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00:00This is Bloomberg Daybreak Middle East. Your top stories this morning. U.S. equity slipped from the all time highs amid worries about rising interest rates. Meanwhile China's tech stocks fall once again as a share sell by 10 cents spooks the investors OPEC and its allies agreed to increase output not as analysts predict a smaller than expected surplus this quarter due to weaker supply. China Iran plunges as it reopens for trade after nine months. The company is promising to focus on its core business following a multibillion dollar government backed daylight. And the great resignation continues. A record four and a half million Americans quit their jobs in November highlighting the persistent churn in the labor market. It's just gone 8:00 and across the Amazon warm. Welcome to the show on Manus Cranny. In Dubai two huge themes the great resignation and the great rotation the value hunters of the world unite. That is the message. As money flowed out of the tech side of the trade aka investments plummeted. Tesla came off by one point three sorry by 4 percent. So we're seeing a small continuation on the downside across the US equity gauges at the moment. No it was a drubbing for tech but it vainglorious moment for the great rotation. Is this the year where value will remain. The triumphant trade. The growth trailed finally by one and a half percent yesterday. So cyclicals and value shares they really took a march higher. And some people are going to welcome this broader church of participation away from matter. Not away from but perhaps less matter less alphabet less less of that tech and a bit more about growth in the economy to the oil market. They added 400000 barrels of oil. So there was no press conference. My question is was this a political acquiescence or a pragmatic response to looking through on the Quran and to say right well this market can take more oil barrels that surplus will be less. And so therefore Barclays raised our target onward to 80 dollars. They say that the 400000 barrels added was a political consideration. But we are in for a more volatile period of time. Bob McNally from Rapid and joins me a little bit later to talk about the oil markets. Let's get to Juliette Saly. She's in Singapore with a bit of a tech wobble meltdown cathartic moment. What do you make of it Jules. Yeah certainly the tech story very much in focus here to Manus and taking a shine off that rebound we saw on overall Asian equities yesterday you can see that big fall coming through in the Hang Seng Tech Index now holding it May 20 20 lows falling for a third session and no surprise 10 cent dragging quite heavily on this. A couple of reasons behind 10 since well it's divested some of its money in C Singapore C selling three billion dollars of shares. We saw 80 ISE of course hit hard in the US. And then also we've heard from the China state administration for market regulations. So a watchdog finding Tencent for failing to report nine deals. You've got weakness coming through in other markets across the region to the likes of South Korea China. But we are still seeing that yen at a five year low against the dollar boosting the NIKKEI somewhat. Let's have a look too at another big story we're following. China while wrong resuming trade after a nine month halt. This chart really just showing you the big fall that we have seen about 50 per cent now. Fifty three per cent drop. This is the bad asset manager that received a six point six billion dollar rescue package. So we had a huge role as it resume trade. More than 190 million foreign shares changing hands in the first 30 minutes of trading. And that makes it by far the most actively traded stock in Hong Kong today by volume minus. That is what you call a monster day for fellow Jews Jules see through the morning Juliette Saly there in Singapore with the very latest reopening trade on China harangue now OPEC and its allies as it said chose to increase oil production. The delegates say the 23 nation alliance led by Saudi Arabia and Russia approved 400000 and barrel a day increase scheduled for February. Will we get all of that oil Stephen. Jen Psaki is with me. So Steve and I started with the moot pragmatism or political response. What do you think. Adding 400000 barrels. You know I think to a degree it has to be pragmatism. I mean when you look at their view of the market and when you look at you know the the where we're going the analysts do see we're going to have a tight market. Now obviously where it gets a bit muddled in their view on all Micron. You know these are the open plus members saying that Omicron is going to have a muted impact on oil demand. And you know that's really that's hard to see. You need a crystal ball to exactly see what's going to happen. You know you have a record cases in the United States spreading in Europe. It's spreading in Asia. How is that going to affect travel. However government is going to react. Even OPEC doesn't know. But they're betting that the market will be tighter in the first quarter. Inventories are going to be lower than what they're initially expected. And because of that they need to add the supply. But as you said might be tough for some of these countries to add to supply because they have been struggling. Well this is the theme that came through from Rita san. It's something which I know Bob McNally will pick up on little a little bit later on. Four hundred thousand barrels is the headline. But where is the restraint. Does the UAE and Saudi Arabia have the ability as it were to step into the breach. If for example Libya and Nigeria can't make their allocation. Yes you know they they can. The question is do they want to. And do they want to take that responsibility. You know I think what they're going to try to do is they're going to try to push these member states to meet their commitments as much as possible. You know that that requirement is something that they. That they are going to be sticking to these members. But you know we have analysts saying if Saudi Arabia and Russia doesn't step in maybe only half of that 400000 barrels a day will be added to the market. So it's a difficult situation at least Saudi Arabia. Are they willing to fill that void. They can make more money if they do. But at the same time they want everyone to be paying their fair share. Now in terms of the fresh freshly baked notes that are coming out Steven do you think that they're more bullish. I talked to Buy Barclays at the top coordinated dollar. I'm looking at some of the trades that went through. I love this 100 150 dollar call spread. Maybe. Maybe it's maybe it's prescient but there are some big block trades going through that. You know I think when you when you look at these forecasts and it it's difficult to exactly say which block trades are happening when you look at the forecasts of where oil is going. You know you have seen over the last few weeks definitely especially since Biden had had coordinated the release of strategic reserves. You have seen this kind of push from analysts say you know oil is going to be going higher and eight dollars. Ninety dollars seems to be the direction that the market is heading. Now will people be making bets that we're going to hit one hundred dollars. One hundred ten dollars. That's more difficult to see. And again it goes back to all Micron. What will be the government reaction from moment on if China has to shut down. Those calls are going to be bad. Those predictions are going to come to fruition. So it's a very difficult sort of thing to play out in your mind. Exactly. ISE as we speak China are restricting their exports and very much focused on the domestic market Stephen. Let's see how the day plays out. Brent Crude trades at seventy nine eighty four down two tenths of one percent. Having put on a couple of percent going into the meeting 9x down two tenths of 1 percent at seventy six. Eighty four are oil reporter Stephen Stock Kinski with the latest update now. North Korea appears to have launched its first ballistic missile in about two months. That comes just days after the leader Kim Jong un signalled that he was returning to stalled. Nuclear talks with the US would be a low priority for him this year. Let's bring in our government editor John Herskovitz. He's with me now. So John a low priority for negotiation. What do we know and how significant this launch is. But we're still trying to figure out the date of what has been launched so far it looks like a short range ballistic missile fired from North Korea as England to waters off of its East Coast. The launch comes after Kim has shown that he's not really interested in getting back to these talks where he could win sanctions relief for his economy. At this point he seems to be focused on his domestic economy but not when the international negotiations which could help him. OK let let's see what the year brings on the political front of course many political hotspots around the world are government editor John Herskovitz there not least with North Korea. What happens of course between Taiwan and China and the U.S.. Some major political hurdles to cross in 2022. She's back by popular demand with first world headlines. It is Juliette Saly. To buy an additional 10 million courses of its Covid-19 pill. This is on top of the 10 million doses the US had previously agreed to purchase Pfizer's Covid pill was cleared for emergency use by the FDA last month. It's been shown in clinical trials to sharply reduce hospitalizations and deaths from Covid-19. Prosecutors have dropped their criminal case against former New York Gov. Andrew Cuomo. Albany's district attorney says the allegation that Cuomo groped a woman in the executive mansion over a year ago is credible but there wasn't enough evidence to proceed. Last month two other counties also ended their Cuomo investigations without bringing charges. Goldman Sachs says Bitcoin could hypothetically reach a hundred thousand dollars as it continues to take market share from gold as part of a broader adoption of digital assets. Global Ethics and E.M. Strategy co head Zack Crandall wrote in a note that even the digital point's consumption of resources would curb demand. Bitcoin climbed about 60 percent last year and a surge of forty seven that or four thousand seven hundred percent since 2016. While a record at four and a half million Americans quit their jobs in November highlighting persistent churn in the labor markets the increase in departures was broad across industries and push. They quit right up to 3 percent matching the most in data going back to 2000. The unprecedented level of resignations including a record 1 million in leisure and hospitality alone suggests a lingering struggle for employers to retain talent. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts in more than 120 countries. This is Bloomberg minus Jose. Thank you very much. Still to come we're going to discuss the implications of the opaque plus decision on the oil market with rapid and energy. Group founder and president Bob McNally joins me in just over 25 minutes. But up next Arianna's investment strategy from global CIO Isaac Pillar joins the team. He thinks Chinese markets have become too pessimistic. This is member. Once the coffee shop passes and things start to go back to normal and workers fully return and demand goes back to normal I don't see any reason why the economy wouldn't revert back to the low inflation regime regime that we've been in for 20 years. Reverting to the mean. If we could all only do that. Is the most dovish Fed policy maker in Minneapolis. Fed President Neel Kashkari who's seeking two rate hikes to counter the inflation risk is not enough. ISE Pool is the Ariana Portfolio Advisory Service Global CIO Isaac. Good morning. Happy New Year. Kashkari is on to Goldman is on three. And you say neither the market nor the Fed have been great indicators on on what can come from rates. So I've got a spread. Isaac 25 reps from Standard Chartered yesterday 100 basis points from Goldman yesterday. Take it away. Give me your best shot. Well I think what we can say is that the Fed is going to hike. They've come out with all of the noises from all of the Fed presidents that they've reversed the transitory call. They're ending tapering. They are getting the market ready for rate hikes and they're probably going to come at some stage in the first half of this year. Now I think that the market is pricing three. The Fed said three in their economic projections. And and both of those have tended to be really bad indicators of what really comes over. Over the last say 10 to 15 years. So I mean I ignore that. I think that the market is going to be found wanting a little bit here. They're going to be over extrapolating inflation. And in reality the Fed will be looking very much so to take a steady slow as she goes approach to this. I don't need to rush into hiking rates three times. But by signaling that three could come. They are preparing the market for rate hikes. And that's the critical part here. The messaging how they get that message across so they don't spook markets. And so they don't spooked the economy. Yeah well they certainly don't want another taper tantrum. Monday Tuesday trading the bond market perhaps had some of this quaking in our boots. I want to reflect on some of the correlations Matt Miller sent me and a chart on what's up last night. And it is the ISE and prices paid. And it tracks the CPI. Martin's point is that there's still issues and bottlenecks. There's still oil prices up at the high ground but it is about the correlation between the two and one lags the other obviously. Martin is more or less calling a peak in this inflation CPI. I mean the prices paid the ISE am 82 to 68. Does that fact shines for you. And if it does call a peak in inflation what's the consequence for me in the bond market. I think it does call a peak in inflation. Not necessarily this month not even necessarily Q1 because lag times can can be variable but the peak in inflation is likely to come at some stage over the next six months. We're not going to be at 7 percent or 6 percent inflation at the end of this year. And what that means is while we're not talking about transitory inflation we are talking about inflation. That comes back to something a little bit more like the Fed's target. And that means the Fed they're going to hike but they really need to be careful about the speed at which they start putting that handbrake on. They don't want to go three or four and then find inflation gets back to 1 percent reverts to mean as Kashkari said that we've seen over the last five years that they really need to allow inflation to get back to near their target not 100 basis points below. OK. Let's wrap up a couple of big calls. I started the show with the great rotation and I was talking about art of growth into value. The biggest rotational move that we've seen since 1995. Does that endure for you. And is that a trade that you will participate in 20 22. It is we think that you're going to see the Covid steepening this year as that they call for three rate hikes just needs to tread water a little bit and a longer day longer. End of the curve pushes higher with with with growth and inflation and frost. That's a good signal for cyclicals for value stocks and financials. We saw a little bit of it last year. I think we'll see more of it this year. OK I love your. I don't think I can say it on the the description of your call for China. I walked in this morning. I was looking at some of the China tech stocks. I know you're laughing because I use the word offer but tech drops for a third day you know 10 cents spooking the market a little bit. They're selling some assets. Then you got Charlie Munger Building Monster W Possession and Alibaba. So I got two sides of this trade. I've got Alibaba. I got the Charlie Munger bid bidding it up. I got Tencent taken a bit of a wobble. How do you look at China for this year. Do you want tech. Do you want broad China. How do you get a return in China this year. Broad China's always a challenge because it is a difficult market just to take the index. But but overall I would say that the way the market behaved last year relative to the developed markets relative to the year before it's baked in a lot of pessimism about earnings growth making a lot of pessimism about the new economy. And we've seen authorities move towards a more accommodative stance and that's only going to intensify ahead of the National Congress in October. So we think a stronger economy this year better earnings growth particularly in the consumer side industrials servicing infrastructure spending and infrastructure building. This is a market that has been beaten down substantially and it is far too pessimistic in our view. We think 20 to 40 percent undervalued. And this could be a year like like in 2020 and years we've seen in the past where there's a lot of catch up available to investors into China. Now what goes through my mind I was looking at your call sheet. You're bullish on Aussie. So let me just extrapolate. I think that's obviously an F X caused such a spike in the dollar. But also if you're more bullish on China is there a carry trade into Aussie. I'm not. Are you just being nationalistic. There is there is some some of that by carry Australia. I won't say nationalistic. The Australian dollar has has had a bit of a rough ride over the last 12 months. We've been up and down and finished around 72. And I think that you've got a situation where Australia has got a good reopening taking place now. It will probably persist through the first half of this year. It's clearly linked to China and better China. Growth is going to help that. The broader Asian currency currency is last year got walloped lower. And that always has an impact on the Aussie. And I think a better outlook for Asia a better outlook for China really will be supportive of the Australian dollar over over this year. And we think there is a fair way up a lot of tailwinds for the Aussie over 2022. OK Isaac we like you calls coming out with fresh fresh meat on the bone for our viewers. Isaac my guest this morning from Oriana Portfolio Advisory Service global seat over the global view. Steep in the curve. A bit of value sir. This is Bloomberg. As we kick off 2022 a rebound in the US economy still faces a good deal of uncertainty. Bloomberg's David Westin talked about that with Stephanie Kelton Prof of Economics at State University of New York at Stony Brook. She also formerly served as a chief economist the Senate Budget Committee. In terms of the outlook it is always a footrace between the tailwinds that you hope are strong enough to propel you forward and keep you know keep the economy expanding. Allow us to continue to add jobs at the sort of pace that we've been adding over the last number of months. Now it's been very strong. But the risks are obviously you know what you're coming up against in terms of headwinds. And you know David for me the big headwind has been from the very beginning of this. The virus itself. And as we got vaccines and as we got more of the population vaccinated and we began the reopening we started to see just how resilient the economy had been through this. And then of course we get hit with Delta. And then here comes on NIKKEI. So you know if we are lucky and what we're hearing from a lot of the experts turns out to be correct that Omicron is more transmissible but less difficult to deal with in terms of the you know health impacts and so forth. And we're going to see maybe after the next three weeks or so we'll be. This will be kind of rearview mirror in terms of all Micron. So if there's not another mutation and another variant that we have to deal with and I think you know the the outlook looks pretty good to me. Well the big headwind is the virus. You know from your mouth to God's ears through basically the vaccine really taking care of the problems for us. We're getting past the underground. At the same time as you look back at what we saw last year is the virus hitting the supply side of the equation the demand side more. Because I think one things that surprised some people was how much it hit the supply side which really drove inflation. Well I think that's absolutely correct. I mean there are both things are at play here right. It is the case that we had extremely robust fiscal support this time unlike after the financial crisis and the fiscal. The fiscal response from Congress after the 2008 economic downturn this time was much different. We had much more robust fiscal support. People had more money. They had more income to spend coming out of the sort of reopening part of all of this. And so there were demand impulses there at play that helped to you know allow consumers to go racing back in. And it's really been a question of what people are trying to spend money on. You know it isn't the case. I don't believe that what we have is just a generalized case of too much money chasing too much too few of everything else. Right. Goods and services. Stephanie Kelton the prof of economics at the State University of New York. Bitcoin could be opportunity to step in. That's according to Goldman Sachs. Why. Because it's about a store of value. This is ten days that didn't redefine the narrative. But I want to give you a sense of what's happened as we went into Christmas and traded down 9 percent dying at probably over the past 10 days. We traded at twenty buck range sixty seven forty six and a half in the past six months. But Goldman Sachs have this new store of value. Note I'd where they say look you could make one hundred thousand dollars on bitcoin. So from forty six two hundred thousand dollars not overnight but it's about a store of value. If bitcoin rises as a store of value as a destination for a store value relative to gold and hypothetically that could rise by 50 percent over the next five years. What you're looking at the possibility then of honor a thousand dollars. It's DAYBREAK Middle East. Top stories this morning. U.S. equity slipped from the all time high amid worries about rising interest rates. Meanwhile China's tech stocks are falling once again as a share sell by Tencent spooks. The market and its allies agreed to increase oil output. That as analysts predict a smaller than expected surplus this quarter due to weaker supply. China Iran plunges as it reopens for trade after nine months. The company promising to focus on its core business following a multibillion dollar government backed bailout. And the great resignation continues a record four and a half million Americans quit their jobs in November highlighting the persistent churn in the labor market. Juliette Saly is back in Singapore back at the wheel juggling tech and builders. Good morning Jules. The big sell off in tech. Let's start that. Yeah let's start with this GTA chart that we have for our Bloomberg clients it's just really showing you this downward trend that we're seeing in the Hang Seng Tech Index falling as much as 4 per cent in the morning session in Hong Kong. We saw that hit to the ideas in the US overnight. And of course you are mentioning Tencent divesting its say stake Singapore C which also took a hit. We've also had the regulator finding Tencent Cent for failing to report nine deals and you're seeing that really way through onto the overall Hang Seng Tech Index which is at its lowest since May 2020 and falling the most as you can see as before since September. Looking at some of the other moves though the Hang Seng Tech Index as I mentioned under pressure Tencent and a lot of its partners also falling. Alibaba though has been holding up okay. You can see it's only down by about a quarter of one per cent there. And this is after The Daily Journal reported that Charlie Munger the chairman has nearly doubled the holding of the Chinese Internet giant in recent months. If you're going to go and go in and size a at broaden it out for me to the broader to the broader Asian market. How we doing this morning. Yeah we had that really good day yesterday. Doesn't look like it's lasted very long. So we aren't in the red today on the MSCI Asia Pacific Index really being led by not only what you're seeing in the Hang Seng Tech Index but the likes of the calls Jack and the Cosby as well. Remember the likes of Samsung weighing quite heavily. You can see a little bit of upside in the NIKKEI. No surprise then as the yen remains at that five year low. But we are still seeing some weakness coming through in a number of the other key markets. And I've put the PCI in there as well because we did have inflation data coming through from the Philippines. B ISE saying BSP is likely to keep rates low and the Philippine peso rising the most in three weeks as we start to see inflation ease there minus. OK Jill thank you very much. Juliette Saly in Singapore where the cracks may be appearing in Turkey's plan to stabilize the mirror. We've got new data from the central bank and the finance ministry suggesting that President Irwin's market moving promises last month to protect the lira deposits from the exchange rate risk on all the mike cracked up to be. Where are the cracks and the fissures. Let's ask Simone Foxman. So this was all about protecting the average man and woman with your deposits in the bank at 14 percent relative to inflation at 36 percent. What's the issue. Yeah. Right. It was it was to protect those deposits from falling if you couldn't get back at that return from the banks. Also to protect companies as well. But we looked at foreign currency holdings at the end of the week of December 24th and those actually rose to a new record and some two hundred and thirty nine billion dollars. Now households actually put some of their money back in lira as it seems but companies did not. We saw one point six billion dollars in money flow into foreign currency holdings suggesting that at least on the corporate side there's some doubt here. Another data point we got was from the finance and treasury minister himself. Reading the. Yesterday he talked about the uptake for these new products that would protect those holdings from that exchange rate risk. At the moment just eighty four billion liras has moved into those. That's about six point three billion dollars out of a total of five point two trillion euros overall however. So just a really small fraction is because people don't understand is it because they don't trust the government. There are a lot of possibilities out there but at the moment that data is not encouraging for the uptake of this product. And the investment arm of Saudi Arabia's pension fund they published the return figures for the first time. Magic number. Healthy return. Now more than 14 percent I say that's pretty healthy. This is the return for Persona Investment Company. Over the last year this is a company that manages actually the assets of two combined pension funds that total two hundred and fifty billion dollars in assets. And that is as you know it's really rare that we get a lot of investment data from Middle East sovereign wealth funds from pension funds in the region. But we've seen a little bit more data come out of Saudi Arabia in the past couple of years. One thing that I particularly love seeing is our holdings of U.S. stocks from the PIIGS. This is of course a different entity. But we love to get these numbers because it gives a little bit of an indication in such a murky area of what these big funds are doing. And this by the way is one of the top 15 pension funds around the world. Indeed and it's fascinating to sort of see the returns. This is the beginning of of more information more disclosures that are going to have to have the likes them about line of course with some of the Nordic wealth funds. And let's talk about the UAE because we covered this story. Yes it broke during my European show. The UAE under pressure for its lack of financial transparency. What does it specifically refer to. Who is this regulator and what are they most concerned about. Yeah it's the Financial Action Task Force. And so Ben Barton's doing some great reporting from our colleague there in Dubai learning that the regulator is leaning too towards adding the UAE to this great list it has of countries with substantial deficiencies around preventing things like money laundering terrorist financing proliferation financing. Simply saying that there are a handful of thresholds about how well the UAE is tracking various metrics how much KSA is happening and it hasn't met some of the metrics that the regulator has put forward. I would note this was really interesting to me. The IMF has actually done a study of developing and emerging economies that were great listed between 2000 and 2017 and they found that there were substantial decreases in the inflows capital inflows into countries that got this designation. Whether or not Dubai actually faces those given its cachet as a financial hub I think is a very open question but it's certainly not a great time to have this designation applied if in fact it is because it's already competing more avidly with Saudi Arabia which is trying to bring folks to Riyadh. And this could just be another little black mark on its overall reputation. OK. Thank you very much Simone Foxman CAC Financial Center in Doha with the very latest on the report about Dubai. Now to China. The Beige Book that international says that the recent surge in immigrant infections will make it hard for Beijing to maintain that zero Covid policy without hurting the economy. Bloomberg spoke to the firm's chief economist Derek Scissors who told us why despite that some China watchers are expecting growth to be a little bit better this year compared to 2021. There are a lot of people who think that in 2022 which is a party Congress year where Central Congress Party Congress will meet and say that Xi Jinping is a leader again that the party will not tolerate a weak year economically and that's a reasonable expectation. But they think that's going to happen through stimulus that China was constrained in its monetary and fiscal policy this year and next year it will be more or less constrained and you will get more money coming into the system. What our survey which is over 3000 firms says that that hasn't started yet. I didn't start even in mid-December. So people are talking about it. They're expecting it. That's a reasonable expectation. Well we don't actually have firms borrowing more to to ramp up economic activity in 2022. Maybe that will occur. It had but it hasn't occurred yet. You just heard about problems in the Chinese financial system. China may be more cautious than a lot of people expect. How long does it take for the transmission process to take effect. So if you actually allow more credit to be spreading to the Chinese economy how long will it take to actually see the benefits of it. Well obviously that depends on how aggressive China wants to be. They have shown in the past that when they want to push the panic button credit can spread very very quickly like within one quarter. And of course you'll have a lot of optimism as people start borrowing that that activity will pick up a quarter from now. I don't see that happening in this case. I think what China is looking is for have a better second half of 2022. The first half of 2022 could stay weak. And so I think what you'll get is targeted easing not a large surge of credit that's going to take longer to work as the people's bank looks to see who's responding and who isn't. So I would expect that the impact of a looser policy is more a July August that rather than a march forward. Derek is the fact that the panic button as you put it hasn't been pushed suggests there's nothing really to panic about. I look I think China's policy in 2020 has been quite wise and I think there are a number of countries including the United States have leverage themselves into a difficult situation. So know I'm not criticizing the Chinese for being cautious now. I think there is a risk here from home grown. As we know China practices a zero Covid policy. Omicron is very infectious. I can attest to that personally. And so it's going to be a challenge for them to hold to that zero point zero Covid policy. And you may see more of these shutdowns of large cities for just a few cases. So that could cause economic weakness that the central government isn't expecting in the first quarter. So I don't want to criticize China. I think you're right not to push the panic button. But that doesn't mean there isn't a risk from Covid in the first quarter 20 20 to. Well let's talk about some of the other risks as well. Do you think the risks from the property sector to the broader economy have been effectively contained. I don't know. I think the risk has been contained. I don't mean to say the property sector isn't going to drag down the broader economies still in 2022 because it is. So I think there's a macro economic problem. China is still working through. You could say the property sector has nowhere to go but up but it might not go up. And that would continue to be an anchor on economic growth. I don't think financial transmission of the property sector is a serious danger. You could have a major developer default. No question. But I think everyone's pretty much ready for that now. I don't think it will come as a surprise and lead to bad assets which are difficult to value. So I think as a macroeconomic problem property continues in 2022. But as a financial risk it's pretty low. China Beige Book international chief economist Derek says is plenty more ahead on DAYBREAK Middle East. This is Linda. Of CAC and his allies have agreed an increase in oil over the delegates say the twenty three nation alliance led by Saudi Arabia and Russia approved a four hundred thousand pound a day increase scheduled for February. The group is sticking to its plan to gradually restore its output halted during the pandemic after it analyzes the predicted a smaller than expected surplus for this quarter due to weaker supply. Lot of issues to pay and bopping Dally stayed up late for as founder and president of Rapid in Energy Group. Here we go. Bob 400000. As consensus was expected no press conference no communication. Two things go to peace goes through my mind. A practical pragmatic response looking through Omnicom. So you add four hundred thighs and or was there a hint of politics and leaned on from the US here. Good morning. Good morning and happy new year. No you know what this is about. No drama. Keep your heads about you know when all others are losing theirs. You saw a little bit of panic in Washington the last couple of months. And as NPR releases and threatening you know companies with antitrust suits etc.. OPEC plus is keeping their cool. They have a flexible policy. Are they resisting calls to accelerate the tapering. On the other hand they didn't hit the panic button when Omicron emerged. They're going to say you know what it's not clear that demand is going to get hit as hard to the restrictions will be as hard. So you know what I don't think is politics going on. I think the White House today man as you know expressed gratitude for what OPEC plus is doing but they are just keeping it cool. Everyone's in agreement. Proceed with the plan and if necessary adjust. So it's sort of no drama is the mantra right now. When I look at the market and it's quite tight I mean I put this in my market minute which is the front spread. The March April spread and the DAX DAX spread both in backwardation both becoming more and deeper into backwardation. How tight is the market. Bob. You know super tight. But you have to look through that and I think oh peek plus is looking through that. We just had a massive destocking in the second half of the year draws of 1 2 million barrels a day in the third quarter. About one point one million barrels a day in the fourth quarter. So no question. And you know what. The speculators the financials are coming back. And I think a lot of folks are itching to take on the Biden line at eighty five dollars and so forth. But I'll tell you I think OPEC plus like we and I think other barrel counters are looking into this year and seeing builds builds that will put inventories back into a normal range later this year. We have supply growing twice the rate of demand this year and that's what healthy demand growth. And so I think folks are saying yeah it got really tight last year. We need builds now. But not to oversupply the market just to put us back into balance. I think that's what folks are aiming for. And that's why I don't think you see this bullishness among the OPEC plus ministers. That is reflected in the financial markets and the spreads you're talking about. OK. Then does that cop buy. We're all I can get to a trading a brand at the moment. Seventy nine semi I call it eighty dollars for cash Bob. Let's let's not. That's not disagree. Over twenty five cents. We're trading at eighty dollars in Brent. If we normalize on the supply side do you believe that that brings those dying to ward 70. Give me your call on a normalization of balances. Yep. A normalized call Magnus. We would say Brent is fairly valued at seventy to seventy five dollars this year. The downside risk is Omicron or another demand destruction. The upside risk would have to be things go very south with Iran or Libya at the same time even worse. So geopolitical risk is bullish. Macro risk is bearish. But the Goldilocks for this year anyway I want to say this year is 70 75 in our view. So we would be selling rallies well into the 80s unless someone do something about Israel doing something to Iran et cetera. Now later years we're gonna have a massive bull cycle. But for this year we think we're going to build those stocks. It's it's a balanced year and we just don't see the case yet for a hundred dollars. Hundred twenty dollars. And as we came into the office overnight and something that I haven't spent a great deal of time analyzing so I want your first take on the cosmic time. On the Kazakhstan president accepting the government's resignation. A state of emergency to January the 19th. Amidst these protests is there should I should I correlate anything to oil in any way from political dislocation in Kazakhstan. It is hugely important for oil. Man is hugely important. Remember the consensus says that governments will force their voters into either electric vehicles or efficient cars is going to crush oil demand this decade or for reasons of climate change and so forth. And yet when we look around the world and what my company does this very closely and we see instances of public blowback at higher energy prices more often than not the governments walk back those policies. France Mexico Brazil. And just in the last 24 hours the Kazakhstan government which has lifted caps on LP rearm reimposed those put back in place the subsidies. And now the government has resigned. The only country that really sticks with its increased energy costs policy we watch is Iran. They had the largest protests in 40 years a few years ago over a fuel price increases. They shot several hundred protesters. So I don't think that's the way the West is going to go. So there is a cautionary tale for the whole peak demand speedy transition story. And what we're seeing unfolding in Kazakhstan which we've seen all around the world but doesn't get a lot of attention. So very important for oil demand later this decade and transition policies. So that's on the on the broader way forward can I return back to the near-term Bob. So normalization on supplies you're at 70 bucks. I'm Rita san. I'm going to put yourself in. I'm Rita virtually head to head. I'm Rita says 400000 barrels of an add. It's going to be darned hard to actually deliver that because of supply constraints within OPEC. Who is most constrained and what really Bob gets onto the market from the four hundred thousand that they've promised us. Right. And I agree with them Rita. We're not going to get every one of those 40000 barrels a day. Russia's the producer that is most constrained. We'll be lucky if we can get 10 to 20 thousand barrels a day out of them in February. But Saudi Arabia UAE Iraq Kuwait we think they can go up and deliver about 300 in total three hundred three hundred twenty thousand barrels a day. But you know as we get into May in the spring everyone's going to start to tap out. And then pretty much it's going to be more or less in Saudi Arabia and the UAE. So we are heading towards a vanishing spare production capacity. No question. We're about four point three million barrels a day total right now will be about half that level by the end of the year. But we're heading there slowly. I think some people are getting a little prematurely bullish. That's all it's coming. But I think we don't want to get ahead of ourselves. You're hitting you're hitting at home today Bob prematurity bullish and I think you're trying to sort of get that call with Prince Abdullah Abdullah's has been said in mind. People are itching to take on the eighty five dollars. Bob you're a good man. You're in the room. You're part of the game. Bob McNally great to get you to your take on the start of the year for the founder and president of Rapid Energy. My guest this morning we're all just a little bit too bullish on the open market. He'd never be too bullish on a bit of this. This is the. News a week into the fourth dose we know at a higher degree of certainty that the fourth dose is safe. The first piece of news the second piece of news we know that a week after the administration of the fourth dose we see a five fold increase in the number of antibodies in the vaccinated the first. Israel's prime minister Naftali Bennett said talking about the efficacy of vaccine dose number four. And Israel is not the first country in the world to offer a shot. Number four let's get the latest business flash headlines from around the world. Morgan Stanley is betting on offices in New York City. Bloomberg's been told that the bank has sealed the deal to take over space that houses the headquarters of Black Rock signing a 15 year lease roughly 400000 square feet. That Park Avenue Plaza is among the largest property deals signed in New York since the pandemic began. Black Rock will move to West. Black Rock will move west to Hudson Yards in 2023. American Express is just the latest band to delay the return to the office in their plants as Covid-19 case search. The company says it will give the US employees two weeks notice before it starts planning to bring a large number of staff is back in. It previously had said that it was aiming for a January 24th return. IBEX is requiring all employees to be fully vaccinated before they return against Covid-19 before coming back to the offices. Well two shows have seen strong gains. That's after a big GM and the top selling automaker in the United States. The Detroit based company lost its kind to the Japanese rival which boosted sales 10 percent last year. Two point three million units sold in the U.S. in 2021 and narrowly outpaced GM. They blame chip shortages slowing sales. The Japanese carmaker says selling GM isn't likely to be sustainable. And as you Bloomberg Surveillance sorry for the cough even I got a cough. Right. Let's talk about the Treasury market. I told you about rising years. It's still there. The velocity and the scale of the change the scale of the steepening. You're looking at the car of Steve named by 10 15 20 basis points in the past ten twelve sessions. So yes a rising on tenure paper. I want to show you the kind of flow. This is the ETF on treasuries in the United States of America. Double nickel. For those of you who like KGTV in the library what you got here is the price of the ETF and the BOND ETF falling. But I want to show you the flow. If you focus in on the red stripe far right red stripe that is the flow out of treasuries. That is one big theme which is not going away. There's a great rotation theme. I'll give you a snapshot. It's in the DTV library. This is profitless tech. Who nobody wants that on their book anymore. Or those Renaissance IPOs. Oh no. This is this shift. Good morning. It is DAYBREAK. Middle East. Your top stories this morning. U.S. equity slip from their all time highs amid worries about rising interest rates. Meanwhile China's tech stocks fall once again as a share sale by Tencent spooks the investors back and its allies agree to increase. I put that as analysts predict a smaller than expected surplus this quarter due to weaker supply. China harangue plunges as it reopens for trade after nine months. The company is promising to focus on its core business following a multi-billion dollar government backed bailout. And the great resignation continues. A record four and a half million Americans quit their jobs in November highlighting the persistent churn in the labor market and its growth in the UAE. Breaking news headlines coming in across the Bloomberg terminal from the central bank of the U. A E. Total GDP four point two percent in 2022. How did they see that breaking down. So total growth of four point two percent. They see non hydrocarbon real GDP at three point nine percent. And when it comes to their inflation outlook it will remain roughly flat in 2022. So this is a call on growth for the United Arab Emirates from the central bank governor. The telephone call is on its way. You're welcome. On the show any day. Let me take you to the two narratives and the two themes for markets. One is the great resignation from jobs. The other is great rotation great rotation out of growth and into value on a steepening yield curve rising rate environment and growth. And therein lies the point. We saw this demolition of tech yesterday. The lack of arc investment taking a plunge. Tesla down by four point two percent. So we're going to see how hawkish the hiking boots on off the Fed tonight in the meetings you know that's what was the tone in December and growth took a drubbing. It was the biggest rotation. Let me just show you just how much of a drubbing it really was. This is the biggest rotation since 1995 the start of the year the biggest New York stock rotation since 1995. Growth your value to growth. Growth trailed by one and a half percent. So Black Rock Franklin Templeton all saying look this is actually not. This is one of their top picks. It didn't inform us fund manager survey that we did at Bloomberg. But it is this value will be triumphant this year in 1995 as trading commodities very very badly in a penthouse in West London in Mayfair. Let me take you to the rest of market oil. She's just faltering ever so slightly this morning on Brent down in 1879. We've just had a conversation with Bob McNally at Rapid and he said seventy dollars is where we trade to get a normalization of inventories. They didn't panic at OPEC. They said he panicked in the White House but they didn't panic at OPEC. The market seems keen to take on Joe Biden's line in the sand. At eighty five dollars spare capacity will decrease over the space of the year but we're just too polished too soon in this market. Juliette Saly never flinches. She's in Singapore with the markets. Joe Weisenthal. So you're gonna say I was never too bullish. Well we are asking the bears win out today matters. We are certainly seeing that flow through in what we saw in tech areas in the US. We're seeing the Hang Seng Tech Index actually at its lowest level since May 2020. A raft of reasons behind this. You mentioned 10 cent selling some of its shares in Singapore's sea. We also had the regulator finding 10 cent for failing to report nine deals. And we're seeing quite a lot of weakness coming through from a number of these players in the Hang Seng Tech Index. Elsewhere you've got the likes of Samsung weighing on the Cosby. So it is a downbeat day. We've got most of the major markets that we track lower and even the NIKKEI they're fairly unchanged but just slightly to the red. Even though you've got that yen still holding January 2017 lows. Let's hit the board and have a look at China quite wrong as well as it comes out of the lunch break after falling substantially more than 50 per cent in the morning session as it resumed trade following a nine month trading halt and still holding on to that 53 per cent loss. This is the bad asset manager that received a six point six billion dollar rescue package. And we have seen such a huge amount of shares trade hands in this stock more than 190 million wiring shares in the first 30 minutes of trade in Hong Kong. So the most actively traded stock by volume today minus. Joe thank you very much. Time 53 percent. It's quite staggering. Joe's we'll be with you through the morning Juliette Saly. In Singapore though with the very latest. Now OPEC and its allies as we've been discussing have agreed to increase that oil output. The delegates of the twenty three nation alliance led by Saudi Arabia and Russia have approved 400000 barrel a day increase. That's scheduled for February. Will we get all that oil. Stephen stepped. Pinsky has been tracking the meeting and the ISE. COLMES Stephen the consensus was 400000 of an ad. That's what we got. Bob Magnolias just said to me that shows they just didn't panic at OPEC like they're panicked in the White House. Good morning. Yes. And that's a very good take. And an interesting view to have and I think yeah you can definitely surmise one one way to summarize what happened at the OPEC plus meeting yesterday. They didn't panic. They didn't look at all McCone. They don't see the you know the glut that is formed as something to worry about. They think demand will be all right. And they are showing confidence by to the market at least by adding those 400000 barrels a day. Now you did pose the question will we get all those 1000 barrels a day. And if you look at the past they haven't been able to meet the numbers that they said they will. You know it's difficult for countries from you know Algeria Nigeria Libya all of them are having difficulty meeting these numbers with certain outages or other restraints within the country. So because of that even though they're saying 400000 even though they are saying you know the market will be a bit of a surplus but the demand will still be there if they don't add those as much of those barrels back then it won't be as much of a bearish factor in the oil was trading up yesterday. Yesterday's download it today. But I think overall it shows a confidence from. OK. Plus. And in terms of the actual number of barrels delivered to the market this is the debate it seems to be supply restriction. When the likes of Libya and Nigeria. Steven do you think that that promise of 400000 barrels. You think all four hundred thousand will make it to the market. Energy aspects dates it likewise rapid in. It seems to be when we talk to you. According to the traders that we talk to and the analysts that you could see maybe just half come into the market which is a stark difference you know. And so that means that well it could just be half or they could physically only be able to spend bring happened to the market. And then what do you do with the remaining amount that Saudi Arabia come out and pump more. Russia is likely restrained. They probably aren't able to pump more than according to are given. So there is going to be some debate and it's going to be difficult. And I think the market will be looking very carefully at the tanker data and other information as they see what is actually coming out of these countries and what are they actually pumping. Indeed. Steven thank you very much Steven such INSKEEP with the very latest on the epic plus decision. I told you two themes at the start of the show great rotation and the great resignation. And it is continuing at a mighty pace. 4.5 million Americans quit their jobs in November highlighting the persistent churn in the labor market. Let's get more with Bruce Einhorn 4.5 million. Bruce resigning. What do we know. What's the qualitative data behind that and relative to job openings. Put it in context for me Bruce. OK. So this is a report from the Labor Department. It's the JOLTS report the jobs opening. Job openings and Labor turnover survey. And as you said it showed that four and a half million people left their jobs which is a record. It also matches the quit rate of 3 percent matches the high going back to 2020. So we are seeing that even though there has been some talk about maybe you know the great resignation is losing some momentum at least in November we saw that it's still very much an active thing. On the other hand we also saw that there was a pickup in hiring that job vacancies declined which shows that there are there are employers who are really out there hiring still. And in terms of the sectors Bruce are most affected I mean the two things that markets are going to look at A is bottlenecks and the consequence for the economy and wages. Do we know anything more in terms of those kind of facets from the reports. Yes we know the sectors that hit the hardest. Accommodation food services transportation warehousing. So I think you notice a theme here. These are all things that we're highly affected by by the pandemic. And there's been a fair amount of burn out there. A lot of people saying you know we're not going back to those jobs. And so that's where you saw the biggest the biggest number of people just saying hey we're we're moving on to something else. As far as wages go I think that that still remains to be seen. OK Bruce thank you so much. Dexterity as ever across all the stories behind Horn in Hong Kong. Let's get up to speed with first world headlines from around the world. Juliette Saly. With me in Singapore Jules Menezes. Israeli Prime Minister Naftali Bennett says that preliminary data shows a fourth vaccine dose brings a significant increase in Covid fighting antibodies. Bennett spoke Tuesday during a visit to a medical center where the government launched a trial of a second booster early last week. Israel is now the first country in the world to offer a fourth shot of the Corona virus vaccine. Big news a week into the fourth goes we know at a higher degree of certainty that the fourth dose is safe. That's the first piece of news. The second piece of news we know that a week after the administration of the fourth dose we see a five fold increase in the number of antibodies in the vaccinated person. Prosecutors have dropped their criminal case against former New York Governor Andrew Cuomo. Albany's district attorney says the allegation that Cuomo groped a woman in the executive mansion over a year ago is credible. But there wasn't enough evidence to proceed. Last month two other counties also ended their Cuomo investigations without bringing charges. Goldman Sachs says Bitcoin could hypothetically reach 100000 dollars as it continues to take market share from gold as part of a broader adoption of digital assets. Global ethics and ARM Strategy Co head Zack panel wrote in a note that even the digital coins consumption of resources won't curb demand. Bitcoin climbed about 60 percent last year. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts more than 120 countries. This is Bloomberg minus Jose. Thank you very much. Let's talk about markets shortly. We're going to catch up with Credit Suisse has fired a ball for our region for the DCC. Next up let's go global. State Street senior investment strategist Mahesh IIB joins me to discuss the top risks for 2022. This is Bloomberg. Once the carbon shock passes and things start to go back to normal and workers fully return and demand goes back to normal. I don't see any reason why the economy wouldn't revert back to the lower inflation regime regime that we've been in for 20 years. That's the most dovish Fed policy maker the Minneapolis Fed president Neel Kashkari who's seeking two rate hikes to counter the inflation risk. My guest this morning is Mahesh IIB. She's a senior investment investment strategist at State Street Global Advisers. I liked you so much. I gave you investment twice. Mahavishnu. Good morning. Happy New Year. Here we are. Let's set out the State Street store. I've got a range so far of 25 basis points in Standard Chartered for hiking. We're all getting a little bit too aggressive too ahead of ourselves. Dennis Gartman says 100 basis points. What says State Street. Good morning Miles. And Happy New Year. So State Street is is actually our chief economist Dimona had considered that inflation would be stickier than expected. But in terms of rate hikes is very much wait and see with regards to data and data. Has the storage just over 2021 not just in terms of economic growth but really job data which is key which we know what the Fed looks at in terms of the rate and it's very much like the Fed in terms of how many are expected of a 20 22. It ranges depending on what you're looking at from the markets and between 25 to 75 basis points. But it's very fluid. And I think we have to understand that that fluidity is is required given the nature of risks that we see on the horizon at this point in time. I like that word fluidity in terms of the react the reaction mechanism the producer myself which is looking at the car of the two year tenure curve. The two hands has done probably more work in the past two days in terms of straightening than it did in the past three months. I would say that's a bit of a mindset shift. It's a birth state. But it has got consequences for the growth and value proposition. So two for one it's better than Tesco is a Waitrose here or even spends a does the curve steep and further in your view near-term and b. Is there a consequence for us. Are you driven more to the great rotation as we've seen take place over the past couple of days. So in terms of growth versus value we have been advocating throughout 2021 to have a diversified equity portfolio which does include include an allocation to value value we know has very long term cycles of play. And definitely with the OP taking in yields that we saw we saw we saw 20 21 starts and we made 20 21. And there was a view to definitely shift into value but be very patient with it. There are over 10 cycles and we've actually had this to ing and fro ing and sort of every couple of weeks. So value is underperforming. That value is up for me. But looking at the fundamentals the earnings revisions for the value sectors financials and energy is actually very very strong. So it's not just that people are momentarily reacting to the uptick in yields and buying value there is actually a reason behind it. There is a positive growth momentum and the sentiment a demonstrated by an earnings revisions upwards. No. The market regime indicator something that you and I have touched on each. Each time you join me and I would say that it's fairly fluid. So we go from full on panic melt on both to something much more stoic. Now you say there's been a retracement in the MRI regime and for you it's an indicator to buy. To get long. Getting 27 percent out of the US is going to be darn hard this year. So where where do you want to add on your or I drop. So the MRI has dropped it's dropped significantly it's been driven by the rapid reduction in implied volatility across equities and currencies and respectful basis. Not that we're just looking at the S & P for example. It's across key developed market equity. And this is not in terms of where we're looking to add we're still overweight the US but less so. And so again following that great great rotation and shifting into where we see value in the market which is European and Asian Pacific and cheese and early December our key sort of sort of decision was we need to be less overweight in U.S. equities and less underweight Asians. So we're still underweight but definitely looking to bring that back to neutral. So again following the valuation here a little bit more in terms of regional equity IBEX. So you're still quite cautious on on Asia. Many people last year debated as to whether China should stand on its its own special pillar. I had ISE it pu with me just an hour ago saying China per say is 30 to 40 percent undervalued. They don't want to buy the broad MSCI index. They want to be a little bit more discerning. But I look at tech under pressure in China this morning. Are you are you very cautious on China or would you look for pockets of opportunity in China if so high or were. So whether it goes to China we have been advocating for a separate allocation to China. China follows its own cycle entirely. Not just different to the rest of emerging markets more broadly versus developed markets as well. And so it warrants an indication which gives very good diversification benefits in a multifaceted context. Nevertheless you know trying to time both by China I would say now is a good opportunity if you're looking to add China a medium term perspective. Yes we're likely to see negative headlines coming out of China. But let's not forget the absolute growth perspective is still likely to have the highest level of growth of the 2022 versus any of the developed markets. And essentially that growth number is what feeds into your as the equity expectations. It is interesting to consider China from an active allocation. So what we need just buying the index but looking at an active manager who's able to play sort so the policy decisions the navigation between at what point do you want to be owning China. H is versus Asia. So you play that onshore offshore sector dispersion and how policy impacts these two indices separately. OK a building narrative this morning on DAYBREAK Middle East. A little bit more bullish China perhaps than we think may have. Thank you very much Mahesh ISE senior investment strategist at State Street Global Advisors. My guest this morning on MARKETS. Plenty more ahead. This is Bloomberg. As we kick off 2022 we've got the rebound in the US economy still facing a good deal of uncertainty. Bloomberg's David Westin talk with Stephanie Kelton Prof of economics at the State University of New York at Stony Brook. She also formerly served as the chief economist at the Senate Budget Committee. In terms of the economic outlook it is always a foot race between the tailwinds that you hope are strong enough to propel you forward and keep you know keep the economy expanding. Allow us to continue to add jobs at the sort of pace that we've been adding over the last number of months. Now it's been very strong. But the risks are obviously you know what you're coming up against in terms of headwinds. And you know David for me the big headwind has been from the very beginning of this. The virus itself. And as we got vaccines and as we got more of the population vaccinated and we began the reopening we started to see just how resilient the economy had been through this. And then of course we get hit with Delta. And then here comes on NIKKEI. So you know if we are lucky and what we're hearing from a lot of the experts turns out to be correct that Micron is more transmissible but less difficult to deal with in terms of the you know health impacts and so forth. And we're going to see maybe after the next three weeks or so we'll be. This will be kind of rearview mirror in terms of Micron. So if there's not another mutation and another variant that we have to deal with and I think you know the the outlook looks pretty good to me. Well the big headwind is the virus you know from your mouth to God's ears. Basically I know the vaccine really taking care of the problems for us. We're getting past the underground. At the same time as you look back at what we saw last year is the virus hitting the supply side of the equation the demand side more. Because I think one things that surprised some people was how much it hit the supply side which really drove inflation. Well I think that's absolutely correct. I mean there there are both things are at play here right. It is the case that we had extremely robust fiscal support this time unlike after the financial crisis and the fiscal. The fiscal response from Congress after the 2008 economic downturn this time was much different. We had much more robust fiscal support. People had more money. They had more income to spend coming out of you know the sort of reopening part of all of this. And so there were demand impulses there at play that helped to you know allow consumers to go racing back in. And it's really been a question of what people are trying to spend money on. You know it isn't the case. I don't believe that what we have is just a generalized case of too much money chasing too much too few of everything else. Right. Goods and services. That was Stephanie Kelton Prof. Of Economics at the State University of New York in Stony Brook. Now do you have a stomach for volatility. Do you believe that you'd like a little bit of bitcoin to help you whether the inflation storm 10 days. That didn't change the narrative. But we drifted downwards by over 6 percent. Where do we go from here. Well bitcoin could make it to one hundred thousand dollars. Why. Because it's Goldman Sachs. Say it's all about the store of value. You saw value in gold. Want a store of value in bitcoin. They say the overall store value at Lexicon is about 700 billion dollars. Bitcoin as a store of value could hypothetically rise by 50 percent over the next five years. NASDAQ says if that happens you could see a 17 to 8 percent compound annualized return. What does that get. Hundred thousand dollars and change the system. But. This is Bloomberg Daybreak Middle East your top stories this morning. U.S. equity slipped from the record highs amid worries about rising interest rates. Meanwhile China's tech stocks are falling once again as a share out by 10 cent spooks the investors. OPEC and its allies agree to increase oil output. That as analysts predict a smaller than expected surplus this quarter due to the weaker supply. And China harangue plunges as it reopens for trade after a nine months. The company is promising to focus on its core business following a multibillion dollar government bank bailout. And the great resignation continues. A record 4.5 million Americans quit their jobs in November highlighting the persistent churn in the labor market. Markets are on the move. I mean they are irked by the China harrowing crash. After nine months of being off the market. Juliette Saly has the context of Czech tech I should say and that wealth management. Good morning. Yeah absolutely. That is the big story of the day today minus that selloff that we are seeing in tech more broadly. Asian stocks lower off by about half of 1 percent. We are seeing some good support coming through in the likes of the financials. Also the energy players and materials stocks today. But it is those stocks dragging the overall regional index down and seeing the likes of Korea Samsung weigh on the Cosby too. You've got a slight pick up there on the NIKKEI 2 to 5. That says the yen holds near that five year high although you're seeing a little bit of weakness coming through in the US dollar today. But certainly the story as we're about to see on my shot of the take play is weighing through Manus. That is similar to what we had seen in the U.S. session. And if we just continue on with the tech narrative Jews what are we seeing as what I mean the Hang Seng Tech Index. It's coming back to Earth with a bump isn't it. It certainly is and this duty of a chart really just shows you it's holding at the lowest level since May 2020 but falling the most since September last year as you can see. So not a great start to the new year for the Hang Seng Tech Index which is down for a third session and certainly falling below that moving price target that we had been looking at reflected thereby that blue line on my shot. We have been seeing quite a bit of weakness coming through in Tencent. You've had that divestiture of Singapore. See we saw quite a lot of weakness coming through in the 80 ISE. If we flip the board and have a look at how Tencent is doing in the afternoon session and flowing through into a number of the other players to the likes of May Taiwan. Worth pointing out though Alibaba is in the red but not as badly as some of the other players. You can see it down by just about one per cent there. We have heard that the Daily Journal a newspaper and software business has nearly doubled its holding of Alibaba in recent months minus. Jill thank you very much. Yeah. If you're going to go and go in in size as I say to a Johnny Monger all in on Ali Baba. Well the cracks are beginning to appear in Turkey's plan to stabilize the lira. We've got new data from the central bank and the finance ministry and they suggest the present to end market moving promises that he made last month to protect lira deposits from exchange rate volatility. While there might not be everything that they were cracked up to be. Let's get to Doha. Simon has the details. Simona. Yeah. Two bits of data here. Minus that support that theory. And remember the goal of these new measures was to keep money in liras stop folks and businesses from moving their money out of the country into dollars or other foreign currency. First as foreign currency holdings overall. We're at a new record level. Two hundred and thirty nine billion dollars worth of foreign currency holdings. And that's really been driven by companies. Yes households have actually cut their foreign currency holdings but that wasn't enough. And in fact far less than would be needed to offset the increase. One point six billion dollars worth of foreign currency holdings added just in that seven days ended December 24th. So that's one measure. The other metric and actually a number that was cited by the finance minister himself just yesterday is the amount of money moving into these new protected vehicles out where your your deposit. If it didn't make that the rate of return based on the from the bank to offset the foreign currency losses the government would come in and step in and protect that. They will be seen some eighty 84 billion dollars. Sorry 84 billion liras of inflows so far that at a five point two trillion liras in deposits overall in the country. So that's just really a tiny fraction not getting the interest probably that the government wanted to see. And it's all about disclosure and I have lived through this with it with the North Bank many years ago whether they came I did Norway and began to tell us how they perform. Now is Saudi Arabia raising the curtain on how the pension fund is doing in terms of the returns. What's the magic number. Yeah a little bit more than 14 percent return last year. This for Hassan. Investment company and Hassan manages the assets 250 billion dollars worth of assets. So not a paltry sum. There are of two different pension vehicles that were combined and a lot of this coming just from market performance long term allocation. According to Sana. But as you said this is a transparency thing right. We don't get that much data from Middle East. Middle East funds generally Middle East sovereign wealth funds Middle East pension funds and the like. We've seen the PIIGS a different fund of course in Saudi Arabia go out and actually start disclosing some of their U.S. stock holdings. That's been really fun to get every quarter. But any number and any figures we get on returns are really eager to see it because it just gives us some indication and a really murky world. It's a rather opaque world. And here in the UAE there's a there's a big issue isn't that it's a lack of perhaps disclosure. We've got financial transparency being questioned. It is by perhaps the UAE going on a grey list by regulator. Who are they. And what are they most anxious about in terms of the UAE. Yeah the Financial Action Task Force Ben Barton Stein a reporter for us in Dubai breaking the news that this regulator is likely to add the UAE to its grade list of countries all about not enough protections to prevent against money laundering to prevent against the raising of money for terrorists or for weapons proliferation. So all of those really concerning things not just for this regulator but for for various governments around the world. And the concern is does this come in and stop the flow of capital coming into the UAE and coming specifically into Dubai which is known as a financial hub in part Dubai bill its reputation by trading with places that don't always keep the best records whether that's Africa or Eastern Europe or even parts of Asia cannot move. Can it take the steps necessary to avoid this designation. Because studies do show that folks that are added to this list do see a decline in that capital. Also a bad time considering the competition that the UAE is facing from Saudi Arabia right now to. Samantha thank you very much. Foxman the Carter Financial Center in Doha. Let's return back to the other lead story for the region on oil. OPEC and its allies have agreed to increase oil output. Delegates said the 23 nation alliance led by Saudi Arabia and Russia have approved 400000 barrels a day increase scheduled for February. The group is sticking to its plan to gradually restore output halted during the pandemic. That's after analysts predicted a smaller than expected surplus in this quarter due to weaker supply. Let's get the implications for the market for the sentiment and the break evens. Farhad Iqbal is the head of Private Bank at a Middle East research at Credit Suisse. So we seem to have swallowed this announcement quite easy 400000 barrels. The market's a bit later this morning by a quarter of 1 percent. Farhad the backdrop to oil for 2022 is a hoax. What are you targeting on price. And how important is it to bolster sentiment for our equity markets. So my son would let me start by saying that in terms of the barrels of oil that are coming to market there is still not a full amount is unlikely to or is not necessarily expected to hit markets because of production constraints and some of the some of the OPEC nations. So that's part of the reason why I think it's been so easily swallowed. Plus the market clearly seems to be as optimistic as big pluses. We're near term a little bit more cautious. I mean we're more nervous about the impact of only corn on economic activity. We're nervous about the potential for renewed supply side disruptions that can cause a temporary macro slowdown. And that's why the Anderson committee has a house. We moved our equity allocation from overweight back to neutral literally the in the last week of December. So we're starting off the year on a on a more conservative note. We still think there's scope for. We still expect oil prices to remain elevated this year. I mean near-term we think the supply demand dynamics going to be more favorable. We've got an 83 dollar target for on a three month horizon. Which way of where. You know very much in the ballpark of right now. But we think the dynamics will become less favorable over the course of the year and we'd expect to see oil lose a little bit of ground. Still remain elevated. And we've got a similar to some B street on the target for 4 12 months. So you know given the kind of supply controls we have and the active management biotech class we think oil will still remain very elevated. But that momentum that we saw last year we don't really see that being repeated this year. So let's just take a bite. Here in Dubai there's a couple of different stories and I want to get a sense of just how bullish you are for I know it's part of your chosen equity markets for this year the UAE along with Egypt and with Qatar. But for the growth numbers here in the UAE. Farhad we've just had them at a slight disadvantage. You know you might not be in front of the screen at the moment. They're going for double the bubble double growth four point two percent versus two point one percent last year. Now they're normal aside three point nine. But it's the oil GDP again which is going to be the bulwark 5 percent versus 2 percent last year. So a very bullish call on growth. Public spending will continue positive credit outlook higher employment and better business sentiment. It's still a very bullish call from the central bank. Do you share those sentiments or any reservation. Sure we do share those but that level of optimism. I mean we've said for some time to expect to see a significant acceleration in the UAE given that it is behind me to call on global markets. And so the kind of recovery we see in global and at a global level is something we would expect to see a higher beta version of in the UAE. We do have some concerns over the impacts of the ending of Expo 2020. This march on momentum overall. For sure there will be a slowdown in momentum but the underlying growth environment should still remain very favorable and very positive. I think it's also important to add that you know the point that you made about oil is a very important one. And I think it's something that gets overlooked because we spend too much time focusing on the changes and being made in regulations to help support the non oil economy and the kind of growth dynamics we're seeing which are very encouraging. But at the end of the day this is still a region that depends heavily on the oil sector and it will do so for the foreseeable future. So oil being you know our expectations of oil being elevated this year are also going to be extremely important in terms of our expectations of continued growth in the UAE over 21 to. And in terms of the rest of the markets you have some other quite bullish calls. I mentioned Egypt out there. I mean governments have this sort of quite bullish note as well where they talk about the tourism normalizing for them. It's part currency and it's part equity. To what extent might Egypt outperform because they've struggled with supply chain issues Farhad haven't they. In terms of really getting above 50 on the PMI. So just give me the nuance arms within Egypt. I think the trouble that when we're huge fans of Egypt we're very positive on the outlook for Egypt. I think the problem that we've had in the risks that we see for Egypt is that tourism is extremely important. But there's going to be a limit to how much it can recover. We can't really see our travel going back to pre pandemic levels this year. It take that next year for that to happen. On current estimates that even that might be delayed further. Who knows. So for both the UAE and Egypt while tourism is going to be a significant driver of recovery there's only so much that it can actually contribute. The other issue that we've had with Egypt is that we still feel that the currency is slightly overvalued. And that has been one of the factors. That coupled with the fact that real interest rates are still positive has been a factor that is dampened economic activity overall. And we suspect that that's been something that has held back performance thus far. We still do expect performance in the equity market to be very attractive very robust this year. If we're correct in our assessment that we should see modest appreciation of around 5 odd percent in the currency I think that would also add a little bit of momentum and help provide positive support equity performance as well. OK. Thank you so much. I had a private bank. Middle East research at Credit Suisse says calls on the markets as we set up for 2022. Plenty more ahead on DAYBREAK Middle East. This is Bloomberg Daybreak. Ford Motor stock surged to a 20 year high after doubling factory capacity for its battery powered F 150 lightning pickup. We spoke to the company's president of the Americas and International Markets Group about what's driving the demand. Price is one factor I would say but I think it's the compelling nature of the product that's really important here. This product has when we were doing research with our customers they loved the acceleration of it. They love the talk it brings in. They love the payload of two thousand pounds. It's great driving tragedies credibly fast. You know truck owners love talk and talk is what this electric vehicle brings. It's more than so many 770 feet pound of torque all of that capability. It's built Ford tough. You know it's one of the vehicles that's been in the leading high selling vehicle for us for you know more than more than 45 years in a row leading it segment. So combining all that into a very compelling product proposition with a starting price of under 40 thousand thirty nine nine thousand nine hundred seventy four is what's made this such a compelling proposition for our customers. Well no color is the issue here selling it to consumers or is it actually producing enough to sell to consumers. Because that's been the real hang up when it come to auto sales over the past 24 months. Yes. You know between the Covid crises the chip prices the entire industry has struggled to produce that at the levels that we were producing. So you take that price those two twin crises and then as we're transforming the company to go from internal combustion engines to battery electric vehicles changing that demand has been a real trick. We thought we were setting up our factories appropriately for the demand but as soon as we revealed the vehicle we had to nearly double the capacity to 80000. And that's what today's announcement is so important because even after we increased capacity with this vehicle to 80000 light things that the reservations continue to come in at record pace. And today that's why we're announcing that we're going to now increase capacity in this plant to 150000 light things. And that involves then you know the entire supply chain the batteries the motors the controllers. So given the fact that you have increased production that you have seen such robust demand and that the potential of additional stimulus from the federal government and a broader base of electric vehicle manufacturers do you think that electric vehicles could reach 10 percent of the American market by the end of this year. That's that's difficult to say like you said it because it will be both. Not only demand based on the demand are we are seeing for our vehicles and the rest of the industry is seeing. It feels like the demand is certainly there. But the question will be how quickly can we all of us execute to build capacity to meet that demand. And that's what we are very busy doing by the next 24 months. We expect to get to about six hundred thousand battery electric units globally. And that's before our bigger investments that we're making in Kentucky and Tennessee both for battery and batteries as well as assembly come on line because they don't come online till about 2025. Come on girl. Hot hot dry. That Ford's president for the Americas and international markets. On one hand of a truck. Is he going back. And so together with the Plan B measures that we introduced before Christmas we have a chance to ride out this Omicron wave without shutting down our country once again. We can keep our schools and our businesses open and we can find a way to live with this virus. UK Prime Minister Boris Johnson getting through the Omnicom way with a national lockdown despite the country reporting more than 200000 daily cases for the first time in the pandemic. Well let's get more with you on Garen. She's in our London studio. Loud and great to have you with me. Happy New Year. Can you tell me a little bit more about his main message. Because he's not been off the TV and Sky TV all weekend. Yes. Happy New Year to you too. And Boris Johnson has been around a lot. But that's obviously because he's had a grueling and to last if you want to say that politically and many people are feeling that he's out with a new message. And the new main takeaways yesterday really Magnus was as you said earlier we are just not going to bring in new restrictions here in the UK despite a record number of cases which were reported yesterday over 200000. So later today Boris Johnson is meeting his cabinet and he's going to say to them we're going to stick to plan B measures which is wearing face masks and of course working from home where is possible. But he also made it clear as he has done a lot throughout his time and he said booster vaccines and testing are our ticket to riding the macron wave. And to of course keep schools and businesses open here in the UK. Now the one thing that I have seen on the news flow has been the rapid tests there. You know the flow before you go tests. In other words getting these. They were handing them out like Smarties you know on the corners at tube stations. But we've now run into shortages. How serious are those shortages lan. Manus I remember going into the pharmacies and they just giving me a box of these lateral flow tests and I'm telling you before New Year's Eve you just couldn't get any at all. All the pharmacies and chemists here in the UK had signs up in their windows just saying we've got shortages. There's none available. And this caused a lot of unrest as people did want to go out and party and did want to enjoy their celebrations. And of course see loved ones over the festive period. So this has caused a lot of disruption and unease. And of course we've seen so many businesses suffer shortages of staff because they cannot get hold of these lateral flow tests and people are having to quarantine for longer which is really impacting the economy. And the NHS has also had a lot of trust go into critical incidences as they are really suffering shortages of workers due to the huge wave of on the Quran. But Boris Johnson is promising 100000 tests to critical workers to make sure supply chains and the economy keeps ticking over as we do try to ride this wave through the and keep that fine balance of keeping the economy open businesses going schools open and keeping the numbers under control here. Magnus. But look everybody's trying to assess when the peak of this wave comes on Iran is like wildfire. When do they expect the peak to come. Absolute wildfire here man I said we were just talking about it a little bit earlier. We feel like we know so many people who have been diagnosed with Covid-19 this time around. But yesterday was really interesting. The chief scientific adviser Patrick for Lance. He was in that speech with the prime minister yesterday and he said it's just not clear when Macron will reach its peak. And we also seeing people over the age of 50 go into hospital. So we are seeing increases in that age group. But what is interesting is a lot of health advisers have now said that here in London which was the epicenter of the Macron variant we are seeing things plateau here. So there seems to be some signs that we could be moving towards a peak. However we just don't know when that is. Land you know the message flow before you go. They aren't gardens in London with the very latest. Absolutely. Absolutely. I had a long lateral flow test PCR test and QE and passenger locator forums. Let me just show you how the equity markets are faring at the moment. Done a third of 1 percent. It is technology which is a little bit more under pressure. Likes of Tesla coming up. Dani Burger and I will debate the great rotation in just a moment. This has been.

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"Bloomberg Daybreak: Middle East" live from Dubai, connects Asian markets to the European opens. The show focuses on global macro issues with a Middle Eastern context. (Source: Bloomberg)

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