Top conservative rival. It is 8 a. M. In dubai and 5 a. M. In london. This is Bloomberg Markets middle east. We do have geopolitical events taking center stage with the launch of the seventh north korean lipstick Ballistic Missile test. The bloomberg dollar index 0. 35 . On friday,ow u. S. Inflation data came in softer than expected. The mix still slumbering the slumbering, reaching 10. 40 on friday. Look at how u. S. A city u. S. Equity markets closed. Down,nes index also nasdaq was of the outlier of. 09 . Lets take a quick look at what is happening in this part of the world. Of the week of the week in the past, the last five trading days, lets chase him the key companies. Retailers, losses coming from insurance stocks. Level, we saw it being the best performer in terms of volume and activity. Upside, surprising sales with Earnings Growth as the rapid earnings season. Lets crossover. Brent crude, 15. 84 closing trade friday. A continuing build in this rig inventories. Apparently it is another part to wah. What is driving that, it is the highest in almost three ar u. S. Tenure paper 2. 33 and the South African rand is barely below the flatline closer. Ls check on the first word headlines around the world. Reuters is reporting that the u. S. And saudi arabia have signed over 100ilon worth of deals ahead of President Trumps visit to the kingdom on thursday. Surpass 300 could billion over the next decade. Reuters also said the u. S. Firm Jacobs Engineering group is the front runner to become the joint venture partner in the Infrastructure Project in the kingdom. s president of the ante with his Biggest Campaign writing Desk Campaign rall, speaking to tens of thousands of his supporters, he said voters must choose between peace or tension. Becomeill not let iran isolated once again. [applause] we would like to have constructive and effective interaction with the world. Meanwhile he also launched a on his mainack conservative rival, accusing him of unethical management of the rons holiest right. The goal state is the largest arab oil producer outside of opec, s p lowered the sovereign debt rating. Tosohanged the outlook negative. Has theand old prices ssure on its finances, the Russian Energy minister has reportedly said that opec production curve could be extended by more than six months. He said the size of the output cut is likely to remain the same if the if it is prolonged. He said that all markets may be balance if the kur a extended. Curbs are extended. Day. L news 24 hours a this is bloomberg. Yusef beijing is Holding Hundreds of World Leaders and executives and officials. More than 100 countries have already signed up. Tom, walk us through what you have seen so far. I believe the event is going to start in a little less than an hour or so. Ths right weve heard the opening address from president xi npg. Recipient ofne big a love of this Development Funding. Said this is a project of the century. He said it is an opportunity and a force for peace in a world fraught with allenges. He says Development Funding will be pumped into these projects along the maritime rate and the overland route. It is a hugely ambitious project that was originally launched in 2013. The idea of this summit is really to clarify chinas goals and ambitions on this, to give some transparency and to turbocharge this project which is gone in fits and starts since it was first launched. A lot of money on development banks, they want to get private investors on board. Also heard from the russian president , vladimir putin. President putin said he supported the project and supported the great integration of the eurasia area. We also heard from turkeys president to set the sensors of economic gravity worth sifting east. Work shifting east. A lot Going Forward, how to navigate the Economic Risks and the political risks but this is a top priority for president xi jinping. In terms of those conversations that may or may not be happening and how north korea is going to be factored into that, ultimately we have been told time and time again that time is going to be the one that can fit the scale when it comes to a possible escalation. What kind of response could we see from the chinese this time around . Dont expect a response any different from the one we heard of until now from china. We will hear from the foreign next week that i will be very surprised if there is a change in tone from china. We do know that they havent been in the last few months that they have been putting pressure on north korea to a degree of at least. They are reducing coal exports out of north korea. There are lots of measures we could be taking that what they do not want td is undermine the north korean regime because they do not look to see a flood of refugees coming across the border. This is an example of north korea trying to steal the limelight. They often do these missile test around large summits with the state leaders are gathering. 700 kilometers is the range of this Ballistic Missile. It reheabout 2000 kilometers. The japanese said this may be a different type of missile being tested. We may see more pressure coming from washington. There is a north korean delegation here. It will be interesting to know what kind of conversations there will be having with their chinese counterparts. This highlights the number one geopolitical risk. Yusef lets get you a little bit of a preview of what is still to come on the show. We talk about how wobbly oil prices could affect saudi arabias credit rating. Tracey it are going to talk all things geopolitical as President Trump gets ready for his First Official foreign trip. The head of Investment Strategy at abu dhabi commercial ba i joining us next. This is bloomberg. Tracey you are watching Bloomberg Markets middle east live from dubai. Lets talk about global trade, in terms of the comments we have been getting from key officials, ultimately a lot at stake. Rattling from the campaign trail from donald and then the case he might translate that into action but we have not seen as much as many people feared. Perhaps the revival of an of the kind to global trade . Tracey it is interesting, we do have Steve Mnuchin at the g7 meeting in italy. He is talking to trade ministers and so far the comments have been relatively positive. Tracey on that note, u. S. Treasury secretary Steve Mnuchin says the g7 nations are starting to understand where the white house stands when it comes to President Donald Trump and america. Speaking at the finance ministers meeting in bahrain said the finance ministers are more comfortable with the agenda now that he has had talks with the international community. We believe in free trade. We are the largest, most open market but where we do have large imbalances, we have had very productive discussions with our counterparts. I mentioned the agreement with china, it is a start in the ght direction. Conversationsad with germany and others, making sure we have a plan to get to more balanced growth. Lets get more on this with the head of Investment Strategy at abu dhabi, spain. Abu dhabi commerzbank. It is looking good for america in terms of trade, we have the positive comments from g7 leaders, we also have the announcement of the u. S. China trade deal. Has the world got more comfortable with the notion of America First . We live in a world of excess supply and at the same time the u. S. Is the buyer of last resort ch means the world needs for Global Growth to persist we need u. S. Growth and thus its trading partners are actually quite willing to make pragmatic deals with the u. Son bilateral basis. Chinavery clear with where in fact that much has not happened, there have not been that many accommodations when it l and autoters in stee part but there has been an upturn in the long run with bioengineering and agribusiness the guidelines are proved so the u. S. Companies can do that. As long as it remains of this bilateral deal then the trading partners of the u. S. Are quite willing to do some damage limitation. I dont think it is good for Global Growth that the u. S. Takes partners with him to tootiate with whom negotiate specific deals. There is one dissenting voice at the g7. The u. S. Is the buyer of last resort. Tracey we have Philip Hammond making some comments on the sideline in beijing. Youre looking at live pictures. Strategy, howe does it impact how you go about investing in emerging markets . This is for additional context, what is happening between the commodity story, and a lot of Downside Pressure and what is happening in terms of valuation on the emerging markets. When we are talking about trade, we talking about something structural and here we are talking about something happening at the cyclical level. China will slow down. Weve had a spillover of growth from the u. S. To europe, that has weakened the dollar and that has been beneficial for emerging markets. Not so much the commodity story. This is likely going to end. We could have some rollover. We are seeing some stabilization in great in the u. S. And europe, things keep going up. From a cyclical point of view, i would be rather cautious with emerging markets. Tracey on emerging markets we always talk about Global Financial conditions. Aontionssee tightening, those baddies that is bad news for emerging markets. If the fed going to need to move faster in order to affect financial conditions . This lease squarely to the issue of inflation in the u. S. Ispite of having unemployment having come down so significantly, it was 4. 8 at the beginning of the year, now it is 4. 4, we had a bounce back in average earlier average Hourly Earnings. Growth insignificant inflation, you would need to have average Hourly Earnings going well above. The fed is going to likely do these two more hikes. With growthest going to roll over in europe, i do not think this dollar weakness is going to persist. The dollar is going to strengthen. Were going to see some dollar which means the curve is going to flatten a little bit. That could be manageable for emerging markets. Just want to listen and quickly live to some of the comments hammond has been making on brexit. That the scale of Infrastructure Investment required cannot be met to buy Public Financing loan and and theinancing alone you take in the a partner in delivering this infrastructure in supporting the finance, design and delivery needed to make the division to make the vision a reality. China and the u. K. Have a long and rich trading history. Indeed the english first attempt to find the trade route to china the 16th century, although it took us for decades to find one. Four decades to find one. I welcome the belt and road initiative. In january, for the first time, tracey Philip Hammond speaking in beijing. That was hammond, talking about brexit, obviously a big topic for markets. It feels we have this laundry list of geopolitical event risk and they have not sent theyve not center to markets. They are main super low despite what is ostensibly some big headlines. Something like korea is difficult to make any assessment about. Everything that is related to populism, the new trend in western democracy, it seems there is a caging in of populists when they get to power. We see that in the United States and we see that in the u. K. With ms. May calling for an election d tting the parliament in the middle with a majority that will be presumably more moderate in terms of brexit. Raising theot of stakes on the negotiations side but they are not going to start until the u. K. Government in the medium to longer term, i think the biggest risk would be the elections and the discussion of a possible election in austria this fall. Elected it iset sometimes good because they have to put deeds behind their words alwaysis almost difficult to change institutions in which we work and markets operate. Tracey we still have plenty to get through. Yusef we will a little bit about crude oil as well. Countdown, saudi aramco, we have plenty to discuss. This is bloomberg. Tracey this is Bloomberg Markets middle east live from dubai. Yusef lets take of the conversation about crude oil. Again, a lot of new information over the next couple of days last couple of days, including the latest rate data. Rig data. Blue bar are gas d read our declines. The reference line in yellow is your the bpi price. Wpi price. From an opec perspective, they need to do more, dont they . 50 u. S. Dollars is at the breaking price for the u. S. Shale producers. They were also affected by the adjustments and i think the price could stabilize at 50. The commitment from opec, it has to be it is not entirely clearyet but when the market will get more confidence, i think 50 is a good bet and a sound that. Elsey in terms of what opec could actually do, ive seen a few ideas loading around, one of the thing to do a short shot to the market and t oer is they coulsathey are extending beyond six months. What you see in terms of options . Definitely the second option is better. These kind of shortterm, it is something you can do maybe once but it is also a way of losing credibility over time. I think they are also trying to figure out exactly how the situation will involve in the the u. S. Ill evolve in itef in terms of the impact is having on this part of the world, the data is showing that the deficit is narrowing. Look at what is happening in terms of earnings, the pitcher came in more positive than a lot of analyst would expect. What is your latest read on momentum . It has been quite good pgrs on Fiscal Consolidation and i believe that agents perceive that as a source of stability and that gives them confidence to operate. I think that is really important. Good Fiscal Consolidation has happened across the region. That is the key here Going Forward. Prudent policies, prudent macro policies. Givesnot very sexy but it confidence to operators. Tracey very quickly, we did have the u. S. Rig data and we saw u. S. Inventory showing the biggest job down this year. You expect the market t rebalance this year or are you waiting for next year . I do not expect a significant rebalance. I expect more stabilization. I think one should take into consideration, supply is definitely the most important factor in the market. Tracey we have to leave it there. That was luciana generali, head of Investment Strategy. This is bloomberg. Tracey it is a 30 a. M. In dubai. North korea fired a Ballistic Missile early sunday in its seventh such test this year. This one flew 700 kilometers before landing in the sea. The latest test comesusdays after south korea elected moon jaein as its new president. Meanwhile, japanese Prime Minister shinzo abe issued a statement condemning the test. Despite strong warnings from the international society, north korea once again went ahead with it a Ballistic Missile launch. It is absolutely unacceptable. We strongly protest against it. Irans official News Agency Says the philippines has agreed to buy 16. 2 billion barrels of oil a day. Will beippine say the used to supply a refinery opened in three years. They also signed a deal to open and oilfield. Egypt has reached pulmonary outline a 12 billion loan from the imf. Egypt will receive 180 quarter billion dollars one and a quarter billion dollars in june. Praised egypts efforts to restore confidence in an economy that has been battered since the 2011 arab spring. Global news 24 hours a day powered morethan 2600 journalists and analysts ou the world. This is bloomberg. Tracey saudi arabia raised 9 billion, one billion more than the government said it planned to raise. Are we set to see more sales from the region . Joining us is the Fitch Ratings head of global finance, the sharp, fitch put out some commentary saying the main limitation seems to be on the supply side. We dont have that many issuers selling into the market. Why is that given there seems to be such Strong Demand . The best way to answer that is to look at where is the the markets . En, thelook at the top t most developed with the malaysia , and the most developed you e turkey, pakistan a sukuk or aor bond has its different factor which we can discuss. It is a slow developing Capital Market. Tapping into the market and again that will trickle down into the Financial Sector and the corporate sector. Tracey it is times like these that our client selected pull up the function the tells you about this key loans. Yusef you can click here the history tab and it will give you a visual breakdown of every year in terms of what it takes. Youll see this is all the way see these2006 you can are the number of deals off to a healthy start. Upe you expect 2017 to shape in terms of the number of deals and the volume of deals. It took the longerterm sukuk to give us a clear perspective. We expect to see the same level of growth in 2017 with the mber that we have, it is the first task of 2017, if you compare it to april 2017, it is almost 60 . I think we are expecting a growth that is much less than we saw in 2016. You have other sovereigns that could tap the market and secretarial down to financial institutions. Tracey i want to go back to saudi arabias 9 billion sukuk sale. Through the prospective and it said the bond will comply with u. S. Protection rules, is that going to be the norm Going Forward . This structure that the sovereign used was hrid structure. It is not common in that universe but it is common in the other ratios. , it is and approach linked to the credit and in this way it is saudi arabia instead of the underlying sukuk. It is used for some synchronization. That thischnicality structure could fall under that. We could see more of sukuk coming under that specific structure. Or is this something we have just seen . Itm a credit point of view, has a direct factor credit application on the sukuk as long as we continue. Yusef the saudi finance said he admitted clear that they are looking to tap the debt market in the second quarter. What is standing in their way from beingolr in their intentions . Ambitions . What could hamper that at the time asset . It is usually the issue of when to tap the market. There are indications that it is going to come back to the market. Our projections for oil is for 52. 5 and 42018, it still continues to be in that range. We look at that from the medium to longterm. It is something they are trying develop for the whole market. Curvek seeing the yield and by issuing sukuk and bond helps. At least that is out of e y. Need to be taken to develop these markets in these countries. Tracey we have been talking more about the sovereign issue because they tend to be the biggest naturally. Could we get a situation where we have more corporate issuing compliance bonds, especially if we assume companies are going to reduce their alliance their reliance on bank lending . It is a difficult growth story for developed markets. Sovereign,t with the it is unusual that the sovereign is just starting. Pushing togns are diversify their funding and said of relying on the Banking System and ats to ease some of the liquidity pressure. They have developed their regulations, we are seeing a lot of countries like saudi arabia talking about diversifying their funding but i think it is not something that will happen overnight. It is something that we expect to develop. It is something that the sovereigns and governments are trying to push. You have to have the idea of transparency and infrastructure. And you need to have the corporate structure, you have to start with the toptier worth andand high net Family Companies and it would ta time for them to tap such market. Arabia,side from saudi there are interesting stories to be told when it comes to the United Arab Emirates and the gulf countries. What stands out to you in terms of broader trends . The liquidity situation has been different when you take hotter you take quartar. We are seeing and corporate stepping into Capital Market and that is something they have been for some time doing. Liket like anything a new thing on the corporate side. Artar, kuwait,u oman, it is a different story. The sovereign yield curve is starting to develop and that should progress markets across the board. Yusef great to have you on the program as always. He is the global head of islamic finance for fitch rating. Ll to come, the birth pace the birthplace of the pharaohs hitting a decade high. We break down all tse details and see what it means for markets. This is bloomberg. Tracey welcome back. Well like a most of the middle east crude producing nations, bahrain has taken a hit from low oil prices. Thef we set down with countrys Economic Development board to see how it is coping. It is a challenge. It is a challenge for all the d50 countries but it is also a countries but it is also an opportunity. We can push forward Economic Reforms they can make bahrain competitive. Less than 20 of its gdp comes from oil and gas, most of its gdp comes from Financial Services and manufacturi. Iten a sense of the was a sense of the change in reforms the push through and how receptive has the government been . There are three big opportunities that came out of this. One is spending an awful lot of money on physical infrastructure. Million is being invested in an expansion of the airport, a arabia,orporate saudi new tourism developments they are also focusing on soft infrastructure. Writing new laws, new bankruptcy laws, new trust laws that will create new opportunities for businesses and to make it much easier for businesses to do business in bahrain and from bahrain. Is it safe to say the strategy is changing . Theres definitely change a foot in bahrain. It has a long history of being a pioneer. It was the first place in the gulf to have a truly global aline, the first place for Financial Services, the first place for Islamic Banking and islamic finance but now it wants to put bahrain back on the map again. , the the smallest economy same size singapore but it is right next door to the biggest economy which is saudi arabia. Will that be the Competitive Edge for bahrain, given that is a neighbors bahrain is a very open and free economy. The gcc at the heart of is very important. Give us a sense of the industries youre after, that would like to grow . Tourism, we are trying to attract hotels and attractions that will encourage some of the visitors to stay a little bit longer. Bahrain gets a little bit about a million visitors coming across because way from saudi arabia but we want this visitors to stay a little longer. The other big area is in things downstream aluminium. There is quite a few opportunities from manufacturer is using aluminium. You said earlier it is a challenging environment for foraindo it make sense some of the government assets to fund these ending . Spending . The of the third 2 billion being invested in bahrain, most of it is coming from the private sector. There is tremendous private sector confidence in bahrain and we seeing a lot of companies expand in bahrain. Meanwhile, egypts inflation has hit a 30 year high, sitting at 31. 5 . The higher than expected putting pressure on the government as it tackles already politically sensitive economic reform. Tracey were joined by the head of research, great at t bk. Lets kick off with the inflation part of the story and ultimately, s p coming out confirming egypts rating with a stable outlook. Viewers inclined to pull up on the bloomberg the top panel, that is the central bank depository, the yellow line, youre on your inflation. The central bank is not in a difficult spot, the inflation has been moderated. Now they need to act. They are not in a difficult spot in terms of Monetary Policy. Youre reading these reports saying the imf is pressuring them to raise Interest Rates because of the high inflation but ultimately egypts inflation figures are being driven by the currency devaluation we saw in november. It is going to basically played in novemberaway 2017. Ultimately, egypts inflation is driven by food prices. Food prices account for 45 of the Consumer Price market. Egypt to the economy in is also quite low. Around 50 of gdp. The Monetary Policy transmission against the in a frontier market like egypt, it is not that well developed. Monetaryf you assume policy is too blunt a tool to fight inflation in egypt, what other levels what other levers are available to the governmt . Currency. Imf released a statement on egypt when they approved the next eight and it was quite optimistic. It was encouraging to the point where you dont know if they are patting the government or themselves on the back for developing this reform program. There are a lot of positive implications in this market. Weve seen a flux in foreign portfolio investments. Weve seen an uptick in exports and manufacturing has to take up. Manufacturing has ticked up. They said they are moving to a freely flowing currency, i dont see that. Tracey when bc it leveling up . When do you see it leveling up . The broader picture is, i dont see us moving to a freely floating regime. I am looking at the chart and it looks like it is tightly managed. If you speak to corporates on the ground, the biggest concern they have is access to dollars. Had they achieved the market clearing rate, this problem would not exist. Tracey talking about accessing dollars, could we get another International Bond sale from egypt . I thinso i think the finance ministry is looking to tap markets before the start of the fiscal year in july. You are at late may and early june for that. I think the vote of confidence we saw with the imf is going to help them acce markets and i think a lot of the data flow we are seeing out of egypt has been encouraging. They are moving in the right direction. I would say it is taking a lot longer than some people have expected. You are staying with us because the next we are going to be talking about a preview of the Market Action you can expect as the week gets underway. All the stocks you need to watch out for. This is bloomberg. Tracey welcome back to Bloomberg Markets middle east. Whichsunday here in dubai means we are just shy of another new trading week in the region. Yusef plenty of earnings to cut through. The companies we are watching, that includes been aghast ana gas comingdna in at around 40 million. A remarkable downturn here, the stock turning at closing at 44 on thursday. Key egyptian companies, firstquarr ss for ghabbour auto. Down 2 in the last trading session. Way underperforming. Jordans union tobacco. Theirre to report firstquarter numbers. Shares of the company surged 134 . I urge you to pull out the yard tobacco index. It is been one of the better performers. Arecoms egypt, they currently down 16 this year. Analysts are averaging an interesting position on the stock. You see the downside. One thing that we will all be watching as the week its underway is any news under irans president ial election. We have the founder of lighthouse research, he is still with us. John paul, i dont expect you to produce the outcome of the iranian election but i want to ask you what you are watching. I think irans election for most of the world matters terms of what it stands is going to be on the Nuclear Agreement. Weve seen even some hardline candidates as a moved in the direction of saying they still support the Nuclear Agreement. I think from a broader global perspective, the iranian election is going to be a relatively big nonevent, massivelits an issue but if you have all the candidates, both moderates and hardliners moving in t dection theyre going to support it, i would not expect them to tear it up. Tracey here we have a candidate who is trying to fill the banking gap that has been left oud onday. Widget. Mah och lynd johnson akmadenijad is he going to be able to really challenge rouhani in this vote . Of challenge lot to the Nuclear Agreement. When of the things you heard from very educated liberals within tehran was if they were going to see any benefits from the agreement, they would be in favor of not supporting it but ultimately there have been benefits. Youve seen a boost in gdp growth things are moving in the right direction but im not sure what their expectations were before signing the agreement. I think the biggest risk is simply whoever is elected comes out with stronger rhetoric because from my perspective the big threat from the Nuclear Agreement is not hereon, it is the big threat to this Nuclear Agreement is not iran, it is donald trump. All he needs is a little kindle for the fire to really pushes support to making the agreement a bit tighter for hereon. For iran. Tracey we did have s p lowering omans credit rating. Are you expecting any reaction . Bein my mind it should all based in at this point. Point. D in at this if you look at the outlook for old prices and the pace for onomic reforms, all of these economies are going to be running these deficits for the foreseeable future. That is going to intel an increase in debt levels over the coming years. When i look at the sovereign Credit Profile of this region, im not surprised that oman has been cut to noninvestment data. More surprising is the fact that some other economies have been able to maintain their ratings. Yusef great to see you. We also have some that is all we have for this edition of Bloomberg Markets middle east. Tracey we will be live tomorrow. This is bloomberg. Jonathan from new york city, i am jonathan ferro. With 30 minutes dedicated to the fixed income. This is bloomberg real yield. Jonathan coming up, valuations remain elevated, volatility sinks. The epicenr the reflation trade comes unstuck and chinas Deleveraging Campaign rocks commodities. Where are the investors who turned bullish . We start with a big issue. Is low volatility a sign of investor complacency . You see that in equities, in credit, in interesras,