Very much appreciate what could be the largest ipo ever. And rising risks, pboc governor chinas Financial System is left significantly more vulnerable and calls for reform. Yousef it is bright and early in dubai. Clock looking at some a. M. Local time. Welcome to Bloomberg Markets middle east. What a dramatic start to the we. The Saudi Crown Prince appears to be melting something of a purge against several highprofile princes in the world family. Yousef the list, i keep having to look through it again. Accused of everything from corruption to of using public funds, some very big names on the list. Including a very well known as this man. Businessman. Looking at a lot of foreign officials. A lot to digest here from a market perspective. Tracy that is exactly right. Its bringing out executive editor for the middle east. With the obvious question, is this a power grab in anticorruption clothing . Its hard to not come to that conclusion. Came first, before the reshuffle, before he changed the National Guard. The National Guard was kind of the last major power center that was not under the control of the crown prince himself. Now really every lever of power inside saudi arabia is directly controlled by him and his allies. Of course, we have no sense, no way of telling what these corruption charges specifically refer to, or whether the people are guilty. The fact that it includes senior princes, and the sweeping nature of this, is remarkable. And quite surprising. Yousef just for context, a political earthquake like, this possibly trumps what we saw over the summer back in june when everybody was already saying that the fact that he had the deputy crown prince moving to crown prince, it clears the way for the ultimate ascension of the throne. This is a much bigger deal. It hits so me different sectors. Riad exactly. The drama in the summer was over one person. Hen as deputy crown prince, was the main power everyone was watching. He are he had a lot of the levers of power under him. The move was really just a confirmation of this power. , its weeks away any resistance, anybody who could stand in his way in his ascension to power. Tracy we say in our story, taking over the National Guard is not quite the same as, for instance, installing a new oil minister. But it has been associated with the former king. My question is, does this start to incite more risk within the royal family . Riad i would be guessing now. I dont know what is going on inside. , you probably have some princes in the royal family now wondering what does that mean for them, what is going on, is there any way to stop the crown prince if they so desire . There is also a strong current of support for him, especially from the younger side, the younger princes. He has installed some of the younger princes in positions of power in the region in a way that it was obvious even then that these are the future, they are going to take over from the more senior princes. Yousef im looking at the list again, a lot of notable businessman. Group. D of the mbc another prominent businessman. These are household names in the kingdom. But also the economy minister, and this is key. Does this mean we will see a shift in policy there, or is it a consolidation of existing ways of doing business . Riad i think the letter. Economyr, who was the minister, was a key figure. The person who was talking to the media, laying out the privatization plans, the changes they are pushing forward. It is kind of morphing consolidation of what was kind of more of a consolidation of what was already there been a change in tact. , it is clearly being reinforced by this. Tracy one of the names on the list is familiar to people all around the world. He made some antitrump remarks on twitter over the summer. How much does trump and his relationship with mbs and stirring things up in the middle east play into this decision . Riad i think it plays into the princes confidence, typically with regard to iran. Is quite aggressive and antiiranian. Now it is old news, we have the Prime Minister resigning, blaming iran. Managingoombergs editor for the middle east and africa. Thank you very much. Lets going on in the region. Lets take a look at how the u. S. Markets closed on friday. It was 20 going on over there as well. We had the payroll report for september, saying that u. S. Businesses added the most workers in your after recovering from the hurricanes. The jobless rate falling to the lowest since 2000. We still have the elusive wage growth. Not really coming through. That was not enough however, to knock sentiment when it comes to stocks. The s p 500 reaching a record. Meanwhile, the vix at an alltime low. Bloomberg u. S. Dollar recovering. Take a look at brent, 62 per barrel. Yousef the vix continues to surprise. In focus, gold, relatively unchanged for the most part. You look at the cftc data from late friday on futures and options, Money Managers have cut their bullish positions on gold as of the friday close, down 7 10 1 . Mind, we are in the fifth weekly gain for nickel. The electric car story will increase the demand for nickel. Eurodollar down. Of 1. 8 . And at it was one of the poorest performing emergingmarket currencies. Lets check on the first word headlines. Trump has urged list arabia to lift to aramco on the new york stock exchange. He tweeted he would very much appreciated and it was important to the United States. A person familiar with aramco says the message came out of the blue for the company. The move raises the political state stakes in what would be the largest initial Public Offering ever. Chinas Financial System is getting significantly more vulnerable to two higher leverage, according to the pboc governor. In a lengthy article on the central bank website, he said risks are cheerleading, including some that are hitting, complex, sudden, contagious and contagious and contagious. Lebanese Prime Minister has unexpectedly resigned. In a televised speech from saudi arabia, he said he fears for his life and accused iran for the stabilizing his country and the region. This raises the prospect of a renewed political partition between iran and saudi arabia in lebanon. The n president has called on the catalan president has called on groups before the election. He tweeted that it is the moment for all democrats to unite. Elections have been called for december 21 in a bid to help pressure on the separatists by forcing them to choose whether to take part. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im deadly humphrey. This is bloomberg. Yousef thank you. Our other topt story, President Trump has arrived in japan for the start of a 12 day, five country trip. It is the largest far east itinerary for an american leader in a generation, and arguably resents presents diplomatic tests. Stephen engle joins us. Run us through some of the key angles to this visit. Obviously it will be a packed schedule. There are some angles to this. At the top of the pyramid is the Korean Peninsula and north korea. Ind of reassuring the allies north asia, including japan and south korea, his next on tuesday, that the United States will have its back. Also, trade is a big issue. The United States runs trade deficits with all five of the nations he will be stopping on in this whirlwind tour of the region. Fair and reciprocal trade is what donald trump wants for the United States with his asian trading partners, and also once again, to send a message to pyongyang that north Koreas Nuclear and Missile Program will not be tolerated. ,e has already spoken to troops and has set in japan that their north korea approach is not going to be like past approaches like past president s, and he is already ramped up rhetoric to a speech to troops here in japan. Let me read a little bit of it, you can kind of get the tone. He says, we dominate the sky, we dominate the sea, the land, we dominate the space. Regime,no dictator, no no leader should ever underestimate american resolve. A speech to the troops, he is rallying them, but he is not backing down from the rhetoric that has been shaking the nerves of allies in asia. Trump is clearly navigating a tricky situation when it comes to north korea, but in general, there is a theory he has had that are luck when it comes to connecting with leaders in asia. Some people with, shall we say, likely national bents the philippines and india. Have you seen any sense of that coming through . It is still early going, but we did get a sense of that from his comments to the press on air force one on the flight from hawaii here, when he chinaked on his views on and the new mandate, if you will, his strength in power base after the party congress. Trump trade it back onto himself and said, i am a strong man, as well. He relates to strong men, and here in asia. The ultimate strongman, if you want to call him that, if kim jongun. Yousef excellent reporting. Stephen engle live out of tokyo. Linesking nine hitting the bloomberg. An for the net income figure, 1. 6 million for the Third Quarter. Looking at Third Quarter revenue. The estimate was for 1. 12. Let me run you through some of the other lines coming through as part of the statement. They are saying all geographies and segments performed for a and they will continue to focus on expansion via partnerships. Looking into some of the bloomberg and sigh, 28. 3 return this year, compared to 14. 1 for the Dubai Financial market transportation index. Tracy interesting numbers. Head of research at in bg, there is plenty of us to get to good lives maybe start with payrolls in the u. S. The number was ok, it did not match estimates, but that wage growth is not coming through. What does that mean for the feds think is that the lack of invasion of inflation is temporary . Its something that that has been grappling with for many months. I think one of the issues that some analysts have had with the appointment of jay powell as the new fed president next year is that he is not an economist, he ,as only benefit for five years does he have the ability to navigate the thread the fed through these waters . Markete a tight labor and higher inflation, that is not seem to be holding true and has not for some time. 2018,k as we head into partly because of the low base for 2017, we should start to see the headline inflation number pick up. We feel there is room for the fed to continue to hide. Two hike. But if the models they have been using are no local no longer reliable, they will have to find a new way to look at the economy. Tracy i loved the comment saying that the phillips curve is flat as kansas. That really describes it. You mentioned powell confirmed as the new said fed head. Moving have difficulty things . Been mostly down the line, what janet yellen has indicated, he is been behind that. Athink his natural leaning slightly more hawkish. He is a republican and he has expressed some concerns about quantitative easing in the past. That might suggest he is more hawkish than a fed under yellen might be. Yousef the other big story is what is going on with the tax changes in the United States. This is affecting some of the s p 500 companies, we have a chart. This is higher tax versus lower tax ratio. In spite of the recent updates, the highest taxed Companies Continue to underperform to their lowest tax peers. A very contentious issue. Where do you stand on the debate . Will it make much of it different to the current state of proposals . Khatija the proposals we have seen so far really look like they are going to help support middle income households. Toprovide some boost consumption. On the Corporate Tax side, it really seems to be targeting forcing earnings, and companies to recapture a that. I think that is a positive. But i dont think it goes as far as trump wanted as far as the Corporate Tax rate and support for businesses and investment going for it. I think we will see some used to from the 2018 household cuts and corporate measures, but overall, if youre looking 10 years down the line, im not sure any growth is going to be sustained. I suspect the real outcome will be a bigger budget deficit. Tracy you are staying with us. Later in the show, were going to speak to the ceo of the Emirates Real Estate Investment trust about Third Quarter growth figures. Yousef of the latest pmi rings from the uae and saudi arabia, and egypt. We will break down the numbers. There are some surprises in there. This is bloomberg. Yousef this is Bloomberg Markets middle east, im yousef gamal eldin. Tracy and i am tracy alloway. Lets get it check on the news. Softbanks talks to merge with tmobile have ended after months of negotiation youd according to people familiar with the matter, the ceos cannot resolve how to share controlled combined control of the company. Unlimited that the data plan will continue. Apple briefly became americas first 900 billion company on friday, as its stores around the world were inundated with customers trying to buy the new iphone x. Demand for the phone, which has a thousand dollars price tag, how to the company to report at least 84 billion in the christmas quarter. 3. 7 , gained at least taking the market cap above 900 billion before slightly paring down. And you say businesses are calling for an end to the soap opera of brexit. The consideration of british industry practice and and the president drechsler will address tomorrow. He will criticize theresa may for her approach to brexit. That is your Bloomberg Business flash. Yousef thanks. Some breaking lines hitting the bloomberg on pmis 43 companies. 55. 9, versus 65. 1 in september. Slightly stronger. 48. 4. Arabia,comes to saudi 55. 5 in 55 point the prior month. I would like to start with uae by virtue of the fact we are here, and we are seeing growing pressures a little bit in the uae figures. Tracy although the headline numbers are showing really strong growth khatija although the headline of us are showing really strong growth in output sectors, were seeing in the rest of the service, a squeeze on margins for companies in the uae in particular. If we look at last month, 8 surveyed said they cut their selling prices, that is a huge number, a record for the series. It does point to margins being squeezed, having to work harder for new sales. At the same time, theyre fine facing higher input costs. It will have an impact in terms of their ability to boost employment, because they are obviously not willing to spend more when their margins are under pressure, and really having to restructure a lot of the way they operate and find new efficiency. Tracy i curious, and terms of the headline, pmi recovering for the uae, do you see evidence it is being driven by companies maybe boosting inventory ahead of the vat . Khatija im not sure, but we have seen some interest regulation industry accumulation for the survey. From such that they are optimistic about demand over the next few months, and in anticipation of that, a are building up production inventory. Materials they would be using to manufacture or supply whatever it is they are supplying. You can see those building up before they have to pay the 80, but it could be that they are expecting to ban to expecting demand to remain strong. Yousef in terms of the threat of saudi arabia, pmi relatively online from the previous month, 55. 6 versus 55. 5, but i want to look at the political story. Serious arrests, arguably unprecedented in scale. How surprised were you when you heard the news, and more important, what does it mean for the way you look at saudi . Khatija i think everyone was a price with the news overnight come i dont think anyone was expecting quite that kind of reshuffle and crackdown, but certainly, if you look at how the economic story has played out over the last few months, we had a huge announcement of the construction of a new city a couple of weeks ago in saudi arabia, massive investment required by foreign companies. Really what it is showing is the new leadership is committed to modernizing the economy and diversifying the economy and addressing the issue of overreliance on oil. A hugere going to impose structural change, you will challenge the businesses that are already enjoying the benefits of the existing system. I think what the signals is that the crown prince is a strengthening his position, that will then allow him hopefully to continue with pushing forward reforms that are needed and themted and executing in a way to get the results he wants, and ultimately it will be a good thing for the economy, but clearly there is risk around that process and i think there is going to be a lot of noise. At the end of the day, it looks like hes moving in the right direction to achieve what he wants to achieve. Tracy in terms of the Overall Economic growth rate of the middle east, we have the imf releasing its outlook for the region last week. Rose in the gcc is expected to come in at i think half a percentage point. Have you feel about that estimate . A littlewe think it is conservative, our forecast is a little stronger. I think the headline number is misleading, because it will flex cuts to the oil production, and saudi arabia in particular, they are cutting by more than they agreed. That has really been waiting number. On the headline statistics, not as fast as last year, but i think its something that is going to recover as we head into 2018. Yousef lovely having you on the program, as always. Emirates. Esearch at we have a busy week ahead, we want to make sure you are crossed that. Heres some of the highlights. We are already discussing of donald trump, on his first president ial tour of asia, he has added an exit day to his five nation trip. Issues you know about, north korean aggression, chinese activity in the South China Sea will dominate discussions. Tracy on tuesday, mario draghi will speak on banking supervision at 10 00 a. M. Local time in frankfurt, and on wednesday, the chief brexit negotiator and