Geopolitical tensions weigh on markets. The u. S. Reviews its plans for north korea after a pyongyang show of force. Calm. G version for Chinese Investment picking up. Lets check the markets. Those trading figures out of china are being felt across the markets. The Australian Dollar is mostly affected by chinese tray numbers. The china gdp figure pretty good. The Australian Dollars saw a jump. It is up 0. 1 . If you look at the function on bloomberg, the south korean won is spiking 3 10 of 1 . We are seeing iron ore feeling the pressure, pressured since entering a bear market. The sovereign bonds, mixed a little bit. We are seeing the u. S. Treasury yields continuing to slump. The australian markets are closed for the holiday. Gdp numbers, china but also geopolitical tensions. North korea and turkey. Plenty to digest. If you look at what happened to the turkish rea, the first gauge of their result and what a rally we saw, as much as 2. 4 strengthening. Vote. Ere seeking a yes we are just two hours away from the opening of markets in dubai. Across the board, a mixed picture. Vendorsthe largest continuing to report including the National Bank of kuwait. Arab tech getting smashed. Investors are on board. Also, saudi arabia in focused, a lot of banks under pressure after the lawsuit coming out of the United States implicating some of the things over there and we want to a deeper into the key equity trades in the middle east and africa. For now, back to you in hong kong. We have to check on the first world headlines. A lot that investors need to keep an eye on. North koreas latest missile test is not expected to change washingtons stance for dealing with pyongyang. Defense sources say the launch was in mediumrange missile and that it exploded after five seconds. We are told that President Trump is to its prepared to take unilateral action. Vice president mike pence will meet south koreas acting president on monday. It is the first stop on his asian trip to focus on business. The white house said they would also discuss military options for north korea if provocation occurs. Will leave on a trip around the middle east to discuss Regional Security issues. He begins in saudi arabia to meet with his international counterparts. Ater, he will travel to israel he is also stopping in egypt, qatar, and djibouti. Quenchedlice have protester against marine le pen. Those protecting the candidate strengthened Intelligence Services are said to have picked up an imminent threat. France has been under a state of emergency since the terror attacks in 2015. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is. Loomberg thank you. Lets get more on the top story here. Has claimedesident victory in a referendum on the most sweeping overhaul of the countries government since its founding 93 years ago. Voters backing plans to give him wide ranging new powers on the expectation that he will safeguard the economy. I hope todays constitutional changes will be good for the country. Our nation voted with their free will on changes. Istanbul,se, in seeing the referendum, what pens now in turkey and there is plenty of milestones to look out for and why dont we brought in this out a little bit to get some additional insight. Thank you very much for coming on the program. Narrower than one would have expected. A lot of the posters said it would be narrow. Observers would not have gone into that. Does that bring a new element of it certainly does. There is a controversy over the results. The election board discount in the eligible votes not stamped by the electoral boards. I do not think it will lead anywhere. That is going to make it more difficult for Prime Minister erdogan to reach consensus. There is certainly a lot of risk because we do not know it if he is going to reach a more with theser continue policies he has advocated during the campaign. My first indication is that he will and that not be good for investors. Policy,rms of economic you are saying he is going to continue. Mr. Erdogan has made it clear that he thinks highinterest rates leads to higher inflation. Monetary policy is going to be looser. We are not going to get Structural Reforms as the world bank would understand. Turkish growth will highly depend on projects like fiscal stimulus which is going to be bothersome as the world enters inflation. Arguably, if you are getting 11 yields, that could be an argument for mitigation. How much conviction do you expect in terms of capital inflows . It is a fundamental part of the road going forward. There is no connection. To the institute of international finance, emerging markets are seeing 50 billion in the First Quarter. Risk appetite declines, turkey will be sold off. Commitments toic a policy path, turkey will be sold because some of the risks like what donald trump will do it will affect us. President erdogans promise leads to expansion of talks with the European Union. Erdogan is doing is tailoring the constitution to. It one person, himself what does this mean for turkey it is veryou problematic. The problem is not the parliamentary regime. The problem is we do not have checks and balances between the and the judiciary. The new constitution eliminates what we have and makes turkey a oneman regime. We hope he will use his powers wisely make decisions that are good for turkey. I seriously doubt that. I look at russia and i see that with the exception of those industries, the economy is not recovery. Mr. Erdogan has a strange view of economic development. The most important question, assuming he is the wisest guy on earth, what is going to happen one if he loses the 2019 elections . We do not know the answers to these questions. Theou mentioned relationship between turkey and the European Union. What can we expect from mr. Erdogan in terms of alliances . I honestly expect that most of the conflict was related to the propaganda in taking the nationalist vote. That there ised no exception from the eu perspective. Annualized, the sanctions will end. It might come to the point where economic sanctions might be discussed. Could completely dissociate from the European Union. Given our credit dependency which comes from the origin good, these are simply not for the turkish economy. The moment that comes to parliament, investors will start. Closing thoughts on the central bank. There has been political pressure on the bank. What do you expect them to do now . Are they going to cater to the demands of the executive presidency . I do not think they care for the economic reality. The strange Monetary Policy actually gives them the option to cut interest rapidly. A lot of it zone money flows. The turkish lira appreciates. They will immediately switch to Monetary Policy. Themhe market will give that opportunity. Turkish Monetary Policy will always lag. Expected to reach as much as 10 . Great having you this morning. Ack to you plenty more to come on Bloomberg Markets middle east. Earnings underway. We will look at the winners and losers. Plus, as chinas economy accelerates we will be live in beijing next. You are watching Bloomberg Markets middle east, i am yousef gamal eldin in istanbul. Chinas economy accelerated for the Second Quarter as investment, retail sales, and factory output came in above estimates. Tom mackenzie has the numbers. It has been a while since we saw strong data for the First Quarter in china. That is right. The 6. 9 beating estimates. Uptick inong investment. Nominal gdp, the inflationary 11. 8 . S, came in at 77 of this growth came from the consumer. So, a positive in terms of that whole debate around the rebalancing of the chinese economy. Economistrom an earlier in the show. Starta confirms a strong on the year with gdp expanding. The government is in a very good position to achieve their annual growth target. Meanwhile, we think that gdp growth may celfin throughout the year. We are forecasting 6. 6 . Suggesting that the quarterly number may be the top range we will get for 2017. View is concerned by other to. Omists that we spoke we have retail numbers beating expectations suggesting that Consumer Confidence remains robust. There was concern that automobiles would have moved somewhat because of the tax hike. We also had Industrial Production numbers also beating expectations. Data. Eresting what wouldnt be interesting yet come what is that mean . I think that is the key lead. On going full Bloomberg Intelligence said the pbs he would reverse repo rates. They have done that twice already. Thismy colleague data will likely give confidence to the pbs he in terms of their decision to move to a tightening phase. Horizon,tions on the still the real estate picture and the Statistics Bureau saying that is a focus going forward. We saw credit numbers, that aggregate credit coming in above forecast. Those are the two things going forward. The gdp toexpect slow moderately for the next year. Way off from fears of a hard landing. Coming up, the are jumping on the turkish referendum results. More on the implications, next. On theusef gamal eldin banks of the bosporus river in istanbul. And Beautiful Day over there. Im shery ahn in hong kong. We are talking about the lira. Lets take a look at bloomberg. It continues to surge 2 this morning on the back of that referendum. Winning thedogan, presidency. Given that inflation is hovering near 10 , the question seems to be what will this mean for Central Banks . April 26 is when the central bank needs to make its policy decision. It has been a difficult year for the central bank, coming under fire for not hiking rates fast enough. After the referendum results, the appreciation of the lira might use. The central bank has to fight for credibility and underscore that it is immune to a president erdogan who is now even more powerful than before. This is critical to the story. 10 in 2017be about. Will the central bank be able to move in either direction . The strength of the dollar weighs heavily on the picture. Discuss thetinue to impact of the referendum. Our guest maintains a negative view on the lira cash why . Quite a wholesale. Ictory for president erdogan the victory margin is low. I think there will be challenges. Careful that to be we cannot rule out protesting given the margin of victory. I think you need to be a bit more careful. Is to price out the jump on friday. Were back to levels that we saw on wednesday. Is an economy looking at significant fiscal deficit and high inflation. Reasons to be of skeptical. That may be the case but ultimately you have people like the face is more favorable. They are saying turkey might be a beneficiary of that. They are also pointing out that equities are trading at a major discount. If you think about a currency that stands out and grabs your attention, the turkish lira would be one. It is also one of the worst performers this year. Can you know short term on the lira, continue to play out the fallout of the referendum . You can get more mileage from here because the next big political issue will probably be 2019 with the election vote seal theld basically for president r erdogan. The question is whether the fundamentals would support that. The first test would be the meetings on the 26th. I feel that the central bank is losing credibility. President erdogan defines himself as an enemy of interest rates. Bank wille central matter. Failing to bring that down, it doesnt look as cheap. Not the currency. How about the south korean won. We cannot leave out north korea right now. Absolutely. They did not do very well with their Missile Launch on saturday. Somebody would have to pay for that. Prestige lost a lot of with that failure. Another one,hed the might now be even more aggressive in terms of posturing. I think the dollar and south korean won is probably lower. He risk is not over given that were seeing stick around. We will get you right after the break. Well have plenty more coming up. Opposition. Have the details next. Symbol, you are watching Bloomberg Markets middle east. These are the headlines. Chinas growth accelerated for a Second Quarter. Investment picked up. Gdp expanded 6. 9 . 9 . Stments grew above retail also expanded almost 11 . Chinaser cements rebound. Iran has boosted a natural gas output with six new projects. He raised Production Capacity to 570 meters a day putting it on par with guitar. The president says 20 million were spent to complete the project. Avon has the largest natural gas reserves the most is used domestically. The worlds biggest shipbuilder winning the backing of. Ondholders the National Pension service has 175d to a proposal with million maturing this month. Had thehave gone plan not been accepted. Global news 24 hours a day, you are watching bloomberg. It is time to get a check of the markets. A little bit of the next. It is certainly next. The original index is not showing the full picture. You have a number of markets close today. We are seeing weakness in singapore down 0. 8 . Of course, the china data was better than expected. You have seen investments. Some lose coming through most of the currencies in the region. It is all about the strength of the end, as well. Have a look at some of the other functions we are seeing. A little bit of mixed movement coming for in the commodity space. This is likely to play into the australian market. Southe seeing a pickup in korean players on the back of a report that a white house Foreign Policy advisor says the timing would be deployed and operational. We had mike pence clarifying that strong danger coming through korean cosmetics. Up. N this is after profits. Some good winners on the next day for asian markets. Our guestring back from the corey bank, the head of strategy. Lets talk about the Australian Dollar. Numbers benas gdp across the board. We have to keep in mind that are underrices pressure. Could these figures override that . I think that is not a factor in itself. Iron ore price of con up a lot. A little bit of pullback is not a big issue. Is whethers to see this could be sustained. Easing retail sales did really well. It is a question of how the harnessing market will react to a tightening measures. That would actually have implications on the bunker view for iron over. Now, 76 over 77. Athink you will find some 78. Fresh salmon could surface. Here is a thought for you. You have a confluence of geopolitical risk. You have Commodity Prices that are correcting. Becomes, how much conviction can there be . When the heart economic realities have not been pinned down. That is a very good question. You think about how equities are doing. We are looking at equities near record highs. You are also looking at yields. Basically, one of the other is wrong. Equity industries are saying [indiscernible] disconnect which for risk of aprobably the pullback is larger than bond yields. I and a bit concerned. I think the reflation story may be recalibrated if they are unable to pull that phenomenal budget that he was talking about. Data has actually started to moderate in the u. S. You could even get currency is doing better. Reflation has shifted. N europe and Japan Investment spending in the Fourth Quarter of last year was pretty strong. You get reflation stories shifting away. The yen. Ntioned we are seeing the dollar decline in. What is your price target . Yen is supported by a few things. The differential is favoring the yen. Yields are lower, you get less incentive to purchase more bonds. They have changed their policy target. That qe so, it means has been reduced. Differential has also favored the yen. We are really potentially looking at 2 or 3 appreciation. Barring geopolitical risk, there is room. Thank you for joining us from the corey bank. Lets get back to our top stories. President erdogan said to consolidate power in the chances of turkey becoming a European Union member may be summer. Several officials have said they will pressure harder for visa free travel. Whatever you from the eu so for been the response has clear. You listen to the European Union, the election has been described as unfair. You are looking from comments from the european commissioner. They are awaiting a report on the voting irregularities. They are making a clear that they would not let turkey go down a path away from democracy. This is a tricky situation. Europe is an important source of capital inflows for tourism. This relationship goes back many years. You cannot just cut off relations. Turkey is a member of g20 and nato. There are many things binding them together. It will be difficult for either of them to take a villainous stance. Lets wait to see what we are from the european side. A lot of observers are beginning to try just these numbers. I do not think you can make a call. When it comes to the markets, they are reacting right away. React tonvestors could the latest developments. Our emerging by markets reporter. Gainingeeing the lira strength. The currency has slumped because of erdogans propensity to metal with centralbank policy. How long can we expect this to shortlived. Ay be people are just happy to see that the status quo is the same. People are happy to see that there is stability. Investors are going to reassess the risks. They want to know what erdogan is going to do. They want to know how he is going to metal in business. People are going to wait and see what erdogan is going to do. I was looking through a Research Note this morning. Put the story on a chart. You are looking at something in excess of 30 . Remarkable divergence. N opportunity talking about which sectors could prosper. Every company that has been part of erdogans growth story will rally. Any company that has not been in the headlines for being part of will rally. On at this point, we are going to see a rally across stoxx so long as they do not have headlines. What is really important to assess is what is erdogan going to do with his power . Stocks aretate which going to fall at this point because we do not know the relationships. Thank you for joining us. Plenty more coming up on bloomberg. Golf Bank Earnings are next. You are watching bloomberg. Im yousef gamal eldin life in istanbul. Seen the worst performance among middle eastern markets yesterday following the most since february. Ring in our guest to discuss the markets. s was a very interesting trading day in dubai. We saw a lot of activity with construction companies. The main activity happened with eric tech, a developer in dubai going through a restructuring program. Right now, there are many details coming out. There is a lot of speculation about how things are going to turn out. The offer was around 1. 5 billion doings. A lot of investors see this as wiping out minority shareholders. The Company Announced the name of the new ceo to have a major role in the restructuring program. Shareholders will vote tomorrow. Were seeing a lot of concern. This is popular among retail investors. It has been a remarkable story. Eric tech continues to move along. In terms of other companies, what are you watching . We have a few different names should attract a lot of attention as well. Yesterday, one group are signing an agreement with a major player in the emirates. Have a Development Together in on the w2 attract attention from investors. Of course, we have important things coming out with results in the region. Yesterday we had numbers from nbk in kuwait. The results were good. Stocks performed well. We have some very important names like kolkata is on the ank and cash kolkata kolkata islamic bank. I love you put that results were good. Widen this conversation. I know you are watching those things carefully. These numbers coming in better than analysts expected. Is going on yet what is going on . There is a couple of things. Was gloomye outlook because the deposit margins are including improving on a sequential basis. You saw the international bond. Ssue being a key element at the same time, provisions seem to be peaking. We definitely see them lower than expected. T is not for all the banks a couple of them have already gone through provisioning. For some, provisions could see a rise. The liquidity indicators are tremendously varied. When you compare saudi arabia to qatar, there are different stories. Which banks going to be out performers . Banks are able to keep a lid on funding. There are going to benefit much more from rising rates. Yields are being reset upwards. Those banks will benefit. Also, these pings are positioned to ride out the cycle because they have been more prudent. They could afford to do so. Selective much more in their lending appetite. For example, one bank was down yesterday because of claims from the u. S. , potentially is actually best positioned from rising rates. Are you concerned about fiscal headwind . I think compared to last year , i was really worried about the outlook for the region. Looking at oil price, probably going to see extension of deal. Question is, how much shale will be dumped out of the ground. As long as that not more than one billion barrels extra, or the prices will remain between the 5060 mark. Volatility as over to come that intour taking account, historically, there was a high correlation between growth and incremental fiscal spending on saudi. Gdp was reduced. There is only Energy Prices as thethrough as well vat and luxury tax and so on the is about 6 and saudi can very much moderate pace of fiscal parity. There is room for additional issues for the next two years a breakevenead level the following years so very much you can phase the fiscal parity so we are getting less concerned. I mean the outlook is not exuberance and you have to realize that the growth environment is slow. What about when it comes to you continued see united National Bank is a target. Absolutely. , the merger is getting a lot of attraction. I was just on a trip in the United States and canada to see investors. Very much this is on the forefront. They havent had any positions in our markets. They seem to be looking at this as a key player. The cost synergies, the message merger has been created. The advantage of this company is message. [indiscernible] basis point. That will actually increase thanks to the synergies have been merger the same time also [indiscernible] the new combination is going to be that caused later going forward. We see a lot of financial synergy from this. There is a lot of excess capital. In other markets, you can see this. Right for consolidation ripe for consolidation. It doesnt really make sense. We will have to leave it there. Thank you so much. 20 more coming up. Eldinim yousef gamal live on the bosporus river in his temple. Shery and im in hong kong. You are there because of president erdogans referendum of course. The lira up 2 . The eyes of investors will be on the markets when they open. Yousef we have had some fascinating conversations throughout the program. Anderms of the turkish lira also the longerterm political implications of this power grab by president erdogan. The fact that the vote was as itrow as he was, that means could be a lot of pushback from the opposition already getting quite a few claims from contesting some of the votes because of irregularities but also again in terms of the economic front in terms of the market from we are getting more reaction and more [indiscernible] they are seeing nonnegligible risk of election. This is the key. They are expecting political pressure on the central bank to ease policy and build swiftly. That is one reaction. Central bank also saying, reasons for the weaker referendum outcome will stimulate the economy again. Finally, another banks and the prevailing uncertainty has been removed in turkish politics. What a day it has been and what a few days we had ahead of us. That is how we have this edition of Bloomberg Markets middle east. With we have had to deal the changes in turkey but also how that affected the markets. Lets take you through with the asian markets are doing right now because we are seeing the benchmark gaining 4 10 of 1 . It is a next picture across the markets as we see the japanese yen strengthening and gaining 0. 3 . Of course, australia, hong kong, and new zealand are on holidays. For investors, we are taking a look at geopolitical tensions from north korea but also all day long we have been talking about turkey in the changes occurring in the government and in the constitution damage also because the u. S. Inflation data weaker than expected in march, what that is doing for treasury yields and don yields just coming back online in asian and asian trading we are seeing the yields continue to lose ground that to spot 20. So, a lot of watch out for when it comes to investors trading in the asian market. We have all of that talk stories from around the will coming up as well. This is bloomberg. The lamarcus middle east. This is your first world news. Turkish president president erdogan has followed his win in a referendum that if it is a premises of israel by taking in a political opponents at home and abroad. At his victory speech last night supporters chanted that he should bring back the Death Penalty a move that would finish their day to join the European Union. He also warned punishment about challenging the legitimacy of his wing. His win. I hope todays constitutional changes will be good for the country. Our nation voted with free will changes