xiaomi -- saudi stop market, we talk with a ceo. yousef: it is 5:00 a.m. in london. shery: i am in hong kong. we are seeing investors be more conscious ahead of the fed meeting and also the jobs report out of the u.s.. a few markets are closed in asia. hong kong, japan, and south korea. for those that are trading, take a look at this function on the bloomberg. you can see australia is leading the declines. remember, only after seven days of rallies for the australian market. we are seeing the aussie dollar lose point for mark -- .4%. japan is on holiday for the -- rest of the week. just to keep -- -- you have to keep an i on the japanese yen. treasuries not trading in asia today. japan is closed. yields fell overnight. we are seeing the sovereign debt market across asia. we are also seeing oil rebounds after a drop to its lowest in a week. yousef: absolutely. in this part of the world, they kingdom was holding a wide ranging interview. a rare conversation with the deputy crown prince. he has been spearheading vision 2030. let me run you through some of the key points. this is critical for investors. as the market opens up to the world, you're looking at plans on a domestic spending bid. you have proceeds from saudi aramco that are going to be deployed into mining, entertainment, and others. local content will be made more mandatory. idea of dismissed the popular pressure being the reversed some of those reforms and restored some of those allowances. that is what decision-makers were telling us. on the deficit he said it fell by 44%, below projections. oil revenue was improving as well. let's look at key actions in the markets.s -- we see mixed signals overall. that beat some of the expectations, but because of some of the rally, you saw some selloff there. another stock in focus down 6.4%. you're seeing a bright spot here. consumer non-cyclical stocks. utilities under pressure in the emirates. qatar with picture, the worst performer. in terms ofening other key aspects that we are watching. look at this spread when it comes to bonds over treasuries, those over one point 4%. also what is happening with the catheter -- qatar index. that has been volatile and reflecting pressures in liquidity. that is eating quite a bit. also a quick note on the south african currency. longest streakhe of declines in one month. that is with the rate hike odds. let's get other headlines from across the world with the first word news. deputy crownia prince says the kingdom will spend a big chunk of the aramco ipo proceeds at home. hea me -- in an interview hinted that 70% could be spent on developing domestic industries. he also talked regional politics and tensions with iran, saying dialogue with tehran is possible. to an can i come understanding with a regime that has a believe built on extremist ideology which is stated in its constitution and in the will of khomeini that they should control the muslims in the world. >> president trump tweeted that the u.s. government needs a good shutout in september after congress agreed on a budget deal that denies a much of his wish list. the bill gives them no money for the border wall, only a small cut to the epa, and funding for planned parenthood. democrats call the threat to shut down the government's sour and shameful. the pan's top diplomat says his country is ready to take the lead in ridding north korea of north -- nuclear weapons. they told the yuan conference that japan would lead efforts to d nuclear rise the peninsula. threat. envoy said the of a north korean nuclear attack on tokyo or seal israel. seoul israel. apples numbers came in slightly below estimates. current.s revenues at at 43.5 billion dollars, below estimates. it is a mixed picture for suppliers trading in taiwan. global news. 24 hours a day. powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ♪ let's get back to the story on the ground when it comes to the ongoing reforms around the saudi stock exchange. part of the plan to tie down the markets is a settlement cycle. we spoke to the ceo of the saudi stock exchange to the middle east largest equity market. here is what he said. is awould like to see growing number, day after day and year after year. we have a limit of 49%. we would love to achieve that level. yousef: the other big thing has been ipos and your hearing whispers of what companies are considering ipos. how many ipos are you looking forward to in 2017? , we are after launching looking at ipos from two different sides. we are offering to platforms for listing, the main market and no. listed givesany approval and we can say that at least 20 saudi companies have national advisors. we see a very healthy ipo pipeline on the market. family are there more offers you are considering? one going provides more opportunities for others? the company's and family houses, small and medium enterprises, you will see and i am optimistic about the pipeline. i'm optimistic about the reach. between thes in main market and the other? how many would be on the main market? >> we continue to work closely with financial advisors to encourage listings on the main market. they are going to the alternative markets for listing and the cost to go public. it is a platform that gives people comfort before they do a more stringent market. last year we had three. yousef: shortselling has been dry since you introduced it around april 23. why is that? when will activity pick up? how do you read consolidate with finance? happened last week. broker.big fine for the they tried to get the demand growing for the market. i can comment on compliance. basically, it is a bilateral agreement. it the waytructure they would see appropriate. yousef: in terms of widening the appeal of the saudi stock market, increasing options? you said this was on the table in the next 24 months. give me i have -- a more accurate timeline. what needs to happen to be able to deliver on that? >> clearinghouse in saudi arabia. that will happen this year. -- allogy and regulatory of those are on the way to enable the saudi clearinghouse to clear derivatives. we are moving forward. we are going to release. yousef: with this happen after the emerging market inclusion? >> it depends on the decision on whether it will happen. non-saudioss listings companies. are you making progress there? is a company that is trying to list in both. we have been speaking to many companies to attract them to join. hopefully we will get some this year. yousef: how many? >> we don't know. ipo 2018, do we still have a deal here? >> we're still on target and that is still the plan. we have to determine the many factors. 2018 is our year. yousef: that is the ceo of the saudi stock exchange on his ambitious plans to open up the markets to foreign investors. here's a program of what's to come. we will be assessing global risks. including brexit, the french collection, and the potential shutdown of the u.s. government. shery: the saudi crown prince thousand to keep half of the kingdom's oil money at home. we will look at that and the chances of extending their production curve with ihs markets. this is bloomberg. ♪ shery: this is "bloomberg markets: middle east." live on bloomberg tv and radio. i'm in hong kong. yousef: i'm in riyadh. let's get a check of business flash headlines. the great state in deutsche bank drop 10%. a company reported a 3% holding in february. surpassesgs company blackrock 5.9% investment which has the largest state in georgia. -- deutsche. united airlines apologize for hauling of passenger off a plane. the ceo told lawmakers it should never be repeated. the house transportation committee hearing comes after the doctor was dragged off a united flight in chicago having refused to give up his seat to a crew member. thisu and the public in committee need answers. 2 million people will fly today or something close to 2 million. they are tired of being treated inappropriately without courtesy. if something is broken, and the obvious to five between passengers and airlines needs to be addressed. yousef: a company is not prepared to continue funding another company. wenttalian flag carrier into bankruptcy for the second time in this decade. they have exhausted all options after it was voted against a $2 million plan which cut salary and job cuts. saudi arabia's de facto leader says half the money raised by a aramco's ipo will be spent on domestic investment. he also said the kingdom will retain full ownership of its oil and gas reserves. sole decision-making authority on production levels after the national oil companies public share sale. let's get more from ihs markets from a president for energy. thank you for talking to us. let's talk about this ipo of saudi aramco. said that the prints just having the sole decision-making authority on saudi aramco after the ipo, some key questions remain. how much transparency will there metrics forerating saudi aramco to facilitate forecasting? that remains the key question for investors in this ipo. involve a 5%ing to of aramco, as the prince said in the interview, much of the control remains within aramco's management and all the wells and reserves remain within the control of aramco. benefit from the assets by aramco. shery: the prince has also said repeatedly that he does not care if oil prices go down because if that is the case, saudi arabia can expand to growing aging -- growing asian markets. where can we see that potential for saudi arabia? i think oil prices are important to saudi arabia. with this plan ipo, there are strong economic incentives for them to support prices. drove the agreements among output last to cut compliance to these measures has been quite good so far this year. prices, high oil prices are certainly important to saudi arabia an important to the upcoming aramco ipo. about oilt's talk prices. we are gearing up for the big meeting in terms of extending the agreement. before we get to the agreement, let's talk about the reality of supply and demand. we pull this up a chart. it will show crude oil in the united states. it crosses a key line, u.s. gasoline inventories. inventories might have started to come down. the gasoline supplies have been coming up. what is happening here is it is all moving downstream. perhaps that is not an indication that this agreement is working. how much oil is out there really and how much of an impact has this agreement really had? >> oil inventories remain very high. though crude oil inventories might have gone down a little bit, crude oil inventories in the u.s. remain much higher than the five-year average level. fix tos really no quick the high oil inventories that we have globally. it will take time for any output .uts to work through the system the problem that opec faces is , thereecision they make is going to be a reaction. the reaction from the opec production cuts is growth in u.s. oil supply. double seen u.s. oil since the level a year ago. a u.s. oil production is on the rise and that is going to provide a balancing force to the output cuts in opec. inventories isl going to be slow to come by. yousef: the people at standard chartered are saying that u.s. total oil production will hit a record this month. if you look at what the market is pricing, is it relevant whether this agreement is extended are not? more toneed to do depress prices and global markets? >> great question. processto speed up the to reduce global oil inventories, opec and other non-opec members may in fact need to cut more. i think that the more easily achievable solution is for opec to extend the cuts that are in place through the rest of this year. and then the hope is that the strongdemand will remain , that will help counterbalance the rise in u.s. oil production. over time the market will dent in theput a oil inventories globally. it will take time. yousef: thank you so much for your thoughts this morning. by shery: president for energy. saudi arabia's, market regulator says it is a matter of time before your money starts coming in. we discussed with the capital markets authority next. this is bloomberg. ♪ yousef: let me show you you valuations in the saudi stock market. in comparison to the emerging market increase, it is one of the is performing sections. worst-performing industries have been transportation and banks. you can see the spikes happen in the bond issue that came through in october and november. let's hear from the deputy chairman of capital markets. what is yet to say about what is coming next? people got trading started at the beginning of last week with no incidents to speak up. we can now hopefully declare some degree of victory with respect to the transition and move on to the other elements of reform. yousef: how many do you have at the moment and are there enough for the msci reviews? >> good question. around 60.ve thanore important thing the number is to look at the rates of increase. increasead an over 50% in the past few months. aat has largely been reflection of the interest in saudi as we have opened up the markets. the registration will increase even further as we had transition. that is the feedback we have been receiving. yousef: i look at the data and it still has not increased meaningfully over the last few months. went you expect that spark to happen. oil at $50 and keeping sentiment as they? is it the msci energy market that will open things up? >> i have two quick points. when most people look at foreign investor rates and percentages, they might not see a significant increase. but that number might be a misleading numbers because the vast majority of that number are strategic investors that have invested in publicly traded firms, even before listing. in some cases many generations ago. the number we are looking at are the in esters -- financial investors other coming in and tapping the market. that number has been increasing over time. we expect that with the fromition of the markets people at zero to the people at two, that will increase appetite international investors. but it is a question of the macro environment and how they like to position saudi. shery: we are counting down to the weekend vote that could shape the future of europe. a cio joins us next to talk about the french elections and other threats to global markets. this is bloomberg. ♪ >> it is 12:30 in hong kong. these are the first word headlines from around the world. the white house says president had a good call with his russian counterpart with a talk about stepping up efforts on syria. tensions had risen on missile strike last month and the idea that the kremlin interfered in the election campaign. trump said it would be better if two rivals to get along. the turkish president has rejoined the just this party that he cofounded after 33 months hiatus. prohibitedreferendum party affiliations for president. at an event marking his attorney, he warned that turkey could drop plans to join the eu. >> now he will open the chapters and you will keep your promises. the tableen set at and discuss, if not, we have nothing to discuss with you. presidentnian reelection campaign one a boost after he described his rivals spending plan as unaffordable. he is a conservative from a prominent family and it helped garner more support. other candidates, including a conservative cleric, has criticized his own economic record. the imf says spending cuts and an increase in oil prices are lowerg gulf countries some budget deficits. in a nifty with bloomberg, the regional director held efforts to transform economies that have relied on oil exports for more than five decades. toit has improved banks removing some of the subsidies and increasing revenues because of the oil prices. in 2016 to 50-50 five dollars a barrel. both on revenues and expenditures have helped reduce. expecting somere of the key reforms to come in like the introduction of another plan. >> global news. 24 hours a day. this is bloomberg. ♪ shery: we have hong kong, japan, and south korea on holidays right now. for those that are open, markets are looking makes. get the picture. what are you seeing. all those markets are closed that you mention. it is not a big line coming through on the first column. you can see the australian market is leading in the region. down 1%. weakness is coming through from banking stocks on the back of disappointing earnings. the material players. singapore looking very good. stocks in singapore at 2015 highs. you're seeing fluctuation in chinese markets. the csx 200 down at lunch break. we have been coming through consumer stocks. but technology stocks are lower in china. that is on the back of apple earnings. it is still clawing towards the 10,000 point level. in terms of currency, the malaysian currency is up against the dollar for the sixth consecutive session that is now in a five-month high. it could be on overbought territory. aussie being held up again. the lower iron or price hurting as well. look at what is moving in terms of stock today. singapore banks leading those gains. up by about 3.5%. how look at the losers. we can see weakness coming through in some of the aussie banks. west bank down 2%. a sunni group down 6%. there are quite a few. most of them on the aussie share market today. yousef: thanks. let's talk about the french presidential election. big events coming up. they are going head-to-head in a debate that is later today. will bevised encounter their last before sunday's runoff. ahead, they are into new playing to their audiences as one would expect when it comes to politics. shery: opinion polls still showing mccrone holding a strong lead up 20 points over the past over what is widely seen as france's closest election in decades. let's discuss this in global a unionthe market with bank chief investment officer. thank you for talking to us. it was a market friendly result from the first round of the french elections. it looks like this scene is set for a micron win. does that mean we can ride on volatility for now, at least until the french election? >> the election related volatility has dissipated. to tapered to start the program as we going to the second half and moving to 2018. shery: also brexit. we continue to talk about it. we are hearing reports that the eu has raised the opening price of the uk's brexit bill to 100 billion euros. tensions seem to be rising between the sides. we are seeing harsher rhetoric from both sides. how will this affect markets in the upcoming weeks? >> we think the pendulum in the u.k. has long from overly pessimistic going right after brexit, then became very optimistic at the economic numbers look very strong. the pendulum is starting to swing once again. the u.k. economy is starting to slow. it will be a contentious negotiation with the eu. we should see the weakness coming into both the u.k. and the european markets as well as volatility in the currency in the months ahead. yousef: i want to look ahead to the fomc. bloomberg intelligence put out a note, a fascinating read, describing the situation comparing the fed to smoothly gliding through a pond to call and ater on the surface vigorous paddling below the surface. in terms of details of the balance sheet, what the expect to see on that front? >> re-think the second half of the year they will begin to provide guidance on how they will shrink the guidance sheet. that is targeted at maintaining a stable shape of the yield curve going forward. that will be key to maintain bank earnings and maintain profitability within the financial sector of the u.s. economy. yousef: we have u.s. auto sales. the numbers are surprising. they surprised expectations. this is the fourth straight down months after record year in 2016. europe is holding up fine. china is holding up fine. thesesconcerting are figures and what do they tell us about the situation or the resilience of u.s. consumer spending? >> it is definitely something to watch in the u.s.. there are technical factors behind the weakness in the auto sales. in past years, we have seen quite a lot of fails in leasing fleets. a lot of those cars are coming back into the market as used cars and putting pressure on pricing as well as volume in the new car market. that is a technical aspect. we are seeing softness from the credit card company earnings. that is something to watch in the u.s. at this point to see if the u.s. consumers close more meaningful. ofwe look to the second half the year, we think there is enough momentum to see reseller asian and growth from the soft first-quarter we have seen in the u.s. shery: we have to talk about growth in equity markets in the u.s. if we look at the bloomberg or our viewers, they can see in fact we are seeing world equity valuation back in your cycle peaks. very near these peaks we saw back in 2009. the blue line along with markets index is in white, but the vast majority is the premium founding u.s. stocks, they make up for more than half of the msci world index. how close are we right now to correction in u.s. markets? increase in the we are concerned about violations in the u.s. that's a, when we look at the first quarter earnings numbers, they have come out robustly beating both the bottom and top line. that is underpinning the u.s. equity market. when you look more globally, we see better opportunities in equities around the world. we see selective opportunities given the trump performance in european banks. for really attractive valuation and good earnings, we see a lot of opportunities in places like japan. yousef: before we go to the next news comingbreaking out that saudi telecom made a similar bidding move. it is set for that market. let's get back to the opportunities you are seeing. i will that the u.s. aside for a second, what about the story in europe? how do you trade that at the moment? >> we have seen a nice rally coming out of the french elections. that is to be expected. we want to be selected in europe given where valuations are. half, wento the second think the ecb will start to taper. that should allow yields to rise in europe and to be very positive for banks. we see a very good discount in terms of valuations versus the u.s. peers. it there. will leave thank you for joining us on the show. still to come, we are going to look deeper into the key story, apple and what they are doing. quarterorted second iphone sales that ms. expectations. our technology reporter has details from san francisco. reporter: apple reported fiscal second-quarter earnings. they missed on measures such as revenue and for cost revenue and iphone sales. what this means is that given apple has a really successful year in terms of the stock, a jumped 26%, outperforming the 13% gain in the nasdaq composite. investors werend looking for weakness in iphone sales as an opportunity to capitalize on the gains they have made this year and take some profit. we saw that immediately after the numbers were released. the stock took a little bit of a hit and was down a few percent. we will see how that pans out tomorrow. and whether that trading continues. what is interesting is the main think people are looking forward to is the iphone eight. it is likely to be released later this year in the autumn. the apple executives were saying that has encouraged some customers to hold off on buying the current product. about somecknowledge things that have been in the iphone eight of his encouraged delays and whole luster people not find the iphone 7. what is interesting is that the iphone 7 was not that significant an upgrade to its predecessor. healthy sector, but there are differences in camera and speak, but it was not a significant upgrade to the phone. that could change. apple has typically upgraded the phone and changed the design every two years. now it is every three years. that has made them vulnerable to thele not wanting to buy newest phone and holding off until the next one because they are far more aware that the next iphone is a significant upgrade. investors are betting a lot on the iphone eight. they hope it will reinvigorate apple's sales. we don't know how quite significant the upgrade is and whether the company can deliver on that. coming up, the interview saudi arabia's largest listed real estate form -- firm. we get details about their expansion. this is bloomberg. ♪ shery: you are watching bloomberg. a development company is saudi arabia's largest property development group. they have been focusing on the city of mecca, now medina is on the table plus a further expansion is in the cards. i spoke to the ceo yesterday. he tells me they are also considering bringing in foreign investors. >> there is much already in that cap and medina. may, and medina. cities have their own features and character. with they mecca seasonality factors. we leveraged on the experience and capabilities. this is our strength. we struggle with more mecca andt within medina. but also other businesses complement the business model for real estate investment. yousef: so would you say it is on the table outside of mecca and medina? when to go outside of these two cities, it might be in option for other investors to get involved. >> absolutely. who knows, the markets will diversify within the province. those are the cities we really invest heavily and leverage on our expertise. see expansionn being part of the story in the next few years? >> absolutely. to certain people through partnerships giving them access and financial benefits. yousef: talk to me about how you will fund this expansion. are you looking at loans? what is on the table here? funds is that they now, sharon. othert comes to debt, forms of debt, support is something we are working on currently. interview, that is the least form of financing because of all the complexities and getting a director. we are trending toward sharing more risk and using new instruments. is involvement with another company. yousef: are we going to see more of that? of you developing these kind of funds? where is the initial cash going to come from? is that going to be from the selling of assets, is that on the table as well? what about pushing more of that into elements -- into creative diversification strategies? >> absolutely. we are a development company and lifestyle development company. we sell units, we sell lifestyles. they say you can't have the cake and eat it, we want to develop the whole side. we develop, we sell, we create the value. substantial in turning around our company. a lot of cash in liquidity in achieving our strategy. ceo of a real estate investment company. coming up, we look at the top events expected to move the european markets. this is bloomberg. ♪ shery: asia markets looking make with australia leading that the clients. materials are bleeding in the fall in australia. we are looking ahead to the market open in the emirates. what are you watching? in the emirates and in the rest of the region, plenty to cut through. with cut -- pick up earnings from kuwait. first quarter net income raising. continuing to grow, 25% of the group revenue now. you're seeing the success of the program is the highlight of the quarter. i also want to talk about the processing manufacturing giant who was this -- expecting to report later on today. estimated revenue year on year for the first quarter, 6.1 billion saudi currency. , and theyhuge company came in with a major loss that's all the stock tumbling at the end of the last quarter. analysts will be looking carefully for indicators of a rebound and what it says about the saudi arabian economy. finally, at the salon group -- that reported earnings in the first quarter that came in with revenue down the percent. the stock is down nearly 7%. a quick look at what is going on in the kingdom. the deputy crown prince was giving a rare interview. it has been one year since the 2030 project. analysts will be adjusting some of what was said. and it comes to the budget, they said it will fall 44% below oil projections. oil revenues improved, not because of popular pressure, but because there has been a tangible improvement. also, the domestic spending. they take their programs -- earnings from saudi aramco and plant locally, 50-70%. to money, interest amy, and defense. we are waiting to see the reaction on the saudi stock market as we hear more from these key decision-makers. let's get a check of the stories that are expected to move markets in europe. a reported joins us from london. you are watching deutsche bank and the chinese firm continuing its buying spree. reporter: good morning. deutsche bank in focus because there's been more news from a chinese hotel conglomerate group. they were building a stake back in february in deutsche bank. death increased to 4.8% in march. have a have a shareholding of 9.92%. they said in february they plan to keep that under 10%. this makes them the top shareholder in europe's largest investment bank, overtaking blackrock now in second place. this ceo focusing attention on turning around this bank which is been hit by legal and misconduct charges. they did a capital increase recently of 8 billion euros. they have gone a bit of a line spree globally. we're still cutting through the cake of today's earnings. what is on the agenda for today? reporter: lots to talk about. we have numbers from a host of banks. we have bmp coming out of france today. our focus is going to be on what they have to say about the trading in the business, how currencies, fixed income, currencies, and commodities are doing. interesting conversation around politics as well. stocks in some of the banks moving higher as a result of first's successes in the round, what will be key in the second round? we will be talking later on this of ang about the cfo company who has been speaking to a colleague. retailer anda u.k. another cfo will be joining us here on daybreak europe. movements in the pound are hurting profits in the u.k.? we will have a good conversation here. thanks. plenty to look forward to. that is all we have for this edition of "bloomberg markets: middle east." looking at u.s. equity futures, they are still low. shery: we are also taking a look at emerging markets in asia. currency is looking pretty solid. i have to say the aussie dollar right now is way down. commodity prices looking soggy when it comes to industrial metals, led by copper. this is a mixed picture across markets in asia. we will have other headlines at the top of the hour on daybreak europe coming up next. this is bloomberg. ♪ selling if you are iphones as consumers await the next device. apple shares fall down. manus: waiting for yellen. no hike is expected, traders look forward signals of what is to come from the fence. anna: france's biggest bank beats estimates. we year from its ceo. >> bottom line is 4.4%. ♪