said he is working very hard to try to secure that. It is a marketing event here in china. It is also about holding up on times that aramco already has. This ceo met with the chairman of simo tech and they will be building on that allegiance and that relationship they have in su jin projects products. We have a lot happening this afternoon. We hope to get more details. Tracy Tom Mackenzie in beijing. Chinese banks are going to have to wait at least until next year before they can actually get a piece of that aramco deal. In the meantime, there are several other options, several other ipos that are coming to market in the gulf region. After a bad year for ipos in 2016, this year should provide a bumper cross. We have bloombergs philippe a push echo fully baked. Which read philippe. Which regions the see that coming from . Ilippe everyone has been talking about aramco, but there are some interesting spots here in the middle east that will be active in terms of ipos before it here before they come to market. Some of them are in egypt. It country is going the country is going through recovery. Since november of last year when the currency was allowed to fluctuate, stock markets have been extremely active there. We have seen a lot of interest from international investments. It is natural to see a lot of ipos coming out of egypt this year. Of theed to the chairman Egyptian Stock Exchange here in dubai this week, he said they are expecting about 10 ipos for the year. Some of them are already lined up. It will be active. Very interesting. From those ipos that are being speculated, do we know any names right now . We do know a few names, from egypt. Era Africa International banks. We know that they might come to market any time as soon. We have in saudi arabia, which is also a market that is expected to be very active this year. Thatard in the same event we have here in dubai, one of the regulators, one officer from the cma saying that there is a company from the gcc hear from the region that is expected to cross list in the main market there before the end of the year. A also have the family, it is gigantic group in saudi arabia. They own business in so many different areas. They say they do intend to ipo part of their businesses. That could be a game changer for saud a saudi. Clearly a lot of excitement about potential deals coming to market. I have to bring in the pessimism. As talk about what could not that optimism. This chart is the tadawul versus oil prices. End, they are starting to move in think while oil was collapsing over the past week or so. Oil has since recovered it what could not be optimism here . We cannot forget we are in the middle east. We cannot forget it is all about oil at the end of the day. Especially for saudi, which is the biggest stock market here in the region. If we do not see clarity in hows of the price of oil, much of a recovery we can see in the domestic economy this year . What exactly companies are going to consider, in terms of spending and capex along 2017, than the ipo activity when not be as intense as a lot of people are seeing at this moment. Considering oil between 50 and 60. This is the scenario we heard from, from specialist of andstments and investors bankers. It would be ok, we could see activity. If things do not go as well as expected in the beginning of the year, of course it would not be as exciting as we hoped. Tracy always nice to have you on, always bringing us the latest on gulf markets. Lets bring in someone else for some or agreed to in we are joined by the head of research at our friends capital, he is in apple dobby. Abu dhabi. When it comes to deals in the u. S. Markets, are you as excited as other investors seem to be at the moment . Very good morning we are excited, however there ipoa few concerns of the and the ipo in banks. I would say that the main challenge will be valuations, especially with the upward stroke in yield curves. On the other hand, i believe that the year we could probably see more ipos coming to the wavet, and we see another after the wave we see this year in terms of free structuring. A lot of debts will be returning for private companies. Cost of borrowing is increasing. It through ipos, a wave of restructuring, debt restructuring and probably merger and acquisitions rate. Probably shift towards ipo. In my opinion, i am optimistic in terms of investment banking. Further ipos will increase the supplies, you get a person into equity markets especially with the height cost of borrowing. Tracy we did just have the federal reserves decision feeding through two Central Banks decision here in the gulf region. How do you expect tightening from the fed to Impact Market sentiment in this region . Point, i thinkis the markets were expecting more statements from the fed. Hink that 25 basis points now, we will start feeling like a increase and costs on the bottom line of companies, especially those with high leverage. The five basis is still not significant enough to see an impact on the spending power, which is my major concern, because the mortgage has been on an upside for the last three years. Shrinkings are facing disposable income. We might see the Retail Sector suffering this year. That will impact the dollars future prospect. Yesterday because of expectations. Shery how about regulations in the region . What is the impact for the small and Mediumsize Enterprises when it comes to regulations trying to tap the debt market . Talal when it comes to regulation, i think the biggest revolves around the thinking, and how the Trump Administration banking and how the Trump Administration will have their regulation expectations. I think regulations for the time being is a concern. Is, andters more concerns me is the new introduction of the tax systems of the value added tax to the region. Some sort of analysis on Market Studies should focus on that more to see how that would impact the consumption, power of the corporates in the region. Especially the gcc. Atry the head of research our eyes capital. Live from tokyo next, this is bloomberg. You are watching bloomberg, i am Tracy Alloway in dubai. In hong am shery ahn kong. The bank of japan kept its monetary evening plan unchanged after the fed raised its Interest Rates. A reaction from the chief japan economist, and a former boj official. You for joining us. Lets discuss this decision. Expected, but at the same time many people are expecting the bank of japan to eventually move its targets on the 10 year yield. Is that your expectation, the long will that take . Of all, we expect the bank of japan raised the target 40 basis points over the year. I think the timing should be delayed into autumn because of the remaining slight and inflation rates. It is not necessarily happening in the possible or near future. Shery sluggish inflation, not surprising that the wage growth has been so bad in japan. Our bloomberg can look at my bloomberg and see the wage growth after the shinto labor negotiations in spring took place. That seems pretty bad. Hikes rose by only 11 an hour, that would be the yellow bar. This is really nonexisting compared to the profits of these corporations, those would be the blue bars. Given these weakening wage trends, how can inflation actually be seen in japan when wage growth is not happening . Hiromichi that is a very good point. First of all, on wage growth, we expect it slightly. Even though it was not so good, mainly because the establishing it remains quite limited. Without wage inflation, the bank of japan should continue to rely on Exchange Rate weakness. There could be some argument of the trading at the states. It is very difficult for japan to continue to weaken the currency. Without the wage growth, not much from that yen depreciation. Where is inflation . That should be only from the expected inflation in the corporate sector. The bad thing right now is that housing is expecting inflation rates and is weakening. It is very difficult for us to say, even 1 by the end of this year. Tracy it is Tracy Alloway here in dubai, let me brought in the south. We do have the fed hiking and existingaintaining its pass. How much of a headache is that fed tightening cycle for the boj, given we have seen that yen strength in over the past few hours. Last night, i think the reaction of the dollar to the fed decision should have been disappointment for the bank of japan. Expect aof japan did bit more positive reaction to this decision. If the yen weakens, there should be more room for boj to become somewhat more independent. I think the reaction was not so positive yesterday. Even though fed is saying they will do to hikes a year again, maybe three times next year, but dollaryen is not remaining around 113, it is very difficult terror raiseit boj to raise Interest Rates. The remaining stable dollar, not i think the boj may want dollaryen to thengthen two 120 or for yen to weaken to weaken two 120 before they become more confident of the rate hike. Shery mention this early on. When exactly the boj is going to start offering Forward Guidance when it comes to yield curve targeting . Had see that materializing and Development Developing . Hiromichi every quarter boj does publish a report. Next one is in april. If they do start to send a message to the market, only chance for them by the middle of the year would be april meeting. To communicate with the market starting in april. If they do not do so, i think the next chances in july. Only action can be taken before the end of that would be october. Possibly they will start to do some new rise asian where they did actions in july about the possible case. , april. E no meaningful communication from the april meeting. Tracy definitely an interesting calendar coming up. Chief japan economist. He is just one of the many speakers at the upcoming credit asian swiss investment. You could see exclusive coverage on Bloomberg Television later this month. Coming up, investors stay on the sidelines as self affect south africa gets hit by a flood. Are live in cape town to assess the emerging market bonds. Storieshe major success in markets recently. This is bloomberg. , Bloomberg Technology technology can become plaques. Technology insurance should be clear. Tracy you are watching bloomberg, i am Tracy Alloway in dubai. Shery a quick check of some of the other stories we are following. Says he isaire owner planning to buy as much as 2. 4 billion worth of american shares. He may buy a stake of up to 13 after failing in a bid to march the company last year. That would make him the secondbiggest shareholder. It would be a family investment, and not a takeover bid. The king of morocco has removeds Prime Minister in a rare move aimed at settling a deadlock over forming a government. The decision was made public late wednesday. He won the election in october, but not with enough seats to govern alone. King mohammed is expected to name another one as premier. Barclays africa sold less than half of its target in a South African bond option as it competed with a wave of debt issuance from other lenders. The bank raise just under 50 million worth of randa nominated up bonds. Lets get more from rob brand in cape town. Walk us through what went wrong with this bond sale. Does it say more about Barclays Africa, or does it Say Something about the wave of emerging market issuing that we have seen . Bank issue its issuance has been double the amount of last year. That africa was going to find it difficult to find the taxes they were looking for. Barclays plc said last year that it wants to offload its entire system in the local company. That uncertainty over barclays there were risk that not going to be adequately compensated given the press guidance. How does this affect Barclays Africa future fundraising plans . Barclays africa is more than adequately capitalized. Same could be said for the African Banks too. They raised a substantial amount of capital last year for private placement investors. This time around they thought they would place the market in big Capital Markets to see what kind of impression they could get. They were not really ready to budge on price. There is no reason to believe they were not able to compete in some places for the rest of the year. They might just have to think of the pricing and move forward. Tracy very quickly, do we think this will could be a warning sign for broader influence from south africa . Rob that is the big question, but the investment think this was an anomaly. I dont think we are going to see failed auctions in coming months. That said, i think it is fair to speculate that the backdrop of Interest Rates, and the South African government is in placing its local government. Fromfe to speculate your on. You rob. Ank that is it for this edition of Bloomberg Markets middle east. Shery we do have the headlines at the top of the hour. Daniel President Trump has put historic spending cuts in his first budget which will before congress later. The proposals touch on every federal agency and Program Including the state department and the Environmental Protection agency. Changing government priorities to boost defense and security spending. The doj cap this unprecedented evening unchanged hours after the fed raises key interest rate. The economy slowly improving, bond yields under control it may have to raise its target if inflation begins to strengthen. China has followed the fed in tightening policy